THE WORLD BANK I BANK DUNIA Sharing Development Solutions for an Emerging Indonesia O F L4 7 6 k 7 /) Rodrigo A. Chaves Country Director, Indonesia Letter No.: CD-360/DOISP/IX/2013 September 20, 2013 Mr. Robert Pakpahan Expert Staff of Minister of Finance on State Revenue With Full Mandate as Director General of Debt Management Ministry of Finance Gedung Frans Seda, Jalan Dr. Wahidin No. 1 Jakarta 10710 Indonesia Dear Mr. Pakpahan: Re: Dam Operational Improvement and Safety Project - Loan No. 7669-ID Amendment No. I I refer to the loan agreement ("Loan Agreement"), dated March 27, 2009, between the Republic of Indonesia (the "Borrower") and the International Bank for Reconstruction and Development (the -"Bank") for the Dam Operational Improvement and Safety Project (the "Project"). I refer also to your letter dated July 5, 2013, requesting an amendment to the Loan Agreement to: (i) restructure the activities to accommodate, inter alia, works that are urgently needed for the sustainability of the dams; (ii) changes to the implementation arrangement to reflect the restructuring of the DGWR; (iii) reallocate the proceeds of the Loan; (iv) an extension of Closing Date; (v) revision to the performance indicators; and (vi) revision to the definitions. After due consideration, the Bank concurs with this request, and accordingly the Loan Agreement is hereby amended as set out below and the performance indicators are revised as set out in the revised Supplemental Letter. 1. Parts 1 and 2 of Schedule 1 to the Loan Agreement are amended and restated as follows (amended language is italicized for ease of reference): "Part 1. Dam Operational Improvement and Safety Works and Studies Restoring dam performance and safety by providing for: (a) design and construction of minor and localized rehabilitation and safety remedial works to restore operational performance and/or safety, including electro- mechanical equipment and/or minor upgrade in approximately 33 dam Sub- projects; ISEB Tower 2, 12th Floor, JI. Jend. Sudirman Kay. 52-53, Jakarta 12190 a +6221 5299 3000 6 +6221 5299 3111 0 www.worldbank.org/id Mr. Robert Pakpahan - 2 - September 20, 2013 (b) survey, investigation and design Preparation Activities, including social and environmental management plans, for medium to major works to restore and/or improve operational performance and safety for approximately 23 dams scheduled for later rehabilitation and remedial works outside of the scope of the Project, including second-phase works for approximately 14 dams included under Part 1(a) of the Project; (c) BDSF repair and/or upgrading to improve safety monitoring and preparedness systems for spillway emergency discharge for approximately 34 dam Sub-projects; (d) establishing a river inflow and sediment monitoring system to improve the operational hydrology for approximately 56 dams, and review of the flood flow data, estimated flood discharge frequency and probable maximum flood or flood envelope curves related to watershed areas; and (e) assessment of spillway capacity and downstream flooding risk and Preparation Activities for approximately 56 dams, including surveys, modeling and feasibility studies for later structural works. Part 2. Operation and Maintenance Improvement and Capacity Building Improving O&M, dam safety monitoring and strengthening of the capacity of DGWR through: (a) preparation of O&M plans, instrumentation monitoring and data processing plans, standard operational procedures and manuals, and undertaking needs-based budgeting and O&M activities for: (i) approximately 34 dams and reservoirs which will be included in the Sub-projects under Part 1(a) of the Project; and (ii) approximately 23 dams scheduled for later structural works outside of the scope of the Project; (b) preparation of dam and reservoir management plans, emergency spillway operation (including dam failure) contingency plans & procedures for approximately 56 dams; (c) staff training for dam safety monitoring, maintenance and operations; and (d) conducting Community Participation Programs in reservoir maintenance, income- generating agriculture and silviculture activities related to reservoir maintenance and related skills training with local communities living near approximately 20 reservoirs." 