RESTRICTED Report No. EAP - I Oa This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representinig their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION CURRENT ECONOMIC POSITION z w0 Z- AND PROSPECTS C O z M cn x - r-t C OF X INDONESIA .4 5> O o November 14, 1 969 East Asia. & Pacific Department CURRENCY EQUIVALENTS B. E. Market Rate U.S. $1.00 = Rp. 326 I Rupia = U.S. $0. 003 1 million Rupiahs U..S. $3. 067 This report was prepared by a mission that visited Indonesia in September/October 1969, together with the IBRD Resident Staff. Members of the visitng mission were: Wouter Tims Chief of Mission Graeme Thompson Chief Economist Mrs. Helen Hughes Industrial Economist Daniel K. Lee Economist Martin Hartigan Economist Miss Daphne Minott Secretary Anthony A. Churchill of the IBRD Resident Staff participated in the mission's work as a full member of the team. The members of the Resident Staff provided the material for the sectoral part of the report and for the lists of new projects and required pre-investment surveys.  TABI4 OF CONTENTS Page .BASIC DATA i SUMMARY AND CONCLUSIONS iii Chapter 1 Major Developments in 1969 and Issues . . . 1 2 Economic Performance in 1969/70 . . ... . . 10 3 Public Administration and Fiscal Management .. . .. . . . . . . . . 27 4 Resources for Development 1970/71 . . . . . 35 5 External Trade and Payments . . ..... 6 Sector Problems and Programs . . . . . . . 60 Annex I List and Summary Description of Projects for Commitment in 1970/71 II Pre-Investment Surveys and Technical Assistance for 1970/71 STATISTICAL APPENDIX  BASIC DATA Area 735,381 square miles Land use as percentage of total area: Estate agriculture 1.14 Smallholder agriculture 13.10 Food crops (9.30) Cash crops (3.80) Population (1969) 118.1 million Density per square mile 161 Rate of growth (1961-1969) 2.4% p.a. Density of main islands (per square mile) Java and Madura 1,.9 Sulawesi 119 Sumatra (and adjacent islands) 106 Kalimantan 24 Other Islands 40 Political Status: Unitary Republic, Member of the United Nations and the Association of Southeast Asian Nations (ASEAN) Gross Domestic Product (1969) Rp 3,100 billion Per Capita GDP $ 80 Money and Credit Exchange Rates (September 30, 1969) BE Rate DP Rate 1 Rupiah $ .0031 $ .0026 1 Dollar Rp 326 Rp 379 % Change December 1968 June 1969 December 1968 - (Rp billion) (Rp billion) June 1969 Total Money Supply 114.2 147.1 28.8 Time Deposits 12.0 38.3 219.2 Bank Credits to Private Sector 45.1 73.7 63.4 Price Index 523 521 -0.4 (September 1966 = 100) - ii - Public Sector Operations (Rp billion) 1969/70 1970/71 1968 Revised Preliminary Actual Estimates Estimates Government Receipts 185.3 333.6 444 Revenue 23.1 Other 35.5 98.5 124 Government Expenditure 185.3 333.6 4t4 Routine 1 87 Development 35.5 118.4 161 Public Savings - 19.9 37 External Assistance to the Public Sector 35.5 98.5 124 a. Counterpart funds 35.5 67.5 78 b, Project aid - 31.0 46 External Public Debt ($ million) Total external debt obligation in 1969 on debts contracted to June 30, 1969 3,399.6 Total debt service in 1969 on guaranteed debt (after rescheduling through 1969) 33.8 Debt-Service Ratio (1969) (after rescheduling) 7 per cent Balance of Payments ($ million) 1968 1969 % Actual Estimate Change Exports f.o.b. (oil net) 647 722 11.6 Imports c.i.f. -834 -969 16.2 Services (net) - 77 - 87 13.0 Trade Balance -264 -334 Commodity Concentration of Exports (1968) Rubber 27.0 per cent Oil (net) 12.1 per cent Foreign Exchange Reserves ($ million) (Central Bank only) December 1968 September 1969 Gross 53.4 129.7 Net -34.8 34.8 斗細  SUNMARY AND CONCLUSIONS i. The stabilization program of the last three years slince the be- ginning of the Suharto administration brought about a virtuaniy complete halt of general inflation in the first half of 1969. It had not been expected that these efforts would be successful so early, nor had it been foreseen that one of the consequences of the policies to restrain demand would inevitably be some degree of stagnation during that period. However, economic policies were adjusted to the new circumstances quite rapidly, and around the middle of 1969 economic activity was again rising, thanks to the acceleration of government development expenditures and an increase oftcredits extended to the production sectors. ii. Recent economic performance has been satisfactory. The limited data available on major food and cash crops and on the mining sector sug- gest that in 1968 an increase of 4 to 5 percent in the national product may have occurred. Preliminary data for the first nine months of 1969 suggest only a slight further increast. in GNP, mainly because of almost unchanged agricultural production. Over this period of 1969, prices increased only by 0.5 to 1.0 percent per month on the average, largely reflecting increases in non-food categories which restored the ratio be- tween food and non-food prices to that of 1967. Exports are expected to increase in 1969 to a level about 11 percent above the.previous year, as a result of higher international prices for Indonesia's major exports and as a consequence of the rehabilitation and improved maintenance of existing production facilities combined with rising output from new investment in export-oriented sectors of the econoMr. iii. The stagnation of domestic demand in early 1969 reduced imports and the utilization of program aid. As a result, foreign exchange reserves increased during the first half of 1969 but were reduced in the following months as import demand rose sharply. Program aid disbursements increased in the third quarter of 1969 to originally planned levels, but because of earlier shortfalls a larger pipeline will remain at the end of the calendar year than was originally projected. iv. For the first time in recent years, there,was a surplus in the routine budget for the fiscal year 1969/TO.to assist in financing a sub- stantially increased development program. Revenues are expected to exceed the budget targets by a small margin, making it possible during the current year to effect increases in the very low level of government salaries with- out recourse to deficit financing. Despite this fiscal progress, in the first quarter of the fiscal year changes in Government orgAnization and difficulties in planning and launching the enlarged program of development work held development expenditures to a level far below original projec- tions. Thereafter, expenditures began to accelerate and it is expected that this trend will continue, resulting in,only a-minor shortfall of actual expenditures as compared to budget estimates for the fiscal year as a whole. - iv - v. The year 1969 thus marks the transition of Indonesia from sta- bilization to rehabilitation and development; this confronts the Government with different and, in many respects, greater administrative challenges. Indonesia is now beginning to repair the damage, physical and institutional, done by years of neglect, mismanagement and inflation. The Indonesian au- thorities are eager for rapid and spectacular results, but the number of tasks to be tackled, the time required for planning and organization of projects and programs and the limitations on domestic resources which can be mobilized, will require sustained efforts on the part of the Government and continued aid, both technical and material, from the outside. vi. Progress is evident in the preparations for a much larger and more systematically planned program of public investment for next year. A considerable number of sector and project studies were started and arrangements for others were made. This has resulted in a substantial growth of the portfolio of projects ready for commitment by outside do- nors or expected to be ready within the next fiscal year and for which technical assistance in implemenation as well as capital aid will be need- ed. It is clear that these efforts must be continued in the years ahead and expanded into other sectors and new areas, in order to provide the basis for further acceleration of the development effort. The Indonesian authorities have drawn up an extensive list of surveys and studies which need to be unlertaken in the near future and for which external assistance is required. vii. The expected increase in the level of project aid disbursements - projected at some $140 million in 1970/71 - will lead to considerabN- pres- sure on local currency resources of the development budget in the coming year Current expenditures in the central government budget are still at levels which are inadequate for efficient operation of the public sector, both with regard to salaries of government employees and expenditures for the maintenance of equipment and infrastructure. Additional pressures on limited resource$ are created by risipg debt servicing costs, the larger transfers to the regional and local governments and the costs of preparing for the elections in 1971. The need to increase both current and develop- ment outlays in 1970/71 is reflected in revenue measures for the coming year directed towards the generation of substantial additional public re- sources. The Indonesians authorities are planning to increase government revenues by 36 percent over the level estimated for the current year. viii. This substantial increase of revenues is still not sufficient to meet all requirements. Originally planned salary increases had to be reduced in the course of formulating the 1970/71 budget despite the urgent need for substantial salary increases to improve efficiency and thus assist the development effort. The burden on the budget would be easldi.to a limited extent if budgetary transfers to the tanking system, as part of the medium- term credit p,.*ogram, could be disconti.nued. This appears to be consistent with financial stability. The pressures would also be reduced if, in ad- dition to counterpart funds generated by program aid, project aid were to finance some part of local currency as well as direct foreign exchange costs of aided projects. -v - ix. To ensure the continuation of on-going aid projects, to undertake new projects and to provide for increasing domestic development expenditures, the development program is to be enlarged to Rp 161 billion in 1970/71, an increase of 37 percent over 1969/70. The public savings target of Rp 37 billion for 1970/71 will make it feasible to medt these development needs in the public sector. This transfer of budgetary resources is almost dou- ble that of 1969/70, and its attainment, in an economy still recovering from recent major disturbance, would be a real achievement. It will in- crease Indonesia's own contribution to the development budget from 15 per- cent in this year's program to 23 percent next year, notwithstanding the projected acceleration of development expenditures. It will also mean raising tAx revenues to over 10 percent of GNP as compared with less than 5 percent three years ago. In addition to the larger provision of Indone- sia's own resources for the development budget and disbursements of project aid estimated at Rp 46 billion, an increase of counterpart funds for de- velopment financing will be required from an estimated Rp 67 billion in 1969/70 to Rp 78 billion in 1970/71. When account is taken of subsidies on imported aid-financed commodities, this will requir program aid com- mitments and disbursements in 1970/71 of $340 million. x. Indonesia is presenting to the IGGI a request for project aid commitments of $260 million in external financing for the period starting on January 1, 1970 and continuing through the fiscal year 1970/71. The request is fully supported by the project list presented in Annex I of this report. The mission considers the level and sectoral emphasis of this project request appropriate to the needs and priorities of the next phase of development in Indonesia. A major part of the request is for projects expected to be ready before the end of 1969 and the remainder should be ready in the course of the next year. A total of $600 million in project and program aid will assure Indonesia of the resources required to finance its rising development efforts. Commitments of this magnitude will make possible disbursements in 1970/71 of $480 million, an increase of 16 percent over 1969/70. Net of debt service costs, the official exter- nal contribution to investment expenditures will increase over these two years from $359 million to $399 million, assuming a rescheduling of the 1970 obligations on pre-1967 debt. xi. This level of aid disbursements, together with an increase of export earnings by about 10 percent during the next fiscal year, would provide an increase of foreign exchange resources of 12 percent. When account is taken of debt servicing costs and a reduced recourse to short- term trade credits, this would allow imports of go6ds to increase 11 per- cent. Part of this increase represents capital goods imports financed with project aid and private capital, so that other imports can increase by less than 6 percent. It is estimated that these imports will increase by 9 per- cent from 1968 to 1969; a larger amount of program aid could be justified on this comparison. A larger request could also be defended on the basis of the need to enhance Indonesia's negligible foreign exchange reserves. The program aid request of $340 million must therefore be considered a conservative estimate of requirements. - vi - xii. Indonesia's debt service liabilities in 1970/71 are estimated at $81 million, assuming a rescheduling on so-called Paris terms of the liabilities due in 1970 on the pre-1967 debt and acceptance of the Abs proposals to be implemented from the beginning of 1971. The latter assumption implies a payment in 1971 and each subsequent year of $56 mil- lion, of which one quarter ($14 million) would be payable in the fiscal year 1970/71. This raises the probable debt service ratio from 7 per- cent in 1969/70 to 10 percent in 1970/71. Debt service on loans con- tracted in 1967 and later years amounts during the coming fiscal year to $28 million; this figure will rise rapidly with a continuing inflow of aid and the expiration of the grace period applying to most aid received by Indonesia in recent years. From 1973 onwards the servicing of new credits will involve larger payments than those on the old debts (if these are settled in accordance with the Abs proposals) and the debt ser- vice ratio will rise to well over 13 percent. This emphasizes Indonesia's need to obtain external resources on the softest possible terms. CHAPTERs 1 MAJOR DEVELOPMENTS IN 1969 AND ISSUES 1. The last Bank economic report (EAP-5a) was issued on May 16, 1969. It was apparent then that 1969 would be a transitional year in which Indo- nesia's major efforts would begin to shift from stabilization to develop- ment. This was recognized in the fact that the new Five-Year Development Plan (1969-19T4) became effective on April l the beginning of the fiscal year 1969/70. I/ Price Developments 2. One indicator of the financial stability achieved during 1969 was the behaviour of the Djakarta cost-of-living index which rose by less than 11 per cent between September 1968 and September 1969, and by 3 per cent in the first ten months of calendar 1969. The index is not representative of Indonesian price developments generally, but it is one of the few avail- able indicators of the effect of the stabilization measures on the prices of consumer goods, particularly rice. From December to July the index declined, although there was a normal,seasonal rise in March. In August a rise in rice prices caused the index to increase by dbout 3 per cent. In the second half of September prices rose more rapidly, again principally as a result of a rise in rice prices, reflecting uncertainty about rice supplies and availability, a possible actual shortage of supply and possibly speculative action. The substantial decline of maize production may have been another factor which increased the demand for and price of rice. In September there were no market injections from Government rice stocks, but such injections began in October and resulted in a slight decline of rice prices below their September peak. Production and Income 3. Statistical information on output and income in Indonesia is insufficient to permit any comprehensiv- or accurate assessment of overall economic performance, particularly on a current basis. Such information as is available suggests that aggregate output and income in 1969 has increased somewhat above the 1968 level, although this can- not be quantified more precisely. Output in agriculture, the most impor- tant sector, appears to be approximately the same as or perhaps slightly higher than in 1968. Price performance suggests that the 1968/69 wet season rice crop and the prospective 1969 dry season crop'may have appro- ximately been the same as or slightly larger than that of the preceding year, but this is uncertain in view of the probable increase in demand and a possible increase in privately held stocks. Little information is available on other crops although, in general, increases of output are 1/ Previously the fiscal and calendar years had coincided. - 2 - expected except in the case of maize. The volume of production of export croDs does not apiear to have changed appreciably but the value of output has increased principally as a result of the increase in the world market price of rubber. 4. Comprehensive information is lacking on industrial production. Spot-checks, incomplete production statistics and data on apparent absorp- tion of imported raw materials indicate that industrial production increas- ed significantly between the middle of 1968 and the middle of 1969. In the most important sector, textiles, estimates indicate that output has grown in the period by about 50 per cent. In most consumer goods industries in- cluding food-processing industries output seems to have increased somewhat, despite the cessation of operations by a number of marginal producers. There were increases in production of cement and in the extractive export industries: tin mining, crude oil and forestry. Output of crude oil during 1969 is expected to be about 26 Der cent higher than in 1968 and further increases are expected.in the coming year from existing proven fields. None of the new contract areas is expected to be in production in the year. The increase of development expenditures produced some in- crease in construction activity. Work has been resumed on a number of construction projects in recent months. Exports 5. Export performance was satisfactory during the first semester of 1969, increasing by 17 per cent as compared to the first half of 1968, although slightly below the level of the second half of 1968. 1/ Indonesia benefited from buoyant international prices for several major export pro- ducts including rubber and tin, and, 3s already indicated, crude oil, tin and forest production rose sharply. ,It is estimated that in the 12 months of 1969 exports (including net oil rdeceipts) will be 11 per cent higher in value terms than in 1968. Import Trade and Aid 6. The stagniition of domestic demand which immediately and inevita- bly followed the stpppage of inflation, reduced imports and the utilization of program aid in the first semester of calendar 1969 below the levels of the latter part of 1968. As a consequence, foreign exchange reserves which had been negative for many years increased during the first half of 1969. However, current information shows a significant increase of imports in the third quarter accompanied by a much higher rate of utilization of pro- gram aid and a partial reversal of thp movement of foreign exchange re- serves. Development expenditures which were slow to get under way in the early part of the year, increased substantially contributing to the growth of import demand; as a result the disbursement of both project and program aid is rising. For the year as a whole, aid utilization will probably fall 1/ Including net oil revenues and estimated overprice earnings. -3- somewhat short of the estimates made at the beginning of the year, reflect- ing essentially the low level of domestic and import demand in the first half of the year as the transition from stabilization to development oc- curred. Government Budget 7. It had been expected at the beginning of this year that the central government budget for the fiscal year 1969/70 would be balanced for the year as a whole but that during the first and second quarters revenues would not be equal to the expenditure targets. The development expenditures planned between March and September were expected to require temporary recourse to central bank financing, to be repaid from revenue surpluses anticipated during the last semester of the fiscal year. In fact, however, changes in Government organization and difficulties in planning and organizing the actual undertaking of an enlarged program of development work held development expenditures in the first three months of the fiscal year to a level far below the original projections. In the second fiscal quarter, however, such expenditures began to accelerate and they are expected to continue to do so in the second half of the fiscal year. 8. Revenue collection in the first semester on the other hand was above the targets, so that the bud7et in that period was in surplus. This contributed to the stagnation of domestic demand and the maintenance of a greater degree of price stability through the middle of 1969 than had been anticipated. The stagnant situation in the first half of 1969 re- flected the unexpectedly early achievement of economic stability and experience in other countries demonstrates that there is inevitably a period of stagnation before the economy begins to recover and production starts to rise. In the case of Indonesia economic policies were adjusted to the new circumstances quite rapidly, as is demonstrated by the relative- ly short period of stagnating demand. Private Investment 9. Private investment does not appear either to have increased appreciably or to have occurred on a significant scale in 1969. No systematic measurement or indices of domestic private investment exist. Fragmentary data indicate a readjustment on some scale in industry with the cessation of operations and the disposal of assets by a number of marginal producers and the beginnings of expansion by others. Investment financed with the aid of medium-term credits from the banks had not by the end of September grown to significant levels. A considerable number of additional foreign investment agreements and, in oil, production- sharing agreements were concluded but actual investment had not reached significant proportions by the third quarter of the year. Development Program Preparation 10. Preparations for a much larger and more systematically planned program of public investment progressed as a considerable number of sector and project studies and planning efforts were started and as arrangements for others took shape. Associated with these were plans and the begin- ning of action toward the rehabilitation of the physical production and infrastructure facilities operated by Government agencies and enterprises and for changes and improvements in the operational and financial struct- ure of these agencies and enterprises. These changes were directed to- ward placing increased responsibility and authority for physical and financial operation in the hands of the management of Government enter- prises and toward the establishment of their financial viability. Family Planning 11. An important step during the year was the decision to undertake a serious and large-scale program to reduce the rate of population growth. Initial steps to organize such a program led to a request to the United Nations Development Program and the World Bank for assistance in this effort and at the time of writing of this report a combined team fielded by the UN, WHO and the Bank was at work in Indonesia assisting the Govern- ment in the preparation of an operational program geared to achievement of the targets set for the family planning effort in the next five years. Prospects and Policies 12. The task of economic development confronts the Indonesian Go- vernment with different and, in many respects, greater challenges than the stabilization effort. At the same time, the increased attention to development is not being allowed to minimize the importance of maintain- ing price stability. Fiscal and monetary policies continue to be formulat- ed and development programs planned and implemented with this primary ob- jective in mind. 13. In a broad sense 1969 is a year in which Indonesia began to re- pair the damage, physical and institutional, done by years of neglect and mismanagement and by continuous rapid inflation. It is a year in which the Government is laying the groundwork for an enlarged and planned program of development. Although all concerned, both in and out of the Government and both in and out of Indonesia, are eager for more rapid and spectacular results and impatient with the pace of progress, the great number of tasks to be tackled, the time inevitably required for the planning and organization of concrete projects and programs, and the limitations of the resources which can be mobilized and effectively deployed, all counsel patience on the part of all concerned, continued and persistent effort on the part of the Government of Indonesia to deal with the issues and problems it confronts, and continued adequate aid, both technical and material, from the outside. 14. Some of the more important problems and issues which the Govern- ment faces in the immediate future are listed below. The nature of the problems and the status of efforts to deal with or of plans for dealing with them are discussed elsewhere in this report. 15. One of the major problems is of course that of mounting a con- siderably enlarged public and private investment program without endanger- ing the financial stability achieved with such difficulty and success. Although continued assistance from abroad is counted' on and is required, and although the mobilization of internal savings has increased decidedly, much greater mobilization of savings for both Government and private invest- ment is and will be necessary. With this in view consideration is being given and needs to be given to meams of increasing tax and other revenue collection by provincial and local governments, which could be used for the employment of the large number of underemployed in the execution of local- ly planned and directed local-scale projects for the improvement of roads, irrigation works, schools and other facilities. 16. Similar consideration is,being given to the need for changes in the structure and level of the import tariff, both the indivldual and the company income taxes and taxes on the consumption of petroleum products. Attention is being given also to means of improving tax administration where the need and opportunity for improvement is recognized to be great. 17. The need is recognized for further physical, organizational and financial overhaul of the Government-owned enterprises so that they can produce goods and services more efficiently and profitably and can con- tribute toward Government tax revenues and also generate savings to be used for expansion of their own pre-luctive facilities or as contributors via divideftds towards other Government investment programs. 18. There is clear recognition of and the beginning of action on the need to create effective development finance institutions either within or independent of the state commercial banks, which could more effectively mobilize and deploy private savings as well as aid resources. 19. There is also recognition of and action on the paramount need to stimulate and encourage by a variety of means the development of do- mestic enterprise and the expansion of domestic private investment. 20. The need is clearly recognized for increased efficiency in Government and for the elimination of the whole range of illegal levies by Government personnel and agencies on production activities and of malpractice in.the administration and collectioh"of taxes. It is universally agreed that substantial increases in salaries, at almost all levels, are a pre-requisite to increases in efficiency and the eli- mination of both the petty and the major.varieties of malpractice and corruption which interfere with productive effort. 21. The presence of redundant personnel in Government agencies and enterprises is another recognized problem and attention is being given to means for reduction or appropriate redeployment of such personnel. 22. This list is by no means exhaustive but is illustrative of the wide range of problems which the Government faces and with which it is attempting to deal. It emphasizes both the need for decision and action and the time which will be inevitably required for progress on these matters, however energetically they are attacked. - 6- Program for Fiscal 1970/71 23. The Government considers it possible to increase public sector revenues substantially in the next fiscal year and the mission agrees. Tentative estimates of internal resources for 1970/71 made by the Govern- ment indicate impressive (35 per cent) increases. In the case of direct taxes substantial improvements in administration and collections beyond those contemplated are necessary and somewhat higher receipts in 1970/71 should be possible. Claims on additional resources in the budget will come both from the current expenditure categories and from the development budget; a careful scrutiny of the expenditures is therefore necessary in order to assure adherence to stated priorities and policy objectives. 24. It is expected that the capacity to absorb project finance will increase substantially in the near future. The institutional framework for the implementation of economic development is gradually improving with technical and management assistance from abroad; simul- taneously the acceleration of project preparation and appraisal could quite quickly provide a large portfolio of economically attractive invest- ment projects, ready for financial commitment and implementation. As a consequence, requirements of project-type assistance will increase, but an even more rapid increase of local currency needs for the development program, including maintenance expenditures, will occur. In addition, not all projects lend themselves to external financing and for those that do the commitments of project aid usually cover only part of the project costs. This underlines the prime importance of a major savings effort in the public sector. The need to increase both current and development outlays is reflected in budget policies for the coming year directed towards the generation of additional domestic revenues. The tentative outline of the next years' budget provides for a substantial surplus of revenues over current expenditures. The Private Sector 25. The Domestic Investment Law, if well administered, should sti- mulate private investment. A number of impediments still exist, however, and corrective measures are needed in order to facilitate the implementa- tion of the investment law. Some of the existing regulations affecting the corporate structure are often unacceptable to new investors; labor legislation makes it relatively unattractive to employ women and almost impossible to reward good performance or to punish inefficiency; the laws relating to ownership of land and real estate and to leuding on the collateral of fixed assets are hampering the flow of investable resources to potential users. As a consequence, a number of foreign private invest- ment contracts in fact amount to amenIments to the existing laws and regu- lations. This creates legal confusion, doubts about the value of contractual commitments and obligations, and a continued and growing diversion of adminis- trative resources into individual contract negotiations. -7- 26. Private investment is best promoted in a stable legal framework. This is needed to facilitate the approval procedures and other administra- tive requirements now in practice for both domestic and foreign investors. The government machinery dealing with new investment projects needs to be organised in a way which simplifies negotiation proceduzles and,reduces the delays and difficulties for private investment which are inherent to the present system. 27. In the same way, private investment promotion requires an en- vironment of physical facilities which,enable investors to get established in a short time and to make their investment operationally efficient with- out undue delays in order to keep invqstment costs down and thus improve competitive positions. The creation of industrial estates, endowed with proper infrastructure facilities and with adequate security of tenure, is of great importance. 28. Action as outlined above would give major encouragement to private investment, both domestic as well as foreign. However, the im- pact of such measures with regard to domestic private enterprise would depend mainly on the response of local entrepreneurs. The latter may constitute one of Indonesia's scarcest resources and could therefore be a major bottleneck for any program that is designed to stimulate private investment. It is difficult to see how any policy which would not pro- vide incentives to entrepreneurial talent wherever it can be found could be economically sound, as it would lead to less than optimal use of very scarce resources. Industrial Policy 29. With the rapid increase of investment proposals from both fo- reign and domestic sources, a coordinated strategy for industrialization becomes more urgent. Although the Five-Year Plan clearly outlines a num- ber of policies in this area, and in addition industrial priorities have been set in the context of the medium-term credit program, there remain areas of uncertainty and some doubts about the adherence of all govern- ment agencies involved to the stated priorities. The role of private vis- a-via public enterprise and the function of protection need clarification. The general policy, enunciated by the Government, of allowing market forces to operate with limited government interference, has.not yet been translated into action at all administrative levels. For industry such action would imply that permits for private investment should be granted automatically by government in all but a few sectors and that the require- ment of permits and approvals for a whole variety of actions would be eliminated. Also indicated is the desirability of limiting protection for domestic industries, a policy approach which is reinforced by the difficulties of implementing a highly differentiated tariff under Indo- nesia's geographical conditions. Promotion of savings in the private sec- tor is an important target of the current Five-Year Plan and commendable efforts are already being made in this direction. The time deposit policy, combined with efforts to extend medium-term credit through the banking system have been the first steps. In this connection it is of prime im- portance that the institutional framework for medium- and longer-term lend- ing to the private sector be strengthened and expanded. -8- Agricultural Development 30. The priority given to agricultural development, and more spe- cifically to the increase of rice production, is fully justified. Some of the important elements of a concerted program (see Chapter 6) are only now being developed and have not yet been effectively employed. The irri- gation program for 1969/70 appears to give more than desirable emphasis to new areas at the expense of rehabilitation of existing systems where the returns are great. It involves the initiation of a very large number of new projects. Given the limited financial resources available to the sector, this could lead to unnecessary shortfalls in output and thus an extension of the present dependence on food imports. 