document of the world bank000 10,000 22,010 date achieved 02/29/2004 12/31/2006 12/31/2007 comments...

Document of The World Bank

Report No: ICR0000767

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-46270 IDA-35350 JPN-50505 JPN-53442 JPN-54209 JPN-55749 JPN-56879 JPN-

90423 JPN-90424 NETH-5136)

ON

A LOAN IN THE AMOUNT OF US$ 208.9 MILLION

AND

A CREDIT IN THE AMOUNT OF SDR 87.5 MILLION (US$111.3 MILLION EQUIVALENT)

TO THE

REPUBLIC OF INDONESIA

FOR THE

SECOND KECAMATAN DEVELOPMENT PROJECT

August 11, 2008

Sustainable Development Sector Unit Indonesia Country Management Unit East Asia and Pacific Region

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

ii

CURRENCY EQUIVALENTS (Exchange Rate Effective April 2008)

Currency Unit = Rupiah Rps 9,000.00 = US$ 1

US$ 100 = Rps. 900,000.00

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

AJI Aliansi Jurnalis Independen- Association of Independent Journalists Bappenas Badan Perencanaan Pembangunan Nasional- National Development Planning

Agency. Located in Jakarta, the capital of Indonesia BPD Badan Pemwakilan Desa - Democratically elected village representative body. This

body was introduced under Regional Governance Law 22 of 1999 BPKP Badan Pemeriksa Keuangan dan Pembangunan - Finance and Development

Supervision Agency BPS National Statistics Board CAS Country Assistance Strategy CDD Community Driven Development DPL Development Policy Lending DPRD Dewan Perwakilan Rakyat Daerah - Local Parliament. DPRD-I is the parliament at

the province level. DPRD-II is the parliament at the district level. EIRR Economic Internal Rate of Return FD Fasilitator Desa - Village Facilitator FK Fasilitator Kecamatan - Kecamatan Facilitator FMR Financial Management Report GAC Governance and Anti-Corruption Strategy GOI Government of Indonesia IDT Inpres Desa Tertinggal program “program fro left behind villages” ISR Implementation Status Report KDP Kecamatan Development Program Kecamatan Sub-district containing on average 20 to 25 villages with as many as 100,000 persons MKab Konsultan Manajemen Kabupaten -District Engineer Consultant KMProp Konsultan Manajemen Propinsi - Provincial Consultant KPKN Kantor Perbendaharaan dan Kas Negara - Treasury State Office KPM Direktorat Kelembagaan dan Pelatihan Masyarakat LKMD Lembaga Ketahanan Masyarakat Desa - Village Council LP3ES Institute for Social and Economic Research, Education and Information MDTF Multi-Donor Trust Fund M&E Monitoring and Evaluation MIS Management Information System MOHA Ministry of Home Affairs Musbangdes Musyawarah Pembangunan Desa - Village Development Meeting NGO(s) Non-Governmental Organization(s) NMC National Management Consultants, located at central level O&M Operations and Maintenance PMD Pembangunan Masyarakat Desa - Community Development Agency under the

Ministry of Home Affairs PNPM-Mandiri National Community Empowerment Program PPK Program Pengembangan Kecamatan QAG Quality Assurance Group RMU Regional Management Unit Rps. Rupiah

iii

SME Small and Medium Scale Enterprises TA Technical Assistance TK-Prop Tim Koordinasi Propinsi - Coordination Team at provincial level consisting of

various government ministries and chaired by Bappeda TK-Kab Tim Koordinasi Kabupaten - Coordination Team at district level consisting of

various government ministries and chaired by Bappeda TPK Tim Pelaksanaan Kegiatan – Activity Implementation Team UDKP Unit Daerah Kerja Pembangunan - Kecamatan Development Forum, composed of

village representatives. UDKP I Kecamatan–level meeting to discuss what KDP is and local sanctions for

that year UDKP II Kecamatan– level meeting to decide which village proposals will be

accepted and elect members of the UPK UPK Unit Pengelola Keuangan - Financial Unit elected by the UDKP II forum usually

composed of two or three persons who handle the kecamatan and village finances for KDP

UPP Urban Poverty Project VIP Village Infrastructure Program WB World Bank

Vice President: James W. Adams Country Director: Joachim von Amsberg

Sector Manager: Sonia Hammam Project and ICR Team Leader: John Victor Bottini

INDONESIA SECOND KECAMATAN DEVELOPMENT PROJECT

CONTENTS Data Sheet A. Basic Information

B. Key Dates .................................................................................................................. iv C. Ratings Summary ...................................................................................................... iv D. Sector and Theme Codes ........................................................................................... v E. Bank Staff................................................................................................................... v F. Results Framework Analysis ...................................................................................... v G. Ratings of Project Performance in ISRs ................................................................. viii H. Restructuring (if any)................................................................................................ ix I. Disbursement Profile ................................................................................................. ix 1. Project Context, Development Objectives and Design............................................... 2 2. Key Factors Affecting Implementation and Outcomes .............................................. 4 3. Assessment of Outcomes .......................................................................................... 15 4. Assessment of Risk to Development Outcome........................................................ 20 5. Assessment of Bank and Borrower Performance ..................................................... 20 6. Lessons Learned ....................................................................................................... 22 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 23 Annex 1. Project Costs and Financing.......................................................................... 25 Annex 2. Outputs by Component and Implementation Arrangements........................ 26 Annex 3. Economic and Financial Analysis................................................................. 29 Economic Impact Analysis............................................................................................ 29 Results of the Economic Impact Analysis Study ........................................................... 29 General Project Income Multiplier............................................................................... 30 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 32 Annex 5. Beneficiary Survey Results ........................................................................... 34 Not Applicable.............................................................................................................. 34 Annex 6. Stakeholder Workshop Report and Results................................................... 35 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR..................... 36 Annex 8. List of Supporting Documents Consulted ..................................................... 38

MAP IBRD No. 33420R1

iv

A. Basic Information

Country: Indonesia Project Name: ID-KECAMATAN DEV. II

Project ID: P073025 L/C/TF Number(s):

IBRD-46270,IDA-35350,TF-50505,TF-51369,TF-53442,TF-54209,TF-55749,TF-56879,TF-90423,TF-90424

ICR Date: 06/10/2008 ICR Type: Core ICR Lending Instrument: SIL Borrower: REPUBLIC OF INDONESIA Original Total Commitment:

USD 320.2M Disbursed Amount: USD 335.0M

Environmental Category: B Implementing Agencies: Directorate General of Community and Village Empowerment Cofinanciers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual Date(s)

Concept Review: 02/15/2001 Effectiveness: 08/31/2001 01/17/2002 Appraisal: 05/10/2001 Restructuring(s): Approval: 06/26/2001 Mid-term Review: April 2005 04/27/05 Closing: 12/31/2006 12/31/2007 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Low or Negligible Bank Performance: Satisfactory Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies: Moderately Satisfactory

Overall Bank Performance: Satisfactory Overall Borrower

Performance: Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance Indicators QAG Assessments (if

any) Rating

Potential Problem Project Yes Quality at Entry None

v

at any time (Yes/No): (QEA): Problem Project at any time (Yes/No):

No Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Satisfactory

D. Sector and Theme Codes

Original Actual Sector Code (as % of total Bank financing) Central government administration (BC) 2 2 General industry and trade sector (YZ) 24 24 General transportation sector (TZ) 24 24 Other social services (JB) 24 24 Sub-national government administration (BH) 26 26

Theme Code (Primary/Secondary) Gender (59) Secondary Secondary Other social protection and risk management (56) Secondary Secondary Participation and civic engagement (57) Primary Primary Vulnerability assessment and monitoring (55) Secondary Secondary E. Bank Staff

Positions At ICR At Approval Vice President: James W. Adams Jemal-ud-din Kassum Country Director: Joachim von Amsberg Mark Baird Sector Manager: Sonia Hammam Zafer Ecevit Project Team Leader: John Victor Bottini Scott E. Guggenheim ICR Team Leader: John Victor Bottini ICR Primary Author: Varalakshmi Vemuru F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) Objectives of the proposed four year project are: (i) support participatory planning and development management in villages; (ii) support a broad construction of social and economic infrastructure in poor villages; and (iii) strengthen local formal and informal institutions by making them more inclusive, accountable, and effective at meeting villagers' self -identified development needs. The project is a continuation of a longer-term participatory program for poverty reduction that includes the two Village Infrastructure Projects and the first Kecamatan Development Project. Revised Project Development Objectives (as approved by original approving authority)

vi

On April 15, 2005, the project agreement was amended (approved by the acting Country Director at the time) to add funds specifically to help respond with post-disaster reconstruction. The project’s development objectives were not changed; the additional funds simply allowed the project to expand coverage in disaster-affected areas and cover more villages. The “open menu” was not changed but explicit approval was provided for the use of project funds for emergency social needs. The project cycle and procedures were not amended, but flexibility was allowed to shorten planning and speed up disbursement. (a) PDO Indicator(s)

Indicator Baseline Value Original Target

Values (from approval documents)

Formally Revised Target

Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : minimum # number of participating villages. Value quantitative or Qualitative)

7,000 10,000 22,010

Date achieved 02/29/2004 12/31/2006 12/31/2007 Comments (incl. % achievement)

The number of villages is dependent on the Kecamatan selected. The project is being implemented in the poorest Kecamatans. Coverage is more than twice the planned target, with many additional villages covered in disaster-affected areas.

Indicator 2 : HH expenditures rise for each year of KDP involvement Value quantitative or Qualitative)

1% 4% 5%


An assessment in 113 villages revealed that average general income multiplier for project villages was 1.165 as a result of additional cash injected into the local economy during the project. The expenditure increases were 5% for villages.

Indicator 3 : Providing Low cost quality infrastructure (less than current cost from line agencies with similar or better qualities).

Value quantitative or Qualitative)

0% 20% 56%


Ranged from 43% for irrigation systems, 59% for roads and bridges and 66% for water supply

Indicator 4 : Infrastructure built by KDP to be ranked as satisfactory Value quantitative or Qualitative)

0% 70% 94%


48% infrastructure built under KDP ranked as very good quality and 46% as good quality

Indicator 5 : Ability of villages to carry out long term planning by year 3 Value quantitative or Qualitative)

0% 50% 100%

Date achieved 02/28/2003 12/31/2006 12/31/2007 Comments (incl. %

All villages carried out village and inter-village planning focused on annual plans and subproject proposals and designs. Since 2006, villages are beginning to undertake village visioning

vii

achievement) exercises using participatory methods like social mapping. Indicator 6 : Villages able to meet audit standards in FMS & Design (# of villages with completed courses) Value quantitative or Qualitative)

0% 80% 80%


It is 95% for villages in Java, Sumatra, Sulawesi and Kalimantan but 70% in the more difficult and remote areas of NTT, NTB and Papua.

Indicator 7 : Resolution rate of all cases in corruption database Value quantitative or Qualitative)

0% 70% 45%


There was an increase of 45% in the number of corruption cases resolved from the KDP I levels. More cases were uncovered due to increased attention and an increase in consulting services in every province dedicated specifically for this purpose.

Indicator 8 : Decision Meetings made more inclusive Value quantitative or Qualitative)

0% 50% 70%


Decision meetings were attended by 70% of available adult residents, 68% being poor and 46% women.

Indicator 9 : Annual increase in number joint DPRD - project monitoring teams Value quantitative or Qualitative)

0% 75% 100%


This has improved over project implementation. Local legislatures are more aware of KDP though direct monitoring is less than hoped for still.

Indicator 10 : Facilitators deployed in Kecamatan Value quantitative or Qualitative)

0% 90% 100%


All participating Kecamatan are served by facilitators.

Indicator 11 : % of technical problems resolved Value quantitative or Qualitative)

0% 75% 57%


Progress with fixing technical problems was very good compared to resolving corruption cases reported. Vast majority of the small cases are resolved; except for bigger cases, especially those that reached legal system.

Indicator 12 : % of village participating in technical training courses Value quantitative or Qualitative)

0% 50% 100%

Date achieved 02/29/2004 12/31/2006 12/31/2007

viii

Comments (incl. % achievement)

All technical training has to be completed before funds are released and is a standard part of the program. The quality of technical training has improved significantly.

Indicator 13 : % Governance Training completed Value quantitative or Qualitative)

0% 75% 100%


All participating districts and sub-district officials attend training in KDP principals and participatory development each year.

Indicator 14 : Assessing village revenues Value quantitative or Qualitative)

0 1 1


Report on inventorying and listing options for village revenues has been commissioned.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value Original Target Values

(from approval documents)

Formally Revised Target

Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : # of desa with project proposals Value (quantitative or Qualitative)

0% 80% 100%


All participating villages have project proposals based on which funds are released (though not all village proposals are funded).

Indicator 2 : # of Public Infrastructure sub-project implementation agreement Value (quantitative or Qualitative)

0% 80% 100%


All subprojects sanctioned for funding have subproject implementation agreements, without which funds cannot be released.

