Completion Report NUSSP ADB IRM

Completion Report

Project Number: 35143 Loan Number: 2072/2073-INO (SF) September 2011

Indonesia: Neighborhood Upgrading and Shelter Sector Project

CURRENCY EQUIVALENTS (as of 15 June 2011)

Currency Unit – rupiah (Rp)

At Appraisal At Project Completion (29 October 2003) (15 August 2011)

Rp1.00 = $0.0001172 $0.0001170 $1.00 = Rp8,530 Rp8,553

ABBREVIATIONS

ADB – Asian Development Bank ADF – Asian Development Fund BAPPENAS – Badan Perencanaan Pembangunan Nasional (National Development

Planning Board) BKM – Badan Keswadayaan Masyarakat (community self-help groups) BP4D – Badan Pengembangan dan Pembangunan Perumahan dan Permukiman

Daerah (Local Board for Housing and Shelter Development) BPN – Badan Pertanahan Nasional (National Land Agency) CDD – community-driven development CFI – central financial institution DGHS – Directorate General of Human Settlements km – kilometer m2 – square meter MOF – Ministry of Finance MPW – Ministry of Public Works NSD – new site development NUP – neighborhood upgrading plan PNM – Permodalan Nasional Madani (National Fund for Social Investment) PMU – project management unit PPTA – project preparatory technical assistance RP4D – Rencana Pembangunan dan Pengembangan Perumahan dan

Permukiman di Daerah (local spatial planning and shelter strategy) RRP report and recommendation of the President SPAR – subproject appraisal report TA – technical assistance

GLOSSARY

bupati – Administrative head of a kabupaten kabupaten – The third level of government in Indonesia, a subdivision (district) of a

province kampong – A residential areas, usually for low-income classes, in a town or a city

NOTES

(i) The fiscal year of the government and its agencies ends on 31 December.

(ii) In this report, "$" refers to US dollars. Vice-President B. N. Lohani, Vice-President-in-Charge, Operations 2 Director General K. Senga, Southeast Asia Department, (SERD) Director B. A. Finlayson, Officer-In-Charge, Indonesia Resident Mission (IRM),

SERD Team leader S. Hasanah, Senior Project Officer, IRM, SERD Team members W. Kubitzki, Principal Portfolio Management Specialist, SERD F. P. A. Arifin, Associate Project Analyst, IRM, SERD Suzana, Senior Operation Assistant, IRM, SERD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page BASIC DATA ii

MAP vii

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

A. Relevance of Design and Formulation 1 B. Project Outputs 3 C. Project Costs 8 D. Disbursements 8 E. Project Schedule 8 F. Implementation Arrangements 9 G. Conditions and Covenants 9 H. Consultant Recruitment and Procurement 9 I. Performance of Consultants, Contractors, and Suppliers 10 J. Performance of the Borrower and the Executing Agency 10 K. Performance of the Asian Development Bank 11

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

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14 A. Overall Assessment 14 B. Lessons 14 C. Recommendations 15

APPENDIXES 1. Project Logical Framework 16 2. Participating Cities and Districts and Selection Criteria 21 3. Project Outputs 23 4. Project Costs and Financing Plans 30 5. Disbursements 32 6. Flow of Funds 33 7. Project Implementation Schedule 34 8. Implementation Arrangements 35 9. Compliance with Loan Covenants 38 10. Consultant Packages 47 11. Economic and Financial Reevaluation 49 12. Gender Equality Results in Neighborhood Upgrading and Shelter Sector Project 53

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BASIC DATA A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report

Number

Indonesia 2072/2073(SF) Neighborhood Upgrading and Shelter Sector Project Republic of Indonesia Directorate General of Human Settlements in the Ministry of Public Works Original loan amount: $68.6 million (Loan 2072-INO) SDR13.89 million (Loan 2073-INO) Actual loan amount: $51.94 million (Loan 2072-INO) SDR13.73 million (Loan 2073(SF)-INO) PCR: INO 1263

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan (Loan 2072/OCR) – Interest Rate – Maturity (number of years) – Grace Period (number of years)

Terms of Loan (Loan 2073/ADF) – Interest Rate

– Maturity (number of years) – Grace Period (number of years)

13 October 2003 31 October 2003 17 November 2003 18 November 2003 19 December 2003 09 September 2004 07 December 2004 31 March 2005 None 31 December 2009 14 January 2011 (Loan 2073) and 31 May 2011 (Loan 2072) 1 LIBOR + 0.6% 25 years 6 years 1% during grace period; 1.5% thereafter 32 years 8 years

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8. Terms of Relending – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

LIBOR + 0.6% + 0.5%a 23 years 3 years Local Financial Institutions

9. Disbursements

a. Dates Initial Disbursement

12 December 2005 Final Disbursement

14 January 2011 (Loan 2073) and 31 May 2011

(Loan 2072)

Time Interval 62.0 months (Loan

2073) and 62.0 months (Loan 2072)

Effective Date 31 March 2005

Original Closing Date 31 December 2009

Time Interval 57.0 months

b. Loan 2072-INO: Amount ($‘000) Category or Subloan

Original

Allocation

Last Revised

Allocation

Amount

Canceled

Net Amount

Available

Amount

Disbursed

Undisbursed

Balance 01 Civil Works 41,412.00 46,648.00 0.00 46,648.00 46,328.53 319.47 01A-CW (high

fiscal capacity) 1,530.00 1,335.12 0.00 1,335.12 1,334.07 1.05

01B-CW (medium fiscal capacity)

22,000.00 17,583.75 0.00 17,583.75 17,576.57 7.18

01C-CW (low fiscal capacity)

17,882.00 16,629.13 0.00 16,629.13 16,330.40 298.74

01D-CW (for new site and additional upgrading)

0.00 11,100.00 0.00 11,100.00 11,087.49 12.51

02 Credit 17,100.00 757.55 16,342.45 757.55 757.55 0.00 03 Training and

Workshop 0.00 0.00 0.00 0.00 0.00 0.00

04 Consulting Services

0.00 0.00 0.00 0.00 0.00 0.00

05 Interest during Construction

4,509.00 4,509.00 0.00 4,509.00 4,509.00 0.00

06 Commitment Charges

0.00 0.00 0.00 0.00 0.00 0.00

07 Front-End Fees 343.00 343.00 0.00 343.0 343.00 0.00 08 Unallocated 5,236.00 0.00 0.00 0.00 0.00 0.00 Total 68,600.00 52,257.55 16,342.45 52,257.55 51,938.08 319.47

c. Loan 2073(SF)-INO: Amount (SDR‘000) Category or Subloan

Original

Allocation

Last Revised

Allocation

Amount

Canceled

Net Amount

Available

Amount

Disbursed

Undisbursed

Balance 01 Civil Works 0.00 0.00 0.00 0.00 0.00 0.00 02 Credit 0.00 0.00 0.00 0.00 0.00 0.00 03 Training and

Workshop 5,139.00 5,253.00 0.00 5,253.00 5,179.30 73.70


6,667.00 8,313.00 0.00 8,313.00 8,228.22 84.78

a 0.5% was the additional fee charged by Ministry of Finance to the Central Financial Institution

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463.00 324.00 0.00 324.00 323.67 0.33


0.00 0.00 0.00 0.00 0.00 0.00

07 Front-End Fees 0.00 0.00 0.00 0.00 0.00 0.00 08 Unallocated 1,621.00 0.00 0.00 0.00 0.00 0.00 Total 13,890.00 13,890.00 0.00 13,890.00 13,731.20 158.81

Total $ Equivalent 21,297.07 21,297.07 0.00 21,297.07 21,053.58 243.49 Note: The exchange rate used was SDR1 = $1.53 10. Local Costs (Financed) - Amount ($ million) 60.6 - Percent of Local Costs 63% - Percent of Total Cost 56% C. Project Data

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

Foreign Exchange Cost 14.60 12.40 Local Currency Cost 111.90 95.51 Total 126.50 107.91

2. Financing Plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 35.70 31.89 ADB Financed ADF 19.30 20.56 OCR 63.40 47.09 Other External Financing 2.20 3.02 Total 120.60 102.56 IDC Costs Borrower Financed 0.00 0.00 ADB Financed 5.90 5.35 Other External Financing 0.00 0.00 Total 126.50 107.91

ADB = Asian Development Bank, ADF = Asian Development Fund, IDC = interest during construction, OCR = ordinary capital resources.

3. Cost Breakdown by Project Component ($ million)

Component Appraisal Estimate Actual A. Improved Shelter Planning and Management 1. City Shelter Strategy

4.60

4.20

B. Improved Access to Shelter Microfinance 1. Microfinance for Shelter Development

17.10

0.90

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C. Upgraded Poor Neighborhood and New Sites 1. Neighborhood Upgrading 2. New Sites

89.70 67.20 22.50

88.40 82.80

5.60 D. Strengthened Sector Institute 1. Capacity Building for Site Development 2. Capacity Building for Shelter Microfinance 3. Project Implementation Support 4. Public Campaign

9.20 3.60 2.60 3.00 0.00

9.06 1.21 0.10 6.85 0.90

E. Financial Charges during Implementation 5.90 5.35 Total 126.50 107.91 4. Project Schedule

Item Appraisal Estimate Actual Date of Contract with Consultants National Management Consultant January 2004 12 September 2005 Oversight Consultants January 2004 21 September 2005 Procurement Consultants January 2004 January 2006 Preparation of Gender Strategy and Action Plan None June 2008 Public Campaign for Health Behavioral Changes None 28 November 2009 Completion of Engineering Designs July 2004 September 2005 Civil Works Contract Date of Award August 2004 October 2005 Completion of Work June 2009 November 2010 Equipment and Supplies Dates First Procurement August 2004 October 2005 Last Procurement January 2009 August 2010 Completion of Equipment Installation March 2009 November 2010 Start of Operations Completion of Tests and Commissioning July 2005 March 2006 Beginning of Start-Up August 2005 April 2006 Other Milestones None None 5. Project Performance Report Ratings

Ratings Implementation Period

Development Objectives

Implementation Progress

From 31 March 2005 to 31 December 2006 Unsatisfactory Unsatisfactory From 1 January 2007 to 31 December 2008 Partly satisfactory Partly satisfactory From 1 January 2009 to 31 December 2010 Satisfactory Satisfactory

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D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Membersb

Fact-Finding 17–31 Jul 2003 4 24 a, b, c, d Appraisal 13–31 Oct 2003 5 30 a, c, d, e, f Inception 31 May–12 Jun 2004 4 20 a, b, g, h Review 1 20 Apr–6 May 2005 3 10 h, i, j Review 2 14 Feb–17 Mar 2006 2 18 h, i Review 3 11 Oct–15 Dec 2006 2 20 h, i In-Depth Review 21 May–21 Jun 2007 4 25 h, i, k, l Review 4 4 Dec 2007–18 Jan 2008 2 15 h, m Midterm Review 17 Jul–3 Sep 2008 3 20 h, k, m Special Project Administration 1

18–19 Nov 2008 2 4 h, m

Special Project Administration 2

2–4 Mar 2009 2 6 h, m

Review 5 30 Mar–5 May 2009 3 15 h, k, m Special Project Administration 3

22–23 Jun 2009 1 2 h

Review 6 28 Oct–26 Nov 2009 3 15 h, k, m Review 7 21 Jun–8 Jul 2010 2 12 h, m Review 8 7–22 Dec 2010 2 12 h, m Project Completion Review

6 Apr–16 May 2011

3 17 h, m, n

b a = senior housing finance specialist, b = programs officer, c = social development specialist, d = counsel, e =

principal programs specialist, f = housing finance specialist and staff consultant, g = associate operations analyst, h = project officer, i = project implementation specialist, j = control officer, k = gender and development advisor, l = urban development specialist, m = portfolio management specialist, n = associate project analyst.

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I. PROJECT DESCRIPTION

1. Indonesia’s urban population continues to grow. By 2010 it comprised about 50% of the total population; approximately 20% of urban households were poor or vulnerable to poverty. Local infrastructure improvements were not able to keep up with urban growth, leading to increased pressures on all aspects of the urban environment. Only about 50% of the urban population had access to safe water, 30% did not have access to sanitation facilities, and about 35% of urban areas lacked proper drainage systems. The poor, especially the self- or informally employed, did not have opportunities to obtain loans to improve their livelihoods, due to high interest rates and lack of collateral. 2. The Neighborhood Upgrading and Shelter Sector Project was formulated to support the government’s urban poverty reduction strategy by creating sustainable mechanisms to (i) provide resources to local governments, in partnership with communities, for site development and upgrading of basic infrastructure in poor urban neighborhoods; (ii) expand access of poor urban informal settlers to microcredit for shelter finance; and (iii) facilitate participatory community-driven planning by strengthening the role and capacity of communities and governments to meet their responsibilities. 3. The expected impact (goal) of the project was to help improve living conditions of the urban poor through increases in assets, well-being, and income opportunities. The outcome (purpose) was to increase the provision of shelter for the urban poor through upgrading slums, improving housing, and providing new housing for the urban poor in the project participating neighborhoods. To achieve its outcome, the project included four outputs/components: component 1: improve planning and management systems to upgrade sites and establish new ones for the urban poor; component 2: improve access to shelter finance by the poor through central financial institutions and local financial institutions for their branches; component 3: upgrade poor neighborhoods and develop new sites for the poor; and component 4: strengthen sector institutions to deliver the program. The project logical framework, which describes the project impact/goal, outcome/purpose, outputs/components, and performance indicators and targets, is in Appendix 1. 4. The Asian Development Bank (ADB) provided financing for the project through two loans1 with the original total allocation of about $90.1 million. The project was implemented in 32 local governments2 within 17 provinces.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

5. The project was prepared in the context of the National Development Strategy (PROPENAS) 2000–2004 and ADB’s strategy for Indonesia as described in the 2003–2005 country strategy and program. The PROPENAS sets out policies and targets for urban shelter, focusing on meeting the needs of the urban poor for improved housing.

1 ADB. 2003. Report and Recommendation of the President to the Board of Directors: Proposed Loans to the Republic

of Indonesia for the Neighborhood Upgrading and Shelter Sector Project. Manila. Loan 2072-INO had an original allocation of $68.6 million and Loan 2073(SF)-INO an original allocation of SDR13.89 million. At project completion the total loan proceeds disbursed were equivalent to about $73.0 million. At the request of the government and considering the project’s poverty reduction orientation, ADB agreed to provide the Asian Development Fund loan, which was used for financing capacity-building activities and consulting services.

2 Project locations comprised cities (kota) and districts (kabupaten). The participating local governments in the project will henceforth be called “the cities”, except where a distinction of the administrative terms is required.

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6. Based on the PROPENAS, in 2002 the Ministry of Regional Infrastructure3 issued the Ministerial Decree on Policies and Strategies for Housing and Settlements. In support, the National Development Planning Board (BAPPENAS) prepared the Urban Poverty Reduction Strategy, which provides guidelines on meeting the needs of the urban poor. Furthermore, in early 2000 the government declared its commitment to the international “Cities without Slums” initiative 4 by working to eradicate slums in at least 30 provincial capitals by 2010. 7. The project was intended to (i) contribute directly to the national development priorities and targets expressed in the PROPENAS; (ii) reinforce BAPPENAS’s National Urban Poverty Reduction Strategy Framework; (iii) contribute to the refinement of the 2002 Ministerial Decree on Policies and Strategies for Housing and Settlements; and (iv) be the main contributor to the achievement of cities without slums targets by providing support for infrastructure upgrading, strengthening property rights for tenured plots, providing appropriate shelter finance, and strengthening the capacity of institutions responsible for providing spatial and pro-poor urban planning. 8. The project conformed with ADB’s 2003–2005 country strategy and program, which included five themes: (i) improving governance and strengthening capacity for long-term sustainable development; (ii) meeting local rural and urban development needs through decentralization, and identifying local development partners that prioritize good governance and poverty reduction; (iii) promoting human development by improving access by the poor to social services, especially education and health, and addressing local gender inequalities; (iv) mainstreaming environment management and sustainable use of natural resources; and (v) reducing poverty by promoting long-term significant growth. The project was in line with all five themes.

9. To assist the government in formulating the project, a project preparatory technical assistance5 was provided. In line with the decentralization laws,6 the project was designed as a decentralized investment project, which required local governments to contribute to the project investments.7 The project was formulated as a sector project loan and primarily designed for cities classified as provincial capitals, metropolitan cities, or large or medium-sized urban areas with significant slum areas. 10. The project was prepared based on detailed pilot studies in six cities chosen on a competitive basis involving more than 59 cities that requested to participate. 8 Based on the proportion of informal settlers to total city population and local government willingness to contribute to project implementation, the government screened cities interested in participating in the project. Thirty-two cities (including the pilot cities) were included. A list of participating cities and detailed

3 In 2004 the Ministry of Regional Infrastructure was reorganized and renamed the Ministry of Public Works. 4 The Cities without Slums Action Plan is a product of the Cities Alliance, a coalition of cities and development partners

committed to making unprecedented improvements in the living conditions of the urban poor. The initiative aims at improve the lives of 100 million slum dwellers by 2020.

5 ADB. 2002. Technical Assistance to the Government of Indonesia for Preparing the Neighborhood Upgrading and Shelter Sector Project. Manila. (TA 3895-INO, for 1.0 million, with $500,000 cofinancing provided by the United Kingdom’s Department for International Development, approved on 11 July 2002).

6 Laws 22 and 25 of 1999. 7 The Ministry of Finance issued Ministerial Decree No. 35/2003, which regulated that for civil works financed under

projects, a local government has to provide counterpart funds with the ratio determined by its fiscal capacity. Cities with high fiscal capacity were required to provide 70% of the counterpart funds, medium 40%, and low 10%.

8 Makassar, Mataram, Medan, Pekan Baru, Pontianak, and Tangerang were chosen as pilot cities after consideration of their populations of informal settlers, and willingness to contribute to the project. However, Pekan Baru decided not to participate as the city objected to the amount of the contribution and/or counterpart funds it should provide. The ministerial decree (footnote 7) was announced after the studies were completed.

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eligibility and selection criteria for city participation and selection of project sites (neighborhoods) are in Appendix 2. 11. In consultations with the governments, the project preparatory technical assistance consultants prepared detailed studies, known as the subproject appraisal report (SPAR), for the pilot cities. The SPAR was used as a reference for implementing and financing project activities.9 Based on the SPARs for the pilot cities, the overall project targets were prepared.10 However, during project implementation, component 2 targets for housing microcredit were reduced, as achievement of the original targets was considered unlikely. However, the targets for the neighborhood upgrading subcomponent under component 3 were increased in response to strong demand. Thus in December 2008, ADB and the government reformulated the project targets and scope by downsizing component 2 and increasing the neighborhood upgrading subcomponent.11 B. Project Outputs

1. Component 1: Improve Planning and Management Systems to Upgrade Sites and Establish New Ones for the Urban Poor

12. Under this component, the project provided assistance to local governments in developing planning systems that cater to the housing needs of the poor. The report and recommendation of the President (RRP) states that participating cities were to (i) develop systems for pro-poor shelter within the housing component of the local spatial planning and shelter strategy (RP4D), (ii) encourage political commitment to these systems, (iii) provide outreach to undertake participatory planning with poor communities, and (iv) strengthen coordination with the National Land Agency (BPN) and other relevant agencies (footnote 1).

13. To meet the targets, each participating city was required to allocate budget for the (i) preparation of pro-poor RP4Ds and (ii) establishment of an agency responsible for the construction and development of local housing and settlements (BP4D). The project provided consultant support12 to assist all participating cities in (i) preparing the RP4Ds, (ii) integrating the RP4Ds in the cities’ medium-term investment plans, and (iii) strengthening coordination with BPN and other related agencies. The project also financed capacity-building activities to encourage political commitments to the RP4Ds and participatory planning involving poor communities. 14. At project completion, all 32 participating local governments had completed their RP4Ds. However, only 26 cities have endorsed and/or legalized and integrated the RP4D into their medium-term investment plans. Six cities were unable to legalize their RP4Ds by the end of 2010 due to insufficient counterpart funds. 29 participating local governments were able to establish their own BP4D. However, some of the BP4Ds are not yet fully functional due to limited budgets provided by the concerned cities. In these cities, the BP4D functions are covered under their public works agency. Thus, even though the BP4Ds are not yet fully functional, the RP4Ds produced under the project will be implemented through these agencies. The Directorate General of Human

9 Since completion of the SPAR is compulsory prior to implementing project activities, cities not included as pilot cities

were required to prepare their own SPARs. Local governments financed SPAR preparation. The project preparatory technical assistant consultants trained local government staff to prepare SPARs. All were completed in late 2005.

