Conflict prevention and post-conflict reconstruction (P) Project

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Initial Project Information Document () Report No: AB602 Project Name INDONESIA - Support for Poor and Disadvantage Areas Region East Asia and Pacific Region Sector Other social services (75%); Sub-national government administration (25%) Theme Conflict prevention and post-conflict reconstruction (P) Project P Borrower(s) REPUBLIC OF INDONESIA Implementing Agency(ies) MINISTRY OF DISADVANTAGE AREAS MINISTRY OF DISADVANTAGE AREAS Address: Jl. Abdul Muis 7, Jakarta, Indonesia Contact Person: Syaifulah Yusuf Tel: ( 62 21) Fax: (62 21) Environment Category B (Partial Assessment) Date Prepared March 7, 2005 Auth Appr/Negs Date March 17, 2004 Bank Approval Date May 15, Country and Sector Background Characterizing Indonesia's conflicts Indonesia's multiple conflicts differ from many of the country contexts in which the post-conflict literature developed. Five factors are particularly relevant for understanding conflict in Indonesia. The first is that all of Indonesia's conflicts are subnational and most are highly localized. An immediate consequence is that the typical post conflict reconstruction infrastructure of UN agencies, international and national NGOs, and global assistance mechanisms are barely present in most of Indonesia's conflict regions and in several of the more difficult areas they do not operate at all. On the other hand, there are also resources available for reconstruction that are not present to the same extent when conflicts involve large-scale destruction: government and private sector resources can return with less effort, there are no sovereignty or national policy issues to resolve before starting reconstruction, and so on. The second factor is that the superficial characteristics of conflict varies tremendously across the country, but that this very variance masks a fairly limited number of causes. Reviews of Indonesia's major conflicts show religion as the "cause" of conflict in Maluku, separatism the "cause" in Aceh, and ethnic hostility "the cause" in Kalimantan. Yet underneath all these differences is a grab for organizational and economic resources by interest groups on the one hand, and widespread feelings of social injustice and anger on the other. The third characteristic of Indonesian conflicts is the penetration of conflict right down to the level of the subdistrict and in some cases, even to the village. Indonesia's conflicts do not create "revolutionary solidarity" among populations the way that East Timor or even Indonesia's own independence movement did. Even in the movement most closely resembling a well-organized resistance movement, in Aceh, conflicting loyalties divide local groups into violently opposed factions, thus creating fertile ground for the resumption of conflict at what often appears to be minor provocation. The fourth factor is that the pervasiveness of conflict in rural Indonesia is badly underestimated. Seven provinces are generally accepted as being the major conflict zones. But conflict in Indonesia is better viewed as taking place along a continuum that ranges from widespread banditry in provinces such as

2 2 Lampung or Jambi to the more formally recognized conflicts of Aceh or Maluku. The susceptibility of many apparently non-conflict areas to outbreaks of civic violence is high. The fifth factor is that post-conflict reconstruction is not as simple as restoring the pre-conflict status quo. In all of the areas studied during project preparation, the conflict has itself had a transformative effect on sociocultural and economic relationships. Communities that intermingled freely are now rigidly segregated from each other, and in some areas, cycles of vendettas to avenge grievances have become common. Investors who lost their assets in the conflict often do not have additional assets to reinvest once the conflict is over. That development support cannot be limited simply to restoring previous patterns opens as many new doors as it closes old ones. Impacts from conflict The impact of conflict on rural populations exhibits a number of common patterns across the country. Not surprisingly, conflict affected populations always experience significant drops in living standards and general economic growth, in some cases dramatically so. Table 1 summarizes the overall story of economic decline. In 2001, five of the 16 conflict districts had poverty rates double the national average, while six more were too dangerous to collect any data at all. Although Indonesia as a whole has made good progress towards achieving Millennium Development Goals, the conflict districts have not; for example, more than 50% of the population in Central Kalimantan, West Kalimantan, Poso (Central Sulawesi) lack access to clean water; Economic decline comes from several sources, some more obvious than others. Conflict increases risk and encourages private investment to go elsewhere. Conflict also promotes the emergence of many investment dampening legal and illegal fees. Conflict makes groups abandon critical economic activities -- and it creates opportunities for others to start economic activities that depend on continued violence. Table 1: Annualized Growth Rate in Selected Conflict Districts (1993 constant dollars) Province District Name Percent change Aceh Aceh Besar -0.73% Aceh Pidie -3.39% Maluku Ambon % North Maluku Halmahera Barat -3.48% North Maluku Ternate 1.62% Central Sulawesi Palu 1.15% Central Sulawesi Poso -2.07% East Java/Madura Sampang -2.48% Second, Indonesia has a large population of internally displaced people (IDPs). The number of IDPs has dropped from more than one million people in 2001 to approximately 500,000 people in late In some areas IDPs have returned to their home communities, but in other provinces large populations of IDPs remain. Most refugees who fled from Kalimantan to Madura are highly unlikely to return -- it would spark an immediate resumption of ethnic conflict - and yet their continued stay in Madura is placing strong pressure on already strained services and land resources. Other provinces such as NTT are similar: where IDPs remain and are not in refugee camps, pressures on host communities are high and secondary conflicts