Indicator 3 : % of O&M groups formed Value (quantitative or Qualitative)

0% 70% 97%


G. Ratings of Project Performance in ISRs

No. Date ISR Archived DO IP Actual Disbursements

(USD millions) 1 02/14/2002 Satisfactory Satisfactory 0.00 2 08/19/2002 Satisfactory Satisfactory 18.09

ix

3 01/02/2003 Satisfactory Satisfactory 18.09 4 02/11/2003 Satisfactory Satisfactory 18.09 5 04/14/2003 Satisfactory Satisfactory 18.09 6 05/13/2003 Satisfactory Highly Satisfactory 18.09 7 12/10/2003 Satisfactory Highly Satisfactory 30.12 8 12/19/2003 Satisfactory Highly Satisfactory 30.12 9 06/18/2004 Satisfactory Satisfactory 136.84

10 11/29/2004 Satisfactory Satisfactory 203.59 11 06/13/2005 Satisfactory Satisfactory 273.23 12 12/27/2005 Satisfactory Satisfactory 295.23 13 09/29/2006 Satisfactory Satisfactory 318.02 14 02/23/2008 Satisfactory Satisfactory 330.68

H. Restructuring (if any) Not Applicable

I. Disbursement Profile

2

1. Project Context, Development Objectives and Design (This section is descriptive, taken from other documents, e.g., PAD/ISR, not evaluative)

1.1 Context at Appraisal (Brief summary of country and sector background, rationale for Bank assistance) KDP’s roots lie in Indonesia’s long history of using central government’s spatially targeted transfer programs to reduce poverty. As early as the 1980s, GOI began promoting block grant transfers to subnational administrations. Many of these came with fairly tight strings attached on how the funds could be allocated, but these were increasingly relaxed, especially a number of donor-funded pilot programs intended to promote deconcentrated management in provinces and districts. Given GOI’s ongoing interest in poverty reduction, several large pilots were started in the early 1990s that used participatory planning and block grant transfers to help villagers provide economic services such as water-supply, roads, and irrigation. Asia’s economic crisis and the collapse of the New Order government brought dramatic changes to the Bank’s role in Indonesia. The outpouring of popular anger over the corruption and violence of the New Order’s final years also brought with it a backlash against development assistance, much of which was targeted at the World Bank, which was seen as having been too close to government and too willing to turn a blind eye to abuses taking place in development programs. Ongoing Bank programs were restructured, with as much as 70% of the portfolio cancelled, and new lending fell to historical lows. It was against this backdrop of political and economic turbulence and transition that the government asked the Bank to scale-up both the VIP and the first KDP. Both projects involved block grant transfers directly to communities, without going through the collapsing and leaky inter-governmental system. And because they both were built on modular designs, with each block grant independent of its neighbor, problems in one region would not impede the overall program. Between 1998 and 2001, the major crisis years for Indonesia, the two programs together reached close to 20,000 villages, with VIP having a heavier presence on Java and KDP providing more coverage in the off-Java areas. KDP2 was the first indication that community-based program approaches could be part of a longer-term program to strengthen governance and reduce poverty. GOI had just announced its massive decentralization program, which would transfer some 60% of the development budget to district governments. Bank policy documents such as the 2001 and 2004 CAS increasingly referred to the role of a scaled-up CDD program providing the vehicle for promoting demand-side governance reform as part of this overall transitional program.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The objectives of the project were to: (i) support participatory planning and development management in villages; (ii) support a broad construction program of social and economic infrastructure in poor villages; and (iii) strengthen local formal and informal institutions by making them more inclusive, accountable, and effective at meeting villagers’ self-identified development needs. The outcomes would be: (i) economic outputs and impacts from community investments; (ii) changes in community’s abilities to plan and manage development programs; (iii) increasing involvement of civil society in development monitoring; and (iv) improving the interest and role of local government in responding to community-identified priority needs.

3

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification Not applicable 1.4 Main Beneficiaries (original and revised, briefly describe the "primary target group" identified in the PAD and as captured in the PDO, as well as any other individuals and organizations expected to benefit from the project)

The main project beneficiaries were some 20 million people in 1,000 of the poorest Kecamatans (of the 3,500 in Indonesia at the time), which benefited both directly and indirectly through project investments. These benefits for villagers in target kecamatan included direct returns from infrastructure and 89 million man-days of labour and indirect benefits through improved access to health and education services and increased economic activity in project villages. Other important benefits were: (i) cost-effective economic infrastructure for communities; (ii) benefits from both the process and the products of KDP2 reaching the poor; and (iii) high levels of end user satisfaction with the project investments. Secondary beneficiaries were (i) the Community Development Department (Pembangunan Masyarakat Desa-PMD) of the Ministry of Home Affairs, (ii) the National Management Consultant Unit (NMC), consultants at different levels, village level facilitators and partner agencies providing implementation support; and (iii) local governments. 1.5 Original Components (as approved) KDP2 was to be implemented in 700 sub-districts and 10,000 villages (according to the project agreement) but, as with KDP 1, immediately upon effectiveness, the scope of the project was increased, at the government’s request, and KDP 2 was expected to work across 30 provinces covering 246 districts, 1000 sub-districts and 27,500 villages. The project consisted of the following four components: Component A: Kecamatan Grants Program. Project Cost: US$310.60 ($232.5 million, Bank financing) This component provided villages with annual sums of money ranging from Rps. 750 million to 1.5 billion per Kecamatan, depending upon population. The kecamatan grants operated on an open menu basis with a very short and well-socialized negative list of mostly environmentally risky activities. Basically villagers could choose public goods, village infrastructure or revolving funds. No windows or set amounts were mandated. On average more than 70% of funded subprojects ended up being for village infrastructure and a little less than 30% for revolving funds, scholarships, or social services. Component B: Community Capacity Development. Project Cost: US$65.5million (100% Bank financing) This component supported the development of communities’ ability to plan, manage, and maintain their own projects through a sustained strategy for developing capacities and transferring skills. This will done through (a) deploying some 2,000 local-level facilitators to provide technical support, training, and quality oversight; and training some 30,000 village facilitators in basic project management skills; (b) training project financial units in fiduciary management; and (c) training local government in participatory planning. Component C: Implementation Support. Project Cost: US$ 40.4 million (100% Bank financing) This component supported the hiring of management consultants for every project district (two consultants each for the 245 districts) and for the National Management Consultant office in Jakarta. Consultants were trained before being contracted and mobilized. The training included: (i) basic skills in development planning and management, (ii) cross-village programs in cooperative planning, (iii) village linkages to the government and private sector at the district level, and (iv) district level participatory

4

poverty assessments and dialogue on sustainability. This component will also strengthen the ability of the implementing agency and project villages to carry out pilot activities. Component D: Monitoring and Evaluation Studies. Project Cost: US$2.9 million (100% Bank financing) This component supported the Department of Planning - Bappenas and Department of Community Development - PMD’s efforts to track impacts from the project and to seed pilot programs in a number of areas that have to do with local governance and poverty. Provision was made for a mid-term review and various surveys to trace both the effects of the project’s institutional reforms and also hypotheses about local governments and poverty reduction as well as several additional studies and pilots. 1.6 Revised Components: Following the 2004 tsunami in Aceh and Nias, KDP2 was amended in April, 2006, to provide additional funds for block grants for disaster-affected sub-districts/villages. These were added through a new component that was a mirror image of Component A block grants, but specifically to be used for disaster-affected areas. Substantial donor funds, of which a Dutch contribution of US$ 70,85 million (as a Signed Amount), were provided as blended financing partway through the project (which in part accounts for KDP2’s achievement beyond in its original performance targets.) 1.7 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations) There were no changes in the project’s core design. However there were changes in the coverage and scale, activity focus, project schedule and funding allocation as mentioned below: Project Schedule: The project was originally scheduled to end on December 31, 2006. The closing was extended by one-year to December 2007 to respond to the Central Java earthquake. Funding allocations: US$5 million was added as an IDA grant to KDP2 following the tsunami in Aceh/Nias, and US$6 million was reallocated from Training to Consultant’s services to support quickly the expanded Aceh/Nias coverage. As the MDTF for Aceh/Nias became effective, an additional $84.5 million was added to the KDP program (not to this project) to support reconstruction. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry (Including whether lessons of earlier operations were taken into account, risks and their mitigations identified, and adequacy of participatory processes, as applicable) KDP2’s design focused on (i) establishing participatory processes for planning and managing investments; (ii) building local government ownership of the program while retaining key features of simplicity and direct transfers; (iii) instituting transparency and democracy from the bottom-up to complement the ongoing program of decentralization to districts; (iv) establishing a robust system of checks and balances to encourage transparency by taking into account both financial flows and flows of authority, and (v) promoting local-level social inclusion, with particular attention to gender issues. Project preparation for KDP2 included regional workshops for civil society groups and local governments managed by independent NGOs, a consultation program for all provincial and district parliaments, a widely available information package on the project, on-site workshops to discuss evaluations and recommendations made by the communities at the end of their second year in the project; and a national workshop whose purpose is to consult national NGOs and central agencies on national issues raised by the regions.

5

Lessons Learned from previous Bank-assisted projects. Some of the key lessons specifically from the KDP1 implementation that were incorporated into the design of KDP2 were:

• Mainstreaming CDD requires a dynamic long-term vision that sequences policy, organizational, and operational reforms. Striking the right balance between moving a large new agenda forward and overburdening a weak and at times resistant system requires constant dialogue and adjustment between government and the WB;

• Complexity is the enemy of CDD – KDP2 continued to push on streamlining administrative procedures and to test changes by the ability of users to work with them effectively;

• Community projects benefit from good engineering, but providing this requires tailored training, manuals, and oversight procedures – KDP2’s big improvement over KDP1 was the increase in the number and quality of field engineers. Their number more than doubled, to a minimum of 1 per sub-district, with corresponding improvements in their training and management.

• Increased participation of women can be attained by providing a separate planning channel. However, to preserve overall community ownership of the process, both men and women vote and decide on sub-project allocations for women’s proposals rather than women alone. This contrasts with other efforts at gender mainstreaming that segregated male and female planning procedures.

• Building stronger constituencies in government through orientation for District and Kecamatan Heads; involvement of government agencies in coordination meetings, supervision and monitoring missions; financial counterpart contributions – matching grants from internal resources; feedback from all levels of government--thus minimizing interventions by local officials distorting choice and leading to corruption.

• Improved transparency and improved communication material with greater use of visual-aids and community education material in training; and use of community-level interpersonal communications as well as local media such as radio and local television.

• Monitoring through flexible approaches that combined quantitative with qualitative and participatory monitoring with site visits and autonomy and consistent reporting under the project. KDP2 was much more successful than KDP1 at using findings from M&E to guide annual and overall decision-making.

• Block grants, directly transferred from the national treasury to village accounts, are central to the design and implementation of the project.

Risks and their mitigation are summarized in Annex 9. Quality Enhancement Review (QER) There was no QER conducted by the Quality Assurance Group (QAG) for the Project. 2.2 Implementation (Including any project changes/restructuring, mid-term review, Project at Risk status, and actions taken, as applicable) Coverage and scale: The project was finally implemented in 30 (91% of the total in the country) provinces covering 246 (55% of the total in the country) districts and 1,354 (26% of the total in the country) sub-districts. A total of 22,010 (35%) villages were covered under the project. The extent of the project increased both in response to disasters like the Bali bombing, as a result of which a new province

6

and new kecamatans were added and also the matching grants provided by the local governments which resulted in addition of new kecamatans. Project Amendment: The project was restructured in April 2005 through the addition of a new component whose purpose was to provide for the reconstruction of communities devastated as a result of natural disasters. Donor Support – In addition to the Aceh reconstruction grants, KDP2 benefited from significant overall donor support. The Government of the Netherlands provided nearly $60 million of general support. Other donors providing bilateral funding included CIDA, AusAid, DANIDA, DFID, and Japan (PHRD and JSDF). These funds were directed to the Borrower’s overall assistance program and linked to KDP community planning and sub-project implementation. These additional funds from so many sources are evidence of strong support for the approach and the results to date and allowed villagers to fund and construct more priority village infrastructure. The government itself ended up providing about $24 million additional in block grants to villagers in Aceh for recovery purposes. Risks Due to Delays: KDP2 was considered to be at risk in the beginning owing to initial delays in appointment of key staff and consultant procurement under a new system. Compliance with agreed procurement schedules was intermittent, and KDP2 was rated unsatisfactory in more than three ISRs and project management as unsatisfactory in one ISR (as noted later in this ISR, many of these delays were because of changes to the State Finance Law, and were largely outside the control of the executing agency). The Bank conducted a Mid Term Review (MTR) of the project in April 2005. The MTR found that all of the assumptions made at the beginning of the project were relevant and had led to significant results in the field. Factors outside government control or implementation agency’s Economic crisis: Indonesia’s economic crisis and prolonged recovery affected KDP in several ways, but, most importantly, because of the risk of heightened rather than reduced poverty in rural areas. Banks sharply reduced lending, including local lending for SMEs and microfinance. Second, most national poverty programs shut down, in many areas leaving KDP2 as one of the few sources of community-level investment. Third, high-level government attention over how to handle recovery, including the role to be played by development finance, changed dramatically from year-to-year, making long-term planning for KDP very difficult. Decentralization: Indonesia’s national decentralization law dramatically changed the relationship between local and central governments. Impacts on KDP included confusion over the roles and responsibilities of civil servants assigned to oversee the project; local changes to administrative units; a process of administrative fissioning that saw a near-doubling of the number of districts in Indonesia; and changing rules on local government contributions to the program. Not all of these changes were negative and many simply required some time so that the new procedures could be assimilated into the KDP program. Conflict, Bali bombing and Tsunami: The project areas experienced a range of natural and man-made disasters like the tsunami that affected Aceh and Nias; earthquakes in Nias, Jogjakarta, Central Java and Papua; conflicts in Maluku, C. Kalimantan, C. Sulawesi, Aceh and W. Kalimantan; and bombings in Bali. Following the tsunami, the project expanded to all rural sub-districts (243) of Aceh and Nias, reaching more than 6,000 villages. Other areas where KDP responded rapidly to unexpected disasters and conflicts include Jogjakarta and Central Java (earthquake), Papua (earthquake), Maluku (conflict), and Bali

7

(bombing). While the project successfully responded to these events, it stretched the project’s implementation capacity and also reduced the pace of implementation. Factors subject to government control or the implementation agency’s Positive

(i) Strong political commitment and support: The project was able to garner support at the highest levels under KDP-I and into KDP-II. KDP2 was also among the first GOI projects to require – and receive – significant levels of matching finance from subnational governments.

