DocTumen of The World Bank FOX OMCIAL USE ONLY Reput N.. 5849-IND INDONESIA PUBLIC INVESTMENT IN REPELITA IV December 27, 1985 Countrv Programs Department East Asia and Pacific Regional Office Country m M ba II I dbItom m my be mud by re_dmb euy in the pemc of Itheir .ffd. duIum lb eantub my so a urwhe be dbedmd withou Weed B.ik auIbwuth. CURRENCY AND OTHER EQUIVALENTS Currency Fiscal year averages: Rp per US$1 1979/80 623 1980/81 627 1981/82 637 1982/83 674 1983/84 983 1984/85 1,050 September 30, 1985: 1,121 Weights and Measures Unless specified otherwise, all weights and measures are metric. Abbrevia- tions used include: DWT deadweight ton ha hectare kg kilogram kWh kilowatt hour mW megawatt TCF trillion cubic feet Fiscal Years The Government of Indonesia's fiscal year runs from April 1 through March 31. Some public enterprises use different fiscal years (as specified in the text). FOR OFFICIAL USE ONLY PREACE 1. This public investment review has been prepared by World Bank staff over the past year,. drawing on a range of ongoing economic and project work. The overall macro-economic framework is based on analysis completed for the 1985 Economic Report, partially updated to reflect recent changes in the economic outlook (especially for oil). Important sectoral inputs were provided by two recent World Bank reports on the tree crops and power investment programs. Other sectoral reviews are based on information collected during project work (for transport, housing and transmigration) or especially prepared for this report (for wacer resources, education and healch). In those sectors where World Bank staff have limited Indonesian experience (e.g., manufacturing, mining and pecroleum), the discussion of issues is inevitably more general and incomplete. 2. This report was discussed with government officials in November 1985 and a back-to-office report (dated December 9, 1985) is on file. Subsequently, some editorial and factual corrections have been made. However, this version of the report does not purport to reflect fully the Government's views on investment priorities or the latest information on investment trends. 3. Although the Analysis presented in this report is very preliminary, ic is hoped that it will provide a useful framework for continuing discussions with the Government on investment priorities and planning mechanisms. This review should also help to identify- appropriate areas for future World Bank support, through both lending and economic work. World Bank staff are graceful for the assistance provided by government officials, especially in BAPPENAS, in the preparation of this report and look forward to future collaboration on related follow-up activities. This document has a restncted distribution and may be used by recipients only in the performance of their officml duties. Its contents may not otherwise be disclosed without World Bank authorization. INDONESIA PUBLIC INVESTMENT IN REPELITA IV Table of Contents Pale SUMMA.RY AND CONCLUSIONS ................... i PART I - AN OVERVIEW ...................... A. Itouto. B. The Economic Outlook and Resource Availability ....... 2 The Resource Constraint. ......................... .... 2 Impact on-Public Investment ......................... 5 C. Public Investment Priorities and Constraints ............. 9 An Indicative Investment Program ....... o ............... 9 Sectoral Priorities ...... ................. ...... 17 Project Implementation.. ..... . - ........ .- ..... 23 Financing Issues..... . ..... .............. . ........... . 26 D. Planning and Budgeting Procedures ................ 28 Investment Planning ...................I............. 28 Project Appraisal ......... .. ........... 31 The Budget Process .............. .......... 33 PART II - SECTORAL POGRM..o..... .......................... ....... . 39 A. Introduction. ........... 39 B. Major Tree Crops...... 39 C. Water Resources..o .... 0.0..u-0-s...... .... .- .... ... 45 D. Manufacturing ......... .O...O.. 50 E. Mining and Petroleumm ..... 58 F. Teleomwunications............. ... .... 79 I. Housing ............o................ 85 J. Transmigration..... . . ..... ......... . ... 89 K. Education ....... . o . ... ... . .... 94 L. Healt.,................ ........ ......... . ...... 101 a-:.X TABLES..... 107 Preparation of this report was coordinated by Mark Baird. Sectoral inputs were provided by Geoff Fox (major tree crops), Daniel Gunaratnam (water resources), Chris Wardell (mining), Andres Liebenthal (petroleum and power), M.S. Parthasarathi (transport), A. Shanmugarajah (telecommunications), Jaime Biderman (housing), Gloria Davis (transmigration), Cecilia Valdivieso (education) and Nick Prescott (health). Text Tables Table No. Page Part I 1.1 Smmary of Economic Indicators ......................... 3 1.2 Trends in Public Finance and investment ...................... 6 1.3 Indicative Public Investment Program for REPELITA IV ......... 10 i.4 Development Expenditure and Public Investment ................ 11 L.5 Selected Development Indicators .............................. 14 1.6 Physical Achievements and Targets ................. ............ 15 1.7 Proposed Format for Project Profiles .................... ..... 30 1.8 Conversion Factors for Project Appraisals ..................... 33 Part II 'Major Tree CroDs 2.1 Recent Trends for Major Tree Crops........................... 40 2.2 Selected Planting Programs o g r a ms.. ........... ............ . 42 2.3 Indicative Iairestment Program for Major tree Crops........... 44 water Resources 2.4 Irrigaced Area and Rice Production in 1981 ... . ..... 46 2.5 Physical Programs for Irrigation ...48 2.6 Indicative Investment Program for Water Resources............ 49 .{anufacturing 2.7 Industrial Capacity Targets......... ... ... 52 2.3 Indicative investment Program for Manufaacturing.............. 56 Mining and Pecroleum 2.9 Mineral Production ............................ .. ............ . 59 2.10 Mining and Petroleum Project Proposals for REPE1ITA IV ....... 61 2.11 Indicative Investment Programs for Mining and Petroleum ...... 64 Pover 2.12 Electricity Consumption and Installed lapacity ............... 66 2.13 Alternative Power Scenarios for REPELITA IV AND V ............ 68 2.14 Indicacive Investment Program for Power (PLN) ................ 71 Transoort 2.15 Recent Transport and Traffic Trends.... 73 2.16 Transport Targets for REPELITA IV....... 76 2.17 Indicative Investment Program for Transport .................. 77 Table "To. Pate Telecommunications 2.18 Trends ln Telecommunicacions Services ........................ 80 2.19 Indicative Investment Program for Telecommunications (Perumtel) ............................................... 83 Housinr 2.20 Housing Program Trends......................* .... ... 86 2.21 Indicative Znvestmenc Program fcc Housing (BTaT) .............. 88 Transmigration 2.22 Trends in Transmigration .......* ........ ....... ... ........ 90 2.23 Indicative Sponsored Program for REPELITA V...O-......... 92 2.24 Indicative Itzvescment Program for Transmigration ............. 93 Education 2.25 Enrollment Trends and Targets ................................ 95 2.26 Official Targecs for REPELITA IV ............. * ............... 97 2.27 Indicative Investment Program for Educacion . . 99 Health 2.28 Trends in Health ecatus and Services ................... ..... 102 2.29 Indicative Investment Program for Health...... ............... 104 SUMMARY AND CONCLUSIONS i. This public investment review has been prepared by World Bank staff over the past year, drawing on a range of ongoing economic and prpject work. The starting point was the Covernment's five-year development plan .for 1984/85 to 1988/89 (REPELITA IV). For selected sectors, the plan's targets have been reviewed in light of ezpected resource and project implementation constraints, as well as World Bank staff views On appropriate invescment priorities. On the basis of this analysis, an indicative public investment program has been prepared to show broad sectoral allocations and financing requirements (see Table 1.3). This program is very preliminary, due to weaknesses in the data base and gaps in coverage, and is therefore presented for discussion purposes only. However, this initial cut at the problem does heLp to illustrate the major issues which will affect investment decisions and project implementacion over the next few years. As such, it will hopefully provide a useful frame- work for further follow-up work within BAPPENAS, as welL as for identifying appropriate areas for future WoJrld Bank support. ii. Indonesia will continue to face a tight and uncertain balance of payments outlook over the nest few years, and this is likely to be the binding constrainc on investment levels. The macro-economic framework used for the indicative program results in an investment level for REPLItTA IV about one third lower than projected in the plan. -Although there are no simple criteria for allocating this investment between the public and private sectors, the Covernment is keen to'expand the role of the private sector in financing and implementing investmenc, and this is a stated objective of the REPELITA IV plan. Therefore, given the overall constraint on investible resources, public investment will have to remain tightly controlled. The projections used for this exercise assume real public investment falls by 2Z in 1985/86, remains ac this level in 1986/87, and then grows by only 2% per annum during the final two years of REPELITA IV. However, even this trend may prove difficult to finace, given uncertainties in the external environment (e.g. even lower oil prices) and in the prospects for mobilizing domestic resources (e.g., from the recent tax reform). As a result, the impact of a more constrained resource situation on public investment Levels and allocations is also briefly discussed (see para. 1.14). iii. The sectoral composicion of the indicative program has basically emerged from a "bottom up" approach. However, an attempt has also been made to ensure broad consistency between the sectoral programs and the macro-econo- mic projections of resource availability and development trends. Overall, the indicative program reinforces and eztends the priorities identified in the plan. In particular, as compared to actual trends during REPELITA III, the. indicative program proposes a reallocation of development expenditure away from the industrial sectors (manufacturing and mining) and towards economic infrastructure (water resources, power and telecommunications) and social services (education and health). Such a reallocation is justified by: (a) the relatively Limited development of economic and social infrastructure in Indonesia, compared co other countries in the region; and (b) the Government's objective to give an expanded role to private investment in the directly productive sectors. However, for all sectors, the absolute allocations in the indicative program are lower than projected in the plan and physical targets are reduced accordingly, even for the priority sectors. For ezample: the planting programs for rubber, oil paLm and coconut are reduced by 26% from 1.4 million to 1.0 million ha; the area to be covered by new irrigacion programs is reduced by 34% from 2,140 to 1,420 ha; the expansion of PLN's generation capacity is reduced by 20Z from 5,255 to 4,222 KW; the expansion of Perumtel's exchange capacity is reduced by 57% from 75a,000 to 325,000 lines; the number of sponsored transmigrants is reduced by 20% from 500,000 to 400,000 families; and the additional public enrollments, at alL levels of the education system, are reduced by 16Z from 3.4 to 2.9 million students. For a number of sectors - incLuding tree crops, transmigration, telecommunications and education - these cuts are due primarily to project implementation con- straints (see para. v below). However, the changed economic outlook, in so far as it affects effective demand and resource availability, is a more important factor for water resources and power. Similar arguments apply in the manufacturing and mining sectors, where all major project proposals need to be carefully evaluated in terms of their economic returns and the justifi- cation for public sector involvement. iv. There is also a significant reordering of priorities within some sectors: (a) In the water resources sector, the indicative program gives lower priority to the construction of new large-scale irrigation systems oan Java. Instead, more emphasis is given to completion of ongoing projects (including two multipurpose dams) and intensive system upgrading (to improve operations and facilitate maintenance). New irrigation development is concentrated on the Outer Islands, including swamp reclamation for transmigration sites. (b) In the transport sector, the indicative program gives priority to the road subsector, with particular emphasis on the maintenance and betterment programs. Accordingly, substantial cuts have been made in the planned investments for railway infrastructure, port facili- ties and shipping fleet developmpnt. These are all areas wiere significant increases in capacity can be achieved with improved operational efficiency. (c) In the education sector, the indicative program proposes a signifi- cant reallocation of investment from primary to secondary and higher education programs. Due to the success of the EIPRES program, universal primary education has basically been achieved. At the same time, Indonesia has relatively low enrollment ratios at the secondary and higher education levels, and this is reflected in che severe shortage of skilled manpower. V. Given the rapid expansion of pubLic investment over the past five years, it is hardly surprising that progress in many sectors has become increasingly hampered by project impLementation constraints. Absorption is obviously higher in sectors, such as manufacturing and mining, where there are Large well-defined projects, which can often be constructed on a turnkey basis. However, investments in rural infrastructure and social services - iii - require substantially more locally-trained manpower and effective channels for decentralized administration. Therefore, the priority given to these sectors in REPELITA IV, in both the plan and the indicacive program, will bring project implementation constraints into even sharper focus. Three types of constraints are identified in this report: (a) Many impLementation constraints are related to fundamental institu- tional factors: the general shortage of trained manpower, civil service policies (including the compensation system) and decision making/management practices. While actions can and should be taken in these areas, it would be unrealistic to expect major break- throughs in the near future. Rather, it would be more appropriate to cake related constraints into account in the selection and design of projects. (b) On the other hand, there are a range of regulatory and procedural bottlenecks (e.g., in the areas of procurement, land acquisition and budget procedures), where timely action could have a significant impact on implementation performance over the next two to three years. Most of chese bottlenecks cut across sectors, and related reforms will require broad-based governmenc comitment and support. Cc) Finally, there are some sector-specific constraints that will con- tinue to impinge on project implementacion performanice if action is not taken. These include problems of agency coordination (e.g., for tree crops and transmigration), local contractors (e.g., for power and telecommunications) and sector policies (e.g., for housing). wi. The financing plan underlying the indicative program is similar co that realized during REPELITA III. In particular, cLose to 90% of public investment (excluding projects funded by Pertamina) is to be financed from budgetary resources, including onlending of ezternal Loans, with the balance coming from the internal funds and domestic borrowing of public enterprises. However, the dependence on budgetary resources varies significantly from sector to sector, ranging from close to 10OO in water resources, transmigra- tion, education and health, to less than 30Z in petroLeum and telecommuni- cations. There is also considerable scope for improving che cash generacion and borrowing capacity of public enterprises in certain sectors. In part, this is a macter of raising revenues through consumption/traffic growth and more realistic charges and Lending rates. However, equally important are improvements in operating efficiency (e.g., PLN's fuel consumption and system Losses) and financial management (e.g., Perumcel's billing collection and BTN's arrears reduction). For the PTPs, some injection of government equity or debt conversion will also be required. Cost recovery is important, not only for the financial viability of public enterprises, but also to finance much needed recurrent expenditures. For this purpose, the scope for greater use of IPEDA taxes (e.g., for irrigation) and fees (e.g., for education and health) needs to be explored. Where appropriate, special meAsures, such as means-tested scholarships, could be introduced to protect lower-income groups. via.. In the area of investment pLanning, it is only appropriate that the primary responsibility for preparing sectoral investment programs remains with - iv - the line agencies, who are best equipped to do the job. However, it is also appropriate for SAPPENAS to provide guidelines for project selection and play an active role in ensuring macro-economic and inter-sectoral consistency. For this purpose, it *would be useful to keep an inventory of project profiles, that are updated on a regular (say, quarterly) basis. As a first cut, the type of listing provided in Annex TabLe 3 wouLd probably be adequate. How- ever, at least for major ongoing and new projects, a somewhat fuller profile should eventually be prepared. One possible format for this work is provided in Table 1.7, including projections of both investment and recurrent costs, as well as sources of financing. The availability of up-to-date project profiles and sectoral investment programs would be a very valuable input for adjusting pubLic investment in line with changes in the economic outlook. It would also be helpful if BAPPENAS could identify a core program of high-priority proj- ects, to be protected against resource shortfalls and implementation delays. viii. The key to good investment planning is good project selection and design. For this purpose, economic cost-benefit analysis can be a very usefuL cool, in so far as it colLapses a complex sec of issues into one commcn yardstick, such as net present value (NPV) or the economic rate of return (ERR). However, it is equally important for decision makers to be aware of the assumptions used iv the analysis,-major uncertainties and risks involved, and the range of options considered. This analysis should not simpLy be geared towards deciding whether a project is "good" or "bad," but also high- lighc issues relating to project timing, size and design. Finally, project analysis cannot just be done once at the feasibility stage and left on the shelf. Rather, regular updating should be undertaktn, especially for major projects, to reflect changes in aggregate resource availability and market conditions (while taking into account sunk costs). Lx. In Indonesia, many of the more difficult investment decisions are made in che context of the budget cycle. However, because of limitations in both investment pLanning and budgetary procedures, these decisions are not always made in a sqsrematic manner. In particular, most project proposals receive only a cursory review at budget time and many relevant factors (including non-budgetary and multi-year financing requirements) are often overlooked. Therefore, moving the focus of investment planning from the five- year plan to an ongoing review process would in itself be useful. Two comple- mentary changes are proposed for the budget process: (a) to simplify monitor- ing of project implementation, the budget should be based on similar project classifications as used in the investment program, with a consolidation of funding accounts; and (b) given the recent trend towards decentralization, greater attention needs to be given to the planning and monitoring of lump-sum alLocations (e.g., the INPRES programs) for local governments. Finally, the budget is also an important source of financing for recurrent expenditures. Therefore, for budgetary purposes, BAPPENAS should: (a) agree with the Line agencies on guidelines -or determining appropriate unit costs for recurrent items; and (b) look closely at the recurrent cost of new projects. Ac the margin, adequate funding of recurrent expenditures may mean sacrificing some new investments. But the benefits, in terms of improved utilization of exist- ing assets and the provision of better qualicy services, is lilg ly to be well worth the coscs. X. This report represents a very preliminary and partial attempt to address public invesement issues in Indonesia. A major constraint has been the incomplete data base for public finance trends and project proposals. Many of these gaps have been filled in the preparation of the indicative program by using rough estimates or adjusted official numbers. However, this is an area where further updating and follow-up is required. The following specific points are worth noting: (a) At the present time, there is no comprehensive or consistent set of public finance statistics available for rndonesia. The framework used in this report provides a useful starting point. However, sub- stantially more data is needed, especially in public enterprise and local government accounts, to reconscruct a reliable series on public investment. (b) Although 1984185 and part of 1985/86 are now past, no actual data for these years were availabLe for use in this report. In the indicative program, adjustmencs have been made to reflect the estimated pace of projecc implementation wherever possible. However, for same sectors, the investmenc trends are based on budget allocations or anticipated resource requirements. All of these numbers need to be updaced, and the investment program rephased accordingly. Cc) As far as possible, the sectoral programs used in TabLe 1.3 have been built up from World Bank staff views on investment priori- ties. However, due to either data or expertise constraints, this has not always been possibLe. Some important examples include manu- facturing projects not under the Ministry of Industry, petroLeum investments fundet by Pertamina, and components of the transport program. While some broad judgements have been made on investment levels and priorities in these areas, more project-specific analysis is still required. PART I AN OVERVIEl r. Au OVERVIEw A. Introduction 1.01 During the 1970s, Indonesia used its increased oil revenues to embark upon an expanded program of public investment. Many of these invest- ments are now paying off: the Government's irrigation program has helped Indonesia become self-sufficient in rice, while the school construction program has brought universal primary education within sight. However, other investments have proved costly to the economy. Faced with a worsening balance of payments outlook, the Government decided in 1983 to reph'-se a number of large capital-intensive projects, primarily in the energy and mining sectors. This decision has resulted in significant foreign exchange savings and contributed to a marked reduction in the country's current account deficit. gowever, the medium-term prospects remain uncertain, wich continued restraint necessary in future levels of pubLic investmenc. Therefore, effective use of the limited resources available remains a priority concern. 1.02 It is in this context that World Bank staff have prepared this public investment review. The starting point for this ezercise was the Goveqment's five-year development plan for 1984/85 to 1988/89 tIEPELITA M).1 For selected sectors, the pLan's targets have been reviewed in light of expected resource and project implementation constraints, as well as World Bank staff views on appropriate investment priorities. On the basis of this analysis, an indicative public investment program has been prepared to show broad sectoral allocations and financing requirements. This program is very preliiinary, due to weaknesses in the data base and gaps in coverage, and is therefore presented for discussion purposes only. However, this inicial cut at the problem does help co illustrate the major issues which will affect irvestment decisions and project implementation over the next few years. As such, it is hoped that this review will provide a useful framework for further follow-up work within BAPPENAS, as well as for identifying appropriate areas for future World Bank support (through both lending and economic work). 1.03 This report is in two parts. Part r provides an overview of public investment issues during REPELVrA IV: the economic outlook and resource avail- ability (Sectinn B); public investment priorities and constraints (Section C); and related suggestions for planning and budgeting procedures (Section D). Part II looks more closely at investment issues in eleven sectors: major tree crops, vacer resources, manufacturing, mining and petroLeum, power, cransport, telecommunications, housing, cransmigration, education and health. 1/ GOI, Rencanr Pembanzunan Lima Tahun Keemoat. 1984/85-1988/89 (March 19, 1984). -2- B. The Economic Outlook and Resource Availability The Resource Constraint 1.04 DeveLopments in the Indonesian economy during the 1970s were domin- ated by the impact of higher oil revenues, which helped finance a significant increase in budget expenditure and imports. without uncae recourse to exter? il borrowing. As a result, over the decade to 1981, the fixed investment rate rose by six points to 212 and real CDP growch averaged more than 8% per annnm. Not surprisingly, domestic inflation was also high (20Z per annum) over this period. However, the more basic concern remained the count_,'s vulnerability to fLuctuations in world oil markets. This vulnerabilitf has been exposed over the past three years, when indone-ia's export earnings from ail and LNC fell by close to 24%. In response, the Covernment acted on two broad fronts: (a) to adjust incentives, through devaluation of the rupiah, reduced subsidies and freer interest rates; and (b) to restrain aggregate demand, primarily through rephasing a number of large, capital-intensive projects. These measures proved successful in managing the balance of payments, with the current account deficit falling from 8.5Z to 2.4% of CUP over the past three years. Domestic inflation wLs also reduced to 9% in 1984. However, there have been costs in cerms of slower economic growth (averaging 3.6Z per annum over the past three years) and Lower fixed invest- mnent (down to 18: of GDP in 1984). Furthermor-, the economy is still heavily dependent on oil and LNG, which accounced for about cwo thirds of government revenues and export earnings in 1984185. 1.05 Indonesia will continue to face a tighr and uncertain balance of payments outlook over the next few years, and this is likely to be the binding constraint on investment Levels. A number of scenarios for future develop- ments yere presented in the 1985 Economic Report, prepared earlier this year.- However, since that time, there has been a significant deterioration in the economic outlook for Indonesia, due primarily tu the short-term market weakness and uncertain prospects for oil. As a result, we have prepared a partially updated set of projections, referred to as the "indicative scenario," for use in this public investment review. As with aLl economic projections, this scenario is not intended to be a precise forecast of future events. Rather, it is simply presented to illustrate the broad magnitude or the resource constraint during REPELITV rv. The major assumptions and results of the indicative scenario are summarized in Table 1.1. Note the fo,lowing: (a) World oil prices are assumed to fall by about 22% in real cerms during BEPELITA IV. This is a major factor behind the projected deterioration in the terms of trade over this five-year period. 2/ World Bsank, Indonesia: Policies for Grouth and Employment (Report No. 5597-IND, April 23, 1985). -3- Table 1.1: SUMMARY OF ECONOMIC INDICATORS Growth rates /a Shares of GDP /b rndicator REP. III LEP. IV REP. III REP. IV - (Z p..a.) -(. Z) - CDP 4.8 3.8 100.0 100.0 Oil and LNG -1.1 3.3 23.3 22.6 Nan-oil economy 6.8 4.0 76.7 77.4 - Agriculture 4.2 3.7 25.7 25.4 - Industry 9.4 4.1 17.0 17.6 - Services 7.8 4.1 34.0 34.4 Ezpenture 9.8 2.0 98.3 97.9 Consumption 11.8 2.4 75.2 79.3 Investment 3.9 0.6 23.1 18.6 - Fixed investment 4.9 0.5 Z1.5 17.5 - Stock changes 1.6 1.1 Trade Exports (goods & NFS) -1.2 3.2 27.8 23.3 - OiL & LNG -1.9 l.9 20.6 15.1 - Non-oil exports 1.7 7.0 7.2 8.2 Imports (good & NFS) 5.5 -1.3 26.1 21.2 Prices Terms of trade 9.7 -0.8 Domestic prices 23.6 8.0 eflo icems 1978/79 1983/84 1988/89 Current account (Z of CNP) 2.5 6.0 3.1 Reserves (mths of imports)/c 2.3 5.6 6.3 Debt service ratio (Z)/d 21.2 17.8 26.1 /a At 1981 orices. 7b At current prices. 7- Total net foreign assets in months of imports (goods only). 7-d Total external debt service co gross exports (goods and services). Source: WorLd Bank staff estimates. -4- Domestic inflation is projected to be around 3 per annum, consistent with the official plan assumption.- (b) Real CDP growth is projected to average 3.8% per annum, signifi- cantly slower than during REPELITA EII. As in the past, the major contributions to growth will come from services, agriculture and oil. However, the industrial sector is expected to become an increasingly important source of employment and exports. (c) After falling during 1984/85, fixed investment is projected to recover only slowly over the remainder of REPELITA IV, shoving Lictle growth for the five-year period. As a result, che average fixed investment rate is projected to be significantLy Lower than during REPELI & III. The five-year ICOR is also relatively Low at 4.0, reflecting assumed improvements in capacity utilizacion and investment efficiency. (d) A viable balance of payments outlook is dependent upon sustained growth in non-oil exports and the impact of demand restraint on import requirements. Overall, the current accounc deficit is projected to be constrained to about 3Z of GNP during REPELITA IV and steadily reduced in later years. Even so, the debt service ratio would initially rise, reaching a peak of around 26% in the Late 1980s. 1.06 The official plan projections for REPELITA IV, which were prepared before the recent weakening of the world oil market, are considerably more optimistic than the indicacive scenario used in this report. rn particular, the plan is based on a real CDP growth zate of 5Z per annum and an average fixed investment rate of more than 26Z._/ The end result is an investment level for RUEPELTA IV that is more than 50% higher than projected in the indicative scenario. The potential impact of related resource requirements on the balance of payments is almost certainly understated in che pLan, and given che present outlook for oil prices, could quickly lead co an unmanageabLe 3/ This ensures comparabiLicy of plan and indicative program numbers at current prices. However, actual inflation is presently running at less than 6Z per annum and, with continued monetary and fiscal restrainc, could stay around this level over the medium cerm. In this event, all nominal projections of budgetary revenues and expenditures, as well as of investment levels, wouLd have to be reduced. However, the underlying reaL trends would remain the same. 6/ The plan projects the fixed investment rate to rise from an estimated 22.6Z in 1983/84 co 29.0% in 1988189 (at current prices). The estimated rate used in this report for 1983/84 is 20.6Z (at 1981 prices). Although current price estimates are Likely to be higher, the plan's base-year assumpcion would still seem to be overstated. -5- external debt burden. To avoid this situation, the Government has kept tight control over budgetary expenditures and external borrowing over the past two years. Imoact on Public Investment 1.07 Unfortunacely, there is no comprehensive or consistent set of statistics available Eor discussing public finance issues in Indonesia. As a result, it is difficult to estimate public investment levels and related sources of financing, Let alone link these to macro-economic developments. This is an area where considerably more empirical and analytical work is required. For this report, some preliminary nmbe87 have been put together for the Central Government and public enterprises.- The results are presented in Annex Table 2 and summarized in TabLe 1.2 below. The basic definitions and (historical) data sources are as follows: (a) Government savings are defined as domestic revenues minus recurrent expenditure.- In deriving recurrent expenditure, the official budget data have been adjusted to exclude aortization payments an#,to include che recurrent component of developaent expenditure.-_ (b) Basic data on domestic borrowing by che Government and public enterprises are from the monetary survey compiled by Bank Indonesia. Data on public extepal borrowing are from the World Bank's Debtor Reporting System.- Cc) PubLic enterprise investments financed-by internal funds (excluding Pertamina) and transfers from the Government are based on (very rough) estimates by World Bank staff. Public investment, and the breakdowu between direct government and public enterprise investment, are then derived from these financing estimates. 51 Local government invesrments are covered insofar as they are financed through che cencral government budgec. However, investments funded from local sources are excluded. 61 To avoid confusion, cte official budget data are referred to as "routine expenditure" and the adjusted numbers as "recurrent expenditure." 7/ In Annex Table 2, all public borrowing is assumed to be channelled through the central governmenc budget. However, in practice, some public enterprises (e.g., Pertamina and Garuda) are permitted to borrow directly from external sources. At the same time, not all borrowing by the Central Government is actually reflected in the official budget data. lbl 1.21 llllOS IN PUILIC FIWIE MI IK6111SIENT a1 ctual, Cstieatus frojuctioas 1Tot1s ladicatar IllI/1 1180 111 Il 2ilo) 110213 li1H3114 3118415 tl5sJI& 1111111 lI/U lint" EEP.III RIEP.IV FUItIC fINANCE IUMAV (i t billIal1 Public savings 2,611 4.115 4,611 4,693 *,241 3,421 1,116 6,293 66356 fill3 22,410 34,11I -------------- ~ ~~~~~~~~~ . ............ .......................... ................ ............................. ... .... _ ................._ ..... ..... ..... Iovurnnlt 21,31 3,l315 4,351 4,321 3 li,40 Is,ip 31,11 $,136 6,36 6,214 20,111 31,111 Public cnicrrlss 215 344 312 its 405 450 501 551 620 9 I1,63 2,111 PukliC barr4*iag iIktt I 14311 1,131 3,113 1,1t11 1 3,33 3,31 4,3435 5,31 5,031 11,141 . ........... ............................. ........ ................................... ................................................. .......... ................... ...... Dlomstic 34531 11,4501 I5 3,o5s 12,4311 11,1141 1,11f 1,194 1,365 2,212 13,6411 4,14 External 34J 1,013 1,031 2,493 3,609 2,310 2,651 2,432 2,960 3,364 1,64 3111?I Public i*wmsl.nut 2,64 31133 5,151 1,113 1,412 l,"9 9,410 10,el 11,201 132,14 21,466 52,011 .. . ............. ......................_. _.............. ........... . ............ . .._. ...... ....... . . .. Siraed qawroa.nt tiI I,45 3,321 3,6 2,651 3,8131 I,16 S,i05 501 6,1I3 lI,9t6 24,144 Public tatrgrisu 1,13 2,013, 2,134 4,141 41671 4,910 56144 S,015 51601 6,1l0 I35,50 21,4" IKwSIKEMn 1UH1V It l of o leass duaatlic Ilaulaat 22.4 22.4 23.4 25.9 21.1 24.1 19.0 10.0 11.9 10.0 23.I 11. .......... ............... . ....... .... ...... ................... ..................................... -------------.... ............. . ._._ ..... ... Public filid lmwustueut 1.3 3.2 10.6 12.9 10.1 10.4 10.1 9.3 9.5 9.4 10.3 9.3 -Ilruct g4veralult 2.3 3.6 5.3 6.0 3.6 4.1 4.0 4.9 4.3 4.1 4.1 4.6 -hilic atlurfrirn 5.5 4.6 5.l 6.3 6.5 S.1 6.L0 4. 4.0 4.1 5.0 1.1 Private ifted iavaleiat It.& 52.6 10.I 1.4 l0.6 1.3 1.4 1.1 1.9 3.2 33.3 1.1 Chang. ml s liKk 3.3 1.5 2.0 2.1 0.5 3.0 3.5 0.5 0.5 0.1 1.6. 1.1 Baros niltaral awvias 26.1 21.3 20.2 11.0 3 5 .5 11.4 I1.3 14.9 15.3 15.0 20.1 15.1 Publitc IAVIAs 6. 9.2 L.6 1.1 3.5 9.3 .6. 6.0 1. 5.3 3.4 6.4 -Iovernal.t 1.4 1.5 6.3 1.1 1.9 9. 5.4 5.5 5.3 4.3 7.3 5.9 -Public uaaurprlhm 0.9 0.1 0.6 0.6 0.1 0.5 0.1 0.S 0.1 0.5 0.6 0.5 Priate sawing, 13.5 16.1 1.5 130.3 1.1 3 9.1 1.9 9.3 9.1 31.6 9.3 . ...... .......... ............... ..................................... _ ............................... ------ Al Al current prices. laurcti oasns lIdl. 2. -7- 1.08 This public finance framework, together with the official national account 8catistics, provides a plausible picture of recent investment trends.- As shown in Table 1.2, public investment is estimated to have averaged 10% of GDP and 44Z of gross domestic investment during REPELITA III. Initially, public investment grew strongly in response to the favorable ezternal resource situation. However, as oiL prices began tc weaken, the Government decided to rephase a number of major capital-intensive projects in 1983. Project implementation constraints also began to emerge, as the burden of a substantially larger investment program, especially in areas such as rural infrastructure and social services, became apparent. As a result, public investment is estimated to have fallen, in real terms, by about 181 in 1983/84. Even so, real public investment was still 29% higher than in 1978/79 (and rose by another 101 in 1984185). On the financing side, most of the public investmene during Repelica III was funded by government savings (76%) and net external borrowing (29%). Net domestic borrowing by the public sector was negative during REPELITA III, due to the large buildup of government deposits at Bank Indonesia in 1983/84 (which continued in 1984/85). The contribution of public enterprise savings (excluding Pertamina) is assumed to have been relatively small in recent years, due to the poor financial performnace of many public enterprises and their dependence on the budget and subsidized credits from Bank Indonesia for investment financings. 1.09 The public finance projections in Table 1.2 are related to the base- case scenario discussed above. Although this scenario includes projections of investment, there are no simple criteria for defining appropriate shares for the public and private sectors. The Government, for its part, is keen to expad the roLe of the privace sector in financing and implementing invest- ment, and this is a stated objective of the REPELITA IV plan. However, in practice, private investment has been depressed during the first tvo years of the pLan, due to the impact of excess capacity and high interest rates. Assuming some improvement in these conditions (which may be optimistic), real private investment is projected Co rise on average by 7.5Z per annum over the final three years of REPELITA rv. Given this trend, and the overall con- straint on investible resources, public investment vill have to remain tightly controLled. The projections used for this exercise assume real public invest- ment falls by 2Z in 1985/86, remains at this Level in 1986/87, and then grows by only 2: per ann-u during the final two years of REPELI&A TV. Even chis trend may prove difficult to finance given the impact of lower oil prices on public savings. As shown in Annex Table Z, the fiscal projections leave a financing gap in the final four years of REPELITA IV, which is assumed to be 8/ The national account statistics include aggregate estimates of gross (fixed) domestic investmenc, based on trends in domestic construction and capital good imports. However, no breakdown by public and private sectors is provided. -8 - covered by government borrowing (use of deposits) from Bank Indonesia.91 Accordingly, by 1988/89, the Large accumulation of deposits in 1984/85 is eliminact ,(leaving net borrowing at close to zero over the five-year period).