Document of The World Bank FCLE OY FOR OFFICIAL USE ONLY Report No. 2336-IYV) INDONESIA YOGYAKARTA RURAL DEVELOPMENT PROJECT STAFF APPRAISAL REPORT May 18, 1979 Agriculture and Rural Development Department Rural Development Division This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS US$1 = Rupiahs (Rp) 625 Rp 1 = US$0.0016 Rp 1,000,000 = US$1,600 WEIGHTS AND MEASURES 1 metric ton = 1,000 kilograms (Kg) = 2205 pounds = 0.98 long ton 1 meter (m) = 29.37 inches = 3.28 feet = 1.09 yards 1 hectare (ha) = 10,000 m2 = 2.47 acres 1 square kilometer (km2) = 100 ha = 0.39 square miles INDONESIAN FISCAL YEAR April 1 to March 31 GLOSSARY FOR OFFICIAL USE ONLY Bupati District Officer Camat Sub-district Officer Desa Village Dukuh Hamlet Kabupaten District Gotong Royong Cooperative effort by villagers Kader Village Health Promoters Kecamatan Sub-district Lurah Village Headman Pedukuhan Hamlet ABBREVIATIONS AETE Agency for (Agriculture) Education, Training and Extension ATDC Agricultural Technical Development Center ATDSC Agricultural Technical Development Subcenter BANGDES Pembangunan Desa - The Directorate of Rural Development BAPPEDA Badan Perencanaan Pembangunan Daerah - Provincial Development Planning Agency BAPPENAS Badan Perencanaan Pembangunan National - National Development Planning Agency BKUK Badan Koordinasi Usaha Kesehatan-Health Coordinating Committee BRI Bank Rakyat Indonesia - People's Bank of Indonesia CCHC Comprehensive Community Health Care CRIA Central Research Institute for Agriculture DIY Daerah Istimewa Yogyakarta - Special Province of Yogyakarta DPUK Kabupaten Public Works Service DPUP Provincial Public Works Service ECD (BAPPEDA) Evaluation and Coordination Division (BAPPEDA) GK Kabupaten Gunung Kidul GOI Government of Indonesia INPRES Instruksi Presiden - "Presidential Instruction" - a rural works program KMKP Kredit Modal Kerja Permanen - Working Capital Credit Program KP Kabupaten Kulon Progo LPH Research Institute for Horticulture Crops LPP Research Institute for Animal Husbandry LPTI Research Institute for Industrial Crops LSD Lembaga Sosial Desa - Village Development Forum MTU Mobile Training Unit PAS Provincial Agricultural Service PIS Provincial Industries Service PFS Provincial Fisheries Service PHS Provincial Health Service PCU Project Coordination Unit PPL Field Extension Agent REC Regional Extension Center TDC Technical Development Cell UDKP District Development Unit USAID United States Agency for International Development VTC Vocational Training Center YIS Yayasan Indonesia Sejahtera-Association for Indonesian Welfare r This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. INDONESIA YOGYAKARTA RURAL DEVELOPMENT PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. BACKGROUND ........................................... 1 A. General ......................................... 1 B. The Rural Sector ................. ..1............. C. Government Structure ........................... . 3 D. Previous Bank Group Assistance in the Rural Sector ....................................... 4 II. THE PROJECT AREA ..................................... 5 A. Introduction .................................... 5 B. Physical Environment ............................ 5 C. Population ...................................... 6 D. Economy ......................................... 7 III. ONGOING AGENCIES AND PROGRAMS ............ ............ 9 A. Agriculture ................................... . . 9 B. Non-farm Enterprises .............. .. ............ 10 C. Rural Infrastructure .......................... .. 11 D. Social Services ..... ................. .. ......... 11 E. Community Development .............. .. ........... 13 IV. THE PROJECT .......................................... 13 A. Background ...................................... 13 B. Project Strategy ................ .. .............. 14 C. Project Composition ............... .. ............ 16 D. Detailed Features ................ .. ............. 17 Agricultural Development ........... .. ......... 17 Non-Farm Development ..... .................. ... 23 Social Services Support ............ .. ......... 24 Rural Roads .................... ............... 25 Institutional Development ..................... 25 E. Cost Estimates ....... .......... .. ............... 27 F. Financing ........ ............ .. ................. 31 G. Procurement ..................................... 32 H. Disbursements .................... ............... 32 I. Accounts and Audits ............... .. ............ 33 Table of Contents (Continued) Page No. V. ORGANIZATION AND MANAGEMENT .......................... 33 A. Introduction ........ ................... 33 B. Project Coordination ...........o ................ 34 C. Project Implementation ....... ................ 34 VI. MARKETING, PRICES AND FARM INCOMES ................... 42 A. Marketing .................... ........... 42 B. Prices ........................... 42 C. Farm Incomes ..................... 42 VII. BENEFITS, JUSTIFICATION AND RISK ..................... 45 A. Benefits ........... ... ........ 45 B. Economic Analysis .................... . .... . 46 Cost Recovery and Fiscal Impact O .. . 47 Environmental Impact .. . 48 VIII. AGREEMENTS AND RECOMMENDATIONS ....................... 48 ANNEX 1: Project Costs Table 1: Summary of Estimated Project Cost Table 2: Project Costs by Year and Account Categories Table 3: Estimated Project Costs by Activities and Account Categories ANNEX 2: Illustrative Farm Family Budgets Table 1: Prices of Staple Food Crops at Harvest Time (1977-1978) Table 2a: Silvipasture Model Without Project, Yields and Input Data Table 2b: Silvipasture Model Without Project, Family Budget for 0.7 ha Farm Table 2c: Silvipasture Model With Project, Family Budget for 0.7 ha Farm Table 3a: Terracing Model Without Project, Yields and Input Data Table 3b: Terracing Model With Project, Yields and Input Data Table 3c: Terracing Model Without Project, Family Budget for 0.7 ha Farm Table 3d: Terracing Model With Project, Family Budget for 0.7 ha Farm Table 4: Illustrative Model of Production and Income from Improved Home Garden, 0.3 ha. ANNEX 3: Selected Data and Documents Available in the Project File MAP IBRD 13978 Administrative Boundaries and Proposed Project Actions This report is based on the work of an appraisal mission in June 1978 com- prised of Messrs. Furst, Anderson, Draper, Leeuwrik, Temple (Bank); Balcet, McNulty (Consultants) and a subsequent post-appraisal mission in October/ November comprised of Messrs. Furst, Draper, Temple (Bank) and Ms. Jellinek and Mr. Leersnyder (Consultants). INDONESIA YOGYAKARTA RURAL DEVELOPMENT PROJECT I. BACKGROUND A. General 1.01 The Government of Indonesia (GOI) has requested Bank Group assis- tance for the initiation of a multipurpose rural development program in the Special Province of Yogyakarta (DIY). The project now proposed would con- stitute the first, essentially experimental technical development phase of such a program and would be the first Bank Group assisted project in Indonesia designed to support the Government's new approach to critical area development through the strategy of decentralizing authority to the Province to address its special problems. Such an approach is dictated by the severity and difficulty of the problems faced by the rural population in the project areas; and it is justified by the potentially widespread application of a successful experience to the substantial population and land area of Java affected by similar (albeit mostly less severe) problems. The project actions would be focused on two Kabupaten (districts) within DIY, Gunung Kidul and Kulon Progo. Together, these areas of broken, upland terrain support over one million people, the vast majority of whom subsist as smallholders; with arable land averaging less than 1 ha, most are also part time casual wage laborers, or otherwise engaged in secondary activities. Poverty is widespread and severe; per capita incomes, estimated at the equivalent of some US$60, are among the lowest in Indonesia (1978 average: US$200). After discounting for outmigration which is still occurring, population pressure continues to increase, with a net growth rate exceeding 1% per annum. Under the intensive pressures, the ecologically safe limits of cultivation have long since been exceeded and the resulting serious soil erosion and soil depletion problems are everywhere in evidence on the hillsides. Problems of low and precarious incomes are exacerbated by minimal availability of public health services and by a lack of basic amenities, including reliable and safe water supplies. These special problems and their proposed solutions are further analyzed in Chapters II and IV respectively. B. The Agricultural and Rural Sector 1.02 About 108 million people, some 80% of Indonesia's total population, live in rural areas. With the exception of oil palm and tea, agriculture is dominated by smallholders. There are an estimated 14.4 million smallholders producing subsistence and cash crops on 14.2 million hectares, and about 1,800 large plantations comprising 2.2 million hectares. About 70% of all farms have less than 1 ha. The main products of these small farms are rice, corn, cassava, soy beans, fruits and vegetables, accounting for about 64% of total agricultural output. Other annual crops account for 10%; perennial crops, 4%; livestock, 7%; forestry, 11%; and fisheries, 4%. The main cash crops are rubber, tea, coconut, oil palm, sugar and coffee. -2- 1.03 The major issues facing the agricultural and rural sector in Indonesia are: the need to create productive employment opportunities to raise the incomes of the rural poor; the need to raise domestic food supply to keep pace with rising demand; the need to expand agricultural exports; and the need to ensure productive, sustainable use of Indonesia's varied land, water and other natural resources. 1.04 In Java, where 82 million people live on 7% of the country's total land area, all lowland and most of the better upland is totally utilized. About one-third of Java's rural population is landless and a large proportion of the remainder cannot support themselves on incomes from their own farms alone. Intense population pressures have increasingly forced small farmers and landless peasants to eke out a meager existence by cropping marginal up- land areas and low potential steep mountain slopes, dangerously exceeding safe ecological limits. Whereas several government programs are directed toward increasing the productivity of lowland and irrigated agriculture, upland agri- culture has received scant attention. Whilst there is a continuing need to pursue developments in the major irrigated areas in Java through improved water usage, supporting services and solving pest and disease problems, and extending these developments to the other islands, there is also an urgent need to develop a comprehensive program for erosion control and improved agricultural practices in the upland areas of Java, which constitute a sig- nificant proportion of the croplands. Production and poverty in these areas have worsened over time and without systematic interventions are likely to become more serious as widespread erosion further weakens the resource base. Through its Greening Movement (Impres Penghijauan) program and more recent (1978/79) extension of BIMAS credit for mixed cropping (BIMAS Palawija Tumpang Sari) on an experimental scale, the Government has initiated actions designed to stabilize and improve productivity of upland areas. However, results so far obtained by the Greening Movement program indicate that a more comprehensive approach is needed to secure farmers' effective participation; and a major bottleneck to the expansion of production credit in the uplands is likely to be a lack of proven technical packages suitable for extension in these fragile areas. Similarly, the present Bank Rakyat Indonesia (BRI) credits for cattle fattening, 1/ an important activity for upland farmers, are mainly focused on lowland areas. Credit terms would need to be softened to take into consideration the longer fattening cycles characteristic of the up- lands to have a widespread impact in these areas. 1.05 Although the Government has not yet formalized a policy or national program for rural development, there is growing interest and commitment for poverty-oriented rural development. Government has initiated pilot programs, with a focus on rural poverty areas, which incorporate the decentralization of planning and integration of various development efforts. In 1974, Government instituted an Area Development Program designed to assist ten "critical" areas in development efforts. Selection criteria include high population density in relation to resource base and a low per capita income. Development efforts 1/ Made available under the BRI's KMKP program, sub-program PUTP. are to be based on low cost per beneficiary to ensure replicability. In this regard, Government has initiated two pilot Area Development Programs in Aceh and Central Java provinces with USAID support. The proposed Yogyakarta Rural Development Project would be a third pilot effort to alleviate rural poverty on an area-wide basis. It is expected that Government would evaluate the results of these and other approaches to assist in the formulation of large-scale rural development programs. Other Indonesian programs designed to support rural development include the nation-wide INPRES program which finances rural infrastructure and supports employment generating activities, and the Bank-supported Transmigration Program which is intended to alleviate intense population pressures in Java by resettling large numbers of farm families and landless laborers on the other Islands, principally Sumatra and Kalimantan. C. Government Structure 1.06 Government power in Indonesia is highly centralized, with major con- trol vested with the President and his cabinet. As of 1978, there were 17 ministries, the most important of which in this project were: Agriculture, Industry, Manpower and Transmigration, Health, Public Works and Home Affairs. 1.07 Provincial government is organized at four levels: Province, Kabupaten (district), Kecamatan (subdistrict), and Desa (village). Within the Desa are unofficial units called Pedukuhan (hamlet). The Province is headed by a Governor who is appointed by the President and responsible to the region's Legislative Council. The Governor coordinates all line agency activities, which are represented at the provincial level as directorates. The Kabupaten is run by a Bupati who is also appointed by the Ministry of Home Affairs, on the advice of the Governor, and is responsible for coordinating activities represented at his level by sub-directorates. The Kecamatan includes 10-15 Desa, and is the lowest level at which there are full-time paid civil servants representing the various Government ministries. It is run by a Camat, who is appointed by the Governor and has direct responsibility for coordinating Government activities in his district. The Desa, which is more an administrative unit embracing 10-15 Pedukuhan than a distinct geographic entity, is run by a Lurah with the assistance of a 5-man staff. The Lurah is appointed by the Governor upon nomination of the villagers and is remunerated by land cultivation rights. His chief responsibility is promotion of Govern- ment programs at the Desa level. A Pedukuhan has from 50-100 households and is run by a Dukuh or headman who is unpaid, and whose position, nominally elective, is often hereditary. The dynamism of the Desa and Pedukuhan are often reflected in and dependent upon the personality of the local leaders. 1.08 Development Planning is carried out both at the national and at the provincial levels. Government is currently seeking suitable approaches to strengthen the provincial capability to plan, coordinate, and execute projects. BAPPENAS, the National Development Planning Council (Badan - 4 - Pereneanaan Pembangunan Nasional), is directly under the office of the President and has the responsibility of developing a national development plan. This job entails coordinating regional and sectoral plans; dealing with the national budget and with foreign assistance funds; and monitor- ing, evaluating, and preparing economic reports. BAPPEDA, the Provincial Development Planning Boards (Badan Perencanaan Pembangunan Daerah), were established in 1974 in all provinces to institute a local capacity for regional planning. Each BAPPEDA has the responsibility of drawing up five- year Development Plans for its province and overseeing its implementation through establishment of annual work programs as well as coordinating all local development efforts. The move to decentralize planning is still young, and the Yogyakarta BAPPEDA staff must be strengthened if it is to fulfill effectively its assigned tasks. Its senior staff includes a chairman, vice chairman, secretary, and division chiefs, all of whom are appointed by the Governor. Its four divisions are Infrastructure, Economic Affairs, Govern- mental and Cultural Affairs, and Evaluation and Coordination. D. Previous Bank Group Assistance in the Agriculture and Rural Sector 1.09 Previous Bank Group assistance to the agricultural sector in Indonesia has included IDA credits totalling about US$212 million and IBRD loans for US$617 million, for 29 agricultural projects accounting for over one-third of all lending. Agricultural projects comprise: twelve for irrigation development and rehabilitation, two for tea, one for sugar, one for seed production, three for agricultural estates, one for beef cattle, two for nucleus estates/smallholder development, two for fisheries, three for fertilizer expansion and distribution, two for agricultural extension and research, one for transmigration and rural development, one for rural credit; there is also a nutrition project which is initiating actions for developing a national nutrition plan through strengthening institution capacities, providing training and pilot programs of direct interventions in 180 villages. Most projects in agriculture have been for rehabilitation and expansion of productive capacity, in both food and tree crops. The Tenth Irrigation proj- ect includes the rehabilitation and extension of the Kali Progo irrigation scheme serving the major irrigated areas of DIY and embraces a program for tube well irrigation in the flat land of the Wonosari plain in Gunung Kidul. 1.10 There is an increasing awareness of the need to provide productive work opportunities and incomes for Indonesia's presently underemployed and growing rural labor force, in addition to a more rapid increase in agricul- tural production, particularly of food crops. The Bank is assisting Govern- ment in a major study aimed at formulating policies and programs to raise food production and expand non-farm rural development. The review will cover such issues as domestic and foreign resource mobilization, trends and outlooks for agricultural growth, population, employment, and income distribution. The final report provides input for the formulation of the Third Plan and will be ready in 1979. - 5 - II. THE PROJECT AREA A. Introduction 2.01 The proposed project area comprises the two poorest Kabupaten - Gunung Kidul (GK) and Kulon Progo (KP) - in the Special Province of Yogyakarta (DIY). Located on the island of Java, the province is one of the most impover- ished of Indonesia's 26 provinces. It covers 3,200 km2, and has an estimated population of 2.65 million (1977). The province is predominantly rural, with 80% of its population living in rural areas. The average man/land ratio is 1,033 persons per km2 of net cultivable land. The Kabupatens of GK and KP, which constitute respectively the easternmost and westernmost regions of the province, have a population of 657,000 and 395,000 inhabitants, respectively (1977). Per capita income in the province in 1978 was about US$90, compared to the national average of US$200. GK and KP are particularly poor, with an annual per capita income estimated at US$60. 