Doummat Of

The World Ban}

FM OmCAL USE ONLY

LA). 1335- rAJ

l-put Pb. P-3659-InD

RXPOR? _bDENkO

oF TUE

PRESIDET OF Tq

IETErMIO5rR DANK }OR ON XIDDEVELOPIIBN

TO THM

ZgCU15VE DICORS

O A

-P<#:iD zOAN

IN AN AMOUNT EQY1VALT TO UB*43.0 MILION

TO TE

REPUEIC OF ZEDONESIL

POR A

SECOND NOWFORMAL EUCATION PROiIECC

October 14, 1983

Thkdoemoh m a umb 'I,uI disddmum mid q be mud by uep mg'inly .b. ..e nwe ofI dr UCW d ln. lb inbd d uW UN whs kb dh.hhui 'Ia W_M tk ahddhl

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

CURRENC EQUIVALENTS

Currelcy unit - dosian Rupia (Rp)

US$1 Rp 97 0Rp 100 l US$0.103Rp 1,000 I US$1.03Rp 1 imillin U US$1,030.93

GOVER T OF IDONESIAFISCAL YEAR

April 1 - march 31

SCHOOL YEAR

July 1 - June 30

ABBREV}IATIONIS

BP! - Regional Materials Developmet and Staff TraingCenter

DGFLSPO - Directorate General for Nouformal Education,Youth and Sports

Dikmas - Directorate of Community Education (forEerlyknown as Penmas)3 Ministry of Education

GOT - Government of IndonesiaMEC - ministry of Education and Culturepakets A, B and C - Basic Education Curriculum Guidelines, DikmasRepelita - National Five-Year Development Plan (Repelita I,

1969-74, Repelita II, 1974-79, Repelita III,1979-84, Repelita IV, 1984-89)

SB - - District Materials Development andStaff Training Center

FOR OMCIAL USE ONLY

INDONESTA

SECOND NONFORMAL EDUCATION PROJECT

Loan and Project Summary

Borrower: Republic of Indonesia

Amount: $43.0 million equivalent (including capitalized front-endfee)

Terms: Repayable in 20 years, including five years of grace at thestandard variable rate

ProjectDescription: The project objectives would be to increase access to

nonformal education, improve the quality of nonformaleducation programs, and strengthen the managementcapability of the Ministry of Education's Directorate ofCommunity Education (Dikmas). To achieve these objectives,the project would: (a) expand learning programs in basiceducation and employment-oriented training; (b) improvethe quality of educational programs by developingrelevant learning materials and providing staff training;and Cc) improve program implementation by introducingbetter planning, monitoring and evaluation systems and anapplied research program at Dikmas.

The project would benefit about 800,000 Indonesian illi-terates and school dropouts in 17 provinces by providingbasic education and employment-oriented skill training.In line with the Government's stress on poverty allevia-tion, the project is targeted to serve the poorest seg-ments of the population. The benefits expected from theproject depend largely on the competence and commitmentof the Dikmas staff. To minimize the risk of poor qual-ity staff, the project provides strong support in theform of increased staff training, development of relevantlearning materials, and improved supervision, monitoringand evaluation. In addition, studies would be conductedunder the project to analyze incentive requirements ofvillage level extension staff and to explore alternativemeans of generating local financial support for nonformaleducation activities. The possibility of misallocationof resources of the employment-oriented training funds tomembers of the village who are not necessarily in thegreatest need would be minimized by a strengthened moni-toring system at the village level and by applyingstringent selection criteria.

Thi doCUnMnt has a resticted dstrbution and may be used by repients only n the performance of their official duties. Its contents may not otherwis be discosed witPjut World Bank authorization.

- ii -

Estimated Cost:/a Local Foreign Total-- ($ million)

Expansion of village-levellearning programs 13.7 7.8 21.5

Improvement of learning materialsand staff development 16.9 7.1 24.0

Strengthening of management,monitoring and evaluation,and applied research 2.0 1.6 3.6

Base Cost 32.6 16.5 49.1

Physical contingencies 3.2 1.7 4.9Price contingencies 13.8 3.7 17.5

Total Project Cost 49.6 21.9 71.5

Front-end Fee on Bank Loan - 0.1 0.1

Total Financing Requirements 49.6 22.0 71.6

Financing Plan: Bank 21.0 22.0 43.0Government 28.6 - 28.6

Total 49.6 22.0 71.6

Estimated Bank FY 1984 1985 1986 1987 1988 1989 1990 1991Disbursements: ($ million)

Annual 0.1 5.0 8.1 8.4 8.2 8.2 4.3 0.7Cumulative 0.1 5.1 13.2 21.6 29.8 38.0 42.3 43.0

Rate of Return: Not applicable

Staff AppraisalReport: No. 4595-IND dated October 13, 1983.

/a The project would be exempt from customs duties and other taxes onimported items. Taxes on other items would be insignificant and arehence not included in project costs.

REPORT AND RECOMMENDATION OF THE PRESIDENTOF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLICOF INDONESIA FOR A SECOND NONFORMAL EDUCATION PROJECT

1. I submit the following report and recommendation on a proposedloan to the Republic of Indonesia for the equivalent of $43.0 million(including the capitalized front-end fee) to help finance a SecondNonformal Education Project. The loan would have a term of 20 years,including five years of grace, at the standard variable interest rate.

PART I - THE ECONOMY A1

2. A basic economic report, "Indonesia: Growth Patterns, SocialProgress and Development Prospects" (No. 2093-IND dated February 20, 1979),was distributed to the Executive Directors on February 26, 1979, and acountry economic memorandum has been prepared in each subsequent ycar. Thelatest of these, entitled "Indonesia: Policies for Growth with Lower OilPrices" (No. 4279-IND dated May 12, 1983) was distributed to the ExecutiveDirectors on May 17, 1983. Annex I gives selected social and economicindicators for the country.

Barckground

3. The Republic of Indonesia is a highly diverse country spreadacross an archipelago of more than 13,000 islands with a land area of abouttwo million sq km. It now has a population of over 150 million, growing atabout 2.2% p.a., and is the world's fifth most populous nation. The countryhas a highly diversified resource base, with plentiful primary energyresources, significant mineral deposits, large timber potential and adeveloped system of agricultural commodity production and export. A highproportion of these primary resources are located on the sparsely populatedislands of Sumatera and Kalimantan, while two-thirds of the population liveon Java, which has areas with some of the highest rural population densitiesin the world. About 20% of the population live in urban areas in both Javaand the Other Islands, and the current rate of urban population growth isover 42 p.a. The 1982 estimate of GNP per capita is $580, which placesIndonesia amongst middle income countries.12

11 Substantially unchanged from the President's Report on the NucleusEstate and Smallholder Sugar Project (No. P-3634-IND), circulated undercover of R83-264, dated August 11, 1983, and approved by the ExecutiveDirectors on August 30, 1983.

/2 On the basis of the World Bank's system of country classification andAtlas methodology for calculation of GNP.

-2-

Macroeconomic Developments and Resource Management

4. Until 1981, the economy had been growing at almost 82 p.a. forover a decade. This was associated with rapid increases in publicexpenditures, total investment and savings. The initial impetus for thisoccurred in the period of recovery from the turbulence of the mid-60s. TheGovernment took effective action to restore macroeconomic stability,liberalize the economy, rehabilitate infrastructure, and provide incentivesfor domestic and foreign private investment. However, for the last decadethe dominant external influence has been the huge expansion, and significantvariability, in foreign exchange earnings from oil. Net exports from theoil and gas sector rose from $0.6 billion in 1973/74 to $10.8 billion in1980/81, when the current account enjoyed a surplus of $2.1 billion. Oilreceipts also provide about 70% of Central Government receipts and havehelped finance the sustained increase in demand via the budget. The patternof expenditures has also helped foster diversified growth: of particularnote has been the support for agriculture, through investment ininfrastructure, support services and effective use of subsidies to maintainproducer incentives. This supported an agricultural growth rate of almost42 per annum over the past decade, and movement towards self-sufficiency inrice. During 1971 to 1981 manufacturing has also enjoyed a high growth rate(of about 14Z p.a.) from a very low base, but this has been predominantlyoriented toward the protected domestic market.

5. Since 1981, the macroeconomic resource position has changed dra-matically. Depressed international markets and the decline in both volumeand price of oil exports have led to a turnaround in the current account ofabout $10 billion in two years, with a deficit of almost $7 billion in1982/83, equivalent to about 82 of GNP, a level that could not be sustainedfor more than a year or two. The Government responded swiftly and effec-tively to the worsened resource situation, and, during the first half of1983, introduced a comprehensive package of policy measures to reduce thecurrent account deficit. First, in January 1983, an austere 1983/84 budgetwas introduced, that incorporated a sharp reduction in subsidies on oil,fertilizer and food, and a squeeze on current expenditures. Second, onMarch 30, 1983, the Rupiah was devalued by 28% from Rp 703 to Rp 970 to theUS dollar, without changing the full convertibility of tne currency. Thiswas, in part, in response to the substantial private sector capital outflowover the previous months. Third, in May, a major rephasing of publicinvestment was announced, in particular of large-scale import-intensiveprojects in the industrial, electric power and transport sectors. Thesemeasures have already ensured the effective management of the short-runforeign exchange position and should reduce the current account deficits tosustainable levels over the next two to three years. As a consequence ofthe changed resource position, growth was low in 1982 and will continue tobe low in 1983. In order to minimize the impact on domestic incomes andemployment, the Government is reallocating any rupiah savings from therephased projects to public expenditure activities with a high domesticcontent.

-3-

Policy for Medium-Term Growth

6. While a reduction in growth is unavoidable in the short-run periodof reduction in the current account deficit, it is essential that growthrates be restored in the medium term: a rate of growth of the order of 6Xper annum for the non-oil economy is probably necessary to have a signifi-cant impact on employment creation and poverty alleviation in the 1980s.This will require the diversification of the economy away from its presentdependence on oil, for both foreign exchange earnings and domestic savings.

7. The Government has already taken major policy initiatives tomobilize domestic resources. This involves both the increased mobilizationof private savings, especially of the household sector, through thefinancial system, and the diversification of sources of public finance awayfrom oil exports. With respect to the former, the Government introduced amajor financial reform on June 1, 1983, that includes the significantderegulation of deposit and lending interest rates, the reduction insubsidized refinancing facilities from the central bank and the removal ofall credit ceilings. In addition to encouraging deposit mobilization, thisshould also lead to increased efficiency of resource use. With respect topublic finance, the most important measures in the recent past have been thelarge increases in domestic fuel prices to reduce the subsidy onconsumption; subsidies on food and fertilizer prices have also been reduced,and the Government is in the process of introducing a major tax reform.

S. The development of additional foreign exchange earnings from thenon-oil economy will be highly dependent on the policy environment for themanufacturing sector. In the 1970s, rapid growth in output of manufacturesoccurred in response to buoyant domestic demand, supported by a protectivetrade regime and closely regulated investment licensing system. As a conse-querce, the sector is almost entirely oriented toward domestic sales, andmajor parts of it suffer from significant inefficiencies, by internationalstandards. In the future, a higher share of output will have to be alloca-ted to exports if growth is to be maintained, especially in the relativelylabor-intensive consumer goods industries, as well as to continued importreplacement. This will require measures to improve the overall efficiencyof the sector, through policy development on the trade regime and regulatoryframework, backed by adjustment strategies for existing industries andspecific export promotion policies. The Government has already introduced arange of export promotion measures intended to reduce the existing importsubstitution bias in the economy, ensure ready access to finance forexporters, raise product quality and improve marketing capacity. In August1983 it was further announced that there would be a major overhaul in theregulatory framework for private investment, with the objective of simplify-ing and streamlining the licensing system.

