Completion Report

Project Number: 27289 Loan Number: 1572 January 2007

Indonesia: Capacity Building in Urban Infrastructure Management Project

CURRENCY EQUIVALENTS

Currency Unit – rupiah (Rp)

At Appraisal At Project Completion (as of 31 July 1997) (as of 31 December 2003)

Rp1.00 = $0.000335 $0.000117 $1.00 = Rp2,983 Rp8,505

ABBREVIATIONS

ADB – Asian Development Bank BAPPENAS – Badan Perencanaan Pembangunan Nasional

(National Development Planning Agency) CBUIM – capacity building in urban infrastructure management CMS – career mapping system CPCO – central project coordination office CPO – central project officer CPPE – Center of Public Works Professional Education, MPW CSC – central steering committee DGPARA/PUOD – Public Administration and Regional Autonomy, MOHA DGRD/BANGDA – Directorate General of Regional Development, MOHA DGURD – Directorate General of Urban and Rural Development, MPW EA – executing agency FY – fiscal year ICB – international competitive bidding IUIDP – Integrated Urban Infrastructure Development Program LA – loan agreement LCB – local competitive bidding MAR – Ministry of Administrative Reform MOF – Ministry of Finance MOHA – Ministry of Home Affairs MPW – Ministry of Public Works MSRI – Ministry of Settlement and Regional Infrastructure MTDP – Medium Term Development Plan NUDS – National Urban Development Strategy PBME – project benefit monitoring and evaluation PCR – project completion report PDAM – Perusahaan Daerah Air Minum

(local government water supply enterprise) PIU – project implementation unit PPMS – project performance monitoring system TA – technical assistance TOR – terms of reference UIMT – urban infrastructure management training

GLOSSARY

Pusdiklat – National Training Center, MPW Bandiklat – Training Center, MOHA daerah – district

NOTES

(i) Before 2000, the fiscal year (FY) of the Government and its agencies ended on 31 March. Since 2000, the fiscal year has ended on 31 December.

(ii) In this report, "$" refers to US dollars.

Vice President C. Lawrence Greenwood Jr., Operations Group 2 Director General A. Thapan, Southeast Asia Department (SERD) Director S. Lateef, Social Sectors Division, SERD Team leader P. van Klaveren, Water Supply and Sanitation Specialist, SERD Team member M. Lindfield, Principal Special Initiative Specialist, Regional and

Sustainable Development Department

CONTENTS

Page

BASIC DATA i

MAP vi

I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1

A. Relevance of Design and Formulation 1 B. Project Outputs 3 C. Project Costs 5 D. Disbursements 5 E. Project Schedule 6 F. Implementation Arrangements 7 G. Conditions and Covenants 7 H. Related Technical Assistance 8 I. Consultant Recruitment and Procurement 8 J. Performance of Consultants, Contractors, and Suppliers 9 K. Performance of the Borrower and the Executing Agency 9 L. Performance of the Asian Development Bank 10

III. EVALUATION OF PERFORMANCE 11 A. Relevance 11 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 12 D. Preliminary Assessment of Sustainability 12 E. Impact 13

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons 13 C. Recommendations 14

APPENDIXES 1. Project Framework 16 2. Status of Consulting Services 25 3. Cost Breakdown by Project Component 30 4. Breakdown of Yearly Disbursements of Funds, 1997–2003 31 5. Project Implementation Schedule, 1997–2003 32 6. Status of Compliance with Loan Covenants 34 7. Quantitative Assessment of Overall Project Performance 44 SUPPLEMENTARY APPENDIXES A. Profiles of the Pilot Cities B. Performance Evaluation by Project Component

BASIC DATA A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency

6. Amount of Loan 7. Project Completion Report Number

Indonesia 1572 Capacity Building in Urban Infrastructure Management Project Republic of Indonesia 4 March 1998–7 April 2000: Secretariat General,

Ministry of Public Works 8 April 2000–4 January 2001: Directorate

General of Urban Development, Ministry of Settlement and Regional Development

5 January 2001: Project completion: Directorate General of Urban and Rural Development, Ministry of Settlement and Regional Infrastructure

$42 million (original) $35 million (revised on 16 July 1998) $25.587 (at completion) 948

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan –Interest Rate – Maturity (number of years) – Grace Period (number of years)

16 June 1997 4 July 1997 1 October 1997 3 October 1997 4 November 1997 5 December 1997 4 March 1998 4 March 1998 0 31 October 2002 31 December 2003 1 Floating (LIBOR-based, spread of 0.6%) 25 4

iii

8. Disbursements a. Dates Initial Disbursement

1 May 1998

Final Disbursement

2 September 2004

Time Interval

66 months

Effective Date

4 March 1998

Original Closing Date

31 October 2002

Time Interval

56 months

b. Amount ($ million) Category or Subloan

Original

Allocation

Revised Allocation (Oct. 2000)

Amount

Canceled

Net Amount

Available

Amount

Disbursed

Undisbursed

Balance 01. Civil Works 0.92 0.40 0.52 0.40 0.14 0.26 02. Equipment

and Vehicles 2.36 1.87 0.49 1.87 1.06 0.81

03. Education and Training - Overseas - Domestic

18.06 3.79

13.36 2.10

4.70 1.69

13.36 2.10

9.18 2.75

4.18 (0.65)

04. Consulting Services

- Foreign - Local

2.43 4.91

5.56 4.89

(3.13) 0.02

5.56 4.89

5.69 2.54

(0.13) 2.35

05. Administrative and Advisory Support

2.12 0.64 1.48 0.64 0.55 0.09

Subtotal 34.60 28.82 5.78 28.82 21.91 6.91 06. Interest during

Construction 5.54 4.63 0.91 4.63 3.68

0.95

07. Unallocated 1.86 1.55 0.31 1.55 0 1.55 Total 42.00 35.00 7.00 35.00 25.59 9.41

9. Local Costs (Financed) Appraisal Actual - Amount ($ million) 14.0 9.7 - Percent of Local Costs 33.3 34.0 - Percent of Total Cost 20.0 22.0 C. Project Data

1. Project Cost ($ million) Cost Appraisal Estimate Actual

Foreign Exchange Cost 28.00 15.93 Local Currency Cost 42.00 28.29 Total 70.00 44.22

iv

2. Financing Plan ($ million) Cost Appraisal Estimate Actual Foreign Local Total Foreign Local Total A. Implementation Costs ADB 23.37 14.00 37.37 12.25 9.66 21.91 Central Government 0.00 19.90 19.90 0.00 18.63 18.63 Provincial Government 0.00 3.10 3.10 0.00 0.00 0.00 Local Government 0.00 5.00 5.00 0.00 0.00 0.00 Subtotal (A) 23.37 42.00 65.37 12.25 28.29 40.54 B. Interest during Construction ADB Financed 5.54 0.00 5.54 3.68 0.00 3.68 Subtotal (B) 5.54 0.00 5.54 3.68 0.00 3.68 Total 28.00 42.00 70.00 15.93 28.29 44.22 ADB = Asian Development Bank.

3. Cost Breakdown by Project Component ($ million)

Component Appraisal Estimate Actual

Foreign Local Total Foreign Local Total

a. Human Resources Development 18.06 18.90 36.96 10.09 15.30 25.39 b. Institutional Development 1.67 12.29 13.96 1.43 7.99 9.42 c. Policy Development 0.54 1.94 2.48 0.28 1.21 1.49 d. Implementation Support 0.89 4.52 5.41 0.45 3.38 3.83 e. Contingencies 1.30 4.35 5.65 0.00 0.42 0.42 f. Interest and Other Charges during Construction 5.54 0.00 5.54 3.68 0.00 3.68 Total 28.00 42.00 70.00 15.93 28.29 44.22

4. Project Schedule

Item Appraisal Estimate Actual Start End Start End A. Establishment of Implementation Unit 1. Central Project Coordination Office and

Central Project Officer Oct 1997 Jun 1998 Jan 1998 Sep 1998

2. Central Project Implementation Units (PIUs) Jan 1998 Oct 1998 Jan 1998 Oct 1998 3. Provincial and Local PIUs Jan 1998 Oct 1998 Jun 2000 Dec 2000 B. Human Resources Development

1. Human Resource Strategy and Career Mapping

Jul 1997 Mar 2002 Jul 1997 Sep 2003

2. Training Needs Identification and Material Development

Jan 1998 Dec 1998 Dec 1999 Nov 2000

3. On-the-Job Training Jul 1999 Mar 2002 Sep 2000 Nov 2003 4. Training of Trainers Jan 1998 Jun 2000 Oct 2000 Dec 2002 5. Seminars Jul 1998 Mar 2002 Jan 1999 Nov 2002 6. Short Courses Apr 1998 Mar 2002 Jan 1999 Nov 2002 7. International Training Oct 1997 Apr 2002 Aug 2001 Aug 2002 8. Undergraduate Diplomas and Degrees Oct 1997 Dec 2000 Oct 1998 Dec 2003 9. Master's Degrees Oct 1997 Mar 2002 Sep 1998 Mar 2003 10. PhD Degrees Oct 1997 Mar 2002 Sep 1998 Dec 2003

C. Institutional Development 1. Management System and Program Development

Jul 1998 Jun 2000 Dec 2000 Nov 2003

2. Pilot Test Apr 1998 Mar 2002 Jan 2001 Oct 2003

v

3. Institutional Development Assistance Oct 1997 Mar 2002 Jan 2002 Feb 2003 D. Policy Development

1. Information System Development Apr 1999 Apr 2002 Dec 2000 Nov 2003 2. National Urban Development Strategy Apr 1999 Apr 2002 Jan 2000 Nov 2003 3. Spatial Planning Methods Apr 1999 Apr 2002 Dec 2000 Nov 2003 4. Local Government Financial Management Apr 1999 Apr 2002 Dec 2000 Nov 2003

E. Implementation Support 1. Best Practices Documentation Apr 1997 Mar 2002 Jul 2003 Nov 2003 2. Performance Monitoring and Evaluation Apr 1998 Dec 2000 Jan 2002 Nov 2003 3. Implementation Support Jul 1998 Mar 2002 Dec 1999 Nov 2003

5. Project Performance Report Ratings

Ratings Implementation Period

Development Objectives

Implementation Progress

From 4 March 1998 to 2 September 1998 Satisfactory Satisfactory From 2 September 1998 to 17 October 2000 Satisfactory Satisfactory From 17 October 2000 to 6 March 2001 Partly Satisfactory Partly Satisfactory From 6 March 2001 to 27 November 2001 Satisfactory Partly Satisfactory From 27 November 2001 to 1 August 2002 Satisfactory Satisfactory From 1 August 2002 to 20 November 2003 Satisfactory Satisfactory

D. Data on Asian Development Bank Missions

Name of Missiona

Date

No. of Persons

No. of Person-Days

Specialization of Membersb

Fact-Finding 31 Mar–17 Apr 1997 6 114 d, f, h Appraisal 16 Jun–4 Jul 1997 6 114 d, f, h Special Project Administration 6 July–10 Jul 1998 2 5 d, f Inception 18 Nov–24 Nov 1998 2 14 d, f Review 23 Aug–27 Aug 1999 2 10 b, f Midterm Review 27 Sep–6 Oct 2000 3 30 a, b, f Review 6 Mar–16 Mar 2001 1 11 a Review 5 Nov–12 Nov 2001 1 8 a Review 5 Aug–13 Aug 2002 1 9 a Final Review 3 Nov–7 Nov 2003 2 10 d, f Project Completion Reviewb 18 Nov–18 Dec 2005 2 10 g, e

a a – senior urban development specialist, b – urban economist, d – project economist, e – national consultant, f – assistant project analyst, g – national officer, h – local consultant.

b The project completion report was prepared by a national officer (Indonesia Resident Mission) and a local staff consultant.

4

4

1

1

7

7

5

5

2

2

3

3

6

6

9

9

8

8

11

11

10

10

J a v a S e a

B a n d a S e a

A r a f u r u S e aI N D I A N O C E A N

S o u t h C h i n a S e a

P A C I F I C O C E A N

S u l a w e s i S e a

S U M A T R AK A L I M A N T A N

S U L A W E S I

H A L M A H E R A

I R I A N

J A V A

S E R A M

ARU

SULA

BURU

WAIGEO

YAPEN

BIAK

LOMBOK

SUMBAWA

SUMBA

BALIFLORES

TIMOR

WETAR

ALOR TANIMBAR

BACANBANGGAI

MOROTAI

OBIMATOR

BATAONE

LAUT

BUTONMUNA

BELITUNG

BANGKA

LINGGA

NIAS

SIBERUT

PAGAI

BATU

SIMEULUE

WEH

NATUNA

MADURA

DOLAK

Palembang

Jambi

Tanjung Pinang

Pangkal Pinang

Bandar Lampung

SerangJakarta

Bengkulu

Padang

Pekanbaru

Medan

Banda Aceh

Pontianak

Palangkaraya

Banjarmasin

Samarinda

Kendari

Makassar

Palu

Mamuju

Ambon

Ternate

Manokwari

Jayapura

Gorontalo

Manado

SemarangTegal

Surabaya

MalangYogyakarta Mataram

Denpasar

Kupang

Bandung

Bekasi

North Sumatra

Lampung

West Java

Central Java

D.I. Yogyakarta

East Java

Planned Project Provinces

West Nusa Tenggara

Central Kalimantan

South Kalimantan

North Sulawesi

South Sulawesi

BANGKA-BELITUNG

NANGGROE ACEHDARUSSALAM

NORTHSUMATRA

RIAU

RIAU ISLANDS

WEST SUMATRAJAMBI

BENGKULU

SOUTH SUMATRA

LAMPUNG

WEST JAVA

BANTEN

CENTRALJAVA

BALI

WEST NUSATENGGARA

EAST NUSATENGGARA

SOUTHSULAWESI

WESTSULAWESI

SOUTHEASTSULAWESI

CENTRALSULAWESI

SOUTHKALIMANTAN

CENTRALKALIMANTAN

WESTKALIMANTAN

EAST KALIMANTAN

EAST JAVAYOGYAKARTA

GORONTALO

NORTH SULAWESI

NORTH MALUKU

MALUKU

PAPUA

WESTIRIAN JAYA

TIMOR-LESTE

M A L A Y S I A

BRUNEI DARUSSALAM

PA

PU

A N

EW

GU

INE

A

Planned Project Province

National Capital

Provincial Capital

Planned Project City

Provincial Boundary

International Boundary

Boundaries are not necessarily authoritative.