10 For detailed project targets see Appendix 1 (the design and monitoring framework). 11 The major change in project scope was approved on 16 December 2008. The project completion report refers to this

change as project reformulation. The new site development (NSD) subcomponent was not reformulated as at that time eight cities had proposed to participate. Thus, the executing agency anticipated that the targets could be met.

12 In reference to the spatial planning law and other related government regulations, the consultant was supposed to (i) prepare guidelines for the preparation of an RP4D, (ii) ensure that the RP4D prepared by local governments are in accordance with the guidelines and that the RP4Ds are integrated into the medium-term investment plans, and (iii) facilitate coordination with BPN and other agencies.

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Settlements (DGHS) confirmed that continuous support to the remaining 6 cities would be provided to integrate their completed RP4D into the medium-term investment plan beyond project completion and to further strengthen the BP4Ds. Capacity-building activities related to this component have created strong community ownership and encouraged cities to involve poor communities in planning and implementing shelter improvement initiatives. 15. The original project schedule targeted the completion and integration of RP4Ds into the medium-term investment plan for the early years of project implementation (by mid-2004 for the pilot cities and by mid-2006 for the other cities) to support investments planned under component 3. However, since the majority of the RP4Ds were completed after 2008, investments under component 3 were implemented with limited reference to the RP4Ds.13 The RRP indicates that the RP4D should provide information on land availability, priorities for development, strategies for meeting needs of the urban poor, and likely sources of finance. It should prioritize site upgrading, new site development (NSD), and a time-bound action plan indicating land to be developed for various purposes. Observations on the completed RP4Ds indicate that in general they provide this required information and data. 16. Delays in completion of the RP4Ds were mostly due to insufficient budgets provided by participating cities. In addition, the prolonged absence of the national housing and urban development specialist 14 and poor performance of many regional urban planning specialists contributed to the delays. Appendix 3 provides an overview on RP4D preparation, legalization, and integration into the medium-term investment plan.

2. Component 2: Improve Access to Shelter Finance by the Poor through Central Financial Institutions and Local Financial Institutions or their Branches

17. Originally, $17.1 million was allocated for about (i) 30,000 house improvement microcredits, and (ii) 25,000 loans for new houses (starter houses) under the NSD subcomponent. However, due to continued low demand for housing credits from poor families, delays, uncertainty in the implementation of the NSD subcomponent, and subsequent poor disbursement under this component, in December 2008, the government and ADB reformulated the project targets by downsizing the housing microcredits. Based on the project reformulation, the allocation of loan proceeds was reduced to $1.5 million providing housing microcredits for 1,500 poor families.15

18. The following issues contributed to the poor demand for housing credits: (i) difficulty identifying suitable local financial institutions (LFIs) in some participating cities, (ii) relatively high interest rates (15.5%) put forward by the National Fund for Small and Medium Scale Investments (PNM) to LFIs,16 (iii) subsequently high interest rates for housing microcredits (30%– 40%)17 offered by LFIs to poor families, and (iv) limited awareness of microcredit schemes among potential LFIs and poor communities.

13 Investments under component 3, particularly the neighborhood upgrading started in late 2005. The executing agency

decided to go ahead with component 3 since the project had already experienced implementation delays due to the delays in declaring project effectiveness.

14 The specialist was mobilized at the beginning of the contract (December 2005), but resigned in September 2006. The consulting firm recruited for these consultancy services failed to find a replacement until late 2007. The executing agency indicated that the reason for the delay was that the consulting firm had difficulty in finding suitable candidates due to its weak contract management.

15 The revised project design and monitoring framework indicates that 40 savings groups are to be established and 15 LFIs to be engaged.

16 The PNM's subsidiary loan agreement is financed under the ordinary capital resources loan. 17 The RRP estimates interest rates at 14%–25% per annum. Several steps of onlending (from MOF to PNM and from

PNM to LFIs, and from LFIs to beneficiaries) contributed to the high interest rates.

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19. To facilitate distribution of the microcredits, ADB loan proceeds (financed from ordinary capital resources) were onlent to PNM, which was selected as the central financial institution (CFI). PNM then selected LFIs to loan microcredits to poor families.18 The Ministry of Finance (MOF) and PNM signed the subsidiary loan agreement on 25 January 2005.

20. At project completion, PNM had signed 13 subloan agreements with 12 LFIs in 11 cities. In total, 2,164 families have utilized microcredits for a total of Rp6.9 billion ($0.76 million) and 80 saving groups were established. Thus, the reformulated targets of 1,500 families and establishment of 40 saving groups were exceeded. The actual average credit size was Rp3.2 million/family (about $380), which is higher than the RRP credit size estimate of $230/family. 19 Field observations indicate that most of the credits were used for house improvement, e.g., replacing floors and roofs, adding sanitation facilities, and obtaining land title.20 PNM reported that the proportion of nonperforming loans was very low (less than 1%). The remaining $0.74 million under this component was canceled and refunded to ADB. Thus the total subsidiary loan agreement was reduced to $0.76 million. An overview of PNM’s subloan agreement distribution is in Appendix 3.

3. Component 3: Upgrade Poor Neighborhoods and Develop New Sites for the Poor

21. Component 3 comprised support to upgrade poor urban neighborhoods and develop new sites for low-income families.

a. Upgrading of Poor Neighborhoods

22. Originally, under the upgrading subcomponent, by the end of the project at least 300 neighborhood upgrading plans (NUPs) were to be completed; neighborhoods of at least 100 poor communities in 30 local governments were to be improved, and at least 500 contracts for upgrading civil works contracts were to be awarded. At project reformulation, the targets under the upgrading subcomponent were increased to 800 NUPs, and 2,000 contracts to upgrade civil works. 23. Community groups in selected neighborhoods21 prepared NUPs, specifying investments to be financed under the project. A NUP was prepared using a participatory approach involving all residents of the respective neighborhood. To facilitate the preparation of a NUP and implementation of the investments,22 a community-based organization and/or community self-help group (BKM) was established.23 Facilitators were deployed to assist communities and BKMs in preparing and implementing the NUPs. 24 Based on the NUP, civil works contracts for the construction of facilities were prepared and signed between the BKMs and city project managers. In accordance with the ADB procedure for community contracts, each contract did not exceed $30,000. To finance the construction, funds were direcly transferred to the BKMs.25 24. The upgrading works started in 2005 in 14 cities with some start-up delays due to delayed issuance of the government annual budgets, and difficulties faced by some local governments in

18 The LFIs set their interest rates. The ceiling for each loan to beneficiaries was set at Rp12 million. 19 Even though at current prices Rp3.2 million is considered little in terms of size, beneficiaries confirmed that the credits

helped them improve their houses. 20 About 1% of the credits were reportedly used for other purposes than housing improvement. 21 The neighborhood selection criteria are in Appendix 2. 22 Including street lighting, storm drainage, public toilets, and communal sanitation facilities such as group septic tanks,

water mains and public taps, secondary solid waste management, and community facilities. 23 Some neighborhoods already have BKMs established under the Urban Poverty Reduction Project. 24 Facilitators were contracted under the oversight consultant (OC) contracts. 25 Funds were transferred in four tranches, i.e., 30%, 30%, 30%, and 10%.

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providing the agreed counterpart funds.26 However, the issues were resolved and, starting from 2006, all cities implemented the upgrading program, which was completed in December 2009 in accordance with the original implementation schedule. Due to the success of the upgrading subcomponent and increasing demand from communities, targets and budget allocated for this subcomponent were increased at project reformulation. 27 In total, about $8.6 million was reallocated for additional upgrading activities in 19 cities; these were implemented through 41 civil works contracts. Similar to the original upgrading program, facilities constructed under the additional upgrading include water supply and sanitation facilities; roads, pathways, and drainage; and electricity and street-lighting facilities. 25. At project completion, the revised targets as specified during the project reformulation were exceeded. All 32 participating cities completed their upgrading programs; 803 NUPs were accomplished with the active participation of communities. More than 3,000 upgrading civil works contracts were awarded and implemented by the BKMs. The project improved more than 6,800 hectares of urban slum areas in 803 neighborhoods and benefited about 800,000 poor urban households (more than 3.0 million people). In total, the project improved and developed about 600 kilometers (km) of neighborhood roads, about 1,100 km of footways, more than 750 km of drainage channels, 630 public standpipes, about 28 km of water pipelines, 2,620 public toilets or communal sanitation facilities, 386 units of temporary waste disposal, 1,470 carts for solid waste facilities, 5,220 communal bins, and 7.360 household bins; and installed more than 16,000 street lights. Appendix 3 provides a detailed list of the built infrastructure under the neighborhood upgrading subcomponent.

b. New Site Development 26. This subcomponent aimed to provide assistance to establish new settlements for poor families outside existing slum neighborhoods, where conditions have deteriorated and upgrading activities would not be meaningful. Selected families from these poor communities were to be resettled to new sites. Originally, these new sites were to be developed in 10 project cities with 25,000 houses built for low-income families. 27. The original project design assumed that local governments would provide land for the new site location, and DGHS would construct the infrastructure (roads, water supply, sanitation, and electricity) for new sites financed by loan proceeds. Under component 2, the project originally allocated $8.6 million for starter house loans, with the intension that these loans would be provided to 25,000 poor families to finance the construction of new houses. This suggests an average loan amount of $344 per family. However, during project implementation, it became apparent that the starter house concept was unlikely to draw interest from the urban poor. With the estimated $344, only low-quality houses could be built, consisting of wooden walls, earth floor, and very limited sanitation facilities—not meeting the minimum requirements for healthy houses set by MPW. 28. Therefore, ADB and DGHS agreed not to apply the starter-house concept. Instead, they agreed to build houses that meet MPW standards.28 DGHS estimated that each house would cost about Rp40 million (about $4,700). As the relatively high interest rates offered by PNM through its LFI29 under component 2 discouraged communities from taking loans under the project, local

26 Cities were required to provide counterpart funds for the financing of civil works. The ADB loan proceeds were

ongranted to cities and channeled through the annual budget allocation for budget implementation of the Ministry of Public Works.

27 Reallocation from the unallocated category. 28 The minimum size was 27 m2 with brick walls and ceramic tiles. 29 The interest rates offered by LFIs were about 30%. Under the project procedures, PNM was not allowed to lend the

funds directly to beneficiaries (but through LFIs).

7

commercial banks were invited to provide loans to finance new houses under the NSD component.30 29. At the beginning, eight cities31 proposed to participate in the NSD program. However, after verification of land availability32 only three cities could be included. To ensure that the new houses are affordable for poor families, the participating cities granted or subsidized land for the house plots.33 The provision of infrastructure (water supply, roads, drainage) was mainly financed by the project.34 In close collaboration with the land office (BPN), the city administrations issued land titles under the name of beneficiaries; these were essential as collateral to receive credits from commercial banks. 30. To build the houses, the cities selected private developers to prefinance the house construction. After house construction was finalized and selected beneficiaries signed credit agreements with local commercial banks, the developers received payments from local banks on behalf of the beneficiaries. The beneficiaries are poor families working in the informal sector and do not receive fixed monthly salaries, such as fisher folk, construction workers, and ojek35 riders. Loans provided from the banks will be repaid within 10 to 15 years with interest rates ranging from 4.5% to 11% per annum.36 Appendix 3 provides the detailed selection criteria for beneficiaries and the detailed infrastructure built under the NSD program in the three cities. 31. At project completion, in total, 405 houses were built with an average house size of 27 square meters (m2) and land size of 100 m2. On average the house price was Rp42 million (about $4,900). In addition to providing appropriate and affordable houses to low-income families, the reformulated NSD program was able to establish a new collaboration scheme between central and local governments, private developers, and local commercial banks to build and finance new housing sites for poor urban families that are usually not bankable.

4. Component 4: Strengthen Sector Institutions to Deliver the Program 32. This component included a range of capacity-building activities for local governments, LFIs, and civil societies to (i) undertake pro-poor spatial planning and shelter strategy development, (ii) finance shelter for the poor, (iii) upgrade and develop sites for the poor, and (iv) establish self-help groups. 33. In general, all targets under this component were met. Financed by the project, 200 local government staff completed master’s degrees; eight DGHS staff received scholarships for international master’s degrees; and about 200 local government staff completed short course diploma programs in urban settlement and management. More than 15,000 community members and 3,200 staff from city and local government administrations received training on the community-

30 In normal conditions, banks are unlikely to agree to provide credits to poor and informal families. However, with the

involvement of and guarantees from the participating cities, banks finally agreed to provide credit. Local banks offered lower interest rates (about 10% per annum) compared with 30% from LFIs.

31 Bau-Bau, Bengkulu, Bone, Buton, Makassar, Palembang, Polewali Mandar, Serang. 32 The key criteria were (i) lands should be owned by local governments with land title as proof, and (ii) the cities should

be willing to allocate land for the NSD. Endorsement from the local house of representatives was also required. The land title will then be split for beneficiaries.

33 In Bone and Polewali Mandar, land was provided free of charge. In Bau-bau, the city charged beneficiaries 50% of the land price.

34 In addition to providing land, the three cities contributed to the construction of infrastructure. 35 Rented motorcycle used for local transportation within neighborhoods. 36 In the first year, the interest rate was low as local banks were able to apply the interest subsidy program provided for

low-income families under the State Ministry of People’s Housing program. In the second and following years (until the sixth year), the subsidies are to be reduced and in the seventh year, the interest rate will be at the market rate, i.e., 11%.

8

driven development (CDD) approach, and attended national and local workshops on, for instance, shelter strategy development, project management, performance evaluations, and the operation and maintenance of project facilities. The capacity-building activities promoted under the project have created strong community ownership and active community participation in planning and implementing neighborhood upgrading plans. Appendix 3 provides details on the achievements under this component. C. Project Costs

34. At appraisal, the project cost was estimated at $126.5 million, comprising $4.6 million (3.6%) for component 1, $17.1 million (13.5%) for component 2, $89.7 million (70.9%) for component 3, $9.2 million (7.3%) for component 4, and $5.9 (4.7%) for interest during construction. The foreign exchange cost accounted for $14.6 million, or about 11.5% of the total project cost. ADB was estimated to contribute 70% of the project costs through the provision of a $68.6 million loan from its ordinary capital resources and an SDR13.89 million (about $20.0 million) loan from the Asian Development Fund. At project reformulation, the allocation of loan proceeds for component 2 was reduced to $1.5 million. This resulted in the reduction in the project cost to $110.9 million. 35. At project completion, the total project cost was reduced to $107.9 million comprising $4.2 million for component 1, $0.9 million for component 2, $88.4 million for component 3, $9.1 million for component 4, and $5.3 million for interest during construction. The actual project cost reduced the ADB portion from $88.6 million (70% of the total project cost) to $73.0 million ($51.9 million from ordinary capital resources and $21.1 from the Asian Development Fund) accounting for about 67.7% of the total project costs. The significant increase was noted for the share of beneficiaries, which increased from $1.7 million at appraisal to $2.92 million. The increases in beneficiary contributions under the NSD and upgrading component were the main factors in the increase of beneficiary portion to the total project costs. Appendix 4 provides detailed project costs and financing plans. D. Disbursements

36. In total, $73.0 million of the loan proceeds were disbursed or about 99.3% of the revised loan amount of $73.55 million. The RRP does not provide a disbursement schedule. To facilitate disbursement of the loan proceeds, two imprest accounts were provided: (i) to facilitate implementation of the civil works (the upgrading and NSD), and (i) to distribute the housing microcredits. The first imprest account was managed by DGHS, while the second by PNM. 37. Communities implemented most of the civil work contracts (averaging $30,000). Thus the use of the imprest account helped accelerate the disbursement of loan proceeds. DGHS and PNM demonstrated efficiency in managing the imprest account, with no significant issues during project implementation in the management of the imprest accounts. Appendix 5 provides details on the disbursement of loan proceeds, while Appendix 6 provides the funds channeling mechanism. E. Project Schedule

38. At appraisal, project duration was estimated to be 6 years, starting from the first quarter of 2004. The first 6 months were allocated for (i) finalizing preliminary RP4Ds for the six pilot cities, and (ii) implementing NUPs in these cities. Work in the nonpilot cities was expected to start from 2005 and be completed by 2008. The NSD was to be completed during the last 3 years of the project. 39. Due to delays in declaring project effectiveness and in the issuance of the government annual budget and expenditure, actual project implementation started in late 2005. Because of

9

these delays, and to avoid further delays, the concept of six pilot cities was not implemented. In 2005, the first year of project implementation, 14 cities implemented the neighborhood upgrading activities. All project activities except for the NSD, were completed in 2009, 1 year late compared with the original target of 2008. At the end of 2009, construction of infrastructure in the NSD sites had just started. Difficulties in securing land for the NSD sites, the need to reformulate the NSD approach, and the late start of NSD implementation37 led to delays. To facilitate NSD completion, the project was extended by 1 year, until 31 December 2010. Appendix 7 provides a comparison between the original and actual project schedules. F. Implementation Arrangements

40. The implementation arrangements as outlined in the RRP were generally followed. DGHS in MPW was the executing agency. Each participating city established a local coordinating office (LCO), which was tasked with coordinating and implementing project activities in their cities.38 Selected communities established community self-help groups to plan and implement community investments and to operate and maintain the built facilities. PNM was selected as the central financial institution (CFI) to implement component 2, and during implementation signed subloan agreements with 12 LFIs. A financial project management unit was established at PNM. Appendix 8 provides the implementation arrangements. G. Conditions and Covenants

41. Most of the loan covenants were complied with. Covenants related to (i) active roles of the project steering committee, (ii) coordination between cities and the CFI, (iii) proper operation and maintenance of built facilities, and (iv) timely provision of counterpart funds, were rated as partly complied with. The project steering committee was established, but did not meet regularly as required. Coordination between cities and the CFI was weak. Delays and sufficient provision of counterpart funds, particularly in component 1, have delayed completion of the RP4Ds. The status of compliance with the loan covenants is given in Appendix 9. H. Consultant Recruitment and Procurement

42. In general, the consultant selection process adopted by the executing agency was satisfactory. The original project design provided for 11 consulting services packages.39 During implementation, two additional consulting packages were recruited, i.e., an individual consultant contract to help the executing agency prepare and implement a gender strategy and action plan, and a consulting team to implement a public campaign to promote healthy hygiene behavior.40 The recruitment followed ADB’s Guidelines on the Use of Consultants, and was completed within a reasonable time. The RRP indicates that the project would provide about 105 person-months of international consultants and 855 of national consultants and 1,631 person-months of facilitators. At project completion, 34 person-months of international consultants and 2,611 of national consultants were contracted. The project also engaged facilitators for 7,010 person-months. Significant increases in the number of person-months of national consultants and facilitators were due to (i) the need for international inputs reduced and the allocation was reallocated to the national consultants, (ii) additional activities i.e. the public campaign and (iii) the increase in the

37 The NSD concept was deeply discussed in mid-2008, a year late compared with the original 2007 schedule. 38 In line with the project design i.e. decentralized project investment. 39 The national management consultant, nine packages of oversight consultants, and procurement consultant. The

facilitators were contracted under the nine oversight consultant packages. 40 Mobilization of the public campaign consultant was also intended to ensure sustainable use and maintenance of the

facilities provided, particularly related to sanitation and solid waste management (toilets and temporary waste disposal sites, waste bins).

10

number of neighborhoods (under component 3). No additional costs were required to cover the above increases.41 Appendix 10 provides a list of consulting packages under the project.

