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Facility Review and Planning Document: Feb 2011

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INDONESIA INFRASTRUCTURE INITIATIVE

FACILITY REVIEW AND PLANNING DOCUMENT (FRPD) February 2011


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INDONESIA INFRASTRUCTURE INITIATIVE

FACILITY REVIEW AND PLANNING DOCUMENT (FRPD) February 2011


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TABLE OF CONTENTS

1. EXECUTIVE SUMMARY 7

2. WORK PLAN DEVELOPMENT 8 2.1 Introduction 8 2.2 Water and Sanitation (Watsan) 9 2.3 Transport 15 2.4 Infrastructure Policy and Investment Program 22 2.5 Infrastructure policy and planning 24 2.6 Telecommunications 24 2.7 Risk based methodology in internal audit function 25

3. REVIEW OF PROGRESS 26 3.1 Introduction 26 3.2 Activity development and approvals 26 3.3 Activity expenditure 28 3.4 Expenditure projections to June 2011 31

4. MANAGEMENT SYSTEMS 35 4.1 Communications 35 4.2 Risk management/ Gender/ Environment 37 4.3 Administration and management 37 4.4 Facility management and procurement systems 38

ANNEXE 1: IndII organisational chart 39

ANNEXE 2: Key results matrix 40

Table 1: IndII structure, MC responsibilities and expenditure targets 9

Table 2: Activity development, August 2010 – January 2011 i Table 3: Approved activity budgets by counterpart agency 28

Table 4: Approved activity budgets by component 28

Table 5: Activity approved budgets and expenditure 28

Table 6: Monthly expenditure by work plan period 31

Table 7: WSI activity approvals 33

Table 8: WSI activity approvals and contract commitments 33

Table 9: Total allocation and breakdown of World Bank Trust Fund 34

Figure 1: Hibah Progress at Local Government 11

Figure 2: Cumulative Water Hibah progress 12

Figure 3: Cumulative Sanitation Hibah progress 12

Figure 4: Cumulative Technical Team and AusAID approvals 27

Figure 5: Contract commitments 31

Figure 6: IndII forecast expenditure – monthly and cumulative 32

Figure 7: IndII forecast expenditure – WSI - monthly and cumulative 33

Box 1: Key elements of the forward work plan period - Watsan 9

Box 2: Key elements of the forward work plan period - Transport 15

Box 3: Key elements of the forward work plan period – Policy & Investment 22


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ACRONYMS

ADB Asian Development Bank

AIPCS Australia Indonesia Partnership Country Strategy

AMPL Air Minum dan Penyehatan Lingkungan (Water supply and environmental sanitation) Working Group AP Angkasa Pura

APID Administrasi Pendapatan Investasi Daerah

ARF Adviser Remuneration Framework

ASA Air Services Australia

ASEAN Association of South East Asian Nations

ATCS Area Traffic Control System

ATM Air Traffic Management

ATM Air Traffic Master Plan

AUD Australian Dollars (also $A)

AusAID Australian Agency for International Development

BP3D Badan Perencanaan Pengendalian Pembangunan Daerah

Bappeda Badan Perencanaan Pembangunan Daerah

Bappenas Badan Perencanaan dan Pembangunan Nasional (National Development Planning Agency)

BLUD Badan layanan umum daerah

BPKP Badan Pengawasan Keuangan dan Pembangunan

BRT Bus Rapid Transport

BUMN Badan Usaha Milik Negara (State Owned Enterprise)

CBO Community Based Organisation

CMEA Coordinating Ministry of Economic Affairs

CPG Commonwealth Procurement Guidelines

CSS City Sanitation Strategy

DED Detailed Engineering Design

DFA Direct Funding Agreement

DG Directorate General

DGCA Directorate General of Civil Aviation

DGH Directorate General of Highways (Bina Marga)

DGHS Directorate General for Human Settlements (Cipta Karya)

DGLT Directorate General of Land Transport

DGPT Directorate General of Post and Telecommunications

DGR Directorate General Rail

DGPT Directorate General of Post and Telecommunications

DGST Directorate General of Sea Transport

DGWSD Directorate General for Water Supply Development

DPU Departemen Pekerjaan Umum (Department of Public Works)

ECU Expressway Corporation Unit

EIA Environmental Impact Assessment

EINRIP Eastern Indonesia National Roads Improvement Project

FCPS Fraud and Corruption Prevention Strategy

FGD Focus Group Discussion

FMO Financial Manual of Operations

FY (Australian) Fiscal Year - i.e. July to June

GOA Government of Australia

GOI Government of the Republic of Indonesia

GIS Geographical Information System

GPS Global Positioning Satellite (technology)


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IASTP Indonesia Australia Specialised Training Project

IAT Impact Assessment Team

ICAO International Civil Aviation Organisation

IEDA Indonesian Expressway Development Authority

IEG Infrastructure Enhancement Grant

IEI Immediate and Emerging Issues

IFGI Infrastructure for Growth Initiative

IIC Indonesian Infrastructure Community

IIFF Indonesia Infrastructure Financing Facility

IISTF Indonesia Infrastructure Support Trust Fund (World Bank-managed IndII Trust Fund)

IBMS Indonesian Bridge Management System

IMO Infrastructure Maintenance and Operation

IRMS Indonesian Road Management System

IndII Indonesia Infrastructure Initiative

IndII IA Indonesia Infrastructure Initiative Imprest Account

INP Indonesian National Police

INTP Indonesian National Traffic Police

IPM Infrastructure Project Management

IRSDP Infrastructure Reform Sector Development Project

IRT Independent Review Team

IT Information Technology

ITSAP Indonesia Transport Safety Assistance Package

ISSDP Indonesia Sanitation Sector Development Program

JAATS Jakarta Automated Air Traffic Control System

JBIC Japan Bank for International Cooperation

JICA Japan International Cooperation Agency

KKPPI Komite Kebijakan Percepatan Penyediaan Infrastructure

KRA Key Result Area(s)

M&E Monitoring and Evaluation

MDB Multilateral Development Bank

MDG Millennium Development Goal(s)

MIS Management Information System

MOF Ministry of Finance

MOT Ministry of Transport

MPW Ministry of Public Works

MSOE Ministry of State Owned Enterprises

MTDP Medium Term Development Plan

MTEF Medium Term Expenditure Framework

NGO Non-Government Organisation

NPMP National Ports Master Plan

NRMP National Roads Master Plan

NRRIT National Railway Revitalisation Integrated Team

NTB Nusa Tenggara Barat

NTT Nusa Tenggara Timur

P&R Policy and Regulatory

PAMSIMAS Penyediaan Air Minum dan Sanitasi Berbasis Masyarakat

PDAM Perusahaan Daerah Air Minum (District Water Supply Company)

PDD Project Design Document

PELNI Palayaran Nasional Indonesia (National Shipping Line)

PERPAMSI Persatuan Perusahaan Air Minum di Seluruh Indonesia (Ind. Assn of Drinking Water Co.)

PLN Perusahaan Listrik Negara (State Electricity Authority)


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PMK Peraturan Menteri Keuangan (Minister for Finance Regulations)

PNPM Program Nasional Pemberdayaan Masyarakat (PNPM Mandiri)

PPP Public Private Partnership

PSO Public Service Obligation

PSOs Pioneer Shipping Services

PTKAI P.T. Kereta Api Indonesia (Indonesia National Railway)

P2ID Phase II (IndII) Implementation Document

RBIA Risk Based Internal Audit

RENSTRA Rencana Strategis (Strategic Plan)

RFT Request for Tender

RMP Railways Master Plan

RSA Road Safety Audit

RSEU Road Safety Engineering Unit

SC Social Contract

SOP Standard Operating Procedure(s)

SPE Strategic Partnership Engagement(s)

SPR/SR Special Purpose Railway / Special Railways

SPS Strategic Partnership Support

STT Sanitation Technical Team

TA Technical Assistance

ToR Terms of Reference

QAE Quality at entry

USAID United States Agency for International Development

WASAP Water and Sanitation Sector Program (Trust Fund through EKN managed by WB)

WASPOLA Water and Sanitation Policy Formulation and Action Planning Project

Watsan Water and Sanitation

WB World Bank

WSI Water and Sanitation Initiative

WSLIC Water and Sanitation for Low Income Communities

WSP Water and Sanitation Program (through World Bank)

WWTP Wastewater Treatment Plant

Facility Review and Planning Document: February 2011

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1. EXECUTIVE SUMMARY

This Facility Review and Planning Document (FRPD) reviews the period from August 2010 to January 2011; and presents a forward work plan for the period February 2011 until the end of the current Phase in June 2011.

The remaining five months of the IndII program will be extremely challenging with the major focus on:

1. Finalising and implementing the existing program within the limited time constraints that remain;

2. Developing a substantial forward work plan for Phase II; and

3. Achieving full expenditure for both the IndII and WSI Imprest accounts of funds totalling $51.4 million, by the end of June.

AusAID, through its review processes, and the IndII Board have agreed to work toward an extension of IndII for another four years. Separately, the Australian Government has determined that its development aid is to reflect a more judicious use of technical assistance and a greater use of partner government systems. Accordingly, the overall composition of a future IndII program of support is likely to involve less policy and more project preparation technical assistance, and more fiscal transfer to decentralised units of government - through support for GoI’s Hibah programs and Infrastructure Enhancement Grants (IEGs).

All elements of the IndII program are currently on target to achieve planned outcomes on time and within budget. Critical to IndII meeting planned outcomes over the remaining four months will be AusAID’s timely review and approval of activity designs and budgets.

As of end-Jan 2011, IndII had achieved the following:

Eighty-two (82) IFGI-funded activities had been approved and commenced, of which 41 have been completed;

Approximately half of the original $A40 million had been spent, with the remaining half to be spent during the last five months of IndII (Phase I) – including a large transfer to fund the IEGs in March 2011;

IndII remains on track to complete 65,000 WSI-funded household water and wastewater connections, with more than one-half of those connections already completed; and

Signed, formal engagements for the IndII Watsan program with approximately 70 local governments had been completed (mainly grants agreements through the implementation of the WSI and IEGs).

