INDONESIA INFRASTRUCTURE INITIATIVE

Transcription

1 INDONESIA INFRASTRUCTURE INITIATIVE FACILITY REVIEW AND PLANNING DOCUMENT (FRPD) January 2016 January 2017 i

2 ii Facility Review and Planning Document: Jan 2016 Jan 2017

3 INDONESIA INFRASTRUCTURE INITIATIVE FACILITY REVIEW AND PLANNING DOCUMENT (FRPD) January 2016 January 2017 iii

4 CONTENTS EXECUTIVE SUMMARY Background Introduction to IndII The IndII approach IndII contract summary to date Expenditure profile - Phase II Key counterpart agencies IndII achievements over the October 2014 December 2015 period Transport Program highlights Watsan Program highlights Proposed forward workplan through January Proposed priorities for the Transport Program Proposed priorities for the Watsan Program Proposed budget allocations Key issues requiring Board attention Transport issues WatSan issues Proposals for new activities (unallocated funds) ANNEXES ANNEXE 1: RATIONALE AND CONTEXT... 1 A1.1 Introduction... 1 A1.2 Transport... 1 A1.3 Water and Sanitation... 2 ANNEXE 2: PROGRAM REVIEW AND FORWARD WORKPLAN... 4 A2.1 Introduction... 4 A2.2 Transport... 4 A2.2.1 Introduction and overview... 4 A2.2.2 Achievements... 5 A2.2.3 Forward work plan... 7 A2.3 Water and Sanitation A2.3.1 Introduction and Overview A2.3.2 Achievements A2.3.3 Forward work plan ANNEXE 3: OPERATIONS, MANAGEMENT AND CROSS CUTTING THEMES A3.1 Introduction A3.2 Monitoring and Evaluation A3.2.1 Current reporting period A3.2.2 Future M&E activities A3.3 Communications A3.4 Administration, management and procurement ANNEX 4: DETAILED EXPENDITURE AND ACHIEVEMENTS TO JUNE ANNEX 5: ACTIVITY SUMMARIES - PRIORITIES FOR INDII S EXTENSION A5.1 ACTIVITY SUMMARY - Provincial Road Improvement and Maintenance (PRIM) Program A5.2 ACTIVITY SUMMARY - National Roads A5.3 ACTIVITY SUMMARY Public Transport in Jakarta A5.4 ACTIVITY SUMMARY - Water Hibah A5.5 ACTIVITY SUMMARY - Sanitation A5.6 ACTIVITY SUMMARY - Water sector governance A5.7 ACTIVITY SUMMARY - PDAM financial reform A5.8 ACTIVITY SUMMARY - Australia Indonesia Infrastructure Research Awards (AIIRA) iv

5 Table 1: Acronyms & abbreviations... vii Table 2: Contract summary (expenditure) to date ($M)... 2 Table 3: Expenditure profile (in $M)... 2 Table 4: Counterpart agencies... 3 Table 5: Program expenditure by category ($M and % of total expenditure)... 8 Table 6: Transport expenditure and achievements Table 7: Watsan expenditure and achievements v

6 vi Facility Review and Planning Document: Jan 2016 Jan 2017

7 ACRONYMS & ABBREVIATIONS Table 1: Acronyms & abbreviations ADB ADD AIIG AIIRA AIPCS AMDAL AMPL AP APBN ASEAN AusAID Bappeda Bappenas BPP-SPAM BRT BUMD BUMN CBO CMC CMEA CPG CPMU CSS DAK DED DFA DFAT DG DGCK DGH DGHS DGLT DGST DGWR DisHUB DJPK DPU EDMP EIA EINRIP FOE FRPD GDP GDMP G-G GIA GIZ GOA GOI gtkp HHC HRD Asian Development Bank Activity Design Document Australia Indonesia Infrastructure Grant Australia Indonesia Infrastructure Research Awards Australia Indonesia Partnership Country Strategy Analisis Mengenai Dampak Lingkungan Air Minum dan Penyehatan Lingkungan (Water supply and env. sanitation) Working Group Availability Payment(s) Anggaran Pendapatan dan Belanja Negara Association of South East Asian Nations Australian Agency for International Development (to late-2013) Badan Perencanaan Pembangunan Daerah Badan Perencanaan dan Pembangunan Nasional (National Development Planning Agency) Badan Pendukung Pengembangan Sistem Penyediaan Air Minum Bus Rapid Transport Badan Usaha Milik Daerah Badan Usaha Milik Negara (State Owned Enterprise) Community Based Organisation(s) Construction Management Consultant Coordinating Ministry of Economic Affairs Commonwealth Procurement Guidelines Central Project Management Unit (DGHS) City Sanitation Strategy Dana Alokasi Khusus (Special Purpose Grant) Detailed Engineering Design Direct Funding Agreement Department of Foreign Affairs and Trade Directorate General Directorate General Cipta Karya Directorate General of Highways (Bina Marga) Directorate General for Human Settlements (Cipta Karya) Directorate General of Land Transport Directorate General of Sea Transport Directorate General Water Resources Dinas Perhubungan, Direktorat Jenderal Perimbangan Keuangan Dinas Pekerjaan Umum Expressway Development Master Plan Environmental Impact Assessment Eastern Indonesia National Roads Improvement Program Faculty Operating Expenses Facility Review and Planning Document Gross Domestic Product Gas Development Master Plan Government to Government Grant Implementation Adviser Gesellschaft für Internationale Zusammenarbeit Government of Australia Government of the Republic of Indonesia Global Transport Knowledge Practice Household Connections Human Resource Development vii

8 IAT IBRDICAO IE IEG IFGI IIAP IIFF IIGF IIRMS IndII INP INTP INTP ISSDP ITSAP IURSP JICA KPI KPPIP KSAN LARP LASU LH M&E MDB MDG MIGAS MIS MoF MoHA MoT MPW MTDP MTEF NGO NORC NPMP NTB NTT OBA P&I PA PAMSIMAS PAU PBAS PBMC PMU PD PDAM PIU PPP PRIM PRMS RBIA RENSTRA RFT RPJMN Independent Impact Assessment Team International Bank for Reconstruction and Development Impact Evaluation Infrastructure Enhancement Grant Infrastructure for Growth Initiative Indonesia Infrastructure Assistance Program Indonesia Infrastructure Financing Facility Indonesia Infrastructure Guarantee Fund Indonesia Integrated Road Management System Indonesia Infrastructure Initiative Indonesian National Police Indonesian National Traffic Police Indonesian National Traffic Police Indonesia Sanitation Sector Development Program Indonesia Transport Safety Assistance Package Integrated Urban Road Safety Program Japan International Cooperation Agency Key Performance Indicator(s) Komite Percepatan Penyediaan Infrastruktur Prioritas Konferensi Sanitasi dan Air Minum Nasional Land acquisition and Resettlement Plan Lead Advisory Support Unit Local Government Monitoring and Evaluation Multilateral Development Bank Millennium Development Goal(s) Ministry of Energy and Mineral Resources Management Information System Ministry of Finance Ministry of Home Affairs Ministry of Transportation Ministry of Public Works Medium Term Development Plan Medium Term Expenditure Framework Non-Government Organisation Independent research organisation at Univ. Chicago (National Opinion Research Center) National Ports Master Plan Nusa Tenggara Barat Nusa Tenggara Timur Ou[ut-based Aid Policy and Investment Port Authorities Penyediaan Air Minum dan Sanitasi Berbasis Masyarakat Policy Advisory Unit Performance-Base Annuity Scheme(s) Performance Based Maintenance Contracts Port Management Units Public Diplomacy Perusahaan Daerah Air Minum (District Water Supply Company) Program Implementation Unit Public Private Partnership Provincial Roads Improvement and Management Provincial Roads Management System Risk Based Internal Audit(ing) Rencana Strategis Request for Tender National Medium Term Development Plan viii

9 RSA RSEU RTTF RUNK saiig SOP SPD TA TM ToR UKP4 USAID VfM VGF WASAP WASPOLA Watsan WB WIPS WSI WSP WSSI WWMP WWTP Road Safety Audit Road Safety Engineering Unit Road Traffic and Transport Forum National Road Safety Action Plan Australia Indonesia Infrastructure Grants for Sanitation Standard Operating Procedure(s) Sanitation Public Diplomacy Technical Assistance Traffic Model Terms of Reference President s Delivery Unit for Development Monitoring and Oversight United States Agency for International Development Value for Money Viability Gap Fund/ing Water and Sanitation Sector Program (Trust Fund through EKN managed by WB) Water and Sanitation Policy Formulation and Action Planning Project Water and Sanitation World Bank Working in Partner Systems Water and Sanitation Initiative Water and Sanitation Program (through World Bank) Water and Sanitation Index Wastewater Masterplan / Master Plan Wastewater Treatment Plant ix

10 EXECUTIVE SUMMARY This Executive Summary is intended to provide a brief overview of the key points to be discussed at the February 2016 Indonesia Infrastructure Initiative (IndII) Board meeting. The issues addressed in this note (and expanded upon in the annexes) include: Background on the IndII Facility key areas of focus, approach, program partners, etc; A brief review of program achievements over the previous reporting period (October 2014 December 2015); Proposed program focus and budget allocations for the remaining 12 months of the current 19-month extension period (January 2016 January 2017); and Other key issues requiring the Board s attention. 1. BACKGROUND 1.1 Introduction to IndII IndII s goal is to promote sustainable economic growth by working with the Government of Indonesia (GoI) to enhance infrastructure policy, planning and investment. The main focus is on water and sanitation (Watsan), and Transport, including cross-sectoral issues such as infrastructure finance and governance. The Watsan Program includes: Results-based grants for water and sewerage (e.g. the Water Hibah and the Australia Indonesia Infrastructure Grants for Sanitation (saiigs)). Project preparation in wastewater/ solid waste, for funding by Government of Australia (GoA) (grants), the GoI or Multilateral Development Banks (MDBs). Private sector support, including Perusahaan Daerah Air Minum (PDAM) business plans to enable bank financing, and PPP preparation and advisory. Support for governance measures, such as social contracts and service delivery indices, for laggard water utilities. Research partnerships to improve planning and delivery of sanitation and water services. The Transport Program includes: A comprehensive package to improve the policy, planning, delivery and safety of national roads. A pilot, conditional-grant program to improve provincial road maintenance the Provincial Roads Improvement and Management (PRIM) program. Advisory assistance with the reform of urban bus services in DKI Jakarta. IndII was conceived as a two-phase, seven-year program. Implementation commenced in July 2008 and was scheduled for completion in June However, to enable seamless assistance through the initial period of the President Joko Widodo administration, additional funding has been made available to enable Phase II to be extended to January The focus of IndII activities over this period is to finalise existing programs and to lay the foundation for a planned follow-on infrastructure program. 1.2 The IndII approach The program uses a combination of grants and technical assistance to achieve its goals. Effective and tested mechanisms such as demonstration, leverage, innovation and communications characterise IndII s design and delivery of its programs, in working collaboratively with GoI counterparts. For example, grants linked to performance incentives are used to leverage changes in GoI governance and, ultimately, changes to the relevant policies. Several themes underlie the IndII approach: Changing the business model: Putting in place the necessary institutional reforms, planning tools, and legal/policy frameworks to deliver the reforms required. Incentives: Using performance incentives to enhance infrastructure funding and delivery at national and local levels; and introducing new procurement modalities using results-based arrangements. Decentralisation: Securing governance and management reforms at the local level; and using fiscal 1

