World Bank Documentdocuments.worldbank.org/curated/en/777501468040132201/...BPJT : Badan Pengatur...

Document of The World Bank

Report No: ICR0000952

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-46960)

ON A

LOAN

IN THE AMOUNT OF USD 17.1 MILLION

TO THE

REPUBLIC OF INDONESIA

FOR A

PRIVATE PROVISION OF INFRASTRUCTURE TECHNICAL ASSISTANCE LOAN

May 28, 2009

Sustainable Development Department Indonesia East Asia and Pacific Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective May 28, 2009)

Currency Unit = Indonesian Rupiah IDR 10,000.00 = US$ 0.969

US$ 1.00 = IDR 10,320

FISCAL YEAR January 1 –December 31

ABBREVIATIONS AND ACRONYMS

ADB : Asian Development Bank AusAID : Australian Agency for International Development BAPPENAS : Badan Perencanaan Pembangunan Nasional (National Development

Planning Agency) BPJT : Badan Pengatur Jalan Tol (Indonesia Toll Road Authority) BPKP : Badan Pengawasan Keuangan dan Pembangunan (Financial and

Development Supervisory Board) BPPSPAM : Badan. Pendukung Pengembangan Sistem Penyediaan (Water Supply

Development Supporting Agency) CAS : Country Assistance Strategy CBT : Capacity Building and Training CIIF : Consolidated Indonesia Infrastructure Forum CMEA : Coordinating Ministry for Economic Affairs CPS : Country Partnership Strategy DG : Directorate General EO : Event Organizer FY : Fiscal Year GoI : Government of Indonesia IBRD : International Bank for Reconstruction and Development ICR : Implementation Completion and Results report IICE : Indonesian Infrastructure Conference and Exhibition IIS : Indonesia Infrastructure Summit ILI : Intensive Learning Implementation Completion and Results report IndII : Indonesia Infrastructure Initiative IRSDP : Infrastructure Reform Sector Development Program ISR : Implementation Status and Results report IT : Information Technology JBIC : Japanese Bank for International Cooperation Keppres : Keputusan Presiden (Presidential Decree) KKPPI : Komite Kebijakan Percepatan Pembangunan Infrastruktur (Committee

on Policy for the Acceleration of Infrastructure Provision) LA : Loan Agreement M&E : Monitoring and Evaluation

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MIS : Management Information System MoF : Ministry of Finance MoEMR : Ministry of Energy and Mineral Resources MoPW : Ministry of Public Works MoT : Ministry of Transportation MS : Moderately Satisfactory MTR : Mid-Term Review MU : Moderately Unsatisfactory NGO : Non-Governmental Organization OGM : Operational Guidelines Manual OPCS : Operations Policy and Country Services PAD : Program Appraisal Document PDF : Project Development Facility PDO : Project Development Objectives Perpres : Peraturan Presiden (Presidential Regulation) Perpres 67 : Presidential Regulation 67/2005 concerning the Cooperation of

Government and Business Entities in the Provision of Infrastructure PhD : Doctor of Philosophy PIU : Project Implementation Unit PMK : Peraturan Menteri Keuangan (MoF Regulation) PMU : Project Management Unit PP : Peraturan Pemerintah (Government Regulation) PPF : Project Preparation Facility PPI : Private Provision of Infrastructure PPIAF : Private Provision of Infrastructure Advisory Facility PPITA : Private Provision of Infrastructure Technical Assistance PPP : Public Private Partnership / P3 P3CU : Public Private Partnership Central Unit PSP : Private Sector Participation PUSTRA : Pusat Kajian Stratejik (Centre for Strategic Studies) RMU : Risk Management Unit Rp. : Rupiah (IDR – Indonesia Rupiah) TA : Technical Assistance TAP4I : Technical Assistance Project for the Public and Private Provision of

Infrastructure TAS : Technical Advisory Services ToR : Terms of Reference UU : Undang-Undang (Law)

Vice President: James W. Adams

Country Director: Joachim von Amsberg

Sector Manager: Sonia Hammam

Project Team Leader: Hongjoo J. Hahm

ICR Team Leader: Hongjoo J. Hahm

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INDONESIA Private Provision of Infrastructure Technical Assistance Loan

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design ...............................................72. Key Factors Affecting Implementation and Outcomes.............................................113. Assessment of Outcomes ..........................................................................................194. Assessment of Risk to Development Outcome.........................................................275. Assessment of Bank and Borrower Performance......................................................276. Lessons Learned........................................................................................................307. Comments on Issues Raised by Borrower/Implementing Agencies/Partners...........30Annex 1. Project Costs and Financing ..........................................................................32Annex 2. Outputs by Component..................................................................................33Annex 3. Economic and Financial Analysis .................................................................42Annex 4. Bank Lending and Implementation Support/Supervision Processes.............42Annex 5. Beneficiary Survey Results ...........................................................................43Annex 5. Beneficiary Survey Results ...........................................................................43Annex 6. Stakeholder Workshop Report and Results...................................................43Annex 7. Summary of Borrower’s ICR and/or Comments on Draft ICR .....................44Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders .......................46Annex 9. List of Supporting Documents.......................................................................46MAP

A. Basic Information

Country: Indonesia Project Name: Private Provision of Infrastructure Technical Assistance Loan

Project ID: P076271 L/C/TF Number(s): IBRD-46960

ICR Date: 06/13/2009 ICR Type: Core ICR

Lending Instrument: TAL Borrower: REPUBLIC OF INDONESIA

Original Total Commitment:

USD 17.1M Disbursed Amount: USD 13.0M

Environmental Category: C

Implementing Agencies: Office of Coordinating Ministry for Economic Affairs/ KKPPI Secretary 1 /PPITA-PMU National Planning Agency/ Secretary 2 of KKPPI PMU-PPITA

Cofinanciers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 04/25/2002 Effectiveness: 10/31/2003

Appraisal: 03/19/2003 Restructuring(s):

Approval: 05/22/2003 Mid-term Review: 10/24/2005

Closing: 12/31/2006 12/31/2008 C. Ratings Summary C.1 Performance Rating by ICR

Outcomes: Moderately Satisfactory

Risk to Development Outcome: Moderate

Bank Performance: Moderately Satisfactory

Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Moderately Satisfactory Government: Satisfactory

Quality of Supervision: Moderately SatisfactoryImplementing Agency/Agencies:

Moderately Unsatisfactory

Overall Bank Performance:

Moderately SatisfactoryOverall Borrower Performance:

Moderately Satisfactory

C.3 Quality at Entry and Implementation Performance IndicatorsImplementation

Performance Indicators

QAG Assessments (if any)

Rating

Potential Problem Project at any time (Yes/No):

Yes Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

Yes Quality of Supervision (QSA):

Satisfactory

DO rating before Closing/Inactive status:

Moderately Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

General energy sector 5 10

General public administration sector 50 50

General transportation sector 15 15

General water, sanitation and flood protection sector 15 15

Telecommunications 15 10

Theme Code (as % of total Bank financing)

Decentralization 14 14

Infrastructure services for private sector development 29 29

Legal institutions for a market economy 14 14

Participation and civic engagement 14 14

Regulation and competition policy 29 29 E. Bank Staff

Positions At ICR At Approval

Vice President: James W. Adams Jemal-ud-din Kassum

Country Director: Joachim von Amsberg Andrew D. Steer

Sector Manager: Sonia Hammam Keshav Varma

Project Team Leader: Hongjoo J. Hahm Stephen R. Dice

ICR Team Leader: Hongjoo J. Hahm

ICR Primary Author: John Holdaway F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) The project's development objective is to assist GOI to develop and implement the policy and regulatory reforms and build the institutional and social foundations needed to

enable, promote and facilitate efficient and sustainable large-scale private investment in infrastructure. Revised Project Development Objectives (as approved by original approving authority) Not Applicable (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Sound cross-sectoral and sectoral policies for promoting and realizing PPI are based on sound analysis, embodied in laws and regulations, and operationalized.

Value quantitative or Qualitative)

No policies are implemented

Sufficient cross-sector policies implemented

No change

Sufficient policies established, preliminary implementation is promising

Date achieved 06/22/2005 12/31/2008 12/31/2008 12/31/2008 Comments (incl. % achievement)

PPITA assisted in the drafting of many laws and regulations to govern PPI, the most significant of which was Perpres 67/2005 concerning PPI, that provides a legal basis for the provision of public support to private infrastructure. (75%)

Indicator 2 : Independent, non-ministerial regulatory bodies with sound operating procedures and competent personnel are established for key sectors


No regulators are established

Regulators established in water (BPSPAM) and toll roads (BPJT)

No change Some sectoral regulators established

Date achieved 06/22/2005 12/31/2008 12/31/2008 12/31/2008

Comments (incl. % achievement)

BPPSPAM was established, but is not fulfilling its envisioned role as a regulator. BPJT was established as both the regulator and PPP contracting agency for toll roads. In MoT there are no current plans to establish independent regulatory bodies. (30%)

Indicator 3 : Local governments understand the role of PPI, factors conducive to a favorable investment climate and their roles and responsibilities in enabling PPI


no local government driven PSP activity

Local government actively involved in securing PSP in infrastructure

No change

Local government is securing PPI but still requires capacity building. 1 project delivered.

Date achieved 06/22/2005 12/31/2008 12/31/2008 12/31/2008


Workshops were conducted to socialize Perpres 67 and the Operational Guidelines Manual on PPP implementation. P3 nodes in Tangerang, Sumedang, Klungkung and Bandung were estalished. The Tangerang water supply concession was signed in August 2008. (90%)

Indicator 4 : Public awareness and understanding of the needs for and benefits of well managed PPI increase

Value quantitative or

Public unaware of key PSP activities and

Public is well aware of the

No change PSP activities are well understood by

Qualitative) processes. benefits and challenges of PSP activities.

general public.


The 2005 and 2006 Indonesia Infrastructure Summit are high profile events held to increase public awareness. The KKPPI website, infrastructure magazine, activities under CIIF also played a key role in increasing awareness. (100%)

Indicator 5 : Opportunities for public participation are ensured in formulating and formalizing laws, policies, regulations and procedures concerning PPI at all government levels


no stakeholder consultation for PSP activity

Stakeholder inputs are reflected in final policies

No change

Stakeholders consulted, level of input difficult to measure


Ministries conducted public consultations on any draft law before submission to Parliament; while Parliament conducts its own public consultation and deliberation process as required by Indonesian law. (90%)

Indicator 6 : Private sector investors are informed of the efforts by government to promote PPI and participate in the formulation and enactment of a favorable investment climate


Private investors are unaware of GoI efforts.

investors have adequate information about GoI policies as well as transactions with regards to PSP.

No change

Information on Indonesian PSP policies widely disseminated


The KKPPI website is an important channel for communications on a daily basis and hosts copies of relevant laws and regulations and current developments in both Indonesian and English. (100%)

Indicator 7 : Soundly conceived PPI schemes have been developed and tendered through transparent competitive processes


no transactions are tendered.

A number of "next generation" transactions are tendered. Financial closure is achieved.

No change

2 #next generation# projects tendered, but not fully compliant with Perpres 67. One major project in the pipeline.


Of the 10 model projects announced at the IICE 2006, only Tangerang Water Supply reached financial close in August 2008; however it was not compliant with Perpres 67/2005. (30%)

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Mobilization of advisory team

Value (quantitative or Qualitative)

Not appointed

All three core consultants have been appointed and mobilized.

All three core consultants# work complete

Date achieved 10/31/2003 10/24/2005 01/01/2005 Comments (incl. % achievement)

The MoPW advisory team was mobilized in May 2004, MoT team in Oct 2004 and CMEA team in January 2005. (100%)

Indicator 2 : Sectoral strategy for key infrastructure sectors


not started Done by MTR

Sector strategies for all key sectors complete, but MoT sub-sectors require further clarification.

Date achieved 10/31/2003 10/24/2005 10/24/2005


The sector strategy (Renstra) was produced by MoPW for Water and Toll Road sectors, and by MoT for the Sea Transport, Air Transport, Railways and Land Transport sub-sectors in 2005. The MoT sub sectors require implementation regulations. (70%)

Indicator 3 : Finalization of a revised Keppres 7/98 Value (quantitative or Qualitative)

Keppres 7/98 revision not issued.

