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LOAN NUMBER 1100 IND

Loan Agreement(Sixth Irrigation Project)

BETWEEN

0REPUBLIC OF INDONESIA

AND

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

DATED APRIL 10, 1975

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CONFORMED COPY

LOAN NUMBER 1100 IND

Loan Agreement(Sixth Irrigation Project)

BETWEEN

REPUBLIC OF INDONESIA

AND

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

DATED APRIL 10, 1975

LOAN AGREEMENT

AGREEMENT, dated April 10, 1975, between REPUBLIC OF INDONESIA(hereinafter called the Borrower) and INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank).

ARTICLE I

General Conditions; Definitions

Section 1.01. The parties to this Agreement accept all the provisions of theGeneral Conditions Applicable to Loan and Guarantee Agreements of the Bank,dated March 15, 1974, with the same force and effect as if they were fully setforth herein (said General Conditions Applicable to Loan and Guarantee Agreementsof the Bank being hereinafter called the General Conditions).

Section 1.02. Wherever used in this Agreement, unless the context otherwiserequires, the several terms defined in the General Conditions have the respectivemeanings therein set forth and the following additional terms have the followingmeanings:

(a) "DGWRD" means the Directorate General of Water ResourcesDevelopment of the Borrower's Ministry of Public Works and Electric Power;

(b) "PROSIDA" means Proyek Irigasi IDA, an executive body withinDGWRD;

(c) "Prior Development Credit Agreements" means the development creditagreement (Irrigation Rehabilitation Project) dated September 6, 1968; thedevelopment credit agreement (Second Irrigation Rehabilitation Project) datedJune 15, 1970; the development credit agreement (Third Irrigation RehabilitationProject) dated November 6, 1970; the development credit agreement (FourthIrrigation Rehabilitation Project) dated March 9, 1972, and the development creditagreement (Jatiluhur Irrigation Extension Project) dated October 3, 1974, allbetween the Borrower and the Association;

(d) "Groundwater Group" means the Groundwater Group within DGWRD;

(e) "cusecs" means cubic feet per second;

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(f) "Cirebon Irrigation Systems" means an irrigation area (daerah) of about89,000 hectares surrounding the volcano, Gunung Ciremai, along the north coastof the Province of West Java;

(g) "Rentang Irrigation System" means an irrigation area (daerah) of about92,000 hectares extending north and west of the Cirebon Irrigation Systems alongthe north coast of the Province of West Java;

(h) "Sampean Baru Irrigation System" means ail irrigation area (daerah)of about 9,800 hectares to the north of the Sampean Baru Primary Canal alongthe north coast of the Province of East Java;

(i) "Project Area" means the areas comprising the Cirebon IrrigationSystems, the Rentang Irrigation System and the Sampean Baru Irrigation System;

(j) "Madiun Irrigation Systems" means an irrigation area (daerah) of about130,000 hectares surrounding the City of Madiun in the Province of East Java;

(k) "North Sadang Irrigation System" means an irrigation area (daerah)of about 6,500 hectares to the north of the Sadang River in the Province of SouthSulawesi; and

(1) "IPEDA " means Iuran Pembangunan Daerah, contributions for regionaldevelopment collected from owners of land, established and operating under LawNo. 1l/PRP/1959 of the Borrower.

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrower, on the terms andconditions in the Loan Agreement set forth or referred to, an amount in variouscurrencies equivalent to sixty-five million dollars ($65,000,000).

Section 2.02. The amount of the Loan may be withdrawn from the LoanAccount in accordance with the provisions of Schedule 1 to this Agreement, assuch Schedule may be amended from time to time, for expenditures made (or,if the Bank shall so agree, to be made) in respect of the reasonable cost of goodsand services required for the Project described 'n Schedule 2 to this Agreementand to be financed out of the proceeds of the Loan.

Section 2.03. Except as the Bank shall otherwise agree, the goods, worksand services (other than consultants' services) for the Project to be financed out

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of the proceeds of the Loan shall be procured in accordance with the provisionsof Schedule 4 to this Agreement.

Section 2.04. The Closing Date shall be June 30, 1982 or such later dateas the Bank shall establish. The Bank shall promptly inform the Borrower of suchlater date.

Section 2.05. The Borrower shall pay to the Bank a commitment chargeat the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principalamount of the Loan not withdrawn from time to time.

Section 2.06. The Borrower shall pay interest at the rate of eight and one-halfper cent (8-1/2%) per annum on the principal amount of the Loan withdrawnand outstanding from time to time.

Section 2.07. Interest and other charges shall be payable semi-annually onMay 15 and November 15 in each year.

Section 2.08. The Borrower shall repay the principal amount of the Loanin accordance with the amortization schedule set forth in Schedule 3 to thisAgreement.

ARTICLE III.

Execution of the Project

Section 3.01. (a) The Borrower shall cause the Project to be carried outwith due diligence and efficiency and in conformity with appropriate agricultural,economic, engineering and financial practices, as follows:

(i) PROSIDA will carry out Parts A(l), (2), (3), (5), (6), Part B,Part C(l) through (5) and (7), Part D, Part G and Part I(1)of the Project;

(ii) the Borrower's Ministry of Agriculture will carry out Part E,Part H, Part 1(2) and Part J of the Project;

(iii) PROSIDA, in cooperation with the Public Works Service of theProvincial Governments of West and East Java, as appropriate,will carry out Part A(4) and Part C(6) of the Project;

(iv) the Groundwater Group in DGWRD will carry out Part F(4)of the Project; and

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(v) DGWRD will carry out Parts F(1), (2) and (3) of the Project.

