Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 29170

IMPLEMENTATION COMPLETION REPORT(SCL-40540)

ON A

LOAN

IN THE AMOUNT OF US$86.9 MILLION

TO THE

REPUBLIC OF INDONESIA

FOR A

STRATEGIC URBAN ROADS INFRASTRUCTURE PROJECT

June 30, 2005

Transport Sector UnitEast Asia and Pacific Region

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

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

(Exchange Rate Effective May 31, 2003)

Currency Unit = Rupiah 1,000,000 Rupiah = US$ 121.58

US$ 1 = 8225.0 Rupiah

FISCAL YEARJanuary 1 December 31

ABBREVIATIONS AND ACRONYMS

ADB Asian Development BankAMDAL Environmental Impact Assessment (Process)BAPPENAS National Development Planning AgencyBINKOT Directorate of Urban Road DevelopmentDLLAJ Road Traffic and Transport UnitEA Environmental AssessmentEIA Environmental Impact AssessmentEMP Environmental Management PlanERR Economic Rate of ReturnGOI Government of IndonesiaIWG Interministerial Working GroupJabotabek Jakarta Metropolitan Area (Jakarta, Bogor, Tangerang, Bekasi)JBIC Japanese Bank for International CooperationKabupaten Regency/District (Level II local governmentKotamadya Incorporated municipality (Level II local government)KPI Key Performance IndicatorKrismon Indonesia Term for the Financial Crisis of the late 1990sMPW Ministry of Public WorksPAP Project Affected PersonPHRD Population and Human Resource Development Grant (from the Japanese Government)Perda DecreePDO Project Development ObjectivePMU Project Management UnitQLI Quality of Life ImprovementsREPELITA Five Year Development PlanROW Right of waySAR Staff Appraisal ReportSESIM Strengthening of Environmental and Social Impact ManagementSURIP Strategic Urban Roads Infrastructure ProjectTA Technical AssistanceTKI, II Provincial level, local levelURMS Urban Road Management System

Vice President: Mr. Jemal-ud-din KassumCountry Director: Mr. Andrew Steer, EACIF

Sector Director: Mr. Jitendra N. Bajpai, EASTR Task Team Leader: Mr. Edward Dotson, EASTR

INDONESIAStrategic Urban Roads Infrastructure Project

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 55. Major Factors Affecting Implementation and Outcome 106. Sustainability 137. Bank and Borrower Performance 148. Lessons Learned 169. Partner Comments 1810. Additional Information 20Annex 1. Key Performance Indicators/Log Frame Matrix 23Annex 2. Project Costs and Financing 25Annex 3. Economic Costs and Benefits 28Annex 4. Bank Inputs 29Annex 5. Ratings for Achievement of Objectives/Outputs of Components 32Annex 6. Ratings of Bank and Borrower Performance 33Annex 7. List of Supporting Documents 34Annex 8. ICR Workshop Summaries 35Annex 9. Resettlement Experience 42

MAPIBRD No. 27993

Project ID: P004016 Project Name: Strategic Urban Roads Infrastructure project

Team Leader: Edward Dotson TL Unit: EASTRICR Type: Core ICR Report Date: June 29, 2005

1. Project DataName: Strategic Urban Roads Infrastructure project L/C/TF Number: SCL-40540

Country/Department: INDONESIA Region: East Asia and Pacific Region

Sector/subsector: Roads and highways (81%); Sub-national government administration (17%); Central government administration (2%)

Theme: Export development and competitiveness (P); Other urban development (S); Pollution management and environmental health (S); Decentralization (S)

KEY DATES Original Revised/ActualPCD: 07/01/1995 Effective: 11/11/1996 11/11/1996

Appraisal: 09/14/1995 MTR: 02/29/2000 02/29/2000Approval: 06/25/1996 Closing: 09/30/2001 05/31/2003

Borrower/Implementing Agency: REPUBLIC OF INDONESIA/MINISTRY OF PUBLIC WORKSOther Partners:

STAFF Current At AppraisalVice President: Jemal-ud-din KassumCountry Director: Andrew D. Steer Marianne HaugSector Manager: Jitendra N. Bajpai Anupam KhannaTeam Leader at ICR: Edward Dotson Edward DotsonICR Primary Author: Hugh Brown

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: M

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: S S

Project at Risk at Any Time: Yes

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:

The Strategic Urban Roads Infrastructure Project (SURIP: Loan No. 4054-IND) was identified in 1994 in response to Government concerns that development of the urban sections of the national road network were not being given sufficient attention in Integrated Urban Development Plans (IUIDP) being prepared at the time for urban areas. SURIP was conceived as the first in a series of projects, to cover the North Java Corridor and regions outside Java (primarily Sumatra). The basic scope was the construction or improvement of bypass routes for urban areas along the North Java Corridor. SURIP was intended to compliment improvements on the interurban sections being undertaken in concurrent Asian Development Bank (ADB) and Japanese Bank for International Cooperation (JBIC) projects. The section of the corridor in the Province of Central Java was selected as the main geographical focus as having the most acute congestion problems and because of the preparedness for, and commitment to the project by provincial level agencies.

The design of SURIP supported the Bank’s Country Assistance Strategy (CAS) of 1995 and the Bank’s Country Study, Indonesia Environment and Development of July 1994 (Report No: 12083-IND). The CAS highlighted the importance of managing infrastructure so as to support private sector development and competitiveness, strengthen capacities at all levels of government, and facilitate the decentralization of responsibilities. The Country Study stressed that reducing the rate of growth of congestion and the numbers of vehicles in key urban areas was critical for efficiency and for protecting the health and welfare of the urban population.

The original five objectives of the Strategic Urban Roads Infrastructure Project (SURIP: Ln. 4054-IND) as stated in the Staff Appraisal Report (SAR) were thus to: (a) reduce traffic bottlenecks on the national road network in selected urban areas in the North Java corridor; (b) address the environmental and social issues associated with the use of the national road network; (c) assist the Government of Indonesia (GOI) in the process of decentralization of responsibility for urban transport; (d) strengthen capabilities of GOI's central and local government agencies involved in urban road development and management; and (e) assist GOI in the articulation and implementation of an urban transport policy.

Assessment of Objectives. The objectives reflected the Bank’s urban sector experience in Indonesia, which confirmed that the size and complexity of urban road and transport problems were best addressed by sectoral projects within the framework of integrated plans for infrastructure and urban development. The project design also took into account the Bank’s sectoral approach to urban transport, which was to provide assistance through an integrated package of policy, institutional and infrastructure initiatives.

The objectives were clear, except that (b) was perhaps a little broad and should have stated “address the environmental and social issues associated with the construction of urban links in the national road network.” The project was not particularly demanding for the implementing agency or risky, but was complex in introducing urban transport objectives (c) and (e) into what was otherwise an urban road development project.

3.2 Revised Objective:

The objectives of SURIP were not revised, despite the addition of a major maintenance component in response to the financial crisis which occurred in Indonesia from late 1997 to mid 2002. The financial crisis did not alter the underlying needs for increased road capacity. In hindsight, it was an oversight not to

- 2 -

have added an objective related to road maintenance when this new component was included in the project,

3.3 Original Components:

The original five project components were: a) road construction (seven schemes; US$132 million); b) urban road management and quality of life improvements (QLI) (four activities; US$32.3 million); c) institutional and human resources development (two subcomponents; US$2.0 million); d) GOI urban road program development (one subcomponent US$0.6 million); and e) policy articulation and implementation (two subcomponents; US$0.6 million).

In general, each of the components (a) to (e) was designed to achieve the corresponding objective (a) to (e). The design took into account the lessons from previous urban road projects in Indonesia, which showed that the implementing agency had the capability to complete civil works successfully, but no capacity for longer term planning – hence component (d). No capacity existed at the local level for transport planning, formulating road programs and traffic management. The ascribed cause was the delay in enacting enabling regulations for devolution of responsibilities for these activities from central to local government. These enabling regulations were in place by the start of SURIP. The project therefore included components (b), (c) and (e) to make a start on providing this capacity. (However as was discovered during implementation, the availability of regulations only facilitated devolution of responsibilities. Local governments had to take other administrative steps before they would accept responsibility for these activities). Limited urban transport policy development and implementation was another lesson learned which the project sought to address through component (c).

3.4 Revised Components:

The difficulties that arose during the monetary crisis resulted in the need to make a number of revisions to the project components.

Component A - Road construction. A number of amendments was made to the scope of the schemes, as follows (see Table 1 of Section 10).

New Component F - Road maintenance. Due to the crisis, no government funds were available to maintain deteriorating local (Kabupaten and Kota) roads on Java. At the request of GOI, the legal agreements were amended in December 1998 to provide for routine and periodic maintenance, including labor-intensive maintenance works in Central Java, DI Yogyakarta, DKI Jakarta, and West Java. Periodic maintenance works in excess of Rp 2,000,000 and labor-intensive routine maintenance works not exceeding Rp 2,000,000 were provided for in a new Component F, which incorporated 355 separate contracts to maintain 837 km of roads.

The schemes included were those that were already in the priority maintenance programs of the different local governments and had already been approved by GOI for funding. Bank funding simply replaced funding that would normally have been provided by central government, but could not be provided due to the financial crisis. The key performance indicators were not modified with the introduction of this component. An appropriate indicator would have been a measure of roads in various maintenance conditions. The impact of the project investment was to reduce the length of local roads in the poorest condition.

Reduction of Component B1. Expenditures on road maintenance were funded by a major reduction in the funds allocated to Component B1. The scope of this sub-component was only loosely defined at appraisal

- 3 -

as traffic calming and traffic management measures to encourage traffic to use the bypasses and improve the “quality of life” in the urban centers previously suffering from through traffic. As the schemes were firmed up, it became apparent that they would require far less than the US$11.8 million Loan allocation.

Component D. Due to lack of funds for future schemes, the output of component D – an evaluated five-year road investment program, was revised. The revised component provided for the Phase 1 roll out and beta testing in a further ten cities of the Urban Road Management System (URMS) maintenance management module, which had been previously developed under the Bank’s Highway Sector Project. This revised output strengthened capabilities in road management rather than road development.

Component E. Under decentralization, formulation and implementation of urban transport policy became a local government responsibility. In order to respond to this change, the second stage output of the component was revised to focus on policies to assist the local government of Bandung to restructure bus services. This was partially funded by the same Japanese Population and Human Resource Development (PHRD) Grant that funded the first stage study, with the balance funded from the SURIP Loan.

3.5 Quality at Entry:

The Bank's Quality Assurance Group did not review the project at appraisal. Quality at entry is rated as satisfactory because:

(i) The project objectives supported the Government’s strategies, the CAS, and previous Bank interventions in the urban transport sector.(ii) There was full compliance with the Bank’s safeguard policies for environmental assessment (EA) and involuntary resettlement. The project was placed in safeguard category A as a number of the road schemes required involuntary resettlement and road construction on new alignments, with attendant environmental impacts (noise, fumes). The EA was adequate in identifying sensitive receptors close to the proposed roads (such as schools and community health clinics), but less adequate in identifying severance of footpaths and bicycle tracks. As a result, supplementary work to identify and make provision for these paths was required during implementation.(iii) The project was technically appropriate and considered technically sound at appraisal using the approach in use at the time for checking engineering designs. Alternatives were considered and the economic rationale was robust. The implementing agency had considerable institutional and staff experience in undertaking Bank funded projects, and consequently the engineering designs for the first two years of implementation were ready at appraisal. Unfortunately construction problems that emerged during implementation (see lessons learned) showed that the quality of detailed engineering design at entry was not as good as assumed. Difficulties in controlling frontage access to the roads suggest that the alternative of building frontage roads in addition to enacting regulations should have been pursued during preparation.(iv) Financial management and procurement arrangements met the Bank's requirements.(v) The key performance indicators (KPI) were measurable and directly the result of investment and/or actions within the project. The values to be assigned for rating outcomes were specified. This assisted later assessment but did not capture the full range of outcomes, especially for environmental and social outcomes. No values were given for rating output indicators, which caused considerable difficulty in later assessment for this ICR. (vi) The risks identified were largely those related to technical issues. The bigger risks of the ensuing financial and political crises were not foreseeable at the time of appraisal.

