Document of

The World Bank

Report No: 21029-IND

PROJECT APPRAISAL DOCUMENT

ONA

PROPOSED LOAN

IN THE AMOUNT OF US$11.7 MILLION AND

A PROPOSED CREDIT IN THE AMOUNT OF SDR 4.6 MILLION AND

A GEF GRANT IN THE AMOUNT OF SDR 2.0 MILLION

TO THE REPUBLIC OF INDONESIA

FOR THE

WESTERN JAVA ENVIRONMENTAL MANAGEMENT PROJECT

IN SUPPORT OF THE FIRST PHASE OFTHE WESTERN JAVA ENVIRONMENTAL MANAGEMENT PROGRAM

MAY 15, 2001

Urban Development Sector UnitEast Asia and Pacific Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective April 25, 2001)

Currency Unit = RupiahlRp = US$.0001

US$1 = 9,600

FISCAL YEARJanuary I -- December 31

ABBREVIATIONS AND ACRONYMSADB Asian Development BankAMDAL Environmental Impact Assessment (process)APL Adaptable Program LoanBAPPEDA-1 Provincial Development Planning AgencyBAPPEDA-II District Development Planning AgencyBAPEDAL National Environrnental Impact Management AgencyBAPEDALDA Provincial Environmental Impact Management AgencyPropinsi

BAPEDALDA Municipality/District Environmental Impact Management AgencyKotamadya/Kabupaten

BAPPENAS National Development Planning AgencyBOD Biochemical Oxygen DemandBOO/BOT Build-Own-Operate/Build Operate Transfer (private sector participation

mechanisms)Bupati Chief executive of a kabupatenCAS Country Assistance StrategyCDS City Development StrategyCEF Comnnunity Environment FundCPSU Central Program Support UnitDKI Jakarta Jakarta Metro Area (Daerah Khusus Ibukota Jakarta)DGURD Directorate General of Urban and Rural Development, Ministry of Settlements

and Regional Infrastructure (also known as Kimpraswil)DPRD Provincial Council of a Province or the Local Council of a Kabupaten or a

KotaEA Environmental AssessmentEMP Environmental Management PlanFMS Financial Management SystemGBWMC Greater.Bandung Waste.Maiiagement CorporationGEF Global Environment FundGHG Greenhouse GasGOI Government of IndonesiaGTZ German Technical AssistanceIPLT Wastewater Treatment PlantIUIDP Integrated Urban Infrastructure Development Project

Vice President: Mr. Jemal-ud-din Kassum, EAPVPCountry Manager/Director Mr Mark Baird, EACIF

Sector Manager/Director: Mr. Keshav Varna, EASURTask Team Leader/Task Manager: Mr Finn Nielsen, EASUR

JABOTABEK Jakarta metropolitan area (Jakarta, Bogor, Tangerang, Bekasi)JIEP Jakarta Industrial Estate PulogadungJUDP3 Third Jabotabek Urban Development Project (Ln. 3246-IND)JWMC Jabotabek Waste Management CorporationKabupaten DistrictKota Incorporated MunicipalityKIP Kampung (poor neighborhood) Improvement ProgramLACI Loan Administration Change InitiativeMEIP Metropolitan Environmental Improvement ProjectMOF Ministry of FinanceMSRI Ministry of Settlements and Regional InfrastructureMOU Memorandum of UnderstandingNGO Non-Governmental OrganizationNIMBY "Not In My Back Yard" phenomenon associated with siting landfillsNKLD "State of the Environment" ReportOECF Overseas Economic Cooperation Fund (of Japan)OED Operations Evaluation DepartmentO&M Operations and MaintenancePAP Project Affected PersonPER Programmatic Environment ReviewPLG Participating Local GovernmentPMR Project Management ReportingPROKASIH Clean Rivers ProgramPropenas Parliamentary DecreeRKL/RPL Environment Management/Monitoring PlansSekwilda Chief Administrative Officer - Secretary of provincial or local governentSLA Subsidiary Loan AgreementTA Technical AssistanceTPA Solid Waste LandfillUKL/UPL Environmental Management and Monitoring PlansUSAID United States Agency for International DevelopmentWalikota Chief Executive of a KotaWJEMP Westem Java Environmental Management Project

I

INDONESIAWESTERN JAVA ENVIRONMENTAL MANAGEMENT PROJECT

CONTENTS

A. Program Purpose and Project Development Objective Page

1. Program purpose and program phasing 32. Project development objective 33. Global objective 34. Key performance indicators 3

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 42. Main sector issues and Government strategy 43. Sector issues to be addressed by the project and strategic choices 64. Program description and performance triggers for subsequent loans 6

C. Program and Project Description Summary

1. Project components 92. Key policy and institutional reforms supported by the project 103. Benefits and target population 104. Institutional and implementation arrangements 10

D. Project Rationale

1. Project alternatives considered and reasons for rejection 132. Major related projects financed by the Bank and other development agencies 153. Lessons leamed and reflected in proposed project design 154. Indications of borrower commitment and ownership 165. Value added of Bank support in this project 17

E. Summary Project Analysis

1. Economic 182. Financial 193. Technical 204. Institutional 205. Environmental 206. Social 227. Safeguard Policies 25

F. Sustainability and Risks

1. Sustainability 252. Critical risks 263. Possible controversial aspects 29

G. Main Loan/Credit/GEF Grant Conditions

1. Effectiveness Condition 302. OtherLoan/Credit/GEF Grant Covenants 30

H. Readiness for Implementation 31

I. Compliance with Bank Policies 31

Annexes

Annex 1: Project Design Summaiy 32Annex 2: Detailed Project Description 39Annex 3: Estimated Project Costs 64Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Sunmmary 69Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 75Annex 6: Procurement and Disbursement Arrangements 77Annex 7: Project Processing Schedule 91Annex ,8: Documents in the Project File 92Anmex 9: Statement of Loans and Credits 96Annex 10: Country at a Glance 98

MAP(S)IBRD 30672

INDONESIA

Westem Java Environmental Management Project

Project Appraisal Document

East Asia and Pacific RegionEASUR

Date: May 15, 2001 Team Leader: Finn NielsenCountry Director: Mark Baird Sector Director: Keshav VarmaProject ID: P040528 Sector(s): US - Urban Environment, VP - Pollution Control

/ Waste ManagementLending Instrument: Adaptable Program Loan (APL) Theme(s): Environment; Urban

Poverty Targeted Intervention: Y

Global Supplemental ID: P068051 Team Leader: Finn NielsenSector Manager/Director: Keshav Varma

Supplement Fully Blended? Yes Sector(s): US - Urban Environment; VP - Pollution Control/ Waste Management

Program Financing DataEstimated

APL Indicative Financing Plan Implementation Period Borrower_________ _______________ ~~(Bank FY)

IDAIIBRD Others Total Commitment ClosingUS$ m % US$ m US$ m Date Date

APL 1 17.53 77.1 5.22 22.75 08/01/2001 06/30/2005 Republic of IndonesiaLoan/Credit

APL 2 49.27 75.2 16.21 65.48 01/01/2004 12/31/2007 Republic of IndonesiaLoan]Credit

APL 3 22.09 54.1 18.73 40.82 08/01/2006 12/31/2010 Republic of IndonesiaLoan/Credit _ _ _ _ _ _ _ __ _ _ _ _ _

Total 88.89 _ 40.16 129.05[X] Loan [X] Credit [X] Grant [ ] Guarantee [ O Other:

For Loans/Credits/Others:Amount (US$m): US$11.78 million (IBRD); and US$5.75 (IDA) (SDR 4.60 million) shown in the IDA/IBRD column,and a Grant of SDR 2 million (US$2.54 million equivalent) from GEF in the "Others" column. For APL2 and APL3, theblend IDA/IBRD will be determined at the time of negotiations, reflecting Indonesia's eligibility for IDA at the time.A total of $10 million has been committed from GEF; the remaining $7.46 million would be disbursed over APL2 andAPL3.

Proposed Terms (IBRD): Variable Spread & Rate Single Currency Loan (VSCL)Grace period (years): 5 Years to maturity: 20Commitment fee: 0.75 Front end fee on Bank loan: 1.00%

Proposed Terms (IDA): Standard CreditGrace period (years): 10 Years to maturity: 35Commitment fee: 0.50 Service charge: 0.75%

Financing Plan (US$m): Source Local Foreign TotalBORROWER 2.60 0.08 2.68IBRD 8.21 3.56 11.77IDA 4.00 1.75 5.75GLOBAL ENVIRONMENT FACILITY 2.52 0.01 2.53

Total: 17.33 5.40 22.73

Borrower/Recipient: REPUBLIC OF INDONESIA

Responsible agency: MINISTRY OF SETTLEMENTS AND REGIONAL INFRASTRUCTUREDirectorate General of Urban and Rural DevelopmentAddress: Jl.Patimura No. 20, Jakarta, IndonesiaContact Person: Ir. Budiman Arief, Director General of Urban and Rural DevelopmentTel: 62-21-72-79-6155 Fax: 62-21-72-79-6155 Email:

Other Agency(ies):BAPPENAS (National Development Planning Agency)Address: Jl. Madiun No. 4-6, 3rd Floor, Jakarta, IndonesiaContact Person: Mr. Dedi M. Masykur Riyadi, Deputy of Regional and Natural ResourcesTel: 62-21-334-819 Fax: 61-21-310-1921 Email: sudjana@bappenas.go.id

Estimated disbursements ( Bank FY/US$m):FY 2002 2003 2004 2005

Annual 1.98 6.70 4.95 3.90Cumulative 1.98 8.68 13.63 17.53

Project implementation period: 2001-2004Expected effectiveness date: 10/31/2001 Expected closing date: 06/30/2005

OCS APPAD F-. R. Mdh 2MM

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A. Program Purpose and Project Development Objective

1. Program purpose and program phasing:

As reflected in Indonesia's National "Agenda 21" and supporting parliamentary decrees, theGovermment of Indonesia (GOI) has embarked on a campaign to reduce environmental pollution. Theultimate goals of the program are to improve living conditions and improve Indonesia's internationalcompetitiveness. A critical priority is improving urban environmental management. GOI has elected toinitiate its environmental program by focusing first on urban areas in western Java including Jakarta.These areas are home to most of Indonesia's industries and have severe pollution problems which affect alarge and dense population. They were also among those hardest hit by the recent economic crisis. TheBank has been requested to assist with a nine-year program to address the local governments' highestpriority environmental problems. The proposed program falls within the Bank's Country AssistanceStrategy (CAS), which was developed in partnership with GOI. The program will:

(a) strengthen institutionally and economically the local, provincial and regional institutionsresponsible for waste management and environmental control;

(b) develop local environmental strategies and plans within the national strategy;(c) increase community awareness and participation in environmental management both at the

local government and community levels;(d) improve waste collection and disposal as well as support activities directed at waste reduction,

reuse and recycling;(e) improve the environmental conditions of a number specific, high priority localities; and(f) assist in developing a commercial level composting industry through a grant from the Global

Environmental Facility (GEF).

The nine-year program will be implemented with a three-phase adaptable program loan (APL).

2. Project development objective: (see Annex 1)

The APLI, to be implemented over 40 months, will: (a) lay the strategic framework which will form theinstitutional and community foundation for sustainable environmental waste management among theparticipating local and provincial governments; (b) prepare detailed designs for the investments to beimplemented mostly during the subsequent two phases; and (c) form the basis for reducing Greenhouse Gas(GHG) emissions by establishing commercial scale compost production.

3. Global objective: (see Annex 1)

The program supports the Global Environment Facility (GEF) objective of reducing methane generationand therefore greenhouse gas (GHG) emissions. This will be accomplished by supporting increasedcomposting of the organic fraction of municipal solid waste instead of dumping it in landfills. Compostingreduces GHG emissions by (a) avoiding the production of methane gas from anaerobic decomposition oforganic waste; and (b) producing a useful agricultural input that reduces the need for synthetic fertilizers(which contribute significant GHG emissions through their production).

4. Key performance indicators: (see Annex 1)

The performance indicators mentioned in this section apply to APL I components only.The key policy indicators include the following: (a) successful development and adoption/implementationof: (i) policies on hospital waste management; (ii) landfill advisory committees; (iii) communityenvironment facilities; (iv) Jabotabek Waste Management Corporation and Greater Bandung Waste

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Management Corporation with local funding; and (v) an environmental awareness program; and (b) publicreview of the annual "State of the Environment" reports.

Key physical indicators include: (a) production and marketing of some 60,000 tons of additional qualitycompost; and (b) establishment of some 1000 plus community environment subprojects, known as "greenKIP" projects, through participating local governments.

A key social indicator is assistance provided to some 7,000 waste-pickers and collectors.

B. Strategic Context1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)Document number: R2001-0001(IDA\R2001-0003;IFC\R2001-0002) Date of latest CASdiscussion: 01/30/2001

The CAS of 2001 emphasizes three broad objectives: sustaining economic recovery and promotingbroad-based growth, building national institutions for accountable government, and delivering better publicservices to the poor. The proposed Western Java Environment Management Project substantiallycontributes to the third objective by promoting more efficient service delivery by local governments. Theenvironment will be improved in the participating urban areas mostly by improving solid wastemanagement, but also by defining programs for industrial and medical waste, by monitoring environmentalperformance systematically, and by carrying out public awareness campaigns and local institutionalstrengthening. Assistance to waste-pickers (including waste collectors in residential and industrial areas)will contribute towards the larger target of poverty reduction.

la. Global Operational strategy/Program objective addressed by the project:

The GEF program will reduce greenhouse gasses and provide other environmental benefits such as moreefficient use of synthetic fertilizers, reduced soil erosion, and more sustainable agricultural practices. Theproject is fully consistent with the Short Term Climate Change window of the GEF's Operational Strategy.It meets the criteria for such projects in that it is: (a) cost effective (a unit GHG abatement cost of about$1.75 per tonne of carbon equivalent); (b) likely to succeed as shown through previous pilot activities; and(c) one of Indonesia's top priority GHG abatement initiatives as reflected in the Algas Report, pp. 13 and15, and is strongly supported by the community and local administrators. An independent technicalcommittee will be established to monitor and verify the compost production and GHG emission reductions.This committee will establish Indonesia as a "center of excellence" for both compost production andresearch.

2. Main sector issues and Government strategy:

The sector is defined here as "urban environment and pollution and waste management". The main issuesare:

a) high levels of air and water pollution from many sources, especially solid waste, vehicleemissions, industrial and residential waste water;b) low public awareness about the health impacts of urban pollution and ways to address thatpollution;c) inadequate enforcement of existing, appropriate regulations and incorrect pricing for servicesand "violations" of rules;d) institutional weaknesses at all levels, unclear roles of each level, and thus poor coordination,resulting in poor service delivery;e) inadequate capital investment to keep up with population and waste growth;

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f) low human resource capacity; andg) insufficient recurrent budgets, linked to poor cost recovery, resulting in inadequate private sectorparticipation and overall inefficiency.

The main issues in the sector have been well studied and are documented in the following reports:

Indonesia Environment and Development: Challenges for the Future (Report No. 12083-IND, 1994)This report provides a comprehensive analysis of environmental challenges facing Indonesia, as

well as their causes, impacts, the costs and ways to finance remediation, and a priority action list. Thereport provides order of magnitude estimates which are sufficient to identify the highest priority issues,namely, water supply and sanitation, solid waste management, vehicle emissions and industrial pollutioncontrol particularly in Java.

Private Sector Participation in Solid Waste in Indonesia (Informal Sector Report, 1995)This report summarizes barriers to greater private sector participation in waste management

activities (e.g., lack of technical knowledge, inadequate planning and contract periods being too short) andsuggests ways to improve service delivery through the judicious use of private firms, largely throughincreased competition, accountability and transparency.

Community Based Composting and Recycling Pilot Project (1996)Through the Fund for Innovative Approaches in Human and Social Development, the Bank carried

out six integrated pilots under three Bank urban projects (in Sulawesi, Bali, and East Java). The pilotprojects provided many lessons (e.g., the community's enthusiasm and technical feasibility), and weresuccessful in highlighting the potential for community involvement in waste management activities.

Jabotabek Environmental Manaaement Strategv (1995)Funded by the Third Jabotabek Urban Development Project, this comprehensive report reviewed

the causes of environmental degradation in Jabotabek (economic and technical review) and prioritizedactivities to respond to the environmental degradation. This study was part of a similar exercise (assistedby the UNDP Municipal Environmental Improvement Program) carried out in Kuala Lumpur, Manila,Bombay, Katmandu, and Beijing, and is the basis of this project.

Other ReportsDuring project preparation, five studies/reports were prepared: (a) Community-Based Solid Waste

Management, May 1998; (b) A Rapid Appraisal of Industrial Pollution Abatement in Semarang Indonesia- Issues and Opportunities, September 1998; (c) Review of the Kampung Improvement Program -Evaluation in Jakarta, September, 1998; (d) Evaluation of the Sanitation Component of KIP JUDP3, July1996; and (e) Assessment of Popular Participation of KIP JUDP3, June 1995. These reviews highlightedthe complexity of community involvement in urban environmental activities and the clear need to bridgecommunity demands and local govemment capabilities. Preparation of the JUDP3 ICR also highlighted theneed for local government "ownership" and management of project implementation, as well as the beneficialimpact of community involvement.

Two other reports were prepared by the Bank's Environment and Social Unit in 1999: (a) AReview of Landfills in Indonesia, and (b) Environmental Management Plan Implementation in Indonesia:Review of Selected Urban Projects. Both reports highlighted the difficulties in ensuring that landfills areoperated properly and recommended greater community involvement and more attention to operations.

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3. Sector issues to be addressed by the project and strategic choices:

The project is part of the Government's program to improve the local environments and competitiveness ofurban areas and to bring about improved municipal management, greater cost recovery, and reducedenvironmental contamination. The project will support the shift of decision-making from centralgovernment to some of the most capable local governments in Indonesia. The project addresses the localand provincial governments' highest priority environmental problems, as perceived by the localgovermments and documented in the studies referred to in section 2, above. A copy of GOI's draft ProgramDevelopment Letter is included as an attachment to Annex 1.

Inadequate Provision of Municipal Services. Services (e.g., waste collection, transport and disposal) arepoorly integrated across agencies and the private sector. There has been insufficient focus on costrecovery, inadequate and inefficient investments, poor operations management and inefficient asset use.With the decentralization of responsibilities for provision of all services to local governments, sustainableprovision of these services has come into focus.

Local Government Leadership. Local governments are the key agencies in addressing urbanenvironmental issues but they are easily overwhelmed by the magnitude of environmental problems.Planning is piecemeal: the three levels of government (local, provincial, central) seldom coordinate theirplans, nor do the adjacent local governments. Many studies exist but they tend to be driven by theavailability of extemal financing. Communities have little involvement in decision-making or monitoring ofthe services provided. Policy issues such as incentives, institutional arrangements, implementationcapabilities, and proper landfill siting processes are seldom addressed. The project will support localgovernments, as provincial and national government agencies delegate implementation and enhance theirown roles of "assistant" and "regulator" respectively.

Solid Waste Management. The project focuses mainly on solid waste which is a major source of air andwater pollution and local flooding. Due to factors such as income growth, lifestyle changes andconsumerism, the rate of waste generation is increasing faster than the rate of local population growth, andthe composition is changing even faster, compounding waste management problems. Environmentalupgrading needs a holistic approach. For example, making incremental improvements in many interrelatedareas, such as improving solid waste collection, will have minimal benefits in BOD loadings, if there arenot corresponding advancements in sewerage and industrial pollution control.

Composting Viability. Composting can be a less technically demanding option than sanitary landfiUing(with methane recovery), land reclamation, or incineration and should provide a cost effective way to dealwith a part of the growing waste stream. The GEF funding supports the piloting project to scale up theproduction of compost from a neighborhood activity to a industrial commercial level with marketing as anagro-chemical product.

4. Program description and performance triggers for subsequent loans:

APL1 - August 31, 2001 to December 31, 2004

Program Area. From the outset, participation was open to all local governments in westem Java andJakarta. During preparation, some local governments withdrew for various reasons. At present the threeprovinces of DKI Jakarta, West Java and Banten are participating as well as a total of eight localgovemrnments including: Bandung (City and District), Bekasi (City and District), Bogor City, Cilegon City,Cirebon City, Depok City, Serang District, and Tangerang City.

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1. Overall Urban Environmental Management (US$11.1 million)

Development of provincial and local environmental strategies;Development of a strategic plan for the collection and disposal of medical waste;Management and technical adivsory services to the Central Program Support Unit;Engagement of local communities in decision-making in environmental management includingcommunity consultations in connection with the issuance of the annual 'state of the environment'reports, and establishment of a landfill advisory board for each existing landfill/waste dump;Review and improvement of the curriculum for environmental education in the public schoolsystem;Program to build local environmental awareness in DKI Jakarta;Preparation of a Cilegon/Serang 'Emergency Response Plan' for potential large scale industrialaccidents;Conduct of feasibility studies, detailed engineering design, and works to treat wastewater and toimprove the Kesenden Oxidation Pool in Kota Cirebon;Study, detailed engineering design (DED) and construction for lake rehabilitation in Kota Depok;Preparation of a sewerage scheme to improve the quality of the Cikapundung River in BandungCity;Feasibility study, environmental assessment and DED, and construction for a domestic wastewatertreatment plant in Kota Tangerang;DED and drainage construction works for urban areas in Kota Depok;Development of city parks and greening in Kota Cirebon.

2. Solid Waste Management (US$6.88 million)

Development of the organizational structure for the Jabotabek and Greater Bandung WasteManagement Corporations, and establishment of these organizations;Preparation of feasibility studies for landfills and preparation of waste management plans,including environmental impact assessments and remedial plans (AMDALs), as well asconstruction of Kopiluhur landfill (Kota Cirebon) and provision of transport and collectionfacilities and heavy equipment;Improved solid waste management services, feasibility study, AMDAL, DED for new landfill inEast Serang;Design of the GEF Grant Mechanism for compost, development of a market for agricultural use ofcommercial scale composting and establishment of a technical advisory team;Development of compost facilities in Jakarta (100 tons per day minimum) including environmentalassessments, financing plans, detailed engineering design, and marketing assistance program; orengagement by DKI Jakarta in a multi-year contract for procurement of 100 tons per day of goodquality compost from the market;Preparation of an assistance program for waste-pickers (both at landfills and collectors in thecities) and development of a community-based solid waste management program for wastereduction through reuse, reduce and recycle ("3Rs"); andConstruction of a new solid waste disposal site in Kota Tangerang (feasibility studies, AMDAL,DED will be done under TA to the CPSU in component 1).

3. Community and Private Sector Participation (US$1.86 million)

Preparation of a program design and implementation plan to reduce waste from small andmedium-size industries;

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- Preparation of program design and implementation plan for a Community Environmental Facility(CEF) to assist communities in developing activities and small businesses to reduce environmentalpollution;

- Preparation of a program to reduce pollution from soybean processing industries in central Jakarta,and support to soybean processing and salted fish industries in northem Jakarta;

- Revision of the design of the plans for the wastewater treatment plant in the Jakarta IndustrialEstate Pulogadung (JIEP) to include wastewater from neighboring residential areas, preparation ofa environmental impact assessment (AMDAL), detailed design, and preparation of managementand financing plans; and

- Feasibility studies for centralized wastewater treatment for industries in Serang and Tangerang.

4. Composting Support (GEF Program) (US$2.79 million)

- Disbursement of grants and subsidies to compost producers for additional production in localgovernments participating in WJEMP.

Requirements (triggers! to proceed with APL2

a) Jabotabek Waste Management Corporation and Greater Bandung Waste ManagementCorporation have been established and their operations are funded partially by the revenuesgenerated from their transactions;

b) Each participating local government (PLG) has selected at least one landfill and established forthe landfill a neighborhood advisory committee that meets regularly;

c) The funding arrangement between the central government and local and provincial governmentshas been established for APL2 and APL3 activities, including the ratio of grant/counterpartmatching fund levels;

d) PLGs' solid waste net revenues have increased by 20% over FY200 1 net revenues;e) Waste management master plans for Jabotabek and Bandung regions have been updated,

agreed and publicly vetted. Environmental impact assessments, consistent with IDAenvironmental assessment requirements, and operating plans exist for all operating andproposed landfills;

f) At least eight annual "State of the Environment" reports, acceptable to IDA, have beenprepared by the participating local governments; and

g) An aggregate of at least 60,000 tons of quality, certified compost has been produced.

In order to proceed to APL2 at least 50% of participating local governments must have met the aboveconditions. Any local government not meeting the above "triggers" would not be eligible to proceed toAPL2. Appraisal of APL2 will take place about 20 months into APL l.

APL2 - January 1, 2004 to December 31, 2007

Construction of new TPAs (landfills);Conversion of vehicles to liquid petroleum gas;Implementation of hospital waste management strategy (part 1);Construction of industrial waste water treatment facilities;Procurement of solid waste management equipment;Assistance to small and medium-sized industries for pollution reduction;Phase 2 development community environment facilities; andContinued technical advisory support.

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Requirements to proceed with APL3

a) Jabotabek Waste Management Corporation and Greater Bandung Waste ManagementCorporation operating (operations funded by revenues);

b) Local governments' solid waste net revenues increased by 60% from tipping fees and privatewaste hauler license fees;

c) Public Advisory Boards for all TPAs (funded by local governments) have continued theiradvisory functions from APLI. Public discussions of landfill operations held at DistrictCouncils (DPRD);

d) The annual "State of the Environment" reports continue to be published and publiclydiscussed;

e) Any new community wishing to join the program must meet all conditions of APLI and APL2;and

f) At least 300,000 tons of quality, certified compost produced during APL2.

APL3 - January 1, 2007 to December 31, 2010

APL3 would be similar to APL2 with an additional focus on proper management of facilities built in APL Iand APL2. APL3 would require greater cost recovery, private sector participation, and contribution bylocal governments. Finally, APL3 would broaden the experiences gained under APL2 by opening theparticipation to a greater number of local governments, provided they meet the conditions of APL2.

C. Program and Project Description Summary

1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed costbreakdown):

APLI is largely focused on making managerial improvements, ensuring adequate planning andcommunity participation, and carrying out detailed engineering design of subsequent components,particularly for landfills (TPAs), wastewater treatment and septage treatment facilities (IPLTs). As APLI"sets the stage" for APL2 and APL3, efforts were made to minimize large civil works and equipmentprocurement in order to maximize policy development and capacity building first. In addition tobroad-based policy reforms, e.g., annual community-vetted environmental reporting, public advisoryboards, regional waste disposal options, and compost support, some activities with tangible and immediateenvironmental benefits are also included in APLI.

The GEF grant will support the development of viable compost production and marketing sytems.The GEF component has two parts. First, GEF will provide some US$2,156,000 for a program to providegrants to the producers of additional compost from municipal solid waste in the project area. This programwill be designed under one of the project's technical assistance packages and will be submitted for Bankapproval before proceeding. Once approved, the program will be administered by the EnvironmentalManagement Agency (Bapedal). Second, GEF will provide about $380,000, to be used for independentreviews of compost quality, production levels, and to assist in marketing. A total of $10 million has beenapproved by GEF, to be disbursed in approximately equal parts in APLI, 2, and 3.

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dcatie *a6 jf G0F %ofComponent Sector Coats %Of fineacki B fiank g GEF

_____________ (tUSM .:To*, Y5CXtal0 ) wssu: (U :SM p financing1. Overall Urban Urban 11.10 48.8 9.80 0.0 0.00 0.0Environmental Management Environment2. Solid Waste Management Pollution Control / 6.88 30.2 5.93 0.0 0.00 0.0

Waste Management3. Community and Private Other Environment 1.86 8.2 1.69 0.0 0.00 0.0Sector Participation4. Composting Support-GEF Urban 2.79 12.3 0.00 0.0 2.54 100.0

Environment

Total Project Costs 22.63 99.5 17.42 0.0 2.54 100.0Front-end fee 0.12 0.5 0.12 0.0 0.0

Total Financing Required 22.75 100.0 17.54 0.0 2.54 100.0

2. Key policy and institutional reforms supported by the project:

The key policy and institutional reforms supported by the project are: (a) improved cost recovery andprioritization for solid waste services, with a special focus on privatization of commercial services (localpublic agencies to concentrate on residential solid waste collection, especially in poor areas, or contractthese services to private companies); (b) establishment of the Jabotabek and Greater Bandung WasteManagement Corporations; (c) strengthened compost marketing associations to increase composting andbetter integration with the agricultural community (with GEF assistance); (d) establishment of provincialand local environmental strategies; and (e) preparation of annual plans ("State of the Environment" reports)for participating communities that highlight last year's achievements and next year's goals.