11 transfers to the regions to better engage and empower local governments. Private sector development: Leveraging and enhancing the role of the private sector in financing and delivering needed infrastructure; and mobilising domestic funding resources. 1.3 IndII contract summary to date The table below summarises technical assistance expenditure for IndII Phases I and II, including Phase II extension funding estimates. In addition, IndII will have facilitated an expected $ million 1 in government-to-government grants (e.g. Water Hibah Phases I & II, Sanitation Hibah) by program end. Table 2: Contract summary (expenditure) to date ($M) (i) Phase Dates Contract TA Total (i) Phase I 28 July June Phase II 1 July June Phase II extension (i) 1 July Jan Total Phase II Total IndII (Phases I & II) 28 July Jan Based on latest contract amendments. (ii) Estimates for Phase II extension period. 1.4 Expenditure profile - Phase II During the implementation of IndII, expenditure has ebbed and flowed, reflecting changes in program momentum. Facility expenditure was relatively low during the second half of 2015, reflecting a general scale-down of activities following the most recent contract extension. However, with a range of approvals and remobilisations in December 2015, expenditure will increase substantially in the second half of the final program year. This expected increase can already be noted from the expenditure accrued to date in January 2016, totalling slightly more than $3.1 million. By end-june 2016, IndII is expected to have spent approximately $20.25 million for the fiscal year (slightly under the original forecast of $22.63M). Table 3: Expenditure profile (in $M) $4,0 $3,5 $3,0 $2,5 $2,0 $1,5 $1,0 $0,5 Actual - Monthly Forecast - Monthly Actual - Cumulative Forecast - Cumulative $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0,0 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 $0 1 Throughout the FRPD, all $ amounts refer to Australian dollars, except where a different prefix to indicate US$ is used 2

12 1.5 Key counterpart agencies Facility Review and Planning Document: Jan 2016 Jan 2017 The Directorate General of Human Settlements (DGHS) and Directorate General Highways (DGH) at the Ministry of Public Works and Housing (MPW&H) are IndII s primary counterparts for program implementation. Through grants and various Technical Assistance (TA) programs, IndII also works with more than 200 local governments (LGs). Table 4: Counterpart agencies Counterpart agency DGH (Bina Marga, MPW&H) DGHS (Cipta Karya, MPW&H) MoF/Bappenas CMEA (Coordinating Ministry for Economic Affairs) BPPSPAM (MPW&H) More than 200 LGs LGs in Eastern Indonesia Palembang DKI Jakarta Main activities National Roads and Road Safety, PRIM Water Hibah, Sanitation Grants (SAIIGs), PDAM Financial Reform, City Sewerage grant and preparation, Solid waste project preparation Mainstreaming Hibah grants & Dana Alokasi Khusus (DAK) reform; IndII governance Private finance for water projects, Public-Private Partnership (PPP) support; IndII governance Water and Sanitation Service Index (WSSI) (of 100 LGs) Recipients of Watsan hibah grants (Water, SAIIGs), PDAM Financial reform PRIM pilot (NTB), Social Contracts for water Preparation, design and grant for Palembang sewerage TransJakarta assistance and bus corridor reform 2. INDII ACHIEVEMENTS OVER THE OCTOBER 2014 DECEMBER 2015 PERIOD This section highlights a number of key achievements during the October 2014 to December 2015 reporting period. This review period was chosen on this basis that it corresponds with the first 15 months of President Widodo s administration. 2.1 Transport Program highlights Planning, delivery and management of National Roads IndII has developed a traffic model (TM) for Java and Sumatera which predicts traffic volumes to The TM, together with an IndII-developed Infrastructure Model (IM), is being used to prioritise investments in national road projects for RENSTRA , and for longer-term planning. The TM forecasts have been used to assess the performance of the planned DGH national road network, the conclusion being that the future road network requires significant additional capacity to meet the needs of road users and to avoid serious congestion issues. DGH now accepts that a new Expressway Development Master Plan (EDMP) is required, the highlight of which is to be the inclusion of a second expressway spine running east-west through Java. The EDMP is to be prepared by IndII in A decision tool to help select the most appropriate procurement route/ financial structure for each project, based upon Value for Money (VfM) criteria, has been developed by IndII and is ready for trialing within DGH. Through a series of meetings and briefings, IndII has communicated to DGH senior government officials, across multiple agencies, the potential to use viable alternatives to the conventional toll road delivery model, which has been the usual delivery structure for expressways to date. The decision tool will consider, for each project, a range of delivery models including using privately financed Performance Based Annuity Schemes (PBAS) based on reimbursement through Availability Payments (APs). Through continued IndII meetings and briefings, support for a Pilot PBAS/AP highway project has increased significantly - with officials in DGH, the Ministry of Finance (MoF), the Indonesia Infrastructure Guarantee Fund (IIGF), the Komite Percepatan Penyediaan Infrastruktur Prioritas (KPPIP) and CMEA now all now supporting the need for a successful pilot project. DGH and others are now actively promoting Bewan Solo as the preferred pilot project. 3

13 To improve planning of existing road improvement or rehabilitation projects, IndII has developed and partially implemented a new Road Asset Management System (RAMS) for use at Balai level, to replace the outdated Indonesia Integrated Road Management System (IIRMS). To continue improving the quality of road projects, IndII has: (a) updated and modernised several design standards; (b) provided training and assistance; and (c) recommended larger, pre-designed works contracts with strengthened contract documents and supervision to help raise contractor capability and quality Provincial Roads - Improvements and Maintenance (PRIM) IndII has developed a new approach to provincial road maintenance using conditional grants to incentivise better management and delivery of road maintenance at the provincial level. This approach has been trialled as a pilot in Nusa Tenggara Barat (NTB) and potentially will form the basis for new hibah and DAK initiatives at central government level. PRIM has helped NTB Dinas Pekerjaan Umum (DPU) to plan, design, procure and implement routine maintenance on sections of road totalling 880 kms (one-half of the provincial networks) and to conduct rehabilitation, backlog and minor works on 975 kms. However, the overall standard of routine maintenance achieved requires further improvement during PRIM has achieved a better understanding of the importance of maintenance within DPU, and the adoption of a systematic, evidence-based approach using a newly developed software tool - the Provincial Roads Management System (PRMS), used for maintenance planning and budgeting TransJakarta Bus Rapid Transport (BRT) system Assistance to date has focussed on the corporatisation process and the legal transformation of TransJakarta as a managing operator to PT Transportasi Jakarta. Improved procurement of buses has been achieved by the introduction of updated performancebased specifications that provide greater flexibility to the bus manufacturers - while ensuring that buses perform as intended to meet user needs. Progress has been made on improving BRT infrastructure by producing complete designs for the TransJakarta Control Centre (now in operation) and the Cawang Bus Depot (to be constructed), so that both facilities can deliver a modern service for bus users Jakarta s non-brt bus system This activity has involved selection of a pilot project (Route S66 between Blok M and Manggarai) to demonstrate how a modern bus service can be managed and operated on one route in Jakarta - as a pre-cursor to wider bus improvements across Jakarta. New institutional arrangements have been introduced for Route S66, with an MoU signed between Kopaja, Dishubtrans, and PT TransJakarta committing to implementing a pilot project under the public transport improvement program. IndII has supported improved designs for corridor infrastructure and buses, with new specifications for accessible low-floor buses and more appropriately located bus stops Development of Pilot PPP port project IndII supported the development of a pilot PPP port project through the initial selection of New Makassar Port (based on a multi-criteria analysis) and subsequently, preparation of a full prefeasibility study, including basic design, business case, and contract terms sheets. This activity was undertaken in collaboration with the port technical team and key stakeholders representing the Directorate General of Sea Transport (DGST)/ Ministry of Transport (MoT), port authorities, CMEA, Bappenas, MoF, IIGF, PT Sarana Multi Infrastruktur (SMI), and South Sulawesi Province and Makassar City LGs. Although the project was eventually assigned to Pelindo IV due to urgency, the activity s comprehensive pre-feasibility study was well received by DGST/MoT, and is considered a benchmark for the preparation of future PPP port projects. 4

14 2.1.6 Integrated Urban Road Safety program Facility Review and Planning Document: Jan 2016 Jan 2017 The Directorate General of Land Transport (DGLT), as IndII s main counterpart for road safety, selected four city pilot projects for support, from proposals submitted by local governments. IndII has developed detailed engineering designs and budget estimates for road safety improvements in those four cities; these are now ready for implementation. Local governments, other relevant agencies and community groups from each city participated fully in the consultation processes. IndII produced of a series of (four) new road safety design guidelines, which are to be formally adopted by DGLT in Watsan Program highlights Water Hibah The DFAT-funded Water Hibah program has been completed in 274,000 households, which represents approximately 89% of the DFAT Water Hibah grants awarded by the GoI to 130 local governments. Unutilised funds remain, and are estimated to be equivalent to extending services to approximately 12,000 more households. These additional funds are planned to be used in a pilot project for implementation during One-hundred percent (100%) of the USAID-funded Water Hibah of 38,000 household connections in 27 local governments has been completed. Under the 2015 Anggaran Pendapatan dan Belanja Negara (APBN) Water Hibah program, the GoI has implemented services to approximately 145,000 households using the IndII model, and with support from IndII for baseline and verification the output represents approximately 72% of the budget allocated for 2015 by GoI. IndII has supported the GoI with the development of a water hibah delivery model suitable for APBN funding and capable of nation-wide scale up to meet the GoI s Universal Coverage policy target Sanitation Hibah and saiig and city sewerage Six thousand (6,000) household connections for the Sanitation Hibah have been completed, which represents approximately 66% of the program allocation of 9,000 connections. IndIl has contracted works under saiig for 18,700 households in 22 local governments. IndII completed master plans for sewerage services in eight cities: Batam, Palembang, Pekanbaru, Bandar Lampung, Bogor, Surabaya, Makassar, and Cimahi. The Asian Development Bank (ADB) has provided a loan to the GoI for implementation of the sewerage plans in three of these cities (Pekanbaru, Cimahi, and Makassar), with the detailed design for Cimahi and Makassar being provided by IndII. IndII has also completed detailed design for sewerage in Palembang, including development of a mechanism for funding its implementation directly by grant to the Palembang LG. Implementation of Palembang sewerage is programmed for co-financing between the GoA and GoI, with DFAT grant funding the treatment plant and pumping stations, and GoI funding the sewerage network Sector governance Two (2) water governance initiatives (WSSI and Social Contracts) to support the Hibah decentralisation objectives through the application of social contracts to nine (9) NTT and NTB local governments have been developed. Through the Water and Sanitation Service Index (WSSI), one hundred local governments have agreed to participate in an assessment of their performance in delivering water and sanitation services. The assessment involves two components: (a) an objective assessment of measurable service indicators at the institutional and facility level; and (b) a subjective assessment of customer perceptions of the quality of the service delivered. After the analysis of the results, the 5