,


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2. WORK PLAN DEVELOPMENT

2.1 Introduction

This chapter of the FRPD reviews recent program development and outlines IndII’s forward strategy for the period February 2011 to June 2011. It builds upon and extends previous FRPDs and work plans, as the facility’s fundamental approach to program design and development remains unchanged.

As noted in earlier FRPDs, a crucial element of IndII’s approach is the concept of “progressive engagement” - beginning small with concept development, and progressively building the engagement through scoping, design and pilot activities, before moving to full engagement. The momentum toward full engagement has clearly strengthened during the previous work plan period, and will continue to do so until the June 2011 end-date for the current phase of IndII. The rapid scaling up of activity has been necessitated to some extent by this imminent end date. There is little doubt that the remaining five months of IndII will be challenging. There are two major challenges in this regard:

First, is “wrapping up” and finalising all existing programming. This will include designing and procuring for new activities. However with only five months remaining, IndII can begin only new activities with short project life cycles. All programming, whether new or existing, must be fully completed - with invoices submitted and paid by June 2011. This is a substantial challenge, given the funds remaining to be expended. As can be seen in greater detail in the tables and charts in chapter 3, IndII must program and spend the equivalent of what it has achieved in the first 30 months of the program (approximately $A20 million, not including WSI funds), during the final five months of the program. This may seem unrealistic; however, some large expenditures are planned in coming months (in particular the IEG investments in March). The above-mentioned strategy of progressive engagement has resulted in IndII moving to full engagement on a number of fronts, greatly enhancing the facility’s current capacity to program and spend. Over the remaining months of IndII, (non-IEG) spending is forecast at around $A3 million per month, which is roughly three times the monthly average of the past year. These are ambitious, but achievable, goals. Momentum will be increased to even higher levels in coming months, but understandably, this pace will need to be slowed in June, due to the program end-date

Second, in addition to the ambitious tasks outlined above to complete existing programming, IndII must also develop a forward plan for the (expected) four-year extension. This is proving to be a management-intensive exercise, consuming considerable time of the IndII staff, and involving the design and implementation of many small scoping and design activities. During the coming five months, IndII expects to finalise a number of these scoping studies, including: studies on solid waste and drainage; a review of WSI and the IEGs; a concept note on possible road safety and roads overloading activities; the design of a watsan service index; and the first stage design of a number of other activities including port authorities, roads’ overloading and urban mobility measures.

Coinciding with this rapid scale up in activity in the final months of IndII (Phase I) is the recent announcement of the Australian Government’s Advisor Remuneration Framework (ARF). The ARF is designed to ensure that AusAID maximises value for money from taxpayers’ funds used to finance Australia’s international development assistance initiatives. The Framework defines remuneration ceilings which could have significant ramifications for the future functioning of a Facility whose effectiveness to date has depended heavily on its ability to engage highly qualified and experienced specialists across a wide range of disciplines. IndII remains confident that it can continue to deliver a first-class infrastructure program, but acknowledges that the implementation of the ARF in the short term may constrain having some activities approved and initiated in the coming months.

In reviewing the most recent FRPD period, it is clear that IndII has gathered considerable momentum in terms of its programming activities and its engagement with GoI. The Water and Sanitation program is being implemented in 70 local governments1 with a range of WSI and IFDI activities; the Transport program has continued to develop, with a large roads’ program in progress at DGH, and a rapidly expanding set of new activities being developed at MoT; and IndII’s engagement with GOI continues to broaden and deepen through a range of activities under the Infrastructure Policy and Investment program.


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Despite these important changes and developments, IndII’s work plan continues to be shaped by the directions and guidance provided by the Advisory Board. IndII will continue to seek a sensible balance between demand responsiveness and strategic focus, and between assisting strong and weak agencies. Continuing efforts are also being made to arrive at an appropriate mix of national and sub-national activities (as directed by the Board). The proposed work plan contained in this FRPD is designed not only to respond to these directions, but also to reflect the Government of Indonesia’s policy reform and institutional development priorities - as defined in various laws, regulations and policy statements. A significant, related issue that must be addressed as a matter of urgency is the need to prepare for any next stage of IndII support, should an extension be approved, to ensure GoI continued participation in planning and implementing activities.

Table 1: IndII structure, MC responsibilities and expenditure targets

Component / theme Role played by IndII Budget

$A Million

Spent as of Jan 2011

To be spent by

June 2011

IndII – IFGI funded Activity Identification and preparation, procurement, management and M&E for Watsan, Transport and Policy and Investment component activities

40.0 20.3 19.7

Infrastructure Project Management

Policy & Regulation

Infrastructure Enhancement Grants

WSI – WSI funded Urban Water – Hibah Component executed by IndII on behalf of

AusAID - Implementation, M&E, verification, and oversight of BI Special Account.

20.0 4.5 15.4 Urban Sanitation – Hibah 5.0 1.0 4.0

WSI technical assistance including - Sewerage Master Plans (8 cities), public diplomacy, verifications, baseline surveys etc

Components executed by IndII on behalf of AusAID - Activity Identification and preparation, procurement, management and M&E.

10.1 1.7 8.4

Facility Management Contract costs for management covering total activities: both IFGI and WSI

13.3 9.4 3.9

Total 88.4 36.8 51.4

2.2 Water and Sanitation (Watsan)

Box 1: Key elements of the forward work plan period - Watsan

Conclude the baseline survey and start the Hibah socialisation to LGs (WSI). Continue the verification process for the Water Hibah (WSI). Continue the implementation of the second batch of Water and Sanitation Hibah LGs (WSI). Implement the wastewater capacity building consultant (WSI). Continue the wastewater master plans for eight cities and the wastewater master plan oversight

consultant (WSI).

Support WB implementation of the Pamsimas component of WSI (WSI). Implement twenty two LG sanitation Infrastructure Enhancement Grants (IEG) projects (IFGI).

Continue with implementation of other Watsan activities in Losari Beach, Mamminasata, multi-village CBO (Community Based Organisation) water supplies, and NTT/NTB water governance project (IFGI).

The water and sanitation sector represents a significant portion of the overall IndII program of collaboration with the GOI. The focus of the program is the implementation of the GoA’s Water and Sanitation Initiative (WSI), delivered through the Water Hibah, Pamsimas, the Sanitation Hibah, and the preparation of investment plans for wastewater development in eight cities. In addition to the WSI, IndII is providing support to selected local governments through the Infrastructure Enhancement Grants (IEG), as well as through a number of smaller initiatives to promote water supply and sanitation outcomes.


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2.2.1 GOI water supply incentives grant (Water Hibah)

The Water Hibah is a program under the AusAID Water and Sanitation Initiative to encourage local governments (LGs) to invest in their water companies (PDAMs) to improve public water services. It is part of a broader GoI program to reform and restructure the water sector covering tariff setting, credit finance to PDAMs, and debt restructuring. The incentive component of the Water Hibah is an output-based grant to selected LGs that invest equity in their PDAMs and which the PDAMs then use to expand their water supply networks. The PDAMs must further ensure that the expansion results in connections to low income households, 50% or more of which are classified2 as poor. The LGs receive their grant after the network expansion is complete and the new connections to poor households have been verified as working satisfactorily, by an IndII-appointed consultant. The size of the grant is directly linked to the number of new connections made.

The funds for the Water Hibah grants are provided by AusAID to the Ministry of Finance (MoF) under the provisions of a Direct Funding Agreement between GoI and AusAID. The Water Hibah program itself is implemented using GoI systems and procedures, and grants are provided to the LGs by the MoF through new GoI regulations governing grant transfers. The Water Hibah program is one of the first programs to test the application of the new grant channel, and the first to apply it to water and sanitation infrastructure. The LGs must first sign “on-granting” agreements with MoF, legally binding them to implementing the program. The LGs must also implement the expansion program in accordance with a Program Management Manual issued by the GoI technical agency - the Directorate General of Human Settlements (DGHS). The MoF has signed on-granting agreements with 35 LGs, committing approximately $16.5 million in grants (59,000 connections). The balance of the $20 million will be committed to selected LGs demonstrating good performance and the capacity to absorb additional grant. The implementing agency, DGHS, has submitted a request to MoF in January 2011 recommending the award of approximately $3.5 million in additional grants to 11 LGs (17,000 connections). Overall, the Water Hibah activity is expected to result in approximately 65,000–75,000 new water connections.

AusAID and MoF signed a Direct Funding Agreement (DFA) in May 2010 and implementation of the Water Hibah commenced in June 2010. The attached figures (1) and (2) show the progress of implementation to date. Figure 1 (over) shows the allocation of the Water Hibah3, the connections achieved as the end of January, and the connections verified. Figure 2 (over) shows the cumulative growth of connections from start up to the present - and the projected path to completion. A verification consultant has been engaged by IndII to assess the compliance of local governments and PDAMs with the terms and conditions of the Hibah grants and to verify the application for payments made by the local government. Verification of the completed connections started in December 2010. Applications for payment of the Hibah were received from 10 local governments, comprising 23,469 connections, with a grant value of IDR 45.2 billion.

A workshop was held by IndII, MoF, and DGHS on

8 December 2010 to review applications for payment of the Hibah from 10 local governments. This workshop set out the procedure and documentation necessary to support the payment of the grants. The sum total of the initial payment requests was IDR 45.2 billion (approximately $5 million). After review of all documentation including evidence of the payment of local government equity to the PDAM, a total of IDR 37.4 billion (approximately $4.2 million) was authorised for payment. The MoF subsequently disbursed IDR 37.4 billion on 13 December 2011 from the Bank Indonesia special account for the Hibah, to 10 local governments.

