Document of The World Bank FOR OFFICIAL USE ONLY Report No. 36856-IND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL FINANCE CORPORATION AND THE MULTILATERAL INVESTMENT GUARANTEE AGENCY COUNTRY ASSISTANCE STRATEGY PROGRESS REPORT FOR REPUBLIC OF INDONESIA September 5, 2006 Indonesia Country Team, World Bank East Asia and Pacific Region The International Finance Corporation East Asia and Pacific Department The Multilateral Investment Guarantee Agency This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. The Country Assistance Strategy Report No. 27108-IND was discussed by the Board on November 25, 2003. CURRENCY EQUIVALENTS Currency unit: Rupiah (Rp) as of August 15, 2006 $1 = Rp. 9,077.00 FISCAL YEAR Until March 31, 2000: April 1 to March 31 Until December 31, 2000: April 1 to December 31 From January 1, 2001: January 1 to December 31 "The development of our nation and state cannot possibly be separated from the effort to create a just and democratic society. It is within that context that we are determined to develop and uphold law, eradicate corruption, and solidify the consolidation of democracy". "The alleviation of poverty does not merely require high economic growth, but it also necessitates a quality of growth that reaches directly to the betterment of the plight of the poor people". State Address of the President of the Republic of Indonesia before the Plenary Session of the House of Representatives on 16th August 2006 ­the Eve of the Sixty-First Anniversary of Indonesia's Independence. The World Bank IFC MIGA Vice President Jeffrey Gutman Farida Khambata Yukiko Omura (Acting) (Executive VP) Director Andrew Steer Richard Ranken Philippe Valahu (Acting) Task Team Leader Preeti Ahuja Stoyan Tenev Cecilia Sager Co-TTL Steen Andersen Core Team Indonesia Country Team key contributors: Luc Lecuit; Susan Wong and Richard Cibulskis (M&E/results assessment); Joel Hellman (governance advisor & Aceh and Nias coordinator); Kundhavi Kadiresan (portfolio manager); Yogana Prasta (portfolio); William Wallace (lead economist); Yoichiro Ishihara (economist); Rajashree Paralkar (country officer); Eriko Tominaga (consultant); Aliya Husain (research analyst); Silvia Irawan (JPA); Dewi Widuri and Taufikurrahman (trust funds); John Factora (operations officer); Susan Palmer (program assistant); Amenah Smith (program assistant) i ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities AHI Avian and Human Influenza AML Anti Money Laundering law BPK Supreme Audit Agency BPKP State Internal Audit Commission BRA Executing Agency for Reconciliation and Reintegration BRR Executing Agency for Rehabilitation and Reconstruction ­ Badan Rehabilitasi dan Rekonstruksi (BRR) NAD-Nias CAS Country Assistance Strategy CCT Conditional Cash Transfer CAS PR Country Assistance Strategy Progress Report CDD Community Demand Driven CPIA Country Policy and Institutional Assessment DFID Department for International Development (United Kingdom) DPL Development Policy Loan DSF Decentralization Support Facility EC European Commission ECD Early Childhood Development FDI Foreign Direct Investment FY Fiscal Year GAM Free Aceh Movement GDP Gross Domestic Product GOI Government of Indonesia IBRD International Bank for Reconstruction and Development IDA International Development Association IDF Institutional Development Fund IFC International Finance Corporation INT Department of Institutional Integrity JSDF Japan Social Development Fund KDP Kecamatan Development Project KPK Anti-Corruption Commission LG Local Government MDF Multi-Donor Fund MDGs Millennium Development Goals M&E Monitoring and Evaluation MIGA Multilateral Investment Guarantee Agency MOF Ministry of Finance NBFI Non-Bank Financial Institution NGO Non-Government Organization PAMSIMAS Water and Sanitation Program for Poor Communities PENSA Program for Eastern Indonesia SME Assistance (IFC) PEP Private Enterprise Partnership (IFC) PHP Provincial Health Project PGN Indonesia's Natural Gas Utility Company PPP Public-Private Partnership SME Small- and Medium-size Enterprise TA Technical Assistance TF Trust Fund UCT Unconditional Cash Transfer UK United Kingdom CONTENTS I. OVERVIEW............................................................................................................................................................ 1 II. PROGRESS IN ACHIEVING CAS OBJECTIVES ............................................................................................ 1 THE CORE CAS OBJECTIVE: ADDRESSING THE UNDERLYING ISSUE OF GOVERNANCE .................................................. 2 IMPROVING THE CLIMATE FOR HIGH QUALITY INVESTMENT AND GROWTH .................................................................. 5 MAKING SERVICE DELIVERY RESPONSIVE TO THE POOR ............................................................................................... 7 RESPONDING TO DISASTERS IN ACEH AND NIAS............................................................................................................. 8 MANAGING THE BANK'S PORTFOLIO............................................................................................................................ 10 III. NEW DIRECTIONS IN THE WORLD BANK GROUP PROGRAM............................................................ 11 RECALIBRATING BANK GROUP SUPPORT FOR INDONESIA'S DEVELOPMENT ................................................................ 11 FURTHERING THE GOVERNANCE AGENDA.................................................................................................................... 12 DISASTER RISK MANAGEMENT: A NEW CAS PILLAR .................................................................................................. 14 PROGRAM SUPPORT & INNOVATIVE MODALITIES ........................................................................................................ 16 DEEPER PARTNERSHIPS: A BETTER WAY OF DOING BUSINESS IN A COMPLEX ENVIRONMENT ................................... 17 IV. MANAGING RISKS............................................................................................................................................. 17 CAS PROGRESS REPORT ANNEXES: 1. Recent Macroeconomic, Poverty and Sector Developments 2. High Case Benchmarks for FY08 3. IBRD & IDA Lending Envelope and Scenarios FY07-FY08 4. Country Policy and Institutional Assessment (CPIA) Rating 2005 5. Progress in Fulfilling DPL Triggers 6. Key Environmental Indicators 7. Framework for Strengthening Monitoring & Evaluation of Results 8. Strategic Partnerships 9. Aceh & Nias: Progress on Recovery and Reconciliation CAS PROGRESS REPORT TABLES: A1: Key Economic and Program Indicators A2: Indonesia at a Glance B2: Selected Indicators of Bank Portfolio Performance and Management B3: IBRD/IDA Loans, Credits and Key Grants Programs FY2004-FY2008 B3: IFC and MIGA Program FY2003-FY2006 B4: Summary of Non-lending Services B5: Social Indicators B6: Key Economic Indicators B7: Key Exposure Indicators B8: Operations Portfolio B8: Statement of IFC's Held and Disbursed Portfolio B9: CAS Results Framework Monitoring Matrix iii TABLES Table 1: Summary of Progress towards CAS Outcomes Table 2: Achievement of CAS High Case Triggers Table 3: Indonesia Program at a Glance FIGURES Figure 1: Constraints to Investment Figure 2: Indonesia Country Policy and Institutional Assessment BOXES Box 1. IFC and MIGA Activities over the CAS Period Box 2. Examples of Bank Group's Assistance to Indonesia REPUBLIC OF INDONESIA MAP (IBRD No. 34976) iv I. OVERVIEW 1. Since the Board discussion of the FY2004-07 CAS , Indonesia's transition from 1 economic crisis and towards democratic governance has progressed strongly. Indonesia has moved into post-program monitoring with the IMF; held its first direct Presidential and local executive elections; and reduced poverty to below pre-crisis levels. While governance issues remain a serious impediment to development, prospects of genuine reform are also now better than in decades. Against this background, an unprecedented series of natural disasters (the Aceh tsunami of December 2004, the Nias earthquake of March 2005, the earthquake in Yogyakarta and Central Java in May 2006, the tsunami in West Java in July 2006), and the growing threat of avian influenza have placed an extraordinary burden on the new Government of President Yudhoyono, which already had its hands full with an ambitious development agenda. 2. The Bank Group's CAS focuses on addressing the two fundamental problems impeding rapid poverty reduction: (i) a weak investment climate; and (ii) low quality service delivery to the poor. The common root ­ weak governance­is hence the underlying focus of the CAS. Progress at varying rates has been made in each of these areas, and triggers for the High Case met. But, both the Government of Indonesia (GOI) and the Bank Group recognize that the task ahead remains very large. Implementation of the CAS is largely on course, although the engagement in post-tsunami recovery has expanded the Bank program, and required redeployment of resources. 3. The Bank Group's strategy is strongly aligned to that of the government's, and the CAS program remains relevant. It is thus proposed that the CAS period be extended by one year, which would correspond to Indonesia's scheduled graduation from IDA access at end-FY08. It is proposed that the CAS' strategic thrust and annual lending envelope remain unchanged, but that an additional emphasis is given to natural disaster management. It is also proposed that the Government's request for additional policy-based lending be supported over the remaining two years of the CAS period--justified on the basis of improved creditworthiness, progress on the reform agenda, and special financing needs caused by recent disasters. II. PROGRESS IN ACHIEVING CAS OBJECTIVES 4. Implementation of the CAS is broadly on-track, although delays in some areas arose from the Bank's extensive engagement in the post-tsunami effort. Table 1 summarizes the progress towards CAS outcomes (details in Annex B9). Some 56 original outcome indicators have been regrouped into 27 key outcomes for monitoring purposes. Five additional areas are added to capture Bank engagement in the reconstruction of Aceh-Nias and Yogyakarta; support to Aceh peace process; and to avian and human influenza (AHI) response. 1CAS Report No. 27108-IND was discussed by the Board on November 25, 2003. 1 Table 1: CAS Program Implementation: Summary of Progress Towards CAS Outcomes Pillar On-track On-track with delay Marginal/Slow progress Improving the · Fiscal discipline · Access to finance · Energy/gas sector Investment · Fuel subsidies · Improved Investment · Road sector Climate · Capital and social budget Climate · Water utilities · Stability of financial sector · Improved Invest Climate at · Rural Productive · Coastal zone mgt local level Services/Incomes · Tax Services · Labor regulations · Customs Services · Land titles Service delivery to · Access to basic education · Early Child Educ · Health Service the poor · Community-based infrastructure & · Quality of education Effectiveness service · Sanitation Governance · Participatory development · Local Governance · Decentralization · Public Financial Mgmt Regulatory Framework · Anticorruption Institutional framework Disaster Risk · Reconstruction of Aceh & Nias · Avian & Human Management · Support to Peace Process in Aceh Influenza · Yogya Response (early stage) · Disaster Risk Management framework The Core CAS Objective: Addressing the Underlying Issue of Governance 5. Constitutional reforms securing direct elections are creating a new accountability framework at all levels. Decentralization is bringing control over resources closer to communities, providing new opportunities for participation and monitoring of service delivery. The opening up of the media and surge of new collective organizations within civil society are giving rise to voices for good governance. The results of these remarkable changes are evident in a new level of participation, competition, and transparency in public life. But, while governance indicators show some evidence of improvement, there remains considerable public demand for broader improvements in public services delivery. 6. Over the CAS period, the Government has triggered genuine momentum in the fight against corruption. The main driver of the anti-corruption effort has been a new set of powerful independent oversight and prosecutorial institutions such as the Anti-Corruption Commission (KPK), Anti-Corruption Court, Judicial Commission, Police Commission, and the Prosecutorial Commission. Mostly established under the previous administration, these new institutions have begun to deliver tangible results with strong support of the President, who has made governance a key theme of his administration. In addition, existing institutions like the Supreme Audit Agency (BPK), the Financial Transaction and Analysis Centre (PPTAK), and the Attorney General's Office are more active. High profile corruption investigations have been launched, leading to a number of successful prosecutions. 7. The Government is now turning to deeper institutional reforms, although the judiciary is lagging. Promising initiatives in civil service reform are being launched in select ministries and are expected to lead to a more comprehensive reform. But progress has been 2 much less evident in the critical area of legal and judicial reform, where the adoption of an impressive blueprint for reform of the court system has not been followed through with effective implementation. Also, despite good success in prosecuting corruption, there has been less progress in implementing a coherent, well-focused anti-corruption strategy. The area of greatest progress has been in public finances; a number of laws have been passed, strengthening management and oversight, though fiduciary reforms need to be deepened at Local Government (LG) levels. The sensitive areas of political party and electoral financing are yet to be addressed. 8. Governance indicators are slowly improving. In the most comprehensive survey to date of the impact of decentralization on public service delivery, between 60 to 65 percent cited improvements in quality of local administration and public education and health services2. However, the survey also showed that corruption and inefficiency continue to threaten higher quality public services. At the same time, while most global surveys still place Indonesia near the bottom on a range of indicators, there are recent signs of progress. Surveys show that, compared with 2003, firms are now less likely to cite as obstacles to doing business, a range of governance categories, including corruption, legal system, conflict resolution, and tax administration. The improvement is particularly pronounced regarding national level corruption. The 2005 Transparency International Global Corruption Barometer found that 81 percent of Indonesians believed that corruption would decrease over the next 3 years ­ the highest share of optimists of 69 countries surveyed. 9. The Bank's "Governance CAS" has led to a mainstreaming of governance engagement across all sectors of the Bank's program. Governance concerns have been a major driver of the CAS High Case scenario, project selectivity and design, partnerships and AAA. This is reinforced by cross-cutting business platforms or CAS delivery mechanisms that seek to link analytics and financing to governance reform at each level of government ­ community, sub-national, and central government. 10. The Bank's large Community Driven Development (CDD) portfolio seeks to combine high-return investments with innovations in participation, planning and monitoring, designed to improve governance in sub-districts and villages. The CDD platform has performed very strongly over the CAS period, improving access to community level infrastructure and services, while contributing to improvements in transparency and accountability in over half of Indonesia's villages and towns. The CDD platform is now in broad use for delivering, among others, local level infrastructure, rural water and sanitation, early childhood development, and coastal zone management. The CDD network of facilitators has played a central role in the reconstruction of Aceh and Nias, and the approach has been chosen by the government for the massive housing reconstruction program in Yogyakarta and Central Java. The government has announced its plans to scale up and apply the approach as a nationwide, pro-poor service delivery program. 11. Progress on local governance has been less than hoped; a multi-donor Decentralization Support Facility (DSF) has been established to help support reforms. With some 440 local governments now undertaking 50 percent of public spending, Indonesia's 2 Governance and Decentralization Survey 2004; Center for Population & Policy Studies - Gajah Mada University and World Bank 3 governance challenge has largely "gone local". Capacity problems at the local level remain severe, and slow progress on elaborating a clear, consistent intra-governmental fiscal framework has obstructed the flow of development resources. To help focus and harmonize donor support for this major issue, the DSF was established in 2004. Financed by the DfID (UK), with the engagement of a growing number of key donors, and managed by the Bank, the DSF is providing analytics, capacity-building, policy and program inputs for improved LG service delivery. The DSF collaborates closely with a new generation of Bank-financed projects, targeting reform- minded districts that seek to enhance accountability, transparency and participation. Three new Bank-supported projects are engaging about 100 rural and urban districts on a broad program of governance capacity building and investments. In tandem, IFC's business environment program targets the reform of LG procedures that impede investment. In contrast to the CDD platform, progress on LG reform has not been as great as hoped for, in part due to slow progress in clarifying on-lending/on-granting policies, and in part due to redeployment of Bank staff to Aceh. It nevertheless remains a very high priority ahead, in the CAS. 12. At the national level, there has been progress on public financial management and fiduciary reforms, with strong Bank support. A series of governance-oriented Development Policy Loans is helping define and implement important actions for improving public procurement, budgetary processes, accounting standards and treasury systems. The institutional framework for addressing corruption at the Ministry of Finance (MOF) has also been strengthened and is operational. A complementary $60 million Government Financial Management and Revenue Administration Project is assisting in an ambitious restructuring of MOF, and is strengthening accountability, streamlining and modernizing processes, systems and capacities in budget, treasury and revenue areas. 13. By mobilizing substantial trust funds, the Bank Group has been able to expand the reach of its governance program, and include areas generally outside a "standard" program. Thus, the Bank's AAA program has included the measurement and monitoring of governance through a 100-district governance and decentralization survey, experiments to test the impact of community participation on corruption, and direct monitoring of corruption e.g., by placing monitors in trucks to count bribe payments on Aceh routes. Other recent work includes civil service reform, support for anti-corruption institutions (KPK, BPK), post-conflict reconciliation/reintegration, and increased access to justice for the poor. A joint IFC-Bank team is exploring ways to assist with the setting up of a special court or arbitration body to support the objective of resolution of commercial disputes. 14. In response to serious and high-profile discoveries of corruption, the Bank has introduced a rigorous fiduciary framework across the entire portfolio. Within the Bank, a Jakarta-based anti-corruption team assists in the design and monitoring of anti-corruption plans, which are required for every project. These plans identify corruption risks and seek to embed risk mitigation strategies in the project design, including oversight and monitoring mechanisms, complaints handling, increased disclosure requirements and specific sanctions. The Country Team works closely with Bank's Department for Institutional Integrity (INT) and other Bank units, as well as KPK, BPK, and the State Internal Audit Commission (BPKP), to investigate allegations and to use the results to leverage policy and institutional reforms in relevant ministries. 4 Improving the Climate for High Quality Investment and Growth 15. In response to improved policies, growth is slowly rising, and poverty is falling. Growth was 5.6 percent in 2005­the highest in eight years. Growth softened in the first half of 2006 due to higher fuel prices and interest rates, but a rebound is expected. Annual growth is projected at 5.5 percent for 2006, rising to 6-7 percent in 2007-8. Macroeconomic policy performance is strong; the deficit fell to 0.8 percent of GDP in 2005; and public debt/GDP fell to 47 percent (from some 100 percent in 1999). GOI's debt/GDP target of 30-35 percent by 2009 is well within reach. Public debt service as a share of the budget has fallen to 24 percent in 2006 (below pre-crisis levels). Increased growth is not yet translating into formal employment -- open unemployment reached 10.4 percent in 2006, posing significant socio-political risks -- and rural and regional poverty pockets remain a challenge. But the national poverty head-count fell to 16 percent (below pre-crisis levels) in early 2005; more than 13 million people have been lifted out of poverty since 1999 ­ a 7.5 percent improvement over this period. 16. Fundamental weaknesses in the investment climate are being gradually addressed, leading to higher confidence and stronger sovereign credit ratings. The investment rate has increased over the CAS period (22 percent in 2005, up from around 19 percent in 2003), gross FDI inflows have recently risen (to nearly $16 billion in 2005), and businesses state that investment obstacles are less intense than they were two years ago (Figure 1). While serious bottlenecks, including inadequate infrastructure, a weak legal system, and bureaucratic red tape remain, overall, confidence is up, raising the value of the Rupiah, and making the Jakarta Stock Market one of the best regional performers over 2 years. Citing improved policy record, Moody's and S&P raised ratings to B1 and BB-, respectively, although still below investment grade. Fig 1. Constraints to Investment 17. The health of the banking sector (% of firms identifying constraints as moderate to very severe) 0% 10% 20% 30% 40% 50% 60% 70% 80% has improved, but state banks remain Macroeconomic Instability vulnerable, and there is a need for Economic Policy Uncertainty greater financial sector diversification. Local Corruption Commercial banks' performance has National Corruption improved considerably post-crisis; and Legal System and Conflict Resolution Transport they are now among the most profitable in Tax Administration the region. Capital adequacy ratios are Labor Skill and Education 2005 stronger for the vast majority of banks, but Cost of Financing 2003 some state banks have demonstrated loan Tax Rate Labor Regulation-Regional portfolio weaknesses. The Anti-Money Customs&Trade Regulation-Regional Laundering Law (AML) was successfully Customs&Trade Regulation-National amended and the Deposit Insurance Licensing and Permits-Regional Electricity Corporation has been launched, and Bank Labor Regulation-National Indonesia has promoted improved Licensing and Permits-National corporate governance in the sector. Monopoly Practices Diversity in the sector through Crime Access to Financing development of non-bank financial Telecommunication institutions (NBFIs) and capital markets is Access to Land being pursued, but the share of NBFI Source: Investment Climate sector has remained at around 19 percent, and access to finance for underserved sections of the 5 economy, remains limited. A major new package of financial reforms was announced in July 2006, marking the next wave of reform. 18. A series of annual Development Policy Loans, coupled with a large AAA program and IFC interventions, are supporting policy and institutional reforms for higher growth. Reforms supported by DPLs have reduced inefficient public expenditures; strengthened tax administration and debt management; enhanced competitiveness of the financial sector; supported governance and fiduciary reforms; and are putting in place the building blocks for a better business climate and service delivery. Technical Assistance (TA) is being provided on key issues: regulations for investment law implementation; improved efficiency of domestic and international trade; a diversified, healthy financial sector; public procurement; enhanced legal certainty and anti-corruption measures. Via its Municipal Simplification Program, IFC is helping build LG capacity and improve business licensing and registration. IFC is also supporting several initiatives devoted to developing SMEs (Box 2). Box 1. IFC and MIGA Activities over the CAS Period IFC: IFC's program has grown steadily over the last 2 years, and Indonesia is now the 2nd largest exposure in IFC's East Asia region portfolio (around 17 percent of total). As of June 30, 2006 IFC's committed portfolio stood at $747.3 million in 32 institutions. During FY04-05, IFC committed $300 million in 13 projects, including $65 million in 3 agribusiness projects with strong backward linkages and $95 million to banking and NBFI to strengthen their SME operations. In FY06, a new three year three year growth phase was launched to enhance IFC's impact even further; $246 million was committed in 8 projects in FY06. MIGA: Its outstanding portfolio consists of 2 projects in infrastructure and services sectors. The total outstanding gross exposure is $50.9 million. Over the CAS period, MIGA continued its support for the Paiton Power Generating Complex. MIGA seeks to encourage FDI flows by profiling potential opportunities via its online investment promotion services. MIGA is prepared to support inflows in priority sectors (including oil and gas), and is actively looking at investments in the infrastructure and mining sectors. 