- However, the fiscal outlook could be significantly worse, with changes in the external environment (e.g., Lower oil prices) or prospects for mobilizing pubLic resources (e.g., the impact of the recent tax reform). Therefore, the affordability of the projected public investment levels should not be taken for granted. 1.10 The investment alLocations presented in Indonesia's official five-. year plans are for development expenditure by the Central Government only. This concept differs from the broader definition of public investment, as used in the indicative program, in three important respects: (a) investmencs funded directly by public encerprises (and Local authorities) either from internal funds or borrowing are excluded; (b) some recurrent expenditures, such as the fertilizer subsidy, are incLuded; and (c) development expenditure is on an authorization (racher than cash) basis. As shown in Annex Table 2, the pubLic finance projections imply development expenditure of Rp 52.3 trillion over the five years of REPELITA IV, about one third Lower than the ap 78.6 trillion projected in the plan document. In practice, actual budgetary allocations in 1984/85 and 1985/86 have been consistent with the available zesources, ani this trend is expected to continue. The real concern, therefore, is not so much that development expendicure is running excessively high, but rather that an updated pLanning framework is required for investment decisions. Related issues are taken up in the following section on public invesrtent priorities and constraints. 9/ After rising by about ZOZ during 1984/85, oil and LNG revenues are expected to fall in 1985/86 and only recover to the 1984/85 level (in nominal terms) by 1988/89. The projected elasticities for non-oil taxes are: income tax, 1.2 with respect to (wrt) ncn-ail CDP; vaLue added tax, 1.2 wrt manufacturing GDP; import duty, 0.6 wtrt non-oil imports; export tax, 0.6 wrt non-oil exports; excise duty, 1.0 wrt private consumption; and other taxes, 1.0 vrt CDP. On the ezpenditure side, the budgetary subsidy for petroleum is assumed to be eliminated by 1988/89. Routine expendicures on personnel and materials (including transfers to regions) are projected to rise on average by 5Z per annum in real terms during REPELI&A rV, reflecting the priority attached to the funding of operations and maincenance expenses. 10/ There is still a concern, however, that the required levels of domestic borrowing towards the end of REPELITA IV could crowd out the private sector or fuel inflationary pressures. In this event, unless additional tax revenues could be mobilized, budgetary expenditures (including for investment) would have to be reduced further. -9- C. Public Investment Priorities and Constraints An Indicative Invesement Program 1.11 An indicative public investment program for REPELITA IV, consis tC with the indicative scenario discussed above, is summarized in TabLe 1.3.1T This program draws on the sectoral programs presented in Annex Table 3 and discussed in Part II of this report. After making an aggregate adjustment to exclude recurrent expenditures and projects funded by Pertamina, these sec- toral programs can be integrated with the projections of total public invest- ment and major financing sources (the domestic component of the budget, ex 17r- nal and domestic borrowing, and the internal funds of public enterprises)i from Table 1.2. The "other" sectors (primarily for regional development, defense and public administration) are then calculated as a residual. 1.12 The sectoral composition of the indicative program has basically emerged from a "bottom up" approach. For each sector, consideration has been given to a range of relevant issues: the Government's objectives and targets, implementation constraints, the roLe of the private sector and the priority of individual project proposals. An attempt has also been made to ensure broad consistency-between the secto .l programs and the macro-economic projections of resource availabilicy and development trends. However, this is in no sense an -'optimal" program. There are also a number of areas where further updating and follow-up is required: (a) Although 1984/85 and part of 1985/86 are now past, no actuaL data for these years were availabLe for use in this report. Wherever possible, adjustments have been made to reflect the estimated pace of project implementation (e.g., for major trwe crops, water resources and transmigration). However, for some sectors, the investment trends are based on budget allocations (e.g., education and health) or anticipated resource requirements (e.g., power). In so far as there are shortfalls from these levels, the proposed 11/ These numbers are at current prices, assuming an inflation rate of 8Z per annum. In so far as actual inflacion is Lower (as seems likely in 1985/86), the same leveLs of real investment could be financed with smaller allocations. 12/ Noce that external and domestic borrowing are presented on a gross basis in Table 1.3. Therefore, for consistency, amortization payments (estimated for domestic borrowing) are deducced from gove-nment and public encerprise savings. laible 1.3: INDICATIVE PUBLIC IMVESII(f11 PFROGRAN FOR REPELIVA IV - fin Rp billion at current pricesl levestlent costs financed by . . .... .. ... .. .... ... . . .....~. . .. . . --- -- --- - -- -- -- --- 61 External Oamestic PE Sector 1184/O5 1195186 1996181 1981/88 198/l89 Total budget loans oInsc Al funds hijor tree crops 491 All 749 180 969 3,508 352 1,040 1,146 653 Uater risources 603 651 891 193 814 3,760 2,599 1,11 0 0 znufacturing 1,039 ,0os8 980 690 o00 4,191 502 3,358 5617 310 mining 289 131 203 170 200 992 268 705 19 0 Petroleum 11463 1,561 1,603 1,530 11706 71862 265 678 52 6.868 Paler 1,596 1,896 1,681 Il,0 2,160 9,222 1,7O 0 5,&39 0 1,823 Transport 1,310 1,184 1,251 11439 1l,4 1,091 1,351 3,551 170 21 [aliwoaunicatians 103 258 464 519 584 1,921 0 503 118 108 lHuusing 207 291 279 318 35S 1,1451 291 300 837 23 [ransitigratlion 466 542 593 640 610 2,931 2,1d1 450 0 0 Education 1,502 1,511 1,M5 1,88l 1,181 8,161 1,33 1,341 0 0 llealth 253 255 352 390 387 1,638 5,230 409 0 0 Other 1,570 1,11 1,964 2,790 3,2W1 11,338 4,091 1,625 804 (1,1791hi Sub-total 10,157 11,920 12,l810 14,032 15,4714 65,192 24,521 26,157 4,629 9,065 ---------~. -- - - --- -- -- - -... . - - - - - - - - - .... . - - - - - - Lass: Recurrent component 1,008 1,198 1,225 5,316 1,510 6,301 6,307 fertamina funds 1,052 1,322 1,416 11455 1,624 6,868 6,368 Total ,8917 9,410 10,169 11,201 52,340 52,017 18,214 26,957 4,629 2,217 a/ by public enterprises only. bi Heqitive nusber indicates that internal funds al public enterpruse, as estimated by sector lexcluding Pertaainall are larger than assused In eacro-ecanamlc projections. Saurces Annex Tables 2 and 3. - 12. - Table 1.4: DEVELMR?EN EXPNDITURE AND PUBLIC 1 1STNENT a/ - in Rp billion- - a j oi fotal-- eawlop;ot .fi4.;;t.@ ~~~~~~~'Ja92iovent .n.i; v2 expenditure pragru SI uxpenditore ;r:orua ii REP.111 REP.IV REP.IV REP.IV REP.111 REP.IV REP.IV REP.PI Sector ktual Plan Budget Total Atual Plan Budget Total -lajr tre crops c/d/ 68 1,675 1,9 3,508 2.1 2.2 2.7 5.4 later rswrces c/ 2,291 6,393 3,760 ;,760 7.0 8.5 7.3 s.e 3inufacturing 4,079 5,97 3,860 4,797 2.5 . 7.5 7.; .lininq 2,466 2,497 973 992 7.6 ;. :.9 1.' Petroleum cl 0t 1,781 943 7,88 1.5 2. 4 L. 12.1 Powr cl 2,208 7,84 7,39 9,222 6.8 14.4 14.4 14.1 T,ransport 4,193 9,107 6,901 7,09t 12.9 1L2.0 13. 10.9 Telec uicaftious cl 1= 519 50 1,92' 0.5 0.7 1.0 3.0 .'oising ctdl ZD 700 51 1,451 0.3 0.9 1.1 2.2 Trussuigration 1,604 3,824 2,931 2,951 4.9 5.1 5.7 4.5 Educabti 3,391 [1,540 0,676 8,676 10.4 15.t 16.9 !3.3 Health 736 2,052 1,631 1,638 2.3 2.7 3.2 2.5 Oithr 10,045 21,704 11,913 I1,= 30.9 29.7 23.1 17.4 Sub-total 2,605 7,610 51,479 65,192 100.0 100.0 100.0 100.0 5^rtilizer subsidy dl 1,'4 3,000 3,010 4.7 4.0 5.3 Total 34,:2 73,S10 54,489 104.7 104.0 105.8 ai For RE0ITA IV, plaued dekopmt apeditu an th budget cnmout of the indicativ prom an rougly comparable. b/ 'otal proa include rrcmt cMponat ad inmstets funded by Pertamina. Budget nubrs cvr M8I bdget nd external loans only. cl stiated far REltA IIl actu1. di Estimatod for RBeLTA IV pla. Surce: Annen es I and ;. - 12 - investments could be rephased into later years, a jout increasing resource requirements for REPELITA IV as a whole. _ (b) The residual resources available for "other" sectors are constrained in the indicative program, compared to actual budgetary allocations in recent years (see Table 1.4). Careful scrutiny of the priority of these programs is therefore required. In some cases (e.g., regional development), additional funding may be justified, in which case the allocations to other sectors would have to be cut back even further. (c) rt is hard to overlook the negative number in the final coLumn of Table 1.3 for "other" sectors. This indicates that the internal funds of pubLic enterprises, as estimated by sector, are Larger than assumed in the macro-economic projections. The major reasons for this discrepancy are the estimated contributions of PLN, Perumtel and the tree crop estates. In addition, including projects funded by Pertamina would increase the estimate of pubLic enterprise funds by fourfold and increase the estimate of total public investment by over 13Z. (d) As Ear as possible, the sectoral programs used in Table 1.3 have been built up from World Bank staff views on investment priorities. However, due co either data or expertise constraints, this has not always been possible. Some important examples include manufacturing projects not under the Ministry of Industry, Pertamina's investments in pecroleum expLoration and development, and components of the transport program. While some broad judgements have been made on investment levels and priorities in thsse areas, more project- specific analysis is still required. 1.13 The sectoral composition of the indicative program and its budgetary component are sumarized in Table 1.4; comparabLe data on actual development expenditure during REPELITA tII and as planned for REPELITA rV are aLso shown. Given the broader definition of public investment used in the indica- tive program (see para. 1.10), it is only possible to compare the higetary component with past and planned trends in development expenditure.- However, on this basis, this table shows clearly that the indicative program 13/ On the other hand, the shortfalls may indicate implementation problems that could constrain investment Levels in later years as well. I: is also important to ensure that the opportunity for rephasing has not been pre-empted by resource reallocations to other sectors. 14/ Note thac the budgetary component of the indicative program is defined to include all external loens, even though some of these are not channelled through the budget (and others are not captured in the development expen- diture estimates). The indicative program is also on a cash basis, while development expenditure is based on authorizations (although the diffe- rence is assumed to be small over the five-year period of REPELITA IV). - 13 - basically reinforces and extends the priorities identified in the plan. rn particular, as compared to actual trends during REPELITA III, the indicative prog-am proposes a reallocation of development expenditure away from the industrial sectors (manufacturing and mining) and cowards economic infrastruc- ture (water resources, power and telecommunications) and social services (education and health). Such a reallocation is justified by: (a) the rela- tively limited development of economic and social infrastructure in Indonesia, compared co other countries in the region (see Table 1.5); and (b) the Govern- ment's oW37ctive to give an expanded role to private investment in ocher sectors__ Unfortunately, without historical estimates, it is impossibLe to calculate comparable trends on sectoral composition for total pubLic invest- ment. However, it is evident from Table 1.4, that the focus on development expenditure can exaggerate the importance of those sectors, such as educacion and health, that are heaviLy dependent on budgetary funding. With growing use of domestic borrowing and public enterprise funds in other sectors, it is possible that the effective reallocation of resources is less dramatic than indicated by the trend in development expenditure. 1.14 The indicative program represents a serious effort to cut back excessively large programs and eliminate low priority projects. For all sectors, allocations in absoLute terms are lower than projected in the plan and physical targets are reduced accordingly (see Table 1.6). However, as indicated in Section B above, there is a legitimate concern, heightened by -recent trends in oil pri. , that the resource outlook could deteriorate from the indicative scenario.T%7 In this event, further cuts in public investment, no matter how painful, wQuld have to be made. Some relevant priorities are indicated beLow: a) There are a number of sectors where implementation constraints could well lead to investment shortfalls from the levels projected in the indicative program, irrespective of resource availability. In the tree crops and education sectors, for example, continuation of recent trends could lead to savings of Rp 900 billion and ap 1,800 15/ In practice, the private sector also plays an important role in the power, education and health sectors. The future development of private activity in these areas will have a significant impact on public investment requirements. 16/ For example, if nominal oil prices were to fall to US$20 per barrel (and stay at that level), Indonesia could lose an additional US$ 7.4 billion in foreign exchange (18Z of projected non-oil imports) and Rp 11.9 trillion in government revenues (15Z of projected expenditures) over che next chree years. - 14 - Table L.5: SELECTE WELPREW INDICATORS a/ I :Jnit; noe'a Thailand ppiaus Nalays,a Karea SJP per capita US S 580 70 920 1,860 1,910 Paw Cnhu.ptim per capita kWh 99 355 390 676 1,204 Electrification ratio X 12 - 4t 43 S1 95 'eLecommications TLaphu denosity Per 100 0.4 1.1 1.2 6.3 11.7 Education Grass rnls t ratios -isary 97 96 84 % -Sweoodary 27 n 29 55 65 84 -Higher x 4 4 21 4 22 Health Iafant urtality rate Per '000 102 51 51 'L 32 Populati.on per pbvsicda '000 11.5 7.1 9.0 7.9 1.4 a/ 13oft data ae for 1991 ar 199. Otb"wisu latest available data ar used. iouc: bwid Bak staff istiat. - 15 - Table 1.6: PHYSICL ACIEVEM S UN TARGES Z changp IP f ru REP.III REP. IV REP.III REP.IV Sector Units Actul Plan IPa/ Actual Pla bier tru craps Planting pragrau '000 ha 542 1,362 1,Otl 96.7 (25.9) -Rubber '0O ha 243 562 3m 55.3 (32.7) -Gil pall '000 ha 120 454 313 161.1 (31.1) -Coant 'M00 hi 178 346 320 79.5 (7.5) later resurces Irrigation prqra aoo lib 2,051 2,140 1,420 (30.8) (33.6) -t systiu a000 hi 334 600 346 3.6 (42.3) -Rehabilitatio *000 ba 730 360 614 (IL91 70.6 -Tertiaries 00 522h720 142 (128) (90.3) -suaps '000 ha 465 460 31B (31.61 (30.9) Pave kew PLN capacity -1,524 . 5,255 4,2 177.0 (19.7) Telecounuications Now eebcangq line '000 no 2 750 3S 42.4 (36.7) Ibusing Now Per=au/BTN uits '000 no 19e 300 300 64.4 0.0 Transugration Families settled '000 no 500 750 600 20.0 (20.0) Sponsored '000 no 370 S00 400 8.1 (20.01 -Spntaeaus '000 na 130 250 ;00 53.8 (20.0) ^ucatiu lCd pulic mrullunts '000 no 8,173 3,430 2,872 (64.91 (16.3) -Primrm '000 no 6,464 445 445 (93.1) 0.0 -Junior secondary '000 no 1,195 1,64 1,431 20.0 (13.0) -Seuiar scodary '000 no 514 909 611 19.9 (24.5) -Higher '000 no 529 391 (27.9) al Indicative program. Source: 6MI,REPELITA IV plan and World Bank staif estimates. - 16 - billion respectively over the next three years.-7/ Such shortfalls, however, would have serious developmental consequences, without significant reductions in import requirements. In the case of tree crops, the impact on non-oil exports would result in a net Loss of foreign exchange. Therefore, the correct response to lower oil prices would be to redoubLe efforts to improve implementation performance in thise areas. (b) There is, however, scope for selectiveLy reducing public investment, even in the priority sociaL sectors. In the ed-.cation sector, the INPRES program for primary school construction has now largely met its objectives. Under the indicative program, INPRES funding for primary education is assumed to be phased out (or switched to other programs) by the end of .EPELITA IV. However, by advancing this date to 1986/87, additional savings of ap 580 billion could be realized. In the health sector, public investment in new hospital capacity warrants close scrutiny. The indicative program includes Bp 130 biLlion for 18 new hospitals during REPELITA IV. (c) rn the 1983 rephasing exercise, more rhan Rp 4,000 billion of the estimated foreign exchange savings were from four projects: che F:usi refinery, Aceh oLefins, Plaju aromatics and Bintan alumina. The indicative program assumes chat these rephased projects remain on the shelf during REPELITA IV, an imperative that would be reinforced with even lower oil prices. However. there are possibly other proposed investments in the manufacturing, mining and petroLeum sectors that need to be reevaluated. In particular, the indicative program includes lum-p-sum allocations for manufacturing projects outside the "inistry of Industry (Rp 1,020 billion) and for petro- leum investments funded by Pertamina (Rp 6,870 billion) over the next three years. These allocations need to be justified on the basis of individual project appraisals. (d) Similar arguments apply to the lump-sum allocations for public investment in rail, maritime and air transport. The indicative program assumes that these investments are cut back by about 40% in 1986/87, saving an es rmated Rp 970 billion over the Last three years of REPELITA IV. These lower investmencs Levels are justified by the scope, with efficiency improvements, to handle projected traffic growth using the existing infrastructure. However, the case for the remaining investments, totalling some 17/ For major tree crops, the savings are based on a REPELITA IV pLancing program of 750,000 hectares (25% less than the indicative program). For education, the savings assume that post-primary investment remains at the 1985/86 budget level in reaL terms (actuaL investment in 1985/86 will probabLy be lower). 18/ These savings are relative to maintaining real investments at 1985/86 budget Levels. - 17 - Rp 1,450 billion, could be undermined with Lo-wer oil prices and economic growth prospeccs. Again, therefore, individual project proposals should be carefully appraised. SectoraL Priorities 19/ 1.15 The three major.tree crops covered in this report are rubber, oil palm and coconut. The Government s plan target for REPELITA IV is to plant about 1.4 million ha of these crops on public estates and smallholder schemes, about 150X higher than the level achieved during REPELITA tII (see Table 1.6). Tree crop programs offer substantial benefits in terms of export earn- ings, employment generation and regional development, and therefore deserve priority in the allocation of investible resources. However, there are serious doubts whether the estates (PTPs) and project management units (PMUs) could implement the planned programs without adverse impacts on the quality of planting and coordination of activities. Recognizing these constraints, the Government is working on an action program to address implementation probLems in a number of key areas (including manpower training and agency coordina- tion). Even so, it is unlikely that more than 1.0 million ha could be planced during aEPELITA IV, one third below the plan target. Given the limited man- agement and financial capacity of che PTPs, their development should be concentrated on: (a) new block-planting of oil palm in areas where new Settlement is warranted; (b) the completion of existing NES/PIR projects; and (c) some limited new NES/PIR rubber developmene in transmigration areas. The main burden for smallhoLder rubber development would then fall on PMU-based schemes. 1.16 The indicative program for water resources is designed to provide irrigation for 1.4 million ha. Recognizing resource constraints, and changing sector priorities, this program is about one third smaller than impLemented during REPELIT& III and planned for REPELITA IV. On Java, there is very little scope for new irrigation development and basic rehabilitation of exist- ing schemes is almost completed. Therefore, to sustain rice self-sufficiency, the indicative program gives prioricy to: (a) completion of ongoing projects, including two multipurpose iams (Wadas Lintang and Kedung Omba); and (b) intensive system upgrading, to improve operations and facilitace maintenance. Further investments in major multipurpose dams on Java (e.g., Jatigede and Wonarejo) need to be carefully ecaluaced in terms of their potential contribu- tion to flood control, water suppLy and hydropower, as well as to irrigation development. However, given che overall resource constraint, the indicative program includes only minimal allocations (primarily for land acquisition) for these projects during REPELITA IV. On the Outer IsLands, the scope for new irrigation development, including swamp reclamation for transmigration sites, is more extensive. Total investment costs are estimated to be 41Z less than allocated in the plan, due to the smaller size and cnanging composition of che irrigation program (away from new Large-scale systems), as well as Lower 19/ This section provides a brief summary of the sectoral investment projects identified in Part II of this report. Project implementacion and financ- ing issues are discussed separately below. - 18 - prices for civil works contracts. Over 90% of the indicative investment program is related to ongoing projects. Although Java still accounts for about 60% af cocal investment costs, 66% of new projects are located on the Outer Islands. 1.17 The plan projects a growth rare for the manufacturing sector of 9.5% per annum, including 17% per annum in the machinery, metals and basic chemi- cals subsectors during REPELITA IV. The overall growch rate is significantly higher than projected in the indicative scenario discussed above. Further- more, the plan's reLated targets for capacity expansion may be exaggerated, given the excess capacity thac presently exists in many subsectors (e.g., cement and car tires). The total cost of ongoing and proposed projects under the Hinistry of Industry is projected to rise from Bp 46 bilLion in 1984/85 to an annual average of ap 618 billion over the subsequent two years. The major investments in new capacity are for the Aceh paper project (Rp 410 billion), the Xaltim urea plant (Bp 300 bilLion) and the Gresik ammonia plant (Bp 190 billion). Most of the other projects are for rehabilitation or improve- ment of existing capacity for production of fertilizers, cement, engineering goods, ships, salt and textiles. Similar information is unavailable for projects under other Ministries, including investments in high-technology, defence and railway industries. But, judging from budget allocations, these projects may have cost more than Rp 700 billion per annum during 1984/85 and 1985/86. In Later years, priority is given to compLeting ongoing projects. Some nev investment, especially for subsector restructuring, may also be justified. However, under present conditions, all major public investments (ongoing and new) should be carefully reevaluaced. In the absence of detailed project information, but reflecting the overall resource constraint and the potential role of the private sector, the indicative program assumes that total public investmtnt in the manufacturing sector declines in nominal terms over the remainder of REPELITA IV. 1.18 The indicacive investment programs for mining and petroleum, as presented in Table 1.3, exclude expected private equicy concribucions to joint ventures and product-sharing arrangements during REPELITA LV. Of the balance, Rtp 6,a70 billion is for Pertamina's own investments in oil and gas development (about which little is known). One priority in this area is for additionaL investment in incerfuel substitution (especially by gas) co stretch out export earnings from oil. Lead times on such invescmnets are long, and therefore preparacion is needed now for che effects to be beneficial in the 1990s. Other major projects, that are ongoing or deserve priority during R.EPLITA IV, include Bukic Asam coal (Rp 4g0 billion), Ombilin 1I coal Cap ZOO billion), .Musi refinery modernization (Rp 130 billion), the refinery optimization pro- gram (Rp 160 billion), the LPG export cerminal (Bp 50 biLlion) and phase I of the aromarics plant (Rp 420 billion). The three major mining and petroleum projects rephased in 1983 - Bintan alumina, Plaju aromatics (phase 1I) and the olefins complex - are excluded from the indicative program. These projects, with potential investment coscs of fp 3,200 billion during REPELITA IV, are noc considered to be justified under present balance of payments and worLd market conditions. Any decision to reactivace these projects would have to be based on the willingness of a foreign partner to make a significanc equity contribution towards their cost, together with favorable long-term marketing arrangements. - 19 - 1.19 The Covernment's primary target for the power sector during REPELITA IV is to expand PLN's inscalled capacity by 5,225 MW, a 38% increase over the 1983/84 level. To evaluate this target, World Bank staff have pre- pared a range of illustrative scenarios using aLternative assumptions on economic and poLicy variables affecting power development (see Part II). The scenario chosen for the indicative program is based on economic trends similar to the indicative scenario discussed above, but with some cutbacks in the Government's targets for electification and capcive plant takeover. Under these assumptions, the projected increase in PLU's installed capacity during REPELIZA IV is 4,222 MW, 20% below the plan target. About one half of the indicative investment program is for generation, primarily in hydro and coal- fired plants. Over 80% of the generation investments during REPELITA IV are for committed projects (i.e., construction started in 1984/85 or earlier). Major expenditures during REPELITA rV for hydro pLants are for Nrica (Rp 470 billion), Saguling (Rp 330 billion) and Ciraca (Rp 640 billion); the major expenditure on coal-fired plants is for Suralaya (Rp 610 billion). About two thirds of the investments are on Java, where the major generation projects are located. Investments on the Outer Islands give greater emphasis to transmis- sion and distribucion, and to diesel plants wichin the generation program. Further work is required to ensure that the indicative program is a least-cost solucion. - Particular attention should be given to, the sequencing of genera- tion projects on the Outer Islands (where the analysis is complicated by the absence of a unified grid) and to the overall balance between generation and transmission and distribution investmencs. On the one hand, an expanded electrification program may be justified to make better use of Lumpy genera- tion investments coming on stream. However, in light of the expected resource constraint, it would also be appropriate to review standards and unit costs for the electrification program, to see if the targets can be met with less money. 1.20 An efficient transport system is vital in rndonesia, due to the size, population and geography of the country. The indicative program gives priority to the roads subsector, with particular emphasis on the maintenance and betterment programs. Corresponding uts have been made in the planned investments for railway infrastructure and rolling stock, port facilities and shipping fleet development. These are all areas where significant increases in capacicy can be achieved with improved operacional efficiency. Invescmenc priorities identified for the three major subsectors during REPELITA rV are as follows: (a) In the roads subsector, the plan target to rehabilitatelupgrade 18,000 km of roads is feasible in terms of implementation capacity. The major concern is to ensure that adequate budgetary resources are provided to maintain the coverage and standards of the program. On the construction side, it is doubtful whether the plan target for new rural roads (12,000 km) can be achieved. Indeed, a more selec- tive rural roads program, supported by regular maintenance, would probably be more appropriate. The target for new eoll roads (198 km) also needs to be reevaluated, taking into account the effective contribution they cam make to relieving craffic congestion. In urban areas, priority should be given to improving traffic manage- ment rather than expanding public transport services. In parr:- - 20 - cular, further public investments in city buses should be kept to a minimum. (b) In the railway subsector, the pLan gives priority to increasing transport capacity and service quality. .oth of these objectives can perhaps best be served, in the immediate future, by improving PJKA's management and the operational efficiency of the existing railway system. Therefore, present plans to purchase new rolling stock (25 locomotives, 210 passenger cars and 200 freight wagons) would seem to be excessive. Other major investments in new track and infrastructure should also be deferred, pending a major overhaul of PJKA's operations and preparation of a medium-term railway plan. In this way, expenditures during the remainder of BEPELITA IV can be focussed on compLeting ongoing projects (e.g., the rail link for Bukit Asam) and rehabilitation. tc) For the maritime subsector, the plan proposes an ambitious program of port and shipping development. However, as in the case of rail- ways, the immediate priority is efficiency improvement rather than capacity expansion. For major ports, priority investments over the next five years for facility rehabilitation and container handling are to be financed under projects supported by the World Bank and ADS. Additional port investments during REPELITA IV should be minimal. As regards shipping, the major issue relates to the pro- posed expansion of the national (.LS) fleet by 420,000 DWT. Util- ization rates for these ships could be increased at least three times. As a result, even allowing for the Government's new scrap- ping policy and rapid cargo growth, it is unlikely that more than 150,000 DWT of new capacity will be required during REPELITA IV. 1.21 The plan's primary target for the telecommunications sector is to add 750,000 direct exchange lines during REPELITA IV. This would increase capacity by more than 140% and raise the telephone density from 0.4 to 0.9 per 100 people. As shown in Table 1.5, this is still a relatively low level of deveLopment compared LaO other countries in the region. However, the pace of progress is likely to be constrained by Perumtel's implementation capacity. Even allowing for improvements in this area, including the impact of turnkey contracting, the expansion of subscriber connections is unlikely co exceed 325,000 lines, less than half of the official plan target. There is signifi- cant bunching of the related investment program over the next thrae years, with real expenditures more than doubling in 1985/86 and rising by anocher 72% through 1987/88. The largest componenc of the indicative program is for the cable network (32Z), followed by ex-hanges (262) and transmission (23%). In general, the proposed phasing would seem to give good overall balance, between switching/network expansion, local/long-distance facilities and urban/rural services. There are also no obviously low priority comoonenr.3 within the investment program. In particular, two questionable projects originally pro- posed (e.g., a public car radio telephone system and the submarine cable Link between Surabaya and Banjarmasin) have been omitted. However, i- further implementation constraints occur, Perumtel will have to cake steps to ensure chat overall balance is maintained. - 21 - 1.22 The Government's public housing target for REPELITA rV is to build 300,000 housing units, of which 140,000 wouLd be built by Perumnas and the -rest by private developers with mortgage financing primarily from 3TN. This program is about two thirds larger than realized during REPELITA III, for both Perumnas and private developers, but would still account for onLy ZOZ of the new urban housing requirements during REPELITA IV. For the indicative program it is assumed that half of the units are low-cost units. Unlike in past years, private developers are expected to supplement Perumnas' efforts to con- struct core units during REPELITA IV. No provision has been made for higher income houses (RM7h) and flats, which should be constructed and financed by the private sector. In the case of flats, effective demand is also a Limiting factor. The indicative housing prograM is considered to be justified by the potential benefits, in terms of stimulating construction activity and provid- ing a basic service to low-income households. However, to avoid shortfalls due to institutional constraints, action will be required to: (a) eliminate Perumnas' backlog of partially completed and unsold units/lots; (b) strengthen BTU's capacity to handle the projected levels of mortgage financing; and tc) resolve a number of regulatory and legal issues (e.g., civil service pre-- ferences, Land titling and registration). 1.23 The pLan proposes moving 750,000 families under the transmigracion program, of which some 500,000 families would be sponsored transmigrants. These targecs are at the high end of a Eeasible range, and significanc short- falLs have already occurred during 1984/85. The major reasons for these shortfalls are the increasing managerial demAnds, particularly in Light of decentralization of procurement and the limited implementation capacity of the various agencies invoLved (especially the Ministry of Transmigracion). As a resulc, the indicative investment program is based on a less ambitious target: 600,000 families, including 400,000 families -under the sponsored pro- gram. Even this target may prove difficult to achieve. If realized, however, the impact would be significant, reducing the population growth rate of Java from 1.7% to 1.2Z per annum and creating an additional 160,000 new jobs each year. Most of the viable sites for food crop agriculture in the traditional transmigration regions of Sumatra and Sulawesi have nov been filled. As a result, over 50% of the transmigration during REPELITA rV is assumed to be to Kalimantan and trian Jaya. As more remote sites are selected, higher produc- tivicy farming systems and second-stage agricultural development vill become increasingly important to ensure settLers adequace outpuc and incomes. Note that the indicative investment program does not include any provision for rehabilitation of existing transmigracion sites or Lssiscance (e.g., mapping) for spontaneous transamigrants. These may well be cost-effective expenditures, that could be financed by reducing the number of new sponsored transmigrants. 1.24 The Government's enrollment projections for the education sector are summarized in Table 1.6. With the virtual attainment of universal primary education, little further growth is projected in primary schooL enrollments. As a result, even allowing for improved staffing ratios and teacher actrition, new primary teacher demand is Likely to faLl to an Annual range of 20- 25,000. Some of the teacher training high schools (SPGs and SPOs) should therefore be converted to use as secondary schooLs, especially in provinces where the primary teacher surplus is most pronounced. Similarly, the country's new primary schooL conscruction requiremencs are minimal, with - 22 - investment during BEPELITA IV being limited mainly to school rehabilitation and teacher housing (for schools in remote areas). Accordingly, the official targets for new primary school teachers and classrooms would seem to be grossLy exaggerated. On the other hand, post-primary enroLlments are projected to grow rapidly, as the Coveriment gives priority to improving the supply of skilled manpower. Although achievement of these targets would be highly desirable, the related expansion of pubLic investment is likely to be constrained by the project implementation capacity of the Government. Therefore, unless some reduction in post-primary enrollment targets is accepted, the quality of education will suffer. Accordingly, for the indicative program, the end-plan targets for public enrollments have been cut by 5 at the junior secondary level, 101 at the senior secondary level and 15% for higher education. 1.25 In order to cost out an indicative investment program for the health sector, the following assumptions have been made on physical progress during REPELITA IV: (aJ The commucity health program warrants top priority in the provision of health facilities. Consistent with the plan targets, the - indicative program includes provision for the addition of 500 health centers, 6,000 subcenters and 1,500 mobile centers. In addition, provision has been made to rehabilitate or expand another 10,000 centers. The drug subsidy, available to patients at heaLth cencers, is assumed to be capped at its present level in real terms. (b) The plan is less explicit on the targets for medical care, in part because of the importanc role the private sector can play in this area. The indicative program provides for 18 new hospicals, while another 341 hospitals are slated to be rehabilitated or improved. Cc) The disease control and nutrition programs are important elements of the Government's strategy to improve health status, especially for infants. The plan targets in these areas are appropriate. However, some rephasing will be required to reflect underfunding of these programs in 1984/85 and 1985/86. The major components of the indicacive health program are for medical care (34%), coinunity health (32Z), disease control (23%) and nutrition (6Z). This composition is broadly similar to that proposed in the plan. However, compared to budgeted expenditures during REPELITA III, it represents a major reallocation from comunity health to disease control and nutrition. This crend reflects the priority attached co these last two programs. Although community health remains a priority as well, the phase of rapid expansion of Eacilities is now over and the drug subsidy needs to be capped. It may also be possible to make further cuts in the medical care program, especially in areas where there is scope for private sector development. - 23 - Project Implementation 1.26 DeveLopment expenditure by the Central Government rose by 9Z per annum in real terms during LEPELITA III. With such a rapid expansion, it is hardly surprising that progress in many sectors became increasingly hampered by project impLementation constraints. As a result by the end of the plan period, outstanding authorizacions to spend (SIAPs)2' stood at Rp 3,040 bil- Lion, equivalent to 302 of development expenditure in 1983/84. Furthermore, the sectoral allocation of SlAPs was highly skewed, exceeding 10OZ of annual expenditure for education and transmigration but less than 2Z for manufactur- ing, mining and defense. This pattern would probably have been even more marked, if authorizations not already been reallocated to sectors that could readily absorb them. Absorption is obviously higher in sectors, such as manufacturing and mining, where there are large well-defined projects, which can often be constructed on a turnkey basis. However, investmencs in rural infrastructure and social services require substantially more locally- trained manpower and effective channels for decentralized administration. Therefore, the priority given to these sectors for REPELITA rv, in both the pLan and the indicative program, will bring project implementation constraints into even sharper focus. 1.27 Implementation constraints, while they may manifest themselves as project-specific probLems, are often related to more fundamental institucional factors. For Indonesia, these factors are describe 2jtn some decail in the recent World Bank report on Kanagement Development.