9. Agriculture will also continue to be of great importance forexport revenue (accounting for almost 75X of 1980 non-oil exports), food

- 4 -

production and employment. Rice producticn has been steadily rising to anestimated total of 23.2 million tons in 1982, compared with 13 million adecade earlier. This achievement is largely a result of the rehabilitationand expansion of irrigation systems, the dissemination of new agriculturaltechnology, and widespread access to seeds and fertilizers. Futureinvestment in physical infrastructure, in irrigation and rural roads,combined with a favorable market environment and good support services willbe the main determinants of further expansion in food production. In thepast tree crops have suffered from relative neglect, and the age structureof the trees is now very old. However, the Government of Indonesia (GOI)has a highly ambitious program of rehabilitation and replanting,necessitating substantial investment in manpower and improved organizationof distribution and marketing. Transmigration remains a high priorityprogram for promoting development in underpopulated regions, providingopportunities for landless families on Java, Bali, and Lombok, and relievingeconomic and environmental pressures on those densely populated islands.

Incomes, Employment and Human Development

10. Despite the high concentration of the resource windfalls, theavailable evidence, from household expenditures surveys, indicates a fairlywide distribution of the benefits of growth in the past ten years or so.Per capita consumption of the bottom 40% in the expenditure distribution isestimated to have increased by 2.4% per annum between 1970 and 1980. Thesegains are also borne out in the basic health indicators, with a 25% reduc-tion in the infant mortality rate and an increase in life expectancy from 47to 53./I These improvements should not, however, mask the continuedexistence of widespread poverty. Almost 40% of the population are estimatedto have been in this condition in 1980. The core of the poverty problemcontinues to be in rural Java, where landless laborers form a large, andpossibly rising, fraction of the population, and where, for most of the197Ds, there is little evidence of any rise in real agricultural wages.However, in the 1979-81 period, bumper rice harvests appear to have led toimprovements in wages and incomes in Java, while agricultural incomes onparts of the Other Islands dependent on export crops declined in the face ofthe international recession. Following the devaluation this situation willlikely reverse. Export incomes should rise, backed by the internationalrecovery, but real incomes in Java could be adversely affected.

11. In the future, the availability of productive employment will be akey determinant of the distribution of income. The labor force will grow atabout 2.6% p.a., equivalent to around 1.5 million people p.a., in the nextdecade. In 1980 agriculture still accounted for 55% of employment, andindustry only 13%; the growth of services employment, from 24% of the totalin 1971 to 32% in 1980, was the main mechanism for providing incremental

/1 On the basis of the 1971 and 1980 population censuses.

employment in the 1970s. The growth in service incomes was partly sustainedby rising oil incomes in the 1970s; and it is unlikely that this pattern ofgrowth will be repeated in the future. If an adequate growth in labordemand is to be achieved, it will be necessary to adopt policiesspecifically oriented toward employment creation, in addition to restoringoverall growth. In the short-run, the maintenance of employment-intensivepublic works activities can make a significant contribution.

12. There has been substantial progress in extending the provision ofsocial services throughout the population. Universal enrollment in primaryeducation has been virtually achieved and the enrollment rate in juniorsecondary schools is now 35%. However, the weak educational base of thepopulation continues to be a major obstacle to rapid economic developmentand a substantial further expansion of secondary and tertiary education willbe necessary as well as a major effort to raise the quality of the wholesystem. In the health sector, there has been a large expansion in facili-ties, notably at the sub-district level, but continued expansion and animprovement in quality will be necessary to increase effectiveness. Thiswill have to be complemented by a major expansion in water supply andsanitation if the improvement in indices of mortality and morbidity in the1970s is to be maintained. Currently, only 18% of the rural and 40% of theurban population have access to safe water /1 compared with Governmenttargets: of 60% and 75%, respectively, for 1990.

External Capital Flows

13. Even with the comprehensive program of domestic adjustment poli-cies outlined above, Indonesia will continue to require external capitalinflows. Indeed, during the short-run adjustment period, the maintenance ofsignificant net inflows will be essential if the adjustment policies are tobe smoothly implemented and without excessive cost to current incomes andthe development process. In 1982/83 the Government was able to use pastfinancial asset accumulation to help finance the deficit: official reservesdeclined by $3.3 billion and foreign assets of the commercial banks by anadditional $0.9 billion. While the reserve cover is still adequate, thescope for additional drawdown is limited and the bulk of the finance offuture deficits will have to come from medium- and long-term public borrow-ing. About $5 billion per annum of new commitments will be required overthe next three years to finance the projected deficits during the adjustmentperiod. It is reasonable to expect that at least 40% will come from offi-cial development assistance (ODA) - at the June meeting of the Inter-Governmental Group on Indonesia the donors pledged over $2.2 billion for1983/84 - with some increase in borrowings from the financial markets andcontinued use of official and private export credits.

/1 Government estimates for 1981.

- 6 -

14. Total public debt outstanding at end-1982 was $18.3 billion, withan additional $12 billion of undisbursed commitments. The debt profile isexcellent, with ODA accounting for 54% of the total and no short-term debt;the average maturity of new commitments was 15 years in 1982. The debtservice ratio rose to 22% of exports, with the oil sector on a net basis, in1982/83, and is likely to rise somewhat further in 1983/84 and settle atabout 25% in the mid-1980s. This is largely a consequence of the decline inanticipated export earnings rather than increased borrowing. This debtburden is high by Indonesia's past standards, but remains within the limitsof prudent debt management. Backed by the effective program of domesticadjustment, Indonesia should be in a position to raise the required externalfinance without undue difficulty.

PART II - BANK GROUP UPERATIONS IN INDONESIA /1

15. As of September 30, 1983, Indonesia had received 48 IDA creditstotalling $931.8 million, and 82 Bank loans amounting to $6,127.5 million.IFC investments totalled $136.8 million. The share of the Bank Group inIndonesia's total (disbursed) external debt outstanding at the end of 1982was 13.3%, and the share of debt service, 7.9% compared with 11.2% and 7.6%respectively in 1981. Annex II contains a summary of IDA credits, Bankloans and IFC investments as of September 30, 1983. Given the criticalimportance of agriculture (including transmigration) for employment, foodsecurity and exports, over one-third of Bank Group supported projects havebeen in this sector. In addition, loans and credits have been extended tovirtually all other sectors of the economy, including transportation,education, urban development, water supply, rural development, nutrition,industrial development financing (including small-scale industry), power,telecommunications, population and technical assistance.

16. During Repelitas I (1969-74) and II (1974-79), and in line withthe objectives of these first two Five-Year Plans, a high proportion of BankGroup lending was directed initially toward the rehabilitation and then theexpansion of infrastructure and production facilities. Special attentionwas also given to meet the shortage of skilled manpower and technicalassistance needed for preinvestment studies and project execution. RepelitaIII (1979-84), published in early 1979, stressed the need for continued highgrowth and stability, but departed from previous plans by placing specialemphasis on more equitable income distribution and poverty alleviation.This focus, which was fully in line with the conclusions of the basiceconomic report, required greater attention to employment generation

/1 Substantially unchanged from the President's Report on the NucleusEstate and Smallholder Sugar Project (No. P-3634-IND), circulated undercover of R83-264, dated August 11, 1983, and approved by the ExecutiveDirectors on August 30, 1983.

(particularly in the industrial sector) and to improvements in basic publicservices. While Bank lending was already consistent with these objectives,increased emphasis has been given to these priorities.

17. Because the country has moved from a position of resource surplusto deficit, as discussed in Part I, the development momentum will in alllikelihood decelerate in the short run. To minimize this adverse impactwill require effective policy reform to improve the environment for privateinvestment and to mobilize additional domestic resources so that investmentsin industry, infrastructure, tree crop development and human resourcesdevelopment can continue. The Bank's program of lending and economic workis being geared to support the required measures. The primary emphasis of

* Bank involvement will be on policy and institutional development andtechnical assistance in the key sectors. This will involve a closeintegration between sector work and lending and the gradual broadening oflending to the subsector and sector level in order to assist with policyissues at this level. The only significant shift in the composition oflending involves a rapid expansion planned in the education sector, a directresponse to the severe shortage of skilled manpower. In the industrialsector, in-depth sector work is focused on a policy to promoteindustrialization which will build on Indonesia's comparative advantage inlabor and resource-intensive industries. This analysis may lead to a seriesof industrial projects which would facilitate sectoral reform. In energy,sector work and continued lending is concentrating on policies to diversifyIndonesia's energy base, rationalize pricing and improve sectoral planning.Irrigation and tree crops will continue to absorb a substantial portion oflending in view of the importance of these sectors, and continued supportfor transport is anticipated. Continued lending in the areas of provisionof social services, in population, health and nutrition, urban developmentand water supply will increasingly emphasize institutional support and thedevelopment of innovative low-cost solutions.

18. The last two years have seen major improvements in thedisbursement ratio /1 from a low of 137 in FY80, 'o 18. in FY82, compared toa Bank-wide average of 21.3Z, in Thailand of 21.kZ and in Nigeria of 17.3Zin FY80. The poor FY80 ratio was in large part merely a result of the rapidincrease in commitments during the FY77-79 period when total Bank/IDAcommitments to Indonesia increased by 122% compared to a Bank wide increaseof 83%. However, it also reflected implementation difficulties arising outof GOI's budgetary, procurement and payment procedures, including issuanceof tender documents and opening of letters of credit. The severe shortageof managerial and technical manpower of course compounds the problem. Anumber of steps have been taken by GO! and the Bank to address these issues.Several special Bank missions have visited Indonesia to analyze the problems

/1 The ratio of actual disbursemerts during the fiscal year to the cumula-tive undisbursed amount at the beginning of the fiscal year.

- 8 -

and make recommendations for simplifying budgetary and financial procedures.The GOI and the Bank have also instituted formal and regular joint reviewprocedures to identify general and project specific problems and work outcorrective measures. In addition, procurement seminars were held in Jakartain September 1979 and November 1981. As a consequence of these jointinitiatives, 001 has taken measures to streamline some of the complexbudgetary and financial procedures affecting praject implementation. Inaddition, the Bank is helping the GO in a special effort to identifyproblems in the construction industry with a view to developing appropriateremedial actions and policies. Weaknesses in the domestic contractingindustry have been identified as one of the major causes of implementationproblems in Indonesia. Finally, to reduce initial project implementationdifficulties, many operations are now being presented for Boardconsideration at a later stage in the project cycle. As a result of theseefforts, improvements are taking place. This was reflected in an increasein disburRements from $204.0 million in FY79 to $582.8 million in FY83. Itis nevertheless important that the Bank and GOI maintain their efforts.

19. From 1968 until 1974, all lending to Indonesia was made throughIDA. Due to the country's improved creditworthiness following the commodityand oil price boom in 1973/74, the bulk of the Bank Group's subsequentlending has been through IBRD loans, with a modest amount of IDA lendingbeing justified primarily on poverty grounds, as the per capita GNP was wellbelow the IDA cutoff of $625. Given Indonesia's much improved credit-worthiness, IDA lending was discontinued in FY80.

20. The proposed project constitutes the third lending operation pre-sented to the Executive Directors this fiscal year. Projects at an advancedstage of preparation and appraisal include the Highway Betterment, theSecond Provincial Irrigation, and the Secend Swamp Reclamation Projects.

