Report No. 5318-ND Indonesia The Major Tree Crops: A Sector Review A Study of the Prospects for Rubber, Oil, Palm, and Coconuts during Reperita IV (1984-88) April 15, 1985 Projects Departmnent East Asia and Paciic Regional Otfice FOR OFFICIAL USE ONLY Docu-mt of the World Bank 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. CORRENCY EQUIVALENTS Before November 15, 1978 ˘1.00 = Bp 415 at Annual Averages 1979-83 1979 $1.00 = Rp 623 1980 ti.00 = Rp 627 1981 t1.00 = Rp 632 1982 t1.00 = Rp 661 1983 $1.00 = Rp 909 b/ 1984 Conversiom used in this report Sl.00 = Rp 1,000 a/ Unless indicated otherwise, the sign -$- in this report refers to United States dollars. bJ On March 30, 1983 the Rupiah was devalued from $1.00 = Rp 730 to - 1.00 = Rp 970. FIS CAL YEARS Governw-lt and Bank Indonesia - April 1 to March 31 State Banks and PTPs - January 1 to December 31 FOR OFCIAL USE ONLY GLOSSARY AAEIE Agency for Agricultural EAucation, Training and Extension Agraria see Dit-Gen Agraria ARP Assisted Rubber Replanting Project Bakosurtanal Badan Kbordinasi Survey dan Pemetaa Nasional (National Coordinating Agency for Surveys and Napping) Bappenas National Development Planning Agency Bapengko Badai PengeIola Kopra (Copra Marketing Board) Bapepam Badan Pelaksana Pasar Modal (Capital Market Executing Agency) BBD Bank Ruml Daya BEI Bank Ekspor Impor Indonesia BI Bank Indonesia Bims Bimbingan Nasal SBae a ahan Makaman (Mass Agricultural Intensification Program) Bina Program Directorate of Program Developmemt BKEI Badan Koordinasi Per-anaiu Modal (Capital Investment Coordinating Board) nRI Bani Rakyat Indonesia BIU-BlHN Biro Tata Usaha-Badan Usaha Ml1ik Negara (Bureau for State-owned Enterprises withtn a Government Department) CPO Crude Palm Oil _ C Coconut Working Centre Dit-Gen Agraria A directorate-general in the Department of Home Affairs dealing amongst other things, with rural land surveying and mapping Disbun Dinas Perkebunan Daerah (Regional Estate Crops Service) Dit-Gen E Directorate-General of Estates DOA Department of Agriculture DOF Department of Pinance DTE Dana Tanaman Ekspor (Export Crops Fund) Estate A commercial tree crop or perennial holding larger than 25 ha Estate Company A company operating estates FFB Fresh fruit bunches (oil palm) GCC Group Coagulating Centre 001 Government of Indonesia lak Milik Land Title (freehold) HGU Hak Guna Usaha (land title, right to use) INPRES Instruksi Presiden - a special fund used under Presidential Instruction to facilitate project activities before standard administrative arrangements have been finalized. I This doment has a resricted distribution and may be used by recipients onbr in the performance of r their oriia dues Its contents may not ohoerwise be dbicoed without World Bank authorizaUltio -ii- IPEDA, Iran Dangunan erah (land tax based on estiuted production potential) J1D Joint Marketing Office Cantor Pemasaran Bersama) IVC Local-foreign joint venture companies I Wredit Irwestasi Kecil (SmaU InvestIet Credit) R1uuil Kantor Inspektorat Wailayah (Regional Inspectorate of DOA) LPP Iebaga Pendidian Perkebman (Estates Training Institute) NES NucleLs Estates and Smallholders Project (in thi report used to refer solely to foreign-assisted projects - see also PIR) NSSDP North Snutra Smalaholder Developmet Project Persero State omned compmy PES Private Estates and Smnllholders Project PIR. Perkebaan tnti Rakyat (Nucleus Estates and Smalholder Project) - in this report used to refer solely to whofly GOI-financed projects. PIR Lokal PIR Project (mainly for local farmers) P1I Rhusus PIR. Project (mainly for transmigrants) PLPT Penyaluh Iapangan Pertanian Terpadu (Village Extension Worker) IMU Project Management Unit (in this report refers to such units handling GOI Smalbholder Rubber and Coconut Replanting schemes - SRDP, SC)P and PRPTE) P4 Proyek Penixikatan Produksi Pertanian (Estate Crops Upgrading Project) PNP Nerusahaan Negara Perkebunan (Deprtmental Estate Enterprise) - see also PTP. PRPTE Proyek Rehabilitasi dan PereuaJaan Tanaman Ekspor (Export Estate Crops Rehabilitation and Replanting Project) PT Pernsahaan Terbatas (Limited Liability Company) FTP Perseroan Terbatas Perkebunan (State-owned Timited Liability Eatate Compaay) - in this report PTP also refers to PNP unless context indicates otherwise. Repelita Rencana Pezbangunan Tima Iahun (National Five-year Development Plan) SBPN Staf Bina Perusahaan Negara (Former Non-structural Agency of Expert Staff in DOA for State-owned Enterprises) SCDP(U) Smallholder Coconut Development Project (Unit) SRDP(U) Smallholder Rubber Development Project (Unit) Serah Pakai Right to transfer land use Team Thusus Special team in Dit-Gen E for estate projects INONESIA HE MAJDR. REE CROPS: A SECTOR REVITh Table of Contents Pag THE EXECUTIVE SUMKARY ............. ..................... vii - sii CELATE I. THE TRFE CROPS SECTDO ................. ................... 1 Introduction 3..............................**...... 3 Overview of the Sector ... ...................................... 4 Structure of the Tree Crops Sector ...... .......................11 Government T>nstitutions Involved in the Sector ................. 13 Approaches to Smallholder Tree Crops Development .... ........... 16 History of the SmalIholder Programs ............ ................ 17 II. THE MARKET OUTLOOK FOR RUBBER, OIL PALM AND CODNNUTS ........... 21 Introduction ................................................... 23 The Outlook for Rubber ........ ................................. 23 The Outlook for Palm Oil ........... ..................... 28 The Outlook for Coconut Oil and Fresh Nuts o ....... ........ 32 Forecast of Domestic Edible Oil Surplus and Deficit in Repelita IV ......... .................... ......... 36 III. ACHIEVEHMES UNDERL REPELITS III ................................. 39 Plantings ..............................o..................... 41 Organization, Management and Planning..... .........*........... 44 Land Availability and Suitability ................ .............. 52 Strategies and Options for Tree Crops Development .............. 53 Marketing ........ ....................................... ....... 59 FiTance .*......................*... 60 F-Inncin.g Smallholder Developmet_ .... ..................... ... 62 Financing Estate Development.. ... ........ ............ .. ..... 67 External Assistance ...................................* 72 The principal authors of this report are Geoffrey Fox and Philip Melkye (consultant). John Greenwood and Dennis Notley made substantial contributions. The report reflects the situation in the tree crops sector in mid-1984. A draft was discussed with Government in December 1984. - iv- Page IV. REPELITA IV - POGRAM AND STP-ATEGIIS ......................-,,, 75 Repelita IV Planting Targets ................................... 77 Selecting Strategies for Tree Crops Development in Repelita IV ............ .......... .. ............ 79 Defining a Planting Program for Repelta IV .................... 86 Processing and Mill Requirements .............................. 88 The Cost of the Analyzed Program ............................... 90 Sectoral Context of the Analyzed Program ....................... 95 V. FINANCIAL. I XPICATCS - ESTATES .. .................... 99 General o...... o**. ..101 enveralent Reuati .............. ................-.......... ...... 101 Market Regulatzion *. ..........* *.... ....*... ......... 105 Requirements to Support Smallholder Development .... ....... ...... 106 Mobli7ing Private Capital. ................ ......... 108 Financial Resource Gap - Public Sector Estates ................. 111 Capital Markets ........... ..... ,.......................... ....... . 1.16 Funding the Program - Areas for Attention ...................... 118 VI. FINANCIAT IMPLICATIONS - SMALLHOLDER, DEVELOPMENT ............... 121 Capital Requirements ..............*******...**...... ............ 123 Indirect Cost Recovery .................. .-......... 124 Credit Schemes .........**9 ................................ 127 Summary of Possible Funding Sources .......... **...o..... ........ 139 VII. LAND REQUMIRDINIS FOR TE REPELITA IV MREE (ROPS PROGRAM ....... 141 Land Area Required for Tree Crops in Repelita IV ............... 141 Site Identification and Alienation ............................. 142 VIII. MANPOWER. REQUIREKENTS AND ThAINING .................... . ........ 145 Introduction ......................9 ............................ 147 Repelita III Training Revieved 9........... *.......-.......*...... 148 Repelita IV Training Requirement ........... ................... o 149 Implementing Manpower Training in Repelita IV ................... 150 Recommendations ...... * ......... .. ........................ 153 v~~ IXL ORGANIZATION AND M&AGMENT OF THE SECTOR IN REPELITA IV ....... 157 Options for Improvezent of the Organization and Nanagement of Smalholder Development ...................... 159 Options for Improvement of the Organization and Management of the PTPs and Private Estates ................. 162 Sector-Wide Options for Improvement of Tree Crops Operations, Processing, and Marketing of Smallholder and Estate Produce ................ ................ ......... 165 X. RECOHMENDATIONS FOR AN ACTION EROGRAM TO FACILITATE IMPLEffEN- TATION OF THE DREE (ROPS HLOG1AM IN REPELITA IV .............. 169 I. ERINCIPAL RECOMMENDATIONS ..... .......... ........... 169 Recommended Actions for Institutional Development of the Sector .. ...... ...... .......... oo..o ........ 169 Recommendations for Management and Manpower Development of the Sector .....o ......... .............. 170 Recommendations for Financial Development of the Sector .......o....................................... 171 II. OTHER RE 0MMAIDATIONS .......... .... .... .. .. ......... ...... 172 TABIES IN TEXT A list of text tables is given in the detailed index at the start of each chapter. Data in all text and amnex tables are report estimates, unless another source is indicated. ANNXES TO THE CHAPTERS Annexes are numbered 1, 2, 4, 6 and 8 to correspond to the chapters. Annex 1 .............................................................o 177 Annex 2 ...... ... -o -............*........**......... 188 Annex 4 ...o ..... ....-**........**.*...b*..... 201 Annex 6 ..... 220 Annex 8 *.0 ... *.............*...... 232 Map: IBRD A18752 - VI - 7;':K r '- t4 4ak - V:i TEE EXECUTIVE SUJMKARY Index Page Background to the Sector ........................,, ix Economic Justification for an Expanded Program ............... x Structure of the Sector: Smallholdings and Estates ................. x Program Responsibility and Strategies ...... .... ................. xi The Suggested Program in Sumnary ...... ..............................x iii Investment Coats .................................................... xiv Financing Sources ...... ............................................. Xiv Institutional Problems ,,,,,,,,,,,,,,,,,,,...... Xvi Trainiug ........................................................... xviii Major Recommendations ............................................... xix Tables in Text 1. Planting Progras ............................................ xii 2. Development Costs in 1984 ........................................ xiii 3. Estimated Costs of a 1 million ha Repelita IV Tree Crop Program . xiv 4. A Possible Financing Plan for a 1 million ha Program .... ........ xv Ii - ix- THE EXECUTIVE SUMMARY The Main Findiugs and Recommendations of the Report Background to the Sector 1. Rubber, oil palm, and coconuts together occupy one-third of the cropped area in the country, provide employment and cash in-ome for one of every eight people in the labor force, and account for about 4(X of agricultural export earnings, excluding timber. In future years, these three crops are expected to acquire an even greater importance, since plantings have been sharply accelerated in recent years and production will rise rapidly as these young high yielding trees come to maturity. Tree crops also provide a base of growing importance for development of related processing and manufacturing industries relying on the crops for raw materials. Indonesia is already the second largest producer in the world of rubber and coconuts, and its much younger oil palm output accounts for nearly one-fifth of world supply. Thus the three major tree crops are important not only because of their role in the national economy but also because of their large, and growing role in world markets. 2. Major Government attention to the three tree crops developed in the early 1970s, a decade after nationalization of foreign-owned estates. The Government launched an estate rehabilitation program and initiated programs for reaching the many hundreds of thousands of smallholders who have traditionally dominated coconut and rubber production (oil palm is almost exclusively an estate crop). By the end of the decade the Government had worked out program strategies which, supported-by improved Government finances resulting from the sharply higher oil income, permitted plantings to be rapidly increased. Some 540 000 ha of rubber, oil palm, and coconuts were planted or replanted during Repelita III. This was an impressive accomplishment, and the Indonesian tree crop planting program became the largest in the world. Such a large program required the identification and evaluation of huge areas of land; the employment and training of thousands of new managers, administrators, technicians, and farmer leaders; the expansion and coordination of the activities of the dozen or so Government agencies that contribute to the program; and the allocation of much larger sums of money to this sector of the economy than ever before. It is scarcely surprising that a number of problems have emerged which today act as serious constraints on the system's implementation capacity. Despite these problems, the Government will try to approximately triple the program during Repelita IV, planting 1.5 million ha compared to the 540,000 ha during Repelita III. This report considers that a feasible, but still optimistic, goal for Government project planting would be about 1 million ha, excluding private estate plantings. The main reason for this conclusion is the seriousness of the constraints on implementation capacity as the program has expanded. We see little hope that more than 1 million ha could be planted, at acceptable standards, even if sufficient funds were made available. As-it is, we expect difficulty in x financing the program we suggest and because of this difficulty, the report pays considerable attention to how the program might be funded. A program of 1 million ha of good-quality plantings would represent a near doubling of what was achieved in Repelita III, and would be a major accomplishment. Economic Justification for an Expanded Program 3. Both the Food and Agriculture Organization and the Bank have studied the long-term market outlook for rubber, oil palm and coconuts. Although there are bound to be bad years as well as good, the general outlook is encouraging, fully justifying the large production increases that will result from the Indonesian program and from planting programs in other countries. Production costs for each crop in Indonesia are low enough to provide an attractive return on investment, both for the national economy and in terms of private financial returns to smallholders and estates. Indeed it appears probable that project smallholders will be able to attain the target income of Rp 1,500,000 per family (before debt service payments) by about 1995. Structure of the Sector: Smallholdings and Estates 4. Today Indonesia has about 3.0 million ha under coconuts, 2.5 million under rubber, and 0.4 million under oil palm, the newest and fastest-growing of the major tree crops. Smallholdings account for 86% of the planted area and 68% of the production of estate crops, mainly rubber and coconuts. 1/ Oil palm has been almost exclusively grown on estates. Traditionally, smallholder tree crops have been grown under low input/low management regimes, in part because they are often sources of secondary income. Major problems on smallholdings are the low genetic potential for yield, and the age and poor condition of the trees. Government estate companies are organized as PNPs or PTPs. 2/ At present there are 26 such companies, of which 12 are rubber dominant, 2 oil palm dominant, 8 non-tree crop and 4 mixed crop companies. Yields in PTPs are substantially higher than for smallholdings, and usually better than for private estates. However, weaknesses in staff training, financial management, and planning still constrain performance in many PTPs. Despite recent improvements in accounting, most corporate financial plans 1/ In Indonesia "estate" crops include not only all tree crops such as rubber, oil palm, coconut, cocoa and cloves, but also such industrial crops as sugar, cotton, tobacco, and pepper. This report examines only rubber, oil palm and coconuts. 2/ PNPs are departmental trading enterprises operated on commercial lines, with capital provided by the Ministry of Finance. Over time, the PNPs have gradually been converted to PTPs, which are limited liability companies with the Government as the sole shareholder. There is now only one PNP. For simplicity, this report will refer to PNP/PTPs as PTPs. - xi - continue to overstate available funds and cash flow surpluses. In evaluating investment options, there is often inadequate attention to economic appraisals or the PTPs' relative capacity. Private estates are important in rubber, oil palm, and coconats. There is a legal maximnm on the amount of land an Indonesian can own, and foreign ownership of agricultural land is barred. Even so, private estates with rights to use land account for lOZ of estate crop prodaction, including 21Z cf estate rubber production by foreign private companies. Program Responsibility and Strategies 5. The Directorate General of Estates (Dit-Gen E), within the Department of Agriculture, is responsible for the overaU development of estate crops. Team Khus-us, a non-structural team responsible to the Directorate General of Estates, was established In 1979 to determine implementation policies and monitor implementation of all NES and PIR projects. 3/ To date, the Government has used two basic strategies for promotiTng smallholder tree crop development, one relying on project management units (RfUs) and the other on large public sector estates. Under the PMU strategy, management units are created by the Dit-Gen E in areas of smallholder concentration. Under the partial approach-, smallholders receive extension and planting materials (generally for cash), and the farmers are responsible for purchase of other inputs and for the maintenance of their trees. In the -comprehensive approach-, farmers receive planting materials, fertilizers and herbicides, a cost of living allowance equivalent to all or part of the cost of their labor input, and intenslve extension support from the PHU. The comprehensive package is made available on long term credit from BRL The major PFU program is termed PRPTE (Proyek Rehabilitasi dan Peremajaan Tana-an Ekspor). This is now the largest of the Indonesian programs for smaliholder rubber and coconut development. Uader the nucleus estates strategy, the Government assigns tracts of unused land for development of block plantings by the PTPs. Part of the plantings become nucleus estates owned by the PTPs and the remainder is allocated to smallholders who receive their inputs and extension and marketing services from the estates. The GOI budget provides funds to the PTPs as contractors to clear the land, establish and maintain the trees to maturity, build infrastructure, and provide employment to the settlers during the developuent period. Participants then assume full responsibility for their trees and for repayment of the main development costs. When this debt is paid off, settlers receive clear title to their land. 6. The Government's planned and actual planting programs for the three major tree crops during Repelita III are shown in Table 1. Over these five years, there was a shortfall, compared to planned levels, of 30%, spread across all three crops. Even so, the results are impressive and 732 of the new plantings were on smallholdings. 31 NES and PIR projects are both based on the nucleus estate strategy, the former with external assistance and the latter with 100% government funding. Prior to 1983, there were two separate implementing teams for these programs. - xii- Table 1: PLANTING PROGRAMS a/ ('000 ha) Crop Repelita IfI Repelita IV Repelita IV Planned AcCual GOI Targets Bank Sugsested Program Rubber 437_3 243.4 648.0 378.0 Oil Palm 75.9 L19.9 480.0 313.0 Coconuts 267.9 178.3 346.0 320.0 TOTAL 781.1 541.6 1,474.0 - ,on.0 a/ Cross comparisons between the official plan-ing targets aid, in the case of Repelita III, between the planned and actual results are possible in general terms although there are minor differences in the inclusion/exclusion of certain data. 7. The experience gained during implementation of Repelita III provides a mumber of useful observ.aions on the strengths and weaknesses of the various strategies. Utilization of the public sector estates is best suited for large-scale planting of new areas and the provision of essential infrastructure in difficult areas which could not otherwise be developed for smallholders. The PMUs are more suited to development of scattered smallhoIdings and particularly the replanting of existing smallholder areas. The extent to which nucleus schemes should be pursued is limited by the management and financial capacity of the estate companies; but the project comitments existing prior to the commencement of Repelita IV, including the very large PIR program, have absorbed almost all of this capacity. The PTPs therefore require a period of consolidation and a more modest level of smallholder planting if the quality of development is to be maintained. Although the PTPs have demonstrated their ability to establish and maintain tree crops they have performed less well as trainers for smallholders and in providing extension particularly for the smallholder food crop areas that are part of all NES/PIR projects. Too often, newv settlement by smallholders in the NES schemes involves the costly provision of housing and infrastructure for people living on or very close to the land to be developed. The percentage of truly landless, poor new settlers in the NES projects is unknown and the socio-economic considerations of NES development require further study. The issue facing Government is whether provision of housing and infrastructure is justified in settlement of local people, or whether the full benefits of the costly nucleus estates system should be restricted to transamigration settlement under NES or FIR projects, leaving the cheaper PMU approach to assist local smallholders. Because of the infrastructure provided and the payment of full wages for all labor, the development for a family under NES/PIR costs approximately $6, 500 compared with about t3, 500 under the PMU schemes. The development costs for different crops and schemes are su-mrized -in Table 2. There is little difference between field costs for each of the crol-: in either of the two ma-In strategies (i.e. NES/PIR and FMI the general name for SRDP, SCDP, and PRPTE programs): it is the infrastructure which makes the difference. While it is not always possible to base projects on the lower-cos., strategy (e.g. oil palm is more suited so block planting), the NES/PIR approach should be used only where new settlement activities are truly warranted. In all ocher cases the PHU strategy offers imuch lower costs. Table 2: DEVELOPMENT COSTS IN 1984 (Rp million per ha) Field Other Total Infrastruc- Total Scheme/Crop labor field costs field costs ture costs costs NES JPIR Schemes Rubber 0.78 1.17 1.95 1.36 3.31 Oil Palm 0.68 1.13 1.81 1.37 3.18 coconut 0.83 1.12 1.95 1.29 3.24 PHU Schemes SRDP Rubber 0.38 1.04 1.42 0.26 1.68 PRPTE Rubber 0.82 0.78 1.60 0.20 1.80 SCDP-hybrid coconuts 0.46 0.95 1.41 0.10 1.51 -tall coconuts 0.51 0.64 1.15 0.10 1.25 PRPTE-hybrid coconuts 0.62 1.02 1.64 0.05 1.69 -tall coconuts 0.49 0.70 1.19 0.05 1.24 The Suggested Program in Summary 8. Based on the estimated planting capacities of the NES and PHU based schemes for each crop, the report suggests a target planting of about one million hectares comprised of 378, 000 ha of rubber, 313,000 ha of oil palm and about 320, 000 ha of coconuts. These figures exclude the extent of likely plantings by.private estates or joint ventures. The findings of the economic analyses tend to support the Government objectives c..o concentrate PTP development on new block-planting oil palm projects in areas where nev settlement is warranted, on the completion of existing NES/PIR prjjects, and on some limited new NES/PIR transmigration rubber development. The main burden for smallholder rubber development would then be concenntrated upon the PMU-based SRDP and PRPTE schemes. The estimated labor absorption is about 400, 000 man-years annually through Repelita IV. About 81 of this development-phase labor would continue to be needed in the mature period. The combined contribution to GDP of the output of the three major crops by 1988, which is vir-ually unaffected by any Repelita IV plantings, is estimated to reach Rp. 2,950 billion. -Xiv - Investment Costs 9. The estimated investment costs for the Government tree crops program during Repelita IV is about Rp. 4,500 billion in constant prices and about Rp. 6,000 billion after allowing for inflation. These costs are for a program of 1.5 million hectares, which exceeds the Bank's judgment of sysrtm implementarion and financing capacity at acceptable standards. For the Bank- suggested program of 1 million hectares the total investment cost is estimated at Rp_ 3,600 billion in current prices. This figure includes Rp. 450 billion for the large additions to processing capacity that would be needed. Oil palm development would account for nearly half the investments. SmalIholder programs would accoutr for 57% and estate land development for 43Z of total investments. These estimates are shown in Table 3. Table 3: ESTIHATED COSTS OF A 1 MILLION HA REPELITA IV TEM CROP PtOG(AM (Rp billion - current prices) Rubbere Oil Palm Coconuts Total Estates 497 1,024 31 1,552 Smallholdings (incl. NES/PTR programs) 838 632 592 2,062 TCTALS 1,335 1,656 623 3,614 Financing Sources 1o. The report suggests a possible financing plan for the more modest 1 million ha program. While several financing plans might be constructed, the report's approach has been to estimate the amounts that might be mobilized from existing IBRD commitments, prospective leasing/suppliers credits, and from Government budget contributions to non-credit smallholder costs. The sum of these sources leaves a residual that will have to be financed by borrowings from state banks, supported by Bank Indonesia liquidity credits or by further external loans. The results of these estimates are shown in Table 4. - V- Table 4: A POSSIBLE FINANCING PLAN FOR A I MILLION H} PROGRAM a/ (Rp billion at current prices) Z of Financing Estates Smallholders Total Total GOI bulget fueds /b - 352 352 9.7 Internal PTP funds 653 - 653 18.1 IBRD commitments Ic 158 382 540 15.0 Leasing/supl. cralits 69 - 69 1.9 Other borroving /d 672 1, 328 2, 000 55.3 Total 1 552 2, 062 3, 614 100.0 a/ For Government rubber, oil palm and coconut projects only. b/ Excliules the subsidy cost of credit programs and some credit costs of ongoing smalholder projects. c/ Existing commitments and proposed SRDP II only. d / State banks supported by Bank Indonesia liquidity crediits, or further external loans. I1. Under the above plan non-bugetary sources would be carrying a considerably larger share of the financing burden than during Repelita III. Points in generating sufficient finaucing are likely to be (i) improvement of the borrowing capacity of the PTPs through the zorovision of more equity or the conversion of their government debt to equity, (ii) the use of a modest (C) export tax on tree crop exports (but. not if a value added tax is applied to tree crop production), and (iii) additional foreign borrowing. 12. The Government's direct budget contribution would consist of normal funding of the non-credit smallholder costs plus payments (not quantified in Table 4) to the executing banks (mainly BRI) to compensate them for the difference between the 1Z interest to be charged smallholders and the much higher interest they would have to receive to cover their administrative costs and profit. Government would also hold a considerable contingent liability since it has agreed in some cases to assume 71 of the risk for bad debts. Although there are many uncertainties surrounding the sm.alholder credit program, estimates suggest that the total cost of credit subsidies, either direc. from the budget or indirectly via Bank Indonesia liquidity credits, for the 1 million ha program over the full life of the loans in current terms would amount to at leas-t Rp 350 billion based on the optimistic assumptions of 8CC collections for rubber and coconuts and 9(% for oil palm. This level of subsidy does not represent net flows between tree-crop producers and the Government, which require a wider calculation of Government expenditures on, and tax and dividend receipts from, the sector. Such a calculation, made for Repelita III, showed that overall financial flows between the Government and the sector were slightly in favor of the Government (i.e., there was no net subsidy). - Xvi. - 13. On balance, it would seem that the 1 million ha program analyzed in the report could be finanmed during Repelita IV. However, there are many uncertainties in these projections. Therefore, the Government is urged to consider possible ways of reducing program costs. One option that would not reduce planring targets would be to reduce the coverage of labor costs in NES/PIR and PRPTE projects ro the more modest levels used in SRDP and SCDP projects and, where possible, to reduce investment in settler housing and infrastructure in areas where settlement has already taken place. 14. In addition to the general question of finding enough finance to fund a major program expansion there are a number of secondary points about the program's financing that deserve mention: (a) By 1982, budget constraints (both resource and procedural) were evident in the abnormally slow release of funds for virtually all estate crops projects and programs. Disputes over interest rate subsidies have also delayed BRI's release of new credit funds. *b) One State bank, BRI, has done most of the lending to tree crop smallholders. Past efforts to use BRI as an executing (rather than channeling) 4/ bank for smalIholder credit have proved largely unsuccessful. However, this approach still has a number of potential advantages, including more careful selection of borrowers and Improved collection incentives. The Government has recently agreed -o subsidize executing banks, in order to encourage their participation in the program and to secure these advantage s. (c) The financial health of the PTPs deteriorated rapidly during 1981 and 1982, but has since started to recover. The volatility of PTP earnings underscores the need to strengthen their balance sheets to make them eligible for the additional bank borrowings they will need. Institutional Problems 15. The rapid build up in the NES program, and more recently, the increasing demands of the even larger PIR program-have stretched the management and technical capacity of the PTPs to the limit. Much needed manpover and management skills have been diverted from the estates, with the result that their own development programs have suffered. In some cases PTPs are diverting funds to new development in the PIR projects to satisfy government targets, at the expense of routine estate investment to ensure production maintenance of the trees and normal replacement. 16. The record of achievement under Repelita III was to a very significant extent dependent on the institutional support provided by the Dit-Gen E, including Team Rhusus and the Smallholder Rubber and Coconut Development Project Units (SNDPU and SCDPU), Which report to the Director-General but are not part of the formal structure of Dit-Gen E. 41 An "executing- bank makes-loans as a bank, using its own or borrowed funds to finance a particular credit program; a -channeling- bank acts as an agent of Government and receives a handling fee for services rendered. - xvii - At the commencement of Repelita III most of the programs were in their infancy and the staff were new to the task. As additional responsibilities were undertaken, and higher targets set for planting in increasingly diverse project locations in the outer islands, the management capacity within the Dit-Gen E direcrorates and the non-structural units was increasingly stretched to the point that, towards the end of Repelita III, technical quality deteriorated. Achievement of targets came to be viewed as an end in itself, and the growing number of implementation problems as the programs approached their absorptive capacity received inadequate attention. The proposed doubling of the Repelita III program in Repelita IV will require major improvements in-the existing organization and support institutions. 17. There are a number of specific institutional constraints that deserve attention: (a) the dissolution of the Staff Bina Perusahaan Negara (SBPN) which had important functions as controller and coordinator of public sector estate companies' development, particularly in matters of budgeting and technical quality control. Whilst these functions are to be exercised by other bodies including strengthened supervisory boards (Komisaris) of the PTPs, there remains an urgent need for a central cadre of skilled staff for these functions; Cb) functional ambiguities between the non-structural units (Team Rhusus and SRDPU and SCDPU) and directorates of Dit-Gen E have led to duplication of effort and inefficiency, and the eventual weakening of the directorates. Team Rhusus, which was established to assist implementation and monitoring of externally financed NES projects, grew through the course of Repelita III into a multi-purpose institution embracing a great number of the responsibilities of the line agencies, the directorates. In addition to its former responsibilities, it now handles project appraisal, land-use planning, procurement and contract negotiation, special study tasks and project financial planning. Lately it was combined with Team Rhusus PIR Swadana servicing the large number of wholly government financed schemes. It is clear however that the responsibilities of Team Khusus have outgrown its capacity and that considerable strengthening will be necessary; (c) lack of well-defined plans for execution of the allocation of responsibilities of the Directorate of Extension (Dit E), the Agency for Agricultural Education, Training and Extension (AAETE) and the Dinas Perkebunan Daerah staff responsible for extension in the provinces. This situation is further compounded by the lack of a clear policy on the role of the PTPs and SRDPU/SCDPU in extension work once the smallholders crops reach maturity. As the preseut agreements stand, the estates and SRDPU/SCDPU have responsibility to provide extension to their smallholders only until crop maturity; and (d) some uncertainties in the detailed operational relationships between the Junior Minister for Estate Crop Production, the Director-General of Estates and the Secretary-General of Agriculture. This has led to - xviii - delays in decision making, and inadequate coordination of the PTP and smallholder development programs. 18. Of increasing importance as smallholder crops reach maturity is the strengthening of the Directorate of Agribusiness, Processing and Marketing to assist with smallholder product marketing, pricing and cost recovery. The importance the Government attaches to the role of the private estates in smallholder development in Repelita IV will also necessitate strengthening of this Directorate. 19. Another constraint identified over the past years has been the poor planning for allocation of suitable land for settlement. The central problem is the inadequacy or absence of proper site identification and selection before land is allocated to the projects. The resources of Bakosurtanal, the Natioal Coordinating Agency for Surveys and Mapping and the Directorate- General of Agraria, the principal land-use mapping agency, have reached their capacity and Team Khusus does not have the staff to adequately supervise the few qualified local contractors. Assigned land is often not free from title and compensation claims, and there is overlap with other development plans at the central or provincial level. Large areas of land assigned by the provincial governments have also had to be rejected because of unsuitability for food crops and tree crops. The standard requirement of a minimum food crops area of 1.25 ha for each transmigrant farm has resulted in high rejection of transamigration sites, many of which are suitable for tree crop establishment. One estimate suggests that there are some 1.2 million hectares of surveyed land rejected for transmigration which might be used for tree crop NES/PIR settlement. Training 20. Mobilization of sufficient skilled manpower and management to implement Repelita IV presents one of the greatest challenges to the Government. The manpower and training needs of Repelita IV are much larger than the present system can handle. It is estimated that the 1 million ha planting program proposed in the report will require the training of some 23,000 new program staff, plus another 23,000 farmer leaders, at a cost of Rp 18 billion (1984 constant prices). The report does not present a detailed training program for the sector; it does suggest what needs to be done to develop such a program. 21. During Repelita III it was evident that there was a large shortfall in the number and training of staff to implement the program. This manifested itself among other things in excessive low-quality tree crop establishment, some poor site selection, inferior development of infrastructure, and substandard extension for smallholders. Supervision of the Bank-financed projects reveals that funding for training is not adequate and timely and that it may not be viewed in Government as a critical input to the sector. The placement of training in the Dit-Gen E is not well defined and there is a heavy reliance on outside agencies to provide a long, largely irrelevant formal training program of 30 days or more. The Estates Training Institute (LPP) at Yogyakarta has been strengthened to provide technical and management-related training, but it is still in a transition phase concerned -xix - with staff recruitment and training, program development and institutional goal setting. The PTPs, apart from their on-the-job training of junior staff, rely heavily on LPP and other agencies, including universities where training is more academic than practical. The SRDP and SCDP projects have found it difficult to obtain sufficient support from outside agencies to supply training for their well-defined programs and have chosen to do what they can with in-house programs while negotiating for future formal courses from AAETE and LPP. The PRPTE training program relies almost exclusively on courses supplied by LPP, agricultural universities and the FTPs, but again the training is more formal than practical. It is difficult to assess how much of the required training was completed during Repelita III. Indications are that the externally-financed projects achieved from 30-50% of their training objectives and PRPTE about 50% of the required formal training. It has become obvious that many of the 3,800 extension staff lack detailed knowledge of the crops they handle. A considerable backlog of training exists therefore, as Repelita IV begins. Major Recommendations 22. The central problem of the tree crops program over the next five years is to expand implementation capacity to permit the successful planting and maintenance to maturity of 1 million ha., and the orderly handling of the additional crops from maturing Repelita III plantings. There are six critical problems, most of them institutional, requiring early attention. The Bank is more confident of its analysis of the institutional problems identified, and of the general directions in which solutions must be sought, than it is of specific solutions. There is a pressing need to clarify the inter-relation- ships among the principal units so problems will be given the attention which many senior officials know they need. Listed below are the six main problem areas and the Bank's recommendations for dealing with them: (i) Refinement of inter-relationships within the DOA: There is now considerable uncertainty over responsibility for various parts of the tree crop program among senior officials of the Department. The relevant decrees are too general to resolve these uncertainties. For example, there are now serious weaknesses in PTP forward planning and in the control and coordination of FTP development, in defining the tasks for which the implementing agencies are each responsible, in the Integration of smallholder and NES activities, in the coordination of Dit-Gen E and Department of Transmigration work on land availability, in the planning and implementation of programs for processing and marketing of smallholder crops, and in enlisting a larger contriburion from the private estates. The responsibility and the authority of the Dit-Gen E should be strengthened to become the focal point of planning and implementation of the tree crop program. (ii) Readjustment of the Functions of Team Khusus: Team Khusus was established in 1979 to provide special attention for project implementation. The arrangement has worked quite well until recently, when it began to suffer from the accumulation of more functions than were originally intended. This has overburdened Team Khusus and weakened some of the structural units within the Dit-Gen E whose functions have been shifted to Team Rhusus. What is now needed is realignment of functions between Team Khusus and the Dit-Gen El's structural units (whose organization and functions should be reviewed simultaneously). This can probably best be done with the help of one or more working groups, perhaps with outside assistance. The Bank recommends that the Dir-Gen Estates appoint an appropriate working group before the end of 1984, giving it a deadline for submission of its recommendations. (iii) Manpover Trainin: Repelita III saw considerable progress in the development of training institutions, including the growth of LPP and the introduction of in-house training by the units responsible for the SRDP and SCDP projects. Repelita IV will require a much larger expansion of training than was required by RepeliEa III. There is also a need for many more short-term skill-focused courses, conducted by the implementing agencies. LPP should not abandon its role in providing courses for managers and others but it should also become a resource institution capable of training trainers for the implementing agencies and preparing training aids. We recommend the engagement of suitable technical assistance to help LPP develop these two new activities. Our more important recommendation is that the Dit-Gen E establish a Manpower and Training unit of its own to develop in-house training activities by the implementing agencies. The SRDP and SCDP units have started to do this, and provide a model of what is needed. The new unit recommended will need technical assistance from an organization experienced in planning and monitoring large training programs. It might be feasible and helpful to have the same technical assistance source serve both the LPP and the proposed new unit within the Dit-Gen E. (iv) Securing a larger contribution from the private estates: There is potential for harnessing the resources of the private sector in the tree crop program, particularly to assist smallholder development. The Government has recently established a multi-agency team to review incentives to encourage investment in private estates. Preliminary results from this review suggesr that further work is needed before a satisfactory incentive package can be defined. Problem areas that we believe need clarification or change include: establishment of policies and guidelines that would assure timely repayment from the Government of the prefinanced costs of smallholder development. Ar present, private estates are uncertain exactly what costs will be reimburseable and how and when they will be repaid. ... The present ratio between smallholder and estate area development should be reviewed to see if it is unnecessarily burdensome to the private sector. - xxi- Greater certainty for producers and investors would be provided by an export tax formula geared to world market prices and designed to ensure an adequate flow of crude palm oil to the domestic market. In the absence of this, oil palm investors should be guaranreed that they will be permitted to export a reasonable minimum percentage of their production. In recent years, the permitted export percentage has been subject to wide and unpredictable swings, forcing producers to accept the burden of assuring adequate domestic supplies of cooking olls at prices lower than export. elimination of uncertainty surrounding the right of estates to establish down-stream processing and marketing activities; these would offer them additional earning opportunities, now clouded by uncertain Government policy. As far as foreign investment is concerned, confusion arises over whether the Government does or does not wish to have new joint foreign ventures in the sector. Resolution of this issue, of course, is sensitive and difficult, but it needs to be faced if substantial private investment in the sector is to be achieved. (v) Finding the money: The report analyzes the costs of the tree crops program and uses parallel Bank work on Government finances to assess financing possibilities for the sector. There is good reason to believe that a program of 1 million ha can be financed, but that anything much larger would quickly run up against financial limits. The report shows the relative contributions that could be expected from five sources, i.e., the internal cash flows of PTPs, BI liquidity credits, borrowings from domestic banks, budget appropriations, and foreign borrowing. The financing plan suggested shows a smaller reliance on budgetary funds than the Government's present plans and a greater reliance on bank borrowing by the PTPs. It also reflects the Government's decision to base smallholder financing on bank-mobilized funds rather than on Government funds distributed through the banks. One important financial recommendation is that Government agree to convert a substantial part of PTP Government debt into equity, strengthening balance sheets of these companies enough to permit greater borrowing from banks. There is also a need to reduce the need to borrow. For example, PTPs have sometimes borrowed to pre-finance Government investment in smallholder plantings. It is equally important to reduce the size of loans which smallholders must assume, both in NES/PIR and in PRPTE projects. We recommend Government consider reducing the provision of housing and infrastructure in NES/PIR projects, and the amount of wage payments in NES/PIR and PRPTE projects, to more modest levels as is the case in the SRDP and SCDP projects. (vi) Simplifying procedures for the release of, and accounting for, budgetary funds: There is little question that program implementation is continually being frustrated and slowed down by unnecessarily cumbersome rules and procedures that govern the release - xxii - of funds to projects and the subsequent accounting for their use. There have recently been a few positive steps to simplify procedures, such as the agreement to prefinance the World Bank share of project funding from the BUN instead of from DTE, and revised procedures for the release of credit funds from BRI. The Bank believes that several additional changes are necessary and possible. We therefore recommend a full review of present budgetary mechanisms that affect the flow of finance to tree crops projects. Pending the results of a full review, we recommend the streamlining of rules in order to: ... Give more discretion to project managers to transfer funds between line items within budget headings. Approve indicative budgets or requests for funds (DUPP) on a two-year basis, with final allocations agreed annually. ... After the normal detailed review of annual budgets, eliminate further Bappenas reviews and approvals for all implementation items, i.e., all review of contracts, expenditures, and budget revisions (provided the budget is not increased). .. Increase reliance on post audits to ensure that money is properly spent and avoid time-consuming reviews during the year. Secure release of funds for use against authorized budget items without restrictions, and institute a procedure to allow projects to account for budget expenditures prefinanced by PTPs or from other sources. CHAPTER I: THE TREE CROPS SECTOR Index Page Introduction ................ ** ...........*.............................. 3 Overview of the Sector Gross Area ...................................... 4 Rubber Area and Production .... . 5 Oil Palm Area and Production .................................... 7 Coconut Area and Production ................ . ............. . .... . 7 Export Earnings ................................................. 8 Employment in the Sector ...................9...... 9 Structure of the Tree Crops Sector Smallholdings ............... .. ........................ 11 Estate Holdings . . ............ ... ... ... 12 The Government-owned Estates .. 12 Government Institutions Involved in the Sector Department of Agriculture (DOA) ............................. .... 13 Directorate-General of Estates (Dit-Gen E) .............. . ....... 14 Office of the Junior Minister ............ ................... . . -. 14 The Banking Sector .............. .......... .. 15 Anproaches to SmallholMer Development Nucleus Estates and Smallholders (NES/PIR) ....... ............... 16 Project Management Units (PMUs) .. ............................... 16 History of the Smallholder Programs Project Management Unit Programs................................. 17 Nucleus Estates and Smallholders (NES) Programs ............... .. 19 Tables in Text 1.1 Area Under the Major Tree C r o p s .............................. 5 1.2 Production of Tree Crops by Enterprise (1979-1983) ........... 6 1.3 Exports by Commodity .... .9 ...... 9 1.4 Labour Inputs by Crops ...................................... . 10 - 2 - Y--P2S- ,4 4- A/w 3 CHAP'TER I: THE ThEE CROPS SECTOR I/ Introduction 1.01 The onset in 1981 of the worst international recession in fifty years dramatically changed the macro-economic situation in Indonesia. In the five years before 1981 the economy was growing at an impressive 8Z per annum due mainly to increased oil revenues. FoUowing the sharp decline in ommomdity prices and orld trade, particularly the major weakening of the international oil marker, grouth in the economy slowed to 2.6% from 1981-83. The Government was suddenly faced with the need to reduce its current account deficit, which widened from 3% of GNP in 1981/82 to 6% in 1983/84, and at the sme time minimize the cost in domestic employment and welfare. A number of short-term measures have already been taken. These include devaluation of the rupiah, reduction in public investment programs, price increases In subsidized commodities and restrictions on imports. In the medium term Indonesia will need to intensify efforts to reduce its dependence on oil as a source of foreign exchange earnings and increase public revenues and domestic savings. Growth of the non-oil economy will be assisted by down-stream processing industries based on agriculture, particularly tree crop production. 1.02 The agriculture sector is of overwhelming importance to the majority of Indonesians. Nearly 80X of the population of 160 m1llion live in rural areas and agriculture is the major source of income for about two-thirds of rural households. Growth in the purchasing power of the sector will foster growth in both manufacturing and the non-trade sectors of the economy (construction, transport, utilities and services), in particular via public sector purchase of goods and services (especially labor) out of oil revenues and the multiplier effects of these purchases. The expansion of agricultural commodity exports will have an increasingly important influence on the country's balance of payments. 1/ In Indonesia, the term 'estate crops- is used to mean the tree crops (such as rubber, oil palm, coconut, cocoa, cloves) together with other industrial crops, such as sugar, cotton, tobacco and pepper. This report, however, focuses on the three principal tree crops: rubber, oil palm and coconut, and for purposes of the report the term tree crops refers to these three crops only. - 4- 1.03 The central role of agriculture in the current structural adjustment of the economy is r-.flecred in the fourth five-year development plan, Repelita IV. which began on April 1, 1984. Repelita IV includes extensive development activity for most crops, but the potential of the major tree crops, rubber, oil palm and coconut to improve foreign exchange earnings, import substitution, income generation and employment in the rural sector has resulted in Government planning for the most ambitious development program for these crops ever attempted, worldwide. The plan calls for the planting of 648,000 ha of rubber, 480,000 ha of oil palm and 346,000 ha of coconut, at a cost of t4.5 billion in 1984 constant terms. In view of the severe financial constraints facing the Government and the large investment of management and m.anpower resources required to accomplish such a program, the Government invited both the FAO and the World Bank to review its plans for the tree crop sector. The FAO has reported separately (Report No. 101/83 TA.INS 41, November 1983) on the market outlook for tree crops commodi ties and on production options. The present report examines the strategy and program options, the constraints on implementation and management, the manpower and training implications, the financial alternatives, and the impact on capital resources, and provides recommendations for the Government in meeting the needs of the sector in the next few years. Overview of the Sector 1.04 Gross Area. The total area of estate crops in Indonesia comprises about 8.9 million ha. Rubber, oil palm and coconuts together occupy about 5.8 million ha or 65X of all estate crops, and about 33% of the total cropped area of Indonesia. Details of total areas of the three crops since 1979 are given in Table 1.1 and area data for all estate crops are provided in Annex 1, Table 1. Coconuts now comprise about 50% of the area under the three major tree crops, rubber 43Z and oil palm 6%. Some 80% of the rubber area and virtually all the coconuts grown in Indonesia are cultivated by smallholders. Oil palm, however, has been almost exclusively an estate crop because of the need for rapid transport of the fruit to the mill, and the absence of P market for smallholders fruit. Smallholder oil palm cultivation began in 1978 and is all under supervision in official schemes. -5- Table 1.1 AREA UNDlER THE MAJOR TREE CROPS (hectares) 1979 1980 1981 1982 a/ 1983 b/ Rubber Smallholder 1, 926, 158 1,945,776 1, 994, 196 1, 995, 601 2, 018, 841 PNPIPrP 187, 040 190, 339 202, 295 231, 589 238, 117 Private estates 270, 742 246, 375 243, 630 245, 382 247, 221 Subtotal 2, 383, 940 2, 382, 490 2,440,121 2,472, 572 2, 504,179 Oil Palm Smallholder 3,125 6,175 5,695 5,928 5,934 P'6P/PTP 176, 408 199, 538 213, 264 259, 281 261, 008 Private estates 81, 406 88, 847 100, 008 100, 676 101, 894 Subtotal 260, 939 294, 560 318, 967 365, 885 368, 836 CocoUt Smallholder 2, 520, 150 2, 622, 206 2, 752, 386 2. 846, 610 2,901, 413 FTrIPTP 10, 405 15,050 15, 075 17, 610 17, 645 Private estates 48,230 43,167 57,401 57,401 58, 601 Subtotal 578,785 2, 680 423 2, 824, 862 2,921,621 2,977,659 DTAL \ 5,223 664 5,357,473 5 583, 950 5,760,078 5,850,674 aI Preliminary figures. b/ Estimated figures Source: Directorate-General of Estates. 1.05 Rubber Area and Production. Rubber is grown on 2.5 million ha of which 8(Z is farmed by smallholders. About 2a: of the area is evenly dividle between private and Government-ownel estates. Production from each of the three major tree crops in the last five years is shown in Table 1.2 and further details for all estate crops in Annex 1, Table 2. Indonesia's rubber production climbed from 682,000 tons in 1961 to 960, 000 tons in 1981 but fell to about 860, 000 tons in 1982 due largely to smallholder witbdrawal from the market at a time of low commodity prices. Production in 1983 is estimated at 1 million tons. While Indonesia is the world 's second largest producer of rubber, the average growth in production of 1. per annum between 1961-1982 has not kept pace with Indonesia's neighbors. Indonesia's share of the ASEAN rubber market fell from 43 in 1961 to 3Z in 1980 due mainly to ambitious replanting programs in Thailand and Malaysia. Thailand achieved -6- replantings of 29, 000 ha annually in the early 1970s, rising to over 60, 000 ha per year at present, while Malaysia has planted 20, 000 ha and replanted 10, 000 ha annually since the mid 1960s. The Indonesian industry continues to be dominated by about 1.8 million ha (over 7CC of the total rubber area) of low-yielding. over-aged trees grown from unselected seed. Excluding early programs to replant old rubber on a limited scale, most Indonesian smallholder planting programs since 1976-77 have emphasized new plantings on large tracts of uninhabited land in the outer islands, and most of these areas are only now coming into product ion. As a result of the extensive senile and neglected rubber in the smaltholder areas, which is tapped only in periods of favorable prices, the average smallholder yields in Indonesia remain low at about 350 kg/ha. In comparison, average smallholder yields in Thailand are 450 kg/ha and in Malaysia 640 kg/ha. On Government-owned estates which have retired old trees and replanted with clonal planting material, average yields are estimated at 850-950 kg/ha. Details of the market outlook for the rubber subsector are provided in Chapter II (paras 2.02 to 2.10). Table 1.2 PRODUCTION OF TREE CROPS BY ENTERPRISE (1979-1983) (tons) 1979 1980 1981 1982 a/ 1983 b/ Rubber SmalIholder 673,151 689,069 642,329 549,065 688, 888 PNP/IPTP 169,562 185,815 193 378 190,083 196,968 Private Estates 121, 255 114, 483 127,520 121,802 131,157 Subtotal 963, 968 989, 367 963, 227 860,950 1, 017,013 Palm Oil Suallhold er 760 629 913 947 978 PNP/PTP 438, 756 498, 908 532,513 594,417 678, 720 Private Estates 201, 724 221,544 265,616 278,690 292,446 Subtotal 641, 240 721, 081 799,042 874,054 972, 144 Coconut (Copra Equivalent) Smallholder 1, 596,191 1,629,726 1,764,567 1, 710, 697 1, 605, 129 PNP/PTP 3,612 3, 701 3,387 3,177 3, 043 Private Estates 22, 284 32,646 24,468 25,528 19,978 Subtotal 1, 622, 087 1, 666, 073 1, 792, 422 1 739, 402 1, 628, 150 TOTAL 3, 227,295 3,376,521 3, 554,69'1 3 474, 406 3, 617, 307 a/ Preliminary figures bI Estimated figures Source: Directorate-General of Estates 1.06 Oil Palm Area and Production. Indonesian oil palm is produced on 369,000 ha of which about 70Z is held by 10 Government-owned estates and 282 held by about 18 private national and private foreign-national joint venture companies- Only 2Z of the total area is at present in smallholdings. Indonesian palm oil production at 970,000 tons in 1983 represents 18Z of the world's toral production of 5.5 million tons. Indonesian production has increased 1OZ per annum on average in the last five years from 641,000 tons in 1979. The rate of increase reflects the substantial plantings undertaken since 1974, with plantings on Government and private estates averaging 20,000 ha per annum. Production increases are expecred to total about 30% In the next five years reaching 1.36 million tons in 1988 even if there is no further new planting. Rapid increases in production are expected to continue since about 120,000 ha of the total oil palm area of 369,000 ha, or 32%, is still immature. Less than 1% of the oil palm in Indonesia is over-aged and average yields on Government and private estates at 18 tons FF3/ha are expected to rise further owing to the low average age distribution. Palm oil production has assumed critical importance in the Indonesian economy since the deficit of lauric oils (coconut and palm kernel oil) has required diversion of palm oil from the export market to meet domestic demand for cooking oils. By 1978, GOI regulations reserved 362 of total palm oil production to the domestic market, or about 290,000 tons. By 1981, about 489,000 tons or 612 of production were allocated for domestic consumption and requirements in 1984 are expected to be for 632,000 tons. The world trade in palm oil, and the domestic market, production and prices are discussed in Chapter II (paras 2.11 to 2.21). 1.07 Coconut Area and Production. Indonesia is the world's second largest producer of coconuts after the Philippines, producing about U million tons of nuts in 1983 on a mature area of about 2 million ha. About 982 of this production comes from smallholdings. Indonesia's coconut production has remained virtually unchanged in the last five years, varying between 10.7 to 11.0 million tons. In copra equivalent terms, production has been stable at about 1.6 m1llion tonS . This lack of growth in production has occurred for three main reasons. First, overaged trees are now estimated to have reached 297,000 ha or lO of the total area and are expected to increase at a rate of 38,000 ha p.a. While annual new planting and replanting is estimated between 30,000 ha and 60,000 ba per annum in the last 10 years (depending on the level of spontaneous plantings assumed), the level of planting has not been sufficient to reduce the overall average age distribution or increase production. Second, the apparent large increases in total areas between 1979-1983, when Government sponsored programs were intensified, represents immature holdings not in production. Third, selling prices for copra in producing areas have increased only 2% in total over I years -8- thereby discouraging plantings and productivity. Domestic on-farm consumption of fresh coconut, including klentic oil 1/, is believed to have increased from about 30% of total production in 1979 to between 50-60Z in 1983. 1.08 Export Earmings. The importance of tree crops in the exports of Indonesia is shoun in Table 1.3. Agricultural exports have comprised as much as 28Z of total exports in 1978-79. The principal estate crops of rubber, palm oil, coffee, tea, tobacco, pepper and copra cake traditionally make up about 80-85Z of agricultural exports exrluding timber. Three main factors have placed increasing pressure on the importance of tree crops as exports. First, in addition to the drop in the value of oil, liquified natural gas (LNG), and mineral exports in 1982-83, timber which provided as much as $2.2 billion in 1979/80 export revenue declined to only $0.6 billion in 1982-83 as a result of the Government's policy to phase out log exports and reap greater value-added in plywood production. The plywood industry, stiU in its infancy, provided only $324 million in export revenue in 1983. Second, growth in export earnings bas been affected by diversion of palm oil to the domestic market. Comprising 11X of agricultural exports excluding timber in 1978/79, palm oil represented only 6% of these exports in 1983. The value of export income foregone to provide palm oil to the domestic market may be as high as t369 millioa in 1984. Third, coffee is not likely to recover its former level of export revenue given the prices anticipated during Repelita IV. Coffee exports dropped from $715 million in 1979/80 to $362 million in 1982/83. Rubber continues to be the single most important export estate crop in Indonesia, providing about half of total estate exports in recent years. The GOI's intent for Repelita IV is clearly to increase rubber production in view of slower growth in export revenues from oil, LNG and timber; and with even greater emphasis, to develop rapidly oil palm and coconuts to meet edible oil deficits and free more palm oil supplies for export. 11 Traditional oil using wet processing method. Fresh coconuts are grated, water added and the slurry then squeezed, boiled and oil decanted. Unlike copra oil, klentic oil is milky and strongly aromatic. -9- Table 1.3 EXPORTS BY CCHMODITY (oS$ million) 1978/79 1979/80 1980/81 1981/82 1982/83 Timber 1,130 2,166 1,672 761 555 Estate crops Rubber 774 1,101 1,078 770 614 Palm oil 221 257 178 79 103 Palm kernels 2 12 7 4 1 Copra cake 34 65 46 32 38 Subtotal 1,031 1,435 1,309 885 756 Others 730 912 805 535 562 Total estate crops 1,761 2,347 2,114 1,420 1,318 Other agriculture 308 602 487 493 462 Total agriculture 3,199 5,115 4,273 2,674 2,335 Total minerals 437 609 774 744 704 Total manufactures 360 447 540 752 855 Total oil & LNG 7,374 11,323 16,661 18,824 14,743 Total exports 11,370 17,494 22,248 22,994 18,637 Source: World Bank Economic Reports 1983 and 1984. 1.09 Euployment in the Sector. It is estimated that about 8 million people in the smallholder sector are dependent on rubber as their main source of income. Mainly these are smallholder families and share tappers who operate 2.0 of the 2.5 million ha of rubber under cultivation. Since most of these smallholdings are in the outer islands this amounts to about 10% of the population outside Java. A further 1.2 million smallholder families (about 6 million people spread fairly evenly between Java and the outer islands) are estimated to be dependent for their livelihood on coconuts. The Government estate sector employs about 965,000 workers (65Z in rubber and 35% in oil palm) and the private estates employ a further 290,000 workers during peak periods. The total number of people directly and indirectly dependent on tree crops from estate work is estimated to be about 6.2 million. Smallholder and estate cultivation of the three major tree crops employs an estimated 20 million people. 1.10 The potential for further employment generation in tree crops is enormous; not only because land has yet to become a constraint to development in the outer islands, but also because labor absorption in tree crop establishment and exploitation is high. A comparison of labor - 10 - absorption in the three main tree crops is shown in Table 1.4. Oil palm is the most labor-absorptive of the tree crops during the development period; the average of 0.46 man-years per hectare per year over the 3-4 year period is about 4(Z higher than for rubber established over a 6-7 year development period, and 30-4& higher than for establishment of hybrid or tall coconuts. In the development of oil palm the GOI creates about 9,200 man-years of labor for each 5,000 ha established, or roughly 2, 300 jobs. In rubber, a 5,000 ha development creates about 10, 400 man-years of labor but only 1,600 jobs in an average year (6-7 year development period). Over the production life cycle rubber is the most labor-intensive of the three crops. Assuming that smallholders have no activity outside their tree crops, a minimum of 2, 350 permanent jobs are created for each 5, 000 ha of producing rubber, about 1,600 permanent jobs for 5, 000 ha of mature oil palm anid between 1, 100-1, 450 permanent jobs for each 5,000 ha of coconuts. The importance of the sector for job creation is evidenced in past performance. In the previous five years about 1.1 million new man-years of labor were created from the development of 572, 000 ha of rubber, coconut and oil palm. Less readily quantified but likely to be of major importance is the employment creation from future 'downstream processing and manufacturing industries relying on tree crop raw materials. Table 1.4 LABOR INPUTS BY CROPS a/ Maintenance and Land clearing and development harvesting Total Number of Average man-years Average number of years of per year of man-years man-days/ha development development/ha b/ per ha Rubber Estate 543 6 - 6.5 .32 .39 Smallholders 581 6 - 7 .31 .47 Oil Palm Estates and Smallholders 529 3.5 - 4 .46 .32 Hybrid Coconuts Estates and Smallholders 550 5 - 5.5 .35 .29 Tall Coconuts Smallholders 614 7 .31 .22 a/ Derived from averages in actual estate and smallholder development programs and with man-days detailed in Annex 4 Tables 2 to 4. b/ Assuming estate standard of 286 man-days per year. Structure of the Tree Crops Sector 1.11 Smallholdings. Smaliholdings are defined, in the statistical base, as private ownership of 25 ha of land or less. Most are in the range of 0.5 ha to 10 ha with an average af 1.5 ha per holding for both rubber and coconut production. Traditionally, smallholders are not solely dependent on income from tree crops. Many have other land where, during periods of depressed prices for rubber or coconut, rice and other crops take priority. This situation, in which crops do not compete for land and to some extent have complementary demands for labor, has given the Indonesian smallbolder a flexibility that has enabled him to weather depressed prices, particularly for rubber, in the 1960s and early 1980s. Such flexibility is not found in the estates, although many of the larger estates do cultivate more than one crop. 1.12 Smallholder rubber and coconut esrablishment, upkeep, and production techniques in Indonesia have not kept pace with cultural and technological developments. The appropriate technology and economics of smallholder production are well known but such knowledge is mainly confined to the technologically advanced government-sponsored programs for smallholders, the public sector and foreign estates. Traditionally, smallholder tree crops have been grown under low input/low management regimes in part because they are often secondary income sources. Major problems are the low genetic potential for yield, the age and poor condition of the plantings and, in the case of rubber, the preparation of inferior quality products fetching low prices. Correction of these problems is made difficult by the dispersed and isolated locations of many of the smallholdings, small farm size, lack of an adequate infrastructure, the low level of education of farners and the general lack of suitable finance and credit facilities for smallholders. 