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Docomnt of

The World Bank

FOR OMCLAL USE ONLY

Report No. 12656-IND

STAFF APPRAISAL REPORT

INDONESIA

SEMARANG-SURAKARTA URBAN DEVELOPMENT PROJECT

MAY 16, 1994

MICROGRAPHICS

Report No: 1265rj IDType: SAR

East Asia and Pacific RegionCountry Department IIIInfrastructure Operation Division

This document has a restricted distribution and may be used bv recipients only in the performance oftheir official duties. Its contents ma} not otherwise be disclosed witbout World Rank autborization.

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CURRENCY EOUIVALENTS(As of December 1993)

Currency unit = Indonesian Rupiah (Rp)$1.00 = Rp 2,105

Rp 1 million = $475

WEIGHTS AND MEASURES

Metric Units

FISCAL YEAR

Government of Indonesia: April I - March 31Provincial and Local Governments: April I - March 31

Water Enterprises: January I - December 31

FOR OFFICIAL USE ONLY

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

AMDAL - GOI environmental assessment processANDAL - GOI detailed environment impact assessment studyAPBD 1/11 - Annual provincial/local government development budgetAPBN - Annual central government development budgetBANGDA - Directorate General for Regional Development, MHABAPPENAS - National Development Planning AgencyBAPPEDA I/1I - Provincial/Local Development Planning AgencyBPKP - Central Audit BureauBPD - Regional Development Bank (Provincial Level)CPMO/FO - Central Project Management Office/Finance OfficeDATI 1/11 - Provincial/local level governmentDGCK - Directorate General Cipta Karya (Human Settlements), MPWDGBM - Directorate General Bina Marga (Roads and Bridges), MPWDGM - Directorate General Monetary Affairs, MOFDGWRD - Directorate General for Water Resource Development, MPWDPUK - KabupatenlKotamadya department of public worksDPUP - Provincial department of public worksDIP/DIPDA - Central/regional project budgetDUP - Preliminary project budgetGOI - Government of IndonesiaIDC - Interest during constructionIKK - Kecamatan headquarter townIMG - IUIDP Implementation Management Group, BAPPENASINPRES - Presidential Instruction, including a class of GOI grantsIUIDP - Integrated Urban Infrastructure Development ProgramKabupaten - Local (Level II) districtKampung - Urban neighborhoodKIP - Kampung Improvement ProgramKotamadya - Incorporated municipality/city (Level II)Kecamatan - Kabupaten or kotamadya administrative districtLIDAP - Local Institutional Development Action ProgramMCK - Communal lavatory and toilet facilityMIP - Market Improvement ProgramMHA - Ministry of Home AffairsMOF - Ministry of FinanceMPW - Ministry of Public WorksMurni - Rupiah murni, or money from 'pure" domestic sourcesNGO - Non-governmental organizationO&M - Operations and maintenancePADS - Pendapatan Asli Daerah (local government taxes and charges)PBB - National land and buildings taxPDAM - Local government water enterprisePEMDA - Local (Municipal/District) governmentPIA - Program Implementation AgreementPIL - Preliminary environmental assessment

This document has a restricted distibudon and may be used by recipiens only in the ptnwancf ldrI official duties Its contents may n othwise be disclosed with World Bank atonza.IL

PIU - Project Implementation UnitPJM - Medium-Term Expenditure ProgramPMDU - Provincial Management and Development Unit (for water enterprises)PMO/FO - Local Project Monitoring Office/Finance OfficePMU - Project Management UnitPPF - Project Preparation FacilityPPMU - Provincial Project Management UnitPUOD - Directorate General for Public Administration and Regional Autonomy,

MHARAKORBANG IIII - Provincial/local annual budget coordination meetingRepelita - Five-year Development PlanRIAP - Revenue Improvement Action ProgramRKL - Environmental Management PlanRPL - Environmental Monitoring PlanSDO - Routine central GOI grant, primarily for salariesSK - Surat Keputusan, decree of a senior officialSPABP - special grant fimd channel from Central to local governmentsTKPP - Urban Development Coordination TeamTUA - Directorate of Budget Administration, MOFUNDP - United Nations Development ProgramWalikota - Kotamadya chief executive (mayor)

INDONESIA

SEMARANG AND SURAKARTA URBAN DEVELOPMENT PROJECT

Loan and Project Summary

Borrower: The Republic of Indonesia

Beneficiaries: The Municipal Governments of Semarang and of SurakartaWater Enterprises (PDAM) of Semarang and of Surakarta

Amount: US$174.0 million equivalent

Terms: Repayable in 20 years including five years of grace, at the Bank'sstandard variable interest rate

Onlending Terms: Out of the loan proceeds, US$66.5 million equivalent would beonlent by the Central Government to the Municipalities of Semarangand Surakarta and their Water Enterprises at an annual interest rateof 11.5% which reflects the 6 month average of the 3-monthSerdfikat Bank of Indonesia (SBI) rate at the time of projectappraisal, for a term of 20 years, including 5 years grace. BothMunicipal Governments and their PDAMs are fully responsible forthe interest during construction. The Central Government wouldbear the foreign exchange risk.

Project Objectivesand Description: The main objectives of the project are to (i) improve the provision

of urban infrastructure and services and the efficiency of urbaninvestments, (ii) promote stronger, more autonomous, and financiaUymore independent municipal governments and (iii) contribute towardsurban poverty alleviation, mainly through better access to essentialservices and an improved urban environment.

The project would finance priority investments in Semarang and inSurakarta in: a) urban roads and transport; b) water supply anddistribution systems; c) storm drainage and flood control; d) solidwaste collection and disposal; e) human waste disposal (sewerage andon-site sanitation facilities); f) multi-sectora! programs for kampung(low income area) improvements and market improvements, and g)programs for the development and strengtbening of local institutions,(h) programs to increase local revenue generation, and (i) technicalassistance for implementation.

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Bendits and Risks: The project would benefit the urban populations in Semarang andSurakarta through provision of better qualty and more reliable andaccessible urban infrastructure and services. The water supply,drainage. and human and solid waste disposal investments wouldgreatly improve the living environment by providing safe and reliablewater, reducing property damage and productivity losses, anddecreasing pollution and the incidence of diseases. The urban roadsmanagement investments would assist the local economies bylowering transport costs and travel times. Kampung and marketimprovement investments would help lower income population bybetring living conditions and local commercial facilities. Themain risks are the limited capabilities at the local level to plan,manage, and implement investment and development programs. Thisweakness may cause implementation delays, poor quality, costoverruns and non-achievement of revenue targets. In order tomitigate these risks, appropriate measures have been included in theproject, such as the use of standardized procurement documents,increased involvement of private sector in O&M delivery,employment of consulants, managed at the local level, to assist withimplementation. Another mitigating factor is the strong ownershipof the proposed program by the two municipalities developed throughtheir close involvement in the preparation process.

Estimated Costs:

D4l PoreignT'US$ million)

Water Supply and Distribution 16.2 39.5 55.7Drainage 18.5 10.2 28.7Urban Roads & Transport 34.6 16.9 51.5Solid Waste Management 4.7 2.5 7.2Sanitation & Sewerage 11.6 8.0 19.5KIP/MIP 3.9 2.1 5.9Housing/Urban Renewal 3.7 2.0 5.7Implementation Support 17.6 7.5 25.2O&M Overheads & Taxes 41.3 9.2 50.5

Total Base Cost /a 152.1 97.9 249.9

Physical Contingencies 6.2 6.6 12.8Price Contingencies 25.2 9.1 34.3

Totl Pjject Cost 183.5 113.8 297.3

Interest During Construcion 23.5 23.5Tota Financing Equirded/b 207.0 113.8 320.8

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/a Includes repayment of PPF of US$1.7 million./k Includes taxes and duties of US$18.9 million equivalent and land acquisition amounting to US$9.5

million equivalent.Note: Due to rounding, totals may not add up.

FINANCING PLANgmZa EBRD TotalSources Loan

(US$ million)

Loca Governments 50.8 16.4 67.2Water Enterprises 27.5 56.3 83.8Provincial Government 3.3 0.0 3.3Central Government 41.7 101.3 143.0

Total 123.3 174.0 297.3

Interest During Construction 23.5 23.5TotFinalcin qired 146.8 174.0 320.8 /b

/a Totals may not add up due to rounding.

Disbursement:

EBRD-Fiscal Year 1995 196 1997 1998 1999 2

Annual 20.7 39.4 43.6 34.1 27.9 8.1Cumulative 20.7 60.0 103.7 137.7 165.7 174.0

Poverty Category: Targeted intervention - about 30% of additional water supply for theurban poor. Solid waste, drainage and flood control, sewerage,kampung and market inhfrasucture improvement components of theproject include elements that would directly benefit the urban poor.

Estimated Economic Rate of Retun: 17% to 50% for roads, minimum 12% for water supply,not quantified for other components.

Maps: IBRD No.: 25468 Key Map - Indonesia, Java & Central JavaIBRD No.: 25469 Semarang - Urban Infirastructure Improvements - Map IIBRD No.: 25470 Semarang - Urban Infiastructure Improvements - Map 11IBRD No.: 25471 Surakarta - Urban Inflastructure Improvements - Map IIBRD No.: 25472 Surakarta - Urban Infrastructure Improvements - Map H

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HIDONESIA

SEMARANG AND SURAKARTA TRBANDEVELOPMENT PROJECT (SSUDP)

TABLE OF CONTENTS

1. URBAN SECTOR ...................................... 1A. Sector Overview ...................................... 1B. Urban Development in Semarang and Surakarta ...................................... 2

H. SECTOR STRATEGY AND BANK EXPERIENCE .................................. 4A. Government Strategy ...................................... 4B. Bank Experience ...................................... 5C. Bank Sector Strategy .............. ......... 6

. THE PROJECT......................................................... 7A. Project Objectives .......................... 7B. Project Desripon .......................... 7 C. Project Cost and Financig Plan .......................... 11

IV. PROJECT IMPLEMENTATION ...... ....................................... 13A. Implementation Agencies .......................... 13B. Project Coordination and Monitoring .......................... 15C. ImplmetaionSchedule .......................... 16D. Procurement and Disbursement .......................... 16E. Project Accounts and Audit .......................... 21P. Projec Reporting, Monitoring and Bank Suprvision .......... .......................... 21

V. FNAqNCIAL ASPECTS ................................................... 21A. Financiil Status of the Kotamadyas ............................................... 21B. Financial Situation of the PDAMs . .............................................. 23

VI. PROJECT JUSTIICATION AND RISKS ........................................ 24A. Economic Justification ................................................... 24B. Enviroment Impact ................................................. .. 26C. Social mpact . ................................................... 26D. Impact on Poverty ...... ................................................... 27E.Risks. ................................................... 28

VI. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS ....................... 29

ANNEXES

1. Urban Lnfrasrcture Projects2. Detailed Project Description3. Detailed Cost Table4. Detailed Financing Plan5. Implementation Organization and Arrangements6. Technical Assistance7. Overall Implementation Schedule8. Summary of Procurement Arrangements9. Estimated Schedule of Disbursements10. List of Key Indicators11. Financial Projections KOTAMADYA SEMARANG

Financial Projections KOTAMADYA SURAKARTA12. Key Financial Indicators PDAM SEMARANG

Key Financial Indicators PDAM SURAKARTA13. Summary of Economic Evaluation14. Resettlement15. SPABP "Special Grant" Channel Financing16. Supervision Staming and Schedule17. Documents in the Project File

MAPS: JBRD No.: 25468 Key Map - Indonesia, Java & Central JavaIBRD No.: 25469 Semarang - Urban Infrastructure Improvements - Map IIBRD No.: 25470 Semarang - Urban Infrastructure Improvements - Map IiBRD No.: 25471 Surakarta - Urban Infrastructure Improvements - Map IIBRD No.: 25472 Surakarta - Urban Infrastructure Improvements - Map U

The report is based on the findings of an appraisal mission which visited Indonesia duringOctober/November 1993. The mission was led by H. Unger (EA3IN) and comprised E. Dotsoa,R. lyer, A. Kim TEA31N), W. Luscombe (ASTTP), D. Martin, 1. Richardson, and I. Wetherill(consultants); substantial support was provided P. Midgley, M. Nuch and G. Soraya (EA3RS) inIndonesia. The peer reviewers were Messrs. J. Kozel (EAIIN), J. Hicks (TWURD), K.S. Lee(TWURD) and G. Read (EA2EU). Mr. A. Khanna (EA3IN) Infrastructure Division Chief, andMrs. M. Haug, Country Department Director (EA3DR) have endorsed the project. Ms. Lu Kangwas responsible for the production of the report.

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1. URBAN SECTOR

A. SECTOR OVERVIEW

1.1 Demographic Trends. The urban population iP. Indonesia exceeds 55 million antl is growing atabout 5% per year, more than twice the overall population growth rate. About 80 million Indonesians (40% ofthe population) are expected to be city dwellers by the year 2000. Indonesia has 15 metropolitan and largecities :f more than half a million people, 40 secondary cities of over 100,000 (provincial headquarters andincorporated municipalities), 200 small towns with mver 20,000 residents (district headquarters), and about3,200 service centers (sub-district headquarters) with 3,000 to 20,000 people. Seven of the ten largestmetropolitan areas are in Java.

1.2 Insttutional Framework. At the national level, there is no single minisiry for urbandevelopment. The principal central ministries involved in urban issues are the Ministry of Home Affairs, theMinistry of Public Works, and the Ministry of Finance. The Ministry of Home Affairs (MHA) is responsiblefor oversight of the regional governments, primarily through its Directorate General for Public A14nistrationand Regional Autonomy (PUOD) and Directorate General for Regional Deveiopment (BANG1l-IMinistry of Public Works (MPW or DPU) is responsible for oversight for most infrastructure. -t_ VrW,the following directorates-general are responsible for urban infrastructure: the Directorate Gener. or Hu JanSettMements (Cipta Karya or DGCK) is responsible for oversight of city and regional planning, water supply,urban drainage, sanitation and sewerage, solid waste management, kampung improvement programs (KIP), andmarket improvement programs (MIP); the Directorate General for Roads (Bina Marga or DGBM) isresponsible for oversight of urban roads and bridges; and the Directorate General for Water ResourceDevelopment (DGWRD or Pengairan) is responsible for urban flood control and bulk water sapply. TheMinistry of Finance (MOF) is responsible for central and local finance through its Directorate General forMonetary Affairs (DGM), while the Directorate General for Budget (Anggaran or DGA) administers budgettransfers.

1.3 The National Development Planning Agency, BAPPENAS, is responsitle for overall planning andallocation of resources, focussed on Five-Year Development Plans (Repelita) and Annual National DevelopmentBudgets (APBN). Witbin BAPPENAS, the Bureau for Urban Development, Settlement and Public Housingunder Deputy I (Regional and provincial Development), is responsible for oversight and coordination of urbaninfastructure development. All key agencies with responsibilities in the urban sector are represented in theInter-agency Coordinating Team for Urban Development (Tim Koordinasi or TKPP) chaired by BAPPENAS.

1.4 Although Indonesia continues to have a highly centralized unitary government, at the regionallevels, provincial (Level I) and local (Level II) governments operate with increasing responsibilities anddelegated authority. There are 27 provinces and 301 local governments, including 54 kotamadya(municipalities) and 247 kabupatens (districts). Legislative powers at both provincial and local levels are heldby People's Representative Councils (Dewan Perwakilan Rakyat Daerah or DPRD).

1.5 Provincial governments are headed by governors who represent the President and the centralgovernment; the governors also head the semi-autonomous provincial administrations. Bupatis (kabupatenheads) and Walikotas (municipal mayors) respectively represent the governors and provincial governments, andhead their own local governments. Regional Development Plaming Agencies (BAPPEDA I and II) reportdirecdy to their respective governors, district heads or mayors, and are responsible for planning and resource

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allocation. Regional government services are provided by separate departments (Dinas I and II) analogous toline ministries oe the central government.

1.6 Urban Infrastructure Issues. The main problems and issues faced by cities are: (a) largeinfrastructure and O&M backlogs; (b) poor integration of infrastructure planning with land management andtransport objectives; (c) weak management of water enterprises and municipalities, as evidenced by poorservice levels, lack of adequate cost recovery, revenue generation, and little use of crecil and informationsystems; (d) inefficient programming of the dcs;ign and construction cycles; (e) complex and changingrelationships among local, provincial and central agencies with respect to responsibilities for project andprogram preparation, appraisal, financing, implementation, and O&M; (f) shortage of trained and experiencedmanagerial and technical personnel at all levels; and (g) limited involvement of the private sector in urbaninfrastructure.

1.7 Sector Priorities. Country-wide, only about 20-25% of urban households have direct access topiped water supply, another 15% buy drinking water from vendors or standposts, ard the rest rely on shallowwells and sometimes on surface water. Only about 40% of urban households have access to sanitationfacilities, and surface water courses in urban areas are frequently polluted due to discharge of untreatedwastewater. In the larger cities, inadequate industrial water supply, and lituid and solid waste disposal areserious problems. The problems of deficiencies in basic services and degr2-ed environmental conditions arecausing health risks among the urban poor (who, in 1990, were estimated to be 17% of the urban population).To meet GOI's service and equity objectives, more investment is needed in low cost, local or tertiery systemsin poorly served urban areas. The Bank's 1993 Urban Public Infrastructure Services Report (No. 12154-IND)estimated that the 1990 infrastructure investment backlog was at least US$5 billion for the four main subsectors(piped water, sewerage, urban roads, and drainage). Further, a substantial backlog prevails in the maintenanceof facilities, which has resulted in decreased productivity of the infrastructure.

1.8 Sector Finances. Finances of provincial and local governments have long been dominated bycentral government transfers and are characterized by weak local resource mobilization, low per-capita budgetsand very limited use of credit for capital investment. The dominant role of central government grants forfinancing local government services is partly due to the limited local authority for levying taxes. Grants aretherefore a way to resolve the disparity between local needs and local resource mobilization. Although grantallocation criteria have been modified to respond better to local needs and shortfalls (comparct to minimumstandards), there is a need to base grant allocations more on performance and productivity.

1.9 Sectoral Coordination and Local Participation. Due to the hierarchical administrative system,coordination of the urban sector has been rather poor and local participation in the decision-making process hasbeen limited. The large size and diversity of the country, the number of concerned agencies, and the lack ofexperienced staff have led to a somewhat fragmented approach to urban development. In view of theincreasing scale of urbanization, greater decentralization and devolution of responsibilities is nece. sary.

B. URBAN DEVELOPMENT IN SEMALRANG AND SURAKARTA

1.10 Semarang is the provincial capital and main port of Central Java Province. It is located on thenorth coast of Java and is about 500 km east of Jakarta. With an area of about 373 km2, Semarang is thelargest city in Central Java and is the fifth largest in the country. Over the past ten years, the population ofSemarang has grown at an average annual rate of 2%, almost double the provincial rate. This trend is

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expected to continue and by the year 2000, the population is expected to reach 1.5 million. On the other hand,the household size decreased from 5.2 persons in 1980 to 4.6 in 1990. As a result, the need for residentialland has been increasing. While in the past development was concentrated on the flat coastal plain and lowlandareas, the lack of land in the lowland areas has in recent years led to increasing development in the hilly areasand along the main roads to the south. The built-up area of the Kotamadya was just over one third of the totalarea, with population densities of 33 per hectare (ha) for the entire city area, and 93 persons per ha for thebuilt-up areas.

1.11 Semarang is developing rapidly with major commercial, industrial and residential developmentsrecently completed, under construction or planned. There are now over 5,000 industrial units operating in thecity: over 100 large factories; about 1,800 smal scale industries; and the rest in the informal sector. Theycover a wide range of products including food products, hardware, chemicals and textiles. Further industialdevelopment is taking place in both east and west Semarang, with over 1,000 ha under various stages ofplanning and construction.

1.12 Sr t (also called Solo) was founded in the 18th century and is the original center ofJavanese culture in Indonesia; it remains a major national center for performing arts and batik mafctuie. Itis the second largest city in Central Java and is centrally located in the fefrile lowland areas of the province.The Kotamadya, which covers about 66 knm, is generally flat, except in the north, where the land risesappreciably. The city is partly bounded by Bengawan Solo, the largest river in Java, and is crossed by severalof its tributaries.

1.13 Between 1980 and 1990, the population of Surakarta grew from 469,000 to 503,000, an averageannual growth rate of 0.7%. The current population of Greater Surakarta, which includes the urbanized areasin the adjacent distrcts, is about one million and is expected to increase to around 1.2 million by the end of thecentury. The average household size decreased from 5.0 in 1980 to 4.6 in 1990, while the number ofhouseholds increased by 1.7% annually. 88% of the Kotamadya is already built-up and the population densitiesare high, especially in the central parts of town, where the average of 117 persons/ha in 1990 is expected toreach 132 persons/ha by the year 2,000. Greater Surakarta is an irmportant city in Central Java (after Semarangand Pedalogan) for private invetment commercial, industrial and residential development, is growingrapidly. At the same time, redevelopment of the downtown area is acceleraing because of lack of ievelopableland, and almost all new development is occurig outside the municipal boundaries, especially in the East,South and West.

