Public Disclosure Authorized

Report No.

PID9850

Project Name

Indonesia-Second Kekamatan Development Program

Region

East Asia and Pacific Region

Sector

Other Social Protection

Project ID

IDPE73025

Borrower(s)

GOVERNMENT OF INDONESIA

Public Disclosure Authorized

Public Disclosure Authorized

Public Disclosure Authorized

Implementing Agency Address DEPARTMENT OF HOME AFFAIRS Jl. Pasar Minggu Raya, Pasar Minggu, Jakarta, Indonesia Contact Person: Ayip Muflich Tel: 62 21 7919 1684 Fax: 62 21 7919 6118 Email: [email protected] Environment Category

B

Date PID Prepared

May 21,

Projected Appraisal Date

May 1, 2001

Projected Board Date

September 18,

2001

2001

1. Country and Sector Background At present, Indonesia is engaged in a difficult transition. Indonesia's political and economic crisis highlighted several key features about development that had been masked by the New Order growth years. These included: (a) despite high rates of poverty reduction, vulnerability remained high and many poor were not sharing adequately in economic growth; (b) delivery of development services to villages was expensive, of poor quality, and excessively centralized; (c) gaps between local governments and villagers were large.The new government's recovery agenda focuses on democratization, a large scale decentralization program, and a 10 point economic reform program designed to promote growth and reduce poverty. The Bank's recently completed CAS supports this program.Sectoral studies by GOI, the World Bank and others have highlighted the need to reform local governance and improve village -level public service delivery. Key to this effort is an ambitious program of community-driven development and a shift from centrally planned public services to demand-responsive designs. The first Kecamatan Development Project (Ln. 4330-IND) was a $225 million project consisting of providing unearmarked block grants for poor kecamatans (subdistricts) to support a bottom-up, participatory planning process. Results showed that community managed projects could produce high quality, low-cost infrastructure provided that information was complete and accessible, that communities retained control over planning decisions, and that a strong facilitation process was set in place to promote direct negotiation of conflicting interests. KDP-1 reached over 15,000 poor villages in Indonesia. 2. Objectives Objectives of the proposed project are to (i) support participatory planning and development management in villages; (ii) to support a broad based construction program of economic infrastructure in poor villages;

and (iii) to strengthen local formal and informal institutions by making them more inclusive, accountable, and effective at meeting villagers self-identified development needs. 3. Rationale for Bank's Involvement The project fits closely with core CAS objectives of supporting more participation in development, better poverty alleviation programs, and more effective governance. KDP-1 gave a strong start to community-driven development for rural Indonesia by introducing new ways to work with local institutions. KDP was large enough to show that participatory principles can work on a large scale in Indonesia, and that results from community owned projects can meet all Bank and Government standards for quality, accountability, and financial management. KDP also introduced innovative ways to involve civil society.Nevertheless, from the beginning KDP was meant as the first stop on a longer-term program to reform local governance and improve development effectiveness. Bank involvement contributed the following elements that would not have been otherwise available: (a) comparative experience with community programs; (b) expertise to allow direct procurement of goods, technical assistance by villages; (c) procedures, guidelines, and training for sound financial management by villages; (d) direct payment mechanisms for independent NGOs and journalists to monitor project performance; (e) intensive field supervision.Maintaining Bank support for the new project will consolidate these gains, particularly as Indonesia is still working through what the new rules will be under the decentralized regime. Bank support will also provide a basis for using worldwide knowledge about successful community-driven development to address many of the technical problems that are sure to come up as communities take on more and more responsibility. 4. Description The main work of the project will be to assist villages select activities to be funded from a sum of money available to all villages within a subdistrict (kecamatan). A forum of all villages in the kecamatan will select from among proposals made by community organizations. There is no decision-making above the kecamatan. The large majority of the funds are used to build public infrastructure of any kind. Project preparation will assess:the feasibility of expanding this menu to include community-supported education (i.e. books, scholarships, teachers) and health programs where they decide this is their top priority;private sector linkages with the project for telecommunications and technical services; andA portion of the funds will be earmarked for other activities such as training and capacity development proposed by the communities and local project monitoring groups. Besides the grant, the project provides technical support to villages and various capacity building exercises so that they can take on increasing responsibilities for village planning. The project will provide each kecamatan with a technical consultant skilled in appropriate engineering, and an empowerment consultant to support community facilitation. The project will include a significant training activity to promote the development of these skills. Additional possible components that will be assessed during preparation include:a contract with private banks to provide village-level banking services; anddistrict level procurement reforms that facilitate village and kecamatan purchase of technical services for projects too complex to be handled by village management.Project monitoring will combine quantitative