1/ They contain the following administrative units: Kecamatan Desa Pedukuhan Gunung Kidul 13 144 1,385 Kulon Progo 12 88 976 B. Physical Environment 2.02 Mean annual rainfall is in the range of 1,000-4,000 mm, but with substantial yearly variations. There is a distinct wet season from about November to April, when 75% of the rain falls, and a dry season from May to October. Mean daily maximum temperature is 300C and mean daily minimum 22 0C. 2.03 The topography of the province is dominated by Merapi Volcano (3,000 m), in the north, flanked to the east and west by the broken hilly country of the Kabupaten of GK and KP. Soils vary widely from the fertile volcanic ash on the slopes of Mt. Merapi and the alluvial soils at its southern base to the very poor limestone "karst" area in southern GK. Between these extremes are shallow but relatively fertile lateritic limestone and black clay soils in the Wonosari plateau in central GK and generally poor lateritic soils in the uplands of GK and KP. The upland of both Kabupaten have moderate to steep slopes and terracing efforts in these areas have so far been ineffective. However, erosion has taken a heavier toll in GK where soils are shallower. The karst area is the most difficult; here, a succession of steep conical hills, mostly rock, are interspersed by small V-shaped valleys. Only about 25% of the land is usable; farmers cultivate the narrow valleys and the small soil areas between limestone outcroppings on the hills. 1/ The absolute poverty level for Indonesia in 1978 was US$78. 2.04 Hydrological conditions in both Kabupaten are extremely variable, but water shortage is particularly acute in the "karst" area of south-eastern GK where the limestone subsurface is coupled with very deep and inaccessible groundwater, making it one of Java's most water-short areas. The main sources of water are surface ponds, only 20% of which contain water in the dry season. Many of the local people must walk up to 5 km for their domestic water supply. Water shortage, coupled with its isolation and relatively poorer soil, combine to make GK the geologically less fortunate of the two project areas. 2.05 DIY was originally covered with tropical rain forest. During the colonial period, the plains were cleared for sugarcane and rice cultivation, and part of the hillsides for perennial crops. It is only in the last 50 years that annual food cropping has been taking place in the uplands of GK and KP, but as increasing population pressures forced numbers of farmers to move to the higher uplands, considerable land degradation through soil erosion has occurred. To preserve the land, farmers have attempted to build terraces on many of the steep slopes. However, even where these exist, they are poorly designed and maintained and have frequently not been effective in preventing soil erosion and loss of fertility. The physical results of such land use and management practices are: (a) an increasing imbalance in hydrological regimes which causes growing aridness in the dry season and increased flood- ing during the wet monsoon; (b) a rapid depletion of the soil base, both quantitatively (soil loss through erosion which results in the siltation of irrigation facilities and streams, and in turn, increased flood hazards) and qualitatively (decline in fertility through leaching of soil nutrients) and; (c) hence, a decline in productivity, and subsequently, a decline in incomes. However, production can be improved in these areas through appropriate soil conservation measures coupled with improved agronomic practices. C. Population General 2.06 The province's designation as "Special" stems from the fact that it is the only province whose Governor is a traditional King or Sultan. Since Independence, the problems of population pressure have increasingly dominated the province. The carrying capacity of the fertile lowlands has long been exhausted and increasing numbers of farm families have been moving to the less hospitable uplands to eke out a living. The 1978 population density was around 840 persons per km2, making DIY second only to Jakarta as the most populated area in Indonesia. 2.07 Average farm size in the hilly areas, excluding homestead and yards, is .70 ha, the smallest in Indonesia's hilly and mountainous uplands. Social position is based on the amount of land held, with a clear differentiation between those who control enough land to be relatively independent and those who must engage in sharecropping or wage labor to survive. Although in the project's upland farming areas absolute landlessness is unknown, the poorest farmers are those who own the most inaccessible, the least fertile, or the steepest plots - and thus, severe soil erosion is largely a problem of those who are least able to afford preventive measures. As a practical matter, however, the degree of disparity of living levels among individuals is not excessive. Material possessions are modest even at the highest level, and for all, the way of life is simple and largely traditional, typified by simple housing, long working days for both men and women, which often includes an inordinate amount of time spent on water and fuelwood collection and por- terage, and low nutrition levels, with corn and cassava being the main staples. Crop yields are low; a large portion of the land produces, on a pure crop basis, only about 1.4 tons/ha of cassava, 0.3 tons/ha maize and 0.2 tons/ha dryland rice. Cows ar!e goats are kept in pens beside the house. Livestock represent an important means of saving, and families, particularly children, may spend as many as 3 to 4 hours collecting daily feed. 2.08 Ill health is a common problem, particularly among the young, as evidenced by a high mortality rate (estimated at 19/1,000), a high infant mortality rate (135/1,000) and a low life expectancy (50 years in 1976). The morbidity rate is very high with gastro-intestinal infections, worm infes- tation, and lung tuberculosis being among the most prevalent diseases. Mal- nutrition, particularly during the preharvest season, contributes to health problems, as does the acute water shortage particularly in the karst area of southern GK. 2.09 A major constraint in the development of agriculture and industry is the lack of all-weather roads. GK and KP together have 570 km of surfaced provincial and Kabupaten roads, which link the larger population centers to each other and to rural areas. Many of these are so poorly maintained, however, that farmers must often carry produce and supplies considerable distances to the nearest passable road. There are in addition a network of rural roads, some 3,000 km in GK and 1,200 in KP which connect villages to each other. Many of these roads are passable only in the dry season, thus exacerbating the problem of isolation in these two Kabupaten. D. Economy 2.10 Agriculture provides the main livelihood for 90-95% of the popula- tion in both KP and GK. Despite maximum utilization of available lands, however, there is a severe deficit in food crops. Both Kabupaten are net importers of food -and GK in particular is vulnerable to famine in a poor crop year. 2.11 Farmland falls into three categories: sawah or irrigated rice; dry farmland; and homegardens. Homegardens account for over 50% of farmland in KP, with the remainder divided equally between sawah and dry. Dryland farming is of key importance in GK, representing about 75% of the area, with homegardens covering almost another 20%. The main dryland crops are cassava, maize, upland rice, and groundnuts; typically grown in mixed stands. Though - 8 - single season cropping is characteristic of dryland cultivation, in some areas, there are second plantings of groundnuts and soya, primarily for sale. Homegardens, located around the homestead, provide farmers, especially the poorest, with the basic ingredients for survival. The typical homegarden is a mixture of fruit trees, firewood trees, and trees which produce building materials, with underplantings of annual and other herbaceous plants such as roots, tubers, medicinal plants, and vegetables. Together, these plants form a close canopy similar to natural forests which protects the soil from erosion. The mix usually depends on the farmer's relative need for home consumption and cash crops. Significantly, the proportion of homegardens increases with increasing population pressures. 2.12 Livestock production provides savings and supplementary income for large numbers of farm families. Livestock densities in the project areas are above the provincial average, which in turn is second highest in Indonesia. Some 35% of the province's farmers keep cattle (1.7 head of cattle per farm); 92% poultry; 42% goats and sheep; and 4% buffaloes. In the sawah areas, cattle are widely used for draft purposes while in the uplands, they are kept mainly for breeding and meat production. Trade data indicate that there is a net export of cattle from DIY, especially from GK. Livestock is moved on the hoof, normally through the Siyono Livestock Market in GK, operated every fifth day by the GK Market Service. Sales are conducted almost exclusively through brokers who take an estimated commission of 10 to 15%. Productivity is low, with a cow producing only 3-4 calves during its active life. Causes are poor genetic quality, coupled with insufficient feed and inadequate disease control. 2.13 In GK and KP, there are an estimated total of nearly 7,500 families who catch fish in fish ponds, public waters, and rice fields. Yields per ha are lower than the national average, since most producers do not use advanced stocking and feeding technology, depending instead on natural feed scavenged by fish. As a result, the annual catch of some 412 tons is mostly consumed by the farmers, with only 10% marketed. 2.14 Incomes derived from the typical small landholdings in the project area are usually insufficient to meet basic nutritional needs, and during the slack periods (growing months), the men may turn to cottage industries or other non-farm employment throughout the towns and cities of Java. Avenues open for productive employment are few, and most jobs are poorly remunerated. Many engage in such agro-related activities as wood gathering and tapping of coconut trees for sugar. Non-farm rural production is poorly developed, including such rudimentary activities as handicrafts, stone quarrying, lime burning, blacksmithing, tile making, and water delivery (GK). Approximately 400 registered small-scale enterprises were reported to employ 3,000 people in 1974 in the project area, with only 10 medium-scale (employing 10-50 persons), all in KP. Another 50,000-60,000 people were engaged full time or part time in informal non-farm activities. In addition, it appears that the value of manufacturing output has shrunk in recent years, popsibly in part because of an influx of cheap, mass-fabricated goods. Fundamental to the weak performance - 9 - of this sector, however, is lack of capital formation, low levels of worker and management skills, the low level of technology, and the scarcity of developed markets. III. ONGOING AGENCIES AND PROGRAMS A. Agriculture Provincial Agricultural Service 3.01 The Provincial Agricultural Service (PAS) has three sections in the project area dealing with crop production - food crops, horticulture, and estate/ industrial crops - and one dealing with fisheries. The sections dealing with crop production have only 33 field extension agents (PPLs) in GK and 20 PPLs in KP, representing average ratios of extension workers of 1:2,000 ha and 1:3,000 ha respectively, compared with targets under the National Food Crops Extension project of 1:600-1,000 ha. These agents concentrate mainly on irrigated rice areas. There are no special efforts which focus on the upland area's most pressing problems of an eroding soil base and diminishing soil productivity. Thus, terracing efforts have been undertaken by farmers mainly without governmental support, and research has been negligible into methods of increasing yields in homegardens and in the food crops on which upland farmers depend. The PAS has small field stations of doubtful utility in KP and GK and Gadjah Mada University in Yogyakarta has conducted research in the area, but mostly relevant to irrigated rice. On a national level, the Central Research Institute of Agriculture (CRIA) has instituted an upland cropping research program in a number of locations throughout Indonesia, but none in or near Yogyakarta. The research findings of two other research institutions (Research Institute for Industrial Crops - coconut, cloves, and vanilla, and Research Institute for Horticulture Crops - fruits and vegetables) have also not been applied in the project area. Fisheries Service 3.02 The Fisheries Service has 5 fisheries agents in each of the proj- ect Kabupaten. It operates two fish hatcheries in the project area, one at Genjahan, GK, and the other at Banjararum in KP. In addition to operating the hatcheries, the staff are expected to provide extension services to farmers and operate training courses in fish culture and pond management. Due to financial and staffing constraints, these activities are minimal. Directorate of Agraria 3.03 The Directorate of Agraria, which is a part of the Department of Home Affairs, has 17 technical staff members in DIY to deal with the process of issuing legal title to land holdings. Since most of the area's farmers do not hold full legal title to their land, the existing technicians are not - 10 - sufficient in numbers to complete the process in the near future. Moreover, because of historical considerations special to DIY where the Governor, by customary law holds extensive rights over much of the land, individual regis- tration would require his formal approval. Provincial Livestock Service 3.04 The provincial chief of Livestock Services is in charge both of nationally funded programs, the most important of which is an artificial insemination (AI) program to improve the fertility of cattle through genetic upgrading, and of locally funded activities, particularly dealing with animal health. The AI program, instituted in 1974 in DIY with a current annual goal of 10,000 inseminations (2,000 per Kabupaten), is run by a provincial AI coordinator, and operates in the project area through two AI posts in KP and one in GK. The major efforts to improve animal health are vaccination programs to control foot-and-mouth disease, hemorrhagic septicaemia, Newcastle disease, and diphtheria. The Service also attempts to alert farmers to health problems by having an animal husbandry livestock assistant at the Siyono Market on market days to inspect livestock for disease. B. Non-farm Development Non-Farm Enterprises 3.05 Government assistance to small-scale enterprises in Indonesia is still in an early stage of development and the programs have not yet been extended to the project area, where Government agencies have been little represented and problems are particularly severe. The prime agency is the Provincial Industries Service (PIS), whose main function is promotional. Although small branch offices exist in KP and GK, their main efforts have been directed towards handicrafts and those of the Provincial office toward larger industries than occur in the two Kabupaten. Institutional interventions to increase the earnings from non-farm rural production have included credit schemes - KIK/KdPK for large loans, (average size Rpl.5 million), and Bank Rakyat Indonesia's (BRI's) mini-credit for loans in the RplO,000 to RplOO,000 range - technical assistance and industrial extension through, for example the IDA Small Scale Enterprise Development Project 1/, and cooperatives formation. Limited mini-credit facilities are available in the project areas, but KIK/ KMKP is not effectively available to small scale enterprises since the sup- porting technical assistance and extension efforts to these have yet to be developed. 1/ See IBRD Report No. 1614a-IND (Credit 785-IND). - 11 - Vocational Training 3.06 To meet the needs of those who leave the formal educational system, and to provide the nation with a supply of skilled artisans, the Government has established a network of Vocational Training Centers (VTCs). 1/ The net- work is administered by the Ministry of Manpower and Transmigration through its Directorate of Vocational and Management Development. The VTCs are rein- forced by a system of Mobile Training Units (MTUs), which provide shorter vocational courses in outlying areas. The population of KP and GK have little access to vocational training opportunities. There is only one VTC in DIY, located in Yogyakarta city; in 1977, KP contributed only 13 students and GK only 33 out of a total of 618 in the province. There is also only one MTU, which conducted 4 out of its 12 courses in 1977 in KP and GK, reaching a total of 85 students. C. Rural Roads 3.07 The approximately 400 km of provincial roads in the project area are maintained by the Provincial Public Works Service (DPUP) and the remaining 170 km of Kabupaten roads are maintained by the Kabupaten Public Works Services (DPUK). The area's 4,200 km of rural roads are maintained by the villagers themselves, with some financing being provided by the Impres Desa program for the purchase of materials. In GK, and less successfully in KP, there are active self-help programs through which villagers collectively rebuild and upgrade the local roads. The Ministry of Manpower and Transmigration in 1975 instituted a more formal program of village road maintenance, providing funds to pay for labor and materials in an effort both to generate employment and to improve infrastructure. However, there is a need to establish at the Kabupaten level systematic standards for low-cost rural road construction and to re- inforce the DPUK to undertake the management of directly executed construction and maintenance work. D. Social Services Rural Health 3.08 The Government organization delivering rural health care flows from the Ministry of Health and includes health offices at the provincial, Kabupaten, and Kecamaten levels. The lowest level at which Government provides health services is at the Kecamaten health center. There are 12 health centers in KP and 13 in GK. Each center nominally has one qualified physician, one nurse, one midwife, one sanitarian, four to six malaria home 1/ Financed under IBRD 4th Education Project (Credit 1237-IND). - 12 - visitors, two vaccinators and several junior assistants. In fact, in 1978, there were only 15 doctors for the 25 centers in KP and GK. In addition, there are at the Desa level a number of maternal child health clinics and outpatient clinics in both KP and GK. 3.09 The Government has instituted three outreach programs designed to provide additional health care at the local level and to increase use of existing health facilities. The Kader program trains village health promoters (kaders), who are local part time volunteers, to perform simple curative, preventive and organizational tasks in the village under the supervision of the health center doctor and his staff. The program was instituted in the project areas in 1974 with the training of 300 kader in KP and 500 in GK and is working well in some villages of Kulon Progo. The School Health program, launched throughout the country under Pelita II (1973-78), seeks to ensure that all schools have at least one teacher qualified to give first aid, teach health subjects and emphasize the importance of nutrition. The Kabupaten school health supervisor provides a key leadership role with the Provincial Health Service (PHS) providing instructional material and arranging for teacher training. The Comprehensive Community Health Care program (CCHC) operated by the Gadjah Mada university provides support for rural health services by assigning senior medical students to work in the Kecamatan health centers as part of their medical training. Besides assisting with the c-enters' routine work, the students undertake health promotion work in the villages such as Kader training and supervision, latrine construction and nutrition instruc- tion. Despite the limited achievements thus far attained in upgrading health facilities, it is increasingly clear that there will continue to be a severe shortage of professional medical personnel available for service to the rural areas. There is therefore an acute need for an increasing number of para- professionals who would serve to improve the outreach of the existing health services in Kulon Projo and Gunung Kidul. Rural Water Supplies 3.10 Although water shortage is an acute problem in southern GK (para. 2.04), financial constraints have frustrated efforts to address the problem on a wide scale. The Government has a number of programs underway, with responsibility divided among the Provincial Public Works Service and the Provincial Health Service. UNICEF has supported a pilot program of ferro- cement rainwater catchment tank construction, the technology for which was developed by DIAN DESA, a private, non-profit Indonesian appropriate technology group. Now that a clearly defined appropriate technique has been established for relatively low cost potable water supply under the UNICEF pilot program, there is a need to expand the provision of this service in the areas of critical shortage. This project would support such an expansion and it is expected that DIAN DESA would be the executing agency. - 13 - E. Community Development Directorate of Rural Development 3.11 The Ministry of Home Affairs through its Directorate of Rural Development (BANGDES) is responsible for fostering community development activities at the local level. The Directorate works through District Devel- opment Units (UDKP) which have been formed at the Kabupaten and Kecamatan levels to promote self-help activities at the Desa and Pedukuhan levels. These in turn promote formation of Village Development Forums (LSDs), headed by the Lurah and his staff, to communicate Government policies to the Desa and the Pedukuhan and to promote village development. The strategy to generate popular involvement is to organize people around issues of particular concern to them. Thus, LSD members are each charged with an area of community interest (social welfare, law and order, economic affairs) and they promote formation of corresponding special interest groups in the Pedukuhan, run by volunteer leaders responsible to the Dukuh. Due to lack of training and inadequate funding, these various groups often do not function effectively. Indonesia has a traditional and well-established obligation of self-help (gotong-royong) through which villagers are expected to participate in projects of communal interest without pay or remuneration. In practice, gotong-royong and the dynamism of the Lurah and Dukuh remain the principal motivating forces among villagers. Since it will often occur that these motivating forces are in imbalance, there is a need to provide a mechanism to elicit full participation of villagers if development innovations are to be accepted and sustained. 