Documeait of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 3736/-IND

STAFF APPRAISAL REPORT

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS VI PROJECT

March 22, 1982

Projects DepartmentEast Asia and Pacific Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EOUIVALENT

US$1.00 Rupiahs (Rp) 625Rp 100 US$0.160Rp 1 million US$1,600

WEIGHTS AND MEASURES - METRIC SYSTEM

1 millimeter (mm) = 0.039 inches1 meter (m) = 39.37 inches1 kilometer (km) = 0.62 miles1 square kilometer (sq km) = 0.386 square miles1 hectare (ha) = 2.47 acres1 cubic meter (cu m) = 35.31 cubic feet1 liter (1) = 0.264 gallons (USA)1 kilogram (kg) = 2.2 pounds1 metric ton (ton) = 2,205 pounds

GLOSSARY OF INDONESIAN TERMS

Adat = Body of traditional lawAlang-alang = (Imperata cylindrica), a coarse grass which establishes

after slash and burn operationsBupati = District ChiefCamat = Subdistrict ChiefDesa = VillageDukuh = Hamlet of 25-30 homes, part of a villageGotong-royong = Community self-help projectHak Pakai = Land title giving the right to use to exploitHak Milik = Land title giving full ownership to the landKabupaten = DistrictKecamatan = SubdistrictMarga = Community group under Adat lawMushalla = Small prayer housePuskesmas = Community health center usually subdistrict levelTeam Khusus = A group of specialists within DGE working on foreign

assisted projects

GOVERNMENT OF INDONESIAFISCAL YEAR

April 1 - Mlarch 31

FOR OFFICIAL USE ONLY

ABBREVIATIONS

BAPPEDA = Provincial Developmnent Planning AgencyBAPPENAS = Badan Perencanaan ]'embangunan National - National

Development Planniing AgencyBI = Bank IndonesiaBRI = Bank Rakyat Indonesia - People's Bank of IndonesiaDGA = Directorate Genera:L of Agrarian AffairsDGE = Directorate Genera:L of EstatesDGFCA = Directorate Genera:L of Food Crops AgricultureDIP = Daftar Isian Proyek - Project Implementation BudgetDPD = Dinas Perkebunan Daerah - Provincial Estate Crop

ServicesFFB = Fresh fruit bunchesGOI = Government of IndoniesiaINPRES = A Rural Development ProgramIPEDA = Iuran Pembangunan ')aerah - Land taxJMO = Joint Marketing OfEiceLPP = Estates Training InstituteMOA = Ministry of AgricuLtureMOF = Ministry of FinanceNES = Nucleus Estate and Smallholder projectsPCC = Provincial Coordinating CommitteePNP = Perusahaan Negara 'Perkebunan - State-owned estate

enterprisePPL = Field extension workerPTP = Perseroan Terbatas Perkebunan = State-owned enterprise

with limited liabilityREPELITA I = First Five-Year Development Plan (1969/70-1973/74)REPELITA II = Second Five-Year Development Plan (1974/75-1979/80)REPELITA III = Third Five-Year Development Plan (1980/81-1984/85)RSSI = Ribbed smoked sheet (rubber) Grade 1SIR = Standard Indonesia Rubber

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS VI PROJECT

Table of Contents

Page No.

1. BACKGROUND AND PROJECT AREA

General . . . . . . . . . . . . . . . . . . . . . . . 1The NES Projects. . . . . . . . . . . . . . . . . . . 1Project Formulation . . . . . . . . . . . . . . . . . 2Location. . . . . . . . . . . . . . . . . . . . . . . 3Climate . . . . . . . . . . . . . . . . . . . . . . . 4Topography and Soils. . . . . . . . . . . . . . . . . 4Land Use, Population, Farm Size and Tenure. . . . . . 5Existing Infrastructure and Services. . . . . . . . . 8

2. THE PROJECT

Project Works . . . . . . . . . . . . . . . . . . . . 11Agricultural Development. . . . . . . . . . . . . . . 13Physical Development. . . . . . . . . . . . . . . . . 14Settlement and Community Development. . . . . . . . . 22Technical Assistance and Program Support. . . . . . . 24Status of Engineering . . . . . . . . . . . . . . . . 26Implementation Schedule . . . . . . . . . . . . . . . 27Cost Estimates. . . . . . . . . . . . . . . . . . . . 28Financing . . . . . . . . . . . . . . . . . . . . . . 29On Lending Interest Rates . . . . . . . . . . . . . . 32Procurement . . . . . . . . . . . . . . . . . . . . . 32Disbursement;. . . . . . . . . . . . . . . . . . . . . 34Accounts and Audits . . . . . . . . . . . . . . . . 35Environmental Effects . . . . . . . . . . . . . . . 36

3. ORGANIZATION AND MANAGEMENT

General . . . . . . . . .. . . . . . . . . .. . . . 36Project Management. . . . . . . . . . . . . . . . . . 36Agricultural Support Services for Smallholders. . . . 39Operations and Maintenance. . . . . . . . . . . . . . 40

4. AGRICULTURAL PRODUCTION, MARKET PROSPETS, PRICES,FARM INCOMES AND PROJECT CHARGES

Agricultural Production . . . . . . . . . . . . . . . 41Market Prospects. . . . . . . . . . . . . . . . . . . 41Prices. . . . . . . . . . . . . . . . . . . . . . . . 42Farm Incomes. . . . . . . . . . . . . . . . . . . . . 43Cost Recovery .. . .. . . . . . . . . . . . . . . 43

1.05 The first three NES projects are sufficiently advanced to assesstheir effectiveness. Initially, delays in budget preparation and receipt offunds by the nucleus estates, slowed implementation. To resolve this, GOIhas simplified financial procedures with automatic release of funds for thefirst two quarters to the estates. Smallholder and estate plantings are nowon schedule, with the planting or rehabilitation of about 46,900 ha ofrubber, 10,000 ha of oil palm and 3,300 ha of coconuts (Table 1.1). Fielddevelopment is good, with total plantings for NES I, II, and III, already52% completed. The construction of smallholder infrastructure, however, hasbeen less satisfactory and the movement of smallholders to the project areasat times has been behind schedule. At certain locations this causes laborshortages for further project construction and maintenance of tree cropplantings. When building roads, water supplies, village facilities andsettler housing, the central and provincial governments and nucleus estatesneed to carefully plan and coordinate their inputs. To facilitate this, NESIII and IV initiated several changes in project design and organization.The nucleus estates now have greater autonomy in designing and implementingthe smallholder components and this has improved the timeliness of infra-structure construction. The DGE has estabished a special team (Team Khusus)to assist the nucleus estates, particularly with coordinating agenciesengaged in project works. NES IV and V contain funds to commence prepara-tory works for the succeeding projects. These cover key start-up activitiessuch as nursery establishment, access roads, and laborer housing. While allthese activities have considerably helped project implementation, the TeamKhusus needed strengthening to expand and upgrade its project formulation,design and supervision activities. NES V commenced this, and providesconsiderable consultant services to Team Khusus which would enable it givegreater technical assistince to the estates in project area selection,project area and village design, tree crop establishment and processingfacility construction. These services would also assist Team Khusus givemore attention to the timely disbursing of project funds, and prepare it toplay a much larger role in the preparation, design and supervision of Bankassisted projects. Despite these problems the DGE has well prepared andimplemented NES projects. It played a key role in preparing the difficult(involving land redistribution) West Java components of NES V and thisproject. Progress with tree crop plantings are now excellent; and disburse-ments, which at end-1980 were 11% of total funds allocated to the first fourprojects, are presently (mid-December 1981) 20% of these loans.

Project Formulation

1.06 This project would be the sixth in the NES series. By using PTP XIIand PTP XXIII to transfer technology to smallholders and settle them on predo-minantly tree crop holdings, it meets the GOI's desire for using the technicaland managerial resources of the public sector estates to promote smallholderdevelopment. It also would intensify land use and farmer productivity in WestJava and Bengkulu, raise smallholder incomes by increasing food crop, rubberand coconut oil production for local and export markets; and assist stop theeroding and degrading of project lands in West Java.

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS VI PROJECT

Table of Contents

Page No.

1. BACKGROUND AND PROJECT AREA

General . . . . . . . . . . . . . . . . . . . . . . . 1The NES Projects. . . . . . . . . . . . . . . . . . . 1Project Formulation . . . . . . . . . . . . . . . . . 2Location. . . . . . . . . . . . . . . . . . . . . . . 3Climate . . . . . . . . . . . . . . . . . . . . . . . 4Topography and Soils. . . . . . . . . . . . . . . . . 4Land Use, Population, Farm Size and Tenure. . . . . . 5Existing Infrastructure and Services. . . . . . . . . 8

2. THE PROJECT

Project Works . . . . . . . . . . . . . . . . . . . . 11Agricultural Development. . . . . . . . . . . . . . . 13Physical Development. . . . . . . . . . . . . . . . . 14Settlement and Community Development. . . . . . . . . 22Technical Assistance and Program Support. . . . . . . 24Status of Engineering . . . . . . . . . . . . . . . . 26Implementation Schedule . . . . . . . . . . . . . . . 27Cost Estimates. . . . . . . . . . . . . . . . . . . . 28Financing . . . . . . . . . . . . . . . . . . . . . . 29On Lending Interest Rates . . . . . . . . . . . . . . 32Procurement . . . . . . . . . . . . . . . . . . . . . 32Disbursement. . . . . . . . . . . . . . . . . . . . . 34Accounts and Audits . . . . . . . . . . . . . . . . . 35Environmental Effects . . . . . . . . . . . . . . . . 36

3. ORGANIZATION AND MANAGEMENT

General . . . . . . . . . . . . . . . . . . . . . . . 36Project Management. . . . . . . . . . . . . . . . . . 36Agricultural Support Services for Sma]lholders. . . . 39Operations and Maintenance. . . . . . . . . . . . . . 40

4. AGRICULTURAL PRODUCTION, MARKET PROSPECTS, PRICES,FARM INCOMES AND PROJECT CHARGES

Agricultural Production . . . . . . . . . . . . . . . 41Market Prospects . . . . . . . . . . . . . . . . . 41Prices. . . . . . . . . . . . . . . . . . . . . . . . 42Farm Incomes. . . . . . . . . . . . . . . . . . . . . 43Cost Recovery . . . . . . . . . . . . . . . . . . . . 43

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Page No.

5. BENEFITS, JUSTIFICATION AND RISKS . . . .. . . . . . 51

6. AGREEMENTS REACHED AND RECOMMENDATIONS . . . . . . . . 56

LIST OF TABLES IN MAIN REPORT

1.1 NES Projects: Progress of Tree Crop Plantings . . 101.2 Mean Annual Rainfall at Sites . . . . . . . . . . . . 41.3 Present Land Use: West Java Sites. . . . . . . . . . 61.4 Farm Size Distribution: Bengkulu . . . . . . . . . . 72.1 Road Design Standards . . . . . . . . . . . . . . . . 172.2 Project Road Construction . . . . . . . . . . . . . . 182.3 Village Infrastructure. . . . . . . . . . . . . . . . 202.4 Crop Processing: Installed Capacity. . . . . . . . . 212.5 Consulting Services . . . . . . . . . . . . . . . . . 272.6 Annual Price Contingencies. . . . . . . . . . . . . . 282.7 Project Cost Summary. . . . . . . . . . . . . . . . . 292.8 Source of Project Funds . . . . . . . . . . . . . . . 324.1 Phasing of Tree Crop Plantings. . . . . . . . . . . . 464.2 Tree Crop Yields and Production . . . . . . . . . . . 474.3 Project Area Cropping Patterns, Yields and Production 484.4 Smallholder Farm Incomes. . . . . . . . . . . . . . . 494.5 Rent and Cost Recovery per Farm Family. . . . . . . . 505.1 Investment Costs for Economic Analysis. . . . . . . . 525.2 Economic Rates of Return. . . . . . . . . . . . . . . 535.3 Sensitivity Analysis. . . . . . . . . . . . . . . . . 545.4 Estates Financial Standing (1980) . . . . . . . . . . 54

ANNEX

1. Table 1: Project Cost EstimatesTable 2: Estimated Schedule of DisbursementsTable 3: Proposed Allocation of Loan FundsTable 4: Development Cost Per Smallholder FamilyTable 5: Consulting Services - Cost Breakdown

2. Table 1: PTP XII - Summary Cash Flow StatementTable 2: PTP XXIII - Summary Cash Flow StatementTable 3: PNP XXVIII - Summary Cash Flow Statement

3. List of Machinery, Vehicles and Equipment

4. Start-Up Funds

5. Related Documents and Data Available in Project File

MAPS

1. IBRD 16212 - West Java Sites2. IBRD 16213 - Bengkulu Sites3. IBRD 15636 - Maluku Sites

1. BACKGROUND AND PROJECT AREA

General

1l01 Under its nucleus estates and smallholders development program, theGovernment of Indonesia (GOI) has requested Bank assistance to develop about28,000 ha of tree crops (rubber and coconuts),, food crops and house gardens inWest Java, Bengkulu and Maluku provinces with the public sector estatesPTP XII, PTP XXIII, and PNP XXVIII as development agents. The project wouldimmediately benefit some 8,450 families in the first two provinces and,through estate development in the other, set :he stage for additionalsmallholder investments at a later time. it would also include technicalassistance to the Directorate General of Estai:es (DGE) and the participatingPNP/PTPs.

1.02 GOI identified the project with Bank assistance, and it reflects thenational needs and priorities outlined in the Third Five-Year Plan(Repelita III, April 1979-March 1984). GOI aiad the Bank prepared the project,using feasibility and resource survey studies by PTP XII, PTP XXIII,PNP XXVIII and the consultant firm P.T. Agriconsult International. Thisreport is based on material contained in the above studies, and the findingsof an appraisal mission composed of Messrs. M. Saddington, C. Carlier (Bank),T. Phillips, L. Gullan, P. Durham (Commonwealth Development Corporation), andW. Cooke (consultant), which visited Indonesia in August 1981.

1.03 GOI's major objectives in the agricaltural and rural sectors, andits development strategies, are detailed in thie Staff Appraisal Report of theNucleus Estates and Smallholders V Project, May 6, 1981 (SAR NES V), and wouldnot be described again here. This report also outlines the Bank Group'sagricultural lending strategy, describes the rubber, palm oil and coconutsubsectors, and lists the Bank Group's lending in these subsectors.

The NES Projects

1.04 Recognizing the scarce technical and managerial expertise availablewithin GOI to implement rural development projects, GOI has increasinglysought to use the technical and managerial resources of the public sectorestates to promote and guide smallholder development. The Bank, sinceNovember 1977, has helped finance five nucleus estates and smallholdersprojects. When fully developed, these projects would settle/resettle some49,000 smallholder families, developing for them about 66,000 ha of rubber,27,000 ha of oil palm, 10,000 ha of coconuts, and associated food crop andhouse garden areas. For the nucleus estates, they would develop about44,000 ha of rubber, 18,000 ha of oil palm, and 6,000 ha of coconuts.

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1.05 The first three NES projects are sufficiently advanced to assesstheir effectiveness. Initially, delays in budget preparation and receipt offunds by the nucleus estates, slowed implementation. To resolve this, GOIhas simplified financial procedures with automatic release of funds for thefirst two quarters to the estates. Smallholder and estate plantings are nowon schedule, with the planting or rehabilitation of about 46,900 ha ofrubber, 10,000 ha of oil palm and 3,300 ha of coconuts (Table 1.1). Fielddevelopment is good, with total plantings for NES I, II, and III, already52% completed. The construction of smallholder infrastructure, however, hasbeen less satisfactory and the movement of smallholders to the project areasat times has been behind schedule. At certain locations this causes laborshortages for further project construction and maintenance of tree cropplantings. When building roads, water supplies, village facilities andsettler housing, the central and provincial governments and nucleus estatesneed to carefully plan and coordinate their inputs. To facilitate this, NESIII and IV initiated several changes in project design and organization.The nucleus estates now have greater autonomy in designing and implementingthe smallholder components and this has improved the timeliness of infra-structure construction. The DGE has estabished a special team (Team Khusus)to assist the nucleus estates, particularly with coordinating agenciesengaged in project works. NES IV and V contain funds to commence prepara-tory works for the succeeding projects. These cover key start-up activitiessuch as nursery establishment, access roads, and laborer housing. While allthese activities have considerably helped project implementation, the TeamKhusus needed strengthening to expand and upgrade its project formulation,design and supervision activities. NES V commenced this, and providesconsiderable consultant services to Team Khusus which would enable it givegreater technical assistvnce to the estates in project area selection,project area and village design, tree crop establishment and processingfacility construction. These services would also assist Team Khusus givemore attention to the timely disbursing of project funds, and prepare it toplay a much larger role in the preparation, design and supervision of Bankassisted projects. Despite these problems the DGE has well prepared andimplemented NES projects. It played a key role in preparing the difficult(involving land redistribution) West Java components of NES V and thisproject. Progress with tree crop plantings are now excellent; and disburse-ments, which at end-1980 were 11% of total funds allocated to the first fourprojects, are presently (mid-December 1981) 20% of these loans.

Project Formulation

1.06 This project would be the sixth in the NES series. By using PTP XIIand PTP XXIII to transfer technology to smallholders and settle them on predo-minantly tree crop holdings, it meets the GOI's desire for using the technicaland managerial resources of the public sector estates to promote smallholderdevelopment. It also would intensify land use and farmer productivity in WestJava and Bengkulu, raise smallholder incomes by increasing food crop, rubberand coconut oil production for local and export markets; and assist stop theeroding and degrading of project lands in West Java.

1.07 The project would continue and expaad development commenced underNES V, and further prepare DGE and the public sector estates for future Banksector lending in the NES program. PTP XII would develop smallholder foodand tree crops in relatively highly populated West Java, thus continuing inthis province a program initially commenced unider NES V, while PTP XXIIIwould establish smallholders around the Bengkuilu nucleus estate it currentlyis establishing under NES V. To increase DGE's expertise in preparing andsupervising smallholder infrastructure development, the project wouldprovide technical assistance in road planning and construction to the TeamKhusus, which in turn would make this expertise available to the PNP/PTPs.To help restructure and strengthen the Departtient of Agriculture's estateadministration and support staff (SBPN), it would provide them withtechnical assistance in project preparation anid financial analysis of theestates.

1.08 Using start-up funds NES V provided, PTPs XII, XXIII and PNPXXVIII have already undertaken preparatory works. PTP XII has startedrehabilitating the access road to the Agrabinta estate, while PTP XXIII andPNP XXVIII have established rubber nurseries at Seluma and Seram. Theseactivities would ensure NES VI-s early implementation. The proposed projectalso contains funds for preparatory works for future NES projects.

Location

1.09 The project is located in three provinces, West Java, Bengkulu andMaluku. The West Java component has two adjacent sites, Cikaso andAgrabinta, situated on the West Java south coast some 220 km due south ofJakarta in the districts (kabupatens) of Sukatumi and Cianjur. Both small-holder sites border old PTP XII rubber estates of the same name. PTP XII'sCikaso estate has a leased area of 2,000 ha gross, with a surrounding pro-posed smallholder development area of 3,500 ha gross, while the Agrabintaestate-s leased area is 3,000 ha gross, with a proposed smallholderdevelopment area of 6,400 ha gross.

1.10 The Bengkulu site (gross area 22,000 ha), known as Seluma, liesabout 14-34 km southeast of Bengkulu township along the eastern side of theBengkulu-Manna road. The site, about 20 km long and 6-12 km wide, is situa-ted in kabupatens North and South Bengkulu. The Bengkulu-Curup road is itsnorthern boundary, a protected forest is its eastern boundary, and a locallyfinanced smallholder rubber replanting project near Tumbuan village, itssouthern boundary. The site, which is solely for smallholders, surroundsthe rubber nucleus estate which PTP XXIII is currently establishing underNES V to service the proposed smallholders. The Maluku site is on thesouthern coast of Seram island, lying about 100 km to the north-east ofAmbon, the provincial capital. Its gross area is some 11,000 ha, consistingof several PNP XXVIII concession areas bordering the Gulf of Elpaputik.

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Climate

1.11 The climate at all sites is wet tropical, with generally a short orno dry season. Mean annual rainfall varies from 2,450 mm at Seram to 3,635 mmat Cikaso and Agrabinta. Table 1.2 shows the mean annual rainfall at thevarious sites. In West Java the dry season is normally between May andSeptember, however, the monthly averages at the sites are generally above 200mm for the driest month. Nevertheless extended dry periods (below 60mm/month) of four to five months do occur about once every five years. TheBengkulu site has no pronounced dry season, and only occasionally a monthbelow 150 mm. At the Maluku site, the dry season extends from November toMarch. The amount and annual distribution of rainfall are suitable for theselected crops (rubber, coconuts or food crops) at the different sites.Temperatures are relatively high and uniform year round, and do not limit cropgrowth. Average monthly maximum temperatures vary from 29-310c, and minimumfrom 21-220C.

Table 1.2: MEAN ANNUAL RAINFALL AT SITES(Minimum of ten-year recording)

Cikaso and Agrabinta Seluma SeramRainfall Rain days Rainfall Rain days Rainfall Rain days

Month (mm) (no.) (mm) (no.) (mm) (no.)