15 WSSI will be socialised to all stakeholders. The final stage will involve the handover of the Index to Badan Pendukung Pengembangan Sistem Penyediaan Air Minum (BPPSPAM) (PUPR) in association with an independent stakeholder from the water and sanitation sector. The design of the NTT/NTB water governance program is developing innovative mechanisms to improve support from local government to the PDAM through Social Contracts agreed between the stakeholders at the local level. The Phase I program was implemented in four districts: Dompu, Sumbawa Timur, Flores Timur, and Ende. The Phase II activity includes the addition of five new local governments and PDAMs in NTT and NTB: Kabupatens Lombok Tengah, Manggarai, Sikka, Timor Tengah Selatan and Timor Tengah Utara. Of 20 commercial-quality, bankable PDAM business plans, two (2) have been approved for Perpres29 support (loans drawdown complete or in process) and another six (6) are pending approval by MoF, with a further six (6) scheduled for approval in PROPOSED FORWARD WORKPLAN THROUGH JANUARY 2017 As noted in Section 1 of this summary, IndII has been extended beyond its Phase II end date of June 2015 in order to provide seamless assistance through the initial period of the President Widodo administration. The focus is to lock in and strengthen key program achievements and engagements in order to position infrastructure support for the longer term. This would include, for example, continuing assistance to ensure sustainable mainstreaming of hibah grants within GoI inter-government fiscal arrangements, as well as ongoing efforts to ensure continuity in the gradual transformation of the Bina Marga planning and delivery model. 3.1 Proposed priorities for the Transport Program Planning, delivery and management of National Roads Assist, inform and advise GoI across various departments to help select and subsequently commence planning and procurement of a PBAS/AP demonstration project to the stage where transaction advisers can be appointed, and the market is aware of and interested in the opportunity. Finalise and further embed planning tools and processes leading to publication and adoption of an Expressway Development Master Plan (EDMP), and an implementation strategy, using a mix of public and private-sector financing and delivery models, covering five-year tranches up to 2030 to match the RENSTRA national planning periods. Help to identify and resolve the bottlenecks that are causing delays in implementing awarded, but not yet operational, toll road concessions. Continue the impetus to improve national road project quality through revised contract conditions, larger multi-year contracts, design reviews, design support, construction audits and strict enforcement of corrective actions and continued training. If these activities progress as planned during 2016 with active participation from DGH in Jakarta, it would be appropriate to continue DFAT support into 2017 and beyond to assist with continuing to embed new working methods and processes across the Indonesian Balai areas, and to continue to support and modernise the private sector Provincial Roads Improvements and Maintenance (PRIM) Work with DPU to develop and implement recruitment/ training/ organisational plans for gradual transfer of all PRIM responsibilities from IndII (PIUC) to DPU during Continue enhancement of PRMS as a survey, planning and management tool for provincial roads, and transfer ownership and capability to DPU NTB through a program of training and mentoring so that DPU NTB can prepare and fully own the program and budget for 2017 works. For the 2016 program of works, continue improvement of local road design and supervision capability through improved terms of reference, training, mentoring and design/ construction reviews. 6

16 Strengthen the Road Traffic and Transport Forum (RTTF) composition by increasing private sector involvement, and improving definition and transparency of monitoring function through updated Standard Operating Procedures (SoPs) and website. Similar to the National Roads improvement activities being undertaken currently, if PRIM continues to make strong progress during 2016 in NTB, consideration should be given to continue support in 2017 and beyond to enable the roll-out of PRIM across all provinces TransJakarta BRT system Design Phase 2 (Deptan to Mampang Prapatan) and Phase 3 (Mampang Prapatan to Dukuh Atas) busway improvements, including surveys, architectural concept designs, structural and engineering designs for shelters, busway and intersection designs. Provide procurement advice and technical support for the delivery of new busway infrastructure. This particular activity should be concluded at the end of However, there may be other areas of support to TransJakarta relating to the BRT system which would be useful; these should be considered during the replacement facility re-design process Improving Jakarta s non-brt bus system Continue to assist Dishubtrans, TransJakarta and the operator (Kopaja) with detailed pilot project route planning and implementation for new bus services on Route S66 (Blok M to Manggerai). Provide significant assistance and training to Kopaja to establish the required management organisation, systems and procedures to establish and operate Route S66 bus services. Continue to provide Dishubtrans with long-term strategic network-wide advice and recommendations including: bus fare scales and structures, suitability of existing and proposed terminals, measures to facilitate mobility inclusion, bus operator training program, bus service operating manual, depot/maintenance facility requirements and locations, specifications for the e-ticketing system, vehicle specifications, database/ information systems and advice on necessary changes to regulations. If substantial progress is made this year with the establishment of a pilot route (or the activity is almost at the stage where bus operations will start), it is recommended that the activity be continued, and expanded, to support much-needed transformation of bus services across the whole of Jakarta. 3.2 Proposed priorities for the Watsan Program Water Hibah Complete the existing results-based grant programs, including application of remaining uncommitted DFAT Water Hibah funds towards a pilot project to demonstrate a simplified implementation of the APBN Hibah, with reduced baseline and verification resource requirements. Support GoI with the implementation of the 2016 APBN Water Hibah, for up to IDR 800 billion equivalent approximately to 270,000 households, and with implementation of the APBN Sanitation Hibah for septic tank upgrading and servicing for up to IDR 200 billion, equivalent to 60,000 households. In parallel with support for implementation of APBN Water and Sanitation Hibah, assist with further development of the hibah model by applying the outcomes of the pilot program to the mainstreaming program to 2019, and develop a concept for the performance-based DAK for implementation beyond Sanitation Hibah, saiig and city sewerage Complete the Sanitation Hibah of 9,000 household connections. This is expected to be completed within the current program. Future support to GoI should integrate the Sanitation Hibah into an APBN-funded hibah program. 7

17 8 Facility Review and Planning Document: Jan 2016 Jan 2017 Complete 50,000 household connections for saiig. This will require extension into the future infrastructure support program. Peer review and commit the $45 million grant for Palembang sewerage, including procurement and mobilisation of the Construction Management Consultant (CMC). This will require novation of the CMC contract to the future program as well as budgeting of the grant to the future program Sector governance Adopt the Social Contract governance methodology as a policy tool by GoI, and mainstream the WSSI into GoI oversight of the water sector, in conjunction with newly issued PP121/2015 on water supply services, and PP122/2015 on water resource management. Encourage acceptance by the GoI of the Palembang city sewerage funding mechanism, and commitment from both DFAT and the GoI to implement the program, including coordinated support through the DFAT Construction Management Consultant (which will require novation to the planned follow-on IndII program). Support an additional 12 PDAMs to access loans with Perpres29 support, and roll out the capacity building program. Continue advisory support for, and facilitation and/or preparation of, privately financed water projects. 3.3 Proposed budget allocations The table below/ over summarises total expenditure, by program category, throughout IndII Phase II to June 2015, and proposed allocations over the extension period to January Note that the focus in the extension period is to finalise ongoing programs such as the Watsan hibah grants, and to support programs that are likely to continue beyond IndII s extension, such as the national roads program, PRIM and Palembang sewerage. No major new initiatives are proposed in the remaining period to January 2017, and a number of programs (for example, ports, solid waste, other transport and some cross-sectoral activities) have been discontinued and will not require funding in the extension period. Annex 4 of the complete FRPD provides a more detailed (activity-level) description of expenditure and achievements to June 2015, and the proposed allocations through the extension period. Table 5: Program expenditure by category ($M and % of total expenditure) Sector Program Phase 2 IndII Expenditure to January 2016 Phase 2 Extension (to Jan17) (iii) Total % F cast (iv) Actual Difference 2015/ /17 Total % Watsan Watsan grants and mainstreaming $ % $3.26 $2.21 $1.06 $5.59 $5.70 $ % Sewerage project prep.(including Palembang) $ % $0.40 $0.07 $0.33 $0.69 $0.79 $ % Solid waste project $ % preparation Water sector governance (i) $ % $0.38 $0.32 $0.06 $0.65 $0.70 $ % Water PPP project/pdam financing (ii) $ % $0.85 $0.46 $0.38 $1.45 $1.25 $ % Total Watsan $ % $4.89 $3.06 $1.82 $8.38 $8.44 $ % Transport National Roads: - Delivery $ % $1.91 $1.13 $0.78 $3.27 $2.78 $ % - Planning $ % $1.26 $1.38 -$0.12 $2.17 $1.86 $ % - Policy $ % $0.90 $0.53 $0.37 $1.55 $1.22 $ % PRIM (Prov. Roads Improve. & Maintenance) $ % $1.14 $0.93 $0.21 $1.95 $2.10 $ % Road Safety $ % $0.12 $0.25 -$0.13 $0.20 $0.20 $ % Urban Public Transport (iv) $ % $1.31 $1.21 $0.11 $2.25 $2.40 $ % Maritime Transport (ports) $ % Other Transport (RPJMN, Rail, Multimodal) $ % $0.02 -$0.02 Total Transport $ % $6.64 $5.44 $1.20 $11.39 $10.56 $ % Other AIIRA research awards $ % $0.04 $0.02 $0.02 $0.06 $0.00 $ %

18 Other (cross-sectoral) (v) $ % Activity wrap up/ redesign/ stocktake Unallocated $0.23 $0.23 $0.40 $0.71 $ % Total Other $ % $0.27 $0.02 $0.25 $0.46 $0.71 $ % Total $ % $11.80 $8.52 $3.27 $20.23 $19.70 $ % Notes: (i) Water and Sanitation Service Index, Social Contracts, Scoping studies and CBO support; (ii) Private finance for water projects, PPP advisory, PDAM access to commercial loans (iii) Additional funding requests excluding ongoing contracts. Note that 2016/17 is est. budget, subject to funds availability in next fin. year. (iv) Corporatisation of TransJakarta, bus corridor reform; Internal audit, asset management, gas master plan, 3IDE (v) Indicator of burn rate, calculated as 7/12 times the annual forecast 4. KEY ISSUES REQUIRING BOARD ATTENTION 4.1 Transport issues Improving impact and effectiveness of the National Roads Program It is essential that all stakeholders agree with and support the various national road initiatives being developed by IndII, as many authorities and departments outside DGH are actively involved. It has previously been agreed that a Steering Committee for National Roads should be established and used as the main forum for overseeing and managing improvements to National Road planning and delivery. The major changes to national road planning and delivery tools and processes at DGH are now designed and ready to be transferred to DGH counterpart staff during This can only happen successfully if DGH allocates suitable and sufficient numbers of counterpart staff. Recommendation: The Board request DGH to agree to convene a first steering committee meeting soon, and all GoI organisations involved be encouraged to actively participate and contribute to the Steering Committee. The Board further encourages DGH to develop and implement a staffing plan to be able to take full ownership of all new tools and processes Selection of a National Roads availability payment pilot project If the GoI is to construct a road network necessary to deal with future inter-urban traffic growth through to 2030, it will undoubtedly need to rely partly upon private finance to fund many of the projects. To pave the way for a future pipeline of successful PPP road projects in Indonesia, IndII has supported the development of a pilot PPP project to instil confidence into the national and international private road sector. Selection of a pilot project is on-going but a decision needs to be made quickly if significant progress is to be made during Recommendation: The Board request that DGH finalise their choice of pilot Availability Payment (AP) project based upon a formal assessment of candidate schemes, before the end of February, and that all government bodies involved in the pilot AP project support DGH s choice Encourage commitment of counterpart resources for PRIM in West Nusa Tenggara (NTB) PRIM tools and processes are being used effectively in Dinas Pekerjaan Umum (DPU) NTB, although with significant IndII support and involvement. During 2016, the ownership of tools and processes should be transferred entirely to DPU NTB counterpart staff. This can only happen successfully if DGH allocates suitable and sufficient numbers of counterpart staff. Recommendation: DPU NTB be encouraged to develop and implement a staffing plan to be able to take full ownership of all new PRIM tools and processes, including delivery of routine maintenance, backlog of minor works, and major maintenance projects. 9