Finalized by MTR Perpres 67/2005 established


Keppres 7/1998 was revised and superseded by Perpres 67/2005. % Achievement = 100%

Indicator 4 : Draft of sectoral implementing guidelines for revised Keppres 7 in water, toll roads, telecom and ports


not started Draft complete by MTR

Drafts complete and updated regularly

Date achieved 10/31/2003 10/24/2005 10/24/2005


The Operational Guidelines Manuals (OGM) in English for all target sectors were drafted by late 2005 and finished in 2006. No sub-sector OGMs have been produced so far, although in the MoT an OGM for the transport sector was produced. (100%)

Indicator 5 : Technical drafts for revised sector laws and regulations in roads, maritime and railway sectors


not started Drafts by MTR

Drafts complete and passed by parliament with some still awaiting implementation

Date achieved 10/31/2003 10/24/2005 06/17/2005


In addition to the sectors (roads, maritime and railways) the draft law for the Air Transport and Land Transport sub-sectors and Electricity were also produced. Since then, Railways and Sea Transport Law have been passed by Parliament. (100%)

Indicator 6 : Training needs assessment and selection and target criteria Value (quantitative or Qualitative)

not started

Assessment complete by MTR

Completed and implemented under the loan


An initial assessment was made before the PPITA loan, and subsequently updated and implemented under PPITA. (100%)

Indicator 7 : Curriculum development for training program and education strategy Value (quantitative or Qualitative)

not started Done by MTR Completed and implemented under the loan


The proposed training program was subsequently fine-tuned by a consultant before implementation under the PMU. (100%)

Indicator 8 : Design of P3 network and open central files and library Value (quantitative or Qualitative)

not started Done by MTR Completed and implemented under the loan


Design for the P3 network and the open central files and library were completed and formed the basis of GoI targeted reforms under the loan. (100%)

Indicator 9 : Establishment of P3 network at central level



P3 network is not present in the form originally envisaged, but has begun to operate.


RMU in MOF, P3 node in MOT. Establishment of P3 Central Unit (P3CU) was delayed and not achieved until after loan close. Due to this delay, the RMU had to respond by effectively acting as a P3CU. (70%)

Indicator 10 : Establishment of CIIF



CIIF established as planned, but only remained active for 1 year and now is in the form of the infrastructure forum under CMEA

Date achieved 10/31/2003 10/24/2005 05/15/2009 Comments (incl. %

Although established, CIIF is now defunct. That said, some of the activities under it are being carried out by KKPPI. The World Bank P3 framework TA

achievement) evaluated the role of the CIIF going forward. (30%)

G. Ratings of Project Performance in ISRs

No. Date ISR Archived

DO IP Actual

Disbursements (USD millions)

1 06/04/2003 Satisfactory Satisfactory 0.00 2 12/12/2003 Satisfactory Satisfactory 1.06 3 05/05/2004 Satisfactory Satisfactory 1.42 4 08/04/2004 Satisfactory Satisfactory 2.46 5 06/22/2005 Satisfactory Satisfactory 3.96 6 05/19/2006 Satisfactory Satisfactory 9.41 7 02/05/2007 Satisfactory Moderately Satisfactory 12.09

8 02/07/2008 Moderately Satisfactory Moderately

Unsatisfactory 12.58

9 10/21/2008 Moderately Satisfactory Moderately Satisfactory 12.58 H. Restructuring (if any) Not Applicable

I. Disbursement Profile

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1. Project Context, Development Objectives and Design (this section is descriptive, taken from other documents, e.g., PAD/ISR, not evaluative)

1.1 Context at Appraisal (brief summary of country and sector background, rationale for Bank assistance)

1. The Indonesia Country Assistance Strategy (CAS) for FY2001-2003 identified three broad avenues to reduce poverty and vulnerability in a more open and decentralized environment. These were (a) sustaining economic recovery and promoting broad-based growth; (b) building national institutions for accountable government; and (c) delivering better public services for the poor. PPITA was envisioned to support all three of these avenues, but with a particular focus on item (a), recognizing that infrastructure could become a significant bottleneck to economic growth in Indonesia. 2. The PPITA project was designed to complement, reinforce and integrate ongoing and planned initiatives within a sound overall PSP strategy to accelerate private investments in infrastructure. The main aim is to develop a more competitive, transparent policy and legal framework for key sectors. For this to happen, policy and institutional reforms are necessary. 3. The World Bank has extensive institutional knowledge and experience in private sector participation (PSP) in infrastructure internationally coupled with local experience in delivering Technical Assistance Project for the Public and Private Provision of Infrastructure (TAP4I-I) and the Second Technical Assistance Project for the Public and Private Provision of Infrastructure (TAP4I-II). 4. The Bank has also been actively involved in helping to shape the policy and regulatory reform agenda in all key infrastructure sectors, including transport (roads, railways, ports), energy (power, domestic gas), urban (water supply, public transport, solid waste), telecommunications and water resources. This combination of global and local and cross-cutting and sector-specific expertise placed the World Bank in a strong position to design and deliver the PPITA project in conjunction with the Government of Indonesia (GoI). 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)

5. The project’s development objective was “to assist GoI to develop and implement the policy and regulatory reforms, and build the institutional and social foundations needed to enable, promote and facilitate efficient and sustainable large-scale private investment in infrastructure.” 6. The key indicators in the loan agreement (LA) did not correspond exactly to those in Annex 1 of the PAD. From the beginning of implementation, the task team used the indicators from the PAD to track project performance in the ISRs, which in turn are automatically generated in the ICR. After considerable deliberation, the current ICR team determined that the best approach was to keep using the ISR (PAD) indicators in the data sheet while describing the differences between the competing sets of indicators. The

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detailed explanations in the data sheet and main ICR text of values achieved are not expressly compared against the LA indicators, but do provide the information relevant to them.

7. The LA stipulated 21 indicators, of which 12 were to be achieved by the mid-term review and 9 by loan closing (tables 1 and 2).

Table 1: Mid-term indicators in loan agreement

1. Mobilization of advisory teams

2. Sectoral strategy for key infrastructure sectors

3. Country framework assessment for P3 potential

4. Draft guidelines for P3 by local governments

5. Finalization of a revised Keppres 7/98

6. Draft of sectoral implementing guidelines for revised Kepres 7 in water, toll roads,

7. Technical drafts for revised sector laws and regulations in roads, maritime and railway sectors

8. Training needs assessment and selection and target criteria

9. Curriculum development for training program education strategy

10. Design of P3 network and open central files and library

11. Establishment of P3 network at central level

12. Establishment of CIIF

Table 2: End-term indicators in loan agreement 13. Updated sector and country framework assessments

14. Establishment of at least five P3 nodes outside Jakarta;

15. Network of P3 training providers established and provision of training on-going

16.About 7 private infrastructure project opportunities have been prepared and tendered

17. Regulations for at least four sectoral regulatory bodies have been prepared

18. Amendments to at least three sector laws have been prepared

19. Impact evaluation of effectiveness of advisory consultants has been carried out

20.Assessment of effectiveness of public communication development has been conducted

21. Actions required for continuation of P3 initiatives have been designed

8. Furthermore, the following two performance indicators from Annex 1 of the PAD are not in the data sheet or the LA:

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• Organization structures, skill-mixes, capacities and cultures of government agencies understand and are pro-active in the expansion and evolution of their current roles as providers of infrastructure and services to include the enabling of private provision.

• Information relevant to PPI is actively maintained, more accessible, and more effectively disseminated and discussed with all stakeholders.

9. While these indicators can not be added to the data sheet, for completeness, these indicators are included the discussions in Section 3.2 Achievement of Project Development Objectives.

10. In some cases the indicators in the LA conflict with those in the PAD. The most significant discrepancy is between indicator number 16 in the LA (see Table 2), which set a target of seven tendered transactions, while the Key Performance Indicators section in the PAD explicitly discouraged using a specific number or value of private infrastructure projects as a performance indicator due to the short duration of the project and because the primary focus of PPITA was to lay an effective institutional foundation and create an enabling environment for infrastructure PPP projects rather than to actually reach financial closure on such projects.1 This is further discussed in sections 2.3 Monitoring and Evaluation Design, Implementation and Utilization,3.2 Achievement of Project Development Objectives and 5.1.(a) Bank Performance in Ensuring Quality at Entry.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification

11. Neither the PDO nor the Key Indicators were revised. 1.4 Main Beneficiaries, (original and revised, briefly describe the "primary target group" identified in the PAD and as captured in the PDO, as well as any other individuals and organizations expected to benefit from the project)

12. The ultimate beneficiaries of the project are the users of public infrastructure services that would be more affordable and better operated. The people of Indonesia –including private entrepreneurs, their companies and shareholders – are also expected to benefit from economic growth and increased employment generated by new investments through the private provision of infrastructure (PPI) and a consequent reduction in poverty level. However, the benefits from the project and to Indonesia are more likely to be sustained in the longer term if PPI is implemented under a more transparent and competitive PSP framework. The beneficiaries of capacity building are central and local

1 The PAD noted in this context that: “(a) the full impacts o f most of the activities to be supported under the project will at best not be felt until towards the end of the implementation period …..” and “(b) the successful implementation of the project activities is viewed as a necessary but not a sufficient condition for restoring large-scale private infrastructure investment and substantial progress will also be needed in other key areas affecting the overall investment climate.

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government officials, and other stakeholders, including non-governmental organizations (NGO). 1.5 Original Components (as approved)

Component A: Cross-sector TA & advisory services ($6.06m) 13. This component was (a) to strengthen the secretariat to KKPPI (Committee on Policy for the Acceleration of Infrastructure Provision) and the KKPPI sub-committees; and (b) to provide technical assistance (TA) to BAPPENAS through a core advisory team (CMEA TA). Objectives of this component include (i) revision of Keppres 7/1998 and replacing it with a better cross-sector framework for PSP; (ii) an infrastructure needs assessment; (iii) a PSP country framework assessment; (iv) a strategy for PSP; and (v) establishment of a P3 network, including a P3 Central Unit. Component B: Sector TA & advisory services ($8.58m) 14. Technical assistance to the Ministry of Public Works (MoPW) and Ministry of Transportation (MoT) mainly to assist them to (i) prepare sub-sector policy, and legal and regulatory reforms; (ii) prepare sub-sector specific guidelines and procedures for PSP; (iii) enhance institutional capacity for the units involved in PSP; and (iv) identify and assist with the preparation of PPP projects for offer to the private sector. The TA was to be provided through core advisory teams in MoPW and MoT. Component C: Capacity building (including communications) & training ($1.5m) 15. Technical assistance to the Coordinating Ministry for Economic Affairs (CMEA) to develop curricula and training modules, and to provide short training courses, conferences, workshops and other developmental programs on relevant issues in infrastructure PSP. Component D: PMU ($0.39m) 16. Funding to strengthen the capacity of the Project Management Unit (PMU) in administration, procurement and financial management. 1.6 Revised Components

17. There was no formal revision of components. However, the country-wide infrastructure needs assessment under Component A was considered impractical in the project context and in consultation with GoI was not pursued. Instead a Bank staff study, Averting an Infrastructure Crisis, was helpful in informing policy makers and other stakeholders of the macroeconomic needs and the key sectoral issues. 1.7 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations)

18. Although there were no changes in the project’s core design, there were material changes in the scope and scale of the project and project schedule as detailed below.