3. Benefits and target population:

The project will generate the following benefits: (a) environmental benefits, through improved solid wastecollection and disposal; wastewater treatmnent; reduced waste discharges from industries; (b) health benefitsthrough reduced risk of exposure to illnesses caused by improper waste disposal; and (c) institutionalreforms, through increased efficiency in waste management and disposal, greater accountability at the locallevel as a result of more active community participation and involvement of the private sector. Increasedproduction and agricultural application of compost will reduce the waste to be landfilled and increase soilproductivity and crop yields and by reducing use of other fertilizers. It will also reduce GHG emissions.

About 15% of the program's 30 million urban population, or 4.5 million, are poor and are often the mostaffected by sub-standard municipal services. These are considered the key beneficiaries. In addition,specific targeted efforts will be provided for about 350,000 people through programs for waste-pickers.

4. Institutional and implementation arrangements:

The project will be carried out in accordance with the Project Management Manual, acceptable tothe Bank. Issuance by DGURD of the Project Management Manual is a condition of effectiveness.The Manual will be written in Bahasa Indonesia and will include a description of procurement procedures(including a letter on national competitive bidding procedures) and standard documentation, reportingrequirements, financial management procedures including audit procedures, the project's performanceindicators, and the environmental criteria applicable to project and subproject design.

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Key implementation rests with the PLGs. Central govermment support will be provided mainly fortechnical support, coordination and monitoring, plus assistance with legislative and policy changes. Sincethe activities under this project transcend any single ministry, the Ministries of Finance, Home Affairs,Environment, Industry, Settlements and Regional Infrastructure, and BAPPENAS (the National PlanningDevelopment Agency) established a Project Coordination and Steering Committee to oversee project issuesat the central government level during project preparation. After project effectiveness, the role of thisProject Coordination and Steering Committee will change to that of a review committee and will be knownas the Project Coordination and Review Committee. The Project Coordination and Review Comrnmittee willbe responsible for: (a) reviewing and disseminating best practice and lessons learned among the PLGs; (b)review of the semi-annual progress reports by the Central Program Support Unit (CPSU); and (c) review ofthe PLGs' annual State of the Environment reports being prepared under the overall urban environmentmanagement component (see Annex 2 for details). The members of the Project Coordination and ReviewCommittee will be selected as a condition of effectiveness.

The PLGs would be supported by the CPSU, which would represent DKI Jakarta, West JavaProvince, Bapedal (National Environmental Impact Management Agency), and the Ministry of Settlementsand Regional Infrastructure (MSRI). (Banten Province will not be represented in the CPSU at projectstart-up because it was established as a province only during appraisal, and its cadre was not identified. Asand when it achieves the capacity to operate at normal strength, its representation will be reviewed.)Establishment of the CPSU, satisfactory to the Bank, is a condition of effectiveness. The CPSU willsupport the Project Coordination and Review Committee's review each PLG's annual State of theEnvironment Report. These reports would be compiled by the CPSU and made available to the public inBahasa Indonesia. The CPSU will implement the central government components and will provideassistance to the provincial and local governments.

At the provincial level, each province will establish a Provincial Program Support Unit (PPSU),satisfactory to the Bank, as a condition of effectiveness. The PPSU will be composed of members fromthe provincial sector units and will report to the Govemor. Its role is to supervise the implementation ofprovincial level components, and to coordinate between the CPSU and the LPSU.

At the local level, each PLG will pass a council resolution supporting its participation in theproject and agreeing to public consultation on environmental indicators and targets, and reportingmechanisms for annual progress on these targets, as a condition of effectiveness. In addition, eachPLG must establish a Local Program Support Unit (LPSU), satisfactory to the Bank, as a condition ofeffectiveness. The LPSU will be located in the local development planning agency (Bappeda-IF). It will beheaded by the chief administrative officer (sekwilda) and will report to the city chief executive (walikota) ordistict chief executive (bupati), who in tum report to the DPRD. The resolution serves as a statement ofthe PLG's intention to participate in the project through to completion and to execute its responsibilitiesunder the implementation program in Annex 5 of the DCA, in accordance with the Project ManagementManual. PLG commitments include under the implementation program include the following:

(a) At least four PLGs will prepare an annual State of the Environment Report and furnish it to the CPSUand the Bank not later than March 31, 2002, and the remaining local govemments will prepare and submitannual State of the Environment Reports no later than March 31, 2003;

(b) The PLGs will have their annual State of the Environment Reports evaluated by an independent team,acceptable to the Bank, not later than July 31 each year, starting in 2002;

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(c) PLGs which do not have an Environment Forum that is part of an existing urban forum, shouldestablish an Environment Forum by July 31, 2002;

(d) All PLGs operate landfills will select at least one landfill and establish for that landfill, not later thanDecember 31, 2003, a neighborhood advisory committee to advise the PLG on the performnance of theagency responsible for the landfill;

(e) GOI shall furnish to the Bank for approval a program to foster good quality compost production, andwill make sub-grants available in accordance with the agreed program;

(f) For PLGs with investment subprojects, the PLG will issue land acquisition and resettlement guidelinesacceptable to the Bank; and

(g) For PLGs with investment subprojects, the PLG will select and prepare subprojects using technical,financial, economic, environmental and social criteria acceptable to the Bank.

Composting. The compost grants will be administered by Bapedal through a relatively simple programwhereby compost producers will be provided grants upon proof of production (submission of receiptswhich are randomly audited). The project will support the establishment of a Compost Advisory Teamwith roots in an already established association of compost specialists. This team will randomly testcompost quality and verify the independent audit reviews of compost use (e.g., field checks). They will alsoassist with market development and disseminate the results. The nascent compost (and vermi-compost)marketing association will be assisted, as will independent, local NGOs to provide community educationand verification of composting activities. It is planned that an international bi-annual composting trade fairand conference will be held in Indonesia.

Monitoring and Evaluation Arrangements:

The CPSU will be responsible for overall project monitoring based on reports from the PPSUs andthe LPSUs. The CPSU will monitor the status of contracts on a monthly basis. These results will besummarized every six months and presented to the Project Coordination and Review Comrmiittee. Everyyear, an "Environmental Update" will be prepared by the Review Committee. This document will becomposed of the "State of the Environment" reports prepared by all PLGs. The Environmental Update willbe discussed publicly, at an annual "environmental forum" (see section E, para. 5.4) to which the media,community representatives, political leaders, and government staff will be invited. The discussions willinclude a summary of how local environments are improving or deteriorating.

Project impact data will largely be collected by local secondary schools (which will be providedwith tools and specific guidance as part of the CPSU TA). Collection of this data will be integrated withthe Environmental Awareness and Environmental Education TAs. The project's Project Coordination andReview Committee will disseminate lessons across PLGs. For centrally implemented components, theDirectorate General of Urban and Rural Development (DGURD) within MSRI, will be responsible formonitoring project accounts (in addition to consolidating local government accounts). Bapedal will beresponsible for reviewing and monitoring progress of technical studies and GEF funds allocation.

Bank headquarters and resident office staff would jointly supervise project implementation twice ayear, with very intensive efforts in the first 18 months following effectiveness. The WJEMP will not have aformal mid-term review due to the forty-month implementation schedule. However, to prepare for theappraisal of APL2, it will be necessary to collect information on the results of the monitoring and

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evaluation activities. GOI will prepare and furnish to the Bank by July 31, 2003, a report integrating theresults of the monitoring and evaluation activities, and review the report with the Bank by September 30,2003. GOI and the Bank will decide upon a course of action to remedy any problems needing correction.Only PLGs which meet the "triggers" will be included in APL2.

Six months prior to the closing of the project, the CPSU would furnish an implementationcompletion report to the Bank, reviewing project achievements against objectives, including costs incurredand benefits derived, as well as the performance and contribution of all parties associated with projectexecution.

Financial Management System:

A Financial Management System (FMS), satisfying the Bank's requirements under OP/BP 10.02and the LACI (Loan Administration Change Initiative) standards, will be established under the project. Theproject accounting system and procedures will follow the government's accounting system. The LPSUs willbe responsible for maintaining the accounting records (under the supervision of the CPSU) on a cash basis,and for keeping all the supporting documents for annual audits. Consolidated project accounts will beprepared by the CPSU for the annual audit, and the audit opinions shall be submitted to the Bank within sixmonths after the end of each FY.

Issuance of a Project Management Manual, acceptable to the Bank, and documenting theFMS and procedures, is a condition of effectiveness. The manual will include control, accounting anddisbursement procedures, project management reporting (PMR), and auditing arrangements (detailed inAnnex 6).

A Special Account in the amount of US$ 1.75 million, will be in the custody of the DirectorateGeneral of Budget, MOF, and will be held in Bank Indonesia. The Special Account for the GEF grant willbe US$250,000 and will also be managed by the same Directorate within MOF.

The Bank financial management specialist assessed the financial management system, includingdisbursement, audit arrangements and human resources capacity at the national, provincial and districtlevels and found that they met the Bank's requirements after implementation of the agreed action plan.

D. Project Rationale

1. Project alternatives considered and reasons for rejection:

This project began as a solid waste improvement program following the recommendations of the JabotabekEnvironmental Management Strategy, carried out under the Third Jabotabek Urban Development Project(Ln. 3246-IND; closed FY00). The study was expanded to include other key urban areas of West Java(Bandung, Serang and Cirebon). All government parties were adamant that the project should include themore difficult provision of "environmental management". Community consultations during the first phaseof project preparation reinforced the desire for a comprehensive response to urban environmental issues.The task team agreed to this broader scope, provided that the majority of implementation would be carriedout by local governments, that the DPRD, Mayor/District Chief (Walikota/Bupati), his/her staff, and thelocal community, would be both more empowered to respond to environmental issues, monitored fairly, andheld accountable for implementation results. It was agreed not to finance the number one environmentalpriority, i.e., removal of lead from fuel, as this cannot be done at the local level. (Legislative controls are

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being pursued to remove lead from fuel.)

Limiting the project to Jabotabek. This project's geographic scope was initially lirnited to Jabotabek.However, during preparation, the benefits of broadening the project's geographic scope emerged. Firstly,Jakarta's two neighboring provinces, West Java and the newly created Banten, have some of Indonesia'sworst environmental problems. Given the close environrmental links between Jabotabek and its neighbors,significant, measurable improvements can be made only by tackling all three jurisdictions simultaneously.Secondly, by including the two provinces, their overall willingness to implement tough policy reforms israised. Thirdly, the inclusion of these additional areas brought support to examine nationwide policiessuch as including waste minimization measures and environmental awareness into school curriculums, andit enabled a more senior Project Review and Steering Committee than would otherwise have been possible.Fourthly, by expanding the scope, the project can potentially demonstrate both the complexities andpractical responses to making environmental improvements at the local level for the rest of the country.

Limiting the project to solid waste collection and disposal was deemed too narrow. The key issues in thesolid waste sector are not so much related to investment requirements, but rather management and policyinitiatives such as sharing disposal facilities, phasing out local government collection of waste frombusinesses, and increasing revenue collection and transparency. Local governments are more likely toundertake policy changes if the changes are incorporated into a larger strategy. Furthermore, improvingsolid waste management practices alone would not have a significant impact on the urban environment;waterways would still be polluted from sewage and air quality would still be poor from vehicle emissions.

Limiting Implementation to One Government Agency. The project could be executed by a sole centralgovernment agency. T1his arrangement was deemed impractical because issues of urban environmentalmanagement and pollution reduction must be tackled at the local level for maximum benefit. As Indonesiais currently decentralizing, it was agreed that this project presented a golden opportunity to work withnewly empowered local governments. The provincial governments of DKI Jakarta and West Java and theirlocal agencies are among the most capable provincial governments in Indonesia. The provincialgovernments are capable of performing oversight functions of local governments within their jurisdictions.The Banten Province was established early in 2001 and has, therefore, no prior experince but the localgovernments under the new province do have the experience.

Other Donor Participation. Many agencies are active in this sector, with some 60 donor-funded wastemanagement pilot projects underway in the project area. The Japan Bank for International Cooperation(JBIC) is financing a large-scale transfer station in Jakarta; the Asian Development Bank (ADB) a study inBandung; a Swiss aid small-scale, pilot and long term program in Cirebon; and the German Gesellschaftfur Technische Zusamrnmenarbeit (GTZ) in recycling activities. The management committees established ineach local government will be responsible for coordinating all these activities, and it was agreed that thisproject would include a strong component to strengthen the local governments capacities in the sector.

Project as Specific Investment Loan (SIt). At the start of the project preparation, a SIL with a totalproject cost of approximately US$300 million and a five-year implementation period was anticipated.However, the APL was deemed more appropriate for several reasons: (a) Bank support to makingmeasurable and sustainable improvements in urban environment management will require a long-termpartnership with government. The APL's format is well suited for this purpose; (b) the APL enablesemphasis on development "software" requirements before "hardware" investments are made; (c) the APLenables the Bank and GOI to assess progress and make design changes before proceeding with subsequentphases; (d) decentralization is an important GOI objective, and the APL enables the Bank to engage theparticipating local governments in urban environmental issues in a flexible manner over time; and (e) the

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PLGs and MOF prefered the smaller loan sizes and commitment fees in this era of budget constraints.

2. Major related projects financed by the Bank and/or other development agencies (completed,ongoing and planned).

Latest SupervisionSector Issue Project (PSR) Ratings

.______________ _ I(Bank-financed projects onlylImplementation Development

Bank-financed Progress (IP) Objective (DO)

-Improve provision of basic urban Third JABOTABEK Urban S Sservices, especially in low income Development Project (JUDP3)communities;-Strengthened environmental protectionMunicipal service provision Various decentralized urban S S

projects (e.g. BUIP, EJBUDP,KUDP, Second Sulawesi UDP,Municipal Innovations)

U SImproved educational planning & West Java Basic Educationmgmt; developed institutional andinteragency capacity at district andprovincial levels

S SEnhancement of farmers' capacity to Decentralized Ag/Forestryparticipate in extension to promote Extensionenvironmentally sustainable farming

Other development agenciesADB Bandung UDP

Botabek UDPJBIC Jakarta Transfer StationSwiss Government Cirebon Urban AssistanceUSAID Private Sector ActivitiesGTZ Small-scale Composting jIPIDO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

3. Lessons learned and reflected in the project design:

Similar projects such as JUDP3, provide important lessons: (a) working with DKI Jakarta isconsidered difficult by the neighboring, less affluent and less powerful municipalities; (b) the JabotabekEnvironmental Strategy (funded under JUDP3) is technically very good, but based on an internal Bankreview, its implementation strategy had the least amount of stakeholder involvement and follow-throughcompared to the other five Metropolitan Environmental Improvement Projects cities (Kuala Lumpur,Manila, Bombay, Katmandu, Beijing). A clear lesson is that stakeholder involvement, local institutionalownership and meaningful and sustained dialogue are criticalfor the long-term success of environmentalprojects in Indonesia.

These findings were corroborated by OED's impact evaluation report entitled, "Enhancing the Quality of

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Life in Urban Indonesia: The Legacy of Kampung (Village) Improvement Program", (Report 14747-IND)which found that targeted urban sector development can have a very positive impact on low income areasand that the majority of residents experienced environmental improvement through neighborhoodprograms. This came about largely when local governments acted asfacilitator; and a respectfulpartnership was established between the local government and civil society. Project assistance to Bapedalalso highlights the need for the involvement of other stakeholders to enhance agency accountability and tohelp sustain minimum requirements for operating funds. (This means moving away from a"project-to-project" operating style).

Integrated Urban Infrastructure Development Projects (IUIDP) have had considerable success inimproving municipal service delivery; however they are not appropriate for operations such as WJEMPthat involve technically complex investments, that span several administrative jurisdictions, and that requirea planning horizon over five years. Another lesson from the IMU)Ps is that the development effectivenessof the investments depends critically on the existence of appropriate sub-sector policies. The ongoing BaliUrban Infrastructure Project (Ln. 41 55-IND) is providing useful input on the establishment of regionalwaste management corporations, and the process of government consultation has been incorporated.

A clear lesson has emerged from the ongoing Second Sulawesi Urban Development Project (Ln.4105-IND). The objective of infrastructure development can be met more easily than the objective of"improving urban management" through an investment project. This is mostly due to two broad issues: (a)DGURD and the local government's prime focus is often on awarding contracts; and (b) longer term andbroader institutional changes need better municipal management, e.g., adequate pay based on measurableoutputs, connecting community wants with ability to pay, building partnerships that transcend singledepartments or local governments. Although management improvements are more difficult to achieve andmeasure than infrastructure development, improvements are possible and are already accruing to localgovernments that show leadership. These skills and attitudes are transferable.

Six small scale composting facilities were previously established in Indonesia through World Bank grants.They verified that composting is a practical waste management option and highlighted the needforlarger scale marketing programs, and inclusion of avoided waste disposal collection and disposal coststo ensure sustainability. Similarly, the Bank hosted an international workshop in 1998 to explore ways inwhich urban waste could be integrated with agricultural needs (also see the report by Michael Sanio, Reuseof Urban Waste for Agriculture: An Investment Program for Progressive Action, May 1998, WastingWaste Conference).

4. Indications of borrower and recipient commitment and ownership:

GOI has consistently emphasized environmental improvement as a development objective inprevious Repelitas (five-year plans) and investment projects. Indonesia is a recognized leader in developinginnovative environmental management programs, e.g., the Clean Rivers Program (PROKASIH), thePresidential Clean City Award (Adipura), the multi-agency anti-air pollution program known as "BlueSky", and the industrial environmental pollution rating. The launch of WJEMP by central and localgovernments indicates that implementation and day-to-day management will be given a greater focus in thenext decade.

GOI's increased concern about the deteriorating air quality and the impact of lead in vehicleemissions led to the launching of a plan to phase out lead in fuels by 1999; however, the financial crises hasdelayed this plan.

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An important indication of commitment is the relatively lengthy preparation process that thisproject underwent. Public workshops were held, advertisements were placed in newspapers, and athorough two-stage stakeholder consultation process was undertaken. However, once a firm conunitmentwas given (i.e., political conditions improved) progress improved. Recent meetings, both with the publicand local government staff and leaders (including local councils) have been productive and refined theproject to mesh with recent developments. Project preparation has been seriously impacted by: (a) theregional economic crisis; (b) a transfer of overall responsibility for the program from BAPPENAS toDGURD, (c) three major reorganizations of DGURD in one and a half years, the latest in January 200 1;and (d) staffing uncertainties in participating agencies. However throughout this period, GOI displayed aconsistent determination to continue with the project and provide tangible improvements to local urbanenvironments as soon as possible.

All levels of the government, and increasingly importantly, local communities, support composting.Environmental groups consistently encourage the government to adequately incorporate composting into thewaste management system.

5. Value added of Bank and Global support in this project:

The Bank is well positioned to assist GOI in meeting the objectives of the proposed project. Thebroad scope, and multi-jurisdictional nature of this project require a concerted and long term effortinvolving investment finance, assistance in practical management methods, and complementary researchactivities. Under the Bank-supported Bandung City Development Strategy (CDS) the city identified overallenvironmental quality improvement as a priority. The project will benefit from the collaborativeinvolvements by the community, and various bilateral and multi-lateral agencies (e.g., World Bank, ADB,JBIC, USAID and GTZ) under the city's coordination.

The Bank has considerable experience in urban environrental management in Indonesia, as well asinternational experience, both of which will be required to maximize the impact of this project. The Bankis also active at all three levels of government -- central, provincial and local -- and all are involved in theproject. The Bank's widespread presence in Indonesian urban areas will allow relatively rapid replicationof successful components.

The Bank is also able to provide an integrated approach to municipal management activities. Forexample the project has two main subcomponents (environmental education and compost marketing)incorporated within other existing Bank-financed projects such as the West Java Education Project (Ln.4308-IND) and the Decentralized Agricultural/Forestry Extension Project (Ln. 45100, Cr. 3280-1ND),which is training farmers in the appropriate use of fertilizers and compost. The Bank will assist GOI inestablishing international linkages between secondary schools for the design and monitoring of the project'sperformance indicators to ensure that they are relevant.

Assistance from the GEF will help Indonesia establish itself an internationally reknown "center ofexcellence" for composting application and research, in addition to large scale exploration on how best tomake composting an integral component of an overall municipal waste management strategy. The GEFfunds will make it possible to further reduce GHG emissions as well as to provide an incentive to establisha better overall waste management system. GEF support is essential (a) to overcome the barriers to theworld's first large-scale GEF supported composting program, particularly its start-up costs and perceivedrisks; and (b) to support independent scientific monitoring, evaluation, and dissemination to demonstratethe system's global and local benefits and cost-effectiveness, and thus promote its replication. Contact hasbeen established with a successful compost marketing operation in India, and the project will explore this

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operation during the first year. Each local government will keep account of their earned carbon credits forthe amount of compost produced. The Bank will during project implementation assist GOI to find marketsfor these credits.

The Bank will endeavor to bring international experience into the project. One such example wouldbe the replication of a successful waste-picker assistance program in Brazil, where poor families are paidscholarships (Bolsa Escola) to keep children in school; this should be readily transferable to Indonesia. Thetransfer of this knowledge will go both ways, and Indonesia should be able to export some of itscomposting acumen. The project will also facilitate the establishment of an international panel ofcompost/waste management experts to provide assistance to Indonesia and help transfer technically soundinformation.

E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)

1. Economic (see Annex 4):* Cost benefit NPV=US$ million; ERR = 20 % (see Annex 4)O Cost effectivenessO Incremental CostO Other (specify)

Annex 4 provides a general economic analysis for the three-phase nine-year program. APLIestablishes policies through studies, prepares feasibility studies and detailed designs for infrastructure tostart implemention in APLI but more substantially in APL2, and increases devolution for the provision ofmunicipal environmental services to local governments. The studies and reviews are intended to provideenvironmental management strategies to serve as a basis for future development to improve the efficiencyof overall service delivery and therefore have significant economic rates of return. Well designed policiesand improved management capacities should be able to increase service delivery efficiencies by at least30%. Improvements start already in APLI where key studies will be awarded to consultants selectedthrough quality and cost-based assessments of competitive proposals unlike past practices whereconsultants were generally engaged through nontransparent processes with poorly defined deliverables andon time-based contracts.

As many as 4.5 million urban poor stand to benefit from the proposed nine-year program throughimprovements to local environments. Although a single program cannot hope to alleviate all of westernJava's urban pollution, the proposed program will provide tangible benefits through: (a) improved solidwaste collection and disposal; (b) improved public health; (c) increased economic growth includingemployment generation both within participating industries and local neighborhoods; (d) improvedmunicipal management; and (e) enhanced environmental awareness.

Improved solid waste management will reduce localized flooding, water and vector-borne ailments,and respiratory problems associated with particulate air pollution. Enhanced private sector involvement insolid waste management will increase overall efficiency and enable local governments to concentrate onresidential collection, especially in poorer neighborhoods. Programs to assist waste-pickers and collectorswill improve their health, economic opportunities and overall quality of life. Local and national economieswill be strengthened through assistance to participating small and medium-sized industries.

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Wherever possible, costs and benefits will be quantified in monetary terms. Economic analyseswith cost-benefit reviews (on a with and without basis) will be conducted for all solid waste andenvironmental management components in excess of US$100,000. The benefits associated withenvironmental improvements are difficult to quantify due to factors such as improved quality of life andreduced mortality. It may be necessary to carry out a least-cost analysis for some of these components.

The GEF incremental cost analysis shows a baseline case cost for treatment of 700,000 tons ofwaste at $25/tonne (total cost $17.5 million - see Annex 4). The GEF alternative of composting, isestimated at $27.5 million. GEF funds have been approved to offset the incremental cost of $10 million.The average unit GHG abatement cost is $1.75/tonne of carbon equivalent. This is far below the $10/tonupper GEF limit and highlights the potential replicability of this option as both a cost effective municipalwaste management option and global GHG emission reduction program.

2. Financial (see Annex 4 and Annex 5):NPV=US$ million; FRR = % (see Annex 4)APLI 1 comprises policy, strategy development, institutional strengthening, preparation of detailed designsfor the start of physical implementation during the last years of APLI and more substantially in APL2.Hence, a financial analysis is not applicable for APL 1. However, a financial analysis was carried out forthe program based upon data obtained from recently completed urban environmental projects.

The exact ratio of loan versus grant from central to local government for the remaining period of theprogram is still uncertain; however, this will be resolved during APL 1, for which the financing issue hasalready been decided. Funds for environmental education, innovations in solid waste management, andproject management will be provided through grants from the central government. For communityenvironmental facilities, participating local governments would receive grants and loans. The loans wouldbe made through subsidiary loan agreements, whose terms and conditions will be agreed with theBank during the second year of the project.

Cost Recovery: Inadequate levels of operation and maintenance funds for solid waste operations are themost debilitating problems in the sector, and policy initiatives being promoted by this project will furtherincrease O&M requirements. However, current levels of solid waste collection and disposal practices arein the local governments' views unacceptable. Through the introduction of the Jabotabek and BandungWaste Management Corporations, improved and more efficient waste disposal is anticipated. Theincreased costs for the improved disposal will be largely bome by tipping fees, which will mainly comefrom commercial establishments. Detailed operational and cost recovery policies will be finalized in APLIfor application in APL2 and 3. Cost recovery analyses will be completed for all components overUS$100,000 except for environmental education.

Fiscal Impact:

Indonesian local governments are facing financial uncertainty as new decentralization laws havebeen passed, but their impact and execution remain unclear. APL 1 will continue to use the well establishedsystem of subsidiary loan agreements for transferring funds from the central government to the localgovenmments for civil works. During the course of APLI, local governments will have time to see how thenew fiscal decentralization laws -- and their accompanying financial impact -- unfold. The environmentalawareness campaign will inform the public about the importance of good environmental management andwaste disposal practices, and will help the public appreciate why tariff increases are necessary for goodurban service delivery.

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Flow of Funds: The normal funding channels for local government finance will be followed. No additionalchannels or agency changes will be involved. The Bank will support simplification of the procedures andwill not participate in the clearing of disbursements of funds to and at the local government level.

3. Technical:During appraisal all the proposed sub-projects were reviewed. All except the consultancy to assess thecompost market and identify a compost grant "window", are well tried technical studies for which thetechnical solutions and experience are well documented. Most local government units have priorexperience with these types of consultancies. With the increased local ownership and local governmentresponsibility, and with close support from the CPSU, no particular problems with the implementation ofthe consultancies are anticipated. The compost market assessment consultancy will require particularattention and supervision by both CPSU, Bappedal, and the Bank.

4. Institutional:

4.1 Executing agencies:

The project is being implemented during the transition from the fonner centralized administrationto the new decentralized administration where local governments will be taldng over the technical andfinancial responsibilities for the development of their area ofjurisdictions. GOI has agreed that the projectshould be implemented under "the old system" which means that MSRI will serve as the executing agency.

4.2 Project management:

In recognition of the transitional nature, MSRI has agreed to establish a CPSU as a support unitrather than as an executing organization and the former steering committee as a Project Coordination andReview Committee. In addition, the project will be guided at the provincial and local levels with ProvincialProgram Support Units reporting to the Governor and Local Program Support Units for PLGs reporting tothe relevant bupati or walikota. The Bank has reviewed the implementing institutions' skills and capacitiesand has made specific recommendations regarding the training to be provided. These support units willhave the capacity to implement the project successfully with training and regular updating of skills andrepetition of courses for new staff.

4.3 Procurement issues:

The procurement capacity assessment concluded that with the training recommended in theassessment report, the implementing units would be able to handle the procurements under project. Theassessment report is in the project file.

4.4 Financial management issues:

An assessment of the detailed financial management system prepared by DGURD was foundsatisfactory to the Bank. The assessment report is in the project file.

5. Environmental: Environmental Category: B (Partial Assessment)5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (includingconsultation and disclosure) and the significant issues and their treatment emerging from this analysis.

As part of program preparation over 500 interviews were carried out with a wide range ofstakeholders, i.e., all levels of government, NGOs, community groups, the private sector, universities, anddevelopment institutions. Public workshops were held and advertisements explaining the environmentalobjectives were placed in local newspapers. A two-stage preparation process was used. First, existing

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information was reviewed and key urban environment needs, specific to each commnunity, were identified.After stage I was agreed-to by the program Steering Committee, more detailed preparation activities tookplace. Unique preliminary environmental management strategies for each participating community wereprepared, as was an overall policy matrix for improved environmental management.