- 4 -

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:

The project is rated as satisfactory overall, even though achievement of two of the five objectives is deemed unsatisfactory. The major objective of the project - to reduce traffic bottlenecks essential to the promotion of economic development - was achieved without adverse environmental or social consequences, while the capabilities of central agencies involved in urban road development were strengthened. The outcomes of the other objectives were unsatisfactory, despite satisfactory outputs from the studies for these activities, largely due to institutional factors beyond the control of the project managers.

Reduce traffic bottlenecks on the national road network in selected urban areas in the North Java corridor. Achievement of this objective is rated satisfactory. Of the seven towns for which four lane bypasses were proposed, four bypasses were completed as planned, two were revised, and one was not constructed. The six completed bypasses are estimated to attract over 80% of through traffic and to operate without congestion over at least 80% of their lengths.

Address the environmental and social issues associated with the use of the national road network. Achievement is rated satisfactory. This objective was included to ensure that the road designers did not simply confine themselves to highway design issues, but considered broader environmental and social issues as well. The KPI, impact on Project Affected Person (PAP), was clear, measurable and directly managed through the project. No PAP was made worse off by activities of the project. However achievement of this objective also included a range of other items that were difficult to define as KPI. The project contributed to the formulation of guidelines for formulation and implementation of resettlement plans and Environmental Management Plans (EMP), which are now in everyday use by the implementing agency in the design and implementation of road schemes.

Assist GOI in the process of decentralization of responsibility for urban transport. Achievement is rated unsatisfactory. Local government traffic management units (Dinas Lalu Lintas Anka Jalan Tinkat II - DLLAJ TkII) in Cirebon, West Java were established and staffed before the project, and training was successfully provided. In the project cities in Central Java, the DLLAJ were formally established before the technical assistance for staff training was launched, but the organizational arrangements and staffing took longer to complete than anticipated by central government. These units did not become operational until 2001/2002, too late to participate in SURIP in a meaningful way.

Strengthen capabilities of GOI's central and local government agencies involved in urban road development and management. Achievement is rated satisfactory. The target of full integration (or mainstreaming) of environmental assessment, management, and monitoring into project planning and design was achieved for road schemes, despite changes in the institutional arrangements in the executing agency.

Assist GOI in the articulation and implementation of an urban transport policy. Achievement is rated unsatisfactory. A Draft Urban Transport Policy Statement was prepared by Consultants in 1999. However, the Draft Statement was not endorsed by BAPPENAS or the Interministerial Working Group (IWG) and therefore did not become established as a component of GOI policy. Further, with the major changes in government, the five-year forward planning program (REPELITA VII) was replaced and not continued.

4.2 Outputs by components:

A comparison of the actual outputs by component compared with the target outputs set out in the SAR is

- 5 -

presented below and summarized in Annex 1. The overall project output is rated as satisfactory, even though the outputs from three subcomponents are rated as unsatisfactory.

Component A: Road construction. This component is rated satisfactory. Section 1 of Semarang by Pass was completed as designed. Due to land subsidence, the area of Section 2 was increasingly subject to flooding. Soft ground conditions (met elsewhere along the corridor) limited the potential for embankment construction, and so the section was built on a viaduct as an elevated road. This improved traffic flow by taking bypass traffic over the at grade railway and road crossings into the port.

Demak bypass was designed as a dual two lane carriageway. Due to the shortage of funds, the lengths of road between bridges and junctions were built as a single two lane carriageway.

The Pemalang bypass was designed and scheduled to be constructed in the later years of the project. As a result of the financial crisis it was decided to delay the start of construction. The surface was overlayed to ensure that the existing road would continue to provide for high traffic volumes without drops in operating speeds until the bypass was built.

Section 2 of the Cirebon bypass crosses two main rail lines. At the time of appraisal, the railway company (PT Kereta) had recently introduced a policy that all new and widened railway crossings should be grade separated. Various options were considered, including moving the two tracks closer together to reduce the cost of bridging them, but a cost effective road grade separated design acceptable to the to rail and road agencies could not be found. As the only feasible option appeared to be to retain the existing road and rail alignments, the decision was made that a flyover should be built to reduce traffic delays and achieve the Project Development Objectives (PDO).

It is estimated that the costs for comparable individual subprojects varied by –63% to +30% from the costs originally estimated in the SAR (in 1996 prices), with the overall cost difference being about an 8.6% increase. The most significant increase was due to the decision to build the flyover across two major rail lines in Cirebon bypass Section 2, rather than upgrade the existing at-grade crossing as envisaged at appraisal.

Component B: Quality of life improvements. Assessment. Overall, this component is rated satisfactory. The rating is based on a combined assessment of the outputs of the three subcomponents. The highly satisfactory result obtained for the QLI works has been tempered by the unsatisfactory ratings for the structure plan review and Right of Way (ROW) protection, on the basis that the outputs from these subcomponents failed to reach a satisfactory rating by only a small margin.

B1: Traffic and Environmental management plan (including civil works) for seven towns. This sub-component is rated highly satisfactory. The original loan allocated US$11.8 million (1996 prices) for this subcomponent, but without a detailed scope of works. As noted earlier, due to the financial crisis, the allocation was greatly reduced. The actual expenditure under the loan was US$ 3.2 million.

Packages in individual towns comprised traffic management works for channelization of junctions, provision of better road lanes for becaks (cycle rickshaws), and other measures to improve road safety - to reduce traffic speeds and calm traffic flow - thereby offering the potential for reduced noise and air pollution. Pedestrian facilities were improved, including widening and resurfacing of footpaths, additional pedestrian crossings and more waiting areas at bus stops, which were also provided with shelters. Landscaping was provided to create shade and attractive areas for people to sit. Drainage improvements were also provided to ensure adequate road drainage and to reduce localized flooding. Improvements were made to the layouts of

- 6 -

parking areas adjacent to markets so the space was used more effectively. The output represented a change in function from a major road where ensuring the efficient passage of through traffic was the primary objective to a more visually pleasant pedestrian friendly environment where catering for non-motorized and local traffic movements was the prime objective. Surveys taken shortly after the initial schemes were completed showed that traffic flow and noise levels had fallen. However it was too early to have any definitive data on traffic accidents.

The subcomponent is rated as highly satisfactory because of the high technical quality of the output and high level of local ownership and commitment. The approach taken to the preparation of the component engendered this local ownership. The scope of works was only loosely defined, and local governments were invited to participate in forums where they assisted in the design of the component within the basic framework outlined by the Project Management Unit (PMU). All activities were conducted by Indonesian Bank, PMU, and local government staff and in Bahasa Indonesia. Some limits were placed on the extent of road works that could be financed, but otherwise local governments were free to design the schemes that they felt best met local conditions. All procurement, plan preparation, design, construction and supervision was done by local government staff from the cities and using Indonesian consultants and contractors.

B2: Structure plan review for seven project towns. This subcomponent is rated unsatisfactory. Reviews of local government’s urban structure plans were carried out satisfactorily, and recommendations were made on how the local structure plans and Integrated Urban Infrastructure Development Plans (IUIDP) should be updated, to take account of the new bypasses. Structure plan revisions normally occur on a five-year cycle. During the period of the project only the Kotamadya Cirebon Structure Plan was revised, while Cirebon already had a bypass (2 lanes) included in the Structure Plan. To merit a satisfactory rating, structure plans for all seven towns should have been revised.

B3: ROW for seven road schemes protected. Overall, this subcomponent is rated unsatisfactory. The output from this subcomponent was based on two separate activities:

i. Local Government regulation (Perda) for individual sub projects by the opening date of road. The regulations were intended to limit direct access to the bypasses. They were prepared and enacted in all cities. However the regulations have not been enforced, except in Kaliwungu, for two main reasons. First, limited access to toll roads is a new concept. Traditionally everyone felt that roads were provided by the government for the people, so they had rights to direct access. This was the argument used by the Mayors of Demak and Kudus in refusing to enforce regulations signed by their predecessors. Second, much of the initial land acquisition by the local government for the bypass alignment was done without cash compensation, on the understanding that the adjacent land owners would reap benefits from the construction of the road. Direct access was seen by the land owners as one of the benefits. Thus local government staff remain reluctant to rigorously enforce the regulations.

ii. Land Use plans showing acceptable location for development alongside (bypass) road prepared by opening date. Proposals that included details of acceptable locations for development were prepared. However, to be capable of implementation and enforcement, these proposals needed to be included in the urban structure plans when they were next revised. This did not happen. Thus while the technical work was completed satisfactorily, the ROW is not being protected in all seven towns, so the output is rated as unsatisfactory.

Component C. Institutional and human resource development. The rating of satisfactory is based on an assessment of the combined outputs of the two subcomponents. While neither achieved the output indicators set out at appraisal, institutional development was achieved in both subcomponents. In this assessment,

- 7 -

institutional development in the central government agencies for mainstreaming of environmental assessment (subcomponent C2) is considered to have greater development impact than institutional development of local government agencies dealing with traffic management (subcomponent C1).

C1: Strengthening of DLLAJ in participating local governments. The output of the subcomponent is rated as unsatisfactory, as the specific achievement target set out in the SAR could not be met. For the institutional reasons noted earlier, except in Cirebon, staff in local government traffic management units were not appointed and so could not be trained.

C2: Strengthening BINKOT AMDAL Section. This subcomponent is rated satisfactory. The output set out in the SAR for this subcomponent was TA for Strengthening of Environmental and Social Impact Management (SESIM) to permit the Environmental Impact Assessment (AMDAL) section in the Directorate of Urban Road Development (BINKOT) to take a lead role in environmental management and monitoring of sub projects. In 2000, after consultants for the TA had been selected, the Directorate General of Highways (Bina Marga) of the Ministry of Public Works (MPW) was restructured, and a new Directorate General of Urban and Rural Development (DGURD) took over the functions of the previous Binkot, but did not retain the Environmental section. Therefore the SESIM TA prepared environmental guidelines and operational procedures for road construction and operations management, a training manual, and a Bahasa Indonesia translation of the World Bank’s “Road and Environmental Handbook”. These documents and backup information have been published in book and digital form (CDROM) and provided to all local governments. SESIM also trained 25 trainers who trained 105 others.

Although DGURD does not have a separate Environmental section, the overall results remain positive. The underlying objective of strengthening BINKOT AMDAL section – mainstreaming of Environmental Impact Assessment (EIA) into the urban road design process – has been achieved. Environmental awareness has increased throughout DGURD and the companion Directorate General of Regional Infrastructure (DGRI), and DGRI Environmental staff provide training in environmental management to DGURD staff. The tools to enable high quality EIA to be undertaken have been prepared and disseminated. In effect, EIA has been contracted out so that consultants rather than the staff of DGURD take the lead role in the preparation of the environmental aspects of projects. Overall, the SESIM TA made a strong contribution to capacity building and professional development within the client organization. For this reason the output of the subcomponent is rated as satisfactory.

Component D. Urban Road Program Development. This subcomponent is rated satisfactory, because the consultants' work and the URMS output from the revised component were satisfactory, and the system is ready for implementation in cities. However, the recommendation that a Core Unit be established to support the promulgation of URMS, maintain and support the software, and provide training in its application, has so far not been acted upon. While this so far has prevented further implementation of the system, it does not detract from the quality of the output produced.

Component E: Urban transport policy articulation and implementation. The rating of unsatisfactory is based on an assessment of the combined outputs of the two subcomponents. As subcomponent E1 related to overall policy, the unsatisfactory output for this subcomponent is assessed to outweigh the satisfactory rating for component E2 which concerned only technical guidelines.

