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Completion Report

Project Number: 34112 Loan Number: 1909 December 2011

Indonesia: Poor Farmers’ Income Improvement Through Innovation Project

CURRENCY EQUIVALENTS

Currency Unit – Indonesian rupiah (Rp)

At Appraisal At Project Completion (12 October 2001) (26 May 2011)

Rp1.00 = $0.0001 $0.000116 $1.00 = Rp10,000 Rp8,593

ABBREVIATIONS ADB

AIAT BAPPENAS BIPP CADI CIF CPI DAIC DCC DMF IAARD ICALTD IEE MOA MOF NARI NGO NSC O&M PCMU PCR PIU PIVF PPMS PRRA R&D SDR SMS TA VAIC VPIC

– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –

Asian Development Bank assessment institute for agricultural technology Badan Perencanaan dan Pembangunan Nasional (National Development Planning Agency) Balai Informasi Penyuluhan Pertanian (Information Center for Agricultural Extension) Center for Agricultural Data and Information cost of insurance and freight consumer price index district agricultural information center District Coordination Committee design and monitoring framework Indonesian Agency for Agricultural Research and Development Indonesian Center for Agricultural Library and Technology Dissemination initial environment examination Ministry of Agriculture Ministry of Finance National Agricultural Research Institute nongovernmental organization national steering committee operation and maintenance project coordination and monitoring unit project completion review project implementation unit project intervillage forum project performance monitoring system participatory rural rapid appraisal research and development special drawing right short message service technical assistance village agricultural information center village project investment committee

NOTES

(i) The fiscal year (FY) of the government ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2009 ends on 31 December 2009.

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

Vice-President S. Groff, Operations 2 Director General K. Senga, Southeast Asia Department (SERD) Director J. H. Mir, Environment, Natural Resources, and Agriculture Division, SEER

Team leader A. Musa, Finance Specialist, SEER Team member E. T. Tayao-Castro, Associate Project Analyst, SEER In preparing any country program or strategy, financing any project, or by making any designation of or any reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page

BASIC DATA i

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 1

A. Relevance of Design and Formulation 1 B. Project Outputs 2 C. Project Costs 6 D. Disbursements 6 E. Project Schedule 7 F. Implementation Arrangements 7 G. Conditions and Covenants 8 H. Consultant Recruitment and Procurement 8 I. Performance of Consultants, Contractors, and Suppliers 9 J. Performance of the Borrower and the Executing Agency 9 K. Performance of the Asian Development Bank 9

III. EVALUATION OF PERFORMANCE 10

A. Relevance 10 B. Effectiveness in Achieving Outcome 10 C. Efficiency in Achieving Outcome and Outputs 11 D. Preliminary Assessment of Sustainability 11 E. Impact 12

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13

A. Overall Assessment 13 B. Lessons 13 C. Recommendations 14

APPENDIXES 1. Project Performance Against Initial Design Framework 2. Farmer Group Officers, Village Facilitators, and Inter-village Facilitators by Gender 3. Breakdown of Farmer Groups by Gender and Farmer Group Members by Income Group 4. Summary of Village Public Investments by Type and By District 5. Demonstration Plots and Farmers’ Trainings 6. Annual Research and Development Budget for Marginal Rain-Fed Areas 7. Research and Development and Local Initiatives for Marginal Rain-Fed Areas 8. Summary of Technologies for Marginal Rain-Fed Dry Land Areas 9. Training Programs Conducted for Project Staff 10. Project Cost by Expenditure 11. Planned and Actual Yearly Disbursement 12. Fund Flow Arrangements 13. Planned and Actual Implementation Schedule 14. Project Organizational Chart 15. Status of Compliance with Loan Covenants 16. Consulting Services, Planned and Actual 17. Procurement of Goods and Services, Planned and Actual 18. Financial and Economic Analyses 19. Overall Project Assessment 20. Physical Project Progress as of May 2011

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 1909 Poor Farmers’ Income through Innovation Project Republic of Indonesia Ministry of Agriculture $56,000,000 (SDR42,091,000) Net loan amount: $50,764,934.85 (SDR33,588,820.78) 1305

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 (if any)

1 April 2002 11 April 2002 2 July 2002 4 July 2002 15 August 2002 17 January 2003

a

17 April 2003 17 July 2003 1 30 June 2008 5 January 2011 2 1% per annum during the grace period and 1.5% per annum thereafter 32 8 None

a By letter dated 19 December 2007 and countersigned by the authorized representative of the Government of

Indonesia on 30 May 2008, this Loan Agreement (along with numerous others) was amended with regard to the conversion of payment obligations under ADF loans into SDR as the result of an Asian Development Bank Fund Currency Management Proposal.

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9. Disbursements a. Dates

Initial Disbursement

23 October 2003

Effective Date

17 July 2003

Final Disbursement

21 December 2010

Original Closing Date

30 June 2008

Time Interval

86 months

Time Interval

59 months

b. Amount ($)

Category Original Last Revised Amount Amount

No. Description Allocation Allocation Cancelleda Disbursed

01 Civil works 309,778 314,389 (4,611) 314,389

02 Equipment 2,159,140 2,982,558 (823,418) 2,982,558

03 Materials 114,339 80,655 33,774 80,565

04 Training/fellowships 3,844,972 3,823,965 21,007 3,823,965

05 Consulting services 4,989,689 3,368,572 1,621,117 3,368,572

06 Operation and maintenance 3,298,539 3,948,150 (649,611) 3,948,150

07 Surveys, investigation, design, and mapping 422,787 399,524 23,263 399,524

08 Research and development 2,123,243 3,831,127 (1,707,884) 3,831,127

09 Community development 8,122,038 4,456,201 3,665,837 4,456,201

10 Village investment fund 26,981,279 25,985,224 996,055 25,985,224

11 Interest charge 1,056,968 1,574,570 (517,602) 1,574,570

12 Unallocated 2,538,054 0 2,538,054 0

Total 55,960,826 50,764,934 5,195,892 50,764,934 a

There were two partial cancellations: SDR4,902,000 ($7,512,952.26 equivalent) on 5 September 2007 and SDR3,600,179.22 ($5,524,763.03 equivalent) on 21 December 2010.

(in SDR)

Category Original Last Revised Amount Amount

No. Description Allocation Allocation Cancelleda Disbursed

01 Civil works 233,000 211,665 21,335 211,665

02 Equipment 1,624,000 1,954,326 (330,326) 1,954,326

03 Materials 86,000 52,345 33,655 52,345

04 Training/Fellowships 2,892,000 2,489,236 402,764 2,489,236

05 Consulting services 3,753,000 2,218,894 1,534,106 2,218,894

06 Operation & Maintenance 2,481,000 2,585,008 (104,008) 2,585,008

07 Surveys, Investigation, Design & mapping 318,000 271,431 46,569 271,431

08 Research & Development 1,597,000 2,523,750 (926,750) 2,523,750

09 Community Development 6,109,000 2,942,783 3,166,217 2,942,783

10 Village Investment Fund 20,294,000 17,318,181 2,975,819 17,318,181

11 Interest charge 795,000 1,021,201 (226,201) 1,021,201

12 Unallocated 1,909,000 0 1,909,000 0

Total 42,091,000 33,588,820 8,502,180 33,588,820 a

There were two partial cancellations: SDR4,902,000 ($7,512,952.26 equivalent) on 5 September 2007 and

SDR3,600,179.22 ($5,524,763.03 equivalent) on 21 December 2010.

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10. Local Costs (Financed) - Amount ($’000) 35,381.80 - Percent of local costs 58.41% - Percent of total cost 46.58%

C. Project Data

1. Project Cost ($’000)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 15,280 50,765 Local Currency Cost 55,640 25,195 Total 70,920 75,960

2. Financing Plan ($’000)

Cost Appraisal Estimate Actual

Implementation Costs Borrower Financed 14,918 25,195 ADB Financed 54,944 49,190 Other External Financing 0 0

Total 69,862 74,385

IDC Costs Borrower Financed 0 - ADB Financed 1,058 1,575 Other External Financing 0

Total 70,920 75,960

3. Cost Breakdown by Project Component ($’000)

Component Appraisal Estimate Actual

1. Poor farmer empowerment 49,510 39,452 2. Development of information resources 1,585 722 3. Agricultural innovation development and innovation 11,786 9,382 4. Project management 6,981 24,829 Total project cost before service charge 69,862

a 74,385

Interest during construction 1,058 1,575

Total 70,920 75,960 a

Incorporates physical contingencies of $2,530,000 and price contingencies of $4,530,000.

4. Project Schedule

Item Appraisal Estimate Actual

Consulting Firm: Date of Contract with Consultants Q1 2003 29 Nov 2004 Completion of Work Q4 2007 31 Oct 2009 NGO Consultant: Date of Contract with Consultants Q1 2003 10 May 2005 Completion of Work Q4 2007 15 Jun 2009 Civil Works Contracts: ICALTD Office Building/Infrastructure Rehabilitation Date of Award Q4 2003 15 Jul 2004 Completion of Work Q2 2005 13 Nov 2004

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Item Appraisal Estimate Actual

BP2TP Office Building/Infrastructure Rehabilitation

Date of Award 27 Aug 2004 Completion of Work 25 Nov 2004 IAARD Office Building/Infrastructure Rehabilitation Date of Award 14 Sep 2004 Completion of Work 14 Oct 2004 Pati Office Building/Infrastructure Rehabilitation in Date of Award 22 Aug 2005 Completion of Work 19 Dec 2005 Equipment and Supplies First Procurement Q1 2003 1 Nov 2003 Last Procurement Q4 2007 9 Sep 2009 Other Milestones

First Partial Cancellation 5 Sep 2007 Second Partial Cancellation 21 Dec 2010

5. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives

Implementation Progress

30 September 2002 to 31 December 2010 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 23 July-24 August 2001 10 306 a,b,c,d,g,j,s,t,u,v Appraisal 1-12 October 2001 7 84 a,c,e,f,j,s,t Inception 21 May–5 June 2003 5 80 h,i,j,k,l Loan review No. 1 9–19 August 2004 2 22 h,m Loan review No. 2 9–18 November 2004 3 30 h,m,n, Midterm review 9–23 June 2006 2 30 h,m Loan review No. 3 23 February–6 March 2007 2 24 m,o Loan review No. 4 19–27 November 2007 2 18 k,o Loan review No. 5 15–22 May 2008 2 16 k,o Loan review No. 6 14–18 November 2008 2 10 k,o Loan review No. 7 27 March–2 April 2009 2 14 k,p Loan review No. 8 28 August–4 September

2009 1 8 p

Project completion reviewb 12–26 May 2011 4 47 m.q.r

Total 689 a a = rural development specialist, b = senior sector specialist , c = project specialist; d = manager, e = counsel; f = senior

social specialist; g = environment specialist; h = project economist, i = financial management specialist, j = senior control officer, k = assistant project analyst, l = disbursement analyst, m = associate project analyst, n = project implementation specialist, o = principal project management specialist, p = senior agricultural economist, q = financial specialist, r = staff consultant, s = consultant (economist), t = consultant (gender specialist), u = consultant (information technology specialist), v = consultant (environment specialist).

b The project completion report is prepared by A. Musa, Finance Specialist, Southeast Asia Department.

I. PROJECT DESCRIPTION

1. In Indonesia, lack of poor farmers’ access to appropriate technologies, public goods investments and information has constrained their ability to increase their income. 1 The Government of Indonesia (the Government) took steps to fill the gaps in providing public goods support for agriculture and increasing crops other than rice. The Government also increased farmers’ access to information and appropriate technologies in order to improve their livelihoods. 2. On 15 August 2002, the Asian Development Bank (ADB) approved a SDR42.09 million2 loan from its Special Funds resources to the Government for the Poor Farmers’ Income Improvement through Innovation Project (the Project). The project’s expected impact was increased innovation in agricultural production and marketing by poor farmers. Its outcomes were to (i) improve targeting of village-level public investments to location-specific needs for agricultural and rural development, (ii) increase the access of farmers to information, and (iii) reorient agricultural research to marginal rain-fed areas. The project had four components: (i) poor farmers’ empowerment; (ii) development of national and local agricultural information resources; (iii) support for agricultural innovation, development, and dissemination; and (iv) project management. The project was implemented in five districts: Blora and Temanggung (Central Java), Donggala (Central Sulawesi), East Lombok (West Nusa Tenggara), and Ende (East Nusa Tenggara).

II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 3. ADB’s 2001 country operational strategy, poverty assessment in Indonesia, and the 1998 agriculture sector strategy study and update in 2000 provided the overall context for agricultural and rural development in Indonesia. The project’s objectives and implementation strategies were consistent with ADB’s country strategy and program, 3 which focused on (i) reducing poverty and improving equity by targeting rural areas and less-developed islands, (ii) creating and strengthening basic institutions, (iii) undertaking human and social development, and (iv) enhancing the role of women. The project was relevant at appraisal and completion because it was in line with the government’s national strategy and program for poverty eradication. 4. ADB provided project preparatory technical assistance (TA) in 2001.4 The quality of the TA was satisfactory because it was able to design and formulate the project in accordance with ADB’s country strategy and program and government policies and plans. The project was based on the recommendation of the TA report; the findings of ADB missions; a review of various studies and other relevant projects; and discussions with national and local government authorities, nongovernmental organizations (NGOs), poor farming communities, and other stakeholders. The formulation process was adequate because the design focused on using a

1 ADB. 2002. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the

Republic of Indonesia for the Poor Farmers’ Income Improvement through Innovation Project . Manila (RRP

341112). 2 $50.76 million equivalent at appraisal and $55.96 million at project completion.

3 Indonesia Country Strategy and Program Update, 2002–2004. July 2001.

4 ADB. 2001. Technical Assistance to Indonesia for Preparing the Poor Farmers’ Income Improvement Project.

Manila. Following the TA, at the request of the government, an ADB loan fact-finding mission visited Indonesia from 23 July to 24 August 2001. This was followed by a pre-appraisal mission from 23 October to 14 November 2001 and an appraisal mission from 1 April to 11 April 2002.

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participatory process and methods such as consultation with stakeholders (poor farmers) and focus group discussions on planning and implementing village investments. 5. During project administration, only one design change was made, for an interim arrangement between ADB and the Indonesian Agency for Agricultural Research and Development (IAARD) of the Ministry of Agriculture (MOA), for village investment activities in 2003–2004. This was caused by the delayed recruitment of local NGOs that were responsible for initially organizing farmer groups—a maximum of 10 villages per district in 2003 and 30 villages per district in 2004—through the assistance of village facilitators. The technical team of the project implementation unit (PIU) selected and trained the facilitators in the participatory planning process. Starting in 2005, when the NGOs and the consultants were fielded, the IAARD stopped applying the interim arrangement and adopted the original implementation mechanism for mobilizing farmer groups.

B. Project Outputs

6. In the design and monitoring framework (DMF), the indicators for the project’s impact and outcomes are mostly measurable. However, the DMF included quantitative and qualitative indicators for only the first three project components, and some of the targets set for the outputs were unclear. The DMF and its indicators for all four project components were refined in 2007 to ensure that the targets were qualitatively and quantitatively measurable and relevant to the overall investment activities. Appendix 1 shows achievements relative to the targets set in the refined DMF. Most of the project outputs exceeded those targets. The following sections provide analyses of each project component and output.

1. Poor Farmer Empowerment

7. This component aimed to empower farmers to plan and implement village-level public investments to support innovations in agricultural production and marketing. It involved three subcomponents: mobilization of farmer groups and village planning, institutional development, and village-level investments.