Both project preparation reviews and previous country experience confirm that, with respect to theurban environment services being targeted by the program, e.g., solid waste management and air and waterpollution, the most important requirement is improving the management of service delivery. Therefore athree-phase adaptable program loan was proposed where APLl would focus heavily on required policydevelopment and management improvements. Making these improvements would be a pre-requisite(trigger) for construction of any facilities in APL2. Therefore a broader "Programmatic EnvironmentalReview" (PER) was prepared during project preparation, rather than a specific environmental assessmentfor sub-projects.

The PER identified potential environmental impacts in the program, most of which occur in APL2and APL3, from landfills, hospital waste facilities, compost operations, and waste water treatmentfacilities.During negotiations, however, nine subprojects originally included in APL2 were brought forward forexecution in APLl. Environmental assessments, land acquisition and resettlement action plans, consistentwith both GOI and World Bank requirements, will be followed for each subprojects in the entire program,to ensure that the landfills are safe and that they have adequate operational guidelines. Along withpreparing the required EAs, APLI will assist local govemments in preparing credible landfill operatingplans, and more importantly will provide mechanisms to ensure that the guidelines are followed and that thecommunity will help monitor their progress.

Potential environmental impacts from compost facilities and the quality of compost need to becarefully monitored. The project also proposes to address medical waste collection and disposal (to befurther refined in APL I with establishment of the necessary implementation framework and policies).Current practices are woefully inadequate, and Bank-supported activities will meet all environmentalsafeguards. A thorough EA and EMP will also be completed for any medical waste facility or wastewatertreatment plant.

5.2 What are the main features of the EMP and are they adequate?

Each facility that is identified by the screening process as having potential environmental impactswill require a customized EMP which complies with technical management standards for the type offacility. The EMPs will include community consultations (with advisory boards), establishment of adequateoperating budgets and staff capacity, and defined processes for affected stakeholders to raise concerns.Each facility will also require an environmental monitoring and management program, consistent with anEnvironmental Impact Assessment with relevant environmental indicators, such as the number of fires,leachate generation, and odors for landfills.

The activities being undertaken through this project are typical of local government responsibilities.Subproject preparation and implementation minimize "artificiality" and will make the processes ofenvironmental assessment and management planning a regular feature in all participating localgovernments. The environmental safeguard activities undertaken should be the same for Bank-financed andnon-financed works and services. The extensive community consultation component is designed toencourage this.

5.3 For Category A and B projects, timeline and status of EA:

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Date of receipt of final draft: April 28, 2000A PER and model EMP were prepared as part of preparation for APLl. Each facility with

potential environmental impacts will require a specific Environmental Assessment with an EMP acceptableto both the GOI and the Bank. They will be publicly discussed through the local-DPRDs and will befinalized 16 months prior to APL2 for those activities to be financed in APL2 and 16 months prior to APL3for activities in APL3.

5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EAreport on the environmental impacts and proposed environment management plan? Describe mechanismsof consultation that were used and which groups were consulted?

In preparation of the program many stakeholders were consulted, but no specific facilities requiringan EA or EMP were included for the first or second years of APLI implementation. APLI is largelyproviding the time, financing, and political commitment necessary to prepare good EAs and EMPs.Instituting the public consultation needed for these activities is a key component of APLI. All PLGs whichdo not have an Environment Forum that is part of an existing urban forum, are required to establish anEnvironment Forum by July 31, 2002, as well as mechanisms for this group to report directly to DPRDsand political leaders. An annual environmental report (with public a consultation program includingworkshops, media advertising, school programs) will be produced by each PLG, as a requirement to moveforward to APL2. Any PLG planning a specific facility late in APLI will be required to follow the publicconsultation processes being promoted under the project.

5.5 What mechanisms have been established to monitor and evaluate the impact of the project on theenvironment? Do the indicators reflect the objectives and results of the EMP?

Each subproject will be evaluated on its contribution to environmental improvement. There are,however, components in late APL1 and in APL2 and APL3 that can potentially have a negative short-ternimpact on the environment. They will each require a customized EMP and monitoring program. APL I willidentify these facilities and prepare acceptable EMPs and monitoring regimes prior to construction. Theywill also need to be placed within a publicly agreed policy framework and properly financed (particularlyoperating costs). The screening process for these facilities is outlined in the PER.

6. Social:6.1 Summarize key social issues relevant to the project objectives, and specify the project's socialdevelopment outcomes.

Traditionally slums are not well served by municipal crews because waste collection frombusinesses is more lucrative. Poor solid waste collection practices in slums cause the urban environment todeteriorate. Women and children who spend most of their time in slum areas bear the brunt of poor urbanenvironments in terms of increased incidence of health problems and lost economic opportunities. Hence,the program's focus on improving solid waste collection from neighborhoods will ameliorate theenvironment, reduce health risks to urban poor and ultimately open the door to greater economicopportunity. The project's environmental education activities will be targeted to school children and mayinclude relevant activities away from school. A recent Bank survey of the poor found that women placedenvironmental degradation as their second highest priority, while men placed it eighth. This differencewould be incorporated into project implementation by targeting environmental awareness campaigns moretoward women.

The community participation in the project, and particularly in the Community EnvironmentalFacility (CEF) planned under the third component, is vital. Local govemrnent ability to work withcommunity members is still a concem as local govemments often prefer to work through known

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intermediaries instead. Working with the waste-picking community will require sensitivity and sustainedcontact from local government staff. Project officers may at times find themselves mediating betweenwaste-pickers and local government waste management staff. Key to this component will be its ability toenhance mutual respect.

Compost activities have been promoted by community groups and environmental NGOs. Theseindividuals need to be kept involved in the composting activities to both help with community educationactivities and market development, and provide input to compost producers on any potential concernsneighboring residents or compost users may have.

6.2 Participatory Approach: How are key stakeholders participating in the project?

This project will be participatory throughout all stages of subproject preparation andimplementation. Many groups were contacted for their input into project design. Further and sustaineddiscussions will be required for the waste-picker assistance program and for the CEF. Public workshopswere held in all participating communities and these will continue to serve as an integral part of projectimplementation. Another key area will be the work with individual schools, as they will monitor key projectperformance indicators.

The agricultural community is a key stakeholder for the widespread use of compost, as is theprivate sector (potential compost producers and users), community-based organizations and environmentalNGOs who have been, and will continue to be involved in the production and marketing of compost.

Increased overall participation is structured within the newly evolving local government role. Forexample, much of the participation will be through the recently empowered DPRDs. The project not onlyintends to identify and strengthen the mechanics of greater community participation at the local governmentlevel generally and not just for environmental activities.

6.3 How does the project involve consultations or collaboration with NGOs or other civil societyorganizations?

Independent commnunity groups will review each city's annual "State of the Environment" reportand provide inputs. In order to reduce public concems over landfills and to increase the emphasis onmanagement, PLGs which operate landfills are required to establish a "neighborhood advisorycommittee" no later than December 31, 2003, in order to advise the PLG on the performance of theagency responsible for the landfill.

The CEF will have special features which will be available to groups of households and NGOs.The detailed institutional arrangement for administering the Fund will be prepared during APL1.

6.4 What institutional arrangements have been provided to ensure the project achieves its socialdevelopment outcomes?

The project is structured to fit within and strengthen local government policies and capacities. Theonus of implementation for the majority of the project rests with the chief executive of the municipality ordistrict (Walikota/Bupati) and his/her elected council. Independent verification is available both throughthe technical strengths of the Provinces of DKI Jakarta and West Java (and eventually Banten) and CentralGovernment agencies.

A key Bank priority is improving governance in Indonesia; this project is designed to improve theservice delivery capabilities of PLGs. Environmental services are usually the first priority of awell-functioning local government, and generally these services are easier for local residents to understand

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and see improvements when they occur. The improvements being sought from local governments areconsistent with other sectors such as improving contracting practices, community consultation, and serviceplanning.

A pre-requisite for a well-functioning local government is merging institutional arrangements withsocial development and building mutual trust. "Social development", which needs to occur in parallel withstrengthening the local government, would occur in three phases: community awareness, communityparticipation, and community monitoring as elaborated upon below.

Community awareness will include training programs for government staff and key communityrepresentatives (e.g., the local media), a regional Environmental Awareness Campaign, and a school-basedprogram. Annual State of the Environment reports would be prepared and made available to the public.These reports would contain information on contract awards, attainment of performance targets, andgeneral baseline environmental conditions.

Community participation will occur through such activities as landfill site selection and advisoryboards and comments from community representatives will be sought through the urban forums. The CEF,which starts in APLI, is designed to be managed by and for the community (in APL2 and 3). Communitymonitoring will be carried out via the annual reporting process, landfill advisory boards (neighboringresidents will be asked to monitor adherence to agreed-to operating plans), periodic reporting in the media,and international peer reviews of composting activities. A key monitoring task will be the review ofprocurement activities.

Community participation and monitoring will be integrated into ongoing local governmentfunctions through workshops, public reports, and public council meetings. The public's institutional role isto increase government accountability and provide assistance to local governments in service provision. ThePER lays out possible mechanisms for public involvement in the provision of local environmental services,however these are neither exhaustive nor prescriptive. Much community consultation already occurs inIndonesia. The project will promote local government openness toward community consultation and as thesame time will better define institutional mechanisms for consultation and participation.

6.5 How will the project monitor performance in tertns of social development outcomes?

Each year a publicly vetted "State of the Environment" Report will be prepared by each PLG.These will be accompanied by public meetings and media presentations. The social development outcomeswill be stated annually and their level of attainment reported publicly. As is already practiced, reports willbe compiled and reviewed annually by the provinces of DKI Jakarta, West Java and eventually Banten andthe central government agencies. Independent NGOs and Bank supervision missions will verify reportedprogress.

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7. Safeguard Policies:7.1 Do any of the following safeguard policies apI to the project?

Policy ApplicabilityEnvironmental Assessment (OP 4.01, BP 4.01, GP 4.01) 0 Yes 0 NoNatural habitats (OP 4.04, BP 4.04, GP 4.04) 0 Yes * NoForestry (OP 4.36, GP 4.36) 0 Yes * NoPest Management (OP 4.09) 0 Yes * NoCultural Property (OPN 11.03) 0 Yes 0 NoIndigenous Peoples (OD 4.20) 0 Yes * NoInvoluntary Resettlement (OD 4.30) 0 Yes 0 NoSafety of Dams (OP 4.37, BP 4.37) 0 Yes 0 NoProjects in International Waters (OP 7.50, BP 7.50, GP 7.50) 0 Yes 0 NoProjects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60) 0 Yes 0 No

7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies.

A PER was undertaken as part of APL I preparation (see Section E5). Following negotiations, atotal of nine civil works subprojects were shifted forward from APL2 to APLI. Of these nine, it ispossible that some of them would require a specific environmental assessment and mitigation plan, landacquisition and/or resettlement. However until the feasibility studies and detailed engineering designs arecompleted, it is too early to identify precisely which requirements would be followed for which investments.The Bank would not disburse for these subprojects unless all applicable safeguard policies had been strictlyfollowed.

F. Sustainability and Risks

1. Sustainability:

Sustainability of solid waste management improvements depends on the ability to increase the fundsavailable for operations. This will be accomplished through greater cost recovery for waste collection,particularly through licensing arrangements with the private sector for collection of business waste,improved collection of tariffs and tipping fees, successful development and operation of the Jabotabek andBandung Waste Disposal Corporations, and greater transparency of service delivery and associatedcharges.

Sustainability in management improvement depends largely on the leadership and professionalismshown by local government representatives, as well as commensurate improvements to workingenvironments, especially salaries. Another important management area is improved relations between thethree levels of government -- central, provincial, and local. During project implementation, especiallyAPLl, all levels of government will be refining their roles, resource allocations, and staff salaries andaccountabilities. Sustainability needs to be predicated on a transparent and reliable government structure.Sustainability is also conditional on local governments assuming, and being empowered to assume,responsibility for activities such as waste disposal as formulated in Law 22/99.

There are no significant technical issues, though care is needed to ensure adequate training andoperating budgets and thorough review of medical waste and composting proposals. Another importantrole of the GEF funds is to encourage composting on a scale that enables Indonesia to claim to be a worldleader in composting.

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2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1):

fD t:ft;Xk tV| RRis,I Orai4 : RiglkMitigation Meaa MOFrom Outputs to ObjectiveSector CAS Goals

(from Goal to Bank Mission.)Political support; financing plans can be H Maintain the high level of local govermnentagreed. ownership. Relate the success or otherwise to

the performance on the CAS Base Caseperformance by GOI.

Willingness by community to spend time M Maintain the high level of local governmentand money on waste management. ownership.

Willingness by agencies to M Increase program's local profile."commnercialize."

Program Purpose

(a) TA or incentives effective M (a) Bank supervision to be pro-active and(b) Financial support available "profesionally heavy" in the first year.(c) A single project can have impact (b) Proactive budget planning.

(c) Success breeds success. Superviserigorously from day one to achieve success.

Local governments effectively prepare & M Supervision to focus on reporting during first 12maintain reports. months.

GEF Operational Program

Compost output and cost; monitoring M Several groups responsible for monitoring fromprogram effective. different perspectives: technical advisory group,

financial intermediary and CPSU.Project Development Objectives

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Possible to overcome current incentives S The GEF grants overcome the initial difficulties.where pricing is difficult issue in a sector Gradual phasing out of the grant over 9 yearswith negative externalities. would enable the market to stabilize.

Increasing public support possible. Awareness campaigns through several media,Support from private sector parties schools and fiu-ther accentuation of environmentaffected. issues in teacher's training.

PLGs able to institute revenue collection Awareness campaigns and the fiscal realitiesand increase charges. during the project period will focus local

governments on cost and sustainability. (Risk:drop the environmental agenda entirely, by localgovernments.

Web-site can be maintained and expanded M The involvement of schools in monitoring.

From Components to OutputsGlobal Environment Objective: M Small producers are keen and will cooperate,Compost production and use can be especially with the possibility of GEF grants.accurately recorded and monitored at The financial intermediary has a vested interestmany small production sites. in maturing the market for compost.

Project components/sub-components

Overall Urban Mgmt.Environmental Awareness:Disparate activities within participating M Program and project management beingcommunities can be woven into an devolved to local governments.effective response to urban pollution.

Local governments assume key Complimentary community enviromnentalresponsibility for urban pollution awareness programs planned for all stages andreduction efforts. locations.

Composting Program: Composting can S GEF assistance will provide incentive tocompete with other waste management overcome inertia in launching larger scalealtematives and external environmental efforts. Changing approach from waste disposalbenefits can be included in overall to production of agrochemical. Thoroughsustainability review (e.g. against review of technical merits of compostingfertilizer subsidies). completed.

Program Mgmt. Capacity: Staff M . Governments given clearly definedcapabilities and pride can be improved responsibilites and performance measurements.through targeted training. Project Support Unit to be staffed by competentQuality assistance can be provided and and committed staff.measured.

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(a) Individual programs maintain Pemda M (a) Continue the close dialogue.and community ownership. (b) Part of the MOUs. Close supervison by(b) Environment management reports CPSU. Participation of educational institutions.prepared, sustained and adopted (c) Cooperation-from children on to parents.elsewhere.(c) Government wants to borrow forin-school education programs.(d) Support for environmental reportingmaintained, sufficient communityconsultation, and quality documentsprepared (through a credible process).

Community & Private Sector M Pilot activities in APL 1 chosen in areas withParticipation, Industrial Waste Water high support and are relatively modest.Reduction: Local governments able to Larger scale activities in APL2 and APL3work with industry; sufficient would not proceed without documentedcommitment to finance and legislate financing and management agreements.pollution reductions.

(a) Pilot activities can be well targeted M Public education campaign to be run byand yield important results. professional and experienced firm. Teacher(b) GEF activities can be designed to both training to be integrated with the W. Java Basicbenefit local environments and mesh with Education Project.other similar poverty relief activities. Full appraisal of GEF and environmental mgmt.(c) Industries capable to implement, and and education activities prior to inclusion ininterested in, pollution reduction programs APL2.(with improved profitability). Existing "Urban Forums" and newly empowered(d) Attainment of consensus possible; DPRDs used to promote input and disseminationindustries and government willing to of annual "State of the Environment" reports.finance these activities. Responsibility for all activities within a local(e) A credible cost -sharing and government rests with Walikota/Bupati andmanagement program can be developed. Sekwilda. Annual plans to be produced by each

city.All local governments to publicly discusss andagree to participation in the project throughDPRD resolution.Program would only proceed if cost sharingarrangements, technical issues, and financeaspects resolved in APL 1. Involvement ofindustry associations, independent bankingreviews, pollution targets set for eachparticipant.

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Solid Waste Management, Municipal H (a and b) Agreement from govermments is partcapacity for solid waste management: of loan effectiveness and support for the policy(a) sufficient political commitment and has been obtained from central and provincialprofessional capacity to maintain the agencies. Private waste haulers are expected toCorporation pay licensing fees.(b) sufficient cooperation between local (c) Program would not go ahead if thisgovernments, community groups, and agreement is not in place--requires fullDPRDs appraisal.(c) agreement by stakeholders to finance (d) Prior to any construction, each new, andrecommendations--technically appropriate expanded landfill will require an agreed(d) sufficient attention paid to operating plan (with budget allocations andmanagement and finance aspects of names of responsible staf). Local communitieslandfills will be involved in siting and monitoring(e) sufficient desire to help this operations.group--and that they wanted to be helped. (e) APL 1 activities are relatively modest (pilot

activities) and project focus is with localgovernment agencies (a group that hastraditionally not been involved in waste-pickersassistance programs). GEF assistance as well.

(f) adequate operating budget and S Adequate budgets and on-the-ground resultscompetency of key staff; condition a move from APL 1 to APL2 and(g) sufficient cooperation between local APL3. Corporation given more autonomy forgovernments, community groups, and staff recruitment and salary provision.DPRDs; Partnering Corporation with a similar agency in(h) agreement by stakeholders to finance Australia (or elsewhere). Corporation heldrecommendations--technically accountable for performance.appropriate; Programs would only go ahead if financing and(i) adequate budgets and staff allocated to management agreements in place.landfill management; Bank organizes procurement training for all(j) there is sufficient desire and capacity levels of government and support fromby local governments and communities to international consultants for procuremententer into large scale composting processing.programs;(k) conditions developed and sustained toenable qualified staff to act moreprofessionally and efficiently.

Overall Risk Rating sRisk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk)

3. Possible Controversial Aspects:

Indonesia's recently empowered civil society took an active part in project preparation and will continue todo so in implementation. Of the ten NGOs invited to a preparation meeting in April 2000, eight boycottedthe meeting over concem with Indonesia taking on any new external debt.

Landfills, to be constructed in APLI and particularly APL2, are a controversial issue. Jakarta ia alreadyexperiencing public opposition to existing landfills. Similarly, medical waste disposal facilities, which may

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be financed in APL2, could be contentious. Activities with waste-pickers should not generate controversythough this has traditionally been a sensitive issue in Indonesia.

G. Main Credit, Loan and Grant Conditions

1. Effectiveness Conditions

1. Execution of the GEF grant.2. Each participating local government has passed council resolutions (perdas) supporting its

participation in the project and agreeing to public consultation on environmental indicators andtargets, and reporting mechanisms for annual progress on these targets. (Those which do not passsuch resolutions are excluded from APL1.)

3. Each participating local government has entered into a Memorandum of Understanding withMSRI, acceptable to the Bank, and covering the period until project completion.

4. GOI has established (a) a CPSU (central government), including representatives from theProvinces of DKI Jakarta, West Java, Bapedal, and DGURD; and (b) Provincial Program SupportUnits; and (c) Local Program Support Units with competent staff in adequate numbers.

5. GOI has selected the members of the Project Coordination and Review Committee.6. Project Management Manual, which would include the supplemental letter on NCB, acceptable to

the Bank, shall be issued.

2. Other [classify according to covenant types used in the Legal Agreements.]

1. At least four participating local governments will prepare an annual State of the EnvironmentReport and furnish it to the CPSU and the Bank not later than March 31, 2002, and the remaininglocal governments will prepare and furnish annual State of the Environment Reports no later thanMarch 31, 2003. (Type: implementation, monitoring and evaluation)

2. The annual State of the Environment Reports will be evaluated by an independent team, acceptableto the Bank, not later than July 31 each year, starting in 2002. (Type: implementation, monitoring,review and reporting)

3. Participating local governments which do not have an Environment Forum that is part of anexisting urban forum, should establish an Environment Forum by July 31, 2002. (Type:implementation, monitoring, review and reporting)

4. All participating local governments which operate landfills will select at least one landfill andestablish for that landfill, not later than December 31, 2003, a neighborhood advisory committee toadvise the participating local government on the performance of the agency responsible for thelandfill. (Type: implementation, monitoring, review and reporting)

5. GOI shall furnish to the Bank for approval a program to foster good quality compost production,and will make sub-grants available in accordance with the agreed program (Type: implementation,flow of project funds)

6. The participating local governments will issue land acquisition and resettlement guidelinesacceptable to the Bank (Type: involuntary resettlement)

7. The participating local governments will select and prepare subprojects using technical, financial,economic, environmental and social critera acceptable to the Bank. (Types: implementation;environmental, involuntary resettlement)

8. GOI will furnish to the Bank for approval the terms and conditions of any subsidiary loans (Type:flow of project funds)

9. GOI will prepare and furnish to the Bank by July 31, 2003 a reporting integrating the results of themonitoring and evaluation activities, and review the report with the Bank by September 30, 2003.(Type: Implementation, monitoring, review and reporting)

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10. GOI will maintain a financial management system, prepare statements in a formn acceptable to theBank, have the records and statements audited, and submit the audits to the Bank no later than sixmonths following the end of the year. (Type: accounting and auditing)

H. Readiness for Implementation

0 1. a) The engineering design documents for the first year's activities are complete and ready for the startof project implementation.

1 1. b) Not applicable.

1 2. The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.

1 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.

0 4. The following items are lacking and are discussed under loan conditions (Section G):

i. Compliance with Bank Policies

1 1. This project complies with all applicable Bank policies.O 2. The following exceptions to Bank policies are recommended for approval. The project complies with

all other applicable Bank policies.

GIi / t tL.A ¶)A ' ., Finn Nielsen Keshv L Mark Baird a

Team Leader ector Director 'V Country Director

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Annex 1: Project Design SummaryINDONESIA: Western Java Environmental Management Project

Key Pd0 formance0Hier#hy of Obetives lico*rs Monitoingq & Evaluation Critcal 4M swp i;

Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission)Prevent Environmental Solid waste, health, air Central Program Support Political support; financingDegradation pollution data; details below Unit (CPSU) plans can be agreed

National statistics, schoolscollected data

Well functioning Service delivery standards Annual "State of the Willingness by communityinfrastructure services Environment Report" by to spend time and money onproviding adequate services each PLG this;in response to the demandsfrom all strata of the urbancommunityEfficient partnership for Degree of private sector Number of service contracts Willingness by agencies topublic -private - involvement and public "icommercialize"government provision of consultationinfrastructure servicesProgram Purpose: End-of-Program Indicators: Program reports: (from Purpose to Goal)Arrest environmental Trend analysis with baseline CPSU TA or incentives effectivedegradation trend in of: solid waste, health, air Independent monitoring Financial support availabletargeted West Java and pollution, Greenhouse gas World Bank supervisionJakarta urban areas emissions (i.e. compost Intermninisterial /local A single project can have

production). agency taskforces impact.Increase service delivery Residential customer Annual State of the Local governmentscapacity satisfaction with waste Enviromnent Reports effectively prepare &

collection increased from maintain reports50% to at least 75%.

GEF Operational Program:Demonstrated GHG Cost-effectiveness of GHG Independent verification of Compost output and cost;reduction through mitigation (not to exceed quantities and cost of waste monitoring programsustainable composting GEF maximum of US$ composted and diverted effective.operations 20/tonne) from landfills.

Cost comparison betweencomposting and landfilling.

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Key PerformanceHierarchy of Objectives Indicators Monitoring & Evaluation Critical Assumptions

Project Development Outcome / Impact Project reports: (from Objective to Purpose)Objective: Indicators:Establish the institutional Policies developed Feasibility studies, Possible to overcomeframework for (Jabotabek and Bandung detailed designs and current incentives whereimplementation of APL2 Waste Management Master operating/management pricing is a difficult issue inand APL3 Plans, hospital waste plans a sector with negative

program, Compost Grant Industry workshops externalities.Local governments have allocation program Annual local environmental Increasing public supportreached the trigger points finalized) reports possible.for inclusion in the Jabotabek Waste New regulations Support from private sectorappraisal of APL2 Management Corporation Annual budget parties affected.

established Master plan/reports, Local govts. able to instituteEnvironmental Awareness Council response. revenue collection andprogram established in at increases in charges.least 80% of participatingcommunities.Community advisory groupsestablishedSuccessful appraisal ofAPL2A minimum of at least one Data regularly inputed into Web-site can be maintainedschool in each participating web-site and expandedcommunity regularlycollecting baseline data.

Global EnvironmentObjective:Triggers points for 60,000 tonnes of organic Independent verification of Compost production andappraisal of APL2 reached waste composted and thus compost production and use can be accurately

diverted from landfills use. recorded and monitored atmany small productionsites.

First Bi-annual List of participants Dissemination of report onInternational Conference the conference.and Trade Fair on OrganicWaste Treatment andMarketing

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Key PerfohirmaneHierarchy of Obj9ctives |niatr Monitoing &fi:EsalSuationtl Critical AssumpEtiosil

Output from each Output Indicators: Project reports: (from Outputs to Objective)Component:Municipal capacity for solid (a) JWMC established (a) Articles of (a) sufficient politicalwaste management (b) GBWMC established incorporation; biannual commitment and

(c) Agreed-to regional project reports professional capacity toAgreements on policies, Waste Management Master (b) Master Plans by maintain the Corporationinstitutional arrangements Plans appraisal of APL2 (b) sufficient cooperationand bidding doccuments for (d) Agreed-to hospital waste (c) Master Plan, with policy between local governments,components to be program and finance agreements community groups, andimplemented during APL2 (e) improved revenue (d) bi-annual reports and DPRDs

collection final bid packages (c) agreement byOperational Public (f) program in place to (e) bi-annual reports stakeholders to financeAdvisory Boards for assist and include waste recommendations -Landfills pickers in local waste technically appropriate

management activities (d) sufficient attention paidEnhanced professionalism (g) Number of staff trained to management and financein participating local in each local government aspects of landfillsgovernment units unit in relevant diciplines. (e) sufficient desire to help

(a,b,c,e in place within 24 this group - and that theymonths of APLl want to be helped.effectiveness)

Composting Program being 60,000 tons of compost Monthly statements Composting can competeimplemented produced and US$ 3 mill., compiled quarterly by with other waste

equivalent, disbursed as CPSU. Independent management altemativesgrants confirmation (reports) and external environmental

benefits can be included inoverall sustainability review(e.g. against fertilizersubsidies).

Increased Environmental Ten schools monitoring Monthly reports by schools Disparate activities withinAwareness by local officials environmental data for the compiled quarterly by participating communitiesand community Project CPSU can be woven into an

effective response to urbanpollution.Local governments assumekey responsibility for urbanpollution reduction efforts.

Program developed for Bidding documents Individual reports on each Local governments able toIndustrial Waste Water prepared for physical activity - compiled and work with industry;Pollution Reduction implementation under APL2 reviewed by CPSU sufficient commitment to

for first year Program presented, with finance and legislaterequired documentation, to pollution reductions.World Bank for APL2 andAPL3 appraisal beforeMTR

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Program management CPSU fully staffed (100%) Monitored by PLG (through Staffcapabilities and pridecapacity in place and staff with the appropriate skills monthly reports), compiled can be improved throughtraining program conducted mix. and verified by CPSU targeted training.

Training program (quarterly reports) Quality assistance can becompleted (numbers to be provided and measured.provided at appraisal)

Project Components / Inputs: (budget for each Project reports: (from Components toSub-components: component) Outputs)Overall Environmental (a) Project reports and (a) Individual programsManagement (Urban) community consultation maintain Pemda and(a) strategy and policy documents. Individual comnunity ownership.development reports prepared by PLG (b) Environment(b) capacity building and reviewed by Management reports(c) environmental education independent NGOs on each prepared, sustained and(d) program support pilot activity. adopted elsewhere.(e) prepare local and Project reports and separate (c) Government wants toregional environmental training docurnents prepared borrow for in-schoolmanagement strategies, e.g. by participants and CPSU education programs.Westem Java Environment (a) Project documentation (d) Support forStrategy reflecting that program environmental reporting(f) Finalize in-school agreed to by every maintained, sufficientprogram for APL2 and stakeholder and appraised community consultation,APL3. by Bank. and quality documents(g) Run public awareness (c) Annual preparation of prepared (through a crediblecampaign "State of the Environment" process).

reports and independentverification by NGOs.