2. Section I.A.1, Section I.B.1(a)(ii), Section I.B.2(a), and Section I.B.6 of Schedule 2 to the Loan Agreement are amended and restated to reflect the organizational restructuring of DGWR and changes made to the description of activities as follows (amended language is italicized for ease of reference): ISEB Tower 2, 121h Floor, JL Jend. Sudirman Kay. 52-53, Jakarta 12190 2+6221 5299 3000 d +6221 5299 3111 Owww.worldbank.org/id Mr. Robert Pakpahan - 3 - September 20, 2013 Section .A. 1: "(a) maintain until completion of the Project the NSCWR which shall be responsible for synchronization of the Project within the context of the national water resources priorities as well as conducting independent monitoring and evaluation of the Project; (b) cause DGWR to be the implementing agency for the Project, and maintain until completion of the Project, the CPMU in the Directorate of Rivers, Lakes and Reservoirs of DGWR, established by Decree No. 206/KPTS/D/2008, dated December 11, 2008, which shall be responsible for overall management and coordination of the Project, and thereafter by the Decree No. 253/KPTS/2011, dated May 26, 2011, the CPMU is to be subsequently placed in the Directorate of Operation and Maintenance henceforth; (c) maintain until completion of the Project, the CPIU in the Directorate of Rivers, Lakes and Reservoirs of DGWR, established by Decree No. 206/KPTS/D/2008, dated December 11, 2008, which shall be responsible for coordinating day-to-day implementation activities at the central level, and thereafter by the Decree No. 253/KPTS/2011 dated May 26, 2011, the CPIU is to be subsequently placed in the Directorate of Operation and Maintenance henceforth; (d) maintain until completion of the Project, each of the nine PIUs, which were established by Decree No. 206/KPTS/D/2008, dated December 11, 2008, in those BBWS/BWS Offices in Project Provinces in which activities will be undertaken in the first year of Project implementation; and (ii) establish, by no later than December 31, 2009 and thereafter maintain, until completion of the Project, PlUs in the remaining BBWS/BWS Offices and Dinas PUP/PSDA Offices in the Project Provinces; in each case with terms of reference and staffing acceptable to the Bank, to be responsible for day-to-day Project activities in such BBWS/BWS Offices and Dinas PUP/PSDA Offices, respectively, in accordance with the Project Management Manual; (e) (i) establish by no later than December 31, 2009 and thereafter maintain until completion of the Project, the PIU in each of RCWR, DSU, the Directorate of River and Coastal, and the Directorate of Operation and Maintenance, in each case with terms of reference and staffing acceptable to the Bank, to be responsible for day-to-day Project activities in RCWR. DSU, the Directorate of River and Coastal, and the Directorate of Operation and Maintenance respectively, in accordance with the Project Management Manual; and (ii) merge by no later than January 31, 2014, the PIU in the Directorate of River and Coastal into the PIU in the Directorate of Operation and Maintenance, and (f) (i) for community participation activities under Part 2(d) of the Project, ensure that such activities will be implemented by the PlU in each of the BBWS/BWS Offices and of the Dinas PUP, as the case may be; and (ii) for community participation ISEB Tower 2, 12th Floor, JI. Jend. Sudirman Kay. 52-53, Jakarta 12190 2+6221 5299 3000 4D+6221 5299 3111 o www.worldbank.org/id Mr. Robert Pakpahan -4 - September 20, 2013 activities under Part 3(d) of the Project, establish by no later than December 31, 2009 and thereafter maintain until completion of the Project a unit in each Provincial Dinas PUP/PSDA and BBWS/BWS Qffices, in each case with terms of reference and staffing acceptable to the Bank, in accordance with the Project Management Manual." Section I.B.l(a)(ii): "the list of proposed dams, the eligibility requirements, and the preparation, appraisal, selection and implementation procedures, for Sub-projects and Preparation Activities, which requirements and procedures shall include: (A) the list of Sub-project sites selected for remedial, minor rehabilitation or reconstruction works activities under the Project, as the same may be updated from time to time with the agreement of the Bank; (B) the list of sites selected for Preparation Activities; (C) arrangements for, and the carrying out of, timely public and stakeholder consultations; (D) technical standards, design criteria and DSC safety inspection requirements; (E) the mitigation and dam safety measures;" Section I.B.2(a): "in carrying out Part I of the Project, ensure that: (i) Sub-projects are selected only from among the dams listed in the Project Management Manual as dam sites meeting the construction eligibility criteria for Sub-projects; and (ii) that Preparation Activities are selected for second-phase, more