-2 They include: (a) the general shortage of trained manpower (technical, professional and managerial), and relaced weaknesses in university education and training programs; (b) civil service policies, including the fragmented compensation system, that do not promoce high levels of compecence or fuLl-time job commitment (especially at middle-management Levels); (c) the high premium on avoiding conflict and seeking concensus, that can lead to drawn out, and sometimes inconclusive, decision making; and (d) the emphasis an management by concrol, thac overbur- dens higher-Level officiaLs whiLe more junior staff have Limited opportunities to develop skills and responsibilicy. These are all complex and sensitive issues, that go well beyond the scope of this report. Kevertheless, it is evident that they impinge on the capacity of the Government and public agen- cies to plan, implement and use projects efficientLy. For REPELITA IV, 20/ SLAPs are authorized development expenditures noc spent in the budgec year. The mazimum period of carryover-was reduced from three to two years for the 1985/86 budget. 21/ Pressure to do this comes from the balanced-budget concept used in Indonesia, which requires budgeted and auchorized expenditure to be close in aggregate. During 1983/84, for example, authorizations for the mining sector were increased Late in che fiscal year to a level seven times higher thLan budgeted. 22/ The World Bank, rndonesia: Management Develooment (Report No. 4965-MLD, May 20, 1985). - 24 - actions could be initiated to reLieve skilled manpower constraints (e.g., through technical assistance, training programs and investments in higher education) and to study appropriate civil service reforms (including institu- tional changes and compensation issues). However, it would be unrealistic to expect major breakthroughs in the near future. Rather, it would be more appropriate to take related constraints into account in the selection and design of projects. In general, simple projects, involving well-defined funding channels and administrative responsibilities, would seem to have the best chance of success under present conditions. 1.28 On the other hand, there are a range of regulatory and procedural bottlenecks, where timely action could have a significant impact on implemen- tation performance over the next two to three years. Most of these bottle- necks cut across sectors, and relaced reforms will require broad-based govern- oent commitment and support. The Government's willingness to tackle these issues has been amply demonstrated by the recent changes in customs procedures and investment regulations. Other areas, where implementation constraints persisc, include: (a) Procurement. Delays in procurement are most serious for larger (over Rp 500 million) equipment and civil works contracts, where the procutement process can take up to two years to complete. Major problems appear to be: (i) lack of standardized prequalification and contract documents; (ii) failure to initiate the procurement process earLy enough; (iii) compLicated bidding and bid evaluacion procedures; and (iv) confusion on the procedures to be followed. The Government's preference for local materials and consultant services, while L 3itimate, has sometimes led to further delays in contract awards.2 (b) Land acquisition. Virtually all projects require the acquisition of Land by the Government and its transfer to project agencies. How- ever, this process is difficult and time-consuming in Indonesia, especially on Java and around major cities. A major constraint is the Government's reluctance to use its right to eminenc domain. Other problems include: (i) cumbersome administracive procedures; {iL) deficiencies in Land titling and registration; and (iii) diffi- culties with regard to price negotiations. (c) Budget orocedures. The understanding in public agencies of the Gavernment's budgetary procedures is very uneve. One resuLt is that many agencies are reluctant to enter into multi-year contracts or initiate the procurement process prior to DIP finaLization, even though this is permitted by Ministry of Finance procedures. The procedure for DIP revision is also complex, making it difficuLt to reallocate funds within and between projects. Further delays can occur in the release of funds, because of either cumbersome reim- 231 The limited capacity of local contractors can also lead to higher costs and longer implementation periods. - 25 - bursement proc Ijres or the failure of agencies to submit proper documentacion._ The Government has al1ody taken a number of steps to cLarify procurement and budgecary procedures.- And, a committee chaired by the Minister for the Utilization of the State Apparatus. is examining the complex problems of land acquisition. Equally important, BAPPENAS is establishing an implementation secretariat, to identify and resolve systemic implementation problems. Eowever, even greater attention to these issues will be required, if the physical targets underlying the indicative program are to be realized. 1.2.9 Finally, there are some sector-specific constraints that will continue to impinge on project impLementation performance if action is not taken. Related probLems identified in Part II include: (a) Agency coordination. This is emphasized as a constrainc in che tree crops and transmigration sectors. For tree crops, the Government is working on an action program to address implementation problems, including agency coordination. At present, responsibilities within the Department of Agriculture are unclear for: (i) PTP and private estate development; (ii) integracion of smalUiolder and NES schemes; (iii) coordination with the Ministry of Transzigration on land acquisition; and (iv) processing and marketing of smallholder crops. The functions of Team Ihusus, established in 1979 to improve project implementation, also need to be reviewed. For transmigration, the new Ministry of Transmigration has taken some actions to streamline the various steps associated with the settlement of transmigrant families. However, coordination with ocher agencies responsible for follow-up deveLopment activities (e.g., input supply, extension, credit and land ticling) is stilL weak. (b) Local concractors. The performance of Local concractors is identi- fied as a constraint in boch the power and telecommunications sectors. Two basic reasons are apparent: (i) the general weakness of the domestic construction industry in Indonesia; and (ii) che Limiced project management capacity of PLN and Perumtel. At presenc, for example, Perumtel is experiencing serious problems with the numerous small contractors involved in cable network construc- tion. To help resolve chese problems, Perumtel is considering hiring project management consultants to supervise ongoing work. Preparations have also been made to introduce turnkey contracting for future cable network construction. 24/ In 1982/83 and 1983/84, the Ministry of Finance may have also deliberacely deLayed fund releases, because of uncercainties in resource availability. However, there has been less evidence of this restraint over the past two years. 25/ For example, a manual an budgecary procedures has been prepared, and project managers are being given a course an the subject. - 26 - (c) Sector poLicies. The impact of sector policies on institutional performance and project impLementation is welL illustrated in the housing sector. In-order to achieve the REPELITA IV targets, action wilL be required to: (i) modify regulations which prevent more private construction of low cost housing; and (ii) enact mortgage legislation co secure BTN loans. In all of these areas, the evident problems largely reflect broader institu- tional and manpower weaknesses in the economy. However, the examples provided suggest that short-term actions can be taken in the sectoral context, co minimize the impact of these weaknesses and improve project implementation performance. Financing rssues 1.30 The financing plan underlying the indicative program is similar to that reaLized during REPELITA 1II. In particular, close to 90Z of public investment (excluding projects funded by Pertamina) is to be financed from budgetary resources, including onLending of external loans, with the balance coming from the internal funds and domestic borrowing of pubLic enterprises. tn recent years, che Government has pivged strict limits on the utilization of export credits for public investment,C in order to contain the country's external debt obligations and to help keep the Lid on "bad" projects. At the same time, public enterprises have been encouraged to makle greater use of internal funds and domestic borrowing (at market rates) to finance their investmeats. In principle, this switch in financing away from budgetary sources wouLd be desirable: it provides an incentive for pubLic enterprises to become commercially viable and- to be more selective in their choice of proj- ects. However, the financial position of many public enterpr .s, especially those in the industrial and transport sectors, is not strong.'9 Furthermore, an imuediate improvement in profitability or creditworthiness is unlikely, given managerial weaknesses and present economic conditions (wich high interest rates and weak domestic demand). Therefore, for REPELIZA IV, it is 26/ The ceiling was set at US$1.5 billion for 1984/85 and US$1.3 billion for 1985/86. Eligible projects for export credits are specified and prior approval for opening negotiations is required from che Coordinating Minister for Economic, Financial and Industrial Affairs. 27/ Domescic borrowing, as defined in this report, includes subsidized liquidicy credits from 3ank Indonesia. Since the financial reforms of June 1983, the Government has Limited the number of programs eLigible for liquidity credits and increased onlending races to IZZ in most cases. 28/ A case in poinc is the PJICA (the Indonesian Stace Railway). All of PJICA's investment requirements are met by the Government which also provides a subsidy to cover operating Losses (presently running at Rp 60 billion per annum) and makes a separate contribucion towards maincenance. - 27 - only realistic co expect that the Large bulk of public investment will con- tinue co be financed from budgetary resources. 1.3L This said, che dependence on budgetary resources still varies signi- ficantLy from sector to sector. As shown in Table 1.3, development expendi- ture funds the bulk of public investment in water resources, transport, trans- migration, education and health, but Less than 30Z in petroleum and celecommu- nications. There is also considerable scope for improving the cash generation of pubLic enterprises in certain sectors, such as power and telecommunica- tions. Under the indicative program, for example, the self-financing ratios for PLZ and Perumcel are both projected to rise substantiaLly during REPELITA IV: from 3Z to 332 and from 31Z to 51Z respectiveLy. In addition, Perumtel is expected to make a significant contri.Wion to general revenues, through deveLopment fund payments and income taz.- Perumtel has also started to borrow domesticalLy over the past year and could finance up to one third of its investment program from this source during REPELITA IV. Other pubLic enterprises that are expected to make significant use of domestic borrowing during REPELITA rv include the PTPs (tree crop estates), BTN (the housing mortgage bank) and Jasa Marga (the toll road agency). As indicated in the sectoral discussions of Part rI, the projected increases in cash generation and borrowing capacity are both dependent upon efforts to improve the financial viability of chese pubLic encerprises. In part, this is a matter of raising revenues through consumption/traffic growch and more realiscic charges and Lending rates. However, equally important are improvements in operating efficiency (e.g., PLN's fuel consumption and system Losses) and financial management (e.g., Perustel's billing coLLection and BTN's arrears reduction). For the PTPs, Eoe injection of government equity or debt conversion wilL also be required.' 1.32 Cost recovery is important, not only for the financial viability of public enterprises, but also to finance much-needed recurrent expenditures. During REPELITA rII, routine expendicure by the Central Government rose by only 3.7% per annum in real terms; excluding debt service payments and subsi- dies, the residual allocated Eor personnel and materials rose by only 1.62 per annum. Furthermore, the sectoral composition of routine expenditure has generally been fized, with little flexibilicy to move resources to priority areas. As a result, allocations for operations and maintenance (O&M) have become increasingly inadequate, reducing the returns on investment and the quality of services provided. In a number of sectors, such as irrigation and education, efforts have been made to overcome the resource conscraint by providing for recurrent items in the development budget. The Government has 29/ Public enterprises are subject co a 35Z income tax and contribuce 55% of retained earnings to the Government's Development Fund. PLN has been exempted from income tax since 1980/81. 301 There is also scope for financing tree crop investments through moderate export taxes, which could potentially cover the projected requirement of budgetary resources. If channelled through the Export Crops Fund (DTE), these revenues would be directly available for the tree crops program. - 28 - also budgeted for real growth in routine expenditure of more than 15X during 1985/86, including substantial increases in civil service/teacher salaries. This is an encouraging trend. Nevertheless, there is also a case for financ- ing more of these recurrent expenditures through cost recovery on public services. While there are Legitimate social reasons for wanting to Limit the burden of cost recovery on the poorer segments of society, the sectoral discussions in Part II (e.g., for tree crops, irrigacion, housing and health) indicate that even poor beneficiaries can often afford to pay significantly more for public services than presently required (and often do for private alternacives). 1.33 The scope for increasing tariff charges (by PLN and Perumtel) and lending rates (by BTN) has been touched on above. However, two other poten- tial areas of cost recovery are also worth highlighting: (a) In the irrigation sector, direct cost recovery through land tax (IPEDA) and water charges is very Low (generally around IOZ-15% of farmers' net profits and 5Z of the incremental earnings from irrigation investments). Unfortunacely, higher water charges may not always be appropriace, given that many beneficiaries are close to the absoLute poverty Level. An aLternative approach, therefore, would be to modify the present IPEDA system, to provide for better Land valuations (capturing the returns to irrigation investment) and to earmark a portion of the revenues for irrigation O&M. General increases in IPEDA are also appropriate for improving municipal finances and funding the development of urban services. (b) In the social sectors, the share of public costs recovered through fees is relatively Low: about 10% for health services (incLuding recurrent costs), 6Z for junior secondary education, 10% for senior secondary education and 13% for university scudents. Furthermore, the real level of fees has been steadily eroded by inflation in recent years. Therefore, fee adjustments should be considered, possibly with speciaL measures (e.g., means-tested scholarships) to protect Lower-income groups. There may also be a case for the Government providing grants-in-aid or credit subsid:es to private health and education facilities, especially where these can attract them into rural and Low-income areas. The end resulc could welL be to reduce the net burden on the Government's budget, for both capital and subsequent recurrent costs. D. Planning and Budgeting Procedures Investment Planning 1.34 The most important public planning documents in Indonesia are the five-year REPELITA pLans prepared by BAPPENAS. These plans provide an extremely useful summary of the Government's view of economic prospects and the implications for sectoral programs. However, as a basis for identifying investment priorities, the plans have a number of Limitations: - 29 - (a) while the plans do discurs broad issues of sectoral strategy, they do not yovide a comprehensive listing of project proposals and costs;3 (b) the broad sectoral allocations provided in the plans relate-to deveLopmenc expenditure by the Central Government, and exclude investments financed from non-budgetary sources; (c) the plan allocations are not disaggrepated on an annual basis, which makes it difficult to relate them co budgetary expenditures or to identify issues of proje:t timing and phasing; and (d) che pLan is not updaced on a regular basis, to reflect changes in resource availabilicy and implementacion performance. At the same time, mny Line agencies (e.g., PLN and Perumtel) do maintain sectoral investment programs, for both their own planning purposes and budget submissions to BAPPEZAS. These programs include substantially more project detail than is available in the plan. However, they are often not subject to adequace scrutiny for consistency with the Covernmentj investment priorities or expected financial and implementation constraints.3'/ Although these discrepancies are often recognized implicitly, pressures to push ahead can still mount, especially if favorable external financing is readily available or if budget allocations (even if cut in aggregate) fail to be selective among project proposals. Unrealistic planning numbers, no matter how "unofficial", can also promote excessive investment in supporting infrastructure and upstream/downstream industries. 1.35 It is only appropriate that the primary responsibilicy for preparing sectoral investment programs remains with the line agencies, who are best equipped to do the job. However, it is also appropriate for BAPPENAS to provide guidelines for project selection and play an active roLe in ensuring macro-economic and inter-sectoral consistency. For this purpose, it would be useful to keep an inventory of project profiles, that are updaced on a regular (say, quarterly) basis. As a first cut, the type of listing provided in Annex Table 3 would probably be adequace. However, at least for major ongoing and new projects, a somewhat fuller profile should eventually be prepared (perhaps as a mandatory requirement in all future appraisal reports). One possible format for this work is shown in Table 1.7. This format provides information 31/ BAPPENAS does prepare an annual "List of Project and Technical Assistance Proposals." However, this is realLy a list of project proposals fcor external funding, many of which will not be impLemented (due co their Low priority or resource constraints). Ongoing projects and projects funded entirely from local sources are excluded. 321 A case in point is Perumtel's proposed investment program for REPELITA IV. This program calLs for the addition of 950,000 telephone lines, 20Z above che official plan carget and almost 200Z more than assumed in the indicacive program. , LhI .wini m__S_ - _aL - WP L _wn P. _ a 2. Cmm L. him - 9. m . IL Omm L. in' m L LmaIunt 2. iwupi_ _ _ _ _ _ _ _ _ _ _ L~~~ ~L_ I. 3 s. a L _ |~~~~~~~100 No 2 9W -a~~~~~~~~~~ _ No L PI 4. bowg km Dmmr I VON L iafin a um SU- L NW Iwq L OR k ~ ~ ~ ~ L m b u L~~~~~~~~~~ _ _ L -inlin L Naw tow- ANal gm_ Smwm~~~~~~~ ink~~~~~~~ _m _ - 31 - on: (a) the project's ownership and purpose; (b) the construction period and commissioning data; (c) estimated investment costs and financing sources; (d) some indication of the project's priority (such as the economic rate of return); and (e) other related investments, Ahich are dependent upon, or determine, the timing of the proposed project. %.,te that all costs are inclu- ded: ihether or noc they ar 53unded from the bud.,et, and whether or not they. fall within the plan period.3 For budgetary purposes, it would also be useful to provide some estimates of the recurrent expenditure requiremeq, of the project and possible sources of Einancing (including user charges).- 1.36 Unfortunately, there is no easy or mechanical way to adjust the public investment program in line with revised projections of resource avail- ability. Even if one could construct a linear ranking of all projects, many would be interrelaced and their priority could change with economic condi- tions. It is also not feasible co go back to the drawing board and redesign the public investment program every time oil prices fall or interest rates rise. In the final analysis, much will depend on the good judgment of the key decision makers invoLved (as was evident in the 1983 rephasing exercise). However, the availability of up-to-date project profiles and sectoral invest- ment programs would be a very valuable input into this decision process. It wouLd also be helpful if BAPPENAS could identify a core program of high-prior- ity projects, to be protected against resource shortfalls and implementation delays. Such a program shouLd nat be Limiced to ongoing projects or large indivisibLe projects in a few sectors. Rather, it should represent the mini- mum package of investments that the Covernment would want co undertake, in the event that resource availability were to be substantialLy reduced (say, by 10-20Z). Project Apiraisal 1.37 The key to good investment planning is good project selection and design. Project appraisals are used in Indonesia, by both implementing and financing agencies (such as the Warld Bank). Hovever, they are not always w"ll integrated into the planning process and are at cimes not subject co adequace central direction and review by BAPPEXAS. This function is critical, to ensure that the appraisals are based on consistent and realistic assump- tions (e.g., for macro-economic developments and shadow prices) and to provide results that can be readily absorbed by non-specialist decision makers. For this purpose, economic cose-benefit analvsis can be a very useful tool, 33/ Note that Table 1.7 provides a breakdown bet-seen Local and foreign costs. As used in Indonesia, these terms often refer to the sources of financing. Hovever, foreign costs should include all import requirements, whether or noc they are Locally financed or procured. Ideally, che import content of Locally-produced goods should also be included. 34/ Although the profile could be further extended to include ocher useful indicators, such as manpower requirements, there would soon become a trade-off between completeness and manageability. - 32 - insofar as it collapses a complez set of issues into one comon yardsq7k, such as net present value (NPV) or the economic rate of return (ERR)._ However, it is equally important for decision makers to be aware of the assumptions used in the analysis, major uncertainties and risks invoLved, and the range of options considered. The analysis should not be simply geared towards deciding whether a project is "good" or "bad," but also highlight issues reLating to project timing, size and design. In many cases, a project will preempt other investments (e.g., the use of limited gas reserves for fertilizer or power plants) or require complementary investments to be effec- tive (e.g., the need for road access to a transmigration site). Finally, project analysis cannot just be done once at the feasibility stage and then left on the shelf. Rather, regular updating should be undertaken, especially for major projects, to reflect changes in aggregate resource availabiLity and market conditions (while taking into accounc sunk costs). 1.38 For project appraisals, it is important to use prices that reflect economic benefits and opportunity costs (ofeen referred to as shadow prices). Domestic prices are often inappropriate for this purpose, due to government interventions and ocher market distortions. A better approach is to use 3g7rder prices, excluding the impact of trade restrictions and taxes._ For traded goods, border prices are usually readily available. Hovever, for non-traded goods, domestic prices have to be adjusted using appropriate conversion factors. For World Bank project appraisals, a set of conversion factors has been calculated, based on the 1975 input-outpw table and the 1976-78 industrial surveys, but with prices updated to L984._ The results are summarized in Table 1.8. Note that the standard conversion factor is less thn 1.0, indicating that the official exchange rate understates the economic value of foreign exchange. There is also a significant variation of conversion factors amng sectors and products, reflecting the differential impact of trade restrictions. For Labor, the conversion factors suggest that wage races overstate opportunity costs, especially on Java. Use of these conversion factors, therefore, would improve the estimated rate of return on projects that generate significant foreign exchange savings and employment. 35/ For a recent review of cosc-benefit techniques, see Anandarup Ray, Cost- Benefit Analysis: rssues and Methodologies (WorLd Bank, May 1984) and W.C. Baum and S.M. Tolbert, Investing in Development: Lessons of World Bank Eznerience (World Bank, July 1985). In some cases, simpLer indicators, such as foreign exchange savings or jobs created, can provide a useful first approximaticn of a project's value. However, such indicators can also be misleading, especially if they ignore indirect impacts and other important costs and benefits. 36/ Border prices are intended to provide an indication of the foreign exchange cost (saving) of a project's input (output). However, border prices can also be distorted and will change over time, possibly due to the impact of the project itself. 37/ For a discussion of the methodology, see H. Chanem and M. WaLton, Indonesia: The Use of Shadow Prices (World Bank mimeo, August 1984). - 33 - Table 1.8: CONVERSION FACTORS FOR PROJECT APPRAISALS Standard conversion factor 0.9 Sectoral conversion factors Industrial machinery 0.85 Other traded manufactures 0.8 Construction 0.8 Non-traded services 0.75 Transport 1.0 Rural unskiLled labor Java 0.65 Oucer rslands 0.8 Source: World Bank staff estimates. The Budget Process 1.39 Project appraisals are an important input into investment planning, which in turn feeds into the budget process. Indeed, in rndonesia, many of the more difficult investment decisions are made in the coneext of the budget cycle. As already noted, development budget allocations for the first two years of REPELITA rv have been kepc in Line wich resource availability and therefore have not fully funded the pLan programs. However, che way in which these cuts are made is not always systematic or consistent with identified investment priorities. In part, this reflects the lack of up-to-date seccoral investment programs. However, ic is also due to limitations in the budget process itself: (a) The budget only funds an annual time sLice of the investment program, and provides no indication of the fucure resource impact of present investment decisions. Furthermore, under the SUAP arrangement, unspens87uthorizations can be carried over for a period of up co two years., As a result, future resource requirements are difficulc to predict and can often be dominated by large ongoing projects (which are not necessarily subject to further budge: review). (b) The budget is highly fragmenced, with project funding coming from a variety of sources: (i) the normal DIP allocations to government departments; (ii) external loans channelled through che BLN account; (iii) I)PRES funding for local authorities; (iv) DIPP allocations 38/ Annual budget allocations- are not intended to be multi-year conmimentsi. However, for externaLly funded projects, multi-year contracts do not require annual Kinistry of Finance approval. - 34 - for the tree crops sector; and (v) PMP equity for public enter- prises. In any one year, there may be as many as 800 DIPs, with one project funded from several DIPs (as weLl as other budget alloca- tions). There are also other financing accounts, su `as the RDI, which are not incorporated into the official budgec_ (c) The treatment of financial transactions with public enterprises is both fragmented and incompLete. For example, government equity contributions are usually made from the PMP account. However, some pubLic enterprises receive equity through DIP allocations (e.g., PLN) or conversion of debt (e.g., Perumtel). Debt conversions, as well as funds channelled through the WDI account, are not recorded in the budget. On the other hand, substantial funds also flow into the budget from public enterprises. During 1984/85, for example, Perumtel paid more than Rp 60 billion in income tax and development fund payments. (d) About 25% of the locally-funded development budget is channelleW0 o Local authoricies through general and sectoral INPRES programs,° allocations of IPEDA revenues and special programs for Irian Jaya and East Timor. In 1983/84, these flows totalled Rp 1,448 billion, incLuding Rp 540 billion of general INPRES transfers and Rp 549 bil- L_on for the primary school construction program. This approach is consistent with the Government's commitment to decentralize adminis- tration and can help to overcome implementacion bottlenecks. How- ever, effective control, in terms of the pLanning and utilization of these funds, is minimal. 1.40 These budgetary problems are common in virtually all countries (including the United States). However, they are probably compounded in Indonesia by the recognized weaknesses in accounting and auditing proce- dures. Furthermore, given the dominant role of the budget in financing public investment, the impact is that much more severe. A concerted effort therefore to rationalize che budget process, and link it more ctosely to investment pLanning, could reap significant benefits. Three general points are worth highlighting. First, the budget process is not always the best vehicle for making investment decisions: the time pressures permit only a cursory review 39/ The RDI account is basically a revoLving fund, comprising foreign loan repayments made by project units but not yet due to be repaid to the external lender. These funds are used to make loans (not grants or equity contributions) to a wide range of government agencies at interest rates ranging from 3% to 14%. No information is available On the amount of lending from the RDI account. 40/ The general INPRES programs are allocated t- the provinces, districts and villages for general use, while the sectoral programs are targeted for special programs (e.g., primary schools, health centers and rural roads). I2PRES funds are "dropped" quarterly by the Ministry of Finance to the local branch of a state commercial bank (usually BRI). The scate bank is then responsible for making payments to contractors or project managers. - 35 - of most project proposaLs and many relevant factors (including non-budgetary and multi-year finance requirements) are often overlooked. As a result, moving the focus of investment planning as proposed above, from the five-year pLan to an ongoing review process, would in itself be useful. Second, the fragmented nature of the budget makes ir. extremely difficult to relace invest- ment program and budgecary numbers. Adoption of similar project classifica- tions, and consolidation of funding accounts, could therefore simplify the process of monitoring project implementation. Third, given the recent trend towards decentralization, greater attention needs to be given to the justifi- cation for lump-sum allocations, especially through INPRES programs, for locaL governments. This in turn should be linked to efforts to strengthen locaj1 planning units (BAPPEDAs) and to improve monitoring of fund utilization-_ 1.41 Finally, the budget is also an important source of financing for recurrent expenditures. Although efforts to improve cost recovery will pro- vide supplementary funds, some of these (e.g., IPEDA) will still have to be channelLed through the budget. As with projects, financing of recurrenc expenditures is highly fragmenced, including sectoral allocations in boch the routine and development budgets, as welL as Lump-sum transfers (the SDO pro- gram) to local governments. Again, consolidation is an important prerequisite to more effective pLanning of these expenditures. In addition, for budgetary purposes, guidelines should be agreed becreen BAPPENAS and the line agencies an appropriate unit costs for recurrent items such as salaries, materials and overheads in relation to the existing capital stock (e.g., per hectare of irrigated land or per primary school). For example, the Directorate of Irri- gation has proposed such guidelines for O&M expenditures on main irrigation systems totalling Rp 13,000 (at 1981/82 prices) per hectare per year (plus Rp 1,050 per hectare per year for provincial and regency overheads). However, these norms have Act as yet been approved by BAPPENAS and actuo budget allo- cations have been substantially lower. BAPPENAS should also look closely at the recurrent cost of new projects (the project profile format proposed in Table L.7 would be usefuL in this regard). This can often be substantial, especially in the socIal sectors. For example, World Bank staff estimates suggest that for every Rp 100 invested in education during the 1980s, an additoal iLp 31 will be added co annual requirements of recurrent expendi- ture. 2 This amount is almost doubLe the actual budgetary impact of education projects impLemented during the late 1970s. At the margin, adequate funding of recurrent expenditures may mean sacrificing some new investments. Bur the benefits, in terms of improved utilization of existing assets and the provision of better quality services, is likely co be well worth the cost. 41/ This issue is discussed in some detail in the World Bank, Indonesia: Selected Asoects of Suatial DeveLoomenc (Report No. 4776-IND, November 1, 1984). This report proposes a revised formula for INPRES allocations related to the resource requirements and availabilicy for regional investment programs. INPRES funding would then enter directly into the regional budgets, to be allocated and monitored by che BAPPEDAs. 42/ See Oey Meesook, Financing and Ecuicy in the Social Sectors in Indonesia (World Bank SWP No. 703, 1984). NJ) "I'll' a' I~~~ Oh - 37 - PART II SECTORAL PROGRAMS - 38 - * 7//:s , e e- -e/2 /,- AY --/ /~, - 39 - 1. SECTORAL PROGRAMS A. Introduction 2.01 This part of the report Looks at some of the sectoral programs for REPELITA IV in more detail. Sectors covered include major tree crops, water resources, manufacturing, aining and petroleum, power, transport, telecomnuni- cations, housing, transaigration, education and health. The starting point for these sectoral reviews is the official targets proposed in the plan. How- ever, tbese have been adjusted, as appropriate, to cake account of: (a) the expected impact of resource and project implementation constraints; and (b) World Bank staff views on appropriate sectoral priorities. Based on chis analysis, indicative investment programs have been developed for these sectors (see Annex Table 3). These programs are generally more comprehensive - in terms of project detail and financing sources - than available in the plan. However, they are not iatended to provide a blueprint for sectoral development or a complete listing of project prioricies; substantially more work would be required for this purpose. Rather, the indicative programs are presented to illustrate the constraints and trade-offs that the Government will have co face in its investment decisions over the nest few years. B. Maior Tree Crops s Backzround 2.02 This section focuses on che three major tree crops: rubber, oil palm and coconut. Together, these crops provide livelihood for some 20 mil- lion people, or abouc 131 of the popuLation, and account for one third of the total cropped area in the country. The area planted in these crops has steadily expanded over the pasc four years (see Table 2.1). Production has also risen for oil palm, the newest and fastest-growing of the major tree crops. However, for rubber and coconut, production trends have generally been erratic with very little overall growth. Export performance has also been adversely affected by declining world prices for rubber and the Government's decision to divert palm oil suppLies to the domestic market. As a resulc, despite an encouraging recovery in 1983/84, export earnings from these three crops are still 302 below 1979/80 levels. Even so, they still account for about one third of Indonesia's non-oil exports. By izcernational standards, Indonesia is the second largest producer of ribber and coconuts, and accounts for 181 of world palm oil production. I/ This section covers investments related to rubber, oil palm and coconut in the estate crops program (01.1.04) as defined in the plan. For a broader and more detailed review of sector issues, see the World Bank, The Major Tree Croos: A Sector Review (Report No. 5318-nDD, April 15, 1985), referred to as the Tree Crops Report in this section. - 40 - TabLe 2.1: RECENT TRENDS FOR MAJOR TREE CROPS 1979-83 growth race 1983 liavels Planted Prod. Export Planted Prod. Export Crop area volume value /a area voLume value /a (Z p.a.) - ('000 ha) ('000 cons) (US$ my Rubber 1.2 1.3 -6.8 2,504 1,017 829 Smallholder 1.Z 0.6 2,019 689 PTP 6.2 3.8 238 197 Private estate -2.2 2.0 247 131 Oil Palm 9.0 10.6 -13.6 369 1,137 150 Smallholder 17.5 5.1 6 1 PTP 10.3 11.1 261 799 Private estate 5.8 9.2 102 337 Coconut 2.8 -3.5 -13.7 2,978 1,628 32 SmaLLholder 3.8 -1.4 2,901 1,605. PTP 14.1 -25.2 18 3 Private estace -22.0 -41.3 59 20 Total 2.5 1.3 -8.3 5,851 3,782 1,015 SmallhoLder 2.7 -0.8 4,926 2,295 PTP 8.4 9.2 517 999 Private estate -5.5 -1.9 408 488 /a Export data are for comparable fiscal years. 7i Production and export data include palm oil and palm kernel. Source: DC Estates and 3ank Indonesia. 2.03 SmalLholders account for 84Z of the planted area and 611 of the pro- duction of these major tree crops. Traditionally, siallholder tree crops have been grown under Low input/low management regimes, in part because they are often secondary income sources. The Government has used two basic strategies for prguoc:ig smallhoLder development, one relying on project mana emeni unics (PMUs)_l and che other using the nucleus estate approach (NES and PZR).._ /2 The major PHIU program is termed PRPTE. This is now the largest ot Indonesian programs for smalLholder rubber and coconuc development. Other PMU programs include SRDP (rubber) and SCDP (coconut). 3/ The developmenc costs for NES/PIR schemes are generally about double those of PIU programs due to the inclusion of infrastructure and field labor costs. - 41 - Most pubLic estates are organized as PTPs: limited liability companies with the Government as the sole sharehoLder. At present, there are 17 PTPs involved in che production of rubber, oil palm and coconut. Yields in PTPs are substantially higher than for smallholders, and usually better than for privace estaces as well. However, weaknesses in capital structures, manage- ment and staff training, as well as the burden of implementing government tree crop programs, itill constrain performance in many cases. Private estates are important in all three crops and account for about 131 of total production. More than 201 of estate rubber production is by foreign private companies. Objectives and Targets 2.04 The Government's broad objectives for the tree crops sector during REPELITA IV include: (a) raising farmers' incomes; (b) promoting an equitable distribution of income; (c) increasing domestic production and the quality of smallholder output; (d) increasing sales of export commodities; and (e) con- serving natural resources. The plan also has two specific objectives, namely to raise the income of smallholders to Rp 1.5 million (at 1984 prices) per year and to obtain US$5-.5 billign of annual export earnings from estate crops by the end of the plan period.