3.12 Elsewhere in Java, successful small scale efforts to promote popular participation in development activities have been undertaken by Yayasan Indonesia Sejahtera (YIS - the Association for Indonesian Welfare), a non- governmental, non-profit organization. This organiation is experienced in the training of village leaders in community participation and development. Its community development projects in Java and the other Islands range from nutrition and health activities to cattle breeding and the development of credit cooperatives. It is expected that YIS would be employed to provide similar services under the project. IV. THE PROJECT A. Background 4.01 The project would be one of the pilot projects for Government's Area Development Program (para. 1.05). DIY was selected as a "critical" area, and in December 1975, GOI requested Bank assistance in developing a program to improve the quality of life of its citizens. The preliminary design was drawn up under the direction of BAPPEDA/Yogyakarta with participation of government - 14 - officials and Gadjah Mada University. Through subsequent Bank missions and five man-months of international consultancy, the project was further refined. In line with the priority focus of Government's area development programs, the two poorest Kabupaten in DIY were selected for project participation, and key agricultural activities were designed to concentrate on the most critical areas, the hillsides, with complimentary activities in other sectors addressing basic infrastructure and social needs. The project would complement and reinforce existing Government programs, several of which are supported under Bank-financed projects, such as food crops extension (1267 IND), research and extension (1179 IND), nutrition development (1373 IND), and fertilizer dis- tribution (1139 IND). B. Project Strategy 4.02 The project would constitute a first five-year phase of a longer- term development program in DIY designed to increase incomes and to improve rural living conditions. Project activities were selected to focus on those problems which represent prime bottlenecks to development. For upland agriculture, the most fundamental of these in GK and KP is soil erosion and low productivity, and thus the project's agricultural actions focus first on stabilizing the land base, and then on developing new technology packages for agricultural production. The project also supports development of the most promising immediate income-producing activities in the area: fisheries, livestock production, and small-scale enterprises. It addresses a key infra- structural bottleneck: all-weather rural roads. Finally, it attempts to tackle the most pressing needs in the social sphere, paucity of health per- sonnel, and shortage of drinking water in selected critical areas. Project execution would be in the hands of appropriate local (mainly provincial) authorities and the proposed arrangements are in line with existing manage- ment and organizational structures. The aim would be to strengthen and progressively to augment implementation capacity at the local level; current weaknesses and deficiencies constitute a further reason for the cautious and modest program that is now proposed. As a multi-purpose endeavour, the proj- ect would also seek to strengthen and improve the coordination of existing and new activities, but it is not designed as a fully integrated approach whose overall success would depend on the success of each of the several com- ponents. Rather, each element or component would be implemented at a pace consistent with the capacities of the specific agency responsible for it and in the light of any special difficulties or problems that might emerge through implementation. In sum, organization features are also designed with refer- ence to the concern for replicability in the wider context of Javanese rural development problems. 4.03 Many project activities are experimental in nature, particularly those designed to test the technical, economic, and social appropriateness of measures proposed for arresting soil erosion, and for field testing and introducing improved agricultural technologies for upland farming. The - 15 - project strategy is to initially confine the technical development activi- ties to three pilot areas, comprising about 3,650 ha, and then, after a positive evaluation of the trials and pilot programs carried out during the first three years, to extend project activities to an additional 3,500- 4,000 ha in years four and five. The approaches refined, tested, and evaluated would be potentialy applicable to the 400,000 ha of similarly endangered uplands in eastern and central Java. The three pilot areas have been selected to represent lands at different stages of degradation. Gedung Poh in northern GK, with moderate slopes, is severely eroded despite terrac- ing attempts, with much of the land abandoned. Banjar Oyo in northern KP, although steeper in parts and with only rudimentary attempts at terracing, is less eroded. The third area, Hargo Tirto, also in KP, is far steeper but with heavy tree cover, with 90% of its land in homegardens. In these three pilot areas, the project would introduce such soil conservation methods as terracing, and reforestation combined where appropriate with introduction of fodder production linked with livestock and would experiment with packages to increase productivity of home gardens and of food crops generally. Whenever possible, the project would draw on existing technology particularly those developed in the Upper Solo Watershed Project 1/ and with methodologies developed by CRIA. 4.04 In the approach to other components, the project would couple an experimental strategy with the use of existing techniques. Development of non-farm activities would combine a survey to determine the optimum strategy for long-term industrial development with immediate influx of credit through existing facilities. Expansion of currently available vocational training opportunities is expected to be undertaken in a follow up project. The rural health component would build on the proven success of the small-scale volun- teer health promoter (kader) system used elsewhere in Java, and the use of school teachers as health educators/primary health workers. The village water supply component would expand a UNICEF pilot program of low cost roof rain- water catchment tank construction using technology which has been identified as the most appropriate for the area. The rural roads component would intro- duce low-cost labor intensive all-weather gravel roads construction and maintenance as a methodology not hitherto used on Java. To overcome the social and cultural constraints often encountered in rural development proj- ects, and to ensure that development actions would be sustained, the project would introduce community participation training activities for project staff, participants, and other Government staff concerned with the project. Finally, the project would strengthen the existing provincial planning board's capa- bility to coordinate the project activities of the various participating agencies; to monitor the project through the development of a management information system; and to plan and prepare future projects. 1/ UNDP/FAO Upper Solo Watershed Management Project, AG:DP/INS/72/006. - 16 - C. Project Composition 4.05 Specifically, the project would comprise the following components (the proportion of the total baseline costs is indicated in parentheses): (a) Agricultural Development (45%), including: (i) Technical Development through soil conservation measures, improvement of cropping practices and specialized technical training for project staff; (ii) Inland Fisheries, including con- struction of new fingerling stations and rehabilitation of existing ones, and technical training and improvement of fisheries extension; (iii) Livestock, including parasite control, marketing improvement, extension of artificial insemination, and technical support; and (iv) Incremental Agricultural Credit. (b) Non-Farm Development (14%), including: (i) Small-Scale Enterprise Support, to develop and upgrade small enterprises having good prospects for growth; and (ii) Incremental Credit. (c) Social Services Support (13%), including: (i) Rural Health to help implement a low-cost preventive health system based on trained village voluntary health workers and school- teachers; and (ii) Water Supplies by provision of rainwater catchment tanks in areas of critical need. (d) Rural Infrastructure (15%), introducing new road building methodologies for rehabilitation and upgrading of rural roads. (e) Institutional Development (13%), including (i) Project Orga- nization and Coordination improving provincial planning coor- dination monitoring and evaluation and project preparation capa- bility by strengthening BAPPEDA through reinforcement of staff and training; and (ii) Community Participation through communication and leadership training for Government staff, project staff, and project participants. 4.06 Each component would be managed by a full time component manager representing the appropriate Provincial Service. Such functions as planning and budget preparation and monitoring, which cut across component lines would be handled by a Project Coordination Unit to be established under the project in BAPPEDA's Evaluation and Coordination Division (ECD). BAPPEDA would also be responsible for overall project coordination and for securing co-operation among the component managers and the Bupatis of GK and KP. - 17 - D. Detailed Features Agricultural Development (US$5.1 million) 1/ 4.07 Agricultural Technical Development. The project would finance the establishment of a Technical Development Cell (TDC) within the Provincial Agricultural Service initially to supervise the implementation of the agri- cultural activities under the project with the objective of the Cell becoming fully integrated within the Service to develop future, large-scale programs for upland areas. The Cell would be staffed with a multi-disciplinary team of eight senior level staff qualified in agroeconomics, agronomy, soil conservation, land use, tree crops, animal husbandry, and training. Because of the extreme shortage of experienced, senior technical personnel at the provincial level, an additional 72 man-months of internationally recruited specialist consultancies would be provided to support the work of the project's agricultural staff. The function of the TDC staff would be to plan, design and provide direct leadership to the staff of the Agricultural Technical Development Center and sub-centers (see below) to be set up under the project and through these centers to implement agricultural development programs in the pilot areas. They would prepare and assist with the implementation of annual work programs, and, through BAPPEDA, arrange for the allocation and timely release of appropriate budgets. The TDC would establish close liaison with provincial and national-level agricultural research and development bodies and later in the project assist BAPPEDA in follow-up project pre- paration. The establishment of the TDC and its staffing by an agricultural economist, senior agronomist, land use/soil conservation specialist and tree crop specialist would be a condition of disbursement for the agricultural components (Working Paper C-2). 4.08 Agricultural Technical Development Center (ATDC). The project would finance the establishment of an ATDC at Nglipar in Gunung Kidul to undertake technical development and adaptive trials for upland farming. This would be the main field station to be established under the project. The choice of GK reflects the larger area of uplands in this Kabupaten, about 40,000 ha (excluding the Karst area) of dry cropland and 23,000 ha of homegardens compared with 10,000 ha of dry cropland and 28,000 ha of homegardens in KP. Necessary buildings, equipment, and staff housing would be provided, and the ATDC would be staffed by six well-qualified technicians specialized in: agronomy, soil-conservation engineering and land use, farm manage- ment, tree crops, animal husbandry, and agricultural training and 20 field assistants. The Center would include three main technical sections: (a) a land-rehabilitation and soil-conservation unit responsible for planning, designing and implementing the various physical measures to control soil erosion, e.g. bench terracing, drainage, etc.; (b) an adaptive research unit to conduct trials and investigations at the Center and in farmers' fields in the pilot areas to develop more productive, sustainable upland-farming systems, particularly on the terraced land; (c) an agricultural training unit whose activities would be directed to staff and farmer training. Initial staff training and program design would be carried out with technical support from the Central Research Agricultural Institute (CRIA) in Bogor, the Research Institutes in Industrial Crops (LPTI), Horticulture (LPH), and Animal Husbandry I/ Baseline costs excluding contingencies. - 18 - (LPP), the Agency for Agricultural Extension, Training and Education, (AETE) and the Watershed Management Project in Solo, the Gadjah Mada University, and the Directorate of Agraria. Assurances have been obtained that formal arrangements will be concluded between these agencies and the Provincial Government for the provision of these services. Extension activities gen- erated by the project would be incorporated in the work programs of the extension services being developed in Yogyakarta under the National Food Crops Extension project and existing Rural Extension Centers (REC). The ATDC would be absorbed eventually in the nationwide network of agricultural institutions (Working Paper C-3). 4.09 Agricultural Technical Development Subcenters (ATDSC). The project would finance establishment of two subcenters in KP with similar functions to the ADTC. These subcenters, one in the pilot area Hargo Tirto and the other in pilot area Banjar Oyo, would focus on the needs of the specific area in which they would be located, i.e. homegarden development in Hargo Tirto and soil conservation and tree and food crop improvement in Banjar Oyo. The organizational structure would be simpler than at the ATDC and would reflect the major tasks of the subcenters. Four technicians, tree crops, soil con- servation, agronomy, and training, and 10 field assistants would operate the Hargo Tirto subcenter. Five technicians, agronomy, soil conservation/land use, tree crops, animal husbandry and training, and 17 field assistants would operate the Banjar Oyo subcenter. Eventually, they too would be absorbed into the national program network of agricultural institutions (Working Paper C-3). 4.10 Nurseries and Seed Multiplication. The project would establish two central nurseries, one at the ATDC, Nglipar and the other at the Hargo Tirto subcenter. These nurseries would produce forest and fruit-tree seed- lings required for homegarden/tree-farming improvement and the establishment of silvipasture and bench terraces (fuelwood and fruit-tree species to be planted along the lip of terraces). In addition, nurseries would be estab- lished to produce a portion of the legume seeds and grass cuttings needed for establishment of pastures and protection of terrace risers. Selected farmers would also be subcontracted to participate in the multiplication of grass cuttings and improved food-crop planting materials which are not avail- able on the market (cassava) or are of poor quality (maize). The nurseries would be operated and supervised by staff of the ATDC and subcenters (Working Paper C-3). 4.11 Soil Conservation. The project would help build up the provincial soil conservation capabilities, and as a first phase finance the construction of bench terraces or rehabilitation of existing terraces, with associated drainage and other physical works to minimize sheet and gully erosion on dry- land slopes sufficiently benign to be suitable for annual cropping. About 600 ha of dryland terraces and 50 ha of irrigated terraces would be con- structed or improved in the three pilot areas including the construction of small dams and diversion structures for irrigation purposes. In addition, provision has been made for about 800 ha of dryland and 50 ha of irrigated terraces to be constructed in an outreach program starting in the third and fourth year of the project, respectively. Design and layout of the soil - 19 - conservation works would be undertaken by the staff of the ATDC and sub- centers under the guidance and supervision of the TDC, while the TDC would prepare detailed plans for the dams. With the assistance and under the supervision of agricultural staff, construction would be carried out by groups of local farmers, who would be paid a wage on the basis of a percent- age of the market price of their labor sufficient to ensure their effective participation. Wage payments would be administered by ATDC and ATDSC staff. During appraisal, the wage payment percentage for labor on soil conservation works was calculated at 50% of local labor cost for dryland terracing and 10% for irrigated terraces. The average cost of terracing is estimated at Rp220,000/ha for new dryland bench terracing, RpI28,000/ha for rehabilitation of dryland terraces and Rp5l,000/ha for irrigated terraces. However, it is probable that these estimates would need revision during project implementa- tion, as socially acceptable levels of payments are determined by experience. As an additional incentive, grass/legume mixtures and tree seedlings for terrace risers would be provided free of charge. Fertilizers would also be provided free for the first crop grown after terrace construction to com- pensate for the temporary drop in crop yield likely to occur due to dis- turbances of the soil structure. Farmers would be responsible for maintenance of the terraces and associated works, for which procedures would be worked out with farmer groups and local officials. Assurances have been obtained that Government will provide the Association with proposals for the maintenance of soil conservation works by April 1, 1982 (Working Paper C-5). 