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19. Focus on project identification:While it was not necessarily intended to be an output of PPITA, at the request of GoI, PPITA began to focus strongly on supporting potential PPP project identification following the Indonesia Infrastructure Summit (IIS) in January 2005 and the Indonesian Infrastructure Conference and Exhibition (IICE) in November 2006. Further details are provided in section 2.2 Implementation. 20. Increasing availability of grant funds:During the later years of implementation, PPITA found itself in a very different environment from the one for which it was designed. Substantial grant funds had flowed into the sector making the project’s IBRD loan funds less attractive. This is discussed further in section 2.2 Implementation. 21. Risk Management Unit: While it had not originally been identified as an implementing agency of PPITA, the Risk Management Unit (RMU) in the Ministry of Finance (MoF) began playing a key role in the PPP network. This role, and its implications for PPITA, is further discussed in section 2.2 Implementation. 22. Project schedule: The project was originally scheduled to end on 31 December 2006. The project was extended twice, the first to 31 December 2007 and subsequently to 31 December 2008. 23. Funding allocations: Of the original US$17.1 million, US$3,946,723 was cancelled, mainly due to the unattractiveness of the borrowing terms (as discussed above). 2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry (including whether lessons of earlier operations were taken into account, risks and their mitigations identified, and adequacy of participatory processes, as applicable)

24. Project focus: The PPITA project was designed around two inter-related initiatives by GoI to restore private investment in public infrastructure by (i) the establishment of KKPPI, and (ii) introduction of improved cross-sector policies, practices and procedures to facilitate PPI. The main focus of the loan was on item (ii) since KKPPI was already established before the PPITA loan. 25. The Project’s core focus was on assisting the KKPPI to make timely and well-informed decisions, on operationalizing the cross-sectoral framework through supporting sector-specific policy and regulatory reforms, on strengthening institutional capacities in areas related to PPI, and on improving the quality and availability of information on PPI-related topics. 26. Project Preparation Facility: The World Bank provided a Project Preparation Facility (PPF) to CMEA to prepare the PPITA loan. Key outputs prepared and agreed were: (i) TOR for three core TA teams (in CMEA, MoPW and MoT); (ii) TOR for high priority studies; (iii) the Project Operations Manual; (iv) a detailed procurement procedures manual in accordance with the Bank’s Guidelines for Selection and Employment of Consultants by World Bank Borrowers (May 2002), and (v) a detailed financial management manual.

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27. Risk mitigation:Two major institutional risks were identified from the outset: (i) absence of a strong political commitment to implementation of PPP projects in a transparent and competitive manner, and (ii) failure of the key participating agencies to assign competent and motivated staff to work as counterparts to the advisory consultants. The task team attempted to mitigate these risks through maintaining a constant dialog with the KKPPI Secretariat and other high-level decision makers within line ministries.

28. Lessons learned: Major lessons learned from TAP4I-1 & 2 taken into account in the design were:

• Objectives should be focused specifically on enabling PPI, not on broad infrastructure development;

• Counterpart funding must be at levels which ensure ownership and sustainability; • Effective PMUs must have access to key decision-makers, issue clear and specific

financing guidelines, and have a clear mandate to ensure project funds are properly used;

• Implementing agencies should be responsible for ensuring the quality of outputs and their transformation into outcomes; and

• TA services need to be (i) carefully positioned in the bureaucracy where their outputs can be effective, (ii) demand-driven not imposed, (iii) able to respond rapidly to financing requests, and (iv) focused on directly assisting executing agencies and any decentralized units.

29. Overly complex design:The project design was complex; and its complexity made it difficult to apply many of these lessons in the day-to-day management of the project. Also, the large number of entities involved made supervision difficult, both by the Bank and by GoI itself. 30. PPITA also piloted a range of procurement, fiduciary and supervision initiatives including a new system of financial management reporting, dual auditing by BPKP and an independent auditor, an internet public disclosure campaign, setting of the billing rates by the market and including the non-government member on the procurement committee, which was in conflict with government regulations that the procurement committee must comprise government officers. Applying all of these requirements under PPITA placed a strain on the project management and supervision resources of both government and the Bank; especially compared with the relatively small loan amount. 31. Deficiencies in project management arrangements:PPITA was managed by a PMU in CMEA, which managed PIUs in MoT and MoPW and individuals within in BAPPENAS, Ministry of Energy and Mineral Resources (MoEMR) and Tangerang and Yogyakarta regionalgovernments that worked with the PMU to manage PPITA projects. Two major problems emerged with this arrangement: (i) The PMU, under CMEA, did not have the requisite authority and capacity to ensure that all other project management

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entities were fulfilling all of their obligations under the loan;2 and (ii) the vital role of the MoF (with its RMU) was not foreseen such that the MoF was not included as an implementing agency of the project. 32. Sub-national PPPs: Sub-national governments were targets for capacity building and the implementation of projects, yet Perpres 67/2005 did not provide a mechanism for the provision of public support to sub-national projects. This limited the sorts of projects that they could undertake to those that were already financially viable without government support. 33. Unidentified risks:The complex nature of PPP reform was a major risk that was not identified during project preparation. The agencies involved in the implementation of the project (KKPPI, key sector ministries and sub-national governments) had limited expertise in PPI, but were required to take decisions on important and complex issues. The “international best-practice” PPP framework designed for Indonesia was an amalgam of models from a number of different countries: the exact PPP framework designed for Indonesia had not been tried elsewhere. This, coupled with the inherent difficulty of establishing institutions in Indonesia, was a major risk to the project. The PPP network establishment was not completed as envisioned in the PPITA project design documents, although a PPP network does exist. This, and its implications for PPP development in Indonesia in future is discussed in section 2.5 below. 2.2 Implementation (including any project changes/restructuring, mid-term review, Project at Risk status, and actions taken, as applicable)

34. Good early progress: PPITA was approved in 2003 and closed at the end of 2008 after being extended twice – a period of over 5 years. Implementation progress was very good during the first three years earning consistent Satisfactory ratings until 2006 and showing good progress against a large numbers of mid-term and key outcome indicators. Many laws were drafted, institutions established and capacity building activities carried out. The Mid-Term Review was completed in October 2005, at which time progress was again rated Satisfactory. 35. Later setbacks and their resolution: A confluence of factors then led to much less impetus in 2007 and early 2008 resulting in an implementation rating of Moderately Unsatisfactory in February 2008. Main negative influences were the ongoing PPP agenda debate within GoI, less costly grant funds becoming available for TA (discussed below), and reassignment of many PMU staff following the IICE in December 2006 which seriously reduced project management capabilities—especially on procurement and financial monitoring. In early 2007, the task team held informal discussions with counterparts toward canceling the remaining loan funds, but GoI strongly requested that the project continue.

2 In hindsight, with its strong role in determining the fate of future infrastructure projects, the placement of the PMU in BAPPENAS might have been a better option.

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36. The supervision team expressed their concerns via ISR Management Letters on January 30, 2007 and January 7, 2008; the latter of which recommended that GoI conduct a formal “full and frank assessment of the progress of all activities under PPITA at the end of January 2008”, and that “if meaningful progress still appears unlikely, the mission recommends that Government freeze any new activities and requests cancellation.” Following this latter Management Letter, the proposed meeting was held and GoI reiterated their commitment to the loan. The PMU was restaffed and then started to make commendable progress in reestablishing planned activities such that implementation was rated Moderately Satisfactory in the final ISR dated October 2008. 37. The major factors affecting implementation are discussed below in more detail. 38. Project focus changes: While the PAD explicitly discouraged PPITA’s focus on sub-project delivery as a project output target, at the request of GoI, primarily as the result of the Indonesia Infrastructure Summit (IIS) in January 2005, there was a significant refocusing of the project’s efforts towards achieving PPP investments. This reflected the drive to achieve infrastructure transactions in the PPP agenda for Indonesia as a whole. Various sectors nominated infrastructure projects, with 91 of these being announced at the summit. A further summit, the Indonesian Infrastructure Conference and Exhibition (IICE), was held in November 2006 for which PPITA assisted in the identification of ten high-priority Model Projects intended to demonstrate the new PPP framework. As a result of this project focus TA resources in MoPW and MoT were redirected to preparation of sub-projects. CMEA TA continued to focus on the revision of Keppres 7/1998 and institutional design for PPP, but also assisted in the prioritization of transactions, preparation of information memoranda and pre-feasibility studies to assist in the prioritization process. Despite all of these efforts, including those of other donors in the sector, GoI has struggled to deliver a PPP project, although progress has been made toward that objective. For a further discussion of the outcomes and outputs of these efforts, please refer to section 3.2 Achievement of Project Development Objectives. 39. Procurement delays: Procurement delays were pervasive throughout the duration of the project due to the complicated project design, which posed an even greater challenge given the lack of procurement capacity in the line ministries, with the PMU in CMEA filling the gap. This slowed down implementation and loan disbursement. The procurement plan was seriously disrupted when the PMU was dissolved in 2007. An analysis of a selection of QCBS procurements indicates that procurement took an average of 269 days. The breakdown of the average figure in Table 3 shows that bottlenecks occurred more often on the government side.

Table 3: Procurement processing Working Days Spent in Procurement Process No. Sub-project TA

GoI World Bank

Total Working

Days

1. Adv to KKPPI Secretariat 212 96 308

2. Due Diligence Workshop 218 33 251

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3. MIS and Data Base for KKPPI and PMU PPITA 202 43 245

4. Provision of EO for PPITA CBT Program 145 43 188

5. TA for PPP in Water Sector: Water Conveyance 157 51 208

6. Development of a P3CU and its Network TA 209 44 253

7. TA and support to PPI on Low Cost and High Rise Multi-Family Housing Provision for Low and Middle Income Groups

403 69 472

8. PPP for Urban Transportation Infrastructure project, Pilot Project of Yogyakarta City Stage II

177 50 227

Average 216 54 269

40. Counterpart buy-in:The most important factor for buy-in was political commitment at the ministerial level. Achieving toll road transactions had the full attention and backing of the Minister of Public Works. However, buy-in in MoT was significantly less than in MoPW, partly because the PIU head was not of sufficient rank and the high-level buy-in was not sufficient to overcome the bureaucratic inertia. 41. Inadequate supervision of consultants:The PIUs in MoT and MoPW did not have the capacity to supervise the TA staff and thus had to rely on the staff of the relevant Directorate General (DG). In MoPW, where PPP was already a priority of the relevant DG, supervision was adequate. In the case of MoT, where PPP was not such a high priority, the various DGs were not actively involved in supervision and the quality of outputs suffered. In recognition of this, the core advisory consultant in CMEA was brought in to assist, and work was completed, however operationalization of the policies prepared under the TA was disappointing due to the lack of high-level counterpart buy-in described in the previous paragraph. This disappointing performance is discussed further in section 5.2.(b) Implementing Agency or Agencies’ performance. 42. Waning GOI commitment to PPITA: As the implementation progressed, grant funds for TA became increasingly available, including from ADB, AusAID, JBIC, the Government of the Netherlands, and the Private Provision of Infrastructure Advisory Facility (PPIAF) channeled by the World Bank. Commitment to PPITA began to falter in late 2006 as GoI questioned the wisdom of borrowing at IBRD rates for TA. As a result, PPITA-specific targets slipped (e.g. establishment of the P3CU during the life of the loan, although it was established after the loan closed), while reform in the PPP agenda continued under other projects (e.g. support to the RMU). Combined with other implementation problems in early 2007, this led to the discussions on canceling a portion of the loan, which the GOI initially resisted, but eventually requested as the closing date approached and the availability of competing TA grants made the project funding less critical. 43. Reconsideration of the PPP agenda: The perceived importance of PPP for delivering infrastructure services, coupled with slow progress on initiating projects after the two infrastructure summits, led to high-level debate on the PPP strategy. The office of the Vice President expressed impatience with the long PPP process, viewed the KKPPI as the bottleneck and pushed to fund non-Perpres-67-compliant projects. A second group

