O IAL LOAN NUMBER 1958 INDDOCUMENT,

Loan Agreement

(Swamp Reclamation Project I)

between

REPUBLIC OF INDONESIA

and

INTERNATIONAL BANK FOR RECONSTRUCTION

AND DEVELOPMENT

Dated 4A ' O 1981

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LOAN AGREEMENT

AGREEMENT, dated 34"04 , 1981, between

REPUBLIC OF INDONESIA (hereinafter called the Borrower) and

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter

called the Bank).

ARTICLE 1

General Conditions; Definitions

Section 1.01. The parties to this Agreement accept all the

provisions of the General Conditions Applicable to Loan and

Guarantee Agreements of the Bank, dated October 27, 1980, with

the same force and effect as if they were fully set forth herein

(said General Conditions Applicable to Loan and Guarantee

Agreements of the Bank being hereinafter called the General

Conditions).

Section 1.02. Wherever used in this Agreement, unless the

context otherwise requires, the several terms defined in the

General Conditions have the respective meanings therein set forth

and the following additional terms have the following meanings:

(a) "AARD" means the Agency for Agricultural Research and

Development in the Borrower's Ministry of Agriculture;

(b) "Basic Agrarian Law" means Law No. 5/1960 of the Bor-

rower (UNDANG-UNDANG POKOK AGRARIA), as the same may be amended

from time to time;

(c) "DGCK" means the Directorate General of CIPTA KARYA,

Directorate General of Housing, Urban and Regional Development in

the Borrower's Ministry of Public Works;

(d) "DGF" means the Directorate General of Fisheries in

the Borrower's Ministry of Agriculture;

(e) "DGFCA" means the Directorate General of Food Crops

Agriculture in the Borrower's Ministry of Agriculture;

(f) "DGT" means the Directorate General of Transmigration in

the Borrower's Ministry of Manpower and Transmigration;

(g) "HAK MILIK" means the right of ownership in respect of

land as provided under the Basic Agrarian Law;

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(h) "HAK PAKAI" means the right of use in respect of landas provided under the Basic Agrarian Law;

(i) "JMT" means the Borrower's Junior Minister forTransmigration;

(j) "P4S" means PROYEK PEMBUKAAN PERSAWAHAN PASANG SURUT,the Project Unit for Tidal Swamp Reclamation in the Borrower'sDirectorate General of Water Resources Development in the Ministryof Public Works;

(k) "PPL" means PENYULUH PERTANIAN LAPANGAN, an agricul-tural field extension worker in the Borrower's Ministry ofAgriculture;

(1) "PPM" means PENYULUH PERTANIAN MADYA, an agriculturalfield extension supervisor in the Borrower's Ministry ofAgriculture;

(m) "PPS" means PENYULUH PERTANIAN SPESIALIS, an agricul-tural subject matter specialist in the Borrower's Ministry ofAgriculture;

(n) "PTPT" means PENYIAPAN TANAH PEMUKIMAN TRANSMIGRASI,the Borrower's Directorate of Land Preparation for TransmigrationSettlement in the Borrower's Directorate-General of BINA MARGA,Ministry of Public Works;

(o) "Project Area" means 9,000 hectares of a flat low lyingplain at Karang Agung in the Musi Banyuasin District, about 70kilometers from the east coast of South Sumatra, and about 80kilometers to the northwest of Palembang bounded in the southeastby the Air Hitam, a tributary of the Calik river and in thesouthwest by the Teluk Tenggulang river;

(p) "Project Coordinator" means the official in the officeof JMT, assigned to coordinate all activities related to trans-migration projects receiving financial assistance from externalsources and whose duty station is Jakarta;

(q) "Project Implementation Agencies" means the projectimplementation agencies which includes inter alia, P4S, PTPT, DGT,DGCK and JMT engaged in the implementation, or assisting in theimplementation of physical works, in the Project Area;

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(r) "Regional Coordinator" means an official in the office

of JMT assigned to coordinate all activities related to the

implementation and operation of the Project and other tidal swamp

reclamation transmigration projects in South Sumatra and whose

duty station is Palembang; and

(s) "Settler" means a settler and his family settled in the

Project Area.