4.12 Reforestation and Silvipasture. The project would support a program to establish forest trees or, where possible, silvipasture (forest trees underplanted with permanent pasture associated with a cattle-fattening enterprise) on very steep slopes (40% and above) or on steep slopes where soils are too shallow for terracing. About 350 ha of marginal croplands would be converted to this system at an estimated cost of Rp240,000/ha. Since participating farmers would be encouraged to give up annual cropping on land which had provided their livelihood, the project would hire them at 100% of labour cost to establish and maintain the newly forested areas at income levels commensurate with that previously obtained from their farms, until their plantations start to generate income (Working Paper C-6). Silvipasture is envisaged as an alternative means of generating income, but in those areas near DIY where it has been initiated, it has met with varying degrees of success. Present indications are that where the cattle-carrying capacity is less than two animals/ha, beef enterprises based on silvipasture are not economically justifiable. With the technical support of the Research Insti- tute for Animal Husbandry the system would be carefully monitored and evalu- ated during the initial three-year phase and the necessary conditions for its success determined before being extended into other areas. Credit would be extended to participating farmers for the purchase of animals for fattening, provision of basic veterinary services, insurance, construction of cattle- sheds, and fertilizer needed to maintain pasture production at high levels. Labor inputs, planting materials, and the first year's application of fertil- izer would be financed by the project. Because of the experimental nature of - 20 - this activity, provision would also be included for a cash subsidy to partici- pating farmers of Rp 12,600 for the first animal and Rp 10,000 for subsequent animals, which is about equal to the yearly interest charges on the cattle credit. This provision would only be used in marginal sites chosen for silvi- pasture as an integral part of sub-watershed development, where chronic cash flow problems to participating farmers would otherwise occur (Working Paper C-7). 4.13 Food Crop Trials. To develop sound recommendations for upland crops, the project would support an adaptive research and technical develop- ment program for food crops in the three pilot areas including some 150 ha of agronomic trials over the project period. A baseline survey would be conducted in these areas to comprehensively ascertain the agro-socio-economic resources in relation to production practices and levels. The trials work would include: (i) experiments to isolate the effect of such production factors as improved crop varieties, soil and crop management, and pest/ disease control - these would be carried out under controlled conditions at the ATDC, its subcenters, and at collaborating research stations; (ii) trials in farmers' fields managed by field staff of the ATDC and subcenters to test cropping systems for their agro-economic potential; and (iii) final evaluation of various new technological systems in farmers' fields under farmers' own management to establish the effectiveness of new technology and farmers' ability to manage new systems. The program would be the responsibility of the TDC and would be carried out in collaboration with the CRIA, which would provide technical assistance, staff, and training. Assurances have been obtained that formal arrangements would be concluded between CRIA and the Provincial Government to provide these services. New technologies developed by the trials program and successfully tested in the pilot areas would be formulated into suitable extension packages for incorporation into programs for dryland crops through ongoing national Bimas/Inmas programs (para. 4.17) thereby significantly adding to the development of dryland agriculture and extensive areas of similar ecology in Java (Working Paper C-4b). 4.14 Homegarden Improvement. The project's approach to homegarden improvement would be (a) gradual replacement of some existing crops with improved varieties of similar species or with more economic species, and (b) improvement in the layout of crops and in husbandry pratices. Some 1,160 ha initially would be affected in the three pilot areas, at an esti- mated average cost of Rp4O,000/ha, with provision for an outreach program of an additional 650 ha starting in year 3 of the project. Varietal improvements and introduction of new crops would be preceded by detailed surveys of home- gardens to evaluate present production systems. Where necessary, soil stabi- lization would be undertaken, with the project financing wages to farmers for work on gully protection and waterway repairs. The project would also finance free distribution during the testing period of insecticides, fertilizers, and seedlings of improved varieties of traditional crops and of such cash crops as pineapples, cloves, and vanilla. It would also attempt to increase vegetable production both for home consumption and sale by distribution of vegetable seeds. Crop innovations would be accompanied by extension efforts to help improve the layout and farming practices in the homegardens with particular - 21 - emphasis on family nutrition. The project would also finance technical sup- port from the Research Institute for Industrial Crops (coconuts, cloves, vanilla) and the Research Institute of Horticultural Crops (fruits, vege- tables), who would assist the staffs of the TDC, ATDC and subcenters with program planning, staff training, and the supply of improved plant material. Gadjah Mada University would participate in the survey 9f homegardens in the pilot areas. Improved techniques developed in the piloJt areas would then be available for extension to homegarden areas of some 80,000 ha in DIY in sub- sequent programs (Working Paper C-4a). 4.15 Land Registration. It is expected that an important factor in securing farmer participation in soil conservation and related works would be the issuing of legal title to farm land. Presently, relatively few farmers hold title to their land and the Government, through the Directorate of Agraria, is pursuing ways of accelerating land titling. A special effort would be made to accelerate the issue of land titles in the pilot and outreach areas and the incremental costs to the Department of Agraria for this work would be borne by the project. The TDC would work in close liaison with the Department of Agraria in the execution of this work. The Governor's approval to individual land registration in conformation with national policies and programs was confirmed during negotiations. 4.16 Agricultural Technical Training. Many of the project staff would be newly recruited graduates from universities and high schools with little or no job experience. Specialized on-the-job and in-service training for those staff would be a key element to the success of the project. To assure that due priority is given to training issues, that training needs are properly assessed, and that training is relevant and practical, the staffs of the TDC, ATDC and ATDSC would include training officers responsible for the identifi- cation of training needs, arrangements for courses, and evalution of results. They would be professionally supported by consultancy services provided by the Agency for Agricultural Education, Training, and Extension. Preliminary assurances have been obtained from the Central Research Institute for Agricul- ture (CRIA), the Research Institute for Industrial Crops (LPTI), the Research Institute for Animal Husbandry (LPP) and the Research Institute for Horti- culture (LPH) to arrange for 180 man-months of technician on-the-job training of relevant project staff, and to provide support by consultancy visits of their specialist staff; the Directorate of Reforestation, would provide on- the-job training based on the Upper Solo project in land use assessment and soil conservation measures, (para. 4.08). Overseas training would include three six-month courses in relevant dryland crops for senior agronomist staff at IRRI, Philippines, in Years 2, 3 and 4 of the project, and one-month study tours to the Minor Export Crops Research Institute, Matale, Sri Lanka, for two tree crop specialists in Year 1 and Year 3 of the project to study the approaches developed for establishing Kandy Gardens (Working Paper C-10). 4.17 Incremental Credit. Incremental credit would be provided to cover the additional demand for credit generated by the agricultural actions en- visioned under the project for (i) seasonal credit for secondary crops and mixed cropping; and (ii) for medium term credit for cattle fattening under the proposed silvipasture system (Working Paper C-14). To ensure provision of credit facilities after the completion of the project and to promote - 22 - replicability, existing credit facilities under national programs would be used, e.g. the BRI's BIMAS Palawija Tumpang Sari program for mixed cropping and PUTP program for cattle fattening, with appropriate adjustment in the package content and terms, (see para. 1.04). Credit requirements would be included in the project costs to ensure their timely provision, but not in its financing, since funds are available to increase allocations to BRI. 4.18. Inland Fisheries. The fisheries component is designed to increase both (i) the quantity of fish available for local consumption and (ii) the disposable income of fish farmers in Gunung Kidul and Kulon Progo. The project would finance the build-up of fresh water fish-hatchery capacity through the rehabilitation and expansion of the two existing Fisheries Service hatcheries, and the construction of two new hatcheries (Bejiharjo, GK, and Sedangsari, KP), for which land is being acquired by the Provincial Government. Assurances have been obtained that plans and specifications for the construction and renovation of these hatcheries would be prepared by the Provincial Fisheries Service by October 1, 1979 and would be submitted to the Directorate General of Fisheries for its review and approval before construction commences. An estimated 56 new extension workers and hatchery workers would be appointed under the project. Both new recruits and current staff would receive refresher training at regular intervals. Farmer train- ing particularly in fish pond management and rice cum fish culture would also be increased, with three week-long courses given at each hatchery, each for 15-20 farmers. Vehicles would be provided under the project, both for the new hatcheries and for extension workers (motorcycles). The Provincial Fisheries Service would have responsibility for all project activities carried out under the inland fisheries component and for coordinating the activities with BAPPEDA and other concerned agencies. Although it is expected that full benefits of the program will not be realised for 10 years, an increase in fish production from the present 411 to around 900 tons, is projected by year five of the project. Provision for a marketing survey is included in year four of the project. The component would complement existing programs addressing sea and brackish water fisheries development and provide a basis for expanding inland fish production in other parts of Java (Working Paper C-8). 4.19. Livestock. The livestock component's three aspects which are com- plemented by improved fodder production (see para 4.13) are improving genetic quality of beef cattle through artificial insemination, modernization of the existing cattle market, and disease and parasite control. Building onto the nucleus program initiated in the Province under the national AI Scheme, the project would establish a total of four new artificial insemination subposts, in addition to the two now operating in KP and one in GK - two in each Kabupaten in Year 1 and two in each Kabupaten in Year 4. Additional inseminators would be trained at the Directorate's Training Institute of Ungarau, Central Java. Consultancy services support in the associated sterility program would be provided from Gadjah Mada University. To facil- itate the rational planning of the expansion of AI, the present system of monitoring and evaluation would be reinforced. The project would also pro- vide financing for the renovation and improvement of the facilities at Siyono livestock market, situated about 20 km from the pilot area of Gedung Poh. Assurances have been obtained that plans and specification for these works would be prepared by the Provincial Livestock Service by October 1, 1979 and would be submitted to the Directorate General of Animal Husbandry for its - 23 - review and approval before construction commences. It would augment the present vaccination program for Newcastle disease in poultry and initiate a cattle-deworming campaign, both of which activities would be concentrated in or near the pilot areas. Periodic surveys financed by the project, to be conducted by staff of the Faculty of Veterinary Medicine of the Gadjah Mada University would monitor the incidence and severity of disease and parasite infestation and the effectiveness of control methods with the objective of incorporating these practices into extension packages in follow-up programs (Working Paper C-9). Non-farm Development (US$1.6 million) 4.20 Small-scale Enterprises Support. To complement ongoing programs which primarily provide credit to SSEs, a concentrated effort would be made to firstly identify the specific constraints associated with the stagnation and decline of this sector in DIY, and then to develop solution to these problems. This approach is expected to regenerate and expand SSE activities and could be replicable in other areas of Java facing similar difficulties. To develop a strategy for development of small-scale enterprises, the project would establish a Technical Cell composed of three senior specialists, (an industrial economist, business management specialist and a technical officer, one of whom would be the component manager), and six field workers within the Provincial Industries Service (PIS) whose prime function would be to develop recommendations for small-scale enterprise development. The Cell would establish an information base pertaining to the small-scale enterprise sector, covering its production and employment characteristics, major constraints, and potential for expansion. Expertise for the necessary economic analysis would be provided by two man-years of internationally-recruited specialists. The information would be used to assist the PIS in directing its extension efforts to those subsectors where growth prospects are good. To help implement recommendations of the Technical Cell, the project would establish a Small- scale Enterprise Promotion Committee which would coordinate the work of all involved agencies. This Committee would be comprised of the Chairman of BAPPEDA, the Provincial Heads of the Services of Industry, Trade, Manpower and Transmigration, the Head of the Provincial Office of BRI, the Chief Executive of the PPIK project and such other persons that the Governor may choose to appoint. Besides addressing the direct problems of appropriate techniques for given quality standards, raw material supplies, marketing, etc., both the Cell and the Committee would identify and promote appropriate credit procedures to suit the size and operations of local enterprises and related vocational training programs; it is expected that the latter would be extended to the project areas under a follow up project. The establishment of the Technical Cell and staffing by the three senior specialists would be a condition of disbursement for this component (Working Paper C-13). 4.21 Incremental Credit for Small-scale Enterprises. Because capital injection is required for substantial development of small enterprises, the project would provide incremental credit for loans to small-scale entrepre- neurs. As under Agriculture, existing credit facilities under national programs would be used, without IDA financing since funds are available. To ensure continued provision of credit after completion of the project, and to promote replicability of project operations, credit would be channelled - 24 - through the BRI (KIK/KMKP and mini credit programs) which has the capacity to reach down to the rural population through its extensive network of village branches. The project would also initiate a training program for BRI staff in the handling of small-scale productive enterprise loans and in the application of simplified BRI procedures for small loans, so that access to credit becomes easier for the small entrepreneur. The target is Rp 723 million of credit releases to 4,200 enterprises over the project life (Working Papers C-13 and C-14). Social Services Support (US$1.4 million) 4.22 The project would include simple health services and water supplies. Rural Health would: (a) support pre- and in-service training, and furnish basic kits of drugs and equipment for some 3,150 volunteer lay health workers (kaders), to provide for at least two active kaders in 50% of hamlets (50 to 100 households) in GK and KP; (b) finance a series of training courses for approximately 1,460 teachers, two in each of the 730 elementary schools of the two Kabupatens, to increase the number and distribution of teachers who can effectively teach health and nutrition subject matters. Kader training would be undertaken by Kecamatan health center doctors and staff who in turn would be trained under the project to conduct this training. Doctors' training would include a ten-day training course at the provincial headquarters and staff training would include two-day courses at Kabupaten training centers. Training staff would be drawn from the Comprehensive Community Health Care (CCHC) Department of the Faculty of Medicine of Gadjah Mada University and Provincial and Kabupaten health professionals. The kaders themselves would be trained at 13-week sessions, approximately eight hours a week. Though essen- tially a volunteer program, the project would experiment with providing non-monetary incentives for the kaders, such as uniforms, shoes, and badges. Training of school teachers would be conducted in courses arranged jointly by CCHC, and Provincial and Kabupaten health and education authorities. The project would finance the provision of first aid kits to schools, stocks of basic medicines, teaching manuals, audio/visual materials to support both kader and teacher training, vehicles, and incremental staff. The executive authority for the rural health development program would be the Provincial Health Service (PHS). The PHS would contract with Gadjah Mada CCHC Department for the provision of all pre- and in-service training under the project, for ongoing technical assistance to the kader program, and for performance evaluat- ion under a contract approved by the Association. The conclusion of this contract would be a condition of disbursement for this component. The imple- mentation of project activities would be a joint undertaking by PHS and CCHC with PHS being responsible for overall management and coordination of CCHC inputs (Working Paper C-16). 