3 3 are likely to occur. Third, essential services such and education and health are severely curtailed or stop during conflict, mainly due to loss of staff and destruction of facilities and equipment. Schools, health centers and staff housing have often been targeted for burning in the process of conflict. The willingness of teachers and health workers to stay in their posts, and the ability of health staff to perform outreach services to villages are profoundly affected by the security situation. These problems compound the already low budgets for maintenance of facilities and recurrent costs of service provision. Fourth, the breakdown of state services, particularly those that are needed for post conflict dispute resolution, is not turning out to be something easily restored once the conflict is over. In Ambon City, capital of one of the proposed provinces most affected by inter-religious conflict, the Municipal Court currently has 6 judges when it should have 21. The main court in North Maluku in Ternate likewise has only 5 judges. Such a failure of law enforcement creates an environment where small, soluble disputes can easily lead to broader social conflict and can drag on for years, preventing a return to normal conditions. The breakdown of the legal system has coincided in some areas with an increase in legal disputes. Particularly where populations have been displaced, land disputes have arisen. Members of conflicting communities may now be resident in their houses, crops may have been harvested and sold, houses damaged or even sold by other IDPs. Some interlocutors reported that at least 50 discrete land disputes exist in the district of Central Maluku alone. Yet, with the courts understaffed or inappropriate to handle these disputes, the government has not found an appropriate policy response or mechanism to provide support for neutral and legitimate mediation. Initiatives to enhance community-led mediation processes are thus a high priority in Indonesian post-conflict areas. Fifth, most Indonesian conflicts are cyclical. As Collier has pointed out, while objective grievances do not explain violent conflict, the subjective grievances created by the conflict itself create the potential for many more future conflicts. Many of the current conflicts in Indonesia now have their own "grievance myth" that justifies the resumption of conflict not because of any one provocation, but because of an inherited cause that justifies re-starting conflicts that may have temporarily settled down. Increasing spatial segregation resulting from past conflicts exacerbates inherited grievances in places such as Maluku, where formerly co-resident communities now launch raids on each other from separated settlements. Without mechanisms to discuss and defuse inter-group tensions, they fester and worsen. Government Strategy Overall government policy towards conflict follows a two-track approach.top priority is given to using the security forces of the state to end open conflict and to ensure the territorial integrity of the nation.the "security approach" is complemented by a program of development assistance to help the conflict affected areas recover from the fighting and to re-start growth. In early 2003 a multi-sector planning group led by Bappenas and supported by UNDP produced a draft overarching strategy for the management of conflict. Objectives of the government's master policy framework are to promote a multisectoral approach to conflict management rather than the single sector approaches applied in the past. Further, the strategy moves away from centralized solutions to emphasize decentralized, participatory approaches that incorporate social reconciliation into reconstruction and rehabilitation programs. Nevertheless, the overall strategy retains a number of weaknesses that have vitiated government post

4 4 conflict efforts in the past. Although the strategy emphasizes local participation and close tailoring of reconstruction programs by the decentralized government agencies, the strategy still has no mechanisms for doing this and instead proposes a standardized reconstruction program for all conflict areas. The strategy also continues to promote subsidized credit and other distorting measures. Most significantly, however, is that the strategy concentrates exclusively on "managing conflict", not on providing a guide for a transition from conflict to redevelopment. The proposed project, therefore, fills an important gap in the overall strategy. The government has also made some generally forward if uneven progress towards reviewing the composition and role of the armed forces. At the political level, "dwifungsi" -- the military shadow government twinned with civilian positions -- has ended. The military faction in the legislature has also steadily lost power. The government recently completed a white paper on defense needs, which for the first time acknowledges the budgetary problems that made extra-budgetary fund-raising by regional commanders a necessity and which contributes to many of the regional conflicts across the country. However, the historically ambiguous role and still unsatisfactory budgetary morphology of Indonesia's military means that it remains the wild card in national level conflict analysis. The individual agencies that will be involved in SPADA, the Ministry of Health, the Ministry of National Education and the Ministry of Home Affairs, each have units charged with support to conflict areas; all three ministries are members of the Bappenas coordinating group. In conflict areas, the Education Ministry promotes interventions such as block grants for schools which enroll children of internally displaced families, and it provides for counseling of traumatized students and teachers. The Ministry of Health supports an emergency response in conflict areas, including clinic reconstruction, emergency supplies of drugs and equipment, and mobile medical teams to provide curative and preventive services. This ministry also welcomes partner agencies and NGOs to assist in needs assessment and to provide humanitarian assistance and to fill gaps in health program support in conflict and post-conflict situations; but it has no formal policy to engage nongovernment or independent providers to fill medium or long term service gaps. Home Affairs has the greatest experience with multisectoral projects, but its post-conflict units have in the past focused on what it calls "cultural" and "security" approaches to conflict management. More relevant are the community development experiences of Home Affairs and Public Works (Kimpraswil) programs such as KDP and UPP. Home Affairs is also well-placed for addressing many of the decentralization issues that arise in post-conflict management, but it is increasingly constrained by lack of administrative capacity. Public Works has more overall managerial capacity, but is still focused primarily on building infrastructure. 2. Objectives Prior to the onset of the East Asia crisis in 1997, Indonesia was a world leader in poverty reduction. In the two decades leading up to 1996, poverty levels fell from over 60 percent to less some 12-15% of the population although, as the crisis then demonstrated, many more people were hovering just above the poverty line and were especially vulnerable to the shock. When the economic crisis hit following two drought years, per capita GNP was halved to $580 and poverty shot up by at least 100%, rising to a peak of 27% in early Since then, formal poverty levels have dropped, helped by macro stability, increased real wages and employment, and a decline in real food prices. However, despite the good news on the post-shock decline in poverty rates, Indonesians face startlingly high vulnerability to poverty. The 2001 Poverty Report showed that over a three-year period, between percent of all Indonesians face a greater than even chance of

