Region

East Asia and Pacific Region

Sector

Other Social Protection

Project ID

IDPE72355

Borrower(s)

GOVERNMENT OF INDONESIA

Public Disclosure Authorized

Indonesia-Kecamatan Development Program Project Supplemental

Implementing Agency

Environment Category

B

Date PID Prepared

October 24,

Projected Appraisal Date

November 8, 2000

Projected Board Date

December 5, 2000

Public Disclosure Authorized

PID9667

Project Name

Public Disclosure Authorized

Public Disclosure Authorized

Report No.

Address DEPARTMENT OF HOME AFFAIRS Department of Community Development Jalan Pasar Minggu Ray 19 Pasar Minggu, Jakarta Delatan Indonesia Phone 62-21-791-96118 Ayip Muflich PMD Jl. Pasar Minggu Raya Km. 19 Pasar Minggu, Jakarta Selatan Phone 62-21-79196118

(PMD)

2000

1. Country and Sector Background The main country and sector issues for community development in Indonesia have been described in the interim Country Assistance Strategy, the draft CAS now being prepared and discussed with Indonesian civil society in August, 2000, and the sector work summarized through a series of working papers from the Local Institutions studies. Relevant non-Bank reviews and issues papers include reports by KIKIS and Jari-JPS, and the Social Monitoring and Early Response Unit (SMERU) working papers. Issues pointed out by these reviews and studies include: (i) community capacities for planning and managing development in Indonesia, though varied, are significant; (ii) traditional development approaches have often bypassed, marginalized, and undermined local institutions; (iii) benefits from community-based approaches are higher user satisfaction, better maintenance, and significantly lower construction costs; (iv) community-managed development requires a special emphasis on transparency and inclusion; (v) successful project approaches depend on trained technical and social facilitators who can provide information, work with local groups, and make linkages to non-community based organizations. 2. Objectives Objectives of the original Kecamatan Development Project are to support community planning, to produce low-tech rural infrastructure, and to provide bridging micro-finance while Indonesia's micro-finance policies improve. The proposed KDP-Supplemental maintains the same objectives. Its purpose is to provide supplemental finance to allow the completion of the

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KDP project. 3. Rationale for Bank's Involvement The project is central to CAS themes of community participation and poverty alleviation. KDP is the vanguard operation for demand-responsive projects in rural Indonesia. Bank value added includes dialogue over civil society involvement in KDP monitoring and implementaiton, support for community-managed procurement, audit, and disbursement through the transfer of world best practice examples, and on-site supervision during Indionesia's ongoing decentralization. 4. Description This project supplements the existing Kecamatan Development Project (Ln. 4330-IND). A very rapid scale-up precipiated by the Indonesian crisis and also severe drought raised first year participants from 250 subdistricts to 501. Because of the crisis, Bank participation in the proejct rose from 70% to 90%. As a result of this increase over appraisal estmates, Year 3 is experiencing a shortfall. The entire Supplementary Credit is to cover this shortfall. KDP rests on three legs. The first leg consists of a very fast financial transfer system that delivers unearmarked block grants to poor rural subdistricts. The grants are used to support a 4-5 month bottom-up planning process which begins with sub-village community organizations and culminates in an allocation meeting held in the subdistrict center. Proposals can be submitted by any group, but only two proposals can be submitted by any one village and, furthermore, if there are two proposals, the second one must come from a women's group. There is no higher-level review of project proposals, and grants cannot be earmarked or "assigned" to activities other than those endorsed by the subdistrict council. The second leg of KDP is made up by facilitators and engineers drawn from NGO and private sector sources. Their job is to encourage broad-based participation in planning meetings, to pre-qualify the technical support that will be hired by villagers, to monitor and supervise implementation, and to facilitate the provision and dissemination of information. Subdistrict facilitators are complemented in the field by a man and a woman village facilitator who are elected by the village and trained by the project to provide a meeting point between the project and the people. Finally, a third leg for KDP comes from a variety of mechanisms intended to promote transparency and to support social controls. Each province participating in KDP has an independent NGO monitor. The project also receives independent monitoring through a national contract with Indonesia's Association of Independent Journalists; more than 300 articles on the project have been published in regional and national newspapers. Aside from some information about bidding, all KDP information is public and increasingly detailed information is published in provinces and on village signboards. Beginning in Year 3, the project will provide briefings to district parliaments at the outset of field activities, and a wrap-up accountability presentation when activities are completed. 5. Financing Total ( US$m) Total Project Cost $55 million 6. Implementation Implementation will be through the Department of Community Development,