INDONESIA

CAPACITY BUILDING FORURBAN INFRASTRUCTURE MANAGEMENT PROJECT

(as completed)

0 100 200 300 400 500

Kilometers

N

07

-00

06

HR

108 00'Eo

108 00'Eo

132 00'Eo

132 00'Eo

0o

0o

8 00'So

8 00'No

8 00'No

8 00'So

I. PROJECT DESCRIPTION 1. Even as Indonesia's economy had been shifting from agrarian to industrial, poor urban infrastructure in the provincial towns had constrained the country’s economic growth. Although sector development was occurring within a supportive policy framework, it was held back by local governments' lack of experience in urban infrastructure project preparation, funding, and implementation; constraints on their organization, staffing, and operations; shortage of professional human resources; lack of experience with decentralized approaches to service provision; and weak financial management. Recognizing that improved capacity in central, provincial, and local government agencies was essential to extend adequate urban infrastructure and services across the country, the Government requested the Asian Development Bank (ADB) to assist in implementing the Capacity Building in Urban Infrastructure Management (CBUIM) Project in 1996. The Project was approved on 4 November 1997 for a loan of $42.00 million and became effective on 4 March 1998. 2. The Project’s long-term objective was to improve the living and environmental conditions of the urban population throughout Indonesia by providing improved urban infrastructure services in a more cost-effective and sustainable manner. The Project was to help improve the ability of (i) provincial and local governments to deliver and facilitate delivery of urban infrastructure services; (ii) nongovernment institutions, including the private sector and local communities, to participate in urban management; and (iii) central government agencies and institutions to provide advisory services and training programs. 3. The Project had the following four intended outputs: (i) improvement of human resources through (a) development of a career mapping system, and (b) provision of postgraduate, undergraduate, and short-course education and training for urban managers, particularly at the local level; (ii) strengthening of sector institutions through (a) conducting pilot projects for developing and testing improved operational arrangements in about 11 project cities, and (b) preparing and implementing institutional development programs for selected agencies; (iii) preparing and implementing sector policy action plans; and (iv) implementing support, including project performance monitoring and evaluation. The Project targeted eight key areas of urban infrastructure services1 in which the capability of provincial and local governments was to be strengthened. The project framework is given in Appendix 1.

II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 4. The Government’s strategy for urban sector development was stated in its Sixth Five-Year Development Plan and guided by the 1987 Statement on Policies for Urban Development. The Development Plan emphasized (i) enabling local governments to provide, operate, and maintain urban services; (ii) improving local governments’ ability for planning urban infrastructure investments; (iii) enhancing consultative processes and coordination at all government levels for financing and administering urban services; and (iv) promoting balanced urban infrastructure development. The strategies were made operational in 1985 under the Integrated Urban Infrastructure Development Program (IUIDP), which adopted the following approaches: (i) transferring local branch offices of the central government agencies, including staff, to the provincial and local governments; (ii) shifting funds allocation responsibilities from the central to the provincial and local governments; (iii) encouraging private-sector and community participation in urban infrastructure services at the local level; and (iv) setting taxes for urban

1 These included: (i) water supply, (ii) sewerage, (iii) drainage, (iv) solid waste management, (v) road network, (vi)

slum area upgrading, (vii) market upgrading, and (viii) urban planning as integrating sector.

2

infrastructure services at levels commensurate with the costs of investment and operation. In 1994, the Ministry of Public Works (MPW) embarked on an initiative under which its local branch offices were incorporated into local governments.2 This initiative was pilot tested in 94 local governments before being extended nationwide. 5. The current Indonesian government policy for the urban sector is given in the National Development Agenda, which is a part of Law No. 25, National Development Systems. Under the Law, the President issued the Medium Term Development Plan (MTDP), 2004-2009. The MTDP seeks to raise the level of sustainable economic growth, create jobs, and accelerate achievement of the Millennium Development Goals. It states five development agenda: (i) poverty reduction, (ii) urban and regional linkages, (iii) increased human quality, (iv) increased environmental quality, and (v) improved infrastructure services. On the basis of the National Development Agenda, MPW’s Directorate General of Human Settlements has prepared a strategic plan providing 10 development programs. These include to (i) establish an efficient government organization under principles of good government, (ii) improve local government capacity and the participation of community and local enterprises in providing urban infrastructure, and (iii) develop infrastructure in a sustainable manner. 6. The ADB's operational strategy3 for Indonesia at appraisal supported the Government’s strategy as stated in the Sixth Five-year Development Plan and the 1987 Statement on Policies for Urban Development. It emphasized promoting efficient economic growth through improving physical infrastructure, human resource development, and sustainable resource management. In the urban sector, the Government and ADB focused on (i) making investments more effective through better planning and targeting the urban poor, industrial, and institutional users of urban services; (ii) sustainable urban environmental and land management; (iii) enhancing local governments’ capacities to plan, fund, implement, operate, and maintain projects, as well as to cover their costs; (iv) developing sector financing mechanisms; (v) developing public-private and community partnerships for the provision of services; and (vi) enhancing transparency and accountability in public sector decision making. ADB, with the World Bank and bilateral agencies, was active in supporting the implementation of IUIDP projects. 7. ADB’s current country strategy is stated in its Country Strategy and Program, Indonesia 2006–2009. This document emphasizes ADB’s support to the Government to achieve more rapid pro-poor sustainable growth and enhance social development under its MTDP, the need to address such constraints as urban infrastructure and services, and decentralization. These strategic elements were incorporated into the Project’s design through its four project components and such operational mechanisms as a project performance management system (PPMS) designed to monitor achievement of project objectives through performance indicators set out in the project framework. Thus, the project design was consistent with ADB’s strategy for Indonesia, including its urban sector strategy and the country urban development objectives. At the time of project preparation, these objectives centered on a revised IUIDP approach. 8. No major changes in project objectives and scope were made during project implementation. After enactment of decentralization laws 4 in 1998, adjustments in some activities were made during the October 2000 midterm review in response to local governments’ needs in the decentralization environment. These changes included (i) reducing short-term training activities overseas and increasing in-country training, which was less constrained by 2 Branch offices of the Directorate General of Human Settlements became new dinas (service departments) of local

governments or were split into several dinas. 3 ADB. 1994. Indonesia Country Operational Program Paper 1994–1997. Manila, 4 Law No. 23, Decentralization and Local Autonomy, was issued in 1998, which was much earlier than envisioned at

appraisal. Related to this law is Law No. 25, National Development System (Pemerintahan Daerah), 2004.

3

participants’ English language skills; (ii) revising a career mapping system (CMS) in light of government reorganization; and (iii) enhancing national policy for private-sector and community participation. These adjustments aimed to optimize the intended benefits of the Project without changing the original scope. B. Project Outputs 1. Part A: Improved Human Resources 9. The human resources component included (i) preparation of a CMS, and (ii) provision of education and training programs for civil servants involved in urban infrastructure management. The education and training programs consisted of (i) training needs identification and curriculum and materials development, including preparation of a master plan for urban management training and urban infrastructure management training (UIMT); (ii) on-the-job training; (iii) short courses in urban management; (iv) scholarships for undergraduate programs; (v) specialist and master's degree programs in-country and overseas; (vi) PhD degree scholarships; (vii) foreign language and basic training; and (viii) urban seminars and comparative studies. The CMS was established and was applied in the pilot districts, but it has yet to be institutionalized for nationwide application. The education and training programs were satisfactorily implemented, exceeding the number of targeted beneficiaries. Participants in the training programs were selected based on the prescribed criteria prepared during appraisal. The number of participants in the urban management training was 8,454 against 6,500 targeted, while those in the UIMT reached 807 against 350 targeted. The postgraduate program achieved more than 860 participants against 525 originally targeted, and 2,046 participated in the undergraduate program against 1,800 originally targeted. As of September 2006, about 50% and 75% of the participants given PhD and Master’s degree educations, respectively, remained in the government offices, while more than 90% of the participants receiving bachelor’s degree and other higher education training remained in government offices. 10. Changes were made in the mode and category of in-country training implementation. Namely, most in-country training programs were originally scheduled to be undertaken through direct appointment of government training institutions such as Pusdiklat (MPW’s National Training Center), Bandiklat (the Ministry of Home Affairs Training Center), selected training centers under the provincial governments, universities, and nongovernmental training centers. Most of these programs were contracted out to consulting firms, however, as those government institutions lacked adequate venues, equipment, and training materials.

2. Part B: Institutional Development Component

11. This component was to (i) pilot test systems, programs, and activities in the areas of organization, public-private partnerships, staffing and career mapping, spatial planning, feasibility studies, urban infrastructure services, transportation management, and financial management in the 11 cities selected; (ii) establish management systems and programs for central training units of MPW and the Ministry of Home Affairs (MOHA); and (iii) provide assistance to central and provincial government agencies for monitoring local government operations, monitoring and preparing feasibility studies, and for financial management. 12. A total of 15 packages of consulting services were envisaged at appraisal. These were further broken into 24 packages. Management systems and programs were developed for central training units of MPW and MOHA. Urban development management information systems were developed and installed in all the pilot cities. Institutional support for central and provincial government agencies involved in urban management was provided to monitor local government operations, prepare feasibility studies, and improve financial management systems.

4

The new CMS was tested but not institutionalized, as it required a radical reform of the existing civil servants structure. 13. In spite of the Government’s strategy focused on developing the capacity of local governments for project management and implementation, the responsibility remained with the urban managers seconded to local governments from the central government. Various studies were prepared by consultants under the direction of these managers. With these managers returning to their original central institutions upon project completion,5 the capability of local governments for planning, managing, and implementing urban infrastructure projects diminished, and difficulty for local governments to produce planning documents6 was the likely consequence. To overcome the circumstances, adjustments in consulting services were made at the time of the October 2000 midterm review to focus on strengthening the capacity of local governments. The status of the consulting services is given in Appendix 2. 3. Part C: Policy Development 14. This component aimed to support the central, provincial, and local governments in implementing policy initiatives and sector framework. It included (i) preparing a national urban infrastructure development strategy, (ii) evaluating and improving spatial planning methods, (iii) developing guidance techniques for spatial planning for major strategic cities, (iv) improving financial management and accounting systems of local governments, and (v) strengthening the urban management information system. All the components were basically implemented through six packages of consulting services, as opposed to three packages originally envisaged. 15. The main output was the National Urban Development Strategy (NUDS) II.7 NUDS II aimed to proceed with urban infrastructure development in the newly established decentralized environment and with more active participation of diverse stakeholders in the urban development process. This put increased importance on functional links between cities and their surrounding areas. Spatial planning methods, technical guidelines, and urban management information systems were developed and tested in Semarang, one of the pilot cities, and then disseminated to the other pilot cities. Financial management and accounting systems were improved for the use of local governments and local government water supply enterprises (Perusahaan Daerah Air Minum [PDAMs]), and these were installed in all the pilot cities’ PDAMs. 4. Part D: Implementation Support 16. This component was to help the selected local governments in (i) preparing city profiles and identifying capacity building needs, (ii) disseminating information on best practices in the sector, and (iii) monitoring key indicators for project performance. A total of 20 governments, consisting of 6 provincial governments and 14 cities, were selected as areas for pilot testing the systems and programs established in the areas of organization, public-private partnership, staffing and career mapping, spatial planning, feasibility studies, urban infrastructure services, transportation management, and financial management. City profiles were prepared for those areas. These provided basic data related to urban infrastructure services and sketched out preliminary capacity building programs. The PPMS was prepared to monitor key indicators of project performance at the local and central levels, as well as to assess the impact on the target institutions and degree of achieving end-of-project objectives. Monitoring reports were prepared

5 This trend of staff movements is clear from the information given in the PPMS. 6 According to Presidential Instruction No. 7/1999, each local government and local government-owned enterprise

prepares a plan with a 5-year planning horizon and annual planning steps that is based on instructions from local government heads.