5 5 periodically experiencing extreme poverty. Worse, measure by indicators such as those used for the Millenium Development Goals, large numbers of Indonesians continue to suffer from lack of access to basic education, safe water, adequate sanitation, electricity, and access to basic social services. Taking all these indicators into account, poverty is an issue that continues to concerns nearly half of the Indonesian population. A particularly disquieting aspect of Indonesian poverty is the difference between levels of poverty incidence, and the absolute numbers of people living in poverty. Because of the dense settlement of Indonesia s island of Java, where nearly 60% of the population live at densities that can exceed 1,000 people per km2, the greatest numbers of poor people are found on Java which, in fact, makes up some 60% of the total numbers of Indonesia s poor. But the highest incidences not in Java. Rural, off-java provinces such as those of the eastern islands, Papua, or Lampung can show poverty rates that exceed 50% of the rural population, and substantial areas of the eastern islands still experience not just absolute poverty, but seasonal starvation. Strategies for reducing poverty differ significantly between Java and off Java provinces. On Java, urbanization, capital investment, and active factor markets argue strongly for development strategies that provide poor communities with better access to urban and industrial job opportunities. But for the off-java areas, capital investment is much lower, and communities often lack even basic services. But for a large number of poor off-java areas, the challenges thrown up by difficult geographies, insufficient infrastructure, and lack of basic services was dramatically exacerbated by the outburst of violence and civic conflict that erupted after the fall of the New Order government. Conflict, Governance, and Poverty -- Between 1998 and 2002 Indonesia went through an exceptionally turbulent transition, with both the overall East Asian economic crisis and the Indonesia-specific collapse of the New Order regime triggering outbursts of conflict across the archipelago. By late 2001, the country was experiencing large-scale violent conflict in seven of thirty-two provinces, and more than one million people were officially registered as having been displaced. The costs of the conflict have been very high. Economically productive assets constructed at great cost over the previous decades were destroyed in a matter of weeks. While reliable or comprehensive statistics are not collected in the conflict areas, the general story emerging from studies and site assessments is one of rising impoverishment, stalled growth, and delayed recovery. Many of the districts that were high growth before the conflict show negative growth rates after it: six of the sixteen districts to be included in the proposed project show growth rates below -4% over a period when national growth rates were +4% over the same period. In one conflict district of Aceh, 265 of 443 primary schools were burned down; in another North Maluku district, 31% of the schools were destroyed outright and the remainder are now in a state of collapse because there has been no maintenance. In Poso, another of the proposed project sites, 35% of the health clinics lack a doctor or medicine, and only 62% of the villages have a midwife, leading to endemic problems negatively affecting maternal and child health. In short, successfully reducing poverty in these provinces required a development strategy that could address both the causes of conflict and that could provide them with a framework for restarting equitable recovery and growth. The new government formed after the 2004 elections formed a special state ministry to deal with poor and disadvantaged areas. Working closely with Bappenas (the planning ministry), this ministry has produced a long-term strategic action plan to support better governance and effective poverty reduction in the 100 poorest districts of the country, which includes all of the districts that suffered from significant outbursts of civic violence. The core of the strategy consists of policies and investments that will build local capacities; provide basic services to poor communities, promote growth by removing distortions and by providing

6 6 public infrastructure, and support appropriate processes of local-level reconciliation and recovery. Of the 100 kabupaten, the group covered by the proposed SPADA project covers 50 districts whose poverty is closely tied to two post-1998 calamities. Forty of these districts experienced significant conflict during the post-new Order turmoil. An additional ten districts are in Aceh, where not only was poverty exacerbated by an accelerating anti-separatist military action, but where in December of 2004 a devastating earthquake and tidal wave killed more than 100,000 people and left another 500,000 displaced from their homes. (SPADA was originally designed to cover Aceh in its third and fourth years, but the tidal wave caused an acceleration and expansion of the Aceh component into a free-standing set of activities). SPADA s overall objectives are to improve the effectiveness of public sector planning for development in poor districts, with a special emphasis on support for measures that will break the conflict cycle The project will achieve these objectives through three types of activities: strengthening community-led planning and dispute resolution processes; promoting private investment and job creation; and increasing utilization of effective education and health services. Dealing with conflict-related poverty is, however, extremely complicated because the underlying causes and triggers of violent conflict are multifold. Recurring conflicts are often rooted in an accumulated legacy of mistrust and