PART III - THE NONFORMAL EDUCATION AND TRAINING SUBSECTOR

Background

21. During the past decade Indonesia's formal education system hasexpanded rapidly. Despite this rapid expansion, about 20% (18 million) ofthe Indonesian population aged 7-44 years remains V 'terate. In additionto this large number of illiterates, there is a growing number of schooldropouts who contribute to a pool of some 19.2 million under- and unemployedpersons. Over the decade of the 1970s, about 17 million children did notcomplete primary sc0ool and in 1980/81 alone about 1.2 million childrendropped out of primary school. Between 1980 and 1985, the labor force inthe 15-24 age group is expected to increase from about 13 million to 15million. A large proportion of this age group will enter the labor forcewith less than full primary education and minimal or no employable skills.

- 9 -

Organization and Financing of Nonformal Education

22. The Directorate General for Nonformal Education, Youth and Sports(DGPLSPO) in the Ministry of Education and Culture (MEC) has the majorresponsibility for providing basic education and training to the out-of-school population through a national program of nonformal communityeducation (Dikmas). The Dikmas organization and program is aimed at schoolleavers, dropouts and illiterates, as well as those adults in need offurther training to become more productive citizens. The Dikmas programsare administered through a network of provincial and district offices andresource centers (BPXs and SKBs), subdistrict field workers and villagetutors. Dikmas activities are complemented by those of other governmentalagencies and nongovernmental orgaaiizations. In 1980, a Junior Minister forYouth Affairs, whose responsibilities include promoting training andguidance for out-of-school youth, was appoi-ted. He reports directly to thePresident, indicating a rise in the status and importance of such nonformaleducation activities. Growing Government concern for nonformal educationactivities is reflected in the increasing share allocated to Dikmas in theoverall MEC budget. The Dikmas budget grew from $1.9 million in 1975/76 to$16.2 million in 1980/81, an average annual growth rate of 43Z. During thesame period, total allocations to DGPLSPO rose from $4.3 million to $24.8million, an increase of 34% p.a.

Key Issues in Nonformal Education

23. The major objectives of the First Nonformal Education Project(Loan 1486-IND) were: (a) provision of effective nonformal educationprograms; (b) development of learning materials and staff training; and (c)strengthening of management capabilities. The project is scheduled forcompletion in June 1984. It has largely accomplished its goals, whaich hasresulted in a revitalization of the Dikmas organization (formerly known asPenmas). Under the project, a core of complementary education programs inbasic literacy, family life education, vocational training and small-scaleenterprises were developed. By the end of 1982, Dikmas programs werereaching about 5 million learners (compared with 400,000 in I977/78). Thesmall business component (called Learning Funds) was an experiment in thecreation and operation of small-scale enterprises. Approximately 2,700learning and production groups were established in four years, of whichabout two thirds were successful in sustaining an economic activity andproviding increased incomes to participants. The individual rate of returnto investment in such businesses (rate of growth of individual incomecompared to the rate of growth of training costs) is estimated to have beenabout 25%. Between 1978 and 1981, a system was also set up to develop,produce and distribute basic learning materials, including 18.5 millionbasic literary booklets and 600 prototype posters, slides, tapes, cassettesand other visual aids. At the same time, about 17,000 Dikmas staff andlearning group monitors and tutors were trained in regional training andmaterials development centers. The establishment of such centers under theproject began the process of decentralizing the planning of Dikmasoperations and bringing program design closer to the learning locale.

- 10 -

24. Despite the basic attainment of project goals, the mid-termevaluation of the First Nonformal Education Project in December 1981 raisedseveral issues related to the scope, quality and management of the newprograms:

25. Scope. Although the First Project covered the seven most populousprovinces of Indonesia, there remains a need to intensify and expandservices to these provinces, since they contain 502 of the country'silliterates and a large number of unemployed youth. There is also a need toexpand nonformal education programs outside Java to the Other Islands,particularly densely populated areas such as Bali and high growth areas suchas South Sumatera. Poverty-stricken regions like East Nusa Tenggara alsorequire increased assistance.

26. Qualit. While the project facilitated access to basic educztionfor large numbers of learners, provided them with instructional materialsand created a flexible institutional format in which to learn, substantialimprovements could be made in the content of learning materials and the useof participatory teaching methods. Many learning group leaders andfieldworkers indicated that the literacy materials are too technical.Weaknesses were also noted in the organization of the small businessprogram; in particular, fieldworkers and tutors require more trainingin marketing, simple accounting, and business management techniques.

27. Management. Integration and communication between functionalunits of Dikmas need strengthening, and feedback from the field todecision-makers needs reinforcement at every level. Also, while a method andinstruments for collecting quantitative program evaluation data (e.g.,Participation rates) have been developed, there is a need to collect moreperformance data on program effectiveness, in order to strengthen overallplanning and management.

Government Strategy

28. The Government strategy is to address the problems of inequity,under- and unemployment and illiteracy through the provision of a totaleducation system which promotes nonformal community education as acomplement to the formal education system. Nonformal education provideseducational opportunity through p agrams of basic literacy, primary schoolequivalency and craft training for those bypassed by the formal system andthose who have dropped out. During the Fourth Five-Year Plan, 1984-89(Repelita IV), the Government is expected to continue Dikmas programs begununder Repelita III to: (a) increase literacy in the national language byexpanding access to basic education through the formal and nonformal schoolsystem; and (b) increase access to training in income-generating skills.The Government plans to improve program quality and expand program coveragethroughout the country, with the assistance of the Bank under the proposedsecond-phase project and the involvement of domestic non-governmentorganizations (para. 43 below).

- 11 -

Bank Group Involvement in Education

29. The Bank Group has supported 13 education projects in Indonesia.These projects have pursued the main objectives of meeting critical manpowerrequirements, improving quality and increasing equity. Five projectsaddressed quantitative expansion and qualitative improvement of basic edu-cation, and seven projects focussed on expanding and strengtheningvocational and technical education. More recently, the Bank has embarked ona major in-service training project with the Ministry of Public Works.Apart from education projects per se, the Bank is also helping theGovernment to overcome specific short-term manpower constraints throughproject-related training in projects in a variety of sectors (vir ,agriculture, power, coal development, population and health). OED ProjectPerformance Audit Reports (PPARs) have been prepared on two educationprojects in Indonesia and the lessons of experience have been incorporatedin the design of the proposed project. The PPAR for the Technical EducationProject (Credit 219-IND) (No.2998, dated June 2, 1980, SecM80-440) stressedthe importance of including fellowships for development of teachers andschool administrators and appointing key staff for project implementation ina timely manner. The PPAR on the First Agricultural Training Project(Credit 288-IND) (No. 3508, dated June 30, 1980, SecM8O-527) stressed theimportance of advanced preparation and the need for carefully designed andsuitable technical assistance components.

PART IV - THE PROJECT

Background

30. The proposed project was prepared by the Government with theass-stance of consultants. It was appraised by missions in November 1982and in February 1983. Negotiations were held in Washington from September 1to September 6, 1983. The Indonesian delegation was led by Dr. W.P.Napitupulu, Director General for Nonformal Education, Youth and Sports. TheStaff Appraisal Report (No. 4595-IND) is being circulated separately.Supplementary project data are provided in Annex III.

Objectives

31. In support of the Government's stress on poverty alleviation andexpanding opportunities for employment, the project would increase access tononformal education, improve the quality of nonformal education programs,and strengthen the management capability of Dikmas. It would build on theexDerience of the First Nonformal Education Project by expanding the programto ten additional provinces and giving greater emphasis to overall Dikmasquality improvement. The project would support the entire staff training,institutional development and infrastructure investment costs, and a portionof the recurrent costs, for the Fourth Five-Year Plan, 1984-89. In addition,it would provide direct assistance to basic education programs in the poorestsubdistricts of the country. To achieve these objectives, the project would:

- 12 -

(a) provide direct support to learning programs in basic education andemployment-oriented training; (b) establish new regional and districtstaff training and materials development centers CBPMs and SXBs); (c)strengthen existing centers to enable them to develop relevant learningmaterials; (d) provide training in program development and operations tostaff at all administrative levels; and (e) improve program implementationthrough the introduction of improved planning, monitoring and evaluationsystems, and implementation of an applied research program at Dikmas.

Expansion of Village Learning Programs ($31.5 million) /1

32. The proposed project would support two types of village learningprograms: (a) basic education programs for illiterates and dropouts fromprimary school; and (b) employment-oriented training for under- and unenr-ployed youth. The project would expand these programs from the initialseven provinces financed under the First Nonformal Education Project to anadditional ten provinces selected in accordance with the five followingindicators: Ci) total population; (ii) population density; (iii) number ofilliterates; (iv) number of school dropouts; and (v) youth unemploymentrate. Within the ten provinces the program would be concentrated in 63districts and 381 subdistricts selected on the same five criteria. Daringnegotiations, assurances were obtained from the Government that it wouldestablish criteria and procedures satisfactory to the Bank for the se2Jectionof subdistricts in which employment-oriented training groups and basiceducation learning groups supported under the project would be located(Section 3.07(a) of the draft Loan Agreement).

33. Basic Education. The delivery system for learning programs wouldcontinue to be structured around learning groups. Working in close coopera-tion with local government officials and village leaders, fieldworkers wouldidentify priority village training needs and organize groups comprised ofabout 10 villagers. Each group would be led by a tutor who, in addition toteaching, would schedule meetings, keep records of attendance, and makeadministrative arrangements. Learning group tutors work with Dikmasfieldworkers and monitors to manage*learning activities by providing therequired resources, e.g. meeting sites, technical specialists and funds. Theduration of the learning groups' activities depends upon training objectivesand the previous educational experience of the participants.

34. The core learning material for basic literacy groups is a seriesof booklets termed Paket A. The core material would provide the learnerwith a sustainable literacy level. It contains basic information related tofamily life, civics, leadership, and prevocational skills. The projectwould provide funding for the production of about 30 million Paket Al-AIOObooklets. Supplementary materials, audiovisual aids and simulations wouldalso be developed.

/ This and subsequent cost figures indicate proposed outlays includingcontingencies.

- 13 -

35. This component would assist the Government to establish about76,200 new village groups through the financing of basic education fundsprovided for the groups. The funding available is based on total groupenrollment and funds would be used to purchase consumable learningmaterials. The fieldworkers would also be provided with motorcycles toimprove supervisicn of learning groups in the more remote rural areas.

36. Employment-oriented Training. Employment-oriented training groupswould formulate learning programs to create productive skills, generateincome, enhance the effectiveness of other local development projects, andinvolve the least educated and poorest members of a community. Fieldworkersand local officials would meet with residents to determine the types ofskills available in the community and the interest of residents in organizingsmall businesses to meet local demand for desired goods and services. Groupleaders would have attained a high craft proficiency level and have somebusiness experience. Each group member would make a counterpart contributionin kind or in cash equal in total to at least 2X of the start-up costs.Group members would agree to a training schedule and keep records of financialtransactions. The Departments of Industry, Agriculture and Home Affairswould provide technical support to the groups. Through an Employment-oriented Fund, the project would provide an average grant of Rp 200,000C$200-1983 prices) per group to cover operating costs, i.e. mainly consumablematerials and small equipment purchases. Supplementary training materials,audiovisual aids and simulations would also be provided to assist field-workers in training the groups. The Government would establish criteria andprocedures, satisfactory to the Bank, for the selection of activities to beassisted by the Employment-oriented Fund and for the replenishment of theFund (Section 3.07(b) of the draft Loan Agreement).