The Borrower shall provide, promptly as needed, the funds, facilities, services andother resources required for the purpose.

(b) Without restricting its obligations under paragraph (a) of this Section,the Borrower shall ensure that sufficient liquid funds to cover the budgetedexpenditures estimated by PROSIDA, DGWRD and the Borrower's Ministry ofAgriculture to be required for their respective Parts of the Project during eachquarter shall be made available to PROSIDA, DGWRD and the Borrower's Ministryof Agriculture, respectively, not later than fifteen days after the first day of eachsuch quarter.

Section 3.02. Within three months of the date of this Agreement, or suchother date as shall be agreed between the Borrower and the Bank, in order toassist the Borrower in the preparation of plans, designs, specifications and contractdocuments for the civil works included in Parts A, B, C and E(l), and wherevernecessary, Part H of the Project and in the supervision of the construction thereof,in carrying out the studies included in Part F of the Project, and in implementingthe overseas and local training programs included in Part I of the Project, theBorrower shall employ consultants whose qualifications, experience and terms andconditions of employment shall be satisfactory to the Bank.

Section 3.03. Within six months of the date of this Agreement, or suchother date as shall be agreed between the Borrower and the Bank, the Borrowershall employ the following advisors whose qualifications, experience and 'terms andconditions of employment shall be satisfactory to the Bank:

(i) an advisor to assist PROSIDA in improving the management andorganization of PROSIDA and in strengthening the operationand maintenance capabilities of Provincial Government staff;

(ii) an advisor to assist the Borrower's Ministry of Agriculture incarrying out Part J of the Project;

(iii) a soil conservation advisor to assist the Borrower's Ministry ofAgriculture in carrying out Part H of the Project;

(iv) an agricultural planning and management advisor to assist theBorrower's Ministry of Agriculture in preparing the agriculturaldevelopment program referred to in Section 3.10 of thisAgreement; and

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(v) two advisors on drainage and river problems to assist PROSIDAin carrying out Part B(2) of the Project.

Section 3.04. (a) Except as the Borrower and the Bank shall otherwise agree,the Borrower shall through PROSIDA and its appropriate local agencies: (i) guideand direct farmers in completing the civil works on each tertiary irrigation anddrainage canal system, and on the quaternary canals related thereto, included inParts A, B, and C of the Project; (ii) cause the civil works on each such tertiaryirrigation and drainage canal system to be completed within twelve months afterthe first fifty meters of each such tertiary system have been rehabilitated orconstructed by the Borrower; and (iii) to the extent that farmers fail to carryout such civil works themselves, complete such civil works.

(b) Without restricting its obligations under Section 4.05 of thisAgreement, the Borrower shall ensure that adequate credit and agricultural inputs(including fertilizers and agricultural chemicals) are made available to farmers ineach tertiary and quaternary network to be rehabilitated or constructed under PartsA, B and C of the Project as soon as each such tertiary and quaternary networkis completed and begins operation.

Section 3.05. (a) The Borrower undertakes to insure, or make adequateprovision for the insurance of, the imported goods to be financed out of theproceeds of the Loan against hazards incident to the acquisition, transportationand delivery thereof to the place of use or installation, and for such insuranceany indemnity shall be payable in a currency freely usable by the Borrower toreplace or repair such goods.

(b) Except as the Bank shall otherwise agree, the Borrower shall causeall goods and services financed out of the proceeds of the Loan to be usedexclusively for the Project.

Section 3.06. (a) The Borrower shall furnish to the Bank, promptly upontheir preparation, the plans, specifications, reports, contract documents andconstruction and procurement schedules for the Project, and any materialmodifications thereof or additions thereto, in such detail as the Bank shallreasonably request.

(b) The Borrower: (i) shall maintain records adequate to record theprogress of the Project (including the cost thereof) and to identify the goods andservices financed out of the proceeds of the Loan, and to disclose the use thereofin the Project; (ii) shall enable the Bank's accredited representatives to visit thefacilities and construction sites included in the Project and to examine the goods

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financed out of the proceeds of the Loan and any relevant records and documents;and (iii) shall furnish to the Bank all such information as the Bank shall reasonablyrequest concerning the Project, the expenditure of the proceeds of the Loan and

the goods and services financed out of such proceeds.

(c) The accounts of PROSIDA, the Groundwater Group and theBorrower's Ministry of Agriculture, which are to be kept pursuant to the provisionsof Section 4.02 of this Agreement, shall be audited each fiscal year in accordancewith appropriate auditing principles consistently applied by independent auditorsacceptable to the Bank, and as soon as available, but in any case not later thanfour months after the end of each such year, the Bank shall be furnished withcertified copies of such accounts for such year as so audited and the report ofsuch audit by said auditors of such scope and in such detail as the Bank shallhave reasonably requested.