In the coming work period the focus will be on completion of the program, verification of remaining connections, and implementation of any supplementary grants awarded by MoF.

2 Low income households in the Water Hibah program have been defined as households with an electricity connection <1.3 KVA while poor households are those

with an electricity connection <0.9 KVA 3 Figure (1) also shows the allocations and progress of the Sanitation Hibah.


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2.2.2 Sanitation Hibah

For the Sanitation Hibah, IndII is applying the output-based grant mechanism of the Water Hibah to a pilot program to expand sewerage connections in the existing sewer systems of the Banjarmasin, Surakarta, Balikpapan, Bandung, and PDPAL Jaya Jakarta. The mechanism for implementing the Sanitation Hibah is essentially the same as that of the Water Hibah, requiring each LG to invest in the wastewater company4 to achieve new sewer connections. The grant is paid after sewer connections are verified by the same independent consultant who will be undertaking the verifications for the Water Hibah. The Sanitation Hibah also provides a lower level of grant for localised communal sewer schemes that will connect to the main sewer at some future date. A total of $A5 million is allocated for the WSI Sanitation Hibah, which is expected to yield approximately 10,000 new house connections.

Implementation on the Sanitation Hibah started in June 2010: as at January 2011, all five LGs participating in the Sanitation Hibah have signed on-granting agreements and have been surveyed by the baseline survey consultant. The attached figures (1) and (3) show the progress of implementation to date. Figure (1) shows the allocation of the Sanitation Hibah5, the connections achieved as the end of January, and the connections verified. Figure (3) shows the cumulative growth of connections from start up to the present, and the projected path to completion. Notably, the scope of the Sanitation Hibah and the pace of implementation are lower than the Water Hibah. Two reasons for this are that the base level of sewerage services is much lower than water services, and that the incentives for poor households to connect to the sewer system are not as obvious to the household as the benefits of a water connection.

Notwithstanding that, the first stage verification which was conducted at the same time as the water supply verification yielded IDR 8.1 billion (approximately $1 million) in grant disbursements.

In the current work plan period, the primary focus will be on completing the remaining sanitation hibah program and increasing the allocation to Banjarmasin and Surakarta. Some additional grants may be allocated for small scale localised schemes using communal sewer facilities.

Figure 1: Hibah Progress at Local Government

4 Where the sewer system is operated by the PDAM as in Bandung, Surakarta, and Balikpapan, the investment is to the PDAM. 5 Figure (1) also shows the allocations and progress of the Water Hibah.

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Figure : 1Hibah Progress at Local Government

Water Hibah AllocationSanitation Hibah AllocationInstalledVerified


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Figure 2: Cumulative Water Hibah progress

Figure 3: Cumulative Sanitation Hibah progress

2.2.3 Wastewater investment plans

This component of the Water and Sanitation Initiative supports the preparation of master plans and investment proposals for sewerage systems in selected cities. A significant part of the activity is the selection and approval process, requiring commitments from the city governments to implement the investment programs, using funding principles established under the MOF on-granting regulations.

During the previous work plan period, three consultant packages for the preparation of Wastewater Investment Plans for Surabaya, Bogor, and Makassar (Packet 1), Bandar Lampung, Palembang, Batam

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Figure : 2Cumulative Water Hibah Progress

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(Packet 2), and Cimahi, Pekanbaru (Packet 3), have been tendered and awarded as part of the WSI sanitation component. IndII also engaged an oversight consultant to supervise the implementation of these three Master Plan and Investment preparation contracts.

By January 2011 the Packet 1 consultant had submitted a draft Interim Report, while Packets 2 and 3 have submitted inception reports and are due to submit their Interim Reports in the immediate future.

2.2.4 Other water and sanitation programming (IFGI funded)

Complementing the WSI during the next work plan period will be a range of other water and sanitation initiatives funded through IndII. These include:

Implementation of Infrastructure Enhancement Grants (IEG) using output-based modality and GOI grant mechanism.

The IndII program includes a provision of funds for Infrastructure Enhancement Grants (IEGs) to enhance the efficiency and service delivery of existing infrastructure, including wastewater and solid waste facilities. The IndII WatSan Technical Team approved a proposal for implementing the IEGs with a total allocation of funds of $6 million. During the previous work period, the GoI and IndII have agreed on a framework for the implementation of the sanitation IEGs for the period to 30 June 2011.

GoI and IndII jointly prepared and issued general guidelines for the selection and prioritisation of candidate proposals and local governments. LG selection is based on criteria which, ranked in importance, are: (a) the LG has a City Sanitation Strategy6 (CSS); (b) The LG is in the process of preparing a CSS in FY 2010; (c) the LG has a Medium Term Investment Program (RPIJM) for sanitation that has been approved by DGHS; and (d) the LG has a program of sanitation that it planned to implement in FY2010. The selected LGs must also agree to apply the IEG in accordance with the requirements of the on-granting agreement between the LG and the Ministry of Finance.

The maximum value of each grant was based on an appraisal of the candidate LG’s FY 2010 Sanitation program as defined in their sanitation Budget Implementation Documents (DPA). This was the starting point for the output-based determination of the grant amount eligible for each LG. The review of candidate LGs was completed by the DGHS in consultation with IndII. After the evaluation, 22 local governments were selected to participate in the Sanitation IEGs.

The on-granting agreements (NPPH) for the IEGs between the MoF and the 22 beneficiary LGs (4 districts and 18 municipalities) were signed on 26 October, 2010. The total grant award is Rp48 billion - or approximately $5.6 billion. The balance of the $6 million is allocated for verification consultants and supervision of the implementation of the program. The grants will be disbursed upon verifiable and successful completion of the LG’s accredited sanitation program for 2010. The LGs will then apply the grant to specific and approved sanitation infrastructure for the FY2011 program, which must include a counterpart sanitation investment minimum equal to 30%, 40% or 50% of the value of the grant; the percentage being based on the Fiscal Capacity of the LG (low, medium, or high/very high). This component must be financed entirely from the LG’s own revenue sources. IndII is in the process of tendering the services for a team of independent consultant that will be assigned to verify the completion of FY 2010 sanitation program, and the FY 2011 sanitation program and budget, prior to the grant payment.

In the forthcoming work period IndII will mobilise the verification consultants, conduct an appraisal of the completion of the FY 2010 sanitation program; evaluate the FY 2011 program and the programming of the locally funded counterpart component of the program; and supervise the implementation.

Nusa Tenggara water supply governance project

This activity focuses on strengthening small, weak PDAMs in Eastern Indonesia through the creation of a more favourable and supportive external governance environment, as well as

6 A City Sanitation Strategy is a document showing the commitment of the municipal or district government to implement a program of

sanitation improvements agreed to between the local government and community stakeholders, and is part of the GOI’s Accelerated Sanitation Development Program (PPSP).


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seeking improvements to the internal PDAM environment. It also recognises that, with the low fiscal capacity of districts, external assistance is necessary to improve PDAM sustainability.

The overall goal is to improve the delivery of urban water services in Eastern Indonesia by piloting the application of social contracts (SCs)7 between the PDAM, the LG and each community in five local governments. As at January 2011, the second stage of the activity had commenced and five8 LGs are proceeding with second stage activities.

The consultant conducted a plenary “kick-off” meeting for Stage 2 in Kupang on 11 January 2011, chaired jointly by the provincial government and Bappenas, at which each LG and PDAM presented their social contract proposals and progress towards the mutual objectives.

In the coming work plan period, the focus will be on implementing the social contracts, delivering assistance that has been committed in the social contracts, and strengthening the external environment of the PDAMs.

Detailed engineering design (DED) for the Mamminasata Solid Waste

IndII has engaged consultants to prepare the detailed design of the regional solid waste disposal site in South Sulawesi which will serve the local governments of Makassar, Gowa, Maros, and Takalar, under the coordination of the provincial government. Finalisation of the design will enable the GoI to implement the project through a JICA loan, scheduled to be effective from mid-2010. As at January 2011, the consultant had completed the detailed design and documentation for the solid waste facility and the completed documents and drawings were handed over to the client, DGHS.

Losari Beach environmental impact assessment

The Losari Beach Wastewater Treatment Plant (WWTP) will treat 10,000m3 of sewage (from the equivalent of 20,000 households) by the year 2028. The selected six-hectare site is located within three kilometres of the main business and tourist area of Makassar, on undeveloped land near the coastal area. The proposed treatment process involves aerated lagoons. Under GOI legislation, a full environmental impact assessment (EIA) must be completed before the project can be approved and proceed. 9

The EIA is being conducted in two stages: the first being an initial assessment to determine the significant environmental issues; while the second involves detailed field work and analyses to determine the environmental impacts, mitigation measures and monitoring requirements. The first stage was completed by the IndII consultant during the previous work plan period, while the second stage, to include coastal waters’ field studies and community consultations, was commenced during the second half of 2010. By January 2011, the second stage activity had been contracted and the consultant had mobilised. The consultant has prepared an Inception Report and detailed workplan to complete the activity by May 2011.

In the coming work plan period, the focus will be on completing the environmental impact assessment and securing the decision from the Regional Environmental Commission on the appropriate environmental management and/or mitigation measures.

Upgrading community-based pipe water services with private sector support (second- generation project)

IndII is undertaking this activity jointly with World Bank/Water and Sanitation Program (WSP). Presently, the GoI's efforts in village water infrastructure are focused on the initial challenges of building water supply systems and organising communities to operate them. This activity addresses the question of scaling up those initial systems, by introducing private sector-based support systems. The project has three key components: (a) supporting 25 community based organisations (CBOs) to access investment financing through a commercial (microfinance) bank;

7 A social contract is an agreement that outlines the obligations of the PDAM, the local government, and the community - but which does not have legal force.