(ii) Serving very difficult areas: The project took cognizance of the very difficult circumstances in

island kecamatans in Riau, Maluku and Maluku Utara; up-river kecamatans in East Kalimantan; and in Papua and West Papua, and made special provisions for the administration and operational costs for these areas including transport and communication costs and most importantly in human resource development.

(iii) Anti-corruption Action Plan: KDP was the first World Bank project anywhere to introduce an

anti-corruption action plan as part of its strategic approach to reducing corruption risks. (Such plans are now mandatory for all new projects in Indonesia.)

(iv) Enhanced Disclosure of Information: During preparation, the government and Bank team

developed a transparency policy that went beyond the existing Bank disclosure policy, which was being revised. The Country Director/EAP region proposed to the WB Board that KDP2 be one of four Bankwide pilot projects with enhanced disclosure, particularly the public disclosure of audit findings. This pilot program, which was the only one of the four put into practice, was executed over KDP2’s lifetime. As with KDP1, overall GOI implemented KDP2’s transparency policies well.

Negative factors

(i) Delays in appointment of key staff and fund flow delays: Delays in budget releases for Indonesian development projects are endemic and affect all Indonesian projects other than DPLs. The delays in release of funds by the government were very serious and adversely affected implementation. Further, funds for a given financial year are frozen in December at the end of the Indonesian fiscal year. Delays reached as long as 10 months in a one fiscal year. In addition, during the course of KDP2’s implementation, the State Finance Law was re-written. Poor socialization of the new law and an excessively detailed set of requirements for line agencies to access their budgets have if anything made budget releases even later in the financial year, particularly for weak agencies that lack internal resources to pre-finance activities such as PMD. Overcoming the challenges posed by late budgets has been KDP’s biggest challenge.

(ii) Slow information flow: Poor or delayed information from Jakarta to participating regions and

slowness in response to requests plagued project start-up and lessened the coverage of the matching grants component. This was addressed to some extent as project implementation progressed, but remained a major hurdle in the decentralized management set-up.

(iii)Insufficient investment in training: While the role of training of facilitators and communities is

crucial for successful project implementation, the project invested too little in this. The training periods were reduced arbitrarily, and training for both consultants and communities remained under funded.

8

(iv)Limited capacities: The decentralization of project management to the regional level and individual contracts with consultants was a good strategy which addressed problems of over centralization identified in the task team’s review of KDP-I. However, the RMUs remained weak in the absence of well qualified staff and the ability of the RMU to manage their consultants. The RMUs were unable to assess consultant performance periodically and terminate the services of poorly performing staff.

(v) Legal status of UPKs: The UPKs are currently custodians and managers of the repayments from

the micro-credit program for the women’s groups supported under the project. At least 60% of the UPK’s have reasonably large amounts of revolving funds of Rps. 3 billion or more and have personnel trained in financial management including book keeping and auditing. However, in the absence of legal recognition of their status, the risks of funds being co-opted by the local government agencies, to the detriment of women groups, is a real risk, but remains unaddressed or only partially so.

(vi) Complaints handling: The unique and innovative initiative of setting-up of a complaints tracking

and resolution mechanism under KDP-I was extended to KDP-II and was decentralized to the Regional Management Units. The majority of reported cases under this involved misuse of project funds (67%) and deviation from project principles and procedures and amounted for very small amount compared to the total kecamatans grant (0.5%). However, the project was able to resolve only 45% of the cases, against a target of 75%. Part of the problem is an overly ambitious target: when the target was set there was strong momentum for judicial sector reform but this later fizzled out.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization (a) M&E design and implementation The KDP2 built on the extensive Monitoring and Evaluation (M&E) System of KDP1 to track its progress and evaluate its impact. KDP2 implemented a three-pronged strategy that guided elements of the project design as well as the M&E system: (i) eliminate complexity in project design features and funds flow; (ii) ensure transparency of all project information including financial transactions; and (iii) respond quickly to complaints. The system consisted of quantitative and qualitative tools, including internal monitoring from program stakeholders and external independent monitoring by Indonesian non-governmental organizations (NGOs), journalists and audit teams. The program commissioned several impact and technical studies to measure its impact on poverty alleviation and local governance. KDP’s M&E system built on the opportunities offered by Indonesia which included:

• Nascent democracy and more open political climate – to build on the growing trend for citizens and community groups to speak out and voice their concerns to document and report stakeholder’s feedback on project’s progress.

• Growth of civil society organizations – to form partnerships with the rapidly expanding media and civil society groups to undertake independent monitoring.

• Skilled pool of consultants – to recruit educated consultants and facilitators and investing in staff development in the areas of community facilitation and mediation skills, technical supervision and reporting.

9

• Relative ease of communications – to use the efficient communication network of telephones, faxes, post and e-mail sown to the district level to send reports and communicate to the national level using a single national language.

• Firm government and World Bank support and commitment to developing a strong M&E system – to make use of the financial and technical resources committed for M&E activities including a 22-person M&E Unit and Complaints handling Office to develop and implement this system.

Key challenges in the development of the KDP 2 M & E system are summarized in Annex 10. The key components of the internal monitoring system were:

• Field monitoring and reporting by Government officials and Consultants at provincial, district, kecamatan and village level and through the monthly reporting to enable the NMC and PMD to assess progress in the project cycle, monitor financial disbursements and keep track of problems arising in the field;

• Community participatory monitoring by the newly elected Village Councils (BPDs), Special Groups or Teams in villages and NGOs;

• Case Studies and documentation of lessons learned by two full-time staff of the NMC to capture the rich, descriptive information and analyses on multiple themes related to KDP implementation;

• Procedures for handling complaints and grievances to be addressed by a five member Complaints Monitoring Unit responsible for ensuring that complaints and questions are answered promptly and investigated further in the field. The Complaints Monitoring Unit coordinates with KDP field managers and government officials to ensure follow-up action in response to complaints.

The key components of the external monitoring activities and evaluation system were:

• Independent province-based monitoring by NGOs to amplify the voices of communities so that their concerns are heard and to share their experiences in the field, best practices and lessons learned, technical and financial monitoring, and recommendations for program improvement;

Activity Objective Implementing Agencies/Actors

Outputs

INTERNAL MONITORING ACTIVITIES Monitoring by consultants/MIS

To monitor and regularly report upon KDP progress

Consultants at the national, provincial, district and kecamatan

Monthly reports, database, problems solved

Monitoring by Govt. Officials

To monitor and regularly report upon KDP progress, trouble-shooting

Govt. officials at the national, provincial and district level, DPRD, etc.

Reports and problems solved

Community Monitoring

To monitor projects within their communities

Community members Activities monitored by the community

Case Studies To document lessons learned and best practices of KDP

Occasional consultants Case studies

Complaints Resolution Process

To document and resolve field problems

6 full-time KDP staff in Handling Complaints Unit

Resolved cases Database of complaints

Financial Supervision and Training

To improve the financial skills of UPKs and economic loan groups and to check financial/admin records at the kecamatan and village levels

5 full-time staff with accounting backgrounds in the Financial Supervision and Training Unit

Training to UPKs and economic groups. Field finances checked and audited.

10

• Independent monitoring by Journalists through a contract with the Institute for Social and Economic Research, Education and Information (LP3ES) and the Association of Independent Journalists (AJI) to provide systematic external monitoring and reporting on KDP and to publish or broadcast their findings. There is no prior review or censorship of the stories.

• Special studies on KDP’s impact upon household welfare; and the impact of KDP on community

organization and perceptions; evaluation of the infrastructure and economic activities; and • Audits and/or regular financial inspections by the Finance and Development Supervision Agency

(Badan Pemeriksa Keuangan dan Pembangunan or BPKP), the government audit agency, NMC Financial Supervision and Training Unit (a very effective informal, internal “audit” group, which worked closely with the Complaints Handling Unit), and the World Bank.

Activity Objective Implementing

Agencies/Actors Outputs

EXTERNAL ACTIVITIES NGO Province-Based Monitoring

To monitor and provide an independent source of qualitative information on KDP

40 provincial NGOs Monthly reports

Journalist monitoring and reporting

To provide independent monitoring and reporting on KDP by local journalists

18 provincial journalists, LP3ES/AJI

Newspaper articles, radio reports

EVALUATION ACTIVITIES World Bank Supervision Missions

To supervise KDP progress and achievements

World Bank, PMD, BAPPENAS, NMC, LSMs

Aide-Memoire (usually twice a year)

Financial Audits To audit KDP finances BPKP Audit findings and reports

Impact Evaluation (a) To evaluate KDP’s impact on community organization and perceptions; (b) to assess the feasibility of measuring KDP impact on poverty, incomes, and living standards.

External consultant team to use panel baseline data

Baseline survey of 4500 HHs and community leaders. Economic feasibility assessment

Technical Infrastructure Study

To evaluate KDP infrastructure projects and recommend improvements

External consultant team (5 persons) including one expatriate

Study evaluating the quality of KDP infrastructure projects

Economic Loan Study

To evaluate KDP economic loan activities and recommend improvements

External consultant team (4 persons) including one expatriate

Study evaluating the quality of KDP economic loan activities

Institutional Improvements Evaluation

To measure and evaluate the individual and institutional changes resulting from perdas and training

External evaluation team together with BPDs, DPRDs etc.

Analysis of the effectiveness of KDPs capacity building measures

Poverty impact study

To evaluate the medium term impacts of KDP on poverty

BPS (National Statistics Board)

Evaluation report

(b) M&E utilization The KDP2 M&E components were designed to cross-validate and triangulate information from various sources. Also, the integration of quantitative and qualitative methods allowed the programs to reach some more generalizable conclusions as well as understand in greater depth the reasons or dynamics behind certain outcomes. In combining these two methods, the program was able to meet more of its information needs and gain boarder perspective of the progress and impact KDP2 was making.

11

The M&E system provided four key evaluations:

• Check regularly on project progress – through routine and systematic collection of information through Consultant and government field reports/MIS; financial supervision; monthly independent reporting from NGOs and journalists; complain handling mechanisms; and case studies.

• Assess project impact – through the 4,600 household impact survey, case studies, audits and Bi-annual World Bank supervision missions.

• Elicit a variety of perspectives – through monitoring by implementers such as consultants and communities, monitoring by independent actors like NGOs and journalists, and participation of other donors and NGOs in World Bank supervision missions.

• Quantitative and qualitative assessments – Consultant reports, MIS and household surveys for quantitative data; and case studies, descriptive reports from NGOs, journalists, complaints and grievances for qualitative reports.

The decentralized management of MIS and complaints handling system introduced in KDP2 in place of a fairly well-functioning centralized system in KDP1 worked very well, even though initially the changes led to delays. The optimal utilization of the M&E system was initially limited by the inadequate staffing and limited capacities of the staff appointed for M&E functions at the Regional Management Units. However, as the project implementation progressed, key M&E positions were filled, staff capacities built, MIS was up and running, and key studies and surveys were contracted. With all its delays and weaknesses, KDP2 is very well documented, with detailed implementation data and data on results. M & E arrangements for KDP 2 have been utilized for follow on projects, for KDP 3 and 3b, and are being used now, in 2008, after KDP 2 closed. Sustainability of the arrangements in the medium-term is not in question. Many of the arrangements have also been copied by other community-based projects.