31. The existing Bimas Gotong Rojong program for the improvement of yields through the distribution and use of modern inputs shortcomings suitable both in design and execution.' It is less than fully effective and costs, especially in foreign exchange, are high. To a large extent, the program is being implemented in areas with insufficient or unreliable water supply. This is not only reducing returns to the economy but also increases the risks to farmers. There were heavy financial losses during the last dry season. Concentration on areas served by skilled staff in adequate numbers is necessary if such losses are to be avoided and if farmers are not to be discouraged from using modern inputs and technology in the future. The Government is aware of these shortcomings and plans now to reduce the Bimas Gotong Rojong program substantially in the future, while at the same time efforts are being made to design better and more manageable programs which in due course can become substitutes for the Bimas Gotong Rojong programs. 32. In the longer run, the agricultural strategy to increase food production can only succeed if the Government makes sure that farm prices of the main crops are remunerative and stable. In other countries it has been repeatedly demonstrated that this is a basic condition for agricul- tural development. Stable and remunerative prices not only stimulate the use oi' modern inputs but also encourage farmers to invest in new technology with their own savings. The recent decisions on rice price policies are no doubt a significant step forward, but effective imple- mentation of this policy will require administrative reorganization and improved facilities for storage, milling, transport and distribution. Rural Works Program 33. Rural investment and savings can also be generated through the financing of local projects under rural works programs. It is the in- tention of the Indonesian Government to undertake a program on a substan- tial scale in the next fiscal year. ExperieAce with a smaller but similar program in 1969/70 has proved successful. Not only will this alleviate the unemployment problem and increase rural incomes, but at the same time it should help to cY*eate the rural infrastructure needed for increased output and improved acqess to markets. In addition, programs of this -9 - sort have demonstrated elsewhere that over and above the resources pro- vided for such programs by the central government, the local community can add substantial resources in cash and kind once the profitability of the investment and the virtual absencq of corruption through full public proceedings are established. Statistical Development 34. The improvement of basic economic information is an essential element in the improvement of the decision making process. More adequate budgetary allocations for the Central Bureau of Statistics are planned now, mainly for substantial extension of branch offices and field staff and for closer communications between them and the main office in Djakarta, but also for efficient data processing equipment and staff. It may be desirable to reconsider the present administiative organization in order to determine the best organizational location within the Government for the statistical services. 35. Improved data can assist decision making only if the skills required for economic analysis and interpretation are built up and orga- nized to provide the Government with timely and well-conceived recommenda- tions. Improvements in the extent and quality of staff work, and in the channels of communication within and between Government agencies, must also be given priority. - 10 - CHAPTER 2 ECONOMIC PERFORMANCE IN 1969/70 36. During the first eight months of 1969, a remarkable stability of prices and exchange rates was achieved. As was to be expected at the close of a period in which all efforts were concentrated, successfully, on halting inflation, the first semester of 1969 and, to a lesser extent the third quarter, was a period of stagnation, marked by little increase in output and relatively low demand. Production and Income 37. No national accounts for Indonesia for any recent year are available which could provide reliable estimates of economic growth; neither had any estimates been made for 1969 at the time of writing of this report. The basic production and trade statistics on which nation- al accounts must be based are in any case incomplete and of doubtful qual ity. However, the data available on major food and cash crop production and on the mining sector suggest that in 1968 an increase of the nation- al product of some 4 to 5 per cent may have occurred. Preliminary data of the same sort for the first nine months of 1969 would suggest that the national product may have increased only somewhat in that period but this judgment cannot be quantified. 38. Agricultural output in 1969 will probably turn out to be ap- proximately equal to or slightly higher than that of 1968. The results of the dry season rice crop, harvested mainly in September, are not yet available and varying estimates exist for the earlier wet season crop harvested in the spring of 1969. Price performance through September, taken together with the level of imports and net releases from Govern- ment stocks to the public, suggests that 1969 rice output will be about equal to or possibly slightly larger than that of 1968, although this is uncertain since there are no data on privately held stocks. 39. Output of other food crops, with the exception of maize, is expected to recover at least partly after the substantial decrease in their output recorded in 1968. It appears from spot checks tha.tVthe decline in rice prices in early 1969 was greater than in the case of alternative crops, causing some shift away from rice planting in the 1969 dry season. 4o. Production trends in the estate and cash crop sectors are mix- ed, with some increase of output volumes expected during 1969 for rubber, coffee, sugar and tobacco, and decreases in the case of tea, palm oil and kernels. Except in the case of sugar, which is produced entirely for the domestic market, these changes in output roughly correspond with price developments in international mark_ts. The short-run output re- sponses to price are, however, limited by a variety of institutional and structural factors. - 11 - 41. Little information is available on the performance of the in- dustrial sector. The achievement of stability and the subsequent months of stagnating demand have resulted in a number of failures of marginal producers; however, in the industrial plants which were able to stay in the market, utilization of capacity increased significantly. In the first half of 1969 the demand for imported raw materials for industrial use was low except in the case of raw cotton and yarn which were offered to the textile industry at heavily subsidized prices and substantial cred- it advantages. Outside the textiles sector a slight increase in manu- facturing output may have occurred in the first six months of 1969. Be- tween June 1968 and June 1969 the textile industry appears, from indirect evidence, to have increased its output by 40-50 per cent. 42. the minerals sector continued to show rapid growth. Output of crude oil increased by about 26 per cent, entirely from fields that have been in operation for a considerable time. The output increases which are hoped for as a result of current explorations in new contract areas can- not materialize in 1969 or to any great extent in 1970 since exploration in those areas is still in its early stages. Tin output increased rapid- ly in 1968 and has continued to grow during 1969, mainly as a result of the on-going program for improved maintenance of the dredgers and gen- erally improved management in the state enterprise. In forestry, the rapid growth of production under the new concessions granted in 1967 and 1968 is reflected in an estimated increase of log production by about 50 per cent in 1969. 43. No data of sufficient scope and reliability are available to permit estimates of activity in the trade, transport and construction sectors. In the last a higher level of activity is noticeable, as com- pared to 1968; the usual relation between trade and transport on the one hand, and production on the other, would suggest only small increases in the other two sectors during the first half of 1969. Prices and Monetary Policy 44. Prices. In the last eight months of 1968 price increases slow- ed considerably as compared with the immediately preceding year and were at the annual rate of 15 to 20 per cent. The first nine months of 1969 show price increases of much smaller magnitude at a monthly average of 0.5 to 1.0 per cent.. In the first quarter, the lean period of the rice market, prices still were rising some 2 per cent per month, but they dropped in the second quarter to the level of December 1968. During the third quarter and especially in the latter half of September there was again some increase in the general price level reflecting a sharp rise in rice prices. Increases in planned imports of both PL-480 and other rice were quickly effected, however, and the present order posi- tion for imported foodgrains (commercial and aid-financed together) and the expected arrival schedules suggest that in the coming months suffi- cient supplies should be available to prevent further price increase. - 12 - 45. An interesting development is the significant reduction in the rate of increase of non-food prices. In the latter half of 1967 and in early 1968, there was a clear lag of non-food prices behind the price of rice. However, from the second quarter of 1968 until the end of 1968, i.e. after the rice price was brought under control, non-food prices con- tinued to rise at a rate of some 6 per cent per month. Since the begin- ning of 1969 non-food prices have risen very little and at a rate which is only slightly faster than in the case of food prices. The relation between food and non-food prices is about the same at present as it was in 1966 and early 1967, which seems to indicate that the price distor- tion -caused by the foodgrains crisis of late 1967 and early 1968 has been largely corrected. 46. In the first half of 1969 a combination of factors led to a lower level of aggregate demand than had been anticipated and to the vir- tually complete halt of inflation. Although the major efforts of the Government during 1968 had been concentrated on halting the inflation it had not been expected that these efforts would be completely successful by the first semester of 1969. Neither had it been clearly foreseen that one of the consequences of the successful effort to restrain demand would be at least some period of stagnation and that this period would come in the first half of 1969. 47. The first half of 1969 was expected at the beginning of the year to be a period of considerable monetary expansion. The then anticipated large requirements of the Government sector for temporary bank credit to finance accelerated development expenditures, the expected rice procure- ment program of BULOG_and a large projected expansion of credit to the private sector were together expected to increase the net domestic assets of the central bank by a maximum of Rp 38 billion between the end of Janu- ary and the end of June, or by approximately 40 per cent. Actual develop- ments were quite different. The fact that BULOG purchased far less rice than anticipated resulted in only a small increase in its liabilities to the central bank; the slow start of the Government development program removed the need for the Government t3 use central bank financing; and the credit expansion of the -central bank to the banks and to the rest of the economy was considerably smaller than had been anticipated and planned. This was due to a large extent to the improven liquidity positions of the commercial banks, which enable them to meet a larger part of credit exten- sion from their own resources. The combination of factors resulted in an increase of ret dome!stic assets of the central. bank of only Rp 12 billion between January and the end of June 1969. 48.. The increase in the money supply over the same months of approx- imately Rp 32 billion related on a net basis as a consequence almost en- tirely to the foreign sector; the increase of credit to the private sec- tor was offset by increases in time deposits. It should not be overlooked, however, that credit to the economy increased by 56 per cent over this period, and was directed to sectors o. the economy other than those from which the adqitional time deposits originated. Depressed demand for im- ports combined with a continued growth of export earnings resulted during the first half year in a sizeable addition to the net foreign assets, es- pecially in February, March and April. - 13 - 49. Under present circumstances of relative price. stability and sta- ble exchange rates the willingness of the public to hold cash balances has grown and can be expected to grow further. The level of real cash balances in Indonesia is in fact extremely low when compared to that in other coun- tries at about the same average income level. In the middle of 1969, the total money supply probably represented about 4 per cent of the GNP as roughly estimated and, with inflation under (ontrol, a significant in- crease in the demand for real cash balances can be expected in the next few years. A study recently made in Indonesia links the demand for currency and deposits to price expectations, which in turn are assumed to be a function of past price experience. For past years a realistic explanation of the real demand for currency and deposits (including time deposits) appears to be possible along these lines; it can be directly re- lated to a weighted average of price increases over the three preceding years. Using the apparent relationshi.p found to exist in past years for the current year 1969/70, it seems po;sible that an increase in real cur- rency and deposits including time deposits of some Rp 70-80 billion could occur in this year without danger of inflationary pressures; this would represent about the same rate of non-inflationary growth of the money supply as was observed during the first half year of 1969. 50. This magnitude of monetary expansion would permit a substantial expansion of credit beyond that which occurred in the first part of 1969, and the second half of 1969 is exp-ted to show a reduction of net foreign assets. Given this situation it seems doubtful that there is any need for the transfer of Government budget revenues to the banking system for lend- ing to private and Government enterprise sectors. 51. The history of almost unlimited recourse to deficit financing for the financing of Government expenditures until 1966 and the fact that Indonesia has, as a consequence, only a short experience of responsible budgetary policies argues strongly aghinst the introduction of deficit financing into the financial operations of the Government despite the probable availability of non-inflationary credit resources. It-seems clear, however, that there is a case for the discontinuation of the present transfer of budgetary resources for medium-term credit extension to the (public and private) enterprise sector, in order to reduce the strains on development resources. The availability of greatly increased non-infla- tionary medium-term credit resources and the lag in the provision and uti- lization of these resources by the enterprise sector of,the economy strong- ly suggests the need for measures which would strengthen the capacity of the banking institutions to provide development finance and the need to create development finance instrumentalities which would positively assist existing enterprises in expanding their production facilities and would assist new productive enterprises to come into existence. Also indicated is the need in other ways to remove existing obstacles and to provide in- centives and other assistance to private investment and especially domes- tic private investment. - 14 - 52. Mobilization of Resources. The inflationary conditions of the past reduced the willingness of the public to hold cash and almost com- pletely wiped out the existence of time deposits. In the middle of 1968 time deposits outstanding for one month or longer amounted to less than one per cent of total money supply. 53. The introduction of the new deposit interest rates in October 1968 has changed this situation dramatically, and notwithstanding a num- ber of successive reductions of these interest rates, time deposits have continued to increase throughout 1969 (see Table 1). Table 1: STATE BANK TIME DEPOSITS (In billions of Rupiahs) Up to 3 End of: 12 months 6 months months Total 1968 : October 0.9 0.2 0.7 1.8 December 2.8 0.8 0.9 4.5 1969 : March 10.9 3.7 1.8 16.4 June 17.6 5.3 1.6 24.5 September 22.1 6.1 1.5 29.8 Source: Bank Indonesia. 54. In August, time deposits amc-unted to more than 17 per cent of the money supply, and had become a major basis for the state banks' lend- ing operations. The banks' liquidity position, which had been rather precarious in the last few months of 1968, improved substantially, with liquidity rising from the required minimum of 30 per cent of current li- abilities in December 1968 to 47 per cent in March 1969 and 54 per cent at the end of May 1969. There has, however, been a substantial decline since that date. 55. The Installment Savings Scheme introduced for the D-jakarta area in the beginning of 1969 has made a good start on a much smaller scale, with savings commitments of Rp 75 million through June and rapidly in- creasing collections. Credit Policy 56. In the past years and throughout most of 1968 the state commer- cial banks, which in September 1968 accounted for about 84 per cent of - 15 - total credits outstanding 1/, derived a major part of their credit re- sources from the central bank. In September 1968, just before the new interest policy on time deposits became effective, credits to the state commercial banks from the central bank were the main source for addition- al credit extension. Roughly speaking, half of the additional credits from state banks in the period January/September 1968 were financed with such central bank credits, the other half by increased demand deposits. In the period that followed, the new policy with regard to deposit in- terest rates and guarantee arrangements for these deposits in state banks by the central bank, brought about a major change in the operation of the state banks. Between October 1, 1968, when the new deposit rates became effective and the end of June 19694 time deposits have added substantial- ly to the loanable funds of the state banks, making them less dependent on central bank credits. For the private banks the new measures involved greater competition from the state banks for time deposits - and initial- ly competition subsidized by the central bank which carried part of the interest costs - which led to a reduction of the share of private banks in total credit operations. 57. The deceleration of the inflation rate necessitated frequent changes in interest rates on both loans and deposits; from October 1968 to mid-September 1969, interest rates were adjusted on five dates. Not- withstanding the significant reduction of deposit rates since October 1968 - for 12-month deposits from 6 par cent per month initially in Oc- tober 1968 to 2.5 per cent in mid-September 1969 - the attractiveness of the system has been largely maintained, as the upward move of time depos- its throughout the period demonstrates. In September 1969 total deposits of more than one month duration amounted to almost Rp 30 billion, against Rp 1.2 billion in October 1968. About half is deposited by private in- dividuals and there are indications that substantial amounts have come from abroad as repatriated capital. 58. The dovnward adjustment of lending rates has not been as sub- stantial as in the case of deposit rates. This has led to a slightly easier position for the private banks, but there is still a problem here as priority credits - notably for exports and essential production oper- ations - axe to be made available at interest rates which do not cover the cost of money. In order to escape this squeeze, banks would prefer to supply the more lucrative non-priority credits but are obliged by the central bank to restrict such lending to only 25 per cent of new loans. In a number of private banks, this has led to use of resources for high- ly speculative purposes, followed by suspension of a number of these banks from the clearing. 1/ Excluding direct credits from the central bank.' The share of the state commercial banks would be reduced to 40 per cent if direct credits of the central bank are included in the total for September 1968. - 16 - 59. The central bank provides rediscount facilities to the state banks up to a specified percentage of bona-fide credits at interest rates of half the lending rate. This has eased the position of the state banks considerably as they have been able to mix cheap funds from the central bank with high cost time deposits entrusted to them. These rediscount facilities are at present not available for private banks, but measures are being formulated to reduce this discrimination and to Provide similar facilities to at least some of the private banks. 60. A number of measures were taken in the second half of 1968 and in 1969 to enforce the policy of selectivity in the extension of new cred- its, and to facilitate the financing of imports under BE grants and loans. Although it is difficult to interpret the statistical information on the composition of credit, available data would indicate that some major shift occurred. Most notable is the almost thrpefold increase of credits to the textile industry in the last quarter of 1968. Of total state bank credits outstanding in June 1968, about 3 per cent was directed to the textile in- dustry, 27 per cent to export financing; over the period till the middle of 1969, additional credit to the textile industry absorbed about 23 per cent of the total credit expansion, while export financing (including the export producing sector) accounted for some 8 or 9 per cent. As private banks - domestic as well as foreign branch banks - have not increased their lending for exports at a significantly more rapid pace than the state banks, this in fact amounts to a reduction of the proportion of ex- port financing in total credit, which is compensated by a larger avail- ability of export credit from abroad. The increase in credits to the textile industry reflects the efforts of the Government to accelerate the use of imported raw cotton and yarn, mainly under PL-480 arrange- ments. Production in the textiles industry has over the same period in- creased by about 50 per cent. Medium-Term Credit 61. With the beginning of the current fiscal year, which date also was the initiation of the new Five-Year Plan, the Government announced a program for the extension of medium-term credit. The main features of this program were described in the last Bank economic report (EAP-5a). A program for medium-term lending (up to 5 years) amounting to Rp 30 bil- lion was envisaged for the current fiscal year. 62. The initial screening of applications for this type of financ- ing is done in the state banks, which then forward applications to the central bank. As in a majority of cases the central bank provides more than half of the credit from its own resources, a second evaluation takes place at that stage. In addition, funds from the development budget which are provided for medium-term credits are disbursed through the central bank. The Planning Agency (BAPPENAS) indicates priority areas for lend- ing and the desirable distribution by sectors. 63. The novelty of this operation and the as*ociated problems of administering the scheme with due sDeed, alon! with limited exrerience - 17 - in the entdrprise sector itself, show up in the actual expansion of medium-term credits; through September disbursements amounted to only Rp 4.6 billion out of commitments of Rp 11.3 billion. The appropriate skills for judging the value of investment proposals are inadequate, both in the central bank and in the state banks, and the latter also show some lack of initiative. In many cases, however, it is difficult to obtain adequately documented applications. The Government is plan- ning to reduce the degree to which the decisions on credit extension are centralized, in the belief that larger responsibilities for individual banks and their branches could accelerate the program without negative im- pact on the quality of loans. It is also requesting technical assistance from abroad for all the institutions involved designed to increase their capacity to conduct the medium-term and projected longer-term development financing on an effective basis. Organization and Training 64. The central bank and BAPPENAS have organized training programs on investment credit for the staff of the state banks in Djakarta and five other cities. In addition, there is a need for general training programs on bank management. Some banks have made arrangements for con- sultant services to assist them with project appraisal and management improvement. There is room for expansion of these activities. 65. External technical assistance has been requested for the de- velopment of the banking system. This technical assistance is to be channeled through a training and research institution managed and con- trolled by all of the banks including the private banks. 66. Financial assistance has been requested for re-equiping and modernizing the facilities, particularly the record-keeping and data- processing of the state banks. Bank Rakjat, the agricultural bank with many branches scattered throughout the country, is discussing the pos- sibility of such assistance with the Asian Development Bank (ADB). Im- provements in the banking system expected from such kinds of technical assistance will contribute to the efficiency and the effective manage- ment of these institutions,,.in keeping with the major role to be played by these institutions in the mobilization and distribution of financial resources for development. Foreign Private Investment 67. From early 1967 to the middle of 1969, new investments by for- eign private firms, not including those in oil operations, in Indonesia were approved for an estimated total value of $562 million. The volume of agreements is still rising, as the table below demonstrates. - 18 - Table 2: FOREIGN PRIVATE INVESTMENT CONTRACTS, 1967-1969 (in millions of U.S. dollars) ---Approved--- Estimated Year Value Number Disbursements 1967 123 22 7.4 1968 227 70 11.3 1969 (1st half) 212 35 0.5 Total 562 127 19.2 a/ Excluding oil exploration and production. b/ Excludes mining. 68. Disbursement estimates are incomplete as the Bank Indonesia has not as yet completed the administrative arrangements which would provide complete coverage of the actual inflows. 69. Most of the investment agreements relate to extractive in- dustries: mining, forestry and fisheries. Out of the total value of the agreements, no less than 80 per cent belongs to these sectorsi; the next largest sector, industry, is only 8 per cent of the total. 70. Considerable progress was made during 1968 and 1969 in return- ing foreign owned but nationalized or sequestered plantations and in- dustries to their original owners. A total of 82 agricultural estates belonging'to 28 foreign companies were returned up to the middle of 1969; another-30 estates, the owners of which have declined the invitation of the Government to resume operations, are still left with the Government. Similarly, a number of other foreign owned operations - largely in the industrial field - have been returned. In addition a number of small- holder rubber lands, smoke houses and remilling operations which were nationalized during the Malaysia confroniation were returned to their original owners. 71. - In the oil exploration and production field, the Government, some years ago, introduced the production-sbaring contract, under whicli foreign oil companies can operate in Indonesia on the basis of a sharing arrangement with the Government, represented for that purpose by the state 'il company, Pertamina. In total, 28 such arrangements now exist (see table below). - 19 - Table 3: OIL EXPLORATION AND PRODUCTION CONTRACTS, - 1964-1969 (in millions 6f U.S. dollars) Number,of Estimated Bonus Year Contracts Expeiditures Payments 1964 1 10.0 1965 - 1966 5 55.8 - 1967 2 19.5 1.0 1968 15 162.8 22.0 1969 b/ 5 56.3 6.9 Total 28 304.4 29.9 a/ Expenditures and bonus payments are estimated totals for the period of the contracts b/ Through August 10, 1969. 72. Virtually all of the foreign companies involved in these con- tracts have begun exploration work. In most cases they have not yet com- pleted the geological and geophysical work preliminary to actual drilling operations. Several, however, have already begun drilling operations which have yielded prom.sing but as yet inconclusive results, and several more are at the stage where offshore rigs are en route and other prepa- rations for drilling operations are almost complete. 73. For the most part, onshore areas, other than those where for- eign companies have been producing for several years, have been reserved for the domestic Government oil company; most of the contracts of recent years relate to offshore areas. Fiscal Performance 74. Despite the high degree of inflation in 1967 and much of 1968, Government revenues in real terms have increased rapidly from a low base of Rp 60 billion in 1967. The figures given in Appendix Table 5.1 mount to a real increase of approximately 19 per cent from 1967 to 1968, a more rapid rise of 32 per cent to 1969/70 and the prospect of a further in- crease of the same order in 1970/71. 75. These higher receipts represent improved collection rather than changes in tax rates or in the taxablp base. They have nevertheless con- siderably expanded the resources available to the central government for routine and development expenditures. The Government's tentative revenue projection of Rp 320 billion for 1970/71, an increase of 36 per cent over estimated actual receipts in 1969/70, would be a highly creditable per- formance. - 20 - 76. The following table reflects an underlying stability in the pattern of receipts despite the growth of total revenues: Table 4: SOURCES OF REVENUE, 1967 - 1969/70 (as percentage of annual totals) 1967 1968 FY 1969/70 Actual Actual Revised Estimates Direct taxes 28 30 33 Income tax 5 7 Company tax 18 23 27 Foreign oil companies (12) (17) (20) Other (6) (6) (7) Other direct 5 - - Indirect taxes 70 67 66 Trade-related Z 43 Domestic sales and excise 24 24 25 Non-tax receipts 2 3 1 77. Charges on imports, including import sales tax and the MPO, a withholding tax which is in effect an import duty, have increased as a proportion of revenues from 28 per cent in 1967 to 38 per cent in 1969/70. Exnort taxes accruing to the central government have declined from 18 to only 3 per cent of central government revenues. 78. The rapid growth in receipts from foreign oil companies accounts for the increase in the proportion of total receipts represented by direct tax revenues. Other company taxes and personal income taxes remain at about one-eighth of total receipts; the percentage represented by person- al income.tax has actually declined slightly. This is a matter of con- cern to the Government which appreciates that the growth potential of direct taxation must be realized if domestic resources are to increase rapidly enough to support the development programs of the public sector. The International Monetary Fund is providing technical assistance to the Government in the effort to improve administration and collection in this as well as in other tax areas. 79. Non-tax receipts rose from 2 to 3 per cent of revenues between 1967 and 1968 but slipped to little more than one per cent (Rp 2.5 bil- lion) in the 1969/70 projections. No substantial recovery is indicated for 1970/71. The main contributions are from the after-tax profits of the banks (Bank Indonesia and the State commercial banks) and a few of the public sector enterprises. The weak overall performance of this sector, which should be adding substantially to public savings, indicates the need for efforts to increase the efficiency of these enterprises. Technical as well as capital assistance is being requested and in a num- ber of areas is now beipg provided for this purpose. - 21 - 80. During 1969 revenues have increased slightly more than ori- ginally budgeted, principally because of buoyant revenues from taxes on imports and the success of the various tax directorates in meeting or slightly exceeding their tax collection targets. The use of targets and the payment of bonuses when the targets are exceeded is a major feature of the Indonesian tax system. The combination of rapid inflation, a poorly paid bureaucracy, a poorly organized and inadequately staffed ad- ministration, unrealistically high (tax rates, and the lack of public and high political support for the enforcement of tax laws and regulations in the past resulted in poor collections. The need to assure at least a minimum of collections led to the development of the system of tax collection targets and bonus incentives for each of the tax offices. These targets are set by the Minister of Finance after discussions with the Tax Directorates, and are based on judgments on the extent to which collections can be improved with such analyses as can be made with the limited data available. Each tax office is then expected to meet and recently has met its revenue targets. Revenue collections in excess of the amounts targeted result in part in the payment of bonuses to tax collecting officials. 81. As the figures above indicate, this system has worked with a considerable degree of success so far. Revenues have increased rapidly. Present budget plans call for a further 36 per cent increase for fiscal 1970/71. Given the state of the admWniotrative apparatus, it is not certain that any other system of tax collection would have achieved such a rapid increase in revenue. The Government recognizes, however, that greater improvements in tax administration and collection than those ef- fected thus far with the aid of the incentive system are necessary and possible and that these need to be effected as rapidly as possible. 82. The Government is well aware of the administrative problems in the field of taxation and the currently planned program of salary in- creases is an initial step in the direction of administrative reform. It recognizes that high priority must be given to further reforms in tax structure and administration. The substaitial development effort of the past years is starting to show results and as this process accelerates increasing demands will be placed upon the Government budget. The 1969/70 Budget 83. The original budget for fiscal 1969/70 projected a 31 per cent increase in revenues over 1968. Current expectation, based on the re- sults of the first half of the fiscal year, is that the initial target will be exceeded by about Rp 7 billion and that the increase over the, preceding year will be 35 per cent (see Appendix Table 5.1). Most of the increase is expected to result from higher collections of sales taxes on imports and domestic production. Direct taxes are projected at a level slightly above the original target, mainly as a result of increases in the withholding tax on imports (MPO). Since no changes were made in the structure of the various taxes, the increases can be attributed mainly to improvements in collection. - 22 - 84. Routine expenditures have been kept to levels specified in the original budget, with the exception of salary payments as a result of two extra month's bonus payments to all Government staff during the second half of the year (see Table 5). Table 5: ROUTINE EXPENDITURES 1969/70 (In Billions of Rupiahs) Original Ist Semester 2nd Semester Estimate Budget (Actual) a/ (Projected) 1969/70 1. Personnel 107 52 61 113 (a) salaries (69) (35) (ho) (75) (b) rice (38) (17) (21) (38) 2. Material 37 18 24 42 3. Regional Transfers 41 21 23 44 4. Debt Service 16 10 4 14 5. Other 2 1 1 2 Total 203 102 113 215 a/ Provisional actuals for the second fiscal quarter. 85. Salary increases were proposed originally for the 1970/71 fiscal year but the combination of increased revenues and an anticipated short- fall in development expenditures during 1969/70 will permit some immediate increase. This will be made in the form of a two-month holiday bonus to be paid out during November and December, and is expected to cost Rp 8 billion. 