Social contracts will be customised to suit the particular situation and priorities of each local government and will be used as a basis to improve the sustainability of the PDAMs

8 The five LGs are Ende, Flotim, Kupang, Sumtim, Dompu 9 Funding for the construction of the WWTP is expected to be obtained from the ADB, and will be part of a larger project which includes the construction of sewers,

pumping stations and pumped transmission pipes.


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(b) Introducing private sector participation programs in two districts that aim to support the ability of CBOs to improve performance; and (c) Introducing service obligations agreements between local governments and CBOs - and monitor through benchmarking.

For component (a), 17 CBOs have submitted the loan proposals to BNI and are currently being appraised by the bank. Three more CBOs are expected to submit the loan proposals soon.

Total investment of the 17 CBOs is about Rp3 billion of which Rp2.1 billion is proposed for BNI loan financing. The performance grant for the CBOs is estimated at Rp1 billion or equivalent to AUD 0.12 million (see right).

MOU between BNI and IndII regarding the provision of credit facility for the successful CBOs have been finalised and ready for signing by both parties.

For component (b), a consultant has been contracted and started to work in November 2010. Based on the initial assessment, four LGs (kabupatens of Bandung, Cianjur, Malang and Tulung Agung) have been identified as potential LGs for private participation. A workshop was held in Bandung on 20 January 2011 involving Bappenas, the LGs and potential CBOs of Bandung and Cianjur, and the private sector. The purpose of the workshop was to inform the private sector service providers about CBOs; the opportunity to participate in the development of the CBOs; and possible types of partnerships.

In the coming work plan period, the focus will be on implementing a similar workshop in Malang for selected CBOs in Malang and Tulung Agung - by the end of January 2011. Subsequently tenders will be prepared for small-scale private sector management, or operations contracts for the selected CBOs.

2.3 Transport

Box 2: Key elements of the forward work plan period - Transport

Road Safety Provide further support to the Indonesian National Police (INP) and the Directorate General Land

Transport (DGLT) to strengthen institutional capacity through scoping studies.

Conduct a Road Safety Audit (RSA) and crash reduction program , and develop road safety manuals and DVDs

Roads Commence Stage 2 study of road maintenance for provincial and kabupaten roads; Continue work on the support to the establishment of an Indonesian Expressway Development

Authority (IEDA);

Continue work on developing a National Road Master Plan (NRMP); Continue to review road design standards to ensure that designs are based on optimal whole life

costing; and Introduce performance-based contracting. Rail Transport Monitor National Railway Master Plan (NRMP) document to be issued by DGR (MOT), with due

consideration of the IndII Consolidated Background Papers and the Interface Report; Commence development of Special and Limited Public Railway regulations (Phase 3); Commence a scoping study on the PSO-IMO-TAC framework (Phase 1). Sea Transport Complete National Ports Master Plan (NPMP) Technical Report (with corresponding NPMP summary

document, draft decree and Working Papers); Commence a scoping study for the establishment of port authorities (Stage 1). Urban Transport


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Establish mechanism and program to assist in the development of urban transport infrastructure in selected Local Governments (LGs), through a blending of technical and grant (IEG) assistance;

Begin development of a program to assist urban mobility improvement plans in Greater Jakarta area; Continue and broaden urban transport policy activities in Surabaya. Air Transport Continue work on Air Traffic Management (ATM) Study; Continue work on the Open Skies Phase II Study; and Finalise Bali Airport (Ngurah Rai Airport) Study(ies).

The IndII Transport program – covering both the Roads and Non-Roads sectors - has grown substantially since the last reporting period, not only in the number and scope of activities, but also in terms of funding.

The Roads program has two strategic elements: to improve the effectiveness of the existing quantum of resources for roads management at the Directorate General of Highways (DGH), through key programs such as the implementation of a Medium-Term Expenditure Framework - Performance Based Budgeting (MTEF-PBB) system; and to reduce the national road toll through better road safety institutional arrangements and capacity.

2.3.1 Roads

The IndII road program provides an integrated package of technical assistance, primarily to DGH, to support policy reform, institutional change, budget planning and performance accountability, and improved efficiency and effectiveness of service delivery at the national, provincial and kabupaten levels. The roads program consists of three components: (a) policy, institutional and technical support to improve road safety; (b) scoping and needs assessment aimed at improved road maintenance for provincial and kabupaten roads; and (c) support for the implementation of the MTEF-PBB.

(a) Road safety

The road safety component is in its second year and the Road Safety Engineering (RSE) Unit has already identified improvements in the understanding of road safety issues and in the creation of safer roads in Indonesia. A Road Safety Book to target all stakeholders related to road safety, including policy-makers and engineering staff, was launched in December 2010.

A blackspot program has been established in DGH. Although it faces challenges, as in any new program, there is a need to continue to transfer knowledge to many engineers in the Balai’s so that the objectives of the program can be met. DGH has set a target of 250 blackspots to be investigated in the five years 2010 – 2014.

Two workshops were held in October 2010 to provide EINRIP Contractors and their staff with necessary background information and knowledge to be able to develop a safe and efficient traffic management plans for road work sites. Other IndII road safety programs have started in August and September 2010, continuing existing positive support of DGH.

The Road Safety Audit (RSA) program, targeting firstly the Eastern Indonesia National Roads Improvement Project (EINRIP) designs, together with a crash reduction (i.e. black spot investigation) program, has to date completed road safety audit reports and crash reduction reports. RSEU team members from DGH have been trained to become lead auditors.

The development of three road safety technical manuals and accompanying DVDs have progressed and completed preliminary (first) drafts for two of the three manuals, namely Road Safety Engineering for Indonesian Roads (how to improve safety on Indonesian roads using low-cost measures including black spot investigations) and Roadside Hazard Management (a step-by-step guide to clear zones, and strategies to reduce the risk of common roadside hazards, including technical advice on the correct use of crash barriers). Agreement was reached on the layout for the manuals, and preparation of diagrams continued.

A road safety scoping INTP-MOT activity was aimed at developing a wider road safety program to be supported by IndII, including potential expansion of the program in Ministry of Transport, and INTP. Working papers summarising current legal and institutional framework on road safety


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management, and reflecting any changes in 2008 conclusions resulting from the new law and regulation, were prepared by two international road safety consultants. Recommendations related to improving the overall policy dialogue among DGH/INTP and DGLT/MOT, and a review of the Indonesian National Traffic Police corps were prepared. A summary of recommended road safety activities for INTP and MOT and identified Dinas Perhubungan was delivered - and will be proposed for implementation during IndII Phase II.

(b) Sub-national (provincial and kabupaten) roads

Rural roads provide vital links to services and employment for communities, access to markets and the transport of goods. Their quality, in terms of providing reliable and efficient access, can also significantly affect socio-economic outcomes.

In many parts of Indonesia, poor conditions exist on many regional and local road networks. Consequently, the DGH has been given national responsibility for the provision of leadership and support to local road agencies to help improve the management of regional roads - this being defined as the third important mission of DGH in RENSTRA 2010-2014.

This project’s primary aim was to review current road maintenance practices and funding at the sub-national level to assist DGH in its mission, through developing and demonstrating a systematic and sustainable approach to planning, programming and budgeting road maintenance activities in selected provinces and kabupatens; this will provide a model that can be adopted throughout Indonesia.

The specific objectives of the first phase, which was finished in early September 2010, were to:

Collect detailed information on the current road maintenance situation in representative sub-national road agencies, in particular in Eastern Indonesia;

Carry out a detailed investigation of the maintenance needs, funding and management practices in the selected local government areas as a basis for the design of an ongoing program of sector support;

Identify the role of DGH and other potential agencies in supporting road maintenance management for provincial and kabupaten roads; and

Confirm the jurisdictions which will be included in the piloting of the road maintenance planning process.

The second phase commenced in January 2011 and includes piloting activities in Nusa Tenggara Barat to: Develop a road maintenance policy statement; Draft a complementary set of technical guidelines which detail appropriate access, design

and maintenance standards, performance measures and indicators; Socialise the draft policy to local government and DGH; Prepare maintenance planning procedures including the processes, data, models, tools and

criteria. Demonstrate draft maintenance planning procedures and verification of network funding

needs; and Identify the staffing and resourcing needs, including capacity building strategies for local

government staff.

(c) Support for the MTEF-PBB

DGH has started a comprehensive reform program with IndII support to define the implications of MTEF-PBB, and to determine which elements of DGH’s planning, programming and implementation functions would need to be improved under an MTEF budget system.

Direct MTEF support: IndII assistance to develop the 2011-2013 MTEF began in March 2010 and is finalising the translation of the draft Standard Operating Procedure (SOP) for preparing the 2012 budget. Translated SOP will be reviewed and discussed with relevant DGH officers for finalisation - followed by a training program for echelon levels 2, 3 and 4.

Planning for inter-regional and metropolitan network capacity expansion: IndII is supporting two significant initiatives: (i) improving expressway delivery through support to PBJT and


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DGH, including conducting diagnostics on current problems and issues and preparing recommended improvements on staffing and organizational changes; and (ii) creating a capital works pipeline in a National Road Master Plan (NRMP).

Enhanced value for money: Two projects are being supported by IndII to improve service delivery efficiency: (i) reviewing current road design standards to incorporate regional best practice to ensure that designs are based on optimal whole-life costing; and (ii) addressing inefficient contracts and the need to ensure better standards for contract performance, through IndII support for developing bidding and contract documents for initial pilot projects. Subsequent support will examine how DGH can more broadly apply the PBC concept across the department; and within PBC, how increased use of community-based contracting can improve routine maintenance and result in improved road condition; these initiatives began in end-August 2011. Working papers were produced on: (i) defining the current road design standards for each road category and intervention type; and (ii) defining a matrix of pavement construction and rehabilitation designs for representative service conditions. for a range of design lives and incorporating necessary design features affecting pavement performance and whole-of-life cost. Draft working papers are currently being progressed which discuss: (i) the benefits of expanding the PBC approach to a wider application; (ii) the procurement and contracting process, given the new guidance offered by the new procurement Perpres; and (iii) appropriate levels of authority and management within the institutional levels of DGH.