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Solid Waste Management (a) Invoices for compost (a) adequate operating(a) compost grant program sales and compost credit budget and competency of(b) technical assistance distribution. Random key staff(c) Greater Bandung & audits. (b) sufficient cooperationJabotabek Waste (b) Advisory Board between local governments,Management Corporations minutes. community groups, and(d) waste management (c) reports (and minutes of DPRDsmaster plans and meetings) prepared by the (c) agreement bycommunity advisory boards JWMC, government stakeholders to finance(e) hospital waste program agencies, and supervision recommendations -(f) engineering design and reports by Bank missions technically appropriatebid packages (d) agreed to policies, cost (d) adequate budgets and(g) waste picker assistance sharing arrangements, and staff allocated to landfill(h) Public Advisory Boards facilities design managementfor landfills (e) bid packages, AMDALs (e) there is sufficient desire

and Bank EAs and capacity by local(f) CPSU and Bank governments andsupervision reports community to enter into

large scale compostingprograms.(f) conditions developed andsustained to enable qualifiedstaff to act in a moreprofessional and efficientmanner.

Community and Private (a) CEF APL2 and APL3 (a) Pilot activities can beSector Participation Program agreed to by well targeted and yield(a) community assistance, participating stakeholders important results.e.g. finalize program for and appraised by Bank. (b) CEF activities can beAPL2 and APL3 (b) Project documents designed to both benefit(b) SME assistance produced by CPSU, local environments and(c) pilot activities and individually assisted mesh with other similarindustry assistance enterprises, business poverty relief activities.(d) Finalize industry leaders, and trade (c) Industries capable toassistance program for associations reflecting implement, and interestedAPL2 and APL3 workshop results and in, pollution reduction(e) JIEP waste water industry performance programs (with improvedprogram ratings. profitability).

(c) Final report reflecting (d) Attainment of consensuspolicy agreement by all possible; industries andstakeholders and Bank government willing toappraisal. finance these activities.(d) Bid documents and (e) A credible cost sharingproject supervision reports and management program

can be developed.

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Annex 1:Attachment

REPUBLIC OF INDONESIA

April , 2001

Mr. Mark BairdCountry Director, IndonesiaWorld BankJakarta Stock Exchange BuildingTower 2, Floor #12Ji. Jenderal Sudirrnan Kav. 52-53Jakarta 12190

Re: Western Java Environmental Management Project (WJEMP)Program Development Letter

Dear Mr. Baird,

As a signatory to the International Agenda 21, the Government of Indonesia is strengthening itsapproach to the management of the environment, including the serious problems faced in urban areas.Through consultation with the stakeholders, Indonesia has prepared its national Agenda 21. As long ternreference, some basic policies were formally clarified in the PROPENAS (National Five Year DevelopmentPlan). Following on from initiatives developed during the Third Jabotabek Urban Development Project(JUDP III) financed with the support of the Bank, the major urban environmental issues have beenassembled under a comprehensive preparation effort for the Western Java Environmental ManagementProject.

West Java, DKI Jakarta and the new province of Banten represent the most densely populated andindustrialized region of Indonesia, and, therefore, the most susceptible to environmental decline, depletionof natural resources, and impact on community health. Considering the extent of the environmentalproblems in the Western Java region, the Government intends to implement WJEMP using a phasedapproach that is best supported through a 3 stage, 10 year Adaptable Program Loan (APL) initiative.Despite the extensive preparation effort, the 1st phase of WJEMP referred to as APL I (the InitiationPhase) is primarily concerned with policy and strategy development and detailing; however, it is alsosupported by priority sub-project components that can be implemented quickly by local governments, withloan funds channeled through Subsidiary Lending Arrangements (SLAs).

This Initiation Phase will be followed by APL 2, the Acceleration Phase, and then a ConsolidationPhase in APL 3. The basis for these phases will be the Local Environmental Strategies to be prepared byeach local government in APL 1, in accordance with the national Urban Environmental Program. Some ofthe proposed investments in these later phases are already known. However, as each province and localgovernment start to become more aware of environmental issues through the preparation of theirenvironmental strategies, further sub-project components will be added to the proposed investrnentprogram. These sub-projects could be public investments, with a form of on-lending of IBRD loanproceeds to the local governments (to the determined), and private sector or community based developmentprograms that would also be eligible for funding support under the Project using mechanisms that are

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similar to on-going Bank supported poverty alleviation efforts.

WJEMP will be ideally suited for the nature of the Government's program, as it provides the longterm yet flexible commitment that is required for a comprehensive program of environmental awareness,capacity building, and accommodating sub-projects to be identified by local governments as they increasetheir competence in handling urban environmental issues in an era of regional autonomy.

The selection of program activities identified in the Project Implementation Plan April 2001 hasbeen achieved through several rounds of consultations with the provincial and local governments, andreflect their local priorities. Other sub-project components to be brought in to WJEMP during APLs 2 and3 will follow an even more rigorous community consultative approach that fully respects the new era ofregional autonomy. The local governments and their conmrunities, and private sector participants will havefull responsibility for implementation of sub-project components in their regions. Under WJEMP, thecentral government will have no responsibility for implementation, instead concentrating on environmentalawareness issues and capacity building in the regions.

In support of WJEMP preparation, each of the local governments has entered into a Memorandumof Understandings (MOU) with the Executing Agency (Directorate General of Urban and RuralDevelopment) that confirms their participation in the Ist phase of the Project. As more detail is added tothe subsequent WJEMP phases, these local governments (and others, probably) are expected to enter intosubsequent MOUs that reflect accurately their planned environmental improvement campaigns developedfrom the Local Environmental Strategies, referred to above.

Yours sincerely,

Drs. Muhammad Abduh, MADeputy, Development Financing

and Foreign Cooperation

or

A. Anshari RitongaDirector General of Budget

Directorate General of BudgetMinistry of Finance

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Annex 2: Detailed Project DescriptionINDONESIA: Western Java Environmental Management Project

The environmental deterioration being seen in the urban areas of western Java, which encompassesthe provinces of DKI Jakarta, West Java and the newly created Banten Province, is severe and isthreatening the longer term environmental sustainability of one of the most economically productive areasof Indonesia. This deterioration is due to rapid population growth, increasing industrial pollution, overexploitation of natural resources, undercontrolled development and poor waste management.

The Government of Indonesia has requested an adaptable program loan in three tranches in orderto address this environrmental deterioration systematically over the next decade. The proposal from theGovernment comprises projects to address the highest priority environmental needs, as expressed by thelocal governments during project preparation. The first tranche, APL1, is largely a technical assistanceproject aimed at preparing the foundation for sound environmental management through four components:(a) an overall urban environmental management component; (b) a solid waste management component; (c)a community and private sector participation component and (d) composting support from the GEFprogram.

Each technical assistance (TA) package described below has an introductory table denoting thename of the TA, the contract number, the implementing agency, the proposed year of start-up, the duration,and the base cost in millions of US dollars. It is followed by a background section, a brief description ofthe TA's terms of reference, and outputs. The overall urban environmental management component andthe solid waste management component both carry civil works, and the solid waste management componentalso includes provision of equipment. The civil works and equipment descriptions follow the TAdescriptions.

By Component:

Project Component 1 - US$11.10 million

Overall Urban Environmental Management

Introduction. This component consists of a total 21 technical assistance (TA) packages whichfocus on drawing up environmental strategies for the provinces West Java and DKI Jakarta, and then ondrawing up local environmental strategies for the eight PLGs. The component will also: develop astrategic plan for the collection and disposal of medical waste; design and implement public educationprograms about the importance of a clean environment and what can be done at the local level to improvethe urban environment; develop an emergency preparedness program for Cilegon and Serang; carry outfeasibility studies for and construction of a wastewater treatment; carry out studies and implement works toprotect and improve local lakes; and strengthen the CPMU. Civil works include drainage works inurban areas and development of parks and city greening. The base cost shown excludes taxes.

West Java Province Environmental Strategy Base Cost USD million

Contract Category Implementing Agency Year Duration (months)

West Java 3-1 TA BAPEDALDA Tk I 1 15

Background. The most important activity in the Overall Urban Environmental Managementcomponent is the preparation of the West Java Environmental Strategy, which will serve as a model forenvironmental strategies to be prepared by each PLG. The environmental strategies will provide local

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governments with a basis and guide for controlling the future development of their jurisdictions. Jakarta isin the process of preparing its strategy. Aside from developing the strategy, urban environmentalmanagement will require capacity building and the preparation of frameworks to respond to priority localenvironmental problems.

The TA will:(a) collect secondary data and review national urban environmental issues;(b) analyze selected "State of the Environment Reports" to assess crucial regional environmentalproblems;(c) review local urban environmental issues with Bapedalda, other agencies, stakeholders;(d) present reviews, tailored for each local government, entitled, "Preliminary Statements of LocalUrban Environmental Concerns";(e) identify options for addressing urban environmental issues raised in reports under (d); and(f) discuss options extensively with communities, universities, research institutes, industry.

Output: Detailed strategy for the province which will serve as a model for the other provinces andlocal government units

Local Environemental Strategy TAsYear Duration (months)

2 12TA & Contract Implementing Agency Base Cost USD million

Kota Bandung (Kota Bandung 3-1) BAPEDALDA Tk II 0.074Kabupaten Bandung (Kab. BAPPEDA Tk II 0.078Bandung 3-1)Kota Bekasi (Kota Bekasi 3-1) BAPPEDA Tk II 0.097Kabupaten Bandung (Kab. Bekasi BP2P 0.0753-1)Kota Bogor (Kota Bogor 3-1) BAPEDALDA Tk II 0.111Kota Cirebon BAPPEDA Tk II 0.071(Kota Cirebon 3-1)Kota Depok (Kota Depok 3-2) BAPPEDA Tk II 0.107Kabupaten Serang (Kab. Serang BAPPEDA Tk II 0.1003-2)Kota Tangerang BAPEDALDA Tk II 0.047(Kota Tangerang 3-2)

Background. Once the West Java Province Environmental Strategy (West Java 3-1) has beendeveloped, Kota Bandung will prepare its strategy using the West Java strategy as a model. In developingthe strategy at the local level, the importance of an iterative process which can gradually improve the finaloutput is recognized. For this reason, the strategy will be developed through consultations with variousstakeholders such as community-based organizations, NGOs, universities, government agencies,professional associations and the private sector. The public "Urban Forum" will provide the opportunity,and the "space and time" for civil society to discuss common environmental problems and strategies, and toexplore technical, social, and economic options. A key factor for the success of the consultation process istransparency. Good databases and easy access to information are vital, as a good strategy is useless if heldonly by an elite. The implementing agencies for the development of the environmental strategies of the

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local governments will be the respective technical units of the local government (Bapedalda or Bappeda).

The TA will:(a) review and prioritize urban environmental issues;(b) review changes and additions to the regulations governing the environment and proposals forchanges;(c) design a detailed strategy; and(d) discuss above strategy with various stakeholders.

Output: Detailed strategy and medium and long-term environmental action plan.

Development of a Strategic Plan for the Collection Base Cost USD million

and Disposal of Medical Waste 0.407Contract Category Implmenting Agency Year Duration (months)

Pusat 3-l TA CBAPEDAL 1 15 months

Background. In many cities medical waste from hospitals and clinics is disposed of in an unsafemanner, posing a health hazard for the community. One option is to construct waste disposal facilitieswhich would serve a number of hospitals and clinics. Having a local facility would reduce operating costs,making proper disposal more affordable, and would provide opportunities for the private sector to constructand operate the facilities. Prior to financing any specific medical waste treatment facility, BAPEDAL willstudy various options. The study will integrate the findings of previous medical waste studies.

The TA will:(a) identify existing policies, legislation and regulations within BAPEDAL and the Ministry ofHealth, and make recommendations for modifications and additions;(b) identify waste sources to be included (hospitals, clinics, veterinarians, etc.);(c) define the types of waste to be covered;(d) explore options for collection, storage, transportation and final disposal of medical waste,including the use of existing incinerators or the hazardous treatment facility in West Java;(e) estimate investment requirements, and determine collection charges according to particularcategories of medical waste and types of establishments. This would include a review of disposalcosts in order to determine an appropriate fee structure for different types of establishments;(f) analyze cost recovery and financing options;(g) define the roles and responsibilities of govemment agencies, local governments, hospitalauthorities and other establishments;(h) prepare training requirements for medical practitioners, including an overseas study tour insoutheast Asia;(i) prepare public awareness requirements (to be conducted in close cooperation with TA contractPusat 3-3 for the promotion of environmental awareness);() analyze prospects for private sector participation in the management of medical wastecollection, storage, treatment, and disposal; and(k) establish a timetable for implementation of the strategic plan and define the objectives to beachieved in the initial phase (5 years).

Output: A strategic plan based on a 15-year time horizon with a detailed action plan for the firstfive years; detailed proposals for activities for implementation in APL2 (either publicly providedfacilities/services or bidding documents for private sector participation); standard operational manuals

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based on already existing generalized procedures; identification of land acquisition needs and environmentalassessment if the plan is to provide publicly owned facilities.

Management and Technical Advisory Services to Base Cost USD million

Central Program Support Unit 2.499Contract Category Impleienting Agency Yea Duration (months)

Pusat 3-2 |TA DGURD I1 30

Background. As WJEMP's design is innovative, decentralized, and broad in scope, GOI willrequire additional consultant services especially in the early part of the project (APLI).

The TA will:(a) assist the CPSU in (i) disseminating infornation pertaining to APLl's objectives andcomposition, its targets, and specifications, and (ii) preparing APL2;(b) support "on-the-job" and formal training programs for government personnel, particularly inthe participating local governments and prepare these personnel for more significantimnplementation efforts in APL2; and(c) evaluate the capabilities of the concemed implementation units, particularly in the provincialand local governments as they assume their increased responsibilities through regional autonomy.

Developing appropriate skills, systems and procedures for sustainable operation of APL2 and APL3 will bean important factor in the execution of this assignment. Provisional sums have been provided in thecontract to enable the CPSU to respond to unforeseen needs for support.

Output: Good performance of local governments; training programs for strengthening localgovernments; standard documents for sub-projects in APL2 and APL3; preparation of APL2 proposals;personnel training programs; WJEMN management information systems including consolidated projectaccounts and progress reports

Design, and hnplementation Supervision Base Cost USD minllion

of Environmental Awareness Component 0.555Contract Category Implementing Agency Year Duration (months)

Pusat 3-3 TA BAPEDAL 1 24

Background. As GOI makes improvements in environmental infrastructure and services and morevigorously enforces environmental law, the public must take a more active role in supporting initiatives inenvironmental protection and improvement. The environmental awareness campaign will increase publicrecognition of its potential role in promoting a cleaner, healthier and more attractive urban environment.The TA will define the strategy, target groups, action plan and mechanisms, and also contribute toestablishing a suitable environmental communication forum.

The TA will:(a) employ the most cost-effective means of communication, using a mix of media, materials, plusgroup or community activities;(b) develop methods to monitor the progress and impact of the environmental awareness campaign;and

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(c) provide measurable indicators that relate to a baseline condition.

Output: Strategy, action plan and mechanisms to increase public environmental awareness;baseline database on impact of present level of public awareness on a poorly managed urban environment;detailed campaign strategy for imnplementation, from 2001-2003 and from 2004-2006; management of theimplementation of the first phase of the campaign.

Design and Implementation Supervision Base CostUD million

of Environmental Education Component 0.480Contract Category Implementing Agency Year Duration (months)

Pusat 3-4 TA DIKNAS (Ministry 2 24of NationalEducation)

Background. The Indonesian public's understanding of the impact of poor waste management isgenerally low. In addition, decades of non-transparent government mean that people inside and outsidegovermment almost completely lack respect for and confidence in environmental rules and regulations. Thegovernment wishes to rebuild this confidence from the ground up.

This TA will:(a) review the curriculum, teaching materials, teachers' skills and classroom facilities;(b) draw up a guide book for teachers to use in environmental instruction;(c) design and implement a training program for teachers; and(d) design a public awareness program for youth.

This TA will be closely related to the environmental awareness campaign in TA contract Pusat 3-3. Theimplementing agency will be the Ministry of Education, particularly the Directorate of Primary andSecondary Education, and implementation will be managed by the local government, facilitated by thisDirectorate.

Output: Teachers' guide book on urban environment issues; training courses for teachers; over3000 teachers trained; public awareness programs aimed at school pupils.

Local Environmental Awareness, DKI Jakarta Base Cost USD million0.151

Contract Category fmplementing Agency Year Duration (months)

DKI 3-6 TA BAPEDALDA Tk I 2 18

Background. Local environmental awareness building is important in Jakarta because thebehavior and activities of the citizens of Jakarta are often emulated by those in the other provinces. TheTA will seek to build local environmental awareness in DKI Jakarta, to promote a spillover effect inwestern Java.

The TA will design and implement a program, using the media, events, competitions, exhibitions,etc., to improve environmental awareness of the citizens of Jakarta and to garner strong, broad-basedsupport to act responsibly.

Output: Ratio and TV advertisements, competitions, exhibitions

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Cilegon/Serang Emergency Preparedness Program BaseCostUSDmillion0.488

Contract Category Implernenting Agency Year Duration (months)

Pusat 3-5 ITA IBAPEDAL 1 24 months

Background. Cilegon, together with the surrounding areas of Kabupaten Serang, is one of themost heavily industrialized areas in West Java. There are approximately 275 active industrial enterprises,of which approximately 147 likely have the potential for industrial disaster such as explosion, fire,chemical spill and/or leakage of hazardous wastes that would threaten the well-being of the surroundingcommunities. To complicate the situation further, Serang sits on a geological formation that is prone toearthquakes, volcanic eruptions and tsunamis. The potential for industrial disaster in Serang is such that itwas selected as one of three Indonesian locations for a special industrial disaster prevention project byUNEP. The objective of the Cilegon-Serang Emergency Preparedness Program is to strengthen localpreparedness to the point where industries, emergency services, and the local community will be able tocollectively respond to industrial emergencies.

The TA will:(a) review systems and procedures;(b) review organizational aspects;(c) create a database for development and dissemination;(d) encourage community participation; and(e) design training and institutional strengthening.

The Environmental Impact Management Agency (BAPEDAL) wishes to use this program as amodel for similar industrial areas. The TA will work closely with the industry leaders, governmentofficials and services (e.g., fire, police, military, medical and environment), NGOs, and local communityleaders.

Output: Detailed assessment of the risks of each industry; information dissemination plans; afive-year emergency preparedness action plan for Cilegon and Serang; detailed simulation training plan; amonitoring plan; financing plan

FS and DED for Treatment of Wastewater Discharges and Base Cost USD nillon

Improvement of Kesenden Oxidation Pool 0.037Contract Category Implementing Agency Year Duration (months)

Kota Cirebon 3-2 TA PDAM Cirebon 2 12

Background. Cirebon has a sewerage system serving a population of some 84,000 households orapproximately 30% of the total of 280,000. The local government wishes to expand service coverage by20% or 56,000 households.

The TA will:(a) review the operations of the existing systems and the Kesenden oxidation plant;(b) carry out feasibility studies and detailed engineering design to expand coverage to the proposedtarget; and(c) design sludge lagoons for the Kesenden site to serve both desludging of the anaerobic cells, andto receive septic tank sludge that is presently discharged in the oxidation ponds with the

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consequential detrimental impact on treatment performance.

The TA will be required to develop a self-financing project that could be funded during APL2 with costrecovery achieved through sewerage charges paid by existing and new households. The local governmentwill not contribute to the project, but internal subsidies from the water enterprise (PDAM) can beconsidered. To assist the PDAM during implementation (during which it will be repaying existing loans),consideration will be given to reducing dividends paid to the local government.

Output: Review of Kesenden Oxidation Pond and proposed additions for treatment of septic tanksludge; detailed engineering designs for modifications and expansion of the sewerage system; biddingdocuments; institutional strengthening

Study for Nornalization and Development of Lakes Base Cost USD tOiltion

0.197Contract Categosy lmplementing Agency Year Duration (months)

KotaDepok3-1 TA |BAPPEDATkII |1 12

Background. Located to the south of Jakarta, the town of Depok has a total of 22 small lakeslocated in almost every subdistrict. Depok functions as a catchment area for part of the Jakarta region. Formany years, these small lakes, especially the Dongkelan and Pitara lakes, have provided the surroundingcommunity with a source of income from fisheries, water supply, rain retention basins, recreational areasand a source of unused land. In addition they also serve as a water supply resource for part of Jakarta.

Increasing needs for development land, together with weak law enforcement and low publicawareness about pollution control, have resulted areas of the lake being encroached upon by multiple users.This has resulted in uncontrolled exploitation of the lake environment, deteriorating water quality, andreduced storm water retention capacity, the latter which has contributed to more frequent flooding inJakarta.

In 1999, the local government of Depok established a working committee comprisingrepresentatives of various agencies to control, protect and preserve the function of the lakes. The localgovernment intends to develop an integrated water resource management system for these lakes, and toestablish and maintain close cooperation between the government, private sector, communities, NGOs, andlocal schools. The working committee will need strengthening to make it more effective.

The TA will:(a) review all existing data, and conduct a rapid assessment on the overall existing physical statusof the 22 lakes including flora and fauna;(b) assess the social interactions of the communities living adjacent to the lakes and their potentialrole in sustainable management of the lakes; and(c) assess possible adverse impacts of upstream pollution flows coming via the rivers.(d) identify in detail the existing condition of each lake and the hydraulic inter-linkages (if any)between them;(e) examine the lake areas, water depths, bank stability, hydraulic control structures, water quality,sedimentation, water usage of local communities, and usage for water supply;(f) review the current impacts of solid and liquid waste;(g) assess the role of each lake for storm water retention and control, and for water supply. Wherethe quality of raw water is affected by liquid and solid waste from neighboring communities, the

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TA will highlight for priority actions under the implementation program. The TA will coordinatewith other local governments to the south of Depok in an effort to reduce pollution coming from theupstream areas;(h) study the potential economic benefits of the proposed improvement plan; and(i) give attention to fishing and community-based tourism, and other community-based economicactivities.

The proposed improvement plan will be discussed with local communities, NGOs and localschools. To the maximum extent possible, the objectives should optimize the environmental and economicfunction of the lakes, minimize adverse impacts, and consider the social and cultural needs of thecommunity.

Output: An overall management plan; detailed design for the protection and enhancement of thethree largest lakes; program for the local communities' participation in the protection of the lakes

Feasibility Study and Preliminary Engineering Design for Base Cost USD million

Cika undun River Domestic Wastewater Facilities 0.181Contract Category Implementing Agency Year Duration (months)

Kota Bandung 3-3 TA BAPEDALDA Tk 1 12

Background. Bandung's municipal water supply takes in raw water from the Cikapundung River.The water quality of the river has worsened alarmingly, due to uncontrolled discharge of householdwastewater. A preliminary study estimated that about 30 liters/sec of domestic wastewater are dumpedinto the Cikapundung River from the 13 communities (kelurahans) located along its banks. Water qualitymust be improved by reducing pollution loads.

The study area will cover the river bank communities in the vicinity between Siliwangi Bridge inthe north to Sukarno-Hatta Bridge in the south, an area which is not served by the existing network. As thearea is located below existing sewer collectors and is densely settled, special attention will be paid toalternative technical solutions and combinations of systems, with close consultation with the beneficiaries.

The TA will:(a) adopt a participatory planning process where alternative technical solutions, their consequencesin terms of land acquisition, pipe alignment, construction phasing, local participation inconstruction, and cost implications are thoroughly discussed and agreed with the residents.Community-based organizations, NGOs and relevant local government agencies will alsoparticipate and assist in the vetting and approval of the proposals;(b) estimate O&M costs and propose billing rates for connected households; and(c) assess various alternative options, including the capacity of institutions which could beresponsible for operating the system and propose tentative institutional and training plans to ensuresustainable operations.

Output: Technical and institutional recommendations, preliminary designs, cost estimates,estimated billing rates, a Land Acquisition and Resettlement Action Plan for the recommended systems, theproposed institutional arrangements, an institutional strengthening and training plan, and an action planwith TORs for the next phase.

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Feasibility Study, AMDAL and DED for Domestic Wastewater Treatment (IPLT) Base Cost USD million0.1 10

Conhact Category Inplementing Agency Year Duration (months)

Kota Tangerang 3-1 TA Dinas TPL TK II 2 12(Local SanitationDepartment)

Background. The sludge treatment plan capacity in Kota Tangerang is fully exhausted. This TAwill prepare the Environmental Impact Monitoring Agency (Bapedalda) of Kota Tangerang to prepare forthe implementation of a septic tank sludge treatment plant (IPLT) in the south-east area of the city(Kecamantan Ciledug). The treatment plant is required because the existing facilities of Kota andKabupaten Tangerang are overloaded. An available site that is owned by the local govermment will beanalyzed for suitability and its impact on the neighboring communities assessed, through an environmentalassessment (AMDAL) that will meet national and Bank guidelines.

The TA will review wastewater management needs in neighboring urban areas in KabupatenTangerang and also the western parts of DKI Jakarta. The feasibility study will:(a) review the 1999 Wastewater Master Plan to check the treatment plant demands for 5 and10-year planning periods, and also to serve a larger area than planned earlier, taking into accountthe needs to serve a larger area, including other subdistricts in Tangerang that may be served byother treatment plants in the future;(b) examine areas in southem Kota Tangerang that are prone to flooding and prepare a draft actionplan for serving these areas with improved drainage and/or sewerage because of malfunctioningseptic tanks that back up in heavy rain; and(c) carry out a financial analysis that is based on sub-sector cost recovery.

Outputs: Demand forecast for sludge disposal; review of existing sludge disposal practices;environmental assessment; business plan including proposed charges; proposal for organizationalarrangements including job descriptions; detailed engineering design and bidding documents; operationalmanuals

Detailed Engineering Design and Drainage Construction in Urban Areas Base Cost USD miillion0.625

Contract Category Implementing Agency Year Duration (months)

Kota Depok 1-3 CW DPU Municipal 3 18Works

Background: Under TA Depok 3-1, a feasibility study for normalization of the lakes in KotaDepok will be completed about 12 months into APLI. One of the recommendations expected from thestudy will be a drainage plan for the urban areas presently discharging into the lakes.

The Subproject will:For the areas recommended to be served by improved drainage, the subproject will prepare detailed

designs, bidding documents for construction of the recommended civil works and construction of improveddrainage for some of the urban areas in the municipality.

Output: Improved drainage of urban areas surrounding the lakes and improved control of thepollution discharged into the lakes.

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Detailed Engineering and Construction for Rehabilitation of Lakes Base Cost USD million0.52 1

Conttact Category Implenenting Agency Year Duration (months)

Kota Depok 1-4 CW DPU Municipal 3 18Works

Background: Under TA, Depok 3- 1, a feasibility study for normalization of the 21 small lakes inKota Depok (south of Jakarta) will be completed about 12 months into APL 1. The main recommendationsfrom the TA will be proposals for an integrated water resource management system and to establish andmaintain close cooperation between the government, private sector, communities, NGOs, and local schools.It is expected that an immediate objective would be to minimize adverse impacts.

The Subproject will prepare detailed designs and bidding documents for the physicalinfrastructure for the recommendedinitiatives. Detailed plans will be developed for implementation of theinstitutional strengthening recommended to implement and sustain the proposed developments includingmonitoring and control functions. Construction of physical infrastructure will also commence under thesubproject.

Output: Improved water quality and overall environmental quality, physical stabilization of thelakes, improved management, and strengthened monitoring of the uses and activities related to the lakes andimproved enforcement of regulations, so that the lakes can recover their function as water retention area,water source for part of Jakarta, and facilitate environmentally friendly activities such as fishing andrecreational activities.

Construction of Domestic Wastewater Treatment (IPLT) .s46eCostUSDil9on

Contract Category Implementing Agency Year Duration (months)

Kota Tangerang 1-1 CW Dinas Perumahan 3 12TK II (LocalSanitationDepartment)

Background. Under TA, Kota Tangerang 3-1, a feasibility study will be undertaken for theconstruction of a waste water treatment plant for domestic waste in the south east of the city (KecamatanCiledug), including the required environmental assessment studies that will need meet national guidelinesand the Bank's criteria. For the recommended plant, the detailed design and bidding documents will alsohave been prepared.