7 NUDS I had been prepared in 1987 based on the then-existing IUIDP.

5

annually. The PPMS was initially designed to monitor all items of urban infrastructure services planned by local governments. After pilot testing, it was simplified to only monitor performance indicators that could measure the achievement of activities and outputs for the four project components. Preparation of city profiles and the PPMS were delayed, as were dissemination of information on sector best practices and NUDS II, because provincial and local project implementation units (PIUs) were established late. C. Project Costs 17. At appraisal, the total project cost, including contingencies, interest, and other charges, was estimated at $70.0 million, comprising $28.0 million of foreign currency cost and $42.0 million of local currency cost. The ADB loan was envisaged to finance $42.0 million (60%) of the total project cost, that is, the entire foreign exchange cost of $28.0 million (including $5.5 million for interest on the ADB loan) and $14.0 million of the local currency cost. The Government, including the participating provincial and local governments, was to cover the balance of the local currency costs, amounting to $28.0 million (40%) of the total project cost. 18. In 1997–1998, the Asian financial crisis hit the country, resulting in serious financial problems for the Government.8 In July 1998,9 the Project’s cost was reduced to $58 million, with ADB’s share estimated at $35 million and the Government’s share at $23 million, and a part of the loan was cancelled accordingly. 10 These measures were in response to the limited availability of counterpart funds and the increased project costs in local currency terms. 19. At project completion in December 2003, the actual cost of the Project was $44.22 million, with a foreign exchange cost of $15.93 million and a local currency cost of $28.30 million equivalent. ADB financed $25.59 million (58%), of which $15.93 million (including $3.68 million for interest on the ADB loan) was for foreign exchange cost and $9.67 million for local currency costs. The Government counterpart contribution totaled $18.63 million (42%). The unused loan balance amounting to $9.41 million was cancelled at project completion. The reasons for the lower project costs were (i) the Asian financial crisis, which resulted in substantial depreciation of the rupiah and led to a lower cost of local currency expenditures in US dollar terms; and (ii) non-achievement of some activities, such as finalization of NUDS and institutionalization of CBUIM products, due to a lack of counterpart funds. There was a large cost overrun in foreign consulting services (150% of the original allocation), while all the other categories were lower than estimated. The cost overruns were largely attributed to the cost for in-country training programs, where consulting services were substituted for local institutions and agencies. The project cost estimated at appraisal and actual project cost are shown in Appendix 3. D. Disbursements 20. Total disbursements of the ADB loan at project completion amounted to $25.6 million, of which $0.1 million (0.5%) was for civil works, $1.1 million (4.1%) for equipment and vehicles, $11.9 million (46.5%) for education and training, $8.2 million (32.2%) for consulting services, $0.6 million (2.1%) for administration and advisory support, and $3.7 million (14.4%) for interest during construction. Only 60% of the loan amount or $42.0 million originally agreed was used. Delays in disbursements occurred over the entire project implementation period. Disbursements picked up only late in 2001 when institutional support activities commenced at the local level

8 Indonesia was the country most severely affected by the Asian financial crisis. When the loan agreement had been

signed in December 1997, the exchange rate was about Rp3,650 to $1, with an average exchange rate in 1997 of Rp2,763 to $1. At the height of the Asian monetary crisis, that rate was Rp15,000 to $1.

9 To help relieve the Government’s financial burdens, ADB trimmed its portfolio to produce currency savings. 10 The amendment for partial cancellation of $7 million of the loan was issued on 16 July 1998.

6

upon the establishment of local PIUs. The delays in disbursement were also attributed to insufficient coordination and cooperation among various parties involved. 21. The Government financed Rp153.3 billion or $18.63 million equivalent (42%), compared with $28 million or 40% of the total project cost estimated at appraisal. The Executing Agency (EA) had difficulty to finance the counterpart portion after the Asian financial crisis. To relieve the EA of this difficulty, ADB increased its financing share to 80% of expenditures for fiscal year (FY) 1998/1999 on a contract-by-contract basis. In FY1999/2000 and thereafter, ADB returned its financing to the original ratio as stipulated in the loan agreement. The EA had requested continuation of the 80/20 financing beyond FY1998/1999. ADB did not accept this proposal, however, as the shortfall for ADB’s overall portfolio in Indonesia was about 16.4% at that time while that for the Project was about 70%. The availability of necessary counterpart funds for FY2002 was a basic condition for extending the loan closing date. The reason the Government financing ratio (42%) ended up higher than the 40% estimated at appraisal was basically due to the transfer of overseas education and training programs to in-country programs. A breakdown of yearly disbursements is in Appendix 4. 22. In accordance with ADB's new policy on transforming pool-based loan products to LIBOR-based loan terms, the loan agreement was amended and restated on 2 December 2002. The amendment was to provide for the application of different terms and conditions to (i) the portion of the loan that had been disbursed, and (ii) the portion of the loan that remained undisbursed. Accordingly, changes were made to the amortization schedule of the loan given in Schedule 3 of the loan agreement, while the other terms of conditions remained unchanged. E. Project Schedule 23. The Project was approved on 5 December 1997 and the loan declared effective on 4 March 1998. The loan closing date was originally set for 31 October 2002, but ADB extended this to 31 December 2003. The Government had requested to extend the loan closing date by 22 months until 31 August 2004 to ensure implementation of the remaining activities, including (i) some overseas and in-country doctorates and master’s courses, (ii) implementation of local UIMT, and (iii) institutional strengthening in the pilot areas. Major reasons for delays in project implementation were (i) counterpart fund constraints after the 1997–1998 Asian financial crisis; (ii) dramatic changes in the political and administrative environment at the national and local levels after the enactment of laws number 22 and 25 of 1999; (iii) a complicated coordination and decision making process among the multiple agencies involved; and (iv) a lack of clear operational procedures and definition of roles and responsibilities of each agency, including the central project coordination office (CPCO), as well as the project and subproject managers. 24. To make up for the delays in project implementation, time-bound action plans were prepared and agreed between the EA and ADB review missions on several occasions. The ADB Midterm Review Mission proposed changes in the implementation arrangements, in particular regarding the CPCO structure, expeditiously finalizing and operationalizing the CMS, accelerating the recruiting of consultants for the education and training programs, selecting pilot cities and obtaining their full commitment to the implementation, and providing counterpart funds in a timely fashion. Nevertheless, government financial problems, compounded by introducing new decentralization initiatives, continuously hindered achievement of agreed action plans and eventually resulted in a delay in completing the Project by about 1 year. The project implementation schedule as projected at appraisal and actual is in Appendix 5.

7

F. Implementation Arrangements 25. Project implementation arrangements designed during appraisal were basically followed. MPW, acting through its Secretariat General, was the EA. MPW and MOHA were the principal implementing agencies. A central steering committee (CSC) was established and was supported by a technical committee. The CSC was chaired by the National Development Planning Agency with representatives from MPW, MOHA, Ministry of Finance, and Ministry of Administrative Reform. The CPCO was established, headed by a full-time coordinating officer to coordinate and review the progress of Project activities implemented by two central project officers (CPOs) from MPW and MOHA. The central project implementation units were created by the main implementing offices at the central level to manage their activities under the Project.11 Local PIUs were established in the participating provincial and local governments to manage project activities in the pilot areas.

26. Almost all offices and committees required at the central level were established and staff assigned in a timely manner. However, the local PIUs in the selected pilot areas were not established until the beginning of 2001, delayed from January 1999 as necessary decrees could not be issued by the mayors and district heads concerned in the absence of instructions from MOHA12 and of counterpart funds. Provincial PIUs were never established, due to an unclear definition of the role in the Project of provincial governments under the new decentralized structure. Given the number of participating agencies and project management units involved in the Project, the CPCO encountered difficulties in coordination and decision making. To ensure the integration of project activities among the principal implementing agencies, the project management structure was changed based on the October 2000 ADB Midterm Review Mission’s recommendations. These included a change in the heads of the CPOs to deputy heads of the CPCO and a reduction in the number of subproject managers. 27. Following changes in government administrative arrangements, the EA was changed three times. Accordingly, the CSC members also were changed three times during implementation. The last CSC members were appointed in July 2000, following the administrative restructuring in April 2000. These frequent changes and a lack of well-defined policies and operating procedures (particularly, with regard to financial management) adversely affected project management and coordination across the various implementing agencies. G. Conditions and Covenants 28. From a total 31 covenants, 22 covenants were fully complied with, 8 were partly compiled with, and the remaining 1 was waived. Covenants partly complied with were those affected by issues related to counterpart funding, establishment of project implementation offices, implementation of the career mapping system, pilot testing of institutional programs, and policy support. Those covenants were influenced by (i) coordination difficulties among implementing agencies due to administrative changes; and (ii) delays in allocating annual project budgets on the part of central and local governments, as a result of (a) delays in approving the sectoral annual development budgets, (b) application of a new law (No. 25/1999) relating to local government budget allocation, and (c) the 1997–1998 Asian financial crisis. Covenant No. 28 that required establishing an action plan to improve the financial management of local governments were waived, as similar support was provided by other agencies. 11 Right after the loan agreement was signed, ministerial decrees for establishing respective CPIUs were issued by

secretariats general and the Directorate General of Human Settlement of MPW, the Directorate General of Public Administration and Regional Autonomy, the Directorate General of Regional Development, and MOHA’s training center.

12 Letter of secretary general of MPW, dated 29 January 1999 and issued to the 14 selected local governments advising of the CBUIM status and appointing the local PIU staff.

8

29. The CMS was prepared and tested, but it was not institutionalized and introduced nationwide because it failed to provide (i) clear definition of the central and local institutions or agencies that were to participate in the CMS, and (ii) a justification for introducing the proposed system only in institutions involved in urban infrastructure management. Moreover, there was concern about likely political and social implications upon introducing the new CMS system. The CMS was revised to be acceptable and open to the private sector, but it has yet to be applied widely. Nevertheless, a survey undertaken to assess impact of the CMS in some pilot areas showed general agreement on the necessity to improve human resource management in Indonesia. The status of compliance with loan covenants is set out in Appendix 6. H. Related Technical Assistance 30. Technical assistance (TA) for preparing the Project13 and parallel TA related to private sector participation 14 aimed to support Government efforts to provide improved urban infrastructure services across the country. The TA projects encountered some difficulty in arriving at a consolidated approach to attain their objectives, as the working team was comprised of senior staff from various departments and consultants and was guided by a steering committee appointed by MPW. The involvement of different people from various agencies and institutions (including National Development Planning Agency, Ministry of Finance, MPW, and MOHA) made it hard for the working team to arrive at a well integrated project design. The proposed design resulted from compromise that satisfied each of the parties concerned but failed to provide (i) justification as to how each of the components could fit into national urban policies; (ii) detailed implementation procedures, including those for administering a large number of consultant services; and (iii) an annual disbursement schedule of the counterpart funds broken down by category and institution. Another design issue was lack of flexibility. After the Asian financial crisis and the dramatic events of May 1998,15 the Government accelerated the implementation of decentralization. The Project, however, faced difficulties in selecting the pilot cities, as most local governments had financial problems at the time. 31. An ADB study from 199616 on the effectiveness of TA for capacity building stressed the need to incorporate the following elements into institutional development efforts in Indonesia:

(i) promoting commitment and a sense of ownership on the part of the target institutions through the close involvement of decision makers;

(ii) better preliminary diagnostic analysis; (iii) use of specific institutional development programs supporting capacity building

activities; (iv) clear objectives and performance indicators; and (v) enhanced effectiveness and sustainability of training, based on adequate needs

assessment and focusing on management competencies. I. Consultant Recruitment and Procurement 32. At appraisal, a total of 25 packages of consulting services with a total input of 1,692 person-months were envisaged, consisting of 100 person-months of foreign and 1,592 person-months of local experts, namely (i) four packages under part A, (ii) 15 under part B, (iii) three 13 ADB. 1995. Technical Assistance to the Republic of Indonesia for Capacity Building in Human Settlement

Infrastructure Management. Manila. 14 ADB. 1997. Technical Assistance to the Republic Indonesia for Private Sector Participation in Urban Development.

Manila. 15 In May 1998, the Suharto regime that had governed since 1968 fell and was replaced by a new political regime. 16 ADB. 1996. Technical Assistance to the Republic of Indonesia for Assessment of the Effectiveness of Bank

Assistance in Capacity Building. Manila (TA 2541-INO, approved on 8 March).

9

under part C, and (iv) three under part D. Some adjustments were made, however, at project inception based on discussions with the agencies concerned in November 1998. Changes in packaging of consulting services were made on several occasions with a view to enhancing the effectiveness and efficiency of the services and to provide opportunities to local consulting firms. As a result, a total of 50 packages of consulting services were approved, consisting of 1,742 person-months (65 person-months of foreign and 1,677 person-months of local experts). All the packages of consulting services were engaged in accordance with ADB’s Guidelines on the Use of Consultants (April 2006), and Government procedures. Domestic and overseas education and training programs were awarded to government institutions, universities, and consulting firms. 33. There were many delays in engaging consultants. These were mainly due to the limited understanding of the government tender committee about ADB Guidelines that differed from the Government’s regulations. In particular, problems occurred when the ADB Guidelines were revised in April 2002, and the revised version was applied retroactively. The most problematic case was in respect of consulting services for urban management training, for which the engagement action was initiated in October 2001 following the ADB Guidelines valid at that time. It was required that this be redone, using the quality- and cost-based selection method. Misinterpretations and consequent impact on project implementation could have been avoided if changes to the Guidelines had been disseminated and explained to the Borrower in advance. 34. At appraisal, it was envisaged that a total of 17 procurement packages—consisting of five packages for civil works to refurbish training institutions under MPW and MOHA, seven packages for training equipment, and five packages for training materials—would be procured through international competitive bidding (ICB), international shopping, or local competitive bidding (LCB) in accordance with ADB guidelines for procurement (April 2006). As of project completion, six packages of civil works and 11 packages of equipment and materials had been procured. Procurement of these packages was conducted basically according to the schedule originally envisaged. Procurement made using ICB procedures included three packages of equipment for support to MPW’s Pusdiklat and to four provincial government training centers and four regional training centers, management information systems, and two packages of training materials. J. Performance of Consultants, Contractors, and Suppliers 35. The performance of the consultants was generally satisfactory. Delays were noted for the consulting services provided with respect to the institutional management support for local governments, due to government administrative changes and restructuring. The turnover of consulting experts was less than 20%. A common problem that affected overall project activities and effectiveness was lack of integration and coordination among activities under different contracts. While this would not be unusual for projects or programs implemented by a number of different institutions through different packages, each consultant should have related more closely with the others to achieve the common project objectives in a more coordinated manner. 36. Performances of contractors and suppliers were in general satisfactory without any significant delays in delivering the works and equipment. Government training centers were refurbished, and office vehicles and equipment such as computers and furniture were delivered satisfactorily. The quality of works and equipment met the standards and specifications stipulated in the contract documents. K. Performance of the Borrower and the Executing Agency 37. Performances of the Borrower and EA were assessed as partly satisfactory, although it was affected by various factors that were mostly beyond the control of the executing and