19. Inadequate infrastructure remains a major impediment to investment and poverty reduction; the Bank Group is delivering strong support to address this. Major projects have been financed to support infrastructure at every level, including national roads, power and gas development, and urban and community level infrastructure. A major program of advisory services is also supporting the Government's efforts to establish policies and institutions for private investment in infrastructure, which will need to play a major role in Indonesia's planned $12 billion annual infrastructure program. TA from the Bank has helped in setting up of new public private partnership (PPP) and risk management units, regulatory reforms, new legislation on Toll Roads and Land Acquisition. A strategy to mobilize long-term private financing (through NBFIs) has been developed; work to design major funds for infrastructure guarantees and financing is ongoing. IFC has been supporting captive infrastructure solutions and is developing local currency mechanism for financing infrastructure. The second Indonesia Infrastructure Summit in November 2006, to be held with Bank Group support, will seek to re- launch Indonesia's engagement with private investors. 20. Higher investment in rural areas is essential for poverty reduction; it remains a priority for the Bank Group. A major Rural Investment Climate Survey has been recently completed by the Bank, and confirms that special interventions in rural areas remain essential. Current Bank Group activities include a set of projects to help modernize the provision of services to farmers and fishers (extension, research, irrigation, credit, and property rights) within 6 the new decentralized context. Projects in water management, agricultural services, land titling, and coral reef protection are implemented by different ministries, but pursue a common approach to reform ­ making services more responsive to the end user, linking producers to markets and offering sustainable alternatives. IFC via PEP (Private Enterprise Partnerships) Indonesia is a key part of the Bank Group effort, supporting business linkages in the seaweed, cocoa and agribusiness sectors. Results of the overall program include system-wide reform in some sub- sectors (e.g. irrigation, coral reef protection), and demonstrated income increases in project areas. Needed progress in some areas ­ e.g. agricultural services ­ remains difficult. Making Service Delivery Responsive to the Poor 21. While performance on several MDGs (e.g. primary education completion, infant mortality) is strong, there is slow movement in others (e.g. water and sanitation, maternal mortality) (Annex A2). A major report: "Making Services Work for the Poor" has just been completed by the Bank, and its ideas are being disseminated to a nationwide audience through a 12-part television series. The report provides a diagnosis of how Indonesia's economic crisis, decentralization and democratization have combined to have different effects in different sectors and regions. Success has been generally greatest when the decentralization is used to enable service providers ­ schools, clinics etc ­ to be more genuinely responsive to the needs of the poor. This is more likely in an environment in which progress is monitored and local opinions are translated into decision-making by local and central officials. There are already some remarkable examples of success over the past five years (e.g. school­based management with community participation), but also some failures (e.g. some immunization programs). The Bank's program seeks to help the Government apply the successful models at a scaled up level. The recent major reduction in fuel subsidies has enabled a major pro-poor increase in public spending on health and education services (Box 2). 22. The past three years have seen important progress in educational policy, and in the Bank's program of support. A major review of the sector has led to a new generation of Bank programs emphasizing responsiveness to parents and students requirements, access, educational quality, teacher reform, and competition. Advisory services have supported, for example, transition to district block grants mechanism; direct funding of grants to schools; scholarships to poor students; community-led school rehabilitation/construction program (reducing construction time and costs); and integration of Early Childhood development (ECD) in the Education Act. Bank programs have also piloted the increased participation of communities in the delivery of education services, by supporting the establishment of school committees associated with the provision of direct funding of grants to schools. There has been a resultant improvement in district planning capacity and school management. The creation of autonomous, effective and accountable tertiary education institutions; and a pilot new approach to improve ECD access are being supported. Evaluation of the ECD project has found significant gains in school readiness and enrollment, with stronger outcomes for poorest children. Seven basic education projects were restructured to help establish more transparent budgeting, planning, and management; and rolling out new policies on teacher management and performance. These regionally focused projects are contributing to high enrollments, maintaining transition rates from primary to junior secondary, and aiding teacher development. 7 23. While there is some progress in health services for the poor in Bank targeted provinces, broader evidence of improvements in healthcare has yet to materialize. A series of Provincial Health Projects (PHP) were designed to help clarify the roles of government levels and build capabilities in nine provinces. Several rounds of block grants have been completed, and support for building district government capacity to implement pro-poor planning, monitoring and reporting of health services and outputs is ongoing. At the center, work on drug and food control systems and public accountability measures is underway. A competency-based curriculum for primary care physicians was prepared to be used across medical schools, and training for close to 5,000 medical students was provided. 24. The Bank's portfolio includes the world's largest share of CDD projects, which are increasingly being used to deliver basic education, health care and clean water to poor communities. CDD interventions encompass 30 of Indonesia's 33 provinces and cover close to 55 percent of its rural and urban villages and towns. These have built or rehabilitated schools, health facilities, water and sanitation systems, roads, bridges, markets and electrification systems. Their unique design involves engagement of social and technical facilitators who know the communities well (Box 2). Over the past year this approach has been used to launch a major new program in ECD (see above), and to scale up the successful community water and sanitation program. Functioning water supply systems have been established in over 1,020 villages (covering over 2 m villagers). The approach is being scaled up via the 3rd phase PAMSIMAS (Water and Sanitation Program for Poor Communities), which will benefit some 5,000 communities with a population of around 12.5 million. Responding to Disasters in Aceh and Nias 25. Reconstruction efforts after the Tsunami have become a major part of the Bank Group's program. In the immediate aftermath of the tragedy, the Bank was asked to lead the international team in preparing the Damage and Loss Assessment (prepared in three weeks, and measuring in detail the precise scale of the damage). Bank staffs were seconded to help GOI prepare plans for reconstruction, including the setting up of the Reconstruction Agency (BRR) and by mobilizing funds for a Multi-Donor Fund (MDF) for Aceh and Nias, which quickly raised $538 million in grants from 15 donors, including a $25 million grant from the World Bank's net income (Box 2). In partnership with the Dutch Government, the Bank established a multi-donor office in Banda Aceh and made the facilities available to all donors. 26. The Bank Group quickly developed a portfolio of grant operations, technical assistance, policy dialogue and analytical work equal in scale to a full-fledged country program. With financing from the MDF, JSDF (Japan Social Development Fund), IDA credits and co-financing, the Bank is currently supervising a portfolio of about 20 projects, providing over $320 million for reconstruction and development including in formerly conflict affected areas, covering a range of reconstruction needs. Many of these draw upon the Bank's CDD network, which has now been extended to every village in Aceh and Nias, with the Bank- supported projects generating over 2 million work days thus far in the affected areas. The Bank's Aceh and Nias program has been delivered with very modest additional Bank administrative resources, financed by redeployment of regional and country budgets. However, by mobilizing an additional $12 million in bilateral trust funds the Bank has been able to field a team of over 50 professionals in Banda Aceh, delivering strategic and technical support to the 8 BRR, monitoring reconstruction progress, maintaining a local communications network across the region, and developing a medium term reconstruction expenditure framework. IFC has also launched a PEP Aceh-Nias, a three year US$6 million initiative, to revitalize SMEs. Via a matching grant scheme, IFC has supported 3 private initiatives to assist with the recovery efforts. Box 2. Examples of Bank Group's Assistance to Indonesia Fighting Poverty via Broad-based Community Level Programs: Kecamatan Development & Urban Poverty Programs (KDP and UPP) are the hallmark of Indonesia's CDD interventions. KDP (which began in 1998) is now the largest Bank-financed CDD program in the world. Under these programs some 38,000 Indonesian villages and cities have benefited, with 75 percent of funds going for socio-economic infrastructure and 25 percent for economic activities. Over 3 million villagers earned direct short-term employment through these interventions with some 2/3rd of the workforce from the poorest parts of the community. KDP was the only program successfully operating throughout the entire martial law period in Aceh. As part of post-tsunami support, 1,450 KDP facilitators are supervising over 11,000 volunteers in over 6,000 villages to select, design, build and monitor infrastructure. Overall, evaluations and international audits of these projects show that return rates average some 35-50 percent; costs are less than half that spent on these works, when built through government contracting; and levels of corruption in the micro-projects are relatively low. Replacing Regressive Fuel Subsidies with Pro-poor Expenditures: As international oil prices rose in 2005, GOI took the bold and politically difficult decision on a two-pronged course of action: reduce fuel subsidies, but provide compensatory targeted assistance to poor Indonesians. GOI's ambitious unconditional cash transfer (UCT) program is the world's largest ever cash transfer program (in coverage and total volume) and was rolled-out in record time of about two months, reaching some 19.2 million poor and near-poor households (some 34 percent of the national population, well in excess of the poverty level of 16 percent). The significance of GOI's efforts goes beyond targeted compensation to the poor, in that it also applied about $10 billion in 2006 in budgetary savings to strategic pro-poor programs including reduction of school fees and scholarships for poor students; basic health care and health insurance for the poor; and, the provision of rural infrastructure. Having followed fuel subsidy policy implications over time, the Bank was well placed to provide technical expertise around this difficult reform. GOI valued and drew on the Bank's analysis of the impact of various scenarios on the budget, inflation, poverty, and sought advice on policy sequencing and on the reallocation. The GOI-Bank team briefed the Vice-President and Cabinet members on options and provided just-in-time support to GOI's decision to rapidly roll-out a UCT program. Further support on designing a conditional cash transfer (CCT) scheme is underway. Helping Aceh & Nias Recover: This largest trust fund in the East Asia Region (and among the largest Bank-wide), the MDF, offers an effective, flexible mechanism for bringing together key members of the donor community, GOI and civil society to support post-disaster recovery. Within its first year of operation, of the total MDF amount of $538 million, about $492 million had been committed to projects, while close to 45 percent of the resources under active projects had been disbursed. Other than providing project financing, it has become a forum for coordination and policy dialogue among relevant stakeholders. Some innovative features include a governance structure (Steering Committee) that represents the interests of partners (GOI, donors, civil society, and the World Bank as the trustee), management by three co-chairs (with specialized terms of reference), and use of partner agencies to appraise and supervise projects. An integrated approach that includes land titling, housing, infrastructure, flood control, environmental protection, and building social capital, is being employed, with a key role played by communities in reconstruction and rehabilitation. A pro-active communications strategy has helped to strengthen relationships with beneficiaries. Recently, a strategy was approved for the use of remaining funds that includes co-financing of MDF-funded projects by the GOI Reconstruction Agency (BRR) ­ an innovative approach-- uncommon in developing countries. Supporting SME Development: IFC has provided over $200 million to banks and a finance company to support their SME and micro-lending operations. Its largest local currency facility offering to a client globally and the largest single transaction to date in Indonesia, was successfully concluded in May 2006, with $140 million equivalent provided to Bank Danamon ­ a leading SME and consumer lending bank in Indonesia. This will enable Bank Danamon to increase the scale of its microfinance, and lending activities to SMEs, and diversify its funding base. IFC's Promoting Enterprise Access to Credit (PEAC) program, jointly with Swisscontact, has facilitated $11 million in loans to over 150 SMEs. Moreover, IFC's Program for Eastern Indonesia SME Assistance (IFC-PENSA) is a key provider of TA, capacity building and advisory support, and is another example of a strong partnership (jointly funded by IFC with 6 donors). The PEP-Aceh-Nias, co-funded with Australia, aims to revitalize the SME sector, post-tsunami. 9 27. Following the historic Aceh peace accord of August 2005, the Bank embarked upon a major program of support for post-conflict reintegration and development. The Bank led a major "Needs Assessment" for demobilizing ex-combatants and supporting war-torn villages, and is providing TA to the Reconciliation Agency (BRA), focused on their strategic planning and mechanisms for delivering assistance to conflict-affected communities and individuals. A socialization program has been supported, and the village level network is used to monitor conflict incidents. On the first anniversary of the peace accord (August 15, 2006), plans were announced to use the CDD facilitators to channel development funds to all affected villages. To date the peace agreement has been highly successful, improving the quality of life and outlook of the Province, and sharply increasing the prospects of a successful reconstruction. 28. Nearly a year after the BRR and the MDF were set up, the pace of recovery in Aceh is strengthening, but many challenges remain. Houses are being built in large numbers (nearly 45,000 of some 120,000 destroyed units were rebuilt by end-June); farmers and fishers are returning to their livelihoods, the school year has started normally, and health services are available across the affected areas. Around $1.5 billion has already been disbursed for rehabilitation and reconstruction by a wide array of donors and NGOs (see Annex 7). But despite progress, the environment for reconstruction remains difficult. The pace of infrastructure reconstruction is lagging behind the housing program. Land titling is facing administrative bottlenecks. Inflation and unemployment are stubbornly high. Restoring livelihoods remains a serious problem, particularly for women. And, peace is still fragile. Managing the Bank's Portfolio 29. Important gains in overall portfolio quality have been achieved, but continued hands-on management is essential. Over this CAS cycle, the Bank has delivered a total of some $2.13 billion in loans and credits, of which 75 percent was on IBRD terms, and $700 million was in the form of program support. As of June 30, 2006, the Bank's active portfolio comprised 25 projects with total net commitments of $2.3 billion. All projects but one (96 percent of total) were rated satisfactory. The ratio of "at risk" to total projects (by commitments) has improved from 20 percent in FY04 to 8 percent in FY06. The risk factors include weaknesses in project management, corruption and misuse of funds, delays in counterpart funds release by GOI, procurement problems and M&E issues. These are being addressed actively including via: project restructuring, loan cancellations, follow-up on counterpart funds, application of remedies for misuse of funds; and procurement/financial and project management improvements. 30. A large trust fund (TF) program over the CAS period enabled the Bank to quadruple advisory and capacity building services to the Government. The TF portfolio includes over 130 TFs under Bank oversight for a total of nearly $850 million; a number of programmatic Jumbo TFs of $10 million or more are included. Given this scale, special measures are being taken to ensure effective management. A trust fund unit has been established at the Bank in Jakarta, to facilitate systematic monitoring, identification and application of specific risk mitigation measures. A recent TF portfolio review indicates that TF programs place the strongest emphasis on activities related to responsive service delivery, followed by governance issues, and the improvement of the investment climate. The reconstruction of Aceh and Nias has also become a substantial focal area. Over the past few years, the Bank has seen 10 real benefits from genuine partnerships, including: improved aid coordination; high-quality research and policy dialogue; and enhanced knowledge dissemination. III. NEW DIRECTIONS IN THE WORLD BANK GROUP PROGRAM The High Case and IBRD Exposure 31. The Bank's program is in the "High Case". Indonesia has achieved both the CAS high-case indicators (Table 2), and the DPL triggers (Annex 5), as well as registered improvements across several areas of the Country Policy and Institutional Assessment (CPIA; Annex 4). Indonesia's Fig 2. Indonesia Country Policy and Institutional Assessment overall CPIA rating reached 16. Transparency 1. Macroeconomic Mgt 3.7 in 2005, having & Accountability 2. Fiscal registered systematic 15. Public 3. Debt improvements across key Administration categories since 1999, led by 4. Trade 14. Revenue sharp improvements in the Mobilization macro-economy (Fig. 2). 5. Financial Sector 13. Budgetary Mgt But the 2001 12. Property Rights 6. Business Environment decentralization made & Governance management of some areas 11. Environment 7. Gender (e.g. environment) far more difficult, and these remain 10. Social protection 8. Equity of public 9. Building HR resource use weaker than pre-crisis. Indonesia 1999 Indonesia 2005 Maximum 32. Indonesian debt to IBRD has been declining since 2001, as agreed between the Government and the Bank. In view of the extraordinary borrowing at the time of the financial crisis, and Indonesia's very high debt levels, it was appropriate that the Bank's exposure should fall. Even with increased disbursement projections (arising from the proposed increase in quick-disbursing budget support), the Bank's IBRD exposure will continue to decline steadily from $9.78 billion at end-2003 to $6.36 billion in 2008, and IBRD debt service/exports is projected to decline from 2.6 percent in 2003 to 1.1 percent in 2008. Indonesia's share of total IBRD exposure has also declined from 9 percent in FY03 to 7.3 percent in FY06. Recalibrating Bank Group Support for Indonesia's Development 33. Planned new lending remains within the original CAS parameters ­ of up to $1.4 billion (IBRD and IDA) per year under the High Case ­ and will be calibrated to progress on key reforms and financing needs. Given the strong continuing relevance of the current CAS, and Indonesia's impending graduation from IDA-IBRD Blend to IBRD status by end- FY08, it is proposed that the CAS period be extended by one year. The High Case FY08 triggers are set out in Annex 2. Given Government's strong commitment to accelerate reform, it is expected that Indonesia would remain in the High Case. But in the event that the High Case triggers, most significantly those pertaining to the macroeconomic framework, are not achieved, the IBRD lending envelope would shrink to the Base Case levels. If reform progress stalls or 11 there are policy reversals, IBRD lending would fall further to Low Case levels. In this event, IDA commitments will be reduced below the present allocation (Annex 3). Table 3 profiles the Bank program. The CAS Results Framework (Annex B9) is revised to reflect mid-course adjustments. 34. While the broad thrust of the CAS remains unchanged, the program will be deepened in four specific ways: (i) a stronger support for governance reform via civil service reform and transparent, nationwide poverty programs; (ii) a focus on disaster risk management; (iii) increase in program financing for the remainder of this CAS period; (iv) stronger partnerships, including among the Bank Group. 35. While IFC's strategic priorities remain broadly the same, in FY06 IFC entered a new growth phase in its activities in Indonesia. Experienced staff was added to the country team and a new sectoral approach was launched. The growth phase prioritizes: (i) financial markets; (ii) infrastructure; (iii) agribusiness and resource-based industries; (iv) SMEs, and (v) investment climate, as strategic sectors. IFC's investment program is expected to grow from US$250 million in FY06 to US$350 million in FY08. Financial markets, infrastructure, resource- based industries and general manufacturing each are expected to account for about a quarter of the overall IFC Indonesia investment program. Furthering the Governance Agenda 36. The Yudhoyono administration is extending its governance agenda to include much- needed civil service and administrative reforms. Significant pilot initiatives are planned in the Ministries of Finance and Education that could serve as models for a more comprehensive strategy of civil service reform at the national level. GOI is planning to launch an independent remuneration commission to advise on pay scales and the design of a more transparent compensation package for higher level officials (Pejabat Negara) that is planned to be extended to all civil servants eventually. Moreover, a Cabinet level unit to assist on implementation of reforms is planned. The Bank has mobilized substantial TFs to support these important efforts as a key addition to the overall governance program in the CAS. 37. Local-level governance reforms for improved service delivery and infrastructure development will be pursued in concert with partners. The Bank will leverage its policy dialogue underpinning the DPL, TA and capacity support including via the DSF, to assist GOI in making progress, including on the issues of intra-governmental fiscal framework implementation. A package of key fiduciary and accountability reforms, in areas of public participation, transparency, financial management, and procurement, is being pursued via a set of operations targeting reform-minded districts across 21 provinces. Lessons from these recent launched operations will help shape Bank support to strengthening LG capacity and performance. 