1.13 There are no reliable figures available to indicate the trend in smallholder yields over past years. Smallholder supply of rubber is responsive to price and the cost of labor: more so than for the estates. Average rubber yields are estimated to be in the order of 350 kg/ha annually. Good clonal material can yield at least triple this amount and up to 3,000 kg/ha/yr on estates. It is expected that with the ageing of smallholder plantings, smallholder yields and production will increasingly decline. About 35 of smallholder rubber plantings date from 1940 or earlier, 30Z from 1940-50 and an additional 11% from 1950-60. Assuming a 30-year cycle, and that there are some 2.1 million ha of rubber smallhold_ngs, about 70,000 ha of rubber requires replanting annually to maintain smallholder production levels. In 1982, the Dit-Gen E estimated that there was a backlog of old and damaged trees amounting to 280,000 ha, whereas replanting of smallholdings over the five years of Repelita III amounted to no more than 75,000 ha. - 12 - 1.14 The situation for sma}Iholder coconut plantings is similar: of the 2.9 million ha of smallholder coconut about 290,000 ha (10%) are overage and a further 1.9 million ha (65%) are classified as mature. The area passing from mature to senile annually is difficult to assess, but, if a normal pattern of age distribution is in effect, about 38,000 ha would pass annually into the senile category at 60 years from planting. In Indonesia, with an expected age skew of the mature plantings, it is possible that 50,000 ha each year reach senility. During Repelita III, about 34,000 ha of smallholder coconuts were reported replanted each year. Average coconut yields (copra equivalent) are about 800 kg/ha, whereas the new hybrid varieties on smallholdings have a potential of 3,000-3,500 kg/ha. 1.15 Since farmers have neither financial resources, access to inputs nor the technical knowledge to improve their situation, Government assistance is necessary if the productivity of the sector is to be increased. Formulating a program appropriate to the needs of Indonesia's smallholders is a major undertaking, both on account of the very large size range of smallholdings, and the variety of conditions under which smallholder production takes place. The programs will need to be flexible in terms of location and size of land area for development; the model of smallholder production; the level of infrastructure and the availability of management and technical services. 1.16 Estate Holdings. There is a legal maximum on the amount of land an Indonesian can own, the limit varying from province to province. Foreign ownership of agricultural land is not permitted. There are about 850 estate companies which have rubber as their main crop. Private foreign estate companies constitute 21% of total estate rubber production. About 28 estates are predominantly or exclusively planted to oil palm, of which 18 are privately owned. About 30Z of the 362,000 ha of estate oil palm and 30% of palm oil production of 970,000 tons is produced by private estates, the remainder by 10 public sector estates. Only 3% of the 3 million ha under coconuts is estate-managed; the private estates contributing 59,000 ha and the public estates 18,000 ha in 1983 when production from both private and public estates comprised 23,000 tons of the total 1.6 million tons of copra produced. 1.17 The Government-owned Estates. In 1958, estates formerly owned by foreign enterprises were nationalized by the Indonesian Government. In 1968 these estates were reorganized into 28 PNPs (Perusahaan Negara Perkebunan) on the basis of location, crop and size. In 1972 the Government established two additional PNPs. A PNP is a legal entity established by Government regulation, with its capital provided by the State Treasury but operating on commercial lines as a departmental trading enterprise. A PNP may be considered as a transitional status and, over the past 15 years, the PNPs have gradually been converted by the Government to PTPs (Perseroan Terbatas Perkebunan), which are limited liability companies, with independent management, operating under the ordinary rules of the commercial and civil codes, but also under Government guidelines and policies beca'xse Government is the sole shareholder. For convenience this report uses PTP to refer to the PTPs and PNPs unless the context requires otherwise. Some of the PNPs/PTPs - 13 - have been amalgamated in order to achieve viable operations through economies of scale, and there are now 25 PTPs and 1 PNP, of which 12 are concerned primarily with rubber and two with oil palm. There are no PNPs/PTPs in which coconut is the principal crop. A list of the PNP/PTP estates, their location and the principal crops grown is provided in Annex 1, Table 3. 1.18 Like any limited liability company in Indonesia, each PTP is governed by its charter - a memorandum of association prepared under the Company Act. The PTPs are wholly owned by the Government through the Department of Finance. The life of each PTP, as set out in its charter, is 75 years. The Department of Finance, as shareholder, monitors the operations of the PTPs tbrough the Directorate of State Enterprises (Persero); except that responsibility for the technical aspects is delegated to the Department of Agriculture and was exercised, until r.ecently, through the Staf Bina Perusahaan Negara Sektor Pertanian (SBPN). 1.19 The management of a PTP is vested in a full-time Managing Board (Direksi) which consists of a President Director and at least two and at most four additional directors; all appointed by the Minister of Finance taking into consideration the recommendations of the Minister of Agriculture. These directors usually include a commercial director, a production director and a development director. Each Managing Board is supervised by an outside Board of Commissioners (Dewan Romisaris) composed of not less than two nor more than five members appointed by the Minister of Finance. In practice, the Board of Commissioners comprises representatives from the Departments of Finance, Agriculture, and Defense and Security. Government Institutions Involved in the Sector 1.20 Department of Agriculture (DOA). The DOA comprises a Secretariat, an Inspectorate and four Directorates-General: Estates, Fisheries, Food Crops, and Livestock Development, plus the Agency for Agricultural Research and Development (AARD), the Agency for Agricultural Education, Training and Extension (AAETE), and an agricultural quarantine unit. The Minister is chairman of two important associated units which are not formally part of the DOA structure: The Sugar Council (Dewan Gula) and Bimas (agricultural intensificarion program). The Directorate-General of Estates (Dit-Gen E) is responsible for overal development of tree crops (rubber, coconuts, oil palm, tea, coffee and cocoa) and industrial crops (e.g., tobacco, sugar, cotton and spices) planted by smallholders and private estates, and for public estates in their development activities in Government programs. The Minister of Agriculture has the responsibility for oversight of other developments on the public estates. 1.21 A special team, the Staf Bina Perusahaan Negara (SBPN), which assisted the Minister of Agriculture in matters concerning the state enterprises including the PTPs, was abolished under Presidential Decree - 14 - in 1983. Many of the former functions are planned for distribution to the Boards of Commissioners of the PTPs, the Development and Finance Control Agency (Badan Pengawasan Keuangan dan Pembangunan), the Dit-Gen E, and the Secretariat to the Minister of Agriculture. The four regional inspectorates (the Kinwil) which oversee groups of public estates divided on a geographic basis, and which report to the Minister of Agriculture, are also scheduled under the Presidential Decree to be dissolved. Their functions, which have included regional reporting, administrative matters and group co-ordination have noE been passed to other institutions as alternative arrangements have not been formalized. The impact of these pending changes is not clear. 1.22 Directorate-General of Estates (Dit-Gen E). The Dit-Gen E is comprised of six structural directorates9 Program Development, Rehabilitation and Expansion, Agribusiness and Processing, Production Development, Plant Protection, and Extension. The rapid acceleration in the tree crops program in the mid 1970s necessitated the establishment in 1979 of a non-structural special team (Team Rhusus) to provide technical assistance to the project implementing agencies on procurement, budgeting, recruitment, start-up activities and legal matters. Later, a second special team - Team Khusus PIR Swadana - was established to assist the Perkebunan Inti Rakyat (FIR) program, comprising projects on the NES concept but wholly financed by the Government. Under Presidential Decree No. 23 of 1983, the two teams were abolished and replaced by a single non-structural team - the Team Khusus Proyek Perkebunan Berbantuan MTMP2B). This new team is responsible to the Dit-Gen E for determining implementation policies and monitoring implementation of all NES and PIR tree crop projects, regardless of the financing arrangements. More recently the Team Khusus has been made responsible for significant amounts of project appraisal. The present, tentative organization and delineation of responsibilities for both the structural and non-structural components of the Dit-Gen E are shown in Annex 1 Table 4. 1.23 Tree crop activities of the GOI at the provincial and district levels are handled by the Regional Estate Crops Service (Dinas Perkebunan Daerah - Disbun). The Disbuns are responsible in technical matters to the Dit-Gen E, but administratively to the provincial governments. Through the mid-1970s their main function was tree crop extension. In 1974, however, this function was transferred to an integrated national extension service, the AAETE. This arrangement has not proven satisfactory to the implementing agencies and for Repelita IV the extension function has been returned to the various Directorates- General. The issues of manpower development and extension are examined in Chapter VIII. 1.24 Office of the Junior Minister. In 1983 a new position of Junior Minister for Estate Crop Production was established to assist the Minister of Agriculture in monitoring and coordinating implementation of policies and programs for estate crop production, including tree crops. The position was creared with the emphasis on improving coordination of - 15 - the Department of Agriculture with the Departments of Finance, Industry, Trade and Cooperatives. The Junior Minister is directly responsible to the President. He is authorized a staff of a secretary and five expert personnel. The Director-General of Estates remains the chief executive of tree crop development in the Department of Agriculture, but in the implementation of policies and programs he is subject to coordination by the Junior Minister. To improve the effectiveness of these institutional changes the DOA is undertaking a comprehensive review of the exact operational relationships between the Office of the Junior Minister, the Dit-Gen E and the Bureau for the publicly-owned enterprises. The precise responsibilities of Team Khusus, in respect of the nucleus estate components of the NES and PIR projects, have yet to be determined within the Dit-Gen E. There are also plans to re-examine the structure of Team Khusus and the exact division of responsibilities among, and the operational procedures for Team Khusus, the Directorate of Programming, the Directorate of Extension and the Directorate responsible for private sector estates within the Dit-Gen E. The now long-standing fluidity of the institutional framework is an extremely serious problem and is hampering implementation of the tree crops sector program, and the addressing of sector-wide issues. 1.25 The Banking Sector. The institutional structure of the Indonesian banking system includes Bank Indonesia (BI), the central bank which is the apex of the Indonesian financial system, five state commercial banks 1/, 79 private national commercial banks, 11 foreign commercial banks (including one joint venture bank), 49 representative offices of foreign banks, 26 regional development banks, one state-owned development bank (Bapindo), and various development finance companies and non-bank financial intermediaries, savings institutions and insurance companies. BI has an enormous impact on the state commercia' banks and their role in the tree crops sector: BI provides liquidity credits at 3-6% to the state banks; covering up to 80% of lot;n values. BI also utilizes DOF budget allocations to fund credits to state banks for long-term loans to PTPs under externally-financed orojects. Smallholder credit is either channeled from the Department of ;inance, to be later converted to BRI-administered loans on behalf of tne GOI, or is provided by BRI as executing bank with substantial financing from BI liquidity credits or on-lent external funds. In practice, Bank Bumi Daya (BBD) and BRI have the greatest impact on agricultural sector activities. BBD has been the dominant lender of short- and lcng-term credit to the PTPs and forestry enterprises. BRI is the main state bank providing smallholder credit, including credit under the B2I{AS rice program; the Kredit Investasi Kecil (KIK) and Kredit Modal Kerja Permanen (KMXP), programs to provide small investment credit and working capital funds (supported by the World Bank assisted Small Enterprise Development Projects I-III) 1/ Bank Rakyat Indonesia (BRI), Bank Negara Indonesia 1946, Bank Dagang Negara, Bank Bumi Daya (BBD), and Bank Ekspor Impor Indonesia (BEII). - 16 - and credits for fisheries, cooperatives, fertilizer imports and tree crops. BRI maintaIns 350 branches and 3,700 village units and has 27,000 employees. BRI also supervises secondary village and local rural banks. In recent years the Bank Ekspor Impor Indonesia has assumed a greater role in the provision of capital for PTPs' estate components, in PIR projects, and for PTPs' own expansion programs. These projects are explained in paras 1.30 to 1.36. Large private estates receive working capital and short-term loan funds from private national banks and, to a lesser extent, foreign commercial banks. The impact of the banking system and banking regulation on the sector is covered in Chapter V. Approaches to Smallholder Development 1.26 Nucleus Estates and Smallholders (NES/PIR). The QOI has used a number of strategies for promoting smallholder tree crops development. Two strategies have been utilized extensively throughout Indonesia, one relying on large public sector estates (PTPs), and the other based on project management units (PMUs). The nucleus approach relies on the PTPs' managerial and technical expertise to promote and guide smallholder development. The Government assigns tracts of unproductive forest or bushland for development by the PTPs on the Government' s behalf in block planting. The GOI budgets funds for the PTPs as contracting project managers to clear the land, build settler infrastructure and housing, provide employment for settlers, and establish and maintain the tree crops to maturity. New participants are considered as settlers on probation for a period of three years during which time they are employed as laborers in the project. If they are judged suitable at the end of three years, the settlers are given full freehold title (Eak Milik) to their project holdings and they enter into individual credit agreements with BRI, lodging the land title as security. As tree crops mature, smallholders assume full responsibility for their holdings and for repayment of the main development costs, their land titles being retained by BRI until loan obligations are fulfilled. If the projects are assisted by external financing, they are termed NES in this report (nucleus estates and smallholders), and if wholly financed by GOI they are termed PIR (Perkebunan Inti Rakyat). NES projects have assisted settlers from within or near the project areas, also transmigrants from Java. PIR projects, similarly, assist existing rural settlements, under PIR Lokal projects, while PIR Khusus projects give priority to the settlement of transmigrants. 1.27 Project Management Units (FMUs). Under PMU schemes, management units are created by the Dit-Gen E in areas of geo;piaphic concentration of tree crop smallholders. The P[Us undertake planting, replanting, and rehabilitation of smallholder estate crops. For a -partial' PMU approach, it is proposed that farmers would receive extension assistance but would pay cash for planting materials at cost of production and buy fertilizers and maintain their trees at their own expense. In a -comprehensive" approach, farmers receive credit in the form of planting materials, fertilizers and herbicides, also a cost-of-living allowance - 17 - equivalent to all or part. of the value of their labor; as well as intensive extension support from the PMU_ The cost of the comprehensive credit has at times been financed by budget funds channeled through BRI. MDre recently BRI has provided a portion of the requirements from their own sources. There are two types of PHU projects, differentiated by the credit provided to smallholders and the crops assisted: PRPTE projects (Proyek Rehabilitasi dan Peremajaan Tanaman Ekspor) involve long-term credit for exportable estate crops and P4 projects (Proyek Peningkatan Produksi Perkebunan) involve credit for other estate crops, particularly annual crops and rapidly growing perennials. The PRPTE program is now the largest of the Indonesian programs for smaIlholder rubber, coconuts and other tree crops. 1.28 All P(Us have the same basic structure, regardless of their size or the commodity planted. Each has a unit head, responsible for the planting target, who is assisted by three deputies, for administration, technical support and finance. Reporting to the unit head are three or four subunit heads, each responsible for a portion of the overall PMU planting target and supervising several extension workers, each working with a group of 10-15 farmers operating an area of 250-350 ha. Oving to a moratorium on the creation of new government positions, most PMU staff do not have regular civil service status. PHU staff are responsible for identifying land to be planted and for the registration of participants. In theory, the land selected for development comprises old trees in contiguous blocks, but in practice this varies widely and some PMUs assist mainly with new plantings. After registration, PMU staff submit the names of farmers to the BRI which clears them with the village head so that an account can be established. Iand clearing is often arranged on contract, with the costs being charged to the farmers' accounts. The PMU produces planting materials and rents vehicles to deliver them to farmers. PAU staff oversee planting and provide agro-inputs and cash payments-for both establishment and maintenance. After maturity, plans call for the RMU staff to provide extension and coordinate marketing and processing. Presen. planning is to utilize private processing facilities, although some processing is done in group centers. 1.29 Currently there are 870 PMUs under Dit-Gen E authority. These PMUs are responsible for establishing 15 commodities in the 26 provinces. There are 136 PMUs engiged in rubber development: ten (including three SRDP) are large scale PMUs responsible for planting 10,000 ha each over a five-year period, and the remainder are small scale PMUs responsible for planting 2,000-3,000 ha in the same period. There are 334 PMUs (inclu-ing 70 SCDP) responsible for coconut development. History of the Smallholder Programs 1.30 Project Management Unit Programs GOI assistance to smallholders began in 1969 with the introduction of an export cess on 13 agricultural commodities with part of the proceeds being used to support a replanting program for rubber and coconuts. Through Repelita I - 18 - (April 1969 - March 1974), funds and manpower were limited, and the Dit-4en E concentrated on the production and distribution of planting materials on a grant basis. The impact was relatively limited and yields were not significantly increased. Nearing the end of Repelita I the Government laid plans for two externally-assisted projects to promote rubber establishment using PMUs. The first of these PMUs was established In 1973 under the World Bank assisted North Sumatra Smallholder Development Project (NSSDP) and the second was formed in 1974 under the West Sumatra Smallholder Development Project (WSSDP) - a cooperative program between GOI and the Federal Republic of Germany. These were successful in reaching their targets (NSSDP 9,000 ha and WSSDP 3,000 ha) and establishing high quality rubber, but the PMUs were large and GOI felt the approach was too management intensive and not easily replicated. 1.31 With additional resources available during the second five year plan (April 1974 - March 1979) the GOI initiated a rubber development program using PNUs for its Assisted Replanting Projects (ARP) and Group Coagulating Centres (GCCs). The ARPs were intended to be less management Intensive than the externally assisted EMUs and, therefore, to be financially and managerially more replicable. CCCs were originally intended to promote cooperative processing and marketing, but by the end of Repelita III, they had largely abandoned this function and were assisting smallholders to replant rubber. Daring Repelita II the GDI also formed 250 PMUs, known as Coconut Working Centres (CWCs) in 21 provinces to assist in the rehabilitation and replanting of coconut. 1.32 The ARP/GCC program planted about 1,000 ha of rubber in 1976, 3,000 ha in 1977 and 12,000 ha in 1978, all assisted by grants to smallholders. The projects generated considerable smallholder interest but suffered from a shortage of qualified staff, limited funding, and technical problems, with the result that plantings were of poor quality; and well below NSSDPJWSSDP standards. 1.33 In 1980 a second Bank assisted smallholder development project, the Smallholder Rubber Development Project (SRDP I), commenced. Ar appraisal in 1978 the project was designed to establish a National SmalIholder Rubber Replanting Organization and absorb all ARPs and GCCs. It was envisaged that the program would be financed through continuation of a cess on rubber production and that inputs would continue to be provided free of charge as a grant to smallholders. The cess had, however, been reduced to zero from April 1976 (although the legislation enabling collection of a cess remained in force) and the GOI decided that direct expenditure would be covered by a credit package extended to smallholders through BRI. The bases for the GOI decisions were that: (i) the previous cess had proven difficult to control; (ii) some PMUs were intended to establish a variety of crops which were not exported and not subject to an export tax or cess; and (iii) there was a need to acquaint smallholders with credit systems and encourage efficient use of resources. Proposals were reappraised in 1979/80 and the restructured - 19 - project provided financial assistance as credit to establish 38,500 ha of rubber, under three PIUs, and for establishment of a central project office, reporting to Dit-Gen E but outside the regular Dit-Gen E structure. GCCs were not included in the project, but it was expected that they would be gradually upgraded and then absoreed into the SRDP program. In the first three years of implementation progress has been encouraging. Of the 19,000 ba budgeted, more than 18,000 have been planted and the quality of plantings is generally good. Training programs have been initiated for PHU managers and staff, and close control over and support by management has ensured high staff morale. 1.34 In 1980 the Bank also appraised the first Smallholder Coconut Development Project (SC)P I) using credit arrangements similar to those in SRDP I. The project included 70 PMUs in 6 provinces and provided credit assistance for planting about 38,000 ha of hybrid and tall coconuts, and for rehabilitating 42,000 ha. Like SRDP I, it also established a management system outside the Dit-Gen E structure. Two major problems have been encountered during implementation: the dispersed 9M(Us have made logistical support and supervision difficult, and the establishment of a new management system on a large scale has led to considerable -npower and administrative difficulties. As a consequence, there is substantial shortfall in planting targets and disbursements are slow. 1.35 The emphasis placed on the PHU-based programs by the Dit-Gen E, intensified during Repelita III (April 1979 - March 1984). In addition to the SRDP I and SCDP I projects, the number of rubber replanting PMUs increased from 30 to 133 over the period and the nuaber of Coconut Working Centers from 250 to 274. An ambitious target for smalrnolder rubber replanting was set by the Dit-Gen E at 150,000 ha, and for rubber rehabilitation 50,000 ha. For coconuts the CWCs were given the task of replanting 168,000 ha of talls and 10,000 ha of hybrids. The progress of these programs is examined in detail in Chapter III. 1.36 Nucleus Estates and Smallholders (NES) Programs. In 1974 the GOI began to consider a radical departure from past (PFI) programs, by using the public sector estates to develop smallholder tree crops. The concept was that suitable PTPs would establish new estates, each providing management and services for the development of associated smallholdings. The idea of nucleus estates was not new and had been tried with success in Papua New Guinea and in West Africa, but the PTPs in Indonesia were untested and on y a few, mostly in North Sumatra, were fully rehabilitated and able to undertake such responsibilities. Recoguizing the great potential of the PTPs to rapidly develop smallholder tree crops, the GDI required projects to achieve two objectives: first, to utilize itmediately the managerially and financially strong PTPs for smallholder development and second, to continue rehabilitation of the weak FrPs and expand others to new locations for eventual tapping of their manpower and technical resources to assist smallholders. The pr..blems of - 20 - commencing the nucleus estate projects were substan tial, discussions witbhin GOI taking place over three years from 1974-77 before critical issues were resolved. These problems included decisions on the optimm size for suallholder tree crop areas, target incomes to be achieved, cost recovery through cess or credit, the ratio of estate to smallholder development, and designation of project management responsibilities. In 1977 the Q0I commenced the first NES project: utilizing FrP X and PIP V to develop rubber for smallholders in South Sumatra and Aceh, and rehabilitating trP I and PTP XI with a viev to their future participation in smnallholdar development. The project was assisted by the World Bank in the B I loan (1499-IND). By the end of Repelita II, a second project was underway in Riau and Jambi provinces in Sumatra, using PTP IV to develop a new nucleus estate and 22,700 ha of smallholder rubber. The GOI also initiated plans for local PIR projects, using PTPs as for NES development, but without external finance. 1.37 Since 1977 the Government, with Bank assistance, has financed seven nucleus estate and smallholder (NES) projects for tree crops which, when fully developed, will have settled, or resettled, 80,000 smallholder families and will have established for them 100,000 ha of rubber, 41,000 ha of oil palm and 15,000 ha of coconuts. Estate development will comprise 43,000 ha of rubber, 22,000 ha of oil palm and about 9,000 ha of coconuts. In addition 14 rubber factories, 8 palm oil mills and 4 copra mills will be constructed to process the nucleus estate and smaIlholders' crops. The total cost of these projects is estimated to be l .3 billion; of which the Bank is committed to finance $655 million. At March 31, 1984 about 60% of the nucleus estate plantings and 45% of the smallholder program were completed. Annex 1 Table 5 provides key program data for the seven projects and AnneTx Tables 6 and 7 provides full details of the cropping targets and the achievements to 1983/84, for the estates and the smallholders components in each project. -21 - CHAPTER II: THE MARKET OUTLOOK FOR RUBBE., PAIM OIL ANO CO) NUTS index Page lutroducffion ................................... .w...... * 23 The Outlook for Rubber World Demand Forecasts ....................... ............... 23 World Supply Forecsrts.. .................................. 24 P2tential Market for Indonesian Rubber 25 Projected Indonesian Rubber Production . ........... 27 Price Forecasts for Natural Rubber. .. ......... 27 The Outlook for Palm 01. International Trade In Palm and Palm Kernel Olss................ 28 The Indonesian Market for Pam and Palm Kernel Oils............. 28 Projected Domestic Palm Oil and Kernel Oil ...........Prod ctio 29 Domestic Prices and Pricing Policy . ............................ 30 Farmgate Price for FFB...................... 32 Tne Outlook for Coconut Oil and Fresh Nuts International Trade in Coconut Oil........-......... .......... 32 The Domestic Market .................... . ... *00....... ... *00-0 33 Projected Coconut Production in Indonesiad...... o....... e.0.0. 33 Domestic Price Forecast for Copra ............................... 34 Forecast of Domestic Edible Oil Surplus and Deficit in Repe-lita IV....... 36 Tables in Text 2.1 Forecast World Elastomer Demand.............................. 24 2.2 Projected Natural Rubber Supply from Countries Other Than Indonesia ............... ........... , 25 2.3 Potential Market for Indonesian Rubber....................... 26 2.4 Price Forecasts for Rubber....... ............................ 27 2.5 Indonesian Palm Oil Production, Export and Domestic Sales 29 2.6 Projected Indonesian Production of Palm Oil, Kernels and Kernel Oil .................................... 29 2.7 Projected Palm Oil, Kernel and FFB Prices.................... 31 2.8 Projected Coconut Production in Indonesia.................... 34 2.9 Projected Copra Prices ....................35 2.10 Edible Oil Surplus/Deficit; Imports and Exports, 1984-20. W... 37 - 22- VL-&s el-ICc 3- /64ttA -23 - CHAPTER II: THE MARKET OUTLOOK FOR RUBBER, PALI OIL AIND COCONUTS Introduction 2.01 The recent review by FAO of the tree crops sector in Indonesia focused particularly on the domestic outlook for rubber, oil palm and coconuts. Their report (No. 101/83 TA.INS 41; November 1983) examines demand and supply constraints and gives an assessment of future prices and production under varying assumptions. The present review has been facilitated by the FAO work and some of the material contained in their report is summarized here to provide a brief overview. The Outlook for Rubber 2.02 The FAO team did not prepare independent long run forecasts for rubber supply and demand but updated and combined existing forecasts by the World Bank, the International Institute of Synthetic Rubber Producers, and others. A large number of simulations were then made to establish the probability attaching to three demand scenarios, and conclusions were drawn on the level to which Indonesian rubber output could rise without significantly depressing international rubber prices. 2.03 World Demand Forecasts. The baseline adopted by FAO for projecting world elastomer demand was the estimated 1985 demand of 13.4 million tons. Applying widely assumed growth rates, FAO prepared the forecast stmmarized in Table 2.1, showing that total demand for elastomers is expected to grow to 21 million tons in the year 2000. In order to outline price prospects for natural rubber, however, it is necessary to consider three categories of demand for elastomers. The first category is the demand which, on technical grounds, can be met only by isoprenic rubber, i.e., natural rubber or a relatively costly synthetic with technical properties very similar to natural rubber. This category is estimated to comprise 36% of the tire market, which in total accounts for about 75% of natural rubber consumption, and 12Z of the non-tire market. The second category is that part of the market which will use isoprenic rubber if the price is competitive with alternative materials. The category includes many end uses such as footwear, belting and hoses, currently supplied by the least costly synthetic, styrene- butadiene rubber (SBR), and also retreading. It accounts for a further 20% of the tire market and 23% of the non-tire market. The third category of demand cannot be met by isoprenic rubber, because it requires material with technical properties which isoprenic rubbers do not have. This demand is supplied by a range of synthetic rubbers used in such items as inner tubes and roofing materials. Forecast demand for elastomers in the three categories is shown in Table 2.1 and is considered further in discussion of the potential market for Indonesian rubber (para 2.05). - 24 - Table 2.1 FORECAST WORID ELAS1TOMER DEKAND (Thousands of tons) 1975 1980 1985 1990 1995 2000 Total demand 10,395 12,425 13,430 15,990 18,430 21,000 (2,500) a/ of whic: ti.re v,v29 6,958 7,25- 8,475 9,5% 10,920V non-tire 4,366 5,467 6,178 7,515 8,846 10,080 Category 1 2,782 3,270 3,476 4,103 4,689 5,342 Category 2 2,364 2,818 3,038 3,612 4,157 4,738 Category 3 5,249 6,337 6,916 8,275 9,584 10,920 aI Assumed standard error of estimate. Source: FAO Report 101/83 TA.INS 41. The above figures show that total wrorld rubber demand is expected to grow by 56Z between 1985-2000, with dewnmd for tire rubber (which provides 75% of the market for natural rubber) groving by 51% and non-tire demand growing by 63%. These estimates provide a generally optimistic outlook for natural rubber producers. 2.04 World Supply Forecasts. In order to assess market prospects for Indonesian rubber, FAG prepared forecasts of natural rubber supply from the producing countries other than Indonesia. The forecasts, to the year 2000, are shown in Table 2.2. The supply of isoprenic rubber in Eastern European countries is also shown, as this supply will compete directly with natural rubber and is expected to grow generally in line with internal demand in these countries. Production of synthetic isoprenic rubber elsewhere, above the present very limited amounts, is expected to increase significantly onlj in the event of a large deficit of natural rube-r, which is considered unlikely. - 25 - Table 2.2 PROJECTED NAIURAL RUBBER SUPPLY FRO! ODUNTRIES OTHER THAN INDONESIA (Thousands of tons) Country 1975 1980 1985 1990 1995 2000 Malaysia 1,459 1,529 1,510 1,450 1,450 1,450 (80) Thailand 355 501 695 910 1,450 1,550 (150) India 136 155 175 200 225 250 (20) Sri Lanka 149 133 130 130 130 130 (5) China 25 113 170 200 240 270 (30) Liberia 83 78 60 60 50 50 (10) Ivory Coast 15 22 30 37 45 60 (15) Philippines 52 69 77 95 115 120 (25) Others 218 225 250 275 300 325 (32) TOTAL 2,492 2,825 3,097 3,357 4,005 4,205 E. European isoprene rubber 788 1,200 1,350 1,550 1,810 (225) Note: Figures in brackets represent assumed standard errors of estimate Source: FAO Report 101/83 TA.INS 41. 2.05 Potential Market for Indonesian Rubber. FAD considered three scenarios for the categories of demand (para 2.03) which would affect both international prices and the potential market for Indonesian rubber. Scenario 1 supposes that the supply of natural rubber is less than the demand for isoprenic rubber. Scenario 2 assumes that the supply of natural rubber is greater than the demand for isoprenic rubber - 26 - (category 1), but less than the combined deumd for categories 1 and 2. This is the situation which has prevailed since the birth of the synthetic rubber industry, with the price of natural rubber fluctuating around a centre point set by the cost of styrene-butadiene rubber (SBR) production. Scenario 3 assumes natural rubber supply greater than total demand in categories 1 and 2. This represents the situation where there would be a glut of natural rubber, such as occurred in the 1930s. 2.06 FAO made a large number of simulations of long-term world supply and demand for the various types of rubber, to establish the probability attaching to each of the scenarios above at different levels of natural rubber production in Indonesia. The analysis showed that the probability of an isoprenic deficit (Scenario 1) is negligible and that the probability of a glut (Scenario 3) is low unless Indonesian production approaches three million tons per annum. The expectation is that the present situation (Scenario 2) will be most probable while Indonesian production is less than 2.4 million tons per annum. If production were to exceed this level, it would be necessary for natural rubber to regain markets now held by synthetics, involving a period of natural rubber prices substantially below SBR prices. The potential market for Indonesian rubber is shown in Table 2.3. Table 2.3 POTENTIAL MARKET FOR INDONESIAN RUBBER (Thousands of tons) 1975 1980 1985 1990 1995 2000 (a) Isoprene and isoprene substitutable market potential (Categories 1 & 2) 2,099 2,497 2,347 3,045 3,341 4,125 (b) Potential market if natural rubber maintains its current share of Category 2 - 1,021 891 1,729 1,808 2,378 Source: PAO Report 101/83 TA.INS 41. - 27 - 2.07 Projected Indonesian Rubber Production. The present review has analyzed the possibility for Indonesia to attain a production level of 2.4 million tons by the year 2000, assuming the planting programs discussed in Chapter IV. Four production outcomes were examined using a range of assumptions for tree crop strategies, estate and smallholder yields and non-project planting levels. The assumptions and the results of this analysis are provided in Annex 2, Attachment 1. The conclusion is that, even under the most optimistic assumption, Indonesia is not likely to reach 2.4 million tons production level by 2000; the range in projected production being from 1.7 million tons to 2.3 million tons. 2.08 Price Forecasts for Natural Rubber. The SBR price provides the reference point for natural rubber price forecasts under the most likely scenarios. At present prices of oil, the estimated cost of producing SBR 1500 is in the range of US01.05-1.14Ikg. A lOX rise in oil prices is likely to result in a 7Z rise in SBR prices. Thus the long-run effect of increased oil prices would be to raise the price of natural rubber. The short-n effect, however, is the reverse since tire rubber is consumed jointly with gasoline: a rise in the price of the latter cuts demand for the former, precipitating a period of adjustment in rubber markets. 2.09 Based on an assumption that the market share of natural rubber in the future continues at or below its present level, the IBRD Commodities Division projects that the long-term price for natural rubber will move in the manner outlined in Table 2.4. Table 2.4 PRICE FORECASTS FOR RUBBER (US$/kg) 1985 1990 1995 2000 New York average RSSI price (1984 US$) 1.31 1.42 1.58 1.74 New York average RSSI price (current US$) a/ 1.46 2.32 3.46 5.11 Average Indonesian unit value (current US$ fob) a/ 1.05 1.67 2.48 3.68 a/ Current prices are derived by applying to the constant price series the Bank's manufacturing wnit value index (MUV). 2.10 Using these forecasts, financial farmgate prices were calculated for the three major rubber producing schemes. These are detailed in Annex 2, Attachment 2. Upon the assumptions made, prices for rubber from the NES/PIR projects will increase from Rp 710/kg in 1985 to about Rp 944/kg in 2000, while the change for SRDP rubber sold through the private market will be Rp 627 to Rp 833/kg, and the rubber of lesser quality from PRPIE and spontaneous planters will increase from Rp 619 to Rp 823/kg during the same period. - 28 - The Outlook for Palm Oil 2.11 International Trade in Palm and Palm Kernel Oils. Palm oil, because of a rapid and sustained increase in output and exports, has become one of the most important products in the fats and oils complex. It now accounts for 11% of all edible oils produced and 14% of the world trade in oils and fats, second only to soybean oil. Palm kernel oil has a minority share of the market for lauric oils and is in close technical competition with coconut oil. Details of the growth in world supply and consumption of palm oil and palm kernel oil are given in Annex 2 Attachment 3. 2.12 A number of countries are now planning to increase production of palm oil and some of them hope to export part of their incremental production. The volunme of world trade in all fats and oils has been growing by some 75,000 tons a year with palm oil supplying an average of 20% of the increase over the decade, but over 30% in the last few years. This increasing share of the market has been accomplished with only a very limited fall in the price of palm oil relative to the competing oils and fats, such as soybean oil. The factors that have facilitated this performance include the widespread acceptance of palm oil for food use; the greater variety of palm oil formulations resulting in a widening of possible end-uses; a relatively stable increase in output and export availabilities, and a large increase in imports by countries which have a tradition of solid fat consumption and which are geographically close to the main exporters. 2.13 It is expected that greater supplies of palm oil in the 1980s, mainly from Asia but also from West Africa and South America, can be easily absorbed in the world market as total oil consumption increases, or at the expense of relatively more expensive oils. The market potential for palm oil is expected to be greater in developing and centrally planned countries. Sales to these countries may require much greater use of trade agreements, counter trade provisions, long-term contracts and the development of suitable transport linkages. Notwithstanding these changes, it is anticipated that by the end of the 1980s the market share of palm oil will iacrease at the expense of other competing oils. 2.14 The Indonesian Market for Palm and Palm Kernel Oils. In recent years the domestic demand for palm oil and kernel oil has increased at about 132 per year while the availability of cooking oils has risen by only 3.7%. Anuual per capita consumption is in the 7.5 to 9 kg range. To control growth in the edible oil deficit, the Government has regulated exports since 1978. It has also encouraged increase in the fractionation and refining capacity and has kept domestic prices below world market prices. The impact of these policies on the export and domestic sales of palm oil is shown in Table 2.5. - 29 - Table 2.5 INDONESIAN PAIM OIL PRODUCTION, EXPORT AND DOMESTIC SALES (Thousands of tons) 1979 1980 1981 1982 Est. 1983 Total production 641 721 796 874 972 Local sales 290 218 489 560 500 Exports 351 503 307 314 472 % production sold locally 45 30 61 64 51 Sources: Dit-Gen E and review estimates. 2.15 No limit has so far been encountered in the domestic market to the substitution of palm oil for coconut oil. Of the total 1981 domestic market for cooking oils and fats of about 1.1 million tons, 50X was zoconut oil, 39Z palm oil and 11% palm kernel oil. lauric oils (coconut and palm kernel) thus contributed about 60X of total refined oil consumption. Ar present there is fractionation capacity for 1 million tons of palm oil per year and a throughput of only 500,000 tons each year. 2.16 Projected Domestic Palm Oil and Kernel Oil Production. Projections have bean made for the domestic production of palm oil and kernel oil, using the project planting program of 313,000 ha analyzed in this report (Chapter IV) and assuming that additional planting of 54,000 ha will be completed by private estates through Repelita IV. This is a 'considerable increase over the rate of private planting during recent years. It reflects the government policy of stimulating private participation in the sub-sector, but it also takes into account that detailed arrangements for private sector participation are not yet finalized. Details of the assumptions and analysis are in Annex 2, Attachment 4. The impact of the projected production levels on domestic supply and export levels is discussed in paragraphs 2.31 and 2.32; Table 2.6 sunmarizes the results. Table 2.6 PROJECTED INDONESIAN PRODUCTION OF PALM OIL, KERNELS AND KERNEL OIL (Thousands of tons) 1984 1985 1986 1987 1988 1990 1995 2000 Crude palm oil 918 1,014 1,081 1,210 1,362 1,761 2,913 4,050 Palm kernels 296 327 349 391 441 570 942 1,310 Palm kernel oil 133 147 157 176 198 256 424 590 - 30 - 2.17 Domestic Prices and Pricing Policy. Although the Government exercises no control over the price of palm kernels or palm kernel oil, marketing of palm oil is controlled in Indonesia. Trade in pal-m oil is governed by four constraints: (1) the assurance of adequate supplies of crude palm oil (CPO) for-the domestic market to avoid shortages of domestic cooking oils; (2) a fixed price for CPO for domestic consumption, to protect the coconut oil industry and keep cooking oil prices under control; (3) controls on exports and imports of cooking oils through licensing and taxation; and (4) assignment to the Joint Marketing Organization (KPB) of responsibility for control of all marketing of CPO from the public sector and of domestic sales of CPO from the private sector, to ensure that as much CPO is directed to the domestic market as is necessary and that a fixed price is maintained. 2.18 Every six months, the Department of Trade determines the monthly CPO requirements for the domestic market. This is done in consultation with the Departments of Industry and Agriculture taking into account the needs of all sectors of the processing industry. Each processor is then given a monthly allocation of CPO to purchase. Resulting orders are channeled through KPB to an appropriate producer, who must ship at the fixed fob price. Suppliers to local processors sell at a fixed estate price. Any part of a producer's monthly quota not taken by the processors may be exported, together with any surplus production not covered under the quota scheme. All exports from the public sector are fiandled by KPB. Private sector companies are free to negotiate their own contracts once they have obtained an export licence. 2.19 In recent years the Department of Trade in cooperation with the Departmeent of Agriculture has resorted to at least five forms of regulation: (a) export quotas from 1978 originally set at 50% of production, revised to 60%, relaxed, reinstated and then brought to 85%; (b) direct price controls on domestic sales since 1978; (c) fixed export taxes from March 1976 to 1979, then these taxes plus an additional export tax (PET), on a formula using check prices, which tax rose as high as 26% in early 1979 but generally fell thereafter reducing to zero in November 1981. The fixed tax was at zero during 1983, but returned to 5% in early 1984, when the PET reached 37%; (d) a complete ban on exports (except for committed exports); and (e) regulation through KPB of all PTP sales, and sales for the domestic market from private processors. The use of these controls to direct part or all of the CPO to the domestic market is not an issue with most private producers, independent processors or the PTPs. The constantly changing level of controls, quotas and taxation is, however, an issue since it inhibits effective planning and financial forecasting by palm oil producers or new investors. This problem is discussed further in Chapter V para 5.10. 2.20 As a result of these price and market interventions, the official price of palm oil for the domestic industry has been below the international price since the inception of government price controls, except for a few months in early 1983 during the recession. In 1982, for example, the domestic price of palm oil was about Rp 270-290/kg while the - 31 - Table 2.7 PROJECIED PALK OIL, ERIEEL AMD FFB PRICES (1984 constant prices) a/ bl Export c} d/ Palm Palm Palm Palm Value of FFB Financial Farugate FFB Price oil kernels oil kernels per ton fob Oil exported For Before After domestic --i4/t cif- -Rp 000ht fob- -Rp 000- taxes taxesS/ consumptioni. Europe R 000 1984 585 410 500 299 115 60 17k' 44 1985 518 347 431 234 98 45 40 43 1986 528 350 439 235 100 46 41 44 1987 538 353 447 235 102 48 43 46 1988 549 356 457 236 104 50 45 48 1989 559 359 465 236 106 52 47 50 1990 570 362 474 237 108 54 49 52 1991 570 360 474 235 108 54 49 52 1992 569 358 474 233 108 54 49 52 1993 569 356 474 231 107 53 48 51 1994 568 354 474 229 107 53 48 51 1995 568 352 474 227 107 53 48 51 at Freight insurance brokerage at US285/t in 1984 inflated by Z per annum through 1990. bt Freight, insurance, brokerage at US4l11/t in 1984 inflated by Z per annum through 1990. c/ By virtue of an average extraction rate of 23 for palm oil and 3.% for kernels. d/ Based on deductions (average) of Rp 46,000/t for transport, processing, bulking, general charges anD 7.1 of the value of sales for selling and administrative expenses. ef Current export tax is % plus surtax of 37.1 or total tax of 42.18 on crude oil. When local price is equivalent to export price in 1985 it is assumed the GOI will maintain only x export tax. f/ Local price of Rp 425/kg crude oil and Rp 295/kg kernels converted to FFB price less items in footnote d/. If full export tax deducted from palm oil price of Rp 500, 000/t less deductions and converted to FFB value. - 32 - export price was between Rp 340-390/kg. This substantial price *differential has stimulated illegal export of palm oil assigned to the domestic markets. In the most recent price adjustment the Department of Trade announced a 44Z increase in the price of palm oil for domestic consumption, from Rp 295/kg to Rp 425/kg. The present fob price fluctuates between Rp 550-600/kg but was as high as Rp 800/kg in early 1984. In an additional effort to discourage exports, the Department of Trade re-introduced an export tax of % and imposed an export surtax at the following rates: 37.18 on crude palm oil, 26.1Z on crude stearine and 27Z on refined bleached deodorized stearine. 2.21 Farmgate Price for FFB. Using the international price forecasts from the Bank's Commodity Division, the projected FFB financial prices likely to be paid to smallholders through 1995 are as indicated in Table 2.7 on page 31. The Outlook for Coconut Oil and Fresh Nuts 2.22 International Trade in Coconut Oil. The world production of coconuts has risen gradually from an average 29 million tons in 1967-71 to 37 million tons in 1981, the last year of available statistics (Annex 2, Attachment 5, Table 1). About 7 of production is processed into copra with most of the remainder being consumed as fresh nuts. The Philippines is the largest exporter of copra and coconut oil, accounting for 73 of the world supply. Second largest exporter is Papua New Guinea with x of international trade (Annex 2, Attachment 5, Table 2). Major importers of coconut oil are members of the EEC which in 1982 imported nearly 4(Z of the world coconut oil trade and the USA and Canada which account for a further 33 of world imports (Annex 2, Attachment 5, Table 3). 2.23 Future production of copra in the world will depend on the total production of nuts less the domestic requirements for fresh consumption. It is expected that industrial processing of fresh nuts, which results in 30-5M higher oil and emulsion extraction rates than is possible in households or in rural units, could reduce the overall consumption of fresh nuts for domestic oil expression. Pressure on world supplies of coconuts from fresh consumption is also likely to be alleviated by increasing substitution of coconut oil by cheaper oils such as palm oil. Currently only 4& of the total coconut oil produced in the world enters world trade. This amounts to about x of edible oils traded or f of total consumption. - 33 - 2.24 World dem-nd for coconuts is conditional -a the supply of competing products. The consumption of fresh nuts depends on the availability of fresh fruits, protein rich flours, and other sources of edible protein. Refined coconut oil competes with palm kernel oil, soybean, sunflower, rapeseed and other oils by itself, or as part of compounded cooking oils. It also has characteristics which make it suitable for industrial non-edible purposes. These characteristics generally ensure a premium for coconut oil over other edible oils such as soybean and palm oils. Future development of the coconut industry is likely to move away from oil production towards increased consumption of fresh nuts. It is estimated that about 502 of world production in che future will be consumed as fresh nuts. Given these circumstances the world supply and demand for coconut oil is likely to increase modestly from 3.2 million tons in 1985 to 3.9 million tons in 1995. 2.25 The Domestic Market. Per capita consumption of coconut products In Indonesia is estimated by the Indonesian Central Bureau of Statistics as follows: coconur oil as cooking oil 7.5 kg (copra equivalent) fresh nuts and klentic oil 4.0 kg industrial use 0.7 kg 12.2 kg Currently some 50-70% of coconuts in Indonesia are used as fresh food and oll, a further 15-25% is used for cooking oil where the particular qualities of lauric oils are required, and 52 goes for industrial use. Thus some 60-80% of coconut consumption is not open to ready substitution. This lack of substitutability results in a price premium for coconut oil in the domestic market. Price differentials of competing products have a bearing on wbat substitution does take place, but the cross elasticity of demand for coconut oil with respect to other oils is likely to diminish with increased substitution. Consequently there is some variability in the estimated growth rates for domestic demand of coconut prodacts; a projection of about 6% for cooking oil and 3.5% for fresh nuts seems most probable. 2.26 Projected Coconut Production in Indonesia. Projections have been made for the likely production of coconut, expressed as copra equivalent, under two sets of conditions. In the first scenario, the results for which are summarized in Table 2.8, rhe following yields were assumed for existing plantations: 1,500 kg/ha for recent plantings, replantings and r-habilitation; 1,000 kg/ha for fully mature plantings and 50 kg/ha for senile plantings. The rate of replanting was considered to keep pace with the area of over-age trees which cease to be harvested each year. Using these assumptions, total production is estimated to increase from about 2 million tons copra equivalent in 1984 to 3 million tons in 2000. - 34- - Table 2.8 PROJECTED CDCONUT PRODUCTION IN INDONESIA (Thousands of tons of copra equivalent) Production from Production from Production from Total mature plantings new and replantings senile palms 1984 1,363 578 91 2,032 1985 1,402 594 87 2,083 1986 1,477 624 89 2,190 1987 1,524 645 U4 2,283 1988 L,546 654 149 2,349 1989 1,582 669 160 2,411 1990 1,619 684 171 2,474 1995 1,802 760 232 2,794 2000 1,985 836 229 3,050 2.27 The second, more pessimistic scenario, used conservative yields of 0.65 tonslha for the old plantings and 1.2 tons/ha for the Goverument-sponsored new and replanting programs. The area of old plantings was assumed to decline through 2000 due to the absence of sponsored replanting programs in the 1920s and 1930s. In this situation projected production is estimated to grow from 1.9 million tons of copra equivalent to only 2.1 million tons in 2000. Details of the analysis are given in Annex 2, Attachment 5, Table 4. 2.28 Domestic Price Forecast for Copra. The trade in copra and coconut oil is regulated and directed by the Government in an effort to achieve a balance between consumer and producer interests. Bapengko, the Copra Marketing Board established in 1969, has responsibility for the setting of quotas and performance standards and the licensing of inter-island shipping involved in copra and coconut trade. The intent is to ensure that there is sufficient edible ofl for the Javanese market. Ar present about 40% of the coconut oil factory capacity and nearly 90X of its refining capacity is located in Java. The effect of this is to give a marketing edge to the copra buyers and oil refiners over smallholders. This is exemplified by the fact that the average price for copra in producer areas rose by only 2% between 1978 and mid-1983, while the copra price in consumer areas on Java rose 15.7% and coconut oil prices by 17%. In 1983 the farmgate price for nuts sold for processing was only US$140 per ton copra equivalent while the Java traded price was US$298 per ton. Such depression of the farmgate prices for copra has made the crop unattractive in many areas. - 35 - 2.29 Under the Bank-assisted Smallholder Coconut Development project a study is proposed to examine the potential for improving the market position of smallholders in the copra distribution system. In particular the study would evaluate the feasibility of organizing farmer groups for drying and marketing of copra and the practicality of developing uniform standards for judging copra quality. The study is expected to start early in 1985. 2.30 Using the Bank's December 1983 commodity forecasts for the international price of copra, projections outlined In Table 2.9 were derived for the farmgate price of coconuts expressed in copra equivalent. Reflecting the international trade in cooking oils and fats in which coconut products are likely to be increasingly displaced by the expected availability of large supplies of cheaper oils (in particular soybean oil and palm oil), the farmgate price of copra oc the PMU-based schemes is expected to decline in constant 1984 prices from Rp 294,000/ton to Rp 243,000/ton by 1995 (about 18%). Table 2.9 PROJECTED COPRA PRICES (Constant 1984 terms) Financial farmgare prices cif US/t Ex factory _/ Paid by SCDP c/ (10% moisture) PTPs/NES bf Pp 000t 1984 559 403 332 294 1985 472 32.1 265 234 1986 476 324 267 236 1987 481 329 271 240 1988 486 333 275 243 1989 491 338 279 247 1990 496 343 283 250 1991 494 341 281 249 1992 492 339 280 247 1993 490 337 278 246 1994 487 334 276 244 1995 485 333 275 243 a/ Inter-island freight, port handling, adjustment for losses, processing costs, adjustment for moisture content, UStI56/t in 1984. b/ After deduction of general charges, selling expenses and taxes of 12.5% and profit margin of 5% or a total of 17.5% for rPPs. c/ Processed by smallholders, 15% moisture, and sold to middlemen. 73% of value (ex factory) is paid by PTPs. Conversion to economic prices is 5% higher in the case of NES and 8.5% for SCDP/PRPTE coconut smallholders. - 36 - Forecast of Domestic Edible Oil Surplus and Deficit in Repelita IV 2.31 An analysis has been made of the way in which the overall balance of supply and demand in the cooking oil sector is likely to evolve during Repelita IV. The outcome depends to a large extent on trends in household incomes. Over the past decade, rapid increases in disposable income have been associated with an even more rapid rise in the consumption of cooking oil. In the immediate future a period of slower Income growth may be expected as a result of the income adjustment to lower world prices for Indonesian petroleum products. Since there are no reliable projections of consumption expenditure available, the analysis was based on rwo alternate projections of growth in household expenditure. In the low income hypothesis, per capita disposable income was assumed to grow at 1% per annum in real terms to 1987 and 2% per annum thereafter. In the high income hypothesis, per capita disposable income was projected to grow at 3Z per annum over the entire period. In both cases 2% per year of total consumption is assumed to switch from lauric oils to palm oil until a minimum of 40X lauric oil is reached. The assumed overall elasticity of demand for cooking oil was taken as 1.5, about what has been observed in the past. Full details of the assumptions used in the analyses are given in Annex 2, Attachment 6. 2.32 The results projecting edible oil supply and demand in Indonesia to 2000 are summarized in Table 2.10. The supply of lauric oils is expected to increase from 803,000 tons in 1984 to 1,170,000 tons in 1990 and 1,730,000 tons by 2000. This increased supply is inadequate to meet the demand for lauric oils until 1987 in the low income growth scenario, and it is barely adequate to meet demand until 1995 in the case of high income growth. Total demand for all oils is projected to exceed 2 million tons by 1988, or at the latest 1990. The two scenarios also provide indications of future exports. If personal income growth is low and consumption does not exceed 2,700,000 tons in 1995, Indonesia way be able to export 380,000 tons of lauric oils and 1,300,000 tons of palm oil. In the high income scenario, exports of palm oil would amount to about 870,000 tons and lauric oils 100,000 tons in 1995, but by the year 2000 lauric oil production would again be below demand. Even using the low income scenario which provides better prospects for exports, and reversal of coconut oil imports by 1987, it is evident that irrespective of income level, expansion of coconut and oil palm production as rapidly as possible is desirable. - 37 - Table 2.10 EDIBIE OIL SURPLUS/DEFICIT; DMPORTS AND EXPORTS, 1986-2000 (Thousands of tons) 1984 1985 1986 1987 1988 1990 1995 2000 Production Coconut oil 670 675 730 800 870 914 1,035 1,140 Palm kernel oil 133 147 157 176 198 256 424 590 Sub-total lauric oils 803 822 887 96 1,068 1,170 1,459 1,730 Crude palm oil 918 1,014 1,081 1,210 1,362 1,761 2,913 4,050 Total oils production 1,721 1,836 1,968 2,186 2,430 2,931 4,372 5,780 Scenario 1: Low Income Growth Deuand For lauric oils a/ 948 951 958 965 972 997 1,080 1,400 For all oils 1,580 1,640 1,710 1,770 1,870 2,077 2,700 3,500 Balance bI Laurie oil (import) export (145) (129) (71) 11 96 173 379 330 Pal- oil export 286 325 329 405 464 681 1,293 1,950 Scenario 2: High Income Growth Deand For lauric oils a/ 978 1,009 1,042 1,075 1,108 1,168 1,360 1,896 For all oils 1,630 1,740 1,860 1,990 2,130 2,430 3,400 4,740 Balance b/ Lauric oil (import) export (175) (187) (155) (99) (40) 2 99 (166) Palm oil exports 266 283 263- 295 340 499 873 1,206 a/ Represents demand for coconut oil and palm kernel oil, declining to be 40X of all oils by 1994. b/ Exports represent surplus, and imports a deficit in production compared with demand. Source: Production estimates IBRD; demand estimates FAO - 38 - .;5-4°S a- W/<^r - 39 - CHAPTE TII: ACHIEVEMENTS AID ROBLEMS OF THE REPELITA. III ROGRAM Index Page Plantings Rubber.................................................. 41 OiloPment P1ann......................**....................... 43 CDconuts T.a .................................................. . 44 Organization, Management and PLmnnSng nstitutional Aspects r........................................... 44 LadAvailabilty alnd Suitability,,,,,,,,,,,......... .... ................... ......... 524 SrtgeanOpinfoTreCosDevelopment 4 Corporate Financial Plannntng.........,,,,,,,,,,,, 48 PRTe Trainin s Progras ...................................... .... 50 Es tates Training ...e................................... ........ 51 IAnd Avilasbility and Su ita y................................. 52 Strategies ad Options for Tree Crops Development re NES Shemes e....................... *........3............... 6 TNne PIR Schemes as................................ 55 The P eU Schemes ............. 55 Public S ect or Estates ..................5... 6 Low Input - low Output .......................................... 57 masrketiug ............. @.v...e**se*.*se@. 59 Finance Capital Transfers - Repelita III............ .................. 60 Aret Surplus ... ............................................. 60 Frinaeng SInallholder Development Exources of sunds .............................. 72 Budget and Releases .....Plnne .an .A.t.l......g................... 62 Credit Releases .............................. 64 Non-Credit Releases .ee a Bdt dt.................. 65 Cost Recovery ......................................... 65 Banking System Reforms ..........th.7Te .Co ....................... 66 The Role of BRI .............................. 66 Financing Estate Development PTP Performance in Repelita II ...............67 Areas of Cocr ...............70 Private Indonesiana Investment .................................. ............... ............... 71 External Assistance.,,,, ............ .......................... 72 Tables in Text 3.1 Repelita III - Planned and Actual Plantngs tlngs... . 42 3.2 Repelita III Funds Inflow-Outflow .............. o.4oo.oe................... 61 3.3 Credit Releases Repelita III Budget and Actul ual...... 64 3.4 Financial Status of the 17 Tree Crop PT Ps*.* .. 68 3.5 Financial Ratios of 17 Tree Crop PTPT Ps........... 69 - 40 - His A'>- 'a/$4a - 41 - CHAPTER III. ACHIEVEMENI5 AND PROBLEMS OF THE REPELITA III PROGRAM 3.01 Recognizing the importance of tree crops for increasing small- holder incomes and non-oil exports, for keeping pace with the domestic demand for fats and edible oils, and for using underutilized land, the Government set ambitious targets for the expansion of tree crops in Repelita III (1979-1984). A summary of these targets and the plantings which were achieved over the five years is given in Table 3.1. Even though targets were not achieved, the results are impressive. During Repelita III some 243,000 ha of rubber, 120,000 ha of oil palm and 178,000 ha of coconuts were established, with over 70%, or nearly 400,000 ha on smallholdings. About 56% of the total smallholder targets in Repelita III are estimated to have been met. Estates planted 146,000 ha or about 27% of the total 541,000 ha of tree crops established over the past five years. Plantings 3.02 Rubber. Rubber plantings during Repelita III were promoted through five major schemes: (i) the Bank-assisted NES projects; (ii) the PIR wholly Government-financed nucleus estates and smallholders schemes in which settlers are either local farmers (PIR Lokal) or transmigrants (PIR Rhusus); (iii) the Bank-supported SRDP scheme aimed principally at replanting uneconomic smallholdings, but including some new plantings; (iv) the extensive PRPTE scheme, fully financed by the OI and implemented by small PHUs, for replanting and establishing new rubber; and (v) an externally financed planting program in West Sumatra. 3.03 Under the Bank-assisted NES program about 55,000 ha (92%) of the planned 60,000 ha of smallholder rubber were planted during Repelita III. Under the same program, the nucleus estates achieved their target and established a further 29,000 ha of rubber. Teams set up jointly by the Departments of Agriculture and Finance have recently completed the field work for a physical audit of the first five NES projects (NES I to V) which has included an evaluation of the quality of the rubber planted. A report is being prepared, but preliminary analysis shows that 80% of the plantings are satisfactory or better, 15% require rehabilitation and 5% have failed. Apart from poor weeding in smallholder areas, which increases costs and may slightly delay maturity, the principal problems resulting in long-term adverse effects have been excessive losses of original plants, and inadequate manuring. 3.04 The achievements under the PIR Rhusus program for transmigrants were disappointing. Only 18,000 ha (about 29%) of the planned 61,000 ha of smallholder rubber was planted during Repelita III, and about 200 ha of the targeted 26,000 ha rubber on the associated nucleus estates. The main reasons for the shortfalls were inadequate coordination, weak - 42 - Table 3.1: REPELITA III - PLANNED AND ACrUAL PLANTINGS FOR ESTATES AND SMALLHOLDERS CROPS, BY PROGRAM Planned Actual Estates Smallholdings Estates Smallholdings ha ha ha % ha z RUBBER NES, Foreign-aided 28,141 59,870 28,758 102.2 54,972 91.8 PIR Khusus 26,000 61,100 200 a/ 0.8 17,875 a/ 29.2 PIR Lokal - 7,000 - - 4,725 al 67.5 Sub-total NES-type 54,141 127,970 28,958 53.5 77,572 60.6 SRDP planting/replanting - 28,100 - - 26,400 93.9 PRPTE planting/replanting - 150,982 - - 78,257 b/ 51.8 P3RSB (West Sumatra) - 7,600 - - 4,994 65.7 Sub-total PMU planting 186,682 - - 109,651 58.7 SRDP rehabilitation - 18,400 - - 3,300 17.9 PRPTE rehabilition - 50,134 - - 893 b/ 1.8 Sub-total rehabilitation 68,534 - - 4,193 6.1 PNP/PTP own planting - - 23,000 n.a. - - MOTAL RUBBER 54,141 383,186 51,958 n.a. 191,416 49.9 OIL PAIM NES, Foreign-aided 14,801 16,840 11,948 80.7 16,099 95.6 PIR Thusus- 5,500 17,000 200 3.6 5,440 32.0 PIR Lokal - 21,742 - - 13,059 60.1 PNP/PTP own planting - - 73,179 n.a. - - TOTAL OIL PAIM 20,301 55,582 85,327 n.a. 34,598 62.2 COCONUTS NES, Foreign-aided 5,499 5,370 9,103 165.5 6,278 116.9 SCDP Planting - 37,600 - - 22,500 59.8 SCDP Rehabilitation - 41,400 - - 7,600 18.3 PRPTE Planting-Hybrids - 9,656 - - 6,966 b/ 72.1 PRPTE Planting-Talls - 168,423 - - 125,874 b/ 74.7 TOTAL COCONUTS 5,499 262,449 9,103 165.5 169,218 64.5 TOTAL ALL CROPS 79,941 701,217 146,388 n.a. 395,232 56.4 al To February 1984 b/ -To March 1983 Source: Dit-Gen E Report DOK.00.15.08.84 and IBRD data. - 43 - management and inadequate financial arrangements, resulting in slow land acquisition, delayed procurement, unsatisfactory preparation of manpower and facilities, and difficulties in arranging for the required number of smallholder participants. The quality of the PIR Rhusus rubber is reported-to be variable and not of the standard achieved by the NES projects. This assessment remains to be confirmed, as inter-agency evaluation teams will not be in the field until late 1984. 