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centered on MoF was unwilling to approve government support outside prevailing laws and regulations. 44. While the push for non-compliant projects would provide short-term gains, a small number of compliant projects was needed to prove that the PPP framework worked fairly and transparently, and to lay the foundation for desired large-scale private investment. GoI has recognized these priorities and is now proceeding with a smaller number of PPP demonstration projects supported by a range of development partners. 45. Reform of public/private support channels: Prior to the 1997/98 Asian financial crisis, any ministry could issue guarantees for private ventures. A moratorium on such risky activity was then imposed until MoF decree PMK 38/2006 established the Risk Management Unit (RMU) as the sole institution for providing public support to private projects. 46. The RMU has been under significant pressure from line ministries and other parties to issue guarantees to non-Perpres 67/2005 compliant projects, but has remained understandably cautious. The ability of the institutional and regulatory framework to withstand such challenges is testament to its strength. The next step is for the RMU to issue a government guarantee to a qualifying project. 47. While an allocation of public support to a specific infrastructure project has not yet been made under the new framework, GoI, via the RMU, has made some progress towards providing financial support to PPI. GoI allocated Rp 4.9 trillion to a “land-capping” scheme, under which toll-road concessionaires that were awarded concessions prior to the financial crisis in the late 1990s (including a number of key sections along the crucial Trans-Java route) will pay 110% of the land costs initially envisaged, with GoI to pay for the remaining land acquisition costs. Transactions which do not move to financial close after accessing the land-capping funds will be terminated. While these are not Perpres 67/2005 compliant projects, dealing with such special cases in a fair and transparent manner will go a long way towards building Indonesia’s reputation as a destination of choice for foreign direct investment in infrastructure. 48. In recognition of the increasing importance of the RMU in MoF, the task team attempted to add it as an implementing agency and provide PPITA loan support in 2006 and 2007; however, the lower cost of a World Bank facilitated PPIAF grant was a more attractive option for GoI.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

49. Design: There are difficulties inherent in monitoring progress of TA loans. Completion of reforms, such as issuing draft laws or establishing institutions, do not in themselves represent meaningful improvements in the sector. In many cases, the benefits of such reforms will not be felt for some time: output indicators are easy, outcome indicators are hard. With this in mind, the M&E framework of PPITA, designed under the PPF, adopted outcome indicators designed to demonstrate increased understanding

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and engagement of PPP on the part of various stakeholders. These are very hard to measure, and the design documents did not provide instructions on how to measure them beyond “stakeholder feedback through discussions with supervision missions” and reports produced by the PMU, consultants and other advisors; without arrangements to design and implement a reliable or objective methodology to measure the knowledge and attitudes of a broad range of stakeholders, the project mainly relied on outputs to represent such indicators. 50. Implementation: The inconsistencies between the PAD and the LA posed difficulties in terms of selecting performance monitoring indicators for use in the ISR (and by extension the ICR). 51. Utilization: As discussed above, TA loans are inherently difficult to monitor. Some creativity was required on the part of the supervision team to assess the progress of the loan using the data collected during supervision missions, but also—and arguably more importantly—through the ongoing dialog with GoI. This ongoing dialog led to the pursuit of MoF as a potential additional Implementing Agency due to the importance of the RMU in the PPP framework (even though it was not an output indicator of PPITA). However, not surprisingly MoF opted for financing from a World Bank administered PPIAF grant rather than an IBRD loan. 2.4 Safeguard and Fiduciary Compliance (focusing on issues and their resolution, as applicable)

52. Anti-corruption action plan (ACAP): An ACAP was agreed during project appraisal. PPITA was one of the pilot projects under the Bank to safeguard against corruption. The plan included the Financial and Development Supervisory Board (BPKP) as the auditor for the project, members from civil society were to be appointed to the procurement evaluation committees, and the principle of public disclosure was to be put into practice. All supervision missions conducted by the task team included an appraisal of compliance with the ACAP and the results were consistently satisfactory. 53. Financial audit and reporting: The published annual audit reports for the years 2003 to 2007 achieved an unqualified opinion, indicating that PPITA implementation fully complied with the accounting standards and principles set. The Bank awarded PPITA the 2006 award for financial management. In 2007, financial reporting deadlines were not met because the PMU was in effect dissolved. Consequently, the timelines for the submission of financial reports were revised and these later deadlines were met. 54. Public Disclosure: Public disclosure was consistently practiced through several media: newspapers, the PMU’s Infrastructure magazine, the KKPPI website, and a series of seminars and workshops. An electronic-based complaints handling mechanism was installed and the head of the PMU was responsible for addressing complaints. Non-government personnel participated in the procurement process; however, their participation in the evaluation committees was mainly passive and not as active as anticipated. Independent observers were present at the opening of bids.

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55. Environmental and social:Proposed PPP investments are required by the prevailing laws and regulations to comply with environmental and social standards and to complete Environmental Impact Assessments (Analisa Mengenai Dampak Lingkungan, AMDAL), and Land Acquisition and Resettlement Action Plans as necessary. Line ministries are responsible for these matters as part of the normal project preparation process. 2.5 Post-completion Operation/Next Phase (including transition arrangement to post-completion operation of investments financed by present operation, Operation & Maintenance arrangements, sustaining reforms and institutional capacity, and next phase/follow-up operation, if applicable)

56. GoI has a robust and wide-ranging program of PPP reforms planned in the coming years supported by their annual reform agendas—in the form of Presidential Instructions 5/2007 and 5/2008—and various donor funded program loans. These include ADB’s Infrastructure Reform Sector Development Program (IRSDP) in BAPPENAS, the World Bank’s Infrastructure Development Policy Loan and a similar loan from the Government of Japan. Under ADB’s IRSDP, a Project Development Facility (PDF) and Technical Advisory Services (TAS) are in place. The PDF will fund PPP project preparation and transactions, ensuring compliance. The funding will be for national and regional projects. TAS will build upon the achievements of PPITA, particularly with respect to further P3 network development. The World Bank will continue to support the PPP agenda through a number of trust funds provided by PPIAF and AusAID. AusAID’s Indonesia Infrastructure Initiative (IndII) and grants from other bilateral agencies could be further tapped to fund this area of work. 57. Regulatory and policy reforms: While the Rail and Sea Transport laws were drafted and established during the life of PPITA, they still require a government regulation (PP) to be issued if they are to be operationalized. Each PP should further clarify how PSP is to be implemented in the relevant sector. The same will apply to the Air Transport, Land Transport and Electricity laws when they are passed by Parliament. 58. There has been discussion of an amendment to Perpres 67/2005 to permit the provision of public support to sub-national PPPs, however, it has yet to appear in GoI’s official policy reform package. While this is so, the proposed Ministerial Regulation under MoPW concerning PPP in the Water Sector, detailed in the Inpres 5/2008 Policy Package, proposes to address some of the sectoral sub-national issues. 59. At the policy level, the concept of non-ministerial sector regulators is still to be debated and formulated. Such regulators would enhance competition and make Indonesia a more competitive, and hence attractive, country for PPP. In some quarters, this is now recognized as a necessary next phase of development. Promoting the acceptance of such a concept to the relevant line ministries needs to come initially from KKPPI, as experience shows that few institutions are willing to reform themselves and to cede power. 60. Institutional reforms: A fully empowered, functioning P3 network is necessary if PPP is to be sustained in the long-term; however, it is not clear that the P3 network described in the PPITA design documents in 2003 is still the ideal model for Indonesia.

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While the P3CU was not established during the life of the loan, one of the last activities carried out under PPITA was the drafting of the Ministerial Decree to establish the P3CU in BAPPENAS. The establishment of this decree was effected in March 2009, after the close of PPITA. The CIIF and KKPPI Secretariat are not currently operational and the P3CU in BAPPENAS and the P3 nodes in the line ministries and sub-national governments still need further capacity building. The RMU and the P3CU are currently fulfilling some of the functions of the KKPPI Secretariat, but more study is needed to determine whether this is the best way forward. To this end, the World Bank is providing technical assistance to re-evaluate the relevance of the current form of the P3 network in Indonesia. 61. Regardless of the final shape of the P3 network, standard operating procedures, at present under preparation, defining the inter-relationships of the P3 institutions still have to be operationalized to speed up PPP transactions and the contracting agencies still require guidance to prepare projects to ensure compliance with PPP regulations. As PPP projects begin to come online, the establishment of an independent Guarantee Fund by MoF will help Indonesia conform with international best practice in the field, this is being supported by a PPIAF funded trust fund administered by the World Bank. 62. PPP Projects:The progress in PPPs being implemented outside the legal framework provided by Perpres 67, while promising, will permit only those projects that are already financially viable to be successful PPPs. If GoI is able to allocate financial support, successfully and transparently, to economically viable but financially non-viable projects in an efficient manner, then a whole new world of infrastructure projects will open up for the private sector. GoI spread its PPP project preparation resources too thinly in the early years, tabling ninety-one unprioritized projects worth billions of dollars at the IIS 2005. The introduction of the ten Model Projects at the IICE 2006 with well-prepared information memoranda was a positive step, yet some of these projects were not financially viable and others had legal issues that would not have permitted them to have been brought to market as “model” PPPs. In recognition of this weakness in project preparation, GoI is focusing on bringing a small number3 of well-prepared compliant projects to market. This agenda is supported by GoI’s infrastructure reform packages (Inpres 5/2007 and Inpres 5/2008) and by the program loans of ADB, JICA and the World Bank. 63. Recommended follow-up actions by the World Bank: The World Bank’s support of GoI’s infrastructure agenda via its IDPL and other instruments described above are well considered. Given the large number of donors and many facets of PPP reform, close donor coordination will be key to ensure that efforts harmonize properly. 3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

3 Between one and three depending on whether the source is GoI’s own infrastructure reform packages, or the various development partner program loans.

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(to current country and global priorities, and Bank assistance strategy)

64. Objective:The main theme of the World Bank’s Country Partnership Strategy (CPS) for FY2009-12 is investing in institutions to improve service delivery. The CPS recognizes that Indonesia’s infrastructure needs may be in excess of what can be provided in a timely manner by public finance. By supporting GoI reforms and projects the World Bank hopes to assist in an increase in private sector financial commitments to infrastructure projects from 0.5% of GDP in 2005 to 0.75% by 2010. Private sector development and infrastructure are two of the five thematic areas in the CPS. Thus, the objective set out under PPITA, laying a strong foundation through policy reforms and institutional development for PPI to materialize, remains highly relevant. 65. Design and Implementation: PPITA was designed to lay the groundwork for a PPP agenda for Indonesia. It did so, however, the PPP framework that emerged was slightly different from that envisioned at project design. Given the nature of large-scale, cross-sectoral institution building and the extended life of PPITA this was inevitable. The task team managing PPITA did try to adjust to this new landscape, although their ability to do so under the framework of PPITA was limited due to the uncompetitiveness of IBRD loans against grant funds. Thus, the design and implementation of PPITA are judged to be moderately relevant. 3.2 Achievement of Project Development Objectives (including brief discussion of causal linkages between outputs and outcomes, with details on outputs in Annex 2)

66. Project development objective: The project’s development objective is to assist GOI to develop and implement the policy and regulatory reforms and build the institutional and social foundations needed to enable, promote and facilitate efficient and sustainable large-scale private investment in infrastructure.

67. Although there are certain deficiencies, the PPP framework established by GoI through the policy and regulatory reforms made and the institutional and social foundations established, assisted by PPITA has made significant improvements to the ability of GoI handle potential PPP projects in a transparent manner. 68. There is large-scale private investment in Indonesian infrastructure occurring at present (detailed below under Indicator 7) and much of it is being undertaken by reputable international investors and contractors. Clearly, there is still scope for further substantial private participation in Indonesian infrastructure projects, and bottlenecks remain in the provision of public support to such projects, but the groundwork is laid. The ability of the institutional and regulatory framework to stand up to political challenges to issue public support on an ad hoc basis is particularly commendable. 69. The institutional framework did not end up exactly as envisioned at appraisal and some key institutions lack capacity, but the project succeeded in introducing a regulatory framework and the foundations of a strong institutional framework, despite the difficulties of establishing new institutions in the country (as further discussed in section 5.1.(a) Bank Design Performance).

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70. The results for the seven PDO indicators, as recorded in the Results framework entered into SAP, plus the two additional PDO indicators included in the PAD, are summarized below as a basis for assessing the achievement of the PDO. 71. Indicator 1: Sound cross-sector and sector policies for promoting and realizing PPI are based on sound analysis, embodied in laws and regulations, and operationalized.