86. This increase in routine expenditure will result in a lower sur- plus on the routine budget to be transferred to the development budget. The transfer is now estimated at approximately Rp 20 billion instead of the originally projected Rp 24 billion. The Development Budget 87. In the first quarter of the fiscal year expenditures from the development budget were only Rp 8.2 billion compared to the original budg- et program of Rp 23 billion. This shortfall was the result of several factors, the basic one being that the ope.rating ministries of the Govern- ment were not prepared with actual operational plans for the expenditure of the amounts budgeted and approved. Preceding years of limited expend- iture and of inadequate and frustrated planning efforts had resulted in the absence of any pipeline or shelf of plans for projects which were sufficiently developed or specified to permit actual rapid use of f-qnds. - 23 - A second factor was that new procedures were instituted which were de- signed to direct the use of funds only to reasonably well conceived pro- jects, which actually fit into the general scheme of development and the priorities established by the Five-Year Plan. As the spending ministries developed operational plans and accommodated themselves to the new ap- proval and control procedures introduced, and as the original standards were somewhat relaxed, expenditure accelerated. This has resulted in a rapid rise in development budget expenditures in the second quarter and prospectively in the third and fourth quarters. Table 6: DEVELOPMENT BUDGET RUPIAH EXPENDITURES 1969/70 (In Billions of Rupiahs) 1. Original Budget 87.1 Additions to end of 2nd Quarter 11.2 Total to be authorized 98.3 2. Expenditures lst semester 25.3 1st quarter (8.2) 1/ 2nd quarter (17.1) 3. Estimated Expenditures 2nd semester 51.8 2/ 4. Projected Expenditures 1969/70 77.1 1/ Excludes Rp 3 billion authorized for transfers to the banking system for medium-term industrial credits. 2/ Includes estimated disbursements of 2p 4.2 billion for industrial credits through the banking system. Source: Appendix Table 5.4. 88. The rate of expenditures has not been even for all departments and agencies reflecting varying degrees of project preparation and vary- ing organizational problems in the operating agencies. In some cases the shortfalls were caused by inadequate preparation of the program and the inability of the administrative machinery to handle large increases in activity and expenditure. In other cases over-optimistic estimates of project aid disbursements led to the inclusion of a greater than neces- sary local cost component in the budget. The experience of this year has been useful in identifying some of these problems and should result in the preparation of a more realistic budget for next year. - 24 - 89. The additions to the development budget made up to the end of September represent increases in the activities of those departments where the absorptive capacity exists, and in some cases (e.g. West Irian and the Bimas Gotong Rojong program) where no provisions were made in the original budget. Despite these additions and as a result of lags elsewhere the level of total expenditures anticipated is about 4 per cent below that of the original development budget. Given the problems involved in launching such a large increase in the development program, this is a satisfactory result. Fiscal Impact of the Budget 90. Mainly because of the projected shortfall in development budg- et expenditures it is not likely that the total impact of the public sec- tor by the end of the fiscal year will be on the expansionary side. The two expansionary factors are the slightly lower than estimated transfer to the development budget (the result of salary increases) and the un- anticipated net costs experienced in the Bimas Gotong Rojong rice pro- gram. The value of the rice which the Government was able to collect from farmers who received inputs under the program was considerably be- low the Government's expenditures for the purpose. This has meant that an additional Rp 10 billion, the difference between its expenditure for and realization from the program, either remains as an outstanding cre- dit of the Central Bank to BUL, the Government rice procurement agency, or must be paid to the Central Bank as a development budget expenditure. The net impact of the Government sector can be estimated as follows, assuming that the loss referred to is paid out of the development budget. (In Billions of Rupiahs) 1. Routine Revenues 235 Routine Expenditures 215 Surplus 20 2. Development Budget Expenditures 77 3. Bimas Gotong Rojong Program Net Expenditure 10 Total 87 4. Financed by: Surplus on Routine 20 Program Aid Counterpart 67 - 25 - 91. The current estimate is that development budget expenditures as such will not exceed Rp 77 billion while receipts will edual Rp 87 billion which would permit the Bimas program loss to be paid out of this budget. If howver expenditUres should prove to be higher than current- ly estimated, then part or all of the bimal program loss would heed to remain a credit of the Central Bank to BUL and the Central Bank would then need to accommodate this amount within its agreed non-inflationary credit ceiling. This appears likely lo be readily possible given the lag in disbursement of medium-term credits mentioned above. Counterpart Generation and Use 92. The budget for the current fiscal year 1969/70 projected a development program financed to the extent of just over 50 per cent by counterpart funds. In the last Bank economic report (EAP-5) a detailed account was given of counterpart funds generated by program aid disburse- ments. Until September 1969 only part of the countervalue of program aid was transferred by the central bank. to the budget, as (a) there were coun- terpart funds which the central bank withheld as an offset to credit extend- ed domestically on aid-import commodities and (b) some funds were treated as subsidies, mainly in relation to foodgrain and other PL-480 imports. In essence until the end of August 1969 the countervalue of program aid was transferred to the budget only to the extent of cash receipts from the sale of program aid commodities. Credit extended under deferred pay- ment arrangements for the same commodities was until September 1969 re- garded as credit extended by the Government rather than by the banking system. Under the new arrangements from the beginning of September full countervalue less subsidies accrues to the budget and all credit is ex- tended by the banking system. 93. The subsidy component has two parts. First there is a need to adjust prices of program aid imports to lower domestic levels; in this case it is not entirely proper to use the term subsidy, as import prices are in some cases considerably above world market prices and reflect the cost of tied aid. Secondly, there are credit sales whre repayment does not fully take place, and there are also adjustments of the value of stocks at the end of each year on account of changes in domestic market prices, deterioration of quality and losses of volume. - 26 - Table 7: COUNTERPART USES IN 1969/70 (in Billions of Rupiahs) Original Revised a Estimates Estimates- Credits to the public outstanding, 31 December 1968 3T.2 36.1 Aid disbursements, 1st quarter 1969 18.7 11.1 Transfer to the budget (-) - 11.5 - 11.3 Credits to the public outstanding, 31 March 1969 44.4 35.9 Aid disbursements 1969/70 104.4 104.0 Subsidies on sales (-) - 27.8 - 30.4 Stock adjustment subsidies (-) - 16.o - 9.2 Transfer to the budget (-) - 64.0 - 67.5 i/ Credits to the public outstanding 31 March 1970 41.0 33.T a/ Estimates for 1969/70 by the mission on the basis of the first half year realizations. b/ Revised budget estimate. 94. Original and revised estimates are given in the table above for the current fiscal year. The revised estimates of aid disbursements are explained in Chapter 5. Over the course of the year the amount of out- standing credit is expected to be redr.ced somewhat, mainly because of lover sales than expected for fertili.-ers and substantially reduced cre- dit requirements for imported wheat. 'Stock adjustment subsidies are reduced for the same reasons, although by the end of the year more re- sources may be required for this purpose depending on the rice price at that time. - 27 - CHAPTEF 3 PUBLIC ADMINISTRATION AND FISCAL MANAGEMENT 95. The advent of a degree of price and exchange stability, combined with increased developmental expenditures, has brought into more prominent focus the structural and administrative weaknesses of the public sector. These weaknesses are not confirmed to'the public sector but are characteristic of the whole of the economy; experientced managerial talents are at a premium, as are technical, secretarial and oth6r skills. The ability of the public sector to both attract and hold skilled personnel is, however, somewhat less than that of the private sector since the public sector is faced with severe political and financial restraints. If the development effort is to succeed, the overcoming of these restraints will have to be given top priority by policy makers. Wages and Salaries. 96. The present wage and salery structure is difficult to analyze with any accuracy given the compromises that have been made with the system. Currently official civilian salaries range between Rp. 2,500 and Rp. 15,000 (US$7.00 to us$4o.o) per month (ineluding cash payments plus rice allow- ances for an employee with a wife and two children). Military salaries have approximately the same range. The majority of civil servants are in the lower end of the salary range. Table 8: CENTRAL GOVERNMENT SALARY AND PERSONNEL STRUCTURE (During lst Quarter 1969) Salary Level No. of Employees % Distril Group I (low) 303,786 59.1 Group II 176, 451 34.4 Group III 30,528 5.9 Group IV (high) 2,915 0.6 Total 513,680 100.0 Source: Budget Office 97. The above table understates the numbers actually employed by government. It excludes personnel of state enterprises, regional governments and the armed forces. It is also based on budget authorized numbers; many departments have additional personnel who are financed through other fund - 28 - sources. It does give, however, an accurate reflection of the salary distri- bution and indirectly of the skill levels of public employees. More than 90 per cent of all employees (Groups I and II) are in the lower skill brack- ets and receive wages of less than US$10 per month. This in brief is the twofold problem of public employment: too many unskilled personnel at the bottom of the structure and too few skilled personnel at the top end of the structure. The problem is compounded by the fact that wages at the lower end of the scale are competitive with wages for unskilled labor in the econ- omy while at the higher end of the scale they are far from competitive in the market for even moderately skilled labor. 98. This unbalanced salary structure has had a number of undesirable consequences. The most obvious of these is that it has encouraged, permit- ted and even forced the use of public positions to enhance private income. Leaving aside the undesirable moral aspects of the practices involved, there are directly negative effects on productive activities on which illegal levies are made, on the revenue-collecting efforts of the Govern- ment and on the desired provision of Government services. This problem will be difficult to solve unless public salaries are more competitive. In addition, the terribly low salaries have encouraged employees to seek two or mc.re jobs, sometimes within the public service. This generally means that two or more jobs are done inefficiently. Another common pract- ice is the distribution of fringe benefits in the form of housing and transportation. Personnel Administration 99. Very few of the departments or agencies have more than a rudi- mentary personnel system. In most cases personnel files are incomplete and uncertainty exists as to the actual numbers employed in some ministries. Salary payments are made in lump sum amounts in cash to the ministries which in turn distribute these payments. No independent check on this distribution appears to be made by the Treasury or Budget Office. If a better civil service is to evolve, attention must be accorded to the im- provement of the civil service system. Expenditure Controls 100. At times controls over expenditures are excessive and at others lax. Recently, the Government has held aggregate expenditures within the severe limits of aggregate receipts by ruthless and determined restriction of expenditgre. But beyond this control is weak. It is hampered by the lack of an adequate system of reporting and post auditing within individual ministries and to and by the Ministry of Finance. 101. A further factor that makes control difficult is the large volume of cash transactions. These are inherently more difficult to control effectively. - 29 - Administrative Reforms 102. Considerable improvement in organization and administration is needed. The numbers of experienced administrative and technical personnel are not adequate to the tasks imposed by the development effort. For some time to come considerable well-selected and carefully planned infusions of outside assistance will be required. Actual experience in the conduct of specific projects and programs with the advice and assistance of experienced personnel from abroad will probably provide the most effective training pos- sible. A number of steps, however, can and should be taken which are neces- sary accompaniments and in some cases prerequisites to efficient operation of the Government program being planned and undertaken. Salary Increases 103. One of the genuine prerequisites to effective Government operation is a substantial .increase in the level of Government salaries. As an im- portant element in the effort to stop inflation, Government salaries were held far below the general advance in the price level. This was an essen- tial feature of the entire effort, particularly since the numbers of Govern- ment employees were conceded to be excessive in relation to actual service performed. The time has come, however, when the inefficiency and the mal- practice imposed has become a serious obstacle to effective Goverhment operations - whether in the collec6ion of taxes, the performance of routine maintenance and rendering of services, or the planning and execution of new development programs. Performance cannot be either expected or demanded at present levels of compensation. 104. It would be desirable that the numbers of employees be reduced when these are redundant. In a few agencies this has been done already. Such action is inhibited, however, by the extent of existing unemployment and the limited degree to which as yet new work opportunities are being created. It is further limited by the fact that records are not suffi- ciently well-organized to permit appropriate discrimination between Depart- ments and agencies. Budgeting Procedures and Practices 105. Steps are being taken with the assistance of the IMF, to review existing budget preparation, disbursement and control procedures. Out of such systematic review there can come in the course of the year improvements which should both facilitate program execution and improve expenditure control. 106. At present the authorities concerned with project implementation and financing have only limited information concerning the progress of work on each individual project. There is a need to establish procedures which could lead to greatly improved recording of progress on active projects. This could not only provide valuable information for the agency authorizing - 30 - new expenditures, but would also make it possible for the responsible min- istries concerned and for the national planning agency to be continuously informed about physical progress of the development program and about the occurrence of soecific bottlenecks. The substantial acceleration of de- velopment expenditures envisaged for the 1970/71 fiscal year will require considerable improvement in the flow of information on actual implementation. Timely collection of information will enable the Government to take action expeditiously whenever required for the maintenance and acceleration of developmental activity in the public sector. The Government is requesting technical assistance in setting up a system of progress reporting on dev- elopment projects. Tax Reforms 107. The major efforts of the Government in the field of taxation have to date been concentrated on increasing revenues by improving collections and without major alterations in the tax base or the tax system. A number of such alterations are currently under study and discussion within the Government. Efforts should be made to accelerate these studies and decisions in a number of areas. Import Duties 108. Perhaps the most important area where action is required is in the field of tariff reform. Import duties are at ptesent the single most important source of revenue of the Government and at the same time tariff levels influence the scope and direction of economic activity. The current system and level of import duties is the result of numerous ad hoc measures taken over the past years partly in response to inflation. The net result is a tariff structure with many exceedingly high rates and unsatisfactory collection. High tariffs, aided by geography have stimulated evasion. The cost and risks of smuggling tend to set upper limits on enforceable tariff rates. Because costs of smuggling are not uniform for all commodities, the system is probably promoting an unintended distortion of the cost pattern for imports. 109. A first technical step toward rationalization of the tariff has been taken. Technical assistance has 'been received from the IMF in the conversion of the customs code to the Brussels nomenclature. As a next step it is desirable that an interdepartmental group be established which would with both technical assistance 'and advice from groups of the public, address itself to the difficult and complex task of reordering the structure and level of the tariff, taking into account the effects on both revenue and the structure of domestic production. The Corporate Income Tax 110. This tax is not today as important a source of revenue to the Government as it should be. Approximately 90 per cent of the business in- come tax (an estimated 27 per cent of total tax collections in 1969/70) is attributable to the tax on oil company profits and the state banks. Very - 31 - little is collected from other corporate business (private or Government owned) despite and possibly in part because of high rates. Revision of the structure and level of the tax is 4nder consideretion and efforts are being made with the assistance of the tMF to improve its administration. Oil Taxation ill. The present agreements under which international oil companies operate in Indonesia provide the Government with specified resources under both types of contract being used. Under both the contract of work agree- ments and the more recent production-sharing contracts, the Government re- ceives fixed percentages of company revenues after the deduction of specified costs which under production-sharing contracts cannot exceed 40 per cent of gross sales proceeds. Since the international oil companies operate in Indonesia as contractors of Pertamina, the state oil company, all tax pay- ments are channeled through Pertamina to the inistry3 of Finance. It seems desirable that this system be changed so that these payments be direct to the Ministry of Finance and thus isolated more clearly from the tax liabil- ities and financial operations of Pertamina itself as a producer and dis- tributor of petroleum products, and from taxes on domestic consumption of petroleum products collected by Pertamina as the sole distributor of such products in Indonesia. 112. Pertamina is the owner and operator of extensive production, transport, refining and marketing facilities. It is, as the sole distri- butor of petroleum products in the :,omestic market, the instrument for collection of taxes on the sales of these products. As a corporate entity it has tax liabilities of its own insofar as it earns profits. It seems desirable, consequently, that the present system whereby taxes payable by consumers of petroleum products are not distinguished as such but are in- corporated in product prices, be altered so that Pertamina functions purely as a collector of such taxes and an instrumentality for their transfer to the Government. Such alteration would ensure that receipts from sales or excise taxes on petroleum products accrued fully to the Government and that these were not diluted or otherwise affected by Pertamina's corporate operations. The latter would then be subject to normal corporate profit taxation, and Pertamina's capital investment program would be financed as in the case of other Government enterprises out of the combination of its cash flow and such borrowings as it could arrange on the basis of its financial strength and the merits of the proposed investments. Local Government 1/ 113. The following table showing the 1969/70 budget for the region of Central Java is illustrative of the revenue and expenditure pattern of local government. 1/ Regional and local governments include level one, the region or pro- vince, and below this level the Kabupaten or Ketjamaten or the munici- palities. The Kabupaten are in turn subdivided into villages. Most of the revenues of the region consist of Central Government transfers and most of the Kabupaten's revenues consist of transfers from the regional level of government. - 32 - Table 9 ROUTINE AND DEVELOPMENT BUDGETS PROVINCE OF CENTRAL JAVA, 1969/70 (In Millions of Rupiahs) Rupiahs Percent Routine Budget A. Revenues Local taxes 175 3.6 Central Government transfer 4,702 95.4 Service charges 50 1.0 Total 4,927 100.0 B. Expenditures Administration 91 1.9 Education and welfare 1,990 40.3 Transfer to Kabupatens 1,492 30.3 Transfer to Development Budget 65 1.3 Other 1,289 26.2 Total 100.0 Development Budget A. Revenues Land tax 92 6.4 Transfer from Routine Budget 65 4.4 ADO 1/ 652 49.9 Surplus from 1968 budget 560 38.6 Other 83 5.7 Total 1s452 100.0 B. Expenditures Agriculture and irrigation 336 23.1 Communications 176 12.2 Mining and electric power 80 5.5 Social services 208 14.3 Unallocated 652 44.9 Total 1,452 100.0 1/ ADO is the 10 per cent tax on all exports except oil collected by the Central Government in behalf of the Provinces and transferred directly in foreign exchange to the Provincial governments. Source: Pemerintah Propinsi Djawa Tengah. - 33 - Land Taxes 114. At present there are two principal forms for the land tax in Indonesia, the IPEDA or rural land tax and the IREDA or urban tax. These taxes are based on the rental value or estimated yield of the property. It is generally acknowledged that there is considerable scope for larger collections from these taxes. Enforcement is complicated by the division of responsibilities among the different levels of government. In addition, the number of officials responsible is too small in relation to the size of the taxable area. 115. Both the price level changes which have occurred in recent years and the prospective increases in income as 6 result of Government efforts to increase productivity in agriculture justify the belief that the com- bination of improved administration and if possible also higher rates could produce significant and equitable increases in revenues from these real property taxes on both rural and urban areas. In addition the insti- tution of charges for irrigation water where irrigation systems are being rehabilitated or constructed, and for urban services where such services are being improved or constructed should produce significant and equitable increases in revenue. ADO 116. The present system of transferring the 10 per cent export tax in foreign exchange to the regional governments has helped to remove ob- stacles to exports and provided incentives for exporting regions, but also has various disadvantages. The amounts transferred are determined on the basis of the port of export and as a result provincial Governments are de- voting considerable effort and ingenuity to finding ways of channeling exports through their ports. 1/ This had led to under-utilization of exist- ing transport facilities and to uneconomic investment in new facilities. It may also have encouraged the export of lower quality products. Major ports, where finishing and processing facilities could be operated on an efficient scale, may fail to attract raw materials from a number of regions. Under the present scheme'there may be a strong incentive to export directly less finished products rather than to risk the loss of the ADO funds. 117. The main advantage to the provincial governments of the ADO was that it provided them with a source of income which was in foreign exchange and therefore less subject to the eroding effects of domestic inflation. Now that stability in prices and exchange rates has been substantially achieved, it should be possible to devise a system of transfers from the Central Government which will avoid the undesirable economic effects of the present system (see para 118). 1/ One possible modification of this tax that has been under discussion within the Government is to base the distribution of tax on the region of origin of the exports. This would be difficult to administer. - 314 - Transfers of Central Government Revenues to Provincial Governments 118. The present system for determining the size of other financial transfers from the Central Government to the regions is open to improvement. Except in the case of the ADO the relative amounts to be transferred to the various provinces are determined mainly by the number of civil servants on the provincial government payrolls, although other factors such as road mileage are taken into account. Although this system is responsive to existing provincial requirements, it tends to put an undesirable premium on employment as such and encourages the retention of redundant personnel. It would appear that a more efficient and equitable allocation system could be devised in substitution for both the existing transfer schemes. 119. Such a system might allocate approximately the total amount presently transferred. primarily on the basis of population but provide for increments above this base in accordance with the revenue performance of the provincial governments. It may be necessary and equitable also to give some recognition in any formula devised to the income and export producing performances of the various provinces. How precisely this might be done is an appropriate subject for serious attention in the coming year. - 35 - CHAPTER 4 RESOURCES FOR DEVELOPMENT, 1970/71 120. Indonesia's effort to launch a substantial development program is still in its early stages. The past year, the first year of the Five Year Plan, has been one in which problems of administration, project prep- aration, and institution building have tended to dominate the development picture rather than the limitation o,f financial resources. These problems have been by no means overcome; much still remains to be done, but the im- provements in the economic framework are such that increasing attention will now have to be devoted to obtaining the maximum amount of domestic financial resources for productive investment. The Public Sector 121. In present circumstances, the ability of the public sector to capture an increasing share of national income and to channel it into productive investment is one of the cornerstones of the whole develop- ment program. Development of the private sector will be governed in part by the rate at which the basic infrastructure of the economy is rehabilitated and improved. In 1969/70 the resources channeled to the public sector through the tax sys1miM probably represented about seven per cent of national income as roughly estimated. While a substantial improvement on the 3 to 4 per cent of 1966, the proportion is still in- appropriate to both the taxable capacity of an economy which includes an important oil sector, and the domestic financing required for public sector development. In order to meet the requirement of the 1970/71 development program and other high priority expenditures, the Govern- ment plans to increase its domestic revenues to close to 10 per cent of national income. The 1970/71 Revenue Targets 122. The burden of increasing public revenues continues to fall largely on the Central Government. As elaborated above, the regional authorities collect little revenue apart from their share of export taxes, and transfers to the regions for official salaries alone are a major item of the Government budget. Appropriate incentives to local governments could result in a higher contribution in future years. The possibilities for this were mentioned in Chapter 3. 123. The Government plans to raise some Rp 320 billion in 1970/71. This represents an increase of 36 per cent over the revised estimate of Rp 235 billion for 1969/70. The increase from the previous year was 35 per cent. The rapid increases, admittedly from a low base, indicate the continued determination of the Government to expand its budgetary resources. The necessity for rationalization of the tax structure and - 36 - rates in a number of areas is recognized along with the necessity for continued efforts to improve tax administration and to insist on en- forcement of tax legislation. The concensus however is that these ef- forts are not likely to have sufficient result in 1970/71 to justify safe revenue estimates higher than those made. There is agreement also, however, that efforts should not be limited by these estimates. 124. The sources from which the additional revenues are to be ob- tained are identified in Appendix Table 5.1. 125. Trade-related taxes would continue to provide about one-third of government revenues although the proportion declines slightly. The projected increases in revenue from customs duties will raise the ef- fective tariff to close to 30 per cent of dutiable imports (excludes foodgrains and fertilizer). This is slightly above the rates realized in the first half of 1969 and close to the levels estimated to be ap- propriate in previous Bank economic reports. Export taxes now make only a small contribution to the Central Government budget. 126. The much higher returns from the domestic oil tax would come mainly from a planned increase in g .soline prices. The growth target of 44 per cent in indirect taxes as a whole will require a major effort. 127. By comparison the proposed growth of revenue from direct tax- ation is not impressive, particularly in view of the small share of these taxes, apart from the oil revenues, in total revenue. In view of this fact, and realizing that in the coming years the opportunities for increasing revenues will exist mainly in the area of direct taxation as compared to other revenue sources, it is intended that major efforts will be concentrated on improvement of the administrative capacity specially in the field of direct taxation. The Financial Sector 128. The other major source of,domestic financing for investment, in addition to budgetary revenues a.d foreign aid, is the resources that can be mobilized by the financial or banking system. It has al- ready been noted that the demand for real cash balances, which are the monetary liabilities of the financial institutions, has risen rapidly in the past year. As shown in Table 10 the real value of monetary li- abilities increased by Rp 75 billion or nearly 100 per cent between the end of the first quarter, 1968, and that of 1969. There has been a further increase of one-third or Rp 50 billion in the second and third quarters of 1969. 129. As discussed in Chapter 2 and indicated in Table 10, an in- crease in monetary liabilities of roughly the same amount in the next as in the current fiscal year appears possible. This would have to be matched by an expansion in domestic credit if there is no significant build up of foreign excaange reserves. Such an increase in credit would be equal to roughly hal.:f of the total Government development budget so that its effi- cient allocation is obviously of great importance. - 37 - Table 10 GROWTH OF MONETARY LIABILITIES AND CREDIT 1966 TO 1969 AND ESTIMATES FOR THE END OF FISCAL YEAR 1969/70 (In Billions of Rupiahs) End of First Quarter of 1966 1967 1968 1969 1970 1. Monetary Liabilities (June 1969 prices) 58.8 72.5 78.5 154.0 250 2. Price Index (June 1969 = 100) 9.7 34.5 65.4 107.0 110 3. Monetary Liabilities (Current prices) 5.7 25.0 67.0 164.7 275 4. Net Foreign Exchange Assets and Other Items .7 -4.7 -7.4 4.5 5 5. Credit 5.0 29.7 74.4 160.2 270 a. To General Govt (net) 2.6 21.2 37.4 46.9 45 b. To official entities 1.1 22.3 25 c. To public enterprises 1.1 4.2 8.0 30.2) d. To private enterpri- ) ses and others 1.3 4.3 27.6 59.5) 200 e. To non-monetary ) financial instit. .3 1.3) 6. Shares of Total Credit (%) a. General Government 52 71 50 29 17 b. Official entities 1 14 9 c. Public enterprises 22 14 11 19) d. Private enterprises ) and others 26 15 37 37) 74 e. Non-monetary finan- ) cial institutions 1) Source: Bank Indonesia and Mission estimates which include data on credits and deposits not included in Appendix tables 6.7 to 6.9. - 38 - 130. In recent years there has been a shift in the allocation of credit away from general government over to the enterprise sectors. (See Table 10) Official entities, i.e. BULOG received a substantial share (25 per cent) in 1968/69 but should not need much additional allocation in 1969/70 if they are reimbursed by the budget for Bimas losses. A net credit level for DULOG of about Rp 25 billion should be sufficient to cover a peak rice stock of 600,000 tons which is the maximum likely level during the coming year. 131. Adequate guidelines have not yet been worked out for-determining the broad allocations of credit in the coming year. The Government is com- mitted to a balanced budget implying no net credit increase to General Gov- ernment. 132. If the Government and BULOG do not absorb any net credit during 1970/71, then the full increase in credit would be available-for-the enter- prise sector. It seems important to ensure that a substantial portion of this credit increase be directed to the private sector, and also that the medium term credit program be given adequate resources. The latter program was planned at a level of Rp 30 billion for the current fiscal year, but will probably fall well below that because of initial administrative diffi- culties. By next year the banks should be capable of carrying out a larger program. The Routine and Development Budgets 133. At the end of October, a number of policy decisions had still to be taken before the Government could make firm estimates of all the main components of the budget for the fiscal year beginning April 1, 1970. The extent and phasing of the proposed salary increases was not entirely decided. The budgetary provision for debt service awaited the outcome of negotiations related to the Abs proposals for the settlement of pre-1967 debt. In addition elements of both the ordinary and the development expenditure program were still under discussion. 134. In the routine budget, tha largest increases from the 1969/70 expenditure estimate of Rp 205 billion would be for salaries. Tentative plans of the Government call for an increase in salary payments (exclud- ing all no4-cash payments and overseas payments) of approximately 75 per cent over the level of 1969/70, as shown in Table 11. This could cover both selective and across-the-board increases. The Government also plans no net increase in number of government employees and is examining the possibility of effecting reductions. - 39 - Table 11: EXPENDITURE ON PERSONNEL, 1969/70 AND 1970/71 (In Billions of Rupiahs) 1969/70 1969/70 1970/71 (budget) (revised) (estimate) Personnel (Central Government) 107.2 113.1 131.3 1. Salaries: (a) domestic 50.5 61.o 88.4 (b) overseas 4.4 4.1 4.4 2. Rice 38.5 35.0 38.5 3. Material 13.8 13.0 - 4. Regional Transfer (salaries) _2.0 25.0 43.8 Total (salaries only, 1 + 4) 136.6 135. This provision for salary increases is essential for the reasons indicated in Chapter 3. There is question, however, whether it is large enough, if on an across-the-board basis, to accomplish the purposes. The aggregate amount which can be used for the purpose is however limited by the resources available and other claims on their use. Consequently con- sideration is still being given to the possibility of greater than average salary increases on a selective basis combined with some reduction in num- bers. 136. A second pressure on the next routine budget comes from the need to increase expenditures on materials for civil use, in the provision of essential services and the maintenance of all types of infrastructure fa- cilities. It is recognized that maintenance has been neglected in the past and that budget allocations will have to provide steadily increasing amounts for the maintenance of infrastructure and other equipment as exis- ting facilities are rehabilitated and expanded. 