Component E1: Urban Transport Policy and Programs. This subcomponent is rated unsatisfactory. A Draft Urban Transport Policy statement was prepared in May 1999 by consultants funded through a Japanese PHRD grant. While the report was “accepted” by the IWG, the recommendations were not

- 8 -

endorsed, so the output must be judged as less than satisfactory. The second stage work reviewed public transport policy and the structure of the bus industry, and suggested regulations and guidelines to assist local government in restructuring bus services in the Bandung Metropolitan area. Detailed regulations were prepared for major revisions to bus service delivery. At a technical level, while the output was generally satisfactory, and the results of this work were accepted by Bandung municipality, they have yet to be implemented. The assessment that the output is unsatisfactory is based largely on the inability of either study to develop implementable recommendations. (In contrast to component D, where the output is implementable).

Component E2: BINKOT Guidelines. This subcomponent is rated satisfactory. Standards and Guidelines for Feasibility Studies and Detailed Engineering Design were prepared by end 1999. The work was performed to a satisfactory standard, and the standards and guidelines are ready for use. The revisions to the Ministerial structure in 1999 did not provide a suitable unit with responsibility for the continued development of such Standards and Guidelines. As no follow on to SURIP (or other urban road project) has been identified, little use appears to have yet been made of the guidelines prepared. However, this does not detract from the quality of output produced.

Component F: Maintenance. This subcomponent is rated highly satisfactory, as the inclusion of this work had a significant impact on the condition of the road network, many sections of which were in a severe state of disrepair. The project carried out work on 837 Km of road in 355 maintenance contracts, using over US$14.06 million of loan funds. Of this total, there were 117 periodic maintenance contract packages for a value of US$10.01 million, and 238 labor intensive maintenance packages for a contract value of US$4.05 million.

4.3 Net Present Value/Economic rate of return:

The post construction economic appraisal of the various by pass schemes was undertaken using the same methodology used at appraisal.

Traffic surveys of the national and urban bypass roads for the SURIP subprojects were undertaken in 2003, and compared with 2003 traffic forecasts from the SURIP economic evaluation, undertaken in 1995. The results of this comparison are presented in Annex 3.

The disturbances caused by the financial crisis, with high rates of inflation and an extremely unstable exchange rate, made derivation of comparable road construction costs and other economic parameters difficult. The Borrower’s ICR estimated the actual outturn costs in 1996 prices. These are also included in Annex 3, with the costs estimated at appraisal in 1996 prices.

At appraisal the Economic Rate of Return (ERR) for individual schemes was in a range from 17 percent (Demak) to 30 percent (Kudus). The recalculated ERRs are in a similar but narrower band - from 22 percent (Kaliwungu) to 25 percent (Cirebon).

4.4 Financial rate of return:

Not applicable.

4.5 Institutional development impact:

The institutional development impact is modest. The ability of the project to achieve the maximum

- 9 -

institutional benefit was adversely affected by the two Ministerial restructurings that occurred in 1999, and the increased emphasis on decentralization and associated social and political instability.

One beneficial impact was the ownership of the implementation of Subcomponent B1 (QLI Physical Works) by local governments. The implementation approach (described in section 4.2 above) supported the policy on decentralization and showed that engendering ownership by local governments ensured successful planning and construction of QLI works and their sustainability. The institutional success of Subcomponent B1 has led to similar schemes being adopted in other road projects, including the Bank funded Strategic Roads Infrastructure Project (SRIP).

The successive restructurings of MPW have resulted in very separate units being responsible for urban and rural infrastructure. This structure has exacerbated the lack of integration of road planning and construction, and has reduced the impact of a number of the SURIP initiatives. Lack of a unit to promulgate the initiatives for URMS (Component D), Standards and Guidelines (Component E2) has meant that to date these initiatives have had limited impact. This situation could be reversed if there were widely distributed local governments to whom responsibility for these activities has been transferred under decentralization. In contrast, despite the absence in the new structure of a central government unit responsible for environmental management of urban road projects, beneficial institutional impact has been achieved through the mainstreaming of guidelines and operational procedures for addressing environmental and social issues.

As urban transport policy (Component E1) remains ad hoc and at a central government level, ownership was difficult to establish in the midst of the restructuring of Ministries. The need for a concise urban transport policy is not understood at local levels. The guidelines on bus service reform (prepared for Bandung under Component E1) is one aspect that was completed successfully and could assist other local governments in their development of policy.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Dec

-96

Mar

-97

Jun-

97

Sep

-97

Dec

-97

Mar

-98

Jun-

98

Sep

-98

Dec

-98

Mar

-99

Jun-

99

Sep

-99

Dec

-99

Mar

-00

Jun-

00

Sep

-00

Dec

-00

Mar

-01

Jun-

01

Sep

-01

Dec

-01

Mar

-02

Jun-

02

Sep

-02

Rup

iah

Exc

hang

e R

ate

(US

$1)

Rupiah/US$

2,300

>15,000

7,500

>12,000

8,800

Financial crisis - The financial crisis that swept across Asia from July 1997 severely affected Indonesia. The major problem, illustrated above, was the catastrophic and prolonged drop in the value of the Rupiah,

- 10 -

know as Krismon, or "monetary crisis." An exchange rate of Rupiah 2,300 to US$1.00 was assumed in the SURIP SAR in 1996. In July 1997, the exchange rate was around Rp 2,400 to the US$, by end of 1997 the rate had halved to around Rp 5,000 to the US$, and by mid June 1998, the daily Rupiah rate topped over 15,300 to the US$. It was not until the first six months of 2002 that a steady improvement was seen with the Rupiah rate stabilizing at around Rp 8,900 to the US$.

The crisis left government with insufficient funds either for normal budgetary requirements, or for the counterpart funds required for major loan projects. The crisis had a negative impact on the physical implementation of the works by contractors, and the inability of the government to provide the needed counterpart funds led to substantial delays in implementation and the need for several major restructurings of the SURIP loan.

5.2 Factors generally subject to government control:

Adverse impact of restructuring the Ministry of Public Works. The Executing Agency for SURIP was initially the Directorate of Urban Road Development (BINKOT) within the Directorate General of Highways (Bina Marga) of the Ministry of Public Works (MPW). MPW was substantially restructured in 1999 and again in 2000, becoming the Ministry of Settlements and Regional Development (Kimpraswil), including a new Directorate General of Urban and Rural Development (DGURD), which incorporated the previous BINKOT. The restructuring of MPW created difficulties for government staff to maintain continuity in focus and activities. The new structure for DGURD exacerbated the lack of integration of road planning and construction, and did not provide central government units responsible for environmental management, urban road standards and guidelines or the URMS.

Delays in approving contracts. Significant delays that often ran to several months occurred between bid evaluation and forwarding the recommendation to award to the Bank, due to review by a National Procurement Team in BAPPENAS. Every contract of over 10 billion rupiah had to be submitted to the National Procurement Board, which delayed the schedule by two to three months. The requirement was changed mid way through the project.

Insufficient funds allocated by the Ministry of Finance (MoF) to local governments for land acquisition. Land prices in bypass corridors rose rapidly between 1995 and 2003 independently of the effects of the Krismon. These cost increases were due to local land speculation arising from the decision to build the bypasses. Earlier land acquisition and adoption of more appropriate land use policies to protect the bypass could have mitigated land price increases to some extent. Due to land price increases, funds allocated for land acquisition were often inadequate, especially where there were delays to sub-project implementation, and this resulted in further delays as additional funds had to be sought.

5.3 Factors generally subject to implementing agency control:

Appropriate management structure. The decision to nominate the Head of BINKOT as the Project Manager (i.e., the Head of the PMU) streamlined decision-making. The Head of BINKOT was at the same level as heads of other agencies and so commanded authority that led to faster decisions being made.

Project restructuring in response to crisis. The close project management of SURIP by the PMU and relevant agencies mitigated the impacts of crisis. Monitoring of the progress of procurement and implementation and early interventions when delays occurred greatly assisted project implementation. The financial reporting system developed by the PMU permitted expenditures to be tracked closely despite volatility in the value of the Rupiah. This system is now being used on the Bank’s Sumatra Roads Project.

- 11 -

Adoption of SURIP engineering design standards for bypass construction. Wholehearted adoption of the SURIP standard for sub-project construction led to a better standard of bypass and better integration with urban road networks. As an example, the SURIP standard provided for design load to more closely reflect expected maximum loads rather than legal limits, and so assists in avoiding excessive damage due to truck overloading.

The implementing agency was not successful in influencing several factors that were potentially under its control:

Inappropriate foundation designs on bridges in Central Java. Problems occurred on the bridges of the Kaliwungu and Weleri bypasses and on toll bridge embankments in Semarang, all of which existed before the project. The very soft soils in the area required more extensive and deeper foundations than proposed in the initial design. The corrective work on both the existing and new bridges was extensive. Many of these problems arose because soils investigations were not undertaken as part of design, or their results were incorrectly reported. The procedures have since been revised.

Problems compounded by budget process. The budgeting process was inadequate for multi-year construction projects. Monies were not available until April each year and agencies did not want to commence the procurement process before the budget was available. This led to a situation where contracts were not awarded until September at the start of the wet season when construction should not be taking place. Recent changes to the budgeting process are addressing this problem.

Termination of contracts and rebidding was delayed. The currency collapse made it impossible for contractors to honor their contracts due to the rise in bitumen product prices, which were priced in US dollars. The contract escalation clauses for materials did not operate properly, and did not adequately reflect the Rupiah price increase for these materials. A revised formula was developed, but a ministerial decree gave contractors the option to terminate contracts without penalty, rather than use the revised formula. Four contractors chose to do this. The net result was that the contracts had to be reformulated and rebid, causing further delays of up to 12 months.

Changes in key personnel in BINKOT. Changes in many key personnel at BINKOT arising from the restructurings and consequent loss of knowledge about the project and urban transport technical issues led to delays and increased the need for the PMU and the Bank to assist. These losses were compounded by what appeared to be an arbitrary allocation of technical staff to posts within the new agency structure.

5.4 Costs and financing:

At appraisal total project costs, not including the maintenance component, were projected at US$167.64 million. Actual costs, including the maintenance component, were US$109.23 million. The Bank's estimated financing at appraisal was $86.93 million or 52 percent of the total, and counterpart contributions of $80 million represented the balance. There was no cofinancing. The difficulties that arose during the monetary crisis resulted in the need to make significant amendments to the Bank financing of components and the Loan size. At completion, the SURIP Loan financed $76.55 million and the Second Highway Sector Loan (HSL 2 - Ln. 3712-IND) contributed US$11.115 million, for total Bank financing of US$86.36 million or 80 percent of the total project costs. The borrower financed $22.84 million equivalent or 20 percent of the total. Total project costs comparing appraisal estimates to actuals are provided in Annex 2.

- 12 -

Table 2 in section 10 provides summary information about the changes made to the civil works components, which were most affected by the crisis. The major changes included: (a) increasing the Bank’s financing share of Civil Works, from 50 percent to 70 percent and later to 80 percent, in order to reduce the counterpart funding requirements; (b) increasing the Bank’s financing share of Consultants Services, from 80 percent to 100 percent; (c) adding the maintenance component (Component F) for local roads, providing up to US$18.7 million for periodic and routine maintenance; (d) reducing the funding for civil works in the QLI component (Subcomponent B1) to fund the maintenance component; and (e) cancelling US$10 million of the Loan (in August 1998).

The closing date was extended three times from the original date of September 30, 2001. The first extension to September 30, 2002, was to compensate for the slow down in implementation due to the financial crisis, and to allow adequate time for the completion of works, with lower than anticipated supply of counterpart funding, so as the achieve the Project Development Objectives (PDO). The second extension to March 31, 2003, was to compensate for the lower than anticipated transfer of funds from HSL 2 , and to allow BINKOT sufficient time to construct Cirebon bypass section 2 with the lower levels of counterpart funds that were available. The third extension to May 31, 2003, was to allow completion of the works contract for the Cirebon bypass section 2.

6. Sustainability

6.1 Rationale for sustainability rating:

The project's sustainability is rated as likely. All of the Component A bypasses and Component B1 QLI schemes are likely to be physically sustainable. The importance of maintenance in extending the economic life of roads has been fully internalized in GOI road agencies. Even when funds were in short supply, the government took measures to amend the Loan Agreement to allow it to finance maintenance. This suggests that the government will be equally diligent to ensure that the roads constructed or maintained under the project will be adequately maintained in future. The extent to which the reduction of traffic bottlenecks remains sustainable will depend in part on the on the extent to which the capacity and function of the schemes are maintained through the controls on access and roadside activities provided by subcomponents B2 and B3, or through the provision of frontage roads.