The Subproject will construct a septic tank sludge treatment plant (IPLT) and establish asustainable organization to operate the plant.

Output: Improved treatment of domestic waste and improvement of environmental health as theincreased treatment capacity will enable the municipality to put an end to uncontrolled discharge ofsludges in empty lots and in water bodies.

Wastewater Treatment Facility Base Cost rnillion (USD)

and Improvement of Kesenden Oxydation Pond 0.671Contract Category Inplementing Agency Year Duration (months)

Kota Cirebon 2-3 ICW PDAM Cirebon 3 15

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Background. The feasibility study, site location and environmental studies, detailed design andpreparation of bidding documents will be undertaken during the first two years of the APL funded from aprovisional sum under TA Pusat 3-2, Management and Technical services to the-Central Program SupportUnit.

The Subproject will construct waste water treatment facility, optimize Kesenden oxydation pond,and establish a good operation and maintenance guideline. The oxidation pond will be extended if thefeasibility study has established such demand.

Output: Wastewater from a large neighborhood of Kota Cirebon having been treated beforedischarge to the sea and an efficient operation of the treatment facility.

Development of City Parks and Greening Base Cost USD million

Contact Category Implementing Agency Year Duration (months)

Kota Cirebon CW Dinas Pertamanan 13 12

Background. Planning, and design will be undertaken in consultation with the civil society duringthe first two years of the APL, funded from a provisional sum under TA Pusat 3-2, Management andTechnical services to the Central Program Support Unit.

The Subproject will implement urban greening and improvement of city parks through theinvolvement of private sector and the community.

Output: Improved parks, improved urban environmental quality, townscape, and micro climate,enhanced amenity and quality of life.

Project Component 2 - US$6.88 million

Solid Waste Management

Introduction. This component consists of seven TA packages geared specifically toward improving solidwaste management. These include TAs for the establishment of waste management corporations inJabotabek and Greater Bandung, feasibility studies, engineering designs and construction of landfills, TAsrelated to composting, and TA to introduce the "3R" solid waste reduction scheme and assistance towaste-pickers. It also includes provision of transport and collection facilities and heavy equipment for alandfill.

Jabotabek Waste Management Corporation Consultant Support Base Cost USD million1.011I

Contract Category Imple0mting Agency Year Duration (months)

Pusat 3-6 TA DGURD 1 30

Background. WJEMP-supported initiatives expect to improve overall municipal service delivery,especially related to improved solid waste management. One of the key sub-components of the solid wastemanagement component is the establishment of the Jabotabek Waste Management Corporation (JWMC).At present, individual cities (kota) and districts (kabupaten) carry out solid waste management andoperations in Jabotabek for their respective service areas. Some of the resources and operations (landfills,

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transfer stations, transport services) are best shared or operated jointly. Most cities have their own landfills,but many of these are nearing exhaustion. Therefore, optimal development of future solid wastemanagement under comprehensive regional cooperation plans will be required. This is the key justificationfor the proposed Jabotabek Waste Management Corporation.

A combination of waste reduction, reuse, recycling and composting has the potential tosignificantly reduce the volume of solid waste going to landfills, resulting in sizable cost savings tomunicipalities and income potential for individuals. If current management practices continue, the resultwill be ever increasing operational and maintenance losses, increased equipment replacement costs,continued environmental degradation, and a further decline in service levels. In addition, the indirect costsrelated to public health, municipal water supply, dumpsite and landfill remediation, flood controlmaintenance, and illegal dumping of hazardous and toxic waste, could escalate to crisis proportions.

The TA will cover solid waste management throughout Jabotabek, including:

(a) establishment of the JWMC;(b) planning, feasibility studies for the eventual construction of new transfer stations and landfills

in Jabotabek;(c) support to the GEF composting grant program and sub-projects in compost product

development and marketing, and waste recycling; and(d) implementation of the proposed medical waste strategic plan.

Output: Strategic plan (including proactive NIMBY initiatives) and site identification; businessplans including the role of the private sector; legal framework for the Corporation; operational plans, jobdescriptions, and an operational organization.

Greater Bandung Waste Management Corporation Base Cost USD million

Consultant Su ort 0.415Contc Category Implementing Agency Year Durahton (monts)

West Java 3-2 TA BAPEDALDA Tk- 1 24I

Background. At present, the city of Bandung (kota) and the surrounding district of Bandung(kabupaten) which together make up Greater Bandung, are responsible for solid waste management andoperations for their respective service areas. Some resources and operations (landfill, transfer stations,transport services) are best shared or operated jointly, especially because the city of Bandung hasexhausted available land within its administrative area for sanitary landfill sites.

Both local governments have expressed interest in forming a joint solid waste management entity,and will be expected to benefit from the existence of a single overarching plan for the operations andmanagement of solid waste in Greater Bandung. There is a possibility that one or two more neighboringlocal governments (Garut and Sumedang) will join the Greater Bandung Waste Management Corporation(GBWMC).

A combination of recycling and composting has the potential to significantly reduce the volume ofsolid waste going to the landfill, resulting in sizable cost savings to the municipalities and income potentialfor individuals, NGOs and private companies. There is a considerable agro-business community in theBandung area that could serve as a basis for the private sector to become involved in composting, with

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which GBWMC will develop close cooperation.

The TA will explore opportunities for solid waste composting in Greater Bandung, especially toreduce the potentially high cost of transporting urban waste. The TA will liaise closely with the medicalwaste study TA (Pusat 3-1) to ensure coordination in implementation.

Output: Strategic plan (including proactive NIMBY initiatives) and site identification; businessplans including the role of the private sector; legal framework for the Corporation; operational plans, jobdescriptions, and an operational organization

Feasibility Study, AMDAL and DED for Kopiluhur TPA Base Cost USD million0.157

Contract Category Implementing Agency Year Duration (months)

Kota Cirebon 3-3 |TA IDinas Kebersihan l 1 12

Background. Solid waste management in the city of Cirebon has become a critical concern. Thesolid waste disposal site (TPA) at Grenjeng was exhausted over a year ago, and has raised protests fromthe surrounding community. As an emergency measure, the garbage is being disposed of in an open dumpin Harjamukti village in Kopiluhur subdistrict. Soil cover is done every two or three days in order tomitigate the worst effects. Compaction is done using a small bulldozer each time a truck dunps garbage,while the wastepickers search for recyclable materials. No proper engineering has been done.

The city's plan for Kopiluhur includes the use of geo-textiles to block leaching. Before a geo-textileliner can be placed, the newly dumped waste must be removed. A remedial program and specificidentifications for "no dump" areas need to be identified, followed by implementation of a strict disposalmanagement regime. A feasibility study, environmental impact assessment, and detailed engineer design(DED) for TPA Kopiluhur are crucial to achieve compliance with GOI and Bank environmental standardsand requirements for sanitary landfills.

The TA will:(a) review existing plans;(b) project the amount of waste to be generated until the year 2020 and the capacity of Kopiluhur,and evaluate the existing and potential recycling and composting in Cirebon;(c) define a definitive plan for the Kopiluhur TPA, including selecting from various methods forcontrolled or sanitary landfills, siting, design, technology selection, construction techniques, andoperation and maintenance procedures;(d) carry out DED which includes (i) construction pre-design of TPA Kopiluhur, (ii) technicaldesign of construction works, (iii) workloads description conceming necessary material and labor,(iv) sequence of implementation, monitoring, and supervision activities for physical construction,and (v) bidding documents;(e) define an institutional plan for operating the TPA and a training program for all staff directlyassociated with the TPA operation as well as city managers;(f) draw up an environmental impact assessment complying with Indonesian regulations, WorldBank standards for conducting environmental social studies and impacts assessment for newprojects, and community consultation procedures in accordance with Bank guidelines; and(g) conduct stakeholder consultations with local affected groups through the establishment of apublic advisory board to be set up and funded by the project during APL 1.

Outputs: Definitive plan for the Kopiluhur TPA; DED for infrastructure works; institutional

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plan; enviromnental and social assessments

Improved Solid Waste Management Services and Feasibility Study, Base Cost USD million

AMDAL and DED for new TPA in East Serang 0.236Contract Category Implementing Agency Yeau Duaibon (months)

Kab. Serang 3-1 TA Dinas Kebersihan 1 12

Background. The existing solid waste disposal site (TPA) at Cilowong is the only one in Serang,and it serves only the urban area in the western part of the district (kabupaten). The existing TPA is verypoorly managed, causing serious local environmental damage. To serve the rapidly expanding eastern partof Kabupaten Serang, the local government has proposed the development of a new TPA in eastern Serang.The new TPA is expected to serve five subdistricts (kecamatans), as well as an extensive industrial area ofabout 20,000 ha that is planned in eastern Serang, that is already supporting 190 operating industrial unitsin a first phase of about 8,000 ha. The site selection of the new landfill will be subject to careful siteselection analysis using criteria to be agreed with the Bank.

The cleansing agency (Dinas Kebersihan) of Kabupaten Serang has limited solid waste collectionand transportation infrastructure and equipment. Of the existing equipment, only 40% is in adequateoperating condition. One of the consequences is that the local government is not able to fully support thecollection and disposal of industrial waste, thereby missing the opportlunity for increasing revenues andextending solid waste management services to the poorer areas of Serang and other smaller towns.

It is essential to establish a new TPA in East Serang to increase coverage. Serang will improve itsoperations of the existing TPA in order to reduce the level of local environmental damage. In accordancewith the overall objectives of WJEMP, the cleansing agency will promote the "3R" concept of "reduce,reuse, recycle". Composting will be included in the plan in order to reduce the total volume of waste.

The TA will:(a) conduct a feasibility study;(b) carry out an environmental impact assessment;(c) carry out DED for the construction of a TPA in East Serang;(d) examine the potential role of the private sector (especially local industrialists) to supportimproved waste management throughout Serang; and(e) design a plan to encourage regional cooperation with Cilegon city in order to optimize the use ofavailable TPA capacity and the use of solid waste collection and transportation equipment.

During the execution of this assignment, the TA will be required to proactively coordinate with the CPSUto ensure that the overall WJEMP objectives are fulfilled. CPSU will be responsible for ensuring thatproposed WJEMP environmental and technical solutions being developed elsewhere under the project areshared with the cleansing agency and the TA.

Outputs: Feasibility study, environmental impact assessment, DED for the new TPA, plan tooptimize solid waste activities between Serang and Cilegon

Design of GEF Grant Mechanism for Compost Base Cost USD mniiion

Contact| Category Implementing Agency Yea Duration (months)

Pusat 3-7 (GEF) |TA |BAPEDAL II 18

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Background. Ever increasing solid waste production in urban area can have serious impacts onthe environment and creates a heavy burden on city finances to manage it. During decomposition, solidwaste also produces huge amounts of methane gas which contribute to global climatic change. Compostingcan significantly help reduce these adverse impacts. Composting organic waste is a technically simpleoption, and is potentially less costly than sanitary landfills. It also reduces greenhouse gas emissions. Toassist in promoting significant composting operations in western Java, the Global Environment Facility(GEF) has approved a grant of $10 million equivalent to be managed through WJEMP. The grant isproposed to support the development of viable compost production and marketing systems in Jakarta andWest Java.

Support for composting is based on the fact that even well designed and operated sanitary landfillsdo not recover more than 60% of the methane generated, and are therefore a source of greenhouse gasproduction. The potential benefits from developing a viable compost production and marketing system are:(a) reduction of greenhouse gas emissions, (b) reduced usage of non-point source polluting syntheticfertilizers, (c) reduced soil erosion, and (d) more sustainable agricultural practices.

In Indonesia most of the compost production has been relatively small scale, and has not developedmarketing and quality control systems. Little consideration is given to the potentially large-scaleagricultural end users. Composting must be justified on the basis of supplying a quality product to adefined market at competitive prices. Analysis done during project preparation indicates that there is apotential supply of 1.15 million tons. If it can be delivered at the right quality and price, a significantmarket is waiting to be served.

The TA will develop a compost grant mechanism, develop a market for agricultural use ofcommercial scale composting, and establish a technical advisory team. Detailed activities include thefollowing:

(a) assess composting technology, production, and marketing development;(b) assess compost quality and competing products;(c) assess the price of compost relative to competing products;(d) assess current marketing system of compost and other fertilizers;(e) prepare quality control mechanisms;(f) estimate market demand and targets for increasing supply;(g) develop and conduct marketing campaign, especially targeted at large scale users; and(h) develop an international compost information dissemination strategy.

The objective of this subcomponent is to achieve an additional 60,000 tons of compost by the end of APLI,through a combination of a compost grant mechanism and marketing assistance. The mechanism will besimple to administer, transparent, and easy to verify that the funds are being used as intended. The first 10months of the TA will be for the preparation of the frameworks and mechanisms, and the subsequent phase(20 months) will assist in supervising and evaluating implementation.

Output: A report containing the above assessments, recommendations for quality controlmechanisms, market demand projects, design of a marketing campaign; recommendations for institutionalmanagement of the production grants; legal instruments necessary for implementation of the institutionalarrangements

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Development of Commercial Scale Composting Plant Base Cost USD million

Contract Category .mplementing AgencyDinaS Year Duration (months)

DKI 3-3 TA Kebersihan DKI 112

Background. Jakarta authorities wish to expand composting of solid waste significantly to reducethe volume of waste being landfilled and hence reduce expenditures for solid waste management in thebudget. In addition, increased production and usage of compost have positive environmental impacts bothat the micro and macro levels.

At present, municipal waste is composed of paper, plastic, glass, rubber, textiles, metals, andorganic material. Some materials are recycled but the volumes are modest. The remaining solid waste,especially the organic waste, is sent to landfills. Solid waste in Indonesia has a high organic factor(60-75%). It is also quite dense and contains a lot of moisture. The high organic fraction makescomposting an attractive alternative to reducing the amount of waste being landfilled (in addition torecycling inorganic matter). Composting will help to (i) reduce greenhouse gas emissions, and (ii) reducethe amount of waste sent to landfills, thus saving the avoided disposal costs, reducing landfill areas,reducing traffic to landfills, and reducing investment costs for new equipment.

DKI Jakarta introduced composting in the late 1980's, but the focus was more on small-scalecomposting. With the decision to reduce the organic fraction being landfilled, it is important to developlarge-scale commercial compost plants. The city has considered constructing a plant on DKI-owned land.

The TA will:(a) establish a commercial scale compost plant to produce high quality compost;(b) link the compost production to other WJEMP activities such as compost marketing initiativesand GEF grant scheme;(c) assist with project site selection and management of vehicle movements to/from the plant;(d) draw up preliminary engineering designs;(e) carry out the initial environmental assessment;(f) project the production and sale of compost based on outputs from a parallel marketingassessment (separate assignment under WJEMP);(g) estimate project cost and financing plans; and(h) prepare bidding documents for potential private sector investments in partnership with DKIJakarta.

Output: The output of this sub-project will be a 100 ton/day increase in good quality compostproduction. Depending on the findings during this TA, DKI may enter into a BOO/BOT contract with aprivate operator or it may enter into a multi-year compost supply contract for 100 t/day. To assess theoptions, a feasibility study will be undertaken to guide DKI including preliminary engineering design,environmental assesment, and costs and financing plan

Community-Based Solid Waste Management - Reduce, Reuse and Recycle Base Cost USD million

(3R) and Assistance to Waste Pickers 0.473Contract Category Implementing Agency Year Durion (months)

DKI 3-2/3-7 TA Dinas Kebersihan 1 30

Background. The volume of solid waste produced in urban areas is increasing rapidly, rendering

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the disposal problem difficult to cope with. The urban solid waste management problem cannot be solvedonly by adding more personnel, equipment, or budget. It is very important to make efforts to reduce theamount of waste through the "3R" program of reduce-reuse-recycle.

The "3R" program represents a comprehensive effort in environmental management to minimizethe amount of waste in the production, distribution, and consumption of goods, covering:

(a) waste reduction: minimization of waste in the industry through better design, betterprocesses, and use of more suitable raw materials, and also minimization in the distributionsystem by more efficient packaging or by avoiding excessive packaging;

(b) waste reuse: using waste "as is" for secondary uses or /processes, such as using wastewaterfrom cleaner processes for other processes which do not require clean water, reusing usedcloth or textiles, furniture or equipment; and

(c) waste recycling: using waste as raw material for other useful products through otherprocesses, such as composting, producing plastic pellets from used plastics, producing officepaper from used paper, processing used oil, etc.

Waste reduction will mainly be the role of industries and distributors, but consumers should beencouraged to buy products which support waste reduction. Waste reuse by individuals or businesses cansignificantly reduce waste. Waste recycling can generate income for low-income communities as well assmall and medium size industries.

The main activity of this TA will be the development of community-based recycling includingassistance to waste-pickers, and a public awareness campaign to reduce or reuse waste especially thoserelated to community activities.

The private sector can play an important role in waste reduction, reuse, and recycling as producersand suppliers and also as buyers of secondary raw materials supplied by the community and homeindustries. The challenge is how to develop and strengthen linkages between the community, the privatesector, and the agencies.

In the solid waste management chain in Indonesia, the waste-pickers both at landfills and collectorsaround town are known as "pemulung"; those who buy recyclable materials from waste-pickers are"lapak"; "bandar" are waste traders, and "pemasok" or suppliers to industries, play important roles.Waste-pickers are the most vulnerable group with low and fluctuating incomes, living in unhealthysettlements, and exposed to disease. They are the under-privileged and usually are excluded fromdevelopment programs or social activities. Waste-pickers work at various levels of the urban solid wastemanagement system: at the household level, at the transfer sites, and at landfill sites such as BantarGebang where 3,000-4,000 work. The project will help waste-pickers be more productive and improve theirliving conditions.

The TA will:(a) develop a strategy and action plan to promote waste reduction-reuse-recycling, includingpreparations for implementation;(b) develop an action plan for community-based recycling involving all stakeholders in two projectareas;(c) develop an action plan to increase the scope, efficiency, and productivity of waste-pickeractivities (at the household level, market, transfer sites, and final disposal sites) and to improvetheir living conditions;

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(d) facilitate the establishment and development of cooperation between the private sector, informalsector, community cooperatives, and the five municipalities in DKI Jakarta to maintain asustainable framework for waste reduction-reuse-and recycling;(e) identify locations for two pilot projects, design implementation plans, -and identifyingprocurement needs for equipment, facilities and civil works in the two pilot project areas; and(f) support the cleansing agency (Dinas Kebersihan) in the implementation of the pilot projects inyears 2 and 3 of APLl. Implementation would start with simple activities in year 2, and beexpanded in year 3 of APLI.

Output: Strategy plans for community-based waste reduction; detailed action plans for two pilotcommunities in DKI Jakarta

Solid Waste Transport and Collection Facilities B aeCostUSD million

Contract |ategory Implementing Agency Year Duration (months)

Kota Cirebon 2-1 IGoods iDinas Kebersihan 13 12

Background. A needs assessment and feasibility study which will be undertaken during two yearsof the APL, funded from a provisional sum under TA Pusat 3-2, Management and Technical services to theCentral Program Support Unit.

The Subproject will provide Kota Cirebon with solid waste transport and collection facilities, andguidelines to improve the efficiency of the operations.

Output: Improved and extended service of solid waste transport and collection, and higherefficiency.

| Heavy Equipment at Kopiluhur Landfill Site Base Cost million (USD)

Contract Category Implerenteig Agency Year Duation (months)

Kota Cirebon 2-2 |Goods Dinas Kebersihan 3 15

Background. A needs assessment and feasibility study will be undertaken during two years of theAPL funded from a provisional sum under TA Pusat 3-2, Management and Technical services to theCentral Program Support Unit.

The Subproject will provide heavy equipment for sanitary landfill sites to replace the very old andwom out equipment, and establish a good and consistent operation and maintenance program andguideline, including its budget plan.

Output: Better and more efficiently operated sanitary landfill sites and established operation andmaintenance program and guidelines and its related budget.

Construction of New Solid Waste Disposal Site Bas3 Cost USD million

Contract Category Implementmng Agency Year Duration (montbs)

Kota Tangerang 1-3 CW Dinas Kebersihan 3 15

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Background. The feasibility study, site selection and environmental studies, detailed design andpreparation of bidding documents will be undertaken during two years of the APL funded from aprovisional sum under TA Pusat 3-2, Management and Technical services to the Central Program SupportUnit.

The Subproject will provide a sanitary landfill and an institution capable of operation thelandfill in a technical and financial sustainable manner.

Output: Improved waste collection in the municipality and safe disposal of solid waste.

Construction of Kopiluhur Solid Waste Disposal Site Base Cost USD million___________________________________________________________0.802

Contract Category Implementing Agency Year Duration (months)

Kota Cirebon 3-1 CW Dinas TPL TK II 3 18(Local SanitationDepartment)

Background. The feasibility study, site assessment and environmental studies will be undertakenduring two years of the APL under TA Kota Cirebon 3-3. If the site is confirmed to be an acceptable sitefor a landfill, the TA will proceed to produce detailed engineering design and bidding documents. If theKopiluhur site is found unsuitable, the TA will expand the site identification study. Stakeholderconsultation will be conducted with local affected groups through the establishment of a Public AdvisoryBoard to be set up and funded by the project during APLI

The Subproject will provide Kota Cirebon with an environmentally safe solid waste disposalfacility and strengthening of the institutions responsible for waste collection and disposal,including operational and supervision procedure together with capacity building/training.

Output: Improved waste collection in the municipality and safe disposal of solid waste.

Project Component 3 - US$ 1.53 million

Community and Private Sector Participation

Introduction. This component consists of seven TAs. It focusses on support mechanisms for small andmedium industries; support to the soybean processing industry; support for a number of operations whichare potential targets for private sector participation; and the community environment facility.

Preparation of Program Design and Implementation Plan for Base Cost USD million

Small and Medium Scale Industry Support 0.240Contract Category Implementing Agency Year Duration (months)

Pusat 3-9 TA DEPERINDAG 2 18(Ministry ofIndustry and Trade)

Background. The facility is open to all small and medium-sized industries submitting proposalsduring implementation; it is not limited only to the tofu processing, batik, or electroplating industries. Acommittee will review the proposals and decide to what extent the proposed action would benefit theenvironment. The facility can be in the form of credit, training, information, or other assistance.

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Most of the pollution in urban areas comes from industry. Therefore it is crucial to encourageindustries to take an active role in preventing and reducing pollution. Large industries and some of themedium industries have participated in the Clean River Program (PROKASIH) and the "PROPER" system,which Bapedal uses to evaluate and rate industries (in terms of black, orange, green gold, from worst tobest), and then discloses lists of the most polluting industries. The program is ongoing and has successfullyreduced the amount of pollution discharged to rivers. There has been little involvement from small andmedium-sized industries and households.

After working for many years with large industries, it is now necessary to look at the small andmedium-sized industries, and encourage them to contribute to pollution prevention and reduction. Most ofthese industries have very low capacity (in financing and human resources) in terms of environmentalprotection and improvement. It is necessary to provide incentives for them to behave responsibly in parallelwith strengthening law enforcement.

The TA will:(a) consult stakeholders to get their inputs to improve the current government policy, strategy,program and mechanisms;(b) provide technical assistance, training, and information on ways to reduce pollution; and(c) design incentives and a financing facility which WJEMP will provide in APL2 and APL3 tobuild waste treatment or improve the efficiency of their production processes to reduce pollution.

These efforts will be closely related to environmental awareness campaign and law enforcement.The implementing agency for this sub-component will be the Ministry of Industry and Trade, workingclosely together with BAPEDAL and DGURD. BAPEDAL will be a member of the Selection Committee.The Ministry of Industry and Trade is operationally responsible for the development of industry, includingits environmental protection aspects.

Outputs: Literature to disseminate way to reduce pollution to small and medium sized enterprises;report proposing incentives and design of grant facility for APL2 and APL3; recommendations foradministration of the Fund.

Preparation of Program Design and Implementation Plan for Base Cost USDnDillion

Community Environment Facility (CEF) 0.343CnUtact Category lmplementing Agency Year Duration (months)

Pusat 3-8 TA DGURD, with 2 12assistance from DGof CommunityDevelopment(PMD) and localgovernments

Background. The success of environmental management very much depends on public supportand participation. The understanding of local environmental problems and community participation inimproving their settlement, are the foundation for understanding macro problems and for developingsupport for a sustainable environment. The CEF will assist the community in developing activities andsmall businesses which help to reduce pollution and improve environmental quality. It will include technicalassistance, training, facilitators, and a grant facility. The program and mechanisms will be developed in thesecond year of APL1.

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This TA will:(a) based on the plans developed during project preparation, prepare the frameworks, organizationand procedures to assist environmental protection and improvement at the community level;(b) lay the groundwork for the financing facility through information, training, and grant; and(c) define the procedures to select a financial institution through which to channel the project fundslater on.

This scheme is different from the TA to small and medium industries, which will be managed at a higherlevel (central or provincial) due to its higher coverage. WJEMP will make the funds available in APL2 andAPL3 through an implementing bank. The implementing agency for preparation will be the DirectorateGeneral of Community Development (PMD), and implementation will be managed by the localgovernments, facilitated by PMD.

Outputs: Detailed frameworks, organization and procedures to operate the CEF in APL2 andAPL3.

Preparation of Soybean Processing Industries Pollution Reduction Program Base Cost USD million

in Central Jakarta 0.128Contract Category Implementing Agency Year Duration (months)

DKI 3-5a TA Dinas PERINDAG 1 12Tk I

Background. Inefficiencies in soybean processing result in significant losses of raw materials andexcessive organic (BOD) waste loading into waterways. The over 4,600 soybean processing industries inJakarta account for 80% of the total waste load from the food sector in Jakarta. Even if ranked separatelyfrom the food sector, soybean processing ranks third in terms of total negative environmental impacts fromsmall-scale industry behind car repair shops and textile/batik dyeing.

Roughly 70% of soybean processors are located in clusters of about 50 individual producers, while30% are scattered. The current location of many soybean producers is unsuitable, mostly along river banksin the low-income areas. Waste is insufficiently treated (if at all), resulting in polluted waterways, which inturn, result in conflicts with the downstream population. However, the industry is important, as soy-basedproducts are an inexpensive, staple food.

There are three different ways to deal with waste from the soy industry. Firstly it can be preventedthrough more efficient use of raw materials or production of byproducts. Up to 90% reduction in wastedischarge can be achieved based on preventive measures alone, motivated by profit-driven market forces.Secondly it can be treated, or converted to a less polluting form, one of which uses the Anaerobic-AerobicFixed Film Reactor similar to that being employed in South Jakarta. Finally it can be discharged, causingenvironmental problems.

Opportunities for increasing efficiencies of processing raw materials and for reducing wastedischarges in this industry hinge on applying techniques to capture lost material from the waste stream forthe production of saleable by-products (such as soy sauce and Nata de Soya), or through reintroductioninto the primary products (closed loop production). In the case of soy production, the principal wastestream is "whey" which is currently discharged by soy producers, although it contains 33% of the soybean.

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The TA will:(a) explore various prevention options such as reusing the whey, changing production processes,and producing saleable by-products from the waste stream such as Nata de Soya or soy sauce;(b) explore various waste treatment options and their cost and benefits; -

(c) indicate financing options, both through WJEMP and other available sources (such as theexisting small scale credit schemes);(d) carry out financial and environmental analyses of alternative production and treatment options,and the impact on the environment (cost-benefit) for each option;(e) conduct consultations and small testing with the soy producers in an iterative "feed andfeedback process" to check the applicability and acceptability of various options;(f) test the marketing of new by-products through a survey of consumer preferences regardingwaste stream by-products;(g) estimate market potential of by-products at current production costs, i.e., financial viability ofthe overall concept (self-sustained reduction of waste from soy production through profit-orientedprevention strategies applied industry-wide); and(h) carry out the preliminary engineering design for a pilot plant to serve as a demonstration projectincluding preparation of bidding documents for implementation in the first year of APL2.

The TA will conduct consultations with soy producers to discuss ways to improve the settlementsand living conditions, in addition to exploring ways to reduce pollution. Micro credit will be availablethrough the assistance for small and medium industries which will be managed separately in the WJEMP.

Outputs: Action plan to make improvements, organization framework to implement commonactivities.

Support to Soybean Processing and Salted Fish Industries in Northern Jakarta Base Cost USD million0.220

Contract Category Implementing Agecy Year Duration (months)

DKI 3-5b TA Dinas PERINDAG 2 12

Background. Inefficiencies in soybean processing result in significant losses of raw materials andexcessive organic (BOD) waste loading into waterways. The over 4,600 soybean processing industries inJakarta account for 80% of the total waste load from the food sector in Jakarta. Even if ranked separatelyfrom the food sector, soybean processing ranks third in terms of total negative environmental impacts fromsmall-scale industry behind car repair shops and textile/batik dyeing.