137. The element of debt service in the budget will depend on the arrangements concluded with creditor countries concerning the settlement of external debts contracted before June 1966. The Government is now contemplating providing Rp 5.5 billion ($17 million equivalent) for these debts in 1970/71. The effect of the settlement according to,the Abs pro- posals would be to increase this to Rp 18.3 billion. If it is assumed (as is done in Chapter 5) that the Abs formula will,not become effective before January 1, 1971, only Rp 4.5 billion will be required. Thus there is a wide area of uncertainty as to the debt service requirement in the 1970/71 budget. Service on official loans contracted since 1966 will cost Rp 10 billion. - 4o - 138. An examination of the needs of the development budget indicates that, in addition to funds from counterpart generation, Rp 35 to 40 bil- lion will be required from the routine budget. This should be within reach if increases in routine expenditures can be contained to planned levels. The surplus in 1969/70 is expected to be Rp 20 billion. The Development Budget 139. With a transfer of Rp 37 billion from the routine budget, the generation of some Rp 78 billion of counterpart funds from disbursements of the program aid anticipated in 1970/71 and a much higher level of pro- ject aid disbursements, the total resources available for public sector development could amount to about Rp 161 billion in 1970/71. 140. Examination of the probable rate of disbursements for ongoing projects, together with those expected on new projects for which commit- ments are requested in 1970, suggests a total of $173 million for the 15 months from the beginning of 1970, with disbursements on new projects concentrated in the second half of the period (see Table 18). During fiscal 1970/71 this would amount to $140 million and would raise the project aid component of the development budget from an estimated Rp 31.0 billion in 1969/70 to Rp 46 billion in the coming year. 141. Program aid disbursements are not fully reflected (at the BE- rate) in counterpart funds generated for the development budget, because of the need to adjust foreign and domestic valuations for some program aid categories and also until September 1969, because of deferred payment arrangements for aid goods, as described in Chapter 2. 142. The composition of expenditures in the tentatively planned de- velopment budget is specified in Table 12. 143. Comparison with 1969/70 estimates shows clearly the pressure on domestic resources created by the higher level of project aid disburse- ments. Local costs associated with external aid projects may amount on average to 50 per cent or more of total project costs. A somewhat lower ratio is calculated for 1970/71, which nevertheless will absorb as a first claim on the Rupiah resources of the Development Budget nearly 35 per cent of all domestic resources and counterpart funds. The lower ratio arises out of the phasing of project work and because part of the local cost re- quirements will be met by banking system resources. The desirability that project aid finance some part of Rupiah as well as direct foreign exchange costs of aided projects is indicated by pressures on Rupiah resources and the fact that many essential development projects are not of a size or type generally financed by aid-givers and yet require both Rupiah and di- rect and indirect foreign exchange expenditures. - 41 - Table 12 THE 1970/71 DEVELOPMENT BUDGET (Preliminary, in Billions of Rupiahs) Resources Surplus from the routine budget 37 Counterpart funds 78 Project aid disbursements 46 161 Expenditures A. Rupiah Budget Local Cost Associated With Project Other Total Aid A. Rupiah Budget 1. Economic Field 31.5 51.0 82.5 Agriculture 0.5 6.0 6.5 Irrigation 9.0 11.0 20.0 Electric power 8.5 2.5 11.0 Communications 5.0 7.0 12.0 Highways 7.5 5.5 13.0 Industry & mining - 3.5 3.5 Rural development - 11.5 11.5 Other 1.0 4.0 5.0 2. Social Field 0.5 14.5 15.0 Health - 5.0 5.0 Education - 5.0 5.0 Other 0.5 . 5.0 3. General - 17.5 17.5 Armed forces - 5.0 5.0 West Irian - 3.5 3.5 Transfer to the banking systen-/ - 6.0 6.0 Other - 3.0 3.0 Sub-total 32.0 83.0 115.0 B. Project Aid Disbursement 46.0 Total 161.0 1/ May serve as allocation for Bimas subsidy if the need arises. - 142 - 144. In the initial formulation of budgetary requirements for de- velopment in 1970/71, a smaller transfer of funds from the routine bud- get seemed possible. The resources remaining after provision for local support for project aid would in these circumstances have imposed very serious constraints on expenditure in the economic fields not directly related to project aid and also in the social sector. The reassessment of both routine and development budget needs which followed resulted in the judgment that the amounts which should be devoted to salary in- creases would have to be less than originally planned, despite-the ur- gent need for such increases as a prerequisite to an effective develop- ment effort. As shown in Table 12, the public savings target of Rp 37 billion, which is higher than was originally contemplated, will make feasible a budget which does meet the development needs of the public sector. The new target is also a very substantial increase on the re- vised estimate of Rp-.20 billion for 1969/70. Its attainment, in an. economy still recovering from recent major disturbance, would be-a real achievement. Implications for the Five Year Plan 145. The Plan is designed "to give an indication of the direction of growth in accordance-with stipule.ted development priorities." Plan programs are stated in.general terms, and the details are provided by the annual development budget. The Mission's estimates of funds avail-- able for that budget can be compared with the plan projection of re- sources for 1970/71: 1/ Preliminary Repelita Budget Estimates (Rp billion (Rp billion at end of at current 1968 prices) _ prices) % Budget surplus 33 21.6 37 23.0 Counterpart funds 75 49.0 78 48.5 Project aid _45 2.4 46 28.5 153 100.0 161 100.0 1/ The acronym for the Five Year Plan. 146. Allowing for chang-s in domestic and international prices from the last quarter of 1968, the two estimates of resources correspond close- ly. The Plan shows nearly the same level of project aid disbursements as now appears feasible. The proportion of purely domestic resources shows a small but siR,nificant increase. -43- 147. As shown in Table 13, however, thi position could alte.- after 1970/71 if the resource base does not change and Plan targets are to be achieved. Expenditure in categories unrelated to project aid could be put under increasingly severe pressures as project requirements expand. The Plan figure of Rp 95 billion for project aid disbursements in 1971/ 72 is possibly too high. Preliminary forecasts of disbursements suggest Rp 75 billion as a more likely figure. The resources problem will still be serious unless additional domestic finance can be obtained. The most obvious source is an increase in revnue which not only meet? the need for higher routine expenditure but pirmits much larger net public savings for transfer to the development budget. Table 13: FIVE-YEAR PLAN PROJECTION OF PUBLIC RESOURCES, 1971-1974 (In Billions of Rupiahs) 1971/72 1972/73 1973/74 Sources of Finance 223 264 296 Public savings 43 55 71 Counterpart funds 85 85 85 Project aid 95 124 140 Uses 223 264 296 Project aid 95 124 140 Associated local costs /l 86 112 126 Available for other economic and social programs 52 28 30 /l 90 per cent of project aid. Source: First Five-Year Development Plan and mission estimates. 148. A method of calculating the surplus needed from the routine budget for 1972/73 that may be more accurate than the Plan projection is as follows. In 1970/71 with $140 million of project aid disbursements the estimated related Rupiah expenditures are Rp 37 billion. Later per- haps in about two years from now, project aid disbursements may be expected to rise to and level off at the amount of annual new commitments, say, at about $260 million (the amount required as new project aid commitments for 1970/71). When this occurs and assuming the same relation between foreign exchange and Rupiah costs of aided projects as usually obtains, about Rp 75 billion of Rupiah resources will be required for the foreign aided portion of the development budget, or Rp 38 billion above present require- ments. If counterpart generation from program aid does not increase appreciably above present levels, the entire amount of this additional financing will have to come from the surplus generated in the routine budget. Thus, even without taking account of increases in other parts of the development budget, the Government will, in the next two years, have to approximately double the rou ine budget surplus of Rp 37 billion required for 1970/71. - 45- CHAPTER 5 EXTERNAL TRADE AND PAYMENTS 149. Indonesia's need for exterhal aid arises both as the result of a gap between the domestic resources which can be mobilized in the short run and the requirements of the investment program, and at the same time as a consequence of import and other payments requirements and its exter- nal balance of payments as a whole. The following analysis of external economic policy and performance leads to an evaluation of aid requirements for the 15 months from January 1, 1970. It makes clear that Indonesia will require a continuing net inflow of aid, a good part of it in the form of program aid, the counterpart of which is required to alleviate the short age of rupiah resources even with the fiscal and savings performance de- scribed in Chapter 4 above. The Exchange Rate System 150. Since the beginning of 1969 only minor changes have occurred in the system of multiple exchange rates which have been in use in Indonesia for the last few years. On the import side, about 85 per cent of all transactions take place at the so-called BE-rate, whereas part of service payments and imports of gc-ds which are considered less essential take place at the higher DP-rate. The BE-rate stabilized at Rp 326 per dollar in October 1968 and has remained at that level throughout 1969 while the DP-rate, after strong fluctuation during the last quarter of 1968, has been stabilized partly through Central Bank intervention. The DP-rate decreased gradually from a peak of Rp 485 in October 1968 to about Rp 378 per dollar, Rp 400 per dollar in January 1969 and to about Rp 378 per dollar since May 1969. 151. The Central Bank is prepared to buy and sell foreign exchange in the market in order to avoid erratic rate fluctuations. In the BE- market, a stable rate of Rp 326 per dollar has been maintained during the past year and sales of foreign exchange take place at that rate, with the Central Bank in charge of supplying sufficient amounts of foreign exchange to clear the rate. More active intervention has now become a regular feature in the DP-market, where the Government has been prepared to buy and sell foreign exchange at a rate now about 15 per cent above the current BE-rate to provide incentives to exporters at a rate con- sidered necessary. In the latter part of 1968 there was a small diver- sion of BE funds to the DP-market, but this was more than balanced by substantial purchases of DP foreign exchange early in 1969. It should be borne in mind that supplies of DP-exchange are rather erratic and can easily distort the balance between supply and demand in this rather small market. 152. In earlier reports economic missions have suggested that grad- ually the list of goods and services that can be imported only with DP - 46 - exchange should be reduced, together with a corresponding reduction of the supplies of such funds by curtailing and ultimately abolishing the export overprice system. Now that both rates have been stabilized, this seems to be an appropriate time to examine whether the purposes served by the present two-rate system could not be achieved by other and less arbitrary devices. In this connection, since more favorable credit arrangements apply to BE imports and since the BE rate is used for customs valuation for all imports, the cost differential among imports, whether financed with DP or BE exchange, is smaller than indicated by the spread between the two rates. 153. On the export side, the uncertainties for exporters as to their ultimate returns in terms of rupiahs have become less of a problem now that the exchange rates are stable. However, discrimination among dif- ferent categories of export still exists as an important element in ex- port incentives. The 5 per cent export tax levied by the CentrAl Gov- ernment applies only to commodities in category A, which therefore pro- vides an immediate advantage of 5 per cent in terms of earnings to expor- ters in category B. The difference is, in fact, somewhat smaller because this tax (as well as the ADO tax of 10 per cent for the regions) is paid only on the basis of the surrender export value and not the actual invoice value of exports. Furthermore, the percentage of export earnings to be surrendered to the Central Bank varijes greatly not only among commodities in each category but in category A the so-called overprice (which is the difference between actual value of exports and the amount surrendered) ranges from almost zero for tin to 38 per cent for rubber, whereas in category B exporters of timber obtain an overprice of about 30 per cent and the average for all other category B commodities is estimated at about 80 per cent of the check price. 154. The variations in effective export taxes and rupiah receipts among commodity groups are substantial. For example, effective export taxes vary from 2 to nearly 15 per cent of the invoice value of exports. Rupiah returns to exporters, in relation to f.o.b. values, are consider- ably higher for category B exports other than timber than for rubber and other category A products. 155. Since the proceeds from the overprice are sold in the DP market (or sold abyoad), returns to exporters in general are increased by this system. Appendix Table 10.1 indicates that since June 1968 the returns for most exporters have been improving. The determination of check prices and.export taxes in the context of stabilizing and converging exchange rates has been consistent with the maintenance of export incentives par- ticularly in the form of the growth in category B exports. The margins between the returns to exporters under the system and the value of exports at the DP-rate are one measurle of the advantage of illegal exports. The ratios suggest that the incentives to smuggling have diminished consider- ably. 156. There are, however, alternative ways of giving export incen- tives. Previous Bank economic reports have suggested that the incentive system be changed by replacing the overprice system by an arrangement for the surrender of the full export value combined with an incentive scheme which allows imports of DP items at the BE rate. Under present conditions replacement of the overprice system should be preceded by full consideration of the alternatives open to the Government, and in particular of their implications for policies relating to the provision of export incentives, the discouragemetit of non-essential imports and capital outflows and the establishment in the future of a unitary ex- change rate. In any case, systems of export incentives and the gradual removal of uncertainties for exporters with regard to their returns should be carefully designed and managed, taking account of supply elasticities and the position of Indonesia's exports in world markets. If exporters were in future to surrender th6ir full receipts thii would lead to a situation in which the BE-market would reflect more promptly and automatically the benefits of international price increases which at present tend to flow largely into the DP-market. Whatever changes are made should if possible reduce the administrative responsibilities of the executing agencies. Export Performance and Prospects 157. The growth of exports duriqg the first half of 1969 gives rise to the expectation that exports in 1969 (with oil on a net basis) will reach a level of almost 12 per cent above the preceding year. To a large extent, this is due to the very rapid increase of gross and net oil exports. Gross exports of oil increased by almost 19 per cent and imports for the oil sector at a slightly lower rate. The mission ex- pects non-oil exports to rise by about 9 per cent during 1969. The distribution of non-oil export receipts between surrendered value and overprice earnings will probably show a considerable shift between 1968 and 1969. As the overprice percentage on rubber exports increased from about 25 per cent of the check price at the beginning of 1968 to about 38-per cent in the middle of the year (reflecting the rise in inter- national rubber prices) overprice earnings should increase their share in non-oil exports from about 24 per cent to over 27 per cent of in- voice value in 1969. As a consequence, it is expected that during 1969 the surrendered export receipts will not increase by more than about 7 per cent over the preceding year. 158. For the next fiscal year, 1970/71, the mission expects that total export earnings (with oil on a net basis) will rise by about 10 per cent. Rubber exports, which benefit in 1969 from exceptionally high prices, will probably increase further in volume terms but the expected reversal of the recent price rise could result in about the same value of rubber exports as during the current year. Copra exports which declined considerably during 1969 are expected to recover, once the new market arrangements effective in August 1969 begin to have their impact. On that basis a recovery of copra exports to their 1968 level is projected. The International Coffee Agreement will probably benefit Indonesia in the coming year as prices are expected to remain high and stable and quotas may be increased somewhat. For palm oil and kernels about the same level of exports is projected implying a slight decrease - 48 - Table 14 EXPORTS (f.o.b.), 1968 - 1970/71 (In Millions of US Dollars) 1968 1969 1969/70 1970/71 Rate of Growth( Actual Estimate Estimate Projection 1969 1970/71 Category A (Major commodities) 377 399 404 432 5.9 6.9 Category B (Minor commodities) 82 92 96 103 12.2 7.4 Total Surrendered Value 459 491 500 535 -7.0 7.0 Overprice Earnings 110 131 132 140 19.1 6.7 Total Non-oil Exports 569 622 632 675 9-.3 6.-8 Oil Exports (gross) 303 358 370 437 18.8 18.1 Oil Sectors' Imports 225 258 260 298 15.6 14.6 Total Exports (Oil net) 647 722 742 814 11.6 9.8 - 49 - of prices compensated by some increase in volume. It is extremely diffi- cult to forecast earnings from pepper exports, as market supply and there- fore international prices are highly volatile. About the same earnings are projected in 1970/71 as in the pOst two years. With improved quality and marketing arrangements some increase in earnings from tobacco exports is projected. The high price of tin in the world market is expected to continue during 1970 as a result of market interventions under the Inter- national Tin Agreement. It is expected that Indonesia's quota in the world market will be raised somewhat by agreement with other major pro- ducers, so that earnings from tin exports could be some 10-12 per cent above the current year's level. 159. Oil exports should maintain an upward trend although at a somewhat reduced rate as compared with 1969. Total exports in the dil and the non-oil sectors together can, therefore, be expected to rise by about 10 per cent, a slightly lower percentage than in 1969. Imports 160. In the first quarter of 1969 imports into Indonesia were at levels well below the 1968 average as the economy completed its transition from inflation to relative price stability. The combination of a good wet season rice harvest, large commodity stocks, a tight credit situation and stagnant domestic demand had its greatest impact on imports financed by program aid which amounted to only $34 million during the first quarter of the year, including minimal acqaisitions of PL-480 rice and wheat under the Kennedy Round arrangements. 161. The acceleration of imports in the second and third quarter which is likely to continue for the rest of the year, could raise total non-oil imports to $969 million, on a c.i.f. basis, in calendar 1969. This would represent an increase of 16 per cent over the previous year. A calculation of resources available for the BE-market is presented in Table 15,,and estimates of imports by sources of finance and major com- modities in Table 16. 162. There have been several recent measures to facilitate imports. Credit facilities have been expanded and the requirement for pre-payment of import duties has been abolished. The Government has also tried to create specially favorable conditions for the use of,program aid funds such as specially favorable credit facilities. 163. BE-imports in 1969 are expected to be almost 12 per cent above the level in 1968. BE-aid disbursements increased at the same rate though with a substantial acceleration in the last half year. Indonesia's own BE-resources increased by about 3 per cent, mainly as a result of a large reduction in new short-term borrowing abroad by about $50 million. Lower debt servicing and repayment of short-term credits resulted in an increase of BE-resources available for goods imports by almost 12 per cent. As a consequence, the share of Indonesia's own resources in the financing of BE-imports of goods remained the same in 1968 and 1969. - 50 - Table 15 SOURCES AND USES OF FOREIGN EXCHANGE FOR THE BE-MARKET 1966 - 1970/71 (In Millions of US Dollars) 1968 1969 1969/70 1970/71 Rate of Growth (%) Actual Estimate Estimate Projection 1969 1970/71 BE-Resources 842 893 938 1,002 6.1 6.8 Export Earnings 1/ 503 559 580 637 11.1 9.8 BE-Aid Disbursements 245 274 319 340 11.8 6.6 Short-Term Credits 2/ 96 45 39 25 DP-Market Intervention -2 15 - - BE-Uses 3/ 850 888 956 1,02 .5 .8 Debt Servicing / 39 19 20 48 Non-freight Services 47 48 47 50 Repayment Short-Term Credits 67 41 47 34 Imports of Goods 697 780 842 870 11.9 3.3 (c.i.f.) 1/ Surrendered value less A.D.O. for nQn-oil exports, and conversion into Rupiahs of net oil exports after paments of oil debts. 2/ Gross receipts. 3/ The difference between total resources and total uses represents (and is equal to) the sum of changes in net foreign assets and liabilities, the net IMF-position and the errors and omissions of the balance of payments. I/ Excluding oil sector debt payments. - 51 - 164. The fact that total BE-imports in 1969 did not increase by more than 12 per cent is largely related to smaller imports of foodgrains. When imports of rice, both commercially and under aid programs, and of wheat inder Kennedy Round arrangements are subtracted from the 1968 and 1969 totals, other BE-imports appear to be rising in 1969 by about 24 per cent. In addition, account must be taken of the fact that substantial quantities of agricultural inputs were imported outside the BE-system, financed with foreign short-term credits linked to the Bimas Gotong Rojong program. In the previous economic report it was suggested that as far as possible the Government should finance such imports through program aid on soft terms, instead of with short-term credits. This now appears to be an accepted rule, as the Government is re-negotiating the contracts with five foreign firms involved in the Bimas program in order to substitute imports financed with BE-aid for a major part of their direct imports of agricultural inputs. 165. The general trend in imbort composition during 1969 has been towards a sharp increase in capital goods imports and a reduction in food- grains requirements as domestic production rises. This is the case not- withstanding the recent emergency authorization of an extra 250,000 tons of commercial rice supplies which is assumed to add $37 million to the BE-import bill for 1969/70. The rate of increase for all other categories of imports (excluding foodgrains and capital goods) is estimated at about 19-20 per cent. 166. The mission estimates that $1,189 million will be required for imports of a c.i.f. basis in fiscal 1970/71, an increase of 11 per cent over 1969/70, compared to the rise of imports in 1969 of about 16 per cent. The total import bill will reflect a further rapid expansion of project aid imports as the investment program gathers momentum. Disbursements and therefore imports related to externally aided projects could increase by almost 50 per cent from 1969/70 to perhaps $140 million in 1970/71. Assum- ing about $35 million for capital goods financed from foreign private re- sources, there remains $1,015 million for all other imports. 167. The projections for 1970/71 are based on'the assumption that increased domestic foodgrains production will reduce the.need for imports somewhat, thus leaving a larger amount of foreign exchange resources for other imports. The explicit assumption is made that no cash resources will be used for foodgrain imports other than necessary under marketing obliga- tions related to food aid. A minimum allowance is therefore made in the 1970/71 projections for rice imports on a cash or acceptance basis. 168. Under those conditions it will be.possible to increase the sup- ply of foreign exchange resources to the market for non-food imports by about 14 per cent. The higher debt servicing burden to be carried in 1970/71 is a major reason for this rather small increase, which compares with an estimated increase of 24 per cent in 1969. - 52 - Table 16 NON-OIL IMPORTS OF GOODS (c.i.f.)-, 1968 - 1970/71 (In Millions of US Dollars) 1966 1969 1969/70 1970/71 Rate of Growth Actual Estimate Estimate Projection 1969 1970/71 BE-Imports 697 780 842 870 _11.9 3.3 Foodgrains 178 135 168 160 ,Other Aid-BE 150 163 183 200 -Other General BE 369 482 491 510 Project Aid Imports 21 75 95 140 .257.0 47.5 Other Imports 1/ 116 114 132 179 --1.7 35.6 Total Non-oil Imports of Goods 834 969 1,071 1,189 16.2 11.0 1/ DP and Free imports, private capital and A.D.O. - 53 - The Balance of Payments 169. Estimates of the balance for 1969/70 and projections for 1970/ 71 are summarized in Table 17. They embody the mission's estimates of program and. project aid utilization for each year and the assumption that a debt settlement based on the Abs proposals will take effect from the beginning of 1971. External Debt 170. The three elements of debt service reflected in the balance of payments estimates are the service on part of the debt contracted before June 1966; one quarter's payment (fi st quarter 1971) on the "Sukarno debt" at the annual rate stipulated in the Abs proposals; and the increas- ing obligations arising from new loans and credits for development nego- tiated since mid-1966. The first category includes non-guaranteed debt not subject to rescheduling, obligations arising from the Debt Investment Conversion Scheme (DICS), some refinanced debt and the final payments on the oil debt serviced by Pertamina. 171. The proposals of Dr. Hermann Abs 1/ were submitted to the Paris Club of Western creditor countries and Japan on July 30. The principles underlying his recommendations for the settlement of accumulated past debt now amounting to some $2.1 billion are: (a) no reduction of capital amounts; (b) repayment of these debts in 30 equal annual instalments, beginning in the year following conclusion of an agreement and adherence by the respective creditor country; (c) no interest payments; (d) no discrimination among creditor countries, or for any other reason. 172. The principal is calculated at $1,687.5 million which on Abs terms would give rise to annual repayments of $56 million. Even on these conditions the estimated debt-service ratio would rise to over 15 per cent for 1970/71. The increase of the debt component of the Government budget to 7-8 per cent of estimated domestic revenues would exert considerable pressure on the limited resources available for transfer from the routine to the development budget. The mission has made its balance of payments projections on the basis of acceptance by both Indonesia and its creditors of the Abs proposals without modifications, but beginning from January 1971. 1/ Dr. Hermann Abs: Indonesia's External Debt Problem and Reflections on its Solution; Report dated July 30, 1969 to members of the Paris Club of Indonesian Creditor Countries. Table 17 BALANCE OF PAYMENTS (SUMMARY) 1968 - 1970/71 (In Millions of US Dollars) 1st Qtr 1970/71 1968 1969 1969/70 1970/71 1970 (15 months) Actual Estimate Estimate Projection Estimate Projection Goods and Services Non-oil exports 1/ 569 622 632 675 154 829 Net oil exports 2/ 78 100 110 139 32 171 647 722 742 814 186 1,000 Non-oil imports of goods 3/ -834 -969 -1,071 -1,189 -240 -1,429 Non-oil imports of services 4/ -77 -87 -85 -92 -28 -120 Current account (deficit ='-) -264 -334 -414 -467 -82 -549 Official Transfers and Capital 266 349 414 480 107 587 Program loans and grants 5/ 245 274 319 340 77 417 Project loans and grants 6/ 21 75 95 140 30 170 Miscellaneous Capital 65 43 37 68 3 71 Debt Service -75 -53 -55 -81 -15 -96 Errors and Omissions - 4 8 - 7 - - - Monetary Movements 12 -13 25 - -13 -13 1/ Includes overprice. 2/ Net of imports of goods and services for the oil sector other than service payments on oil debts 3/ c.i.f. 17/ Excludes freight on imports. I/ Based on L/C's opened. 5/ Disbursements. For 1970 a settlement on the same terms as were agteed for obligations due in 1967 through 1969 (the so-called Paris terms) a,'e ssumed. Any addi- tional debt repayments by Indonesia which would go beyond those would in- crease program aid requirements by an equivalent amount. 173. In 1970/71 service on loans and credits contracted in 1967 and later years amount to some $28 million. However, this figure will rise rapidly with a continuing inflow of aid and the expiration of the grace periods applying to most aid received by Indonesia, and is, on present estimates, likely from 1973 to involve larger annual repayments than those on old debt under the Abs proposals. This fact in itself points to the need to provide Indonesia with external resources on softest possible terms. External Resources 174. The growth of non-oil imports in the next year is estimated at 11 per cent as compared to the current fiscal year. This is less than the 16 per cent growth presently estimated to occur in 1969 and can raise some doubt about its adequacy. It is expected that investment expendi- tures in the public sector will increase by some 35-40 per cent, and the progress of the rehabilitation program will, without doubt, result in a growth of demand for imported production materials. Not the least, a growth of domestic output and income. may lead to a rise in the demand for imported consumer goods. Eac. of those elements is at present diffi- cult to predict as little experience exists in Indonesia which could be the basis of more precise estimates and because the statistical record of the past is insufficiently documented. An increase of imports by 11 per cent therefore appears to be the minimum for which the country must plan now under conditions of considerable uncertainty and there is no reason to suppose that this projection would contain any significant mar- gin of safety. It must also be remembered that Indonesia's net foreign exchange reserves are still negligible or negative and that therefore the defense of the exchange rate and the avoidance of speculative import de- mand can only be achieved in the vety short run; any doubt in the market regarding the adequacy of foreign exchange supplies to meet demand at the present exchange rate may seriously endanger the stability that was achieved over the past few years. 175. The program aid request of $340 million which Indonesia is sub- mitting for 1970/71 must therefore be considered a realistic estimate of requirements; a higher figure could be defended on the ground that a viable development requires the enhancement of foreign exchange reserves in order to provide the means for avoiding undue exchange rate fluctua- tions and to meet unexpected import demand. 176. Slow utilization of program aid in the first half of 1969 be- cause of slack conditions in the economy and tight monetary and fiscal policies, which is unlikely to be fully compensated by more rapid absorp- tion in the second half of the year, could result in a disbursement level for the full year of $274 million, compared to the original target of $320 million. Late commitment of general BE-aid from several donors and the - 56 - restrictions which in some cases govern its use contributed to the short- fall of disbursements. As commitments of program aid for 1969 are at the level which Indonesia requested from the IGGI, a pipeline of program aid by the end of 1969 of around $115 million is expected (See Table 18). 177. About two-thirds of this pipeline is expected to be used in the first quarter of 1970, implying that all present commitments of PL-480 credits and Kennedy Round assistance will be exhausted by the end of that period. For the fiscal year 1969/70 program aid disburse- ments of $319 million are estimated, almost equal to the original dis- bursement projections for the calendar year 1969. A pipeline of $40 million is projected for the end of March 1970, consisting entirely of general BE-aid funds. At the present rate of utilization, this amount would cover about 4 months of disbursement requirements, but the compo- sition of the pipeline will reduce the speed at which disbursements can be expected. Therefore, it might be desirable for Indonesia to obtain early commitments of general BE-aid, if possible in the first quarter of 1970, in order to maintain the present monthly disbursement level over the course of the first half of 1970. 178. The projected disbursements of program aid for the fiscal year 1970/71 are about 6.5 per cent higher than those presently estimated for the current year. This increase from $319 million in 1969/70 to $340 mil- lion in 1970/71 will provide no increase in net receipts of aid as Indonesia will be faced with a substantially increased debt burden from the begin- ning of 1970. Deducting debt service from program aid would leave about $260 million both in 1969/70 and 1970/71 if the aid request is met. This implies that the increase of non-project aid imports projected for the next fiscal 'year will in fact be met entirely from Indonesia's own foreign exchange earnings. 179. . The program aid request of $340 million for fiscal year 1970/71 contains a slightly larger amount than last year for food aid; for 1969 Indonesia requested $135 million of rice, wheat and bulgur, whereas this year an amount of $140 million is sought, of which about $90 million would be used for rice imports and the remainder mainly for wheat. Total food- grain imports are estimated for 1970/71 at $160 million, leaving there- fore $20 million for cash or short-term credit financed imports under normal marketing requirements associated with US food aid. The import requirements of cotton and cotton yarn are estimated at $50 million, com- pared to aid imports of these commodities in 1969/70 of $46 million. As most of the latter arrived late in 1969 and is carried over as stocks into 1970/71 it appears that a new commitment of this order is appropriate. 