4.23 Rural Water Supplies. Based on the earlier UNICEF assisted pilot scheme (para. 3.10), the project would provide some 75,000 people with convenient and safe drinking water through construction of about 5,000 ferrocement rainwater catchment tanks of 9m each in the critically watershort area of southern GK. The average cost per tank would be approximately US$135. The project would finance construction materials not generally available in the village (sand, cement, reinforcing steel, mesh wire) and train local villagers for the construction teams, thus providing about 75,000 man-days - 25 - of paid employment over a three-year period. Responsibility for project implementation is expected to be contracted by PHS to DIAN DESA, with the PHS managing and supervising the contract, which would be approved by the Association. This component has been prepared in close collaboration with DIAN DESA and takes full account of DIAN DESA's implementation capability. If an alternative agency were chosen, the component may need to be redesigned and adjusted to fit its capacity. By September 1, 1979, the Government would furnish the Association with a list of criteria for selection of sites for installation of water tanks, and a work plan for the first year of operation. The conclusion of a satisfactory contract by PHS would be a condition of disbursement for this component. (Working Paper C-17). Rural Roads (US$1.8 million) 4.24 The project would finance equipment for a demonstration village road improvement program which during the project period would upgrade to all-weather standards about 215 km of selected village roads in GK and KP at an average cost of US$6,600/km including bridges and culverts. The project would strengthen the Kabupaten capability for road construction and mainte- nance and introduce and demonstrate low-cost village road construction designs and techniques with emphasis on labor intensive methods. First priority would be placed on roads into areas where activities initiated under the agricul- tural components of the project would temporarily take land out of production and consequently require participating farmers to be provided with an alterna- tive source of income. In addition, some would be selected in the Karst area of southern GK to improve general conditions there. Villagers would par- ticipate in the scheduling of work and selections of roads to be improved. Overall management of the project would lie with the Head of the Public Works Service (DPUK) in each Kabupaten. The project would provide four man-years of internationally recruited technical assistance to introduce gravel road construction methods and to help each of the two DPUKs improve their tech- nical and organizational capacity in rural road planning, designs, cost estimates, other engineering assistance, and supervision and control. The DPUKs, in consultation with villagers, will select roads to be improved, schedule work to be done and formulate a long-term village road maintenance plan. Assurances have been obtained that Government would provide the Assoc- iation with this plan by April 1, 1982 (Working Paper C-18). Institutional Development (US$1.4 million) 4.25 Project Organization. The direct management of each project com- ponent would be the resonsibility of a full time component manager who would be a senior official appointed by the Governor upon the advice of the Head of the participating Service (Agriculture, Industry, Health, and Public Works); the appointment of managers would be a condition of disbursement for each component. Each component manager would be directly responsible to his Service Head for day-to-day operations, and to BAPPEDA for planning, programming, and budgeting of project activities. BAPPEDA would be responsible for overall project coordination, consolidating project budgets, preparing requests for approval by the Governor for the authorization of the release of project funds, major procurement, disbursements, monitoring, evaluation and - 26 - follow-up project preparation. In order to strengthen BAPPEDA's capabilities in these activitie, BAPPEDA would establish a Project Coordination Unit (PCU) in its Evaluation and Coordination Division. The head of this Division will be the Project Coordinator; informal assurances were obtained that the Associ- ation would be consulted on future appointments to this position. The project would finance 14 additional BAPPEDA staff, for the PCU, including a project coordinator, financial officer, budget officer, procurement/disbursement officer, monitoring officer, two bookkeepers, an evaluation officer supporting clerical staff and later in the project, a planning officer. In auaition, three man-years of internationally recruited technical assistance for project management and organization and on-the-job training of BAPPEDA staff would be provided. The establishment of the PCU and appointment of the project coordinator, financial officer and budget officer would be a condition of credit effectiveness. A special fund for unforeseen studies and innovations to complement project activities and follow up project preparation would be included in BAPPEDA management costs. These funds would be allocated by BAPPEDA to the appropriate agencies upon satisfactory proposals for studies and innovations, and would provide for additional international and local consultancies to assist BAPPEDA in preparing follow-up rural development projects. Detailed proposals for the use of this fund would be submitted to the Association for approval, and any expenditures from this fund in excess of US$15,000 will only be made after prior consultation with and approval of the Association (Working Paper C-19). 4.26 Monitoring and Evaluation. To ensure that both monitoring and evaluation would be an integral part of the project's management system, two of the staff provided under the project would be for the positions of monitor- ing officer and evaluation officer within the PCU. The monitoring officer would be responsible for assisting component managers in setting up targets, designing report formats, and coordinating data collection and processing. The evaluation officer would be responsible for analysis of information collected by the monitoring system and for coordination of the activities of independent agencies which might be contracted to help evaluate the project with particular emphasis to assessment of lessons learned and inclusion of the findings of evaluation in follow up project preparation. The project would finance such contracts and in addition 16 man-months of internationally recruited technical assistance to help BAPPEDA design and implement the monitoring and evaluation activities. The data generated by these operations would be used in a mid-term review of the project by Government and the Association which is scheduled for about December 1981. Based on this review, activities would be rescheduled as necessary, the appropriate activities and location for the additional agriculture development program would be deter- mined (para. 4.03), and recommendations given on the timing and emphasis for the follow-up project preparation work (para. 4.25). Assurances have been obtained from Government that a report on the mid-term review would be sub- mitted to the Association for review and consultation before the additional agricultural program is initiated (Working Paper C-19). 4.27 Community Participation Training. In components which introduce new ideas, technology and resources into villages from the outside, full partici- pation of villagers is crucial if development innovations are to be accepted, - 27 - assimilated and sustained. The importance of this is demonstrated in the terminal report of the UNDP/FAO Upper Solo watershed project 1/ which concluded that "extension experience in the first subwatersheds tackled indicates that work arrangements applied through the traditional top-down method do not result in farmers' involvement". The project therefore would finance development participation training intended to train Government cadre and project staff how to best elicit farmer involvement and how to maintain a continued dialogue concerning development issues with project participants. Villagers would also receive leadership training, with special emphasis on the village and the hamlet leaders, who, as farmers themselves, would be expected to elicit cooperation and involvement of other farmers in project activities. The training system would draw on existing concepts of self-help and on hamlet-level community organizations, and would attempt to motivate farmers by demonstrating that project actions would contribute to the community welfare. Courses would be conducted at the Kabupaten, Desa, and Pedukuhan level focusing on techniques to evoke and maintain community involvement. Training would also include an initial orientation and awareness phase, followed by various workshops throughout the life of the project. Existing Kabupaten-level community development workers of BANGDES would have responsibility for implementation and supervision of this component in the project areas. Their main task would be to ensure that community participa- tion becomes an integral part of all project actions. The project would also finance, on an experimental basis, a small hamlet self-help fund for 300 selected Pedukuhan in the project area to test the effectiveness of direct funding of locally initiated development activities. The fund would finance community mini-projects not already covered by existing financing. It is expected that training, follow-up and technical assistance would be provided under contract, approved by the Association, to the Provincial Directorate of Rural Development by Yayasan Indonesia Sejahtera (YIS). YIS has been closely associated in the preparation of this activity the design of which takes full account of its implementation capability. The position is therefore similar to the water supplies component in that if an alternative agency were chosen, this activity may need to be redesigned to fit the assessed capacity of the alternative agency. The conclusion of a satisfactory contract by the Provin- cial Directorate of Rural Development whould be a condition of disbursement for this component. The policies, criteria and procedures for expenditures under the hamlet fund would be submitted to the Association for review (Work- ing Paper C-1l). E. Cost Estimates 4.28 Total project costs are estimated at US$19 million of which US$2.7 million (14%) is the foreign exchange component. Because of the tax-exempt status of implementing agencies, these costs do not include local, provincial or national taxes. Unit costs are based on local prices prevailing in the Yogyakarta area. Physical contingencies of 20% have been applied to the rural road construction costs; 10% to all other construction costs; and 5% to vehicle costs. Local baseline costs which have been estimated as of November 1978, are exceptionally low in US Dollar terms following the 1/ Ibid para. 2.1. - 28 - 50% Rupiah devaluation, in November 1978. However, domestic inflation is expected to be substantial during the early part of the project, and price contingencies for this project need to be higher than usual. Total price contingencies over the five-year implementation period would be 65% of the baseline costs, assuming the following rates of price increase: (a) local costs at 30% in 1979, 20% in 1980, 15% in 1981-82, and 10% thereafter; and foreign costs at 7% throughout. Price contingencies include an allowance for the eventuality of a one-year lag in the implementation of the agricultural technical development component. Details of the cost estimates are presented in Annex 1 and summarized in Table 4.1. 4.29 The direct costs of foreign consultants (salaries, overseas allowance and company overhead and fee) amount to US$5,600 per man-month for long-term consultants and US$6,400 per man-month for short-term consultants. Including indirect costs (travel, housing, office and miscellaneous expenses), the total costs are respectively US$7,000 and US$8,000 per man-month. Total costs of local consultants would be about US$650 per man-month. Table 4.1 : PROJECT COST SUMMARY -------- Rp Millions ------- ---------US$'000 --------__ % of Foreign % of Total Local Foreign Total Local Foreign Total Exchange Base Costs Agricultural Development 2,636 570 3,206 4,220 910 5,130 18 45 Technical Development 1,988 496 2,484 3,180 790 3,970 20 35 Livestock Development 111 19 130 180 30 210 15 2 Inland Fisheries 213 55 268 340 90 430 21 4 Credit 324 - 324 520 - 520 - 4 Non-Farm Development 877 105 982 1,400 170 1,570 11 14 Support Services for Small-Scale Enterprises 139 105 244 220 170 390 43 4 Credit 738 - 738 1,180 - 1,180 - 10 Social Services Support 783 115 898 1,250 190 1,440 13 13 Rural Health 315 78 393 500 130 630 20 6 Rural Water Supplies 468 37 505 750 60 810 7 7 Rural Roads 742 344 1,086 1,190 550 1,740 32 15 Institutional Development 555 351 906 890 560 1,450 39 13 Project Organization and Coordination 323 306 629 520 490 1,010 49 9 Community Participation 232 45 277 370 70 440 16 4 Total Base Costs 5,593 1,485 7,078 8,950 2,380 11,330 21 100 Physical Contingencies 206 25 231 330 40 370 11 3 Price Contingencies 4,368 183 4,551 6,987 293 7,280 4 65 TOTAL COSTS 10,167 1,693 11,860 16,267 2,713 18,980 14 168 r - 30 - F. Financing 4.30 Financing of the project costs would be shared as follows: Table 4.2: PROPOSED FINANCING I.D.A. Govt. Total I.D.A. Govt. Total - …Rp millions----- - ------…US$'OOO- ---- Civil Works 1,470 599 2,069 2,352 958 3,310 Vehicles and Equipment 463 92 555 740 148 888 Tech. Assistance and Staff Training 1,497 - 1,497 2,396 - 2,396 Project Preparation and Pedukuhan Develop- ment Fund 255 108 373 424 173 597 Incremental Operating Costs 3,805 1,552 5,357 6,088 2,483 8,571 Credit - 2,009 2,009 - 3,214 3,214 Total 7,500 4,360 11,860 12,000 6,976 18,976 The proposed IDA credit of US$ 12 million would finance 63% of total project costs. It would cover the full foreign exchange costs (US$2.7 million) and local costs (US$9.3 million). GOI would provide the remaining Rp 4,360 million (US$7 million). Project beneficiaries would contribute in varying proportions and amounts to the cost of on-farm development. These contri- butions would all be in kind and therefore have not been included in project cost estimates. All project funds except credit would be fully allocated under the national budget, with local expenditures being pre-financed by government out of annual budget appropriations in accordance with the new budgetary system and procedures for financing foreign-assisted projects setforth in Ministerial Decree No. 387, 1978, Ministry of Finance. Prior to the beginning of each fiscal year, BAPPEDA would prepare a project work program and budget proposal to be reviewed by the Steering Committee for Foreign Assistance within the Ministry of Home Affairs. Upon the advice of this committee the Minister of Home Affairs would request the Minister of Finance to authorize and release project funds from annual budget appro- priation into a Special Project Account in the BRI regional office in - 31 - Yogyakarta. Funds would be released from this account to be spent for com- ponent activities upon the recommendation of BAPPEDA and the authorization of the Governor. Each quarter, BAPPEDA would prepare a summary of project expenditure, documented according to standard Government procedures and acceptable to IDA, which would be sent through the Directorate of Regional Development to the Ministry of Finance. The Ministry of Finance would then send a certified statement of project expenditure to IDA for reimburse- ment. Assurances have been given that these new procedures, agreed upon at appraisal, have been approved at all requisite levels of Government (Working Paper C-19). G. Procurement 4.31 The purchase of vehicles and equipment would be bulked where possi- ble in contracts of US$100,000 and more (totalling US$1.0 million including contingencies), and be awarded under international competitive bidding proce- dures in accordance with Bank Group guidelines. A preference equal to 15% of the c.i.f. cost or the customs duty, whichever is lower, would be extended to qualified local manufacturers in the evaluation of bids. Contracts for not more than eight vehicles for start-up purposes would be awarded on the basis of the Borrowers normal procedures. Contracts for such purchases which cannot be bulked in packages of US$100,000 or more, which are not suitable for ICB, would be purchased through normal GOI procedures which are satisfactory; the aggregate amount of such contracts would not exceed US$0.5 million equivalent. All proposed purchases of vehicles and equipment exceeding US$100,000 in esti- mated value and all studies and innovations (para. 4.25) exceeding US$15,000 in estimated value would be submitted to IDA before bidding and award. 4.32 Construction costs of buildings and the rehabilitation of existing buildings are too small to be of interest to international contractors. These works would be carried out following local competitive bidding procedures which are satisfactory. Construction of rural roads would be carried out by force account using village labor. H. Disbursements 4.33 The proposed IDA credit would be disbursed at the following rates: (a) 100% of foreign expenditures for directly imported vehicles and equipment; (b) 100% of the ex-factory cost for locally manufactured equipment procured under ICB; (c) 100% of total expenditures for training and both foreign and local consultants; and - 32 - Table 4.3: ESTIMATED SCHEDULE OF DISBURSEMENT (US$thousands) Disbursements Undisbursed I.D.A Fiscal Year Balance During Cumulative Quarter 1980 1st quarter - 12,000 2nd quarter - 12,000 3rd quarter - - 12,000 4th quarter 500 500 11,500 1981 1st quarter 600 1,100 10,900 2nd quarter 900 2,000 10,000 3rd quarter 800 2,800 9,200 4th quarter 500 3,300 8,700 1982 1st quarter 500 3,800 8,200 2nd quarter 600 4,400 7,600 3rd quarter 600 5,000 7,000 4th quarter 600 5,600 6,400 1983 1st quarter 600 6,200 5,800 2nd quarter 700 6,900 5,100 3rd quarter 800 7,700 4,300 4th quarter 800 8,500 3,500 1984 1st quarter 600 9,100 2,900 2nd quarter 400 9,500 2,500 3rd quarter 400 9,900 2,100 4th quarter 500 10,400 1,600 1985 1st quarter 400 10,800 1,200 2nd quarter 400 11,200 800 3rd quarter 300 11,500 500 4th quarter 200 11,700 300 1986 1st quarter 150 11,850 150 2nd quarter 100 11,950 50 3rd quarter 50 12,000 - 33 - (d) 40% of locally procured vehicles not purchased under ICB; and (e) 70% for all other project items excluding credit. Disbursement applications for expenditures under categories (a) through (d) would be fully documented; disbursements for expenditure under (e) would be against statements of expenditure by BAPPEDA, with the supporting documenta- tion retained by BAPPEDA and made available for review by IDA supervision missions. Table 4.3 (page 32) indicates estimated disbursement by fiscal year. I. Accounts and Audits 4.34 Assurances have been obtained from the Government during negotiation that the Yogyakarta Provincial Directorate of Finance would: (a) maintain separate accounts for this project; (b) provide BAPPEDA with monthly project financial statements; (c) engage independent auditors acceptable to IDA, and (d) submit audited financial statements, along with the auditors' comments and opinions to IDA within six months of the close of each fiscal year. V. ORGANIZATION AND MANAGEMENT A. Introduction 5.01 The project would support the Government's goal of strengthening the provincial project coordination capability vested in BAPPEDA, whilst observing the existing government organizational structure. Further, the project would build up the implementation capability of provincial agencies to carry forward an expanded development program in the future. BAPPEDA's capability in program formulation and coordination would be strengthened by: the creation of a Project Coordination Unit in BAPPEDA; regular meetings of the component managers and Bupatis of GK and KP under the Chairman of BAPPEDA to review and coordinate project activities; basing the authoriz- ation of funds upon the recommendation of BAPPEDA; and, reinforcement of BAPPEDA by the appointment under the project of eight additional senior staff and the provision of four man-years of technical assistance. Direct manage- ment of the various activities would be the responsibilty of the participating Provincial Services, reinforced as needed by the project. For the Livestock, Fisheries, and Village Roads components, existing staff in these Services would be the component managers. New appointments would be made under the project for the managers of the Agricultural Technical Development, Small- Scale Enterprises, and Health/Water Supplies components. These new posts are expected to become permanent as their functions become established in the Services during the project period. It is expected that these innovations will succeed in strengthening BAPPEDA and the line agencies to adequately undertake their key role in provincial development and would serve as a model for future projects in DIY and for replication elsewhere in Indonesia. - 34 - B. Project Coordination 5.02 The design of the planning, management and coordination of project activities has taken full account of the existing Provincial Government struc- tures, and emphasizes the reinforcing of these where needed. Responsibility for overall project management and implementation guidance would rest with the Governor. The appropriate Provincial Services would be responsible for executing their respective components and would fit these into existing func- tional responsibilities. BAPPEDA would have the key role of overall project coordination, detailed forward planning and securing coordination among the different components. The task of follow-up project preparation allotted to BAPPEDA under the project, would be a logical continuum of BAPPEDA's coordinating function. 