Roughly 70% of soybean processors are located in clusters of about 50 individual producers, while30% are scattered. The current location of many soybean producers is unsuitable, mostly along river banksin the low-income areas. Waste is insufficiently treated (if at all), resulting in polluted waterways, which inturn, result in conflicts with the downstream population. However, the industry is important, as soy-basedproducts are an inexpensive, staple food.

There are three different ways to deal with waste from the soy industry. Firstly it can be preventedthrough more efficient use of raw materials or production of byproducts. Up to 90% reduction in wastedischarge can be achieved based on preventive measures alone, motivated by profit-driven market forces.Secondly it can be treated, or converted to a less polluting form, one of which uses the Anaerobic-AerobicFixed Film Reactor similar to that being employed in South Jakarta. Finally it can be discharged, causing

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environmental problems.

Opportunities for increasing efficiencies of processing raw materials and for reducing wastedischarges in this industry hinge on applying techniques to capture lost material from the waste stream forthe production of saleable by-products (such as soy sauce and Nata de Soya), or through reintroductioninto the primary products (closed loop production). In the case of soy production, the principal wastestream is "whey" which is currently discharged by soy producers, although it contains 33% of the soybean.

The TA will:(a) explore various prevention options such as reusing the whey, changing production processes,and producing saleable by-products from the waste stream such as Nata de Soya or soy sauce;(b) explore various waste treatment options and their cost and benefits;(c) indicate financing options, both through WJEMP and other available sources (such as theexisting small scale credit schemes);(d) carry out financial and environmental analyses of altemative production and treatmnent options,and the impact on the environment (cost-benefit) for each option;(e) conduct consultations and small testing with the soy producers in an iterative "feed andfeedback process" to check the applicability and acceptability of various options;(f) test the marketing of new by-products through a survey of consumer preferences regardingwaste stream by-products;(g) estimate market potential of by-products at current production costs, i.e., financial viability ofthe overall concept (self-sustained reduction of waste from soy production through profit-orientedprevention strategies applied industry-wide); and(h) carry out the preliminary engineering design for a pilot plant to serve as a demonstration projectincluding preparation of bidding documents for implementation in the first year of APL2.

The TA will conduct consultations with soy producers to discuss ways to improve the settlementsand living conditions, in addition to exploring ways to reduce pollution. Micro credit will be availablethrough the assistance for small and medium industries which will be managed separately in the WJEMP.

Outputs: Action plan to make improvements, organization framework to implement common activities.

Feasibility Study for Pulogadung Domestic/Industrial Base Cost USD rmillionWastewater Treatment System 0.432

Contract Category Implementing Agency Year Duration (monfts)

DKI 34 TA Dinas PU Tk I 1

Background. In 1996 detailed designs were prepared by a private firm for a wastewater treatmentplant for the industrial estate in Pulogadung. Because of the financial crisis, implementation was neverstarted.

This TA will:(a) update the design and cost estimates; and(b) prepare a feasibility study for inclusion of the domestic waste from the neighboring low-income

residential areas.

In considering the feasibility of the proposal, the TA will review the possibility of private sectorparticipation in the operation and possibly the ownership of the treatment plant.

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Output: update of the industrial waste water projections; review of the adequacy of the existingdesign, including the feasibility of includng discharges from the low-income residential areas, proposals fortariff structures; detailed design and bidding documents for the proposed or revised design and proposedinstitutional arrangements.

Feasibility Study for Centralized Wastewater Treatment Base Cost USD illion

for Industries 0.081Contract Category Implementing Agency Year Duration (month)

Kab. Serang 3-3 TA BLH (Environment 3 12Bureau)

Background. There are two principal industrial areas to the west (900) industries and in thesouth-east (300) industries. Of these 1,200 industries, 300 are classified as large; only 50 of theseindustries have industrial waste treatment facilities, and many of these fail to meet discharge standards. Thetechnical assistance is required to prepare a comprehensive plan for the management of industrialwastewater from these two principal areas. TA contract Tangerang 3-2, which will have started in year 1of the project, will produce a strategic environmental plan which will provide the overall framework for thisTA.

The TA will: evaluate altemative wastewater collection and treatment arrangements, including thepreparation of alternative least cost phased implementation programs that take into account the anticipatedcost of land purchase, and the social impact of land acquisition and resettlement (if any).

Output: Inventory of all industrial wastes in Kota Tangerang (working from existing data andSupplemented by surveys); site identification study and preliminary environmental impact assessment ofalternative treatment plant sites and inventory of affected persons (if any); feasibility studiy andpreliminary design with proposed business and organizational plans.

Feasibility Study for Centralized Wastewater Treatment Base Cost USD million

for Industries 0.081Contac Category Implementing Agency Year Duration (months)

Kota Tangerang 3-4 TA BAPEDALDA 3 12

Background. In Kota Tanerang there are two principal industrial areas to the west with 900industries an in the south-east with 300 industries. Of these 1200 industries, 300 are classified as large.Only 50 of these industries have industrial waste treatment facilities, and many of these fail to meetdischarge standards. This TA will follow on with the local strategic plan prepared during the first twoyears of the project (TA contract Kota Tangerang 3-2).

The TA will:(a) prepare a comprehensive plan, including site identification, for the management of industrialwastewater from these two principal areas including wastewater from housing sub-areas withinthese industrial locations;(b) evaluate alternative wastewater collection and treatment arrangements, including thepreparation of alternative least-cost phased implementation program, taking into account landacquisition and social impacts

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Output: Inventory of all industrial wastes; preliminary environmental impact assessment ofalternative treatment plant sites and inventory of affected person.

Project Component 4 - US$1.77 millionComposting Support (GEF Program)

Disbursement of Grants and Subsidies to Compost Producers for Additional Base Cost USD million

Production in WJEMP Participating Local Governments in Accordance with 1.774Mechanisms and Procedures Defined under Pusat 3-7 TA

Contact Categoly I|mplementing Agency Y Duration (months)

Pusat 2-1 (GEF) isub-grant IBAPEDAL 13 24

Background. The TA under this contract Pusat 3-7 will have established the framework for thefund to be operated through a financial institution.

Output: Producers of 60,000 tons of high quality compost will receive grants; the financialinstitution will provide compost producers grants in accordance with the terms developed earlier.

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Annex 3: Estimated Project CostsINDONESIA: Western Java Environmental Management Project

1 00 Xd 0f ;t::0 XT7 t- 0 X: : i:iT0:qX:Q::::: :Local Foretig :4 Totel: l:000000000project000 Cost By: Component ;02 : US ;$miU1ion US $milliorif U0fiS $mimlLliont

Overall Urban Environmental Management 7.41 2.09 9.50Solid Waste Management 3.53 2.27 5.80Conmmunity and Private Sector Participation 1.30 0.38 1.68GEF Component 2.25 0.09 2.34

Total Baseline Cost 14.49 4.83 19.32Physical Contingencies 0.32 0.21 0.53Price Contingencies 2.41 0.36 2.77

Total Project Costs 17.22 5.40 22.62Front-end fee 0.12 0.12

Total Financing Required 17.22 5.52 22.74

Locai Foreign TotalPjec. _.Cost By Category US $million US $millien US $millon

Goods 0.27 1.61 1.88Works 4.07 0.90 4.97Technical Assistance 10.20 2.80 13.00GEF Compost Services 0.33 0.09 0.42GEF Compost Grant 2.37 0.00 2.37

Total Project Costs 17.24 5.40 22.64Front-end fee 0.12 0.12

Total Financing Required 17.24 5.52 22.76

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Incremental Cost Analysis

Broad Development Goals

The proposed Westem Java Environmental Management Project (WJEMP) will improve urbanenvironmental services and municipal waste management, consolidate the Indonesian governnent'sn-unicipal service decentralization efforts, and support local economic development in the major urbanareas of western Java and Jakarta. The proposed GEF component - an innovative organic wastecomposting program - will pilot an environmentally sound and potentially efficient method of managingorganic waste that would also cost-effectively reduce Indonesia's GHG emissions. If successful, it willprovide a replicable model for organic waste management that can be applied in other urban areas ofIndonesia and in other developing countries.

WJEMP within the longer term Western Java Environmental Management Program.

GOI requested Bank assistance for its longer-term program, and the Bank agreed in principle to assistthrough a three tranche APL covering nine(?) years of the program. The GEF at the same time agreed tothe government's request to provide a US$ 10 million grant for the nine year program period. The analysisdeals with the entire program period.

Like for the other activities in the program, the APLI will predominantly be used to undertake the detaileddesign, set up the institutional framework and to initiate some pilot activities.

Baseline

Currently, about 50% to 60% of the urban waste stream in the West Java and Jakarta areas is collected anddumped at "basic" landfills, which are mostly open dumps. Collection rates are lower in poorneighborhoods - Jakarta's collection is estimated at 66%, but Botabek's is only 23%. The rest of the wasteis dumped in canals or vacant lots or is burned. Management of the existing disposal sites is deficient in anumber of areas: irregular waste covering, sporadic compaction, poor dumping control, ineffectiveleachate collection and treatment, etc. Anaerobic decomposition of the organic waste that is dumpedcreates significant quantities of methane, a potent greenhouse gas. However, under the unfavorable landfilloperating conditions, methane collection and flaring have not been attempted at any of the sites, so most ofthe methane escapes into the atmosphere. An altemative means of reducing methane emissions from wastes- separating organic and non-organic waste and composting the organic component - has been tried on asmall scale in about 40 local areas, and a few such programs are still operating. Areas of high organicwaste supply have been identified and many people are aware of composting and its potential role in acost-effective integrated waste management system.

All levels of government within Indonesia recognize the environmental unsustainability of existing wastemanagement programs and are attempting to remedy the situation. The proposed project is one example ofthe environmentally sustainable baseline situation that GOI is striving to achieve. The project's goal forthe Jabotabek urban region is 100% collection coverage and sanitary landfilling by end 2006. Since mostof the waste disposal will occur in existing sites where retrofitting for methane collection would be verycostly and difficult, methane collection will not be attempted under the baseline scenario. Although willcosts vary considerably between sites, it is estimated that the sustainable waste management baselinesystem (sanitary landfilling with no methane collection) will cost an average of $35.00 per tonne of wastereceived on site by 2009. The baseline costs will be much less than this initially, but will rise over time as

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more effective and sustainable waste collection and disposal techniques are applied. These costs willfinanced by Indonesia.

Global Environment Objective

The global environment objective of the project's GEF component is to cost-effectively reduce GHGemissions from the decomposition of collected organic waste in western Java. Assuming the component issuccessful, a second objective is to facilitate its replication and hence further GHG reductions in otherurban areas in Indonesia and other developing countries.

GEF Alternative

The GEF alternative would promote an alternative, less technically demanding and hence potentially morewidely replicable way to reduce landfill GHG emissions than sanitary landfill with methane collection,which is to compost part of the organic waste stream in the neighborhoods that produce it and sell thecompost to farmers for use in their fields. Composting is an aerobic (with oxygen) waste degradationprocess that produces C02 as a by-product. Sanitary landfilling results in anaerobic decomposition, whichproduces methane (CH4). Composting is a potentially cost-effective way to reduce GHG emissionsbecause: (a) methane produced by anaerobic decomposition is a much more potent GHG than the C02produced by composting, plus the best designed and operated landfill gas recovery systems (or anaerobic"fuel cells") collect 80% of the methane, at the very most; (b) composting occurs much closer to the wastegeneration source, thus reducing waste collection and transportation costs and their associated emissions,and composting also avoids the operation of landfill equipment; (c) compost application reduces the use ofsynthetic fertilizers, which involve an energy-intensive, GHG-emitting manufacturing process. (Althoughcompost only has a low fertilizer contribution, its ability to improve soil structure enables more efficientuse of fertilizers).

Under the GEF alternative, communities in the Jabotabek region would be encouraged by financialincentives and assisted technically to aerobically compost an average of at least 100,000 tonnes/year of theorganic waste they produce over the nine year life of the program. Mechanisms would be developed tomarket the compost to local farmers. The GEF Alternative would thus divert at least 100,000 tonnes/yearof organic waste from landfills, where it would otherwise decompose anaerobically. In so doing, it wouldreduce GHG emissions by about 600,000 tonnes of C02 equivalent per year.

Scope of the Analysis

The scope of the analysis is: (a) the urban organic waste stream and the associated system for thecollection and disposal of this waste in the Jabotek region of Indonesia; and (b) the agricultural area aroundthis region that will use the compost that is produced by the GEF altemative method for processing thisshare of the organic waste stream.

Costs

The objective of the GEF Alternative is to divert 1,000,000 tonnes of organic waste from local dumps andlandfills to compost production over the program's nine year life. The estimated cash flows of the Baselineand GEF Alternative systems are summarized in the following table:

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Incremental Cost Analysis Table

2001 2002 2003 2004 2005 2006 2007 2008 2009Waste treated (tonnes per year) 40,000 60,000 75,000 100,000 125,000 150,000 150,000 150,000 150,000

COMPOSTING

Costs PER TONNECollection 3.5 3.5 3.5 3.5 3.5 3.5 4.0 4.0 4.0Separation 3.0 3.0 3.0 3.5 3.5 3.5 4.0 4.0 4.0Residue Disposal 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0Public Education 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5Processing (inci land and capital) 28.0 28.0 27.0 27.0 26.0 25.0 25.0 24.0 23.0Transport 3.0 3.0 3.0 3.5 3.5 3.5 4.0 4.0 4.0Management/Quality Assur 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0

Total Costs 45.0 45.0 44.0 45.0 44.0 43.0 44.5 43.5 42.5

REVENUES PER TONNERevenue from Disposal fee (same as the 4.0 4.8 10.1 13.0 16.9 20.8 32.5 33.8 35.0Total Landfilling Cost)Revenue from sale of compost 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0Total revenue (US$ per tonne of waste) 4.0 5.8 12.1 16.0 20.9 25.8 38.5 40.8 43.0

Cost difference between composting and 41.0 39.2 31.9 29.0 23.1 17.3 6.0 2.8 -0.5landfiling(US$ per ton) I

Cost difference stream (for all waste) in 1.6 2.4 2.4 2.9 2.9 2.6 0.9 0.4 -0.1million US$

Total cost difference stream (million US$) 16.0Present value of cost difference stream 11.1of INCREMENTAL COST (million US$)

at dicount factor of 10%

LANDFILLING COSTS Uncon- Land-troled fillingdispo- costssal

Investments PER TONNEEnvironmental remediation (if required for 1.0 1.0 2.0 2.9 3.9 4.8 7.5 8.0 8.5the landfill) incl. closureSite Acquisition (incl. community 0.0 0.0 2.0 2.6 3.3 3.9 4.8 4.9 5.0compensation)Transfer 0.0 0.8 1.6 2.4 3.3 4.1 6.0 6.3 6.5Design and Costr. 0.0 0.0 1.0 1.0 1.8 2.5 5.5 5.8 6.0Operational costs 3.0 3.0 3.5 4.0 4.8 5.5] 8.8 8.9 9.0

Total Costs 4.0 4.8 10.1 13.0 16.9 20.8 32.5 33.8 35.0

The agreed incremental cost of the GEF Alternative is $1 1.1 million. Indonesia requests a GEF grant of$10.0 million, and will fund the balance of these costs from its own resources. The GEF grant requestequates to a unit GHG abatement cost of $1 .7/tonne of carbon equivalent.

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Incremental Cost Matrix

Baseline Altemative - IncrementGlobal Environment Negative. Expanded 6.0 million tonnes ofBenefit waste collection and methane gas emissions

sanitary landfilling avoided by divertingincreases anaerobic 1,000,000 tonnes ofdecomposition and organic waste tomethane emissions. composting.

Domestic Benefit Better community Same as baseline.health from moreeffective wastetreatment.

Costs US$22.9 million US$34.0 million US$1 1.1 million

Identifiable taxes and duties are 0 (US$rn) and the total project cost, net of taxes, is 20.2 (US$m). Therefore, the project cost sharing ratio is 86.73% of

total project cost net oftaxes.

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Annex 4: Cost Benefit Analysis SummaryINDONESIA: Western Java Environmental Management Project

To assist in overall program development an Economic Rate of Return, using data from theJabotabek Environmental Management study, was estimated for the nine year program. The summaryfollows.

A discrete economic analysis does not apply for APL 1, Western Java Environmental ManagementProject (WJEMP), which include few physical investments but sets the strategic framework, strengthens theinstitutions and prepares the feasibility studies and detailed design for the investments to be undertaken latein APLI and in APL2 and APL3.

Regional Economic Setting

1. 'The provinces of West Java (which included the new province Banten at the time) and DKIJakarta contained some 41.6 million and 9.5 million people respectively in 1998. The population of theproject area was estimated at 16.6 mnillion, 33% of the regional total. The population growth rate 1995 to1998 was 1.9% in West Java and 1.2% in Jakarta, both declining from previous periods. In West Java 48%of the population is urban. The growth of the urban population of the region 1995 to 1998 was estimated at4.3%, compared to 5.0% 1990 to 1995. Most of the growth up to 1996 took place in Botabek (Bogor,Tanggerang and Bekasi, all included in the WJEMP).

Table A4.1 Population of the Project Area, Jakarta and West Java (000)

I________ _______ X=Total 1998 Total Growth % paKota/ 1990 1995 1998 Group Region 1990195 1995198

Kabupaten (000) (000) (000) % % %Jakarta 8228 9144 9489 57.0% 2.1% 1.2%Bandung 2069 2422 2502 15.0% 3.2% 1.1%Tanggerang NA 2303 2263 13.6% -0.6%Bekasi NA 1640 1457 8.8% -3.9%Bogor 272 329 346 2.1% 3.9% 1.7%Cilegong NA 313 332 2.0% 2.0%(Serang)Cirebon 255 266 259 1.6% 0.8% -0.9%Project NA 16417 16648 100.0% 32.6% 0.5%West Java

Other NA 489 3389 8.2% 6.6% 90.7%urban

Total 12208 16906 20037 48.2% 39.2% 6.7% 5.8%urban

Total 35380 39340 41578 100.0% 81.4% 2.1% 1.9%% Urban 34.5% 43.0% 48.2%

RegionUrban 20436 26050 29526 57.8% 57.8% 5.0% 4.3%Total 43608 48484 51067 100.0% 100.0% 2.1% 1.7%% Urban 46.9% 53.7% 57.8%

Note: Tanggerang, Bekasi and Cilegong were not classified as kotamadya (cities) in 1990 and separate population data is notavailable. Cilegong is the recently formed kot within Kabupaten Serang.

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2. Average per capita GRDP in Jakarta is some four times that in West Java. This is not reflected inworker earnings. In 1997, West Java's manufacturing non-supervisory workers earned 97% of those inJakarta. Earnings in West Java are also less skewed even at that level (the median wage of workers was2.2% higher than in Jakarta). The cost of living in Jakarta, as evidenced by the minimum wage, is similar tothat in the surrounding areas of Jabotabek but some 20% higher than in the remaining areas of West Java.

3. As recorded in pre-crisis statistics, the proportion below the absolute poverty line was 2.5% inJakarta and 9.9% in West Java (10.5% in urban areas and 9.4% in rural). Post-crisis statistics areunreliable, but imply that the overall proportion of the urban poor has increased to some 20%.

4. Other surveys to determine the effects of the crisis (RAND with USAID and World Bank fundingand surveys) showed that mean incomes in West Java and Jakarta decreased significantly more than theaverage but that median incomes did not. Data imply that largely it was the incomes of the comparativelywealthy that fell the most while those of the poor were less affected.

Regional Environmental Health

5. The environmental study of the Third Jabotabek Urban Development Project (JUDP3) found thatthe overall levels of air and water pollution in the region were severe, costing the inhabitants some US $750million per year (some $ 55 per person). Some 85% of the cost was due to air pollution, mainly from urbantransport: around 5%, or US $40 million per year, was caused by the burning of solid waste. Theremainder was due to water pollution, some US $110 million a year. These costs are consideredconservative, since they only include the ill effects of some of the known pollutants (a later study on urbanpolicy (Strategic Urban Roads Infrastructure Project (SURIP-UTPP) estimated the annual transport relatedcosts of air pollution in Jakarta alone as some US$1.3 billion).

6. In 1995, cases of diarrhea per thousand people were reported to be 38.5 in West Java and 12.4 inJakarta. The national average was 25.8. A similar relation relates to cause of death and morbidity. In WestJava diarrhea is one of the top ten causes of hospital death. Similarly, diarrhea is the 3rd most treateddisease at health centers in West Java and the seventh in Jakarta. Diarrhea or intestinal infection was themain cause of admission to hospitals in both West Java and Jakarta. Similar data are not available for otherwater-related diseases but JUDP3 record the following for DKI Jakarta in 1992.

Table A4.2 Water Related Diseases, DKI Jakarta 1992

Disease Admissions Deaths Estimated due to(1,000) water quality

Diarrhea 20624 489 76%

Cholera 1224 20 90%

Hepatitis 2062 79 50%

Typhoid 11420 170 50%

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Paratyphoid 988 38 40%

Total 36318 796

7. The Program will contain four major components, each with sub-components:

* overall environmental management* solid waste management* community and private sector participation* GEF supported composting grants.

8. Local governments were asked to propose sub-projects and some 190 have been identified. Theseare of varying sizes and only some 60 are costed at more than US$ 150,000. In many cases, the sub-projectwill itself contain separate sub-components. This applies particularly to CEF sub-projects but will alsoinclude sub-projects in other sectors.

Sub-Project Economics

9. Sub-projects fall into two major groupings: (a) those whose benefits are generic and determined bythe overall level of pollution and (b) those whose benefits are location specific. This distinction will be usedto determine the type of analysis required. The CPSU will determine whether or not a specific sub-projectcan use one of the generic groups or should have its own location specific analysis.

10. Generic projects are those whose benefits will depend largely on the overall level of environmentaldegradation. While the benefits to such projects would be different in areas with more or less pollution,variations in the benefits within any one area will be minor as long as they follow standard operatingprocedures. These procedures will be determined by the CPSU.

11. The generic groupings that have been identified are the nine relevant groups specified by JUDP3and the conmmunity environment facility sub-projects. These are discussed below. Followed by a discussionof the project groups which might require specific evaluation. Those that have already been identified are:industrial pollution (SME), composting and flood control.

12. Sub-projects of all sizes should be subject to least cost solutions analysis. Projects belowUS$100,000 will not require economic evaluation but should have a financial analysis. Projects betweenUS$100,000 and $50,000 require an economic evaluation only if there is no generic ERR whichdemonstrates viability. The latter will be accepted only if the project follows standard operating proceduresset by the Project. Sub-projects over US $250,000 should receive a detailed economic evaluation, althoughthis can make use of the JUDP3 asswmptions and data used to make their generic ERRs.

13. All sub-project proposals will be required to provide a description of the direct and indirectbeneficiaries and of the effects that will be mitigated by the project. The description should includebeneficiary nunbers and their physical/socio-economic condition. Since land values will often be required,the area affected and the present average land value should be estimated. Data should also be collected onthe current level of parameters related to whatever effect it is proposed will be reduced, e.g., cases ofdiarrhea.

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Indicative Project ERR

14. An indication of the project ERR can be provided from the JUDP3 evaluation of the available dataon sub-projects costing more than US $150,000. They imply an overall project ERR of 20.4% (as shown inTable A4.5 at the erid of this annex).

JUDP III Project Types

15. The JUDP3 project identified 12 sub-project types, nine of which have been or might be proposedfor WJEMP. The JUDP3 project ERRs were based on the human health costs of air and water pollution.The forrner used standard dose-response relationships and the results were found to be conservative by theSURIP UTPP urban transport study. The effects of water pollution used a cross-sectional and time basedanalysis of river water quality and diarrhea. Adding other water borne diseases would increase the benefitsby around 50%.

16. The retums on the JUDP3 sub-projects would be only marginally affected by location specificdata. The project calculations were made for the Jabotabek area, which includes all of the program areasapart from Bandung, Serang and Cirebon. The pollution situation outside Jabotabek is certainly less severe.However, the diarrhea situation in West Java as a whole implies that using Jabotabek derived data is notunreasonable. Therefore, it is proposed to use the generically based ERRs for all projects that can bedirectly related to one of the above project types.

17. The JUDP3 ERRS, which allowed for the costs of management, training, advisory consultants andpublic awareness programs, were as follows.

Table A4.3 JUDP3 Project Economic ERRs

Project Type ERRRubbish Collection/Disposal 26.2%Toxic Waste Management 19.0%Septic Tank Maintenance 23.2%Community Septic Tanks (see below) Neg.Local Drain Cleaning 14.9%Diesel Vehicle Particulate Control 20.1%CNG Large Bus Fuel 26.5%LPG Small Bus/Taxi Fuel 17.0%Environmental Protection & Pollution ControlInspection/Advisory Service (see SME below) 28.0%Source: JUDP III Phase III Report, June 1994

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Community Environmental Facility (CEF) Projects

18. The ERRs for Community Environmental Facility projects will also be estimated generically. Theyinclude waste collection, drainage and latrines. These sub-projects are very similar to the kampungimprovement projects (KIP) which the Bank funded since Urban I started in 1972. Those projects werejustified by their likely effects on land values. The 1988 project completion report (PCR) for the Urban IIIProject validated this assumption. It estimated average land price increases resulting from KIP of: 24%along roads, 29% along footpaths and 61% in inner kampungs. These reflected in ERRs of 26% to 31%.The 1995 impact evaluation report confirmed the PCR's estimated land value increases (but noted the needto assure that these benefits accrued to residents).

Industrial Pollution Control (SME)

19. The J`UDP3 analysis found large potential benefits from setting up an agency to control industrialpollution (estimated ERR of 28%). The benefits would be from decreased fuel burning and from decreaseddumping in the drains/rivers. Industrial waste is specific to the proposed intervention and it would benecessary to validate the benefits for each proposal. This would be particularly imnportant given the obviousopportunities for collusion. The Central Program Support Unit will evaluating sub-projects to ensure thecapture of social benefits.

Community Septic Tanks

20. The JUDP3 finding for community septic tank benefits is surprisingly low. One reason is the shortperiod assuned but extending this would not increase the return sufficiently. Similarly, JUDP3 includedsignificant costs for management and awareness campaigns etc. Even excluding these raises the ERR toonly some 4%, however. The finding is important since it is government and Bank policy to supportcommrunity facilities such as these. Therefore, the issue of sewerage requires more comprehensive reviewand is not included in the Program

Composting

21. Composting rates in Jakarta are insignificant. In West Java more waste is composted and an evenhigher percentage (35%) is burnt at source. This probably reflects the rural areas. The program areas arelikely to have characteristics more similar to Jakarta's.

Table A4.4 Garbage Disposal Practices

Province Collected Composted Burnt River Dumped Total

West Java 18.6% 6.0% 35.4% 11.5% 28.5% 100.0%

Jakarta 70.2% 0.8% 9.9% 4.3% 14.8% 100.0%

Indonesia 17.0% 6.2% 34.5% 8.6% 33.7% 100.0%

Source:EnvironmentalStatistics ofIndonesia, BPS1996, p 132

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22. The World Bank internal study Small Scale Composting, Financial and Economic Analysis, ACase Study recommended that the government could provide compost marketing support in an attempt toexpand demand, but should not provide financial support to producers unless the social benefits would besufficient to validate them.

23. The analysis was based on the cost and revenue structure of a plant with capacity of 16tonnes/month. Demand, which gave a sufficient financial return, was at least 60% of capacity. Low relativedemand, when social returns are insufficient to justify support occurred at around 40% of capacity. Arelatively narrow range, 40% to 60% of capacity, occurs where government intervention would be bothnecessary and economically viable. At the lower end of the range, the ERR would be the assumed 10%cut-off rate, rising to 20% at the higher end.

24. The emphasis should be on the correct estimation of demand for the compost. A compost plant canbe both economically and financially viable as long as the demand was correctly forecast and capacityproperly related to demand. The burden should be placed on the project proposers to explain why a subsidyis needed. Proposers will be required to prepare a detailed business plan with validated sales forecasts.These alternatives will be investigated by the Program.