Improvement of Learning Materials and Staff Development Programs($34.7 million)

37. Establishment of new Regional and District Offices andStrengthening of Existing Offices. To support the expansion of villagelearning programs through improved quality of learning materials and stafftraining programs, the proposed project would finance construction,equipment and furniture for three new regional materials development andstaff training centers (BPKs) and 24 new district centers (SKBs). The BPMswould continue to improve Dikmas management capability by integratingpreviously dispersed responsibilities for planning, staff training, materialsdevelopment, and evaluation. The BPMs would: (a) oversee the production anddistribution of Paket A booklets; (b) develop supplementary materials tosupport basic literacy courses and employment-oriented training groups; (c)develop materials for staff training courses; and (d) implement the monitor-ing and evaluation of Dikmas activities. These institutions would beincreasingly responsible for: (i) producing locally relevant supplementalmaterials; (ii) training monitors and village-level tutors; and (iii)promoting greater coordination between Dikmas programs and those of other,4EC departments.

- 14 -

38. Learning Materials Development. The BPMs would be responsible forthe production of about 30 million Paket Al-AIOO literacy booklets and theirdistribution through the district offices. This core learning materialwould be supplemented by locally relevant materials prepared by the BPMsaccording to national and regional plans agreed annually by the Directorate,the national materials development centers and the BPHs. The staff of theBPMs would be responsible for field testing supplementary materials beforemass production (para. 45 below). SKBs would provide technical support toDikmas fieldworkers in preparing locally relevant supplementary materials toserve learning groups within their area of responsibility.

39. Staffing. There are about 4,500 existing Dikmas staff. About1,400 new staff would be required to cover the proposed expansion plannedunder this project. By the end of the project, each of the country'ssubdistricts should have one fieldworker. The number of professional staffin each of the BPMs would be about 40, while in the SKBs the number would beabout 17. At negotiations, assurances were obtained from the Governmentthat staff would be appointed or transferred to these new positions inaccordance with a schedule prepared by the Government and reviewed andagreed with the Bank (Section 3.06 of the draft Loan Agreement).

40. In-service Training. About 720,000 staff-days of regularin-service training would be provided at the national, provincial, anddistrict levels. Training would be provided to: (a) improve planning andprogramming capability; (b) strengthen technical support skills; and (c)improve Dikmas outreach. The project would expand and improve the qualityof Dikmas in-service training for staff from all provinces. During thefirst three years of the project, the six existing BPMs would be responsiblefor all in-service training of regional and district level Dikmas staff.By 1986187, when the three new BPMs would be operational, the trainingworkload could be shared among the nine regional centers.

41. Improvement of Planning and Programming Capability. Under theproject, annual training workshops focussed on policy, planning, and overallmanagement, would be organized for about 160 project implementation unitstaff, regional Dikmas directors, and technical unit chiefs of the nationaland regional materials development centers. To further strengthen theability of the SKBs to provide support to Dikmas activities at thesubdistrict and village levels, management and technical workshops would beheld for about 220 SKB chiefs and 435 technical staff.

42. Strengthening of Technical Support Skills. To improve the per-formance of BPMs, about 540 key professional staff from the BPMs wouldattend an annual workshop specialized in areas such as materials development,training, programming and evaluation. In order to improve their ability tosupervise fieldworkers and oversee Dikmas activities, about 310 chiefs, 930district field officers and technical staff and 1,500 Dikmas subdistrict

- 15 -

chiefs would be trained in personnel management, training, Droiect adminis-tration, methods of monitoring and evalnation and participatory leadershiptechniques. Training for about 3,5nn subdistrict level fieldworkers wonldbe more field-based and would focus on improving implementation skills,facilitating group discussion, producing learning materials and collectingdata for program evaluation.

43. Improvement to nikmas nutreach. Training would also he provided- tor private sector nonformal education personnel. To further expand the

coverage of its nonformal education activities, Dikmas plans to mobilize thesupport of local non-government organizations which have initiated and

* financed a large number of basic education Rroups within the countrv.Approximately 760 representatives from women's and youth organizations wouldbe trained to organize nonformal education groups. Similarlv,representatives of subdistrict and village governing councils would betrained to identify potential learning groups. Approximately 12,7nnmonitors (one per ten tutors) would undergo training on recruitment oftutors and learners and learning group administration, in order to assistfieldworkers to assess learner needs and supervise basic education groups.To alleviate the problems of inadequate supply of trained tutors, fundswould be provided to train about 127,000 volunteer tutors from villagesthroughout the country. In addition to instruction on how to teach adultsand how to use Paket A, the training program for tutors would be designed toenhance competence in: (a) developing locally relevant learning materials;(b) linking basic education courses with employment-oriented trainingactivities; and (c) assisting those who do not speak the national languageto acquire literacy and fluency in it.

44. Technical Assistance and Overseas Training Fellowships. Tosupport the materials development and in-service staff training programs,domestic specialist services and foreign consultant services would beprovided for the Vational Dilcmas Directorate and the PRPs. Wev staffwould receive specialized training, either at home or abroad, in management,program development, training design, learning materials development,evaluation and nonformal education curriculum design. Funds would heallocated for domestic fellowships under contracts with local educationalinstitutions to conduct training in the above six areas of specialization,plus computer application. During negotiations, assurances were obtainedthat the Government would establish criteria and procedures satisfactorv tothe Bank for the award of fellowships (Section 3.07(c) of the draft LoanAgreement). The project would also continue to support Dikmas pre-servicetraining through a Diploma Course offered by secondary teacher trainingcolleges. Over 68n students have graduated from the program since it beganin 1980 and a large majority have been appointed as staff in the S1Rs; anadditional 2,000 students would be trainee under the project.

- 16 -

45. During negotiations, assurances were obtained from the Governmentthat it would ensure adequate field testing of instructional materialsdeveloped under the project, using sampling procedures satisfactory to theBank, and undertake any necessary revisions arising from such testing, priorto mass production of any such materials (Section 3.08 of the draft LoanAgreement). Furthermore, in the context of the proposed joint Bank-DikmasAnnual Review, the Government would furnish to the Bank for review andcomment by September 1 each year a plan and budget detailing a training andmaterials development, production and distribution program for the comingyear, and thereafter implement such a plan, taking into account the Bank'scomments (Section 3.09(a) of the draft Loan Agreement).

Strengthening of Management, Monitoring and Evaluation, and AppliedResearch ($5.3 million)

46. Planning and Management. The Dikmas Directorate's capabilitieswould be strengthened through the creation of a technical secretariatresponsible for the management of technical assistance and an expanded moni-toring and evaluation section described below. The project would providetechnical assistance in establishing an effective planning and managementsystem, including an improved monitoring, evaluation and research program.To strengthen the process of decentralization begun in the seven initialprovinces of the First Nonformal Education Project (effected by what isknown as Decree 089), BPMs and SKBs would have increased responsibility forpreparing, pilot-testing, producing and distributing locally relevantlearning materials, and conducting field-based training in their use. Tomake this effective, the Government has agreed to extend the provisions ofDecree 089 to all provinces included in the proposed project by January 1,1984 (Sect'on 3.10 of the draft Loan Agreement).

47. Monitoring and Evaluation. The existing monitoring and evaluationsystem would be modified to include identification of key programactivities; determination of appropriate performance measures andiadicators; definition of supervision and monitoring responsibilities ofDikmas staff at all levels; and design of effective reporting and reviewactivities, including feedback and follow-up. Case studies would also beundertaken of the effectiveness of learning programs and of theadministrative system. The project would finance technical assistance inthe design and implementation of modifications to the system.

48. Computer-assisted Information System. The project would includefinanciuig for a computer-assisted information syste-m An order to support themanagement, monitoring and evaluation systems. Tl.e project would providetechnical assistance to set up the new system and train staff in itsoperation.

49. Mid-term and Final Evaluations. Mid-term and final evaluationswould be conducted under the auspices of the Ministry of Education's Officeof Educational and Cultural Research and Development. The reviews wouldconcentrate on assessing the degree to which Dikmas had met its okjectives

- 17 -

under the proiect and on identifying strengths and weaknesses. The finalevaluation would serve as the Project completion report and would assessDikmas capacity for program implementation after an expansionary period ofabout a decade. During negotiations, the Coverninent provided assurancesthat it would conduct mid-term and final evaluations, in accordance withterms of reference and a schedule satisfactorv to the Rank, and promptlyfurnish such evaluations to the Bank; a Project Completion 'Report would hefurnished to the Bank within six months of the loan closing Aate (Sections3.04 (b) and (e) of rhe draft Loan Agreement).

50. Applied Research. The project would provide financing for studiesin nonformal community education. An administrative mechanism andprocedures for identifying and selecting priority areas of study werereviewed during appraisal. nuring negotiations, assurances were obtainedtrom the Government that, by September 1 of each year, it would furnish tothe Bank for review and comment an annual program, including detailed termsof reference, for studies to be carried out during the coming fiscal vearunder the project, and thereafter implement such a program, taking intoaccount the Rank's comments (Section 3.09(b) of the draft Loan Agreement).

Management and Implementation

51. The existing Dikmas Directorate, under the Director General forNonformal Education, Youth and Sports, would continue to staff and haveresponsibility for overall project management. The fnirectorate Generalwould liaise with and other relevant units of the Ministry of 7ducation onmatters related to policy decisions, scope and content of programmonitoring, review, and evaluation of project activities. Theorganizational structure established in the First Nonformal VducationProject would be adopted in all the provinces included under the proposedproject. nay-to-day management of project activities would he conductedby the national, provincial and district offices of the nikmas organization.The overall coordination and liaison with the Rank would be theresponsibilitv of the Dikmas Directorate.

52. The project would be implemented over a period of about fiveyears. Acquisition of 27 sites (3 RPMs and 24 SKBs) is proceeding and theGovernment expects to complete all actions necessarv to acquire these sitesby December 31, 1983: funding for this is also provided in the 1983/84 COIbudget. During negotiations, assurances were obtained that acquisition ofthese sites would be accomplished not later than six months prior to thescheduled start of construction at each site, and satisfactory evidence ofsuch acquisition would be furnished to the Rank (Section 3.05 of the draftLoan Agreement). Local consultants have been appointed to work on thestandardization of designs for the RPMs and SWBs and final desiRns werereviewed at negotiations. Construction drawings and hid documents are

- 18 -

scheduled for completion by November 1983 and construction is expected tobegin within three months of loan effectiveness. Terms of reference fortechnical assistance experts and planning and scheduling for the stafftraining and fellowships programs are at an advanced stage of preparation.Basic equipment lists for the APTAs and the SKBs have also been reviewed bythe Bank.