10

implementing agencies. The EA was changed three times during the project period, following government administrative restructuring. The EA was initially MPW, acting through its Office of the Secretary General. In April 2000, the Directorate General of Urban Development, in the newly established Ministry of Settlements and Regional Development became the EA, following another government administrative restructuring. Then, in January 2001, the Project was transferred to the Directorate General of Urban and Rural Development, Ministry of Settlements and Regional Infrastructure (MSRI) as part of the Ministry of Settlement and Regional Development’s reorganization arrangements. All these changes involved also changes in key personnel within the EA. The steering committee members also changed whenever the EA was changed. The steering committee could not provide clear policy direction and guidance for institutional and human resource development and management.17 These changes adversely affected project implementation. 38. The large number of implementing institutions—as many as nine—with a corresponding number of project managers and technical teams for monitoring the performance of consultants and providing guidance to them, made coordination more difficult. That was particularly true for the CPCO, which was primarily responsible for coordination among all the parties concerned. The difficulty was compounded by a lack of clear procedures relating to responsibilities and decision-making authority among the CPCO, project managers, and technical teams. In 2000, the CPCO structure was changed to strengthen its coordination and decision-making authority, with the assignment of two deputy managers from MOHA and MSRI and establishment of four central PIUs (two within MOHA and two within MSRI). The multiplicity of implementing agencies, and especially as financial and implementation management activities were the responsibility of different administrations, was one of the main factors causing a lack of motivation and accountability. This resulted in project implementation delays. 39. The 1997 Asian financial crisis made it difficult for the Government to provide sufficient counterpart funds for the Project. As counterpart budgets for FY2002 and FY2003 were inadequate and disbursements slow, only $25.6 million, or 73%, of the available loan amount had been contracted as of project completion. The Government, however, financed Rp158.3 billion, far exceeding the Rp83.5 billion originally estimated as the counterpart portion. L. Performance of the Asian Development Bank 40. From March 1997 to June 1998, a total of 10 ADB missions (226 person-days) were fielded. ADB review missions identified major issues related to the country situation and governmental restructuring and recommended adjustments needed for project implementation. Difficulties encountered by the Project were addressed by the ADB review missions in a timely manner. The October 2000 Midterm Review Mission discussed with the EA the overall program and implementation schedule and agreed to a time-bound action plan to minimize delays in implementation and other problems. Subsequent ADB review missions carefully reviewed the status of the time-bound action plan and suggested additional actions. This effort was only partially successful, however, mainly due to persistent difficulties with counterpart funds. 18 Continued support and assistance to the EAs to assist them to comply with ADB procedures and procurement regulations (mainly through the Indonesia Resident Mission) were effective. 41. In 1997, the Asian financial crisis hit Indonesia. ADB immediately dispatched a special project administration mission to analyze the impact on the Government and decided to finance 17 The lack of clear directives from the CSC was one of the major reasons for the failure to institutionalize the CMS. 18 Implementation of Provincial Management Support (TOR-08B) that was to strengthen the management capacity of

the pilot local governments was particularly affected as the local governments were unable to ensure necessary counterpart funds.

11

80% of expenditures on a contract-to-contract basis for all ADB-financed projects under implementation. This was effective in reducing the Government’s financial burden and allowed implementation to continue uninterrupted. ADB’s performance is therefore rated satisfactory.

III. EVALUATION OF PERFORMANCE 42. Evaluation of project performance was based on information given in the project benefit monitoring and evaluation (PBME) reports. The PBME as well as the PPMS were established before implementation to monitor achievement of project outputs and objectives. The PBME set out the indicators to assess long-term objectives, end-of-project objectives, and project outputs. A. Relevance 43. The Project is assessed as relevant for its consistency with the Government’s sector strategy and ADB’s strategy for Indonesia, including its urban sector strategy. The Government’s current policy and strategies for urban development are given in the MTDP and strategic plan, while ADB’s current country strategies are given in the Country Strategy and Program, Indonesia 2006-2009 issued in October 2006. This document emphasizes the need for development in the urban sector using a demand-driven approach, which could be achieved through the participation of local governments, communities, and the private sector. The Project was designed to improve the ability of local, provincial, and central governments to deliver adequate urban infrastructure services on a sustainable basis with the participation of the private sector and local communities, 44. Minor adjustments in project design were made during the October 2000 midterm review, to (i) respond to the needs of local governments in the decentralization environment, (ii) reinforce the focus on human resource development, (iii) reassess the CMS in light of the government restructuring, and (iv) develop national policy to enhance urban sector development through private-sector and community participation. These adjustments and improvements were considered minor and appropriate to optimize the intended benefits of the Project. B. Effectiveness in Achieving Outcome 45. The Project is assessed as less effective in achieving the outcome originally envisaged. While the education and training programs were satisfactorily implemented, various CBUIM programs, including the CMS, failed to be adopted and institutionalized by the Government. Training and education institutions were strengthened by refurbishing buildings and structures and supplying training equipment and materials. The education and training programs under the human resource development component used improved training and education materials to reach an increased number of local and provincial government personnel engaged in urban infrastructure services. Overall, the number of professional staff in urban-related offices of central, provincial, and local governments has increased by about 860 since the beginning of the Project. Enrollment in urban management education and training programs stands at 5,847 in 2006. The number of professional staff increased by about 153 in the pilot cities and by 201 in the pilot provinces. This has resulted in an increased ability of local provincial governments to deliver urban infrastructure services. 46. The capacity of provincial and local governments for urban management was improved, and institutional effectiveness and efficiency in the pilot project areas was increased. Under the new development regulations, local governments are authorized to prepare their own development plans and budgets. Spatial plans and urban sector feasibility studies were also developed. In the pilot areas, there are notable improvements in urban infrastructure and services investments; involvement of public-private and community partnerships; resource revenues; maintenance budgets for roads, drains, and other urban infrastructure; and cost

12

recovery for solid waste. The newly established financial management system was being used by the participating local governments and PDAMs. The central agencies' ability to provide advisory services and training programs was also improved by providing education and training to a number of professional staff of the four central agencies primarily responsible for sector development, especially MOHA’s Public Administration and Regional Autonomy and MOHA’s Directorate General of Regional Development, which had been constrained by shortages of qualified staff. The number of trainers in the urban infrastructure sector stands at 807. 47. The Project was effective in enhancing private-sector and community participation in planning, policy making, and budgeting by conducting urban development coordination forums. Participation of nongovernmental institutions has increased. Urban development coordination and public forums that provide transparent development paradigms with a library accessible through local government websites are in place. The number and value of projects with public-private and community partnership has been increasing gradually. C. Efficiency in Achieving Outcome and Outputs 48. The Project was assessed as efficient in financial and economic terms. Almost all activities were carried out and the outputs, as revised in July 1998 and during the midterm review, were attained at a cost less than estimated at appraisal. After partial cancellation of the loan amount for what can be termed “currency savings” resulting from the financial crisis, the total project cost was estimated at $58 million. At project completion, it became $44.2 million. Implementation of in-country education and training programs for urban management, spatial planning, and land management using domestic institutions19 was particularly cost-effective. Urban management master's degrees provided at domestic institutions, for example, required an average of $200 per student-month, compared with $600 per student-month originally envisaged. The use of senior government officials as trainers for training was also cost-effective. The average cost of overseas education and training programs was $100 per person per day. D. Preliminary Assessment of Sustainability 49. Overall, the Project was rated less likely to be sustainable. The Project achieved one of its primary objectives of improving the ability of the 14 pilot local governments to deliver urban infrastructure services through strengthening human resources and institutional arrangements. A substantial number of government staff at the central, provincial, and local levels were trained and educated. Most of the participants in the international and long-term domestic training programs have remained within their offices, as required in the Government's regulations. However, practices and new approaches are yet to be disseminated and replicated to other local governments. The capacity building instruments developed under the Project contain functions similar to those in other guidelines, causing confusion for local governments. The CBUIM activities are yet to be institutionalized nationwide. These include such monitoring and evaluation instruments such as city profiles, a project performance management system and a project benefit monitoring evaluation system.20 An urban infrastructure management information system was developed, but others, such as (i) knowledge management, (ii) lessons learned and good practices, and (iii) a system to integrate CBUIM with other related capacity building efforts, were not developed. 50. At the local level, the sustainability of capacity building appears mixed, as it depends largely on the local leader who directs urban policies and appoints the urban managers. At the 19 These include MPW’s Pusdiklat, MOHA’s Bandiklat, training centers under provisional governments, selected

universities, nongovernment training institutions, and the training centers of metropolitan cities. 20 The city profile is a reference benchmark study of the target local institutions while the others are tools designed to

monitor and evaluate the Project achievements and its impact on the target beneficiaries.

13

national level, the sustainability depends on the motivation and capability of MPW’s senior staff and managers to adopt CBUIM to the new context of local governments, create the appropriate instruments for coordinating activities, and disseminate lessons learned and good practices. E. Impact 51. The Project aimed at improving the living conditions, environmental health standards, urban environment, and economic opportunities for the urban population in Indonesia. It targeted (i) local institutions in the 14 pilot areas, (ii) related central agencies and institutions, (iii) related nongovernmental institutions, (iv) Indonesia’s private sector, and (v) local communities of the pilot areas. Through its human resource development, training and pilot-testing activities, the Project will eventually benefit the population (23.4 million) of the 14 pilot cities through improved provision of urban services. It has improved environmental management and service provisions in these cities. It also helped expand urban infrastructure to the urban poor, women, and children.21 In respect to the Project’s objective to put in place a nationwide, long-term capacity building strategy for these institutions, the results were mixed, as the CBUIM initiatives developed under the Project are yet to be institutionalized and applied nationwide.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS A. Overall Assessment 52. The Project has achieved its main objective of improving the ability of the 14 pilot local governments to deliver improved urban infrastructure services through human resources development programs. A survey was conducted of the five pilot local governments to get their assessment of the project performance. The human resources development component was rated satisfactory, whereas the institutional development and implementation support components were rated less satisfactory.22 However, given a fluid political environment and frequent changes in government administrative systems, the CBUIM model developed under the Project is yet to be fully institutionalized and applied all over the country. The sustainability of project facilities and instruments appears weak, as it depends on the capacities of individual leaders at the central and local levels. Accordingly, the Project’s long-term goal to improve the living conditions, public health standards, urban environment, and economic opportunity for the urban population through improved institutional capacity of provincial and local governments will not be achieved to the extent envisaged at appraisal. Based on the assessment of relevance, effectiveness, and efficiency, the Project is rated as partly successful. The quantitative assessment is shown in Appendix 7. B. Lessons 53. Based on the assessment of the Project, lessons learned are as follows:

(i) The project design and implementation schedule should be detailed and logical to avoid confusion. For example, policy development should have been scheduled as the first activity instead of the last.

(ii) Project staff needs to be carefully selected with particular attention to team building, flexibility, and communication, especially in the case of a project involving several agencies and institutions. Getting the right managers is important for the new institutions and for achieving new policies. Every effort should be made to ensure that project staff initially appointed, and especially project and subproject managers, remain until project completion.

21 The PBME reports indicate that about 20% of the population in the pilot areas belong to the low-income category. 22 Details are shown in Supplementary Appendix B.

14

(iii) Clear operating procedures and instructions relating to responsibilities and decision-making authority among all the parties concerned should be issued before project implementation to ensure that all project activities are undertaken in a uniform and consistent manner.

(iv) Flexibility should be given in financing plans so that fund reallocations can be made in a timely manner. Delays in the engagement of consulting services packages and the implementation of the institutional development program in the pilot areas were mainly due to a lack of counterpart funds.

(v) Full commitment of participating institutions and assurance by the heads and legislative bodies should be made a prerequisite for selection of pilot local governments. In the absence of such commitment, there were significant delays in submitting outputs to the CPCO, poor quality of outputs, and a lack of effectiveness of project activities within the target institutions.

(vi) Sufficient time should be allowed for implementing a capacity building project. This is particularly true when the so-called “new paradigm” of decentralization is to be established in a dynamic and still unsettled environment. Commitment, patience and perseverance, progressive assimilation, cooperative spirit, incentives to change, as well as guidance and examples from the top are some basic and intangible ingredients necessary to the long process of changing institutions’ paradigms.

(vii) The roles and responsibilities of various offices and committees temporarily established for project implementation should be formally authorized to ensure they are able to fulfill their mandates without resistance from the established cadre. Project experience suggests the same functions can be carried out in a more effective way by establishing implementation units within existing structures.

(viii) Project implementation arrangements should be carefully prepared, as the large number of implementing institutions, and with a corresponding number of project managers and technical teams for monitoring and guiding the consultants, made coordination more difficult.

(ix) In order to ensure that local PIUs are established in a timely manner, assurance should be obtained for the issuance of necessary decrees by mayors and district heads concerned, supported by provision of necessary counterpart funds and issuance of instructions from the EA.

C. Recommendations

1. Project Related 54. Future Monitoring. (i) Various programs for implementing the CBUIM were implemented under the leadership of managers seconded to local governments from central government offices. With the departure of these managers to their original offices upon project completion, the capability of local governments for planning, implementing, and managing urban infrastructure became weak, causing local governments’ difficulty in producing planning documents. Staff movement from the local to the central level should be carefully monitored and controlled to ensure that the capacity of local governments is not weakened. (ii) MPW has established a knowledge center and library where various training materials and instruments developed under the Project are stored. These materials and instruments need to be filed and organized so that they are easily accessible to potential users. 55. Covenants. A CMS was prepared, but it was not applied nation-wide as it failed to take into account the existing legal framework. The CMS needs to be revised so that it can be institutionalized and applied to government staff at the local level.