-' The first of these specific objectives should be achievable. Most of the schemes developing two hectares of estate crops, if initiated in 1984, would provide this level of smallholder net incomes (before cost recovery) from estate crop production by the mid-1990s. Assuming income is also derived from food crops, the target income Level is likely to be sec several years earlier. Oil palm development promises the most rapid buildup of smallholder incomes. On the other hand, the export objective is simply not realistic. Gone of the REPELITA IV plancing will come to production over the next five years, and even if all production from plant- ings were expected, it would noc achieve the targec level of export earnings (given projected world market prices). Z2A5 The Government's official plan target for REPELITA IV is to plant about 1.5 million ha of rubber, oil palm and coconut, of which about 1.4 mil- lion ha will be on public estates and in smaliholder schemes (see Table 2.2). These plantings are abouc 150Z higher than achieved during REPELITA 111. An analysis of market prospects, made in the Tree Crops Report, con- cludes there are unlikely to be demand constraints on the production of these three crops over the medium term. Furthermore, economic analyses of farm models indicate that the estimated rates of return (in the range of 10-15Z) could justify a rapid expansion of the planting programs. The potential bene- fits in terms of employment generation and regional development are also substantial. However, there are serious doubts whether the estates and proj- ect management units could implemenc such large programs without adverse impact on the quality of planting and coordination of activities. Proposals to diversify PTPs could also hurt existing crop production. Recognizing these constraincs, the Government is working on an action plan to address impLemen- tation problems in a number of key areas, including manpower training, the 41 In Indonesia, the term "estate crops" is used to cover both tree and industrial crops. - 42 - organization/coordination of government agencies and the planning capacity of public estates. With improvements in these areas, the planting programs could be expanded to about 1.0 milLion ha, one quarter below the plan target, but still a significant improvement over past performance. TabLe 2.2: SELECTED PLANTING PROGRAMS /a (in '000 ha) REPELITA IV REPELITA III Plan Indicacive Program Planned Actual targets program /b Rubber 437.3 243.4 562.0 378.0 Estate 54.1 148.9/c 138.0 85.0 SmalLholder 128.0 77.6 123.0 116.0 SRDP/PRPTE 255.2 113.9 301.0 177.0 Oil PaLm 75.0 119.9 454.0 313.0 NESrPIR Estate 20.3 85.3/d 112.0 150.0 SmalLholder 55.6 34.6 342.0 /e 163.0 Coconut 268.0 178.3 346.0 320.0 NES Estate 5.5 9.1 3.0 6.0 Smallholder 5.4 6.3 18.0 22.0 ScDP/PRPTE 257.1 162.9 325.0 292.0 Total 781.2 541.6 1,362.0 1,011.0 Estate 79.9 Z43.3 253.0 241.0 Sma1lholder 701.3 395.3 1,109.0 770.0 /a Excluding private estace development. T7 The &nalyzed program from the Tree Crops Report. 7T Includes 119,900 ha of PTP own plantings. Td Includes 73,200 ha of PTP own planting. /e Includes 104,000 ha of smallholder development by private estates. Source: World Bank, Tree Crops Report. 2.06 Economic rates of return do not vary significantly for rubber, oil palm and coconut. ThereforL, the overall selection of crops should be based on Local conditions, such as soil suitability and the proximity of nucleus estates or other relevant facilities. The findings of the Tree Crops Report cend to support the Government's objectives to concentrate PTP development on new block-planting of oil palm in areas where new settlement is warranted, on the completion of existing NES/PIR projects, and on some limited new NES/PIR - 43 - rubber development in transmigration areas. The main burden for smallholder rubber development wouLd then be concentrated upon PHU-based schemes. While the PTPs have demonstrated cheir ability to grow tree crops efficiently, they have performed Less well in training smallholders, especially in food produc- tion. The extent to which nucleus chemes should be nursued is also limited by the management and financial capacity of the estate companies. Given the burden of existing couuitments, most PTPs require a period of consolidation to ensure that the quality of development is maintained. Costs and Financing 2.07 The indicative planting program of 1.0 million ha, together with related processing and mill requirements, is estimated to cost Rp 3.5 trillion at current prices (see Table 2.3). This is about 40% less than the cost of achieving the official plan targets. However, in constant prices, the inest- ment program is still substantially larger than realized in recenc years._ This raises a number of important issues on the required level and sources of finacng. 2.08 Looking at the existing financiaL structure of the PTPs, they are likely to generate only about Rp 635 biLlion of internal funds for investment during EpELIThA IV, or about 43% of their total financing requirement. Fur- thermore, their long-tern borrowing capacity may be only ftp 525 billion, of which tp 158 biLlion would be absorbed by undisbursed WorLd Bank Loans. In practice, many PTPs have little or no imediate borrowing capacity. There- fore, it is essential for the Government to inject new equity or convert existing debt to equity. The lacter option is preferable because ic works on both sides of the debt/equity racio. For example, with conversion of Rp 150 billion and a 60:40 gearing racio, addicional borrowing of Rp 375 bil- lion (as required t' close the borrowing gap under the alcernative proposal) could be mobilized. PTPs should also look to new financing options, such as leasing arrangements and suppliers' credits. Given the financial record of most PTPs and existing tax disincencives, bond issues are unlikely to be a significant source of funds during REPELITA IV. 2.09 The GOX budget (excluding external loans) is expected to provide ap 352 billion during REPELITA IV, financing 18% of the p7alLholder program. A potentiaL source of these funds would be export taxes._ The present export 5/ UnfortunrteLy, no reLiable data on the investment costs and financing of tree crop programs are available for past years. Therefore, only qualitative comparisons are possible. 6/ Additional revenues are also generated, indirectLy, through the IPEDA land tax; these are used at the local Level to fund supporting infra- structure for tree crops. An extension of land taxes on mature block- planted holdings in older schemes should be considered. However, a national Land tax, specifically earmarked for tree crop development, is not considered to be administratively or politically feasible. _ 44 - tax on crude palm oil (5% plus a 37% surtax since July 1984) is intended to divert sales to the local market. As world palm oil prices are projected to fall over the next zouple of years, a basic 5% tax would probably be suffi- cient to maintain a slight premium for Local sales by 1987. With more favor- abLe world prices expected for rubber, the Government should consider reintro- ducing the 5% export tax. Together, these export taxes could generate about Rp 336 billion during REPELITA IV, close to the projected requirement of budgetary resources. If channelled through the Ezport Crops Fund (DTE), these revenues would be directly available for the tree crop program. Table 2.3: INDICATIVE INVESTMENT PROGRAM FOR MAJOR TREE CROPS (in Bp billion at current prices) Program 1984/85 1985/86 1986/87 1987/88 1988/89 Total Rubber 203.6 231.6 273.7 290.1 297.8 1,296.8 Estates 70.4 83.6 98.1 109.8 119.3 481.3 Suallholders 133.2 148.0 175.6 180.3 178.5 815.6 Oil Palm 198.7 276.1 355.9 354.4 420.5 1,605.6 Estates 130.9 183.8 235.1 206.7 237.9 994.3 Smallholders 67.8 92.3 120.8 147.8 182.6 611.3 Coconut 94.8 105.4 118.5 135.5 150.9 605.2 Estates 9.0 6.3 5.8 5.2 4.0 30.2 Smallholders 85.9 99.1 112.7 130.3 146.9 575.0 Tocal 497.1 613.2 748.1 780.0 869.2 3.507.6 Financed by: Estates 1.505.8 IBRD /a 158.0 Other loans /b 694.8 PIP equity 653.0 SmallhoLders 2,001.9 GOI Ic 352.0 iBRD7a 382.0 Other loans /b 1,267.9 /a Ezisting comhitments only. /b Residual financing from Bank Indonesia, commercial banks and external sources. /c Excludes the subsidy cost of credit programs. Source: Annex Table 3. 4- 65 - 2.10 The most problemat' component of the financing pLan for major tree crops is smallhoLder credit._ Under the indicative program, total require- ments of smallhoLder credit are projected to be more than Rp 1.6 trilLion. The Tree Crops Report concludes that this level of credit is feasible, given BaI's financial projections, plausible assumptions on the future availability of Liquidity credits from Bank Indonesia, and a concentrated effort to mobil- ize resources from other domestic banks (e.g., BElI and BBD) and external loans. The central issue, however, is the cost of subsidies needed to enabLe state banks to engage in smallholder credit programs. Estimates presented in the Tree Crops Report suggest that the total cost of credit subsidies provided directly from the budget or indirectly through Bank Indonesia (at the presenc onleuding rate of 12X) would amount to at least Rp 350 billion for the indica- tive program over the full life of the Loans. Even this estimate is based on the otcimistic assumption thac coLlections would reach 802 for rubber and _oconuc and 90% for oil palm. There is evidence thac interest subsidies can Lead to a misuse of funds and that many smallholders could afford a signifi- cantly higher rate of repayment than is presently required. The Government should therefore review its cost recovery policies, to ensure that the heavy subsidies involved are justified. 2.11 On balance, it would seem that the indicative program for develop- ment of the major tree crops could be financed. However, there are obviously many uncertainties in these projections. Therefore, it is essential to develop contingency plans for making further cuts in the investment program, if and when financing constraints develop. One option worth considering would be to reduce the coverage of Labor costs, settler housing and infrastructure under KES/PIR projects. C. Water Resources 8l Background 2.12 There are about 5.1 million hectares of irrigatel,land in Indonesia, most of which is used for rice production (see Table 2.4).- Public works schemes, managed by the Directorate General of Water Resource Development 71 One state bank, BRI, has done most of the lending to tree crop small- holders, generally as a cha"nelling agent for government funds. However, the more active involvement of banks as executing agents has a number of potential advantages, including more careful selection of borrowers and improved coLlection incentives. The Government has recently agreed to subsidize executing banks in order to encourage their participation in the SRDP II program. 8/ This section covers the irrigation (01.2) and water management (18.1.01) progrDms as defined in the plan. 9/ The only other crop which is seriously irrigated is sugar cane (20,00a hectares), but this is very minor compared to rice. - 46 - (DCGJRD), account for about 80X of the irrigated area, with the oalance provi- ded by traditional village systems. As would be expected, most of the irriga- tion, especially from Large-scale schemes, is on Java. Rice is also grown under rainfed conditions and on reclaimed swamps. TidaL swamplands which have been drained and cleared of forest for transiigrants are concentrated in South Sumatra and ICalimantan. As shown in Table 2.4, average rice yields on irriga- ted land are more than double those on unirrigated land, and the harvesting intensity (i.e., the ratio of harvest to service area) is also higher. Java accounts for about 51Z of the paddy rice area and 61Z of rice production in Indonesia. Table 2.4: IRRIGATED AREA AND RICE PRODUCTION IN 1981 Service area Harvest Average Rice Java Sumacra Other Total area yield prod. ('000 ha) - ('000 ha) (ton/ha) (m tons) Irrizated 3,174 1,071 885 5,130 7,260 4.0 29.2 PubLic works 2,644 781 650 4,075 5,790 4.1 23.5 - Large 1,638 222 106 1,966 2,810 - Medium 466 344 341 1,151 1,650 - Small 540 215 203 958 1,330 Village 530 290 235 1,055 1,470 3.9 5.7 Unirrigated 444 667 909 2,020 2,040 1.8 3.6 Rainfed 437 444 683 1,564 1,600 1.8 2.8 Swamps 7 223 226 456 440 1.9 0.8 Total 3,618 1,738 1,794 7,150 9,300 3.5 32.8 Source: DGWRD and World Bank staff estimates. 2.13 As a proportion of the tocal development budget, irrigation expendi- tures fell from 5.82 during REPELITA It to 4.7Z during REPELITA rII. In real terms, irrigaia'n expenditures declined on average by 12Z per annum during REPELITA III.- Even so, over 2.0 million hectares were either developed or rehabilitated, more than doubLe che achievement during the previous five years (see Table 2.5). About one half of this area was on Java, although chis was primarily for rehabilitation of existing schemes; new development has moved increasingly to the Outer Islands, especially Sumatra and Kalimantan. The 10/ In 1979/80, the Government introduced a new plan sector, resources and environment, which accounted for 2.5% of development expenditure during B.EPELITA III. A Large component of this expendieure was related to water management. Including this component would basically offset the real decline in irrigation expenditures. -47- - Governmenc's investment program for irrigation has been a major factor behind che rapff/expansion of rice production, by 5.8% per annum, over the past decade._ As a result, Indonesia has been basically self-sufficient in rice since 1981. The 1984 rice crop is estimated at 25.5 milLion tons and BULOG stocks have reached 3 million tons. This emerging rice surplus wilL have a major impact on the size and orientation of the REPELITA IV irrigation program. Objectives and Targets 2.14 The Government's main objectives for water resource development during BEPELITA IV are: (a) investmenc in irrigation to sustain self-suffi- ciency in rice; (b) swamp reclamation for transmigration; and (c) river con- trol works for multipurpose use. To meet these objectives, WorLd Bank staff have prepared an indicative irrigation program covering 1.4 million hectares. Recognizing resource constraints, and changing sector priorities, this program is about one third smaller than implemented during REPELITA III and planned for REPELITA IV (see TabLe 2.5). It is expecced that this program will be adequate to support a trend increase in rice production of 2.5% per annum. As a result, for mose "average rainfall" years, rice self-sufficiency will be sustained. More rapid growth of rice production is not considered justified, given the limited export opportunities (world trade is thin and Indonesia's quality low) and high storage costs. However, the scope for using irrigated Land for other crops - such as fruits and vegetables - needs to be explored on a priority basis. With crop diversification, the quantity and timing of water requirements could alter significantLy. Specific provisions for studies on these issues are included in the indicative investment program. 2.15 On Java, there is very lictLe scope (about 160,000 hectares) for new irrigation developmenc, and basic rehabilitation of existing schemes is almost compLeted. Therefore, the indicative program gives prioricy to: (a) compLetion of ongoing projects, including two multipurpose dams (Wadas Lintang and Xedung Ombo); and (b) intensive system upgrading, to improve operations and facilitate maintenance. Further investments in major multipurpose dams an Java (e.g., Jatigede and Wonarejo) need to be carefully evaluated in terms of their potential contribucion to flood control, water suppLy and hydropower, as well as to irrigation development. However, given the overall resource constraint, the indicative program includes only minimal allocations (primarily for land acquisition) for these projects during REPELITA IV. On the Outer Islands, the scope for new irrigation development is more extensive. The indicative program includes provision for new reclamation works on 120,000 hectares of tidal swamplands, to accommodate 15,000 tranamigrant families per 11/ It is estimated that about 16Z of the increase in rice production during the 1970s was associated solely with expansion and improvements in irrigation, about 9g with improved rice varieties and fertilizer use, and 75Z with the joint interaction of these variables. See WorLd Bank, Indonesia: Policy Ontions and Strategies for Major Food Crops, (Report No. 3686b-IND, April 4, 1983). - 48 - year. The balance of the swamps program LS for upgrading/rehabilitating tidal and inland swamplands that have already been settled. TabLe 2.5: PHYSICAL PROGRAMS FOR IRRIGATION (in '000 hectares) REP. riI REP. IV Indicative program for REP. rv Actual Plan Total Ongoing New Small systems 146 } 51 51 - Medium systems 52 } 600 51 48 3 Large systems 136 } 223 179 44 Groundwater - - 21 21 - Rehabilitation 730 360 614 553 61 Tertiary 522 720 142 142 Swamps 465 460 318 8 310 Total 2,051 2,140 /a 1.420 1,002 418 /a Escludes 500,000 ha of river control. Source: GOI, REPELrTA rV plan and World RAnk staff-esti,ates. Costs and Financing 2.16 The indicative irrigation program and related investments in water management are escimated to cost about Rp 3.8 trillion at current costs (see Table 2.6). About one third of this amounc, equivalent to the foreign exchange cost of foreign-assisted projects, is expected to be financed from external loans. This is somewhat higher than the share (about one quarter) financed from external loans during REPELITA. III, due to the assumpcion that compLetion of ongoing foreign-assisted projects will be given priority over the next few years. As in the past, the baLance of funding will come from the Government's domestic budget. Note that the indicative program is 41% smalLer than the plan allocations for irrigation and water management. This is due to the smaller size and changing composition of the irrigation program (away from new large-scale systems), as vell as substantially lower unit costs, based on recent experience with international, bids for civil works contracts. During 1984/85 and 1985/86, the indicative program costs are on average 15% lower than budget allocations, due to the impact of implementation constraints. Related SIAPs and undrawn externaL loans can therefore contribute towards financing water resources investments in later years. - 50 - irrigation O&M (8%) and medium-scale irrigation (7%). However, new investments show a significant reorientacion of priorities, with no significant allocation for large-scale irrigation but subscantially higher shares for the fLood concrol (28%) and swamp (30%) programs. (c) These changing prioricies also reflect a shift in the regional distribution of investments. Java still accounts for about 60% of total investment costs. However, among new projects, 66Z are located on the Outer IsLands, including 30Z on Sumatra and 20% on Sulavesi. 2.18 A related issue, which impacts directly on the efficiency with which exiscing and new investments are utilized, is the provision of recurrent expenditures for operations and maintenance. The Directorate of Irrigation has estimated that O&M expenditures on main irrigation systems shouLd total R.p 13,000 (ac 1981/82 prices) per hectare per year. However, routine budget allocations have been less than half of this amount. For this reason, 0&M provisions for irrigation have been included directly in the developmene budget in recent years, and this practice is projected to continue during LEPELITA IV. However, there is also a strong case for mobilizing additional resources for this purpose through cost recovery. At the moment, direct cost recovery chrough land taxes (IPEDA) and water charges is very low (generally around.10-15% of farmers' net profics and 5% of the incremental earnings from irrigation investments). Unfortunacely, higher water charges may not always be appropriate, given that many beneficiaries are around the absolute poverty Level. An alternacive approach, therefore, would be to modify the present IPEDA system, to provide for better Land valuations (capturing the returns to irrigation investments) and to earmark a portion of the revenues for irrigacion O&L. The Government is planning to study alternative institutional arrangements for such a scheme in the West Tarum irrigation area. D. Manufacturing 12/ Background 2.19 , Value added in the manufacturing sector grew by an impressive 14.4% per annum over the decade to 1981. Initially, this growth was concentraced in the production of reLacively labor-intensive consumer goods. However, as the "easy" options for import substitution were steadily exhausted, the focus shifted to more technologically complex upstream products. With the bulk of output destined for che highly-protected domestic market, costs for many products were high by international standards. Accordingly, manufactured 12/ This section covers the industry (02) and business development (17) sectors as defined in the plan. The primary focus is on projects under the Ministry of Industry, although general issues relating to manufacturing projects under other Ministries (e.g., Research and Technology, and Communications) are also discussed. Projects under the Ministry of Mines and Energy are covered in the following two sections of this report. - 49 - Table 2.6: INDICATIVE INVESTMENT PROGRAM FOR WATER RESOURCES (in Rp billion at current prices) Program 1984/85 1985t86 1986/87 1987/88 1988/89 Tocal Irrigation 475.5 517.6 707.0 604.0 631.1 2,935.3 Small 24.0 29.1 31.1 31.7 42.4 158.3 medium 34.9 48.9 70.2 51.2 57.8 262.9 Large 248.1 247.0 381.5 287.2 291.2 1,455.0 Groundwater 19.0 26.7 27.2 27.9 28.6 129.4 Tertiary. 4.4 5.2 5.7 5.8 6.5 27.6 Rehabilitation 102.5 113.4 128.3 131.9 130.3 606.4 0SK 42.6 47.5 63.0 68.3 74.3 295.6 Rivers 94.8 100.5 146.0 146.1 139.5 627.0 River improvemenc 81.1 74.5 85.1 83.1 81.7 405.5 Flood control 4.6 7.4 45.7 46.8 40.3 144.9 Other 9.1 18.7 15.2 16.2 17.5 76.7 swamos 21.0 26.1 26.9 28.2 27.8 130.0 Tidal new 8.2 10.4 13.0 13.2 13.1 57.9 Tidal rehab. 3.8 5.7 4.0 4.5 5.3 23.3 Inland 9.1 9.9 10.0 10.4 9.4 48.8 Planning 11.5 12.5 13.4 14.4 15.3 67.1 Total 602.9 656.7 893.4 792.7 813.8 3,759.5 Of Which: Ongoing 583.6 623.0 824.4 697.5 705.9 3,434.4 New 19.3 33.7 69.0 95.2 107.9 325.1 Financed by: GOI budget 347.7 389.9 595.0 602.1 664.3 2,599.0 External Loans 255.2 266.8 298.4 190.7 149.5 1,160.5 Source: Annex Table 3. 2.17 There are a number of features worth noting in che composition of the indicative investment program: (a) Over 90% of the costs are reLated to ongoing projects, of which 77% are foreign assisted. About 55% of new projects are projected to be foreign assisted, requiring disbursements of Rp 180 billion during REPELITA IV. (b) The major components of the program are for large-scale irrigation (39%), irrigation rehabilitation (16%), river improvement (11%), - S1 - exports remained narrow-based and did not grow significantly during the 1970s. .ore recencly the performance of the manufacturing sector has been adversely affected by the slowdown in domestic demand. Value added hardly grew during 1982 and 1983, and excess capacity is now pervasive in a number of industries (e.g., cement, steel, tires, televisions, automobiles, motorcycles, teztiles and plywood). As a result, many producers have begun to look abroad for markets, Leading to more rapid growth in manufactured exports. However, the size of the manufacturing sector is still relatively small, accounting for only 13Z of GDP and 28X of non-oil exports in 1983. 2.20 The pattern of industrialization in Indonesia has been strongly influenced by a range of government policies. Investment in priority areas has been promoted directly through public enterprises and indirectly through a variecyl3f incentives administered by the Investmenc Coordinating Board (BKPM).- Domestic industry has aLso been protected from foreign compecition by import tariffs and quantitative restrictions. In recent months, this policy environment has undergone considerable change, including simplification of investmeat procedures and reductions in the range and level of import car- iffs. However, a number of other recent government actions have served to promote some potentially costly and uneconomic investments. Two areas are of particular concern: (a) the increased number of product categories subject to importer Licensing with related quotas and/or bans (e.g., steel); and tb) regulations requiring increased local content in final products through "dele- tion programs" (e.g., diesel engines). The expressed purpose of these poli- cies is to improve capacity utilization and promote domestic interlinkages. However, the effective impact could well be to encourage premature import substitution, with cost penalties for downstream industries. As a result, potential exporters could become uncompetitive in international markecs or find it more profitable to sell domestically. Obiectives and Targets 2.21 Industrial development is a key element in the Government's strategy to diversify the economy. Specific objectives for REPELITA rv are to: (a) deepen and broaden the industrial base, by developing industries such as machinery, transport equipment and electronics; (b) promote small-scale enterprises and strengthen their links to the rest of the industrial sector; (c) develop Indonesian skills in engineering, technology and industrial man- agement; and (d) increase exports of manufactured products through diversifi- cation programs and improved competitiveness in international markets. In these ways, it is hoped to support a manufacturing growth race of 9.5Z per 13/ No reliable information is available on manufacturing investmenc or the share financed by the public sector. However, some relevant daca for REPELITA III are as follows: (a) approved domestic investment in manufac- turing cotalled ap 8.0 crillion (although only a fraction of this amount was probably implemented); (b) implemented foreign investment in manufac- turing totaLled Rp 1.3 trillion; and (c) relevant budgetary allocations totalled Rp 4.1 trillion, or 12.5% of total development expenditure during REPELITA III. - 52 - annum, including 17Z per annum in the machinery, metals and basic chemicals subsectors. Table 2.7 summarizes capacity targets for selected manufacturing products. The overall growth rate is significantly higher than the indicacive projection (6.1Z per annum) presented in Part I of this report. Furthermore, the related capacity targets may be exaggerated, given the excess capacity that presently exists in many subsectors. Therefore, the viability of specific investment proposals should be carefully evaluated on the basis of a thorough economic appraisal. Some of the relevanc issues are illustrated in the following reviews for four key subsectors: paper, fertilizer, steel and engineering goods. Table 2.7: INDUSTRIAL CAPACITY TARCETS Growth Units 1983/84 1988/89 (Z p.a.) Hachinery & metals Industrial machinery units 1,550 3,600 18.4 -Airplanes J-b units 72 101 7.0 tailway wagons /c units 300 650 16.7 Ships '000 DWT 195 493 20.4 Steel - Steel slab '000 tons 1,100 1,600 7.8 - fiot rolLed coil '000 tons 1,100 1,700 9.1 - Cold rolled coil '000 tons 0 1,150 Aluminum ingots '000 tons 225 300 5.9 Basic chemicals Fertilizer - Urea '000 tons 2,190 5,610 20.7 - TSP '000 tons 960 1,500 9.3 Cement '000 tons 10,290 21,000 15.3 Paper - Newspaper '000 tons 0 90 - Craft paper '000 tons 0 90 Other industries Car tires '000 units 4,335 10,290 18.9 Cooking oiL '000 tons 1,226 1,967 9.9 Textiles m meters 2,130 2,860 6.1 Garments '000 dozens 20,300 26,000 5.1 Weaving yarns '000 bales 1,540 1,740 2.5 Salt '000 tons 1,100 2,100 13.8 /a Official plan targets. 7i Including helicopters. 7- Freight and passenger wagons. Source: COI, REPELITA IV plan. - 53 - 2.22 There are presently about 30 paper mills in Indonesia, including five in the public sector. Total capacity has expanded rapidly over the past decade, reaching 140,000 tons of pulp and 391,000 tons of paper in 1983. Even so, imports still account for 40Z of domestic paper consumption and 66Z of pulp requirements. The subsector is in urgent need of restructuring, to reduce the number of producers, increase mill size and integration, and improve plant'technology. This restructuring should probably be associated with a gradual reduction in nominal import tariffs on paper (pulp is already duty free) and assistance (financial and technical) to viable mills. Related investment costs could total Bp 5a-100 bilLion during REPELITA rv. The Government is also planning two new public sector mills over the next few years. The first, at Aceh, is already under construction and is designed to produce 175,000 tons per annum of sack kraft paper. Estimated investment costs are just over Rp 400 billion. The second mill at Cilicap is still under review. However, che present proposal is to construct a long-fiber bleached kraft pulp mill with an annual capacity of 130,000 tons and at an estimated cost of Rp 275 billion. The product differentiation between these two miLls would seem to be appropriate given domestic and export market prospects. However, further study is needed to determine whether costs of the Cilicap plant can be made competitive, given projected pulp prices and potential management constraints. 2.23 All fertilizer production is in the public sector. At the start of REPELITA rV there were seven plants in operation, with a total capacity of i.2 million tons of urea and 1.0 million tons of triple superphosphace (TMy).L4 By the end of 1985, another four plants are expected co be on stream__ increasing urea capacity to 4.5 million cons. As a result, Indonesia could become a net exporter of fertilizer in the near future (gross exports have aLready risen sharply, reaching US$47 million in 1983). Future demnd for fertilizer is difficuLt to project. Domestic consumption rose rapidly by about 15X per annum during the 1970s. However, this growth rate is now expec- ted to sLow, as the Government gradually phases out price subsidies (which were still about 65% in 1984) and the impact of the recent rice surpLus fil- ters through to input demand. The prospects for export sales of urea may be more promising, given Indonesia's abundant supplies of natural gas (see Section E below) and the expected improvement in world prices over the medium term. However, large investments for this purpose would have to be contingent upon clearly defined marketing arrangements. Based an information provided by the Ministry of Induscry, two new fertilizer investments - the Kaltim III urea project (570,000 tons) and an expanded ammonia plant at PT Petrokimia Gresik - have already been approved in the 1985/86 budget (see Table 2.8). Another two pLants (for urea and TSP) are plasned to achieve the capacity i4/ Indonesia also produces small quantities of ammonium sulphate, DAP and compound fertiLizers. 15/ One of the new fertilizer plants is owned by ASEAN. Indonesia is obliged to take 60% of the plant's output (520,000 tons per annum) and may purchase the baLance if the other partners do noc buy it. - 54 - targets for REPELITA IV. The timing of these proposals should be carefully scrutinised in relation to market prospects. The more immediate priority would seem to be improvements in the operations of existing plants (i.e., energy conservation, rehabilitation and debottlenecking) and the fertilizer distribution system. 2.24 Finished steel production in Indonesia totalled 1.1 million tons in 1983, compared to installed capacity of 2.8 miLlion tons and consumption of 2.6 million tons. Despite a rapid growth in domestic production during EPELITA III, imports still account for 602 of finished steel consumption and 36% of crude steel requirements. The major steel producer is PT Krakatau Steel, a public sector company, which runs an integrated plant designed to produce bars and rods, and more recently hot Tg2led coils. Construction of a cold rolling mill (850,000 tons) is underway..° However, in general, investments in new steel capacity should be deferred pending completion of ongoing studies on the efficiency of existing plants. At the moment, produc- tion costs are high due to inefficient operating practices (including over- manning of facilities) and excess capacity in many products and processes. Consequently, PT Krakatau Steel operates at a loss, despite relatively high domestic prices supported by tariffs and restrictive imporqx1g arrangements. These high prices in turn feed into downstream activities,- contributing to the "high cost" economy and reducing the competitiveness of Indonesia's pro- ducts. With improvements in operating efficiency, the plan targers for pro- duction of hot and cold rolled coil could almost be achieved. However, increased production of steel slab will require new investments, which will not come on stream during LEPELITA IV. 2.25 The8 nineering subsector in rndonesia is still relatively small 4pd undeveloped.i0 Contributions to manufacturing value added in 1982 were about 4Z for electronics and 2Z each for structural metal products, motor vehicles and motorcycles. The structure of the engineering subsector is rop heavy; resources are heavily concentrated in assembly operations (e.g., motor vehicles and television sets), where many sub-scale pLants generate Low value . 16/ In addition, it iS reported that BKPM has approved investment applica- tions for a billet and steel reinforcing rod plant in Jakarta and a profile steel plant at Cilegon. The present status of these projects is unkown. 17/ Conservative estimates suggest that high domestic steel prices raise production costs by 10Z for structural metal products, 9Z for metal furniture and fixtures, and 7% for cutlery, handtools and hardware. 18/ No breakdown is available of public and private production for the engineering subsector. However, except for strategic concerns, the criteria for selecting new investments are basically independent of ownership considerations. - 55 - added with limited technoLogy transfer.!9/ Intermediate level products (e.g., small boilers and machinery tools), that should be more compatible with the country's production capacities and comparative advantage, are largely impor- red. For REPELITA IV, che Government is planning on a rapid growth rate (17% per annum) for the engineering subsector, with particular emphasis on heavy industrial machinery and transport equipment. In order to encourage upstream linkages and reduce import content, deletion programs have been introduced for a number of activities (e.g., mocor vehicles, heavy equipment, diesel gener- acors and machine tools). However, there is some concern that these programs could perpetuate the high-cost structure of engineering goods production, by reducing competicion and economies of scale. By contrast, a gradual Liberal- ization of import restrictions could help to actract resources into areas where Indonesian production is likely to be competitive, for import substitu- cion or export development. One such area is intermediace level machinery and parts: machine tooLs, machine-grade castings, small industrial forgings, industrial pumps and boilers, and food processing machinery. However, much of the new investment in these areas could probably come from the private sector. The public sector, in curn, could focus on restructuring existing capacity, especially in che motor vehicLe industry and the heavy equipment complex at Surabaya, during REPELITA IV. To be effective, these restructuring programs wiLl have to be associated with changes in production programs and operational reforms to give managers greater autonomy. Recent proposals to establish large forge and foundry plants should be postponed indefinitely, given che fractured demand from the automotive industry and the complex technical/organizational requirements of centralized component production. Costs and Financing 2.26 The outlines of an indicative investment program for the manufactur- Lng sector during REPELITA IV are shown in Table 2.8. The estimated cost is Rp 4.8 trillion at current prices. The only project-specific information available is for ongoing and pr8ggsed investments (through the 1985/86 budger) under the Ministry of Industry.- However, the program has been filled out using the following assumptions: (a) Total development budget allocacions for anufacturing (industry and business development) averaged Rp 0.9 trillion during 1984/85 and 1985/86, of which 85% was from ezternal Loans. Public investment in manufacturing during these two years is then estimated, assuming tnat foreign exchange costs (i.e., external loans) account for 70% of the cotal. 19/ In the electronics industry, for example, value added is only 5Z-15Z of total sales and cechnology transfer is limited by foreign product Licensing arrangements (as weLl as the domestic market orientation of the industry). 20/ The information provided relates to foreign exchange coscs, which are assumed to account for 702 of total project costs. - 56 - (b) In later years, priority is given to completing ongoing projects. Some new investment, especially for subsector rescructcuing, may also be juscified. However, under present conditions, all major public investments (ongoing and new) should be carefully re- evaluated. In the absence of detailed project information, but reflecting the overall resource constraint and the potential role of the private sector, total public investment in the manufacturing sector is assumed to decline in nominaL terms over the remainder of REPELITA IV. TabLe 2.8: INDICATIVE INVESTMENT PROCRAM FOR MANUFACTURING (in Rp billion at current prices) 1984/85 1985/86 1986/87 1987/88 1988/89 Total Ministry of Industry /a 46.4 650.6 600.0 550.0 5ao.0 2,347.0 Kaltim I lb 12.3 12.3 PT Barata7b 7.7 24.1 25.7 6.4 64.0 PT Boma Bisma /b 6.2 19.4- 17.7 10.7 54.0 PT Kertas Rraft Aceh 19.5 313.0 75.2 407.6 Kaltim III 44.0 209.6 50.4 303.9 PT Pusri Ship 13.8 9.2 2V 0 PT Semen Gresik /b 13.7 23.8 14.4 51.8 PT Petrokimia Gresik 75.9 82.2 30.1 188.3 .Pusri I-3 lb 41.4 82.8 L10.4 41.4 276.1 PT Ind. Kapal 0.8 '26.2 19.6 12.6 4.5 63.8 PT Ind. Hesin Perkakas 3.5 3.5 3.1 5.5 15.7 Perum Garam /b 2.1 6.9 8.3 17.3 PT Ind. Sandang I 13.6 22.8 7.3 7.3 51.0 Pt rnd. Sandang II 59.8 6.3 66.1 New projects 14.7 296.2 641.2 752.1 Other Ministries /c 993.0 437.3 380.0 340.0 300.0 2,450.2 Total 1,039.4 1,087.8 980.0 890.0 800.0 4,797.2 Financed by: GOI budget 149.4 122.8 100.0 80.0 50.0 502.2 External Loans 727.6 761.5 686.0 623.0 560.0 3,358.1 Domestic Loans 110.5 149.2 115.6 98.0 94.0 567.2 PE funds 52.0 54.4 78.4 89.0 96.0 369.8 /a Individual projects are those requiring resources through 1985/86. 7T Rehabilitation or improvement projects. 77 Includes business development program. Source: Annex TabLe 3. - 57 - 2.27 The total cost of ongoirg and proposed projects under the Ministry of Industry is projected to rise from Rp 46 billion in 1984ly5 to an average of Rp 618 billion per annum over the subsequent two years.2 The major invescments in new capacity are for che Aceb paper project (Rp 408 billion), the iCaltim II urea plant (Rp 304 billion) and the Gresik aonia pLant (Rp 188 billion). Most of the other projects are for rehabilitation or improvemenc of existing capacity for production of fertilizers (Kaltim I and Pusri I-B), cement (PT Semen Gresik), engineering goods (PT Barata Indonesia, Soma Bisma lndra and Industri Hesin Perkakas Indonesia), ships (PT rnduscri Kapga indonesia), salt (PT Perum Caram) and textiles (PT Sandang I and II)._ This still leaves a relatively large amount of committed funds, especially in 1984/85, for unspecified projects under ocher Ministries - including high-techno1iqgy, defence and railway industries - and the business development program._ Some potential areas of new invescment, for both import substitution (e.g., machine cools) and export development (e.g., fer- tilizers), have been discussed above. However, even in these areas, the economic returns to specific project proposals need to be carefully evalua- ted. Furthermore, it is important to consider the justification for public sector involvement. In some cases, public investment will be required for strategic, scale or externality reasons. However, in many subsectors, the primary role of the Government will be to improve the environment for private investment, through poLicy reforms (e.g., trade policy and investment regula- tions) or by providing basic infrastructure (e.g., transport facilities and power supplies) and services (e.g., technical training and marketing information). 