Section 3.07. The Borrower shall take or cause to be taken all such actionas shall be necessary to acquire as and when needed all such land and rights inrespect of land as shall be required for carrying out Parts A, B, C, D(2), E(1)and H of the Project.

Section 3.08. Until the completion of the Project:

(a) The Borrower shall cause PROSIDA to be at all times adequatelystaffed with qualified and competent personnel under the supervision of acompetent and experienced General Manager, and, to that end, the Borrower shallcontinue to strengthen PROSIDA's staff.

(b) Before making any new appointment to the position of GeneralManager of PROSIDA, the Borrower shall inform the Bank of the names,qualifications and experience of the persons considered for such appointment andafford the Bank a reasonable opportunity to exchange views with the Borroweron the qualifications and experience of such persons.

(c). Without limitation on the obligations of the Borrower under paragraph(a) of this Section, the Borrower shall employ in PROSIDA for each of the IrrigationSystems included in the Project Area a qualified and competent Sub-project Managerand on a full-time basis a qualified and competent Deputy Sub-project Manager,shall cause such officials to be vested with all necessary powers and authorities,and shall charge such Sub-project Manager, and in his absence his DeputySub-project Manager, with full responsibility for the rehabilitation and development,and the operation and maintenance during construction, of each such IrrigationSystem.

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(d) The Borrower shall cause PROSIDA to cooperate closely with theagencies of the Borrower's Ministry of Agriculture responsible for agriculturalsupport services.

(e) The Borrower shall employ on a full-time basis a qualified andcompetent person to serve in its Ministry of Agriculture as director to supervisethe agricultural development program referred to in Section 3.10 of this Agreementand shall appoint a qualified and competent person to serve in the area of theCirebon Irrigation Systems as project manager responsible for agricultural supportservices.

(f) The Borrower shall cause PROSIDA to operate and maintain theIrrigation Systems constructed under the Project until the Provincial Governmentsof East and West Java, as appropriate, assume responsibility therefor.

Section 3.09. Within twenty-four months of the date of this Agreement,or such other period as shall be agreed between the Borrower and the Bank, theBorrower shall have constructed the agricultural development center referred toin Part E(l) of the Project; thereafter, the Borrower shall employ therein suchnumbers of qualified and competent staff as may be required for the effectivecarrying out of the agricultural extension, research and training activities of saidcenter under the Project.

Section 3.10. Within twelve months of the date of this Agreement, or suchother period as shall be agreed between the Borrower and the Bank, the Borrowershall, through its Ministry of Agriculture, prepare and submit to the Bank for itsreview and comments an agricultural development program for the improvementof agricultural production in the Project Area and thereafter, shall implement saidprogram pursuant to the time schedule set forth therein.

Section 3.11. Within twelve months of the date of this Agreement, or suchother period as shall be agreed between the Borrower and the Bank, the Borrowershall, through its Ministry of Agriculture and PROSIDA, prepare and submit tothe Bank for its review and comments prior to the commencement ofimplementation the program for carrying out Part I of the Project.

Section 3.12. Within six months of the date of this Agreement, or suchother period as shall be agreed between the Borrower and the Bank, the Borrowershall through its Ministry of Agriculture prepare and furnish to the Bank a planfor the carrying out of Part J of the Project.

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ARTICLE IV

Other Covenants

Section 4.01. (a) It is the policy of the Bank, in making loans to, or withthe guarantee of, its members not to seek, in normal circumstances, special securityfrom the member concerned but to ensure that no other external debt shall havepriority over its loans in the allocation, realization or distribution of foreignexchange held under the control or for the benefit of such member. To that end,if any lien shall be created on any public assets (as hereinafter defined), as securityfor any external debt, which will or might result in a priority for the benefitof the creditor of such external debt in the allocation, reaization or distributionof foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipsofacto and at no cost to the Bank, equally and ratably secure the principal of,and interest and other charges on, the Loan, and the Borrower, in creating orpermitting the creation of such lien, shall make express provision to that effect;provided, however, that, if for any constitutional or other legal reason suchprovision cannot be made with respect to any lien created on assets of any ofits poitical or administrative subdivisions, the Borrower shall promptly and at no -cost to the Bank secure the principal of, and interest and other charges on, theLoan by an equivalent lien on other public assets satisfactory to the Bank.

(b) The foregoing undertaking shall not apply to: (i) any lien created onproperty, at the time of purchase thereof, solely as security for payment of thepurchase price of such property; and (ii) any lien arising in the ordinary courseof banking transactions and securing a debt maturing not more than one year afterits date.

(c) As used in this Section, the term "public assets" means assets of theBorrower, of any political or administrative subdivision thereof and of any entityowned or controlled by, or operating for the account or benefit of, the Borroweror any such subdivision, including gold and other foreign exchange assets held byany institution performing the functions of a central bank or exchange stabilizationfund, or similar functions, for the Borrower.

Section 4.02. The Borrower shall maintain or cause to be maintained recordsadequate to reflect in accordance with consistently maintained sound accountingpractices the operations, resources and expenditures, in respect of the Project, ofthe departments or agencies of the Borrower responsible for carrying out the Projector any part thereof.