8. Mobilization of farmers groups and village planning. Local NGOs recruited by the project, under the supervision of a national NGO, were responsible for mobilizing farmer groups in partnership with village facilitators and with the assistance of formal and informal village leaders, especially religious leaders. The local NGOs provided training on capacity-building and support for two recruited facilitators per village in the five project districts. They also helped establish links between the farmer groups and the government and private agencies that could support farmers. The project recruited 2,316 village facilitators and 2,401 intervillage facilitators (Appendix 2). Of these totals, 51% of the village facilitators and 53% of the intervillage facilitators were women, indicating that male and female farmers received equal representation. The process of forming the farmer groups included social preparation and assessments, and participatory planning for village-level public investments. 9. The project served 1,067 villages, more than the 1,000 targeted at appraisal (Appendix 3), because new villages were formed from the targeted villages. In the villages, 4,008 farmer groups were established, composed of 937 all-male groups (23%), 403 all-female groups (10%), and 2,668 mixed-gender groups (70%). The total number of members in all groups was 158,111. Poor farmers and women were adequately represented. About 84% of the members belonged to the poor income group. Women constituted 26% of the farmer-

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beneficiaries. The female participation rate ranged from a high of 48% in Ende to a low of 23% in East Lombok, with the remaining districts between 33% and 35%. 10. Institutional development. The project met its target output of establishing, developing the capacity of, and supporting the operation of three institutions: district coordination committees (DCCs) in the five project districts, project intervillage forums (PIVFs) at the subdistrict level, and village project investment committees (VPICs) in each project village. DCCs were established to backstop the investment plan preparation, ensure the sustainability of new projects undertaken by villages, and harmonize village investments with the government’s district-level investments. PIVFs were formed in all 89 subdistricts, with a total of 1,080 members. PIVFs consisted of the elected heads of the VPICs and the facilitators elected from each project village to assume the responsibility of public investment approval bodies. One VPIC was established in every project village to assess, implement, and monitor investments proposed by farmer groups, as well as manage funds. Thus, the project formed 1,067 VPICs. The project provided funds to cover the operational costs of the DCCs and the PIVFs through the PIUs’ budgets, with funds from the district and national budgets. The operational costs of the VPICs were covered under each NGO’s contract. 11. Village-level public investments. The farmer groups adopted a participatory approach in planning investments and making decisions about them. The project allowed the farmers’ groups to propose the kinds of rural development investments needed to overcome the main constraints they faced in developing agricultural innovations. The PIVFs approved 6,671 public village investments that were implemented in the five districts (Appendix 4). They consisted of investments in 1,479 farm roads, 41 storage facilities, 1,353 minor irrigation systems (run-of-the-river or -creek, impoundment, or low-lift pump types), 35 installations of soil and water conservation infrastructure, and 11 rural market facilities. The project also provided various capacity building activities for farmers, including the demonstration plots and farmer trainings listed in Appendix 5. 12. The amount of the grant a village received varied with the size of the investment required and the number of villages in the district (Appendix 4). It ranged from $22,000 (Ende) to $24,000 (Temanggung) per village. The investment costs were shared by the farmer-beneficiaries through contributions of voluntary labor, land, and local materials. Aggregate beneficiary contributions accounted for about 33% of the investment cost—significantly higher than the 20% envisaged at project appraisal. Those contributions are significant mainly because beneficiaries donated parts of their land for the construction of farm-to-market roads, irrigation, and other infrastructure, in addition to their contributions of voluntary labor and local materials. Investment activities were completed in 1,067 villages; the original target was 1,000 villages. 13. Furthermore, the district governments supplemented the project activities with their own interventions to stimulate agribusiness development based on location-specific comparative advantages. In the districts of Temanggung, Donggala, and East Lombok, for example, the district governments provided a number of villages with funds to initiate innovative activities, such as revolving stocks of small ruminant animals and cattle that have increased the livestock number over the years. Some of the animals have been sold as fatteners, generating additional income for the farmer-beneficiaries, while others have been raised as breeders. 14. Only a few farmer groups producing large volumes of agricultural commodities were able to establish partnerships with private institutional buyers through the help of local NGOs, VPICs, or district governments. Notable examples are the market contract arrangements between (i) farmer groups producing organic vegetables in Temanggung and a local hypermart;

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(ii) farmer groups growing potatoes of the Atlantic variety in East Lombok and Indofood; (iii) farmer groups producing cocoa in Ende and PT Mars; (iv) farmer groups in Donggala producing cocoa and a private buyer; (v) farmer groups growing chili in East Lombok and PTABC Food; and (vi) farmer groups growing vegetables and chili in Temanggung and a Carrefour agent, Pak Jenggot, as well as Indofood and herbal medicine companies.

2. Development of National and Local Agricultural Information Resources

15. This project component focused on developing an agriculture market information system to increase access to agricultural information for poor farmers and extension workers. With technical and financial support from the project, the MIS of the MOA’s Center for Agricultural Data and Information (CADI) was upgraded to increase its coverage and scope. Its coverage of market price information was expanded to include the project areas. A national farming website (http:portalagribisnis.deptan.go.id) was established, initially as a source of information and eventually as a platform for agricultural trade for importers, investors, traders, processors, and others who might be interested in sourcing from and supplying to the country’s agriculture sector. The MIS was restructured and included in that website. The project established three other websites: www.deptan.go.is, www.kitbang.deptan.go.id, and www.pustaka.deptan.go.id. 16. The project established a district agricultural information center (DAIC) and, as a pilot activity, one village agricultural information center (VAIC) in each of the five project districts. The objective of these centers was to improve farmers’ and agricultural extension workers’ access to the web and information technology services. However, the DAICs and the VAICs experienced operational problems such as poor telephone or internet connectivity and frequent electric power outages at the local level. Another problem, the lack of permanent staff to manage the DAIC facilities, was resolved by integrating the DAICs into the structural unit of the district governments. Agricultural extension workers accessed information from the DAICs on and off line and disseminated it to the farmers who were in dire need of such information. 17. Promotional posters were used to raise awareness of the existence of the VAICs. However, most of the users of VAIC facilities were students and teachers. Only a few farmers availed themselves of production and market information through the VAICs’ internet facilities. Reasons were the isolated or remote location of the project villages, limited transport services, and farmers’ limited financial capability to pay for transportation. To overcome these problems, the project used other modes of information dissemination such as print media, video compact discs (VCDs) and DVDs, and short message service (SMS). Simple and easy-to-read printed materials (such as leaflets and brochures) on agricultural technologies were produced and distributed to local extension offices, assessment institutes for agricultural technology (AIATs), VPICs, and farmers. Some of the materials and technical guides produced by the AIAT and the Indonesian Center for Agricultural Library and Technology Dissemination (ICALTD) for women beneficiaries addressed food processing using agricultural products as raw materials. In 2008, the project introduced SMS on cell phones to complement the online system. Training on the use of SMS to collect and deliver market information was conducted at the project districts.

3. Support for Agricultural Innovation Development and Dissemination

18. This project component aimed to reorient agricultural research to the needs of the marginal rain-fed areas, support national agricultural research institutes (NARIs) in developing agricultural innovations relevant to project areas and marginal rain-fed agriculture in general, and develop outreach programs to inform farmers about potential innovations they can use to improve agricultural production.

http://www.deptan.go.is/

http://www.kitbang.deptan.go.id/

http://www.pustaka.deptan.go.id/

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19. With the involvement of 19 NARIs, IAARD reoriented its research and development (R&D) towards technologies in marginal rain-fed areas and increased its R&D budget for these areas from about $8.7 billion in 2003 to $20.0 billion in 2007. A total of 128 technology packages were produced from 246 titles and topics in agricultural R&D for marginal rain-fed areas. Appendix 6 presents the annual R&D budget of the AIAT. 20. The project provided $5.72 million to the four AIATs in the project areas to undertake research and technology assessments. This support addressed region-specific technical problems and issues as well as the development of agricultural innovations suitable to the project areas. It supported 103 assessments and dissemination of 77 technology packages. Appendix 7 shows R&D activities and research outputs of the AIATs and selected NARIs. The project provided approximately $0.8 million to 11 selected NARIs and 4 AIATs for building refurbishment and procurement of vehicles, furniture, and laboratory equipment, to improve their capability to undertake R&D activities in marginal rain-fed areas. 21. To inform farmers about technological innovations in agricultural production, a manual of outreach programs was produced and distributed to relevant NARIs and AIATs. The ICALTD disseminated proven technologies in electronic and non-electronic formats (Appendix 8) including 1,500 pamphlets and printed materials on agricultural production and processing technologies. It also selected technical agricultural information from various sources and published the information in different formats: interactive CDs (25 topics), VCDs (10 topics), CDs (500 topics), and folders (34 topics). The ICALTD also made appropriate technologies available for download from its ―Agritech‖ website, which covers more than 400 titles. 22. Four AIATs produced 36 titles on innovation development through local initiatives. The participating organizations were NGOs, extension workers, farmers groups, and AIAT researchers. Under the AIATs’ aegis, 106 kinds of information exchange and capacity building activities were conducted, including farmers’ exchange visits, farmer seminars, field days, dissemination activities, and trainings. Training programs on household-business industries, gender mainstreaming, female empowerment, food processing (e.g., processing of coconut oil, chips for snacks, and instant ginger drink) for women beneficiaries were conducted in the five project districts (Appendix 5), as was training in other areas of agribusiness development.

4. Project Management

23. The project established a national steering committee (NSC) to monitor the national project coordination and monitoring unit (PCMU) and the PIUs to implement the project. The project provided adequate support for both institutions to manage and finance their staff, operational costs, equipment, minor civil works, and consultants. The project developed a project performance management system (PPMS) to monitor project progress. The project also ensured that the project external audits and independent reviews of NGOs and village implementation bodies conducted their assignments effectively. 24. The NSC, chaired by the MOA secretary general and with representatives from the National Development Planning Agency (BAPPENAS) and the Ministry of Finance (MOF), was established on 18 July 2002. Operational costs of the NSC, which supported project management and coordination, were covered by the PCMU from the national budget. The PCMU at the IAARD and the five PIUs in the project districts were responsible for planning, budgeting, coordinating, and monitoring project activities at the national and district levels.

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25. The PCMU was assisted by consultants and the national and local NGOs engaged by the project with an adequate number of supporting PCMU staff (i.e., 17). Project management and coordination were routinely implemented, and facilities (e.g., office equipment, furniture, and vehicles) were procured to serve project needs. The PCMU designed and established a PPMS that incorporated the gender impacts of project activities (e.g., income, employment, empowerment). Training activities were conducted at all levels on PPMS applications, including trainings on information management for PIU, AIAT, and DAIC staff (Appendix 9). 26. The PCMU also developed the implementation of an exit strategy to (i) facilitate the smooth phase-up of the five PIUs at project completion and the loan account closing date; and (ii) put in place appropriate institutional and financial arrangements for sustained operation and maintenance of project-supported infrastructure and facilities.

C. Project Costs

27. The actual project cost was $76.0 million, 6.6% higher than the appraisal estimate ($70.9 million), because of higher community contributions, and civil works and research expenditures funded by the government. ADB’s contribution was lower than the budget set ($50.8 million equivalent disbursed of $56.0 million equivalent allocated). ADB’s share of $50.8 million accounted for 66.7% of the project cost, while the government’s contribution, $17.5 million, constituted 23.0%. Contributions from district governments and farmers of about $7.7 million represented 10.2%. Appendix 10 compares the estimated budget and the actual costs.

28. ADB approved the request to reallocate loan proceeds among the project’s components and the expenditure categories of the ADB loan to foster positive consequences for preparing the following activities: (i) integrate rural agribusiness development, (ii) advocate greater participatory agriculture technology dissemination, (iii) advocate of the improved feedback of farmers’ technology needs, (iv) internalize closer coordination among institutions and stakeholders, and (v) formulate the exit strategy of the project.

D. Disbursements

29. The granting of an exemption for the project from Kepmen 35 5 allowed the loan proceeds to be channeled to the districts as grants before the format for the subsidiary grant agreement was finalized. An imprest account was established to expedite disbursements for the project fund from ADB. Appendix 11 presents the detailed plan and disbursements by year and financier. Appendix 12 shows the management of the flow of funds from various financiers. 30. The government complied with ADB’s conditions with regard to the disbursement of loan proceeds. Of the total loan allocation of SDR42.1 million at appraisal, 80% or SDR33.6 million was disbursed (Basic Data B.9b). The balance of SDR8.5 million was cancelled in two tranches: SDR4.9 million on 5 September 2007; and SDR3.6 million on 21 December 2010. Partial cancellations were made possible by savings in loan proceeds resulting from the appreciation of the SDR, the loan denomination, and the higher government and community contributions.

5 “Keputusan Mentri,‖ a minister decision, a circular issued by the MOF.

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E. Project Schedule

31. The project was originally scheduled to be implemented over 5 years, from 17 April 2003 to 30 June 2008. The project implementation period was extended from 5 years to 6.7 years (to 31 December 2009) for the following reasons: (i) the significant delay in signing the grant agreements,6 and in the start-up activities; (ii) the increase in the number of villages from 1,000, as targeted at appraisal, to 1,067, which was caused by the creation of small villages from large ones; (iii) to allow the formulation of an exit strategy and the preparation of videos of successful project experiences and the benefit assessment; (iv) to allow the documentation, compilation, and preservation of project-supported research findings, technical innovations, training manuals, and farming practices for future use; and (v) to allow the project more time to develop institutions and build capacity at the village level to ensure project sustainability. Appendix 13 compares the project implementation schedule at appraisal with the actual schedule. 32. In January 2010, the Government requested for a loan extension for another ten months from 31 December 2009 to 31 October 2010 to complete activities on: (i) strengthening and consolidation of results achieved, particularly in rural economic and post-investment activities; and (ii) strategy formulation to ensure sustainability of activities that have been implemented. ADB has approved the requested loan extension until 31 October 2010. Later, the Government had to recall the loan extension request due to unavailability of counterpart funds. Subsequently, the loan was closed on 5 January 2011.

F. Implementation Arrangements

33. Appendix 14 shows the modified project organizational chart compared with the organizational structure envisaged at appraisal. The executing agency for the project was the IAARD of the MOA, which was mainly responsible for the overall coordination of the project implementation. The MOA established the NSC to provide policy guidance on the coordination of project implementation. The IAARD established a PCMU headed by a project coordinator, who reported to the NSC. PIUs were established in each project district to manage, coordinate, and monitor the implementation of project activities at the district level. Under the leadership and management of the PCMU and the PIUs, regular technical coordination meetings were held and channels of communication were kept open. The meetings were very useful in setting the direction of project implementation and the inputs from the team of consultants, as well as in establishing close coordination and a synergistic relationship between the project management, the team of consultants, the PIUs, and the NGOs. Overall, the PCMU and PIUs implemented their functions satisfactorily and the activities were mostly accomplished, despite some delays. 34. The DCCs in the five districts likewise performed their function in the project effectively: as a forum to provide technical backstopping for village investments and to coordinate village-level development with district-level development initiatives as designed. The DCCs, working with the PIVFs and VPICs, have been instrumental in guiding the systematic use of village infrastructure to support agribusiness development and also in initiating brainstorming steps to sustain the changes and benefits introduced. The VPICs were responsible for implementing village-level investments. A national NGO contracted by the MOA was responsible for

6 Between the MOF and the five district authorities (the project implementing agencies). Although the loan was

signed on 17 January 2003, the grant agreements were not signed until 11 March 2004, to wait for the decree of the MOF (KMK 481, issued on 30 October 2003). This was to exclude the project from the previous decree (KMK 35, issued on 22 January 2003, requiring on-lending demand-driven loans initiated by district authorities to be borne directly by the concerned district authorities).

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supervising and coordinating the local NGOs or community organizations that were implementing the village activities of the first project component. 35. To ensure the sustainability of project activities after project completion and to improve coordination among the implementing agencies and units from the national level to the village level, three modifications were made in the organizational structure: (i) a district NGO consortium and an assistant team leader of the national NGO were created at the district level; (ii) the PIVF coordinated with the subdistrict head instead of the Agriculture Office, as originally designed; and (iii) the VPIC coordinated with the village head to harmonize the proposed village investments of the farmer groups with the government’s village-level investments. This arrangement did not exist in the original design.

36. In the third project component, the NARIs were responsible for the implementation of strategic research activities and supported the AIATs’ work in generating appropriate technology components for marginal rain-fed areas. The four AIATs, which fall under the IAARD, were responsible for implementing the project’s provincial R&D activities. 37. In general, implementation arrangements between the IAARD and implementing agencies and institutions were adequate to deliver project outputs. The IAARD was able to establish close, effective coordination with relevant agencies (i.e., the MOF and the National Planning Agency) as well as district governments. The five district heads earmarked counterpart funds from their budgets for the project and worked hard to set up the local implementation arrangements. G. Conditions and Covenants 38. None of the major covenants were modified, suspended, or waived, because most conditions and covenants were relevant and realistic to the project’s needs. The government’s overall compliance with the loan covenants has been generally satisfactory (Appendix 15). Except for the delays in loan effectiveness, hiring of consultants, and fielding of NGOs, there was no major noncompliance with covenants. Adequate care was taken by the IAARD in meeting all the financial, social, and environmental requirements in project planning, design, and implementation. Audit reports on project financial statements and accounts were prepared on time by the audit agency of the government, and no significant anomalies or discrepancies were noted. Transactions were adequately supported by relevant documents. Audit findings and recommendations were followed up and implemented by the PCMU and the PIUs. H. Consultant Recruitment and Procurement

39. Overall, all the consultants and NGOs were recruited, contracted, and mobilized as planned. The contract for the NGO services was awarded to a national NGO, Yayasan Agribisnis, which completed the recruitment of the district-level NGOs in September 2005. The IAARD, on 29 November 2004, awarded a contract to the AHT Group Consultants to engage international and domestic consultants. Both the NGO and the consulting firm were recruited in accordance with ADB’s Guidelines on the Use of Consultants. 40. The actual cost of consultancy services was less than the budget at appraisal, mainly due to appreciation of the SDR. A total of 796 person-months (pm) of consultancy services was allocated at appraisal: 742 pm of domestic consultants and 54 pm of international consultants (Appendix 16). A total of 859 pm of consultancy services—790 pm of domestic consultants and 69 pm of international consultants—was used. The overage was due to the need to increase the

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pm of the international team leader as a result of the extension of the project and the additional services needed from some international and domestic consultants. 41. Procurement of all vehicles and equipment was carried out by the PCMU in accordance with the procedures set out in the loan agreement, namely, international shopping (Appendix 17). Contracts for civil works such as the renovation of district offices and the procurement of office furniture were handled by the PIUs using local competitive bidding procedures acceptable to ADB. For the village infrastructure, utilities, and amenities, no third party or contractor was involved. Civil work contracts for community-managed village infrastructure such as small irrigation schemes and access roads, financed from the village investment funds, were carried out by the VPICs and communities through community participation. I. Performance of Consultants, Contractors, and Suppliers

42. As reported after the project performance audit in 2007, there was no major discrepancy with the services of the input suppliers and contractors, indicating that their services were satisfactory. The IAARD in general and the PCMU in particular did not encounter major problems with the consultants’ and NGOs’ services. The overall performance of the consultants was very satisfactory. The NGOs also satisfactorily achieved the objectives of organizing farmer groups and providing market assistance to link them with potential institutional buyers. J. Performance of the Borrower and the Executing Agency

43. Because of delays in (i) loan effectiveness, (ii) signing of grant agreements between the MOF and the district governments, and (iii) recruitment of consultant and NGO services, project performance was constrained in the first three years of implementation. The delay in start-up was overcome in good time. The IAARD made timely adjustments and substantial improvements to address implementation problems and concerns. Thus, the IAARD was able to catch up as a result of good management and operation, and implementation efficiency and effectiveness. The IAARD did not encounter significant problems in following ADB guidelines and procedures. The overall performance of the government and the IAARD was highly satisfactory in achieving the project’s development objective. This rating is supported by the project performance ratings given during the review missions (Basic Data C.5). K. Performance of ADB

44. ADB consistently provided timely advice and assistance, and monitored the project closely during implementation. ADB fielded 299 person-days of staff and consultant services for a project inception mission, eight regular project review missions, a midterm review mission, and a project completion report (PCR) mission (Basic Data D). The review missions were useful in recommending to the IAARD time-bound actions to improve implementation. These actions were implemented by the IAARD and proved effective in resolving implementation issues. Further, ADB acted promptly on the government’s requests for an interim arrangement related to the initial preparation and implementation of investment plans in 2003–2004, contract variations in consultancy services, partial cancellation of savings in loan proceeds, adoption of a flexible policy in setting the target for village coverage, and extension of the loan closing date. Based on the IAARD’s assessment, ADB’s performance in administering the project was highly satisfactory.