1.14 Acoess to Urban Infratructr Services. The increase in the urban population and theexpansion of the urbanized areas in Semarang and Surakarta have not been mached by a correspondingdevelopment of infrastructure services. While improvements have been carried out in recent years bymunicipal and provincial authorities, they have been limited due to shortage of funds. This has relted in adeterioration of the standards of service, and in some of the newly developed areas, even essential services arenot always available.

1.15 In Semaang, the local water enterprise (PDAM) supplies piped water to some 40% of thepopulation (29% through house connections and 11% through public taps), with the rest relying on wells andother sources. There is no sanitary sewer system and existing open storm water drains are used to collect bothstorm water and wastewater flows. Over 45% of the population does not even have septic tans. Frequetflooding occurs in the northern and eastern low-lying parts of the city. The existng solid waste system doesnot cover all urban areas and over 40% of the solid waste is disposed of by dumping in vacant plots, canals

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and rivers. With the closure of three dump sites, currently only one solid waste disposal site is operational.The main deficiencies of the urban transport system are: (a) a lack of capacity for east - west through traffic;(b) inadequate arterial/primary collector roads to the east and south of the center; (c) the lack of a proper roadsystem in the east and southeast of the town, where much of the urban development is expected to take place;(d) poor road and traffic conditions on bus and minibus (oplet) routes; and (e) poor traffic conditions and lackof facilities for pedestrians, public transport and parking in the central business district.

1.16 In Surakarta, with PDAM supplies of piped water being limited, 61% of the population reliesentirely on shallow wells for water supply. Two separate sewerage systems are in existence: the larger onecovering the central areas of the city, which was built in the Dutch colonial period, is only partially operationaldue to inadequate maintenance; the other serves a small area of 65 ha and a population of 18,000. While 80%of the 1990 population had private toilets, only 65% had septic tanks of which only a small proportion areemptied regularly. Solid waste collection services are functioning better with about 80% of the populationbeing served; however, waste treatment faciLities are indequate and water courses are contaminated. The mainurban transport issues are: (a) the low railway bridge on the main east - west route for through traffic (n. A.Yani); (b) one - way traffic in the main street of the CBD which diverts buses and inconveniences passengers;(c) delays to road traffic from railway level crossings; (d) conflict between motorized and non-motorizedtraffic; and (e) availability and organization of parking in the CBD.

II. SECTOR STRATEGY AND BANK EXPERIENCE

A. GOVERNMENT STRATEGY

2.1 IUIDP Approach. With large deficiencies in urban infrastructure and a fast-growing urbanpopulation, GOI's strategy in the past emphasized physical ifastru targets: length of roads to be built,percentage of population to be supplied with piped water, sanitation services, etc. These targets have aprominent place in the five year national development plans (Repelitas). In 1987, GOI issued a Statement ofPolicy, representing a consolidated view of development in the sector. This Statement, incorporated in RepelitaV (for the period 1989-94) includes: (a) strengthening local governments to build, operate and maintain localservices; (b) improving the planning and programming of urban infrastructure investmen; (c) mobilization oflocal revenues and the optimization of their use; (d) implementing coordinated financing and administrationsystems for local services; and (e) strengthenig consultative processes at various levels of government,particularly the participation of municipalities and districts.

2.2 GOI's Policy Statement called for Integrated Urban Inftructure Development Programs (IUIDP)as the operational approach for achieving the above objectives. The policy was traLslated into action plans forlocal institutional reforms (Local Institutional Development Action Plan or LIDAP) and improvements in localresource mobilization (Revenue Improvement Action Plans or RIAP), sector planning, and financingarrangements. GCI has issued reglations and policy clarifications to operationalize the IUIDP approach; withWorld Bank, Asian Development Bank (ADB) and bilateral assistance, GOI has undertaken a nation-wideprogram for IUIDP preparation and implementation since 1987; and UNDP and UNCHS have supported acentral assistance team to the IUlDP Management Group (IMG). More than 50 percent of local govermmentshave so far prepared IUIDP plans.

2.3 Local Borrowing. Under Repelita V, GOI has also given priority to the expansion of borrowingby water enterprises. To induce a higher level of credit financing, GOI has adopted less conservative financial

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criteria for borrowing by local entities (debt service coverage ratio of not less than 1.5 for local governmentgeneral fund operations and not less than 1.3 for local enterprises like PDAMs). This has considerablyenhanced the legal borrowing capacity of local governments, particularly the larger municipalities. GOI'sstrategy is to move int.rest rates on such loans toward market rates over the medium term.

2.4 Repellta VI. Repelita VI and the 25 Year Plan I, both of which start in March 1994, emphasizesustainable urban development through improvement in the quality of the living environment, support foreconomic growth, reduction in regional imbalances, and poverty alleviation. Wbile continuing the basicpremises of Repelita V and the National Policy Statement for Urban Development mentioned earlier, RepelitaVI will take a broader approach by expanding the IUIDP into an Integrated Urban Development Program(IUDP) that includes: (a) broadening to include spatial planning and urban planning in addition to public worksinfrastructure development plans; (b) covering a larger number of smaller cities and towns; (c) expanding thescope to cover low income and rental housing, infrastructure provision for low-income areas, and urbanrenewal; (d) involving the private sector and communities to a greater extent; and (e) strengtheningenvironmental suinabiity. To accelerate decentralization and implementation of plans, emphasis will beplaced on better use of resources, mobilization of local revenues, developing financing mechanisms, andincreasing cost recovery by municipalities and their agencies. Better coordination and strengthening of localagencies will also be sought.

B. BANK EXPERIENCE

2.5 Overall Sector Experience. Bank involvement in the urban sector also started in the early 1970swith low cost investment project in shelter, water supply, sanitation, and urban roads, aimed at alleviatingurban poverty. Sites and services and slum upgradmg projects were to demonstrate replicable approachesbenefitting the poor, while recovering costs and reducing the financial burden on the public sector. Many ofthese projects succeeded in physical terms, but had litle impact on the policies of national and localgovernments and on urban management. The Bank had not paid adequate attention to the policy andinstiutional requiements for improving the productivity of the urban economy and reducing urban poverty,and improving management of the urban environment. Purther, as many of the urban programs did notachieve sustainable policy reform and institutional development, project approaches were generaly notreplicable outside the framework of Bank financial support.

2.6 In the urban water supply sector there has been relatively little change in approach since the mid-seventies. While many projects have provided substantial economic benefits, the expence indicates: (a)supply of water has lagged behind increasing demand; (b) delays in project implementation are common; (c)inproving institutions and moving towards cost-recovery have been slow and difficult; (d) water quality is apersistent problem; and (e) disposal of waste water in densely populated areas has been difficult.

2.7 A review of Bank experience in urban transport projects highlights issues similar to the ones facedin the urban and the water sectors, namely: (a) weak institutional capacity; (b) inadequt counterpart f%nding;(c) slower than expected implementation due to lack of final engineering designs at appraisal, and overopfimistic scheduling; (d) weak enforcement u, t-affic management schemes; and (e) inadequate maintenancedue to lack of capabilty in road and traffic signal maitenance and insufficient funding.

2.8 By the mid-1980s, the experience of donor-assisted projects had led to shifts in their approaches tothe urban sector. It was recognized that central governments alone were unable to meet the increasing needs

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for infrastructure services of rapidly growing urban populations and greater efforts had to be devoted to: (a)improving the management of urban institutions and strengthening inter-governmental fiscal relations; (b)improving local resource mobilization; (c) enhancing the management of urban infrastructure, particularly withregard to maintenance; (d) establishing enabling regulatory frameworks; (e) expanding financial services forurban development; and (f) promoting private sector participation in urban service delivery. Recent initiadvesby governments and donors in these areas reflect a growing appreciat -n of the importance of policies,institutions, and regulations in formulating effective strategies to manage urban growth.

2.9 Experience in Indonesia. The Bank has financed 11 completed anc 8 ongoing urban and watersupply projects in Indonesia since 1974, for more than fifty local governments and many of their waterenterprises (see Annex 1). Urban lending operations in Indonesia have progressed from demonstration projectsin Jakarta through more programmatic investments in selected other large cities, to sector lending within anagreed policy and institutional framework (although still limited in terms of area and subsectoral scope). Watersupply projects initially covered only a few cities at a time, but later, like Bank projects in other countries,assisted a large numoer of urban settlements under one operation. In urban transport projects (or the transportcomponents of urban development projects) attention has focussed on road construction and maintenance whileinadequate attention has been given to traffic management, and to improvement of facilities for public transportservices and for pedestrians. Details concerning Bank-funded water and urban infrastructure projects areavailable on file.

2.10 Bank experience confirms that: (a) limited planning and implementation capacity at the centrallevel and the difficulties inherent in providing essentially local services by central government departmentsreduces the efficiency of mass delivery programs; (b) capacity building at the local level is a long-term processthat needs to be accompanied by an increase in local responsibility and accountability; (c) to develop suchresponsibility and accountability, central-local financial relations need to provide more local governmentautonomy; and (d) private sector involvement needs to be enhanced. GOI is also aware of these issues andthey have been addressed to a large extent in the design of the current project.

C. BANK SECTOR STRATEGY

2.11 The Bank has oriented its sector lending to assist the Government to deliver adequate urbaninfrastructure services in cost-effective ways. GOI and the Bank emphasize improvements in: (a) servicelevels, in a regionally balanced fashion, particularly for the poor; (b) urban productivity and the effectivenessof investments through better infrastructre planning, especially at the city level, and through enhanced localgovernment capacity for fiscal management, revenue mobilization, project implementation and O&M; (c) theurban environment, by enhancing local government capacity to plan, implement and operate infrastructure in anenvironmentally sound fashion; and (d) enhancing community participation.

2.12 In promoting efficient urban development, the Bank's strategy supports the expanded IUDPapproach; however, implementation should include both sectoral and hnegrated approaches as appropriate.While all plans should be integrated, in some cases, implementation can be better handled through separatesectoral projects. For example, in smaller municipalities multisectoral projects are generally of manageablesize and complexity; an integrated investment approach would, therefore, be more appropriate. In other cases,where the requrements of a particular sector are sufficiently large and complex, both in technical terms as wellas on policy, institutional and financial matters, sectoral projects within the framework of an integrated planmay be better.

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2.13 Improving local management capacity is another area where the Bank's strategy is aligned withthat of GOI. Local governments and local institutions such as PDAMs should have well qualified and welltrained staff. In addition, local resource mobilization and retention should be increased. These issues could beaddressed through revenue improvement programs, greater retention of tax collections, pricing policies to effectcost recovery (O&M costs and perhaps a portion of investment costs), flexibility to use funds as needed inpriority areas, and increased local borrowing at market rates of interest. The Bank also recognizes that theinfrastructure deficiencies are large and that the financial capabilities of local institutions are limited; GOIgrants will therefore continue to be an important source of financing. In order to optimize their use, grantsshould be allocated on an incentive basis e.g., to match increases in revenue generation and investments bylocal governments and local enterprises.

2.14 The Bank's strategy also promotes the establishment of an enabling regulatory and planningframework for urban land management. The Government has recently established a national agency (BPN) forland and a focus of the Bank's strategy will be to support GOI efforts to simplify zoning and other regulationsto facilitate more efficient urban land use and strengthen tenure. An enabling framework for increased privatesector participation has also to be developed.

HII. THE PROJECT

A. PROJECT OBJECTIVES

3.1 Rationale for Bank Involvement. The Bank Group's Country Assistance Strategy for Indonesia,which was presented to the Board on April 12, 1994, highlights the need to focus on interregional equity,delivery of higher quality services and enhanced competitiveness in a climate of macroeconomic stability. Thiswill be addressed through a lending program of investme,its to overcome bottlenecks in infrastructure andhuman resources; decentralizing responsibilities and reducing pollution are fuirther objectives of the Bankstrategy. This project is part of a series of urban development projects supported by the Bank under the IUIDPframework. It will make a contribution in these areas in the Central Java cities of Semarang and Surakarta andhas the folowing principal objectives: (i) improve the provision of urban infrastructure services and theefficiency of urban investments, (ii) promote stronger, more autonomous, and financially more independentmunicipal governments, and (iii) contribute towards poverty alleviation, mainly through better access toessential services and an improved urban environment.

B. PROJECT DESCRIPTION

3.2 The project will support a program of high priority investments in both cities in roads, watersupply, drainage, human waste management, solid waste management, and KIP/MIP all complemented by localinstitutional development programs to increase the institutional capacity of the implementing agencies, andfinancial action plans to improve local financial management and revenue generation.

3.3 Urban Roads. The urban roads component, the largest sectoral component in the project, willprovide a more comprehensive solution to the existing traffic problems in both cities through a more efficientroad network. In Semarang, the program will comprise: (a) construction of a 3 km extension of the NorthernRing Road (including three new bridges), and of four new bridges to complete links in the secondary roadnetwork; (b) minor improvements to 73 km of roads, including widening and betterment; (c) rehabilitation andperiodic maintenance of 59 km of road, including resurfacing and as needed, drainage, curbs, sidewalks; and

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(d) a traffic management program, including improvements to road links, intersections, traffic signals, publictransport and pedestrian facilities, parking areas and road safety. In Surakarta, the program will comprise:(a) construction of the initial 5 km of the Northern Ring Road (including three new bridges); (b) minorimprovements to 27 km of road; (c) periodic maintenanice of 59 km of road; (d) a traffic management program;and (e) an urban transport study to establish future policy, investment needs and priorities (a similar study isbeing undertaken in Semarang financed by ADB).

3.4 Detailed engineering design, economic and environmental analyses are required for the newprimary roads to be constructed/upgraded in the later years of the program in both cities, as well as for somecollector roads in Semarang. The Bank will review the preliminary engineering designs and environmentalassessments (PIL or ANDAL) prior to commencement of detailed engineering design and the detailed designs,RKL and RPL prior to start of procurement. Similarly, the traffic management program for both cities foryears 2-5 will be finalized based on detailed traffic management schemes which will be prepared during thefirst year of implementation. Technical assistance to the local governments is included in the project for designand implementation.

3.5 Water Supply. In Semarang, this component will raise the service level of piped water supplyfrom about 40% of the present population to about 64% of the 1999 population. It comprises source supplyadditions, improvements to the transmission, storage and distribution system, reduction in unaccounted forwater (UFW) and technical assistance. Supply expansions include: (i) a bridging program of 360 liters persecond (l/s3), of which 1 10 I/s will come from maintenance and refurbishment of (a) deepwells (50 l/s); (b)intake pumps at Kali Garang (40 Us); and (c) a small package treatment plant at Kali Garang (20 l/s); theremaining 250 I/s by increasing the capacity of the existing Gajah Mungkur water treatment plant; (ii)providing up to 2,000 I/s from Kelambu Barrage through a raw water canal to Kudu where the first two stagesof a water treatment plant for 500 Uls each will be constructed under the project in 1997 and 1999. Thetransmission, storage and distribution system in the eastern part of the city will be expanded by 550 km tosupply the additional available water. 68,000 new house connections and 300 public taps will be provided,benefitting a total of about 90,000 households. UFW will be reduced from the current high level of 46% to26% through (a) contracting out a leakage reduction program on a target-related basis, (b) a rolling meterchecking, recalibration, repair and/or replacement program through upgrading the meter workshop and asupply of meters and spare parts, and (c) updating system maps and consumer records in order to ensure thatall consumers are billed.

3.6 GOI had made great efforts to involve the private sector in a Build-Operate-Transfer (BOT)scheme for the Kudu treatment plant, transmission, storage and major distribution facilities. Financial analysisof this alternative indicates that - on the basis of the available information - it would be viable for PDAMSemarang with a maximum initial bulk water tariff of Rp. 650/m3 at 1993 prices compared to Rp. 392/e3

under the current arrangements. Since negotiations between GOI agencies and the private sector joint venturehad not been concluded successfully until the end of February 1994 (even after several years of discussions),the project loan includes financing for the construction of the Kudu treatment plant and the related transmissionand distribution system. The main problem standing in the way of successful private sector participation is therelatively slow and somewhat uncertain build-up of domestic demand, whereas the proposed BOT schemewould require a guaranteed large volume offtake from the beginning to be viable. Should GOI decide at a laterstage to go ahead with this part of the project as a BOT scheme, the Bank will reappraise the Semarang watersupply component to evaluate the impact of the agreed bulk water rates on the financial viability of PDAMSemarang.

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3.7 The water supply component in Surakarta will raise the service level from about 30% of thepresent population to about 58% of the 1999 population. It comprises a supply augmentation program,improvements to the distribution system, UFW reduction, technical assistance and studies. Ten new deepwells(seven duty and three standby), each yielding 30 I/s, will provide additional supplies. The distribution systemwill be augmented by about 30 km of new primary and secondary distribution pipes, and approximately 110km of new tertiary distribution pipes; in addition, the distribution system will be rehabilitated through thereplacement of 45 km of pipes ranging from 50 mm to 100 mm in diameter. Maintenance programs for theexisting and new wells as well as an O&M program for the extended distribution system are also envisaged.About 14,000 new property connections and over 50 new public taps will be provided, benefitting a total ofabout 18,000 households. UFW will be reduced from 34% to 22% (by in-house efforts, supported by technicalassistance) through continuing the current programs of leakage reduction, rolling meter recalibration, repair andreplacement programs, and detection and elimination of illegal connections.

3.8 Assurances were given by GOI at Negotiation- *hat (a) Central government miancing will bemade available for the post-1996 bulk water supply scheme . - 'emarang in Kudu; (b) funding for thecompletion of the Kelambu - Kudu conveyance canal will be w.ade available by GOI, and (c) in PDAMSurakarta, the Leakage Control Division wiH be established by December 31, 1994.

3.9 Drainage. This component will support high priority improvements in both Semarang andSurakarta for areas subject to frequent flooding; it includes channel rehabilitation, widening and deepening,removal of bottlenecks (such as undersized culverts and bridges), and some new construction. In Semarang, 28km of primary drains and 126 km of secondary and tertiary drains will be improved. In Surakarta, 3 km ofprimary drains, 17 km of secondary and tertiary drains, and two stormwater pumping stations will beimproved. In addition, in Surakarta, a small pumping station will be constructed near the mouth of the KaliPepe to lift drainage flows into the proposed wastewater treatment plant.

3.10 An essential part of the drainage component is a major improvement in the level, quality andexecution of O&M. Project financed technical assistance will install a Performance Oriented Maintenancemanagement System (POMMS) in both cities. Up to 40% of all O&M will be contracted out, with guidelines,manuals and sample documtnts for increasing private sector participation being provided by the ongoingUSAID PURSE Project. Final versions of the Terms of Reference and short list of firms for POMMS will berequired by Negotiations. Assurances were given by GOI at Negotiations that local governnent fundingwiri be steadily increased to reach 100% of road and drainage O&M requirements by the end ofFY1997/98.

3.11 Sanitation & Sewerage. The project will support improvements to on-site and off-site sanitationfacilities in both Semarang and Surakarta. In Semarang, the program comprises: (a) an off-site sanitationimprovement program, which includes the construction of 14 km of trunk and interceptor sewers; constructionof a 29 ha wastewater treatment plant (in two phases) comprising anaerobic, facultative and maturation aerobicponds; construction of seven pumping stations; and a 59 ha pilot area with full sewerage and houseconnections; (b) an on-site sanitation improvement component which includes construction of a septagetreatment facility including sludge thickener, digester, drying beds and maturation ponds; construction of 272communal bathrooms and toilets (MCKs); procurement of desludging trucks; and a credit ,cheme for theconstruction of up to 4,500 private toilets and septic tanks for individual households. Prior to carrying out thedetailed design, GOI will examine alternative options to the conventional sewerage system proposed under (a)above. If a more cost-effective and technically sound alternative is identified, GOI will propose it to the Bankfor review and possible appraisal.

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3.12 In Surakarta, the human waste component comprises: (a) an improvement program for the oldDutch sewer system, which includes its rehabilitation; construction of the upstream length of an interceptorsewer; and construction of an in-stream treatment plant; (b) rehabilitation of the Mojosongo sewerage systemand addition of an oxidation pond sewage treatment plant near Kali Anyar, and an extension of the main trunksewer; (c) an on-site program, comprising a small credit scheme for the construction of individual septic tanksto serve a further 2,300 households, the construction of 200 MCKs and communal toilets, and procurement oftwo desludging trucks.