43. Communities implemented most of civil works under the project. Contractors were recruited mainly to implement infrastructure construction under the NSD program and additional neighborhood upgrading. The recruitment process followed national procurement procedures, which ADB has acknowledged. The recruitment was considered satisfactory. No significant problems were encountered in preparing tender documents and evaluating bids. I. Performance of Consultants, Contractors, and Suppliers

44. Overall, consultant performance is rated partly satisfactory. The consultant contributed to delays in project implementation. In particular, the prolonged absence of the national housing and urban development specialist and weak performance of most of the regional urban planning specialists contributed to delays in component 1 and the NSD subcomponent. Frequent changes in regional experts also contributed to delays in overall project implementation. Weak contract management by the consulting firms and difficulties in finding suitable candidates were the reasons for the frequent changes. DGHS replaced weak-performing consultants. However, the replacements were generally not any better.42 Frequent substantial contract revisions, reallocations, and numerous resignations and change of staff, in particular at the regional level, are evidence of weak contract management by the consulting firms. The consultant implementing the public campaign was not able to fully meet the objectives. Field observations at neighborhoods included under the public campaign program indicated that the campaign had little impact. Discussions with community members indicated that the consultants failed to involve all levels of community members. 45. The performance of contractors recruited for infrastructure development in the new site locations and additional neighborhood upgrading was considered satisfactory in terms of quality of work and delivery schedules. J. Performance of the Borrower and the Executing Agency

46. The performance of the borrower is rated partly satisfactory. The delays in declaring effectiveness of the project were mainly due to delays in completion of the subloan agreement between MOF and PNM. Delays in (i) establishing the imprest account for component 3, (ii) issuing MOF’s circular letter to establish fund flow and disbursement procedures; and (iii) signing ongranting agreements between MOF and the participating local governments to finance the civil work contributed to delays in project start-up and implementation. Frequent delays in the issuance of the government’s annual budget and expenditure and subsequent release of counterpart funds for cities contributed to the project implementation delays. 47. The executing agency’s performance is rated satisfactory. Delays in the issuance of the government annual budget and expenditure and insufficient provision of counterpart city funds were beyond its authority. At project start-up, the executing agency’s performance, particularly in managing consultants, was weak. However, it was able to improve its performance during project implementation, and carried out appropriate actions to resolve issues and expedite project progress.

41 Consulting services were financed from Loan 2073(SF)-INO. The original loan amount allocated under this loan was

SDR18.89 million. At project completion SDR13.71 million was disbursed. 42 The executing agency indicated that difficulties in finding good quality consultants were most likely because of the low

remuneration rates offered by these firms.

11

K. Performance of the Asian Development Bank

48. Overall ADB’s performance is rated satisfactory. However, ADB’s contribution to project design was considered partly satisfactory. In particular, overambitious targets and incorrect assumptions caused implementation issues under component 2 and the NSD subcomponent. This resulted in project reformulation to adjust project targets and scope. Interestingly, the delays and issues that occurred during project implementation were caused by the potential risks identified at appraisal. Having known the complexities of a project of this nature, its inherent challenges, and the potential risks, project preparatory work should have included measures to address key issues before commencing project implementation. For example, the availability of the land parcels needed for the NSD program should have been clearly identified. Mitigation measures to address risks associated with the implementation of component 2 were lacking in the project design. An appropriate assessment of affordable interest rates for poor families and an analysis of the potential demand for housing credits among poor families were not conducted. Insufficient provision of counterpart funds was also identified as a risk. However, no clear measures for mitigating these risks were indicated. 49. The project was delegated to the Indonesia Resident Mission in 2005. The government appreciated the delegation as this made communication and coordination between ADB and government easier and simpler. During the 6-year implementation period, ADB fielded 14 project administration missions (1 inception mission, 8 review missions, 1 in-depth review mission, 3 special project administration missions, and 1 midterm review mission) for a total of about 265 staff person-days or about 44 staff person-days per year. The missions mainly comprised project implementation specialists and project officers. The frequency and number of staff-person days per mission appeared to have been sufficient for effective supervision. ADB took the initiative to adjust the NSD subcomponent and proactively provided advice to establish cooperation agreements between private developers, commercial banks, and local governments, which triggered the successful implementation of the NSD in three cities. With regard to consultant management, ADB assisted DGHS in the performance evaluation of consultants and provided advice on remedial actions needed to improve consultant management by DGHS. As a result, consultant management by DGHS was improved. 43 ADB provided DGHS with access to its consultant database to find suitable consultants to replace nonperforming consultants. To expedite completion of component 1, ADB and DGHS increased the project resources by recruiting seven additional urban development specialists to help cities complete their RP4Ds.

III. EVALUATION OF PERFORMANCE

A. Relevance

50. The project design was in accordance with (i) the government’s poverty reduction and shelter strategies44 to be implemented through decentralized investment projects, and (ii) ADB’s shelter sector strategy at the time of appraisal, and continues to be so. With the urban population expanding rapidly over the past 10 years, many Indonesian cities face deteriorating urban infrastructure and services for transport, water supply, sanitation, and waste management; and inadequate housing and worsening environmental conditions. The project design recognized that urban issues require integrated approaches that specifically target the poor, and encourage the involvement of local governments and communities in poor neighborhoods. Thus, the design emphasized strengthening the capacity of and coordination among shelter sector stakeholders

43 Consultant performance was discussed during all project review mission and noted in the review mission

memorandums of understanding. 44 Including the National Urban Poverty Reduction Strategy Framework and the 2002 Ministerial Decree on Policies and

Strategies for Housing and Settlements.

12

such as MPW, spatial planning divisions at city and district administrations, nongovernment organizations, and community organizations in planning and implementing neighborhood upgrading investments. 51. Components 1, 3, and 4 are rated relevant. Although the provision of microcredits for housing improvement under the project was in accordance with government and ADB strategies, the design for this component, which resulted in unaffordable high interest rates, has made this component partly relevant. Overall, the project is rated relevant. B. Effectiveness in Achieving Outcome

52. The project was approved in December 2003, and therefore was not using ADB’s current design and monitoring framework format.45 The purpose of the project was defined as “increased provision of shelter for the urban poor,” with an attached indicator specifying that at the project end more than 150,000 urban poor households would have improved shelter. In line with the project reformulation of December 2008, the project purpose target was increased to 450,000 households with improved shelter. With regard to achieving the defined project purpose and meeting the revised targets, all project components are considered effective. Project activities have resulted in improved livelihoods of poor neighborhoods and improved shelter for about 800,000 poor households (about 3.1 million poor people). Thus, the targets of 450,000 households as specified in the reformulated project framework were exceeded. C. Efficiency in Achieving Outcome and Outputs

53. The process of achieving the project outcome/purpose was efficient. The expected outcome was achieved within the estimated project costs. The project was extended for twelve months to accommodate completion of the new site development, which was delayed due to difficulties in acquiring lands and obtaining financing for house construction. This delay, however, did not require additional costs. The economic and financial reevaluations indicate that the project costs have been offset already during the 5 years of project implementation. The economic and financial reevaluations is in Appendix 11. 54. The efficiency in attaining achieved outputs under the four project components varies and can be described as follows:

55. Component 1. At project completion all participating 32 cities completed their pro-poor RP4Ds, as expected by the project design. However, the process was slow and required additional consultant inputs in some cities. Furthermore, six cities have not legalized the RP4D, thus sustainability of this planning effort and political commitment to implement pro-poor spatial planning is uncertain in these cities. In addition, coordination between the National Land Agency and other relevant agencies remains weak in some cities. Considering this, the component is rated partly efficient.

56. Component 2. At project completion, 2,164 beneficiaries (families) had utilized microcredits under this scheme for a total of Rp6.9 billion ($0.76 million), 12 LFIs participated, and 80 saving groups were established. The revised targets were generally met. However, considering the very limited impact of the component on the establishment of a housing improvement financing system for poor families and the substantial downsizing of component scope, the component is rated partly efficient.

45 The design summary of the project logical framework comprised goal, purpose, and four components; instead of the

current design and monitoring framework structure of impact, outcome, and outputs.

13

57. Component 3: neighborhood upgrading. Implementation of the upgrading subcomponent, which absorbed about 80% of the total project cost, is rated highly efficient. All targets under this subcomponent were exceeded and about 800,000 urban poor households (about 3.1 million poor people) have benefited from the project. Communities appreciate the built facilities and in general properly operate and maintain them. The appreciation of project beneficiaries was also demonstrated by significant community contributions, which were not anticipated at project design.46 Due to the successful implementation of this subcomponent and the increasing demand, additional funding was provided during project reformulation in 2008 to broaden the scope for upgrading activities in poor neighborhoods. 58. Although the implementation progress of infrastructure works was slightly hampered in some cities due to delays in providing local counterpart funding, all civil works contracts were completed before the original loan closing date of 31 December 2009.

59. Component 3: new site development. Although the targets under this component could not be achieved, the government considers the establishment of new sites in three cities and the construction of new homes for 405 poor families who could move out of slum areas government as a major success of the project. Achievements to draw together central and local governments, private developers, and local banks to establish and finance new housing sites for poor families will be used as fine examples to be replicated in other cities. Given these results, the component is rated partly efficient. Thus, the overall component 3 (combining the upgrading and NSD subcomponents) is rated efficient.

60. Component 4. This component included a range of capacity-building activities for local governments, LFIs, and civil society. All targets under this component were met. DGHS confirmed that master’s degree programs and short course programs provided under the project helped MPW strengthen managerial and technical skills and the capacity of key staff to undertake pro-poor spatial planning and shelter strategy development. The capacity-building activities were organized in an efficient manner and have created strong community ownership in planning and implementing upgrading activities and contributed to the successful implementation of civil works. Given these results, the component is rated efficient. D. Preliminary Assessment of Sustainability

61. Indications that investments made under the project are relevant to the communities and city administrations are significant, thus the sustainability of the upgraded infrastructure and the established new housing sites is rated likely. Even though the RP4Ds were completed late, the integration of RP4Ds into the medium-term plans of 26 participating cities is encouraging and government commitment to support all project cities in the integration of RP4Ds and strengthening of BP4D indicate that sustainability of the Improved Planning and Management Systems to Upgrade Sites and Establish New Ones for the Urban Poor is likely. The project housing microcredits have had very limited impact on improving access to shelter finance for the urban poor. Thus, the microcredit sustainability is less likely. E. Impact

62. The project has successfully contributed to (i) improving the livelihoods and welfare of more than 3 million people in 800 poor neighborhoods in 32 cities, (ii) reducing poverty, (iii) improving hygiene, and (iv) establishing healthier environments in slum areas. The project has contributed to creating significant positive economic, social, environmental, and institutional impacts. 46 The total community contributions were estimated at $0.9 million. The RRP did not estimate any community

contributions for this subcomponent.

14

Improvements of access roads in poor neighborhoods provide safer, faster, and better accessibility to and from people’s houses. Better drainage reduces flooding, which reduces destruction of property and prevents groundwater contamination. Participation in civil works to build infrastructure created short-term employment for poor community members, which increased their incomes.47 Active community participation in the preparation of upgrading and investment plans and construction of infrastructure contributed to strengthening local capacity for community planning, development, and good governance.

63. In particular, the project has promoted good governance through (i) transparent planning, procurement, disbursement, and implementation based on jointly agreed procedures; (ii) well-defined institutional arrangements; and (iii) transparent mechanisms for transferring investment funds to community-managed bank accounts. Participatory planning and implementation of upgrading activities contributed to positive gender impacts for women and men. 48 Improved neighborhoods contribute positively to the life of families, women, and children; and help to enhance their economic productivity. Appendix 12 provides the assessment on project impacts related to gender aspects of the project.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

64. Based on the review of its relevance, effectiveness, efficiency, and sustainability, the project is rated successful. However, further support is required to strengthen (i) pro-poor spatial planning and the integration of community-driven neighborhood upgrading into overall city spatial planning, and (ii) political commitment to implement pro-poor spatial planning and allocate sufficient budget.

B. Lessons

65. The project produced some important insights for neighborhood upgrading interventions to be considered for future project designs. Involving beneficiaries at all stages of planning and implementation of upgrading activities and promoting inclusive community empowerment are key to ensuring pro-poor investments and sustainability, including (i) community control of decision-making over resources and investment choices; (ii) simple and transparent funds flow arrangements with direct transfers to community accounts; (iii) efficient facilitation support, including social facilitators to ensure full community participation, and engineering facilitators to oversee technical quality of civil works; (iv) strong accountability procedures, such as public disclosure of budgets and contracts; (v) community management of funds and procurement matters; and (vi) training for communities in establishing effective mechanisms to operate and maintain new infrastructure. Qualified and experienced community facilitators and sufficient time for community empowerment activities are important to ensure that community members are sufficiently involved in prioritizing their needs, developing investment proposals, and taking decisions. 66. Under the decentralization law, the national government no longer exercises administrative control over regional governments. Likewise, the provincial government does not have administrative control over district governments. Subsequently, local coordinating offices are under the administrative supervision of local governments, thus establishing appropriate city

47 The project created about 4.5 million days of short-term employment, with average salary of about Rp40,000/working

day ($4.4/working day). 48 The gender equality results indicate that even though for some components the gender action plan targets were not

met, women’s participation in all stages of project activities was improving. Many women benefited from the project.

15

management and monitoring arrangements is essential to exercise administrative and technical supervision and provide support to community neighborhoods. 67. Covering a vast number of cities spread over almost the entire country may not be an effective way of maximizing the use of resources. A focused geographic approach would have provided flexibility for designing better social and economic benefits for the beneficiaries. The effectiveness of the investment in generating development impact, as well as project efficiency, would have been improved. C. Recommendations

1. Project Related

68. Strong emphasis needs to be placed on the establishment of adequate operation and maintenance mechanisms to ensure sustainability of infrastructure investments. Effective supervision and guidance is required from district and city administrations, consultants, and facilitators to ensure that communities (i) understand the importance of systematic maintenance, (ii) receive appropriate technical advice on maintenance issues and estimating maintenance costs, and (iii) establish appropriate mechanisms to finance and regularly conduct maintenance activities. 69. To advance larger communities and promote integrated approaches, increasing the investment amount in each community and/or neighborhood could be increased. During the selection of project neighborhoods, more attention should be given to ensure that the agreed selection criteria are applied and to avoid political interventions. 70. Clearly defined landownership and/or political commitments to provide public land for establishing new housing sites for poor communities are essential preconditions for NSD. Land titles are necessary prerequisites to be used as collateral to secure housing microcredits for poor families. To facilitate the public–private partnership approach, encouraging private developers to prefinance and build social housing schemes, and commercial banks to provide loans to poor families, concerted awareness campaigns, and well-organized advocacy measures are useful. 71. A microfinance scheme for housing development could be considered as a long-term development tool, provided that interest rates are affordable to poor families. A careful demand assessment during project preparation should guide the viability of potential microfinance schemes to be included in a project design. 72. The project performance evaluation report is recommended to be carried out 2 years after this project completion report

2. General

73. The advance recruitment of consultants should be provided in development projects to facilitate start-up operations and establish the necessary project management systems. This is to avoid unnecessary delays in implementation, particularly if training is to be conducted to equip project staff with the appropriate project implementation skills. 74. Insufficient and delayed provision of counterpart funds by governments creates subsequent delays in project implementation. To accelerate project implementation and disbursement, financing of particular cost categories should not be split between ADB and government financing. Straightforward financing of cost items by either ADB or the government would improve implementation and disbursement.

16 Appendix 1

PROJECT LOGICAL FRAMEWORK

Design Summary

Performance

Indicators/Targets

Revised Performance

Indicator/Targets

Assumptions

and Risks

Accomplishment Goal Increase the assets, well-being, and income opportunities for the urban poor throughout Indonesia

Upward trend in housing finance to the poor as percentage of mortgage finance Increased percentage of households with land or building-use permit titles Decreased area covered by “heavy slums” in participating local governments

Increased percentage of households with land or building-use permit titles Decreased area covered by “heavy slums” in participating local government areas

More than 1,000 households provided with land or building permit titles About 6,830 hectares of urban slum areas in 32 cities were upgraded

Purpose Increased provision of shelter for the urban poor

Over 150,000 urban poor households with improved shelter, and 40,000 by midterm review

445,000 urban poor households with improved shelter, and 370,000 by midterm review

The central government is committed to housing for the poor

The project benefited about 800,000 urban poor households in 803 neighborhoods (kelurahan)

Components Improved planning and management systems for upgrading and new site projects for the urban poor Improved access to shelter finance by the poor through CFIs and LFIs or branches

Shelter development strategies prepared in standard format in 30 local governments, including 20 prioritized upgrading and new site subprojects by midterm review At least 30,000 households request finance At least 800 savings groups formed, 300 by midterm review Up to 30 participating LFIs

Shelter development strategies prepared in standard format in 30 local governments, including 20 prioritized upgrading and new site subprojects by midterm review At least 1,500 households request finance At least 40 savings groups formed Up to 15 participating LFIs

Local governments are committed to housing for the poor LCOs are established and function effectively

Enough land is available for new site development

No systemic problems affect CFIs and LFIs

All 32 participating local governments completed their RP4D and 26 cities have endorsed their RP4D 32 LCOs established and functioning well 2,164 families received microcredit from 12 LFIs 80 savings groups formed 12 LFIs participated in distributing microcredit facilities

Appendix 1 17

Design Summary

Performance

Indicators/Targets

Revised Performance

Indicator/Targets

Assumptions

and Risks

Accomplishment Upgraded poor neighborhoods and new site developments for the poor, with a sustainable maintenance regime

Proportion of loans in arrears Proportion of loan applications approved Proportion of applications from, and approvals to, households below the 35th percentile At least 300 neighborhood upgrading plans completed, including arrangements for maintenance; 150 by midterm review At least 100 upgrading subproject investment proposals received; 50 by midterm review At least 500 upgrading civil works contracts let; 200 by midterm review At least 100,000 housing lots improved; 30,000 by midterm review At least 10 new site subproject investment proposals received; 3 by midterm review At least 10 new site civil works contracts let; 2 by midterm review Poor people express satisfaction with new

At least 800 neighborhood upgrading plans completed, arrangements for maintenance At least 100 upgrading subproject investment proposals received At least 2,000 upgrading civil works contracts let At least 100,000 housing lots improved; 30,000 by midterm review At least 10 new site subproject investment proposals received; 3 by midterm review At least 10 new site civil works contracts let; 2 by midterm review Poor people express satisfaction with new

Nonperforming loan rate was less than 1% All loans were for low-income community (the 35th percentile) 803 NUPs completed More than 800 upgrading subproject investments received and implemented More than 3,000 upgrading civil works contracts awarded and implemented by local community groups in 32 cities More than 800,000 housing lots were improved 8 new site development proposals were received; however, after verification of the land availability, 3 proposals were developed covering 405 housing lots 7 civil works contracts were awarded under 3 new sites subprojects During review and PCR missions, beneficiaries

18 Appendix 1

Design Summary

Performance

Indicators/Targets

Revised Performance

Indicator/Targets

Assumptions

and Risks

Accomplishment Strengthened sector institutions responsible for delivering the program

structures and procedures DGHS project management systems established in year 1 20 LCOs established in year 1, and 10 in year 2 Specialist lending unit with required capacity established in CFIs At least 40 people attend diploma courses 7,200 receive other training; 500 attend national workshops; 3,000 attend local workshops in housing finance, shelter planning, and implementation of community-based housing projects At least 20 housing development organizations established by project completion

structures and procedures DGHS project management systems established in year 1 20 LCOs established in year 1, and 10 in year 2 Specialist lending unit with required capacity established in CFIs At least 40 people attend diploma courses 7,200 receive other training; 500 attend national workshops; 3,000 attend local workshops in housing finance, shelter planning, and implementation of community-based housing projects At least 20 housing development organizations established by project completion

(poor people) expressed satisfaction and appreciation for the project PMU was set up in DGHS in year 1 All 32 participating local governments established LCOs in year 1 International and national microcredit specialists were mobilized 200 local government staff received short-course diploma programs; 200 government staff completed master’s degree in urban development and 8 DGHS staff received scholarships for international master’s degrees in urban and housing development 15,188 community members were trained; 800 city staff attended national workshop; and more than 3,200 attended and were involved in local workshops on housing finance, shelter planning, and implementation of community-based housing projects 29 cities established BP4Ds

Appendix 1 19

Design Summary

Performance

Indicators/Targets

Revised Performance

Indicator/Targets

Assumptions

and Risks

Accomplishment Activities To be developed by the project management unit, with assistance of operational support consultant

Inputs Component 1: Consulting services, facilitators, and training for shelter planning and management

Component 2: Funding for shelter microfinance program Component 3: Infrastructure works

35 person-months (international), 244 person-months (local), 601 person-months (local facilitators) Total: $2.5 million Diploma courses and other training Total: $1.9 million CFI loans for onlending through LFIs Total: $14.9 million Upgrading Total: $67.2 million New site development Total: $22.5 million

35 person-months (international), 244 person-months (local), 601 person-months (local facilitators) Total: $2.5 million

Diploma courses and other training Total: $1.9 million

CFI loans for onlending through LFIs Total: $1.5 million Upgrading Total: $67.2 million New site development Total: $22.5 million

The borrower does not comply with rigorous procurement practice

CFIs and LFIs operate effectively Good community support from community development center Deteriorating economic situation and lack of secure employment affect finance take-up Cities are willing to deputize and commit competent staff

3 person-months of an international expert, 414 person-months of local experts, and 650 person-months of local facilitators assigned to support cities in improving local shelter planning and management. Total: $2.5 million

Diploma courses and other training completed. Total: $1.7 million $0.76 million were distributed 803 BKMs implemented the upgrading subproject. Total costs for the neighborhood upgrading was $82.8 million.