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III. EVALUATION OF PERFORMANCE A. Relevance

45. The project was rated as highly relevant during appraisal and at completion. It was designed to address the poverty problem in rural areas in Indonesia. At appraisal, the project was consistent with Indonesia’s policy and national strategy for drastic poverty reduction. It remained relevant at project completion because the policy of poverty eradication was still an important agenda item in the government’s 2004–2009 Medium-term Development Plan. 46. With the objective of reducing poverty through village-level investments and the introduction of innovations in agricultural production and marketing, the project was in line with ADB’s country and strategy program for the agriculture sector at appraisal and remained in line with ADB’s strategies for poverty reduction and gender mainstreaming at completion. During appraisal, the project was envisaged to be different from other projects, with village investments made by farmer groups using participatory approaches instead of by government agencies taking responsibility for managing funds for the construction of village infrastructure facilities.

B. Effectiveness in Achieving Outcome

47. The project is assessed as highly effective in meeting most of its objectives and outcomes. The overarching outcome, as stated in the DMF, was to increase innovation in agricultural production and marketing by poor farmers in five districts. This was expected to result in increases in the value of agricultural production or income of at least 25%. The project exceeded this target because it attained higher income growth, ranging from 30% to 50%. At project formulation, it was also envisaged that increases in the value of agricultural production would be achieved through increases in production and productivity of at least 25%, reduction in crop losses of at least 25%, and decreases in farm-market price differentials of at least 25%. The project exceeded the target growth rate in agricultural production. This is evident from the results of the IAARD impact study, which showed that the project brought about more than a 35% increase in agricultural production due to increased farm yields, cropping intensity, and/or area planted. The increase in agricultural production ranged from 33% to 48%. 48. On average, the reduction in crop losses was 21%, and it ranged from 10% to 30%. The decrease in postharvest losses could be attributed to the adoption of improved preharvest and postharvest practices and the existence of common-use drying floors and warehouse or storage facilities. Moreover, ex-farm prices increased by 10% to 20% as a result of product quality improvement arising from farmers’ adoption of superior crop varieties or clones and postharvest practices, as well as the establishment of better market contract arrangements with new buyers. 49. Gender mainstreaming of the project was likewise successful, with hard evidence showing that women benefited substantially in terms of income opportunities and empowerment. As a result of training on food processing, women farmers were able to engage in food processing and home-based agro-industries. The home-based business industries contributed 30%–40% to the total household income of women beneficiaries. Women who were also engaged in farming activities, such as vegetable and cacao production and goat farming, received training on agricultural production technologies. Women farmers’ empowerment is evidenced by their membership in committees in farmer groups, where they were actively involved in making decisions about investment planning, prioritization, and implementation. Women accounted for 16% of the farmer group officers (Appendix 2). Approximately 51% of the village facilitators and 53% of the intervillage facilitators were women.

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50. Using the participatory process or the bottom-up approach, the targeting of village-level public investments to location-specific needs of agricultural and rural development improved or was strengthened. About 90% of the poor farmers in the villages where investments have begun were satisfied with the quality and types of public investments because they chose the investments themselves based on location-specific needs, to promote agricultural and rural development, and because these investments increased their economic activities and income. 51. The project’s objective of increasing farmers’ access to information on agricultural production technologies and market opportunities was also achieved. Print media, VCDs/DVDs, radio, television, the internet, and SMS were used to disseminate information to farmers on improved production and processing technologies and prevailing market prices. The objective of reorienting the focus of agricultural research to the needs of marginal rain-fed areas was also attained, as is evident from the significant increase in the IAARD’s research budget allocation for such areas—130%, from Rp 8.7 billion in 2003 to Rp 20 billion in 2007 (Appendix 6). C. Efficiency in Achieving Outcome and Outputs

52. The project is assessed as efficient. The results of the financial and economic analyses (Appendix 18) indicate that village-level public investments on small-scale irrigation systems in all five project districts are financially and economically viable. The economic internal rate of return (EIRR) of individual investments ranges from 52% in Donggala to as high as 185% in Blora, which has the largest irrigated service area. 53. Most of the FIRRs are more than 50%. At appraisal, the investment for an access road in Omu, Donggala district was also found viable financially (FIRR = 26.3%) and economically (EIRR = 27.7%). Using 2011 constant prices, the recalculated FIRR of 22.7% and EIRR of 24.5% for the same access road project reveal that investment in this infrastructure is still financially and economically viable. D. Preliminary Assessment of Sustainability

54. The project outputs are rated most likely sustainable. The mission team for the PCR noted that two years after project completion, the condition of the infrastructure is relatively well maintained by villagers. The PCR mission was conducted 1.4 years after project completion, given the circumstances mentioned in para. 32. This confirmed that the participatory planning and construction of village-level investments were well implemented, resulting in strong ownership and a strong maintenance system. In several villages, a user fee is collected to cover the operations and maintenance (O&M) costs, indicating sustainable use of the infrastructure. Through village decrees, farmer groups were assigned to undertake the O&M of village infrastructure in the five project districts. These groups have expressed their willingness to provide free labor for this purpose. After project completion, the district governments asphalted or improved some farm roads constructed by farmer groups and have committed to provide a budget for asphalting or concreting farm roads in other villages. In some districts, it was reported that some village facilitators continued their roles without pay after project completion. 55. Measures being adopted to sustain DAIC operations in the five project districts include the integration of the DAICs in district bureaucracies and the provision of budgets by local governments in these districts to cover the DAICs’ monthly O&M costs. To generate funds to cover their O&M costs, the VAICs have initiated income-generating activities by charging fees for printing, photocopying, scanning, computer rental, data back-up, and poster production.

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56. Spillover effects of the project have also been reported to the PCR mission team. To spread the benefits from the introduction of improved agricultural technologies to other farmers and high school students in other villages or districts that were not covered by the project, some farmer groups in the five project districts have conducted trainings for free (e.g., cacao grafting, use of bio-fertilizer in cacao production, hatchery technology in poultry production, and organic vegetable production) and plan to continue implementing this activity.

E. Impact

57. In general, the project had positive economic, social, institutional, and environmental impacts. Economic impacts in the five project districts included (i) increased yields due to the adoption of improved farm technologies, including the use of new, superior varieties and clones; (ii) more diverse sources of income and employment, not only for farmer groups but also for individual beneficiaries, including women and landless members of farmer groups; (iii) improved incomes as a result of increased yields, cropping intensity, and planted areas—especially for the second and third cropping seasons (for irrigated farms)—as well as lower production costs from using organic fertilizer and biopesticides, reduced postharvest losses, and better prices received for farm produce; (iv) more opportunities for women to increase their incomes from farming and food processing activities; (v) increases in the price of lands adjacent to the farm roads constructed; (vi) increases in marketable surplus, thereby transforming some rice-deficit villages to rice-surplus areas; (vii) expansion of cultivated areas, especially with the opening of idle land (e.g., conversion of an idle, water-logged area in Donggala into productive land after construction of a drainage canal); (viii) decreases in product marketing costs and input procurement costs due to lower transport cost, as well as reduced travelling time resulting from farm road construction; (ix) increases in the number of buyers going to the villages due to the improved road system; (x) increases in capital build-up funds or savings of the farmer groups; and (xi) development of agribusiness enterprises (e.g., public transport, water pump services). 58. Anecdotal evidence provided to the PCR team revealed that the project’s most significant social impact was on empowerment of farmers and women. The project took a participatory and bottom-up approach to planning wherein farmer groups were proactively involved in selecting and implementing proposed investments. This involvement improved their self-esteem and decision-making capacity. As a result, their sense of community participation was revived. Their sense of responsibility for and ownership of project activities was nurtured and institutionalized. Many women beneficiaries served as village facilitators and members of farm groups. They reported that the project enhanced their social and economic status in the community and increased their self-confidence, employment opportunities, and income. 59. The project has enhanced the physical, human, and social assets of the poor. The additional income derived from the project enabled some beneficiaries to buy motorcycles and cover household expenses, including the costs of educating their children. Other social impacts were the increased volunteerism and participation of the villagers, including women, in the construction and rehabilitation of village infrastructure. The project also leveraged the farmer group relationships with local government units and other stakeholders by helping them formalize and strengthen their organization capability to deal with those stakeholders.

60. The PCR mission’s interaction with various stakeholders suggests that the project has had a significant institutional impact, in terms of strengthened institutions. The capacity of the MOA, the IAARD, and the district governments to execute and implement the project was enhanced. Their skills in using participatory strategies and bottom-up approaches in planning and implementation of village-level public investments are transferable across development

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investment programs. The project also brought about closer collaboration and coordination among implementing agencies and units from the national to the district levels, and with NGOs.

61. The project introduced environment-friendly technologies such as the use of livestock waste for biogas to produce cooking gas and bio-urine for fertilizer. This has other positive environmental effects such as reduced carbon dioxide from burning wood for cooking and reduced methane from livestock waste fermentation. The use of bio-pesticides in vegetable production has also had favorable effects on human health, while the use of organic and bio-fertilizers will help improve soil fertility.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment 62. As shown in Appendix 19, the PCR mission rated the project’s overall performance as highly successful because it was highly relevant to the Government’s and ADB’s policy of reducing poverty, highly effective in meeting indicators set in the DMF, efficient in the overall project management, and most likely sustainable. Most investments are well maintained by beneficiaries after project completion, with continuous support from the district governments, using the participatory approach. 63. The Government and the ADB staff also supported NGOs and consultants who worked very efficiently to closely address various implementation problems faced by the project. They also helped in properly and successfully delivering the targets, which were mostly higher than the targets at output and outcome levels, as well as the targets set for the impact in the initial project design and monitoring framework (Appendix 1). 64. The success of the project is also reflected in the physical progress, as assessed during the PCR mission. The actual achievement of each project component and output was higher than the initial targets in the program framework indicators (Appendix 20). There is a significant demand for replicating investments similar to those in the five districts to more than 300 districts. The Government and ADB should therefore, explore a multi-tranche financing facility for replicating the investments. B. Lessons

65. A number of lessons were learned through the project:

(i) The participatory approach and the adoption of gender mainstreaming in village investment planning and implementation are key factors in the project’s success. Poor farmers, including women, decided on the type of investments needed in their villages. That instilled in them a sense of ownership and responsibility that was critical to sustainability.

(ii) The focus on very poor, remote villages where limited government programs were operating contributed to the success of the project. The villagers really valued the investments and were willing to provide significant contributions.

(iii) Village-based planning, construction using local labors, and the O&M of small-scale village infrastructure have leveraged local resources, as compared with contracting them to a third party. This strategy minimizes potential corruption.

(iv) The mobilization of farmer groups is most effective with the active participation of village facilitators (50% of whom were women) who are village residents or

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respected village leaders (e.g., religious leaders), and the successful involvement of a consortium between a national NGO, local NGOs, and other civil society organizations.

(v) Close coordination between the district governments, the IAARD and AIATs, and the village heads from the start of the project is crucial in ensuring their continuous support after project implementation to sustain the benefits gained from the project.

(vi) An effective monitoring system that uses clear criteria and indicators to track development, including a digital map monitoring system, contributed significantly to the successful implementation of the project.

C. Recommendations

1. Project-Related

66. Future Monitoring. District governments should continue to monitor project activities after project completion. They need to regularly monitor the performance of the farmer groups’ agribusiness enterprises, the village infrastructure and facilities, and other support services. Doing so will ensure the viability and sustainability of the postproject impact, both quantitatively and qualitatively. 67. Further Action or Follow-Up. The government may conduct further training on cooperative organizations and management for the farmer groups, especially to improve their access to financial institutions. Market assistance should be provided continuously, especially for the farmer groups that are now producing large volumes, through the establishment of market linkages or market arrangements with potential buyers. 68. Timing of the Project Performance Evaluation Report. To measure the significant impacts of the project, the project performance review mission should be fielded in 2014, about 5 years after project completion. This will allow more time for village investment projects with long gestation periods to produce significant impacts on project beneficiaries.

2. General

69. The following actions are recommended for project appraisal of future projects:

(i) The MOA should proceed with a formal request from the government through the National Development Planning Agency and the MOF for a follow-up project to ensure that it is in the government and ADB pipelines.

(ii) Climate changes and food security are the focus of various development activities. The new proposed project should include these aspects in the design and strategies of potential investments.

(iii) To meet the significant needs for investments in public infrastructure and long-term credit for developing key commodities, integrated revenue and non-revenue investments that involve public-private partnerships should be explored. To replicate village investments, the new project should focus on other districts and villages that have a high incidence of poverty.

(iv) Investments in research and technology improvements should focus on exploring the value chains for commodities with the greatest comparative advantage in a clustered area. Market demands and economies of scale should be the basis for

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promoting any innovation to villagers. Attention should also be given to the certification system for improving the quality of products.

(v) Neither the MOA or local government authorities—including district governments—should serve as a financial institution that provides investment and working capital for villagers. They should improve the access of villagers to formal financial institutions by empowering villagers to comply with formal lending requirements through land certification, market networks, and business management.

(vi) Because Indonesia has been developing Islamic financing, mostly in urban areas, ADB and the government should explore the potential of Islamic financing products for various investments in rural areas.

(vii) The design of a project should focus on one outcome and the indicators set for the outputs should be quantitatively and qualitatively measurable to avoid potential modifications of outputs during implementation.

70. The following are general recommendations for project implementation:

(i) For sustainable O&M, district governments should be allowed to purchase assets (e.g., vehicles, computers) to use during project administration, and the local authorities should commit to use the assets to monitor and leverage services after project completion.

(ii) To avoid potential delays in the implementation of a project, the government should seek retroactive financing and/or prepare recruitment of services (including consultants and NGOs) before the loan becomes effective.

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PROJECT PERFORMANCE AGAINST INITIAL DESIGN FRAMEWORKa

Design Summary Monitoring Indicators/Targets PCR Assessment

Impact

Increased innovation in agricultural production and marketing by poor farmers

Poor farmers innovate in production, marketing, and agribusiness to increase value of agricultural production by at least 25% or decrease crop losses by at least 25% and decrease farm-market price differentials by at least 25% in target villages three years after project completion. More than 50% of the benefits accrue to poor farmers. Women are substantially benefited by the project in terms of income opportunities and empowerment.

Assessment showed (i) high FIRRs (14%–151%) and increased agricultural production from 31% to 48%; (ii) reduced post harvest losses from 10% to 30%; (iii) income growth from 30% to 50%; and (iv) increase in ex-farm price by 10% to 20%. Poor farmers accounted for 84% of the beneficiaries. Women-based business industries contributed 30%–40% to the total household income. About 51% of village facilitators and 53% of intervillage facilitators were women.

Data Sources and Reporting Mechanisms PCR Assessment

Village potential data survey, independent audits, project completion report, post completion studies

Monitoring indicators can be properly assessed in these sources.

Assumptions and Risks PCR Assessment

Assumptions:

District governments and villages will continue to support the institutions established by the project after project completion. Effective links can be established with ADB’s proposed project for rural microfinance to allow farmers access to credit for private investments to complement the public investments supported by this project. Risk:

The elite capture project benefits.

Continued government commitment toward sustainable development is in place. The cancellation of the microfinance program did not adversely affect the project. Because the project was properly monitored, the elite did not capture the project benefits.


Outcome:

Improved targeting of village-level public investments to location-specific needs of agricultural and rural development Increased access of farmers to information Reorientation of the focus of agricultural research to the needs of marginal rain-fed areas

At least 80% of poor farmers in target villages are satisfied with the quality and types of public investments in their village at project completion. At least 80% of poor farmers in target districts feel that they have adequate access to information about their income improvement potential and on means to achieve it at project completion. The government’s research budget for rain-fed marginal areas increases by about 30% over its present level 2 years after project completion.

Results of the satisfaction survey showed that 90% of the target farmers were satisfied with the quality and types of public investments of the project (87% to 93%). The proportion of poor farmers among the farmer-beneficiaries was reassessed in 2009 and estimated at 84%. An increased budgetary provision was prepared and included in the 2005–2009 strategic plan of the Ministry. The IARRD’s R&D budget for rain-fed marginal areas increased by 130% from 2003 to 2007.

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Farmer surveys in the project completion report; ADB’s project performance audit report The monitoring mechanisms for the indicators were properly formulated.


Assumptions:

Farmers will adopt the new method of initiative planning versus accepting top-down development investments, as was customary in the past. Community organizations and DCCs will play the expected role of galvanizing support for farmer groups.

