Dear Mr. Nihill / H.E. Governor Hamengbukuwono X / Governor Waluyo:

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1 Public Disclosure Authorized The World Bank 1818 H Street N.W. (202) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS CONFORMED COPY Letter No: JA-213/JRF/V/2010 May 12, 2010 Public Disclosure Authorized Public Disclosure Authorized Mr. Denis Nihill Chief of Mission International Organization for Migration (IOM) Sampoerna Strategic Square, North Tower Floor 12A, Jl. Sudirman Kav , Jakarta Indonesia Facsimile: H.E. Sri Sultan Hamengkubuwono X The Governor of Yogyakarta Special Province Komplek Kepatihan; Jl. Malioboro, Yogyakarta Indonesia. Facsimile : H.E. Bibit Waluyo Governor of Central Java Province Jl. Pahlawan No. 9, Lt. 11/12 Semarang Indonesia Facsimile: Dear Mr. Nihill / H.E. Governor Hamengbukuwono X / Governor Waluyo: Re: Indonesia: Yogyakarta and Central Java: Access to Finance and Capacity Building for Earthquake-Affected Micro and Small Enterprises Project Java Reconstruction Fund Public Disclosure Authorized Grant No. TF IN; Amendment to the Grant Agreement We refer to the Grant Agreement for the above-referenced Project among the International Bank for Reconstruction and Development/International Development Association, acting as administrator of grant funds provided by the multi-donor Java Reconstruction Fund (the Bank ), the International Organization for Migration ( IOM ) and the Republic of Indonesia, represented by the Yogyakarta Special Region and the Central Java Province, dated October 7, 2008; and the Accession Agreement, dated December 3, 2008, by which Central Java Province became a party to the agreement (together, the Grant Agreement ). We refer also to your letter, dated February 24, 2010, requesting amendment to the Grant Agreement, the endorsement of the Yogyakarta Special Region, dated February 22, 1010, the endorsement of the Central Java Province, dated March 12, 2010, and the endorsement of the Java Reconstruction Fund, dated April 30, The Bank, the Recipient, the Yogyakarta Special Region and the Central Java Province have agreed to amend the Grant Agreement as set out in the Attachment to this letter.

2 2 of 6 May 12, 2010 Except as specially amended hereby, all other provisions of the Grant Agreement remain in full force and effect. Please confirm the agreement, on behalf of the Recipient, to the amendments set forth above, by signing and dating the form of confirmation set forth below, and returning one fully signed original of this letter of amendment to us. Upon receipt by the Bank of one of the originals of this amendment letter duly countersigned by the Recipient, this amendment letter shall be deemed to have been effective as of the date of countersignature by the Recipient. Sincerely, /s/ Joachim von Amsberg Country Director, Indonesia INTERNATIONAL ORGANIZATION FOR MIGRATION By: /s/ Denis Nihil Name: Denis Nihill Date: May 17, 2010 GOVERNMENT OF THE REPUBLIC OF INDONESIA YOGYAKARTA SPECIAL REGION CENTRAL JAVA PROVINCE By: /s/ Hamengku Buwono X By: /s/ Drs. Hadi Prabowo MM. Name: Hamengku Buwono X Name: Drs. Hadi Prabowo MM. Date: May 31, 2010 Date: May 31, 2010

3 3 of 6 May 12, 2010 ATTACHMENT Indonesia: Yogyakarta and Central Java: Access to Finance and Capacity Building for Earthquake-Affected Micro and Small Enterprises Project Java Reconstruction Fund Grant No. TF IND Amendment to the Grant Agreement 1. Schedule 1, Project Description, of the Grant Agreement is amended as follows: (a) Part C: Access to Finance of the Project is deleted. (b) Part D: Market Access Recovery of the Project is re-named Part C: Market Access Recovery and all references to Part D in the original text of the Grant Agreement are changed to Part C. (c) Part E: Capacity Building Technical Assistance is re-named Part D: Capacity Building Technical Assistance and all reference to Part E in the original text of the Grant Agreement are changed to Part D. In addition, the following sentence is added at the end of Part D: Provision of technical assistance to local governments in Yogyakarta and Central Java to build their capacity to assist MSEs. (d) Part F: Project Management, Monitoring and Evaluation is re-named Part E: Project Management, Monitoring and Evaluation and all references to Part F in the original text of the Grant Agreement are changed to Part E. 2. Schedule 2, Project Execution, of the Grant Agreement. Sub-sections (viii) and (ix) of paragraph 1(a) of Section I.B of Schedule 2 to the Grant Agreement, which describes the portion of the Project Manual related to the deleted, former Part C of the Project, are deleted. 3. Paragraph 2 of Section I.B of Schedule 2 to the Grant Agreement is amended by deleting sub-paragraph (a) and by making sub-paragraph (b) the entirety of paragraph 2 as follows: 2. The Recipient shall exercise its rights under the Memorandum of Understanding in such manner as to protect the interests of the Recipient, the Provinces and the World Bank, and to accomplish the purposes of Grant, and, except as the Provinces and the World Bank shall otherwise agree, the Recipient shall not assign, amend, abrogate or waive the Memorandum of Understanding or any provision thereof. 4. Paragraph 3 of Section I.B of Schedule 2 to the Grant Agreement is amended by replacing the words Parts D and E where they appear twice with the words Parts C and D. 5. Paragraph 4 of Section I.B of Schedule 2 to the Grant Agreement is amended by deleting the word and at the end of sub-paragraph (a); replacing the period at the end of sub-paragraph (b) with ; and ; and adding a new sub-paragraph (c) as follows: (c) by no later than March 31, 2011 to develop and provide to the Bank a copy of the Recipient s exit strategy to ensure sustainability of the Project benefits beyond the Closing Date.