20 Appendix 1

Design Summary

Performance

Indicators/Targets

Revised Performance

Indicator/Targets

Assumptions

and Risks

Accomplishment Component 4: Consulting services facilitators and training for site development Consulting services facilitators, and training for shelter microfinance

Consulting services facilitators and training for project implementation

10 person-months (international), 114 person-months (local), 238 person-months (local facilitators); $9 million Diploma courses and other training; $2.6 million 15 person-months (international), 134 person-months (local), 792 person-months (local facilitators); $1.5 million

Diploma courses and other training; $1.0 million

45 person-months (international), 363 person-months (local) with office equipment and other related expenses; $2.9 million

10 person-months (international), 114 person-months (local), 238 person-months (local facilitators); $9 million Diploma courses and other training; $2.6 million 15 person-months (international), 134 person-months (local) with office equipment and other related expenses; $1.5 million Diploma courses and other training; $1.0 million

45 person-months (international), 363 person-months (local) with office equipment and other related expenses; $2.9 million

Trainees proposed are acceptable to courses

The investment cost of NSD is $5.6 million 200 person-months of local experts assigned to support and train related local agencies on site development Total costs1.1 million Diploma courses and other training; $0.1 million 6 person-months of international and 380 person-months of local experts assigned to train the LCOs for shelter microfinance. Total costs $0.1 million

Diploma courses and other training; Costs: $1.0 million 25 person-months of international experts, 1,617 person-months of local experts and 6,360 person-months of facilitators were deployed to support governments and communities in implementing the project. Total $7.0 million

BKM = badan keswadayaan masyarakat (community self-help group), BP4D = Badan Pengembangan dan Pembangunan Perumahan dan Permukiman Daerah (local board for housing and shelter development), CFI = central financial institution, DGHS = Directorate General of Human Settlements, LFI = local financial institution, LCO = local coordinating office, NSD = new site development, PCR = project completion report, NUP = neighborhood upgrading plan, PMU = project management unit, RP4D = Rencana Pembangunan dan Pengembangan Perumahan dan Permukiman di Daerah (local spatial planning and shelter strategy) .

Appendix 2 21

PARTICIPATING CITIES AND DISTRICTS AND SELECTION CRITERIA 1. The Neighborhood Upgrading and Shelter Sector Project was implemented in 32 cities and districts within 17 provinces. The table lists the participating cities and districts and the number of neighborhoods in each under the neighborhood upgrading subcomponent. At project completion about 6,800 hectares of slum areas were upgraded.

List of Participating Districts and Cities and Slum Areas Upgraded Province

Cities and Districts

Number of Subdistricts

Number of Neighborhoods

Upgraded Slum Areas (hectares)

North Sumatra 1. Medan 7 18 266.31 2. Tanjung Balai 6 21 212.46 West Sumatra 3. Padang 8 20 137.13 Jambi 4. Jambi 9 46 175.03 Bengkulu 5. Bengkulu 4 17 136.05 South Sumatra 6. Palembang 2 7 182.38 Lampung 7. Bandar Lampung 3 26 277.52 Banten 8. Serang 7 27 386.35 West Java 9. Tangerang 12 43 202.00 10. Subang 11 19 191.25 11. Sukabumi 6 17 244.19 Central Java 12. Rembang 6 35 190.04 Special Region of Yogyakarta

13. Yogyakarta 13 35 246.89

West Kalimantan 14. Pontianak 5 23 345.37 East Java 15. Surabaya 21 60 402.33 16. Lamongan 27 60 296.32 West Nusa Tenggara 17. Mataram 3 23 308.18 South Sulawesi 18. Makassar 11 43 308.63 19. Gowa 3 13 90.40 20. Jeneponto 9 23 100.91 21. Bulukumba 2 9 112.26 22. Bone 3 16 165.24 23. Luwu 4 11 72.75 24. Palopo 3 8 150.76 25. East Luwu 1 13 214.48 West Sulawesi 26. Polewali Mandar 6 11 308.52 Central Sulawesi 27. Palu 4 35 363.00 South East Sulawesi 28. Kendari 8 27 195.33 29. Kolaka 2 14 88.68 30. Muna 8 24 94.84 31. Buton 12 33 212.16

32. Bau Bau 6 26 122.00 Total 232 803 6,799.76

Source: DGHS. 2010. Project Completion Report Neighborhood Upgrading and Shelter Sector Project. Jakarta

22 Appendix 2

2. Selection criteria. The Directorate General of Human Settlements (DGHS), the executing agency, invited districts and cities to participate in the project; 57 responded. After confirmation and verification, DGHS prepared a long list of 42 cities and districts. To determine if a local government is eligible for inclusion in the project, DGHS applied the following criteria: (i) has significant slum areas suitable for upgrading; (ii) is classified as a provincial capital, metropolitan city, or large or medium-sized urban area; (iii) has financial capacity to provide matching grants required for the project; (iv) can technically and administratively build institutional capacity and manage subprojects; and (v) confirms that it has the capacity and willingness to contribute matching grants to the subproject; (vi) is able to generate surplus income for the next 3 years; (vii) provides documentary evidence of endorsement of the local government assembly and chief executive; (viii) has no adverse findings from banks and suppliers; and (ix) has or commits to establish a housing unit. Based on these criteria, DGHS concluded that 32 local governments within 17 provinces were to be included in the project. 3. To determine the neighborhood covered under the upgrading program, the following selection criteria were applied: an area is eligible for a neighborhood program if it has (i) inadequate housing and services, as evidenced by the endorsement of the regional development planning agency; and (ii) interest in and commitment to the project, expressed by the legal formation of a project community-based organization or, if already established under World Bank’s UPP, the community-based organization provides a document expressing interest and willingness to participate, endorsed by representatives of all households in the area concerned.

Appendix 3 23

PROJECT OUTPUTS

A. Component 1: Improved Planning and Management Systems for Upgrading and New Site Projects for the Urban Poor

1. Target output: Shelter development strategies prepared in standard format in 30 local governments, including 20 prioritized upgrading and new site subprojects by midterm review. 2. Project result: 32 participating local governments completed their spatial planning and shelter strategies (RP4D) and 26 cities endorsed the planning documents (Table A3.1).

Table A3.1: Status of Pro-Poor Spatial Planning and Shelter Strategies

No. City, District Establishment

of BP4D

Database (year

completed)

Academic Text (year completed)

Legalization Status (year

endorsed) RP4D (year

implemented) 1 Rembang Yes 2005 2008 2009 2010 2 Pontianak Yes 2005 2008 2009 2010 3 Lamongan Yes 2005 2008 2010 2011 4 Mataram Yes 2005 2008 2008 2009 5 Gowa Yes 2006 2008 Expected in 2011 Expected in 2011 6 Jeneponto Yes 2006 2008 2010 2011 7 Kolaka Yes 2006 2007 2009 2010 8 Bengkulu Yes 2007 2008 2008 2010 9 Bandar Lampung Yes 2007 2008 2008 2010

10 Subang Yes 2007 2007 2010 2010 11 Makassar Yes 2007 2009 2010 2011 12 East Luwu Yes 2007 2007 2009 2009 13 Kendari Yes 2007 2007 2010 2010 14 Muna Yes 2007 2008 2009 2009 15 Buton No 2007 2009 Not yet Unclear 16 Medan Yes 2008 2009 2010 2011 17 Tanjung Balai Yes 2008 2009 2010 2011 18 Padang Yes 2008 2008 2010 2011 19 Jambi Yes 2008 2008 2010 2011 20 Palembang Yes 2008 2008 2009 2011 21 Serang Yes 2008 2010 2010 2011 22 Sukabumi Yes 2008 2009 2009 2010 23 Yogyakarta Yes 2008 2009 2010 2010 24 Surabaya No 2008 2009 Not yet No budget 25 Bone Yes 2008 2008 2010 2011 26 Luwu Yes 2008 2008 Expected in 2011 Expected in 2011 27 Palopo Yes 2008 2008 2009 2010 28 Polewali Mandar Yes 2008 2008 2009 2010 29 Palu Yes 2008 2009 2009 2010 30 Bau Bau Yes 2008 2008 2009 2010 31 Tangerang No 2009 2010 No budget No budget 32 Bulukumba Yes 2009 2010 Expected in 2011 Expected in 2011

RP4D= Rencana Pembangunan dan Pengembangan Perumahan dan Permukiman di Daerah (local spatial planning and shelter strategy Notes: (i) The average time required for preparing the RP4D (from the completion of the database to finalization of the RP4D) was 1.6 years; (ii) The average time for legalization of an RP4D was 1.2 years; (iii) The average time for integration of the RP4D to the RPIJMP was 0.9 years. Source: DGHS. 2010. Project Completion Report Neighborhood Upgrading and Shelter Sector Project. Jakarta

24 Appendix 3

B. Component 2: Improved Access to Shelter Finance by the Poor through Central Financial Institutions and Local Financial Institutions or Branches

3. Target output: At least 1,500 households request financing; at least 40 savings groups formed; up to 15 participating local financial institutions (LFIs).

4. Project result: 2,164 families received microcredit from 12 LFIs; about 80 saving groups were established; 12 LFIs participated in distribution housing microcredit facilities.

Table A3.2: Local Financial Institutions, Beneficiaries, and Financing

No Local Financial

Institutions Subloan

(Rp million)

Date of

Subloan Signing

Number of Beneficiary

Families

Coverage of Beneficiaries

Annual Interest

Rate (from PNM to LFI)

1 Kopwan Waspada, Surabaya 500.0

11 Oct 2006 847

Low-income families in Surabaya

15.5%

2 KSU Aktual Utama, 100.0

21 Nov 2006 12

Low-income families in Palopo

and Luwu

15.5%

3 PD BPR, Lamongan

4,000.0

690.1

28 Nov 2006 106

Low-income families in

Lamongan

15.5%

4 KSP Amal Karya, Makassar 250.0

28 Nov 2006

97

Low-income families in Makassar

15.5%

5 KSP Berkat, Bulukumba (phase 1) 200.0

3 Jan 2007

30


Bulukumba

15.5%

6 BPR Eka Prasetya, Medan 1,000.0

12 Jan 2007 139

Low-income families in Medan

15.5%

7 BMT Bina Ummat Sejahtera, Rembang 1,000.0

21 Feb 2007

327

Low-income families in Rembang

15.5%

8 BPR Mustika, Kolaka 100.0

2 Apr 2007 19 Low-income

families in Kolaka

15.5%

9 KSU Millennium, Pontianak 100.0

20 Apr 2007

11

Low-income families in Pontianak

15.5%

10 KBPR Abang Pasar, Gowa 150.0

22 May 2007 18

Low-income families in Gowa

15.5%

11 KSP Berkat, Bulukumba (phase 2) 2,000.0

18 Sep 2007

289


Bulukumba

15.5%

12

Koperasi Pengusaha Sektor Informal, Yogyakarta 400.0

22 Jul 2007

260


Yogyakarta

15.5%

13 KSU Aktual Utama, 500.0

29 Oct 2008

51

Low-income families in Palopo

and Luwu

15.5%

Total 6,990.1 2,164 LFI = local financial institution, PNM = permodalan nasional madani . Note on BPR Lamongan: the original subloan was Rp4 billion. However, due to low demand the LFI distributed only Rp690,100,000. The remainder was refunded to PNM. Source: PT Permodalan Nasional Madani. 2011. Project Completion Report. Jakarta

Appendix 3 25

C. Component 3: Upgraded Poor Neighborhoods and New Site Development for the Poor with a Sustainable Maintenance Regime

1. Upgrading of Poor Neighborhoods

5. Target output (reformulated): At least 800 neighborhood upgrading plans completed, including arrangements for maintenance.

6. Project result: 803 neighborhood upgrading plans implemented in 32 cities.

Table A3.3: Constructed Infrastructure by Year of Project Implementation

Infrastructure 2005 2006 2007 2008 2009 2010 Total 1. Roads

Paving blocks/Footways (m) 45,834 300,751 322,317 232,717 101,633 79,795 1,083,047

Concrete pathways (m) 1,056 19,857 5,398 1,925 36 345 28,616

Neighborhood roads (m) 23,493 172,486 220,376 126,492 32,736 37,855 613,438

2. Drainage

Open drainage channels (m) 37,328 191,351 198,283 172,019 48,370 58,878 706,230

Coverage drainage channels (m2) 36 1,644 13,580 10,768 2,120 844 28,992

Closed drainage channels (m) 3,541 4,908 2,175 1,319 32,327 5,798 50,069

Supporting facilities 75 7,620 4,158 3,259 4,977 90 20,179 3. Solid waste facilities Household bins 245 3,755 2,560 465 342 0 7,367 Communal bins 61 874 1,506 1,903 373 506 5,223

Transportation facilities, carts 25 341 411 310 306 78 1,471

Temporary disposal sites 64 188 51 23 37 23 386

4. Sanitation facilities

Public toilets/ communal sanitation facilities 118 881 984 369 150 124 2,626

5. Water supply

Distribution pipelines (m) 0 0 0 0 0 27,751 27,751

Springs captured 0 18 6 2 2 6 47

Deep wells, drilled wells 60 181 296 167 167 30 904

Public taps 0 313 102 25 25 100 632 6. Electricity

Street lighting (locations) 494 2,848 4,074 3,932 3,932 943 16,464

Source: DGHS. 2010. Project Completion Report Neighborhood Upgrading and Shelter Sector Project. Jakarta

26 Appendix 3

2. New Site Development 7. The project has developed mechanisms for financing land and services including construction of houses. The participating local governments were responsible for providing land where the private developer could build the houses. These plots of land were then granted to the intended beneficiaries. The private developers were responsible for house construction and the local bank for providing the credit scheme to finance the house construction. Land should be provided as close as possible to centers of employment and work in order to offer viable livelihood opportunities to the intended beneficiaries. The new site development (NSD) should also be close to existing infrastructure and service networks to reduce the cost of extending these networks.

8. Plot and house sizes were kept small (but still within the agreed standard issued by the Ministry of Public Works) so that more people can be accommodated and costs kept low. The local government is also responsible for processing land titles under the name of each beneficiary in collaboration with the local land office. The local bank and each beneficiary signed a housing credit agreement after the land title is issued. The local commercial bank then provided payments to the private developer who constructed the houses after the signing of housing credit agreements and completion of infrastructure facilities. The utilities and infrastructure development under the NSD become the responsibility of the government not the homebuyer. The Neighborhood Upgrading and Shelter Sector Project provides budget from ADB’s loan proceeds for the construction of basic infrastructure facilities for the sites, such as roads and drainage system, water supply system, solid waste management facilities, and electricity. The local government is responsible for providing budget for the construction of public facilities including public hall, schools, and social amenity facilities. These approaches assumed that if infrastructure and utility components were subtracted from the cost structure of housing development, the cost of the house could be significantly reduced. 9. The prequalification process or selection of potential beneficiaries under the NSD follows the following criteria: (i) the poor family does not have housing or shares a house with other families (exceeding normal conditions); (ii) the family’s income ranges from Rp1.0 million to Rp2.5 million per month with work locations close to the sites; (iii) the project target locations are prone to flooding, fire, or other conditions that do not support a proper living area; and (iv) the beneficiary is married and/or has a family. Women-headed households and other vulnarable households were given priority during the selection process. 10. Since the number of identified potential poor urban families who were willing to benefit from the NSD exceeded the number of houses developed in each city, selection of the final beneficiaries was done through several steps designed to ensure transparency in the selection process and smooth implementation of the program. The local government held a socialization, supported by household groups in each target village, to identify if the area has slum neighborhoods with very poor conditions and cannot be upgraded. The invitees were low-income families, without houses. The government described the concept of the new sites, including the requirement of the beneficiaries to pay for the house including the house credit schemes. Then the administrator of each of the target villages processed the registration of potential beneficiaries interested and willing to participate to the NSD. Based on number of houses to be constructed, the local government developed additional criteria for the final selection of the beneficiaries and submitted the results to the local bank for the final verification process to fulfill the bank’s administration conditions for signing of the housing credit agreement.

Appendix 3 27

11. In Bone, the local government provided 2.6 hectares in Torro neighborhood; 143 houses for poor families were constructed. The house price was Rp40.3 million for a 27 square meter (m2) house with a plot size of 74 m2 The investment cost50 for the Bone NSD was Rp13.3 billion ($1.6 million), comprising Rp5.8 billion ($0.6 million) from loan proceeds and Rp7.5 billion ($0.9 million) from government counterpart funds and beneficiaries. The price of the house does not include the price of land as the land is granted from the local government. All 143 houses were sold; and the project completion review mission estimated that the owners occupied about 60% of the houses. Electricity meters were installed in all new houses. Street lighting was provided and water meters installed. 12. In Polewali Mandar, 130 houses were constructed on 2 hectares. The investment cost for Polewali Mandar NSD was Rp14.3 billion ($1.5 million), comprising Rp6.8 billion ($0.8 million) from loan proceeds and Rp7.5 billion ($0.7 million) from government counterpart funds and beneficiaries. All of the main infrastructure works financed by loan proceeds were completed including 2,970 meters of access roads, 2,460 meters of open drainage channels and 1,680 meters of closed channels, 1,780 meters of water distribution pipelines equipped with 4 fire hydrants, a temporary disposal site with a handcart, 130 individual septic tanks, and 27 street lights including 130 electricity meters in houses. The house price was Rp41.5 million and house size 27 m2 with plot size of 84 m2. Similar to Bone, the price of the house does not include the price of land as the land is granted from the local government. 13. In Bau-Bau city, 132 houses were constructed on 3.5 hectares. The house price was Rp44 million the house size is 27 m2 with plot size of 150 m2. In Bau-Bau, the house price is higher than in Bone and Polewali Mandar, as in Bau-Bau the land is not fully granted by the local government. The local government required that house owners pay 50% of the total land price. The investment cost for Bau-Bau NSD is Rp15.1 billion ($1.5 million), comprising Rp7.6 billion ($0.8 million) from loan proceeds and Rp7.5 billion ($0.8 million) from government counterpart funds and beneficiaries. The infrastructure built on this site includes 1,550 meters of access roads, 2,960 meters of drainage channels, 3,600 meters of water distribution pipelines including 32 cubic meters of elevated reservoir and pumping station, 2 communal septic tanks with pipe services networks, a temporary disposal site equipped with 2 communal bin containers, and 32 street lights with 132 electricity meters in houses.