Risks:

Facilitators will not be able to include the poorest farmers in the participatory process. Farmers do not understand their role in the process and cannot assume the proactive role required of them. Farmers do not believe that their planning exercise will result in investments at the village level because of participation fatigue and hence do not take the exercise seriously.

Assumptions:

Farmers were closely involved in planning and implementing various investments. They became more innovative and enterprising. VPICs were organized and active in 1,067 villages.

Risks:

The village facilitators had consistently sought out the poorest of the poor farmers in each of 1,067 selected villages, including obtaining the blessings of the influential village elders and religious leaders.


Outputs

1. Poor Farmer Empowerment (i) Group Mobilization (ii) Institutional

Development (iii) Village-level public

investments

Farmers’ groups are formed in all villages. Poor farmers and women receive adequate representation in the groups. Groups have effective facilitators. Groups are able to use a participatory process for decision making. PICs function as village-level bodies to assess and implement investments in every eligible village. PIVFs at the sub-district level are responsible as the public investment approval bodies. The DCCs function effectively as a forum to provide technical backstopping for village investments and farmer innovations and to coordinate village-level development with district-level development initiatives. All three of these institutions are formalized in the district administrative structure before the completion of the project. Farmer groups use the participatory process to identify village-level public interventions that will support innovations in agricultural production and marketing. Every farmer group is able to establish partnerships with public and private agencies that can assist them in

In 1,067 villages, 4,008 farmer groups were formed (23% male groups, 10% female groups, and 67% mixed-gender groups). The project provided skills training in social, management, and technical aspects. One VPIC has three to five members including a female facilitator. Most VPICs functioned well in assessing and implementing investments during and after the project was closed. PIVFs actively worked on public investment approval bodies at the sub-district level. DCCs worked with PIVFs and VPICs to use the village infrastructure to support agribusiness development and to sustain the changes and benefits introduced. The three institutions have been formalized in all districts, and they worked during and after the project was closed. Farmer groups used the participatory process to identify village-level public interventions and access to markets. The groups who produced large volumes were able to establish market contract arrangements with private agencies/companies. The market price information

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implementing investments and adopting innovations. Coverage of the market price information system of CADI increases to cover all project provinces.

system of the CADI had been improved. It includes general market information, production levels, market updates, and the latest production technologies.


Farmer surveys in the project completion report; ADB project performance audit report These sources were properly formulated.


Assumptions:

Terms of reference for national and local NGOs are well specified. Coordination between national and local NGOs is good. Local NGOs have the capacity to implement the project at the village level. Any shortfall in capacity can be made up by training from the national NGOs. Women facilitators accepted by farmers are effective. VPIC members understand the project concept and have sufficient capacity to undertake the project responsibility. District governments provide sufficient support for PIVFs. The governments and NGOs can work through new partnership modalities.

The assumptions were well formulated.


Outputs 2. Development of National and Local Agricultural Information Resources

The MIS includes more general market information, such as production levels and market updates, of interest to farmers. The coverage of the information system is nationwide. A system of regularly updating the information is established. A national farming website is established that will become a source of information and eventually a platform for agricultural trade. The farming website is used for business operations after it is operational. Information centers are established and functioning at the target district level.

The MIS included the national farming website,

covered over 2,000 commodities, and was regularly updated by the IAARD. The website (http//www.portal agribusiness deptan.go.id) is used as the one-stop shop/service for agricultural information, including market prices and technologies, and DAICs and VAICs were established to enable poor farmers’ access to the information technology services. Simple and easy-to-read extension materials such as leaflets, brochures, and other printed materials on agricultural technologies were produced and distributed to local extension offices, AIATs, VPICs, and farmers. Some of the extension materials and technical guides produced by the AIATs and the ICALTD for women beneficiaries were on food processing that uses agricultural products as raw materials.


Project completion report; ADB review mission reports

These sources were properly formulated.

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Assumptions:

Strong counterpart support is provided by the MOA, especially the IAARD, and by district governments. The private sector becomes an active user of the site.

The assumptions were well formulated.


Outputs

3. Agricultural Innovation Development and Dissemination Assist Borrower in reorienting its upstream technology development activities toward the needs of poor farmers through supporting staffing, operational costs, equipment, and consultancy services

Establish a fund to be administered by the AIATs in the target provinces

Human resources, basic knowledge, and support infrastructure have been developed within the IAARD. Fifteen target NARIs have undertaken specific research programs to develop agricultural technologies for marginal rain-fed areas that increase their research budgets for marginal rain-fed areas by at least 20% over levels in 2002.

At least five local innovative production/marketing methods for farmers are approved by the AIAT and are being implemented. At least five innovation development initiatives are implemented in each target district every year thereafter. Nineteen NARIs and four AIATs undertake outreach programs to disseminate appropriate technologies for project areas and for marginal rain-fed areas in general. At least 20 kinds of information-exchange activities including farmer fairs, farmer field days, trainings, seminars, and exchange visits have been held by the relevant AIAT in each target district. At least 20 information-exchange activities are held in each project district every year thereafter.

The capacity of IAARD and the NARIs were enhanced through training, clinic management, extension services, workshops, and seminars. Vehicles, furniture, and laboratory equipment were provided for 11 NARIs and AIATs. Over 100 research and assessment activities were implemented by the NARIs and AIATs. A total of 38 titles of local innovation development activities were conducted by four AIATs. Participating institutions include NGOs, extension workers, and farmer groups for adoption by poor farmers. The NARIs and AIATs converted manuals and technical information into interactive CDs (25 topics), VCDs (10 topics), CDs (500 topics), and folders (34 topics) for dissemination through libraries and technology. The ICALTD uploaded to its ―Agritech‖ website over 400 titles on appropriate technology as well as a large number of brochures, posters, manuals, and VCDs. About 106 capacity-building activities were conducted, including exchange visits, fairs, and seminars. Training programs on household-business industries, gender mainstreaming, women’s empowerment, and food processing (e.g., processing coconut oil, chips for snacks, and instant ginger drink) for women beneficiaries were also conducted in the five project districts.

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Project completion report; ADB review mission reports These sources were properly formulated.


Assumptions: There is wide publicity of the available grants. Local stakeholders undertake proactive initiatives.

Risks: The NARIs might be tempted to use the project fund for regular research

initiatives that are not directly relevant to marginal rain-fed areas.

The assumptions and risks were well formulated.

Design Summary - Outputs Monitoring Indicators/Targets PCR Assessment

4. Project Management for the PCMU, established at IAARD

and the PIUs at five districts

Adequate operational costs, equipment, staff, and consultant support are available for the NSC, PCMU, and five PIUs. A PPMS is developed. Adequate support exists for the DCCs, external audits, and independent review of NGOs and village implementation bodies; and a PCR is produced.

The NSC, PCMU, five PIUs, and five DCCs function well, and adequate financial, managerial, and technical supports exist to properly implement all investment activities.


Project reports; review mission reports; project completion report; project accounts These sources were properly formulated.

Assumptions and Risks Assumptions PCR Assessment

No assumptions and risks were formulated.

No assumptions and risks were assessed.

Inputs/Resources PCR Assessment

Adequate budget for the following investment categories: equipment and machinery; civil works, salaries, surveys and designs, community development; R&D; consultants; training; O&M; materials; village investment funds

Local counterpart funds are available in a timely manner.

ADB = Asian Development Bank; AIAT = Assessment Institutes of Agricultural Technology; B/C = benefit-cost ratio; CADI = Center for Agriculture Data and Information; DAIC = District Agricultural Information Center; DCC = district coordination committee; DVD = digital video disc ; EA = executing agency; FIRR = financial internal rate of return; FY = fiscal year; IAARD = Indonesian Agency for Agricultural Research and Development; ICALTD = Indonesian Center for Agriculture Library and Technology Dissemination; MOA = Ministry of Agriculture; NARI = National Agriculture Research Institute; NGO = nongovernment organization; NPV = net present value; NSC = national steering committee; PCMU = project coordination and monitoring unit; PIU = project implementation unit; PIVF = project intervillage forum; PPMS = project performance management system; R&D = research and development; SMS = short message service; VAIC = Village Agricultural Information Center; VCD = video compact disc; VPIC = village project investment committee. a

The DMF was refined during the February 2007 loan review mission.

b In the government’s audited financial report, costs incurred by the government and the district governments for these cost items were reported as recurrent costs amounting to $1.00 million for the government and $0.82 million for the district governments.

Sources: ADB (RRP: INO 34112), PCR mission interviews, and ADB mission reports.

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BREAKDOWN OF FARMER GROUP OFFICERS, VILLAGE FACILITATORS, AND INTERVILLAGE FACILITATORS BY GENDER

District

Farmer Group Officers Village Facilitators Intervillage Facilitators

Male Female

Total

Male Female Total Male Female

Total No. % No. % No. % No. % No. % No. %

Temanggung 2,462 90.0

276 10.0 2,738 285 48.0

312 52.0 597 285 65.0

153 35.0 438

Blora 2,115 90.0

236 10.0 2,351 329 51.0

314 49.0 643 467 50.0

461 50.0 928

East Lombok 935 89.0

121 11.0 1,056 103 46.0

121 54.0 224 103 46.0

121 54.0 224

Ende 2,194 74.0

773 26.0 2,967 170 49.0

174 51.0 344 179 55.0

144 45.0 323

Donggala 2,365 83.0

494 17.0 2,859 254 50.0

254 50.0 508 239 49.0

249 51.0 488

All districts 10,071 84.0 1,900 16.0 11,971 1,141 49.0 1,175 51.0 2,316 1,273 53.0 1,128 53.0 2,401 Source: Indonesian Agency for Agricultural Research and Development.

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BREAKDOWN OF FARMER GROUPS BY GENDER AND FARMER,

GROUP MEMBERS BY INCOME GROUP

Table A3.1: Number of Farmer Groups by District

District

Farmer Groups by Gender

All-Male Members All-Female Members Mixed Gender Total

Number % Number % Number %

Temanggung 325 35.0 189 21.0 410 44.0 924

Blora 239 30.0 121 15.0 429 54.0 789

East Lombok 85 25.0 19 6.0 243 70.0 347

Ende 29 3.0 25 3.0 938 95.0 992

Donggala 259 27.0 49 5.0 648 68.0 956

All districts 937 23.0 403 10.0 2,668 67.0 4,008

Source: Indonesian Agency for Agricultural Research and Development.

Table A3.2: Farmer Group Members by Income Group and by District

Income Group

Percent Poor

Poor Medium and High Income All Groups

District Male Female Subtotal Male Female Subtotal Male Female Total

Blora 29,980 8,999 38,979 9,522 4,847 14,369 39,502 13,846 53,348 73

Donggala 18,989 6,085 25,074 2,097 861 2,958 21,086 6,946 28,032 89

Ende 12,826 6,211 19,037 374 112 486 13,200 6,323 19,523 98

East Lombok 10,903 2,528 13,431 962 163 1,125 11,865 2,691 14,556 92

Temanggung 28,409 8,593 37,002 3,542 2,098 5,640 31,951 10,691 42,642 87

All districts 101,107 32,416 133,523 16,497 8,081 24,578 117,604 40,497 158,101 84

(76%) (24%) (100%) (67%) (33%) (100%) (74%) (26%) (100%) Note: Figures in parenthesis are percent shares. Source: Indonesian Agency for Agricultural Research and Development.

Appendix 4

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SUMMARY OF VILLAGE PUBLIC INVESTMENTS BY TYPE AND BY DISTRICT

Table A4.1: Number of Village Public Investments by Type and by District

District

Number of

Villages

Village Investment Type

FR VS MI TAD FT ID SW VM Total

Blora 295 11 8 522 586 595 1 4 6 1,733

Donggala 254 212 1 49 388 154 0 5 3 812

East Lombok 112 116 3 126 215 116 0 0 5 581

Ende 172 620 1 97 124 124 115 18 0 1,099

Temanggung 234 815 20 551 588 600 0 1 5 2,580

All districts 1,067 1,774 33 1,345 1,901 1,589 116 28 19 6,805

Percent 26 1 20 28 23 2 0 0 100

Table A4.2: Allocation of Village Investment Fund by District and by Village

District Number of

Villages Budget per District

(Rp) Budget Per Village

(Rp)

Blora 295 67,943,399,553 230,316,609

Donggala 254 57,230,453,625 225,316,747

Ende 172 37,840,050,625 220,000,294

East Lombok 112 25,713,086,421 229,581,129

Temanggung 234 55,632,887,444 237,747,382

Total/Average 1,067 48,871,975,534 228,592,432

Table A4.3: Investment Cost of Physical Village Infrastructurea by Source of Funds (Rp)

Beneficiaries/ Community

Total

District Project %

Blora 8,255,203,967 82 1,783,877,948 18 10,039,081,915

Donggala 9,889,482,000 69 4,358,894,700 31 14,248,376,700

Ende 7,363,872,865 74 2,427,580,556 25 9,791,453,421

East Lombok 4,993,150,725 47 5,582,944,560 53 10,576,095,285

Temanggung 9,343,054,178 65 5,123,943,450 35 14,466,997,628

All districts 39,844,763,735 67 19,277,241,214 33 59,122,004,949

FR = farm road; FT = farmers' training; ID = information development; MI = minor irrigation; TAD = technology assistance and dissemination; SW = soil and conservation; VM = village market; VS = village storage. a

Consist of farm roads and small-scale/minor irrigation systems.


Appendix 5

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DEMONSTRATION PLOTS AND FARMERS’ TRAININGS

Topics

Number of Villages Implementing

Demonstration Plots Farmers' Trainings

BL DG TM Total BL DG ED TM Total

Irrigated rice cultivation 56 44 12 112 85 6 91

Hybrid rice cultivation 6 6 1 1

Upland rice cultivation 1 1

Corn cultivation 49 20 1 70 2 56 4 62

Hybrid corn cultivation 38 3 2 43 1 1

Peanut cultivation 1 14 15

Vegetable cultivation 2 5 1 8 28 2 30

Garlic cultivation 1 1 2 2

Shallot cultivation 9 3 12 7 7

Onion cultivation 1 1

Tomato cultivation 2 1 3 2 2

Chili cultivation 7 17 24 16 16

Potato cultivation 2 1 3 3 3

Ornamental plant cultivation 4 4 4 4

Strawberry cultivation 1 1 3 3

Orange cultivation 1 1

Watermelon cultivation 1 1

Japanese pumpkin cultivation 3 3 1 1

Fruit plants cultivation 31 31

Root crop cultivation 63 63

Pomelo cultivation 1 1

Ginger cultivation 2 2 1 1

Coffee cultivation 3 3 2 11 13

Tobacco production 1 1

Utilization of medicinal plants 1 1

Longkan fruit handling 1 1

Albizia cultivation 5 5 4 4

Tree crop cultivation 1 1

Processing of agricultural products 11 47 58

Processing of chips for snacks 1 1 4 35 39

Processing of instant ginger drink 3 3

Chicken production 85 85

Goat/sheep production 122 1 58 181 7 2 85 32 126

Goat/sheep fattening 5 4 9 1 9 10

Cattle production 31 31 52 17 69

Appendix 5

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Number of Villages Implementing

Demonstration Plots Farmers’ Trainings

Topics BL DG TM Total BL DG ED TM Total

Cattle fattening 1 16 17 1 8 9

Duck production 2 2 1 1

Rabbit production 3 3 2 2

Livestock feed nutrition 4 4 Integrated livestock production and crop cultivation 7 19 26 7 1 8

Mix cropping cultivation 3 3

Soil and water conservation 1 1 3 85 88

Agriculture technology 34 34 34 4 38

Farm management

Agribusiness management 7 7 7 7

Balanced fertilizer application 1 1 2 1 1

Organic fertilizer production 1 2 4 7 2 85 30 117

Organic pesticides 6 6 6 9 15

Institutional development 3 3 3 85 10 98

Gender mainstreaming 85 85

Women farmer empowerment 23 23 23 23

Household-business industry 110 110 110 19 129

Cocoa cultivation 71 71 13 13

Eggplant cultivation 1 1

Coconut oil processing 2 2 7 7

Vanilla production 1 1

Coconut cultivation 1 1

Total 468 209 184 861 202 46 825 302 1,375 BL = Blora; DG = Donggala; ED = Ende; TM = Temanggung. Source: Indonesian Agency for Agricultural Research and Development.

Appendix 6

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ANNUAL RESEARCH AND DEVELOPMENT BUDGET FOR MARGINAL RAIN-FED AREAS

Annual Research Budget (Rp Million)

Research Area 2003 2004 2005 2006 2007

Food and horticultural crops 2,028.4 1,008.2 1,255.7 1,295.0

Livestock 233.9 574.5 179.0 240.0

Tree crops 2,098.5 650.7 386.7 634.0 865.0

Agricultural resources 1,850.7 3,376.1 3,026.4 3,104.0 5,415.0

Agricultural machinery 329.9 150.0 128.0

Local specific technology (AIATs) 4,182.2 2,098.5 3,797.4 9,692.2 12,431.5

Total 8,695.2 8,728.2 8,547.7 15,053.7 20,006.5

Percent increase, 2003–2007 = 130%

Average annual growth rate, 2004–2007 = 27%/year AIAT = Assessment Institute of Agricultural Technology. Source: Indonesian Agency for Agricultural Research and Development.