19 4.2 WatSan issues 10 Facility Review and Planning Document: Jan 2016 Jan Establish a coordinating mechanism for the APBN Hibah between MoF, Bappenas, and technical ministries. Bappenas has signalled an allocation of up to IDR 10 trillion APBN funding for water and sanitation hibah over the current five-year medium term development plan. The GoI budgeted IDR 500 billion in 2015 and IDR 1 trillion in As the annual APBN hibah budget increases, the need for better coordination between the principal GoI stakeholders becomes more important. Such a mechanism exists under donor-funded programs, but is absent under APBN-funded hibah. As a precursor to establishing such a mechanism, the Directorate General of Fiscal Balance (DGFB) MoF has issued a revised PMK (214/2015) for the implementation of the hibah. This PMK better defines the role of DGFB and is a first step to establishing a coordinating mechanism. Recommendation: The Board request Bappenas to lead the formation of the coordinating mechanism Agree on the further development of the hibah mechanism through a pilot project to demonstrate effective mainstreaming of APBN hibah. The success of the DFAT Water Hibah in which baseline and verification process is implemented using census type surveys has established this mechanism as a de-facto gold standard. However the APBN program is ambitious and will target up to 280,000 connections in 2016 alone; this could result in up to 500,000 connections or more in The current census style baseline and verification is proving unsuitable for large-scale mainstreaming and will become the limiting factor affecting the large scale roll-out of the APBN program. IndII has developed a more economic methodology for implementing the hibah which also includes some further innovations that will make the program more widely applicable. It is proposed that this mechanism be applied to a small pilot program that uses the remaining funding under the DFAT Hibah program, to demonstrate the benefits of the changes to GoI agencies. The pilot will cover approximately 10 LG/ PDAMs and use approximately $5M of remaining DFAT Hibah funds to provide 15,000 connections. This will not require a change to the Direct Funding Agreement (DFA) but will require a commitment from the stakeholders. Recommendation: The Board approves the use of remaining DFAT funds to be applied to a pilot project demonstrating the revised hibah methodology, with Bappenas or MoF leading the activity Agree on co-financing for the Palembang sewerage project between the GoI and DFAT. IndII prepared sewerage master plans for eight (8) cities during Phase I. The GoI is implementing six (6) of the eight master plans through ADB loan funding and bilateral funding from three donors. DFAT has pledged up to $45M to implement Palembang sewerage. However the final design cost estimates for the works exceeded the funds pledged by DFAT. The GoI has agreed in principle to modify the scope for Palembang sewerage to implement it through joint co-financing between DFAT, the GoI, and the regional governments of Palembang and South Sumatera. Nevertheless, before the project can be submitted to DFAT for approval of the grant funding, a formal agreement is required, binding each of the stakeholders from GoI and the regional governments. Delays with decisions on the financing of Palembang would have an impact on IndII s use of funding allocated to assist implementation. Recommendation: The Board approve proceeding with implementation of sewerage for Palembang under co-financing by DFAT and the GoI, with the lead to be taken by DGHS (PUPR), involving Bappenas and MoF Accelerate processing of saiig grant payments and issuing new grant awards Local governments are experiencing difficulties in implementing saiig because of a lack of skills at LG levels, and amongst local consultants and contractors. Local governments have also underestimated the cost of construction, which is resulting in a slower implementation. IndII is supporting local governments with increased consultant services through restructuring of the saiig contracts to

20 overcome the lack of capacity. Where verification has been completed, the GoI should process grant payments promptly to allay nervousness about high costs and slow reimbursement of the grant amongst local governments. Despite this nervousness, some local governments have asked for additional grants to be implemented in Recommendation: The Board direct that the MoF and DGHS act promptly to process grant reimbursements for saiig. MoF and DGHS should also expedite new grant awards and extend grant agreements to December 2016 to provide confidence in the process by local governments. 4.3 Proposals for new activities (unallocated funds) Slightly more than $1M has been set aside for the development of new activities. This amount could be increased by reducing allocations for existing programs, per Board priorities. However, it should be noted that any potential constraint is not so much financial, but rather, the limited time available before the IndII facility is closed in less than one year from now - in January (For even small activities, the average life project life cycle could extend well beyond 12 months.) For this reason IndII proposes to the Board that the Facility focus new activities on scoping and preparation studies - to position the next infrastructure support program to address new and emerging GoI priorities. Two key examples of possible new activities this year are: (a) Exploring the options to support the development of regional water utilities. This is a significant initiative which is receiving high level attention, and has the potential to become the platform for restructuring the role of central and provincial governments in the water sector. (b) Providing support for Komite Percepatan Penyediaan Infrastruktur Prioritas (KPPIP) to undertake some relatively quick, initial value-for-money analysis or outline business case studies for select priority and strategic projects. 11

21 ANNEXES 1

22 ANNEXE 1: RATIONALE AND CONTEXT A1.1 INTRODUCTION IndII has been addressing critical infrastructure issues in transport and watsan for the past seven years. Its activities have evolved over that time in response to the needs and priorities of the Government of Indonesia (GoI), and following close consultation with senior GoI officials. Through the latter part of 2014 and first half of 2015, this close relationship with GoI priorities has been confirmed by the emphasis given to IndII s recommendations encompassed in Bappenas RPJMN and MPW s RENSTRA for IndII s influence is also demonstrated in individual policy initiatives, such as the development of the national water hibah, amongst others. Nevertheless, there are new senior decision-makers in GoI and Government of Australia (GoA) whose views and priorities need to be canvassed to test relevance, support and commitment; such a test is appropriate for the coming 12-month run-up to IndII s replacement in February While most ongoing IndII programs are expected to continue in the new infrastructure support model and to continue to reflect GoI priorities provision needs to be made for this test of relevance and commitment in the workplan for the coming period. A1.2 TRANSPORT The period of the extension to January 2017 coincides with a fundamental re-examination within GoI of the role of infrastructure in supporting development and employment. A decline in infrastructure spending as a proportion of GDP since the Global Financial Crisis has left a huge backlog of work to overcome; IndII is well placed to play a part in facilitating this work. With growth slowing and logistics costs rising, the role of roadbuilding and port development is receiving greater attention at the policy level. At the same time, there is a growing recognition that delivery quality and asset maintenance need improvement, both for national and sub-national networks and services. For IndII s Transport sector, the extension provides the opportunity to consolidate achievements, re-assess priorities and build a sound foundation for IndII s replacement after January Therefore, during the extension period, IndII innovations in policy, planning and delivery will be reviewed for their effectiveness, sustainability and relevance to the new infrastructure development agenda. These innovations include PRIM s approach to incentivising provincial road maintenance, the introduction of new financing and performance-based models (including Performance-Base Annuity Scheme (PBAS) or availability models) to accelerate delivery of expressways and other major projects, and reforms to urban non-brt bus services. In parallel, tools and techniques introduced by IndII will be made an integral part of the government s procedures for planning, delivering and managing transport infrastructure and services, supporting the urgent prioritisation of projects and preparation of a committed project pipeline. These IndII-developed tools and techniques include the Transport and Infrastructure models for national roads planning, the national road asset management system (RAMS), the performance-based, life-cycle approach to project procurement, the provincial maintenance programming and budgeting tool (PRMS), and corporate management guidelines for TransJakarta. The Transport sector s activities have always been aligned with RPJMN and RENSTRA priorities, and indeed have helped shape those key, guiding documents. IndII s activities have transformed earlier spending strategies that focused on reactive, short-term projects into a forward-looking, longer-term, network-based vision, highlighting the urgent need to address a substantial investment backlog and provide urgent additional capacity for the growing economy, particularly in the roads sector. Private-sector participation, competition, incentive and life-cycle cost optimisation have been constant underlying themes. New IndII planning tools have shown how critical road network capacity constraints are, and have sharpened the focus on preparing and expediting the project pipeline. New methods of program financing and delivery introduced by IndII, including availability- and performance-based approaches, which offer alternatives to the conventional revenue-based model, are more attractive to project financiers and more likely to accelerate program delivery. New design standards and procurement arrangements recommended by IndII offer life-cycle efficiencies and higher standards of Annexes: 1

23 delivery quality, helped by a strengthened asset management function and tools. In urban transport, IndII support for TransJakarta s transition to a Badan Usaha Milik Daerah (BUMD), a locally owned enterprise, and reform of non-brt bus services will improve efficiency and customer service, and help reduce traffic congestion. And assistance to the Directorate General of Land Transport (DGLT) and four (4) pilot cities under an urban road safety program (IURSP) has opened a new channel for central government assistance to local administrations. Even so, with new leaders now in senior GoI positions and pressure on IndII s budget for an extension of the work IndII has completed since 2008, it remains important to subject ongoing Transport activities to critical scrutiny: Do they continue to address the most urgent needs? Are they effective in leveraging sustainable changes in infrastructure governance, quality, efficiency and pace and quality of delivery? As Annex 2 explains, this review will play a key role in IndII s future work plan for Transport. A1.3 WATER AND SANITATION The primary focus of the IndII Watsan Program is to ensure that local governments (LGs) play a more engaged and committed role in the improved delivery of water and sanitation services. Although the number of households served with piped water has increased over the past 25 years, service coverage has declined as a percentage of the population. Watsan services are locally defined functions, but LGs have failed to invest commensurate with the needs of the sector. Moreover, public resources have tended to be channelled through central budgets, undermining efforts to promote good infrastructure management and to build effective institutional capacity at the local level. The IndII Watsan program directly addresses the mismatch between local government responsibility and the primacy of central government investment in the water and sanitation sector. The use of results-based incentives in the water and sanitation hibah grant programs has ensured LGs a more committed and engaged role in the expansion of piped water systems and the development of new sewerage networks using central government funds. The IndII Water Hibah was so successful in aligning incentives across central and local government, that the grant program is currently being mainstreamed into centre-regional fiscal arrangements using APBN funds (supported by IndII technical assistance). The GoI has committed up to $1 billion from the national budget over the next five (5) years for output-based water and sanitation hibah. This sharp increase in direct funding to local governments coincides with aspirational targets for water and sanitation of the program, that is 100% access to safe water, 0% living in slums, and 100% access to sanitation (by 2019). Renewed interest in direct funding to local government will reshape the role of central ministries, beginning a slow adjustment away from implementation (i.e. provision) of local infrastructure by such central agencies to policy, oversight, capacity development at local government. The biggest changes will happen in IndII s main counterparts: DGHS, MoF (DJPK), Bappenas and Home Affairs. In confirming progress to date, the priority of GoA should be to ensure the integrity of the reforms achieved through the hibah program at both the national and local government levels. This is a sensitive time with a new GoI administration and new Echelon 1 officials in counterpart agencies inheriting the existing programs. Moreover, the likely reduction in GoA grants will result in reduced leverage over implementation. Assistance under the IndII extension will focus on consolidating gains through careful coordination of activities in DGHS. However, the overall Watsan program remains strategically placed to affect and support the broad GoI initiatives in the water sector, including assistance to DGHS, Bappenas, and MoF with the implementation of the APBN hibah, and specific support to the directorate for environmental sanitation in DGHS with designing output-based APBN sanitation program for 2016 and beyond. MoF requires support to manage the sudden increase of hibah and DAK as well as support to transform the DAK to output-based format by 2017, and Bappenas requires support with the coordination of the roll-out of the APBN hibah. Where local government has capacity for greater investment and an appetite for borrowing, IndII includes a program to support commercial borrowing by water utilities to attain higher service levels at an accelerated pace. Annexes: 2