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrower, on

the terms and conditions in the Loan Agreement set forth or

referred to, an amount in various currencies equivalent to

twenty-two million dollars ($22,000,000).

Section 2.02. The amount of the Loan may be withdrawn

from the Loan Account in accordance with the provisions of

Schedule 1 to this Agreement as such Schedule may be amended from

time to time by agreement between the Borrower and the Bank, for

expenditures made (or, if the Bank shall so agree, to be made) in

respect of the reasonable cost of goods and services required for

the Project described in Schedule 2 to this Agreement and to be

financed out of the proceeds of the Loan.

Section 2.03. Except as the Bank shall otherwise agree,

procurement of the goods and civil works to be financed out of the

proceeds of the Loan shall. be governed by the provisions of

Schedule 4 to this Agreement.

Section 2.04. The Closing Date shall be December 31, 1986

or such later date as the Bank shall establish. The Bank shall

promptly notify the Borrower of such later date.

Section 2.05. The Borrower shall pay to the Bank a commitment

charge at the rate of three-fourths of one per cent (3/4 of 1%)

per annum on the principal amount of the Loan not withdrawn from

time to time.

Section 2.06. The Borrower shall pay interest at the rate

of nine and three-fifths per cent (9-3/5%) per annum on the

principal amount of the Loan withdrawn and outstanding from

time to time.

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Section 2.07. Interest and other charges shall be payablesemiannually on May 1 and November 1 in each year.

Section 2.08. The Borrower shall repay the principal amountof the Loan in accordance with the amortization schedule set forthin Schedule 3 to this Agreement.

ARTICLE III

Execution of the Project

Section 3.01. (a) The Borrower shall carry out or cause (i)P4S to carry out Parts A, B and H of the Project, (ii) PTPT tocarry out Part C of the Project, (iii) DGT to carry out Parts D, E(excluding Part E.4) and F of the Project, (iv) its Ministry ofHealth to carry out Part E.4 of the Project, (v) DGFCA to carryout Part G (excluding Part G.3) of the Project, (vi) AARD to carryout Part G.3 of the Project and (vii) JMT to program and coordi-nate the implementation and operation of the Project through theProject Coordinator and the Regional Coordinator, all with duediligence and efficiency and in conformity with appropriate agri-cuxltural, engineering, management, administrative and financialpractices. The Borrower shall provide, promptly as needed, thefunds, facilities, services and other resources required for thepurpose.

(b) Without any limitation or restriction upon its obliga-tions under paragraph (a) of this Section, the Borrower shallcause (i) DGFCA to appoint two PPM's and six PPL's under thesupervision of a PPS to assist in the implementation of Part G.2of the Project and (ii) AARD to appoint suitably qualified andexperienced research and support staff in adequate numbers toassist in the carrying out of agricultural research.

Seccion 3.02. The Borrower shall appoint and post by notlater than December 31, 1981, a suitably qualified and experiencedperson as Regional Coordinator.

Section 3.03. (a) In order to assist (i) P4S in the prepara-tion of field surveys, final construction drawings, constructionsupervision and construction management for the Project, and (ii)DGCK in planning the subdivision of the Project Area and indesigning village facilities for the Project, the Borrower shallby not later than March 31, 1981, employ international and localengineering consultants.

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(b) In order to assist JMT in the programming and coordin-

ation of the implementation of the Project, the Borrower shall by

not later than March 31, 1982, employ an international management

consultant.

(c) In order to assist PTPT in the supervision of land

clearing and DGT in the supervision of the construction of houses,

villages and comiunal facilities for the Project, the Borrower

shall by not later tba March 31, 1982, employ local engineering

consultants.

(d) In order to assist P4S in the carrying out of (i) a

nationwide inventory of coastal and near coastal swamp develop-

ments and ranking of development potentials, (ii) a survey of

selected existing swamp development to assess the viability of

their upgrading needs, (iii) an environmental impact study of

selected swamp developments the Borrower shall employ consultants

by not later than January 31, 1982.