Section 4.03. (a) The Borrower shall cause all canals, structures, roads,equipment and other facilities of the irrigation systems included in the Project

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Area to be operated and maintained by the Provincial Governments of West andEast Java, as appropriate, and all such repairs and renewals thereof to be madefrom time to time and in accordance with appropriate agricultural, engineeringand financial policies and practices, and shall cause such action to be taken asshall be reasonably requ,red to ensure the economic use of the water made availableby such systems for agricultural development and operations. To that end, theBorrower shall promptly take or cause to be taken such measures to increase theeffectiveness of the operation and maintenance of the Irrigation Systems includedin the Project Area as shall be agreed between the Borrower and the Bank.

(b) Without restricting its other obligations under paragraph (a) of thisSection, the Borrower shall:

(i) ensure that adequate funds shall be made available for use bythe Provincial Governments of West and East Java, asappropriate, for the operation and maintenance of each of theIrrigation Systems included in the Project Area within one yearof the completion of each such Irrigation System;

(ii) take such measures as may be necessary to improve theeffectiveness of the operation and maintenance staff of theProvincial Governments of West and East Java;

(iii) submit to the Bank by May 31 of each year a report of theactual expenditures of the Provincial Governments of West andEast Java on operation and maintenance for the previous yearand a report on the estimated expenditures of the ProvincialGovernments of West and East Java to be made on operationand maintenance for the coming year; and

(iv) within three years of the date of this Agreement, or such otherperiod as shall be agreed between the Borrower and the Bank,submit to the Bank for its review and comments a consolidatedoperation and maintenance manual to assist the ProvincialGovernments of West and East Java in the operation andmaintenance of the Irrigation Systems constructed under theProject and thereafter, shall cause the Provincial Governmentsof West and East Java to carry out such operation andmaintenance pursuant to said manual.

Section 4.04. (a) Except as the Bank shall otherwise agree, notwithstandingthe provisions of paragraph (b) of this Section, the Borrower shall, through theIPEDA, establish and thereafter maintain and collect, or cause to be established

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and thereafter maintained and collected, charges on irrigable agricultural land, oron the users of the land, serviced by the tertiary irrigation and drainage networksrehabilitated or constructed under the Project, as each of such tertiary networksis completed, at such levels as shall be required to (i) cover all operation andmaintenance costs attributable to the provision of irrigation and drainage for suchland, beginning two years after completion of each such tertiary network, and(ii) recover over the useful life of the irrigation system a reasonable portion ofthe capital expenditures attributable to such system. To that end, operation andmaintenance costs and capital expenditures for facilities and services which arecommon also to other water uses shall be apportioned among the various usersin an equitable manner.

(b) The Borrower shall, beginning four years from the date of thisAgreement, submit or cause to be submitted to the Bank for its review not lessthan once every two years a report on the IPEDA rate collected from the differentclasses of land in the Project Area and the methodology used in determining theestimated net value of production thereunder.

(c) In the event and to the extent that the funds available to the Provincial-Governments of West and East Java from their respective resources are insufficientto cover the expenditures estimated to be required for continuous operation andmaintenance in accordance with Section 4.03 of this Agreement, the Borrowershall, promptly as needed, take such measures as shall be required to cover suchexpenditures.

Section 4.05. The Botrower shall take such action as shall be necessary toprovide adequate agricultural support servicef in each of the Irrigation Systemsincluded in the Project Area, including provision of agricultural extension servicesand agricultural inputs (impro ied seed, fertilizers, agricultural chemicals andagricultural credit) in order to encourage the optimum use of irrigation water foragricultural production.

ARTICLE V

Effective Date; Termination

Section 5.01. The following is specified as an additional matter, within themeaning of Section 12.02(c) of the General Conditions, to be included in theopinion or opinions to be furnished to the Bank, namely that the obligationsreferred to in Section 4.04 of this Agreement can be implemented in accordancewith the provisions of Sections 5(B) and 6(1) of Law No. 1l/PRP/1959 of theBorrower.

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Section 5.02. The date July 9, 1975, is hereby specified for the purposesof Section 12.04 of the General Conditions.

ARTICLE VI

Representative of the Borrower; Addresses

Section 6.01. The Minister of Finance of the Borrower is designated asrepresentative of the Borrower for the purposes of Section 11.03 of the GeneralConditions.

Section 6.02. The following addresses are specified for the purposes ofSection 11.01 of the General Conditions:

For the Borrower:

Ministry of FinancePost Office Box 21Jakarta, Indonesia

Cable address:

MINISTRY FINANCEJakarta

For the Bank:

International Bank forReconstruction and Development

1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable address:

INTBAFRADWashington, D.C.

IN WITNESS WHEREOF, the parties hereto, acting through theirrepresentatives thereunto duly authorized, have caused this Agreement to be signed

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in their respective names in the District of Columbia, United States of America,as of the day and year first above written.