2.4 Safeguard and Fiduciary Compliance (focusing on issues and their resolution, as applicable): There were no significant deviations or waivers from the Bank safeguards and fiduciary policies and procedures during the implementation of the project. Financial Management COSU played a continuous, close role in KDP2.The fiduciary system for KDP2 was a departure from standard business practices in Indonesia. The project involved minimal prior review, with only two large investments in each province requiring prior review. Project disbursements took place against agreed plans that had been verified by the sub district project manager, not against actual receipts. The system included checks and balances in funds withdrawals, accounting and reporting of expenditures as well as periodic inspections in the field. The system was supplemented by communities’ social controls and transparency. Villager’s capacities to manage these systems were supplemented by hands-on training and technical assistance. While there were delays in fund flows and counterpart funding, the counterpart financial contribution and government pre-financing were relatively limited, and thus did not hamper implementation. The project’s Financial Management was rated moderated unsatisfactory in the last ISR (2/23/08) due to the delays in mobilizing facilitators and under-utilization of the project financial management specialists unit in Jakarta and reduced budgets for training. Overall financial management by sub-district finance units was satisfactory and improving. There were no outstanding audits. A consolidated Financial Management Report (FMR) was prepared which included the progress report, financial report and procurement report. The financial report covered

12

the project financial statement, SA and SOE. In order to overcome the inappropriateness of standard audit guidelines for the project, the PMD ensured that project audit was conducted as per the (i) Terms of Reference for the audit of special purpose financial statement and (ii) the audit manual for the community projects (Pedoman Pelaksanaan Audit dan Pelaporan for Program Pengembangan Kecamatan, issued by BPKP in April 13, 1999). Procurement KDP2’s procurement assessment risk was rated as “medium”. The government's procurement performance for the project was satisfactory to highly satisfactory despite the scale of the procurement required (i.e. reviewing 27,000 individual CV's for field positions). Ex ante review by the procurement unit and ex post review by the task team under guidance from the OSU group confirms the general impression that KDP2 procurement was done well. QAG cited KDP's village procurement as regional best practice. KDP2 introduced a system of direct contracting for community facilitators, whose salaries are managed through a private sector payroll agent. This system reduced quality problems, overhead costs, and other procurement risks significantly. Procurement at the village level focused as much on capacity building as on risk mitigation. Villages procured and managed their own technical assistance for projects from lists of pre-qualified service providers. Safeguards Following an OED review of KDP1 that raised questions about possible safeguard impacts under the first KDP, in 2005 KDP2 carried out a Comprehensive Technical and Safeguards Assessment (available in project files) that covered 116 randomly selected villages. No major negative environmental impacts were observed and those environmental impacts observed (5% of cases) were extremely small and easily remedied. Land acquisition assessments were part of the proposal review process and any land acquisition had to be approved by the district level oversight engineer. Land and resettlement were also recorded in the project's master database and reviewed during field supervision. No significant adverse impacts from land acquisition or involuntary resettlement were reported from any KDP2 subproject. Because KDP did not allow involuntary land acquisition, any displacement was small (i.e. <5 families), voluntary, and kept within village boundaries. For indigenous people’s safeguards, KDP2 had developed an overall safeguard policy framework to ensure that project activities provided culturally appropriate benefits through informed participation. KDP's general strategy was to improve the quality of information through better facilitation and local-language materials (i.e. support for local language community radio programming). In a “test” case – the Baduy of West Java - consultations proceeded as they were supposed to, with no action taking place until requested by community leadership (they later requested a health center to be placed on the community boundary) While few adverse impacts from KDP on indigenous people were anticipated and none ever recorded, the second goal of the IP safeguards policy is to maximize benefits, not just minimize impacts. For that objective, nowhere was there a bigger challenge than the large, troubled, and challenging province of Papua. In order to provide qualified field personnel in Papua, KDP2 developed a unique program to recruit and train bright young Papuan villagers through a special training program designed jointly with Papuan NGOs and the provincial university. Each subdistrict participating in KDP could nominate three of its brightest high school graduates for a nine month training course in the university, which was followed by one year of mentoring by the trainers in their field stations. Graduates of the program were certified as civil engineers (this program was later scaled up still further by the newly elected Government of Papua and West Papua).

13

Corruption The World Bank’s GAC strategy acknowledges KDP to be among a select group of projects in its portfolio that have supported innovative work on transparency, accountability, and a multi-stakeholder approach to governance and development engagement. KDP operated in a high risk country, an environment with weak institutions for control and a long history of corruption taking place in development projects without sanctions. KDP’s design also introduced a number of project-specific risk factors because of the responsibility given to highly dispersed communities. At the same time, being a CDD project, KDP offered a good potential for greater oversight through multi-stakeholder participation, collective action of communities, investments in public goods, and low risks due to the small amounts involved.

The key elements that were introduced into the design for managing corruption were:

• improving diagnostics - forensic reviews of other projects, introducing corruption vulnerability mapping, ethno-economic studies of community development, and field measurements;

• reducing discretion – fixed bands for grants rather than variable amounts and limited discretion with a “yes” and “no” but not “yes..if”;

• reducing transactions - money sent directly to sub-district accounts, community withdrawals against thresholds, and facilitators moved to direct payroll, without firms;

• promoting competition – good and services from private suppliers with block grants and competition filters which throw out bad proposals with markups or capture problems;

• lowering costs of acquiring information – 10 public signboards per village displaying data on wages and materials, easy to read documents and procedures and facilitators from within the village;

• promoting social controls – placing procurement in the public domain, requirement of more than one signature on all KDP documents, teams monitor materials delivery, public accountability meetings, villagers undertake cross audits and greater participation of women who steal less than men;

• strengthening formal oversight – invest in good MIS, working with the legal system, use of auditors and World Bank’s role; and

• applying sanctions – quick response to matters, sanctions must hurt, asking for money back rather than reallocating it elsewhere, and developing a protocol with main partners.

KDP2’s anti-corruption measures set a standard for CDD projects across the region. Particular elements introduced by KDP and its sister program, UPP, that are now used across the Bank include:

• Vulnerability “mapping” (see Woodhouse, “Village Corruption in Indonesia,” files) • Handling complaints units • Web-based tracking • Tailored audits • Randomized experiments to identify interventions that produce measureable reductions in leakage

and corruption (see Olken papers, on file 2.5 Post-completion Operation/Next Phase (including transition arrangement to post-completion operation of investments financed by present operation, Operation & Maintenance arrangements, sustaining reforms and institutional capacity, and next phase/follow-up operation, if applicable): (a) Transition arrangements Appropriate transition arrangements have been put in place, particularly in the following areas:

14

Operations and Maintenance for infrastructure: O&M is a big concern for village infrastructure. For all infrastructure constructed, the project requires an Operations and Maintenance (O&M) Committee at the village level, having members from the beneficiary families as well as others selected by the community. However, there is some doubt on the meaningfulness of standard O&M indicators: the technical sustainability survey found much lower rates of villages forming O&M committees on Sumatra versus Java, but with similar levels of actual maintenance. However, reasons for poor quality O&M require better diagnostics. KDPs analysis points to three core reasons for poor O&M: (a) much of what is called poor O&M is the result of poor initial designs and construction; (b) total cash flow in villages is too low to support all but minor infrastructure repair; and (c) local governments do not include village level infrastructure in their investment and maintenance plans. All three issues are being pursued under KDPs follow-on projects. While the O&M for irrigation channels, water supply schemes, sanitation units, schools, health centres etc. can still be handled by communities, the project is exploring a different arrangement for roads, including handing them over to the local governments and/or line departments for maintenance as these are truly public goods with multiple users and high costs for repair. UPKs for managing repayments of micro-credit: Women’s groups managing revolving funds repay them to UPKs. The capacity of the UPKs has been built up for financial management and book keeping, accounting and managing the repayments, such that these funds will always be available for micro-credit to communities. Starting in 2005, UPKs have been receiving professional accounting reviews and technical assistance to promote links to private banks. The key issue for the transition is the ambiguous legal status of kecamatan financial units. GOI plans to clarify this in 2008/2009 through a Dirjen instruction. Government Policies: Based on the KDP1 and KDP2 experience, the GOI is now developing a national policy supporting participatory planning and decision-making and resource allocation by communities for self-defined development needs and priorities such as small-scale infrastructure, employment generation, and reconstruction aid. The requisite regulations and institutional capacities are being developed for the National Policy as part of the Government’s new National Community Empowerment Program-Mandiri (PNPM-Mandiri). (b)Follow-up projects KDP2 was succeeded by KDP 3 (a) and KDP 3(b), which together contributed an additional $240 million of WB assistance. In 2007, GOI announced that a National Community Empowerment Program (PNPM-Mandiri) built on the KDP program will be scaled up to cover 50,000 rural villages by 2009. Financed with an annual allocation of at least US$ 1.2 billion for the next three years, GOI plans to extend the program until 2015. A new project to support PNPM Mandiri –Rural KDP) was approved by the Board in May, 2008. (c) Future impact evaluation. GOI, with Bank support, is carrying out a series of evaluation studies to assess KDP’s overall impacts. These are described in the evaluation plan for the National Program for Community Empowerment, which is scheduled for Board presentation on May 20, 2008. The main relevant evaluations include:

• Long-term poverty impact of KDP • Infrastructure sustainability assessment • Disaster recovery and post-conflict assessments

15

3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation (To current country and global priorities, and Bank assistance strategy) KDP2 had an overall development objective of reducing poverty and improving local-level governance in rural Indonesia, and was in consonance with GOI’s decentralization and reforms agenda. The project complemented GOI’s efforts at consolidating and improving village and sub district government, with building sound local administrations and improved procedures for popular participation in development decision. The KDP program tied in with two of the three main CAS goals: improving governance and reducing poverty. 3.2 Achievement of Project Development Objectives (Including brief discussion of causal linkages between outputs and outcomes, with details on outputs in Annex 2) The project was more than successful in achieving its objectives:

• targeting successfully reached poor communities; • infrastructure created met technical quality standards; • infrastructure costs were approx. 40% less than similar works built through standard line agency

procurement; • rates of return on economic infrastructure are high; • corruption and leakage rates are low; • high community contributions (avg. 17%); • participation of the poor and of women is high; • social and environmental safeguard impacts are minimal; • flexible and responsive to disasters; and • government commitment to expand and sustain the project.

The key outcomes of the project in meeting its objectives are described as follows:

(i) support participatory planning and development management in villages;

Governance The project supported the establishment of a model for participatory planning and financing in 22,010 villages across the country where communities participated in a democratic, participatory process of planning and decision-making regarding the allocation of public development funds. Community contributions averaged 17% nationwide, with wide provincial variation. There was high government commitment and buy-in with 40% of districts providing matching grants in KDP2.

(ii) support a broad construction program of social and economic infrastructure in poor

villages; Targeting

a) High coverage of poor communities – KDP-II covered 22,010 of the poorest villages in Indonesia. Project processes have ensured high participation of the poor, who made up 60-70% of total participants.

16

b) Targeting the poorest – Evaluation studies indicate that KDP-II geographical targeting is pro-poor. The KDP-II poverty headcount is significantly higher than non-KDP head count and the proportion of the poor residing in the KDP Kecamatans is bigger than the proportion of KDP population. The proportion of poor people in covered kecamatans is 24%, compared to 14% for non-KDP kecamatans.

Social and Economic infrastructure

a) Improved access to markets, town centers, education and health facilities, and clean water supply: KDP-II funded some 81,464 infrastructure, economic and social activities across 245 districts in 30 provinces. Economic infrastructure created includes 12,944 kms of roads built or upgraded, 3,298 bridges built or reconstructed, 2,068 irrigation systems built, 4,400 clean water supply units and 1,760 sanitation units built. The social infrastructure includes construction and renovation of 2,650 schools, 2,067 “packages” of school equipment and materials, 88,750 individual educational scholarships, construction and renovation of 2,051 village health units and posts and special village electrification projects for 282 villages. Work on village infrastructure projects provided almost 1.7 m villagers 20.2 m person days of labor.

Technical quality

b) 90% of the infrastructure built under the project meets quality standards. Cost of Construction

c) Village infrastructure built through KDP methods costs 56% less on average than equivalent works built through government and ministry contracts.

Rates of return

d) EIRRs for KDP infrastructure ranged from 39% to 68% (on average 53%). In most cases, these very large benefits resulted from either entirely new economic activities that were made possible by KDP infrastructure or latent production capacity that was finally able to be channeled to local markets. (IRRs for small infrastructure should be treated with some caution, however).

Expanded Business Opportunities and Employment

e) 20.2 million workdays were generated through short-term employment on labor intensive infrastructure works, many new businesses and transport services opened up due to new roads, bridges, and piers; and there are almost 808,000 loan beneficiaries and entrepreneurs participating in KDP credit & business activities.

(iii) strengthen local formal and informal institutions by making them more inclusive,

accountable, and effective at meeting villagers’ self-identified development needs.

Low corruption and leakage rates a) The total number of corruption complaints as of 2006 came to 976 for a total value of $650,000.

Over $170 million was disbursed over that same period, for a corruption rate of 0.4%. Independent audits of KDP performed by Price Waterhouse and Moores Rowland found that less than 1% of village subprojects showed deviations. Of that total, KDP has recovered 40% of the missing funds. Keeping in mind that the mechanisms for measuring corruption rates are highly imprecise, the general picture is one of efficient delivery of development funds to villages.

Community and local government contribution

b) KDP2 saw high levels of local contributions. On an average 17% of project costs were provided by local communities. KDP2 initiated a system of local government contributions to the kecamatan allocations. The local governments were also allowed to add kecamatans as long a they provided

17

the full kecamatan block grant allocations; the project would provide TA including training, M&E and supervision. 79 of the 190 participating Kabupatens added 147 Kecamatans in the first year bringing the number of Kecamatans to 1,260 against the planned 1,000. Papua, the poorest province, added the most kecamatans. The local governments thus provided more than US$ 50 million of their own funds to the project.

Participation of women and poor

c) Participation of women in KDP meetings and activities averages over 40%. Significant impacts on rural household expenditure were observed with the expenditures going up by 5% in the project areas, with a multiplier effect of 1.6. Furthermore, the longer a kecamatan received KDP support, the greater the impact on its household expenditure.

Responding to natural disasters

d) KDP2 proved to be a very robust instrument for supporting post-tsunami efforts in all sub-districts of Aceh and Nias reaching more than 6,000 villages. Other areas where KDP responded rapidly to unexpected disasters and conflicts include Jogjakarta and Central Java (earthquake), Papua (earthquake), Maluku and a number of other provinces as well (conflict), and Bali (bombing).