Summary of Benefits and Costs:N/A

Main Assumptions:N/A

Sensitivity analysis / Switching values of critical items:N/A

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Annex 5: Financial Summary

INDONESIA: Western Java Environmental Management Project

Years EndingJune

Year I | Year 2 |Year3 3 Year4 4 Year 5 Year 6 Year 7Total FinancingRequiredProject CostsInvestment Costs 2.3 7.6 7.2 5.5 0.0 0.0 0.0

Recurrent Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total Project Costs 2.3 7.6 7.2 5.5 0.0 0.0 0.0

Front-end fee 0.1 0.0 0.0 0.0 0.0 0.0 0.0

Total Financing 2.4 7.6 7.2 5.5 0.0 0.0 0.0

FinancingIBRD 0.1 2.8 5.0 3.8 0.0 0.0 0.0IDA 2.0 3.8 0.0 0.0 0.0 0.0 0.0Government (total) (0.2) (0.7) (0.9) (0.9) (0.0) (0.0) (0.0)

Central 0.1 0.4 0.4 0.1 0.0 0.0 0.0Provincial 0.1 0.2 0.1 0.0 0.0 0.0 0.0Local Govts. 0.0 0.2 0.4 0.8 0.0 0.0 0.0

User Fees/Beneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0GEF 0.1 0.2 1.4 0.8 0.0 0.0 0.0

Total Project Financing 2.4 7.6 7.2 5.5 0.0 0.0 0.0

_ X ~~~~~~~Year I Year 2 Year 3 Year 4 Year 5 LYear 6 Year 7Total FinancingRequiredProject Costs

Investment Costs 0.0 0.0 0.0 0.0 0.0 0 0 0.0Recurrent Costs 0.0 0 0 0.0 0.0 0.0 0.0 0.0

Total Project Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Front-end fee 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total Financing 0.0 0.0 0.0 0.0 0.0 0.0 0.0

FinancingIBRDIIDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0Government 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Co-financiersLocal Gvts 0.0 0.0 0.0 0.0 0.0 0.0 0.0User Fees/Beneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0

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Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total Project Financing 0.0 0.0 0.0 0.0 0.0 0.0 0.0

The Bank financing of US$ 17.53 million of which IDA US4 5.75 million and US$ 11.78 million.The project base cost is US$ 19.32 million; physical contingencies - US$ 0.53 million, and price contingencies - US$2.78 million. GEF currnent cost financing is US$ 2.54 million.Exchange Rate I US$ = IR 9,600.

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Annex 6: Procurement and Disbursement Arrangements

INDONESIA: Western Java Environmental Management Project

Procurement

Procurement of works and goods will follow the "Bank Guidelines: Procurement under IBRD Loans andIDA Credits", January 1995 edition, revised January and August 1996, September 1997 and January 1999.Standard Bidding Documents (including Standard Prequalification and Bid Evaluation Documents), whichmay be updated from time to time, will be used for all Bank financed procurement.

Selection of consultants will follow the "Bank Guidelines: Selection and Employment of Consultants byWorld Bank Borrowers", January 1997 edition, revised September 1997 and January 1999 and "StandardRequest for Proposals for Selection of Consultants", July 1997 edition, revised April 1998 and July 1999.

The compost grants under the GEF grant will be distributed through a financing intermediary in accordancewith guidelines to be developed during the first year of the project and acceptable to the Bank.

The Procurement Plan providing a timeline for each step of the procurement process has been prepared forAPLI and will be updated annually.

A Procurement Capacity Assessment Report (PCAR) was conducted for the project and is available on theproject file. This covered legal issues, project cycle management, organization and functions, support andcontrol systems, record keeping, staffing, the general procurement environment, and overall riskassessment.

Summary of the Procurement Capacity Assessment. The legal framework which was revised by GOI inearly 2000 is generally acceptable. However, NCB procedures still have weaknesses. The new Keppres18/2000, revising the old Keppres 16/1994, includes new provisions on procurement of goods and selectionof consultants, and guidance on fraud, corruption and collusion practices. In general both Keppres' havesome acceptable guidelines, rules and procedures compared with the World Bank's procurement guidelines,rules and procedures. However, there are still provisions in these Keppres' that are inconsistent with Bank'sguidelines, such as: (a) the criteria and procedures for prequalification are unclear; (b) interest for latepayments is unclear; (c) automatic re-bidding if the participating bidders number less than three; (d)rejection of all bids if all bidders' prices are above the budget allocation; (e) above certain contractthresholds, a large firm or foreign firm must join with smaller firms or a local firm; and (f) the guidelinesfor the procurement of goods and selection of consultants are unclear. A supplemental letter on NCB hasbeen agreed with GOI and is an attachment to this Annex.

The institutional anchoring of procurement is weak with bidding committees and senior project positionsbeing temporary in nature and without clear guidelines. The biggest weakness, however, stems from a longculture of collusion among contractors, inefficient use of consultants, lack of transparency and interferencefrom senior levels in the process, and the transient nature of the committees and staff responsible forprocurement. The ongoing decentralization of responsibilities to the local govemnments adds uncertainty tohow the future performance will be. Under the project, each implementing unit will implement only two tofive contracts, mainly TA contracts, which will be of sizes similar to what they have been procuring in thepast. All contract documents and methods of selection for the first year's procurement were agreed by theBank prior to negotiations, thereby reducing the risk of delay in procurement. Considering the various riskelements, the overall risk assessment is: Average.

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Procurement methods (Table A)

Table A shows the project cost by procurement arrangements.

During project preparation, GOI changed the overall administrative procedures of the country from being acentralized system basically with all responsibilities located at the central administration in Jakarta to adecentralized form of govermnent with the main responsibilities transferred to the local governments. Asthe responsibilities and the regulations to guide the decentralization had not been spelled out at the time ofmaking the decision, the Govenmment and the Bank agreed to develop the project in a manner which made itleast dependent upon the future regulations and that resulted in the first project of three APLs becoming aTA loan, only. During the negotiations, GOI expressed its desire to accelerate the implementation of ninecivil works and goods subprojects from APL 2 to APLI with implementation starting during the last yearof APLl. The negotiated documents confirm that procurement under each of these nine will have to complyfully with the Bank's guidelines and have to be approved individually by the Bank.

The principle method for procurement is ICB. Contracts for Goods estimated to cost US$200,000equivalent or less and contracts for civil works estimated to cost US$500,000 equivalent may be procuredunder NCB procedures in accordance with the Bank's Guidelines.

During negotiations, GOI and the Bank agreed on a draft supplemental letter relating to NCB procedures.A copy of the draft supplemental letter is attached in Annex 6 and it was agreed that the supplemental letterwould also be included in the Project Agreement Manual.

Of the nine subprojects, six are for civil works at a total value of US$4.0 million and will all be procured inaccordance with ICB procedures except for one subproject worth about US$0.17 million being procuredthrough NCB. The remaining two subproject projects are procurement of gods i.e., specialized solidwaste trucks and heavy equipment for operation in the landfills, and are estimated to cost of US$1.9million. GOI agreed during negotiations that the procurement of specialized vehicles will not be part of theGovernment's reserved list and they would both be done by ICB.

The consulting services, for capacity building, development of regulations, guidelines, standards, operatingprocedures, preparation of investment projects, detailed engineering and design, studies and for training andawareness building, estimated at US$13.4 million, will be provided under consultancy contracts procuredusing the consultants selection methods shown in Table Al. Ten consultants' contracts estimated to costUS$5.1 million will be selected based on Quality and Cost (QCBS). Quality Based Selection (QBS) hasbeen selected for 23 consultancy service contracts, where assignments are highly specialized and whereconsultants have to show willingness to innovate and seek alternative solutions. The estimated cost isUS$7.9 rnillion. One TA to be financed under the GEF Grant (NBF) will be procured under QBS.

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Table A: Project Costs by Procurement Arrangements(US$ million equivalent)

Procurement Method'Expenditure Category ICB N?C Other NJ.B.F. Total Cost

1. Works 4.36 0.15 0.00 0.00 4.51(3.93) (0.14) (0.00) (0.00) (4.07)

2. Goods 1.71 0.00 0.00 0.00 1.71(1.54) (0.00) (0.00) (0.00) (1.54)

3. Services 0.00 0.00 11.81 0.38 12.19Consultants' Services (0.00) (0.00) (11.81) (0.00) (11.81)4. GEF Sub-grants 0.00 0.00 0.00 2.16 2.16

(0.00) (0.00) (0.00) (2.16) (2.16)5. Front-end fee 0.00 0.00 0.12 0.00 0.12

(0.00) (0.00) (0.12) (0.00) (0.12Total 6.07 0.15 11.93 2.54 20.69

(5.47) (0.14) (11.93) (2.16) (19.70)

'Figures in parenthesis are the amounts to be financed by the Bank Loan/Credit/Grant. All costs includecontingencies.

2 1Includes civil works and goods to be procured through national shopping, consulting services, services ofcontracted staff of the project management office, training, technical assistance services, and incrementaloperating costs related to (i) managing the project, and (ii) re-lending project funds to local govemmentunits.

N.B.F. Not Bank Financed

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Table Al: Consultant Selection Arrangements (US$ million equivalent. Current and incl. tax)

Pusat 3-1 Development of a Strategic Plan for the Collection and Disposal of Medical Wastes _ 491,731 | 491731

Pusat 3-2 Management and Technical Advisory Services to Central Program Support Unit - 3,082,463 - 3,082,463

Pusat 3-3 Design and Implerrentaton Supervision of Environmental Awareness Component 679,031 = 679,031

Pusat 3-4 Design and Implementation Supervision of Environmental Educaton Component 593895 593,895

Pusat 3-5 Ciegon/Seranp Emergency Preparedness Program - 596,820 596,820Pusat 3-6 Jabotabek Waste Manawenient Corporaion Consultant Support 1,245,654 - 1245,654Pusat 3-8 Preparaion of Program Design and Implemenrtaton Plan for Community Environment

Facifity 424,599 424,599Pusat 3-9 Preparation of Program Design and ImplernentaDon Plan for Small and Medium Scale

Industry Support (SNIS) 294,319 294,319West Java 3-1 West Java Province Environmental Stratepy 635,696 635,696West Java 3-2 Grater Bandung Waste Management CorporaDon Consultant Support 507,727 507,727

DKI 3-2/3-7 Community Based Solid Waste Management- Reduce, Reuse and Recycle (3R) andAssistance to Waste Pickers - 588,975 588,975

DKI 3-3 Develoment of Commercial Scale Compost Plant 501,235 501,235DKI 3-4 Feasibility Study for Pulogadung Domestic / Industial Wastewater Treatment System 514,729 514,729

DKI 3-5a Preparation of Tahu Industries Poliuton Reduction Prograrr in Central Jakarta 152,985 152,985

DKI 3-Sb So to Tahu I Temp Sated Fish Industries in North Jakarta = 267,129 267,129DKI 3-6 Local Environmental Awarness-DKI Jakarta 187,912 187,912Kota Bandung 3-1 Kota Bandung Local Environmental Strategy - 90,305 90,305Kota Bandung 3-3 Feasibility Stedy and Prelininary Engineering Design for Cikapundung River Domestic

Wastewater Faciities 216,258 216,258Kab. Bandung 3-1 Kabupaten Bandung Local Erreronmental Strategy 95,258 - 95,258Kota Bekasi 3-1 Kota Bekasi Local Environmenta Stratepy 118,271 118,271Kab. Bekasi 3-1 Kabiupaten Bekast Local Environmental Strategy - 90,888 90,888Kota Bopor 3-1 Kota Bogor Local EnvironmentalStrategy 134,730 134,730Kota Depok 3-1 Study for Norrnmaikatbon and Manapernent of Lakes 235,202 235,202Kota Deok 3-2 Kota Depok Local EnviromnenttSlrateal y 130,360 - 130,360Kota Tangerang 3-1 Feasibility Study, AMDAL and DED for Domesltc Waste Treatment (IPLT) 133,273 133,273

Kota Tangerang 3-2 Kota Ta erans Local Environmental Stray 57,388 57,388Kota Tangerans 3-4 Feasibility Study for Centrabzed Indusries Waste Water Treatment 103,482 103,482Kota Clrebon 3-1 Kota Cirebon Local Environmental Strategy 86,810 86,810Kota Cirebon 3-2 FS and DED for Treatment of Waste Water Discharges and Improve Kesenden

Oxidaton Pool 45,153 45,153Kote Citreon 3-3 Feabiti Study, AMDAL and DED for TPA Kopiur - 196,580i 186,560Kab. Serang 3-1 Improved Solid Waste Management Services and FS, AMIDAL and DED for New TPA - 281,077 281,077

Kab. Serang 3-2 Kabupaten Serang Local Environmental Sategy 121,621 1121,621Kab. Seran 3-3 Feasibility Studyfor Centralized Industries Waste Water Treatment 103,482 103,482

Pusat 3-7 (GEF) Design of GEF Compost Grant Mechanism and Marketing Study for Agricultural Use of_________________comameria scale Cop t-418,454 418,454

Note: QCBS = Quality- and Cost-Based SelectionQBS = Quality-based SelectionSFB = Selection under a Fixed BudgetLCS = Least-Cost SelectionCQ = Selection Based on Consultants' QualificationsOther = Selection of individual consultants per Section V of Consultants Guidelines)N.B.F. = Not Bank-financedFigures in parenthesis are the amounts to be firanced by the Bank Loan/IDA Credit.

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Prior review thresholds (Table B)The 43 procurements under the project for technical assistance, will be done by 15 local government uniisin 8 local governments, four provincial units (in three provinces) and four national government units. Ofthe 10 contracts estimated at more than US$0.5 million, five will be procured by national government units,three by DKI and two by the Province of West Java.

Table B shows the threshold values for prior review. Since the project is the first of three planned APLs,particular attention will be paid to procurement procedures to inculcate good practices from the start of thisplanned nine-year relationship. The major procurements in civil works and goods vre scheduled for thesecond and third APL, with TA dominating procurements in APLI.

The Procurement Capacity Assessment Report identified the unfavorable procurement climate in theimplementing agencies, and Indonesia generally, and identified the risk as average. Hence, to mitigate therisk and to help the implementing units to start well on the nine year program, the first contract within eachprocurement category and each implementing unit will be subject to prior review. To remove thetemptation to fragment contracts into smaller contracts, the threshold for prior review of bidding documentsfor goods and civil works have been set at US$100,000.

Contracts for consultants' services estimated to cost $100,000 or more for firms will be subject to priorreview (seven contracts). The following will be subject to prior review by the Bank: (a) terms of referencefor such contracts; (b) the qualifications and experience; and (c) the terms of employment. Forconsultancies financed from provisional sums, all documents, including contracts and selection mrthods,will be subject to the Bank's prior review.

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Table B1: Thresholds for Procurement Methods and Prior Review - IDAIIBRD Loan

Expenditure Contract Value Procurement Contracts Subject toCategory Threshold Method Prior Review

(US$) (US$ millions)

1. Works First contract each local ICB and NCB 4.52government agency.

Thereafter contracts for$100,000 or more

2. Goods First contract each local ICB and NCB 1.71government agency.

Thereafter contracts for$100,000 or more

3. Services First contract each local See Table Al TORs, shortlists andgovernment agency. qualifications for all

Thereafter contracts for contracts.firns of $100,000 or more, (13.35)

and for individuals of$50,000 or more

Table B 2: Thresholds for Procurement Methods and Prior Review - GEF Grant

Expenditure Contract Value Selection Contracts Subject toCategory Threshold Method Prior Review

(US$ ) (US$ rnillions)

3. Contractual First contract each local QBS TORs, shortlists andServices government agency. qualifications for all

Thereafter contracts for contractsfirms of $100,000 and (0.42)

more

4. Sub-grants N.A. Will be determined 2.37after Year I and tobe approved by the

Bank

Total 2.79

Total value of contracts subject to prior review: 20.00 million

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Annex 6Attachment

REPUBLIC OF INDONESIA

Supplemental Letter No. 2

,2001

International Bank forReconstruction and Development

International Development Association1818 H Street, N.W.Washington, D.C. 20433United States of America

Re: Credit No. _-INDLoan No. -IND(Western Java Environmental Management Project)Representations and assurances relating toNational Competitive Bidding Procedures

Dear Sirs:

In connection with the Development Credit Agreement of this date between the Republic ofIndonesia and the International Development Association (the Association) and the Loan Agreementbetween the Republic of Indonesia and the International Bank for Reconstruction and Development (theBank) for the above-captioned Project, I am writing on behalf of the Republic of Indonesia to set forth thefollowing:

1. General

The procedures to be followed for national competitive bidding under Schedule 3 to theDevelopment Credit Agreement shall be those set forth in Presidential Decree No. 18/2000 of the Republicof Indonesia with the clarifications set forth in the following paragraphs required for compliance with theprovisions of the "Guidelines for Procurement under IBRD Loans and IDA Credits" (the Guidelines).

2. Registration

(a) Bidding shall not be restricted to pre-registered firms.

(b) Where registration is required, bidders (i) shall be allowed a reasonable time to completethe registration process, and (ii) shall not be denied registration for reasons unrelated to their capability andresources to successfully perform the contract, which shall be verified through post-qualification.

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3. Pre-qualification

When pre-qualification shall be required for large or complex works (not for simple goods andworks):

(a) eligible bidders (both national and foreign) shall not be denied pre-qualification, and

(b) invitations to pre-qualify for bidding shall be advertised in at least one widely circulatednational daily newspaper a minimum of 30 days prior to the deadline for the submission of pre-qualificationapplications.

4. Joint Ventures

A bidder declared the lowest evaluated responsive bidder shall not be required to form a jointventure or to sub-contract part of work or part of the supply of goods as a condition of award of thecontract.

5. Preferences

(a) No preference of any kind shall be given to national bidders.

(b) Regulations issued by a sectoral ministry, provincial regulations and local regulations,which restrict national competitive bidding procedures to a class of contractors or a class of suppliers shallnot be applicable to procurement procedures under the Credit or the Loan.

6. Advertising

(a) Invitations to bid shall be advertised in at least one widely circulated national dailynewspaper allowing a minimum of 30 days for the preparation and submission of bids and allowingpotential bidders to purchase bidding documents up to 24 hours prior the deadline for the submission ofbids.

(b) Bid documents shall be made available, by mail or in person, to all who are willing to paythe required fee.

(c) Bidders domiciled outside the area/district/province of the unit responsible for procurementshall be allowed to participate regardless of the estimated value of the contract.

(d) Foreign bidders shall not be precluded from bidding. If a registration process is required, aforeign firm declared the lowest evaluated bidder shall be given a reasonable opportunity for registering.

7. Bid Security

Bid security, at the bidder's option, shall be in the form of a letter of credit or bank guarantee froma reputable bank.

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8. Bid Opening and Bid Evaluation

(a) Bids shall be opened in public, immediately after the deadline for submission of bids, andif bids are invited in two envelopes, both envelopes (technical and price) shall be opened at the same time.

(b) Evaluation of bids shall be made in strict adherence to the criteria declared in the biddingdocuments and contracts shall be awarded to the lowest evaluated bidder.

(c) Bidders shall not be eliminated from detailed evaluation on the basis of minor,non-substantial deviations.

(d) No bidder shall be rejected merely on the basis of a comparison with the owner's estimateand budget ceiling without the Association/Bank's prior concurrence.

9. Reiection of Bids

(a) All bids shall not be rejected and new bids solicited without the Association/Bank's priorconcurrence.

(b) When the number of responsive bids is less than three, rebidding shall not be carried outwithout the Association/Bank's prior concurrence.

Unless otherwise agreed to in writing between the Republic of Indonesia and the Association/Bank,these representations and assurances form an integral part of said Development Credit Agreement and LoanAgreement.

It is our understanding that, in making the Credit/Loan, the Association/Bank may rely on thestatements set forth in this letter.

Very truly yours,

REPUBLIC OF INDONESIA

byAuthorized Representative

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Disbursement

Allocation of loan/credit/grant proceeds (Table C)

Table Cl: Allocation of IDA/IBRD Loan Proceeds

Expenditure Category Amount in Financing PercentageUS$ million

Works and goods (including 5.60 90 %specialized trucks butexcluding all other vehiclesfor sub-project financedunder SLA)

Consultant Services 11.81 100%

Front-End Fee 0.12 100%

Total IDA1IBRD Costs 17.53

1/ IDA Credit of SDR 4,600,000 converted at 1 SDR = US$ 1.26804 (March 31, 2001)

Table C2: Allocation of GEF Grant Proceeds

Expenditure Category Amount in Financing PercentageUS$ million"

Consultants' Services 0.38 100%

Sub-grants 2.16 100% of sub-grants disbursed

Total GEF Grant 2.54 100

Total Cl + C2 20.07

1/ GEF Trust Fund Grant of SDR 2,000,000 or above

Financial Management

The project is being implemented decentrally by local government units which are responsible for allaspects of their sub-project. The government budgeting, accounting procedures and internal controls meetthe minimum standards required and will be followed in the project. During the last three years, only theCPSU has had experience with implementing donor-financed projects. It will be responsible for

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consolidating the project accounts based on monthly reports from the local governments. DGURD hasdeveloped a Project Management Manual which sets out the procedures to be followed by participatinglocal governments; issuance of this manual, acceptable to the Bank, is a condition of effectiveness.

At the local government level the effectiveness of internal control procedures is questionable and with thelack of experience with the requirements of donors, it is necessary to conduct financial managementtraining for the staff of the participating units prior to effectiveness.

CPSU's quarterly Project Management Reports will form the basis for the projects annual accounts.Auditing arrangement were agreed during negotiations and will be undertaken in accordance with theTerms of Reference below.

Financial Management Action Plan

Issues Action Responsible Due DateUnit

1. Project * Project management (procurement and * DGURD * October 1,management financial) training for project staff is part 2001capacity of Bridging Consultancy

2. Project * PMM revised DGURD * May 31, 2001Management . PMM issued . July 31, 2001Manual * Provision of TA to develop accounting * September 30,(PMM) software is included in Bridging 2001

Consultancy scope of works3. Budget and * LGU - 1st year budgets prepared * LGUs * Done

funding for * CGU- revised 1st year budgets * CGUs * September 30,1st year of 2001Project

4. Circular * Draft SE for payment procedures to be * DGURD * Doneletter (SE) sent to WBOJ after final GOI reviewby DG meetingBudget * DG Budget issued the SE * DGB-MOF * September 30,

20015. Audit * draft audit TOR * DGURD * Done

arrangement . Auditor assignment agreed * September 30,2002

6. . Program included in PIP/PAD/PMM . DGURD/ . DoneCommunity/ * Fund mechanism to be defined in APLl PMD * During APLIprivate under TA Pusat 3-8 for implementationsector in APLs 2 and 3participationcomponentand activity

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Audit

TERMS OF REFERENCEfor the Audit of Special Purpose Project Financial Statements

Objectives

The overall objectives of the audit are: (i) to enable the auditor to express a professional opinionon the project financial statements, the operation of the overall financial management system includinginternal controls, and compliance with financing agreements; (ii) to provide project management withtimely informnation on financial aspects of the project to enable follow-up action; and (iii) to assess theachievements of the project objectives as measured by performance indicators.

The audit should cover the entire project, i.e., all sources and application of funds by allimplementing agencies. The auditor should visit the various implementation units and other agencies asconsidered necessary for the audit.

ScopeThe audit will be carried out in accordance with International Standards of Auditing and

with the Audit Manual for World Bank Financed projects (July 1998). It will include such tests andcontrols as the auditor considers necessary under the circumstances. Specific areas of coverage of the auditwill include the following:

(1) an assessment of whether the project financial statements have been prepared in accordance withconsistently applied Generally Accepted Accounting Principles (GAAP) and give a true and fair view of theoperations of the project during the year and the financial position of the project at the close of the fiscalyear. Any material deviations from GAAP, and the impact of such departures on the project financialstatements as presented would be stated;

(2) an assessment of the adequacy of the project financial management systems. The financialmanagement system would include methods and records established to identify, assemble, analyze, classify,record and report on transactions and to maintain accountability for the related assets and liabilities,including internal controls. This would include aspects such as adequacy and effectiveness of accounting,financial and operational controls, and any needs for revision; level of compliance with established policies,plans and procedures; reliability of accounting systems, data and financial reports; methods of remedyingweak controls or creating them where there is none; verification of assets and liabilities; and integrity,controls, security and effectiveness of the operation of the computerized system (if any);

(3) an assessment of compliance with provisions of financing agreements, especially those relating toaccounting and financial matters. This would inter alia include verification that:

(a) all external funds have been used in accordance with the conditions of the relevantfnancing agreements, with due attention to economy and efficiency, and only for the purposes forwhich the financing was provided;

(b) counterpart funds have been provided and used in accordance with the relevant financingagreements, with due attention to economy and efficiency, and only for the purposes of which they

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were provided;

(c) expenditures charged to the project are eligible expenditures and have been correctlyclassified in accordance with the relevant financing agreement;

(d) goods and services financed have been procured in accordance with the relevant financingagreement;

(e) all necessary supporting documents, records, and accounts have been kept in respect of allproject activities;

(f) clear linkages exist between the accounting records including accounts books and theProject Financial Statements;

(g) where the Special Account has been used, it has been maintained in accordance with theprovisions of the relevant financing agreement;

(h) statement of expenditures (SOE) used as the basis for the submission of withdrawalapplications accurately reflect expenditures and activities on the project; and

(i) project expenditures as reported by the project implementation agencies are reconciled withthe amounts withdrawn from the Special Account and the amounts deposited to the SpecialAccount are reconciled with the amounts disbursed from the IBRD Loan and IDA Credit; and

(4) an assessment of the Project Management Report (PMR) and the achievements of the plannedresults of the projects as measured by the performance indicators as stipulated in the relevant financingagreement.

Project Financial StatementsProject Financial Statements shall be prepared by each LPSU whereas the consolidated project accountsshall be prepared by PPSU (at provincial level) and CPSU for the whole project account, and shouldinclude: (i) Annual Project Expenditures and Financing; and (ii) Cumulative Project Expenditures andFinancing. Sources of funds would show IDA/IBRD, GEF, and GOI counterpart funds separately. Projectexpenditures would be summarized by main project components, disbursement categories and by projectlocation (province or kabupaten) both consolidated for the current fiscal year and accumulated to date. Theconsolidated project account shall also include Financial Statement of Special Account covering: (i)deposits and replenishments received from the Bank; (ii) withdrawals from the special account; and (iii) theremaining balances at the end of the fiscal year.

The auditor should provide an opinion as to the degree of compliance with the Bank's procedures and theexactitude of the balance of the Special Account at year-end. The audit should examine the eligibility andintegrity of financial transactions during the period under review and fund balances at the end of the period,the operation and use of the special account in accordance with the financing agreement, and the adequacyof internal financial controls.

Special Account: The auditor must assess a reconciliation report between the project expendituresmade from the special account and the withdrawals from the special account. Reconciliation should also bemade with the amounts paid from the pre-financing account and direct payments (if any). The auditorshould assess a reconciliation report between the amounts deposited to the special account and disbursed by

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the World Bank to the special account.

Statement of Expenditures: The auditor is also required to audit all SOEs (paid from the specialaccount and/or other accounts) used as the basis for the submission of withdrawal applications. Theauditor should apply such tests and control as the auditor considers necessary under the circumstances.These expenditures should be carefully compared for project eligibility with the relevant financingagreements, and with reference to the Project Appraisal Document for guidance when necessary. Ineligibleexpenditures identified as having been included in withdrawal applications and reimbursed by the WorldBank should be noted separately by the auditor. The total withdrawals under the SOE procedure should bepart of the overall reconciliation of Bank disbursements described above.

Audit ReportThe audit report shall contain the auditor's opinion on the fairness of the project financial

statements, including an opinion on the Special Account and a separate paragraph commenting on theaccuracy and propriety of expenditures withdrawn under the SOE procedures and the extent to which theBank can rely on SOEs as a basis for loan disbursement. The report should refer to the auditor's TOR.The auditor should submit the report to the project executing agency who should then promptly forwardone copy of the audited accounts and report to the Bank. It should be received by the Bank no later than sLimonths after the end of the project's fiscal year (June 30).

Management LetterIn addition to the audit reports, the auditor will prepare a management letter or include in the

report, in which the auditor will:(a) give comments and observations on the accounting records, systems, and controls that were examinedduring the course of the audit; and identify specific deficiencies and areas of weakness in systems andcontrols and make recommendations for their improvement;(b) give comments on economy, efficiency, and effectiveness in the use of resources;(c) report on the achievement of the planned results of the project;(d) report on the degree of compliance of each of the financial covenants on the financing agreement andgive comments, if any, on intemal and extemal matters affecting such compliance;(e) communicate matters that have come to attention during the audit which might have a significantimnpact on the implementation of the project; and(f) any other matters that the auditor would consider pertinent.