REPUBLIC OF INDONESIA

By Zahar ArifinAuthorized Representative

INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT

By /s/ Gregory B. VotawActing Regional Vice President

East Asia and Pacific

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SCHEDULE 1

Withdrawal of the Proceeds of the Loan

1. The table below sets forth the Categories of items to be financed out ofthe proceeds of the Loan, the allocation of the amounts of the Loan to eachCategory and the percentage of expenditures for items so to be financed in eachCategory:

Amount of theLoan Allocated % of(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(1) Civil Works 41,000,000 50% (representingincluded in the estimatedParts A, B, C foreign expendi-and D(2) of tu-e component)the Project

(2) Equipment and 2,500,000vehiclesincluded inPart D(1) ofthe Project

(a) Directly 100% of foreignimported expenditures

(b) Locally 95% of localmanufac- expenditurestured (ex-factory)

(c) Imported 65% of localgoods pro- expenditurescured lo-cally (ex-cludingvehicles)

(3) Consultants' 500,0 100% of foreignservices, equip- expendituresment and materialsfor groundwater in-vestigation includedin Part F(4) of theProject

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Amount of theLoan Allocated % of(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(4) Agricultural 5,500,000support programincluding sur-vey and evalua-tion

(a) Civil Works 50% (representingincluded in the estimatedParts E and foreign expendi-H of the ture component)Project

(b) Equipment,materialsand vehiclesincluded inParts E and Jof the Project

(i) Directly 100% of foreignimported expenditures

(3) Locally 95% of localmanufac- expenditurestured (ex-factory)

(iii) Imported 65% of localgoods pro- expenditurescured lo-cally (ex-cludingvehicles)

(c) Consultants' 100% of foreignservices, tech- expendituresnical assistanceand trainingincluded inParts E, H,1(2) and J ofthe Project

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Amount of theLoan Allocated % of(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(d) Survey and evalua- 50% (representingtion services in- the estimatedcluded in Part J foreign expendi-of the Project ture component)(other than inCategory 4(c)above)

(5) Consultants' 6,500,000 100% of foreignservices, tech- expendituresnical assistanceand training in-cluded in PartsA, B, C, F(1),F(2), F(3) andI(1) of theProject

(6) Mapping services 1,000,000 80% (representing(including equip- the estimatedment and materials) foreign expendi-

ture component)

(7) Unallocated 8,000,000

TOTAL 65,000,000

2. For the purposes of this Schedule:

(a) the term "foreign expenditures" means expenditures for goods orservices supplied from, the territory, and in the currency, of any country otherthan the Borrower; and

(b) the term "local expenditures" means expenditures in the currency ofthe Borrower, and for goods or services supplied from, the territory of the Borrower.

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3. The disbursement percentages have been calculated in compliance with thepolicy of the Bank that no proceeds of the Loan shall be disbursed on accountof payments for taxes levied by, or in the territory of, the Borrower on goodsor services, or on the importation, manufacture, procurement or supply thereof;to that end, if any event occurs which shall affect the amount of any such taxesincluded in the cost of any item to be financed out of the proceeds of the Loan,the Bank may, by notice to the Borrower, correspondingly adjust the disbursementpercentage then applicable to such item.

4. Notwithstanding the provisions of paragraph I above, no withdrawals shallbe made in respect of expenditures prior to the date of this Agreement.

5. Notwithstanding the allocation of an amount of the Loan or the disbursementpercentages set forth in the table in paragraph I above, if the Bank has reasonablyestimated that the amount of the Loan then allocated to any Category will beinsufficient to finance the agreed percentage of all expenditures in that Category,the Bank may, by notice to the Borrower: (i) reallocate to such Category to theextent required to meet the estimated shortfall proceeds of the Loan which arethen allocated to another Category and which in the opinion of the Bank arenot needed to meet other expenditures, and (ii) if such reallocation cannot fullymeet the estimated shortfall, reduce the disbursement percentage then applicableto such expenditures in order that further withdrawals under such Category maycontinue until all expenditures thereunder shall have been made.

6. If the Bank shall have reasonably determined that the procurement of anyitem in any Category is inconsistent with the procedures set forth or referred toin this Agreement, no expenditures for such item shall be financed out of theproceeds of the Loan and the Bank may, without in any way restricting or limitingany other right, power or remedy of the Bank under the Loan Agreement, bynotice to the Borrower, cancel such amount of the Loan as in the Bank's reasonableopinion, represents the amount of such expenditures which would otherwise havebeen eligible for financing out of the proceeds of the Loan.

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SCHEDULE 2

Description of the Project

The Project is part of the Borrower's program to increase food supplies andincomes of about 365,000 farmers and their families in the Project Area by assistingin the development of irrigated agriculture. It consists of the following Parts:

Part A: Cirebon Irrigation Systems

The rehabilitation and improvement of the Cirebon Irrigation Systemsin West Java to serve about 89,000 hectares as follows:

(1) rehabilitation of about 120 headworks and weirs;

(2) rehabilitation and desilting of about 450 kilometers of primary andsecondary irrigation and drainage canals and related structures;

(3) rehabilitation of tertiary irrigation and drainage canals and quaternaryirrigation and drainage canals related thereto and construction ofpermanent structures on tertiary irrigation and drainage canals andpermanent head gates for quaternary irrigation and drainage canals;

(4) improvement of about 300 kilometers of access roads and constructionof about 55 kilometers of inspection roads and paths;

(5) construction of about 40 kilometers of drainage canals and relatedflood protection works in coastal areas and rehabilitation of about200 kilometers of drainage canals; and

(6) on about 20 pilot areas of about 100 hectares each, design andconstruction of pilot on-farm development works consisting of tertiaryand quaternary irrigation and drainage canals with related controlstructures; farm roads; and to the extent possible, land consolidation.