Table A3.4: New Sites Development in Three Cities

City / District

Description Bone Polewali

Mandar Bau Bau

Sites and Housing Development

1. Developed areas (ha) 2.6 2.0 3.5 2. Size of plots (m2) 78 84 150 3. Size of house building (m2) 27 27 27

4. Number of constructed houses 143 130 132

5. House price (rupiah) 40,300,000 41,500,000 44,000,000 Constructed Infrastructure

50 Physical investments only, similarly for Polewali Mandar and Bau-Bau.

28 Appendix 3

1. Roads network Paving block pavement (m) 1,511 1,866 None

Asphalt pavement (hot-mixed) (m) 600 1,112 1,553

2. Drainage channels Open channels (m) 1,196 2,464 2,964 Closed channels (m) 3,023 1,683 None 3. Water supply system Elevated reservoir

capacity (m3) 18 None 32

Distribution networks (m) 2,502 1,785 3,599 Fire hydrant 11 4 5 4. Sanitation system Individual system (on-

site) 143 130 None

Communal/sewerage system (off-site) None None 2

5. Solid waste management system

Household bins container 143 130 132

Communal container - - 2

Temporary disposal site 1 1 1

- Handcart - - 1

6. Electricity network Power supply capacity (kVA) 160 150 160

Number of street lights 41 27 32ha = hectare, kVA = kilo Volt Ampere, m = meter, m2 = square meter, m3 = cubic meter Source: DGHS. 2010. Project Completion Report Neighborhood Upgrading and Shelter Sector Project. Jakarta

Appendix 3 29

D. Component 4: Strengthening Sector Institutions to Improve Service Delivery

14. The component had five outputs (Table A3.5).

Table A3.5: Outputs and Results for Component 4

Target Output Project Result DGHS project management system established in year 1

PMU was set in DGHS in year 1

20 LCOs established in year 1 and 10 in year 2

All 32 cities established LCOs in year 1

Specialist lending unit with required capacity established in year 2

All required specialists were mobilized

At least 40 people attend diploma courses; 7,200 receive other training; 500 attend national workshops; 3,000 attend local workshops in housing finance, shelter planning, and implementation of community-based housing projects

200 local government staff completed their master’s degree in urban and housing development; 8 DGHS staff completed their international master’s degree; 200 local government staff received short course diploma programs; 15,188 community members were trained; 800 local government staff attended national workshop and more than 3,200 attended and are involved in local workshop held by LCOs and the consultants

At least 20 housing development organizations established by project completion

29 cities have established BP4Ds

BP4D = Badan Pengembangan dan Pembangunan Perumahan dan Permukiman Daerah (local board for housing and shelter development), DGHS = Directorate General of Human Settlements, LCO = local coordinating office, PMU = project management unit, RP4D = Rencana Pembangunan dan Pengembangan Perumahan dan Permukiman di Daerah (local spatial planning and shelter strategy) . Source: ADB. 2003. Report and Recommendation of the President to the Board of Directors: Proposed Loans to the Republic of Indonesia for the Neighborhood Upgrading and Shelter Sector Project. Manila; DGHS. 2010. Project Completion Report Neighborhood Upgrading and Shelter Sector Project. Jakarta

30 Appendix 4

PROJECT COSTS AND FINANCING PLAN

Table A4.1: Summary of Project Costs ($ million)

Cost Estimates at Appraisal Actual Costs

Components

Foreign Exchange

Local Currency

Total Costs

Foreign Exchange

Local Currency

Total Costs

A. Improved Shelter Planning and Management 0.90 3.70 4.60 0.70 3.50 4.20 1. City Shelter Strategy 0.90 3.70 4.60 0.70 3.50 4.20 B. Improved Access to Shelter Microfinance 0.00 17.10 17.10 0.00 0.90 0.90 2. Microfinance for Shelter Development 0.00 17.10 17.10 0.00 0.90 0.90 C. Upgraded Poor Neighborhoods and New Sites 6.10 83.60 89.70 5.40 83.00 88.40 1. Neighborhood Upgrading 5.20 62.00 67.20 5.20 77.60 82.80 2. New Sites Development 6.90 21.60 22.50 0.20 5.40 5.60 D. Strengthened Sector Institutions 1.70 7.50 9.20 0.95 8.11 9.06 1. Capacity Building for Site Development 0.20 3.40 3.60 0.10 1.11 1.21 2. Capacity Building for Shelter Microfinance 0.40 2.20 2.60 0.00 0.10 0.10 3. Project Implementation Support 1.10 1.90 3.00 0.85 6.00 6.85 4. Public Campaign 0.00 0.00 0.00 0.00 0.90 0.90

Subtotal 8.70 111.90 120.60 7.00 95.50 102.56 E. Financial Charges during Implementation 5.90 0.00 5.90 5.35 0.00 5.35

Total Cost 111.90 111.90 126.50 12.40 95.50 107.91 Source: ADB. 2003. Report and Recommendation of the President to the Board of Directors: Proposed Loans to the Republic of Indonesia for the Neighborhood Upgrading and Shelter Sector Project. Manila, PCRM calculations

Appendix 4 31

Table A4.2: Financing Plan

($ million)

ADF = Asian Development Fund, CFI = central financial institution, LFI = local financial institution, OCR = ordinary capital resources Source: ADB. 2003. Report and Recommendation of the President to the Board of Directors: Proposed Loans to the Republic of Indonesia for the Neighborhood Upgrading and Shelter Sector Project. Manila, PCRM calculations

Cost Estimates at Appraisal Actual Costs Source

Foreign Exchange

Local Currency

Total Costs

Percent

Foreign Exchange

Local Currency

Total Costs

Percent

Asian Development Bank 14.60 74.00 88.60 70.0 12.40 60.60 73.00 67.6

ADF 3.98 16.02 20.00 4.02 17.04 21.06

OCR 10.62 57.98 68.60 8.38 43.56 51.94

Central Government 0.00 0.60 0.60 0.5 0.00 0.50 0.50 0.5

City and District Governments 0.00 35.10 35.10 27.8 0.00 31.39 31.39 29.1

CFIs and LFIs 0.00 0.50 0.50 0.4 0.00 0.10 0.10 0.1

Beneficiaries 0.00 1.70 1.70 1.3 0.00 2.92 2.92 2.7

Total 14.60 111.90 126.50 100.0 12.40 95.51 107.91 100.0

32 Appendix 5

DISBURSEMENTS

Loan 2072-INO ($) Category or Subloan

Original

Allocation

Last Revised

Allocation

Amount

Canceled

Net Amount

Available

Amount

Disbursed

Undisbursed

Balance 01 Civil Works 41,412.00 0.00 46,328.52 46,328.52 319.47 01A-CW (high

fiscal capacity) 1,530.00 1,335.12 0.00 1,334.07 1,334.07 1.05

01B-CW (medium fiscal capacity)

22,000.00 17,583.75 0.00 17,576.57 17,576.57 7.18

01C-CW (low fiscal capacity)

17,882.00 16,629.13 0.00 16,629,13 16,330,40 298.74

01D-CW (for new site and additional upgrading)

0.00 11,100.00 0.00 11,100.00 11,087.49 12.51

02 Credit 17,100.00 757.55 16,342.45 757.55 740.28 0.0003 Training and

Workshop 0.00 0.00 0.00 0.00 0.00 0.00


0.00 0.00 0.00 0.00 0.00 0.00


4,509.00 4,509.00 0.00 4,509.00 4,509.00 0.00


0.00 0.00 0.00 0.00 0.00 0.00

07 Front-End Fees

343.00 343.00 0.00 343.00 343.00 0.00

08 Unallocated 5,236.00 0.00 0.00 0.00 0.00 0.00 Total 68,600.00 52,257.55 16,342.45 52,257.55 51,938.08 319.47

Loan 2073(SF)-INO (SDR‘000) Category or Subloan

Original

Allocation

Last Revised

Allocation

Amount

Canceled

Net Amount

Available

Amount

Disbursed

Undisbursed

Balance 01 Civil Works 0.00 0.00 0.00 0.00 0.00 0.0002 Credit 0.00 0.00 0.00 0.00 0.00 0.0003 Training and Workshop

5,139.00 5,253.00 0.00 5,253.00 5,179.30 73.70


6,667.00 8,313.00 0.00 8,313.00 8,228.22 84.78


463.00 324.00 0.00 324.00 323.67 0.33


0.00 0.00 0.00 0.00 0.00 0.00

07 Front-End Fees

0.00 0.00 0.00 0.00 0.00 0.00

08 Unallocated 1,621.00 0.00 0.00 0.00 0.00 0.00 Total 13,890.00 13,890.00 0.00 13,890.00 13,731.20 158.81Source: ADB Loan Financial Information System.

Appendix 6 33

FLOW OF FUNDS

Imprest Accounts

Asian Development Bank (mix of ADF and OCR Loans)

Ministry of Finance

Consultants and Training Services

Directorate General of Human Settlements

Central Financial Institutions PNM

Participating Local Governments

Local Coordinating Offices

Statement-of-Expense Account

Site Upgrading and

New-Site Infrastructure Works

Imprest Accounts

Counterpart Contributions

Microloans for House Improvements and Starter Homes

Targeted Urban Poor Beneficiaries in Upgrading Neighborhoods and New Sites

Component 2: Shelter Microfinance Component 3: Upgraded

Neighborhoods and New Sites

Subsidiary Loan

Agreements

Component 1 and 4: Capacity Building and Project

Implementation Support Contribution from the central Government

funded from ADB loan proceeds

iI1 = OCR rate + front-end fee +

commitment fee

i2 = SBI + 1% p.a. or I1 + 0.5% p.a.

Local Financial Institutions

Subproject Loan Accounts

Counterpart Contributions

Subloan Agreements

Interest rate

Margin = 15.5%

Interest rate margin = 30-40%

matching grants from local governments

i = 30-40%

ADF = Asian Development Fund, BI = Bank Indonesia, BTN – Bank Tabungan Negara, I = interest, OCR = ordinary capital resources, p.a. = per annum, PNM = Permodalan Nasional Madani, SBI = Sertifikat Bank Indonesia (Bank Indonesia/Central Bank Certificate)

Loan repayment

34 Appendix 7

PROJECT IMPLEMENTATION SCHEDULE

2004 2005 2006 2007 2008 2009 2010 A. Six Pilot Cities Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Component 1

Improved Shelter Planning and Management

Component 2

Improved Access to Shelter Microfinance

Component 3

Upgraded Poor Neighborhoods and New Sites

Component 4 Strengthened Sector Institutes

B. Other Cities (26 cities)

Component 1

Improved Shelter Planning and Management

Component 2

Improved Access to Shelter Microfinance

Upgraded Poor Neighborhoods and New Sites

Component 3 New Sites Development

Component 4

Strengthened Sector Institutes

Notes: = original schedule = actual project implementation Major issues contributing to delays in declaring project effectiveness include (i) the establishment of an imprest account was hampered by the project falling under KMK 35/2003; (ii) issuance of the Ministry of Finance’s Circular Letter (Surat Edaran, SE) establishing fund flow and disbursement procedures; (iii) ongranting agreements with the participating local governments; and (iv) the designation of a project authority for project implementation as a result of KMK No606/2004, which abolished the previous concept of project manager. The physical activity started only in late 2005. Source: ADB. 2003. Report and Recommendation of the President to the Board of Directors: Proposed Loans to the Republic of Indonesia for the Neighborhood Upgrading and Shelter Sector Project. Manila, ADB. 2006-2010. Back to Office Reports of Review Missions. Jakarta

Appendix 8 35

IMPLEMENTATION ARRANGEMENTS

CFI = central financial institution, LFI = local financial institution, PNM = permodalan nasional madani Source: ADB. 2003. Report and Recommendation of the President to the Board of Directors: Proposed Loans to the Republic of Indonesia for the Neighborhood Upgrading and Shelter Sector Project. Manila

Ministry of Finance

Project Steering Committee

Interministerial Committee on Housing and

Settlements

Directorate General of Human SettlementsProject Management Unit

Capacity Building Consultants Components

1 and 4 Local Governments Local Coordinating

Offices CFI (PNM) Financial Project Management

Units

LFIs or Branches

Local Savings-and-Loan Groups Component 2: Shelter Microfinance

Community-Based Organizations Component3:

Upgrading and New Sites

Beneficiaries

Executing Agency

Implementing Agencies

36 Appendix 8

1. The Directorate General of Human Settlements (DGHS) of the Ministry of Public Works (MPW) was the executing agency for the Neighborhood Upgrading And Shelter Sector Project A project steering committee was led by the National Development Planning Board (BAPPENAS) with members from BAPPENAS, the Land Office (BPN), the Ministry of Finance, the Ministry of Home Affairs, and the Ministry of Public Works. DGHS established a project management unit (PMU). A government staff member with significant experience in project management headed the PMU, assisted by the regional coordinator of directorate settlements development, DGHS, and supported by a team of national management consultants. 2. The major tasks of the PMU were to (i) implement, manage, and monitor the overall project activities; (ii) determine eligibility of a local government to participate in the project; (iii) formulate and distribute project implementation guidelines;1 (iii) engage international and national consultants to assist the PMU in overall project management; (iv) ensure compliance with loan covenants; (v) regularly report to DGHS and the Asian Development Bank (ADB); (vi) undertake financial management including withdrawal applications, consolidate statement-of-expense accounts, and review and certify all direct payment claims to ADB; and (vii) evaluate project implementation. The PMU was responsible for ensuring that before a subproject is approved (i) community self-help groups (BKMs) are established and staffed, (ii) an adequate neighborhood upgrading plan was prepared, (iii) all beneficiaries voluntarily agreed on the plan, and (iv) the participating local government agreed in writing that a specified BKM represent the subproject community. 3. Each participating local government established a local coordination office (LCO) to coordinate city and district implementation activity for the project. LCOs liaised with CFIs and coordinate activities of LFIs or their branches, and community groups. The LCOs prepared monthly and quarterly reports for the PMU. They reviewed and endorsed the neighborhood upgrading plans prepared by the communities and worked closely with the local project manager (satker). The local satker was responsible for the management of all district contracts (community civil work contracts). The local satker signed contracts with the community groups. The contract would then be submitted to the PMU for co-signing by the PMU head. The local satker together with the LCO is responsible for the monitoring and supervision of civil works implemented by community. The satker represents the government when the facilities were handed over to the community. 4. Each participating neighborhood established a BKM. 2 It formed the basis of the neighborhood upgrading plan process, articulated community needs and aspirations, and ensured that the community was adequately represented in decision making. The BKM was responsible for (i) coordinating and leading the preparation of the neighborhood upgrading plan, (ii) preparing community contracts, (iii) facilitating the establishment of user groups, (iv) signing community contracts on behalf of community members, (v) implementing the works, and (vi) representing the community when the facilities were handed over. The user groups are responsible for the operation and maintenance of facilities. 5. The project recruited 32 city coordinators and 270 facilitators (contracted under the oversight consultants) to provide technical assistance to cities and assist communities in implementing the project. A city coordinator had the responsibility to manage, supervise, and 1 Project guidelines describe (i) the roles and responsibilities of all project stakeholders; (ii) the mechanisms and

procedures for preparing neighborhood upgrading plans, gender action plans, and fund channeling; (iii) reporting, monitoring, and evaluation procedures, as well as complaint-handling management; and (iv) operation and maintenance requirements of the improved and built infrastructure.

2 A BKM normally consisted of 11 members.

Appendix 8 37

monitor community facilitators and the implementation progress; prepare consolidation reports; assist the LCO in handling complaints and supervise the project monitoring information system data entry. Community facilitators, organized in teams covering up to five neighborhoods, are responsible for (i) disseminating the project scope and approach to communities; (ii) facilitating the establishment of BKMs and user groups; (iii) facilitating the preparation of the neighborhood upgrading plan; (v) helping communities and BKM to select priority investments, develop community subproject proposals, and draft community contracts; (vi) facilitating and providing technical guidance to BKM to implement, monitor, and assess the works; (vii) providing the community with assistance in bookkeeping and report preparation; and (viii) assisting user groups in formulating and implementing facility operation and maintenance. 6. To implement component 2 of the project, Permodalan Nasional Madani (PNM) was selected. MOF onlent $17.1 million of the loan proceeds to PNM; the onlending agreement was signed on 25 January 2005. PNM established a financial project management unit to coordinate with the LCOs to ensure that the LFIs channel the loans efficiently and effectively to beneficiaries.

7. To implement and manage the project, DGHS was assisted by teams of consultants. Originally 11 teams were recruited: (i) a national management consultant at the central level, (ii) 9 teams of oversight consultants at the regional level, and (iii) a procurement consultant at the central level. The national management consultant experts were mobilized in September–October 2005. Their main responsibilities were to assist the PMU in overall project management and coordination. They were also responsible for monitoring, evaluating, coordinating, and establishing procedures and operation standards of field implementation by the oversight consultants as well as the performance of oversight consultants and the procurement consultants. 8. The oversight consultant teams were tasked with efficiently and effectively managing project implementation in their assigned areas, in line with project strategy as articulated in the project manuals. Their responsibilities included providing support to regional governments and LFIs in ensuring that critical factors to achieve project goals are accurately identified and dealt with to facilitate successful implementation. The procurement consultant was tasked with helping DGHS to manage all procurement-related matters at the central, regional and community levels.

38 Appendix 9

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Loan Agreement Covenants Status of Compliance

Sector Article IV Section 4.06 (a)

The Borrower shall exercise its rights under the Subsidiary Loan Agreements and shall cause the Qualified LFIs to exercise their rights under the Subloan Agreements, in such a manner as to protect the interests of the Borrower and ADB and to accomplish the purposes of the Loan. The Borrower shall take all action which shall be necessary on its part to enable the Qualified CFIs to perform their obligations under the respective Subsidiary Loan Agreements and shall not take or permit any action which would interfere with the performance of such obligation.

Complied with. SLA with PNM was signed in 2005. 13 subloans were signed. Due to poor performance, PNM's SLA was reduced to $0.76 million ($16.34 million was cancelled)

Article IV Section 4.06 (b)

No rights or obligations under the Subsidiary Loan Agreements or Subloan Agreements, as the case may be, shall be assigned, amended, abrogated or waived without the prior concurrence of ADB. The Borrower shall include a provision to this effect in each of the Subsidiary Loan Agreement and Subloan Agreement, respectively.

Complied with.

Schedule 5 Para. 6

The Borrower shall cause PMU to prepare criteria and guidelines to be approved by ADB, on the eligibility of local government to be approved to undertake an Upgrading Subproject. A PLG shall be selected in accordance with such criteria and guidelines, which shall include the following: (i) demonstrated financial capacity to provide matching grants required for the Project; (ii) demonstrated surplus income generation for the following three years through providing projections of revenues and expenditure for these years; (iii) documentary evidence of endorsement of the DPRD and the local government chief executives; (iv) no adverse findings from its banks and suppliers; and (v) demonstrated existence of, or commitment to establish housing unit within a section of the local government, which will form the basis of an HDO.

Complied with. DGHS prepared criteria and guidelines for local government eligibility, which were approved by ADB. 32 local governments were selected to participate in the Project.

Schedule 5 Para. 7

The Borrower shall cause PMU to prepare criteria and guidelines to be approved by ADB, on the eligibility for and preparation, evaluation, appraisal and implementation of an Upgrading Subproject. An Upgrading Subproject proposal shall be eligible for selection as an Upgrading Subproject in accordance with such criteria and guidelines, which shall include the following: (a) inadequate housing and services, as evidence by the endorsement of the local government planning agency; (b) nationally-or locally owned government land that could be made available for the Upgrading Subproject; (c) interest in and commitment to the Project, evidenced by the legal registration of a CBO for the Project or, if currently registered, provision by the CBO of a document expressing interest and willingness to participate, endorsed by representatives of all households in the area concerned; (d) the local government has the technical and administrative capacity to undertake institutional capacity building and subproject management; and (e) the local government has confirmed its capacity and the willingness to contribute to the Upgrading Subproject.

Complied with. DGHS prepared general project and procurement guidelines that were approved by ADB.