3.3 Efficiency (Net Present Value/Economic Rate of Return, cost effectiveness, e.g., unit rate norms, least cost, and comparisons; and Financial Rate of Return) Under the project social and economic infrastructure covering improved access to markets, town centers, education & health facilities, and clean water supply was created. KDP2 funded some 81,464 infrastructure, economic and social activities across 246 districts in 30 provinces (details in 3.2). Over 90% of the infrastructure built under the project meets quality standards and is still functioning 4 to 5 years after completion of construction, and the cost of construction was 56% less on average than equivalent works built through government and ministry contracts. EIRRs for KDP infrastructure ranged from 39% to 68% (on average 53%). In most cases, these very large benefits resulted from either entirely new economic activities that were made possible by KDP infrastructure, or latent production capacity that was finally able to be channeled to local markets (details in Annex 2). 3.4 Justification of Overall Outcome Rating (Combining relevance, achievement of PDOs, and efficiency) Rating: Satisfactory The project has exceeded almost all of the performance targets envisaged at appraisal and MTR. It has also covered a significantly larger geographical area and higher number of households, and has been efficient in delivering outcomes. It did this in an extremely difficult, volatile country context that saw the scaling back or delay of most WB investment programs. Program management has been erratic and project supervision frequently highlighted managerial inadequacies. On balance, however, the rating team feels that while overall project management was problematic, the fact that it could steer such a big program in such a difficult environment also merits an overall rating of “satisfactory”. For details see Sections 3.2, 3.3, and 4. 3.5 Overarching Themes, Other Outcomes and Impacts (If any, where not previously covered or to amplify discussion above)

18

(a) Poverty Impacts, Gender Aspects, and Social Development Poverty Impacts A 6,000 household panel was constructed from SUSENAS (expenditure survey) data and run against controls for the period 2002—2007. The main findings are that:

• KDP2 has a positive impact on consumption for poor households and households in poor kecamatan. Households in the lowest 2002 consumption quintile participating in KDP2 saw their real per capita consumption increase by between 5.4 and 10.5 percentage points more than in control areas. KDP2 households in the poorest quintile of kecamatan saw similar impacts of between 5 and 13 percentage points.

• The percentage of households moving out of poverty is higher among KDP2 participants in poor areas. The evidence suggests that the likelihood of households moving out of poverty was higher in poor kecamatan for KDP2 households. At the World Bank $2-day poverty line, KDP2 households in poor kecamatans were 9.2 to 11.7 percentage points more likely to move out of poverty between 2002 and 2007.

• Disadvantaged groups other than the poor are less likely to benefit from the program. Female-headed households and households with a head lacking primary education see insignificant or negative impacts for real per capita consumption and movement out of poverty.

• Access to outpatient care expanded in KDP2 areas. Among those household heads not seeking outpatient care in 2002, KDP2 household heads are between 9.7 and 11.5 percentage points more likely to seek outpatient care in 2007 than household heads in the control group. In contrast to the real per capita consumption and poverty status results above, disadvantaged groups also benefit in terms of expansion of access to outpatient care.

• KDP2 reduces unemployment. The change in the unemployment rate was (-)1.5% lower in KDP2 kecamatan in comparison with control kecamatan.

Gender and Social Development Aspects

• The project had a well-defined strategy for integrating gender in the project cycle with respect to each stage and phase. Terms and Conditions were defined for each stage in the cycle of project activities to ensure that women participated in the project. Annex 11 gives details of these terms and conditions and impacts.

(b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development):

Local governments matching grants: In KDP2 (2002-2007), 79 districts or 40% of the total 190 participating KDP districts provided matching funds for subproject block grants. This precedent has since been scaled up and most districts in Indonesia now provide either a matching grant or a direct transfer modeled on KDP. Auditing as a tool to reduce corruption: The project carried out a highly innovative randomized evaluation of alternative interventions to reduce corruption and other forms of leakage. An evaluation study found that increasing audit samples and publicizing audit results lowers losses. The National Auditors have started to adopt this as part of their standard operating procedures to curb the occurrence of corruption. (a full study is available in WB files) Spin-off projects in Provinces: Many provinces adopted the KDP model for delivering development through other programs funded from their own resources. KDP2 reviewed 26 of these spin-off projects (report is in WB project files)

19

Adopting the project as a national model: The GOI has adopted the project model to promote more broad-based growth under the first nationwide poverty reduction program. The program aims to reach the every kecamatan of the country by 2009. Grant Funds and Multi-Donor Trust Funds: The project’s robust implementation arrangements encouraged a large number of donors to partner with the project: they included Japan, AusAid, Danida, New Zealand, CIDA, DFID, and the Netherlands. Project expansion in post-tsunami Nias and Aceh was funded by a Multi-Donor Trust Fund for Post-tsunami Recovery. (c) Unintended Outcomes and Impacts (positive and negative): Positive

• Adoption of community-based development approaches by national and district governments through the National Program for Community Empowerment;

• Government interest in KDP’s M&E systems have (in part) led to a much broader use of mixed methods evaluations to make policy decisions;

• Ongoing consolidation of more than 95 CDD programs into the PNPM umbrella. • Use of CDD for post conflict reintegration • Trial of a community based conditional cash transfer • Adoption of KDP by the Governments of Papua and West Papua

Negative (i) Covering the poorest of the poor. The project was successful in targeting the poorest Kecamatans. Even within the selected Kecamatans, the socialization process was aimed at the poor households. However, KDP’s design and management structure were too rigid to allow for intense facilitator and community training in order to negotiate decisions involving the highly vulnerable and poor members of the community. The planning and decision making committees usually operated on a majority vote and were not as inclusive of the poor as hoped for, and the infrastructure that got created under the project sometimes provided the very poor only wage labour benefits during construction period. They were also not often recipients of micro-credit as the emphasis was on having a viable enterprise, ability to repay, a good past repayment record. (ii) Quality of women’s participation: The project did make provision for women to be represented in forums and committees for each of the activities in the project implementation. Women actually propose two of the three project proposals allocated to each village and decide on these in a separate women’s only meeting. However, their ability to voice opinions, defend proposals, raise issues and argue was limited owing to social, cultural, traditional and religious environment. Also, it was the elite women too often who were in the forefront rather than the poor. Project’s impact on changing or altering these barriers to women’s participation and changes to gender equity is now being measured under the project. (iii) Support from other Technical Departments: The interest and technical support of sectoral ministries in executing the sub-project proposals was limited, making the project depend on its own technical staff. This also limited the project from taking up more technically difficult activities or activities that involved recurrent costs. Examples of such necessary activities include large-scale health provision, providing teachers for schools, or any kind of infrastructure network planning. (iv) Project’s Micro-credit approach: The micro-credit under the project allowed communities to get money from the project at commercial rates to be invested in private goods and village revolving funds. This money reached the poor but not the poorest. The money was invested well with attendant multiplier

20

effects through employment, but the repayments remained low, well below sustainability levels. Internal WB discussion of whether to allow microcredit within KDP2 was lively, with surprising alignments: macroeconomists such as Sir Nicholas Stern (WB VP at the time) and the WB country director arguing to retain it until the crisis was over. By 2006, microcredit was removed from KDP2 except for grants to women’s revolving funds. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes) 4. Assessment of Risk to Development Outcome Rating: Negligible to Low Institutionalization of information flow, transparency and accountability: The project established mechanisms for implementation which enabled the free flow of information to different stakeholders and from different formal and informal sources; established intra and inter village platforms for cooperation and decision making; and established check and balances, social oversight and transparency. However, this social capital needs to be nurtured beyond project to impact development effectiveness in public programs other than KDP. Relationship between communities and local governments: There has not been as significant a change to the attitude of local government towards communities, though local government support for KDP has grown tremendously. The capacity of villages to voice their demands in the district-level development planning process is still limited and remains a key challenge of the program. Government ownership of KDP is strong and more so now with the rebranding of Bank-financed CDD projects, KDP and UPP, as PNPM Mandiri. 5. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues)

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase) Rating: Satisfactory The Bank's performance in the identification, preparation, and appraisal of the project was satisfactory. The project’s objective was consistent with the government’s development priorities and the Bank’s CAS. During preparation and appraisal, the Bank took into account the lessons and experiences emerging from KDP1 in designing the KDP2. Bank undertook significant upstream work on community-level institutions and their interface with formal public institutions – the organization structures, stakeholders, and the formal legal, regulatory, and political regimes. Detailed attention was given to procurement and accountancy practices and flow of funds and goods. In-depth understanding of gender dynamics led to culturally sensitive responses to development priorities of men and women. Tackling corruption required a good understanding of the incentives that drive it, creativity in designing counter-incentives, and conviction to go into cases of fraud. The Bank worked closely with the PMD, the Government’s implementing agency, to design a robust M&E system and a complaints handling mechanism and in expanding decentralized management arrangements. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Satisfactory

21

The Bank fielded a multi-disciplinary supervision team with expertise in project management, financial management, procurement, monitoring, and safeguards. The key to KDP’s supervision was basing it in the field, which allowed for more frequent site visits and more sustained follow-up.. For the ICR, the key issue to discuss is how best to assess the Bank’s intense supervision effort. The issue has two particularly important dimensions. First, overall, KDP and the other CDD operations have a different “life cycle” than normal Bank operations: they are in general relatively cheap to prepare, but because they are localized, dispersed over large areas, and involve a number of decentralized agencies, they require a more sustained, on-site program of supervision simply to check whether the government systems are operating well. Secondly, KDP2’s context – a weak national agency, intense pressures to scale up rapidly, a high risk national environment, and a large number of disasters, conflicts and other abnormal events, also led to a policy choice by Bank management to provide more than normal hands-on assistance to the government. While the choice can be debated, the opinion of the ICR team is that without this hands-on help, the project could not have carried out all of the functions loaded onto it given the turbulence of the overall environment and the limited capacities of the project’s executing agencies. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory

Based on the Bank performance during lending phase and supervision as discussed in Section 5.1, the overall performance is rated as Satisfactory. The intense involvement in the preparation and supervision, the quick project preparation at low cost, candid and supportive supervision reporting, robust M&E and immediate response to complaints, defined Bank’s overall performance under the project. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory GOI remained committed to KDP throughout its lifetime, although there were a number of political perturbations that threatened policy changes that would have ended the KDP program. GOI provided requisite levels of counterpart financing, audit oversight, and compliance with covenants. (b) Implementing Agency or Agencies Performance Rating: Marginally Satisfactory PMD’s performance needs to be placed in context. PMD was a weak agency entrusted with scaling up a very big project in an extraordinarily difficult environment, one in which much stronger agencies and more traditional project designs stalled or failed to achieve their objectives. By contrast, despite the many hiccups, KDP not only disbursed well and effectively, but managed to scale-up dramatically over the course of the project’s lifetime, with few major problems, delays, or sacrifices. However, there were also many avoidable problems that stronger management could have rectified. Particular problems included (i) chronic delays in procurement; (ii) poor management of consultants; (iii) slow responses to audit findings and other complaints; and (iv) delayed or low quality performance on the training and capacity programs, especially for local governments. Technical Elaboration of PMD’s performance: PMD submitted all required quarterly and annual reports in a timely manner and these reports were informative and provided details on project’s progress. KDP2’s financial management system including accounting, controls, auditing and reporting was adequate and satisfied the Bank’s financial management requirements. Procurement of all works, goods and technical services under the project followed the Procurement Guidelines “Procurement under IBRD Loans and

22

IDA Credits”. The procurement aspects of the project in relation to the social and economic infrastructure at the community level were managed in a satisfactory manner by the PMD. As the project implementation progressed, tKDP management within Home Affairs weakened. Consultant selection, training, supervision and evaluation suffered from poor oversight and divisive leadership. Key staff positions under KDP2 remained empty for long periods of time simply because no action was taken to recruit replacements or because the salary offers and working conditions for several types of needed professional staff was not competitive even with other government programs. The training programs – both technical and social, had not been handled well with reduced emphasis, less time and allocations. A critical problem with the functioning of the implementing agency was the consistently poor budget forecasting and funds disbursements. However, the functioning of the PMD was also constrained by systemic problems such as national budgets being released very late in the annual budget cycle; the newly introduced performance-based budgeting of GOI not being conducive for multisectoral programs such as KDP2; and budget preparation and release from within the executing agency that were also badly fragmented, leading to additional delays and management problems. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory In light of the government and implementing agencies’ performance as discussed in Section 5.2, the overall performance of the Borrower was Satisfactory. 6. Lessons Learned (Both project-specific and of wide general application) Important factors for the success of a project: The KDP principles and mechanisms of transparency, participation, community elected facilitators and committees, and open public meetings are critical in supporting consensus building and decision making; and these are critical components of good governance. Scaling up: The key design features that enabled scaling up of the project were (i) project’s disbursement system

that enabled direct transfer of funds into a uniquely coded sub-district account, in a modular fashion, thus keeping each Kecamatan independent; and funds are transferred at the beginning of the planning cycle; (ii) project built on an internal architecture whose core elements were field tested for many years and were familiar to administrators and consultants; (iii) decentralization of management functions to regional management units and autonomous decision making; (iv) project offered both incentives and sanctions for local governments; (v) all technical, managerial and social services under the project were outsourced and were purchased from the national and local market and not from civil servants; and (vi) high levels of transparency with social oversight to limit corruption and other distortions and long participatory planning to limit elite capture.

Implementation:

Block grants provided to communities as direct transfers from the national level can be effective in reaching target beneficiaries, reducing potential leakage, and accelerating rapid disbursement. However, this needs to be accompanied by creating and strengthening a participatory planning and decision making mechanism at the local level to enable communities to decide on their priorities, make necessary allocation; plan and design sub projects and execute them. Training and facilitation to

23

communities in particular on financial management including basic accounting and book keeping, procurement, information disclosure, monitoring and evaluation and operations and maintenance, is extremely important.