Part B: Rentang Irrigation System

The rehabilitation and improvement of the Rentang Irrigation Systemin West Java to serve about 92,000 hectares as follows:

(1) replacement of the Rentang Barrage on the Cimanuk River by areinforced concrete barrage about 600 meters upstream of the RentangBarrage designed to permit a maximum flow of 1,500 cusecs;

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(2) rehabilitation of about 200 kilometers of drainage canals andconstruction of about 60 kilometers of drainage canals and relatedstructures to serve a coastal area of about 30,000 hectares;

(3) rehabilitation of tertiary irrigation and drainage canals and quaternaryirrigation and drainage canals related thereto and construction ofpermanent structures on tertiary irrigation and drainage canals andpermanent head gates for quaternary irrigation and drainage canals;and

(4) on about 20 pilot areas of about 100 hectares each, design andconstruction of pilot on-farm development works consisting of tertiaryand quaternary irrigation and drainage canals with related controlstructures; farm roads; and to the extent possible, land consolidation.

Part C: Sampean Baru Irrigation System

The construction and expansion through PROSIDA of the SampeanBaru Irrigation System in East Java to serve about 9,800 hectares as follows:

(1) rehabilitation of the weir and intake on the Sampean River;

(2) construction of an earthfill closure dam on the Sampean River;

(3) construction of about 35 kilometers of primary irrigation canals,rehabilitation of 9 kilometers of primary canals and related structuresand construction of about 120 kilometers of secondary irrigation canalsand related structures;

(4) rehabilitation of tertiary irrigation and drainage canals and quaternaryirrigation and drainage canals related thereto and construction ofpermanent structures on tertiary irrigation and drainage canals andpermanent head gates for quaternary irrigation and drainage canals;

(5) land levelling of up to 2,000 hectares;

(6) construction of about 100 kilometers of access roads, inspection roadsand paths; and

(7) construction of a pilot pumping scheme on about 100 hectares todemonstrate irrigation of high value crops on upland areas; and ontwo pilot areas of about 100 hectares each, design and construction

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of pilot on-farm development works consisting of tertiary andquaternary irrigation and drainage canals with related controlstructures; land levelling where necessary; farm roads; and to the extentpossible, land consolidation.

Part D: Equipment, Vehicles and Other Civil Works

(1) Purchase and utilization of equipment and vehicles for theconstruction, operation and maintenance of the Irrigation Systemsincluded in Parts A, B and C of this Schedule; and

(2) Construction of offices and camps for construction staff and of housesfor operation and maintenance staff involved in the construction,operation and maintenance, respectively, of the Irrigation Systemsincluded in Parts A, B and C of this Schedule.

Part E: Agricultural Support Program

(1) The establishment of an agricultural development center at Plumbonin West Java and construction of about twelve rural extension centersin the areas of the Cirebon Irrigation Systems and the RentangIrrigation System; and

(2) Strengthening of the agricultural extension services of the Borrower'sMinistry of Agriculture through technical assistance, training and thepurchase and utilization of equipment, vehicles and a communicationssystem.

Part F: Feasibility Studies and Detailed Engineering

(1) Feasibility study including detailed engineering of the rehabilitationand improvement of the Madiun Irrigation Systems and of possiblestorage dam sites in the area of the Madiun Irrigation Systems;

(2) Feasibility study for the provision of dry season irrigation for about30,000 hectares of the Cirebon Irrigation Systems;

(3) Detailed engineering of the irrigation and drainage networks to beconstructed in the North Sadang Irrigation System; and

(4) Investigation, through the Groundwater Group, of the groundwaterresources and alternative sources of supplementary water in the Upper

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Solo and Madiun Valleys in East Java to determine the mosteconomical method of increasing water supply for agriculturalproduction in these areas.

Part G: Mapping

Preparation of maps for the areas to be rehabilitated in the MadiunIrrigation Systems, to facilitate the development of the tertiary irrigationand drainage networks of the areas included in the Prior Development CreditAgreements and for the Jatigede Dam Reservoir area.

Part H: Soil Conservation

Preparation and implementation by the Borrower's Ministry ofAgriculture in cooperation with DGWRD of a soil conservation program inthe Cimanuk River catchment area including inter alia:

(1) development of improved agronomic techniques;

(2) establishment of forestry and vegetation belts; and

(3) stream and river stabilization.

Part I: Training

(1) A training program for PROSIDA staff consisting of:

(a) overseas training of about 20 provincial chief and sectionengineers and about 6 senior engineers at similar and suitableirrigation systems in neighboring countries;

(b) overseas training of about six middle level engineers;

(c) overseas training of about six post-graduate engineers inprinciples of planning and design of water systems; and

(d) audio-visual training for operation and maintenance staff.

(2) A training program for the Borrower's Ministry of Agriculture staffconsisting of:

(a) overseas training of about eight senior staff in agriculturalmanagement, crop data collection and soil conservation;

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(b) overseas training of about 10 middle level staff in areas suchas rice production techniques, multiple cropping, farmerorganizations, rice agronomy, plant protection and soilconservation; and

(c) training in local institutions of about 35 local staff in areas suchas those specified in paragraph (b) above.