5.03 Annual Work Programs. In collaboration with component managers and their Service chiefs, BAPPEDA would prepare consolidated annual project work programs and related budgets for approval by the Governor and also prepare quarterly and annual project progress reports for review by the Governor. By January 1 of each year BAPPEDA would send to the Association or review, copies of the approved annual work programs for the coming year. 5.04 Inter-Agency Coordination. The PCU would establish day-to-day relations with the component managers and their Service Heads for planning, programming, budgeting and monitoring of project activities, (para. 4.25), which would provide basic information for project coordination. In addition, the component managers, the Bupatis of GK and KP, the Project Coordinator and such other persons as the Governor may appoint, would meet at least quarterly under the Chairman of BAPPEDA to review and discuss implementation matters. 5.05 BAPPEDA. Under the direction of the Project Coordinator, the PCU would systematize the assembly of data for detailed planning of components and budgets, and the formulating of these for presentation by BAPPEDA to the Governor for approval. Planning would be based on close monitoring of act- ivities and expenditures and the preparation of periodic progress reports for the various activities. The Unit would also be responsible for consolidated processing of major procurement and for disbursements. In addition, the PCU would initiate the design of selected evaluation studies and supervise their execution. C. Project Implementation 5.06 All components would be implemented by existing Provincial agencies. The direct management of components would be by Component Managers appointed - 35 - by the Governor on the advice of the Heads of these agencies. Each Component Manager would be directly responsible to his Head for day-to-day operation of his component, the preparation of annual work programs, budget proposals, quarterly progress reports and monthly financial reports and after approval by his Head, submitting these to the Project Coordinator in BAPPEDA. Where appropriate. he would also provide proposals and technical inputs for follow-up project preparation activities. A schedule of early and key events is summar- ized in Table 5.1 (page 39). Agricultural Development 5.07 Implementation of the agronomic trials and pilot programs in soil conservation works and minor irrigation, reforestation/silvipasture and home garden improvement components would be the responsibility of the proposed Technical Development Cell (TDC) to be established within the Provincial Agricultural Service (PAS). During the project period, the cell would concentrate exclusively on agronomic activities under the project which are pilot for a broad-based agricultural development program for the province. It is foreseen that once this program gets underway, the TDC would be suffi- ciently strengthened to take responsibility for a much expanded program of upland agricultural development. Under the project, the Head of the TDC would be the Component Mlanager. Project activities would be implemented through the Agricultural Technical Development Center (ATDC) and two Sub-Centers with TDC staff preparing detailed work plans, assisting and supervising field staff during implementation. To enhance its expertise for carrying out these activities, the TDC would establish close linkages with the related national agencies in these disciplines. Thus, the Central Research Institute for Agriculture (CRIA) would play a dominant role in agronomic trials; conducting baseline surveys on which to develop a systematic trials program, assisting with trials design; providing three field technicians on secondment to the project and on-the-job training for project staff; follow-up consultancies to assist with trial evaluation and forward planning. The Directorate of Reforestation would provide on-the-job training for project staff in soil conservation and land use planning through its Upper Solo project and the Research Institute for Animal Husbandry (LPP) would provide support for fodder (silvipasture) development through supply of planting materials, project staff training and field consultancies. For the home garden improvement operations, the Research Institutes for Industrial Crops (LPTI) and Horticulture (LPH) would make available improved cultivars for reproduction in project nurseries, provide on-the-job training for project staff in nursery and husbandry tech- niques and field consultancies to assist the TDC in developing improved packages and directing trials. Additional reinforcement of TDC staff would be through the provision of 72 man-months of internationally recruited special- ists in agronomy and land use planning/soil conservation. The natural and social science faculties of the University of Gadja Mada (Agriculture, Veteri- nary Medicine, Botany, Forestry and Social), would also provide technical support in selected areas. 5.08 Miost of the physical work of the field operations would be carried out on farmers' land in the pilot areas using their families' labor. Project - 36 - field staff, working in collaboration with the local government officials (the lurah and dukuh) would develop close relationships with farmer groups and 'contact' farmers. Through a concurrent participatory training program, both project staff and farmers would initially combine their talents in the detailed planning of local goals for the various activities; thereafter, project staff would assist and supervise the participating farm family labor in the execution of the work. Participatory training would continue apace with the trials and pilot programs so that as improved agronomic packages and farming sytems are developed, they can be locally rapidly adopted. 5.09 The TDC and field staff would also maintain a close interface with staff of the existing agricultural services and particularly agricultural extension. In the development of improved agronomic packages, periodic progress reporting and recommendations would be made to the Directorate General, Food Crops through the Head of PAS, for the extension of packages when these have been identified. Similarly, the results of the pilot programs in soil conservation, silvipasture and home gardens would be reported to the respective Directorates General and positive results formulated into extension packages. At the Provincial and Local level, the TDC and ATDC and Sub-Centers would serve as focal points for seminars and workshops at which project staff would update staff of the existing agricultural services on progress and interchange views on priorities and orientation of developmental work. 5.10 Inland Fisheries. The Provincial Fisheries Service (PFS) would have executive authority for the inland fisheries component. The technical sub-section of the PFS would be responsible for the construction and rehab- ilitation of the hatcheries, transport of fingerlings and supervision of extension workers. The sub-section for information and training would be responsible for the training programs. 5.11 Livestock. The Provincial Livestock Service would have the respons- ibility for the livestock sub-components. The existing provincial Artificial Insemination Coordinator would supervise the work of the inseminators and develop their work schedules. A data processing assistant would be appointed to his staff under the project to monitor the results of the program. The Kabupaten Market Service would make the necessary arrangements for the ren- ovations of the Siyono livestock market in GK and would continue to operate the market and receive the market fees. The coordination of the expanded campaign to control Newcastle disease in the project area; and the invest- igation into the best method and value of deworming cattle would be the responsibility of field officers to be designated by the Service, who would work in close cooperation with the staff of the ATDC and Sub-Centers. Surveys would be conducted by the Faculty of Veterinary Medicine at Gadjah Mada University, who would also provide consultancy services and laboratory support for these activities. - 37 - Off-farm Development 5.12 Small-Scale Enterprises. The Provincial Industries Service (PIS) would have overall responsibility for the coordination of activities proposed under this component. A Technical Cell, to be established within the PIS would undertake survey, planning, and extension work; the head of Cell would be the component manager. The Bank Rakyat Indonesia (BRI), would be respons- ible for credit disbursement for small-scale enterprise loans under the KIK/KMPK and mini-credit schemes. BRI would also be responsible for organizing special training programs for its sub-district and village-level branch staff. To ensure coordination among the agencies participating in activities proposed under this component, the project would establish a Small-Scale Enterprises Promotion Committee comprised of the Heads of the Provincial Services of Industries, Trade, Manpower and Transmigration, the Head of the provincial office of BRI, the Chief Executive of the PPIK Project and the Head of the Technical Cell. This committee would be headed by the Chairman of BAPPEDA. Social Services 5.13 The three health sub-components--Kader, school health, and water supply--would be organized as a unit under the executive authority of the Provincial Health Service (PHS). Overall project execution would be the job of a Component Manager with medical qualifications and public health experience. The Component Manager would be assisted by three part-time assistants, one for each sub-component. At the Kabupaten level, three full- time Component Coordinators would work under the supervision of the head of the Kabupaten health department. 5.14 The arrangements for day-to-day supervision at the Kabupaten level would vary with each sub-component. For the Kader program, it would be provided under contract by the CCHC of Gadjah Mada University (para. 3.09(c)), which would provide all pre- and in-service training and ongoing technical assistance. CCHC would work in cooperation with Kabupaten health supervisors. For the school health program, responsibility would lie with the school health supervisor from the Kabupaten Health Office. The rural water supply component would be supervised by a Kabupaten health officer but day-to-day implementa- tion is expected to be contracted to DIAN DESA (para. 3.12) who would provide practical on-the-job training of the village construction teams; assist local authorities in site selection; arrange for purchase, storage and delivery of materials; ensure quality and proper allocation of materials; provide tech- nical assistance and supervision of implementation; and report, on a monthly basis, to the Head of PHS. 5.15 To ensure coordination among all aspects of the rural health activi- ties, an Advisory Committee would be formed including the Provincial Head of Health Services, the Component Manager and his assistants, a representative of CCHC, a representative of DIAN DESA, (or approved alternative agency), and a public health officer of PHS. - 38 - Rural Roads 5.16 The responsibility for management and implementation of the village roads improvement program would lie with the Chiefs of Public Works (DPUK) for the Kabupaten of Gunung Kidul and Kulon Progo. Each DPUK, in consultation with villagers, would select road links to be built and schedule the work to be done. Two internationally recruited rural road construction specialists, responsible to the Kabupaten Chiefs of Public Works, would provide technical support and training to staff of the two DPUKs. Development Participation 5.17 The Provincial office of the Ministry of Home Affairs' Directorate of Rural Development (BANGDES) would have overall administrative responsibil- ity for the component. Executive responsibility for development of training materials, training, and follow-up activities is expected to be contracted to Yayasan Indonesia Sejahtera (YIS), who would also undertake to administer the experimental hamlet self-help fund. YIS would establish a community develop- ment team of two experienced field workers and a supervisor in each of the two project Kabupaten. Their function would be to provide professional guidance, assist hamlet and village leaders to plan village development projects, to develop strategy for effective participatory methodologies and communication techniques, and to provide sustained support for these activities to communi- ties affected by the project. YIS would also provide training to Kabupaten and Kecamatan officials, project staff, and village leaders in an effort to improve development communications between government cadre and the villagers. Technical, administrative and logistic support would be provided by YIS' headquarters staff in Jakarta and by its field office staff in Solo, Central Java. The project component would cover ten Kecamatan; five in Gunung Kidul and five in Kulon Progo, and in each of them, BANGDES would assign a Kecamatan- level commmunity development officer who would be responsible for overseeing and monitoring YIS activities, and to provide official linkage with the Bupati of each Kabupaten, the Provincial BANGDES office, and BAPPEDA. Staffing 5.18 To assist the implementing agencies who currently do not have the in-house capability to carry out the proposed work programs, the project provides for 44 man-years of local and expatriate consultants during project implementation. Assurance has been given that consultants would be employed on terms and conditions satisfactory to IDA. 5.19 The timely recruitment and posting of staff would be critical to effective project implementation. A summary of incremental staff requirements are shown in Table 5.2 (page 40). All recruitment of senior staff would be conducted on the basis of detailed job descriptions. Assurances have been obtained that qualified and experienced individuals would be appointed to all senior staff posts listed in Table 5.3, (page 41), and these positions would be filled as indicated in the table. - 39 - Table 5.1: SCHEDULE OF EARLY AND KEY EVENTS Key Target Event Responsibility Date 1. Establish Project Coordination Unit, Governor and and appoint Component Managers BAPPEDA Aug. 1979 2. Conclude contracts for Community BANGDES Participation activities, the Water Supplies PHS and component and the Health component BAPPEDA Aug. 1979 3. Secure formal agreements with CRIA, LPTI, LPH, LPP, AETE and Solo Watershed project for staff training and technical assistance, and, for CRIA only, staff secondment PAS July 1979 4. Establish Technical Development Cell (Agric) PAS Oct. 1979 and Technical Cell (SSE) PIS Oct. 1979 5. Finalize plans/specifications for fish hatcheries and Siyono livestock market PAS Aug. 1979 6. Finalize first year workplans for all BAPPEDA and Oct. 1979 components Participating Agencies (PAs) 7. Initiate baseline surveys of farming systems/homegardens TDC Aug. 1979 8. Invite tenders for project buildings BAPPEDA and PAs Aug. 1979 9. Commence construction program, including nurseries BAPPEDA and PAs Oct. 1979 10. Complete appointment of key senior staff for all components BAPPEDA and PAs Oct. 1979 11. Initiate crop trials and pilot hillside program TDC Nov. 1979 12. Mid term review of project activities; proposals for expansion of agricultural devel- opments and soil conservation works maintenance; detailed procedures for roads maintenance BAPPEDA and PAs Dec. 1981 Table 5.2 : INCREMENTAL STAFF AND CONSULTANCIES FINANCED BY THE PROJECT Staff (Number) Consultancies (Man-Months) Total Senior Tech. Junior Tech. Senior Admin. Junior Admin. Inter- III(a) Upwards 1(a) to II(d) IlI(a) Upwards I(a) to II(d) Local national Total 1. Agriculture. a. TDC 8 2 - 9 19 88 82 170 b. ATDC and Sub- 6 35 to 61_- - 18 59 to 85 Centers -_- c. Fisheries - 30 to 61 - 30 to 61 4 4 d. Livestock - 6-to 10 - 6 to 10 20 20 2. Non-Farm Development. a. Small-Scale 3 6 - 3 12 20 24 44 Enterprises 3. Social Services. 3/ a. Rural Health 1 4 - 4 9 130- - 130 b. Water-Supplies.l/ 7 18 to 24 - 3 28 to 34 - - - 4. Rural Roads. - - - - - 48 48 5. Institution Development. a. Community 2/ 4/ Participation- 2 4 - 90- b. BAPPEDA - - 8 to9 6 14 to 15 - 52 52 Totals 27 105 to172 8 to 9 43 183 to 251 352 206 558 1/ Staff employed for first three years; expected to be provided by DIAN DESA under contract for services 2/ Staff employed for whole project period are expected to be provided bv YIS under contract for services. 3/ Estimated requirements; consultancy services to be provided by GMU CCMC under contract for services. 4/ Estimated requirements; consultancy services expected to be provided by YIS under contract for services. 5/ 35 to 61 indicates progressive increase in numbers during the 5-year project. .1, .K C d~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I - 41 - Table 5.3 SENIOR STAFF TO BE APPOINTED UNDER THE PROJECT Activity Post To be employed by Technical Development Cell Agricultural Economist November 1, 1979 Senior Agronomist it 1I Agronomist April 1, 1980 Land Use/Soil Conservation Specialist November 1, 1979 Land Use Officer April 1, 1980 Tree Crops Specialist November 1, 1979 Animal Husbandry Officer April 1, 1980 Training Coordinator/Planner Agricultural Technical Agronomists (2) January 1, 1980 Development Center and Land Use/Soil Conservation if It it Sub-Centers Specialists (2) it . if Tree Crops Specialists (2) Small-Scale Enterprises Industrial Economist February 1, 1980 Business Management Specialist , Technical Officer Rural Health and Component Manager October 1, 1979 Water Supplies Assistant Executive Manager, Kader Program (Part-time) 1/ " Assistant Executive Manager, School Health (Part-time) 1/ Assistant Executive Manager, Water Supplies (Part-time) 1/ Before Project BAPPEDA Project Coordinator 1/ Effectiveness Project Financial Officer " " Project Budget Officer " i Project Monitoring Officer January 1, 1980 Project Evaluation Officer " it Procurement/Disbursement Officer i it Bookkeepers (2) i Project Planning Officer July 1, 1981 1/ Staff already in post. - 42 - VI. MARKETING, PRICES AND FARMI INCOMES Marketing 6.01 The pilot areas for upland technical development, Gedung Poh, Banjar Oyo, and Hargo Tirto, produce mainly for subsistence consumption, with small amounts of surplus fruit, vegetables, coconut sugar and firewood, being sold in local and Kecamatan markets. These markets are connected by competi- tive channels through Kabupaten markets to large central markets in Yogyakarta City and Muntilan (Central Java). Because the incremental production attribu- table to project activities derives in large part from the avoidance of major declines in production, additional production would be small in absolute terms. Furthermore, additional marketed surpluses for any single product would be minute in relative terms because the project areas contribute less than 1% of the total produce sold in Kabupaten markets. Thus, marketing is not expected to present any problems for the additional marketed surpluses which would result from project activities. Similar considerations would apply to an expansion of upland development of larger areas in a possible follow up project. Most of the incremental production of food crops would be locally used to offset current inflows to the area (para. 2.10); products from home gardens, (fruits, vegetables, etc.), would be marketed through customary outlets. However, for certain cash crops such as cloves and vanilla, there may be a need to assess the adequacy of the present marketing system and to introduce measures to relieve any constraints which may inhibit production. This aspect would be addressed by the project and, depending upon the outcome of such studies, appropriate measures would be included in proposals for fol- low up projects (para. 4.25). Prices 6.02 In the financial analysis all farm inputs and outputs, with the exception of family labor, are valued at constant end-1978 farmgate prices which are based on a recent survey conducted by the PAS. Sample checks con- ducted by the appraisal mission indicate that these prices would give reason- able estimates of expected farmgate prices in the project areas (see Annex 2, Table 1). Family labor spent in off-farm activities is valued at wage levels which prevailed in the project areas at the end of 1978. 6.03 In the economic analysis, prices for rice, cassava and maize have been derived from the Bank's Commodity Division's forecasts for world market prices adjusted for transportation and marketing costs. All other commodities and inputs have been valued at actual farmgate prices. Farm Incomes 6.04 Given the experimental nature of terracing and silvipasture and the uncertainties associated with the underlying technical coefficients, the analysis of farm models as presented below is necessarily speculative. - 43 - Nevertheless, the models give a useful indication of the expected direction of development and of the benefit levels which might accrue from investments in erosion control. 