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RESEARCH AND DEVELOPMENT AND LOCAL INITIATIVES FOR MARGINAL RAIN-FED AREAS

A. Some of the Research and Assessments by Title Some of the Institutes Involved

One-season food crops/horticulture-based farming system; livestock-based farming system; application of promising cacao; coping strategy of poor farmers; dairy goat production as an agribusiness in marginal areas; utilization of organic waste and microbes for red ginger; farming under coconut trees in East Lombok; technology development for mechanized banana; agribusiness activities in the neglected areas; technology development on integrated pest control and drip irrigation system for potato farming in Temanggung; integrated water and nutrients management in shallot farming in Donggala; soil conservation for vegetable-based farming system in Temanggung; utilization of agricultural and livestock farming wastes as organic fertilizer to control environmental pollution in the marginal land areas in Donggala; improvement of environment-friendly livestock production management through application of the bio-process of agricultural wastes and utilization of medicinal plants in Blora; integrated pest control research for smallholders of estate crops, especially cocoa in Donggala; developing intellectual property assets of technology innovation and transfer to the farmers; technology to improve farmers' income through rejuvenation and preparation of parent plant stock yard application; installation unit for biomass processing into biogas energy for marginal land in Nusa Tenggara Timur; development of a model for rural paddy hatchery development of candlenut processing technology for marginal lands in Ende.

ICRI for Food Crops and Livestock, Central Java AIAT, ICRI across districts, ICRI Soils Agro-Climate, ICASERD Indonesian Coffee and Cacao Research Institute; BBP2TP; Indonesian Animal Production Research Institute; Indonesian Medicinal and Aromatic Crops Research Institute; Indonesian Center for Agricultural Engineering Research and Development; Indonesian Vegetable Research Institute; Indonesian Soil Research Institute; ICALTD

B. Some Local Initiatives to Develop Innovations for Poor Farmers Location/Implementing Agency

Testing performance of cacao fruit-breaking machine; simple cacao seed separator performance test; extension strategy through amateur radio; demonstration plot on the use of Walangsangit; health supplement for local chicken farming; use of agricultural wastes (dried banana leaves and Kiambang) as a source of mixed substrate for cultivation of mushroom; Bodox as an alternative of animal protein supply for duck layer feeds; demonstration plot on the use of male chicken rotation of mating and use of carton box as hatching machine to increase chicken productivity; utilization of tobacco plant as plant pesticide and use of its compost in cultivation of some vegetables; demonstration plot on the use of Maja fruit as plant; pesticide for Walangsangit control in rice farming; postharvest handling of cassava and banana; postharvest handling of cocoa; processing instant herbal drug from Empon-Empon; banana farming technology to support agricultural development in Ende

Donggala, AIAT-Central Sulawesi; East Lombok, AIAT-West Nusa Tenggara; Ende, AIAT-East Nusa Tenggara;

AIAT = Assessment Institute for Agricultural Technology; BBP2TP = Balai Besar Pengkajian dan Pengembangan Teknologi Pertanian (Center for Agricultural Research and Technology Development); ICALTD = Indonesian Center for Agricultural Library and Technology Dissemination; ICASERD = Indonesian Center for Agro Socio-Economic Research and Development; ICRI = Indonesian Central Research Institute and Development; ICPHTD = Indonesian Center for Postharvest Technology Development; KP KIAT = Kantor Pengelola Kekayaan Intelektual dan Alih Teknologi (Intellectual Property Office of Management and Technology Transfer). Source: Indonesian Agency for Agricultural Research and Development.

Appendix 8

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SUMMARY OF TECHNOLOGIES DISSEMINATED AND TECHNICAL INFORMATION MATERIALS IN ELECTRONIC AND NONELECTRONIC FORMATS PREPARED

FOR MARGINAL RAIN-FED DRY LAND AREAS

Table A8.1: Some Technologies and Best Farm Practices Disseminated by the Assessment Institutes for Agricultural Technology

Technologies and/or Best Farm Practices

Utilization of cacao pulp as feedstuff for ruminantsi; Integrated pest management; best practices: crop management in dry land II; organic farming, from trash becomes money; Gliricidia maculate as fence and feed for ruminant; virgin coconut oil technology; compost from cacao by product and manure; integrated farming of vegetables and sheep; land conservation and strip cropping system; integrated farming of cacao and goat; integrated land conservation toward erosion minimalist on tobacco; biopesticide from plants; organic farming toward improved land quality and productivity; cacao grafting technique; Nimba (Azadirachta indica) as biopesticide; best practices/technology for countryside development; integrated paddy management; cattle feedlot technology; improving quality and quantity of grass; paddy and crops superior variety description; corn cob for ruminant feedstuff; integrated crop management; best farming systems practices/technology; feeding management in feedlot; forages for goat and sheep.


Table A8.2: Technical Information Materials in Electronic and Nonelectronic Format

Developed and Distributed by Assessment Institutes for Agricultural Technology

Title of Technical Information Materials I. VCD/DVD: simple hatchery; fertilization of paddy; paddy scientific bank; compost making; rice straw ammonization; improving cacao quality; sheep fattening; corn plant management; dried chili processing; red chili plant management; cacao postharvest technology; terracing and land clearing; tapioca and banana for flour processing; potato, rice corn, corn cracker and banana chip processing; how to process virgin coconut oil; keycap from coconut juice; citrus plant management; and land management. II. Comics: sustainable farming in dry land; use of animal manure for composting;

compost: using and making; hybrid chick production; balance fertilization. III. Booklets and Leaflets: ginger cultivation, potato cultivation, paddy cultivation, curcuma

cultivation; dam: making and using; duck egg preservation. Source: Indonesian Agency for Agricultural Research and Development.

Appendix 8

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Table A8.3: List of Technical Information Materials Developed and Distributed by the Indonesian Center for Agricultural Library and Technology Dissemination

Title of Technical Information Materials I. Leaflets and Booklets: Best practices in the production of the following commodities: red onion, chicken, chili, corn, fruits crops, peanut, cacao, goat, soybean, potato, coffee, cucumber, mango, pineapple, banana, vegetable, tomato, cassava II. Interactive CD/VCD: Alley cropping; paddy straw fermentation; banana processing technology; utilization of home yard; compost manufacturing; farming and postharvest processing of cashew nut; fattening technologies for goat and sheep; alternative feeds and utilization of waste on cattle feed; farming and postharvest processing of chilies, cacao, dry land rice, cabbage, potatoes, oranges, soybean, cassava, medicinal plant, coconut; farming of peanut; utilization of terrace supporting plants and sustaining critical land; and maize farming and utilization of corn cob for cattle beef feed III. Information Materials: Duck layer farming; water and soil conservation; utilization of agricultural wastes; technology of processing virgin coconut oil, potato chip, cashew nut syrup, banana flour, feed processing from cacao waste; sheep and goat rearing; and corn cultivation and postharvest processing IV. Folders: Land conservation by alley cropping system; coconut shell charcoal; compost manufacturing; egg hatching by using kerosene-fueled oven; simple egg hatching technology; chili drying; utilization of home yard; cultivation of grasses for animal feeds; cow fattening; processing of coconut sugar, paddy straw by using urea, compost by using starter microbes, soybean sauce, coconut water sauce, dried cassava, cassava powder, and tapioca soybean milk; ginger cultivation; construction of channel dam for land irrigation and flood control; rainwater management; postharvest handling of cacao; organic fertilizer, processing agricultural wastes; rice cultivation without land tillage; corn cob for ruminant feed; preparation of land terrace; weeds, supporting crops, and feeds for sheep; feeds for goats and sheep; cashew nut farming; ―Nimba‖ as plant pesticide; simple method to preserve duck eggs; botanical potato seed as an alternative in potato planting; cutting in orange plant; technology of processing virgin coconut oil, potato chips, cashew nut syrup, banana flour, and tapioca (cassava) flour V. Other Materials: Technology of feed processing from cacao wastes Technology of organic fertilizer processing from sheep and goat manures Technology of corn cob and chip processing Utilization of weed (―gamal‖) as animal feed Water pond construction and benefits Technology of multiplication of cacao plants ICALTD = Indonesian Center for Agricultural Library and Technology Dissemination. Source: Indonesian Agency for Agricultural Research and Development.

Appendix 9

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TRAINING PROGRAMS CONDUCTED FOR PROJECT STAFF

Short-Term Training Programs for AIAT, PIU, and DAIC Staff

Title of Training/Workshop Participants 1. Capacity Building (website development and

management, database development)

10 AIAT and PIU Information Management staff

2. Capacity Building of Agricultural Technology Information Management Staff (designing and implementing website, database management of agricultural technology information, managing network infrastructure, and disseminating agricultural innovation)

26 participants from AIAT and DAIC

3. Training Workshop on Information Management

25 information staff of AIAT and 13 information management staff of PIUs in the five districts

4. Training on Information Management, Database Management, Design, Management, and Website Development

30 DAIC and PCMU staff

5. Workshop on Using Information Technology to Farmers in Accessing Agricultural Information

200 participants – from District Agricultural Unit, PIU staff, and village investment committee members from five districts

AIAT = Assessment Institute for Agricultural Technology; DAIC = District Agricultural Information Center; PCMU = project coordination and monitoring unit; PIU = project implementation unit. Source: Indonesian Agency for Agricultural Research and Development.

Appendix 10

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PROJECT COST BY EXPENDITURE

Table A10.1: Project Cost by Expenditure, at Appraisal ($’000)

No. Category ADB Government

District Governments, Beneficiaries Total

01 Civil works 341 39 0 380 02 Equipment 2,376 632 0 3,008 03 Materials 126 14 0 140 04 Training/fellowships 4,232 243 0 4,475 05 Consulting services 5,492 0 0 5,492 06 Operation and maintenance 3,632 1,052 170 4,854

07 Surveys, investigation, design, and mapping 465 52 0 517

08 Research and development 2,338 259 0 2,597 09 Community development (NGO) 8,940 133 0 9,073 10 Village investment fund 27,000 3,750 6,750 37,500 11 Interest during construction 1,058 0 0 1,058 Subtotal 56,000 6,174 6,920 69,094 Recurrent costs 0 1,004 818 1,822 Total 56,000 7,178 7,738 70,916

ADB = Asian Development Bank; NGO = nongovernmental organization. Sources: ADB’s RRP; and Government of Indonesia.

Table A10.2: Project Cost by Expenditure, Actual ($’000)

No. Category ADB Government

District Governments, Beneficiaries Total

01 Civil works 314 50 0 364 02 Equipment 2,983 0 0 2,983 03 Materials 81 0 0 81 04 Training/fellowships 3,824 0 0 3,824 05 Consulting services 3,369 0 0 3,369 06 Operation and maintenance 3,948 0 170 4,118

07 Surveys, investigation, design, and mapping 399

0 0 399

08 Research and development 3,831 0 0 3,831 09 Community development (NGO) 4,456 0 0 4,456 10 Village investment fund 25,985 0 6,750 32,735 11 Interest during construction 1,575 0 0 1,575 Subtotal 50,765 50 6,920 57,735 Recurrent costs 0 17,407 818 18,225 Total 50,765 17,457 7,738 75,960

ADB = Asian Development Bank; NGO = nongovernmental organization. Sources: ADB and Government of Indonesia.

32 Appendix 11

PLANNED AND ACTUAL DISBURSEMENT

Table A11: Planned and Actual Yearly Disbursement ($’000)

Yearly Disbursements Accumulated Disbursements

Year Planned Actual Year Planned Actual

2003 4,051 104 2003 4,051 0

2004 13,830 2,629 2004 17,881 2,525

2005 18,503 8,762 2005 36,383 8,015

2006 17,618 14,676 2006 54,002 19,594

2007 16,915 23,536 2007 70,916 30,918

2008 13,769 2008 40,487

2009 14,931 2009 46,965

2010 3,618 2010 50,583

2011 182 2011 50,765

Sources: ADB and Government of Indonesia.

Sources: ADB and Government of Indonesia.

Figure A11. 2: Planned and Actual Accumulated Disbursements ($’000)

0

20,000

40,000

60,000

80,000

100,000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Year

$'000 Planned

Actual

Figure A11.1: Planned and Actual Disbursements ($’000)

0

5,000

10,000

15,000

20,000

25,000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Year

Planned

Actual

$'000

Appendix 12 33

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FUND FLOW ARRANGEMENTS

Source: Mission consultations with Ministry of Finance.

Ministry of

Finance

Indonesia Resident Mission/Asian Development

Bank Headquarters

National

Executing Agency Project Coordination and

Management Unit

Bank Indonesia

Special Account

District

Subdistrict

Village

Suppliers of Village Investments

District Provincial

Treasury Office

1 &16

3 &18

4

Farmer Groups

Intervillage Forum

Project Implementation

Unit

5

6

7

Village Bank

Account

8

Village Project Investment Committee

10

11

12

2 & 17

Cash Flow

Document Flow

District Bank

Indonesia Office

Provincial Treasury

Operating Account

15

9

13

14

8a

8b

8c

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PLANNED AND ACTUAL IMPLEMENTATION SCHEDULE

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DCC = district coordination committee; MIS = management information system; MOA = Ministry of Agriculture; NGO = nongovernment organization; NSC = national steering committee; PCMU = project coordination and monitoring unit; PIU = project implementation unit; PIVFs = project intervillage forums; PPMS= project performance and monitoring system.

Sources: ADB (RRP: INO 34112) and Government’s Project Completion Report.

Appendix 14

36

PROJECT ORGANIZATIONAL CHART

Figure A14.1: Project Organizational Chart, at Appraisal

Sources: ADB (RRP: INO 34112) and Project Administration Memorandum (PAM) for the

Poor Farmers’ Income Improvement through Innovation Project.

National

Farmer Group

Province

Sub-District

Village

Asian Development Bank

Project Implementation Unit

Village Facilitator

National Steering Committee

National Nongovernment

Organization

Project Intervillage

Forum

Nongovernment Organization

Consortium

Nongovernment Organization

Project Coordination and Monitoring Unit

Ministry of Agriculture Staff

Consultants

Agriculture

Office

Information Center for Agricultural Extension, the Food Security Body,

Agriculture Service Staff Consultants

Assessment Institute for

Agricultural Technology

District Coordination Committee

Note Direct Administration and Supervision Reporting

Technical Guidance, Assistance, and Coordination

District


Bupati

National Agricultural Research

Institutes

Agency for Agricultural Research and Development

Appendix 14

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Figure A14.2: Project Organizational Chart, Actual -

District NGO

Consortium

Head of Village

Sub District Agriculture Service & FFL

Head Sub District

Assistant Team

Leader (ATL) of

the National

NGO

Asian Development Bank

National

Steering Committee

National

Farmer Groups

Province

Sub-District

Village

Project Implementation Unit

Village

Facilitator

National Nongovernmental

Organization

Project Intervillage

Forum

Nongovernmental Organization

Project Coordination and Monitoring Unit

Ministry of Agriculture Staff

Consultants

Information Center for Agricultural Extension, the Food Security Body,

Agriculture Service Staff Consultants

Assessment Institute for

Agricultural Technology

District Coordination

Committee

Note Direct Administration and Supervision Reporting

Technical Guidance, Assistance, and Coordination

District


District Head

National Agricultural Research Institutes

Agency for Agricultural Research and Development

ATL = assistant team leader; NGO = nongovernment organization. Source: Government of Indonesia’s project completion report.

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STATUS OF COMPLIANCE WITH LOAN COVENANTS

Nature of Covenant

Reference in Loan Agreement

Status of Compliance

1. Environmental Covenants: The Government will ensure, or cause the

governments of the Project Districts to ensure that: Project implemented shall be carried out in accordance with the existing environmental laws, regulations and standards of the Borrower and the Bank’s environmental procedures, requirements and guidelines; All monitoring and mitigation measures indicated in the IEE shall be undertaken for the Project. In particular: (a) no physical intervention (e.g., rehabilitation and/or construction of new roads or irrigation systems, introduction of a new species in agriculture improvement and livestock) in the villages adjacent to national parks or other protected areas, specifically, to Rinjani Protected Area and Lore Lindu National park shall be undertaken without endorsement of local environmental NGOs, the appropriate local government authority, the NSC, and the Bank on a case to case basis; and (b) the public shall have free access to environmental information pertaining to the Project: as part of each village investment plan assessment, the PIVFs shall carry out environmental screening and where applicable, obtain an initial environmental examination in accordance with ADB’s Environmental Assessment Requirements dated March 1998. Any negative environmental impact that may occur as a result of the implementation of a village investment plan shall be mitigated as indicated in such IEE.

Loan Agreement, Schedule 6, para. 15

Complied with. (a) No activities conducted in these areas (b) No restriction to access to environmental information Environmental screening enforced in the village investment proposal

2. Social Covenants: As part of each village investment plan assessment, the

PIVFs shall carry out social assessment of each village investment plan to ensure that there is no displacement of people from land, income sources, housing or other assets as a result of village investment activities. In case of any loss of land, income sources, housing or other assets, the Borrower shall ensure that affected parties shall be compensated at replacement cost agreed upon by those affected and endorsed in writing by the farmer group undertaking the investment.

Loan Agreement, Schedule 6, para.16 (Social Assessment)

Fully complied with. The affected parties have made written statements of their loss of land for physical infrastructure development as donations to the community ownership which were endorsed by the village government authorities.

(a) Governments of the Project Districts to ensure that the gender action plan developed by the Project is complied with during the implementation of the Project so that (i) at least one facilitator in every Project Village will be a woman and that a woman facilitator will be one of the three signatories to the VPIC Account for receiving funds for investments approved by the PIVF; (ii) a woman village facilitator from each Project Village will be a member of the PIVF; and (iii) village investment plan selection criteria will provide additional weighting to investments that improve welfare of women, and include components or features

Loan Agreement, Schedule 6, para. 17 M (Gender)

Fully complied with. (i) Fully implemented as set in the village investment requirements. (ii) Fully implemented as set in the village investment requirements. (iii) Women participation in decision

making for village investment prioritization.