January 288 14 304 25 133 9February 204 11 270 13 90 9March 257 13 292 15 155 12April 289 12 292 14 200 12May 277 11 229 11 251 15June 210 10 187 9 400 16July 225 9 175 9 406 19August 205 8 206 10 215 17September 235 9 234 11 202 14October 501 15 357 16 171 11November 574 18 394 17 105 9December 370 17 359 18 124 11

Total 3,635 147 3,299 168 2,452 154

Topography and Soils

1.12 The West Java sites lie adjacent to each other in a narrow coastalstrip some 60 km long, and extending up to 10 km inland from the sea. Theyhave a narrow coastal plain, which quickly becomes undulating to hilly awayfrom the coast, and quite mountainous with many deep ravines further inlandto the north. Several large rivers dissect the sites, flowing from north to

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south into the Indian Ocean, and make access across the area difficult. Thelargest river, the Cibuni, separates the two Cites. The land generally liesat 5-150 m above sea level, and while the Agrebinta or eastern end conta-nsperhaps the larger proportion of flat land, bcoth sites have at least 25% ormore above 35% slope. The sites' topography generally is unsuitable for foodcrops, which should be restricted to the coastal plain, or to small, flatplots on top of the ridges and in the valleys, About two thirds of the areais generally suitable for tree crops. The soils are red yellow mediterraneanand grumosols, consisting of limestone sediments on the hilly to mountainousland, and regosols in the coastal area. They are acidic to neutral, containmedium amounts of nitrogen and potash, but are low in phosphorus. However,with the correct fertilizer inputs they are suitable for tree and food crops.In places the soils are shallow (10-20 cm deep), underlaid by rock. PTP XIIis currently surveying the sites to exclude such small areas from cropdevelopment.

1.13 The Seluma site lies in the narrow area between the western Sumatracoast and the Barisan mountain range. In the west it is flat to undulating(0-15% slopes), with this land form covering up to 40% of the total area,while towards the east it is undulating to hilly (15-40% slopes). Some 50% ofthe site is above 30% slope. The main soils are red-yellow podzolics, brownpodzolics and brown latosols. They are all lc,w in plant nutrients, and highlyacidic. However, with the correct fertilizer inputs, they are suitable forrubber and food crops.

1.14 The Seram site is on the narrow coastal plain and terraces betweenthe island's southern coast and the central Seram mountain range to the north.it is flat to undulating in the north, dissected by three major rivers andmany small streams, all running south. The rivers are fast flowing, risequickly following rain in the moutains and their beds have moved considerablyup and down the coastal plain over time. Site elevation is from sea level to250 m. The soils are silty clay, with some sandy areas near the coast, andhave good potential for coconuts and rubber. Only coconuts would be plantedin sandy areas.

Land Use, Population, Farm Size and Tenure

1.15 West Java. Present land use at the two West Java sites is similarto that described in the NES V SAR (para. 2.0g), that is, a mixture of houselots, rainfed sawah (rainfed, bunded rice fields), upland crops (rainfed rice,corn, cassava, soybean, peanut or vegetables), kebun (small, irregularlyplanted areas of rubber, coconuts, cloves, bamboo, various fruit trees andtimber species), open grasslands and belukar (scrubby regrowth). Table 1.3shows the present estimated land use at the two sites.

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Table 1.3: PRESENT LAND USE: WEST JAVA SITES('000 ha)

House- Rainfed Grass-lots sawah Upland Kebun land Belukar Total

Cikaso 0.2 0.7 0.7 - 3.1 - 3.5Agrabinta 0.4 0.1 1.1 0.3 4.0 0.5 6.4

Total 0.6 0.8 1.8 0.3 7.1 0.5 11.1

Source: Directorate General of Agrarian Affairs (Agraria) land usemaps scale 1:10,000, and village leaders' (lurah) records.

1.16 Farmers usually plant upland crops on sloping areas, which they croponly once every two or three years. The grasslands consist mainly of Imperatacylindrica, a coarse grass of little nutritional value known as alang alang,which quickly takes over areas left fallow. Belukar grows on steep or otherareas which farmers have thinned or cleared for timber or cropping, but thenleft unused or uncropped-for at least five years. The project would establishtree crops mainly on the grassland and upland areas.

1.17 The proposed project areas lie within the boundaries of severallarge villages (two at Cikaso, two at Agrabinta) which themselvesconsist of several hamlets or small groups of houses known as dukuks. Asthere is insufficient suitable land, the project would be unable to developtree crops for every family in each village. Thus the project would treat thedukuk as the basic unit for development, that is, establish tree crops forevery family within each dukuk developed. Existing farms occupy the entiregross area proposed for smallholder development, with some 3,700 separate farmfamilies (about 1,350 families at Cikaso and 2,350 at Agrabinta) operatingthem. Average gross farm sizes are 2.6 ha at Cikaso and 2.7 ha at Agrabinta.Farm size distributions are generally similar to those shown in NES V SAR(para. 2.09, Table 2.3). Except for some 100 ha which farmers own (TanahMilik title), the provincial government owns (Tanah Negara title) the land atthe sites. The lurahs have discretionary control over the government land andcan grant individual farmers the right to cultivate it. The Government,however, can withdraw this right to cultivate at any time, and thus candirect, if necessary, that farmers release this land for the project, or forredistribution to other farmers. The West Java Governor has alienated the*areas proposed for development, and all farmers concerned, including thosewith Tanah Milik titled land, have agreed to enter the project.

1.18 Bengkulu. Secondary forest predominantly covers the Seluma site,particularly in the center and western portion, with grassland or scrubbygrowth adjacent to it and with small patches of wild rubber and coffee spreadthroughout the project area, and upland crops mainly near the villages on

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the eastern boundary. Present land use within the 22,000 ha is approximately100 ha swamp forest, 200 ha rainfed sawah, 1,000 ha kebun, 1,000 ha alangalang, 1,200 ha coffee, 1,300 ha wild rubber, 1,900 ha upland crops, 6,300 hascrubby regrowth and 9,000 ha dryland secondary forest.

1.19 An estimated 2,550 farm families cu:Ltivate or have land rights inthe project area. They are basically shiftingl cultivators, who clear a siteand grow upland crops (mainly rainfed rice) on it for two years. During thefirst year they usually interplant the area with rubber or coffee, which theythen leave until it bears. On average each family is cultivating about 3.0ha, consisting of 1 ha p.a. of upland crops and 2 ha of bearing tree crops,either rubber or coffee, or a mixture of both. Each family has several smallsites around their village, and as they wish -o expand their holdings, theyclear forested land progressively outwards from the village. Table 1.4 givesthe estimated farm size distribution for the area.

Table 1.4: FARM SIZE DISTRIBUTION: BENGKULU

(%)

Farm 3izeLess than More than2.0 ha 2.0-3.0 ha 3.0-8.0 ha 8.0 ha Total

Number of farms 58 24 16 2 100Area 26 29 37 8 100

1.20 The community (margha council) basiaally owns and controls the useof this land. When a family wishes to open naw land, they ask the margha forpermission. Providing they continue to cultivate or occupy that land, theyhave the right to use it and own the produce from it. However, if theyabandon the land for a certain period (6 montAs to 3 years), the right of usereverts to the margha. The Governor has alieaated the area proposed fordevelopment, and provincial and PTP XXIII officials are currently taking acensus of the project area farmers to determine all those with land rights,and make certain, as expected, that all farmers agree to enter the project.

1.21 Maluku. The Seram island site (11,300 ha) is covered by old coconut

plantations (850 ha, over 70 years old) and forest (10,150 ha). The forestconsists of primary and secondary growth, plus some abandoned rubber. Thecoconuts are still producing at a low level. The primary forest contains sometimber of commercial value, while the secondary forest has large amounts ofbamboo but little else of value.

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1.22 The project area lies within old PNP XXVIII concession areas andprovincial government land. The Directorate General of Agrarian Affairs(Agraria) is currently renewing the PNP leases, and alienating additionalareas PNP XXVIII requires for the project. By about end-March 1982 Agrariawould complete its surveys and land title checks, and issue PNP XXVIII withthe right to use this land (Hak Guna Usaha). The issuing of Hak Guna Usaha isa condition of disbursing for the works PNP XXVIII would undertake under theproject. Squatters, from coastal villages bordering the concessions, havecultivated small patches (total about 50 ha) of coconuts, bananas, cocoa andfood crops within the concession areas. While they have no land title they dohave rights under customary (adat) law, and PNP XXVIII would compensate themfor their trees.

Existing Infrastructure and Services in Smallholder Areas

1.23 Existing Infrastructure. Agrabinta and, to a lesser extent, Cikasohave extremely poor access, both into and within the project areas. Thisseverely constrains development of the sites. Except for a small, hand-operated vehicle ferry over the Cikaso river, which limits loads and the flowof vehicles, access to the Cikaso estate is reasonable. However, access toand within the proposed smallholder area is poor to nonexistent. At Agrabintaonly four-wheel drive vehicles can traverse the access road from the kabupatenroad (offtake at Patrol village) to the estate. Access within the smallholderarea is by bike or walking track, and the site is dissected by several largerivers (para. 1.12). Although the sites border each other, it is impossibleto drive directly from one to the other. Because of the sites long, narrowshape, the main access roads must traverse completely each site. Thus thesites would require some 84 km of main access road, and PTP XII has startedconstruction of this (65 km) using start-up funds from NES V. Jakarta,some 160 km away, is the closest major port to the sites.

1.24 PTP XII currently operates old rubber estates at Cikaso andAgrabinta. It recently planted (1978/79-80/81) some 500 ha of tall coconuts(50 ha underplanted with cocoa) at Agrabinta. The project would rehabilitateboth estates, which would then serve as nucleus estates for the proposedsmallholder development.

1.25 A bitumen road connects the Seluma site with Bengkulu, theprovincial capital, and present port. The provincial public works wouldreplace one bridge (25 m long at 22 km marker from Bengkulu) on this roadby December 1983. A bitumen road also connects the site to the new Bengkuluharbor which the province is constructing, and is scheduled to complete byend-1983. The smallholder site presently has no internal road network. PTPXXIII's only other activity in the province is the establishing of a 5,000 harubber nucleus estate (under NES V), which would service the proposed

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smallholder site. PTP XXIII started work on the nucleus estate in late 1980,and has constructed an access road into the site, and is currentlyestablishing 700 ha of rubber. Under start-up funds (from NES V), it also is

establishing 200 ha of rubber for the proposed smallholders.

1.26 In Maluku the Seram island site is isolated. Transport in and outof the area is only by small motor launch. The site has no jetty or wharf,and large equipment or supplies must be unloaded on the beach from landingships (LST vessel, 200 ton). The nearest main port is Amahai, some 50 kmsoutheast around the coast, with a new jetty (1979) capable of handling 2,000ton vessels. The provincial government is presently extending to Seleman, onthe island's north coast, the road running north from Amahai to Makariki (12km). An access road to the project area would off-take from this road some 4km north of Makariki. From there the proposed main estate compound is some 25km to the west. The road contractor has already constructed the road to theproposed project area access off-take, and expects to complete it to Selemanby end-1983. Ambon, the provincial capital, is connected to Amahai by lightplane or passenger ferry. PNP XXVIII has operated the old coconut estates atthe project site since the early 1960s.

1.27 Existing Services: West Java. The project area's two subdistricts(kecamatans) and six villages have some public health, education andagricultural facilities. About half of the villages have health facilities,all have elementary schools (grades 1-6) and two have junior high schools(trades 7-9). Most villages have a local market place, although the kecamatanmarket is at a considerable distance from them all. The two kecamatans haveagricultural extension services, however, only one or two extension staff(usually a field extension worker, PPL) are stationed in each kecamatan, whicheach have in excess of 5,000 farm families. The desired extensionworker/farmer ratio is about 1 PPL/1,600 farmers. Generally the agriculturalservices are concentrated in the sawah areas, with little or no services inthe upland areas, that is, the proposed project areas.

1.28 Existing Services: Bengkulu. Public services in the Seluma siteare similar to those described in West Java. Some villages have healthservices, all have elementary schools, while two have junior high schools.Agricultural extension services are available at the kecamatan level, but theratio of PPLs to farmers is lower than desirable.

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Table 1.1: NES PROJECTS: PROGRESS OF TREE CROP PLANTINGS(End-April 1981)

NES I NES II NES III NES IV NES V Total------------------- (ha) -----------------------

RubberSmallholder - Planned /a 11,500 22,700 28,000 - 37,000 65,900

- Actual 6,750 3,880 3,800 - 0 14,430

Estate - Planned 24,800 3,500 10,790 - 5,000 44,090- Actual 25,600 790 6,060 - 0 32,450

Oil PalmSmallholder - Planned - - - 8,000 19,000 27,000

- Actual - - - 0 0 0

Estate - Planned 5,000 - 5,100 - 7,500 17,600- Actual 5,630 - 4,370 - 0 10,000

CoconutSmallholder - Planned - - - - 9,700 9,700

- Actual - -- - 0 0

Estate - Planned 4,800 - - - 700 5,500- Actual 3,300 - - - 0 3,300

SubtotalSmallholder - Planned 11,500 22,700 28,000 8,000 32,400 102,600

- Actual 6,750 3,880 3,800 0 0 14,430(Percentage completed) (59) (17) (14) (0) (0) (14)

Estate - Planned 34,600 3,500 15,890 - 13,200 67,190- Actual 34,530 790 10,430 - 0 45,750

(Percentage completed) (99) (23) (66) - (0) (68)

Total- Planned 46,100 26,200 43,890 8,000 45,600 169,700- Actual 41,280 4,670 14,230 0 0 60,180

(Percentage completed) (90) (18) (32) (0) (0) (35)

/a As proposed in the NES projects.

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THE PROJECT

2.01 This project is the sixth in the Bank assisted NES series, andwould continue GOI's smallholder development Frogram using public sectorestates to establish nucleus estate and smallholder tree crops andinfrastructure. It would also assist the program's future expansion byrehabilitating and upgrading an existing estate which would eventuallypromote future smallholder development. The project would establish orrehabilitate some 17,000 ha of rubber and 9,5CO ha of coconuts (11,500 forthe estates and 15,000 ha for smallholders) and provide processingfacilities, in the provinces of West Java, Ber.gkulu and Maluku; resettlesome 8,450 families in West Java and Benkulu; and rehabilitate and expandPNP XXVIII, an estate in Maluku. The project would provide technicalassistance to DGE and the public estates.

Project Works

2.02 The proposed project would include:

A. West Java - PTP XII at Cikaso and AErabinta

(a) Nucleus Estate Development

(i) planting about 1,170 ha of rubber at Cikaso and 970 ha ofrubber and 500 ha of coconuts at Agrabinta, rehabilitatingabout 600 ha rubber at Cikaso and 770 ha of rubber and480 ha coconuts at Agrabinta;

(ii) constructing estate housing and buildings at bothsites,

(iii) constructing about 30 km of collection roads (13 km atCikaso, 17 km at Agrabinta), rehabilitating some 60 km ofcollection roads (24 km at Cikacso, 36 km at Agrabinta) and160 km of farm tracks (70 km at Cikaso and 90 km atAgrabinta);

(iv) rehabilitating a rubber factory at Cikaso (8 ton/day) andAgrabinta (9 ton/day), and conEtructing copra preparationfacilities on both sites and a copra processing factoryat Agrabinta (2 ton/hour); and

(v) procuring vehicles, road construction and agriculturalequipment and machinery.

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(b) Smallholder Development

(i) planting about 2,000 ha coconuts for about 1,350 smallhold-ers at Cikaso and about 3,500 ha coconuts for about 2,350smallholders at Agrabinta;

(ii) developing about 600 ha for house gardens and food cropsat Cikaso (200 ha) and Agrabinta (400 ha);

(iii) building housing with sanitation and water supply, and thenecessary village infrastructure, for about 400 families atCikaso and 800 families at Agrabinta, and rehabilitating(including completely rebuilding some houses) houses for some580 families at Cikaso and 1,000 families at Agrabinta;

(iv) constructing about 21 km of principal access road, about100 km of village roads and 150 km of farm tracks;

(v) providing at both sites seeds, fertilizer and pesticideswhich the smallholders can purchase for their food cropareas, and cash payments of Rp 110,000 to families movedonto new house lots for seeds, seedlings fertilizers andpesticides (Rp 55,000), and subsistence (Rp 55,000); and

(vi) procuring road construction and agricultural machinery andequipment for both sites.

B. Bengkulu - PTP XXIII at Seluma

(a) Nucleus Estate Development

(i) constructing estate housing and buildings and procuringestate vehicles needed for managing smallholder development.

(b) Smallholder Development

(i) planting about 9,500 ha rubber for about 4,750 smallholders,and developing about another 1,100 ha for house gardens andfoodcrops;

(ii) resettling about 3,400 families from Bengkulu, and buildingfor them housing with sanitation and water supply, thenecessary village infrastructure, and rehabilitating about650 houses for existing smallholders;

(iii) constructing about 120 km of village roads and about 285 kmof farm tracks; and

(iv) providing at the site seeds, fertilizer and pesticides whichthe smallholders can purchase for their food crops, and

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distributing to families moved onto new house blocks aninitial package of food crop and vegetable seeds, perennialseedlings, fertilizer and pesticides, plus an initialRp 55,000 cash payment for subsistence.

(v) procuring road construction and agricultural machinery andequipment.

C. Maluku - PNP XXVIII at Seram Island

Estate Development

(i) planting about 4,000 ha of rubber and 3,000 ha of coconuts,and constructing estate housing, buildings and about 40 kmof main access, 80 km of collection roads and 240 m ofbridgeworks; and

(ii) constructing a 40 ton/day rubber factory, copra preparationfacilities and processing factory (1 ton/hour).

(iii) procuring road construction and agricultural machinery andequipment.

D. Technical Assistance and Program Support

(i) providing consultant services tD assist Team Khusus and theestates to implement the project and identify and preparefuture projects;

(ii) providing consultant services tD help strengthen SBPN, toprepare sugar projects in the Other Islands, and tostrengthen staff training for sagar production; and

(iii) providing funds for start-up activities, including planning;nursery and field development; and construction of houses,buildings and roads for future Bank-assisted tree cropprojects.

Agriculture Development

2.03 West Java. All project land would be free from title or compen-sation disputes, and available for redistribution. At each site PTP XIIwould pool the land suitable for tree crop planting into blocks of at least50 ha, and up to 500 ha. Suitability would depend on slope and present orpotential land use. Because of harvesting difficulties on land too steep,the estate would plant coconuts up to about 30% slope and estate rubberup to about 35% slope. Existing irrigated or rainfed sawahs and suitableflat areas required for villages, houses and gardens or foodcrops would notbe planted to tree crops. Each settler family would receive 1.5 ha of blockplanted coconuts. The project would redistribate project area lands so thateach settler family would be left with at least 0.5 ha for their house,

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garden and food crops. Any families moved into a new village area, inaddition to the 1.5 ha of coconuts, would also receive a cleared 0.5 ha fortheir house and garden (0.2 ha) and food crops (0.3 ha). PTP XII wouldprovide these settlers with a Rp 110,000 (US$178) cash payment for subsis-tence (Rp 55,000), and to purchase (Rp 55,000) seedlings for the garden,

vegetable and food crop seeds and fertilizer and pesticides. At each sitePTP XII would make available seeds, fertilizer and pesticides which thesmallholders could purchase annually for their gardens and food crops. Sofar at NES V West Java sites the smallholders have used these funds toimprove their gardens and food crops. PTP XII would maintain and fertilize

the block planted coconuts until they come into bearing and were transferredto the smallholders. At this stage (fifth year after planting) PTP XIIwould provide tree crop extension services, fertilizers and agrochemicals,collection, processing and marketing services for the smallholders. Thesmallholders would finance these services (para. 3.13). The existingkecamatan agricultural services would provide food crop extension services.

2.04 Bengkulu. As in West Java all project land would be free fromtitle or compensation disputes, and available for redistribution. Eachexisting settler family would receive 2.0 ha block planted rubber, andat least another 1.0 ha of which 0.5 ha would be suitable for their house,garden and foodcrops. If possible the remaining 0.5 ha could include anycoffee, cloves or kebun areas the settlers consider too valuable todemolish. New settler families would receive 3.0 ha, of which 2.0 ha wouldbe -uiltable for rubber, 0.5 ha for house, garden and foodcrops, and theremaining 0.5 ha for either food or tree crops. PTP XXIII would clear 2.5ha per family, block planting 2.0 ha with rubber and leaving 0.5 ha for thehouse, garden and food crops. The estate would maintain and fertilizer therubber until maturity in the sixth year after planting when the smallholderbecomes responsible for it. PTP XXIII would supply each family resettledwith an initial package of seedlings, seeds, fertilizers and pesticides forthe garden and the food crops. After the smallholders take control of theirrubber, PTP XKIII would provide tree crop extension services, collection,processing and marketing services, and make available seeds, fertilizers andpesticides which the smallholder can purchase for both his tree and foodcrops. The local kecamatan agricultural services would supply food cropextension services.

2.05 Maluku. PNP XXVIII would establish a 4,000 ha rubber estate onthe proposed site's western end, on the eastern end, and possibly oncoastal areas, it would establish a 3,000 ha coconut estate. As theirexisting operations include only some 600 ha of rubber, 3,300 ha of coconutsand 1,100 ha of nutmeg on scattered sites, along with a proposed oil palmdevelopment in Sulawesi, the proposed plantings would become one of itslargest and most important production areas.

Physical Development-

2.06 Land Clearing and Planting. Using the prospective settlers andother labor, the estates would manually clear the sites. They would usechainsaws on trees, regrowth or bush, and weedicides on small brushes and

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alang-alang. They would poison old rubber treas, preferably in the yearbefore land clearing. If that is impossible, they would poison the stumps,and any regrowth. To facilitate the burning of felled timber, the estateswould clear mainly during the dry season (April to September in West Javaand Bengkulu, November to February in Maluku). They would first underbrushthe area, then fell all trees, leaving them for six to eight weeks to drywhere cut down, preferably in a north-south direction. After the firstburning, the estates would chainsaw the remaining timber of about 15 cm orless in girth, stack this around stumps and larger logs, and reburn thearea, concurrently spraying with weedicide any alang-alang or other weeds.They would then manually plant the cover crop, line the tree rows, dorequired terracing, and dig the pits for the trees. Finally, during the wetseason, they would plant the tree crops.