The outcomes addressing the environmental and social issues associated with the use of the road network and strengthening the capabilities of GOI agencies (Component C2) are highly sustainable as the procedures developed in the project are now mainstreamed into Indonesian road planning and design practices. They have been used in road projects including, the World Bank-funded Eastern Indonesia Region Transport Project-1 (EIRTP-1), the Strategic Roads Infrastructure Project (SRIP), as well as in ADB-funded projects.

The project came too early to have any sustainable impact on the process of decentralization. However the training materials, policy papers and documents produced for franchising public transport services represent sustainable outputs that can be used to support capacity building and transport policy formulation and implementation in local governments following decentralization.

6.2 Transition arrangement to regular operations:

The bypass schemes were all implemented by the agency with the corresponding operations and maintenance responsibilities. The indicators that were used to assess the project outcome – attraction of through traffic and operation without congestion – remain valid for future monitoring. The physical works

- 13 -

of the QLI schemes were similarly implemented by the local governments with corresponding operations and maintenance responsibilities. Suitable indicators for monitoring are those already used: traffic and noise levels, traffic speeds and accidents.

The reviews for inclusion of the roads in local structure plans were prepared for the corresponding local governments which now need to ensure the necessary amendments are made during the current reviews of the plans. The local governments which prepared the various regulations for protection of the ROW are also those responsible for seeing them implemented and enforced.

The engineering design, environmental and resettlement procedures developed during the project are now standard practice for the design and implementation of national road schemes. The most appropriate monitoring indicator for these aspects of the project is the extent to which the guidelines, procedures and methods developed are used.

The Standards and Guidelines and URMS were prepared for the central government agency which should have the responsibility, even under decentralization, for their promulgation and dissemination. However for full use to be made of them, either new units need to be established with specific responsibility for these tasks, or existing units need to be assigned responsibility for them.

The regulations for restructuring public transport in Bandung were prepared for the agency responsible for their implementation. However actual implementation requires a political decision.

7. Bank and Borrower Performance

Bank7.1 Lending:

The Bank’s performance in the preparation stage is rated as satisfactory.

Preparation was undertaken by a core team comprised of local and headquarters based staff and consultants, with considerable experience in Indonesia, particularly in resettlement and environment. During preparation, the scope of the project was broadened to ensure that the proposed roads were not considered in isolation but integrated with the rest of the urban road network and the IUIDP, and that operational issues were considered. The Bank introduced several innovations, including moving of noise sensitive facilities like schools and clinics away from the road alignment, and the QLI component. Full participation of the local government officials and residents was encouraged in order to improve the design and delivery of the QLI subcomponents. Land acquisition and resettlement were being undertaken and financed by local governments, so it was necessary to develop enforceable agreements to ensure that the Bank requirements would be met. Environmental assessment for road schemes was relatively new, and thus was also a focus, leading to the inclusion of an institution building component.

The Bank found that effective tools for urban road design and implementation programming were lacking, and thus components were added to facilitate institutional development using the experience gained from this project. Understanding was reached with the government on the inclusion of a policy component for the development of an Urban Transport Policy Statement and Action Plan for inclusion in the Repelita VII Urban Policy by mid-1997. The Bank also ensured that full engineering and environmental documentation was made available at appraisal for the road schemes to be constructed in the first two years of the project. In line with common practice on Bank funded road projects in Indonesia at the time, the engineering designs were not subjected to detailed scrutiny. Given the later problems with the designs, a design audit at

- 14 -

preparation stage would have been appropriate.

7.2 Supervision:

The Bank performance in supervision is rated as highly satisfactory. Overall the Bank conducted 16 supervision missions between July 1996 and January 2003.

The Asian financial crisis started to affect the project in 1997 within 12 months of effectiveness. From that moment, the Bank team was constantly proactive and flexible in assisting the Borrower to manage project implementation and the flow of funds so as to mitigate the impact of the financial crisis on the achievement of the development objectives, and to preserve road assets. Attention was also focused on resolving environmental and resettlement issues and ensuring compliance with safeguard policies and legal covenants. (The covenant requiring Annual Work Programs was not enforced, as the objective of the covenant was met with more frequent updating of work programs by the Borrower). To ensure that relevant and timely advice could be given, at all times the status of project implementation was well documented. This status reporting was greatly assisted by the monitoring systems set up by the PMU, regular quarterly reporting by the Borrower, supplemented by forwarding to the Bank of the monthly Core Construction Supervision Team civil works progress and environmental monitoring reports.

In February 1999, task management was decentralized to the resident mission in Jakarta to better address implementation issues and achieve better follow up with the implementing agency and the PMU, both of which were also based in Jakarta. (Task team members handling procurement, civil engineering, environment and resettlement had been based in Jakarta since project effectiveness). Contract terminations, cost escalations and road maintenance issues were serious problems engendered by the crisis that needed urgent resolution to avoid the possibility of the suspension of disbursement. Regular meetings (generally weekly) were held with the PMU, followed as needed with meetings with the Head of the PMU. At all times the Bank team, the executing agency and the PMU worked closely and successfully to provide an integrated approach to managing the project with the aim of solving problems and speeding critical decisions. From June 1999, field inspections were undertaken on an approximately monthly basis to review bypass and QLI works in progress, in conjunction with implementing agency staff, representatives of the provincial government, PMU and construction supervision consultants. Every six months a formal mission was undertaken. (The formal missions noted in Project Status Reports as set out in Annex 4 were therefore only a small part of the supervision effort.).

Despite the changes in ministerial structures and staffing, Bank staff also closely supervised the quality of the QLI program, the technical assistance and the Urban Transport Policy components. The Bank remained concerned that the Urban Transport Policy and Program study was completed to a satisfactory quality. Flexibility was shown in modifying the scope of TA subcomponents C1, C2 and E1 in the light of changed circumstances, in order to try and achieve the desired project outcomes.

7.3 Overall Bank performance:

Overall, the Bank performance is considered to be satisfactory.

Borrower7.4 Preparation:

The Borrower's contribution to preparation was satisfactory. BINKOT staff made important positive

- 15 -

contributions to the design of the sub-projects, including the timely provision counterpart funds for designs of sub-projects proposed for the first two years of the project. BINKOT staff also supported the innovations suggested by the Bank and worked hard to ensure all conditions for successful project implementation (particularly relating to resettlement) were met by effectiveness. The one weak point of the preparation, as came to light in the early stages of implementation, was in the engineering designs. The schemes had been prepared by a number of Bina Marga agencies, and as BINKOT staff discovered during implementation, to different engineering design standards. In line with current practice at the time, the designs prepared for tendering were not final engineering designs.

7.5 Government implementation performance:

Overall, Government implementation performance given the difficult macroeconomic conditions and shortage of counterpart funds brought about by the Asian financial crisis was satisfactory. Commitment was sustained, except for the Urban Transport and Policy Component; stakeholder commitment to this component was less than desirable for successful implementation due to the lack of a single agency being fully accountable for the outputs. (The Japanese PHRD grant obtained for this component was satisfactorily executed.). Stakeholder commitment to other institutional components appeared to be high at time of preparation, but dissipated during implementation. The restructuring of Ministries negatively affected the execution of the project, but the extent of the impact was in part mitigated by having the position of Director of Urban Roads as project manager throughout implementation, thus facilitating prompt responses to emerging problems.

7.6 Implementing Agency:

The performance of the Implementing Agency (first BINKOT, subsequently DGURD) is rated as satisfactory. These agencies established a full time PMU adequately staffed by consultants and government officers, which satisfactorily discharged its responsibilities for overall project implementation, financial management, procurement, progress monitoring and reporting and oversight of construction supervision, resettlement and environmental management. BINKOT gave strong support to the PMU which was essential to ensure the appropriate management of sub-projects. Despite the difficulties resulting from the changes to the ministerial restructuring, agency staff adopted the project road design standards and actively continued to observe the Guidelines produced by SESIM (Component C2) for the improved environmental and social management of roads. Technical Assistance was used effectively for studies and training. The failure to use the outputs for Components D, E1 and E2 (URMS, UTPP and Standards and Guidelines) was disappointing, but due largely to factors beyond the control and responsibility of the implementing agency.

7.7 Overall Borrower performance:

Overall, the Borrower performance is rated satisfactory, given that it was operating in a changing and very difficult environment through much of the project.

8. Lessons Learned

1. Good project management facilitates effective project implementation. For any major project involving senior, regional and local government officials, it is essential that the Project Manager have a line position at a senior level within the executing agency to deal effectively with other government officials. SURIP was fortunate to have the Director of BINKOT (and subsequently DGURD) as the project’s nominated project manager, thus facilitating prompt responses to emerging problems. The SURIP PMU was a team composed of experienced local and international consultants (funded from the Loan), and

- 16 -

seconded staff from the implementing agencies. The use of good practice project management techniques by the PMU throughout the project life was a key factor in its successful implementation. The PMU’s financial management system was of high quality and was extremely useful, and provided the ability to plan around fluctuations in exchange rates. Similar systems are now being used on all Bank road infrastructure projects in Indonesia and could have wider application.

2. Flexible, supportive supervision by Bank staff is essential to ensure effective implementation and respond to changed circumstances. Projects are not self implementing once designed – they need constant adjustments in response to changing circumstances if the development objectives are to be achieved. This is all the more true in times of rapid change like the East Asia financial crisis). Close supervision under trying circumstances is best achieved with a field-based TTL.

3. Major road improvements need to be integrated into urban structure. This issue was also known at the start of the project, but (like final engineering design) was to be addressed during the project. As bypasses were built, ad hoc road connections, pedestrian crossings and other facilities developed and decreased the safety and efficiency of the new road. Many of these problems could have been avoided if the broader design issues had been addressed before the start of construction.

4. Controlling access to new roads requires more than by-laws. New rights-of-way create land development opportunities on land fronting new roads, but providing access to this land can be detrimental to the functioning of the facility. This was known at the start of the project, and the local government regulations (Perdas) were conceived as means to control such access, rather than the more expensive option of building frontage roads. It was found in SURIP that the regulations were ineffective, except perhaps in the short term. Where development adjacent to the road is anticipated, access controls are needed, and physical measures (such as frontage roads) are a necessary expense. This is a lesson that has wide application.

5. Proper design procedures are essential. SURIP designs were undertaken by a variety of agencies to widely varying procedures and standards, and poor design was inexorably followed by poor construction quality at completion. It is essential that a unified design procedure and standards, based on international good practice, be consistently used by government agencies at all levels. The Standards and Guidelines TA financed by SURIP made a start on developing an Indonesian Road Design Manual, and this initiative needs to be continued.

6. Final engineering designs and full bidding documents must be completed and checked as compliant before tendering. The difficulties encountered in SURIP convinced the road agency and reconfirmed the Bank view that good-quality final engineering designs and full bidding documents must be completed before tendering, consistent with international good practice. This lesson was learned early in project implementation to the benefit of the Kaliwungu Stage II, Semarang and the Cirebon sub-projects. This approach is now standard procedure for World Bank and ADB financed road projects in Indonesia, and should always be applied everywhere. 7. QLI-type schemes can be mainstreamed but local ownership is essential. The experience of SURIP is that small sub-projects to improve conditions in towns once bypasses are built are welcomed by local governments who take ownership. Such schemes can be very successful if planned, designed and constructed under the responsibility of the local government. The same approach to QLI is now being incorporated into the proposed Strategic Roads Infrastructure Project (SRIP), and could have wider application.

- 17 -

8. Capacity building can be successful even with changes in the organizational structure if the capacity building comprises modular training programs related to specific technical topics and guidelines on good practice in planning, design and procedures that can be applied by a group of technicians or professional staff in their daily operational tasks. Subcomponent C1 is a prime example. Even C2 is judged to have had some benefits, although it rated unsatisfactory on both output and outcome indicators.