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and qualitative techniques. On the quantitative side, statistical surveys will evaluate the quality of the participatory process. Representative sample surveys will also assess the economic impact of the project on the poor. On the qualitative side, the project will expand civil society involvement substantially. It will continue the NGO provincial based monitoring developed under KDP, and also the emphasis on monitoring by newspaper journalists. The proposed project will introduce joint implementation monitoring by a village-district parliament councils (now being piloted under KDP), and horizontal learning by cross-village visits. All monitoring reports are disseminated and discussed publically. 5. Financing Total ( US$m) Total Project Cost Financing for the project are expected to be from IDA (659) and GOI (35%) resources. Total ( US$300m) Total project costs and financial composition of the three year project are estimated to come to $300 million. This number has the potential to change significantly during project preparation. 6. Implementation Project Implementation will be through the Ministry of Home Affairs, Department of Community Development (PMD). At each administrative level of the project, PMD will form a coordination committee whose functions are to work with local governments in order to provide information to villagers about other planned development programs, to provide technical support as requested and/or required by project technical criteria, and to solve administrative bottlenecks and problems. Within the subdistrict and villages, communities will carry out planning through locally elected administrative councils. Government will be supported by consultants drawn from private sector and NGO backgrounds. The consultants will provide technical and facilitation services to the participating communities. Funding flows will continue to use the KDP procedures of direct, unearmarked standard grants to collective bank accounts held by villagers. The advantage of this system is that it is, easy to document and free from leakage. The project will carry out independent financial, technical, and social audits. The project operates on Indonesia's annual January-December fiscal year. 7. Sustainability It should be kept in mind that the project supports Indonesia's large decentralization program and is thus part of a transitional strategy that will change as responsibilities and opportunities become clearer. The project's sustainability is expected to come from three sources. Fiscal sustainability derives from the increasing share of the project budget that is assumed by local government. Furthermore, under the new decentralization laws, communities have much more ability to retain taxes and fees than before. Technical sustainability is expected to come from communities greater sense of ownership and the O&M plans required for each subproject proposal. Social sustainability derives from the restoration of community ownership over community institutions and development decision-making. Over the longer term, sustainability of the project will come from incorporation of the project's principles into community development, and the disappearance of individual project interventions. - 3 -

8. Lessons learned from past operations in the country/sector The Indonesia program, like Indonesia itself, as a whole is moving away from large-scale, top-down development programs. The three key features of the new approach are (a) a renewed focus on project quality rather than just quantity; (b) a wholesale shift into demand-responsive project design; and (c) using and developing local capacities wherever possible. Particularly relevant lessons learned from past operations in the sector include:the gap between community and government institutions seriously inhibits the ability of many development projects to provide villagers with quality services that respond to local needs;community access to relevant information about development programs is a major barrier and lies at the root of many quality and corruption problems;community projects require skilled facilitation in both their social and their technical dimensions. Such skills are scarce;most communities can meet WB objectives in procurement, financial management, and project quality provided that project formats and procedures are designed appropriately;rebuilding government linkages must be done with great care and begin from a clear vision of where accountabilities lie. 9. Program of Targeted Intervention

(PTI)

10.