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Ministry of Home Affairs. The project involves a total of 32 national-level TA contracts. Technical assistance for the project includes a national engineering and project management team; provincial and district technical coordination; and subdistrict and village facilitators. Monitoring and evaluation for the project derives from a quantitative survey managed though the University of Indonesia, provincial-based monitoring by NGOs in each participating province, and an independent contract with LP3ES/ the Indonesian association of independent editors (AJI). 7. Sustainability Project sustainability is expected to take the direct form of a follow-on project that gradually transfers funding to the national and local budgets, and the indirect forms of strengthened community and subdistrict organizations that increasingly manage development decisions. The approach is congruent with the current Indonesian policy of decentralizaiton. The main risks to project sustainability are contract management issues. Indonesia's still unclear program for managing decentralization is the primary risk to overall sustainability of the community empowerment objectives. 8. Lessons learned from past operations in the country/sector Lessons learned from past operations primarily highlight the need for transparency and trained facilitators, preferably drawn form project areas. Care is also needed in structuring linkages to the formal administration since much ofthe project involves a re-allocation of development budgets from line agencies to community govenrments. As with all community projects, inclusion and community ownership of investments are paramount considerations for long-term sustainability. 9. Program of Targeted Intervention

(PTI)

10.

Y

Environment Aspects (including any public consultation) Issues The project is rated as a "B". For social safeguard concerns, the individual subprojects funded through the grants are small and do not produce significant impacts. Project screening requires that any subproject proposed by villages which involves land acquisition and/or population displacement include a compensation plan that meets Bank standards before the project engineers can provide technical certification. The vast majority of villages choose design alterations that eliminate all resettlement. The project does cover areas covered by Bank policies on indigenous/isolated people. Although in general demand-driven projects such as KDP are inherently suited to the Bank' policy goals of promoting culturally informed choice, the project also includes special arrangements (use of church-based NGOs, extra supervision by safeguard specialists) in areas where cultural concerns are likely to affect local understanding and performance. Environmental management concerns are addressed through the project manual, which includes an environmental screening and mitigation procedure, and through the project's negative list, which prohibits pesticides, large boats, chainsaws, and other known sources of environmental damage. Political risk is an important consideration for projects in Indonesia these days. KDP is active in all of the politically sensitive provinces. Risks will be addressed through close field monitoring High-level consultation with regional stakeholders minimizes risk. In Aceh, for example, KDP

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activities were delayed by a month while the Joint Commission of the Humanitarian Pause prepared a letter giving the project official authorization to proceed as part of the "protected" humanitarian agreements. KDP activities have been suspended in Central Maluku. Corruption risks are medium. The project pursues a strategy of risk minimizaton by combining formal accounting controls and public scrutiny. Eighty-nine percent of the project's funds are direct block grant tranfers between branches of banks. These are monitored extremely closely through two independent reporting channels, and no cases of leakeage have been reported by any of the monitors or participating communities. Leakage and funds misuse have been reported once the money reaches villages. There are also cases of communities not following project procurement and contracting rules. BPKP estimates that 5t of the projects fall into this category. The project maintains a publicly available "problems" database and follow-up registry. Twelve subdistricts and one district with significant implementation problems in Year 1 have been reviewed by Bank missions to review the status of corrective actions and/or prosecutions. Evidence that the KDP approach improves ground level impacts from development projects is given by the nearly 30t efficiency gain over standard projects implementing similar activities. However, there is no illusion that the leakage problem is close to being solved. Year 3 will include on-site discussions with civil society groups involved in corruption reform as well as intense field supervision by project management and the Bank. Public input into KDP in Indonesia is fairly extensive and ongoing. It includes public dissemination of all project sites, amounts, problems, and complaints, as well as bimonthly programs in each province to get local input. Province-level NGOs monitoring the project are encouraged to hold public discussion of their findings. Because the proposed Supplementary Credit will just fill in an existing project rather than introduce new activities, no special public consultations are planned prior to negotiations. However, the current project includes a broad-based series of public consultations at the end of this year's construction cycle to evaluate performance and introduce improvements for the next round. The project will also be supporting training and review workshops that will be hosted by regional NGOs and journalists on opportunities for improving independent, critical monitoring. 11.

Contact Point: Task Manager Scott E. Guggenheim The World Bank 1818 H Street, NW Washington D.C. 20433

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

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

Certain components may

This PID processed by the InfoShop during the week ending November 10,

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2000.