complex activities at sites among the foregoing list for Sub- projects and for activities at sites among the remaining 23 dams listed in the Project Management Manual as meeting the preparation criteria for the Project;" Section I.B.6: "The Borrower shall ensure that each Community Participation Program shall be: (a) implemented: (i) with respect to Part 2(d) of the Project, by the PIU in each of the BBWS/BWS Offices and the Dinas PUP/PSDA Qffices in the designated reservoir areas; and (ii) for Part 3(d) of the Project, by the PIU in each of the Provincial BBWS/BWS and Dinas PUP/PSDA Offices in the designated sub-catchment areas, in each case in accordance with the Project Management Manual;" 3. Paragraph (i)(a) of the Project Outcome Indicators and Outcome (a)(i) of the Intermediate Outcome Indicators of Annex I to Schedule 2 to the Loan Agreement are amended to reflect changes to the description of activities as follows: Project Outcome Indicators: "(i)(a) Reduction in dam failure risk of about 33 rehabilitated dams using an appropriate Risk Assessment Method & achieving operational Spillway Emergency Operation Plans for these dams. 'Extreme' Hazard dams reduced from 3% to 0%; 'High' Hazard dams reduced from 81 to <5%; 'Moderate' Hazard dams increased from 0% to >95%. Overall Hazard of the 34 dams reduced by >30% of Risk Score." ISEB Tower 2, 121h Floor, J. Jend. Sudirman Kay. 52-53, Jakarta 12190 E+6221 5299 3000 0 +6221 5299 3111 O www.worldbank.org/id Mr. Robert Pakpahan - 5 - September 20, 2013 Intermediate Outcome Indicators: "Outcome (a) (i) Dam Portfolio Risk Assessment indicates that functionality of about 33 MPW-owned dams is restored, safety risks of at least 22 dams greatly reduced, and that the risks of 23 un-restored dams (DOISP 2) are still manageable:" 4. Additionally, paragraphs 16 and 25 of Section I of the Appendix to the Loan Agreement is hereby amended and additional paragraphs 14(a) and 14(b) are inserted between paragraphs 14 and 15 to reflect changes related to the DGWR restructuring as set out below (amended language is italicized for ease of reference): "14(a) "Directorate of Operation and Maintenance" means the Directorate of Operation and Maintenance within MPW and any successor thereto. 14(b) "Directorate of River and Coastal" means the Directorate of River and Coastal within MPW and any successor thereto. 16. "Dinas PUP/PSDA" means a Water Resource Office in a Project Province; and "Dinas PUPs/PSDAs" means more than one Dinas PUP/PSDA. 25. "Government Regulation on Dams" means the draft of Government Regulation on Dams under Law 7/2004 covering dam development, dam management, reservoir water conservation, control of water destructive power, dam decommissioning, dam safety, public roles and provisions for improved documentation and information; supervision and compliance, which was submitted to the State Secretariat in October 2008 and thereafter issued by the Borrower on February 2010 as Government Regulation No. 37/2010." ISEB Tower 2, 12m1 Floor, J. Jend. Sudirman Kay. 52-53, Jakarta 12190 2 +6221 5299 3000 0 +6221 5299 3111 0 www.worldbank.org/id Mr. Robert Pakpahan - 6 - September 20, 2013 5. The Bank has reallocated the proceeds of the Loan allocated in the table in Section IV.A.2 of Schedule 2 to the Loan Agreement as set out below: Amount of the Percentage of * Loan Allocated Expenditures to be (expressed in financed USD) (Inclusive of Taxes) 1) Goods, works, services, consultants' 28,619,000 80% services and incremental operating costs for Part I of the Project 2) Goods, services, consultants' services, 9,798,000 80% except for training and workshops, and incremental Part 2(d) operating costs for Part 2 of the Project 100% for Part 2(d) 3) Goods, services, consultants' services, 5,135,000 80% except for training and workshops, and incremental Part 3(d) operating costs for Part 3 of the Project 100% for Part 3(d) 4) Goods, services, consultants' services, 3,362,000 80% training and workshops, and incremental operating costs for Part 4 of the Project 5) Goods, services, consultants' services, 3,086,000 80% training and workshops, and incremental operating costs for Part 5 of the Project TOTAL AMOUNT 50,000,000 6. Additionally, the Bank has established July 1, 2015 as the later date for the purposes of Section IV.B.2 of Schedule 2 to the Loan Agreement. Except as specifically set out in this letter, all terms and conditions in the Loan Agreement remain unchanged. The Bank will disclose this letter agreement and related information on this Loan in accordance with the World