6.05 Variations in soil fertility and degree of erosion among different project areas and among different elevations in the same area are likely to lead to large differences in the impact of proposed project activities on farm incomes. These differences are of major importance in the decision process of the very poor target farmers who of necessity must avoid risky ventures. Thus, a series of farm models has been prepared to measure the differential impact of project activities on farmers' incomes, to test different sets of hypotheses about farmers' behavior and to estimate likely incentives required to ensure farmers' participation. The most tentative among these models is the one for homegardens; Annex 2 shows one example of a 0.3 ha home garden and its possible development as a result of project activities. For illustrative purposes, Annex 2 also presents two more detailed models of 0.7 ha each, one for silvipasture and one for terracing, together with their assumptions regardng prices, yields, input requirements and cropping patterns. 6.06 The silvipasture model reflects a situation common in the most distressed areas, (areas of shallow soils on steep slopes), where agricultural incomes are projected to fall to zero in 45 years' time if erosion is allowed to continue unchecked. Under the project, farmers' incomes would increase with the introduction of reforestation coupled with cattle fattening. Al- though these enterprises present farmers with internal rates of return which range from 15% to 35%, there may still be problems of sufficient incentives because incremental family incomes would be highly negative in the early years of the project. 6.07 Many farmers in the project areas are near the minimum level of income required for subsistence. They would therefore, be reluctant to replace annual food cropping, which provides immediate and relatively depend- able albeit low returns, with a silvipasture system which requires a higher degree of investment and indebtedness but promises higher returns in future years (six years minimum). To offset this risk aversion which is reasonable but relatively high, an incentive payment would be made under the project equal to the cost of establishing seedlings and pastures and meeting marginal cash flow requirements for cattle fattening which cannot be met during the first five years of the project from official credit programs. Provided these payments are made, the silvipasture farm models suggest that very poor farmers could reasonably be expected to participate in the project. 6.08 The terracing model is based on data accumulated over a four-year period from the Solo Watershed Project. Without the project, incomes from agriculture in such areas, (upper elevations on gradual slopes), which are suitable for terracing are expected to decline at an average rate of 1.5% per annum. Under the project, rehabilitation of bench terraces combined with the introduction of better agricultural practices would reverse this trend, - 44 - replacing low-paying off-farm employment (Rp. 75 per day) with productive on-farm activities for farmers who currently face a future of declining agricultural incomes. 6.09 The results of these two illustrative farm models are summarized in Table 6.1 for the prevailing average family size of five. Present per capita incomes range from Rp. 8,000 on steep slopes where erosion has been the most serious to Rp. 9,500 on the gradual slopes. In year ten without the project per capita incomes are projected to fall to Rp. 7,000 and Rp. 9,000 respec- tively. With the project at full development, total per capita incomes would rise by 90% to Rp. 13,000 for those who participate in reforestation and cattle fattening--activities which entail somewhat higher risk--and by 20% to Rp. 10,500 for farmers who would benefit from terracing works. Although incomes could almost double for some project participants during the life of this first-phase project, they would not yet reach the national absolute poverty level of Rp. 40,000 nor the current provincial per capita income level of Rp. 36,000. Further increases in the living standards of this target population would come about through a combination of: sustained agricultural development set in motion by this project; follow-up action under subsequent phases of Yogyakarta's rural development program; and the effects of Govern- ment's transmigration program. However, from the local farmers' point of view, the immediate impact of increased incomes accompanied with a more secure future would be a major step forward. Table 6.1: SUMMARY FARM FAMILY BUDGETS (in Rupiah) Total Agricultural Non-farm Total Family Per Capita Farm Family Budegt Income Income Income Income Present Silvipasture 14,000 26,000 40,000 8,000 Terracing 24,000 24,000 48,000 9,500 Future Without Project /1 Silvipasture 8,000 26,000 34,000 7,000 Terracing 21,000 24,000 45,000 9,000 Future With Project /1 Silvipasture 40,000 25,000 65,000 13,000 Terracing 31,000 21,000 52,000 10,500 /1 In project year ten, silvipasture incomes have been averaged over the seven year growth cycle for trees. - 45 - VII. BENEFITS, JUSTIFICATION AND RISK Benefits 7.01 The project would test and extend a number of experimental rural development actions designed to reduce poverty in the two poorest Kabupaten of Yogyakarta. The agricultural components would (a) test the economic and social viability of agronomic and hill-farming techniques developed in the FAO Solo Watershed Project; (b) lay a sound basis for future protection of agricultural land that is presently subject to serious erosion; and (c) help to reduce large-scale siltage of irrigation works downstream. The development participation activities would add the essential social dimension to complement the technical solutions being sought under the project. The health component would expand a system of improving rural health conditions through voluntary health workers and reach up to 400,000 people at an annual per capita cost of US$0.30. The village water supply program would provide potable water at an average annual cost of US$0.50 per beneficiary for about 75,000 people in the drought area of Kabupaten Gunung Kidul. The village road component would introduce and demonstrate labor-intensive gravel road con- struction technology and strengthen the Kabupaten Public Works Department for improving the technical standards and maintenance of rural roads. The small- scale enterprise component would initiate a system of technical assistance for small-scale entrepreneurs and improve their access to credit. The project's management and coordination system would introduce financial procedures and a planning, monitoring, and evaluation system designed to increase the effec- tiveness of Yogyakarta's provincial development programs. The immediate benefits of these actions would reach the poorest people in Gunung Kidul and Kulon Progo, the two poorest Kabupaten in DIY. Thus, the project would be in accordance with the policy of GOI to bring the rural poor into the mainstream of development by providing the productive means for them to help themselves. 7.02 Long-term economic benefits of the project stem from the potential for expanding these rural development programs to other areas throughout the country. For example, in just the two Kabupaten affected by the project the agricultural components could be expanded to cover an estimated 70,000 hec- tares of land which will be severely damaged through erosion over the next 20-30 years if effective means of watershed protection are not quickly developed and effectively extended. The health system could eventually be used to reach the majority of people who live in rural Java. The rural road construction and maintenance management system could reduce the current rapid rate of deterioration in rural roads built under village self-help programs-- approximately 2,000 kilometers in the two project Kabupaten alone. 7.03 More immediate economic benefits would flow from, first, the sub- stitution of productive on-farm employment for low-paying non-farm activities for 1,000 families in Gunung Kidul and 1,600 families in Kulon Progo. Second, provision of approximately 400,000 person-days of temporary employment per year during the life of the project from the road construction and the village water supply components. Third, the fisheries component would create a - 46 - permanent source of protein through an estimated 470 tons of incremental fish production per annum at full development. Finally, the most important physical benefit would be the increased availability of foodstuffs from food crop and homegardens improvement and fisheries which would have a significant impact on local nutrition levels. Economic Analysis 7.04 Though the component activities are of an experimental nature, an indicative economic analysis has been performed on the agricultural and road components to show the levels of economic benefits which Indonesia could reasonably expect from such investments. For a project of this type, any point estimate of rate of return is necessarily subject to considerable uncer- tainty; the major factors are treated in some depth through sensitivity analysis. No formal economic analysis has been carried out for the supportive components that would address the basic needs for health, drinking water and nutrition--although a least-cost approach combined with the limitation to critical priority items ensure that the benefits of these programs far out- weigh their costs; likewise, no formal economic analysis has been carried out for research activities because the benefits will accrue to future investment. 7.05 The cost of the agricultural supporting services, including physical contingencies, necessary to establish silvipasture, supervise terracing construction and extend better agronomic techniques have been allocated on a per hectare basis, assuming that the infrastructure would eventually serve 14,000 hectares. Physical input costs have been calculated at market prices. The resulting investment costs are expressed in end-1978 constant prices adjusted to exclude taxes. Foreign costs and benefits have been valued at the official exchange rate (US$1.00.= Rp. 625). The cost of unskilled labour has been assessed at 50% of the recorded wages in non-farm activities and in off season agricultural activities, except for the least productive areas prone to drought, where 30% of the recorded wages has been used. The period of con- struction and build-up of benefits in the analysis are based on the implemen- tation schedules presented in Working Papers C-2 and C-18. Full project devel- opment would occur in the seventh year for silvipasture and in the sixth year in areas suitable for terracing. Benefits are projected over a 30-year decision horizon. 7.06 On the basis of the foregoing assumptions, the economic rates of return are estimated at 13% for silvipasture, 14% for terracing, and 11% for the rural roads component. This latter figure understates the net benefits of the roads component because the value added of induced production has not been quantified. If GOI's desire to raise the incomes of its poorest income groups were to be quantified in a social analysis, the internal rates of return would be much higher. 7.07 Sensitivity analysis was used to determined how much negative devi- ation from appraisal estimates in respect of critical variables is permissible before the economic basis for the project is undermined. With the critical rate of return taken as 10% (the best estimate of the opportunity cost of - 47 - capital in Indonesia), the assumption here is that unless such a return is realized, the Government would, on purely economic grounds, not wish to proceed to an expansion phase of the program without experimenting with alternative approaches to the development of upland agriculture. Results indicate considerable sensitivity to shortfall in project benefits (road-user savings or crop yields and prices), with permissible shortfalls varying from 10% to 20%, while on the cost side the range is from 10% to 30%. The results underline the difficulty of initiating effective development programs in such marginal areas. They also indicate that the proposed approach, involving an experimental and small-scale first phase, is fully appropriate in the Light of the evident risk and uncertainties. Considerable attention has been given in the detailed project design to minimize these risks. First, flexibility in project design would allow adjustments during project implementation in view of new findings. Second, the emphasis on local participation would enhance the involvement of beneficiaries in project implementation and thereby increase the probability of project success. Finally, close monitoring and evaluation will be an additional safeguard. 7.08 Despite the risks inherent in development efforts addressing mar- ginal and neglected areas, the project fully deserves support. It represents a modest but critical effort to improve living conditions in some of the poorest regions in Indonesia. While small in scale, the project promises to help resolve some of the most difficult development issues on the island of Java: how to halt cumulative deterioration of the meager resource base in crowded upland areas. With the safeguards built in to project design, these risks are worth undertaking. Cost Recovery and Fiscal Impact 7.09 Given the experimental nature of the project and the poverty of the target group, an initially low level of cost recovery is to be expected. Except for the terracing component in which farmers would contribute about 40% of establishment costs, all incremental capital costs would be financed by GOI. This level of contribution by project beneficiaries is considered acceptable because their per capita incomes would remain below the critical consumption level for rural Java of Rp. 48,000 throughout the life of the project. However, the government's incremental fiscal burden after project completion would be low because most incremental operating costs would be borne by the project beneficiaries who would produce the incremental agricul- tural production, own and maintain the water tanks, become the volunteers who would staff the health component, and contribute voluntary labor for maintenance of the roads. 7.10 It is expected that levels of cost recovery would increase over- time. A major objective of the agricultural component is to develop more efficient versions of the least-cost approaches proposed for initial use under the project and to determine the appropriate levels of farmer's con- tributions of labor time towards the capital costs of establishing new terraces and replanting trees. The outcome will significantly affect cost recovery because labor represents approximately 80% of total establishment - 48 - costs. Prior to the expansion of these activities to larger areas, it is confidently expected that unit costs would decline as more efficient tech- niques with lower labor requirement are discovered. Consequently, the proportion of total capital costs contributed by farmers is expected to rise during the life of the project. Environmental Impact 7.11 The project would have a positive environmental impact in the two Kabupaten. Reforestation and soil conservation would serve to arrest soil erosion and the rapid deterioration of soil fertility in the areas selected for treatment. Without these efforts the basis for sustaining the liveli- hoods of many thousand upland farm families would be lost through unchecked destruction of the land resource. Monitoring of these activities would be carried out by the TDC to measure the arrest of soil erosion and changes in stream flows. VIII. AGREEMENTS REACHED AND RECOMMENDATIONS 8.01 During negotiations, agreement was reached on the following principal points: (a) formal arrangements would be concluded between the Provincial Agricultural Service and provincial and national agricultural research and development institutions for staff training and technical support (para. 4.19); (b) Government would provide the Association with plans and proce- dures for ensuring the maintenance of road works carried out under the project (para. 4.24) and, plans for maintenance of soil conservation works (para. 4.11), by April 1, 1982. (c) before initiating the additional agricultural program, an in- depth review of the project would be conducted by Government and submitted to the Association for review and consultation (para. 4.26). 8.02 Assurances were also obtained that: (a) by September 1, 1979, the Provincial Health Service would furnish to the Association a list of criteria for the selection of sites for the construction of rainwater catch- ment tanks, and a workplan for the first year of operation (para. 4.23); (b) qualified and experienced individuals would be appointed on a timely basis to all senior staff posts (para. 5.19). - 49 - 8.03 A condition of effectiveness of the proposed credit would be the establishment of the Project Coordination Unit and appointment of its key staff (para. 4.25). 8.04 Conditions of disbursements would be: (a) for each component, the appointment of a full time component manager (para. 4.25); (b) for the agricultural and small-scale enterprise components, the establishment and key staffing of Technical Cells in the respective services (para. 4.07 and 4.20); and (c) for the rural health, rural water supply and participatory development components, the conclusion of satisfactory contracts for the provision of these services by the Provincial Health Service and Provincial Directorate of Rural Development respectively (paras. 4.22, 4.23 and 4.27). 8.05 With the above assurances and conditions, the proposed project would constitute a suitable basis for an IDA credit of US$12.0 million on standard terms to the Republic of Indonesia. - 50 - ANNEX I Table 1: SUMMARY OF ESTIMATED PROJECT COSTS Table 1 PY 1 PY 2 PY 3 PY 4 PY 5 ------T-:- ------------------ Rp Million ----- ---------------- Rp Milli.. GIL,? AGRICULTURAL DEVELOPMENT 501.3 424.5 479.5 802.2 998.4 3,205.9 _ Technical Development 401.6 320.3 404.6 704.9 923.4 2,754.8 -. Technical Development Cell 166.6 181.1 183.1 113.4 50.1 700.4 1,.C Hargo Tirto A.T.D. Sub-Center & Pilot Area 71.4 37.6 64.3 75.4 70.3 319.0 51 Banjar Oyo A.T.D. Sub-Center & Pilot Area 60.4 31.0 55.2 76.2 89.8 312.6 500 Nglipar ATDC & Gedung Poh Pilot Area 94.0 55.1 87.4 119.9 143.1 499.6 799 Technical Training 9.3 9.5 8.2 7.7 2.7 37.3 60 Credit - - 6.3 66.3 198.3 270.9 433 Expansion Phase - - - 246.0 369.0 615.0 984 Livestock Development 42.9 21.3 30.5 51.6 36.9 183.1 293 Market Reconstruction 20.6 - - - - 20.6 33 Artificial Insemination 18.2 6.5 6.6 18.0 11.0 60.3 96 Newcastle Disease Control 2.3 1.7 1.4 1.7 1.1 8.0 13 Worm Control in Cattle 1.8 3.0 7.3 12.1 17.0 41.2 66 Credit for PUTP Program - 10.1 15.3 19.8 7.9 53.1 85 Inland Fisheries 56.7 83.0 44.4 45.8 38.0 267.9 429 New Hatchery - Bejihorjo, GK 33.8 23.8 7.8 8.4 8.4 82.2 132 New Hatchery - Sendangsari - 31.7 14.5 7.5 8.2 61.9 99 Rehab. of Banjararum Hatchery 8.8 3.6 3.9 4.0 4.0 24.3 39 Rebab. of Ponjong Hatchery - 12.3 3.9 4.2 4.4 24.7 39 Training, Extension and Admin. 