Enhanced road program delivery: Two IndII activities planned for the next work plan period are designed to address quality of intervention planning, and measuring output through performance indicators. The first is to assist in specifying optimal road preservation strategies in the MTEF by upgrading the Indonesian Road and Bridge Management Systems (IRMS) and (IBMS), and by examining their potential to continue to provide valid management advice. The second activity involves IndII support to DGH to identify suitable indicators of performance (at various levels) to measure both budget expenditure efficiency and accountability in spending outcomes. These activities were originally planned to be carried out under the original IndII Phase I program but, have had to be postponed to Phase II, following more in-depth analysis of the Indonesian Road Management System (IRMS).

Within the last five years, national railways have provided only a small contribution to GDP, while rail transport plays a relatively insignificant role in national freight, logistics, and distribution transportation. (The road sector dominates with 91% of freight transport and 84% of passenger transport.) The disparity in the use of different modes of transportation is causing inefficiencies in the national transportation system. Therefore rail, sea, land, and air transport modes must be improved significantly, to increase their important roles in the development of the economy.

For Phase II, IndII proposes that the focus of Air, Sea and Rail Transport support will be to continue to assist the GoI, in particular the Ministry of Transport (MoT), to develop necessary regulatory and institutional frameworks to implement recent key legislative reforms. The focus will be on deepening rather than broadening the present pattern of support.

2.3.2 Sea transport

(a) National Port Master Plan (NPMP)

IndII has worked closely with the Directorate General of Sea Transport (DGST) to develop the National Port Master Plan (NPMP). The draft NPMP Technical Report (including an NPMP summary, a draft decree, and nine working papers) was prepared in September 2010, following IndII and the Independent Review input, as well as comments from NPMP Steering Committee members. However, there are significant delays in finalising the technical report, as the quality of final reporting has still not been accepted by IndII, particularly in relation to expected compliance with IndII’s consolidated comments on the NPMP Technical Report and the NPMP Working Papers (as Annexes 4 to 12 of the NPMP Technical Report), issued in December 2010. It is expected that before June 2011, all pending NPMP documents can be resolved and the required technical reports can be finalised.


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(b) Port authorities

In line with the NPMP, IndII will also support DGST in undertaking a scoping study for the establishment of port authorities (Stage 1) which will start in mid-March 2011 and conclude in April 2011. Output of this activity will include: (i) review and assessment of port management and operations for port authorities and port management units (including current port operations and international best practices); (ii) initial findings and recommendations on forms of organisations, management, and operation of port authorities and port management units; and (iii) preparatory documents and clear scope of activity (AP, AD, and TOR) for technical /management, financial and legal aspects for supporting port authorities and port management units.

(c) Proposed Phase II sea transport initiatives

Proposed Phase II initiatives in Sea Transport include assisting DGST with key institutional reforms, notably the development of the port authorities. Other work may include developing management systems and procedures for port operating units; streamlining port licensing and regulations governing investment; and possibly, facilitating new port investments - once the necessary regulatory and institutional settings are in place.

2.3.3 Railways

(a) National Railway Master Plan (NRMP)

IndII’s major collaborative activity with the Directorate General Rail (DGR) involves assisting the development of the National Rail Master Plan (NRMP), which establishes the regulatory and institutional structure for sector and network development over the next 20 years. IndII has finalised two main reports, namely: (i) the NRMP Consolidated Background Papers (April 2010); and (ii) Future Indonesian Railways – An Interface Report towards the NRMP (August 2010). Both the consolidated and interface reports have been uploaded in IndII website. With considerations of these, DGR is now finalising the NRMP document to be issued in an MOT Ministerial Decree.

(b) Special Railways

IndII has also supported DGR and the Coordinating Ministry for Economic Affairs (CMEA) in conducting an initial assessment of the development of Guidelines for Special Railways (SR) Phase 1, in September 2010. Although the concept of SR has been established in Indonesia, the correct implementation and supervision of granting licenses for SR operations remains a challenge. Given current positive investment trends in Indonesia, SR investments could be very attractive to commercial entities, including railway enterprises. This scoping activity has provided an initial review of relevant national and international rail transport data and a scope of the proposed Guidelines for Special Railways.

Following the Special Railways Phase 1 activity, IndII has supported DGR in implementing a second phase (September 2010 to February 2011), which involves a complete study on the establishment of Guidelines for Special Railways. This activity has covered: (i) findings concerning adequacy of SR Regulation (in terms of legal framework and commercial criticism of the SR provisions); (ii) existing regulation of railway private investment and implementation of needed reforms (for both ministerial and government regulation guidelines); and (iii) next steps (Phase 3) addressing the needs of development of Special and Limited Public Railway regulations. In parallel, two independent reviews of the activity report have been undertaken by an external reviewer and the law firm of Makarim & Taira S; both reviews are positive with regard to the consultant’s final report, as no major findings and recommendations have changed as a result of these reviews.

As a continuation of the above Phase 2 work, Phase 3 is expected to start in mid-March 2011 and continue to June 2011; IndII is currently tendering for the legal consultants required to support this activity.


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(c) Railway restructuring

A further key GOI rail transport initiative, in which IndII is currently involved at the preliminary stages, is to develop the railway transportation system in Jabodetabek to serve up to three million passengers. This ambitious initiative includes several potential activities: (i) identifying and valuing assets to be transferred from PTKAI to PT Jabodetabek; (ii) agreeing on services to be provided between operators; (iii) preparing an Infrastructure Maintenance and Operation (IMO) cost agreement between DGR and PTKAI, for suburban areas; (iv) preparing a network statement by PTKAI; (v) developing a financial support agreement between DGR and PT Jabodetabek; and (vi) upgrading accounting systems and business plans.

A Rapid Assessment for Jabodetabek Railway Restructuring was finalised in October 2010 and four priorities, namely: (i) asset separation, (ii) preparation of network statement and terms sheet, (iii) preparation of basic concept of Special Delivery Unit (SDU) and establishment of a SDU, and (iv) upgraded accounting system (among nine main areas) have been indicated. This will be as a basis for developing two main railways program of railway asset separation and Jabodetabek railway support in the future (in line with government plan to issue a new Inpres on domestic connectivity)

In the context of railway restructuring, a new scoping study on the PSO-IMO-TAC framework (Phase 1) has been started in February 2011 and is expected to be finalised in March 2011. The goal of the activity is to improve the operation of the Public Service Obligation (PSO), Infrastructure Maintenance and Operation (IMO), and Track Access Charge (TAC) schemes. The main objectives of this activity are to provide DGR with experienced advisers to: (i) assist in gaining different stakeholders’ perspectives on refining the PSO-IMO-TAC scheme; (ii) develop an initial PSO-IMO-TAC conceptual framework to provide the basis for an improved set of regulations; and (iii) develop draft TORs for the next stage of the activity (proposed for IndII Phase II). In particular, the Joint Decree of the three Ministers (KM19/1999, S3/KMK.03/1999, KEP. 024/K/03/1999) of PSO-IMO-TAC needs to be reviewed and revised in the future.

(d) Proposed IndII Phase II railway initiatives

To encourage much-needed progress in the rail transport sector following the completion of the rail master plan (RMP), opportunities for IndII Phase II support to Indonesian railways are extensive. At a broad level, potential IndII assistance includes: (i) developing the regulatory framework governing special railways; (ii) reforming the Jakarta metropolitan commuter railways system; and (iii) supporting other urgent reforms, including the separation of railway infrastructure and the restructuring of PTKAI. However, the most compelling short-term rail sector need is the coordinated preparation and implementation of a sound Jabodetabek transport investment plan. Within this process are a number of related activities which IndII has the capacity to support, including financial, legal and administrative advice and reform. In continuing IndII involvement in this sector, the National Railways Revitalisation Integrated Team (NRRIT) will remain closely involved as a key partner.

2.3.4 Urban transport

Two main urban transport activities commenced last year are nearing completion: (a) a program to assist in the development of bus services in selected LGs, through a combination of technical and grant (IEG) assistance; and (b) a program focussing on urban transport development in Surabaya.

(a) Bus services in selected LGs

Three bus transport components were conducted during the previous work plan period. The first component involved developing a strategic paper for Bogor angkot. In this paper, the strategy planned is to restrict incoming district angkot from operating in the city - by developing border terminals and to manage the operation of municipal angkot in terms of number and performance. The second component involves establishing an IEG mechanism for the transport sector. Extensive coordination has begun involving Bappenas, the Directorate General of Transport, the Ministry of Finance, selected local governments, and AusAID. The third component assists local governments in completing all technical requirements for improved bus services - preparing the technical and functional specifications, the detailed engineering design,


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and required tender documents for the proposed infrastructure. It is unlikely, however, that the infrastructure development previously designed to be completed by June 2011 can be realised. Until June 2011, the activity will focus on establishing the IEG mechanism at the central and local government levels and developing infrastructure prototypes in Palembang and Surakarta. Other activities planned are to deliver practical training for bus operators.

(b) Surabaya urban transport development

The emerging dynamics of this activity has altered the planned approach and the expected outputs. During the course of the study to date, it has been found that rather than solely deal only with bus rapid transit (BRT) development, it is preferable for Surabaya to place greater attention on developing an urban mobility strategy for the city. The aim is to provide an understanding that through urban mobility, Surabaya will have more a comprehensive approach to manage people and freight mobility within the city area. A strategy paper has been developed that outlines the aspects to consider in planning for urban mobility - including a review of previous planning, and terms of reference for future activities. Between now and June 2011, the activity will focus on completing the terms of reference, ready for tenders by local government, and to start a demonstration project on non-motorised transport.