72. PPITA was instrumental toward creating a cross-sector policy and regulatory framework for PPP in Indonesia. Perpres 67/2005 concerning private participation in infrastructure was issued in November 2005. MoF regulation on the provision of government financial support PMK 38/2006 was issued with assistance from PPITA. Inpres 3/2006, the Policy Package for Improving the Investment Climate in Indonesia issued in February 2006 was followed by Inpres 5/2007 and 5/2008, the annual Policy Packages in which the PPP agenda featured prominently. 73. Laws on Road (38/2004) and Water Resources (7/2004) were passed with implementation government regulations issued, all with support from PPITA. Laws on Railways (23/2007) and Sea Transport (17/2008) were passed, however the government regulations (PPs) are still under discussion; the new Laws on Air Transport, Land Transport and Electricity remain under consideration by Parliament. 74. These laws were drafted with input from PPITA funded consultants located within the ministries in question. The KKPPI’s strong role in disseminating information and capacity building and training ensured these policies were based on sound analytical processes. 75. While the direct effect of these laws and regulations in helping to stem the tide of non-Perpres 67/2005 compliant infrastructure projects has been substantial, Indonesia has yet to see a compliant PPP project brought to operation. 76. The framework is yet to be put to the test in a comprehensive way, yet in recognition of its impacts on “almost compliant” projects, the achievement of Indicator 1 is judged satisfactory or as 75% achieved. 77. Indicator 2: Independent, non-ministerial regulatory bodies with sound operating procedures and competent personnel are established for key sectors. 78. Designs for these bodies were completed under the various sectoral TAs, however, as was identified as a risk in TAP4I-II, “it (was) unrealistic to expect agencies to reform themselves.” 79. These regulatory bodies were established in roads and water, but were staffed by civil servants and report directly to MoPW. The envisioned water regulator, BPP-SPAM now operates more like a strategic planning institution for the water sector rather than a regulator. BPJT, also reporting to MoPW was established and is operating as both the

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regulator and PPP contracting agency for toll roads; a situation that presents competing incentives for the different parts of the institution. That said, it is operating in its envisioned role. 80. In MoT there are no plans to establish independent, non-ministerial sub-sector regulatory bodies. Due to the lack of success in establishing these non-ministerial regulatory bodies, the achievement of Indicator 2 is judged unsatisfactory or as 30% achieved. 81. Indicator 3: Local governments understand the role of PPI, factors conducive to a favorable investment climate and their roles and responsibilities in enabling PPI. 82. The extensive CBT program established by PPITA extended regular invitations to local government representatives in Jakarta, but to augment this, regional workshops were also conducted to socialize Perpres 67 and the Operational Guidelines Manual on PPP implementation. 83. P3 nodes in Tangerang, Sumedang, Klungkung and Bandung have been established to facilitate PPP implementation. West Java Province is about to issue a decree to establish a P3 node to advise on PPP matters and ensure compliance. These local P3 nodes still require capacity building and assistance from central government and development partners, but the framework is beginning to operate with the signing of the Tangerang water supply concession August 2008 upon approval from the local parliament. 84. Certain local governments with high capacity have demonstrated their understanding of the role of PPI, and have begun to implement sub-national PPPs. As such, the achievement of Indicator 3 is judged highly satisfactory or as 90% achieved. 85. Indicator 4: Public awareness and understanding of the needs for and benefits of well managed PPI increase.

86. A very significant outcome of the project is the much broader understanding in the minds of GoI, private investors and the general public concerning PPI in Indonesia. Indonesian PPP in infrastructure is a regular item in newspapers and other media. The two infrastructure summits were landmark events that could have been better capitalized on, but still raised much awareness about the possible advantages of PPP in Indonesia. The KKPPI remains the driver of infrastructure reform in Indonesia and, as discussed in Indicator 5 above, their website provides much relevant information. The seriousness of GoI’s commitment to PPP reform is evident in its presence as a major theme of their infrastructure reform agendas issued in each of the last three years. 87. The achievement of Indicator 4 is judged to be highly satisfactory or 100% achieved.

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88. Indicator 5: Opportunities for public participation are ensured in formulating and formalizing laws, policies, regulations and procedures concerning PPI at all government levels. 89. Prior to PPITA, GoI regulations already required public participation on draft laws both by the ministries, prior to submission to parliament, and by parliament itself when the laws have been submitted. While no similar requirement exists for policies and regulations, KKPPI’s understanding of the importance of close cooperation with the private sector led them to undertake extensive public consultations surrounding infrastructure policy packages issued over the period of PPITA’s operation. 90. The achievement of Indicator 5 is judged to be highly satisfactory or 90% achieved. 91. Indicator 6: Private sector investors are informed of the efforts by government to promote PPI and participate in the formulation and enactment of a favorable investment climate. 92. The prominent inclusion of PPI in the annual Policy Reform Agenda issued via Presidential Instructions over the last three years point to the seriousness with which GoI tackled this issue. Indonesia’s two infrastructure summits and numerous other public information events were well publicized and received substantial international attention. The main conduit of dissemination of electronic information concerning PPI is the KKPPI website, hosting laws, regulations, policies and public information documents about infrastructure related matters in Indonesian and English. In addition to this website, an internet search for “Indonesian PPP” returns many relevant links to information relevant to private sector investors. 93. The achievement of Indicator 6 is judged to be highly satisfactory or 100% achieved. 94. Indicator 7: Soundly conceived PPI schemes have been developed and tendered through transparent competitive processes. 95. GoI is dealing with large-scale private investment in their infrastructure in a transparent and competitive manner. The Tangerang Water Supply project identified as a Model Project at the IICE 2006 and prepared and tendered with PPITA assistance reached financial close (i.e. all conditions precedent to drawdown of funds from financiers fulfilled or waived) in late 2008 and is targeted for operation by late 20094.This project had the requisite number of bidders and fulfilled all guidelines of Perpres 67/2005; however, as it did not require public support, it did not provide an opportunity for the RMU to issue a guarantee. Furthermore, the Solo-Kertosono toll road is well on the way to reaching financial close, again without public support; although as this project only had one qualified bidder and GoI decided to move forward without retendering, this

4 Inpres 5/2008

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is not a Perpres 67/2005 compliant project. These are two major PPP projects for Indonesia (both in dollar terms and symbolically) that benefited from the clear regulatory framework established by GoI with support from PPITA. 96. While this progress is commendable, the only projects that have reached financial close to date have not required public support (contingent or otherwise) so have not provided the demonstration effect that GoI had hoped for. If GoI is able to demonstrate the efficacy of the RMU in providing support to private infrastructure projects, then a large bank of economically viable, but not financially viable projects will be open to investment. GoI recognizes this fact and is focusing strongly on bringing a small number of demonstration projects to market supported by infrastructure program loans from the World Bank, ADB and the Japanese government. The Central Java Coal-Fired Power Plant mentioned above, the preparation of which is being handled by IFC, is the most likely candidate for the first demonstration project; it is expected to be tendered in 2009. In addition to this, there are many other small PPP water and power projects being conducted at the sub-national level. 97. Finally, Indonesia is moving forward on its 10,000 MW Coal-Fired Power Crash Program under which it tendered dozens of Engineering Procurement Construction (EPC) contracts for coal-fired power projects across the archipelago. These are not the Build Operate Transfer model that is envisioned within the PPITA project design, however, it will give GoI an opportunity to demonstrate its willingness to engage with the private sector in infrastructure provision. 98. In recognition of the progress made, yet mindful of the challenges that still remain, achievement of Indicator 7 is judged moderately unsatisfactory, or as 30% achieved. 99. Indicator 85: Organization structures, skill-mixes, capacities and cultures of government agencies understand and are proactive in the expansion and evolution of their current roles as providers of infrastructure and services to include the enabling of private provision. 100. As further detailed in Indicator 4 below, PPITA’s extensive CBT program helped build understanding as to the new public role in PPI. This program included dozens of seminars, workshops and short courses (detailed in Annex 2) attended by thousands of public servants chiefly from CMEA, BAPPENAS, MoT, MoPW, and a number of local governments, but also from MoH, MoEMR and others. 101. The IIS and IICE held in 2005 and 2006 respectively were conceived and delivered solely by GoI with assistance from development partners limited to the preparation of information memoranda for some key projects and general advice. The prominent inclusion of PPP reforms in GoI’s reform agendas (including the issuing of a specific

5 Additional indicator included in the PAD but not in the ISR monitoring and, as such, not included in the Datasheet generated by the system.

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policy package targeted at increasing private investment in infrastructure) was similarly not required by any development partner loan or grant, but as a pure government initiative. The establishment of the P3CU after the close of PPITA also points to GoI’s proactivity in the ongoing PPP reform agenda. 102. The prominence of PPP in the national policy reform agenda points to a clear growth in the understanding and proactivity of government agencies in enabling PPI. As such, the achievement of Indicator 8 is judged highly satisfactory or as 100% achieved. 103. Indicator 96: Information relevant to PPI is actively maintained, more accessible, and more effectively disseminated and discussed with all stakeholders. 104. The KKPPI website, which receives thousands of visitors per month, provides up to date news, analysis and copies of laws, policies and regulations relating to PPI in Indonesian and, to a lesser extent, English. While GoI has not run a major infrastructure investment summit since 2006, regular smaller events are run to disseminate information and receive stakeholder input. The most recent such event was the launching of the P3CU in March 2009 held by BAPPENAS attended by a wide range of stakeholders from government, private sector, development partners and civil society.

105. In recognition of the usefulness of the KKPPI website in disseminating information relevant to PPI and GoI’s continuing commitment to running public information dissemination events, the achievement of Indicator 9 is judged highly satisfactory of as 90% achieved.

106. For a table of PPITA’s outputs, please refer to Annex 2. 3.3 Efficiency (Net Present Value/Economic Rate of Return, cost effectiveness, e.g., unit rate norms, least cost, and comparisons; and Financial Rate of Return)

107. As the direct benefits to society of the policy reforms supported by PPITA are expected to accrue well past the closing date of the loan, it is very difficult to talk about economic rates of return. However, the transparent manner in which the government is dealing with the private sector in the 10,000 megawatt crash program, the Tangerang Water Supply Project, Solo-Kertosono Toll Road and other smaller infrastructure projects worth, in aggregate, investments of over a billion dollars were shaped in large part by the reforms championed in the early years of PPITA’s implementation. PPPs are difficult and to rush implementation before a solid framework is established for them would be unwise. As such, PPITA’s approach of establishing the legal and institutional basis for PPP before focusing on project delivery still appears to have been the most cost effective strategy.

6 Additional indicator included in the PAD but not in the ISR monitoring and, as such, not included in the Datasheet generated by the system.

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108. For these reasons, the efficiency of PPITA is judged to be Satisfactory. 3.4 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs, and efficiency)

109. PPITA did experience significant project management issues. However, in the context of PPITA’s status as an IBRD loan in a broader environment of grant funds (including those managed by the World Bank), this is understandable. The lack of progress against some specific PPITA indicators does not indicate a lack of interest in the PPP agenda generally. On the contrary, GoI’s identification of PPP as a high priority in their annual infrastructure action plans issued over the past three years and the myriad other development partner initiatives detailed previously in this document demonstrate their strong commitment to doing PPP right in Indonesia.

Indicator Rating Relevance of Objective Highly relevant Relevance of Design and Implementation Moderately relevant Achievement of Project Development Objectives Moderately Satisfactory Efficiency Satisfactory

110. The Outcome of the project is rated Moderately Satisfactory given the robust regulatory and institutional framework established, but also recognizing the work still required compared with appraisal plans.

3.5 Overarching Themes, Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above)

(a) Poverty Impacts, Gender Aspects, and Social Development 111. Not applicable as the impacts of PPP provision on poverty, gender aspects and social development will not be measurable until well after this ICR is due.

(b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development)

112. Under PPITA, a number of new institutions were established including the KKPPI secretariat, P3 nodes, the Consolidated Indonesia Infrastructure Forum (CIIF), sectoral regulatory bodies and the RMU. These institutions and the various counterpart institutions of PPITA have varying levels of capacity, were not always implemented as initially envisioned, and in some cases may not currently be operational, but it is clear that their knowledge and understanding of the role of PPP in infrastructure, as well as that of other key agencies and institutional bodies, has increased notably under the project. See section 3.2 Achievement of Project Development Objectives for further details on the Capacity Building Program established under PPITA. (c) Other Unintended Outcomes and Impacts (positive or negative)

There were no significant unintended outcomes or impacts.