24 Beyond the hibah, a range of other IndII programs seeks to enhance the role of local governments in the delivery of water sanitation services. The PDAM financial reform program is a private-sector focussed program to improve access to commercial bank lending through the development and implementation of high-quality business plans. The program makes use of (a soon to be extended) GoI capital guarantee and subsidy program to promote intermediation between capital starved water sector, and an abundance of domestic savings that could be mobilised to invest in water connections. Other IndII programs to enhance the watsan services offered by local governments include the NTT/NTB water governance program, an innovative program that uses social contracts to align incentives across the various stakeholders (PDAMs, LGs and consumers); and the water and sanitation service index (WSSI), an initiative to assess and compare LG watsan service quality - from the perspective of consumers. Annexes: 3

25 ANNEXE 2: PROGRAM REVIEW AND FORWARD WORKPLAN A2.1 INTRODUCTION This chapter provides the core content of the FRPD, in that it first reviews activities over the previous FRPD workplan period, and maps the proposed forward workplan to January A2.2 TRANSPORT A2.2.1 Introduction and overview Indonesia s transport sector faces very serious policy, strategy, financing and delivery challenges. Rapidly growing demand outstrips supply. The quality of infrastructure is poor. Traffic congestion chokes economic, trade and income growth. While IndII cannot resolve all shortcomings, it has structured its priorities to address the main issues, in many instances by providing a demonstration of needed reforms. The lessons feature as key messages in RPJMN , issued by Bappenas, and the RENSTRA plans of MoT and MPW. IndII s Transport program has four (4) main components that address areas of critical need 2 : (a) Provincial road maintenance 3 : Unlike other donor programs that focus on rehabilitation and reconstruction, IndII s PRIM program targets road maintenance, using NTB as a pilot. It aims to improve the way provincial governments manage and maintain their networks on a sustainable basis. PRIM s carrot-and-stick approach uses AIIG grants (eventually to be replaced by central government transfers) as an incentive: 40% of the deemed cost of works pre-financed by NTB are reimbursed if verified as planned and carried out using agreed procedures and to agreed standards. This incentive is reinforced by public scrutiny of maintenance plans and outcomes. (b) National road network development 4 : IndII's national roads (NR) assistance has three (3) subcomponents: NR Policy concentrates on the institutional, financing and regulatory changes needed to deliver the expressway program, including private-sector participation and new, innovative forms of project delivery; NR Planning is providing new network planning tools and, using these, preparing a master plan of prioritised expressway and road improvement projects; and NR Delivery is helping to raise design, construction and supervision quality standards following lessons learned from EINRIP, and is strengthening accountability and capacity for lifecycle asset management at the Balai level. All three sub-components demonstrate a radical departure from the status quo and are essential to DGH's transition to a modern network development and management agency. (c) Public transport: This component has two (2) sub-components aimed at making Jakarta's public transport more efficient, offering better-quality and more reliable services, and helping to reduce traffic congestion 5 : TransJakarta Sub-component A is supporting the BRT system manager in its transition from a unit under DisHub to a DKI-owned commercial enterprise; and TransJakarta Sub-component B is preparing with DisHub for a restructuring of the non-brt bus system using performance-based contracts (administered by TransJakarta) to achieve better- 2 Recent years has seen a consolidation of IndII s support on a few critical areas. It has largely withdrawn from the maritime, railway and civil aviation sectors as other donors have (or plan to) become more active. 3 Of Indonesia s ± 480,000-km network, 49,000 kms are provincial roads, carrying a fifth of all vehicle-km. Some 90% of national roads are in good/fair condition but almost one-third of provincial roads are not, from premature deterioration caused by poor-quality construction and lack of maintenance. 4 60% of the 38,570km national road network urgently needs upgrading to accommodate 3-5-fold traffic growth by 2030: some 7,300 km of new expressways (Rp 640 trillion), as well as upgraded arterial roads (Rp 300 trillion). They need to be built to higher standards, to last longer. This will require new ways of financing and delivering a program that far larger than has been achieved to date. 5 In 2012, of 26 million person trips per day in Jakarta, half were by motorcycle (up from 21% in 2002), and a further 25% each by car and public transport (the latter down from 40% in 2002). Traffic congestion is some of the worst in the world. A 12-route BRT system carries only 7% of public transport trips, using tendered operator contracts based on minimum service standards. The rest are carried by 14,000 angkots and 2,200 minibuses owned by individuals, loosely organised into cooperatives, and 1,600 larger buses owned by companies. Each vehicle is licensed separately, but with no service obligations. Non-BRT safety and service standards are very poor. In concert with traffic restraint, IndII s proposed reforms of public transport will make it more attractive as an alternative to cars and motorcycles. Annexes: 4

26 regulated, safer, more efficient, scheduled services. Both Sub-components promote incentives for better performance and customer service. The BRT sub-component is focussing on improved internal organisation and systems, as well as operational capabilities and infrastructure (bus depot and busway control room); the non-brt reforms will be implemented in a pilot project on a chosen route. (d) Road safety: To June 2015, IndII s road safety program has involved: capacity-building in DGH and the Traffic Police, including support for a program of road safety audits (RSAs) and blackspot treatments, and, under IURSP, preparation of plans and designs for integrated road safety treatments in Medan, Pekanbaru, Bandung and Denpasar as a possible model for technical cooperation between DGLT (under MoT) and local city governments. A2.2.2 Achievements (a) Provincial road maintenance (PRIM) PRIM secured the commitment of Rp billion ($27 million) from the NTB provincial budget (APBD) for three years of Stage 1 ( ) implementation. To date, IndII s support for PRIM has helped NTB public works agency (DPU) to: (i) plan, design, procure and implement routine maintenance over sections of road totalling 880 kms (half the provincial network), and to conduct rehabilitation, backlog and minor works over 975 kms through eleven contracted works packages (and with a twelfth recently started); (ii) pilot improved swakelola (force-account works) over 200 kms of the network in Sumbawa Besar; (iii) introduce new road safety improvements in designs and contracts, backed by IndII s RSA approach; (iv) improve bid quality through changes to tender documents and evaluation; (v) introduce community consultations in advance of maintenance works for the first time; (vi) improve traffic control during construction; (vii) develop a new, evidence-based provincial road management system (PRMS) for needs assessment, prioritisation, planning and scheduling that has been used to develop the PRIM Stage 2 program; (viii) conduct two (2) rounds of independent verification for grant disbursement; and (ix) train NTB staff in road maintenance planning and implementation activities, as well as the field staff of consultants and contractors. The value of works contracted in the 12 packages and swakelola is Rp 259 billion ($25.9 million). Certified completion (expenditure) at end-june 2015 was Rp 238 billion ($23.8 million), 80% of the contracted value, And expected completion targets for 2015 will be met. Until now, grants disbursed from MoF to NTB amount to only $509,100, but the recommended disbursement from the most recent verification process, and awaiting signature from the new Director-General in DGH, is for $1.05 million. With TA assistance, improvements have been made in maintenance planning, programming and budgeting and, with close mentoring, the performance of the better consultants and contractors. Even so, the lack of a culture of quality remains a concern, exacerbated by less stringent controls on competing road works opportunities funded in NTB from APBN. Public scrutiny, channelled through the Road Traffic and Transport Forum (RTTF), had been expected to highlight shortcoming in maintenance planning and delivery, and exert pressure on DPU to achieve better outcomes. Efforts to establish the RTTF in this role, however, have not yet been successful. A key question, therefore, is whether PRIM s incentive structure is likely to be effective in sustaining improvements over the longer term. As originally envisaged, Stage 2 would see the role of the Project Implementation Unit Consultants (PIUC) reduced to help show whether achievements have Annexes: 5

27 resulted from the grant incentive, or from the presence of the PIUC. Between now and December 2015 there is potential to revisit the structure of PRIM s incentives and to design mechanisms more closely linked to sustainable improvements in institutional governance and performance. (b) National road (NR) network development IndII has helped achieve a strategic shift for national roads, from one of rehabilitation and incremental improvement to a focus on long-term network development, improved quality in design and delivery, optimum life-cycle asset management, and new incentive-based forms of project and/or program delivery and maintenance, using private finance where appropriate. Under the NR planning activity, a provisional, long-term ( ) expressway plan and a corresponding road renewal (upgrading) program for have been developed - the basis for DGH s RENSTRA and the highway components of Bappenas RPJMN. They were developed using two (2) new IndII planning tools: a model for testing the impacts of population and economic growth and road development options on network performance (traffic volumes, speeds, congestion, travel times and other KPIs); and a linked model that prioritises strengthening, widening and realignment treatments. The outputs have highlighted the critical need to expand road capacity to avoid levels of traffic congestion that would threaten economic growth. Complementing this, the NR Policy Team has focused on: (i) strengthening institutional capacity to plan and deliver the expressway program; (ii) advising on alternatives to the conventional toll road delivery model (with a special focus on PBAS), and drafting changes to regulations to accommodate these new models; (iii) preparing guidelines on the choice of delivery model based on Value for Money (VfM); (iv) developing a strategy for expressway program financing; and (v) scoping the outline business case for a PBAS demonstration project. In summary, the IndII NR delivery activity has: (i) advised on the consultant and/or contractor capacity and quality requirements for program implementation, including an accelerated program of preliminary designs and corridor reservation; (ii) updated several design standards, including new long-life pavement designs, and provided associated training and assistance with implementation; (iii) recommended larger, pre-designed works contracts with strengthened supervision to raise contractor capability and quality; advised on the implementation of performance-based maintenance contracts; and (iv) developed a new road asset management system (RAMS) for use at the Balai level, and advised on the institutional changes needed to implement it. While these activities lay the foundation for longer-term improvements in institutional performance and delivered output, DGH is under increasing pressure to deliver immediate projects. Infrastructure development has taken on greater importance among GoI s priorities, and is seen as playing a crucial role in reversing a slowing rate of economic growth. Therefore, in the early stages of the IndII extension period to January 2017, a review will be carried out of critical DGH priorities - and adjustments made as necessary. It is likely that this will lead to a greater focus on improving the pace and quality of program delivery in the short term. (c) Public transport Under TransJakarta Sub-component A, PT Transportasi Jakarta (TJ) has been successfully established under a Board (appointed in May 2014) with assets and full operations transferred on 1 January Day-to-day assistance has been given through the transition, with strong engagement by Board members and senior staff. PT Transportasi Jakarta s management has adopted most of the Annexes: 6