IndII has also received request from President’s Development Monitoring and Oversight Unit (UKP4) to assist in implementing their action plans to improve traffic situation in Greater Jakarta area, particularly to demonstrate how the coordination and monitoring frameworks are working for the showcase corridors. It is expected that this activity will lead to greater involvement by IndII in the Jakarta transport sector.

(c) Proposed Phase II urban transport initiatives

The urban transport sector has developed since the last FRPD progress report, not only in terms of activity number, but also in approach and engagement. Phase II initiatives will focus more on urban mobility assistance that allow the national government and cities to develop policies and programs to improve mobility, and lead to more sustainable growth in the transportation sector - and thus improved quality of life in Indonesian cities.

Some of the Phase II initiatives that a close, productive relationship will support include: (i) creation and operation of a National Urban Mobility entity to review existing policies, conditions and international best practice and make recommendations; (ii) work with the national government to develop a national urban transport policy and associated laws and regulations that encourage cities to invest in sustainable mobility strategies and action plans; (iii) provide technical assistance to local governments to develop comprehensive mobility plans; (iv) help cities improve institutional and staff capacity; (v) develop a model / template BRT program; (vi) provide assistance to cities to develop pilot projects for BRT systems; and (vii) invest in small-scale infrastructure improvements, such as improved pedestrian crossings and signals, improved sidewalks, and dedicated lanes for non-motorised vehicles.

2.3.5 Air transport

IndII is supporting the Directorate General Civil Aviation (DGCA) through three activities to improve the policy framework for air transport: (a) an Air Transport Master Plan (ATMP); (b) an implementation framework for the ASEAN Open Sky Policy; and (c) a diagnostic for the refurbishment of the existing Ngurah Rai airport in Bali.

(a) Air Traffic Master Plan

IndII is assisting DGCA with the development of an ATMP which will reflect GoI Law No. 1/2009 and Global Plan Initiatives set out by the International Civil Aviation Organisation (ICAO). The master plan recognises the importance of a viable, safe and efficient national transportation system. Reports on air traffic analysis management and forecasts, and an air traffic management planning review have been submitted. A series of focus group discussions have also been conducted to provide inputs and comments to the reports. The draft ATMP is expected to be submitted by early March for initial review. An external reviewer will provide input in March and a presentation of the draft master plan is planned for April 2011.


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(b) ASEAN Open Sky Policy implementation framework

Stage 2 of the activity has commenced in January 2011. The inception report has been submitted, highlighting several issues that DGCA has raised regarding the completion of Stage 1, including the type of strategy to use, legal ramifications, etc. Most of these have been addressed during the Inception Report meeting with DGCA, and the remainder will be addressed during the second stage activity. The activity will also be reviewed externally, by mid-June 2011.

(c) Existing Ngurah Rai airport in Bali

There is a critical need to improve airport facilities in Bali, through optimising the existing Ngurah Rai Airport (demand and supply side management). IndII’s support for DGCA includes preparing a comprehensive stocktake of research and related works to date, and providing advice on the most appropriate future directions.10 Deliverable 2: a Diagnostic Report on the existing Ngurah Rai Airport has been submitted and presented to the DGCA, Angasa Pura (AP) 1, and representatives from the Bali local government. The report shows that the capacity of Ngurah Rai Airport can be successfully expanded, before considering new airport development. Implementation of new measures such as slot pricing, rapid exit, less check-in counters, etc will require less complex actions, time, and budget to be implemented. Potential follow-up activities have been submitted for review and IndII is considering activities that can be delivered by June 2011.

(d) Proposed Phase II aviation initiatives

For the next phase, the focus of assistance for air transport will be on deepening rather than broadening the current pattern. The priority for IndII Phase II support to air transport will be on improving national navigation systems to acceptable international standards, and facilitating the development of other infrastructure to accommodate the expected rapid rise in air travel. As well as providing assistance at the strategic level, IndII second-phase support will involve measures to improve the efficiency of existing airports, as well as high-level training to meet new air transport investments, updated technologies and recruitment and procurement support - thus building individual and institutional capacity.

2.4 Infrastructure Policy and Investment Program

Box 3: Key elements of the forward work plan period – Policy & Investment

Advancement of the Umbulan Springs public private partnership (PPP) project development.

Advancement of the 20 PDAM activity to accelerate delivery of new household connections.

Pilot BLUD formation with three selected local government partners.

This third IndII structural component covers a range of important cross-sectoral themes such as PPPs; infrastructure financing; the use of BLUD units for local government services delivery; public service obligations; establishment of demand-driven capital grants systems; and other initiatives (e.g. telecommunications). It has a strong focus on policy and regulatory issues and includes infrastructure investment facilitation initiatives. Under this component IndII provides continued support for and development of successful initiatives commenced under earlier AusAID programming (e.g. radio spectrum management), while monitoring opportunities to provide support in other sectors and thematic areas.

2.4.1 PPP institutional and transaction support

IndII sees PPP as an alternative means of financing substantial, high-priority projects that would otherwise be proposed for financing as conventional public sector projects. Before committing funds to assist with the design of a PPP financing structure, IndII must be assured that preparatory studies have demonstrated a project’s feasibility on technical, economic, legal, environmental and social considerations. IndII then assists contracting agencies to strengthen their capacities to prepare and tender public private partnerships (PPP) projects, and in improving the quality of their PPP projects.

10 IndII support to DGCA is restricted to assessment and reporting activities; it is not intended that IndII will extend support beyond this preliminary activity.


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In the previous work plan period, IndII: Completed MOUs for Cipta Karya, Governments of East Java, Pasuruan City, Pasuruan Regency,

Sidoarjo Regency, Gresik Regency, Surabaya City to support the proposed Umbulan Spring PPP project.

Mobilised engineering consultants to determine the most effective and cost-efficient pipeline route and water treatment plant location for the Jatiluhur to Jakarta pipeline.

Conducted a due-diligence engineering review of the proposed Kota Bandung waste-to-energy project.

IndII will remain cautious, however, about committing further funds for new PPP project preparation activities until some positive results have been achieved from the initial set of pilot activities planned for the forthcoming work plan period. In this regard, IndII will: Develop an Expression of Interest (EOI) document for Umbulan Springs; conduct roadshow/s and

evaluate EOI responses and - if strong investor interest is clearly evident - seek additional approval to develop a Request for Tender (RFT) and Draft Contract.

Complete pre-feasibility Studies for Umbulan Spring, and for the Jatiluhur to Jakarta pipeline and water treatment plant.

Assist the Investment Coordinating Board to develop a dedicated PPP Directorate.

2.4.2 Other infrastructure financing

In addition to promoting PPPs, IndII continues to pursue a number of other activities to promote infrastructure financing from the public, private and donor sectors. These include:

(a) Indonesia Infrastructure Financing Facility

The Indonesia Infrastructure Financing Facility (IIFF) is Indonesia’s first non-bank financial institution designed to provide infrastructure investors with access to long-term finance and contingent liability support for development of major infrastructure projects. IIFF also encourages local banking institutions to support medium- to long-term lending opportunities. IndII has provided ongoing support to the IIFF expansion to facilitate the development and execution of the Shareholder’s Agreement; awarding an investment grade credit rating; and producing risk management and HR policies. The activity was completed in September 2011.

(b) 20 PDAMs

Ongoing support has been provided for the financial and governance reform of 20 PDAMs to facilitate commercial borrowings for investment in new household connections and ancillary infrastructure. Of the original 20 PDAMS, three (Kabupaten Tasikmalaya, Kudus and Lombok Timur) have completed the process and have been approved by the Minister for Public Works (MPW) to apply for financial support to secure commercial borrowings under Perpres 29 of 2009. This will result in 80,000 new household connections able to deliver reliable and good quality water supply to an additional 400,000 people. Following an independent review, 11 of the remaining 17 PDAMs re-confirmed their commitment to the reform process and IndII proposes (subject to Technical Team approval) to provide them with additional technical assistance to complete the process. Five PDAMs with the required water licences and approvals have been selected in the next tranche to undertake the process. This is expected to result in 158,700 new household connections servicing an additional 793,500 people.

(c) Hibah

IndII assisted the Ministry of Finance (MoF) to streamline the current system of inter-governmental grants (in particular the Hibah Grants mechanism) as a means of improving government financing of infrastructure in the regions. During the previous work plan period, IndII provided support to adapt the Standard Operating Procedures (SOP) to meet the immediate needs of MoF for the budgeting and implementation of Hibah grants in 2010 and 2011. IndII developed and commissioned a computer application for the receipt of grant requests, payment of grants and monitoring of grant contracts. A fiscal index was developed to evaluate local government eligibility for grant funding.


24

(d) BLUD

IndII has undertaken initial design and scoping work on a potential program to assist local governments implement and finance infrastructure services through the BLUD (Badan layanan umum daerah), a semi-autonomous agency for the delivery of key services. During the past work plan period IndII: Identified a number of possible institutional reforms in three cities in the wastewater sector;

and assessed the role and resources of the Ministry of Home Affairs (MoHA) Administrasi

Pendapatan Investasi Daerah (APID) Directorate, as it relates to BLUD activities.

In the coming period IndII will develop and pilot the BLUD and other development strategies in three selected cities, by preparing a (city-specific) governance and political economy analysis to provide a context for and help with identifying feasible local institutional and organisation development actions. Depending on the results, it may also be the first activity in a longer-term program at the national level to promote the BLUD and complimentary institutional strategies.

(e) Public Service Obligations (PSO) policy

IndII provided assistance to Bappenas to develop a general policy framework for subsidising the provision of non-commercial infrastructure services by private operators, equivalent to that for Badan Usaha Milik Negara (BUMN) PSOs. During the coming work plan period, a pilot project designed to recognise the Connectivity Framework requirements and emphasis will be designed to test and refine the general policy framework.

2.5 Infrastructure policy and planning

It was agreed previously that the IndII facility would provide support to Bappenas in the preparation of the infrastructure section of the draft national medium-term development plan (RPJM), and with its subsequent refinement following the installation of a new Government in October 2009, That activity commenced with the placement of two infrastructure advisors in Bappenas from May/June 2009 and will continue until June 2011.