2.28 The financing plan shown in Table 2.8 assumes a steady shift away from government equity as a source of funds for public investment in the manu- facturing sector. Instead, the share of public investment financed from the internal funds of pubLic enterprises is assumed to increase from an estimated 5Z in 1984/85 and 1985/86 to 12Z by l988/89. The balance of investment is assumed to be financed from domestic bcrrowing. In practice, this financial restructuring may be difficult to achieve, due to the impact of high interest rates, weak managemenc and excess capacicty on the financial position of many 21/ This list excludes che cold rolling mill, being constructed as a joint venture. Apart from land and some infrastructure provided by P.T. Krakatau Steel, all of chis investment is being funded by che private partners. 22/ Pusri I-B is basically a aew project, which ucilizes very little of the existing fertilizer plant; hence, the high cost. Some of che other proj- ects are still subject to the results of sector studies (e.g., S-andang I and II) or the availability of suitabLe financing (e.g., the Gresik amonia plant). 23/ According to the plan, the business development program is incended co "enhance the role of che national entrepreneur, especially the economically weak group." However, details on specific investment proposals are unavailable. - 58 - pubLic enterprises. Similar constraints could also prevent the private sector from taking up the slack in manufacturing investment. However, this need not necessariLy impLy that the burden should shift back to the deveLopment bud- get. Rather a better strategy might be to cut back on pubLic investment in the short term, focus instead on restructuring esisting capacity and improving the policy environment, and in this way Lay the basis for stronger growth in later years. A careful review of these strategic iSSUeS, and their impact on investment planning, is urgently required. E. Mining and Petroleum 24/ Background 2.29 Oil dominates the Indonesian economy, accounting for about 80% of commercial energy consumpiion, and 60% of ezport earnings and domestic budget receipts. aver the past five years, oil production has declined in response to changing world markee conditions and lower OPEC quotas (see TabLe 2.9). Domestic consumption has also been constrained by higher prices, which are now close to world Levels (with some cross-subsidization of kerosene). Estimates of oil reserves are inevitabLy subject to large uncertaincies.- owever, most experts put end-1982 proven reserves at about 9 billion barrels, with the possibility of adding another 2 billion barrels from new discoveries by the year 2000. These reserves could support moderace growth in annual production to about 500 million barrels by 1990. However, without unexpected new finds, production will then start to tail off. This Long-term production constraint, together with continuing uncertainty in world market conditions, underscores the importance of diversifying Indonesia's primary energy sources. 2.30 The major indigenous alternatives to oil are natural gzs and coal. As shown in Table 2.9, production of both has expanded over the past five years (albeiL from a very low base in the caze of coal). Natural gas produc- tion totalled about 1.2 TCF in 1983, of which 22Z was used in the field and 12Z was flared. Of the baLance, 64Z was exported to Japan as LNG from lique- faction centers based at Arun and Badak. LNG exports have risen by 14% per annum in real terms since L981 and now account for 15% of total export earn- ings. rndonesia has vast reserves of natural gas, almost equivalent in energy terms to the country's proven oil reserves. Because the bulk of these reserves are located away from the major populacion and industrial areas, LNG exports are likely to remain the primary use of natural gas over the medium term. However, the Covernment is also considering options for expanded domestic use, especially as an industrial feedstock, in gower generation and for city gas systems. Although there have been plans to revive the coal industry since the mid-1970s, production is still welL below the peak Levels (2 million tons) achieved in the 1940s. Almost all of the present production 24/ This section covers the mining and oil and gas sectors as defined in che plan. The power sector is discussed separately in Section F below. For an overview of the energy sector, see UNDP/World Bank, Indonesia: Issues and Opcions in the EnerZy Sector (Report No. 3543-IND, November 1981). - 59 - is concentrated in two mines in Southern Sumatra, one at Bukit Asam (open casc) and the ocher ac Ombilin (open cast and underground). However, there are also large coal deposits in Kalimantan, where a number of major basins have been identified. Therefore, while proven reserves are put at only abouc 1 billion tons, potential estimates range as high as 23 billion tons. For the foreseeable future, the primary use for coal wiLl be in power generation (see Section F). Table 2.9: MINERAL PRODUCTION Growth rate (Z p.a.) Mineral Units 1978 1983 1988 /a 1978-83 1983-88 Petroleum million bbls 597 491 585 -3.8 3.6 Natural gas billion cf 820 1,186 1,980 7.7 10.8 Coal '000 tons 264 486 9,930 13.0 80.8 Tin /b '000 tons 27 27 38 - 7.1 Copper ore /b '000 tons 181 205 170 2.5 -3.7 Nickel ore '000 tons 1,207 1,298 2,550 1.5 14.5 Bauxite '000 tons 1,008 778 -5.0 Iron sand /b '000 tons 233 125 -11.7 /a Official plan targets. 7,b Concentrate. Source: Ministry of Mines and Energy and GOI, REPELITA IV plan. 2.31 Other major minerals produced in Indonesia include tin, copper ore, nickel ore, bauxite and iron sand. As shown in Table 2.9; production of these minerals has been fairly stagnant or declining in recent years. World Bank staff have very Limited knowledge of these subsectors in Indonesia and of the factors influencing performance. However, a major consideracion is clearly unfavorable world prices, vich tin and bauxite prices both down in constant dollar terms since 1978 and only very marginal gains for copper and aickel. According to the latest WorLd Bank commodity price forecasts, all of these mineral prices are expected to continue falling in constant dollar terms over the remainder of this decade. The major reasons for this pessimistic projec- tion are the continued substitution of synthetic and other natural materials for metals, increased efficiency in the use of these materials, and a "maturing" of the industrial councries which has led to lower metal and mineral use per dolLar of real CDP. - 60 - Objectives and Targecs 2.32 The Government's broad objectives for the mining and petroleum sector during REPELITA IV are to: (a) use appropriate technologies to boost mining production and exports; (b) increase mineral processing and feedstock supplies for domestic industries; (c) diversify energy sources and improve the efficiency of energy use; and (d) step up supporting research and development activities. Related production targets are summarized in Table 2.9. A list of investment proposals for REPELITA IV, based primarily on information provi- ded by the Ministry of Kines and Energy, is given in Table 2.10. This includes all major ongoing projects and some rephased or new projects still subject to government approval. Any final judgment on these proposals should be based on a thorough economic appraisal (something that we have not attempted for this report). However, some preliminary reactions are given in the following paragraphs. 2.33 in the coal subsector, first priority shouLd be given to completing the Bukit Asam project. TLhis project will have an annual capacity of 3.1 mil- Lion tons, more than six times the present production of coal in Indonesia. However, iimplementation has been seriously delayed and the first coal is not now expected to be produced until October 1986 (about one year behind sche- dule). The ongoing expansion and rehabilitation at Ombilin I should also be completed on a priority basis. Ombilin II, a mine-rail-port complex oriented to coal exports, is presently under study and, if it proves viable, construction could probably start in 1986/87. Capacity will be determined during feasibility, but is presently planned at 600,000 tons per annum (and could be a. much as I million tons). Related investments in a coal washing plant and coal terminal will also be required during REPELITA IV. Under a series of production-sharing contracts signed in 1981/82, international mining companies are to finance expLoration and possibly development of potential mining areas in Kalimantan. As none of these companies has yet finished feasibilicy work, it is difficult to predict what level of investment will actually take place during REPELITA IV. However, unless the pace of coal development is substantially accelerated, it will be difficult to meet fully the projected requirements of the power sector from domestic suppLies. 2.34 Of the other mining projects, only two are ongoing: construction of the Singkep I tin dredger and the joint venture in tin plate production. Both of these projects are expected to be completed in 1985. All of the other project proposals will have to be carefully evaluated, especially in lightc of the unfavorabLe world market conditions noted above. By far the largest of these projects is the alumina plant on Bintan Island. This plant is intended to produce 600,000 tons of alumina per annum, using Local low-grade bauxit-. The alumina, in turn, would be used in the recently-completed Asahan aluminum smeLter. The alumina plant was one of the projects rephased in 1983, after about Rp 90 billion had already been invested. However, it is estimaced that another Rp 800 bilLion would be needed to bring it to complecion. This is a ver7 high cost, mostly in foreign exchange, which could not be justified give present prices for alumina imports. Any decision to reactivate this project would have to be based on the willingness of a foreign partner to make a significant equity contribution towards the cost, together with favorable Long-term marketing arrangements- - 61 - Table 2.10: MINING AND PETROLEUM PROJECT PROPOSALS FOR REPELITA IV /a Cost /b Project Ownership Purpose (Rp bTa) minin 2.080 Sukic Asam /c PT Taba Coal mining (3.1 aln tpa) 49O OmbiLin I /c Peru. Satubara Coal mining (750,000 tpa) 40 OmbiLin ri Perum &acubara Coal mining (600,000 tpa) 200 Coal terminal Peru. Batubara Coal transport (loading 750 tpd) 20 Coal washing plant Peru. Satubara Coal wvshing (150 tph) 10 Parambahan Ic Privace Id Coal mining (500,000 tpa) 40 E & S XaLimntan Ic Private 7d Coal mining 300 Other minerals Singkep I /c PT Timah Tin dredger (1,200 epa) 20 PT Latinusa Ic Joinc venture Tin pLate production (130,000 tpa) 50 sincan alumina ST Aneka Tambang Alumina production (600,000 tpa) 8a0 Cilegon nonferrous PT Aneka Tambang Nonferrous smelting & refining 110 (zinc 50,00 cpa, copper 50,000 cpa, sulphuric acid 230,000 tpa) Poiualaa ferro-nickel PT Aneka Tambang Ferro-nickel prod. (add 85,000 tpa) 110 Cunung Limbung PT Aneka Tambang Copper, lead & zinc mining (1,000 tpd of ore) 20 stainless steel Joint venture Stainless steel prod. (60,000 tpa) 110 Petroleum 10.250 Production and suoolv M:usi refinery I/c Pertamina Refinery modernizacion 130 Refinery opcimizacion Pertamina Improved operacions ac Dumai, Cilacap and Salikpapan 160 LPG export cerainal/c Pertamina LPG processing (45n,000 tpa) 50 .Ships/c Pertamina Petroleum transport (145,500 DWT) 700 Domestic supply Pertamina Petroleum discribucion 1,060 Exploracion & prod. Pertanina/e Oil & gas exploracion & production 5,230 Ciey gas sysces PCX Rehab. & devel. of gas systems in 8 cities 80 Petrochemicals Metbanol plant/c Pertamina Methanol production (1,000 tpd) 20 Aromatics pLanc I /c Pertamina PTA production (150,000 cpa) 420 Aromatics pLant II Pertamina Parasxylene production *800 OLefins pLant Pertamina Ethylene (350,000 tpa) & derivatives production 1,600 /a Excluding studies and R&D proposals. /b Raugh estimaces of pocential costs at current prices during REPELITA IV. /c Ongoing project. All, other proposaLs are subject to government approval. 7d Product sharing with Perum Bacubara. 7e Excludes investment by private contractors under produce-sharing arrangemencs wich Pertamina. Source: Ministry of Mines and Energy and World Bank staff estimates. - 62 - 2.35 By far the Largest of the proposed petroleum investments is for exploration and production. A sustained effort in this area is essential, if the projected trends in production and exports are to be achieved. An unspe- cified amount of this investmene will be provided by foreign oil companies under production-sharing arrangements. For this component, the net impact on the tance of payments and domestic resource requirements will be mini- mal.- The major issue, therefore, is whether the incentives, under present market conditions and government policies, will be sufficient to attract foreign oil company interest. In addition, Pertamina is ezpected to invest about Rp 1.0 trillion per annum in exploration and production activities dur- ing REPELITA IV. Other major claims on Pertamina's resources are expected to be for domestic supply and ships. The proposed investments in these areas are relatively Large andtg7ould therefore be carefully evaluated in relation to the country's needs.- One priority in this area is for additionaL invest- ment in interfuel substitucion (especially by gas) to stretch out export earnings from oil. Lead times on such investments are long, and therefore preparation is needed now for the effeces to be beneficial in the 1990s. Where sound investments have been identified - such as completion of the LPG export cerminal.or the proposed refinery optimization - these should be undertaken on a priority basis. PG8's program to rehabilitate and develop city gas systems also deserves continued support. However, the major question marks in the oil and gas sector relate to the proposed new investments in petrnchemicals: to provide backward Linkages to paraxyLene production in che aromatics plant and to produce ethyLene and derivatives in a new oLefins complex. As with the 3intaD alumina project, chese proposals were shelved in 1983; because of their substantial foreign exchange requirements. Since then, the balance of payments outlook has become tighter and more uncertain. The economics of these projects is further undermined by the recent buiLdup in petrochemical capacity worLdwide. Therefore, it seems unlikely that activation of these proposals could be justified during B.EPELITA IV. 25/ Direct foreign investment and reLaced import requirements for the oil and gas sector are not recorded in Indonesia's official balance of payments or national accounts statistics. There is aLso some doubt as to whether investments funded by Pertamina are fully captured. For the public investment estimaces used in Part 1, all investments funded by privace equity (whether in joint ventures or product-sharing arrangemenes) and by Pertamina are excluded. 26/ This is difficult to do without additional information. For exampLe, no details are avaiLable on specific investmencs proposed for domestic supply, including a breakdown between oil and gas projects, and their relationship to production plans. Pertamina's requirement for new ships should be related to the present structure and age of its fleet, the projected volume and pattern of trade, and alternative transport arrangements (e.g., by ship purchases, leasing or contract services). - 63 - Costs and Financing 2.36 Table 2.11 shows indicative investment programs for mining and petroleum during RP&ELITA IV, based on the considerations outlined above. For the mining sector, the estimated cost is Rp 1.4 trillion, or about 65Z of the potential costs of the proposals Listed in Table 2.10. Excluding private equity contribucions, the public investment costs are reduced further to Rp 1.0 trillion. Note the following features: (a) Initially, most resources are focussed on completing the Bukit Asam project. There is some doubt, however, whether the estimated ezpenditures during 1984/85 actually took place; any slippage would offset the relatively low Level of mining investment projected for 1985/86. (b) Subject to the rsults of the ongoing feasibility study, work on Ombilin II coula start in 1986/87. There would also be scope for introducing some other new mining projects in the latter years of REPELITA IV. However, the amounts involved would not be adequate to finace a major project, such as Bintan alumina, without substantial additional foreign equity participation. (c) Foreign equity is expected to become an increasingly important source of funds in the mining sector, financing about one third of investment over the final three years of REPELI.TA IV. Most of this investment is for coal development in [alimancan. The levels and timing of this investment will depend on prevailing local and incernational market conditions for coal. 2.37 For the petroleum sector, the indicative investment program for REPELITA IV is estimated to cost EBp 7.9 trillion, or about 772 of the pocen- tial costs of the proposals listed in Table 2.10. Excluding funding by Pertamina, the public investment costs are reduced substantially co Rp 1.0 trillion. Note the following features: (a) Two thirds of the program is for exploration and production, most of which is financed by Pereamina's own resources. Pertamina also finances investmenes in domestic supply and ships, as well as part of the proposed refinery optimization program. (b) Government budget funds and external loans will be required to finish the lusi refinery, the methanol plant and the refinery optimization program. The proposed rehabilitation and developmene of the gas systems in eight cites will also be financed from these sources. (c') For the reasons outlined above, the proposed new investments in the aromatics expansion and olef ins complex have not been included. aeactivation of these proposals could only be considered with a significant improvement in Indonesia's balance of paymenes outlook and after a thorough review of their economic viability. - 64 - Table 2.11: rNDrCATIVE rNVESTMENT PROCRAMS FOR MININGN AND PETROLEUM (in Rp billion at current prices) 1984/85 1985/86 1986/87 1987/88 1988/89 Total Mining Bukit Asam 227.0 111.4 150.9 - - 489.3 Ombilin 1 39.7 2.9 - - - 42.6 OmbiLin 1I - - 50.0 70.0 80.0 200.0 Parambahan 5.7 22.2 4.1 11.4 43.4 E&S Kalimantan - 20.0 80.0 100.0 100.0 300.0 Singkep r 11.2 5.3 - - - 16.5 PT Latinusa 27.9 19.5 2.2 - - 49.6 Other projects - - - 100.0 120.0 220.0 Total 305.8 164.8 3^05.3 274.1 311.4 1,361.4 lin-anced by: GOI budget 33.8 56.0 85.9 42.5 50.0 268.2 Ezternal loans 251.2 60.9 115.0 127.5 150.0 704.6 Domestic loans 2.9 13.6 2.2 - - 18.7 Private equity 17.9 34.3 102.2 104.1 111.4 369.9 Petroleum - musi refinery 1 23.6 95.5 6.1 - - 125.2 Ref. optimizacion - 56.5 103.8 - - 160.3 LPC export terminal 37.9 16.7 - - - 54.6 Asphalt plant 1.5 14.9 3.5 - - 19.9 Methanol plant 16.4 - - - - 16.4 Aromatics plant 1 299.9 85.9 32.1 - - 417.9 Ships 62.4 126.4 158.8 171.4 185.8 704.8 Domestic supply 82.2 161.0 236.2 237.4 341.4 1,058.2 Exploration & prod. 928.1 998.0 1,047.9 1,100.7 1,154.7 5,229.4 City gas systems 10.8 6.0 14.1 20.1 24.4 75.4 Total 1,462.8 1,560.9 1,602.5 1.529.6 1,706.3 7,862.1 Financed by: GOI budget - 123.2 90.8 38.0 6.3 6.4 264.7 External loans 200.4 107.7 145.3 68.8 75.7 678.0 Other COI 7.6 40.9 3.3 - - 51.8 Pertamina funds 1,051.6 1,321.5 1,415.9 1,454.5 1,624.2 6,867.6 Source: Annex Table 3. - 65 - F. Power 27/ Background 2.38 The power sector in Indonesia includes: (a) PLN, the State Electric Pover Corparation; (b) captive plants installed primarily for industrial use; and (c) a number of small private companies and cooperacives which serve remote areas. PLN's installed capacity has expanded almost fivefold over the past decade (see TabLe 2.12). Almost three quarters of PLU's capacity is located on Java. Despite ongoing efforts to develop the country's hydro and geothermal potential, more than 80% of PLN's capacity is still based on pecroleum (in steam turbines, gas turbines and diesel generators). The availability and reliability of PLN's supply was a major problem in the earLy 19709 and this motivated many induscrial consumers to instalL captive pLant. More recently, there has been a relative decline in the growth of capcive plant, indicating that PLN has increasingly met the demands of new consumers. Even so, captive plant still accounts for about one half of installed capacity and one third of electricity consumption in Indonesia. 2.39 Electricity consumption has grown rapidly by 12.7% per annum over the past decade, with PLN sales rising at an-impressive 16.5Z-per annum. By comparison, real CDP grew by 6.6Z per annum over this period, implying an average elasticity of 1.9. The major reasons for this rapid growth were the expansion of PLN's generation capacity and extension of the distribution net- work. Even so, per capita electricity consumption (99 kWh per annum) and the electrification racio ( lj) are 'till exceptionally low compared to other countries in the region._ As a result, electricity still accounts for Less than lOZ of comercial energy consumption in Indonesia. Furthermore, there has been a markg4 slowdown in the growth of PLN's sales, especially an Java, since 1982/83.- This slowdown occurred in all consuming sectors and was due almost entireLy to a fall in average consumption per customer. The major factors at work here are probably the sLower growth in the non-oil economy and the recent sharp increases in electricity tariffs. 27/ This section covers the power sector (03.2.01) as defined in the plan. The investment program is for PL, which dominates the sector's resource requiremewnts. For a more detailed discussion of power investmene issues see the World Bank, Indonesia: Power Sector Investment Review (Report No. 5486-IND, September 1985), referred to as the Power Invesument Review in this section. 28/ Comparable estimates for other countries on per capica electricity consumption and the electrification ratio in 1981 are: the Philippines 390 kWh, 43Z; Thailand 355 kWh, 41Z; Korea 1,204 kWh, 95%; and Malaysia 703 kWh, 612. 29/ PLN's sales rose by 9Z in 1983/84, with the number of customers up by 16% buc average sales per customer down by 6%. - 66 - Table 2.12: ELECTRICITY CONSUMPTION AND INSTALLED CAPACITY Growth rates (X p.a.) L973/74 1978/79 - 1983/84 REP. II REP. III CONSUMPTION (CWh) PLU sales 2,175 4,287 10,006 14.5 18.5 Household 1,066 1,962 4,271 13.0 16.8 Industrial 331 1,443 3,445 59.8 19.0 Other 778 881 2,290 2.5 21.1 Captive Plant a/ 2.505 4,278 5,531 11.3 5.3 Total 4,680 8,565 15,537 12.8 12.6 P1.1 CAPACITY (MW) Hydra 279 359 664 15.2 13.1 Steam oil 225 556 1,556 19.8 22.9 Steam coal - - - - Geothermal - - 30 - n.a. Gas turbine 42 882 899 83.8 0.4 Diesel 231 499 671 16.7 6.1 Total 812 2.296 3,820 23.1 10.7 ai All industrial. Captive pLants of Less than 5 kW and major hydra and steam plants serving enclave industries are excluded. Source: World Bank, Power Investment Review. Objectives and Targets 2.40 The Government's main objectives far power development during REPELITA IV are to: (a) improve the standard of living in cities and rural areas; (b) stimulate economic and industrial growth; and (c) improve the oper- ation and management of eLectricity facilities. Related physical targets for PLN include the addition of 5,255 MW of installed capacity and the eztension of the rural electrification program to cover 7,000 villages with 1.6 million - 67 - consumers.30/ An addicional 50,oaa consumers are co be supplied through rural cooperatives. The Government is also committed to a policy of replacing cap- cive pLant by PLN's supply as rapidly as possible and of Licensing new captive plants only where PLN cannot supply. To evaluate these targets, World Bank staff have prepared a range of illustrative scenarios, using alternative assumpcions on economic and policy variables affecting power development. Given the Long gestation of power generation investments, this analysis has been extended through REPELITA V. The results are summarized in Table 2.13 and discussed below. 2.41 PLN sales are projected to grow by a range of 13.4Z to 19.3Z per annum during BEPELITA rv. The major assumptions underlying these projections are as follows: (a) The plan targets for CDP and industrial growch are used in Scenarios A to BP. However, given the present uncertainties on resource availability, especially from oil, a slower growth path is a real possibility. The impact on power requirements of the macro-economic projections presented in Part I is illustrated in Scenario BE. There is also uncertainty regarding the future elasticity of industrial demand for electricity. Two alternative assumptions (1.6 and 1.3) are used in these scenarios, but an even lover elasticity (possibly less chan one) cannot be ruled out. (b) The Government's policy on captive pover takeover is reflected in Scenarios A and B. However, continued operation of some of the larger existing capcive plants could well be an economic alternative to PLN supply, especially during peak periods. New investment in captive planc may also be justified for some large and remote industries, especially chose which need process heat. Therefore, a more gradual takeover policy is assumed in Scenarios BP and BE. (c) The Government's objective is to increase the electrificacion ratio from ics present level of 12Z to over 40% by 1993/94. This assump- cion is used in Scenarios A and B. However, such rapid progress may not be compatibLe with the availability of resources or PLN's implementation capacity. There is also some doubt as to whecher rural customers will be able to afford the implied levels of elec- tricity use, without subscancial subsidies from the Government. A more gradual pace of electrification is therefore assumed in Scenarios BP and BE. 30/ The plan also projects PL.N sales to total 96,078 GWh during REPELITA IV, with 5.9 million new customers. However, these numbers seem to be exaggerated. A more plausible assumption, consistent with the Govern- ment's objectives on electrification and captive plane takeover, would be for PLY saLes to total about 86,000 GWh, with 4.7 million new custo- mers. This assumption is used in Scenario A below. - 68 - Table 2.13: ALTERNATIVE POWER SCENARIOS FOR REPELITA IV AND V Scenarios Indicator A B BP BE/c Assumptions CDP growth (Z p.a.) 5.0 5.0 5.0 4.1 Industrial growth (Z p.a.) 7.0 7.0 7.0 6.6 Elasticity of industrial demand for eLectricity 1.6 1.3 1.3 1.3 Captive plant takeover (X)/a - Java 90 90 60 60 - Outer Islands 40 40 - Electrificacion ratio (1)/a 41 41 36 36 Results Elect. cortsuption growth (1 p.a.) REPELITA IV 13.3 11.6 11.1 9.3 - REPELITA V 13.3 11.6 10.9 9.3 PUS sales growth (Z p.a.) - REPELITA IV 19.3 16.8 15.3 13.4 - REPELITA V 16.7 14.8 14.0 13.2 PLU capacity added (MW) - REPELITA tY 4,462 4,214 4,222 4,222 - REPELITA V 7,282 4,487 3,736 3,061 PUN investment cost (USS bilLion)/b - REPELITA rV 9.7 8.2 7.8 7.5 - REPELITA V 11.6 10.5 9.4 9.1 /a At the end of REPELITA V (1993/94). 7; At April 1984 prices. 7T Estimates of PLU capacity added and investment costs are approximate only, and may not reflect the least-cost program. Source: World Bank, Power Investment Review and staff estimates. 2.42 Least-cost investmene programs for PLNl were presented in the Power Investment Review for Scena5i?s A, B, and BP, using reasonable assiaptions on key performance parameters.31 Scenario A is based on the Governmnt's 31/ These investment programs have been prepared using PLN's in-house pLan- ning models. The major assumptions are as follows: the Load factor re- mains at 68Z; transmission and distribution losses are reduced from 16% in 1984/85 to 13% by 1986/87; and the system outage standard is kept at one day per year. - 69 - targets for economic growth, electrification and captive pLant takeover. Yet the required increase in PLN's installed capacicy is only 4,462 MW, 15Z Less than projected in the pLan. Mosc of this increase is accounted for by hydro (34:) and coal-fired (32X) pLants. Under the alternati7e scenarios, with slower consumption growth, the major adjustments relate to the levels and timing of investment in uncommitted coal-fired plants, especially on Java (e.g., Suralaya and Paiton). However, in all scenarios, the share of oil- fired capacity is substantially reduced from its present level of 82Z to around 30S-35Z by the end of REPELITA V, and could go even lower if it proves economic to substitute nacural gas in existing oil-fired plants. This trend is considered appropriate, given che high economic value of petroleum products relative to other fuels. 2.43 Scenario BE is a new scenario developed to iLLustrate the impact on PLN sales of the maore pessimistic macro-economic projections (especially for REPELITA IV) presented in Part r of this report. Because of the overalL resource constraint, the targets for captive pLanc cakeover and electrification have also been set ac the Low end of the range discussed in the Power Investment Reviev (i.e., as used for Scenario BP). Although a leasc-cost investment program has not yet been prepared for this scenario, same preliminary conclusions emerge. Firstly, as compared to Scenario BP, new generation projects on Java couLd probably be delayed by about one year. During REPELITA IV, this would affect construction of the next two coal-fired plants (Paicon 1 and 2 and Suralaya 5 and 6), the Jacigede multipurpose project and several geothermal plants (Dieng, Salak and Drajac). SecondLy, similar delays may be possible on the Outer IsLands. But, here the timing issue is complicated by the absence of a unified grid system and further analysis will be needed to determine the impact an investment priorities. Finally, the combination of slower growth and a tighter resource constraint may require a reevaluation of che balance between generation and transmission and distribution investments. On the one hand, an ezpanded electrification program may be justified to make better use of lumpy generacion investments coming on stream. However, in light of the expected resource constraint, ic would also be appropriate to review standards and unit costs for the electrification program, to see if the targets can be met with less money. Costs and Financing 2.44 There are still many uncertaincies in the demand outlook and selection of generation options. Power planners will therefore have to review the investment program on a regular basis, and make necessary adjustments as circumstances change. However, at the present time, Scenario BE wouLd seem to provide the maost reasonable basis for planning, taking into account the projections in Part I on economic growth and the overall resource constraine. The projected increase in PLN's installed capacity during REPELITA rV is 20% below planned levels. The related investment program, as sm-arized in - 70 - TabLe 2.14 is estimated to cost Mp 9.2 trillion at current prices.321 Note the foLLowing features: Cd) About one half of the program is for generation, primarily in hydra and coal-fired plants. Over 80Z of the generation investments during B.EPELITA IV are for committed projects (i.e., construction started in 1984/85 or earlier). Major expenditures during REPELITA LV on hydra plants are for Mrica (Rp 465 billion), Saguling (Rp 328 billion) and Cirata (Bp 635 billion). The major expenditure on coal-fired plants is for SuraLaya (Rp 613 billion). (e) About two thirds of the investments are on Java, where the major generation projects are Located. Investments on the Outer IsLands give greater emphasis to transmission and distribution (61Z of total investments) and to diesel plants within the generation program (49% of generation investmenc). 2.45 This indicative invescment program is relatively Large compared to actual pover investments during REPELITA III and the projected level of public investment Eor REPELITA IV (as discussed in Part I of this report). The power sector's share in public investment3^/ therefore projected to rise from 8.7% to 14.1% between these tvo periods.- It is expected that PLU wilL be able to implement this ezpanded program. provided ongoing efforts to strengthen planning and project management are intensified. Other potential implementa- tion constraints, some of which are already evident, include time-consuming procurement procedures, unsatisfactory performance by local contractors and probLems with land acquisition. However, the overriding constraint is Likely to be the availability of resources. Projections prepared by WorLd Bank staff suggest thac the share of investment costs financed by PLY's own funds could be increased from 14% in REPE.ITA III tu .20% in REPELITA IV (and as high as 33% by 1988/89). This result is dependent upon two key assumpcions: (a) real tariff increaR of 15Z during B.EPELITA IV (with no real increase in primary fuel prices); and b) efficiency improvements in fuel consumption, system losses, Labor productivit7 and working capital management. Even so, an addi- 32/ It should be stressed that this investment program is not optimized in relacion to resource availability or the least-cost solution. As compared to Scenario BP, the only adjustment is to delay new generation projects on Java by one year; further work is required to evaluate the timing of projects on the Outer Islands and the size of the transmission and distribution program. 33/ The share of power investment in CDP is projected at 1.7% for BEPELITA IV. This is similar to ratios achieved in other countries (e.g., the Philippines, Brazil and India) during a phase of power infrastructure development. 34/ The required increase would doubLe to 30%, if the impact of corporate tax and the recently introduced VAT an petroleum products is taken into account. - 71 - tionaL Rp 7.4 trillion would still be rsgyired from development ezpenditure (government equicy and external loans)._ This amount is 6% lower than the allocation in the pLan, but would stiLl absorb 142 of the more constrained leveLs of deveLopment expenditure projected in Part r. Even so, the costs of further cutbacks, in terms of lower economic growth or less efficient energy development, would be difficult to justify. TabLe 2.14: INDICATIVE INVESTMENT PROGRAM FOR POWER (PLN) (in Rp billion at current prices) Program 1984/85 1985/86 1986/87 1987/88 1988/89 Total Generation 793.6 983.3 759.4 811.5 952.8 4,300.6 Hydro 433.1 S08.3 359.0 495.1 566.3 2,361.7 Steam oil 61.7 75.9 72.6 54.1 - 264.3 Steam coal 208.8 216.7 140.8 143.6 306.6 1,016.6 CGorlermal 33.0 15.0 5.5 7.0 28.9 89.3 Gas turbine 2.6 - - - - 2.6 Diesel 54.3 167.5 181.5 111.6 51.1 566.1 Other invesements 802.2 913.0 924.2 1,074.4 1,207.5 4,921.3 Transomssion 387.9 366.2 269.1 290.2 316.3 1,579.6 Distribution 434.4 511.3 624.0 748.3 848.7 3,166.6 Other 29.9 35.5 31.1 36.0 42.6 175.1 Total 1,595.8 1,896.3 1,683.6 1,885.9 2,160.3 9,221.9 Financed by: GOI budget 300.0 324.0 349.9 377.9 408.2 1,760.1 External loans 1,245.3 1,336.9 922.9 1,101.5 1,032.5 5,639.0 PLN funds 50.4 235.4 410.8 406.5 719.7 1,822.8 Source: Annex Table 3. 35/ Note that the development expenditure requirements in 1984/85 and 1985/86 are substantially higher (96%) than provided in the budgets. This overrun may be due in part to carried-over expendirures (SIAPs) from earlier years. However, in so far as actual expenditure is lower, some rephasing of the investment program will be required. - 72 - C. Transport 36/ Background 2.46 An efficient transport system is vital to Indonesia due to the size, population and geography of the country. The existing system includes all major modes: (a) Th. sea transport network extends to approzimately 300 ports and numerous other landing points. Indonesia's shipping fleet includes 8.150 domestic vessels (4.6 million DWT) and 62 ocean going vessels (0.8 million DWT). (b) The principal road network cotals over 147,000 km, of which 30% is in Sumatra and 25Z in Java. The road vehicle fleet includes 866,000 cars, 718,000 trucks -nd 160,000 buses. (c) The Indonesian State Railway (PJMA) has a total route Length of 6,400 km, of which almost 70% is in Java and the remainder in three separate systems in Sumatra. PJKA's rolling stock includes 518 locomotives, 915 passenger cars and 9,500 freight cars. (d) There are 53 classified airports in Indonesia and several hundred smaller, aon-classified airfields. The commercial aircraft fleet exceeds 700. (e) There are several thousand km of navixable waterways in Indonesia, on which an estimated 10,000 river craft are operating. 2.47 According to the national accounts statistics, the transport and communications sector grew in real terms by 11.3% per annum over the past decade, impLying an elasticity to CDP growth of 1.7. As shown in Table 2.15., modal growth rates have ranged from very rapid for air transport to virtually stagnnac for rail transport. Available data for freight traffic suggest that about 73, is now transported by road, 27% by sea, 3% by rail and less than 1Z by air.- _ However, there are considerabLe variations in modal shares by region. For example, movement of goods in Java is 96Z by trucks, while 57% of intra-island cargo traffic in Sumatra is by coastal shipping and almost all inter-island cargo traffic is by sea. The coverage of the transport system is generally adequate for a country at In&rnesia's stage of development. How- ever. in many cases, the infrastructure is in urgent need of rehabilitation and upgrading. Other inefficiencies result from weaknesses in the institu- tional framework for transport pLanning, management and regulation. The 36/ This section covers the road and bridges %04.1), land transport (04.2), maritime tr2nsport (04.3) and air transport (04.4) subsectors as defined in the plan. 37/ Comparable shares for passenger traffic are 82% by road, 11Z by rail, 5Z by air and 2% by sea. - 73 - Table 2.15 LECENT TRANSPORT AND TRAFFIC TRENDS Growth Races (Z p.a.) Indicator Units 1973 1978 1983 REF. II REP. III Road transport Cars ('000 no.) 307.7 535.4 865.9 11.7 10.1 Trucks ('000 no.) 144.1 336.8 717.9 18.5 16.3 Buses ('000 no.) 30.4 53.4 160.3 11.9 24.6 Railwav traffic Passengers ('000 no.) 29.4 31.4 46.0 1.3 7.9 Freight ('000 no.) 4,561.0/b 4,500.0 5,037.0 -0.3 2.3 Port traffic Domeseic (mil. tons) 20.0 29.9 8.4 international (ail. tons) 114;6 131.0 2.7 Air traffic /a Domestic - Passengers ('000 no.) 1,649.0 4,150.6 4,900.2 20.3 3.4 - Freight ('000 tons) 13.8 42.5 53.9 25.2 4.9 International - Passengers ('000 no.) 97.1 850.2 1,055.8 54.3 4.4 - Freight ('000 tons) 3.1 6.2 22.4 14.9 29.3 /a Departures for passengers and Loadings for freight. lb For 1972. Source: BPS. Government has started to tackle these problems thlgygh the recent sweeping reforms of cuscoms, ports and shipping operations.- SimiLar actions in other subsectors, in both operational and policy areas, are urgently required to relieve transport bottlenecks ard reduce costs. 38/ For a sunmmary of these reforms see the World Bank, Indonesia: Policies for Crowth and Employmnen (Report No. 5597-IND, April 23, 1985), pp 31-32. - 74 - Objectives and Tarcets 2.48 The Government's basic objectives for the transport sector during REPELITA IV are to facilitate more efficient flows of goods and services and to increase the mobility of people to all parts of the country. The plan aLso recognizes the importance of transport services for stimulating regional development and national integration. Related physical targets for the road netvork, rail system, shipping fleet and aircraft fleet are summarized in Table 2.16. Unfortunately, more detailed project proposals, consistent with these targets, are not availa6Le. Nor has it been possible, for this report, to undertake a comprehensive review of transport strategy, including issues related to intermodal coordination and linkages to other economic activ- ities. Therefore, the following discussion is limiced to general comments an priorities and constraints in each of the major subsectors. 