3.13 Solid Waste Management. The solid waste component of the project will increase servicecoverage from 60% to 80% in Semarang, and from 80% to 90% in Surakarta. The collection systems in bothcities will be rationalized and modernized through replacement and purchase of new vehicles and containersand construction of temporary collection depots. In Semarang, the program includes: (a) closure works at theold disposal sites needed to prevent continued air and groundwater pollution, and improvement of theJatibarang final disposal site; (b) site selection study and land acquisition for the next disposal site; and (c)procurement of equipment such as dump trucks, armroll trucks, compactor trucks, loader, back hoe andhandcarts. Actions to improve the Jatibarang disposal site, especially construction and site managementmeasures and construction of a new, low level access road, have been taken by GOI.

3.14 In Surakarta, the principal elements are upgrading the Putri Cempo disposal site and procurementof equipment similar to Semarang. As in the case of drainage O&M, support from the PURSE Project, as wellas the Bank's study on Private Sector Participation in Municipal Solid Waste Management, will provideassistance in contracting out waste collection services.

3.15 Kampung Improvement Program (KIP). The project will support GOI's new community-based development approach to KIP, Tri-Bina, comprising Bina Lingkungan (development of physicalenvironment), Bina Manusia (human resources and social development), and Bina Usaha (business andeconomic development). In Semarang, 16 Kelurahan covering about 420 ha, benefitting 197,000 people, willbe improved; in Surakarta, 26 Kelurahan, covering 390 ha and benefitting 33,700 people will be improved.Social and economic development in the 42 Kelurahan in the two cities will be programmed over three yearswith community involvement.

3.16 Market Improvement Program (MIP). The project includes a program in the two cities torehabilitate and improve high priority, important markets through the rehabilitation of infrastructure andimprovements to market superstructures.

3.17 Urban Renewal (Perumahan Rakyat). Perumahan Rakyat will be a pilot component in theproject, with technical assistance for the preparation of: (a) an urban renewal action plan and a feasibility studyin Semarang, mainly for the Bandarharjo slum area (about 14,000 people on 24 ha); (b) a similar study in thehigh priority area of Mojosongo in Surakarta (about 75 ha); and (c) a credit scheme for housing rehabilitationin both Semarang and Surakarta. Investment funds for infrastructure provision for low income communities forthe first stage of implementation of (a) & (b) have also been included in the project, but (c) will be fundedfrom GOI's national TRIGUNA program.

3.18 Historic Areas Conservation. The project will support pilot physical improvement componentsin the core areas of both cities selected historic buildings and areas in Surakarta; and at Kota Lama and theTawang Railway Station in Semarang) to protect and promote conservation of historic buildings and areas,make them more liveable, and also enhance their tourist potential.

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3.19 Implementation Support and Institutional Capacity Building. Mindful of existing absorptiveconstrains with regard to technical assistance, implementation support and capacity building have been kept tothe minimum levels considered necessary to achieve project objectives in an effective manner. Implementationsupport constitutes about 7% of total project costs (about 12% of the loan), while institutional development andcapacity building constitutes 1% of total project costs (about 2 % of the loan). GOI will still seek bilateralgrant funds for funding some of these components. Annex 6 details the Implementation Support andInstitutional Building activities supported by the project.

3.20 Implementation support and Institutional Capacity Building activities cover contract engineeringservices, program management/implementation, sector development and implementation related studies.Contract engineering services cover detailed engineering design and construction supervision for all majorcomponents in both cities: roads, water supply, sanitation and drainage. Program managementimplementationassistance provides for: (a) advisers to the PMO, the PMU and the PFO in both cities; (b) an adviser to theprovincial-level PPMU; (c) assistance for the implementation of RIAP, including the development of LandInformation Systems for improved taxation in both cities; (d) Urban Management Support for InfrastructureDevelopment Programs (UMSIDP) in both cities, for the formulation of metropolitan area development plans,implementation of Urban Spatial Information Systems (in the form of a basic GIS), and formulation ofguidelines and technical standards for controlling development and maintaining the cultural heritage; and (e)POMMS installation for improved roads and drainage maintenance. Sector development assistance includesfinancing of: (a) a Sanitation Adviser at the national level; and (b) project management training at all levelsincluding project launch activities.

3.21 Implementation support studies in specific sectors cover the following: (a) in urban roads;preparation of a detailed traffic management program fcr both cities; (b) in water supply, the funding of UFWControl Experts in both cities, a management and a financial Adviser for PDAM Semarang, and a metropolitanwater resources and system development study for Surakarta; (c) in sanitation, an industrial liquid waste surveyin both cities, a house connection survey in Surakarta, and advisory services to start up the new seweragedivision in Surakarta; (d) in solid waste, studies to select a new disposal site in Semarang to meet medium termneeds; (e) studies mentioned in para. 3.17 for infrastructure for low-income communities; and (f) studies forhistoric building preservation.

C. PROJECT COST AND FINANCING PLAN

3.22 The total project/program cost of the SSUDP for the five year period (GOI) FY1994/95 - 1998/99is Rp. 625.7 billion, equivalent to US$297.3 million. Base costs, in October 1993 prices, total Rp. 526.4billion (US$250.1 million), and contingencies account for the remainder. (Physical contingencies for land andcivil works have been computed at 10% of base costs (except for roads & drainage works for which 5% hasbeen assumed) and those for equipment at 10%. Price contingencies for local and foreign costs have beencomputed assuming 2.5% for foreign inflation and 5.5% for local inflation. Semarang accounts for 68.6% ofthe costs and Surakarta, 31.4%. Table 3.1 shows details of the project cost.

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Table 3.1 PROJECT COST

Rp Mu S mllon %of % ofDescrip00n Local Fore Total Local Fordlp Total Base Cost Foreg

Exchan

Water Supply 34,086 83,172 117,258 16.2 39.5 S5.7 22% 71%Drainage 38,892 21,562 60,454 18.5 10.2 28.7 11% 36%Urban Roads & Trausport 72,865 35,583 108,449 34.6 16.9 S1.5 21% 33%Solid Wae Management 9,955 5,244 15,199 4.7 2.5 7.2 3% 35%Santation & Sewerage 24,323 16,830 41,153 11.6 8.0 19.5 8% 41%KIP/MIiP 8,115 4,369 12,484 3.9 2.1 5.9 2% 35%HoushingUrbanRenewal 7,751 4,175 11,930 3.7 2.0 5.7 2% 70%

Conract Services 17,931 5,977 23,908 8.5 2.8 11.4 5% 2S%Technical Assistance 19,142 9,959 29,101 9.1 4.7 13.8 6% 34%Taxes 39,888 0 39,888 18.9 0.0 18.9 8% 0%Overheads 11,283 0 11,283 5.3 0.0 5.3 2% 0%Roudine O&M 35.973 19,370 55,343 17.1 9.2 26.3 10% 35%

Tota Base Cost al 320,206 206,242 526,448 152.0 97.9 249.9 100% 47%

Physical Contingenies 13,101 13,982 27,083 6.2 6.6 12.9 7% 52%Price Contingencies 52,957 19,250 72,207 25.2 9.1 34.3 20% 27%

Tota Project Cost b/ 386,264 239,474 625,737 183.5 113.8 297.3 171% 38%

1nere During Consructon 49,478 0 49,478 23.5 0.0 23.5

Tot Financig Requhed43s,742 239,474 675,215 207.0 113.8 320.8

a/ Due to rounding, totals may not add up.bJ Including taxes and duties amounting to USM28 milion equiovent and land acquisition amnounting to US$9.5

million equivalent.

Table 3.2 FINANCING PLAN

Rn BMion $ millio.pesco~9a Own IBmD Total Own IBRD Total % of

Somca Ia Sour Loan Cost

Local Governments 107,096 34,221 141,317 50.9 16.3 67.1 23%Water Enerpises 57,880 118,583 176,463 27.5 56.3 83.8 28%Provincial Goveram 6,942 0 6,942 3.3 0.0 3.3 1%Cental Govenmen 88,076 142,567 230,643 41.8 67.7 109.6 37%Central Governme¢t 70,371 70,371 33.43 33.43 11%(SPABP to TK I & U)

Total 259,993 365,743 625,736 123.51 174.0 297.26 100%Percen1eg 42% 58% 100% 42% 58% 100%

Interest Durig Consruction 49,478 49,478 23.5 23.5

Tolal Em atin£ 309,471 365,743 675,214 147.0 174.0 320.8

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3.23 Financlng. The proposed Bank Loan of US$174.0 million will finance 58.5% of the project cost.GOI agencies will finae about US$123.5 million, of which US$42 million will be from central govermentDIP, US$3 million will be from the provincial government, US$51 million will be from the two Kotamadyas,and US$27 million from the PI>AMs of the two cities. Proposed sub-loans to the Kotamadya and the PDAMswill be US$66.5 million under subsidiary loan agreements. The sub-loans comprise all of the central fundingfor the water and solid waste components, as well as a major portion of central financing for KIP/MIP. Localentities are fully responsible for interest during construction amounting to US$23.5 equivalent. Table 3.2shows the financing plan, while the details are shown in Annex 4. It should be noted that although asubstantial grant element still remains, the overall flnaning plan, with an Increased reliance onborrowings for capital costs (through the sub4loans) is consistent with the Bank's (and the Govenmnent's)sector strategy described In Paragaph 2.13. Assurances were obtained at Negotiations on the timelyprovision of GOI funds for the project through the various funding channels.

3.24 Onlending Terms. As indicated above, part of the proceeds of the loan will be onlent by GOI tothe two local governments and the respective PDAMs. Sub-loan terms will be for a maximum of 20 years,including five years grace, at a fixed interest rate of 11.5%. Consistent with GOI and Bank strategy to movelocal borrowing towards market rates (see Paragraphs 2.3 and 2.13) the interest rate for the subloans reflectsthe six month average of the three month Serdficat Bank Indonesia (SBI) rate prevailing at the time of projectappraisal. GOI will bear the foreign exchange risks.

3.25 Confirmatlon was received from GOI at Negotiations that SPABP grant procedures andchannelling of funds are as described In Annex 15 and that the terms and conditions for the suboans tothe local governments and water enterpries are as described In paras 3.23 and 3.24. Confirmation wasalso given by GOI at Negotations that all payments (i.e. from both SPABP and SLA funds) to localcontractors would be made from the Treasy (KPKN) office in Semarang. Execution of the subloanagmments is a condition of Loan effectiveness.

3.26 Retroactive Financing. In order to make an early start on the implementation of the program,retroactive financing, not exceeding US$5 million, was agreed. Expenditu incurred for civil workscontracts, goods and consultant services (a) in accordance with Bank procurement guidelines and procedures,and (b) after November 1, 1993, are eligible for retroactive financing. A Project Preparation Faeility (PPF)in the amount of US$1.7 million had been granted by the Bank and was used to finance part of the pro;ectpreparation studies; it will be repaid from the loan as soon as it has become effective. A Japan Grant Fundof US$0.3 million for this project was used to finance the environmental assessment work.

IV. PROJECT IMPLEMENTATION

A. IMPLEMENTATION AGENCIES

4.1 Project Implementation Agreements (PIA). Existing organizations at the municipal level wilbe responsible for implmentation of the project, except for the coordinating agencies described below.Project Implementation Agreements (PIA) have been drawn up between GO1, Central Java Province,Kotamadyas Semarang and Suraarta, and their PDAMs to confirm essential understandings and commitmentsbased upon the medium-term expendite programs (PIM), financing plans, Revenue Improvement ActionPlans (RIAP) and Local Institutional Development Action Plans (LIDAP). Through the PIAs, Kotm yas

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Semarang and Surakarta and their PDAMs would commit themselves to comprehensive sectoral invesutentprograms (including O&M budgets), specific revenue targets and measures to strengthen the institutionalcapabilities of urban management. The investment and sector plans can and will be amended annually toreflect changing conditions during project implementation. However, the process of preparing and laterupdat the comprehesive sectoral programs is the core of the IUIDP approach and all amendment proposalsshould include an environmental assessment, a management and monitoring plan and, if necessary, aresettlement plan. Execution of PLAs acceptable to the Bank Is a conet-don of Loan effectiveness.

4.2 Urban Roads Tramc Management. The Roads and Bridges Section of the Municipal PublicWorks Agency (DPU II) is responsible for the construction, maintenance and supervision of local roads andbridges. Provincial and national roads are the responsibility of the provincial and national governmentsrespectively. A separate section will be established in the DPU to implement the traffic management program.Conslting support is being provided under the project to design in detail, evauate and implement indidualschemes in the traffic management program.

4.3 A technical team for a Performance Oriented Mainnance Management System (POMMS) hasalready been established at the municipal level to provide technical support (planning, programming, budgeig,controlling, evaluating and reporting) to strengthen the O&M program for roads and drainage. The projectprovides consulting support to the POMMS teams in both cities to help identify the needs for additional O&Mstaff, additional equipment, and training.

4.4 Water Supply. Consulants appointed by the cenal govermment will assist the PDAMs inSemarang and Surakarta in implementing the major new investments of the project. The PDAMs will beresponsible for operating and maintaining the water supply assets generated by the project. A UFW Controlexpert will be provided under the project to PDAM Surakarta to help implement the UFW reduction program.PDAM Semarang will engage a contractor to address and manage system leakages under the supervision of aUFW Control expert. In addition, a Management Adviser and a Financial Adviser will be provided to PDAMSemarang for institutional strengthening in O&M, on-the-job staff training and on financial matters.

4.5 Drainage. At the municipal level, the drainage sub-section will be removed from the saitationsection and converted to a separate section, with responsibility for storm drainage and flood control within themunicipal area. The central government will be responsible for implementing investments under itsjurisdiction. O&M performance will be strengthened through POMMS and consulting support, as describedabove in the case of roads.

4.6 Human Waste Disposal. Construction of new sewerage works in each city will be carried out bythe respective Environment Sanition Project (PLP), with a staff member from the Environmental SanitationDivision (Sub-Dinas TPL, Dinas PU Cipta Karya) as Project Manager on behalf of the central public worksdepartment. The local PDAM will take over the management of the system through a separate unit, Unit AirLimbah (UAL). For the longer term, consideration will be given to proposals to establish separate sewerageenterprises.

4.7 The on-site sanitation program in both cities will be implemented by the central government (PLPDGCK) using municipal staff (BANGDES) as project managers. Three agencies have been established tofacilitate the on-site sanitation development program: a Sanitation Directing Group (KPS), at the municipal

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level; a Sanitation Guiding Group (KBS), at the district / kecamatan level; and a Sanitation Working Group(KKS), at the targeted sub-district / kelurahan level. A new section will be established in the PDAM to operatesludge collection services in areas not covered by private operators.

4.8 Solid Waste Management. Dinas Kebersihan (Cleansing Agency) in the two municipalities willbe responsible for all solid waste management activities.

4.9 Infrastructure for Low-income Communities and KIP. The municipal housing agency (DinasPerumahan) in each city will be responsible for the implementation of the KIP and the Perumahan Rakyatcomponents. Consultant teams, providing assistance on the technical, financial, economic, institutional andenvironmental aspects, will be located in the Dinas Perumahan, but will be responsible to the Directorate ofHousi.g, DGCK.

4.10 MIP. The market agency in each city (Dinas Pengelola Pasar) will be responsible forimplementation of the MIP component of the project. Training support on market management is beingprovided under the ADB-financed Project.

B. PROJECT COORDINATION AND MONITORING

4.11 Municipal Government Responsibilities. The municipal governments in Semarang andSurakarta will have primary responsibility for project coordination and monitoring. A Steering Committee(SC) and a Technical Team (Tim Teknis) established under the local planning board (BAPPEDA II),fimctioning as a Project Monitoring Office (PMO), will provide overall guidance. A Project Management Unit(PMU) will be established by the city mayor to coordinate the activities of the units implementing the varioussector programs. Local Project Finance Offices (PFO) will be established under the jurisdiction of the financesection of Mayor Secretary's Department for financial monitoring of the project. In addition, in Surakarta, atemporary new sub-unit will be established in the PMU to monitor RKL/RPL. The project will providetchnical assistance to the municipal IUIDP teams through consultant support.

4.12 In order to ensure the availability of full-time staff in the implementation units, both municipalgovernments will issue special Letters of Assignment to release staff from their regular duties. SatisfactoryNMG-approved drafts of the official Instruction (SK) on Implementation Arrangements and of theInstructions from the city mayors on the establishment of the implementation units have been receivedand reviewed prior to Negotiations.

4.13 Central Government Responsibilities. Existing central government agencies and organizationsalready established for coordination and monitoring of all IUMP projects in Indonesia will also be responsiblefor coordination and monitoring of the project at the national level. These include: (a) the TKPP, assisted bythe IUIDP Management Group (IMG), which will be responsible for central interdepartmental policycoordination and guidance; (b) the DGCK in MPW, assisted by its Central Project Finance Office (CPFO),and the Central Project Management Office (CPMO), attached to the IMG, which will be responsible fortechnica supervision and management of the project. The CPMO will monitor all programs and sub-projects,while the CPFO will oversee all project accountng and auditing, and also monitor loan disbursements.

4.14 Provincial Government Responsibilities. The provincial Government of Central Java wil haveonly a limited role in the management of the project. Four functional units, established by the government to

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implement the ADB-funded Central Java and D.I. Yogyakarta Urban Development Program will support themunicipal level implementation agencies as required. The Bank will provide limited capacity buildingassistance to the Provincial Project Management Unit (PPMU) under this project.

C. IMPLEMENTATION SCHEDULE

4.15 The SSUDP will be implemented over a five year period from April 1994 to March 1999. Annex7 indicates details of the implemeuwtation schedule. In preparation for the start of implementation in GOIFY1994/95, the provincial and municipal governments have submitted their finalized budget requests (DUPs)for funding first year project implementation (based on the appraised project), so that the necessary budgetauthorizations (DIPs) are provided. Assurances to this effect have been received at Negotiations.

4.16 In order to facilitate project implementation on schedule, priority technical assistance packages(Priority 1 and 2) have been identified. Priority 1 consultants, i.e. (i) first year key implementation advisors,and (ii) first year detailed engineering design and supervision have been appointed. The TOR for Priority 2consulting services have been reviewed prior to Negotiations, and the shortlists for their selection will becompleted by July 1994.

4.17 The following consulting services which have been identified as being Priority 1 will be mobilizedduring the first year of project implementation: (a) PMO/PMU/PFO Advisors; (b) POMMS for Roads andDrainage O&M; (c) detailed traffic management program; (d) a Management and a Financial Adviser forPDAM Semarang; and (e) consultants for detailed engineering design and construction supervision for at leastthe first year and second year sub-projects / programs. The following consulting services have been identifiedas being Priority 2: (a) LIDAP and RIAP for both cities; (b) solid waste TPA site selection; (c) UFW ControlContractor for PDAM Semarang, and UFW Control Advisor for PDAM Surakarta; (d) Land InformationSystem for RIAP; (e) industrial liquid waste surveys in Semarang and Surakarta; and (f) house sewerconnection survey in Surakarta.

4.18 Status of Project Preparation. The project is ready for implementation: the central and localbudgets have been allocated for this fiscal year, land for major project facilities, including the resetlement site,has been acquired, and a first year program of simple subprojects is ready for execution.

D. PROCUREMENT AND DISBURSEMENT

4.19 Procurement of works and goods will follow the "Guidelines for Procurement under IBRD Loansand IDA Credits" dated May 1992. Large civil works contracts costing US$3 million or more and goodscontracts costing US$200,000 or more would be procured following International Competitive Bidding (ICB)procedures, using the Bank's standard bidding documments (SBD). A General Procurement Notice would beissued in advance to encourage participation of eligible parties. Smaller civil works contracts, valued at lessthan US$3 million up to an aggregate amount of US$137.3 million and goods contracts valued less thanUS$200,000 up to an aggregate amount of US$7.0 million would be procured under Lox I Competitive Bidding(LCB) procedures acceptable to the Bank. Goods contracts for less than US$50,000 each up to an aggregatetotal of US$0.7 million, may be procured through prudent international and/or local shopping. All consultingservices under the Bank loan would be procured in accordance with the "Guidelines for the Use of Consultantsby World Bank Borrowers and by the World Bank as Executing Agency" dated August 1981. Domesticpreference may be provided during bid evaluation at a rate of 15% (of the CIF price or the applicable customs

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duty, whichever is lower) for local manufacturers participating in the ICB procurement of goods, and at a rateof 7.5% for local contractors participating in the ICB procurement of civil works.

4.20 Procuremient Review. Civil works contracts exceeding US$1 million equivalent in value, goodscontracts exceeding US$200,000 equivalent in value, and consultant contracts with an estimated value ofUS$100,000 or more for engagement of firms (US$50,000 or more for the engagement of individuals) wouldbe subject to prior review by the Bank. The balance of contracts for goods and civil works, including thosereimbursed under Statement of Expenditures (SOE), would be subject to selective post-review by the Bank.Contractors for civil works exceeding US$ I million in value would be pre-qualified in accordance withprocedures satisfactory to the Bank. Terms of Reference for all consulting services, including detailedengineering design and supervision, studies and other technical assistance, would also be subject to prior Bankreview. Prior review by the Bank is expected to cover some 20 goods and about 25 civil works contracts,amounting to 62% of the total value of contracts. This relatively low review coverage will be compensated forby (i) standardized bidding documents, (ii) prior review of each different type of contract (road works,drainage) since there are numerous groups of contracts of similar nature, and (iii) systematic post-review byBank staff.