2.07 In Maluku the existing labor is insufficient and unskilled inplanting rubber. PNP XXVIII would arrange with one of the Javanese provin-cial governments for families skilled in rubber estate work to transmigrateto Maluku as estate labor. Additionally, when clearing the existing coconutareas, PNP XXVIII would cut the tree trunks into sections and stack toensure they burn completely. To prevent cocorut beetle breeding, it wouldquickly plant the cover crop and ensure it covers stumps left in the field.

2.08 Nurseries. The, estates should establish nurseries about twelvemonths before planting. In West Java, using start-up funds from NES V,PTP XII would establish rubber and coconut nurseries during the 1981-82 wetseason. PTP XXIII and PNP XXVIII have both established nurseries andcommenced planting at Seluma and Seram during the 1981-82 wet season (PTPXXIII, 200 ha smallholder rubber; PNP XXVIII 400 ha rubber, 250 hacoconuts). They used NES V start-up funds, antd would continue to use thesefunds for nursery production for 1982-83 plantings, the first fieldplantings the proposed project would finance.

2.09 Road Construction. The estates wouLd establish a network ofaccess, collection and village roads throughout the proposed sites, and anetwork of estate or farm tracks through the -:lantations. Project roads,which would complement the existing provinciaL and kabupaten roads, havethree basic designs. Firstly, principal access roads (Department of PublicWorks Class III Standard), which would connec-: the project area, factory andmain offices with the nearest provincial road; secondly, primary collectionand village roads which would connect the estate divisions and all villageswith a principal access road, and year round would allow heavy loads to betransported to and from the estate divisions and villages to the processingfacilities; and thirdly, estate or farm tracks which would allow infieldproduce collection and input distribution to within some 300 m of any treecrops or cultivated area. The project would require about 25 m of thesetracks per ha of tree crops on undulating land and 30 m per ha in more hillyareas. These tracks would also serve as streets or secondary village roadswithin the smallholder villages. As far as pDssible all roads would followground contours to reduce gradients and earthworks to a minimum. All

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estate and farm tracks would be surfaced with a minimal thickness of gravelto ensure their use during the wet season when agricultural activity isgenerally at its peak. Table 2.1 lists the road design standards, which areDirectorate General of Highways (Bina Margha) standard designs.

2.10 The project would construct a total of about 61 km of principalaccess road, 250 km of primary collection or village road, 680 km of estateor farm track and 80 km of secondary village road. It would alsorehabilitate about 60 km of primary collection road and 160 km of estatetrack. Except for bridgeworks the estates would construct the roads andtracks by force account. Using funds from NES V, both PTP XII and PTP XXIIIalready have commenced constructing (by contract) the access roads to theirrespective sites, that is, PTP XII to Cikaso and Agrabinta (65 km) and PTPXXIII to its nucleus estate at Seluma (8 km). This latter road would alsoservice the proposed smallholders. The estates would locally recruitconsultants to assist survey road alignments, design the cross-section andsupervise construction. Table 2.2 shows each estates' proposed estimatedroad construction by length and type. The estates would ensure that theirmachinery suppliers train the estate road construction staff in theappropriate use of the purchased machinery. An assurance was obtainedfrom GOI that PTP XII, XXIII and PNPXXVIII would hire consultants, underterms and conditions acceptable to the Bank, to assist survey, design andsupervise construction of the road works (see para. 2.25).

9.11 Housing, and Sanitary Facilities. In West Java and BengkuluPTP XII and PTP XXIII would construct (mainly by contract) about 4,600 small-holder houses (1,200 in West Java, 3,400 in Bengkulu) and rehabilitateanother 2,230 (1,580 in West Java, and 650 in Bengkulu). Besides buildingnew villages, PTP XII and PTP XXIII would replace any substandard houses ofexisting settlers. The basic house would be about 36 sq m including anenclosed kitchen (3 sq m) and adjacent porch (3 sq m) attached to the backof the house. The house would be of timber, or steel and prefabricatedmaterials, with either a tiled or galvanised iron roof. Wherever possiblethe estates would use locally available materials, and generate the maximumpossible local employment. Within each site the house lots and housingunits would be modular and of uniform design. On each house plot theestates would construct pit latrines at a minimum 15 m from the house andpotable water supply. The houses would be ready before the smallholdersarrive. The estates would locally recruit consultants to assist design thevillage, food crop and garden layouts and supervise construction. For PTPXII and PTP XXIII, these consultants would also assist with road design(para. 2.10). An assurance was obtained from GOI that PTP XII and PTPXXIII, under terms and conditions acceptable to the Bank would hire theseconsultants (see para. 2.25). Using standard estate designs, the estatesalso would construct housing for their management and permanent field staff.

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Table 2.1: ROAD DESIGN STANDARDS

Primary Estate/farmPrincipal collection track oraccess or village 2nd village

Design detail (Class III)/a (Class VI) (Class VII)

Geometric /bDesign speed (km/h) 60-40-30 /, 30 -

Maximum gradient (%) 6-8-12 6 12Right-of-way (m) 20 10.0 8.0Formation width (m) 5.0-8.0 6.0 3.0Pavement width (m) 3.5-6.0 4.0 -

StructuresBridge width (m) 4.5 /d 4.0 4.0Loading /eCulvertsTf

PavementDesign wheel load (kg) 5,000 4,000 1,000Compaction (% AASHO) 95 95 90Pavement thickness (cm) /g 15 8Compaction subgrade (% AASHO) 90 90 90

/a Directorate General of Highways, Department of Public Works (BinaMargha) standard class number.

/b Pavement to be designed in accordance with Bina Margha guidelines forflexible pavement design No. 04/PD/BM/1974.

/c Flat-rolling-mountainous terrain, Bina Mar,gha standard specificationsNo. 13/1970.

/d 4.5 m per single lane.

/e Structures to be designed in accordance with Bina Margha LoadingSpecifications for Highway Bridges No. 12/L970.

/f Minimum culvert width is 5.0 m.

/g Depending on design speed.

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Table 2.2: PROJECT ROAD CONSTRUCTION(km)

PrimaryPrincipal collection Estate/farm Secondaryaccess or village track village

(Class III) /a (Class VI) (Class VII) (Class VII)

West JavaPTP XIIConstruction (NE) /b - 30 70 -

(SH) 7c 21 70 150 30Rehabilitation (NE) - 60 160 -

BengkuluPTP XXIII

Construction (SH) - 70 285 50

MalukuPTP XXVIIIConstruction (Estate) 40 80 175 _

TotalConstruction 60 250 680 80Rehabilitation - 60 160

-~~~-

/a Bina Margha standard class number.

/b NE, nucleus estate.

/c SH, smallholders.

2.12 Water Supply. At the West Java sites existing settlers obtainpotable water from small streams or shallow wells (1-3 m deep). Usuallythese sources are adequate for year round water supplies, and PTP XII woulddig and equip a well for each new house lot. Equipping consists of aconcrete apron and raised ring (about 0.5 m) around the well top and astructure for a rope and pulley. At Seluma local settlers also obtainpotable water from rivers, streams or wells (5-8 m deep). PTP XXIII woulddig and equip a well, or construct some other suitable water source, foreach new house lot for year-round water supply.

2.13 Village Infrastructure. Settlement planning and village designare related to traditional community living patterns and the physicalfactors of topography, water supply and access. Generally the villageswould be about 200 families, consisting of a number of small groups or

19 -

blocks (25-30 households) arranged around a v[llage center with communityfacilities. The villages would be constructeil on flat to gently undulatingland preferably with suitable underground waters The settlers' food cropareas would be adjacent to their house lots and ideally within 0.5 km fromthem. The community facilities usually include a village office, communityhall, elementary school, place of worship, market, sports ground and,depending on village size and location, a sub--health center (sub-puskesmas).Houses would also be constructed for the educational and health staff.Allowing 0.2 ha per house lot and 0.1 ha per Eamily for community areas,roads footpaths and waste land, the estates would clear some 0.3 ha/family or60 ha gross/village. They would also clear all estimated 70 ha gross/villagefor the 0.3 ha per family food crop area. Besides these areas, the estateshould allocate each village some 0.5-0.75 ha gross per family reserve landfor a graveyard, fuel wood reserve and community grazing land. The estateswould construct all the village infrastructure except the health andeducation facilities which the Provincial Coordinating Committee (PCC) wouldconstruct, using central government funds for local infrastructuredevelopment programs (INPRES). In West Java }'TP XII would construct aboutsix villages (two in Cikaso and four in Agrab:Lnta). These are required tosettle farmers near to their proposed tree crop plantings. In Bengkulu PTPXXIII would construct some 15 villages, of wh:.ch one would be a mainvillage, containing additional public buildings and services, forexample, a bank, post office, health center (puskesmas) and lower secondaryschool. Table 2.3 shows the proposed village infrastructure by site.

2.14 Processing Facilities. At each site the estates would have orwould construct sufficient processing capacity to handle their own and thesmallholder's production. Table 2.4 gives details by site of estimatedproduction and installed processing capacity. Under the project, PNP XXVIIIwould install the total required processing capacity for rubber at Seram, asconstructing by stages would give only minimal savings. Only about Rp 6.4million or 4% of the total expenditures could be delayed. However, at allother areas the estates would install processing capacity by stages, and,unider the project, install sufficient capacity to handle production up toaround 1990. At Cikaso and Agrabinta PTP XII would rehabilitate two existingrubber factories in three stages, the first itL 1982, the second in 1987, andthe third in 1991. The project would finance the first two stages. PTP XIIwould also construct a coconut oil extraction factory at Agrabinta to be inoperation by end-1986. This would initially Ihave a single 1.0 ton/hour screwpress, and eventually by 1995, five such presses (plus stand--by capacity),working three shifts per day. The project wouLld finance two of the presses,which in 1990 would start working three shifts per day. Additionally, PTPXII would construct two copra preparation facilities, one at each site.Each facility would have an initial copra proc.uction capacity of 2 tons/hourwhich would be sufficient up to 1990, when it .would be doubled.

2.15 At Seluma, under NES V, PTP XXIII woWuld install a 40 ton/dayrubber factory. This could cope with the nucleus estate and smallholderproduction up to 1990. Eventually PTP XXIII wrould build a second factory,sited in the smallholder area, to handle the mtaximum production.

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Table 2.3: VILLAGE INFRASTRUCTURE

Floor Totalarea Unit cost cost Number of units

Item (sq m) (Rp'000/sq m) (Rp mln) Cikaso Agrabinta Seluma

Village office 36 60 2.2 2 4 14Village office 108 60 6.5 - - 1Community hall 48 50 2.4 2 4 14Community hall 135 50 6.8 - - 1

Mosque 100 50 5.0 - - 2

Mushalla 50 50 2.5 2 4 13Market 100 50 5.0 1 - 7

Bank 36 60 2.2 - - 1Bank houses 36 85 3.1 - - 4

Sports ground 1.5 ha -/a - 2 4 15Post office 54 50 2.7 - - 1

Post office houses 50 85 4.3 - - 3

Primary school 320 90 28.8 2 4 15Junior high school 1,000 90 90.0 - - 1Teacher houses 50 85 4.3 6 12 48Health center 250 85 21.3 - - 1Subhealth center 80 85 6.8 1 1 8Warehouse 40 45 1.8 2 4 14Warehouse 54 45 2.4 - - 1

Settler housesNew house /b 36 20 0.72 650 1,200 3,400Well - 30 0.03 650 1,200 3,400Latrine - 25 0.02 650 1,200 3,400Rehabilitatedhouse 36 10 0.36 330 600 650

/a The sports ground would be cleared only, this being done during generalclearing of the village.

/b At Cikaso and Agrabinta the new houses include some existing houses whichwould be completely rebuilt, that is, complete rebuilding is necessary forrehabilitation.

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Table 2.4: CROP PROCESSING: INSTALLED CAPACITY

InstalledEstimated processing capacity

Commodity Production /a under maximumSite Crop processed 1987/b 1990 Peak project required

Cikaso Rubber L & S /c 3.8 5.6 12.0 6.0 12.0(ton/day)

Agrabinta Rubber L & S 2.9 5.2 13.1 6.0 13.0(ton/day)

Coconut/d Copra 1.0 2.1 4.2 2.0 5.0(ton/hour)

Seluma Rubber L & S 2.2 32.4 114.1 40.0/e 100.0(ton/day)

Seram Rubber L & S 1.2 12.0 40.0 40.0 40.0(ton/day)

Coconut/d Copra 0.3 1.3 2.5 1.0 3.0(ton/hour)

/a Where relevant estimated daily production includes nucleus estate andsmallholders.

/b Final year of project implementation.7-c L&S refers to latex and slab./d PTP XII and PNP XXVIII would install central copra preparation

facilities to dry the coconut meat./e To be provided under NES V.

2.16 At Seram PNP XXVIII would install a coconut oil extraction factory,which would be operating by end-1987. It would initially have a single1 ton/hour screw press, and eventually (1994) three such presses (plusstand-by capacity), operating three shifts per day. The project wouldfinance the one press stage of the factory, plus a 2 ton/hour coprapreparation facility and a small bulking depot near the Amahai wharf forstorage of coconut oil and copra cake before shipment to markets.

2.17 At all sites, if requested by GOI,, the completion of requiredprocessing capacity could be considered for Bank financing under subsequentloans. The rubber factory costs have been estimated to allow either 100%crumb rubber production or a mixture of crumib and sheet rubber. The estates

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would be responsible for installing, operating and maintaining all proces-sing facilities. The project provides, however, for consultant assistanceto design, prepare specifications and tender documents, assist evaluatetenders received and supervise construction of the project rubber andcoconut oil processing facilities. PTP XII and PNP XXVIII would constructtheir coconut oil extraction factories using at least two main contracts:(a) civil works plus buildings (design, supply and construct); and (b) plantand equipment (supply, erect and commission). These factories would takeabout 42 months from the appointment of engineering consultants tocommissioning. Assurances were obtained from GOI that: (a) PTP XII and PNPXXVIII would hire consultants for the above mentioned work withqualifications and under terms and conditions acceptable to the Bank (para.2.25); (b) PTP XII would complete its coconut oil extraction factory byDecember 31, 1986, and PNP XXVIII by December 31, 1987; and (c) if the PTPXII mill is not in operation by the stated date, PTP XII would purchase fromsmallholders at an appropriate price any coconut production offered forsale after December 31, 1986.

Settlement and Community Development

2.18 Recruitment and Selection. In West Java the smallholders wouldcome from those presently cultivating project lands either as owners orrenters of private land (Tanah Milik), or as leasers or squatters on govern-ment land (Tanah Negara). The Provincial Government has already made acensus of all cultivators within the proposed sites and currently is obtainingland owners agreement to give title to the project of the land requiredfor project purposes. Those leasing or squatting on government land havealso given to the project any rights to the areas they are cultivating.Although existing right holders would become project beneficiaries, theywould not necessarily receive back under the project the same amount ofland they had pre-project. In allocating project lands, preference would begiven to small farmers or the landless. Farmers who own or cultivate landboth outside and inside the project area may have to give their rights to aproject block to a-married child. In particular, families from Cikaso wouldbe ineligible to enter the project who, besides land in the project area,own 1.0 ha or more within a sawah area, adjacent to the project area, wherethe provincial government proposes to construct future irrigationfacilities. Cultivators from blocks or dukuhs which have insufficientsuitable land to allow each existing cultivator a tree crop block would begiven the opportunity to move to another block with excess land. Allproject beneficiaries would have to live within the project boundaries, andmay have to move to a project village. Beneficiaries would be marriedcouples, aged 20 to 60 years, with possible exceptions to this age limit forexisting settlers. Those between 40 and 60 years should have children. ThePCC and project manager would select the smallholders to enter the project.

2.19 In Bengkulu the smallholders would be all those with cultivationrights within the project area, and the inhabitants of several trans-migration settlements adjacent to the site (total some 2,550 families).After these groups, small farmers (3.0 ha or less) from the project

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kecamatans and kabupatens would have priority. The Bengkulu PCC wouldselect the additional smallholders, and with PTP XXIII, transport them tothe site. The PCC also is presently takirg a census of those with culti-vators- rights within the project area to obtain their agreement to enteringthe project and giving to the project title of the required land.

2.20 PTP XII and PNP XXVIII would hire one member of each smallholderfamily as a permanent estate laborer, and guarantee him or her a permanentjob until the estates hand over to the smallholder family the operation ofits individual holding. The estates would hire prospective coconut small-holders for four years and prospective rubber smallholders for five years.The estates would train the smallholders :Ln planting and maintenance ofimmature trees, and harvesting and maintenance of mature trees. At SelumaPTP XXIII would plant about 50 ha of rubber as a tapping training area forsmallholders. It also would establish other required facilities to runabout a one-week residential course in tree tapping and care. PTP XXIIIwould train at least two members from eaclh smallholder family. To obtaincontrol of their holdings the smallholders must prove themselves satisfac-tory estate laborers/trainees and willing to work and live on their treecrop holdings.

2.21 Land Allocation. In West Java *:he PCC, in association with theDirectorate General of Agrarian Affairs (DGA), where necessary would provideall families with the right of use title 'hak pakai) to 0.5 ha for house,garden and food crops within one year of ?roject works commencement in thearea. In Bengkulu the PCC, also in assocLation with DGA, would provide allsmallholders with hak pakai to 1.0 ha (house lot of 0.2 ha, food crop 0.3 ha,remaining 0.5 ha suitable for either food crops or tree crops) within oneyear of their arrival. If appropriate, the PCC and DGA would also providethis for existing settlers. At all sites the PCCs and DGA would provide thesmallholders judged satisfactory settlers with land ownership title (hakmilik) to their entire holding within three years after settlement. The Bank

Rakyat Indonesia (BRI) however, would retain the hak milik certificates assecurity until the smallholders repay their debt incurred under the project.The provincial and kabupaten DGA would do the cadastral survey necessary todefine each smallholder-s holding. Each smallholder would receive a treecrop block fully planted with the appropriate number of trees. An assurancewas obtained from GOI that each qualifying smallholder would receive withinthree years after settlement hak milik to 1.5 ha of planted tree crops inWest Java and 2.0 ha of planted tree crops in Bengkulu and in each case anadditional area for house lot, garden and food crops to give a total ofabout 2.0 ha in West Java and 3.0 ha in Bengkulu.

2.22 Subsistence. In West Java and Bengkulu each family moved onto anew house lot and food crop area would receive Rp 55,000 (US$88) initialcash payment for food and transportation before arrival at the projectsite. this would be in addition to Rp 55,000 for the purchase of inputs(para. 2.02-2.03).

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2.23 Health. The West Java and Bengkulu provincial governments,through their PCCs and using INPRES funds, would provide health care facili-ties to Repelita III standards in the project areas. In Java these stand-ards are one puskesmas (one building 80 sq m, doctors's house 70 sq m, twostaff houses each 50 sq m) per 30-40,000 people and one sub-puskesmas (onebuilding 30 sq m, one staff house 50 sq m) per 5,000 people, and in theOther Islands (includes Sumatra) one puskesmas per 15-15,000 people and onesubpuskesmas per 1-2,000. At both Cikaso and Agrabinta the PCCs wouldconstruct one sub-puskesmas, and at Seluma one puskesmas and five sub-puskesmas. The provincial health authorities would staff and operate thecenters. Health services, with a primary health care approach, would focuson malaria control, immunization, nutrition, family planning and environ-mental sanitation. Malaria control would include house spraying, malario-metric surveys and treatment.

2.24 Education. Using INPRES funds the West Java and Bengkulu PCCs,in association with the Ministry of Home Affairs, would be responsible forconstructing an elementary school (grades 1 to 6) in each new village (6 inWest Java, 10 in Bengkulu). The project would provide funds for one lowersecondary school (SMP, grades 7 to 9) in Bengkulu. The Directorate Generalof education would construct the lower secondary school, and be responsiblefor staffing all schools.