2.49 In the roads subsector, the pLan correctly gives priority to maintaining, rehabilitating and upgrading the existing network. The basic objective is to increase the proportion of national and provincial roads that are iu "stable condition" from 25 to 70% over the five years of £EPELITA IV. This will require rehabilitation/upgrading of more than 18,000 km of roads. This target is considered to. be feasible, given.the recent rate of progress under the highway betterment program (about 2,000 km per annum) and the scope for further expansion: management by the Directorate General of Highways and provincial departments of puolic works is good, and local contracting capacity exists to carry out the work. The major concern is to ensure that adequate budgetary resources are provided to maintain the coverage and standards of the program. On the construction side, the plan gives priority to linking important production and marketing cencers, especially in newly-sectled transaigration areas. This is an appropriate focus. However, it is doubtful wiether the target for new rural roads (12,000 km) can be achieved. In recent years, rural road construction has reached about 1,500 km per annum, but many of these roads are of poor quality and do not Last through the rainy season. A more seLective construction program, supported by regular maintenance, would therefore be more appropriate. The target for new toll roads (198 km) also needs to be reevaluated, rakiny9 nto account their effec- tive contribution to reLieving traffic congestion.- In urban areas, priority should be given to improving traffic managemenc rather than expanding public transport services. In pari .ular, further public investments in city buses should be kept to a minimum__ 2.50 In the railway subsector, the plan gives priority to increasing transport capacity and service quality. Both of these objectives can perhaps best be served, in the imediate future, by improving PJKA's management and 391 At present, Bina Marga has 102 km of coll roads in operation and another 238 km is under construction. 40/ For a more detailed discussion of urban transport issues, see the World Bank, Indonesia: Urban Services Sector Report (Report No. 4800-IND, June 25, 1984). - 75 - the operational efficiency of the existing railway system. For example, the availability of passenger coaches and freight wagons is presently only about 70Z. With simple changes in maintenance policies, this racio could be raised to 90Z, increasing PJKA's carrying capacity by 30Z and avoiding new invest- ments of at least Rp 100 bilLion. Similarly, the availabiLity of Locomotives could be raised from 801 to at Least 852. There is also ample scope for improving the utilization of roLling stock. For example, reductions in wagon turnaround times could double PJ'A's freight capacity and save another Rp 200 billion in new investments. Present plans to purchase new rolling stock, as suzzarized in Table 2.16, would therefore seem to be ezCessive. Other major investments in new track and infrastructive should also be deferred, pending a major overhaul of PJRA's operations and preparation of a medium-term railway plan. In this way, expenditures during the reminder of REPELITA IV can be focussed on compLeting ongoing projects (e.g., the rail link for Bukit Asam) and rehabilitating existing rolling stock and infrascructure. Some priority investments identified by a recent WorLd Bank mission include equipment for track realignment (Rp 2 billion), machinery for rail flaw detection and grind- ing (Cp 8 billion) and cranes and welding equipment for bridge repair (Rp 2.3 billion). Purchase of up to 100 special-purpose container wagons (Rp 2.5 billion) and related Lift trucks (Rp 2 billion) might also be justi- fied, to facilitate intermodal operations. 2.51 For the maritime subsector, the plan proposes an ambitious program of port and shipping development. However, as in the case of railways, the iinediate priority is efficiency improvement rather than capacity expansion. At Tanjung Priok, for example, the berth utilization rate was only 53Z in 1983. Studies indicate that, except for a new container terminal, no port expansion is required at Tanjung Priok uncil the mid-1990s. However, substan- tial changes will have to be instituced .to handle projected traffic leveLs efficiently. For major ports, priority investments over the next five years for facility-rehabilitation and container handling are to be financed under projects supported by the WorLd Bank (Tanjung Priok, Teluk Bayur, Panjang, Palembang and Pontianak) and ADB (Surabaya and Kalimantan ports). Additional port investments during REPELITA IV should be minimal. As regards shipping, the targets for the local, traditional and pioneer fleets are reasonable. Some special-purpose bulk carriers (e.g., for fertilizer and palm oiL) may also be required, although there is a general over-supply of these ships at the present time. The major reservation, however, relates to the proposed expansion of the national (RLS) fleet. For these ships, utilization rates could be increased at least three times (from 10 to 30 tons per DWT per year), with improvements in cargo handling and port operations. As a result, even allowing for the Covernment's new scrapping policy and rapid cargo growth, it is unlikeLy efpt more than 150,000 DWT of new capacity will be required during REPELITA rIV. In addition, PT Pelni is in the process of purchasing six new 41/ The new scrapping policy, introduced in Hay 1984, requires that all ships older than 25 years be scrapped. This will reduce the national fleet by about 200,000 DWT during REPELITA IV to 285,000 DWT. With improvements in utilization rates, this fleet could handle about 5.7 million tons, a 50Z increase over 1983 cargo levels. - 76 - ships (13,000 DWT each) for passenger services; no other new passenger ships should be required during REPELITA IV. Similarly, for the international fleet, no further expansion can be justified without a significant improvement ia compeciciveness. Table 2.16: TRANSPORT TARGETS FOR REPELITA IV Status REPELITA IV targets /a radicator Units 1983/84 Improvement Expansion Roads 147,498 18,205 13,478 National (km) 11,809 3,750 484 ProvinciaL (km) 33,998 14,455 994 District (km) 101,691 - 12,000 Railways 10,933 18,822 435 Locomotives (no.) 518 1,223 25 Passenger cars (no.) 915 2,000 210 Freight wagons (no.) 9,500 15-,599 - 200 Shipping fleet /b 6,250 279 1,907 National ('000 DWT) 482 166 420 Local ('000 DWT) 360 53 98 Traditional ('000 DWT) 270 60 85 Pioneer ('000 DWT) 21 5 Special ('000 DWT) 3,515 319 International ('000 DWT) 1,602 980 Aircraft fleet 700/c 55 Cassa (no.) 31 Fokker (no.) 24 /a 'tmprovement" includes the betterment program for roads and rehabilitation/replacement of existing assets for other subsectors. "Expmasion" includes construction for roads and new purchases for other subsectors. /b Excluding tankers. 7T Escimated fleet of all coanercial aircraft (public and private). Source: GoI, REPELITA IV plan. 2.52 In the air transport subsector, the plan gives priority to improving service quality and extending domestic services to remote areas not served by other meAns of transport. Major investments to date have focussed on complet- ing the new Cengkareng airport in Jakar:a, which began operations in May 1985. Aircraft purchases are to be Limited to the pioneer fleet, including 31 Locally-made Cassa planes and 24 imported Fokkers. Garuda is not expected tc, purchase any new aircraft, for replacement or expansion, during REPELITA IV. - 77 - Finally, inland waterway development is intended to complement the road and rail network, especially in remoce areas. To this end, the plan proposes adding more than 50 quays and 18 ferry boats during BEPEIZTA IV; anocher 13 ferries are to be rehabilitated. Costs and Financing 2.53 Table 2.17 show an indicative investment program Eor the transport sector, based on the considerations outlined above. The total cost during BEPELITA IV is estimated to be Rp 7.1 crillion at current prices. Note that the classification of programs is the sane as used in the plan and actual Table 2.17: INDICATIVE INVESTMENT PROCRAM FOR TRANSPORT (in QIp billion at current prices) Program 1984/85 1985/86 1986/87 1987/88 1988/89 TocaL Roads and brid es 664.9 677.6 789.3 938.7 1,104.3 4,174.8 Maintenance /a 144.1 152.8 178.2 207.9 242.5 925.4 Betterment 337.4 340.0 440.9 544.2 661.2 2,323.6 Construction /b 183.4 184.8 170.2 186.6 200.6 925.8 Land transport 236.6 238.1 140.7 152.6 165.5 1.138.0 Traffic facilities 9.3 10.0 11.2 12.6 14.2 57.3 Railways 224.6 225.0 126.0 136.1 146.9 858.6 Inland waterways 2.7 3.1 * 3.5 3.9 4.4 17.6 Maritime transport 279.4 277.7 220.1 239.1 259.7 1.276.0 Port facilities /c 112.0 13.7 90.2 97.2 104.9 514.3 Fleet developmecnt 136.2 136.2 94.5 102.0 110.2 579.1 Other programs /d 31.2 31.5 35.4 39.9 44.6 182.6 Air transuort 189.2 190.4 100.8 108.8 117.5 706.8 Airport facilities 86.8 86.8 50. ' 54.4 58.8 337.2 Fleet development 102.4 103.6 50.4 54.4 58.8 369.6 Total 1,370.2 1,383.9 1,250.9 1,439.1 1,647.1 7.091.1 Financed by: GOT budget 598.8 610.0 613.1 709.7 818.9 3,350.5 Ezternal loans 694.0 714.9 613.1 709.7 818.9 3,550.6 Domestic loans 65.9 56.0 22.7 17.7 7.3 169.6 Internal funds 11.5 3.0 2.0 2.0 2.0 20.5 /a Includes support works. /b Includes coll roads funded by Jasa ?farga. Th Includes port investments funded by Perumpel II. /d Dredging, sea safety and maritime services. Source: Annex Table 3. - 78 - budget allocations (with the addition of invest ts funded by Jasa Marga and Perumpel 1I) are shown for 1984185 and 1985/86_ For later years, che following assumptions are used (all costs at 1983/84 prices): (a) For roeds and bridges, the betterment program hss been increased to provide for full funding of the plan target (18,000 km); unit costs are estimated at Rp 100 million per km. The maintenance and construction programs are assumed to increase by 8% and 6Z per annum respectively. An additional Rp 150 billion is incLuded for toll road investments funded directly by Jasa Marga during REPELITA IV. (b) For Land transport, the annual level of investment in railway infrastructure and rolling stock is assumed to falL to Rp 100 bilLion. Investments in traffic facilities and inLand waterways are both projected to increase by 4Z per annum. (c) For maritime transport, annual investments in port facilities are assumed to fall to around Rp 70 billion. The allocation for fleet development is sufficient to purchase abut 470,000 DWT of new capacity (at an average coIs,of Rp L million per DWT) for public sector shipping companies.- Other programs are projected to increase by 4% per annum. (d) For air transport, investments in airport facilities are projected to fall to Rp 40 bilLion per annum. The allocation for fleet development is sufficient to purchase 30 small aircraft for domestic services (the rest are assumed to be privately owned). 2.54 Of the total public investment program for transport, over 97% or Rp 6.9 trillion is to be financed from the Government's budget or externaL loans. This amount is 22% lower than the ip 9.1 trillion allocated in the aEPELIIA IV pLan. However, more importantly, there is a significant realloca- tion of resources among subsectors. In particular, the share allocated for roads and bridges has been increased from 4 / to 592, with particuLar emphasis on the maintenance and betterment program._/ Corresponding reductions have been made in investments for railway infrastructure and rolling stock, port facilities and shipping fleet development. These are all areas where signifi- cane increases in capacity can be achieved with improved operacional effici- ency. Of course, as noted above, some investments will still be required, to rehabilitace existing assets and remove capacity bottlenecks. Hovever, with- out steady progress on efficiency issues, transport costs will remain high, adversely affecting traffic growth and raising questions about the justifica- tion for further expansion. 42/ The program allocation of external loans has been estimated for 1985/86. 43/ Some special-purpose vessels (e.g., for Pertamina and Pusri) are included in other seccoral investment programs. 44/ About 50% of the maintenance funds are to be channelLed to Local government agencies through the INPRES program for rural roads. - 79 - 2.55 During REPELITA IV, the only public enterprise in the transport sector with realistic prospects Eor raising non-budgetary resources on any scale is Jasa Marga. A recent W'orld Bank review of Jasa Marga's financial sicuation indicated that, while internal cash generation would be minimal, up to Rp 170 billion of toLL 4gad investmencs could be financed from bond issues over the next five years. _ Jasa Marga also expects that about 60X of toLl road investments during REPELITA IV will be funded through the Government's budget, either as equicy contributions or on-Lending of ezternal Loans. How- ever, this funding should be subject to a careful economic evaluation of the proposed toll roads.- Most of the other Lransport enterprises are likely to remain a significant burden on the Goverment's budget, for both investment and recurrent purposes. One of the most serious eases is the Indonesian State Railway (PJKA). All of PJKA's investment requirements are met by the Government. In addition, the Government provides a su6sidy to cover operating losses (presently running at Rp 60 billion per annum)_ and makes a separate contribution towards maintenance. Since tariffs for both passengers and freight are competitive with road transport, there is little scope for raising tariffs at this time. Rather, priority should be given to improving the effi- ciency of railway operations, through bet:er utiLization of available rolling stock, more effective coordination of operations and traffic management, and economies in che use of labor, materials, fuel and equipment. There is also a need to identify profitable new services, where the railway can effectively compete with other transport options. Through these measures, the operating subsidy could be steadily reduced during REPFELITA IV, and PJKA could increas- ingly finAnce its own investments in Later years. H. Telecommunications Background 2.56 Indonesia embarked upon a program to develop a modern telecommunica- tions network in the early 1970s. As shown in Table 2.18, this lcd to a rapid expansion of telephone exchange capacity (especially automatic changes), an even more rapid exTansion in teLephone traffic and a swicch from telegraph to 45/ Jasa Marga's own revenues from toll collections are largely absorbed by operating expenses, including interest on bond issues. Through 1984, Jasa Harga had raised Bp 163 billion from bond issues and plans to raise another Rp 385 billion over the next five years. However, of this planned amount, about 50% will be used to repay outstanding obLigations. 46/ These losses are expected to equal 36% of operating costs in 1985 and would increase substantially with adequate provision for aepreciacion, pension liabilities, dividends (for government investment) znd stock losses. 47/ This section covers the telecommunications sector (04.5.02) as defired in the plan. The investmenc prog-am is for Perumtel, the public corporation responsible for the domestic network, which dominates the sector's resource requirements. - 80 - telex Eacilities. Indonesia also became one of the first developing counteies to introduce satellite transmission Eor the domestic network. However, thv pace of development has slowed over the past five years and access to telecom- munications services remains very limited. Indonesia's telephgze density of 0.4 per l00 peopLe is easily the Lowest among ASEAN countriesħd' and Little progress has been made in improving Indonesia's relative ranking over the past decade. There are also significant regional variations in telephone densities within Indonesia, ranging from 4.4 in Jakarta to less than 0.2 in the smaller Outer Islands. In addition, Jakarta has access to the most automated and advanced technology. Table 2.18: TRENDS IN TELECOMMUNICATIONS SERVICES (growth rates in Z p.a.) Indicator 1969-73 1973-78 1978-83 Telephone exchange capacity 1.9 16.3 7.0 Automatic 9.4 24.8 9.5 Kanual -4.5 1.2 -3.8 Direct exchange lines 7.1 8.4 12.8 Telephone traffic Domestic (pulses) 28.6 27.9 18.9 International (minutes) 44.8 40.3 23.2 Telegraph traffic Domestic (words) 17.2 7.4 9.9 International (words) 4.2 -8.3 -19.4 TeLex traffic Domestic (pulses) 27.9 29.4 56.4 International (calls) 81.1 36.0 23.3 Source: GOI, Nota Keuangan. 2.57 The effective demand for telephone services is high and increasing. Unmet demand is most pronounced in the eight largest cities, but is rising elsewhere as well. By the end of 1983, the number of registered appLicants for telephones was about 255,000, or close to ha:f the number of subscribers 48/ Comparable telephone densities for other ASEAN countries are: Singapore, 31.6; Malaysia, 6.3; the Philippines, 1.2; and Thailand 1.1. - 81 - in the country.ħ2 Waiting Lists are noW over five years long in some exchange districts with little hope of subscriber connection in the near future. Partly as a result of this acute shortage of celephone lines, the network is very congested and a Large proportion of call attempts cannot-be completed or are subject to long delays. Umet demand also encourages cjrrup- tion. For example, although the official connection charge in Jakarta was recently raised from Rp 2,000 to Rp 5,000, many applicants are viLlinf co pay Rp 4-6 million for an immediate connection. Objectives and Targets 2.58 The Government's basic objectives for the telecommunications sector during REPELITA IV are to: (a) escablish, as rapidly as possible, a sound and efficient teLecomuaications network; (b) make Perumtel largely self-financing and, eventually, a substanrial nec contributor to the Government's budget; Cc) deveLop a cadre of staff in Perumtel who are capable of long-range strategic planning and effective program implementation; and (d) develop sound domestic construction, consulting and, where economically justifiabLe, manufacturing industries, to support the telecomunications sector. The primary p 3yical target for tEPELITA IV is to add 750,000 direct exchange lines (DELS).- This wouLd increase capacity by more than 140Z and raise the telephone density from 0.4 to 0.9 per 100 people. Achievement of this target aould clearly be desirable, especially in a country such as Indonesia where traniurt and information costs are high and social incegration so import- ant.- Furthermore, the poter:ial demand for increased telecommunications services is ampLy demonstrated by the relatively low levels of development compared to other ASEAN countries and the Long waiting list for connections. The real issues therefore are whether the related investments can be impLemen- ted and financed (relacive to other priority claims on resources). 49/ The number of registered applicants understates effective demand because: (a) many prospective subscribers are discouraged by the long delays in obtaining telephone connections; and (b) demand is not registered in areas which currenrLy have no service. 50/ A DEL is a connection from an exchange to a subscriber. In addition, each subscriber may have his own network of lines and celephones. 51/ For a more general discussion of the benefits from telecommunications investmenc, see Saunders, et. al., Telecomunicarions and Economic Develomnent (WarLd B.-nk, 1983). - 82 - 2.59 Perumtel has prepared a medium-term investment program to expand capacity by 950,000 Lines, somewhat higher than the official plan target for REPELITA IV. However, this program has been divided into three bacches, which can be rephased in line with impLemencation and financial constraints. Batch I, which is currently under implementation, consists of the installation of 200,000 analog DELs (carried over from REPELITA rII) and an addicional 120,000 digital DELs. The financing for Batch I has already been secured and exchange installation is proceeding according to schedule. However, Perumtel is exper- iencing serious problems in cable network construction, which is being carried out by numerous smalL contractors. Perustel is considering hiring program management consultants, to ensure that this work is compLeted by the end of 1989 (18 months behind schedule). Preparations have also been made to introduce turnkey contracting for cable network construction in Batches II (240,000 DELs) and III (200,000 DELs). With complementary improvements in Perumtel's internal capacity for investment planning and coordination, it should be possible to have most of the Batch II budget committed by the end of 1989 and to start advanced planning for Batch rII. Even so, the sub:;criber connections added during REPELITA IV are unlikely to exceed 325,000 lines, less than half of the official plan targets. 2.60 A related issue is the Government's decision to introduce digital techonology during EEPELITA. IV. This is a logical decision, which Will improve the range of services (e.g., redialling) while also allowing Perumtel to computerize traffic measurement and bilLing. It is obviously important that the transitional costs and disruptions of introducing digital technoLogy are kept to a minimum. However, it is also important for Perumtel to ensure that it gets the right equipment at the right price. In this regard, the Government has decided to develop a Local production capacity in PT Inti, with technical support from Siemens A.G. of West Cermany. Under a recently-conclu- ded agreement, Siemens wiLl initially supply 100,000 lines of digital exchanges per annum during 1984-86 and provide technical assistance to estab- lish a domestic manufacturing faciLity with annual capacity of 150,000 units. Local production would start with simple assembly of Siemens' compo- aencs and then as PT Inci gains experience, Local concent and multi-sourcing of components would increase. To avoid excessive protection of this equipment and to diversify technical risks, the Government shouLd consider importing a second digical exchange system for parc of the country, together with a speci- fic pre-determined domestic preference margin. Otherwise, Low product quality and produtpon efficiency will spill over into the costs of telecommunications services.- 52/ Similar issues apply to the local manufacture of cables, where Low rates of capacity utilization have raised costs substantialLy above internacionaL leveLs. - 83 - Costs and Financing 2.61 The indicative investment 5yogram for the che telecommunications sector is summarized in Table 2.19.5 Estimaced investment levels for 1984/85 are from Perumtel's latest budget submission. For later years, the program is based on detailed investment proposals prepared by Perumcel, but rephased in line with the implementation constraints noted above. In particu- lar, Batch I (the ongoing program) and Batch II (apart from telex facilities and phase four of the digital. program) are assumed to be fully funded by 1989. No provision has been made for Batch III. In practice, it is more Likely that implementation of Batch II will slip somewhat, while some advanced planning for Batch III may be required. However, overall investment levels would not be greatly affected by these changes. Table 2.19: INDICATIVE INVESTMENT PROGRAM FOR TELECOMMUNICATIONS (PERUMTEL) (in ap biLLion at current prices) Program 1984/85 1985/86 1986/87 1987/88 1988/89 Total Ongoing program 103.0 249.2 328.2 291.6 225.9 1,198.0 Eachanges 39.4 60.6 90.9 41.9 0.7 233.5 Telex 2.7 8.1 31.2 4.8 4.4 51.3 Cable network 35.6 57.5 74.9 78.1 84.4 330.4 Ground transmission 8.9 19.0 30.1 26.1 13.2 103.3 Satellite transmission 8.5 70.4 36.8 31.1 4.8 151.5 Other 7.9 33.6 58.5 109.5 118.3 327.9 New programs - 8.9 135.9 227.3 357.6 729.8 Exchanges - 53.3 72.0 135.3 260.6 CabLe necvork - 0.5 18.2 91.2 174.4 284.3 Ground transmission - 8.5 64.3 64.1 48.0 184.9 Total 103.0 258.1 464.3 518.9 583.5 1,927.8 Financed by: External loans 70.7 83.4 181.0 104.6 62.9 502.5 Domestic Loans - 44.5 56.8 111.3 158.6 445.8 Common bonds - - 76.5 103.0 62.0 241.5 User's credic - 30.2 - - - 30.2 Internal funds 32.3 100.0 150.0 200.0 300.0 707.8 Source: Annex Table 3. 53/ Consistent with Perumtel's budgetary procedures, the data are for calendar years l984 to 1988. There are, theref3re, some expenditures on Batches II and III in 1989, which fall into the REPELITA rv period but are noc reflected in Table 2.19. - 84 - 2.62 The estimated cost of the investment program is Rp 1.9 trillion at current prices. There is a significanc bunching of this investment over the ne_t three years, with real expenditures more than doubling in 1985/86 and rising by another 72Z through 1987/88. However, even at this Level, telecom- munications investment vould only be equivalent to about 0.5% of GDP; this rate is still Lover than achieved in Indonesia during the mid-1970s (0.7%) and sustained in other countries Vdich have successfully developed their telecom- munications sector (normally around 1.0%). The largest component of the investment program is for the cable necwork (32Z), followed by exchanges (26%) and transmission (23%). In general, the proposed phasing-would seem to give good overall balance, between switching/network expansion, Local/Long-distance facilities and urban/rural services. There are also no obviously low-priority components within the investment program. In particular, twO quescionabLe projects originally proposed (i.e., a public car radio telephone system and the submarine cable Link between Surabaya and Banjarmasin) have been omit- ted. However, if further impLementation delays do occur, PerumteL wiLl have to take steps to ensure that overall balance is maintained; an unbalanced system can quickly Lead to wasted investmencs and poor quality services. 2.63 A preliminary financing plan for the indicative investment program is shown in TabLe 2.19. Under this proposal, about 26% of the funding is to be hnlled through the Government's budget, as onlending of external Loans. This amount (Rp 502 billion) is consistent with the plan allocation for ELEPELIT& IV. More than Rp 700 billion, or 372 of the program, is projec- ted to be financed from Perumcel's internal funds. (In addition, Perumtel is expected to provide close to Rp 900 billion to the Government's budget, through income tax and development fund payments.) Preliminary financial analysis by World Baik staff indicate that these contributions are feasible, provided that: (a) subscriber connections and traffic grow with exchange expansion; (b) installation charges and tariffs at least keep pace with infla- tion; and (c) Permutel is successful in improving billing coLlections, espe- cially from public sector subscribers. This leaves another Rp 700 bg>ion to be financed from domestic borrowing, common bonds and user's credit.- Permutel has already initiated action to raise the required funding for the next one to two years. 54/ Government equity for Perumtel is usually provided through conversion of loans (rather than PMP), and as such does noc aLways get captured in budgetary transactions. 55/ An earlier proposal to use s Lscriber bonds has been rejected by the Miniscry of Finance. - 85 - 1. Housing 56/ Background 2.64 The urban population in Indonesia has grown ac about 4Z per annum over the past decade, reaching 45 million (or 22Z of the country's total popu- lation) in 1983. As a result chere are now about 300,000 new urban househoLds to be housed every year. Most of these households find their own shelter, sometimes using informal credit mechanisms and smaLl private contractors. However, starting in 1974, the Government also initiated a small public hous- ing program through the National Urban Development Corporation (Perumnas). Peruas has steadily increased its output from 50,000 units in REPELITA II to more than 80,000 units in 2EPELITA III (see Table 2.20). The least expensive unics, costing about Rp 1.5 million ac 1983 prices, are affordable by low income families earning as little as Rp 50,000 per monch (the 20th percenciLe in Jakarta). However, there is some evidence that most units have actually been aLlocated to civil servants and other families earning closer to Rp 100,000 per month (the estimated median income in Jakarta), because of "crowd- ing out" due to inadequate overalL suppLy and biases in beneficiary selection criteria. 2.65 The present housing finance system is dominated by the Bank Tabungan Negara (BTE). At present, BTN provides mortgage loans for up to 95% of the house price ac interest races ranging from 5% to 9X over a 15 or 20 year term. As of September 1983, 8TN had financed 82,380 Perumnas units (Rp 120 billion) and more than 90,000 privacely constructed units (Rp 403 billion). More than 70X of mortgages for privacely conscructed units were above Rp 5 million, meaning that they could only be afforded by families earning at Least Hp 180,000 (80th percentile in Jakarta). As the financing of privately con- structed unics has expanded more rapidly tha.s the Perumas program; 3TN's funds have been increasingly diverted to a aarrower segment of the housing market. S ?m7 commercial banks and a semi-private mortgage company, PT Papan Sejahtera,7 cater to even higher income clients. In addition, some large companies reportedly provide housing assistance to their employees. Objectives and Targets 2.66 The Government recognizes "the provision of cheap and equitably dis- tribuced housing in a healthy environmenct as a basic need of the popula- cion. The related pubLic housing program for E.EPELITA IV is to build 300,000 housing units of which 140,000 would be built by Perumcas and the rest by 56/ This section covers the STY-financed component of the peopLe's housing program (11.1.01) as defined in the plan. For an overview of related urban issues, see World Bank, Indonesia: Urban Services Sector Renort (Report No. 4800-IND, June 25, 1984). 57/ By September 1983, PT Papan Sejahtera had made 1,oa0 loans at an average value of Rp 12 million. - 86 - private developers wich mortgage financing primarily from BTN.58/ This program is about two chirds higher than realized during REPELITA LII, for boch Perumnas and private developers, but would stiLl account for only 20Z of the new urban housing requirements during REPELITA IV. Although the plan does not provide any details on the types of houses to be built, the stated priority is for Low income househoLds. For the indicative program discusW4 beLow it is assumed that about half of the units are low cost core units,- _ affordable by the 16th to 50th percentile of househoLds in Jakarta. Unlike in past years, private developers are expected to supplement Perumnas' efforts to construct core ltouses during REPELITA Lv. No provision has been made for higher income - houses (RKTM) and flats, which should be constructed aud financed by the private sector. In the case of flats, effective demand is also a Limiting factor. Table 2.20: SOUSINC PROCRAM TRENDS /a REP. LI REP. III REP. tV/b BEP. II REP. III REP. -V/b (ir. '000 units) - - (Z of total) Perenmas 50.7 81.8 140.0 95.6 44.8 46.7 Core houses 20.1 50.8 82.0 37.9 27.8 27.3 Standard houses 30.6 28.5 58.0 57.7 15.6 19.3 Other units /c n.a. 2.5 - n.a. 1.4 - Private developers /d 2.3 100.7 160.0 0.4 55.2 53.3 Core houses - - 71.0 - - 23.7 Standard houses 2.3 100.7 89.0 0.4 55.2 29.7 Total 53.0 182.5 300.0 100.0 100.0 100.0 /a Historical Perumnas daca are for units constructed; all other data are for units sold. /b For thz indicative program. 7- Flats and higher income houses. /d Finamced by BTN. Source: Eerumnas, BTN and World Bank scaff escimates. 58/ The plan also includes proposals to improve the qualit7 of rural housing in 10,000 villages and kampungs in 400 cities. However, chese cargecs lie outside the public housing program as defined in this section. 59/ Core houses are defined as houses of 12 to 30 sq m (on lots of 48 sq m to 120 sq m). - 87 - 2.67 The size of the proposed public housing program for REPELITA IV is considered to be justified by the potential benefits, in terms of stimulating construction activity and providing a basic service to Low income groups. However, tc. avoid shortfalls due to institutional constraints, action wilL be needed in a number of areas: (f) Perumnas' backlog of partially coam67 ted projects and unsold units/lots needs to be eliminaced,- and an immediate sale poLicy introduced. At present, there are lengthy delays in Loan processing and the realizacion of sales revenue. (g) BTY needs to be strengthened to handle the projected levels of mortgage financing. Priority areas include reduction of arrears on loan payments, control over personnel costs and other expenses, improvements in project appraisaL and loan processing procedures, strengthening of financial management and accounc:ag, and recruit- ment of qualified personnel. (h) There are a number of regulatory and Legal issues thac need to be resolved. These include modification of regulations which prevent more private construction of low cost housing, changes in present procedures which give preference to civil servants in the allocation of housing, enactmenc of mortgage Legislation co secure BTN Loans, and streamlining of land titling and registration. Costs and Financing 2.68 The indicative investment program for the housing sector during REPELITA IV is sumarized in Table 2.21. The estimated cosc is about Rp 1.5 trillion at current prices. Note that all houses financed by BTN, whether constucted by Perumnas or private developers, are included. However, all downpayments, which cover from 10% to 30Z of the house price, are treated as pure private investment and excluded. The residual mort-gage cost per house ranges from Rp 1.4 milLion for the smalLest core house to Rp 6.8 million for the largest standard house (at 1983/84 prices). Therefore, the emphasis on constructing core houses, especially during the final three years of REPELITA IV, helps to keep the investment costs down. For example, if aLl new units were standard houses, the total cost of the investment program would be increased by abouc one third. 60/ At the end of REPELITA III, Peruimias had 20,271 units under pre-sale agreement, 13,272 units under construction, 29,371 units committed but not yet started, and 13,900 unsold serviced plots. - 88 - TabLe 2.?l: INDICATIVE INvESTMENT PROGRAM FOR HOUSING (BTN) (in Rp bilLion at current prices) Program 1984/85 L985/86 1986/87 1987/88 1988/89 TotaL Perumas 34.2 98.3 144.0 170.7 184.3 631.5 Core houses 12.6 51.6 55.8 61.8 66.8 248.5 Standard houses 21.6 46.7 88.2 108.9 17.6 382.9 Private developers 173.0 192.9 35.1 147.0 171.0 819.1 Core houses - - 70.0 90.8 110.3 271.1 Standard houses 173.0 192.9 65.1 56.2 60.7 547.9 Total 207.2 291.2 279.1 317.7 355.3 1,450.6 Financed by: COI budget 19.0 - 63.0 66.2 69.5 72.9 290.5 Ezternal loans - - 100.0 100.0 100.0 30a.0 Bank Indonesia 170.0 200.0 - - - 370.0 Domestic borroving 15.0 25.0 107.9 142.7 176.3 427.1 BTN funds 3.2 3.2 5.0 5.5 6.1 62.9 Source: Annex TabLe 3. 2.69 The Government is keen to diversify the sources of financing for the housing investment program. At present, BTN ig almost encirely dependent upon equity contribucions from the Government (PMP) 1 and subsidized liquidicy credits from Bank Indonesia. Small amounts of money are also generaced through Tabanas, the small savings scheme. However, B7 is now Looking to other financing sources, including external loans, domestic borrowing (chrough certificates and Lecters of credit) and a downpaymenc scheme for potential homeowners. Given the financing program used in Table 2.21, the average cost of funds would be about 9%. 8TN's administrative costs would probably add another 42, even after the institutional i Eweents proposed above. Therefore, to mnke BTN financially viable, _ the Government has recently decided to increase mortgage lending rates from the oLd range of 5&-9% to about 9Z-15Z. The lowest race will still be below the 12- charged by the Government on other "priority" programs. However, it will be positive in real terms (at present inflacion rates) and targetted to the Lowesc cost units and 61/ PMP used to be also provided directly to Perumnas, buc this practice stopped in 1982/83. Now all funding for the Perurmnas program is channelled through BTN. 62/ BTN's financial viability will be a prerequisite for mobilizing the levels of domestic borrowing assumed in Table 2.21. - 89 - tower income households. Where additional subsidies are considered justified, these should be provided directly in the form of flat subsidies rather chan through the incerest rate mechanism. J. Transmigration 63/ Background 2.70 More than 60% of Indonesia's population resides on Java, which has areas with some of the highest rural population densities in the world. At the same time, vase tracts of forest and coastal land lie uncultivated on the Outer Islands. The Indonesian cransmigracion program, which is intended co move the underutilized labor of Java to the underucilized land of the Outer Islands, has become the largest voluntary resectlement scheme in the world. There are basically four categories of transmigrants: (a) Soonsored transmigranrs who were previousLy landless agriculturaL laborers or smallholders Living at near-subsistence level. These transmigrants receive extensive support from the Government during the initiaL five years of settLement for transport, land, housing, social services, subsistence and agricultural supplies. Cb) Local transmigrants who live in and around the areas to be sectled and who receive the same benefits as the sponsored cransmigrancs. During REPELITA III, local transmigrants amounted co about 10 of the total population of the sectlement3s (c) Registered soontaneous transmigrants who move ac their own expense and settle at a site of their choice. These transmigrants register in order to receive government benefits and in some areas they may obtain the same amount of Land as the sponsored transmigrants. Generally, however, direct government support is Low. (d) Unregistered soontaneous transmigrants who settLe an their own at a site of rhir choice and who receive Little or no government support. 