3.05 During Repelita III the Dir--Gen E rapidly expanded the number of PHUs servicing the SRDP and PRPTE programs. Beginning with 30 rubber PHUs in 1979 the program expanded to 136 rubber PHIs by 1983. Of the 46,500 ha of rubber scheduled for planting or rehabilitation under the SRDP program in Repelita III, 63% or 29,700 ha was achieved. Under the PRPTE scheme some 79,000 ha of smallholder rubber was established or rehabilitated up to March 1983, about 39% of the Repelita III target. A recent survey made by the Dit-Gen E of the quality of plantings under the PRPTE scheme shows that about 75% are in acceptable condition, a further 11% require improvement, and 14% are of such poor quality that they will have to be abandoned or replanted. In their review of the implementation problems affecting the success of the PRPTE program, Dit-Gen E reports that delay in the disbursement of budget funds has been the most significant reason for program implementation delays. For the 1983/84 budget year there was no release of budget funds by the end of the fiscal year, and in the case of SRDP, only 2% of the 1983/84 development budget was disbursed. The impact of these shortfalls on field activities, particularly maintenance, ha. been severe; the issue is further discussed in paras 3.39-3.45. 3.06 Oil Palm. During Repelita III oil palm was developed in the NES, PIR Khusus and PIR Lokal schemes, and by the PTPs and private estates. Under the NES externally assisted schemes the estates were to plant 15,000 ha of oil palm during Repelita III, and they achieved 12,000 ha or 80X. Smallholder plantings in the same period amounted to 16,000 ha of the target 17,000 ha (95%). The quality of the plantings is good and the first palms are expected to bear fruit in early 1985. The achievements under the PIR Khusus scheme for oil palm were disappointing. Only 5,500 ha of the planned 17,000 ha of smallholder plantings were established (32%) and about 200 ha (4%) of the target 5,500 on nucleus estates. The problems cited for the rubber program (para 3.04) similarly affected the PIR Khusus oil palm schemes. Establishment of oil palm under PIR Lokal was rather more successful. Some 13,000 ha were planted; about 60% of the Repelita target. The quality of the palms is reported to be extremely variable. Records for the estates own plantings of oil palm are conflicting, but based on data provided in corporate plans of the PNP/PTPs and by estimating plantings on private estates, an aggregate 73,000 ha is judged to have been planted. Even if the actual figures are 10 or 15% lower the results are nevertheless impressive. - 44 - 3.07 Coconuts. The Bank-assisted NES smallholder coconut development scheme plantings in Repelita III were 6,300 ha, about 117% of the target of 5,400 ha. Under the same scheme the estates planted 9,100 ha against a planned 5,500 ha (165%). The quality of NES coconut plantings is good, although there have been problems with the quality of seed nuts which have added to the cost of preparing seedlings for field planting. 3.08 Under the SCDP project, 37,600 ha of smallholder coconuts were scheduled to be planted in Repelita III and about 22,500 ha (60%) were achieved. In addition the project rehabilitated 7,600 ha (18%) of a 41,400 ha target. The project has suffered from overly ambitious project design which required the establishment of 70 PMUs in 6 provinces. The effect has been that plantings are scattered, often in remote and inaccessible locations, and that supervisioa has been inadequate to achieve proper establishment and maintenance. Project management difficulties have affected the morale of the field staff and the smallholder participants. These problems have been compounded by the very slow release of GOI budget funds which has resulted in severe slowdown of the program. 3.09 Under the PRPTE scheme, 178,000 ha of tall and hybrid coconuts were scheduled for planting under Repelita III and 133,000 ha (75%) are reported to have been planted by March 1983. It is likely that there has been some overstatement of the PMUs' accomplishments. A recent survey by the Dit-Gen E of the quality of the plantings indicates that of the 133,000 ha, 66% of the area (88,000 ha) is of good quality, 21% or 28,000 ha is in need of rehabilitation and 13% or 17,000 ha have failed and will need to be replanted. The Dit-Gen E survey reports that the main constraints to effective implementation of the PRPTE coconut program are the insufficient number of adequately trained field staff to implement the program, difficulties in site selection, problems with the co-ordination of land clearing, and slow budget releases. 3.10 The implementation problems arising during Repelita III and their implications for successful implementation of Repelita IV are dealt with in the sections on organization and management (para 3.11 to 3.19) strategies and options (para 3.29 to 3.32), and finance and mobilizing capital (para 3.37 to 3.41). Organization, Management, and Planning 3.11 Institutional Aspects. The achievement under Repelita III has, to a significant extent, been dependent on the institutional support provided by the Dit-Gen E and its non-structural units, Team Khusus, SRDPU and SCDPU. At the commencement of Repelita III most of the programs were in their infancy and the staff were new to the task. As additional responsibilities, larger programs and higher targets for planting in increasingly diverse project locations in the outer islands were undertaken, the management capacity within the Dit-Gen E directorates and the non-structural units was increasingly stretched to the point that, towards the end of Repelita III, technical quality began to -deteriorate. Achievement of targets came to be viewed as an end in - 45 - itself, and the growing numbers of implementatio problems as the programs approached their absorptive capacity received inadequate attention. In spite of the willingness and entuias of the staf, it is highly unlkely that with the exsting organization and support institutions the Dit-Gen E can go far beyond the record of establishing 540,000 ba in Repelita III and achieve the targeted 1,500,000 ha of planting called for in RepelIta IV. Major strengthening and improvements in planning, manpower training and extension, and improved coordination among the agencies will be essential preconditions. 3.12 Several events have exacerbated the difficulties of the already stretched institutions in implementing the existing projects and programs. First, reorganization and senior management changes in 1982 within the Department of Agriculture, the SBPN, the Dit-Gen E and Team Rhusus (referred to in paras 1.20-1.24) have resulted in temporary uncertainties regarding the functional responsibilities of these bodies. Second, the Team husus which was organized originally to cope only with monitoring the implementation of externally financed NES projects, has been required to accept responsibilities for project appraisal, land-use planning, contract negotiation, special study tasks, and project financial planning. Team Rhusus now has responsibility to assist the PNP/PTPs with the preparation of feasibility studies and to oversee the very large PII program (formerly under the separate Team Khusus PIR Swadana) which in comparison dwarfs the externally-financed NES projects. Team Rhusus staff recruitment and development have not kept pace with its increased responsibilities which have outgrown its capability. Considerable strengthening and commitment of resources will be necessary if Team Ihusus is to fulfill its plamned level of responsibilities. The number of senior staff will need to be increased and the second echelon staff given additional training, particularly in project preparation, finance, and land-use planning. 3.13 Other organizational problems have arisen during the evolution of the Dit-Gen E over the past five years. The first concerns the fostering in the Dit-Gen E of the semi-autonomous, non-line, agencies such as SRDPW and SCDPU which have become responsible for their own planning, production of planting materials, extension, supervision and staff training. While the creation of these non-structural agencies has -contributed significantly to efficient implementation of Bank-financed projects, functional ambiguities have arisen with the set of line agencies or directorates in Dit-Gen E responsible for similar tasks. Support of the semi-autonomous institutions implies a gradual weakening and reduced importance of the line agencies, as a part of their responsibilities and resources are moved to the semi-autonomous units. In addition, since SRDPU, SCDPU and Team Rhusus are responsible for planning, project development, etc., the present system implies duplication of effort leading to inefficiencies in manpower utilization. In the light of the manpower constraints and the inadequate technical expertise in the sector, the Dit-Gen E will need to rationalize the two management approaches. In the past the non-structural units by - 46 - themselves were sufficient to undertake the major thrust of project related work, but as the Dit-Gen E's program for PRPTE, PIR Khusus and PIR Lokal has grown, the role of the line directorates within the Dir-Gen E has become increasingly important to the successful implementation of the tree crops program. The Director-General of Estates is committed to strengthening the directorates. In particular, since one of the major deficiencies in the sector is che diverse number of agencies involved in planning, i.e., Team Khusus, PTPs and the Directorate of Program Development, strengthening of the role of the latter Directorate has assumed critical importance. The Directorate of Agribusiness and Processing must also assume greater importance since product processing and marketing, product pricing and cost recovery will require additional staffing and expertise as the project crops mature. The importance of the role of private estates in Repelita IV and the specialized problems of their development may also warrant the particular strengthening of appropriate directorates. 3.14 Experience in the Bank-assisted projects NSSDP, Transmigration I, NES I and SRDP I, where rubber production has started, shows that adequate extension and control over participating smallholders is required to safeguard the economic life of the trees (about 25 years). Smallholders on their own tend to apply over-intensive tapping systems (daily rather than alternate or each third day tapping); to nLeglect weeding, manuring and disease control and to handle latex carelessly, so reducing the value of their product and the economic life of their trees. The GOI has not finally decided whether extension during the exploitation phase would be r-tained by the agencies responsible for implementing the plantings, or would be given to the provincial Di sbun staff responsible for tree crop extension. It is expected that the implementing agencies will be responsible for extension at least until farmers' credits are repaid and this will require additional staff well-versed in maintenance of mature plantings, exploitation techniques, processing and marketing. However, if the GOI decides to give responsibility for mature-phase extension to the existing extension service, the project implementing agencies will be able to concentrate fully on the development of tree crops to maturity and few extra staff with training will be needed in the Disbun. Such a decision would be a useful move towards integrating responsibility for the various projects within the structural GOI agencies. 3.15 Within Dit-Gen E, the Directorate of Extension (Dit E) will also require considerable attention. A pressing need remains for extension services for the 75-80% of all smallholders who are not participants in the project development programs, as well as determination of policies and their implementation in respect of extension during the later stages of the projects. If Dit E is to provide satisfactory direction and support to the provincial extension workers in technical matters, considerable strengthening of the directorate is needed. Similarly, staff are necessary to develop training programs in association with AAETE and to guide implementation of these programs. It is expected that these needs will be addressed under the proposed TJ1ird National - 47 - Agricultural Extension Project, which would also clarify the boundaries of. Dit-Gen E responsibilities in practice. Nevertheless, Dit E needs to recruit and train staff in anticipation of the project becoming effective, and to establish operational systems, even if at first restricted to priority areas and priority crops. 3.16 telated to the questions raised on organizational responsibi- lities for produce processing and marketing, credit repayment (para 3.13), and extension services (paras 3.14-3.15) is the question of how to increase farmers' participation in order to improve the impact of efforts in these areas. A gradual involvement of the farmers in decision making during the tree crop development period may foster valuable relationships between farmers, estate management and extension staff, and increase the probability that the farmer will accept advice once he is the decision maker when the tree crop is mature. 3.17 Development Planning. The emphasis of planning within the tree crops sector and for project-specific planning throughout Repelita II and III has been on program size, planting targets aid location. Planning for implementation capacity and strengthening of the institutions; planning for manpower, and financial and investment planning have generally taken a -back-seat- to consideration of program size, and the fulfillment of large physical targets. Planning by objective has emphasized production, exports, and smallholder income. The diverse number of parties in the planning process, at times inadequately coordinated, has jeopardizei project ard program implementation. The agencies and bodies involved include the Bureau of Planning and the Bureau for State-owned Enterprises (BTU-BUMN) in the Department of Agriculture, the Directorate of Program Development of the Dit-Gen E, the * PTPs, Team Rhusus, SRDPU, SCDPU, and the Directorate of Program Development in the Department of Transmigration (before 1983 known as DTrADA, since 1983 as Bina Program), and at times, the Directorate of State Enterprises (Persero) in the Dit-Gen Internal Monetary Affairs of the Departmenr of Finance. The key problems for planning are: (a) Physical plamting targets have guided all other considerations rather than being guided by available trained manpower, implementation capacity, financial and other resources. As long as resources were not overextended, particularly investment capital, and there were sufficient PTPs capable of undertaking new activities, distortions in planning in the early years of Repelita III were not serious; (b) The effectiveness of the agencies involved in planning for tree crops, apart from the need for centralized supervision, is often eroded with new directives and instructions to the Dit-Gen E or PTPs to undertake previously unscheduled projects. The planning process is effectively negated by rush and overly optimistic requests to meet unexpected new targets. The recent new PIR - 48 - Harapan target, to plant 100,000 ha of oil palm by six PTPs, is an example where implementation capacity, commitments under existing projects, and rational siting of PTPs in PIR areas have been inadequately considered. In one extreme case, dense primary jungle has been cleared although it was not intended by the Provincial Government for development. The properly planned PIR and NES projects already being implemented are jeopardized by the same implementing agencies being asked to add unplannel, quickly directed projects. The value of financial and manpower planning within the PTPs is limited when resources must constantly be adjusted to fit an ever increasing volume of projects and targets; (c) Overly optimistic physical targets for land clearing, planting, and material supply have led to poor implementation when, although required inputs for one operation are available, inputs for another are not. This occurrence is mos- notable in the PIR projects where provision of planting material, land clearing and fertilizer procurement have not always been properly coordinated; cd) Clear priorities are not defined between programs or projects with different objectives. In the late 1970s the emphasis for PTPs was on replication of the NES projects in PIR Lokal and PIR Ihusus projects, but the importance of one series of projects compared with others seemed to be reflected only in the size of planting targets. Priorities were not set for PTPs planting tree crops for existing transmigrants settled under earlier programs, relative to assistance to transmigrants in newer settlements in PIR Khusus projects, or for PIR Rhusus projects compared with PIR Lokal projects. Setting priorities for strengthening and expanding PMUs by geographic area, crop development and target farmers, has also been largely overlooked. The planning process has tended to focus on expanding all strategies without rationalizing a balance within and among them to achieve a clear set of objectives. 3.18 Corporate Financial Planning. A final issue for management which is of immediate concern is the. placement of the functions of the former SBPN. One of the mos- important functions carried out by the SBPN was to act as controller and coordinator of PTP development, particularly in matters of budgeting and forward planning. Although SBPN was weak in financial planning and monitoring, investment appraisal, marketing support and advice, these shortcomings were not particularly serious as long as the PTPs were generating substantial cash flows for reinvestment and the payment of dividends to the GOI. The function of monitoring and - 49 - control of the PTPs increased in importance when cash flows declined in 1981-82 while large investment programs were being initiated without firm funding arrangements. There was rapid and serious deterioration of the financial situation of a number of PTPs. Control and supervision functions became imperative as the SBPN sought to have the PTPs cut costs and review their investment plans more closely. 3.19 The disbandment of SBPN in 1983 has eliminated the direct supervisory role of the GDI and its ability to coordinate and act as controller for the group of PTPs. The 17 tree crop PTPs represent a very large undertaking - with total assets in 1983 of gl.3 billion, sales of $564 million, and profits of $168 million. The GDI has an objective to grant greater autonomy to the PTPs to operate as commercial companies, and in this context a reduction in some control functions may be advisable. It should be noted that in practice the autonomy of the PTPs has been undermined in recent years by their being required or requested to undertake new estate expansion programs, to prefinance (at high cost) some smallholder programs, to take over or continue unprofitable estates, and to operate smallholders schemes under cumbersome budget controls. These problems need addressing, but also guidelines for physical and financial performance standards are necessary and the degree of supervision/support should be reduced only progressively, based on the success of programs to build up each PTP's financial and planning expertise. Even so, there will continue to be a need for an adequately szaffed central unit or units capable of reviewing major investment proposals and PTr performance against targets. The coordinating functions which SB?N served may be more important now than before, as the PTPs are being called upon to undertake projects in such size and numbers as to be unmanageable. Early resolution of responsibility for the PTPs is imperative. 3.20 Financial planning in the PTPs has been facilitated by major improvements in accounting. A standardized system, inappropriately known as the MISI management information system, was fully operational for all the PTPs by 1980. The SGV group began systems design for the PTPs in 1972 under the Fourth Agricultural Estates Project (Credit 319). The NES I project (Loan 1499) in 1978 provided further technical assistance to improve cost accounts for individual estates of the PTPs and by commodity. The information is largely financial and major additional work is needed to integrate physical information into the system, and to further improve the management relevance and accuracy of repor'ts (see para 9.08). Using the system as a basis for corporate planning, the former SBPN established guidelines for preparation of financial projections by the PTPs in 1981. Ten-year financial plans or Rencana Jangka Panjang- were prepared in 1982 and 1983 but have now lapsed. Adoption of standard benefit and input prices was particularly useful in comparing the relative efficiency and productivity among the PTPs, but several improvements are still required to make the corporate - 50 - plans better tools to forecast profitability, cash flow and liquidity problems, and to assess the capacity of the PTPs to expand investment. The deficiencies in corporate financial plans at present include: (a) The value of sales tends to be overstated, as they are usually based on optimistic production targets rather than achievable production; (b) Inventories of finished product stocks and intermediate goods are either not accounted for, or tend to be understated; thereby overstating sales and income. (c) Unit costs for estimating the costs of goods sold, i.e., tapping or harvesting, transport, processing, are frequently projected at constant levels without regard for economies of scale or level of throughput; (d) Accounts and trade receivables, and hence working capital, are usually understated. Available funds and cash flow surpluses are thus overstated; (e) Corporate plans do not include simple investment analysis giving rates of return. Capital requirements and the ability of PTPs to undertake new investment projects are often heavily dependent on projected cash flow surpluses and lack sensitivity analysis for making alternative financial decisions. 3.21 While such basic deficiencies can be fairly readily rectified, there is at present no supppor- unit to establish and amend guidelines for financial planning for the PrPs. A corporate planning unit is required to monitor the results of the PTPs, advise on financing and investments, and to utilize past performance data to make better projections. In the absence of supervision of the preparation and results of the financial plans, difficulties are frequently not known until financial statements are issued or until there is a request for loan reallocations or new borrowings. The 'fire engine- approach to finance for large and important corporations such as the PTPs, denies the GOI full capacity to maximize PTP profits, and hence dividends to benefit the general budget, or to generate retained earnings to assist funding of new investment programs. 3.22 PRPTE Training Programs. Training of staff in the Dit-Gen E Directorate of Rehabilitation and Expansion to implement the planting, replanrting, and rehabilitation programs under PRPTE has been the responsibility of outside agencies such as the Estates Training Institute (LPP) and the agricultural institutes. During Repelita III the Directorate concentrated its training efforts on bringing all of its 12, 800 staff employed in the PMUs to a minimum level of expertise - 51 - commensurate with the grade in which these staff had been employed. The number trained and to be trained is not available, but it is believed that some 4,500 staff received training. Since most of the staff have at least a general training in agriculture and better still, at least two to three years practical experience in the PRPTE program, the necessity for such formal training is being increasingly questioned within Dit-Gen E. Much of the year-long training program at the agricultural institutes and the six month crash course at LPP is spent in the classrooms and is academically oriented. Time spent at research centers, while intensive and practical, may not meet the needs of these staff and these approaches are under review. 3.23 During the course of Repelita III, it has become evident that many of the 3,800 PLPTs (extension staff) lack detailed knowledge of the crops they handle, in particular crop diseases, the use of herbicides, nursery management, and harvesting and marketing techniques. An in-service training program is required to provide skills in practical agronomy and impart some knowledge of basic extension methods. Greater use can be made of contact farmers, -buddy' systems, demonstration sites, and such extension aids as pamphlets, slides and photographs. There is substantial potential for adoption of a properly managed training program based on visiting systems of extension. Since the PRPTE program is already large and growing, it has become clear from the experience in Repelita III that it is not feasible to bring staff at all levels to central locations for intensive training. Suitable staff will need to be assigned from each province to attend courses to equip them as trainers. Assistance will need to be provided to organize training in each province. If the scheme operates well, all the PLPTs in a province could be reached in about a year. 3.24 Estates Training. Most PTPs, if not all, have provided some pre-service and/or in-service training during Repelita III. Some P?Ps have placed untrained workers with experienced staff for periods of several months before setting them to work on their own (known as the buddy- system). Other PTPs have hired technical assistance to develop training programs. The results during Repelita III were mixed and the numbers trained inadequate to meet the rapid increase in demand for skilled manpower on the estates and in their projects. Only a few of the PTPs notably in North Sumatra, have well-managed, routine training programs. 3.25 The estates have increasingly looked to the LPP to provide maragement and technical training for their upper level staff. Using the assistance provided under the NES V project, LPP is to expand its facilities from the one central campus in Yogyakarta to include a second major campus in Medan and four regional training centers. To date, only the Medan center is functioning in addition to the central facility. The intention is to increase the training capacity to reach lower level staff - 52 - and farmer leaders and to locate the training facilities closer to the major tree crop areas. LPP, however, has a wide range of responsibi- lities for training manpower in the sugar sector as well as the tree crops sector and has been fully stretched attempting to meet the competing demands. During Repelita III LPP established a three year estate management course and a six-month crash course for extension workers in the PRPTE program. In addition, LPP offered limited consultant assistance to the estates for management problems. While LPP has been important as a source of training beyond the scope of the PTPs, the training needs of the estates are beyond the LPP capacity. In 1983, the year of greatest output, LPP is believed to have provided training for about 50% of the estate managers and inspectors in 2-1/2 mouth management courses. These courses were often at levels lower than the present capability of the managers and classroom work was more academic than related to practical management applications. The need therefore arises for the estates and LPP to define the specific training needs of the estate manpower that require priority, and for LPP to take a more aggressive role in assisting the esEates with their training needs. Land Availability and Suitability 3.26 A major constraint to the fulfillment of the Repelita III planting targets has been the poor planning for allocation of suitable land for projects. Assigned land is often not free from title and compensation claims or there is overlap with other development plans at the central or provincial level. Large areas of land have also had to be rejected because of unsuitability for food crops and/or tree crop production. The standard requirement of a minimum food crops area of 1.25 ha for each transmigrant farm has particularly resulted in high rejection rates of transmigrarion sites; some rejected sites would have been quite suitable for tree crop development only. Recently, the Department of Transmigrarion has added several farm type variations to the standard model which are expected to reduce the site rejection rates. In general, the central problem is the inadequacy or absence of proper site identification and selection before land is allocated. In part, this has been caused by difficulties in obtaining reliable basic area data from Government agencies and topographic maps of the scale and accuracy required for planning. Bakosurtanal, the National Coordinating Agency for Surveys and Mapping, although it has made a good start to vork on mapping, has a limited capacity to meet the large and growing demands made on it from all parts of Government. The Directorate-General of Agraria has even more limited capacity. Its land capability maps have often been found to be inaccurate and therefore of little use for project planning. The Soil Research Institute in Bogor, while it is doing a lot of high quality work on soil classification and soil surveying throughout Indonesia also has limited capacity and is unable to monitor the land surveys for NES/PIR projects. - 53 - 3.27 For tree crop projects, the responsibility for coordination of land-use planning work by the various Government agencies rests in the Team Khusus, but it has had too few technical staff to cope with the demands of Repelita III. Given that some 1.5 million ha of land will need to be allocated, surveyed and physically planned to fulfill the Government's objectives for Repelita IV, staffing for land use planning requires urgent attention. Locally recruited staff should be supplemented with internationally recruited consultants for the Dit-Gen E to prepare climatological studies, including water deficit calculations, topographic mapping, land use, vegetation and soil surveys, undertake hydrological invesrigations and all aspects of physical planning. An additional avenue is to improve the linkages with the transmigration program. The Directorate Bina Program of the Transmigrarion Department, assisted by a multi-disciplinary technical advisory group and several planning consulting firms financed from a World Bank loan, carries out the selection and evaluation of sites for transmigration. Its work program. also includes the testing of new mapping techniques using radar, laser and computer technologies to increase the speed and accuracy of topographical surveys and reduce costs. Coordination with Dir -Gen E's program could yield benefits in two respects: first, sites reiected for transmigration may still be suitable for a tree crop program, and second, in building up its institutional capacity in land use planning the Dit-Gen E may draw from Transmigration's experience. These issues are discussed further in Chapter VII. Strategies and Options for Tree Crops Development 3.28 The heterogeneity of the tree crops sector has necessitated the adoption of a multiplicity of development strategies employing different management systems to achieve diverse objecrives. The complexity and plurality of these strategies is such as to make planning for Repelita IV difficult. The experience gained during implementation of Repelita III, however, provides a number of useful observations on weaknesses and strengths of the various strategies. These are summarized below. 3.29 The NES Schemes. The main observations for these externally funded projects are: (a) Utilization of the public sector estates is best suited for extensive block planting of new areas and the provision of essential infrastructure in difficult areas which could not otherwise be developed for smallholders. The use of PTPs is not suited to development of scattered smallholdings or to replanting of existing smallholder areas as was tried in the NES II project. - 54 - (b) The capacity for utilization of the nucleus estates in smallholder development is limited by the extent of the management and financial strength of each estate company. Existing project commitments prior to the commencement of Repelita IV, with the addition of the large PIR program, has absorbed almost all of this capacity. The PTPs require a period of consolidation and a safe level of planting to undertake in smallholder programs, rather than implementation of targets which assume unlimited PTP field and management capacity. (c) Although the PTPs have shown their ability to establish and maintain tree crops, they have performed less well as trainers for smallholders or as an advisory service to provide extension to smallholders, especially on food cropping. (d) Estates which specialize in the growing of one particular tree crop have been found to be poor implementers of smallholder development schemes involving a different tree crop. Oil palm estates, for example, do not do well developing smallholder rubber and vice versa. Only 7 of the 17 tree crops PTPs are truly capable in both rubber and oil palm. A considerable period of time is required to build up experience in any new crops. (e) The NES schemes have not been successful in establishing food crop areas to the extent planned for smallholders. The estates do not have the technical experience necessary to organize food cropping, and cannot reasonably be expected to ensure technical advice from the Food Crops Extension Service, or arrange the availability of Bimas credit and inputs for settlers cultivating their second and subsequent crops. The magnitude of this problem and its factors have recently been fully realized by the Dit-Gen E and it is expected that improvements in the situation will result. (f) -New' settlement by smallholders in the NES schemes sometimes involves the costly provision of housing and infrastructure for people already living on or very close to the land to be developed. The percentage of truly landless, poor new settlers in the NES projects is unknown and the socioeconomic considerations of NES developments require much greater study than evidenced until now. The critical issue is whether settlement of local people is justified, using the more costly NES system to provide housing and infrastructure, or whether these benefits should be restricted to transmigration settlement under NES or PIR Khusus projects, leaving the PMU approach of SRDP or PRPTE to assist local smallholders. - 55 - 3.30 The PIR Schemes. In general, the preparation of the wholly GOI financed PIR projects has been less rigorous than that under NES projects. The main observations are: (a) Due to the proliferation of the PIR programs, the estates as implementing agencies have been stretched to the limit of their managerial and financial capacities with the result that the quality of plantings and maintenance in smallholder projects has begun to deteriorate. A few of the plantings on PTPs' own estates are also now showing signs of neglect. (b) Problems have arisen with the timing of smallholder entry into projects in relation to area development, due to the extensive use of contract clearing and problems in coordinating the development program of the estates with settler selection by the provincial government. The original intention in NES/PIR projects was to use settlers in land clearing, planting and maintenance over the entire development period and thereby provide maximum employment and training benefits. The critical problem is the timing of the arrival of the smallholders into the project so that they can benefit from employment and training and yet not delay the implementation schedule of the PTPs. (c) The experience in the past few years suggests that Government commitment for the PIR Ehusus schemes, judged from the standpoint of inadequate budget allocations and slow fund releases, has not been as strong as for the NES schemes. Project implementation in many of the PIR projects has suffered and continues to suffer from inadequate financial arrangements. Restrictions on releases of funds up to budget ceilings must be equitably applied to all projects and, if budgets cannot be made adequate, projects should not be approved or undertaken. (d) Since the PTPs are best qualified to undertake large-scale development of rubber and oil palm in areas free from existing settlement, the PIR Khusus program has tended to develop tree crops for new transmigration areas and is not adequately dealing with the older transmigration sites, where the need for tree crops is far more urgent. The issue is what strategy can effectively develop tree crops for transmigrants in remote older areas of settlement with existing transmigrant populations. 3.31 The PHU Schemes. These schemes, whether SRDP, SCDP or PRPTFE, give rise to the following comments: (a) There is considerable resistance by many smallholders to felling existing old and uneconomic stands of rubber and coconuts for replanting. Consequently some 50% of the area developed under SRDP has been new planting rather than replanting. No readily - 56 - acceptable solution has yet been found to induce smallholders to replant, but experience indicates that incentives to intercrop and provision of cash payments may be necessary. (b) SRDP and SCDP schemes, since they do not provide settler housing or infrastructure and require that at least 50% of the cost of labor be provided in "sweat equity", provide a substantially less costly (in cash terms) means for establishing tree crops than the NES schemes. The advantages to the GOI in long-term mobilization of capital for the sector are significant in the SRDP approach. (c) Experience with SRDP indicates that slower growth in the PRPTE program, with more intensive supervision by the Dit-Gen E and clearly planned objectives, would be preferable to the rapid and extensive development of PMUs which has occurred, without logistical support, supervision and available funds being fully assured. As with the PIR developments, consolidation of PMU activities is required within financial and manpower constraints. Cd) The major issue which will determine the success of the PRPTE strategy for rubber and coconuts concerns the speed with which the existing PMU structure can be rationalized and staffed with adequately trained personnel, operating under adequate supervision from the Dit-Gen E. Without these improvements PRPTE planting targets in Repelita IV will not be fulfilled. Ce) In addition to serious manpower and training difficulties, delays in the release of funds in the SRDP, SCDP and PRPTE programs have resulted in inadequate maintenance of existing plantings, untimely provision of inputs, poor morale of staff and smallholders, and unnecessary costs to correct mistakes. Financial planning for the PRPTE requires better coordination between Dit-Gen E and the Department of Finance to avoid financial difficulties which may jeopardize the success of the program in the longer term. (f) With the success of SRDP in attracting participation of smal1holders with cash payments equivalent to 50% of the normal financial wage, possible cost reductions in the PRPTE program to levels comparable to those in SRDP need to be fully explored. 3.32 Public Sector Estates. General observations on the PTPs' own activities are: (a) The demands placed on the estates in the NES and PIR programs have diverted much needed management and manpower skills and finance from the PTP's own estates to smallholder developmeat activities and new nucleus estates in the outer islands. In one or two extreme cases, areas of rubber planted and replanted in - 57 - the late 1960s and early 1970s have been neglected, with overtapping and bark consumption that will require replanting far earlier than is normal. In some cases where PTPs are diverting funds to new development in the PIP, projects to satisfy development targets, it has been at the expense of the routine investment required on existing estates to ensure production maintenance of the trees and normal replacement. (b) Manpower planning within the estates deserves far more attention than it has received in the past. While the DOA at various times over the years has reorganized PTP holdings and consolidated PTPs to improve efficiency, these efforts have not always dealt with the critical issue of the existing labor in the estates and the large differences in production costs and profitability resulting from excess labor. Recruitment of labor by undersupplied PTPs, or for new projects requiring labor, from PTPs with excess labor, has not received priority in the coordination of PTP activities. While excess labor was formerly found only in the Java estates, such as PTPs XI, XVIII and XXVI, distortion and large differences are now evidenced throughout the PTP network. In the numbers of permanent employees per 1,000 ha, differences of 60% now occur in the North Sumatran estates alone. (c) With the advent of programs such as SRDP and PRPTE which reduce the development burdens of PTPs for smallholders rubber development, PTPs should be utilized for development in areas where they have clear comparative advantages, i.e., in block planting for transmigrants or where specialized processing facilities are required. This is particularly the case with oil palm. 3.33 Low Input - Low Output. A long debated issue concerning the best strategies for smallholder tree crop development is the potential for using less intensive, cheaper approaches than those which have been used in the past. The forthcoming SRDP II project includes a component based on a low cost -partial approach" to smallholder rubber replanting and it will be monitored closely to judge its success. There are two opinions regarding the merits of high or relatively high input - high output models versus the low cost - lower output approach. Those who support the first approach argue that intensive assistance and support is necessary to ensure reasonable yields and farmer incomes, provide for adequate cost recovery, and enhance the economic rate of return. Those who argue for a more extensive approach believe that in situations such as exist in Indonesia, where technical expertise, managerial skills and capital are in short supply but labor and land are relatively plentiful, it is appropriate to design programs which may have lower benefits per farm family but benefit greater numbers at less cost per family. - 58 - 3.34 The central issue is the miniumm amount of financial and institutional arrangements that are required for smallholders to ensure their financial viability in the long term. One way often proposed to reduce input costs to the public sector is to supply smallholders with high yielding planting material but no other inputs, and a minimum of technical advice. The argument is that even if the full potential of the material (to yield at about four times the level of unselected material) is not realized, the benefit to the individual and tc the economy will nevertheless be substantial. Experience with such s iemes, including Indonesian experience in Repelita I (para 1.30) has been poor and it is generally agreed that some inputs in addition to improved planting material are needed if smallholders' plantings are to achieve satisfactory production levels. Another point debated over many years has been whether smallholder rubber development using selected clonal seedling material rather than budgrafted material would give acceptable results, for lower investment costs. Clonal seedling stumps are cheaper to produce than budded stumps but, if they are to give comparable yields per hectare, they must be planted at higher density and subjected to rigorous selection through the immature period and through the early years of tapping. It is very rare that a smallholder can be persuaded to remove slower growing or lower yielding trees, but without such thinning, the tapping costs for seedlings are higher and the per hectare yields lower than those of budgrafted material under similar maintenance regimes. Clonal seedlings reach tappable size earlier than budgrafts but do not tolerate tapping at as high an intensity as the recommended budgrafted material. Also, the average yields of clonal seedlings under the best management are, in general, a little less than these of budgrafts of a clone properly selected for the prevailing soil and climatic conditions. Most agronomists now agree that the high level of management skills necessary to realize the potential of selected clonal seedlings, together with the slightly lower potential yield, make this material unsuitable for use by smallholders on a large scale. Although used in the early years of the replanting schemes in Malaysia and Thailand, clonal seedlings are no longer used in official schemes in these countries, and have never been extensively used in Indonesia. 3.35 An interesting pilot project has been in progress at Dusun Pulau in South Sumatra since 1972/73, to test the merits of a low cost investment strategy. Here, a group of farmers were given grants covering the cost of land clearing, budgrafted planting material and some fertilizer. A minimum of extension support was also provided. About 50 ha was planted in 1972/73 and the area was increased to about 500 ha by 1976/77. Each area was intensively intercropped for about three years and, when intercropping ceased, most of the area became infested with sheet lalang - a strong growing grass weed, which is difficult to control and which competes strongly with rubber for nutrients and water. Details of maintenance practices are not now available but girth measurements in January 1984 showed that growth of the trees was significantly below normal, and that one third of the trees planted in 1974/75 had not attained tappable girth ten years later, whereas all would normally be tappable after no more than seven years growth. Yields have not been regularly recorded but the 1972/73 plantings were reported to produce 632 kg/ha in 1982, when (at 10 years of age) a yield of more than 1,200 kg/ha - 59 - would be expected. The average yield for the province has been estimated by Barlow and Muharminto (Smallholder Rubber in South Sumatra, September 1982) at 518 kg/ha, a figure which will reflect large areas of unselected seedling rubber of various ages and so cannot be directly compared with the Dusun Pulau yield. In view of the vast area of rubber remaining to be replanted, it is important that relatively low cost strategies, such as that at Dusun Pulau, be tested further. However, experience to date indicates that Indonesia's present strategies involving medium to high inputs and outputs (the PRPTE, SRDP, and NES/PIR programs) are probably more advantageous to the economy. Marketing 3.36 Key problems of marketing evidenced in the sector are discussed in Chapter II by commodity. The choice of strategy and crop has significant implications for both processing and marketing. Prior to the NES projects and the expansion of PMUs in the SRDP and PRPTE programs, Government action to improve smallholder processing, product quality and marketing arrangements was limited to the establishment of cooperative rubber processing facilities in the Assisted Replanting Program (ARP) and of Group Coagulating Centres. The NES projects promised GOI a new avenue to provide maximum benefits to smallholders through use cf PIP-owned and operated factories and mills. Several critical problems for smallholder processing and marketing now exist: (a) The proliferation of PMU development will require enormous investments in processing by the end of Repelita IV and PMUs do not have the advantage of PTP capital and expertise for their processing requirements. GOI is unsure whether marketing smallholder production in SRDP and PRPTE projects by way of private processors in lieu of investment in Government-owned factories will provide maximum benefits to farmers. Experience at NSSDP, a PMU-style project which sells smallholder rubber production through a tender system, has proved unsatisfactory in that smallholders have had no incentive to improve product quality. (b) Formulation and implementation of long term regulations governing a pricing policy for smallholder production should receive urgent attention. A consultant study is to prepare formulae for the pricing of smallholder rubber and oil palm. These formulae will have to be reviewed by GOI and regulations adopted to implement them. (c) A few recent studies have indicated improvements in rubber and copra marketing which the Department of Agriculture and the Dit-Gen E might undertake. A program for improved copra drying and group marketing in a cooperative system is being undertaken by the Dit-Gen E, but specific actions to assist rubber smallholders to obtain greater premiums from improved product quality, and avoidance of excessive middlemen in the long chain of rubber marketing are not as clear. - 60 - (d) The Dit-Gen E's capacity to alter rubber quality and marketing for snallholders, apart from strategies directed for PTPs or PfUs, is limited since the Dit-Gen E does not control licensing of processors and traders. The Dit-Gen 2 can, however, improve its marketing services through the Directorate of Agribusiness and Processing with adequate and well-trained staff to evaluate and advise on market conditions and product quality, cost recovery and prices to be expected by smallholders. Finance 3.37 Capital Transfers - Repelita III. In reviewing Repelita III experience, the question may be posed whether commitments and outlays to the sector are justified in terms of financial benefits to GOI. While the economic benefits of tree crops for increasing rural incomes, employment, and export earnings are well understood, the design of Repelita IV raises the issue of the extent, if any, to which the sector is a drain on the Government. Central to the issue is the determination of a prudel.- level of investment compatible with overall availability of budget resources, loans from the banking sector and whether taxes, both export and corporate, and future dividends from PTPs and private estates will justify GOI raising the additional resources. The presumption has been that investment in the sector primarily supports economic and social goals. It has been questioned whether estate development in NES /PIR projects and the PTPs in general absorb GOI investment funds with little or no returns to GOI. Analysis of the total outflows by GOI to the sector and zhe financial returns is provided in Table 3.2. 3.38 Net Surplus The principal finding from this analysisis is that 00I over the last five years has received more than it outlayed in the sector. Even though most benefits of the intensive investment period since 1977 have not yet accrued, GOI was able to derive a surplus of Rp 40 billion in Repelita III from the sector. Outflows do not include investments by PTPs of their own funds, but do include GOI appropriations and long-term state bank loans made to the PTPs The level of private sector estate borrowings is not a demand on the GOT and has been excluded. Inflows probably understate corporation taxes from the private sector estates to GOI as data were not available. The surplus to GOI would be about Rp 129 billion more for the five year period if fertilizer and interest subsidies are excluded from the analysis. As export taxes on rubber were reduced to zero, and those on oil palm reduced to 5Z in 1981, GOI received less tax benefits than would ordinarily be derived. Inflows to GOI would be substantially higher if loan repayments by the PTPs were included in the analysis. This data is not readily available but repayments from the PTPs and smallholders in Repelita IV from p;evious loans will supplement sources in Repelita IV. The findings support the view that subject to adequate finanLo l rptilrna -- the estates and for smallholders, and within the context of implementation capacity, the financial benefits to GOI justify further and rapidly expanded levels of investment in tree crops. - 61 - Table 3.2 REPELITA III FUNDS INFLOW-OUTFLOW TREE CROP SECTOR (Rp billion) Outflows by GOI Inflows to GOI Through Public sector (PTPs) Budget appropriations and Export taxes a/ 119.2 State bank long-term loans a/ 301.0 Sales: Other taxes e 59.6 Equity 33.8 Corporate taxes 196.3 Fertilizer subsidies b/ 25.6 Land taxes 39.7 Interest subsidies c/ 22.9 Dividends 21.2 Appropriations to GOI g/ 29.8 Subtotal 383.3 465.8 Through Private Sector Loans to smallholders 240.0 Export taxes d/ 214.8 Grants to smallholders 160.0 Sales: Other taxes e 107.4 Fertilizer subsidies b/ 54.4 Corporate taxes 34.7 Interest subsidies c/ 26.4 Land taxes 71.6 Dividends hl 10.6 Subtotal 480.8 439.1 Total 864190 Note: Public sector comprises the 17 tree crops PTPs. Private sector includes suallholders and private estates. a! Represents GOI-sponsored project loans including Department of Finance/Bank Indonesia disbursements and long-term loans of the state banks for projects. b/ World Bank estimates December 14, 1983 'Cost Recovery Issues in Tree Crop Projects," with 32% of total subsidy allocated to PTPs and 682 to the private sector. c/ Differential on average outstanding debt of PTPs, 1979-83, between interest rate of 13.5% and 16% or 2.5%; for smallholders between 10.5Z and 16% or 5.5%. d/ Assumed at 6% on total sales which would include export, MPO and former PET taxes on oil palm. e/ Conservatively projected at 3Z of sales covering local MPO and PPN taxes. f/ 2% of the value of sales. jI Appropriations to Department of Agriculture and other Government agencies and transfers to GOI in operating costs of the PTPs assumed at 1.52 of value of sales. h/ Includes dividends for only a few of the joint venture estates. Figure may be substantially higher. - 62 - Financing SmalIholder Development 3.39 The experience of Repelita III highlights the need to re-examine the institutional machinery for budgeting and release of funds, particularly for the requirements of tree crops where natural and technical considerations demand that funds not be managed primarily to suit administrative convenience. In particular the experience of Repelita III raises some key questions regarding (a) consolidation of a multiplicity of budget sources for these integrated projects; (b) flexibility in shifting releases under unutilized ceilings from one year to another; and (c) longer range routine financial planning and coordination between the Department of Finance and the Directorate-General of Estates, particularly for smallholder development which at present is analyzed outside of Repelita planning only on an annual basis once the Repelita targets are set. 3.40 Sources of Funds. In Repelira III, as in previous Repelitas, the GOI has relied principally on budget sources of funds to finance the predominant share of expenditures in the tree crops sector. In addition, the public sector estates have received loans from Bank Indonesia for externally-financed projects and approved levels of borrowing from the state banks; SRDP and SCDP projects have used BI/BRI funds for credit expenditures, with an interest subsidy from budget sources. BEII funds have also been used for some PIR Khusus credit expenditures. Budget funds provided for smallholder tree crops by the Department of Finance have been traditionally for credit expenditures in the NES and PIR projects. These funds at the national level have been allocated from the Dana Tanaman Ekspor (DTE) based on export taxes on tree crops. These funds have been used in all smallholder tree crop projects and were originally intended for non-credit expenditures such as project management, roads and social services. DTE was later utilized to prefinance expenditures and cover interest subsidies; the distinction among budget sources for credit and non-credit expenditures becoming less clear. Non-credit expenditures are also paid from provincial government budgets and INPRES funds for schools, health facilities and others. The SRDP and PRPIE projects were the first to utilize BRI's own funds, with liquidity credits from BI to finance smallholder credit costs. The intent of GOI has been to reduce capital requirements on the public budget and have BRI and other state banks participate as executing banks rather than as channeling agents for DOF budget funds. Grant financing of tree crop development was tried only briefly in the early 1970s. A cess or tax on the value of rubber exports was imposed and used by the Directorate-General of Estates to finance early ARP and GCC project costs. The cess rate was reduced to zero in 1974 and the GOI reverted to other sources for financing tree crop development. 3.41 Budget and Releases. By 1982 budget cnnstraints were evidenced by the slow release of funds for all externally-financed tree crops projects and for the Dit-Gen E's own program. A number of reasons have been advanced for delays in the release of funds. These have included: - 63 - (a) delays in submission or consideration of DUP and more particularly DUPP budget requests and thereby delays in approvals (DIPs and DIPPs) coupled with too detailed and/or inappropriate review by the DOF but more particularly by BAIPPENAS, resulting in delayed approvals from the Director-General of Domestic Monetary Affairs; (b) extremely detailed controls on the use of funds released under budgets, and complex requirements for accounting for their use. This confusion of the budgetary control and cash control functions causes extreme difficulties for projects to account for use of funds, with little discernable benefit in the way of increased financial control. Thus there are delays in submitting or approving payment requests, Surat Permintaan Pemubayaran (SPP), or failure on the part of project authorities or PTPs to complete letters of accountability, known as SPJ, which are intended to justify the use of funds previously released; (c) inadequate preparation of budget revision requests by project aut'horities for changes in the project design or work program. Insufficient discretion is given to project managers, which is particularly critical given the complexity of the projects, and the need to quickly analyze and choose appropriate cost-effective technical solutions to problems as they arise; (d) inadequate separation of project funds from PTP corporate budgets; Ce) problems arising from reconciliation of prefinance and reimbursement to the DTE; and (f) conflicts over interest rate subsidies from the DTE paid to BRI, thereby delaying BRI's release of new credit funds. 3.42 The administrative constraints were not of critical importance in the earlier years of Repelita III, when adequate prefinancing from budgetary or PTP sources was available. The extreme seriousness of the situation was highlighted by the experience of the IBRD Special Assistance Program, under which disbursement percentages for the NES projects were increased to 100%. Despite this, 1983/84 budgets were not approved-until half-.'ay through the project year; virtually no pre- financing was made available, and thus project execution benefited little. The greatest obstacle was probably the shortage of funds in D7E. Although funds could be moved from one budgetary source to another, in practice transfers were slow. The result was that inves tment projects relying on the DTE, such as NES aad PIR, experienced greater fund shortages than other investment projects, not because of a conscious -64- rationing of funds accordIng to the relative priorities of investment projects, but because of the administrative shortcomings of the funding arrangements. The DTE was unable to rely upon allocations from export tax collections in 1983, when both palm oil and rubber export taxes were at zero rates, and regular budget funds had to be used as a source for project expenditure. Perhaps an equally serious obstacle is the extremely detailed earmarking of budgetary funds releases, coupled with a refusal to accept accountability reports for authorized budget expenditures which have been financed from sources other than funds released for the particular purpose. These constraints to the flexible use of the available resources result in a slow-down in project execution. A promising alternative which merits further consideration is the system under discussion for private estate company participation in smallholder development, whereby GOI would agree to fund a total contract for development of a given hectarage of tree crops, number of houses, etc. in a similar way to other large civil works contra_ts. This approach would be equanly valid for the PTPs. 3.43 Credit Releases. The releases from budget sources for credit expenditures during Repelita III for NES/PIR projects, SRDP/SCDP, and PRPTE projects from budget sources are shown in Table 3.3. Table 3.3 CREDIT RELEASES REPELITA III BUDGET AND ACTUAL (Rp million) a! h/ ci Year NES/PIR - SRDP/SCDP/P3RSB - PRPTE - Budget Actual % Budget Actual z Budget Actual Z Releases d/ Releases d/ Releases d/ 1979/80 6,914 6,267 91 966 668 69 16,944 13,620 80 1980/81 20,276 18,926 93 6,542 5,884 90 81,414 61,961 76 1981/82 83,965 72,633 86 21,014 17,866 85 70,141 64,522 91 1982/83 156,857 83,408 53 28,340 14,502 51 76,900 19,41 25 1983/84 129,705 8,372 6 28,745 714 2 27,026 0 0 Total 397,717 189,606 48 85,607 39,634 46 272,425 159,514 59 a/ Includes IBRD-financed NES projects, and wholly GOI-financed PIR Lokal and PIR Mhusus projects. b/ Smallholder Rubber and Coconut Development Projects and smallholder rubber in a German-assisted rubber project. c/ Project Management Units under the management of the Directorate- General of Estates but not receiving external assistance. d/ Total credit releases for the budget concerned, some of the releases occurring in subsequent financial years. - 65 - Any delay in release of credit funds is particularly serious since they provide for 60-70% of all smallholder development expenditures. The seriousness of the present situation is most evident in PRPTE programs where no 1983/84 funds were made available despite satsifactory budget allocations. The SRDP and SCDP developments with 22 of budget releases and the NES/PIR projects with only 6% fared little better. Releases to these projects from the previous years' budgets was possible, but only for previously approved work programs which remained incomplete at commencement of the new budget year. The lack of funds for all projects in 1983/84 jeopardized previous field development through inadequate maintenance and delayed project construction, and will likely lead to cost overruns. While many of the PTPs have prefinanced smallholder field development, the PMU projects have no similar alternative source of funds for continuing development, with the result that there have been delays in payment of sums due to suppliers and participating smallholders. 3.44 Non-Credit Releases. Releases for non-credit expenditures, while involving substantially smaller amounts of capital, were worse than those for credit in 1983/84. The PRPTE program which required Rp ;3.5 billion received only Rp 171 million or 1% of the budget allocated. The SRDP and SCDP projects did not receive any non-credit funds in 1983/84. The amount of non-credit releases for al1 NES/PIR projects is not known. The lack of these allocations is particularly serious since they provide for expenditures for project management and for salaries. In a number of cases this has resulted in the deterioration of staff morale and staff departures without replacement. The lack of non-credit releases has also delayed construction of roads and social infrastructure and the provision of food crop inputs and subsistence packages. 3.45 Cost Recovery. The issue of cost recovery in the tree crops sector has assumed critical importance with constrained budget funds and the rising level of expenditures required to finance the sector investments. The GOI is correctly concerned that an efficient and cost-effective mechanism be found to recover costs for smallholder tree crop development. Since the early 1970s Government has avoided grant financing mechanisms for the sector such as a cess (recoveries based on a tax on exports) specifically allocated for implementation of a tree crops program. Specific tree crop land taxes or special levies at the farmgate have also been avoided as a means of recovering expenditure or as a source for financing tree crops. Funding of tree crop establishment in loans to smallholders from the budget was first begun in 1973 in the North Sumatra Smallholders Development project. While experience with the short-lived cess and problems with misappropriation of funds may have played a part in the preference for credit versus cess recovery systems, it is clear that GOI is committed to credit for tree crops, as it is for all of its agricultural program, so that it can introduce farmers to the credit mechanism and discourage the thought of 'free goods". Credit systems and cost recovery are discussed further in Chapter VI. - 66 - 3.46 Banking System Reforms. The GOI initiated a comprehensive set of financial sector reforms on June 1, 1983 aimed at increasing domestic resource mobilization and improving financial intermediation, increasing efficiency of resource use, and providing greater operational flexibility to commercial banks. The major reforms included a substantial deregulation of interest rates, a sharp reduction in the scope of subsidized rediscounting facilities/liquidity credits and the abolition of all credit ceilings. State banks were allowed to set their own deposit rates as well as lending rates for all non-priority programs, placing them on the same footing as private banks. The scope of rediscounting facilities (virtually all state bank lending was eligible for refinancing earlier) was reduced sharply and essentially limited to priority credit programs, including tree crop programs and the lending rates for most of these programs (which had varied from 6.(Z to 13.5 earlier) were unified at 1Z . Against the current inflation rate, this new lending rate is positive in real terms and is expected to remain marginally positive in the near term. The new rate, however, is considerably below market rates of 18-24 . 3.47 The measures which Government has taken in the interest of financial sector reform are appropriate and important. As with any phased reform, additional steps will be necessary. Of particular relevance to the tree crops sector, the Government and Bank Indonesia recognize the need to raise interest rates under preferential credit programs to bring them more closely in line with market rates. However, BI would like to see the interest rate system stabilize before taking any additional measures to adjust the level of interest rates. The World Bank is working with the Government on the interest rate and subsidy issue in a sector-wide context and, with Government agreement, is undertaking substantial financial sector work which will provide a better basis for discussing the appropriate interest rate policy for priority sectors. 3.48 The Role of BRI. BRI is one of the largest banks in Southeast Asia with total assets including loans outstanding of Rp 4.7 trillion (44.7 billion) as at December 31, 1982. Approximately 24 million rural households (around 9Y.) are said to hold deposits with BRT, although this figure seems much too high. About 150,000 loans are made annually by BRI and its disbursements reached Rp 1 trillion in 1982 of which 3(1 were for medium- and long-term loans. Low cost, 2-x. official funding in BI liquidity credits and Government demand deposits provided about 8(X of funds for BRI lending. Time and savings deposits financed the remainder. BRI's average cost of funds has been as low as 2.2g in past years butr in 1982 closer to X, and in late 1984 about 11% . While gross income was Rp 217 billion in 1982 (including a subsidy of Rp 8 billion for operations of village units), net income was only Rp 23 billion, or a return on assets of less than 0.% . BRI has not had the advantage, as have other state banks, of extensive foreign exchange transactions to boost its income. In November 1983 6. of all loans by number and 1. by amount were in arrears. Excluding the Bimas program, arrears represented 3(. by number and 1& by amount. BRI's share of risk for its loans - 67 - portfolio is roughly 3X, but the financial situation of BRI remains precarious since its high provision for bad debts at 4. of outstandings may not be adequate. High arrears are largely the result of weak sanctions within the legal/financial system and occasional moratoria on recoveries of Bimas debts on political grounds, although recently there has been a substantial improvement in Bimas recoveries. Even with future improvements in appraisal, loan supervision and collections, BRI's financial situation is dependent on GOI since it is required to carry out development programs which have resulted in 8(1 of its portfolio being in small loans at high cost. These loans are low revenue generating and are risky. BRI now operates over 300 different credit programs almost all of which have different terms, procedures, refinancing provisions, and reporting requirements. As a bank, BRI is expected to intermediate between borrowers and lenders, attract depositors, identify high yielding investments, and earn profits, but it is constrained by its other role as a development agency administering government-determined programs. Despite its deposits from the private sector (non-governmental deposits) BRI is almost wholly dependent on GOI sources to sustain its operations. 