38. The Government has recently announced plans for nation-wide village level CDD and Conditional Cash Transfer (CCT) Programs, targeting poor communities and households. The experience of the Bank-supported KDP and UPP programs, which have been implemented in over half of Indonesia's villages, is helping inform the proposed CDD program. In addition, GOI plans to convert its successful experience in UCT into a grant program that will be conditional upon household actions. The two complementary interventions seek to improve 12 access to health and education services, via transparent, participatory, effective resource transfers. The Bank will continue to provide TA and requisite financing. Table 2: Achievement of CAS High Case Triggers Reform Area Result/Status Macroeconomic stability and creditworthiness Cutting inefficient spending Exceeded Reduced fuel subsidies; savings to pro-poor programs/cash transfers. Fuel price adjustments saved $15 billion in public funds over 2005-6. Reduce reliance on debt Exceeded Prudent fiscal management. Public debt/GDP ratio down to 47% from 100% in financing 1999. Debt service burden at 23.6% is lowest burden since 1994. Budget deficit projected at 0.8% of GDP in 2005 and 2006 deficit also projected below 1% Investment Climate Strengthen financial sector Fulfilled Deposit Insurance Corp in place. Capital Mrkt Supervision Agency & Dir. Gen'l Finan. Inst. merged to strengthen regulation, supervision. Indonesia off non- compliant countries list of Financial Action Task Force. GOI Financial Sector Reform Package launched. Increase private investment Substituted Electricity law was annulled by Constitutional Court, requiring substitution of to power & Fulfilled the original trigger. Major legislations passed (Toll Road; Land Acquisition; Inter-ministerial Committee on Infra., PPP; Risk Management Units established). Infra. Reform Package (153 policy actions) launched. Reduce transaction costs for On Track Investment Law signed; implementing regulations being drafted. New Customs business Law drafted. Nat'l Export & Invest. Agency (PEPI) with problem solving authority for investment issues established. Progress has been made in reducing number of days for business start-up. Investment Climate Reform Package (85 policy actions on taxation, customs, excise, SMEs, labor etc.) launched. Public procurement/ financial management Strongly improve fiduciary Fulfilled Completed: Finance regulations, MOF restructuring, new budget procedures, management public procurement standards. Passed Finance, Treasury and Audit laws. Other audit and treasury measures at different stages of development. Anti-corruption committee, Anti-corruption Court, Financial Transactions Analysis Center, Business Competition Spn. Commiss. operational. GOI elaborated Nat'l Action Plan for Corrupt Eradication. Yudhoyono's anti-corruption instrument to the Executive. UN anti-corruption convention signed. Decentralization Improve local fiscal Fulfilled Completed: local debt restructuring; rescheduling; write-offs; framework for accountability own-source revenues, regional Bonds underway. Largely clean local elections creating accountability framework. Justice sector and legal reform Improve governance in the Fulfilled Attorney General's Office reform blueprint launched. Judicial Commission justice sector operational. Anti Corruption Court and independent oversight commissions for AGO/Prosecutions and the Police created & given considerable autonomy and authority. Many high profile public figures -- including a governor, dozens of councilors and General Elections Commission staff--convicted and are in prison. Service delivery Improve service delivery to Fulfilled Large increase in education and health spending since 2000. Fuel subsidy poor, publish standards for savings funded social services for the poor; early program implementation public service delivery units assessments favorable. Minimum service standards in education and health in place. Decree on free health; block grants to schools for free education to poor. Public service quality at facility level improving, per decentralization surveys. Poverty reduction strategy Improve poverty orientation Exceeded Issued medium term plan (RPJM) and annual work plan (RKP) for 2006 budget. of public spending Increased allocation for sectors prioritized for poverty reduction in 2005 revised budget and 2006 budget. Fuel subsidy savings reallocated to core social programs. Regions to account for > 50% of total public investments in 2006. Aid effectiveness Improve implementation of Partially On-lending/on-granting decrees revised and issued. Several other laws on decentralization framework Fulfilled implementation of decentralization are finalized and at various stages of review 13 39. The Bank will seek stronger partnerships with Indonesian anti-corruption and audit institutions to prevent and detect fraud and corruption in Bank and other projects. While the Bank's INT unit will continue to take the lead in investigating corruption allegations in Bank projects, the Country Team will pilot (beginning with the roads sector), a new framework to identify and flag fraud and corruption risks at an early stage through external monitoring experts and auditors working in close cooperation with the BPK and the KPK. The Bank will also work with GOI to operationalize a "10 Step Program" to curb illegal logging and achieve sustainable forest sector governance, enhance law enforcement and public information, and combat corruption. Support will be provided for AML and asset forfeiture laws to combat illegal logging. The Bank will also support GOI in implementing the Extractive Industry Transparency Initiative (EITI); a staff member will be seconded to the Jakarta Office, supported by DfID. Disaster Risk Management: A New CAS Pillar 40. Aceh and Nias will require ongoing heavy engagement throughout the next two years and beyond. A comprehensive strategy, for engaging LG in reconstruction and oversight of local infrastructure development has been approved by BRR. The Bank's Aceh MDF portfolio is expected to grow to around 12-14 projects and IFC is pursuing the creation of new financing opportunities for SMEs in Aceh/Nias. The role of the MDF is expected to grow as some NGO programs begin to phase down, and as the BRR seeks to directly co-finance MDF projects with its own funds, to benefit from design and supervision quality. 41. Lessons from Aceh are being applied to reconstruction of Yogyakarta and Central Java, following the May 27 earthquake. The scale of the damage is estimated at some US$3.1 billion--among the most costly natural disasters in the developing world over the past decade. About 157,000 houses were completely destroyed, and over 200,000 were damaged. GOI has chosen a community-driven housing program modeled in many ways on the MDF-financed Bank program in Aceh. The Bank is already using reallocated funds from the ongoing UPP to move forward with the first 6,000 houses, which are now underway. While most of the housing grants are expected to come from GOI, the Bank is currently putting together a MDF for donor grant co-financing. So far, six donors have expressed commitment. 42. Indonesia has become the epicenter for Avian and Human Influenza (AHI) risks. The H5N1 virus is now considered endemic in poultry in most provinces. With 46 AHI-related human deaths (as of August 23, 2006), Indonesia overtakes Vietnam (whose last AI death was recorded in 2005), as the country with the most human fatalities from the virus. While tests indicate that so far there has been no significant mutation of the virus, the risk remains significant. Indonesia's response to date is not regarded as fully adequate. Control measures, including vaccination and culling of infected stocks, are seriously underfinanced and fraught with implementation problems. But recently a consensus has emerged between the Government and international specialists on a detailed plan of action, which was endorsed at a major GOI- donor meeting in August 2006. As a result, it is hoped that a credible response can now be scaled up, supported by significantly increased donor financing. As a first step, the Bank will mobilize $15 million in grant resources, including through the AHI multi-donor trust fund facility. 14 Table 3: Indonesia Program at a Glance IBRD/IDA Lending ($ million) Trust Funds ($ million) Sector Active Planned Projects Existing Grants Volume Expected New Grants Loans FY07 FY08 FY07-FY08 Policy Loans Key Co-financing/Project linked TFs Multi Donor Multi Donor Development Policy - MDF Aceh & Nias 538 - EC/Netherlands 19 -- X X Loan (DPL) - Canada/UK/Australia 14 (GFMRAP) (KDP- Aceh) - MDF(Avian & 15 Infrastructure DPL X - ODS Phase out 37 Human Influenza Sub-Total 600 600 - GEF 12 Facility) - MDF (Trade) 15 Investment Loans Single Donor - MDF (Yogyakarta) 76 Governance 238 X - Japan (PHRD- 17 - MDF (Education) 300 Various) Transport 200 X X - UK (ILGRIP) 13 Single Donor 98 13 Other Infra/public - Netherlands - Japan (PHRD- 238 X X (Kecamatan Various) works (incl. housing) Development Project, - Netherlands (teacher 40 Health 462 X X Early Childhood management) Education, Water Education 171 X X resource & Irrigation) - Australia (Water & 8 NRM/Rural Devt 192 X X sanitation ­ low income communities) Key TA & AAA linked Trust Funds Community Dev. 810 X X Single Donor Multi Donor - UK (Decentralization 26 - Canada/UK/ 47 Sub-Total 2,311 400-800 400-800 Support Facility 1, Australia (Decentraliz Poverty Reduction Support Facility 2) 1,000- 1,000- Partnership) -EC/Netherlands (Basic 50 Total Commitments 2,311 1,400 1,400 - Netherlands 46 Education) Tot. Undisbursed 1,616 (Institutional Single Donor Total Disburs. Development, Water & - Netherlands (multi- 11 (Actual/Expected) 730 750-850 750-850 Sanitation) purpose for education) - Belgium (NTB Water 11 - Sweden(Governance 5 Resource Based Poverty Partnership) Alleviation) Other Grants Other Grants JSDF, IDF, others 5 JSDF, IDF, etc 30 Current TF Volume 850 New TF Volume 596 Total Undisbursed 580 Expected Disburs. 275 Key AAA Completed in CAS period FY04-FY06 Expected New AAA FY07-FY08 National Governance Breakthrough Sectoral Perspectives on Corruption, Regional Public Expenditure Public Expenditure Review, Public Financial Mgmt Measure. Review Framework, Good Environ. Governance, Corruption Monit. Surveys Local Government Platform Local Environment Governance (AMDAL review), Justice for the Governance and Decentralization Survey 2 Poor, Governance and Decentralization Survey 1 Investment Climate Breakthrough Averting an Infrastructure Crisis; 1st Infra Summit, Investment Employment Study, Improving Investment Climate, Infra Summit Climate Analysis, NBFI Study, Rural Invest. Climate Survey Reducing Poverty PRSP Support, Poverty Assess, Fuel Savings/Unconditionl Cash Conditional Cash Transfer, Migration and Remittances, Conflict & transfer poverty Improving Service Delivery Edu. Sector Study, Makg Srvices Work for Poor, ECED Sector Social Protection Study, Health workforce, Teacher Report Management Responding to Disasters Damage & Loss Assess Aceh, Aceh & Nias 9 months & 1 year Aceh Expenditure Review, Aceh 2-year Review, Aceh/Yogya Donor report, Damage and Loss Yogya Coordination., Poultry Sector Strategy 15 43. These recent events, together with the country's high level of hazard vulnerability, reinforce the pressing need for a disaster risk management framework. GOI is taking steps to reduce disaster risk and to promote better coordination of emergency response and recovery efforts. The Bank is exploring with partners ways to support the operationalization of the new legislation and institutional arrangements, while integrating improved disaster risk reduction into its sectoral work. Joint TA in select key areas will be provided, including developing national and LG capacity for assessing disaster damage, losses, and needs; assessing capacity to absorb catastrophic events; and supporting development of a social protection system to manage sources of vulnerability; designing instruments for financial risk transfer and flexible risk financing. Program Support & Innovative Modalities 44. Increased program support would be provided in FY07 and FY08 in response to a request from Government, if the country remains in the High Case. This is justified on grounds of special needs arising from the recent natural disasters, a steady improvement in Indonesia's macroeconomic performance, good progress on structural reforms, and clear policies on important socio-economic and governance issues. Recent natural disasters have placed a large financial burden on GOI. Even in Aceh, where the donor response was very generous, GOI will incur over $3 billion in costs. In the case of the Yogyakarta disaster, donor financing support is limited (in part because the impressive Government response has taken the huge disaster off the radar screen). It is thus proposed that program support through the annual DPL be raised from $250 million p.a. in the original CAS to $600 million p.a. in FY07 and FY08. In FY08 part of this amount may be via the vehicle of a special Infrastructure DPL, which would be co-financed with the Asian Development Bank. In the case of both the core DPL and the Infrastructure DPL, the lending decision would depend upon progress on the Government's stated reform program. Beyond this CAS period, in the normal course of events, a reduction of IBRD DPL volumes from the levels agreed in FY07-08 is expected. The aggregate lending envelope and the program share therein will be carefully reviewed during the preparation of the next Indonesia CAS and will be based on country context and other relevant factors, including IBRD exposure and credit risk concerns. 45. Indonesia's growing sophistication calls for a richer set of instruments. The use of local currency financing, IBRD hedging products, and Shariyah financing are under review, as is an assessment of Carbon Offset and GEF products. To help fill the large financing gap in infrastructure the Bank is working with GOI on the design of a Guarantee Fund and an Infrastructure Fund to catalyze and mobilize additional private capital. A joint IFC-Bank team has prepared the first "sub-national" IFC corporate loan in Indonesia, for PGN ­a natural gas distribution company. This is a useful mechanism for combining IFC's market expertise with the World Bank's public policy experience. It would help PGN further transition to more market based sources of financing. Finally, in education and possibly in the CDD program, engagement is to shift from stand-alone projects to sector wide interventions, supported by several donors. A basic education operation will aim for universal primary enrollment and 75 percent enrollment in junior secondary education by 2009; a time-slice financing concept is under consideration, whereby, funding would be released according to specified outcomes. 16 Deeper Partnerships: A Better Way of Doing Business in a Complex Environment 46. Over the past few years the Bank Group program has seen real benefits from genuine partnerships; these will be extended further. This has occurred more dramatically in the reconstruction of Aceh and Nias, where the MDF has provided a whole much greater than the sum of the parts. Two new multi-donor funds are being created ­ for Yogyakarta, and for public financial management. The Bank is also strengthening partnerships to help improve delivery of core services. Notably, the new education project (see above) is planned as a multi-donor program. The Bank is also working with partners to coordinate assistance to higher education through its support for a "Presidential Scholars Program"; it supports promising young academics' PhD studies abroad and encourages them to take up faculty or research positions in emerging "centers of excellence", on their return. The same synergy is now being seen in two of the multi-donor offices ­ the DSF office in Jakarta, and the Eastern Indonesia office in Makassar. Both of these are two years old, and are beginning to demonstrate that for highly complex areas or regions it is simply more efficient and effective to work together. Both of these offices are managed by the Bank, but funded by other donors. In the coming years, it is likely that the Bank would join other such ventures that other partners would lead. 47. The World Bank Group members will work in closer partnership on (i) business environment, (ii) sub-sovereign finance, (iii) infrastructure development, and (iv) Aceh's reconstruction. · Following joint analytics on the Investment Law, IFC and the Bank will support development of related implementing decrees, and collaborate in the development of non-bank finance mechanisms (e.g., venture capital). IFC is also helping several municipalities reduce the business licensing red tape. · At the sub-national level, the joint Municipal Fund is exploring opportunities to work with selected provinces to improve governance, finances, and management processes. MIGA is collaborating in efforts to strengthen the institutional capacity of sub-national investment promotion intermediaries. · Infrastructure development support by the Bank and IFC continues to focus on policy reform, financial sector and institutional strengthening, promotion of PPP and specific project investments. MIGA is exploring suitable opportunities for provision of non-commercial guarantees to foreign investors. · In Aceh/Nias, IFC is working closely with BRR on the rebuilding of livelihoods, which helps multiply the impact of Bank efforts to support sustainable recovery. IV. MANAGING RISKS 48. The original CAS placed primary emphasis on the risk that GOI would demonstrate insufficient political will to tackle the issues of governance. The election of President Yudhoyono, who has placed good governance at the center of his platform, has changed the nature of political risks in Indonesia. In the coming year, the risks will be focused largely on the difficulties of translating political will into concrete policies that will be implemented across Indonesia's fractious bureaucracy. In particular, the two most salient risks are: 17 49. Policy formation: Though Indonesia is a presidential system, the Office of the President lacks a significant policymaking apparatus, leaving policy formation with ministries. While the President clearly and consistently sets out his administration's priorities, their translation into actionable policy programs has been very uneven across the ministries. And reform-minded ministers often lack the technical support within their own ministries to address major policy and institutional reforms. These risks have been exacerbated by the fact that the Cabinet ministers come from a broad range of political parties weakening the coherence of the overall government program. The Bank team has sought to mitigate these risks by mobilizing a major program of TA for key ministers in developing their policy programs across the CAS pillars. 50. Policy implementation: The implementation of reforms depends upon a bureaucracy that is itself widely recognized as the most significant obstacle to change in Indonesia. Major reforms are required in the recruitment, promotion, compensation, size, and culture of the civil service. And decentralization has added an additional layer of complexity to this problem. Indonesia has recently begun its first direct elections for governors and district heads across the country which may make it more difficult for the President to push his priorities across Indonesia's 440 districts. GOI is beginning to address these risks by developing a program for civil service reform with Bank assistance. Recently MOF issued decrees related to on-granting and on-lending, and the Bank is working to strengthen reform programs at the decentralized level through the DSF and three LG focused operations, supported by the Eastern Indonesia multi- donor office. 51. Other risks identified in the initial CAS document in macroeconomic performance, financial sector, fraud and corruption, and security remain relevant. GOI is focused on addressing all these challenges and the Bank is working with other key partners to support sustained progress on macroeconomic performance and in the financial sector. Transparency and accountability measures are built strongly into the Bank's program and implemented rigorously; the Bank program is additionally supporting stronger public financial management, anti-corruption initiatives and institutional reforms focused on good governance. In addition, the terrible natural tragedies in Aceh, Nias, Yogyakarta and elsewhere highlight Indonesia's unusual vulnerability to such risks. The additional pillar in this CAS update is designed to mitigate these, as well as seek to address the AHI pandemic threat. 18 ANNEXES CAS ANNEX 1 Page 1 of 8 Recent Macroeconomic, Poverty and Sector Developments Economy In recent years, Indonesia has achieved sustained macroeconomic stability and economic growth, effectively closing the chapter on the 1998 financial crisis and its calamitous aftermath. Maintaining economic fundamentals and creating a more inviting investment climate are critical to reclaiming impressive levels of pre-crisis economic growth and poverty reduction. Growth reached a post-crisis high of 5.6 percent in 2005 ­ the highest growth rate in the region ­ with investment growth relatively high at 9.9 percent (Figure 1). However, slower than budgeted government spending, turbulence in currency markets, and dramatic increases in subsidies affected market confidence, leading to a short-term bout of volatility (Figure 2). In response, the government raised interest rates and cut fuel subsidies, leading to a monetary and fiscal tightening that slowed growth in the fourth quarter. Fig 1.1. Growth and Investment Fig 1.2. Market confidence strengthens (year-on-year growth rate, percent) (Rupiah exchange rate against US$) 25% 7% 11000 1600 Investment (LHS) GDP (RHS) 1500 Exchange rate (Rp/US$)(LHS) 20% 10500 6% 1400 1300 15% 10000 5% 1200 10% 9500 1100 4% 1000 5% 9000 900 3% 0% 800 8500 JSX Stock Index (RHS) 700 -5% 2% 8000 600 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- 2003 2004* 2005** 2006*** 04 04 04 04 05 05 05 05 06 06 06 Source: BPS, World Bank Source: CEIC, World Bank staff The Bank projects a growth rate of 5.5 percent in 2006. Government spending from reduced subsidies should provide more of a fiscal stimulus especially later in the year. This should be accompanied by falling interest rates and a pickup in investment and consumer durable spending. Assuming progress on infrastructure and investment reforms, these trends could be reinforced by an increase in private investment. Assuming good progress on the reform agenda and a favorable world environment, growth should accelerate to above 6 percent in 2007. On the external front, the exchange rate depreciated to above Rp. 10,000 against the US dollar in August 2005 for the first time since 2002, fueled by a loss of market confidence in macroeconomic management (e.g. monetary policy) and concerns over the impact of high oil prices on the economy (Figure 2). The authorities' decisions to tighten monetary policy and to substantially cut fuel subsidies restored market confidence and the Rupiah has strengthened dramatically. As of August 14, 2006, the exchange rate stood at Rp.9,090, for a gain of more than 10 percent since the October fuel price increase. In 2005, the budget deficit-to-GDP ratio improved to -0.5 percent, while the government debt-to- GDP ratio improved to 47 percent from 100 percent in 1999, contributing to improved CAS ANNEX 1 Page 2 of 8 macroeconomic stability. The improvement in tax administration helped improve the non-oil and gas revenue-to-GDP ratio, from 9 percent in 2001 to 11 percent in 2005. A series of cuts in fuel subsidies in 2005 freed up more than US$10 billion in government resources. The lower deficit in 2005 is also due to low expenditures resulting from delayed disbursements, especially of capital spending. This was due to the change in administration and efforts to improve fiscal management (e.g., reorganization of Ministry of Finance and new public financial management systems). Poverty After the spike during the economic crisis, poverty is back to pre-crisis levels. The poverty rate has been reduced to about 16 percent in 2005, following a peak of over 23 percent in 1999 as a result of the economic crisis (Figure 3). Macroeconomic stabilization underpinned this recovery, bringing down the price of goods such as rice that are important to the consumption of the poor. However, the rate of poverty reduction has slowed down in the first half of this decade. Average growth rates in the last 5 years (4.7 percent) have not been as fast paced as in the decade pre- crisis (7.6 percent). Fig 1.3. Poverty Trends Indonesia is characterized by high numbers of "near poor". The national poverty rate masks the 60.0 Milllion poor large numbers of people who live just above the 48.0 Percent poor 50.0 national poverty line. While only some 16 38.4 40.0 37.3 36.1 34.2 35.1 percent of Indonesians live under the national 30.0 poverty line (of about US$1.5 a day), close to half 23.4 of all Indonesians (over 110 million people) live 20.0 17.4 17.6 16.0 18.2 on less than US$2 a day. There is a high degree of 16.7 10.0 vulnerability and movement of households in and 0.0 out