Facilitators have an important role providing communities with project information on processes,

activities and simple rules for decision making and procurement. However, ensuring proper selection and recruitment of facilitators based on qualifications, disbursal of timely and agreed remuneration, provision of timely training and refresher courses, routine performance evaluations with rewards and punishments are all critical in ensuring effective and accountable facilitation.

Facilitators working in conflict areas require specialized training in negotiations and conflict

management skills to be able to work together with village leaders and communities to mediate conflicts that may arise and emphasize the common good of the entire community. Flexibility in Bank procedures is also essential in post-disaster and post-conflict contexts.

Separate proposals from women and their selection/finalization in separate forums is critical as their

experiences, habits, problems and needs are very different and may not be appreciated by men. The provision of technical facilitation has greatly increased project benefits and efficiency by

improving the design, construction, operations and maintenance of village infrastructure, including improving local procurement. Sustained interventions in an area is a prerequisite for improved impacts and the larger rates of return for the project. Evaluation studies show that the highest returns to investments under the project are found in the latest years in the oldest cycles which points to the need for a sustained intervention in the same area instead of a “hit and run” intervention. I

Monitoring: Infrastructure design and construction appraisals by community members without formal engineering

training can be undertaken using simple guidelines; enabling communities to participate in and monitor work of Technical Facilitators from the project.

Threat of an audit weighs as much as its execution and is very cost effective even at 100%. To further increase audit effectiveness, audit assignments must be randomized to reduce repeater collusion and audit reports must be distributed among villagers in a written form.

Audit and increasing probability of an audit leads to reductions in corruption on an average of 8

percent of expenditures. For infrastructure projects, reductions come from reductions in over-invoicing of materials procured and reductions in over billing of labour.

Grassroots monitoring is more effective in reducing theft when community members have substantial

private stakes in the outcome, but less effective for public goods. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies No issues were raised by the Borrower/Implementing agencies

24

(b) Co financiers:

Not applicable (c) Other partners and stakeholders (E.g. NGOs/private sector/civil society)

No issues were raised by the other partners and stakeholders.

25

Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Components Appraisal Estimate (USD millions)

Actual/Latest Estimate (USD millions)

Percentage of Appraisal

Kecamatan Grants 310.6 258.54 112.2 Community Capacity Building 65.5 48.64 77.83 Implementation Support 40.4 37.03 215.3 Monitoring and Evaluation Studies 2.90 2.26 77.9

Total Baseline Cost 419.4 346.47 108.9 Total Project Costs 419.4 346.57

Project Preparation Fund 0.0 0.00 0.00 Front-end fee IBRD 2.10 2.08

Total Financing Required 421.5 348.55

(b) Financing

Source of Funds Type of Co financing

Appraisal Estimate

(USD millions)

Actual/Latest Estimate

(USD millions)

Percentage of Appraisal

Government 101.30 101.30 100 International Development Association (IDA) 111.30 111.30 100

International Bank for Reconstruction and Development (IBRD) 208.90 208.90 100

Netherlands Ministry of Foreign Affairs - 70.85

26

Annex 2. Outputs by Component and Implementation Arrangements

The twin purposes of the Second Kecamatan Development Project were to support better governance in rural villages and to provide rural communities with public goods and development infrastructure that would raise the incomes of the poor. The project was based on key principles of transparency, participation, bottom-up decision-making, village financial management, and technical and social facilitation drawn from the private sector and NGOs. The outputs by components and the implementation arrangements are detailed below. Component A: Kecamatan Grants Program. Highly Satisfactory The project was finally implemented in 30 (91%) provinces covering 246 (55%) districts and 1354 (26%) sub-districts. A total of 22, 010 (35%) of all villages were covered under the project. Kecamatans were provided block grants ranging from Rps. 750 million to 1.5 billion each annually, depending on their population. This grant was made available to all villages within the selected kecamatan. Grants were channeled directly to a collective bank account held in the kecamatan. These funds were used to support subprojects selected through a competitive selection process of proposals made by community and hamlet level organizations. The project operated on an open menu principle—anything not on a very short negative list would be allowed. Over 70% of the grant ended up being used for infrastructure, economic activities, and social services allocated on a competitive basis to proposals from villages. A provision was made allowing 10% to be allocated up-front to pre-existing, successful (verified on audit) savings-borrowing schemes being operated by women's groups. Socialization and Planning

• 100% of the villages in the selected Kecamatans undertook information dissemination and socialization processes with workshops at province, district, kecamatan and village levels, along with distribution of project related printed material.

• Two facilitators – one man and one woman were selected in all project villages who supported communities with the socialization and planning processes.

• Most villages under the project undertook village visioning and all went through a planning process and identified social and economic infrastructure priorities for support by the Social and Technical Facilitators at the Kecamatan level. The subproject proposals required low-tech and labor-intensive methods and were not supplied by other sources of skills and resources. 75% of the village meetings were attended by local government representatives.

Matching Grant In KDP2 (2002-2007), 79 districts or 40% of the total 192 participating KDP districts provided matching funds for subproject block grants. This was reflective of the respect and faith that local governments have in the capabilities of communities in KDP to identify their priorities and implement subproject which are of high quality and are cost effective. Outcomes

a) Improved access to markets, town centers, education & health facilities, and clean water supply: KDP2 funded some 81,464 infrastructure, economic and social activities across 245 districts in 30 provinces. Economic infrastructure created includes 12,944 of roads built or upgraded, 3,298 bridges built or reconstructed, 2,068 irrigation systems built, 4,400 clean water supply units and 1,760 sanitation units built. The social infrastructure includes construction and renovation of 2,650 schools, provision of 2,067 packages of school equipment and materials, 88,750 individual educational scholarships, and construction and renovation of 2,051 village health units and posts

b) EIRRs for KDP infrastructure ranged from 39% to 68% (on average 53%). In most cases, these very large benefits resulted from either entirely new economic activities that were made possible

27

by KDP infrastructure or latent production capacity that was finally able to be channeled to local markets.

c) 20.2 million workdays have been generated for 1.2 million villagers through short-term employment on labor intensive infrastructure works, many new businesses and transport services have opened up due to new roads, bridges, and piers; and there are almost 808,000 loan beneficiaries and entrepreneurs participating in KDP credit & business activities.

d) KDP2 saw high levels of local contributions. On an average about 17% of project costs were provided by local communities.

e) Participation of women in KDP meetings and activities ranged from 26 to 45%. Significant impacts on rural household expenditure were observed with the expenditures going up by 5% in the project areas with a multiplier effect of 1.6. Furthermore, the longer a kecamatan received KDP support, the greater the impact on its household expenditure.

Component B: Community Capacity Development. Satisfactory In order to enable the community to plan, implement, manage and maintain their own sub-projects, KDP2 adopted a strategy for community capacity building which included sustained training, basic technical facilitation and administrative skills, interaction of communities with district governments, inter-village and inter-kecamatan forums to promote joint problem solving and local conflict resolution. Outputs

a) 90% of the infrastructure built under the project met quality standards and the village infrastructure built through KDP methods cost 56% less on average than equivalent works built through government and ministry contracts.

b) The total number of corruption complaints as of 2006 came to 976 for a total value of $650,000.00. Over $170 million was disbursed over that same period, for a corruption rate of 0.4%. Independent audits of KDP performed by Price Waterhouse and Moores Rowland found that less than 1% of village subprojects showed deviations. Of that total, KDP has recovered 40% of the missing funds. Keeping in mind that the mechanisms for measuring corruption rates are highly imprecise, the general picture is one of efficient delivery of development funds to villages.

c) Local governments provided their own administrative and supervision costs, often more than the required 6%. KDP2 initiated a system of local government contributions of the Kecamatan allocations and local governments were allowed to add Kecamatan as long a they provided full kecamatan allocation and the project would provide TA including training, M&E and supervision. 79 of the 192 participating Kabupatens added 147 Kecamatans in the first year brining the number of Kecamatan to 1260 against the planned 1000. Papua the poorest Province added the most Kecamatans. The local governments thus provided more than US$ 50 million of their own funds to the project.

Component C: Implementation Support. Moderately Satisfactory The project hired and trained 30,000 villagers and 2,000 facilitators to work at the sub-district level, as part of the training of trainers strategy. These Master Trainers were exposed to four sets of skills namely (i) basic skills in development planning and management (procurement, financial management, participatory design, technical skills); (ii) cross-village programs in cooperative planning, ex post quality review, and conflict resolution; (iii) village linkages to the government and private sector at the district level through monitoring and long-term development planning; and (iv) district level participatory poverty assessments and dialogue on sustainability. Project participants including community leaders, facilitators, NGOs, parliamentarians, women's groups, etc. were supported to meet other community leaders from elsewhere in Indonesia and neighboring countries to learn from each other’s experience in program implementation and solving similar problems in community development.

28

Output Community involvement

• In 22,010 villages across the country, communities participated in a democratic, participatory process of planning and decision-making regarding the allocation of public development funds.

• Community contributions averaged 17% nationwide with wide provincial variation. There was high government commitment and buy-in with 40% of districts providing matching grants in KDP2.

Facilitators

• Owing to the need for a relatively high degree of facilitation and financial oversight in order to overcome traditions of corruption, a lack of transparency and top-down planning, the project employed a large number of contract staff. It is estimated that 4200 Indonesian consultants at the national, provincial, district and sub district levels provided technical assistance and guidance. In addition, every village elected two facilitators, one man and one woman.

• Facilitator performance evaluation was carried out with involvement of local government and firms who reviewed and certified performance. Some non-performing consultants were terminated, but not in a timely manner.

Training

• Training was provided to villagers and facilitators but there was scope for improvements in quality of training material, greater decentralization of training budget and greater authority to provincial teams for effective training and increased in-service training.

• Training to local governments was limited and could have been expanded. Local Government Coordination

• In order to achieve a synergy in the project and local government planning, and promote more cooperation with other similar programs to avoid duplication and maximize opportunities; the project supported socialization of local governments and DPRDs, began to consolidate the Tim Koordinasi, provided guidelines for clear and decentralized procedures authorizing cooperation outside the project, and increased the presence of line agencies and other donors in the village discussions. All this resulted in increased matching grants by local governments as well as spin-off projects.

Component D: Monitoring and Evaluation Studies. Satisfactory This component supported the MIS for tracking project progress and impacts. It also supported various studies and evaluations. The MIS functioned well though some improvements are needed. This CDD project is well monitored and documented. MIS

• The MIS was functional but was not fully effective owing to quality of staff, MIS hardware, and non-integration of different data sources into a single database.

• The external website needed improvements.

Studies and Evaluations • A number of studies were commissioned during the life of the project to understand a range of

project impacts including quality of infrastructure, EIRR, poverty impact, women’s participation, conflict areas, etc.

29

Annex 3. Economic and Financial Analysis (Including assumptions in the analysis)

Economic Impact Analysis A post-construction economic impact analysis was conducted on 113 KDP rural infrastructure projects across four provinces to determine the overall economic benefits that have accrued to the villages that planned and built infrastructure facilities according to the KDP’s CDD approach. The study was limited to four types of KDP infrastructure namely Roads, Bridges, Water Supply and Irrigation. These four types of infrastructure were chosen because they have been shown over time to be the dominant types of infrastructure requested by KDP villages across Indonesia.

Results of the Economic Impact Analysis Study The study revealed that the infrastructure supported under the project had significant impacts on the economies of the villages analysed. This analysis measured those impacts, both quantitatively and qualitatively, with the following instruments:

• Economic Internal Rates of Return • General Income Multiplier • KDP vs Contractor Cost Comparison • Project-Specific Quality of Life Indicators • Basic Technical Quality Review

1. Economic Internal Rate of Return

Type of Infrastructure No. Projects Average EIRR Water Supply 41 38.62% Roads/ Bridges 55 51.84% Irrigation 17 67.64%

Total Projects 113 The study revealed that EIRRs ranging from 38.62% for water supply to 67.64% for irrigation. The benefits were as a result of either entirely new economic activities that were made possible by KDP infrastructure, or suppressed/latent production capacity that was finally able to be channeled to local markets. The most frequently seen examples were roads that provided access to previously isolated villages where, before the road, all produce had to be hand carried or carried in small amounts on motor cycles, for kilometers before reaching the nearest market. Likewise, a number of irrigation projects were able to more than double the area under cultivation as well as channel water from local springs during the dry season. In some cases this resulted in triple benefits: (1) additional area cultivated, (2) two crops per year instead of one, and (3) increased fertility due to timely watering. The resulting increases in yields per hectare were very significant. There were also 8 projects that produced EIRRs of over 100% due to extra-ordinarily large benefits. These projects were not included in the calculation of averages shown above due to the risk of major distortions.