Technical Assistance and Program Support

2.25 To help the DGE and individual estates implement the project,the DGE in its overall smallholder development programs, strengthen SBPNand prepare sugar projects in the Other Islands, the project would providethe following consultant services:

(a) DGE would:

(i) internationally recruit one civil engineer (with considerableexperience in road construction) to be attached to the TeamKhusus for two years. His contract would be signed, and hewould be ready to start work by September 1, 1982. He wouldcoordinate and supervise: (a) any road survey and design theestates undertake, using consultants or their own staff, forsmallholder project preparation, appraisal and implementa-tion; and (b) any subsequent road construction the estatesundertake, by force account or contract;

(ii) internationally recruit a rubber processing engineer to beattached to Team Khusus for two years. He would assist theestates with the design, preparation of tender documents,evaluation of tenders received and supervision of construc-tion of rubber mills (contract to be signed by July 1, 1983);

(iii) internationally or locally recruit appropriate short-termconsultants for Team Khusus to assist with the preparation of

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future projects, and the implementation of this or otherongoing projects, particularly with PNP XXVIIITs component atSeram (24 man-months);

(iv) internationally recruit consultants for SBPN to plan, designand help supervise implementation of sugar projects in theOther Islands. SBPN is currently evaluating proposals forthis work, which would be financed by funds from NES V andfrom this project (178 man-morLths, contract to be signed byJanuary 1, 1983); and

(v) internationally recruit a fina,ncial analyst and a land useplanner experienced in tropiccl tree crop development, eachto be attached to SBPN for two years. Both experts wouldlead groups within SBPN which would advise and assist theestates in development planning. The financial analyst'sgroup would review each estate-s financial resources annuallyand would advise on the amount: of development the estatescould finance and the type and source of funds the estateshould employ. The land use planner's group would collectall existing pertinent resource data (land use maps, topo-graphical maps, soil surveys, climate and so on) and wouldidentify areas with potential for tree crop development.Taking account of GOI s long-range regional planning, socio-economic data, existing infrastructure and services, it wouldestablish priorities for further investigations and projectpreparation in such areas. This group would closely coord-inate with Team Khusus project preparation group. (48 man-months, contracts to be signed by August 1, 1982). SBPN wouldform two other groups to work on commodity marketing andinspection services. Using funds already available under NESI DGE would internationally recruit consultants to lead thesetwo groups;

(b) PTP XII would:

(i) internationally recruit consuLtants to design, prepare tenderdocuments and specifications, assist evaluatetenders received, and supervise construction of the proposedcopra preparation facilities and oil extraction mill atCikaso and and Agrabinta (32 man-months, contract signed byJanuary 1, 1984);

(ii) locally recruit consultants to survey, site, design, and wherenecessary supervise construction of the smallholder villages,food crop area layout and project roads (196 man-monthsconsisting of 36 man-months for village design and 160 man-months for road design and construction, contract signed byAugust 1, 1982);

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(c) PTP XXIII would:

(i) internationally recruit an agriculturalist experienced inrubber and oil palm establishment (24 man-months, contractsigned by September 1, 1982) to assist with the implementationin Bengkulu province of PTP XXIII's development program;

(ii) locally recruit consultants to survey, site, design, and wherenecessary supervise construction of smallholder villages, foodcrop areas, and project roads (136 man-months consisting of 60man-months for village design and 76 man-months for road designand construction, contract to be signed by August 1, 1982); and

(d) PNP XXVIII would:

(i) internationally recruit a financial expert to assist with thefinancial management of the estate and training of counterparts(24 man-months, contract to be signed by September 1, 1982,plus an additional 12 months for short-term follow-ups);

(ii) internationally recruit consultants to design, prepare tenderdocuments and specifications, assist evaluate tenders received,and supervise construction of the proposed copra preparationfacilities and oil extraction mill at the Seram site and copraand coconut oil bulking depot at Amahai (30 man-months,contract to be signed by January 1, 1985);

(iii) locally recruit consultants to survey, site, design andsupervise construction of project area roads (130 man-months,contract to be signed by August 1, 1982).

2.26 Table 2.5 lists the required consulting services and their basecost. An assurance was obtained from GOI that the agencies would have signedcontracts and finalized arrangements for engaging consultants withqualifications and under terms and conditions acceptable to the Bank by thedates specified in para. 2.25 and Table 2.5.

Status of Engineering

2.27 Topographical maps at 1:25,000 scale exist for Cikaso and Agrabinta,and 1:100,000 scale for Seluma and Seram showing height contours and drainagepatterns. DGA has prepared (May 1980) 1:10,000 scale present land use mapsfor Cikaso and Agrabinta, while PTP XXIII-s consultants have completed recentfield surveys (May 1981) of Seluma, checking on present land use. Sufficientsoils information is available for the sites except at Cikaso and Agrabintawhere PTP XII is currently checking on soil depth to exclude areas of shallowsoils. PTP XXIII has already excluded some 1,500 ha at Seluma because ofrocky outcrops. While more detailed work is not required to furtherdelineate shallow soils here, PTP XXIII would watch for them during landclearing, and if encountered would exclude them. All estates have either

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Table 2.5: CONSULTING SERVICES

Consultants CostInternat. Locally Internat. Locallyrecruited recruited recruited recruited Total--- (man-months) --- ------ (US$ million) ------

DGE (for SBPN) 226 0 2.7 0 2.7

Project implementation,road engineer, rubberprocessing engineer,agriculturalist,financial expert (DGE,PTP XXIII, PNP XXVIII) 132 0 1.6 0 1.6

Design, supervise con-struction coconut oilprocessing facilities(PTP XII, PNP XXVIII) 62 0 0.7 0 0.7

Design, supervise con-struction villagesroads (PTP XII,PTP XXIII, PNP XXVIII 0 462 0 1.2 1.2

Total 420 462 5.0 1.2 6.2

established or selected the sites for nurseries to supply the initial year'splantings, and PTP XXIII and PNP XXVIII are presently defining the boundariesfor the first year's land clearing. PTP XXIII and PNP XXVIII have preparedoutline plans, presented on existing topopgraphic maps, showing project layoutand preliminary road alignments. PTP XII is currently undertaking atopographic, soil and vegetation survey for outline planning. Standarddesigns and specifications exist for all smallholder and estate housing,buildings, village infrastructure and roads. When the estates have clearedthe sites, to assist detailed planning, they would produce 1:10,000 basictopographical maps with five meter contour intervals for at least the villageand food crops areas and project road alignments.

Implementation Schedule

2.28 GOI would fully implement the project over 12 years, that is, fromestablishing the first nurseries till the last blocks of trees planted com-mence bearing. The proposed project would assist with implementation overfive years, from mid-1982 till mid-1987. During the first 24 months the

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activities most crucial to project implementation would be access road con-struction at PTP XII; land clearing and estate housing and buildings at PTPXXIII; and estate housing, labor recruitment from Java, and procurement ofinitial road construction and agricultural equipment at PNP XXVIII. Usingstart-up funds from NES V, the estates have already commenced most of thesecrucial tasks.

Cost Estimates

2.29 Total estimated project cost over 12 years is US$250 million. TheBank and CDC would assist finance the project during the first five years,during which period US$190 million is the estimated project cost, of whichUS$103.9 million (55%) is the foreign exchange component. The cost ofstart-up works, commenced under NES V, are excluded from this five-yeartotal. GOI would finance all project costs (US$60 million) from year six tocompletion. Project costs are expressed in mid-1982 prices and because ofthe tax exempt status of the implementing agencies, do not include taxes.

2.30 Base cost estimates were derived from the detailed cost analysisof contract prices of recent similar works undertaken by estates, includingPTP XII, PTP XXIII and PNP XXVIII, or have been based on the NationalDevelopment Planning Agency (BAPPENAS) standards and unit construction costsin nearby areas. Consultant service costs are based on recent contracts forsimilar services in Indonesia. Estimated direct and reimbursable costs areUS$12,000/month for foreign consultants and US$2,500/month for local con-sultants (Annex 1, Table 5). Before calculating base cost estimates, allrecent unit prices were projected to mid-1982 prices by using the appropri-ate local and foreign price contingencies listed in Table 2.6. Base costsinclude allowances for the recent (January 1982) 60% increase in domesticoil prices. Because of the different wet and dry months in West and EastIndonesia, in West Java and Bengkulu PTP XII and PTP XXIII would clear andprepare land from about April to September and plant from October to March,while in Maluku PNP XXVIII would clear and prepare from about August toJanuary and plant from February to July. At each site estimated tree cropestablishment costs are based on these "development" periods, that is, atWest Java and Bengkulu from April 1982 to end-March 1987, and at Maluku fromAugust 1982 to end-July 1987. The cost estimates include an allowance forphysical contingencies of 15% for housing, infrastructure and roads, and 10%for field development, services, equipment and supplies. The cost estimatesalso include allowances for price escalations during implementation (30% ofbase cost plus physical contingencies) based on the price contingencies inTable 2.6.

Table 2.6: ANNUAL PRICE CONTINGENCIES

(%)

1981 1982 1983 1984 1985 1986 1987

Domestic costs 18 14 12 10 10 10 10Foreign exchange costs 9 8.5 7.5 7.5 7.5 6 6

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Table 2.7 summarizes project costs while Annex 1, Table 1 and Staff WorkingPapers give their details.

Table 2.7: PROJECT CCST SUMMARY

ForeignLocal Foreign Total Local Foreign Total exchange----(Rp million)------ ---(US$ million)--- (%)

Smallholderdevelopment 15,375 17,251 32,626 24.6 27.6 52.2 53

Nucleus estatedevelopment 16,665 22,692 39,257 26.7 36.3 63.0 58

Program support 2,442 8,621 11,063 3.9 13.8 17.7 78

Base cost 34,482 48,564 83,046 55.2 77.7 132.9 58

Physicalcontingencies 3,844 4,900 8,744 6.2 7.8 14.0 56

Price contingencies 15,462 11,498 26,960 24.7 18.4 43.1 43

Total Project Cost 53,788 64,962 118,750 86,1 103.9 190.0 55

Financing

2.31 The proposed Bank loan of US$68.1 million (including US$1.1 mil-lion capitalized front end fee) would finance 35% of the project's estimatedtotal cost and 64% of the foreign exchange cost for the first five years ofproject implementation. During this period CDC would finance the project inparallel, and its proposed loan of US$28 million would supply 15% of theproject's total cost and 27% of foreign exchange costs. GOI would provideto the project implementing agencies Rp 53.8 billion (US$86.1 million) outof annual budget appropriations, and would secure suppliers' credit of aboutRp 5.6 billion (US$8.9 million) to assist ftnance the new processing plants.GOI expects no problems in obtaining suitabLe suppliers' credits.

2.32 Nucleus Estate Development. The Ministry of Finance (MOF) would

finance the bulk of local cost for nucleus estates and estate tree cropplantings, infrastructure, road building and agricultural equipment. TheMOF would obtain suppliers' credits to finance the foreign exchange cost ofthe copra preparation facilities and coconul: oil extraction mills at PTP XIIand PNP XXVIII, and the rubber factory at PNP XXVIII. Because theimplementing estates do not currently have sufficient investment funds, theywould not finance any project works.

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2.33 Smallholder Development. The MOF would directly provide funds forpractically all smallholder local costs, while the Bank and CDC loans wouldfund the foreign exchange costs. INPRES program funds would finance educa-tion and health facilities. Smallholders would repay part of their develop-ment costs, that is for the credit items of tree crop planting, subsistencepayments, settler housing, road, and tree crop development overheads (cal-culated as 10% of the tree crop establishment costs). They would not repaythe noncredit items of water supply, village infrastructure, education andhealth facilities, and project management (calculated as 5% of the tree cropestablishment costs and paid to the implementing estate). GOI would providethe Rp 37.5 billion (US$60 million) required to carry out the project inYears 6-12. These funds would maintain smallholder and nucleus estateplantings while they are immature and construct additional processing capa-city. The funds would come from the MOF and possibly machinery suppliers'credits. Sources for all project finance for the first five years aresummarized in Table 2.8.

2.34 Budgetary Allocations: Smallholders. The MOF, as at present,would channel smallholder development funds directly to the nucleus estatesthrough quarterly disbursements in accordance with an approved annual budgetand in advance of the expenditures as required by the nucleus estates. Bankfunds would be used to reimburse expenditures by PNP/PTPs based on thedisbursement percentages for the works as carried out (para. 2.41). Thecosts of development of smallholder credit items would be translated intostandardized credit amounts for individual settlers in credit agreements atthe end of the year when each tree crop area has come into maturity (seepara. 4.09). Bank Rakyat Indonesia (BRI) would be the designated bank torecover smallholders' outstanding debts. Subloans to smallholders would befor 17 years, with a two-year grace period and repayments starting in thesixth year after planting for coconut, and a three-year grace period andrepayments starting in year seven for rubber. Interest would be 10.5% p.a.,and that accruing during the grace period would be capitalized.

2.35 Budgetary Allocations: Estates. The MOF would allocate funds fornucleus estate and estate development quarterly in accordance with a pre-viously agreed annual expenditure budget. It would make these funds avail-able to the participating PNPs/PTPs either directly or through BankIndonesia (BI) under the terms of a loan agreement, or as interest-freefunds which GOI would convert to equity not later than three months afterthe closing date for the Bank and CDC's loans. The loans would havedifferent lengths and grace periods depending on the estates- present andprojected financial ability to repay the loans, and whether the funds comefrom GOI-s annual budget appropriations or from the Bank and CDC loans. GOIwould only on-lend budget funds for a maximum of 16 years including aneight-year grace period. All loans would have a 13.5% p.a. interest ratepayable on the amounts withdrawn and outstanding. The finalizing of thesefinancing arrangements in a form and substance satisfactory to the Bank is acondition of disbursing against the works the individual estates wouldundertake with the funds. Both PTP XII and PNP XXVIII would require inter-est-free funds, which later would be converted to equity, to financially

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undertake the proposed nucleus estate development. PTP XII currently has atight cash flow position, resulting from earlier development loans obtainedfrom BI and commercial banks with onerous repayment conditions, present lowcommodity prices, and a large development program GOI is requesting it toundertake. Some 80% of PTP XII's income comes from tea, which presently isselling at depressed prices, and for which future prices are forecast nobetter. PNP XXVIII has a poor financial standing, having made losses in thelast two years because of a small, inadequate production base which ispredicted to cause future losses. Any other proposed developments for PTPXII during the next eight years must be closely scrutinized to ensure PTPXII's debit to equity ratio does not exceed 60/40. GOI and the Bank havealready agreed to a development program for ENP XXVIII until 1990. Annex IIcontains projected cash flows for PTP XII and PTP XXIII. The project filecontains other detailed financial data for the estates.

2.36 For PTP XIIs nucleus estate develcpment MOF would provide budgetfunds as a 16-year loan, including eight years grace, and repayable in 16semiannual repayments over the balance of the loan period. It would provideBank and CDC funds on an interest-free basis, and would convert these fundsto equity not later than three months after the Bank and CDC loans closingdate. For PTP XXIII-s nucleus etate development MOF would provide budgetfunds as a 16-year loan, including an 8-year grace period, and Bank and CDCfunds as a 20-year loan, including an 8-year grace period. For PNP XXVIII'sestate development MOF would provide budget funds as interest-free funds andwould later convert them to equity, and Bank and CDC funds as a 20-yearloan, including a 12-year grace period. An eight year grace period is nor-mal for rubber development which takes six years to come into bearing.Because of its weak financial standing, PNP XXVIII would have 12 year graceperiods. MOF would also repay all PNP XXVIII]s current outstanding debts toother estates, and write these debts off. During the proposed development,and for other future developments, the estates would keep a debit to equityratio of no greater than 60/40. Projected cash flows for PNP XXVIII suggestthat its debt to equity ratio would increase to 70/30 around 1988-95. AsPNP XXVIII is an entirely government-owned entity, this would be acceptable,however, once through this period it also should reduce its debt to equityratio to 60/40, and not exceed this in future. To ensure the sound finan-cial basis of PTP XII, PTP XXIII and PNP XXVI]II, assurances were obtainedfrom GOI that (a) it would provide the nucleus estate and estate developmentfunds as described in this paragraph; (b) it would ensure that PTP XII andPTP XXIII would at all times maintain a ratio of long-term debt to equity ofnot more than 60/40, that PNP XXVIII would for the first 15 years of theproject maintain a ratio of long-term debt to equity of not more than 70/30and afterwards would at all times maintain a ratio of long-term debt toequity of not more than 60/40; and (c) PTP X:-I, PTP XXIII and PNP XXVIIIwould consult with the Bank before undertaking any other new developmentproject exceeding Rp 1.5 billion in the case of PTP XII and PNP XXVIII andRp 2.0 billion in the case of PTP XXIII.

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Onlending Interest Rates

2.37 Under the NES program, the GOI has an established interest ratepolicy of lending or onlending public funds to smallholders at 10.5% p.a.,and to public sector estates at 13.5% p.a. With inflation rates projected

Table 2.8: SOURCES OF PROJECT FUNDS(US$ million)

Ministryof Suppliers Total

Category Finance INPRES credits CDC IBRD cost

Smallholder Develop.Tree crops 20.2 - - 16.5 - 36.7Agrochemical 1.5 - - - 8.5 10.0Civil works 14.4 2.3 - - 7.4 24.1

Nucleus Estate Develop.Tree crops 14.2 - - 11.5 - 25.7Agrochemical 0.9 - - - 5.5 6.4Civil works 22.7 - - - 10.2 32.9

Machinery & equipment 8.0 - 8.9 - 16.1 33.0Settler subsistenceand staff relocation 1.7 - - - - 1.7

Technical assistance 0.2 - - - 7.8 8.0Start-up funds - - - - 11.5 11.5

Total 83.8 2.3 8.9 28.0 67.0 190.0

Front-end fee - - - - 1.1

at 12% for 1982, and falling to about 10% thereafter, the interest ratefor smallholders would be slightly negative in real terms. However, thisinterest rate is justified for the present project since smallholder bene-ficiaries are below the absolute poverty level, and GOI wishes to assistthis target group.

Procurement

2.38 Agricultural machinery (US$3.4 million including contingencies),road construction equipment (USI1.7 million), and rubber processing equip-ment (US$0.8 million) for rehabilitating PTP XII's rubber factories would beprocured through international competitive bidding (ICB) in accordance withBank Guidelines. Qualifying domestic manufacturers would receive a prefer-ence in bid evaluation of 15% of the cif cost or the import duty, whichever

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is the lower. GOI would procure rubber proce3sing and coconut oil extrac-tion equipment (US$12.0 million) for the new factories through proceduresensuring competitive prices, and with the suppliers advancing aboutUS$8.9 million in credit. Equipment, spare parts and supplies costing lessthan US$50,000 would be locally or internatiolally procured through prudentshopping involving at least three price quotations. Additionally, eachestate could procure one unit or set of road construction machinery andequipment (including items costing more than US$50,000 each) for initialroad works through prudent shopping involving at least three price quota-tions. The total procured in this manner wouLd be limited to the aggregateamount of US$1.4 million. To the extent possible DGE would centrally pro-cure road construction equipment and agricultural machinery for the estates,using the minimum number of contracts. The estates would construct thecoconut oil extraction factories using a limited number of contracts, thisnumber to be agreed between the Bank and GOI, with a minimum of two maincontracts: (a) civil works plus buildings (sapply and construct); and (b)plant and equipment (supply, erect and commission). In establishing andmaintaining tree crops the estates would procare small equipment such aschainsaws, hand sprayers and nursery watering systems through prudentshopping, or local competitive bidding which is acceptable to the Bank.Because GOI does not allow importation of vehicles, all motor vehicles andcycles would be procured locally following GOI procedures. However, theBank would not disburse against them. ICB in accordance with BankGuidelines would be used to procure about US$5.5 million of agrochemicals(excluding urea). The estates could procure up to US$1.5 million of agro-chemicals annually following prudent shopping procedures involving at leastthree price quotations. Since P.T. Pusri is the sole producer, supplier anddistributor of urea in Indonesia, and since world market urea prices areabout 70% higher than Pusri's price, and foreign bidders would not be inter-ested in tendering, the estates would procure urea (US$1.8 million) directlyfrom Pusri or its authorized distributors witaout competitive bidding aswas done in earlier NES projects.

2.39 Contracts for consultant services ('JS$8.0 million) would beawarded in accordance with Bank Guidelines on the use of consultants.

2.40 All civil works contracts for housiag, project and processingplant buildings, settlement and estate infrastructure, and principal accessroads (US$54.3 milion) are small and widely szattered in area and time span.Most contracts are about US$0.5 million, and Dccasionally up to US$2.0 mil-lion, and would not be of interest to international contractors. Theseworks would be carried out following local competitive bidding according tocurrent government procurement procedures whiah are acceptable to the Bank,or by force account if suitable contractors are not timely available or ifthe estates can do the work cheaper than contractors. Except for majorbridge works, the estates would construct all roads by force account, whilethey would construct most settler houses, estate buildings and villageinfrastructure by contract. Assurances were obtained from GOI that: (a)the works would be grouped into a number of saitable contracts (minimum size

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whenever feasible US$320,000) that would enable large local contractors orjoint ventures of small local firms to bid; and (b) documents for contractsto cost US$320,000 or more would be submitted to the Bank for review beforetendering and award. GOI procurement procedures for contracts belowUS$320,000 include provisions to strengthen locally based firms, and firmsowned by economically weak groups.

2.41 A Smallholder Development Agreement between the DGE and thenucleus estate would specify the details of the work to block plant the15,000 ha of smallholder's tree crops and maintain them for four years forcoconut and five years for rubber. Similarly, the financing arrangementsbetween BI and PTP XII, PTP XXIII and PNP XXVIII would specify the work toestablish and maintain the rubber and coconut plantings for the estates.Tree crop development involves the execution of a series of specialized,integrated services of labor and machinery (such as land clearing, landpreparation, nursery establishment, planting, farm and estate trackconstruction) which cannot be procured in a timely, sequential mannerthrough a competitive bidding processs. Therefore, the estates themselveswould undertake these works either by force account or subcontract, plussome other works that must be integrated with tree crop development andphased over an extended time period, such as land clearing for villageinfrastructure, food crop and house and garden areas, and collection andvillage road construction. Unit cost information for tree crop developmentis well established and could be used to monitor financial requirements andguarantee quality control.

Disbursements

2.42 The Bank and CDC would finance the project in parallel, with CDCdisbursing for tree crop establishment and annual maintenance until bearing(excluding agrochemicals). This includes all land clearing, even that forvillage infrastructure and the smallholders house lot, garden and food cropareas, nursery and budwood garden production, land preparation, planting,weeding and maintaining, estate overheads, and farm and estate trackconstructing and maintaining. The Bank would disburse for the followingitems at these rates:

(a) 35% of the civil works including roads, smallholder and estatehousing, buildings, garages, workshops and divisional offices;

(b) 100% of the foreign expenditures for road construction, agricul-tural and processing machinery and equipment, 100% of theex-factory cost (less any identifiable taxes) of equipmentmanufactured locally, and 60% of imported farm equipment purchasedlocally;

(c) 100% of the foreign expenditures for agrochemicals, 90% of localexpenditures for prudent shopping, and 100% of the totalexpenditures for urea (ex-factory); and

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(d) 100% of the cost of all consultant services, and start-upexpenditures for future Bank-assisted NES projects.