of poverty. One-third of Indonesia's poor and 1996 1999 2002 2003 2004 2005 near-poor live in urban areas which makes them Source: BPS, World Bank particularly vulnerable to food price shocks. Inequality in Indonesia, however, has remained stable and relatively low (with a Gini coefficient of about 0.33). Regional disparities in poverty are significant. While most of Indonesia's poor live in the densely populated western part of the archipelago, poverty incidence is higher in eastern Indonesia and in more remote areas. Services are unequally distributed across regions, with an undersupply of facilities in remote areas. There are considerable variations between regions in the distance to health facilities. Some non-income dimensions of poverty remain a challenge. Despite progress on the income poverty MDG, Indonesia has made slower progress on select non-income indicators of poverty ­ such as maternal mortality rates (MMR), infant mortality rates (IMR) and malnutrition. Indonesia's MMR (307 deaths in 100,000 births) is three times that of Vietnam and six times that of China and Malaysia. Only about 68 percent of births in Indonesia are accompanied by skilled birth attendants while poor women tend to use traditional birth attendants. One-fourth of children CAS ANNEX 1 Page 3 of 8 below the age of 5 are malnourished in Indonesia, with malnutrition rates stagnating despite reductions in poverty. The current government has set its sights on the reduction of poverty by prioritizing poverty reduction in its medium-term and annual plans. It also developed a poverty reduction strategy which fed into its planning process. Indonesia has set ambitious targets toward reaching its MDG-related development goals, including the reduction of poverty to 8.2 percent by 2009. To achieve these objectives, the Government's annual work-program for 2006 emphasizes a focus on agriculture and rural development, job creation, health, education, infrastructure, security, and the reconstruction of Aceh and Nias as priorities. The recent reallocation of the fuel subsidy into poverty related programs reflects Government poverty reduction priorities. In the face of soaring oil prices in 2005, the new Government took a bold move by increasing fuel prices by a total of some 160 percent over the course of the year (in March and October) to reduce a fuel subsidy that had ballooned to more than the amount spent in key development sectors. The Government reallocated about US$2 billion of these funds in 2005 and about US$3 billion in 2006 to four major poverty programs including basic education, health, village infrastructure and social protection. The social protection program was set up as a targeted unconditional cash transfer (UCT) meant to protect the poor from the impact of the fuel price hike. The UCT was designed to reach the poorer one-third of households in Indonesia with a transfer of US$30 every 3 months. The Government has indicated that the UCT program will only run through one year, after which they may transition into a Conditional Cash Transfer (CCT) program. Investment Climate Indonesia has been suffering from slow recovery in private investments compared with other crisis affected regional economies. The 1998 financial crisis and subsequent instability led to a large drop, particularly in private investments. A non-conducive business climate has prevented a stronger recovery of private investments, even as the political and macroeconomic situation has improved. Indonesia currently has one of the least business-friendly environments in the region ­ ranking below China, Malaysia, the Philippines, Thailand and Vietnam, with the time and cost of starting a business exceeding every major regional economy. Corruption, a weak legal system, and bureaucratic red tape have been barriers to improvement of the investment climate. In a cross-country study for the 2005 Corruption Perception Index, Indonesia ranked as 137th out of 157 countries surveyed. The 2006 Doing Business report ranked Indonesia as 115th out of 155 on the `ease of doing business': a more detailed look reveals Indonesia in 14th position in ease of starting a business, and 145th in enforcing contracts. At the same time, corporate governance is generally weak. However, as conglomerates move to second generation transition, measures to improve this situation are being initiated. Improving the investment climate is one of the top priorities set by Indonesia's new government. GOI has focused its efforts on five key policy areas: taxation, customs, labor regulation, infrastructure, and investment policy. The President has repeatedly stressed the importance of CAS ANNEX 1 Page 4 of 8 simplifying the business environment. A target of reducing business start up time from the current 151 days to 30 days has been incorporated in GOI's 2006 Annual Plan (RKP). The administration is putting in efforts on improving the investment climate through strengthening the judiciary system, improving accountability and enhancing transparency. There are signs that the government's commitment to reform is beginning to pay off. In surveys conducted end-2005, businesses viewed investment climate obstacles as less severe than two years earlier. In the latest TI Global Corruption Barometer 2005, 81 percent of Indonesians surveyed believed that corruption would decrease over the next 3 years ­ the largest share in all 69 countries surveyed. The governments efforts has resulted in the increasing trend of FDI inflows (in 2005 inflows were some US$ 2.3 billion, well above the US$1.0 billion in 2004). Investment growth rate was 10 percent in 2005, compared with only 1.6 percent in 2003. Financial Sector Indonesia's financial sector traditionally was and continues to be bank dominated ­ 81 percent of financial sector assets are in commercial banks. The banking sector was the center of the 1998 crisis ­ the recapitalization of banks cost the Government 50 percent of GDP ­ one of the costliest in the world. Indonesia took major steps to recapitalize and consolidate the banking industry through state-owned asset management company ­ The Indonesian Bank Restructuring Agency (IBRA). The performance of the banking sector since the crisis has improved substantially. Bank Indonesia continues to strengthen its supervision and regulation of the banking sector and is widely considered to be far stronger than before. In January 2006, Bank Indonesia introduced comprehensive regulations pertaining to good Corporate Governance (CG), aiming at reduced costs of banking supervision, enhanced effectiveness in overseeing and managing banks, absence of misuse of corporate assets, improved public confidence in the banking sector and ensured safety of deposits. Indonesia's banks are now among the most profitable in the region. Foreign ownership of banks has increased substantially, and correspondingly, quality of management has also improved. Milestones marking the end of the crisis are being observed. IBRA closed in 2004 after six years of operation ­ with a realized recovery rate of about 28 percent on the face value (about US$60 billion) of the assets under its mandate. A deposit insurance agency has been put in place and a schedule for the gradual withdrawal of the blanket deposit guarantee has been announced. Another major positive development was Indonesia's removal from the list of Non- Compliant Countries and Territories of the Financial Action Task Force as regards measures to counter money laundering and combat the financing of terrorism. The Jakarta Stock Exchange was home to one of the best performing equity markets in the region in 2004 and 2005, with US- dollar returns of 45 percent and 16 percent, respectively. The Government recognizes the need to diversify the financial sector through development of Non-bank financial institutions (NBFIs) and capital markets. Regulations and supervision of NBFIs need to be further improved. Mutual funds in Indonesia had a rough year in 2005 ­ with total assets under management declining from a high of nearly US$13 billion in March 2005 to less than US$3 billion now. The Government is taking steps to address underlying concerns. CAS ANNEX 1 Page 5 of 8 Indonesia has large needs for infrastructure financing. The government hopes to mobilize some of the resources from domestic capital markets and institutional investors through mechanisms such as infrastructure funds. Improving access to finance for underserved sections of the economy is also a Government objective. Infrastructure Recognizing the need for infrastructure to promote economic growth, to connect the archipelago, and to tackle its large poverty agenda, the new administration has made infrastructure its highest economic priority. It is responding to the fact that Indonesia has among the lowest levels of access to infrastructure in the region. Infrastructure performance has actually deteriorated in some sectors (water, provincial and local roads), and there has been a dramatic decrease in infrastructure investment since 1996. While public spending has bounced back since 2000, the private sector is yet to return. Actions are needed to improve the public management of infrastructure and to provide conditions conducive to private participation in infrastructure. A committee of government ministers, National Committee on Policy for Accelerating Infrastructure Provision (KKPPI) was established in 2005. The KKPPI is tasked with inducing private public partnership in infrastructure. The 91 transactions offered during the First Summit have met with very limited private sector response, suggesting the need for greater preparation in terms of both transaction specific details and the general investment climate. Decentralization has not lived up to its full potential, as procedures for financial transfer from the center to local governments do not provide incentives to local governments to improve their performance; and regional governments do not have the authority and financial resources needed to effectively provide provincial infrastructure. In the roads sub-sector, the national network is in relatively good condition; the provincial road network is also predominantly in good/fair condition; but the district and urban road networks are of much poorer quality and generally in poor/bad condition. The situation is worst in Eastern Indonesia. While road conditions are good on the main heavily trafficked roads, 43 percent of the network on Java, and more in Jakarta, is currently congested with related high travel times and costs. Congestion is expected to increase to 55 percent of the network by 2010. Financing of the road sector falls short of what is needed by about 2 billion US$/year. Road sector projects have also had ongoing problems of corruption, which is predominantly in the public procurement process. Despite the new law on procurement, there are still a number of implementation problems in the Ministry of Public Works, in spite of the ministry's new willingness and commitment to address these issues. Indonesia's growth is highly energy dependent and demand is expected to grow by about 5 percent each year ­ more than twice the pace of the rest of the world. Even after the reduction in fuel subsidies, prices in the energy sector remain distorted. In some instances, higher fuel costs have yet to be transferred to final consumers in government controlled sectors such as electricity (PLN). Investments in the energy sector have been lagging behind for a number of years despite CAS ANNEX 1 Page 6 of 8 momentous needs. Investment of more than US$5 billion annually is needed for power, gas, and coal development. While recent investments have been funded through public channels, attracting private investors is the only viable way forward in the sector. Access to water supply and sanitation in Indonesia is among the lowest in the region, and financing is inadequate. The system of financial transfers from central government to decentralized authorities needs to be streamlined. Investments in the water and sanitation sector have sharply declined since the financial crisis, from an average of US$400 million in 1990s to under US$45 million in 2005. Government spending for the sector is about ten times lower than needed to achieve 2015 MDG targets. Tariff reform and restructuring of water utilities are desperately needed. While access to improved sanitation is estimated at 71 percent, actual sewerage coverage (estimated at 1.3 percent) is among the lowest is Asia. Impact of inadequate access is particularly adverse on the poor who suffer from high incidences of water-borne diseases. Sanitation facilities, including waste water treatment and disposal sites, and public health and hygiene awareness campaigns are needed with strong local government and community participation. Community-based sanitation system, piloted over recent years, provides an Indonesian model for urban sanitation that is feasible and affordable and can be developed alongside more conventional approaches and on-site sanitation. Rural Development and Agriculture Agriculture employs 45 percent of Indonesians and contributes 17.5 percent to GDP, but growth is stagnating. Growth has averaged only 0.9 percent/year during 1993-2000 (down from nearly 4 percent through the early `90s). Revitalizing the rural economy will require an emphasis on new directions and renewed attention to the fundamentals: (i) focus on high value commodities and diversification; (ii) rebuilding the research and extension systems; (iii) sustainable natural resources management; and (iv) securing land ownership. President Yudhoyono has taken a leadership role in developing an agenda for the revitalization of agriculture, fisheries, and forestry that was formally launched in June 2005. In supporting this agenda, Ministry of Agriculture is focusing on the quality of agriculture services, promoting the adoption of improved technologies, building partnerships with agribusiness and the private sector and supporting smallholders. In natural resources management, while the government has undertaken measures to strengthen institutional arrangements, and develop updated policy, regulatory and administrative frameworks, there are a number of key issues that need to be tackled. Environment and Natural Resources Management Over the past two years Indonesia has made progress in addressing the challenge of balancing `growth requirements' with sound environmental and natural resources management. CAS ANNEX 1 Page 7 of 8 Important steps have been taken, particularly in forest governance, where Indonesia is spearheading unprecedented initiatives. Following President Yudhoyono's decision give top priority to curbing corruption, he has directed relevant government agencies to accelerate efforts to control illegal logging. As a consequence, the Ministry of Forestry and other relevant institutions have begun two parallel, complementary initiatives designed to improve the fundamental pillars of forest governance: (i) Promoting Transparency in the Forest Sector Initiative to provide relevant, reliable, accurate and up-to-date forest sector information continuously to decision makers as well as to the public; and (ii) Promoting Law Enforcement in the Forest Sector to implement and support a systematic, comprehensive framework of prevention, detection and suppression of forest crimes and to effectively curb illegal logging and improve law enforcement. These initiatives have been developed in consultation with civil society, donor agencies and the private sector. GoI is also collaborating with the Mining Policy and Reform Division of the Bank on sustainable mining development, with particular focus on social, environmental and land use to improve the investment climate in the mining sector, and also on ensuring that local communities have a greater share in the economic benefits of mining. Furthermore, Indonesia's national effort towards the Asia Forest Law Enforcement and Governance process (FLEG) is setting a constructive pace for progress in the region, creating a momentum and serving as a model for other countries seeking to improve forest governance. Public information disclosure programs are proving to be the most effective policy tools for improving the level and quality of environmental management in Indonesia. The Program for Pollution Control Evaluation and Rating (PROPER) with its 466 rating of industrial enterprises, is helping the Minister of Environment to pursue polluters. The Good Environmental Governance Program is strengthening efforts of the Ministry of Environment (KLH) to improve the quality of environmental governance at the local level. The Bank has been supporting the design and scaling up of these activities under an Asia-Europe Meeting (ASEM) Grant in FY05 and 06. Finally, through the reform of the Environmental Impact Analysis Procedures (AMDAL) system financed by a World Bank Technical Assistance program, KLH has also started to address the challenges and demands of decentralized environmental management, and improve its policy dialogue with local governments at district and provincial levels. Coordination among concerned ministries and agencies remains a challenge for deepening these reforms. Progress on service coverage indicators for water supply and sewerage has been limited relative to other comparators in the region. The Bank's lending operations have helped bring about improvements in public participation and transparency in solid waste management and drainage in cities and industrial areas. Health Despite significant investments in the public sector by GOI and donors, the performance of the sector has not improved. Greater GOI focus on managing the entire health system (including the substantial private health system), is required. It must improve key lagging outcomes (maternal mortality); better control communicable diseases (polio, TB, HIV/AIDS); and address changing disease pattern (rising non-communicable diseases). The emergence of new diseases (such as CAS ANNEX 1 Page 8 of 8 HIV/AIDS and avian influenza) and the re-emergence of old diseases (e.g. polio) present new challenges for the sector in disease surveillance, control and immunizations. The HIV/AIDS epidemic is at crossroads with rising prevalence among high risk groups (sex workers, drugs users, and in Papua), while there is little focus on decreasing transmission. Adjusting to decentralization is a large, unfinished agenda: the significantly reduced role of provinces since 2001 and increased role of districts in service provision needs rebalancing. Post- decentralization, basic public services such as immunization have dropped to less than 50 percent as a result of unclear responsibilities among levels of governments. Epidemiological transition to non-communicable diseases is increasingly important, but infectious diseases remain a significant part of the disease-burden. Recognizing the role of the private sector, shifting public sector focus from provider to regulator of private health services, in a decentralized context is the key. More people seek care in the private sector for critical services and this proportion is rising, even among the poor. Ministry of Health should ensure quality/accountability including via regulation and licensing. The poor face high out-of-pocket payments and insurance coverage is very low; health financing needs improvement. Education Progress on primary and secondary enrollment rates in Indonesia over the years has been remarkable. Net primarily enrollment is at about 92.5 percent, and the gross enrollment rate for secondary education has been consistently rising and is now 83 percent in Junior Secondary and 54 percent in Senior Secondary. However, it tends to lag behind in Early Childhood Education and Higher Education, with gross enrollment rates of 21 percent and 17 percent respectively. Indonesia is currently facing challenges in improving quality and increasing equal access across the country. Only four of Indonesia's higher education institutions made the Asiaweek 200 ranking of top Asian universities, with the best ranking only 61 out of 77. Wide regional differences of enrollment and inequality across income groups remain. Decentralization process has left responsibility and accountability for many education areas vague. There is no clear and efficient definition and assignment of roles and responsibilities, and there is a lack of effective management system and skills to implement the reform in the sector. The Government issued the Teacher Law in 2005 to improve teacher quality and distribution. Implementation of this law through upgrading and certification process for over 2 million teachers over 10 years will be a monumental task. There are inefficiencies and imbalances of teachers among urban and rural areas. The government is attempting to define incentives (financial, housing) to encourage teachers to locate to more remote areas. The Ministry of National Education recently finalized a five year plan (2005-2009), RENSTRA, focusing on equity and expansion of access, quality relevance and competitiveness, and governance and accountability. CAS ANNEX 2 Page 1 of 1 Indonesia CAS High Case Benchmarks, FY08 Indicative Triggers Objective (Strategy) (to be achieved by end-2007) I. Improve Investment Climate for Growth Pursue macroeconomic and fiscal framework that continues to Consolidate macroeconomic stability (by reduce public debt to GDP below 40% and to restore inflation pursuing prudent monetary and fiscal policies) to single digits on a sustainable basis Issue implementing regulations for the new Investment Law Stipulate clear criteria to consistently carry out customs Promote private sector development (by regulations concerning use of priority, green, and red lanes issuing simplified, transparent, and sensible Significantly improve the policy framework for SMEs through regulations that reduce transaction costs to policies aimed at increasing access to finance, improving agri- business and by improving infrastructure business linkages, improving availability of human resources provision) and regulatory reforms Risk Management unit fully operational, making decisions on public support for infrastructure investments Continue implementation of the financial sector safety net, including continued phased withdrawal of the deposit guarantee Strengthen the financial sector (by improving in line with government targets. regulatory framework, adopting acceptable Strengthen insurance industry by improving the regulatory and standards, and promoting competition) supervisory framework and developing a strategy to deal with insolvent insurance firms II. Governance and Anti-Corruption Improve budget disbursement rate on capital and material expenditures Consolidate from nearly zero to at least 50% of core Enhance public financial management (by government cash operations into Treasury Single Account improving budget planning and execution, and (TSA) making systems more transparent and effective) Monitor implementation of the new Indonesian Government Accounting Standards in central government financial statements, and show clear progress towards full implementation. Issue implementing regulations on Witness Protection Law and Address root causes of poor governance and Freedom of Information Act corruption (by strengthening institutional and Establishment of national remuneration commission that legal framework and launching civil service reviews civil service salaries and transparency of pay packages reform efforts) Positive trend in the number of investigations leading to prosecution III. Making Services Work for the Poor Use evaluation findings of pilot fuel subsidy financed health, education and village infrastructure programs to inform design Enhance pro-poor service delivery (through of future compensation schemes in a decentralized context improved public expenditure and implementation Commence pilot conditional cash transfer (CCT) program of programs that benefit the poor within Issue implementing regulations for Law on Teachers and Indonesia's decentralized context) Lecturers, particularly in regard to teacher performance and decertification IV. Enhanced Disaster Risk Management Enhance disaster risk preparedness and Commence designing a coordinated, pro-active public risk response (by strengthening institutional capacity management framework and framework) CAS ANNEX 3 Page 1 of 1 Indonesia IBRD & IDA Lending Envelope and Scenarios FY07-FY08 (US$ million) High Case Base Case Low Case FY07 IBRD Envelope 885 620 300 o/w Development Policy Operations 530 200 0 FY07 IDA* Envelope 365 204 TBD** o/w Development Policy Operations 70 - - FY07 Total 1250 824 o/w Development Policy Operations 600 200 0 FY08 IBRD Envelope 885 620 300 o/w Development Policy Operations 530 200 0 FY08 IDA* Envelope 362 201 TBD** o/w Development Policy Operations 70 - - FY08 Total 1247 821 o/w Development Policy Operations 600 200 0 * The IDA envelope is denominated in SDR. A current exchange rate of US$1.46/SDR has been applied to determine the equivalent US$ amount. IDA amounts for Indonesia were agreed upon at the time of the IDA14 replenishment negotiations. ** In the event of significant policy slippages or reversals, and based on the context, actual IDA commitments will be lower than the allocated amount. CAS ANNEX 4 Page 1 of 1 Indonesia Country