4 4 of 6 May 12, Section I. C (Additional Terms and Conditions Governing Credits) of Schedule 2 to the Grant Agreement is deleted and the subsequent section previously Section I.D is re-named Section I.C Safeguards. 7. Section V of Schedule 2 to the Grant Agreement is amended by deleting the first paragraph that is numbered as paragraph 3 in the original text of the Grant Agreement which refers to the Additional Credit Account. In the second paragraph numbered as paragraph 3, sub-paragraph (d) which refers to the Additional Credit Account is deleted. 8. Part IV of Schedule 2 to the Grant Agreement is amended by replacing the table in Section IV.A with the following table: Category Amount of the Grant Allocated (in USD) % of Expenditures to be Financed (1) Credit 0 (2) Goods 750, % (3) Consultants services 1,316, % (4) Training & Workshops 1,367, % (5) Operating Costs 100% a) Staff Costs 518,933 b) Other 317,247 (6) Overheads 213, % TOTAL 4,484, Extension of Closing Date. With respect to the Closing Date in paragraph 2 of Section IV.B of Schedule 2 to the Grant Agreement, the Bank has established June 30, 2011 as the later date for the purposes of Section 3.06(c) of the Standard Conditions. 10. Appendix to the Grant Agreement. The following definitions are deleted from the Appendix and subsequent paragraphs re-lettered in alphabetical order: (a) definition 1 of Additional Credit is deleted; (b) definition 2 of Additional Credit Account is deleted; (c) definition 6 of Credit is deleted; (e) definition 7 of Credit Agreement is deleted; (f) definition 9 of Financial Intermediary or FI is deleted; (g) definition 12 of MOU is deleted; (h) definition 14 of PNM is deleted; (h) definition 18 of Selected FI is deleted; and (i) definition 21 of Subproject is deleted. 11. Supplemental Letter (Performance Indicators). The Supplemental Letter, dated September 29, 2008, from the Recipient to the Bank setting out the performance indicators for the purposes of paragraph 1 of Section II.A of the Annex to the Grant Agreement is amended as follows:

5 5 of 6 May 12, 2010 PDO Project Outcome Indicators Use of Project Outcome Information Contribute to the GOI s Number of MSEs having Adjust project assistance/ initiatives to support the recovery MSEs in Yogyakarta reached their pre-earthquake operating capacity, sales, and activities as needed during project implementation and Central Java and enable them to reach at least their preearthquake capacity. profit. Intermediate Outcomes Intermediate Outcome Use of Intermediate Component I - Assessment for identification of intervention/targeting beneficiaries Component II - Asset replacement At least 3000 home industries, MSEs and small businesses across a variety of industry sectors have received physical assets/materials that are essential for operations. Component III - Access to Finance Indicators Number of assessments conducted; Number of selected MSEs registered in the project database; Percentage of women beneficiaries. Number of MSEs having received and using assets in production; Number of production/public facilities restored. Deleted Outcome Monitoring The database will be used to select, monitor, and track performance and income levels of beneficiaries by sector, gender and type of assistance provided. Monitor implementation progress via interviews to determine if the assistance if effective and introduce necessary adjustment after the mid-term review Deleted Cancelled Component IV - Assistance for Market Access Up to 3000 home industries and MSEs have recovered former buyers or attracted new ones. Component V - Capacity Building & Technical Assistance At least 3300 home industries, micro-enterprises and small business have improved business management skills At least 40 workshops/forums conducted for government capacity building at various levels. Number of MSEs that have improved access to markets; Number of MSEs participating in fairs and expos. Number of MSEs participating in TA Number of MSEs with financial records which previously had none. Number of MSEs with business plans which previously had none. Number of workshops/forums conducted for government capacity building. Monitor implementation progress via interviews to determine if the assistance if effective and introduce necessary adjustment after the mid-term review. Monitor implementing progress through training quiz and interviews to determine whether the TA is effective and the approaches are realistic.

6 of 6 May 12,

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