27

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes)

113. Beneficiary Surveys and Stakeholder Workshops were not conducted by the World Bankfor this operation. Please see the Borrower’s ICR for GoI run stakeholder workshops. 4. Assessment of Risk to Development Outcome

114. It is envisaged that the work of PPITA will be carried on through the initiatives detailed in section 2.5 Post-completion/Next Phase. Funding for communications and CBT is unlikely to be a constraint with a properly formulated program. The possibility that the push to provide public support to non-compliant projects could again become a political issue can not be ruled out, yet the RMU has withstood such challenges in the past, and its success in providing land-capping support to toll-roads (detailed in section 2.2 Implementation) further strengthen its position. 115. A very promising sign following the close of the loan was the establishment of the P3CU under BAPPENAS. This is a clear demonstration of GoI’s commitment to the PPP agenda and recognition of the value of such an institution in its own right rather than as a purely output focused exercise to comply with development partner loan covenants. 116. With these factors in mind, the risk to development outcome is judged to be Moderate.

5. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues)

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase)

117. The project’s objectives were consistent with GoI’s development priorities and the Bank’s CAS. Lessons learned from TAP4I (1 and 2), were incorporated in the design. The Bank provided a PPF to assist the Borrower to prepare a detailed system for managing and monitoring the PPITA project. Particular attention was paid to safeguarding against corruption. 118. However, the project design was extremely complicated and did not take into account the new decentralization legislation that governed sub-national governments’ participation in PPPs. Neither did it recognize the importance of the RMU in the PPP process and did not identify MoF as an implementing agency. Most importantly, however, it failed to recognize the significant bureaucratic inertia involved in the establishment of new institutions and reassignment of roles, responsibilities and budgets. 119. While outcome indicators were identified, the data collection strategy for the M&E was limited to a list of desired outputs (see PPITA PAD Annex 1: Project Design Summary). This made evaluation of the project at close difficult. Further, the inherent

28

difficulties of establishing an inter-ministerial institutional and regulatory framework should have been foreseen at the project design phase. 120. As such, the Bank’s performance in the identification, preparation and appraisal of the project is rated Moderately Satisfactory.

(b) Quality of Supervision (including of fiduciary and safeguards policies)

121. The World Bank conducted nine supervision missions over the life of the loan. Supervision was not just limited to these missions as there was a regular dialog between the Bank and GoI; especially during the early years of PPITA. The aide memoire from the mission held from 24 October to 4 November 2005 was the Mid-Term Review (MTR). The aide memoires succeeded in identifying pertinent issues to be addressed. The Bank also provided external resources (World Bank Institute, PPIAF) to advise and assist on PPP implementation in response to GoI’s desire for more PPP transactions. 122. In recognition of the implementation difficulties encountered in the later years of the loan, the task team held a meeting with GoI in mid-2007 to discuss options including canceling the loan, however, GoI requested very strongly that the loan continue. In light of the shifting PPP landscape, the PPITA team could have been more proactive in adjusting the Key Indicators and reevaluating the proposed PPP framework; yet its ability to do this was constrained by the uncompetitiveness of PPITA’s IBRD terms (e.g. the failure of the attempt to add MoF as an implementing agency). 123. The Bank’s quality of supervision is rated Moderately Satisfactory.

(c) Justification of Rating for Overall Bank Performance

124. Overall, the Bank’s performance is judged Moderately Satisfactory in terms of preparatory input and quality of supervision. 5.2 Borrower Performance (a) Government Performance

125. “Government” in this case is defined as the central authorities responsible for the policy direction in the thematic area of the loan, i.e. BAPPENAS, CMEA and MoF. 126. GoI through KKPPI remains committed to PPI as part of GoI’s policy. It showed strong commitment to a transparent and competitive process for PPI. GoI provided requisite levels of counterpart funding, audit oversight and compliance with the anti-corruption action plan. 127. While there were implementation issues that threatened the continuity of PPITA, the task team attributes this to the decreasing competitiveness of an IBRD loan in the context of the abundance of grant funds arriving in Indonesia for TA rather than a lack of GoI commitment to the PPP agenda generally. The politicization of the PPP agenda and the internal frustration by what some saw as the overly stringent requirements for public

29

support and slow progress did threaten the framework established by GoI assisted by PPITA (further discussed in section 3.5(c) above). However, the ability of the institutional and regulatory framework to withstand such challenges and the progress it has made since that time reconfirms the strength of the foundation established to support PPP in Indonesia. 128. For these reasons GoI’s performance is rated Satisfactory.

(b) Implementing Agency or Agencies Performance

129. “Implementing Agencies” in this case are referred to as the parts of GoI responsible for the day-to-day management of the project. 130. Although two PIU were established for PPITA, project management across all of the implementing agencies relied heavily on a strong PMU in CMEA. When the PMU was operating in full strength it was able to mitigate, to some extent, the weaknesses in project management at the line ministries resulting in Satisfactory ratings for project implementation for the first six supervision missions. After it was downsized in late 2006, the PMU was unable to discharge its role properly and procurement and other key project management tasks in the line ministries ground to a halt for much of 2007 and the beginning of 2008. 131. When the KKPPI secretariat was dissolved alongside the PMU, Bank management looked to the implementing agencies to show leadership and either reinstate the KKPPI or propose a replacement. The KKPPI Secretariat has yet to be reinstated, and the PMU was only reinstated almost a year after the issue was identified in a management letter from the World Bank. 132. The PIUs are supposed to champion PPITA and to elicit buy-in from the directorates general within their ministry. In the case of MoT, buy-in was the poorest. A consequence was that no sub-projects were implemented in the ministry, although these were provisioned in the PPITA loan. 133. In MoT, supervision of consultants’ work was also very weak, leading to poor performance and delivery of output from their advisory TA. In MoPW, the relevance of a P3 node is still not appreciated. Although the node was established, it lacks empowerment. Despite significant amount of supervision, the first TA in BAPPENAS to develop the P3 network was aborted. This was due to the inability of the consultants to perform. 134. The Implementing Agencies’ performance is rated Moderately Unsatisfactory (c) Justification of Rating for Overall Borrower Performance

135. Implementation was problematic in certain key areas, as detailed above. Nevertheless, the GoI’s success in laying the foundation for transparent and competitive PSP by 2005 is a landmark achievement, especially when put in the perspective of other

30

countries’ experience. For this reason alone, the Borrower’s performance overall is rated Moderately Satisfactory.

6. Lessons Learned (both project-specific and of wide general application)

136. Project complexity: PPITA and previous experience indicate that complex projects involving many stakeholders (ministries and other agencies) are susceptible to institutional risks. Project designs with such complex arrangements should include explicit mitigation measures to reduce risks. 137. Ensuring senior ownership and buy-in is easier said than done: The PPITA PAD identifies the need for an effective linkage to key decision makers as a key lesson learnt from TAP4I-II; saying “a future project should be attached to and support a functioning high level coordinating agency or central agency that enjoys effective support within Government.” Task teams can continue to build capacity of their counterparts and continue a high-level dialog with their superiors but, in practice, the World Bank has no power to suggest or approve appointment of counterparts in implementing agencies. A greater sense of ownership of an advisory TA and hence more buy-in is likely to occur if it is situated in a specific sectoral area within a ministry (e.g. a DG) but, as noted above, this must be complemented by ongoing dialog with senior decision makers (e.g. a Minister or Secretary General). 138. Donor coordination: As stated previously, PPP reform is enormously complex, involving many governmental and non-governmental entities. Donors working in an area such as this need to ensure that they coordinate closely with GoI and harmonize their agendas to avoid working across purposes. 139. Institutional development: PPITA’s experience shows that creating new institutions and empowering them is much more difficult than anticipated in the project documents. Such change requires a long gestation period and a willingness to re-distribute power between the various institutions. 140. Loans vs. grants: Borrowers have been willing to borrow at IBRD rates for program lending and larger project loans, however, IBRD technical assistance loans may not be competitive where an abundance of grant funds exist as is the case in Indonesia at present. This lesson is consistent with the experience of many other countries where only grants or IDA money are accepted for TA and non-income-earning projects. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies

141. The Implementing Agency’s comments are included in Annex 7. (b) Cofinanciers 142. Not applicable.

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(c) Other partners and stakeholders (e.g. NGOs/private sector/civil society)

143. No specific inputs from other partners and stakeholders.

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Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Components Appraisal

Estimate (USD millions)

Actual/Latest Estimate (USD

millions)

Percentage of Appraisal

CROSS-SECTORAL TA AND ADVISORY SERVICES

6.06 5.51 91

SECTOR-SPECIFIC TA AND ADVISORY SERVICES

8.58 5.05 59

CAPACITY BUILDING AND TRAINING

1.50 1.50 100

PMU SUPPORT SERVICES 0.39 0.39 100 REPAYMENT OF PPF ADVANCE

0.40 0.40 100

Total Baseline Cost 16.93 12.85 76

Physical Contingencies 0 0 0

Price Contingencies 0 0 0

Total Project Costs 16.93 12.85 76 Front-end fee PPF 0.00 0.00 0 Front-end fee IBRD 0.17 0.17 100

Total Financing Required 17.10 13.02 76

(b) Financing

Source of Funds Type of Cofinancing

Appraisal Estimate

(USD millions)

Actual/Latest Estimate

(USD millions)

Percentage of Appraisal

Borrower 1.90 1.00 53 International Bank for Reconstruction and Development

17.10 13.02 76

Total 19.00 14.02 74

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Annex 2. Outputs by Component

Component/Activity Target Achieved MetCMEA

• CMEA TA: Country PPI Framework Assessment taking intoaccount the Bappenas “White Paper” on Infrastructure SectorPerformance

• Indonesia's Infrastructure Roadmap for Public Private Partnership(PPP)

• Indonesia Country Framework Report for Private SectorParticipation in Infrastructure

Y

• CMEA TA: Prioritization of cross sectoral and sectoral issuesidentified in the Framework Assessment

• A Review on Sector Policy, Regulatory and InstitutionalFramework

• Basic Principles in the Design of a PSP Framework• Indonesia Country Framework Report for Private Sector

Participation in Infrastructure• Macro-Economic Impact Analysis• Working Paper No.5: PSP and the Re-Alignment of the Four

Primary Functions

Y

• CMEA TA: Flowing from the above, develop the Country PPIStrategy and implement component elements of it

• Working Paper No.2: PSP Infrastructure Policy for Indonesia: AProposal

Y

• CMEA TA: Input for preliminary screening/evaluation of TAassignments based on the Country PPI Strategy

• Indonesia Country Framework Report for Private SectorParticipation in Infrastructure

Y

• CMEA TA: Input to final review for revision of KeppresNo.7/1998

• Working Paper No.4: Draft Presidential Regulation on PrivateParticipation in Infrastructure Provision

• Operational Guidelines Manual (OGM) for Perpres 67/2005• Perpres 67/2005 and the Policy for Implementation

Y

• CMEA TA: Input for revised Local Government Enterprise law • Consultations held Y• CMEA TA: Screening/evaluation of TAs to be funded under

PPITA and other sources and firming up of TORS• Survey Report on Previous Studies and Technical Assistance

Services• Prepare and Review Related TORs

Y

• CMEA TA: Input to preparation of guidelines for regionalregulations on PSP (including on fund channeling system tolocal government)

• Basic Principles in the Design of a PSP Framework Y

• CMEA TA: Lessons learned under PSP in the infrastructuresector in general

• Lessons Learned from PPP Projects• Case Studies on PPP Projects

Y

In house Advisory TAto KKPPI

• CMEA TA: Assistance on donor coordination for infrastructureTA funding

• Report on Technical Assistance : Funding Sources• Prepare Other PPI Related TA for Financing under PPITA and

Other Sources

Y

34

• CMEA TA: PSP specific project review/analysis as requestedby KKPPI (including review of Keppres No. 15/2002)

• Report on Readiness Criteria and Checklist for Transaction• Working Paper No.3: Readiness Criteria for MEMR Projects

Y

• CMEA TA: Monitoring and reporting on substantive aspects ofPPI program implementation

• Policy Document for PPP Implementation• Report on Revised Guidelines for Transaction• Working Paper No.1: An Assessment of Progress on the PPITA

IBRD Loan No.4696-IND• Recent Developments in Indonesia’s Private Sector Participation

(PSP) Framework

Y

• CMEA TA: In liaison with MOPW and MOT Advisory TA initiatedevelopment of policy on government support