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to promote and facilitate women’s involvement in investment implementation. (b) The Borrower shall ensure, or cause the Project Districts to ensure that assessment, processing and implementation of village investment plans shall be carried out in full compliance with the participatory processes developed and agreed upon between the Borrower and the Bank.

Loan Agreement, Schedule 6, para. 18 (Participatory Processes)

Complied with. Participatory process in village investment plans has been fully implemented.

(c) The Government shall ensure that during the first year of Project implementation, the PCMU shall formalize eligibility criteria initially agreed upon between the Borrower and the Bank for selection of villages subject to the Bank’s approval.

Loan Agreement Schedule 6, para. 19 (Eligibility Criteria for Village -level Investments)

Complied with. Eligibility criteria have been developed by the PCMU and approved by the ADB in FY 2003.

3. Financial: (a) For the purpose of audit of accounts and financial statements of

the project, the Borrower shall ensure that any independent auditors financed from Loan proceeds shall be selected and engaged in accordance with competitive selection procedures acceptable to the Bank.

Loan Agreement, Schedule 6, para 21 (Audit)

Complied with. The BPKP has been engaged for this purpose.

(b) The Borrower shall prepare and shall cause the governments of the Project Districts to prepare, by 31 December of each year, an annual work plan for the next year to ensure that during each year of Project implementation adequate budgetary allocation of required counterpart funds is made and such funds are released by the relevant authorities on a timely and regular basis to facilitate Project implementation. The operation plan shall include (i) the allocations of sufficient counterpart funds for Project implementation; (ii) proposed budgetary allocation for the rehabilitation of roads; and (iii) financing plan for the project activities for the succeeding year.

Loan Agreement, Schedule 6, para. 9 (Counterpart Funds)

Complied with. Annual work plan has been prepared at the end of the fiscal year.

(c) The Borrower shall ensure that throughout the period of Project implementation, the Loan proceeds shall be disbursed to the Project Districts by budgetary transfers earmarked for such purposes.

Loan Agreement, Schedule 6, para. 10 (Use of earmarked funds)

Complied with. Has been routinely implemented yearly.

(d) The Governments of the Project Districts ensure the provision of the Loan proceeds, and the counterpart contributions necessary for financing Project activities shall continue throughout the Project implementation period, not-withstanding: any change in authority or responsibility for channeling of external assistance, and for provision of corresponding counterpart contributions between the national Government and districts; or any requirements for provision of matching counterpart contributions for funding Project activities from the Project Districts arising from the full implementation of Laws 22 and 25 of 1999.

Schedule 6, para. 11-14 (Laws 22 and 25)

Complied with. The local governments have continued to support counterpart contributions yearly.

(e) The Borrower shall provide timely updates to the Bank on the process of decentralization and take into account any views expressed by the Bank thereon.


Fully complied with. The Bank kept informed and updated on the process of decentralization.

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(f) If existing Project districts are subdivided during or before Project implementation as a result of the decentralization process, villages in newly formed districts will be eligible to receive Project funds if the new district governments make the commitments to Project implementation similar to those made by the governments of the Project Districts in their commitment letters addressed to the Bank.


Fully complied, giving rise to 67 new villages in the project districts. The target grew from 1,000 to 1,067 villages, resulted from the drawing of new boundaries for big villages (pemekaran).

(g) Upon completion of the Project, the project activities shall be sustained and incorporated into the planning and budgetary processes of the governments of the Project Districts and shall be funded through regular budgetary allocation of the governments of the Project Districts.


Complied. Districts incorporated activities introduced by the project into the government planning and budgetary processes.

4. Other Covenants:

Established, Staffed, and Operating PMU/PIU: (i) A Project Coordination and

Monitoring unit (PCMU) shall be established within the IAARD and shall serve as the NSC’s secretariat. The PCMU shall be headed by as Project Coordinator. The Project Coordinator shall have the appropriate authority for administrative and operational matters and shall be assisted by three assistant coordinators responsible for Part A, Part B and Part C of the Project. (ii) Project Implementation Units (PIU). PIUs shall be established in each Project District

within the office of the Bupati. A PIU shall manage, coordinate and monitor the implementation of project components at the district level. The Bupati may assign primary responsibility for Project implementation to the relevant agency most suited to implement the Project. A Project Manager shall have appropriate authority for administrative and operational matters and shall be appointed by the Bupati to head the PIU. Each PIU shall be provided with office premises and adequate staff assigned full-time by the Bupati.

Loan Agreement, Schedule 6, para. 3 (Implementation Arrangements) Loan Agreement, Schedule 6, para. 5 (Implementation Arrangements)

Fully complied with. PCMU established. Project coordinator and assistant coordinators posted. Fully complied with. PIUs established in five districts of Temanggung and Blora in Central Java, East Lombok in West Nusa Tenggara, Ende in East Nusa Tenggara, and Donggala in Central Sulawesi.

(b) Fielding of Consultants: The services of consultants shall be utilized in

carrying out the Project, particularly with regard to: project implementation and procedures, project management information systems, project monitoring and evaluation, complaints resolution, participatory planning, agricultural marketing, economic and financial analyses, gender related issues, and project management and coordination.

Loan Agreement, Schedule 5, para. 1 (Consultants)

Complied with late. Consultants were recruited and fielded in December 2004.

(c) Project Progress. (i) In the third year of the Project implementation, the

Borrower shall submit to the Bank a midterm review report following which the Borrower and the Bank shall undertake a midterm review of the Project to assess the initial impact of completed Project outputs, and to make adjustments, as necessary to subsequent Project implementation. The review will assess the

Loan Agreement, Schedule 6, para. 20 (Midterm Review)

Complied with. Midterm Project Implementation Report has been prepared and submitted to ADB prior to the ADB MTR fielded on 9–23 June 2006. Initial impact assessment of completed project

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adequacy of budget allocations, disbursement of loan proceeds targeting mechanisms, and delivery of Project inputs.

outputs has been conducted, and the report was completed.

(ii) Within the first 12 months of Project implementation, the Borrower shall establish a PPMS, satisfactory to the Bank, for monitoring progress in farm and agribusiness performance. Such PPMS shall, inter alia, monitor social impact and impact on agricultural productivity and marketing.

Schedule 6, para. 22 (Project Performance Management System)

Complied with late. A computerized PPMS was developed. Workshops, training, monitoring, and evaluation on its operation were regularly organized by PCMU /PIUs.

(iii) Semi-annual reports shall be submitted to the Bank. Section 4.07 (b) (Semi-Annual Reports)

Fully complied with. Routinely implemented.

(iv) Promptly after physical completion of the project, not later than 3 months, the Borrower shall prepare and furnish to the Bank a report in such form and detail as the Bank shall request.

Section 4.07 (c) (Project Completion Report)

Complied with. The draft of the project completion report was submitted on time

(v) A National Steering Committee (NSC) shall comprise of representatives of the MOA, BAPPENAS, MOF and other concerned stakeholders as may be determined by the chairperson of the NSC. NSC shall be responsible for overseeing and providing policy guidance in the coordination of the Project implementation. It shall meet on a regular basis at least semi-annually, or more often if necessary.

Loan Agreement, Schedule 6, para. 1 (Implementation Arrangements)

Complied with. NSC established and coordination meetings and implemented field supervision as required.

(d) Project Executing Agency and Implementing Agencies: (i) IAARD shall

be the Project EA responsible for overall coordination of project implementation. Offices of the head of the Project District governments (Bupati) shall be IAs for Part A and IAARD for Parts B, C, and D. Depending upon the specific administrative situation of the Project District, the Bupati may assign primary responsibility for project implementation to the Office of Agricultural Services, the Food Security Body, BIPP, or other relevant agency that in view of the Bupati is most suited to implement the Project. A National-level NGO shall be responsible for supervision and coordination of local NGOs/community organizations contracted to implement the village level activities under Part A of the Project.


Complied with. The EA and IAs were appointed and have taken on their responsibilities in project implementation. A national NGO has taken responsibilities for supervision and coordination of local NGOs.

(ii) District Coordination Committee (DCC). DCC shall be established in each

Project District within the office of the head of the District government (Bupati). Members of the DCC shall include representatives of local parliament, a representative of the Regional Advisory Committee (RAC) and staff of relevant district government services officially assigned by the Bupati.


Complied with. DCCs have been established in five districts with relevant members.

(iii) Project Inter-Village Forum (PIVF): PIVF shall be established at the sub-

district level consisting of the elected chairpersons of VPICs and the elected woman facilitators, one from each village in the Project district. The PIVF shall be responsible for assessment and approval of the village investment plans. The


Complied with. PIVFs were established with the relevant organization personnel and responsibilities as described in the guidelines.

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PIVF shall be the sole village investment approval body. Representatives of NGOs and facilitators working in the village, agricultural sub-district services office and BIPP will be invited to attend semi-annual meetings of the PIVF as observers and advisors. (iv) Village Project Investment Committees (VPIC): Each Project Village shall

establish a VPIC. Villagers from the Project Villages will elect five members to form the VPIC. The chairperson of the VPIC shall be a member of the PIVF for that sub-district and will present village investments at the forum. Two members of each VPIC shall constitute a village finance unit to manage funds for approved village investments and the other two members shall constitute a village implementation unit.


Complied with. VPICs were established in each village as described in the guidelines.

(v) Participating NGOs: During the first year of Project implementation, the

PCMU shall have recruited a national-level NGO with extensive experience in agriculture and rural livelihood in accordance with competitive selection procedures acceptable to the Bank; and During the first year of Project implementation, the national-level NGO, shall assist PCMU in identifying recruiting and subcontracting local NGOs or local community organizations to implement project activities at the village level. The local implementing NGOs and local community organizations shall be selected through competitive selection procedures agreed upon between the Bank and the Borrower and based on selection criteria acceptable to the Bank.


Complied with. A national NGO was mobilized in May 2005, and local NGOs were recruited (subcontracted) and fielded in October 2005 in five districts.

(vi) Execution of Contract: After the conclusion of negotiations but before

signing of the contact, the Bank shall be furnished with the contract as negotiated for approval. Promptly after the contract is signed, the Bank shall be furnished with 3 copies of the signed contract. If any substantial amendment of the procurement contract is proposed after its execution, the proposed changes shall be submitted to ADB for prior approval.

Loan Agreement, Schedule 5, para. 4 (d) (Consultants)

Complied with. Prior approval from ADB obtained for amendments to contracts of PCMU consultants and NNGO.

ADB = Asian Development Bank; Badan Ketahanan Pangan = Food Security Body; DCC = district coordination committee; BIPP = Balai Informasi Penyuluhan Pertanian (Information Center for Agricultural Extension); BPTP = Balai Pengkajan Teknologi Pertanian (Assessment Institutes for Agricultural Technology); Bupati = district governments; Dinas Pertanian = Office of Agricultural Services; EA = executing agency; IAARD = Indonesian Agency for Agricultural Research and

Development; IAs = implementing agencies; IEE = initial environment examination; MTR = midterm review mission; NGO = nongovernment organization; NNGO = national nongovernment organization; NSC = national steering committee; PCMU = project coordination and monitoring unit; PIU = project implementation unit; PIVF = project intervillage forum; PPMS = project performance management system; VPIC = village project investment committee. Sources: ADB (RRP: INO 34112) and back-to-office reports of project review missions.

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CONSULTING SERVICES, PLANNED AND ACTUAL (Person-Months)

Appraisal Estimates Domestic Consultants

Component Specialization Domestic International Total Addendum

1 Addendum

2

A. Project Management

Implementation specialist/team leader - 27.0 27.0

Implementation specialist 60.0 60.0 39.8 19.0

MIS specialists 16.0 12.0 28.0 16.1

National monitoring and evaluation specialist 60.0 - 60.0 38.7 19.0

District monitoring and evaluation specialistsa 240.0 240.0 146.9 75.0

Ombudsperson 60.0 60.0 2.0

B. Farmer Empowerment

Participatory planning specialist 27.0 4.0 31.0 38.8 9.0

Agricultural marketing specialist 4.0 4.0

Economist/financial analyst 6.0 4.0 10.0 25.8 9.0

Gender specialist 27.0 27.0 34.7 9.0

Liaison specialists/district liaison officersb 240.0 240.0 182.3 75.0

C. Support for Agricultural Innovation Development

Information management specialist 6.0 3.0 9.0 5.8 14.0

D. Agricultural Marketing Information

Agricultural marketing specialist including

above including

above 10.8 19.0

Total 742.0 54.0 796.0 541.7 248.0 a Consists of district money specialists from Blora, Temanggung, East Lombok, Ende, and Donggala with an original contract of 48 person-months each.

b Consists of district liaison officers from Blora, Temanggung, East Lombok, Ende, and Donggala with an original contract of 48 person-months each.

Sources: ADB (RRP: INO 34112) and Indonesian Agency for Agricultural Research and Development.

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International Consultants Actual Totals

Grand Total Component Specialization Addendum 1 Addendum 2 Domestic International

A. Project Management

Implementation specialist/team leader 21.5 12.5 34.0 34.0

Implementation specialist 58.8 58.8

MIS specialists 3.0 16.1 3.0 19.1

National monitoring and evaluation specialist 57.7 57.7

District monitoring and evaluation specialistsa 221.9 221.9

Ombudsperson 2.0 2.0

B. Farmer Empowerment

Participatory planning specialist 4.0 47.8 4.0 51.8

Agricultural marketing specialist 4.0 4.0 4.0

Economist/financial analyst 9.9 8.0 34.8 17.9 52.7

Gender specialist 43.7 43.7

Liaison specialists/district liaison officersb 257.3 257.3

C. Support for Agricultural Innovation Development

Information management specialist 6.0 19.8 6.0 25.8

D. Agricultural Marketing Information

Agricultural marketing specialist 29.8 29.8

Total 48.4 20.5 789.7 68.9 858.6

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PROCUREMENT OF GOODS AND SERVICES, PLANNED AND ACTUAL ($’000)

ADB = Asian Development Bank; NGO = nongovernmental organization.

Sources: ADB (RRP 34112) and Government of Indonesia's project completion report.

46 Appendix 18

FINANCIAL AND ECONOMIC ANALYSES A. Introduction

1. In general, the project had positive economic, social, institutional, and environmental impacts. Economic impacts in the five project districts included (i) increased yields due to the adoption of improved farm technologies, including the use of new, superior varieties and clones; (ii) more diverse sources of income and employment, not only for farmer groups but also for individual beneficiaries, including women and landless members of farmer groups; (iii) improved incomes as a result of increased yields, cropping intensity, and planted areas—especially for the second and third cropping seasons (for irrigated farms)—as well as lower production costs from using organic fertilizer and biopesticides, reduced postharvest losses, and better prices received for farm produce; (iv) more opportunities for women to increase their incomes from farming and food processing activities; (v) increases in the price of lands adjacent to the farm roads constructed; (vi) increases in marketable surplus, thereby transforming some rice-deficit villages to rice-surplus areas; (vii) expansion of cultivated areas, especially with the opening of idle land (e.g., conversion of an idle, water-logged area in Donggala into productive land after construction of a drainage canal); (viii) decreases in product marketing costs and input procurement costs due to lower transport cost, as well as reduced travelling time resulting from farm road construction; (ix) increases in the number of buyers going to the villages due to the improved road system; (x) increases in capital build-up funds or savings of the farmer groups; and (xi) development of agribusiness enterprises (e.g., public transport, water pump services). 2. The most common physical infrastructure investments in all the project districts are for the construction or rehabilitation of small-scale irrigation systems and farm roads. At project appraisal, an assessment was made of the financial and economic viability of village investments in these two types of agricultural infrastructure. The midterm review mission did not undertake financial and economic analyses of the village investments. In 2010, the IAARD conducted an impact assessment of village investments focusing on small-scale irrigation systems and farm roads in the five project districts.1 However, only financial analysis was used in the IAARD study; economic analysis to evaluate the economic viability of the village investments was not done in the IAARD study. However, results of the financial analysis shown in Tables A18.2a through A18.2e indicate that public investments in small-scale irrigation systems in all five project districts are highly financially viable, with FIRRs ranging from 37% to 185%. A project-wide estimation of EIRR was not considered possible due to the lack of data. 3. For this PCR mission report, the financial and economic analyses of village investments also focused on small-scale irrigation systems and a farm access road. The updated FIRR and/or EIRR figures in the postproject evaluation are compared with those estimated at appraisal and in the IAARD study. B. Financial and Economic Analyses of Small-Scale Irrigation Projects 4. To isolate the effects of irrigation from those arising from investments in other village infrastructures such as farm roads, village markets, and storage facilities, the financial and economic analyses of small-scale irrigation projects conducted for this mission covered only those villages in each project district that implemented only one type of public investment, namely, the construction or repair of minor irrigation systems. The analyses were based on information obtained from field visits by the PCR review mission team and from project reports

1 IAARD. 2010. ―An Assessment of Village Investment Impacts.‖

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(―Report and Recommendation of the President to the Board of Directors of ADB‖ and the report prepared by the IAARD on the impact of village investments).