GeneralThe auditor should be given access to all legal documents, correspondence, and any other

information associated with the project and deemed necessary by the auditor. Confirmation should also beobtained of amounts disbursed and outstanding at the Bank.

The auditor should be fanmiliar with the Bank's Audit Manualfor World Bank Financed Projectswhich provide guidance to auditors conducting audits of World Bank financed projects.

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Annex 7: Project Processing ScheduleINDONESIA: Westem Java Environmental Management Project

ProlPt Schedule Ptanned ActualTime taken to prepare the project (months) 8 24First Bank mission (identification)

Appraisal mission departure 10/15/99 11/12/2000Negotiations 01/10/2000 04/20/2001Planned Date of Effectiveness 05/22/2000 08/31/2001

Prepared by:

Government of Indonesia

Preparation assistance:

Japanese Government PHRD (TF29453)

Bank staff who worked on the project included:

Name SpecialityDaniel Hoomweg Senior Environmental EngineerSuhadi Hadwinoto Urban Development SpecialistMohamad Nuch Operations Officer

Keiichi Tamaki Financial Analyst

Vivianti Rambe Environmental SpecialistUnggul Suprayitno Financial Management OfficerAnne Harrison Program Assistant

Leila Elvas Financial AnalaystJoAnne Nickerson Operations AnalystRizal Rivai Procurement SpecialistHilarion Bruneau Senior Financial Management SpecialistKarin Nordlander Senior Counsel

Finn Nielsen Senior Municipal Engineer

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Annex 8: Documents in the Project File*INDONESIA: Western Java Environmental Management Project

A. Project Implementation Plan

See Below

B. Bank Staff Assessments

Project Capacity Assessment Report, March 2001

C. Other

* The following documents were used as reference in preparation of the WJEMP, but are filed withthe Indonesia Third JABOTABEK Urban Development Project (LN. 3246-IND):

* Assessment of Popular Participation of KIP-JUDP III (Draft Final Report)- Novemeber-1 994- 50pgs.* Environmental Protection Component 2 Part A- Institutional Analysis and Strengthening Strategy

(Final Report)-Volume I-Institutional and Organizational- November 1994-10 Chapters (2 copies)- Environmental Component 2 Part B-Environmental Protection and Pollution Control Strategy and

Action Plan (Inception Report) August -1993-39pgs. with cover letter from Ir. H. Muzahiem Mokhtar-September 1, 1993- lpgs.

- JUDP III Environmental Protection Component (B) small scale Industries Waste Reduction in DKIJakarta (Draft Final Report) Volume l(Text),- June 1993- 13 1pgs., Volume II (Appendices) June 1993

- Environmental Protection Component (A) Joint Waste Water Treatment for Industrial Estates- VolumeIA, IB, Executive Summary, Volume II, Volume 3- June 1993

* JUDP III Evaluation Report Sub-project design and Implementation Pilot Project Resources Recovery-October-1995- 20pgs.

The following documents are part of the official project file for WJEMP:

I. Inception Report, March 1998

II. Workshops Reports

* Laporan Lokakarya, Serang, April 30, 1998* Laporan Lokakarya, Cirebon, May 6, 1998* Laporan Lokakarya, Bandung, May 13, 1998* Laporan Lokakarya, Jabotabek, June 25, 1998

III. Action Plans

* Action Plan, Serang, September 1998* Action Plan, Cirebon, September 1998* Action Plan, Bandung, September 1998* Action Plan, Jabotabek, September 1998

IV. Deliverables - April 1999 (Addendum 1)

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* Project Summary* Volume I Environmental Education for Schools* Volume 2 Community Environmental Facility (CFF)* Volume 3a.(i) Solid Waste Strategic Plan for Jabotabek* Volume 3a.(ii)Basic Design Leuwigajah Site Improvement, Bandung* Volume 3a.(iii)Basic Design, Kopilohur Landfill-Cirebon* Volume 3a.(iv)Brief Technical Evaluation, Bantar Gebang Landfill Extension* Volume 3b.(i) Waste Reduction in the Tahu Sector* Volume 3b.(ii)Waste Reduction in the Electro Plating Sector* Volume 3c.(i) Recommendations for Prokasih Program Cikapundung River,

Bandung & Ciliwung River, Jakarta/Bogor* Volume 3c.(ii) Ground Water Conservation Bandung, Project No.21* Volume 4 WJJEMP Project Management* Volume 5 Economic Analysis* Volume 6(i) Project Costing and Financial Table* Volume 6.(ii) Summary and Contract Procurement Packages* Volume 6.(iii) Financial Analysis* Volume 7 List of Priority Sub-Projects

V. Deliverables - September 1999 (Addendum 2)

* Terms of Reference* TPA Kopiluhur Cirebon Environmental Review* Project Implementation Plan* Volume I Project Support* Volume II Solid Waste Management* Volume III Small/Medium Scale Industry Support* Volume IV Environmental Education and Awareness* Volume V Community Environment Facility* Volume VI Subproject Information* Volume VII-A Project Cost and Financing Plans* Volume VII-B Subproject Table "Base Cost"* Programmatic Environmental Review (Executive Summary)* Programmatic Environmental Review (Full Document)

VI. Deliverables -April 2000 (Addendum 3)

* Project Implementation Plan* Project Environmental Review* Request for Proposal/RFP (English & Indonesia)* Sub-Project Mapping - June 2000* Clipping Environmental Issues - June 2000* Technical Assistance Table "Base Cost" - June 2000

TORs:* Study Environmental Degradation in Town of Bandung [English &

Indonesian]

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* AMDAL for Cikapundung River Domestic Wastewater Facilities [English &Indonesian]

* Productive Vegetation Study in Town of Bandung [English & Indonesia]* Study for Monitoring Air Quality in Kota Bandung [Indonesia]* Kampung Improvement Program CBD Tribina Kabupaten Bekasi [English &

Indonesia]* Study of Town Vegetation - Bekasi [English & Indonesia]* AMDAL for TPA Cipayung [Indonesia]* Study Normalization and Development of Lakes [Indonesia]* Structuring and Vegetation of Cisadane Rivers Banks in The Town of Bogor* Oriented on Agroindustry [English & Indonesia]* Feasibility Study, AMDAL and DED for Domestic Waste Treatment (IPLT)

[Indonesia]* AMDAL for TPA Kopiluhur Cirebon [English & Indonesia]* Study of Vegetation Using Productive Plants to Empower

Economy-Kabupaten Serang [English & Indonesia]* Improvement Environmental Sanitation for Low-Income Community (SPAL

MCK and Waste Facilities) in Kabupaten Serang [English & Indonesia]Study for Urban Poor Area Upgrading, Industrial and Coastal AreasSettlement [Indonesia]

* Based Solid Waste Management Reduce, Reuse, Recycle (3R) [English &Indonesia]

* Feasibility Study for Jakarta Industrial Estate Pulogadung CentralizedWastewater Treatment System [English & Indonesia]

* Development of Commercial Scale Compost Plant [English & Indonesia]* Waste Minimization through Assistance to Waste Pickers in DKI Jakarta

[Indonesia]* West Java Solid Waste Management Consultant Support [English &

Indonesia]* Platform Strategy Environmental Development in West Java [English]* Central Project Management Unit Consultant Support [English & Indonesia]* Jabotabek Waste Management Corporation Consultant Support [English]* Environmental Education & Awareness [English]* Air Quality Program for The Urban Areas of West Java and Jakarta [English]* Cilegon Emergency Prearedness Program [English & Indonesia]* Support to Small/Medium Scale Industries: Tahu/Tempe & Salted Fish* Industries in North Jakarta.

Borrowing Capacitv:* Borrowing Capacity DKI Jakarta - August 2000* Borrowing Capacity Kota Bandung - August 2000* Borrowing Capacity Kabupaten Bandung - August 2000* Borrowing Capacity Kota Bekasi - August 2000* Borrowing Capacity Kabupaten Bekasi -August 2000* Borrowing Capacity Kota Bogor - August 2000* Borrowing Capacity Kota Depok - August 2000

-94 -

* Borrowing Capacity Kota Tangerang - August 2000* Borrowing Capacity Kota Cirebon - August 2000* Borrowing Capacity Kabupaten Serang -August 2000* Project Cost by Component - September 2000* Dokumen Tender untak Pekerjaan Borongan/Local Competitive Bidding [Bill

of Quantity/BO] Paket Pembangunan TPA sampah Sanitary LandfillKopiluhur -/Cirebon

* Dokumen Tender untuk Pekerjaan Borongan/Local Competitive Bidding[Rencana Kera dan Syarat-syarat Teknis/RKS Teknis] PaketPembangunan-TPA Sampah Sanitary Landfill Kopiluhur - Cirebon

* Dokumen Tender untuk Pekegoan Borongan/Local Competitive Bidding.Paket Pengadaan Kendaraan Pengangkut Samnpah den Peralatan Penunjang,untuk TPA

* Dokumen Tender untuk Pekerjaan Boronganl Local Competitive Bidding[Engineer Estimate/EE] Paket .... Pembangunan TPA Sampah SanitaryLandfill Kopiluhur - Cirebon

* Dokunnen Tender untuk Penigadaan Barang dan jasa/Local Competitive &International Competitive Bidding. Paket A,B,C,D&E Pengadaan KendaraanPengangkut Sampah den Peralatan Penunjang untuk TPA

* Dokumen Tender untuk Pengadaan Barang dan Jasa/Local CompetitiveBidding. Paket D pengadaan Kendarsan Pengangkut Sampah den PeralatanPenunjang untuk TPA

* Dokumen Tender untuk Pekerjaan Borongar-/Local Compepetitive Bidding[Rencana Kerja den Syarat-syarat Umum/RKS Umum] Paket ...Pembangunan TPA Sampah Sanitary Landfill Kopiluhur -Cirebon

• Tender Dokument for Procurement of Goods and ServicesIntemational Competitive Bidding. Package A Procurement of Heavy Equipment

for The Final Disposal Site.* Dokument Tender untuk Pengadaan Barang den Jasa Local Compepetitive

Bidding Paket C Pengadaan kendaraan Pengangkut Sampah dan peralatanpenunjang untuk TPA

* Tender Document for Procurement of Goods and Services IntemationalCompetitive Bidding Package B Procurement of Heavy Equipment for The Final

Disposal Site.

*Including electronic files

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Annex 9: Statement of Loans and CreditsINDONESIA: Westem Java Environmental Management Project

May-2001Difference between expected

and actualOriginal Amount in US$ Millions disbursements

Project ID FY Purpose IiRO IDA GEF Cancel. Undisb. Orig Frm Rev'd

P059930 2000 DECNT. AGRICULTURALUFORESTRY EXTENSION 13.00 5.00 0.00 0.00 16.66 3.74 0.00

P059477 2000 ID-WSSLIC II 0.00 77.40 0.00 0.00 74.99 0.00 0.00

P049545 2000 ID-PROVINCIAL HEALTH I 0.00 38.00 0.00 0.00 36.09 2.19 0.00

P055821 1999 ID-URBAN POVERTYPROJECT 0.00 100.00 0.00 0.00 31.64 1.11 0.00

P056074 1999 ID-MUNICIPAL INNOVATIONS PROJECT 5.00 0.00 0.00 0.00 2.74 2.00 0.00

P041895 1999 ID-SULAWESI BASIC EDUC. 47.90 15.93 0.00 0.00 51.67 17.55 0.00

P036049 1999 ID-EARLY CHILD DEVELOPMENT 21.50 0.00 0.00 0.00 19.34 15.34 15.33

P040196 1999 ID-SUMATRABASICEDUCUATION 54.50 20.10 0.00 0.00 54.11 9.11 0.00

P003967 1999 ID-FIFTH HEALTH PROJECT 44.70 0.00 0.00 5.00 29.42 11.00 0.00

P063732 1999 CORPORATE RESTRUCTRG 31.50 0.00 0.00 16.50 9.65 26.15 0.00

P064118 1999 WATSAL 300.00 0.00 0.00 0.00 250.00 250.00 0.00

P048715 1998 IIDP 34.50 0.00 0.00 8.50 18.80 21.98 16.30

P045337 1998 ID-KECAMATAN DEV FUND 225.00 0.00 0.00 0.00 133.97 52.93 0.00

P036956 1998 ID-SAFE MOTHERHOOD 42.50 0.00 0.00 8.00 19.61 10.74 7.16

P039644 1998 ID-W. JAVA BASIC EDUCATION 103.50 0.00 0.00 3.76 50.46 -26.92 0.00

P040061 1998 BENGKULU REGIONAL DEVELOPMENT 20.50 0.00 0.00 0.00 18.93 7.53 0.00

P040062 1998 CORAL REEF MGMT REHA 0.00 0.00 4.10 0.00 2.08 1.77 1.42

P036048 1998 CORAL REEF MGM REHAB 6.90 0.00 4.10 0.00 4.14 3.81 3.21

P055755 1998 BANKING REFORM ASST. 20.00 0.00 0.00 0.90 6.42 7.32 0.00

P003993 1996 SUMATRA REG. ROADS 234.00 0.00 0.00 50.00 157.19 35.69 0.69

P036053 1997 IND-SULAWESI UDP II 155.00 0.00 0.00 67.05 20.19 82.24 -17.91

P041894 1997 ID-SUMATRA SECONDARY EDUCATION 98.00 0.00 0.00 0.03 30.37 -3.26 0.00

P042540 1997 ID-IODINE DEF. CONTROL 28.50 0.00 0.00 9.00 9.54 11.06 10.09

P049051 1997 BEPEKAAUDITMODERP 16.40 0.00 0.00 0.90 10.38 9.04 7.10

P040195 1997 ID-QUALITY OF UNDERGRADUATE EDUC(QUE) 71.20 0.00 0.00 9.89 30.57 13.76 4.21

P003700 1997 SOLAR HOMES SYSTEMS 0.00 0.00 24.30 0.00 18.68 14.56 6.71

P003987 1997 ID-CENTRAL INDONESIA SEC. EDU. 104.00 0.00 0.00 0.00 51.79 35.19 0.00

P036047 1997 IND-BALI URBAN INFRASTRUCTURE PROJECT 110.00 0.00 0.00 30.06 46.53 24.49 4.14

P004026 1997 RLWY EFFICIENCY 105.00 0.00 0.00 20.00 79.31 81.98 0.00

P003978 1996 IND'LTECHNOLOGYDEV 47.00 0.00 0.00 8.54 9.00 17.54 11.56

P004003 1998 ID-SECONDARY SCHOOL TEACHER DEVT 60.40 0.00 0.00 30.00 2.42 32.12 0.76

P004004 1998 ID-HIGHER EDUC SUP.(PUE) 65.00 0.00 0.00 6.86 7.58 -3.56 -7.38

P004008 1996 NUSA TENGGARA DEV. 27.00 0.00 0.00 4.90 5.45 6.19 -1.73

P004021 1998 POW. TRANS & DISTIl 373.00 0.00 0.00 163.71 18.56 182.27 18.14

P004016 1996 STRATEGIC URB. RDS I 86.90 0.00 0.00 10.00 24.66 30.16 9.65

P037097 1998 ID-E.JAVASEC.EDUC. 99.00 0.00 0.00 3.63 37.76 18.02 0.00

P004014 1996 KERINCISEBLATICDP 19.10 0.00 15.00 3.00 11.73 11.00 0.00

P004011 1996 SULAWESI AGRI AREA 26.80 0.00 0.00 3.70 4.75 1.58 -4.27

P003699 1996 KERINCI SEBLAT ICDP 0.00 0.00 15.00 0.00 9.26 4.63 0.00

P003988 1995 ID-BOOK & READING DEV 132.50 0.00 0.00 36.50 42.85 76.18 42.69

P039754 1995 IND-TAP41-2 28.00 0.00 0.00 3.00 9.33 12.33 5.56

P003951 1995 IND-KALIMANTAN UDP 136.00 0.00 0.00 18.04 16.26 34.30 16.30

P003972 1995 AG. RESEARCH II 63.00 0.00 0.00 22.10 11.25 32.35 2.30

P003984 1995 LANDADMINISTRATION 80.00 0.00 0.00 33.90 0.25 34.15 17.65

P004001 1995 TELECOM SECTOR MODER 325.00 0.00 0.00 69.67 90.33 160.00 110.00

P003988 1995 ID-PHRD II 69.00 0.00 0.00 12.00 8.89 20.07 11.73

P003890 1994 IND-SEMARANG SURAKARTA UDP 174.00 0.00 0.00 40.07 23.10 63.17 13.45

P004010 1994 DAM SAFETY 55.00 0.00 0.00 19.80 3.98 23.78 -0.07

P003910 1994 SUMATERA & KALIMAN P 260.50 0.00 0.00 56.00 34.36 90.36 94.70

P003945 1994 HIGHWAY SECTOR II 380.00 0.00 0.00 46.00 38.58 84.58 -12.09

P003954 1994 JAVA IRR IMP&WRM 165.70 0.00 0.00 41.17 15.42 56.59 34.58

Total: 4536.00 256.43 62.50 862.18 1711.07 1709.91 422.16

-96 -

INDONESIASTATEMENT OF IFC's

Held and Disbursed PortfolioMay-200 1

In Millions US Dollars

Committed DisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic1993/96 PTBBLDharmala 11.35 0.00 0.00 21.40 11.35 0.00 0.00 21.401995 PT Bakrie Pipe 17.14 0.00 9.50 0.00 17.14 0.00 9.50 0.001997/00 PT Bank NISP 0.00 5.00 0.00 0.00 0.00 0.00 0.00 0.001997 PT Berlian 9.29 20.00 0.00 27.09 8.15 16.65 0.00 23.571995 PT Bunas Finance 5.54 0.00 0.00 1.45 5.54 0.00 0.00 1.451996 PT Dharmala 20.00 0.00 0.00 10.00 20.00 0.00 0.00 10.001995 PT Grahawita 0.00 0.00 5.00 0.00 0.00 0.00 5.00 0.001995 PT Hotel Santika 3.78 0.00 0.00 0.00 3.78 0.00 0.00 0.001991 PT Indaci 0.00 0.00 1.83 0.00 0.00 0.00 1.44 0.001990/91/93/95/99 PT Indo-Rama 0.00 3.50 0.00 0.00 0.00 3.09 0.00 0.001992/94/96 PTKIAKeraniik 16.51 6.02 0.00 53.49 16.51 6.02 0.00 53.491995 PT KIA Serpih 15.00 6.24 0.00 49.50 15.00 6.24 0.00 49.501997 PTKalimantan 20.00 15.00 0.00 6.00 15.56 15.00 0.00 4.671997/00 PT Makro 0.00 1.22 0.00 0.00 0.00 0.00 0.00 0.001998 PT Megaplast 8.75 2.50 0.00 0.00 8.75 2.50 0.00 0.001993 PTNusantara 3.18 0.00 0.00 10.38 3.18 0.00 0.00 10.381994 PT PAMA 0.00 0.71 0.00 0.00 0.00 0.71 0.00 0.001996 PT Pramindo Ikat 25.00 8.18 25.00 59.50 25.00 3.91 25.00 59.501991 PTRIMBA 1.51 0.60 0.00 0.45 1.51 0.60 0.00 0.451993 PT Samudera 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.001997 PT Sayap 10.00 0.00 0.00 12.00 10.00 0.00 0.00 12.001992/95 PT Viscose 23.59 0.00 0.00 29.46 23.59 0.00 0.00 29.461997 PT Wings 8.68 0.00 0.00 12.79 8.68 0.00 0.00 12.791994 Prudential Asia 0.00 4.80 0.00 0.00 0.00 2.24 0.00 0.001991 SEAVI Indonesia 0.00 1.43 0.00 0.00 0.00 1.43 0.00 0.001980/87 Semen Andalas 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.002000 Ciluluk Village 0.04 0.00 0.00 0.00 0.02 0.00 0.00 0.001994 KDLC Bali 2.08 1.14 0.00 0.00 2.08 1.14 0.00 0.001991 LYON-MLF-Ibis 2.01 0.00 0.00 2.01 2.01 0.00 0.00 2.011988 Manulife 0.00 0.32 0.00 0.00 0.00 0.32 0.00 0.001995 POF 5.14 1.93 0.00 6.00 5.14 1.93 0.00 6.001995 PT ABS Finance 0.00 1.31 0.00 0.00 0.00 1.31 0.00 0.001997 PT AdeS Alfindo 3.41 3.53 0.00 5.90 3.41 3.53 0.00 5.901989 PT Agro Muko 0.00 2.20 0.00 0.00 0.00 2.20 0.00 0.001997 PT Alumindo 17.98 0.00 0.00 16.00 17.98 0.00 0.00 16.001991 PT Argo Pantes 9.38 13.00 0.00 11.36 9.38 13.00 0.00 11.361989/91/94 PT Astra 0.00 5.82 0.00 0.00 0.00 5.82 0.00 0.001997 PT Astra Graphia 0.00 2.00 0.00 0.00 0.00 2.00 0.00 0.001997 PT Astra Otopart 0.00 1.07 0.00 0.00 0.00 1.07 0.00 0.00

Total Portfolio: 239.36 112.52 41.33 334.78 233.76 95.71 40.94 329.93

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic2000 PT Petrosea 15.00 8.20 1.80 0.00

Total Pending Commitment: 15.00 8.20 1.80 0.00

- 97 -

Annex 10: Country at a GlanceINDONESIA: Westem Java Environmental Management Project

EastPOVERTY and SOCIAL Asia & Low-

Indonesia Paciflt Income Development diamond-

Population. mid-year tmittions) 207.0 1t837 2417 Life expectancyGNP per capita (Atlas method, US$) 580 1,000 410GNP (AtlAs methood US$ billionsJ t20.1 1,83l 988

Average artnual growth, 1993-99

Population (%) 1.6 1.2 1.9Labor force (%) 2.7 1.3 2Z3 GNP Gross

Most recent estimate (latet year avallable, 19S3-99) capita enroiiment

Poverty (f% of population below national poverty line) 20Urban population t% of total population) 35 34 31Life expectancV at birth tyears 65 69 680Infant mortality (per 1,000 live births) 43 35 77Child malnutrition t% of childrep unde'r 5 34 22 43 Access to safe waterA¢cces to imoroved water source (% of Dopu/ation) 62 84 64Illiteracy (%o population age 15+) i 14 15 39Gross primary enrollment (% ofschool-age populafion) 113 119 96 Indonesia

Mate 115 121 102 - Low-income groupFemale 110 121 86

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1979 19S9 1S9S 1999SEconomic ratios'

GDP (US$ bit/ions) 55.1 101,5 98.8 151.2Gross domestic investment/GDP 24.8 291 20.0 13.1Exports of goods and sorvices/GODP 30.6 25.1 81.2 349 TradeGross domestic savings/GDP 32.8 32.8 29,4 21.0Oross national savinas/GDP 23.9 24.9 13.9 TCurrent account balance/GOP -1.6 4.7 4.2 DInterest payments/GOP 1.9 33 5.7 4 8 DoSmastic v-.C+l- Inestment Total debt/GDP 33.8 58.5 152,7 97,5 Savings mTotal debt servie/exports 37.5 34.7 37.9Present valuo of debtGDP 1. 46.4 1 1Present value of debt/ex0orts . 264 2984.

Indebtedness1979-89 1989.90 1998 1909 1939-03

(average annual growth)GOP 6.0 53 -13.0 0o3 34 - IndonesiaGNP or capdta 3.9 3.4 -17.8 0.4 2.6 -L ow-income groupExports of goods and services 1.4 6.9 112 -31.6 7.7 11

STRUCTURE of the ECONOMY1979 1989 1998 1999 Growth of investment and GDP I%)

(% of GDP)Agriculture 27.3 21.7 17.0 17.3Industry 37.7 38.3 42.7 43.1320

Manufacturinq 11.7 19.7 24.1 25.4 0

Services 35.0 40.0 40.3 39.6 -20 9

Private consumption 57.6 58.5 65.1 72.5 .40

General aovernment consumption 9.5 8.7 5.5 6.5 - GD - GDPImports of goods and services 22.6 21.4 41.7 26.9 9 _

1979-89 1989-99 1998 1999 Growth of exports and imports (%)(average annual growth)Agriculture 3.4 2.5 -0.7 2.1 40

Industrv 6.5 7.2 -14.0 1.2 20Manufacturina 13.0 8.2 -114 2.6 0

Services 7.0 4.7 -16.4 -1.4 95 96 57.20

Private consumption 6.5 7.3 -6.3 3.7 40General government consumption 5.3 0.8 -15.4 0.7Gross domestic investment 6.7 3.9 -34.6 -20.0 |0Imports of goods and services 1.8 8.5 -5.3 -40.7 - Exports m mportsGross national Product 5.9 5.1 -16.5 2.0

Note: 1999 data are preliminary estimates.

The diamonds show four kev indicators in the countrv (in bold) compared with its income-group average If data are missing, the diamond willbe incomplete.

- 98 -

Indonesia

PRICES and GOVERNMENT FINANCE1979 1989 1998 1999 Inflation (%)

Domestic prices(1% change)Consumer prices 6.4 58.5 20.5 75-Implicit GDP deflator 33.6 10.0 81.2 12.8 so /

Government finance 25 -(% of GDP, includes current grants) oCurrent revenue 17.1 15.1 16.3 94 95 96 97 98 9Current budget balance -3.9 0.5 2.8 GDP denator o CPIOverall surplus/deficit -3.2 -1.5

TRADE

(UJS$ millions) 1979 1989 1998 1999 Export and import levels (USS mill.)

Total exports (fob) 23,833 48,354 55,546 60,000Fuel 9,340 7,424 10,256Rubber 952 1420 1229 40 * Manufactures 7,669 23,322 26,281

Total imports (ciO .. 19,624 33,778 35,945Food 521 1284 1,787 20,co_Fuel and energy 3,146 3,122 3,958Capital goods 5,904 6,388 3,366

93 94 95 99 97 98 99Export price index (1995=100) .. 83Import price index (1995=100) .. 87 * Exports * ImportsTerms of trade (1995=100) .. 95

BALANCE of PAYMENTS1979 1989 1998 1999 Current account balance to GDP (%)

(US$ millions)Exports of goods and services 25,460 52,722 59,317 6Imports af goods and services 19,675 41,060 41,972_Resource balance 5.785 11,662 17,345 4

Net income -2,920 -8,066 -10,958 2Net current transfers -4,464 1,013 -99

Current account balance -1.599 4,609 6,288 99 99

Financing items (net) 1,847 -3,140 -2,836Changes in net reserves -248 -1,469 -3,452 .4.Memo:Reserves including gold (US$ millions) .. .. 26,169 31,221Conversion rate (DEC, locallUS$) 623.1 1,770.1 10,013.6 7,405.0

EXTERNAL DEBT and RESOURCE FLOWS1979 1989 1998 1999

(US$ millions) Composition of 1999 debt (USS mill.)Total debt outstanding and disbursed 18,624 59,402 150,875 147,435 A. 11,578

IBRD 739 8,542 10,692 11,578 G: 20,941 8 s82IDA 525 854 694 682

Total debt service 3,065 9,833 18,967 23,225IBRD 95 1.134 1,456 1,584 9,083IDA 4 15 26 29

Composition of net resource flowsOfficial grants 137 214 255Official creditors 555 2,935 2,696 .r E: 32c054Private creditors 99 80 -3,653 0Foreign direct investment 226 682 -356 F 6400794 5

Portfolio equity 0 199 250

World Bank programCommitments 815 2,007 1,672 1,693 A - ISRO E - BislaeralDisbursements 229 1,258 1,212 1,506 B - IDA D - Other muljlateral F - PrvatePrincipal repayments 24 481 754 785 C - IMF G - Short-termNet flows 205 777 458 721Interest payments 76 667 728 845Net transfers 130 109 -270 -124

Development Economics and EASPR

99 -

107° INDONESIAJava Sea WESTERN JAVA ENVIRONMENTAL

SUMATERA MANAGEMENT PROJECT

PROJECT REGENCLES 0 KOTA/KOTAMADYA CAPITALS MAIN RIVERS

PROJECT CiTIES 0 KABUPATEN (DISTRICTi CAPITALS OTHER RiVERS* EMERGENCY PREPAREDNESS SUB-PROJECT 0 PROPINSI (PROVINCE) CAPITAL SELECTED KOTAMADYA BOUNDARIES

NATiON CAPITAL KABUPATEN (DISTRICT) BOUNDARIES

PROPINSI IPROVINCE) BOUNDARIES'

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