4.21 Procurement packaging. Where technically feasible and administratively pracical, sub-projectshave been packaged together for tendering. Procurement of physical components has been kept separate foreach agency (central & local governments, PDAM) to avoid administrative delays and complex paymentprocedures. Similarly, procurement has been kept separate for each sector (roads, drainage, etc.) as eachcontract would be administered by a different agency. However, consulting services have been combinedwherever feasible e.g., support packages for studies, institutional strengthening for both cities etc. Table 4.1summarizes the procurement arrangements, while details by sector, category, and contract numbers are given inAnnex 8; details of procurement packaging are available in the project files.

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Table 4.1 Procurement Arrangements (US$ million)/#

Procurement MetbodsExpenditure Category ICB LCB Other/b NBFfc Total Cost

Civil works 23.5 122.8 146.2(17.2) (89.8) (107.0)

Goods 46.7 8.0 1.7 56.3(36.3) (7.5) (0.0) (43.8)

Contract Services 12.6 12.6(Det Eng. Design & Supervision) (11.4) (11.4)

Technical Assistance 13.8 13.8(11.8) (11.8)

Land 11.0 11.0(0.0) (0-0)

Taxes 21.5 21.5(0.0) (0-0)

O&M and Project Administration 35.7 35.7(0.0) (0.0)

Total 72 130.7 26.5 69. MI /d(53.5) (97.3) (23.2) (0.0) (174.0)

IDC 23.5Total Fnancing Required 320.8

la Figures in parentheses are the respective amounts financed by the Bank.lb Includes local and international shoppng, selection of consulants following Bank guidelines, and repayment of PPF./c Not Bank financed; includes also procurement of vehicles, which will be funded by 001./d Exchudes IDC.

4.22 Disbursments. IBRD loan disbursements will be made at the following rates for the variousmain expenditure categories as detailed in Table 4.2: (a) Sub-projects under SLA to local governments andwater enterprise - 100%; (b) Civil Works - 65%; (c) Equipment and Supplies - 100% of the CIF cost ofdirectly imported goods (ICB), 100% of ex-factory costs, for goods supplied by local manufacturers, and 65%of the costs of other locally procured goods; and (d) Consultancy Services and Training - 100% of the costs forconsultants employed by the local and provincial entities, and 80% of the costs for consultants employed bycentral government agencies.

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Table 42 Disbursement

Amount of theLoan Allocated % of(Expressed in Expenditures

Category Dollar Equi )to be Fin

Psrt A of the Pro;ect:

(1) Civil Works 45,800,000 65%

(2) Equipment and 2,700,000 100% of foreign expenditres,supplies 100% of local expenditures

(ex-factory costs) and65% of local expenditures forother items procured localy

(3) Consultats' services 3,500,000 100%and traning

(4) Sub-projects under the SLAs:

(a) KM Semarang 10,300,000 100%(b) PDAM SemarAng 42,100,000 100%

Part B of the Project:

(5) Civil works 21,800,000 65%

(6) Equipment and supplies 3,000,000 100% of foreign expenditures,100 of local exnitres(ex-factory cost) and 65% oflocal expenditures for otheritems procured locaUy

(7) Consultants' services 2,200,000 100%and training

(8) Sub-projects under tbe SLAs:

(a) KM Surkarta 4,600,000 100%(b) PDAM Surakrt 9,500,000 100%

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Part C of the Project

(9) Consultants' servicesand training

(a) employed by the Borrower 14,600,000 80%(b) employed by provincial

agencies 1,100,000 100%

(10) Refunding of Project 1,700,000 Amount due pursuant toPreparation Advance Section 2.02 (c) of

Loan Agreement

(11) Unallocated 11.100.

Total $174,000,000

Esdmated IBRD DisbursementsIBRD Fiscal Year 1995 199 7 6 1999 22

A.msal 20.7 39.4 43.6 34.1 27.9 8.1Cumulative 20.7 60.0 103.7 i37.7 165.7 174.0

4.23 To facilitate disbursements, a Special Account will be opened by the Ministry of Finance in BankIndonesia for withdrawals against all eligible foreign and local expeditures. This account will be mainnedin US dollars, with an initial deposit of US$ 5 million. The Bank will replenish the Special Account in respectof drawings on the application of DG Budget (TUA) supported by the following documentation: (a) in the caseof civil works contracts with a value of US$1 million and over, and equipment contracts with a value ofUS$200,000 and over, (i) Payment Orders (SPMs) issued by the offices of the State Treasury (KPN); (ii)Certificates of Performance (3erita Acara) issued by the implementing agencies; and (iii) "No Objection' letterfrom the Bank regarding the award of the contract; and (b) in the case Of contracts below the limits indicatedabove, i.e., civil works contracts below US$1 million in value, equipment contracts below US$200,000 invalue, and contracts for consulting firms below US$100,000, and contracts for individual- below US$50,000,Statements of Expenditure (SOE). Such replenishment of the Special Account would be made on a monthlybasis or when 20% of the initial deposit has been used, whichever comes first. Detailed supportngdocmentation for SOEs will be retained by DG TUA and the implementing agencies and made available to theBank for review on request. Payments to local conftators (including payments out of SBABP and SLA funds)in both cities will be made from the KPKN Treasury office in Semarang.

4.24 The proposed disbursement period of five years is somewhat less than the disbursement profile forIUIDP projects in Indonesia. However, as this project has been prepared taking into account the start upproblems encountered in the earlier projects, and because of the steps taken to (a) mobilize the high priorityconsulting services, and (b) assure availability of counterpart funds for the first year, it is consideredachievable. The project completion and loan closing dates are March 31, 1999 and September 30, 1999respectively. The estimated schedule of disburments is shown in Annex 9.

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E. PROJECT ACCOUNTS AND AUDIT

4.25 At the local level, the Project Finance Offices (PFOs) in each city will maintain accounts forproject related expenditures financed by all sources of funds for all project components, including those relatingto the PDAMs. At the national level, the Central Project Finance Office will prepare project accounts of allcomponents implemented directly by the central agencies. CPFO will also be responsible for consolidatingquarterly project accounts from the two PFOs and submitting them annually for audit by the governmentauditors, Badan Pengawasan Keuangan dan Pembangunan (BPKP). CPFO will also coordinate audits of theSOEs with the Directorate General for Budget, Bank Indonesia, and the central office of the State Audit Board.In additon to financial audits, assuranes have been obtained at Negotiations that GOI will carry outannual technical audits during project implementation. Terms of Reference for financial audits will befinalized by GOI in consultation with the Bank; the detailed requirements for technical audits will be reviewedby the first supervision mission.

4.26 Assurances have been given by GOI at Negotiations that the consolidated project accounts,including the Special Account and SOEs, as well as the overall accounts of the two PDAMs, will beaudited annually by Independent auditors in a manner satisfactory to the Bank and that the auditedaccounts would be submitted to the Bank no later than six months after the end of each fiscal year,commencing FY94/95.

F. PROJECT REPORTING, MONITORING AND BANK SERVISION

4.27 DGCK, with assistance from the CPMO and the CPFO, will prepare and submit to the Bankquarterly progress reports (QPR) on the basis of inputs from the PMOs/PFOs, with an overall summary andcovering the progress on (a) physical aspects of each component; (b) institional development action (LIDAP)and revenue improvement (RIAP) programs; (c) consulng servic; (d) compliance with loan agreementcovenants; (e) administration and finance, includng project cost, commitent and disbursement schedule; and(f) a list of executive actions to be taken by the various parties. QPRs will be submitted within 45 days fromthe end of each quarter, startng with the quarter ending September 30, 1994. On completion of the SSUDP,the DOCK, assisted by the two cities, wfll prepare a Project Completion Report, for review by GOI and theBank.

4.28 The project will require 25-30 staff weeks of Bank supervision each year during the first twoyears and 15-20 staff weeks annually in the subsequent years of the project. Supervision missions will includemainly technical (urban infrstructu), institutional, financial and enviromental expertise, supplemented fromtime to time by expertise in community development and resettlement. The proposed arrangements andschedule for project supervision have been discussed with GOI at Negotiations.

V. FINANCIAL ASPECTS

A. FINANCIAL STATUS OF TIHE KOTAMADYAS

5.1 Kotamadya Semarang. Kotamadya Semarang (KMSMG) is in a financially sound position:during the period FY88/89 - FY92/93 local revenues, assigned revenues (land and building tax, other assignedrevenues), and grants from provincial and national governments all grew steadily. The Kotmadya anally

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financed development projects ranging in value from Rp. 18 billion to Rp. 20.9 billion. Debt service chargeswere more than adequately covered, with the lowest debt service coverage ratio (DCR) during the period being5.0, against the current GOI minimum of 1.5.

5.2 In order to meet the investment costs of the current project and to improve its financial position,KMSMG has prepared a Revenue Improvement Action Plan (RIAP). Through focussed efforts on highpotential revenue improvement areas such as: (a) property tax on land and buildings; (b) public roads lightingtax; (c) development tax; (d) advertisement tax; (e) entertainment tax; (f) building permit fees; (g) parking andterminal fees; (h) and market fees, KMSMG's revenues during the 5-year project period are projected toincrease (as a result of the RIAP) by Rp. 58.1 billion, at a total cost of Rp. 0.5 billion.

5.3 Financial projections for KMSMG (see Annex 11) indicate that the Kotamadya wil be able tomeet project related development expenditures, incremental O&M costs and debt service costs. As the impactof the RIAP begins to be felt, KMSMG is projected to have a DCR increasing steadily from 1.3 to 7.7 duringthe project period, thus providing an opporunity to meet future investment needs through market borrowingsrather than through relying exclusively on government grants.

5.4 Kotamadya Surakarta. The fimancial situation of Kotamadya Surakarta (KMSKT) is similar:local revenues, assigned revenues, government grants and total income all went up steadily from FY88/89 toFY92/93; development expenditures increased from Rp. 4.3 billion per annum to Rp. 8.5 billion; and the DCR1ranged from 2.5 to 4.8. KMSKT's RWAP forecasts a revenue increase of Rp. 20 billion during the projectperiod, at a cost of Rp. 0.3 billion. Financial projections for KMSKT (see Annex 11) also indicate a soundposition; the DCR during the project period increases steadily from 3.1 to 9.7, providing (as in the case ofSemarang) an opportunity to finance future investments through market borrowings.

5.5 Cost Recovery. The two cities charge for solid waste disposal and sanitation (including on-sitesanitation, sewerage and sludge removal); water supply charges are handled by the respective PDAMs.Because of low rates and low collection efficiencies, the present revenue from solid waste charges in bothkotamadyas covers only 70-75% of O&M costs, with no contribution being made towards capital costs. Twosolid waste tariff increases are proposed in each kotamadya during the project period: (a) in Semarang, theminimnum rates will be increased by 25% each in FY1995/96 and FY1997/98, with larger increases of 150%on each occasion for others; and (b) in Surakarta, rates for households will be increased by 50% and 65%respectively in FY1995/96 and FY1997/98, while the corresponding increases for business and industry will be200% and 130%. In both cities, collection efficiencies will also be improved. As a result of these efforts,both kotamadyas should be able to achieve full O&M cost recovery by the end of FY1997/98; however, onlynegligible contributions are expected towards capital costs. Details of the analysis are available in project files.

5.6 The on-site sanitation programs in both Semarang and Surakarta wiUl operate on a full costrecovery basis, with the beneficiary households making a small down payment, foUowed by monthly instalmentpayments. Sludge removal that wil be managed by the PDAMs on behalf of the respective PEMDA (as asupplement to the service provided by the private sector) will achieve full cost recovery by the end ofFY1996/97 through increases in the charge per collection. Charges will be reviewed periodicaUy and a furtherincrease is anticipated in the year 2000.

5.7 In the case of the sewerage system, the PDAMs (which will take over the operation of the systemon behalf of Pusat) wil add a surcharge to the water bills. Financial analysis indicates that in both cities, asurcharge of 10% wiUl be sufficient to cover O&M costs and depreciation. The surcharge will be phased in,

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starting at 5% for the first two years of system operation (with the central government providing an initial 50%operating subsidy) and 10% thereafter. All other entities in the area served by the sewer system will be also becharged varying flat rates (depending on the size and nature of the building unit) with an average rate of Rp.1000 per month. An NGO, the Community Welfare Association (PKK), will collect the flat rate sewer chargesfrom non-PDAM customers for a fee.

B. FINANCIAL SITUATION OF THE PDAMS

5.8 Audited financial reports for PDAM Surakarta for each of the last four years, ending March1992, indicate that the PDAM made a small operating profit each year. Unaudited figures for fiscal 92/93indicate a significantly higher profit as a result of the impact of a 50% tariff increase. PDAM Semarang, onthe other hand, has performed somewhat unevenly; after making small profits in 1988 and 1989, it postedlosses in 1990 and 1991. Unaudited results for 1992 reveal a substantial loss of Rp. 2.9 billion on revenues ofRp. 11.3 billion. As a result of a 55% tariff increase, preliminary figures for 1993 indicate a return toprofitability.

5.9 Results of the financial projections for the two PDAMs, taking into account project costs of aboutRp. 170 billion (of which Rp. 65 billion will be financed by the PDAMs and the remainder through sub-loansfrom the Bank loan), indicate that the PDAMS should be able to produce gross revenue starting FY1995 withfull O&M costs and depreciation being covered, provided a number of key actions are taken at specifiedtimes; these are discussed below. Details of the financial projections - income statements, balance sheets andfunds flow statements - are available in the project files. Annex 12 contains the key financial indicators foreach PDAM.

5.10 Tariffs. In addition to the 55% tariff increase in 1993, PDAM Semarang will require increasesof 25% every alternate year, starting 1995. The current ratio of 1:3 between the lowest and highest domesticrates as well as the ratio of 1:8 between the lowest rates and the highest rates (paid by large industrialcustomers) will be retained during the early project period. In order to provide an incentive for large industrialorganizations (who currently use water from their own wells) to connect to the PDAM system, the PDAM willreview the tariff structure during the latter part of the project period to reduce cross-subsidies and to simplifythe structure towards cost pricing. In the case of PDAM Surakarta, in addition to the 50% tariff increaseeffected in 1992, average tariff increases of 25%, 25% and 30% are required in 1994, 1996 and 1998respectively; these average tariff increases are based on projections done at appraisal and actually requiredincreases may differ. The current tariff structure, with a ratio of 1:4 between the lowest and highest domesticrates and a ratio of 1:8 between the lowest domestic tariff and the highest industrial tariff, will be retainedduring the early project period. As in the case of Semarang, the Surakarta PDAM will also review the tariffstructure during the latter part of the project period. Agreement was reached at Negotiations that GOI willcause the measures to be taken, including tariff reviews and adjustments every two years, to enable eachPDAM to cover from its revenues O&M costs and depreciation after FY1994. If tariffs are adjusted to thelevels projected above, achievement of this financial target wil be feasible.

5.11 Other issues. Increases in the number of connections, reduction in UFW, personnel costs(especially the number of staff per 1,000 connections) and accounts receivable (number of days billingsuncollected), will be monitored at half-yearly intervais during implementation. Assurances that PDAMSemarang will introduce by June 30, 1995 an installment house connection program for low incomefamiles were given by GOI at Negotiations.

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VI. PROJECT JUSTIFICATION AND RISKS

A. ECONOMIC JUSTIFICATION

6.1 Urban Roads. By improving urban roads and reducing transport costs, the proposed sub-projectsare expected to promote commercial and industrial activities. The expected benefits include: (a) savings invehicle operating costs and travel time through increased speeds and in some cases, through reduction in thetravel distance. New road sub-projects were evaluated by computing the economic rate of return (ERR) over aten year project horizon; resurfacing sub-projects have a five year horizon. In Semarang: (a) the new roadand bridge sub-projects, which expand road capacity and shorten travel distances, have an estimated averageERR of about 37 percent; (b) road widening, as part of the improvement schemes, increases vehicle speeds andthereby reduces travel times, giving these schemes an estimated average ERR of 44%; and (c) resurfacing, aspart of periodic maintenance, improves road condition and thereby reduces vehicle operating and costs, givingan estimated average ERR exceeding 50%, provided continued routine maintenance is performed. InSurakarta: (a) the proposed new Northern Ring Road, which would increase the road capacity and reducetraffic congestion in the center of town by diverting traffic to the new road, has an estimated average ERR ofabout 17 percent; and (b) road widening, as part of the improvement schemes, increases vehicle speeds andthereby reduces travel times, giving the schemes an estimated average ERR of 31 %; (c) the ERR of periodicmaintenance exceeds 50%. The estimated economic benefits from the proposed road improvements in bothcities are adequate to justify the investments. The traffic management program in both cities will consist of aseries of schemes to be defined in detail and evaluated by the Bank prior to implementation. Experience withtraffic management programs suggests that the economic benefits will be more than adequate to justify thesmall investments involved.

6.2 Water Supply. Least cost options were chosen for both cities to meet water demand throughtechnically sound solutions: six alternative schemes were evaluated in Semarang, while the most suitable projectdesign was chosen to achieve improved efficiency of the water supply system in Surakarta. The proposedinvestments will increase service coverage, increase average per capita consumption, and reduce water losses.They will provide better access to safe water, increase productivity by saving hauling time, save fuelexpenditures for boiling, and reduce water-related diseases. The estimated financial rates of return (FRR) for a10 year project horizon from 1994 to 2004 are about 13 percent and 12 percent for Semarang and Surakartarespectively (assuming tariff increases of 25 percent every alternate year from 1995 for Semarang and 25percent, 25 percent and 30 percent in 1994, 1996, and 1998 for Surakarta, respectively). The ERRs for thesub-projects were not calculated, since the FRRs establish financial viability of the proposed investments; ERRswould be higher because of consumer surplus.

6.3 Drainage. The sub-projects are expected to benefit the residents and the local economy byreducing property damage, loss of production, health risks, and inconvenience. ln other cities of Indonesia,drainage and flood control projects resulted in higher land prices after a few years of project implementation.Expected increases in land values due to reduced flooding were compared with investment and O&M costs toevaluate the economic viability of the proposed drainage and flood control sub-projects. In Semarang,drainage sub-projects in the eastern and the central parts of the city will improve current conditions, whilethose in the western part will prevent, through rehAbiUitation, flooding caused by silt. For the drainage sub-projects in the eastern and the central parts of Semarang, increases in land values required (to break-even withinvestment and O&M costs) range from 36 percent to 177 percent, or between Rp. 20,000/i2 and Rp.55,000/me except for the Kali Banger HI sub-project, where increases of 28. percent are required because of

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low land values. On the other hand, in the western part of Semarang, an increase of only about 1 percent inland value would be sufficient to cover the cost of the required rehabilitation and maienance, since thecurrent land prices are already high (Rp. 150,000/m2). In Surakarta, the six sub-projects (that involveinvestments of any significance) require average land value increases of less than 10 percent. The Jln. A. Yanipump station sub-project, which will allow uninterrupted road traffic on a section of the main road wheretraffic is currently impeded for several hours when it rains, the high land value increases required are welljustified.

6.4 Sanitation and Sewerage. The proposed sanit tion sub-projects comprise on-site and off-sitesystems (including de-sludging services) depending on population densities, soil conditions, and ground watertable. The technologies to be adopted are consistent with the experience of other developing countries: whileconventional sewerage systems are most suitable for metropolitan areas where population densities are high(greater than 200 persons/ha), on-site sanitation facilities are more appropriate for areas where populationdensities are low, in view of the high capital investment needed for conventional sewerage systems. Overall,the proposed sewerage sub-projects for both cities are economically justified since they are most suitableoptions for a first phase investment to provide a safe living and working environment by minimizing investmentcosts, resettlement, and negative environmental impacts as well as protecting the public from epidemic diseases.

6.5 In Semarang, the proposed sewerage investments will reduce the pollution of ground water andrivers by constructing: (a) a waste water treatment plant with sludge drying beds; (b) a trunk sewer to transportsewage from the Kali Semarang interceptors to the treatment plant; and (c) a pilot separate sewer systemincluding house connections in a densely populated area of 59 ha. These sub-projects were selected formin mizing costs over the long run, by taking advantage of economies of scale, using appropriate technologies.Seven alternatives were evaluated for waste water treatment and fcultative ponds were selected since they onlycost about half of any of the other options. 70% of the project area population (about 388,000 persons) will beserved, and the improvements will contribute to the further development of the city by providing a safer andcleaner working and living environment.