9. Decentralization. There are several steps to decentralization of functions from central to local government, which take time to implement and then more time for various organizations and their staff to settle into their new roles. Drafting of technical standards and guidelines for the functions to be decentralized is a necessary first step. Technical assistance and training can help in building capacity to start undertaking new technical tasks, but should only be given once the organizations are seen to be fully staffed and all administrative steps have been seen to be completed. Not all functions can be decentralized. Decentralization also requires changes to be made in the roles and responsibilities of central agencies. It is hampered when these changes do not occur, especially the lack of units in central agencies with responsibility for functions which can only be performed at a national level such as formulation and updating of technical standards and guidelines, or policy frameworks.

10. Urban Transport Policy. For effective formulation and dissemination, urban transport policy needs a single strong agency to be responsible. Roads are only one aspect of this policy, so it cannot be the responsibility of the road agency. Where a single agency with responsibility for urban transport policy does not exist, no amount of Bank support can engender it.

9. Partner Comments

(a) Borrower/implementing agency:The Borrower provided comprehensive input to the ICR in the form of a twenty three page report with in addition three Appendices. The Borrower’s input to this ICR was informed by the results of a questionnaire given to representatives of relevant provinces, local governments and central government agencies. The analyses of the responses to the questionnaire are included in the Appendix 1 of the Borrower’s report, with the full responses given in Appendix 2. A stakeholder workshop was held on March 24, 2003, where Project Management, Finance and Economic Issues, and Institutional and Legal Issue were discussed in working groups. Appendix 3 of the Borrower’s report contains an English translation of the summary findings, which is reproduced as Annex 8 of this report. A summary of the Borrower’s input to the ICR, prepared by the Bank is given below.

Although the Borrower’s contribution to the ICR was prepared prior to the closure of the project loan, it reports in detail on the predicted loan outturn expenditure (as at May 26, 2003) by component and sub-component and compares these with the amounts specified in the loan agreement. The prediction was for an outturn expenditure of US$76.8 million versus US$76.9 million set out in the loan agreement. Through a detailed analysis of the influence of Krismon on exchange rates and the effect on government budgets, this ICR documents the background and rationale for five loan amendments made during the project. This analysis also described the political changes occurring in Indonesia at the same time resulting in a rapid shift from an authoritarian to a democratic form of government which caused uncertainty and unrest, and resulted in a deepening of the financial and economic crisis.

The impacts of the Krismon influenced SURIP in several significant ways. Availability of counterpart funding became scarce, and the prediction of future expenditure uncertain making effective management of

- 18 -

the loan and its components difficult. Funds for adequate maintenance of the existing road network were in short supply. Consequently, a maintenance component was added to the loan divided into two categories, larger periodic maintenance works and, in line with poverty alleviation, a labor intensive periodic maintenance component for smaller schemes. These components were for works in Central and West Java and Jabotabek.

Six pages are devoted to a detailed description of Component A: Road Construction and its outturn in terms of expenditure, traffic forecasts and economic performance. The project set out to achieve high standard bypasses, or ring roads around major bottlenecks on the North Java Corridor via construction of new roads or upgrading of existing bypasses in eight cities. Detailed tabulations document what was actually achieved versus planned. New or planned completions of bypasses were achieved in four of the eight cities with lesser, though still significant upgradings made, in the other four cities. Problems which occurred with incomplete preparatory work for sub-projects (eg inadequate soil investigation) and incomplete designs common on fast tracked sub-projects early in SURIP are documented. This approach lead to large addenda on contracts as designs were often significantly changed, with additional items added to the Bill of Quantities and new rates negotiated, resulting in construction delays and increased costs.

The actual traffic forecast to use the project roads and estimated economic results were shown to be similar to that forecast in the original SURIP SAR. Overall, the borrower’s ICR rated these bypasses as Highly Satisfactory (i.e., all seven bypasses attract 80% of through traffic and operate without congestion).

The Urban Management and Quality of Life Improvements (QLI) component is described in detail. QLI involving civil works improvements such as pedestrian, becak, drainage and landscaping improvements was found to be quite successful and well supported by local governments. The “soft” sub-components such as Structure Plan Review and enforcement of development and access controls along the new bypasses were found to be less successful. It appears this was because local governments were not fully aware of their obligations under the SURIP loan.

Component C: Institutional and Human Resources Development was shown to be frustrated by uncertainties created by policy changes occurring throughout government in Indonesia. This limited the project’s ability to fully strengthen DLLAJ (traffic units) in participating local governments. The sub-component Strengthening of Environmental and Social Impact Management (SESIM) within Binkot (Urban Roads Group) in Bina Marga which existed at the outset of the project ceased to exist after the first of two major restructurings of central government agencies and their regional counterparts.

Component D: GOI Urban Road Programme Development was founded on the further development and roll out of the Urban Road Management System (URMS) with the aid of consultants to several pilot cities. Experience has shown that for URMS to be effective, it needs to be supported, maintained and administered by a committed central body.

Component E: Policy Articulation and Implementation. This ICR describes the status of the work done on Component E1: Urban Road Transport Policy and Programmes comprising work on developing Urban Transport Policy and Program (UTPP) and Refinement and Implementation of Urban Public Transport Policies in Bandung. Unfortunately, the guidelines and knowledge generated by these TA have not been adopted as official policy or achieved wide-spread use for reasons beyond the Project.

More successful was the development of SURIP road design standard and guidelines. Although DGURD had a number of recognised standards they lacked a formal document setting out standards and guidelines to be adopted in the planning and detail design of road schemes, in particular, bypasses of the standard

- 19 -

conceived under SURIP. A TA was instigated on this project to outline the contents of an Indonesian Road Design Manual (IRDM) and to prepare in detail a section on Feasibility Studies and Detail Engineering design. A draft outline of the IRDM with detail sections on Feasibility and Detailed Design, including provision of a standard TOR and Contract Document were prepared and used within SURIP.

The new component, Periodic Maintenance, was considered to have had a major beneficial effect on the standard of the road network. The project carried out work on 837 Km of road in 355 maintenance works contracts using over US$14 million of loan funds.

(b) Cofinanciers:None

(c) Other partners (NGOs/private sector):None

10. Additional Information

Summary of Revisions to Component A road Component A Road Construction

- 20 -

Project Name Project Length (km)

Project Cost (Rp. Billion)

Planned Actual Original Actual Remarks 1 Cirebon Bypass Bypass satisfactorily completed. Section 1 6.0 6.0 6.05 7.52 Completed as planned Section 2 1.8 1.8 77.2 Initial plans for at-grade rail crossing

cancelled, replaced by overlay. Later, major flyover proposal re-introduced and completed

Overlay Section 2 & 3 2.6 3.2 See above 2 Pemalang Bypass not completed. Section 1 5.6 5.2 3.6 Projects shelved, replaced by overlay

to prolong existing pavement life Section 2 4.1 0 3 Weleri Bypass 5.2 5.2 31.9 31.6 Bypass satisfactorily completed.

Initial contract terminated prematurely Eventually completed in two Phases. Improved bridge design made possible by additional soils investigations

4 Kaliwungu Bypass 8.6 8.6 62.2 75.7 Bypass satisfactorily completed. Initial contract terminated prematurely. Contracts re-packaged and continued. Bridge failures required redesign and reconstruction.

5 Semarang Ring Road Bypass partially completed. Section 1 6.6 6.6 47.4 57.1 Initial contract terminated

prematurely, and then continued with repackaging.

Section 2 1.5 1.5 130.5 Scope extended to include major flyovers.

6 Demak Bypass 8.5 7.0 64.8 79.0 Bypass partially completed. Krismon and land acquisition problems resulted in reduced scope of work, with single carriageway over most of length. Bridges and junctions constructed to allow for future dualling when funds available.

7 Kudus SE Ring Road 11.7 11.7 53.9 50.8 Bypass satisfactorily completed. Initial contract terminated prematurely and then continued with repackaging. Rigid pavement added on short section to overcome soils problems

- 21 -

Summary of SURIP Loan Amendments

Loan Category Original WB Funding

Jan-98 Dec-98 Jul-99 Jul-01 Aug-02 Mar-03

Completion Date 30-Sep-01 30-Sep-02 31-Mar-03 31-May 03

1a. Civil Works projects implemented by central level agencies

50% US $ 50,800,000

70% FY 1997/98 80% FY 1998/99 50% thereafter US $ 50,800,000

80% FY 98/99 & 99/20 50% thereafter US $ 28,500,000

80% US $ 28,500,000

80% US $ 44,500,000

80% except 70% Cirebon Bypass Section 2 Phase II US $ 47,020,000

80% except 70% Cirebon Bypass Section 2 Phase II US $ 47,020,000

1b. Civil Works Projects implemented by the participating Local Governments

60% US $ 11,800,000

70% FY 1997/98 80% FY 1998/99 60% thereafter US $ 11,800,000

80% FY 98/99 & 99/20 50% thereafter US $ 11,000,000

80% US $ 11,000,000

80% US $ 2,750,000

80% US $ 1,255,000

80% US $ 1,255,000

1c. Contracted routine and periodic maintenance works under Part F.1 of the Project.

N/A NIL

80% US $ 14,000,000

80% US $ 10,300,000

80% US $ 10,330,000

1d. Contracted routine and periodic maintenance works under Part F.1 of the Project.

N/A NIL

80% FY 98/99 & 99/20 50% thereafter US $ 4,700,000

90% US $4,700,000

90% US $2,200,000

90% US $4,060,000

90% US $4,060,000

2. Goods for sub projects implemented by central level agencies

100% foreign 65% Local US $ 3,500,000

100% foreign 65% Local US $ 550,000

100% foreign 65% Local US $ 560,000

100% foreign 65% Local US $ 560,000

3A. Consultancy Services Implemented by central level agencies

80% US $ 11,300,000

100% US $ 13,260,000

100% US $ 12,765,000

100% US $ 12,765,000

3B. Consultancy Services Implemented by Participating Local Governments

100% US $ 2,100,000

100% US $ 600,000

100% US $ 760,000

100% US $ 760,000

4. Training 80% US $ 1,800,000

100% US $ 740,000

100% US $ 150,000

100% US $ 150,000

UNALLOCATED US $ 5,600,000 NIL NIL NIL NIL NIL

Cancelled US $10,000,000 US $10,000,000 US $10,000,000 US $10,000,000 US $10,000,000

Total Loan 4054 US $ 86,900,000 US $ 86,900,000 US $ 86,900,000 US $ 86,900,000 US $ 86,900,000 US $ 86,900,000 US $ 86,900,000

- 22 -

Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

HS-All seven bypasses attract 80% of through traffic and operate without congestion (V/C ratio) over at least 80% of their length.S-Five to six bypassesUS-Four bypassesHU-Three or less

Highly satisfactory Four bypasses completed and performing in excess of target. Two bypasses partially completed, but performing in excess of target. One project not built. Assessment: Satisfactory

HS- All PAP better offS - No PAP worse offUS - 10% PAP worse offHU >10% worse off

Highly satisfactory No PAP worse off.Assessment: Satisfactory

HS - All eight DLLAJ participated in at least 75% of preparation and implementation activities.S - 6 DLLAJ participating in 50% of activitiesUS - 4 or less DLLAJ participating in 50% of activities.HU - DLLAJ operational, but not participating

Unsatifactory Establishment of DLLAJ units delayed, as was their participation in project preparation and implementation.Assessment: Unsatisfactory

HS – Full integration of AMDAL into design and at least 90% of schemes reviewedS - 50% schemes reviewedUS - <50% schemes reviewHU – No change in current operations

Satifactory Government restructuring resulted in loss of in-house personnel who had been trained under SESIM. Application of environmental procedures remains as part of project preparation and planning, carried out by consultants on behalf of GOI. Assessment: Satisfactory

HS - GOI UT Policy incorporated in REPELITA VII for Transport Sector S - UT Policy Statement endorsed by BAPPENASUS - Draft not agreedHU - No Draft Statement produced by IWG

Unsatisfactory Policy development and articulation was not satisfactory. REPELITA VII was not continued with. Assessment: Unsatisfactory

Output Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

A. Road ConstructionSeven Road projects

Satisfactory Component A Assessment: SatisfactoryFour schemes completed in full; two partially completed; one not completed.