Appendix 9 39

Loan Agreement Covenants Status of Compliance Sector Schedule 5 Para. 8

At the local level, the Borrower shall cause: (a) the LCO to be established to coordinate Upgrading Subproject and Subproject implementation; (b) the PLG to formally nominate LCO full-time staff to manage the relevant Upgrading Subproject(s) and Subproject(s); (c) the PLG to liaise with the Qualified CFIs and coordinate the activities of Qualified LFIs and community groups; and (d) the PLG and LCO to (i) liaise with the communities, so that the CBOs are involved in the NUP process and articulate community needs and aspirations, and (ii) ensure that the community is adequately represented in the decision-taking process, and where appropriate, represented in the LCO’s procurement activities, which shall be undertaken in a transparent manner, with appropriate publication of the process stages.

(a) and (b) complied with. LCOs were established in all participating local governments. (c) Partially complied with. Coordination between cities and CFI was generally weak. (d) Complied with.

Schedule 5 Para. 9

The Borrower shall cause PMU to submit the ADB for review and approval, the first three Upgrading Subprojects and any subsequent Upgrading Subproject for which the financing from the Loan proceeds is equal to, or exceeds, $1 million.

Complied with for the submission of the first three upgrading subproject. No upgrading subproject was equal to or exceeded $1 million.

Schedule 5 Para. 10

Each Upgrading Subproject submitted for approval to ADB shall include the following documentation and information prepared in accordance with sound financial, engineering, environmental and business practices:

(a) scope of the Upgrading Subproject indicating the location, present condition and improvement proposed

(b) details of compliance of the Upgrading Subproject with the selection criteria described in para. 7 of this Schedule.

(c) cost estimates; (d) net present value and economic internal rate of

return calculations (e) details of proposed contract packages for

procurement of civil works; (f) results of the field review, environmental

socioeconomic, and poverty reduction impact screening; and

(g) the proposed implementation schedule.

Complied with.

Schedule 5 Para. 11

The Borrower shall ensure that all land required for a proposed upgrading subproject has unencumbered, clear title.

Complied with.

Schedule 5 Para. 12

The Borrower shall cause DGHS to ensure that, before a Subproject is approved: (a) the representative local CBO is registered and appropriately staffed; (b) an adequate NUP has been prepared; and (c) all of the beneficiaries under the NUP have voluntarily agreed on the NUP.

Complied with.

Schedule 5 Para. 13

The Borrower shall cause (a) DGHS to determine the eligibility of, and select the Qualified CFIs based on established criteria and capacity and financial soundness as agreed with ADB; and (b) each Qualified CFI to establish a CFI project management unit (FPMU) to supervise the lending activities under Part B, including the guidelines for eligibility of and selection of Subprojects, and coordinate with the LCOs in ensuring that Loan proceeds are being channeled efficiently and effectively by the Qualified LFIs to Qualified Beneficiaries.

Complied with. PNM was selected as CFI. FPMU was established in PNM.

Schedule 5 Para. 14

The Borrower shall cause each of the Qualified CFI to submit to ADB for review and approval, the first three

Complied with.

40 Appendix 9

Loan Agreement Covenants Status of Compliance Sector

subloans, and any subsequent subloans for which the financing from the Loan proceeds is equal to, or exceeds, $2 million. Except as ADB may otherwise agree, in order to ensure that the Qualified CFIs shall remain eligible for access to Loan proceeds under the Subsidiary Loan Agreement, the Borrower shall cause the Qualified CFIs to submit to ADB an opinion through the annual auditor’s report in form and substance satisfactory to ADB, from an independent external auditor whose qualifications, experience, and terms of reference are acceptable to ADB which certifies that: (a) The Qualified CFI is in compliance with all applicable prudential lending practices, including but not limited to (i) a liquidity ratio defined as cash and short term assets over short term liabilities of not less than one; (ii) loan loss provisioning sufficient to cover non-performing assets; (iii) no single loan that is in excess of 20% of the Qualified CFI’s capital resources, except for the credit program under Bank Indonesia-backed KLBI’s Scheme; and (iv) CAR of not less than 5 percent; and (b) the Qualified CFI has (i) a ratio of net NPLs to total loan portfolio not in excess of 5 percent, and (ii) a positive Return on Earning Assets ratio.

Schedule 5 Para. 15

The Borrower shall cause the FPMU to: (a) prepare criteria and guidelines to be approved by ADB, on the eligibility of a local financial institution to be selected as a Qualified LFI; and (b) select the Qualified LFIs based on the established criteria and on information provided, including audited financial statements.

Complied with. 12 LFIs signed subloan agreements.

Schedule 5 Para. 16

The Borrower shall cause each of the Qualified CFIs to submit to ADB for review and approval, the first three Subloans, and any subsequent Subloan for which the financing from the Loan proceeds is equal to, or exceeds, $2 million. Except as ADB may otherwise agree, in order to ensure that the Qualified LFIs shall remain eligible for access to Loan proceeds under the Subloan Agreement, the Borrower shall cause the Qualified CFIs to submit to ADB, within 60 days after the end of each fiscal year a certification that all Qualified CFI has entered a Subloan Loan Agreement, continues to meet the criteria for eligibility.

Complied with, the first three subloans were reviewed and approved by ADB.

Schedule 5 Para. 19

The Borrower shall cause each Qualified CFI to enter into and to be in compliance with the relevant implementation arrangement between the ADB, the Borrower, and the Qualified CFI.

Complied with. The implementation arrangement was signed on 9 September 2004.

Schedule 5 Para. 23

The Borrower shall provide timely updates to ADB on the process of decentralization undertaken in accordance with the provisions of Laws 22 and 25, and any implementing regulations issued thereunder, and take into account any views expressed by ADB thereon.

Complied with.

Schedule 5 Para. 24

The Borrower shall ensure that: (a) If existing PLGs are subdivide during or before Project implementation as a result of the decentralization process, communities in newly formed districts will be eligible to receive Project funds if new local governments make commitments to Project implementation similar to those made by PLGs; and (b) upon completion of the Project, the Project activities

(a) Complied with. (b) Generally complied with.

Appendix 9 41


shall be sustained and, inter alia, incorporated into the planning and budgetary processes of the PLGs and shall be funded through regular budgetary allocations to the PLGs.

Environment Schedule 5 Para. 17

The Borrower shall ensure that: (a) the PMU prior to the approval of a Subproject, shall screen for involuntary resettlement effects, to ensure that there are no losses of land, income, housing, community facilities, and resources that would require compensation to be paid out in accordance with ADB’s Policy on Involuntary Resettlements; (b) in the event that any involuntary settlement arising from land acquisition is required for the Project, that it will conform to the resettlement policy and procedures in ADB’s Policy on Involuntary Resettlements and Handbook on Resettlement and to the relevant neighborhood upgrading plan and Resettlement Framework; (c) Project activities are carried out in accordance with ADB’s Indigenous People’s Policy and any Action Plan for Specific Plans for Indigenous Peoples, as agreed upon by the Borrower and ADB, and that no persons shall be adversely affected in terms of the Policy as a result of Upgrading Subprojects, Subprojects or any other activity under the Project; (d) Upgrading of Subprojects, Subprojects, or any other activity financed under the Project by Loan proceeds shall be carried out in compliance with the Borrower’s environmental, safety, social safeguard, procurement, labor and social protection laws, standards, regulations and requirements and ADB’s Environmental Assessment Guidelines 2003 and requirements, and social safeguard policies, including ADB’s Policy on Social Protection Strategy; (e) all monitoring and mitigation measures are undertaken for environment impact assessments or initial environmental examinations in accordance with ADB’s environmental guidelines; (f)[i] environmental and social protection and mitigation measures are recommended and the conditions set in place for their implementation before any Upgrading Subprojects is approved for site development; [ii] DGHS strictly applies an environmental review procedure, as agreed between the Borrower and ADB, when reviewing Upgraded Subprojects for approval, and [iii] all works are carried out in accordance with the approved initial environment evaluation and environmental management and monitoring plan; (g) the public shall have free access to environmental information pertaining to the Project; and (h) the Project facilities are designed, constructed, operated, maintained and monitored in strict conformity with all applicable laws, regulations, permits, and approvals, of the Borrower, including national and local environmental protection, social development, health, labor, child protection and occupational safety regulations and standards.

No subprojects resulted in involuntary resettlement or triggered ADB’s Indigenous People’s Policy. Environmental impacts are largely positive.

Financial Schedule 5 Para. 20

The Borrower shall prepare and shall cause: (a) the PLGs for Pilot cities to prepare within 60 days of the Effective Date; and (b) all other PLGs by 15 November of each year; an annual work plan for the next year to ensure that during each year of the project implementation, adequate

Complied with. Distinction between pilot cities and other cities no longer applicable due to the delay in declaring the loan effectiveness

42 Appendix 9


budgetary allocation of required counterpart funds is made and such funds are released by the relevant authorities on a timely and regular basis to facilitate project implementation. The annual work plan shall include (i) the allocation of sufficient counterpart funds for project implementation; (ii) proposed budgetary allocations for Upgrading subprojects and (iii) financing plan for project activities for the succeeding year.

Budgetary allocations were signed off in the ongranting agreements of each participating local government with MOF.

Schedule 5 Para. 21

The Borrower shall make the following assurance with regard to Kepmen 35: (a) all funds distributed under the Project to the PLGs, provinces, cities and municipalities which are selected for participation in the Project (Participating Parties) are for non-cost recovery and non-revenue generating projects, which meet all the requirements of Kepmen 35, Article 5 in conjunction with the provisions of Chapter 6, and therefore, the funds distributed are grants to those participating parties; (b) pursuant to Kepmen 35, Article 27(3), the total value of each Upgrading Subproject shall be calculated as (i) the amount of the grant, plus (ii) he counterpart contribution; (c) pursuant to Kepmen 35, Article 28, the signing of the on-granting agreement, regardless of the actual date of signing, shall be construed as occurring on the date of the signing of the Loan Agreement.

Complied with. Ongranting agreements were signed on 7 June 2005 with all cities.

Schedule 5 Para. 22

The Borrower shall ensure and shall cause the PLGs to ensure that the provision of the proceeds of the Loan, and the counterpart contributions, necessary for financing project activities shall continue throughout the period of project implementation notwithstanding: (a) any change in authority or responsibility for channeling of external assistance, and for provision of corresponding counterpart contributions, between the Borrower and PLGs; or (b) any requirements for provision of matching counterpart contributions for funding project activities from the PLGs arising from the full implementation of Laws 22 and 25 of 1999, unless otherwise agreed by ADB.

Complied with.

Schedule 5 Para. 27

Without prejudice to the generality of Section 4.07 of this Loan Agreement: (a) for purpose of audit of accounts and financial statements of the Project, the Borrower shall ensure that any independent auditors financed from the Loan proceeds shall be selected and engaged in accordance with competitive procedures acceptable to ADB; and (b) the PMU and LCOs shall maintain separate Project accounts, with the LCOs keeping records of all Upgrading Subprojects expenditures and forwarding these every quarter to the PMU for consolidating.

(a) Not applicable: No audits were financed from the Loan proceeds. No loan proceeds were allocated for financing of audits. (b) Complied with.

Others Article IV Section 4.01(a)

The Borrower shall cause DGHS, the PLGs and the Qualified CFIs to carry out the Project with due diligence and efficiency and in conformity with sound administrative, financial, engineering, environmental, microfinancing and business practices.

Complied with.

Article IV Section 4.01(b)

In carrying out the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5 hereto.

Complied with.

Article IV Section 4.02 The Borrower shall make available to DGHS, the PLGs and the Qualified CFIs, promptly as needed, the funds, facilities, services, land and other resources, which are

In general the Borrower complied with the covenant. The requirements to provide

Appendix 9 43


required, in addition to the proceeds of the Loan, for carrying out of the Project and for the operation and maintenance of the Project facilities.

counterpart funds were with PLGs, particularly for the implementation of components1 and 3. Operation and Maintenance of facilities are the responsibilities of participating communities.

Article IV Section 4.03(a)

In carrying out the Project, the Borrower shall cause competent and qualified consultants and contractors, acceptable to ADB, to be employed to an extend and upon terms and conditions satisfactory to the Borrower and ADB.

Generally complied with. The responsibility to recruit consultants and contractors are with DGHS. The procurement process of consultants and contractor in general followed ADB’s procedure and guidelines. However, performance of consultants was partly satisfactory.


The Borrower shall cause the Project to be carried out in accordance with plans, design standards, specifications, work schedules, construction methods acceptable to ADB. The Borrower shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such details as ADB shall reasonably request.

Complied with.

Article IV Section 4.04 The Borrower shall ensure that the activities of its departments and agencies with respect to the carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures.

Complied with


The Borrower shall make arrangements satisfactory to ADB for insurance of the equipment financed out of the proceeds of the Loans to such extend and against such risks and in such amounts as shall be consistent with sound practice.

Generally complied with. Equipment purchased under the Project were mostly simple equipment for use by the community e.g. garbage bins, simple water treatment facilities, and street lighting tools. As formal insurance for such equipment was not available, the proper operation and maintenance arrangements by communities were considered replacing the formal insurance.


Without limiting the generality of the foregoing, the Borrower undertakes to insure, or cause to be insured, the Goods to be imported for the Project and to be financed out of the proceeds of the Loans against hazards incident to the acquisition, transportation, and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such goods.

Not applicable – no imported goods were procured under the Project


The Borrower shall (i) maintain, or cause to be maintained, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistency applied, by independent auditors

Complied with. BPKP, the independent auditors endorsed by ADB to audit the project accounts, submitted the audit project account to

44 Appendix 9


whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 9 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors’ opinion on the use of the loan proceeds and compliance with the covenants of this Loan Agreement, as well as on the use of the procedures for the Imprest Account and statement of expenditures, all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

ADB regularly since 2006 until project completion.


The Borrower shall furnish to ADB quarterly reports on the carrying out of the project and on the operation and management of the project facilities.

Complied with.

Article IV Section 4.08

The Borrower shall enable ADB’s representatives to inspect the Project, the goods financed out of the proceeds of the Loan, any Qualified CFIs, and any relevant records and documents.

Complied with.

Article IV Section 4.09

The Borrower shall ensure that the Project facilities are operated, maintained and repaired in accordance with the sound administrative, financial, engineering, environmental, business and maintenance and operational practices.

Generally complied with. The responsibilities operating and maintenance of the built facilities are with communities.

Schedule 5 Para. 1

Established, staffed, and operating PMU/PIU. The Borrower shall cause (a) DGHS, as the Project Executing Agency, to be responsible for the overall technical supervision, strategic guidance management, implementation and monitoring the financial and economic performance and socioeconomic and environmental benefits of the Project; and (b) the PMU to be provided with full-time qualified technical and administrative staff, adequate resources, and specialist consultants and advisors.

Complied with. However, frequent change in PMU staff occurred. Moreover, the head of PMU was not on a full-time basis.

Schedule 5 Para. 2

Implementing Agencies for the Project shall be responsible for the implementation of the Projects as follows: (i) for Part A, Directorate of Technical Development (DTD), DGHS, with support from other DGHS technical directorates; (ii) for Part B, the Qualified CFIs with support of the Directorate of Housing Finance, DGHS; (iii) for Part C, PLGs with support from relevant regional directorates, DGHS and DTD; (iv) for Part D, DTD, DGHS

Complied with. However, following reorganization in MPW, the Project Director is no longer from DTD but from Directorate of Settlements Development (DSD).

Schedule 5 Para. 3

The Borrower shall cause a Project Steering Committee (PSC) to be established, chaired by BAPPENAS, and composed of members of the National Board for Policy and Supervision of Housing and Human Settlements of the Borrower, and other stakeholders, with permanent director- level representative of BAPPENAS, National Social Development Board (BKSN), BPN, MOF, MOHA, and MSRI, and the Qualified CFIs. DGHS directorates shall serve as the PSC’s technical secretariat. Meetings of the members of PSC at director-level or above, shall be held at least quarterly, focusing on project progress. The PSC shall approve annual budgets and biannual progress report and coordinate, monitor and provide technical assistance resources to Participating Local Governments.

Partly complied with. PSC was established but did meet regularly as required.

Appendix 9 45

Loan Agreement Covenants Status of Compliance Sector Schedule 5 Para. 4

The Borrower shall cause DGHS to establish and maintain a Project Management Unit (PMU) within DTD to be responsible for the day-to-day implementation of centrally administered components of the Project, coordination and supervision of Upgrading Subprojects’ activities and maintenance of an up-to-date MIS on the status of Project and Upgrading Subproject implementation. DGHS shall ensure that PMU is adequately staffed with a full-time qualified project manager, who shall be retained as Project Manager for a minimum of two years, representatives of the Implementing Agencies, and full-time officers for key project components such as urban planning, housing finance, community development, project management, procurement, administrative affairs, and finance and accounting.

Complied with, though PMU was in DSD, and PMU head was not full time.

Schedule 5 Para. 5

The Project Director shall be the Director of Technical Development, DTD who shall be responsible for coordinating all consultancy services provided under the Project and the PMU shall supervise consultants’ day-to-day coordination and manage and operational support consultants. The PMU shall be responsible for coordinating services and supervising the bidding and contract management.

Complied with, though changed to DSD.

Schedule 4 Para. 1

Fielding of Consultants The services of consultants shall be utilized in carrying out of the Project, particularly with regard to: (a) architecture, planning, engineering; (b) community development; (c) environmental services; (d) economic and financial analysis; (e) shelter planning and financing; (f) microfinance and microlending systems; (g) community mobilization; (h) recruitment services; (i) project coordination support specialist; (j) public information specialist; (k) quality assurance and municipal engineering specialist; (l) project performance monitoring and evaluation (PPME) specialists; and (m) project accountancy support specialists.

Complied with. All consultants were fielded.

Schedule 5 Para. 18

Project Performance Monitoring System (PPMS) The Borrower, through the PMU, monitor and evaluate the benefits of the upgrading subprojects, long-term benefit monitoring and evaluation in accordance with a comprehensive program and scheduled timeframe, acceptable to ADB to: (a) examine and assess the project technical and disbursement performance; (b) evaluate the delivery of the planned infrastructure, facilities, activities, and programs; (c) assess the achievement of the project objectives; and measure the project’s social and economic benefits. The PPMS shall be integrated into the management information system of the cities so that the monitoring of social and economic benefits can continue beyond project implementation. Annual PPMS reports shall be prepared by each LCO, consolidated by the PMU and submitted to ADB.

Complied with (late).

Schedule 5 Para. 25

The Borrower and ADB shall undertake a comprehensive review of the project implementation to assess the initial impact of completed project outputs, and to make adjustments, as necessary, to subsequent project implementation: (a) in the second year, when the first batch of Upgrading Subprojects for the Pilot Cities are being implemented; and (b) in the fourth year, when the

(a) Due to delays in project implementation, comprehensive review of project implementation was only done in the third year of implementation (2007).

46 Appendix 9


Borrower shall submit to ADB a midterm review report following the review.

(b) Implemented in August 2008.

Schedule 5 Para. 26

The reviews shall assess a detailed evaluation of the project scope, implementation arrangements, and achievement of scheduled targets, Upgrading Subproject progress and implementation, performance of consultants, institutional capacity, and possible reallocation of loan proceeds, the adequacy of budget allocations, disbursement of loan proceeds, the targeting mechanism, and delivery of project inputs.

Complied with. Implemented in 2007.

Schedule 5 Para. 28

The Borrower shall cause: (a) the PMU and the Qualified CFIs to submit to ADB semi-annually, reports on the implementation of project-funded activities, in a format acceptable to ADB, and indicating physical performance, summary profiles of feasibility studies, summary appraisals of applicant CBOs and NUPs, progress made under Part B and D; (b) within 6 months after the completion of an Upgrading Subproject, the DGHS to prepare and submit to ADB an Upgrading Subproject completion report, summarizing the status of the Upgrading Subproject implementation and operational performance and an overview of project progress, problems encountered during the period, steps taken and steps proposed to resolve the problems, compliance with loan covenants, and project activities to be undertaken during the next six months; (c) within eight months after completion of the Project, DGHS and Qualified CFIs to prepare and submit to ADB a project completion report summarizing the overall status of project implementation, operational performance, PPMS, and targets achieved.

(a) Complied with. (b) Complied with. (c) Complied with. The DGHS’s PCR was received in early March 2011 and PT PNM’s PCR was received in May 2011.