28 recommendations of the plans prepared by the IndII advisers; these plans included institutional, business, investment, operations, marketing, finance, asset management, HRD, ICT and performance monitoring plans. Specifications and designs have been prepared for reconstruction of the Cawang depot and a new control centre, and IndII s specifications for better-quality buses have been included in DKI s e-catalogue for procurement. Following a diagnostic review, TransJakarta Sub-component B (the non-brt bus component) has focused on preparing a pilot project that will entail replacement of existing unregulated services on a chosen route, with services operated by a single entity and with schedules to meet demand. The project will also involve payment-per-km replacing the setoran system 6, proper-specified city buses instead of the current inappropriate vehicles, properly located bus stops, traffic engineering to support bus priority, and fleet management with electronic ticketing. These initiatives, supported by the Governor of Jakarta, will be ready to implement during the IndII extension. Once successfully in place, the pilot route will be regulated by TransJakarta. (d) Road safety IndII s road safety capacity-building support for DGH has achieved much better recognition of the importance of road safety, an understanding of the standards required of a safe road system, and an expansion of annual black-spot treatment programs under a new line-item budget. Manuals and standard drawings developed by IndII have become the basis for internal DGH training programs. IndII s involvement has also been instrumental in securing cooperation between DGH and the National Traffic Police, with DGH now given access to the police crash database system (IRSMS), therefore allowing better-targeted road safety improvement programs to be developed. These data show that almost three-quarters of road fatalities occur on the sub-national road network, so IndII has also worked closely with agencies in NTB, using the RTTF to help develop a model provincial road safety strategy. Collaboratively with MoT, under the IURSP activity, IndII has helped prepare integrated road safety solutions to area- or corridor-wide safety problems in urban areas. Plans and treatment designs have been prepared in conjunction with city administrations in Medan, Pekanbaru, Bandung and Denpasar; these are now being implemented under APBD budgets. IndII also helped DGLT, in MoT, to establish standard guidelines and manuals for selected treatments. A2.2.3 Forward work plan The forward workplan for Transport involves an initial six-month bridging period, during which priorities will be re-assessed and the final allocation of remaining budgets decided. This review will seek clear evidence of high-level commitment to the ongoing program, together with strengthened coordination, monitoring and governance arrangements, without which IndII s support might be phased out. Adjustments will also be made to the program and its priorities where new needs are identified. (a) Provincial road maintenance (PRIM) Under PRIM s original design, the 40% grant contribution was intended to encourage strong oversight by the Program Implementation Unit (PIU) and to increased demands on contractors and consultants to perform effectively; however, it is not clear that this is happening as expected. Notwithstanding some improvements, the performance of supervising consultants (especially), contractors and (except for one balai) swakelola teams have been disappointing: a widespread, long-standing, cultural problem that will take persistence under PRIM to overcome, helped by stronger external scrutiny, greater incentive and pressure to perform. 6 Under the setoran system, the crew rents the vehicle each day and attempts to recover the costs from fare revenue. This incentivises unsafe driving and discourages spending on vehicle upkeep. Annexes: 7

29 Verification and grant disbursement currently occur at the end of a long chain of events (needs assessment, planning, budgeting, design, procurement, execution, supervision, technical audit and certification of completion) and do not happen until all contract requirements are completed. There is no immediate pressure on contractors to improve at intermediate points: therefore, shortcomings in design, procurement, supervision or implementation do not have consequences until the end of the contract cycle when physical output quality is finally assessed and verified. The conditions attached to PRIM s grant transfers should incentivise changes throughout the process, not only at the end when it may be too late to rectify earlier shortcomings. Furthermore, they should do so without the high level of external TA currently needed. PRIM s original design envisaged external scrutiny holding the PIU accountable for sound planning and output performance through the Road Traffic and Transport Forum (RTTF). Information was to be made available to interested stakeholders through a dedicated website, at public meetings and through the RTTF itself. Opportunities for feedback were to be publicised. This process was to expose the PIU to critical scrutiny and pressure it to perform better, all in accordance with the requirements of Law 22/2009 on Road Traffic and Transport. However, these intended outcomes have not eventuated. Moreover, since PRIM s design, the policy environment has changed. Bappenas is preparing proposals for a new conditional grant program, paralleling DAK, targeted at improving sub-national infrastructure (including kabupaten/kota roads) and its maintenance. PRIM principles are expected to feature in the preparation and submission of proposals, initial screening, and independent verification of performance as the basis for reimbursement. $5 billion has been allocated in 2016, the start of a three-year program. Given this development, in the first six months of the extension, a stronger effort will be made to have the RTTF play the role envisaged in PRIM s design, and to devise governance and performance incentives that are not so TA-intensive in support and verification. This will involve: (i) (ii) linking partial grant disbursements to activities and actions of the RTTF; expanding the RTTF s membership (or at least attendance at meetings), to include wider public representation; (iii) identifying PRIM governance, process and output milestones that will require meetings of the RTTF for information and review; (iv) standardising the presentation of plans and progress to the RTTF; (v) inviting the media to RTTF meetings; publicising the proceedings and reporting them directly to the Governor and the media (including through social media); (vi) improving the quality, details and timeliness of information made available through websites (including the NTB DisHub website); and (vii) utilising social media to publicise PRIM plans and progress, and to invite comments and complaints. With Bappenas interested in applying PRIM principles to a new nationwide conditional grant program, important tasks for the coming six months also include assessing the prerequisites for successful expansion of the program, identifying the steps, resources and timetable needed to mainstream the PRIM approach, confirming the changes needed to accommodate kabupaten and kota road networks as well as capital works, and identifying the possibility of additional donor support. The continued enhancement of PRMS as a survey, planning and management tool for provincial roads, and transfer ownership and capability to DPU NTB through a program of training and mentoring so that DPU NTB can prepare and fully own the program and budget for 2017 works, will continue during IndII will work closely with NTB DPU to develop and assist them implementing Annexes: 8

30 necessary recruitment/training/organisational plans for the gradual transfer of all PRIM responsibilities from IndII (PIUC) to DPU during For the 2016 program of works, IndII will continue the improvement and strengthening of local road design and supervision capability through improved terms of reference, training, mentoring and design/ construction reviews. (b) National road (NR) network development Until now, NR Planning has focused on developing planning tools and using them to prioritise expenditure for RENSTRA and beyond. For the coming extension, the focus must change to ensuring that they are made effective and sustainable in the hands of DGH staff. This means working side-by-side with DGH in the further development and application of the planning models. To do this successfully, DGH staff must: (i) take progressive ownership and receive training; (ii) update RENSTRA estimates and produce longer-term National Roads master plans (including a more detailed Expressway Development Master Plan) and address other planning needs when they arise; (iii) clarify the role of the planning tools within the DGH planning, budgeting and monitoring function and map the associated technical work-flows onto the organisational structure and business work-flows of DGH (i.e., carrying out a business process mapping of the planning function); and (iv) oversee the extension of the planning models to other islands, with DGH taking ownership (with IndII assistance) of the survey, analysis, calibration and verification tasks. For the IndII extension, the priority tasks for NR policy development and strengthening include finalising and agreeing with DGH and BPJT a recommended mix of delivery models, and a financing plan for the expressway program, advising DGH and BPJT on urgent tasks involved in implementing the program, and developing and securing approval of the outline business case (OBC) and procurement plan for a demonstration expressway project using the availability payment (AP) scheme. The aim of the last of these would be a procurement-ready project by January 2017 or earlier. The priorities for NR delivery will be on putting into practice the technical lessons learned from EINRIP and IndII to date. This involves: (i) requiring detailed engineering designs before procurement, thereby strengthening contract control and minimising variations and claims; (ii) adopting the FIDIC (International Federation of Consulting Engineers) contract process, including technical audits, hold-points on certification, and sanctions for poor performance; (iii) training DGH, supervisory and contractor staff in a culture of quality and contract compliance, including the application of new design standards; (iv) strengthening the contracting industry by increasing project size, maintaining a pipeline of large (v) projects offered for competitive tender (including ICB) and enforcing contract specifications; strengthening and making direct the lines of accountability between DGH, Balai, Satker, PPK, Supervision Engineer(s) and contractor(s); and, (vi) improving asset management, helping Balais IV and V to prepare their forward works plans and 2016 budget proposals using RAMS. In relation to the last of these priorities, also required will be customizing RAMS to meet their requirements, training other Balais in the use of RAMS for works programming and budgeting, developing an aggregation tool to consolidate all preservation works plans at the central level and integrate them with centrally-planned capacity-expansion programs, training staff in improved data collection and analysis, and promoting improved routine and periodic maintenance methods, including the use of KPI-based area-wide maintenance contracts (AWMCs). Annexes: 9

31 As noted earlier, these priorities will, however, be reassessed in September and October 2015 to ensure that they reflect the priorities of new DGH management staff. If necessary revised activity designs will be prepared in October. (c) Public transport Under TransJakarta Sub-component A, IndII consultants have built a strong relationship with TJ management and the Board. Day-to-day assistance is proving effective in dealing with management and operational issues. A continuation of this support has been requested by the CEO TransJakarta, together with efforts to strengthen asset management and address the infrastructure needs that constrain the efficiency of operations. This support is already underway with the following key tasks: continuing organisation capability development focused on infrastructure and asset management, and operational performance; and a busway infrastructure re-development pilot for a section of the busway including passenger capacity analysis, busway infrastructure condition audit, engineering survey with asset outputs, concept designs for stakeholder consultation, detailed engineering designs, cost estimates and technical oversight of construction. Designs for the busway infrastructure redevelopment pilot will be delivered in two further stages: Phase 2 (Deptan to Mampang Prapatan) and Phase 3 (Mampang Prapatan to Dukuh Atas). The design services include surveys, architectural concept designs, structural and engineering designs for shelters, busway and intersection designs. Now that a reform plan has been prepared for the non-brt pilot route; the next step for TransJakarta Sub-component B is to assist DisHub in implementing the planned reforms. This will require careful stakeholder management, particularly in convincing existing operators on the pilot route that they will be better off under the proposed reforms. Once the pilot reforms have been proven to be effective, work can proceed with rolling them out to other routes. This will require: (i) consolidating individual owners into formal businesses; (ii) replacing existing buses with proper city buses; (iii) eliminating the setoran system; (iv) eliminating excess buses and vehicle-kms by having demand-based service schedules; (v) providing designated bus stops on every route and preventing stopping at non-designated places; (vi) reorganising the route network with high-volume traffic concentrated on BRT routes and non- BRT buses providing complementary services; (vii) charging fares according to distance travelled and offering integrated fares with a network-wide electronic ticketing system; (viii) ensuring adequate depot and workshop facilities for all operators; (ix) developing or remodelling terminal facilities to accommodate the new operating procedures and vehicle types; and (x) giving priority to buses through traffic management measures. (d) Road safety The road safety activity with DGH will move into a new phase during the coming extension: addressing road safety needs in conjunction with the asset management task of the Balais; it will become linked to the Balai-based programs of the NR delivery activity. For IURSP, a review will be carried out to determine whether there is scope for its principles to be adopted under the new conditional DAK/hibah programs being prepared by Bappenas, and for road safety to become a sub-component of those programs. Annexes: 10