Policy and Institutional Assessment (CPIA) Rating, 2005 Indonesia Blend1 2005 2005 1. Macroeconomic management 4.5 3.9 2. Fiscal Policy 4.0 3.5 3. Debt Policy 4.5 3.7 4. Trade 4.5 3.9 5. Financial Sector 3.5 3.5 6. Business Regulatory Environment 3.0 3.5 7. Gender 3.5 3.7 8. Equity of public resource use 4.0 3.4 9. Building human resources 3.5 3.5 10. Social protection and labor 3.5 3.3 11. Policies and institutions for environmental sustainability 2.5 3.1 12. property rights and rule-based governance 2.5 3.0 13. Quality of budgetary and financial management 3.5 3.5 14. Efficiency of revenue mobilization 3.5 3.6 15. Quality of public administration 3.5 3.3 16. Transparency, accountability and corruption in the public sector 3.0 3.1 Economic management (1-3) 4.3 3.7 Structural policy (4-6) 3.7 3.6 Policy for social inclusion and equity (7-11) 3.4 3.4 Public sector management and institution (12-16) 3.2 3.3 Overall score 3.7 3.5 1IBRD-IDA Blend Countries Cohort. CAS ANNEX 5 Page 1 of 1 Progress in Fulfilling DPL Triggers Fulfilled Triggers for DPL1 Fulfilled Triggers for DPL2 DPL Core Policy Area I: Macroeconomic Stability and Creditworthiness · Reduction of government debt to GDP to below · Progress in reducing subsidies to the non-poor 60 % · Make tax revenue administration more efficient · Issuance of international bond through expansion of modern tax offices · Divestment of majority shares in all IBRA banks · Develop and implement a debt management strategy · Implement law 33/04 by drafting government regulations including the re-design of KMK 35 DPL Core Policy Area II: Improved Investment Climate · Progress in establishing a financial sector safety net · Complete draft amendment of Law 34 · Effective functioning of the Investment Team · Continue establishing a financial safety net · Progress in tax administration and customs reforms including implementing the first phase of the removal of the deposit guarantee and clarify roles with respect to bank closing and emergency operations · Develop strategy to strengthen non-bank financial institutions (partially fulfilled) · Develop a medium-term plan for infrastructure development that encourages public-private partnerships · Develop a medium-term action plan and effective framework to coordinate the development of SMEs DPL Core Policy Area III: Improved Financial Management and Anti-Corruption · Issuance of implementing regulations for State · Issue additional implementing regulations for State Finance Law Finance Law, Treasury Law and State Audit Law · Organizational reform at the Ministry of Finance, · Treasury single account timetable and activity plan including first steps to establish a Treasury Single adopted for the consolidation of bank accounts Account · Investigation unit is established and fully · Presidential Decree on Government Procurement operational in the IG MOF, vested with the issued necessary legal powers to investigate all MOF · Continuation of special audits program for SOEs employees CAS ANNEX 6 Page 1 of 1 Indonesia: Key Environmental Indicators CAS ANNEX 7 Page 1 of 2 Framework for Strengthening Monitoring & Evaluation of Results The Bank's results and monitoring and evaluation (M&E) strategy in Indonesia focuses on three main areas: Government Systems ­ enhancing the capacity of key Government ministries to measure and monitor for results both at the national and local levels. Bank Portfolio ­ strengthening the results focus and M&E systems for ongoing and pipeline projects. Partners (other donors and civil society) ­ collaborating with other donors and partner organizations that are working on building M&E capacity in Indonesia. Enhancing Government Systems ­ The Bank has supported efforts to strengthen government systems at both the national and local levels. The Bank has undertaken several initiatives to improve the government's monitoring of results and outcomes using a mixture of trust fund assistance, project-specific support, and policy guidance. Progress on measuring results has been made on several fronts: 1) Through the Dutch Trust Fund, the Bank provided technical guidance to support the Ministry of Home Affairs' efforts to monitor decentralization and track the performance of local governments. 2) The Bank team provided assistance to Bappenas (Ministry of Planning) on how to monitor Poverty Reduction Strategy Paper (PRSP) implementation and other major poverty reduction programs. 3) The country team has provided technical M&E expertise to various ministries to establish baselines, measurable progress indicators, management information systems, reporting systems, and rigorous evaluations including select impact evaluations across several projects. The Bank has also been encouraging the Government and other donors to harmonize technical approaches and performance indicators across key sectors such as education and water and sanitation. 4) The country team has been working with the national and district governments to develop performance measurement frameworks, especially focused upon public financial management, fiscal health, service delivery, investment climate and governance reforms. This framework will allow the Government and donors to map capacity building needs in these areas as well as assess the performance of local governments. 5) The Bank is working with the Government across the various community-driven developments (CDD) programs to coordinate approaches and undertake cross-project impact evaluations. Findings from these evaluations will be used to inform future programming for national CDD programs. Bappenas is leading this effort. 6) The Government requested the Bank's technical expertise in evaluating four large fuel compensation schemes worth $1.5 billion in 2005 in order to improve the implementation CAS ANNEX 7 Page 2 of 2 of future rounds of these projects in 2006, and influence the 2007 budget allocations for pro-poor programming. 7) Indonesia is currently implementing a Bank administered Trust Fund for Statistical Capacity (TFSCB) to prepare the national strategy for development of statistics (NSDS). 8) Finally, in tsunami-ravaged Aceh, the Bank has provided real-time M&E guidance to the Government's newly established Aceh and Nias Reconstruction Agency (BRR) to establish M&E systems, reporting guidelines, and analyze survey data. Strengthening the Results Focus within the Bank portfolio ­ The country team made a concerted effort to improve the results focus within projects. All eight projects approved in FY05 and most projects for FY06 gave special attention to M&E strategies and strengthened systems, including baseline data collection. The CDD platform projects completed or are in the process of finalizing over 12 evaluations and studies examining results and lessons learned from these operations. The local service platform, especially the three new district level projects, ILGRP, USDRP, and SPADA are currently preparing their baseline activities. In addition, the country office is strengthening its trust funds management to focus and report upon results and outcomes of grant-financed activities. Working with Partners - Working with other development actors such as donors and NGOs is critical for harmonization of systems and accountability. The Bank has discussed collaboration with other donors in monitoring of MDGs at the district level. In Aceh, the Bank has assisted in coordinating M&E efforts for Aceh reconstruction including joint survey work with UNDP, Oxfam and other development agencies. In cooperation with NGOs, the Bank has begun work to build the capacity of Indonesian social research organizations and universities for M&E and qualitative research. There are also numerous NGOs involved in monitoring independently Bank-supported activities, such as the Kecamatan Development Program. There is still, however, much to be done in the remaining CAS period. The aforementioned activities will continue, but greater engagement and leadership by the Government on these issues is needed. Over the next few years, the Bank will support the Government in its efforts to monitor the implementation of their medium-term development strategy and poverty reduction programs. This includes a greater emphasis on poverty monitoring and evaluating the effectiveness of major national and district-level poverty reduction programs. Second, much more can be done in terms of harmonizing M&E systems within a sector (e.g. health) and in geographical areas (e.g. Aceh). Efforts in M&E have paid-off in the context of yielding a balanced account of progress towards the CAS outcomes. Lastly, the emphasis on rigorous results frameworks and M&E systems for Bank projects as a way to better manage the bank portfolio for result should continue. CAS ANNEX 8 Page 1 of 2 Strategic Partnerships Efforts in recent years to harmonize aid delivery mechanisms in Indonesia are leading to new ways of doing business. Bilateral donors and multilateral institutions have engaged in several major "strategic partnerships" which are helping the government to carry out development work in areas such as decentralization. These types of partnerships allow the Bank and donors to collaborate on development issues in areas that fall within their assistance strategies and the Bank's CAS. These strategic partnerships, which often involve financial support through trust funds1, are becoming a growing line of business for the Indonesia's country program. They help complement traditional Bank lending operations for activities where grant funding is more suitable. For example, strategic partnerships are supporting emergency response operations, CDD pilots for future scaling up and replication, and joint analytical work with donors and other multilateral organizations. Many benefits have been gained through these partnerships, including: (i) improved aid coordination; (ii) pooling of development funds; (iii) direct assistance at the sub-national level; (iv) high-quality research and policy dialogue; and (v) knowledge dissemination. With help from donor funding, the Bank has also established multi-donor offices, which function as "intellectual centers" through partnering with other development players, government officials and NGO staff. For example, the multi-donor office in Jakarta provides an opportunity for UNDP and ADB and bilateral donors (e.g., DFID, Japan, AusAID, and the Dutch) to work on a day-to-day basis with the Bank. These offices are used for conferences and seminars on emerging issues, impromptu discussions with officials from different parts of Indonesia and cultural events whose theme is a major development topic. The offices also serve as public information and dissemination centers that provide access to a broad range of information on Indonesia's development agenda and progress. The Bank is working with all major development players in Indonesia on these partnerships. Major bilateral partners include the European Commission, United Kingdom, Netherlands, Japan, and Australia. In particular, the United Kingdom and Netherlands have strong engagement with the Bank on AAA work. Joint activities between these two donors and the Bank are helping influence education, trade policy and investment climate policy reforms of the government. There is also convergence in thinking amongst the key partners on implementing governance reforms and a new partnership is expected to be established in FY07 with the European Commission as the lead player. Financial support for these strategic partnerships, provided mainly by bilateral donors, has helped the Bank to leverage its limited resources. For example, only around one quarter of the annual AAA program ($10-12 million) for Indonesia is funded by the Bank's budget, with the 1 Indonesia is one of the largest recipients of Bank-administered trust funds. The Indonesia portfolio consists of 130 trust funds totaling $850 million, including the Multi-Donor Fund for Aceh and Nias. CAS ANNEX 8 Page 2 of 2 remainder being funded from several different programmatic trust funds. This type of external funding from donors is also useful for large assistance programs which are owned and implemented by the government. For example, joint operations are seeing ADB, Japan and the Bank teaming up in support of the government's policy reform agenda. Recently, ADB and Japan co-financed the Second Development Policy Loan with $200 million and $100 million respectively (out of a total $700 million program). The table below provides additional examples of strategic partnerships where the Bank has been able to mobilize significant external resources. Strategic Amount Major Focus Partnership (US$ million) Donors Areas Multi-Donor Fund 538 European Rehabilitation and reconstruction of Aceh and Nias in the for Aceh and Nias Commission, wake of the earthquake and tsunami in December 2004 (MDF) Netherlands, & United Kingdom Decentralization 53.1 United Formation and functioning of the Local Services Platform Support Facility Kingdom while at the same time promoting a harmonized donor approach to supporting Indonesia's sub-national governance reform program. Program for 24.2 Netherlands Governance, investment climate, legal and justice sector Institutional reform, civil service reform, Eastern Indonesia, public Development and expenditure framework and education Capacity Building Indonesia Water 22.0 Netherlands Improvement of water and sanitation services using demand and Sanitation driven approaches Program Strategic Poverty 13.1 United Deepen understanding of poverty implications of broad-based, Partnership for Kingdom national-level policy issues Indonesia CAS ANNEX 9 Page 1 of 5 Aceh & Nias: Progress on Recovery & Reconciliation Enough money has been pledged and committed for the reconstruction in Aceh, but disbursements, while rising significantly since September 2005, are still slow in reaching beneficiaries and inflation is increasing costs. $8.5 billion has been pledged by the Government, donors and NGOs, enough not only to replace what was damaged or lost ($5.8 billion), but largely adequate to "build back better" in most sectors, though inflation will continue to erode budgets and reduce planned results. Overall progress to date: After a slow start, the pace of reconstruction has picked up markedly since September 2005, though critical Fig 9.1. Reconstruction Needs and Commitments (US$ billion) gaps are still apparent. Of up to the 120,000 houses needed, 45,000 have been completed; new housing starts are at 3,500-5,000 per month. Of 127 health facilities damaged or destroyed, 113 have been completed. Of 2,000 schools damaged, more than 520 have been completed. Nearly all children have returned to school, though many are in temporary facilities. Over 2,400 new teachers have been trained and mobilized. Of the 7,000 boats lost or damaged, more than 6,000 have been replaced. Over 60 percent of damaged farmland has been restored and replanted. In total, over 1,100 reconstruction projects are underway by over 300 donors and NGOs. (See table next page for more progress indicators.) The main challenge now is to address the "missing middle" of district-level infrastructure that will connect houses into communities -- feeder roads, drainage, water and sanitation, waste management, power, and sea defenses. Remaining Multi-Donor Fund resources will be devoted to this issue--district-level infrastructure needs. Though the construction sector is booming, livelihoods remain under-addressed. Unemployment is currently at 7.3 percent for men and 20.8 percent for women with high risks of longer term unemployment as the construction boom subsides. By end-June 2006, $4.8 billion had been committed to specific reconstruction projects and over $1.5 billion had been disbursed (in addition to the funds disbursed for relief work). Since October 2005, disbursements have exceeded on average $150 million per month. By end-June 2006, NGOs had disbursed 45 percent of their commitments, donors ­ 20 percent, and the BRR ­ 29 percent. Yet both "on-budget" and "off-budget" donors alike continue to complain of disbursement delays. Budgets for 2006 were delivered to BRR on January 2, 2006. Slow disbursements were caused in part by the sheer scale and scope of the reconstruction process. But "business as usual" procedures (by both government and donor agencies) for project approvals, CAS ANNEX 9 Page 2 of 5 mobilization of project implementation units, and procurement in addition to poor inter-agency communications still undermine the need for speed. Inflation (39 percent over the past 12 months) has revised costs of reconstruction (especially housing) substantially. Progress indicators (as of April 2006) Category Damages/Needs Recovery Progress (as of April 2006) Housing 120,000 units 45,000 units a Schools 2,006 units 524 units Teachers 2,500 died 2,400 new teachers/replacements Health 127 units 113 units Facilities Roads 3,000 km. 490 km. Bridges 120 41 Sea ports 14 2 (complete), 3 (under construction) Airports 11 airports/air strips 5 airports/air stripsb Fishing boats 7,000 units 6,160 units Fish ponds 20,000 hectares 9,258 hectares (rehabilitated) Rice fields 60,000 hectares 37,926 hectaresc and plantations Source: BRR. a June 2006 estimate b All key airports/airstrips are however now serviceable. c. The affected rice fields were able to be replanted much quicker than initially anticipated, and without high investment. The BRR is taking a stronger leadership role, but central and local government agencies are still not fully engaged. BRR has "institutionalized urgency" into the reconstruction process, but is still trying to define its own role and operating procedures. Though initially created to coordinate other donors' efforts, the BRR is now the largest donor itself controlling over $900 million in GoI funds in 2005-06 with a total program of $2.1 billion through 2009. BRR does not yet have sufficient capacity to implement or monitor a portfolio of this magnitude (over 193 projects in 2005) and is planning to outsource key project design, planning and management functions. BRR has a new anti-corruption unit and a strong system for complaints handling and investigations, though its monitoring system for ongoing projects is still weak, creating high corruption and performance risks. Though BRR enjoyed a brief honeymoon with the people of Aceh and Nias, this is inevitably ending and local criticism is rising, exacerbated by a communications strategy oriented more towards donors and national media than local constituencies, ordinary villagers and IDPs. With a relatively modest Bank contribution of $25 million in grants and $1 million in Bank budget (compared to the ADB's $300 million grant or the >$100 million pledges of Australia, Dutch, EC, Japan, and US), the team has sought to maximize our leverage by mobilizing other donor and government resources. The Bank has mobilized $598 million for reconstruction, including the Multi-Donor Fund (MDF) with 15 contributors, restructured IDA projects, donor CAS ANNEX 9 Page 3 of 5 co-financing of IDA projects, and Japan Social Development Fund grants. The Jakarta Office raised over $8 million from donors to supplement our budget to support over 164 staff and consultants providing TA to the BRR and other government agencies. As of July 2006, the MDF has committed $330 million to 13 projects. A further 4 projects valued at $402 million is currently under development. These projects will be co-financed by the MDF ($162 million) and the BRR ($240 million). The MDF has already disbursed $146 million to projects on the ground. The Bank's largest projects are for housing construction ($85 million), land administration and titling ($28.5 million), community-driven infrastructure in rural areas ($64.7 million) and in urban areas ($18 million). Most Bank projects deliver assistance through an extensive community-based network of facilitators and volunteers, reaching every village in Aceh and Nias and all tsunami-affected areas. 1,450 facilitators supervise over 11,000 volunteers in over 6,000 villages to develop, select, design, build and monitor infrastructure projects financed through block grants disbursed directly to the communities. In early 2006, an innovative strategy was approved for the use of remaining MDF funds via co-financing of bank administered infrastructure and capacity building projects. This brings an additional $200 million in reconstruction financing from GOI's own budget to meet the huge infrastructure gaps and engage local government more pro-actively in the reconstruction of district level facilities. The BRR is also co-financing with the MDF the Support for Poor and Disadvantaged Areas (SPADA) and an extension of the KDP in Nias to build 5,000 houses through community-driven processes (KRRP). It is hoped that through the extensive engagement of the local governments and building of local capacity, this will encourage them to use their own resources to finance some of the infrastructure activities. Existing donor coordination mechanisms are too focused on trying to reach out to all donors rather than engaging the largest donors on joint programming and problem-solving that could have a larger impact on results. The top 10 donors and NGOs (including BRR) hold 75 percent of the existing projects allocated for Aceh and Nias. Closely coordinating this group will have much higher returns than the search for a more comprehensive coordination system. BRR is taking a "more muscular" approach to donors and NGOs, planning on taking over slow or non- disbursing donor projects and publicly pressuring others for results. So far in 2006, there have been no violent incidents between GAM and the Indonesian National Military (TNI) or police, capping off what had been a significant decline in reported incidents over the last half of 2005. A local human rights monitoring organization, Koalisi HAM, reported that human rights violations declined dramatically throughout 2005. There has been no increase this year. In a sign of increased confidence, more than 8 times the anticipated number of ex- GAM have returned to their villages, and conflict affected Internally Displaced Persons (IDPs) have also been returning from across Aceh and elsewhere. Initial tensions caused by the large number of returning IDPs have quickly stabilized. CAS ANNEX 9 Page 4 of 5 Table 1. Pledges and contributions and cash paid into the Multi Donor Fund as of 30 June 2006 Contribution Pledge Agreements amount in $ signed Cash Received Source million $ Million $ Million European Commission* 247.58 247.58 53.27 Government of Netherlands 100.00 100.00 60.00 Government of United Kingdom* 47.96 10.00 10.00 World Bank 25.00 25.00 25.00 Government of Denmark 18.03 18.03 18.03 Government of Norway 17.96 17.96 17.96 Government of Canada 11.04 11.04 11.04 Government of Sweden 10.44 10.44 10.44 Asian Development Bank 10.00 10.00 10.00 Government of United States 10.00 10.00 10.00 Government of Germany 10.00 10.00 7.40 Government of Finland* 9.82 9.82 4.28 Government of Belgium* 9.82 9.82 2.55 Government of New Zealand 8.80 8.80 2.20 Government of Ireland 1.20 1.20 1.20 Total Contributions 537.67 499.70 243.38 * Exchange rate as at 30 June 2006; Source: Bank Indonesia CAS ANNEX 9 Page 5 of 5 Table 2: Multi Donor Fund Projects and Concepts as of 30 June 2006 Partner Budget Actual % Agency $ million $ million Total Pledges/Receipts 537.67 243.38 45% Projects Reconstruction of Aceh Land Administration System Project World Bank 28.50 11.70 41% Community Recovery Through The Kecamatan Development Project (KDP) World Bank 64.70 49.00 76% Community Recovery Through the Urban Poverty Program (UPP) World Bank 17.96 6.55 36% Community-Based Settlement Rehabilitation and Reconstruction Project for NAD World Bank 85.00 21.44 25% and Nias Technical Support for Badan Rehabilitasi Rekonstruksi (BRR) NAD-Nias UNDP 14.74 11.00 75% Tsunami Recovery Waste Management Program UNDP 14.43 11.00 76% Support to Strengthen the Role and Capacity of CSOs in the Recovery of Aceh UNDP 6.00 3.00 50% Labor-based Rural Road Rehabilitation in Aceh UNDP 6.42 2.42 38% WFP Shipping Service WFP 24.70 24.70 100% Reconstruction and Rehabilitation of Ports UNDP 3.58 3.58 100% Aceh Forest and Environment Project World Bank 17.53 1.60 9% Flood Mitigation Program for Banda Aceh World Bank 4.50 0.00 0% Infrastructure Reconstruction Enabling Program World Bank 42.00 0.00 Total Projects 330.06 145.99 44% Concepts Road and Bridge Repair Lamno-Calang World Bank 11.50 0.00 Nias Kecamatan-Based Recovery and Planning Project World Bank 25.75 0.00 Support for Poor and Disadvantaged Areas World Bank 25.00 0.00 Infrastructure Reconstruction Enabling Financing Facility World Bank 100.00 0.00 Total Concepts 162.25 Total Allocations to Projects and Concepts 492.31 145.99 Estimated Investment Income 12.50 4.34 35% Estimated Administration, Appraisal and Supervision Costs 13.35 1.84 14% Total Unallocated Funds*/Cash Remaining 44.51 99.88 * Total unallocated funds may fluctuate depending on exchange rates and rate of investment and actual costs of administration, appraisal and supervision. 