6.6 The proposed sub-projects are based on the findings of several consulting studies, and areminiimum requirements to prevent major environmental degradation and epidemic diseases at least cost for themedium term, especially for a fast growing city like Semarang. The option to delay the project will neitherbenefit the population, especially the poor, nor the government except for a temporary reduction in investmentcosts. In the absence of adequate provision of sanitation services, the poor are more likely to be exposed toenvironmental and health risks, while the higher income groups are able to pay to avoid direct negativeimpacts. Moreover, per capita water consumption is expected to increase with the proposed water supplyimprovements under SSUDP. Without proper water treatment, the increased waste water generation will havea significant negative impact on the en-ironment by further polluting rivers and ground water, that arealternative sources of water for the poor. The opportunity cost of doing nothing would exceed the proposedinvestments-it will financially ccst more to goverment to restore the damage.

6.7 In Sunrakwt, the sanitation sub-projects, chosen on the basis of previous studies, represent themost suitable options for the medium term at least cost from among the various alternatives considered fortechnological choice, site location and size, environmental and social impacts, and investment costs. Theproposed investments will reduce the pollution level of Bengawan Solo River (a major source for drinkingwater) by treating waste water prior to it being discharged into the river.

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6.8 Solid Waste Management. The proposed investments in solid waste management are justifiableon the basis of cost recovery, in addition to indirect benefits resulting from the reduction of negativeenviromnental impacts. They propose customized systems that can collect and transport domestic, market, andcommercial waste, at least cost, taking into account the volume and content of waste as well as the distance tothe disposal site. In both Semarang and Surakarta, the percentage of population served will increase, andenvironmental degradation through burning or dumping of unconnected garbage into rivers and drains will besubstantially reduced through the environmentally safe operation of new and improved land fill sites. O&Mcosts will be recovered in full by the end of the project period through user charges.

B. ENVIRONMENTAL IMPACT

6.9 The project which is "Category A" will have a positive impact on the environment in both citiesthrough improvements to solid and human waste disposal, drainage and flood control, and the KIP. FourANDAL (detailed environment assessments) studies were carried out by GOI (and reviewed by the Bank duringappraisal) for the following components: (a) Solid Waste, Semarang; (b) Sewerage, Semarang; (c) Drainage,Semarang; and (d) Sewerage, Surakarta. These have led to significant improvements in project design,including more appropriate mitigating actions, especially for the wastewater treatment plant site in Surakarta.The Environmental Assessment Summary was distributed to the Executive Directors on October 14, 1993.

6.10 The following actions will be taken during subsequent stages of the project:

(a) Solid Waste, Semarang - In order to improve site conditions and operations at thesolid waste disposal site in Jatibarang, construction and site management measureshave been taken, and a new low level access road has been built. In addition, theproject will finance studies to select a new disposal site in Semarang to meetmedium term needs.

(b) Urban Roads - As indicated in Paragraph 3.4, for major urban road componentswhich have been appraised on a programmatic basis, environmental screening(PIL) will be carried out prior to commencement of detailed engineering designsand the management and monitoring plans (RKL/ RPL) prior to start ofprocurement. The Bank will review both. Assurances have been given by GOIat Negotiations that environmental protection measures stipulated In thereslective Environmental Management / Monitoring plans (RKL/RPL) will becarried out in a manner satisfactory to the Bank.

(c) Liquid wastes - Under the implementation support and capacity buildingcomponent, industrial liquid waste surveys will be carried out in both cities.

C. SOCIAL IMPACT

6.11 The proposed flood control works on the Kali Banger (river) in West Semarang willhave an important social impact. The drainage improvements along this frequently overflowing watercourse will require the relocation of about 800 families who live along the river banks and in theright-of-way. As part of the detailed environmental assessment process, the City of Semarang, withthe assistance of the central government and consultants, had prepared a detailed resettlement plan

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which involved NGO participation, public meetings and cowultations with the affected people, and asocio-economic survey of the area's population to gauge the response to the relocation proposals,determine tenure status, family incomes, and preferences for the different resettlement options. Mostof the resident of the Kali Banger area support the relocation proposals, and a majority of themexpressed a preference for serviced plots as compensation. The plan includes a timetable andimplementation arrangements by the city of Semarang which will be responsible for resettlement.

6.12 The resettlement plan has been approved by the mayor of Semarang in August 1993 andwas reviewed at appraisal for compliance with the Bank's OD 4.30 on Resettlement. the main optionproposed is resettlement of affected families in Karang Roto, an area about 6km from Kali Bangerwhich already accommodates several hundred people affected by the earlier stages of Semarangdrainage improvements. Serviced plots with title and a minimum size of 60M2 will be provided bythe city, and relocating families will have to pay - dependent on the value of their existng plot andimprovements thereon - a maximum of 25% of the new plot price in affordable installments.Assistance with moving to the new land and with the construction of basic housing wiU be given bythe City to households entitled to such support. The City wil also offer the option of financialcompensation based on the value of the land (with improvements) to be acquired, as determined bythe land tax (NJOP) assessment.

6.13 In response to the results of the survey and te consultations with affected people, thelocal government will upgrade the physical and social infrastructure at the resettlement site in KarangRoto, and construct a primary school, a local market, a health care facility, and places for worship;this will also benefit the earlier resettlers. The City will improve the access road to Karang Roto (topromote the provision of public transport services by private operators), install street ligMng, andinitially provide two vehicles so that the community can organize transport to the nearest major urbantransit hub. The complete package of resettlement and compensation options by the Kotau u4ya hasbeen disclosed to the affected people prior to Negotiations.

6.14 The newly issued Presidential Decree No. 55/93 on land acquisition for public facilieswill be applied for dealing with all aspects of raestemen and compensation. The directive whichsubstantially complies with OD 4.30, recognizes the different land righs, stipulates fair compensationfoi land and other objects (improvements) to be acquired, and calls for consultation, negotiations, andreaching consensus with the affected people. Assurances were obtained fhom GOI at negotiationsthat the resettlement plan will be Implemented as agreed with the Bank. Details of theresettlement and compensation arrangements are contained in Annex 14, and in the resetlement plan(and supplements) is in the Project File.

D. IMPACT ON POVERTY

6.15 The project is expected to substantially alleviate poverty and many project activities aretargeted at improving the quality of life and enviroment in the poorer kampung areas of the city.Under the Water Supply component, about 30% of the incremental water supply will benefit theurban poor. The significant increase in the number of house connections in both cities will increasethe reach of piped water to more of the urban poor. In Semarang, an instmt payment scheme willbe introduced for house connections for the urban poor; a similar scheme already exists in Surakarta.In both cities, additional public taps are being instaUed for those who cannot afford house

- 28 -

connectons. The drainage component, by reducing flooding in the low lying are where many ofthe urban poor live, will befit the poor by reducing property damage and health risks, and byimproving the general environment.

6.16 The proposed investments in sanitation and sewerage will reduce health risks (ormedical expenditures) and improve the productivity of the population as a whole. The urban poorwill benefit directly from the construction of MCKs in both cities and may be able to take advantageof loans that will be offered towards the cost of house connections to the sewer system. Sludgeremoval facilities that will be offered by the PDAMs will extend this service to the more congestedareas of the city, where typically more of the urban poor live.

6.17 The KIP program, one of GOI's principal means of reducing urban poverty, willimprove the living environment in selected densely populated urban areas in both cities by improvedwater supply, sanitation, drainage, access paths and roads as well as houses, through activeparticipation of the communties. Construction of small shops and stands in the two cities under theMIP will provide employment opportnties for the poor. The pilot Permnahan Rakyat componetin Semarang and Surakarta and the associated small credit schemes for housing rehabilitation willbenefit the urban poor in the pilot areas.

E. RISKS

6.18 Lhnmted Intitutional Capacity. Limited institutional capacity at the local level maycause implementation delays, cost overruns, low quality works, and non-ahievement of revenuetargets. Reviews during preappraisal and appraisal missions have focused on these aspects andproposed a number of institutional support measures to mitgate these risks: use of standardizedprocurement documents and processes, increased involvement of private sector firm for mainteanceoperatons, locally managed consultant support to assist with implementation, and targeted supportfrom the center with new and more complex project components, such as sewerage. Anothermitgadng factor is the strong "ownership" of the proposed program by the municipalities which hasdeveloped over the preparation period. The local staff have shown their comptnce, ability andcommitme to this program, by implemeing a number of the smaller and simpler sub-prqectsalready while awaitng the processing of this loan.

6.19 Consultant Appointments. Delays in the selection and appointent of consulants hveslowed implementtion of urban sector projects in the past. In the case of the SSUDP, procrementand consultt selecdon is proceeding in parallel with project processing, so that consultan can beappointed and contracts can be awarded and signed upon loan signing. Retroactive financing, up toan agegate amount of US$5 million equivalent, has been re ed for approval to coverexpendire for goods, works and consultants procured according to Bank guidelines betweenappraisal and loan sign.

6.20 Fiancial Matters. Availabilty of GOI funds and financial viability of the twomunicipalities and the PDAMs in the two cities are possible risks to timely completion of the projee*.and its sustainability. Assurances will be sought during Negotations regading the availabilty of allrequired DIP fumding for 1994/95 from Pusat, and Level I and Level I governments. Supervisionmissions will monitor the availability of DIP funds for the subsequent years. In the case of the

- 29 -

muicipalities, RIAP consultants will be responsible for assist them with implening the revenmeenhancement actions. Tariff increases by the PDAMs will be a covenant in the loan agreement.Supervision missions will monitor progress in increase in the mber of connections and the reductionin the unaccountd for water.

VII. AGREEMENTS REACHED AND RECOMMENDATION

7.1 At negotiations, agreements were reached with GOI that:

(a) central government funding will be made available for the timely compltion of theKelambu-Kudu raw water conveyance canal (para. 3.8);

(b) a leakage (UFW) control division will be established in PDAM Surakarta (para 3.8);

(c) 100% local governmet funding will be provided by the end of FY1997/98 for O&M ofroads and drains in both cities (para. 3.10);

(d) (i) SPABP funds will be used for funding provincial and local govment projects andfor consultants employed by local goverments (para. 3.25); (ii) SPABP funds will bechannelled as described in Annex 15; (iii) terms and conditions of subloans will asdescribed in paras 3.23 and 3.24; and (iv) aU payments (i.e., from both SPABP andSLA funds) to local contractors would be made from the Treasury (KPKN) office inSemarang (para. 3.25):

(e) all necessary budget requests ()UPs) have been submitd by the three levels ofgovernment, and the budget approvals (DIPs) will be issued in tme for start ofimplementation in FY1994/95 (paras. 3.23 & 4.15);

(t) audited project and water enteprise (PDAM) accounts will be submitted to the Bank not laertban 6 months after the end of the financial year (para. 4.25);

(g) the municipal govermnens and their water anterprises respectively will review and adjusttheir tariffs for solid waste services (para. 5.5), sewerage (para. 5.7) and water supply (para.5.10) services;

(h) PDAM Semarang wil introduce an insment house connection program for low incomefamilies (para. 5.11);

(i) the enviromental protection actions set out in the respective EnvironmentalManagement/Monitoring plans (RKlJRPL), and the resettlement plan for the KaliBanger drairage project in Semarng will be canried out in a manner satisfactory to theBank (para. 6.10 and 6.14); and

(j) GOI will carry out ammsl technical audis during project implementation in a mannersasfactory to the Bank and funish the audit rmdons to the Bank (para. 4.25).

- 30 -

7.2 The following are condtions for loan effectiveness:

(a) execution of the subsidiary loan agreements between the central government and themunicipalities of Semarang and Surakarta and their water enterprises respectively;

(c) final approval of PIAs by the two municipal mayors, the Central Java provincial govenor,and by the Secretary-General for Home Affairs of the central government (para. 4.12);

7.3 Recommendaffon. With the above agreements and conditions, the project is suitable fora Bank Loan of US$ 174.0 million equivalent with a 20 year maturity, including a grace period of 5years at the Bank's standard variable rate. The Borrower will be the Republic of Indonesia.

- 31 -Annex I

INDONESIA

SEMARANG-SURAKARTA URBAN DEVELOPMENT PROJECT

URBAN INFRASUCTR PROJECTS

Fiscal PPARLoan Year/ Closed/ Original PCRNo. Effective Closing Project Name Loan Rep. No. Year

1 1040 1975 1981 Jakarta Urban Development 25.00 4620 19832 1049 1975 1982 Five Cities Water Supply 14.50 6256 1986? 1336 1977 1984 Second Urban Development 52.50 6329 19864 1653 1979 1987 Third Urban Development 54.00 8b83 19905 1709 1981 1987 Second Water Supply 36.00 8622 19906 1972 1982 1988 Fourth Urban Development 43.00 8583 19907 2236 1983 1991 Jakarta Sewerage/Sanitation 22.408 2275 1983 1990 East Java Water Supply 30.60 10853 19929 2408 1984 1991 Fifth Urban Development 39.25 11501 199210 2632 1986 May 93 Second E. Java Water Supply 43.3011 2725 1986 1992 Housing Sector Loan 200.0012 2816 1987 1991 Urban Sector Loan 270.00 10388 199213 2817 1987 Oct94 Reg. Cities Urban Transport 51.0014 2932 1988 Mar 95 Jabotabek Urban Development 150.0015 3219 1990 Dec 96 Second Jabotabek Urban Dev. 190.0016 3246 1991 Dec 96 Third Jabotabek Urban Dev. 61.0017 3304 1991 Dec 96 East Java-Bali Urban Dev. 180.3018 3340 1991 Dec 96 Sulawesi-Irian Jaya Urban Dev. 100.0019 3726 1995 Sept 99 Surabaya Urban Development 175.00

Total 1,737.85

Annex 2

INDONESASEMARANG-SURAKARTA URBAN DEVELOPMENT PROJECT

DETAILED PROJECT DESCRIITION - INFWRASRUCTURE COMIPONENT

Sc torm/on Semamnig Surabata

Water Supply -Refurbishment ad upgading of a Water Treaunent Plant -Development of 10 new deepwells-Construction of two new Water Treaent Plants -Well mainenae progamme-Well maintenance programme -Water loss (UWF) reduction programme-Water loss (UFW reduction programme -Water Resources and Development study-550 km of new distibution pipeines -Extension and infill of the distibution ntwork-68,000 new house connection and 300 new public taps -18,000 new house connections and 125 new public taps

Baniaton -Waste Water Treatment Ponds (29 ha) -Rehabilitation of the Mojosongo Sewer System (65 ha)Sewerage -7 Pumping stations -Rehabilitation of the le'bres Sewerage System (55 ha)

-Septage Treatment Plant (4 ha) -2 Waste Water Treatmnit Plants-14 km sewer interceptor and trunk sewers -Septage Treatment Pat (1.5 ha)-59 ha pilot poject separate sewer system -Credit Scheme On-Site Saniation (2300 households)-Credit Scheme O1-Site Sanitation (4500 households) -200 MCK's and 2 deshudging trucks-272 MCK's and S deshlging trucks

Drainge & -improvement of 28 kn of primy drains -improvement of 3 km of primary drainsFlood Control -inprovement of 126 km of secondary and tertary drains -improvement of 17 km of secondary and tertiary drains

-periodic maintenance equipment -improvement of Demangan and A. Yani pumping stations-periodic maintenance equipment

Urban Road -improvement of 76 km of urban roads -construction of 4.7 km of new roads (ring road)-periodic maintenance of 78 km or urban roads -improvement of 36 km of urban roads-construction of 4 new bridges -periodic maintenance of 60 km of urban roads-aic m gement prcmram -constuction of 3 new bridges (part of ring road)

-taffic management program-preparation of an urban trausportaion plan

;olid Waste -Improvement of the Jatibarang Final Disposal Site -Upgrading of the Putri Cempo Final Disposal Sitedanagement -Closure works at the old disposal sites -Site location study for new Final Disposal Site

-Site location study for new Final Disposal Site -32 open dump trucks, 14 armnroll trucks, 2 compactor-Land acquisition for new disposal site (11 ha) trucks and a transportation pool-4 open dump trueks, 65 armroll trucks, S compactor trucks -1 wheel loader, 1 bulldozer, 1 backhoe and 91 gerobaks-1 tracked loader, I backhoe and 182 gerobaks

Jrban Renewalt -Infrastructure development in low income area -Infrastructure development in low income areaCP/MIP -Housing rehabiLtation tbrough credit scheme -Housing rehabiltation through credit scheme

-Kampung Improvement Programme: 412 ha -Kampung Improvement Program: 389 ha-Market Improvement Programme: 19 markets -Market Improvement Program: 29 markets

Annex 3Page 1

IndonesiaSemarang-Surakarta Urban Development Project

DETAILED PROJECT COSTKOTAMADYA SEMARANG

Descriptio Ep. million US$ milion % Base % ForignLoal Foreig Toal Local Forei6g Total Cost Exchange

Water Supply 28,160 67,913 96,073 13.4 32.3 45.6 36.5Y 70.7YeDrainage & Flood Control 33,677 16,292 49,969 16.0 7.7 23.7 19.0°/e 32.6%Ur "& xadsandTrnsport 43,339 22,052 65,390 20.6 10.5 31.1 24.9% 33.7%Solid Waste Managentd 8,074 3,689 11,763 3.8 1.8 5.6 4.5% 31.4%Sanitatin 15,229 10,566 25,795 7.2 5.0 12.3 9.8%o 41.0%KIPIMIP 4,233 2,279 6,512 2.0 1.1 3.1 2.5% 35.0%Housing 4,704 2,533 7,237 2.2 1.2 3A 2.8Ye 35.0 6Urban Renewal 227 122 350 0.1 0.1 0.2 0.1% 350%tTotal Inb truture Base Cost 137,643 125,447 263,089 65.4 59.6 125.0 100%/ 47.7PPhysil Contingenies 9,290 10,403 19,693 4A 4.9 9.4 7.5% 52.8%contrct Srvices 12,834 4,278 17,112 6.1 2.0 8.1 6.5% 25.0%(Dea Engig Design & Superson)TechicalAsistancePPN 28,632 0 28,632 13.6 0.0 13.6 10.9%o 0.(WOOverheads 6,868 0 6,868 3.3 0.0 3.3 2.6% 0.0YOvrhwead for lIplementtion 679 0 679 0.3 0.0 0.3 0.3% 0.0Q%Routine O&M 21,221 11,427 32.648 10.1 5.4 15.5 12.4% 35.0YPrice Contingencies 37,686 14,479 52,165 17.9 6.9 24.8 19.8Y 27.8%/oTobtl Project Cost 254,853 166,034 420,887 121.1 78.9 199.9 160.0W 39.4%SIA hnieD#wing Proect Peiod 36,127 36,127 17.2 0.0 17.2(=dateres Duing Constcion (IDC))Total Jisndug Required 290,980 166,034 457,014 138.2 78.9 217.1

D*toroundi& tas may notadd up.b/ kicudes txs and dutis amuMnting to US$19.6 milln equivaleDn and land aoisition moting to USS6.7 miin equivalent

Annex 3Page 2

IndonesiaSemarang-Surakarta Urban Development Project

DETAILED PROJECT COSTKOTAMADYA SURAKARTA

Description Rp. million US$ million % Base % ForeignLocal Foreign Total Local Foreign Total Cost Exchange

Water Supply S,926 15,259 21,184 2.8 7.2 10.1 20.4% 72.0%Drnage & Flood Control 5,215 5,270 10,485 2.5 2.5 5.0 10.1% 50.3%UrbanRoadsandTransport 29,527 13,532 43,058 14.0 6.4 20.5 41.5% 31.4%Solid Waste Management 1,881 1,555 3,435 0.9 0.7 1.6 3.3% 45.3%Sanitation 9,094 6,264 15,358 4.3 3.0 7.3 14.8% 40.8%K[P/MJIP 3,882 2,090 5,972 1.8 1.0 2.8 5.8% 35.0%Housing 2,217 1,194 3,410 1.1 0.6 1.6 3.3% 35.0%Urban Renewal 606 326 933 0.3 0.2 0.4 0.9% 35.0%Total Infrastructure Base Cost 58,347 45,489 103,836 27.7 21.6 49.3 100% 43.8%Physical Contingencies 3,811 3,579 7,390 1.8 1.7 3.5 7.1% 48.4%Contract Services 5,097 1,699 6,796 2.4 0.8 3.2 6.5% 25.0%(Detail Engin'g Design & Supervision)Technical AssistancePPN 11,255 0 11,255 5.3 0.0 5.3 10.S% 0.0%Overheads 3,057 0 3,057 1.5 0.0 1.5 2.9% 0.0%Overhead for Inplementation 679 0 679 0.3 0.0 0.3 0.7%/ 0.00/%Routine O&M 14,752 7,943 22,695 7.0 3.8 10.8 21.9% 35.0%Price Contingencies 15,270 4,771 20,041 7.3 2.3 9.5 19.3% 23.8%Total Project Cost 112,268 63,481 175,749 53.3 30.2 83.5 169.3% 36.1%SIA Interest During Project Period 13,351 13,351 6.3 0.0 6.3(="Interest Duing Constrution (IDC)")Total Financing Required 125,619 63,481 189,100 59.7 30.2 89.8a/ Due to rounding, toals mnay not add up.b/ Includes taxes and duties amounting to US$89.7 million equivalent and land acquisition amounting to US$2.8 million equivalent.