4 2.71 Progress under the cransaigration program is summarized in Table 2.22. Through the mid-1970s, both the size and quality of the transni- gration program were limited by shortages of funds. In addition, pre-settle- meat preparation was poor and agricultural services were frequencly unavail- abLe. Consequently transmigrant communicies dependent on rainfed agriculture often remained at s-4bsistence Levels. Prompted by higher oil revenues and 63/ This section covers the transmigration sector (0.62) as defined in che plan. 64/ From 1985/86, all spontaneous transmigrants are supposed to register (and get an exit pass), whether or not they receive government assistance. - 90 - concern about shortfalls in rice production, the Government decided to expand the size of the program dramatically during REPELITA III, to a targee level of 500,000 families. To achieve this target, the Government reorganized the transmigration program, giving implementation responsibility to the special- ized Ministries (a new Ministry of Transmigration was Later estabLished in 1983). Despite a slow start under these new arrangements, the Government was able to settle about 370,000 families under the sponsored program and identify another 130,000 famiLies who moved spontaneously (the actual number was probably higher). At these levels, the transmigration program is providing employment to about 170,000 peopLe per anoum, equivalent to 20% of the incremental labor force on Java and Bali. TabLe 2.22: TRENDS IN TRANSMIGRATION (in '000 families) REP. IV REP. i REP. II REP. III Plan Indicative Actual targets pro-ram Sponsored 46 83 370 500 40O Spontaneous /a 17 35 130 250 200 Total 63 118 500 750 600 la Government estimates, not based on actual documentation. Source: GOI, REPELITA nV plan and World Bank staff estimates. Objectives and Targets 2.72 The basic objectives of the transuigration program during REPELITA IV are to: (a) provide land for the landle3s of Java, Bali and Lombok; (b) improve the distribution of populacion; and (c) provide manpower for the Labor-scarce areas of the Outer Islands, so that chey can develop as new centers of production. The program is also seen as a vehicle to promote national stability and integration. The related physical target is to move 750,000 families, of which some 500,000 families would be sponsored transmi- grants. If these targets are achieved, the population growth rate of Java would be reduced from 1.7% to L.1Z per annum and an additional 200,000 new jobs would be g;7ated each year, equal to about 22: of the incremental labor force in Java.y There would also be considerable benefits in terms of increased agricultural production (especially of tree crops) and social welfare, for both the transmigrants and the remaining workforce on Java. The 65/ These numbers include the cumulative impact of transmigration since 1980 (noc just the incremental impact of the REPELITA IV program). - 91 - returns to the individual transmigrants are also reflected in the long waiting list for the sponsored program (tocalling 450,000 applicants in March 1985), the large number of spontaneous transmigrancs who settle in the vicinity of new transmigration villages, and the relacively Low share (less than 5%) of transmigrant families that have returned home to date. 2.73 Despite these potential benefits, the official REPELITA IV targets are at the high end of a feasible range and there have already been signifi- cant shortfalls from these targets. By June 30, 1985, the total number of transmigrants moved was about 70,000 families, compared to a carget of abouc twice that number. The major reason for this shortfall is the increasing managerial complexity of the program combined with the limited implementation capacity of the various agencies invoLved. The new Ministry of Transmigration has consolidated a number of steps (planning, construccion, mobilizacion and transport) associated with the settlement of transmigrant families. However, this has not offset increasing managerial demands caused by decencralization of contracting, movement into provinces where local contractors are weak and supervision difficuLt, and the increased number of sites. In a number of key areas, such as monitoring and staff training, the Ministry needs further strengthening, and the coordination of follow-up developmenr activities (input supply, extension, credit and Land titling) by other ministries is also weak. As a result, many of the pocentiaL benefits from che transmigration program are not being realized. For these reasons, the indicative invescment program in this report is based oc a less ambitious target for REPELITA IV: 600,000 families, including 400,000 famiLies under the sponsored program. Even this carget may prove difficult to achieve. If realized, however, the impact wouLd be significant, reducing the population growch rate of Java from 1.7% to 1.2Z per annum and- creating an additional 160,000 new jobs each year. 2.74 The composicion of the indicative sponsored p'-ogram, by region and settlement model, is suzmarized in Table 2.23. Most of the viable sices for food crop agriculture in the traditional transmigration regions of Sumacra and Sulawesi have now been filled (the province of Lampung was closed to new transmigrants in 1980). As a result, over 502 of transmigration during REPELITA IV is assumed ro be to Kalimantan and Irian Jaya. In general, these Locations are more remoce, costs of movemenc and infrastructure are higher, and the Logistics of implementation are more difficult. TIherefore if che program is to remain vigge, and if destabilizing migration away from existing sites is to be avoided,- careful actention will have to be paid co the seLection of sites and settlement models. The Hinistry of Transmigracion ;.as identified seven farm models, but onlv three of these - upland, cree c-ops and swamps - are likely to be implemented on a large scale during REPELIrA IV. As more remote sites are selecced. higher productivity farming systems and second-stage agricultural development will become increasingly important to ensure settlers adequate output and incomes. 66/ These flows could be back co Java or urban areas on the Oucer Islands. - 92 - Table 2.23: INDICATIVE SPONSORED PROGRAM FOR REPELITA IV (in '000 families) UpLand Tree crops Swamps Tocal Sumatra 75 34 44 153 Kalimantan 109 28 29 166 Sulawesi & NoLuccas 21 8 - 29 Irian Jaya 45 5 2 52 Total 250 75 75 400 Source: World Bank staff estimates. Costs and Financing Z.75 The indicative investment program for transmigration during REPELITA IV is shown in Table 2.24. The estimated cost is Rp 2.9 triLlion at current prices. This cost has been derived from the physical targees summar- ized in Table 2.23, using unit costs which vary by region and settlement model. For the tree crop model, only the settlement -nd infrastructure costs are included; all costs associated with production are assumed to be financed out of the tree crops program (see Section B). For other models, unit costs range from US$5,000 per family (at 1984/85 prices) for upland sites in Sumacra to US$10,000 for swamp sites in Irian Jaya. Compared to Sumatra, average unit costs are 13% higher on Kalimantan, 20Z higher on Sulawesi and 52Z higher in trian Jaya. Under the indicacive program, [Calimantan and Irian Jaya accounc for 60Z of the cotaL investment costs during REPELITA IV (and 68Z by 1988/89). With implementation of an expanded transmigration program, as proposed in the official plan targets, most of the additional transmigrancs would have co be settled in these two regions, Leading to an increase in average unit costs. Note also that the indicative investment program does not include any provision for rehabilication of existing transmigration sices or assistance (e.g., mapping) for spontaneous transmigrants. These may welL be cost-effective expenditures, which could be financed by (less-chan- ropor- tionate) reductions in the number of new sponsored transmigrants.67 Further study of these options is warranted. 67/ ApparentLy the Govern.ient has been financing some rehabilitation out of SIAP funds in recent years; however, the amounts invoLved are noc known. - 93 - TabLe 2.24: INDICATIVE rNvESVMENT PROGRAM FOR TRANSMIGRATION (in Rp billion at current prices) Program 1984/85 1985/86 1986/87 1987188 1988/89 Tocal Sumatra 184.8 193.1 215.2 193.1 208.6 994.8 Upland 115.5 107.7 98.0 59.5 64.3 445.0 Tree crops 28.4 23.5 40.8 47.6 51.4 191.6 Swamps 41.0 61.9 76.4 86.0 92.9 358.1 Kalimancan 170.6 218.4 242.5 293.5 316.4 1.241.4 UpLand 126.0 157.9 154.3 180.9 188.6 807.7 Tree crops 17.3 23.7 40.4 52.4 62.9 196.7 Swamps 27.3 36.9 47.8 60.2 65.0 237.1 Sulawesi & Moluccas 67.7 58.4 38.6 24.5 26.4 215.6 Upland 61.4 51.6 23.9 8.6 9.3 154.8 Tree crops 6.3 6.8 14.7 15.9 17.1 60.8 Swamps - - - - - - trian Java 50.4 81.4 107.2 139.2 150.0 528.1 Upland 50.4 77.1 98.0 111.1 114.3 450.9 Tree crops - 4.3 9.2 14.9 21.4 49.7 Swamps - - - 13.2 14.3 27.5 Less: Local savings /a 8.1 9.2 10.0 10.6 11.4 49.3 Total 465.5 542.1 593.4 639.7 690.0 2,930.6 Financed by: GOI budgec 415.5 442.1 493.4 539.7 590.0 2,480.6 External loans 50.0 100.0 100.0 100.0 100.0 450.0 /a It is assumd that 10Z of the transmigracion beneficiaries are from che local area, with savings of US$1,000 per family (at 1984/85 prices). Source: WorLd Bank staff estimates. 2.76 The transmigration program is funded entirely through che develop- ment budget of the Central Government. 3ased on known and expected commit- mencs of official assistance, primarily from the World Bank, external loans are projected to provide only Rp 450 billion during REPELITA rV. This Leaves a baLance of Rp 2.5 trillion co be funded from che Government's domestic bud- get. These amounts add up to 5.7% of projected development eXpenditure, higher chan the 4.9% allocaced co transmigration during REPELITA rII. How- ever, note that the indicative program costs in 1984/85 and 1985/86 are on average 13% Lower than budget allocations, due to the irnact of implementation constraints. Related SIAPs and undrawn external loans can therefore contri- bute towards financing cransmigration invescments in Lacer -rears. - 94 - K. Education 681 Background 2.77 The Government has made notable progress to date in providing basic education to the school age population. At the primary Level, enrollments have almost doubled since 1974/75; as a result, universal access to grade one has been virtually achieved and the net enrollment ratio is over 97% (see Table 2.25). At the same time, dropout and repetition rates have fallen, despite the much larger number of children involved. ALthough enrollment growth has been even more rapid at pct-primary levels, enrolLment ratios remain relatively low. Within the region, substantially higher enrollment ratios have been achieved in the Philippines, Korea and Malaysia for secondary education, and in the Philippines and Korea for higher education. Even in China, where per capita incomes are significantly Lower,6 ' e enrollment ratio for secondary education is 40% higher than in Indonesia._ 2.78 DeveLopment expenditure by the Central Government for the education sector has increased almost sixfold in real terms over the past decade, and now accounts for about 12% of the total development budget. This rapid expan- sion has put increasing pressure on the Covernment's capacity to implement projects effi-iently. Funding of recurrent expenditure in the education sector, especially for school supplies and teachers' salaries is also inadequate. The increasing importance of this issue is illustrated by the ratio of routine to development expenditure, which declined from over 1.5 in the .id-1970s to around 0.4 in 1983/84 and 1984185. To some extent, this trend has been offset by the recent practice 78 financing some recurrent expenditures through the development budget.' Local government recurrent expenditures are also subsidized through the Subsidi Daerah Otonom (SDO), for which a functional breakdown is unavailable. Even so, qax despice the signi- ficant increase in teachers' pay announced for 1985/86,- many teachers 68/ This section covers the education, youth and culture sector (09) as defined in the plan. Other Ministry of Education (.MEC) progras- (e.g., social welfare and women, research and development, and government apparatus) are excluded. 69/ Comparable estimates for other countries on primary, secondary and higher education enrollment ratios are: CzLina 80%, 38%, 4X; Thailand 96Z, 29%, 4%; the Philippines 84%, 55Z, 21Z; Ualaysia 96Z, 65Z, 4%; and Korea 99%, 842, 22%. 70/ In 1979/80, for example, it is estimated that recurrent expenditures represented 10% of total development expenditure on education. 71/ Average annual teacher pay in 1984/85 was estimated at about US$1,000 at the primary level, ranging up to US$1,450 at universities. The civil service salary increases announced for 1985/86 averaged 20%, plus an additional allowance of Rp 5-15,000 per month for teachers. - 95 - Table 2.25: ENROLL'fENT TRENDS AND TARGETS Growth rates (Z o.a.) Gross enrollment ratios /a School 1974/75- 1983/84- (Z) level/type 1983/84 1988/89 /b 1974175 1983/84 1988/89 lb Prinary 9.0 0.4 65.6 121.3 113.1 State 8.4 0.4 55.3 97.6 91.1 Private /c 11.7 0.2 10.3 23.7 22.0 Junior secondary 12.1 10.4 20.1 44.0 65.0 State 12.0 10.2 11.2 24.5 35.9 Private 12.1 10.8 8.9 19.5 29.1 Senior secondary 14.8 12.0 9.6 25.3 39.5 State 12.4 11.1 5.4 11.9 17.8 Private 17.4 12.8 4.2 13.4 21.7 aixher education /d 15.1 5.I ' 8.2 State /e 16.7 2.9 4.2 Private 12.9 2.2 4.0 /a The ratio of total enrollment to the.relevant age group of the population. For primary schools, the net enrollmentc ratio (using enrollments of the relevant age group as the numeracor) was 55.3 in 1974/75, 97.2 in 1983/84 and is projected to reach 100.0 by 1986/87. /b Based on REPELITA IV plan targets. 7F Includes Ibtidaiyan Hadrasahs (MIs). 7d Includes Diploma, SI, S2 and S3 levels. Ie Includes higher educacion for government employees (PT-K) and Open Yniversicy enroLlments (from 1984/85). Source: Ministry of Education and Culture. continue to hold extra jobs, thereby reducing the quality of their instruc- tion. By the end of BEPELITA III, the education sector absorbed about 9% of total spending by the Central Government. This share is relacively low when compared to other countries in 9he region, most of waich allocate 20Z or more of their budget to educacion.72 2.79 The private sector pLays an important role at all post-primary levels of schooling in Indonesia, where it increasingly serves the strong social demand for education which is not being mec by the public sector. In 72/ One major excepcion is China, which allocated only 8% of its budgec to educacion in 1981. - g6 - 1983/84, 44Z of junior secondary school scudents, 53Z of senior secondary schooL students and 44Z of post-secondary schooL scudents were enrolled in private schools (see Table 2.25). There is considerabLe variance in the qual- icy of private schools at all levels. Private schools and universities often receive Limited direct government aid, cbmmonly in the form of government-paid teachers, and use the physical Eacilities of government schools for afternoon and somecimes evening shifts. Objectives and Targets 2.80 The Government's main objectives for the education sector during Q ELITA IV are to: (a) establish a national education system based an PancasiLa; (b) izprove the quality of primary education, especially for spe- cial groups such as the handicapped, the economically disadvancaged, those who Live in isolated areas and gifted children; (c) expand and improve post-prim- ary education in order to meet the development require-ents for skilled man- power; and (d) strengthen the quality, role and responsibility of private schools. Given the progress already made in expanding state-sponsored primary schools, the emphasis on higher levels of education and private sector devel- apmenc is appropriate. Efforts. to improve the quality and equity of educa- tion, especialLy for low-income groups and rural areas, are also justified. One concern has been the potential impact of an expanding stream of secondary school graduates on urban Labor markets. Cross-sectoral surveys of the Labor force indicate that unemployment rates are high for schooL leavers between the ages of 20 and 24 (20% for junior secondary and 26% for senior secondary), but that they fall as age increases (6% and 7% respectively for ages 25 to 29). In general, expansion of secondary education would seem to be justified by the relacively low enrolLment ratios compared to ocher countries in the region, the evident shortage of skilled manpower and the estimated social rates of return to secondary education. Analysis prepared for the World Bank suggests that rates of return to non-vocational senior secondary education range form 19% to 7Z, depending an the aumber of years (zero to three) it takes to find a job.- 2.81 The Government's enrollment projections for BEPELITA IV, and relaced targets for new teacher and classrooms, are summarized in Table 2.26. As would be expected, lictle further growth is projected in primary school enrollments, with the net enrollment ratio rising to 100% by 1986/87.741 Alternative projections prepared by Bank staff suggest that the primary system has been adjusting to a steady scate pattern since 1980, with a slight decline in grade 1 enrollments and Little gr wth for the primary cycLe as a whole. 73/ For a more decailed discussion of the returns to secondary education, see che World Bank, General Secondary Educacion in Indonesia: Issues and Program for Action (Report No. 4945-END, July 26, 1984). 74/ In practice, it is impossibLe to achieve a net enrolLmenc ratio of 100% due to health and disability Eacrots. Therefore, universal primary edu- cacion is usually assumed to have been reached when the racio exceeds 951. - 97 - Future expansion will be determined Largely by population growth, which has itself slowed down to abouc 2.1Z per annum. This scenario suggests that the demand for new primary teacher positions will show only moderate growth from 1985/86 through the end of this decade. Even allowing for improved scaffing ratios and teacher attrition, new primary teacher demand is Likely to fall to an annual range of 20-25,000. However, teacher training high schooLs (SPCs and SGOs) are still producing about 80,000 graduates per year. Some of these institutions should therefore be converted to use as secondary schools, espe- cially in provinces where the primary teacher surplus is most pronounced. SimilarLy, the country's new primary school construction requirements are minimal, with investment during REPELITA IV being limiced mainly to school rehabilitation and teacher housing (for schooLs in remote areas). As a result, the official targets for new 9pmary school teachers and classrooms would seem to be grossly exaggerated.- Table 2.26: OFFICIAL TARGETS FOR REPELITA IV (in '000) Secondary Indicacor Primary /a Junior Senior lb New enrollments 511 3.024 1.904 S-tate 645 1,648 812 Private 66 1,376 1,092 New teachers 259 142 118 State 233 76 27 Private -- 26 66 91 New classrooms 100 47 17 Stace 42 14 Private 5 3 /a Excluding kindergarten and special schooLs. /b Excluding vocacional and technical schooLs. Source: GOI, REPELITA IV plan and Ministry of Education and Culture. 2.82 Post-primary enroLlments are projected by the Government to grow rapidly during REPELITA IV, by 64% for junior secondary schools, 76% for senior secondary schooLs and 102Z for higher education. Correspondingly, the gross enrolLment ratios wouLd improve to 65Z, 40% and 8Z respectively. The relative roLe of the private sector is projected to increase further at the 75/ Yet, the 1985/86 budget proposes adding 12,500 primary classrooms and 50,300 orimary teachers under the INPRES orogram for che year. - 98 - junior and senior secondary levels. For higher education, rapid growth is expected in both the state and private sectors; the recently estabLished Open University is projected to have 150,000 students by 1988/89. Achievemenc of these targets would be highly desirable, given the shortage of skiLLed manpower in the economy. However, the related expansion of public invescment is likely t?,ye constrained by the project implementation capacity- of the Government.- A recent review of education projects by BAPPENAS staff concluded that the most serious bottlenecks are due to problems of Land acquisition, project management and procurement procedures. These implementa- tion constraints are in turn reflected in poor disbursement performance. For example, of the DIPs approved for the Ministry of Education and CuLture over the past three years, more than 50% are still unutilized; the unspent balance of SIAPs totalled Rp 850 billion in earLy 1985, more tb.n 50% higher than che budget allocation for 1984/85. While many of the implementation constraincs can and should be tackled, progress will inevitably be slow. Therefore, unless some reduction in post-primary enrolLment targets is accepted, the quality of education will suffer. Costs and Financing 2.83 The inaicacive investment program for educacion during REPELITA IV is sunmarized in Table 2.27. This program is based on the official enroLLment projections at the primary level. However, because of the implementation constraints aoted above, the end-plan targecs for public enroLLments have been cut by 5% at the junior secondary level, 10% at the senior secondary Level and 15% for higher education. Other assumptions are as follows: (a) The budget estimates of deveLopment expenditure have been used for 1984/85 and 1985/86. As noted below, there is LikeLy to be a c considerable carryover of unspent funds from these allocations into later years. (b) The INPRES program for primary school conscruction is assumed to be phased out by the end of REPELITA IV. This program has been highly successful in bringing universal primary education within reach. However, the priority now is Co reallocate INPRES resources increasingly towards posc-primary development. (c) The allocations for secontary and higher education after 1985/86 are based an the estimatci capital costs associated with incremental 2nrollments. Additional funding is also provided for rehabilitacion and recurrent item- included in the development budget. 76/ In an attempt co speed up construction of general secondary schools (SMP/SMA), che Government recencly announced that responsibility for implementing these programs would be transferred to che Ministry of Public Works. - 99 _ (d) Other components of development expenditure are projected to grow -after 1985/86 by 6Z per annum (training) and 4% per annum (other programs and culture) in real terms. (e) The financing of development expenditure in 1984/85 and 1985186 is based on budget estimates. In Later years, ic is assumed that excernal Loans continue to provide ap 200 billion per annum (at 1983184 prices), imlmLying a rapidly growing residual for domestic budget financing. Table 2.27: INDICATIVE INVESTMENT PROGRAM FOR EDUCATION (in Rp billion at current prices) 1984185 1985/86 1986/87 1987/88 1988/89 TotaL Educacion and youch 1,354.9 1,361:1 1.624.4 1,693.9 1,760.1 7,794.3 Primary 636.7 654.8 444.5 275.3 83.8 2,097.2 Junior secondary 187.5 170.0 410.5 490.2 565..: 1,823.6 Senior secondary 188.7 251.6 318.9 382.0 449.7 1,590.8 Higher 259.6 218.4 375.8 462.5 571.7 1,839.4 Other programs 82.4 66.4 74.6 83.8 94.1 401.2 Training and culture 147.0 149.7 170.4 193.9 220.7 881.7 Training 99.5 102.1 116.9 133.8 153.2 605.4 Culture 47.6 47.6 53.5 60.1 67.5 276.3 Total 1,501.9 1,510.8 1,794.8 1,887.7 1,980.7 8.676.0 Financed by: COI budget 1,217.2 1,273.0 1,542.8 1,615.7 1,686.9 7,335.6 External Loans 284.7 237.8 251.9 272.1 293.9 1,340.5 Source: Annes Table 3. 2.84 The total cost of the indicative investment program is escimated co be Rp 8.7 triLlion at current prices. This represents 17% of the projected development expenditure during REPELITA IV (see Part I), significantly higher than the average of 10Z recorded over the past five years. Eowever, given the overall conscraint an resources, this program is still 25Z smalLer than the plan allocation of Rp 11.5 trillion. There is also a significant reallocation of resources towards secondary and higher education. As a result, the share allocated to primary education is held to 24Z, compared to 48% during REPELITA III and the plan target of 33% for REPELITA IV. This reallocation is consist- ent with the revised enrollment projections discussed above. However, to be realized, it will require a major attack by the Government on project implementacion constraints for post-primary education projects. - 100 - 2.85 This review has focussed almost exclusiveLy on the public investmenc program for education financed out of the Central Government's development budget. However, a significant proportion of education cosLs, boch recurrene and capital, are borne by the private community. A number of related financ- ing issues, which are generally relevant to all levels of post-primary educa- tion, were discussed in the World Bank's Ceneral Secondary F.ucation Sector Report. The major conclusions were as follows: (a) Student families already pay about five times more than the Government for the direct and indirect costs of junior secondary educa54 n and abouc ten times more for senior secondary educa- tion.- Furthermore, the proportion of recurrent ezpenditure per public school student recovered by fees is relatively high compared to other countries in the region: 6X for junior secondary, 10% for senior secondary and 13% for university students. However, the real level of fees has been declinifA; in recent years. Therefore, fee adjustments should be considered to supplemen' the eduacion sector's claim on che Government's budgee. As an incentive, some of the additional resources raised through fees couLd be recained within the school budgets. Special means-tested scholarships would also have to be provided to protect low-cr-income groups. (b) The Government's objectives for REPELITA rv recognize the growing role of private schools and universities in post-primary education. However, historically, the private sector's contribution has been uneven, both in terms of education standards and locational dispersion. Most private schools are concentrated ir urban areas, in Bali and in a few rural provinces where raere is a long tradition of church-related education. In urban areas, the growth of privace --schools has been given support through the usa of pvblic school facilities. The Government also provides operating grants to private secondary schools under the PP28 regulations. However, these inscitutions are in urgent need of capital investmen:s, to both improve and enlarge their facilities and to upgrade their academic and administrative staff. As wuith putlic schools, opportu- nities for greater cost recovery need to be explored. But, there may aLso be a case for the8 Government providing capital grants-in- aid or credic subsidies,781 especially where chese can attract private schools into rural and low-income areas. The end result could well be to reduce the net burden on the Government's budget, for both capital and subsequent recurrent costs. 77/ These calculations cover both public and private schools. D.. ect costs are those that appear in the schooL's budget; indirect costs include transport, pocket money and unifcrms, etc. 78/ The advantages of credit subsidies are that they could heln leverage additional resource mobilization from the banking system, impose greater financial discipline on the beneficiary, and stimulate che development of cost-recovery mechanisms. This approach would probably be most suitable for higher education institutions. - 101 - L. Health 79/ Background 2.86 Estimates for 1982/83 suggest that public and private expenditure on health in Indonesia totalled Rp 1.5 trillion, equivalent to Rp 9,584 per capita and 2.7% of CDP. About two thirds of chis expenditure was by the priv- ate sector. Within the public sector, the primary responsibility for health services lies with the Ministry of Health (MOH) and its provincial and dis- trict government counterparts, although several other central ministries also own and operate health facilities. By the end of REPELITA rII, there were 1,266 hospitals in Indonesia, of w.hich 619 were in che pubLic sector. Rural health services are delivered principally by a network of health centers, subcenters and mobile centers (see Table 2.28). There is now at least one health center in each subdistrict, designed to serve a standard catchment population of 30,000. Health centers provide a range of services including basic medical care, maternal and child health services, family planning ser- vices and communicable disease control, but generally no in-patient care. More limited village-Level health services are provided through the subcenters and mobiLe centers. To complement the network of physical facilities, there are continuing efforts-to develop a communnity-based outreach system using Local village health volunteers to provide simple primary health care services. 2.87 Development expenditure on the healch sector averaged 0.285 of GDP during BEPELITA 1II. The composition of the program was heavily dominated by the expansion of physical facilities, particularly for the rural health center network (see Table 2.28). However access to health services remains rela- tively Limfted in Indonesia. For exampLe, compared to China, a country with only half-the per capita income, Indonesia has more than three times as many persons per hospital bed and more than five times as many persons per health worker. There are similarly Large differences in health starus between Indonesii and other countries. For example, in 1982, Indonesia's infant mor- tality race was close to 100 per thousand compared to 29 in Malaysia, 51 in the Philippines and Thailand and 76 for all middle-income countries. Consid- erable regional differentials in infant mortality races also persisc within Indonesia, ranging from 80 per thousand in Jakarta to 187 in West Nusa Tenggara. 79/ This section covers the health sector (10.1) as defined in the plan. Other Ministry of Health programs (e.g., rural water supply, environ- mental health, manpower de7elopmenc and government apparatus) are excluded. - 102 - Table 2.28: TRENDS IN EEALTH STATUS AND SERVICES Indicator Units 1978/79 1983/84 1988/89 /a HeaLth status Crude death rate per '000 13.5 11.7 10.1 Infant mortality rate per '000 103.0 90.3 70.0 Life expectancy years 52.0 56.0 59.0 Health facilities Hospital beds no. '000 94.6 103.5 119.4 - State no. '000 69.8 72.5 - Private no. 'o0o 24.8 31.0 Health centers no. 4,353 5,353 5,853 Health subcenters no. 6,592 13,636 19,636 Mobile centers no. 604 2,479 4,000 Health manoover Medics no. '000 12.8 24.1 Paramedics no. '000 86.1 165.2 Non-medics no. '000 63.2 94.6 Total no. 'oa0 162.1 283.9 la OfficiaL plan targets for REPELITA IV. Source: or0, REPELITA nV plan. Objectives and Targets 2.88 Against this background, the plan identifies Eive basic principles to guide the development of the health sector during REPELITA IV: (a) strengthening health service delivery, incLuding measures to support and expand primary health care activities at the community/viLlage level; (b) improving the supply, distribution and qualicy of drugs, medicines and medical supplies; (c) expanding programs to improve utrition, potable water supply and environmental health; _/ 80/ Of these programs, only nutrition falls within the plan's definition of the health sector. - 103 - (d) improving the overaLl management of the health system; and (e) strengthening programs Eor health manpower development. Related targets for health status, facilities and manpover are summarized in Table 2.28. Achievement of these targets would clearly be desirable, given that the quantity and quaLity of health resources continue to be inadequate in Indonesia and Levels of health status are correspondingLy low. The important issues, therefore, concern the financial feasiblity of related investments and of the recurrent costs and manpower requirements that they will generace. 2.89 - rn order to cost out an indicacive investment program, che following assumpcions have been made on physical progress under the major health pro- grams during REPELITA IV: (a) The comhunity health program warrants top priority in the provision of health facilities. Consistent with the plan targets, the indicative program includes provision for the addition of 500 healch centers, 6,000 subcenters and 1,500 mobile centers. In addicion, provision has been made to rehabilitate or expand another 10,000 centers. The drug subsidy, available co patients at health centers, is assumed to be capped at its present level in real terms.il (b) The plan is less explicit on its targets for medical care, in part because of the important role the private sector can play in this area. The indicative program provides for 18 new hospicals, including 7 local government satellite hospicals, 9 mental hospitals, 1 teaching hospital (Class 8) and 1 cancer hospital. In addition, 44 hospitals will be upgraded, 11 improved and 193 rehgbilitated. Provision has also been made to add or improve rehabilitation -nd family planning units at 93 hospitals. Cc) The disease conLrol antd nutrition programs are importanc eLemencs of the Government s .tracegy to improve health status, especially for infants. Key plan targets for REPELITA IV are to: (i) reduce the incidence of communicable diseases (including malaria, cholera, diarrhea and TB) by 25%-50Z; (ii) increase the immunization coverage of children under 14 months from 40Z to 60%; and (ii) expand the family nutrition program (UPGK) to Lower protein-caLoric deficiency in 25,000 new viLlages and 40,000 villages already covered. These targets are appropriate, although some rephasing wiLl be required co reflect underfunding of these programs during 1984/85 and 1985/86. 81/ The Government reduced the health center consultation fee from Ra 450 to Rp 150 in 1979. This fee covers up to three days of drug supplies. Wich further expansion of the community health system, a constant subsidy implies a steady increase in consultation fees. - 104 - Costs and Financing 2.90 The indicative investment program for the health sector, based on the physical targets discussed above, is summarized in Table 2.29. The total cost for REPELITA IV is estimated to be Rp 1.6 trillion at current prices. This amount is 20% less than allocated in the plan (Rp 2.1 trillion). How- ever, in Large part, this shortfall is due to the budgetary constraints that have already been imposed in 1984/85 and 1985/86, which impacted particularly stroangly on the disease control and nutrition programs. On the assumption that these programs return to targetted levels (on an annual basis), the indicacive investment program rises in real terms by 28% during 1986/87 and then stays at this higher Level for the remainder of the plan. Overall, expenditure Levels average 0.31% of CDP, marginally higher than the 0.28% recorded during REPELITA III. Table 2.29: INDrCATIVE INVESTMENT PROGRAM FOR HEALTH (in Rp billion at currenc prices) Program 1984/85 1985/86 1986/87 1987/88 1988/89 Total Comunity health 93.2 103.0 99.1 109.2 121.4 525.9 Health centers 20.7 21.3 19.2 20.9 22.8 104.8 Drug subsidy 40.3 43.7 46.7 5a.4 54.4 235.5 Other programs 32.1 38.0 33.2 38.0 64.2 185.6 Medical care 98.0 105.2 128.4 * 129.8 95.6 556.9 General hospitals 64.9 68.1 82.5 81.8 59.0 356.3 Special hospitals 20.6 23.3 27.6 28.0 15.4 114.9 Other programs 12.5 13.8 18.4 20.0 21.1 85.8 Disease control 38.0 34.9 83.5 101.9 120.0 378.3 Vector borne 12.0 10.8 - 26.0 31.0 35.0 114.8 Other diseases 11.0 11.9 30.9 39.4 48.5 141.7 Tmnunization 10.0 7.6 16.2 18.9 21.5 74.2 Other programs 5.0 4.6 10.4 12.6 14.9 47.6 Other programs 24.1 11.9 41.5 49.2 50.1 176.9 Health education 1.8 2.2 3.0 3.9 5.1 ;6.0 Nutrition 5.9 5.2 28.2 33.5 32.2 105.0 Food and drug admin. 16.4 4.5 10.3 11.8 12.8 55.9 Total 253.3 255.0 352.4 390.1 387.2 1,638.0 Financed by: DIP 97.8 100.9 194.8 217.4 210.7 821.7 rIPRES 80.0 88.7 74.1 79.5 86.1 408.4 External loans 75.5 65.4 83.5 93.2 90.3 407.9 Scurce: Annex Table 3. - 105 - 2.91 The major componencs of the indicacive investment program are for medical care (34%), community health (32%), disease control (23%) and nutri^i'n (6X). This composition is broadly similar to that proposed in che plan." However, compared to budgeted expenditures during REPELITA III, it ..presents a major reallocation from community health to disease control and nutrition. This crend reflects the priority attached to these last two programs. Although community health remains a priority as well, the phase of rapid expansion of facilities is now over and the drug subsidy needs co be capped. It may also be possible to make further cuts in the medical care program, especially in areas where there is scope for private sector development. More generally, all health investment should be carefully scrurinized to ensure that they contribuce effectively to achieving che pLan's targets. rn this regard, substantially more work is required on the regionaL distribution of investments and che financial/organiZacional mechanisms for their implementation. 2.92 There are two complementary areas for which resources will be required if these investments are to be cranslated inco quality health ser- vices: manpower development and recurrent expenditure. The plan targets a 75% increase in health manpower by 1988/89 (see Table 2.28). To achieve chis target, the Ministry of Health has prepared a manpower development program, which gives prioricy co expanding the output of paramedics (nurses and ocher cechnical personnel) and improving the quality of in-service education and craining. The total cost of this program, which is budgeted under the train- ing subsector (09.2) of the plan, could run as high as Rp 400 billion at current prices. 3y comparison, actual budget allocations tocalled ocLy Rp 13 billion in 1984/85, or 20% of the annual requirement. This is clearly an area where substancial increases in funding are warranted. Similar argumencs apply to recurrent allocations for operacions and maintenance. Over the past decade, the Ministry of Health's roucine budget has risen on average by onLy 8Z per annum, and the ratio of routine to development expenditure has fallen from 81% to 30%. To some extent, this decline has been offset by the inclu- sion of some recurrent cerms (e.g., the drug subsidy) -in the development budget. Local government recurrent expenditures are also heavily subsidized throught the SDO, for which a functional breakdown is unavailable. Neverthe- less, the impact of underfunding for operations and maintenance is evident chroughout the health syscem. To remedy this situation it is importanc co assess the needs, budgetary sources and financial availability for future recurrent costs and, if necessary, adjust pLanned investmenr levels accordingly. 821 The plan allocates somewhat more to medical care and commaunity health together (70%) at the expense of nutrition (2Z). No breakdown of-plan allocations between medical care and community healch is available. - 106 - 2.93 The indicative investmgm program is fully funded from the CentraL Gavernment's development budget:.- As in the past, most of che community health program is assumed to be financed from the INPRES account; the balance of investment is funded from DIP allocations and external loans (see Table 2.29). In recent years, up to 10% of public health expenditures (recur- rent and investment) has been recovered through fees. While this share is high compared to many other countries in the region (e.g., 5% recovery in the Philippines), it still implies that public health services are highly subsi- dized. Furthermore, the degree of subsidy has probabLy increased as the real leveL of fees has been eroded by inflation. There is also evidence to su est that even low-income familes could afford to pay more for health services _ and in practice often do for traditional medicine (by a factor of ten times in some instances). Therefore, fee adjustments and reductions in subsidies (as proposed above for drugs) could well be justified. The Government should also take advantage of the recent crend towards greater participation by the private sector in the provision of health services. In 1982/83, for example, ic is estimated that the private sector provided about 60% of health services, including through retail sales of drugs, private medical practice and hospi- tals. This share can be expected co continue rising, as higher incomes Lead to increased emphasis on health care and the quality of service. As a result, the Government can concentrate on those programs where the private sector is less active (e.g., preventive services, especially in rural areas and for low- income groups). 83/ Provincial and district government contribucions are not included; these totalled about .p 8 biLlion in 1982/83, or Less than 5% of the Central Government's development budget for the healch sector. 84/ For example, assuming an average per capita income for the poorest quintile of Rp 30,000 per annum in 1982/83, then about Rp 500 (1.5-) could be spent on health care. This amount is sufficient for chree courses of ouc-patient treatment at a health center, compared to the WHO norm of two. - 107 - INDONESIA PUBLIC INVEST!EXNT IN UEPELITA IV Annex Tables No. Title PaSe 1. Development Expenditure by Sector . . . . . . . . I 2. Trends in Public Finance and Investment . . . . . 3 3. Indicative Sectoral Programs for REPELITA IV . 6 '-4 I II, lK A .\ l ". - .09 - Armex A r. Tabe It lWHTr MU.o IT san Page 1 fin 4P bill . at cwT ancul Palm I ActualSOa 901.!I W IV :ad* Suctr 77/10 30111 S31M 3UE - 3 3 413 X - u us*Inu lM Ac; 01 4qnciturs a tIrt qabu 12 64S L 12.9 511.2 51L. 942.7 M7.4 .Y.U.9 1.1.: ,,1;.3 01.1 Aqncultrs a/ 1. SS .o 0 21.7 SISI 4;.' .J ..0 1. 