30

2. General Project Income Multiplier

Infrastructure No. Projects Av. Multiplier Rp Equivalent Total Project Cost Water Supply 41 1.143 633,730,114 4,914,301,345 Roads/ Bridges 55 1.180 1,124,376,465 7,874,248,178 Irrigation 17 1.173 311,306,718 1,790,319,769

Total Projects 113 2,069,413,297 14,578,869,282 The cash injected into the 113 village economies by the KDP projects generated additional value equivalent to Rp 2,069,413,297 *(US$ 226,165) (US$ 1.00 = Rp 9,150). When compared to the actual total value of all 113 projects (inclusive of village contributions, or Swadaya) this amount is very significant. 3. Cost Comparison Method

Infrastructure Projects

No. KDP Cost Only

(No Swadaya Cost) Cost Pemda (Contractor

Price) Av. Difference %

Water Supply 41 4,101,268,770 6,704,995,650 66.04 Roads/ Bridges 55 6,547,034,660 10,349,768,540 58.70 Irrigation 17 1,669,110,053 2,269,372,345 42.72

Total Projects 113 12,317,413,483 19,324,136,535 The Cost Comparison undertaken during the analysis was designed to determine what the same infrastructure would have cost had it been constructed by the local government contractors instead of KDP. A detailed re-costing (with the help of local public works officials and FKs) was undertaken of the project proposals prepared by each KDP village using local government (Pemda) unit costs and contractor costs. This method was considered to be the most objective and accurate way of comparing the construction costs of a KDP project with those of a technically comparable project built by local government contractors. The Cost Comparison analysis showed savings of Rp 7,006,723,052 (US$ 765,762) because villages mobilized their own labour and other resources to implement the projects themselves. The extrapolation of these figures to the total number of infrastructure projects constructed under and KDP II, even with considerable discounting to allow for problem projects, reveal significant additional economic value and cost savings. 4. Quality of Life Indicators In order to understand the direct and indirect benefits accruing from the project, project-specific indicators were used for four types of infrastructure projects analyzed. These included:

• Increase in number of children attending school • Construction of new houses occurred after the project • Repair and/or renovation of houses occurred after the project • Increase in motor cycle ownership • Additional incomes used to start new enterprises • Increase in general level of personal cleanliness • Increased village cooperation and self confidence • Increased management and planning skills.

From 113 projects 62 (55%) were ranked by villagers as “Sangat Dirasakan” (Impacts Strongly Felt). 46 (41%) were ranked as “Dirasakan” (Impacts Felt) and 5 projects (4%) were ranked as “Kurang

31

Dirasakan” (Impacts Less Felt). In other words 108 projects (95%) were ranked by the villagers who built them as having impacts that were either ‘Strongly Felt’, or ‘Felt’ on a daily basis.

Infrastructure Type

Impact Strongly Felt Sangat Dirasakan

Impact Felt Dirasakan

Impact Barely Felt Kurang Dirasakan

Roads/Bridges 33 17 3 Water Supply 20 20 2 Irrigation 9 9 Total 62 46 5

Some of the specific benefits from each type of infrastructure identified were: For roads and bridges:

• Increase in transport businesses • New businesses opening due to increased traffic on roads and improved access to areas • Decrease in transport costs to bring agricultural produce to market • Greater access to schools, health facilities, markets, and town centers • Time savings due to improved ease of travel and transport For irrigation facilities: • Increased agricultural production For water systems: • Time savings due to better access to water sources, especially for women

5. Post-Project Technical Quality Review

Infrastructure Type

Baik Very Good

Cukup Baik Good/Acceptable

Kurang Baik Not Good/Unacceptable

Roads/Bridges 29 25 Water Supply 19 19 3 Irrigation 6 8 4 Total 54 52 7

The technical evaluation of the projects was based on the standards for technical quality and project management that the villagers set for themselves. These basic standards are implicit in each village project proposal and are also the basis on which the National Management Consultants (NMC) monitored the progress the KDP. Eight simple evaluation criteria that became the basis of a questionnaire that was used for interviews with the head of ‘Tim Pelaksana Kegiatan’ (Head of the Village Implementation Team) and at least three other individuals in the village who had been closely involved with the project from beginning to end. The presence of the extra three people was meant to provide some balance and objectivity to the opinions of the Head of the Implementation Team. A simple scoring system was then used to provide a ranking for the project ranging from “Baik”, “Cukup Baik” to “Kurang Baik”. A project that scored 80% or above was ranked as “Baik” (Very Good/All technical criteria met). A score of between 60% to 79% ranked as “Cukup Baik” (Good/Technically Acceptable). And a score of less than 60% ranked as “Kurang Baik” (Not So Good/ Technically Unacceptable).

32

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/ Specialty

Lending Scott E Guggenheim Lead Social Development Specialist EASIS Task Team Leader Yogana Prasta Senior Operations Officer EACIF Disbursements Unggul Suprayitno Financial Managment Specialist EAPCO Financial Management Naseer Rana Senior Procuremetn Specialist EAPCO Procurmenet Gillian Brown Senior Gender Specialsit EASSD Insitutions/Gender Asmeen Khan Senior Rural Development Specialist EAPES Rural Development Karin Nordlander Legal Counsel LEGEP Legal Anthony Toft Senior Counsel LEGEP Legal Enurlaela Hasanah Consultant EASIS Historian Victor Bottini Senior Social Development Specialist EASIS Institutions Soeroso Soesastromo Consultant EASSD Engineering Susanto Simanjuntak Consultant EASSD Anti-corruption Arie Purwanti Consultant EASSD Document Management Indira Dharmapatini Senior Operations Officer EASIS Planner Sulistiowati Nainggolan Consultant EASRE Safeguards Supervision/ICR Scott E Guggenheim Lead Social Development Specialist EASIS Task Team Leader

John Victor Bottini Senior Social Development Specialist EASIS Task Team Leader and Community Development

Sentot Surya Satria Social Development Specialist EASIS Governance Yogana Prasta Operations Advisor EACIF Disbursements Unggul Suprayitno Financial Managment Specialist EAPCO Financial Management Naseer Rana Senior Procurement Specialist EASCO Procurmenet Gillian Brown Senior Gender Specialsit EASSO Insitutions/Gender Karin Nordlander Legal Counsel EASSD Legal Anthony Toft Senior Counsel EASSD Legal Enurlaela Hasanah Research Analyst EASIS Historian/communication Threesia Mariana Siregar Senior Program Assistant EACIF Administration Fajar S Pane Consultant EASSD Finance Chitrawati Buchori Consultant EASSO Gender Menno Prasad Pradhan Economist EASHD Economics Farida Zaituni Consultant EASEN Safeguards Sri Kuntari Social Development Specialist EASIS Community Development Firman Dharmawan Contract Officer GSDPR Procurement Vivi Alatas Senior Economist EASPR Economics F. Prahastanto Consultant EASIS Operations

O. Herawati Consultant EASIS Engineering and Quality Control

Peter Wrathall Consultant EASIS Financial Management

33

(b) Staff Time and Cost Staff Time and Cost (Bank Budget Only)

Stage of Project Cycle No. of staff weeks USD Thousands (including

travel and consultant costs) Lending

FY01 13.64 148.5 FY02 12.38 95.2

Total: 26.02 243.7

Supervision/ICR FY02 4.23 143.4 FY03 10.95 239.7 FY04 14.33 201.2 FY05 29.65 189.8 FY06 3.95 95.9 FY07 21.21 135.9

34

Annex 5. Beneficiary Survey Results

Not Applicable

35

Annex 6. Stakeholder Workshop Report and Results

The project elicited feedback from stakeholders on KDP and some of their positive reactions are provided below KDP produced several books, reports, and newsletters that provide additional stakeholder insights. KDP has also been studied by a number of academics. These longer reviews are available in project files and on WB websites. Adhuri, Community figure in Singawada Village, Nusa Tengarra Berat Irrigation has great benefits for us because our citizens own rice fields. Before we were having difficulties watering our fields, especially, during the dry season. With KDP funds, Alhamdulillah (thank god) we now have an irrigation system. Before, we were only able to harvest once a year, now we can harvest rice two to three times. Head of Hamlet, Binjai Village, Tayan Hulu Sub-District, Sanggeau District, West Kalimantan “… We are so delighted with KDP’s school for elementary students (grades 1 to 3)… Our children do not need to walk for three kms and we, as parents, do not have to worry about possible accidents for kids who used to ride on the back of trucks…” Sirka Usamen, Head of Loulalang Village, Tolitoli Utara, Central Sulawesi “Before, women were trembling when speaking. Now, due to the economic loans, women are enthusiastic about attending the meetings. Furthermore, they can speak out loud…” Villager in Pagersari Village, East Java, NGO SPEKTRA Report, East Java “Almost every year, the Kalidawir area floods, especially Pagersari Village. Before KDP project, Pagersari was flooded and my house also. My house is at the back of rice fields, so of course there is flooding. The road and drainage system built by KDP was completed in March and I worked as a laborer. The benefits of this system are very much felt by the citizens here because houses do not get flooded any more, especially during rainy season. I can only give thanks because someone still pays attention to me although I am just a small (marginal) person.” Woman in Giring Village, Paliyan Sub-district, Jogjakarta “During dry season, there is not much employment in agriculture in this village. Many local residents have to seek work outside the village. The existence of such jobs as the KDP road surfacing project helps the community very much. Many women became laborers to add to the family income”. Arif Saleh, village representative, in Ampibabo sub-district, Parigi Moutong, Central Sulawesi Parliament members should take examples from here. This is how community members learn from democracy. The competition is fair, because only urgent proposals will be funded”. Sub-District Head, Abung Surakarta, Lampung “KDP is better than other government programs. I can say that KDP is a true reflection of democracy in development. The program allows more community involvement in planning, managing, and implementing projects that they choose….KDP demonstrates real bottom-up planning. This is actually suitable for the community. On the other hand to avoid bias, we need assistance from the facilitator to guide and facilitate the community…. There are so many programs claiming to be ‘bottom-up’ but in fact the implementation is still top-down. I agree that KDP is the best example of a true bottom-up development program.

36

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR

KDP aims to increase/improve community participation in village development through a cycle of activities, such as (i) Information Dissemination and Socialization, (ii) Participative Planning Process, (iii) Village/rural and sub district project selection, (iv) Community implementation of their projects, and (v) Accountability meetings and progress reports. The Kecamatan Development Program II (KDP II) is a continuation of KDP I. The Kecamatan Development Program (KDP) II was implemented from 2003 up to 2006. Total district/regional coverage for KDP II was 30 provinces, 245 districts, 1,346 sub districts, 22,010 villages. Total fund allocation of KDP II is US$ 400,3 million, which is funded by the World Bank with the amount of US$ 320,6 million, government contribution of US$ 101.30 million, and Dutch grant with the amount of US$ 70.85 million. During its implementation, KDP II involved more than 700 sub districts in each phase. In TA 2002 (Phase IV), there were 1,264 sub districts participating (8 sub district dropped), out of 964 sub districts in TA 2003 (Phase V), 7 sub districts could not carry on their activities. While in TA 2004 (Phase VI), 868 districts were involved, but 34 sub districts were dropped and 89 sub districts were affected by disaster. Phase VI was able to be implemented in 2005. The number of funded activities has exceeded the target, with a total of 18,675 activities while the number of activities that were targeted to be implemented in PPK II was 10,000 activities.

I. Strengths and weaknesses in KDP II implementation

By looking at the weaknesses of KDP I implementation, the implementation of KDP II is better. During KDP II implementation from 2003 – 2006, there are strengths and weaknesses with regards to the implementation: A. Strengths

• The performance of KDP II is better compared to the implementation of KDP I. KDP II implementation is more transparent and has clearer accountability.

• KDP II is more consistent in fulfilling the village priority since KDP II is not easily influenced by other parties and it also has a more open menu

B. Weaknesses

• There was no baseline study to see the impact of community empowerment. KDP II was also not doing the social mapping to decide the poor group as the project beneficiaries.

• The government system used within PPK which is based on the representative system can holdup the community participation. Representative system is often more effective in delivering information and suggestions from bottom level (village/community members) to top level (village government) rather than giving out information top to bottom.

• The mechanism and institution for observation and accountability is still weak. • PPK has a limited ability to involve women in the development process.

II. The Impact of KDP Implementation

1. PPK brings positive and negative impacts to the village community and village heads’ ability for working together to decide the development priorities in their villages.

37

2. PPK has given lots of skills needed by the community, for example, in how to draft/plan project proposals and how to manage projects which will increase village capacity in fulfilling its development needs.

3. PPK has increased women’s participation in development. 4. PPK has been actively involved in overcoming the poverty in the rural level which has been done

together with the villagers.

III. Appraisal for the World Bank

1. The problem and challenge encountered by the World Bank in the implementation of PPK is about sustainability. World Bank needs to find the solution to this issue. It is expected that PPK can improve the sustainability aspect, for example by forming a community group in the village or district level based on the universal value, such as honesty, care, willingness, loyalty, kindness, etc.

2. A limited number of sub districts can be funded by the funds lent by the World Bank, resulted in the situation not all locations suggested by the local government can get PPK assistance.

3. It is important to have consistent criteria for the determination of locations between the World Bank, PMD and BAPPENAS, to avoid any delays in decision on locations and project implementation.

4. The World Bank has complained to the Direktorat Kelembagaan dan Pelatihan Masyarakat (KPM) MOHA (implementing agency) to overcome the following issues: (i) availability of the key consultants who are often not available when needed; (ii) the delay in DOK (operational fund/allowance) disbursement; (iii) not enough budget for facilitator training; (iv) the Management information system which is not yet functioning.

IV. Recommendations

If in the following years PMD will be responsible for the community empowerment component, then it has to maintain the quality of the community empowerment process and the management of the facilitators and the consultants. There are few things that need to be improved: 1. To improve the Secretariat and NMC organization/structure for PPK management. 2. To change and or to add the number and qualification of consultants who will assist to manage

the PPK/PNPM Perdesaan. 3. If the above things cannot be fulfilled by PMD, it should be considered that the management of

PPK be shifted to another Department which also has community empowerment activities in the villages.

If the above alternatives cannot be done, it should be considered to form a new independent organization, apart from the Department/Ministry which will manage the empowerment.