180. An amount' of $150 million is requested as general BE-aid as compared to a request for $125 million for 1969. Out of this total $30 million is requested for fertilizer imports and about $30 million is ex- pected to finance imports of capital goods associated with the program for extension of medium-term investment credits. This category is direct- ly related to investment by private and state enterprises. This leaves -57 - Table 18 AID COMMITMENTS AND DISBURSEMENTA, 1968 - 1970/71 (In Millions of US Dollars) Program Project Total Aid Aid Pipeline, 31 December 1967 22.9 41.9 64.8 Commitments in 1968 293.5 69.2 362.7 Disbursements in 1968 244.8 26.3 265.1 Pipeline, 31 December 1968 71.6 90.8 162.4 Commitments in 1969 1/ 319.1 235.0 554.1 Disbursements in 1969 274.0 75.6 349.6 Pipeline, 31 December 1969 116.7 250.2 366.9 Disbqrsements, 1st quarter 1970 76.9 33.0 109.9 Requested commitments 1970/71 340.0 260.0 600.0 Disbursements in 1970/71 340.0 140.0 480.0 Pipeline, 31 March 1971 39.8 337.2 377.0 1/ Including $73 million for Puari Expansion Project. - 58 - $90 million of BE-aid which can be used for direct market sales, assum- ing that the pipeline at the end of the fiscal year 1970/71 will be equal to the pipeline at the beginning of the fiscal year, i.e. $40 million, which may be on the low side depending on its composition. 181. Indonesia presents for the 15 months beginning from January 1970 a project aid request of $260 million. During the past year progress in the preparation of projects has been substantial, partly as a result of a number of surveys and technical assistance activities which are now beginning to provide a growing portfolio of identified and/or appraised projects. It is essential that these efforts be continued in the years ahead and expanded into other sectors and new areas, in order to provide the basis for an acceleration of the development effort. Annex II con- tains a list of surveys and studies which need to be undertaken in the near future and for which Indonesia requests external assistance. 182. The list of projects presented in Annex I contains two different categories of projects. The first category, with a foreign finance com- ponent of about $150 million, is ready for commitments as the preparatory work is expected to be completed before the end of 1969. The second category aggregating about $190 million is not yet at that stage, but studies are in progress or to be undertaken soon, and it is expected that these will be completed early enough to provide projects suitable for commitment well before the end of the next fiscal year. A commitment of project aid of $260 million against the list of projects for 1970/71 will thus not exhaust the portfolio of projects which will become avail- able before the end of the calendar year 1970. This level of new project aid commitments will provide a level of project aid disbursements consist- ent with Indonesia's administrative capacity. 183. The aid request of $600 million will, when commitments of this amount are obtained, assure Indonesia of the resources required to finance its development effort. 184. The level of aid requested is higher (by about $50 million) than the actual commitments of $550 million which Indonesia is obtaining in 1969. The shift of composition towards a larger project aid component, which is already apparent in the 1969-commitments, is reflected again in the new request. Commitments of this magnitude will possibly make disburse- ments of $480 million in the fiscal year 1970/71, compared to $414 million in 1969/70, an increase of almost 16 per cent which is in line with the projected increase of public sector development expenditures. Net of debt servicing costs, the official external contribution to Indonesia's invest- ment expenditure will increase from $359 million in 1969/70 to $399 million in 1970/71, assuming an agreement to reschedule the 1970 liabilities of pre-1967 debt on the same terms as in the last three years. 1/ Combined 1/ Acceptance of the Abs proposal for implementation in 1970 would re- duce the net official c,pital inflow by $40 million, which would then equalize the projected 1970/71 inflow with the actual figure for 1969/70. - 59*- with the increase of the country's own earnings of foreign exchange and the gradual shift towards a more development oriented composition of imports, this level of aid is expected to provide sufficient resources for the main- tenance of stability and the financing of a modest ;but reasonable size in- vestment program, which should make a significant contribution to economic development and under proper arrangements, accompanied by the greater fis- cal efforts outlined earlier, can be effectively implemented. - 60 - CHAPTER 6 SECTOR PROBLEMS AND PROGRANS Agriculture 185. Programs designed to increase food, and notably rice, production are given top priority in the Five-Year Development Plan, followed closely by programs for the rehabilitation of agricultural export production, both estate and smallholder. The emphasis on increasing rice production reflects the role of rice as the dietary staple and hence its critical role in the stabilization and development program. 186. Domestic rice production does not now fully meet domestic con- sunmtion requirements. In the current calender year, import of 700,000 tons will be Tequired at a cost of $140 million. Existing consumption requirements are certain to grow, since population growth alone will add anrroximately 300,000 tons annually to consumption requirements and in- come growth may add an almost equal annual amount. 187. A concerted program designed to achieve the necessary increases in rice production is taking shape. The major components of the program are: (1) The establishment of support prices and the implementation of a purchasing program at these prices which will ensure that farmers receive prices high enough and stable enough to induce the use of purchased inputs, such as fertiliz- ers, plant protection materials and high-yielding seed, and expenditures for improved water supplies. (2) Establishment of means whereby an adequate supply of the necessary inputs can be distributed in a timely fashion. (3) The provision of credit facilities and institutions which would give farmers the means for the purchase of inputs and for investment in improved water and other production facilities. (4) Improvement of the research programs required for the development of satisfactory high-yielding seed varieties and of appropriate programs of fertilizer and plant pro- tection material application. (5) Establishment of a program for the large-scale production and distribution of satisfactory high-yielding seeds. - 61 - (6) Improvement of extension services designed to communicate to farmers research findings and other technical informa- tion. (7) Rehabilitation, improvement and expansion of irrigation, transport, processing and storage facilities. In addition, it is recognized that a much more adequate crop forecasting and estimating system is necessary for proper evaluation and management of the rice production and supply program. 188. The Five-Year Plan has set the ambitious rice production target of 15.4 million metric tons of milled rice by 1973/74. There is room for doubt that this target, which would require an average annual increase in production of almost 8 per cent per year during the five-year period, is either necessary or feasible. To achieve its production target, the Plan proposes the construction of new irrigation facilities serving 830,000 hectares of rice land as well as the rehabilitation of existing irrigation systems serving another 830,000 hectares; it contemplates in addition that the existing yields of rice will be increased on all areas devoted to rice cultivation by the increased use of modern technology and inputs. In accordance with this general program, substantial provisions were made in the 1969/70 development budget for the rehabilitation of existing irrigation facilities, the continuation of c-x-struction of new facilities and the start of construction of additional ones. Provision was also made for the import and distribution of much increased quantities of fertilizer and for the production and distribution of larger quantities of new, high-yielding seed varieties. In addition, the so-called Bimas Gotong Rojong program, which had been started in the 1968/69 wet season with the CIBA contract covering 300,000 hectares, was expanded by contracts with CIBA and other foreign firms to 550,000 hectares in the 1969 dry season and to almost 1.1 million hectares in the 1969/70 wet season. The Bimas Gotong Rojong program was conceived as a means of enlarging th& efforts which were being made by the extension service of the Ministry of Agilculture and the existing fertilizer distribution and credit agencies and of ensuring that credit and input sup- plies would reach a much larger number of farmers and a much larger area of rice cultivation. 189. Experience in 1969/70 has suggested the desirability of some re- shaping of the program for 1970/71 and some shifts in the emphasis on va- rious components of the total program. The shifts contemplated include the following: (a) Greater emphasis on the rehabilitation, of existing irrigation facilities and the completion of irrigation construction projects already underway, together with correspondingly less expenditure of funds and resources on new starts. It is, however, not intended that new starts would be entirely excluded. This reflects the observation and judgment that, per unit of investment, - 02 - the increase in rice output obtainable as a result of rehabilitation of existing facilities and comple- tion of projects underway is generally substantially higher than from construction of entirely new ones. Uncertainty about the urgency of the rice production target lends support to this change of emphasis in the irrigation program. (b) Restriction to approximately 1.1 million hectares of Bimas Gotong Rojong contracts which had originally been planned to cover 1.4 million hectares. (c) Reduction in many areas of the size of the package of inputs which had originally been planned under the Bimas Gotong Rojong contracts. (d), Expansion of efforts to provide inputs and credit to farmers prepared to employ them by means other than the Bimas Gotong Rojong contracts. (e) Expansion of efforts to plan and establish improved milling, storage and transport facilities. 190. Both technical assistance and project aid are being requested, as inaicated elsewhere in this report, for all these purposes, and some are now Deing received. Specifically, IDA has provided a credit for the reha- bilitation of two large irrigation systems and the completion of another partly constructed. Some of the credit funds are being used to prepare plans for the rehabilitation of additional systems; these plans will be ready for the beginning of execution within the 1970/71 year and are suit- able objects of project aid. ADB has also provided a credit for the com- pletion of an irrigation project and has provided assistance for the plan- ning of another. IDA is assisting the Government in planning and carrying forward the work of completing the large Djatiluhur irrigation project, which will serve 186,000 hectares, and plans within the coming months to provide a credit to assist in completing the project. Project aid by the Government of Ja.pan is assisting in completion of storage reservoirs on the rivers, and assistance is being sought for improvement and extension of the irrigation systems served by these reservoirs. Assistance in the planning of rehabilitation and improvement of other systems has been pro- vided by other aid-givers and, as ind:Icated, additional similar technical and financial assistance in both planiing and executing other irrigation improvement projects is-being sought.-; 191. In the field of input supply and distribution, plans have been made for the establishment of a 380,000 ton per year addition to the exist- ing Pusri fertilizer plant at Palembang and the Government has asked a number of the aid-givers to join in financing this project out of 1969 pro- ject aid commitments. A number of the aid-givers, including the United States, tie ADB and IDA have iadicated, without firm commitment so far, their - 63 - willingness to finance this project and the Government of Japan is studying the matter. In addition, the Government and IDA have agreed that part of the IDA technical assistance credit of $2 million will be used to finance a study of Indonesia's further requirements in the area of fertilizer production, distribution and consumpti6n. This study is to be started shortly and among other things is expel:ted to produce plans for an effec- tive fertilizer distribution system, and better information on fertilizer requirements, and to identify and sketch preliminary plans for the next appropriate fertilizer production projects. In addition, IDA is assisting the Government in the preparation of plans for a national system of de- velopment, production, certification and distribution of high-yielding rice seed varieties. The Rockefeller Foundation is considering providing assistance in the execution of this program. 192. In the area of research, a joint U.S.-Indonesian team has recent- ly completed a survey out of which have come plans for the establishment of a coordinated and reinvigorated national program of agricultural re- search. A number of aid-givers are planning assistance in this field, as well as in the training of agricultural specialists. 193. A variety of other efforts to assist in various phases of the rice production program are being made by several donors. 194. In the area of credit, th: ADB has sponsored a study of agricul- tural credit which has recommended measures in this field. These are under review and consideration. 195. In the area of processing and storage, the Government has been providing a supply of small rice hullers and at the same time is requesting assistance in a systematic study and the preparation of.compre.aensive plans for improvements in this area. 196. In addition, greater clarity and complete agreement has now been achieved within the Government with respect to the implementation of rice price policy. A support price at which bJLOG will buy all the rice which is offered has been announced for the coming period and is now in effect. Steps are being planned to expand BULOG's capacity actually to implement this policy. At the same time, imports are being planned in sufficient volume to ensure that BULOG's stocks will be adequate to put supplies into the market whenever rice prices rise sufficiently above the support buying prices to require such action in order to prevent excessive rises in prices at the consumer level. Estates 197. Considerable opportunities exist for the increase of production and earnings on the Government-owned estates producing export commodities. Although a considerable number which had been under Government control have been returned to their private owners, a large number, embracing 590,000 hectares of cultivated land, are operated by Government enterprises. Efforts - 64 - to rehabilitate and to improve these operations are now underway. Organi- zational steps which involve the creation of some 28 estate companies, each managing and operating a number of physical properties, have been taken. The attempt is being made to decentralize authority and responsibility to these management units but at the same time to provide improved common re- search, management and marketing services. 198. Specific plans for the rehabilitation and improvement of several of the rubber and oil palm producing estate companies were prepared with the assistance of IDA and the ADB respectively and credits to assist in financing these projects have been extended by both agencies. Part of the funds provided by the IDA credit are being used to assist the Govern- ment in the preparation of plans for the rehabilitation and improvement of other rubber and oil palm producing estates and a considerable number of these should be completed in time for financing arrangements to be made and execution started in the coming year. The projects generally involve, among other things, renewed fertilization, replanting with high-yielding varieties, rehabilitation of field and processing equipment, and technical assistance in management. They also involve the re-establishment of plant- ing materials and studies designed to improve marketing methods and opera- tions. 199. In the case of the tea estates and those producing other export commodities, assistance is being requested in the conduct of studies need- ed for the preparation of similar project plans. 200. In.the case of sugar, steps are being taken to repair or replace factory equipment where this is most immediately needed for the continua- tion of factory operation. However, it is recognized that a thorough-going survey of the entire sugar production and processing industry is needed as a basis for the planning of a specific program in this area; plans for this survey are in preparation and assistance for its conduct is being requested. Smallholder Export Production 201. The urgent need to rehabilitate and improve smallholder production, notably of rubber but also of copra and other lesser crops, is clearly recog- nized but mainly because of the much greater difficulties involved, a com- plete program for the purpose has not yet been developed. In the case of rubber, equipment for the processing of smallholder rubber into a higher and technical quality product, crumb rubber, has been imported by the Gov- ernment and nade available on a credit basis to private processors. This is a first and desirable step toward' improving the situation. Further actions are necessary to improve the returns to the smallholder producer, and to induce and assist him to improve the basic production operations. The IDA estate credit referred to above provides funds for a systematic study of the smallholder problems and it is expected that out of this study there will evolve a specific program and specific projects for the improve- ment of smallholder rubber production. - 65 - 202. In the case of copra, coffee and other products, similar efforts are necessary to supplement the attempts which are being made by the Govern- ment to improve marketing arrangements. Industry 203. Although the Five-Year Plan properly gives priority to agricul- ture in the allocation of efforts and '*esources, the urgent ne6essity for expansion of industrial output in both the short and the long run is clear- ly recognized. The development of a much larger and much more skilled and experienced domestic entrepreneurial group and the enlargement of domestic private investment is critical to Indonesia's economic progress. Immediate- ly, the efforts of the Government are concentrated on making credit facili- ties available to both private and state industrial enterprises so that they can rehabilitate their production facilities, utilize them more ef- ficiently and at a higher degree of capacity and, where possible, expand them and undertake new production activities. 204. The Government is also attempting by a variety of other means to stimulate investment in industry. These include the provision of tax in- centives under the terms of the Domestic Investment Law, an effort to re- vise the obsolete commercial code and company law, consideration of appro- priate revisions in the Company Income Tax, consideration of revision of the customs tariff, examination of 'he possibility of developiig industrial estates, improvement of electric power and transport facilities, creation of effective development finance institutions, and others. Attention is also being given or is to be given to revision of existing labor legisla- tion and to the improvement of statistical information on economic activity. 205. In addition, the Government is attempting to examine the various "retarded" or unfinished Government industrial projects started in the past with foreign aid, and to determine on appropriate courses of action in each case. It is also seeking technical assistance in the study of and prepara- tion of plans for two sub-sectors of industry in which Government enter- prises at present play a major role and in which there are difficult prob- lems of scale, equipment, efficiency, management and marketing. These are the spinning of cotton yarn and the manufacture of paper pulp and paper products. In both these instances, the Government is seeking technical assistance in the conduct of the.necessary studies, in the preparation of specific plans and in the operation aad management of the existing faci- lities. 206. In all or most of the other activities mentioned above, the Go- vernment is seeking both technical and capital assistance from abroad. Electric Power 207. As of mid-1968, the total installed generating capacity in Indo- nesia amounted to about 650 MW including the 125 MW multi-purpose hydro- electric plant at Djatiluhur serving Djakarta and Bandung, and the 50 MW - 66 - thermal power station supplying Djakarta. Both the generating and the distribution and transmission facilities were inadequate to meet demand and were providing poor service. 208. A comprehensive survey of electric power facilities and services in Java and Sumatra is underway by a Japanese team provided under Japan's technical assistance program. This survey is intended to diagnose elec- tric power requirements over the long run, and the problems in meeting these needs, to identify more clearly the specific projects and efforts which should be undertaken in the coming years, and to recommend an appropriate sequence. In the meantime, in advance of completion of this survey, a number of specific projects clearly needed immediately are being planned with the assistance of other aid-givers, including projects for the im- provement and expansion of distribution and generating facilities in Central Java and North Sumatra and for the improvement of distribution facilities in the Djakarta district. IDA has undertaken to finance the latter project and simultaneously to provide technical assistance in the operational and financial reorganization of PLN, the national power company. This reorga- nization is designed to put PLN in a position effectively to operate the existing and the much enlarged power facilities to be erected in the coun- try. 209. Simultaneously, work is also going forward, with financial and technical assistance from abroad, on a number of electric power projects which had been planned or actually started in earlier years, including expansion of the Djakarta and Palembeng thermal power generating plants and hydro-electric generating facilities associated with the so-called three-K reservoir projects. As a result of the planning and improvement efforts now underway, it is expected that a large number of projects in the electric power sector will be ready for financial commitments and ex- ecution in the coming year. Transportation 210. Indonesia has a basically well planned transportation system which requires principally rehabilitation, efficient operation and better continuous maintenance. Substantial expenditures for rehabilitation are required and limited investment in the construction of new facilities. The major immediate objective in most modes of transport is not to in- crease capacity but rather to reduce high transportation costs. The poor condition of existing facilities and present operational practices are mainly responsible for the latter. 211. The following rough estimates of the total internal traffic carried by the several modes of transport in 1968 provide a measure of their relative importance: - 67 - ton kilometer passenger kilometer million million road transport 11,000 25,000 railways 740 4,05) marine transport 9,000 350 air transport 25 285 212. Technical assistance in the planning of rehabilitation, mainte- nance and improvement and in the operation of most transport facilities, has been obtained but some additional assistance of this type is required particularly in relation to ports and airports. Project aid has been pro- vided for a large road rehabilitation effort and for other lesser invest- ments in other transport modes. The survey and planning work now underway will provide the basis for future investments and operational improvements in transport if supplemented by the pre-investment studies now being plan- ned which are listed elsewhere in thit report. 213. Pending further progress in the studies now underway and planned, only a relatively modest list of new projects is projected for 1970/71. The Railways 214. The growth of 28 percent in freight ton/kilometers from 1967 to 1968 reverses a steady decline in rail traffic since 1939. According to preliminary records for the first six months of 1969, the freight traffic increase experienced in 1968 is continuing. However it is not expected that rail freight traffic will greatly exceed one billion ton/kilometers during the next five years. This figure could be used as a reasonable ceiling in judging immediate investment needs until the on-going studies and the systems analysis recommended by the consultants provide a firmer basis for long-term planning. 215. The future role of the railways is one of the key issues in trans- portation planning. The Five-Year Plan tentatively envisaged railway in- vestments of about US$100 million but decisions on actual investments of any magnitude are to be based on the transport studies now under way. Firm recommendations from the work now being done by German railway consultants and those in other transport modes cannot be expected before mid-1970. 216. However, the need for operating and repair cost reductions make the replacement of steam locomotives by diesel locomotives an economically viable proposition. While total requirements after operational improve- ments cannot yet be assessed, it can be said that the acquisition of five diesel locomotives of the 1,000 HP class will not be in excess of immediate requirements. - 68 - Roads 217. Highway shares with marine transport the task of carrying the bulk of Indonesia's freight and is six times as important as the railways in passenger traffic. 218. The IDA highway rehabilitation credit mentioned above will assist in the rehabilitation of major roads in five provinces and the establish- ment of regular improved maintenance in 25 provinces. Commitment of ad- ditional aid for rehabilitation could appropriately be made during 1970/71. 219. Specifically, commitments of project aid during 1970/71 would be desirable for the following projects: (a) hoad rehabilitation and maintenance, including equip- ment, imported materials, workshops and implementation assistance in the provinces of North Sumatra and Central Java. (b) Detailed engineering of the Djakarta-Bogor and Balikpapan- Samarinda roads. (c) Construction of the Djakarta-Bogor road. 220. Since more than half of the truck and bus fleet is obsolete and should be replaced as soon as possible, total requirements will be between 12,000 and 15,000 units per year, depending on the speed with which the replacement backlog is to be eliminatdd. The renewal and expansion of the road transport fleet has been hampered by the lack of adequate domestic credit facilities. Efforts to remedy this situation are under way and the use of bilateral program and project aid for the purpose is contemplated. Marine Transport 221. Shipping. The Department of Communications estimates that about 4.t million tons of dry cargo was handled in the inter-island trade in 1967 as compared with 4.3 million tons ten years earlier. In respect of ship- ping capacity, it appears that the existing tonnage may be adequate to handle needs in the near future, but further study is required before firm judgments can be made. 222. Ports. The port infrastructures and ships servicing facilities are in poor ccndition due to lack of normal maintenance. 223. howover, in view of the need for further project preparation, as in the case of railways, commitments proposed for the 1970/71 fiscal year are limited to those projects which are quite well-defined and which are clearly of high priority. One of the projects requiring technical assistance is a port rehabilitation feasibility study to be implemented as - 69 - soon as possible. It is probable ths.t this study, and the continuing ef- forts of the Government and foreign advisors now in Indonesia, will result in the definition of a number of projects, the preparation of cost esti- mates, and the estimation of benefits to a sufficient degree of accuracy to justify additional commitments of foreign aid in 1970/71. Among the programs which are ready for commitment and implementation is a project for the rehabilitation of navigational aids, at a foreign exchange cost of US$1.0 million. 224. Dredging. During the last ten years before 1968, the annual output of the Indonesian dredging fleet never came close to meeting main- tenance dredging requirements. Detailed surveys of all major harbor basins and entrance channels are still required to determine the exact volume and location of accumulated spoil to be removed but it is uncertain whether the extent of the backlog problem calls for a large number of con- tracts with foreign dredging concerns. A detailed rehabilitation program has been worked out with the assistance of the UN Dredging Advisor. The total cost of the program is US$1.1 million and Rp 1,000 million. A further allocation of Rp 200 million is required for the reconditioning of the dredger "Sulawesi" which, although 48 years old, must be kept in operation for another four years. The Government of the Netherlands has agreed to finance a dredging survey to be implemented during 1970 and 1971. Civil Aviation 225. Because of the long distances between the main cities and the difficulty of access to the interior of some large islands, air transport is of growing importance in Indonesia. 226. A modernization program nor under way is replacing all the air- craft used by Garuda on its domestic routes with two DC-9's and ten F-27's. One additional F-27 is planned for acquisition in May 1970 and the acqui- sition of two additional DC-9's is tentatively scheduled for 1971. 227. In recognition of the need tc improve airports in order to permit efficient utilization of new types of aircraft 18 airports have been select- ed for upgrading. The improvements which consist primarily of lengthenintr runways and improving their surfaces were scheduled for'implementation in 1969 and 1970. Work has not been started on these projects as yet however. Technical assistance is urgently required for a review of the entire in- vestment program for aviation infrastructure, and the identification, pre- paration and implementation control of high priority projects. Telecommunications 228. In 1969 contracts were placed for the construction of much needed trunk microwave circuits from Bandung to Denpasar on the island of Bali. Also in 1969, in conjunction with ITT, a satellite ground station at Dja- tiluhur near Djakarta was opened for overseas traffic to many of the major - TO - countries of the world. A survey team from the Australian Post and Tele- graph Administration is providing technical assistance to the Telecommuni- cations Corporation in the preparation of its development program. 229. Concurrently with the improvement of trunk facilities the neces- sary switching equipment for connection to local exchanges would be con- structed and local exchanges would be expanded to meet the pressing demand for new subscriber connections. The planning work in connection with the proposed trunk route through Sumatra is now nearing completion, and will be ready for financing early in 1970, and work on the planning of the Eastern extension of the Java-system through the Lesser Sunda islands is proceeding and should permit the obtaining of financial commitments towards the end of 1970. Tourism 230. For a number of reasons, Indonesia has started late in the field of tourism. However, in 1968 some 50,000 tourists visited Indonesia and snent an estimated US$10 million in foreign exchange. The number could grow rapidly. Indonesia is a potential link for tours through Southeast Asia from Japan, the U.S. and Europe. 231. There is a consensus that development should start in Bali. Arrangements have been made for a UNDP-financed study for the development of tourism in Bali. 232. IL is th'a policy of the Government to rely on private capital for further investments in hotels and tourist facilities. It has already adopt- ed a series of measures to stimulate these investments, such as exemptions from import duties of materials and equipment needed for hotels and exten- sions of finance from government banks. Education and ManDower 233. Studies and planning efforts in the field of education are under- way, but in the absence of a proper manpower survey, there is not yet a firm base for determining educational and training targets. The Department of Mannower hopes to complete by early next year a national manpower survey, covering both public and private sectors. This will update and expand the survey of 1963-1965. 234. The Government, with the assistance of the Ford Foundation, has begun an assessment of the entire educational system and problems, which will examine objectives, organization, structure and policy. This is an essential prerequisite to the planning and implementation of a large-scale program for the imorovement of educational facilities and efforts. The study will take about two years to complete but interim reports may be available ear- lier. - 71 - 23'. Meanwhile, there is some scope for projects in areas of obvious priority and a number of those have been identified and are to be prepared. Wat er_u Rpf 236. There are major deficiencies in potable water supply facilities in Indonesia, and shortages are particularly acute in urban areas. Be- cause rates have not been adjusted to the inflation of recent years, col- lections barely cover operating costs and leave little or nothing for improvement and expansion. 237. Water supply has a relatively low priority in the Five-Year Plan. Rp 7 billion is provided for improvements in water supply and sewerage sys- tems, about a third representing foreign exchange requirements. Some 20 per cent, all in runiahs, were allocated for 1969/70. Major investment awaits the preparation of plans for five systems: those of Djakarta, Bogor, Solo, Denpasar and Palembang. Requests are:being made for assistance in making these plans and for technical suppox, in operating the systems. The Government is discussing with WHO and tfe IBRD the initiation of a long-range national program of planning, technical assistance and timing in the water supply sector. Family Planning 238. In 1969, the Government made the decision to undertake a serious and large-scale program to restrain population growth. It established a national family planning institute (iKBN), which is attempting to prepare an operational program. 