fatalism that is not easily overcome. Nevertheless, carefully constructed and sustained interventions can help communities move beyond a violent past. Extensive empirical research on the dynamics of conflict in Indonesia, experience with other development and recovery programs in Indonesia's conflict areas, and lessons learned from the experience of other conflict-afflicted countries have identified three ways through which SPADA can break the conflict cycle. First, SPADA will help to improve relations between different groups and communities. Conflict areas are generally marked by high levels of hostility between different groups, with identities and negative perceptions hardened by past acts of violence. Work by Varshney (amongst others) has shown that areas with few cross-cutting ties between groups are more susceptible to conflict. The Indonesian experience with community driven development projects has shown that community-driven decision-making, project planning and implementation can help not just in rebuilding an area's social and economic infrastructure, but can also increase the quantity and quality of social capital between different groups. This is because they provide incentives for people to work together and through providing participatory processes for this to take place. In order to help improve inter-group relations, SPADA will build on the Indonesian community development experience, with key decisions being made through platforms at the sub-district and district levels. Experience has also shown that while it is important to ensure that marginalized members of the community such as internally displaced people (IDPs), women and minority ethnic/religious groups are included in the process, an approach of inclusivity is better than one of targeted assistance. For example, providing targeted assistance to IDPs can often cause resentment in the host community and can hence help fuel conflict in the future. As such, SPADA will attempt to include all groups in decision-making, rather than focusing solely on those groups most affected by conflict. Second, conflict areas are often marked by a break-down in relations between the community and local government, and by an absence of effective institutions (formal and/or informal) to help manage conflicts before they become violent. Evidence from an ongoing DEC-ES study on conflict in Indonesia is showing that the quality of local leadership (at the district level and down) is a key determinant of the likelihood of areas experiencing violent conflict. At present there is often a lack of channels of accountability to ensure that decision-making is in the community's best interests. In conflict-ridden areas, a vicious cycle is often perpetuated where violence erodes local institutional capacity, which, in turn, increases the chances of

7 7 future violent conflict. SPADA is designed in such a way as to help strengthen both local governance and conflict resolving institutions. The project institutionalizes relationships between the community and local government via the school and health committees, business forums and sub-district and district forums, in ways that provide positive examples of state involvement. All SPADA components are built on an inclusive, participatory planning process during which different communities and stakeholders assess their needs and priorities and use the project structure to sort through appropriate but fast-acting responses to them. By providing voice to local demands, the project will help build accountability amongst local government. Strengthening the community and district governance platforms this way is entirely consistent with the Indonesia CAS, and SPADA's focus on a reinvigorated planning process is what guides the path that leads from conflict recovery to normal development. Third, SPADA will help to break the conflict cycle through addressing the socioeconomic factors that provide the contexts within which conflicts can erupt. Empirical quantitative and qualitative research has shown that there is often an economic basis to conflict in Indonesia. Whereas poverty in itself does not explain conflict, inequality between groups and high levels of unemployment, especially amongst young men, can provide both a locus for dissent, and a population group easily mobilized for destructive purposes. SPADA aims to tackle the economic bases to conflict. The activities supporting private sector development address economic revival directly by focusing on the key services required by the private sector and an investment-friendly regulatory environment. The project's focus on inclusiveness in the selection of proposals will help ensure that the benefits of this will be shared across different identity groups. Similarly, health and education will have a significant impact on labor productivity in addition to providing vital services to the community. Evidence from the ongoing conflict research study shows that communities with lower levels of education are more easily mobilized by leaders who want to create conflict, or emphasize exclusive group identities, for their own purposes. The availability of education is also one of the key factors in getting IDPs to return home, boosting land and labor productivity in the short terms and providing skills in new labor market entrants in the longer term. The different components of SPADA are thus based on a diagnosis of the proximate and underlying causes of conflict, and the different interventions that are required to help break the conflict cycle and to allow the transition from recovery to longer-term development. The different components combine to ensure that a significant impact is made, as opposed to a one-off activity that would have a limited effect in transforming attitudes and inter-group relations, improving governance and local dispute resolution institutions, and promoting economic growth and human development. 3. Rationale for Bank's Involvement The Bank's global experience is of high relevance for this project. Post conflict programs in Indonesia have always concentrated on infrastructure reconstruction. This will be the first attempt to build a reconstruction program around development planning. The project draws on two particular bodies of knowledge that are also taking on growing significance in the country dialogue. First, new approaches to using community planning methods for post conflict work is promoted by both the Conflict Prevention Unit and the LICUS group. Second, the body of knowledge on end user involvement in social service delivery that was summarized in the 2004 World Development Report informs the proposed project's design throughout.