(e) In order to assist P4S in carrying out a groundwater

investigation at Karang Agung, the Borrower shall employ con-

sultants by not later than March 31, 1982.

(f) In order to assist P4S, DGFCA, DGT and DGF in monitor-

ing the physical, ecological and socio-economic impact of the

Project, the Borrower shall employ consultants by not later than

October 31, 1984.

(g) The qualifications and experience of the consultanto

referred to in paragraphs (a) through (f) of this Section, and

their terms and conditions of employment shall be satisfactory to

the Bank.

Section 3.04. (a) The Borrower undertakes to insure, or make

adequate provision for the insurance of, the imported goods to be

financed out of the proceeds of the Loan against hazards incident

to the acquisition, transportation and delivery thereof to the

place of use or installation, and for such insurance any indemnity

shall be payable in a currency freely usable by the Borrower to

replace or repair such goods.

(b) Except as the Bank shall otherwise agree, the Borrower

shall cause all goods and services financed out of the proceeds

of the Loan to be used exclusively for the Project until its

completion.

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Section 3.05. (a) The Borrower shall furnish to the Bank,promptly upon their preparation, the plans, specifications,reports, contract documents and construction and procurementschedules for the Project, and any material modifications thereofor additions thereto, in such detail as the Bank shall reasonablyrequest.

(b) The Borrower: (i) shall maintain records and proceduresadequate to record and monitor the progress of the Project (in-cluding its cost and the benefits to be derived from it), toidentify the goods and services financed out of the proceeds ofthe Loan, and to disclose their use in the Project; (ii) shallenable the Bank's accredited representatives to visit the facili-ties and construction sites included in the Project and to examinethe goods financed out of the proceeds of the Loan and any rele-vant records and documents; and (iii) shall furnish to the Bank atregular intervals all such information as the Bank shall reason-ably request concerning the Project, its cost and, where appro-priate, the benefits to be derived from it, the expenditureof the proceeds of the Loan and the goods and services financedout of such proceeds.

(c) Promptly after completion of the Project, but in anyevent not later than six months after the Closing Date or suchlater date as may be agreed for this purpose between the Borrowerand the Bank, the Borrower shall prepare and furnish to the Bank areport, of such scope and in such detail as the Bank shall reason-ably request, on the execution and initial operation of theProject, its cost and the benefits derived and to be derived fromit, the performance by the Borrower and the Bank of their respec-tive obligations under the Loan Agreement and the accomplishmentof the purposes of the Loan.

Section 3.06. The Borrower shall cause:

(a) P4S to assign and post by not later than March 31, 1981,a qualified and experienced site manager to supervise the con-struction of the hydraulic infrastructure who shall serve also asfield coordinator to coordinate land clearing, housing and settle-ment in respect of the Project until the completion of the con-struction of the main and secondary hydraulic infrastructure andrelated structures.

(b) PTPT to assign and post by not later than January 31,1982, a qualified and experienced site manager to supervise theclearing of house lots and farm plots in respect of the Project.

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(c) DGT to assign and post by not later than January 31,

1982, a qualified and experienced site manager to supervise the

construction of houses and village facilities, the supply of

provisions, the settlement of settlers and to coordinate the field

activities of supporting agencies and, upon completion of the main

and secondary infrastructure and related structures of the Pro-

ject, to assume the post of field coordinator responsible for the

coordination of all Project activities.

Section 3.07. The Borrower shall ensure that the health

center and sub-centers referred to in Part D of the Project are

constructed concurrently with the construction of the villages in

which they are to be located and that, for each such village at

least one such sub-center is constructed, adequately staffed and

made operational immediately prior to the settlement of the

first Settlers in such village.

Section 3.08. The Borrower shall cause DGT, in cooperation

with the Directorate General of Agrarian Affairs in its Ministry

of Home Affairs, to issue a certificate evidencing: (i) HAK PAKAI

to each Settler to his 0.50 ha house lot and 1.75 farm plot within

one year after the date of arrival; and (ii) HAK MILIK to all of

each such Settler's land within 5 years after the date of arrival.