B. Urban Management and Quality of Life Improvements

B1: Traffic and Environmental management plan (including civil works) for seven towns

B2: Structure plan review for seven project towns

B3: ROW for seven road schemes protected.

Satisfactory Component B Assessment: Satisfactory

All towns implemented QLI works... High level of local ownership established. Assessment: Highly satisfactory.

All reviews satisfactorily completed, but no local government structure plan updating was undertaken during the project. Assessment: Unsatisfactory.

Perdas were enacted in all towns. However enforcement is limited. Assessment: Unsatisfactory

Perdas include details of acceptable locations for development were prepared.

- 23 -

These need to be included in future revisions of urban structure plans. Assessment: Unsatisfactory

Institutional and Human Resource Development

C1: DLLAJ Strengthened and staff trained in eight participating local governments

C2: Strengthen BINKOT AMDAL section

Component C Assessment: Satisfactory

Some Tk II training provided where units established. A number of Tk II units not established in required timeframe. Training provided to Tk I Units instead. Units participated in B1 to varying extents. Assessment: Unsatisfactory

BINKOT and Environmental section restructured, so the formal target not achieved. SESIM TA otherwise very successful, and outputs fully incorporated into existing practice. Assessment: Satisfactory

D. GOI Urban Road development Urban Road ProgrammeSatisfactory

Satisfactory Component D Assessment: SatisfactoryOriginal Sub-component deleted and replaced by URMS implementation TA. Satisfactorily completed, but the unit required to further develop URMS has not been set up.

E. Policy articulation and implementation

E1: Urban Transport Policy and Programmes

E2: BINKOT Guidelines

F.Maintenance Category 1c: Periodic Maintenance Category 1d: Routine Maintenance

Unsatisfactory

Satisfactory

Satisfactory

Component E Assessment: Unsatisfactory

Policy statements prepared, but were uneven and not adopted as GOI policy standard. Subsequent work on public transport policy in Bnadung was completed satisfactorily but the recommendations have yet to be acted on. Assessment: Unsatisfactory.

Output of Standards and Guidelines TA prepared to a reasonable standard, and within required timelines. Guidelines also completed under other components.. Assessment: Satisfactory

Component F Assessment: Highly SatisfactoryAll schemes implemented. Total cost US$10 millionAll schemes implemented. Total cost US$4.05 million

1 End of project

- 24 -

Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)

Appraisal Estimate

Actual/Latest Estimate

Percentage of Appraisal

Component US$ million US$ million A. Road and Bypass Construction

106.85 84.46 79

B. Urban Management and Quality of Life

24.33 1.98 8

C. Institutional and Human Resource Development

2.00 1.90 95

D. Urban Road Program Development

0.50 1.35 270

E. Policy Formulation and Articulation

0.53 1.31 247

F. Road Maintenance

0.00 16.42 -

Total Baseline Cost 134.21 107.42 Physical Contingencies 10.52 0 Price Contingencies 16.19 0 Taxes (GOI Expenditure) 6.72 1.61 Total Project Costs 167.64 109.23 Total Financing Required 167.64 109.23

- 25 -

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 106.70 24.80 0.00 0.00 131.50(53.30) (14.70) (0.00) (0.00) (68.00)

2. Goods 3.40 0.60 0.00 0.20 4.20(3.20) (0.50) (0.00) (0.00) (3.70)

3. Services 0.00 0.00 16.20 0.00 16.20(0.00) (0.00) (13.40) (0.00) (13.40)

4. Miscellaneous -Training 0.00 0.00 2.20 0.00 2.20(0.00) (0.00) (1.80) (0.00) (1.80)

5. Miscellaneous -Land 0.00(0.00)

0.00(0.00)

0.00(0.00)

6.80(0.00)

6.80(0.00)

6. Miscellaneous -Taxes and Duties

0.00(0.00)

0.00(0.00)

0.00(0.00)

6.70(0.00)

6.70(0.00)

Total 110.10 25.40 18.40 13.70 167.60(56.50) (15.20) (15.20) (0.00) (86.90)

Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 68.80 17.88 0.00 0.00 86.68(56.50) (16.15) (0.00) (0.00) (72.

65)2. Goods 0.57 0.00 0.00 0.00 0.57

(0.57) (0.00) (0.00) (0.00) (0.57)

3. Services 0.00 0.00 11.66 0.00 11.66

(0.00) (0.00) (11.18) (0.00) (11.18)

4. Miscellaneous -Training 0.00 0.00 1.90 0.00 1.90(0.00) (0.00) (1.90) (0.00) (1.9)

5. Miscellaneous -Land 0.00(0.00)

0.00(0.00)

0.00(0.00)

6.80(0.00)

6.80(0.00)

6. Miscellaneous -Taxes and Duties

0.00(0.00)

0.00(0.00)

0.00(0.00)

1.61(0.00)

1.61(0.00)

Total 70.73 18.13 13.56 13.50 109.23

(57.07) (16.15) (13.08) (0.00) (86.30)

US$10.0 million was cancelled.

- 26 -

1/ Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies.2/ Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff

of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

Project Financing by Component (in US$ million equivalent)

Component Appraisal Estimate Actual/Latest EstimatePercentage of Appraisal

Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF.A.Road and Bypass Construction

64.80 66.80 0.00 65.00 21.03 100.3 31.5 0.0

B. Urban Management and Quality of Life

19.10 13.20 0.00 1.79 0.18 9.4 1.4 0.0

C. Institutional and Human Resource Development

2.00 0.00 0.00 1.90 95.0 0.0 0.0

D. Urban Road Program Development

0.50 0.00 0.00 1.35 0.00 270.0 0.0 0.0

E. Policy Formulation and Articulation

0.53 0.00 0.00 1.31 247.2 0.0 0.0

F. Road Maintenance 15.01 1.63Total 86.93 80.00 86.36 22.84 99.3 28.6

The SURIP Loan financed $76.55 million and the Second Highway Sector Loan (Ln. 3712-IND) contributed US$11.115 million

- 27 -

Annex 3. Economic Costs and Benefits

1. Introduction. The project economic analyses were re-evaluated by the Borrower with assistance from the Bank, and reported in the Borrower’s ICR. The methodology used was the same as one used at appraisal. The key assumptions made remained the same as at appraisal, with traffic flows and construction costs amended to reflect actual flows and costs in 2003.

2. Traffic Flows. Traffic levels in 2003 are lower than forecast, with actual traffic totaling only 80% of forecast traffic. This is consistent with the interruption to growth caused by Krismon, with traffic levels not returning to pre-crisis levels for 3-4 years. The actual share of total traffic taken by the bypasses of SURIP cities is 47%, as compared with a forecast 53%. At the higher levels of forecast total traffic, with greater levels of congestion, a higher bypass share of traffic would be expected, and it is apparent that the traffic forecasts have proved to be quite robust.

3. Cost Estimates. The “as built” actual cost estimates for Kaliwungu, Kudus, and Weleri, are for essentially the same scheme as the SAR cost estimate. In Cirebon, the costs are higher as it was decided to proceed with the section II scheme (which included a bridge over the railway), whereas the SAR costs are for the Section I scheme. The higher cost of Semarang NRR are due to the costs of the extended elevated section required to provide a passable road in times of frequent local flooding. The cost for the Demak are lower than the SAR estimates reflecting the decision to build the by pass initially as a single two lane road rather than the dual two lane road agreed at appraisal.

Daily Traffic Estimates Cost Estimates (Rp. Billion)

Economic Rate of Return

Sub-Project Road 1995 2003

Forecast 2003

Actual

SAR Costs, 1996

Prices

Actual Costs, 1996

Prices

ERR (%)

Forecast

ERR (%) Observed

1. Cirebon Bypass 19,621 37,497 21,849 15,709 29,938 24.0 25.2 Bypass 0 16,969 14,816 18,105 18,016 24.4 23.9 National 15,763 9,883 7,619

2. Weleri

Total 15,763 25,852 22,435 Bypass 0 28,133 15,912 55,975 72,549 21.1 22.2 National 18,020 1,496 12,919

3. Semarang NRR

Total 18,020 29,629 28,831 Bypass 0 18,660 13,519 24,642 29,493 27.0 22.2 National 21,817 9,980 8,377

4. Kaliwungu

Total 21,817 28,640 21,896 Bypass 0 15,384 11,798 30,369 27,720 17.2 23.9 National 14,440 9,418 7,619

5. Demak

Total 14,440 24,802 19,417 Bypass 0 12,977 7,694 26,769 24,308 29.7 22.7 National 15,263 13,655 14,909

6. Kudus

Total 15,263 26,632 22,603

- 28 -

Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle Performance Rating No. of Persons and Specialty

(e.g. 2 Economists, 1 FMS, etc.)Month/Year Count Specialty

ImplementationProgress

DevelopmentObjective

Identification/Preparation

12/09/1994 6 URBAN TRANSPORT SPECIALIST (1); CIVIL ENGINEER (1); URBAN SECTOR REPRESETATIVE (1); RESETTLEMENT SPEC. (1); TRANSPORT PLANNER (1); ENVIRONMENTAL SPECIALIST (1);

04/ 10/1995 5 URBAN TRANSPORT SPECIALIST (1); HIGHWAY ENGINEER (1); URBAN SECTOR REPRESETATIVE (1); TRANSPORT PLANNER (1); ENVIRONMENTAL SPECIALIST (1);

08/11/1995 URBAN TRANSPORT SPECIALIST (1); HIGHWAY ENGINEER (1); IMPLEMENTATION ENGINEER(1); RESETTLEMENT SPEC. (1); TRANSPORT ECONOMIST (1); ENVIRONMENTAL SPECIALIST (1); TRANSPORT PLANNER (1)

Appraisal/Negotiation12/14/1995 7 URBAN TRANSPORT

ENGINEER (1); HIGHWAY ENGINEER (1); IMPLEMENTATION ENGINEER (1); RESETTLEMENT SPEC. (1); TRANSPORT ECONOMIST (1); ENVIRONMENTAL SPECIALIST (1); TRANSPORT PLANNER (1); PROGRAM ASSISTANT (1 - negotiations)

Supervision

07/29/1996 3 URBAN TRANSPORT S S

- 29 -

ENGINEER (1); CIVIL ENGINEER (1); RESETTLEMENT (1)

11/01/1996 4 OPERATIONS OFFICER (1); URBAN PLANNER (1); URBAN TRANSPORT SPEC. (2)

HS HS

03/21/1997 7 HIGHWAY ENGINEER (1); TRANSPORT OPS OFFICER (1); RESETTLEMENT SPEC. (1); IMPLEMENTATION SPEC. (1); URBAN TRANSPORT (1); TRANSPORT PLANNER (1); TRAFFIC ENGINEER (1)

HS HS

08/05/1997 5 TRANSPORT OPS OFFICER (1); URBAN TRANSPORT (1); TRANSPORT PLANNER (1); RESETTLEMENT (1); ENVIRONMENT (1)

S S

11/19/1997 4 TRANSPORT OPS OFFICER (1); URBAN TRANSPORT (1); TRANSPORT PLANNER (1); ENVIRONMENT (1)

S S

05/01/1998 2 URBAN TRANSP SPECIALST (1); CONSULTANT (1)

S S

07/17/1998 1 TASK TEAM LEADER (1) S U10/28/1998 5 TASK TEAM LEADER (1);

SECTOR COORDINATOR (1); CONSULTANT (1); SOCIAL DEV SPECIALIST (1); OPERATIONS OFFICER (1)

S U

02/29/2000 6 TTL/CIVIL ENGINEER (1); URBAN TRANSPORT SPECIALIST (2);SECTOR COORDINATOR (1); RESETTLEMENT (1); ENVIRONMENT (1)

S S

11/06/2000 3 TTL/CIVIL ENGINEER (1); RESETTLEMENT/LAND (1); ENVIRONMENTAL (1)

S S

11/14/2001 3 TTL/ENGINEER (1); RESETTLEMENT (1); ENVIRONMENT (1)

S HS

06/20/2002 1 URBAN TRANSPORT ENGINEER (1)

S S

ICR03/2003 1 MUNICIPAL ENGINEER

(1)S S

- 30 -

(b) Staff:

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)

Identification/Preparation 28.50 118.9Appraisal/Negotiation 128.20 445.9Supervision 131.54 514.4ICR 7.33 47.0Total 295.57 1,126.2

Costs incurred up to and including FY99 were increased 15% to take into account changes n accounting practices starting in FY00.