ADB = Asian Development Bank, BPKP = Badan Pemeriksa Keuangan dan Pembangunan (state auditor board), BPN = Badan Pertanahan Nasional (National Land Office), CAR = capital adequacy ratio, CBO = community-based organization, CFI = central financial institution, DGHS = Directorate General of Human Settlements, DPRD = Dewan Perwakilan Rakyat Daerah (local house of representatives), FPMU = financial project management unit, HDO = housing development office, KLBI = kredit likuidasi Bank Indonesia (Bank Indonesian Liquidity Credit), LFI = local financial institution, LCO = local coordinating office, MOF = Ministry of Finance, MOHA = Ministry of Home Affairs, MSRI = Ministry of Settlement and Regional Infrastructure, NPL = non performing loan, NUP = neighborhood upgrading plan, PCR = project completion report, PLG = participating local government, PMU = project management unit, PNM = Permodalan Nasional Madani, SLA= subloan agreement

Appendix 10 47

CONSULTANT PACKAGES

Contract Value

Description of Works, (excluding tax) Contractor, Number,

Disbursement No PCSS No and Date Currency Amount Implementation Time Currency Amount

1. National Management $ 672,348 Nippon Koei in ass. with $ 665,993

Consultant Rp 33,866,672,856 Adicitra Mulyatama Rp 27,290,346,320

PCSS No. 0001/22 Sep 05 €

30,800.00 KU. 08.08/Bintek-PLP/104/IX/2005 € 28,049

£ 25,460 12 Sep 2005–31 Dec 2010 £ 21,155

2. Procurement Consultant $ 62,220 Perentjana Djaja in ass. with $ 62,220

PCSS No. 0002/22 Sep 05 Rp 9,300,194,399 C. Lotti & Associati, Rp 9,300,194,399

Gafa Multi Consultant &

Cipta Sanita Mandiri

KU. 08.08/Bintek-PLP/108/IX/2005

21 Sep 2005–31 Dec 2009

3. Oversight Consultants Rp 13,957,028,100 PT. TATA GUNA PATRIA Rp 13,954,628,100

Region I: Southeast Sulawesi in asc. with Polatek

PCSS No. 0003/14 Des 05 Rancang Bangun &

(Kendari, Bau-Bau, Muna, Beutari Nusa Kreasi

Buton, Kolaka) KU. 08.08/SKS-Bintek-PLP/

231/XII/2005

Jan 2006–Oct 2009

4. Oversight Consultants Rp 14,971,214,000 Widya Graha Asana in Rp 10,642,197,225

Region II : South Sulawesi I association with

PCSS No. 0004/14 Des 05 Tulada Konsula

(Makassar, Bulukumba, KU. 08.08/SKS-Bintek-PLP/

Gowa, Jeneponto, Bone) 232/XII/2005

Jan 2006–Jun 2010

5. Oversight Consultant Rp 12,531,127,670 Studio Cilaki 45 & Rp 12,530,827,670

Region III: South Sulawesi II Prospera Cons. Eng

PCSS No. 0005/14 Des 05 KU. 08.08/SKS-Bintek-PLP/

(Palopo, Luwu, Luwu Timur, 233/XII/2005

Polewali, Palu) Jan 2006–Oct 2009

6. Oversight Consultant Rp 12,102,053,904 Multi Karya Servindo Rp 12,102,053,904

Region IV: East Java Abadi

PCSS No. 0006/14 Des 05 KU. 08.08/SKS-Bintek-PLP/

(Surabaya, Lamongan, 234/XII/2005

Mataram) Jan 2006–May 2009

48 Appendix 10

Contract Value

Description of Works, (excluding tax) Contractor, Number,

Disbursement No PCSS No & Date Currency Amount Implementation Time Currency Amount

7. Oversight Consultant Rp 12,789,768,900 Yasa Karsa Graha Rp 12,758,482,000

Region V: West Java KU. 08.08/SKS-Bintek-PLP/

PCSS No. 0007/14 Des 05 235/XII/2005

(Tangerang, Sukabumi, Jan 2006–Aug 2009

Subang, Serang)

8. Oversight Consultant Rp 14,739,618,715 Blantickindo Aneka Rp 10,423,505,948

Region VI: Central Java KU. 08.08/SKS-Bintek-PLP/

PCSS No. 0008/14 Des 05 236/XII/2005

(Yogyakarta, Rembang, Jan 2006–Jun 2010

Pontianak)

9. Oversight Consultant Rp 8,442,945,938 Cipta Sanita Mandiri Rp 8,442,946,044

Region VII: Sumatra I KU. 08.08/SKS-Bintek-PLP/

PCSS No. 0009/14 Des 05 237/XII/2005

(Medan, Tanjung Balai) Jan 2006–Oct 2009

10. Oversight Consultant Rp 5,437,588,851 Hi - Way Indotek & Rp 5,275,446,019

Region VIII: Sumatra II Wahana Mitra Amerta &

PCSS No. 0010/14 Des 05 Ciriatama Nusawidya Cons.

(Padang, Jambi) KU. 08.08/SKS-Bintek-PLP/

238/XII/2005

Jan 2006–Aug 09

11. Oversight Consultant Rp 13,175,458,510 Indomas Mulia Rp 12,574,223,595

Region IX: Sumatra III KU. 08.08/SKS-Bintek-PLP/

PCSS No. 0011/14 Des 05 239/XII/2005

(Bengkulu, Palembang, Jan 2006–Jun 2010

Bandar Lampung)

12. Consulting Services for Rp 464,151,000 Hendra Wahyu Wardana Rp 464,151,000

Preparation of Gender Strategy and Action Plan

KU.08.08/SPK/SNVT BINTEK-PLP/

VI/111/2008

Jun–Nov 2008

13 Public Campaign for Health Rp 7,679,433,105 PT Waseco Tirta Rp 7,679,433,105

Behavioral Change KU 08.08/SPK/SNVT/BINTEK-

PLP/XI/18/2008

28 Nov 2009

Appendix 11 49

ECONOMIC AND FINANCIAL REEVALUATIONS

1. The Neighborhood Upgrading And Shelter Sector Project included four components: (i) improving planning and management systems to upgrade sites and establish new ones for the urban poor, (ii) improving access to shelter finance by the poor through central and local financial institutions, (iii) upgrading poor neighborhoods and developing new sites for the poor, and (iv) strengthening sector institutions to improve service delivery. 2. The major share of loan proceeds was disbursed for civil works under component 3 to upgrade poor neighborhoods in 32 project cities and establish new sites for poor families in three cities (new site development [NSD]). Of the $73.9 million loan,1 $46.3 million (62.6%) was disbursed for civil works under component 3. 3. Under the upgrading subcomponent, basic infrastructure in 803 poor neighborhoods in 32 project cities was improved. About 800,000 poor households (more than 3 million people) benefited from upgrading activities. In total, the project financed (i) improvement and development of about 613 kilometers (km) of neighborhood roads, about 1,100 km of footways; (ii) more than 750 km of drainage channels; (iii) more than 900 wells, and about 28 km of water pipelines; (iv) 2,626 public toilets or communal sanitation facilities; (v) waste facilities including 386 units for temporary waste disposal, 1,470 carts for solid waste facilities, 5,220 communal bins and 7,360 household bins; and (v) installation of more than 16,000 street lights. Under the NSD subcomponent, $2.2 million from loan proceeds was utilized to finance infrastructure development in three cities (including roads, sanitation, water supply, electricity supply) to establish new neighborhoods for 405 new houses for poor families. 4. For the implementation of upgrading activities in the poor neighborhoods, the project applied a community-driven development (CDD) approach; interventions were identified through a participatory process during implementation. Improving roads and pathways within poor neighborhoods; constructing and enhancing drainage channels, sanitation, and water supply systems; and introducing a waste collection system certainly contributed to improving the livelihoods and welfare in all project neighborhoods, but did not result in improved income generation that can be measured. While benefits of slum upgrading are evident by and large, the project completion review mission was not able to conduct conventional economic and financial analysis to quantify project-specific benefits and provide a thorough calculated economic internal rate of return or financial internal rate of return. The following provides an estimation of benefits and impacts. A. Increased Short-Term Employment 5. The implementation of civil works financed by block grants provided directly to communities was carried out largely by local manual labor. The creation of short-term employment opportunities for local workers resulted in a cash injection in local economies. It was estimated that about 100,000 residents of project neighborhoods were engaged in civil works at an average of 45 working-days. At an estimated wage rate of $4.4/day, the project has

1 The original loan amount was $90.1 million. After partial cancellation of loan proceeds, the total loan amount was

reduced to $73.9 million, which comprises Loan 2072-INO for $52.6 million from the ordinary capital resources; and Loan 2073(SF)-INO for SDR13.89 million ($21.3 million) from the Asian Development Fund.

50 Appendix 11

generated an additional income of about $19.8 million for poor community members participating in civil works under the project. B. Increased Income-Generating Opportunities 6. Feedback from review missions and interviews carried out by the executing agency confirmed that improving roads and pathways within neighborhoods enhanced income-earning opportunities of small home industries, particularly related to food processing, handicraft, batik, and small repair services. Improving drainage systems contributed to reducing damage and losses due to flooding. Microentrepreneurs stated that (i) the number of customers has increased as improved and new access roads and pathways make it easier and safer for customers to reach their shops and workshops, (ii) transportation costs have been reduced to reach local markets and customers to deliver goods and services and buy products, and (iii) hazards related to flooding have been reduced. Considering a conservative assumption that 10% of 800,000 households are self-employed or working in small-scale businesses, and that they were able to improve their monthly income by $10 as a result of upgrading activities under the project, the total annual additional earnings generated by the project are about $9.6 million, or $48 million over 5 years . C. Health Costs 7. Lack of access to safe water sources and basic sanitation facilities has severe consequences for health and livelihoods. Waterborne diseases, caused by poor sanitation and regular flooding, have a high cost in terms of health. Poor urban neighborhoods with high population density are more exposed to the negative impacts of poor sanitation, as in such confined spaces human excreta that is not properly disposed of or treated will pollute water resources, spread disease, and increase health risks of residents. About 30% of Indonesians suffer from waterborne diseases, including cholera, diarrhea, and typhoid fever, which are linked to the use of unprotected water supplies, poor sanitation, and inadequate community awareness of hygienic practices. An assessment carried out for the Asian Development Bank (ADB)-financed Metropolitan Sanitation Management and Health Project estimated the avoided health costs of having access to sewerage systems at $5.50 per person per year for urban households in densely populated neighborhoods.2 8. Neighborhood upgrading activities included the establishment of 2,626 public toilets or communal sanitation facilities; construction of more than 750 km of drainage channels, which helped to mitigate flooding; establishment of more than 900 wells; and construction of about 28 km of water pipelines. Considering that the project covered 803 neighborhoods, with about 3 million people, and assuming that half benefited from investments to improve heath, sanitation, access to safe water, avoided health costs based on the ADB assessment are estimated at $11.0 million per year, or $55 million over 5 years. D. Improved Access to Water Supply 9. Additional principal benefits resulting from improving water supply systems in neighborhoods, which have not been quantified but confirmed by community members, are time saved in collecting water, and lower expenditure for water.

2 ADB. 2010. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical

Assistance Grants to the Republic of Indonesia for the Metropolitan Sanitation Management and Health Project. Manila.

Appendix 11 51

E. Cost Effectiveness 10. CDD approaches provide good quality community infrastructure at significantly lower costs than technically comparable projects using traditional (non-CDD) modes of government contracting. Evaluations of CDD infrastructure projects in Indonesia using local government (pemda) unit costs and local contractor costs demonstrate that the investment costs of CDD-provided infrastructure average only 63.7% of pemda costs, if local contributions are excluded. If local contributions are included, CDD-based infrastructure costs only 75.5% of similar infrastructure using conventional contracting by local governments. Assuming that the project spent $46.3 million for infrastructure investments mainly using the CDD approach and considering that these costs come to 75% of similar infrastructure using conventional contracting, the potential saving is estimated at $15.4 million. F. Good Governance 11. Using a CDD approach by involving communities in planning upgrading activities and implementing civil works in partnership with local government administrations, the project has strengthened the ability of communities to articulate their needs and seek support for their development plans, and has improved the ability of the respective district government to respond to their demands. Participatory involvement of communities also ensured the establishment of transparent procurement and disbursement mechanisms that contributed to cost effectiveness and mitigated potential risks of corruption. G. Summary 12. Taking into consideration the investment cost of $44.1 million financed from loan proceeds for upgrading activities, potential income generation, avoided costs, and possible savings, project costs have been offset already during the 5 years of project implementation.

Overview Investment Costs versus Potential Income Generation, Avoided Costs and Savings

Investment for Upgrading (financed from loan proceeds)

$44.1 million

Short-Term Employment

$19.8 million

Income-Generating Opportunities $ 9.6 million, annually $48 million over 5 years Avoided Health Costs $11.0 million, annually $55 million over 5 years Potential Savings through Cost-Effective Procurement $15.4 million

Source: PCR calculations H. Improved Planning and Management Systems 13. The project completion review mission was not able to quantify benefits of improved planning and management systems developed under component 1. Although with significant delays, at project completion all 32 participating local governments completed strategies for pro-poor shelter within the housing component of the local spatial planning and shelter strategy (RP4D). However, only 26 cities have endorsed and/or legalized their RP4Ds. Potentially, well-defined RP4Ds that are integrated in the overall spatial plans, and reflected and embedded in midterm development plans and annual budgets can contribute to efficient budget allocation and

52 Appendix 11

execution. At this time, a final assessment of the economic and financial impacts of the RP4Ds cannot be concluded. 14. After the downsizing of component 2 from $17.1 million to $1.5 million, and the final cancellation to $0.76 million at project completion, only 4.4% has been disbursed to provide housing credits to about 2,160 poor families. Thus the original target to provide about 30,000 loans for housing microcredits through local financial institutions to poor families was clearly missed. The main issues relate to (i) difficulty identifying suitable (LFIs) in some participating cities, (ii) relatively high interest rates (15.5%) put forward from (PNM) to the LFIs, (iii) subsequently high interest rates for housing microcredits (30%–40%) offered by LFIs to poor families, and (iv) limited awareness of microcredit schemes among potential LFIs and poor communities. In summary, component 2 is rated less efficient, thus the project completion review mission did not discuss potential benefits related to the provision of microcredits.

I. Capacity-Building Programs 15. Investing in related human resources and support structures is critical to tapping the benefits of the project. Under component 4 more than 200 government staff completed their master’s degree in a 13-month program financed by the project; many have been promoted at their respective organizations. Furthermore, the project provided short course diploma programs in urban settlement and management for about 200 local government staff. To broaden and deepen community participation more than 15,000 community members and staff from city and local government administrations have received training on the CDD approach, and attended national and local workshops on, for example, shelter strategy development, project management, performance evaluation, and operation and maintenance of project facilities. While the impact of these capacity-building activities to create strong community ownership and active community participation in planning and implementing upgrading plans increased transparency and decreased corruption is evident throughout all project neighborhoods. Quantifying these impacts was not feasible.

Appendix 12 53

GENDER EQUALITY RESULTS IN NEIGHBOURHOOD UPGRADING AND SHELTER SECTOR PROJECT

1. Gender refers to differences between women and men in their roles, responsibilities, capacities, experiences, and needs. In development projects, gender provisions (e.g., a gender action plan [GAP]) specifically aims to ensure that women and men can have equal access to and control over project resources; and are able to benefit equally from the project according to their needs.1 In the Neighborhood Upgrading and Shelter Sector Project, gender issues are commonly related to differences between women and men in

(i) needs and preferences in type and location of public and neighborhood facilities, (ii) ways of using public and neighborhood facilities, (iii) access to information, (iv) tasks (division of labor) within the household and community (including differences

in the time women and men perform their tasks), (v) capacity in the decision making process, and (vi) ownership of and control over resources and assets (especially land and housing).

2. Those differences have especially affected how and to what extent women and men participate in project stages and activities. A. The Development of a Gender Action Plan: Process and Progress 3. The project had a design-phase gender analysis and strategy, which are included in the Asian Development Bank (ADB) report and recommendation of the President (2003) as a supplementary appendix.2 The gender analysis offers a comprehensive overview of generic gender issues in various aspects of urban development and housing, with some targets for participation of women in project activities. However as a supplementary appendix, the gender analysis and strategy is only available upon request. Therefore, it is easily 'forgotten' and has not been integrated in other project main documents such as the project operational guidelines. 4. In 2006, the project was selected for a gender review along with four other projects. This review was carried out under World Bank supervision.3 The review aimed to look at how gender and women's issues had been addressed in community-driven development (CDD) projects to understand “what worked and why” in order to help influence the PNPM design.

1 In this report, in addition to “gender,”– “gender mainstreaming” is also a key concept. The Asian Development Bank

(ADB) Gender and Development Framework and Strategies (1998) states that ADB’s Policy on Gender and Development will adopt mainstreaming as a key strategy in promoting gender equity. Gender mainstreaming refers to the inclusion of gender considerations into all ADB activities, including macroeconomic and sector work, and lending and technical assistance. It aims to ensure that gender issues are systematically addressed in all ADB operations through, for instance, the development of gender action plans, provision of technical support and assistance for projects by the gender specialist in resident missions, publication of manuals and check-lists to improve gender equity in various sectors, and facilitation of lateral learning and sharing of experience among project directors and project management on the implementation of gender strategy in projects.

2 ADB. 2003. Report and Recommendation of the President to the Board of Directors: Proposed Loans to the Republic of Indonesia for the Neighborhood Upgrading and Shelter Sector Project. Manila.

3 The projects selected for gender review are (i) Kecamatan Development Project, (ii) Urban Poverty Project, (iii) Neighborhood Upgrading and Shelter Sector Project, and (iv) Water Supply and Sanitation in Low Income Communities.

54 Appendix 12

5. The review identified existing good practices that have been developed and proved successful in existing projects:4

(i) For effective implementation of gender strategy: develop a gender strategy with clear objectives and targets, translate the strategy into project documents and guidelines, and get clearer support from the “top” (especially from the executing agency, e.g., senior officials from the executing agency especially the project director, high officials of the steering committee).

(ii) For enhancement of women’s participation: include quotas for women’s participation in

meetings, organize meetings at times convenient for women and encourage them to bring their children (this means more women can attend the meeting), hold separate women’s meeting at key stages in planning and the decision-making process, include targets for women’s participation in decision-making bodies (this women-only meeting can provide them space to discuss issues important to them without men around and give confidence and help to reach a consensus before facing a mixed group), open up a range of positions on community implementing and monitoring committees and encourage the selection of women for these committees so that they can demonstrate their skill and capabilities.

6. The findings of the review demonstrate a low score for the project in various aspects of gender equality including in its sustainability and impact. However, the report mentions that the project has a comprehensive gender strategy and the low score might be caused by the recent start-up of the project when the review was conducted. Other projects all improved their integration of gender over time. 5 In relation to the World Bank gender review, the project officers recommended that the formulation of the gender action plan as well as possible recruitment of a project-based gender specialist should be held in abeyance until the World Bank gender review is complete and its findings reviewed.6 7. The project’s gender strategy was not revised or updated until 2 years after the project was declared effective on 31 March 2005. The project officers collected data on the participation of women, but limited this to their representation in community-based organizations or the BKM. In May 2007, soon after the placement of a new gender specialist at the ADB India Resident Mission, the project gender strategy was revised by the gender specialist and discussed in the loan review mission.7 In June 2007, the revised GAP was fully accommodated by the project. However no one on the project team was assigned to supervise and monitor GAP implementation. The need to mobilize a project-based gender specialist was formally voiced by the executing agency and mission team during the Loan Review Mission in December 2007.8 ADB supported the executing agency's proposal to hire a gender team for 6 months (February 2008) because after 3 years of project implementation, data on different levels and forms of participation of men and women in project activities had not been systematically collected and analyzed. Only nominal participation is recorded (i.e., attendance in meetings and activities). Moreover, the project GAP had not been sufficiently implemented.