ATICLE IV

Other Covenants

Section 4.01. (a) It is the policy of the Bank, in making

loans to, or with the guarantee of, its members not to seek, in

normal circumstances, special security from the member concerned

but to ensure that no other external debt shall have priority over

its loans in the allocation, realization or distribution of

foreign exchange held under the control or for the benefit of

such member. To that end, if any lien shall be created on any

public assets (as hereinafter defined), as security for any

external debt, which will or might result in a priority for the

benefit of the creditor of such external debt in the allocation,realization or distribution of foreign exchange, such lien shall,

unless the Bank shall otherwise agree, ipso facto and at no cost

to the Bank, equally and ratably secure the principal of, and

interest and other charges on, the Loan, and the Borrower, in

creating or permitting the creation of such lien, shall make

express provision to that effect; provided, however, that, if for

any constitutional or other legal reason such provision cannot

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be made with respect to any lien created on assets of any ofits administrative subdivisions, the Borrower shall promptly andat no cost to the Bank secure the principal of, and interest andother charges on, the Loan by an equivalent lien on other publicassets satisfactory to the Bank.

(b) The foregoing undertaking shall not apply to: (i) anylien created on property, at the time of purchase thereof, solelyas security for payment of the purchase price of such property;and (ii) any lien arising in the ordinary course of bankingtransactions and securing a debt maturing not more than one yearafter its date.

(c) As used in this Section, the term "public assets"means assets of the Borrower, of any administrative subdivisionthereof and of any entity owned or controlled by, or operating forthe account or benefit of, the Borrower or any such subdivision,including gold and foreign exchange assets held by any institutionperforming the functions of a central bank or exchange stabili-zation fund, or similar functions, for the Borrower.

Section 4.02. (a) The Borrower shall maintain or cause tobe maintained records adequate to reflect in accordance withconsistently maintained sound accounting practices the operations,resources and expenditures, in respect of the Project., of thedepartments or agencies of the Borrower responsible for carryingout the Project or any part thereof.

(b) Without limitation on paragraph (a) of this Section,the Borrower shall cause: (i) P4S and PTPT to maintain separateaccounts in respect of the parts of the Project implemented bysuch Agency; (ii) the accounts referred to in the foregoingsub-paragraph (i) to be sent annually to the Project Coordinatorreferred to in Section 3.01 (a) (vii) of this Agreement; (iii)such accounts to be audited for each fiscal year in accordancewith appropriate auditing principles consistently applied, byindependent auditors acceptable to the Bank; (iv) to be furnishedto the Bank as soon as available, but in any case not later thansix months after the end of each such year, the report of suchaudit by said auditors, of such scope and in such detail as theBank shall have reasonably requested; and (v) to be furnished tothe Bank such other information concerning such accounts and theaudit thereof as the Bank shall from time to time reasonablyrequest.

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Section 4.03. The Borrower shall (i) cause the navigation,

primary and secondary canals and all related structures and

inspection roadways constructed under the Project to be operated

and adequately maintained in accordance with appropriate engineer-

ing and financial practices, (ii) make available by August 15 of

each year half of the annual funds reasonably estimated to be

required and budgeted for the purpose in each such fiscal year and

the other half to be made available in two installments until all

the budgeted amounts have been made available, and (iii) provide

all facilities and other resources required for the purpose.

Section 4.04. In pursuance of the Borrower's undertaking in

Section 4.03 of this Agreement, the Borrower shall (i) cause a

detailed annual operation and maintenance plan for each fiscal

year to be prepared, the first by May 31, 1984, for the 1984

fiscal year and (ii) by not later than May 31, 1984, establish or

cause to be established, an operation and maintenance unit staffed

with qualified personnel for the Project Area.

Section 4.05. The Borrower shall cause P4S, DGFCA, DGT and

DGF to monitor as from the 1985 fiscal year until the end of the

1989 fiscal year the physical and socio-economic conditions and

ecological impact of the Project and shall provide all the funds

and staff needed for the purpose. Copies of the reports prepared

by the abovementioned Project monitoring agencies shall be made

available to the Bank annually.

ARTICLE V

Termination

Section 5.01. The date use 3, 14t/ , is hereby specified

for the purposes of Se cti n 12.04 of the General Conditions.