- 31 -

Annex 5. Ratings for Achievement of Objectives/Outputs of Components(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingMacro policies H SU M N NASector Policies H SU M N NAPhysical H SU M N NAFinancial H SU M N NAInstitutional Development H SU M N NAEnvironmental H SU M N NA

SocialPoverty Reduction H SU M N NAGender H SU M N NAOther (Please specify) H SU M N NA

Private sector development H SU M N NAPublic sector management H SU M N NAOther (Please specify) H SU M N NA

"Other" under the social category refers to resettlement

- 32 -

Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Lending HS S U HUSupervision HS S U HUOverall HS S U HU

6.2 Borrower performance Rating

Preparation HS S U HUGovernment implementation performance HS S U HUImplementation agency performance HS S U HUOverall HS S U HU

- 33 -

Annex 7. List of Supporting Documents

Staff Appraisal Report, Strategic Urban Roads Infrastructure Project, June 4, 1996.

The World Bank, Memorandum of the President of the International Bank for Reconstruction and Development to the Executive Directors on the Country Assistance Strategy of the World Bank Group for the Republic of Indonesia, February 27, 1995.

The World Bank, Memorandum of the President of the International Bank for Reconstruction and Development and the International Finance Corporation to the Executive Directors on the Country Assistance Strategy for the Republic of Indonesia, June 13, 1997.

The World Bank, Memorandum of the President of the International Bank for Reconstruction and Development and the International Finance Corporation to the Executive Directors on the Country Assistance Strategy for the Republic of Indonesia, January 4, 2001.

World Bank Mission Aide Memoires, Project Status Reports and Field Inspection Back to Office Reports (1996-2003)

- 34 -

Additional Annex 8. ICR Worshop Summaries

1. Introduction

In February and March 2003 questionnaires were issued to the representatives of affected Provinces, Kotas and Kabupatens, Bappenas, Anggaran and Sub.dits of all directors in DGURD. Details of questions and responses are given in Appendix 1 and 2. A workshop was held on 24 March where various were discussed in working groups, Project Management, Finance and Economic Issues and Institutional and Legal.

1.1 The WorkshopThe aims of the workshop were outlined by the World Bank followed by a presentation by the PMU consultant of the achievement of the project and some of lessons to be learned.

The delegates consisted by local officials from the various Kabupatens and Kotamadyas, the provinces of central and west Java and central DGURD staff who had made a significant contribution to the project.

The aims of the workshop were outlined by the World Bank followed by a presentation by the PMU consultant of the achievement of the project and some of lessons to be learned.

The delegates were then split into the three groups.

Group A Project Management

Group B Financial and Economic Issues

Group C Institutional and Legal

The groups held 2 sessions, the first dealing directly with their subject matter and the second with the Project benefits.

The views expressed were in discussions and not necessarily the view of the Government of Indonesia

2. Discussion Group A Project Management Session 1

The overall summary is that SURIP had performed well and the benefits of relieving key urban bottlenecks on the North Java Corridor route had significantly improved the situation.

The following comments should be seen as feedback rather that criticism of the project.

2.1 Planning and implementation

1. A bypass has a significant affect on a city, insufficient consideration is taken during the planning stages on the overall city plan and how these should be modifies.2. To improve quality of construction and life of the project much tighter contract supervision is necessary.3. Project Managers and engineers should be more aware of documenting, inspections, authorisations, changes, reason for changes and assessment of risks as eventually there may be a need to comply with ISO 9001.4. Greater awareness and understanding of construction contracts and the responsibilities of the parties is necessary.

- 35 -

5. On Civil Works contracts it was considered that the escalation clauses were insufficiently detailed.6. The standard designs as used on the later SURIP projects experienced very few problems, earlier versions were subject to large variations

2.2 Maintenance1. Uncertainty of GOI budgeting made maintenance planning unclear.2. Budgets are not generally available until the 2nd Quarter of the year in which they are effective consequently delaying tenders and late payments to contractors.3. To solve the above it was suggested that Routine budget under UPR could be used as it is not subject to time constraints.4. On the Ring Roads and Bypasses constructed there is a need to carryout preventative maintenance, cleaning ditches and repair of potholes that may have occurred due to flooding.

2.3 QLI5. QLI projects as well as covering the bypassed national roads and its immediate surroundings should address the access roads to the bypass.

2.4 Operation of the Road Network6. There is a need to ensure a smooth flow of traffic on the bypasses and Ring Roads to reduce the potential for accidents, traffic jams. This will require the support of DLLAJ in maintaining traffic light operation, repairing street lighting as and when necessary and generally manage the traffic flow7. Illegal traders should be controlled by law enforcement after informing and developing alternative locations to ply their business. – Possibly development of rest areas off the road alignment. It was also suggested that there should be road signs along the bypasses and ring roads stating informing 8. With the large the growth in traffic experienced in Indonesia, it is important to focus on the design function of the road that is for strategic national and regional traffic movements.

2.5 Land9. Ideally, land acquisition process takes 2 years.10. Compensation should take both the form of money and resettlement. Project Affected People should as a result of the scheme obtain a better economic and social life.

3. Discussion Group A Project Management Session 23.1 Quality of Contractors

Generally good, but there were some lacking in performance, it was suggested that a stricter Prequalification Process is necessary.

It is considered that there should be a requirement that the monies paid to the contractor should be managed by the Contractor’s senior representative on site to allow him to manage the cash flow rather than his head office. This should be a requirement of Prequalification.

3.2 Quality of Design Consultants

Better survey work both geotechnical and topographical is needed if major changes are to be minimised during construction. The later designs went a long way to improve the situation particularly the topographical survey. Soil surveys should be carried out to Indonesian Soils Investigation Standards.

If designs are to be improved, a stricter selection process will be needed.

- 36 -

Designs should be fully detailed ready for construction to reduce changes and variations on site. Designers must be given sufficient time to carry out the surveys, designs and design checks. Based on a Preliminary Design Layout on an average bypass of medium complexity the consultant should be allowed the time to carry out the survey plus 4-5 months to carry out the Final Engineering Design, checking and Bid preparation. This also requires the client, and utility companies to respond quickly and efficiently.

3.3 Quality of Feasibility Studies under SURIP 1B

Generally enough although there were reservations about the Team Leader’s approach and conclusions.

It was suggested that feasibility studies should prepared under APBN rather than financed by loans particularly for schemes to be implemented in the first year of a loan.

3.4 Quality of Consultant for UTS SURIP iB

Good

3.5 Quality of URMS Consultant

Good enough, but the potential users, towns and cities, and central government need to be informed of its capabilities and trained in its use. For development and testing is still required.

3.6 Quality of SESIM Consultant

Good. Potential users, towns and cities, and central government need to be informed of it’s content and trained in its use. The Training of trainers was carried out by the consultant, it is now important that training is undertaken by these trainers and sufficient budget is available for them.

3.7 Quality of Standards and Guidelines Consultant

Good enough. This project only starts the writing of the Indonesian Road Design Manual (IRDM) outlining the contents of the manual and development of only two aspects, Feasibility Studies and Detail Engineering Design. Further substantial work is needed for the continued development of the manual and the Feasibility and Detail design portions require implementation, feedback and amendment.

3.8 General Comments of provision of Ring roads and Bypasses

Frontage roads should be provided for safety and separation of local and longer distance traffic – the combination of slow and fast vehicles on the same road is potentially dangerous. Both the population and local industry want this separation.

The Bypasses and Ring Roads have been of enormous benefit to the long distance traveller on the North Java Corridor.

No contracts should be awarded until land acquisition is complete. Local Government have limited funds undertake this work.

4. Discussion Group B Economic and Financial Session 14.1 Budgetting

There were no problems in the counterpart funds from APBN

- 37 -

Time and system were not accurate

Disbursement could not be multi-processed

Comment from CPMO: Remaining disbursement work can be accomplished within 3 months.

4.2 Land Acquisition

Land prices between 1995 to 2003 have risen by up to 15 times.

Comment from Cirebon:

APBN funding allocation was a problem in land acquisition and was only released after representative senior management in the Kota. Suggest in future that funding for land acquisition come from the province or is shared between Central Government, provincial and Kabupaten/Kota.

Land acquisition is carried out by local government, it is essential that there is certainty of complete land acquisition at time of Works Contract Award.

During construction flooding was increased as a result of unfinished drainage work.

4.3 Economic Benefit

Comment from Cirebon:

A failing of the EIRR calculations used for the bypasses is that no account is taken of the benefit resulting from new development in the town due to the removal of bypass and improved road network.

Improving drainage channels through the construction of the bypass has led to problems downstream where drainage facilities are less adequate.

Comment from Kendal

EIRR for road schemes do not take into account the economic benefit of improved road network particularly to region less develop regions of the country.

4.4 QLI

Comment from Cirebon:

The extent of QLI projects should be continued.

5. Discussion Group B Economic and Financial Session 11

5.1 Benefits of the Project

Comment from Cirebon:

QLI work has help areas of the city but the benefit is less obvious as it was carried out in the wealthier part of the city.

- 38 -

QLI from a local government point of view was very useful as APBD funds are very limited.

Comment from Kudus:

QLI has benefited both the quality of road surface and improved the environment of the town.

QLI from a local government point of view was very useful as APBD funds are very limited.

Comment from Kabupaten Pekalongan:

In carrying out QLI work it was possible to improve roads in the city. The funds from PEMDA are very limited.

Comment from Kabupaten Kendal (Kaliwungu and Weleri:

The Physical benefits of the project are extremely impressive with the city being relieved of national and regional traffic. Because of the new condition of the town there are many new investors.

From the technical side it is a pity there was a need for many design revisions. (Kaliwungu Bypass in particular experienced a number of construction difficulties).

The improvement in the North Java Corridor has not been matched by an increase in peoples incomes resulting in the appearance of illegal traders that are difficult to handle and influence the function of the road network.

Comments from Local consultants

Kudus: Reduction in noise and accidents on the old national road through town

5.2 Responsibility of the national road now bypassed

Responsibility for the ex-national road is not yet clear.

The capability of local government (PEMDA) to handle the maintenace of the ex-national road is very limited. To reduce maintenance costs, it was suggested that heavy vehicles should not be allowed on the these ex-national roads.

The local authorities expressed their concern that despite UU No13 that TELKOM and PLN continue to dig up roads in the city and this will be the case on the ex-national road.

6. Discussion Group C Institutional and Legal Issues Session 16.1 Planning

There is a need for a transportation Master Plan for the country, Region and Province These should be used to plan road development at the various levels.

Uncertainty of Central Government budgeting and the time to resolve makes planning difficult. Budgets are not usually confirmed until the 2nd quarter of the year in which they are to be implemented. This has the affect of delaying tendering and eventual start of works and delays to

- 39 -

payment of contractors.

GOI counterpart preparation funds (Bappeda, DPRD and APBD) are not clear.

There is a need to clarify the road function, road status and width

Socio-economic and environmental issues need to be addressed more strongly,

There is a need to involve stakeholders in the planning process. i.e. Central, Provincial and Kabupaten’Kotamadya)

There should be better co-ordination on all institutions invlved with handling road transport (Bappeda, Dinas Tata Kota, DLLAJ, police and stakeholders)

There is insufficient co-ordination between city planning and national road network planning

Land acquisition is not seen as an administrative process, but as a road development process

Earlier schemes in the project did not take into account prevailing flood levels sufficiently and consequential pavement damage has occurred.

The types of QLI treatment, some indicate, are not compatible with conditions and needs of the region.