32 A2.3 WATER AND SANITATION A2.3.1 Introduction and Overview While the ultimate goal of the IndII Watsan program is to support the Government s achievement of their aspirational water and sanitation targets, IndII has introduced more specific objectives aimed at improved governance and service delivery in the sector. The IndII focus is to address structural problems that have frustrated achievements in the sector, in spite of significant investments by GoI over consecutive development periods and annual budgets. Although the reasons for this are complex, a root cause is the mismatch between national and sub-national responsibilities for the sector. It is in this context that the grant programs have proven to be a powerful tool in effecting change in sector governance. Other IndII activities integrate closely with the grant program to maximise the impact of governance initiatives. These include the NTT/NTB water governance program, the WSSI, and the IndII public diplomacy program. The success of the IndII grant program has revived GoI initiatives to increase direct sectoral funding to local governments and the establishment of APBN-funded hibah following the IndII design. However, tensions remain amongst national stakeholders on fund allocation and responsibility for disbursement of annual ministry budgets. A2.3.2 Achievements (a) Watsan grants and mainstreaming Water Hibah and mainstreaming During the past year, IndII has provided technical assistance for baseline surveys and subsequent verification of beneficiary households, technical assistance to support implementation, and to assist with monitoring, evaluation, impact assessment, and public diplomacy for the Water and Sanitation Hibah. The USAID Water Hibah, through which USAID pledged US$10 million towards a water hibah program implemented by DFAT (through IndII), was completed in December By the end of the USAID Water Hibah program, 98% (38,290) of the approximate 39,000 USAID water hibah household connections were completed. The Ministry of Finance (MoF) made grant payments to 27 local governments for 37,315 households to close out the USAID grant program. By the end of the program, the DFAT-funded Water Hibah program will deliver approximately 330,000 connections in 129 local governments, fully utilising a grant of $80 million. By June 2015, 267,995 water hibah connections had been completed; of these 200, 235 connections had been verified and $36.2 million was disbursed for 148,000 household connections across 120 LGs. During this current year, DGHS has implemented an average of 5,000 household connections per month, which is slower than the rate of the 8,100 connections per month achieved earlier in the project. In order to complete the program by December 2015, the rate of implementation will have to increase to approximately 6,000 connections per month. As a result, it is likely that this program will be extended in Due to unresolved internal issues, five (5) LGs with a total of 7,000 household connections, may withdraw from the program. Due largely to the success of the DFAT Water Hibah, GoI requested support from IndII to prepare a nationally funded water hibah in 2015, based on the DFAT Water Hibah model. To this end, the GoI has committed $50 million towards a pilot APBN-funded water hibah in To date, IndII has assisted with the formulation of the program design and activities, and is now preparing additional support for the design of a five-year APBN water and sanitation hibah scheduled to start in 2016, with total anticipated expenditure of $1 billion by The GoI also requested assistance from DFAT for baseline and verification consultants to support the roll-out of APBN water and sanitation Annexes: 11

33 hibah, starting from By the end of June 2015, IndII consultants had completed these activities for 144,810 household connections. Under the Sanitation Hibah program, the MoF has issued grant allocations to four (4) LGs, for 9,000 household connections - equivalent to $4.4 million. By the end of June ,550 household connections had been completed. A total of $1.02 million had been disbursed to Surakarta for 2,110 household connections. Australia Indonesia Infrastructure Grants for Sanitation (saiig) and mainstreaming The Australia Indonesia Infrastructure grants for municipal sanitation (saiig) activity is a substantial component of the IndII program and was built upon the successful Infrastructure Enhancement Grants for municipal sanitation. saiig is designed to stimulate local government investment in municipal infrastructure for sanitation, and to provide incentives for governance reforms to lay solid foundations for the delivery of sanitation services, make LG procurement more professional and transparent and to enhance the overall sustainability of operation of the systems. The saiig program is delivered to participating LGs using the Gol on-granting regulations and is disbursed as an outputbased modality, upon verification of acceptable sanitation infrastructure outputs. During the last FRPD period, the MoF issued grant awards to 43 LGs, totalling $22.1 million for 60,000 house connections, and IndII and DGHS have appraised programs in 34 LGs for 44,100 household connections. Construction is currently underway for 58 systems in 20 LGs, with a capacity of 13,350 household connections. Of these, 6,970 household connections had been completed by end of June Implementation of the saiig program has been slower than the initial design due to delays in signing the umbrella (Direct Funding) agreement, and as additional work with LGs has been required in order to ensure adequate budget allocations have been made. During this final stage, IndII will focus on working more closely with LGs to develop further their capacity and to facilitate the completion of the program. Despite delays to program implementation, five (5) LGs have expressed interest in more grants - for approximately 5,000 additional households. In order for budgets to be prepared for implementation in 2016, formal notification to GoI regarding the extension of the grant program still needs to be provided. IndII has also continued to assist MoHA to support the implementation of the saiig. In the last year, capacity-building materials about institutional development for LG delivery of sanitation services were prepared and tested through fieldwork and joint workshops. (b) Sewerage Project Preparation (including Palembang) The City Sewerage and Palembang grant seeks to support the GoI initiative to accelerate the development of urban sanitation, and meet its sewerage coverage targets through the preparation of priority projects in a number of cities. The program also aims to demonstrate the effectiveness of a large-scale investment approach, especially for larger cities, as an alternative to the small-scale approach used under other IndII grant mechanisms. The detailed engineering designs, cost estimates and technical specifications completed by IndII consultants are the next stage in developing centralised sewerage schemes in the identified cities of Palembang, Cimahi and Makassar. These design documents were completed by June 2015 and a significant finding of this process was that the project will cost significantly more than estimated by the ADB PPTA consultant. This is due to a significant underestimate of the scope of the pipework by the ADB PPTA. Discussions are currently underway with GoI and the consultant to revise the scope of the program, which can be financed by the ADB loan and DFAT grant. Preparation of the Working in Partner Systems (WiPS) and Project Design Document for Palembang sewerage is well advanced and expected to be completed in the last quarter of 2015 in time for a peer review by DFAT and GoI by the end of the year. The Environmental Impact Assessment (EIA) and Social Safeguards activities for Palembang and Makassar are progressing. Palembang has received approval of the preliminary stage by the local Annexes: 12

34 government environmental commission. However, at the end of June 2015, Makassar still required additional inputs to pass the preliminary stage approval. (c) Water sector governance (WSSI & NTB/NTT social contracts) Water and Sanitation Service Index The Water and Sanitation Service Index (WSSI) program seeks to incentivise LGs to undertake sustainable reforms that lead to the improved provision of water supply and sanitation services. The Index developed as a part of the program will evaluate LG provision of water and sanitation services. As a part of this program, the index will be completed for 100 cities - the first step in an eventual process to involve all LGs. In this FRPD period, the field studies for the initial 50 cities has been completed and the analysis of the data and index has commenced. BPPSPAM has also selected the additional 50 governments for participation in WSSI, and by end of June 2015, eight (8) had been surveyed. NTB/NTT social contracts Phase 2 of the NTB/NTT social contracts program, which seeks to establish a framework and outline obligations and responsibilities of stakeholders (PDAM, consumers) for reliable water supply, covers nine (9) LGs which include four (4) of the phase 1 participants and five (5) new LGs 7 : NTB - Kabupaten Lombok Tengah and Dompu; NTT - Kabupaten Manggarai, Ende, Sikka, Flores Timur, Sumba Timur, Timor Tengah Selatan (TTS) and Timor Tengah Utara (TTU). In November 2014, LGs participating in the program prepared and signed social contracts during a workshop at Lombok. These contracts covered a wide scope of governance improvements including: approval of a Full Cost Recovery (FCR) tariff by local government, and a policy to provide for annual adjustments, if necessary by means of a subsidy mechanism. support to PDAM for completion of the first two (2) phases of an assets management program. guidance to local government for the establishment of a customer forum. review of adequacy of Standard Operating Procedures (SOPs) and Human Resource Development (HRD) capabilities. (d) Community managed water supply (CBOs) By end-june 2015, 20 of 22 CBOs successfully met activity objectives and approximately $100,500 of performance grants were disbursed. Following completion of the activity, one CBO has taken a further loan and other loans have been provided to two (2) new CBOs. (e) Water PPP project/ PDAM financing PDAM financial reform This long-standing IndII activity of supports PDAMs in providing reliable and sustainable water supplies to target household - through improving corporate governance regimes, achieving full cost recovery tariff structures, and assisting PDAMs to access commercial borrowings and develop guidance materials to assist commercial borrowings. IndII has now developed 20 PDAM business and governance plans and a comprehensive and logically-sequenced toolkit, demonstrating a step-bystep approach for PDAM business and governance plan development,. The toolkit is now ready to be disseminated by the Directorate General Cipta Karya (DGCK) (including publication on the MPW website). In the last year, IndII has also assisted the GoI to revise Perpres29. Two (2) PDAMS have also been approved and are currently implementing the Perpres 29 loans. Private finance for water (PPPs, advisory support) 7 Phase I local governments are Flores Timur, Ende, Dompu and Sumba Timur. Annexes: 13

35 IndII has worked with the GoI to contribute to the long-term development of small water sector PPPs in Indonesia by determining whether the Palu Municipal Water Supply Project could deliver treated water to the proposed SEZ and Pantoloan Port under a PPP modality - and if so, to recommend a preferred delivery option, and determine preliminary risk allocation, costs and commercial terms. The diagnostic review for this project is now complete, and GoI stakeholders have expressed support. CMEA, MOF and IIGF PT SMI have also expressed an interest in supporting the project, conditional to INDII/DFAT continuing to provide assistance. A2.3.3 Forward work plan (a) Watsan grants and mainstreaming Water Hibah and mainstreaming In the forthcoming FRPD period, IndII will focus on the completion of the DFAT Water Hibah while concurrently supporting GoI with the roll-out of the APBN hibah. The support to GoI for the APBN Water Hibah will have three (3) strands: Support with baseline and verification; Support with capacity development in stakeholder agencies (DGHS, MoF, and Bappenas); and Further development of the results-based aid (RBA) model to allow ease of scale up. IndII is also proposing to support the DGHS Directorate for Environmental Sanitation with the preparation of its program. This will include an APBN hibah component starting in The Directorate PPLP has already identified one such component, which is based on the current saiig model. Under the current ABPN sanitation hibah program, 9,000 household connections will be completed in four (4) LGs, involving grant payments of $4.25M. To understand better the impact of the Water Hibah program, IndII also proposes to undertake a midline impact evaluation for DFAT and USAID Water Hibah in LGs, which completed the program by December 2013; this covered approximately 150,000 households. Australia Indonesia Infrastructure Grants for Sanitation (saiig) and mainstreaming Lack of capacity at LG level, to plan and design small-scale sewerage infrastructure has been the most significant problem delaying the progress of the saiig and the Sanitation Hibah to date. As a result, IndII will provide more intensive technical assistance to GoI and LGs to facilitate completion of designs and procurement of works contracts. As a part of this, IndII will continue to work closely with MoHA on institutional aspects but will do this through increased resource inputs in the PAO consultant. In the meantime, the existing Institutional advisory input to MoHA will end on December 2015 with the focus of institutional support shifting to the PAO consultant. This arrangement will provide more direct support to local governments where the need is greatest. One of the products of support to local governments will be a capacity-building toolkit for sanitation services, which will increase the long-term sustainability of the program. The target for IndII is to support 42 of the 43 local governments to complete the saiig grants awarded, by the end of December IndII will also conduct an independent review for the saiig program in the fourth quarter of 2015 to validate lessons learned from the implementation to date and to provide sharper focus on interventions in final stage of the program. (b) Sewerage project preparation (including Palembang) With the detailed design of the three (3) cities nearly complete, the IndII program will focus on the completion of the EIA/AMDAL assignment and the social safeguards for resettlement. However, additional support will be provided under the Detailed Engineering Design (DED) component to allow for modification of the scope of the ADB-funded Metropolitan Sanitation Management Annexes: 14