15

56. Future Action or Follow-up. (i) The CBUIM was never institutionalized. A clear road map and a draft legal and institutional framework to institutionalize the CBUIM products in the government administrative system should be in place. (ii) MPW needs to establish an integrated system for managing information and monitoring urban infrastructure services. The system should be designed within the new institutional and legal framework, and it should create communication links between the expanding CBUIM environment and the MPW’s central management unit in charge of the post-CBUIM project period. In a first step, this unit could be developed as a knowledge center to respond to the needs of the target stakeholders. 57. Additional Assistance. Continued assistance to the Government in its effort to spread CBUIM activities and processes to other local governments is required to achieve the Project’s long-term objective. Any delays in ensuing CBUIM initiatives will halt the momentum built by the Project (and especially in some committed local governments). That momentum would support other urban development programs and projects that have been prepared. 58. Timing of Project Performance Evaluation Report. Given the government institutional and administrative restructuring still in progress in the changing decentralized environment, this evaluation should be conducted 2 years after preparation of the project completion report.

2. General 59. Any change in project design, including objectives, activities, target institutions and persons, procedures, and organization structure during implementation, should be reflected in the project framework, such that needs for amendments to interrelated activities become clear and an integrated approach can be maintained. 60. Guidelines and procedures of the Government and ADB related to project implementation and any changes thereof should be fully disseminated to all the parties concerned before and during project implementation. Also, changes in the internal organization of the EA should be discussed among all parties concerned (including ADB) prior to application. 61. Reporting project activities should, as much as possible, be limited to reporting only key elements for effective management and monitoring of the overall project progress. These elements should be oriented toward important functions, such as monitoring of consultants’ performance and outputs, disbursements, and important actions taken.

16 Appendix 1

PROJECT FRAMEWORK Design Summary Goals (Long-Term) Performance Indicators/Targets Project Achievement Key Issues and

Recommendations 1. Improve the living conditions,

public health standards, urban environment, and economic opportunities of the urban population of Indonesia.

2. Improve the institutional

capacity and capability of provincial and local governments to provide services in a manner that is market-responsive, as well as financially and environmentally sustainable.

3. Assist the Government to

achieve its urban sector policies as outlined in the Sixth Five-year Development Plan and the Urban Policy Action Plan.

1. The Project will directly benefit

the populations of participating cities by improving urban services provision.

2. Continued focus by

Government on decentralization, human resource development, and financial management

3. Innovation and replication of

best practices 4. Increase number of

management education and training programs available.

1. The Project directly benefited

14 pilot cities with total population of 23.4 million.

2. Participants in the training and

education programs included officers selected from all 35 provinces in Indonesia.

3. The new law No. 22 will help

accelerate government decentralization and de-concentration initiatives.

4. Innovation and replication of

practices put into use during Sixth Five-year Development Plan for 90 strategic cities did not occur, as the urban development priority was changed.

5. The number of training and

education programs for urban management under the various central institutions (National Development Planning Agency, Ministry of Home Affairs [MOHA] and Ministry of Finance) has increased.

1. The national policy framework

regarding the rights and responsibilities of agencies concerned with urban development and management should be established before carrying out the training and education activities for civil servants.

2. Training institutes (such as the Ministry of Public Works [MPW] National Training Center) should be established in each province, so that unique local requirements are adequately reflected in the training curricula and programs.

3. The established CBUIM Alumni Forum should be utilized not only as a venue for sharing knowledge and managerial experiences, but also as a source of trainers for future capacity building development.

Appendix 1 17

Design Summary Goals (Long-Term) Performance Indicators/Targets Project Achievement Key Issues and

Recommendations Purpose 1. Improve abilities of local and

provincial governments to deliver and facilitate delivery of urban infrastructures services through a) human resources development and b) capacity building pilot projects at local level.

2. Improve nongovernment

institutions’ abilities to participate in urban management .

3. Improve central agencies’

abilities to provide advisory services and training programs.

Enhancement of human resources 1. Increase number of

professional staff in urban-related offices of central, provincial, and local governments.

2. Increase ratio of professional to

nonprofessional staff in urban related offices of central, provincial and local governments.

3. Increase enrollment in urban

management education and training program.

4. Increase number of trainers in

the sector. 5. Improve quality of training and

education materials. Increased efficiency and effectiveness of urban management at local level 1. Local governments more able

1. Number of professional staff in

urban-related offices of central, provincial, and local governments has increased by 860.

2. Ratio of professional staff in

urban related management is increasing. As of 2006, holders of master’s degree totaled 33% in the urban roads, 22% in the spatial planning, and 12% in the water supply sectors.

3. Through the new autonomy

regulation, enrollment from local governments in education and training increased to 5,847.

4. Number of trainers increased

to 807 due to trainings at the national training centers.

5. Training and education

materials were developed and improved.

1. Under the new development

1. Technical papers and

documentation, including training modules and theses of master’s degree graduates, are not well maintained in the local governments. Adequate filing systems should be established at the local level.

18 Appendix 1

Design Summary Goals (Long-Term) Performance Indicators/Targets Project Achievement Key Issues and

Recommendations to prepare midterm plans, spatial plans, and urban sector feasibility studies

2. Increase proportion of urban

populations covered by approved midterm plans.

3. Increase number and value of

projects with public-private and community partnerships.

4. Improve urban operating

procedures. 5. Reduce cost of providing urban

services . 6. Improve financial management.

Increase participation of nongovernment institutions

1. Urban development

coordination forums created with private-sector and community participation.

regulation, local governments prepare local plans and budgets.

2. Public and private participation

are becoming common procedures for community participation as capacity building for urban development.

3. Operating procedures and cost

of urban services are improving but not specifically measured.

4. New financial management

system was placed in 14 pilot city local government water supply enterprises (PDAMs).

1. Urban development

coordination and public forums are created. As a knowledge center for urban infrastructure management, a library with CBUIM documents is

Appendix 1 19

Design Summary Goals (Long-Term) Performance Indicators/Targets Project Achievement Key Issues and

Recommendations 2. Pilot project results reviewed

and incorporated in operational policies

Increase efficiency and effectiveness of urban management at provincial and central levels 1. Enhance capacity 2. Improve institutional

development advisory capacity 3. Enhance policy advisory

capacity

established and can be accessed through www.kmud.pu.go.id.

2. CBUIM pilot project

achievements and alumni orientations were reviewed but not incorporated into urban development policies.

1. Individual staff capacity is

enhanced where improved institutional capacity is not yet proven.

2. Policy capacity is not enhanced

Outputs 1. Human Resources

Development 1. Human resource strategy and

career mapping system (CMS) 2. Training needs identifications

and curriculum and materials development

1. Human resource strategy

developed and career mapping system (CMS)finalized.

2. Training needs identified and

curriculum and materials for urban management and

1. CMS partly achieved, with preparation of a sample form of agenda for discussion. The agenda was far from the existing legal framework and institutional cultures.

2. Training needs assessment,

curriculum, and training modules development prepared but not well

1. Careful measurement and

selection process for training candidates should be established and reviewed with respect to the local criteria, especially for postgraduate education.

2. To maximize effectiveness in doctoral education (PhD), local universities and institutes could be considered.

20 Appendix 1

Design Summary Goals (Long-Term) Performance Indicators/Targets Project Achievement Key Issues and

Recommendations 3. On-the-job training 4. Training of trainers 5. Urban management short

courses 6. Scholarships for

undergraduate programs 7. Specialist and master’s degree

programs in country and overseas.

8. PhD degree scholarship 9. Foreign language and basic

training 10. Urban seminars and

comparative studies

urban infrastructure management education developed.

3. On-the-job training provided. 4. 350 urban management

trainers provided training both in-country and outside.

5. 6,500 participated in urban

management short courses both in-country and outside.

6. 1,800 in-country scholarships

for undergraduate education in engineering and urban management provided.

7. 500 master's degree

scholarships specialized in urban management provided, both in-country and outside.

8. 25 PhD degree scholarships provided.

9. Language and basic training

for selected candidates provided.

10. 1,200 senior urban managers

and professionals participated in seminars.

11. Overseas training and

fellowships for senior managers and professionals

consolidated and integrated.

3. On-the-job training provided by

the consultants. 4. 807 trainers were trained in-

country and overseas.

5. 5,847 participated in urban

management short courses both in-country and overseas.

6. 2,029 in-country scholarships

for undergraduate provided.

7. 845 master’s degree scholarships both in-country and overseas provided.

8. 15 PhD degree scholarships provided.

9. 565 participated in language and basic training.

10. 1,200 senior urban managers and professionals participated in seminars.

11. Overseas training and fellowships for senior managers and professionals provided.

3. Although the CMS was not established, monitoring and evaluation of the current alumni should be maintained.

1. Follow-up action be taken to establish an integrated urban development and management system for all the pilot cities, as provided in part by the Project.

Appendix 1 21

Design Summary Goals (Long-Term) Performance Indicators/Targets Project Achievement Key Issues and

Recommendations 2. Institutional Development 1. Pilot projects in about 11

provinces: Central Java, Central Kalimantan, DI Yogyakarta, East Java, Lampung, North Sulawesi, North Sumatera, South Kalimantan, South Sulawesi, West Java, and West Nusa Tenggara

2. Institutional support for central

training units 3. Support for central and

provincial agencies involved in urban management, including MPW, MOHA, MOHA’s Public Administration and Regional Autonomy, Directorate General of Human Settlement, Pusdiklat and Bangdiklat.

3. Policy Development 1. Support for implementation of

policy initiatives and sector policy framework

provided. 1. Pilot testing conducted in at

least six provinces, covering testing and application of CMS, support for preparation of midterm plans and feasibility studies, testing and application of infrastructure, and financial management methods and systems.

2. Management systems and

programs developed for central training units of MPW and MOHA.

3. Assistance provided to

central and provincial government agencies covering monitoring of local government operations, preparation and monitoring of feasibility studies, and improvement in financial management.

1. National urban infrastructure

development strategy prepared.

1. Midterm plans, feasibility

studies, and infrastructure and financial management were prepared and applied, but testing and application of CMS in 11 pilot cities were not fully achieved.

2. Urban management systems

and program were developed for the central education and training institutes of MPW (Pusdiklat) and MOHA (Bandiklat).

3. Assistance for monitoring local

governments operations were partly achieved, except activities for local water supply enterprises (PDAM) operations that were not initiated.

1. Evaluation and updating of

National Urban Development Strategy (NUDS) I was partly achieved after the loan was extended to December 2003, using national budget funds.

22 Appendix 1

Design Summary Goals (Long-Term) Performance Indicators/Targets Project Achievement Key Issues and

Recommendations 4. Implementation Support 1. Profiles 2. Dissemination of information 3. Performance monitoring

2. Spatial planning method

evaluated and improved. 3. Guidelines for spatial

planning techniques for major metropolitan and strategic cities developed.

4. Financial management and

accounting system of local governments improved.

5. Urban management

information system strengthened.

6. Profiling system incorporated

in sector policy and institutional development frameworks

1. At least 12 local

governments’ profile and capacity building needs identified.

2. Case study prepared of best

practices.

2. Spatial planning method,

technical guidelines, and urban management information were developed and tested in Semarang (the pilot city) and disseminated to the other four metropolitan pilot areas.

3. Financial management and

accounting system were installed in the 14 PDAMs, but not in the fast growing areas originally planned.

4. Profiling system was yet to be

incorporated in sector policy, although tested in the 14 pilot cities.

1. City profile for all 14 pilot local

governments were developed. 2. Case study of best practices

was prepared but failed to disseminate among other local governments.

Appendix 1 23

Design Summary Goals (Long-Term) Performance Indicators/Targets Project Achievement Key Issues and

Recommendations 3. Dissemination of information

on sector best practices conducted.

4. Monitoring indicators

developed and used regularly.

3. The monitoring indicators were

developed under project performance monitoring system and used regularly, albeit with a late start.

Activities 1. Human Resource

Development • Counterpart Funding • Consulting Services • Training and Seminars

2. Institutional Development

• Counterpart Funding • Consulting Services • Field Activities

3. Policy Development

• Counterpart Funding • Consulting Services

4. Implementation Support

• Staffing of Central Project Coordination Office, Central Project Officer, and Project Implementation Units

• Counterpart Funding • Consulting Services • Field Activities

$37.0 million $14.0 million $2.5 million $5.4 million

$25.39 million $9.42 million $1.49 million $3.83 million

24 Appendix 1

Design Summary Goals (Long-Term) Performance Indicators/Targets Project Achievement Key Issues and

Recommendations Consulting services

• Contingencies

• Interest during construction

• Total cost

• Loan

1,692 person-months, comprising 100 of international and 1,592 of domestic experts $5.6 million $5.5 million

$70 million

$42 million

1,742 person-months, comprising 65 of international and 1,677 of domestic experts $0.42 million $3.68 million

$44.22 million

$25.59 million

CBUIM = capacity building in urban infrastructure management, CMS = career mapping system, MOHA = Ministry of Home Affairs, MPW = Ministry of Public Works, NUDS = National Urban Development Strategy, PDAM = local government water supply enterprise (Perusahaan Daerah Air Minum).

Appendix 2 25

STATUS OF CONSULTING SERVICES

Report and Recommendation of the President Actual Project

Component Main Outputs Expected TOR

Level of Achievement Outputs TOR Procurement

Career mapping systems (CMS) for civil servants involved in urban infrastructure management

01

Completed, but yet to be implemented

Partially achieved in the form of agenda for discussion (far from the existing legal framework and institutions culture).

01

MPW LCB 1998

Urban management training, including preparation of master plan for training program and implementation (training of trainers and module testing)

02 Completed. Achieved through the assignment originally designed and an addendum for training implementation.

02 MOHA LCB 1999

Achieved, with training module implementation through a successive assignment.

03 MSRI LCB 1998

Enhancement of TOR 03 for training needs identification system development and training of trainers

03A MSRI ICB 1998

Enhancement of TOR 03 for training delivery and implementation in 6 packages

03B MSRI LCB 1998

Enhancement of TOR 03, refresher workshop in urban infrastructure management

45A MSRI LCB 2003

Enhancement of TOR 03, develop urban engineering modules

46 MSRI LCB 2003

Enhancement of TOR 03, on-the-job training for urban engineering modules for operation and maintenance

46B MSRI LCB 2003

Enhancement of TOR 03, on urban infrastructure management training for 6 pilot provinces in practicing urban infrastructure management

46B MSRI LCB 2003

Human Resource Development

Urban infrastructure management training, including preparation of training needs identification, curricula and material design, implementation program, and training institutionalization strategy

03 Completed.

Enhancement of TOR 03, on urban and regional leadership training

46B MSRI LCB 2003

Achieved, then updated and revised through a supplementary consultancy.