1.3.n :.:8. 01.1.04 -Etaft crwi 246.2 179.? 14.6 4.Sm. lltblw 1*.2 13.1 31.2 671.3 51.1 mr tiWo ' 25.J SSL 320. :.4 2M2 518.3 CIA 13=.1 I.mLI 414- . 02 Endo" 21. 41*SI 52.4 50.S 51. 62.1 435.1 1,174.0 2,3.1 ',311.9 03 titnnq I u.wq 3714 506.7 W.5 tl14.1 2 ..1 l,300.9 1.:01.7 2 .743.7 .1.0 12.9 L. DL Iltrq 4. 7J J 97.5 46.7 1,140.0 275.1 :7hJ IISS .46.2 .S497.1 OL2 E im =1.1 sz0.7 =A.1 75.1 L".S 1,029.3 1,025.7 :.L1. 4 2,703.7 9,4I3.3 OL..t PON 76.1 1,011.2 :.W37.: 7,347.9 OLL02 -mll 4 gas 2111.1 04 :1. ,.: 1,1.IO. 04 Cis*oinauPos twiS 463.1 710.0 107.3 117 1.3.7 1,2LI 1,J2. 4 3,:;U.S 4,43.; ?,92.? 04.1 RUN I iipun 24L6 342.1 371. 1.2 A.I 5. 1MY.7 I. S 1.aOLis 1.:5.4 YI2 Ln tr_uwt 50 79.3 117.S 104.3 . I 31.S :LI L.a MT. 1,.: 0U4 ISu b now IOL 1434. 147.1 214.9 If. 1 274.4 34.7 56.4 'S.6 1,?4.4 04.4 Air tr.wt 39.1 12-.1 111.2 aL : 9. 09.2 190.4 L4 '94.1 t.3M.9S4 04.5 uts" tUll cat LT J7.0 3s. :.. TS.1 I 70.7 71. 310.s :70.a 5. A 04.5 . gts k it" 9.3 Lb 20.0 51.J 04.*.02 -rocommoacabtm 11.2 IL 10.4 U.L3 04. Taru .31 11.1 :s; :..9 s5.r 37.L 3164 as r,rai & conwabs 30.5 10.2 7.7 131.1 1A.1 129.1 1Ml21 191.? 521.1 W.9 ILL rrue 12.1 7S 21.9 n.: 133.2 ILl 60 0 M3 ;1.7 *554 0e2 Cwatzv 13.1 29.7 3sa ML7 40.4 6a.S 3 314 t6. '1., 01 lom' I u.wqrauai 11.: 21L 41t1. 4359 MA 673.1 671.1 1.410.7 1,797.6 1.21.3 SIL .m 19.4 WL 40.1 41.1 57.? 93.3 015 ".O 1934 2.' OL2 Trmmqraho 142.r1 99.1 3 a 7.7 31W.: .9.7 371.1 57.3 i.m.7 1.aes. 3,a24.4 07 RipeaL dmlae..t 21. 4U. 61.5.9 7t11 7$J. 909.9 _ t: .:4L? 2,39. .1 Cs R dmlm 1.0 '1.7 4. 4. J 54. 0 S1.7 6.1 5 L5.9 'OT.: 09 Edualg'w,vmat I cwlbw :t1.7 574.6 751Z7 703.2 ,o3L:3 L9 I 1.510J8 1 3 .5 1139.3 9.1 Edats i yint :Ml 5144 651AS4 52. 944.7 1.214. 1,311.1 1,714.1 , 5,01. 10,447.5 09.2 r,a". 1.7 41.0 47.0 1.7 17.6 9.3 102.1 =1. =7. 741. 09 7atmu coItus IV? 194 .5 1 9.1 19.9 47.s 47.1 7 .1 95.1 13.7 - 110 - Annex Page 2 Paqi 2 Actul Idq.t REF.Az ;E.:v 230. Sactar M180 30i, 1111 2 92193 13;U14 9413 9S194 "lan ta 71an [0 Htafth & 3caulatio :424.4 :B. I 't. 5 M.4 M. a a0.0 *1:. .l::. * ' 10.1 HealtI 99.4 11,. I72.1 16.9 L!4.4 253.3 5.0 5!i.: . a :. .. a 10.2 Social uIfwe LT.: 3.7 47.0 43.1 42.7 7.7 33.: 'O.9 la.a 4.- 10.3 PCWatim ;S.s 3§. 6 613 47.4 11.7 97.0 100.1 502.0 260.. 1,021.2 II Hosunq & rueUttlent 117.5 t90.7 161.3 150.8 0.8 43.7 4. 7,j Z.o 845. 2,79o.6 1S.1.1 -OI e' s hmanq 111.0 117.S 114.1 1,221.7 -etr 24J.7 J 240. 0 417.4 I.623.? 12 us 10.9 52.7 i 4I4 1. 0.4 90.7 1t9.0 a 59.a 5.9.: 13 fsfu k sinwc 20L.2 47T.0 565.1 47.8 5. i9.3 714.1 1,493. '..:77.1 ',:3.? 14 laforati 4 33.9 4.3 '0.3 7.5 67.1 7.7 151.0 171.I s9l.a 15 Ruuewc & drL_ut S 7.9 97.3 9n.4 IM 1 =2 ZL :7. ? 447.6 .7L 1,37. ILI Sum" tw2naloy 4.? 13.7 11.3 LA3 170.1 7.W 74.4 60.9 22.1 7112. 15.2 Rn4aard no0 J4.1 79.1 112.J. 15. 132Z2 13. 2L.7 450.7 "I. 16 Sav nt Wagarb 111.5 167.A 130.9 2 11 LL4 1120 1716 579.7 1,OIL9 1.W7.& 17 9mam dro_wuat 4. 31L9 IY.4 :30.7 23.9 M29 32.1 70. !L' 1,689., 19 - Rainnaru 4 swmast 10.. 143. 1953 193.5 192.4 1.9 ;9 -07.: 340.a ,?1.33 1L 1.01 -_at .ia.mt 231.2 02.3 ' 1. .7 I4.5 -4lthw 22.7 26.4 95.3 4 SWA-TN.L 3,a13.2 5,11 4,U9.1 6,3.4 9,7L2 10,000.3 10,089.0 2.09.4 =.S.L 73, 9. Plum rFailiw s d 1122.0 234.0 7.0 420.0 324.0 459.0 5L90 0.0 1,534.0 :000.0 MTL 4,014.2 5,91t.1 S,940.1 7,.-1. , 9,89.2 10,459.3 10,647.0 21,349.4 :4449.2 716SO9.M Li Etchiic fortilizer wKW. S1 Estltud far plu nium'm , S= . Nlnutry of Fim a dilI,W!LLTA III and REPITI IV. Aamg lIdle 21 lIfiko IN IIJKiI fIkNI ANA f1 lfIhhl Its IF 1111gwa at curuiel pc ~~'. Iii. 11110~~~~~~lti goiII oiuz 0ztai 8aie4 14165 ISIBI 0131 IIis fatal Historical F,ae,cIed A. CENINAL 6OVIIH1[I 101611I I.Donfilit suuiplta i,1m 10,221 12,213 12,510 15,301 11,idi 11,413 u,lum uIoem u2,ii sul atl? MAI fun of 12-41 2. oil h LUG lew,aeet Il I,21 1,020 1,02 81,21 10,310 12,4:5 10,524 11,714 12,201 12,62 1114sulu of fimasce Mciii 3diI 3.other tails25 2,112 3,211 3,112 4,311 4,181 i,116 1,010 1,011 1,115 IistityV GI Flisa's Mould elii I. uznIa4k ceaplts III iI ll1 436 520 III II2 III 920 1,192 E.gslarof ci lectuat Marl4 list 5.logilig 1,i41noii,ug 4,402 %,t00 i,11 1,954 8,113 1,69 12,020 13,401 i5,511 11,251 lug of (.111 Sue of IL0.1l 0. lope:au, 1,42 2,021 2,213 2,413 *,151 ),'11 4,111 4,011 5,3in a0,11 Im1i1iry of fItaace Mcii lInk 1. alwigls UIl Mi 122 I' 1,0 ,51 1,113 1,514 I,13 1,911 2,240 Niaiulqy at Flaiace Mciii Ink I. Isbidias to u.glasa M1 116 5,201 1,195 1,511 I'm1 2,51 I,131 1,3111 I,11 Niaul,vt of Ilacace MKIdciii a 1. IaIerml debt sericei it It It l0 30 it 30 30 if 30 IiaaalcV o ci liacac Mxld hAl fI". srmall dell service IL. -Iclerail ml 43 411 15in 1,1m 1,112 1,10 1,111 2,216 2,555 ministry of fimusce Mciii Ial 12. -Amoolmialea 261 315 419 525 lo1 1,510 1,511 . 1,131 2,513 3,016 RIAai'lr of Ilmiaceo MINi hal M) oiohI t II 134 1,031 1,110 1,1110 540 111 100 IA) 30 lipRs'lV of Fiedacc MVW Id Ink i.hvalceeal eapeadiluia 4,014 5,11 0,111 1,160 1,111 1,152 1,511 10,211 11,103 11,120 NIgisIry of fieiam * Eu of ilS.-I1I IS. isuliliuar subsidy 125 284 Ill Ill 453 I3? 111 102 III 412 IiniidIi of FiaiicI Mutll lIAI It. Qihsti uccuuuAk tl i. 401 631 165 1,151 1,141 1,011 1,111 1,22 1,311 1,510 151 of Ii Io-241 Maiii hlo Ii. CII., eapeslalur. 3,489 5,049 5,004 5,111 1,30 1,212 1,111 1,411 1,11 1 ,438 1415111 11139301 la. lcrscsiss 1,319 1,411 1,105 1,913 3,2m 1,145 4,200 4,515 5,510 0,111 5,14-1 51141I 19. 1.1usdka 1,311 1,414 1,101 1,914 1,11? 1,145 4,100 4,515 S,S1S 0,111 hiulslry of fimiac. III-20 2ha. Oo,e,lgc 12 1II Ill 121 15131 0 4 0lSl a1 ank I . OIllIE BASIC DAIA GI. uu, daiituigseanls 1,11 1,511 1,101 2,217 I,1m 4,620 4,817 5,100 5,941 1,051 kcil OjaMcii SaabdIn 22. AmimlialAs III 584 410 li1 1,2111 I,1m 2,111 2,411 2,151 3,111 worldiBail Mciii Euti 23. lnIuil 3 10 13 12 ,' 112 115 ,0 lob1 20011oud hl Mii Scab Cenit, ii owue,enl 21. met diamlgci lofarraei 11,2111 11,14111 1133 5122 (213421 (2,5Q'.l 452 19 5071 1,261 list Icdanesla worldi hal .. .. .. . .. . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . I .. .. .. . .. .. .. .. .. .. . .. .. .. .. .. .. . . .. . .. .. .. I. .. . ~~*'3 P1~~~~U II 011Yill lot's %go's II'l 0tl& ItII*$ [ t111l isl 01L'I UO'C 3(la 1U1%)1 loi *r 31 II 01l~~~~~~ti II l0 I O' 1)Y' off' flip fiIt lot' ftI' tie6 If P'"Di 3d 110P JAN f It VI fill I)II M1 I PU PIP liii sit tit 301 ctI $Fan)Jo ~Im1IOp I'M YL 43?l 0!?l ult fit' milt itil 111l Liti mll m1 'PA J V i *IISFI 'It ill Iii lb SRI 1UIII No$ SIS it'? 011 3I0'3 ml%' Poill IY1'l ti1'i tIL't tIPll tilli Fn IPW j le 95 182nog Ia 313 ,IJOK 3~~~1*-11 Oil'? lolls 330'S 9Yi'1 134'! 13,11 III'! iti'I y,iytj Ite itlisi JR9 I"',0 -fi 11 11 NY'S!~~~~file 301'S tit's 13I'3 131'I 101'1 tiU'1 1t1'3 Oi'! YOci' 'P1R9 lAOS 10 loinl'if It ~~~~~It Yil'i lot Ti YI asl 003'lIl i1fl11 i L l tt11111 U i sl gi, vlNoiicq )I1lI01p 113 'VI uIt-i-ti- V19 -MAII 311t'! 014l Ili's6 st"i 9I1'1 501'! ltOls 1131l %all' 3) Io;NIaie PUOIIJtS i'D -If YI-CI.ilI-to On Yti*3,i-t le 1" .111'Y til&' title 3igi' 111'1 Coi'S iEil1 331'I 31'O)tL SIII ol Fn 9l Salina -i IYI~~l1I I* *~3 IY!1!I I' 5fl3 111601 101'S liii III'S 13L'1 10I'I 11161 Ull 01,'! YOI'I IP IQ lRs3 9 1121n03 .3 "SI P1MMN Iit3 PI PMY Its its 10?', IY!'L 511 ml, Itl'I to? o3l IIGSVI' IU P 1143 It sit 1151 3' 11,',1 111'Ii tI1'1I 1,1631 Ifl'31 wl'i I 13'I1 t31,S toll? JUIIJSIIAVI P1tlj- Ili liI1PII to 11111 filoit ritli vlt m l iil ilit c6cJ F3 1'L YO'L 311 1t1 I'I u S'S, t 131'31 11,611 191P1 11111gAv 1"'I""' 110811p 10 63 I'll PIJ'Nus Y411 iS'iIll 111 ut'l0ie 311156 OnI';I 1tli' 311'PY itlP'1 YiI'31 11'lit jq J69 'It lure Pi AN vis,uop'l Iv"u MI Its tit ml oil M4 tit lot HE~ fig 3winiiaq fiUiiiop filM -1 1313 P pAm IV?11 p;)q 43? PLY 153 M0 OIl lot IY! Lii oil tit 'pS IPVJISII VYP 10 fo~~il PiIJfl iI!'? jlpl'? mlt' tit's 003'! mll' I15t 11161 %ti') 3!? toll03 ImialepiI t. P'P'I"d I~~~fli9IIlN 53133 13113 IIJYI YulE 13/Il Il/Il hiLl 13113 13103 *3141 mate *6...... .. 1 1114~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~iiiitl Iap 3 ~~~~~~~~~~~~~~~~~..... ......... ................. .............................................. ................ ........................... ......................... ........................................................................ . ....... ...................... ....................................... .. ........ ........... ............... .................... . .................................................. . ............................. .............. .......... N'). II~~~~~* 19/Itil IIIII II1/12 Vi?I U11/14 II/11S 33/11 itiII IlIl 1111Im tc IlI I 1rc a FuateiIsi O. II4VISIfiilII £IJIAI IL. 6IoIt dJeciiti llnnl/ IS 1,11 10,1 21214 I 65114 15,53iS 11,110 11,1IJ 11,151 21,011 23111J 21 2 ................. ........................................ ..................................................... ................................................. .......................... ............. .. 41. ublic liad ii a,"A. 214 131 3,33 1,11 1412 1,151 1, 101 11241 1230 Sum l 641.49h ml1ii.491 43, fied Bad llmwasIsent ll ,141 3,2121 I111 2I,56 1,111 111 2,033 5,4 1,110 9 1 46. *F invl al 1,13 2,493 2,110 4,4 I,m 4,110 1,11 3,055 5,101 .1,1 05 45 30 Private filed Iavesianl 4,030 1,141 1,102 1,141 1,115 1 206 i,102 1,414 9.211 1 ,111 U-414 51 5 4 -|1 SI. Change il 0046 Il0 £12 1,011 6,14 jig Z,31 1,402 321 381 410 II I1 52. Groas liotiaIl maw$aS 15ii 11,413 10,105 10,114 11,141 1I,111 11.114 15,1 Sl 1,111 9181" 32 12 Pu. Public sawie 2,156 4,S1 3 4 ,110 I1m i,241 3,421 ,s1 1,2m 1,351 ,1 S u l 151..5531 h sl 1o 4 .SSI -G Bawk eavlais 2,311 13,15 4,1351 4,121 3,40 1,911 S,12 5,11 &,211 ,24 3I If F 11t mawls Z15 1 ill 112 s 101 430 I4l 515 120 iiS 42 42 s*. eI'I4.l %&viml9 5,91i ,103 , 2 1J ,252 1,201 1,21S 9,2041 9,11 60,908 12,12t1 S225S Shares oflG 6Il1 ................. ............. 57. lears doaesistc awelseat 22.4 22.4 21.4 23.9 21.6 20.1 I9.0 16.0 11 . 0.01 4 1f100 41218100 5.PuIli. led Aavasl 1.11 1.2 16.3 2. 160.1 16.4 11.1 9.1 9.5 9.4 411218144 4121600 59. -litz 6Bow awsatlaal 2.0 1.4 5.3 6. L.1 4.1 4.0 4.9 4. 4.1 4I12e1I60 1II?3'10 -u pI eanstasal 5.5 4.1 5.l 0.3 1.1 3.1 1.0 4.9 4.0 4.1 49/21e10 491221100 N W rlay hald ijvestau 2.1 I212 10.1 60. 1 601 1.1 1.4 1.2 1.9 8.2 1 0/21.4 50/201800 2. thCnhqe In stek 1.5 1.5 2.0 2.1 0.5 1.4 L. S .1 S .2 0.2 S11211400 6/:236100 11. Brain aatgaa,I navies 2*1. 23.1 20.2 610 63. IS. 511.3S 14.9 15.1 61.0 52/121e00 52I2S1'00 14. Pubilic 3w1wag 3. 9.2 0. .1 U. 9 . 1. 1.0 . 1. $1121u600 1/23160 15. -awli wials 1.4 5.5 1.1 1.1 1.9 9.3 5.4 5.1 1.3 4.1 541241100 54/291100 61. -Ft nawia;p 0.1 4.1 5.1 .11 0.5 0.S 0.3 0.3 O.3 O. S312i1100 33/218104 it. Privall savingi I6t5 11.1 11.5 10.1 1.6 6.5 9.5 t 1 9.3 9.1 11/211loo 161211100 ....................................................................................... ...................................... --------------------------------------------------------------................ . .. ....... .... ..... .. .. ...... ........ . ........ Al Locludol lwislseali wladaed 6fi local glveres.al samron. bi officlal 441d adiEited il 02/51 lid a1d. SUuucea At noted on 6. tdble. lem [ibis It lItIIII1 UCIlM IROMS 1N UlfftllA IV Htge I ............................................... ............... ..: ........I.......................................................... Al £'eelt *hae it 1114 Iicee *- - ---- *-- * -*--- ------------ ....... .......... ...................... ...... go. halme 11135 U31/ ki 1111 1111 l.1.1 3113 151 1 1i 111 1 ill l4aIJ .............................................................................................................................-----------------------------------....------.... ....--..-.--------..--.-..-.--.-- 1- SLI tILE ClUB A. IuIliE 2031. 231.1 213.1 21 .1 11I. 1,21.1 M US 111.1 211.1 21.2 27.1 0,26.1 ..... ................................................................................................................................................- .- -...... - ...... 1i Udl1 16.0 11.D 18.3 501.3 fit.) 411.1 5.2 11.1 11. N.l 11.2 311.1 MIS field tic 41.6 51. I 13.0 1.3 50.I 251A. 46.2 43.1 42.1 11.1 34.1 202.1 pitessill 1.1 9.4 16.1 31.2 11 . 1114.1 1.1 1.1 1.2 229 2H. 16.9 Ill field eit 11 .1 23.4 25.1 21.1 I 21 123.6 I12.5 16.1 20.1 26.1 22.1 15.1 7. flallhalderm 1111. 541. 113.1 1S0. 11.1 111t .1 121.1 U1.1 1111.4 132. 121.5 £41.A __,_,,,,,,,, ........................ ...... . _ _ .... .--......................................... kIS Ctedit 40.2 14.2 13.1 20.6 Is.I 111.1 21.2 29.1 21.1 11.1 10.1 122.4 NoNaulll 1.6 1.1 5.3 1.2 11 24.4 1.2 5.2 4.4 2.4 1.1 26.6 ell C18.l 11.1 42.6 2. 61.1 12. 4 221.0 21.1 1i.) 49 . 41. I 1.1 201.5 lle-uc4edi !5 0.1 11.1 11.1 16.1 43. 5.1 1. 1.2 11 1.1 31.6 soft Credil 12.2 51.1 I0.I 2 4. 11.) 10.C 115. 13.4 1. 6 .1M I 21.1 12.2 lo-uledSt 4 .1 1.2 12 . 11.2 111 62 4.1 1.1 1.1 1.1 21. I 15111 Cedt11 24.6 21.1 1.1 5S.2 I fil 15114 22.2 22.1 21.1 23.1 21.1 12S.1 ha-credIt 1.3 1.1 1.4 3.4 10.6 S314 1.2 1.1 5.5 2.1 1.4 10.1 I. OIL FAP 111.1 211.I 335.6 134.4 420.1 1,0s. 154.0 M3.1 212.5 216.1 26 1. 24.9 . ..... .. ------ ---------------------------------------- . ... ..... .................. ... .............. ............. . ------------------------ ... ... I hlt nt** 114.1 Il.1 215.1 201.1 11.6 114.1 121.2 131.1 1I.& 11t.1 151.6 116.2 ......- .... ......................... ..................................................................... .................................................... field *e 105.1 16.3 134.6 141.3 111.I 1141 162.3 101.1 1l1.1 561.1 522.2 P1 eteIa 25. 14.1 104.1 £0. 4. 14.3 2.4 15.3 19.1 44.4 1. 251. 1. leallh deus 1. 2 120.1 5410. 12.1 1 .1 £2.1 1.5 6 .1 5 .1"I 124.1 i4.1 ---------------------------- . ..................................... ........................................ .... ...... . .,,,. .,, ,,, ,,, DCedit 15.1 11.1 161.6 122.1 131.3 511.0 51. 115.1 10.2 16.6 104.2 392.1 Mo4 -uejil 12.1 1.1 17.1 24.1 21.3 101.1 11.2 11.3 1S .2 15.1 20.1 11.2 C. COCOmul fi94 501.4 511.5 111 650.6 401.2 81.1 H. M. 196.1 1 .1 416. I' Iclale field etc .0 1.3 5.1 5.2 4.0 30.2 0.3 1.4 4.1 3.3 2.1 24.1 a .............................. .. . ............................... .... .. ......... ............. .................................................... ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - - - - - - - - - - - . . . . . . . . . . . . . Pu.@ 2 ................. .......................... _.__. . ........ ......... _----------------------------- - ----------- At swr£V11 *gr|. it rii lr,,iim ... ........ ......... .... ........ ............. ....... ............. .... .. ... .. ......... ............. .... No. tiOaras 11l5 s 5111 itiiI 111U UllX itol S41il U3l 14161 l66 ui5 total ................................. ........................................................ .......... ............... ,..... .... ....... ..................... ...................... :...................................... . 2. Iaallildthra 5.9 99.8 11.) 130.1 144.9 515.0 i1 1.5 65 5.5 95.6 160.6 144.6 ............ .............. ,.,,.................... _... ..__ . Is........ ,...... . .......... __...__. __._.........._.___............... ..... ...... _ EIS £sdit 12.4 81.6 21.1 19.1 11.9 11. 11.1 15.5 1.2 14.4 6.1 44.9 lMo ri t II.J .1 1.1 1.1 1.1 3.4 2.1 2.1 2.3 l.S 1. 1 11.? UPE? Cuedit 11.2 31.4 14.1 11.3 24.3 65.1 10.4 11.1 12.9 14.1 18.1 Is.I k cf413it 2.9 3.4 6.1 5.4 4.1 11.8 2.1 1 1. 4.1 4.4 11.1 PIPI CtadiI 45. 4. 6.5 1.4 36.3 1 01.9 42.2 42.4 IJ.L 41.1 51.4 215.1 NMCrOO 8.2 1.2 2} 31.1 3.4 81.3 34.3 10.4 9.4 1.1 18.4 12.1 52.6 [DIA. 419.1 11.1 145 .1 130.0 I4n.2 1,S1.4 440.1 5S5.1 591.9 113.1 11.& 23,146. ............. ................................... .. ....... -------- .................................................... fiaancad r A.llI55""l. IvIales 1,501.5 131.111 l885 456.0 Il1.&4 other I.ii1 44.6 541.1 PIP equi&i 311.; liallhetders200.6,4 1 ---------t- ----------------------------- .............. ..................... £06 ivudgt 152.0 21.0 IN% 132. * 25.1 Other l3se 8,2 .1192 IL. 641(5 USmlOlCl I A. IliAll0N W1.1 51W.4 101.1 434.6 411.1 2,915.1 414.1 441.6 543.1 444.4 411.5 2,111.1 . .... ...... ......... ............. .... .... .. ....... ......... ...... ------------..---..---..---.-.-.-.-.-.-..---.......... I. apoie 412.9 104.1 4 .1. 55.$ 556.4 2,531.4 431.1 414.5 539.2 "7.2 111.1 2,261. 6S48l Foreip 11.2 15.4 9.1 0.0 0.0 34.4 80.4 11.2 1.1 0.0 6.0 31.1 601 12.1 81.4 36.4 38.5 11.4 8.1 8.9 11.1 1.0 21.1 34.9 10.4 Radius fore1 m 15.2 30.0 15.1 16.4 8.0 8111.4 84.1 25.1 26.4 11. 184.3 91.3 £01 I9.1 13.0 24.4 21.4 15.3 600.4 18.2 I5.I 21.2 85.5 140.1 1 S. N til ir i 'tzr ' 3.6 3.5 123.2 624.6 11.1 530.9 98.5 )5. 91.6 11.1 41.9 421.5 101 9.6 11. 11 31.4 0 0,5 .118 .9 9.6 16.2 25.2 21.4 21.5 800.4 large - 11r I fOr4 4.8 .1 49.3 22.4 12.1 249.2 32.2 44.1 '1.4 I.S 22.1 204.4 £01 0..0. 6.6 o.0 0.0 6.0 0.4 0.0 0.0 0.0 Idrge i r rivfr Forira 12.4 49.4 111 804.4 111.1 140.3 1.0 59.5 110.3 1.9 19.1 423.4 601 ............................................................................................ ....... ...... At t ..t & At Jill plaen .......''-'----.-..r---------.-.................... .......... ................. No. Pfta.t s e4/|$ issIa im Allis *)IU [dill 141| mIlk IIllf 11/i folio I.atl ................................................................................................................................................................ 6lrwntl.oIr fI.ig. 11. 20.1 20.3 21.1 21 .9 12 1.1 11.. 11.6 111.1 1.4 11.4 U.2 101 0.0 0.0 0.0 0. .0 '.0. 0.0 0. 0.0 0.0 0.0 0,0 Iltliily f1ri9 0.5 0.1 0.4 .0 0.0 1. 0.4 0. 0.1 6.6 .0 1.3 £01 4.0 4.5 5.3 $.: 1.1 4.1 J.1 3.1 4.3 4.3 4.4 20.4 e&hi -it I f1aaits 32. 42.3 15.2 51.1 01.2 229.2 J3.2 13.1 41.0 31.9 11.1 11.11 £01 11.1 11.3 21.1 25.1 34.4 102.1 12.1 12.3 11.1 11.1 1.0 11.9 Rehab S 191.,4 53.1 s1. U.11. 24.4 24.1 194.0 49.9 44.6 29.1 19.4 11.1 110.1 101 0. 0.0 0. 0.0 0.0 .0 0.0 0. 0.0 0.0 0.0 0.0 a IN Notails . 1. 1. .1 4 .4 5.0 11.4 3.4 3.4 3.4 3.4 1.9 11.1 £01 24.2 2.3 0.4 33.0 35.1 151.1 24.3 24.3 24.3 24.3 24.1 131.4 0 O N opecial Ioa.sla 3.9 4.0 0.1 1.9 9.4 35.0 1.1 .0 .5 1.5 0.1 21.0 fiO 3.3 1.l 20.1 21.3 31.$ 41.4 .1 9.3 15.9 11. 11.4 6S.1 2. h., 2. 1 0.1 31.0 11.1 10.5 151.9 3.5 9.1 22.1 34.0 41.2 111.9 ... . ................................................... .................................................................................................. 9.111 191f613 0.6 0.0 0.0 0.4 0.0 0.0 0.0 0.0 6.6 0.6 0.0 0.0 m1 0.0 0.6 0.0 0.3 3..1 3.0 0.0 6.0 0.0 0.2 1.9 3.1 ladius 1 1.0 0.6 0.1 6.4 1.6 1.9 0.0 S. 0.3 0.4 0.1 1.3 £01 0.0 0.9 1.5 14.3 20.4 41.2 3.6 0.3 5.9 11.5 14.0 31.3 idit4I li I 1ot4 0.4 0 .0 0.0 0.1 0. . 0.0 0.0 0.0 0.0 0.0 0.0 181 0.0 0.0 0.0 0.5 1.4 1.9 0.0 0.0 0.0 0.3 0.9 1.3 LIf.. lr1 10 . 0.0 0.0 0.0 0.0 0.6 0.0 0,0 0.6 4.0 0.0 101 0~~~~~~.0 0.0 0.0 6.0 0.0 0.0 0.0 0.6 0.0 0.0 0,0 0.0 title j,aI, 1104 0.0 0.0 0.0 0. 0:0 0.0 0.0 0.0 0.0 0.6 0.0 0.0 £01 0.s 6.0 3.0 0.0 3.0 0.6 0.1 0.0 0.0 0.0 0.0 0,0 I;oundsl.ef fo11i 0.3 5.9 4.3 4.2 . 3.1 21.4 *.0 5.1 5.4 4.5 1.9 11.9 101 0. 0. 0. 0.0 0.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 £1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0..6 0.0 0.0 0.0 0. Rehab -i 1 1e11l 2.1 1.5 12.1 21.4 30.3 11.11 3.5 3.0 9.0 1.1 21.0 54.4 £01 0.0 0.5 0.9 1.1 1.2 3.1 0.0 0.4 0.1 0. 0.6 3.6 0. il11iS 94.6 104.1 11.6 114.1 139.5 031.0 11.1 11U. 115.Y IC1.4 95.0 419.1 ......... ...............................................................................................-------............................--------------------------------........................ 1. Ogoil, l4.3 11.4 121U. 124.9 115.4 559.1 01. 0U.5 100.1 91.1 10.1 442.1 ....... ............................... ....... -- .......... ----------------------------------- harpocy( ihio ui .6 0.0 0.0 0.0 0.01 0.0 0.0 0.0 0.0 0.0 0.0 0.0 SOI 1.5 3.4 5.2 2.1 *.1 24.0 3.2 1.9 4.2 4.2 4.2 11.1 Volcimic i.haao 191,596 3.2 13.3 4.1 4.1 1.9 31.1 2.9 11.6 4.6 4.1 4.1 21.1 £01 2.1 2.5 3. . 4.3 11.4 2.3 2.1 J.l 3.1 1.1 13.4 Rivwer ioroviatal futele 11.1 12.1 71.S 41.l I4.t 14t.2 U.4 51.2 .1 U. 5eS.t 11.2 2114. " £01 9.6 13.4 9.3 10.1 10.9 52.1 9.1 10.4 1.4 1.4 1.4 41.9 c;o flood colrol f1 stsn 4. 4.3 30.3 29.5 11.0 15.1 4.2 3.1 24.1 21.1 11.4 *5.2 £°1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 It IswiIAl grils Al flet8 filces ...................................................I ...................................................I.................. ......................... V. If;lotias u4n13 111 Ul/1 l/61 to/St 1,tial 1415 Mits WA/I 1llt HI" [.Gil .......................................................... ........................................................................ ......... 2. 11. 4, 3.3 8.1 Il.2 2311 46. 6. 2.1 31 81. 30.2 14.2 - .- ............................ .............................................. . A........ .................... ;...... ................... ....................: Itier lspteovasel 1we8@. 0.0 0.0 4.3 3.1 0. 3.3 0.0 0.6 1.4 2.1 0.4 1.1 |10 e.4 o.* 0.6 *.o o.e I . 4.* o. *.* 6.0 4.4 o.o flsoo coMiel fw,3il 1.0 3.J 15.4 1.4 2J.2 11.2 0.6 2.1 12.2 12.1 81.6 41.1 £01 3.1 6.0 0.0 0.0 0.0 0.0 4.4 4.0 0.0 0.4 4.4 #.0 C. 144815 21.0 10. 20.9 211.2 21.1 114.0 139. 1 2.4 21.0 20.1 11.9 302.3 1. kolag 4.4 1.1 1.9 1.3 . 14.1 . 4.0 0.1 .1. 51 &.1 21.2 ....... .,................................................... ................................ .. .. .................... .................. _ Neo 110*1 I8. 3.1 4.3 .1. S.0 20.2 1.2 2.6 2.1 .1 3.1 J1 . Z10 0.1 0.3 0.3 0.0 0.3 L. 0.4 0 0.1 0.0 4.6 1.6 Btaal 1tidal *uaas 6t 0.1 1.0 0.2 6.3 0.9 1.? 0. 31 3 .2 0.2 0.0 3.6 601 4.9 2.0 2.0 2.3 2.4 34. 3.1. . .1 3.0 g.e 2. Mew 14A 0 89.1 89. J 2 10.8 13. 91.5 13.4 1 1.1 1 1.1 11. 12.1 14.3 a01 0.4 0.4 1 .4 S , .1 . 11.1 .1. .1 .1. 1 1. 5.1 23.3 lRelb tidal swAmps Flf.i 0.0 0.0 6.04 0.0 0.0 3.0 0.0 0.0 4. 0.6 0.0 6.0 £81 1.2 2.2 8.3 2.0. 2.3 9.0 1.1 1.3 1.4 1.4 1.3 1.1 lalead Amalfi f1 ita 0.0 0.0 0.0 0.0 .0.0 0.3 0.3 6.0 0.6 0.0 0.0 0.0 601 .1 . 1. 10.4 . 43.3 3.4 5.5 1. 1. 1.4 33.9 I, t184MM111S 31.5 12.5 43.4 14. 1 15 11 10.1 80.1 310. 30.1 10.4 S3. 1. Ingnlng 11 81.1 J 8.3 80.9 80.3 5.1 30, 9.1 1.1 1.S 3.3 44.4 Rivet b851 3* 1 w fc34 ili 1 3 1.t1 1111 1. .9 30.3 55 S 10.1 9.1 l.a 1.0 1.2 44.4 603 0.0 0.' *.e 4.0 g. I * .c 0.0 0.0 0.0 0.0 0.0 I.e 2. 6. 1.. 2.l 3.1 . 4. i.11. 0.0 1. 1.11 2.1 1.2 3.4 lever bawg p1l fore8;n 0.0 1.2 2.1 13. 4.i 1 II.& 0.0 1. 1. 2.4 3.2 1.* 610 0.0 0.0 0.0 0.4 0.0 8.0 0.0 0.0 0.0 0.0 0.0 0.0 lolA 402.1 151.1 391.1 112.1 911.3 34351.. 551.2 51I3. 109.? 502.1 S51.1 2,1.0°° ilinng d Ia 603 budget 341.3 239.1 SILO 002.l 404. 2,s19.0 122.0 31'. 112.3 432.3 452 1 2,023.2 Ieterrnl loans 255.2 211.1 211.1 1103.1 1 1341.1 100. 231. 2? .3 2111.9 110.2 101.1 9143. .-- - - - - - - - - - - - - - - - - - - - - - - - - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R t ,rul *rtces II Alll pries hJ. PlICns4 11115 151k 14111 IJIU NIh lotal £6165 6114 l141 1111& HIM !6ll .. P i ,,,,, ~~~~~~~....... .,,......__. ... . . _ _.... .. _ _.. I .............. ............................. 111. iUlalmSUY A. IkIIVISII M 6USIaIV 44.4 45.4 44 .0 S4.$ 3,141.6 3.6 151.3 614.3 *. 'j 3 . 1,1212. .................................. ................................................I... . ................................................................................................. I. P;u 14j3l9 priej.&e iS.1 35.1. 11. 11.1 6.6 11 341.1 14.1 12.4 0.6 415.1 ........ ...................................... .................................................... ...................................... ...... ............................... a111ha I seiabiiali6sa 12.3 121 11.0 0.0 0.6 6.6 '0 11.4 Pi Stite IalcaaaiA IA#uea.umt 1.1 24.6 2.1 n.. 46.6 ..1 30.1 20.0 0.1 0.0 12.3 Pi Il llaBm 6mdia lm lGlAwMat 4.2 61.4 62.1 16.1 14.6. .1 16.1 66.6 {.1 0.0 44.1 PI SIAli, Stall itb glasl 69.1 113.4 13.2 401.4 11.1 210.1 t6. . 6.0 * 344.I 1Ital 111 km gIusI 43.6 201.4 50.4 140.0 0.0 11.1 164.3 31.6 0.0 241.1 Ft Ptai lka skip M.1 .3 23.6 .6. 16.1 1.3 0. .06 69.2 Pi lesee k its fIul noavaraim 9.6 61.3 11.4 46.1 6.0 1.1 144. 16.4 0.0 32.5 PI lae l titt Ilmcmatia 16. 5.4 6.6 6.0 3. 4.4 6.0 6.6 6.3 PI Plna1illais km. C02*aagaai glA&s 15.9 62.2 34.6 I.I. 43.6 4S. 2 32.2 0.0 12.5 1 atirs I'I tlaaa n 6.4 6.3 6116.6 |.4 24.6 I.6 5.3 45s.1 11.2 25.2 210.4 P Inld. pgal lIds. * 6. 24.2 1. 62.1 I.5 1.0 .1 2.5 65.4 9. 1.1 51.1 PIlad. Nliau Pert. 3.1 1.1 1.6 S:s 61.1 0.0 5.6 3.3 2.3 3.6 66.9 Par., large I,eav§ilia 2.1 4.9 6.1 11.1 0.0 1.6 5.5 4.1 0.0 6.4 PI Ind. Sinldia I 11.4 221.1 1.3 .1.1 S1l6 6.0 1.1 16.1 5.1 5.6 40.6 P1led. I&Aad4 6 03 1. 4600 313 50 6006 54.3 1. m gu§1esflacl 6.0 6.0 66. 294.2 441.2 152.1 4.0 9. 66. 261.1 300.5 529.1 .... ...... ................................. .................................................................... .................................................... 3. 1l111t lmhllahll "S. 431.5 110.6 40.0 3a0.6 295.2 9 .4 114.1 J661 249.9 204.2 12 64.0 6. laJactrul& prajatsl ^14.6 201.6 II.M 660.6 646.0 1454.2 109.3 61.4 112.1 111.4 9. 6,241.1 ................... ............................. ........... ..................... . ...... ....... ........ . ,.................................... ....... ......... _ 2. I41ai tiu dutapsIalt I2I.$ 229.2 306.6 1. 66.6 994.0 216.6 I69.5 150.3 132.1 101.9 144.5 ~~~~~~~~~~~~~~~~~~~.............. .... ................. .............. ..................... . ........... ................. ^.... .................... .~~~~~~~~~~~~~~~~~~~~~~~~ 0g .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ At mted t pace. At WII pices llo. fliri;dn 1111 1511 ItiII Alin l/i1 lelil MIN" 1510* lIU Ollie fois lilul ...... I........................................................................ ........................................................................................ . ...... Na. Psa3rde £4~~~~~~~~10611 05061. 114611 1 liii o. Il , 1.1. 14165 13116 £411 11111 11169 I,1.t. a184 5,039.4 1,401.0 16. o t. £4. 4e* " " s.1 2 912.9 912.1 11.0 414.2 544.1 1,11.1 fleancei bxr 101 t 11.4 122., 100.0 so.o s.e 1507.2 113.3 10.3 i,.e U.s 14. 4115.1 Emlve"ililac 121.6 141.1 46.0 123.0l 540.0 3,111.1 41I.1 11.. 1 911.9 311.3 2,111.2 oeelc traa 110.5 119.2 1:3.1 90.0 14.0 511.2 102. 1 121. 11.1 12.4 64.0 401.9 f foods 12.0 514.4 1.0 11.6 19. 60 39.1 15.3 46.6 62.2 61.4 45.1 241.1 IY. 111111c 1. lOki 4.i.. 1111 tl 2l 211.0 111.4 154.9 *. * .0 49.1 I1t.? 93.1 19.0 0.0 .0 42.1 Hom40ed 611 .................................................... --------------------------------------------------- 601 budget J1.1 13.1 13.0 W1.1 20.9 45.3 S.1 0.0 0.0 122.1 flitulil IoAS 195.0 51.3 11.1 11.1 111.3 50.0 11.3 0.0 0.0 212.0 2. AehlUle I otail cst 19.1 2.9 0.0 0.0 0.0 92.1 W6. 2.3 0.0 0.0 0. 29.2 68 baildg 2.6 2.9 5.1 2.4 1.1 0.0 0.0 0.0 0.9 loteiul lc 11 11.1 14.4 0.0 0.0 4.0 4.0 14.4 1. hibIAII ItIa costl 0.0 0.0 1.0 10.0 10.0 200.0 0.0 0. 51.1 31.1 39.4 143.6 fisliacti bvl ............ ............................. .......... . .......................................................... ......................... 001 isdi3 II2.s 11.5 20.0 . 5.0 ..4 0.0 * .. 12. 1, I. 21.0 ltioteal Il..s 31.5 52.5 40.0 154.4 0.0 0.0 21.5 1.& 40.0 141.2 4. Pordakac totl cut 0.0 5.1 22.2 4.1 11.4 41.4 0.0 9.9 11.6 3.0 1.5 11.1 2ideate equIty 1.1 22.2 4. 111. 41.9 0.0 0.9 11.1 3.0 1.5 31.3 5. b 1 *a e illtnl olat1l cost 0.0 20.0 10 6 00.0 300.0 10o .0 0.0 11.1 I3.3 13.1 10.1 222.2 fininted Wil ................................................. ........................................-.---.------.-- Private equity 20.0 00.0 100.0 100.0 31000 0.0 11.1 61.5 11. £0.1 222.2 . SinItIp I latal toil 11.2 3.1 0.0 0.0 *.0 u.s 10.4 4. 0.0 0.0 0.0 1i1. Fsniag -- - .. ..................... ..... ........u. IlelaIs kI an 1.1 1.1 1. 0.0 0.0 0.0 0.0 I.6 GI e tt ejutly 9.15 3.1 .1 1 1.0 4.3 0.0 0.0 0.0 13.1 (U ................................................................................... ............................................................................. fajs I it cqgial ICIL|b Al 0144 s*IicI ................. ........................... .. ......... ........... ................. ...................................... Na. liojia. 14 865 05961 ^1611 1l 11l 66819 lttal MO865 Slut MAY W1111 oil" totaI .... .. . ................... ..................... .................................... ............... ....................................... ................... .......................................................... I. II "^llguta total COil 11.9 19,5 2.2 0.0 0.0 4.6 25. 16.1 L.o 0,1.0 44. f l,R|4 ll.. ~ ........ ............................. .................. .. .................................................. 1ale,oal leanse ll I 2.1 1 20.9 1.9 2.2 g.4 e.g e. 1.? iaa.atic Isas I.2 13.1 2.2 I1. 1.1 11'. 1.1 0.0 0.0 14.1 ptlt iuil 0 3 11.1 1.0 2. 0. .0 0.0 10.6 6.o~. p1lee jacli,, | total ct0. 0.0 0.e 10.0 120.0 220.0 6.0 0. 0. 11.5 II.? 155.2 filisaced kvi ................. ............ ' ''''''''''''--e'''-------.---.-- .._-.___.--- ..__......__.......... 101 ladt 2.0 20.0 5.0 0.0 0.6 0.0 11.4 20.4 21.1 [al al learn 15.0 40.0 15.0 6.6 0.6 0.0 55.1 £1.5 116.0 llk 205.0 1114.11 10.3 214.1 211.4 11^1.4 211.1 141.1 242.4 b0I.5 211.9 1,00.2 .... ----------------------------------------------------............ ........................................ Flalnced bly 61 hudeIt 33.1 56.0 65.1 42.1 50.0 216.2 J1.3 4.0 fall. J1.2 34. 212.l fileriAl los 251,2 ,1 0.1 11..6 121.1 150.0 164. 21 11,7 102.1 Sl,1 1aestIC loans 2.9 13.6 2.2 0.0 0.0 e 1 11 11.1 1.1 0.0 0.0 16.l Pa'inaI. oqutiI 11.9 14.1 104.2 844.1 111.4 6.9 16.6 2.4 81.1 16.5 lS.O 219.4 U. II huE 1. Il,sit asluoryff I hutal 1coit 23.1 91.5 I. 0.0 6.: 125.2 21.9 11.9 4.6 0.0 0.6 100.4 fjulited kvi . ........ ,. ......... ......................................... .. o.................................................. Eclernal lsa 14.0 51.1 1.1 61.9 II.! 44.3 1.4 0.0 0.0 59.1 0Oaet 01 1.6 40.9 1.3 51.0 1.0 35.1 2.4 6., 0.0 40.1 tfiftIiga l t 1.6 2.9 8.6 5.1 Il. 2.5 0.0 0.6 0.0 4.6 2. Iii. o8Iisiaatioe tftal call 0.0 51.1 803.6 0.0 6. Hi.3l e.0 1.1 62.0 0.6 0.0 304.1 flindcs^ byl ..... ................................. ... ... ....... ............. .. ............................... lrlsal leas 12.9 16. 101.6 0.0 29,9 51.1 6.0 0.0 63.0 felia.is funds 21.6 16.9 S6.5 0.0 10.5 29.3 0.0 0.0 41.6 1. 1~l p set l l e#I r I tIII IUlI cl t c.ll9 . I. 0.0 0.0 0.0 54.1 15.1 14.2 0.0 0.0 6.0 49.4 Flamed byl - -- ....-. ...................................... ...................... .......... ... ........ fllesail Iunas 18.6 6.6 81.2 32.0 5.1 4.0 0.0 u.4 11.1 PeFlasiea funds 3.3 10.1 11.4 1.1 6.1 0.0 0.0 0.0 11.1 4. Asphill pldat lolul coal 1.5 14.9 3.5 0.0 0.0 19.9 14 12.6 2.6 0.0 0.0 o.1 Flamled ig ' '' '''''' -'-------- ---- --.- ----.----- ----------------- ._ __.___..,...,,__....,,,,,,_,,,_,,,__......... Parlaels leads 1.5 14.9 3.5 1. 1.4 12.1 2.6 0.6 0. 1. .9 ... At giuuent pratis At aI,14 t1X Moa. PIoltm 5Blls i5s11 Ill IIlla u/ii [alit 14185. 15.ISM Hil1 IIII Ig/1S to1t1 3. hLanol p,lan 1,ilaS cl Ut 0.0 0.0 00. 4.0 41.4 41.2 0.0 o.0 0.0 0.0 51.2 101 hudpl 5. .5. 1.9 0.0 0.0 0.0 0.0 1.9 CDtae.jI lears 97.S 1.3 0.0 0.0 0.0 0.o 1.3 1. Ataeitici plait I 141 n tsl 19t.9 51.5 Jl li 0.0 0.0 451.9 211.1 11. 25.5 0.4 4.0 11l.5 [lirnicid bva .. .. h- - ---------- --------------*--- - *------- ------- - 601 uditil 104.1 05.! 12.1 2M2.1 U1.9 S.1 25.1 e.0 0.0 191.1 lItarIaleSlA 191.1 591. 5 50.1, 0.0 4.4 0.0 4.0 14.1 1.Shps total tesl 02.4 521.0 1511. IlI.4 165.6 104.. 11.0. 55.4 125.1 712.0 121.1 544.6 f InCased bo1................ ......... .............. .........- ........... ..... ............. ........ ... ... .. ........ .. Pprtajrin funds 12.4 12l.1 158.5 111.4 1i5.i 104.5 11.0 010.4 124.1 21.4 124.1 544.1 b lo.silst supply lotal csal 52.2 11.4 211.1 211.1 341.4 ,M.? 11.:1 41.0 117.5 174.5 232.4 141.5 finacedAwl .................... ...................... ------- r------------------------ PSitima Saudi 52.2 1110 231.2 231.4 141.4 1,050.2 11.1 111.4 1. 1s 514.5 232.4 504.5 7. faplarat ion 4 prod. 1&aS cost 921.1 5 5,0U.9 1,100.1 1,154.1 5,229.4 01.4 051.1 151. 59.0 155.9 4,141.1 Finnced ky ................................................... ....................................... l.teraal 1lan, 21.1 11.5 U5.4 55.0 51.1 222.1 2n.5 11.5 54.3 40.5 19.3 115.0 fPIraisa luads 940.0 154. 192.5 se041.2 t *io 5 ,01.1 113.9 144.1 111.1 115.1 141.1 1910.5 to. Clyv a.s systles lotuS cost 10. 1.0 14.1 20.1 24.4 15.4 10.0 5.1 11.2 14.1 51.& 51.1 finiancd ya. ............................-......... ... ..... 601 buditl 10.0 4.9 5.9 A.1 6.4 11.1 9.1 I.? 4.1 4.1 6.4 21.1 EitiiaaI loans 0.5 1.1 0.2 13.5 55.0 41.9 .1 *.9 1.1 I0.5 12.1 W0.A IDIOt 1,402.5 131&0.5 1 507.1 1,529.l 1 Ilu.1 1,12.1 1,154.1 1311i.2 1,212.1 5,174.5 12.1I1.1 ,250.4 ~~~~~~~~~~. . .. .. .. ... ... . ............ ... .. ... .... .. ... .. .... .. -- -- --- --- -- -- --- --- --- -- --- humiXd bly 6 udtal 121.2 10.5 10.0 1.1 1.4 21.1 114.1 11.5 34.2 4.1 4.4 2I1.1 11laisal Inm 250.4 101.1 1.1 U1 .5 165.1 15.0 259.1 92.13 15.1 50.1 51.1 51.1 Il,et 10 1. 0.9 3.3 0.0 0.0 5.5 1.0 135.1 2.1 4.0 4.0 44.1 terliarna lunds 1,051.1 1,121.5 1,415.9 1,454.5 1124.? 2 ,11.1 913.1 1,133.0 1,124.0 1,06.1 15105.4 5,410.1 ........... ............................................... ................................................... ....................................... ................................... 9 9~ ~~ ~~~~~~1 l'Sz 11 Il I'' z WLl VIIt e ll *' II l'1 it 11 l' l' 11111W P1i00 I IflhiI ill t:@ es* c c ee Ce *CI 1w *e re SC @' 1' t/| 11311 P1 t"1' Q~~~~~~~~~* go 0' se s'e 4 e 1t OS Ci 00 o ' it 11113 11110 I; 1 *II ....... .......................... .................................................... .................................... .................................................... .........I tIllt t' lCI t'l '? 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Curs sus 42.6 13.6 11 3.1 41.1 66.5 2413. 44.6 44. 1 44.3 41.4 45.4 191.1 12/11 hic 0.J 2.1 2.9 3.1 1.1 11.1 0.6 2.3 2. 21.4 2.4 10.1 tI/AG too 0.1 1.0 3.1 3.6 . *t 1.1 0. 2. 2.6 2.1 3.1 11.3 l e.tIked 2. .2. 1.5 1.5 1.1 1.1 12.2 a/12 too .0. 1.1 2.4 11 4.4 15.1 0.1 2.1 2.1 2.1 2.i 11.6 leIechie 1.4 1.6 6.1 .0 1. 26.0 1.1 5.0 5.0 S.1 5.1 2.1. 21/90 lo 61 1..3 4.4 1.1 4.6 6.1 .3 1.4 1.1 1.1 1.1 4.1 Saticitd 1.3 3.4 5.4 9.5 21.3 1.4 6.0 6. 6.2 6.2 21.t 21/10 lof 0.4 4.5 4. 1.6 .9 1.3 0.1 4.3 1. 1.3 . . lelich . d. . 0. 40. 4.3 1. 1.2 1.2 1. 1.4 34. 301120 Iclaciud 2.4 40.4 16.9 12.6 43.6 45.4 2.3 3.4 3.4 3.3 3.3 31.2 HIM 12.4 11.41 UQ~~~~~~~~~~~~~ .. .. .. . .. .. .. . .. .. .. . .. .. .. . .. .. .. . .. .. .. . .. .. .. . .. .. ..7 .. .. .. . .. .. .. . .. .. .. . .. .. .. . .. .. .. . .. .. .. . .. .0. la"e 84 Al awreet *:ir At 011/4 prices ................................................ .... ............................................................................................. 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Core busies 0.0 0.0 10.0 0. - 110.5 211.1 0.4 0.0 15. 4 4.1 is.8 141.4 .. ................................... ....... ....... ... ... ......................................... . ................................................................ ... 1t1l2 too 0.0 6.0 1.1 14 4.3 16.1 0.6 0.0 2.2 2.4 1.0 . lelagibs 0.0 0.0 1.l 4.9 12. 29. 0.0 0. 4.1 1.1 1.2 21.5 211/0 foa 0.0 0.0 3. 4.4 1.0 18.2 0.0 0.0 I.l 4.1 1.1 14.0 2/Ita ei 01. 0.0 183. 11.4 11.1 51.4 0.0 0.0 10.4 13.1 14.6 30.4 21110 14l 0.1 0.0 14.4 12.3 14 36.3 0.4 0.0 13. 19.4 HA. 21.9 ^lalched 0.0 0.0 84.5 28.4 24.0 41.4 0.0 0.0 1.1. 13.1 11.1 44.1 1 10/820 leWlaced 0.0 0.0 3.5 43.0 22. 5. *.0 .0 88.5 8.3 11.5 1. S.4 40. 2. 1eadu lious 411J.0 112. 45.8 56.2 W0:1 511.4 840.2 15.5 51.1 48.5 41.1 454.9 .......... .... ............................. ....................................................... ................... . ........................... ........... ................. _ II/II 0lib.ed 18.5 18.0 4.1 *- .1 . 5.3 51.2 15.0 18.6 4.6 5.4 1.4 42.4 1411/24 le^lued 21.4 24.0 0.6 L. 0.4 14.0 81.4 22.1 1. 1.4 5.4 d2.l 451120 hlItbce 21.1 22 9.1 6.2 0.9 100.1 21.4 21.2 1.4 4.0 4.0 4 1.3 54/840 l81 b,ed 44.1 52.1 11.4 35.2 18.4 1446.0 i.) 44.1 14.0 1.2 11.2 824.2 701200 I,8isbii 48.1. 1.5 2;.1 20.0 281.4 14.1 54. 50.5 10.1 84.1 14.1 8/1.0 DIAL 201.1 211.2 219.1 381.1 311.4 1,410.1 111.6 244.4 28.4 2131.5 211.9 1.111.4 .... .. ........... .................. ................. ....... ........ .................................... s...... ... .. _...... ..... ........ ... ..... ... fiearnei by 61 budil 89.0 40.0 44.2 49.5 *12. 210.S 81.4 14.0 52.5 51.1 4l.1 721.3 EsIterel WAS Wi.0 800.0 80.0 300.0 e.g 0.0 19.4 11.5 is.8 220.9 huL land"oAib 110.0 284.0 314.0 151.4 811.5 0.4 0.0 0.0 110.9 luatitic boriutrg% 18.0 25.0 118.0 142.1 16.4 441.1 1.9 21.4 15.1 144.4 I20.0 143.0 III lead, 33.2 3.2 5. 5.5 4.1 22.9 2.4 2.1 4.0 4.6 4.1 81.0 F-i ... . .. ..... . ....... .... ...... ....... .. . . .......................... 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KalI..ula. 11.6 211.4 242.1 291.1 316.4 l,200.4 18.0 111.3 192.1 21 .1 213.1 941. pland 1W.0 151.1 154.1 110.S 111.1 S41.2 11.1 I35.I 122.5 131.0 123.1 61.1 Iree crops 11.1 2J.1 40.1 12.4 2.9 11.1 1. 21.3 I2.1 1.1 42.S 11t.1 ida@,eĞ 21 3 1.1 411 6U.2 61. 231.1 2353 11. 11.9 44.12 44.2 5OJ3. 1. Salanol I lMoluccas it 1 Y.4 11. 24.1 2.4 211. 62. 1 P .0 11.6 11.0 11.0 119.4 Upliad 61J 11.6 22.9 3.6 1.1 154.1 16.9 44.2 I9. 6.3 6.1 112.1 I,.. (lots 6.3 6 14.1 1.1 01.1 0.1 .1. .1. 11.1 01.1 11.1 46.1 Swoops 0.0 1.0 0.0 0.0 0.0 4 0.0 0.0 0.0 0.0 4.0 0.0 4. slla. Jaya 55.4 31.4 002.2 111.2 1 .1 321.1 46.1 61.1 £5.1 102.3 10.1 403. ............................................ ....................................................................... .................................................... Uplan 0.4 11.0 93.0 MA. 114.3 450.9 46A.1 1.I 11.5 11.1 11.3 in.0 free crops 0.0 4.1 9.3 14.9 51.4 49.1 0.0 3.6 1.3 60.9 16.6 36.1 0.0 0.0 0.0 11.2 14.1 21.3 0.0 0.0 0.0 9.1 1.1 19.4 5. Sub-total 416 151.3 6. 61.1 101.4 3,110.4 438.1 412.6 19 4115. 411.4 2,345 . Upland 313. J14. 314.1 Jl 0]2 116.4 1,50.1 321.2 33.0 291. 26.1 24.2 1,411.1 Ifrl Op% 52.0 58.2 103.1 130.1 132.5 4115. 41.1 41,9 53.4 16.0 101.0 3181 luanpi 65.1 11.1 024.2 019.4 112. 0 62.1 3.3 1.1 3.6 111.2 0W0.2 40.1 lesni 6. 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I60.1 U1. 0 6.1 hi.l 46.2 214.2 led satlalite kuspi Local Sawl 64.5 11.1 16.9 9.2 0.0 56.5 3.1 13.5 13.5 6.1 0.0 41.1 UI4dio a1.belals local lout 11.1 10. 1 ILl III 0.0, 4510 10.6 9.0 I.1 1.1 0.0 31.3 aleAbul auilals lcal Bawl ILl1 16.1 11.1 11.4 1141 61.6 11.1 63.0 1flI 131. 1.1 65.5 law roab ail cells loal Ba .3 0.9 1.0 1.0 .3 3.1 0.0 0.6 0.3 0,0 0.9 4.0 N.. f5 wAlls local huwt 1.1 0.6 0.1 1.1 0.0 0.2 .A .0 .0 .s 0.0 *.2 alit, local local levi 4.6 4. 5.6 6.4 6.9 20.3a 4.5 3.1 4.1 4.1 4.1 23.1 N,a Isachisl ol h t, hatrl lout 0.0 0.0 1.1 9.4 1.1. 21.9 0.0 0.0 4.6 6.9 9.1 20.0 Ulm Cl4ash &ap C.il~il Al ut .60 ).2 10.3 0.9 1.3 11.1 5.1 6*1 3.2 1.3I 5.0 34.3 KM rehuab Neill Ceomica Bal 0.0 0.9 0.9 6.0 1.1 4.1 0. .1 0.1 0.5 0.1 3.1 leprows eahd al $ cal ls eolu Bawl 11.1 12.1 11.5 14.5 61.1 61.1 10. 1 .1 Fe.? 10.1 10.1 13.4 3. pecial hnspiaiIs 30.6 33.5 21.6 21.0 11.4 14.9 9. 20.0 21.9 30.6 60.5 93.0 Now seMal1 haup 5.0 3.3 4.1 4.4 0.0 11.31 4. 5.1 5.2 3.2 0.0 141.4 Impioues until hlpi 1.6 10.0 15.2 15.1 I10.1 51.4 6.6 9.5 12.1 11.6 lI1 46.1 bhAb soMatl hilps i .1 4.9 4.1 4.4 2.1 21.5 6.0 4.2 3.1 5.2 III 19.0 lapfole .11.. baoip 2.6 5.9 3.6 1.5 2.3 65.0 6.3 U. 2.1 2.4 6.3 62.0 3. calfl Pat ries 62. 1 IS 60.4 20.0 21.1 01.6 H 11.6 1 14.A 14.1 114. 61.1 leluiral Ill 10.4 14.6 R.0 61.0 11.1 C 1.6 . 11.6 IJ.8 111.4 52.5 lItaal kaulk 3.2 3.5 3.1 4.0 4.5 it.? 3.0 5.0 3.0 3,0 3.0 64.6 E. 1111AS(A CQNIOLLB 33.0 34.9 03.5 101.1 .130. 311.5 3.1. 21.9 6.5 14.1 11.1 231.9 I, Vdtioc haous 12.0 11 26.0 31.0 31.0 114.0 II1 1.1 lol20. 22.6 25.9 61.A Mlaitia 3.0 1.6 60.3 22.1 235. 1 3.6 1.4 6.5 64.5 16.2 11.4 61.9 other 4.0 3.2 1.1 0.1 1.6 . 311. 3.1 2.6 all 6. 6.5 21.1 2. oIier lassatiss1. 11. 9 0 10.1 39.4 45. .141.1 10.1 10.3 24.6 2.1. 33.0 614.9 Cholera 6 biarrios 4.0 4.1 11.3 14.9 lilt HIS 5.1 3.1 9.0 11.0 12.9 40.2 lchewalostis 1.0 1.4 11.1 20.6 21.4 13.9 4.6 4. 13.0 14.1 11. 3 13.2 DII., 2.0 2.2 ~~~~ ~~~~ ~~~~4.5 .4. 4.3 11.4 69 1.9 3.6 3.2 2.9 613. 3. 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