The Bank would not disburse for tree crop establishment and annual mainte-nance until bearing, vehicles, motorcycles, siaallholder and staff relocationexpenses, payments for subsistence and seeds mnd fertilizer packages, andequipment for the two coconut oil processing factories and the new rubberfactory at Seram. An estimated schedule of disbursements, based on actualcisbursement rates for earlier NES projects, is shown in Annex I, Table 2.For the loan-s initial three years the projeci:ed disbursements are moreconservative, or the same, as actual disbursemaents for area developmentprojects in the East Asia Pacific Region as documented by the Bank-s ProjectAdvisory (PAS) Staff. However, because management is now stronger and morecentralized in NES projects, disbursements in the loan's last two years areprojected at a faster rate than shown in PAS- schedule. Documentation madeunder Statements of Expenditure, supporting cLaims for local procurement ofchainsaws, sprayers, and nursery watering sys:ems and civil works carriedout by force account, would be retained in Inionesia and made available toBank supervision missions for inspection and review.

Accounts and Audits

2.43 PNP/PTPs participating under the project would keep separateaccounts for all investment costs relating to NES VI smallholders as well asnucleus estate project implementation, and woald provide such accounts aspart of a separate six montly report to the DGE, the Bank and CDC no laterthan 30 days from the end of the semester. Beginning with NES I, PNP/PTPshave been standardizing their bookkeeping procedures and accountingmethodology following procedures agreed to by the Bank and GOI. This hasfacilitated auditing. The new methodology has enabled the State Auditor toaudit an increasing number of PNP/PTP accounts.

2.44 PTP XXIII and PNP XXVIII are presently audited by the State Audi-tor, while PTP XII is audited by a private commercial auditor. NES VIproject accounts and related disbursements made under statements ofexpenditures, would be audited by independent auditors acceptable to theBank (this includes the State Auditor), and the audit reports would besubmitted to the GOI, the Bank and CDC no later than August first each year.State auditing may eventually substitute private auditing for PTP XII whenits accounts have been standardized, and capacity-of the State Auditorimproved. An assurance was obtained from GOI that these auditing practiceswould be followed.

2.45 The DGE would submit six monthly reports on the project's progressto the Bank and CDC using the format already agreed to by the Bank and TeamKhusus under earlier NES projects.

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Environmental Effects

2.46 The project would establish tree and food crops in areas ofsecondary jungle and alang-alang where a poor economic and ecologicalpattern of shifting cultivation is presently practiced. Standard soilconservation methods would be followed to prevent soil erosion. With theestablishment of a leguminous cover crop, soil fertility would be improvedby the application of fertilizers and crop rotation of food crop land. Thesmall quantities of chemicals used to control alang alang, pests anddiseases would have no significant adverse environmental effects. The newrubber and coconut oil factories would adopt the appropriate standards forthe disposal of liquid effluent to ensure that it is nontoxic and that itwould not harm the health and safety of factory employees or thepreservation of fish and wildlife.

3. ORGANIZATION AND MANAGEMENT

General

3.01 NES V SAR (paras. 4.01-4.05 and Chart I) describes briefly theorganization and functions of the Directorate General of Estates (DGE),public sector estates, and other main government institutions involved inthe tree crop subsector. This is therefore not repeated here.

Project Management

3.02 The DGE would have overall responsibility for executing theproject. The Team Khusus would have primary responsibility for coordinatingproject implementation, while the estates would be responsible and mainlyundertake the individual project works. At the individual sites the nucleusestates (PTP XII and PTP XXIII) would implement smallholder development,with the assistance of central government agencies and the West Java andBengkulu provincial governments. These, and the other estate (PNP XXVIII),would develop processing facilities and other estate civil works andplantings with guidance and supervision from the SBPN. For both smallholderand estate development, the First Director of the implementing estate wouldbe the project manager, and for the individual sites the PNP/PTP concernedwould appoint one of its estate managers as site manager.

3.03 Team Khusus. Team Khusus would coordinate project implementationfor the DGE. Its specific functions would include assistance to the projectmanagers and nucleus estates to prepare annual work programs and budgets,assist with financial administration and guide in technical, engineering andproject procurement matters. It would also monitor and evaluate projectimplementation, providing the inspection services of field development.Under the project, it would internationally recruit a road engineer(para. 2.25).

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3.04 Project Manager. Each of the projEct managers would prepare anannual work program and budget, including quarterly cost estimates for allworks the nucleus estate would undertake for the smallholders, which theTeam Khusus would review and approve on behalf of the DGE before submittingit to the MOF. The project managers would also be responsible for annualbudget requests for the noncredit expenditurEs of health and educationalfacilities financed from the INPRES programs. The DGE would make its ownbudget allocation for technical assistance under the project. An assurancewas obtained from GOI that the project managErs, assisted by the TeamKhusus, would prepare and submit to the DGE annual work programs and budgetsby October 31 each year.

3.05 Nucleus Estates. The nucleus estates would establish the small-holdings, village infrastructure, roads and processing facilities. The DGEwould make a Smallholder Development Agreement with the nucleus estates fortree crop development, extension, processing and marketing services. Thesigning of these agreements in a form and sulstance satisfactory to theBank is a condition of disbursing for the works the individual estateswould undertake under the agreement. Under this agreement's terms andconditions, the nucleus estates would be responsible for the followingservices:

(a) During Tree Crop Immature Period. Land clearing of tree crop,house and garden and food crop area; planting and maintainingthe tree crops until maturity; procuring and applying inputs forthe tree crops development; siting houses and villages andconstructing settler houses, water supply and sanitationfacilities; developing the village infrastructure, excludinghealth and education facilities; constructing and maintainingthe principal access road, village and primary collectionroads, and estate and farm tracks; resettling the smallholders,the providing of an initial subsistence cash payment (Rp 55,000);a seeds and fertilizer cash payment (Rp 55,000) or a package ofseedlings, food crop and vegetable seeds, fertilizers and pesti-cides for any West Java and Bengkulu smallholders moved into asite; the supplying of seedlings, food crop seeds, and agro-chemicals for sale to smallholders at the various sites; andthe employing full time of one member of each family andtraining in tree crop establishment and maintenance; and

(b) During Tree Crop Productive Period. Supplying the smallholdersextension services, training them in harvesting, and collectingtheir production for processing, loan recovery, and marketing.

To assist them in these works and services, the estates would locally andinternationally recruit consultants as stated in para. 2.25.

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3.06 Estates. PNP XXVIII would undertake all project works to estab-lish and maintain its tree crop plantings, infrastructure and processingfacilities. It, however, has been weak financially, managerially,technically and organizationally. To strengthen the estate managerially andoperationally, GOI has appointed production and commercial directors (bothnew posts), and sent seven senior and nine junior staff to PTP VII in NorthSulawesi for training. When needed, it also would second experiencedmanagement staff to PNP XXVIII from other estates; and has proposed a plan,acceptable to the Bank, to consolidate and concentrate PNP XXVIII activitiesat Seram and at one or two other sites. Besides the other consultants itwould hire (para. 2.25), PNP XXVIII would internationally recruit afinancial expert to assist with the day-to-day financial management of theestate and training of counterparts.

3.07 Provincial Governments. The West Java and Bengkulu provincialgovernments would supply the smallholders with health, education, socialand food crops extension services. The Chairman of the Provincial Develop-ment Planning Agency (BAPPEDA), assisted by the nucleus estate projectmanager, would coordinate local government INPRES programs to constructhealth and educational facilities. The kabupaten health authorities wouldensure malaria control by supplying chloroquine and house spraying.Existing GOI programs would provide mother and child health care, includingnutrition and family planning.

3.08 Provincial Coordinating Committee (PCC). The West Java provincialgovernment has already established a PCC to assist the project. Its membersinclude the heads of the various project area kubupatens (Bupatis), the headof the Provincial Estate Crop Services (DPD), the project manager (FirstDirector PTP XII), the site managers, the provincial head of the BRI, andrepresentatives of other relevant provincial government agencies. The PCChas conducted a census of all concerned families and determined theirwillingness to enter the project, and has arranged the alienation of privateand government land for the project. In the future the PCC would:

(a) arrange the construction, (under INPRES programs), of healthand education facilities in the project areas;

(b) arrange for recruitment of prospective smallholders for theproject to be accepted by the project managers as suitable estatelaborers;

(c) expedite the granting of hak pakai and hak milik to thesmallholders; and

(d) ensure adequate food crop extension services for thesmallholders.

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3.09 Bank Rakyat Indonesia (BRI). The BRI would be the handling bankfor recovery of smallholder debt obligations. On behalf of GOI, BRI wouldenter into smallholder credit agreements with each smallholder family whenthe smallholder receives hak milik to his holding, about three years aftersettlement. The nucleus estates would deduct: and transfer to the BRI thesmallholders- repayments from their production, which it would process andmarket for him (see para. 4.09). GOI would pay the BRI a handling fee of 1%or less on the total outstanding loans for this service.

3.10 Bank Indonesia (BI). The BI would make available MOF funds to theestates (see para. 2.35).

Agricultural Support Services for Smallholdei:s

3.11 At maturity (five years for coconu:, and six years for rubber)when the smallholders receive control of their trees, the nucleusestates would supply them extension, processing and marketing services. Thenucleus estates would organize the smallholders into groups of about 20farmers, each of which would elect a group leader. The estates wouldprovide a chief foreman, with an extensive kaowledge of crop pests anddiseases and fertilizer requirements, who woald supervise about fivesmallholder groups. The chief foreman would report all pest and diseaseoutbreaks to the estate which would supply the necessary pesticides for thesmallholders to apply. If necessary, the estates would provide back-uptechnical advice for the chief foreman to diagnose difficult to recognizepests and diseases. The estate would also procure all the smallholders'fertilizer requirements, and, at the correct time, bring it already mixed tothe smallholders' village, supplying him with a measure to apply the correctamount of fertilizer per tree. The chief foreman would organize andsupervise his groups to apply fertilizer. The estate would have a 90 sq mbuilding in each village, consisting of a 36 sq m office for the chiefforeman, and a 54 sq m warehouse.

3.12 Harvesting and Collection. The estate would organize harvesting ortapping schools of about two weeks for the smallholders. They would collectthe smallholders' production for processing from designated collectionspots. To ensure regular, continuous harveEting, and efficient collection,the estates would allocate each group a harvesting schedule.

3.13 Marketing Services. The estates would. market the smallholder-sproduction. The estates would subtract fronL the smallholder's grossproceeds all his fertilizer, pesticide, tree crop advisory services,collection, processing and marketing costs, and would pay him once a weekfor his production (para. 4.06).

3.14 Gardens and Food Crops. In West Java PTP XII would give eachsmallholder it moves into a new area Rp 55,000 to buy initial perennialgarden seedlings, food crop seeds and pesticides and fertilizers. While thesmallholders would be able to purchase the perennial seedlings in the

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villages, PTP XII would supply pesticides and fertilizers for sale at theestate godown in each village. As the smallholder would be a full-timeestate employee and earn a wage, in subsequent years he should be able tofinance his pesticide and fertilizer purchase for his food crops. Thekecamatan food crop services would supply the smallholder extension servicesfor his food crops. The Bank-assisted National Food Crops Extension project(Loan 1267-IND) is training and stationing extension workers throughout WestJava at a ratio of one field worker (PPL) per 1,600 farmers.

3.15 In Bengkulu PTP XXIII would provide each smallholder at arrivalon-site with a package of perennial seedlings, food crop seeds, pesticidesand fertilizers. In subsequent years PTP XXIII would supply perennialseedlings, food crop seeds, pesticides and fertilizers at each of itsvillage godowns for sale to the smallholder. As the smallholder wouldcultivate about 0.3 ha of food crops, he should be able to finance hispurchases of seeds and agrochemicals from his estate laborer wages. As inWest Java, the kecamatan food crop services would supply extension servicesfor food crops. The Bank-assisted National Food Crops Extension II project(Credit 996-IND) in future would upgrade food crop extension services in theproject areas, and station one PPL per 800 farmers.

Operation and Maintenance

3.16 All principal access and village roads constructed by the nucleusestates in the smallholder areas would be turned over to the provincialgovernments. During project implementation the nucleus estates wouldmaintain them. After project completion the kabupaten public works wouldhave this responsibility. However, the estates would maintain estate roadsat all times. An assurance was obtained from GOI that all project principalaccess and village roads would be adequately and timely maintained by theappropriate district agencies after project completion.

3.17 Public buildings and community facilities constructed by thenucleus estates for the smallholders would be turned over to the appropriateministries, which would then assume responsibility for their operation andmaintenance. The Ministry of Religion would supply a religious leader tothe place of worship constructed in each village. The Ministry of HomeAffairs would appoint village officials and make the necessary arrangementsfor the integration of the new villages into the existing district andprovincial governmental structure.

3.18 The nucleus estates would operate and maintain all harvestcollection tracks, crop collection equipment, and processing facilities.The smallholders would contribute 100% of their share of these costs, andthe nucleus estate, after marketing the smallholder-s production, woulddeduct these costs from their gross proceeds.

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4. AGRICULTURAL PRODUCTION, MARKE" PROSPECTS, PRICES,FARM INCOMES AND PROJECI' CHARGES

Agricultural Production

4.01 The project would establish and rehabilitate 26,490 ha of treecrops and 1,700 ha of gardens and food crops, consisting of 17,010 ha ofrubber (including 1,370 ha rehabilitated), 9,480 ha of coconuts (including480 ha rehabilitated), 680 ha gardens and 1,02(1 ha food crops. It alsowould increase production on at least 1,500 ha of existing food crops. TheNES V SAR Annex 2 describes crop varieties and how, for its project areas,the estates would establish nurseries, and clear, plant, maintain andharvest rubber and coconuts. It also describes the existing settlers' foodcropping patterns and yields, and with the project, future food croppingpatterns and yields. In this project, these practices would be similar.Table 4.1 summarizes the phasing of tree crop plantings, Table 4.2 tree cropyields and production, and Table 4.3 project area cropping patterns, yieldsand production.

Market Prospects

4.02 Rubber and Coconut. For rubber and coconut oil, market prospectsremain essentially the same as reported in the NES V SAR (paras. 5.02-5.06).The bulk (90%) of the additional project rubber production would be sold onthe world market, with the balance being sold locally. Rubber smallholdersusually sell their produce as unsmoked sheet or slab and lump to middlemen,who then sell to processors. The price the smallholder receives variesdepending on the middleman's estimate of the diy rubber content (drc), andusually is 35 to 40% of the f.o.b. value of prccessed low grade rubber.Although quality is usually poor with slab rubber containing much dirt andbark, the middleman's profit is usually excessive. With improved quality andmarketing conditions the smallholders should rEceive higher prices than theypresently obtain. Under the project, smallholders would be required to sellenough rubber through the nucleus estate to meEt their debt repayments.However, by reducing middlemen profits and improving the quality of theproduce, the nucleus estate would be able to pay them about 70% of the f.o.b.processed rubber price, and this should encourage them to sell most of theirrubber through the nucleus estate. The nucleus estate in turn would sellrubber production through the Joint Marketing Office (JMO), an organizationthe public estates have established to market their products.

4.03 The incremental production of coconut oil and copra cake would besold locally. Smallholders initially would sell their husked coconuts tothe estates, who would produce copra and crush it for oil and cake. Infuture, the smallholders may retain ownership of the oil and cake until theestates sell it for them. The estates, of course, would process and marketit for the smallholders, charging them for these services. At present,coconut smallholders sell some fresh nuts in the village or produce a lowquality, inadequatley dried copra (moisture content 15% or more) which theysell to middlemen. Under the project, smallholders would be required to

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sell enough fresh nuts through the nucleus estate for their debt repayments.As in rubber processing, however, the nucleus estate would eliminate excess-ive middlemen profits, have the latest and most efficient copra preparationfacilities and crushing mills, and thus be able to pay the smallholders apremium above existing farm-gate prices, thus making it attractive for themto sell their production through the nucleus estates.

4.04 Food Crops. The smallholders would produce upland rice, corn,cassava, and vegetables mainly for family consumption. Surpluses ofleguminous crops (peanuts), cloves, coffee and other garden production wouldbe readily saleable in adjacent market towns.

Prices

4.05 For financial and economic analysis, inputs and outputs have beenvalued at present and projected (1990) prices expressed in mid-1982 constantvalues. Future economic prices for rubber, coconut oil, rice, corn, peanutsand fertilizers were derived from the Bank's Commodity Divisions forecasts forworld market prices and adjusted for transportation, processing, and handl-ing costs down to the farm-gate level (Project File Working Papers). Cropsnot traded on the international markets have been expressed in actual farm-gate prices averaged over three years (1979-81) and adjusted for inflation.Agrochemicals' economic prices have been assumed to remain constant in realterms. Project rubber output has been valued 90% as Standard IndonesiaRubber (SIR) 20 which sells c.i.f. New York for 7% less than ribbed smokedsheet grade 1 (RSS 1). Subtracting ocean freight and brokerage costs wouldgive an f.o.b..price before taxes at Indonesian ports of Rp 773/kg mid-1982and Rp 1,078 in 1990 (US$1-24 and US$1-72/kg respectively). The correspond-ing f.o.b. financial prices are Rp 719 and Rp 1,002/kg, obtained by deduct-ing export and sales taxes (7% of f.o.b. price, Indonesian ports). Thenucleus estate would pay the smallholder about 70% of the f.o.b. financialprice at Indonesian ports, that is, Rp 701/kg drc in 1990 (mid-1982 constantvalues). World supply and demand would also influence the prices of the 10%of rubber sold locally and its estimated value ex-factory would be some 73%of SIR 20, f.o.b. main Indonesian ports. Thus its economic price would beRp 564/kg in mid-1982 and Rp 786/kg in 1990, and its financial price (less2% tax) Rp 553 and Rp 770/kg respectively.

4.06 Before 1976, Indonesian coconut oil prices were generally compar-able to world prices as Indonesia was an exporter. Since 1976, however,domestic demand exceeded local production and GOI limited imports. Domesticprices consequently rose above world market prices. After devaluation ofthe Indonesian rupiah in November 1978, the local price declined to 31%below the world market. Since then strong domestic demand has again pushedlocal prices above world market prices even though, as a substitute forcoconut oil, GOI has diverted palm oil from the export to the local market.World market prices for coconut oil are forecast to rise from US$697/tonc.i.f. at Indonesian ports in mid-1982 to US$1,044/ton in 1990. Localfinancial prices are projected to rise at a slower rate and to come into

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line with world market levels, from Rp 480/kg (US$768/ton) ex-factory Javain mid-1982 to Rp 646/kg (US$1,033/ton) in 1990. Similarly copra cake, theprincipal by-product from coconut oil extraction, is projected to sell atRp 70/kg ex-factory in mid-1982 and Rp 85/kg in 1990. Assuming 4.5 freshcoconuts produce 1 kg of dry copra (6% moisture), which, when pressed, gives62% oil and 38% copra cake, the estates could pay the smallholders aroundRp 50 per fresh nut in mid-1982 (Rp 225/kg copra equivalent) and Rp 65/nutin 1990 (Rp 293/kg copra equivalent). During harvesting periods, thenucleus estates would pay all smallholders on a weekly basis, whether theyare producing rubber or coconuts. This would help ensure they sell enoughproduction through the nucleus estates to meet their debt repayments.Weekly payments reduce the likelihood they would sell their production, eventhough at lower prices, through other channels for a more constant cashsupply. The nucleus estates would establish committees, including represen-tatives of the smallholders, which would meet monthly to set prices forsmallholder production. To ensure the smallholders have a constant cashflow for their production, assurances were obtained from GOI that (a) thenucleus estates would pay them weekly during the first three harvestingyears; and (b) the nucleus estates would establish committees includingsmallholder representatives which would meet monthly to set prices. Insetting smallholder prices, the committee would take into account:

(a) all legitimate-and reasonable expenses of the estates incollecting, transporting, processing and marketing of small-holder production;

(b) the importance of encouraging both smallholder production andgood quality production;

(c) the need for the estate to earn a return on the capital employedin the processing facilities;

(d) settler cooperative charges, if any, and GOI taxes; and

(e) the desirability of both estates and smallholders sharing equi-tably in the value added to smallholder production throughprocessing.

Farm Incomes

4.07 Future farm incomes have been calculated for the West Javasettlers assuming that each family has a 2.0 ha farm consisting of 0.2 hagarden, 0.3 ha food crops and 1.5 ha coconuts. In Bengkulu, each small-holder is assumed to have a 3.0 ha farm consisting of 0.2 garden, 0.3 hafood crops, 2.0 ha rubber and 0.5 ha undeveloped. Revenues, costs and debtrepayments have been calculated in constant mid-1982 values, using presentand projected 1990 prices. Farm budgets have been calculated according tocash flows. Family labor has not been costed, and each family should havesufficient labor to cultivate the proposed garden, food and tree crops

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without hiring labor. Farmers would pay a land tax (IPEDA) which would varyaccording to the annual income from the land. Table 4.4 summarizes theresults for each province.

4.08 During the development period the smallholder is protected fromany loss or fall in income. His estate wages would give him an income,which for many, would be equal to or greater than his present earnings, andwould insure against income declines due to food crop failures. In yearseven after planting for the rubber producers, and year six for coconutproducers, the smallholders would be able to commence and continue theirdebt repayments without difficulty. Incomes with the project would beconsiderably higher than incomes without the project, and should be aconsiderable incentive for project area cultivators to join the project. Infuture without the project the existing West Java cultivator's incomes wouldbe kbout US$305 per annum (the average income for about 70-75% of the WestJava smallholders) or US$60 per capita. With the project, by Year 10 allfamily incomes before debt repayment should be at least US$2,600 or US$520per capita. As the present Indonesian average per capita GNP is aboutUS$420 and the estimated per capita GNP in ten years (1992) is US$620, theproject would enable beneficiaries to significantly improve their incomelevels relative to other income levels throughout the economy, that is, fromabout 15% at present to 84% of per capita GNP. Additionally, an estimated90% of project area farmers presently have incomes below the critical con-sumption level. The project would lift these farmer's incomes above thislevel.