6.2 Implementation

Due mainly to the fast track approach to design there were many amendments to the earlier contracts.

Land problems thought to have been resolved prior to contract award were not causing delays and frustration to works progress.

The responsibility for programme of implementation is not as clear as it should be.

There is a need to scale and plan the development adjacent to bypasses to limit access.

6.3 After implementation

Control and consistency of planning issues need improvement

Traffic light consistency needs to improved for cost effective maintenance

There needs to be stronger control of the right of way

7. Discussion Group C Institutional and Legal Issues Session 117.1 Summary

SURIP bypasses and QLI have proved a major benefit to the national route network. However, there is a need to complete the supporting infrastructure, i.e. alternative routes for local traffic and strong traffic regulations on the bypasses.

There is a need to consider the economic growth as an impact of road development by

- 40 -

anticipating the illegal street markets.

PEMDA need to prepare themselves to receive projects and to carry out O & M

The QLI specification is too high, it should be adapted for each location.

Central Government should inform the stakeholders of the conditions and requirements of a new loan

The World Bank must understand local problems

Any condition of the loan that forces action on local government should be negotiated in detail with local government.

- 41 -

Additional Annex 9. Resettlement Experiences under SURIP

IntroductionAll schemes in Component A Road Construction involved land acquisition and/or resettlement. The Bank, and the central and provincial governments, regularly supervised implementation of land acquisition and resettlement. Central and provincial governments had good and intense levels of communication with the local governments. As the project involved national roads, all levels of government gave a strong commitment to implementation of the project, including land acquisition. Central and provincial governments helped local governments with limited financial capacity, such as Demak, by providing them budget for land acquisition and resettlement.

There was some concern that the cash compensation provided by local government for land acquisition did not reflect the market price, even though market prices were difficult to assess. However, local governments showed their commitment to ensuring project affected persons (PAP) were adequately compensated by giving affected people the option of moving to a serviced-settlement, and being given land certificates for the plot they occupied. The local governments were able to finish land acquisition on time, including relocating schools and installing sound barriers for the schools.

A detailed explanation of resettlement in Cirebon, Weleri, Kaliwungu, Semarang, Demak, and Kudus is given below, together with a table of land acquisition data for the project cities/kabupatens. Overall, the resettlement processes and results are considered satisfactory.

Cirebon

Cirebon bypass affected people operating kiosks in both the kabupaten of Cirebon and the city of Cirebon. Land acquisition was undertaken by providing compensation in cash and a relocation site for the kiosks. No houses were acquired or relocated. The local governments paid all the required cash compensation to the affected people and satisfactorily relocated the kiosks.

Kabupaten Kendal

The local government of Kabupaten Kendal has ring roads in Weleri and Kaliwungu. Both of them are new roads with a total of 191 households affected by the project.

In Weleri land acquisition was completed with compensation paid in cash and the relocation of houses and one elementary school to a new location. They were relocated in the same village, less than 1 km from the original location. The project financed the relocation site and services including a local road, an access road, public utilities, drainage, electricity and a deep well. Beside the relocation site the project also financed a sound barrier at the Puskesmas rawat inap type B. This barrier is to minimize the noise from the road. Moreover, the public facilities run well and the displaced people are happy with the new site and some of them used their land certificates as collateral to get loans from the bank. For these reasons, the resettlement in Weleri is considered satisfactory.

In Kaliwungu, land acquisition was completed with compensation paid in cash and the relocation of 50 households. The 50 households moved to new houses built by themselves and received land certificates. There have been no land sales transactions at this new site. The resettlement scheme for Kaliwungu ring road has been successful in maintaining the living standard of the displaced families, and therefore it is considered satisfactory.

- 42 -

Semarang

The northern ring road in Semarang affected 28 commercial kiosks. Semarang city government moved them to the new location and also provided a public water tap and sanitation. The new location is around 500 meters from the original location. This land belongs to the city of Semarang not the traders. This re-arrangement of the kiosks had a positive impact on the income of the traders and on the local government tax revenue.

Demak

The local government in Demak agreed to build the ring road in 1999. In total 771 households (HH) or equivalent were identified as being affected by the project. Most of the effect was on plots of rain fed rice field without access to irrigation. Different compensation options were used for land acquisition and resettlement. These were land consolidation, cash payment, provision of a replacement plot of land, and resettlement. 751 plots of rice field were acquired. In addition eighteen actual households and two schools were moved to a new location. For this relocation, the local government provided compensation in cash and new location for the eighteen households and the two schools. The relocation site was in Botorejo, about 5 km from the original location. The project financed a site and services, including a local road, an access road, electricity and water supply. Housing was built by the people from the compensation received. Only two out of the eighteen households occupy the serviced land provided them. The remainder moved to other villages and some of them stayed close to their original location, desa Jogoloyo. However all eighteen households still own the serviced land provided them. There have been no land sales transactions on these plots of land. All compensation for land acquisition has been paid and resettlement certification was completed well. Execution of relocation of two schools has been completed at an appropriate location. Due to this performance, resettlement in Demak is considered satisfactory.

Kudus

As is Demak, land acquisition of Kudus ring road in 1999 was executed with options of compensation in cash, land consolidation and relocation of the Puskesmas (community health clinic and the medical storehouse of the kabupaten. 152 households were affected by the project. The project financed new buildings for a Puskemas and the medical storehouse of the kabupaten. All land consolidation processes have been completed, compensation paid and land certificates have been received by the PAP. Resettlement in Kudus is therefore considered satisfactory.

Land acquisition and resettlement by project cityNo City/Sub-project Year executed # of

PAPsCompensation Method

1. CirebonBypass section 1 and port access road, -kabupaten section

1997-1999 173 Cash compensation and relocation,

Bypass- kota section 1999 136 Cash compensation and relocationKendal

2. Ring road Weleri 1998 141 HH Cash compensation and relocation3. Ring road Kaliwungu 1998 50 HH Cash compensation and relocation4. Semarang

Northern ring road 1998 28 Cash compensation and relocation

- 43 -

5. DemakRing road 1997 771 HH Land consolidation, cash compensation,

replacement plot of land, and resettlement6. Kudus

Ring road 1997 152 HH Land consolidation, cash compensation, and relocation

- 44 -

J A W A B A R A T

D.K.I. JAKARTA

JAWA TENGAH

B A L ID.I.YOGYAKARTA

J A W A

T I M U R

J AWA T E N G A H

J AWA

B A R AT

See inset below for detail

SUMATERA

M A D U R A

Sumar Cibaliung

SP. Labuhan

Labuhan

Saketi

BinaungenSimpang

Boyah

Gn. Madur

Merak Cilegon

Serang

Pandeglang

Rangkasbitung

Cikande

Ujunggenteng

Jampangkulon Sagaranten

BagbaganJampanglengah

Cisoloic

SP. KR. Hawu CibadakSukabumi

Cikembar

Cikembang

CiawiBogor

Parung CileungsiGandan

Batujaya

JatiasihBekasi

PomdokbedeSerpoong

Tangerang

Sindangbarang

Pameungpeuk

Pancabali PangalenganGarutMalabar

Cimaung

BandungSelojambe Nagrek

SumedangCileumyi

MajalengkaCijelag

CikamurangSubangSP.

Purwakarta

Latiluhur

Cikampek

Sadong

Pamanukan

Lohbemer

Indramayu

KarangampelJatibarang

Cipatujah

Tasikmalaya

Ciamis

Kelapagenep

Pangandaran

Kuningan

Cirebon

Cilacap

Gumilir Slarang

Wangon

AjibanangPurworkerto

Purbolinggo

TuwelPrupuk Ramdudongkal

SlawiKetonppungan

PajaganTegalLosari

Pemalang

Batang

PagilaranSemarang

Demak

BawenSalatiga

Surakarta

KebumenPurworejo

Kaliwiro

WonosoboTemanggung

PringsuratSecangMagelang

Bamdungan

Maron TempelSlemen

Yogyakarta

ParangiritisBantul

Kaliurang

Boyolali

Klaten

Baron Tepus

Bedoyo

PryungseminanWonogiriSukoharjo

Mokam ImogirlWonosari Giriwoyo

Pacitan

Arjosari

Nawangan

PurwantorPonorogoDengok

Magetan

KaranganyarPalur

Jepara

Margoyoco

Colo

Kudus

JatiBlora

Rembang

Grobogan

Purwodadi Wirosari CepuPadangan Bojonegoro

Bulu

Jatirogo

Ponco

Ngawi

CarubanMadiun

Kediri

Nganjuk

Trenggalek

Jarakan Tulungagung

SrengatBlitarKemlang

Sendangbiru

Kepamjen Turen

MalangPerdem

Pare

PL. RejoKandengan

Kerto SanoJombang

Mojokerto

TubanPakahTemengkar

Babat WidangLamongan

Gresik Surabaya

Sidoharjo

Pasuruan

TosariNongkajajar

PW. Dadi PW. Sari

TretesLbg. Kuning

Probolinggo

GroboganWono RejoLumajang

Puger Ambulu

JemberMayong

BondowosoSunmsersari

MlandimganPanarukan Situbondo

Banyuwangi

Grajagan

PasanggaranBangunrejoGentengkulom

TGC. DlingMuncar

SronoRogojampi Negara

Gilimanuk

Cekik

PulukanAntosari

TabananDenpassar

Sanur

Nusadua

KlungkungAmlapura

Gianyar

BesakihPayangan

Seririt

Singaraja Kubutambehan

Pupuan

Bangkalan

Kamai

Ketapang

TorjunOmben

Sampang

Sotobar

Sumenep Kalianget

Ngadirejo

JAKARTA

CiledugKreu

Weleri

Gempol

Palimanan

Banjar

Brebes Pekalongan

Lohbemer

Indramayu

Karangampel

Ciamis

Kuningan

Cirebon

Wangon

Ajibanang

Purworkerto

Purbolinggo

Tuwel

PrupukRamdudongkal

SlawiKetonppungan

PajaganTegalLosari Pemalang Batang

PagilaranSemarang

Demak

Bawen

Salatiga

Kaliwiro

Wonosobo TemanggungPringsuratSecang

Magelang

Bamdungan

Boyolali Palur

Jepara

Margoyoco

Colo

Kudus

Jati

Grobogan

Purwodadi Wirosari

Weleri Kaliwungu

Palimanan

Banjar

Brebes

KendalKaliwungu

Pati

Wanayasa

Pati

Wanayasa

PekalonganKendal

Sumber

0 40 6020

0 20 40 60 80 KILOMETERS

MILES

IBRD 27993

I N D O N E S I A

STRATEGIC URBAN ROADS INFRASTRUCTURE PROJECTNORTH JAWA CORRIDOR

J UNE 1 9 9 6

J a v a S e aTOLL ROADS, EXISTING

TOLL ROADS, PLANNED

NATIONAL HIGHWAYS

PROVINCE ROADS

The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World Bank Group,any judgment on the legal status of any territory, or any endorsementor acceptance of such boundaries.

CITIES AND TOWNS

PROVINCE (PROPINSI) CAPITALS

RIVERS

PROVINCE (PROPINSI) BOUNDARIES

INTERNATIONAL BOUNDARIES (INSET)

PROJECT TOWNS (SEE INSET)

ROAD SECTIONS BEING IMPROVED BY

NORTH JAVA CORRIDOR ROUTEADB AND OECF

I N D I A N O C E A N

110°13'

110°13'

7°28' 7°28'

J a v a S e a

PHILIPPINESTHAILAND

MALAYSIA

BRUNEI

PAPU

AN

EW G

UIN

EA

A U S T R A L I A

SU

MA

T ER

A

K A L I M A N TA N

J A W A

SULAWESISERAM

IRIAN JAYA

BALI

FLORES

TIMOR

South ChinaSea P A C I F I C O C E A N

I N D I A N O C E A N

Java Sea

SINGAPORE

I N D O N E S I A

Area of main map

MALAYSIA

7°

111°110°109°

7°

109°

0 40 60 MILES20

0 20 40 60 80 KILOMETERS

See insetJakarta

INSET

Kudus