1 A1 of1 Page ANNEX CAS b 6.5 4.9 9.1 4.9 69 24 1.0 -0.5 -0.5 7.5 2008 FY09 2006-2008 6.2 8.5 69 24 2007 11.8 6.2 1.6 -0.9 -0.4 7.3 FY08 750-850 CAS Forecast 1,000-1,400 Last 5.5 72 23 2006 22.7 10.6 13.6 1.4 -1.5 -0.2 7.3 FY07 Updated from 750-850 1,000-1,400 5.6 74 22 Change- 2005 20.1 26.2 10.5 1.1 -0.5 -0.4 6.5 686 752 FY06 5.1 76 22 2004 12.6 28.0 6.1 1.2 -1.0 -1.3 8.6 917 637 FY05 INDONESIA Indicators Actual 4.8 8.4 9.0 7.2 75 19 3.4 -1.7 -0.3 2003 11.0 322 422 FY04 Program & 4.5 2.7 4.5 5.0 80 21 1.6 -0.8 -0.9 6.0 850 450 2005 FY06 Projection Economic 4.0 0.9 1.8 6.0 80 20 1.5 -1.3 -0.8 6.2 800 600 2004 FY05 Key 2004-2007 3.5 4.4 80 20 2003 12.8 6.5 2.5 -1.9 0.2 6.7 525 500 FY04 CAS US$. in period. growth CAS a a Import FOB) FOB) %) current and GDP) balance million) the in average, GDP) (% (Goods)) ($ Export (% GDP) FY) of (Merchandise (%) (Merchandise annual account investment (% financing Imports balance included reserves (CY) Payments of (Bank's million) Value not rates (CPI accounts of ($ is GDP Exports Imports Consumption Gross Current finance Fiscal Foreign disbursements months Nominal FY09 Economy Growth Inflation National Balance Public International (as Program Lending Gross a. b. CAS ANNEX A2 Page 1 of 3 Indonesia at a glance East Lower Key Development Indicators Asia & middle Age distribution, 2005 Indonesia Pacific income (2005) Male Female Population, mid-year (millions) 220.6 1,885 2,475 70-74 Surface area (thousand sq. km) 1,905 16,301 39,946 60-64 Population growth (%) 1.4 0.8 1.0 50-54 Urban population (% of total population) 48 42 49 40-44 30-34 GNI (Atlas method, US$ billions) 282.2 3,067 4,746 20-24 GNI per capita (Atlas method, US$) 1,280 1,627 1,918 GNI per capita (PPP, international $) 3,720 5,914 6,313 10-14 0-4 GDP growth (%) 5.6 8.7 6.9 15 10 5 0 5 10 15 GDP per capita growth (%) 4.2 7.8 5.9 percent (most recent estimate, 2000­2005) Poverty headcount ratio at $1 a day (PPP, %) 8 12 .. Under-5 mortality rate (per 1,000) Poverty headcount ratio at $2 a day (PPP, %) 52 41 .. Life expectancy at birth (years) 67 70 70 100 Infant mortality (per 1,000 live births) 30 29 33 Child malnutrition (% of children under 5) 28 15 12 75 Adult literacy, male (% of ages 15 and older) 94 95 93 Adult literacy, female (% of ages 15 and older) 87 87 85 50 Gross primary enrollment, male (% of age group) 118 116 115 Gross primary enrollment, female (% of age group) 116 114 113 25 Access to an improved water source (% of population) 77 79 82 0 1990 1995 2000 2004 Access to improved sanitation facilities (% of population) 55 51 57 Indonesia East Asia & Pacific Net Aid Flows 1980 1990 2000 2005 a (US$ millions) Net ODA and official aid 945 1,722 1,658 84 Growth of GDP and GDP per capita (%) Top 3 donors (in 2004): Australia 48 77 72 106 20 United States 117 31 174 69 Spain .. 23 66 11 10 Aid (% of GNI) 1.3 1.6 1.1 0.0 0 Aid per capita (US$) 6 10 8 0 -10 Long-Term Economic Trends -20 90 95 00 05 Consumer prices (annual % change) 18.0 7.8 3.7 10.5 GDP implicit deflator (annual % change) 31.0 7.7 20.4 13.7 GDP GDP per capita Exchange rate (annual average, local per US$) 627.0 1,842.8 8,421.8 9,504.0 Terms of trade index (2000 = 100) .. 95 100 90 1980­90 1990­2000 2000­05 (average annual growth %) Population, mid-year (millions) 148.3 178.2 206.3 220.6 1.8 1.5 1.3 GDP (US$ millions) 78,013 114,426 165,020 287,217 6.1 4.2 4.7 (% of GDP) Agriculture 24.0 19.4 15.6 14.0 3.6 2.0 3.8 Industry 41.7 39.1 45.9 40.7 7.3 5.2 4.0 Manufacturing 13.0 20.7 27.7 28.7 12.8 6.7 5.1 Services 34.3 41.5 38.5 45.3 6.5 4.0 6.0 Household final consumption expenditure 51.4 58.9 61.6 63.9 5.2 6.6 4.3 General gov't final consumption expenditure 10.5 8.8 6.5 7.5 4.6 0.1 7.6 Gross capital formation 24.1 30.7 21.4 23.4 7.7 -0.7 7.3 Exports of goods and services 34.2 25.3 41.0 37.7 2.7 5.9 5.8 Imports of goods and services 20.2 23.7 30.5 32.6 1.2 5.7 7.7 Gross savings 25.7 28.1 26.4 29.8 9.9 -1.8 4.8 Note: Figures in italics are for years other than those specified. 2005 data are preliminary estimates. .. indicates data are not available. a. Aid data are for 2004. Development Economics, Development Data Group (DECDG). CAS ANNEX A2 Page 2 of 3 Indonesia Balance of Payments and Trade 2000 2005 Governance indicators, 2000 and 2004 (US$ millions) Total merchandise exports (fob) 62,124 88,845 Total merchandise imports (cif) 33,515 62,195 Voice and accountability Net trade in goods and services 15,243 14,718 Political stability Workers' remittances and compensation of employees (receipts) 1,190 1,866 Regulatory quality Rule of law Current account balance 7,998 2,691 as a % of GDP 4.8 0.9 Control of corruption Reserves, including gold 29,268 47,088 0 25 50 75 100 Central Government Finance 2004 Country's percentile rank (0-100) 2000 higher values imply better ratings (% of GDP) Source: Kaufmann-Kraay-Mastruzzi, World Bank Revenue 18.3 18.6 Tax revenue 11.3 12.5 Expense 16.3 17.0 Technology and Infrastructure 2000 2004 Cash surplus/deficit -2.5 -1.1 Paved roads (% of total) 57.1 58.0 Highest marginal tax rate (%) Fixed line and mobile phone Individual 35 35 subscribers (per 1,000 people) 50 184 Corporate 30 30 High technology exports (% of manufactured exports) 16.2 16.1 External Debt and Resource Flows Environment (US$ millions) Total debt outstanding and disbursed 144,424 140,649 Agricultural land (% of land area) 25 25 Total debt service 16,681 20,464 Forest area (% of land area, 2000 and 2005) 54.0 48.8 HIPC and MDRI debt relief (expected; flow) ­ ­ Nationally protected areas (% of land area) .. 20.6 Total debt (% of GDP) 87.5 55.3 Freshwater resources per capita (cu. meters) .. 13,043 Total debt service (% of exports) 22.5 22.1 Freshwater withdrawal (% of internal resources) .. 2.9 Foreign direct investment (net inflows) -4,550 1,023 CO2 emissions per capita (mt) 1.1 1.4 Portfolio equity (net inflows) -1,021 2,129 GDP per unit of energy use (2000 PPP $ per kg of oil equivalent) 4.4 4.3 Composition of total external debt, 2004 Energy use per capita (kg of oil equivalent) 695 753 IDA, 996 IBRD, 8,943 Short-term, IMF, 9,686 24,500 World Bank Group portfolio 2000 2005 Other multi- lateral, 8,380 (US$ millions) IBRD Total debt outstanding and disbursed 11,715 8,132 Disbursements 1,051 585 Bilateral, 41,526 Principal repayments 761 1,390 Private, 46,617 Interest payments 950 481 US$ millions IDA Total debt outstanding and disbursed 714 1,001 Disbursements 59 67 Private Sector Development 2000 2005 Total debt service 31 36 Time required to start a business (days) ­ 151 IFC (fiscal year) Cost to start a business (% of GNI per capita) ­ 101.7 Total disbursed and outstanding portfolio 880 470 Time required to register property (days) ­ 42 of which IFC own account 480 310 Disbursements for IFC own account 20 53 Ranked as a major constraint to business Portfolio sales, prepayments and (% of managers surveyed who agreed) repayments for IFC own account 43 39 Macroeconomic instability .. 50.1 Economic and regulatory policy uncertainty .. 48.2 MIGA Gross exposure 56 53 Stock market capitalization (% of GDP) 16.3 28.4 New guarantees 0 1 Bank branches (per 100,000 people) .. 8.4 Note: Figures in italics are for years other than those specified. 2005 data are preliminary estimates. .. indicates data are not available. ­ indicates observation is not applicable. Development Economics, Development Data Group (DECDG). CAS ANNEX A2 Page 3 of 3 Millennium Development Goals Indonesia With selected targets to achieve between 1990 and 2015 (estimate closest to date shown, +/- 2 years) Indonesia Goal 1: halve the rates for $1 a day poverty and malnutrition 1990 1995 2000 2004 Poverty headcount ratio at $1 a day (PPP, % of population) .. 13.9 7.2 7.5 Poverty headcount ratio at national poverty line (% of population) .. 15.7 27.1 .. Share of income or consumption to the poorest qunitile (%) .. .. .. 8.4 Prevalence of malnutrition (% of children under 5) .. 34 25 28 Goal 2: ensure that children are able to complete primary schooling Primary school enrollment (net, %) 97 .. 94 94 Primary completion rate (% of relevant age group) 94 96 95 101 Secondary school enrollment (gross, %) 46 .. 55 64 Youth literacy rate (% of people ages 15-24) 95 .. .. 99 Goal 3: eliminate gender disparity in education and empower women Ratio of girls to boys in primary and secondary education (%) 93 .. 96 99 Women employed in the nonagricultural sector (% of nonagricultural employment) 29 29 32 31 Proportion of seats held by women in national parliament (%) 12 13 8 11 Goal 4: reduce under-5 mortality by two-thirds Under-5 mortality rate (per 1,000) 91 66 48 38 Infant mortality rate (per 1,000 live births) 60 48 36 30 Measles immunization (proportion of one-year olds immunized, %) 58 63 72 72 Goal 5: reduce maternal mortality by three-fourths Maternal mortality ratio (modeled estimate, per 100,000 live births) .. .. 230 .. Births attended by skilled health staff (% of total) 32 37 64 72 Goal 6: halt and begin to reverse the spread of HIV/AIDS and other major diseases Prevalence of HIV (% of population ages 15-49) .. .. .. 0.1 Contraceptive prevalence (% of women ages 15-49) 50 55 57 57 Incidence of tuberculosis (per 100,000 people) 343 .. .. 245 Tuberculosis cases detected under DOTS (%) .. 1 20 53 Goal 7: halve the proportion of people without sustainable access to basic needs Access to an improved water source (% of population) 72 .. .. 77 Access to improved sanitation facilities (% of population) 46 .. .. 55 Forest area (% of total land area) 64.3 .. 54.0 48.8 Nationally protected areas (% of total land area) .. .. .. 20.6 CO2 emissions (metric tons per capita) 0.9 1.0 1.1 1.4 GDP per unit of energy use (constant 2000 PPP $ per kg of oil equivalent) 4.2 4.7 4.4 4.3 Goal 8: develop a global partnership for development Fixed line and mobile phone subscribers (per 1,000 people) 6 18 50 184 Internet users (per 1,000 people) 0 0 9 67 Personal computers (per 1,000 people) 1 5 10 14 Youth unemployment (% of total labor force ages 15-24) 8.9 13.4 .. .. Education indicators (%) Measles immunization (% of 1-year olds) ICT indicators (per 1,000 people) 125 100 200 100 75 150 50 100 75 25 50 50 1998 2000 2002 2004 0 0 1990 1995 2000 2004 2000 2002 2004 Primary net enrollment ratio Fixed + mobile subscribers Ratio of girls to boys in primary & Indonesia East Asia & Pacific Internet users secondary education Note: Figures in italics are for years other than those specified. .. indicates data are not available. Development Economics, Development Data Group (DECDG). CAS ANNEX B2 Page1 of 1 CAS Annex B2 - Selected Indicators* of Bank Portfolio Performance and Management As Of Date 06/30/2006 Indicator 2003 2004 2005 2006 Portfolio Assessment Number of Projects Under Implementation a 40 32 31 26 Average Implementation Period (years) b 4.4 4.3 3.2 3.2 Percent of Problem Projects by Number a, c 12.5 18.8 9.7 3.8 Percent of Problem Projects by Amount a, c 7.7 20.1 7.4 4.4 Percent of Projects at Risk by Number a, d 17.5 18.8 12.9 7.7 Percent of Projects at Risk by Amount a, d 12.4 20.1 9.8 4.5 Disbursement Ratio (%) e 22.1 27.2 23.0 20.9 Portfolio Management CPPR during the year (yes/no) Yes Yes Yes Yes Supervision Resources (total US$) 4,412 3,854 3,712 3062 Average Supervision (US$/project) 83 94 93 117 Memorandum Item Since FY 80 Last Five FYs Proj Eval by IEG by Number 259 33 Proj Eval by IEG by Amt (US$ millions) 22,783.7 2,308.5 % of IEG Projects Rated U or HU by Number 24.1 33.3 % of IEG Projects Rated U or HU by Amt 22.2 17.6 a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. CAS ANNEX B3 Page 1 of 3 IBRD/IDA Loans, Credits and Key Grants Programs, FY2004-2008 US$(millions) Strategic Implementation Rewards Risksb Fiscal IBRD Grant Grant Donors (H/M/L) (H/M/L) year Proj IDb IDA c 2004 Loans/Credits actual Coral Reef Rehabilitation and Management (APL 2) 33 23 M M Base Land Management & Policy Development 33 33 H H Case Eastern Indonesia Region Transport 2 200 H M Total 266 56 2005 Loans/Credits actual Urban Poverty Project 3 (UPP3) 67 71 H M Enhanced Support for Poor and Disadvantaged Areas (SPADA) 69 35 H H Base Initiatives for Local Governance Reform (ILGRP) 15 15 13 UK H H Case Urban Sector Development and Reform Program (USDRP) 45 5 Japan H H Higher Education Project 50 30 M H Kecamatan Development Project 3B (KDP 3B) 80 80 H M Government Financial Management & Revenue Admin. 55 5 5 Japan H H First Development Policy Loan 300 H H Grants MDF - Land Titling in Aceh (RALAS) 29 Multi Donors H H Water Resource Management (WISMP) Cofinancing 14 Netherlands H H Total 681 236 66 2006 Loans/Credits actual Domestic Gas Sector Restructuring 80 M H High Second Development Policy Loan 400 H H Case Water Supply & Sanit. for Low Income Communities 3 138 H M Early Childhood Education and Development 68 25 Netherlands H H Grants MDF- Community Reconstruction through KDP 65 Multi Donors H H MDF - Community Reconstruction through UPP 18 H H MDF- Community Based Housing 85 H H MDF- Aceh Forest & Environment 18 H H MDF- Banda Aceh Flood Relief 5 H H MDF- Infrastructure Reconstruction Enabling program 42 H H Kecamatan Development Program 3 Aceh Cofinancing 14 Canada/UK/Aust H H Total 480 206 271 2007 Loans/Credits High Strategic Roads Infrastructure (SRIP) 208 H H Case Yogyakarta Earthquake Housing Reconstructiond 110 76 Multi Donors H H National Agency for Drug and Food Control 40 10 M M Fisheries Revitalization Project 40 40 H M Farmer's Empowerment & Technology 70 30 M M Urban Water Supply & Sanitation Imprv. & Expansion 35 35 H H Third Development Policy Loan 530 70 H H Teacher Management (BERMUTU) 70 70 40 Netherlands H H Standby Projects 2007 Private Infrastructure Finance 60 H H Government Financial Management & Revenue Admin. 2 60 H H Grants Avian and Human Influenza Facility 15 Multi Donors H H MDF-Infrastructure Reconstruction Financing Facility 100 Multi Donors H H MDF-Kecamatan Recov and Reconstruction Planning Nias 26 H H MDF-SPADA Aceh/Nias 25 H H MDF-Roads Lamno-Calang 12 H H Total 1,113 365 293 Expect Delivery of 9-10 projects for $1 - $1.4 bln. CAS ANNEX B3 Page 2 of 3 IBRD/IDA Loans, Credits and Key Grants Programs, FY2004-2008 US$(millions) Strategic Implementation Rewards Risksb Fiscal IBRD Grant Grant Donors (H/M/L) (H/M/L) year Proj ID b IDA c 2008 Loan/Credits High Development Policy Loan 4 430 70 H H Case Infrastructure DPL 100 H H Dam Operational Improvement 80 20 M M Agricultural Export Competitiveness 70 M M West Tarum Canal 80 20 M H Basic Education 120 80 300 Multi Donors H M Electricity Access for Rural 100 52 H H National Roads Improvement Project 300 H H Youth Employment Program 40 40 H M CCT to the poor / DAK for CDD Operations 80 80 H H Infrastructure Guarantee Fund 50 H H Total 1,450 362 300 Expect Delivery of 9-10 projects for $1 - $1.4 bln. Other Possible Projects under Discussion for FY08-FY10 East Java Development Reform Program; Improving Health Outcomes, School Quality Assurance; Teacher Professional Development, ICT in Education, Protection for Migrant Workers, Geothermal Energy, Kalimantan Java Gas, Urban Slum Improvement, Urban Sanitation, Umbulan Spring, Freeway Program Development, West Java Environmental Management 2, Local Government Project (USDRP2/ILGRP2,SPADA2) a. This table presents the actual program for FY04-06 and proposed program for FY07-08. Includes IBRD overprogramming. b. Note that project titles are subject to modification as projects are further developed over the CAS period. c. IBRD/IDA breakdown for FY07-08 is indicative. The IDA envelope is denominated in SDR. A current exchange rate of US$1.46/SDR has been applied to determine the equivalent US$ amount. IDA amounts for Indonesia were agreed upon at the time of the IDA14 replenishment negotiations. d. GOI is currently assessing need to borrow CAS ANNEX B3 Page 3 of 3 CAS Annex B3 (IFC & MIGA) for Indonesia Indonesia - IFC and MIGA Program, FY 2003-2006 2003 2004 2005 2006 IFC approvals (US$m) 74.00 190.25 106.75 205.65 Sector (%) Agriculture and Forestry 35 16 22 Finance and Insurance 20 18 54 78 Food and Beverages 18 Industrial and Consumer Goods 27 23 Oil, gas, and Mining 11 Prof., Scient., and Tech. 18 23 Textiles, Apparel, and Leather 7 5 Transportation and Warehouse 25 Wholes. and Retail Trade Total 100 100 100 100 Investment instrument(%) Loans 46 84 60 95 Equity 47 19 Quasi-Equity Other 7 16 21 5 Total 100 100 100 100 MIGA Guarantees Gross Outstanding (US$m) 52.40 52.4 52.4 50.9 CAS ANNEX B4 Page 1 of 1 Summary of Nonlending Services - INDONESIA (FY04-08) as of June 30, 2006 Product Completion FY Audiencea Objectiveb Recent completions Sectoral Perspectives on Corruption 2004 Government, Bank, Public KG Justice and the Poor 2004 Government, Bank, Public PS,KG Education Sector Study 2004 Government, Bank, Public PD,KG Forest Policy Strategy 2004 Government, Public PD,KG Averting an Infrastructure Crisis 2004 Government, Bank, Public PS,KG Trade Competitiveness Study 2004 Government, Public PS,KG CGI Brief 2004-05 Government, Donors, Public PS Mining Indonesia's Wealth Responsibly 2005 Government, Bank, Public PS,KG Policy Briefs for Incoming Government** 2005 Government, Public PS,KG Investment Climate Analysis 2005 Government, Bank PS,KG Rural Electricity Access 2005 Government, Donors, Public, Bank PS,KG Papua Public Expenditure Analysis 2005 Government PS,KG Preliminary Loss and Damage Assmt. For Aceh 2005 Government, Donors, Public PS Notes on Aceh Reconstruction 2005 Government, Donors, Public PS CGI Brief 2006 Government, Donors, Public PS Fuel Savings/Unconditional Cash Transfer 2006 Government, Bank PS Rebuilding Better Aceh & Nias - CFAN report 2006 Government, Donors, Public PS Aceh & Nias one year after the Tsunami 2006 Government, Donors, Public PS ICTs for Rural Development 2006 Government PS,KG Local Environment Governance (AMDAL review) 2006 Government, Bank PS,KG Accounting ROSC 2006 Government PS,KG ECED Sector Report 2006 Government, Bank PS, KG Making Services Work for the Poor 2006 Government, Bank, Public PS,PD PRSP support 2006 Government PD,KG Rural Investment Climate Survey 2006 Government, Bank PS,KG Local Government Financial Management 2006 Government, Bank, Public KG, PS Public Private Partnerships in Agriculture 2006 Government, Bank, Donors PS,KG NBFI Study 2006 Government, Bank PS,KG Yogya Damage and Loss Assessment 2006 Government, Bank, Donors PS Underway* Poverty Assessment 2007 Government, Bank, Donors PS,PD Improving Rural Productivity 2007 Government, Bank, Public PS,PD Social Aspects of Poverty Reduction 2007 Government, Bank, Public PS,PD Public Expenditure Review 2007 Government, Bank, Donors PS,KG PFM Measurement Framework 2007 Government, Bank PS, KG Governance and Decentralization Survey 2 2007 Government, Donors, Public PS Conflict and Poverty 2007 Government, Bank PS,KG Creating a Diversified Financial System 2007 Government, Bank, Donors PS,KG Conditional Cash Transfer 2007 Government, Bank PS Migration and Remittances 2007 Government, Bank, Donors PS,KG Good Environment Governance 2007 Government, Bank PS, KG Infrastructure Summit 2007 Government, Bank, Donors PD, PS Social Protection Study 2007 Government, Bank PS,KG HIV/AIDS 2007 Government, Bank, Donors PS,KG Poultry Sector Strategy 2007 Government, Bank, Donors, Public PS, PD Aceh Expenditure Review 2007 Government, Bank, Donors PS,KG Aceh Program Implementation 2007 Government, Bank, Donors PS Aceh BRR Support and Donor Coordination 2008 Government, Bank, Donors PS Planned* WBI Capacity Building Pgm. for the Govt. 2005-2007 Government, Bank PS,KG Investment Climate Flagship** 2004-2008*** Government, Bank, Donors, Public PS,KG Local Government Platform Flagship** 2004-2008*** Government, Bank PS,KG National Governance Flagship** 2004-2008*** Government, Bank PS,KG Reducing Poverty Flagship** 2004-2008*** Government, Bank PS,KG Improving Service Delivery** 2004-2008*** Government, Bank PS,KG CGI Brief/DPR 2006-2008 Government, Donors, Public PS Governance Civil Service Dialogue 2007 Government, Bank KG,PS Improving Investment Climate 2007 Government, Bank PS,KG Public Financial Mgmt Measure Framework 2007 Government, Bank KG, PS Country Procurement Assessment Report 2007 Government, Bank PS Corruption Monitoring Surveys 2007 Government, Bank KG Health Workforce & Improving Service Delivery 2007 Government, Bank, Public PS, KG Teacher Management 2007 Government, Bank PS, KG Aceh 2-year Report 2007 Government, Donors, Public PS Employment Study 2008 Government, Donors, Public, Bank PS,KG a. Government, donor, Bank, public dissemination. b. Knowledge generation (KG), public debate (PD), problem-solving (PS). ** Included other sub-tasks not listed in this annex. Budget ranging from $10k to $100k per task. *** Thematic tasks ongoing throughout the CAS period, with a series of deliverables. CAS ANNEX B5 Page 1 of 1 Indonesia Social Indicators Latest single year Same region/income group East Lower- Asia & middle- 1975-80 1985-90 1990-05 Pacific income POPULATION Total population, mid-year (millions) 148.3 178.2 221.3 1,870.2 2,430.3 Growth rate (% annual average for period) 2.2 1.8 1.4 0.9 1.0 Urban population (% of population) 22.1 30.6 46.0 40.6 48.6 Total fertility rate (births per woman) 4.8 3.1 2.4 2.1 2.1 POVERTY (% of population) National headcount index .. .. 16.7 .. .. Urban headcount index .. .. 12.1 .. .. Rural headcount index .. .. 20.1 .. .. INCOME GNI per capita (US$) 500 620 1,250 1,280 1,580 Consumer price index (1995=100) 29 65 351 .. .. Food price index (1995=100) .. 62 364 .. .. INCOME/CONSUMPTION DISTRIBUTION Gini index .. .. 33.0 .. .. Lowest quintile (% of income or consumption) .. .. 8.6 .. .. Highest quintile (% of income or consumption) .. .. 43.1 .. .. SOCIAL INDICATORS Public expenditure Health (% of GDP) .. .. 1.2 1.9 2.5 Education (% of GNI) .. .. .. 3.0 3.5 Social security and welfare (% of GDP) .. .. 1.1 .. .. Net primary school enrollment rate (% of age group) Total .. 97 93 .. .. Male .. 99 93 .. .. Female .. 95 92 .. .. Access to an improved water source (% of population) Total .. 71 70 78 81 Urban .. 92 89 92 93 Rural .. 62 57 69 70 Immunization rate (% of children ages 12-23 months) Measles .. 58 77 82 86 DPT .. 60 70 86 88 Child malnutrition (% under 5 years) .. 40 27 15 11 Life expectancy at birth (years) Total 53 62 66 70 70 Male 52 60 65 68 68 Female 54 64 69 71 72 Mortality Infant (per 1,000 live births) 79 60 31 32 33 Under 5 (per 1,000) 125 91 41 41 42 Adult (15-59) Male (per 1,000 population) 368 275 227 179 192 Female (per 1,000 population) 308 219 175 122 123 Maternal (per 100,000 live births) .. .. 230 41 111 Births attended by skilled health staff (%) .. 36 72 87 86 This table was produced from the CMU LDB system. Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months who received vaccinations before one year of age. CAS ANNEX B6 Page 1 of 1 Indonesia - Key Economic Indicators <------------------------- Actual ----------------------------> <--------------- Projection ---------------> Indicator 2002 2003 2004 2005 2006 2007 2008 National accounts (% of GDP at market prices) Gross domestic product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Agriculture 15.5 15.2 14.6 13.4 12.3 12.0 11.7 Industry 44.6 43.8 44.0 45.8 47.6 47.7 47.6 Services 40.0 41.0 41.4 40.8 40.1 40.3 40.7 Total Consumption 73.2 75.1 75.8 73.7 71.9 68.6 68.7 Gross domestic fixed capital formation 19.0 18.9 21.7 22.0 23.1 24.0 24.2 Exports (GNFS)a 32.0 30.1 32.1 33.5 33.3 32.7 31.7 Imports (GNFS) 25.8 22.7 27.4 29.2 29.8 28.9 28.8 Gross domestic savings 26.8 24.9 24.2 26.3 28.1 31.4 31.3 Gross national savings b 27.6 25.5 24.9 28.6 29.1 32.7 32.7 Memorandum items GDP (US$ billion at current prices) 200 237 254 281 353 397 426 GNP per capita (US$, Atlas method) 830 940 1,140 1,250 1,400 1,610 1,840 Real annual growth rates (%, based on 2000 prices) Gross domestic product 4.5 4.8 5.1 5.6 5.5 6.2 6.5 Real annual per capita growth rates (%, calculated from 2000 prices) Gross domestic product at market prices 3.0 3.3 3.5 3.9 4.1 4.8 5.1 Total consumption 3.4 3.0 3.5 2.7 4.0 0.8 5.2 Private consumption 2.5 2.4 3.6 2.2 0.7 2.6 3.1 Balance of Payments (US$ billion) Exports (GNFS)a 64.6 68.3 93.4 105.2 117.8 129.5 135.5 Merchandise FOB 59.2 64.1 72.2 86.6 98.6 109.3 114.7 Imports (GNFS)a 51.0 55.6 90.4 95.0 105.1 114.7 123.0 Merchandise FOB 35.7 39.5 50.6 63.9 70.6 79.0 86.2 Current account balance 7.8 8.1 3.1 3.0 4.9 6.4 4.2 Public finance (as % of GDP) Total revenues 16.8 16.7 17.6 18.2 19.4 19.0 18.9 Total expenditures 16.9 18.4 18.7 18.7 20.9 19.9 19.4 Overall balance surplus (+) or deficit (-) -0.9 -1.7 -1.0 -0.5 -1.5 -0.9 -0.5 Foreign financing 0.9 -0.3 -1.3 -0.4 -0.2 -0.4 -0.5 Government debt/GDP (excl. IMF) 69.2 60.2 54.6 46.8 37.8 34.4 32.3 Monetary indicators M2/GDP 47 47 45 44 42 42 42 Growth of M2 (%) 4.6 8.1 8.2 17.0 12.9 12.4 11.3 Price indices( Year 2000 =100) Real exchange rate (US$/LCU)c 93.1 83.6 84.4 82.8 72.0 70.5 72.2 Consumer price index (% change) 11.9 6.8 6.1 10.5 13.6 6.2 4.9 GDP deflator (% change) 6.0 4.7 5.9 13.7 15.1 7.9 4.9 a. "GNFS" denotes "goods and nonfactor services." b. Includes net unrequited transfers excluding official capital grants. c. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. CAS ANNEX B7 Page 1 of 1 Indonesia - Key Exposure Indicators <---------------------- Actual --------------------------><------ Projection -------> Indicator 2002 2003 2004 2005 2006 2007 2008 Total external debt outstanding (TDO) (US$m)a 131,343 132,852 139,000 133,482 127,927 123,683 120,368 Net disbursements (US$m)a -9,605 2,563 -1,695 -57 -3,667 -2,480 -3,911 Total debt service (TDS) (US$m)b 24,978 24,251 21,293 20,605 21,697 18,722 19,107 Debt and debt service indicators (%) TDO/XGSc 174 170 143 121 103 89 76 TDO/GDP 66 56 55 47 36 31 28 TDS/XGS 4 3 2 2 2 1 1 Concessional/TDO 25 28 28 29 29 29 28 IBRD exposure indicators (%) IBRD DS/public DS 21 22 17 16 17 19 17 Preferred creditor DS/public DS (%)d 65 49 35 35 38 45 43 IBRD DS/XGS 2.5 2.6 2.0 1.7 1.5 1.3 1.1 IBRD TDO (US$m)e 10,729 9,779 8,943 8,132 7,450 6,806 6,365 Share in Total IBRD Exposure (%) 8.8% 8.5% 8.1% 7.8% - - - IDA TDO (US$m)e 794 880 996 1,001 1,224 1,370 1,516 IFC (US$m) Loans 224.0 Equity and quasi-equity f 137.0 MIGA MIGA guarantees (US$m) 56.5 52.4 52.4 52.4 50.9 a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short-term capital b. Debt services include debt services from projected new loans. c. "XGS" denotes exports of goods and services, including workers' remittances. d. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. e. Includes present value of guarantees. f. Includes equity and quasi-equity types of both loan and equity instruments. 2 B8 of1 a/ Rev'd 6.67 11.43 -1.49 1.17 0.00 17.78 Actual Page Between Frm and ANNEX Orig. 5.84 1.02 5.48 7.39 -14.08 -0.20 59.00 11.43 1.30 50.58 2.83 6.99 9.53 4.31 2.50 -0.34 0.48 2.25 Disbursements 104.56 11.67 67.83 21.90 41.12 38.70 438.48 Difference CAS Expected 55.74 7.02 51.01 14.78 13.58 79.80 0.77 1.30 7.69 Undisb. 173.00 67.91 75.63 90.32 26.66 132.76 57.82 11.98 73.90 18.95 30.12 125.57 44.78 28.54 138.32 65.20 120.18 102.68 1616.01 0.17 1.00 10.65 0.16 11.98 Cancel. 7.50 36.55 44.05 GRANT Millions US$ in 5 IDA 23 30 15 38 40 25 80 35 45.5 67.5 74.5 32.8 Amount 111.3 70.5 71.4 77.4 137.5 979.4 Original 55 80 IBRD 33.2 45.5 200 50 21.5 2.66 31.1 14.5 141 45 45 80 69 32.8 17.1 63.2 208.9 29.5 67.3 1332.26 Grants) and Year 2005 2004 2004 1995 2003 2006 2004 1999 2006 2002 2005 2003 2005 2003 2004 2003 2000 2001 2001 2002 2005 2005 2000 2006 2003 2005 2005 Indonesia- Fiscal B8 (IBRD/IDA 06/30/2006 Of S S S S S S MS S # S S S S MS MS S S U S S MS S S # MS S S Annex As Progress Portfolio Rating Implementation PSR CAS Last Supervision S S S HS MS S MS S # S S MS S MS MS S S MS S S MS S S # MS S S Operations Objectives Development 1.72 appraisal. 727.72 14.11 at 24,578.15 18,567.74 25,305.87 18,569.46 1,616.01 1,630.12 PROJECT PROJECT II projected II Proj. 3) DEVT Prog Areas as Project Prog Project Dev (PHP Mgt 3B date and (LIL) Reform to Management Mgmt Admin 2 Development Strength DEVELOPMENT &POLICY I II Project and and Services & Irr.Sector Development & Govern. & Disadvantaged Market DEVELOPMENT Education LEARNING Revenue Rehab Rehab TRANSPT Local Sector HEALTH HEALTH and & disbursements Gas DEV for Pwr KECAMATAN Mgt Reef Reef UMBRELLA REG CHILD EDUCATION II III Development Poor Workforce Kecamatan MANAGEMENT Resources Name I- Childhood for actual Finl IND Coral- Coral- ODS Third minus 294 Project Govt ID ID ID ID ID-Domestic ID-E. ID-EARLY ID-Early ID-GLOBAL ID-HIGHER ID-Health ID-Initiatives ID-Java-Bali ID-LAND ID-PPITA ID-PROVINCIAL ID-PROVINCIAL ID-SECOND ID-UPP2 ID-UPP3 ID-USDRP ID-WSSLIC ID-WSSLIC ID-Water Kecamatan Support date to Closed) repaid repaid Closed) + repaid + been been been (Active) (Closed) (Active Projects (Active) has (Closed) has (Active has disbursements Closed * which which which Disbursed of Disbursed of Disbursed of Projects Undisbursed Undisbursed Undisbursed ID Result Intended Total Total Total Total Total Total Active a. IBRD/IDA Project P085133 P071318 P071316 P003701 P079156 P077175 P074290 P036049 P089479 P073970 P085374 P073772 P076174 P063913 P064728 P076271 P049545 P049539 P073025 P072852 P084583 P071296 P059477 P085375 P059931 P092019 P078070 Overall CAS ANNEX B8 Page 2 of 2 CAS Annex B8 (IFC) for Indonesia Indonesia :Statement of IFC's Held and Disbursed Portfolio As of 04/30/2006 (In US Dollars Millions) Held Disbursed FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 2006 Bank Danamon 5 0 0 0 0 0 0 0 2004 BonaVista School 1 0 0 0 1 0 0 0 2006 Buana Bank 5 0 0 0 0 0 0 0 2006 Centralpertiwi 45 0 0 0 0 0 0 0 2004 Medan NP School 1.75 0 0 0 0 0 0 0 2002 P.T. Gawi 11.05 0 0 3.49 4.9 0 0 3.49 1989 PT Agro Muko 0 2.2 0 0 0 2.2 0 0 1997 PT Alumindo 2.73 0 0 0 2.73 0 0 0 1989 PT Astra 0 0.2 0 0 0 0.2 0 0 1994 PT Astra 0 0.19 0 0 0 0.19 0 0 2003 PT Astra 0 0.12 0 0 0 0.12 0 0 PT Astra Otopart 0 0.7 0 0 0 0.7 0 0 2005 PT Astra Otopart 24 0 0 0 24 0 0 0 2005 PT Austindo N... 15.23 0 0 0 2.23 0 0 0 2000 PT Bank NISP 0 2.85 2.86 0 0 2.85 2.83 0 2002 PT Bank NISP 0 2.04 0 0 0 2.04 0 0 2004 PT Bank NISP 35 0 0 0 35 0 0 0 1997 PT Berlian 0 3.35 0 0 0 0 0 0 1993 PT Bina Danatama 0.06 0 0 0 0.06 0 0 0 1996 PT Bina Danatama 0 0 3.1 5.77 0 0 3.1 5.77 2004 PT Ecogreen 30 0 0 0 30 0 0 0 2005 PT Ecogreen 25 0 0 0 15 0 0 0 PT Grahawita 0 0 3.75 0 0 0 3.75 0 1991 PT Indo-Rama 0 3.82 0 0 0 3.82 0 0 1995 PT Indo-Rama 0 1.57 0 0 0 1.57 0 0 1999 PT Indo-Rama 0 0.81 0 0 0 0.81 0 0 2001 PT Indo-Rama 20 0 0 0 0.33 0 0 0 2003 PT Indo-Rama 5 0 0 0 4.88 0 0 0 2004 PT Indo-Rama 48 0 0 0 36 0 0 0 1992 PT KIA Keramik 0.23 0 0 2 0.23 0 0 2 1996 PT KIA Keramik 1.65 0 0 53.49 1.65 0 0 53.49 1995 PT KIA Serpih 4.5 0 0 49.5 4.5 0 0 49.5 1997 PT Kalimantan 9.38 0 0 0 9.38 0 0 0 PT Karunia (KAS) 18.1 0 0 4.16 18.1 0 0 4.16 PT Makro 0 2.34 0 0 0 2.34 0 0 2000 PT Makro 0 1.23 0 0 0 0.71 0 0 2006 PT Makro 0 0.65 0 0 0 0 0 0 1998 PT Megaplast 3.5 2.5 0 0 3.5 2.5 0 0 1993 PT Nusantara 0 0 10.16 7.9 0 0 10.16 7.9 2004 PT Prakars (PAS) 16.9 0 0 3.73 16.9 0 0 3.73 1997 PT Sayap 1.67 0 0 0 1.67 0 0 0 2001 PT Sigma 0 1.03 0 0 0 1.03 0 0 1995 PT Viscose 7.81 0 0 0 7.81 0 0 0 2004 PT Viscose 9.5 0 0 0 9.5 0 0 0 1997 PT Wings 1.45 0 0 0 1.45 0 0 0 2003 SMM 3 0 0 0 0 0 0 0 2001 Sunson 11.62 0 0 7.35 11.62 0 0 7.35 2005 WOM 0 20 0 0 0 19.93 0 0 2004 Wilmar 33.33 0 0 0 33.33 0 0 0 Total Portfolio: 396.46 45.6 19.87 137.39 275.77 41.01 19.84 137.39 Approvals Pending Commitment Loan Equity Quasi Partic 2005 Bank NISP SELF 30 0 0 0 2006 Bank Danamon Tbk 150 0 0 0 Total Pending Commitment: 180 0 0 0 t g deb cial 14 SEM FSAP banks of of the ner A in finan bank net 1 in Gvt DPR, bsidyuS for Area ng ng Part L2 GFMRAP2, wen alysis eluF sAIDu ce A monitorin rk di creation safety Page ding PERs an F, DP gn d wo len ding ening and for cy Advi and Lending Len IM, trade sector E Len 4 gth and DPL4, D Lending poli anne investments non-banki SM d sector Thematic Briefs, Management vice,da oign ction O Pl aration an Stren Bank Interventions JBIC - - 3 USAI IFC and institutions IFC program ­ GFMRAP DPL1 DPL3 A Briefings CGI Debt Fiscal WTO Redu A Financial Prep Ongoing Proposed AA Partners ADB, mgt, AA AAA Ongoing Proposed DPL Partners IMF supervision financial to d ) an ) than done( tax t )e of Central budgeting non- w rmed on one) FATF progress ed yb of e ayers' ( on-track tered lower en fo (d ) don( ratiost to MoF list th ding e of and taxp ces italics) maintain Managemen offi regisfo 2005, due d in y signed th es on-track( bonds spen ) Forum an (in dern er er vt partl ures ty BI off untri Growth ursemen ding Debt mo go oth filers cial (t 72% co so een len taken indicators date disb discipline on-going) of of Stabili Matrix and to mbun years, proced able and ed and men d cy an betw ) Period previous Budget Sustain (achieved; Roll-out concept Growing payers Auctions Increas capital Govern in system Financial MOU emergen Indonesia cooperative ( done Year Mid-term 5 Monitoring the e Investment in g i n s to ce 2 P dat ally 2005. D Thi for efforts still to Insuran in 2005) (47% endin Gf are and During in point 2005) Fuel( sp o state- 20% gradu Quality s inter-bank 1% 40% to el 2005) 2006. ding.) all serious 1% in on 0.5% lev 3.2% of Deposit Framework ogressrp social P spen reduced ge High 004,2 and loweb with up 2001 d at D exceeds made plementation si e) rket October G ce NBFIsa ceptanceac hancing en Program an in has lished to from of sector ership h of and for GDP ma (don and regional coverafo 2004 to budgeted s.) BI( suc miten growing estab CAS italics) Results GDP in ratio to point rs capital 3.7% own ownership was complian hersto Guarantee the (in of 2% March in ( be finance bank arrea P, importance safety ket Newly removal come(s) enue closer ni es to of C CAS by % 1.0% pu x substantial private( Climate the t/GDP rev ta private get broad standards B However, ­ GDP Out began B9 eht 1.2 was was in in th on increa sector anlB( of deb tax e of deposits. lic cit icesrp reduced 20% wi Expected capturet nksab stability state-owned 4 behind. seen dual no .) 3.5% least the comply pub Influenced End-CAS Defi (Exceeded, Reduce 2005) Non-oil (Exceeded, Decreas Fuel subsidies Gra to 2005. does At owned of Indonesia international to lagging interest compliances.) Financial continued all Corporation loans Annex Increase Improving on s Outcomes and ceap tee eness One: mic weak resort Outcomes ending undation ensation sp Guaran w fo effectiv banks last al allengesh econo increasingly valid; valid of CAS Pillar comp issue by C cro mic ns ns to cus rove improving blicup no state Blanket ma fo of d imp be of of pursued remai critical remai of erdnel an ce a enacted th to a eb will sa is me me to e be microecono targeting quality to Remaining grow rol Adjustment Consolidate stability the of Goal and schemes. Focus and Outco governan remains Outco Reduction needs BI has in to in of % 04, ted by % ainable. and 20 15% 47: 30%: leastta ancial Term dynamics below ast in expec 7% sust fin Outcomes of to GDP 2005 2005 access 60% debt as and above reached but to 2008 in 5.1% in with Strategic Longer down Inflation 7%: 2005 go mid- Debt below 2005. assessed Investmen GDP 22% Growth 5%: 5.6% Country Maintain macroeconomic stability Stronger diversified sector equitable ces 14 2 Law trade m of the d ner an on practi Law labor and on 2 in to Area g Part n L1 ual) stomsu tes ng tes ograrP proving nical provides C no Best v.nI Page ng no mir t goin d of studies G finance and datio DP, g relatedt d rms sector E tech fo Environment draft ementi ­ to men On (bi-ann analysis report ess refo Gr ce es Thematic Ongoi men - ational chain groun et groun Proposed fo Bank ­ impl Interventions Ongoin- ­ TA NBFI recom Govern GFMRAP Busin Surveys Review Back Intern for regulations Value Investmen mark Back policy Corporate monitoring PENSA assistan activiti AAA Lending AAA AAA IFC to ) isI rms fees & Lane) ved ervisory DGF ) refo oduced have ers expected than to g intr ed progress resol sup fficeso taxes ) re-organized than wer withr (R ) and ( slo ntes year expected x contain and rge beene wer ta italics) firms past of slo( ) mes Law plementin than hav nuisance starting( (in ted )e the are % Growth industry mi erw administration laws derno al pecxe pam' M loc sh inspection 01 regulatory of ( slo over tax indicators date and fund insurance rengthenedts apeB­ don( tax estment 3 170 the to of shed e rough than am's th 40% out liament. restructured city aboli Period wer cted Invt Par Pension and Unviable ( slo Bapep capa e done) pex Draf Parliament Enactment regulations Roll ( to expanded. were on-track, Decreas going from Year Mid-term 5 the e Investment fo lla( dna es 30 by dat are ofe high) by espited from and to 40%) lan inancingf to sh har finance strategy GOI) and mate severe from businesses a red issued er During a cli lined top Quality (s below regulations d 19%, to 82% by remain 151 of as mu s commercial dec 15% decreased by gulatory but businesses % an just cons ogressrp sector's 10% und omfr re nancial ssuedi Fi have from ment's of moderate, (at package of High aro cesca develop ( %)04 around problem green, ent Program ed Es d ages 2005, meti %: a as customst that and ustry investment Govern by regulations for services: financial beyond at,le 2005 SM increased, an above 1 ind firms pack in sinesses and up ed also CAS italics) ce stab increas by BI buyb the st severe to of ju trade Investm services toms priority, the (in at very finan -bank assets by ined thi reform decreas and the come(s) olvent mente 2003 start- ed one tax ministration cus 2003 implemen of of by to w fac (still and includes to Climate non rema redemption) insurance framework ins rov ad Out Es from use eht in system realizationt x measured n th climate between comeeb part( has imp business s ective ective customs severe access fund SMfo 2005) as wi ) ta probleme 2005 increase credi to obstacles ha( eff to eff 10% criteria ngthe sever the deal ys Influenced No. ( banks, 2003 total End-CAS Increase financial NBFIs mutual Stre supervisory to Investment Overall major consistently Reduce da priorities More identifying very 2003 More identifying moderate, around Clear concerning stipulated GOI) hence Improve Improving SMEs, e g cy Outcomes th T ) ) for and to of ess rking One: poli be New wo VA man be e monthly New currently( Outcomes months workin NBFI for to ministries non-banking access busin yb 45 yb inspected 6.1 averag meti allengesh valid; in yet in file in valid. to valid. obtain tosah valid. CAS Pillar basis challenge industry ce classifications C ns to ons a on a ns regulations veah to sts co ns tored imate:cl to ns imate: currently( nit cess cl containers de g financial licenses reduced currently computerized remai reduced cost ( specific ervisi remai pro for Law remai moni rns remai clearan of be inv. y monitored inv. be & required me provi remains sup ctores insurance me er to me tors on retu ) me tor on days have Inv. actions to unds Remaining Time ref Time tax days Improvemen import 7.5 Adjustment Outco Recommendati report dialogue Weak sectors Inadequate SME Weak Outco Implementin new completed Numb needs Trans need Outco indica group Clearance exclusivel Outco indica group doesn't BI that and rof ivate noted Term pr be Outcomes should Strategic Longer It 1 Country Supportive environment competitive sector t 14 of the ner 3 in Area Part Employmen Page abling and en Environment uth ess Yo Thematic Bank Interventions business environment Busin Program ILO Network Partners to 22 Lawsr /0433 estic governments progress fo ) Law to domfoe and regional italics) expected rang for (in regulations 25/99 Growth g than wide a Law indicators date and slower( in from groundwork 25 Period the borrow Implementin and Revisions lays to sources. Year Mid-term 5 the e Investment dat draft to wing d to New During llofo ojectsrp from an Quality local underway) items economically ogressrp ations. stalled atform vey d and ctores move regions to tax completed) 40 pl High Sur( Program ha regul tral te ent and/or been and ­ for Unions cen priva gionalre has about CAS italics) services labor of amendm for in nuisance average the (in Labor levies come(s) ons wards list of local nal by reformulated by to ( Draft n and mate Climate flexible in Out ts sitive eht being functi clit ation po creatio e of to charges law resistance men the th cipating elopment Influenced End-CAS Implement labor strong Clarity govern dev negative restrict harmful Investmen parti above Improving ze Outcomes and sector on One: teriali Outcomes discourage ma formal allengesh valid to CAS Pillar C the ns regulations yet to in regulations has remai new of labor me creation Remaining Adjustment Rigid jobs Outco Impact investment and Term Outcomes Strategic Longer Country t TA 14 2,1 ect B of the D ner tructure B Proj A 4 in Infra D Area Part of A Summit adso Infras R provement g Page Transport posed 4; mI Developmen PL2 JBIC,, and Ongoing- JBIC,, A GA Lending and tructure Ongoing- Reg. Road Reg. Pro- Reg. Thematic Provision tra DPL Bank Interventions Ongoin- GA I. Roads Javat MI MI Java Priv. DPL3 DPL Infras East Suma Strategic Infrastructure Nat. E. Wes Infra IFC, Lending Planned AAA Partners IFC, Lending Lending Partners to held fuel is in large was )e on a regime t progress bring investors summit don( board ) er" investors and tot drew reduction road charges to roads italics) pap ) failed( private that follow-up (in iteh Growth w done( ummiS mit Private a and user 2006). d limited( justmendaf tollr " sum fo from indicators date 2005; late fun road tarif of and cture potential first c ce in established ) ati tru A road Period January Issuan infrastructure Infras together ( participation in planned done: Pilot scheme Improved implemented subsidies Autom mechanisms Year Mid-term 5 the e Investment I) as of to is dat news asy er led to been what oth road (KKPP Agreement Bank and have 4500 During KKPPI to Agenc Quality SBY' the have r establishment with of fo project Management and fo and ogressrp Institutional within ncession approved.) nal ved support roads High infrastructurer captured steps ority ovisionrP ni erational,po sk ed support Ri( F) gements place: Co be quality 24,000km) Program fo Policy Done;( in to tioan preser and pri MO Implementing nkaB for c ure ertise on fully in arran are Model yet of The Indonesia. CAS italics) exp public and eenbs about with improved outcome following truct 2005 establish unit roads has ds. to roads new ha of the (in on nical roa Eastern come(s) fras in ng toll A and ding by economi ns The investments. toll km in environment In ed Agency Climate d-CAS bei established condition Out committee g tech for eht is institutional for e the en GoI Sumatra implemented ghest of decisio hi the eenbs th 1500 entities). prepared arterial in bridges (correspon of Regulatory than been tegic the yb establish Unit Management ha national sector Influenced elopment original center End-CAS A Acceleratin was PPP a preparation Risk making infrastructure Unit Improved established arrangements Toll separate has Improve stra network support subprojects more meters Improving dev No now administration. taken Road Improving c e c e rk key ans of to es the th Outcomes and a of pl is three and text in er four ecifi d (as tly of ecifi of One: as cks e an ampls DPL limits be d Sp DPL through ord next in Sp con d ren th of the of an cing ce . Outcomes being framewo re, Bank an the of cial ects will objectiv ce infra a e infrastructure Water, the the cur so finan allengesh e in on support twork context CAS Pillar Th road-blo te management proj blicu c ncrease in er cation). ar oriented investment ciden p projects ntenan en e C to shed program ty. ivaterp investment reviews focus (I be ov to (Roads Energy, in th thefo ets able supporting in mai ad currently infrastructu this policy d to connections rs yb e publi in rg ro establi priori rt L. adequa on government th an DP tedcepx GDP mmuni ta roads discussed preparati PPP bank rward, are ed .) secto eco sured of fo ce has of rs the of cular Ensure environmental infrastructure mea projects) no Remaining develop suppo Increase key Sanitation Tel sector being of infrastructure Redu corruption private Establish mechanisms sustainable national targets discuss preparation Adjustment new Remove public investment. infrastructure e 1% yea GoI to national to a Lack the Going parti following and Term Outcomes Strategic Longer Country Refurbished infrastructure 14 in Dev. ed of the ect Project . ner tag 5 in Area Gas strategy Support Proj Policy Dev Part Market a t cation GRPLI Page posed Jav g posed RALAS policy UPP, sadvani ), g and Gas onal D A Ongoing- Pro- tan Ongoing- Power investments d an Ongoing- ehc ndal Ongoing- Pro ­ vitalizatione Ongoing- gie d R R Thematic Bank elopmen MIGA A anr Interventions & Management Ongoin- KDP, es ulu (SPAD Ongoin- Domestic Dev Kaliman Java-Bali Support power telecommuni Poo s Lending Lending Lending IFC Lending Land Project, AAA National dialogue Lending COREMAP2 Lending Fisheri Lending Bengk Project, for Area AAA to to gas 7 in d gas and in of been for on lot 39% an CDD and ning and are rges lator ation tenure 10 coral pi ment have which s progress oilr oil cha regu ) t consistent er fo lations in through as us quarterly stemsyst insites reducti angersd from plan a( legisl and govern delivery s and regu / pected and 50% italics) opening ex and ) thefo chanisme such made traditional fishing increased programs m local (in for and an tariff icies COREMAP1 group service ongoing( tion, th justmendaf power.r was 03) on Growth e ongoing( nagemen iorityrp than of level lity regulations fo of rules 20 tarif pol reformed ma in indicators date More( enessrawa strict of c ts destructive lic role and ce elementsll stment most di competi owersl( until are degradation ati reef in ed eholder to adju righ emphasis and Pub utilization accountabi reef stak monitoring Period A( Issuan law sector implementing place) Cost-reflectiv policies Autom mechanisms tariff quarters Land with systems implemented Viable established provinces illegal mining areas. coral 75%) Increas and and funds programs; include Year Mid-term 5 the e Investment as d 's' titles titles to an dat to ctorses si Gas( SOEs, of a parcels CDD re During Quality gas Govtfo some(r land frastructure women distributed hads submitted. land fo yearrep access planning thru planning in & sector secto in ha groups 5% ogressrp ilo Issuance( 608,2 cities vital gas rastructu share er generation) titles maps atory 50,980 ed. by proved other & to High e (50% es cip Program th inf for pow project where power areas. and notifi an ccess for in e key in in ctores eyed; targetfo mi d measure) creas to rtiap participatory a villages a CAS italics) of issued (255,506 Aceh community surv in with PGN in 2006)) the (in come(s) by actorsfo structur derway) for actorsfo slow wen publicly cipation powert titles the d-i m through ( 38,000 creasingni been ,91525 ficiallyfo 00 capitarep early rrigationi, Climate engaged parti but of ooT( Out eht no. tariff unsi Done( no. new cien oject-assistedrp has 50,5 as ctor ed .) start; have process, study privatization N ed sector in 30) parcels come communities terms villages/cities se effi idgesrb ancing yet al PG in million fin April real Influenced End-CAS Increas Not( Improved pricing Parti e.g. 39%) Increas private More 2.5 names) nationwide of successful 52,915 adjudicated, distributed Avg. coastal in 30,000 roads, infrastructure and programs financing Energy Improving rs Outcomes and have toca lack One: a r. of is Outcomes was secto ere allengesh valid valid CAS Pillar th valid valid the C ns significant Law to a number 2, ty in ns ns improvements in e th 200 remai remains in ectrici in remai remai vision me result El me me to ear Remaining cl Adjustment Outco Institutional yet increase Since annulled of Outcome Outco Outco and come- for Term in Outcomes households Strategic Longer Country Sustainable creating opportunities poorer r d 14 an of the Secto ner 6 in ent Trust Area Part Climate GEF Page ment posed werm g and Irrigation Technology Dutch ess Ongoing- & EP Pro ) EU, ­ Thematic Ass Empo Agr. estment Bank Res. DAF Ongoin follow-up Interventions DFID, JICA, ers EATI - Inv (F Poverty Lending Water Mgmt, Lending Farm through Inf AAA Rural Survey Partners ADB, Fund, to from this 680 n th ng me litation in oductivity wi 35-60% pr so progress benefiti and rehabi logies from and livestock and area italics) households implementatio d of techno ranging an (in astructure begin new es nagement,a repairs Growth crop m ll 33% irrigated infr of from indicators date wi of ting incom and in water but adop physical average es improved Period ) the delayed year An villag increases from 250,000ha improved 500,000ha to Year Mid-term 5 the e Investment dat P tes in ra e to th During KDyb Too(. as districts. Quality in farmers tems ogressrp velsel oc vered impact adoption sys for assisted n High els Program ges and diture gatio and lla lev for ds come Vi irri CAS italics) in ( expen resources) areas.) yiel, project- 55 the (in areas HH income come(s) ehold mes in by ni Climate es Out eht hous non-KDP inco measure) /sanitation 30,000 to in to improvedfo asure)e ed significant e increase m water early technologi % areas to Influenced End-CAS and Increas targeted showing compared Increas of (Too 20 the early Improving Outcomes and One: Outcomes allengesh valid CAS Pillar C ns to remai me Remaining Adjustment Outco and Term Outcomes Strategic Longer Country : t ds on ts , 14 of the ner Islan notes Services 7 in Education rt Area MUTU city Constrain Part velopmene sic elopment ects c (SPADA Ba ces Page D g Local Eastern a g sector education, nagementa and d Dev Proj Basi Capa ects Suppo M private imaryrp Ongoing- d report Ongoing- & tra Proposed management Sector Servi in Proj ­ er rting tical er EU Thematic Chil basic an Bank 40%: y umS ) ch Proposed HD Interventions Ongoin- Ongoin- ­ Universal Tea Training/BER Education Free teacher Statis Building Delivering Private in Teach Suppo Earl Project ECED ECE sector Sulawesi and Education CDD KDP Lending AAA Lending Lending AAA AAA Partners IFC investment education, poorest the c for fo ce her and for basi poor) ) d enacted.) italics) to e of teac an planning, cedures cluding th re rman ted (in public was ecially ) new delivery (in ongoing( te of pro of for the teach rfoep esp ack ery anisms cipation ces d indicators da s, to velel ECED in no an implemen improveot financing, d in for on-tr( deliv mech access parti es rvies deployment g, cies an Law Poor adoption and service poli management Period Mid-term progress the Increase financing education Govt. budgetin and education financing guarantee ( Ongoing) Increased communiti education New management adopted ( quality Teacher to Year 5 e e education in the jr. at to .) jr. dat and 2004. er testing on to basic ntersec and rates of service nda and During Responsiv ECD ankB 91.8% 56.0% quality discussions Law prepared to transf ces in 2002 national ogressrp % is about govt. for ECED with services imaryrpta