Bank Policy on Access to Information. By entering into this agreement, the Borrower consents to disclosure of this agreement and related information on this Loan. ISEB Tower 2, 12th Floor, JI. Jend. Sudirman Kay. 52-53, Jakarta 12190 a +6221 5299 3000 *+6221 5299 3111 O www.worldbank.org/d Mr. Robert Pakpahan - 7 - September 20, 2013 Please confirm your agreement to the foregoing by signing and dating both enclosed copies of this letter in the space provided and returning one signed copy to us. The above amendment will become effective as of the date of the later date of countersignature of this letter by the Borrower. Sincerely, Rodrig Ch s Country Direc, CONFIRMED: REPUBLIC OF INDONESIA By: Name: Robert Pakpahan Expert Staff of Minister of Finance on State Revenue Title: With Full Mandate as Director General of Debt Management Date: C ,'- 4, 1 ISEB Tower 2, 12th Floor, JI. Jend. Sudirman Kay. 52-53, Jakarta 12190 2+6221 5299 3000 ib+6221 5299 3111 Owww.worldbank.org/id Mr. Robert Pakpahan - 8 - September 20, 2013 ANNEX ANNEX II to Schedule 2 National Competitive Bidding: Modifications to Procedures The procedures applicable to the procurement of goods, works, and non-consulting services under contracts awarded on the basis of National Competitive Bidding shall be those of the Pelelangan Umum (Public Tendering) and Pemilihan Langsung / Pelelangan Sederhana (Simplified Tendering) methods as set forth in the Borrower's Presidential Regulation No. 54/2010, with the modifications set out below in order to ensure economy, efficiency, transparency, and broad consistency with the provisions of Section I of the Procurement Guidelines, pursuant to paragraph 3.3 of said Guidelines. The Pemilihan Langsung / Pelelangan Sederhana method shall apply to such procurement up to the financial thresholds specified in said Regulation. In the event of a conflict between the Borrower's procedures and these modifications, the latter shall govern. 1. Procuring entities shall use the appropriate standard bidding documents acceptable to the Borrower and the Bank. The provisions of Section 1.14 (Fraud and Corruption) of the Procurement Guidelines shall apply, and each bidding document and contract financed out of the proceeds of the Loan shall include provisions on matters pertaining to fraud and corruption as defined in paragraph 1.14(a) of said Guidelines and the contract provisions set out in paragraph 1.14(e) of said Guidelines. 2. Foreign bidders shall not be precluded from bidding. If a registration process is required, a foreign firm determined to be the lowest evaluated responsive bidder shall be given reasonable time for registration. Foreign bidders shall not be required to form a joint venture or sub-contract part of the supply of goods, non-consulting services, and works as a condition for submitting bids or the award of the contract. Bidding documents shall be made available, by mail or in person, to all international bidders who are willing to pay the required fee. 3. No preference of any kind shall be given to any bidders. 4. Under the Pelelangan Umum method, bidders shall be allowed at least twenty-one (21) days from the date of the invitation to bid or the date of availability of bidding documents, whichever is later, to prepare and submit bids; this period shall be ten (10) days under the Pemilihan Langsung / Pelelangan Sederhana method. 5. Bids invited under the Pelelangan Umum method shall be submitted in one (1) envelope and evaluated using post-qualification. 6. No bidder shall be rejected merely on the basis of a comparison with the owner's estimate and budget ceiling without the Bank's prior written concurrence. 7. Bid security, at the bidder's option, shall be in the form of a letter of credit or guarantee from a reputable bank or other reputable financial institution and shall without exception follow the form provided for this purpose in the bidding documents. ISEB Tower 2, 12th Floor, Ji. Jend. Sudirman Kay. 52-53, Jakarta 12190 2+6221 5299 3000 0 +6221 5299 3111 0 www.worldbank.org/id Mr. Robert Pakpahan - 9 - September 20, 2013 8. All bids shall not be rejected and new bids solicited without the Bank's prior written concurrence. 9. Government-owned enterprises in Indonesia shall be eligible to participate in bidding only if they can establish that they are legally and financially autonomous, operate under commercial law, and are not dependent agencies of the Borrower or sub-borrower. ISEB Tower 2, 12th Floor, J. Jend. Sudirman Kay. 52-53, Jakarta 12190 Z+6221 5299 3000 i +6221 5299 3111 0 www.worldbank.org/id