04 MSRI ICB 2002

Training development assistance, development of the Center of Public Works Professional Education

04 Completed.

Enhancement of TOR 04 for institutionalizing education and training for management information system (MIS) in 6 pilot provinces and 14 cities

04 revision

MOHA LCB 2003

26 Appendix 2

Report and Recommendation of the President Actual Project

Component Main Outputs Expected TOR

Level of Achievement Outputs TOR Procurement

Enhancement of TOR 04, consulting services to support Center of Technical Professional Education

04A MSRI ICB 2003

The output has been changed to develop technical functional training under the new combined TOR.

05 Training development assistance, urban management training strategy and institutionalization

05 Completed.

Combined TOR 05/07 for functional training development nation wide and in selected pilot areas, under support of TOR 03 and 08B.

05/07 revised

MSRI LCB 1999

Training development assistance, urban management training master plan and development strategy

06 Completed. Achieved under the MOHA Training Center (Bandiklat).

06 MOHA LCB 1999

Urban and regional planning training development strategy—development of urban and regional planning training under MSRI (Pusdiklat)

07 Completed. The original TOR was canceled.

Replaced by TOR 07B. 07

Completed. Achieved with the development of training center within MOHA.

07B MOHA LCB 1999

08 Completed. The original TOR was canceled.

Replaced by TOR 08B. 08 Infrastructure management support for pilot provinces and cities

Achieved as institutional development for the pilot cities.

08B MSRI LCB 2000

Replaced with revised TOR 09. 09

Institutional Development

Urban service delivery and financing mechanism: improved capability for service delivery and financing mechanisms in pilot areas

09 Completed. The original TOR was canceled. Achieved as the reassessment and

guideline for water tariff formulation for local government water supply enterprise (PDAM).

09 revision

MOHA LCB 2003

Replaced by revised TOR 10 10 Institutional development support in services delivery and financial management

10 Completed. The original TOR was canceled. Achieved as the formulation of PDAM

performance appraisal guideline. 10 revision

MOHA LCB 2003

Achieved as the institutional development support for spatial planning and project programming.

11 MOHA LCB 1999

Achieved as preparation of additional guidelines for urban infrastructure design.

11B MOHA LCB 1999

Institutional development support in spatial planning and infrastructure program

11 Completed.

Achieved as socialization of developed planning, programming, and guidelines.

11-11B

MOHA LCB 2000

Appendix 2 27

Report and Recommendation of the President Actual Project

Component Main Outputs Expected TOR

Level of Achievement Outputs TOR Procurement

Institutional development support in technical guidance, management information system, and best practices in infrastructure development

12 Completed with TOR 8B. The original TOR was canceled.

Replaced by TOR 08B. 12

Achieved through 3 separate TORs. 13 Achieved as computerized MPW personnel database.

13 A MSRI LCB 2000

Achieved as reassessment of the designed CMS.

13B MSRI LCB 2000

Career mapping information system 13 Completed. The original TOR was revised into TOR 13A and 13B.

Achieved as dissemination and reassessment of the designed CMS.

13B revision

MSRI ICB 2000

Strengthening capacity for urban and regional infrastructure management

14 Completed. The original TOR was cancelled.

Achieved by TOR 8B. 14

Replaced by revised TOR 15A, B, C. 15 Achieved as capacity building for quality assurance in infrastructure planning and programming.

15A MSRI LCB 1999

Achieved as capacity building for enhancing private and community participation.

15B MSRI LCB 1999

Strengthening capacity for urban infrastructure planning and quality management.

15 Completed. The original TOR was divided into 3 TORs.

Achieved as capacity building for decision making process using modeling techniques

15C MSRI LCB 1999

Replaced by TOR 16A and B. 16 Achieved as development of MIS for international cooperation within MPW.

16A MSRI LCB 1999

Improvement of loan management capacity.

16 Completed. The original TOR was divided into 2 TORs.

Achieved as capability improvement of loan management and disbursement.

16B MSRI LCB 2000

TOR revised. 17 Achieved as training of construction management for MPW staff.

17A MSRI LCB 1999

Strengthening training capacity of the construction industry.

17 Completed. The original TOR was divided into 2 TORs.

Achieved as development of MIS for construction industry within MPW.

17B MSRI LCB 2000

TOR revised.

Digital mapping capacity improvement

18 Completed. TOR was replaced by several related TORs.

Achieved as support to urban development management information system in Semarang.

23A MSRI LCB 2003

28 Appendix 2

Report and Recommendation of the President Actual Project

Component Main Outputs Expected TOR

Level of Achievement Outputs TOR Procurement

Achieved as guidelines for land management in the urban spatial development.

29 MSRI LCB 2003

Achieved as capacity building for provincial training board.

30 MOHA LCB 2003

Achieved as strengthening regional training center with Office Management Reinforcing Strategy.

41 MSRI LCB 2003

Development of MPW library facilities.

19 Completed.

Achieved with library facilities established within the Administration Bureau of MPW.

19 MSRI LCB 1999

National Urban Infrastructure Development Strategy (NUDS)

20 Completed.

Achieved under a revised TOR for revising and updating NUDS I.

20 MSRI ICB 2000

Policy Development

New and improved planning methods and techniques for metropolitan areas

21 Completed.

Achieved through pilot testing in Kota Semarang, and successive dissemination in four pilot-areas.

21 MSRI LCB 2000

TOR revised. 22 Achieved as urban sector policy support and capacity building in urban infrastructure management (CBUIM) post-consolidation agenda within urban development.

32 MSRI ICB 2003

Achieved as benefit monitoring and evaluation training and developed performance indicators among MSRI technical staff.

33 MSRI LCB 2002

Achieved as strengthening planning capacity through network information system.

37 MSRI LCB 2002

Methods to upgrade local financial management in fast-growing areas

22 Completed. TOR combined with TOR 8B.

Achieved as urban road management system at four pilot cities.

44 MSRI LCB 2003

Institutional support for development of urban development management information system

23 Completed. Achieved under TOR 23A in the pilot city of Semarang, as a complement of the outputs under TOR-21.

23 MSRI LCB 2003

TOR revised.

Implementation Support

Institutional support for the dissemination of information and communication on lessons learned and best practices in urban

24 Completed. The original TOR was divided into two separate TORs

Achieved as interim support to the central project coordination office by local consultants.

24A MSRI LCB 2000

Appendix 2 29

Report and Recommendation of the President Actual Project

Component Main Outputs Expected TOR

Level of Achievement Outputs TOR Procurement

management and intergovernmental cooperation

Achieved as operational support for project implementation and institutionalization.

24B MSRI LCB 2003

TOR revised. 25 Achieved as policy strategy for cooperatives and small and medium enterprises (SME).

26 MSRI LCB 2003

Achieved as preparation of modules and training materials.

26B SM Cooperative LCB 2003

Achieved as preparation of project benefit monitoring and evaluation within CBUIM pilot areas.

35 MSRI LCB 2003

Achieved as implementation guidelines for cooperative participative development.

38 MSRI LCB 2003

Achieved as consolidation of annual project financial audit report.

40 MSRI LCB

1997–2003 Achieved as database consolidation for education and training program under CBUIM project.

45B MSRI LCB 2003

Achieved as MIS development and training module.

49 MOHA LCB 2003

Operational support for project implementation and institutionalization.

25 Completed. TOR combined with TOR 24B.

Achieved as support for the regional training institutions.

50 MOHA LCB 2003

CBUIM = capacity building in urban infrastructure management, CMS = career mapping system, ICB = international competitive bidding, LCB = local competitive bidding, MIS = management information system, MOHA = Ministry of Home Affairs, MPW = Ministry of Public Works, MSRI = Ministry of Settlement and Regional Infrastructure, PDAM = Perusahaan Daerah Air Minum (local government water supply enterprise), TOR = terms of reference. Sources: ADB. 1997. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of Indonesia for the Capacity Building in Urban Infrastructure Management Project. Manila. (Loan 1572: Capacity Building in Urban Infrastructure Management, approved on 4 November 1997); and Central Project Coordination Office Report 2003.

30 Appendix 3

COST BREAKDOWN BY PROJECT COMPONENT ($ million)

1.00 2.00 3.00 4.00 5.00 6.00 15.00 16.00 17=15+16 18.00 19.00 20.00 21=18+19+20 22=17+21A. Human Resources Development

1. Career Map Development 0.22 0.55 0.77 0.22 0.20 0.42 0.11 0.13 0.24 0.00 0.00 0.00 0.00 0.242. Undergraduade Scholarships 0.00 3.48 3.48 0.00 2.32 2.32 0.00 0.80 0.80 1.83 0.00 0.00 1.83 2.633. Post Graduate Scholarships 12.23 5.14 17.37 12.23 4.43 16.66 7.15 1.44 8.59 4.12 0.00 0.00 4.12 12.704. Trainging of Trainers 0.19 0.59 0.78 0.19 0.39 0.58 0.09 0.14 0.23 0.32 0.00 0.00 0.32 0.555. Training Need Identification 0.00 0.24 0.24 0.00 0.16 0.16 0.00 0.06 0.06 0.11 0.00 0.00 0.11 0.186. Curriculum and Materials Dvnt. 0.15 0.47 0.62 0.15 0.31 0.46 0.07 0.11 0.18 0.20 0.00 0.00 0.20 0.387. Development Of Local Training Institutions 0.00 0.28 0.28 0.00 0.18 0.18 0.00 0.06 0.06 0.10 0.00 0.00 0.10 0.168. Urban Management Training 1.25 1.80 3.05 1.25 1.86 3.11 0.63 0.42 1.05 0.71 0.00 0.00 0.71 1.769. Urban Infrastructure Management Training 2.50 4.09 6.59 3.41 3.73 7.14 1.27 0.95 2.22 2.12 0.00 0.00 2.12 4.3410. On-the-Job Application Training 0.00 1.25 1.25 0.00 0.83 0.83 0.00 0.29 0.29 0.40 0.00 0.00 0.40 0.6911. Seminars and Comparative Study Tours 1.52 1.01 2.53 1.52 0.67 2.19 0.77 0.23 1.00 0.77 0.00 0.00 0.77 1.77

18.05 18.90 36.95 18.96 15.10 34.06 10.09 4.63 14.72 10.68 0.00 0.00 10.68 25.39B. Institutional Development

1. Development Of Modules and Courses 0.00 0.74 0.74 0.00 0.50 0.50 0.00 0.17 0.17 0.29 0.00 0.00 0.29 0.462. Augmentation of Facilities/Equipment at Central 0.23 1.52 1.75 0.23 1.02 1.24 0.12 0.35 0.47 0.60 0.00 0.00 0.60 1.07 Training Establishments3. HRD Program Development 0.00 0.24 0.24 0.00 0.16 0.16 0.00 0.05 0.05 0.10 0.00 0.00 0.10 0.154. Local Adaptation of Training Materials 0.00 0.90 0.90 0.00 0.60 0.60 0.00 0.21 0.21 0.15 0.00 0.00 0.15 0.365. Augmentation of Facilities/Equipment at Regional 0.05 0.83 0.88 0.05 0.55 0.60 0.02 0.19 0.21 0.22 0.00 0.00 0.22 0.44 Establishments6. Strengthening of Local and Provincial Institutions 0.20 1.82 2.02 0.20 1.22 1.42 0.10 0.42 0.52 0.52 0.00 0.00 0.52 1.047. Pilot Testing-Career Map System-Central/Provincial 0.05 1.70 1.75 0.05 1.64 1.69 0.03 0.39 0.42 0.21 0.00 0.00 0.21 0.638. Pilot Development of Improved Final Management System 0.00 1.36 1.36 0.00 1.40 1.40 0.00 0.32 0.32 0.14 0.00 0.00 0.14 0.459. Strengthening Central Advisory Capacity . . a. MPW 0.82 2.46 3.28 0.82 2.64 3.46 0.98 1.29 2.26 0.84 0.00 0.00 0.84 3.10 b. DGPARA 0.21 0.37 0.58 0.21 0.37 0.58 0.15 0.06 0.21 0.14 0.00 0.00 0.14 0.35 c. DGRD 0.11 0.35 0.46 0.11 0.23 0.34 0.03 0.10 0.13 1.23 0.00 0.00 1.23 1.36

1.66 12.29 13.95 1.66 10.33 11.99 1.43 3.56 4.98 4.44 0.00 0.00 4.44 9.42C. Policy Development

1. National Urban Development MIS 0.23 0.51 0.74 0.23 0.34 0.58 0.12 0.11 0.23 0.15 0.00 0.00 0.15 0.392. National Urban Development Strategy Study 0.21 0.64 0.85 0.21 0.42 0.63 0.11 0.15 0.26 0.35 0.00 0.00 0.35 0.613. Spatial Planning Techniques 0.00 0.49 0.49 0.00 0.33 0.33 0.00 0.11 0.11 0.14 0.00 0.00 0.14 0.254. Study on Upgrading Local Government in Financial 0.11 0.30 0.41 0.11 0.20 0.31 0.05 0.07 0.12 0.13 0.00 0.00 0.13 0.24 Management

0.55 1.94 2.49 0.55 1.30 1.85 0.28 0.44 0.72 0.77 0.00 0.00 0.77 1.49D. Implementation Support 0.89 4.52 5.41 0.89 3.02 3.91 0.45 1.05 1.50 2.33 0.00 0.00 2.33 3.83

21.16 37.65 58.81 22.07 29.75 51.82 12.25 9.67 21.91 18.21 0.00 0.00 18.21 40.12Contingencies 1.30 4.35 5.65 1.30 0.25 1.55 0.00 0.00 0.00 0.42 0.00 0.00 0.42 0.42Interest and Other Charges 5.54 0.00 5.54 4.63 0.00 4.63 3.68 0.00 3.68 0.00 0.00 0.00 0.00 3.68

28.00 42.00 70.00 28.00 30.00 58.00 15.93 9.67 25.59 18.63 0.00 0.00 18.63 44.22

Sources: ADB, CPCO, and BPKP auditors reports 2003.