• PSP Framework Assessment in the Transport Sector• Technical Note No.2: On a Method of Estimating the Expected

Cost of Fiscal Support for a PPP Project• Working Paper No.9: Working Paper on Government Support• Working Paper No.8: Policy Matrix : Issues and Actions for PSP

and PSO in the Provision of Infrastructure

Y

• CMEA TA: In liaison with MOPW and MOT Advisory TA initiatedevelopment of policy on pricing and tariff setting

• PSP Framework Assessment in Water & SanitationTelecommunications and Energy Sectors

• The Economics and Financial Aspects of the Evaluation of PSPProjects

Y

• CMEA TA: In liaison with MOPW and MOT Advisory TA initiatedevelopment of policy on risk allocation and risk mitigation

• Technical Note No.4: On Risk Allocation• Risk Management Risk Allocation and PSP Modalities• The Evaluation and Selection of Types of Financial Support by

Government Support for PSP Projects

Y

• CMEA TA: PSP specific project analysis as requested byKKPPI

• Working Paper No.7: Review Proposed Private InfrastructureProjects

• Fiscal Impact of Gas Pipe Transmission East Kalimantan - CentralJava

• Review Proposed Private Infrastructure Projects detailed insectoral sections below

• Information memoranda produced for the 10 Model Projects forIICE 2006, prioritization of 91 projects for IIS 2005

• Reports, pre-feasibility studies and other information produced onPPP and potential PPP projects

Y

• CMEA TA: Working papers on PSP infrastructure issues • Technical Note No.3: On PSP Modalities• Energy Sector : PSP Framework Report• Working Paper No.6: Economic and Financial Guidelines for Due

Diligence• Working Paper No.10: Domestic Capital Market Potential for PPP

Financing• Domestic Capital Markets and PPI Financing

Y

35

• CMEA TA: Continue development of government policies ongovernment support, tariff setting and adjustment and riskallocation

• Working Paper on Key Policy issues including tariffs/pricing,government support/subsidies, risk management

Y

• CMEA CBT: Training Needs Assessment • Training needs assessment Y• CMEA CBT: Training Curriculum & Module Development • Curriculum development Y• CMEA CBT: Seminars / Workshops / Short Courses • I.T. Development for PPP Implementation: Manual on Accessing

Training Materials• Asset Backed Securities• Opportunities in a Rising Democracy• PPP in Changing World• Procurement Procedures for the World Bank Financed Projects• Program Management: A Strategic Decision Management

Process• Project Finance for Executives• Applied Project Finance• Project Feasibility Study• Project Finance Course• Legal Aspects and Regulation of PPP/PPI Projects• PPP Fundamentals and Applications in Water Supply,

Transportation (Toll Roads, Railways, Airports, Ports), and Energy• PPP Policies & Strategies: Efficient & Cost-Effective Public

Services Delivery• Modeling in Project Finance• Project Finance for Infrastructure Project• Contract Law/Legal Aspects• Public Infrastructure Investment and the Role of the Public Private

Partnerships• Employment Intensive Investment• Legal Aspects and Contract Drafting for PPP Projects• PPP Project Finance• Advanced Legal Drafting for PPP Project• Asset Securitization• PPP Due Diligence• Risk Management for Infrastructure Project

Y

• CMEA CBT: Postgraduate (S-2 Program) • Masters and PhD program at Universitas Indonesia Y• CMEA CBT: Capacity Building evaluations • Conducted by consultant Y

Capacity Buildingand Training

• CMEA CBT: Develop sustainability mechanism for CapacityBuilding & Training

• Strong engagement with WB and other development partners andcontinued support of Postgraduate program

Y

PMU PPlTA • CMEA PMU: PMU Workplan • PMU Workplan, as regularly updated in procurement plans Y

36

• CMEA PMU: Training Management Module for PPITABeneficiaries

• Training management module established and implemented Y

• CMEA PMU: PMU Database System • Report on Database and Website Development Y• CMEA PMU: Monitoring and Reporting on loan

implementation, procurement and financial aspects• Working Paper No.1: An Assessment of Progress on the PPITA

IBRD Loan No.4696-INDY

support

• CMEA PMU: Monitoring and reporting of planning andimplementation of procurement and financial aspects of theloan

• Regular PPITA Financial Management reports and ProcurementPlans

Y

• CMEA ComDev: Communication Strategy • Report on Database and Website Development• Technical Note No.1: KKPPI’s Database and Website

Development• Initiate Future IT Applications to Facilitate PPP Information

System

Y

• CMEA ComDev: Media awareness program on PSP. Y• CMEA ComDev: Public awareness program on PSP Y• CMEA ComDev: Socialization of draft Road law Y• CMEA ComDev: Socialization of revised Keppres No.7/1998

(including guidelines for cross sectors and specific sectors)Y

• CMEA ComDev: Socialization of Draft Local GovernmentEnterprise Law

Y

• CMEA ComDev: Socialization of government regulation andguidelines in Communication sector, Roads, UrbanInfrastructures, and other related sub-sectors

Y

Communicationdevelopment

• CMEA ComDev: Socialization of Standard Contract, RiskManagement. and Economic / Finance

• KKPPI Website, Indonesian Infrastructure magazine and variousmedia and civil society events

• Infrastructure Summit 2005• Indonesian Infrastructure Conference and Exhibition 2006

Y

• CMEA R&D: PSP database • Report on Database and Website Development• Technical Note No.1: KKPPI’s Database and Website


System

YResearch &Development

• CMEA R&D: PSP policies, regulatory frameworks. • Input to Perpres 67/2005 governing private participation ininfrastructure, laws on roads, water resources, rail, maritime thatwere all established (and to air transport and land transport thathave yet to be established) and implementing regulations for all ofthose laws. Assistance to the publication of the InvestmentEnvironment Improvement Policy Package issued in PresidentialInstruction 3/2006 any many more.

Y

37

• CMEA R&D: PSP project analysis • Information memoranda produced for the 10 Model Projects forIICE 2006, prioritization of 91 projects for IIS 2005

• Reports, pre-feasibility studies and other information produced onPPP and potential PPP projects

Y

• CMEA R&D: Research on specific subject • Numerous working papers published by CMEA TA Y• CMEA R&D: Journal / research dissemination Y• CMEA R&D: Analysis of PSP Development and preparation of

papers, articles, etc

• Chiefly through KKPPI website, but also through specific events,infrastructure magazine and the IIS and IICE. Y

• CMEA R&D: Develop sustainability mechanism for Research &Development

• KKPPI OGM Y

• CMEA Network: PPP program Database • Report on Database and Website Development• Technical Note No.1: KKPPI’s Database and Website


System

Y

• CMEA Network: Design paper on P3 Center • Design of entire network completed Y• CMEA Network: Establishment of P3 center • Completed behind schedule in March 2009, 3 months after loan

closeY

• CMEA Network: Develop Workplan for P3 Center • Completed on schedule Y

Development of P3Network / Center Unit

• CMEA Network: Develop sustainability mechanism of P3Center

• Developed, but in need of an update. WB TA is currently beingmobilized to assist GoI in the update of the P3 Network design toensure sustainability.

Y

• CMEA CIIF: Establishment of CIIF • Completed, but fell into disuse as KKPPI carried out most of thefunctions in its stead.

N

• CMEA CIIF: Develop Workplan • Developed. Y• CMEA CIIF: Conduct annual forum meetings • First annual meeting was conducted, however, follow-up meetings

were not as KKPPI assumed CIIF’s roleN

• CMEA CIIF: Conduct special forum meetings • KKPPI conducted ad hoc meetings as required to socializepolicies

N

• CMEA CIIF: Develop report on annual and special meetings • Were completed for the meetings that did occur N

ConsolidatedIndonesianInfrastructureForum (CIIF)

• CMEA CIIF: Develop sustainability mechanism of CIIF • WB TA is currently being mobilized to assist GoI in the update ofthe P3 Network design to ensure sustainability and evaluate therole of the CIIF going forward.

N

MoT• MoT: Transportation Sector/Sub-sector PSP Framework

Assessment• PPP Framework Assessment and Lesson Learned YIn-house Advisory TA

to Ministry ofCommunication andother support for PSPFramework

• MoT: In liaison with OCMEA Advisory Team prioritization ofissues identified in MOT PSP Framework Assessment anddevelopment of work program to address issues

• White Paper: Policy Recommendations given Proposed legal &Regulatory frameworks & Existing condition

Y

38

• MoT: Input on preliminary screening/evaluation of TAassignments based sector/sub-sector PSP FrameworkAssessment and on Country PPI Strategy

• PSP Framework Assessment in the Transport Sector Y

• MoT: Input for update of Transport “Sector Blueprint” • White Paper: Policy Recommendations given Proposed legal &Regulatory frameworks & Existing condition

Y

• MoT: Input for sectoral Implementing Guidelines for the revisedKeppres 7/98

• Legislative Initiatives and Regulations in Light of PSP RelatedRegulations

• Legal Comments Concerning the Draft Presidential Regulation

Y

• MoT: Input for revised law and implementing regulations onrailways, ports, land transport and aviation to reflectdecentralization and PSP sector policies

• Law on Railways (23/2007) and Sea Transport (17/2008) passed,the government regulations (PPs) still under discussion; the lawson Air Transport, Land Transport and Electricity drafted, but stillunder consideration by Parliament.

Y

• MoT: Lesson Learned on PSP in Transport sector • Lessons Learned from PPP Projects• Case Studies on PPP Projects

Y

• MoT: In liaison with OCMEA Advisory Team development ofpricing and tariff setting policy for various MOT sub-sectors inrelation to PSP

• Guidelines on Prices/ Tariff Settings and Methods/ Rules forFuture Adjustment

Y

• MoT: In liaison with OCMEA Advisory Team development ofpolicy on government support for MOT sub-sectors

• Guidelines on government support Y

• MoT: In liaison with OCMEA Advisory Team development ofrisk allocation and risk mitigation policy for MOT sub-sectors

• Risk Management for PSP Transportation Sub-Sectors Y

• MoT: Review and analysis of various proposals for PSP • Demonstration PSP Projects Y• MoT: Input for the work program development and aid

coordination task of the CMEA Advisory Services• Coordination on the above three issues and participation in the

identification and prioritization of the model projectsY

• MoT: Continued implementation of components of Sector PSPStrategy

• Design of PPP Node• Post Summit Initiatives

Y

• MoT: Input for development of Standard Contracts andguidelines on risk management, government support, pricingand tariff issues and economic/financial evaluations for sub-sectors

• PPP Procedures Manual Y

• MoT: Input on further development of regulatory frameworksfor railways

• Railway law was passed and government regulation (PP) draftedwith PPITA input, but PP is yet to be established.

Y

• MoT: Input on further development of regulatory frameworksfor maritime sector

• Maritime law was passed and government regulation (PP) draftedwith PPITA input, but PP is yet to be established.

Y

• MoT: Input on further development of regulatory frameworksfor aviation

• Aviation law was drafted with PPITA input, but is yet to beestablished.