8 8 4. Description Overview of the SPADA Project SPADA's investment activities are intended to contribute to a transitional program for promoting post-conflict reconciliation and re-starting development. They do this through three linked activities. First, the bottom-up planning process supported through the block grant components encourages direct negotiations between project stakeholders -- the idea is that cooperative activity that leads to positive benefits spills over into new patterns for resolving conflicts. Second, the project has a multi-tiered capacity development program so that weakened institutions can become more capable and responsive. Third, the project has some highly targeted activities that can either reach highly vulnerable groups who will not recover from the effects of conflict without special help, or else activities such as the dispute resolution program that provide new mechanisms for resolving conflicts peacefully. The project will have five components. All components support the same bottom-up facilitated planning process to identify and prioritize local post-conflict needs, which will be identified in the form of outputs. These proposals are discussed and ranked in subdistrict and district assemblies using criteria that promote cooperation and post-conflict recovery. The five components are: a. Subdistrict grants b. District grants c. Capacity Development d. Implementation Support e. Monitoring, Evaluation, and Studies The planning cycle is described below. SPADA's full planning cycle is described in some detail because the project's entire logical and financial structure is designed to support this sequence. Step 1. Establish the Provincial Team In most instances, the roles of the province will be to influence and clarify province policy, manage monitoring and audits, and encourage inter-district learning. Therefore, in terms of technical assistance, a Coordinator supported by a Deputy and a Secretary should be sufficient. There are some cases where the district is so weak that the province will host the district team until some basic capacities have been restored. Step 2. Establish District Team The initial SPADA team at the district level will consist of: CDD consultants Health consultants Education consultants Private Sector Development consultants These consultants will divide into multidisciplinary teams that will each cover a cluster of sub-districts (roughly 5 to 7 sub-districts per team). The aim is for the teams to travel and work together as much as possible. This greatly reduces logistical problems and the need for repetitive village and sub-district events. Baseline HD and private sector surveys would be commissioned using standard TOR and formats.

9 9 Step 3. Find and Train Effective Facilitators In each village the project must seek out people who can facilitate the inter-village reconstruction and reconciliation process. It is essential in post-conflict areas that these facilitators are known and respected by all sides of the conflict. Particular attention must be given to ensuring that good women facilitators are identified. These facilitators must (a) help socialize the project, and (b) assist the representatives (below). Facilitators will also assess whether conflicts are still too "hot"; these assessments will be used to finalize the list of participating subdistricts and to propose additional confidence building exercises. Step 4. Strengthen Village and Sub-District Institutions Where KDP is active about half of the locations -- much of this preliminary work may already have been done. Key groups are the village governing councils (BPDs) and the inter-village fora, but the project will also involve traditional and religious leaders and any key factions that may be active in the area. In some cases this may involve considerable work, including setting up and training financial management units. The facilitators must also be able to prepare and invite district line agency and NGO representatives to the initial and decision making inter-village meetings. Step 5. Strengthen District Institutions Development Council is a decision-making body chaired by the district planning board (Bappeda II) consisting of representatives from inter-village fora, government agencies, NGOs, and local leaders. The council ratifies collectively prioritized proposals from the inter-village forum that could not be funded from the subdistrict grant. This council allocates funding from the district grants provided by SPADA; however, only the Bappeda and representatives of the inter-village fora vote. The council has the right to challenge proposals and reprioritize them where it deems necessary. The council is responsible for overall supervision of activities, through its local membership. District Boards and Committees are special interest groups dealing with, inter alia: community development, health services, education services, private sector development; e.g. business forums. They are linked to the Development Council as a technical/advisory resource. These groups are responsible for the technical verification of the feasibility of proposals. They may also be used for supervising progress on individual activities. The project will provide training and other capacity building programs for these committees. Step 6a. Map existing resources In order for decision-making forums to make informed rational decisions, it is essential that these forums be informed on the use of resources (and planned use) in their areas. To this end, the component will provide technical assistance in resource mapping to ensure that information on district plans and other available resources are provided to the forums and communities in a user-friendly format. These resource maps will be the basis for resource mobilization.with the collaboration of the local government (e.g. line agency, Bappeda II), NGOs and private service providers, district consultants will map existing resources (human, financial, infrastructures, equipment and materials) and programs operating in the relevant sectors. This will be conducted using standardized formats for each sector. These maps will also include the results of surveys of transportation taxes and local trade tariffs that adversely affect local investment climates. Step 6b. Socialization of project components Simultaneously with Step 6a, the socialization of the project components will be conducted by district consultants and village facilitators at all levels. A wide range of communications media will be used,