The implementation of IndII support for improved infrastructure planning in Papua and West Papua has progressed well and is scheduled to finish in June 2011. A recent IndII M&E Framework Case Study has

noted key achievements and shortcomings to date that include:

Alignment of activity implementation of three key strategic issues important to Bappeda – legalisation of spatial plan, development of management information system and development of standardised operating procedures.

Delivering of eight agreed workshops/trainings that provided Bappeda staff with increased knowledge about planning and monitoring.

The original design was far too ambitious in light of the capacity of Bappeda, and the defined time period.

Whilst IndII does not intend to continue its work under this program in Phase II, it is proposed that this type of activity could more appropriately operate under the AusAID Partnership for Decentralisation.

2.6 Telecommunications

Technical assistance in this sector continued to focus on: the reform of bandwidth-based pricing for cellular mobile services assistance; an overhaul of licensing administration; and the introduction of E-Government initiatives for new licensing of radio communications. In the previous work plan period IndII finalised the revised bandwidth pricing and it was subsequently created in law. Instead of fees being charged on a per-BTx basis, they will now be charged annually on the basis of the bandwidth reserved exclusively across all of Indonesia for each operator. This conforms to international best practice, and is based on sound and widely applied economic theory: it values spectrum on a “price/MHz/pop” basis – i.e. a price for bandwidth consumed over a populated area.


25

A detailed financial assessment of DGPT’s current finance system was completed and produced a specific strategy for addressing changes required to address pricing and E-Government initiatives. A multiple object electronic auction system was developed to facilitate auction of the 2.3 and 2.5 MHz bands.

DGPT has indicated interest in seeking further technical assistance to: assist the development of a corporate strategic plan; to support an overhaul of Telecommunications Law No.36 (1999); and to overhaul its IT applications.

2.7 Risk based methodology in internal audit function

IndII is supporting the Ministry of Public Works (MPW) in its planned enhancement to value-added services in terms of budget impact, infrastructure development and activity safeguards - through the introduction of modern risk-based methodology and practices (RBIA) in the audit and internal review functions of MPW. Stage 2 was completed during the last work plan period and the World Bank trigger for Infrastructure Development Policy Loan 4 was met.

Stage 3 has been approved and will focus on pilot projects and the delivery of in-house and external training on RBIA, internal controls / COSO (the Standard) and fraud audits; and assist in carrying out joint audits of de-concentrated and co-administered budgets after providing further specific training to Bawasda staff. It is expected that this activity will improve the quality and breadth of audit, and value for money contracting through improved purchasing practice and contract monitoring, and also deepen and expand the knowledge base within the Inspectorate General.


26

3. REVIEW OF PROGRESS

3.1 Introduction

The previous chapter of this FRPD reviewed recent (September 2010-January 2011) activities by individual infrastructure sector and outlined proposed activities for the IndII facility for the period February 2011 to June 2011. This chapter considers overall progress of the IndII facility since July 2010, and identifies planned program-level initiatives for the six-month work plan period to June 2011. Included in this section will be an analysis of: overall activity development and approvals; activity expenditure to date; expenditure projections to June 2011;

development of institutional relationships and strategic partnership engagements; progress to date in achieving IndII’s objectives; and

monitoring and evaluation activities. Achievements relating to facility management (including finance and administration), as well as systems and procedures, are addressed in the next chapter (4), “Management Systems”.

3.2 Activity development and approvals

The design, development, implementation and completion of activities continues to be the primary focus of the IndII management team during the most recent work plan period (August 2010-January 2011). Throughout this work plan period there has been a growing emphasis on forward program design beyond June 2011. In continuing the momentum established previously, IndII has developed activities, both in established and new areas, particularly in the transport sector. The past six months has seen extensive implementation of many activities and the completion of some. Table 2 below/over illustrates IndII activity development between August 2010 and January 2011. The shaded rows indicate that total IndII Technical Team (TT) approvals increased from $A39.98 million at the end of the previous work plan period, to approximately $A45.48 million by mid-February 2011. During this time, the number of activities commenced increased from 69 to 82, and the total number of approved activities increased to 88. A further twelve activities have been completed, taking the total number of IndII activities completed to date to 41.

Table 2: Activity development, August 2010 – January 2011

Month AusAID Approval TT Approval ($)Number of activities

commenced

Number of activities

completed

Jan-09 $974,150 $4,636,531 3 2

Feb-09 $1,474,150 $5,806,531 4 2

Mar-09 $2,223,380 $5,886,531 6 2

Apr-09 $3,030,180 $6,320,331 8 2

May-09 $5,160,088 $7,772,280 14 2

Jun-09 $6,530,646 $9,899,103 19 2

Jul-09 $10,345,665 $11,260,253 27 2

Aug-09 $10,437,965 $12,631,553 27 6

Sep-09 $12,340,565 $14,205,153 34 10

Oct-09 $12,446,565 $14,311,153 36 11

Nov-09 $12,698,263 $14,863,851 37 14

Dec-09 $13,433,633 $18,189,501 39 17

Jan-10 $15,036,211 $18,286,276 44 17

Feb-10 $15,291,211 $20,346,896 44 17

Mar-10 $17,484,560 $25,043,741 52 18

Apr-10 $19,881,217 $25,394,064 59 21

May-10 $21,642,877 $30,433,797 60 23

Jun-10 $24,237,832 $32,640,843 64 26

Jul-10 $26,944,551 $39,982,016 69 29

Aug-10 $27,962,841 $43,743,557 71 34

Sep-10 $31,119,823 $43,743,557 76 38

Oct-10 $37,119,823 $44,343,557 77 39

Nov-10 $37,197,465 $44,728,557 78 39

Dec-10 $38,439,265 $45,368,557 79 40

Jan-11 $39,651,358 $45,484,150 81 40

Feb-11 $39,742,209 $45,484,150 82 41


27

The continuing growth in activity implementation is also evidenced by the data illustrated in Figure 4 below, showing a significant increase in AusAID approvals and expenditure.

Figure 4: Cumulative Technical Team and AusAID approvals

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

$45,000,000

$50,000,000

Budget Approval and Expenditure

TT Approval AusAID Approval Expenditure

A significant increase in AusAID approvals during this work plan period, totalling $A12.8 million, represents a 48% increase over the previous work plan period. This compares to a A$5.5 million increase in technical Team approvals, indicating that activities are moving into implementation and completion phases in the third year of IndII.

Although AusAID approval rates are lower than TT approvals, they now total 87% of TT approvals. At the end of the previous work plan period they totalled 74% of TT approvals. There are two reasons for the discrepancy in approval rates between AusAID and the Technical Team:

In a number of cases, a larger activity budget is approved by the TT, while only the first stage of the activity budget is approved by AusAID, consistent with the concept of progressive engagement as discussed earlier. Only upon successful completion of the first stage will the full activity budget be approved by AusAID, thus allowing AusAID approval budget levels to align closer to those of the TT. The lower AusAID approval rate also increasingly reflects the fact that IndII, due to the June 2011 end-date, cannot fully implement a number of activities, and thus is seeking only partial funding approval from AusAID - for selected stages.

TT approvals are based on either a one-page Initial Activity Request (IAR) or a multi-page Activity Proposal (AP) document. Such preliminary documents are not detailed Activity Designs (AD) as required for AusAID approvals, containing both an implementation plan and terms of reference. More time is required to finalise activity design documents and subsequently AusAID approval being obtained.

Table 3 below identifies Technical Team-approved budgets by primary counterpart agency. Continuing the trends of the last 3 FRPDs, IndII’s strongest institutional relationship (in terms of total number of activities and value of activities), continue to be with the Directorate General of Human Settlements (DGHS) and Directorate General of Highways (DGH), in the Ministry of Public Works (MPW).

IndII activities involving multiple counterpart agencies are not necessarily reflected in the following table. This factor is particularly relevant in IndII’s interactions with local government, where a central government department is usually identified as the requesting agency and implementing partner. Hence the figures below / over somewhat understate the importance and relevance of local governments as a counterpart for IndII. As noted earlier, with the watsan programming alone, IndII has programming engagements (such as grant agreements) with approximately 70 local governments.


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Table 3: Approved activity budgets by counterpart agency

Table 4 below identifies total budgets approved by the Technical Team by component. The assessment by component indicates that there has been a significant increase in the number and value of activities in the IndII Policy and Investment component. This reflects a number of activities moving from smaller, first-stage activities to more detailed and larger, project implementation stages, such as the Jatilihur-Jakarta pipeline and water treatment plant and the Financial Reform of 20 PDAMS activities.

Table 4: Approved activity budgets by component

3.3 Activity expenditure

Table 5 below shows the budgets, expenditures and contractual commitments for the 88 activities approved by the Technical Team, and as identified in the above tables. Slightly more than $A20 million had been expended by the end of January 2011 with $A35.4 million contracted or committed. Overall, this represents approximately 89% of AusAID-approved activity budgets.

Table 5: Activity approved budgets and expenditure

Activity No.