ADB = Asian Development Bank, DGPARA = Public Administration and Regional Autonomy, DGRD = Directorate General of Regional Development, GOI = Government of Indonesia, HRD = human resource development, MPW = Ministry of Public Works, MIS = management information system.

Subtotal (B)

Subtotal (C)

Total Project Cost before Contingencies

Total

Subtotal (A)

Foreign Exchange

Local Curency TotalTotal

Foreign Exchange

Component

Project Cost Estimate Appraisal (1997) Revision (2000)

Prov. Gvnt Local Gvnt.

End of the Project (2003)ADB+Govt.

TotalTotal

Central Gvnt

ADB Financing GOIForeign

ExchangeLocal

CurencyLocal

Curency Total

Appendix 4 31

BREAKDOWN OF YEARLY DISBURSEMENT OF FUNDS, 1997–2003

Asian Development

Bank Counterpart Funds Total Year Quarter Amount Cumulative Amount Cumulative

(1) (2) (3) (4) (5) (6) (7) = (4) + (6)

1998 II 2.01 2.01 — — 2.01

III 0.49 2.50 — — 2.50 IV 0.08 2.58 — — 2.58

1999 I 0.00 2.58 — — 2.58 II 0.12 2.69 — — 2.69 III 0.00 2.69 — — 2.69 IV 0.14 2.83 — — 2.83

2000 I 2.07 4.90 — — 4.90 II 0.24 5.14 — — 5.14 III 0.97 6.11 — — 6.11 IV 0.42 6.53 — — 6.53

2001 I 0.48 7.01 — — 7.01 II 3.62 10.62 — — 10.62 III 0.61 11.24 — — 11.24 IV 0.45 11.68 — — 11.68

2002 I 1.26 12.94 — — 12.94 II 0.50 13.44 — — 13.44 III 0.36 13.79 — — 13.79 IV 1.59 15.38 — 13.57 28.95

2003 I 0.00 15.38 0.00 13.57 28.95 II 3.04 18.42 0.00 13.57 31.99 III 0.36 18.78 5.06 18.63 37.40 IV 3.56 22.33 0.00 18.63 40.96

2004 I 0.18 22.51 0.00 18.63 41.14 II 0.11 22.62 0.00 18.63 41.25 III 2.97 25.59 0.00 18.63 44.21 IV 0.00 25.59 0.00 18.63 44.21

Total 25.59 18.63 Sources: Asian Development Bank and Audit and Development Supervising Agency (BPKP) Auditor’s Report.

32 Appendix 5

PROJECT IMPLEMENTATION SCHEDULE AND PROGRESS

1997–2003 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

1 CPCO/CPO 1% 100% 1%

2 Central PIUs 1% 100% 1%

3 1% 100% 1%

1 7% 100% 7%TOR - 01

2 TOR - 03 1% 100% 1%

3 On-the-Job-Training 4% 100% 4%TOR - 03 TOR - 03 B TOR - 46/46 B

4 Training of Trainers 4% 100% 4%TOR - 03 / TOR 2

5 Seminars 5% 100% 5%TOR 15A TOR 15B TOR 15C TOR 13A TOR 13B TOR 09 TOR 10

6 Short Courses 6% 100% 6%TOR 07A TOR 07B TOR 08 TOR 08B TOR 41 TOR 32

7 International Training 6% 100% 6%TGOR 03 TOR 04A

8 Undergraduate 5% 100% 5%Diplmas/Degrees TOR - 03

9 Masters Degrees 6% 100% 6%TOR - 03

10 Ph.D. Degree 6% 90% 5%TOR - 03

Source: RRP & CPCO Report 2003 53% 52%

Establishment of Implementation Units

A. Human Resources

Human Resource Development Strategy/ Career Mapping

Training Needs Identification / Material Development

Provincial and Local PIUs

1 9 9 7 1 9 9 8ACTIVITIES

2 0 0 3 Assigned Weight (a)

Actual Progress

(b)

Weighted Average ©

= (axb)

1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2

Appendix 5 33

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

TOR-24 B1 3% 90% 3%

CITY PROFILE2 Pilot Tests 5% 90% 5%

3 6% 100% 6%

TOR-08B

UDMIS1 4% 100% 4%

NUDS II2 4% 100% 4%

TOR-213 4% 100% 4%

4 4% 100% 4%

1 6% 100% 6%

2 PPMS 4% 50% 2%

3 5% 100% 5%TOR-24B

45% 42% Original Schedule (as per RRP) Actual Completion

CPCO : Central Project Coordination OfficeCPO : Central Project OfficePIU : Project Implementation UnitsSource: RRP & CPCO Report 2003.

ACTIVITIES1 9 9 7 1 9 9 8 1 9 9 9 Assigned

Weight (a)Actual

Progress (b)

Weighted Average c = (axb)

2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3

B. Institutional Dev't

Management Systems & Programs Development

Institutional Development Assistance

C. Policy Development

Information System Development

National Urban Development Strategy Study

Spatial Planning Methods

Local Government Financial Management

D. Implementation Support

Document Best Practices

Performance Monitoring & Evaluation

Implementation Support

34 Appendix 6

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Covenant

Reference in Loan Agreement

Status of Compliance and Relative Considerations/Recommendations

1. The Borrower shall make available, primly as needed, funds, facilities, services and other resources required, in addition to the proceeds of the loan for carrying out of the Project facilities and for the operation and maintenance of the Project facilities.

Section 4.02

1. Partially complied with. Delays in the transfer of the Project activities to the pilot areas, and in the implementation of related activities originated from the following main problems: (i) difficulty in providing counterpart budget from local and central governments; (ii) frequent changes in the Project management resulting from frequent restructuring in the central government administration; and (iii) unclear and fluid situation in Indonesian local governments.

2. The borrower shall (i) maintain separate

accounts for the Project; (ii) have such accounts and related financial statements audited annually in accordance with appropriate editing standards consistently applied, by independent auditors acceptable to the Bank; (iii) furnish to the Bank not later than 9 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto in English language; and (iv) furnish to the Asian Development Bank (ADB) other information concerning accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

Section 4.06 b

2. Complied with. The Project accounts and related financial statements for Fiscal Year (FY) 2001 have been prepared by an independent auditor, and submitted to ADB.

3. The Borrower shall furnish to ADB Quarterly Reports on the carrying out of the Project and on the operation and management of the project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems other things, progress made and problems encountered during the quarter under review, steps taken, or proposed to be taken to remedy these problems, and proposed programs of activities and expected progress during the following quarter.

Section 4.07 b

3. Complied with. The establishment of the Project

Performance Management System (PPMS) in the pilot local governments provided a more complete picture of the Project results in the “daerah”.

Appendix 6 35

Covenant

Reference in Loan Agreement

Status of Compliance and Relative Considerations/Recommendations

4. Submission of the Project Completion Report (PCR) after physical completion of the Project, not later than 3 months or at a later date agreed between ADB and the borrower.

Section 4.07 c

4. Complied with, PCR was submitted on February 2004.

Implementation Arrangements : 5. Project Executing Agencies (EA). The

Ministry of Public Works (MPW), acting through its Secretariat General, shall be the EA, responsible for project planning, implementation, financial control, information dissemination, reporting and Project activities to ADB and coordination among the local governments and the implementing agencies (IA). The Ministry of Home Affairs (MoHA) and MPW shall be the principal IAs.

Schedule 6, Para. 1

5. Complied with. Due to Indonesia

Central Administration restructuring, the present EA was the Ministry of Settlements and Regional Infrastructure (MSRI) (”Kimpraswil”), acting through the Directorate General of Urban and Rural Development (DGURD).

6. Steering Committee (SC). The borrower will establish an SC. It will be chaired by the National Development Planning Agency (BAPPENAS), and will have representatives from MPW, MoHA, Ministry of Finance (MOF), and Ministry of Administrative Reform (MAR). The SC shall be responsible for overall policy direction, project coordination, and project sustainability. The SC shall also supervise and monitor project progress and resolve issues relating to project implementation and, for this purpose, it shall meet quarterly, or more often if necessary.

Schedule 6, Para. 2

6. Complied with. The acting SC was appointed in July 2000, following the administrative restructuring of the Indonesia Central Government in April 2000. The mentioned appointment was decided in accordance with the loan agreement (LA) covenant.

7. The SC shall ensure that: (i) the strategies, methods, and

programs developed and refined under the Project are suitably implemented;

(ii) information is exchanged on best practices, lessons learned and operating procedures among sector agencies, and will appropriately assist in the dissemination of such information

(iii) the information system developed under the Project is designed in collaboration with the relevant sector agencies and the information produced by the system will be available to all of them, and

(iv) the materials and information developed and used during Project implementation are constantly update to reflect lessons earned during Project implementation.

Schedule 6. Para. 3

7. Partially complied with. Also in relation to the mentioned frequent restructuring in the Central Government Administration, the SC slowed down its activities. Moreover, the Project lacked an adequate information system, to connect the different participating Agencies/Institutions, and to spread lessons learned and good practices in the Capacity Building in Urban Infrastructure Management (CBUIM) environment. With this regard, the partial integration of a designed Urban Infrastructure Management Information System (UIMIS) assignment were not sufficient to cover this complex and time consuming task/ function. The consultants were tasked mainly with preparation and storage of project activity outputs.

36 Appendix 6

Covenant

Reference in Loan Agreement

Status of Compliance and Relative Considerations/Recommendations

8. Central Project Coordination Office (CPCO). A CPCO will be established by the borrower and shall be headed by a full-time coordinating officer and shall be staffed with an adequate number of suitable personnel, including women, within 30 days after the effective date. The CPCO shall coordinate and review the progress of project activities implemented through the Central Project Offices (CPOs); hold meetings with the CPOs and Project Implementation Units (PIUs), ensure that materials produced and training programs developed are integrated into the existing system, review consulting packages prior to tendering and award, review the list of trainees and training institutions, and establish the Project performance monitoring and evaluation system. With the cooperation of the CPOs, the CPCO shall coordinate the disbursement of the Project funds.

Schedule 6 Para. 4

8. Complied with. The CPCO was established early 1998 as envisaged, but no CPOs were established. Based on the recommendations and action plans proposed by the Midterm Review Mission of October 2000, the following changes were made in the Project central organization: (i) the CPCO manager was assisted by two deputies from MoHA and MSRI; (ii) four central PIUs, two from MoHA (PIU of Training and PIU of Institutional Development), and two from MSRI (PIU of Education and PIU of Policy Development), collaborate with the CPCO in the four sectors for which they were appointed. However, coordination problems appeared persistent among them due to a lack of effective authority on the part of the CPCO. To improve the situation, an ADB Review Mission of March 2001 reaffirmed that every no objection letter (NOL) request to ADB should be formally endorsed by the CPCO. For the same reason, the SC requested the EA to only endorse proposals included in a detailed implementation schedule jointly prepared by the EA and the CPCO.

9. Central Project Offices. Each of MPW

and MoHA will establish a CPO to be responsible for the implementation of project activities within their respective ministries. Each CPO shall be headed by a CPO Manager and shall be staffed with an adequate number of suitable personnel, including women, within 30 days after the effective date. Each CPO shall report to the CPCO on the progress of Project activities. The CPCO and both CPO shall be located at the same premises.

Schedule 6, Para. 5

9. Complied with. The project implementation arrangement was modified to make coordination function more efficient by designating the head of CPO as the deputy head of CPCO.

Appendix 6 37

Covenant

Reference in Loan Agreement

Status of Compliance and Relative Considerations/Recommendations

10. Project Implementations Units. Each of the Secretariats General of MPW, Directorate General of Human Settlement, DGPARA (i.e., PUOD), DGRD (i.e., BANGDA), Bandiklat and the participating provincial and local government agencies shall, within 30 days after the effective date, create a PIUs to manage its activities under the Project. The PIUs of the provincial and local government agencies shall submit directly to the CPCO regular reports on the progress of the Project Activities. The other PIU shall report regularly to their respective ministries.

Schedule 6, Para. 6

10. Complied with. Four PIUs were established at the central level as mentioned in item 8.

At local level, 14 local governments (12 Kotas and 2 Kabupatens) were selected as center of pilot testing, and the respective local PIUs were established to monitor and coordinate the Project activities in the “daerah”. No PIUs were established in the pilot provinces as the role of provincial governments was unclear under the new decentralized environment.

11. The borrower shall ensure that CPCO,

CPOs and PIUs are adequately staffed at all times with suitable personnel, including women.

Schedule 6, Para. 7

11. Complied with.

Career Mapping System (CMS) 12. MPW has prepared, for local

governments, draft guidelines that provide minimum and maximum qualifications for employment in public works offices. These guidelines shall be reviewed, field tested, evaluated and incorporated, as appropriate, in decrees to be issued by MPW, MoHA and MAR respectively, as appropriate. Implementation guidelines and standard operating procedures shall also be issued by the concerned agency. The career mapping initiatives shall be prepared by MPW and MoHA, in consultation with MAR. A human resource data base shall also be established for MPW.

Schedule 6, Para. 8

12. Partially complied with. A new

CMS was finalized in June 1998. However, several problems existed for its implementation: (i) the final outputs were presented in the form of agenda for discussion without any option to be pilot-tested; (ii) the proposed CMS presented a legal framework with an open work system which was not consistent with Indonesian cultural/ behavioral background ; (iii) a gap between the existing institutional framework and the proposed human resources management system, and the designed CMS, particularly at local level, was significant; and (iv) the split of the existing unitary Public Servant National System into two separate systems as proposed under the CBUIM, and the remaining public administration apparatus were inconsistent. The CMS was revised under TOR-13B and the revised CMS was submitted in August 2002. The CMS was however not incorporated and issued as a government decree for application nationwide. Accordingly, implementation guidelines and operation procedures were not issued.