10 10 including radio, meetings, posters, etc. Step 7. Thematic Rapid Needs Appraisals Supported by the district consultants, the District Boards/Committees will send out teams to undertake a rapid assessment of needs. In some areas this may not be necessary (e.g. pilot locations or where similar exercises have already prioritized needs) in those cases this step may be skipped or shortened. Using simple standardized formats, the facilitators will collect information in the village, and hold discussion groups with male and female village members. The standardized formats will identify main problems, use of basic services, and service coverage. Different techniques will be required to access information from the different interest groups. Step 8. Inter-village/sub-district level Preliminary Prioritization of Needs. The interest groups meet with village representatives in public meetings to discuss priorities and how these should be grouped into inter-village needs. This dialogue may be a crucial step towards getting groups who previously opposed each other to discuss development issues. Technical advice will be sought from sub-district and district levels as required. The list of needs will fall into three main categories: those that will be sent for district grant support, those that will be referred to other sources, and those that will be supported from sub-district grants. Subdistirct proposals will tend to be smaller and simpler. Step 9a. Proposal Preparation and Selection Sub-district proposals. Interest groups in the communities will prepare simple sub-district level proposals with technical support from the district level consultants, line agency officials and others as required. line agency officials, NGOs and private businesses are also invited to these meetings and can submit proposals. These proposals will be prioritized at the inter-village level and checked at the district level to ensure that these are not things covered by another district plan. The plans are then ready for funding as soon as the sub-district level grants are authorized and will be managed using a system based on that used by the KDP. Step 9b. Proposal Preparation District proposals. Each of the relevant technical Boards/Committees at the district level will discuss the identified needs, and prioritize the problems or gaps in services that must be addressed in each geographic area. The main criteria for this prioritization process will be decided by SPADA's national level policy team and will include cost effectiveness, number of potential beneficiaries, degree of benefit, and perceived impact on solving social problems that caused conflict.. Proposals for the district grants will come from the subdistrict forums, which can include proposals submitted by line agencies, the business forums, and NGOs. Proposals that include higher local contributions or mobilize other resources receive priority, and subdistricts are also allowed to use their subdistrict grant to leverage district funds. The district level thematic Boards/Committees will then prepare more detailed proposals with the help of a technical cell attached to them. Elements that must be considered include the local policies and plans of relevant line agencies. All proposals must include a process for service user feedback integrated into each proposal. Proposals are then reviewed by the project verification team to ensure that they meet criteria of technical soundness, consistency with other government programs, and safeguard procedures. SPADA block grants cannot be allocated for sub-projects that have other sources of funding (other than as matching grants). Step 10. Proposal Selection and Review District proposals. The appropriate Boards/Committees will present their priority lists to the Development Forum. If the Development Forum approves the list (e.g. it is in line with the current development plans; it passes a

11 11 technical review/verification; and it does not overlap with other activities), then it is ratified and will receive an allocation of funds. Step 11. District Activity Bidding. The procurement of services, materials and equipment under most of the district level proposals will require a bidding process. Assisted by the project consultants, the relevant Boards/Committees will draft relevant bid invitations and other necessary documentation for the bids. An objective Bid Committee will be created including a small number of representatives of the communities and the respective thematic Board/Committee. Because of weak capacities, procurement will initially be through a procurement agent, whose terms of reference will involve developing a training and certification function so that procurement functions get turned over to qualified personnel over the course of the project. Members of the Boards/Committees are not allowed to bid. Step 12. District Activity Channeling Funds The district grant funds will be channeled directly through the treasury office. From there, disbursements will be made either to the sub-district level (via a small financial management unit) for the sub-district grants or to the suppliers and contractors for the district level activities. Step 13. District Activity -- Project Implementation Projects are overseen by the sponsoring District Board. Each project forms a Project Implementation Unit, which