N

Environment Aspects (including any public consultation) Issues Environmental issues refer primarily to impacts caused by small scale infrastructure construction. The project will use an environmental screening procedure that sifts out forbidden projects (i.e. community roads into protected areas). Mitigable impacts will be addressed through standard operating procedures that are built into project manuals and training programs. This approach has been used for both the Village Infrastructure and first Kecamatan Development Project. Project preparation will include an assessment of how effective these measures have been in actual practice. The three main social safeguard issues are resettlement, indigenous people, and gender. No significant resettlement is anticipated (none has been experienced in the VIP and KDP projects). Village subprojects that would involve displacing or seriously affecting more than five families require a full resettlement plan, a criteria that has been strikingly successful in encouraging a more vigorous than usual search for alternative designs that avoid any displacement. Projects that affect less than 5 families will require payment of cash compensation or the provision of alternative productive land as part of the subproject approval. Affected families will also have to agree with the proposed compensation arrangements, as discussed and recorded in open village meetings. Indigenous people's concerns are met primarily through the design of the project itself since the whole point of demand-driven investment funds like KDP is to allow local decision making over how development resources get used. KDP-1 experience showed that there are four particularly important concerns in how KDP approaches indigenous communities: (i) developing dissemination materials collaboratively with local communities (issues of language, graphics, etc); (ii) identifying appropriate, inclusive decision-making mechanisms in environments where indigenous groups are politically and culturally marginalized; (iii) finding a balance so that groups (i.e. women) excluded from traditional institutions can also join project processes; and (iv) marginalized indigenous groups are especially vulnerable to problems of elite domination and corruption. KDP-1 included several adaptations to address such concerns (i.e. using NGOs with established field presences to manage - 4 -

the program, recruitment and training of facilitators from these communities, special logistical support, police investigations of leakage, etc.). The proposed project will work closely with local groups to make sure that the new project builds on the best of these experiences. KDP-1 included a number of measures to promote gender equity: affirmative action recruitment programs for field staff, equal numbers of male and female village facilitators (a total of some 13,000 village women were hired and trained to be facilitators). All project field staff receive a module of gender training and Year 3 of the project incorporates a variety of new methods to increase women's participation. Results have been positive for participating women in two ways: much greater involvement of women in village and kecamatan planning and decision meetings, and a number of subproject selections that directly benefited women, especially poor women. There is also a much greater acceptance of gender concerns among the government staff and consultants than there was in the beginning of the project, and several local groups have developed gender sensitive programs of their own. Nevertheless, there is plenty of room for improvement. Women's participation in the apex decision meetings drops significantly, and as a result proposals from women's groups often receive lower priority. Limiting the number of proposals to two per village which get decided in village-wide meetings as was done in KDP, acted against women's groups, which usually have a smaller membership than men's groups do. Women faced communication problems: poor women are more likely to lack fluency in Bahasa Indonesia than poor men are, and the project did not have a good overall strategy for producing socialization materials in local languages. Women facilitators and engineers also faced on-the-job pressures that their male counterparts didn't, and the project did not produce a good support program for an already difficult working environment. The new project builds on the lessons from KDP by focusing on three particular areas: identifying formats and media that reach poor rural women; developing a separate planning channel for women's proposals rather than pooling them in the final decision meeting; and improving the open menu and project selection principles so that women's proposals do not get screened out by project design rules. Consultation and openness have been a key part of KDP, and KDP II will extend this. The main lines of the consultation strategy for KDP II are as follows:a series of six regional workshops for civil society groups and local government that will be managed by independent NGOs selected in consultation with the provincial NGO for a;a consultation program for provincial and district parliaments;an information package that includes the project's transparency/disclosure policy, basic project documents, a collation of independent monitoring and reporting studies, the proposed budget, and an online database that has all core KDP documents;on-site workshops to discuss evaluations and recommendations made by communities at the end of their Year 2 cycle under KDP-1 (approx. 10t of the kecamatans).;a national workshop for civil society organizations to exchange views and experiences. Consultation will be particularly important in those parts of Indonesia suffering from conflict. In these areas, project preparation will focus on negotiating neutral "spaces" for the program, and on procedures for adapting KDP II to volatile environments. 11.

Contact Point: Task Manager Scott E. Guggenheim -5-

The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: 62-21-529-9300 Fax: 62-21-529-93111 12.

For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web:

http:// www.worldbank.org/infoshop

Note: This is information on an evolving project. not be necessarily included in the final project.

Certain components may

This PID was processed by the InfoShop during the week ending,

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January 12,

2001.