3.49 The role of BRI as an executing bank for tree crop credit began in the SRDP I project in January 1980. In principle, as an executing bank, BRI is to mobilize capital and cover its administrative costs, default risks and profit from the spread charged over its cost of funds. BRI provides & of its own funds, and receives 24 of the funds in BI liquidity credits at YX, with the 7( balance deriving from the IDA credit, at zero interest. Financial arrangements for this test case of BRI to act as an executing bank were sufficiently complicated as to have proved unmanageable. With the administrative and accounting complexities of groups of smallholders entering a project over five years with three phases of interest rates, subsidies, and risk coverage, the system has not worked smoothly. Delays in release of interest subsidies from DTE delayed BRI releases to the project and disbursements in February 1984 were two years behind schedule. As BRI did not assess the credit worthiness of smallholders before their entry to the project (BRI is required to convert loan funds at year 3 to smallholders), unconvc-rted disbursements to individual loan accounts may be as high as 6( . The Repelita III experience of BRI as an executing bank is discouraging - the issues for Repelita IV are discussed in Chapter VI. Financing Estate Development 3.50 PTP Performance in Repelita III. Following rehabilitation and expansion programs of the PTPs begun by GOI in the late 1960s to mid 1970s, the PTPs became a focal point for development of the tree crop sector. From 1979-82 the 17 tree crop PTPs made investments totalling Rp 907 billion. About 77 of this was for expansion/rehabilitation of the PTPs' existing estates, while 2t or Rp 209 billion was used for nucleus estates in the initial years of the NES/PIR programs. About 44 of the investments made in Repelita III came from PTPs' own funds. Borrowed capital of about Rp 469 million provided 5a of the total funds and 4 or Rp 33.8 billion was provided by GOI in new equity. The level of borrowings was noz problematic since the PTPs, with their assets - 68 - revalued in 1979, had adequate capital structures, and project borrowings allowed deferment of debt servicing during the immature period. With high retained earnings and the revalued assets most of the PTPs appeared to be well capitalized, the average debt-equity ratios for tree crop PTPs being 23:77 in 1979. By 1981 with falling commodity prices in the recession and rising costs of operations, coupled with continued high levels of investments and borrowings, the financial health of the PTPs deteriorated rapidly. The financial situation of the 17 tree crops PTPs in the period 1979-83 is shown in Tables 3.4 and 3.5. Table 3.4 FINANCIAL STATUS OF THE 17 TREE CROP PTPs (Rp. billion in current values) 1979 1980 1981 1982 1983 al Profit and Loss Value of sales 334.7 375.6 362.0 356.4 563.7 Profits before taxes 154.1 127.9 50.9 25.6 167.6 Taxes 64.1 46.4 20.1 12.5 65.3 Net profit 90.0 71.5 30.8 13.1 102.3 Balance Sheet Current assets 162.1 178.3 183.8 199.3 267.0 Fixed assets 461.6 548.3 683.3 805.0 963.7 Total assets 651.9 767.4 916.2 1,067.6 1,290.6 Current liabilities 88.9 114.4 164.7 198.1 223.1 Long-term liabilities 59.2 88.1 159.8 251.2 331.1 Capital and reserves 503.8 564.9 591.7 618.3 736.4 Total liabilities/net wor-th 651.9 767.4 916.2 1,067.6 1,290.6 Financial Ratios Net profit margin % ) 26.9 19.0 8.5 3.7 18.1 Return on equity C) 17.9 12.7 5.2 2.1 13.9 Acid test ratio b/ 1.18 0.83 0.52 0.51 0.76 Current ratio c/ 1.82 1.56 1.12 1.01 1.20 Debt-equity ratio 23/77 26/74 35/65 42/58 43/57 Long-term debt to fixed assets 0.13 0.16 0.23 0.31 0.34 a/ Excludes PNP XXVIII bl Relates such liquid assets as cash, assets readily convertible to cash, and accouats receivable, to current liabilities. c/ Relates all current assets, including inventories and prepayments, to current liabilities. Table 3.5 Financial Ratios of 17 Tree Crop PTPn PTP I PTP 11 PTP it P iy nP V FrP VI PNP ViA FTP VIII PTP xPTn XI PTP XII PTP XIII PTP XVIII PTP XXIII PTP XXVI PNP XXVIII PTP XXIX Net Profit HMargLn 1979 10.1 28.3 28.1 31.6 33.2 22.3 35.1 19.8 25.8 21.6 14.5 24.0 25.5 30.4 25.5 7.0 25.6 1980 14.9 20.0 18.8 26.7 30.9 11.2 26.3 10.4 23.2 7.6 8.7 14.3 16.2 22,7 20.1 (22,2) 11.2 1981 (5.8) 10,6 4.5 18.6 16.8 8.0 12.2 1.3 8.9 7.0 6.5 7.7 2,4 9.6 0.6 (138.8) (9.6) 1982 1.6 8.4 1.9 6.2 10.2 8.0 13.6 0.3 (2.7) (21.2) (4.3) (8.5) (11.6) 3.2 0.3 (108.4) (10.9) 1983 4.5 18.9 11.2 14.3 19.9 16.1 25.4 12.6 11.1 10.3 c/ 22.9 25,9 18.6 19.9 13,6 24.7 Return on Ilqulty % 1979 4 20 15 20 25 20 18 22 13 15 12 18 15 20 14 1 14 1980 9 14 11 18 23 8 12 11 14 6 8 11 11 17 11 (26) 6 1981 (3) 6 3 12 10 5 5 1 6 5 6 5 1 5 0 (393) (3) 1982 1 5 1 3 . 5 5 6 0 (2) (12) (4) (3) (5) 2 0 a/ (5) 1983 3 14 9 12 14 12 15 22 10 5 26 24 13 10 11 19 Acid Test Ratio 1979 0.65 '1,25 0.79 1.82 1.61 0.83 3.42 1.18 0.41 0.26 0.64 1.2' 1.37 0.88 0.54 1.94 1.84 1980 0.69 0.48 0.33 1.89 1.56 0.78 1.66 0.58 0.61 0.46 0.58 0.89 0.94 0.75 0.43 3.42 1.29 1981 0.31 0.25 0.35 0.38 1.37 0.47 0.71 0.34 0.53 0.37 0.59 0.71 0.63 0.61 0.20 2.36 0.21 1982 0.34 0.33 0.35 0.52 0.86 0.35 1.41 0.24 0.40 0.33 0.73 0.54 0.23 1.19 0.36 0.76 0.29 1983 0.26 0.66 0.45 0.R6 0.83 0.81 1.29 0.38 0.62 1.87 0.58 0.72 0.33 2,22 0.52 1.24 Current Ratlo 1979 1.30 1.94 1.36 2,28 1.90 0.99 4.54 1.93 0.85 1.37 1.71 2.35 2.71 1.86 2.17 2.82 2.30 1980 1.44 1,11 0.74 2.85 1.95 1,06 3.02 1.65 1.18 1.01 1.47 2.41 1.75 1.74 1.22 4.80 1.63 1981 0.69 1.05 0.83 0.83 2.28 0.80 1.46 1.11 0.89 0.73 1.43 1.53 1.07 1.87 1.04 2.81 0.90 1982 0.70 1.05 0.59 0.88 1.33 0.57 3.08 0.64 0,68 0.75 1.40 1.33 0.55 3.02 1.05 1.33 b/ 1,34 1983 0.63 1.23 0.65 1.24 1.17 1.00 1.97 0.77 0.88 2.51 1.29 1.40 0,62 3.22 1.22 2.12 Debt Equ lty IT979f - 20/80 32/68 28/72 18/82 25/75 31/69 08/92 25/75 42/58 30/70 23/77 19/81 17/83 19/81 11/89 47/53 12/88 1980 34/66 31/69 34/66 25/75 23/77 24/76 08/92 30/70 43/57 43/57 27/73 24/76 39/61 22/78 27/73 64/36 13/86 1981 50/50 36/64 46/54 51/49 22/78 25/75 14/86 41/59 51/49 51/49 39/61 39/61 52/48 15/85 28/72 97/03 18/82 1982 58/42 37/63 53/47 58/42 32/68 32/68 22/78 56/44 56/44 64/36 49/51 48/52 46/54 21/79 34/66 100/- 27/73 1983 64/36 37/63 49/51 61/39 39/61 33/67 25/75 58/42 61/39 50/50 45/55 41/59 45/55 30/70 32/68 25/75 Long-Term Deblt Flxed Assets 1979 0.05 0.29 0.20 0.06 0.12 0.04 0.03 0.10 0.35 0.23 0.13 0.08 0.10 0.06 0.03 0.61 0.04 1980 0.26 0.23 0.19 0.25 0.11 0.03 0.02 0.16 0.33 0.31 0.12 0.17 0.19 0.07 0.08 1.32 0.02 1981 0.40 0.28 0.28 0.48 0.15 0.0M 0.02 0.26 0.38 0.38 0.31 0,30 0.28 0.02 0.05 2.86 0.01 1982 0.51 0.30 0.28 0.5i 0.40 o.0(I 0,23 0.28 0.39 0.59 0.42 0.43 0.18 0.17 0.11 1.15 0.19 1983 0.58 0,30 0.30 0.59 0.31 0.11 0.23 0.33 0.48 0.65 0.36 0.39 0.21 0.29 0.11 0.19 a/ Equlty exhausted. b/ Equity exhatiuted, ratio not particulnrly meaningful. c/ Excluding profit from tlhe sale of land. - 70 - 3.51 Average PTP profit margins dropped in 1981 and in 1982 seven of the PTPs registered losses. As investments continued the PTPs found themselves with deteriorating liquidity. By 1982, only two of the PTPs had a current ratio above 1.5 and an acid test ratio above 1.0. Both ratios are broad measures of short-term solvency. Increasing levels of debt, including short term borrowings used to finance long-term investments, resulted in deteriorating capital structures. Seven of the 17 tree crop PTPs had debt-equity ratios exceeding 50:50 in 1982 and the best return on equity was G., with 7 of the PTPs reporting losses. Financial results in 1983 (some before ardit) show improvement (Table 3.5). Profit margins were increased to average 1 , although liquidity remains poor, only four PTPs having acid test ratios above 1.0. In 1984 a further considerable improvement in PTP earnings is expected. 3.52 Areas of Concern. The recent history of PTP profitability strongly supports the view that investment in tree crops calls for a high proportion of risk capital in the form of existing or fresh equity, as opposed to loan finance, or reliance upon profits yet to be earned. The experience also underlines the need for contingency plans aimed at enabling rapid rephasing of investment programs should a shortfall in expected earnings indicate that the original plan would cause major financial problems. The seventeen tree crop PTPs present a wide variety of strengths and weaknesses, as can be seen from the key financial ratios shown in Table 3.5. With devaluation and increases in international prices, and the coming into maturity of many plantings, most PTPs forecast a rapid increase in earnings and profits in the next few years. However, as estate enterprises, it must be expected that they will remain vulnerable to marked fluctuations in earnings. These fluctuations are not a new phenomenon and, in the absence of large investment programs or of undercapitalization (high debt/equity ratios), are not necessarily of particular long term concern. However, at the present time when major new investment programs are underway or under consideration and these are to be financed by borrowings and profits yet to be earned, for which year to year forecasts cannot be made with any great degree of certainty, the volatility of earnings calls for particular attention to sensitivity testing and contingency planning to maintain an adequate actual arnd projected debt service coverage. 3.53 The acid test and current ratios suffered markedly as profits fell through 1982, when most of the PTPs became highly illiquid, and the shortage of cash limited the extent of PTP financing for smallholder development pending GOI reimbursement. The situation was exacerbated by PTPs commencing investment programs using short-term bridging financing from state banks. The conversion of this finance to long-term loans takes a long time to arrange since state banks have to consider the proportion of long-term loans in their portfolios, and the availability of long term finance at concessional interest rates is dependent upon the volume of Bank Indonesia x liquidity credits to support such loans. An - 71 - additional problem not highlighted by the figures in Table 3.5, is that both bridging finance, and the long term finance available from local banks, may pose cash flow difficulties for the PTPs. Interest is normally payable on such loans from inception (in the case of bridging finance at about l& p.a.), whereas the underlying investments do not yield returns until maturity of the trees. Whilst for accounting purposes this interest may be capitalized, in cash terms it must be supported by the ability of existing operations to generate cash. The size of a reasonable investment program to be funded from loans requiring debt service during the immature period is therefore constrained by the size of the existing base. PTP finances during Repelita IV are further considered in Chapter V. 3.54 Private Indonesian Investment. While GOI focused on public sector estates in Repelita III, the private estate sector received relatively little encouragement. The role of private investment in the sector remains uncertain. Private Indonesian investors are not as scarce as would be assumed from past planting data and the number of investment approvals. Six local oil palm ventures totalling 488 million in approvals were licensed in 1982-83 and elevent other private Indonesian sponsors are committed to opening new oil palm estates. Investors such as the Astra, Liem and Jusuf groups have large pending investment decisions. The demand for capital for rubber rehabilitation and expansion projects is very large. Establishment of new estates and expansion of existing private plantations are disproportionately low relative to the potential for several reasons: (a) The GOI's, and particularly the Dit-Gen E's, focus in Repelita II ard III has been by necessity on rehabilitation and expansion of public sector estates and development of smallholder tree crops. (b) With primary focus on development of the PTPs, policies and guidance by the Dit-Gen E designed to promote private estate development have been inadequate. Private estates are dominated by small rubber and coconut holdings which lack trained managers, technical expertise and are in poor financial health. The majority of small private estates have little access to investment capital to rehabilitate or expand their holdings, frequently having no clear land title or titles that have expired, thereby holding inadequate security for financing options. (c) Private estates confront investment decisions in an atmosphere of uncertain domestic market controls, particularly for oil palm. (d) Private estates are confronted with new performance requirements to assist smallholder development in NES-style projects (PES). The requirements .re not commercially viable for the majority of these estates in view of their size and lack of resources to rehabilitate their own holdings. Proposals for mobilizing private sector capital are made in Chapter V. - 72 - (e) Title and mortgage constraints adversely affect financing options; Presidential Decree No. 23 of March 1980 provides that the Hak Guna Usaha (HGU) or basic land title (right of exploitation) can only be held by an Indonesian legal entity and cannot be transferred to the foreign investor in joint venture companies (JVC). Provisions to circumvent this obstacle for financing options such as conveyance by the local partner of a Serah Pakai title, or "handover use" of the HGU to a JVC, remain ineffective since Serah Pakai is valueless with its non-registerable stat-us and confers no security for a lender in acquisition of property in the event of default (para 5.09). (f) The Foreign Investment Law (Act No. 1 of 1967) allowing joint venture enterprises a life of 35 years with minimum equity participation of 20o held by Indonesians at the outset, and the possibility of extension for another 30 years, has a diminished value to any foreign sponsor since Indonesian ownership is stipulated to evolve to at least 5]X within 10 years. While the 10 years may be considered from start of production rather than start of the project, precise timing of divestment remains unclear. Profitability and cash flows in tree crop plantatIons are rarely positive prior to years 8-10 (which can be 3-6 years intc. production) with the result that the 10 year divestment policy is likely to be unattractive to most foreign investors (para 5.10). External Assistance 3.55 Bilateral loans to Indonesia totalling about $7.7 billion by the end of 1982 are estimated to have included 4755 million (1( ) in support of agricultural development. Allocations to the tree crops sector from these sources have not been significant. Estimates of the share for tree crops in total suppliers credits of $1.4 billion are not available. Most of the external finance for tree crops has come in multilateral loans from IBRDIIDA and the Asian Development Bank (ADB). Total disbursements by multilaterals now exceed $2.1 billion which includes 4660 million for agriculture and about, $180 million specifically for tree crops. Most of these funds have been disbursed since 1977 under the NES projects. Total disbursements for tree crops from all external sources cannot be estimated with accuracy but since 1970 probably less than $700 million have been disbursed in the sector, representing less than _% of the total public external debt of $16.1 billion at the end of 1982. The proportion of external loan sources for tree crops rpmnins relatively small when it is considered that the sector has previously accounted for 40a. of non-oil exports and the combined output of palm oil, rubber, and coconuts represents about - of GDP. - 73 - 3.56 As the major source of excernal finance for tree crops, IBRD 'ill disburse its existing commitments from Repeliza II and III to provide about g580 million, representing 1K of the total Repelita IV requirements of $3.6 billion. ADB's undisbursei commitments are estimated to provide another 440 mlli1on. While new lending programs by IRD and ADB are under review, present projections for new commitments include only 4240 milion for tree crops from IBRD (excluding tree crops components in transmigrarion projects)- Even with ADB loans, the size and focus of multilateral lending targets may noC be adequate for the direction of the GOI's tree crop program in the next five years. 3.57 As tbe GOI has increasingly relied on IBRD as its primary source of external borrowings for tree crops, alternative sources of loan funds have not been actively promoted- External lending in tree crops other than by IBXD and ADB has been limited mostly to the Commonwealth Development Corporation ($58 million) and Kreditansrtalt fur Wederaufbau ($24 million). GOI is presently seeking Saudi Development Fund participation for financing of project components in an oil palm scheme at Bengkulu with PTP XXIII. Assistance from the Saudi Development Fund is sought for other oil palm and sugar schemes but the level and extent of project promotion with external lenders outside of multilateral agencies has been minimal to date. Reliance on IBRD reduced the need to promote other financial sources and lessened the urgency for GOI to actively mobilize local ard foreign equity capital, expand the participatioa %-. Indonesians in private estate development, and attract foreign investors in joint ventures. Coupled with the need to extend the comercial banking sector to smallholders and ultimately reduce GOI budget. responsibility for tree crops, emphasis in planning capital resources requires new directions which are more commercially oriented and not wholly dependent on budget funds. Capital mobilization must consider requirements of the entire sector, both public and private, and be promoted beyond the present focus on external multilateral donors. - 74 - ' , 20r - 4 , F 6AAik I - 75 - 'IV: REPELITA IV - -RA & S Index Pa Repelita IV Planting Targets Assesslng lantIng Capacity ........... .......... ....... 00***** ... 78 Selecting Strategies for Tree Crops Devwelpment in Repeita IV Development Cost Options ....................................... 79 Econodic Analysis ... ............ ...... ....... 82 Economic Rates of Retu.n .......... 82 Financial Analyses. ..... ........ o............. . .....-, 84 Defining a Planting Program for Repelita IV Rubber - NESfPIR .......o............. .... ....... 86 Rubber - SRDP and PBPTE ............................... 87 Oi plm,,,,,,,,,,,,,,,,,,,,,,,,,,,, 87 The Analyzed Planting Program .................................. 88 Processing and Mlll Requirements Rubober ................................ o............. 88 Pal- Oil ........................ -oo .... 88 Copra/coconut Oil ......... ............... 90 The Cost of the Analyzed Program ............. 90 Sectoral Context of the Analyzed Program Employment Generation ......................................... 95 Foreign Excbange Earnings. ............................... 95 Smallholder Income Objectives........................ .......... 97 Tables in Text 4.1 Repelita IV Official Program................. ...... 77 4.2 Development Costs per Hectare - 1984 ........................ 81 4.3 Econaomic Rates of Return Selected Schemes................... 83 4.4 Smallholder Financial Rates of Return (Credit Components)... 85 4.5 Bank Suggested Planting Program for Repelita IV ............ 89 4.6 Annual Inflation Tndices. ...... ..... ...................... .. 90 4.7 Projected Costs and Financial Requirements for Repelita IV Analyzed Program ..... ................91 1 4.8 Repelita IV Tree Crop Projects Costs (Coastant)o............ 92 4.9 Repelita IV Tree Crop Project Costs (Current) ............... 93 4.10 Estimates of Job Creation in the Analyzed Repelita IV Planting Program ..... o... .. .............................. 94 4.1U Export Earnings and Contribution to GDP of Three Major Tree Crops ............................. 96 - 76 - <, " v kv/ l~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ - 77 - CEEAPTEE IV: REPELITA IV - OGRAM AND SMAEIEI 4.01 The broad objectives of the GDI for tree crops oitliuled for Repelita IV include: increasing farmers' incoms, promoting an equitable distribution of income, increasing domestic production and the quality of smalholder produce, increasig production of export comand conservation of natural resourc. The plan has also set two specific targets: raising the average income of smallholder families to Rp 1.5 million per year and obtaining Rp 5,500 hillion of annual foreiga exchange earnings from estate crops by 1988. Repelita IV Planting Targets 4.02 The Repelita IV program envisages 1.5 million ha of rubber, coonnUt and oil palm planting and replanting, and is summarized in Table 4.1, vith details by type of scheme given in Annex 4, Table 1. In addition to these plantings about 132,000 ha of coconut sw1 lholdings are expected to be rehablitated. Table 4.1: REPELITA. IV OFFICIAL pRO(RAM (c'000 hectares) Planting and Smaliholder Public Private Total Replanting Estate Estate Rubber 424 138 86 648 Oil Palm 342 U2 26 480 Coconut 343 3 - 346 Total 1,109 253 112 1,474 Source: Dit-Gen E 4.03 Including the rehabilitated areas, the targets set for development are approximately three times the 542,000 ha planted and rehabilitated In Repelita III. The ambitious program gives greater priority to oil palm development than did Repelita III, to reduce the domestic edible oil deficit and eventually to earn foreign exchange. The - 78 - plan also places greater importance on sall1holder development than in previous plans. Over 77% of all development or 1.2 million ha would be undertaken for smaliholders to directly benefit roughly 620,000 families. In rubber, the program places the greatest emphasis on PRPTE and SRDP strategies over the PTPs in developing smallholdings. About 300,000 ha of the total 424,000 ha of smaullholder rubber or 70% would be developed by PffUs. Of the remainder of smallholder rubber, the program assumes completion of NES-style rubber projects and gives priority to PIRt Khusus rubber developments, about 85,500 ha, intended to assist mostly transmigrants. Responsibility for almost all coconut development is to be placed on tne PRPIE and SCDP programs to undertake about 320,000 ha or over 90% of the total replanting. While 70% of total oil palm plantings are intended for smallholders, the program diverges from the previous Repelita III, in that it envisages considerable private estate assistance to smallholders. 4.04 Assessing Planting Capacity. The primary difficulty in assessing the likelihood of fulfilling the targets, irrespective of available finance, concerns the capacity of the estates and project management units to implement such a large program. Specifically, the capacity of SRDP and PRPTE to plant and replant rubber can be increased but it is unlikely that it can be increased rapidly enough to plant at an average annual rate of some 60,000 ha to meet the target of 300,000 ha. Experience in PRPTE rubber in recent years where annual plantings exceeded 30,000 ha indicates that quality of planting and coordination of activities were not always adequate. The SRDP program has planned a gradual build-up of capacity from 13,000 ha in 1984 to 21,000 ha by i 1988. The combined PRPTE-SRDP program is likely to fall far short of the ambitious Repelita objectives. The combined smalIholder and PTP estate development target for rubber of 161,000 ha over five years appears reasonable in terms of capacity. Annual rubber plantings by PTPs in NES and PIR programs excluding PTPs' own estate plantings already exceed 50,000 ha. 4.05 In attempting to meet the targets for oil palm the problem arises that a number of the tree crops PTPs have little or no experience in growing the crop and it will take several years for them to develop the required expertise to handle large areas. While 11 of the 17 tree crop PTPs cultivate oil palm, only 7 of the PTPs have large-scale planting experience. The past planting capacity of all of the oil palm PTPs has been about 35,000 ha annually. This level can be expanded substantially but the target of 350,000 ha for the PTPs would require an average annual planting of 70,000 ha. As nine of the 11 oil palm PTPs are also rubber PTPs, it is possible that in attempting to meet - 79 - such targets the rubber program for PIR Xhusus would be jeopardized. The capacity of private estates to develop 130,000 ha of oil palm of which 104,000 ha would be for smallholders is also doubtful, as arrangements for private estate assistance to smallholders have yet to be worked out. The obstacles for private estate development and participation in smaliholder tree crops are discussed in Chapter V. 4.06 The targets place no stress on PTPs for future coconut development. Targets for PTPs largely represent completion of existing NES coconut schemes. The target for SCDP replanting is probably feasible at 54,000 ha over five years, although the achievement in Repelita III was 22,500 ha. The PRPTE plan to double its achievements from 135,000 ha in Repeli-a III to 266,000 ha may be optimistic but as the Dit-Gen E has shifted the focus mostly to less demanding tall coconuts, the target is feasible. 4.07 Optimistic plans and development objectives for tree crops in Indonesia have the advantage of tending to stimulate greater commitment and activity even when the targets cannot always be met. There is merit in the ambitious official program which forces, by its sheer size, a momentum for greater coordination among the departments and agencies, PTPs, PMUs, and project authorities, to move toward meeting the targets. Problems in planning Repelita IV tree crops result from the diversity within the sector, the vast number of options for strategies and difficult choices for utilizing available finance and trained manpower. On the experience of Repelita III, overly optimistic targets may adversely affect program implementation, especially through inadequate attention to quality control, and this in turn can jeopardize the economic and financial viability of the program. Hence, in this report, a Repelita IV program is analyzed which is considered to be feasible - although still optimistic - in terms of institutional implementation capacity. Even this program, involving 1.01 million hectares of planting, may require excessive financial resources from the budget or state banking system. In the absence of comprehensive analysis of Repelita IV investment resources and Priorities for all sectors, no case is presented in this report that the level of resources necessary to achieve these targets should be made available for rubber, oil palm, and coconut programs. Hence, the analyzed program should be interpreted as a target which is consistent with achievable institutional capacities and which should be pursued to the extent permitted by financial resources. Selecting Strategies for Tree Crops Development in Repelita IV 4.08 Development Cost Options. As one basis for selecting strategies for development, much is now known of the costs of development options. There is sufficient experience in the NES, SRDP, SCDP and PRPTE programs to assess actual costs of development, including field development, infrastructure, social services and project management. The costs of - 80 - development per hectare for each of the major tree crops planting strategies are summarized in Table 4.2 and detailed in Annex 4, Tables 2-4 on a per-hectare and-per-family basis. All costs in Table 4.2 are adjusted to early 1984 constant prices and are based on actual physical coefficients or standards adopted in projects and on costs derived from project management authorities, in particular the records of PTPs X, XI, XII and XIII and from SRDP, SCDP and PRPIE expenditure statements obtained from Dit-Gen E and the Team Khusus. Infrastructure and settlement costs, and social service costs normally shown on a per-family basis each receiving 2 ha have been halved for simplicity to equate with per-hectare costs of field establishment. 4.09 Field development costs for the various tree crops are more expensive in the NES schemes than Lis PMUs. The cost of rubber field establishment under NES/PIR arrangements is about Rp 1.95 million/ha ($1,950), or 22% to 37Z higher than fcr PRPTE or SRDP rubber developnent. Hybrid coconur field development under NES appears to be about 19-38Z more expensive than in PRPTE or SCDP schemes. Costs for land clearing, planting materials, and agricultural machinery and equipment have tended to be greater in NES than other schemes. The most significant cost differential, however, results from wage payments. PTPs in NES schemes pay full market wage rates or estate salaried wages whereas SRDP and SCDP schemes pay cost of living allowances (COLA) equivalent to only 50% of the financial wage rate. PRPTE schewes have paid full wage rates. If adjustment is made in wages in SRDP and SCDP schemes to NES levels, field establishment costs are roughly equivalent for all schemes. Management fees and overheads are about 20% higher in NES than in other schemes but comparison is difficult since the costs of overheads in SRDP and PRPTE schemes are as yet incomplete. The use of the schemes to meet varying objectives such as settlement in NES/PIR schemes makes for large differences in total costs of development. Adding the costs of the housing, infrastructure and social services required for NES raises the cost of rubber establishment to Rp 3.31 million/ha (93,310) and Rp 3.24 million for coconuts; more than twice the total cost of development in the PMU-style schemes for the same crops. -81 - Table 4.2: DVELIENT COS-TS PE. HECTARE - 1984 (Rp million - 1984 constant prices) Rubber Oi1 Palm Coconuts N !SI ?IR SRD P 2 Y.FE ____N ___P3 __ _ __ _ __ _ _ __ _ __ _ _ (hybrids) (hybrdsr) ( 1ail) (hybrids) (talls) 1. Field a/ -labor 0.78 0.38 0.82 0.68 0.83 0.46 0.51 0.62 0.49 Fertilizers/ agrochesdcals 0.47 0.52 0.34 0.54 0.39 0.32 0.14 0_32 0.32 Materials! marhinery 0.38 0.33 0.24 0.30 0.42 0.36 0.23 0.45 0.13 AgrIcaltural equipment 0.07 0.03 0.04 0.06 0.06 005 0.05 0.05 0.05 MamagementI overheads 0.25 0.16 0.16 0.23 0.25 0.22 0.22 0.20 0.20 Total field 1.2 1._60 946 2. Infrastructure, settlement, sero.-es, and other costs 1.36 0.26 0.20 1.37 1.29 0.10 0.10 0.05 0.05 Total costs 3.3 a. 3U L- J6- % 1.24 a/ Estimates based an recent experience expressed in 1984 rupiah. Averages taken on tree crop establishient on grassland, bush and grass and, and secoadary forest. 4.10 Several conclusions can be drawa from the development cost tables. Planning for the choice of crop need not be based on the cost of establishment. The cost to establish rubber, oil palm, or hybrid coconuts under NES arrangements, or rubber or coconuts by SMDP or SCDP schemes, are equivalent. The choice of strategy is important however, since the strategies have significant differences in total costs. The NES approach for instance should be used only where higher costs are justified because settlement activities are truly warranted or in the absence of settlement where large-scale rapid block planting of rubber aud oil palm is required. For other new plantings of rubber the SRDP or PRPIE schemes offer the least cost strategy. - 82 - 4.11 Economic Analysis. Economic analysis of the various crops and schemes would appear to provide more neaningful indicators for the choice of strategy and crop development. Economic rates of return were estimated for various farm models and were calculated in early 1984 prices, net of taxes, duties, and subsidies vsing a standard conversion factor of 1.0 for foreign exchange and for all investment costs including labor. Roads, village and social infrastructure costs associated with the various schemes were fully costed in economic rates of return. Costs Include overheads, management fees and non-credit costs wherever they apply. In the case of NES projects, overheads were Increased 20Z to account for the estimated real costs of PTP general charges. Financial prices for fertilizers and agrochemicals were adjusted to economic prices using a 62Z increase in the financial costs. 4.12 The yield projections used for each of the schemes are detailed in farm models, Annex 4 Tables 5-13. In the absence of actual data, a wide range of yield profiles can be justified by varying assumptions as to future smallholder fertilizer use, the effects of extension,-and technical improvements in tree crop agronomy. The projections used in the present analyses are judged to be prudent for planning purposes to reflect the diversity of ecological factors and the wide-range of management skills of smallholders participating in each of the schemes throughout Indonesia. In this sense, yields are slightly more conservative than yield projections made in the project analyses which target specific groups of smallholders in specific (usually more favorable) growing areas. Economic prices for smallholder output are derived from financial prices in Tables 2.4, 2.7, and 2.9 of Chapter II. 4.13 Economic Rates of Return. Using the above assumptions and discounting costs and benefits over 31 years, the estimated economic rates of return together with net present values are summarized in Table 4.3. Economic rates of return are provided for the scheme as a whole Including all infrastructure and other costs, and also shown specifically for each crop. Detailed tables of the economic analysis for each of the farm models are provided in Annex 4. - 83 - Table 4.3: ECONOYIC RATES OF RETURN SELECTED SCHEMES NPV ERRs % Total Total Tree Crops Scheme a/ Scheme a/ Only b/ Rp Million Rubber NES 1.77 12.3 17.0 PIR 0.65 11.0 15.9 SRDP 1.59 13.6 15.0 PRPTE 0.00 10.0 10.8 Spontaneous 0.49 11.8 13.0 Oil Palm - NES - -0.41 9.4 14.3 Coconut Hybrids - NES/PIR 1.35 11.7 15.9 Hybrids - SCDP 2.25 14.7 15.3 Talls - SCDP 1.03 12.7 13.2 a/ Total scheme includes roads, housing, buildings, health and education non-credit costs as applicable to project type. Net Present Values (NPV) are for 2 ha at 10% discount rate, and shown in Rp zillion in 1984 constant values. b/ Excludes the infrastructure items. 4.14 As would be expected, the economic rates of return for NES rubber and coconuts, including all costs associated with the scheme, are lower than those for SRDP and SCDP which reflects the higher costs of settler housing and infrastructure associated with settlement in the NES program. If the latter costs are omitted to provide a basis of comparison for field related benefits, it is apparent that there are no strong economic grounds for choosing NES and PIR rubber schemes over SRDP developed rubber or SCDP coconut development or NES coconuts. The range of economic rates of return between development strategies for the same crop is not significant. PRPTE rubber with 10.82 may be unduly low as yields were assumed to be the lowest of the various schemes on the presumption that fertilizers will not be routinely applied as in the more management intensive approaches of NES and SRDP. The result that NES and SRDP coconuts have a slightly higher (1%) rate of return than in NES oil palm does not conform with experience in Malaysia where benefits in oil - 84- palm over coconuts are usually 10-20% higher. Two reasons account for only a 14% economic rate of return in oil palm. Low yields have been assumed in smallholder oil palm peaking at only 16 tons FFBIha. Peak production may well reach 21 tons FFB/ha or higher, especially in North Sumatra. Secondly recent commodity price forecasts indicate weakening of prices following the expected large supplies of CPO entering the world market in the mid to late 1980s. Higher prices may be achieved, substantially increasing the oil palm economic rate of return. 4.15 The main conclusion to be reached from the economic analyses is that none of the estimated rates of return present a constraint to Government objectives for expansion of rubber, oil palm or coconuts, during Repelita IV. There does not appear to be any economic justification for favoring one crop over another; therefore soil suitability, closeness to nucleus estate or other relevant facilities, and maintaining a reasonable balance between crops to spread risks should guide the overall choice of crops. Hybrid coconuts give better returns than talls, and fears that hybrids would be more susceptible to disease than talls are considered exaggerated. As a practical matter and to reduce possible risks, strategies for increasing coconut production could include a certain balance in plantings between talls and hybrids. Other findings include a high rate of return for spontaneously planted rubber of about 13% which would suggest that Government programs for smallholders might increasingly emphasize spontaneous rubber development. This conclusion, however, should remain tentative since costs and yields are based on proposals for a pilot spontaneous rubber component in the proposed SRDP II project which is as yet untried. 4.16 Financial Analyses. Another tool for planning purposes, financial cost-benefit analysis, can assist in identifying preferable strategies in terms of returns to farmers. Financial cost benefit analyses for a representative range of the planting schemes to be undertaken in Repelita IV are summarized in Table 4.4 below and are detailed in Annex 4. The credit costs associated with the various schemes were used in the analyses and returns were measured in constant 1984 prices before financing charges and loan repayments. The derivation of financial farmgate prices for each commodity taking into account differing product qualities and product mixes between the various schemes is outlined in Chapter II. - 85 - Table 4.4: SMALLHOIDER FINANCIAL RATES OF RETURN (Credit Components) Excluding non-wage Including Imputed Cost Labor of non-wage labor z z Rubber NES 17.6 14.9 SRDP 23.4 19.2 PRPTE 15.2 11.4 Oil Palm NES/PIR 17.0 13.7 Hybrid Coconuts NES/PIR 16.0 14.6 SOCDP 25.7 a/ 20.5 a/ Because of management difficulties it seems unlikely that this return will be achieved on a significant scale. 4.17 The results indicate that all of the above GOI-sponsored schemes may have sufficiently attractive financial rates of return for them to be continued in Repelita IV. NES schemes are expected to have lower financial rates of return for farmers than in SRDP or SCDP schemes since housing and infrastructure are included in credit costs and since the credit costs in SRDP and SCDP projects include wage payments 50% lower than the equivalent market rate. The trade-off for lower wage payments in initial years and reduced credit costs appears to promote higher returns for smallholders over the life cycle of the development. It is clear from the analyses that ways should be sought in the NES schemes to reduce labor costs, perhaps by adopting the SRDP/SCDP system for smallholder wages. It is evident in all schemes that GOI can charge higher nominal rates of interest than the past level of 10.5%, and in particular higher interest than 6% for smallholders in SRDP and SCDP schemes. However, there may be a constraint on charging interest as high - 86 - as the real levels theoretically shown to be possible by the financial rates of return after allowing for the value of own non-wage labor, in that credit recovery in excess of 25-30% of sales income during say 15 productive years may not be feasible. This question is examined in Chapter VI. Defining a Planting Program for Repelita IV 4.18 From the earlier discussion on the marketing outlook for each of the commodities there appear to be no demand constraints on the volume of tree crops production Indonesia is likely to achieve through the year 2000. While economic rates of return do not favor one crop over another, it is in Indonesia's interest for the next five years to give preference to oil palm and coconut development, in view of the growing domestic demand for fats and oils . The need to reach the enormous number of smaalholders who require assistance to replant rubber should, however, argue for balance in the setting of planting targets for both crops. The commitments made in Repelita III for establishment of rubber smallholdings alone necessitate the planting of 128,000 ha of smallholder rubber in Repelita IV. The findings of the economic analyses tend to support official objectives to reduce the burden for smallholder rubber development on the PTPs to the completion of existing NES projects and limited new PIR. Khusus rubber development in favor of a greater concentration of effort in the PRPIE and SRDP rubber schemes. NES/PIR rubber should be required only where new settlement is warranted or where new settlement of existing populations in the outer islands (rather than transmigrants) is undertaken following as much replanting of the areas as possible under PMU-based schemes. Since the PTPs are well suited to the planting of oil palm, GOI targets for establishment of oil palm, irrespective of their size, accord proper priority to development under the NES/PIR schemes. 4.19 Rubber - NES/PIR. Since the PTPs cannot reach the majority of smallholders requiring replanting on vast areas of scattered smal.lholdings, the role of the PTPs in block planting rubber should emphasize completion of existing NES and FIR projects initiated in Repelita III, the planned PIR Khusus projects for transmigrants, and replanting of rubber as required on PTP's own estates. About 76,000 ha of NES smalmolder and estate rubber planmed in Repelita III must be completed, also 8,000 ha should be replanted annually on the estates by 1987-88 to provide a minimum replacement rate of 3.3% per annum. In addition, a reasonable program for PTP involvement in new PIR rubber emphasizing transmigrants would be 123,000 ha. Total PTP involvement in rubber in NES and PIR projects is thus estimated at 201,000 ha which should fully utilize the capacity of the PTPs when their commitment to an oil palm program of 313,000 ha (para 4.21) is taken into account. 87 - 4.20 Rubber - SRDP and FRPTE. Based on the achieveuent and build-up In the capacity of the SRDP program during Repelita III, it is expected that the SRDP scheme will be able to increase annual plantings from 13,000 ha at present to 30,000 ha by the end of Repelita IV_ About 102,000 ha of SRDP rubber can be planted in the five-year period including an estimated 18,000 ha of spontaneous plantings. The capaciry of the PRPTE program will reflec. the absorption of the PRPIE program by SRDP, and the successful outcome of tie present iniziatives to provide more skilled manpower, and improve the organization of AUs . If SXDP plantings do not extend beyond those envisioned under the SRDP II project, PRPTE should be expected to plant an absolute minimum of 75,000 ha. Should management of the PRPE scheme improve during Repelita IV, and the existing financial constraints be alleviated, the capacity of the program could be raised in the later years from the present expectation of 25,000 ha/year to over 40,000 ha/year, but the upper limit for PRPIE rubber plantings for the five-year period is estimated to be 130,000 ha. Careful monitoring, however, would be required to ensure that the quality of plantings is m-antained. 4.21 Oil Palm. The planting capacity of the eleven oil palm PTPF Mill depend on the ability of each to maximize its activities in new oil palm development given that almost all of them are also committed to large existing programs of oil palm and rubber. Any significant level of planting by non-oil palm PTPs diversifying to oil palm is unlikely. The existing capacity of oil palm development at 30,000 to 35,000 ha annually can easily be increased to 50,000 ha in 1984 if financial constraints are alleviated. This capacity could be increased to 70,000 ha annually without significant difficulty. Regardless of the mix of estate versus smallholdings resulting from PIP activities, an achievable program for PTP developed oil palm is estimated at 313,000 ha over the next five years (Table 4.5). This estimate excludes possible private estate sponsored smallholder plantings which are included in the GOI Repelita IV program. 4.22 Coconuts. Expansion of coconut production during Repelita IV should primarily be the responsibility of the PKU-based schemes for the reasons outlined under rubber plantings. Apart from fulfillment of the existing NES commitments (about 28,000 ha), the public sector estates would best be used to provide quality planting material from their seed gardens to support the SCDP and PRPTE programs. Based on their achievements in Repelita III, and on the assumption that there is improvement in the management and skilled manpower availability of both schemes, it is expected that SCDP and PRPTE combined could plant about 292,000 ha during Repelita IV. SCDP has the potential to reach annual plantings of 16,000 ha by 1988. The PRPTE program can be increased from the present level of 33,000 ha annually to 58,000 ha by the end of Repelita IV, particularly if talls are emphasized. - 88 - 4.23 The Analyzed Planting Program. estimated planting capacities described in paras 4.39-4.22 have been used to construct the planting program outlined in Table 4.5. It excludes the extent of likely plantlngs by private estates or joint ventures and is therefore substantially lower than official targets. It also excludes rehablitation and intensification areas, and takes fully Into account the ex:sting constraints on tree crop development whilst assuing modest progress in overcoming these constraints through Repelita IV. In particular, it assumes a period of consolidation for PRPTE rubber. 4.24 To provide the basis for discussiom and planning, pa-ticulrly ccerning capital resource mobilization, this report will analyze the program outlined in Table 4.5. The analyzed program, as it '- referred to in the remainder of the report, examines the impact of planting and replauting just over I millLion ha of tree crops in Repelita IV, about 68X of the GOI targets. Notwithstanding the official targets, the analyzed progra should be regarded-as optimistic since it represets an increase of 87Z in plantings over the 541,620 ha actually planted in Repelta ITTT Processing and Mill Requirements 4.25 Rubber. Wlith the rapid expanslon of tree crps establishment in Repelita III and with the targets proposed in Repelita lV, large investments in rubber processing facilities and palm oil mills wll1 be needed. Planning for rubber processing, in particular, is difficult aince 001 intentions regarding development of facilities outside the NES scheme are unclear. The combined PTPs presently operate 138 rubber factories of which 97 are sheet operations, 35 are crumb, and 6 latex centrifuge factories. The total existing capacity in FTP sheet factories is about 124,000 tons(year. Crumb capacity is estimated to be about 160,000 tons/year and centrifuge latex about 36,000 tons/year. Total combined capacity on all PTP facliUties is therefore about 320,000 tons/year. This capacity presently exceeds PTP production at 197,000 tons by about 621 but it is believed the situation may be overstated since many of the facilities, particularly sheet factories, are old and require rehabilitation or complete renovation. The PTPs predict that with their existing responsibilities for NES/PIR smallholder processing and the requirements of their own estates, construction of 44 new factories in Repelita IV with a combined capacity of about 400,000 tons/year is required. 4.26 Palm Oil. In 1982 the PTPs operated 25 palm oil mills with a combined capacity of 794 tons FFB/hr. This capacity was scheduled to be increased to 1,029 tons FB3/hr in 1983 with the addition of six new mills at PTPs LE, IV, V, VI and X. Between 35 to 39 new mills are Drojected by the PTPs and the Department of Agriculture to be required in Repelita IV. About 1,000 tons FFB/hr needs to be added to existing capacity. Expansion plans for 400 tcas/day fractionation and refining capacity have also been projected, but such plans should be reviewed in light of the large underutilization of existing refining facilities. - 89 - Table 4.5: BANK SUGGESTED PLANTING PROCRAR FOR REPE1TM IV (hectares) Repelita IV 1984 1985 1986 1987 1988 (1984-1988) Estates - PTP Project Plantings Rubber NES 1,000 U,000 10,000 8,000 8,000 48,000 P13 7,000 10,000 8,000 6,000 6,000 37,000 Subtotal 18,000 21,000 18,000 14,000 14,000 85,ODO 011 palm 30,000 30,000 30,000 30,000 30,000 150,000 Coconuts hybrid 3,440 1,130 830 600 0 6,000 Total PNP/PTP 51.44 521130 48.830 4 SDsilholders Rubber NES hybr. 13,000 7,000 7,000 3,000 0 30,000 PIR 18,000 25,000 22,000 14,000 7,000 86,000 SRDP 13,000 14,000 17,000 19,000 21,000 84,000 SRDP spont. 0 0 3,000 6,000 9,000 18,000 PRPTE 10,000 10,000 10,000 20,000 25,000 75,000 Subtotal 54,000 56,000 59,000 62,000 62,000 293,000 01i palm NES 23,000 28,000 33,000 37,000 42,000 163,000 Coconuts NES bybr. 5,170 6,390 6,600 3,840 0 22,000 SCDP hybr. 12,000 12,000 12,000 14,000 16,000 66,000 PRPTE hybr. 7,000 10,000 12,000 15,000 18,000 62,000 PRPTE talls 26,000 29,000 33,000 36,000 40,000 164,000 Subtotal 50,170 57,390 63,600 68,840 74,000 314,000 Total smallholders 127,70 141.390 155.600 167.840 0 Total estates and snallholders 178.610 1 204 430 212440 2 1.011O000 Total rubber 72,000 77,000 77,000 76,000 76,000 378,000 Total oil palm 53,000 58,000 63,000 67,000 72,000 313,000 Total coconut 53,610 58,520 64,440 69,440 74,000 320,000 - 90 - 4.27 CGpra/lCOCOUt Oil. GOI Cwmitment for copra processing in the SCDP and PRPTE schemes bas yet to be worked out and plans for new coconut oil facilities by PTPs in the outer islands are equally unclear. Projections of copra and coconut oil processing requirements are to be analyzed as part of a pricing, processing and marketing study under the SCDP I project. The Cost of the Analyzed Program 4.28 Based on the cost estimates in 1984 prices, detailed in Table 4.2, total costs In current terms have been calculated for the GOI tree crop programs in Repelita IV. The costs include mantenance of trees already planted, but which have yet to reach maturity. This amounts to maintenance of 290,000 ha of rubber, 132,000 ha of oLl palm and 207,000 ha of coconut planted prior to 1984. No provilsion was made for physical contingncies as cost estimates were based on actual physical standards achieved in Repelita ITI in the various schemes_ Expected cost increases arising from inflation are outlined in Table 4.6 below. Table 4.6: ANNUAL INFLATION INDICES (percent) 1984 1985 1986 1987 1988 1989 1990 Domestic 12.0 10.0 10.0 10.0 9.0 7.0 6.0 Foreign 3.3 8.0 9.0 9.0 9.0 7.5 6.0 4.29 Total estimated costs in constant and current terms for the proposed Repelita IV planting program outlined in Table 4.5 are provided in Tables 4.8 and 4.9. Table 4.7 provides a summary of total current costs over the next five years net of existing IBRR commitments made in Repelita III for the analyzed program. The division of costs into credit and non-credit components accords with present practices followed in financing each of the tree crop schemes. In constant terms the cost of the proposed program is Rp 2,745 billion or $2.7 bUillon. In current terms the program would cost Rp 3,613 billion or $3.6 billion. The factory and mills program described in para 4.25-4.27 is estimated to amount to about Rp 450 billion of the total costs. The financial implications of the enormous Rp 3,600 billion program are discussed in Chapters V and VI dealing first with the estates and then the smallholder programs. The cost of the GOI Repelita IV program is estimated to be $4.3 billion in constant 1984 prices, and $5.6 billion in current terms. -91 - Table 4. 7 PROJCED ODSTS AND FINANCIAL RE - POR REPELIA IV ANALD O (Rp bilon -current terms) Total IBRD Net Requirements Commitments Reqrets Estate development Rubber 496.7 0i palm 1,023.5 Coconuts 30.7 a/ Total estate development 1.57.7 1,393.2 Smaliholder development M/SIPIR Projects: Rubber 490.6 Oil palm 631.8 coconuts 101.0 Subtotal 1,223.4 IU Projects SRDP - rubber 148.7 SCDP - coconuts 111.7 RunE - rubber 198.7 PRFE - coconuts 379.4 Subtotal 838.5 b Total smallholder development 2.061.9 243.6 1,818.3 Total estate and smallholders 3,612.8 401.3 3,211.5 a/ Of which from PTPs' own ftmds Rp 653.0 billion, leaving Rp 740.2 billion for new borrowings or further equity - see Chapter V for anlysis. b/ Of which Rp 1,465.8 billion for credit components, and Rp 352.5 billion for non-credit components. - 92- Tabl 4A.8: mu.r IT c C0l RJEC25 a25 tp bUlTIo -1984 coasat, pt±ces) 1964 1985 1986 1987 1988 lRepet IV Rubr M:;o estates). Pield, eseIyc 44.3 4.S 4z-1 37.7 4.s 21 Praces.lag a/ 8.1 81. 15.2 22.9 24.6 78.9 Subtotal 52.4 51.6 57.3 60.6 59.1 281.0 Rubber (CEL estates): ?1.-" incb ry, 1fastr e 12.8 20.1 20.6 20.1 22.1 95.7 Thtal 65.2 71.7 77.9 80.7 8L.2 376.7 OIL Pala: 1eld machinery. e 97.8 lOZ.3 107.1 107.5 107.5 522 Procsing bl 23.4 55.3 79.5 *4.4 54.4 257.0 Subtotal 121.2 17.6 186.6 15.91 161.9 779.2 Ccot: Field, _cd1.ezy. Infra eattar 8.3 5.4 4.6 3.8 2.7 24.8 TTAL lSTAlES =7 2, .L Z.4 2u 16L7 SIALL83ZD Rubber CRS) : CrEt 37.2 29.3 26.8 18.3 10.8 122.4 Now-credi c/ 7.3 5.2 4.4 2.4 1.1 20.4 Subtotal 44.5 34.5 31.2 20.7 11.9 142.8 Rubber CM) : Credt 28.8 39.3 49.9 45.4 37.7 201.1 l.a-credit c/ 5.1 7.8 9.2 8.7 7.1 37.9 Subtotal 33.9 47.1 59.1 54.1 ".8 239.0 lubber tc( ) : Credt 11.3 13.4 16.5 19.3 21.7 82.2 low-credit d/ 4.2 4.5 5.7 6.6 7.6 28.6 Subtotal 15.5 17.9 2Z.2 25.9 29.3 110.8 Rubber C2&P): CredIt 22.2 22.3 2L.8 25.9 28.1 120.3 Noa-crmIlt Ce 7.2 5.1 5.L 5.9 7.4 30.7 Subtotal 29.4 27.4 26.9 31.8 35.5 151.0 TOM 1MU13 Credit 99.5 104.3 115.0 108.9 98.3 526.0 NOn-Credit 23.8 22.6 24.4 23.6 23. 17.6 TOTAL _a2 L.4 ,,; 643.6 Oi1 Pula CrdiLt 51.6 65.6 80.2 90.9 104.2 392.5 l.a-credt ci 11.2 13.5 15.7 17.1 20.1 78.2 TTAL OI;L im 62.8 79.1 95.9 108.6 124.3 470.7 Coconut Oils): Cedl±t fL.7 15.3 17.2 14.6 8.1 66.9 Mon-credit 2.1 2.7 3.1 2.5 1.3 11.7 Subtotal 13.8 18.0 20.3 17.1 9.4 78.6 ACounuts SCSP) - Eybrd I taUs: cre.dt 10.4 21.7 12.9 14.3 16.7 66.0 Non-etedt 4/ 2.7 3.1 3.6 4.1 4.4 17.9 Subtotal L3.1 14.8 16.5 18.6 2L.1 83.9 Coaonuts (IRIE) - E & tU.: Credt 42.2 42.6 43.4 49.7 57.4 235.3 Non-credIt el 10.4 9.6 9.3 10.6 12.1 52.0 Subtotal 52.6 52.2 52.7 60.3 69.5 287.3 MTAL CDUU23: CcedIt 64.3 69.6 73.5 78.6 82.2 3682 Non-credit 15.2 15.4 16.0 17.2 17.8 81.6 TOM L I=aL9.59 TOTAL SHAtIMEWfS: Cedit 215.4 239.5 268.7 278.4 284.7 1.286.7 Mon-axedit 50.2 51.5 56.1 58.5 61.1 277.4 Tt1 265.6 291.0 324.8 336.9 345.8 1,564.1 TOML A3 - 5 AND SE4LTDUS 460.3 525.7 593.7 573.3 591.6 2.744.8 si JtLues proceasi for g a projects estate ad aLlholder xobber factorLe. 1 acldes. processing for sueflholder oll pe2m. c/ k par the pOojes. V Ceit ad non-rdit Item s per SDP L Am per the SOP I poject. - 93 - Table 4.9: tREUflk IV MM CgDP NRou.cr COSTS (Currat Hp bllion) TotsL 1984 1985 1986 1987 1988 Repelita IV nnm (Pr?.) Rubber (NES + cm estates): Fields, uacblnery, Infrastructure 46.96 5L.16 54.48 53.53 53_82 259.95 lrocessing af 8.59 9.53 19.67 32.52 38.38 108.67 Subtotal 55.54 60.68 74.15 86.05 92.23 368.62 lubber (Cf estates): Field, mchinery. Infrastructure 13.57 24.81 26.66 28.54 34.48 128.06 Total fl 1J50J2 132& f6796 68 011 Palm: Field, achinery, ifras e 103.67 120.30 138.59 152.65 167.70 682.91 prcsg bi/ 24.8 65.03 102.87 63.05 84.86 340.62 Subtotal 12B.47 185.34 241.46 215.70 252.56 1,023.53 Coconuts: Field, mahebnry, infrastructure 8.80 6.35 5.95 5.40 4.21 30.71 TOTAL Em 238 IV = 3 399 SAITLDERS Wibber ( AE : Credt 39.43 34.46 34.68 25.99 16.85 l51.40 Non-credit c/ 7.74 6.12 5.69 3.41 1.72 24.67 Subtotal 47.17 40.57 40.37 29.39 18.56 176.07 Rubber CEll) : Credit 30.53 46.22 64.57 64.47 5S.81 264.60 NFn-credt Cf 5.41 9.17 11.90 12.35 31.08 49.91 Subtotal 35.93 55.39 76.48 76.82 69.89 314.51 Rubber (SEDP) : Credit 3L.98 15.76 21.35 27.41 33.85 110.35 Man-credt d/ 4.45 5.29 7.38 9.37 31.86 38.35 Subtotal 16.43 21.05 28.73 36.78 45.71 148.69 lubber (CRPTE): Credit 23.53 26.22 28.21 36.78 43.84 158.58 Non-credt d/ 7.63 6.00 6.60 8.38 11.54 40.15 Subtotal 31.16 32.22 34.81 45.16 55.38 198.75 TOTAL BDBBE: Credit 105.47 122.66 148.82. 154.64 153.35 684.92 on-credit 25.23 26.58 31.57 33.51 36.19 153.08 TOTAL INa lL= IS& I3 ai: a Oil Pals: Credit 54.70 77.15 103.78 129.08 162.55 527.25 No-credit of 11.87 15.88 20.32 25.13 31.36 104.55 TOTAL OIL PAIM 66.57 93.02 124.09 154.21 193.91 631.80 Coconut (mIS): Credit 12.40 17.99 22.26 20.73 12.64 86.02 tn-credit c/ 2.23 3.18 4.01 3.55 2.03 14.99 Subtotal 14.63 21.17 26.27 24.28 14.66 101.01 Coconuts (SCDP) - Nybrid & tails: Credit 11.02 13.76 16.69 20.31 26.05 87.83 Ni-credit el 2.86 3.65 4.66 5.82 6.86 23.85 SubGrcl 13.89 17.40 21.35 26.13 32.92 111.69 Cocaots (PREE) - Hybrid & tails: Credit 44.73 50.10 56.16 70.57 89.54 321.11 N-credit e 31.02 11.29 12.03 15.05 18.88 68.28 Subtltal 55.76 61.39 68.19 85.63 108.42 379.38 T0TAL CONITI: Credit 3J681.85 2 U 461 128.23 lL96 tn credit 16.11 ILfl 20.70 24.42 27.77 107.12 TOTAL Mau ta 11& iaa "LS Z&2 TOTAL SMAITSoWS: Credit 228.32 281.65 347.70 395.33 44.13 1,697.13 NIon-credit 53.21 60.56 72.59 83.07 95.32 364.76 TOTAL fltj 342f Mn 4 0 539.45 2-061.6 TDTAL COSTS - mEES AND SALTAERS aU2L laL.t ia76 a5 21L 32 6 281 *61 TzI es processing for m projects estate ad ssallholder rubber factorie. bJ Tncludes processing for ssmol3der ol pals. cXI Am pe the NB projects. if Credit wdA tm-credt items as per SUIP L- / As per the SCDP I project. - 94 - Table 4.10: ESTI(ATES OF JOB CREATION IN THE ANALYZED REPELITA IV PLANTING PROGRAM Total Manpower Required for Whole Immature Period Man-years Estates: NES/PIR rubber 277,447 Oil palm 161,381 Coconut hybrids 11,559 Subtotal 450,387 Smallholders: Rubber schemes 573,558 Oil palm 301,493 Coconut schemes 656,267 Subtotal 1,531,318 Total employment for entire immature period 1.981.705 Annual Labor Requirement at ProductionE! Man-years Estates: Rubber 33,150 Oil palm 48,000 Coconuts 1,740 Subtotal 82,890 Smallholders: Rubber - all schemes 134,810 Oil palm 52,160 Coconuts - all schemes 68,080 Subtotal 255,050 Total employment each year 337,940 a/ Based on existing PTP experience, it is assumed that 2.5 man-years are required annually for traDsport and processing for each ton FFB per hour of processing capacity. Assuming the majority of new rubber facilities are crumb lines, about 7.6 man-years are required annual-ly for each tonlday installed capacity. - 95 - Sectoral Context of the Analyzed Program 4.30 Employment Generation. A shortfall in meeting the official planting targets wil reduce the ability of GOI to meet its objectives for extensive employment generation in the sector, since the peak demand for labor in tree crops development occurs with clearing and planting In the first year of establishment. To assist GOI in assessing the impact on job creation of an investment of Rp 3,600 billion over the next five years, the employment generation effects of the analyzed planting program for public sector estates and smallholders are presented in Table 4.10. The labor coefficients used in the analysis are derived from Table 1.4 in Chapter I. Manpower requirements are estimated for new planting and replanting only and do not include labor requirements for maintenance or production from previous plantings. 4.31 About two million man-years of work are likely to be created during the total years of immature tree crop establishment in the analyzed program for Repelita IV. Although imprecise, given the phasing ,of plantings over the five years, the estimate indicates labor absorption of about 400,000 man-years annually in Repelita IV. This labor force would continue to be almost fully committed in the mature period since harvesting, tapping, collection and field maintenance are estimated to require 340,000 man-years of labor input annually. Transportation and processing of estate and smaflholder oil palm and rubber production from the new factories and mills proposed under Repelita IV will provide another 14,000 man-years of labor inputs. 4.32 Foreign Exchange Earnings. Foreign exchange earnings and exports by 1988 are virtually unaffected by any Repelita IV plantings. W'ith the exception of oil palm planted in 1984/85, none of the new plantings will come into production before 1988, and the initial palm oil production will be small. The GDI targets to derive 45.5 billion in export earnings from the tree crops sector by 1988 are not achievable. Total production from past plantings, even if al1 production could be exported, would not achieve the target based on expected world market prices. As al copra and coconut oil production is to be consumed domestically and coconut oil imports are required to meet lauric oil demand in addition to total domestic consumption of palm kernel oil and CPO diverted to the edible oil market, only rubber will provide substantial export earnings through 1988. Projected export earnings and local sales values for the three major tree crops are shown in current terms in Table 4.11. -96- Table 4.11: EXIORT EARNINGS AND ODNTRIBUTION TD GDP OF TEREE MAJOR MEE CLOPS (US$ m l lions - current prices) 1984 1985 1986 1987 1988 Total Rubber Value exports 898 991 1,094 1,211 1,448 5,642 Iocal sales 64 77 93 111 143 488 Subtotal 962 1,068 1,187 1,322 1,591 6,130 Oil palm Palm oll exports a/ 86 112 118 93 107 516 palm oil - local sales a/ 225 328 397 434 387 1,771 Palm kernels - local sales 48 57 71 9 85 270 Subtotal 359 497 586 536 579 2,557 Coconut (copra) Domestic value of copra equivalent bI 635 785 923 1,056 1,198 4,597 Value of coconut oil c/ (60) (60) (79) (26) (26) t277) Subtotal 575 706 897 1,030 1,112 4,320 Total export earnings 984 1,103 1,212 1,304 1,555 6,158 Value of domestic production 912 1,168 1,458 1,584 1,727 6,849 Total value of production 1,896 2,271 2,670 2,888 3,282 13,007 Total contribution to GDP d/ 1,7Q§ 2,4D4 24 52 2,± 11,702 a/ Assumes high income scenario of projection of palm oil supply to fill edible oils demand. b/ Does not account for value added on coconut oil production. c/ Based on high income scenario of demand for coconut oils. d/ From 1980 through 1982, value added on estate production was 73Z and on smallholder production 96%. Weighte'd a-verage for all production 90%. - 97 - 4.33 Total export earnings from the these tree crops by 1988 are not expected to exceed $1.56 billion of which g1.45 billion or 92Z vill be derived from rubber. The net domestic value of production (after deducting imports) which is predominantly in copra and its derivatives is estimated at $1.72 billion by 1988. Emphasis on export revenues for tree crops in Repelita IV has tended to distort the importance of increased production of palm oil and copra for import substitution of edible oils. The combined contribution to GDP of the three major tree crops by 1988 is estimated to reach $2.95 bilUon. 4.34 Smallholder Income Objectives. The GOI target to improve smallholder incomes in tree crop projects to Rp 1,500,000 per family (constant 1984) is likely to be met on all schemes planned in Repelita IV. Most of the schemes developing 2 ha of tree crops, if Initiated in 1984, would provide this level of smalIholders net incomes (but before cost recovery) from production of tree crops by 1993-1995. Assuming income is also derived from food crop production the target income objective is likely to be met in the various crops and schemes several years earlier. Oil palm development provides most rapid build up in smallholder incomes. "I4 1 4, OD - 99 - CHAPTER V: FINANCIAL IMPLICATIONS - ESTATES Index General a........................................................... 101 Investment Climate The Banking System...o.......................o.......... o ...... 101 Rupiah Borrowingso..o.......... ................................. ......... o 102 Foreign Exchange Borrowings ................................... 103 InvestmexLt Codeo ................................. 103 Market Regulation Copra and Coconut Oil ... ..... o ................ ........ 105 Requirements to Support Smallholder Development................... 106 Mobilizing Private Capital Indonesian Investmento. ...... .........o................. .... 108 Foreign Investment.............. ........oo...... ......... 110 Financial Resource Gap - Public Sector Estates Capital Requirements ... ..o ... ........ ..o 111 Financial Projections ...... ...... ........ ..... . ....... .. . . . 11.2 Available Funds and Capital Shortfall ........................... 113 Borrowing C...................... ................. ...... 113 PTP Equity Requirements...................................... 115 Demand on State Bankso.s......................................... 116 Capital Markets Share Issues ...................................... 116 Bond Issues...o............................................. . 117 leasing.... ......... 118 Funding the Program: Areas for Attention PTs............. 4e4444.44.. ... ... ................... . ..... ..... . 18 Small Private Estates............... 119 Tables in Text 5.1 Indicative Program for Small Private Estates .............. 109 5.2 Financial Requirements for PTP Estate Development...o........ 111 5.3 Summary PTP Income Projections and Retained Earnings ........ 112 5.4 Borrowing Capacity Gap of 17 Tree Crop PTPs ................. 114 5.5 Closing Borrowing Capacity Gap of 17 Tree Crop PTPs ......... 115 5.6 Possible Sources of Funds - PTPs ........................... 119 - 100 - -<'x 4,$ S7 / 4A / - 101 - CHAPIER V: FIANCIAL EICAIONS - ESTAES General 5.01 This chapter considers both public and private sector estates developUent. First, it seeks to ecamine the financial implications for the PTPs of the program set out in Table 4.5 for project plantings of 241,000 ha of rubber, oil palm and coconut. This progr , including associated processing facilities, is estimated to cost Rp 1,550 billion irn current terms over the Repelita IV period. The discussion is also germane to assessing the prospects for the PTPs to finance plantings for their own account outside the context of a NESIPIR project. Second, the chapter also examines the financial implications for private estate plantings. GOI hopes that new plantings by large wholly Indonesian private estate companies, or large Indonesian-foreign joint venture companies may be significant in the near future_ In addition, the position of small private estates (holdings of say 25-250 ha) which generally have limited technical expertise or access to finance is examined. Smallolder (less than 25 ha) plantings totalling 770,000 ha in the analysed prcgram are dealt with in Chapter VI. The possibility of additional smallbolder areas associated with new private estate investment is covered in the present chapter. 5.02 The role of the banking sector and fiscal incentives which impact on estates, including private local estates, joint ventures and the PTPs is considered in paras 5.03-5.09. Specific constraints for mobilizlng capital from foreign and private national investors are discussed in paras 5.10-5.14, proposed and estimated capital mobilization for the private sector is considered in paras 5.15-5.19, and the public sector PTPs in para 5.20 to 5.31. Areas needing attention for adequate funding for the estate sector are summarized in para 5.32-5.33. Tnvestment Climate 5.03 The Banking System. PTPs depend heavily for finance on the state baiks, which until recently have operated under a system of rigid banking regulations. The institutional structure of the banking system was described in paras 1.25, and 3.46-3.47. Banking reforms in 1983 have allowed greater market determination of interest rates, but this has not improved markedly the ability of estates to mobilize long-term capital for development. The impact of the banking system on PTPs and private estates is described below in terms of their capacity to mobilize rupiah and foreign currency. - 102 - 5.04 Rupiah Borrowings. Public sector estates have generally enjoyed better access to rupiah funds than private estates. Prior to June 1983 credit ceilings by Bank Indonesia (BI) favored tbe public sector in general and thus in the case of estate enterprises, the publicly owned PrPs. PTPs have had little difficulty mobilizing rupiah funds thxougb the state banks. Until 1982 state bank investment credits with terms over six years for the PIPs were rare but all PTPs have had access to investment credit granted at 12% or 13.5Z, for which the state bank rediscounted 70-75% of the loan with BI at 3%. The PTPs have also had access to 6Z working capital loans from the state banks which the BI rediscoimted on 75% of the loan value at 3%. Roll-overs, and reschedulings or refinancing are usually approved. The PTPs consistently utilize credit from Bank Bumi Daya (BBD) and to a lesser extent, Bank Ekspor Impor Indonesia (BEII) for long-term credit facilities. 5.05 Prior to the 1983 reforms, the state banks were not generally allowed to make rupiah loans to the private estates. Private commercial banks on which the private estates would rely, had only limited access to rediscount facilities with Bank Indonesia due to shortage of funds and could make only short-term and working capital loans. Private national banks have received Rp 90 billion of the rediscounting offered by Bank Indonesia, or bnly 3% of the Rp 3,000 billion granted state banks. As foreign commercial banks had to obtain special permission to make loans of more than one year, and these loans when granted went to textile, chemical or other manufacturing interests, the private estates had little access to medium or long term rupiah credit. In comparison to the PTPs, the private estates receive working capital loans at interest rates varying from 22-24%. In the 1983 reforms, all credit ceilings were eliminated, but other constraints to lending to private estates remain. 5.06 In the June 1983 reforms, the BI liquidity credit facility which had allowed PTPs plentiful cheap funds for priority lending, was extensively modified and simplified. Uniform rules were adopted of 80% rediscounting at 3%, with a 12% rate to the final user. Working capital and investment credits for private national estates and smallholders, and investment credits for nucleus estates, are eligible to receive liquidity credit funding. Depending on the pace 6f implementation of the priority credit programs, demand for liquidity credits during Repelita IV may exceed the total supply for all sectors. If so, interest rates for subsidized credit may rise if BI reduces its 80% rediscount proportion, or both PTPs and private estates may need to rely upon market rate bank credit to fund part of their programs. The current prime rates of szate banks are about 18%, and of private banks 24%, which are high in real terms - of the order of 8-14%. - 103 - 5.07 Foreign Exchange Borrowings. The state banks may not grant foreign currency loans to the PTPs, nor are the state banks a1lowed to guarantee repayment of private foreign bank loans (Presidential Decree No. 59 of 1972). The lack of direct access to foreign currency loans is not of significance for the PTPs, as the rupiah is freely convertible permitting purchases of imported equipment. In any case, 13 of the 17 tree crop PTPs have benefited from IDA credits or IRD loans for rehabilitation and expansion. Three of the four PTPs which bave not received loans originating from IBRD funding have received other official loans with foreign exchange from the Asian Development Bank, Kreditanstalt fur Wederaufban, and other international lenders. PTP XXVI is the only tree crop PTP not having received a foreign-assisted loan for rehabilitation and expansion of its existing estates. Foreign exchange funds as on-lent to the PTPs have been on extremely favorable terms, the foreign exchange risk being assumed by GOI, and with repayment as long as 20 years. Interest is added to capital on a simple basis during lengthy grace periods, resulting in an effective interest rate some points lower than the nominal 13.5%. 