239. At the request of the Government a team jointly organized by the UN, WHO and IBRD is investigating population planning problems on Java, Madura and Bali and is assisting and advising in the planning of an opera- tional program. - 72 - Table 19 ESTIMATED COST OF PROJECTS READY FOR COMMITNENT, 1970/71, BY SECTOR 1/ Local Currency Commitments Requested Sector Total Cost Cost in Category: (In Million (In Billion A B US$ Equivalent) Rupiahs) Tin Million US$T Agriculture ) Forestry & ) 115,0 17.0 17.6 45.0 Fishery ) Irrigation 98.0 15.3 27.8 23.0 Tin Mining 13.2 0.7 11.2 - Industry 83.0 10.8 1.9 48.0 Power 116.0 11.2 56.0 23.0 Transportation 67.3 11.5 8.7 23.0 Telecommunications 43.0 5.0 26.8 - Development Finance Institutions 15.0 - - 15.0 Other Sectors 35.5 5.5 - 18.0 Total 586.0 77.0 150.0 195.0 1/ Figures shown include rough estimates for those projects for which no reliable co,t data are available. - 73 - Table 20 LIST OF PROJECT PROPOSALS Local Foreign Num- Total Currency Exchange ber Title Status Cost Cost Cost (In Thou- (In Mil- (In Thou- sand US$ lion Rp) sand US$) Equivalent) AGRICULTURE, FORESTRY & FISHERY A-1 Pump Irrigation A 600 65 400 A-2 Development of Ground Water for Livestock A 385 20 325 A-3 Tuna/Skipjack Fishing A 3,750 250 3,000 A-4 Rehabilitation of PNP-IV (Rubber) A 12,000 2,800 3,300 A-5 Rehabilitation of PNP-VI (Oil palm) A 16,000 2,400 8,600 A-6 Rehabilitation of PNP-VIII (Tea) A 2,900 300 2,000 Sub-total Category A 35,635 5,835 17,625 A-7 Seeds Industry Development B 12,000 1,600 7,000 A-8 Rehabilitation of Sugar Factories B - - 4,700 A-9 New Sugar Factories B - - 1,300 A-10 Rehabilitation of PNP-XII (Tea) and PNP-III (Quinine) B 6,000 1,000 3,000 A-11 Livestock Development Slaughter Houses - Djakarta & Surabaja B - - - A-12 Livestock Development Ranch Cattle - Eastern Islands B - - - A-13 Improvement and Rehabilitation of State Fishery Enterp. B 3,500 600 1,650 A-16 Rehabilitation of Additional Gov't Rubber Estates B 29,000 7,100 7,000 A-15 Development of Pine and Agathies Plantations B - - - A-16 Development and Improvement of Teak Wood Exploitation B - - - A-17 Agricultural Credit through Banking System B - - - A-18 Rice Processing Plant B - - - Sub-total Category B 1/ 80-000 11,000 45,000 Total Agriculture 11 000 17000 62j600 1/ Including rough estimates of costs of all projects listed. - 74 - LIST OF PROJECT PROPOSALS (cont'd) Local Foreign Num- Total Currency Exchange ber Title Status Cost Cost Cost (In Thou- (In Mil- (In Thou- sand US$ lion Rp) sand US$) Equivalent) IRRIGATION B-1 Rehabilitation of Irrigation Systems: 1/ (1) Pemali Tjomal A ) 7,800 (2) Tjiudjung A ) 23,000 3,300 1,500 (3) Sadang A) 3,500 (4) Djatiluhur A 25,000 3,250 15,000 Sub-total Category A 48,000 6,550 27,800 B-2 Rehabilitation of Irrigation Systems: 1/ (1) Brantas Delta Irrigation B 4,600 1,200 1,000 (2) Kali Porong B 2,200 200 1,600 (3) Gambarsari and Passanggrahan B - - - (4) Other Areas B - - - B-3 Teluk Lada Irrigation B 4.,500 1,140 1,000 B-4 Sempor Dam and Irrigation B 19,000 3,600 8,000 B-5 River Dredging - Flood Control B - - - B-6 Ground Water Exploration for Irrigation B - - 5,000 B-7 Rehabilitation of Djratunseluna Basin Irrigation B 4,500 620 2,600 B-8 Progo River Project (Kalibawang Irrigation) B 3,700 900 1,000 B-9 River Training -Flood Control (1) Solo B 4,080 1,000 1,000 (2) Tjitanduj B 5,400 1,430 1,000 Sub-total Category B 48,000 8,800 23,000 Total Irrigation 982,000 159300 50,800 1/ Request for commitments includes some part of the local currency cost. -75- LIST OF PROJECT PROPOSALS (cont'd) Local Foreign Num- Total Currency Exchange ber Title Status Cost Cost Cost (In Thou- (In Mil- (In Thou- sand US$ lion Rp) sand US$) Equivalent) TIN ING C-1 Rehabilitation of Mantung Power Plant A 4,040 175 1/ 3,500 C-2 Rehabilitation of Manggar Power Plant A 1,150 50 1/ 1,000 C-3 Electric Transmission and Distribution A 1,250 80 1/ 1,000 C-4 Rehabilitation of Dredges A 41,0 220 1/ 3,h25 (1) Klantji ( 750) (2) Neranteh (1,000) (3) Lais ( 375) (4) Sungai Liat (1,300) C-5 Electric Mines A 1,900 100 1/ 1,600 c-6 Dock Facilities A 800 35 1/ 700 Total (All Category A) 131240 660 11 225 1/ Local currency cost is to be paid out of own financial resources of P. N. Timah, the state-owned tin mining corporation. - 76 - LIST OF PROJECT PROPOSALS (cont'd) Local Foreign Num- Total Currency Exchange ber Title Status Cost Cost Cost (In Thou- (In Mil- (In Thou- sand US$ lion Rp) sand US$) Equivalent) INDUSTRY D-1 Expansion of Letjes Paper Mill A 2,530 270 1,700 D-2 Rehabilitation of Padalarang Paper Mill A 270 40 150 Sub-total Category A 2,800 310 180 D-3 Rehabilitation of Spinning Mills B 1,300 225 600 D-4 Expansion of Spinning Mills B - - 8,000 D-5 Foundry B 5,400 840 2,800 D-6 Improvement of Manufacture of Agricultural Equipment: 3 690 600 1 830 (a) Rice hullers/mills plant B (1 58) (320) t8) (b) Small tools plant for agriculture B (1s120) (130) (720) (c) Sprayers plant B ( 170) ( 30) ( 70) (d) Water pumps plant B ( 820) (120) (460) D-7 Takengon Paper Mill B - - 30,000 D-8 Rehabilitation of Blabak Paper Mill B 530 60 350 D-9 Industrial Estates B - - - D-10 Rehabilitation of Salt Industry B - - - Sub-total Category B 80,000 10,500 48,000 Total Industry 83,000 1Q800 50,000 - 77 - LIST OF PROJECT PROPOSALS (cont'd) Local Foreign Num- Total Currency Exchange ber Title Status Cost Cost Cost (In Thou- (In Mil- (In Thou- sand US$ lion Rp) sand US$) Equivalent) POWER E-1 West Java Transmission and Distribution A 10,300 700 8,000 E-2 Central Java Transmission and Distribution A 29,500 2,300 22,000 E-3 East Java Transmission and Distribution A 9,000 600 7,000 E-4 Medan, Generator, Transmission and Distribution A 22sA00 2,600 13,000 E-5 Isolated Distribution and Diesel Generators A 8,200 1,000 5,000 E-6 Micro-Hydro Power Plants A 1,700 200 1,000 Sub-total Category A 81,100 00 56,000 E-7 Rehabilitation of City Gas Net- works for Medan, Djakarta, Semarang B - - 800 E-8 Garung Hydro Power Plant B - - 7,500 E-9 Central Java Thermal Power Plant B - - 10,000 E-10 Batang Agam Hydro Power Plant B - - 5,000 Sub-total Category B 35,000 800 23,300 Total Power 116 000 112 79000 - 78 - LIST OF PROJECT PROPOSALS (cont'd) Local Foreign Num- Total Currency Exchange ber Title Status Cost Cost Cost (In Thou- (In Mil- (In Thou- sand US$ lion Rp) sand US$) Equivalent) TRANSPORTATION F-1 Engineering Design for Djakarta-Bogor Highway A 1,000 140 600 F-2 Road Rehabilitation in North Sumatra and Central Java A 17 100 3.100 7 000 (a) Highway equipment ( 5- ( ) (b) Imported materials ( 830) - ( 830) (c) Base workshops ( 220) - ( 220) (d) Implementation assistance ( 200) - ( 200) (e) Clearance and transportation of imports (2,600) ( 800) - (f) Local materials and labor (7,500) (2,300) - F-3 Rehabilitation of Dredger A 4,180 1,000 1,100 Sub-total Category A 22,280 41240 8,700 F-4 Djakarta-Bogor Highway Construction B 22,000 4,2;0 9,000 F-5 Balikpapan-Samarinda Highway Construction B 6,600 1,400 2,300 F-6 Railways - 5 units of 1,000 hp Diesel Locomotives B 1,150 50 1,000 F-7 Bulk Unloading Equipment for Tandjung Priok, Belawan, Surabaja B 1,310 100 1,000 F-8 Rehabilitation Navigational Aids B 2,230 400 1,050 F-9 Replacement of Sea Dredgers B 4,600 200 4,000 F-10 Inland Waterways Infrastructure Improvements B 6,000 1,000 3,000 F-11 Two Aircraft for feeder-lines B - - 1,000 Sub-total Category B 4,5000 7,300 22,500 Total Transportation 67,300 11,500 31,700 - 79 - LIST OF PROJECT PROPOSALS (cont'd) Local Foreign Num- Total Currency Exchange ber Title Status Cost Cost Cost (In Thou- (In Mil- (In Thou- sand US$ lion Rp) sand US$) Equivalent) TELECOMMUITCATIONS G-1 Sumatra Microwave System A 19,100 1,890 13,000 G-2 Eastern Extension of Microfave System A 8,300 1,320 4,000 G-3 Communication Systems A 15,700 1,820 9,800 Improvement Total (All Category A) h43100 5,030 26,800 DEVELOPMENT FINANCE INSTITUTIONS H-1 Development Loan Finance B - - 15,000 OTHER SECTORS J-1 Water Supply B - - 10,000 J-2 Family Planning B - - 3,000 J-3 Education: Secondary Technical Training Centers B - - 5,000 Total (All Category B) 35 000 5 500 18,000  ANNEX I LIST AND SUMMARY DSCRIPTIONS OF PROJECTS EXPECTED TO BE READY FOR COMMITMENT IN 1970/71 Note: Projects are classified in the tables as follows: Category A: Projects expected to be ready for commitment by early 1970, for which reasonably firm cost esti- mates can be provided. Category B: Projects for which feasibility studies are likely to be completed in 1970/71; cost estimates are given only for projects where such data are avail- able. The totals for category projects in the following tables include rough estimates for listed projects for which cost data are not yet available.  - 1 - SUMMARY DESCRIPTIONS OF PROJECTS A. Agriculture A-1 Pump Irrigation The project envisages the installation of pumps in suit- able locations to improve rural irrigation systems. Areas have been identified and sub-projects prepared. Detailed study of all aspects of feasibility, including the institutions arrange- ments, would be a pre-requisite to the implementation of each sub-project. 300 units are requested. A-2 Development of Groundwater for Livestock Following a survey and report by a Dutch expert (Ir. Felius), a project is prepared for Timor, Flores and Sumba. The project would include a more detailed survey of the actual construction sites, expert assistance and the setting-up of windmills for stock watering both on farms and cattle-holding grounds as well as providing some water for crop production. A-3 Tuna/Skipjack Fishing Project (AER Tembaga) During April 1969 an FAO/IBRD project preparation mission investigated the above project and appraisal of the project is provisionally scheduled for October/November 1969 and subject to the outcome of the appraisal, it is anticipated the project could be implemented in 1970. A-4 Rehabilitation of PNP-IV - (Rubber) Project preparation is in progress and it is anticipated that an IDA appraisal team will visit Indonesia in November 1969. Depending upon the outcome of appraisal, it is expected the pro- ject can be implemented starting in 1970. A-5 Rehabilitation of PNP-VI - (Oil Palm) Project preparation is in progress and it is anticipated that an IDA appraisal team will visit Indonesia in November 1969. Depending upon the outcome of the appraisal, it is expected the project can be implemented starting in 1970. A-6 Rehabilitation of PNP-VIII - (Tea) Following a survey completed by a Dutch commercial company (H.V.A.) and negotiations with the Netherlands Government, it is anticipated implementation of this project will start in 1970. -2- A-7 Seeds Industry Development Project An FAO/IBRD project identification and preparation team visited Indonesia in April/May 1969 and in consultation with the Director General of Agriculture prepared the outline of a Seeds Industry Project described in detail in the mission's draft re- port of June 20, 1969. The report recommends a phased development of the Seeds Industry, the first phase would be the development of a rice seed industry in Java and Bali capable of extension to other crops and other territories as opportunity and circumstances permit. The project envisages: (i) establishment of a National Crop Improvement Center at Sukamandi; (ii) development of 13 seed growing districts with specialized production and modern seeds process- ing plants in each district; (iii) establishment of a National Seeds Organization. Because of the complexity of the project, consideration is being given to making a short-term contract with a consulting organization to assist the Government in preparing the project, using funds from IDA Credit 135. A-8 Rehabilitation of Sugar Factories Assistance is required to carry out arrears of maintenance and urgent replacement of turbo-generator sets and boilers etc., for six sugar factories at Tasik Malu, Modjosarang, Sudhono (each with a boiler of 20 ton/hour capacity and a turbo-generator set of 1.200 kw/hour) tasik Madu, Modjosrangen and Pradjakan (each with a boiler of 40 tons/hour capacity and a turbo-generator set of 2,000 kw/hour). A-9 New Sugar Factories Development program for sugar (Tjot Girek and Sulawesi). These are two retarded projects which are to be surveyed and studied by consultants during 1969 under technical assistance funds from the IDA technical assistance credit. Subject to the outcome of this study it is anticipated that there may be a pro- ject for implementation starting in 1970. A-10 Rehabilitation of PNP's XII and XIII - (Tea and Quinine) (a) Subject to the outcome of the Tea Industry Survey which it is intended to carry out in 1969/70 with U.K. Government -3- and/or funds from the IDA technical assistance credit,, it is anticipated that implementation of the above development project would start in 1970. (b) A study should be made and a project prepared for the modernization and possibly the extension of quinine pro- duction. A-l Slaughter Houses and Angillary Equipment - Surabaja and Djakarta Following detailed surveys presently being conducted by the Belgian Government in relation to Surabaja and previous surveys carried out by Dr. Umboh in Djakarta, it is anticipated that there will be sufficient information and justification to begin construc- tion in 1970. A-12 Livestock Development Project - Eastern Islands In August 1969 an IDA project identification team in con- junction with the staff of the Director General and Provincial Officers made a reconnaissance survey covering Bali, Lombok and Timor and reached the conclusion that the prospects for a live- stock development project aimed at producing beef cattle for export were favorable. It is anticipated that a livestock dev- elopment project for the Eastern Islands can be ready for im- plementation in 1970. A-13 Improvement and Rehabilitation of State Fisheries Enterprises Project preparation can be done under technical assistance and the project may reach the implementation stage in 1970. It would improve the facilities and provide additional equipment and organizational assistance for the state fishing enterprises located at Ambon, Kendari, Sambu and Tengal. A-l Rehabilitation of Selected Government Rubber and Palm-Oil Estates Following the survey of Government rubber estates provided for in IDA Credit 155, it is anticipated that rehabilitation projects on two further PNP's could be prepared and implementation begun in 1970. A-15 Development of Pine & Agathies Plantations (Central Java) Technical assistance is requested for the formulation of a program and the preparation of investment projects for the improve- ment and systematic exploitation of the above plantations which cover some 100,000 hectares. It is anticipated that such a pro- ject could be ready to begin implementation in 1970. The principal ingredients would be saw-mills and processing facilities, technical and management assistance, roads and handling equipment. A-16 Development and Improvement of Teak Wood Exploitation Technical assistance is requested for the formulation of a program and the preparation of investment projects for the im- provement and systematic exploitation of Government teak planta- tions mainly in Central and Eastern Java, which in aggregate amount to 400,000 hectares. It is anticipated that some devel- opment projects could be ready to begin implementation in 1970. A-17 Aricultural Credit The programs designed and implemented in the last few years to increase and intensify rice production have demonstrated the important role of agricultural credit. The Asian Development Bank has completed an initial study of the role of agricultural credit, and as a next step an action program must be formulated which will lead to a first project for agricultural lending through the banking system with external assistance during the next fiscal year. A-18 Rice Processing Plant Rice milling is the largest single component in the food processing industry of the country. The existing rice milling equipment has suffered largely from negligence and obsolescence for many years and is responsible for excessively large breakage in milled rice and the general deterioration of quality standard for rice. The project is designed to reduce such loss and improve the quality of rice milling up to the level of international mar- keting standard. Necessary preparatory studies for a pilot pro- ject have been completed by a British team of experts. -5- B. Irrigation B-1 Rehabilitation of Irrigation Systems Studies of 12 irrigation rehabilitation projects are under way with assistance financed by IDA. Studies of and plans for execution of four of these projects will be completed in the coming months. (1) The Pemali Tjomal Irrigation System in Central Java was constructed between 1893-1909 mainly for sugarcane production. The project area comprides: 126,450 ha of tech%ically irrigated land 18,600 ha of semi-technically irrigated land 31,000 ha of primitively irrigated land The area is dependent on 10 different rivers for water through 10 weirs. Most of these are 50 to 80 years old and almost completely destroyed resulting in an estimated 50 to 60O reduction of the initial distribution capacity. (2) Tjiudjung Irrigation System in West Java provides technical irrigation to 24,000 ha. The proposed project includes rehabili- tation of irrigation system and expected increase in rice produc- tion is expected to reach 46,000 tons of paddy. (3) Sadang Irrigation System located in South Sulawesi was originally constructed in 1939 and suffered deterioration due to inadequate maintenance. The project is aimed at the rehabilitation and expansion of the existing canal system, hydraulic structures and related facilities including inspection roads. The project will extend technical irrigation to 60,000 ha for increased rice production. (4) Rehabilitation and completion of Djatiluhur Irrigation Project. The dam and storage reservoir on the Tjitarum River and the hydro-electric power facilities have been completed. The canal system required to permit optimal utilization of the water and land resources within the Djatiluhur command area remains to be completed. Following are some of the major undertakings in- cluded under the proposed project: (1) Rehabilitation of main canals. (2) Rehabilitation of the old irrigation system to improve irrigation covering 117,000 ha of land. (3) Completion of secondary canal system covering 40,000 - 50,000 ha of land. (4) Installation of distribution and drainage system for the purpose of converting 80,000 ha of the existing rain-fed areas to dependable irrigated double cropping rice fields. B-2 Rehabilitation of Irrigation Systems Under the program of preparation for the rehabilitation of irrigation facilities in 12 areas (see B-1), the following pro- jects are expected to be ready for commitment during 1970/71: (1) Brantas Delta Irrigation The operational deficiencies of the Lengkong weir and the insufficient discharge capacity of the Kali Porong have caused heavy intake of silt into the irri- gation system and consequent reduction in the capacity of the irrigation system. Lack of maintenance has reduced the operational efficiency even further. Improvement of irrigation water supplies and water control is the purpose of this project, through silt removal and the rehabilitation of existing canals and hydraulic structtres, for an area of 33,000 ha. (2) Rehabilitation of Kali Porong The project is designed to improve irrigation to about 33,600 ha of land for rice and sugarcane produc- tion. A diversion weir and irrigation canals were mostly built more than 100 years ago. Inadequate maintenance in the past necessitates extensive repair works to restore the original capacity. Major components of the prfject are removal of silt from irrigation canals and rehabilitation of hydraulic structures. Kali Porong is one of the two main tributaries of the River Brantas in the project area. (3) Gambarsari and Pasanggrahan Rehabilitation of pumping stations, heavy equipment to remove silt and repair works on the irrigation canals will be undertaken in order to improve irrigation to 30,000 ha under rice cultivation. -7- (4) Other Areas In the course of 1970/71 it is expected that, in addition to the projects listed above, new rehabilitation projects in other areas, belonging to the group of 12 presently under study, will become ready for commitment. B-3 Teluk Lada Irrigation The project located in West Java includes: (1) the rehabilitation of the existing irrigation net works covering 20,000 ha; (2) conversion of rain-fed area to dependable irrigated fields; and (3) flood control works on the Tjiliman and Tjilemer Rivers., The project is designed to supply year-round irrigation water to 7,000 ha now used for rice production and to add another 20,000 ha under the Gambarsari and Pasanggrahan Irrigation System. Construction of a dam, a power plant, main canals and improvement and extension of the existing irrigation system will be undertaken. B-4 Sempor Dam and Irrigation The project is designed to supply year-round irrigation water to 7,000 ha now used for rice production and to bring another 20,000 ha under the Gambarsari and Pasanggrahan Irrigation System. Construction of a dam, a power plant, main canals and improvement and extension of the existing irrigation system will be undertaken. B-5 River Dredging - Flood Control Emergency work on dredging of river mouths is required and the present project is to undertake necessary work on the rivers in South Sulawesi and the northern coast of Java. B-6 Groundwater Exploration and Development for Irrigation A pilot project combined with technical feasibility studies to examine the possible use of groundwater for irrigation purposes as planned. - 8 - B-7 Djratunseluna Basin Development The project area, located in Central Java, is watered by five major rivers and covers an area of 40,000 ha in rice production. The river basin has a number of irrigation facilities, mostly diversion weirs in the rivers. Many of these structures were built between 1928 and 1932 and require extensive repair works to restore the original design capacity. Reconnaissance survey was completed in late 1968 by a Dutch team and tentative estimates of rehabilitation requirements and the scope of further needed studies of expansion projects were presented to the Government of Indonesia. The present project is, in principle, confined to the rehabilitation phase of the work leaving the undertaking of new projects. Major items under the project include the following: (1) Rehabilitation of weirs and irrigation facilities to improve water supplies for rice production in 42,000 ha in the P Lain of Demak. (2) Rehabilitation of flood diversion sluice and other irrigation facilities supplying water to 30,000 ha in the Plain of East Semarang. (3) Other minor improvement works. B-8 Progo River Development (Kalibawang Irrigation) Rehabilitation of irrigation facilities and additional dev- elopment work is planned for more efficient utilization of water and other resources of the river basin area. Kalibawang irriga- tion is the first stage undertaking and is designed to ensure irrigation to 6,500 ha for double rice cropping. B-9 River Traiing :- Flood Control (1) Solo Basin Emergency work is required to protect over 60,000 ha of paddy land from recurrent danger of flooding. Flood control work will assure increased protection to a pumber of large urban areas located along the Solo River. (2) Tlitandu River Basin Rehabilitation and improvement of existing dikes, construction of aiversion channels and other necessary works to reduce flood damages will be undertaken. Upon completion of the project, 20,000 ha of land will be protected from flooding, 6,700 ha will be reclaimed and 28,000 ha will be covered by extended irrigation. -9- C. Tin Mining he tin mining projects proposed, represent a continuation of those financed by aid committed during 1968 and 1969, amounting to $5.9 million. The recipient, the state-owned tin mining corporation, is capable of meeting local currency requirements out of its retained earnings. C-1 Rehabilitation of Mantung Power Plant The construction of the power plant at Mantung, Bangka, was started in 1953 but the work was discontinued. The present plan calls for installation of necessary equipment and use of tech- nical services to put the plant into operation. The plant is expected to supply needed electric power for the rapidly ex- panding tin mining operations on the island of Bangka. C-2 Rehabilitation of Manggar Power Plant Procurement of diesel generators necessary to supply electric power to tin mining on the island of Belitung, one of the most important tin producing areas in Indonesia. C-3 Electric Transmission and Distribution Improved transmission and distribution of electricity to mining districts in Bangkaj Belitung and Singkep is required for modernization of tin production. The project calls largely for the rehabilitation and replacement of existing equipment. C-4 Rehabilitation of Tin Dredgers The project is designed to overhaul the older dredgers which have been in use for more than 25 years. Engineering and pro- curement of equipment, spare parts and machinery required for four dredgers is proposed. C-5 Electric Mines The project will help modernize tin production through supplies of electric motors, transformers and other necessary equipment and materials required for land mining units. C-6 Dock Facilities With the planned increase in the rehabilitation of the tin dredgers, adequate docking facilities will be required, for this purpose rehabilitation of the existing spillways and dry docks is proposed. Purchase of welding generators, mobile cranes and neces- sary equipment for dry docks including tugboats is planned. -10 - D. Industry D-1 Expansion of Ltes PaPer Mill This mill located. in East Java utilizes rice straw as raw material, as do two other plants listed below. The plant consists of two units: one built in 1940 and the other being installed presently with annual production capacity of 3,000 tons and 6,000 tons respectively. The projept is aimed to make necessary ad- justments in installed equipment so that the mill may attain rated capacity. D-2 Rehabilitation of Padalarang Pa2er Mill This plant located in West Java was originally built in 1924 and was expanded in 1938 with rated capacity of 13 tons per day. The present daily capacity, however, is limited to 10 tons and the quality of product is inferior largely due to obsolescence and negligent maintenance for many years. The present program is a follow-up of the first phase of rehabilitation which was implemented in 1968. With the proposed addition, the mill's daily capacity will be raised by 30% to an annual capacity of 4,000 tons. D-3 Rehabilitation of Spinning Mills The spinning mills concerned have suffered from inadequate maintenance and lack of spare parts. Consequently only 376,000 put of the registered 481,000 spindles were in operation in 1968. This situation was further aggravated by the fact that for various reasons most of the spinning mills were put into operation several years after the arrival of machinery in the country. The project is designed to correct this situation by provid- ing necessary maintenance supplies and machineries for a number of these plants. Out of $2.0 million estimated requirement for this project, $1.4 million was obtained in 1969 and the balance of $0.6 million is requested for 1970/71. D-4 Expansion of Spinning Mills It is proposed to expand some of the existing mills to raise production efficiency by the addition of 60,000 spindle,s to se- lected plants,. This reflects the assumption that the rehabilitation and expansion of existing mills is more economical than construction of new mills. The expansion will facilitate the subsequent trans- formation of present spinning mill capacity into integrated tex- tile mills. - 11 - D-5 New Model Foundry Center The center to be set up in Surabaja, East Java is to serve as a model plant in the production of good quality iron and steel castings for machinery and equipment. At present, Indonesia is not equipped technologically to produce quality castings that qan compete with imported products. The project is based on a survey conducted by experts provided by UNIDO and is expected to be ready for implementation by early 1970. D-6 Improvement of Manufacture of Agricultural Implements (a) Rice Hullers/Mills Plant Rice milling, the largest component in the food proces- sing industry is not properly equipped and defective milling makes it difficult to maintain uniform grade. This results in excessive breakage in rice milling. The project is aimed at the production of proper milling machinery and equipment to correct this situation. (b) Small Tools Plant for Agriculture The project is to construct a new plant for the produc- tion of small agricultural tools and implements for Indo- nesian farmers, who are still relying on relatively ineffi- cient and primitive tools for farming. Detailed plan has not been worked out. (c) Sprayers Plant With the widespread use of insecticides under various package programs in rice production, it is expected that demand for sprayers will increase very rapidly. The project may play an important role in supplying this essential im- plement to rice cultivation. (d) Water Pumps Plant This is another project designed to supply small-scale irrigation pumps to Indonesian agriculture. Experiences of healthy development in pump manufacturing industry in other Asian agricultural countries should serve as a reliable guide for this project. D-7 Takengon Paper Mill A contract was originally signed in 1964 to set up a pulp and paper mill in North Sumatra with a daily capacity of 100 tons but construction was suspended due to domestic financing diffi- culties. The Government has requested technical assistance for a feasibility study of this unfinished plant. - 12 - D-8 Rehabilitation of Blabak Paper Mill This existing plant produces only 2,000 tons annually as against the original design capacity of 7,200 tons. This is largely due to failure in chemical processing of pulp and lack of maintenance leading to mechanical failures of installed paper processing machinery and frequent power failures. Upon comple- tion of necessary studies requested under technical assistance, the Government plans to undertake the required rehabilitation work of the plant. D-9 Industrial Estates The Government has been taking various steps to stimulate both foreign and domestic investment in industry. Acquisition of necessary land by investors has proved to be extremely dif- ficult and the facilitation of this process is urgent. A request for technical assistance is separately submitted to conduct a feasibility study for this purpose. D-10 Rehabilitation of Salt Industry Salt production needs to be expanded in Indonesia to meet domestic demand. Quality improvements are necessary and studies need to be conducted to determine the possibilities of producing special types of salt and to ascertain whether other raw materials can be efficiently employed (see DTA-23). It is expected that the survey of the salt industry will lead to the formulation of specific rehabilitation programs during 1970/71. - 13 - E. Power E-1 West Java Transmission and Distribution The West Java area is supplied from an inter-connected transmission system operating at 150 KV, 70 KV and 30 KV. Generating capacity at present is adequate and two new 50 MW units are to be installed at the Tandjung Priok Power Station (Djakarta) under Japanese aid. Primary distribution is at 12 KV and 6 KV and these systems and the 30 KV network are heavily overloaded. Together with the low tension systems they are badly in need of extensive rehabili- tation to meet the present demand and to permit expansion to supply the suppressed demand not only in Djakarta, which is separately covered by an IDA credit, but also in the main cities of Bandung, Bogor and many other towns. E-2 Central Java Transmission and Distribution The project is designed to relieve the existing acute power shortage in Central Java by expanding the transmission network and improving distribution facilities. This will contribute to more efficient and dependable supply to a number of areas pre- sently served by isolated diesel plants. E-3 East Java Transmission and Distribution The project is designed to improve transmission and distrib- ution of power through establishing an integrated network in East Java in the same way as for the two preceding projects. Power from the Karangkates station, now under construction, will also be linked by a transmission line to Surabaja. E-4 Medan, Generator, Transmission and Distribution The project will provide additional generating capacity and improve transmission and distribution facilities in order to sup- ply urgently needed power in the Medan area. E-5 Isolated Distribution and Diesel Generators The project is designed to promote rural electrification to isolated areas by providing diesel generators and necessary dis- tribution supplies. E-6 Micro-Hydro Power Plants The project is aimed to promote construction of small scale power plants throughout the country utilizing, wherever feasible, water power potential as a part of the rural electrification pro- gram. - 14 - E-7 Rehabilitation of City Gas Networks for Medan, Djakarta, Semarang The project is intended to rehabilitate city gas production facilities and distribution networks in the cities listed above. E-8 Garung Hydro Power Plant Construction of a hydro power plant with 10 MW capacity may be proposed when the US-AID financial feasibility study is com- pleted. E-9 Semarang Thermal Power Plant Construction of a thermal power plant in Semarang or alter- native location in Central Java may be proposed upon completion of the feasibility study for the Central Java power rehabilita- tion program (see E-2), financed by US-AID. E-10 Batang Agam Hydro Power Plant The proposed plant located in the western part .of Sumatra will have generating capacity of 10 MW. The project will include construction of a dam and a power plant, and installation of transmission, distribution and other related facilities. Feasi- bility depends on the possible uses of coal for power generation in the same area. - 15 - F. Transportation F-1 Detailed Engineering Djakarta-Bogor Highway The Djakarta-Bogor connection is a narrow and winding road of about 50 kilometers. The present traffic density is about 8,000 vehicles, or 15,000 passenger car units, per day. The road is heavily congested and structural standards are no longer appropriate. The proposed project consists of the detailed en- gineering for .a six-lane highway. The cost of construction is now estimated to be about $440,000 equivalent per kilometer. According to the results of a pre-feasibility study undertaken by the Highway Services the rate of return on the investment for the construction of the proposed road would be about 30%. Detailed engineering of this road should start as soon as pos- sible, since a modern road connection is required to the planned industrial complex at Tjibinong. F-2 Road Rehabilitation in North Sumatra and Central Java The UNDP 1968-70 have established a rehabilitation program for 12,000 km of roads in Indonesia. Necessary technical and economic studies have been completed. The proposed project con- cerns highway rehabilitation and maintenance in the Provinces of North Sumatra and Central Java. The rate of return on the investment for the rehabilitation of these roads exceeds 25Z in all cases. The project will take three years to implement. Most of the equipment to be imported will have a longer life than three years; it could however later be used for routine and periodic maintenance of roads in North Sumatra and Central Java as well as in neighboring Provinces. Arrival of the equip- ment is scheduled for late 1971; training programs will be under- taken to increase the implementation capacity of departmental forces. F-3 Rehabilitation of Dredgers A detailed rehabilitation program for the existing dredging fleet has been prepared by the Directorate of Harbors and Dredg- ing with the assistance of the UN Dredging advisor. The proposed project would consist of the replacement of propulsion units, pumps, generators, piping and plates of dredtes from Germany, the USA, the Netherlands and Japan. Detailed estimates of bene- fits are not available but the project appears to have high pri- ority. Without further rehabilitation the existing fleet could not cope with future dredging requirements; the alternatives would be large dredging contracts with foreign firms or the ac- quisition of new dredges. A detailed list of required ports and a work program are available now but the proposed Dutch Dredging Team should further investigate the composition and the justifi- cation of this project. - lb - F-4 Djakarta-Bogor Highway Construction Upon completion of the detailed engineering as described above (see F-1), construction work may be initiated in 1970/71. F-5 Engineering Design for Balikpapan-Samarinda Road The proposed road is to improve the road transportation between the oil producing region of Samarinda and the port of Balikpapan, southeastern Kalimantan. The cost is tentatively estimated at $100,000 per kilometer. F-6 Railways - 5 units of 1,000 H.P. Diesel Locomotives This project is for the acquisition of five, 1,000 horse- power diesel locomotives, to be used as main line tractive power for passenger and freight trains. Preliminary investigations indicate that the replacement of steam locomotives by diesel locomotives would result in lower operating and maintenance costs. Provided that traffic is sufficient to utilize the additional engines in a completely dieselized main line system the rate of return on the investment would be 12-15%. However, final commit- ment should be deferred until the German Railway Advisory Team has completed its investigation of traffic potential, operational improvements and minimum tractive power requirements. F-7 Bulk Unloading Equ,iment for Tandjung Priok, Belawan