Y

Development

• MoT: Legal Review on awarded PSP projects • Legal review of Tanjung Perak/Teluk Lamong Port in Surabaya,the Margagiri – Ketapang Ferry Terminal, Soekarno-Hatta AirportRail Link and others

Y

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• MoT: Input on legal provisions for Regulatory Body in varioussub-sectors as appropriate

• Institutional Reforms and Establishing Regulatory Bodyprocedures were established but were never implemented

N

• MoT: Screening of proposals, e.g.o Tanjung Api-Api Ocean Harboro Kualanamu Airport development)o Trans Sumatera Railwayo Ferry Transport at Sabang, Belawan, Batam, and Kupang

• Review and preparation of information memoranda on TanjungPerak/Teluk Lamong Port in Surabaya, the Margagiri – KetapangFerry Terminal, Soekarno-Hatta Airport Rail Link and others

Y

MoPW• MoPW: MOPW Sector/Sub-sector PSP Framework

Assessment• PSP framework assessment Y

• MoPW: In liaison with OCMEA Advisory Team prioritization ofissues identified in MOPW PSP Framework Assessment anddevelopment of work program to address issues

• Working Paper on Review of current PSP proposal Y

• MoPW: Input on preliminary screening/evaluation of TAassignments based sector/sub-sector PSP FrameworkAssessment and on Country PPI Strategy

• PSP action plans Y

• MoPW: Input for sectoral implementing guidelines for therevised Keppres 7

• Input to various Laws and Regulations Y

• MoPW: Input for revised road law and its implementingregulations

• Input to various Laws and Regulations Y

• MoPW: Initial review of viability and timing of toll roadproposals

• List of PSP Potential projects based on previous studies byvarious donors

• Working paper on identification of activities with potential for PSP• Screened and prioritized list of PSP pilot project prospects

Y

• MoPW: Lesson Learned under PSP in Urban Infrastructuresand Toll Roads

• Lessons Learned from PPP Projects• Case Studies on PPP Projects

Y

• MoPW: Input for Government Regulation on Regulatory Bodyfor Water Supply and Waste Water Services

• Assistance on the establishment of BPP-SPAM, however remainsa ministerial body and not an independent agency

Y

• MoPW: Review of PSP Funding Facility for UrbanInfrastructures at local level

• Working Paper on PSP modalities• Working Paper on Funding Arrangements

Y

• MoPW: In liaison with OCMEA Advisory Team development ofpricing and tariff setting policy for various MOPW sub-sectorsin relation to PSP

Y

• MoPW: In liaison with OCMEA Advisory Team development ofpolicy on government support for MOPW sub-sectors

Y

In-house advisory TAto Ministry ofSettlement andRegionalInfrastructure andother support for PSPFrameworkdevelopment

• MoPW: In liaison with OCMEA Advisory Team development ofrisk allocation and risk mitigation policy for MOPW sub-sectors

• Working Paper on Key Policy issues including tariffs/pricing,government support/subsidies, risk management

Y

40

• MoPW: Legal Review on awarded PSP projects • Assistance in JORR and JORR II Ring Road projects, TransjavaExpressway feasibility study, Solo-Kertosono Toll Road,Tangerang Water Supply, Bandung Water Supply, Cirebon WaterSupply and other smaller projects.

Y

• MoPW: Review/analysis of specific proposals for PSP, e.g.o Corporatization of Perum Jasa Tirta

• Assistance in JORR and JORR II Ring Road projects, TransjavaExpressway feasibility study, Solo-Kertosono Toll Road, variousbatches of toll road projects, Tangerang Water Supply, BandungWater Supply, Cirebon Water Supply and other smaller projects.

Y

• MoPW: Promoting PSP projects for water supply in 4 cities(Pontianak, Sabang, Makassar, and Banjarmasin)

• Promoted in Bandung, Cirebon, Tangerang (financial close),Banjarmasin (currently operating), Samarinda (currentlyoperating), Semarang (currently operating), and others

Y

• MoPW: Establishment of Secondary Mortgage Facility (SMF) • Did not occur N• MoPW: Input for development of Standard contracts and

guidelines on risk management, government support, pricingand tariff issues and economic/financial evaluations for sub-sectors.

• Working paper on selection criteria for RFP• Demo project preparation documentation• Best practice standard toll road concession agreement

Y

• MoPW: Input on guidelines on local government toll roadbusiness

• Input provided, but did not occur N

• MoPW: Legal review of proposals for local legislation in relationto PSP Funding Facility

• Did not occur N

• MoPW: Capacity building on PSP investment evaluation withinMOPW

• Capacity building program established and implemented Y

• MoPW: Input for Government Regulation on Road Fund • Input provided, but did not occur N• MoPW: Input for Government Law on Toll Roads • Input to Law 38/2004 on Roads Y• MoPW: Input for Government Regulation on Water Supply

Services• Input to law 7/2004 on Water Resources• Input to implementing government regulation

Y

• MoPW: Input for Government Regulation on Sanitation • Input to implementing government regulation Y• MoPW: Input for implementation of PSP Funding Facility for

Urban Infrastructures• Working papers on Indonesia Infrastructure Financing Facility,

later taken forward by a separate projectY

• MoPW: Input on legal provisions for establishment ofRegulatory Body in Water Supply

• Assistance on the establishment of BPP-SPAM, however remainsa ministerial body and not an independent agency

Y

• MoPW: Input on legal provisions for establishment of RoadFund Board

• Establishment of Road Fund did not occur N

Project PreparationSupport

• MoPW: Screening of project proposals e.g.:o Toll Road and/or Urban Infrastructure project

• Assistance in JORR and JORR II Ring Road projects, TransjavaExpressway feasibility study, Solo-Kertosono Toll Road, variousbatches of toll road projects, Tangerang Water Supply, BandungWater Supply, Cirebon Water Supply and other smaller projects.

Y

41

• MoPW: Implementation support to projects • Detailed feasibility study and transaction support provided toTangerang Water Supply and Solo-Kertosono Toll Road projects,both of which are moving towards construction and operation.

Y

BAPPENAS• Review of Private Sector Infrastructure Development Facility

(PSIDF)• Working papers on Indonesia Infrastructure Financing Facility,

later taken forward by a separate projectY

42

Annex 3. Economic and Financial Analysis (including assumptions in the analysis) Economic and financial analyses are not customarily done for this type of project.

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/ Specialty

Lending Stephen Dice Sr. Urban Specialist EASIS

David Hawes Infrastructure Specialist –Consultant

EASIS

Aniruddha Dasgupta Urban Sector Coordinator EASIS Naseer Ahmad Rana Sr. Procurement Specialist EAPCO

Rajiv Sondhi Sr. Financial Management Specialist

LOAFC

Yogana Prasta Sr. Disbursement Officer EACIF Karin Nordlander Lead Counsel LEGES Anthony Toft Senior Counsel LEGES Albert Wight Operations Advisor – Consultant EAPCO

Supervision/ICR Hongjoo J. Hahm Lead Infrastructure Specialist EASIS Aijaz Ahmad E T Consultant FEU Novira Kusdarti Asra Financial Management Specialist EAPCOAndre A. Bald Infrastructure Specialist EASIS Rodrigo G. Bazzano Barfield E T Consultant EASURNatasha Beschorner Senior ICT Policy Specialist CITPO Steven Charles Burgess Senior Operations Officer EAPCORichard Cabello Sr Investment Officer CASDRAniruddha Dasgupta Lead Urban Planner ECSSDJan Drozdz Sr Water & Sanitation Spec. AFTU2Mesra Eza E T Consultant EASTEJohn Holdaway Consultant EASIS Migara Jayawardena Senior Infrastructure Specialist EASTEPaul G. McCarthy Consultant EACIF Eiji Oyamada Consultant WBISDEka Zarmen Putra Consultant EASTERizal H. Rivai Sr Procurement Spec. EAPCOImad Saleh Senior Procurement Specialist EAPCORajiv Sondhi Senior Finance Officer LOAFCAndry Utama Thamrin Finance Analyst LOADMAndri Wibisono E T Consultant EASIS

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(b) Staff Time and Cost Staff Time and Cost (Bank Budget Only)

Stage of Project Cycle No. of staff weeks USD Thousands (including

travel and consultant costs)Lending

FY02 4 52.22 FY03 21 131.39 FY04 0.00 FY05 0.00 FY06 0.00 FY07 0.00 FY08 0.00

Total: 25 183.61

Supervision/ICR FY02 0.00 FY03 0.00 FY04 5 63.06 FY05 14 59.39 FY06 21 105.48 FY07 42 96.32 FY08 31 65.32 FY09 26 55.38

Total: 139 444.95

Annex 5. Beneficiary Survey Results (if any) None conducted.

Annex 6. Stakeholder Workshop Report and Results (if any) None conducted.

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Annex 7. Summary of Borrower’s ICR and/or Comments on Draft ICR Borrower’s comments on the ICR are as follows:

45

A copy of the Borrower’s ICR is available at: http://irispublic.worldbank.org/85257559006C22E9/GetContent?OpenAgent&URL=http://irispublic.worldbank.org/85256D6D0070FA6A/(SEC)?OpenAgent&I4_SERVICE=VC&I4_KEY=6751DB67383D8B6685256BCF0062F083D313D19F90D5256785256BD60028F638&I4_DOCID=9F184B13D4C07339852575C9002801A8&

46

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders None requested.

Annex 9. List of Supporting Documents 1. Implementation Completion and Results: Guidelines, OPCS, August 2006 2. Memorandum of the President on a Country Assistance Strategy for Indonesia, 2003,

World Bank 3. Country Assistance Strategy FY 2004-2008, World Bank 4. Country Partnership Strategy FY 2009-2012, World Bank 5. Project Appraisal Document for Proposed PPITA Loan, April 2003, World Bank 6. Project Information Document for PPITA Loan, World Bank 7. PPITA Loan Agreement, 2 July 2003 8. PPITA Implementation Status Reports 9. World Bank Supervision Mission Aide Memoires 10. Borrower’s ICR 11. Borrower’s comments on World Bank ICR

Puncak Jaya(5030 m)

Obi

Ceram

Buru

SULAWESISUMATERA

Bali

KALIMANTAN

Raba

Pematangsiantar

Sorong

Timika

FakfakAmahai

PaluJambi

Mataram

BandungSurabaya

Semarang

Palembang

Pekanbaru

Palangkaraya

Bandar Lampung

Serang

PAPUA

19

21

22

26

29

20

23

25

24

2827

30

32

31

33

12

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13

1415

8

67

3

54

2

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17 18

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9

PAPU

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EA

A U S T R A L I A

THAILAND

MYANMAR

19

21

22

26

29

20

23

25

24

2827

30

32

31

33

12

11

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1415

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67

3

54

2

1

16

17 18

10

9

Balikpapan

Parepare

Baubau

Tarakan

Raba

Ende

Waingapu

Pematangsiantar

Sorong

Merauke

Timika

FakfakAmahai

Palu

Ambon

Gorontalo

Jambi

Medan

Kupang

Padang

Manado

Mataram

Bandung

Kendari

Denpasar

Surabaya

Semarang

Bengkulu

Jayapura

Palembang

SamarindaPontianak

Pekanbaru

Yogyakarta

Banda Aceh

Bandjarmasin

PalangkarayaPangkalpinang

Makassar

Ternate

Bandar Lampung

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Manokwari

Mamuju

Tanjungpinang

JAKARTA

PAPU

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A U S T R A L I A

SINGAPORE

VIETNAM

THAILAND

MYANMAR

TIMOR-LESTE

BRUNEI

PHILIPPINES

MA L A Y

SI

A

CelebesSea

Java Sea BandaSea

Arafura Sea

SuluSea

PACIFIC OCEAN

I N D I A N O C E A N

PAPUA

AruIs.

KaiIs.

TanimbarIs.

Halmahera

Biak

Yapen

Morotai

Misool

Waigeo

Peleng Obi

Muna

Ceram

Buru

SULAWESI Sula Is.

Timor

FloresAlor

WetarMoa

Babar

Sumba

SumbawaLombokJAWA

NatunaBesar

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SUMATERABangka

Lingga

Nias

Siberut

Enggano

Simeulue

TalaudIs.

Bali

KALIMANTAN

Men t a w

a i I s .

Puncak Jaya(5030 m)

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115° 120° 125°

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INDONESIA

NANGGROE ACEH DARUSSALAMSUMATERA UTARARIAUSUMATERA BARATJAMBIBENGKULUSUMATERA SELATANLAMPUNGBANGKA-BELITUNGBANTEND.K.I. JAKARTA

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JAWA BARATJAWA TENGAHD.I. YOGYAKARTAJAWA TIMURBALINUSA TENGGARA BARATNUSA TENGGARA TIMURRIAU KEPULAUANKALIMANTAN BARATKALIMANTAN TENGAHKALIMANTAN SELATAN

KALIMANTAN TIMURSULAWESI UTARAGORONTALOSULAWESI TENGAHSULAWESI BARATSULAWESI SELATANSULAWESI TENGGARAMALUKU UTARAMALUKUPAPUA BARATPAPUA

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IBRD 33420R2

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INDONESIASELECTED CITIES AND TOWNS

PROVINCE CAPITALS

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RIVERS

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PROVINCE BOUNDARIES

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This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.

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