Project Costs and Financing

53. The total cost of the project, including the capitalized front-endfee of $0.1 million, is estimated at $71.6 million equivalent, net of taxesand duties. Base costs have been adjusted to reflect prices in A-agust 1983.Construction costs were based on recently contracted works similar tofacilities developed under the First Nonformal Education Project. Equipmentcosts were derived from master equipment lists which were reviewed duringappraisal and found appropriate in scope and cost. Furniture costs wereestimated as 10% of construction costs. Costs of learning materials andprinted materials were based on experience gained under the first-phaseproject ranging from about S0.30 per Paket A booklet to $6.80 for simulationgames. Unit costs for technical assistance were estimated as follows:$8,000 per staff-month for foreign consultants (inclusive of salaries,allowances and international air fare), and about $9nn per staff-month forlocal consultants. Overseas fellowships were estimated at about S2,0fn perstaff-month, and local fellowships at about SROO equivalent per staff-month.Recurrent costs such as consumable materials, honoraria and travellingallowances were estimated on the basis of current practices in the firstphase project which were reviewed during appraisal and found reasonable.Phvsical contingencies represent 10% and price contingencies 36% of basecosts. Price contingencies were calculated on base costs plus phvsicalcontingencies and estimated as follows: local - 20% for 19R8, 15% for 19Q4,11% for 1985, and 7% for subsequent years; foreign - R% for 19R3, 7.5Z for1984, 7% for 1985 and 6% for subsequent years.

54. The total project cost of $71.6 million equivalent (including thefront-end fee of $0.1 million) would be financed by a proposed loan of 943.nmillion equivalent, covering 60% of total project costs excluding taxes(100% of foreign and 43% of local expenditures). The Government wouldfinance from its annual budget the remaining costs of $28.6 million (40% oftotal project costs).

Recurrent Costs

55. To assist the Government in setting up and operating the expandedprogram, the Bank would finance some incremental recurrent costs including:(a) expenses of the tutors involved in the training of staff; (b) per diemallowances; (c) travel allowances; and (d) consumable materials used duringthe project period. The annual recurrent costs generated by the projectwhen fully operational (1989/90) would amount to Rp 5.5 billion, represent-ing 17% of the total 19R2/83 recurrent expenditures of nikmas (Rp 33 billion)

- 19 -

or 0.5% of the 1982/83 recurrent budget of the Ministry of Education (Rp 1trillion). These additional costs should not constitute an unreasonabledemand on the Ministry budget.

Procurement

56. Past experience in Indonesia has shown that contracts for civilworks do not attract foreign bidders unless they are grouped into very largepackages. Since this is not feasible under the proposed project because ofthe geographical dispersion of project sites, contracts for civil works($14.0 million including contingencies) would be awarded on the basis oflocal competitive bidding following procedures which are satisfactory to theBank. Equipment bid packages exceeding $100,000 equivalent would be awardedon the basis of international competitive bidding in accordance with BankGroup guidelines and are expected to represent about $2.0 million in total.Local manufacturers would receive a margin of preference in bid evaluationof 15% of the c.i.f. price of competing imports or the actual customs duty,whichever is lower. Equipment in bid packages below $100,000 and allconsumable materials would be procured locally and are expected to representabout $3.8 million in total. 0ff-the-shelf items of equipment and consum-able materials not exceeding $50,000 equivalent for each package andaggregating to a maximum of about $500,000 could be purchased throughprudent shopping on the basis of a minimum of three competitive pricequotations. Most learning materials would be printed textbooks and tutorsguides produced locally and are expected to represent $13.5 million intotal. Printing services would be procured through local competitivebidding from private printing enterprises or government establishments.Books and instructional printed matter would be purchased directly frompublishers or distributors at the lowest possible prices. Prior approval ofthe Bank would be required for the award of civil works contracts exceeding$500,000 equivalent (covering about 76% of the value and 33% of theestimated number of contracts) and for contracts for the purchase of equip-ment, consumable materials, learning materials and books exceeding $200,000equivalent (covering about 78% of the value and 41% of the estimated numberof contracts). Employment of consultants would be carried out in accordancewith Bank Group guidelines.

Disbursements

57. The proposed loan of $43 million would be disbursed over a periodof about six years. Disbursements would be made against the followingcategories of expenditures: (a) civil works - 60% of total expenditures;(b) equipment, consumable materials, learning materials and books - 100% offoreign expenditures, 90% of local (ex-factory) expenditures, and 75% ofother local expenditures; (c) Employment-oriented Fund, consultants'services, fellowships and professional fees - 100% of total expenditures;and (d) training, per diem and travelling allowances - 50% of totalexpenditures.

- 20 -

58. Withdrawal applications would be suported by full documentation,except for expenditures on training, per diem, and travel allowances,consumable materials and the Employment-oriented Fund, which would bereimbursed against statements of expenditure certified by the ProjectDirector. Documentation for these statements would be retained by theproject unit and be available for review by the Bank during projectsupervision missions. To the extent practicable, withdrawal applicationswould be aggregated in amounts equivalent to $100,000 or more, prior tosubmission to the Bank.

Accounts and Auditing

59. All agencies involved in project implementation would prepare andmaintain separate project accounts in accordance with sound accounting prac-tices. Accounts and documentation supporting the statements of expenditurewould be maintained separately and would be readily available centrally forreview by visiting Bank missions. During negotiations, the Governmentprovided assurances that: (a) accounts, statements of expenditure andfinancial statements for each fiscal year would be prepared and audited byindependent auditors acceptable to the Bank; and (b) certified copies of theaudited accounts and financial statements, for each fiscal year, togetherwith the auditor's report would be furnished to the Bank as soon asavailable, but not later than nine months after the end of each fiscal year(Section 4.02 (c) of the draft Loan Agreement).

Benefits and Risks

60. The project would provide basic education and employment-orientedskill training to about 800,000 Indonesian illiterates and school dropouts.In line with the Government's stress on poverty alleviation the project istargeted to serve the poorest segments of the population. In the long term,the project is expected to: (a) increase literacy levels and promote accessto primary school equivalency for those desiring to re-enter the formalschool system at the secondary level; (b) provide village-level skilltraining, direct employment and increased incomes to the poorer segments ofthe population; and (c) improve the effectiveness of and increasereceptivity to government services and programs such as health, nutrition,family planning and agricultural extension.

6i. The benefits expected from the project depend on the competenceand commitment of the Dikmas staff. To minimize the risk of poor qualitystaff the project provides strong staff support in the form of increasedtraining, development of relevant learning maLterials, and improvedsupervision, monitoring and evaluation. In addition, studies would beconducted under the project to analyze incentive requirements of villagelevel extension staff and to explore alternative means of generating localfinancial support for nonformal education activities. There is also apossibility of misallocation of resources from the employmenL-orientedtraining funds to members of the village who are not necessarily in thegreatest need of such resources and training. Control would be exercised by

- 21 -

a strengthened monitoring system at the village level and bv applyingstringent criteria, developed in consultation with the Bank, for selectinglearning groups to be funded, based upon lessons drawn from the pilotcomponent in the First Nonformal Fducation Project.

PART V - LEGAL INSTR7MENTS AND ATrHORITY

62. The draft Loan Agreement between the Republic of Indonesia and theBank and the report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement are being distributed to the ExecutiveDirectors separately. Special conditions of the project are listed inSection III of Annex III.

63. I am satisfied that the proposed loan would comply with theArticles of Agreement of the Bank.

PART VI - RFCOMMENDATION

64. I recommend that the Executive Directors approve the proposedloan.

A. W. ClausenPresident

Attachments- by Ernest Stern

October 14, 1q83Washington, D.C.

-22 - ANNEX IPage 1 of 5 pages

INDONESIA - SOC1AL INDICATORS DATA SEMTINDONES1A REPERINCELcOU a 9 CI UCNSrD AVERACKS) 1L.

NOST (MSoT RECURr ESTDATE) kbb b |= h DDLI INCUS PDDLE rcGE

19 t70& ESTINAIIL& AA I P-ACiI LAT. AMERCA CARTE

AUZ (Z W5AND 33. Ot)TOTAL 1919.3 t919.3 1919.3ACRICUDTURAL 266.0 307.1 311.3

cGr PEE CAPITA (US$3 90.0 150.4' 330.0 1023.6 201P.2

-m CmwouM aR CAPTA(KILOGRAMS OF COAL EQUIVALENT) 129.0 143.0 266.0 792.8 1407.6

NUATION AD5 PITA!L STATISTISPoPULATION.MID-YEAR (THUSMANDS) 94680.0 116201.0 149451.0 -URBMA POPULATION (E OF TOTAL) 14.6 17.1 20.6 32.9 65.9

POPULATION PROJFCTIONSPOPUI.ATTON IN YEAR 200 (HILL) 215.7STATtONARY POPULATION (MtLL) 399.5YEAR STATIONVAR POP. REACErD 1140

POPULATION DENSITYPER SQ. %0. 49.3 60.5 76.2 260.7 35.6PER SQ. 10. AGR. LAND 355.9 378.4 461.2 1696.5 93.2

POPULATION AGE STRuIscURE (E)0-14 YES 40.7 44.0 39.8 39.4 40.1

15-64 YRS 56.2 53.4 57.1 57.2 55.365 AND AMVE 3.1 2.5 3.1 3.3 4.1

POPULATION GROWTH tATE (:)TOTAL 2.1 2.0 2.3 2.3 2.3URBAN 3.7 3.6 4.u 3.9 3.7

CRUDE BIRTH RATE (PER THOUS) 45.8 40.7 34.6 31.3 31.5CRUDE DEATH RATE (PER THOUS) 22.5 17.2 13.1 9.6 8.1CROSS REROOUCTION RATE 2.8 2.7 2.2 2.0 2.0

FAMILY PLANNINGACCEPrTORS ANIUAL (Taou0) .. 181.1 3051.0USERS (: OF HARRIED WOMEN) . 0.2 36.0 46.6

FMO AIMl NUIIONlNINDEX OP FOWO PROD. PER CAPITA(1969-71-100) 93.0 102.0 122.0 125.2 113.0

PER CAPtTA SUPPLY OFCALORIES (2 OF REqUIREEWICS) 86.0 94.0 110.0 114.2 111.3PROTEINS (CRAMS PER DAY) 38.0 42.0 49.0 57.9 67.9OF WHICH ANINEL AND PULSE 6.0 6.0 7.01c 14.1 34.1

CHILD (ACES 1-4) DEATH RATE 22.9 16.9 13.7 7.6 5.3

SALlELIFE EXPECT. AT BIRTH (YEARS) 41.2 47.3 53.5 60.2 64.6INFANT MT. RATE (PER T10US) 149.9 IZO.9 105.0 68.1 62.6

ACCESS TO SAFE WATER (.POP)TOTAL .. 3.0 23.0 37.1 64.8URBAN 10.0 41.0 54.8 77.8RURAL .. 1.0 13.0 Z6.4 44.3

ACCESS TO EXCRETA DISPOSAL(I OF POPULATION)

TOTAL ,. 15.0 23.0 41.4 5L.6URBAI .. 19.0 20.0 47.5 69.8RURAL *- 14.0 24.0 33.$ 29.8

POPULATION PER PHYSICIAN 46730.0 26510.0 11530.0 7771.9 1776.0POP. PER NUMSINC PERSON 4510.0/f 7680.0 2300.0 2462.6 1012.2POP. PER HOSPITAL IED

TOTAL 1360.0 1650.0 1610.0/d 1047.2 477.0URBAN 250.0 .. 70O.07i 651.1 667.5RUML *- *' 3160.0f 259t.9 1921.6

ADMISSIONS PER HOSPITAL ED .. .. 22.4/. 27.0 27.2

AVERAGE SIZE OF HOUSEHOLDTOTAL 4.4 4.8URBAN 4.9 5.3RURAL 4.3 4.7

AVERAGE NO. OF PERSONS/RONTOTAL .. 1.5URBAC .. 1.6RURAL 1.5

ACCESS TO ELECT. (2 OF DNELLINCS)TOTAL *- X-.@ -fURBAN .. .. . -

RURAL .. ..