5.08 No restrictions are placed on the size of overseas borrowings by private companies in Indouesia but aln external borrowings are required to be reported tO Bank Indonesia, and are channeled through one of the 26 foreign or local commercial banks. The amount of offshore loan funds held by the private estates is unknown but believed to be significant in the case of the large estates. Offshore loans are rarely over 6 years, but the cost of the funds at about 2 to 4 points above the Singapore inter-bank offered rate (SIBOR) plus fees and withholding tax, can still be reasonable, presently about 14-15% per annum. Large private estates are often forced to borrow foreign exchange to cover rupiah costs and bear the foreign exchange risk. When foreign exchange risk or the cost of forward exchange cover is taken into account, equivalent to perhaps another 6% per annum, the offshore and rupiah interest rates are roughly in line with each other. Only the strongest and most efficient private sector estates, usually foreign or joint ventures with access to funds from parent companies, are able to mobilize foreign capital for investment. 5.09 Investment Code. With the introduction of new tax laws in 1984 the previous system of tax holidays, accelerated depreciation, and related fiscal incentives was withdrawn for all investments approved after January 1, 1984. The principal remaining incentives for investments approved by the Capital Investment Coordinating Board (BKPM) relate to customs exemptions on imported capital equipment, and assistance in expediting government approvals and in obtaining permits. New investment proposals have suffered long delays due to uncertain terms and conditions for approvals, a lack of centralized planning and adequate project promotion, and a clear line of responsibility for negotiating with foreign participants and large private national investors. At various times the former SBPN, the Dit-Gen E and the Sugar Council (Dewan Gula), have been involved. Major disincentives relating to land titles and a requirement that foreign equity participation should be less than 49% within 10 years, only shortly after tree crops have matured, will most likely prevent foreign equity participation. The most critical - 104 - constraint remains the iambiity of joint venture companies (JVCs) to bave a clear title to use land (ECU). The right to transfer land (Serah Pakai) provides Insufficient assurance to foreign investors that their interests are adequately protected. A second important constraint for both local and foreign investors is the lack of access to investment capital within Indonesia. Taking into account that Indonesia is firmly against foreign ownership of land, a mifnimm package of amendments to existing legislation, decrees and regulations required in a comprehensive Investment Code for Agricultural Enterprises must: (a) provide for a new and registerable contract of lease specific to joint venture companies to confer greater security to foreign participants. S&ch a contract of lease would not stipulate securiry to land but the -right to manage' where a management contract exis rs between the foreign sponsor and a JVC. Such lease$ if registerable and tranferable, would permit lenders the right to sell or transfer the lease to new management agents, possibly with final approval granted by BKPH; (b) legislate that the EGU land title and the Serah Pakai right to transfer are automatically extendable for a second period of 30 years; and clarify and provide an interpreta tive statement to Presidential Decree 23 indicating precise circumstances under which rights may be withdrawn. The present decree states that the Government may declare a JVC operation terminated if its obligations toward the Government are not sufficiently fulfilled. Sponsors and lenders find this too vague to proceed with investments in the order of the gl0-30 million required for estate enterprises; Cc) give all land right documents including ECU, CB (right to build), SPT (land allocation letter) and Serab Pakai the same life, say 30 years; (d) clarify the specific conditions under which foreign investors may use their shares as collateral for borrowings, and provide confirmation that state banks may make term loans against shares to JVCs; and (e) clarify the means by which investment approvals for estates are to be handled, nominating clear responsibility. The -one stop window' of BKPN needs to be strengthened to facilitate large plantation investments, and the responsibility within DOA for pre-approval arrangements, incentives and concessions needs to be further clarified. -105 - Maer k eguatton 5.10 The lack of stable standards outlined in explicit policies constitute a further impedint to moblizing capital. Government policy to direct oil palm to the domestic market since 1978 has been described in paras 2.17-2.20. The use of regulation to divert. a portion of crude paim oil to the domestic market is not at issue with most private producers, independent processors or the PTPs. The changing level of controls, quotas and taxation is, however, at issue since the frequent changes make planning and f-nancial forecasting hazardous for palm oil producers or ne# investors. Investors need to be assured (a) that the amount of output they will be compelled to provide to the local market is clearly defined and not subject to frequent unfavorable changes; (b) that a minaium level of future local prices applicable to compulsory sales is known; and (c) that taxation is not used to cause export prices after taxation to drop below a specified minimum level. Instead of the present dual control system of quotas and prices, greater certainty for producers and investors would be provided by an export taxation formula geared to monthly world market prices and designed to assure an adequate flow of crude palm oil to the domestic market. Artrac-ang foreign and large local investors in oil palm could also be further enhanced by GOI assurances confirmed in a guarantee, legislation or through a clause in the SPS or SPT approval documents that private investors would be allowed to export a mini-mu percentage of their production. Ihe revised export tax formula, if consistently applied, would make such guarantee unnecessary, but in the absence of satisfactory tax guidelines, a minimm percentage of guaranteed exports would provide some incentive. Based on long-term projections of the domestic edible oil deficit, -the available palm oil for export will remain at about 20Z of production through the period to 2000 (Table 2.10 - high income growth scenario). To attract any significant level of private investment and thereby iacrease export possibilities, guarantees for export to large investors should be made at some 50% of production. The export guarantee would still leave a measure of uncertainty with domestic price levels. Domestic prices for palm oil need to be considered in the context of the edible oil market as a whole, where regulations applied to coconut oil raise significant issues. 5.11 Copra and Coconut Oil. Ensuring adequate supplies of coconut oil and direct control of processors and wholesalers is the responsibility of the Copra Marketing Board - Bapengko. Quotas are set for individual wholesalers and processors. Provinces in the past were required to provide a quota of about 50% of production for processing in Java, the intent being to secure edible oils for the Javanese market. In 1980 Java had 124 coconut oil factories, 33% of the national total, with a capacity of 692,000 tons copra equivalent vhich represents 45% of the national capacity. In addition, 68 coconut refining mills on Java have a capacity - 106 - of 198,000 tons or 80% of the national refining capacity. Bapengko regulations covering quotas, the licensing of inter-island shippers, and the collection of taxes, prevent competition at the wholesale level and strengthen the position of copra processors and oil refiners over producers. Between 1978 and mid-1983, the average price for copra in producer areas rose only 2% while the copra price rose 15.7Z and coconut oil prices by 17% In consuming areas. The system has further promoted inefficient old mills in Java over efficient mills in the outer islands and has led to waste and spoilage and higher costs in transportation and distribution. Alternative and less distortionary regulations to ensure adequate supplies of coconut oil to the domestic market were to have been studied in 1981 under the SCDP project, but the study is now expected to commence in 1985. The present system of regulations discourages new or existing mediuw or large estates from investing in coconuts, and penalizes smallholder returns. Requirements to Support Smallholder Development 5.12 The most recent constraint to further development of private estates has resulted from the BKPM directive of November 3, 1983 which compels private estates to contribute to smallholder development in NES-style projects These regulations presmpedly apply to all new private estate proposals, including joint-ventures and expansion of existing estates. The intent is that 80% of new areas developed by private estates would be for smaUlholders; the remaining 20% being retained by the estate for at least one production cycle. The private estate is also required to assist processing smallholder production. The majority of small private estates, as was the case with the PTPs until the 1970s, lack technical expertise, trained managers, and adequate capital, and are in poor financial health. The West Java Private Estates & Smallholders (PES) Development study prepared for Dit-Gen E, September 1982, indicated that only one of forty private estates investigated was financially healthy and none of those studied was immediately capable of assisting smallholders. Guidelines for reimbursement or funding for private estate expenditures for smallholder planting, infrastructure, overheads, and purchase price of land; or for pricing of smallholder production have not been established by BKPM or DOA. 5.13 Any revitalization of existing private estates must confront two realities. First, with the exception of private oil pals estates of which there are about 16 vith an average planted area of 5,730 ha (1981), the majority of private rubber and coconut estates are small, with over 95% by number less than 250 ha. Second, most private plantations require rehabilitation prior to demands for assistance to smallholders. The NES approach has been the least successful when applied to weak and financially deficient PTPs. This would be equally true for private estates. - 107 - 5.14 The impact of requirements for private estates to develop 80% of land available to them for smallholders discourages the initial investment which would later make assistance to smallholders possible. Other alternatives must be devised to permit new private sector investment and rehabilitate existing estates in concert with smallholder development. Various options besides the NES approach applied to private estates should be fully studied. One option would be to address loug standing constraints by reinstituting a private estate program along the lines of the one begun in the late 1970s, when some Rp 30 billion was granted from Bank Indonesia to Bank Ekspor Impor Indonesia (BEII) for on-lending to small private estates with feasible investment plans. Such a program coordinated with an estate-oriented project management unit (PHU) to monitor small estate development and also undertake smallholder development in the same vicinity, might address 'both needs. Another proposal being considered by the Dit-Gen E to assist the underdeveloped small estares is ro facilitate groupings of small estates and use PTPs for technical guidance and management support. An alternative to further straining the PTPs-would be to group sm-all estates under the guidance of a suitable central organization. BEII has proposed to the Department of Finance that under arrangements where a technical and advisory body is created, BEII would be prepared to conaider both equity and loan funding. Other investment and development banks such as Bapindo, International Development Finance Corporation, PT Bahana, and Private Development Finance Company of Indonesia could be tapped for participacion. Appropriatp actions are required to determine the direction and scope of assistance that the Government can offer to revitalize the private estates and still meet its objectives of smallholder development. To this end, the Dit-Gen E should: (a) analyze the inventory of data on private estates including location, size, crop suitability, infrastructure, ownership, management, productivity and financial well-being; (b) determine target areas of support for private estate rehabilitation and expansion in proximity to potential smallholder areas; (c) determine how best to assist private estates to define their suitable areas and crops for development; and to approach Government and provincial agencies to obtain land title extensions or clear land titles, and other licenses; - 108 - (d) prepare initial feasibility and related studies. A private estate guidance and coordinating unit within the Dit-Gen E could provide such assistance; (e) determine management and organizational alternatives for assisting groups of private estates, which could also guide smallholder development in the area; and (f) initiate high level discussions among the DOF, Bappenas, 8I, DOA and the Dit-Gen E to resolve issues of available credit, alternatives for equity financing, the participation of and terms of Government support, and the performance standards that will be required for Government assistance. Mobilizing Private Capital 5.15 Indonesian Investment. Repelita IV targets for oil palm plantings call for about 130,000 ha from the private sector. About 90,000 ha of the 648,000 ha rubber program may also be intended for private estate investment. The status of six local oil palm ventures approved in 1983 is not known. Dit-Gen E indicates that there are an additional eleven sponsors committed to opening new oil palm estates. These sponsors are understood to be willing to proceed even though 80Z of total plantings are to be allocated to smallholders. This requirement, however, and other constraints outlined previously, could seriously jeopardize realization. Based on cost estimates prepared by the Commonwealth Development Corporation for the Riau Oil Palm project (CDC Report, May 1983), a program of 90,000 ha of rubber and 130,000 ha of oil palm would cost Rp 2,175 billion including palm oil mills and rubber. processing facilities, of which about Rp 1,300 billion would be incurred during the Repelita IV period. Such a program is unrealistic within the present financial constraints and available funds from state banks. A more realistic program for small private sector estate development, assuming GOI technical and financial support, may be 25,000 ha of new private estate oil palm and coconut in PES projects with establishment of 25,000 ha of smallholder oil palm, and possibly 40,000 ha of small private estate rubber rehabilitation and replanting. Smaller private estates would probably incur fewer infrastructure costs, such as schools and hospitals, than a large commercial estate, but may nevertheless need to spend more than the costs directly attributable to NES projects. A detailed analysis of likely costs is needed. If costs are one-third lower than the PT Riau estimates, approximate costs and possible sources of funds for such a program would be as shown in Table 5.1. - 109 - Table 5.1: INDICATIVE EROGRAM FOR SMALL ER.IVATE ESTATES, 1984-88 a/ CEP billion - current terms) Sources DTEIAEBD Area Estimated BEII Own BI/ other (ha) cost b/ Funds BRI non-credit Rubber Small estate rehab/ replanting 40,000 c/ 240 190 d/ 24 - 26 Oil Palm/Coconut SmAll estates 25,000 e/ 200 140 60 - - Associated Smallholder 25,000 150 123 27 MOTAL 590 330 84 123 53 a/ Assuming DOA technical and GOI financial support. B/ If costs one third lower than PT Riau estimates. 'E sp 5 billion included for new and rehabilitated processing facilities. d/ Of which possibly Rp 24 billion as equity. e/ Initial development of 30 tons FFB/hr palm oil included. 5.16 The sources outlined in Table 5.1 are based on assumptions that private estates incurring bank interest rates currently in the range 18-24% will require 30% of funds as equity to support higher debt service. State banks, assumedly BEII (see para 5.4), would provide loan funds for the rmeainder of the costs. Smallholder credit costs for oil palm of Rp 123 billion are assumed to come from Bank Indonesia/BRI under liquidity credit arrangements. Non-credit costs are assumed to be fifnnced from the Export Crops Fund (DTE.) and provincial government budgets (CATD). Since the focus on private rubber estate development should be on the small plantations requiring rehabilitation, it is assumed that support from BETU or Government sources would Include finance of 10% of the costs as equity with matching funds in owners equity, the BEll investment to be supported by the Dit-Gen E coordinating unit (para 5.14d). Support from GOI for infrastructure, roads, social services as non-credit costs would need to be forthcoming in any PES project. The rubber rehabilitation/replanting program for private estates could be packaged in proximity to a PEU in an SRDP or PRPTE project, or with assistance from a Dit-Gen E coordinating unit to fulfill - 11 - mallhoolder development objectives and should not place undue burden on small private estates lacking the commercial or technical ability to assist smallholders. 5.17 Until such time as private estates have ready access to technical guidance and investment capital, any revitalization of the private estate sector, except in the case of large estates and large investors, will require GDI support. At present, many smalaholders in NES projects adjacent to PTPs or in PMU schemes have greater access to technical expertise than small private estates. Whilst 1982 Dit-Gen E proposals for 35 private estate support units in 13 provinces may be optimistic, without adequate support or the help of estate-oriented MMUs, the small private estates are certain to decline further. 5.18 Foreign Investment. Any significant level of foreign investment in the estate sector in the present investment climate described in paras 5.03-5.12 remains doubtful. Since 1979 GOI has sought to promote several projects earmarked for foreign partners. These projects include three areas designated for oil palm on some 62,000 ha in Riau. The local partners nominated are PTPs II, V and VI. A fourth project envisages palm oil processing with foreign participation using either PTP V or VI. Project descriptions were published by DDA in January 1983 in "Grow with Indonesia, Agrobusiness Investment Opportunities". None, however, has secured foreign sponsors. With new requirements to develop smallholder areas it is not clear whether the Commonwealth Development Corporation (CDC) will proceed to develop with PTP VI and IFC participation, a 10,000 ha oil palm scheme in one of the Riau concessions. Total costs have been estimated at Rp 120 billion (mid-1983). CDC has been successful in its joint venture approval with the Irian Jaya Development Corporation to establish a cocoa plantation, PT Ransiki. Expansions of existing foreign-controlled plantations have been approved in recent years, e.g., Goodyear International Corporation and Uniroyal, but the record of new foreign sponsors has not been encouraging. Two new proposals for joint ventures may proceed as they are not dependent on large tracts of land with land title problems. One of these would establish an extremely beneficial clonal oil palm unit for the whole of the oil palm sector with eventual cloning in Indonesia. The proposal with 80% participation by Unifield T.C. Ltd. would be locally sponsored by PTPs I and VI, each with lOX ownership. Capital costs are estimated at about Rp 1.5 billion. A second joint venture under consideration is establishment by Revertex of a prevulcanized latex factory in the Belawan duty free export zone. - 111 - 5.19 Estimating the potential capital of foreign investors in plantation joint ventures in Repelita IV is purely speculative; possibly Indonesia could raise as much as Rp 500 blllion in Repelita IV if constraints were removed in a new agricultural investment code (pars 5.09). Foreign investment in oil palm processing is one area of potentially sizable placement of foreign capital. Land title constraints are avoided since the Eak Guna Bangunan (HGB) right to build is in use for 30 years and extendable for an additional 20 years. Assuming greater certainty and consistent policies in edibJ,e oil pricing and palm oil export taxation are achieved, foreign investors may be induced to invest in the oil palm subsector. Financial Resource Gap - Public Sector Estates 5.20 Capital Requirements. The level of investment projected for the Pms in the analyzed planting program covering 241,000 ha of tree crops and required processing facilities, costing some Rp 1,550 billion, represents a 60% increase over the Rp 907 billion investment by the tree crop PTPs in Repelita III. The financial requirements by crop, net of existing commitments by IBRD are shown in Table 5.2. Direct capital costs required are Rp 1,390 billion after deduction of existing IBRD commitments in NES loans. GOI expected disbursements under previous loans have not been deducted as it is assumed that rupiah commitments by the Department of Finance for loan funds and equity would be reviewed on a PTP by PTP basis. Table 5.2: FINANCIAL REQUIREMENTS FOR PTP ESTATE DEVELOPMENT, 1984-85 (Rp billion/USt million, current terms) Total costs IBRD Commitments Required Add±tiLonal Commitments a/ Rubber 496.7 68.2 428.5 Oil Palm 1,023.5 73.8 949.7 Coconuts 30.7 15.7 15.0 Total 1,550.9 157.7 1,393.2 a/ Additional commitments from all sources, external or local. Some of these commitments may have already been obtained. - 12 - 5.21 Financial Projections. Financial projections by each PTP were undertaken during 1982 and 1983 as part of the former SBPN's responsibility to improve corporate financial management and assist GOI to review performance, assess PTP budgets, and monitor PTP development. PTPs were required to submit annually a ERencana Jangka Panjang' or corporate financial plan covering 10 year physical and financial projections. With the dissolution of SBPN there is currently an hiatus. The system, if it is further developed, will improve the PTPs' ability to plan capital requirements, forecast profitability and foresee cash flow problems. With output and input price assumptions harmonized for all PTPs, the projections allow comparisons between PTPs. Deficiencies and potential improvements of the present system are described in para 3.20. The aggregate financial state-ents for all PTPs produced in mid-1983 provide some basis for forecasting the capital shortfall of the PTPs, their borrowing capacity, and requirements for equity. A summary of aggregate data for all 17 tree crop PTPs based on PTP ten year plans, is in Table 5.3. As sales tend to be overestimated on high production targets and inventories are understated, sales have been reduced from PTP/SBPN projections by 152. Unit costs of goods sold have been increased by about 7% and applied to the lower production figures. The total of interest payments, administrative expenses and overheads has been increased by 20%, and depreciation reduced 35% for delays in investment. Average corporate taxes by all PTPs are assumed to be paid at 38% of net profits. Table 5.3: SUMMARY INCOME PROJECTIONS AND RETAINED EARNINGS 17 TRHE CROP PTPS - 1984-88 (Rp billion/US$ million - current terms) Total value of sales 5,652 Less cost of goods sold 3,109 Gross operating profits 2,5X3 Less: Interest, administrative costs, and selling expenses, depreciation, other expenses (other income) 1,853 Net profits before taxes 690 Corporate taxes 262 Net profits 428 Allocations: Dividends (25%) 107 Bonuses (12%) 51 Increases ln retained earnings 270 428 Capital and reserves (1983) 648 Capital and reserves (1988) 918 - 113 - 5.22 Available Funds and Capital Shortfall. Expected net profits have been revised from PTP/SBPN estimates to Rp 428 billion during Repelita IV for the 17 tree crop PTPs. The estimate represents an increase of 55% over Repelita III net profits for these PTPs. Net profits representing a margin on sales of 7.5% after taxes in Repelita IV, as was the margin in Repelita III with two years of poor commodity prices, is prudent since the PTPs will have increased costs for borrowed funds for working capital. The growth in operating and other costs during Repelita IV is expected to be in excess of increases in commodity prices. Based on profits of Rp 428 billion, maximum retained earnings of Rp 270 billion could be derived after allocations for dividends and bonuses at the rates normally used. Retained earnings plus depreciation as a rough measure of available funds for reinvestment are estimated at Rp 653 billion. The estimate is optimistic since 100% of retained earnings are not likely to be available for reinvestment; in particular some will be required for repayment of principal on existing loans. The total capital shortfall for the PTPs is estimated at Rp 898 billion after deducting their own funds of Rp 653 billion from capital requirements of Rp 1,551 billion net of commitments. The measure is imperfect since cash surpluses of one PTP are not transferable to PTPs with cash flow deficits and neither their own funds nor outstanding loan balances are evenly distributed among the PTPs. The amount of required capital to fulfill the shortfall may be substantially higher. 5.23 Borrowing Capacity. The maximum level of total liabilities of the 17 tree crop PTPs for 1983, assuming a maximum aggregate debt-equity ratio of 60:40 on the existing capital and reserves, would be Rp 972 billion. With present liabilities totalling Rp 627 billion, total new liabilities assuming no change in profits or retained earnings would be about Rp 345 billion. Expected retained earnings to 1988 of Rp 270 billion would increase capital and reserves to Rp 918 billion, allowing for total liabilities during Repelita IV to increase to Rp 1,377 billion. After deducting 1983 total liabilities of Rp 627 billion, total new liabilities should not exceed Rp 750 billion. Based on past PTP experience, about 30% of these liabilities would be in accounts and trade payables and short-term borrowings. Total long-term borrowing capacity may be only Rp 525 billion, and after adjustment for existing external undisbursed commitments to PTPs, about Rp 158 billion. Total new long-term borrowing capacity would be limited to Rp 367 billion. The measure is again imperfect since borrowing capacity is not evenly distributed among the PTPs. 5.24 The debt-equity ratio as such is a poor measure of borrowing capacity, as it places emphasis on the book value rather than earning potential of assets, and ignores the maturity and cost of debt, which might make debt servicing impossible. No figures on future debt service ratios are available, and in the discussion that follows, the cruder measure, the debt-equity ratio, is necessarily considered. In all - 114 - events, many PTPs actually have little to no immediate borrowing capacity. These include PTPs I, IV, VIII, XI and XXIII. Other PTPs, based on known commitments, will not be able to service their existing debts as they mature with any substantial new level of borrowings. These PTPs include PTPs X, XI, XIII, XXIII, XXVI, and PNP XXVIII. The borrowing capacity of other PTPs with large investment programs in relation to their capital structure such as PTPs VI and XII is questionable. Since reserves and retained earnings of highly profitable PTPs with debt expansion capacity such as ETPs II, V, and VII are not transferable to PTPs requiring further capitalization, new borrowing capacity based on a capital gearing of 60:40 and aggregate retained earnings of all PTPs is likely to be overstated. Furthermore the 60:40 gearing is high, i.e., possibly leading to financial difficulties in tree crop enterprises which suffer wide variations in income (para 5.30 discusses this matter in relation to bond issues). Regardless, the inescapable conclusion from analysis of even optimistic forecasts of PTP finances is that fresh equity or conversion of existing debts to equity is required to give PTPs the base to borrow sufficient funds for the analyzed Repelita IV investment program. A summary of the estimation of the gap in required borrowing capacity is provided in Table 5.4. Table 5.4: BORROWING CAPACITY GAP OF 17 TREE CROPS PTPs: 1984-88 (lRp billion/US$ million - current terms) 1. Total financial requirements 1,551 2. Retained earnings (1984-1988) 270 3. Cash available from depreciation 383 4. Total cash available (2 + 3) 653 5. To be raised (1 - 4) 898 6. Maximum total liabilities (1988) (D/E 60:40) 1,377 7. Present liabilities (1983) 627 8. Total new liabilities (6 - 7) 750 9. Expected new current liabilities (30% of total) 225 10. Maximum new long-term debt (8 - 9) 525 11. Borrowing capacity gap (5 - 10) 373 -U5- 5.25 PIP Equity rements. PTPs will require nev equity from GOI, or existing GOI debts selectively converted to equity, if they are to implememt the PTP components of the analyzed program while Saintaining a satisfactory financial position, with a prudent debt/equity ratio. All measures of equiry requirements in the absence of detailed financial studies of the various PTPs are speculative, and because equity is presently uneven between PTPs, likely to be understated. The SBPN corporate plan results, however, allow for a better degree of estimatioc than possible heretofore. What is clear is that the analyzed program of 241,000 ha costing Rp 1,551 billion cannot, on reasonable assumptions, be financed solely by retained earnings and borrowings and that therefore an increase in equity ts required. Some of this increase might be achieved by reducing dividend or bonus payments, or deducting aU interest payments, including those on debt supporting investments in immature plantations, from the base on which such payments are calculated. The simplest way for GOI to increase PTPs' equity is to convert existing debts due GOI to equity on a selective basis. Comparison of the maximum new long-term debt figures of Rp 525 billion in Table 5.4 and Np 900 billion in Table 5.5 indicates that conversion of Rp 150 billion of debts would increase new borrowing capacity by Rp 375 billion at a 60:40 gearing ratio, thereby closing the borrowing capacity gap indicated in Table 5.4. The above analyses of global data need to be followed up by in depth corporate plans for each PTP, with associated sensitivity tests, especially of the debt service coverage forecasts. Table 5.5: CLOSING BORROWIUG CAPACtIT GAP OF 17 TRFF CROP PTPs 1984-88 (Rp billion/USS million current terms) Capital and reserves 1988 918 Long-term debts converted to equity 150 Resultant capital and reserves 1988 1,068 Total -exi-m liabilities (60:40) 1,602 Present liabilities (1983) 627 Less debt converted 150 477 Total potential new liabilities 1,125 Expected new current liabilities (Table 5.4) 225 Maximum new long-term debt 900 5.26 Equity requirements of the PTPs will not be uniform regardless of the total investment program. PTP I and PNP XXVIII require debt conversions or fresh equity from GOI funds irrespective of any new investment program outlined in Repelita IV. Financial studies of PTP X and PTP XI have indicated an inability to service their debts from large past and expected borrowings if they proceed with all existing and intended investment programs. For planning purposes, the Department of Finance should insist on in-depth corporate plans with debt service ratio - 116 - forecasts, and should anticipate a need for debt conversions to equity of a minimum Rp 150 bill7on during the next five years. The debt conversion alternative is particularly attractive over the option of providing 100l fresh equity, as i_ works on both sides of the debt-equity ratio, reducing debt as wiel as increasing equity. The ratio of leverage for fresh equity is 1.5:1; thus Rp 150 billion of new equity will support borrowings of Rp 225 billion, the two together increasing cash flow by Rp 375 billion_ In contrast, GOI debt equity conversion increases the effective leverage to 2.5:1, and thus Rp 150 billion of GOI debt converted to equity enables the RP 375 billion cash flow requirement to be raised as loans, without placing a short-term burden on government funds. Without fresh equity or conversion of debts to equity, the financial viability of the PTPs will be seriously jeopardized if they are directed to borrow for development in the Repelita IV program which vill overextend many of them. In the absence of additional equity, most of the PTPs acting with financial restraint would be forced to drastically reduce their investment programs. Further borrowings from state banks or new sources, in addition to funds already committed, is only compatible with GOI assurances to expand the capital base of these corporations. 5.27 Demand on State Banks. Analysis of optimal levels of debt and equity to finance the PIP program provides a basis for estimating the maximum new demand on the banking system from PTPs during Repelita IV, taking into account existing undrawn IBRD loan balances of Rp 158 billion. If the PTPs were to receive no further direct Bank Indonesia loans beyond those already committed, and no new external loans were forthcoming to support the program or its foreign exchange costs, demand on credit from state banks, predominantly BBD and BEII, would be as high as Rp 740 billion. In addition to requirements to reduce demands on state bank credit to permit capital transfers elsewhere in the public sector, state bank loans to PTPs are likely to be more expensive in view of the increase in interest rates paid by the Banks since June 1983. Present costs of borrowed capital for all 17 PTPs from all sources at 5.2% (1982) will more than double in Repelita IV when NES and other project loans come into repayment (beginning 1984) and when a portion of short- and long-term funds from state banks are granted on terms of 18% or gr2ater. PTP options for sources of finance outside the state banks are examined in paras 5.28 to 5.31. Capital Markets 5.28 Share issues by the PTPs or by new joint venture companies as a means of mobilizing capital are in principle an excellent way of meeting rupiah fund requirements in the equity constrained plantation sector. The stock market, since its reintroduction in August 1977, remains in infancy with only 23 issues. Regulations of the Capital Market Executive Agency (Bapepam) provide that share price fluctuations shall be limited to 4% from the previous day, and dividends are subject to income tax whereas interest on bank deposits is not. While plantation companies such as Goodyear and Uniroyal have made public of-aerings, these issues are the result of divestment requirements to bring Indonesian - 317 - participation to 51% after 10 years frot the start of an enterprise (enacted by Foreign Investment Law Act lb. 1 of 1967 and Act Nb. 11 of 1970) rather than objectives of capital mobilization. Even if onstraints on the market were eased, public acceptance of PTP issues Would be by no means assured since their development plans, budgets, borrowings, and financial stability are almost completely directed and Influenced by GDI. Recent depressed commodity prices (1981-83), frequent changes in GOI policy and price intervention, sales quot-as and export taxes would not make PTP share issues particularly attractive to public investors. The present requirements for companies listing stock, which include two previous years of profits, and a return on equity in the previous year of 1OZ, would have precluded all PTPs from a share issue in 1983- 5.29 Bond Issues. A long-term bond issue avoids the problem of pricing shares, and has advantages for PTPs and joint venture companies as bond maturities and yields can be tailored to the long-tern yield in tree crops, allowing debt service and retiring the bond debt without dilution of ownership of the company. Since regulations were enacted in December 1979, only a limited number of bonds have been issued, and none has been issued for estate companies. At present, the largest obstacle for development of bonds in Indonesia is the differential tax treatment for interest on bonds, which attracts tax, compared with interest on bank deposits which at present is exempt from income tax. Until this broad problem is resolved bond issues in geueral are unlikely to become a significant source of long term capital for investment in Indonesia. Even if the question is resolved, the success of bond issues for the estate sector will depend on the financial rates of return from these tree crops. 5.30 The PTPs can meet most Eapepam bond issue requirements: authorized capital of Rp 500 million, paid-in capital of Rp 100 million, a net asset value of Rp 100 million, and audited accounts for 2 years. However, the requirement of a return on capital of 10% for the previous 3 years is perhaps unduly restrictive for estate enterprises. An alternative requirement of a mninmim actual and projected debt service coverage ra.io may need to be introduced, together with a debt-equity ratio considerably lower than 60:40. Bond issues imply high standards of accountability and sound financial and corporate management. The PTPs would need to build a track record of firm financial restraint and maintain a conservative debt coverage ratio over time, if bonds are to be well received in the market. A few of the PTPs have a continued high level of past profitability and include PTPs IV, V, VI and VII. PTPs V and VII are the most likely first potential candidates with a continuous high level of profitability. Bond issues for estate companies should require specified allocations by the PTP to an external sinking fund prior to distribution of dividends and other allocations from after-tax profits. In view of the high tax-free bank deposit interest rates at present, it is unlikely that estate bond issues will be a significant means of generating funds during Repelita IV. - 118 - 5.31 Leasing. Leasing companies within che secondary financial marker of non-bank financial institutions have become increasingly active since 1981 in mobilizing domestic and foreiga capital. Relying substantially on export credit financing in the offshore capital market, lease financing provides an avenue for foreign currency borrowings for estates. To date, no PTP or joint venrure plantation company is known to have made use of lease finance for machinery and equipment from the growing number of ins ritutienal lessors. Four large institutional lessors are capable of garnering the amount of capital required for rubber and palm oil processing facilities (Rp 1 billion-10 billion and above) and about eight smaller lessors could be utilized for smaller equipment purchases requiring foreign exchange. Lease/purchase arrangements for processing equipment can be secured with a 10-30% initial purchase payment, a maturity of 6-10 years, a commitment fee of 1% and availability fees of 0.5% on the outstanding balance. The interest rate may be fixed or variable but is usually 3-4% above SIBOR. A recent study for SBPN on lease financing has indicated that leasing for processing equipment under secure arrangements for final purchase with fixed rather than variable interest rates, packaged with state bank or private commercial bank rupiah loans, is considerably more favorable to PTPs than suppliers credits. With tax advantages in leasing, this option can provide a cheaper source of money for estates (although not necessarily for GDI as a whole) than medium- and long-term loans from state banks, foreign commercial banks or private offshore borrowings. With estimated capital requirements in Repelita IV for rubber and palm oil mills for the PTPs at Rp 460 billion (current cost), lease financing is a highly attractive option for mobilizing a portion of this capital. In order to establish a track record with institutional lessors, one of the more financially healthy PTPs could explore lease/purchase arrangements for processing facilities in che near future. Funding the Program: Areas for Attention 5.32 PTPs. Table 5.6 brings together the analysis of funding requirements and sources discussed in the previous paragraphs. - 19 - Table 5.6: POSSIBLE SOURCES OF FUNDS - PTPs, 1984-1988 (Rp billion/US$ million in current terms) Investment Program Possible sources of Fumds Rubber 497 PTP own funds 653 Oil palm 1,0023 Existing loan drawdowns 158 Coconuts 31 Leasing/supplier credits 69 State banks/BI and external lenders 671 1,551 1,551 Whilst, for reasons discussed above, the figures are subject to many qualifications, the conclusions on priority areas for policy attention highlighted by the analysis are considered valid. These are: (a) the PTPs can be expected, from retained earnings, to provide a sizeable proportion - in the order of 40%, of the funds required for PIP development; (b) the DOF must be prepared to provide 10% or more of these development costs as equity to ensure financially viable PTPs; most of which can be most advantageously provided by conversion of existing long-term debts of the PTPs. To aid the decision process, good corporate plans, highlighting the forecast debt service coverage ratio for each PTP are urgently needed. Without the provision of further equity, it is doubtful that PTPs could complete borrowing on existing commitments, of some Rp 158 billion and take on new borrowings of some Rp 740 billion; - (c) every effort should be made to mobilize as much capital as possible outside the state bank system; and (d) processing facilities requiring some Rp 450 billion in Repelita IV have a large foreign exchange component estimated at Rp 270 billion, and early efforts should be made to secure finance from external lenders for the processing and mills program. 5.33 Small Private Estates. A tentative small private estate development program has been described in para 5.15. Take-off in private sector investments will require far more initiative than planning available capital resources. Requirements include revisions in - 120 - performance standards of private estates developing smallholder tree crops, comprehensive investment legislation to support private sector participation, and consistent marketing policies particularly for edible oils. The GOI vill nevertheless need to commit some capital to begin to revitalize private estates and enjoin their participation. The estimate of demand on the banking system and/or multilateral agencies to support private estates in PES projects is Rp 330 billion or about 562 of the total costs. These funds would assist in developing 25,000 ha of estate oil palm or coconut and about 40,000 ha for replanting rubber on smaller private rubber estates. GOI budget sources for credit and non-credit costs would be required for Rp 176 billion or 302 of the costs to support smallholder oil palm or coconut development on 25,000 ha. Emphasis should be given to mobilizing capital with Bank Ekspor Impor Indonesia which has indicated willingness to take on a substantial role with the private sector plantations. - 121 - CHAPTER VI: FINANCIAL IMPLICATIONS - SKAELL DER DEVELOPMENT Index Page Capital Requirements ................................................ 123 Indirect Cost Recovery Export R axatoc .oblation. .......................................ee 124 Cess Taxation .............h ...................................... 126 rini Taxes ..oga..e..r.. nts.. .................................... 127 C-redit Schemes BRI Resource Mobilization .................................... 128 ISmplicaoions for ReamenthAbii.............................. ...... 129 Priority Program Requirements ........................................... 130 BRI as Executing Ba-nk ............................................... 130 3allhoder Repayment Ability ...................... swe.wooees.......... 132 BRI Cashflow.*. .... ...................... ....... 135 Issues for BRI Credit Recovery ................................... 137 Cost: of Credit Schemes to GI ................................... 138 Summary of Possible Funding Sources ........e.......oo............ 139 Tables In Text 6.1 Smallholder Analyzed Program Financial Requirements 1984-88.. 123 6.2 Export Tax Revenues 1984-88......................... ......... 124 6.3 Banking System Deposits and BRI Share ................ ....... 128 6.4 Requirements on BRI for Tree Crops... .........oo................ 129 6.5 Projected BRI Commitments under Priority Credit Programs ..... 130 6.6 Smallholder Repayment ............................. o ........ 134 6.7 BRI Cashflof...d - Saiod.................................... o. 136 6.8 Sources of Funds - Smallholder Development .......................... o ....... 139 - 122 - I@o< /v - 123 - CHPTER VI: FINANCIAL IMPLICATIONS - SMALLEOLDER DEVELOPMENT Capital Requirements 6.01 The capital requirements for the program set out at Table 4.5 to develop 770,000 ha of smallholder tree crops are shown by crop in Table 6.1. Total program costs for smallholders of Rp 2,062 billion are reduced by IBRD commitments of Rp 244 billion to Rp 1,818 billion. Past commitments are largest in the NES project series, with Rp 191 billion available for disbursement. The level of commitments, however, is negligible in the total capital requirements of the GOI to support smallholder development. Net funds required for credit for tree crop farmers amount to Rp 1,470 billion, and for non-credit, about Rp 352 billion. In total, these sums exceed the likely budget for the entire sector. Mobilizing capital for smallholder tree crops is considered in terms of export and land taxes, the banking sector and GOI budget sources. Recommendations for capital mobilization and sources of funds for smallholder development are summ-arized In paras 6.26-6.27. Table 6.1: SMAILHOLDER ANALYZED PROGRAM FINANCIAL REQUIREMENTS 1984-88 (Rp billion/US$ million - current terms) Existing Of Which Total IBRD Funding Non- Cost Commitments Requirements Credit Credit Rubber NE- PIR 490.6 101.5 389.1 331.1 58.0 SRDP 148.7 22.5 126.2 85.9 40.3 PRPTE 198.7 - 198.7 158.6 40.1 Sub-total 838.0 124.0 714.0 575.6 138.4 Oil Palm - NES/PIR 631.8 5Q.5 572.3 473.1 99.2 Coconuts NES/PIR 101.0 29.8 71.2 61.1 10.1 SCDP 111.7 30.3 81.4 44.9 36.5 PRPTE 379.4 379.4 311.1 68.3 Sub-total 592.1 60.1 532.0 417.1 114.9 Total Smallbolders 2,061.9 243.6 1,818.3 1,465.8 352.5 - 124 - Indirect Cost Recovery 6.02 Export Taxatiou. Export tax revenues channeled to the Export Crops Fund(DmTE) have been used to finance GOI-sponsored tree crop projects since 1979. Originally intended to finance only non-credit costs, the DTE subsequently financed credit costs and interest subsidies on smallholder loans. It also finances costs reimbursable by IBRD or other external lenders; but the reimbursements flow to other budget accounts. Up to late 1981 when the GOI reduced the rubber export tax rate to zero, and that for palm oil to 5% without a surcharge (PET), DTE funds were fully adequate for the existing programs; subsequently, it has become necessary to rely increasingly upon normal development budget sources as a means to finance both non-credit and credit costs (other than BI/BRI funds in PHU projects). The re-introduction of a 5% export tax on crude palm oil and a surtax (PET) of 37% in February 1984 will ease the funding of DTE, but this level of taxation on palm oil is not sustainable; it is more punitive than revenue generating, and has been fixed to ensure diversion of crude palm oil to the local market. The PTPs and private estates in the most recent regulations are allowed to export only 15% of their production in any event. As local crude palm oil prices are raised above the present Rp 425/kg price, it is anticipated that by 1987 the premium to export will become neglible, as international palm oil prices are expected to fall by at least 11Z in real terms over the 1984 price level. With continued short- and long-term favorable rubber prices, GOI would be able to re-introduce the 5Z export tax on rubber. Projections for export tax revenue are shown below for the Repelita IV period. Assumptions used for the proportion of production for export are 91% for rubber, 15% for palm oil in 1984 increasing to 34% in 1985 and 38% thereafter. Table 6.2: EXPORT TAX REVENUES - TREE CROPS 1984-88 Tax Years Revenue X Applied Rp billion/US$ Million Rubber 5.0 1985-88 237.2 Oil palm 42.0 1984 24.9 22.0 1985 38.9 5.0 1986-88 34.9 Total 335.9 - 125 - 6.03 Re-introduction of-the 5% export tax on rubber and maintenance of the 5Z export tax on palm oil after 1985 when local and international palm oil prices are expected to be at similar levels would provide an estimated Rp 335.9 billion covering almost all of the non-credit requirements for Repelita IV tree crops (about 93Z). If G3I established additional local sales taxes on rubber, oil palm and palm kernels at the equivalent export tax rates of 5Z throughout 1985-88, an additional Rp 127 billion in tax revenue could be derived. The introduction by GOI of a 10% valued added tax in early 1985 will require re-examination of the details of this analysis. Given GOI budget constraints, export tax revenues could permit continued GOI funding of some credit subsidies as well as the non-credit costs of project development. Such tax revenues at maximum, even if local sales taxes at equivalent rates are taken into account, are estimated to provide Rp 600 billion, but this would offset only 33Z of the total financial requirements for smallholder development of Rp 1800 billion, or about Rp 250 billion of the estimated Rp 1,465 billion of credit funds after allocation for all non-credit costs. Without increased local sales taxes, export tax revenues are likely to provide only Rp 120 billion or 8% of total credit costs (after covering non-credit costs). 6.04 A recent study of Thailand's public support for tree crops and the impact of Government taxation including general export taxes and a specific export tax (cess) 1/ concluded that such tax impositions for grant financing for rubber smallholders had severely distorted output prices, depressed input prices, created a non-optimal allocation of resources, resulted in poor cultivation techniques, depressed tapping wages, given poor incentives to improve technology and resulted in lover yields and production. Nevertheless, Thailand having had general export and cess taxes as high as 40% of the fob value for rubber, has managed to replant 22Z of its total rubber area since 1968 and treble average smallholder yields which now average 960 kg/ha. Malaysia's annual planting of some 30,000-40,000 ha of tree crops under the FELDA and RISDA programs has been achieved with a low cess tax, and funding from budget sources, development taxes on income, land taxes, and loan cost recovery. The level of uneconomic resource allocation in Thailand may be less a function of the general export taxes and cess and more related to the sheer size of the tax imposition. In Indonesia, price distortions resulting from heavily subsidized fertilizers and interest subsidies may be far more significant than those arising from export taxes. Excluding arguments of credit schemes versus cess/grant financing, Indonesia's mininal export taxes which subvent much of the non-credit expenditures of infrastructure, roads, social services, and project management at the provincial and local level are required in any case, regardless of the focus on tree crops, the project, or smallholders. These DTE expenditures derived from export tax revenue are not specific to project .tree crop farmers, but serve regional development and infrastructure which make any project viable. 1/ Bertrand, T.: The Economics of Public Secror Support Programs for Agriculture: A Case Study of the Rubber Sector in Thailand, 1983. - 126 - 6.05 Reintroduction of a 5% export tax on rubber and a consistent minimum 5% export tax on palm oil, except in cases of severely depressed commodity prices, is recommended. This recommendation will need to be reviewed to take into account the effects of the introduction in early 1985 of a 10% valued added tax. Given the large number of marginal rubber producers, who may stop tapping if rewards are inadequate, a higher level of export tax may be unwise. Rubber export taxes have never exceeded 5% of fob values in the past. At 5%, distortionary effects and depression of incentives are minimal, as is the incentive for tax evasion. The export tax is an administratively simple means to mobilize a portion of the capital costs of the GOI's tree crop program. Since the demand for tree crops is so extensive and the requirements for employment generation and increased rural incomes so critical, arguments of price distortion and uneconomic resource allocation from minimal export taxes are more than counter-balanced by these broader sectoral objectives. 6.06 Cess Taxation. Apart from the general export taxes flowing to DTE for use in tree crop development projects, cess taxes, specific to generating reveuue for financing tree crop development, were enly briefly used in Indonesia from 1972-74. Reintroduction of a cess or higher export tax has received increasing attention as a means to finance the costs of Repelita IV. Both Thailand and Malaysia have used cess taxes and generate this revenue as part of total export taxation. Thailand's cess is calculated with a basic per kilogram charge (0.5 baht) plus a percentage (10%) of the difference of a gazetted price or 10 baht, -whichever is higher. The cess in Thailand has been as high as 15 US cents/kg and total cess and export taxes up to 37 US cents/kg. At present the cess in Thailand is about 6 US cents/kg and combined with export taxes equivalent to 12 US cents. The total tax is equivalent to 17% of the farmgate price of rubber. Malaysia has used cess taxes also calculated on check prices for rubber, but the predominant means of revenue generated for tree crop development is derived from development taxes or income taxes on farmers, presently 5% of their monthly incomes when incomes exceed US$150/month. Malaysia also uses price increase levies on specific crops, management levies, land taxes, charges and contributions to various funds and entrance fees to specific schemes and projects. The cess in Malaysia does not finance a significant portion of development costs and Malaysia has increasingly moved to credit schemes. 6.07 The cess program in Thailand has come under greater scrutiny recently. In addition to arguments of price distortion (para 6.04) there is now considerable doubt whether the cess can meet the demand for replanting grants. In the early 1960s replanting under the ORRAF program, the Government's national replanting fund, accounted for about 1 ha for every 200 ha of non-ORRAF replanting. The adequacy of the cess, even at high collection rates, is now in doubt as the ratio of ORRAF replanting to non-program replanting is now 1 to 3. With the commodity price declines between 1981-83, cess fund surpluses of some Baht 800 million ($42 million) have been almost wiped out. Expectations are - 127 - that Government grants funded outside the cess will be needed to meet about 50% of future costs if the program continues to provide grants equivalent to $1,400/ha. Considerable doubt has also recently been raised as to the real level of Government subsidy in Thailand in the replanting program and whether the cess provides for full recovery over the life of rubber plantings. 6.08 Indonesia has actually utilized a form of cess taxation since 1978 with its export tax fund, the DTE. The export tax in Indonesia has been regarded as available for tree crops although not crop specific, and for either credit or non-credit expenditures. Reintroduction of a cess in addition to the 5% export tax is not recommended for the reasons given in para 6.05. 6.09 Land Taxes. IPEDA, Indonesia's land tax, is a principal means of generating revenues for provincial government expenditures. By intent these land taxes are roughly equivalent to 4.5% of the value of gross revenue on farm holdings, but actual assessments and collections are believed to be at much lower levels of farm income. Tree crop projects, as do all other projects, benefit from provincial government expenditure from IPEDA. The tax finances roads, infrastructure and social services specific to kabupaten (regency) and kecamatan (sub-regency) programs. In lndonesia the chain of land taxes from farmers at the village level is long, and revenues are retained at the desa (village), kecamatan and kabupaten levels for budgets approved by provincial governments. A national land tax for tree crops would be administratively difficult owing to the remoteness and diversity of tree crop holdings and politically avkward since provincial government agencies do not finance or directly manage tree crop development schemes. Land taxes on mature block planted holdings in older schemes should be considered, geared to the need to cover the costs of routine maintenance of roads and infrastructure, provide group inputs, or cover costs of soil and foliar analysis by PMUs, PTPs and other project authorities. Credit Schemes 6.10 To the extent that the state or private commercial banks can be encouraged to mobilize private savings and channel these into various development programs, the burden on the GOI to provide Rp 1.46 billion for smallholder credit in Repelita IV could be reduced. While the activities of the five state banks overlap sectorally and BEII and BBD are beginning to become involved in smallholder credit, the focus of attention in this report is on BRI as the main bank, state or private, operating in the small-scale agriculture and rural sector. Much of the discussion may be relevant also to BEII and BBD activities in smallholder credit. BRI's operations, financial condition and present shortcomings are described in para 3.48. The issue in planning for Repelita IV is what level of participation BRI can be expected to undertake in the tree crops sector. - 128 - 6.11 BRI Resource Mobilization. Banking system deposits are set out in Table 6.3: Table 6.3: BANKING SYSTEM DEPOSITS AND BRI SHARE at December 31, 1983 Money Deposic BRI BRI Banks _Share Rp. Bn RLp.Bn Z Demand 4,177 761 18.2 Time 4,153 277 6.7 Savings 541 149 27.5 8,871 1187 13.4% Source: Bank Indonesia, BRI Balance Sheets. BRI demand deposits are mainly Government funds held pending disbursement of development budget moneys to provincial governments. These deposits can fluctuate widely and while there is usually a substantial amount in the accounts, BRI's share could decline to 17% during Repelita IV. Time deposits are low in relation to BRI's extensive branch network and its scale of operations. Given the projected claims on funds (Table 6.4) BRI can be expected to seek a larger share. Competition is likely to be vigorous but a modest increase in share of 0.3% per year may be attainable. In savings deposits BRI with 300 branches and 3,600 village units should be able to dominate the market. The village units especially, with only Rp 7 million of savings deposits per unit need to be promoted. A rise in BRI's share of 1.0% per year may be feasible. Ongoing financial sector work in IBRD will attempt to assess the likely growth during Repelita IV of banking system deposits and availability of BI liquidity credits. Based on preliminary indications from this work, it is expected that total deposits with the banking system are likely to continue to grow strongly in real terms. For the purposes of this report it is assumed that BRI deposits will increase by about 20% per annum in nominal terms or by Rp 2 trillion in the five years to December 1988. This compares with a growth rate of 25% p.a. over the last five years. - 129 - RRT allocates funds as the need arises to meet the proportion of priority lending to which it is committed. There Is no particular policy as to What ratio of its fuads will be allocated to priority lending but at December 31, 1983, deposits represented the following: Priority Loans 38Z BRI 100% Ioans 40% Other Assets (net) 22Z It has been assumed that a maximum ratio of 35% of BRI's deposit growth might be available to meet BRI's contributions to priority programs, that is Rp 700 billion. 6.12 Implications for Smalflholders. BRI's expected own funds set againsr Repelita IV tree crop costs is shown in Table 6.4. Possible BRI capital outlays for various components of the tree crops progran assime BI would provide 80% on liquidity credit to BRI with 20% BRI's own funds. Table 6.4: REQJIREXENTS ON BRI FOR TREE CROPS DURING REPELITA IV 'Rp. billionfUS1 million) 3RI - BRI portion as Z of Total New portion Incremental Total Credit Costs 20% Deposits Deposits during at end Repelita IV Repelita IV Rubber NES/PIR 331 66 3.3 2.1 SRDP 86 17 0.8 0.5 fRPTE 159 32 1.6 1.0 Sub-total 576 115 5.7 3.6 Oil Palm NES/PIR 473 95 4.8 3.0 Coconuts NES/PIR 61 12 0.6 0.4 SCDP 45 9 0.5 0.3 PRPTE 3_ 62 3.1 1.9 Sub-total 417 83 4.2 2.6 Total 1466 293 14.7 9.2 - 130 - 6.13 Priority Program Requirements. Table 6.5 summarizes IBRD estimates of total demand upon BRI for credit under all GOI priority program during Repelita IV. Table 6.5: PROJECTED OHITMENTS OF BRI UNDER PRIORITY CREDIr PROGRAMS (Rp billionIUSt million - current terms) B. _ BRI Liquidity Priority Program Total Funds Credit Cost of Program 20% 80% Smallholder tree crops a/ 1,466 293 1,173 K.IKJKMYP 870 174 696 Other 215 43 172 2,551 510 2,041 a/ 100l of program - ignoring possibility of BEII and BBD participation. From the above figures, it can be seen that the demand upon BRI own funds, Rp 510 billion, is within the assumed available funds, Rp 700 billion (end of para 6.1U). This factor, together with possible participation of other state banks in funding smallholder credit, would support a view that smallholder credit may possibly be funded from the banking system, even if there is some reduction in the contribution of BI liquidity credits. The ongoing financial sector work will enable the situation to be refined, but for the present, the important financial issue that arises is the cost of subsidies needed to enable the state banks to engage in smallholder credit. 6.14 BRI as Executing Bank. For some time there has been discussion as no whether BRI should act as executing bank, making loans as a bank, or as channeling bank, actirg as agent of the Government and receiving a handling fee for services rendered. GOI has recently decided that BRI, for the particular case of the Second SmalIholder Rubber Development project (SRDP II), would act as executing bank for smallholders loans, with terms and conditions as follows: - L31 - Smallholder Terms (a) 12Z interest rate, 7 years grace, 13 years schedmled to repay. Cb) Interest to be waived until loan conversion (i.e. consolidation of the transactions and formal establishment of the loan account between BRI and the smallholder) expected in year 4. (c) Compound interest to accrue after loan conversion, and be capitalized at the end of the grace period. (d) Smallholders to make monthly payments. (e) The repayment schedule to be calculated according to a model of what the farmer can afford. It is expected to correspond to 20-25% of the farmer's gross income from rubber. (f) Prccedures would be determined for the contingency that a loan is not converted. BRI's Role (a) BRI's cost of funds for the IBRD financed portion of the credit component (65%) to be the same as the IBRD interest rate when the loan is negotiated (approximately 9.9%). GOI would bear the foreign exchange risk. Cb) BI liquidity credits (28Z) to cost 3%; and BRI's own funds (7%) assumed to cost 10.5%. (c) The maturity for both the IBRD money on-lent to BRI and the 31 liquidity credits to be 20 years with seven years grace. (d) DOF to pay BRI a 14% subsidy until loan conversion (expected after year 3), and a 3.5% subsidy thereafter on principal and accumulated interest. (e) BRI to bear 25% of the risk on principal and interest for loans that are converted. The remaining 75% would be shared by WDF and BI in a proportion to be determined. Loan insurance by Askrindo would not ae involved, loss sharing would be paid directly by DOF and BI, and no premium would be charged. Detailed procedures of how DOF and BI would pay BRI for their share of the risk still need to be determined. - 132 - (f) BRI, DOF and Dit-Gen E to agree on the criteria to be used in deciding if the loan to the farmer will be converted. BRI would have the right to refuse conversion. If so, BRI would bear no risk and DOF would repay BRI for the principal disbursed so far. 6.15 Financially, the above arrangements are favorable for BRI. They allow sufficient margin (see Table 6.6) for BRI to proceed with the loans as a profitable business venture, provided BRI can achieve a reasonable level of repayments. Operationally the agreed procedures vwll require further elaboration. From a lender's viewpoint, there can be no doubt that borrowers should be screened and individual loans processed at the inception of the project, equity beirg sought from borrowers where feasible and early renTyments being arranged where the borrower has other income. It ii always7desirable for a full banker/customer relationship to be established as much of the success or failure in achieving repayments depends on the mental attitudes developed between lender and borrower. It is unrealistic to expect the technically oriented staff of the PfUs to be attuned to developing this climate. If it does prove necessary for some reason to commence with bulk lending, -the subsequent conversion should be effected as soon as practicable. To that end, as the broad principles above are defined in more detail, it would be preferable to state that the Department of Finance subsidy of 14Z p.a. during the interest free period be for a fixed term, say 3 or 4 years, rather than -until conrersion. The models used for Table 6.6 have assumed a term of four years. Procedures for handling smallholders who are rejected by BRI for conversion should also be determined now, before development cowmences. 6.16 Sub-loan conditions should have flexibility to permit increases or decreases of interest rate and repayments to meet changing circumstances over the long period of the loans. The long grace period of 7 years helps co avoid pressure on smallholders to tap their trees prematurely to meet repayments. However, many farmers will in fact tap earlier and BRI should seek to have repayments commence from the start of production. 6.17 Smallholder Repayment Ability: Repayments are understood to have commencrd in May 1984 at Aek Nabara, the PMU style North Sumatra Smallholder Development Project, and at Abai Siat, a similar project in Wert Sumatra. From observations in the field in April 1984, impressions were gained as follows: (a) Smallholders will have ample funds to meet repayments, mainly due to prices being far higher than projected following the devaluations of 1978 and 1983, in some cases due also to yields being higher than forecast, and of course for these earlier projects the capital investment was cmall measured in money terms. -133- (b) There is general understanding and acceptance of the need to make repayments. Some farmers will agree to allocate a percentage of sales to repayment, others will inTIst on fixed amounts fortnightly or monthly. (c) There is a general resistance to paying much more than mininmm repayments due to a keen appreciation of the loan interest rate being 6% while the rate earned on savings deposlts is 12-15%. This attitude is widely encouraged by Government officials and advisers, mainly because it is perceived as helping the smallholders, sometimes because of fear that farmers will sell their land as soon as their debt has been repaid. It may be possible to overcome, by directive, the propensity of Government advisers to discourage rapid repayments, but there will always be reluctance to repay while the imbalance of interest rates persists between loans and deposits. 6.18 From field observations and from the financial analysis of credit repayment models in Annex 6, it is clear that the repayment capacity of smallbolders in earlier projects was substantially underestimated, when measured in current terms. This has been recognized with the decisions to require higher interest rates in the NES/PIE projects, and now in SRDP II. It would however, be appropriate to reinforce that approach by adopting a firm policy to encourage the maxismum pace of repayments, withln the borrowers reasonable capacity to repay, in order to recover the credit funds more quickly and so recycle funds for further development. The magnitude of total demand for development credit highlights the pressing need for accelerated repayment of sub-loan R. 6.19 The salient features of the debt service analysis of several farm models in Annex 6, Tables 1 - 11, are summarized in Table 6.6. The models incorporate the loan terms and conditions determined for SRDP II (para 6.14) and comparable assumptions for oil palm and hybrid coconuts as follows: Effective Years for Rubber Oil Palm Coconut Interest free until conversion 1 - 4 1 - 4 1 - 4 Interest 12X on average loan outstanding capitalized and added 5 - 7 5 - 6 to principal Interest 12X on average loan outstanding. Interest In excess of debt service amount added to 8 onwards 5 onwards 7 onwards principal: debt service in excess of iaterest deducted from principal -134- Table 6.6: SMALLHOIDBR REPAMT Debt Service Debt Service Repayment Ainnuial Incomea/ as Z of Starts Ceases Rp million Sales Year During Year current constant 1984 Rubber EES 20 8 23 3.86 1.65 25 8 19 3.59 1.53 30 8 17 3.32 1.42 SRDP 25 8 14 2.95 1.26 PRE 25 8 23 1.95 0.83 Oil Palm -ES 25 5 19 2.33 0.99 Hybrid Coconut iES 25 7 21 2.96 1.26 SCDP 25 7 13 2.50 1.06 a! Net anLual income from 2 ha tree crops after debt service - average through credit repayment period. 