ARTICLE VI

Representative of the Borrower; Addresses

Section 6.01. The Minister of Finance of the Borrower is

designated as representative of the Borrower for the purposes

of Section 11.03 of the General Conditions.

Section 6.02. The following addresses are specified for the

purposes of Section 11.01 of the General Conditions:

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For the Borrower:

Ministry of Financec/o Director General for

International Monetary AffairsJalan Lapangan Banteng Timur 4Jakarta, Indonesia

Cable address: Telex:

MINISTRY FINANCE DJMLN JKT 45799JAKARTA DITJMON JKT 46415

DEPKEU JKT 44319

For the Bank:

International Bank forReconstruction and Development

1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable address: Telex:

INTBAFRAD 440098 (ITT)Washington, D.C. 248423 (RCA) or

64145 (WUI)

IN WITNESS WHEREOF, the parties hereto, acting through theirrepresentatives thereunto duly authorized, have caused thisAgreement to be signed in their respective names in the Districtof Columbia, United States of America, as of the day and yearfirst above written.

REPUBLIC OF INDONESIA

ByN

Authorized Representative

INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT

By (/~Regional Vice President

East Asia and Pacific

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SCHEDULE 1

Withdrawal of the Proceeds of the Loan

1. The table below sets forth the Categories of items to be

financed out of the proceeds of the Loan, the allocation of the

amounts of the Loan to each Category and the percentage of

expenditures for items so to be financed in each Category:

Amount of the

Loan Allocated % of

(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(1) Civil Works for:

Part A (excluding 11,500,000 100%

Parts A.5 and A.6),Part B (excludingPart B.2) and Part

C.2 of the Project

(2) Equipment for con- 1,500,000 100% of for-

struction supervision eign expendi-

and for Part 1.3 of tures and

the Project 95% of localexpenditures(ex-factory)

(3) Training fellowships 100,000 100%

(4) Consultants services 7,400,000 100%

under Part I (ex-

cluding sub-parts4 through 7)

(5) Unallocated 1,500,000

TOTAL 22,000,000

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2. For the purposes of this Schedule:

(a) the term "foreign expenditures" means expendituresin the currency of any country other than the Borrower and forgoods or services supplied from the territory of any countryother than the Borrower; and

(b) the term "local expenditures" means expenditures inthe currency of the Borrower and for goods or services suppliedfrom the territory of the Borrower.

3. The disbursement percentages have been calculated incompliance with the policy of the Bank that no proceeds of theLoan shall be disbursed on account of payments for taxes leviedby, or in the territory of, the Borrower on goods or services, oron the importation, manufacture, procurement or supply thereof;to that end, if the amount of any such taxes levied on or inrespect of any item to be financed out of the proceeds of the Loandecreases or increases, the Bank may, by notice to the Borrower,increase or decrease the disbursement perce-ntage then applicableto such item as required to be consistent with the aforementionedpolicy of the Bank.

4. Notwithstanding the provisions of paragraph 1 above, nowithdrawals shall be made in respect of payments made forexpenditures prior to the date of this Agreement.

5. Notwithstanding the allocation of an amount of the Loanor the disbursement percentages set forth in the table inparagraph 1 above, if the Bank has reasonably estimated thatthe amount of the Loan then allocated to any Category will beinsufficient to finance the agreed percentage of all expendituresin that Category, the Bank may, by notice to the Borrower: (i)reallocate to such Category, to the extent required to meetthe estimated shortfall, proceeds of the Loan which are thenallocated to another Category and which in the opinion of theBank are not needed to meet other expenditures; and (ii) ifsuch reallocation cannot fully meet the estimated shortfall,reduce the disbursement percentage then applicable to suchexpenditures in order that further withdrawals under suchCategory may continue until all expenditures thereunder shallb-7e been made.

6. If the Bank shall have reasonably determined that theprocurement of any item in any Category is inconsistent withthe procedures set forth or referred to in this Agreement, no

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expenditures for such item shall be financed out of the proceeds

of the Loan and the Bank may, without in any way restricting or

limiting any other right, power or remedy of the Bank under the

Loan Agreement, by notice to the Borrower, cancel such amount of

the Loan as, in the Bank's reasonable opinion, represents the

amount of such expenditures which would otherwise have been

eligible for financing out of the proceeds of the Loan.