1. Major Assumptions

5. The financial and economic analyses were conducted in 2011 constant prices and in the local currency, rupiah. Financial and economic analyses covered a period of 15 years. Paddy yield assumptions used in the analyses were based on actual paddy yields before and after the small-scale irrigation investments, which were reported in the IAARD impact evaluation publication and were validated during the PCR mission team’s field visits. Data on the actual investment costs of small-scale irrigation projects by year, which were obtained from the impact evaluation report prepared by the IAARD, were adjusted to constant 2011 prices using a domestic deflator (the consumer price index, or CPI, in Indonesia). Forecast world prices of traded commodities (i.e., rice and fertilizers such as urea, phosphate, and potassium chloride) in 2011 were based on World Bank projections of commodity prices. 2 Prices of nontraded commodities (e.g., seeds and farm chemicals), including the price of farm labor, were based on prevailing local prices. 5. Economic analysis of investments in small-scale irrigation systems conducted in this report was based on the domestic price numeraire, following ADB’s Guidelines for the Economic Analysis of Projects.3 To incorporate the premium on foreign exchange in economic analysis using the domestic price numeraire approach, world market prices of traded goods were converted to domestic prices using the shadow exchange rate prevailing in Indonesia in May 2011. The shadow exchange rate was calculated by multiplying the prevailing official exchange rate (US$1.00 = Rp 8,593) by the shadow exchange rate factor, which is 1.11 in Indonesia. The shadow exchange rate factor is the inverse of the standard conversion factor, 0.90. Economic prices of rice, phosphate, and potassium fertilizers were based on import parity while that of urea fertilizer was based on export parity. To derive economic prices, financial prices were adjusted by removing taxes and import duties. When domestic price numeraire is used for non-traded items, the economic prices of nontraded items are equivalent to the financial prices except for the price for unskilled labor, which was adjusted using the shadow wage rate factor of 0.8. 6. The analyses assumed one cropping season of rain-fed rice before the investment and a cropping intensity of two irrigated rice crops after the investment in small-scale irrigation projects in the districts of Blora, Donggala, East Lombok, and Ende. In Temanggung, irrigation activities during project implementation focused on the rehabilitation of water irrigation channels that existed before the project. Hence, the analyses in this district covered one cropping season of irrigated rice crop before the project and two cropping seasons of irrigated rice after the project. The impacts of the irrigation investments in the project districts were conservatively assumed to have resulted in increased rice cropping intensity and yields. Although there were reported increases in cropping intensity of up to three crops with other annual crops (e.g., corn and vegetables) planted apart from rice, incomes derived from the production of other crops were excluded in the analyses for lack of data.

2 World Bank, 2011. Commodity Price Projections. Washington, D.C. (June).

3 ADB. 1997. ―Guidelines for the Economic Analysis of Projects,‖ Manila.

48 Appendix 18

2. Results of Financial Analysis

7. Detailed estimated production costs and income for rain-fed paddy (before irrigation investment situation for all districts except Temanggung) and irrigated paddy (with or after irrigation investment situation) are shown in the crop budgets presented in Tables A18.1. Using the cost and income data from the crop budgets for the before- and after-project situations, incremental financial costs and benefits from the small-scale irrigation investments in the five project districts were calculated.

8. The NPVs estimated for five project districts are all positive (NPV>0), indicating that the small-scale irrigation systems are financially public investments. The postproject FIRR figures estimated in this report are higher than those obtained at project appraisal, which ranged from 19.8% to 30.2% (Table A18.3). The analysis at appraisal assumed a cropping intensity of 2 with and without the project, yield increases based on differences between irrigated and rain-fed production, and a build-up of benefits over a 6-year period. Results of the financial analysis further reveal that the postproject FIRR estimates in this report are close to or within the range of the calculated FIRR figures obtained by the IAARD in its impact evaluation of public investments in small-scale irrigation projects in the project districts (Table A18.4). The IAARD financial results show that the FIRRs range from 27.1% to 172.1%.

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Table A18.1: Rain-Fed and Irrigated Paddy (Before-Project Situation) and Irrigated Paddy (After-Project Situation) Crop Budgets Per Hectare by District in 2011 Financial Prices

Rain-fed Paddy (One Crop Per Year)

Irrigated Paddy (Two Crops Per Year) (After Irrigation)

(Before Irrigation Investment) Planting Season (PS) 1 PS2

Number/ Quantity

Cost/Unit (Rp/Unit)

Total (Rp)

Number/ Quantity

Cost/Unit (Rp/Unit)

Total (Rp)

Total (Rp)

Item Unit Annual

A. Labor

Land preparation person-day 20 25,000 500,000 20 25,000 500,000 500,000 1,000,000

Planting person-day 15 25,000 375,000 15 25,000 375,000 375,000 750,000 Fertilizer application person-day 10 25,000 250,000 10 25,000 250,000 250,000 500,000

Weeding person-day 15 25,000 375,000 15 25,000 375,000 375,000 750,000

Harvesting person-day 15 25,000 375,000 20 25,000 500,000 500,000 1,000,000

Subtotal (A) person-day 75 1,875,000 80 2,000,000 2,000,000 4,000,000

B. Material Inputs

Seeds kg 25 5,900 147,500 25 5,900 147,500 147,500 295,000

Fertilizer

Urea kg 250 1,955 488,750 250 1,955 488,750 488,750 977,500

SP 35 kg 100 4,616 461,600 100 4,616 461,600 461,600 923,200

KCl kg 50 2,579 128,950 50 2,579 128,950 128,950 257,900

Chemicals liter 1.5 138,000 207,000 1.5 138,000 207,000 207,000 414,000

Water user service chargea 1,400,323 1,633,710 3,034,033

Subtotal (B) 1,433,800 2,834,123 3,067,510 5,901,633

Total cost (A+B) 3,308,800 4,834,123 5,667,510 9,901,633

Yield/Income: Yield/Kg Price/Kg Income Yield/Kg Price/Kg Income

Blora 4,200 2,655 11,151,000 5,300 2,655 14,071,500 14,071,500 28,143,000

Donggala 3,523 2,655 9,353,565 3,692 2,655 9,802,260 9,802,260 19,604,520

East Lombok 4,410 2,655 13,084,470 5,400 2,655 16,021,800 16,021,800 32,043,600

Ende 3,400 2,655 9,027,000 5,250 2,655 13,938,750 13,938,750 27,877,500

Temanggung (irrigated before) 4,470 2,655 11,867,850 4,810 2,655 12,770,550 12,770,550 25,541,100

kg = kilogram; KCl = potassium chloride; PS 1 = planting season 1; PS 2 = planting season 2; SP = superphosphate. a

Assumed to be one-seventh of gross income in PS1 and one-sixth of gross harvest in PS2 based on field interviews in some project districts. Sources: IAARD, ―An Assessment of Village Investment Impacts‖; field interviews; and ADB estimates.

50 Appendix 18

Table A18.2: Financial Analysis of Small-Scale Irrigation Projects by District Constant 2011 Prices (Rp Million)

A. Blora District

a – 38 small-scale irrigation systems, 2,447 hectares

Item 1 2 3 4 5-14 15

A. Incremental gross benefits 41,579 41,579 41,579 … 41,579

B. Investment cost 9,988

C. Incremental production cost 19,366 19,366 19,366 … 19,366

D. O&M of irrigation system 999 999 999 … 999

E. Incremental total cost 13,822 20,365 20,365 20,365 … 20,365

F. Incremental net benefits -13,822 21,214 21,214 21,214 … 21,214

NPV (12%), Rp 113,206 FIRR (%) 153%

B. Donggalaa – 13 small-scale irrigation systems, 673 hectares

Item 1 2 3 4 5-14 15






F. Incremental net financial benefits -5,226 1,939 1,939 1,939 … 1,939

NPV (12%), Rp 6,810 FIRR (%) 37%

C. East Lomboka – 3 small-scale irrigation systems, 140 hectares

Item 1 2 3 4 5-14 15






F. Incremental net financial benefits -1,332 1,122 1,122 1,122 … 1,122

NPV (12%), Rp 5,453 FIRR (%) 84%

D. Endea – 3 small-scale irrigation systems, 73.5 hectares

Item 1 2 3 4 5-14 15


B. Investment cost 933

C. Incremental production cost 579 579 579 … 579


E. Incremental total cost 933 672 672 672 … 672

F. Incremental net financial benefits -933 714 714 714 … 714

NPV (12%), Rp 3,390 FIRR (%) 76%

Appendix 18

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E. Temanggunga

– 4 small-scale irrigation systems, 220 hectares

Item 1 2 3 4 5-14 15







NPV (12%), Rp 8,327

FIRR (%) 116% CPI = Consumer Price Index; FIRR = financial internal rate of return; IAARD = Indonesian Agency for Agricultural Research and Development; NPV = net present value; O&M = operating and maintenance; Rp = rupiah. a

Assumptions used in computing gross benefits and production costs for rain-fed and irrigated paddy crops are shown in Table A18.1. Investment costs of the small-scale irrigation systems irrigation systems were obtained from the IAARD report ―Village Investment Impacts‖ and were adjusted to 2011 base price level using the CPI in Indonesia. Financial analysis in Blora district covered only pump irrigation from river water, check dams alone, and check dams in combination with other small-scale irrigation systems. Wells and water ponds were excluded in the analysis. Sources: IAARD, ―Village Investment Impacts‖; consultant’s estimates.

Table A18.3: FIRR and EIRR Summary of Small-Scale Irrigation Projects at Appraisal

Location Type of Investment FIRR (%) EIRR (%)

Bemiayu, Temanggung Repair an existing irrigation system 28.1 24.3 Ngadimulyo, Temanggung Build a viaduct to extend an irrigation system 22.9 20.0 Caruban, Temanggung Construct pump irrigation 19.8 16.2 Bale, Donggala Construct 10 Atkon pumps 30.2 23.2

All locations 23.2 19.1 EIRR = economic internal rate of return; FIRR = financial internal rate of return. Source: ADB. RRP: INO 34112.

Table A.18.4: Summary of Actual Estimates of Financial Viability Indicators (NPV and FIRR) of Small-Scale Irrigation Projects by Project District, 2003-2008

District and Type of Irrigation System

Number of

Villages

Area Covered

(Hectares) NPV (Rp Million)

(r = 12%) FIRR (%)

I. Blora

1. Pump river water 4 302.0 1,176.7–2,704.9 94.5–124.5

2. Checkdam 19 1,179.0 326.1–1,600.2 39,1–172.1

3. Checkdam and water impoundment 4 250.0 828.0–2,700.4 92.7–158.1

4. Checkdam and shallow well 8 399.0 567.6–1,161.1 77.8–108.7

5. Water impoundment 5 245.0 411.5–1,233.4 41.8–88.5 6. Dig wells 14 843.0 306.2–1,080.6 38.5–102.1 7. Impoundment and dig wells 5 270.0 233.1–1,114.4 33.6–103.1

II. Donggala

1. Small irrigation 13 673.0 182.8–1,884.5 30.3–111.6

III. Ende

1. Small irrigation 3 73.5 272.3–1,161.8 27.1–78.3

IV. East Lombok

1. Small irrigation 3 140.0 386.9–1,375.8 40.0–90.0 V. Temanggung

1. Small irrigation 4 220.0 114.9–938.0 28.6–73.5 FIRR = financial internal rate of return; NPV = net present value; Rp = rupiah. Source: IAARD, ―An Assessment of Village Investment Impacts.‖

52 Appendix 18

3. Results of Economic Analysis

9. The estimated economic import parity prices of rice, potassium chloride, and phosphate fertilizers using the domestic price numeraire approach are shown in Tables A18.5–A18.7. The economic export parity price of urea fertilizer is presented in Table A18.8. Using the economic cost and income data from the crop budgets for the before and after irrigation investment situations, incremental economic costs and benefits from the small-scale irrigation investments were computed to evaluate the economic viability of these public investments in the five project districts (Tables A18.9). 10. Results of the economic analysis shown in Appendix Table A.18.10a-A18.10e reveal that investments on the small-scale irrigation systems in the five project districts were all economically viable. The EIRR ranged from 52% in Donggala to as high as 185% in Blora, which has the highest number of irrigation investments and the largest irrigated service area. As mentioned earlier, irrigation investments in Donggala were mainly in the rehabilitation of existing irrigation systems. The updated EIRR estimates are higher than those obtained at appraisal, which ranged from 16.2% to 24.3%.

Table A.18.5: Border Parity Price for Rice

Constant 2011 Prices ($/ton and Rp/ton)

Rice Import Unit

2011 Price Forecast

Financial Economic

World price (FOB), Thailand, 5% broken $/ton 500 500

Quality/price differential 0.95 0.95

Equivalent value of Indonesian product $/ton 475 475

Freight and insurance cost to Jakarta $/ton 15 15

Value at Indonesian port (CIF) $/ton 490 490

Official exchange rate: Rp = $1.00 8,593

Shadow exchange rate: Rp = $1.00 9,452

Value at Indonesian port Rp/kg 4,211 4,674

Port handling charges, storage, and loss, 10% Rp/kg 421 467

Internal handling/transport costs: near port Rp/kg 55 55

Value at wholesale market Rp/kg 4,687 5,197

Transport cost: local to wholesale market Rp/kg 40 40

Wholesale margin:, 3% Rp/kg 141 156

Value at local market/processor/mill Rp/kg 4,506 5,001

Trader margin, 3% Rp/kg 135 150

Ex-mill price Rp/kg 4,371 4,851

Conversion factor, paddy to rice, 65% Rp/kg 2,841 3,153

Milling cost Rp/kg 166 166

Transport cost, farm gate to local market/mill Rp/kg 20 20

Value at farm gate (paddy) Rp/kg 2,655 2,967 CIF = cost of insurance and freight; FOB = free on board; kg = kilogram; Rp = rupiah.

Sources: World Bank, Commodity Price Forecast, June 2011; ADB estimates; and consultant’s estimates.

Appendix 18

53

Appendix

18 5

3

Table A.18.6: Border Parity Price for Potassium Chloride Constant 2011 Prices ($/ton and Rp/ton)

2011 Price Forecast

Item Unit Financial Economic

World price (FOB), North Europe, Canada $/ton 292 292

Quality/price differential $/ton 1 1


Freight and insurance cost $/ton 40 40


Official exchange rate: Rp = $1.00 8,593

Shadow exchange rate: Rp = $1.00 9,452


Port charges Rp/kg 90 90

Internal handling/transport costs: near port Rp/kg 35 35


Transport cost: wholesale to farm gate Rp/kg 220 220

Value at farm gate (potassium chloride fertilizer) Rp/kg 2,510 2,727 CIF = cost of insurance and freight; FOB = free on board; kg = kilogram; Rp = rupiah. Source: World Bank, Commodity Price Forecast, June 2011; ADB estimates; and consultant’s estimates.

Table A.18.7: Border Parity Price for DAP (Phosphate Fertilizer) Constant 2011 Prices ($/ton and Rp/ton)

2011 Price Forecast

Item Unit Financial Economic

World price (FOB), North Europe $/ton 457 457

Quality/price differential $/ton 1 1


Freight and insurance cost $/ton 40 40


Official exchange rate, Rp = $1.00 8,593

Shadow exchange rate, Rp = $1.00 9,452

Value at Indonesian port, Rp ’000 Rp/kg 4,271 4,698


Internal handling/transport costs near port Rp/kg 35 35


Transport cost: wholesale to farm gate Rp/kg 220 220

Value at farm gate (phosphate fertilizer) Rp/kg 4,616 5,043 CIF = cost of insurance and freight; FOB = free on board; kg = kilogram; Rp = rupiah. Sources: World Bank, Commodity Price Forecast, June 2011; ADB estimates; and consultant’s estimates.

54 Appendix 18

Table A.18.8: Border Parity Price for Urea Constant 2011 Prices ($/ton and Rp/ton)

Export substitute Exported

Destination of Indonesian product East Europe bulk

Quality of marker product Nitrogen, 46%

2011 Price Forecast

Unit Financial Economic

World price (CIF), East Europe (bulk) $/ton 292 292

Quality/price differential Asia 1 1


Freight and insurance cost, $/ton 30 30

Value at Indonesian port (FOB) $/ton 262 262

Official exchange rate, Rp = $1.00 8,593

Shadow exchange rate, Rp = $1.00 9,452



Internal handling/transport costs near port Rp/kg 35 35

Transport cost from fertilizer plant site to port Rp/kg 200 200

Transport cost from market to port Rp/kg

Value at fertilizer plant site Rp/kg 1,925 2,152

Transport cost: fertilizer plant site to local market Rp/kg 30 30

Transport cost to local market to farm gate Rp/kg 220 220

Value at farm gate (urea fertilizer) Rp/kg 1,955 2,182 CIF = cost of insurance and freight; FOB = free on board; kg = kilogram; Rp = rupiah. Sources: World Bank, Commodity Price Forecast, June 2011; ADB estimates; and consultant’s estimates.