6.20 Some important conclusions can be drawn from the smallholder cashflows: (a) Higher rates of repayment have a significant impact on the number of years required to repay. For example NES rubber with repayments equal to 20% of sales requires 15 years of repayments; with 30% of sales the repayment term is 9 years. NES rubber with repayments equal to 25% of sales would, according to the model, reach full repayment in 19 years which is within the specified loan term of 20 years. However, the model is only an estimate, and an estimate of conditions many years ahead. To provide for reasonable contingencies, repayments equivalent to 30X of sales for NES rubber and PRPTE rubber and 25% of sales for SRDP appear to be the appropriate goals to aim for. If performance is in line with projections, the suggested repayments would fully repay the loan before production begins to decline. This would give several years of economic life of the trees, free of debt service, in which the smallholder could build up savings to finance replanting. - 135 - (b) Net income from rubber after debt service, adding, say, Rp 300,000 for imputed food production and other income, would approach the GOI goal of Rp 1,500,000 by year 12, i.e. by the time the trees are reaching full maturity, for all projects except PRPTE. In the case of PRPTE the shortfaU in income is due to low forecast production rather than debt service. (c) The longer loan terms required for NES and PRPTE draw attention to the high labor rates disbursed in these programs which are mentioned also at para 4.09. If the lower SRDP rate could be substituted, it would reduce the rubber loan amount by Rp 780,000, sufficient for NES projects to achieve a reasonable repayment period at 25% of sales. Even further reductions should if possible be aimed at. (d) The PRPIE figures point to the need for a review. The low levels of production assumed in the model raise doubt as to the effectiveness of the program for credit. 'e) Oil palm loans period of 14 years is prolonged by the hidden subsidy in the local palm oil price in favor of consumers. 6.21 BRI Cashflow. The effect of the smallholder repayment models summarized in Table 6.6, have been applied to determine the cash flow situation for BRI (Table 6.7) using the SRDP II terms and conditions, and assumptions for oil palm and hybrid coconuts, as follows: (a) BRI's lending overhead assumed to be 5% p.a., (oil palm 4%) average cost of funds 8% p.a. and profit margin 1% p.a., all on average pure principal outstanding. (b) GOI would pay BRI each year during years 1-4 subsidy of 14% p.a. (oil palm 13%) on average balance outstanding. (c) GOI would pay BRI each year during year 5 onwards, subsidy of 3.5Z (oil palm 2.5%) p.a. on average balance of principal and interest outstanding. For ease of relating to other BRI figures, the margins incorporated to cover BRI's cost of funds, handling costs, profit, and the final margin residual in the cashflow, have been calculated and expressed as a percentage per year of average loan principal outstanding, including capitalized interest. This aspect of the BRI cashflow model in some cases when comparing the models for the different crops, or when testing for the effect of accelerated repayments, gives a misleading result. In practice faster repayments can be expected to produce a higher level of collections and lower actual costs. - 136 - Table 6.7: BRI C&SHEFLOW FREM SKAIIHOLDER CREDIT Share of Bad Debt b/ Repayments Based on BRI Residual Margins Debt Ceases Bad at 25Z Risk BRI at BRI at Implicit GOI Service during Debts a/ BRI GOI 100% Risk 25% Risk Subsidy for Z Year Z Z Z Credit Risk Rubber - NES 25 19 20 5 15 0.46 3.38 2.92 25 19 15 3.75 11.25 1.43 3.50 2.19 25 19 10 2.5 7.5 2.41 3.86 1.45 25 19 5 1.25 3.75 3.38 4.11 0.73 20 23 20 5 15 1.55 4.43 2.88 30 17 20 5 15 (0.19) 2.77 2.96 Rubber - SRDP 25 14 20 5 15 (1.23) 1.93 3.16 Rubber - PRPTE 25 23 20 5 15 1.15 4.04 2.89 Oil Palm - NES 25 19 10 2.5 7.5 (0.21) 1.07 1.28 Coconut Hybrids - NES 25 21 20 5 15 0.38 3.15 2.77 Coconut Hybrids - SCDP 25 13 20 5 15 (1.83) 1.30 3.13 a/ Of both principal and interest. b/ i.e. Profit in excess of 1%, after allowing for lending overhead, and bad debts. Calculated on total net cash flow over period of loan, as percentage p.a. of average balance of "pure" principal - i.e. principal excluding capitalized interest. - 137 - 6.22 The BRI cashflow figures for NES rubber illustrate the sensitivity of the level of collections achieved. If collections reach only 80%, the cost to GOI of carrying 75% of the bad debt risk would be of the order of 2.9% p.a. of the average 'pure' principal outstanding. At a level of collections of 95%, this implicit subsidy reduces to 0.73x. It is worth noting that while an assumption of 80% collections serves the purpose for planning, in practice the goal should be to achieve collections of something like 90 to 95%. In the case of Bimas, collections for the seasons 1975/81 reached 83%. This was the result of a concerted and sustained campaign by Government and ERI to collect arrears. The above analysis indicates a good incentive for BRI to increase its margin, and for GOI to reduce its subsidy, by improving collections. Their combined efforts would have a good chance of achieving the goal. 6.23 Issues for Credit Recovery. A draft consultant report "Pricing of Smallholder-Produced Raw Materials from Tree Crops", being prepared for Dit-Gen E, highlights the fact that the foundations for credit recovery are laid long before the first repayment falls due, and it provides the following observations: (a) 8RI should be funded as a bank with an adequate base, not scheme by scheme, in order to provide better opportunity for BRI to develop its policies for lending and funds management and so remove the heavy administrative burden of program funding, with redeployment of personnel to more productive work. (b) BRI should act as executing bank, applying banking principles, and accepting responsibilLty for credit recovery. Its net cost of funds would need to provide a margin to cover lending overhead, risk and profit. It would approve selection of borrowers, and process individual loans as early as practicable. It should seek to minimize disbursement of loan funds for labor in order to reduce size of loans. Credit recovery systems should be designed in cooperation with extension, processors, and others to suit local conditions. (c) initial project planning and execution should involve SRI in the analysis, in the assessment of borrowers repayment capacity; and in setting loan conditions. (d) interest rate policy should.be capable of being varied from time to time to meet changed circumstances or changes in Government's geAeral interest rate policies. (e) credit recovery policy should seek to (i) maximize credit recovery in order to achieve the benefits of accelerated repayments within the limits of attainable social acceptance; (ii) match repayments to repayment capacity, taking into account - 138 - the need for smallholders to retain sufficient income to pay for fertilizer and reasonable cash requirements for living expenses over and above their own food; and (iii) accept repayments from any source at any time. (f) social incentives and social sanctions should be used to promote pride in the standard of development of smallholdings (and thus capacity to repay); to develop a strong desire to make rapid repayments; and to bring social pressure on delinquent borrowers to meet repayments and arrears; and on sub-standard farmers to improve their husbandry. 6.24 Cost of Credit Schemes to GOI. The arrangements for GOI funding and subsidies for smallholder credit under SRDP II have been analyzed, in order to present the overall costs to GOI of the credit scheme. Costs to the GOI budget are: (i) 65% of the credit costs deriving from the on-lent IBRD funds; (ii) the subsidy payments to BRI; and (iii) 75% of the assumed 20% bad debt experience on loans. Receipts are the principal and interest payments received from BRI. Costs to BI are the 28% of credit costs made available as liquidity credits. Receipts are the related repayments by BRI to BI of principal and interest on these credits. The analysis, detailed at Annex 6, Table 12, indicates that the net cost in 1984 constant rupiah, of GOI support for the credit operation for 2 ha of rubber under the proposed SRDP II scheme, is Rp 3.21 million. This compares with Rp 4.85 million credit for each smallholder and thus indicates that the credit recovery system saves GOI Rp 1.64 million compared to a pure grant system. This saving would be overstated to the extent that at project level considerable costs are incurred in initial establishment of credit accounts. The calculation will also change if the proportion of BI funding is larger, as is the case in non-externally funded schemes. The difference would reflect a change from direct budget subsidies to indirect subsidies via cheap BI liquidity credits. The figure indicates the recycling- benefit of credi. schemes (their ability to allow fresh loans to be made) is rather limited, since 75% of credit recoveries are required to cover administrative costs and bad debts, leaving only 25% for fresh loans. The analysis also indicates that an indirect credit scheme whereby the participant merely paid a development levy at 3.65Z on his output over 30 years, would produce the same net result for GOI, and at higher levy rates 'ould, even after allowing for incremental administrative costs and t.x e..sion, possibly give a better result than credit arrangements. The advantages for credit schemes - instituting a sense of social responsibility, of pride and hence good maintenance of purchased property, of fairness against others not receiving, and generating a revolving fund for further schemes, and introducing the rural community to the monetary economy - are powerful arguments, but the figures from the analysis show the cost of these advantages is high per rupiah lent. - 139 - 6.25 The challenge is to substantially improve the efficiency of the credit system by reducing credit amounts and increasing the rates of repayment, thereby reducing risks, administrative costs and subsidy requirements. This is the first priority, but consideration should nevertheless be given to potentially less costly systems which retain the objective of having the participant contribute to, and feel responsible for, his investment. The notion of a development levy, possibly with clear land title being returned to the participant after say 15 years of levy payments may effectively meet the broad objectives of credit schemes, but at lower overall cost if higher collection rates could be achieved without heavy administrative expenditure. Summary of Possible Funding Sources 6.26 Estimates of demand for funds and sources of funds are set out in Table 6.8 below: Table 6.8: REQUIRMETS AND SOURCES OF FUNDS FOR SMALLHLDER TREE CROP DEVELOTPENT (Rp billion/US$ million - Current Terms) Requirements Sources KES/PIR 1,223.4 IBRD Commitments NES 190.8 SRDP 148.7 SRDP I 22.5 SCDP 30.3 SCDP 111.7 SRDP II (anticipated) 138.3 Sub-total 381.9 PRPTE 578.1 GOI Budget Funds 352.5 a/ Other Borrowing 1,327.5 b/ 2,061.9 2,061.9 a/ Excludes the subsidy cost of credit programs and some credit costs of ongoing smallholder projects. A 5Z export tax could cover some Rp 335.9 billion of this amount. b/ State bank loans supported by BI liquidity credits, or further external loans. 6.27 Because Table 6.8 excludes direct subsidies, it understates the potential demAnds on the GOI budget. Direct subsidy requirements are likely to be highest for projects assisted by external loans at market iuterest rates, but from an overall policy viewpoint the subsidy requirement, whether direct or indirect (i.e. via cheap BI liquidity credits), for a $2.1 billion program is extremely large. There will also be continuing demands upon GOI budgetary funds arising from ongoing NES and possibly other projects. Alternatives open to the GOI in the event the level of demand on BI, BRI, or budget funds is excessive - 140 - include the options of selectively reducing the program size and/or reducing costs. Program costs would reduce as follows if the labour rates in NES/PIR and PRPTE were reduced to the levels paid in SRDP and SCDP. Rp. billions Rubber - NES/PIR 45.24 - PRPTE 30.75 Oil Palm - NES/PIR 55.42 Hybrid Coconuts - NES 8.16 - PRPTE 9.92 149.49 The reduced payments in SRDP are known not to have discouraged the more enthusiastic and determined farmers, and of course the "wages' have to be repaid with interest. Indeed, in SRDP the more enthusiastic farmers have participated without labor payments. Total savings in wages/COLA could reduce the demand-on BI/BRI/budget funds from Rp 1,680 billion to Rp 1,531 billion. Given the many uncertainties surrounding the assumptions underlying the Table 6.8 figures, it would be worthwhile to explore all possibilities for assisting the program's funding. - 141 - CHAPTER VII: LAND AVAILABILITY FOR THE REPELITA IV TREE CROPS PROGRAM Index Page Land Area Required for Tree Crops in Repelita IV .............. .... 141 Site Identification and Alienation ................................ 142 Land Area Required for Tree Crops in Repelita IV 7.01 The analyzed tree crops planting program for Repelita IV involves the establishment of 378,000 ha of rubber, 313,000 ha of oil palm, and 320,000 ha of coconuts. Most of the rubber and coconuts will be developed in existing NES, PIR and transmigration projects and in PMU-operated units. About two-thirds of the land needed has already been acquired or belongs to farmers and local communities and requires no alienation. That this land may already be planted to rubber or coconuts is not always a guarantee that replanting the same crop is the best viable option. RMU staff will need to survey and design each of the areas to be replanted. Currently they are not adequately staffed to undertake this work with the quality required. 7.02 Some 540,000 ha (200,000 ha rubber; 310,000 ha oil palm and 30,000 ha coconuts) of new land will need to be developed under the analyzed plantint program. If house and garden lots and food crops areas are added for the smallholders component, an additional 150,000 ha is needed. Assuming a 15% increase for infrastructure -nd a discard rate of 301 to exclude unsuitable land, a total of about 1,100,000 ha of land will need to be allocated, surveyed and physically planned in the next two to three years. A discard rate of 30% is used in Team Khusus planning but with the present methods of site selection the actual discard rate may be considerably higher - up to 70%. 7.03 The possibility exists for some of the required land to be assigned from the transmigration program or from the fire destroyed areas controlled by the Department of Forestry. In recent years large areas of land which have been surveyed for suitability in the transmigration program have been rejected because they are judged not able to sustain food crop production. It is believed that about 1.3 million ha of this land are suitable for tree crop production. Since Repelita IV recognizes the possibility of block planting of tree crops in transmigration schemes, the NES/PIR schemes could be extended directly into these areas. To economize the use of land resources, closer coordination between the Dit-Gen E and the Department of Transmigration is recommended. Substantial savings in the time, manpower and the cost of survey work would also be realized by the Dit-Gen E. - 142 - Site Identification and Alienation 7.04 About 3 million hectares have been allocated for new Dit-Gen E projects by the governors in 21 provinces. How much of this land is suitable for tree crops production is not known. The procedure being followed to determine land suitability is for a committee with membership from the Department of Forestry, Dit-Gen Agraria and Bappeda to review existing resource data at the regional and provincial level, and to assign potential areas to the Dit-Gen E for further examination. In view of the lack of suitable manpower in the Dit-Gen E, specifically Team Xhusus, the Dit-Gen E usually engages consultants to prepare feasibility studies. This work involves photo-interpretation and evaluation of the existing resource data, reconnaissance surveys at 1:50,000 scale and finally semi-detailed surveys at 1:25,000 scale. The problem arises, however, that the Dit-Gen Agraria frequently overlaps or duplicates this work in the course of its own land surveying, often with the objective of determining the suitability of the area for use in other Government sponsored programs. To avoid this wasted effort, more clearly defined working level arrangements will need to be drawn between the Dit-Gen E and Dit-Gen Agraria. It would perhaps be better for Dit-Gen Agraria to fix and plot the project boundaries and show the legal status of land on maps of 1:50,000 or 1:25,000 scale, and then for Dit-Gen E to verify with. the Dit-Gen Agraria that the proposed land is available for further surveying and development work by them. 7.05 For project implementation to proceed smoothly it is important that the land be as free as possible from title or compensation disputes. To avoid land speculation or squatting it is important that the governors issue Decree Letters of Security and Supervision for the prospective project sites as soon as possible after the decision is taken to assign land to a project. Once the land surveys verify that the land is suited to tree crop development, this should be followed up with a Governor's decree indicating formal alienation of the land. Fixing the amount of compensation through consultation with the owners can take a long time since, in reality, there are no guidelines or standard land prices on which to base settlement of claims. The Department of Home Affairs has the responsibility for fixing local standard land prices, updating them regularly, and circulating this information to agencies. Should land owners not accept the compensation price fixed by the Government, consideration should then be given to applying the remedies under Law No. 20 of 1961 and Presidential Instruction No. 9 of 1973 to cancel land ownership rights, and the rights to fixed assets on the land. - 143 - 7.06 After formal alienation of the land and allocation of budget funds to the project, additional surveying is required which could be done by the Dit-Gen Agraria, or more preferably by consulrtants. This involves detailed surveys and designs for house and garden lots and for infrastructure. Topographic maps of 1:5,000 scale with 2.5 m conrours are required for planning house and garden lots, and for infrastructure, maps varying from 1:1,000 (for roads) to 1:200 for bridge and culvert work. No additional detailed surveying is required for the tree crop and food crop areas. Concurrently, or at the conclusion of this work, cada7stral surveys for the issuance of land certificates must be made by the Dit-Gen Agraria. In the case of the NES/PIR schemes, such work is required to be completed before the end of the third year from block planting of the tree crop area. In practice it is many years later. 7.07 The major constraint to doing this surveying is the weakness of the local consultant industry in high quality land surveys. Most local consultants are unfamiliar with the techniques of remote sensing such as aerial photo-interpretation; their topographic bases tend to be inaccurate, and the amount of corroborative field work is usually inadequate. Consequently, the data presented to the Dit-Gen E generally does not meet the minimum standards for proper planning of new settlement and tree crop areas. The Dit-Cen E will need to employ a consortium of local. consultants and competent foreign consultants to strengthen present weaknesses in the same way that the Department of Transmigration has done to Implement its ambitious program. For the Team Khusus to oversee this work, at least one additional consultant land classifier will need to be recruited. Training of local staff must also be accelerated so that the Dit-Gen E can conduct its own surveys in the longer term. For short-term assistance the services of a competent topographer, remote sensing specialist, and a soil fertility experr are necessary. Without such assistance many of the costly errors of the past, planting crops in unsuitable areas and planning settlement in areas later found to have insufficient land to support the planned number of settlers, are likely to be repeated in Repelita IV. - 144 - ''--s- : e- --A4g/A - 145 - CHAPTER VIII: MANPORE REQUIREMENTS AND TRAINING Index Page Introduction_ ..................................................... 147 Repelita III Training Reviewed .. .................................... 148 Repelita IV Training Requfremenn Training Needs and Costs .................................. ....... 149 Implement-ing Knpower Training in Repelita IV Training Facilities ............................................ 150 Training Priorities ....................... ................. 1l51 Training Programs ................................................. 152 Sectoral Training Needs ......................... 152 Recommendations ..... ............................ ............... 153 Table in Text 8.1 Incremental Staff Numbers and Training Cost,.................... 149 - 146 - Y 9O bj,/ - 147 - CRAPTER VIII: NANP(MER REQUIREKENTS AND TRAIINIG Introduction 8.01 A principal objective of Repelita IV is to create employment; the tree crop planting program will contribute significantly to this objective. To serve the Repelita III tree crop areas coming into production and the new development planned in Repelita IV, incremental staff required for the PTPs and PKUs are estimated to be 23,000 in the management and supervisory grades, 1/ and 162,000 field and factory workers on the PTPs' nucleus estates. Details by program are in Annex 8, Attachment 1. In addition, Repelita IV will directly create employment for about 390,000 farmers participating in the rubber, oil palm and coconut projects, and the continuation of employment for a further 200,000 farmers operating Repelita III project plantings. 8.02 The achievement of planting, rehabilitation and production targets in the tree crop sector will depend on the availability of well trained staff to work closely with smallholders and estate workers during all phases of development. In the short term of Repelita IV it may be possible to achieve large planting and rehabilitation targets expressed in numbers of hectares but if the plantings are not of high quality, reflecting a high level of skill input, the achievement of area targets will be of doubtful value. The provision of skills, through training, is as critical a contribution to the achievement of project objectives as any other input. The Repelita IV program for rehabilitation and planting of rubber, oil palm and coconut will require a substantial investment in training. Ensuring that staff and smallholders involved in meeting Repelita IV targets have a minimum acceptable level of skills is in Itself a formidable challenge but, In addition, there are training needs arising from Repelita III which require immediate attention. 8.03 The sector's involvement in hutman resource development over the next five years will be determined by: (a). the backlog of essential training for staff employed during Repelita III; (b) new training needs of staff and smallholders related to Repelita III crops coming into production; (c) training needs of the additional staff and smallholders involved with the Repelita IV development program; 1/ The staff being added to PMUs are paid out of DIP funds and are not entitled to the full benefits of staff taken into the regular civil service. It would help morale if rules could be worked out entitling DIP staff to be given first consideration for transfer to regular employee status when vacancies occur in posts for which they would be qualified. - 148 - (d) the ability of the existing training delivery system to meet the forecast training requirements; and (e) the willingness of the QOI to provide the substantial funding required. Repelita III Training Reviewed 8.04 Before describing the potential training program for Repelita IV it is helpful to review the tree crop training activities associated with Repelita III and to assess the performance of resource institutions. It should be noted, however, that apart from the Estates Training Institute (LPP) all resource institutions serve the Department of Agriculture as a whole and not the estate crop sector alone. 8.05 In summary, training achievements through Repelita III were not satisfactory. The reasons for this include: (a) the sector's over-reliance on non-tree crops institutions to supply training; (b) lack of control over course content and quality of delivery in outside agencies; (c) over-long courses based on predetermined syllabi rather than actual skill needs; (d) inability of resource institutions to supply sufficient trainee places due to physical and staff limitations; (e) lack of training organization in the various projects and schemes; (f) inadequate funding for training; and (g) absence of overall manpower and human resource development direction from the Dit-Gen E. 8.06 During Repelita III LPP expanded its teaching staff and broadened its course offerings, and the SCDPU and SRDPU began to build a training capability within their organizations and undertake as much in service training as possible. Negotiations were initiated by various projects with LPP, AAETE and the agricultural universities to produce tailor-made courses for tree crop personnel. Despite these efforts in the externally financed projects only 30 to 50% of the required training was completed, and in the PRPTE program where the emphasis was on formal longer term courses only 50% of the places requested were available. As the PTPs did not have a well developed training needs assessment system in place, it is difficult to estimate exactly what proportion of needed training was - 149 - completed for these estates during Repelita III; some backlog is, however, known to exist. Supervision of projects during Repelita III reveals a number of skill related problems: (a) management; (b) planting quality; (c) field supervision; and (d) poor tapping of rubber coming into production. Repel ita IV Training Requirement 8.07 Training Needs and Costs. The experience of Repelita III indicates tCat a number of skill areas are common to the tree crop sector regardless of the development strategy. Virtually all categories of skills training are required for every type of development; with each staff member receiving training in the appropriate category, followed by in-service refresher training throughout the project period. Farmer leaders, participating in the training and visit extension system used in all projects, also require training. The training requirements and estimated costs through Repelita IV are summarized in Table 8.1. Table 8.1 IKCREHENTAL STAFF NUMBERS AND ESTIMATED TRAINING COSTS Estate Development Smaliholder Development Training Incremental Training Incremental Training Category Staff Cost Staff Cost (Rp million) (Rp million) (1984 constant) (1984 constant) Management 845 1,692 993 3,976 Administration 3,234 1,675 4,445 2,509 Supervision 5,527 4,146 4,492 1,498 Factory/Workshop 562. 679 124 124 Extension - - 2,602 976 Sub-Total: Staff 10,168 8,192 12,656 9,083 Farmer Leader - 23,192 1,353 Total 10,168 8,192 35,848 10,436 Considering both the analyzed program the Repelita IV and the requirements of Repelita III areas coming into production during the 1984-88 period, a total of 23,000 incremental PTP and PMU staff will be needed and will require training, together with about 23,000 farmer leaders, at a total cost of Rp 18.6 billion, or about $18 million. Details are in Annex 8, Attachment 2. - 150 - ]mplementing Manpower Training in Repelita IV 8.08 Training Facilities. The DOA estimates an annual growth rate of 10.3% in the demand for agricultural technicians in the estate crops sector, the number growing from the present 24,000 to 40,000 by 1988/89 vhen the overall supply of trained agricultural personnel is expected to be 123,000 against a demand for 146,000. The GOI planning in this respect for an apparent shortfall in supply is considered realistic and takes account of budgetary constraints and the probable absorptive capacity of the various agricultural services. The principal strategies are to strengthen the agricultural secondary schools and to increase in-service training, although leaving a gap between the estimated demand for 53,000 man-months of in-service training and a DOA capacity to supply 43,000 man-months by the end of Repelita IV. 8.09 The AAETE has 21 in-service training centers (BLPP) and one National Agricultural Training Institute (IPLPP) serving agriculture. Separate BLPPs serve forestry and fisheries. The tree crop sector uses the BLPP network to provide courses but, during Repelita III, the externally funded projects SRDP and SCDP found it difficult to secure places since the courses were already at capacity. The number of training places in the 21 BLPPs is approximately 1,500 and while the total number of courses offered annually at each BLPP varies, 30 to 35 seems to be average. About 50% of the courses offered deal with skills training or up-grading while the rest are devoted to promotional, remedial and orientation training. Assuming that the BLPPs each may be able to offer an average of 40 courses per year, the national course total would be 840 plus, say, 10 at the National Institute, for a grand total of 850. Based on past experience about half or 425 courses would concentrate on skills training. At best, 40% of the courses could be tailored to meet specific tree crops sector needs. This means that about 170 courses for about 4,000 staff and farmer leaders would be available nnually. AAETE facilities are being increased under the Third Agricultural Training Project, but not to the extent that tree crop sector training needs can be fully accommodated. 8.10 Within the estates crop sector, LPP is expanding its facilities and, when the second campus at Medan is fully operational, will be able to accomodate some 500 students at any one time. LPP, however, has major commitments for training in the sugar industry, and it also provides three-month career development courses (KST/KMP) which all PTP staff must attend at three levels to qualify for promotions. These commitments take priority with the result that only 700 places are likely to be available for tree crops related skills training in 1984/85r LPP has two Regional Training Centers (RTC) under construction, and two more planned. Of these, one will deal primarily with sugar training but the others will be focussed on tree crop skills training, specifically for junior supervisory staff of the PTPs but also for extension staff. The three - 151 - tree crop RTCs will eventually accomodate a total of about 1,000 trainees each year, but they are unlikely to achieve this level before 1987, due to construction delays, but more particularly because of the acute shortage of teaching staff. This constraint is being addressed, and assignments of experienced staff from selected PTPs to LPP is expected, but the program for training of trainers which is in hand requires urgently expansion. 8.11 It would appear therefore that, in terms of existing and planned institutional capacity some 5,500 or 12% of the total staff and farmer leaders could attend one course each year. Using a midpoint figure of 23,000 as the total to be trained, only 24% could therefore be accommodated. It is evident then, that considerable emphasis -IlI have to be placed on building in-house training capability in all schemes to supplement the existing institutions and to ensure that a minimum of acceptable skills is provided. Such an aproach will require organizational commitment to training, adequate staffing of the training units, and sufficient budgetary resources to support the programs. 8.12 Training Priorities. Given the physical and staff limitations of institutions which provide training for the tree crops sector and the very large number of people to be trained, priorities must be set to ensure that certain operations are satisfactorily completed. For the development phase, farmer leader and field extension worker training should take first priority. For example, for rubber, oil palm and coconut in the NES/PIR schemes and rubber and coconut in the SRDP/SCDP/PRPTE PHU programs, some 15,400 farmer leaders will need to be trained in technical and motivational techniques. If the production phases are added, an additional 7,800 farmer leaders are required on the basis of recruiting one farmer leader for each 25 project participants. 8.13 Junior supervisory staff and extension staff form the largest group to be recruited and trained. Ideally such staff should be recruited from the agricultural secondary schools but it is clear that the output of such schools will not meet the demand by 1988, and that recruitment for PTPs and P[Us is immediately necessary. It is expected, therefore, that many recruits will come from the general secondary schools and will receive in-house training. In view of time constraints, the courses should not attempt to provide general training in basic agriculture but should cover only selected principles at the outline level necessary to explain the procedures and techniques used in the PTP or project concerned. This will require further development of the training programs already operating in SRDP, SCDP and the PTPs. Training for the target group of 12,500 staff, for the development and production phases of estate and smallholder programs, rates high on the training priority list. - 152 - 8.14 Another priority area is training in administrative and financial skills. Without the smooth operation of the supporting organization even the best-trained staff will fail to perform well. The numbers of personnel in these areas are estimated to be 4,500 in the smallholder program and about 5,500 for the project PTPs. 8.15 Management of the smallholder program presents another high priority. There is a target group of 763 in the development phase of Repelita IV and 230 to meet the needs of the maturing crops. On the PTPs program the development target group is about 400 and the mature phase about 450. The total trainee group is therefore about 1,850 divided between senior, middle and junior levels of management. 8.16 In this attempt to set priorities for training it is important to emphasize that all categories of staff training are critical to the successful implementation of the tree crops program. 8.17 Training Programs. No attempt is made to determine the training programs for each group of staff and each project. The skills required are common to most, project staff requiring training in management, administration, field supervision or extension and basic technical matters, at levels appropriate to their staff grade. An outline of the initial and follow-up training needed, by group, is provided in Annex 8, Attachment 2, Table 1 for estate development and in Table 2 for smallholder development. 8.18 Sectoral Training Needs. The discussion above has concentrated on training requirements directly pertinent to implementation of the Repelita IV program. There are, in ado.iztion, very substantial training needs for development of the tree crop sector as a whole. This review includes several recommendations that agencies and units in the government organization require strengthening. An essential component of such strengthening is the training of officials at all levels: variously in policy analysis and planning, in all aspects of management, and in operational techniques for a multitude of disciplines, as well as specific skills training for career development. Private sector estates are expected to play a significant role in tree crop projects through Repelita IV. The larger companies will probably be able to employ trained staff and will also have access to training facilities, but for the staff of smaller companies training needs to be provided in plantation and financial management and in modern agricultural techniques. The PTPs have trained staff, but not in the numbers necessary to undertake the ambitious smallholder planting targets and to fulfill their own development program. In addition to project skills training, PTP staff need tC develop expertise in financial policy and planning matters, and management and personnel development. In support of the sector, intensified training for research workers is also necessary. -153- 8.19 For many of the more sophisticated training needs, overseas courses and assignments should be considered. Formal courses will have a place, but overseas assignments for potential managers to work with established plantation groups or with development organizations, over a period of months, could have significant impact. Similarly research workers might undertake assignments at overseas institutions to work on specific problems of interest to Indonesia, and possibly under the supervision of a university able to award a higher degree on the basis of the research completed. There is need also for more extensive and better use to be made of the training which can be provided in the form of resident consultants, not necessarily restricted to the most senior levels, working alongside permanent staff, and through consultants visiting at intervals over a period of a year or more. Training by these means requires no additional facilities and may utilise either foreign or Indonesian personnel, particularly Indonesian managers or specialists recently retired from public service appointments. 8.20 It is clear that the existing training delivery system does not have the capacity to provide the considerable volume of training support required by the sector during Repelita IV. What can be done therefore, short of trimming the development program objectives to match human resources, to supplement the training institutions and to lay a solid foundation for the future? Recommendations 8.21 The Dit-Gen E must continue to address the need for more and better trained staff and farmer leaders in the sector and, as a matter of urgency, formulate policy which will create the institutional mechanism necessary to assess training needs on a continuing basis and which will provide for the planning and executie-a of programs to satisfy these needs. This will require a sector-wide approach to manpower planning and careful coordination with competing demands from other areas of the e.griculture sector. To achieve this a small and dynamic unit within the framework of the Dit-Gen E will need to be established. The unit would not attempt to centralize training but provide the encouragement and the means by which the various sector projects and schemes could develop in-house capability to conduct on-the-job and other training. 8.22 The existing training institutions such as AAETE and LPP should be supplemented by the creation of simple but effective training units in the PKUs and PTPs. These units, by supplying basic induction training, routine skills training and conducting accurate skills needs analysis, would be in a position to take some of the demand pressure off the training institutions, and provide these institutions with a clear description of their staff and farmer leader training needs. The training units operating in SRDPU and SCDPU are good examples of what is needed elsewhere. - 154 - 8.23 The Dit-Gen E will need to set training priorities and make whatever interim arrangements that can be made to address them. A number of steps can be taken to address the short and long term goals: (a) a senior and experienced manpower and training specialist should be recruited in the Dit-Gen E to provide guidance, backup and direction to training-related activities; (b) the Dit-Gen E should move away from training programs based on longer term formal courses which limit throughput; (c) long-term courses with skill building should be replaced with short training activities conducted close to the working place; (d) future longer-term courses should be designed to meet accurately assessed skill (training) needs; (e) staff with training ability should be encouraged to specialize as trainers by offering them training, status and career prospects; (f) encourage LPP to become a wholesaler rather than a retailer of training programs. The institution should train trainers to take over and run basic technical supervisory and other skills courses in the PTPs and PMUs. LPP is well placed to concentrate on course design, field testing and then decentralizing (wholesaling) training to its clients. An exception would be the career development courses (iST, KMP) which need to be carefully standardized; (g) AAETE, concentrating on in-service training and training of trainers techniques, should also participate in the training of key individuals at provincial, district and farmer leader levels. AAETE should also expand its assistance to field trainers with training needs assessment techniques and use of teaching and instruction aids; (h) the PTPs should strengthen their ability to assess training needs and conduct an increasing volume of orientation, in-service and supervisory courses. This would entail training and appointing a trainer who would assess real needs and plan suitable courses to meet those needs. The trainer would also approach LPP and other insitutions with clear proposals for tailor-made assistance; (i) support the creation or strengthening of training units in all PMU and PTP schemes to address induction and on-the-job training; (j) designate priority training areas for tree crops for the Repelita IV development program; -155- (k) ensure close coordination in the objectives for technical assistance and training under the Agriculture Extension Project, LPP and in the Dit-Gen E; and (1) provide adequate funding to cover training costs which, because of the large numbers involved, will be substantial. 8.24 Bringing about significant change in the way training is organized and funded is universally slow in public sector institutions and cannot be forced. Patience and persistence in raising training issues in the subsectors and showing how they relate to the sector as a whole will eventually pay dividends. This approach requires continuity of contacts, agreement on the need for improvement, and arrangements by which such improvements can be designed and funded. - 156 - <'3~0~7~Lo -4O S/,&w A -157- CHAPTER IX: ORGANT7 ION AND !W(AGoIET-OF --THE SECtOR IN REPELITA IV IndexP A. Options for Improvement of the Organization and Management of Smallholder Development The 12ture Role of Team Rusus ...... ........ ............... 159 Manpower and Trainiug ...................................... 160 Salary Levels .................................. .......... 161 Smallholder Marketing and Processing ........ .0.......... 161 Data YAazaement .... . ... .*...... 161 StrengtheniLng of the National Tree Crops Extemsion service (Disb,m) . 162 B. Options for Improve et of the Organization and Management of the PTPs and Private Estates Creation of a Support Planning Unit for the PTPs1. 162 Rationalizing PTP Estate Holdings ...... 164 Private Estate Development....... .. . 164 C. Sectort-ide Options for Improvement of Tree Crops Operations, Processing, and Marketing of Smallholder and Estate Produce ............ 165 Strengthening the Local Contractor Industry.. ....... ..... 166 Strengthening of Sector-Wide Institutions: The Role of the Office of the Junior Minister for Tree Crop Production................. .......... 166 Administration of the free Crops Sector .... 166 I I~~~~~~~~~~~~~~~~~~~~\ O (I, k - 159 - CHAPTER IX: ORGANIZATION AND MANAGEXENT OF THE SECTOR IN EEPELIT& IV 9.01 To achieve the ambitious planting targets for the major tree crops during Repelica IV will necessitate considerable strengthening and streamlining of the organization and management of the sector. The requirements are different for effective planning, support and control of the smallholder and estate sectors Both require strengthening in their coordination, planning and management A. Options for Improvement of the Organization and Management of Smallholder Development 9.02 The Future Role of Team Ihusus. When Bank assistance for the NES projects commenced in 1977 with NES I, one of the major objectives of the project was the strengthening of the Dit-GEn E so that it could implement Government plans for a rapid increase in the tree crops planting program. Although some progress was made in institution building over the following few years, the ever increasing demands being made of the Dit-Gen E meant that it was never able to fully strengthen its operations to effectively nanage projects, smallholder marketing, extension, and planning for the sector. At the time NES III was being formulated, the weaknesses within Dlit-Gen E were of such concern that it was agreed to establish a special unit, the Team Ehusus, to oversee Implementation of the NES program. High caliber staff in the directorates of the Dit-Gen E, and from the PTPs, were transferred to the Team Xhusus. Strengthening the main directorates of the Dit-Gen E, particularly for project implementatiou, was not then viewed as being quite so urgent. 9.03 As Team Khusus grew with the rapid build up in Bank and other foreign assisted tree crops projects and it demonstrated its competence in implementing these programs, it was assigned increasing responsibilities for project implementation, monitoring; and later, procurement, project appraisal, planning, and data management. More recently Team Thusus inherited responsibility for the large Goverment-funded PIR programs. The effect has been that it increasingly has begun to duplicate responsibilities which would normally be undertaken by the directorates in Dit-Gen E. With the increase in planting targets, the acceptance ever broadening institutional responsibilities and a slow build up in staffing, the capacity of Team Khusus has been severely stretched at the same time that the main directorates in Dit-Gen E have become less fully utilized. For the efficient implementation and realization of the Repelita IV targets this imbalance will need to be corrected. The organizational structure for - 160 - handling smalIholder development is well formulated, but the need now is to balance responsibilities with clearer separation of authority and to strengthen the Dit-Gem E structure at all levels. 9.04 One option is to return the Team Khusus to its original function: supervision of the implementation of nucleus estates based projects (NES and PIR), and have its other responsibilities returned to the directorates in the Dit-Gen E. Team Khusus would then be free to concentrate on effective project implementation. While this option may not be immediately practical because of trained manpower constraints, the Dit-Gen E must seek ways to centralize planning and follow an integrated sectoral approach for the use of manpower and capital resources by the PTPs and PMUs. The Bank is continuing its assistance to strengthening the Dit-Gen E in the NES VII project with technical assistance for planning, and implementation monitoring. This assistance is, however, not yet in place although there woild seem to be no constraint to determining the exact needs and recruiting appropriate personnel. Strong functioning of the Directorates of Program Development and Extension, in particular, is vital to successful implementation of the Repelita IV plan. The NES VII project provides also for substantial strengthening in the functions previously executed by SBPN. Insofar as these functions are compatible with existing responsibilities of Dit-Gen E, there would seem to be no reason to delay the strengthening of the appropriate units. 9.05 Manpower and Training. In view of the importance of manpower development and training in the Dit-Gen E, consideration needs to be given to the establishment of a specialized unit with sole responsibility for fostering training programs and coordinating manpower development. Such a unit could perhaps be effectively absorbed in the Directorate for Program Development, or if sufficient importance is attached, a separate directorate within the Dit-Gen E could be created. Each year, the directorates and non-structural units in the Dit-Gen E would be required to submit their manpower development and training requirements to the training unit, which in turn would coordinate the arrangements for delivery of the training programs. The Unit would also monitor the effectiveness of each of the training courses and make whatever modifications were necessary to ensure that training available to staff is as effective as it could be. In this regard the unit would need to work closely with LPP, AAETE and others to restructure the courses currently being offered and to design new courses to meet existing, but unfulfilled, needs. It would also be useful if the training unit could assist the PTPs upon their request to recommend training programs for specialized fields such as public administration, finance, engineering and agronomy. - 161 - 9.06 Salary levels. A major manpower constraint common to the public sector in many countries, including Indonesia, is the low level of civil service salaries. Within Dit-C4en E, the more senior officers need to rank in competence vith the iore senior PTP officials, and senior financial staff in both Dit-Gen E and the PTPs need to be of a calibre in line with the multi-billion dollar development program underway. It is unlikely that a fully satisfactory solution to the salary levels problem can be found whilst skills are in short supply, although use of modest preinum payments to attract and retain high caliber staff to designated key positions may alleviate the problem. Certainly no discussion of anpower needs can disregard the salary factor. 9,07 Smallholder Marketing and Processing. The Directorate of Agribusiness and Processing requires strengthening to further benefit smallholder development and marketing interests. There seems to be general agreemnnt that the Directorate, properly strengthened, could take the lead role for pricing, marketing and processing of smallholder production. Activities of special units such as the proposed Snallholder Rubber Marketing and Processing Unit tSRMPU) would not then be as critical and Team Khusus would be relieved of planning involvement in PTP product pricing for smallholders. One of the main concerns is to ensure that there is an adequate system of premiums and financial incentives for smallholders to encourage marketing of high quality produce. Various strategies have been proposed to achieve this objective including the creation of farmers associations, revival of the GCCs, establishing drc testing centers, the provision of specific processing extension information for smallholders and greater participation of the Department of Trade and Cooperatives. Whichever choices are made, it is clear that an effective coordinating unit in the Dit-Gen E is necessary. Another most important need is to routinely assess smallholder cost recovery and monitor the arrears on all smallholder projects, and to coordinate these activities with the PTP& and BRI. 9.08 Data Management. Institutional improvements vithin the Dit-Gen E are required to improve the quality and completeness of the data base on tree crops production and smallholder and estate development. In the course of the present review it was never possible to obtain a single set of internally consistent data. Statistics are presently compiled by so many different agencies and units that planning for the sector is made exceedingly difficult. The lack of reliable benchmark data also makes evaluation of project impact a problem. A central statistical unit with proper computer facilities and the authority to collect data from both the structural and non-structural units within the Dit-Gen E and from the public and private estates is required, and could well be built upon the existing statistics sub-directorate in the Dit-Gen E. Improvement in - 162 - data quality needs to be integrated with improvement in management reporting in the project units and PTPs. Whlle computerization has a role to play, the primary emphasis initially needs to be placed upon clarifying, clearly defining, and harmonizing the physical and financial information requests at all levels of project management and within various levels of central Government. Well-documented systems also need to be introduced which vwll both ensure that the accuracy of information is adequately managed, and that review of timely key operating information and ratio analysis becomes an integral part of the management process. A major study is needed, similar or larger in volume to the earlier effort in introducing standard accounting systems for the PTPs and NES smallholder schemes. 9.09 Strengthening of the National Tree Crops Extension Service (Disbum). It is in the long-term interest of the smallholder industry for the Disbun to be strengthened through the provision of more specific direction on operating procedures and the supply of staff transport and extension aids of all types. The recently established Directorate of Extension is making plans in this regard, but the Dit-Gen E's program for Disbun is still unclear. B. Options for Improvement of the Organization and Management of the PTPs and Private Estates 9.10 Creation of a Support Planning Unit for the PTPs. Government Regulation No. 3 (PP3) of 1983 focused on the promotion, supervision and control of estate enterprises, including the PTPs. Promotion is defined as the provision of guidance on planning and operations with a view to achieving efficiency, while supervision and control refer to the evaluation of activities and effectiveness in both technical and financial operations. PP3 makes it clear that the PTPs are regarded as profit making enterprises, but that they are also expected to support development in the private and cooperative sectors. Under the decree the management (Direksi) of the PTPs and their supervisory boards (Dewan Komisaris) are granted greater autonomy to manage their affairs. At the same time, PP3 mandated the dissolution of SBPN which exercised functions of control and coordination of PTP activities, and the four Regional Inspectorates (Kinwil) which supply support and direction to the PTPs in financial, technical and operational matters. It is expected the KINIL wuill continue for a period while the PTPs adjust to the new situation. As a result of these changes, there is now no formal provision for forward planning for the PTPs as a group or coordination of PTP activities with other sectoral developments. This is an unwelcome development since the PTPs will continue to require coordination and direction in the implementation of their responsibilities in the NES and PIR programs. While it is imperative that the PTPs act with greater autonomy to manAge their own affairs, coordination is important to avoid duplication of effort and to provide for total resource use commensurate with the PTPs' individual capacities, location and experience in growing specific tree crops. There are a number of options available to restore formal guidance and coordination .of PTP activities. These are: -163 - (a) delegation of overall planning and coordinatiLon of PTs to the admilistrative bureau CBiro Tata Usaha) in the Secretary-General of Agricultureo' office; Cb) assignment of responsibility to the Director-General of Estates, for execution within the functions of the Directorate of Agribusiness and Processing; (c) establishment of a new coordiuating unit within the Department of Finance (Persero) since the DOF is the sole shareholder of the PTPs; and (d) creation of a holding company over the now independent individual PTP boards of directors, such company possibly to include representatives from DOF, DOA and the Department of Trade and Industry, etc. on its controlling board. 9.ll No single option appears intrinsically better than annther. The overriding consideration for Government in making its choice of alternatives is to ensure that the institution selected can provide effective leadership in the coordination and support of the PTPs' activities, particularly In regard to physical and financial planning. In the past the DOF has preferred to delegate its interests concerning the PTPs to the DOA. Establishment of a unit within the DOF would likely remove the agronomic and technical aspects from the competence of the supervisory unit. The functions of the Biro in the Secretary General of Agriculture's office are planned to be limited to reviewing progress reports from the estates and preparing summary statistics and overviews for the Minister. The establishment of a holding company controlling the PTPs Ps subsidiaries has been discussed for several years but no action has been taken since there is concern that this would add an aXddtional administrative layer between the Individual PTPs, and the DOA, DOF and/or the Dit-Gen E. An advantage of this option would be that other subsidiaries could be added ,o the holding company and adjustments in investments, equity and the operations of the PTPs could be made in the financial policies of a holding company, seeking to maximize profitability in each PTP, but managing them as a group. Problems of coordination of PTP activities, however, are more immadiate and complex than can be resolved by the siople act of establishing a holding company, regardless of the inherent merits of such an organization. As a possibly interim measure there is considerable appeal to placing coordinating responsibility in the Dit-Gen E siuce the operations and development of the PTPs have become increasingly related to the smallholder NES and PIR programs managed by the Dit-Gen E. If this is the case, the PTPs would require more support than the existing capacity of Team Xhusus would allow. Immediately, the Directorate of Agribusiness and Processing might be a suitable location for the responsibility, but it would need substantial strengthening in terms of staff and expertlse. Such strengthening, rapidly undertaken, could be regarded as an interlm move towards establishment of a separate directorate or unit within the Dlt-Gen E, with specific terms of reference which would not diminish the prospects for commercial autonomy of the PTPs. This directorate or unit could merge PTP coordinating functions with those proposed earlier for assistance with corporate and financial planning (para 3.21). - 164 - 9.12 Rationalizing PTP Estate Holdings. Another issue for consideration concerning the efficiency of operation of the PTPs is the long debated subject of the size and dispersed location of the estate holdings managed by the PTPs. The critical question for the GOI is whether it makes sense to amalgamate the small estates on a geographic basis and assign management to newly-created PTPs, or whether the large PTPs with operations stretched from Irian Jaya to Sumatra should be split up and made more manageable in terms of their size and location. A number of PTPs now have estate areas in the outer islands of size comparable to, or significantly larger than, the original, parent estate holding. Problems of size and distance from PTP headquarters have resulted in management problems and high costs of administration and operations. Notable examples are PTPs II (Irian Jaya), VI, VII, XII, and XVIII. There are also a few PTPs with holdings on Sumatra which are double or triple the size of other Sumatran PTPs (e.g., PTPs IV, V and X). No immediate move should be made to disaggregate and reorganize the PTPs until the existing problem of returning them to stable financial health and consolidating management is reduced. During Repelita IV, however, the issue of PTP reorganization should be fully studied. It would be helpful if the DOA would initiate a review of the issues involved and prepare recommendations. 9.13 Private Estate Development. Although the private estates are assigned high priority in Repelita IV to increase tree crops production and, as a new venture, to foster smallholder development, only a few of the large and intermediate-sized private holdings are capable of further development or of providing assistance to smallholders without GOI support. Most private plantations lack capital, access to credit, technical knowledge and management capability in much the same way as do smallholdings. Such private estates have tended to be overlooked in Government support for the tree crops sector. Without strong institutional support the prospects for solving the large and complex problems preventing successful implementation of the Government-proposed PES schemes will remain poor. The Directorate of Agribusiness and Processing within the Dit-Gen E is charged with the responsibility for providing guidance and support to the private estates as well as for smallholders' undertakings. The structure is thus in place but staffing is inadequate, both in numbers and in the range and level of expertise available. To provide rapidly for the essential strengthening of the existing units, the Dit-Gen E is considering the recruitment of experienced senior staff retired from the public sector estates. This initiative needs to be vigorously pursued to provide for immediate operations, while a permanent civil service cadre is recruited and trained. The DOA has created a multi-agency team, with the Director-General of Estates as chairman, to promote and coordinate the development of oil palm on the PES system. This team, however effective, is an interim measure and there is urgent need to arrange for its functions to be allocated to a formal unit on a permanent basis. - 165 - C. Sector-Wide Options for Improvement of Tree Crops Operations, ProcesslnS, and Marketing of Smallholder and Estate Produce 9.14 The program for new palm oil and rubber processing facilities is of such magnitude (about USM45O million will need to be invested in Repelita IV) that guidance and support from the central Government is required to ensure rational placing and efficient operation of these facilities in sallholder and tramigration areas, and among the PTPs themselves. At present, processiug requirements and investments are decided on a project-by-project and estate-by-estate basis without adequate forward planning or coordination. It is very likely that in Repelita IV the PTPs will be strained to plan and finance the factory investment program and manage and operate all factories and mills in the NES/PIR programs, much less provide processing facilities for the B(U-based smalholder programs. this assessment has led to planning for smallholder processing in the SRDP and PRPTE schemes using the private sector. At Abai Siat and Aek Nabara it is believed that smallholders receive a fair value for their produce fron private traders and processors, but there are inadequate incentives to improve product quality under such arrangements. Where private processors or middlemen are buying smallholder production in areas in proximity to Government processing facilities prices have been comparable, but where PTP processing facilities are not in proximity, prices obtained by smallholders are significantly lower. The problems that smallholders may have In assessing the actual drc of the rubber they offer for sale allegedly result in understatement of the drc by middlemen and so lower payment to smallholders. .The demonstration and competitive effect of Government-owned m-ils and processing farclities paying fair value for smallholders produce may act to curb the excesses of the private trade. While Government-owned mills and factories cannot be provided in all EMU areas, they can be strategically placed and constructed over time to ensure that suallholders receive fair prices and at the same time that incentives for expansion of the private trade are not stifled. 9.15 While the PTPs can proceed with most of the processing needs for their own estates and smallholder production under the NES and PIR projr'ts, the Government should give serious consideration to the creation of a new PT to act as a commercial company with sole responsibility for the construction, operation and maintenance of new mills and processing facilities for project crops. The introduction of standardized design specifications, construction standards and procedures for tendering with local contractors, and the greater experience gained from supervision of construction of many mills and factories should result in lower costs than similta construction by individual PTPs. Fconomies of scale should also be expected from the management, operation and maintenance of these mills over those operated by individual PTPs. A centralized operation would afford the opportunity for better determination of product mix to maximize.receipt of premiums on the sales of processed goods, and it would provide more consistent application of quality standards and grading of finished products. A Mills and Factories Corporation in Indonesia could also open the opportunity for private capital participation and for smallholders or cooperatives to own shares in the company processing their production. The DOA should initiate a study to examine the merits of such a proposal. - 166 - 9.16 Strengthening the Local Contractor Industry. There is considerable potential also for Government assistance to encourage and strengthen the local contractor industry to undertake commerciAl plantlng of suallholdings. Contractors are used extensively in Indonesia for land clearing, but planting and main tenance contracting outside of the PTPs has yet to be encouraged by the GOI. Commercial nurseries might be considered to meet smallholder demand for planting materials outside GOI-sponsored projects, and it may occasionally be desirable to use contractors to supply planting material. Such planting contractors and nurseries would need to be licensed and regulated to mTantain quality standards. Strengthening of Sector-Wide Institutions: 9.17 The Role of the Office of the Junior Minister for Estate Crop Productioa. Presidential Decree No. 23 in May 1983, established the position of the Junior Minister for Estate Crop Production. The Decree outlines the powers of the Junior Minister which include the provision of gaidelines to the Director-General of Estates on technical and administrative policy. The role of the.Junior Minister is to monitor and coordinte the implemnttion of GOI policies pertinent to estate crops, and particularly to coordinate the activities of the various government agencies which may be concerned. The Junior Minister wlll play an important role in ensuring smooth cooperation between the Dit-Gen E and agencies in the Departments of Finance, Transmigration, Home Affairs, and Trade and Cooperatives, all of which are directly involved in the tree crops projects. Effective operational arrangements need to be established for execution of this role. 9.18 Administration of the Tree Crops Sector. In the light of the importance the Government attaches to increased tree crop production, settlement of new areas under the transmigration and NES schemes, replanting under the PRPTE program, and growth of the PTPs and private estates, the idea of establishing a new Government unit with the specific purpose of promoting tree crop development werits consideration. A new agency would allow for escalation and centralization of authority for tree crops, clearly delineating responsibility from other Government agencies. Meanwhile, the ability of the Dit-Gen E to effectively and efficiently integrate its program and work with Dit-Gen Agraria, the Departments of Finance, Transmigration, Trade and Cooperatives, and the Governors and Provincial Governments could be substantially improved if its authority were enhanced. 