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SCHEDULE 2

Description of the Project

The Project is designed to reclaim and develop the ProjectArea and to settle about 3,200 Settler families. It consists ofthe following Parts:

Part A: Hydraulic Infrastructure

(1) Clearance of about 800 hectares of land for the right-of-way canals.

(2) Construction of about a 9-kilometer long navigationcanal.

(3) Construction of primary canals of a total length ofabout 24 kilometers.

(4) Construction of secondary canals of a total length ofabout 200 kilometers.

(5) Construction of about 200 kilometers of tertiaries andof about 200 kilometers of small drains in about 100hamlets and villages.

(6) Construction of field bunds along the perimeter of farmplots.

Part B: Inspection Roadways, Bridges, Navigation Jetties, BaseCamp and Associated Facilities

(1) Construction of inspection roadways along the navigationand primary canals referred to in Part A of the Project.

(2) Construction of about 800 tertiary control structuresand of about 200 outlet structures for hamlet drains.

(3) Construction of about 10 pedestrian bridges on thenavigation and primary canals, about 100 pedestrianbridges on secondary canals, about 100 jetties athamlets, 2 navigation jetties and one primary controlstructure.

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(4) Construction of a base camp to house the constructionmanagement staff, including inter alia, offices, messhalls, living quarters, well water supply, generatingand communication facilities.

Part C: Land Clearing

(1) Clearing of house lots and land for village facilities.

(2) Clearing of about 5,600 hectares of farm plots.

Part D: Housing and Community Development

(1) Construction of about 3,200 houses in the ProjectArea.

(2) Construction of community facilities in 6 villages inthe Project Area, including inter alia, primary schools,health subcenters, places of worship, village offices,storage areas and staff houses.

(3) Construction of expanded community facilities in onemain village, including inter alia, a lower secondaryschool, a health center, a market place and staffhouses.

Part E: Settlement

(1) Settlement of about 2800 families from Java or Bali andabout 400 local families in the Project Area.

(2) Provision of storage facilities for sufficient potablewater supply to Settlers.

(3) Distribution to Settlers of the standard assistancepackage including, mosquito netting, sleeping mats andcooking utensils.

(4) Control of malaria in the Project Area.

Part F: Supplies

(1) Distribution to Settlers of monthly subsistence rationsfor a period of at least 18 months from the date of

arrival.

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Part G: Agricultural Support

(1) Distribution to settlers of the standard agriculturalassistance package including, agricultural implements,rice and vegetable seeds, seedlings for fruit trees,fertilizer and pesticides.

(2) Establishment and operation of a rural extension center.

(3) Establishment and operation of an agricultural researchsubstation.

Part H: Equipment and Materials

(1) Provision of boats, generators, telecommunications andoffice equipment for project implementation supervision.

(2) Provision of boats, hydraulic, topographic and labora-tory equipment and aerial photos for studies to becarried out pursuant to the Project.

Part I: Consultants' Services

(1) Management of the construction and implementation ofParts A and B of the Project with the assistance ofconsultants.

(2) Coordination of the implementation of the Project withthe assistance of consultants.

(3) Carrying out of studies relating to future coastal andnear-coastal swamp development, upgrading of existingswamp developments and environmental impact studies withthe assistance of consultants.

(4) Management of the construction of houses and villagedevelopments with the assistance of consultants.

(5) Planning of subdivision of the Project Area with theassistance of consultants.

(6) Carrying out of a groundwater investigation at KarangAgung with the assistance of consultants.

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(7) Monitoring of the physical, ecological and socio-

economic impact of the Project with the assistance of

consultants.

(8) On-the-job training of Project staff and fellowships for

training in remote sensing and ecological assessment.

The Project is expected to be completed by December 31,

1985.