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Annex 4Pare3

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I1-May-94

SEMARANG SURAKARTA URBAN DEVELOPMENT PROJECTSUNMARY OF TECHNICAL ASSISTANCE

DrU5S.K____ _.__ ____.______ . . ... _

140. SEEOMT4INROECT No ow cm AL A T L OST BET serA EECRUm 310 RIMA tE_________________________________________ __ PAcKAGE O F PACI F I ,N tUSS MONIII AGENCY _ ._ __ ___________o_r__I__

I M_ MI MWYi EMA

I PRO A OESIINr ADVISORY sVt

PROVItctLANDWCLIJgvWJ:-PMOVOtWPO 556RAN00* SURAKARTA. PPMOt? PUU A t 60 600 285,036 40 DM COS COOPEATlON WITH TX I1

2 PguTS YEAAPEDR SUERVMSDON (50 KAM + SKA)5I 10 1.50 712.50 126 D1CK ON LS COOPATIO1 Wins D1ss

I I DROAINAB, LOCAL ROADS, SOLID WASTE. OS4SITESAN, tl3P. MIP- FED & SUPERVSON sBM5RANo2ND 2 ST YEAR 1 3550 3,550 L,600,461 275 DIOAS PUTK nSM0

b. IED & SUPERVISJIONSJRAKARTA 2ND - STH YEAR t 2225 2,225 1,057.007 102 DINAS PUTK IStKA

VAT7R WmYSBtOPFfD& SUPERVISION WATBR SUP?LY 2ND *31 YS AR 2 1136S 11365 5,3s,050 S70 DD4AS PUTK I & RSIATED PDA SSRANG AND SURAKARTA SEPARATE

3 ErAeoB sacrok* FfiD S u?RV1DHi SEWSRA&OR2ND - STU YEAR 2 S.300 " 2,Sl I 17.035 436 DtNAS PU Tr I & RELATED PDA0 SBRANG AND SVRAXATA SEPAATE

b. SEWER CONNEtN SURVrY AND PROGRAWMINa SURAIARTA 3 320 352,019 32 DIAS PU TK t & DAM SKADOUsTRIAL LIQUID WASTE ANALYSIS PoR SMO. SEA 2 420 420 399.525 42 DINNS PUTK I A RElATED PDAM SESARAN3 AND SURAKARTA SEAPATB

4 SESSARN SEWERAGEOPTION STUDY 3 400 400 10.024 32 DINAS PUT I IPDAM SM

4 lDL WASESBrEORTPA SITSELECTION AND ITS AMDALSEUARANO 1 000 600 205,036 60 DS PUTb IAND DWAS

KCEBBRSONTXU a5.005 AN ROADS gSCTOR

FED SUPERVISON NATINAL ROADS 2ND * RH YEAR 1 3,017 3,017 1,433,254 300 ROO - SBMARANab TLuF 3MANAOMENT LPLMUrATMN PROORAM (sMG + SEA)(5 I 700 700 332.542 42 RBO * SDjAMRAO

6 DRADIAa SECTORPfD&SUPERVISIONMAJORDRAtNAo12ND.STtNYAR a 1,671 1,671 703,024 167 DMNS pU CKTK I

7 URSNRAWWALSICTORP LT PHIYSCAL DOPROVWM. 0TitiToCARC A O.NCSIRVATION ( I 50t 241.330 DD3ICKR LUTI I& DINAS

MIOESC ARMA CONSERVATION STUDY SBMARAN2 400 40 PERUtAIAN TK IFfiD SUPRV5IINFHYSICULRO1Ct toE ItI

b IIIOWEA UItBASNEiNWAL DTACIONPLAN FORSEARANO I 500 550 736342 50 DS PU CK T I ANDFfiD & SUSERVUIODKURBANREC2WAIMOWINOS3.ORANG 500 00 DINAS PBRUMAKANTK n 9MO

WCEOUNY DEVELOIEA1 PoRDURBAN MnAUCrURS DBVT 250 25FOltSB R UNtl

c. IOUSNt & MAN RINEAL DEr ACtl N MOR SURAKARTA t 500 1,050 4f1,t2 50 DINA9 PU CKTKI ANDFfiD & SUWEVISODNWUREANREIEWAUOUWEOOWRAKARTA 300 30 D1504 PBRLAANTKUISACYh6UNfYDBVBLOlENT IF0RURANINIMASTRUCTU.R W 250 25FGII SUlBAEATA

I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

(f _iVB Fl. BlLAtB9AL PDO5.jOINO WllLL8B SOUGT#i" AILBLtUEW DWLVESIEBACTIEPARIICSPATION OPFTDCTRAL. ROVIALANDLOCALAGCfi

:PRIo3RITY Ct

A6XPare 2

I 1-May-94

SEMARANG SURAKARTA URBAN DEVELOPMENT PROJECTSUMMARY OF TECHNICAL ASSISTANCE

mcla7.wK3 _ ___ ___4)___lt_____MOt 8083780m PrO4WT mow CMr vAL C TOTAL CoOT t.6IAw UBMAU(

-PACKUS 8BMfP O)WPAMKOR wn~ MONTH AOMWIC ______________

I nuMllXMMArM3oaYaUVwMPVMLAMLOCAL5_Vawmaa(AnAIa &SMAA1hA. MW!MLUA2("n I 4.0 4,5W 2.17$.Msi 310 OJCK lHCOO3BCRATOWN33/Thl+U

2 ADVA OTAIMAM U 2.2m 8 110 inoas 1 UTK1ADSPAM s3DAIIAaMM1awcLADMIAGROUDT 3oa(. 1.3 96)DMJUR ^ALA l BVENWATWRMUS2 KADVU0("n 700 48

a AgvaauOMI3ANDMAfU8WIW NAhU0 1 I.2 1.620 709,4 in SUOD 00M 000133AT14 WUX 000 uTE$W r6FOE WOAL MASTRIicnJ8(POaEaSANIS aA ("~

4 AS28AUDWSATW32ADVT 0OASIMMSIAXZAEA 1 1,2t0 1200 $70.071 84 DICE IN SCLOSBOlATM WIMAMASKIAW2OTATIOADVOa

$ lliQMaaOVafACWNNKA(RlA0, USLASEA I RO 1 0 6aS 287.411 40 DIOn 0ATZoS(O CLOSSOOONRAOUIWNHMOD1, 8I0SURAEStA I 304 304 144,418 30 DI8PNDATXUSrA O >LOOOONTOWffR0

& tAIDD7,DNTSYSMlU6D ' L ZMSI#8UWI# I 1.301 L5 619.952 92 A*B9ATKaSm 4 Wt 8COOP8TIWISE ANOA8 tWSUAALTA I 90 950 4130 62 OASnDATKIIrA IN CWB8IO 4n WEl ANODA

7 UR3ANMAMAG<UUT POE F&INFRASS3JIIU 1 2.500 2.0 1.187,64 1U SP nI 30M8VA0 Elt WTKl 20 S+EAVVDftNPROGKb PSW$b

4 PROIEIMA AOWTaAelMo I 1,600 1.,0 760.00$ DICW P1880).lKw. I# OIB15 lUNC

IV _

I WIIStALtAMBROPO*ANWATIESY5S DhYT.S?DY(" t 2.30 2,300 10 7 1 70 DICE 0IN co18AtIW11w88 Wt xs+S IsxA

2 URIUA?UTSIUDYIORSURAKARTA I 8o 88 48.02 48 8SO -8RAAN I4CLADSBCOOS8ATISWE TEIISEA

S £ 3UWLTRE8rNt W SAASD ORNJRAAD B 1 400 400 100.024 45 D0ASTu1sI ma (EOSSCOO?86014W1 DIOA

| GICRAND TOTAL | LAO8IOC2U

1I nL87)ETTOLVB 71E CDVBrnA NOPOTiU crD A PROVnLA I)LOCALAGE NP&MITYPRm

- 41 - ANNEX 7Page 1

INDONESIA - SEMARANG-SURAKARTA URBAN DEVELOPMENT PROJECTIMPLEMENTATION SCHEDULE

9311994 1995 1 1996 1997 1998 | 99 _ID Name _. .J uaia 141113 41 I I I I | I I | 31 | 1 KOTAMADYA SEMARANG 313D l W . 1 19 [_9 ~2 Water Supply 313w - 3 _ , , . , ___ , I

3 Detailed Design & Supervision 313w iv

4 Land acquisition 260.8w - // /7. ,//

5 Procurement of equipment 260.7w 1 / /// /

6 Civil works construction 313w , /_ __

7 Drainage & Flood Control 313w

8 Detaitled Design & Supervision 313w _ _,_'

9 Land acquisition 208.5w -- li

10 Procurement of equipment 104w f |

11 Civil works cons tion 260.7w

12 Human Waste Disposal Management 313w .

13 Detailed Design & Supervision 313w

14 Land acquisition 1 / 56.3w J15 Procurement of equipment 208.5w

16 Civil works construction 261w w E

17 Solid Waste Disposal Management 313w p m; 1118 Detailed Design & Supervision 313w _ /

1_9 Land acquisiton .

20 Procurement of equipment 260.6w

21 Civil works construction 260.6w

22 KIPIMIIP 31

23 Detailed Design & Supervision 313w

24 Civil works construction 260.7w I I I 1

25 Urban Renewal 313w

26 Detailed Design & Supervision 313w _

27 Civil works construction 260.7w Ii: I 'i28 Penataan Bangunan (Fisik) 156.4w I W m29 Detailed Design & Supervision 156.4w

30 Civil works construction 104.2w _

31 Urban Roads & Transportation 313w _ -32 Detailed Design & Superison 313w

33 Land acquisition 104.2w

34 Procurement of equipment 260.7w

35 CMI works construction 260.7w

.~~~~~~~~~~~~~~~~~~~~~Project. SSUDP IV Semarang3 - Sure Critical Emlyl _"l Prog3ress _ Summary Date: 1/6/94 Noncritcal Milestone

- 42- ANNEX 7Page 2

INDONESIA SEMARANG-SURAKARTA URBAN DEVELOPMENT PROJECTIMPLEMENTATION SCHEOULE

9311994 i1995 1996 1997 1998 11999

ID Name Duration 33 | 1996 1 3 | t _4_36 KOTAMADYA SURAKARTA 313w

37 Water Supply 313w i i

38 Detailed Design & Supervision 313w ' / 1>/7/ g/ W ,.Y,Mi.%/!

39 Land acquisition 260.7w .

40) Procurement of equipment 260.7w

41 Civil works construction 260.7w

42 Drainage & Flood Control 313w i_~~~~~~~~~

43 Detaied Design & Supervision 313w R /

44 Procurementof equipment 104.2w e45 Civil works construction 261w

46 Human Waste Disposal Management 313w _

47 Detailed Design & Supervision 313w /

48 Land acquisition 52.2w

49 Procurement of equipment 260.7w

50 Civil works construction 260.7w

51 Solid Waste Disposal Management 313w

S2 Detailed Design & Supervision 313w

53 Land acquisiton 52wI

54 Procurement of equipment 260.7w

55 Civil works construction 260.7w

56 KIP/MIIP 31

57 Detailed Design & Supervision 313w

58 CJvl works construction 260.7w

59 Urban Renewal 31

60 Detailed Design & Supervision 313w I I81 CMI works construction 52w _

62 Penataan Sangunan (Fisik) 104.3w

63 Detailed Design & Supervision 104.3w _l

64 Civil works construction 52.1w _

65 Urban Roads & Transportation 313w _ m

66 Detailed Design & Supervision 313w

67 Land acquisiton 158.3w

68 Procuremnent of equipment 260.7w I_ ~ ~~~~~~~~ I

69 Civil works construction 260.7w

Project: SSUDP IV Semarang - Sura Critical _ _ Progress SummaryDate: 1/6J94 Noncritical Milestone *

2

- 43 -

Annex 8

INDONESIA

SEMARANG-SURAKARTA URBAN DEVELOPNMENT PROJECT

SUMMARY OF PROcuREmET ARRANGEMENTSI.

Total Value for Number ofCatelrON Total CorWract

Contract Details ICB LCB Contracts ICBa LCBSemr1. ClvuNorks

D)rainlage - 51,223 29 - 29KIP/MIP - 7,911 10 - 10Urban Roads 7,812 66,469 40 1 30Solid Waste - 5,146 5 - 5Sanitation 6,153 17,644 3 1 21SVater Supply 7,093 39,400 9 1 8Other - 8,851 4 - 4

Subtotal Civil Work 21,058 196,644 100 3 107

H. Goods (Equipmt & Mateia)Drainage 1,407 1,444 6 1 5Urban Roads - 1,816 6 - 6Solid Waste 600 3,855 15 1 14Sanitaton 4,081 1,739 6 1 5Water Supply 70,721 641 5 3 2

Subtotal Goods 76,809 11,495 38 6 32

Total Semarang 97,867 208,139 138 9 139

Surakarta1. Civi Works

Drainage - 8,233 17 - 17;iPIMIP - 7,099 5 - 5UrbanRoads 11,001 35,027 29 1 28Solid Waste - 708 3 - 3Sanitation 9,730 4,673 8 1 7Water Supply 6,849 - 2 1 1Other - 4,968 3 - 3

Subtotal CivilWorks 27,580 60,708 68 3 65

H. Goods (Equimnent & aterials)Drainage 3,108 998 5 2 3UrbanRoads - 1,461 5 - 5Solid Waste 713 2,729 12 1 11Sanitation 1,960 1,479 8 1 7Water Supply 15,631 2,218 4 3 1

Subtotal Goods 21,412 8,885 34 7 27

Total Surakarta 48,992 69593 102 10 92

TOTAL PROJECT 142M2 77.732 ZdQ 19

/I All amounts shown are Rp milion Proposed conta packes are preliminary, and actu arrngemen maydiffer.

- 44 -

Annex 9

ENDONESIA

SEMARANG-SURAKARTA URBAN DEVELOPMENT PROJECT

EsTiMATED SCHEDuLE OF Do _ S

Quarter Ending Profile Cum % Quarterly Cumulative CumulativeFiscal Year c Loan a (US$ m) (US$ m) % of LOWt

1995 Dec 31, 1994 3.4 3.4Mar 31, 1995 5.8 9.1Jun 30, 1995 6% 5.8 14.9 9%

1996 Sep 30, 1995 5.8 20.7Dec 31, 1995 9.9 30.6Mar 31, 1996 9.9 40.4Jun 30, 1996 26% 9.9 50.3 29%

1997 Sep 30, 1996 9.9 60.1Dec31, 1996 10.9 71.0Mar 31, 1997 10.9 82.0Jun 30, 1997 50% 10.9 92.9 53%

1998 Sep 30, 1997 10.9 103.8Dec 31, 1997 8.5 112.3Mar 31, 1998 8.5 120.9Jun 30, 1998 74% 8.5 129.7 74%

1999 Sep 30, 1998 8.5 137.9Dec 31, 1998 9.3 147.2Mar 31, 1999 9.3 156.6Jun30, 1999 90% 9.3 165.9 95%

2000 Sep 30, 1999 4.1 169.9Dec 31, 1999 4.1 174.0 100%Mar 31, 2000 100%

La Stnard disbursemn profile for Asia, urban projects, from Board approval.kDisrments Depected to be faster than standard profile in early years due to major

equipment prourement for water supply components.l, Loan effectveness date assumed as September 1994; LAn closing date: Sep 30, 1999.

- 45 -

Annex 10page 1

MNONESA

SEMARANG SURAKTA URBA DEVELOPMENT PROJEC

KeU lmplem on and Performance Indicators

Indicators Reporting Reportng to:frequency andresponsibility

1. Availability of funds AnnualBy sub-sector, for next fiscal (1) PFO, by (1) CPFOyear, from Pusat, Level I and cityLevel II Governments (2) CPPO, (2) TKPP/IMG

consolidated and IBRD

2. Procurement progress QuarterlyStatus report, by sub-sector, (1) PMO/PMU, by (1) CPMOagainst original plan, showing cityICB and LCB separately (2) CPMO, (2) TKPP/IMG

consolidated and IBRD

3. Expenditures against plan AnnualBy sub-sector, for this fiscal (1) PPO, by (1) CPFOyear and to-date, including: city-local government funding prcenag (2) CPPO, (2) TKPP/IMGfor O&M requirements conolidated and B1RD

showing funding by Pusat, Level Iand Level U, and IBRD

4. Disbursements from IBRD Loan QuarterlyBy sub-caegories, as in loan CPFO TKPP/IMGagreement, for the qurter, and IBRDthis fiscal year and to date

5. Physical progress QuarterlyBy sub-sector, including: (1) PMU/pMo, (1) CPMO-solid waste collection coverage by city-access to sanitation facility (2) CPMO, (2) TKPP/IMGagainst plan, for the quarter, consolidated and IBRDthis fiscal year and to date

- 46 -

Annex 10page 2

6. Environmental Issues QuarterlyBy sub-sector, against plan, (1) PMUIPMO, (1) CPMOwith explanatory narrative, if by cityrequired (2) CPMO, (2) TKPP/IMG

consolidated and IBRD

7. Resettlement Issues QuarterlyBy sub-sector, against plan, (1) PMU/PMO, (1) CPMOwith explanatory narrative by city

(2) CPMO, (2) TKPP/IMGconsolidated and IBRD

8. RIAP AnnualProgress against plan, this (1) PPO, by (1) CPFOfscal year and to date city

(2) CPFO, (2) TKPP/IMGconsolidated and IBRD

9. PDAM Monitoring ndicators Annualincluding: (1) PDAM/PMU/ (1) CPMOICPFO-piped water supply coverage PFO, by city-unaccounted for water (UPW) (2) CPMO/CPFO, (2) TKPP/IMG

Progress against fore Jsts this consolidated and IBRDfiscal year and to date

10. TA / Consultng Services QuarterlyProgress against plan, (1) PMU/PMO, (1) CPMOespecially start date by city

(2) CPMO, (2) TKPP/IMGconsolidated and IBRD

$8IARANG4URAKARTAURIAN OEVELOPMdT PROJECT Kotamadva Semaranci - Financial Projection Annex 11Page 1

R98 MManGroe8h Pect Period 19495. 19989 Gowh

INCOMEIxpENXEfUE 19s889 19890 1990.91 19912 199M273 Re 1993194 1994195 1995196 t99697 1997198 198199 Rate 193992000 2C000t 200102 20023 200304 200405559 s71 1320 3419 1078 9093 S PROJECT3ONS 3-99 PROJECTIONS

LOCAL REVENUE 1I l 1 - -2 1 1 2 -1 2LoC Tames 8786 6O62 8,151 8,917 9.880 0% 9.8S62 13.925 16.963 19,739 23.150 27.25 18% 30.969 35204 40.028 45,484 51.709 s8807L aC4ieggs 5,474 6.884 8.489 9,297 9.470 6% 11.755 12382 15.481 17,502 20,440 24.417 17% 27,821 31.623 35.828 40c533 45.872 51.904Laea E ruaea 217 289 479 634 512 3% 524 707 825 962 1,123 1.311 17% 1.33 1,794 2.098 2,455 2.872 3359Dqerm bm 613 688 680 749 453 464 625 730 852 994 1.160 1,357 1.588 1.857 2,173 2.542 2.973'3ligrfteeues _839 1.440 2.984 2278 3.85 60 68 830 950 1,109 1329 1.655 1,820 2.130 2,493 2.917 34130OTA=OALRE VENUE 13.488 1.715 22.002 25.295 25.274 7% 23.209 28.337 34,829 40.005 468817 55.473 14% 63,237 72,029 81941 93.137 105910 120498

ASSIGNED REVENUES -1 I I I .1 I 1 1 1ILorda ad"q Tax 1,511 2Z141 3,069 3,065 3.915 13% 4,689 5.895 7,006 8,324 9.887 11,739 20% 14,096 16.927 20.326 24.408 29.309 35.195

g _w Aaknud ReWfMS 130 228 492 642 1.118 .683 1.855 2.049 2.269 2.519 2.801 11% 3.128 3493 3.914 4398 4951 558"ITOTAL ASSIGNE REVENUJES 18640 .389 3.561 3.707 5,034 19% 6.4 .8 90806 10.5903 12,408 149541 18% 17.221 20,420 24,241 28 805 34.261 40,7831