and Surabaja Equipment is required to discharge bulk flowable commodities such as rice, wheat and fertilizer from ships berthed at existing piers. The project also includes bagging machinery for these commodities. The equipment should be portable so that it can be stowed when not in use and will not reduce the flexibility of the terminal for use with general cargo. It is estimated that the project pays off during the first year of full operation. There are at present about 200,000 tons of bagged rice, wheat and fer- tilizers which move through each of the three ports concerned. If these commodities loaded and discharged in bulk form and bagged in Indonesia the reduction in voyage charter rate would be about US15.00 per ton and total benefits per year could amount to US-23 million. The project has been prepared by the UNDP Trans- port Coordination Advisory Team but implementation of the pro- ject should be proceeded by a brief study to determine the de- sirable type and capacity of the equipment. F-8 Rehabilitation of Navigational Aids This project concerns the replacement rehabilitation and repair required to restore the navigational aids of approaches to Indonesian ports, particularly Belawan, Tandjung Priok, Surabaja, Palembang, Makassar, Balikpapan, Bandjermasin, Padang, -17- Bitung, and Ambon. Lighthouses have high priority. Implemen- tation of the project would take three years. A very conserva- tive estimate of the benefits in terms of avoidance of ship days lost is about US$600,000 equivalent per year. The rate of return on the total investment of US$2.2 million exceeds 30 per cent. The project has been prepared by US Coast Guard Study Teams on Marine Aids to Navigation. F-9 Replacement of Sea Dredgers It is planned to re.lace the dredger "Sulawesi" which is 48 years old with a new trailing suction hopper dredge with a hop- per capacity of 2,500 cubic meters per hour. Delivery of the new dredge is expected two years after placement of the order. A comparison of costs for rehabilitation and operation of the "Sulawesi" and the capacity and operating costs for a new dredge indicated that replacement would only be preferable if the cost of capital were less than 13 per cent. However, the Indonesian fleet will not be able to handle all maintenance dredging re- quirements even if the Sulawesi is repaired and a new dredge added to the fleet. The cost of contract dredging is 40-50 US6 per cubic meter whereas the cost of dredging by Indonesian ves- sels would be about 25 USO. As the capacity of the new dredge would be at least 3 million cubic meters per year, annual bene- fits would be about US$600,000. The "Sulawesi" should there- fore be rehabilitated and kept in operation for about five years, and a new dredge should be acquired as soon as possible. This project is based on investigation undertaken by Mr. Venedictoff - ASMIC French Technical Cooperation and Mr. A. V. D'Souza, UN Dredging Expert. Final commitment should await a review by the proposed Dutch Dredging Assistance Team, sched- uled to arrive early in 1970. F-10 Inland Waterways Infrastructure Improvements There are several rivers of potential importance in inland transportation. Identification of promising projects requires detailed economic and technical feasibility studies, and neces- sary assistance for studies is requested separately under the technical assistance program. It is expected that the first projects will be ready during 1970/71. F-ll Two Aircraft for Feeder-lines Air communications provide vital links with isolated areas of the Indonesian archipelago. The study of this sector of transport is not yet started, but it can be safely assumed that two small aircraft for feeder services have sufficiently high rates of return to be included in the present list of projects. - 18 - G. Telecommunication C-1 Sumatra Microwave System Installation of trans-Sumatra microwave circuit is proposed under this project to link large towns and cities in Sumatra with Java and in the future also to Malaysia and Singapore. G-2 Eastern Extension of Microwave System The Project consists of the extension of the existing Java-Bali microwave circuit system to the Nusatenggara islands. G-3 Communication Systems Improvement The project is designed to meet the anticipated increase in demand for local communication facilities with the completion of the proposed inter-island microwave circuit system. The pro- ject provides necessary supplies to link local systems with the major trunk line arid other local exchange facilities to improve services. H. Development Finance Institutions H-1 Development Loan Finance The Government of Indonesia initiated in 1969 a program for the extension of medium-term (3- to 5-year) credits for investment purposes to the economy. So far the applications for such credits reveal a foreign exchange component of well over 50 per cent, mainly for imports of maintenance and spare parts. The latter can be financed to a significant extent from special allocations of BE-aid resources. In the case of credits for balancing and expanding capacity, a project approach appears more appropriate, with the responsibility for the extension of foreign exchange credits largely resting in a specialized financing institution in Indonesia. The improvemepts in capability expected from technical and managerial assistance to the banks will make it possible to handle external finance for investments in medium-size enterprises through such an institution in the near future. J. Other Sectors J-1 Water Supply Water supply facilities, in common with much of the infra- structure in Indonesia, has suffered from inadequate maintenance and failed to keep up with the increasing requirements of a rapidly expan4ing population in the major cities. The project - 19 - is proposed to initiate the urgently required improvement and expansion of the existing network in the metropolitan areas of Djakarta and four other major cities pending on the outcome of the feasibility studies which are expected to be completed in time for implementation of this project in 1970/71. J-2 Family Planning Family planning has been recognized by the Government of Indonesia as one of the high priority projects requiring early implementation. A joint mission of the United Nations, WHO and IBRD is currently in.the field to assist the Government in the formulation of a plan of action, and it is expected that a project on the basis of the mission's findings will reach the implementation stage in the next fiscal year. J-3 Education: Secondary Technical Training Centers In the First Attention List of the UNESCO/UNDP Education Mission, technical training is given high priority. An IDA mis- sion identified four technical training centers as a possible first project in the education sector, and an appraisal mission is expected to report on the feasibility of this investment in early 1970.  ANNEX II PRE-INVESTMENT SURVEYS AND TECHNICAL ASSISTANCE FOR 170o/l Note: The list of pre-investment su veys and technical assistance for 1970/71 is incomplete as: (a) a number of studies and surveys to be undertaken in the next year were not yet completely formulated at the time this report was written; (b) the list excludes all items which do not have a direct relation to the formulation of new projects or to the improvement of production and efficiency in existing facilities.  A. Agriculture I. SecretaryGeneral of Agriculture ATA-1 Organization of A&ricultural Research Sweeping recommendations have been made by a Joint Agricultural Research Survey Team (Report dated July 18, 1969) which include the setting-up of a central Agricultural Research Organization. Assistance of a team of international experts is required to draw up detailed proposals for the implementation of policies to be agreed upon and to prepare specific projects for the setting-up o' the organizational pattern and es- tablishing, equiping or rehabilitating the various re- search instituteg and sub-stations throughout Indonesia. A very tentative cost estimate of the study and project preparation would be of the order of US$500,000, ATA-2 Rice Intensification Program Evaluation As an attempt to promote adoption of modern technology in rice cultivation, the Government launched large-scale programs, including commercial contracts, covering more than 2 million hectares supplying fertil- izers and insecticides, extension services and credit. A consulting team of 3 or 4 experts is required to ex- amine and make recommendations on: (i) existing rice intensification, (ii) fertilizer practices, (iii) credit arrangements, (iv) logistical problems involved. in the existing package deals, and (v) existing rice milling capacity. Tentative cost estimate US$150,000. ATA-3 Swamp Land Reclamation and Tidal Irrigation - South Kalimantan UNDP/SF has already approved a large Land and Water Resources Development project in S.E. Sumatra which includes the above subject. The Government is expected to request setting up a complementary study to be carried out by qualified consultants who should have a direct link with the South-East Sumatra study to ensure the full sharing of information and experi- ence and the or,timum utilization of resources. Cost estimate n.a. II. Director-General of Agricuture ATA-4 Comrehensive Study of Rice Handling, Storage and Marketing To correspond with the intensification of rice production through irrigation rehabilitation, input programs and Talicy incentives, there is an urgent need for a comprehensive survey to appraise the existing policies, practices and facilities for handling and marketing and to make projections and policy recommen- dations on production and consumption projections, pres- ent facilities and future requirements. It is anticipated that the study would require arproximately four experts in the field,.for six months and considerable headguarters back-up. Tentative cost estimate US$200,000. ATA-5 Management Consultants for P.N. Pertani A US-AID team has recently reviewed the operation of P.N. Pertani as a distributor of fertilizer and materials and has made several imnortant recommendations including fundamental changes in its organizational nattern. P.N. Pertani will require a great deal of technical and financial aid, to establish and equip an organization commensurate with its growing task. The program will provide the services of a highly specialized management team which should include experts in fertilizer market- ing, accountancy and financial control, personnel manage- ment and training Tentative cost estimate US$250,0oo. ATA-6 a) Rice Intensification Project - Madiun A pilot project covering 15,000 ha of riceland. In an integrated project intensive supervision and technical and managerial advice would endeavor to in- sure improvement of logistics for distribution of sup- plies and transport, marketing and storage of crops; widespread adoption of modern technology in crop pro- duction; planned and properly phased rehabilitation of irrigation and infrastructure generally, and improved administration of ;roup credit contracts. The project should extend over -t least three years. -3- Tentative cost estimate US$600,000 plus the cost of any supplies (fertilizer, etc.) included in the aid. b) Rice Intensification_ProJect - Pematag_Siantar Similar to a) above. c) Tani Makmur (Bimas) Pilot Prolect - South Sulawesi A team from the Directorate of Agriculture identi- fied and prepared this pilot project and it is described in the team's report. It is a comprehensive agricul- tural development project for one village comprising about 400 ha. of contiguous agricultural land. The project makes provision for irrigation by installing four or five small pumping sets and provides the goods and services required to intensify production - inruts, credits, storage, processing and intensive technical and supervisory services. Total cost US$250,000 (US$140,000 and Rr. 36 million). III. Director-General of Animal Husbandry ATA-7 Livestock Development Project Preparation - Eastern Islands (see Project A-12) A project identification mission of IDA recom- mended a technical assistance team to carry out a de- tailed survey and assist the Government in the prepara- tion of a project suitable for financial. aid. As envisaged, the main duties of the team would be to make a reconnaissance land use survey, select suit- able sites for cattle ranches and prepare detailed proposals with cost estimates of the materials and equipment, personnel and organization needed for the establishment of a Livestock Development authority, the establishment of a number of cattle ranches and supporting services including animal breeding and pasture improvement stations, livestock improvement, infrastructure, roads, quarantine and export cattle holding grounds, port facilities, etc. The Team would consist of: (i) a land utilization specialist with experience in tropical pastures; (ii) a hydrologist; (iii) an experienced ranch management specialist; (iv) a livestock marketing specialist. Tentative cost estimate US$100,000. ATA-8 Rehabilitation of Animal Husbandry Research Institute in Bogor and Surabala Based on surveys carried out by FAO (Dr. Sonoda) and the Australian Government (Dr. Bain) technical assistance is requested to improve and rehabilitate the Animal Husbandry Research Institute at Bogor and the Animal Virology Station at Surabaja. The assist- ance requested would include experts, library facil- ities, laboratory equipment, fellowships, surveys and research investigations over a two-year period. Tentative cost estimate US$675,000. ATA-9 Strengthening of Animal Disease Investigation Service Based on preliminary surveys carried out by FAO technical assistance is requested over a five-year period. to improve the equipment of the Central Live- stock Disease Research Institute at Bogor and to strengthen and coordinate the facilities and services for livestock disease investigation in Eastern Indonesia at Macassar, Denpasar and Kupang with particular refer- ence to improvement of the quality of export cattle. The technical assistance requested would include con- struction and equinment of laboratories, exoerts and fellowships. Tentative cost Estimate US$3,000,000. IV. Director-General of Fisheiies ATA-10 Fisheries Training Centers -_Dakarta and Tengal On the basis of a survey completed by FA0 a request has been made to UNDP/SF for the establishment and equipping of training centers at Djakarta and Tengal with necessary equipment, experts and fellowships. Tentative cost estimate US$3,700,000. ATA-ll Rehabilitation of Fisheries Research Institute - IoEr q.and..Bandung (Inland Fisheries) A request has already been made to the Netherlands Government and Dutch experts are currently carrying out the necessary surveys. Technical assistance is requested over a period of three years (commencing 1970/71) with the objective of improving fish resources in open waters and the expansion of research facilities. Estimated cost. US$ 105,000 and Rp. 15 million. ATA-12 Fisheries Marketing Survey Technical assistance is requested to carry out a market survey for both local and export markets and, to relate the results of the survey to Indonesian fisheries resources. The assistance requested is for experts and equipment to carry out the survey and to provide fellow- ships. Duration two years starting 1970/71. Cost estimate US$110,000 and Rp. 4 1 million. V. Director-General for Plantation Crops ATA-13 Sugr Research Requirements A study is required to determine the personnel, organization and equipment required to upgrade research activities based on Pasuruan Sugar Research Station. The study should extend to include the requirement for sub-stations to serve sugar areas outside Java. Cost estimate n.a. ATA-14 Improvement of Plantation Crop Research A team of three or four experts with exoerience in research organization (rubber and oil palm) is re- quired for three2months. The team would. draw un de- tailed proposals for an effective research organization to serve both the estate and smallholder sectors. They should prepare a phased program for the development of research (including the rehabilitation of the research institute for estate crops at Bogor and RISPA at Medan), draw up specifications for the organizational, person- nel, building and equipment requirements includin' quantities and costs which would provide all the in- formation required to formulate specific technical assistance or investment projects. Two members of the team (senior research agronomists) should remain in Indonesia for two years to assist in implementation of the program, and they should be sup- plemented with two senior laboratory technologists (Bogor and Medan) for 18 months. Tentative cost estimate US$400,000. VI. Director-General of Forestry ATA-15 Develorment of Pine and A.thiies Plantations (Central Java) TSee project A-15) A team is requested to formulate a program and prepare investment projects for the improvement and systematic exploitation of the above plantations which in aggregate extend to 100,000 acres. The team should include a forester, a logging engineer, a forest economist, a silviculturist and a sawmill consultant. Cost estimate about US$150,000. ATA-16 Devopint and Imorovement of Teak Wood Exploitation Similar to ATA-15 above, (See Project A-16) ATA-17 Watershed Rehabilitation end Erosion Prevention Technical assistance is required to carry out long term studies and prepare work programs and in- vestment projects covering the following river catch- ment areas. In all cases the conservation work would be associated with and supplement on-going irrigation works: (i) Upper Solo river (ii) Tjimanuk river (iii) Djratunseluna river (iv) Brantas river. Cost estimate n.a. ATA-18 Forestry Training (Bogor) Rehabilitation of equipment and examination of the curriculum and facilities for the training of forestry staff and workers. Cost estimate n.a. ATA-19 Improvement of Pines The services of an expert on silviculture is requested to study the genetic and environmental char- acteristics resporF;ible for the great differences in the commercial va. es of different pine plantations -7 - and to prepare a breeding and/or selection program for future plantings. Cost estimate n.a. B. Irrigation BTA-1 TJimanuk River Basin Development Technical assistance is sought to work out a master plan for the river basin aroa and prepare a feasibility study acceptable to international lending agencies for Tromotion of efficient utilization of land and water resources of the river basin. BTA-2 Krueng Djrene Irrigation Located in Northern Sumatra, the project area has presently 13,000 ha of land under rain-fed irrigation, which could be converted into double cropping area. Technical assistance is requested to examine the exist- ing design and to prepare a feasibility study for the project. BTA-3 Krueng Bara-Irrigation Technical assistance is required for a f:easibility study of a proposed project which covers an area of 18,750 ha of rain-fed paddy land which could be con- verted into double-cropping area. BTA-4 W! rfTenubuan Irrigation Technical assistance is needed to make reviews and revisions, if necessary, of the existing plan completed by the Directorate-General of Irrigation for the purpose of improving irrigation facilities to 6,000 ha of land. BTA-5 S apean Baru Irriation A feasibility study is requested under the prorram for the purpose of rehabilitation of an earth dam de- stroyed by a heavy flood and improvement of irriqation for 13,700 ha of paddy fields. BTA-6 Dumoga Irrigation A feasibility study and engineering design work is requested for the purpose of finalizing the project preparation. The project area covers about 12,000 ha of paddy land that may be covered by an all-weather irrigation system. - 8 - BTA-7 Gumbasa Irrigation A feasibility study is requested for final nre- paration of a rehabilitation progran for the existing irrigation system covering 8,000 ha of paddy land. BTA-3 LuvU River Basin Development Preparation of a master Plan and a feasibility study covering rehabilitation, flood control and re- lated problems of river basin development. BTA-9 Biam Kanan irrigation Technical assistance is :required to make an over- all review and evaluation of the existing study con- ducted, by Indonesian technical personnel. The project area covers 30,000 ha of land which could be irrigated uDon completion of the proposed project. BTA-10 South Kedu River Basin Develcpment The area is watered by five major rivers and offers a nossibility of improving the existing irriga- tion system through construction of a dam and rehabil- itation of main canals to extend irrigation coverai,e to 51,000 ha under rice cultivation, BTA-11 Seraju Basin Develonment A feasibility study and redesigning of the exist- inF plan are required for the nrocosed construction of a permanent weir in the Seraju river and rehabilitation of canals and existing hydraulic structures. BTA-12 Volcanic Debris Control Survey on the existing conditions and measures to reduce damages from volcanic eruntions will be under- taken under the program C. Mininp CTA-1 Mineral Conservation and Research/Processing Ores Technical assistance will include planning and coordination of mineral resource development, comple- tion and publication of geolo'Ical maps, interpretation of geophysical data, photogFeological mapping and train- ina of Indonesian nersonnel in the field. -9- CTA-2 Aero-Photo and4gtic Survey s Aerial magnetic survey and aefial photo recon- naissance activities are requested for exploring the mineral deposits including oil. CTA-3 Geochemical Mineral Prospecting Technical assistance is requested for conducting geochemical prosuecting in West Java where there are indications of deposits,of lead, zinc; gold and silver. This will be extended to South Sumatra. CTA-4 VulcanoloKy Technical assistance is requested for studies on the presently active volcanoes and seismic surveys to explore possible measures for detecting eruptions. CTA-5 Geope.hs L]Min'.al Prospecting Prospecting of mineral potentials, including lead, zinc, gold and silver, which have been known to exist in West Java and of known intrusions of granitic min- erals in Lampung, South Sumatra, will be carried out under the survey. CTA-6 Geological Techniques and Hydrology The program includes groundwater conservation studies, geological engineering research on dam sites, urban and regional development with respect to water supply and landslide and slope stability research. CTA-7 Coal Production Examination of prospects of the coal industry and study of the feasibility of restoring coal production at Bukit Asam and Ombilin. D. Industry DTA-1 Industrial Estates One general economist and one industrial engineer are requested for the program to make studies on the proposed project for the establishment of industrial estates in Indonesia (see Project D-9). - 10 - DTA-2 Survey of Paper Industry Studies on the (i) raw material availability, (ii) domestic and export marketing prospects of paper and (iii) feasibility studies on various types of paper mills are requested. The study would include a compre- hensive survey of existing production facilities. DTA-3 TaengonPaper Mill The study proposes evaluation of data collected by previous surveys supplementing necessary information on raw materials, paper manufacturing processes, loca- tion of the proposed plant, and other aspects required for the feasibility study. Engineering design is also included in the study (see Project D-7). DTA-4 Letes PaperMill The study will suggest ways to improve the quality of output and to set up a proper management system. Includes research on improvement of paper quality, re- placement of obsolete equipment and the setting-up of a new product management system (see Project D-1). DTA-5 Padalarang_ Paer Mill A request for the rehabilitation of the existing paper mill is made separately and this study is to supplement the project by the research and development in pulp and paper technology as well as imorovement in management of the existing plant (see Project D-2). DTA-6 Blabak Paoer Mill The plant suffers at present from a number of tech- nical deficiencies. Technical assistance is requested in order to attain the designed capacity of the plant. (See Project D-8.) DTA-7 Foundry Center Operation As a part of the proposed project (see Project D-5) for the establishment of the new model Foundry Center, a group of experts is requested in order to introduce modern foundry- technology.i Specific branches of the foundry operation which require experts are the following: (i) foundry eost e.timating for job shop and producti.n; - 11 - (ii) iron casting making; (iii) foundry maintenance; (iv) foundry pattern making; (v) green sand and core molding; (vi) iron and steel foundry metallury; (vii) iron and steel foundry design and snecification. DTA-8 Machinery and Implements ManufabturinTechnol Assistance for construction of several plants is requested for 1970/71 and the technical assistance request includes experts in the field of (i) irrigation pumpos manufacturing, (ii) manufacturing of tools and implements for agriculture, and (iii) metalworking machinery rehabilitation and maintenance and (iv) Quality control in metalworking (see Project D-6). DTA-9 Engine Overhaul and Rehabilitation Survey There is considerable need to improve quality standards in the work of engine overhaul and in renair works for various engines. A survey will be conducted in order to decide on measures required to raise standards. DTA-10 Metal Cutting Tools and Dies Pro.ect Study Machine shop operations in design for manufacture, maintenance and repair of cutting tools, dies and other necessary items will be undertaken. DTA-ll Pressure Vessel Production and Overhaul Survey Undertaking of surveys is proposed for manufacture, maintenance and repair of steam boilers, pressure ves- sels and equipment used in estates, industries, railways, oil and chemical industries. DTA-12 Truck and Bus Body Manufacture Surveys for the manufacture, maintenance and re- pair of truck and bus bodies and components are re- quested to be made. DTA-13 Soda Ash and Caustic Soda Survey A feasibility study on the development of caustic soda and soda ash industries including recommendations on implementation of such study is requested. - 12 - DTA-14 Pesticides Survey A study is proposed to collect information and necessary technical data required for investment programs in the pesticides manufacturing industry. DTA-15 Formic Acid and Acetic Acid Industry Survey Evaluation of the presently available feasibility study and process and engineering study are required to determine whether there is need for a plant to sup- ply formic acid and acetic acid to the rubber process- ing industry. DTA-16 Gowa Paper Mill The plant was put into operation in 1967 but pro- duction has failed to reach the original designed capacity largely due to technical difficulties in the production of paper. The proposal is to provide neces- sary technical assistance to this plant. DTA-17 Siantar Paper Mill The paper mill produces at only one-third of rated capacity due to lack of technical expertise and technical. difficulties. The request provides for assistance to correct this situation. DTA-18 Basuki Fachmat Paper Mill The paper mill can produce only one-third of rated capacity due to technical defects in the processing of the raw material. The request is to provide necessary technical assistance to the plant. DTA-19 Tonaqa Cement Plant The plant produces less than half of the designed capacity of 120,000 tons a year and requires technical assistance to correct this situation. DTA-20 Iglas Gla.ss Factory The factory is faced with failure of attaining rated capacity, inferior product and obsolete equipment. Technical assistance is necessary to improve the pro- duction performance of the plant. - 13 - DTA-21 Intirub Tire Factory The factory suffers from technical difficulties requiring technical assistance in drder to bring about improvements in quality, design and maintenance. DTA-22 P.N. Asam Arans This is an old factory producing carbon dioxide (C02), demand for which has been declining. Technical assistance is requested to ascertain the feasibility of producing dry ice on a much expanded scale utilizing by-product from the petrochemical plant under construc- tion. DTA-23 P.N. Garam Technical assistance is necessary to increase salt production, to improve quality, produce special salt and conduct studies exploring the possibility of settina up salt-based chemical industry (see Project D-10). DTA-24 Survey of the Textiles Industry A comprehensive survey of the textiles industry, including spinning, weaving and finishing is urgently required. The study should contain an analysis of the Present structure of production in the sector, includ- ing the small-scale sector, leading to the formulation of a program for the future development of the sector. Attention should be given to marketing prospects both in the domestic and export markets, competitive posi- tion versus imported textiles and ways to improve efficiency in existing plants. DTA-25 Wood Industries Develqment The rapid growth of output in forestry increases the technical possibility of establishing wood indus- tries. The study will consist of an examination of prospective domestic and export markets for these products and the production possibilities of sawn timber, plywood, and other wood products. DTA-26 Production of Building Materials A study is required to determine the prospects for industries (excluding wood-industries) which pro- duce building materials including pipes, wire, hard- ware and other metal and non-metal construction inputs. - 1ii - DTA-27 National Fertilizer Market Study Arrangements for a study of future demand and marketing of fertilizers are presently being made. Power ETA-1 Garung Hydro Power Plant Assistance is requested under project aid for the construction of the power plant and the present request is for necessary training of staff and to conduct the feasibility studies. ETA-2 Batang Aaun Hydro Power Plant Assistarce is requested for detailed design of the proposed plant and to conduct studies on the related problems including distribution system. ETA-3 Bukit Asam Steam Power Study A study is prouosed to determine the economic and technical feasibility of the construction of the power plant. ETA-4 Asahan Hvdro Power Study Fairly e-tensive studies have been conducted and on the basis of these completed investigations, a final evaluation is needed to determine the feasibility of the project. ETA-5 Electric Power Survey A proposal for an overall electric power survey covering economic and technical aspects of generation, transmission and distribution as well as management aspects including rate structure and collection. ETA-o Power Research Institute Technical assistance is requested for the purpose of strengthening the existing institute through pro- vision of experts, laboratory equipment and other related supplies. ETA-7 Research and Training Institute for Gas Industries The exi,ting 'nstitute reauires technical assistance in strengthening ie technical capability of the staff members and in equining the organizations through pro- vision of necessary supplies. F. Transnortation FTA-1 Coprehensive Transnortation Analysis and PlanninF Technical assistance is requested for the conduct of a comprehensive transportation analysis, the estab- lishment of a framework and procedures for continued planning, and for the training of Indonesian personnel. Advisory services requested include preparation of transportation investment program, and other related activities necessary for transportation planning. FTA-2 Airport Advisory Services Advisory services required consist of: (i) preparation of an inventory of all civil aviation facilities; (ii) survey of the structure, operation and other re- lated aspects of civil aviation; (iii) identification of rehabilitation and other improve- ments and other technical assistance including training of Indonesian personnel. FTA-3 DjakatAirprtqFeasibilit Study The study is designed to make comparison of costs and benefits of expanding the existing airport at Kemajoran and constructing a new airport. FTA-4 Port Advisory Services The advisory services will assist in the improve- ment in the maintenance, administrative and operating procedures of the port facilities to prevent further deterioration. The technical assistance will include identification of port rehabilitation, capital improve- ments and other related problems in the establishment of a long-term development plan. FTA-5 Port of Tjilatjap - Feasibility Sujdl The Government of Indonesia is making a special reouest to conduct a feasibility study on the rehabil- itation of the port as a high priority project which - 16 - has direct relation to an investigation of the Possi- bility of establishing an industrial estate. FTA-6 Inland Waterwavs Feasibility_Study The request is designed to conduct studies on the existing conditions and potentials of inland waterways as an integral part of the transportation system and identification of possible improvements in the infra- structure, fleet, administration, and other related problems (see Project F-10). FTA-7 UranTransportation Study Djakarta The study will lead to short-term recommendations for the alleviation of congestion as well as long-term measures for the develonment of the city transportation system. G. Water SupDly GTA-l Metropolitan Area Water Supp ly The request is made to conduct studies on the existing conditions of the metropolitan water supply system in a number of cities, including Djakarta, Bogor, Denpasar., Solo, and Palembang, leading to im- provement and development projects for water supply and to investigate long-term requirements and possible programs to meet future needs. GTA-2 Manageme n ration and Maintenance of Water upply Systems Technical assistance is requested to study the measures for improvement in the management, operation and maintenance of water supply systems. H. Tourism HTA-1 Bali Tourism Study The purpose of the proposed study is to work out a long-range master plan for tourism development in Bali, investigation of promotional measures and feasibility. studies for the first stage of the infrastructure proj- ects included in the program. J. Education JTA-l Educational Develojpment A UNESCO/UNDP Mission in its so-called First At- tention Progrnl has recommended for early consideration 21 proposals involving total external assistance of about $29 million. Of this amount about $1.8 million is for fellowships, $2.5 million for experts and con- sultants and the balance of $2.6 million for equip- ment and other capital costs. Details of the provision of each of the 21 projects included in the First Attention List are at present under examination and study by the Government. Present indications are that considerable technical assistance will be required for the implementation of this program.  STATISTICAL APPENDIX Table Number Title 1.1 Area and Population of Main Islands 1.2 Population Projection According to Age and Sex 3.1 Balance of Payments (Summary), 1968-1970/71 3.2 Exports (f.o.b.), 1968-1970/71 3.3 Resources for the BE-Market, 1968-1970/71 3.4 Import of Goods, 1968-1970/71 3.5 Aid Commitnents and Disbursements, 1968-1970/71 3.6 Project Aid Commitments and Disbursements, 1968 and 1969 3.7 Commitments and Disbursements of Program Aid, 1968 and 1969 3.8 Counterpart Fund Estimates, 1969/70 and 1970/71 3.9 Gold and Foreign Exchange Reserves, December 1968 - September 1969 3.10 Exchange Rates, December 1966 - September 1969 4.1 External Debts Arising from Official Capital Flows, July 1966 - June 1969 4.2 Service Payments on Debt Outstanding as of June 30, 1969 5.1 Government Receipts, 1967-1969/70 5.2 Government Expenditures, 1967-1969/70 5.3 Financial Transfers from Central Government to the Regions 5.4 Rupiah Expenditures of the Development Budget, 1969/70 5.5 The 1970/71 Revenue Targets 6.1 Total Money Supply 6.2 Causative Analysis of Money Supply, 1966-1969 6.3 Consolidated Balance Sheet of Bank Indonesia, Foreign Exchange Banks and Private Commercial Banks 6.4 Balance Sheet of Bank Indonesia 6.5 Liquidity Position of Foreign Exchange and Private Commercial Banks 6.6 Bank Indonesia Credits by Economic Sector 6.7 Bank Credits to Government and Private Sectors 6.8 Bank Credits by Economic Sector 6.9 Time Deposits of All State Banks 7.1 Output of Major Crops, 1967-1969 9.1 Cost-of-Living Index in the Principal Cities 9.2 Cost-of-Living Index in Djakarta 9.3 Price of Rice in Principal Cities 10.1 Exporters' Receipts per Dollar of Non-oil Exports 20.2 Foodgrain Balances, 1968-1969/70  Table 1.1 AREA AND POPULATION OF MAIN ISLANDS (Population in Thousands) Area (in 2/ Island sq.miles) 1961 1962- 1963 1966 1965 1966 1967 1968 1969 Kalimantan 208.286 [.120 4.220 4.325 b.h33 4.545 b.661 4.782 4.907 5.037 Sumatra (including sur- rouoiding islands) 182,859 15803 16,189 16,588 17,003 17,433 17,879 18,343 18,823 19,322 Sulawesi 72,986 7,1c9 7,283 7,462 7,649 7,842 8,03 8,251 8,468 8,692 Java and Madura 51,032 63,226 64,661 66,148 67,690 69,287 70,9L3 72,660 7T,ho 76,286 Other Islands 1/ 220,218 72129 7303 7,484 7,670 7,865 8,067 8,275 8,492 8,717 TOTAL 735,381 97,387 99,656 102,007 104,445 106,972 109,593 112,311 115,130 118,054 Rate of Increase (%) - - 2.32 2.35 2.39 2.41 2.45 2.48 2.51 2.54 1/ Includes Halmahera, Ceram, Sumbawa, Timor, Flores, Bali, Lombok and West Irian. 