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SCHEDULE 3

Amortization Schedule

Payment of PrincipalDate Payment Due (expressed in dollars)*

On each May 1 and November 1

beginning November 1, 1986through November 1, 2000 735,000

On May 1, 2001 685,000

* To the extent that any portion of the Loan is repayable ina currency other than dollars (see General Conditions,Section 4.04), the figures in this column represent dollarequivalents determined as for purposes of withdrawal.

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Premiums on Prepayment

The following percentages are specified as the premiumspayable on repayment in advance of maturity of any portion ofthe principal amount of the Loan pursuant to Section 3.04 (b)of the General Conditions:

Time of Prepayment Premium

Not more than three years

before maturity 1.45%

More than three years but

not more than six yearsbefore maturity 2.90%

More than six years but not

more than eleven yearsbefore maturity 5.30%

More than eleven years butnot more than sixteenyears before maturity 7.70%

More than sixteen years butnot more than eighteenyears before maturity 8.65%

More than eighteen yearsbefore maturity 9.60%

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SCHEDULE 4

Procurement

A. International Competitive Bidding

1. Except as provided in Part C hereof, goods and civil works

shall be procured under contracts awarded in accordance with

procedures consistent with those set forth in the "Guidelines for

Procurement under World Bank Loans and IDA Credits" published by

the Bank in March 1977 (hereinafter called the Guidelines), on the

basis of international competitive bidding as described in Part A

of the Guidelines.

2. For goods and works to be procured on the basis of inter-

national competitive bidding, in addition to the requirements

of paragraph 1.2 of the Guidelines, the Borrower shall prepare

and forward to the Bank as soon as possible, and in any event

not later than 60 days prior to the date of availability to the

public of the first tender or prequalification documents relating

thereto, as the case may be, a general procurement notice, in such

form and detail and containing such information as the Bank shall

reasonably request; the Bank will arrange for the publication of

such notice in order to provide timely notification to prospective

bidders of the opportunity to bid for the goods and works in

question. The Borrower shall provide the necessary information to

update such notice annually so long as any goods or works remain

to be procured on the basis of international competitive bidding.

3. Contracts for the excavation of canals, clearing of right-

of-way, blockage of creeks and construction of the base camp,

bridges, jetties and the tidal control structure, shall be grouped

together for the purposes of bidding and procurement.

4. All contracts to be awarded in accordance with the provisions

of this Part A shall be awarded on the basis of the standard form

tender and contract documents.

5. For the purpose of evaluation and comparison of bids for the

supply of goods to be procured on the basis of international

competitive bidding: (i) bidders shall be required to state

in their bid the c.i.f. (port of entry) price for the imported

goods, or the ex-factory price or off-the-shelf price of other

goods, offered in such bid; and (ii) customs duties and other

import taxes levied in connection with the importation, or the

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sales and similar taxes levied in connection with the sale or

delivery, pursuant to the bid, of the goods shall not be takeninto account in the evaluation of the bids.

B. Preference for Domestic Manufacturers

In the procurement of goods in accordance with the procedures

described in Part A of this Schedule, goods manufactured inIndonesia may *be granted a margin of preference in accordancewith, and subject to, the following provisions:

1. All bidding documents for the procurement of goods shallclearly indicate any preference which will be granted, the

information required to establish the eligibility of a bid forsuch preference and the following methods and stages that will befollowed in the evaluation and comparison of bids.

2. After evaluation, responsive bids will be classified inone of the following three groups:

(1) Group A: bids offering goods manufactured in

Indonesia if the bidder shall have established tothe satisfaction of the Borrower and the Bank thatthe manufacturing cost of such goods includes avalue added in Indonesia equal to at least 20%of the ex-factory bid price of such goods.

(2) Group B: all other domestic bids.

(3) Group C: bids offering any other goods.

3. In order to determine the lowest evaluated bid of eachgroup, all evaluated bids in each group shall first be comparedamong themselves, without taking into account customs duties andother import taxes levied in connection with the importation, andsales and similar taxes levied in connection with the sale ordelivery, pursuant to the bids, of the goods. Such lowest eval-uated bids shall then be compared with each other, and if, as aresult of this comparison, a bid from Group A or Group B is thelowest, it shall be selected for the award.