GRANTS FROI HIGHER LEVELS -1 -1 1 1 1 -2 -1 1RukmE3aea'Grt 8,108 7,041 7.832 8,929 W0M629 6% 12,486 14.581 17,031 19.895 23,244 27.160 17% 31.739 37.093 43.354 50,676 59.239 69,253Paetewm Gut 93 112 119 126 134 12 151 6% 160 169 179 190 201 214Rodsasa 879 994 1,600 1,791 34% 1,925 2.041 2.163 2t293 2.431 2,577 6% 2.738 2,909 3.090 3.283 3.489 3.707Ogw ruaGrama 3,048 2.822 6.540 8,152 9,879 23% 11,588 13.519 18,814 16,499 21,640 25.315 17% 29.613 34.141 40.523 47,404 98.453 64.868SSUDP SPAsB M 4875 60857 8372 1o,173 7.416TOTALGRANTS 11.153 10.442 15366 16.680 22,391 21% 26.080 35.135 41t192 49i194 57630 62617 19S 64249 74,812 87,147 101,53 118 382 138042

LOANS RAISED -4OSIIrFO 7,853 6.748 2.866 7.939 2300

SS8UOP UDLs 4.000 3,708 8.130 7.243 4 2921TOTAL M om 7.853 6.748 2.6 7 300 0 4.000 3705 5130 7.243 4.923 0 0 0 0 0

EICOLMK E 34.134 36.274 43.54 5621 54,99 13 558632 75.223 68.781 104922 124-096 137 884 20% 144,707 167.261 193 330 223,496 2MM53 9

ROUTINE EXPENDITUREIR ^m* e t 14.68 14.=22 t18242 22.552 25,653 19% 30.839 34,140 37.685 42.142 48.991 52,523 11% 58.898 66.106 74,425 83.9a2 93.974 107,639ssu 0P - alcre leO & 3.326 3.776 4.589 5.332 8.07 6.46 6.848 7.248 7,673 8.125 8.603

ojriaSmcl 789 1.489 1.972 1.773 3,042 5.321 10365 9292 4839 3.928 9372 9.1t0 8929 86D0 a319 9039 77s8TOTAtROUTIEEMPEN IURE 158670 16281 20,214 24,325 28695 19% 36.160 47,831 50953 81.570 56.251 68.002 13S 74,431 S1M8I 90.273 99,974 111138 124000

OEKLOPMENT EXPENDITURESSU P - Tkil Prum 13.346 15.339 22.022 26,278 16.026OVW =mro_ 180M7 18.694 19.959 30.281 20.850 2% 19472 14.046 22.489 31.330 4.566 53.526 70.27 85380 103.057 123522 147.415 175281TOTAL tCVELOPUENT EXPENDITURE 1t8017 t6.694 19.959 30.321 20.850 2% 19.472 27.392 37,828 63.382 67.644 69,552 18% 70.275 85.380 13057 123522 147A45 175,281TOTALEXPENDtTURE 33.687 34.976 40.173 4.606 498544 11% 558632 758223 88.781 104,922 124.094 137,553 18% 144.707 167.261 193328 223496 268.553 299,281

IDE3TCERAGERATIO 106 7.7 7 7 8.7 5.0 21 13 21 4.9 7.7 41 51 6.3 79 97 108 1471

RAN RTAURBAJ4O O6%694TPROJUCT Kotamadya Surararta - Financial Pro&ection Annex 11Page 2

"Kw loam icetssssd hu 1R- 198 I9WCOSIUPINITURfl E 19889 198S0 199081 119182 1992193 RR 19304 10946 1996196 199687 1907196 1698 R9ale 10680 2061 20187 20023 2034 20048

t0093 t9 PROJECTONS 90.3 PROJ"CTIONSLOCALREV~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~UU -~~~~~~~~~~~~~~~~1 -1 I

LoctlTa 1.716 1.918 2194 20 2.70s 11% 2.4 3.617 4. 4.926 5,714 6.700 18% 7.347 6.03 8.82s 9.687 1O.64o 11.6otLaociO a 3,744 4,413 4,762 M770 6.327 16% 6.488 7.403 9o0 90,720 11,181 12111 13% 132b0 14,487 15p,87 17253 18,.6 20.671Lodbt4_esw so so 63 97 11s 35% 137 t44 165 16s 175 184 6% 198 207 210 232 240 261

D q _n6%m. 6S 70 92 to? 148 26% 140 182 175 181 too 20 8% 2t7 230 244 259 274 290MO-T R " "731 134 231 162 1st 1 22 231 24 260 277 12 29 311 329 340 370 392~OtM. LO C RE SNU8 - 6ses3 -s8814 7.3I : 8.72 9.492 14% 9.s66 11.642 13.ees 15.2U 17.620 19.484 15% 21301 232S7 25A28 277E0 30.366 33184

AED a 043t Tax -1I Lat_&~W Tel 666 823 1.066 1.213 1.408 16% 1.600 2.424 2,7U8 3,096 3.647 3.98A tn% 4.746 6.646 6.718 7.999 9.603 11.3081- AftUgdRev.uma 70 134 187 222 824 940 862 970 1.092 1230 1.383 % 1.S30 1.692 1t671 2070 2230 2.34TOTALASS6I# REtENUES 628 967 124S 134 t232 34% t740 32S7 3.723 4.1U 4.77 5.373 1 6,275 7.337 .ss7 to.o6s it.7s3 13,30s

iGANT8FR0 IC*MH6 LEWO 1 .58 1R Eiai t 3,7 4,401 3.829 4,438 5.648 20% 69249 7.0a0 724 8.932 10.069 1.360 13% 12780 14.410 16l238 18.2S7 20.617 23233Ric t 40 0 094 36 81 34 89 100 112 126 142 33% 16 17 188 206 226 248Roa~bWmsQu4 460 1.490 934 1,463 1.625 28% 1.747 1.82 1.963 2.81 2.206 t.338 6% 2479 2.627 2.786 2,962 3.129 3.317 IOOwhyresRR4 t136s 1,439 2t71 3,887 4.035 23% 4649 6.129 6.780 6.616 734s 8281 13% 0.330 10.523 11.S3 13.373 15.076 16.994

M OM tus ~~~~~~~~~~~~~~~~~~2.997 6.62 6286 6.371 6.1LOTMN SRAIIlS 5666 7.339 7.496 s.633 tt2S9 23% 1tS7S 17.096 21s69 22928 26118 28.623 18% 24,768 27.732 31.073 34.828 39s04 43.792

O1R0 p. 597 432 226"S8 8RP I -ALm 2.690 I'm9 1.964 2.189 2j170TOT A NS 697 422 0 M 690 6 I4 2tE89 2 170 0 0 0 0

TOTAL 12672 1563 18t,03 20B 23,013 20% 27 34.14 4119 44 6603 66649 1 52335 s.357 2s08s 72668 81207

RWTINE W1ENMUREBRud 7.879 9.413 9,5£3 11251 13,6E4 19% 16,083 16.9o 17,957 20,27 2t7s9 25,632 11% 28.462 31.624 3U,142 41.059 43,418 4827S

ISsuo1P.hU1e_O 1.688 1.892 2214 3.207 3,724 4.078 4.319 4.575 484 5,134 8.43eloebISmnIcO ~~~~ ~~~~493 76 1.110 1.176 1.174 I.20 923 88 844 782 708 3.617 3.14 294 82 264 .8

1eT0 R E UR372 t0t166 10,703 1242B ION 18% 16;284 18.46t 20.734 23275 26.74 30.054 0 307 39.087 42i71 467472 51 22

DEVEtOPWNENT 4ff 2674 3004 0 197 9 E 4

081 DJ.9Pr 6F8,4 i.Aoo 9.366 11,900 12,387Obr0@_4P_ 4.320 -260 6.16 7?618 8.472 24% 8,a9 9,169 1o2ss 11.678 11.9t 1320s 1B27S 19,26 22,377 26.919 30.112 34.851

TIMOTPEUT6J RE 4.328 5260 6.616 7618 &472 24% 8aast 18.063 20.460 21.33 23855 2563S 18% 16276 19288 32377 25010 30112 34.851T%OTA EXPE EmR 12. 18424 16.218 20.045 23.330 20% 26.175 34.614 41t194 44?208 50.603 a6.604 1% S62.336 ss367 83088 72S6B S1,207 S0824

1 48cERA o i.s o7 46 .8 3s 33 4.7 64 70 8.2 9.7 22 . 36 122 665M

PDAM Semarana - Key Financial Indicato Amnex 12Page 1

P1MM Kftatpfuy S,MMg A01601AUmWu e - P1M K 611 x 0e IW MCtrOrORINe (NOICATORS ONORt3 INaCAToRs

I _ _S AOCUWAATEO 190 100 100 101 1002 1003 1004 19fS 10#e 1ff7 108 1009t 20lo0 201 2g02 2003 200 2005TARIFFt 8REW ASMSUMEO Auit d Aj*d Au4 Ax0 Am 55% Du 2as 0% 11% 0 1ts 0% 11% 0% 11% 0% 11%

tSlPPI.YA4 DEMNOPcPIbi.0 1201.0 124.0 1i..2 .274A1 1.20A4 1.25. 1351.7 .WSA 1406.0 434O 14e2.s 1AS01 1621.3 1,5516 1.62.5 1,614.0 1,646.1 1678.6is podopsMI 0.0% 2t.6% 24.2% 32.6% 36.0% 30.0% 40.7% 44.J% 4.0% 643% 606 % 63.t% 60.66 71.t 73n896 75.7% 77.6% 79.2%M1v6Ntc_M. M-woe 2944 31.20 46.78 5620 6145 66.17 74.17 06.17 102.17 1181.7 13417 150.17 100.17 176.17 1e6.17 1te.17 20617 216.17

.klCoMedumm.000 1.76 15.5e 6.6 6.16 4.72 8.00 12.0 1too 16.0 1s60 1600 16.00 10.00 tO 10.00 10.00 10.00 10.00Cmn6UM0MMANOCgOu0 36.1 363 242 20.6 28.8 27.0 27.1 20.1 2. 24 262 259. 259 26 27.0 274 27. 20.2FW08tV&M.SOid-0003 124 13.2 13.6 7.e 21.1 22.1 24.2 27.0 32.8 37A 42.1 46.6 51.7 S62 0.2 644 66.? 73256. eM0g6*r01mw 54% 4% 56% 47% 46% 45% 44% 40% 36% 33% 20% 26% 20% 20 20 20% 20% 20%PAMMgwn.mPm64c6-MM u'ow 27.17 26.02 30AS 32.07 36.64 4040 43.00 45.00 0O. 5,.77 tsse 03W7 00.03 75S.7 1.20 e2.01 82.75 08.02P1M IWi CapbcOyt-Mf6adv 4.20 46.20 40.20 48.20 43.02 430 83.10 62.76 627e 76.2 78295 76.28 01.23 012 01.23 10821 106.2 10.21Wpudm I I un8oT-Mm2m 6.00 0.00 0.00 6.00 6.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 6.00 0.00 0.00MM Ro*Mbn ad Piidm - ff0 27.17 20.02 30.a 32.97 36.04 4040 43. 46.0 60.es 55.77 6Soe 8 3.0a7 692 75s7 1.28 66.01 92.75 0.2

MAWN83ffWO*MA*oow06RUA- 475 308 224 1s0 sI so 60 0so e0 0o 60 6o 6o 60 0o 6o 6o 0be" d _,.. 220 216 561 507 673 673 t#t 1034 1228 1416 11o 1062 IS 1762 1862 1002 2082 212

EN*%ympom 100 0 0_dIi 7.6 7.0 11.s 10.8 63 6.7 12.0 12.0 12.0 i2.0 12.0 11.0 1.O 10. 10.0 10.0 to 1o.0%_ #of,IM., w MA .2.7% 62S% 0.3% .4.0% 0.0% 66.3%A 12 1.6% 1.% 13.0% 2.6% 10.7% 46% 6.7% 5US 5t1% 4.%

PROJerT 01WLOPMEND iPissti Cad (R MM"b 0 0 0 0 14,088 36,760 e3.et0 82.116 121.400 U7,510 155425 108110 10SD1eS 212.242 21,37t 224,t93ftakoA t Q.6OM (SM(LUto 0.0 6. 0.0 0.0 7.1 17.5 30.3 43.0 67* 76.1 n.3 9003 00. 1.oo8 103.7 108*a ki"Z OP Pri LOW (Rtp MM= a 0 0 0 4.762 1e8120 37.40 57.T8 78440 06.63 06,633 06M3 00.33 96.93 e0 033 .8autJIDPPs*gIAU nJSfUI) 0.0 0.0 e .0 0.0 2.3 to 17 27.3 37.3 46.0 46.0 40.0 48.0 46.0 40.0 46.0WebIaum t 0.0% o .0% 6.0% 0.0% 0.0 O.0% O .1% 23.1% 47.7% 73.3% 100.0% 23A4% 123AS 123A4% 123A% 123A% I13% 121,.4%

FKMPOO Pr.dA DidCoi.Rphn3pv&mW 00 116 s6s 103 220 217 290 340 201 422 466 6 031 no0 5M0 St1 626 663 .5POWMM Iw6 *MW_id- R 3pA Id 164 t1t 23 33 37n 370 6s1 s78 61 tt4 702 6ss Mt 004 M07 DI5 67 Mr7606,Wtgr Rise. Rp5 b04 697 630 e84 7et 739 7 02 M 81 Be 1.01 1,7 1,135Pl CMgtSd ̂ ,ftodD.eRt-te odd 337 376 647 662 064 678 017 003 955 075 M 1 1.205 I.220 t1224 12s tts.17 121OAM WPOW T rt 0.hues 216 278 406 371 413 826 036 784 Ms 06. 007 1.002 1,48 1.164 1,170 1.311 1,2 1.B8Am3t3lmrwus 26.% 456.% 436 11S 5.S 0.0% 23A% 14.% S'S -1.0% 9.0% .. 3% 11.0% 0.% 12.0% 0.7% 12Cubfosttos"C COO8 Re0.946 0 A 2.3 1. 3* 2. 0.0 0.3 1.2 2. 1.6 6 I.5 A I A 1.2 1.1 14 2.0RoftmRmoi A .on%o= *7 .4.% .6.1% 7A% .. % 54% 4% O.5% 3.5% 7?% 6.0% e. 9.3% 6.s% 1O.6% 9.7% 123% 12% 17,1% Oft OetDm soe* 80% 500.0% 643% 73.2% 55.3% 6.0% 662% ss.1% 58.7% 0ees% 6D0% 67.0% 2t1% 454% 36.0% 2.3% 2r.1% 21.%

CaNsTAMr 19tt PRUCE MMLYSSPOAM Pod.OIPCod .R pts PW d o10 168 1s$ m3 242 217 210 308 324 341 3 6 70e 3ts 351 362 M4? 34PDWPxdV ..C es g 222 283 298 400 404 362 420 452 467 484 802 836 812 462 473 464 434 425pooftPsv w flouif who _ 223t 261 3o 408 406 370 4ef st 5M s M on a" on M s oo 472Wf0T%icdRi10 .RO 4bMr a 0 8 0 0 o57 867 597 867 807 807 0M7 M87 607 97 5it7 087 t7

PA0odsafSd4,wMotoWR.oosdd 285 311 408 418 445 360 460 M0 607 we M8 403 4ss 474 474 475 460 470Pl EW Iuid*f& id0W tu3o- M M 407 er7 784 744 86 799 793 230 723 71i 7st8 606 651 B 027 7 snPOA todd t. ki0. . ReA 489t 612 817 784 761 676 eoa ows ttto 747 781 M38 070 7Mt8 7on we M 7 6M4 eV7hmOu7u (Rm 313 319 612 429 464 et6 602 705 763 7M2 740 7 721 78 72s 7M7 73 710_MT MN(ItM) 567 400 3t 821 400 52 M 4t41 5 st8 32 402 810 480 33 474 408hunqlwIwmu 2t. 3% * 2% 5.8 3% .2 1. M 3,t7 4.% 4.1% 41% 5M2 .4.7% M2% * 41% M.

u t"iu"t i TOW16 .2% 362 .4.S% 11S7% .7?A% 3.4% ?A% 2.5% te ss 38% 4.0% 4.0% 40% 5DiUU,(Re108_bs,Is,eoAu t34 451 210 208 278 282 201 20 30 317 3S27 23 34 357 3ts 37x m 402

ORmoAL P88=ft 9WTOB rRS IOt1

VAWILE OS9RMClTR Mt tM %420R) AVt AGI VAR1A8E OR 833CAtY ONO= tMt IERASE

Co. .lA S,681 4.61 Mcou6 40F.W lt3 ( g 1. 1S.3 4.304k--96hP6Ift p6806 1.1 6A4 4. DhostC Rp ibb, 3Ya An ( 1.2 II.? 39

R@R11RdAnatit 4A 7.4% 1.S t6S DeW+ow 05.3% 3.7% t7.1%- - - - - - - --_- -__ __ --

SEMARANG.SURAKARTA URBkAN DEVELOPMENTPROJECT PDAM Surakarta - Key Financial Indicators Annex 12Page 2

IWEL.L ONLY DEVELOPMENT

I INTEREST ACCUJMULATED 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Tariff Iuncase Assumfed 0% 0% 0% S0% 0% 25% 0% 25% 0% 30% 0% 30% 0% 12% 0% 12%

DEzMAND

POPULATION OF SERVICE AREA.- 000 525 531 535 539 545 549 554 560 564 570 574 579 584 W88 593 596POPULATION SERVED .000 184 204 208 227 230 263 279 293 310 328 338 381 364 378 383 393Numberof Conrections 20,727 21,458 23,086 24.355 25,253 29,790 32,460 35,131 38,293 41,562 44,089 46.082 49.346 51,614 53.882 56.170Increae in Coqiaclona 731 1,629 i.269 696 4,537 2,670 2,671 3,162 3,269 2.528 2.592 2,684 2.268 2.2658 2.286Consuimplion M3Manthironneo, 33.2 35 4 360 35.5 38.1 33.4 32.8 32 3 318 31.2 309 31.0 30 4 300 295 295Forecast VolumeSold -000M3a 8.247 9,122 9,974 10.380 10,927 1 1,945 12,771 13.606 14.594 15,5661 16.348 17.368 17.9188 18,553 19.103 19.897% Unaooounted-for Water 39.3% 41.1% 368% 36.0% 340% 310% 280% 260% 240% 220% 210% 200% 200% 200% 200% 200%Water Productio -000 M3 13,594 15.474 15.793 16,219 '16,556 17.312 17,738 18,386 19,203 19,960 20.694 21,710 22,483 23.191 23,879 24,871

MANAGEMENT,

IIDays Accounts Reevble 145 III 60 58 75 75 75 75 75 75 75 75 75 75 75 75Numberof EmnpIoe 245 245 259 264 265 310 334 358 387 416 441 467 493 516 539 562Employees per 100oconnections 1 2 1 1 1 I 1 1 10 10 10 10 10 10 10 10 10 10 1 0 10% Increase #ofewnploiees $NNA 00% 57% 19% 04% 17 0% 77% 72% 81% 75% 60% 59% 56% 47% 45% 43%

PROJECT DEVELOPMENTU,n

Cwuml Prqect Cost.- SSUDP (Rp MA) 0 0 370 5479 20282 27541 31641 33879 33879 33879 33879 33879 33879 33879 C>CimuI Project Cost .US$ iIIlon 2010 00 00 02 27 101 13 7 15 7 169 16.9 169 189 169 169 1169Cumultlve OtlwIenvestmlent (Rp M) 805 1323 1798 2456 2456 2475 2492 2495 2498 2502 5467 9518 12816 1588 19129 24145DisbursemeNnt Profile, IUIDP 00% 11% 162% 59 9% 813% 934% 1000% 1000% 1000% 1000% 1000% 1000% 1000%

FINANCIAL

Tariff in current prlcs (Rp/M3) 248 248 245 291 406 444 495 559 624 720 818 950 1071 1131 1202 1283Avwrage tariff inrease 01% -12% 184% 398% 95% 113% 129% 116% 154% 137% 160% 128% 56% 84% 671%Contributton toinvestment -Ave of3 years 146% 166.4% 1729% 286% 17 1% 157% 34 1% 241% 1569% 64 6% 89 4% 144 0% 1595% 00%R oR on Reaued Assets excl mnt 50% .0 6% -54% -24% 35% 69% 24% -0 1% 0 7% 41% 41% 98% 142% 136% 156% 183%% Debt on Debt plus Equdy 6268% 61.5% 599% 58 3% 470% 474% 606% 64.2% 64 7% 63.7% 814% 568% 512% 4586% 401% 34 4%

1993 CONSTANT PRICE ANALYSIS.

AvenegeTariff(RpM3) 343 322 295 320 406 421 445 476 503 551 594 5353 898 698 704 712H-ousehmold Tariff (RpIM3) 306 332 362 386 407 434 457 498 534 582 823 626 627 630TarifIncreas .59% -8 4% 82% 27.1% 3.8% 55% 70% 5.8% 94% 7.8% 100% 89% 01% 0.8% 11%Saswy (Rp 000)ftnmt0weelt-th 335 358 295 337 347 358 368 379 391 403 415 42? 440 453 487 481Opeatona Eiipend./M3 Sold 230 286 303 327 345 351 372 394 392 387 385 380 383 384 387 391

CRITICAL FINANCiAL. INDICATORS

VARIABLE OR INDICATOR 1994-2003 ANIMMU MAX0MU AVERAGE 1994.2003 MINIMU MAJMU AVERAE

Cash 1.501 13,635 6,442 Debt Seivice Ratbo 1.0 04 27Cash l UMonth Operatirg Expenses 3.4 115. 88s Contr to invest.- Ave 3Yeam 116% 180% 73%Twoif InreaeConsan Pri- 0.1i% 100% 5.7% Dayps Accounts ReceovatiI 76 75 75R oR on Revakied Asetsexcl. 1st -0.1% 15.8% 7.1% Oebt/(detit + equity) 40% 65% 56%

- 51 -

Annex 13

INDONESIASemarang - Surakarta Urban Development Project

SUMMARY OF ECONOMIC EVALUATION

SEMARANGURBIA ROADS

Investmen Costs ERRs M h(in Rp ndillon) (avenage) BWC Ratios

Five New rIdges 8,232 37% 0.7

NineWIdening 4,395 44% 1ATwenty-three Rec!ng 22,719 450% 1.3

DRIAGE & FLOOD CONTROLAffeted Atea Current icrease in Land Va 1/

(ha) Land Value (RpIm) Required (RpAn)East Seinaran 273 15,000 28,000Central Semnarang 41 20,000 62,000

WedSemaran 540 150,000 1515

WATER SUPPLY*FRR 13%I(AM nvesSnwt & Opmea from 1994 to 294) 1

SURAKARTAURBAN ROADS

inwesirmnt Costs ERRts MinimumOIn Rp m_Ion) (average) BIC Ratios

AN Ring Road (New Road) 11,549 17% 1.7TlWee Wn 240 31% 1.38even Res_racin 8,634 t50% 3

DRAINAGE & FLOOD CONTROLAffected Amea Current Increase In Land Value I

(ha) Land Value (Rp;m2) Requred (Rphn)Five Sub-projects 109 70,000 71,600

A. Yanl Punm Staion 2 2/

WATER SUPPLYIFRR 1296(AR kinvem s & Ope fron ftm 1994 to 2004)

Notes:1/ Inaeases I nd Wvalue required to break-een wIth Invsstment and O&M cos2 Beneft are due to u hnired road affic, curently Imeded for seral hous

during and after anls, rthr an to land vae eases.