Cost Recovery

4.09 Smallholder Loans. At the end of the third year after plantingwhen DGA has prepared the hak milik titles for the land, the smallholderswould enter into a credit agreement with the BRI. This agreement wouldinclude all credit expenditures by the nucleus estates during the preceedingyears, and provisional estimates of the estates credit expenditures duringyear four after planting for coconut establishment, and during years fourand five for rubber establishment. The agreements for coconuts and rubberwould be amended in year five and year six respectively to include theestates actual credit expenditures to bring the coconuts and rubber tomaturity. The nucleus estates would keep separate accounts of smallholderdevelopment costs, and total credit items would be divided into standardizedcredit amounts for each smallholder. The credits between the BRI and thesmallholders would be secured by land titles until repaid. The agreementswould be for 17 years, with repayments over 14 or 15 years, that is, withtwo years of grace for coconut producers, and three for rubber producers.Thus coconut smallholders would commence repayments in the sixth year afterplanting, and rubber smallholders in the seventh. Interest would be 10.5%per annum, and would be capitalized during the grace period.

4.10 Cost Recovery. The estates, following procedures establishedunder the earlier NES projects, would recover the smallholder credits byretaining the smallholders' annual credit repayment from the sales revenuesof the crops they would process and market for the smallholders. The

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committees (see para. 4.06) would determine the price for the smallholder'sproduce, net of taxes, depreciation, processing and marketing costs, andmanagement fees. The estates would then detErmine the individual small-holders total sales revenue and would deduct from it an amount sufficient torepay the annual loan installment. An assurance was obtained from GOI thatit would cause each smallholder to sell to PTh XII or PTP XXIII sufficientquantity of coconuts or rubber at the determined prices to amortize hisdebt obligations. The estates would keep all records of raw materialdelivery to the factory by smallholders, and of factory or mill output andsales revenue. They would transfer all cost recovery to the BRI which wouldkeep a record of all individual smallholder accounts.

4.11 Besides repaying all credit development items, smallholders wouldpay a land tax (IPEDA), which village heads would collect and turn over tolocal and provincial administrations for providing public services. IPEDAcan be considered a direct project tax which contributes towards the opera-tional costs of the governmental agencies involved in the villages. It isassessed as a percentage of the value of farm production and the amountscollected would increase as crop yields rise. Annual IPEDA payments areestimated to reach about Rp 60,000 per farm in West Java, and Rp 50,000 perfarm in Bengkulu.

4.12 Rent and Cost Recovery Indices. Tci determine the extent of costrecovery and the relation of project charges to benefits, cost and rentrecovery indices have been calculated. Cost recovery indices vary from 60%to 71%, and rent recovery indices from 94% to 96%. These results aresatisfactory, and Table 4.5 shows the rent and cost recovery indicescalculations. In calculating these indices, export and sales taxes whichGOI charges on rubber (7% of f.o.b. price, Irndonesian ports), and coconutoil (sales tax 2.5% of f.o.b. price, Indonesian ports), have been excluded.If they were, the rent and cost indices woulc increase.

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Table 4.1: PHASING OF TREE CROP PLANTING PROGRAM(ha)

Project sites 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 Total

RubberPTP XII -Rehabilitation- Cikaso (NE) /a 600 - _ _ _ _ 600- Agrabinta (NE) 770 - - - - - 770Planting- Cikaso (NE) - 195 200 225 290 260 1,170- Agrabinta (NE) - 150 200 200 200 200 970

PTP XXIIIPlanting- Seluma (SH) 200 1,000 2,000 2,000 2,000 2,300 9,500

PNP XXVIIIPlanting- Seram (E) 400 650 750 800 800 600 4,000

Subtotal 1,970 1,995 3,150 3,225 3,290 3,380 17,010

CoconutPTP XIIRehabilitation- Agrabinta (NE) 480 - - - - - 480Planting- Agrabinta (NE) - - 250 250 - - 500- Cikaso (SH) - 200 300 500 500 500 2,000- Agrabinta (SH) - 200 500 800 1,000 1,000 3,500

PNP XXVIIIPlanting- Seram (E) 250 400 700 800 500 350 3,000

Subtotal 730 800 1,750 2,350 2,000 1,850 9,480

Total Plantings 2,700 4,900 5,575 5,290 5,230 26,490

/a NE = nucleus estateSH = smallholderE = estate

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Table 4.2: TREE CROP YIELDS ATD PRODUCTION /a

Annual rubber yields Annual rubber productionPTP XII PTP XII PTPXXIII PNP XXVIII

lanting Tapping nucleus estate PTP XXIII PNP XXVIII Nucleus Small-year year 1/b 2/c 3/d Smallholder Estate estate holder Estate

----- (ton/ha) ---------------- -------- ('000 ton)----------

6 1 0.6 0.6 0.6 0.4 0.6 1.60 0.09 0.257 2 0.8 0.8 1.0 0.8 1.0 1.70 0.61 0.808 3 1.0 1.0 1.2 0.9 1.3 2.05 1.88 1.629 4 1.2 1.1 1.3 1.0 1.4 2.34 3.60 2.63

10 5 1.2 1.2 1.4 1.2 1.4 3.23 5.54 3.7311 6 1.3 1.2 1.5 1.3 1.5 3.86 7.92 4.7912 7 1.4 1.2 1.6 1.4 1.7 4.08 9.67 5.4813 8 1.5 1.3 1.7 1.4 1.8 4.36 10.86 6.0014 q 1.6 1.3 1.7 1.4 1.9 4.73 11.99 6.4115 10 1.7 1.3 1.8 1.4 1.9 4.99 12.96 6.7920 15 1.7 1.3 2.0 1.2 2.1 4.51 13.80 8.6325 20 1.5 -1.1 1.6 1.1 1.6 5.05 11.14 7.5830 25 1.2 0.8 1.2 0.8 1.1 4.51 8.35 5.79

Annual copra yields Annual copra productionPTP XII PTP XII PTPXXIII PNP XXVIII

lanting nucleus estate PTP XII PNP XXVIII Nucleus Small-year Tall Hybrid Smallholder Estate estate holder Estate

=------------- (ton/ha) --------------- -------- ('000 ton)----------

4 - - - 0.7 0.16 - 0.18

5 - 1.0 0.8 1.4 0.36 0.32 0.636 - 1.9 1.5 2.3 0.80 1.24 1.637 0.4 2.8 2.2 3.2 1.46 3.12 3.268 0.8 3.5 2.8 3.8 2.09 6.03 5.319 1.2 4.1 3.3 4.4 2.63 9.87 7.65

10 1.6 4.5 3.7 4.8 3.05 13.31 9.8211 2.0 4.5 3.9 5.0 3.34 16.31 11.6912 2.2 4.5 3.9 5.0 3.45 18.64 13.1513 2.5 4.5 3.9 5.0 3.45 20.25 14.12

4-25 2.5 4.5 3.9 5.0 3.45 21.15 15.006-30 2.5 4.0 3.4 4.5 3.45 21.45 14.32

a See project file for more details of tree crop yields and production.b Rehabilitated immature rubber area.c Rehabilitated mature rubber area.d Newly planted rubber.

Table 4.3: PROJECT AREA CROPPING PATTERNS, YIELDS AND PRODUCTION /a

Present Future without Project Future with ProjectArea Yield Production Area Yield Production Area Yield Production

('000 ha) (ton/ha) ('000 ton) (000 ha) (ton/ha) ('000 ton) (-000 ha) (ton/ha) (-000 ton)

West JavaSmallholders

Upland rice 1.2 0.7 0.8 1.2 0.7 0.8 1.1 1.6 1.8Upland rice 0.5 0.6 0.3 0.5 0.6 0.3 - - -Corn 0.5 0.2 0.1 0.5 0.2 0.1 1.1 0.8 0.9Peanuts 1.8 0.5 0.9 1.8 0.5 0.9 0.7 0.9 0.6Coconuts - - - - - - 5.5 3.9 21.5

Estate IRubber 1.5 0.9 1.4 1.5 0.6 0.9 3.5 1.5 5.2 4

Coconut lb 0.5 - - 0.5 2.0 1.0 1.0 3.5 3.5

BengkuluSmallholders

Upland rice 2.6 0.6 1.6 2.6 0.6 1.6 1.4 1.6 2.2Corn 0.5 0.5 0.3 0.5 0.5 0.3 1.4 0.8 1.1Peanuts 0.3 0.4 0.1 0.3 0.4 0.1 1.0 0.9 0.9Rubber 1.3 0.3 0.4 1.3 0.3 0.4 9.5 1.5 13.9

MalukuEstate

Rubber - - - - - - 4.0 2.4 8.7Coconuts 0.8 0.4 0.3 0.8 0.4 0.3 3.0 5.0 14.9

/a This table shows yields and production at their maximum for tree crops. Because different blocks would have differentyields depending on when planted this maxium yield per ha and maximum yield at the site would not necessarily coincide.

/b All coconut yields and production are expressed in dry copra (6% moisture content).

- 49 -

Table 4.4: SMALLHOLDER FAAM INCOMES /a

Y e a r3 6 10 15

--- (constant mid-1982 US$) ---

West JavaNet value food crops, garden 175 310 395 495Net value tree crops 3 815 2,400 2,545Net off-farm income 480 0 0 0Total income 655 1,125 2,795 3,040Debt repayment 3 560 560 560Income less repayment 655 565 2,235 2,480Income without project /b 305 305 305 305Incremental income 35D 260 1,930 2,175

BengkuluNet value food crops, garden 175 310 395 505Net value tree crops 0 470 2,230 2,890Net off-farm income 650 - 0 0Total income 825 780 2,625 3,395Debt repayment 0 0 730 730Income less repayment 825 780 1,895 2,665Income without project 625 625 625 625Incremental income 200 155 1,270 2,040

/a Based on tables in Project File.

/b In West Java family income without the project varies from aboutUS$305 for an 0.7 ha farm with rainfed sawah to US$355 for a 2.0 hafarm without any sawah.

- 50 -

Table 4.5: RENT AND COST RECOVERY PER FAMILY FARM /a(Constant mid-1982 values)

(Rp '000)

West Java Bengkulu

Incremental1. gross value of production 8,007 7,2162. less cash production costs 1,074 1,3523. equals net cash income 6,933 5,8644. less depreciation 789 9535. less imputed value family labor /b 892 -1,2366. less value of management /c 363 3627. less return on own capital /d 675 8838. less allowance for risk/uncertainty /e 717 7249. less general taxes /f 823 724

10. Equals project rent 2,674 3,45411. Rent as % of net cash income (%) [10-3] 39 5912. Debt -recovery 2,324 3,15213. Benefit taxes 180 17314. Total direct charges/taxes [12+13] 2,504 3,32515. Rent recovery index [14.10] 94 9616. Public sector outlays 4,162 4,69417. Cost recovery index [14t16] 60 7118. Farmers income per capita 293 237

(project year 10)

19. Estimated critical consumption level 116 116(project year 10)

20. Estimated national per capita income 388 388(project year 10)

/a All values lines 1 to 17 are discounted over 30 years at 10%,the estimated opportunity cost of capital in Indonesia;values represent incremental benefits and costs.

/b Wage rate Rp 1,000/day in West Java; Rp 1,350/day in Bengkulu.7 At 5% of gross incremental production value./d At 15% of farmers investment outlay.7e At 10% of gross incremental production value.If Village taxes at 10% of gross incremental production.

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5. BENEFITS, JUSTIFICATION AND RISKS

5.01 Benefits. The project would intensify land use at the threeproposed sites, and in West Java and Bengkulu provinces create 2,200 newfarms, associated smallholder settlements and infrastructure. Through landclearing, the constructing of roads, houses, estate buildings and processingfacilites, and supplying agro-chemicals, extension services and technicalassistance it would establish or rehabilitate production from about 26,500ha of tree crops, 1,700 ha of gardens and food crops, and improve productionon another 1,500 ha of food crops. It would directly benefit 8,450 small-holder families, and provide full time employment for another 3,900 familiesworking for the estates. By creating potential employment opportunities inother sectors to service the agricultural settlements the project wouldindirectly benefit at least another 3,600 families. During the initialdevelopment period the project would provide each smallholder family withone full time job for four or five years, and, as project beneficiaries arepresently doing work of low productivity, when the tree crops are bearingwould create at least one new permanent job per project family directlyassisted or hired. By rehabilitating PNP XXVII, the project would helpGOI's smallholder development program expand in the future. It would alsoincrease rubber exports and local supplies cf coconut oil, create productiveemployment for the rural poor, and ensuring a productive and sustainable useof underutilized land and water resources.

5.02 The base cost of settling a family under the project would veryfrom US$5,400 for a coconut smallholder at Agrabinta to US$7,400 (constantmid-1982 prices) for a rubber smallholder at. Seluma (Annex I, Table 4). AtSeluma the higher development cost per family is explained by the largerarea the project would develop for rubber snmallholders (2.0 ha versus 1.5 hacoconut in West Java). At each site the credit, or repayable costs, aresome 86% of the total settlement cost. As t:he project would create about12,400 new permanent jobs in agriculture (pacra. 5.01) for a total investmentof US$130.9 million (base cost plus physica]. contingenecies), each job wouldcost US$10,600. This compares favorably wit:h job creation in medium- tolarge scale industry in Indonesia at about UTS$20,000.

5.03 Expected future crop yields and production with the project areshown in Table 4.3. Additionally, Chapter 4 discusses and presents theeconomic and financial prices for inputs and outputs, based on the Bank-scommodity price forecasts and domestic prices. The project files containtables showing the expected crop production costs and labor requirements perha, and the total expected agricultural benefits at maximum agricultureproduction in the project areas.

5.04 The project file contains tables ,howing the monthly laborrequirements per crop. In West Java, since the project area has excessivelabor supplies and considerable employment of low productivity, the

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agricultural and unskilled laborer wage has been shadow priced. Economicwages have been assessed at Rp 500/man day (about 50% of the market wage),the estimated value of low productive work in the project areas, and theopportunity cost of discontinuing this work. Because of the labor shortagesto undertake the project in Bengkulu and Maluku and cost of transportinglabor to the project area, the current wages there have not been shadowpriced.

5.05 Investment Costs. As used for the economic analyses, and expressedin mid-1982 prices, the total investment costs including physical contingen-cies but excluding price contingencies are:

Table 5.1: INVESTMENT COSTS FOR ECONOMIC ANALYSIS

Smallholders EstatesProject Investment Project Investmentarea cost area cost

(Rp billion) (Rp billion)

Cikaso 8.2 Cikaso 7.1Agrabinta 13.4 Agrabinta 9.3Bengkulu 34.6 Seram 34.6

Investment costs are net of taxes and transfer payments, and foreign exchangecosts were converted to rupiah at Rp 625 = US$1.00, assuming a standard con-version factor of 1.0. Investment costs have been adjusted to reflect theeconomic value of fertilizers, and in West Java, the economic value ofunskilled labor used in plantation establishment.

5.06 Development Period. Table 4.1 shows the phasing of tree crop plan-ting at all sites, and Table 4.2 the yields and production over time. Inclu-ding the plantings financed by NES V start-up funds, in West Java and Bengkuluthe estates would commence some tree plantings during the 1981-82 wet season(October-May); and at Seram during the 1982 wet season (April-October).Smallholders would move to the sites during the project's first year, andduring the second year, start growing food crops. They would achieve theprojected food crop yields over five years and projected garden yields in 15years.

5.07 Economic Rates of Return. Using the foregoing assumptions, anddiscounting project costs and benefits over 30 years, the economic rates ofreturn are summarized as follows:

- 53 -

Table 5.2: ECONOMIC RATES OF RETURN

Smallholder Economic rate Nucleus estate Economic ratedevelopment of return deveLopment of return

(%) (%)

Cikaso 13 Cikaso 11Agrabinta 18 Agrabinta 12Bengkulu 14 Seram 13

5.08 Sensitivity Analysis. Sensitivity analysis was used to determinethe project-s sensitivity to cost overruns, benefit reductions, and lags inbenefit flows. To that end, crossover values at a 10% discount rate werecalculated for the cost and benefit streams. The crossover value is thevalue of the variable tested for which the project s net present value,calculated at 10% discount rate, is zero, or equivalently, the value beyondwhich the economic rate of return would be beLow 10%. Therefore, thegreater the difference between the crossover value and the value assumed inthe analysis, the less sensitive the economic rate of return is to thevariable tested. Table 5.3 shows the results.

5.09 Values in Table 5.3 indicate that Cikaso and Agrabinta nucleusestates are the most sensitive to the variables tested. The other fourcomponents, however, could experience considerable increases in cost ordecreases in benefits, or a three year time lag in the commencement ofbenefit streams (while project costs are assuned not to lag), before theireconomic rates of return would fall below 10%. While adverse conditionsmore readily would cause Cikaso and Agrabinta nucleus estates economic ratesof return to fall below 10%, these components should still be undertaken.PTP XII-s management would closely monitor the progress of these components,and as they are solely estate investments, would have complete control overall the works.

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Table 5.3: SENSITIVITY ANALYSIS

NPV /a at 10 % Crossover values Percent change Benefits laggedSite Costs Benefits Costs Benefits Costs Benefits 1 year 2 year 3 year

---------- (Rp billion) ---------- ----- (%)(Economic rate ofreturn %)

SmallholdersCikaso 8.3 10.6 10.6 8.3 27 -21 13 11 10Agrabinta 10.8 20.9 20.9 10.8 93 -48 18 16 14Bengkulu 31.5 41.7 41.7 31.5 32 -24 12 11 9

EstatesCikaso 7.3 8.1 8.1 7.3 11 -10 10 9 7Agrabinta 9.8 11.0 11.0 9.8 13 -11 10 9 8Seram 27.8 36.8 36.8 27.8 32 -24 12 10 9

/a Net present value

Table 5.4: ESTATES FINANCIAL STANDING (1980)

Profits Debt toTotal Net after tax net worth

Estate assets worth loss ratio

PTP XII 51.2 37.6 3.1 0.22PTP XXIII 74.9 58.2 9.7 0.02PNP XXVIII 2.1 0.7 (0.2) 1.40

5.10 Table 5.3 shows the 1980 audited accounts for PTP XII and PTPXXIII, and 1980 management accounts for PNP XXVIII, which are yet to beaudited. While both PTP XII and PTP XXIII made profits in 1980, lowercommodity prices and rising labor costs would constrain profits over thenext several years. Additionally GOI wants these two estates to investconsiderably more in nucleus estate development in the near future, thusputting more strain on their finances. PNP XXVIII is currently makinglosses, and requires financial restructuring and new investment to becomeprofitable.

- 55 -

5.11 Annex 2 contains the projected cash flows for PTP XII andPTP XXIII, while the project file contains Tor the three estates projectedprofit and loss accounts for the proposed developments, capital expendi-tures under the project, other capital develoDment expenditure, and otherdetailed financial data. These analyses indicate that the estates couldundertake their proposed works and repay the debts incurred under theproject if GOI provides the estates with the proposed mix of equity andloan funds (para. 2.35-36), and ensures they keep to the suggested ratiosof long-term debt to equity (para. 2.36).

5.12 The financial analyses of PTP XII show that while it can under-take this project two other major developments it is now commencing must bereduced in size. These are a GOI fully financed nucleus estate in WestKalimantan (proposed PTP XII investment Rp 15.5 billion) and replanting andreaabilitation of PTP XII rubber lands in Java including old PTP XXX leases(proposed investment Rp 29.5 billion). Over the next five years theseinvestments should be reduced to around Rp 6.7 billion and Rp 14.5 billionrespectively to ensure PTP XII keeps a ratio of long term debt to equity ofno more than 60/40. Additionally, to further help its cash flow positionPTP XII should only borrow about 50% of these funds. GOI has agreed to areduction in these investments.

5.13 The financial analyses of PTP XXIII show it to be financiallystrong and well able to repay the small amourt of funds it would borrowunder this project.

5.14 Project Risks. There are no unusual technical risks for the pro-posed project. The proposed agricultural practices, inputs and yields arebased on experience gained in estate development programs, and the earlierNES projects. Management weaknesses have existed in previous NES projects,especially a diffusion of management responsibility between the DGE, thenucleus estate, the project manager and provincial governments. Sincemid-1980 these have been remedied by delegating increased authority to thenucleus estate, and by selecting the First Director of the estate as aproject manager. Consequently project management and implementation haveimproved considerably.

5.15 At present PNP XXVIII is weak technically, managerially and finan-cially. However, with the measures already l:aken by GOI to strengthen itmanagerially, and the proposed technical and financial assistance outlinedin Chapters 2 and 3, it would be able to undertake its part of the project.In earlier Bank assisted projects the implementing estates were also weak.However, with project assistance they all have developed into strongfinancial and managerial entities.

5.16 There is a risk that smallholders would not sell their productionto the nucleus estates, and the estates would thus be unable to collect thesmallholders annual loan repayments. However, because the estates wouldoperate the harvest collection services, they would be in a strong positionto monitor the flow of smallholder production and to take action if the

- 56 -

smallholders did not repay loans. The smallholders, through their CreditAgreements with the BRI, are legally bound to repay through the nucleusestates. Additionally, to keep their processing facilities operating atfull capacity, the estates would act competitively to obtain thesmallholders production. As well, the project provides that the estateswould pay the smallholders weekly, thus ensuring they have a regular cashincome, which should make cash sales at lower unit prices to middlemen lessattractive.