-23- A!NEX 1

Page 2 of 5 pages

_s. s - SOCAL DIDICAOS DATA SHELEIDOUESIA nEEEEJ(88E mRsUPS (dE-aaID AVE:RAsE) as

mOSTr CRSr RECESTr ErIKA) lbb LgMb : ,P £ SO-.£ nsmmm

1 9 6 T ASIA 4 PACIFC LA. ACICA & CABIN

ADJUSTED kDEI ATIOPRIMALY: TOTAL nLO 77.0 91.0 101_2 105.0

MLE 86.0 83.0 104.0 106.0 106.3FElAE 58.0 n.o 91.0 97.5 103.6

SECONDARY: TOTAL 6.0 15.0 2.0 44.9 40.0MALE 10.0 ZO.0 33.0 50.0 38.6FEMASL 3.0 WO0 ZZ.O 44.6 41.2

WCATIOXL C.' OF SEWDART) 2O.4 22.1 15.5 18.5 34.0

RUFI-TEACEER gATDPRaix 39.0 Z9.0 34.0 3Z.7 30I7sEcoUDAU 14.0 13.0 16.0 D 3.4 16.7

ADUL LITERACf RATE (C- 39.0 56.6 62.q/, 72.9 79.5

1PASSEMCM CARSITKmSMS POP 1.1 2.1 3.SIg 9.7 45.6IADIO CIVERSIMOUSMD 0P 7.2 2l.9 4Z.4 113.7 22Z8

TV AEcD rPO 0.1 0.8 9.6 50.1 10t.3iSPAV ( SDAI GENERAIL

)IEREST) CIULATI0SPER TOOGSaE IOfULATM 11.0 .. 17.71d 54.0 64.1

CXMM& AmWAL ATrEND CAIITA 2.6 S 0.5k 3.4 2_9

TOTL LAIOR. FORMC (30US) 34791.0 41090.0 53604.0FEMALE (PEIRU) 27.8 30.9 29.Z 33.6 24.8AGRICULTURE (PERCENT) 75.%v 66.0 55.0 50.9 31.3

UISR (PERC0T) 8.0 10.0 - 15.0 19.2 23.9

PARTIMcPATIO RATE (PERCENT)TOTAL 36.7 35.4 35.9 38.6 31.3KAE 54.2 49.5 51.1 50.7 49.8FEMA 20.0 21.6 20.8 26.6 14.1

ECUEImIC OENCY 0ATO 1.2 1.3 1.2 1.1 1.4

PERGW;r OF PRIVATE INC1EREcKIVED of

IGEiESr St Or RU1SENOLDS _ _ 23.514 22.2&IGHIEST Z OF HOUSE8DIS *- -- 49.4 48.0LUi= 20l OF t*USOLDS * - 6.6/d 6.4LOWEST 106 OF ZOUSEiOLDS .. .. L4.47T 1' .5

ESTIM ABOLUTE roWeTLVE. CUSS PER CAPITA)

URNBA . __ 136-0s 194.5 2899.RIMAL . _ 1ZO; 155.0 184.5

ESTMT RELTVE lOVErTY DICUNLtVE (USS PER CAPITA

URI".. 119.Oft 178.0 519.8RURAL .. .. 9L07O 164.8 372.1

EST ITED £W. NEXwL AsSOLUTPOVERTY XSCIE LEVEL. CZ)

URBAN o .. 2. 24.4RURAL 51 05 41.1

:0r AVAILABLE.Tr APPLICABLE

Pi O T C S

la The group averas for each indLeator a" populatlon-welbted erittatic ris. Coverage of countrie g rheIndicators depends o- avalablUty of data and La not uniforx.

lb oijless oebhrwiv noted. 'Data for 1960- rfer to any year betewa 1959 and 1961; Data for 1970J between 19b9 and19n: and dara for -Host Recet ExtLmmte between 1979 end 1981.

Ic 1977; /d 1976; le 1975; If 196Z; A l978.

may 1983

- 24 - ANNEX Iam,aTrmOr cm -==:=SPage 3 of 5 pages

3.1; 111451 5.499 v. .8 9 -. 9..1

y . 2. "99.191.- 810 99111 .99.91 191 -~ 'D.1 5275 2 5.19.1 ,

.~.h. 9s .4~ 1991.5 .W 10499.115 95. .. e CZ) 412.. _ 91- 9 W." 111, 11. "w.5. -- 4958 .5. M~5. v~ .- *.1 ft.d.~512 .10.. .5 .1110. 1109919 19109. 92..991*s 9 9.,. LU299.. 1929-99 9199. Z. . _ ~ .

- 9991 9~ (1)lb.- - 45..51 pb .Un- -& (2) b-t.19, -5 9- 191 dL t .5=,5Wb142.. .g a 5= 997 Wen 91.j9~~9 .90129 14 9~ 91 .9. =99941 =..192 1.9 041 91 1 1 19..599=9 9991

.ffl1r.9.) 1~12. 10..5=.55 499:1. gm.- pp.2=~ .95310 91~9. - 2.~.~.l94I99I .2.91 bys17 5 1. 12.. 4.2.1 125 1101."'Uu.. L-& -M I.. .L." .2.5=1. 11t.95 op9.. .inI111"5 ..- 1 .= 993 m.9 12

.29. 0 IV-9-19s.) - 5. - _.9011. 1.9 by .5-99- - s*s.i .ms.9. ~~~~~~~.z.i.g 1.94 ~~~~~~i .s... iwo. ~ dzz byi.1 t-&F zs f h.I."

2090C4r- Im)4.1g. -a _ ~ - -i_~ . L..s.19 -W. 1.999 59.-91. "1.1410 b b1 5C- "5999HIM by .91 � 59=. 5.11.r.. - W1 4 ~1-=9911791f 999,.995 D 1 51 s~9.~...95 .9.91.9... I wf0,ft. two. 99999 999-a 1 11 95= by949Z5--9- 07 U9 l-I..1b1930. .91.19b in1-2.9119

101.9 2990 4.5.. ,..19.1..~~~~~~~~~~- - 9...Ls.A .4 - s.9l. .. 9... .--. l - p.1.. 9.9.1

2034. 1I.7. -4 119 4Wy- 17.9 1.9.5 - 919911VW. E92bIPLJv9 99 ut.9194 993*1 _a..4.-- - 1.4.4 .l =9&5 -. 5=1. 2.1493.9- 19c

gmCY 2~7199 12 7991.- El .poM...5 .9. .5 12.l 4two. 5.99y. = .W .99991 .9.M. 3.9 bzI.5 35by 91.

792. 1.91.9... 14...._.3. .10) 8. 8li 9030 1070. .9 101 t2. -. 9..1.- 310 b- .1 .- 19s. ~.. -r b 1.2-

412.9994.1411.51 99~9.-y .45.- 5-.Lh1l1 9.5. 4959 -- 224 -~ 91.9: 2960. 2070. . -..... - s.s 91 ss. .. ... 214 -t-3. 1-.99.. .5199 -99..914.9.5=10 591 . 5195=1 - 9* 1996 =999

7-- h. P 919 999.19.31)5599 -_.94-110 10tb1r92..99.A .. d1 _14.97- v992.1.1L.41

19 =5 -E 9L.911±1 " 8.995 . .. p. 1149. 5191929129. 95 5='2.gd)- 9.9. 5=.1998-

5..1. 99.811 'K... 2 21 919=.199991 r a.-t1

19991199911 99995=.7919.....5.I .5..E 5. 511117~~ 5.91I..95- 9.we199.4.515 5. 1. s.1s..9sl r-. .20.1. -95 t911.511.. 5-.1- 11 .1. -EY b "2-1 1. 9919 f.. .- 9 55 551.91 99

9999±91.. .1 .. I-911-t U12. 5=.9 = _m. 99=91 91= tclw 21.39=:....1y1.l .hl. MD b-Il

P91.1.59s1. S1 10 ... 10.9 .99.9 - C..1 9!. 95z - C - b-

151 :16020 1q7. 11.9495. 99P11. indlv94 12. M 7 in . :- s...--m-ft-

99~19.. 900 0081.1.l.I9m1= .99 5.s1. - V-S11=9915=5

-ss..) 1 11. E95 F.-. -10 .. P- .ta.m. .5 .14-i...cy- -LIT d.5=..n. E.949 1195two.~9; 00.12. i 1291 495 =1s~9 .9 ..... .s=s -- 5=9 -5= 111 W

I.o.95t. C....2 2.9 I-tl - .91 - -I 995521 1-959. 1 &f l .. 910y 1...1 4121 by~ .5Lf C".9.11 .9.95 991599 9119910. 10 159. 190L. V..p.-0- 9 l...19.

999.1-f-.l -..9.9.) -919- U1 p- s5-t E5 .5. 01 19.9 s.2199 1592 51.Cb. .- =.0.1.

C.5= 913.. 99 - .) - 1- 1.. 1125= .s -1. .51 b 1.14-t- 99991.51.5:10 v. 1. 20r b. 9.- F t.-.IfI m.M--(rAL y-. t 0

C94.2911t5. -Z -19.l94 -l~ 1 =2 .C", = I".5lm d11t .1-.. =1 5 p. b5.4gm.l.2-5 .P.w s- .. L.&-

99*2=199. 1020. 103.95. 1042 4P2.. 9. .. 99 19 9929 551.5... .55 . 5

C U .9 .199 _ -y9 Eint4..5 -t.1115 1.t .11-2.9 -91211.2. V 1 ti..1015.2. .1.. 999.9 4.-9.151. 10. .5.... ~12399.0 .9..9.. - 11ty.. 5 .9999 51945

E." " 1. _I~~ - b-t.- C--fit.1- .- PfTV 19 915.9 (Wy b.10 .091.1. - TV- 5.11-5 9. bs5= 5V..1.912 '8 - E.... .W) .&.21*b.4 .5 -"B. 99 (.. .4B tft..I -SLa ~&5 59.1 1.12... at.... .- I.. 1V 9.515

5=95 5915=1521 1Xftj 101- 99.9.).- 011 b-95. 49.19.. -. soSr1. .495.... .g.91.1 V.9-2 9..11 9r.4 a. 9 . 81 915= -L.rCIr.t.59. Ir53ssd ps9199.)0 Sb.. 12 .

90.9W 99117299 'Ehfl.11. -".9 8 .11a 9- L..". .... 1.117 -1- -.74 L-1.4.2101-----. 29*01109.. p-c *p2. C04-7t2 -L 1.4. .2~yp * s.912 9.11911. 49999. 9129.311 9 C.9416.-5. 5.12I 141

9.. .02.- .1.0. ~. 191. 7551.~.2 119.710 5L4.719...5..9 9909 .- :. Low11 -. 09 P.-Cm. - ttt Uby.5

995.59. 9; .991-51. 499392919 9 -11" 111.-1P---.9.571- 99311--92MG.