4. If, as a result of the comparison under paragraph 3

above, the lowest bid is a bid from Group C, all Group C bidsshall be further compared with the lowest evaluated bid from

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Group A after adding to the evaluated bid price of the imported

goods offered in each Group C bid, for the purpose of this further

comparison only, an amount equal to: (i) the amount of customs

duties and other import taxes which a non-exempt importer would

have to pay for the importation of the goods offered in such

Group C bid; or (ii) 15% of the c.i.f. bid price of such goods

if said customs duties and taxes exceed 15% of such price. If

the Group A bid in such further comparison is the lowest, it

shall be selected for the award; if not, the bid from Group C

which as a result of the comparison under paragraph 3 is the

lowest evaluated bid shall be selected.

C. Other Procurement Procedures

1. Contracts for the clearance of land for farm plots included

under Part C.2 of the Project shall be awarded on the basis of

competitive bidding locally advertised in accordance with the

Borrower's procedures for such contracts.

2. Contracts for aerial photography and satellite imagery,

recording and survey equipment, and miscellaneous equipment and

materials under Part 1.3 under the Project may be awarded, after

competitive bidding locally advertised in accordance with the

Borrower's procedures for such contracts; provided, however, that,

such contracts estimated to cost less than $32,000 equivalent may

be awarded after obtaining at least three quotations from exper-

ienced contracting and supply firms.

D. Review of Procurement Decisions by the Bank

1. Review of invitations to bid and of proposed awards and

final contracts:

With respect to all contracts for civil works estimated to

cost the equivalent of $1,500,000 or more and with respect to all

contracts for equipment estimated to cost the equivalent of

$200,000 or more:

(a) Before bids are invited, the Borrower shall furnish to

the Bank, for its comments, the text of the invitations to bid

and the specifications and other bidding documents, together with

a description of the advertising procedures to be followed for

the bidding, and shall make such modifications in the said docu-

ments or procedures as the Bank shall reasonably request. Any

further modification to the bidding documents shall require the

Bank's concurrence before it is issued to the prospective bidders.

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(b) After bids have been received and evaluated, the Bor-

rower shall, before a final decision on the award is made, inform

the Bank of the name of the bidder to which it intends to award

the contract and shall furnish to the Bank, in sufficient time for

its review, a detailed report on the evaluation and comparison

of the bids received, and such other information as the Bank

shall reasonably request. The Bank shall, if it determines that

the intended award would be inconsistent with the Guidelines

or this Schedule, promptly inform the Borrower and state the

reasons for such determination.

(c) The terms and conditions of the contract shall not,

without the Bank's concurrence, materially differ from those

on which bids were asked or prequalification invited.

(d) Two conformed copies of the contract shall be furnished

to the Bank promptly after its execution and prior to the

submission to the Bank of the first application for withdrawal of

funds from the Loan Account in respect of such contract.

2. With respect to each contract not governed by the preceding

paragraph, the Borrower shall furnish to the Bank, promptly after

its execution and prior to the submission to the Bank of the

first application for withdrawal of funds from the Loan Account

in respect of such contract, two conformed copies of such con-

tract, together with the analysis of the respective bids, recom-

mendations for award and such other information as the Bank shall

award of the contract was not consistent with the Guidelines or

this Schedule, promptly ifform the Borrower and state the reasons

for such determination.

3. Before agreeing to any material modification or waiver of

the terms and conditions of a contract, or granting an extension

of the stipulated time for performance of such contract, or

issuing any change order under such contract (except in cases of

extreme urgency) which would increase the cost of the contract by

more than 20% of the original price, the Borrower shall inform

the Bank of the proposed modification, waiver, extension or

change order and the reasons therefor. The Bank, if it determines

that the proposal would be inconsistent with the provisions of

this Agreement, shall promptly inform the Borrower and state

the reasons for its determination.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

CERTIFICATE

I hereby certify that the foregoing is a true

copy of the original in the archives of the Interna-

tional Bank for Reconstruction and Develop-

ment.

In witness whereof I have signed this Certifi-

cate and affixed the Seal of the Bank thereunto

this S_3 0Lday of .ar , 198 ±.

S SEFOR SECRETARY