5.17 Under Credit 319-IND due to the estates inexperience the process-ing facilities were built late and the resulting unprocessed productioncaused revenue losses. To counteract this, the project would provide inter-national consultants to plan, design, assist with tendering and supervisethe construction of all major processing facilities.

5.18 Taking the above safeguards into account, and along with theresults of the sensitivity analysis, the project's indicated risks arejudged acceptable.

6. AGREEMENTS REACHED AND RECOMMENDATIONS

6.01 During negotiations agreement was reached with the Government onthe following points:

(a) PTP XII would complete its coconut oil extraction factory byDecember 31, 1986 and PNP XXVIII by December 31, 1987, and if thePTP XII mill is not in operation by the stated date, PTP XIIwould purchase from smallholders at an appropriate price anycoconut production offered for sale after December 31, 1986(para. 2.17);

(b) GOI would ensure that each qualifying smallholder would receivewithin three years after settlement hak milik to 1.5 ha ofplanted tree crops in West Java and 2.0 ha of planted tree cropsin Bengkulu and in each case an additional area for house lot,garden and food crops to give a total of about 2.0 ha in WestJava and 3.0 ha in Bengkulu (para. 2.21);

(c) DGE and the estates would hire consultants as outlined inparas. 2.10, 2.11, 2.17, and 2.25 with qualifications and underterms and conditions acceptable to the Bank, and would havesigned contracts and finalized arrangements for engaging them bythe dates stated in para. 2.25 (paras. 2.10, 2.11, 2.17 and2.25);

(d) GOI would (i) provide nucleus estate and estate development fundsas described in para. 2.36; (ii) ensure that PTP XII and PTP XXIII

- 57 -

would at all times maintain a ratio of long-term debt to equityof not more than 60/40; (iii) PNP XXVIII would for the first fif-teen years of the project maintain a ratio of long-term debt toequity of not more than 70/30 and afterwards would at all timesmaintain a ratio of long-term debt to equity of not more than60/40; and (iv) PTP XII, PTP XXIII and PNP XXVIII would consultwith the Bank before undertaking any other new development pro-ject exceeding Rp 1.5 billion in the case of PTP XII and PNPXXVIII and Rp 2.0 billion in the case of PTP XXIII (para. 2.36);

(e) GOI would (i) group works for local competitive bidding into anumber of suitable contracts (minimum size whenever feasibleUS$320,000) that would enable large local contractors or jointventures of small local firms to bid; and (ii) documents forcontracts to cost US$320,000 or more would be submitted tothe Bank for review before tendering and award (para. 2.40);

(f) PTP XII, PTP XXIII and PNP XXVIII would (i) keep separate accountsfor all investment costs under the project for smallholders andestate development; (ii) these accounts would be audited each yearin accordance with appropriate auditing principles consistentlyapplied by independent auditors acceptable to the Bank; and (iii)the audit reports would be submitted to the Bank no later thanAugust 1st of each year (paras. 2.43-2.44);

(g) The project managers, assisted by Team Khusus, would prepare andsubmit to the DGE annual work programs and budgets by October 31each year (para. 3.04);

(h) All principal access and village roads constructed under theproject would be adequately and timely maintained by the appro-priate district agencies after project completion (para. 3.16);

(i) GOI would ensure that (i) the nucleus estates would pay the small-holder weekly during the first three harvesting years; and (ii)the nucleus estates would establish committees including small-holder representatives , which would meet monthly to set commodityprices following guidelines enumerated in para. 4.06 (para.4.06); and

(j) GOI would cause each smallholder to sell to PTP XII and PTP XXIIIsufficient quantity of coconuts or rubber at the determinedprices to amortize his debt obligations (para. 4.10);

6.02 Agreement was reached with the Government that the Bank's loanwould not become effective until GOI has fulfilled all conditions necessaryfor the effectiveness of the CDC loan.

6.03 Agreement was also reached with the Government on the follow-ing conditions of disbursement against individual project components:

- 58 -

(a) Agraria issuing Hak Guna Usaha to PNP XXVIII for its concessionareas at the project site in Seram Island, Maluku province (para.1.22);

(b) The signing of financing arrangements between the MOF or BI andthe individual estates in a form and substance satisfactory to theBank (para 2.35); and

(c) The signing of smallholder development agreements between the DGEand the nucleus estates (para 3.05).

6.04 With the above assurances and conditions the project would besuitable for a Bank loan of US$68.1 million with a 20-year maturityincluding a grace period of five years, and a CDC loan of US$28 million onmainly similar terms. The borrower would be the Republic of Indonesia.

-59 - ANNEX 1Table 1Page 1

iNDONESIA

NUCLEUS ESTATES AND SMALLHOLDEILS VI PROJECT

Project Cost Estimates

ForeignLocal Foreign Total Local Foreign Total exchange---- (Rp million) ---- (US$ million) --- (%)

PTP XII Nucleus EstatesCikaso

Rubber establishment 611 499 1,110 1.0 0.8 1.8 45Roads 186 379 565 0.3 0.6 0.9 67Estate housing & buildings 427 349 776 0.7 0.5 1.2 45Rubber processing 168 167 335 0.3 0.2 0.5 50Power & water 52 106 158 - 0.2 0.2 67Road construction equipment - 809 809 - 1.3 1.3 100Agricultural machinery & equipment - 196 196 - 0.3 0.3 100Estate vehicles 10 59 69 - 0.1 0.1 85Office equipment & furniture 40 227 267 - 0.4 0.4 85Operating expense 66 45 111 0.1 0.1 0.2 40

Base Costs 1,560 2,836 4,396 2.5 4.5 7.0 65

Physical contingencies 192 329 521 0.3 0.5 0.8 63Price contingencies 765 677 1,442 1.2 1.1 2.3 47

Total 2,517 3,842 6,359 4.0 6.2 10.2 60

AgrabintaRubber establishment 497 407 904 0.8 0.7 1.5 45Coconut processing 1,114 2,263 3,377 1.8 3.6 5.4 67Coconut establishment 371 303 674 0.6 0.5 1.1 45Roads 265 536 801 0.4 0.9 1.3 67Estate housing & buildings 75 61 136 0.1 0.1 0.2 45Rubber processing 203 203 406 0.3 0.3 0.6 50Power & water 69 142 211 0.1 0.2 0.3 67Road.construction equipment - 809 809 - 1.3 1.3 100Agricultural machinery & equipment - 235 235 - 0.4 0.4 100Estate vehicles 13 73 86 - 0.1 0.1 85Office equipment & furniture 40 231 271 - 0.4 0.4 85Operating expense 95 63 158 0.2 0.1 0.3 40

Base Costs 2 742 5,326 8,068 4.4 8.5 12.9 66

Physical contingencies 321 619 940 0.5 1.1 1.5 73Price contingencies 1,322 1,438 2,760 2.1 2.3 4.4 52

Total 4,385 7,383 11,768 7.0. 11.8 18.8 63

- 60 -

ANNEX 1Table 1Page 2

ForeignLocal Foreign Total Local Foreign Total exchange

(Rp million) ----- --- (US$ million) --- (%)

PTP XII SmallholdersCikasoCoconut establishment 1,052 860 1,912 1.7 1.4 3.1 45Roads 452 917 1,369 0.7 1.5 2.2 67Settler housing, water & sanitation 330 269 599 0.5 0.4 1.0 45Village infrastructure 13 11 24 0.03 - - 45Education & health buildings 50 40 90 - - 0.1 45Land clearing for food crops, gar-

dens & villages 22 18 40 - - - 45Road construction equipment - 708 708 - 1.1 1.1 100Agricultural machinery & equipment - 59 59 - 0.1 0.1 100Education & health equipment & sup-

plies 3 13 16 - - - 80Settler subsistence & seed, ferti-lizer packages 34 11 45 - - - 25

Operating costs 172 115 287 0.3 0.2 0.5 40

Base Costs 2,128 3,021 5,149 3.4 4.8 8.2 58

Physical contingencies 255 364 619 0.4 0.6 1.0 40Price contingencies 1,081 806 1,887 1.7 1.3 3.0 43

Total 3,464 4,191 7,655 5.5 6.7 12.2 55

AgrabintaCoconut establishment 1,887 1,544 3,431 3.0 2.5 5.5 45Roads 437 888 1,325 0.7 1.4 2.1 67Land clearing for food crops, gar-

dens & villages 44 36 80 0.1 - 0.1 45Settler housing, water & sanitation 622 510 1,132 1.0 0.8 1.8 45Village infrastructure 25 21 46 - - - 45Education & health buildings 95 78 173 0.2 0.1 0.3 45Road construction equipment - 708 708 - 1.1 1.1 100Agricultural machinery & eqpuipment - 105 105 - 0.2 0.2 100Education & health equipment & sup-

plies 6 22 28 - - - 80Settler subsistence & seed, ferti-

lizer packages 68 22 90 0.1 - 0.1 25Operating costs 309 206 515 0.5 0.3 0.8 40

Base Costs 3,493 4,140 7,633 5.6 6.4 12.2 52

Physical contingencies 408 489 897 0.6 0.8 1.4 58Price contingencies 1,803 1,165 2,968 2.8 1.9 4.7 40

Total 5,704 5,794 11,498 9.0 9.1 18.4 49

- 61 -ANNEX ITable 1Page 3

ForeignLocal Foreign Total Local Foreign Total exchange---- (Rp million) -- (US$ million) --- (%)

PTP XXIII Nucleus EstateBengkuluEstate housing & buildings 613 501 1,114 1.0 0.8 1.8 45Estate vehicles 23 134 157 0.1 0.2 0.3 85

Base Costs 636 635 1,271 1.0 1.0 2.0 50

Physical contingencies 94 89 183 0.2 0.1 0.3 33Price contingencies 191 114 305 0.3 0.2 0.5 40

Total 921 838 1,759 1.5 1.3 2.8 46

PTP XXIII SmallholdersBengkulu

Rubber establishment 5,988 4,899 10,887 9.6 7.8 17.4 45Roads 343 697 1,040 0.6 1.1 1.7 67Land clearing for food crops, gar-dens & villages 225 185 410 0.4 0.3 0.7 45

Settler housing, water & sanitation 1,609 1,317 2,926 2.6 2.1 4.7 45Village infrastructure 88 73 161 0.2 0.1 0.3 45Education & health buildings 322 264 586 0.5 0.4 0.9 45Road construction equipment - 1,639 1,639 - 2.6 2.6 100Agricultural machinery & equipment - 238 238 - 0.4 0.4 100Education & health supplies 17 65 82 - 0.1 0.1 80Settler subsistence, seeds & ferti-lizer packages 182 60 242 0.3 0.1 0.4 25

Operating costs 980 653 1,633 1.6 1.0 2.6 40

Base Costs 9,754 10,090 19,844 15.7 16.1 31.8 51

Physical contingencies 1,094 1,126 2,220 1.8 1.8 3.6 50Price contingencies 4,699 2,760 7,459 7.5 4.4 11.9 37

Total 15,547 13,976 29,523 24.9 22.3 47.2 47

_ 62 -ANNEX 1Table 1Page 4

ForeignLocal Foreign Total Local Foreign Total exchange---- (Rp million) ----- --- (US$ million) --- ()

PTP XXVIII EstateSeramRubber establishment 2,815 2,303 5,118 4.5 3.7 8.2 45Coconut establishment 2,587 2,117 4,704 4.1 3.4 7.5 45Roads 1,040 2,110 3,150 1.6 3.4 5.0 67Estate housing & buildings 1,816 1,486 3,302 2.9 2.4 5.3 45Rubber processing 811 811 1,622 1.3 1.3 2.6 50Coconut processing 1,047 2,127 3,174 1.7 3.4 5.1 67Power & water 54 109 163 0.1 0.2 0.3 67Road construction equipment - 751 751 - 1.2 1.2 100Agricultural machinery & equipment - 652 652 - 1.0 1.0 100Estate vehicles & boats 46 260 306 0.1 0.4 0.5 85Estate furniture, office & work-shop equipment 666 666 1,322 1.0 1.1 2.1 50

Staff resettlement 256 110 366 0.4 0.2 0.6 30Operating costs 589 393 982 1.0 0.6 1.6 40

Base Costs 11,727 13,895 25,622 18.8 22.2 41.0 54

Physical contingencies 1,355 1,634 2,989 2.2 2.6 4.8 54Price contingencies 5,313 4,076 9,389 8.5 6.5 15.0 43

Total 18,395 19,605 38,000 29.5 31.3 60.8 52

Program SupportLocal consultants 750 - /50 1.2 - 1.2 -Foreign consultants - 3,125 3,125 - 5.0 5.0 100Start-up costs 1,692 5,496 7,188 2.7 8.8 11.5 76

Base Costs 2.442 8,621 11,063 3.9 13.8 17.7 77

Physical contingencies 125 250 375 0.2 0.4 0.6 67Price contingencies 288 462 750 0.5 0.7 1.2 59

Total 2,855 9,333 12,188 4.6 14.9 19.5 75

Total Project CostsBase cost 34,482 48,564 83,046 55.2 77.7 132.9 58Physical contingencies 3,844 4,900 8,744 6.2 7.8 14.0 55Price contingencies 15,462 11,498 26,960 24.7 18.4 43.1 43

Total Project Cost 53,788 64,962 118,750 86.1 103.9 190.0 55

Note: US$ totals may not always exactly equal Rupiah amounts due to rounding.

- 63 -ANNEX 1Table 2

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS VI PROJECT

Estimated Schedule of Di.sbursements /a

Cumulative Cumulative ActualIBRD fiscal year disbursements disbursements cumulativeand semester (US$ million) /b (%) disbursement /c

(%)

FY83First _ 0 0.7Second 0.7 1 4

FY84First 3.0 4 9Second 8.0 11 15

FY85First 15.0 21 22Second 22.0 31 30

FY86First 31.0 44 39Second 40.0 60 48

FY87First 52.0 78 57Second 62.0 93 66

FY88First 67.0 100 74

/a Closing Date: June 1988.

/b Disbursements have been projected according to past Bankexperience with NES projects.

/c These percentages refer to actual cumulative disbursementsfor area development loans in the East Asia and PacificRegion for FY70-80 as contained in Mr. V. Rajagopalan'smemorandum of December 23, 1981.

-64 - ANNEX 1Table 3page 1

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS VI PROJECT

Proposed Allocation of Loan Funds /a(US$ million)

Total Foreign Loan amount

Bank Loan FundsPart A. Smallholder DevelopmentCivil Works /b

PTP XII 10.3 5.2 3.6PTP XXIII 10.0 5.0 3.5

Subtotal 20.3 10.2 7.1

Machinery and Equipment /cPTP XII 3.0 2.7 2.6PTP XXIII 3.5 3.2 3.1

Subtotal 6.5 5.9 5.7

Agrochemicals /dPTP XII 3.4 2.2 3.1PTP XXIII 5.6 3.6 5.0

Subtotal 9.0 5.8 8.1

Part B. Estate DevelopmentCivil Works /b

PTP XII 8.0 4.8 2.8PTP XXIII 2.2 1.3 0.8PNP XXVIII 17.5 10.5 6.1

Subtotal 27.7 16.6 9.7

2lachinery and Equipment /cPTP XII 5.7 5.1 4.9PNP XXVIII 5.5 5.0 4.8

Subtotal 11.2 10.1 9.7

Agrochemicals /dPTP XII 1.5 1.0 1.3PNP XXVIII 4.3 2.8 3.9

Subtotal 5.8 3.8 5.2

Part C. Program Support /eConsultant Services

PTP XII 1.2 0.5 1.2PTP XXIII 0.8 0.3 0.8PNP XXVIII 1.4 1.0 1.4DGE - Team Khusus 1.0 1.0 1.0

- SBPN 3.0 3.0 3.0

Subtotal 7.4 5.8 7.4

Start-Up 11.5 8.8 11.5

Unallocatedphysical contingencies plus price

contingencies 12.5 5.7 2.7Other 16.4 3.4

Subtotal 28.9 9.1 2.6

Front-end fee /f - - 1.0

Total bank Loan 128.3 76.1 68.1

- 65 -ANNEX 1

Table 3Page 2

Total Foreign Loan amount

CDC Loan FundsPart A. Smallholder DevelopmentTree Crop Development _gPTP XII 10.7 4.8 5.3PTP XXIII 22.3 10.0 11.2

Subtotal 33.0 14.8 16.5

Part B. Estate DevelopmentTree Crop Development /gPTP XII 4.8 2.2 2.4PTP XXIII 18.3 8.2 9.1

Subtotal 23.1 10.4 11.5

UnallocatedPhysical contingencies plus pricecontingencies 5.6 2.6

Total CDC Loan 61.7 27.8 28.0

Total Bank and CDC Loans 190.0 103.9 96.1

/a The Bank and CDC would disburse in parallel, the Bank disbursing againstcivil works, machinery and equipment, and agrochemicals, and CDC againsttree crop planting and maintenance until bearing.

/b 35% of the civil works including roads, estat:e housing and buildings,garages, workshops, factory buildings and divisional office.

/c 100% of foreign exchange cost of agricultura. and processing machinery andequipment, 95% of the ex-factory cost of equ:'pment manufactured locally and60% of imported farm equipment purchased locally.

Id 100% of the foreign expenditures for agrocherlicals or 90% of local expendi-tures for prudent shopping, and 100% of the t:otal cost of urea (ex-factory).

/e 100% of the cost of all consultant services, training, and start-up expendi-tures for future Bank-assisted NES projects.

/f Actual front-end fee is US$1,006,404. The difference of US$93,596 betweenthis figure and the rounded front-end fee of US$1.1 million has been addedto the unallocated category. Actual unallocated Bank loan funds areUS$2,693,596.

/g 50% of the per ha cost of tree crop establishment and annual maintenanceuntil bearing, including all land clearing, nursery and budwood garden pro-

duction, land preparation, planting, weeding and maintaining, estate over-heads, and farm and estate track construction and maintenance.

-66 - ANNEX 1

Table 4

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS VI PROJECT

Development Cost Per Smallholder Family

--- Cikaso --- --Agrabinta -- -- Seluma ---Coconut Coconut Rubber

Non- Non- Non-Credit credit Credit credit Credit credit------------ (Mid-1982, US$/family) ------------

Tree crop establishment 2,545 - 2,476 - 3,639 -Roads /a 46 393 53 304 66 302Land clearing for village,food crops 46 - 53 - 144 -

Settler housing 695 44 735 45 903 63Village infrastructure - 2/ - 31 - 53Education and health - 123 - 134 - 220Road construction equipment 833 - 473 - 541 -Agri. machinery & vehicles 69 17 70 18 78 52Subsistence, fertilizer & seeds 52 - 60 - 80 -Overheads 255 127 245 124 364 182

Base Cost 4,531 731 4,165 656 5,815 872

Physical contingencies 489 100 456 90 630 114

Cost per Family 5,020 831 4,621 746 6,445 986

Total Cost (credit + 5,851 5,367 7,431noncredit)

/a This does not include the cost of the principal access roads.

- 67- ANNEX Table 5

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDEERS VI PROJECT

Consulting Services - Cost Breakdown /a(US$/man-month)

Expatriates Local consultantsForeign Local ''otal Foreign Local Total

Item currency currency cost currency currency cost

Billing RateBasic salary 3,160 - 3,160 - 830 830Social benefits 850 - 850 - 190 190

Home office overhead 2,520 - 2,520 55 635 690Overseas allowance 900 - 900 - 220/b 220Net fee 470 - 470 - 140 140

Subtotal 7,900 - !,900 55 2,015 2,070

Reimbursable ExpensesMobilization and travelInternational travel 648 - 648 - - -

Relocation 362 - 362 - - -Subsistence en route 69 - 69 - 40 40

Miscellaneous 141 - 141 - 20 20

Subtotal 1,220 - 1,220 - 60 60

Duty Station ExpensesLocal duty travel 200 - 200 40 - 40Per diem - 320 320 - 55 55

Field office overhead - 500 500 - 55 55

Housing and utilities 480 1,060 1,540 30 65 95Transport 820 - 820 125 - 125

Subtotal 1,500 1,880 3,380 195 175 370

Total 10,620 1,880 12,500/c 250 2,250/d 2,500

/a Based on recent contracts, projected to end-1981 prices. Portion of foreignand local currency varies.

/b Field allowance for local consultants./c May vary between $10,000 and $14,200 depending on nationality and exper-

ience./d Applies to engineers, senior agronomists, senior economists and senior sur-

veyors. Cost of draftsmen and technicians averages $1,000/man-month.