Part J: Survey and Evaluation of Project Benefits

Survey and evaluation of the economic and social benefits of theProject as well as of the Projects carried out under the Prior DevelopmentCredit Agreements.

The Project is expected to be completed by June 30, 1981.

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SCHEDULE 3

Amortization Schedule

Payment of PrincipalDate Payment Due (expressed in dollars)*

May 15, 1981 435,000November 15, 1981 450,000May 15, 1982 470,000November 15, 1982 490,000May 15, 1983 510,000November 15, 1983 535,000May 15, 1984 555,000November 15, 1984 580,000May 15, 1985 605,000November 15, 1985 630,000May 15, 1986 655,000November 15, 1986 685,000May 15, 1987 715,000November 15, 1987 745,000May 15, 1988 775,000November 15, 1988 810,000May 15, 1989 845,000November 15, 1989 880,000May 15, 1990 915,000November 15, 1990 955,000May 15, 1991 995,000November 15, 1991 1,040,000May 15, 1992 1,085,000November 15, 1992 1,130,000May 15, 1993 1,75,0November 15, 1993 1,225,000May 15, 1994 1,280,000November 15, 1994 1,335,000May 15, 1995 1,390,000November 15, 1995 1,450,000May 15, 1996 1,510,000November 15, 1996 1,575,000May 15, 1997 1,640,000November 15, 1997 1,710,000May 15, 1998 1,785,000November 15, 1998 1,860,000May 15, 1999 1,940,000November 15, 1999 2,020,000May 15, 2000 2,110,000November 15, 2000 2,195,000May 15, 2001 2,290,000November 15, 2001 2,390,000May 15, 2002 2,490,000November 15, 2002 2,595,000May 15, 2003 2,705,000November 15, 2003 2,820,000May 15, 2004 2,940,000November 15, 2004 3,080,000

* To the extent that any portion of the Loan is repayable in a currency other than dollars(see General Conditions, Section 4.02), the figures in this column represent dollarequivalents determined as for purposes of withdrawal.

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Premiums on Prepayment

The following percentages are specified as the premiums payable onrepayment in advance of maturity of any portion of the principal amount of theLoan pursuant to Section 3.05(b) of the General Conditions:

Time of Prepayment Premium

Not more than four yearsbefore maturity 1%

More than four years but notmore than eight yearsbefore maturity 2-1/4%

More than eight years but notmore than fourteen yearsbefore maturity 4%

More than fourteen years butnot more than twentyyears before maturity 5-1/2%

More than twenty years but notmore than twenty-six yearsbefore maturity 7-1/4%

More than twenty-six years butnot more than twenty-eightyears before maturity 8%

More than twenty-eight yearsbefore maturity 8-1/2%

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SCHEDULE 4

Procurement

A. General Procedures

1. Contracts for equipment and vehicles and for the construction of the RentangBarrage shall be let under procedures consistent with those set forth in the"Guidelines for Procurement under World Bank Loans and IDA Credits" publishedby the Bank in April 1972, as revised in October 1972 (hereinafter called theGuidelines), on the basis of international competitive bidding.

2. (a) Contracts for equipment and vehicles shall be grouped so as to attractinternational competition.

(b) Bidders shall not be prequalified.

3. (a) The civil works included in Parts A, B, C, D(2), E(l) and H of theProject (other than the construction of the Rentang Barrage) shall be carried out -under contracts awarded on the basis of competitive bidding advertised locally andpursuant to the Borrower's usual procurement procedures.

Bidders for the civil works contracts included in Parts A, B and C of theProject shall be required to prequalify. The Borrower shall, before qualificationis invited, inform the Bank in detail of the procedure to be followed and shallintroduce such modifications in said procedure as the Bank shall reasonably request.The list of prequalified bidders, together with a stater.nt of their qualificationsand of the reasons for the exclusion of any applicant for prequalification, shallbe furnished by the Borrower to the Bank for its comments before the applicantsare notified and the Borrower shall make such additions or deletions from thesaid list as the Bank shall reasonably request.

(b) The mapping included in Part G of the Project shall be carried outunder contracts awarded on the basis of competitive bidding advertised locally andpursuant to the Borrower's usual procurement procedures.

(c) Without limitation to the provisions of Parts A(1) and (2) of thisSchedule, the Borrower may procure items of equipment or vehicles (excludingspare parts) estimated to cost less than $10,000 each without resort to internationalcompetition, provided that (i) such items of equipment or vehicles are procuredon a basis of reasonable and competitive procurement procedures, including butnot limited to the solicitation of not less than three price quotations, (ii) the total

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cost of items of equipment and vehicles procured pursuant to this sub-paragraphdoes not exceed a maximum amount of the equivalent of $100,000 and (iii) thenumber of vehicles procured pursuant to this sub-paragraph does not exceed amaximum of ten.

B. Evaluation and Comparison of Bids for Goods; Preference for DomesticManufacturers

1. For the purpose of evaluation and comparison of bids for the supply ofgoods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry)price for imported goods, or the ex-factory price for domestically-manufacturedgoods; (ii) customs duties and other import taxes on imported goods, and salesand similar taxes on domestically-supplied goods, shall be excluded; and (iii) thecost to the Borrower of inland freight and other expenditures incidental to thedelivery of goods to the place of their use or installation shall be included.