ollment from cash using m imaryrp enr servi 52.5 of program meet Program and utilization services ality integrated Net between Bank( donors Delivery districts tes ( unifor, ra from scores, italics) ED qu marginally ditional and regulations CAS of 600( 12 40% other which (in EC ECED test vice I) education level con quality ross the come(s) to ol creased in and gh proportion ols s areas ac O to designed) educationfo new G in ot Lecturers rollment pil ty ts standards. hi a by Ser increasedl poorest scho the scho Out number en the they and coverage, with being( in acces poor lished ed Major access ed schoo for quali dary high dary implementing ers estab jr Government dards ch tem.) Making Increas targeted were support. negotiated Increas secon primary 92.8% For Commence program Improvemen international with implementing sys Increase secon stan Issue Tea Influenced End-CAS quality, Improved Improved Improved Two: a be and Outcomes improved, th to Pillar ED wi ement tot CAS EC d to areas valid access allengesh of valid valid. an improv ed ns ns on ns C ng eti proved cus ucation deploymen Outcomes quality remai rg i m remai fo ed remai actual of ta on ers Adjustment me ty me ary me ce Bank-assist teach Remaining cular ndoc In Outco Pover programs Outco parti se Outco Impact in rebalan seen in at to d t yet) of by ce an are men 2002 school Longer outcomes remained evidence Outcomes ortion who school Enrollment( from maryirp & dary nit sesssa on( and prop ter rates performan 6 dren in en of programs 20% ational SS) es secon Country education poor chil to e ag TIM than enrollment dardized intern Strategic the Increased poor ready the ECED less 2004.) Increas junior net completion Improvemen Indonesia's in stan (e.g. Term Better for , II ­ D, d t 14 d Basis of the ner anI & Drugr fo ivaterP an USAI EU, 8 in Area th O, rce 3) WSSLIC PROPER city rce ices Building agemen H Part ale d tion, licyoP l rt H rkfo HP an Page 2 Agency Control Health g d tro Serv Capa rkfo Water Man sAID,u W, and (P an CA, Ongoing Wo Proposed traliza c Wo JI, A, OLA ­ ­ r Con Food tical Suppo Capacity Thematic Unicef Bank Interventions Ongoin- Proposed JBIC ands , WASP Provincial Health Services WSSLIC 3/PAMSIMAS National and Improving Outcomes Decen Secto Environment, Analyti HIV ­ Statis Health Improving Delivery WBI Integrated Resources of Building Lending Lending AAA AAA Partners ADB, Netherl Unesco DFID, %:04 fo n d cy of in gn city an to oft fuel level less emes desi and d and sch italics) poorest cien rp iority provinces rounds district capa effi poorest an ted but, of provinces ongoing pilot educatio, text (in the for completed e services of for 9 reality inform con te and three( increased th projects, managemen performance for been Lampung in lts thi in k wen yakarta health to ensation ed indicators da provinces) to velel w o-poorrp resu health priorities)y-e no implemen have and number ts to k ts d Yog findings in financing hert used traliz e Poor ogramsrp in monitoring of cies rkforce an infrastructure comp resulted and e ongoing( Banyb discussions funded arta men stated wo iny oin grants especially have project poli decen Period Mid-term public implement village future a progress the Increas of health block Yogyak and financing quintile) Increas govern to planning, reporting outputs supported restructuring adap MOH New health adopted ( progress underwa Evaluation subsidy & programs of in to Year 5 e services, e by the in the dat has to and has less less under- over er to health yet from children in for e % policies best services among renewed of that birthfo y ag Java assisted from of was but, 9.7 During Responsiv ws However has Recent liveriesed ldren address services vaccine for to transf chi current ogressrp health sho programs West of ence cognized eries creasedni onal ght 2004 help 004.2 lation aslese HepB recorded of erweight Recently er er cash of in 2005. evid percentage especiall 7.5% tuti health immunizations m percentage and were und may wev zation deliv popu and 2002) and weiyb ho Program and utilization and insti in and the from ge 2001). Delivery rates ( Evidence rity workers the 2002 services utili ones, (The. in polio status, percentage in issues ationally italics) of but ditional and prio in risen future, CAS 2001 2002 vaccine of 18% BCG percenta (in con vice for poorer health The( has intern the proved to stitutional creaseni 40% childhood th tional 5 between come(s) near ht ot designed) im the workers 2004 polio, The 29%si increase between in between of wi malnourished by Ser in utilization in wi provinces. th 1991 as pil Out % trained show % DPT Outbreaks triun 25% malnutrition coverage, in financing into poorest 40% fied to line being( where ze). heal by in 72% atad 80% under at period. better the in observed provinces, ed to malnutrition 5% 50%. ren tion targeted classi same poorest not Making Increase in increased translated Banten been other materiali Increased train attended 66% DHS among than Increased ( exceeded completing than 2005.) Immunization Improved child five remained severe the the atten problem are practices. Commence program Influenced End-CAS quality, Two: in e e t th en g e and Outcomes improved, and risk, the tak thes th tha Pillar cess from d central Health wen ctore es ms CAS pro an s. flu e yet Of since of se reducin rtality service to areas with valid. hav th its eving de mo these public gra allengesh ed ns suffersr level increased services not roles and between in of pro C ni veah Min (avian veness achi ma r dies sector has toni to child policitub weak. roved d the ). demonstrated has an Outcomes remai secto quality restated d d es, imp achieve e poo on the . However rm effecti rema yet an design e akes e has an to es Adjustment me clarity decentralization Bank-assist altheh refo of shocks responses th decentralized fuel-subsi resources not urces ioritirp tur tht deliver endi Remaining In Outco The the lack responsibilities and New pressure to rapid earthqu The provided reso policy place new have impact. MOH commitment MDGs maternal key addressing delivery objectiv Effective implementation exp benefi per rep 46 s at rths at rate per 60 to is bi 307 birth Longer outcomes live Outcomes 334 to Rate mortality f d 40% lth m omr rthsib veli children and es rest 5 derweight hea mortality fro (1995) (DHS-2002/3) child live 5 d un 2002/3). thousan poo der 2004 Country poor un decreas are in thousand per of Strategic the Maternal decreases 100,000 100,000 Under rate thousan per (DHS 71 among % who 25% Term Improved for 14 of the ner 9 in WSSLIC Area city Part d rt an Health g Page 2 Capa and Ongoing- Proposed ­ tical Suppo Thematic Bank Interventions Ongoin- WSSLIC 3/PAMSIMAS Improving Outcomes Statis Building Lending Lending AAA g rfo and italics) enablin done(. al (in local policy ces loc te & community- for of servi indicators da adopting % for to d ts WSS progress ) an Poor men in regulatory Period Mid-term progress the Central govern legal, frameworks managed central, government to Year 5 e . e the safe dat been to period. areas to villages es has et pply et g rg During Responsiv su CAS ta access 2000 villag targ up) ogressrp ni 1 the in water the of with 102 ­ scaled practicin ) ds in ende Program and Delivery th being ds arp ticesc italics) shed by is e sanitation CAS (Functioning bli villagers) (in vice househol the and esta come(s) of llagesvi roach househol hygien o improvementsf by Ser Out % water areas eenbe million app of ye % k 2.08 2500 hav evidence urban to successful yet 20 Making Increased drinking & systems (covering raised The Increased improved ( not Influenced End-CAS Two: a a is and Outcomes Pillar CAS sful water remains to to allengesh C uccess tation e access Outcomes th sani in Adjustment Remaining Scaling-up approach priority Improving challenge of an to Longer source recent Outcomes portion tation no( and pro with access sani water in Country operrp /rural) Strategic Increase population sustainable improved and (urban data) Term of P 14 GRLI , of the ti- ner Flagship 10 in PADAS ands Area Part going g ameworkrF nagementaM An d SMP, ments meznt ment stemsys for an DRP, Flagship going WI g ess E Page and Netherl On- US, cial & ance tion On- Reform PP, Proposed Ass M B, ership ­ urement Govern Govern Thematic U, D TI Bank Finan Proposed A ance Interventions Ongoin- ­ Ongoin- Partn ILGRP GDS2 Meas for Local completed Govern Corrup Local KDP FEA Poverty Project Lending AAA AAA Lending Lending AAA Partners DFID, Japan, Govern ) fo for t d in g, re d and of tool men cts in italics) an for t planning an for rm out on-going( eatrg an for and local and pment ety cts planning planning distri have (in set osure plemented of evaluation 15 and n enden refo er" budgetin to process NGOs develo financial soci govern plemented d cipating proje S osure ents g mi as vernments go nancialfi and the and the th in g rti g mi indicators date Governance discl oceduresrp to era dep system an esc Pap civil cti in wi budgeting measurement public of ap UPP discl in their and oceduresrp era of ) (ongoing; underway.) in ) pra participation governml t. scorecards; alesc e es thirds and PERDA ective government "White localfo enop bovea citi P loca D 13 Period Mid-term Issue Enhanced reporting policy-makin decisions ( on-going Implementatio eff monitoring verification of commitments the No. that planning mgm public scrutiny governments undertaking participatory citizen larger management districtsis Increas involvement policy-makin ( see Two and K adopt Enhanced reporting policy-makin decisions ( progress Year 5 to Key assess S2) areas the resources Bank- to a D d process G to underlying an 28 ­ CDD ogressrp ns atform districts early ough ach on, i n pl provements k-supported Bank nstruction. Local thr During the mi reco Indonesia regio and Ban( thefo toois Survey2 adopted appro participatory 40 because It lable in executi a italics) Aceh nonetheless: 15 services avai in is Program (in villages/cities least come(s) at local significant delayed PRSPs. villages outcomes towards delivered tralization anning, 00 engage CAS date Addressing of in all pl l) budgeting. been governments Out Framework. baseline rticipatoryap ance been Decen of a 38,0( tato and the up records have shifted local a regional in t. of by gro have but cipating been third govern elopment planning End-CAS Core parti projects in activities have inputs supported Governance completed impact Governance One engage dev oversigh (@50% of Objective: Influenced CAS and d still Core an is Outcomes Outcomes int but The allengesh CAS valid C to ns volvemen licy-making creased Three: in pot in remai has me men society Remaining Pillar Adjustment Outco Civil govern planning spotty. is Term Longer Outcomes planning constituents to and Country Strategic Development responsive 14 d 2 the an ey of ner Trust ID, 11 in h Area Support Surv Part GFMRAP, tance d DF, GFMRAP2 going Dutc an Page 4, g and On- Proposed Decentralization Assis rviceseS nds DA.I C DPL2, - and Bank ance tralization tralization herla Thematic for supported Bank Interventions Ongoin- Net ADB, DPL1 DPL3 World Fund Technical Advisory DFID Decen Facility. Govern Decen Lending Lending AAA Partners GTZ, JBIC, t ) and italics) under tions 17/03 adopt curemen (in gulaer Law pro ) d indicators date required Governance sure ments way financial an to ance of disclo under( Fin ). Govern public done Period Mid-term Issue passed Regulations State ( progress Local sound management practices Year 5 to of of e zero t for in es and S2 the el siz and asel to financial D d ckag G within underlying lev at again for ogressrp an pa Finance flows publicfo completed ted TSA service and ews each During the systemt ancialfin 2005) to operations ment lic Bappenas( orontolo ly dated completeds yap ofy a account G expec test Ju financial wa remuneration revi at civil of ture eys and zero consoli Pub PETSfo are cidence and tot in y cash completed cy y programs and italics) in A( Govt Ministr designing endi b urvS lieu effectiveness Paymen timely pilo in of in ctions progress) Program (in d TSA( began nearl eparerp Govern and in national exp tion PERs new reviews ts Aceh in expenditure fun come(s) an program) vernment Central time, pilo intent e acking pensa ing more of CAS date Addressing te reduces ces morf es dards oft atth nsparentra ag baseline Out Treasury underway; accounts go stan the first using d the mitedli(t CSR measured Tre Public rity the curaca and balan ministri for the an th leak as comfo tur improvement ongoin several cla by bank core unting for launcheds wi men ent provide cash of TSA line ced ha users endi Papua; ar.)ey End-CAS Consolidate Objective: All statement acco statement 2004 2005) Establishmen commission salaries Automated enables reporting idle consolidation balance 50% into Redu end- Exp assessm should measuring expenditure. in provinces; the Greater Govern (GOI Education comprehensive Influenced CAS by d be an of and ected new to Core publicr tion eness on g exp rrup the es ment Outcomes Outcomes poo co reforms of goin The Payment effectiv allengesh of is ce endent preparati CAS 2008 valid and valid. ministri environ C to outcome by ns easury servi ns depni the causes programs focus on, ni Three: monitor Tr new assessment sector s) a remai civil remai to decrees root g rward is educati delivered me governance as me fo work ensation Remaining Pillar undertake th, engaging Adjustment be Automated system to Outco Address sector institutin Outco Bappen and operational comp Going on (heal Public ministerial of Term streamlined Longer transparent Outcomes on and and and implementation financial Country Service efficient Strategic Regulated public management An Civil Effective decentralizati 14 ance 2 ance ey of the ner 12 in the Area Surv Studies Govern legal Part Poor n on Govern of crofinance going g e for & TA for Page and th TA On- ­ DFID, for ance urts mifo tralization Thematic ership co ership Bank elopment Interventions Ongoin- ce Proposed ­ SPADA Justi Partn Reform Govern Decen Anti-Corruptio High PENSA dev security institutions Partn Reform, Lending AAA AAA IFC Partners on fo over and of for cases ) two( of rney italics) been tto tworken special resolution entryr emtsys (in Decrees On-Lending Court progress a legal with areas provinces fo of Ministry( has A sector. oning d ) court on of in( stance, ute expansion 5 framework an ) corruption tion tion oft and ss; in indicators date Governance functi al done( g ce assi costs disp to e conflict justice of Decree Offi egal training, progre ) lowered formal g progress Ministerial .) 's on On-Granting in expected year the ) reducing eral paral limited Period Mid-term Issue Issue On-Granting. Finance and issued Effective institution investigating prosecuting including: Anti-Corrup Anti-Corrup Restructurin Establishmen of alternativ mechanisms, literacy focus pilots pilots next Barriers into by accessin ( progress 1- Commission 2- ( 3- Gen done Year 5 of in use of too to and to and by is the negative IG SMEs districts underlying Conflicting( increase in several for not( access the dispute ogressrp Witness transfer ). donor on and 20( networks on ory decision wages.) provisionst tion U Information hed g nviction).oc ive During the of Mandiri, on the performance civil Commission taken KPBfo law implementing ­ declarations by of and fiscal DA( transit the established building Impact s districts outweig prosecu of (Bank governor alternat italics) for er have ssed service consisten d on-lendin to number eenb ndatea pa 40 m wealth households Program (in cases Aceh and started come(s) ansfrt and regulations Freedom partly observed: an and the have on established assistance. e has with have CAS date Addressing equalization gionaler ) on, ance ear in leading legal Anti-Corruption fin as poorer leastta and Out being equalization cl Units in ALD Law the mechanisms fiscal 2006 urposp are cover ongoing( corrupti awaited) ) paralegal areas) trend operational in fiscal Commissi public %of to and by are with officials tell) on expanding on-granting legal, conflict implementing eral size operational. compliance to DAU Investigative in End-CAS Objective: Implement for finance. Positive investigations ( are Court high-profile Election Law auditing regulations Enhance gen evolutions DAU impact the Full public complied Increased using mechanisms (6 paralegal early Issue Protection Act. Improved Influenced CAS to 8. BN, S) and an fo urt,o anded Core 200 AP . th t C by exp in Outcomes Outcomes in (NRR tural be The es gress framework allengesh CAS DAK ctorses nafo can shar valid pro C Commission valid to hold-harmless for scheduled cialos er investigated legal ue vernments. ns establishmen n ti-Corruption engthening Three: en go rapid str as on An and DAU undsf for transf outcome cases rev remai d remains S e up ce me more an further Remaining Pillar ur K) K Adjustment include Remove provisions Increas especially Speed reso sub-national Outco Given anticipated Anti-Corruptio (KP End-CA to KP Outcome Institutional needs in and since Term sector in : WBI) credible index a popular (TI, survey-based of areas on Longer Outcomes oft eption justice in system improvement improvements perc and and percepti indicators ls ight court a in to Country impartial Significant corruption measures measurements trust project-assisted Corruption governance point 2002 Strategic Establishmen and 14 of PP), te the cture Risk , 13 ner U, was in - tru ds Area Part land, (KDP nce, frasn nada,a Finland, erlan Norway, SA, d Page ta i ment) Disaster Framework C the U and d, Thematic ojectsrp assis AR, UK, (housing, ement, Bank environ TS, EU,, Ny, Irelan, ADB, Zealan um Interventions A mark Lending/Grants Ongoing CDD SPADA MDF technical manag and AA GDS Management Partners MDF: Den German New Sweden, Belgi r and the for ) fo are Trust regula with using italics) building loss d ) of loss houses platform (in targets throughe an (GAM number a ) te multidonor lti-Donor oft an)e e, ged reconstruction capacity and problems systems and oft ongoing,( da a don( framework e don( don( ) Mu al th but edsen edon( dama to of group g done,( monitoring or litators) ) damage reporting damage construction houses e mid-term ) yed faci 350,000 th Initial assessment progress ( project continuous, Period CAS Creation framework Aceh-Nias Fund Establishmen institution managin process ongoing Separatist reintegration assessment Initial assessment destro over Establishmen for 50,000 UPP progress Year 5 a to 28 or of the in d h and ment opleep fo clinics 410 and an of new workdays host whic among seeking progress without During ogressrp of 50,000 health WB. roads llion .) ex- 18%t struction with lies) and Manage 2 splaced tents, and fami of processehT( by irrigation systems were ey, 45,000 mi System 2006 Bank-supported di in ency village 156,1 water Abou( older 2005) surv or d Recon italics) June community repaired distribution of host kms Over. mid-2006 by or ers. lan on Program (in Risk of living effici clean underway: 20 above unemployment August householdsfo with rebuilt, WB as populations, oth years in for tleti come(s) mber barracks 0 dna process. 050, er well built 1 570 the k of d by d 15 1 CAS date an an Project Out nu ts, 52,00( ,000 is Bank. roads wor completed rate work aged F Administration d the the through affected numb uilt ed ten 75 hoolssc units for Pillar arency projects, D Disaster M reb by in were by repaired; urban tants see Lan 133 of dication End-CAS Four: Decreas living families. barracks, Transp reconstruction reconstruction houses 1,500 and bridges km drainage sanitation generated infrastructure Decreased tsunami comba individuals available Also adju under Aceh Reduced house Influenced e Pillar th and will dressda velel ect Outcomes Outcomes to conn ties. allengesh is ocessrp GAM CAS e district will C Earthquake to eng of that mmuni peacee edsen co Java chall th meeting s middle into on Remaining main end Adjustment Nia Central The missing infrastructure houses Sustaining dep reintegration & and al Term Aceh nation growth of poverty in Yogyakarta Longer Better Outcomes mic with a tainable enditure) to g and sus line living exp usin econo in percentage and ho Country ge Strategic Rebuilding Restored (GDP) livelihoods Inflation avera Reduced population (household Responding Rebuild 14 of the risk 14 ner in tegy Influenza Area cial exiblefl and Part ment State Stra d Page finan an cing ess Ministry for and ctoreS Human damage ass fer finan Thematic Fund and Bank Planned- Interventions Suitable trans risk mechanisms Initial needs training Planning Analytical Poultry Trust Avian Facility AAA ed d ess ict on ent the and to port an to to to least by italics) elop distr d at to and cies priorities sup (ii) awaren for (iii) capacity; infecti at improve an reduce dev implem (in to coverage monitor and to health to targets te agen reduce ely ankB to working to public HPAI, Systems Health, lation immunity to (vii) da capacity (iv), poultry ove of safe iso diagnostic ination c k (vi) control ns y; ucturing d management to other programs riatpor Ongoing:. for Government)by nce fied man ltr ues team levels flo ltry; an d impr Hu virus vacc restr mid-term and iss pou an app tive practices. g identi to provide for sustained pou HPAI current d (i) Surveilla and to 4 effec in interventio and sector human Period CAS GoI progress been confirmed response increase ergin be understanding provincial to to sector man Projects with respon em have (to include and enhance Animal build and capacity conditions adequate, (v) achieve in progress identify in poultry risk modifying marketing Year 5 to the at ment the to eb post- to During ogressrp rviceses yet ng support e and Manage improve actual to hav ongoi ernment. assessingr italics) is and ets rnment of ildingub fo Program (in Risk Gov el needs me come(s) risks targ lev CAS date Out tcouo Goveof the and AI context ecific th capacity cal e the HP wi lo th Disaster and d by to sp, in an damage overall d ed ter nt End-CAS Four: While effectiveness respon outbreaks defin discussions Technical national disas Influenced Pillar to and nd fied Manageme t pro- Crises Outcomes Outcomes spoer clarieb Risk to eenb ameworkrft legislationt amen Parli allengesh y to e CAS eg devastating C yet hav from to Emergentr rattst sah coordinated managemen the agemen al Disaster a to risk man men reat donors for but approv d othe th k ding an risk Remaining e ed. disaster Adjustment and pending Govern HPAI GOI respon disasters, activ need GOI is nza amewor Fr Term Influe for creating poorer Longer Outcomes stitutional pacitya Human come- for C Management and in In es ds and ened Risk able Country Strategic Avian Sustain opportuniti househol Improved Strength Disaster 95° 100° 105° 110° 115° 120° This map was produced by the Map Design Unit of The INDONESIA COUNTRY ASSISTANCE World Bank. The boundaries, colors, denominations and 0 200 400 Kilometers any other information shown on this map do not imply, on STRATEGY PROGRESS the part of The World Bank Group, any judgment on the REPORT legal status of any territory, 15° 0 100 200 300 400 Miles or any endorsement or a c c e p t a n c e o f s u c h SELECTED CITIES AND TOWNS INDONESIA boundaries. PROVINCE CAPITALS NATIONAL CAPITAL MYANMAR MYANMAR VIETNAM PHILIPPINES RIVERS MAIN ROADS 10° 10° RAILROADS THAILANDTHAILAND Sulu PROVINCE BOUNDARIES Sea INTERNATIONAL BOUNDARIES December 2004 - Tsunami in Aceh 135° 140° Banda Aceh A Y 5° A L S BRUNEI 5° 1 Talaud Medan M Natuna PACIFIC OCEAN Besar I Celebes Is. Tarakan Pematangsiantar Pematangsiantar A Sea Simeulue 2424 1919 Morotai 2 SINGAPORE 2323 Manado Nias PekanbaruPekanbaru Tanjungpinang 2525 Ternate Halmahera 3 KALIMANTANKALIMANTAN Gorontalo Waigeo March 2005 -Mentawai Pontianak Lingga 2626 0° 2020 Samarinda Padang 3030 Manokwari Biak Earthquake Balikpapan PaluPalu Sorong Sorong Siberut 4 5 2121 Peleng Obi Obi in Nias JambiJambi Bangka SUMATERASUMATERA Pangkalpinang PalangkarayaPalangkaraya SULAWESISULAWESI Sula Is. Misool 3232 Yapen Jayapura Mamuju CeramCeram Is. 9 IRIAN JAYA IRIAN JA 6 PalembangPalembang Belitung 22 22 2727 Amahai Amahai Fakfak Fakfak 7 Bandjarmasin 2828 2929 Kendari BuruBuru 3333(PAPUA) (PAPUA) Bengkulu Parepare Ambon Timika imika Puncak Jaya Puncak Jaya 8 Java Sea (5030 m) (5030 m) 5° Ujung Pandang Muna Kai Enggano BandarBandar 1111 Banda Is. LampungLampung JAKARTA Baubau 3131 SerangSerang Sea Aru AENIUGGUINEA 1212BandungBandung Is. SemarangSemarang Madura 1010 1313 AUPAPAP SurabayaSurabaya Wetar JAWA Babar Tanimbar Yogyakarta 1616 1515 Lombok Sumbawa Alor Moa Is. May 2006 - Earthquake in Bali Bali Raba Raba Flores 1414 Merauke WENEWN Yogyakarta and Central Java Denpasar MataramMataram Ende Arafura Sea 1717 1818 TIMOR-LESTE PROVINCES: 10° Waingapu Sumba Timor 10° Kupang 1 NANGGROE ACEH DARUSSALAM 12 JAWA BARAT 23 KALIMANTAN TIMUR 2 SUMATERA UTARA 13 JAWA TENGAH 24 SULAWESI UTARA 3 RIAU 14 D.I. YOGYAKARTA 25 GORONTALO 4 SUMATERA BARAT 15 JAWA TIMUR 26 SULAWESI TENGAH I N D I A N O C E A N 5 JAMBI 16 BALI 27 SULAWESI BARAT 6 BENGKULU 17 NUSA TENGGARA BARAT 28 SULAWESI SELATAN AUGUST 7 SUMATERA SELATAN 18 NUSA TENGGARA TIMUR 29 SULAWESI TENGGARA IBRD 8 LAMPUNG 19 RIAU KEPULAUAN 30 MALUKU UTARA 15° 15° 9 BANGKA-BELITUNG 20 KALIMANTAN BARAT 31 MALUKU 34976 2006 10 BANTEN 21 KALIMANTAN TENGAH 32 IRIAN JAYA BARAT A U S T R A L I A 11 D.K.I. JAKARTA 22 KALIMANTAN SELATAN 33 PAPUA (IRIAN JAYA) 115° 120° 125° 130° 135° 140°