- 52 -Annex 14Page 1

SEMARANG - SURAKARTA URBAN DEVELOPMENT PROJECT

Location: Lowe Kai Banger (river), East SemangResettlement Site. Kaang Roto, 7 km fauth east

Co/suttSurvey Results (84%fe parficipation)

Suf rt for the Trpe of omploymef tFully Agree 13% Private sector 30%Agree 75% SmaUl business 20%oNot agree 2% Government & miitary 90/0No respmse/opinion 10% Y Infonna sectr 18%

Other 23%1

Reocatloo PreferencesResettle to kamang Roto 52%(Seviced plots)Move with cash compensation 1Wo-Note decide (at time _suv) 30%

Consultaion with Reseiving Popultion in Karang RoteOverall support for new resetlement 94%Need pubLhc health center 570hNeed better trsporta facilities 53%Need local mar 38%Need improved water supply, sanitation & draiage 24%INeed improvements to electric power suppl 200%

Note: All the impvm requ ested above will be impmented by the City of Seang m Karag Rotoas part of the projec

AGREED RESETLMENT BUDGET FOR KARANG ROTO

Item Unit Cost ln Rp.

LId Land & Compesation 377,400,000Survey & Site Plans 7.5 ha 9,125,000Site Prepartion 7.5 ha 150,000,000

Alowance Relocation Allowane 6,390,000House Construction Allowmce 95,850,000

Infrasruncture Access Roads (earthwos) 2.5 klm 214,725,000Water Supy Stdpipes 10 65,000,000ToiletBathig/Washing Facilities 6 37,200,000Drainage 2.5 kmn 246,925,000

Sodal Heat Care Facility 1 15,000,000Faciitis Local Madret 1 10,000,000

StreetLighing 2.5 km 7,500,000Surfcing of Acess Roads 2.5 km 150,000,000Primay School 1 48,000,000(Non M uslim) Cemetuy 1 2,000,000Complition of Commmny HSl 1 25,000,000Small Mosque & Churc 2+1 45,000,000

- 53 -

Annex 14Page 2

IMPLEMENTATION OFSETLEMBNT & REHABILTATION PLAN

OvSqll Responsibility: City of Semarang through the Secretary & the Head of Bappeda II

(J) Drahge Project - under Public Works Agecy of City of Semarang - responsible forclearing land and construct drain of Kali Banger; will take overland after affected families have moved.

(ii) KEP Projet - under City of Semarang Housing Agency - responsible forimplementation of physical infr cture improvemens in KarangRoto resettlement site.

Oiii) R Project - under City of Semarang Housing Agency - responsible for land andcompensation aspects, payment of allowaces, plot allocations, houseconstucon assistance, social facilit, issuing of land ctificats("titles"), headed by the Resettement Project Manager, assited bythe municipal team for land acquisition.

Responsibility: BAPEDALDA (Semarang municipal environmenal protection agency)

Support by: NGO involved in original consultation.

Based on: Data from surveys & inteviews.

Intervals: 6 monfts and 2 years after completion of land acquisition.

Ky hndlcators: Completion of physical infastructureCompletion of social facilitiesQualiy of servicesFaimess & adequacy of compenation & allowancesSatisfaction with overall arrangements.

- 54 -

Annex 15

"SPABP Spedal Grant" Channel Financing

Sub-project components to be financed by IBRD loan proceeds which are passed asgrants to local level through the SPABP channel will normally also have a counterpart financingamount from the local govermments' own revenue sources (PADS, normal Inpres grants, etc.).

Local governments will prepare each year a draft budget submission representing theirimplementation plans for sub-projects to be financed from SPABP special grant in the forthcomingbudget year of their approved medium-term expenditure program (PJMs). These draft budgets wouldbe submitted through the Province (with review by the provncial Technical Team (PPMU)) to centralgovernment. After central review by Bappenas, Ministry of Finance and Ministry of Home Affairs.DG Budget of the Ministry of Finance would issue an authorization (SKO) to the Treasury (KPKN)office in the provincial capital to disburse up to specified sums, to be drawn on the project SpecialAccount (para 4.23) for each relevant local government in respect of contract payments properlyauthorized under local government DIPDA budgetary procedures.

Local governments would then prepare draft development budget authorizations(DUPDA) for the relevant sub-projects, specifying, as Rp Rekoning Khusus (RK, Special Account),the amount of funding to be provided by IBRD through the project Special Account, in accordancewith the specified disbursement percentages on eligible expenditure. The DUPDA would also showthe counterpart funding amount(s) and source(s) to be provided from the local government's ownnormal revenue sources. The local governments would also make appropriate provisions in their draftdevelopment budgets (APBD Pembangunan) for these expenditures and their funding sources.Following APBD approval by the local Representative Councils (DPRD) and ratification by provincialgovernor, DUPDAs would be individually approved by Governor with the advice of the provincialTechnical Team (PPMU), and then by local government mayor, thereby becoming DIPDAsauthorizing the implementation of the relevant sub-projects. These procedures are standard inIndonesian local governments.

Each implem on contract would be written specifying one funding source as beingfrom KPKN, represendng the IBRD funding share, and one (or possibly more, although one only ishighly desirable) supplementary local funding source. Disbursement procedures and documentationrequiments for each source and sample standard contract documents have been developed for thisprocedure under previous projects and will be used for local contracts under the project.

For each stage, payment the contractor would be paid through the issue of two (or, inexceptional cases, more) payment orders: one (or more) drawn on the appropriate treasurer for localcounterpart funding source, and one issued by the KPKN in the provincial capital. Before certifyingthe latter payment order, KPKN would verify that the counterpart payment order(s) had been drawnfor the correct amount in accordance with the specified IBRD financing proportion. DG Budget ofthe Ministry of Finance would issue a Circular Letter to KPKN in Semarang instructing them toundertake this duty of verifying that the couterpart funding contribution has been made. Again,local contractors would not have to go to Jakarta to be paid.

Semarang-Surakarta Urban Development Project Annex 16

Supervison Staffing and Schedule

Mission FY Mission Mission Task Task Trans Trans Water Water R&E R&En Pcmt Pcmt Legal Legal Fin Fin RSI RSI lotal Total GRAND

Start Duration Mgr Mgr Eng Eng & San & San nv. v. Spec Spec Spec Spec Anal Anal (S) (S) TOTAI.

Date (Weeks) (S) (S) (S) (S) Eng Eng Spec Spec (TD) (TD) (S) (S) (C) (C)(C) (C) (TD) (TD)

M H M H M H M H M 1I M H M M 11 M l M 1 MiH

1 95 7/94 2.0 2.0 1.5 1.0 0.5 1.5 0.5 1.0 0.5 - - - - 2.0 1.0 2.0 1.5 9.5 5.5 1 5.U

2 95 12/94 2.0 2.0 1.0 1.0 0.5 2.0 2.0 1.0 - - 1.0 1.0 - 1.0 0.5 1.5 0.5 9.5 5.5 15.0

3 96 7/95 2.0 2.0 2.0 1.0 0.5 1.5 0.5 1.0 - - - - - 2.0 - 2.0 1.5 9.5 4.5 14.0

4 96 1/96 2.0 2.0 1.0 - - 1.5 0.5 1.5 0.5 - - - - 1.5 0.5 2.0 1.0 8.5 3.5 12.05 97 7/96 2.0 2.0 0.5 1.0 0.5 2.0 0.5 - - - - - - 1.5 0.5 2.0 0.5 8.5 2.5 11.0

6 97 1/97 1.5 1.5 1.0 - - 1.5 0.5 1.0 - - - - - 1.0 0.5 1.5 (0.5 6.5 2.5 9.0

7 98 7/97 2.0 2.0 0.5 1.0 - 1.5 0.5 - - - - - - 1.5 0.5 2.0 0.5 8.0 2.0 10.0

8 98 1/98 1.5 1.5 1.0 - - 1.5 - 1.0 - - - - - 1.0 - 1.5 0.5 6.5 1.5 8.0

9 99 7/98 2.0 2.0 0.5 1.0 - 1.5 0.5 - - - - - 1.5 0.5 2.0 0.5 8.0 2.0 10.0

10 99 11/98 1.5 1.5 0.5 1.0 - 1.0 - 1.0 - - - - - 1.0 - 1.5 0.5 7.0 1.0 8.0

Note:M = MissionH = Home OfficeS = Bank StaffC = ConsultantTD = Technical DepartmentRSI Resident Mission Indonesia

SSUDPSUP.XLS 5/11/94

- 56 -

Annex 17

INDONESIA

SEMARANG-SURAKARTA URBAN DEVELOPMENT PROJECT

Selected Documents Available in the Project File

Project File No. Project Vile Name

F88862 Elements of Project Implementation PlanF88863 Project Preparation Report (PPR)F88864 PJM SemarangF88865 PJM SurakartaF88866 PJM Water Supply SemarangF88867 PJM Water Supply SurakartaF88868 Urban Renewal (Perumahan Rakyat)F88869 LIDAP SemarangP88870 LIDAP SurakartaF88871 Environmental Assessment Summary Report

Site Operation Plan TPA JatibarangF88872 Resettlement Plan Kali Banger Drainage ProjectF88873 Summary Report (Position Paper) SemarangF88874 Summary Report (Position Paper) Surakarta

Draft Project Implementation Agreement (PIA)F88876 Outline Designs Traffic Management SemarangF88877 Outline Designs Traffic Management SurakartaF88879 Draft Terms of Reference Technical Assistance Projects SemarangF88881 Draft Terms of Reference Technical Assistance Projects SurakartaP88882 Supporting Document for Project Justification

Bahasa Indonesia

F88883 RIAP SemarangF88884 RIAP SurakartaF88885 ANDAL Drainage SemarangF88886 RKL Drainage SemarangF88887 RPL Drainage SemarangF88888 RPK Drainage Semarang (Resettlement Plan)F88889 ANDAL Solid Waste SemarangF88890 RKL Solid Waste SemarangF88891 RPL Solid Waste SenarangF88892 ANDAL Sanitation SemarangF88893 RKL Sanitation SemarangP88894 RPL Sanitation SemarangF88895 ANDAL Sanitation SurakartaF88896 RKL Sanitation SurakartaF88897 RPL Sanitation SurakartaF88899 Project Digest Semarang Volume IF88900 Project Digest Semarang Volume nF88901 Project Digest Surakarta Volume IF88902 Project Digest Surakarta Volume IIP88903 Draft Project Implementation Agreement SemarangF88904 Draft Project Implementation Agreement Surakarta

IBRD 25468

"-'J" ' OORMOPOUTAM ARM1s INDONESIA__,8 Itve~ SEMARANG - SURAKARTA URBAN

J9J -\; '__ lS 2w DEVELOPMENT PROJECTJ__ 't < '3' -tlgJAWA TENGAH

<< KA.NAN AN E¶Z,,' S ''As'8 - - , Deelopment Zones Growth Center Hierarchy

a " \Kc '' fi e- .Stra tic Firt ClossGr1t) -;5 o ii trobic owts C Second ClassGrowth c Third Class

_____________ C-= jj5'--- ,, e 41 I | Stagnant Major RoadsConservation Railroods

_________________________________________________________________________ _ W Borders Kabupaten(disttrict) BoundariesProvince Boundaries

4 1090¢ 110 0 10 20 30 40 50

iepa { I 1 KILOMETERSTOrr,; JAVA SEAr Loae

- 7 BA T- B To SuRy

to p Suraboyo

Purboln 8c_

8-~

I [NDIAN OCEAN -' -_. YOGYAKARTA The boundaries, colors.

denominations and anyother information shownan this map, do not

K imply, on ~~~~~~~~~~~the part of80 '~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~TheWorl'1d Bank Group.N ~~~~~~~~~~~~~~any judgment on the legal

status of any territory,or any endorsementor acceptance of such

10910 boundaries.

MARCH 1994

IBRD 25469

KABUPATENKABUPATEN JAVA SEA DEMAK

KENDAL_' Drainage Subproiets

r -1 ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~*Drainage PUAD A.Yani System

8", ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~?Drainage Pomulorsih A.R. Saleh

1 : 7 Ronggolawo S.K.Ayu Bridge

a ~~~~Bulu Drainage

s*~~~~,, ~~~ 5 ~K. Bangerl

6 K Banggerfll31 7 K. Bongger III

1~~~ 8~I K. Tenggang System

J# ~~~9 Karigowe Secandary System0 ~~~~0 K Sringin

1' Kali Tumpang Rehabilitation

; ~~~~ \ / f bX~~~~~LNDFILL SfTE _H4j > \ hubybe irrpromo ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~To Surabaya

INDONESIASEMARANG - SURAKARTA

URBAN DEVELOPMENT PROJECT- !SEMARANG INFRASTRUCTURE IMPROVEMENTS

0 ~~~~MAP I. PROPOSED PROJECT

- - - - DRAINAGE IMPROVEMENTS

a ~~~~WATER TREATMENT PLANT

/ , J/ A SEWAGE TREATMENT PLANT

I \ I 1 | // - - - - EAST AND WEST INTERCEPTORSEXENSION AREAS FOR SOLID WASTECOLLECTION SERVICEPUMPING STATIONS

0 / \g/ e _° RESERVOIRS

WATER TREATMENT PLANT

SOUD WASTE SERVCE AREAS

*KA _>:OBLPATEN - MAJOR ROADSMABPATENG RAILROADS

, RIVERSThe boundaries, colors, denominations and any other informotionshown on this map do not impl on the port of The World Bank 0 1 2 3 4 5 KECAMATAN(SUB-DISTRICT1 BOUNDARIESGroup. ony judgment on the legal stotus of any territory, or any I I I I I CITY OP SEMARANG MUNICIPAL BOUNDARIESendorsement or acceptance of such boundaries. To Surkodr Yaogyuksal KILOMETERS

MARCH 1994

IBRD 25470

KABUPAT JAVA SNA KABUPATENKENDAL DEMAK h ma

INDONESIASEMARANG - SURAKARTA

URBAN DEVELOPMENT PROJECT0 .MARANG INFRASTRUCTURE IMPROVEMENTS

* <. !,-_,/ ,'MAP 11* PROPOSED PROJECT

ROAD REHABIUTATtON(CURBS AND SIDEWALKS)

NEW RING ROAD CONSTRUCTION~

0 / )KAMPUNG IMPROVEMENT PROGRAM SITES(KIP)

[I] iANmAREMT IMPROvEmENT PROGRAM Srs(MP)

% ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ______ RAILROADS

KECM1ATAN(SUB-DISTRICT) BOUNDAIES

KABUPATEN . CITY OF SEMARANG MUNICIPAL BOUNDARIES' - ~SEMARANGThe boundaries, colors, denominations and any other information 0 1 2 3 4shown on this map do not imply, on the part of The World Sonk I I I 1 1 IGroup, ony judgment on the legal sftaus of any territory, or anyendorsement or acceptance of such boundaries. To Sukort Yogyokarto KILOMETERS

MAFCH 1994

IBRD 25471ToS an The boundories. cot,

denominafions and onyother information sho.rnon this map do .:otmp. tIon the part of

The Worild Bank Group.2ny J Hudgment on the logaostatus of any te,rritry,or any endorsmentor ~acceptance of Such

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To modiun

41.0, INDONESIA

6 ~~SEMARANG - SURAKARTAs-00 JIAYrmiPumpStotion A /----1 RURBAN DEVELOPMENT PROJECT

Dranag_Su_ro__ .SURAKARTA INFRASTRUCTURE IMPROVEMENTSJ>it. Joke Tinkir Drain

2 iI.ItasanudPn Dump PrationMAROS S PRO P IJ7.HonudinDroi A n - - - D- AItNAGE IMPROVEMENTS

3 JiSiamet Piyadi Drain To Wonogi|; FREQUENTLY FLOODED AREA

4 JI.Gajohmada - Ronggawasito Drain PUMP STATIONS

J I.A.Yani Puimp Station AL SEWAGE TREATMENT PLANT

6 ilOemangan Pump Station WIAJOR ROADS _________ ~~~~~~~~~~~~~NEW GROUNDWATER WELLS DEVELOPMENT AREA6 A.Demongan Pump Station MAJOR ROADS ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ CD PRPOED ESRVIR

7 Arun - Blun Surakafto Drain RAIL ROADS t( RPSDRSROR

8 Kali Boro Rehabilitation RIVERS AREA SERVED EY SEWEPAGE SYSTEMS

9 Kali Jenes RehabilWienKECAMAATAN(SUB.DISTRICT) BOUNDARIES la EXISTING RESERVOIR9 aI Kedneg RehaiLitaiong CITY OP SURAKARTA MUNICIPAL BOUNDARY ( EXISTING PUMP STATIONS

10 KGedang Kopi LiningA FLUSHING INLETS

11 Kali Sumber Rehabilitation 0 0.5 1.0 1.5 2.0I I I . . . . INTERCEPTORS

i Pump WWTP North Domangon iJLOMETERS EXISTING SEWERAGE PIPE LINES

MARCH 1994

IBRD 25472

~~~~~~~~SEMARANG - SURAKARTA. \ I I -* ~~~~~~~~URBAN DEVELOPMENT PROJECT

X t sS~~~~~~URAKRTA INFRASTRUCTURE IMPROVEMENTS

t L /2tD i ffi t * ~~~~~~~PROPOSED PROJECT

To SemaraVg ~ ~ ~ ~ ToWnoii AORRADIPRVMET

\ ~ ~ ~ 8< Lv TO Wonosrin ~~~~~~~~(REHABIUTATIO0N,DRAJN &SIDE WALKS)

Y -t _ t / 2-9 ° ~~~~~~~~~ KAPMUNG IMPRO>VEMENT PROGRAM SITES(KIP))t I I S ! ; n~~~~~~~~~~~ MARKET IM^PROVEMlENT PROGRAM SlTES(MIPj

/ g ,. | ;1 ~~~~~~~~~~~~~INFRASTRUCTURE FOR LOWINCOME AREA

/ / ; ~~~~~~~~~~~~~~~~FUTURE RING ROADThe boundaries, colors, I denominatins ond ony - AOIOD

on this me p do notimply, on the port of 4JRAIL ROADSTh0e World Bank Groupforany judgment on the le,aal .- - RIVERSsitatus of any teirri#ory j 0 0.5 1.0 1.5 2.0 EAATNSBDTRC OUAIS

o r a n y e n d o rs e m e nt _________________________________'a alit_I D O N E S I

or acceptance of such KILOMETERS -SCIRTY OF SURAKARTA MUNICIPAL BOUNDARY

MARCH 1994