Appendix

18 5

5

Table A18.9: Rain-Fed/Irrigated Paddy (Before-Project Situation) and Irrigated Paddy (After-Project Situation) Crop Budgets Per Hectare, by District

2011 Economic Prices

Item

Unit

Rain-Fed Paddy (One Crop Per Year) (Before the Investment)

Irrigated Paddy (Two Crops Per Year)

(After the Investment)

Planting Season (PS) 1 PS2 Annual

Number/ Quantity

Cost/Unit (Rp/Unit)

Total (Rp)

Number/ Quantity

Cost/Unit (Rp/Unit)

Total (Rp)

Total (Rp)

A. Labor Land preparation person-day 20 25,000 400,000 20 25,000 400,000 400,000 800,000 Planting person-day 15 25,000 300,000 15 25,000 300,000 300,000 600,000 Fertilizer application person-day 10 25,000 200,000 10 25,000 200,000 200,000 400,000 Weeding person-day 15 25,000 300,000 15 25,000 300,000 300,000 600,000 Harvesting person-day 15 25,000 300,000 20 25,000 400,000 400,000 800,000 Subtotal (A) person-day 75 1,500,000 80 1,600,000 1,600,000 3,200,000 B. Material Inputs Seeds kg 25 5,900 147,500 25 5,900 147,500 147,500 295,000 Fertilizer - Urea kg 250 2,182 545,500 250 2,182 545,500 545,500 1,091,000 - SP 35 kg 100 5,043 504,300 100 5,043 504,300 504,300 1,008,600 - KCl kg 50 2,803 140,150 50 2,803 140,150 140,150 280,300

Chemicals liter 1.5 138,000 207,000

1.5 138,000 207,000 207,000 414,000 Water user service charge

a 1,564,881 1,825,694 3,390,575

Subtotal (B) 1,544,450 3,109,331 3,370,144 6,479,475 Total cost (A+B) 3,044,450 4,709,331 4,970,144 9,679,475 Yield and total income: Yield/Kg Price/Kg Yield/Kg Price/Kg Blora 4,200 2,967 12,461,400 5,300 2,967 15,725,100 15,725,100 31,450,200 Donggala 3,523 2,967 10,453,741 3,692 2,967 10,954,164 10,954,164 21,908,328 East Lombok 4,410 2,967 13,084,470 5,400 2,967 16,021,800 16,021,800 32,040,600 Ende 3,400 2,967 10,087,800 5,250 2,967 15,576,750 15,576,750 31,153,500

Temanggung (irrigated before) 4,470 2,967 13,262,490 4,810 2,967 14,271,270 14,271,270 28,542,540

kg = kilogram; KCl = potassium chloride; PS 1 = planting season 1; PS 2 = planting season 2; SP = superphosphate. aAssumed to be 1/7 of gross income in PS1 and 1/6 of gross harvest in PS2 based on field interviews in some project districts. Sources: IAARD, ―An Assessment of Village Investment Impacts‖; field interviews; and ADB estimates.

Appendix 18

56

Table A18.10: Economic Analysis of Small-Scale Irrigation Projects by District Constant 2011 Prices (Rp Million)

A. Blora District

a = 38 small-scale irrigation systems, 2,447 hectares

Item 1 2 3 4 5-14 15



C. Incremental production cost 19,849 19,849 19,849 …. 19,849

D. O&M of irrigation system 999 999 999 999



NPV (12%), Rp 139,263

EIRR (%) 185%

B. Donggalaa – 13 small-scale irrigation systems, 673 hectares

Item 1 2 3 4 5-14 15







NPV (12%), Rp 11,440

EIRR (%) 52%

C. East Lomboka – 3 small-scale irrigation systems, 140 hectares

Item 1 2 3 4 5-14 15







NPV (12%), Rp 6,934

EIRR (%) 103%

D. Endea – 3 small-scale irrigation systems, 73.5 hectares

Item 1 2 3 4 5-14 15


B. Investment cost 933

C. Incremental production cost 582 582 582 …. 582


E. Incremental total cost 933 675 675 675 … 675

F. Incremental net benefits -933 873 873 873 … 873

NPV (12%), Rp 4,334

EIRR (%) 94%

Appendix 18

57

Appendix

18 5

7

E. Temanggunga

– 4 small-scale irrigation systems, 220 hectares

Item 1 2 3 4 5-14 15

A. Incremental gross benefits 3,362 3,362 3,362 3






NPV (12%), Rp 10,450

EIRR (%) 142% CPI = Consumer Price Index; EIRR = economic internal rate of return; IAARD = Indonesian Agency for Agricultural Research and Development; NPV = net present value; O&M = operating and maintenance; Rp = rupiah. a

Assumptions used in computing gross benefits and production costs for rain-fed and irrigated paddy crops are shown in Table A18.9. Investment costs of the small-scale irrigation systems were obtained from the IAARD report, ―Village Investment Impacts,‖ and were adjusted to 2011 base price level using the CPI in Indonesia. Economic analysis in Blora district covered only pump irrigation from river water, check dams alone, and check dams in combination with other small-scale irrigation systems. Wells and water ponds were excluded in the analysis. Sources: IAARD, ―Village Investment Impacts,‖ and consultant’s estimates.

C. Financial and Economic Analyses of Farm Roads 11. Post-project financial and economic analyses in this report were patterned after the methodology employed at project appraisal (world numeraire or standard conversion factor approach) and in the project preparatory technical assistance report in evaluating the financial and economic viability of a village investment on an access road. Because investments on farm roads do not involve tradable goods, the conversion of investment (i.e., construction and maintenance) costs to economic values used a roads sector conversion factor of 0.86 and a standard conversion factor of 0.9 for benefits (savings in transport costs). 12. In this report, the FIRR and the EIRR of an investment on a 2-kilometer (km) access road in Omu village, Donggala district, were recalculated by adjusting the investment cost and transport cost assumptions used at appraisal to 2011 constant prices using the consumer price index in Indonesia. The access road will benefit farmers growing cacao and coconut. The benefited area is 75 hectares. The weighted average yield of both commercial crops is 3,216 kilograms or 3.216 metric tons (mt) per hectare per year. Before the construction of the access road, porters were paid Rp 77,500/mt/km in transporting the products for sale in the market. With the construction of the access road, the farm products can now be moved by bullock at local rates of about Rp 19,375/mt/km. Transport cost savings on farm outputs are the only quantified benefits considered in the conduct of the financial and economic analyses of the investment on the access road in this report. Other benefits that will arise from the construction of farm roads—such as increases in agricultural production due to improved farm gate prices, increases in the price of agricultural lands adjacent to access roads, and benefits arising from better passenger access to village markets and schools (which vary among villages and districts and can be captured through comprehensive field surveys)—are excluded in the analyses in this report. 13. At appraisal, the investment on the access road in Omu village, Donggala district, was found financially (FIRR = 26.3%) and economically viable (EIRR = 27.7%). As shown in Tables A18.11 and A18.12, the investment on this access road is still financially and economically viable with updated FIRRs of 22.7% and EIRR of 24.5%, respectively.

Appendix 18

58

14. The financial results of the IAARD impact study show that the FIRRs of all the farm road investment projects in four project districts (East Lombok, Ende, Donggala, and Temanggung) are financially viable. Most of the FIRRs are more than 50% (Table A18.13). Using survey data gathered from the farmer-beneficiaries in the project districts, the IAARD incorporated in the financial analysis other benefits arising from the construction of the farm roads, such as the increase in the value of production of farm products.

Table A18.11: Financial Analysis of Investment in a 2-km Road Construction in Omu Village, Donggala District, Central Sulawesi - 2011 Constant Prices (Rp’000)

Item 0 1 2 3 4 5-14 15

Gross benefits

Transport cost savings on outputs 28,040 28,040 28,040 28,040 … 28,040

Total gross benefits 28,040 28,040 28,040 28,040 … 28,040

Construction cost 82,832

O&M 8,283 8,283 8,283 8,283 … 8,283

Total gross costs 82,832 8,283 8,283 8,283 8,283 … 8,283

Net financial benefits -82,832 19,757 19,757 19,757 19,757 … 19,757

NPV(12%) 46,187 FIRR = 22.7% FIRR = financial internal rate of return; NPV = net present value; O&M = operation and maintenance; Rp = rupiah.

Sources: ADB (RRP: INO 34112) and consultant’s estimates.

Table A18.12: Economic Analysis of Investment on a 2-km Road Construction in Omu Village, Donggala District, Central Sulawesi - 2011 Constant Prices (Rupiah’000)

Item 0 1 2 3 4 5-14 5–15

Gross benefits

Transport cost savings on outputs 25,236 25,236 25,236 25,236 …

Total gross benefits 25,236 25,236 25,236 25,236 … 25,236

Construction cost 71,236

O&M 7,124 7,124 7,124 7,124 … 7,124

Total gross costs 71,236 7,124 7,124 7,124 7,124 … 7,124

Net economic benefits -71,236 18,112 18,112 18,112 18,112 … 18,112 NPV (12%) 46,541 EIRR = 24.5%

Assumptions: Benefited area = 75 ha; road benefit length = 2km; O&M per year = 10% of construction cost. EIRR = economic internal rate of return; km = kilometer; NPV = net present value; O&M = operation and maintenance; Sources: ADB (RRP: INO 34112) and consultant’s estimates

Table A18.13: Results of Financial Analysis of Village Investments on Farm Roads in

Selected Project Districts

No. of Sample Villages

NPV (Rp million) (r = 12%)

FIRR (%) District

Donggala 33 97.2–2,826.7 27.0–109.0

Ende 26 46.2–1,608.2 14.0–97.4

East Lombok 4 1,273.2–2,410.2 46.0–76.0

Temanggung 7 565.4––3,317 51.1––103.8 FIRR = financial internal rate of return; NPV = net present value; Rp = rupiah. Source: IAARD. ―An Assessment of Village Investment Impacts.‖

mailto:NPV@12%25)%20=%20Rp%20('000)

mailto:NPV@12%25)%20=%20Rp%20('000)

Appendix 19

59

Appendix

18 5

9

OVERALL PROJECT ASSESSMENT

Weight Remarks Assessment Score Weighted

Rating

20% Consistency of the project goal, purpose, and output with the government's development strategy, ADB's lending strategy for the country, and ADB's strategic objectives at the time of approval and evaluation

Highly relevant 3 0.6

Relevant 2

Partly Relevant 1

Irrelevant 0

30% Achievement of purpose as specified in the policy goals and the physical, financial, and institutional objectives adopted at project approval, or as formally modified during implementation

Highly effective 3 0.9

Effective 2

Less Effective 1

Ineffective 0

30% Comparison of the achievement of project purpose with the use of inputs, based on implementation performance, with consideration of the EIRR or cost-effectiveness of the investment

Highly efficient 3

0.6 Efficient 2

Less Efficient 1

Inefficient 0

20% Likelihood that human, institutional, and financial resources are sufficient to support achievement of results and benefits over the economic life of the project

Most likely 3 0.6

Likely 2

Less Likely 1

Unlikely 0

100% Overall weighted average of the four criteria Highly

Successful ≥2.7 2.7

Successful 1.6 to <2.7

Partly successful 0.8 to <1.6

Unsuccessful <0.8

Source: ADB Operations Evaluation Department. 2008. Guidelines for Preparing Performance Evaluation Reports.

Appendix 20

60

PHYSICAL PROJECT PROGRESS AS OF MAY 2011

Weighted Subcomp. Comp. Subcomp. Comp. Progress

1 Poor Farmer Empowerment 71% 0.0% 0.00% 1 Farmer Group Mobilization and Village Planning 4.30% 0.00%

a. Establishment of farmer group (FG) 106.70% 0.00% (i) Farmers' meeting for FG establishment 30.24% (ii) FG training (iii) FG activities

b. Selection of Village Facilitators (VF) 34.88% 106.70% 0.00% (i) Farmers' meeting for VF selection (ii) VF training (iii) VF activities

34.88% 100.00% 0.00%

100.00%

2 8.80% 0.00%

35.22% 100.00% 0.00%

50.00% 100.00% 0.00%

14.77% 100.00% 0.00%

3 Implementation of Village-level Public Investments 86.90% 0.00% 10.00% 100.00% 0.00%

5.00% 100.00% 0.00%

85.00% 100.00% 0.00%

100.00%

b. Support the establishment and functioning of the PIVF in each subdistrict. c. Establish District Coordination Committee (DCC) through the Bupati decree

a. Provide support at village-level to poor villages in selected subdistricts to prepare village plans

c. Support the implementation of village investments approved by PIVFs

b. Support the subdistrict level PIVFs in their evaluation of villages investments

c. Establish a participatory planning process at village to identify priority to support innovation .

Institutional Development to Support Village Planning and Implementation of Investments a. Assist villagers in electing the Village Project Investment Committee (VPIC) according to the implementation

Weights No Components

Actual Progress Activity

Appendix 20

61

Appendix

18 6

1

Weighted Subcomp. Comp. Activity Subcomp. Comp. Progress

2 1,600 2% 104.88% 2.10%

1 479.6 30.00%

a. Review the existing AMIS 6.04% 100% 1.81% b. Provide additional ICT infrastructures of AMIS 3.58% 100% 1.07% c. Upgrade the AMIS 42.52% 95% 12.12% d. Prepare AMIS operating procedures 9.27% 100% 2.78% e. Perform system trial and data upload 12.12% 100% 3.64% f. Put the AMIS into nationwide operation 12.94% 92% 3.57% g. Provide O&M for regular updating (1 year after operation) 2.54% 150% 1.14% h. Organize administrative & operational staff training 4.59% 100% 1.38% i. Conduct workshop 6.40% 100% 1.92%

100.00% 29.43%

2 Developing a national farming website 458 28.63% a. Review similar websites of other countries 8.06% 100% 2.31% b. Identify an application model for an Indonesian website 10.26% 100% 2.94% c. Design and host the website 32.03% 100% 9.17%

11.31% 150% 4.86%

4.94% 30% 0.42%

f. Provide additional ICT infrastructure 6.07% 150% 2.61% g. Organize administrative & operational staff training 11.70% 100% 3.35% h.Conduct workshop 15.62% 100% 4.47%

100.00% 30.13%

3 647.2 40.45%

10.90% 100% 4.41%

b. Conduct workshop on information utilization 9.60% 100% 3.88% c. Organize training for system & operational staff 13.30% 100% 5.38% d. Develop and host the web-application module 20.00% 96% 7.77%

25.70% 150% 15.59%

f. Perform capacity building of the DAIC staff 12.10% 100% 4.89% g. Conduct workshop 8.40% 100% 3.40%

100.00% 45.32%

a. Prepare district agricultural information center (DAIC) infrastructures

e. Provide O&M for regular data collection and updating (1 year after operation)

Upgrading the agricultural market information system (AMIS) of the MOA

d. Provide O&M for regular updating and expansion (1 year after operation) e. Directly contact private sector for participation in website activities

Establishing information centers at the district agriculture offices

Development of National and Local Agricultural Information Resources

Actual Progress No Components

Cost ($’000

Weights

Appendix 20

62


3 10,100 17% 107.08% 18.20%

1 603.5 5.10% 5.10%

85% 100% 4.34%

15% 100% 0.77%

2 4,474.7 37.84% 45.41%

15% 100% 5.68%

40% 150% 22.70%

45% 100% 17.03%

3 172.4 1.46% 1.46%

35% 100% 0.51%

65% 100% 0.95%

4 5723.9 48.40% 48.40%

20% 100% 9.68%

80% 100% 38.72%

5 501.1 4.24% 3.88%

15% 100% 0.64%

85% 90% 3.24%

6 351.2 2.97% 2.84%

10% 100% 0.30%

90% 95% 2.54%

118,26.8 100%

Actual Progress

b. Review the existing shelf of technologies at relevant NARIs

Weights Components Cost

($’000

a. Publicize widely on available grants for developing innovations requested by farmers b. Undertake the innovation development through Selection of proposals and monitoring by village facilitators and the AIATs

No

Develop and undertake specific research and assessment programs for marginal rainfed a. Prepare specific research and assessment programs for the project implementation period b. Undertake the research and assessment programs specifically for target areas of the project

Support for Agricultural Innovation Development and Dissemination Identify demand driven technologies that are appropriate for the project area. a. Support participatory rapid rural appraisal (PRRA) in project areas

Identify thematic gaps in research programs to adequately address problems of rainfed agriculture

a. Prepare guidelines and manuals for information exchange and capacity development activities b. Organize information exchange and capacity development activities in each district

Support AIATs to promote information exchange and capacity-building among DCC members, district government staff, farmers from the project districts and non-participating villages

Develop and undertake outreach programs for the relevant NARIs

a. Prepare an outreach manual to be developed into prototype outreach program b. Prepare existing and new publication of technical information into electronic format c. Assist the AIATs to develop websites that contain information useful to poor farmers.

a. Organize workshops of senior researchers to identify gaps in research programs at NARIs b. Develop agricultural research programs at NARIs to fill in the gaps

Support local initiatives to develop innovations for poor farmers in the target area

Appendix 20

63

Appendix

18 6

3

Actual Subcomp.

Weighted Subcomp. Comp. Comp. Progress

100.00%

A 71% 100.00% 71.00%

B 2% 105.00% 2.00%

C 17% 107.00% 18.00%

D Project Management 10% 92.00% 9.00%

Development of National and Local Agricultural Information Resources

Support for Agricultural Innovation Development and Dissemination

Summary of Physical Progress - As of May 2011

Poor Farmer Empowerment

No Components Weights


4 Project Management 10% 92.54% 9.25% 1 1.90% 1.82%

60.00% 100% 1.14%

b. NSC's supervision and review 40.00% 90% 0.68%

2 1.90% 1.90%

a. Provide support to external auditor's activities 40% 100% 0.76% 60% 100% 1.14%

3 52.71% 52.12%

92.60% 100% 48.81%

7.40% 85% 3.32%

4 13.20% 13.20%

85.80% 100% 11.33%

5.65% 100% 0.75%

1.66% 100% 0.22%

d. Provide support for regular PPMS application 6.92% 100% 0.91%

5 Supporting project management activities of PIUs 31.32% 23.49% 57.68% 100% 18.07%

42.32% 100% 13.25%

Total 100.00%

b. Provide support for technical and financial project activities

c. Organize trainings and workshops on applications of computer-based PPMS, M&Es, and project database

a. NSC's semi-annual meeting to provide policy guidance for coordination of project planning and implementation

Supporting the national steering committee (NSC) activities

Supporting project management activities of the PCMU

Developing the project performance management system (PPMS) a. Provide consultant support and MIS facilities for developing the PPMS

Assisting external audits and independent review of NGOs and village implementation bodies

b. Provide support to independent review of village investment activities by local NGOs and village investment bodies

a. Provide support for staffing, operational costs, equipment, and consultant

No

b. Develop computer-based PPMS, conventional monitoring and evaluation (M&E), and database designs

a. Provide support for staffing, operational costs, and equipment

Weights Actual Progress Components

b. Provide support for technical and financial project activities, including press vigilance

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