36 Investment Project (MSMIP) component to match the available loan funding. This will be completed by December IndII will also complete the Working in Partner Systems (WiPS) and Program Design Documentation (PDD) for the Palembang City Sewerage Grant after making adjustments for the increase in cost and the inclusion of APBN funding for the implementation of the sewerage network. At present, preliminary agreements with GoI are for DFAT to finance the wastewater treatment plant through grant to local government, while DGHS will implement the sewerage network through APBN. The local government will finance the connections to households. IndII will support the implementation though engagement of a Construction Management Consultant to oversee the DFAT component and provide supervision support to DGHS of the APBN funded component. (c) Water sector governance (WSSI & NTB/NTT social contracts) Water and Sanitation Service Index The focus for the WSSI will be to complete the survey for the second (set of) 50 local governments and to construct the service index. IndII will then work with the GoI to launch the WSSI to socialise it to local governments. IndII will also partner with BPPSPAM and other GoI partners to institutionalise the Index with agreed external partners - to provide a sustainable mechanism for its on-going development. NTB/NTT social contracts For NTT/NTB social contracts, IndII will complete the updated social contracts for the Phase 1 NTT/NTB social contracts with local governments, and complete the implementation of new social contracts for the Phase 2 participants. Later, IndII will prepare a framework for institutionalising the social contract concept as a water governance tool for the GoI to achieve their target by Scoping study - PDAM Water security The PDAM Water Security study is proposed because providing water for urban use will become progressively more challenging as competition for water intensifies and as PDAMS exploit nearby, low-cost water sources. The study will review the extent of current production constraints at selected PDAMs, identify ways to address these issues, and assess the potential for regional water utility development - such as alternative models for operation between regional utilities and PDAMs. It will also examine possible options for the unification and collaboration of some PDAMs, reversing current fragmentation trends. (d) Community managed water supply (CBOs) As noted above in A2.3.2 (d), all IndII support for CBOs was completed by mid (e) Water PPP project/ PDAM financing PDAM financial reform By end of 2015, an additional six (6) business plans will be updated and submitted to MoF, and IndII will provide support to MoF and MPW to streamline review processes. As part of this support, IndII will review all business plan formats currently in use i.e. DGCK, BPP SPAM, MoF and MoHA - and will work with DGCK and BPKP to establish and/or adopt one standard business plan for use by all stakeholder government departments and agencies. IndII will also identify all training courses currently available to PDAMs from all sources and their usage, and will provide support to DGHS, MoF and MoHA to conduct training courses for PDAM financial reform. A baseline survey of up to 11 PDAMs will be undertaken and an incentive payment scheme for PDAMs that adopt the recommended business plan model will be developed. IndII will work with Annexes: 15

37 PDAMs that have implemented comprehensive business and governance plans to identify potential projects where the private sector could add value within their region, such as the distribution of water to neighbouring PDAMs that have limited access to raw water e.g. Kuningan (water excess) to Cirebon (lack of water). Private finance for Water (PPPs, advisory support) As a part of this program, IndII contributes to the long-term infrastructure development of Indonesia by providing financial knowledge, experience and structuring capabilities for the provision of private sector-financed infrastructure to the Coordinating Ministry of Economic Affairs (CMEA) and DGCK. In the extension period, IndII will provide advisory assistance for the implementation of the Jatiluhur- Jakarta water treatment plant and distribution pipeline project; this will be based on IndII s previous work on this project. Similarly, IndII will provide assistance to Kota Palu to develop a pre-feasibility study for the proposed Special Economic Zone and Pantoloan Port water and wastewater project. Assistance may include pre-feasibility study preparation in conjunction with PT SMI or development of a business to business model, assistance with tender document preparation, and capacity building in PPP for relevant Kota Palu staff. IndII will provide follow-up support for Perpres29, specifically in the areas business plan capacity building for PDAMs, Perpres 29 program evaluation and policy recommendation, and will provide advisory assistance with the provision of a commercially acceptable business plan for West Semarang (following assessment of the problems associated with the recently failed PPP). Advisory assistance for CMEA with regard to the drafting of the replacement water law (replacing 7/2004) and provision of a subsequent legal opinion as to its effectiveness in allowing and protecting private sector investment in the water sector will be provided also. Annexes: 16

38 ANNEXE 3: OPERATIONS, MANAGEMENT AND CROSS CUTTING THEMES A3.1 INTRODUCTION IndII s more public activities, project and programs are supported by a coordinated and cohesive structure operating within the organisation. While the public diplomacy profiles of the Initiative s Watsan and Transport activities are substantial, particularly across all levels of national and sub-national government, their successful achievements depend on a well-managed framework that: monitors and evaluates all activities, communicates clearly successes and challenges - to a wide range of audiences, and ensures financial and operational probity. Some of these essential activities and outcomes are summarised in the section below. A3.2 MONITORING AND EVALUATION A3.2.1 Current reporting period (a) Monitoring, design and reporting IndII s technical and financial performance monitoring continues to provide analytical data to assist in facility review and planning activities. The Monitoring and Evaluation (M&E) team (including Gender) has worked closely with Technical Directors (TDs) and Program Officers to produce Six-Month Activity Performance and Completion Reports, and the annual DFAT Aggregate Development Results Reports. Ongoing support continued to be provided to implementing contractors, particularly in helping to develop or improve data collection methodologies, tools and analysis. Externally-commissioned evaluation reports were reviewed and feedback provided to the consultants. As preparation for the IndII extension phase, the M&E team undertook a stocktake of the M&E status and requirement (current and future) of all scheduled activities. This work involved working with technical teams to review design logic models, ensure outcomes and objectives remained relevant, confirm appropriate performance indicators, and identify a schedule M&E for the remaining IndII implementation period. (b) Communication and public diplomacy As part of the Communications and Public Diplomacy Strategy, the M&E team worked with the Communications Team in the re-design of the IndII website, assessment of the successful sanitation public outreach program, regularly provided key data, stories and commissioned videos for uploading on the website, and contributed articles to Prakarsa. Discussions with DFAT Public Affairs will provide direction on future priorities during the extension period. (c) Gender and Disability Two (2) result areas are particularly significant: first, the completion and distribution of a powerful video focusing on the issues of gender and disability within Jakarta s urban mobility system; and second, inputs by the IndII Gender Unit on gender and disability awareness that were subsequently incorporated into the Bina Marga (Directorate General of Highways) RENSTRA. (d) Water infrastructure data sets With the recruitment of the Impact Evaluation Specialist and Research Economist/Data Analyst positions, a significant value-adding to the work of IndII is now underway: analysis of local government water infrastructure datasets. This work covers district (kabupaten/kota) -level information on piped water networks, aspects of local government relating to water infrastructure development, as well as household access and usage of water. Initial data collection has focused on collecting data on the piped water network through the digitisation of data on PDAM networks using annual audit reports issued by BPKP. The objective in compiling this data is to obtain a comprehensive picture of the water sector at the district level in Indonesia as a basis for researching the sector as well as the effects of infrastructure programs on water infrastructure. The work is Annexes: 17

39 expected to be of value beyond IndII - into the successor program, as well as of current and future interest to GoI agencies and donors. (e) Internal Evaluation / Reviews Two (2) significant scheduled internal evaluations in Transport were undertaken: The Provincial Road Improvement and Maintenance Program (PRIM) Review: commissioned to evaluate the institutional changes that have arisen from the implementation of the pilot in Nusa Tenggara Barat (NTB). The Road Safety Review: commissioned to document key achievements and products produced, and provide an assessment of the extent to which IndII s investments had contributed to institutional change within the Directorate General of Highways (Bina Marga). (f) External impact evaluations One major external WATSAN study was conducted: Water Hibah 1 Socio-economic Impact Study - undertaken by NORC (an independent social research agency of the University of Chicago) a study which evaluated the impact of the IndII program on education, health, labour outcomes and spending patterns. A3.2.2 Future M&E activities As IndII moves into the extension phase and activities are either completed or transitioned into the successor program, IndII s M&E work will focus on reporting final outcomes, impact and lessons learned. M&E design inputs will also be provided for extensions, new activities and successor program. Baseline, midline and end-line data will be collected and analysed, both as part of assessment of completed activities and as a basis for future comparison in the period beyond IndII. Subject to final budget and priorities, the following key studies are planned: SAIIG independent review, Water Hibah Phase 2 Impact Evaluation, Support to PDAMs Impact Evaluation, Lesson Learned Review. A3.3 COMMUNICATIONS The overall strategic focus of IndII s communications efforts remains similar to that expressed in the last FRPD, which identified an emphasis on working together with IndII s M&E team; sharing human-interest stories that illustrate the value of IndII s work; using IndII s successes as a platform for Public Diplomacy messages; and highlighting the value of output-based aid. To date, these themes have been expressed through communications activities such as publicising the M&E team s efforts to create a PDAM dataset that will provide researchers and decision-makers with accurate, comprehensive information; featuring youth involvement in sanitation issues in IndII s quarterly journal; and promoting the role of the Australia-Indonesia Partnership and the value of OBA mechanisms through multiple communications channels. The main change in emphasis for the future is a shift from explaining OBA to stressing the role of the private sector in infrastructure development. The primary components of IndII s communications work are: Public outreach campaigns, including a successful Sanitation Public Diplomacy campaign conducted in nine (9) LGs where IndII conducts saiig and Sanitation Hibah; Cross-cutting and sector-specific events such as IndII s traditional End-of-Year event and participation in events such as the Indonesia Water and Wastewater Expo and Forum; The IndII website, recently re-launched with a new look and better navigation; A bilingual quarterly technical journal, Prakarsa, which a recent survey and web audit suggested is particularly valued by those who prefer to learn about infrastructure policy in Bahasa Indonesia; and Complementary activities including e-blasts, ancillary publications, and a weekly news service. While communications activities to January 2017 are contingent upon funding and approvals, expected highlights include a new water and sanitation outreach campaign, a book showcasing findings from the Annexes: 18

40 AIIRA research grants, and a wrap-up event celebrating IndII accomplishments throughout the life of the project. A3.4 ADMINISTRATION, MANAGEMENT AND PROCUREMENT The IndII Procurement Guidelines have been updated and approved by DFAT. They have been customised to meet the particular situation confronting IndII during the 19-month extension. The Contracting Parameters have been updated to include the provision for contract extensions to be exercised based on the Commonwealth Procurement Rules (CPR) principle of achieving value for money through improving the efficiency and effectiveness of the procurement process. The reality is that undertaking lengthy procurement processes during the extension phase could impair value for money by reducing the time available for activity implementation. In addition, DFAT has agreed in general terms to streamline the approvals process by updating existing activity designs to reflect only changes in activity scope, duration and costs. IndII office resources will be suitably organised to provide efficient assistance to technical teams with procurement support for an anticipated 16 new tenders and consultant selection processes, and approximately 20 separate contract extensions, all of which will be completed by January Annexes: 19

41 ANNEX 4: DETAILED EXPENDITURE AND ACHIEVEMENTS TO JUNE 2015 Table 6: Transport expenditure and achievements NOTE: The following three pages are in landscape A3 format; some printers will require manual feed for these pages. Annexes: 20

42 Table 7: Watsan expenditure and achievements Annexes: 21

43 Annexes: 22 Facility Review and Planning Document: Jan 2016 Jan 2017