2/ These projections are based on the assumption that the rate of population increase for Java and Madura was 2.24% in 1961; progressing linearly to 1971 according to the equation: r - 2.24 + 0.03t (where r is the rate of increase and t the number of years since 1961). For the other islands the equation is: r - 2.41 + 0.03t. Source: Central Bureau of Statistics Table 1.2 POPULATION PROJECTION ACCORDING TO AGE AND SEX 1969 1973 Annual ('000) M (1000) M Rate of Growth (In Percent) Male: Age 0 - l4 25,948 22.1 26,747 20.8 0.8 15 - 29 13,504 11.5 17,199 13-h 6.2 30 - 4h 10,034 8.5 9,708 7.6 -0.8 45 - 59 6,103 5.2 7,087 5.5 3.8 60 - 74 2,197 1.9 2,569 2.0 4.0 75 and over 322 0.3 406 0.3 6.0 Sub-Total 58,108 49.5 63,716 49.6 2.3 Female: Age 0 - 1 25,737 21.9 26,231 20.4 0.5 15 - 29 13,356 11.4 16,890 13.1 6.0 30 - 44 11,642 9.9 11,591 9.0 -0.1 45 - 59 5,879 5.0 6,911 5.4 4.1 60 - 74 2,307 2.0 2,736 2.1 4.3 75 and over 369 0.3 470 0.4 6.2 Sub-Total 59,290 50.5 64,829 50.4 2.3 Total Population 117,398 100.0 128,55 100.0 2.3 Source: BAPPENAS (National Planning Agency) Table 3.1 BALANCE OF PAYMENTS (sumRy) 1968 - 1970/71 (In Millions of US Dollars) lst Qtr. 1970/71 1968 1969 1969/70 1970/71 1970 (15 months) Actual Estimate Estimate Projection Estimate Projection Goods and Services Non-oil exports 5 $69 622 632 675 154 829 Gross oil exports 303 358 370 437 99 536 Less: Oil sector imports 2/ -225 -258 -260 -298 - 67 -365 Total Exports (oil net) 647 722 742 814 186 1,000 Non-oil imports of goods 2/ -834 -969 -1,071 -1,189 -240 -1,429 Non-oil imports of services 4/ -77 -87 -85 -92 -28 -120 Current account (deficit = -) -264 -334 -414 -467 -82 -549 Official Transfers and Capital 266 34g9 414 480 107 587 Program loans and grants 51 245 274 319 340 77 417 Project loans and grants i/ 21 75 95 140 30 170 Miscellaneous Capital 65 43 37 68 3 71 Debt Service -75 -53 - -81 -15 -96 Errors and Omissions -4 8 -7 - - - Monetary Movements 12 -13 25 - -13 -13 1/ Includes overprice. 2/ Net of imports of goods and services for the oil sector other than service payments on oil debts. 5/ c.i.f. 1/ Excludes freight on imports. '/ Based on L/C's opened. 5/ Disbursements. Source: Bank Indonesia and mission's nrolections for 1970/71. Table 3.2 EXPORTS (f.o.b.), 1968 - 1970/71 (In Millions of US Dollars) Rate of 1969/70 1970/71 Rate of growth (%) 1970 fiscal fiscal growth (%) 1968 1969 1968 to 1st quart. year year 1969/70 to actual estimate 1969 projection estimate projection 1970/71 Rubber 175 197 12.6 48 200 195 -2.5 Copra 40 31 -22.5 7 29 4o 37.9 Coffee 4h 65 2.3 12 47 50 6.4 Palm oil, kernels 25 24 - 4.0 6 24 25 4.2 Pepper l 11 -21.4 3 12 15 25.0 Tobacco 30 30 5 30 32 6.7 Tin 49 60 22.6 17 62 75 21.0 Total Category A 377 399 5.9 98 ho 432 6.9 Total Category B 82 92 -12.2 24 96 103 7.4 Total A + B 69 491 7.0 122 500 535 7.0 Overprice 110 131 19.1 32 132 140 6.7 Total incl. overprice 569 622 9.3 15h 632 675 6.8 Oil exports (gross) 303 358 18.8 99 370 437 18.1 Total Exports 872 980 12.4 253 1,002 1,712 11.0 Less: Oil sectors' imports -225 -258 15.6 -67 - 260 - 298 14.6 Total Exports (oil net) 647 722 11.6 186 7h2 814 9.8 Source: Bank Indonesia. Table 3.3 RESOURCES FOR THE BE-MARKET, 1968 - 1970/71 (In Millions of US Dollars) Increase Increase 1968 1969 (in %) 1969/70 1970/71 (in %) in Actual Estimate 1969 Estimate Projection 1970/71 Exports (surrendered value)! 659 491 7.0 500 535 7.0 Net oil revenues2/ 55 78 43.8 90 122 35.6 Total 514 569 10.7 590 657 11.3 Less: Regional ADO imports -11 -10 -- -10 -20 -- DP market intervention - 2 15 -- Plus: Short term trade credits.2 96 65 -- 39 25 -- Total BE availability 597 619 3.7 619 662 7.0 Changes in reserves 8 - -- 18 -- -- Total BE-market sales 605 614 1.5 637 662 3.9 Used for: (a) debt servicin-39 -19 -- -20 -8 -- (b) non-freight services -47 -48 -- -47 -0 -- (c) repayment short-term credits -67 -41 -- -47 -34 -- Remains: BE-use for imports of goods (c.i.f.) 62 506 12.0 523 530 1.3 Aid-BE imports 245 274 11.8 319 34o 6.6 Total BE imports of goods (c.i.f.) 697 780 11.9 842 870 3.3 1/ Includes central government export tax receipts and all ADO receipts, but excludes oil exports. 2/ Conversion to rupiahs, after payment of oil debts. / Gross credit amounts; repayments shown separately. h/ Net IMF position, changes in net foreign assets and liabilities, errors and omissions. a/ Ecluding oil debts and payments under the DICS arrangement. Source: Bank Indonesia and mission's projections for 1970/71. Table 3.4 IRPORTS OF GOODS (c.i.f.)!/ 1968 - 1970/71 (In Millions of US Dollars) Increase Increase 1968 1969 (in %) in 1969/70 1970/71 (in %) in Actual Estimate 1969 Estimate Projection 1970/71 BE-Imports 697 780 11.9 842 870 3.3 Rice (cash and acceptance) 83 34 37) Rice (PL-480) 62 67 78) 110 Kennedy Round 33 34 53 50 Fertilizers 20 19 19 30 PL-480 cotton and yarn 37 46 46 50 Other Aid-BE imports 93 108 123 120) Other General BE-imports 369 472 486 510) ADO-Imports (regional) 11 10 10 20 Project Aid Imports 21 75 257.0 95 Tho 47.5 DP and Free Lmports 104 98 117 125 Private Capital Imports 1 6 ** 7 34 .. Total Imports of Goods, c.i.f. 834 969 1,071 1,189 of which: (a) food grains 2/ 178 135 -24.2 168 160 -4.8 (b) capital goo - 22 81 268.0 102 174 70.5 (c) other goods3 634 753 801 855 1/ Excluding imports for the oil sector. 2/ Financed with project aid and private capital only. / Includes capital goods financed from domestic resources. Source: Bank Indonesia and mission's projections for 1970/71. Table 3.5 AID COMMNTENTS AND DISBURSEMENTS, 1968 - 1970/71 (In Millions of US Dollars) Commit- Disburse- Commit- Disburse- Disburse- Commit- Disburse- Pipeline ments ments Pipeline ments ments Pipeline ments 1st Pipeline ments ments Pi- eline 31-12-67 1968 1968 31-12-68 1969 1969 31-12-69 Qtr. 1970 31-3-70 70/711/ 1970/71 31-3-71 Program Aid 22.9 293.5 24.8 71.6 319.1 274.0 116.7 76.9 39.8 340.0 340.0 39.8 BE-grants and loans 22.9 140.4 113.2 50.1 154.2 125.5 78.8 39.0 39.8 200.0 200.0 39.8 PL-480 non-food - 43.8 36.6 7.2 45.7 45.4 7.5 7.5 - ) PL-480 rice - 62.7 62.1 0.6 78.0 68.6 10.0 10.0 - ) 4. 160.0 - Kennedy Round - 46.6 32.9 13.7 41.2 34.5 20.4 20.4 - ) Project Aid 41.9 69.2 20.3 90.8 235.0-J' 75.6 250.2 33.0 217.2 260.0 140.0 337.2 Pre-1967 commitments 41.9 - 19.9 22.0 - 14.0 8.0 2.0 6.0 - 6.0 - Commitments 1968 - 69.2 0.4 68.8 - 40.4 28.4 7.0 21.4 - 14.0 7.4 aommitments 1969 - - - - 235.0 21.2 213.8 24.0 189.8 - 80.0 109.8 Vommitments 1970/71 - - - - - - - - - 260.0 40.0 220.0 rotal Aid 64.8 362.7 265.1 162.4 55.1 349.6 366.9 109.9 257.0 600.0 480.0 377.0 L/ Commitm9nts Zor 15 months from January 1970 to March 1971, as requested. / Includes full commitment ($73 million) for Pusri Expansion Project. Source: Bank Indonesia and information from aid-giving countries. Table 3.5 PR)JSCT AID COMNTMENTS AND DISBURSFMENTS, 1968 AND 1969 (In Millions of US$) Pipeline Commitments Disbursements Pipeline Commitments Disbursements Pipeline 31 Dec. 1967 1968 1968 31 Dec. 1968 1969 1969 31 Dec. 1969 Pre-1967 comitments L1.9 - 19.9 22.0 - 14.0 8.0 Australia - 2.1 - 2.1 6.6 2.3 6.4 Belgium - - - 8 0.8 - Canada - - - 1.0 1.0 - France - 6.3 - 6.3 7.0 4.2 9.1 Germany - 7.0 - 7.0 10.0 6.7 10.3 J ap an - 40.0 o.4 39.6 55.0 22.5 72.1 Netherlands - 6.8 - 6.8 20.8 10.4 17.2 Denmark - - - 1.0 3.1 0.6 United Kingdom - 1.0 - 1.0 1.2 1.0 1.2 United States - - 31.3 6.3 25.0 Int. Development Association - 5.0 - 5.0 84.0 2.0 87.0 Asian Developmrnt Bank - 1.0 - 1.0 13.3 1.0 13.3 T o t a 1 41.9 69.2 20.3 90.8. 235.0 75.6 250.2 1J Commitments as part of multi-year pl,dges. Of which $73 million is added in as commitments for the Pusri Expansion Project. Source: Bank Indonesia, Bappenas and information supplied by aid-giving countries. Table 3.7 COMMITMENTS AND DISBURSEMENTS OF PROGRAM AID, 1968 AND 1969 (In Millions of US Dollars) Pipeline Commitments Disbursements Pipeline Commitments Disbursements Pipeline 31 Dec. 1967 1968 1968 31 Dec. 1968 1969 1969 1/ 31 Dec. 1969 1. BE grants and loans Australia 0.3 8.1 1.9 6.5 10.0 9.0 7.5 Belgium - 0.4 0.3 0.1 1.2 1.2 0.1 France 1.5 6.9 1.4 7.0 8.0 12.0 3.0 Germany 3.4 12.5 314.9 1.0 15.0 10.0 6.0 India 0.5 - 0.2 0.3 - 0.3 - Japan 7.4 65.0 60.7 11.7 55.0 0.0 26.7 Netherlands 0.2 19.4 17.1 2.5 18.0 16.0 4.5 United Kingdom 1.2 3.1 2.2 2.1 3.0 5.0 0.1 United States 8.4 25.0 14.5 18.9 44.0 32.0 30.9 T o t a 1 22.9 160.4 113.2 50.1 154.2 125.5 78.8 2. P : loans Non-food - 43.8 36.6 7.2 45.7 45.4 7.5 Rice - 62.7 62.1 0.6 78.0 68.6 10.0 T o t a 1 - 106.5 98.7 7.8 123.7 114.0 17.5 3. Kennedy Round Australia - 3.9 2.4 1.5 3.4 3.4 1.5 Belgium - - - - 1.5 0.5 1.0 Canada - 0.8 0.1 0.7 0.9 1.4 0.2 France - - - - 3.0 - 3.0 Germany -- - - 3.0 - 3.0 Italy - - - 1.5 - 1.5 Japan - 5.0 - 5.0 10.0 8.0 7.0 Netherlands - - - 1.9 1.0 0.9 United Kingdom - 1.2 - 1.2 - 1.2 - United States - 35.7 30.4 5.3 16.0 19.0 2. T o t a 1 - h6.6 32.9 13.7 41.2 34.5 20.4 Grand Total 293.5 244.8 71.6 319.1 271.0 116.7 1/ Country-breakdown provisionally estimated on the basis of the first nine months of 1969. Table 3.8 COUNTERPART FUND ESTIMATES, 1969/70 AND 1970/71 (In Billions of Rupiahs) 1969/70 1970/71 Estimates Projected 1. Credit outstanding, beginning of period 1/ 35.9 33.7 2. Program aid disbursements during the year 104.0 117.5 3. Subsidies on sales 39.6 29.0 4. End-of-year stock evaluation adjustment 2/ 8.5 5. Projected credit outstanding, end of period 33.7 35.7 6. Transfer of counterpart to the budget (1+2-3-4-5) 67.5 78.0 of which, generated by: (a) general BE-aid 26.6 30.1 (b) fertilizer aid 6.8 9.8 (c) rice 14.3 13.3 (d) wheat 6.6 6.7 (e) cotton and yarn 5.2 8.3 (f) other incl. capital supplies 8.0 9.8 1/ Credits extended in relation to program aid imports, against which the Bank Indonesia blocks counterpart funds. 2/ Accounted for in the sales subsidies of 1969/70 and 1970/71; the stock adjust- ment for 1970/71 refers to stocks on 31 March, 1971. Source: Bank Indonesia and mission's estimates for 1970/71 Table 3.9 GOLD AND FOREIGN EXCHANGE RESERVESt DECEMBER 1968 - SEPTEMBER 1969 (In Millions of US Dollars) Gross Reserves Gross Liabilities Net Foreign Bank Indo- Foreign Bank Indo- Foreign Exchange nesia Bank- Exchange nesia Bank- Exchange Fund ing Dept. Fund ing Dept. IMF Reserves 1968 December: a) IBRD (Nay 1969 Report) 8.0 - -101.0 - - -93.0 b) IMF Old formula 6.5 13.2 - 0.5 64.0 -44.7 c) IMF New formula 25.7 27.7 11.5 12.7 64.0 -34.8 1969 January 28.3 31.5 3.2 8.7 60.0 -12.1 February 51.2 45.9 1.3 9.4 66.8 19.6 March 57.4 40.9 1.0 7.1 63.4 26.8 April 118.3 39.0 43.0 5.5 63.4 45.4 May 122.1 34.5 43.0 5.3 63.4 44.9 June 109.9 34.0 43.0 9.9 63.4 27.6 July 106.0 28.4 29.1 7.3 60.0 38.0 August 112.9 21.1 28.5 6.1 60.0 39.4 September 109.2 20.5 28.5 6.4 60.0 34.8 Source: Bank Indonesia. Table 3.10 EKCHANGE RATES (In Rupiahs per US Dollar) B.E. Market B.E. Credit D.P. Market Rate Rate Rate 1966: December 15 88.5 85 10 1967: March 14 112.5 90 121 June 15 137 132 W8 September 15 17 131 165 December 16 198 140 218 1968:* January 15 ( 5) 285 140 285 February 16 (13) 261 238 287.5 March 15 (15) 260 235 290 April 15 (19) 275 240 315 May 15 ( 8) 289 265 347.5 June 15 ( 5) ....300.... 351 July 15 300 422.5 August 14 307 390 September 16 319 437.5 October 16 (18) 326 48o November 15 326 419 December 15 326 L13 1969: January 15 326 411.5 February 15 326 395.5 March 15 326 382 April 15 326 382 May 15 (16) 326 379 June (16) 326 379 July 326 379 August 326 379 September 326 379 Notes: 1) Prior to May 16, 1967, the BE Credit rate fixed by Bank Negara Indonesia Unit I applies also to payments met from the Foreign Exchange Fund. 2) Commencing May 15, 1967, the rate applicable for payments paid for from the Foreign Exchange Fund was the BE market rate fixed by Bank Negara Indonesia Unit I. 3) Commencing May 27, 1968, the BE Credit is integrated into BE market, by which there is only one rate applicable either for BE originated from foreign aid or that originated from exports. This rate is also applicable for payments paid for from the Foreign Exchange Fund. 4) Commencing May 16, 1967, the rates for BE, BE Credit and DP are the effective rates at the Foreign Exchange Bourse (the Foreign Exchange Bourse was established and officially opened on May 8, 1967). * Figures between brackets are the dates of notification for the DP market rates. Source: Bank Indonesia Table h.1 EXTERNAL DEBTS ARISING FROM OFFICIAL CAPITAL FLOWS July 1, 1966-June 3C, 1969 V (In Million of US Dollars) Creditor Debt Outstanding IDA 51.0 Belgium 1.6 France 10.1 Germany 61.1 India 13.3 Japan 254.7 Netherlands 37.3 United Kingdom 5.4 United States 352.8 TOTAL 687.3 1/ Based upon commitments. Excludes certain debts of public enterprises. Source: Bank Indonesia Table 4.2 SERVICE PAYMENTS ON DEBT OUTSTANDING AS OF JUNE 30, 1969 (In Millions of US Dollars) Participating and "Other"/1 Countries Maturities not subject to rescheduling Maturities on CMEA / Maturities Maturities loans contracted Countries prior to after between June 30, Yugoslavia Grand latest latest Other 3 1966, and June Total and Main- Total Period reschedulinge reschedaling2/ payments- 30, 1969 (2+3+4) land China (5+6) (1) (2) (3) (4) (5) (6) (7) 1969 91.1 9.4 10.5 7.1 27.0 6.8- 33.8 1970 79.8 79.8 21.8 21.2 122.8 75.9 148.7 1971 90.8 90.8 5.4 28.3 124.5 97.5 222.0 1972 89.1 89.1 2.8 28.1 120.0 96.2 216.2 1973 76.1 84.o 2.5 27.7 114.2 101.0 215.2 1974 71.6 83.3 7.7 30.2 121.2 101.6 222.8 1975 77.2 88.6 7.7 35.6 131.9 97.9 229.8 1976 80.0 91.2 7.7 33.6 132.5 90.2 222.7 1977 75.7 90.7 7.7 34.7 133.1 97.1 230.2 1978 86.3 100.9 7.8 40.1 148.8 95.8 244.6 1979 27.3 41.4 5.5 39.7 86.6 88.3 134.9 1980 3.2 20.9 5.6 41.8 68.3 81.0 149.3 1981 0.9 0.9 5.6 42.0 48.5 84.8 133.3 1982 and after 0.9 0.9 136.6 604.3 741.8 164.3 906.1 Total 850.0 871.9 234.9 1,014.4 2,121.2 1,278.4 3,399.6 1/ Austria, Belgium, Denmark, India, Pakistan, Panama, Sweden, Switzerland, U.A.R. and Tanzania. 7/ Excludes maturities on loans guaranteed by Japanese war reparation payments and 50 percent of of maturities on non-government-guaranteed credits. The latter are assumed by the Indonesian authorities to be converted by creditors into investment in Indonesia under the Debt Investment Conversion Scheme (DICS). 3/ Compensation payments to the Netherlands Government, and to the Shell Company, and payments to private companies with which separate agreements have been reached. 4/ The members of the Council for Mutual Economic Assistance referred to here are Bulgaria, Czechoslovakia, Eastern Germany, Hungary, Poland, Rumania, and the Union of Soviet Socialist Republics. 5/ Not including $41.6 million in arrears at June 30, 1969. Source: Bank Indonesia. Table 5.1 GOVERNMENT RECEIPTS, 1967-1969/70 (In Billions of Rupiahs) 1969/70 1969 Revised Apr.-June July-Sept. 1967 1968 Jan.-Mar. estimates1/ Actuals Estimates Taxes on income 14.7 51.0 19.8 91.4 21.5 22.6 Income and corporation tax 7.2 25.1 8.9 44.3 10.6 11.2 Individual tax (3.1) (9.4 (2.7 (11.6) (2.9) (3.1) Corporate tax2/ (3.4) (9.4) (3.1) (18.2) (4.6) (4.3) Withholding tax2' (0.7) (6.3) (3.1) (14.5) (3.1) (3.8) Corporation tax, foreign oil companies 7.4 25.6 10.9 46.9 10.8 11.3 Other 0.1 0.3 -- 0.2 0.1 0.1 .Domestic taxes on consumption 14.5 36.7 12.2 62.2 14.6 15.6 Sales tax4/ 4.2 9.2 3.3 1-4.5 3.1 3.6 ExcisesV 7.0 16.6 6.6 30.0 7.2 7.5 Tobacgo (6.2) (14.2) ... (27.0) ... ... OtherO/ (0.8) (2.4) ... ( 3.0) ... Sales and excise taxes on oil products / 1.5 7.7 1.5 14.1 3.5 3.5 Miscellaneous levies- 1.8 3.2 0.8 3.6 0.8 1.0 Taxes on international trade 27.5 57.3 13.6 79.5 17.1 20.7 Import duties 16.9 37.3 9.3 58.0 12.0 15.0 Sales tax on imports -- 6.1 2.3 146.5 3.2 3.7 Export taxes, central government 10.6 13.9 2.0 7.0 1.9 2.0 8/ Non-tax revenue-- 1.4 4.8 0.3 2.0 0.7 0.3 Total routine budget 58.1 149.8 45.9 235.1 53.9 59.2 Aid counterpart funds 24.7 35.5 12.9 67.5 10.6 16.4 Project loans -- -- -- 31.0 p.m. P.M. Total receipts 82.8 185.3 58.8 333.6 64.5 75.6 1/ Based on an exchange rate of Rp 326 = Us$1. 2/ Excludes corporation tax on foreign oil companies. / Approximately 30 percent derives from individual income taxes and 70 percent from corporation taxes (state enterprises 11 percent and private enterprises 59 nercent). 4/ Excludes sales tax on imports and on domestic sales of petroleum products. 7/ Excludes excises on domestic sales of petroleum products. i/ Mainly excise on sugar. 7/ Mainly stamp duties. 3/ F oitsfom state t4terprises, contribution from central bank profits, foreign exchange Sourced Mis penales. Source: Ministry of Finance. Table 5.2 GOVERNMENT EXPENDITURES, 1967-1969/70 (In &illions of rupiahs) 1969/70 1969 Revised Apr.-June July-Sept. 1967 1968 Jan.-Iqar. Estimates/ Actuals Estimates ioutine budget 70.0 149.8 45.9 215.2 49.7 49.1 Personnel expenditures 22.2 78.4 25.0 113.1 24.5 25.4 Rice (in kind) 2 2. 22.7 h79 TI Rice (cash) 3.6 9.4 2.7 12.3 2.4 2.7 Salaries 8.8 25.8 11.9 59.0 11.7 12.5 Personnel/material -- 2/ 9.4 2.8 13.0 3.1 3.1 Other 0.6 4.4 0.9 2.0 1.5 1.0 External 1.0 2.6 1.0 4.1 0.9 1.0 Material 29.8 29.1 10.5 42.3 8.1 9.6 Domestic 2. 22.7 J7.7 3. 7. External 3.9 6.4 2.8 8.7 1.2 2.1 Subsidies to regions 8.9 25.5 8.0 42.3 11.9 9.2 West Irian 1.3 1.7 9.2 _7710.9 Other 7.6 20.9 6.3 33.1 7.8 8.3 Debt service payments 3.7 10.0 1.6 -12.8 5.0 4.5 Internal 1.2 1.9 . 1.0 0.3 7 External (oil) -- -- -- 2.3 ) External (other) 2.5 8.1 1.2 9.5 ) .7 3.3 Others 5.4 6.8 0.8 4.8 0.2 0.4 Rice subsidy -- 3.2-- -- -- Pilgrimage subsidy 0.9 1.0 -- -- Exp. under previous year's budget 4.5 2.6 0.8 -- -- General election -- -- -- 1.0 -- Other -- -- -- 3.8 0.2 Development budget 17.5 35.5 12.7 118.4 11.2 23.0 Central government 15.2 28.9 9.2 77.5 6.2 23.0 Development bank -- 5.3 1.5 7.3 3.0 -- Autonomous regions -- p.m. 2.0 2.6 2.0 -- Other (incl. project aid) 2.3 1.3 -- 31.0 P.m. p.m. Total expenditures 87.5 185.3 58.6 333.6 60.9 72.1 1/ Based on an exchange rate of Rp 326 = US$1. 2/ Included in material expenditures. 3/ Including Rp 8 billion fuel expenditure ot the armed forces; in former years deducted from oil revenue receipts and not shown in the budget. Source: Ministry of Finance. Table 5.3 FINANCIAL TRANSFERS FROM CENTRAL GOVERNMENT TO THE REGIONS, 1969/70 Total Population Transfer Per Capita Province (in millions) (in millions (in Rupiahs) of Rupiahs) 1. Djakarta Raya 4.7 1,90 412 2. West Java 19.6 5,405 275 3. Central Java 21.8 4,934 226 4. Jogjakarta 2.7 866 320 5. East Java 25.8 5,952 230 6. Atjeh 1.9 1,679 883 7. North Sumatra 5.9 7,320 1,240 8. West Sumatra 2.8 1,483 529 9. Riau 1.5 1,315 876 10. Djambi 0.9 1,270 1,411 11. South Sumatra 3.3 3,074 931 12. Bengkulu 0.5 1,190 2,380 13. Lampung 2.0 1,773 886 14. West Kalimantan 1.9 1,847 972 15. Central Kalimantan 0.6 690 1,150 16. East Kalimantan 0.7 862 1,231 17. South Kalimantan 1.8 1,285 713 18. South Sulawesi 5. 1,751 324 19. Southeast Sulawesi 0.7 549 784 20. North Sulawesi 1.6 1,140 712 21. Central Sulawesi 0.8 1,033 1,291 22. Maluku 0.9 715 794 23. Bali 2.1 665 316 24. East Nusa Tenggara 2.3 971 422 25. West Nusa Tenggara 2.2 594 270 Total 114.4 50,301 440 Source: BAPPENAS (National Planning Agency) RUPIAH EXPENDTTURF.S OF4THE D VELopmNr BUDGET 1)69/70 (In Millions of Hupiahs) Additions 1st 2nd Total % of 2nd Total Original to Quarter Quarter 1st autho- Semester Fiscal Budget Oct. 1/69 Total Dis. Dis. Semester rized Estimate 1969/70 1. Consultative Assembly 10 10 - 10 10 100.0 - 10 2. Gotong Rojong House 709 709 47 115 162 22.9 547 709 3. Supreme Advisory Council 5 5 - ... ... 6.6 5 5 b. State Comptrolling Body 60 60 - 25 25 43.2 35 60 5. Supreme Court 30 30 2 5 7 22.4 23 30 6. Attorney General Office 215 215 30 39 69 32.1 16 215 7. Presidency ho 40 3 11 14 3h.5 26 4o 8. Cabinet Secretariat 591 397 988 115 199 31b 31.7 67h 988 9. Non-Departmental Agencies 596 596 55 156 211 35.4 385 596 10. Dept. of Home Affairs 1,350 114 1,464 5 202 207 15.3 793 1,000 11. Dept. of Foreign Affairs 510 510 16 47 63 10.0 187 250 12. Dept. of Justice 855 855 32 89 121 11.1 204 325 13. Dept. of Information 757 1h0 897 22 122 144 15.9 306 450 1b. Dept. of Finance 1,348 1,348 16 170 186 13.8 614 8o 15. Dept. of Trade 75 475 21 33 54 11.2 171 225 16. Dept. of Agriculture 5,780 5,780 160 1,122 1,282 22.1 3,718 5,000 17. Dept. of Industry 1,885 1,885 1L3 337 480 25.4 1,020 1,500 18. Dept. of Mining 899 899 58 188 246 27.3 554 800 19. Dept. of Public Works 33,690 2,631 36,321 3,6)3 10,53b 14,177 39.0 18,513 32,690 20. Dept. of Communications 10,807 2,866 13,673 336 1,175 1,511 11.0 8,489 10,000 21. Dept. of Education 5,500 5,500 32 508 540 9.8 2,010 2,500 22. Dept. of Health 4,000 109 4,109 234 535 769 18.7 1,731 2,500 23. Dept. of Religion 1,000 1,000 106 181 287 28.7 713 1,000 24. Dept. of Manpower 371 371 51 89 140 37.8 231 371 25. Dept. of Social Affairs 275 275 16 50 66 24.1 184 250 26. Dept. of Trans. and Coop. 1,300 1,300 76 111 186 14.3 613 800 27. Dept. of Defence b,000 950 4,950 1,000 1,o0 2,000 40.4 2,950 4,950 28. Financing and Accounting Division 10,082 865 10,947 2,000 h0 2,040 18.6 4,960 7,000 - Financing through banks (7,282) - Subsidies to Villages (2,600) (2,000) - Reallocation of personnel (200) 29. Irian Barat __310 3,100 - - 2,000 2,000 Sub-Total 87,140 11,172 98,312 8,219 17,093 25,312 25.7 51,757 77,064 30. Subsidy to Bimas 1-2000 Total 89,064 Source: Actuals first semester from Ministry of Finance; second semester estimate by the mission. Table 5.5 THE 1970/71 REVENUE TARGETS (In Billions of Rupiahs) 1969/70 1969/70 Revised 1970/71 Increase (targets) (estimate) (targets) () 1. Direct Taxes 91.2 91.4 11.7 25.5 (a) Income tax 7 25.0 (b) Corporate tax 15.0 18.2 20.0 10.0 (c) Oil revenues 49.7 6.9 59.1 26.0 (d) M.P.O. 11.5 14.5 20.9 44.1 (e) Miscellaneous 0.5 0.2 - 0.2 - 2. Indirect Taxes 127.3 141.7 203.3 43.' (a) Sales tax 12.0 1T. 19.0 31.0 (b) Sales tax on imports 10.0 14.5 19.5 34.5 (c) Export tax 7.0 7.0 7.0 - (d) Customs 60.0 58.0 78.0 34.5 (e) Excise 28.0 30.0 39.5 31.7 (f) Domestic oil tax 14.1 lb.1 36.0 155.3 (g) Miscellaneous 3.0 3.6 4.3 19.4 3. Non-Tax Revenue 2.5 2.0 2.4 20.0 TOTAL 228.0 235.1 320.4 36.3 Source: 1969/70 Budget and Ministry of Finance for 1970/71 projections  Table 6.1 TOTAL MONEY SUPPLY (In Billions of Rupiahs) Total Increase Current money of money Currency deposits suply supply amount % amount % 1963 December 0.3 0.1 0.2 62 0.1 38 1964 December 0.7 0.4 0.4 62 0.3 .38 1965 December 2.6 1.9 1.9 73 0.7 27 1966 December 22.2 19.6 14.4 65 7.8 35 1967 March 24.2 2.0 16.9 70 7.3 30 June 32.4 8.2 21.7 67 10.7 33 September 39.0 6.6 26.9 69 12.1 31 December 51.4 12.4 34.0 66 17.4 34 Total 1967 29.2 1968 March 62.8 11.4 41.2 66 21.6 34 June 86.2 23.4 57.0 66 29.2 34 September 93.8 7.6 62.3 66 31.5 314 December 11.2 20.4 74.6 65 39.6 35 Total 1968 62.8 1969 January 115.4 1.2 71.7 62 43.7 38 February 120.9 5.5 76.0 63 44.9 37 March 130.1 9.2 81.1 62 h9.O 38 April 133.8 3.7 81.5 61 52.3 39 May 1/ 139.2 5.4 85.2 61 5h.0 39 June 1/ 147.1 7.9 89.9 61 57.2 39 July 1/ 150.9 3.8 93.5 62 57.h 38 August 1/ September 1/ 1/ Provisional. Source: Bank Indonesia Table 6.2 CAUSATIVE ANALYSIS OF MONEY SUPPLY, 1966 - 1969 (In Billions of Rupiahs) 1969 lst 1966 1967 1968 Half Year Money supply, beginning of period 2.57 22.21 51.37 114.18 Changes caused by: 1. Government 12.61 23.82 4.11 - 4.62 2. Enterprises 5.69 22.95 84.79 8.50 3. Foreign Sector l/ - 0.26 12.38 35.45 33.00 4. Other 1.60 4.83 9.36 - 4.00 Total Changes 19.64 29.16 62.81 32.88 Money supply, end of period 22.21 51.37 114.18 147.06 Changes in: (a) Currency in circulation 12.55 19.64 40.65 15.24 (b) Demand deposits 7.09 9.52 22.16 17.64 1/ Figures deviate from balance of payments statistics. Source: Bank Indonesia. Table 6.3 1/ CONSOIDATED BALANCE SHEET OF BANK INDONESIA FOREIGN EXCHANGE AND PRIVATE COMMERCIAL BANKS (In Millions of Rupiahs) 196d 1969 December March June ASSETS 1. Cash 10,710 10,751 13,460 2. Gold and Foreign Exchange 45,000 78,033 95,594 3. Advance to Government 52,101 61,08 68,095 2/ 4. Government Guarantee Account 9,284 210,439 8,229 5. Credits 125,970 132,961 166,811 6. Miscellaneous 113,519 95,724 108,585 Assets - Liabilities 356,584 388,956 h60,774 LIABILITIES 7. Foreign Exchange Liabilities 47,415 56,954 71,585 8. Currency (Held by Public) 85,394 91,817 102,004 9. Private Current Deposits 39,201 48,366 58,o4 10. Government Current Deposits 20,949 26,891 39,667 11. n me Deposits 12,029 26,581 38,263 12. Counterpart Fund 23,329 29,160 2,317 13. Itscellaneous 128,258 109,187 126,894 1/ Including Government cash. 2/ Provisional. Source: Bank Indonesia. Table 6.4 BALANCE SHEET OF BANK INDONESIA (In Millions of Rupiahs) 1968 1969 December March June ASSETS 1. Gold and Foreign Exchange 23,214 48,489 68,266 2. Advances to Government 52,100 61,010 67,633 3. Government Guarantee Account 9,284 10,439 8,229 4. Ioans to: (a) Banks 24,637 39,818 44,210 (b) Others 67,359 52,255 61,961 5. M5iscellaneous 5,969 49,h85 49,681 Assets - liabilities 232,563 261,496 299,980 LI ABI LI TI ES 6. Foreign Exchange Liabilities h7,b15 56,95h 71,585 7. Currency (Held by Public) 85,392 91,815 102,002 8. Government Current Deposits 9,172 12,490 27,100 9. Other Current Deposits: (a) Banks 8,178 23,h74 19,922 (b) Others 5,173 8,276 8,649 10. Counterpart Fund 54 116 311 11. Vdscellaneous 77,179 68,371 70,411 Source: Bank Indonesia. Table 6.5 LIQUIDITY POSITION OF FOREIGN EXCHANGE AND PRIVATE COMMERCIAL BANKS (In Millions of Rupiahs) (13 (2) (3) (4) Total Liquidity Minimum Liquid Short-term Position 1/ Liquidity Assets Liabilities (In percent) Requirement 2/ 1965: December 369.9 652.2 60.9 195.7 1966: December 2,139.5 5,063.3 42.3 1,519.0 1967: June 3,997.6 8,629.8 16.3 2,588.9 December 6,436.9 15,380.7 41.9 4,614.2 1968: March 5,932.6 18,277.4 32.5 5,483.2 June 10,300.7 25,847.3 39.9 7,754.2 September 10,255.3 30,095.6 34.1 9,028.7 December 11,041.1 36,668.4 30.1 11,000.5 1969: January 15,132.3 40,807.1 37.1 12,242,1 February 15,648.1 37,691.3 41.5 11,307.4 March 20,526.0 43,810.1 46.8 13,143.0 April 24,438.0 51,506.4 47.4 15,451.9 May 28,747.1 53,603.2 53.6 16,081.0 1/ Column (1) divided by column (2) and multiplied by 100. 2/ 30 percent of column (2). Source: Bank Indonesia Table 6.6 BANK INDCNESIA CREDITS BY ECONOMIC SECTOR (In Millions of Rupiahs) 1969 1968 March June July Augst 1. Liquidity Credit 30,149 47,253 52,461 56,388 589972 Sugar 6,530 7,324 7,268 7,264 7,264 Estate 1,693 2,09 2,h53 2,447 2,447 Agriculture 3,010 16,283 19,026 19,926 20,482 Export 2,865 2,771 2,324 2,729 3,304 PL-480 Raw Cotton 10,9580 12,397 12,156 13,977 13,717 Other 5,471 6,069 9,234 10,045 11,758 2. Direct Credit 61,847 44820 53,710 54,643 56,929 Fertilizer 114,592 1,140 938 - - BULOG 37,2224 32,114 41,195 142,148 44,641 BE Import 606 501 436 435 413 PL-h80 Wheat Flour 3,215 3,166 2,520 2,370 2,117 Other 6,210 7,899 8,621 9,690 9s758 Total 91,996 92,073 1069171 111,031 115,901 Source: Bank Indonesia Table 6.7 1/ BANK CREDITS TO GOVERNNENT AND PRIVATE SECTORS- (In Millions of Rupiah) 1968 1969 March June"/ Ju_/ I BANK INDONESIA 91,996 92,073 106,171 111,031 - Government 78,998 77,744 86,620 89,655 - Private 12,998 14,329 19,551 21,576 II. STATE BANKS 26,211 33,437 44,757 45,70 - Government 2,695 3,466 5,229 49,260 - Private 23,516 29,971 39,528 40,778 III. PRIVATE BANKS 7,476 9,92 12 811 13,451 - Government - - . - Private 7,476 9,912 12,811 13,651 IV. FORKEIGN BANKS 71,04 1,790 1,753 - Government - - - - Private 1,072 1,046 1,794 1,753 TOTAL 126,775 136,_67 165,533 171,939 - Government 81,693 81,210 91,849 94,381 - Private 45,082 55,257 73,684 77,558 1/ Bank Indonesia : Including Liquidity Credit. Other Banks : Central Bank Liquidity Credit not included. 2/ Provisional figures. Source: Bank Indonesia. Table 6.8 BANK CREDITS BY ECONOMIC SIETORI/ (In Millions of Rupiah) 1968 March June 2/ Ju I. Bank Indonesia 91,996 92,073 106,171 111,031 Production 39,525 43,564 46,821 47,980 Export 3,285 3,192 2,710 3,147 Other 49,186 45,317 56,640 59,90 II. Government Banks 26,231 33,36 44,757 45,703 Production 13,374 19,086 28,063 29,739 Export 6,082 6,848 8,778 9,020 Other 6,775 7,502 7,916 6,9h III. General Private Bank 7,h76 9,912 12,811 13,451 Production 2,54o 3,316 4,454 4,677 Export 780 1,033 1,180 1,239 Other 4,156 5,563 7,177 7,535 IV. Foreign Banks 1,072 1,045 1,794 1753 Production - - 289 312 Export - 729 105 Other - - 776 1,336 Total 126,775 136,h66 165,533 171,938 Production 55,439 65,966 79,627 82,708 Export 10,147 11,073 13,397 13,511 Other 61,189 72,509 75,719 1/ Bank Indonesia: Including Liquidity Credit. Other Banks: Central Bank Liquidity Credit not included. 2/ Provisional figures. Source: Bank Indonesia. Table 6.9 TIME DEPOSITS OF ALL STATE BANKS (In Millions of Rupiah) 12 6 3 Months Months Months Total 1968 October 509 92 514 1,115 November 1,774 612 593 2,979 December 2,791 862 775 4,428 1969 January 3,868 1,796 936 6,600 February 6,311 2,829 1,163 10,303 March 10,835 3,732 1,779 16,346 April 14,858 4,642 2,020 21,520 May 16,305 5,hol 1,987 23,693 June 17,589 5,293 1,522 24,h0 July 19,361 5,502 932 25,795 August 20,816 5,789 1,034 27,639 September 22,144 6,147 1,393 29,823 Source: Bank Indonesia  Table 7.1 OUTPUT OF MAJOR CROPS, 1967 - 1969 (In Thousands of Metric Tons) 1967 1968 1969 1969 1st Half Actual Actual Target Actual Food Crops Rice (milled) 9,320 10,30 10,20 10,400 1/ Maize 2,960 2,690 3,370 2,950 1/ Cassava 12,920 9,610 13,550 11,770 1/ Cash Crops Rubber 739 718 740 Palm Oil 174 180 172 Tea 80 109 102 Coffee 162 153 189 Sugar 897 637 807 Tobacco 100 52 28 Copra 1,248 1,275 1,300 1/ Estimate for the full year 1969. Source: Central Bureau of Statistics.  Table 9.1 COST-OF-LIVING INDEX IN THE PRINCIPAL CITIES (September 1966 = 100) J ava Sumatra Kalimantan Djakarta Surabaj a Jogjakarta Malang Medan Palembang Bandjarmasin 1965 December 18.1 17.8 19.7 16.5 16.2 15.8 14.2 1966 December 133.2 127.1 142.2 148.5 ... 150.5 ... 1967 March 180.3 182.1 201.1 175.3 197.6 194.2 164.1 June 186.8 199.1 206.0 182.0 201.8 214.8 216.1 September 221.8 ... 231.7 259.7 262.6 249.5 223.0 December 282.7 290.8 ... 319.3 300.8 347.4 262.3 1967 Average 205.8 193.1 212.6 218.4 221.4 232.0 210.1 1968 March 445.2 473.6 505.9 477.5 ... 515.0 427.0 June 445.1 491.5 526.6 533.8 508.9 442.7 612.5 September 492.3 542.1 561.5 575.9 537.4 558.2 584.6 December 522.2 510.9 607.8 611.2 558.6 574.8 650.6 1968 Average 479.0 506.4 550.7 546.8 544.9 ,28.3 590.9 1969 January 533.5 516.9 ... 596.0 556.7 584.4 676.1 February 542.2 541.6 ... 597.9 547.1 608.8 729.6 March 554.2 568.8 ... 626.6 557.1 628.3 745.0 April 530.9 582.5 ... &.. 564.8 628.2 777.9 May 527.6 ... ... ... 545.2 602.9 ... June 520.5 ... .. . ... *** 594.5 *** July 530.3 ... ... ... ... ... .. August 546.4 ... ... ... ... ... *** September 544.4 .00. ... s* *** *** *** Source: Bureau of Statistics Table 9.2 COST-OF-LIVING INDEX IN DJAKARTA (September 1966 = 100) Food Housing Clothing Others General Index Percentage Percentage Percentage Percentage Percentage Index Change Index Change Index Change Index Change Index Change 1966 Average 81 71 60 80 76 1967 Average 227 180.1 254 257.8 108 80.0 210 162.5 206 171.1 January 150 9.5 161 30.1 99 -8.3 166 7.1 145 9.0 March 191 27.3 216 34.2 95 -4.0 210 26.5 180 24.1 June 193 1.1 284 31.5 96 1.1 209 -0.5 187 3.9 September 250 29.5 250 -12.0 119 24.0 216 3.4 222 18.7 December 338 35.2 307 22.8 137 15.1 233 7.9 283 27.5 1968 Average 542 138.8 420 65.3 252 133.6 432 105.7 464 125.1 January 506 49.7 326 6.2 169 23.4 287 23.2 395 39.6 February 659 10.5 310 -4.9 179 5.9 316 10.1 432 9.4 March 562 10.5 332 7.1 179 1.7 367 16.1 445 3.0 April 502 -10.7 351 5.7 204 12.1 384 4.6 419 -5.8 May 517 3.0 515 46.7 222 8.8 389 1.3 443 5.7 June 530 2.5 545 5.8 242 9.0 416 6.9 455 2.7 July 553 4.3 433 -20.5 270 11.6 432 3.9 475 4.4 August 563 1.8 426 -1.6 287 6.3 483 11.8 492 3.6 September 560 -0.5 426 0.0 289 0.7 498 3.1 493 0.2 October 545 -2.7 426 0.0 298 3.1 500 0.4 487 -1.2 November 551 1.1 427 0.2 336 12.8 542 8.4 505 3.7 December 557 1.1 521 22.0 353 5.1 570 5.2 523 3.6 1960 January 566 1.6 521 0.0 357 1.1 600 5.3 535 2.3 February 577 1.9 530 1.7 358 0.3 610 1.7 543 1.5 March 583 1.0 564 6.4 356 -o.6 643 5.4 555 2.2 April 541 -7.2 560 -0.7 356 0.0 646 0.5 532 -4.1 May 531 -1.8 560 0.0 357 0.3 660 2.2 529 -0.6 June 522 -1.7 549 -2.0 356 -0.3 655 -o.8 521 -1.5 July 522 0.0 589 7.3 362 1.7 683 4.3 531 1.9 August 549 5.2 600 1.9 363 0.3 684 0.2 547 3.0 Source: Bureau of Statistics Table 9.3 PRICE OF RICE IN PRINCIPAL CITIES (In Rupiahs per Kg. of Rice) End of the Period Djakarta Bandung Semarang Surabaja Medan Palembang Makassar Menado 1965: December 2.37 2.30 2.90 ,. 2.00 ... *.. 2.00 1966: December 15.63 13,00 12.90 11.50 10.50 ... 9.50 17.50 1967: June 18.50 16.50 14.80 11.00 22.00 17.00 9.50 17.50 September 30,00 27.00 25.00 20.00 32.00 30.00 11,25 31.50 December 47.50 57.00 43.00 37.00 33.00 61.00 .* 36.50 1968: March 75.00 57.50 52.50 46.00 45.00 90.00 42.00 67.50 June 67.50 53.00 50.00 50.00 65.00 48.00 46.50 61.50 September 65.63 49.57 40.00 40.00 70.00 55.oo 35.oo 61.25 December 62.50 45.28 .. 31.oo ... ... ... .. 1969: March 53.13 39.00 37.50 34.00 48.00 50.00 39.00 58.50 June 42.50 38.50 36.00 ... 49.00 47.00 36.00 49.00 July 50o.oo 45.oo 40.00 36.00 42.50 47.50 35.00 40.00 August 53.13 ... 47.50 45.oo 55.00 50.00 36.50 43.50 Source: Bureau of Statistics  Table 10.1 EXPORTERS' RECEIPTS PER DOLLAR OF NON-OIL EXPORTS Other Categog A Other Category B All Non-Oil Rubber Exports 1/ Timber Exports Exports 1968 1969 196 Y 169 1966 1969 968 11 1969 June Dec. June June Dec. June June Dec. June June Dec. June June Dec. June Export Value f.o.b. Cs) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Surrender Value .80 .77 .64 .94 .95 .94 .50 .50 .70 .50 .50 .20 .81 .80 .70 Tax rate (M) 25 15 15 25 15 15 10 10 10 10 10 10 22 14 14 Less Tax .20 .13 .10 .24 .14 .14 .05 .05 .07 .05 -.05 .02 .18 .11 .10 Net Surrender Value .60 .64 .54 .70 .81 .80 .45 .45 .63 .45 .45 .18 .63 .69 .60 Overprice .20 .23 .36 .06 .05 .06 .50 .50 .30 .50 .50 .80 .19 .20 .30 Exporters' Receipts ($) .80 .87 .90 .76 .86 .86 .95 .95 .93 .95 .95 .98 .82 .79 .90 Exchange Rates a) On surrender value (BE) 302 326 326 b) On overprice (DP) 351 h14 379 Exporters' Receipts (Rp) a) Surrender value (net) 181 209 176 211 264 261 136 147 205 136 147 59 190 225 196 b) Overprice 70 95 136 21 21 23 176 207 114 176 207 303 67 83 114 Total 251 304 312 232 285 284 312 354 319 312 354 362 257 308 310 Percentage of Export Value at BE rate 83 93 96 77 87 87 103 109 98 103 109 111 85 94 95 at DP rate 72 73 82 66 69 75 89 86 84 89 86 96 73 74 82 1/ Weighted average of 1968 export values Source: Mission's estimates. Table 10.2 FOODGRAIN BLANCEs, 1968-1969/70 (In Thousands of Metric Tons) 1969 1970 1968 Jan-Mar Apr-Dec Jan-Mar Stock, opening 152 663 497 348 Imports 1 107 203 980 347 (a) Rice ::t62 ) (ITO-) (6) (227) (b) Bulgur (118) ( 13) ( 55) ( 10) (c) Wheat (360) ( 80) (260) (110) Domestic Procurement 598 1/ 1 208 2/ 75 3/ Total available 1,857 867 1,686 770 Releases 1 116 846 1 284 525 (a) Rice 0 ) (222) (912) (375) (b) Bulgur ( 43) ( 34) ( 70) ( 50) (c) Wheat (268) ( 90) (302) (100) Stock adjustment 78 24 54 15 Stock, closing 663 497 348 230 1/ Includes 8,000 tons of tekad, domestically produced artificial rice. 2/ Includes 38,000 tons of rice procured under Bimas Gotong Rojong Program. 3/ Includes 60,000 tons of rice to be procured under Bimas Gotong Rojong Program. Source: Based on estimates made by L. A. Mears, Advisor to BAPPENAS on the basis of data provided by BULOG.