38 Appendix 6

Covenant

Reference in Loan Agreement

Status of Compliance and Relative Considerations/Recommendations

Human Resource Development 13. Domestic short courses shall include,

among others, urban management core courses as well as spatial planning and land management, infrastructure service delivery, financial management, communication, environmental management, government and community participation, economic and social development and private sector participation. Curricula related to integrated urban infrastructure development planning and programming, urban services including of solid waste management services, spatial planning, and community participation in local government shall be updated. Curriculum development shall be based upon documentation of best practices as well as the experience gained in pilot project conducted under the Project. The domestic short courses shall be provided by Pusdiklat and Bandiklat as well as the training centers of universities, non government institutions and metropolitan cities. Whenever possible, priority shall be given to the utilization of regional education local institutions in order to increase access and local content of the courses.

Schedule 6, Para. 9

13. Complied with. Due to delays in

training need identification and curriculum development (with related pilot testing) in six pilot areas, the start of training was delayed coupled with counterpart budget problems. A massive training program was implemented during FY2002 under TOR-03B, with a total of 2635 participants from the 14 pilot areas. Targets designed in the LA were being achieved and exceeded during FY2003.

Appendix 6 39

Covenant

Reference in Loan Agreement

Status of Compliance and Relative Considerations/Recommendations

14. Post graduate education and training for managers and professionals, and undergraduate managers and professionals, and undergraduate education for high school graduates, who have potential for higher education programs, shall be designed or chosen, and provided, so as to enable participating local governments to upgrade their capacities. Education resulting in a diploma or specialist degree may be provided to university and polytechnic seniors intending to join the government in the area of urban management.

Schedule 6, Para. 10

14. Complied with. Education program were in general exceeded the original targets.

15. Criteria and procedures for the selection of training and education participants shall include guidelines on educations level, work experience, previous training, organization and language ability. The same criteria and procedures shall be distributed to all central, provincial and local government institutions within the sector. The participating central, provincial and local government agencies shall then nominate candidates. Selection of participants for education programs shall be made by the CPCO.

Schedule 6, Para. 11

15. Complied with. Criteria and procedures used to enroll training and education participants fit with those described in the LA.

16. The CPCO shall ensure that the participants are representative of the growing urban areas, that there is a suitable balance of participants among the various levels and agencies of government within the sector, and that staff of local governments, universities and nongovernment institutions receive adequate training and education under the Project.

Schedule 6, Para. 12

16. Complied with. The increasing transfer of the Project activities to the Pilot Areas resulted in more balanced distribution of training participants.

17. The Borrower shall ensure that participants in overseas and long-term domestic training remain employed within the sector for the period stipulated in the borrower’s applicable regulations. The participants shall be required to execute a bonding agreement in the standard form of the borrower. During the course of their studies, the participating staff shall be replaced in their official duties by peers of similar education attainment.

Schedule 6, Para. 13 17. Complied with. The participants in overseas and domestic long-term studies and training under CBUIM, were normally bound to work in the ”daerah”, after finalization of these activities.

40 Appendix 6

Covenant

Reference in Loan Agreement

Status of Compliance and Relative Considerations/Recommendations

18. By the third anniversary of the effective date, the borrowers shall prepare and finalize a plan that shall institutionalize and enhance the sustainability of urban management training programs, by (a) strengthening institutional arrangements for policy, planning, coordination, monitoring and evaluation of the training programs; (b) incorporating training into the career mapping system recommended by MPW; (c) conducting an awareness campaign of the benefits of training among senior decision makers; (d) adopting user behavior for the courses and course materials provided; (e) encouraging public sector training institutions to operate in a more autonomous manner; and (f) encouraging local governments and other training users to utilize the services of private training providers. By the fourth anniversary of the effective date, the borrower shall issue the relevant decrees or regulations to adopt and implement the said plan.

Schedule 6, Para. 14

18. Partially complied with. A plan was partially prepared for several activities undertaken within the CBUIM project. Due to the existing problems and delays in the implementation of project activities, The covenant (“institutionalize and enhance the sustainability” of UIM training programs), were partially achieved. The main bottleneck concerned to the basic step of establishing a new CMS, incorporating UIM training (refer to Point 12 of this Annex)

19. The borrower shall encourage the participation of women in project activities, including training and education under Part A, and the administration of CPCO, CPO and the PIUs.

Schedule 6, Para. 15

19. Complied with. The CPCO Deputy Manager of MSRI and three of the four Central PIU managers are women.

Institutional Development 20. The Project shall pilot test systems,

programs, and activities in the areas of urban infrastructure services, organization, public private and community participation, staffing and career path mapping, spatial planning, feasibility studies, transportation management. The pilot tests shall be carried out in at last 12 local governments and at least the six pilot provinces agreed between the borrower and ADB.

Schedule 6, Para. 16

20. Partially implemented. Due to

delays in the Project activity implementation in the pilot areas, only part of the pilot testing were implemented. Pilot testing was in line with PPMS Quarterly Reports.

21. Within 120 days after the effective date, the CPCO shall conduct a workshop for the pilot provinces and municipalities, district and other local governments and universities and non government institutions within the pilot provinces. The workshop shall focus on project objectives, the role of the pilot provinces, and the institutional and organizational needs of the participants.

Schedule 6, Para. 17 21. Complied with. Two preliminary workshops held by the CPCO in Jakarta (October 1998), and in Denpasar (November 1998). A third workshop held in Jakarta, in December 2000, concerning Institutionalization of CBUIM Services Infrastructure. Representatives of the 14 local PIUs participated in the last workshop.

Appendix 6 41

Covenant

Reference in Loan Agreement

Status of Compliance and Relative Considerations/Recommendations

22. Each municipality and district shall reconfirm whether they will participate in the pilot test on the basis of discussions held at the workshop, and the needs and proposals made by the workshop participants. The CPCO shall determine the provincial and local governments to be involved and which system, programs and activities to be pilot tested in each of the participating provincial or local government.

Schedule 6, Para.18

22. Complied with. From the 26 local governments, which participated in the first workshops of Jakarta and Bali, 14 were invited to participate in a third workshop held in Jakarta in December 2000, and agreed to become centers of the pilot testing. The staff of the local PIUs were appointed by a “decision letter” of concerned Mayors/Bupatis.

23. After the workshop, the CPCO, with the assistance of MPW and IA, shall prepare a city profile containing a pilot capacity building program for each of the provincial governments, municipalities and district that will participate in the pilot tests. The CPCO shall also provide for the financing of the pilot tests on a grant basis from the proceeds of the loan. The CPCO shall provide the Bank with a copy of each draft city profile and pilot program immediately following the agreement with the participating provincial and local governments.

Schedule 6, Para.19

23. Partially complied with. Not all of the 14 pilot areas finalized their city profile, with the support of the CPCO and the Consultants. Pilot testing were conducted in the pilot areas, through the consultant services for Institutional Development (TOR-08B), and the massive UIM training program under TOR-03B, and other activities.

24. By the third anniversary of the effective date, the borrower shall prepare and finalize a plan that adopts methods for making employment in local governments more attractive for urban managers. The plan shall include institutionalizing the CMS pilot tested, refined and recommended by MPW under the Project and aim to increase the number of staff with post high school education in the public works offices of urban local government. By the fourth anniversary of the effective date, the borrower shall issue the relevant decrees or regulations and operational guidelines to adopt and implement the said plan.

Schedule 6, Para.20

24. Not implemented. A new CMS and its institutionalization plan was the specific subject of the consulting services under TOR-13B (Revised), implemented between April and August 2002. As explained in Covenant 12, the CMS could not be implemented during the Project period.

42 Appendix 6

Covenant

Reference in Loan Agreement

Status of Compliance and Relative Considerations/Recommendations

25. By 31 December 1999, the borrower shall finalize a long-term and time-bound action plan that will ensure the sustainability of CPPE. The plan shall cover (i) CPPE’s long-term objectives and performance indicators; (ii) the development and retention of staff; (iii) course and curriculum development; (iv) enrolment targets; (v) development of facilities; and (vi) sources and use of funds, including potential for generating of revenues from tuition fees. By the fourth anniversary of the effective date, the borrower shall issue the relevant decrees or regulations to adopt and implement the said plans.

Schedule 6, Para.21

25. Complied with late. Due to the delay in the engagement of consultants, which was designed to prepare a 5-year Development Plan for the CPPE of Bandung, Semarang and Surabaya under TOR-04: Training Development Assistance this covenant was achieved with late. The current center, called Pusditek, were reorganized based on several MSRI’s Decrees of January and July 2001, and decentralized with establishment of branches in various cities, in accordance with the national decentralization policy.

Policy Support 26. The Project shall provide support for the

development of manuals, guidelines, standard operating procedures and training materials, and for participation of related agencies in the city profiling and subsequent activities. The Project shall also support both for public and private sector, education and training agencies, and training and operations assistance shall be provided to local and provincial governments responsible for densely populated, low income community housing programs.

Schedule 6, Para.22

26. Partly complied with. Support on the

concerned matters were provided mainly in form of training materials, and short management courses, which were undertaken at local level. Pilot testing, and other activities designed for the pilot areas were undertaken.

27. The borrower shall consider using independent institutions to review the effectiveness of the education and training programs and to disseminate information and to organize seminars and workshops.

Schedule 6, Para.23

27. Complied with. The reviews were carried out by several evaluation workshops within the TOR-33 (for education) and TOR-03B (for training). Other evaluation workshops were undertaken during FY2003, These involved a wide variety of stakeholders including independent institutions. Information dissemination, seminars and workshops on UIM were carried out in FY2003 under several consulting services (such as those under TOR-45, TOR-46, TOR-46B).

Appendix 6 43

Covenant

Reference in Loan Agreement

Status of Compliance and Relative Considerations/Recommendations

28. By the third anniversary of the effective

date, the SC shall finalize an action plan for improving the financial management of urban local governments. The plan shall outline the financial objectives of urban local governments, their performance indicators, changes in their budgeting and accounting systems, and related changes in their organization staffing and operations.

Schedule 6, Para.24

28. Waived as was covered by AD TA Number3177, implemented by MoHA.

29. Public-private and community relations shall be supported by training and operations advice provided to staff of local and provincial government responsible for urban management. The letter shall strengthen its urban development coordination forums providing linkages with the community and the private sector for purposes of reviewing planning, programs, and projects.

Schedule 6, Para.25

29. Complied with. The covenant issues were developed by the CS under TOR-15B, concerning the “Strengthening of the Capacity in disseminating Urban Infrastructure provision, to enhance Private & Community participation” (completed in March 99, under the planning Bureau of MPW). More specific and practical actions were carried out under TOR-08B, which had allocated two private sector & community participation experts (one International and one local).

Budgetary Support 30. Funds for the Project activities of the

central, provincial, and local governments shall be channeled through the budgetary allocation of these administrative subdivisions. Each participating government unit or agency shall contribute to the payment of costs associated with the project activities in which they participate. The SC, with sustained inputs from the CPCO, shall closely monitor and assist the provisions of counterpart funds for the EA and the IAs.

Schedule 6, Para.26

30. Complied with. At central level, the

participating Government institutions contributed to the respective project activities, through their budgetary allocations. The pilot areas have provided the necessary counterpart budget for the operational costs of the local PIUs. The pilot areas were contributed with BANGDA for self-financing urban management training.

Monitoring and Evaluation 31. Within 6 months after effective date, the

CPCO and CPOs shall establish a PPMS to monitor project Implementation, and assess the effects of the project on targeted beneficiaries. The PPMS shall include continuous comparisons of actual and projected performance against the baseline indicators. The PIUs shall be responsible for data collection and initial analysis.

Schedule 6, Para.27; Schedule 6, Para.23

31. Complied with late. The PPMS were

established through a simplified version suitable for the local environment, after testing and r in some of the pilot areas. The local PIUs were responsible for coordinating the relevant reporting activities, with the advice and support of the CPCO, supported by the Consultants. The use of the PPMS was delayed due to late establishment of the PIUs.

44 Appendix 7

QUANTITATIVE ASSESSMENT OF OVERALL PROJECT PERFORMANCE

Table A7.1: Overall Rating Criteria Assessment Rating Weight

(%) Weighted

Rating Relevance Effectiveness Efficiency Sustainability Overall Rating

Relevant Less Effective Efficient Less Likely Partly Successful

2 1 2 1

30 30 10 30

0.60 0.30 0.20 0.30 1.40

Notes: Relevance Project’s impact and outputs were fully consistent with the Government’s development

strategy, Asian Development Bank’s (ADB’s) lending strategy for the country, and ADB’s strategic objectives at the time of approval and evaluation. Also considers adequacy of design.

Effectiveness Project achieved its outcomes and is likely to attain its targeted impact. Efficiency Project achieved its objectives in a relatively efficient manner. Sustainability Project’s outcomes and development impacts are sustainable under sound operation and

management of project facilities.

Table A7.2: Rating System

Rating Value

Relevance Effectiveness Efficiency Sustainability

3

2 1

0

Highly Relevant Relevant Partly Relevant Irrelevant

Highly Effective Effective Less Effective Ineffective

Highly Efficient Efficient Less Efficient Inefficient

Most Likely Likely Less Likely Unlikely

Rating: >2.7 = Highly Successful >1.6-2.7 = Successful 0.8-1.6 = Partly Successful <0.8 = Unsuccessful

Sources: ADB. 2006. Guidelines for Preparing Performance Evaluation Reports for Public Sector Operations. Manila (January, Appendix 3: Examples of Rating Each Criterion and Overall Performance Assessment).