9.19 Mnother option is for the Government to reduce its direct responsibility for all smallholder tree crop development through the establishment of an autonomous and self-financing smallholder development authority similar to that successfully being used in Malaysia. There a statutory body has responsibility for all new tree crop land settlement, block planting of crops, and the provision of all associated land - 167 - settlement investments. Established with a large lump siU investment from Government, the authority operates as an autonomous financial entity receiving Government payments only for administration. As operations have been made mote profitable over time, it has become more financially self-perpetuating, relying less on Government budget sources. Acting as a bank, it provides and collects smallholder loans for tree crop establishment. It has full authority to contract for the planting of tree crops, the construction of settler housing and infrastructure and it can arrange, under contract, processing of smallholder production with private factories or through its own facilities in its subsidiary. It may also invest in subsidiary companies which in turn provide inputs or key services for smallholder development. This option for Indonesia would be most applicable for NES/PIR projects. While a newly created PT NES/PIR Authority could not immediately take over the responsibilities for all NES/PIR projects, it could, over the long term, take on more and more of the smallholder development activities of the PTPs. 9.20 The sozmdness of these institutional and management options are best left to the decision of the GOI policy makers since they are in the best position to assess the delicate issues of politics, finance and management which underlie each option. The immediate need is to strengthen the existing sector institutions, while considering the options for the new or restructured organizations which will become essential if tree crop development is to continue at or above the level envisaged for the end of Repelita IV. ;;/ P49 - -34 - ~~~~- 891T- - 169 - CHAPTER X: RECONMENDATIONS FOR AN ACTION PLOGRAM TO FACILITATE MPLEMENTATION OF THE TREE CROPS PROGRAM DN REPELITA IV I. PRINCIPAL RECOMMENDATIONS The major constraints to the achievement of the Repelita IV tree crops program are institutional, management and manpower, and financial. The key actions required to address these constraints are summarized below. A. Recommended Actions for Institutional Development of the Sector (1) Clarify the detailed operational relationships between the Junior Minister for Estate Crop Production, the Secretary-General of Agriculture, and the Director-General of Estates to facilitate efficient utilization of the private sector estates, the PTPs and smallholders in tree crop development (paras 3.11-3.19 and para 9.17). (2) Rationalize the work responsibilities between the Directorates in the Dit-Gen E and non-structural agencies, particularly Team Khusus and the line agencies. With the increase in planting targets, the acceptance of ever broadening institutional responsibilities and a slow build up in staffing, the capacity of Team Khusus has been severely stretched at the same time that the main directorates in the Dit-Gen E have become less fully utilized. For the efficient implementation and realization of the planting targets this imbalance will need to be corrected. The organizational structure for handling smallholder development is well formulated, but the need is now to balance responsibilities with clearer separation of authority, and to strengthen the Dit-Gen E structure at all levels (paras 9.02-9.09). (3) Reassign the responsibilities formerly held by the SBPN to restore formal technical and financial guidance, support and coordination to Lhe public sector estates' activities (para 3.21, 9.10 - 9.11). (4) More clearly define the responsibilities for smallholder extemsion and training in the tree crop sector between the AAETE, the Directorate of Extension and Disbun staff, and strengthen each of these agencies (para 3.15). (5) Strengthen the Directorate of Agribusiness and Processing to assist with smallholder product marketing, pricing and cost recovery (para 9.06); the development of private estates (para 9.13); and possibly the coordination of FTP planning (paras 9.10-9.11). - 170 - (6) Improve the coordination between the Dit-Gen E and the Department of Transmigration, so that there is no duplication of effort in identification of land for development and, particularly, that land suitable for tree crops but which has been rejected by the Department of Transmigration as unsuitable for food-cropping is made available for NES/PIR projects, which should include more transmigrants. (paras 3.27, 4.18, 7.03, 7.04). (7) Strengthen the capacity of the Dit-Gen Agraria to undertake quality land capability studies and survey work for the Dit-Gen E. In the short-term Dit-Gen E will need to employ a consortium of competent local and foreign consultants, In much the same way that the Department of Transmigration has done, to supervise and assist site identification and survey work (para 7.07). B. Recommendations for Management and Manpower Development of the Sector (1) Implementation of projects should not commence before agreement is reached between the participating departments and agencies on the details of the physical and financial development plans following proper feasibility studies. In cases where resource allocation (in particular, finance) is uncertain for the development period, contingency plans should be agreed before the project is commenced (para 3.52). (2) Existing agricultural training institutions do not have the capacity to meet Repelita IV training needs. Training units should therefore be established in PMUs, PTPs and other project agencies (para 8.21). (3) In view of the inadequate training capacity, priorities for training must be determined (para 8.12 - 8.16) and long term courses replaced by shorter term skills training (para 8.22b). (4) LPP and AAETE should become wholesalers of training and concentrate on the training of trainers and support of training units (para 8.22). (5) Dit-Gen E should establish a manpower development unit, employing an experienced manpower and training specialist (para 8.22a). (6) GOI should be prepared to fund substantial investment in training through Repelita IV, and to consider modest premium payments to designated key staff (para 9.05). A minimum of $18 million is required for incremental project training (paras 8.18, 8.22). - 171 - C. Rec edaioa for Financi Development of the Sector (1) Prepare corporate financial plans and derailed preinvestment studies for each of the public sector estates involved in the tree crops sector (para 5.32). (2) Improve the incentives to attract foreign and national private investors to the tree crops sector. The problems are sumarized in paras 5.03-5.07 and the proposed solurions in paras 5.09-5.20. (3) Provide fresh equity or convert existing debt to equity for the finncially weak PTPs to enable them to maintafn development of their own estates, participate fully in the smallholder program and atintain satisfactory debt service and liquidity ratios. Equity requirements and the likely demands on the strate banks are discussed in pars 5.25-5.28. Other potential sources of capital for the PTPs are described in paras 5.29-5.32. (4) Government should revitalize the medium sized private sector plantations and enjoin their participation in the tree crop program. Th-is may require the provision of long term credit on terms appropriate to the specific needs of these estates (para 5.33). (5) Undertake a full review of the mechanisms for preparing and aprovvng project budgets, for releasing funds to project managers, and for accounting for their use. During the Bank's Special Assistance Program, when OOZ IBRD loan financing was available to NES projects, the project implementation rate was little improved because the necessary GDI prefinamcing was not provided. Until the confusion of budgetary control and cash control functions is removed and procedures simplified, smallholder project execution will be hindered. An alternative meriting study would be for GOI to contract on a normal basis for the PTPs to undertake a given development, paying by instalments on satisfactory completion of specified works (para 3.41). (6) Given GOI budget constraints and the limited funds anticipated from the state banking sector for smallholder development, consideration should be given to reinstating rubber export tax revenues (subject to an analysis of the impact of GOI's planned value added tax). These revenues would not be specifically allocated to the tree crops program, but would be a fiscal means to supplement credit funds channeled to BRI and to offset non-credit project costs normally funded via DTE (paras 6.03-6.06). Re-introduction of a cess in addition to export taxes is not considered advisable (paras 6.07-6.08). Land taxes should be regarded as providing provincial and district revenues to cover the costs of routine maintenance of roads and infrastructure, provide smallholder group inputs and to cover costs ot soil and foliar analyses by project authorities (para 6.09). - 172 - (7) The operation of smaMlolder credit needs to be improved sufficiently to reduce overheads and bad debts and so reduce the heavy explicit or bidden subsidies needed for long term tree crop lending. A number of recommundations are proposed to reduce costs of smalIholder credit, and to promote cost recovery (paras 6.23-6.27). II. OTEER RECDDgAIIONS The following recommendations, although slightly less important in the breadth and immediacy of their impact on the Repelita IV program, vill have a major effect on the successful outcome of the tree crops program. (1) The program for new palm oil and rubber processing facilities is of such magnitude that careful planning by the central Government is necessary to ensure rational-placing and efficient operation of these facilities in smallholder and transmigration project areas, and among the PTPs themselves. The Government should consider the creation of a new PT to act as a commercial company responsible for the construction and operation of new mills and processing facilities (paras 9.14-9.16). (2) To remove one constraint to domestic and foreign investment In private oil palm estates, and to encourage further investment by the public sector estates, it is important that the Government adopt consistent marketing and pricing policies for oil palm. The export tax system for palm oil requires revision and consistent application (para 5.10>. (3) To improve extension to smallholders the Disbun ueeds to be strengthened through the provision of more specific direction on operating procedures and the supply of staff, transport and extension aids (para 9.09). (4) Changes within the Dit-Gen E are required to improve the quality and completeness of the data base on tree crops production and smallholder and estate development. The lack of reliable benchmark data makes evaluation of project impact difficult. A strengthened statistical unit with proper computer facilities and the authority to collect data from the structured and non-structured units within the Dit-Gen E and from the public and private estates is needed. Planning must be fully coordinated with review of the budgetary, accounting and reporting systems (recommendation C.5 above). A major study is urgently required (para 9.08). (5) In the light of the importance the Government attaches to increased tree crop production, settlement of new areas under transmigration and NES schemes, replanting under the PRPTE program and growth of the PTPs and private estates, the possibility of establishing a new Government authority reporting to the Minister of Agriculture with specific responsibility for promoting tree crop development merits examination (para 9.18). -173 - (6) In the course of Repelita IV, the GDvernment should study the isse of reorgzation of the PTPs. The critical and related questions are i) hether the small estates votld best be amalgamated on a geographic basis for management by newly created PM, and (ii) vhether the large PTPs with operations stretched as far as from Irian Jaya to North Sumucra should be split up and made more geale in terms of their size and location (para 9.12). (7) Government assis-ance is needed to encourage and strengthen the local contractor industry, to undertake plating of smaliholding and to establish nurseries to meet sualiholder demand (para 9.16). (8) To avoid land speculation or squatting it is Important that provincial governors Issue the appropriate decrees for land alienation as soon as possible after the decision is taken to assign land to a project. Guidelines need to be developed for settlement of clAsi (para 7.05).. (9) In the SCDP I project a study is to examine the coconutlcopra rketing system. It is important that the study be completed as soon as possible (para 2.29). - 174 - kO -175- ANNEXES TO TEE CHAPTEtS Annexes are nDmbered 1, 2, 4, 6 and 8 to correspond iwth the cbapters PAg1 Annex 2 .......................................... 177 ^ns2 ...188 Annex 4 ............. 201 Annex 6 .............. 220 - 176 - lnxe-3 --o, i/,f k ,r ,MS ~~~~~~~~$~~~~R~ - 177 Pag 1 ZUDOFZIA 1979 1990 1981 1982 a/ 1963 b/ (a) Smllbolz _ 1.926.13 1.945,776 1.994,136 l.995,6C1 2,018,841 E9PfisP/ 187,040 190,339 202,295 233,589 238,117 Private estates 270,742 246 375 243.630 245.382 2472 1 Sub-,catml 2,383,940 2,8,490 2,440,121 2.472,57Z 2,504,79 cocacl= Smlb;,oe 2,520,150 2,622,206 2,752,386 2.846.610 2.901,413 PNP/PTP 10.405 15,050 15,075 17,610 17,645 Psi T-e estates 48 230 43,10 57 401 57.401 58.6a0 Sub-total 2,5JS 785 2,680,42 2,824,862 2.921,621 2,977,W Smallholde= 3 -.2 6,175 5,695 5.928 5,934 PNI/PIP 176,40B 1S9,538 213,264 259,281 261,008 Pt±vate estates 8Q.44 88.87 m 0N008 10 676 11 0194 Sbl-tatal 260,939 294,560 318,967 365,8 368,836 COof ee .- tThno^eT 579,649 645,511 749,829 730,334 738,383 MPEPP0, 20,76 20,925 23,016 24,288 24.527 Private estates ZS.804 22 938 24.0Ml 24,233 24 467 Sub-total 626,169 689,374 796,8 6 778,855 757,377 Tea SmaZibolder 39,823 41,329 - 42,288 46,950 47,755 PPPIP;P 40,807 40,442 40,9'9 41,809 42,247 Private estates 27 362 30.929 23,310 23.S34 23 647 Sub-total 107,992 112,700 106,537 112,293 113,649 S.in2Tholdoc: 10.722 31,172 14,861 15,543 16,004 mPP/PIp 16,90M 28,636 20,678 25,483 25,483 Private esta 8046 5,321 7,421 9.199 9 281 Sub-total 35,669 35,129 42,960 S0,22S 50.768 Sc _liholder 191,836 259,927 290,4:4 316,990 320,063 POP/PIP 126,103 37,628 36,722 46,090 46,090 Private estate 2S 534 18 S60 18 996 19 187 19,379 Sub-total 343,473 316,115 -,192 3822677 WS'332 Cotto S7i;V_oldo3 1,46;0 4,306 16,642 2,520 27,795 PEP/IPP 1,318 4,000 4,088 402 402 cl Pr±vate estates - - 2,529 2.55 2,.80 Sub-totmi 2,778 23,259 30,476 3077 7obso SuamUhldet 193,707 127,003 179,092 196,043 204,950 PIP/PIP 11,984 12,822 13,403 13,928 14,066 Private estates 2 7 3 210 3 483 725 725 c/ S u, 3 j9 ;4,398 M.696 ld4er 63.233 68,310 76,S94 74,787 77,185 2PE-p/I - - - - P2rivae eszates 24 57 18S 194 '°9 Sub-total 63,477 68,467 76,782 74,981 77,384 a? Pre2lma-, eIg=ez. D5 EatLated Iiguas. I hsaasued am* an p=vvious yea=. -178 ~sz 1 1979 960 19111 196 a/ 19B3 b/ Move~~~~~~~~~~(a Cir Sam= ~ 391.842 391.S 494..5 539 559 54.897 ZWAP/IT 5.46 5,.4 5.333 - 5.3.7 S.5m pri vate est8, a 192 21.7 16 1 16 725 16 925 Sub-total 4U3I ZW:2i& 5 3'7 Wf .380 Casbaw Sm21*o26a586.874 211,928 136.631 159,465 260.365 DIP/PT? 628 679 637 2.156 2.16 P ate estates 1 436 1I 1,295 1,195 1.202 Sub-tota SL6,80Z 138,463 162,816 163.723 hrIet 69.2S2 70.979 69.371 77,397 77 52 41.70 1.108 1,218 97 g87 Private estates 916 286 83 130 lJO Sub-cotaL 3r:M 2373 7Q.572 .56 78,739 Ctacbacaa - - - 173 173 a/ HP/PT? 3.067 3,305 3m371 3.207 3.207 a/ PrIVst. estats 240 240 2U 858 '858 / Sub-ttal 3,SUt 3,6-15 4.3 Xamf ojLer - - 7.181 7.1U s/ 3P/PT1 6,520 8,13 8.343 2,950 2.950 al Private 2 tates 2 m163 404 40A s Sub-total 85 10,253 10.506 10.538 10.538 Smallhodr 57.360 55.544 57,012 57,813 SBw127 HXP/PT - 2.118 1.879 1.002 1.B39 1,846 PriwVt& eStates 497 217 217 497 497 Sub-tot;l S 57644 58,261 6C.149 6C.470 MMSadmr 3,018 3,152 3,564 3.919 3,959 HP/PT? - - - - - Private estti 11 17 22 18 18 Sub-tocaL 3.029 3,168 3,586 3.937 3.977 Cstor Sinllhal4t ;1,527 1.276 1.297 1.214 1.226 DIP/FP - - - - - PrIvate estates - - - - - Sub-total 1,527 1,276 1.297 1.Z14 1,Z26 Cit xoufLa 9s-a'"^- - 6,587 4,988 4,246 4,290 3.769 DfP/PT - - _ _ _ Private estates 3,023 2 04 1 251 1,267 1.280 Sub-total 9,610 S,557 5,D49 Xawk~ SuaLlbolder 283,365 376,964 373,620 401.017 407.801 PEP/PTP 2,77 2.595 Z,472 2.095 2.122 Pr-vate estates &1963 5 175 5 034 5 242 5 332. Sub-total 291,105 384 734 3B1,26 4082354 43 '5254 Othe-r crow SaaLlholdar 7,792 8,181 8,3A 43,351 13.351 a! WPP/PT? 6,680 7,203 7,347 7,347 a/ 7,347 aI Private estates 568 596 625 625 t 625 */ Sub-total 15,220 15,980 16,316 31.313 n.zzj 2atal cSaall2olAer 6,411.792 6,759,175 7,270,967 7.551.688 7,670,747 2NP/2M? 620,600 369.762 599,103 6S6.378 615.75S Pr__ate estates 622 057 L82 471 506 790 510,096 515 314 . a t a 1 1,654,49 7,8T1,608 8,Y78-.'aa 8.748.162 8,iE1,819 AL As.med vas as previous =r. Source: Dtrec:torate-rimmexal of Is a-es 'Pz 1 -179- Pzoa~ctm -of Etante Ctm r'bu- hezpis C1.79-1993) 1979 1980 .91SL 1982 a! 1983 bW XUD5U 8.ml2halder 673,151 689,069 642,329 549,065 688,888 PNWIM 3169,562 185,815 193,378 190,083 196,968 Priate EAstats 1 255 1214 483 W27 520 MD1 802 131,127 Sob-Total 90Itn 989,367 96,227 60,9S 1,. 3 ODl SfflboAer 1,596,191 1,629,726 1,764,567 1,710,697 1,605,.9 (Copa) PYP/PmP 3,612 3.701 3,387 3.177 3,043 Ptivate Estates 22 284 32 646 24.468 25.528 19.978 Sob-Total 1,6Z2;0d 1,666;073 1,792,422 1,739,402 1,628,150 PALK OIL S rllboldr 760 629 913 . 947 978 PFp/PzP 438,756 498,908 532.513 594,417 678,720 PrIwate Estates 2M 724 22 5s44 265 616 278.690 292 446 Sub-Total 641,240 72,61 799042 874,0S 972, PALK XMRNZL S11l1ahoder 12 91 132 137 142 DSP/IP 84,729 89,731 lOD,020 .103849 120,257 PrIvate Estates 35 218 38 218 40 659 42 677 44.799 Sob-Total 312.63i i27, 1 1 165,198 DFFE SulI.ho1der 251,454 276,295 290,401 245,43Z 218,704 !mElPTP 21.271 13,204 16,190 13.035 8,795 PrIwate Estates 5.592 5 466 8,309 7 420 6.473 Sub-Total 268,317 294Z.5 314.900 26X~-ii 233,972 TEL Sa.lTholder 29,067 20.849 23,269 18,078 25,360 PwePlpP 61,240 68,18L 71,886 63,776 71,300 Private Estates 16 908 17 502 14 662 9 950 14,600 Sub-Total i09 ,IT 9- St 11,260 CDOL Smaillolder 1,035 1,058 1.438 2.523 2,631 PWP/PeP 7,379 8,379 10,265 12,193 12,193 PrIvate Estates 704 816 1 271 1,299 Sub-Total IIIID 10,253 15,993 16,123 SUGAR SmlTho2ar 736,319 1,085,825 1,365,362 1,S04,439 1,521.591 PEP/PTP 1,012,02L 273,353 220,436 24,694 244,694 Private Estates 80 570 83 475 _111007 312.317 113.238 Sub-Tbtal 1,8N3F 93i0 I,I:T653 1.696,a0 1,861,250 1,879,523 CDT= S.al2ho3dez 1,302 3,010 10,956 17,729 17,906 PNP/PT? 1.412 3,908 3,986 506 506 c/ PrIVate EaZtes - - ' 551 1.566 1.582 Sub-Tota1 2,714 6,981 19,994 TOBACCO Sial2hloMer 107,018 69.442 100,112 05.624 110,309 PflP/FTP 21,510 15,161 9,313 10,804 10.911 Private Esates 1510 1 653 1,686 495 495 cl Sub-Total 120,325 6 111,111 116.923 121.715 P3LM cSaLbolde 32.322 36,603 39,810 37,718 32,385 PKP/FTP - - - Private Estates 23 23 23 26 28 Sub-Total 32;95- -6 W37Ia 37,744 32,413 CaoE Smal3bolder 18,145 33,453 28,775 30,606 31,436 hMS/PT? 386 389 176 175 387 P-i1vaz Estates 20 398 401 389 388 Sub-Tozal 1l8551 33,24 29,5 1,170 32,211 a! Pre12ziwn'figre VJ EsAtlated igures. Ft Asnsoed same s pr evIUs veer. -180- A18EM 1 Table 2 Page 2 1979 1980 1981 1982 a/ 1983 b/ CASEMN NUT Smaliholder 8,830 9,020 11,441 12,976 13,126 PNP/PTP 2 4 3 2 2 Pri1vate Estates - - - - 33 Sub-Total 9,832 9,024 11 12,978 13,161 CINAMON 5 aiTilder 10,579 11,367 13,490 16,028 16,028 PNP/ETP 4 2 137 238 238 Private Estates 34 26 - - - Sub-Total 10,617 I1,395 13,627 16,266 16,266 CIcH;K SualTholder - - 10 10 Ł1 PEP/FTP 834 873 890 770 770 A: Private Estates 41 41 43 41 41 3 Sub-Total 875 914 933 sn 821 lowA "na7holder 605 - - 3,225 3,225 a5 PNP/PTP 9,565 9,737 10,223 5,625 5,625 a/ Private Estates 1,894 1,973 1,951 1,117 1,117 aS Sub-Total 12,064 11,650 12,174 9,967 9,967 NUTCDf SualIholder 17,764 18,158 18,382 18,610 18,732 PEP/PTP 188 217 221 191 191 aI Private Estates - - - - - Sub-Total 17,952 18,375 18,603 18,801 18,923 VANILA Smallholder 726 755 663 576 581 PKP/PTP Private Estates - 6 13 1 1 Su'b-Total 726 761 676 577 582 C&STCR SmilTho der 330 176 185 188 190 PNP/TP - _ PrIvate Estates - - _ _ Sub-Total 330 176 185 18 190 CITRONELA. swaTrholder 793 609 457 442 373 PwP/FTP, Private Estates 42 724 286 289 292 Sub-Total 835 1,333 743 731 665 KAPOK Smallholder 29,739 38,987 46,283 50,587 51,225 PNP/PTP 2,076 1,066 1,399 1,478 1,494 Private Estates 412 517 2 308 3,012 3.045 Sub-Total 32,227 40,570 49,990 55, 077 55,764 OBER CROPS Smaliholder 4,663 4,896 4,943 16,069 16.069 a/ PNPI T 2,439 2,560 2,611 2,611 a/ 2,611 a/ Private Estates 3 3 10 10 10 l Sub-Total 7,105 7,459 7,564 18,690 18,690 TOTAL Smallbolder 3,611,493 3,929,658 4,363,908 4,341,706 4,375,018 PEP/PTP 1,823,298 1,179,367 1,177,034 1,247,624 1,358,705 Private Estates 634,854 519,454 601,784 606,397 631,022 T o t a 1 6,069,645 5,628,479 6,142,726 6,195,727 6,364,745 at Assumed same as previous year. Source: Directorate-General of Estates. - 181 - Annex 1 Table 3 IDCAIION AMD CROPS OF ENP/PTP ESTAIE COMPANIES Province of head office Estate company Crops grown Aceh PTP I Rubber, oil palm and pine North Susatra PTP II Rubber, oil palm and cocoa FTP III Rubber and oil palm PTP IV Rubber, oil palm, cocoa, cinnamon and rice PTP v Rubber and oil palm mTP VI Rubber, oil palm, cocoa and coconut PTP VII Rubber and oil palm FTP VIII Tea, cocoa, coffee, of: palm and rice FrP IX Tobacco, oil palm, cocoa and sugar cane ampung PrP x Rubber, oil palm, tea, cocoa, coffee, coconut, clove and cinnamon West Java PTP XI Rubber, oil palm, clove and albizzia -Ft XII Rubber, tea, cocoa, coconut, clove, cinnamon and quinine FTP XTII Rubber, tea, cocoa, coffee, coconut, clove, quinine and pepper rTP xIV Sugar cane Central Java PTP XV-XVI Sugar cane FTP XVII Rosella PTP XvIII Rubber, tea, cocoa, coffee, coconut, clove, kapok, nutmeg, quinine and cashew FTP XIX Tobacco East Java PrP XX Sugar cane PTP XXI-XXII Sugar cane PTP XXII1 Rubber, tea, cocoa, coffee, coconut, clove, kapok, cinnamon, quinine and pepper FrP XXIv-xxv Sugar cane PTP XXVI Rubber, coffee, cocoa, corton, tea, coconut, kapok, clove - PrP XXVII Tobacco, cotton PTP XXIX Rubber, coffee, cocoa, clove South Sulavesi PNP XXVIII Rubber, cocoa, clove, nutmeg, oil palm, coconut Summary Number of PTPs: 25 Rubber dominant : 12 Number of PFPs: 1 Oil palm dominant : 2 Mixed tree crop : 3 Non-tree crop : 9 (including PTP IX) IDirector Ceneral of Estatea NON - StUCTURAL ORGANIZATIONS I I DIRECTORATES I! I Prograa Rehabilitation Agribusines. Production Plant Extension Tee Small- Seal- Developoent and Expansion and Processing Development Protection tiunue holder holder Rubber Coconut SU DeIRE lRATpSot/ DDvelopment Developeet Project Project SaIstc _ P.latn Mtr----- Esat Bsness Project Preparatioo Statistics Planting Haterial| |Estate Business | IPlanting Material Equipment Budget, Procuremen Budget Plannfng Land Hattere Resources Technicale Crop Pent Control Social Development Monitoring Credit Needs Capital Groups I A 11 2/ Disease Control Monitoring Program aed Project Power and Procesesing Mechanization - Weed Control Identification Equipment Market Information Obuervation & -Proincal and Formulation oForevantin Project xteneen |Offiee l Non-Project Extension tProyinoal Farmer Organizations 1ffie Institutiona, Manpower and Equipment Field Officed Extension Materials (PHU) |oonut Provineial Offices (Disbun) Material Supply Pest Control Extension PRPTE Projects 1/ Each Directorate and Sub-Directorate has an adainistrative gecretariat, I/ Crop Group I - rubber, coconut, oil palm, other oil crops, coffee, tea, cocoa. Crop Group 11 - Sugar, tobacco, cloves, fibre crops, spleea. IWOSWIU l VAIU1ICe t0l1 Clot' 1.1Iug DtC0N0111 IsI1s law ut|s. btetf 1/ Icojeel NtNl i tsI It NIB 11Nil if Nil I Fee VI NI) Vil total IMP $COD total Lose , 14N1o. MOI-IND 11t1-IND 1O5-I10S 2001-2ND 2126-IND 2232-1110 N Il De, 914-tim lots-IND t* et VteZ ii ln-0ild 0I1s-211 0Si19-12Ii1 ousjo-ill s 04112-01 D2|l1-Ol9t o4lo-ou/S*miao- lot. project etot CIA)) US 1 34.0 100.5 152.5 64.5 325.0 191 369.1 1,334 4w 10.) 95, 1@ me meunt U a 65.0 45.0 19.0 42.0 111.0 45.1 134,1 *S4,71! 45.0 41,0 145, IO4E- 9gOjiCt cost 1 31 41 is Is s o5 5 3t 40 49 4 . 4511 soI Ca-limansInel8 (Co Ul j *n * - - . _Io 0.0 lI.0 . ,, , No let. eol eoetritblLon Ull| n tl,0 35,5 53.5 22,t 161.0 15.0 jI IIJ,2 1/ 621.1 2J,I I,i eo4,4 0t/proJiect c I is3 is so so so 41 36 . 46 lot. lull Impl.asntatIC fast .11 an . 00.0 I51.0 240.0 64.5 4220 2'50.0 4:0 ag620.5 ill1 3 0.2 W11 1015.4 001/olul cost I I s is It Jo $0 4* it 61 II 511 94 IartlelFptin ItF/tPIe 1, t, tt It 1, VI. XVIII I VII, Xi, Xlil, Xii, XXIII, VI, VIl, XII 11 -tP , _ I te XXIII XXVIII 1)9131 lioviarsa * Arch, V.Jave li Aceh, Jesbis *. Suutre IIJAsA, W,Jemv, I,endlll1- 12 Ptoulie iu, H",,C,ad 1. 14 Pro,iaeee -lAepuwg Vimi 1. Ialimant *SIlhAI, 5in'utu liecaten' It lhetic Lulsijeal 8.I.haatra V,XalluntefI Itslulu 1, lulsa6wl hit e h, H bllhulisr ODeveleesmot tlail;t1 t of X, Ibm J Fn l1,5so 22,7N0 te,000 - 5,100 9,500 0 19.100 J6,500 I1t 1 ,to 19he -, - 34,000 41,000 _10 1 eaeeaucg hal: . - -jAj0 -1..U4 . IL & M all tie, cepe ha 1T1 I 1TI w 1; f 500 3I7~ I33JU JI,1V1 Pleatlog at loat ood pe 1/ he 1,710 It/ 1,600 4,000 4°00o 1,310 t,600 5,925 44.11 - 44,215 Emelar .1 pertlglpiats ae, 5,110 11,350 12,000 4,000 19,150 Ł,450 16,6eO 10,150 It0 .30,000 142,110 Hleating of tubber NG 1,000 3,00 l5,9o - 1,000 6,140 5,500 41,950 4,930 oil ,a:. he 5,100 * 2,115 1500 2J,oo " 12,455 - li;tlS :0el210 graut h 1 i TTWm l de tt * lroasoe.le .IItem lbber lfactrleies e tidy M43 so - (4 653 (1) 40 (2 sS ()40 'O 4 (14) 5 312 (14) 311 poll oil Bills h tr. 11) 30 - (1)30 (1) 30 1() - . 65 60 - * -4 CePIA mill ) tI _ .2 50 2) Q - "4 ° - * , so 1/ Al1 01I Include, In edditis, cotstivellea of eeuses, rde eell villsoe lreesture/ teltb;ted total oest up to matuttey @1 all project ptiutf45g. iglieoo of technical aaaistagea &nWI Arnslete,t-u ci e uta rejets, 16tu a1enttn en rmpIetl tot aese thme h g s ae.ataao eia l 1,650 at e,allaelm St Ia per Patlly, uno ud;4t ys pro4v.....wwle r .ttsagthmnl.' IIt he lee,otresntin instItute CI. P, end' "5 11 Imelude Gueu, Said.' nd l ead erep t.""4, eax hostbel the Is. Ties ultznisq ItistRia eentit 1777 tz""l h l"^ , "4014 s* toi I ha.F / t and Yea at olf e etie ee6 oP leaalad Dete, , Ineludee plentina, teQinmll end eonverelen het not Aheheilieation. / gram^" t"eale *aewt' e ee ee t low tw o w"1zd . Includ4e "epoapte in to lee litiec eel by eate""|A.I 1 aoIetiag, but get an,eoatl, . I otiott clselatog Dete June o0, 1 o s apof 1 es or eep t ccot eealudiot rmeetvcd pgociuaenta. / tudee go 9 126. slliea *sipoted tSle Itaso ied by fir, M. It., ,1 of ptojct cost *erle4dng toverved poruienaat sad teas lt I I possibee !eelUe ltteI-dtelt n .f06 969 million fit 9il VI enM 6*6 million tm oe 11 / lilu ding tte cotrtibution of e t 10.2 *1lli as unpaid lboat, !~~~~~~~~~~~~m i e -184-A l Table 6-- mau wis a= nuw rm.n Palo MtPge app.-. rat. 2.in00 - - . ~.5oo .20 1.50D 1.075 1*75 - -- t r.m0 hcUt - - 262~~~~~~~3 273 19" 1.567 1.75' Su6 1.322 4.75 6.07 - - ~~~5 9 12 35 GO a6 67- - - og e lee. met. SW0 - .- 0 .1000 1.500 1.500 - - --- 410 49 Oct.51 - 72 1.00 .00 1.S U36 167 - …… …4450D 4300 CaltrauZRm S - - 10500 66 262i0 -.0 .0 7.10 11.00 air Ilet, ins". Lwppra. M. 3.00 - - - 500' 75 750 1,000 - 4000 3.000 ActuLn Sao-- - 0 200 7322 0 .0 . cahPrcrfs - - - - - ~~~ ~~~ ~~~~17 26 50 67 . - .2 ST Appr. tot. 3.6000 -To-o 0 700 is M0 - . 000 3.U%g * - Actual SW - - - 30 S5W 1.600 m : : : - 3.900 6.am- * cm.,n win - 11 12 37 IN0 116 - 227 136 * Lr. tat. 4.500 - - - - 0 900 LOW0 1.700 - 2 O .300 .0 ,cc-a, - - - 12 0 0 72 222 '9pr got. 22.000 - - - 1 250 1,500 2.750 2.750 2j75 - .50W 9,25 ACLUBL - - - - 1.251 2.499 1.67 466 - - 6.fl7 6.603 * - - - '- - ~~~ ~~~ ~~~ ~~~~~~10 31 5 56 - - - 96 72 Apr Cgt. 16.000 - - 2. 500 3.500 3 250 3 750 2.000 - - - 9.250 33.000 - - - -~~~~~~~Z.. - 270 '516 5.66 1.27 - 297' 214491 .0z.11at.M - .0 -r 1A1S 1M9L 1900 112 ,40 - - 0 M.' - - - - - - 1~~~~~~~~.1'0 1.200 2.900 - -01.6 3.9240 4.560 cmg_n BnS - - - - I 29 57 - - 77, 93 Our- 351. 3.700 400 600 73520 750 60 600 bo 1.600 1.750 ACLU" - - - - - ps am 92 LIP5 2.01" cm-l- - - - - is 37 56 - f5 119 S0n ltea her. Eat. S .00 -D -so-- 0 2.500 1500 1.500 1.500 1.500 2.000 2.500 Actual mg- - -- 500 2,369 1.620 - 2.869 14.469 Qm.flngrnt - - - - - - - ~~ ~~~ ~~~~6 36 sr - 107 in APer. taL. - - 200 - - - - 200 G00 10 00 90 GM0 - am LA" Actual - - - - - - ~~~~ ~~~~~~~200 790 S7" - 1 1.809 C rin.tnrs - -5 26 '9 12' 11 3m.tr Jays hepr. tat. - - 2.900 - 00 400 600 600 600 440 - 700 1.200 Actual- - &U0 469 G40 anU 1.549 * m.fProgn$ IL-- - 2 31 sa aur no Apse. at. - f.000 - - - - 0 1.200 1.900 2.400 2.600 2.300 SO0 1.9000 Ac'.aI Soo - - - 0 750 5W 1.290 C-.m.flvgra.l S - - - 4 - II fl 6 hoer. SLt. - - 3,00 - - 270 450 550 050 600 400 - T12 1J70 ACtulŽO -- - 300 510 550 - we3 1.360 A op. tnt. - - 2,000 - - - - - 206 300 SW0 SW0 50 200 Soo ACtual AJMIWA- - - - -l a 200 iSp Lwr. 301. - - 3.500 - - - - - 20 50 t 100100 - o c Actual - - SW- DO- - 200 5g0 200 7500 Caa./rwgraas S - 6m 5a - amo 30 Lw-. 351. 9~~~~93 - - - - - - 200~~~ 1.000 2.000 2.000 2.o00 2.oo0 - .20 3220 * : : h Mg, : 200 1.0 977 - WOO0 2.2r7 2 34 2' 0 71 CTable 6 Page 2 &w - ..l w . ftum - - - * C - L apw- - - - - - - t- W aa 3 S .w -JIWn - - - - - - -SlD_ - , _ _ _ _ _ - 32 Z - _ ___- - - - - - 2.3W 2.3W 2.3W 2.W 13W Z .3W ft.G ~- - - - - _ _ -D - - _ - - _ _ _ _ * M Io _ :. Es - - -= : ,~ - - t 2 -< - 2 7 0_ - . DB ~~ A _ S - - - S - aw~~~ _ ___SL. SW. I X- am g _im - _ - _ _ - -.B. e.7 : wJr9vt~ - - - - - - 7 -1Yl .5 J D -. ae-3 W.i_ - - _.3 -.~ -.6 m. . ..aqmnm z 1.'W 3.m.ga a~ gj -2- - 50 2m Z-.U S.S s s C - - 60' s _- _5. 7a..2 _w 13.2 Ti * mif_ S.~ - - &t.* ?.mS 7 5 G33 4 2.930 _.J. - * - -- - ~~~- - - -- g-- v- 1W-be e USW -. *= s 1m 8 - -Fl P- - ---e~. a acs..L Trg~~~- - 12 L" 2150 L-MS .4 2.3W ZAM. I-In '-.- - - - 39 !:-lEs--a~~~~~~~~~~~~~~~O 2-WO 3_M 3-w --is ; - - -- - - a u- r~~~ _ _ - - -0 -_ 11o.3 _ -_ r_ 2: MO. aaIP. m - - 3. Z-MO 2..' 28-M -5M ~W27 4= 9MN4 A M C- a. tmL ms m 33 3W 3W1 I. -a T. - 3L& g -- wcZI.ag O.' 3W L 3W33W 30mm. ,w b~ ~ ~ ~~~~7~ ma C C. .L 1Ew*--pLci 21 * .~~~~~k -- -amMw-i 3, 0' 1~~~m. 0s ae w'i. to ~M30lv.SW-a r.-ms ma am 3W s.Mw ' m ___ 14 J - Ia- 2 m _. 1__ O c S1 O RS O K- -a m -a "- m VI a o a an am am ML an on, - - - - - an ~~~~~~~~~~~~q-.-O at - -am m -r - - - - d~u oft ma sic SW - - - - Am Ca ea a am UT - - - - - ant I4* 1 & - - - - -r orm Mt c nc S OK - -MW a- - - - - --- -WK ad4 US! 5M! - - a in? - - - - - -~~~~~~~~~~~~~~-rW& ZAJd WC or.- - - at_ WVm at an am. W.- - QC WT Mt ~~~~~t~-W aao ma u - - - - ac a - - - - - -~~~~~~a SL AW-A - cm am - - - ~-" -2 at aT-Z- - am - am ---f- OK VW OK -"S~~~- U -df aev Mt DK cc IC c q~~~~~~~~~~~Ł04 mw I .C 8K-c - - - a- a.?15 4, a - - msc Z am - - a , - - - -a- wr- - cm c !* !- -. k = --,,-=- - - 10 (CS.? nbc - - - - - - at ama~~~~O oft- - e am am - - - - am C~~~~~~~~T - - - OM - . ~ ~ ~ ~ ~ -A as ~~~~~~~~~~~~~~~~~~Uag m,o UtI" 4C - - - (C.! U m t I Ł Us-a - - - - - - 0 ~~~ .50.? U!.?o Z ! - .4'! - - - - - - W ~~~~so Z ff 5a - - ISC -W= if" wm C"" toncm=zru Um GU U Auzm am m - - - T a to 2 -z !.-. -187- 1 Table 7 7W - - - - 16 0 - - 3 0J196in3 - - - - - - 72 1 - - ow- s - - - - _ _ _ , * _ _ 2 nrn~~ - . - O PW MUM= 61 p-_ 1. - . 3-, - - . _- _2 _ _ 1.00_ - - Acm-% - - - - D "a - - D 22 9 3 - - - - - - J 7 - - 26 ~~. 346. - - - 6.060 - - - - - -3.6 223x LOW10 LOW 3.790 430 -w 2104 3.23 -' - ]' - - - - - -M DO _ - -. 32X1 ! Ce. Ae z - - - - - - - 2 a - Ar. 146. =O.20 - L6 ii Z.460 W&~ 3.M6 'u 36oW zJs 3.M1 Z.400 M43.3 MAN _s- - - z~~~~~~~~~~. XZ11w aml Z.&= ^.< ^ An =7 m e _=.A15 goinO- - 23 S LD 1.32 5, l. 2.7 3 22 MC_. I7. - - .0 2.30 2.23 3_4 2.M 23 3 .2W 3.0 - 6.4 XMR &0-1 64 Z.t- ;Z.0:0AlG ,1| 1111- Z.,< %M a T 4 .CZ SAR Z - - w : . - 36 2..,0 2 - An30 _2 - - 3 n 7 23 0 .M r 3 D 3 - Y3 42 *6 68 3.03.0 1.1 1 2.317 6.z2 Dll.7 _ 1 7X, _4s - @. '. 3.60 2aP 6.wm l,3.0 ul .B4. ' uo j,.i 23 4.336 4.032 3.606 &,Vl C.39 II-DR 3.920 '1." s. Ac.t-A Z "a 0 3 93 23 93 1 92 a- . 4g0J93.tu 3.1 3 Q.3 326 Z 36.6 6*.6 p, 9.606.-. 3b. b.&J -a s6. bI. .-6t..' cosu.. ,2..a.s 46 . -a6 or 3b "or - . peasome6s at 30e 6066 pro3s 3-p Surst, M4 . . Me imn se oedpers 366 1461.w . MuP. 6..m..C 4. 33.4146 as &peso" of v" inowats opp3ress" Warm6 30aL. P- by 730. 26" NW I- McS 30 pm - s sode.6 463b .m3Jv-. a nu. g 4223 Z=1 -6 OpU L a-..4 sssut33~w. NWI TX VIO S.- 11.Semd h Z- =M a . I--In iut2. Lb. ft a ...u giea.... 661.gl-fl 3.0b. ..Aber. -a1- .633 1b .g-um -2ba.. -- topoaw -1s ppese. 33601046 em-los Se ome 3.. by 30T2 utws-W 1Li. b.0 V2a463. 4t 36.- .301Sb by CN. v 1_146_ 4 C _ _ bs - _ _i w _ - 188 - ATmex 2 Arcacbuent 1 Page 1 An Analysis of Projected Rubber Production in Indonesia to Year 2000 1_ The following assumptions are used in all four production scenarios: (a) Estate and suliholder new plantIgs In organized government programs and on private estates are based on actual planting data for 1976-1983 and assume the analysed program (Table 4.5) for 1984-1988. (b) The ianure areas on estates in 1981 are assumed to decline at the rate of 5Z per annum. Cc) Tmnature estate areas as of 1981 are assumed to be evenly planted in the period 1976-1981. Cd) Existing smallholder production outside of Government-sponsored programs is assumed either to (i) remain constant, assuming production from spontaneous replanting equals that from old rubber which goes out of tapping, i.e., Scenario IA, 2A, etc., or (ii) reduce by 3% per year, assuming spontaneous planters do not keep up their old rate of planting but are brought into the assisted replanting programs of SRDP and PRPTE, i.e., Scenario 1B, 2B, etc. Ce) Plantings after 1988 are estimated at: ,i) about 8,000 ha on the PTP non-project estates, to account for 3.3Z replacement of the area; (ii) about 5,000 ha on PIR estates of the PTPs, assuming PTPs will continue to plant new rubber in areas not suitable for oil palm; (iii) private estates will plant about 5,000 ha annually: a slight increase over the 1979-1982 levels; (iv) NES/PIR smallholders will have a planting program of 25,000 ba annually after 1988 following extension of NES and PIR programs. This level will be required to assist trausmigrant schemes as in the PIR Xhusus projects. (v) SRDP rubber plantings are estimated to rise to 21,000 ha annually by 1988 and increase at a rate of 5,000 ha per annum until SRDP absorbs the PRPTE program. Total SRDP rubber planting would be 60,000 ha per annum by 1995. - 189 - Annex 2 Attachmet 1 Page 2 2. The variable assumptions for the four scenarios are: Scenario 1: Conservative yields for smallholder schemes. Yields Year After Planting (kg/ha) 10 13 20 25 28 NES 1,220 1,500 1,100 550 350 FIR 1,000 1,250 750 350 350 SRDP 1,150 1,400 700 350 350 PRPTE 850 1,000 520 350 350 Yields for estates would peak at 1.8 trha by year 12, declining to 1.5 t/ha by year 24. In an immediate period of consolidation, the PRPTE would be reduced to 10,000 ha annually in 1984-86 and would increase to 20,000 ha in 1987 and 25,000 ha by 1988, thereafter being absorbed into SRDP at the rate of 5,000 per year. Total annual plantings would be 76,000 ha by 1988 and 103,000 ha by 1995. Scenario 2: The same yield assumptions are used as in Scenario 1 but the PRPTE program would proceed at higher levels of planting, assuming management, manpower and finance are not constraints. PRPTE would plant 20,000 ha in 1984 and 1985, and 30,000 ha until the end of 1988 and then be absorbed into SRDP at 5,000 ha per annum thereafter. Total annual plantings for all programs would be increased to 92,000 ha by 1985 and reach 108,000 ha by 1995. Scenario 3: Yields are increased, assuming that smallholders use appropriate fertilizers throughouz- the production period and that extension and training are rapidly improved. The yields applied to existing and future smallholder plantings are: - 190 - Annex 2 Attachment 1 Page 3 Yields Year After Planting (kg/ha) 10 13 20 25 28 NES 1,400 1,600 1,400 1,200 900 PIH 1,300 1,400 1,300 1,000 800 SRDP 1,100 1,500 1,300 1,000 800 PRPTE 1,000 1,100 1,100 ann 500 The levels of PRPTE plantings and total rubber plantings would be the same as in Scenario 1. Scenario 4: The higher yields of Scenario 3 are used, and the level of PRPTE plantings would be increased to the levels described in Scenario 2. 3. Rubber Output. Estimated rubber production, on the assumptions and scenarios described, is shown in Table 1. Table 1. RUBBER PRODUCTION 1984-2000 (Thousands of tons) 1984 1985 1986 1987 1988 1990 1995 2000 Scenario LA 981 988 1,024 1,068 1,130 1,279 1,670 1,979 1B 944 943 953 980 1,026 1,145 1,465 1,715 Scenario 2A 981 998 1,024 1,068 1,130 1,279 1,693 2,025 2B 944 943 953 980 1,026 1,145 1,488 1,761 Scenrrio 3A 985 1,004 1,033 1,082 1,153 1,323 1,750 2,155 3B 948 949 962 993 1,049 1,188 1,546 1,891 Scenario 4A 985 1,004 1,033 1,082 1,153 1,323 1,804 2,365 4B 940 949 962 993 1,049 1,187 1,680 2,040 Since preparation of the above projections from uncertain data (para 9.08), preliminary 1984 recorded export figures suggest that rubber production may be at somewhat higher levels than indicated above. However the essential conclusion remains unchanged that the probability of a supply glut in the rubber market due to increased Indonesian production is low during the forecast period (paras 2.06-2.07). PROJECTED RUDDER PRICES (Rp/kg t Constant 1984) FOB value Financial farmiato prieeJ RSS I a/ RSI b/ R 5 c/ SIR 20 d/ SIR 50 e/ NES/PIR f/ 6RDP R/ PRP'e II/ NES/PIR I/ BRDP ./ PRPTB 1/ fob NY fob JKT fob JKT fob JKT fob JKT projecti proJFcts spontaneule projectr proje to spontaneue USS/kg Rp/ik Rp/kh Rp/kg Rp/kg 1985 1.31 1,166 1,110 987 948 1,044 996 983 710 627 619 1986 1.33 1,184 1,127 1,003 962 1,061 1,011 998 721 637 629 1987 1.35 1,202 1,144 1,018 977 1,077 1,026 1,013 732 646 638 1988 1.37 1,219 1,160 1,032 991 1,092 1,041 1,028 743 656 648 1989 1.40 1,246 1,186 1,055 1,012 1,116 1,064 1,050 759 670 662 1990 1.42 1,264 1,203 1,071 1,028 1,133 1,079 1,066 770 680 671 1991 1.45 1,290 1,228 1,093 1,048 1,156 1,102 1,087 786 694 685 1992 1.48 1,317 1,254 1,115 1,071 1,180 1,125 1,110 802 709 699 1993 1.51 1,344 1,279 1,138 1,093 1,204 1,148 1,133 819 723 714 1994 1.55 1,380 1,314 1,169 1,122 1,236 1,179 1,163 841 742 733 1995 1.58 1,406 1,339 1,191 1,143 1,260 1,201 1,185 857 756 747 1996 1.61 1,433 1,364 1,214 1,165 1,284 1,224 1,208 873 771 761 1997 1.64 1,460 1,390 1,237 1,187 1,308 1,247 1,231 890 786 775 1998 1.68 1,495 1,423 1,266 1,215 1,340 1,277 1,260 911 804 794 1999 1.71 1,522 1,449 1,289 1,237 1,364 1,300 1,283 927 819 808 2000 1.74 1,549 1,475 1,312 1,259 1,388 1,323 1,306 944 833 823 a/ Prices by IIRD commodity forecasts (December 1983) in constant 1981 terms revined to conatant 1984 prices. b/ FOB of RSS I in Jakarta represents about 89% of cif New York prices. c/ Discounted 4,8% from RBSI prices. d/ Discounted 15.32 from RBSI prices. e/ Discounted 18.7X from RSSI pricee. F/ Nes and PIR smallholders expected to produce for end-product of 50% SIR 5; 40% SIR 20 and 10% SIR 50, or 89,6% of RSS I price. 8/ SRDP amallholdere expected to produce for end-product 1Oi SIR 5, 802 of SIR 20, and 102 SIR 50, or 85,42 of ROS6 price. h/ PRPTE and spontaneous planters expected to produce end-product of 901 of SIR 20 and 102 SIR 50, or 84.3% of RSSI prtce. N NES smallholders estimated to receive about 682 of thie FOB equivalent from PTP proceseoro. 1 SRDP, PRPTE and rubber smalliholders selling throughi middlemen and traders expected to receive no more than 63% of the FOB price. k/ Economic prices are assumed to be 9% hligher uhen withholding and othor taxeS are added back to fob values. - 192 - Annex 2 Attachment 3 Page 1 The World Market for Palm Oil and Palm Kernel Oil World Production The global distribution of palm oil production has changed markedly over the last decade. In 1965, 73% of world palm oil output was produced in Africa, 23% in Asia and 3% in Latin America whereas by 1980 almost 68Z was produced in Asia, 27% in Africa and 4% in Latin America. The main change has been the massive increase in palm oil production and exports achieved by Malaysia, where production has grown at over 20% per annum since 1961 and now accounts for more than 50% of world output and more than 60% of world exports. Indonesia accounts for over 12% of world output. In Africa, the Ivory Coast has greatly increased production but Nigeria, now an importer continues to be the largest producer, even though no significant increase inu production levels has been achieved through the 1970s. Details are given in the following tables. WORLD PRODUCTION OF PALM OIL AND PALM RERNEL OIL (Thousands of tons) 1978/79 1979180 1980/81 1981/82.1 Palm kernel oil 535 585 605 645 Palm oil 3,810 4,405 4,580 4,970 a/ Provisional. Source: Unilever. World Consumption Growth in palm oil consumption has taken place mainly in developing countries. In 1980, 20% of world palm oil consumption was accounted for by industrialized countries, with developing countries accounting for roughly 27% of apparent consumption. The Bank forecasts that by 1995 industrial countries will have further reduced their share of consumption to 13%. Asia accounted for 43Z of total world consumption in 1980 and it is expected its share will increase to 50% by 1995. India accounted for over 16% of total imports by 1980 and is expected to continue these imports in the future. India, Singapore and Pakistan together account for nearly 44Z of all imports of palm oil in 1980. - 193 - Annex 2 Attachment 3 Page 2 WORLD EXPORTS OF PAI KRERNELS, PAIN KREUEL OIL AND PAIM OIL (Thousands of metric tons) 1978 1979 1980 1981 Seed 011 Seed Oil Seed Oil Seed Oil Palm kernels & palm kernel oil Nigeria 102 39 74 51 95 57 84 48 Zaire - 17 - 18 - 19 - 21 liberia - 3 - 2 - 3 - 3 Indonesia 7 11 21 1 43 1 27 1 Malaysia 12 131 8 204 -14 -220 -2 248 Other countries 55 32 70 33 56 45 57 29 Total 176 233 173 309 180 345 166 350 Palm oil Zaire 10 - 10 10 Camerons 9 6 9 11 Ivory Coast 75 50 87 68 Papua New Guinea 28 35 43 47 Indonesia 412 351 503 310 Malaysia 1,510 1,901 2,266 2,476 Other countries 20 22 31 37 Total 2,=.49 2.959 Source: Unilever. IMPORTS OF PAIM OIL BY MAIN IMPORTING COUNTRIES (Thousands of tons) 1979 1980 1981 India 309 534 475 Singapore 500 692 412 Pakistan 201 210 233 Netherlands 167 204 168 UK 229 183 165 Germany, FR 175 174 156 USA 145 116 122 Others 981 1,156 1,155 - Total 2,707 3,269 2,886 Source: FAO. - 194 - Annex 2 Attachment 4 Page 1 Projected Production of Palm Oil and Palm Kernel Oil 1. The assumptions on which projections are based are as follows: (a) the yield of fresh fruit bunches (FFB) from existing plantings established over the period 1965-1983, and for plantings to be established from 1984 onwards, will be as in Table 1; Table 1. Yield in Tons FFBlHectare Year from Plantings 1965 - 1983 Future Plantings from 1984 Planting PTP and Private Smal.holdings PTP and Private Smallholdings Estates Estates 3 3 2 3 2 4 7 6 7 6 5 12 10 13 10 6 14 12 16 14 7 16 14 18 15 8 18 15 20 16 9 19 16 21 17 10-14 19 16 21 18 15 19 16 21 17 16 19 16 21 16 17-18 18 15 20 15 19-20 17 14 19 14 21-22 16 13 18 13 23-24 15 12 17 12 25-26 14 11 16 11 27 14 11 .16 11 28 13 10 15 10 29-30 12 9 13 9 Attachment ' - 195 - Page 2 (b) the extraction rate of palm oil from FFB will average 17% throughout: a conservative figure considered realistic in reflecting the very large planting areas involved, in widespread locations and under a variety of management; (c) FFB will contain 5.5% palm kernels, in view of the recent introduction of the pollinating weevil in all oil palm areas, and kernels will yield an average 452 palm kernel oil. (d) upon the basis of available statistics the production of existing non-project plantings is projected to be 340,000 tons palm oil in 1985, this production declining to zero over a ten-year period in line with the projected FFB yield for existing estates. (e) the analysed Repelita IV project planting program of 313,000 ha will be supplemented by 54,000 ha planted by private estates through 1984/88, and the annual program will be as in Table 2, with planting at the rate of 92,000 ha/year continued through 2000. Table 2. Projected Planting Program ('000 ha) 1984 1985 1986 1987 1988 Total Repelita IV PTPs 30 30 30 30 30 150 Private estates 4 5 10 15 20 54 Smallholders 23 28 33 37 42 163 Total 57 63 73 82 92 367 2. On the basis of these assumptions, the projected production of palm oil, kernels and palm kernel oil is shown as Scenario 1 in Table 3. It is, however, difficult to estimate the amount of private estate planting which will be achieved in the circumstances of strong government commitment to this development but with implemenration arrangements yet to be settled. Scenario 2 in Table 3 therefore shows the total production which would result if private estates were to achieve an arbitrary planting rate of 20,000 ha/year from 1984 onwards. Table 3. Estimated Palm 011, Kernel and Kernel Oil Production j/ (Thousands of tons) Scenario 1 - Scenario 2 3 Year Palm Kernel Kernel Palm Ol Kernols KerneL Oil Oil Olt Projected Other Total Projected Otler Total Projected Otiher Tota' Estates Components Estatea Componento Estates Components 1984 918 296 133 - 918 918 - 296 296 - 133 133 1985 1,014 327 147 - 1,014 1,014 - 327 327 - 147 147 1986 1,081 349 157 25 1,064 1,089 8 344 352 3 155 158 1987 1,210 391 176 85 1,152 1,237 27 373 400 12 168 180 1988 1,362 441 198 196 1,224 1,420 63 396 459 29 178 207 1989 1,549 501 225 331 1,310 1,641 107 424 531 48 191 239 1990 1,761 570 256 484 1,410 1,894 157 456 613 71 205 276 1991 2,014 651 293 654 1,495 2,149 211 484 695 95 218 313 1992 2,277 737 332 833 1,596. 2,429 269 517 786 121 233 354 1993 2,542 822 370 1,011 1,691 2,702 327 547 874 147 246 393 1994 2,813 910 409 1,190 1,786 2,976 385 578 963 173 260 433 1995 2,913 942 424 1,368 1,709 3,077 442 553 995 199 249 448 1996 3,145 1,017 458 1,547 1,821 3,368 500 590 1,090 226 265 491 1997 3,377 1,092 491 1,725 1,933 3,658 558 625 1,183 251 281 532 1998 3,607 1,166 525 1,904 2,038 3,942 616 659 1,275 277 297 574 1999 3,833 1,239 558 2,082 2,131 4,213 674 689 1,363 303 310 613 2000 4,050 1,310 590 2,252 2,221 4,473 729 718 1,447 328 323 651 1/ The reliability of the production estlmate for the base year 1984, to which the projectlons through 2000 are related, is limited by the uncertainty of the hletortc data base an annual oil paln plantings througlh 1983 (see para 9.08). 2/ Scenatro 1 assumes the analyzed Repellta IV progeam of 313,000 ha (150,000 ha public estates, 54,000 ha private estatea, 163,000 ha smallholders) together with existing plantings at 1983, 3/ Scenario 2 aasumes the existing plantings and Repelita TV smallholder plantings as In Scenario 1, but estate plantings at 50,000 ha/year: 30,000 ha on public estates (as In the analyzed program) and 20,000 ha/year on private estates to give total prlvate planting of 100,000 ha through RepelLta IV ratlher than the 54,000 ha In the analyzed program. w1 - 197 - Annex 2 Attachment 5 Page 1 Table 1. WORLD PRODUCTION OF COCONUT BY MAIN PRODUCERS (Thousands of metric tons) 1969-71 1978 1979 1980 1981 Philippines 7,601 11,661 8,860 9,640 11,050 Indonesia 7,333 8,900 10,700 10,900 10,800 India 4,472 4,370 4,332 4,500 4,500 Sri Lanka 1,963 1,520 1,819 1,540 1,716 Malaysia 1,277 1,034 1,237 1,219 1,207 Others 6,709 6,524 7,037 7,360 7,392 Total 29,355 34,009 33,985 35,159 36,665 Source: FAD. Table 2. MAJOR WORLD EXPORTS OF COPRA AND COCONUT OIL (Thousands of metric tons) 1970 1980 1981 1982 Copra Oil Copra Oil Copra Oil Copra Oil Philippines 145 795 123 914 106 1,047 192 949 Papua New Guinea 91 28 91 34 102 35 74 38 Mkalaysia 32 61 46 58 37 60 37 58 Sri Lanka 1 32 - 3 2 18 4 39 Vanuatu 40 3 27 1 47 1 44 1 Solomon Islands 34 - 32 - 32 - 32 - Western Samoa 19 - 26 - 15 - 13 - Total world exports all countries 421 989 427 1,093 378 1,208 441 1,121 Source: APCC. - 198 - Annex 2 Attachment 5 Page 2 Table 3. IMPORT OF COPRA AND COCONUT OIL (Thousands of metric tons) 1980 1981 1982 Copra Oil Copra Oil Copra Oil Western Europe 253 411 183 557 283 534 EEC countries (188) (376) (121) (518) (207) (497) West Germany 53 156 75 204 165 159 Netherlands 46 56 3 90 - ill France 53 43 13 83 - 84 UK 10 46 15 54 14 55 Others 26 75 15 87 28 88 Other Western Europe 65 35 62 39 76 37 Eastern Europe 20 90 10 79 20 106 USSR 15 79 5 56 15 93 East Europe 5 1 5 13 5 13 North America - 419 - 493 - 425 USA 399 470 403 Canada - 20 - 23 - 22 Asia & Pacific 190 145 192 238 189 147 Japan 65. 35 74 36 80 32 Singapore 46 21 40 56 32 26 India 11 5 9 64 9 13 China - 30 - 24 - 22 Others 68 54 69 58 68 54 Other countries 7 34 7 32 7 41 Totar 470 1,099 392 1,399 499 1,253 Source: APCC. Table 4. WROJECTUD COODNUT PRODUCTION i LOW YIELD ASBIPrTION (Copra Iquival.nt) New plantingo Mature Spontaneouu HAture Old Yields from Yields from under Government planting, planting. spontaneouu plantings old plaItinge Government Yield (ran Total Total programa coming from Gov't coming to planting. 0.65 T/lhe program plnnting. spontaneous plantings Production Year area Into maturity progrhams maturity At 1,2 T/hlu 0,7 T/hII ('000 T) …'000------------ __-___-__-___-__- oOO h… ----------- I.... 1984 3,000 57 57 30 30 2,913 1,89.1 68 21 1,941 1985 2,999 59 86 30 60 2,853 1,854 103 42 1,916 1986 3,000 31 117 30 90 2,793 1,815 140 63 1,893 1987 3,039 69 186 30 120 2,733 1,776 223 84 1,916 1988 3,065 56 242 30 150 2,672 1,737 290 105 1,922 1989 3,045 ll 253 31 181 2,611 1,697 304 127 1,674 1990 3,026 11 264 30 211 2,350 1,658 317 148 1,826 1991 3,007 12 276 30 241 2,490 1,618 331 169 1,780 1992 3,057 80 356 30 271 2,429 1,579 427 190 1,516 1993 3,107 80 436 31 302 2,368 1,539 523 212 1,851 1994 3,156 80 516 31 333 7,306 1,499 619 233 1,685 1995 3,204 80 596 32 365 2,243 1,458 71s 255 1,918 1996 3,252 80 676 32 397 2,179 1,416 811 278 1,950 1997 3,299 80 756 33 430 2,114 1,374 907 301 1,981 1998 3,346 80 836 33 463 2,048 1,331 1,003 224 2,011 1999 3,393 80 916 33 496 1,981 1,288 1,099 347 2,040 2000 3,439 80 996 34 530 1,91l 1,244 1,195 371 2,068 UA - 20D - Annex 2 Atachment 6 Forecast of the Domestic Edible Oil Surplus and Deficit in Repelita IV Assumptions in the Analysis The estimates of supply and demand for edible oils have been made for two scenarios, based on assumptions of low and high income growth. 1. Common assumptions for both cases are: (a) coconut oil production at 670,000 tons in 1984 will rise to 1,140,000 tons by the year 2000; as projected by FAD; (b) all palm kernel production will be domesticaUly retained for production of kernel oil to supply lauric oil demand; 'c) the demand for lauric oil presently comprises about 60% of the total demnd for all oils in Indonesia. While non-lauric oils can supply aa increasing share of the total demand for oils, the lowest lmit for lauric oils is considered to be 40% of total demand. About 22 per annum in total consumption is assumed to be switched from lauric oils to palm oil until a minimu of 40Z lauric oil demand is reacbed. The supply of lauric oils vis-a-vis this level of demand for lauric oils has governed the estimated level of coconut oil imports; Cd) the overall elasticity of demand for cooking oils was assumed at 1.5. 2. Assumptions for the different scenarios were: (i) in Scenario 1, total demand for edible oils is based on per-capita disposable income growth of 1% per annum in real terms up to 1987 and 2% per annum thereafter, implying a growth in demand cf 5.4% per annum; (ii) the higher demand scenario assumes disposable income growing at 3% per annum in real terms to 2000, implying a growth in demand of 6.9% per annum. - 201 - Annex 4 table I QDI PLANTING PRO(GAMS FOR REPELTTA IV (hectares) Official Programs Public Private Total Analyzed Smallholder Estate Estate Program lubber NES Bank funded 35,500 12,500 - 48,000 - J1S Transmigration 2,000 - - 2,000 - PBR Ehusus 85,500 25,500 - 111,000 - SRDP 90,000 - - 90,000 - PPRTE 211, 000 - 211,000 - Estates Own Planting - 100,000 86,000 186,000 - Subtotal: Rubber 424,000 138,000 86,000 648,000 378,000 Oil Palm NESIPIR Rhusus 74,000 25,000 99,000 - PT? Own Planting 46,000 46,000 - Accelerated PIR 164,000 41,000 205,000 - Private Estates 104,000 26,000 130,000 - Subtotal: Oil Palm 342,000 112,000 26,000 480,000 313,000 Coconuts NES 18,000 3,000 - 21,000 - PRPITE Replanting 266,000 - - 266,000 - SCDP Replanting 54,000 54,000 P2DT 5,000 - 5,000 Subtotal: Coconuts 343,000 3,000 - 346,000 320,000 Total: Three Crops 1,109,000 253,000 112,000 1,474,000 1,011,000 NI'S / 3 1 3 S h a m K r ' S / F A S o t,... B ~ f ~ & .. E ~ b s u .. . .E h s ....... LE. . . . J B L s s .1 L I h u .w . n NES/fit Schs"l OlJ/PlA 5chetw Ntl/flA Schfi *CDr Scheme SICt Ichfum 8p0t schsn " " 'chn eif i Salondaip Sushl OreIal, Secondary aluh Oraeltand luI'Ijt ln-de ,fei? HIa de Cacti Hen-daye. ! nn*1 en Cast. Pan-day. Cent. H"ne,ras ate )'dt-days Cojete Hen-lOy. Tear 0 LAbor Iand lerlMnt IIS 101 14 5125 5 31J5 91 131 44 AS 14 14 169 1It 0 1OJ tAgq 4U t tllth"tnt J191 1is 91 s *1 is 52I 1 5 14 16 S 16 l01 11 0 flossing othar 150 100 150 IDS 1S0 10 61 90 tl 90 61 90 169 11M 0 91 V4u-p ei ore W. 141 91 95 111 i11 105 30 11 Plant aiterlet Lc, Its II6 Its 131 131 11 13I l1o V@rtillt@i aga cIN. 69 214 314 62 :. 204 104 1 Subtotal 740 mi m AU JR g La Tear I Labor 15 103 1I2 102 153 109 14 109 14 109 14 109 100 14 0 139 ortIlluser, agraec. 21 21 11 41 41 41 14 26 gEulrp t 34 34 34 9 9 9 I l t Subtotal 212 313 la MA La "A La 4? Year I Aborf t04 13 101 12 106 l2 49 12 49 11 4l 71 99 71 0 14 ftrtIluer, aroechR. 19 39 39 so so 51 52 40 or I potA t 20 20 *0 I 9 9 Subtotal 14S 65 119 126 II6 i1t 160 41 eart 3 abor 66 44 66 44 66 44 30 44 10 44 10 44 if 56 0 3s Festiliter, aepche..13 72 11 6s so 48 0 66ul at if 17 It 6 * 6 I subtotal 154 Jjj AA MA An La A U Tear Ibot 36 40 50 40 " 40 79 4U 1 9 4* it 41 11 41 0 it g refililtee *gteh. if ?I tl GO is so 10 lqulIpent 16 16 16 14 14 14 9 S Sbtoltal in la Au A L A A LU I1 ter S lAbor so 40 so 40 is 40 It 42 39 41 it 41 53 41 0 is rewtlllas,, atpoo . It of 61 09 69 69 5s 0 fqviln*fkt i6 62 62 43 41 40 44 o5 Trot 5-1 Subtetal u MI ML ML La in Adele. mahinery A, a vew. 10M 32 53 40 20 20 40 0 Oieltlad duleleattra las 126 144 lt 10 165 164 16 et Hsae.s .nt lee 62 0 It 0 0 0 0 0 or, Its, *at.blIeill ooats 1,962 562 1,940 5M1,5 19311 522.,5 1,311 1,442 540 I 1,424 5 1,0 610 1 490 for featly (I ha) *et,ee... to , . 3,964 3,164 ,64 ,063 3 1,014 2154 I 8,2 3,664 1,0016 3 ,0 156 90 Cash PApso"t/KA 10 10 10 0 9 0 0 0 lettler hoalsg 1,011 I,ffl 1,062 0 0 0 0 0 load *chlae e 455 433 43) 0 0 0 0 0 rInM4 W50 440 46' it? M21 I1 pay la? Fra.oIct lldia 13"II 10 t 7 0t 10 Po 10 h eilse 95 52 .5 41 41 41 41 0 Water qqpply 59 so s0 0 0 0 0 0 "a 26 '26 26 26 16 36 36 0 Lie .03111liteto/alleaaalon 26 36 26 36 if to 26 fattler tue.po:lt 34 34 34 0 0 0 0 0 Tratolog - so 3* 29 0J !I s.Wloohetal |s.t 120 110 220 N U U 0 o Ndveaiont. 1m helth 243 2, 142 24 20 0 Subtotat 11H AIM JI Total coet per f,all. 203- OIL am Bz m cams MS/=s ar m uKe_ lalm uuim Ae S&mOO&Cy IOTt Gra2ad 7Eft 0 labew T-. d*.earg 159 103 71 SLS5 56 37.S IaiaestoLabl±ua 100 74 100 71 100 71 Ea og@bar 94 69 94 69 96 09 P2A= muzta=l&7 Lw 1.2232 2.32 FecUlZzem. a3acha. 21 262 262 Sdtsta1 6M 692 681 FC±Za1-Z. agrobl. 78 73 78 FApdp-!- 53 53 53 Subtocal 269 269 269 Toor 2 Z,or 2 8s B8 FXrt±AM, aMcba. 137 237 S57 J4~~~Z1~~ 29 29 29 Sbsta 3- 3 238 283 283 oa 3 labo= 133 96 13 6 96 13 96 TeTCM-. A b 221 2621 1 u±P. t 32 32 32 S-.btsCM. 276 7w 276 7m 4 Lobo= ~0 a 0 0 a r - azocha 0 0 0 0 0 Eqa1pm= 0 0 0 0 0 scbto=1 0 0 0 0 0 Tea 5 zahaS 0 a 0 0 0 F=IIzr &agzcb. 0 0 0 0 0 F-PIVNM= O- 0 0 a 0 Subtoca. a 0 0 0 0 - & .qu1 ;n: 86 S 13} D pin ad 11312 132 321 Scnagam~ 2ae 76 76 76 Pat la excab2lahaot caa 1,836 529 1.756 1L73.5 1,789 463.5 P-- fal.2Y'- C2 ha) est.costS 3.672 1,058 3,596 957 3,578 927 Cash poymnenr/= 70 70 70 SecttLa ba.a±tg .1,062 1,062 1.062 Road. mminurey 155 153 453 lOas 480 4O 4" PJeojCt bafllA5n 139 139 139 vabe2jces 52 52 32 uster wanply 50 50 30 Nppz _ 26 26 26 Lad. etllaee±ot 51 51 31 Sectler tZos-por- 34 31 34 --z7lna 0 0 0 Zecimira aar±s:uc, 96 96 96 Edlcatlo 80d belath 242 242 242 Subtotal 2 27352 :Lo_=1 cot par S-27 N16h scbw s_ ? s5e SW? sc_ Rm sc. A= 18 elinmag 159 33 28t 140 20 140 I9 la 239 lagm..ab21a. 57 2w0 41 65 4A a5 a dS $. paaus 95 68 30 53 X 53 57 22 70 3qrnsw.It mP. 44 22 22 20 20 _m 1. 24 B 6 no 96 NztC12± .g exmcb. 222 36 3r 0 ,O 735 60 681 456 Your1 i 13. ff 5L so 45 66 106 77 89 7-=#, pca 39 5 t 36 1272 Zq.1_.mt 29 40 27 5 5 Subra. 208 1m so2 2 IN 100 72 3B 56 3B 56 106 a8 6 F-12Uwr. a 53 s 6 39 333 2= 16 8 S Suboc1 1 7 102 15 248 13S ye3 Iabor 90 65 35 52 35 52 57 52 49 FV.rx11zm, .tnea. 56 39 3B In2 EREFN&t 13 0 0 3 5 Sc 165 D5 26 yea la b.r 9 6 33 52 35 52 0 52 0 5s-tillaor 60 39 40 0 0 Iq.1inz 19 0 0 a 0 SubetL 173 9& 75 0 0 Tir 5 r6 62 2.5 52 35 O 2 0 O lS%1z... a*uc_. Go 39 40 0 0 -qr m 1S 10- 0 0 - 0 :;~1 14U 106 75 0 0 I ~ ~ 6 I a b u z 0= 2 4 0a 9 0 0~~O 05 0 0 3m.; 1 _ 0 2O 0 0 t-7 '6b. 0 0 26 39 a 0 J72±USzw.aWeb 0 0 0a 0 Zqutimmt 0 0 10 0 0 =.b.rn~.1 0 0 o6 0 0 47cmhay & .qnS 65 32 52 C7 3mrmrf.. 32 - =-_Cb1a~ ~t 1,556 55 1,420 350 s,50 624 1,440 4 11 ?gr (2y CZ ) _.m~ 3.508 1.102 2,840 1.130 2.302 1,2ZI 3,230 968 2,381 Cmb~y.mIoba70 0 o 3 0 SS bmala 1.062 o o O 0 _ da.ry 3m 5 0 0 0 0 433 0 0 0 0 639 n 78 57 57 - 3 21 22D 15 2 cm _a?inp,1 50 0 0 0 0 Sucar 5 mz 1026 0 0 0 0 ;1 C e~S1atea1mau 26 9 9 * 9 Srnt1 c 3: - 0 0 0 O 0 28 28 2a0 0 P.cba±ca aaalaamN in 71 72. 0 07 SSCL-,W 1l 242 0 0 0 ° Sub,a 2.31e 207 207 m 101 =5: =' 6-= 3,az ;=, 3;115 2 nf NES SCIIEHE - EC0I01OIC ANALYS1S'V 2 Ila RUBBS (Rp melllon) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Proiuictiol (tali") .90 1.40 1,80 2,15 2,45 2,70 2.85 3,00 3600 3,00 SPIln price (Rp) - 837 8535 872 890 915 932 949 969 991 1009 Vnluie of anles (Rp million) - - - - .75 1.20 1,57 1.91 2,24 2,5l 2.70 2,91 2,9? 3,03 Opetntleq costm Lern ' n - - - - - - .38 .38 .38 .38 ,38 .38 .38 .38 .38 .38 Itipitns/ - - - - .15 .16 .16 .16 .16 ,16 ,16 ,16 . .16 Invente'nt coats - - - - _ _ _ _ _ _ _ _ _ _ _ _ Lahor .69 ,30 .21 ,13 ,12 ,12 - - - - - - - - - - FurtIli:era/c),nnmlcls .54 .09 .13 .24 .2 .,28 - - - - - - - - - - cn terIala/equtIomnt .46 ,07 ,04 ,03 .03 .12 - -. - - - - - - - Agrlcutturel MAclminery .05 .05 .04 - - - - - - - - - - - - - Overl,esda/mgut. fee ,27 .08 .06 .05 .08 ,07 - - - - - - - - - - nshl payment .07 - - - - - - - - - lloulnet - 1.06 - - - - - - - - Roonds .30 .30 ,31 - - - - - - - - - - - - - fuiltdings .05 .05 .05 - - - - Otloore .18 .18 ,18 - - - - - - - - - - _ Totnl costa 2.61 2.18 1.02 ,45 .48 .59 .54 .54 .54 ,54 .54 ,54 ,54 .54 .54 .54 liet cnal, flow (2.01) (0,59) (0.48) (.45) (.48) (.59) ,21 .66 1,03 1.36 1.70 1.97 2.16 2,37 2,43 2.49 16 17 18 19 20 21 22 23 24 25 26 27 2i 29 30 Prodoetlon (tonn) 3.00 2,90 2,75 2,60 2.40 2,20 1.95 1,70 1,50 1.30 1.10 .85 .80 .70 .70 Sellaisg price 1027 1027 1027 1027 1027 1OZ7 1027 1027 1027 1027 1027 1027 1027 1027 1027 Vulne of salen 3,08 2,98 2.82 2,67 2.46 2.26 2.00 1,74 1.54 1.33 1,13 0,87 .82 .72 .72 (lim rat Lane lobor .38 .38 ,38 .38 ,38 ,38 .38 ,33 ,38 ,38 .38 ,38 ,38 .38 .38 ltupute .16 116 616 .16 .16 .16 ,16 .16 .16 .08 .08 ,0O .08 ,08 ,08 liivnnltient coots lAbor Fnrttilsere/cl,nleal u tHterI 9s Totntl costs .54 ,54 .54 .54 .54 .54 .54 .54 .54 .46 .46 .46 .46 ,46 .46 9 Nnt casIi flow 2.54 2.44 2.28 2.13 1.92 1.72 1,46 1,20 1,00 .87 .57 .41 .36 .26 .26 5 o a/ Average of rubber on secondary forest bush nnd nalang. I/ 42 ain-days per ha during production or 04 mandays. EROR w 12,302 cl Financial prices of fertlliera Increased 62S to economic values. MROR - 17.02 (rubber only) NPW - Rp 1.77 million whole scheme PIR SCIIDIE - EOONOHIC ANALYSISa/ 2 Ile RUIBIR (R-p fLMilND 0 1 2 3 4 5 6 7 ' 9 10 IL 12 13 14 is 1'rodhi.:ting (tonn) - -~ - - - - .90 1.40 1,00 2.15 2.45 2.70 2.85 3.00 3.00 3.00 5ellitig price (Rp) _ - 8 _ _ 638 856 873 892 916 933 950 971 992 11010 Valie oE unlon (Rp millioni) - - - - - .75 1,20 1.57 1.92 2.24 2.52 2.71 J.91 2.97 3.03 oiperntl^q coots l.Phor/i1~ - - - - - - .38 .38 ,38 .38 ,38 .30 .30 ,38 .3B .31S 1npuita!"' - - - - - .16 .16 .16 .16 .16 .16 .16 .16 .16 ,16 Iiventmwniit coute Inhor .69 .30 .21 .13 A12 .12 - Ferttiltern/ciuealent .54 .09 .13 .24 .25 ,28 - - - - - - - - - - lIch.n,ery./toolu/plnnt mat. .46 .07 ,04 .03 .03 .12 - ARrlicutturAl melil.iery .05 .05 .04 - - - - _ _ _ _ _ _ _ _ _ OverIiondI/vSmt. fee .27. .08 .06 .05 .08 .07 - Canlh %l-yment .07 - - - - - - - - - - - - - - lloua tng 1.06 - - - - - - - - - - - - - - Ronda .30 .30 .31 - - - - - - - - - - - - - IIIItinfi .05 .0 .05 - -, Oti'ora .18 .18 .18 - - - - - - - - - Total costs 2,61 2.18 1.02 ,45 .40 ,59 .54 54 ,54 .54 .54 .54 ,54 ,54 .54 .54 Net cani flow (2.61) (2.18) (1.02) (.45) (.48) (,59) .21 .66 1.03 1.38 1.70 1.98 2.17 2.37 2.43 2.49 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Production (toin) 2.25 2.1O 1.90 1.70 1,50 1,30 1.15 1,00 .85 .70 .70 .70 .70 .70 .70 Selling i rice 1028 1028 1028 1028 1028 1028 1028 1028 1028 1028 1028 1028 1028 1028 1028 Valuie of snalne 2.31 2.16 1.95 1.75 1.54 1,34 1.18 1.03 o07 .72 ,72 ,72 ,72 .72 .72 OperAtlolin I.Mbor .38 .38 .38 .38 .38 .38 .38 ,30 .31 38 , 38 .38 .38 .38 .38 1npprt" .16 .16 .16 .16 .16 ,16 ,16 ,16 .16 .00 00 .08 .0o .08 .08 Unveatoent costa - - - - - - - Inbor - - - - - - - - -. - - - -- - Fnrtlllaers/cI,ementl - - - - - - _ - _ _ _ _ _ _ _ I lKitorininl _ _ _ _ - Totnl cnsts .54 .54 .54 .54 .54 ,54 .54 .54 .54 .46 .46 .46 .46 .46 .46 Nlt enii. flow 1.77 1.62 1.41 1.21 1.00 0.80 0.64 .49 .33 .26 ,26 .26 .26 .26 .26 it/ Avorafge o rutblior on secondary forest, busih anel lains. i;/ 42 man-days per lo during production or 84 mnndays. EROR a 10.96% c/ Finnncial prlens of tertilirern. and agrochlemtcals EROR ' 15.902 (rtmbber only) lIncreased 62S to econoic valtuen. NPV I Rp 0.65 million wuhle sctiene SRDP SCIIRU1 - RCW0NOHC ANALYSIS 2 Ila RUIDER (Rp villllonJ 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Prod.ic.t ton (tons) - - - - .85 1.3 0 1.70 2,00 2 .3 0 2.60 2.80 2.80 2.75 2.60 SelllIn price (Rp) - 741 756 772 787 800 823 839 856 875 892 Vnie of uEnaten (Rp milliIon) - - - - .63 .90 1.31 1,57 1.86 2.14 2.35 2.6.0 2.41 2.32 Opernaltng costs M.ihar .36 .36 .36 .36 .36 .36 .36 .36 .36 .36 Input-- .19 .19 .ig .19 .19 .19 919 .19 .19 .19 InvesnLent conta n-- - - - - - Inhor .33 .30 .20 .12 .12 .12 - - - - - - - - _ FcrLliz.ers/clemlcals .51 .13 .19 .28 .29 .29 - HneI.t norv./toul,/lilunt Oat. .49 .02 .02 .01 .03 .09 - Agricultural macl.lt;ery .02 .02 .02 - - - - - - - - - - - - - Overiulin.tf/al: ter, .11 .11 .11 - - - - - - - - - - _ _ _ r-inli pnymuent - - - - - -- ------- IIw."n1. - - - - - - _ _ _ _ _ Ron8ln .00 .08 .08 - - - - - - - - - Buillluignr .02 .02 .02 OLlior,, 00 .05 .07 Totnl costs 1.64 .76 .71 .4t .44 .50 ,55 .55 .55 ,55 .55 .5 55 .55 .55 .55 Net connh flow (1.64) (0.76) (0.71) (.41) (.44) (.50) .08 .43 .76 1.02 1.31 1.59 1.80 1,85 1.86 1.77 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Proht.ietiow (ton.) 2.45 2,20 2.00 1.80 1.55 1.30 1,05 .90 .75 .70 .70 .70 .70 .70 .70 Selling, price 908 908 908 900 908 908 908 908 905 908 908 908 908 908 908 Vnlte of nilen 2.22 2.00 1.81 1.63 1.41 1.18 .95 .82 .68 .63 .63 .63 .63 .63 .63 Operntio n Inbor .36 .36 .36 .36 .36 .36 .36 .36 .36 .36 .36 .36 .36 .36 .36 Inplults .19 .19 .19 .19 .19 .19 .19 .19 .09 .09 .09 .09 .09 .09 .09 Inventment costs tohor - - - - - - - - - - - - - - - ForttlIw.ern/et.mcs{clu - - - - - - - - - - - - - - - llaterinis - - - - - - - - - - - - - - - n Tltal copts .55 .55 .55 .55 .55 .55 .55 .55 .45 .45 .45 .45 .45 .4 M45 Net ennl flow 1.67 1.45 1.26 1.08 0.86 .63 .40 .27 .23 .18 .18 .18 .18 .18 .18 MROR * 13.622 RROR 15.022 (rubber only) NPV I Rp 1.59 million whole aclhe.. MiPTE SCIIEIM - EWfNOHIC ANALYSIS1/ 2 Its RUIUFA (Rtp million) 0 1 2 3 4 5 6 I 8 9 10 11 12 13 14 15 Production (toeia) - - - - - - 0.60 0,90 1.20 1.50 1,70 1.90 2.00 1.95 1.83 Selling prien (Rp) - 746 761 777 799 814 829 844 863 880 Value of nAleo (Rp million) - - - .45 .68 .93 1,20 1,38 1.57 1.69 1.69 1.63 Inor- 0.30 0.30 0.30 0,30 0.30 0,30 0.30 0.30 0,30 Inputn/ - 0,10 0.10 0.10 0.10 0.10 0.10 0,10 0.t0 0.t0 0.10 Investment costs - - - - - - - - - - - - - - - lahor 0.70 0,20 0.20 0.15 0.11 0,11 0.11 Fertilizerf/clIeftenls 0.34 0.08 0.17 0.14 0.19 0.19 - - - - - - - - - - lUnterlnIn/eriiipsent 0.32 0.02 0,02 0.01 0,02 0,09 - - - - - - - - - - Agrtcultural mneclinery 0.03 0.03 0.03 - - - - - - - _ _ _ . _ Overhiends/m,nt tee .11 .11 .11 - - - ' CunIi payment - - - - - - - - - - - - - - - lb.,,tug - - - - - - - - _ _ _ _ _ _ Rlnn,ls 0.08 0.08 0.00 - - - - - - - - - - - - Sl tling. * 0.02 0.02 0.02 Otlho,rn 0.02 0.02 0.01 - - - - - - - - - Totni costs 1.62 .56 .64 .30 .32 .39 ,21 ,40 .40 .40 .40 .40 ,40 .40 .40 .40 Net csml flow (1.62) (0.56) (0064) (.30) (.32) (.39) (.21) ,05 ,28 .53 ,BO .98 1,17 1,29 1.29 1.23 a, 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30' Prorluctlon (tons) 1.70 1.53 1.40 1.20 1.05 0.95 0,85 O,lo 0,70 0.70 0,70 0.70 0.70 0.70 0,70 SetIling lurire 096 896 896 896 896 896 896 896 096 896 896, 896 896 896 896 Value of anlen 1.52 1639 1.25 1.07 0.94 0,85 0,16 0,72 0.63 0.63 0.63 0,63 0,63 0,43 0,63 Ope rat ionR Inalor .30 .30 .30 .30 ,30 .30 .30 .30 ,30 .30 .30 .30 .30 ,30 .30 1uiuiiltn .10 .10 .10 .10 ,10 ,10 .10 .10 .10 .10 .10 .10 .10 ,10 .10 huwanl.ment roata - - - - _ _ _ _ - _ _ _ _ I.ibnr _ _ _ _ _ _ _ _ _ _ _ _ _ Fertll Inrsr/clhe.icals - - - - - - - - - - - - - th.tnrlnln - _ _ _ _ _ _ _ _ _ _ _ _ _ _ ff Total cont. .40 .40 ,40 .40 .40 .40 .40 ,40 .40 .40 .40 .40 .40 .40 ,400 NMt cash flow 1.12 0.99 .85 67 .54 .45 .36 ,32 ,23 .23 .23 .23 .23 .23 .23 a/ Average of rubber on secondary forest, hush and lalang. b/ About III man-days per hIa or 222 man-days for 2 ha. MOILR 9.982 c/ FAnancial rriees of fertilitern anld agrochemlcals FROR * 10.802 (rubber only) IJscrsaned by 622 to economic values. NPV - Rp 0 million whole nieiome SPONTANEOUS - tEWOOHIC ANALTSISa/ (Rp million) 0 l 2' 3 4 5 6 7 8 9 10 11 12 13 14 15 Protsictlon (tons) - - 0,60 0.90 1.13 1.40 1,60 1.70 1,70 1.60 Selling price (Rp) - - - - - - - 761 777 798 514 529 845 865 500 Valise of asle.e (Rp mtillon) - - - - - .46 .69 .92 1.14 1.32 1.44 1.47 1.41 Ojperntilll coststl OAlsonu311 - - - - - - - - 0.30 0.30 0.30 0.30 0.30 0.30 0.30 0.30 InpstoSc/ - - - - - - - 0,05 0.05 0.05 0,05 0.05 0,05 0,05 0.05 Inventoent coats - - - - - - - - 1lthor 0.54 0.31 0.15 0.09 0.09 0.09 0.09 0.09 - - - - - - - - Ferttliter/clsetemienl 0.06 0.08 0.13 - - - - - - - - - - - - Ilateriel./equipsent 0.24 0.04 0.01 0.01 0.01 0.01 0.01 0.11 - - - - - - - - Agr(ctLttural wachlnery _ _ _ _ _ _ _ _ _ _ _ OverI!EadIa/5Mg5ULt fee 0.05 0.05 0.05 - - - - - - - - - - - Caniis paymenlt - - -- -- --- -- Ckin1nh atle - - - - - - - - - - - - - - -- RoneIu * 0.08 0.08 0.09 - - - - - - - - - - - Duildinga 0.02 0.02 0.02 - - - - - - - - - - - - - Otlters 0.01 0.01 0.01 - - - - - - - - - - - - - Total costs 1.00 0.65 0.45 0.10 0.10 0.10 0.10 0.20 0.33 0.35 0.33 0.35 0.35 0,35 0.35 0,35 1 Net casth flow (1,00) (0.65) (0.45) (0,10) (0.10) (0.10) (0.10) (0.20) 0.11 0.34 0.57 0.79 0.97 1.09 1.12 1.06 w 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Prrodiettos (tonit) 1.50 1.40 1.25 1.1,5 1.00 0.90 0.75 0.10 0,70 0,70 0,70 0,70 0.70 0,70 0.70 se lln price 896 896 896 096 896 896 896 896 596 890 896 896 896 896 896 Vatlin of snaes 1.34 1.25 1.12 1.03 0.90 0.81 0.67 0.63 0.63 0.63 0.63 0.63 0.63 0.63 0.63 ra"!rntio0" lbAor 0.30 0.30 0.30 0.30 0,30 0,30 0,30 0.30 0.30 0,30 0.30 0,30 0,30 0,30 0.30 Inpuits 0.05 0,05 0.05 0,05 0.05 0,05 0.05 0.05 0.05 0,05 0.05 0.05 0.05 0,05 0.05 Inventtent corto - - - - - - - - - - - - - - IaMor - - - - - - - - - - - - - Fertllltiz.ru/che.Letl - - - - - - - - - - - - - - - Hlaterials - - - - - - - - - - - - - - Total conto .35 .35 .35 .35 .35 ,35 ,35 .35 .35 .35 .35 .35 ,35 .35 .35 Nlet colsl flow 0.99 0.90 0.77 0.68 0.55 0.46 0.32 0.28 0.28 0.28 0.28 0.25 0.28 0.25 0.28 a/ Average of necositIary JunRle, bustI and lltlng. b/ About 111 man-days per lia or 222 man-days for 2 Ia, ER.OR ' 11.761 FInancial prices of fertilis.ers and ngrochtemicaln0 EROR * 12.971 (rubber only) iirerssetd by 622 to economic values. NWV * Rp 0.49 milLion whole celi.me HFf/PIR scIIE2B1 - 300IL40E1 MNALYSiS!a 2 fa- OIL6 PAlM (Rp millionT 0 1 2 3 4 5 6 7 8 9 10 11 12 13 i4 15 Prodhrtlon (torn,) - - - - 12 20 24 28 30 32 32 32 32 32 32 32 8elting price (RpOOO/t FFD) . - - 50 52 54 54 54 53 53 53 53 53 53 53 Value of antin - - - .60 1.04 1.30 1.51 1.62 1.70 1.70 1,70 1.70 1.70 1.70 1.70 OperatIn7 costs lAkrbo r .27 .27 .27 .27 .27 .27 .27 .27 .27 27 .27 .21 In"ItrtN/ - - - - .27 .27 .27 .27 .27 .27 .17 .27 .27 .27 .27 .27 lnventWlnt costn - - - - - - - - - - - - - - - lnhsor .58 .28 .24 .27 - - - - - - - - - - - I'ertlllr.erskhicmtenls ,69 .25 .44 .36 - - - - - - - - - - Macli Rerv./tootn/plant mnt. .37 .11 .06 .06 - Mirtetlttiiral equipment .04 .04 .04 - - _ _ _ _ _ _ _ _ _ _ Overlheado/mgnt. fee .25 .tO .13 .10 - Cash paymnt .07 ,-- - loudnsli - 1.06 - - - - - - - - - - - - - - Ronla . .30 .30 .31 - - - - - - - - - nultt(ling .04 .04 .04 Othaera .18 .18 .1 - - - - - - - - - - - Total conta 2.52 2.36 1.44 .79 .54 .54 .54 .54 .54 .54 .54 .54 .54 .54 .54 .54 liet casll flow (2.52) (2.36) (1.44) (.79) .06 .50 .76 .97 1.08 1.16 1.16 1.16 1.16 1.16 1.16 1.16 . ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I- 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Proatlttiog, (tana) 32 30 30 28 28 26 26 24 24 22 22 22 20 20 18 BSlitng price 53 53 53 53 53 53 53 53 53 53 53 53 53 53 53 Valun of saleo 1.70 1.59 1.59 1.48 1.48 1.30 1.38 1.27 1.27 1.17 1.17 1.17 1.06 1.06 .95 OperatIonn l,ihor .27 .27 .27 .27 .27 .27 .27 .27 .I7 .27 .27 .27 .27 .27 .27 Inptstn .27 .27 .27 .27 .27 .27 .27 .27 .27 .14 .14 .14 .14 .14 .14 lhiv,stment cost. - - - - - - - - - - - - Labor Perthllzsr/chgemtcals - - - - - - - 2 lhiterlnls - - - - - - Tltal contn .54 .54 .54 .54 .54 .54 .54 .54 .54 .41 .41 .41 .41 .41 .41 a Iekt call fJow .1.16 1.05 1.05 .94 .94 .84 .84 .73 .73 .76 .76 .76 .65 .65 .54 a/ Averagn. of oil psl entablist,ed on necondary forest, hshl flid lalsng. b/ nanedl on 71 man-days/lha upkeep and 30 pan-days/ha EROR 9.42 In hsarveating an average over life of oil, palm. FROR w 14.3S (oil palo only) e/ Based an NIFS V recommendations (IRIIO). IfPV * Rp - 0.41 million /1 INDONEiIA HF8/PIR SCIIEH. - ECOfHIC AHA/YSIS 2 lla WCONUTS - HlYBRIDf (Rp million) 0 1. 2 3 4 5 6 7 0 9 10 11 12 13 14 15 Production (tola)/copra - - - - 1.28 1.60 3.04 5.60 6.60 7.40 7.40 7.40 7.40 7.40 7,40 Selling Price (RpU00/t)b/ - - - - - 296 300 298 297 295 292 291 291 291 291 291 Vntie of sales - - - - *38 .4* .91 1.66 1.95 2,16 2.15 2,15 2,15 2.15 2.15 oporztinls costa l-abor t1i ot- - - ,16 .16 .16 .21 .21 421 .21 .21 421 .21 Fnintts - - - - .27 .27 .27 .27 .27 .27 .27 .27 .27 .21 hivestment contn - - - - - - - - - - - - - - - - Inbor .70 .26 .20 .18 .20 .12 - - - - - - - - - Pertittzern/cIhemcals .40 .12 .17 .18 .19 .19 - HeIe, serv./toola/plnnt mnt. .62 .08 .03 .04 .04 .04 Aritcultutrl. mekcl.inery .04 .04 .04 - - - Overlieacdu/mgut. fee .3t .06 .06 .00 .06 .03 Causi payment .07 - - - - - - - - - - - - - - Iloaiinng * - 1.06 - - Rondn .27 .27 .27 - ol Ili.ngn .05 .04 .04 - ftltwrs .17 .17 .17 - - - - - - - - - - - - - Totnt costs 2.63 2.10 .98 .46 .49 .4o .43 .43 .43 .48 .48 .48 48 ./ 48 .48 .41 Net Auelt 1tow (2.63) (2.10) (.98) (.46) (.49) (.02) .05 .48 1.23 1.47 1.68 1.67 1.67 1.67 1.67 1.67 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Produ.ntlon (tons) 7.40 7.40 7.40 7.40 7.40 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 Setiti.g price 291 291 291 291 291 291 291 291 291 291 291 291 291 291 291 Valun of natle 2.15 2.15 2.15 2.15 2.15 2.04 2.04 2.04 2.04 2.04 2.04 2.04 2.04 2.04 2.04 Uperntions Libot .21 .21 .21 .21. .21 .21 .21. .2L .21 .21 .21 .21 .21 .21 .21 tnputR .27 .27 .27 .27 .27 .27 .27 .27 ,27 ,27 .27 .27 .27 .27 .27 Invelm"ent costs- - - - - - - - - - --- L.mbnur Fert I I .re/caemlIcnIn - - - - - - - - - _ _ _ _ _ _ t Ih ter ltl r,,- - .