4 For a complete analysis of findings see World Bank. 2007. Gender in Community Driven Development Project:

Implication for PNPM Strategy. Washington, DC. 5 Gender in Community Driven Development Project: Implication for PNPM Strategy. Working Paper on the Findings of

Joint Donor and Government Mission, Jakarta (2007) 6 Status of Implementation of Gender Action Plans of Loans, TA Projects, and Grants as at December 2006. Handover

notes of the Indonesia Resident Mission, gender specialist, 2006. 7 In Depth Review Mission, 24 May–6 June 2007 to Sukabumi, Tangerang, Mataram, Pontianak, Gowa, and Kolaka. 8 Memorandum of Understanding Loan Review Mission, 4 December 2007– 8 January 2008.

Appendix 12 55

8. The project effectively mobilized a three-person gender team for July–December 2008. The team (i) updated the GAP, (ii) conducted a gender study,9 and (iii) drafted guidelines for gender mainstreaming in the city slum and poor neighborhoods upgrading project. The report and guidelines were completed, discussed with the executing agency, and formally submitted to the executing agency in March 2009. The gender mainstreaming guidelines produced by the project has been positively received by the executing agency and used by the Gender Working Group of the Ministry of Public Works as one of the references for the Gender Responsive Budgeting Pilot Project (2009–2010) in the ministry. B. Targets in the Gender Action Plan 9. The revised project GAP identifies objectives for each project component:

(i) Component 1: to incorporate sex-disaggregated data and gender analysis in the

development of city shelter planning (i.e., RP4D), and to provide local and city government with practical guidelines to mainstream gender in poor neighborhoods improvement.

(ii) Component 2: To reduce gender disparity in the application and approval of loans for house improvement.

(iii) Component 3: To advance nominal and effective participation of women in the neighborhood upgrading activities.

(iv) Component 4: To raise gender awareness and enhance the capacity of the project team (i.e., project management unit [PMU], satker, LCO, consultant teams) in implementing the GAP.

10. To attain these objectives, the GAP sets targets for each project component. The targets can be categorized into two types: quantitative targets that refer to quantifiable achievements (e.g., participation quotas) and qualitative targets that lead to nonquantifiable changes (e.g., improvement in capacity and practices) and conditions (e.g., gender perspective is well-incorporated in capacity-building materials) that are necessary to achieve the GAP objectives in a more sustainable way.

9 The project Gender Study especially covers (i) General review on socio-economic-demographic profile of 32 project

cities and project implementation in those cities, and (ii) In-depth study on differential participation of men and women in project activities in four cities (Tangerang, Surabaya, Kendari, and Pontianak

56 Appendix 12

Table A12.1: Targets in the Gender Action Plan10

Gender Targets

Project Components Quantitative Qualitative I

City Shelter Planning and Management

The baseline survey for the development of RP4D collected sex-disaggregated data11. Gender analysis based on sex-disaggregated data collected in the baseline survey is included in the socioeconomic section of the baseline survey report. Guidelines for gender mainstreaming in city slums and poor neighborhood upgrading is produced

II

Shelter Finance

Local financial institutions (LFIs) implemented loan application requirements and procedures that enable women to apply for housing loans independently12 Information on LFIs that provide housing loans, the loan application requirements, and procedures are provided (accessible) to low-income households including to poor women in the communities.

III

Neighborhood Upgrading and Development of New Sites for the Poor

At least 30% of community-based organization (BKM) members are women At least 30% of implementation unit members are women At least 30% of participants in public consultation are women Al least 30% of participants in community activities (i.e., Survey Kampung Sendiri/, development of neighborhood upgrading plans) are women At least 20% of participants in community capacity-building or training activities are women (i.e., training for BKM, TPM, O&M)

Specific needs and priorities of women and men are accommodated in the neighborhood upgrading plan (NUP)

IV

Capacity Building

Training and briefings to enhance

Data and information on the need

10 The 3rd version of the project GAP: Revised by the gender team during their assignment in June–December 2008

(The 1st version is the design phase GAP in the RRP and the 2nd version is the GAP revised by the resident mission gender specialist in June 2007).

11 Spatial planning and shelter strategy (RP4D). 12 This means women can apply for the loans on behalf of themselves (husband and wife can apply on behalf of

themselves although they might need the other's formal approval).

Appendix 12 57

and Institutional Strengthening

gender awareness and capacity provided to at least 50% of government staff and consultant teams involved in the project

of government staff and consultant teams for gender awareness briefings and training is available Gender awareness training and briefings and the materials are specifically and practically developed according to the project's needs Communities received information on relevant gender equality issues during the socialization and public consultation meetings in each participating kelurahan (neighborhood).

. C. Achievement of the Gender Action Plan Targets 11. Component 1. This component aims to provide assistance to city governments in developing planning systems that cater to the housing needs of the poor. At project completion, all 32 participating cities had completed their RP4D. 12. For this component, the project GAP has formulated three qualitative targets, two are related to incorporation of gender concerns in development of the shelter strategies and one is related to provision of gender mainstreaming guidelines. In most cities that have worked on the local RP4D, the baseline survey resulted in a very technical report with limited data and analysis on socioeconomic aspects. Sex-disaggregated data has been collected for a demographic profile of the city but not for identification and mapping of different needs of (poor) men and women in public facilities (e.g., clean water and sanitation facilities, roads, lighting) in their neighborhood. In most cities, various stakeholders (including the consultants) w involved in the development of the RP4D still have low awareness of gender perspectives (the importance of identifying the differences between men and women in their needs, preferences, access, and control regarding neighborhood facilities). The development of a city shelter strategy tends to be primarily perceived as a technical exercise. As most cities have completed the baseline survey, the first two qualitative targets (component 1) were not achieved. 13. Nevertheless, the 3rd qualitative target to produce a guideline to mainstream gender in slums and poor neighborhood upgrading project has been well achieved. The guideline has been used as a reference by other gender activities in the Ministry of Public Works and disseminated to other directorates general (outside the Cipta Karya). It has also been provided to some LCOs and OCs (e.g., Lampung, Surabaya, Sukabumi), the Ministry of Women Empowerment (MOWE) and to the members of the ADB resident mission Gender Focal Point Network (the Gender Net). 14. Component 2. This component aims to put in place a financing system (i.e., through provision of microcredit) that can be accessed by low-income households for physical improvement of houses. However, due to poor disbursement, in October 2008 the government and ABD agreed to downsize the housing microcredit and cancel loan proceeds of $15.6 million. As a result, the loan allocation for this component is reduced to $1.5 million to cover administration costs and provide housing credits to 1,500 poor families (instead of the initial target of at least 30,000 families). At project completion, the National Fund for Small and Medium Scale Investments (PNM) had signed 13 subloan agreements with 12 local financial institutions (LFIs). In total, 2,164 families have utilized microcredits under this scheme for a total of $0.76 million.

58 Appendix 12

15. The two qualitative gender targets for this component are related to promotion of equal access to housing microcredit for men and women in poor communities. Briefings on gender targets in the shelter finance component were provided to the staff of the LFI in Pontianak (KSU Millenium) during a loan review mission in May 2007. Anecdotal data from Pontianak (KSU Millenium) and Luwu (KSU Aktual Utama) demonstrate that both men and women can easily access information on loan application requirements and procedures. In addition, men and women can apply for the housing credit independently. In Surabaya, the participating LFI is a women's cooperative (Koperasi Wanita Waspada). In this LFI, access to housing loans is definitively better for women. Commonly, the borrowed funds were used for construction of toilets, adding new rooms, and getting land title. In Luwu, the house improvements, especially the in-house toilets and bathrooms, have reduced women's workload in taking care of their members (young children and the elderly).13 In those cities, the gender targets for component 2 have been achieved. 16. Component 3. This component aims to upgrade poor neighborhoods in urban areas and develop new sites for low-income families. The upgrading subcomponent has shown good progress. At project completion, more than 800 NUPs were complete. In general, community involvement in planning and implementing civil works is very encouraging. 17. Most of the gender targets for this component are quantitative targets related to women's representation and participation in project activities. During 2006–2009, the participation rate of women in BKM membership was steady at around 20%. This is lower than the GAP target of 30%. However, women's participation in the implementing units (the Unit Pelaksana) during the same period is higher at 24% (but also below the target of 30%). 18. Data for 32 project cities (2006–2008) shows that only four cities have a participation rate for women in BKM higher than 25%: Polewali Mandar (30.0%), Bau-Bau (27.0%), Jambi (26,0%), and Luwu (25.4%). The data also demonstrates that other cities also have a higher participation rate of women in implementing units (more than 25%). Some of these cities are even exceeding the 30% GAP target: DI Yogyakarta (54%), Tangerang (37%), Surabaya (32%), and Palopo (30.5%) 19. Data compiled in the project Gender Report (March 2009) shows that participation of women in training increased from 11% in 2007 to 27% in 2008. This participation rate in training is higher than the GAP target of 20%. Women's participation in project cycle activities increased from 17% in 2007 to 21% in 2008. Despite the increase, this participation rate is still below the GAP target of 30%. The increase of women's participation especially happened in neighborhoods that had been involved in the project cycle for a few times. In these neighborhoods, the women (and the community in general) were better informed of the project and had more experience with the project activities. Nevertheless, more detailed sex-disaggregated data on activities such as in training, public consultation, and surveys (e.g., Lokakarya Kelurahan, Rembuk Warga, Survey Kampung Sendiri) are not systematically and consistently available from all participating cities. As a result, thoroughly evaluating the achievement of each quantitative gender targets identified for component 3 was difficult. 20. Further, the Gender Report mentions that women and men participated differently in the project. An important factor that influenced the participation of women and men is the community's perception of project activities. The technical planning and implementation of construction works are often regarded as the prime project activities. Consequently, the project is generally perceived (both by men as well as women in the communities) as more related to men's role and 13 See also project Best Practices Towards the Cities Without Slum (2009)

Appendix 12 59

responsibilities. This perception would not encourage a higher participation of women. When the implementation of project activities is not compatible with women's domestic works schedule, most women will put their daily tasks in a higher priority (than participation in project activities). The domestic tasks are commonly perceived as being their true responsibility and therefore more important. For women who have to perform paid works apart from the household chores, participation in project activities have been experienced as an additional burden They often do not have time and are too tired to participate regularly. As wives, women usually need to consult and get their husbands' permission for their involvement in project activities.

Table A12.2: Participation of Men and Women in Project Activities Women Men More difficult to participate regularly and consistently because the household chores need to be performed continuously (the whole day). The project cycle and activities are perceived as time consuming and too long

Able to participate regularly and consistently, because the income-earning activities have fixed work hours. Usually men have more free time in the evening; therefore the project cycle and activities do not significantly disturb their daily schedule and work loads

Need permission from their husband to participate in the project activities

Can decide more independently on their participation in project activities

More likely to participate if other women are present The presence of other men does not determine the decision to participate

Participation is higher when they are convinced that the activities provide practical and/or direct benefits (e.g., in the maintenance of already constructed facilities)

Tend to participate from the earlier stage (when the construction of facilities is still in planning) and follow the whole process

Generally, less interested in and/or comfortable with more technical activities (e.g., in designing and constructing the facilities)

Comfortable with both technical and social activities of the project

Able to elaborately identify various problems related to the of neighborhood facilities (because the problems are mostly related to their daily domestic activities)

Have more general view of various problems related to the neighborhood facilities

Source: ADB. 2009. Memorandum of Understanding of Review Mission for the Neighborhood Upgrading and Shelter Sector Project. Jakarta

21. Component 4. This component aims to support project implementation and sector strengthening through a range of capacity-building activities that include provision of scholarships for government staff to pursue international or national master’s degrees, comparative study in Mumbai to learn how to handle problems in urban shelter and slum settlements, provision of training on the CDD approach, and participation in national and/or local workshops. 22. Gender targets identified for component 4 are mostly qualitative related to the provision of gender training and/or briefings to both government staff and community members. In general, the project does not organize specific training to raise awareness on gender concerns, although activities (i.e., discussions and briefings) conducted throughout 2007–2009 aimed to enhance gender awareness and capacity of the project team (PMU, satker/project manager, LCOs, NMC, OCs, city coordinator, facilitator teams) and community members. 23. In November 2007, the head of the PMU was invited to participate in lateral learning in the Regional Seminar on Gender, Poverty and Infrastructure in Dhaka, Bangladesh (organized by ADB). She presented the project GAP, shared the experience in implementing the GAP, and identified some challenges that must be dealt with by the project. The project presentation was considered as the best presentation in the event. In mid 2008, the Gender Team visited 15 cities and met the LCO, OC, and BKM in each city to collect data for the Gender Report and to provide

60 Appendix 12

briefings on the project GAP.14 Specific meetings and discussion on gender issues, implementation of the project GAP and the results achieved were conducted in Bandar Lampung (2008)15 and Sukabumi (2009).16 In addition several internal meetings with the PMU, satker, and NMC on implementation of the project GAP were conducted in 2008. 24. Those activities and events indicate that capacity building to raise gender awareness and capacity has been performed but most of the activities are not systematically integrated in the project work plan and are still ad-hoc efforts. It can be expected that if gender awareness had been included in capacity-building programs for central, provincial, and district government counterparts, the project would have had better achievement of gender targets in all components because government staff at all levels would have improved gender capacity and promoted the gender agenda. The GAP targets on capacity building have been partly achieved.

25. A focus on Kota Sukabumi; the field visits. To obtain first-hand information on progress, the resident mission gender consultant conducted field visits in three kelurahans in Sukabumi (Gunung Puyuh, Citamiang, and Karang Tengah). The following issues were discussed: (i) different participation of men and women in major project activities, especially upgrading activities; (ii) different practical benefits related to project activities that can be gained by men and women; (iii) operation and maintenance including issues of sanitation and behavioral change.

26. The upgrading activities and practical benefits received by the communities. Seventeen kelurahans participated in the project in Sukabumi with 28,333 beneficiaries. In general, the participation of women in the BKM is around 13%. This is much lower than the GAP target of 30%. The participation of women is better in the implementing units at 20%. This is also lower than the GAP target of 30%. Nevertheless, women are providing good leadership in BKM and BPS (the O&M group) in some neighborhoods. In Gunung Puyuh, the head of BKM is a widow who also has served as the community head of the neighborhood (Ketua RT) for years. In Karang Tengah, the O&M activities are well-performed by a group of women who also work as health cadres in the community. 27. In total, 110,421 meters of road, 39,166 meters of drainage, 153 toilets, and 66 clean water facilities had been built. In addition, the project has improved lighting and solid waste collection in the participating neighborhoods. The mission observed that the facilities built in the visited sites are in good condition and intensively used. Women mostly explained how public toilets and clean water facilities have substantially benefited them in doing their households chores. Before those facilities were made available by the project, they had to use poor quality water (i.e., collected rainwater) for bathing and washing. In addition, sanitation and hygiene has improved because people prefer to use the clean and well-maintained public toilets than go to the nearby river. The improved neighborhood roads have made the neighborhoods more accessible for public transport (“the ojek can bring us up to in front of our houses, therefore now we don't need to walk and carry the heavy bags from the market. It certainly has made our day-to-day lives easier”). It was also emphasized that the better and clean neighborhood roads function as a safer place for children to play. 28. Operation and maintenance. In all visited kelurahans, operation and maintenance (O&M) has functioned relatively well and users have to pay around Rp3,000–Rp5,000/month/household. 14 Medan, Padang, Jambi, Palembang, Bengkulu, Bandar Lampung, Pontianak, Mataram, Tangerang, Subang, DI

Yogyakarta, Surabaya, Kendari, Makassar, Palu. 15 Participated by LCO staff, oversight consultant (OC) 9 and members of four BKMs (Gedong Pakoan, Pidada, Olok

Gading, and Kangkung). 16 Participated by the mayor of the city, head of BAPPEDA, local government staff from various institutions, LCO staff,

OC team, NMC, representative of the PMU of the Ministry of Public Works.

Appendix 12 61

In two kelurahans, the O&M activities and costs are fully integrated in the existing neighborhood administration; 100% of users pay the monthly cost because it is collected together with other regular neighborhood payments. In one kelurahan, the BPS (O&M group) collects the payment separately from the neighborhood administration. Under this system, the neighborhood still has to deal with 40% “free riders.” D. Implementation of Project GAP and Lessons 29. The experience gained in the last 3 years shows that implementation of the project GAP and achievement of its results have faced various challenges: 30. The missing design-phase GAP. Although a GAP was prepared during project design, it is invisible because it is a supplementary appendix and only available upon request. Consequently it is easily being overlooked. Projects that can have effective gender mainstreaming (e.g., projects with a CDD approach, related to provision of clean water and sanitation facilities), must prepare at least a short version of a GAP to be visibly integrated in the main document (i.e., in the RRP). This short version or summary can be elaborated in the later stage.

31. Delays in the development and dissemination of the project GAP. From the start-up of the project in 2005 until May 2007, the project GAP was revised, updated, or effectively implemented. After it was revised and fully accommodated by the project in mid 2007, it took 1 year to effectively mobilize a gender team that could fully supervise and/or conduct the gender activities. At that point, all of the project guidelines had been finalized and a lot of the project cycle activities had been performed. Therefore the executing agency suggested that during the 6 months of assignment, the gender team should mainly focus on updating the GAP, conducting a review, developing a gender guideline, and providing gender briefing in the cities they visited for the study. This effort is certainly useful, but missed opportunities to systematically conduct gender activities from the early stage of project implementation (to enhance gender equality through project activities over time). 32. To avoid these missed opportunities, future projects must undertake timely revision and/or updating of the design phase GAP (or timely development of a GAP, if no design phase GAP was prepared). To enforce the implementation, targets identified in the GAP should be incorporated in the PAM, the operational guidelines, and the project monitoring system. Sections in the project operational guidelines need to be developed that specifically and clearly address gender activities (use the project GAP as the reference). At the design stage, the gender targets must be integrated in the design and monitoring framework. 33. The project GAP should be sufficiently disseminated to and discussed with all stakeholders during the beginning of project implementation, to ensure that the GAP is understood and owned by all implementers (and not only perceived as the gender specialist's business). Whenever the GAP needs to be updated, the relevant implementers must be consulted and agree on the revisions. The project GAP must function as the main reference for the project-based gender specialist's work plan and outputs. In the case of demobilization and new recruitment of a project-based gender specialist, the GAP should be used as a checklist to identify what has been done by previous experts and what still needs to be done by the new experts. This can ensure the continuation of GAP implementation. 34. Limited capacity of the project team to implement the GAP and monitor results. The PMU leadership has a good knowledge of gender, but other members of the project team, including local implementers still need to improve their gender awareness and knowledge.

62 Appendix 12

Although the project has components on strategy and planning development, community mobilization and capacity building, it tends to be perceived as an infrastructure project with civil works as the prime element. In addition, most of the implementers have a technical background; therefore dealing with social aspects such as gender is not their expertise. The inability to incorporate sex-disaggregated data and gender analysis in the development of the RP4D in most cities has been more likely caused by lack of knowledge and capacity on gender rather than lack of willingness. Therefore, briefings and training on gender perspectives and the project GAP must be timely and systematically provided to the implementers from the PMU at the central level to the community facilitators. In addition, build the capacity of project teams to collect and analyze sex-disaggregated data of all relevant project activities, integrate the collection of sex-disaggregated in the information management system of the project (the project gender specialist must work with the MIS experts for this purpose), and use the GAP as a base for gender monitoring, which must be an integral part of the project monitoring system. 35. Sustainability of project gender equality promotion. With regard to the efforts conducted under the project to improve gender awareness and capacity of national, district, and city government staff, the promotion of gender equality should especially be performed by government staff who have been intensively involved in the project as staff of the PMU, satker, and LCOs, because they have received gender briefings and have experience in implementing the GAP. During this last year of project implementation, lateral learning events (e.g., workshops, seminars, briefings) should be organized where the PMU, Satker, and LCO staff can share their knowledge and experience in mainstreaming gender equality at the project level to other staff in their institutions. These lateral learning events should encourage their institutions to systematically address gender issues in all programs and projects. In addition, the PMU, Satker, and LCOs can be trained as gender focal points in their institutions. These internal gender focal points can initiate a gender-working group in their institutions and continue to promote the gender agenda.

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