ITSIMSELA

NU!CLEUS ESTATES AID SIIALLHPOLERS _1 PROJrCr

PTP XII - Su ,oary Cash Plotw Statesot

Proposed Yucleus Estate and PTP XII Existing Operatio=s Ia

(RV ilin

1982 1983 1984 1985 1986 1987 1988 1999 1990 1991 1991 1993 1994 199S 1996 1997 1998 1999 2104

SourcesProfit before depreiation, interest,taxes from existing operations, NES VIand initial PIR Khusus projects 10,704 10,934 11,959 13,616 14,309 14,856 15,366 16,436 15,663 16,949 18,308 17.804 1,842 20 369 27,912 73,3341 7b.62 26,110 26,350Equity contributions (1981:Rp 2,152) 1,182 2,788 1,754 2.567 1,346 - - - - - - - - - - - -

Lon foodsBank Indonesia (NES VI) 27 768 1,789 2,125 1,764 - - - - - - - - - - - - _ _BRI - Credit 400 1,310 - - - - - - - - - - - - - - - - - -BEII PIR Khuss /b - - - - - - - - - - - - - - - - -Sopplier credit ex) - - 906 754 972 - - - - - - - - - - -

Subtotal 1,337 768 2,695 2,879 2,736 - - - - - - - - - - - - _ -

Total Sources 13,223 14,490 16,408 19,067 18,391 14,856 15,366 16,436 15,663 16,949 18,30R 17,8O4 18,847 20,369 22,927 73,330 74,9 69 2 6,310 6.350

ApplicationsProject Cost

Existing estates /c 1,044 966 745 505 501 371Nucleos estates - - - - -NFS VI 1,290/d 3,557 3,543 4,691 3,110 1,424 625 467 346 149 524 841 2,466 3,308 2,759 937 54 - -Panglejar 1,974 - - - - - - - - - - - -PIR Khosus (1,000 ha) 351 306 238 214 699 - - - - - - - -

Total Project Costs 4,578 4,929 4,526 5,410 4,310 1,795 675 46? 346 149 24 891 2,466 5,30R 2758 937 54 _

Loan Repayments

InterestBank Iodonesia (NES VI) 2 56 228 492 255 874 874 874 874 807 730 644 545 434 307 163BRI Credit 400 96 185 182 176 166 149 137 103 77 50 19 2 - - - - _ _Suppliers credit - - - - - 355 301 239 170 90 - - - - - -E.intiog loans 318 271 723 176 129 86 43 - - - - - - - _ _

Subtotal 416 512 633 844 1,050 1,444 1,345 1,216 1,121 947 749 646 545 434 307 163 _ _

PrincipalBank Indonesia (NES VI) - - - - - - - - 499 565 642 72 9827 939 1,065 1,'09BRI Credit 400 - - 39 50 100 153 165 IR5 00 2720 235 23 - - - - _ _ _Others (suppliers credit) - - - - - 402 457 518 588 668 - - - - - -Existing loans 382 382 382 372 342 342 345 - - -

Subtotal 382 382 421 422 442 897 967 703 1,286 1,453 877 751 827 939 1,065 1,200

Taxes 751 3,870 3,785 3,963 4,405 4,415 4,359 4,6GI 5,290 4,977 5,443 6,171 6,414 b,574 7,373 8,540 8,.P43 9,496 10,3Q3Bonuses 191 568 555 581 646 648 639 676 776 730 799 705 R33 964 1,nRI 1,'53 1,297 1,393 1,S34

Total Applications 6,318 10,161 9,920 11,220 10,853 9,199 7,935 7,669 8,819 8.276 8,397 9,164 11,085 14,219 32.594 12,11h 10,194 10.R89 11,917

Surplus existing operations 6,905 4,329 6,488 7,842 7,538 5.657 7,431 8,767 6,844 8,693 9,911 8,640 7,751 6,150 10,338 11,77S 14,435 15,821 14,433

/a Includes existing PTP XII lands, old PTP XXX leases now transferred to PTP XII, and the area already developed in Nlest Xtalinantan under the 1007 GOI1-financed nucleon estate nod sallhl-der development (PIR Khusus project)./b Bank Indonesia loan already drawn for developing 1,000 ha under the West Kali antan PIR Kb.s.xs project./c Excludes any new investments or expansion of PTP XII, old PTP XXX leases or tea estates./d Includes start-op foods of Rp 2 ,100 million provided in 1981 and Rp 616.6 dlllion in 1982.

IYi~

- 69 -

ANNEX 2Table 2

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS VI PROJECT

PTP XXIII - Sumary Cash Flow Statement(Rp million)

1981 .1982 1983 1984 1985 1986 1987 1988

:ourcesProfit before depreciation, interestand tax 4,554 7,730 9,689 14,605 17,265 20,264 22,466 26,434

Loans for NES VIBRD - 2,843 1,087 1,448 1,396 1,777 - -Bank Dalam Negri - 1,440 1,919 1,851 2,805 2,345 1,279 1,353

ADB loan for nucleus cotton estate,Sulawesi 195 2,091 4,347 - - - - -

Loans for other developmentAlready negotiated 5,700 - - - - - - -

To be sought and negotiated 5,500 7,250 7,OOC 6,500 4,500 1,800 1,500 -

Insurance deposit 1,149 - - - - - - -Miscellaneous including budget allo-

cations 600 582 504 592 1,062 1,238 1,436 1,727

Total Sources 17,698 21,936 24,54(6 24,996 27,028 27,424 26,681 29,514

.pplicationsFixed asset expendituresJavaImmature plantation crop 3,725 3,668 3,972 4,125 3,941 3,402 2,475 2,232Housing 1,402 1,639 792 711 777 823 456 501Operational buildings 1,470 1,057 91", 989 799 598 543 585Factory machinery 1,050 914 588 888 1,034 1,475 1,0909 1,294Vehicles and other assets 1,018 475 593 636 651 726 658 849

Subtotal 8,665 7,753 6,862 7,349 7,202 7,024 5,222 5,461

Pir Khusus BengkuluNucleus estate plantation crop - 552 89L 561 512 505 536 296Housing - 2,443 1,382 1,466 752 576 947 -Operational buildings, machin-ery, vehicles 92 454 393 86 268 216 341 49

NES V development 2,843 2,527 3,367 3,247 4,582 2,345 1,279 1,353Cocoa estate, Sulawesi 2,858 1,866 2,365 2,586 3,388 4,289 3,994 3,851Cotton factory, Sulawesi 195 2,091 4,347 - - - - -

Working capital (887) 363 (54'0) 2,739 829 1,243 1,341 1,601Loan repayments

NES V from IBRD - - - - - - - 712NES V Bank Dalam Negri - - - - - - - 120

Other loans 515 234 - - - - 527 1,832

Interest on long-term loansNES V - 578 781) 1,207 1,712 2,275 2,639 2,695Other loans 728 2,088 3,434 4,593 5,309 5,718 5,898 5,961

Taxation 2,478 695 84L 660 1,988 2,342 2,881 3,972Dividends and bonus 1,551 253 322 245 735 850 1,051 1,448

Total Applications 19,044 21,897 24,443 24,739 27,277 27,383 26,656 29,351

)pening balance 1,565 219 253 355 612 363 404 429Zlosing balance 219 258 355 612 363 404 429 592

- 70 - ANNEX 2Tab le3

INDONESIA

NUCLEUS ESTATES AND SHALLHOLDERS VI PROJECT

PNP XXVIII - Summary Cash Flow Statement(Ep' million)

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

Application of FundsCapital Expenditure on crop developmentand processing

Seram /a 833 2,579 5,552 7,639 8,023 9,014 6,085 2,125 2,220 1,817 813 536 1,231Oil palm project at LUWU /b 781 1,591 8,236 11,486 9,794 6,990 3,137 7,454 2,964 2,252 847 592 239Hybrid coconut seed gardens /e - - 486 697 331 459 1,208 985 39 13 14 15 49

Working CapitalSeram - - - - - 31 94 231 395 561 695 769 755Oil palm project at LUWU /c - - - - 20 398 790 1,179 1,797 1,614 1,300 1,082 869Hybrid coconut seed gardens /c - - - - - - 112 303 410 313 139 74 83

Loan Capital Repayments - Original CapitalSeram - - - - - - 47 153 771 1,755 2,734 3,573 4,033Oil palm project at LUWU /d - - - - - - - - 29 75 100 139 381Hybrid coconut seed gardens /f - - - - - - - - - -

Repayment of Capitalized InterestSeram - - - - - - 47 154 778 1,896 3,010 3,964 4,487Oil palm project at LUWU - - - - - - - - 30 77 102 142 386Hybrid coconut seed gardens - - - - - - - - - - - _ _

Interest Paid on Loan CapitalSeram - - - - - - - - - 1,066 3,208 5,337 6,389Oil palm project at LUWU - - - - - - 127 374 1,673 3,451 4,654 5,087 4,602Hybrid coconut seed gardens - - - - - - - - 80 184 218 265 623

Interest Paid on Working Capital Loanfor the LUWU project - - - - 6 30 108 215 377 522 639 736 814

Taxation - - - - - - - - - - 730 1,315 2,075

Dividend and Bonus - - - - - - - - 2,857 3,562 1,882 1,204 1,306

Total Applications 1,614 4,170 14,274 19,822 18,174 16,922 11,755 13,173 14,420 19,158 21,085 24,830 28,322

Sources of FundsCash released from disposal of presentactivities 80 150 100 100 80 - - - - - - - -

Equity Capital Subscribed for:Seram 417 1,289 2,776 3,820 4,029 4,557 3,120 1,070 697 304 - - -

Oil palm project at LUWU 312 636 3,294 4,594 3,918 2,796 1,226 2,915 1,054 -Hybrid coconut seed gardens - - 194 279 132 184 483 379 - -Headquarters 305 135 231 303 347 492 - - - -

Loan Capital for:Seram 417 1,289 2,776 3,819 4,029 4,557 3,120 1,070 697 304Oil palm project at LUWU 469 955 4,942 6,892 5,876 4,194 1i8,3 4,374 1,581 -Hybrid coconut seed gardens - - 292 418 199 275 1,452 1,547 - -

Working Capital Loan for the LUWU project - - - - 105 174 627 884 1,348 1,210 975 811 652

Profit before Interest, Depreciation andTaxes (386) (284) (331) (403) (541) (307) (38) 1,874 9,722 15,648 20,110 24,019 27,670

Total Sources 1,614 4,170 14,274 19,822 18,174 16,922 11,828 14,113 15,099 17,466 21,085 24,830 28,322

Increase (Decrease) in Bank balance - - - - - - 73 940 679 (1,692) - - -

Ia Apart from the trading results of 1985/86, which have been treated on this schedule as arising steadily in 1986, all other Seram project incomeand expenditures previously detailed in terms of years to June 30 have been reclassified in terms of the calendar year, using the assumption thatthey will arise evenly through the project year.

/b Capital expenditure for the LUWU project has been derived from PNP 28's constant price projections and the Working Party's amendments thereto withadjustments made to increase the costs of roads and processing equipment to a level that bears comparison with NES V oil palm development costs.As a result of our adjustments, the finance required for the oil palm project (other than for working capital) has risen to Rp 51,866 million,compared to a figure of Rp 41,680 million given in a document submitted to the Working Party. The NES VI mission has not appraised the LUJWU project.

/c Net working capital has been determined as equivalent to two months' sales.7d Finance plan adopted for the LUWU project: 40X of finance fo initial capital expenditure in each year is provided inthe form of equity and the

balance as a long-term loan carrying interest at 13-1/2% p.a. Up to 75% of working capital needs are met by a loan for this purpose on whichinterest at 12% p.a. is charged. Each annual drawdown of the long-term loan has been considered separately for repayment purposes; in each caseinterest is capitalized for the first six years and then the combined sum of principal and capitalized interest repaid by equal annual install-ments over the remaining years through to the end of project year 16 or later, when necessary, to give a minimum term of ten years from drawdownto repayment of the final installment.

/e The capita(expenditure for two hybrid coconut seed gardens, each of 180 ha, has been based on the physical inputs for the NES V coconut seed gardens.7W Finance plan adopted for the coconut seed gardens: 407.of the finance required each year has been provided by equity capital and the balance by a

loan carrying interest at 13-1/2% p.a. In the same way as the LUWU project, each annual drawdown of the loan has been considered separately for

repayment purposes; in each case interest is capitalized for the first six years and then the combined sum of principal and capitalized interestrepaid by equal annual installments over the remaining years through to year 16, or frm commencement of the first coconut seed garden to 1998.

- 71 -

ANNEX 3

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS VI PROJECT

List of Machinery, Vehicles and Equipment

Quantity Unit Cost Totaltem PTP XII PTP XXIII PNP XXVIII cost PTP XIi PTP XXIII PNP XXVIII cost

(numbers) ---------- ----- --------- (Rp million) ----------------

,grLcultura 1 Machinery

Wheel tractor (75 hp) 18 2 10 13.0 234.0 26.0 130.0 390.0Disc plow 6 1 8 2.2 13.2 2.2 17.6 33.0

Disc harrow 3 1 8 2.2 6.6 2.2 17.6 26.4

Truck - flatbed (5 ton) 15 2 17 12.0 180.0 24.0 204.0 408.0

Trailer - flat (3 ton) 20 3 10 2.7 54.0 8.1 27.0 89.1

Trailer - tanker (3 ton) 21 2 8 3.3 69.3 6.6 26.4 102.3

Water pump - portable (5 hp) 20 2 10 C.6 12.0 1.2 6.0 19.2

Hand sprayer 405 350 357 C.07 28.4 24.5 25.0 77.9

Chainsaw (20") 24 400 410 C.4 9.6 160.0 164.0 333.6

Sprinkler system - - 1 32.0 - - 32.0 32.0

Subtotal 607.1 254.8 649.6 1,511.5

ransport _Equipment

Jeep 11 11 12 7.5 82.5 82.5 90.0 255.0

Motorcycle 50 25 39 1.0 50.0 25.0 39.0 114.0

Minibus 2 2 3 7.0 14.0 14.0 21.0 49.0

Service van 2 1 2 E.0 16.0 8.0 16.0 40.0Pickup 2 - 3 5.0 10.0 - 15.0 25.0Boat (5 ton) - - 2 1'.0 - - 30.0 30.0

Boat (50 ton) - - 1 5C.0 - - 50.0 50.0

Subtotal 172.5 129.5 261.0 563.0

oad _ConstructLon Equipment

Bulldozer (140 hp) 6 4 3 6,'.0 402.0 268.0 201.0 871.0

Motor grader 4 2 4 53.0 212.0 106.0 212.0 530.0

Compactor - vibrating 4 2 2 40.0 160.0 80.0 80.0 320.0

Compactor - sheepsfoot 4 2 1 28.1 112.4 56.2 28.1 196.7Compactor - pneumatic tire 4 2 2 4.'.0 188.0 94.0 94.0 376.0

Front-end loader (100 hp) 4 3 2 41,.0 176.0 132.0 88.0 396.0

Truck - tipping (5 ton) 32 15 8 23.6 755.2 354.0 189.0 1,298.2

Wheel tractor (97 hp) 4 2 3 13.0 52.0 26.0 39.0 117.0Stone crusher 4 2 1 32.0 128.0 64.0 32.0 224.0Low loader (20 ton) 2 1 - 4X,.0 88.0 44.0 - 132.0

Concrete mixer (large) 6 3 2 1L.3 68.0 34.0 23.0 125.0

Concrete mixer (small) 6 3 2 8.0 48.0 24.0 16.0 88.0

Tanker (water) 4 2 1 26.0 104.0 52.0 26.0 182.0

Tanker (fuel) 2 1 1 26.0 52.0 26.0 26.0 104.0

Trailer - flat (3 ton) 4 2 1 2.7 10.8 5.4 2.7 18.9Trailer - tanker (3 ton) 4 2 1 3.3 13.2 6.6 3.3 23.1

Truck - flatbed (5 ton) 4 2 - 29.0 80.0 40.0 - 120.0Truck - grease 2 1 - 25.0 50.0 25.0 - 75.0

Half-truck 4 2 - 5.0 20.0 10.0 - 30.0

Fuel tanks (2,000 liters) 4 2 2 7.0 28.0 14.0 14.0 56.0Miscellaneous - - - LS/a 10.0 10.0 30.0 50

Subtotal 2,757.6 1,471.2 1,104.1 5,332.9

Total 3,537.2 1,855.5 2,014.7 7,407.4

/a LS = lump sum.

- 72 - ANNEX 4

Page 1

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDER VI PROJECT

Start-Up Funds

NES V - Start-Up Funds

1. NES V provided start-up funds for the three estates involved inthis project. Table I shows the items and amounts involved. While the Bankand DGE have agreed on the allocation of total funds to each estate, ifnecessary, the allocation of funds between items could be changed.

NES VI - Start-Up Funds

2. The project provides US$11.5 million start-up funds to initiateactivities, such as planning, nursery and field development, construction ofhouses, buildings and roads, for future Bank-assisted tree crop projects. GOIand the Bank have already agreed to allocate some of these funds to PTP VI,PTP XXIII and PNP XXVIII for start-up activities of NES VII (Table 2).Other estates could also use these funds, including, among others, PTP IV,PTP XII, PNP XIX, PTP XXIX/XXV, PTP XXVI, PTP XXVII, PNP XXVIII, and PTP XXIX.Before any funds are allocated to these or other estates, however, DGE andthe Bank would agree on the particular works the estates would undertake andthe estimated cost.

- 73 -

ANNEX 4Page 2

Table 1: NES VI START-UP FINANCED FROM NES V

Total CostEstate and Item (Rp million)

PTP XII

Part A. Smallholder Development

Access road and bridges 853Field development 546Settler houses and division offices 129Overhead cost and management 82

Total 1,610

Part B. Nucleus Estate Development

Field development 1,680Roads and bridges 173Houses and buildings 219Equipment, machinery and vehicles 488Overhead cost 168

Total 2,728

PTP XIII

Part A. Smallholder Development

Field development 209Settler houses 150Village infrastructure 151Roads and bridges 200Equipment 300Overhead cost and management 31

Total 1,041

PNP XXVIII

Part B. Estate Development

F'ield establishment 807Roads and bridges 190Houses 1,100Equipment and vehicles 572Overhead cost 81

Total 2,750

- 74 -

A NNEX 4Page 3

Table 2: ALLOCATION OF NES VI START-UP FUND FOR NES VII

Total CostEstate and Item (Rp million)

PTP VI - East Kalimantan

Buildings 120Machinery 300Communication (SSB) 30Telex 3Generator set 3Extension to farmers 12

Total 468

Funds would be allocated approximately Rp 312 million to Part A developmentand Rp 156 million to Part B.

PTP XXIII - Bengkulu

Field development 451Housing 173Roads and bridges 183Road and agricultural equipment 300Sprayers 6Overheads 44Generator set 3Communications (SSB) 30Extension to farmers 10

Total 1,200

Funds would be allocated approximately Rp 1,072 million to Part Adevelopment and Rp 128 million to Part B.

PNP XXVIII - South Sulawesi

Nursery irrigation and 1983 seedlings 325Field development 32 5Houses 55Buildings 19Roads and bridges 143Road and agriculture equipment 300Light equipment 10Communications (SSB) 25Training and recruitment 58

Total 1,2 60

Funds would be allocated approximately Rp 394 million to Part A developmentand Rp 866 million to Part B.

- 75 -

ANNEX 5

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS VI PROJECT

Related Documents and Data Available in Project File

A. Reports and Studies on the Sector or Subsector

A.1 IBRD Sector Report: Rubber Developuent, Prospects and PolicyImplications, July 30, 1981.

A.2 IBRD Sector Policy Paper: Natural Rubber Development,July 9, 1980.

A.3 IBRD AGR Technical Note No. 2: A Study of Tree Crop FarmingSystems in the Low-Land Humid Tropics (2 vols.) June, 1980.

B. Reports and Studies Dealing with the Project

B.1 PTP XII: Outline Planning for Nucleus Estates and SmallholdersVI, Agrabinto and Cikaso, 1981.

B.2 P.T. Agriconsult International: Project Study and PreliminaryOutline Plan NES VI - Smallholder Development in BengkuluProvince, Sumatera (2 vols.) September, 1981

B.3 P.T. Agriconsult International: Nucleus Estate Awaya-Seram,1980.

C. Selected Working Papers

C.1 Working Paper: Estimated Cost of Tree Crop Establishment

C.2 Working Paper: Processing Engineer's Report on ProposedProcessing Facilities at Cikaso, Agrabinta and Seram sites

C.3 Working Paper: Farm Budgets and Economic Analyses.

C.4 Working Paper: Financial Analyses of Estates

C.5 PNP XXVIII: PNP XXVIII Development Program 1982-1990,January 1982.

C.6 PTP XXIII: Census of Prospective Smallholders at the SelumaSite, Bengkulu, December 31, 1981

C.7 PTP XII: Report on Rentice Survey of Cikaso and AgrabintaSites, January, 1982.

IBRD 16212Morok ~~~~~~~~~~~~~~~~~~~~~ ~ ~~~106050' 107'000 107010. JANUARY 1982

.s-~~~~~~ KAnT ~~~~~~~~ ~INDONESIABoss, ~~~~~~~~~-7'00'

NUCLEUS ESTATES AND SMALLHOLDERS VI PROJECT 0°N;<It75 B Sogor /Pur.,,,orta X 0 WEST JAVA SITE (PTP XII)

5" 9 WEST JA VA C Cbbon

0'. .: 7 n f'~ .'t C,a0Ir Bsod.,o PROPOSED NUCLEUS ESTATE SITES

'-;1::Gh".1 ' ,''" ^ d, . .,, ,<d',5 I 'f 7 PROPOSED SMALLHOLDER SITES

½ K j t. : Thok a L _ I r .- : F O R EST A R E A S

a., , 1 =- PROPOSED ACCESS ROADMAP ',"!'/>or !¢7¢_ _=U:nl ';,s0l I,jt ,,j} , ROADS To Co0n/or

:li4 6 e N> J _ RIVERS

INOfeS4AN OCEA C j > Xx -- KABUPATEN (DISTRICT) BOUNDARIES

___i____ ,________________________ ._____________________-_- PROVINCIAL BOUNDARIESToOjOabo.0' 106040 ,,

7,10,~~~~~~~~~~~~~~~~~~~~~~~~~0

0°10' 7) r} KILOMETERS °r 2 4 5 E 10 v E R207

( 1'

g rl y MILES 0 2 4 6If

Patrol-' i -5 U g A B U M / 0 C ) c A N J U R 0~~~~~~~~~~~~~4'

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<-$;t ;•bo. -:~~~~~~~~~~~~~~~~~~~~~~~~r 't>50 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~.U 1lb NOCŽC,c-" WE '5~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

I oe _ _&4 AQ'6Y.7-107~ ~ ~ ~ ~ ~~~~~~~~~~~Sidnbro

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