99155=.9111915.111. 2.1591.5 19.W 2999911-A -.99. A-9 Yf±I(291- ft'. (0.9-0) - 2.9..M 1.,1 5.25 9999.9. 181110195.9.-9951.99119091 t-i" 9995=.51Ib1 5 Cs" 97 99 -9921Y9 0...5= p .l.4 991919 29- 91. 95..6.9 95. 9919

99999-5.. kt W=1.991 W- ~a 1. 999.99119 "-11 I..9 9994 9919.O5=9197. 1i30 2070 5= 1041 4. t0.991118.9- 1. 5=4 7% .1 1... 1A8 41.h1.5~9 -C 2 IW j91- 99 - -?E± .9 5.5. 95.921 5.. 4.55..

bq.s...1 -. 911990 b 70 .5 L9. 9 b51.. 9 88 by . s.D. f--t- - -i9i .1.2 8914 9989.35295

.2I19.5.2.14 S.9.11 L9*1-. 07 1910 10. 419. 4 9-1999957 lW99191 3-5.5. 9.19.9994 10529 1.39 2. 09

95199917100,1099 4.97 011 h-.917 9- 299 1. -919 tb-39 . 19211995 1.99 (ps. 599. -h1. 9. 9..1 - S_S.119y995c99t1

10 .19. 9919181. 891-) 292.914 1p.4b t41. 1. F.r. 9.19%. - -.91..p9-y99

W39 91145941..7 13.) 91 121 4.1. -a1 991099 1 .19.. - .19pp1.199411 5h =99519W-29 192.911 11.-II1.91 -1P,9919 ._t 1191 mg..9 595.9119.1 M-9

49191 219 ... 1 10p1 19 it.It p.s dsp; 123.I.- -1.-2L .102-0-Z

0.11 5... -91)9.991 99. 5= V99.1)-091 499919 999 p1995. 94-t 3.9.99.9 -11-.99 L999 5912 99.2 1011 - W351 P-112.9

19.1519 458 .1110 55.112 5.11. 903. 17 - 416 4.59. 19-991 0499 . ,- . . -. "1

P*,I. r_"I, -C"p- 1-t.4 -t - h- min T,- -L- C99979 f~-Cf L&. .'U9: 91 02.1 29.1." - m 1d= L. -~

9... 0 r .. 1 t1.tb.s.... t 9198999.995p995 .. 1

99 112; WO.117 .0 1314 -5. .=1&2.,I199.51..1.19141.1. 5.09.99 031.19 1.-599 519991) .5= 4999.W91 .2-M 5=9 -e91.1.915 91919 151 211591)-.395 99

.8915.7 U 19. AM199.99 LP12.1 I999919 - 9919199 .b 919t19999 -2. 19951 53919991 1. 499 t.15L.91. 991-

I.__. 1by2 9 99991 85-b993. 2.11.t 5. 31.9. .. t4 .-1---r.tnl 9 W_-119 .99.9910. 9591 rt19t-9 DP-

939-9- 93 992.4991 991 p.0*490991999999

AN=EX IPage 4 of 5 pages

Populatinn 152.6 million (mid-1982)MCP Per Capita: TsS580 (1982 estlmate)

I5DONESIA - ECGSOMIC 1NDICATORS

Annual growth rate (2) /a

(million US5 at F-stimatedcurrent prices) Actual Projected

Indic:tor 1981 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

SATIOXAL ACCOUNTSGross domestic product lb 85.486 5.0 6.9 8.9 7.7 6.3 9.9 7.9 -0.1 1.4 5.1 7.1

Agricutture 21.587 0.0 4.7 1_3 5.2 3.9 5.2 4_9 2.1 2.6 3.1 3.1Industry 34.668 5.6 IL.l 14.2 8.7 7.1 12.5 8.5 -1.9 1.0 9.5 11.4Services 29.231 10.1 5.9 12.5 9.2 7.7 11.8 9.8 5.5 t.0 2.0 5.0

Consumption 66.108 6.4 7.9 5.6 8.9 13.6 13.1 15.8 3.9 0.4 -0.1 4.5Gross inr vestment 18,280 14.6 6.0 16.0 15.0 4.4 17.7 11.1 13.0 -8.1 5.0 6.0Exports of GNFS 23.309 -2.4 17.0 9.5 1.n -0.1 -5.7 -2.6 -10.4 -1.2 12.8 11.1Imports of GNFS 22.411 11.7 16.8 4.4 12.7 22.5 16.9 27.1 10.4 -12.0 -4.2 2.0

Gross national savings 17.016 -16.3 14.2 30.Z -17.5 62.5 33.2 -20.0 -19.0 5.4 28.4 15.3

PRICESCDP deftator (1973 - 100) 166 190 214 238 315 407 448 484 581 668 741Exchange rate 415 415 415 442 623 627 632 661 970 970 970

Share of GOP at market prices (2)(at current prices) Average annual increase (Z) ia

1960 1970 1975 1980 1985 1990 1960-70 1970-75 1975-80 1980-85 1985-90

Gross dooertic product 100 100 100 IOD 100 100 3,a 8.4 7.4 4.2 5.1Agriculture 54 47 32 25 25 23 2.7 4.1 3.3 3.2 4.0Ixdustry 14 18 34 43 41 41 5.2 12.0 9.8 4.2 5.1Services 32 35 35 32 34 36 4.8 9.7 9.5 4.6 6.n

Consumption 91 89 79 71 73 74 4.1 8.4 9.2 4.7 5.4Gross Investment 8 14 20 21 22 23 4.8 1B.3 12.2 5.1 6.0Exports of GXFS 13 13 23 31 27 25 3.6 9.2 2.9 -1.1 3.9Imports of GIF5 -13 -16 -22 -2Z -22 -22 3.2 22.1 14.0 3.8 5.3

Gross nattonal savingRs 8 9 17 26 23 23 6.1 23.1 14.2 Z. 4.5

As 2 of GDP1960 1970 1975 1980 1982

PUBLIC FtStsC£ |cCurrent revenues 11.7 10.1 17.4 22.5 23.2Current expenditures 14.0 8.4 9.9 12.8 11.7Surplus (+) or deficit (-) -2.3 -1.6 +7.5 +9.7 +11.4Capital expenditure n.a. 5.0 11.3 13.0 14.5ForeEgn financing 0.2 3.5 3.7 3.3 3.1

1960-70 1970-75 1975-80 1980-85 1985-90OTNER 14DrCATnRS

Annual GNP growth race (2) 4.5 7.6 7.1 4.2 5.2Annual GNP per capita growth rate (Z) 2.4 5.1 4.7 1.8 3.1Annual energy consumption growth rate (2) 2.2 11.2 11.0 5.6 5.2

ICOR 2.2 2.2 3.3 5.4 4.3Marginal savings rate 0.30 0.48 0.28 0.15 n.3Import elasticity 1.2 2.8 0.84 0.11 1.03

fa At constant 1973 prices for 1975-1981. and 1981 prices for 1982-1985.lb At market prices.Ic Central Government only. on an April-to-Ytarch fiscal year bastss. East Asia and Pacific Programs

October 5. 1983

6oYCX IP re 5 of S page

Population 152.6 m111ion (mid-1982)CGI per Capita: DS$580 (1982 estimte)

NDOSA - BALANC OF PAThES, MXERNAL CAPITAL D?(Million US$ at currant pries)

Actual Estimted ProjectedIndicator 1971 1975 1979 IW80 1981 1952 1953 1954 1955 1990

BALANCE OF PAYMETS la1. Exports 10.861 11.353 18.510 22,885 ZZ.994 19.524 17,540 20,907 25.437 47.398

(a) Oil & UNG (gros) 7.354 7,374 12,340 17,297 18,824 15.631 13.370 15.638 19.425 33,931(b) Nacoil 3.507 3,979 6,171 5,587 4,170 3,893 4,170 5,269 6,012 13.467

2. Imports (including net NIs) -10D686 -11,493 -13,205 -17,589 -22,096 -22,773 -20,020 -20,983 -23,164 40,345(a) Oil sector -2,909 -3.364 -2,960 4.050 -5.407 -5.468 4.357 4,135 -4.398 -6.899(b) Nonoil imports -7.Z41 -7.543 -9,028 -11.837 -14.022 -14.893 -13.698 -15.069 -17.110 -31.646(e) NFS (net) -536 -5S86 -1.237 -1.702 -2,667 -2,411 -1.965 -1,779 -1.656 -1.800

3_ Resouare balance 175 -140 5,305 S,296 898 -3.249 -2,480 -76 2,273 6.9134. Factor services -565 -1.015 -3.106 -3,165 -3.267 -3.566 -3,893 -4,625 -5.599 -9.380

(a) Intereat publtc debt -641 485 '635 -724 -20 -1,466 -1.494 -1,803 -2,098 -3.031(b) Other (set) -424 -530 -2,471 -2,441 -2.4k7 -2,102 -2,404 -2,822 -3,501 -6,349

5. Capital grants 66 66 52 76 67 100 100 100 100 10O6. Balance on current account -624 -1,109 2.198 2,131 -2.302 -6.715 -6.278 -4.601 -3.227 -2.3677. Direct foreign investment 285 271 217 140 139 276 350 350 400 700S. Public K & LT loans

(a) Disburseent 1.956 1.638 1,939 2,564 3.203 4.383 5.411 5,592 5.733 6.973(b) Amortization -825 -977 -1.335 -987 -1.001 -1.146 -1.541 -1.943 -2.297 -4,865(c) Set disbursements 1,131 660 604 1.877 Z.202 3.237 3.870 3.648 3,436 Z,107

9. Other capital (net) -140 888 -1.329 -1.248 -539 -78 2.675 480 1,174 61510. Change in reserves (- increase) -651 -7G5 -1.690 -2,736 988 3,280 -617 123 -1,713 -1,05511_ Met official reserves 2.208 2.916 4,606 7,342 6.354 3,074 3.724 3,636 5,485 10,115

Reserves in months of nonoilimports + BPS 3.4 4.3 5.4 6.5 4,4 Z.1 2_9 2.6 3.5 3,5

Memorandm ItemNet foreign assets of the banking -

system lb - - 6.906 10.787 11,154 7.674 7,824 7.236 8.685 13,315Total reserves in months of nonoil

imports + UNF 3.4 4.3 5.1 9.6 7.8 4.7 6.2 5.2 5.5 4.6

EXIERNAL CAPITAL AND DETr /cGross Disbursements 1.956 2,205 1.855 2.536 2.729Concesstonal Loans U2 484 433 659 792

Bilateral 381 448 399 611 718IDA 49 29 30 42 69Other 12 6 5 6 5

Nonconcessional Loans 1.514 1.721 1.432 1,858 1.937Official export credits 218 271 61 4 165IBRD 191 168 199 331 314Other multilateral 16 12 66 52 86Prisate - source 1.089 1,270 1.126 1.449 1.372

External DebtDebt outstanding & disbarsd Id 11.658 13flJ7 13.234 14582 15,737Offiecial - source 7.077 8,390 8.434 9,400 10.114Private - soarce 6.583 4,717 4,799 5,482 5,623

Undisbursed debt 4,475 5,839 7.932 9.454 11.354

Debt ServiceTotal service payments 1.262 2,062 2.100 1.772 1,974

Interest 441 514 771 519 973Payments as Z exports /I 11.6 18.2 11.3 7.7 9.0

Average Interest Rate on New Loans(.) 6,3 7.6 6.6 8.2 8.6Official - source 5.6 4.6 5.0 5.5 7.9Private - source 8_6 10.2 856 12.3 9.2

Av erage Maturity of New Loans(Tears) 20.5 18.8 18.6 18.6 15.2Official - source 23.8 30.1 24.8 24.4 20.8Private - source 9.1 8.7 11.0 9.9 10.6

As : of debt outstanding at end of lv&cMaturity structure of debt outstanding

Maturities dut within 5 years 40Maturities due within 10 years 69

Interest structure of debt outstandingInterest due within first year 5.7

La On an April-to-March fiscal year basts./b Includes foreign assets of deposit money banks in addition to official reserves.Tc Excludes private nonglaranteed loans./d At end of period. Efst Asia and Pacific Program/e Oil exports treated on gross basis. October 5. 1983