2. Goods manufactured in Indonesia may be granted a margin of preferencein accordance with, and subject to, the following provisions:

(a) All bidding documents for the procurement of goods shall clearlyindicate any preference which will be granted, the information required to establishthe eligibility of a bid for such preference and the following methods and stagesthat will be followed in the evaluation and comparison Gf bids.

(b) After evaluation, responsive bids will be classified in one of thefollowing three groups:

(1) Group A: bids offering goods manufactured in Indonesia if thebidder shall have established to the satisfaction of the Borrowerand the Bank that the manufacturing cost of such goods includesa value added in Indonesia equal to at least 20% of the ex-factorybid price of such goods.

(2) Group B: all other bids offering goods manufactured inIndonesia.

(3) Group C: bids offering any other goods.

(c) All evaluated bids in each group shall be first compared amongthemselves, excluding any customs duties and other import taxes on goods to beimported and any sales or similar taxes on goods to be supplied domestically, to

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determine the lowest evaluated bid of each group. Such lowest evaluated bids shallthen be compared with each other, and if, as a result of this comparison, a bidfrom group A or group B is the lowest, it shall be selected for the award.

(d) If, as a result of the comparison under paragraph (c) above, the lowestbid is a bid from group C, all group C bids shall be further compared with thelowest evaluated bid from group A after adding to the c.i.f. bid price of theimported goods offered in each group C bid, for the purpose of this furthercomparison only, an amount equal to (i) the amount of customs duties and otherimport taxes which a non-exempt importer would have to pay for the importationof the goods offered in such group C bid, or (ii) 15% of the c.i.f. bid price ofsuch goods if said customs duties and taxes exceed 15% of such price. If the groupA bid in such further comparison is the lowest, it shall be selected for the award;if not, the lowest evaluated bid from group C shall be selected.

C. Evaluation and Comparison of Bids for Civil Works; Preference for DomesticCon tractors

1. With respect to any contract for civil works included under Category I of Athe table set forth in Schedule 1 to this Agreement, the Borrower may grant amargin of preference of 7-1/2% to domestic contractors, as determined by theBorrower, in accordance with, and ,subject to, the following provisions:

(a) Contractors shall be required to prequalify as provided in Part A(l)of this Schedule and applicants for qualification applying also for such preferenceshall be asked to provide, as part of the information for qualification, suchinformation, including details of ownership, as shall be required to determinewhether, according to the classification established by the Borrower pursuant tocriteria set by the Bank, a particular firm or group of firms qualifies for a domesticpreference. The bidding documents shall clearly indicate the preference and themethod that will be followed in the evaluation and comparison of bids to giveeffect to such preference.

(b) After bids have been received and reviewed by the Borrower, responsivebids will be classified into the following groups:

(i) bids offered by domestic contractors eligible for preference; and

(ii) bids offered by other contractors.

For the purpose of evcluation and comparison of bids an amount equal to 7-1/2%of the bid amount shall be added to bids received under group (ii) above.

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D. Review of Procurement Decisions by Bank

1. Review of invitation to bid and of proposed awards and final contracts:

With respect to all contracts for equipment and vehicles estimated to costthe equivalent of $75,000 or more and with respect to all contracts for civil worksestimated to cost the equivalent of $250,000 or more:

(a) Before bids are invited, the Borrower shall furnish to the Bank, forits comments, the text of the invitations to bid and the specifications and otherbidding documents, together with a description of the advertising procedures tobe followed for the bidding, and shall make such modifications in the saiddocuments or procedures as the Bank shall reasonably request. Any furthermodification to the bidding documents shall require the Bank's concurrence beforeit is issued to the prospective bidders.

(b) Promptly after the bids have been received, the Borrower shall transmitcopies of the three lowest bids to the Bank and shall inform the Bank of thenames of all bidders and the respective amounts of such bids.

(c) AfLer bids have been received and evaluated, the Borrower shall, before.a final decision on the award is made, inform the Bank of the name of the bidderto which it intends to award the contract and the reasons for the intended awardand shall furnish to the Bank, in sufficient time for its review, a detailed reporton the evaluation and comparison of the bids received, together with therecommendation for award and such other information as the Bank shall reasonablyrequest. The Bank shall, if it determines that the intended award would beinconsistent with the Guidelines or this Schedule, promptly inform the Borrowerand state the reasons for such determination.

(d) The terms and conditions of the contract shall not, without the Bank'sconcurrence, materially differ from those on which bids were asked orprequalification invited.

(e) Two conformed copies of the contract shall be furnished to the Bankpromptly after its execution and prior to the submission to the Bank of the firstapplication for withdrawal of funds from the Loan Account in respect of suchcontract.

2. With respect to each contract to be financed out of the proceeds of theLoan and not governed by the preceding paragraph, the Borrower shall furnishto the Bank, promptly after its execution and prior to the submission to the Bank

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of the first application for withdrawal of funds from the Loan Account in respectof such contract, two conformed copies of such contract, together with the analysisof bids, recommendations for award and such other information as the Bank shallreasonably request. The Bank shall, if it determines that the award of the contractwas not consistent with the Guidelines or this Schedule, promptly inform theBorrower and state the reasons for such determination.