- - - - - - - - - - - - - a. I Total. cnts .40 .48 .48 .48 .48 .48 .48 .48 .48 .48 .48 .48 .48 .48 .48 lint nsili flow 1.67 1.67 1.67 1.67 1.67 1.56 1.56 1.56 1.56 1.56 1.56 1.56 1.56 1.56 1.56 r , /l Develop on tree/bush lnni. M/ After *ledu:ctlon of Rp 46,000JT for processing, general ciarges and transport. ERROR - 11.72 ERROR - 15.92 (coconut only) NPV - Rp 1.35 million vhole actheme INDONF.IA RCDP SClE1I - 00HNOlQC ANAIYSIS 2 lln COWNUTS IIVURIDS!! (Rp million) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Peroihiction (tona)/copra - - - - 1,10 1.46 2.70 9.00 6.00 7.00 7.00 7.00 7.00 7.00 7.00 Selilng prtce (Rp 0001t)b/ - - - - 270 274 273 271 270 267 266 266 266 266 266 Vnlue of nales - - - - .30 .40 .74 1.36 1.62 1,87 1.86 1,86 1.86 1.86 1.86 OperatLi,i costn l.altoref - - - - .22 .32 .32 .32 .32 ,32 ,32 ,32 ,32 .32 Inpult- - - .15 .21 .21 .21 .21 .21 .21 .21 .21 .21 lnveatment costn - - - - - - - - - - - lAbor .70 .22 .15 .14 .14 .14 - - - - - - - - recL111rnitt.er{ ca1s .11 .18 .18 .19 .19 .19 - - - - - - - - - - Mhcie nerv./tool./plant unt. .60 .0S .02 - - .02 - - - - - - - - - - Agricittterat .acbinory .03 .03 .03 - - - - - - - - OverhIendN/m,pst. fee .15 .06 .06 .06 .06 .05 - - - - - - - - - - (Unni, pyment - - - - - - - - - - - - - - - - llnitn ng * - - - - - - - - - - - - - - - - lJul .IIng.. .03 .03 .03 - - - - - - _ - _ _ _ _ _ Otluer, .04 .n4 .04 - - - - - - - - - - - - Totnl coats 1.66 .64 .51 .39 .39 .40 .37 .53 .53 .53 .53 .53 .53 .53 .53 .53 Het cnniN flow (1.66) (.6b) (.51) (.39) (.39) (.10) .03 .21 .83 1.09 1.34 1.33 1.33 1.33 1.33 1.33 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Production (tons) 7.00 7LOP 7.00 7.00 7O00 6.60 6.60 6.60 6.60 6.60 6.60 6.60 6,60 6.60 6.60 Snilting price 266 26b 266 266 266 266 266 266 266 266 266 266 266 266 266 vntwe of sales 1.56 1.06 1.06 1.86 1.86 1.76 1.76 1.76 1.76 1.76 1.76 1.76 1.76 1.76 1.76 Operat tons lAbor .32 .32 .32 .32 .32 .32 ,32 ,32 .32 .32 .32 .32 .32 .32 .32 Inputs .21 .21 .21 .21 .21 .21 ,21 .21 .21 .21 *21 .21 ,21 .21 .2t 1nvantslent coats - - - - - _ - - - - - - - - Lrehor- - - - - ----- Fertil.eers/cliemicals - - _ _ _ _ _ _ _ _ _ * _ _ Hhter lnla - - - - - _ _ _ _ _ _ _ _ - Tottl costs .53 .53 .53 .53 .53 .53 .53 .53 .53 .53 .53 .53 .53 .53 .53 Net cnsh fCnw 1.33 1.33 1,33 1.33 1.33 1.23 1.23 1,23 1.23 1.23 1.23 1.23 1.23 1.23 1.23 a/ LstabIaIhed on bt.sh/laeing. 6 Snlen of copra witl, 151 moisture to middlemen. EROR - 14.72 c/ InclodeR labor for copra maklig. EROR - 15.32 (coconut only) NPV * Rp 2.25 million whole achene SCUP 5CIIaIC - BWOMI HgLYLL8 (Rp willon) 0 1 2 3 4 5 6 7 6 9 10 11 12 13 14 is Pro8uctlon (tons)a/ copfO - - 0.30 118 2,30 3,e0 4,20 4,76 5,513 5,58 5,58 ielling price (RpO0O/t_7 - - - 274 273 271 270 267 266 266 260 206 260 Vnllle of pales - - - 0,08 0,32 0.65 l,03 1,14 1,27 1.46 14 1,46 1,48 orsall cost,l IjMIaurt b/ costa - 0403 0,14 0,23 0,23 0,23 0,23 0,23 0,23 0,;3 0.23 Input. _ _ _ _ - 0,03 0,12 0,16 ,8 0. 0,19 0,19 0,18 0.19 O,18 ogle 0.39 lItvetment comt8 - - - - - - - - ' - - - - hliOr 01,70 0.18 0.15 0.14 0,14 0,14 0,10 0,05 - - - * _ - _ _ FertILi.eraoelie.talt 0.11 0.12 0.13 0.13 0.13 0.13 - - - - _ . . HPInc n.rv./toolu/plant Nut. 0.22 0,03 0,02 - - - 0.01 - - . - _ Agriculttiral macllnery 0,03 0.03 0,03 - - - - - - _ - _ _ (ivertueadu/mgmt, fee 0,15 0,06 0,06 0.06 0,06 0,05 - - - - - - - V.11sl paymenit - - - - - - - - - ------ IIouiIightg t , - - - - - - - - - - _ _ . _. _ - llondi -I1 - Uu[I.Itnge 0.03 0,03 0.03 - - - - - - - - - - - ottlere 0.04 0.04 0,04 - - - - - - _ . . _ _ Totnl costa 1,28 0.49 0,46 0,33 0.33 0.32 0,16 0.31 0,41 0.41 0.41 0,41 0,4l 0,41 0.41 0,41 NOL enlil flow (1.20) (0.49) (0.46) (0.33) (0,33) (0,32) (0.05) 0,01 0,24 0,62 0,73 0,86 1,07 1,07 3,07 1,0? 16 17 18 19 20 21 22 23 24 25 26 27 20 29 30 prodIuettIon (tonl) 5.58 5.50 5.58 5.58 5.56 5.10 5.10 5,10 5.10 5.10 4,76 4,76 4.76 4,76 4.76 SelliI,s price 266 266 266 266 266 266 266 266 266 266 266 266 266 266 266 V.lluo of Satlen l,48 1,48 1,48 t,48 1,48 1,36 1,36 1.36 1,36 1,36 1,27 1,21 1.27 1J2? 1,27 UparaLlonn labor 0.23 0.23 0.23 0.23 0.23 0.23 0,23 0,23 0,23 0,23 0,23 0,23 0,23 0.23 0,23 Inputs 0.8 0.10 0,111 ogle 0,10 0,111 0,111 0.10 0.10 0,10 0,10 Oslo Otte O,18 ogle I,uvoelment costa - - - - - - _ - _ _ _ _ _ - Labor - - - - - - - - - - - - - - - FertttiItera/Cl,emicale - - - - - - - _ _ _ _ _ _ Ilhterfals - - Total Costs 0.41 0.41 0,41 0,41 0,41 0,41 0,4 0.,4 0,41 0,41 0,41 0.41 01441 0,4 0,41 Nbt CEiull Flow 1.07 1t07 1,07 1,07 1,07 0,95 0,95 0.95 0,95 0.95 0,66 0,86 0,86 0,86 o0ee I.. d/ Copra of 152 molnture content, 5.58 tons equal. 4,96 T coprn of 5S Inca I/ lncludee labor for copra making, ROR " 12,7S EROR a 13,21 (coconut only) IYV * Np 1.03 million ,hola schees NM3 scilnti - FINANcIAL ANALYSIS 2 Its RtUIIIR~ (Coetatant 1984 Rp. rLLtion) 0 1 2 3 4 5 6 7 a 9 10 11 12 13 14 is Frodwct1oei (HT) .90 1.40 1,60 2,15 2,45 2,70 2,65 3,00 3.00 3.0 stlnTI 1tt ~770 786 802 819 814 057 873 890 911 927 Vniue of nilen .69 Io.1 1.44 1.76 1,99 2.31 2,49 2,67 2,73 2,78 0 ort1InA costs Inputs .10 .10 .10 .10 .10 .10 .10 10 0 tO 10 Investment cust -~~l4wnt- .69 ,30 .21 .l3 .12 .12 rertilIzre/cmllecNlIn .33 .06 .01 .15 .16 .17 JIJet./r1l1N Cfl I Ineit .46 .07 .04 .03 .03 .12 MArlcutturnl rmiclillery .05 .05 .04 Overilnll. .14 04 03 ,02 .04 ,04 CnnbI pny.eit ,07 IIiuining - 1.06 - lIruA tax * 0,03 0,05 0,06 0,00 0,09 0,1O 0,11 0,12 0,12 0,13 Totnt. cntu 1.74 1.38 0.40 ,33 ,35 .45 ,13 .l5 ,16 .18 .19 ,20 ,21 .22 ,22 ,23 tht canIt (low (1,74) (1,58) (0.40) (.33) (.35) (.45) ,56 .95 1,28 1,58 1,80 2,11 2,28 2,45 2,51 2.55 Debt repaymntit Itirnan toens .Iebt 16 11 18 19 20 21 22 23 24 25 26 27 28 29 30 Prmductlon (FIT) 3.00 2,90 2.75 2,60 2,40 2,20 1,95 l,70 1,50 1,30 1,10 .85 ,80 .70 ,70 WR4T7ig prtse 944 944 944 944 944 944 944 944 944 944 944 944 944 944 944 Vinnle o "nAlen 2,83 2,74 2.60 2,45 2.27 2,08 1.84 1.60 1.41 1,23 1.04 0,00 .75 .66 .66 Operntincsitc In bcor InKut., , to .10 I 0o ,10 .10 .10 .10 .1o .10 .04 ,04 .04 .04 ,04 ,04 Invetetmsit coat Hat or nlu/erlullpmont 4 Mrtc.slt,srat matnclmliery Ovea a endln Cnali pryment IIou4 it,g IPr'A tAx 0,13 0,12 0,12 0,11 0,10 0.09 0,08 0,01 0,06 0.06 0,05 0,04 0.03 0.0. 11.111 Totlnl coat .23 ,22 .22 ,21 .20 .19 .18 .17 .16 0,10 ,09 .00 ,07 .07 ,07 Not cAnnl flow 2,6 2.52 2.38 2,24 2,07 1.89 1.66 1,43 1,25 1.13 0,93 0.72 0,68 ,59 ,59 Debt repayment Income 1ton debt hROP ucilFnle - vi,HNCzA, AIiAi$15 2 Us RUBDER (Conetent 98W4 Rp. million) 0 13 4 5 6 I 8 i 10 11 12 13 M. 15 Protluctlon (IT) .05 1,30 1,70 2,00 2,30 2,60 2,60 2,60 2.75 2.60 -Mle iZ-price 600 694 709 723 742 756 771 786 604 319 Vilne of cteR s58 .90 1,20 1.44 1,71 1,96 2,16 2.20 2,21 2.13 ratng costs fffor Inpilta .12 .12 .12 ,12 112 2 .12 ,12 ,12 .12 Inveiiteent coaL labor l.7 .15 .10 .06 FertIll.r.era/chcuicanl ,31. .08 .12 ,17 ,18 .18 IlecIi.aerv./plant ntls .49 .02 .02 ,01 .03 .09 AprIrlitturat atichinery ,02 .02 .02 otliera 0,01 0.01 0.01 IrFAla tax 03 .04 0.05 O,U6 o0o, 0,09 0.10 0,10 0,10 0,10 Total cotts . 1.00 .28 .27 .24 .21 ,27 .15 .16 ,17 .18 ,20 ,21 .22 .22 .22 .22 Hat eneI, flow (1.00) (.28) (.27) (.24) (.21) (.27) ,43 ,74 1.03 1,26 1.51 1.75 1.94 1.98 1,99 1,91 Debt rnplymrmit Incono leta. *lebt 16 17 18 19 20 21 22 23 24 25 26 27 20 29 30 Production (HT) 2.43 2.20 2,00 1.80 1,55 1.30 1,05 .90 ,75 ,70 .70 ,70 ,70 .70 ,70 Soiliis price 833 833 833 833 833 833 833 833 833 833 033 833 833 833 833 Value of sales 2.04 1.83 1,67 1,50 1.29 1.08 81 .75 ,62 .58 .50 .50 .58 .56 .56 2 rting costE Injute ,12 ,12 .12 ,12 .12 .12 .12 ,12 ,06 .06 .06 .06 .06 .06 .06 lnvesLltent coat Ferti lizern/ciemsicals Ibcth.nerv. /ptanat ttli Mgritciltural machinery Otliet. H IPFDA tax 0,10 0.08 0.07 0,07 0.06 .05 .04 .03 ,03 ,03 ,03 ,03 ,03 *03 *03 I Total costs .22 ,20 .19 ,19 ,l8 ,17 ,16 .15 .09 *09 *09 .09 .09 .09 .09 Net cdas flow l,82 1,63 1,48 1,31 1.11 091 ,71 .60 .53 .49 .49 .49 ,49 .49 .49 Debt repaynet Income Mis. debt IRR 23. X /2 fItPTH-- RUBBMe- FINAUCIA ANAYSIS, (Constant 1984 Rp million) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Productlion (Ht) 0,90 1,20 1.50 1.70 1.90 2,00 1,95 .l.8 1.70 4011i'amprice 085 099 714 733 747 701 775 794 on8 Vnlue of falats 0441 0,63 0.86 1,10 1.27 1.'45 l.55 1.55 1.50 YLarnt L"R cost:. La n,r Inliits 0.06 0.06 0.06 0,06 0.05 0.06 0,06 00. 0.06 0.06 lnvestmanit cost Labor 0.70 0.20 0.20 0,20 0,15 0,11 Ol,l Phrttlyern/r hemlleil 0.21 0,05 0,20 0,09 0,12 0.12 llntnrlala/eqiilpment 0.32 0,02 0,02 0.01 0,02 0,09 Agricitttirnl icl,iinery 0.03 0.03 0,03 0,03 l1gKA tax 0,02 0,03 0.04 0.05 0.06 0.06 0.07 0.07 0.07 Total contn l.26 0,30 0,35 0,33 0.29 0.32 0.17 0,00 0,09 0,10 0,11. 0,12 0.12 O.M3 0.13 0.13 tEat canls flio (1.26) (0.30) (0.35) (0.33) (0.29) (0.32) (0.17) 0,33 0.54 0.75 0.99 1,15 1,33 1.42 1,42 1,37 16 17 t1 19 20 21 22 23 24 25 26 27 28 29 30 Productolon (IIT) 1.55 1.40 1,20 1.05 0.95 0.03 0.00 0.70 0.70 0,70 0,70 0.70 0.70 0,70 0.70 Sem 1Fili price 823 023 823 823 023 823 823 823 823 023 023 023 823 623 823 Vnlua of tnlet .1.40 1,20 1.15 0,99 0,86 0,70 0,70 0,66 0,50 0,58 0.59 0450 0.58 0.56 0.50 Oporatlns cents labor litnpts 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0,06 0,06 0,06 0.06 0.06 O0Of, 0.06 0,06 tnvestment cost Fertllttern/elieniCAlI Iti.erinls/eqtilpmoilt Agrictltural maelinery Ove rliendx Casl payment Ilou sinS tPWDA tax 0.06 0.06 0.05 0.04 0.04 0.04 0.03 0,03 0.03 0,03 0,03 0,03 0,0.3 0003 0o 03 Total coats 0,12 0,12 0,11 0,10 0,10 0,10 0.09 0,09 0.09 0.09 0.09 0.09 0.0'1 0o09 0,09 Ihet ensh flo( 1.28 1,1. 1.04 0.89 0.76 0.68 0,61 0,57 0,49 0.49 0,49 0.49 0,49 0,49 0,49 iiebt repayment Financial Rat. of Return * 15,2Z NIV at LOX Pp 1.75 million NES / 1IR - FINmANiAL MAY81S 2 It,s al Palm (Constant 1904 Rp. million) 0 1 2 3 4 5 6 7 8 9 l0 it 12 i3 i'- r- - l'otliletion (T) . 12 20 24 20 30 32 32 32 32 32 32 32 ItT1i- price 46 50 52 52 52 51 St51t 51 Si 51 51 ¶vrI.ue of "tMies ('*00)' ,58 to0 1,25 1,45 1,5$ 1,63 1.63 1,63 1.63 1,63 1.63 1,63 raigoast. Iniwita .16 .16 ,16 ,16 ,16 .16 ,16 .16 ,16 .16 .16 ,16 Investment cost labor .58 .28 .24 .27 Fortilixeru/cIhamicAia .42 .16 ,27 ,22 IIeclunh rv,/plant Mit .37 ,11 ,06 .06 ARricutturtl eouipt .04 ,04 .04 Uverl,n.ls .13 ,05 .07 .05 Cadli payme.nt *07 llou.uing 1,06 1I17FIA tnx , 0.03 0.04 0,06 0.00 0.07 0,07 0,07 0.07 0.01 0,07 0.07 0.07 Total costs 1.61 1,70 0.68 0.6 ,19 .20 .22 .23 .23 ,23 .23 .23 23 ,23 .23 .23 Not cnah rtoil (1.61) (1.70) (0.68) (0.6) .39 080 1.03 1,22 1,33 1,40 1,40 1,40 1.40 1,40 1,40 1.40 Debt rtpayment Income lean debt 16 17 1s 19 20 21 22 23 24 25 26 27 28 29 30 Production (T) 32 30 30 28 20 26 26 24 24 22 22 22 20 20 is - 8elIIng prteo L S 51 51 51 51 51 St St1S 51 51 51 St 51 Sl 51 5 Vatina of sales 1.63 1,53 1,53 1.43 1,43 1.33 1.33 1,22 1,22 1.12 1.12 1,12 tO12 1.02 ,92 Opetntillg colits UAior Jnhilti .16 .6 .16 .16 .16 ,16 ,16 016 .09 .09 ,09 .09 t09 *09 Investment cost ,Inior Fert: II,. et/clienictats Hacl,suerv./piRnt wmt Aricultti,ratl equipt Overhiendnm Ctull payment louninR a 1Pfft tmx 0,07 0.07 0.07 0.06 000 006 0.06 0.05 0.03 0,03 0.03 0.03 0,05 003 0.04 Total costs .23 .23 .23 .22 ,22 .22 .22 .21 .21 0,14 .14 14 ,14 .14 .13 Not V.asl flow 1,40 1,30 1.30 1.21 1,21 1.11 1.11 tool 1,01 096 .98 .98 .8a .81 .79 Debt repayment Income tens ilebt IRR 1 17.0S NM5 / PlR - FINAHCIA. ANALYSIS 21 lln COcONUTS - IIVRID9S Oo- 1-t at sm7 tRp. iiTMln) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Pro)Iuction (MT) 1,28 1.60 3,04 5,60 6.60 7.40 7,40 7.40 7.40 7.40 7,40 SmIling prica Rp'ooo/T 279 203 281 280 278 276 '275 275 275 275 275 VIlue of acnte .36 .45 .05 1.57 1,u3 2.04 2.03 2.03 2.03 2,03 2,03 2p4Irating costs Inputit .06 .17 .17 .17 .17 .17 .17 .17 .17 .17 .11 Investoealt cost I^1;F,or . .70 .26 .20 .18 .20 .12 Fertill.ern/cIreicaI. .25 .01 10 . I12 .12 TooIu/ncdh./plant "fit 62 .08 .03 .04 .04 .04 Auricult.gral rnciliiery .04 .04 .04 ovrrlwn,io I .16 .03 * .03 .03 .03 .03 Dinha pMymlot .07 Ik..uing l.06 IPFJIA tAx .02 .02 .04 .07 .0 0,09 0.09 0.09 0,09 0,09 0.09 Total costs 1.84 (t,54) (0.40) 0,36 0.39 0,39 .19 21 .24 25 ,26 .26 .26 .26 .26 26 Iket enl fl low (1.64) (1.54) (0.40) (0.36) (t39) (.03) .26 .64 1.33 1,58 1,78 1.77 1.77 1,77 1,77 1,7 Delit repayoent Inn-own lr"is dolht In,!aufl Imi. ,i.i.t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 'roductlott (NT) 7.40 7.40 7,40 7.40 7.40 7.40 7.40 70 7.40 7.40 7.0 7.0 7.0 7.0 7.0 Belting price Rpowo/T 275 275 275 275 275 275 275 275 275 275 275 275 275 275 275 Vatle of ORlO 2,03 2.03 2.03 2.03 2,03 2,03 2,03 2,03 2,03 2,03 1.93 1,93 1,93 1,93 1.93 Ope,ratinag costs babor Innutu .17 .17 .17 .17 .17 .17 .17 .17 17 ,17 .17 17 .17 17 17 Investment cost Fertiti.onrs/chalmcnal Toou/mcli. I./plant mat Agricultural macitinery Of e rhends CA,h pAyment IPIWA tax 0009 0,09 0,09 0.09 0.09 0,09 0,09 0,09 0,09 0.09 0,09 0,09 0.09 0,09 0.09 total coats .26 .26 .26 .26 .26 .26 *26 *26 ,26 *26 ,26 ,26 .26 .26 ,26 met cash ftow 1.77 1,77 1,77 1.77 1.77 1,77 1,77 1.77 1,77 1,77 1,67 1,67 1,67 1.67 1.67 Debt rnpayment Fit -Incom less debt I O I R R I 6o.0 S_ 8cD' scIIrizI - FiNANCIAL ANALYSIS 2 lln QCNTs - 11YDRlD9s (Contaiit Rp, nmillion) 0- O 1 2 3 4 5 6. 7 a 9 10 it l2 13 14 15 iruiIuct1on: fir) t,o10 1.46 2,70 5,00 G,00 7,00 7.00 700 7.00 7,00 7.00 Settiiin price Rp'ooo/11T 247 250 249 247 246 244 243 243 243 243 243 VnIwin of nsles ,27. .37 .67 1.24 1.48 1,71 1.70 t.70 1.70 1.70 k,i0 UPOFat"\^o t Mtn IlniNitN .06 .09 .13 ,13 .13 .13 ,13 .13 .13 .13 ,13 LnveatLitut coat 1tAior 0.27 0.05 0.04 0.04 Fe rtI i Iera/cltieIclt I ,U7 0.01 0,11 0.11 ,12 .12 .12 Toolm/mctch./pinnt mat 0.60 0.00 0.02 0.02 Agulcultural. imchltnery 0.03 0,03 0.03 IF8IIA tax 0.01 0.02 0,03 0.06 0.07 0,08 0.08 0,00 0.08 0,08 0.08 Total caste 0.97 0.27 0.20 0.16 .12 0.21 0,11 0.16 0.19 0.20 0,21 0.21 0.2t 0.21 0,21 0,21 lEnt cnRh flot (0.97) (0,27) (0.20) (0.16) (.12) 0.06 0,26 0.51 1.05 1.28 1.50 1,49 1,49 1,49 1.49 1.49 Debt repayment Ineomne lens olubt 16 17 l 19 20 21 22 23 24 25 26 27 .20 29 30 Prodtrctlon (IIT) 1.00 7.00 7,00 7,00 7,00 7.00 7.00 7.00 7.00 7.00 6.60 6,60 6.60 6,60 6,60 SPIRiii prlee Rp'ooo/HT 243 243 243 243 243 243 243 243 243 243 243 243 243 243 243 Vntne of onl.e 1.70 1,70 1,70 1,70 1.70 1,70 1,70 1,70 1.70 1.70 1.60 1,60 1.60 1.60 1.60 9.ly.!ting Coats Inboe lipits ,13 ,t3 ,13 ,13 .13 .13 .A3 .13 ,13 .13 .13 ,13 ,13 ,13 ,13 Investment Cost ishor FrrttlimngN/cttemienIt Tools/Iicll./plntt Mit AnrIcu1tternl uaehltery Overliendn/mgt fees Clnln / pMyWnunt Otlrttrn IrFJ)A tax 0.08 0,08 0.00 0.08 0.00 0.00 0,00 0.08 o0o, o.oo o0oo 0.08 0,00 0.08 0.00 Total cost, 0.21 0.21 0.21 0.21 0.21 0,21 0,21 02 0,21 0,21 0*21 0,21 0,21 0.21 0.21 a Not canli flow 1.49 1.49 1.49 1,49 1.49 1.49 1,49 1.49 1,49 1.49 1,39 1.39 1,39 1.39 1,39 o - Debt repayment Income lettn debt I R R 1 25,7 w 1il1AHOIAI. AHALYSIS18 A2 UU COtiOIUCIHO 1964 Yr,l Yr.2 I t J Tr.4 Tr.5 tr. 6 tr7 Yr.6 Ytr.9 r.1O Yr ll Yr.2 Vr ,13 Yr.lt Yr,15 Xr.1A tr.11 Yr.16 tr.19 Yr.20 IIIFIATIoIll FACTOR 1.06 I.11 1. 1 1.41 1.54 1. 61 1.15 1.86 1 91 2.09 2.21 2 ,35 2.49 2. 6 1 9 1.96 3.14 3. 13 1.5 3 14 RAI.S (rIISrAllr) n.00 0,00 o0,w 0.00 0.00 o O.o 0.69 1.0 1.44 3.16 1.¶9 2.21 2.49 2.67 2,13 7.78 2.83 2.74 2.60 2.45 ctioir (CUIISTAllt) 1.14 1.58 0,40 0.33 0. 15 0. 45 0.00 0.00 0.00 0,00 0.00 0.00 0.00 0.00 0,00 0.00 0.00 0,00 0.00 0.00 CArIMP.IIJ 1111 1FR 1r seMYICK %OIIITAIIT) 0.00 0.00 0.00 0.r 0,00 0.00 0.56 0.9 9 1. 2 1.3I9 1,60 2,11 2 s 2, 45 2.51 2.55 2.60 2 52 2.3 2, 24 1. CtIJIIRFIT lFFtlS IIIALLIIOLORR CASIIFIo - NrAnIIIEIIr 255 or 6ALUS (PP. IIILLION) SAIF's 0.00 0,00 0.00 0.00 0.00 0.00 I.tl 2.04 2.54 3 61 4.40 5 42 619 7t.04 1,62 6 23 6.68 9. 11 9.11 9.16 *tt:nlIT vIsillmmmir2 1.04 1.84 0.S1 0.41 0.54 0.14 0,00 0.00 0.00 0.00 0.0 O.0 0.00 0,00 0,00 0,00 0.00 0,00 o.0n o ,oo CIIUIARIVM (tPill? 1.84 3.69 4 10 4.61 5. 0 5.95 orEeiitl 1lI1fcIrAI. INC. INITREST 0.00 1.84 3 69 4.20 4.61 5.60 1.t26 815 . St 8.61 8,96 t B1 B.50 7.58 6.96 S.1 4.28 2.45 0 it 0.00 2l SAL.r5 . 0.00 0.00 0,00 0.00 0,00 0,00 0.00 o.St o,ll 0,92 1.30 1.31 1.55 1.76 1.91 2 06 2. 22 1.20 2.19 0.00 I11ERKm?T 1211,491lI F1,8,3VR1 MrACK 0,00 0.00 0,00 0.00 0,59 0.74 0.61 0,95 0.99 1.01 1.01 0.98 0.93 0.84 0.72 0.17 0.38 0.16 0,02 0.00 I rIilictprl. REPAYIICHf O.W 0.00 0.00 0.00 (0.59) (0.74) (0.81) (0.44) (0.18) (0.09) 0.09 0.31 0.62 0.92 1,19 1.49 1.84 2.11 0.32 0,00 1i1n or YEAR IRINCIPAI. 1.84 3.69 4I,O 4.61 5.60 128 5.15 8.59 8.871 8.96 8,81 8.50 7,68 6.96 5,11 4.26 2.45 0.32 0.00 OW0 AY.AA1.A 11.. tRIIICirAL IlC.tIIE.RM.ST 0.92 2.17 3.94 4.43 5.23 6.4S 7712 ,32 6.13 8.92 1.91 8.fi8 6a 19 1.42 6,13 5.03 3.38 136 11.16 t.01on a Av.RAI.AIt: lrt I' U IIICIrAl 0,92 2.11 3.94 4.43 4.93 5.58 5.95 5.9 5.93 5.5 5.95 3.95 5.95 5.95 5,66 5.02 3. 3r 1.11 I. I n.nn I~A5IIrIACn nrtt Illes NINvicI.0.00 0.00 0.00 0.eo0 0.00 0,00 0.98 1.16 2.52 3.30 3,98 4.95 5.61 6.46 7.01 1.55 8.1f it. M M11.13 11.11 firT CA111FIAAl Arl1tR PlUT SARVICr 0.00 0.00 0.00 0,n0 0,00 n,00 0.98 1.25 1.81 2368 2.88 3.59 4.12 4.10 5.10 5.49 5.94 fi I 11 Ii.li t ,I SRI CASIULOW tLLCCTION 802 - PrIAIrluIT 23J or SALCS - (Kr. 111.LION) IIIFrLOI IrRliTi't paluinI (a8n1) 0.00 0.00 0.00 0.)00 0.47 0.39 0.70 0.76 0.19 0,1 0.81 0.79 0,74 0.61 0,58 0.46 0. 1 n 11,1I 11n111 0.1111 Prlin.ipol Iipayments (601) 0.00 0.00 0.00 0.00 (0,41) (0,59) (0.70) (0,35) (0,22) (0,01) 0.0 0.30 0.50 o,014 0,9 1.19 1.41 1.111 11, l, 0.1111 Wilt.g,eugt paymenti; (142) 0.13 0.39 0.55 0h62 I,veornrmot eypm.nt. (3.51) o0.1 10,2 O,21 0,29 0o2l 0,21 0.331 0.30 0.29 0.26 0.21 0.18 0.12 0,115 11,111 11,n1 isihtutat 0.13 0.39 0.55 0,62 0,15 OJI 0,21 0.70 0.81 1.05 1,19 1.39 1.52 1.61 1.75 1.82 1.111 I,M1 1I,l na, rJUlf l.OY 7j1in 6rabnrsed 1.84 1384 0.51 0.41 0.54 0.14 0.00 O.oo, 0.00 0.00 0,00 0.00 0,00 0.00 00oo 0.00 0.1141 11.1i U n.nn l m,,ll,.4 Ovethieal (SI) 0.05 0.14 0.20 0.22 0.25 0.28 0.30 0.30 0,30 0.30 0.30 0.30 0.10 0,30 0,29 0.15 0.11 11.111 11.111 11.111 4t ,t of Pit r,Vo-le (aIt) 0.01 0.22 0.32 0.3O 0.39 0.45 0.48 0.46 0.46 0.48 0,48 0,40 0.48 0.48 0,41 0.40 0.21 11.11 11.111 n.on rf,,fit (IX) 0.01 0.03 0.04 0.114 0.05 0.06 0.06 0,06 0.06 0.06 0,06 0.06 0,06 0.06 0.06 0.05 0.01 11,111 n. (Ml 0,00 N,llt.l.t,,t 1,91 2.23 1.01 1.19 1,'2 1.52 0.83 0,63 0.83 0.63 0.83 0.83 0.18 0.83 0.51 0.10 0.41 0.19 0.,1 o 0.00 IIer CASIILOVE (1.64) (1,84) (0.53) (0.41) (1.05) (1.30) (0.56) (O.IJ) 0,04 0,21 01,6 0,55 0,69 0.83 093 1l2 142 4t ,611 0.10 n,o00 t' Tntr Nr't. Ceahf low 0.40 Averge rFure rrIncdAl 4.52 F 0' ICIAl" rIr Tear as 0.46 FINANCIAL AIIALYVII - l IAj hUS C0OltN6CIH0 1984 lr.I l ri Vr.3 Yr.4 Vc.5 Yr.6 r.72 Yr.6 Yr.9 Yr.10 Yr.11 Yr.12 Vr.13 Yr.14 Yr.15 Yr.16 Vr.1 Yr.le 19 Yr.20 I1ntin,hTjiA FAVIOR 1.06 n1.41 1.28 2.42 2. 1.63 7S li.e6 19.57 2,09 2,21 2,35 2.49 2.4) 2,79 2.96 3.14 3.33 3.) 3.14 SAl.S (lSAIlT) 0.00 0.00 0.00 0.00 0.00 0.00 0.69 1.10 1.44 1.16 1.99 2.31 2.49 2.61 2.73 2.1- 2.82 2.14 2.60 1.45 CEtnit (nfIMrAilt) 1.74 1.59 0.40 0.33 0.35 0.45 0.00 oo . 0.00 0.00 0,00 0,00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 WAHIPI01 5ll n01T 8rAV.IC (ColISIArI) 0.00 0.00 0o00 0.00 o 00 oo ono 0.36 0.9 I.'6 1.6 2,60 2.1 2,18 2.4s 2.31 2.15 t.60 2.32 2.36 2.24 L11t5521 IU11512 IIALU S CASIIFLOrtAW - SLWAIEINT 231 of SALU (Sr. I9IL.LI2o) SAIES 0o00 0.00 0.00 0,00 0.00 0.00 1.21 2.04 2.84 3.61 4.40 5.42 6.19 7,04 1.62 5.23 6.88 9.11 9.21 9.1. titinlr n1I51SDVITr 2.64 1.84 0.31 0.41 n s4 0.14 0.00 0.00 0.00 0.00 0,00 0.00 0 0o 0.00 0.00 0.00 0.00 0.0n (.nn II .21 JMLI2lAKItV. utvnUT 1.64 1.69 *.420 4.67 5.20 5.93 orililNo ItI IlmrAi IltC. 1NIF.ESlT 0.00 1.84 3.69 4.20 4.61 5.80 7.28 6.215 A,3 a.O? 8,96 6.87 6.50 1.66 6.96 5.11 4.28 2.43 0.12 11.1141 IS1 nAIrS 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.51 0.11 0.92 1.10 1.35 1.55 1. 16 1.91 2.06 2.22 2.7 729 11.110n 211151FST 17Yl,4S 1116,3955 A 0tACt 0,00 0,00 0.00 0,00 0.59 0.74 0.81 0.93 0.99 1.01 1.01 0.96 0.93 0.84 0.12 0.51 0.38 0.lr 0.111 21.11( MSIIICIPAI. RRI'AVllKIlt 0.00 0.00 0.00 0.00 (0.39) (0.14) (0.91) (0,44) (0,28) (0.09) 0,09 0.31 0.62 0.92 1219 2.49 1.54 2.1i n.31 11.111n t1ii. or VEAR 1R5lCIrAl. 2.84 2.69 4.20 4.67 5.8o0 128 8.13 8.59 8.81 8.96 6.87 8.50 7.6 6.96 5,11 4.26 2.43 0.33 0,.n1 11. 10 AV.IAI.NIICR II1CIrAI. 1IHC.lNTCllST 0.92 2.1 3.94 4,43 3,23 Of054 1.12 6,31 6873 Olt? 6,91 8,68 8.19 1.42 6,? 5.03 3.36 1.311 0.14 000 AY WAIAIIEE 11illR 9IlIC22AI. 0.92 2.71 1.94 4,43 4.93 5.S6 5.95 5.95 3.95 5.95 5.95 5.95 5.95 5.95 5.86 5.03 3,36 1.36 0.16 0.00 CASiIrl.o( pFt DUT s5659t; 0.00 0.00 0.00 0.00 0.00 0.00 0,96 1.16 I.ts 3.30 3,98 4.95 s.61 6.46 1.01 1.3 8.16 8.6 6.39 6.21 IIr. CAIEIuFl ArirS 1irlT sERvIcr 0.00 0,00 0.00 0.00 0.00 0.00 0.98 lots 1.82 2,38 2,68 3,S9 4.12 4,10 5,20 5.49 5.94 6.10 6,05 8.31 11R2 CASIrFLOW COLLECTICII 55Z - KEPAVIIVT 251 0r BALKS --(RV. IIILLIOlI) 711, e4i paymients (32) o 0.00 0,00 0.00 0,00 0.50 0.62 0.14 0.82 0.64 0,66 0.66 0.64 0.79 O.1L 0.61 0.46 0.31 0.13 0.02 0.00 IrIncIrAl fep.ttmetitu (953) 0,00 0,00 0,00 0,00 (n.50) (0,63) (0.74) (0,37) (0,24) (0,08) 0,06 0,32 0,13 0,18 2.02 12.1 1.56 2.80 0.21 0.00 Ct1olvitnlet rAyFr-nte (Mtil 0, 0.39 0 S) 0.62 1f%l,loeg it rAyue.ta (3.52) 11,2l 0,22 0.21 0.19 0.31 0.31 0,31 0.30 0.29 0.26 0.,2 0.18 0.,2 0,03 0.02 0,00 S111,10/I o0.13 0.39 0,55 0.61 n.1e 0.23 0,21 0.13 0.91 1,09 1,25 1,46 1260 1 75 12,4 1,92 2,01 2.99 0.30 0.00 eśnUiFLeIltr.l 1.e :,4 I.4 051 0.41 0.34 0.14 0.00 0o00 0.00 0.00 0,00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0-00 Lion,1nI Overfl,ud (52) 0,05 0. 14 0.0 0, 2 0.25 0.28 0.30 0.30 0.20 0.30 0,30 0 30 0. 30 0.30 0.21 0.25 0.II 0.01 0.01 0.00 r ..t of KI. h?ndm (522 0,02 0 22 0.32 O .3 0 1.39 0.45 0.46 0.48 0.48 0.48 0, 46 0,48 0,4 04 5 0.41 ,40 0.21 0.22 0.01 0.00 r:.,iIs (122 0.01 0.03 0.04 0.04 (.05 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.05 0.03 0,01 0.00 0.00 21.ht,,I 1 529? 223 2.01 17 , 19 1.23 2,52 0.63 0.61 0.63 0.63 0.63 0.85 0.63 06)1 0,62 0.0 0,41 0,19 0,02 0.00 mrist ure (1.80 (1.24) (0.31) (0,41) (1905) (1,30) (0.36) (0,11) 0,06 0.26 0,41 0.62 0.1 0.92 1.02 1.22 1.53 1.19 0,21 n. 0 TSINT-wt~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~s t.O A,016 ?w,e gitfielpAl 4.52 5 lIa,~2n Pet Wee, a. 2 1.43 1 KUBP1. riIANC3AI. MIAI.3S -3 rm7. IIES WlIiflllCI N0 1984 Vr.I Vr 2 Yr.3 Tr.4 Y.S Vr.6 Yr. Tr.7 t .9 Yr. 10 Vr.11 Vr.ll Vr.13 r 1 6Yr.11,S Yr,16 Yr.lI Yr,A Vr,19 Yr. to 1IIIA1TIOII FACTOR 1.06 t.l1 1.731 1.41 1.54 1.6S 1.15 3.86 1.91 1.09 2.It 2.35 2.49 2.63 2.19 2.96 3.14 3.3) 3.33 3.14 A1J.9s (WHSaTAiir) 0.00 0.00 0.00 0.00 0.00 0.00 0. 69 130 1 44 1.16 1.99 2.31 2.49 2.61 2.13 1.16 2.83 2.14 2.60 2.45 (Ulill? (ColISTAHlT) 1.14 1.5S 0.40 0.33 0.35 0. S 0.00 0.00 0.00 0,00 0.0. 0.00 0.00 0,00 0o00 0.00 0.00 0.00 0.00 0.00 rAtslillt oIlR nIurT S.tVIC.r (WnlOrTAIt) 0.00 0.00 000 0.00 0.00 0.00 0.5 6 0.9$ 1.28 1.56 1.80 2.311 to ,s LAS . 2. 55 2.60 2.51 . 8 2. 24 la 4es A4AII44AA AAA A As A. &,..,AAAAAAAMAA,aa A a A4 AOam am aAma.AA aAlam AAa4A A A amaaaaaA A aa IaOAAAAAIaIAA&AA4 MAi iA IAi # d 6 i 61 1:1mRflt tiRlS 6IIALI,IIOLDER CASIlriJ - AErAYIIE3 251 or ALES (ItF. HL3.L30oN RALrs 0.00 0.00 0.00 0.00 0.00 0.00 1.21 2.04 2.84 3.67 4A40 S-42 6.19 1.04 1.62 8.231 6.8 a .11 9.31 9.16 Arnflr 1'35R3ISrIt9IIT 1.84 1.64 0.51 0.41 0.54 0.14 0.00 0.00 0.00 0.00 0.00 o.no 0,00 0n On 0.00 0.00 0,00 0o hn 0.00 0.on ItiBlillAfVE T. IIllIT 3.84 1.69 4.10 4.f1 S.111 S.95 ,,rrjgliM : rRtIIeIrAI. INC. INIE.RMT 0.00 1.84 3,69 4. 20 4,61 5.o ?-.2t 6.35 5.59 8.81 8,96 8.81 8. SO 7.88 6.96 S.1 4. 28 2 4S 0.32 0.00 2i2 SAL-1A. 0. 00 0.00 O .00 0 00 000 0 00 0.00 03 S 0.11 0. 92 1.10 1 3 1.55 1 16 1.91 2.06 2.12 2.18 1.29 0.00 IIIIERMT.1t 1211,41AS 3 8F,31111 rNAI: 0,00 0.00 0.00 0.00 0.St 0,14 0.81 0. 9 0 99 1301 1.01 098 0. 93 0. 84 0.12 0.51 0.38 0.t6 0.02 0.00 lllW:IAt. SEPAMIillT 0.00 0.00 0.00 0.m (0.59) t0.14) (081) (0,44) (0,28) (0.09) 0.09 0.31 0,62 0.92 1319 3.49 1.64 2.13 0.32 0.00 Frln or ? IFAR tIIIllFAI. 1.84 3.69 4.20 4,67 5,80 1.28 6.15 8,59 8.`1 8.96 L8.t 8.50 T188 6.96 * 5,1T 4,28 2.45 0.32 0.00 0.00 AV.AIM.MII7b ttINEIAI. IIIC.3UFAMT 0.91 2.11 3.94 4.43 5,13 6.54 ?.72 8 831 6,13 8.92 8.91 8.68 8.19 7.41 6.31 5.03 3.36 1 38 0.16 0.00 AVMWAIAIICK. n3Mw. 3tIHr.IfAI. 0.92 2,11 3.94 4,43 4,93 5.58 595 5.95 5.95 5.9S 5.95 5.95 5.95 5.95 S.lhf 5.03 3.36 1.38 0.16 0.00 rA.iII?IAWU rFR DEBT sBRvIC 0.00 0.00 0.00 0.00 0.00 0.00 0.98 1.16 2.52 3,30 3.98 4.95 5.61 6.46 1.01 1.55 6.16 8.38 8.39 8. S DRYT CAMirLFIN ArlRt IIT StFAVICK 0,00 O.0 0.00 0. o0n o.0 O.0 0.91 1.25 3.8 2,38 2.88 3.59 4.12 4.10 5.33 5.49 5.94 6.30 5.05 8,31 OKI CASIfIFL QU,EMu.cr3 90S - KFFAYIIEIIT 251 oF SAt.t - AR rE Ah3LI.30II) 3Il1LIAI 61.;.-.et rayue"tit (fl) 0.00 0.00 0.00 0.00 0.53 0.61 0.19 0.65 0.69 0.93 0.91 0.66 0.63 0.,6 0.65 0.51 0.34 0.14 0.02 0.00 r,in.i'ipa 1e1.ay..Ilts (9033 0.00 0.00 0.00 0,00 ((,53) (0.67) (0.79) (0.39) (06,S) 30,06) 0.0 0.33 0.56 0,83 I.0r 1.34 1.66 1.91 0.29 0.00 i4ovefmlent raylmnm (3143) 0.13 0.39 0.55 0.62 Ilive,fqnP,Imt raq,. m (.51) 0.16 0.23 0.21 0.29 0,31 0,31 0n31 0o30 0.29 026 0.22 0.16 0.31 n.1ns nj.n .0nn 54t.*.tAl 0.13 0.39 0.55 n.62 U.18 0.21 0.21 0.75 0.94 1.14 13 0 3.52 13.68 I.A4 1.9A 2.03 2.2 2.11 0r n 1 n nn OU II 1AA i ;;. 1-1-i-d it iklh i tv 1.84 1.84 0.SI 0,41 0,54 0.14 0.00 0-00 0.00 0.00 0-00 0.00 0.00 0.00 0.00 0.00 0.00 n1,1111 nn ,11 11.110 Ien.11ng 0vi3.qa.I (SI) 0.05 0.14 0.20 0,22 0.2! 0.26 0.30 0.30 0.30 0,30 0.30 0,30 0.30 0.30 0.19 0,75 0.17 11.117 0.111 11.(O LnqI of1 983 frnils (6t) 0.01 0.23 0.32 0.35 0,39 0.45 0,48 0.48 0,48 0.48 0.48 0,48 0,48 0.44 0,47 0,40 O. 11.11 0..111 II. no Proikt (31) 0.01 0.01 0,04 0,04 0.05 0.06 0.06 0.06 0.06 0.06 0.06 0,06 0.06 (.06 0,06 0.05 0.03 O. lnnl II. l5 11.11( 511himtill -,1,7l 2,21 2,01 3.09 1,23 1.52 0,83 0,8) 0.83 0,83 0.83 0.83 0,81 0,61 0.87 0,70 0.41 It.11 tt,112 11.11(3 3IEr rAsliriAJ (1.64) (31.4) (0.51) (0.41) (3,05) (1,30) (0.56) (0,06) 0.13 0,31 O,41 0.69 0.85 1,01 131. 1.32 1.64 1.3 1 11- 11,1) T-Fiil- 1WW lAsh(iov 1.01 Awef.gf ri't.g llrli;cIpal 4.S2 3349Xl (I)Fer Yc.lr *o 1 2,43 1 x . . . . _ .. ............ .... .. ..... . ... ..... _ 1 riIIAltCIAL AI3ALYS IS - 347.8 7 VOlililCIIIO 395 Vr.l Tr.2 Tr.3 Tr.4 Y Tr,5 .6 Yr.6 Yr., Yr.9 r.o Tr .IrI Yr.12 Yr, 13 Yr,4 lr,lS Yr.16 Yr.11 Yr,1. Yr.19 r. 20 IIIFl.ATIIN FACrIlt 1,06 1.11 1.28 1.41 1.54 1.65 1.15 1,16 1,91 2.09 2.31 t.35 2I49 2.6 1 it 2.1 6 3,31 ).) 1.5)3 7.4 SNA.LF (IM MIT)rtio) 0t.10 0.0o 0o.(i 0.00 n,oo0 0.00 n.6s9 i.o 1,44 1.16 1.99 2.31 2.49 2,42 2, 3 3.IN 2.333 2.14 2,60 7.43 iiroiir (MIISTrAll) 1.14 1.58 0.40 0.33 0. 35 0.45 . Oo, 0.00 0.00 0.00 0.00 0,00 0.00 0.00 0,00 0.00 0.o0 0.00 ,,00 .00 (ASIIFII43 AIR 1EN8T SER1VICE (aHISTANt) 0.00 0.00 0.0o, 0.n 0.0w 0.00 0.o56 0.n95 .28 1.58 3.80 2.11 2. 2 2. 45 3.51 2.5S 2.10 2. 52 2,83 7.14 clIRKfniT 11.11115 jjIAL10,0N CAIIt.0WS OWAYiIr or SAM.28 (cRt, lltl.l.lOlt) SALFS, 0.00 0.00 0, 00 0, 00 o,oo 1.21 2.04 2.84 1.61 4.40 5,42 6.19 1.04 7.62 8.23 8.88 9.11 9.11 9.16 (.t2nlT 1I)SMIRSFIMIFT 1.84 1.84 0.SI 0,41 0,s 0.14 0.00 n,u0 0.0o 0.00 0.00 0.00 0,00 0o,0o 0,00 000 0.00 o,no W WI II,HI II.o IIIIIII.ATIVE lltlllT 1.84 1.69 4.20 4,61 5,20 5,95 tIrI11I11g3 rsIhIcII` AI, Illcl 1 1rst 0.00 1.84 3.69 4,10 4,61 5.80 1.26 8.15 8.59 8.81 8.96 8.81 8,50 1.68 6.96 5,31 4,8 2.45 1).31 11.1113 22 SAL.So 0,00 0.00 0.00 0.00 0.00 0.00 0.00 0o,51 0,1 0,92 1.10 1.35 I.55 1,16 1,91 2.06 2,22 2.In 2,39 11,110 311118RSr 172,4nIS InE1,31S1 r r o,00 .00 0.00 0.00 0,00 0,59 0,o14 0.8 0,95 0.99 1.01 3.01 0.98 o,93 0,84 (,12 n.s5 Cli6 0.16 11.11 n,no0 rmIIcirAI. MrAflYHEW o.,o 0,00 o0.W 0.00 (0,59) (0.74) (0.81) (0,44) (0.28) (0.09) 0.09 0,31 0.62 0,92 1.19 1.49 1,84 2.12 11, 31 o.o0 I.III oF V.EA reRlic7rAI. 1.86 3,69 4.20 4.61 5.80 7128 6.135 8,59 6.81 8.96 8,81 6s50 1.08 6.96 5.1 4.26 2.45 n. 11.1111 11.1 1) AV.SALAII(I 3R81C1?AI. 11C.11417.RFST 0.92 2.11 3.94 4.43 5.23 6.54 7.72 86.1 8.73 6.92 8.91 8.68 5.19 7,4 6.31 5,33 3,36 I,ln n,I 11,110 AV.11AIA1Ir 118IlE imImurAF. 0,92 2.11 3.94 4,41 4.91 5.58 5.95 5.95 5.95 5.95 5.95 5.95 5.9S 5.95 5.86 3.0) 1,36 1, In l|l, 1,li4 A5IIFIVIl SIR I)E7T SFVVICr 0.00 0.00 0o,0 000 0.00 0.00 0.90 1.16 2.52 3.30 3.96 4.95 5.67 6.46 1.03 1.55 8.36 3.3In II.PlI 11.3 I lIrF CrA3II1`ll Ar7.R PENT sRVIrK o00 0o,0o 0,00 0,00 0,00 0.00 0,98 1,25 1.81 2,38 2,88 3,59 4,12 4.10 5.10 5.49 5.94 6.1II I 1,111 11,11 OKI CASIWLAW COLI.CIIOII 95J - AtrATIIileT 232 or SALES - (Kr. 1111.11011) 1ti;trsr Fnymenta (952) 0.00 0.00 0.00 0,00 0.56 0.10 0.63 0.90 0.94 0.96 0.96 0,91 0.88 0,80 0.66 0.54 0.36 0. 15 0.01 o0.00 7ri.ielpail rpAym.nts (953) 0.00 0.00 0.00 0,00 (0,56) (0.10) (0.8) (0,42) 0,021) (ol9) 0.09 0.35 0,59 0,81 13,3 3,43 3. 2,02 0,33 o,00 (li,wrn..nt PAymnts. (342) 0.33 0.39 0.35 0.62 Ilernaping IAy..rnts (3.52) 0.18 0.23 1,l.2 0.29 0,1 0,31 0,51 0,30 0,19 0.26 0,27 0.38 0,32 0.05 0. 0 0o,o0 5uI,leulal 0.13 0.39 0.35 0.62 0,36 0,23 0.21 0.18 0.98 1.18 1.26 1.59 1.16 1.92 2.01 2,1I 2.25 2,21 0.33 0.00 1.864 3.8 0,51 0.41 0.54 0.14 0.00 0.00 0.00 0.00 0.00 0.00 0,00 0.00 0.00 0.00 0.00 0.00 0,00 0.00 101841me OytlgleaI (52) 0.05 0.14 0.20 0.22 0.25 0.28 0.30 0.30 0.30 0.30 0.20 0,30 0.30 0.30 0,29 0,25 0,11 0.01 0.01 0.00 Enit l 1of 7. rup (at) 0.01 0.22 0,32 0.35 0.19 0.45 0,48 0,46 0.48 0.48 0.48 0.46 0.46 0.48 0,41 0,40 0.21 0.11 0.01 0.00 ruillt (IX) 0.01 0,03 0.04 0,04 0,05 0.06 0.06 0.06 0,06 0.06 0,06 0,06 0.06 0.06 0,06 0.05 0,03 0.01 0.00 0.00 S,thtnlal 3.91 2.23 1.01 3,09 1.23 'I.52 0.62 0.83 0,83 0,l] 0,8) 0.63 0,82 0.83 0,82 0,l0 0.41 0.39 0,02 0,00 IIET IAS1IFLoU (.114) (3.84) (0,53) (0.41) (1,05) (1.20) (0.56) (0,05) 0.15 0.35 0.52 0.16 0,92 1,30 1.21 1,41 1.16 2,02 0.11 0,00 r44.17 c^.ta.i I..3r , 2.90 ,.'t Ave Igse rI',e Principl 4.52 lI rin rat Year ap 2 1,18 l 5 t e FINANCIAL AIIALYSI3 --TILWNES COmifIEnCN l914 Yr. It Vr. I Y.3 VW. 4 Tr. Vt,r6 yr.? I r.8 Tig. Trill0 Yr,11 11.12 yr.13 vr.1, '(v.15 Yv,16 Vr.I1 Yr.18 Vr.19 Trill) Trill Yr.22 Yr.23 liIiATIIIi FrACTOR 1.06 L.17 1.28 1.41 1.54 1.65 1.75 1.86 1,91 2.09 1,21 2.35 1.49 2.63 2.1, 2.96 3,14 3.31 3.53 3.14 3.98 4.20 4.45 SAWul (1)(HINTA2T) 0.00 0.00 0.00 0.00 0.00 0.00 0.69 1.10 1.44 1.76 1.99 2.31 2.49 2.61 2.13 21.8 2.63 2.24 2.6111 2.45 2.27 2.06 2.84 I'MDIET (CoII!2TAIIT) 1.74 1.58 0.40 0.33 0.35 0,43 0.00 0,00 0,00 0.00 0.00 000 0.00 0. 00f 0.00 0.00 0.00 0.00 0.00 0.00 oo 0.00 0.00 (1.00 E!ASIIFI.fA# BF11 118T S.RYVICP (DI2ISTAtIT) 0.0(0 0.00 0.00 0.00 0.00 0,00 0,56 0.95 1.28' 1.58 I,80s 2.11 2.28 2.45 2.51 2.55 2.60 2.52 2.38 2.21. 2.07 1.89 .1.96 11298122T IFIIIIS SlIA2.LIIOWER CASIIFov - RKFA'lhEIt 202 or SALES KRP, IIZLLIOII) NAILI ~~~~~~~~~~~~0.00 0,00 0.00 0,00 0.00 0,00 2.22 2,04 2.84 3.61 4.40 5.42 6.12 7,04 7.62 6.23 8,85 9,11 9,17 .9.16 S,99 6.14 1.19 .89iI2t 1128111161110I3T 2.61. 1.64 0.52 0.'ul 0.51. 0,14. 0.00 0.00 0. 00 0.00 0,00 0.010 0.00 0.00 0.00 0.00 0.00 0.00 0,00 0.00 0.14 0,00le 0.00 EII11I1AMIVK KIXlIIT 1.64 3.69 4.20 4,67 5.20 3.95 09r111ii11. rRI2ICIrAl. l220, b2lIERKS.T 0.00 1.84 3,69 4.20 4.81 .5.0 7.28 8.15 8.70 9.14 9.46 9.66 9.67 9.52 9.211 8,86 1,95 1,02 5.93 4.10 3.32 2.61 "b. I 72(t SAI.rq 0.001 0,00 0,00 0.00 0.00 0,00 0.00 0.41 0.51 0.13 0.66 2.06 1.24 1.41 2,52 1.6512,76 1.82 1.33 1.83 2.80 1.75 2,61. 2112911951 122,41213 FREE1,18 Cvs RACK 0.00 0.00 0,00 0.00 0.59 0.74 0.81 0.95 1.01 1.05 1.08 1,09 1.09 1.06 2,01 0,94 0.85 0.73 0.60 0.43 0.29 0.11 0.01 lIN 1I:2l1Al RFrPAVrimir 0.00 0,00 0,00 0.00 (0,59) (0.14) (0.61) (0.55) (0.443 (0, 32) (0.20) (0,02) 0.25 0.35 0.52 0.11 0.93 2,09 2.23 148s 1.31 1.63 0.28 FIIi,(O rAR:~ 2NIIICIPAI. 1,84 3.69 4.20 4.61 .5.80 1.28 8.25 6,70 9.14 9.46 9,66 9,67 9.32 9.27 8.66 7.99 7,02 5,93 4,10 3.32 1,62 0.26 0.00 AY.11AI,A11'.9 I'RIIICIrAI. INIC. 2NTFX.MST 0.92 2,11 3.94 4.43 5.23 6.54 1.72 0,43 8.92 9.30 9.56 9.67 9460 9.35 8,91 6.30 1.49 6.48 5.32 4.01 2.52 2.00 0.09 AY.AA2A121:S lMPP. MIRIICIPAI. 0.92 2.71 3.94 4.43 4,93 3.58 5.95 3,95 5.95 5.3 .95 5.95 5, 95 5 .95 5.91 5.95 5.953.9 5.94 5.32 4.01 2,57 2.00 0.09 cAsur1.im uiR ormT sERv2l:r 0,00 0.00 0.00 0.00 0.00 0,00 0.98 1,16 2,52 3.30 3,98 4,95 5.67 6.46 7.01 1.55 8.16 8,38 6.19 8.31 6,20 7.94 7.39 lItIARI 31irI.oU AritR 1111T SARVICK 0.0.0 0.00 0,00 0.00 0.00 0.00 0.98 1.16 2.95 2.56 3,10 3,86 4.43 5.05 5.49 3.90 6.34 6.56 6,36 6.54 6,40 6.29 1,20 3111 CASIIFLOE COWLLC`?1011 50X - REFAY1IICIIT 202 Of SALES - (Rr. IIILLIOII) 121F1A44 GIIN71is paymen.ts (802?) 0.00 0.00 0,00 0,00 0.47 0.59 0.10 0.16 0.61 0.64 0.81 0.88 0.81 0.65 0,82 0.15 0.68 0.59 0OM 0.36 0.23 0.09 0.02 rrinvlpAnl epraybeliti (8I3) 0.00 0.00 0.00 0.00 (0.47) (0.59) (0.10) (0.44) (0.35) (0,25) (0.16) (0.01) 0,22 0,78 0,41 0.56 0.74 0.67 0.99 1.20 1.21 2.31 0.2' Aiv,eriviont rAyue-nts (142) 0.23 0.39 0,55 0.62 r.,mmInu"n ?A7menta (1.52) 0.28 0.23 0.27 0,29 0,31 0,35 0,33 0.34 0,3'. 0,33 0, 31 0,29 0,24 0.23 0,29 0.14 0.09 0.03 f1. of) 1,,2, g.,t A 0,23 0.39 0,55 0,82 0.18 0.23 0.27 0.62 0.17 0,111 2,04 2.21 2.33 2,45 1.53] 1,61 1,66 2.69 2.65 1.81 2,55 1.43 0.11. UU1I*ILM I,11 fii IsIiu.rid 2.84 2.84 0.52 0,47 0.54 0.74 0.00 0.00 0.00 0.00 0,00 0,00 0,00 0.00 0.00 0.00 0.00 0.00 0.01' 11.1121 01. 142 0,1W11.00l( I'..,i,l,,ls Ovrip# (52) Om0 0.14 0).20 0.22 0,25 0,28 0.30 0,30 0,30 0,30 0,30 0.30 0.30 0.30 0.30 0.30 0.)0 0.30 0.21 lo.,lo 12.11 11,05 11,00 civil of NMI F..,.da (822 0,07 0.22 0.32 0.35 0.39 0.45 0.46 0,48 0.41 0,48 0,48 0.48 0,48 0,48 0.48 0.48 0.4.6 0,48 0.43 22. 32 11. 11 2I.0ON 0.02 2r,,iit (223 0.01 0,03 0.04 0.04 0,05 0.06 0,06 0.06 0.06 0,06 0,06 0.06 0,06 0.06 0.06 0,06 0.06 0,08 0,05 11.124 11,121 11.02 (I. 0 SAII't-41 1~~~~.91 2.23 2.01 1.09 2.23 2.32 0.83 0,83 0.83 0,63 0,63 0,83 0.1l3 0.83 0.83 0.8 0,83 0,83 0.74 11. 51 11.111 11,14 0.02 IlYT VA32If1"V (1.84) (1,84) (0.51) (0,41) (1,05) (2.30) (0.36) (0.21) (0.01) 0.08 0.21 0.37 0,49 0.62 0.70 0.77? 0.65 0.65 0.91 1.114 1.11 1.29 n14.' ~~~1F1~ (,.~2~(2.w 1.66 Ayvuair Piro ,,c~. 4.65 IIArrRln Pe.r Year an I 2.55 FINANCIAL AIALYSIS . -1 lWis COiEIrNCIII˘ 1984 yr I Vr.2 Yr. 3 Tr.4 yr.5 t.6 vt.7 vt vs Y9 Ste.lY0 Yr. 1 r.12 Yr.13 Yr 14 Yr.l5 Vr.IA Yr.3I yr.f t r.l9 Vt.20 llrlfAtIOIl FAWMTI4 1.06 L.t7 1.26 1.41 1.54 1-65 1.75 I.616 1.91 2-09 2.2J 2.35 2. 49 2.63 219 2. 96 3. 14 3. 31 3.53 3. 14 SAlTS (('PlIsrANt) 0.00 0.00 0.00 0.00 0.00 0.00 0.69 1.10 1.44 1.16 1.99 2.J1 2.49 2,67 2.73 2.71 2.634 .74 2.(a 2.45 (CREDIT S (0IISTANt) I.14 1.55 0.40 0.33 0.35 045 0.00 0,00 0,00 0.00 0.00 0,00 o. 00 0.00 0.00 0.00 0.00 0110 0.01o oo.00 CASII,II N n SIN T I*.RVICR (miSTAM1T) 0.00 0.00 0.00 0.00 0.00 0.00 0.56 0.95 1.28 1.53 1.60 2.l1 2.28 2.45 2.51 2.55 2,60 2.52 2.34 1. 24 dntI1Itn:T T11TRl SIIALLIIOLWER CASIIFLoW - ElBAY1lEIl? 305 or 1ALA (6P. IIILLIOII) SAI.rS 0.00 (.00 0.00 0.00 0.00 0.00 W .21 2.04 2.84 3.61 4.40 5.42 6.19 1.04 1.62 .23 6.86 .119. 9.11 9,16 CRflI DiltSIIItil5IflT 3.84 1.84 0.51 0.4o o.54 0.14 0.00 0.00 0o 00 0.00 0.00 0.00 0.00 0.00 0o00 o0,0 0.oo o .00 0.00 0o.n L161111ATIltE. k(11?IT 1.84 3.69 4.20 4.61 5.20 5.95 orriiiiio rRlIlI:IrAl. INC.' inRr.rsT 0.00 1.84 3.69 4.20 4.61 5.80 1.28 8.5 6.46 A.60 6.46 6.06 7.32 6.23 4.1S 2.89 0.62 0.00 0.00 0.00 302 UN 0.00 0.00 0o00 0w 00 0o 00 0.00 0.00 0.61 0.65 1.10 1.32 1.63 1.86 2.11 2.29 2.47 2.66 0.00 0.00 0.00 l\ilFtRST 1724'RSAASMR.,3256 IrACt 0.00 0.00 0.00 0.00 0.59 0.74 0.81 0.94 0.91 0.91 0.94 0.687 o71 0.62 0,43 0.20 0.04 0.00 0.00 0.00 IlIIIcIrAI. tRV.AY11MIFIT 0.00 0.00 0.00 0.00 (0.59) (0.14) (0.61) (0.33) (0.12) (0.14) 0.38 0.15 1.09 1.49 1.86 2.21 0.62 0.00 0.00 0.00 1110 or YEAR 1RI11CIrAl. 1.,4 3.69 4.20 4,6 5.80 .S6 8.15 6.48 6.60 8.46 6.06 7.32 6.23 4.15 2.89 0.62 0.00 0.00 000 0.00 Av.%AI.NM37. MIlHtCIPAI, IIC.tNT.RZsT 0.92 2.77 3.94 4.43 5.23 6.34 7.72 6.32 . 6.34 8.53 e.27 7.70 6.78 5.49 3.82 313S 0.31 o.0 0o.W) 0.00 AV,IAI.ANIf 1l)R. itlicirAl 0O.2 2.11 3.94 4.43 4.93 3.50 3.93 5.93 5.93 5.95 5.95 5.95 5.95 5.35 3.82 1.15 0,31 0.1111 11.111) 0.00 CAqlIFIng SIR (165T StRVICK 0.00 0.00 0.00 0,00 0.00 0.00 0,98 3.16 .2.52 3.30 3.96 4.95 5.61 6.46 7.01 7.35 8.16 6.I6 M.19 .11 lIlT CASIII1,41 AFIR DrtT SIRVICF 0.00 0.00 0.00 0,00 0.00 0.00 0,98 3.15 1.67 2.20 2.66 3.32 3,61 4.34 4,72 5.06 7,50 6,1ll 611 1 611. ARI CAIPLOW cOLLBCrTION 80s - AKrAmliV1T 30K oF SAlIS - (RI. IIILLION) IIIILIM 3Wjere*t r1y..ent. (602) 0,00 o.o0 oo00 0o00 0.41 0.59 0.70 0.73 0.77 0.77 0975 0.70 0.b1 0.50 0.35 0.16 0,03 0r RI a I I (.0nn re"I'rpal repmoymento (601) 0o00 0o 00 0.00 0.00 (0,47) (0.59) (0.70) (0,26) (0.09) 0.11 0.31 0.60 0.6 1.19 1.46 1.82 o0so nfl.IIlI t1171 I1 no iSvernopent reyrnts (t45) 0o13 0.39 0.55 0,62 11 41.1vogroent luyentg (3.51) 0.16 0.23 0.21 0.29 0,30 0.30 0.29 0.21 024 0,19 0.13 0.06 0.01 0.n1 0.1111 O I . Of slilst.tel 0.13 0.39 0.55 0.62 0.16 0.23 0.27 0.18 0.96 1,1 1.31 3.57 1372 1.58 1.96 2.04 0.54 0.00 0.00 0.00 ouitlrl i Wirebufrd 1.64 3.64 0.31 0.41 0.54 0.74 0.00 0.00 0,00 0.00 0.00 0.00 0.00 0.00 0.00 0,00 0.00 0.00 0.00 0.00 lI.ndlpg Ov.el,eed (51) 0.05 0.14 0,10 0.22 0.23 0.28 0,30 0,30 0,30 0.30 0,30 0.30 0,30 0.27 0.19 0,09 0.02 0.00 0.00 0.00 014t o1 FRI I,lilr (61S) 0.01 0.22 0.32 0.o5 0.9 0.45 0.45 0.46 0.48 0.48 0.48 0.48 0.46 0.43 0,31 0.34 0.02 0.00 0.00 0.00 rr lt (IX) 0.1 0.03 0.04 0.04 0.05 0.06 0.06 0.06 0.06 0.06 0.06 0,06 0,06 0.05 0.04 0.02 0,00 0.00 0.00 0,00 Sightnta3 1.97 2.23 1,01 1.09 1.23 1.52 0.83 0.83 0.63 0.81 0.63 0.63 0,o3 0.25 0,53 0.25 0,04 0.00 0,00 0.00 lit? cAsorLW (3.84) (1.64) (0.53) (0,41) (1305) (1.30) (0.56) (0.05) 0.13 0.35 0.53 0.74 0.89 1.13 1343 1.79 0.49 0.00 0.00 0.00 vutrne'-1 is it lrw (0.114)F AvrIe un r ter clr 4.44 IlAAARi let 14.*t (0.-9) FINANCIAL ANALISIS -T11A83D2. WOININCIHO 1964 Yr,1 Yr.2 Yr.3 Tr.4 Yr.5 Yr.6 yr.? Yr-1 Yr.9 r,10 Yr,11 Yr.12 Yr Yr.14 lr.15 Tr.16 lr.l7 tr.18 lr.19 Yr.20 IIIFIATII FA)lI Ill 1.06 1.17 1.28 1.81 1-54 1,63 1.73 1-86 1.97 t-09 2.21 7.35 2.49 2.63 2.79 2.96 3.14 3.33 3.53 3.14 0AIJ'l (11119141111 0.00 0.00 0.00 0.00 0.00 0.00 0.58 0.90 1.20 1.44 1.71 1.96 2.16 2.20 2.21 2.13 2.04 1.83 1.67 1.30 rwriiir (gflliliAlr) 1.00 0.28i 0.27 0.24 0.21 0.21 0,00 0.00 0.00 0.00 0100 000 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 cAmIrljatl 1,111 Iinn IIKIIK (0111XIAtA1) 0.00 0.00 0.00 0.00 0.00 0.10 0.43 0.74 1.03 1.26 1,51 1. 75 1.94 1 .98 1.99 1.91 1.82 1.63 1.46 1.1! SIIALLIIOLDER CASIIFLOW - ReFrAythft 251 Of SALI (AFP, 11ILI.OI) t"AIEl 0.00 0.00 0.00 0.00 0.00 0.00 1.0o 1.61 2.36 3.01 3.78 4.60 5.37 S.60 6.17 6.31 6.40 6.09 3.89 5.61 truiit nljlrnlHl'iitir 1.06 0.33 0.33 0.34 0.32 0.45 0.00 0.WOu 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 o.0 LIN11.tIvAlym e1I:I'Iv 1.06 1.39 1.73 2.07 2.39 2.84 llIKIIIIIIittIlIII:!1'A2. IUlI. IIIIOPiJIT 0.00 1.06 1.39 1.13 2.02 2.66 3.45 3.87 3.69 3. 3 3.38 2. 79 1.90 0.71 0.00 0.00 0.00 0.00 0.00 0.00 2fl IAISM 0.00 0.00 0.110 O0.00 0.0 0.00 0.00 0.42 O.59 0.79 0.93 1.13 1.34 1.45 0.00 0W 00 0.00 0.00 0.00 0.00 Ifli:6IM 7 1717H.t1 t,NWAEI 0.00 0.00 0.W30 0.00 0.27 0.35 0.41 0.44 0.43 0.40 0.33 0.721 0.5 0.04 0.00 0.00 0.00 0.00 0.OC 0.00 rNmoilAl;gI, PIpAiliKIIr 0.00 0.00 0.00 0-00 (0.21) (0.35) (0.41) (0,02) 0.16 0.35 0,60 0.56 1,19 0.11 0.00 O.00 0.00 0.00 0.00 0.00 F.11) Onr tAR i1 1ilt(:!FAI. 1.06 1.39 1.73 2.07 2.66 3.45 3.86 3.89 3.73 3.38 2.79 1.90 0,71 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AV.MAIlIIZ pIliill:trtA. 111C. 111TERKAt 0.33 1.22 125. 1.90 2.11 3,06 3.66 3.86 3.81 3.56 3.0o 2.34 1.31 0.35 0.00 0.00 0.00 0.00 0.00 0.00 AV,IAIAMIar. tiMK rItIIuInA. 0.53 1.22 1.56 1.90 2.23 2.62 2.64 2.64 2.64 21 6 2.81 2,34 . 11 0. 35 0.00 0.00 0.00 0.00 0.00 0.00 cmiursue SFr o0vat S.rvtcr. 0.00 0.00 0.00 0.00 0.00 0.00 0.73 1.37 2.03 2.63 3.34 4.10 4.82 5.21 5.56 5.65 5.71 5.42 5.22 4.90 tir.? tARTFLIOW ArIER DlENT sKKVICK 0.00 0,00 0.00 0,00 0.00 0,00 0,25 0.96 1.44 2.66 2.39 2,95 3,48 4,41 5.56 5.65 5.71 5.42 5.22 4.90 1 OKI CAS11FLL1 COLUC.TIOH 602 - RErAfItIrT 232 or SALES - (RV. IIILLION) nTerqin t ryment.t (9o2) 0.00 0.00 0.00 0,00 0.21 0.28 0.33 0.33 0.35 0.32 0.28 0.21 0.12 0.03 0.00 000 0.0 0.00 0.00 0.00 raIpncIg*1 111r4Y,ants (602) 0.00 0.00 0.00 0.00 (0.21) (0.28) (0.33) (0.02) 0.13 0.28 0.48 0.71 0,96 0.57 0.00 0.00 0.00 0.00 0.00 0.00 rovernmslat Sny.entm (141) 0.07 0.17 0.22 0.21 r4overnswlst rnpantIl (3.5)X 0.06 0.11 0.13 0.14 0.13 0.12 0.21 0.08 0.05 ,o101 o.o0 0.00 0.00 0.00 O0o. 0.00 Sibhlt,m 0.01 0.11 0.22 0.27 0.06 0.11 0.13 0.47 0.61 0.713 0.6 1.00 1.t2 0,61 0,00 0.00 0.00 0.o00 0. or 0 Q. OU1FI .OIA 1 MiTie.b1ir,,ed 1.06 0.33 0.35 0.34 0.32 0.45 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 lo..ndlnl Over(2ile.I (51) 0.0) 0.06 0.06 0.10 0.11 0.13 0.14 0,14 0.14 0.14 0,14 0.12 0.07 0.02 0.00 0,00 0.00 0.00 0.00 0.00 Dint of ItRI Flin4, (SI) 0,04 0.10. 0.12. 0.15 0.18 0.21 0.23 0.23 0.23 0.23 0.23 0.19 0.10 0.03 0.00 0.00 0.00 0.00 0.00 0.00 rrorit (12) 0.01 0.01 0.02 0,02 0.02 0.03 0.03 0.03 0.03 0.03 0.03 0.02 0.01 0.00 0.00 0. 0o..00 0.00 0.on 0.00 glib 11o12. 1.13 0.50 0.56 0.60 0.64 0.81 0,40 0,40 0.40 0.40 0.39 0.33 0.12 0.0 o 0,00 0.00 0o. 0.00 o.0o 0.00 SIET CASI2FjdW (1.06) (0.33) (0.35) (0.34) (0.55) (0.71) (0.21) 0.07 0.21 0.33 0.47 0,67 0.94 0.56 0.00 0.on 0.00 0.00 .0no 0.00 T. inI - tI uih,I I t I 0 (0.33) AWIrnr,e r.,r, r.lneipnt 2.02 tl.,r,,n Per Yenr rn 2 (1.23) !ii0 J.5j~MIc5AL MIALIIg WIuICIto look vr.l yr. 2 Vt.)3 IrA Yr,$ Yr. 6 Vt.) Tr.S I ri Yr,10 lt,5I fri2 Yr.53 Vr.14 vr.15 vr.16i Tr.51 r,If.1 Vr.Ily Yr,lgg Sa,J YrIr,11 ?r,.11 11111A111111 FAC1III 1.06 5.51 1.v5 1.41 1.54 1.06S 1.15 1,66 5.9 11309 7,15 1.3s 1,49. 1.63 1,19 1,96 3,14 3,31 3.1I9 3, 14 1. 'l6, 4,1 4.CO ULMF (01hlIRAlNT) 0.030 0.00 0.00 0,00 0.00 0900 0,00 0.41 0.63 0,86 1.10 toll1 .45 1.55 5.55 1450 1,40 1,701.9g,i 16,.1' I,. 6leI,d" 0.161 'SIllII (iiUiisTAtir) 1.16 0.30 0.33 0.33 0.29 0.3? OsIt clog P.00 0.00 0.00 0,00o 0.00 0.00 0.00 0.00 DOW6 11,061I 11,1111 II,16 11,1111 11,1111 01,110 034IgI*IIAI MIN raNT? SEaVICs (CIflISIAIIT noon 0.00 0.00 0,00 0,00 0.030 0.00 0,33 0,54 0,16 0.99 ills 5,33 9.41 1. 42 1,31 l.in 1.56 l,I ,nII,Ii 16,606 6.5191 lIlt IT.PII5 ~I) I. ot11101 .6 IIIALLIIOLOIR CASIWL0W - ArlATII9Rr11~ 52 Or PAUlS R.ILIO) HUMIL 0.00 0.00 0.00 0,00 0.00 0.00 0.00 0,16 5.74 1.19 7,43 2.96 3.60 4.05 4.3) 4,44 4,19 4,16 4,116 1,10 MI4 1.14 3.9 610M11 IosiEsFiifllf k.34 0.35 0.45 0.41 0.45 0.53 0,30 0.00 0. 00 0,00 0,00 0,00 0,00 0.00 0,00 0,00 0,00 0,00 0,00 0,00) n,616 0,04 0,1III1 I.IIIlIArIyf. (UFIIST 5,34 1,19 1,13 2,60 3.0s 3,1 3.61 'lIriiiiII: lfIRIIIIAI. IDl1. INlRIT11M 0.00 1.3i 1,69 2.13 2,60 3,38 4,3S 3.11 5.59 1.93 6.11 6.36 6.13 6,01 3.66 5.19 A4.64A 4.03 3.30 2'll 1,06 9.40 0.10 Mf 3AlES 0,0' 0.00 0,00 0,0000 0 ,00olo 0,0 0,99 0,35 0,4 0,65 0,14 0,90 5.01 5.04 1.11 1.10 1,06 1.01 0.93 00011 0.61 0,19 1Ifro.mT I29,4IftS Trap.93Y33 CRACK 0.00 0,00 0.00 0,00 0.34 0.44 0.51 0.65 0.651 066 0,70 0,75 0,69 0,66 0.65 0,56 0,49 0,41 0.35 0.11 0,10 0.91 0,04 ISINcIrllA. NrFPA?IIFJIT 0,00 0,00 0.00 0,00 (0,34) (0.44) (0.51) (0.47) (0, 34) (0,74) (0050) 0,0 0,75vi 0,36 0,4A1 041, 0,61 0,64 0,61 0.65 "1,66 0,10l Otto 1111, air frA5 TritiICiIAI, 5.34 1.69 21.3 2,60 3,36 4.35 5,51 5,59 5,93 6,11 6. 16 6,13 6,07 51.66 5.59 4,64 4,03 3,36 I'll 1,06 9,40 0,10 0.10 A11,1ALANII: IlIHcr,1AI. viec.,Is'srsU 0.61 1.51 1.91 2.31 2.99 3,51 4,16 5.31 5,16 6.03 6.11 6,15 6,92 5.64 3,41 4.91 4.3) 3,11 3.05 1,39 1,13 9.05 0.55 AY.RAIAIIaIX a rutMil:IIPAI. 0.61 1.55 5.95 1.31 2.52 3.31 3.12 3,ll13.111 3,61 3.62 3.61 3.91 3.51 3.51 3,5 3,51 3,61 1,05 l.39 5.1) 5.05 0.15 0':ASI'l,11 SF1 IlFIT JRIVSIJ. 0.00 0.00 0.00 0,00 0,00 0,00 0.00 0.61 5.06 1.39 2.59 1.70 I'll 3.14 3.91 4.06 4,01 3.56 3.11 J3.32 3.05 1.5i poll orl; E!AflII.6V AFTER DEBT? NRAVICK 0.00 0.00 0,00 0,00 0,00 0,00 0,00 0.41 0,75 1914 1.51 5.9 1.40 loll11 711 2,95 1,92 2,19 1.65 2,40 1,16 1,04 19 SRI CASSIrUM W3UACTI0Nf 101 - *SFA]NP66 751 Or SALIS - (Rf, IIILLIOII) ilktWilt~ raymtii-te (161)1) 0,00 0. 00 0,00 0,00 0,27 0,35 0,62 0,49 0.57 0.55 0.56 0.51 0.55 0,53 0,49 0,44 0,39 0,34 0,26 0,12 11,16 51,1(1 polls prinlg.,lp papFmyi.nts (60) 0.00 0,00 0.00 0,00 (0.11) (0.35) (0,42) (0,34) (0.21) (0,19) (0,06) 0,03 0.57 0,19 0,11 0,44 0,49 05 0,51 0.17pli liti,' 006 0,56 fl-ovoernoopot P'ayments (3.532 0.50 0,54 0.,51 0.19 0.20 0.25 0,21 0,17 0.11 0.10 0.59 0.91 0,5 0,53 0,11 0,156 11,116, 0.04 pool l,,I.m,,Ial ~~~~~~~~~~~~0,09 0.21 0,21 0,33 0,50 CM9 0,51 0,34 0,45 0.51 0.10 0,61 0.94 5,02 5,06 1,06 9,0) 0,999 0,01 0,61 11,14 "61,9 0,41 U~~i51eI.u,se,I 5.34 0.35, 0,45 0,41~~~~~~~~~A 0.45 0.53 0.30 0,00 0,00 0,00 0,00 0,00 0.OU 0.00 0.00 0,00 0,00 0,00 61,1111 (1,.fil Imp96 now1 0,6(WI I.r1.65n OVerl,,Ael (59) 0,03' o -~ 0.06 0'. 10 0`11 a 0.54 0,51 0.59 0,59 0.59 0.19 0.59 0,59 0.59 0,19 0,59 0,99 0,5 19 0,5 111" I o I1, I1 1,111 'I ,01 0,02 BPI 55 f,.,..IR (65) 0,05 0,M 0.15 0,59 0.23 0.76 0.30 0.39 0.31 0,35 0.35 0.31 0.31 0.35 0.39 0.39 0.31 0.19 0.24 0.59 6I. I I 0.09 0.03 F.,,611 (II) ~~~~~~~~~~~0.05 0,02 0,02 0,07 0,03 0,03 0,04 0,04 0.O4 0,04 0.04 0,04A 0,04 0,04 0,04 0,04 0,04 0,00 0,11.) 0,111 I1,611 0,01 0.00 1.43 0.56 0.11 0,110 0.84 0, 99 0,55 O,54 0,54 O,4 0,54 0.54 M 0.54 0,5405 0,5 D4 0,54 0,540.1 0t,4A) 0.33 0,16 0,9Is 0.05 IIET VASIIFIJM11 (1,34) (0,35) (0.45) (0,61) (0,14) (0.66) (0.65) (0,10) (0,09) 0,03 0,16 nil? 0.19 0,46 0.55 0.5! 0,49 0,41 0,49 0,49 0.50 0,54 0,56 Average rlure. rlrnIW.IPA ?.91 I- Iltl, ee .r as 1 5.15 0OIL PAUlI IZNMCIAL Mk1A1 JtIye 1Wir.s conirutlcta l19s Vr. Yr.tI r,3 Yr,4 r.,5 Yr, 6 Yr.I Yr6 Trot Vt.10 Yrtll Tr.l r.t Tr r.ll Yr.15 Yr,tl Tt Yell 1 T l r.l9 Vr,to INHIATIWN FACII 1.06 1i1 1.18 1,41 1.54 1.65 .1 1.A6 1.91 1.9 1t.12 21,35 214 1.63 12.t9 1.96 3.14 3.31 3.51 3.14 SA11S1 (tOITAIfll) 0,00 0,00 O.W0 0.00 0.56 1.00 1.15 1.45 1.56 1,62 1. 63 1. 63 .1 1,03 1.0) L.AS 1.63 1.53 1.53 1.s3 WInS; aiCaURSrA;) t.ei 1.10 0.60 0.00 000 .00 o o,oo o. nooo o.ooo ,0 0,00 0,00 000 00 0,00 0n 000 0.00 0.00 0.00 rABIIVIAM tt N t 1l 1 IIFEVIC9 (0111S1Al2T) 0.00 O,tX 0,00 0.00 0,39 Of0 1,003 to2l 53) 5,40 l 140 2,40 1,40 1,40 1,40 1,40 1,40 1230 2,1.1 1.11 EItIRlllT 1P01SS IIIALLIWLDKR CA8IWlII - llFA5ItIITr 1J OrF IAfl! (RI. 2ILLIQII) 8AtU. U,0o 0.00 0,00 0,00 0, 6t 1,61 1.19 1,69 3,01 J.40 3.61 3,41 4.05 4,29 4,55 4,63 5$1A ,0o $.33 ',1M4 tittlir tlNB1111lI4lU 1.1 2.96 o. I? 0. .5 0,00 0,00 0,00 0,00 0,0. 0,00 00 00 0.00 O,Ott o,0no o0 0,00oo o0,(1 n,o0 1Et11IAtIAIK IXF0IT 2. 15 3.09 4.3St 5,45 urPitilc mucih:mrAl. IIIC: IitSRMT 0,00 1.11 3.69 4,56 $541 5.601 6.06 6,23 6.16 0,10 6.04 S.o I , $0 508 4,56 3,90 3,06 3O 1.03 0,00 313 SAI5.S 0.00 0,00) 0.00 0,00 COll 0.45 0,A 5 0,01 0.71 0.51 0.90 0.96 1 01 1.01 5,14 '1.7 11,11 I.ll 1.15 0.00 WHM09131 I11,11TR3 IARK 0.00 0.00 0.00 0.00 0.64 0.61 0.o0 0o1. 0.15 0.69 0.61 0.64 0.60 0.35 0.48 0,40 0,29 n.I6 0.04 0.00 M1N4CIrAL 6111521t4 0,00 0.00 0.00 0,00 (0o41) o0o21) (0.13) (0.03) o.6 0.16 0.13 0,.3 0.41 0.1 0.6 0.65 0.99 1.10 5.00 0.00 154 or RcIAR IcIrAFlA. 2.1 3,69 4.26 545 3.51 60.0 6.13 6.20 6.e0 0 J04 5.65 5,50 5,06 4,56 3,90 3.06 1,0 I o50 0,00 0,00 AV.SAI.IIUC 1R1IIvPAH Iupc.2N?rRF.ST O#50 t170 4,12 4,11 1 ,61 t 5,95 6,15 lt 6.2 3 6,2 1, 5,93 5,66 S,29 4,61 4,22 3,49 2.59 2,33 0.50 0,00 AV,BAIAMC tiE, 2IIICPAI, 0,65 2,10 41 4. 5,41 '.4. 5.45 5.4 Soil 541 5.41 Sti.4l 5.t4 S.ol 4,61 4.13 3,49 1.59 .,$I 0,50 0.00 rAliltim ili UNIT stI iC 0,00 o0,00oo 0,00 ,o0 o 00 5.31 2.6o f,el 1,61 1,91 3.O 3,25 3,46 3.69 3991 4,54 4A39 kill 4,10 4,51 11Yt ^ANIFL.tJu Arltn OlOt eRIVIC. 0,00 o,oo 0,00 0,00 0,31 0,95 2,16 59 1,65 2,01 1,10 1,33 2,41 1,61 1,11 1,94 3,55 390S 35 4,51 IRI CASIrLMU MUAWTSoS 901 - RIPATIIE1IT 252 0F IIAAI - (RP, IIILIOH) SIIILIU ni;-rfat Paymente 1901) 0.00 0.00 0.00 0.00 051 0.61 0.63 0.64 0.61 0cl7 0.60 0,50 0,54 0,49 0.43 0.36 0o16 0.26 0,00 0O.W fln.!lr4l Plerutiw'ise (902) 0.00 0.00 0.00 0.00 (0.31) (0.13) (0.13) (0,023 0.06 0,14 0.15 0,111 0,17. 0,46 0.59 0,13 0.69 0,99 0,90 0,00 0011110440 t 1f,ywkntg 512) 0-11 0.35 0.4 0.13 t.pve,nme,,t tlpy.p,tl (2,353 0,14 0ol5 0.11 0.16 016 0.55 o0l,5 0.4 0,11 0,11 0oll o.0o 0,06 0,04 0,0 0,00 111-M.1101 0.11 0.33 0.54 0.65 0.34 0,52 0.65 0,16 O,65 0O9. 0,96 1,00 l,04 5,09 , 1513 t,o1 1,13 l,6 0, o,oo Monte Tirib[9F4|er 1.11 l,ts 0.61 C.6J 0,00 .o0 .oo 0,00 o.oo 0o00 ooo o,oo o0oo o0oo 0.00 ,0oo 0.00 0.00 o,oo 0,00 I..endl.l4 Ov@st,ead (4') 0.0) 05 0,l6 0.10 0O,1 021 0 ,.11 t .2t 0,7t 0,13 0,13 0O,t 0C15 0,5l 0,11 0,54 0 0.00 O0O, 0,00 Cr,i of WI Fu,.lI a) 0,01 0,1 0.33 0.40 0.4 0,43 0.43 0,4l 0,43 0.43 0,4 0 0,41 0,4 0.39 0.34 0.2 0.t1 O.5l 0.04 0,00 tr..12e (I5) 0,01 0.03 0,04 0,03 0.05 0,05 0,05 0,05 0,05 0,05 0,05 0,0. 0,05 0,05 0,04 0,01 0,03 0.01 0.01 0,00 5n2.tutaSl 5,11 1,33 1.41 12,49 0,70 0o,0 0,70 0,10 0.10 0,10 0.70 010 0,6A 0,63 0.5 0.45 0.34 .1O 0,01 0,00 KI! CAsuIri (5.32) (56.) (0.61) (0.62) (0.36) (0.15) (0,06) 0,06 0,14 0,12 0,16 0,30 0,36 0,46 0,56 0,12 0O,a 0,96 0,.6 0,00 U.ltil-l"Mi NA11lltw (0.11) Av,,egre hers PlnCle 4. 11. IlArlIn re Yer V.., (0,3. _ _ ,_ - _ , ,_ - . _ . _ .~~~~~~~~~~~~~~~~~~~~~~~~I'L _,,,-__ FINANCIAL AN1L~41AM P LIIIEi91man I,.j4 Vr,1 Yr.,1 Yr.,3 Yr,4 Vt. S Vr,6 Yr.l Trot Vr9 Vr,10 Tr. 1I Itt1 Vr.13 Troll Trots TrAll Trl r.1 0 Yr.16I,9 If,10 Yr.11 Ir.PP IIIrIAIIIIN rACTOII 9.06 9.91 1.1 11 949 1.54 1.01 1.15 1.50 lill?11209 l.ft 2.3s 1.49 2,631 2,19 5,96 3.14 3.3) J,5 3.74 3.96 4.00 flALM. (42lllsAIll') 0,oo00 oi 0,092 0,00 1,0 0,0 030 0.45 0.6s I.57 1.63 2.04 2.03 1,l13 1,03 1,03 1.0) t,0] 1.03 1oo) Ito) 3,n3 1.0) eNPHIT (WIliSlAiir) 9.64 1,34 0,00 0.36 0.39 0,39 0.00 0.00 0.00 0,00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0,00 0.00 0.00 lAnhIlrIAU 6911 1)211 PY.RVtCK.r (1i21181A911) 0,0142 0. 0 0.00 0,01) 0.00 0.36 0.11. 0,04 1.33 l.5t 1.16 top 1,1 11 I'1l I,11 I9.11 03 1,03 2,03 71,0 1.111 1.0) iliNNIMT 'IKPRIS SIIALLIIOLOIR cAIITrLov - irEAYIIIIrt 252 OF SALI (11!, IIILLIO11) fIALKS ~~~~~~~0.00 0,099 0.00) 0,00 0.00 0.60 93.19 lost 3,09 3'll 4,51 4,16 MS0. 5.35 5,01 0.01 6.31 6,15 1,10 1.59 6.04 f.ll iHFri) 091611136F1131"I 9.95 1,612 0.51 0.51 0,60 0.64 0.00 0,00 0,00 0,00 0,00 0,00 0,00 0,1)0 0,00 0,00 0,00 0,00 0.00 0,00 0Dom4 n,110 13NIIII.ATIVK 1turJIIr 1.95 3.23 0,26 4.11 3,31 6010 mviriiii rRIll:IIA. INC. III191FART 0.00 1.95 3,75 4,26 4.71 5,91 1.38 Bills 6.60 Biel polo 5,11 P.5t 6,19 7.70 7,19 f..46 5,54 4,41 3,09 .1,41 no"1 251 FAIPI1 0.010 0.00 0.00 0.00 0.00 0,00 0,70 0,39 0.71 0,95 I,1D 1,19 9,16 9,34 1,01 1.50 9,59 9.69 W.1 1,90 '1101 0,400 11m1;frAt i21,011 FARRF.,25 (RtAC8 0.00 0.011 0.093 1200 0,61 0,70 0,81 0.94 0,,, 1.00 1.00 0,95 0,93 0,90 0.115 0,111 0,05 0.50 0,42 Oils 0.05 P. Q0 1IRIIIEIrA. RKPi9r.Iif 12.0 0.01) 0.00 2. 00 (0.61) (0.161 (0,65) (0.55) (0.21) (0,05) 0.13 0.11 0.33 0,43 0,5 of?) 0,91 1.12 1,21 9.64 9.49 0.00 Full1(i 0TRlAR FRIPICIFAI 1,95 3.15 6.26 4,71 3,91 1,36 ,5 5 .0 060 6,59 5,60 6,12 l,3l 619 1,16 1,019 0,46 115,5 4,42 3.05 9,90041 0.00Qotl AV.PA,AMIIcV rRIlICIP~AL lCitnIII3mur 0.96 2.63 6.00 4.51 .313 6.61 1,11 0,33 6,15 6,63 6,19 I6,02 S 635 og 1.9 ,41 60.6 0.00l 4.96 MA7 I'll 0,10 I,00 MinnaI.AI riUrF rniiIcirAF, 0.95 2,85 6,100 4.31 5,01 5.69 6o01 1.01 6.01 6,01 6.01 6.01 6,01 6.01 0.09 0.01 So16 4,96 3,14 it 13 0.10 0: 110 f'A,Oll1lJ.A Sill fliT SFRRICR 0,00 0. 120 D0,0 0.042l 0.00 0,60 0,46 1.19 2.62 3.30 3.94 4.15 4,40 4.66 4.94 9.24 6,37 6.11 l1.6 I q59 6040 6, $2~ 911't uA51r1.im ArIF.6 1275T SrAVIO 0,00 0,01) 0,00 0.0Oil 0,00 0.60 0.26 0,19 9,65 2,34 2.69 2.96 3.94 3.33 3.53 3,14 4,36 5.06 5301 5.69 4,39 6.32 P.H CASIIFLVW WLLSCTIQN 600 - SIPAYHIIrIT 252 OE 6AL66 - (off IIILLIONI) *Im,.Ra.t rosit (602) 0,000 0.00) 0,00 0.00 0,49 0.60 0.10 0.75 0.19 0.60 0.50 0.15 0,16 0.71 0.65 0.61 0,54 0,4) 0.34 0,10 0,04 0,00 rl',I,.CfIr Olrr ymente (505l) 0,.)0 0100 0,00 0.00 (0,49) (0,60) (0,54) (0,44) (0.11) (0,04) 0.91 0.91 0,2I5 0.535 0,46 0,55 0.13 0,90 1,09 9.31 I'll (1.0 rEiii,rgiqfnt 1*yuinti (1421) 0.94 0,40 0.50 0.63 I?.wip4lW*tow rRiymrntu (3.52) 0.19 0.23 0.27 0,29 0.30 0.31 0.31 0,30 0,19 0,16 0,16 0.14 0.21 0.11 0.13 12,06 0,1ll 0.00 5119,l,,tilI 0.94 0.40 0.56 0.61 0,l9 0.23 0,43 0.61 0.91 9.01 9.21 9.13 9,30 113s 1,4o 1,44 19,46 l,52 9,54 1,60 9s99 0,092 1 Iii ..9..i, .,.,gI 9~~~~~~.95 9.60 0,51 0,59 0.60 U.64 0,00 0,00 0.00 0.00 0.00 0,00 0,00 0.00 0,00 0,00 0,00 0,00 0,00D 0.00 0.00 0,00 l...II, V i,&.,l..'.,' l%Lj 0.05 0.14 0.20 0.23 0.25 0.36 0,30 0.30 0.20 0,30 0ol)030 0,30 0,5 0 0,30 0.30 ,) 0,29 0,15 0.99 0.99 0,04 0.00 l:,,nt -of "PI0`11 r.1.1 i 91) 0,05 0.23 0.31 0,16 0,49 0,46 0,45 0,66 0.45 0,46 0,46 0,46 0,46 0,46 0,46 0,46 0,46 0.40 0,30 0.15 0.01 0.00 reraoil (II 0,01 0.03 0,04 0,05 0.05 0.01. 0,06 0.06 0.00 0,06 0.06 0,00 0.00 o,or, 0.06 0,06 0,06 0,05 0.04 0,01 0,09 0, 119 fil.l.,.to..I 7.09 2.19 9,00 19,94 1,31 1.44 o,54 0,6 0,54 c,s4 0.6 0,64 0,64 0,64 0,64 0,84 0,6 0,1 0,52 0.3if 0.90 0.0 "Rf Cir III (. (1.60) (0.51) (0,59)(,1) ( 9.11) (1. 0,41) (0,23) 0.06 0113 0,31 0,01 0,46 0.59 0,55 0.60 0.66 0.62 1,04 9,211 l,ng 0.011 AV.n1PI,. NOW I.,, I.. 0.19 AiIrni,,, i..', I..rWrIpo 2 0,9 low 0.38~~~~~~~~~~~~~~~~~~~~~~ F3OW1lNT W 1116A rIVNAHIAL FNALffl N7-2IUTW mu m 6CP.t! ! ig0 9 Vr,l rll2 Ir,3 lr,4t Y.S tr,6 Yr?, ire' Tit$ ItO Troll Yt.lJ Trol Yr.14 Vr.IS Yr.16 YTr17 Yr.IA Yr.l3 YIr.2 IIIFiATIOti ril:lem 1.06 l.11 1.25 1.41 1,54 i.64 3.15 316 3.91 2.0* 1,.1 3,35 2,49 16 2,11 2.96 3.14 3. Is 1 3,14 SAILS (CUI2A111) 0.00 0.00 0.00 0.00 0.00 0.21 0.31 0.61 1.24 3,4B 111 1.10 3.10 3.10 I'.10 ,10 t,70 .1l0 1 1.111 ixmir (1hllSTA11r) 0.91 0.21 0.20 0,36 0,13 0,23 0,00 0.00 0,00 0.00 0.00 0.00 0.00 0.00 0.00 0,00 0.00 0.00 o.eon I",fill rAsiirIAU Rio I'IT SIRAVI. (0I13TAHT) 0.00 0.00 0,00 0.00 0.00 0.21 0.26 0.51 1.05 1.29 3.30 ,149 14l9 I.4 t 1,49 1,49 1.49 31.49 Ill , Ali Itt9RIH7 IYAUlS IIAL,10lm,f1S1 CABIrLFl - rSVAIIINt 2IN or SALW (At. 119. L3099) SAI.M 0.00 0.00 0.00 0.00 0.00 0,45 065 ,124 2.44 3,09 3.16 3,99 4,23 4.46 4115 5,03 5,33 3.96 S.q1II, III 'SIlir i;snilPsrilvir 1,03 0.31 0.76 0.23 0,16 035 000 0,00 0.4 00.0 0.00 0.00 0.00 0.00 Clan 0,00 0,00 0. o nn ,Im n I n nn lItililATlVR (Xpiolf , 1,tI 1334 1,60 I,d6 2.01 2,36 mIILIIlrc rIlliIlrAIIt. C, INTEREST 0,00 3.03 1,34 1.60 3.63 2,24 2,66 3, 3.09 2.61 2.33 1.61 , 0,4 0.o0 o.o 0 0.0 0 o.o0 a.t0i n.04 0. 13.191 it SIA 3.0000 0. 00 0. OW 0, 0,W0 0.00 0.16 0,.31 0.61 0,71 0,95 3,00 3,06 0.00 0,00 0,00 0.00 0.4)9 11,191 11.1111 IlEirtSr 3121,4915 fitfVt2iPl (KArP. 0,00 0. 00 0,00 0,00 0O 3 0.29 0,34 0,]3 0.33 0,19 0,22 0.1 0,0) 0,00 0,00 0,00 0,00 0.n0n nii,, 11n1n1n IIIICIPAI. KIAV1lCIIT f0,00 0t 00 0,00 0,00 (0,13t (0O 9) (0.W13 (0,04) 0.16 0,46 o01 0,66 n.14 0,00 0,00 o Ow 0,0) 0,o on 11,1n1 11,1n mI oir IrAK rIliCrAl. 3.03 1334 9,60 its) 2,14 2.06 300 3,09 2,l l.3) 13.6t1 0,.4 0,00 0,00 0.00 O.0 0.00 o0,14 W u1111 11,1111 All.lKAIcc islicLirAlA, INC,IlTERFirl 0,531 1319 1.41 1.13 2.01 2,56 2.16 i.01 2.95 2,51 1.91 3.31 0.31 0.00 0.00 0.00 0.00 0,00 11,1111 it, nn AVY.NIAIlcg 3l9K. 11311)IIsAL 0O51 1.19 3.41 te1l 1.39 2.16 2.36 .336 2.36 1.34 1391 l3.3 0.31 0.00 0o 00 0.00 0,00 0,00 o ,o n l n,111 Ck.IrItL SMA lVeST lrUVICI 0.00 0o00 00. 0,00 11,00 0,45 0o46 0,15 2.01 1.61 3.32 3.49 3.10 3.93 4.16 4.41 4,66 4.96 5.15 1.S5 lItt CASOINL.IN AFtEA DOTS SRVICC 0.00 0,00 0.00 0.00 1,O00 0,4s 029 0:64 1,46 I,90 s ,31 1J01 2,94 3,93 4.16 4,41 4,64 4,96 ,12 5.11 I CA2!1rLt L00LLkCIQ 0SMAvIg!L l F or SALES - RPP. IIILL30I1I 1Ure.it pcy-l.,nm (11011) 0,0 0.00 0.00 0.00 0.11 0o.2 0o11 0.o6 0,21 0.23 0,.3 o0,l 0.02 0.00 0.00 0,00 0.00 0o00 o.0o 0.00 hFlner lgg eep"tnt (3M0) 0.0 0,00 0.00 0,00 (0,13) (0.23) (0,14) (0,0o ) 0,11 0,39 0,55 0.69 0.59 0,00 0,00 0,00 0,04 0,00 0,00 0,00 l;,.ys.,,...I I.y.entt (142) 0.01 0.11 0.11 0,24 Mv.esooernii PAyments (3.2t) 0.01 0.09 0.10 0.11 0,10 0,09 0,01 0,04 0,01 0,00 0.00 Q,w 0,00 0.00 0,00 0.00 Plowl,ita l O.0 0.31 0,21 0,24 0,01 0,09 0.23 0.36 0.31 0,12 0,03 0.64 0.63 0,00 0.00 0,00 O,00 0,00 0.00 0.00 UU I F IAAN N1.iu1i`E.bmrxpd 3.03 0,31 0,26 023) 0.35 0.3$ 0.00 0.00 0,00 0,00 0,00 0.00 0.00 0,00 0,00 0,00 0.00 0,00 0.00 0,04) 1A194111il Ovur11PA4 (323 0.03 0.06 0,01 0,09 0,30 0,33 0,32 0,32 0.12 0.32 0,30 0,06 0.02 0,00 0,00 0.00 0,00 0.00 0,3510 0,04) cnot of '13 Essaids (52) 0,04 0.09 0.13 0,14 Otis 0.31 0.19 0.39 0.19 0,19 0.16 0.09 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 r˘ulit (12) , 0,03 0.01 0,01 0.02 0,02 0,02 0,02 0,02 0.03 0,02 0.02 0.01 0,00 0.00 O.O 0.00 0.00 0.00 n.nn o.o 1111161.31111 I,li o0,4 0.46 0.41 0.45 0.61 0,33 0,33 0.33 0.33 o0,29 016 o.05 000 0,00 o.no 0,0o 0.n n nl, I 10. 141 116f CASIIFIJrl (3,03) (0,33) (0,26) (0,33) (0,36) (0.36) (0,10) 0,03 0,26 0,35 Ois 0,61 0,51 0,00 0,00 O0,0 o.oo o0,o 0,1111 P.1111 Averrge P1.,, tr.ntip^ 1.69 lIarlln For ImOr tn 2 II.lli) X Nil IWIIU~16I0ITCl ICIIUIJI - 7 IIA (R. l III.LIOII) Tr,l Yr.2 Yr.3 tr,4 Yr,5 , Vt, Yr,6 Yr, rIf Yr,lt Yr,I1 lri V10 Yr.lrr17 ?rf,1 Yr,I lV r, r16 Tr,ll Tr,lflr r I111lLATI r. 3it51 to-Onr 1.399 1.396 2.130 3.032 3,363 3,h66 1:1iqiiATIV. Sl I.IqlIIDIPT 0.516 n.03s 14176 1.306 1.431 1,461 OUT AYS IN CU.g1Ir TI RlS ISID inCAil OR itT-unrF(6m) 1.191 1.191 0.)33 0.303 0.350 0.4114 sltAlsnty 10o BK - 14M rAt 0.129 0.381 0.552 0.621 - 3.5% rat o,t83 0.219 0.210 0.293 0,306 0.312 0.312 0.304 0.261 0.760 0.213 11M.1 0.118 0.046 0.006 shAt, or t or lot ril l.OS.1t.S 0,01? 0,106 0.138 0.165 0,203 0.2312 0,64 0.216 0309 0.13 0,342 0,0 1 siISroIAl. CoIVERI111JIT 1.128 1.561 0.rr6 0.913 D.33 0,712 0.270 0,310 0,412 0.450 0,4MI1 0,501 0os9 0,523 0,509 0,4115 0.453 0.90 0,051 SAWt IItMlllSIA RP l.l1IIfalh1Yt ca97J1T (2At) 0.316 0.516 0,144 0,130 0,1s1 0 208 InItA I olItl.AS (culitJlir) 10844 .o0 1,029 1,054 0.6t4 0.9O1 0,210 0.310 0,412 0,450 0,4 1 0o301 O,I3 0,s32 0,509 01.48 0,451 019Q0 0((11 iiiriAtIlill FA:rols 1,060 1.166 1.263 1,411 1.t 1 163) 1,152 1 ,5s 1.969 2.011 2,212 2.343 2.466 21613 2,19) 2,961 3.l 6 3 311 1,31 3,A 136 lI1IAI. )IIll.AYS (autsrANr) 1,140 16(3l o0SOI 0.141 0.445 0.5S1 0,154 0.199 0,709 0.216 0,216 (1,216 0,109 0.199 0.1612 0164 0 144 0,111 11 ,Il6 0,01111 r.o)WVRt III LVNRVJIT lENIS imo-Ii-ri .91,mril CRAIF. Oml P 0,119 0.231 0.210 0,300 0O333 0,363 0,362 014t1 0.54l, 0.541 S O.33 0.344 0,34% 0,541 O.41 0.$43 0.541 II. 041 0.341 0.341 Al l.lrq113011(3,ITrRS MACVt Oil r) 0,01o 0.031 0.035 0039 0.044 0,050 0.050 0.151 0,151 0.151 0,151 00,11 04,31 0,157 0,15. 0,Ii 0,1 0151 0,15? 0.151 IUTAL RKKIVVCRW (dla.NrNT) 0.134 0.268 0.306 0.329 0.319 0,433 0,433 0.696 0.696 00696 0.696 0.696 0.698 0.696 0.696 0.696 0.696 0.696 0.696 0.696 IIIIATIItII FAITONS 1.060 1-166 1.283 1.411 1,536 1,653 1,752 It56 1,969 1,061 2,12 7,345 2,466 2,633 2193 2.963 3.136 3, 211 3,516 3.136 14TIAI. RECOVERY (aPISTANTr) 0,121 0.230 0,236 0,413 0.246 0,262 0,241 0,316 0,355 01344 0,316 0,296 0,l63 0.265 0.250 0,136 01222 0,110 0.190 011It !i'_ tAUIlnrMIMwilsTTAtl (1.613) (1,511) (0.564) (0.506) (0,196) (0195) 0,03 0,11 1 0,11,1 0,139 0,100 0.01 0.012 0.06 0,066 0,072 0,01 0,093 0,31 1 0,1O 1 IIPV At 01 (3,216) lIIv AT it (.398) 31V AT 61 (3.434) IorY AT Ot (.411) llrY At lot (0.366) Co1IT If ClIVUii A3IAV(WIISTA1T) 1.40 I.560 0.400 0,330 0.350 0.450 irv AT ox (4.650) IIIV AT 3% (4.117) llrV AT 61 (4,224) rICv At It (4,046) (irv AT 101 (3,665) F' 11- o% - 232 - Annex 8 ttchmet 1 Page 1 R EPLITA IV IN(RENTAL STAFFING NEEDS 1. Planting Areas Covning Into Production Apart from the personnel necessary to handle the increased planting and rehabilitation program discussed in Chapter IV, staff and labor will be required for the maintenance, harvesting, processing and marketing related to the Repelita III plantings which wlll come into production through the Repeita IV period. The areas concerned are in Table 1, calculated on the assumptions that 75% of rubber on Repelita III NES-zype projects and estates will be tapped by 1988, and 70% of rubber on other projects. AUl oil palm will be in production, also 75% NES coconuts (which are hybrids) and 70% other project coconuts which are a mix of hybrids and talls. No Repelita IV rubber planting will reach production by 1988 but coconuts planted in 1984 will do so, also oil palm planted in 1984 and 1985. Table 1. AREAS CMONG INTO PRODUCTION DURING REPELITA IV (EA) Crop and Repelita III Repelita IV Total Project Type Planted Reaching Planted Reaching Reaching Production Production Production 1. ESTATE PLANTINGS Rubber NES/PIR/PTP 51,958 38,968 85,000 - 38,968 Oil Palm NES/PIM/PTP 85,327 85,327 150,000 60,000 145,327 Coconut NES/PIR/PTP 9,103 6,827 6,000 3,445 10,272 2. SMA.LOL.lDER PLANTINGS Rubber NES/PIR 77,572 58,179 116,000 - 58,179 SRDP/PRPTE 109,651 76,756 177,000 - 76,756 Oil Palm NES/PIR 34,598 34,598 163,000 51,000 85,598 Coconut NES/PMR 6,278 4,708 22,000 5,170 9,878 SCDP/PRPTE 162,940 114,058 292,000 45,000 159,058 2. Staff Requirements Details of staff needed for estate development are in Table 2, and for smallholder development in Table 3. While some staff concerned with the present development program will continue with that program as the areas come into production, these people will require training in the technology of the production phase. All staff requirements are incremental in this sense and, in considering training needs, no allowance is made for the fact that not all of the production manpower needs will be new posts. TABlE 2, SUMMARY Of STArFrma RIouZRImKNTs rY THe IND Of RBPFEIITA IV - ISTATEL Development Pogram Areoa commg to uroduotloin Total Rtiluber Oil palm Coconut Total Rubber Oil palm Coconiut Total staff Aren planted (hal 35,000 150,000 6,000 241,000 - - Area In production (ha) - - - - 38,965 145,327 10,272 194,567 _a_la__t REtat. manager l7 25 1 43 S 24 1 33 Assistant manager 34 50 2 16 16 49 3 66 Division assistant 119 ISO 4 273 55 145 7 207 Factory malager a 24 32 Pactory ansistant 23 73 7 103 subtotal 170 225 7 402 110 315 ILj AI Admini.ttat ln/ Office clerk 340 500 13 853 156 404 23 663 uplrvieion Office staff 170 250 7 427 78 242 It 31I Divinional clerok 23 300 B 546 109 291 14 414 flubtotal 7A 1.050 2B 1.26 23 l.017 46 1.103 3.21131 Sosilor foreman 119 150 4 273 54 145 7 206 Fleld foreman 425 1,575 27 2,327 196 1,617 46 2#059 Poremait tappinig - - - - 662 - - 662 subtotal 544 2.025 31 2.600 912 J9C]2 2.927 . ._21 Lacto!y Factory clerk - 16 194 14 224 Senior forean - -n - 16 97 7 120 rorem.in - - - - 30 120 68 216 Subtotal - _ 62 AL L 9 6 rPelai 26,894 73,900 20696 103,600 15,715 36,820 970 53,S05 Factory - - - - 622 2,423 1,930 4,975 N'ihtotal 26.894 73.900 2,8116 103,660 16.337 39,243 1I 9OQAAf MAiLtU U is Total aLl staff, labor 33JJ8f 7.L0Q .L5 LQ.I ALZUi 429L.UL "IWA -AM2 )l .AA TADIIB 3. RBUFIJiT l S1IAtlLblILDER DUVULL0PHfNI SUMMARY OF STAFFING REWUIRetENTS AND SHALL1OLDIR PARTICIPATION Development pro'iram Arean coming in Productlon Rubber Rubber Oil palm Coconut Coconut Total Rubber Rubber Oil palm Coconut Coconut SRDP/ MRS/PIR NBS/PIR 6CDP/ HES/,IR IRDP/ NtB/PIR 1l48/PIR BCDP/ NBS/PIR Total PRPTt PRPTB PRPTC PRPTe Area planted (ha) 177,000 116,000 163,000 292,000 22,000 770,000 Area in production Iha) - - - - - 76,757 58,179 65,596 159,058 9,870 369,470 Management Field manager 9 23 27 20 3 82 4 12 14 11 1 42 Assistant manager 44 46 54 59 5 208 12 46 57 21 4 140 Divluional/block 35 162 163 95 15 473 16 - 7 32 - 46 Subtotal II 231 241 17 23 763 32 Be 71 64 5 230 Administration/ Casiler 9 - - 20 - 29 4 - - 10 _ 14 finance office clerk - 464 544 - 49 1,057 - 233 265 - 22 540 Office stalf - 232 272 - 2S 529 - 116 143 - It 270 olviuional/block lertk - 125 326 - 29 6B0 162 171 - 13 344 Financial/ ado. staff 263 - - 466 - 751 69 - - 160 -221 Subtotal 292 10021 ILL41 408 103 L.LQLE 73 511 599 170 1399 Superviion Sub-unit assistant - - - 234 - 234 - - - 64 - 64 manager Nursery/field 142 - - 234 - 376 31 - - 64 - 95 Supervisor Senior foreman - 162 163 - 15 340 - 61 06 - 7 174 Field foreman - 560 1,360 - 110 2,050 - 116 428 - 33 577 Tapping foreman - - - - - - 562 - - - 562 Subtotal 142 722 1.523 466 125 3.000 31 779 514 Al1 41.49 Workshao Mechanic 3S - - - - 35 - - _ _ _ Tractor operator 6S -s - - _ Subtotal 114 - - - - 124 - - - - - ralininL Training assistant Is - - 39 - 57 6 - - 22 - 30 extension fltenalon staff 62 - - 117 - 179 27 - - 64 - 91 ireld extension/PLPT 779 - - 676 - 1,657 257 - - 316 - S75 i Mobile unit operator 9 - - - - 9 4 - - - - 4 Subtotal 6 _ .0J4 1,902 294 - 700 smalllbolder 66,500 56,000oo 6500 146,000 11,025 305,025 38,376 29,069 42,799 79,529 4,939 194,734 j farmer leader 3,540 2,120 3,260 5,640 441 15,401 1,535 1,164 1,712 3,162 196 7,791 TAILE 1. TRAININO RBROUZRDHNTS AND COST (Ip mid-1984 Constantl FOR ESTATE TAFrr OVER REPeLITA IV De,velovmeilt aroggam Haisitenmnee|pgoduotlon Detrod Number Training package Total Humber Training package Total to be coat to be cost trained /a Bp H trained La Rp Haniagoment retate manager 43 One month initial course plus 3J one month initial course and one Ilugsitant mniager 46 one week/annum thereafttert 74 week/annum theteatter over Repellta IV, oiviusional aneletant 273 total 2 months per person over 216 totalling 2 months per person I faototy manager - Repalita Iv I np 2 million per 37 Rp 2 million per month. At mid point ractory assistant - month. At mid-point 201 managers. 116 222 sanagore. ijn Costs: 201 x 2 x Rp 2 million 04 443 Cotae 212 x 2 x Rp 2 million 888J0 Administration/ Office clerxk 53 3 months training 743 One month training in tilintico oUtice staff 427 In Repelita IV 6, Pp 466,000 374 Repolita IV I Op 300,000 DIvisioItal clerk 546 470 Factory clerk - 239 1.426 Coetel 1,026 x hp 606,0o0 1.752.6 1.40 Cosats: 1,406 x Rp 300,000 432 Technical Faotory mnager - 32 3 month Initial training In ractory nassatant - 103 Repelita IV I Pp I million Nenior factory foreman - 120 Pactory roreman - 216 Senior field foreman - 204 j79 Coitas 479 x Rp I million 67S 0 SuPOrvinioll Renior field foreman 273 4 courses 6 total 6 206 -4 courses I Rp 1.5 milion over (ncl. Field foreman 2,327 Rp 1.5 million over Repelita IV. 2,059 Repelita IV. At mid-point 1,464 extennicin Tapping foreman - At wid-point 1,300 eupervisoras 662 supervisors, 2.600 Coitau 1,300 x Rp 1.5 million 1.950.0. 2.927 Coites 1,464 x Rp 1.5 million Total 4,0066 as. 4 J|j /a Details by program in Table 2a . TABL.8 3. REISLITA IV sHALLHOLDER DBVeLOPMeNT TRAINING REOUIREMENTS AtD COSTS (aid Ae84 no Constant) FOR STAFF AND FARIIER LADERS Devolooment program Uaintenance/oroduction croOtan liumber Training package Total Number Training package Total to he cost to be cost trained /J Rp H trained /a RPpm Rlaagemenit rield manager 82 Two months training in first year 42 Two months training In first year and two Assistant manager 208 and two weeks/year the.eaCt.rt 140 weeks/year thereafteri totalling 4 months .Dlivisional/block/ 473 totaLling 4 months over 45 over Repelita IV, I Rp 2.0 million/month. Sub-unit manager Repelita IV I Pp 2 million/month. At mid-point 115 managern. At mid point 381 managers. 763 Costa: 382 Xu4 x Rp 2 miliion 3,056.0 230 Costs: 115 X 4 x Pp 2 million 920.0 !minIqtkation/ Caslier 29 3 monthi Initial training in 14 One month initial training In Repelita IV linance Office Clerk 1,057 Repelita IV I Fp 696.000 540 t Rp 300,0000 Office Staff 529 270 Divisloitali/lock Clerk 680 346 Pinancial/Adm. Staff 751 229 3.046 Costs: 3,046 x ap 686,000 2,089.6 1.399 Costs: 1,399 X Pp 300,000 10-21 Worknhop Nechaiilc 35 3 months initial training in Tractor Operator 09 Repellta IV 0 Pp I million, 124 All to be trained, - Costos 124 X Pp 1 mitlion 124.0 BUperviSioii Sub-unit Aset. Hanager 234 4 courses I total Ap 750,000 64 4 courses I Rp 500S 000 over Repelita IV. Nursery/rield 376 over Repelita IV. At mid-point 95 At mid-point 746 supervisors. Supervisor 1,500 supervisors. senior roreman 340 174 Field Foreman 2,050 577 Tapping Poreman - 592 3,000 Costal 1,500 X Bp 0.75 million 1,125,0 1j492 Costat 745 a Rp 0,5 million 373,0 Extension ri*ld extension/PLPT 1,657 4 courses * Rp 750,000 over 575 4 courses 6 Rp 750,000 over Repelits IV. Training Assistant 57 Repelita IV. At mid-point 951 30 At mid-point 350 staf, fxtenuion staff 179 staff, 91 Mlobile Unit Operator 9 4 1,902 Costes 951 x Rp 175 million 1II 70-O Costs: 350 i Rp .75 million 261 La Details by program In Table 3. Developoment program _halntenance/oroduction proegam Number Training package Total NSumber Training package Total to be cost to be cost trained /A Rp N trained j Pp 11 farmer leader Rubber tIES/PIR 2.320 7 two-day courses over 1,164 one two-week tapping course and 6 Ropulita IV. Allowance Sp 7$500/ two-day courses, total 26 days/farmer day. At mId-point 1,160 farmer over Repolita IV. At mid-point S02 farmer loadera. leaders, Costat 1,160 x 14 x Hp 7,500. 121.8 Costa: S02 x 26 x Ip 7,500. 113.5 Trainer costae 76 groups of Trainer coetes equivalent of 13 x 2 day 15 farmers x 7 courtse x Pp 60,000 courses S Pp 60,000 each tot 39 groupsa 40.6 per course. 43.7 Rubber sROP/PiPTE 3J540 Same courses as above, but trainer 155 same courses as above, but trainer costa costs are absorbed in PHU staff are absorbed In PIU staff costs, costa, At mid-point 1,770 farmer At mid-poLnt 769 farmer leaderas Costse I leaderes Coates 766 x 26 X Rp 7,500, 149.6 Costs: 1,770 x 14 x Pp 7,500. 165.9 Trainerc conducting 7 coure, for 52 groups g Trainers I(IPU staffi conducting of 15 farmers * 364 seesions over 7 courses each for 110 groups of Repelita IV of 15 farmerts a 26 teaeions over Repelita IV. oil Palm "os/Pin 3,260 5 two-day coutraes over Repelita IV. 1.712 5 two-day courses over Repelita IV. At mid-point 1,630 farmer leaders. At mid-point 856 farmer leaders. Allowance Pp 7,500 per day. Allowance lip 7,500 per day. Costat 1,630 X 10 X Rp 7,500. 122, Costus 656 x 10 X Ap 7,500. 64.2 Trainer costes 109 groups of Trainer costsi 57 groups of 15 farmers x 5 aessions 15 farmters x 5 aeasions I Rp 60,000 I Dp 90,000 each. 43.6 each. 22.6 Coconut NIS/PIR 441 6 two-day courses over 196 6 two-day courses over Repelita IV. Repellta IV. At mid-point 221 Mid-point 99 farmer leaders. Allowance farmer leaders. Allowance Rp 7,500 per day, Rp 7,500 poe day. Coates 99 a 12 x Pp 7,500. 6 nC Coates 221 a 12 X Op 7#500. 19.9 Trainer cotal: 7 groups of 15 farmers ax k Trainer costs: 15 groups of 15 6 sessions x Pp 60,000 each 3.4 farmers a 6 seasions I Rp 60,000 each. 7.2 /A Details by program in Table 3. Development program Haintenance/oroduction crogram Number Training package Total Number Trcining package Total to be cost to be cost trained /a Rp H trained ia Pp H Coconut RCDP/PAPTB _S_40 Same courses as above, but trainer 3.112 saome courses as above, but trainer costa costs absorbed in PHU satff coats. absorbed in PhU staff crists. At: mid-point 2,930 facmec leaders. At mid-point 1,591 facmer leader.a Costa# 2,920 x 12 x Rp 7,500 Costs$ 1,591 x 12 x Rp 7,500. 143.2 Trainers (PHU staff) conduoting 262.5 Trainera condlcting 6 courses x 106 groups 6 coUtses x 195 groupa of 15 of 15 farmers * 636 training sesalons farere * 1,170 training oveo R eplita MV sessions over Repelita IV. Total 7,.91ja 2,521.6 /A Details by program in Table 3. * 1 . .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. TEMAJOR TREE CROPS, aRm ~~~~~~~~~~~~~~~~~~~~~A SECtOR REMI~EW - 4mm ~~~~~~~~593.0 - 11027.0 44.-1 c 110.0 ~~o~~ua ~~14.0 -C 44.0 _ ~~~~~00-( 11.0 UUmeN is a4 15 / ~ ~~il!ffl - sgj2o DM ~A~~~ 046~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~9