ANNEX II- 27 - Page I of 4 pages

THE STATUS OF BANK GROUP OPERATIONS IN INDONESIA

A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of September 30, 1983) la

US$ millionLoan| AmountCredit Fiscal (less cancellations)Number Year Purpose Bsnk IDA Undisbursed

Sixteen loans and thirty-seven Credits fully disbursed 760.5 544.1 -

479 1974 Bali Tourism - 16.0 0.41100 1975 Sixth Irrigation 65.0 - 5.51197 1976 National Resource Survey & Mapping 13.0 - 1.61237 1976 Fourth Education 37.0 - 2.91250 1976 Second Shipping 54.0 - 0.51268 1976 Seventh Irrigation 33.0 - 5.91336 197. Second Urban Development 52.5 - 4.51337 1977 Tinjung Priok Port 32.0 - 4.81365 1977 Sixth Power 116.0 - 25.71373 1977 Nutrition Development 13.0 - 0.31433 1977 Teacher Training-Fifth Education 19.0 - 4.71434 1977 Eighth Irrigation 63.0 - 27.21435 1977 Ninth Irrigation 35.0 - 4.21472 1977 Second Population 24.5 - 6.61486 1978 Non-Formal Education 15.0 - 4.01499 1978 Nucleus Estate and Smllholders I 65.0 - 22.51513 1978 Seventh Power 94.0 - 27.2785 1978 Smll Enterprise Development - 40.0 7.6

1578 1978 Tenth Irrigation 140.0 - 101.11579 1978 Eleventh Irrigation 31.0 - 11.6

827 1978 Rural Credit - 30.0 2.51604 1978 Nucleus Estate & Smallholders II 65.0 - 45.4869 1979 Polytechnic - 49.0 22.21645 1979 Twelfth Irrigation 77.0 - 42.11653 1979 Third Urban Development 54.0 - 19.6898 1979 Fifth Technical Assistance - 10.0 8.21691 1979 Lower Cimanuk Basin Flood Control 50.0 - 27.01692 1979 Second Agricultural Training 42.0 - 11.01696 1979 Fifth Highway 123.2 - 70.11703 1979 Fourth BAPINDO 50.0 - 7.2919 1979 Transmigration II - 67.0 15.11707 1979 Transmigration II 90.0 - 87.81708 1979 Eighth Power 175.0 - 60.11709 1979 Second WIter Supply 36.0 - 20.2

/a The status of the projects listed in Part A is described in a separatereport on all Eank/IDA financial projects in execution, which is updatedtwice yearly and circulated to the Executive Directors on April 30 andOctober 31.

ANNEX II- 28 - Psgez2 of 4 pages

US$ millionLoan/ AmountCredit Fiscal (less cancellations)Number Year Purpose Bank IDA Undisbursed

946 1980 Yogyakarta Rural Development - 12.0 8.11751 1980 Nucleus Estate & Smallholders III 99.0 - 59.3984 1980 Smellholder Rubber Development - 45.0 31.6995 1980 Fifteenth Irrigation - 45.0 25.2996 1980 National Agriculture Extension II - 42.0 34.91811 1980 Fourteenth Irrigation 116.0 - 78.41835 1980 Nucleus Estate & Smallholders IV 42.0 - 34.31840 1980 National Agricultural Research 35.0 - 35.01014 1980 National Agricultural Research - 30.0 21.71869 1980 Third Population 35.0 - 29.51872 1980 Ninth Power 253.0 - 166.11898 1981 Smllholder Coconut Development 46.0 - 37.31904 1981 University Development 45.0 - 41.91950 1981 Tenth Power 250.0 - 156.31958 1981 Swamp Reclamstion 22.0 - 16.41972 1981 Fourth Urban Development 43.0 - 35.12007 1981 Nucleus Estate and Smllholders V 161.0 - 144.22011 1981 Second Snll Enterprise Development 106.0 - 18.72049 1982 Jakarta-Cikqmpek Highway 85.0 - 85.02056 1982 Eleventh Power 170.0 - 146.92066 1982 Second Seeds 15.0 - 14.82079 1982 Bukit Asam Coal Mining

Development & Transport 185.0 - 144.82083 1982 Rural Roads Development 100.0 - 84.52101 1982 Second Teacher Training 80.0 - 79.72102 1982 Second Textbook 25.0 - 25.02118 1982 Sixteenth Irrigation 37.0 - 34.72119 1982 Seventeenth Irrigation 70.0 - 64.22120 1982 National Fertilizer Distribution 66.0 - 63.02126 1982 Nucleus Est. & Smllholders VI 68.1 - 66.82153 1982 Coal Exploration Engineering 25.0 - 24.62199 1982 Central Java Pulp & Paper 5.5 - 4.9

Engineering Project2214 1983 Twelfth Power 300.0 - 293.82232 1983 Nucleus Estate & Smallholders VII 154.6 - 152.32235 1983 Provincial Health 27.0 - 26.62236 1983 Jakarta Sewerage & Sanitation 22.4 - 22.22248 1983 Transmigration III 101.0 - 99.52258 1983 Public Works Mtnpower Development 30.0 - 29.8

Project2275 1983 East Java Water Supply I 30.6 - 30.52277 1983 BAPINDO V 208.9 - 208.92288 1983 Transmigration IV 63.5 - 62.62290 1983 Second Polytechnic 107.4 - 107.1

ANNEX II- 29 - Page 3 of 4 pages

US$ millionLoan/ AmountCredit Fiscal (less cancellations)Number Year Purpose hlnk IDA Undisbursed

2300 1983 Thirteenth Power /a 279.0 - 279.02341 1984 Third Agriculture Training /a 63.3 _ 63.32344 1984 Nucleus Estate & Smllholder Sugar /a 79.2 - 79.2

Total hank loans and IDA credits 6,076.15 930.10

Of which has been repaid -241.83 -9.70

Total now outstanding 5,834.32 920.40

Amount sold to third party 28.24Amount repaid by third party -27.21 -1.03

Total now held by Bank and IDA/b 5,833.29 920.40

Total undisbursed 3,797.50 177.50 3,975.00

/a Not yet effective.

/b Prior to exchange adjustment.

- 30 - ANNEX IIPage 4 of 4 pages

B. STATEMENT OF IFC INVESTMENTS (as of September 30, 1983)

Fiscal Type of Loan Equity Totalyear Obligor business - (US$ million) ---

1971 P.T. Semen Cibinong Cement 10.6 2.5 13.11971 P.T. Unitex Textiles 2.5 0.8 3.31971 P.T. Primntexco Indonesia Textiles 2.0 0.5 2.51971 P.T. Kabel Indonesia Cable 2.8 0.4 3.21972 P.T. Daralon Textile

Manuf. Corp. Textiles 4.5 1.5 6.01973 P.T. Jakarta Int. Hotel Tourism 11.0 - 11.01973 P.T. Semen Cibinong Cement 5.4 0.7 6.11974 P.T. Primtexco Indonesia Textiles 2.0 0.3 2.31974 P.T. Monsanto Pan Electronics 0.9 - 0.91974 P.T. PDFCI Devel. Fin. Co. - 0.5 0.51974 P.T. KUnaltex Textiles 2.4 0.6 3.01976 F.T. Semen Cibinong Cement 5.0 1.5 6.51976 P.7. Semen Cibinong Cement - 1.1 1.11977 P.T. Daralon Textile

Manuf. Corp. Textiles 0.4 - 0.41977 P.T. Kamaltex Textiles 1.3 0.2 1.51979 P.T. Daralon Textiles 0.9 - 0.91980 P.T. Papan Sejahtera Capital Market 4.0 1.2 5.21980 P.T. Indo American

Industries Glass Dinnerware 11.1 0.9 12.01980 P.T. Semen Andalas Cement and

Indonesia ConstructionMaterial 48.0 5.0 53.0

1982 P.T. Saseka Gelora Leasing Capital MIrket 4.0 0.3 4.3

Total gross commitments 118.8 18.0 136.8

Less: sold or repaid and cancelled 82.6 5.7 88.3

Total held by IFC 36.2 12.3 48.5

Undisbursed (including participant's portion) - - -

- 31 -

AM,RFX TIIT

INDONESIA

SECOND NONFORMAL F.DUCATION PROJ.CT

Supplementary Data Sheet

Section I: Timetable of Key Events

(a) Time taken to prepare the project: R months

(b) Agency which prepared the project: Directorate of CommunityEducation (Dikmas)

(c) First presentation to the Bank: February 1982

(d) First Bank Mission to considerthe project: July 1982

Ce) Date of departure of appraisal mission: October 19R2

Cf) Date of completion of negotiations: September 1q83

(g) Planned date of effectiveness: February 1Q94

Section EI: Special Bank Implementation Action

None

Section III: Special Conditions

The fovernment would:

(a) establish criteria and procedures satisfactory to the Bank for theselection of subdistricts in which employment-oriented traininggroups and basic education learning groups would be located(para. 32);

(b) appoint staff to new positions in the various Dikmas offices inthe project area, in accordance with a schedule agreed with theBank (para. 39);

(c) establish criteria and procedures satisfactory to the Bank for theaward of fellowships (para. 44); and

(d) furnish to the Bank, for review and comment, by September 1 eachyear a plan and budget detailing a training and materialsdevelopment program for the coming year and thereafter implementsuch a plan, taking into account the Bank's comments (para. 45).

I;w~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~IW,,A k J HAILANDw 2-,, n

SuA, China

I mu T_c BRUNEI -L / t ! MALAYSIA nflA

0~~~.~ FO II-.o

-~~~~~~ -2 ~~~~~~~~~MALAYSIA N G ^m , o' NGAPORE

; ; ; l ~~~~~~~~~~~~~~~~~~~X JAB Lr /M A 'N 7 ,,At4tf-

I~~~~~~~~~~ a va Se czf Peu-

100 toe~~~~~~nd c . C/ ez nSUBA

IOD ~~~~~~~~~tW 112' llr

IBRD 174321i4- . 130- *4W

.; INDONESIA

PHILIPPINES ,- SECOND NONFORMAL EDUCATION PROJECT

A NEW D0K0M CENTERS i

W NEDISRICT Q DNU CEN7I u

r DKs NATIoNAL DIRTORATE

*-- - ~~~~~~~~~~~~~~~~~~~~~PROjECT AREAS COVERD UNDER THE'; ' FIRST NONFORMAL EDUCATON PROM?-

~7 -. - INTERNATIONAL OUItDARIEE

' z ~C ; _

- : .-, .QJA;L'-'. MAHERAf ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0*f 0j"\~~~~~~~~~1 I ''%.

-- Co 4 W~~Ea,-dw GuS , j-A WES1 ~ ~ ~ ~ ~ ~ ~ ~ a

- - . - .> -- -. sv2?-, s S 4c' | ¾

I.A.~~~~~~~~~~~~~~~~~~~~~~~~~.

-' -- ~~~~BIJRU ~'*II R I A N JA

.~~ Y .-7 ~ A Y

,,.f.; e *- <--~~~0r (Yc I c

hfa ~3 ma z0o 300 o00- ~~~~~~~~~~~~~~~~~~~~~MILES

_ r= ._ q0 *+ -> r 0 10, 2OG 3D0 200 50- ,,,_ ~'I- O, 10I * i *I0 0 5,

,_ , ' KfILOEES5

12C 130 13*