38

Annex 8. List of Supporting Documents Consulted

• Project Appraisal Document

• Aide Memoires, Back-to-Office Reports, and Implementation Status Reports.

• Project Progress Reports.

• Country Assistance Strategy for Indonesia (Report No. 27108-IND), EAP, World Bank. October 2003.

• Project Restructuring Paper: Indonesia Tsunami Emergency Recovery Support Package:

Proposed Restructuring of three ongoing Projects in Response to the Late-2004 Natural Disasters. World Bank Response to the Tsunami Disaster (SecM2005-0035), January 28, 2005.

• Strengthening World Bank Group Engagement on Governance and Anticorruption. The World

Bank, March 2007.

• Simplified Implementation Completion report, republic of Indonesia – First Development Policy Loans – Loan No. 4761-IND. World Bank. August 2005.

• Vivi Alatas. An evaluation of KDP. The World Bank. 2005

• Judith Edstrom. Indonesia’s Kecamatan Development Project – Is it replicable? Design

considerations in Community driven Development. Paper No. 39, Social Development Papers. Environmentally and Socially Sustainable Development, The World Bank. March 2002.

• Anthony Torrens. Economic Impact Analysis of Kecamatan Development Program Infrastructure

Projects - Final Report. The World Bank. January 2005

• Scott Guggenheim, et al. Enhancing Women’s Participation – Learning from Field Experience. The World Bank.

• National Management Consultants and Kecamatan Development Program Secretariat. Final

Report on the Evaluation of Infrastructure Quality, KDP Cycle IV. 25 September 2005 • Paul Adams. KDP-II Matching Grant Study. The World Bank. December 2004.

• The Ministry of Home Affairs and Community Development Agency (PMD) and National

Management Consultants (NMC). KDP in Conflict Areas. June 2002.

• Susan Wong. Indonesia Kecamatan Development Program: Building a Monitoring and Evaluation System for a Large-Scale Community-Driven Development Program. The World Bank. May 2003.

• Benjamin A Olken. Monitoring Corruption: Evidence from a Field Experiment in Indonesia.

Harvard University and NBER. November 2004.

39

• Detlev Holloh. Review of the KDP Micro Credit Approach. September 2001 • Ekart Hartmann and Heinz Unger. Assessment of technical and safeguards aspects of KDP2.

World Bank. November 2004.

• Patrick Barron, Rachael Diprose, and Michael Woolcock. Local Conflict and Community Development in Indonesia: Assessing the Impact of the Kecamatan Development Program. February 2006.

• Susan Wong. Do Women Make Any Difference? KDP-I Gender Data Analysis: Interim Report.

The World Bank. February 2002. • Andrea F. Woodhouse. Village corruption in Indonesia: Fighting corruption in the World Bank’s

Kecamatan Development Program. The World Bank. June 2002. • Karrie Mclaughlin, Adam Satu, and Michael Hoppe. Kecamatan Development Program

Qualitative Impact Evaluation. The World Bank. April 2007.

• Scott Guggenheim, Tatag Wiranto, Yogana Prasta and Susan Wong. Indonesia’s Kecamatan Development Program: A Large-Scale Use of Community Development to Reduce Poverty. A case study from Reducing Poverty, Sustaining Growth. What Works, What Doesn’t, and Why A Global Exchange for Scaling Up Success Scaling Up Poverty Reduction: A Global Learning Process and Conference Shanghai, May 25.27, 2004.

• Scott Guggenheim. Crises and Contradictions: Understanding the Origins of a Community

Development Project in Indonesia. The World Bank.

• Directorate General of Community and Village Development, MOHA. Kecamatan Development Program, Phase II: Final Report. 2007.

40

Annex 9. Risks and Their Mitigation

Risks and their mitigation The project faced the following substantial risks and the measures mentioned below were taken to mitigate them:

Risk Mitigating measure

Poor management at the Central level reflected in delays in budget approval, vacancies in key positions, under utilization of Consultants leading to wastage of money, poor fiduciary controls, and slow down in project implementation.

Support and constant follow-up with MOHA and the PMD for speeding up processes. Clear demarcation in roles with PMD handling administration, contracts and policy issues along with inter-governmental dialogue; and NMC being responsible for operational and functional aspects.

Delays in fund transfer especially to the village level would force communities to utilize the funds before the end of Indonesian fiscal year curtailing the participatory planning and decision making process; and dilution of procurement processes causing fiduciary risk.

Support and constant follow-up with MOHA and the PMD for speeding up funds disbursal as also allowing for unutilized funds to be rolled over to the next year thus providing communities assurance of funds security and encouraging due process is followed for funds use.

Low capacity of off-Java provinces could result in poor oversight causing poor project management, corruption and loss of confidence for communities

Detailed diagnosis of problems, intense supervision, greater focus on financial management aspects, additional training, greater information facilitation to communities.

Frequent turnover of senior management at the Central Government level could diminish support for the project as well as result in loss of implementation pace

Constant dialogue with GOI and MOHA to ensure continuity in project management.

In addition, the risks deemed moderate were also taken into account and appropriate measures to mitigate them were incorporated into the project design.

41

Annex 10. Key Challenges in the Development of the M & E System

Four key challenges in the development of the M&E system were:

• Ambitious objectives and the wide variety of activities – to capture progress towards poverty alleviation, setting up of processes to ensure inclusion, open and transparent discourse on development priorities, democratic practices, monitoring and evaluation of quality and cost effectiveness of a wide variety of outputs of an open menu and multi-sectoral project.

• Geographical scope and logistics – to obtain standard, timely, and useful reports from vast and difficult geographical areas, and managing data and reports from a large number of villages nation-wide presented enormous data entry and quality-control issues for the MIS.

• Combating corruption – to build into the M&E system measures to detect, prevent and deal with corrupt practices.

• Political change and conflict – to continue unscathed through various political events and conflicts, and manage monitoring activities in areas where program and monitoring were suspended due to insecurities.

42

Annex 11. Gender--Terms and Conditions and Key Impacts

KDP Stage of Activities KDP Terms and Conditions KDP dissemination at the kecamatan level (Inter-village Meeting/1st Kecamatan Development Forum – UDKP I)

• At least three of the six village representatives must be women. • The forum must highlight the importance of women’s participation. • There should be at least one woman in the Financial Management Unit

(UPK) Socialization and selection of FD (1st Village Meeting – Musbangdes I)

• Of the two FDs, one must be a woman. • Local support positions should be open to both man and woman. • Women should hold three of the seven paid KDP positions in the village. • At least 40% of participants must be women.

FD Training • The female FD must be able to attend training: schedule and venue should not be in conflict with other activities.

Socialization and brainstorming for project ideas at the hamlet level and among women’s groups.

• The number and types of existing women’s groups must be identified. • The socialization methods and techniques used must ensure that all the

women are able to understand KDP and realize that the women’s groups have equal opportunities as others to submit proposals.

• At least 40% participants must be women. Selection of women’s representatives and proposals (Special Women’s Meetings)

• As many women as possible are encouraged to attend the Special Women’s Meeting, particularly those involved in the brainstorming process at the group level.

• For brainstorming process, women’s groups should be separated from men’s groups.

Selection of village representatives and proposals for kecamatan meeting (Musbangdes II)

At least 40% of participants must be women.

Proposal Write Up Women must be involved in the proposal writing process, especially the women’s proposals.

Proposal Verification There must be a woman on the verification team. Implementation Preparation (3rd Village Meeting – Musbangdes III)

• At least 40% of participants must be women. • There must be women members on the Project Implementation Team as

well as the Monitoring Team. • The results of the meeting must be known and understood by women’s

groups. Implementation • There must be at least one woman in the Project Implementation Team.

• Women must be invited to hear the explanation of the project implementation team.

• Women must be given equal opportunity to work on infrastructure and other development projects as men, and receive equal wage.

Monitoring • There must be women members on the Monitoring Team and Inspection Team, among others: Team 18 and Auditing Team at the kecamatan level.

• Women must be invited to the implementation and financial accountability meetings at both the village and kecamatan level.

Some of the key impacts of these efforts include:

• Economic empowerment: Women’s credit groups supporting economic activities, small savings and loans were heard and considered in decision making. A total of 25,000 women’s groups were supported under the project and a total of 16% of all kecamatan block grants funds (or about

43

$39.6 m) was given as loans to women. Women used the credit to finance a limited number of traditional enterprises and were provided training, capacity building and skill development which were well received. However, the credit program suffered from problems related to difficulty in measuring returns, capture of the funds by the better-off, low recovery rates, and limited legal and technical advice for small ventures to sustain activities.

• Political empowerment: The socialization process of the project enabled the successful

involvement and reaching out to women through flexible and innovative methods. The project ensured separate meetings for women to help them prioritize their needs and follow up on subproject proposals until the final decision stage. The project encouraged women to become part of the project implementation teams (TPKs).

Social empowerment: Separate women’s proposals ensured greater responsiveness to women’s needs. Women participated but initially many of them were from elite families. Intense and innovative facilitation saw the participation of more women from poor families. The project had some success in redefining gender norms and attitudes shaped by tradition, religion and state ideology; with women being FDs (village facilitators) and members of UPKs, O&M and Monitoring teams. Half of every village delegation to kecamatan-level decision-making meetings was women. In these positions and as participants, women’s contribution to the success and sustainability of activities was noticeable.

Puncak JayaPuncak Jaya(5030 m)(5030 m)

ObiObi

CeramCeram

BuruBuru

SULAWESISULAWESISUMATERASUMATERA

BaliBali

KALIMANTANKALIMANTAN

RabaRaba

PematangsiantarPematangsiantar

SorongSorong

TimikaTimika

FakfakFakfakAmahaiAmahai

PaluPaluJambiJambi

MataramMataram

BandungBandungSurabayaSurabaya

SemarangSemarang

PalembangPalembang

PekanbaruPekanbaru

PalangkarayaPalangkaraya

Bandar Bandar LampungLampung

SerangSerang

PAPUAPAPUA

1919

2121

2222

2626

2929

2020

2323

2525

2424

28282727

3030

3232

3131

3333

1212

1111

1313

14141515

8

67

3

54

2

1

1616

1717 1818

1010

9

PAPU

APA

PUA

NEW

GU

INEA

NEW

GU

INEA

A U S T R A L I AA U S T R A L I A

THAILANDTHAILAND

MYANMARMYANMAR

19

21

22

26

29

20

23

25

24

2827

30

32

31

33

12

11

13

1415

8

67

3

54

2

1

16

17 18

10

9

Balikpapan

Parepare

Baubau

Tarakan

Raba

Ende

Waingapu

Pematangsiantar

Sorong

Merauke

Timika

FakfakAmahai

Palu

Ambon

Gorontalo

Jambi

Medan

Kupang

Padang

Manado

Mataram

Bandung

Kendari

Denpasar

Surabaya

Semarang

Bengkulu

Jayapura

Palembang

SamarindaPontianak

Pekanbaru

Yogyakarta

Banda Aceh

Bandjarmasin

PalangkarayaPangkalpinang

Makassar

Ternate

Bandar Lampung

Serang

Manokwari

Mamuju

Tanjungpinang

JAKARTA

PAPU

AN

EW G

UIN

EA

A U S T R A L I A

SINGAPORE

VIETNAM

THAILAND

MYANMAR

TIMOR-LESTE

BRUNEI

PHILIPPINES

MA L A Y

SI

A

CelebesSea

Java Sea BandaSea

Arafura Sea

SuluSea

PACIFIC OCEAN

I N D I A N O C E A N

PAPUA

AruIs.

KaiIs.

TanimbarIs.

Halmahera

Biak

Yapen

Morotai

Misool

Waigeo

Peleng Obi

Muna

Ceram

Buru

SULAWESI Sula Is.

Timor

FloresAlor

WetarMoa

Babar

Sumba

SumbawaLombokJAWA

NatunaBesar

Belitung

Madura

SUMATERABangka

Lingga

Nias

Siberut

Enggano

Simeulue

TalaudIs.

Bali

KALIMANTAN

Men t a w

a i I s .

Puncak Jaya(5030 m)

0°

5°

5°

10°

10°

15°

0°

5°

10°

15°

15°

10°

95° 100° 105°

115° 120° 125°

95° 100° 105° 110° 115° 120° 125°

130° 135° 140°

135° 140°

INDONESIA

NANGGROE ACEH DARUSSALAMSUMATERA UTARARIAUSUMATERA BARATJAMBIBENGKULUSUMATERA SELATANLAMPUNGBANGKA-BELITUNGBANTEND.K.I. JAKARTA

123456789

1011

PROVINCES:

1213141516171819202122

JAWA BARATJAWA TENGAHD.I. YOGYAKARTAJAWA TIMURBALINUSA TENGGARA BARATNUSA TENGGARA TIMURRIAU KEPULAUANKALIMANTAN BARATKALIMANTAN TENGAHKALIMANTAN SELATAN

KALIMANTAN TIMURSULAWESI UTARAGORONTALOSULAWESI TENGAHSULAWESI BARATSULAWESI SELATANSULAWESI TENGGARAMALUKU UTARAMALUKUPAPUA BARATPAPUA

2324252627282930313233

0 200

0 100 200 300 400 Miles

400 Kilometers

IBRD 33420R2

AU

GU

ST 2008

INDONESIASELECTED CITIES AND TOWNS

PROVINCE CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

PROVINCE BOUNDARIES

INTERNATIONAL BOUNDARIES

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.