reports back to the Development Council. Projects are monitored by a monitoring team and local NGOs. Step 14. Quality Control and Technical Support The project consultants will assist the relevant government agencies (line agency) as the primary institutions with the responsibility of quality control and monitoring the services. Step 15. Monitoring of Implementation All proposals will have community (or service user) feedback processes built into their fund-flow mechanisms. The service user feedback will be reported back to the Development Council on a monthly basis through the Project Management Unit, and this reporting will be linked with the clearance of each tranche of funding or payment. If there are serious complaints, the Development Council will meet to decide actions to deal with the problems. Funding will cease until acceptable solutions are found. Step 16. Local Assessments of Sub-projects and Evaluation A concise review will be made of each sub-project based on standard formats. The relevant Board/Committee will issue a statement regarding the quality and usefulness of each activity. These statements go to the Bappeda and to the DPRD. The technical review will be required at the end of each year to justify further support from the project. Third-party, independent financial and technical reviews will be held by consultants hired by the project's national management team to cross-check the accuracy of these assessments. Specific Component Descriptions Component A: Subdistrict Grants (US$58.1 million) The project will provide subdistricts with unearmarked block grants that can be Rps. 500, 750, or 1,000 million rupiah, depending on their

12 12 population.the grants can be used for any productive purpose, with the exception of a small negative list that covers items banned by Bank policy (i.e. weapons, pesticides, etc). However, villagers choosing projects that require sustained operational support and recurrent funding to be effective, such as improvements in schools or health clinics, must demonstrate that this support and funding are available. Proposals of this sort must include review by the relevant district line agency, although the project will encourage private sector supply of these materials wherever this is possible. Ten percent of the grant is reserved for proposals from women's groups, and 5% is given to youth groups early in the project cycle for them to identify and implement their own reconciliation programs. Subdistrict grants also include a small fund to provide operational support for activities that promote inter-village cooperation, such as sports leagues, cultural events, and transport to inter-village meetings. Villagers prepare proposals with the assistance of a trained facilitator, who also helps them find qualified technical assistance to review and finalize the proposals. Proposals are then ranked in a subdistrict meeting, after which the successful proposals develop detailed technical designs. Criteria for the ranking include their contribution to reconstruction and reconciliation, number of poor beneficiaries, whether they involve cooperation across groups, the extent of local contributions to the proposal, and whether any other resources have been mobilized. Project procurement, financial management, and technical oversight are all done by the communities themselves, assisted by project trainers and facilitators. Any wages paid must be set at less than the local agricultural minimum wage to avoid drawing people out of existing employment. Modalities of grant record keeping are similar to those of the Kecamatan Development Project, with some modifications that are described below, whose purpose is to adapt them to the needs of areas recovering from conflict. Grants are transferred directly from the provincial branch of Bank Indonesia to a collective account owned by all villages that is held in a private bank. The project's Operational Manual includes fiduciary formats and record keeping mechanisms that have been reviewed by the Bank and which have already performed well in practice. However, SPADA differs from KDP in several ways: includes conflict damage assessments within the planning cycle (including pressures caused by hosting internally displaced people); allows for one-off grants to replace the catastrophic loss of productive assets, housing, and public buildings if agreed by the subdistrict forum; uses the planning cycle to encourage low-cost reconciliation measures such as sports leagues and cultural events; conflict resolution training for facilitators and community leaders emphasizes IDP reintegration; invites district sector representatives and NGOs to subdistrict meetings; promotes inter-village and proposals jointly sponsored with line agencies and NGOs; elects members from each subdistrict board (FAD) to advise the district development forum on priority needs identified in the subdistricts. it includes a program for alternative dispute resolution and legal assistance. Component B: District Grants (US$19.5 million). The purpose of the district grants is to support larger or more technical proposals emerging from the subdistrict planning process that also contribute to reconstruction, cooperation, and development. Projects are selected by the district development forum on a quarterly basis using criteria that include demonstrable broad-based benefits, cost and local contribution, and their technical and financial feasibility. Projects that benefit more than one subdistrict are favored by the scoring system, but there is no absolute rule requiring this. For the first two years of the project, the maximum size of an individual proposal is US$50,000 (a procedure will be developed to allow exceptions in special cases). Subdistricts are encouraged to partner their proposals with line agency or NGO funding. Thirty percent of the district grant is reserved to support quality improvements in health and education.