14.1 11.7 14.3 21.6 13.0 74.8 120 NON-FARM DEVELOPMENT 145.0 130.1 203.8 275.8 226.8 982.2 1,572 Support Services for Small-Scale Enterprises 102.0 29.8 28.8 66.8 16.8 244.2 391 Credit for Small-Scale Industry 43.0 101.0 175.0 209.0 210.0 738.0 1,181 SOCIAL SERVICES SUPPORT 204.1 254.o 319.1 60.8 59.3 897.3 1,436 Rural Health 94.7 109.6 68.1 60.8 59.3 392.5 628 Kader Program 59.1 83.7 48.1 40.8 39.3 270.9 433 School Health Program 9.6 11.4 5.5 5.5 5.5 37.3 60 Management 26.1 14.6 14.6 14.6 14.6 84.3 135 Rural Water Supplies 109.4 144.4 251.0 - - 504.8 808 RURAL ROADS 302.6 265.8 205.3 186.1 126.1 1,085.9 1,737 Gunung Kidul Road 178.9 127.9 111.1 101.3 84.0 603.2 965 Kulon Progo Road 123.7 137.9 94.2 84.8 42.2 482.7 772 INSTITUTIONAL DEVELOPMENT 23i.1 170.0 157.5 199.5 149.5 906.5 1,451 Project Organization and Coordination 146.0 120.2 109.7 151.7 101.7 629.2 1,007 Community Participation 85.1 48.8 47.8 47.8 47.8 277.3 444 TOTAL BASELINE COST 1,384.1 1,244.1 1,365.1 1,524.4 1,560.1 7,077.8 11,325 - Physical Contingencies 52.1 50.6 57.0 39.5 32.1 231.3 370 Price Contingencies 139.0 451.0 838.0 1,327.0 1,796.0 4,551.0 7,282 TOTAL PROJECT COST 1,575.2 1,745.7 2,260.1 2,890.9 3,388.2 11,860.1 18,976 * Discrepancies in totals due to rounding Table 2: PRO3ECT COSTS BY YEAR AND ACCOUNT CATRGORIRS (BlP illion) * ~~~~~~~~~~~Foreign Exchange Uni it S CO st Na. of Units Fri ZxP En3 Py4 fy5 TotaL T A.ont.t (Rp '000) I, CAPITAL COSTS A. Conatrccltn cInet/outletchsncnrin m 2.5;3.0 2,690 3.6 3.8 _ _ _ 7.4 0 McL.x inle/natiets No. 15-20 177 1.8 1.5' _ _ _ 3.3 0 C.nnect aig channels a 0.1 470 0.2 0.2 - - - .5 0 Onilni gate vaivet Na. 1.5-3905 284 0.4 0.41 _ _ - .8 0 Piping & nato- enpplp facilities a 0.6-3.33 2,403 6.7 2.0_ 8.7 50 4.3 Tcnhs N.. 50-70 5,030 36.4 109.4 210.0 _ - 355.9 0 _ E--tva-Inn no ponds m3 0.5 33,000 8.8 80. - - - 17.5 0 N--nery pnnda Nt. (3-5/n2) 6 5.0 5.0 - - - 10.0 0 Penning = 2.0-6.0 1,950 6.3 0.8 _ _ _ 7.1 0 Officnn, stones, hnoses & other bldg.. nary 69.1 13.5 2.5 _ - c5.I 10 8.5 Si &rvlies 0.0 - - - - 8.1 0 - R.ad -nnnroction ki 2.2 215 52.8 99.0 116.6 107.8 96.8 473.0 0 - Bridges & Ioned forde n 35/500 513 27.0 30.0 3.0 50.0 - 110.0 0 Mii_nellonnns Ineililir- 6.0 2.9 6.9 13.2 17.1 46.2 0 Sub-total 1/ 222.3 277.8 339.0 0171.0 113.9 1,03.6 1.1 12.8 Physi-In c2nningncniec 28.5 37.6 45.6 27.9 21.1 160.7 1.1 1.0 Sub--tol 260.8 315.1 384.6 198.9 135.0 4,294.3 1.1 14.6 Price centlngneniee 38.0 135.0 260.0 185.0 157.0 775.0 0.1 0.7 T.cal 4/ i2 .8 430.1 644.6 20 92.0 2,069.3 0.1 '5=i3 B. Vehicles a 4 -ehinleF N. 5250-6750 26 127.5 6.8 6.7 _ _ 141.0 90 126.9 Tannkn Na. 7500-15,000 8 03.0 - - _ - 93.0 100 93.0 Van, einibos, residnncal/nffice n.hiNle. No. 3750 1 3.8 - 3. 100 3.8 Motcreynles 600 110 42.6 6.4 2.4 16.8 _ 70.2 100 70.2 Trgilers 500 -750 5 3.3 - - - - 3.3 100 3.3 Sub-tot=l 270.1 15.1 9.2 16.8 - 311.2 95.5 297.1 Pllyninol cactingenciet (519 13.5 .0 .5 .0 - 15.6 95.5 14.9 iab.lccnl 283.6 15.9 9.6 17.6 _ 326.8 95.5 312.0 Price onticieng ias 12 0 2.0 2.0 3.0 - 21.0 90.3 20.1 T.alo 4/ 2926 j, 1172226 _ 2246Z,L 2=5i5 112iL C. Eqnip-ent, Fprnat- e- and Othan Mitariale Indued brending & rc hairal eqpt. cnit 400:500 4 26.4 .9 .8 - .03 28.2 100 28.2 14c9xined pnllecing naehine Ne. 9 000 1 _ 9.0 _ _ _ 9.0 100 9.0 Generator and .rnsare regulator< No. nary 13 1.6 0.2 0.2 - _ 2.0 100 2.0 Tr-inini eqeipatni .9 - - _ _ .9 20 .2 pnrai..r.s and nina -qucpaent 37.1 15.3 10.0 3.8 - 46.2 0 0 Roadcnntracninnequipment 72.0 - - _ _ 72.0 100 72.0 Oihnr 2.4 .2. '2 - 2.0 00 2.2 Otheiatcl 140 4 25.85 11.2 3.8 .03 101.0 42.7 113.4 Price canningenicos _ _ __ _ = _ 9.0 7.0 70.0 3.0 0.0 26.0 18.b 4.9 otal 4/ 149.4 32.iF 18.2 6.8 .03 207.C 57.2 118.5 D. TechnicaL Aoeistlncn 4 Teaming i:nnnslranry and 7i::Oien 290.6 310.4 249.1 117.9 36.6 1,es.o0 93 904.5 Training 79.7 59,.0 40.7 21.9 16.1 21 7.4 0 0 Slb-tIniL 3705 36 . 86 7 1390. 352 . 20 1 4 74.0 904.3 Pr,ce cantinOencine ~~~~~ ~~~~~ ~~~~~ ~~~~~ ~~~~~ ~~~~~ ~ ~~~25. 6.06.0 60.0- 35.0 089 275.0 44.0 120.0 Tntal 395.6 438.t 375.B 199.7 87.7 1,497.4 68.5 1,025.3 0. Credit and Special Fn-de Credit 43.0 111.1 196.6 295.1 416.2 1,062,0 0 - Sp-ncal fucd5 15.0 15.0 15A. L15.0 65.0 225.0 33 75.0 Se,b-tatnl 5B.0 126.1 211.6 410.1 401.2 1,307.0 5.0 75.0 9.0 56.0 143.0 3468.0 341.0 1,095.0 1.8 19.6 Toial 4/ 67.0 180.1 354.6 758.1 1,032.2 2,382.0 4.0 94.6 I 1. OPERATING COSTS ,A, Onlalses, onnE , Wans. All-oa-nsc et. 155.2 179.6 192.4 164.8 167.6 597 0 - H. iacncyn. Land Iicglstratlcn, Stnnltnning 4 Tnnlnetlcn 27.9 55.9 51.3 60.9 23.3 219.3 0 C. FanF Imprnvement Activitice 12.3 50.2 131.2 428.0 593.0 1,214.0 0 D. In-nerlin Talnitis 3.9 6.5 5.0 4.7 3.5 23.5 0 E. T-rnincg M.ernlao 12.3 5.7 5.8 5.9 5.9 35.6 20 7.1 F. Sopplies & MiOa. Materials 36.2 55.9 40.5 46.9 51.1 231.6 10 23.2 G. Vehicle O n 38.0 38.7 39.4 30.0 31.8 179.7 25 44.9 0. Machine, Tnsinleatn 4 Buildicg 0 M 2,3 5.1 6.2 6.2 6.2 26.3 25 6.6 I. Mi-ceooaa...n V. pe. seo 24.8 32.0. 31.5 33.0 29.9 152.1 0 - ibn-tclaL 2/ 312.8 430.2 504.3 783.0 912.3 2,942.b 2.8 01.6 Physical ccniin0ecciec- 10.1 12.2 10.9 10.6 11.0 55.0 15 8.2 Sih-t_tal 322.9 442,4 315.2 793.0 023.3 2,997.6 3 90.0 Price contingencies 46.0 104 a hi"n 336n 1089 a n Ion 1 in..6_9 Otal 4/ 368.9 626.4 055.2 1 51.8_ L986~ 4L 5 L6L 12 106_ 9 Tltal B.neline Coats 1,384.1 1,244.1 1,365.1 1,524.6 5,560.1 7,077.8 01 1,484.0 onral Phlysicel CarlaneniesIr 52.1 50.8 57.0 39.5 32.1 231.3 11 24.9 Sib.toial 1,436.2 t,294,7 1,422.1 1,563.9 1,592.2 7,309.1 20.7 7 ,509 7 Total Price cnti- gsni . n 139.0 451.0 838.0 1,327.0 796. 4 4.0 183.0 Octal Projeci Cnsio 4/ 1,573.2_ 1,745.7 2,260,0 2,890,9 2,358.e2e 11,8601 0=4_.3 1.692,. 1/ 207. physIcal cantingetny for r-nd .cta.. c tinc 10% physi-al -oetinge-ry fox a11 other item. 2/ 102. far f ,GP and 0 and 5% Ean 1. 3/ Inelade.n aalLcan.e nf Rp. 76 iillion En a one yea- deloy in the cpppletien of the erosl- n c. nteni component. 4/ Diacrepancy in totals One to -ending 5/ Prnject p _eperatnlc, hamlet devnlopmntt and sp-tinl stadi-s f.ndn. AiNEX I Table 3: ESTIMATED PROJECT COSTS BY ACTIVTIFIS AND ACCOUNT CATEGORIES Table 3 (Rp million) Ctral VillOge Total Grit Cost Agei, liveaot-k TSne1d C-unity sail-Goalo aural health Water Project Baseline Phy.i-l Contiegeocy F-rigan Eca.n"ge USat Re '000) No of Units Develoyment Oevelopment Fisheries PortioiPation Oroorpritot .ade Eeoaram SupPlY Mouoaersoat Costa 1/ * monun 2 Amocot S. CaPital Costs A. C-otruotioo Inlot/outlet eheenels m 2,5;3.0 2,690 7 _ 74 _ _ _ _ _ _ 0.4 10 .7 0 M orix inlutafotlets No. 15;20 177 - - 3.3 _ _ _ _ _ 3.3 10 .3 0 _ Conerctiegtchaneels ms 0.1 470 - 5 _ _ _ _ _ .5 10 .1 0 Outlet gate -1ues No. 1.5-39.5 284 - _ .8 - _ _ _ _ .8 10 .1 0 Piping and water supply fatilttie m 0.6-3.33 2,403 4.5 .2 4.0 _ _ _ _ _ _ 8.7 10 .9 50 4. T1oks No. 10-671 1,030 - - 5. 0.0 355.8 L 3.6 0 Sme_vet on of po-ds m3 O.5 30,000 _ - 17.3 - - - - 17.5 10 1.1 Nursary po-do No. (3-5/u ) 6 - - 10.0 I _ _ _ _ 10.0 10 1.0 0 Fescing m 2.0-6.0 1,950 3.0 2.4 1.7 _ - _ _ _ _ 7.1 10 .7 0 Oftiets, ator-s, housco cod other bhildtege vary 45.01 11.3 21.8 - 2.5 4.6 _ _ 85.2 10 8.5 10 8.5 site.and -erri- vary 7.8 .3 _ - - - _ _ _ 8.1 10 .8 0 Reed .oestrut-tio klo 2,200 215 - _ _ _ _ 473.0 _ _ 473.0 20 94.6 0 Bridg.es cd pared ro-ds r 35/500 513 _ - - _ - 110.0 I 110.0 10 11.0 0 dlsuellaueoas of-ilitius vary 2.2 5.4 _ _ - 38.6 _ _ _ 46.2 10 4.6 0 Soh-total ~" 62.5 19.6 72.8 - 2.5 626.2 _ 3O3.0 _ 1,133.6 160.7 12.9 B. Vehiclee 4 4 vehicles Nu. 5230-6750 26 54.0 5.2 18.7 _ 10.5 21.0 10.5 10.3 10.5 141.0 0 7.1 90 126.9 Truths No. 7500-1S,000 8 15.0 - _ - - 60.0 - 18.0 - 93.0 5 4.7 100 93.0 VTo, hinibus 6 residoetial/ No. 3750 1 - - - - - - - 3.8 3.8 5 .2 100 3.8 office vohielos Motoreyeles No. 600 110 24.0 4.8 9.6 9.6 3.6 - 17.4 1.2 - 70.2 5 3.5 100 70.2 T-ailes No. 500 5 _ - - - - 2.3 _ 1.0 - 3.3 5 .2 100 3.3 slb-tutr- 93 .0 iO.c 28.3 9.t 14.1 83.3 27.8 30.0 14.3 311.2 15.6 297.2 C. Equipost. F-utiture & other Tndue.d broediog cud tsuheiaol equlp.ent 400;500 25.4 1.0 1.8 - - - - - 28.2 - 100 28.2 Metoeied polleting ..achi.. No. 9000 - - 9.0 - - - - - - 9.0 - - 100 9.0 Geter toes, otoks & regulators No. vacy 1.6 - .4 - - - - - 2.0 - - 100 2.0 Trainiug oqaipot _r - .9 - 9 - 20 .2 Furoiture and misc, oqeqpmeet 10.1 11.2 2.4 - .6 27.6 1.0 2.5 5.6 66.2 _- 0 0 Rued contstr ion equipment No.- - - - 72.0 - - - 72.0 - - 100 72.0 Other 2.4 - .4 - - _ _ _ - 2.8 - - 80 2.2 Sub-total /1 44.5 12.2 14.9 - .6 9.6 1.0 2.5 5.6 181.0 - 113.1 D. Tetheie1 Asistaste cod Training Coesultacy ePd stodiec 380.0 2.0 5.0 36.0 100.0 210.0 30.0 - 237.0 1,005.0 _ - 90 904.5 Traiting 37.31 5.8 - 72.7 45.0 - 44.6 - 12.0 217.4 _0 _ 8uh-total -/ 422.3 7.8 3.0 108.7 149.0 21.0 74.6 0 1,222.4 - 904.5 E. Credit .ad Spe-iel Funds Credit 2 270.9- 53.1 _ - 738.0 - - - - 1,062.0 - - Spee'al f_uds.- - - _ 75., _ _ _ - 150.0 225.0 - _ 33 75.0 Slb-total 270.9 53.1 75.0 738.0 - _ _ 150.0 1,287.0 75.0 II. Operatino Coats A. Salariex, Fees and allowances 375.0 17.5 94.6 47.2 45.8 - 102.6 90.4 86.6 859.7 _ O 0. Slrooyu,Eoud -efietrotloa,monitorieg aed ovaluttio 101.0 5.8 - 12.5 - 100.0 219.3 0 _ C. Fa.- impt-remene a-tiitise 1,214.8 - - - - - - - - 1,214.8 - _ 0 D. Ir-survir tersieino i 18.2 _ _ _ 5.3 _ - 23.5 _ - E. Trainig matetials - _ 1.9 - _ 27.0 6.7 _ 35.6 10 3.6 20 7.1 F. Suppliea 6 misc. earutialo 30.0 43.5 16.1 8.5 - 8.0 125.6 - _ 231.6 10 23.2 10 23.2 C. Vehicle 0 &M 83.2 4.0 8.8 10.d 8.7 - 23.7 24.6 16.0 179.7 10 18.0 25 44.9 0. Maochine, Install. 6 bldg. 0 & M 18.3 1.4 6.6 - - - - - - 26.3 10 2.6 25 6.6 1. Rise. espouses. 39.3 8.2 ./ 17.5 13.0 28.7 4.8 - 7.8 152.1 5 7.6 0 - Sub-tatel 1,061.6 80.4 546.9 84.0 82.0 66.8 289.0 121.6 210.3 2,942.6 53.0 81.8 Tutol Baselie Coste- 2,754.8 183.1 267.9 277.3 982.2 1,085.9 392.5 504.8 629.2 7,077.8 231.3 21 1,484.8 /Diserepa=y in tot.1 due to roundinB. - P-oject preparation, hamlet dovolopuent and speeial studies fu=ds. Table 1: PRICES OF STAPLE FOOD CROPS AT HARVEST TIME (1977-1978) Description Unit Rupiah/ynit _Commodity Market price Market price Farmgate price English Indonesian Yogyakarta Kabupaten level Range Average Paddy Padi gabah Drystalk kg - - 60 to 85 70 Rice Beras Hulled kg 150 140 - - Maize Jajung Dry grain kg 55 45 35 to 50 40 Groundnuts Kacang tanah Unshelled kg - - 75 to 125 100 Shelled kg 325 300 120 to 275 175 Soybean Kedele (or Kedelai) Dry grain kg 200 175 125 to 375 150 Cassava Ubi kayu Fresh tuber kg 30 25 15 to 20 17.5 (or ketela pohon) Sweet potatoes Ubi jalar Fresh tuber kg 30 25 15 to 25 20 (or ketela rambat) Sorghum Cantel kg - - 35 to 55 40 Beans Benguk Dry kg - 35 to 50 40 1/11/79 14 ANNEX 2 54 Table 2(a) Table 2(a): SILVIPASTURE MODEL WITHOUT PROJECT - MIXED FARMING CROPPING PATTERNS, YIELDS AND INPUT DATA PER HA - A. 1978 Coefficients Output (kg) Crop/crop association Cropping Dryland Labor Planting material(kg) pattern (%) Cassava G'nuts rice (mandays) G'nuts Dryland rice Cassava 25 700 120 Cassava/dryland rice 30 540 160 170 16 Cassava/groundnuts 20 625 265 170 30 Cassava/dryland rice/ and groundnuts 25 625 135 80 180 20 20 Total/average per ha. 100 600 60 60 151.5 7.5 7.8 B. Projected Cropping Pattern Without Project (in %) Area severed by crop/crop asaociation Cassava/ Cassava/ Cassava/dryland Years Cassava dryland rice g'nuts rice/g'nuts 1 25 30 20 25 2 30 30 20 20 3 35 30 15 20 4 40 30 15 15 5 45 25 15 15 10 55 25 10 10 15 70 15 5 10 20 80 10 5 5 30 100 0 0 14 C. Projected Yields Without Project (kg/ha) - --------- Cassava ------------- --Dryland rice--- ------ G'nuts ------ INTERCROPPED WITH Dryland Dryland Cassava/ Dryland Years Cassava rice G'nuts rice/g'nuts Cassava g'nuts Cassava rice/g'nuts 1 700 540 625 625 160 80 265 135 2 690 500 600 600 150 75 240 125 3 680 500 600 600 150 75 240 125 4 665 500 600 600 150 75 240 125 5 650 470 570 570 140 70 210 120 10 520 440 535 535 130 65 175 115 15 390 390 450 450 110 55 155 100 20 300 380 400 400 100 50 150 100 30 300 300 340 340 80 50 100 80 1/ Illustrative model, representing critical areas of shallow soils on steep slopes at lower elevations suitable for silvipasture; see Working Paper C-12 2/20/79 Table 2(b): SILVIPASTURE MODEL WITHOUT PROJECT - Family Budget for Mixed Farming on 0.7 ha (in rupiah) - Revenues from agriculture Net income Off-farm income Expenses from agri- Total for cultural family Years Non-cash Cash Total agriculture Activities Non-cash Cash income Un 1 14,400 2,600 17,000 2,600 14,400 2,400 23,000 39,800 2 13,100 2,300 15,400 2,400 13,000 2,400 23,100 38,500 3 12,300 2,200 14,500 2,100 12,400 2,400 23,100 37,900 4 11,800 2,100 13,900 1,900 12,000 2,400 23,100 37,500 5 10,900 1,900 12,800 1,800 11,000 2,400 23,200 36,600 10 8,600 1,500 10,100 1,300 8,800 2,400 23,300 34,500 15 6,200 1,100 7,300 700 6,400 2,400 23,400 32,200 20 4,600 800 5,400 500 4,900 2,400 23,500 30,800 30 3,100 600 3,700 0 3,700 2,400 23,700 29,800 t Illustrative budget representing critical areas of shallow soils on steep slopes at lower elevations suitable for silvipasture; based on technical data from Table 2(a). & i XMX Table 2(c): SILVIPASTURE MODEL WITH PROJECT - Family Budget for 0.7 ha Farm (in rupiah) -/ Net income from agriculture Total family income with project 2/ Before After Years - financing Financing financing Traditional Cattle Off-farm and and and crops Forestry fattening Total income subsidy subsidy subsidy 1 2,000 -19,600 - 65,900 -83,500 24,800 -58,700 115,400 56,700 2 1,900 - 2,800 2,000 1,100 24,800 25,900 6,200 32,1ln 3 1,700 0 28,700 30,400 24,800 55,200 -30,700 24,500 4 1,700 0 9,300 11,000 24,900 35,900 -10,400 25,500 5 1,600 0 9,300 10,900 24,900 35,800 - 9,200 26,600 6 1,500 53,500 28,700 83,500 24,900 108,400 - 7,300 101,100 7 1,400 53,300 15,800 70,500 24,900 95,400 0 95,400 8 1,300 53,300 15,800 70,400 24,900 95,300 0 95,300 Lii 2-8 1,600 22,400 15,700 39,700 24,900 64,600 - 7,400 57,200 9-15 1,100 22,800 15,800 39,700 24,900 64,600 0 64,600 16-22 700 22,800 15,800 39,300 25,000 64,300 0 64,300 23-29 500 22,800 15,800 39,100 25,000 64,100 0 64,100 / Illustrative budget based on forestry and cattle fattening enterprise cash flow and budgets - see Working Paper C-12; 2/ - After year 2, averaged out over the seven-year growth cycle for trees. 2/20/79 *4 C ; Table 3(a): TERRACING MODEL WITHOUT PROJECT - MIXED FARMING CROPPING PATTERN, YIELDS AND INPUT DATA PER HA -/ A. 1978 Coefficients Cropping _ Output (Kg) - -Planting Material Pattern Labor Crop/Crop Association % Cassava Sweet Maize Dryland G'nuts (Man Days) Maize Dryland G'nuts Potato Rice Rice Cassava/Maize 70 2,000 280 230 15 Sweet Potato/Maize 10 1,500 280 165 15 Cassava/dryland rice/g'nuts 20 2,000 300 300 240 30 60 Maize 20 380 185 15 __ TOTAL/AVERAGE PER HA 120 1,800 150 300 60 60 262.5 15 6 12 B. Projected Yields Without Project (Kg/ha) CROP Sweet 1 Potatoes Cassava Maize Groundnuts Rice Years P ASSOCIATED CROP(S) Maize Maize Groundnuts Cassava Maize Sweet Cassava/ Cassava/ Potatoes Rice Groundnuts 1 1,500.0 2,000.0 2,000.0 280.0 380.0 280.0 300.0 300.0 10 1,400.0 1,900.0 1,900.0 260.0 360.0 260.0 280.0 280.0 15 1,300.0 1,800.0 1,800.0 240.0 340.0 240.0 260.0 260.0 20 1,100.0 1,600.0 1,600.0 210.0 310.0 210.0 210.0 210.0 30 800.0 1,200.0 1,200.0 150.0 250.0 150.0 150.0 150.0 1/ Illustrative model representing upper elevations suitable for terracing with constant cropping pattern; see Working Paper G-12. e I-.t, Table 3(b): TERRACING MODEL WITH PROJECT - MIXED FARMING CROPPING PATTERN, YIELDS AND INPUT DATA AT FULL DEVELOPMENT: PER HA l/ Cassava/ Sweet Cassava/ Total/ Maize Potato/ Dryland Rice/ Maize Sorghum Average Maize Groundnut per Ha Crop Distribution 50 30 30 20 20 150 Output (Kg): Cassava 3,500 3,500 2,800 Sweet Potato 2,500 750 Maize 800 1,000 1,000 900 Dryland Rice 800 240 Sorghum 800 160 Groundnuts 500 150 Labor (man/day): Family 250 200 300 200 160 347 Hired Male 60 40 80 50 50 86 Hired Female 15 5 40 10 10 25 Total 325 245 420 260 220 458 X, Planting Material (Kg): Maize 25 Dryland Rice 9 Sorghum 1 Groundnuts 30 Urea (Kg) 200 150 200 150 150 265 TSP (Kg) 200 200 200 200 200 300 Insecticide (lt) 1 1 2 1 1 1.8 1/ Illustrative model based on estimates of production increases following terracing and improved cropping practices; see Working Paper C-1. wr z (9 C Table 3(c): TERRACING MODEL WITHOUT PROJECT - FAMILY BUDGET FOR MIXED FARMING ON 0.7 HA (IN RUPIAH) - Revenues from Agriculture Net Income Off-farm Income Total Expenses from Agri- _ Family for cultural Income Years Non-cash Cash Total Agriculture Activities Non-cash Cash 1 23,600 7,900 31,500 7,300 24,200 2,200 21,600 48,000 10 22,300 7,500 29,800 7,300 22,500 2,200 21,600 46,300 15 21,000 7,000 28,000 7,300 20,700 2,200 21,600 44,500 20 18,200 6,100 24,300 7,300 17,000 2,200 21,600 40,800 25 15,800 5,300 21,100 7,300 13,800 2,200 21,600 37,600 30 13,500 4,500 18,000 7,300 10,700 2,200 21,600 34,500 1/ Illustrative budget representing upper elevations suitable for terracing; based on technical data from Table 3(a). Table 3(d): TERRACING MODEL WITH PROJECT - FAMILY BUDGET FOR 0.7 HA FARM (IN RUPIAH) / Net Income from Agriculture Off-Farm Total Family Income with Project Years Income Years Net Before After Revenues Expenses Income Subsidy Subsidy Subsidy 1 31,500 7,300 24,200 23,800 48,000 48,000 2 40,000 15,500 24,500 22,800 47,300 12,200 59,500 3 57,100 28,900 28,200 21,200 49,400 22,300 71,700 4 74,200 43,300 30,900 20,000 50,900 22,300 73,200 5 74,200 43,300 30,900 21,000 51,900 51,900 6 - 30 74,200 43,300 30,900 21,000 51,900 51,900 2/ Illustrative budget based on estimated production and inputs summarized in Table 3(b) HL e Table 4: ILLUSTRATIVE MODEL OF PRODUCTION AND INCOME FROM IMPROVED HOMEGARDEN OF 0. 3HA- Value of Production (Rp 000) At Full Number of Yield Farmgate Year Maturity Crop Plants Range 2/ Price 3/ 10 (Year 16-30) (Rp~) 1 2 3 4 5 6 7 8 9 1 Upper Storey Coconut 20 5-60 50 -- -- -- -- -- -- -- 5.0 10.0 20.0 60.0 Jak Fruit 2 2-10 200 -- -- -- -- -- 0.8 1.2 1.6 2.0 2.4 4.0 Mango 2 30-250 10 -- -- -- 0.6 0.8 1.0 1.2 1.4 1.6 2.0 5.0 Avocado 2 20-100 40 -- -- -- -- 1.6 3.2 6.0 8.0 8.0 8.0 8.0 Rambutan 2 150-500 2.5 -- -- -- -- 0.8 0.9 1.3 1.5 1.8 2.0 2.5 Bamboo 4 5-10 poles 200/pole -- 4.0 6.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 Sub-totals -- 4.0 6.0 8.6 11.2 13.9 17.7 25.5 31.4 42.4 87.5 Middle Storey Clove 10 0.2-2.8 Kg 3,000 Kg dry -- -- -- -- -- -- 6.0 9.0 12.0 24.0 84.0 Banana 5 1 stalk 600/stalk -- 1.5 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 Papaya 5 15-25 50 -- 3.7 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 Sub-totals -- 5.2 9.0 9.0 9.0 9.0 15.0 18.0 21.0 33.0 93.0 o Ground Level Pineapple 30 15-30 90 -- 1.4 Taro -- 20-60 Kg 20 0.4 1.2 Carrot -- 10-20 " 80 0.8 1.6 Tomato -- 10-20 " 80 0.8 1.6 > assumed the same for subsequent years Chili Pepper -- 5-15 " 200 1.0 3.0 Cabbage -- 10-20 " 30 0.3 0.6 Other -- 20-40 " 150 3.0 6.0J Sub-totals 6.3 15.4 15.4 15.4 15.4 15.4 15.4 15.4 15.4 15.4 15.4 Estimated Gross Value of Production 6.3 24.6 30.4 33.0 35.6 38.3 48.1 58.9 67.8 90.8 195.9 Estimated Production Costs, excluding Labor 4/ 2.5 6.0 8.0 10.0 10.0 10.0 10.0 10.0 10.0 14.0 20.0 3.8 18.6 22.4 23.0 25.6 28.3 38.1 48.9 57.8 76.8 175.9 Estimated Net Income 1/ Based on abstracted information from UNDP/FAO Upper Solo Project, Sri Lanka Tree Crop Diversification (Kandy Garden) Project, and local data recorded in Yogyakarta. 2/ Number of nuts or fruits/tree unless otherwise indicated. F! 3/ Based on 1978 prices in Yogyakarta DIY. 4/ Estimated costs of tools, vegetable seeds, fertilizers and pesticides; does not include cost of tree seedlings. - 61 - ANNEX 3 SELECTED DOCUEENTS AND DATA AVAILABLE IN THE PROJECT FILE A. Selected Reports on the Area A.1 Kali Progo Basin Study, Hunting Technical Services Ltd., and Sit MacDonald and Partners, October 1971. A.2 Upper Solo Watershed Management and Upland Development, AG. DP/IN'/>U!. Termination Report. UNDP/FAO, Rome, 1976. A.3 ENEX Report on Yogyakarta Rural Roads, ENEX, 1978. B. Selected Reports on the Project B.1 Yogyakarta Rural Development Project Preparation Report, BAPPEDA, Yogyakarta, May 1978. B.2 Regional Development of Yogyakarta, UNCRD, 1976. C. Working Papers for Project Implementation C-1 - Overview of Agricultural Sector in DIY C-2 - Technical Development Cell C-3 - Agricultural Technical Development Center and Sub-Centers C-4(a) - Technical Development - Homegardens C-4(b) - Technical Development - Food Crops C-5 - Soil Conservation C-6 - Reforestation C-7 - Silvipasture C-8 - Inland Fisheries C-9 - Livestock C-10 - Agricultural Technical Training C-lb - Community Participation C-12 - Farm and Crop Budgets C-13 - Small-Scale Enterprises C-14 - Incremental Credit C-16 - Rural Health Development C-17 - Rural Water Supplies C-18 - Rural Roads C-19 - Organization and Management IBRD 13978R 110<00' IIU°15' 11O°30' INDONESIA 1 1 45' MAY 1979 ~~~~~~1 .,,ld I f ,l~- - of he pheads f he reoortdthvzto oh. ,,r aS!t,enCllSd.rf,e lalroo td s0 YOGYAKARTA RURAL DEVELOPMENT PROJECT t oo,ddao,tSsOo, otl,5 rh0 mWdo nod I0Pt' on the p,"of rhe Wfod B."e,t I -.p.- "feotoU,oheo,ndhel t ofo,,, toroto or 0 / | PHYSICAL ACTIVITIES g , / *. * Agricultural Techmn al Development Center C ENTRAL \ Kahngjun9 A Agricultura Techn cal Development Subcenters \ Piot Land Rec amation JAVA ' N Solo uri SoI Conservation Programs hANJJAR DYf 0.> Turi Home Garden Improvement (samigaluh0N A 4 Tree Crop FairmT rrg Sysrerrr Developmerit z < nf~~~ lnibwn3| ! t/ N (| i) Mob ITruin nq Uriits /t\Banjararu_ 4rea vf* F sh Hatcrner es . (Rehiabit[ 2 \ / /e) 1 \ Artilicial InserFT nAtion Subposts 7'45'~~ 9 ode | $| Lvesrock Market KARTA /Construction Area' //UL NPROG Ogee/V0> > J r Sentolo ~~~~~~~~~~~~~~~GDNG Pt Ngrwen | -CC _ It t_ 9abai )- EN I RAL~~~CNTRA ~~~( \ A g&U L gtj/ P sy~~~~~~~~~~~~~~~~~~~~~~~~enqiilhargo J AVA 0~ ~ ~ ~ ~ ~ ~~ ~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~0 Prim- F'!ftzary Roads \n/g;j> anh / u ) \ j~~~~~~ A V1 A P:S t A4 u 7 0- % - --- -- ;-->Tps :. : : t ,V D I A ,N O CEAN,|* MfLES : ! -r s '! i6 5. r3Ej!- .