13 13 Both sectors have developed predefined positive lists of eligible activities. Results from the quarterly meetings are published in local newspapers. Grant amounts begin at an aggregate of Rps. 2 billion (approx. US$225,000) in the project's first year. Each year an independent audit commissioned by the national management unit reviews the physical and financial performance of the grants. Satisfactory performance allows the size of the district grant to increase by an additional billion rupiah, up to a maximum of four billion rupiah in the project's final year. Districts receiving a qualified audit are demoted to Rps. 1 billion until the qualifications have been lifted. Districts that do not fix the problems after a reasonable period will be dropped from the program. Projects that are approved by the forum are passed over to the Project Implementing Unit. This management unit includes a privately contracted engineer and a procurement specialist as well as relevant members of the district line agencies. Project proponents must form a three-person project implementation team per approved proposal to supervise project implementation and to provide accountability reports to the PMU and the sponsoring forum. These teams are made up of representatives of the project's proponent and a technical specialist. The PMU reviews the detailed project proposal, cost estimate, implementation procedures, and implementation team before tendering the contract. Project implementation is independently monitored by a monitoring unit attached to the district forum, and by local NGOs that are contracted for that purpose. Component C: Capacity Development (US$16.0 million). SPADA is working in districts and subdistricts of extremely low capacity. They require a substantial investment in improving the capacity of local stakeholders. SPADA's tackles capacity questions through a combination of training, practical exercises, professional technical support, and by developing learning networks. The project will finance subdistrict and district consultants recruited from the private sector and from NGOs, who will be the linchpins for a program of activities to strengthen district, subdistrict, and village administrative capacities These will be activities that continue throughout the year. Districts will be supported by Project Implementing Units staffed by consultants, whose job is to provide technical assistance and training in project screening, management, procurement, and record-keeping. Consultants will also manage a package of in-house and contracted training programs for preparing, evaluating, and implementing development projects. Technical capacity support provided to local governments and the communities through SPADA include health and education diagnostics, support for the private sector forums, and training district legislators in public expenditure analysis and formulation. The project will also fund support to the provincial governments, particularly for monitoring progress on improving local investment climates. This component includes several activities specifically related to conflict. The two largest are an expansion of the program for female-headed households in conflict areas that was successfully piloted under a two year JSDF-supported project in four conflict provinces, and a program for promoting local level use of law and alternative dispute resolution mechanisms that was designed during project preparation. The female-headed household program deals primarily with widows. It provides an intensive training program in rights awareness, group organizing, and reintegration into normal village life. The two key features of the law and alternative dispute resolution program are a program of facilitated mediation and court referrals so that disputes can be resolved peacefully; and a provincial and district working group that involves representatives from the police, the Attorney General's office, the Ministry of Home Affairs, and legal NGOs. Smaller pilot programs that work to develop community-based reconciliation activities, youth employment and other incentives to promote nonviolent dialogue, vouchers for IDPs, and pilot work on community-based land mapping for dispute resolution will be launched in the project's second and third operational year.

14 14 Component D: Implementation Support (US$11.7 million). SPADA includes three major types of implementation support. The different levels of government are backed by a technical assistance structure that includes a national management team, an oversight and monitoring unit in each province, and a multisectoral support team in each participating district. Linked to this management structure is an internationally recruited procurement agent, who will manage procurement during the project's startup period and gradually hand over procurement functions to local counterparts who complete a certification and internship program. The second consists of the technically specialized services needed to carry out baseline inventories, investment climate surveys, and needs assessments, deliver the educational and health services, and to provide training and operational support for an alternative dispute resolution program. The third type of implementation support covers programs for information dissemination, including radio and public awareness programs that address issues related to reconciliation. Counterpart funds of US$7.5 million to cover government implementation support are not included in here. Component E: Monitoring, Evaluation, and Studies ($2.1 million). SPADA requires a sophisticated system for monitoring and evaluation (see Annex 2 for more detail). Project managers need to know in more than casual ways whether the project is on course and whether interventions are having their desired effect. But more than in most project designs, policy makers also need to know more about how to deal effectively with conflict and recovery. The core of this component is a package of quantitative and qualitative baseline and intermediate surveys and case analyses that can track impacts due to project interventions. This category also includes programs for conflict resolution that show promise but should be piloted on a two or three province scale before expanding across the conflict regions, such as community land mapping or options for community based trauma recovery. Summary of SPADA M&E Activities Monitoring activities Community participatory monitoring and evaluation Regular field supervision and monthly progress reporting by project staff, MIS Independent monitoring by civil society groups including public expenditure reviews by NGOs Health and education monitoring Case Studies Grievance/Complaints resolution process Evaluation Activities Impact study qualitative and quantitative HH survey Technical/sectoral studies (EIRR, facility and user surveys, etc) Private sector development assessment tools (also for monitoring purposes) Conflict incidence mapping Training tracer impact assessments Supervision missions Financial audits SPADA's Implementation Framework