Activity Title Contract

value AusAID

Approval Expenditure

1 Senior MoF/AusAID Infrastructure Adviser $1,090,000 $1,178,838 $942,234

2 Success Fee Mechanism Workshop $24,625 $24,625 $24,625

3 UNESCAP Ministerial Conference $8,500 $8,500 $8,500

4 Water and Sanitation Initiative Stage 1 $87,606 $87,605 $87,605

5 Radio Spectrum Management $499,715 $499,715 $499,715

6 IIFF $369,929 $669,230 $493,072

7 Proposals for an Improved Railway PSO Scheme $47,935 $47,935 $47,935

8 Strengthening & Streamlining Procurement in DGH $87,139 $87,139 $87,139

9 MTDP support for Bappenas and IndII $277,000 $393,541 $237,899

Counterpart No. of Activities Approved Budget (AUD) Share (%)

Bappenas 11 $2,851,421.00 6%

Coordinating Ministry for Economic Affairs 1 $160,000.00 0%

DG Civil Aviation (MOT) 4 $1,146,527.00 3%

DG Highways (MPW) 18 $10,669,760.00 23%

DG Human Settlements (MPW) 15 $15,868,510.00 35%

DG Posts and Telecomms (DGPT) 4 $1,370,000.00 3%

DG Rail (MOT) 6 $1,592,971.00 4%

DG Sea Transport (MOT) 5 $1,120,280.00 2%

Local Government (LGs) 10 $5,223,595.00 11%

Ministry of Finance (MOF) 3 $1,321,449.00 3%

Ministry of Home Affairs (MOHA) 1 $81,770.00 0%

Ministry of Transport (MOT) other 1 $408,996.00 1%

Ministry of Public Works (MPW) other 3 $1,329,533.00 3%

Other 5 $2,289,838.00 5%

PT KAI (SOE) 1 $49,500.00 0%

Total 88 $45,484,150.00 100%

Jul-10 Feb-11 Jul-10 Feb-11

Policy and Investment 27 34 $10,800,121 $16,208,309 50%

Transport 34 39 $15,769,808 $17,065,754 8%

Watsan 14 14 $6,119,087 $6,210,087 1%

IEG 2 1 $6,000,000 $6,000,000 0%

Total 77 88 $38,689,016 $45,484,150 18%

Component % IncreasedApproved Budget (AUD)No. of Activities


29

Activity No.


value AusAID


10 Financial Reform 20 PDAMs $1,694,087 $1,700,000 $1,694,087

11 Internal Audit Action Plan $340,503 $359,533 $340,503

12 Losari Beach EIA $380,061 $408,387 $147,493

13 WSI PTA $139,247 $139,247 $139,247

14 Road Safety Audit $760,601 $757,300 $722,631

15 DED for Mamminasata, South Sulawesi $1,053,351 $1,404,694 $1,053,351

16 MTEF Road Sector $375,977 $384,300 $375,977

17 GIS Definition Study $78,775 $78,775 $78,775

18 Urban Water Supply in NTT $94,175 $99,175 $94,561

19 PSO Policy Reform - Infrastructure Provision $334,147 $334,147 $334,147

20 Success Fee mechanism for PPP $67,926 $67,926 $67,926

21 Assessment of Infrastructure Policy Reform $100,549 $160,000 $100,549

22 Papua/West Papua Infrastructure Planning $1,400,000 $1,500,000 $978,468

23 National Ports Masterplan $104,125 $104,125 $104,125

44 Community Based Water Supply Services $606,163 $874,492 $194,016

71 Wastewater masterplan in 4 cities $91,547 $101,590 $85,297

128 MOF Regional Grants for Infrastructure $292,069 $299,290 $292,069

151 WSI - Socialisation & Public Awareness $594,805 $593,268 $390,469

152 National Rail Masterplan Study $95,311 $95,311 $95,311

153 Assistance to DG Highways $54,234 $54,234 $54,234

154 Activity Preparation and Design Fund $658,455 $705,000 $622,357

156 Umbalan Springwater PPP $661,166 $647,500 $660,320

157 National Rail Masterplan Stage 2 $723,586 $721,081 $723,586

164 Water Hibah and Wastewater Design $612,422 $612,410 $612,422

165 National Ports Masterplan Stage 2b $118,496 $118,496 $118,496

166 National Ports Masterplan Stage 2a $88,288 $88,288 $88,288

172 Transport Systems PPP training $29,563 $36,000 $29,563

173 Padang Earthquake Relief Assistance $34,143 $34,143 $34,143

174 Lead Roads Advisor DGH $209,859 $209,859 $209,859

175 Bus Rapid Transport Development in Select Cities $170,634 $170,634 $170,634

176 Provincial and Kabupaten Road Maintenance Management Plans $844,623 $798,863 $154,823

178 Jatiluhur - Jakarta Pipeline and Water Treatment Plant $90,663 $90,663 $90,663

180 Assessment of Air Traffic Management Strategic Policy $508,951 $513,600 $434,127

181 MOT lead adviser $286,150 $425,022 $204,093

182 National Port Master Plan (Stage 3) $693,487 $705,700 $520,420

183 Improving Support Needs for Urban Water Supply in NTB and NTT $895,250 $950,000 $245,748

185 Radiofrequency Spectrum Management and Pricing $684,823 $720,000 $558,035

186 BLUD Pilot and Development (Stage 2) $87,841 $81,770 $75,590

187 IT Strategy - Radiofrequency Spectrum Program (Stage 1) $75,011 $75,011 $75,011

188 Finance Mgt - Radiofrequency Spectrum Program (Stage 1) $75,000 $75,000 $75,000

189 Support for Area Traffic Control System – Surabaya $231,856 $244,035 $186,288

190 Investor Guide for PPP Infrastructure in Indonesia $78,440 $87,850 $78,440

191 ASEAN Open Sky Policy $71,043 $70,000 $71,094

192 Kota Bandung Waste to Energy Stage 1 $49,453 $89,365 $49,453

193 Official Travel $46,537 $100,000 $24,192

194 Road Safety Program - Stage 2a (RSA and Crash Reduction) $1,548,570 $1,588,025 $636,677


30

Activity No.


value AusAID


195 Road Safety Program - Stage 2b (Manuals and Training DVD) $1,141,525 $1,200,000 $416,254

196 Guidelines for Special Purpose Railway Operation $77,034 $77,000 $77,034

197 PPSP Facilitators for Sanitation Development $147,901 $147,901 $147,901

198 PPP Materials for UNESCAP Conference $73,166 $75,700 $73,166

199 Port Authority Stage 1 $2,030 $0 $0

200 2011-2013 MTEF and PBB $320,281 $350,000 $254,041

201 Road Design Standards $720,979 $762,380 $153,139

202 MTEF and PBB Performance Measures $0 $295,000 $0

203 IRMS - IBMS $0 $0 $0

204 Road Classification $0 $0 $0

205 Establishment of an Indonesian Highway Development Authority $486,890 $495,000 $150,755

206 Development of National Road Master Plan $834,016 $873,000 $184,420

207 Procurement and Contracting $376,702 $380,000 $155,456

208 Program Management $708,566 $757,305 $519,372

209 Road Safety Scoping INTP-MOT $96,525 $89,247 $96,525

210 Bali Airport Development (Stage 1) $80,536 $101,655 $41,734

211 Internal Audit at MPW Stage 2 $373,561 $379,985 $373,561

212 Regional Grants Management for Local Infrastructure Stage 3 $305,400 $351,449 $224,306

213 Evaluation of LG IEG Proposals $50,338 $50,000 $50,338

214 Land acquisition for PPP projects $220,216 $390,930 $157,475

215 Bus Improvement Project Phase 2 Stage 1 $247,460 $1,480,219 $98,578

216 BLUD stage 3 $0 $99,550 $0

217 Financial Reform of 20 PDAMs - Stage 2 $55,716 $0 $34,396

219 Jatiluhur – Jakarta Pipeline and Water Treatment Plant (Stage 2) $1,043,875 $1,088,096 $170,982

220 ASEAN Open Sky policy Stage 2 $422,342 $491,194 $84,550

221 Preparation of LG WSSI $80,000 $90,851 $0

222 Sanitation IEG design $5,500,000 $6,000,000 $64

223 Surabaya Urban Mobility Project (Stage 1 Phase 2) $221,520 $245,488 $84,547

224 PSO Reform (Stage 2) $0 $0 $0

225 Guidelines for Special Railways (Stage 2) $292,868 $296,933 $189,889

226 Umbulan Spring Stage 2 $33,545 $0 $11,244

227 Internal Audit at MPW Stage 3 $573,786 $600,000 $46,974

228 Solid Waste Scoping Study $77,796 $77,642 $15,548

229 Special Railways Stage 3 $7,105 $0 $0

230 Scoping Study on PSO-IMO-TAC Framework $108,025 $97,497 $0

231 Traffic Safety during Construction $3,045 $0 $0

232 Urban Drainage Scoping Study

233 Bappenas National Road Safety Master Plan

234 Jakarta Urban Mobility Project

TOTAL $35,407,160 $39,815,259 $20,333,533

Figure 5 below/over indicates the value of completed work, contracted but unspent work, and to-be-contracted work to achieve a total expenditure of $A40 million by the end of June 2011.


31

Figure 5: Contract commitments

TT Approval AusAID Approval

To be contracted $4,592,840

Contracted - unspent $15,073,627

Contracted - spent $20,333,533

TT Activity Proposal Approved $45,769,300

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

$45,000,000

$50,000,000

AU

D A

pp

rova

ls

Contract Committments

Table 6 and Figure 6 below illustrate IndII’s continuation of activity implementation. While the last six months have seen an expenditure of A$1.2 million per month, contract commitments will see this average monthly expenditure rise to approximately A$3 million per month for the last five months of IndII, as well as a one-off disbursement of an A$5.6 million Infrastructure Enhancement Grant to the GoI.

Table 6: Monthly expenditure by work plan period

Work Plan period Average monthly expenditure

July 2008 - January 2009 $48,903

February 2009 - August 2009 $158,945

September 2009 - January 2010 $951,177

February 2010 - July 2010 $1,186,924

August 2010 – January 2011 $1,199,463

Since inception $655,920

3.4 Expenditure projections to June 2011

As IndII continues to increase its range of activities, cumulative budgets will approach the maximum $A40M IFGII Imprest Account expenditure. To manage commitments over the next five months, IndII will closely monitor current and previous TT and AusAID activity budget approvals against actual expenditure, and reflect actual expenditure and commitments in its financial management systems. Where activities are completed under budget, for example due to favourable exchange rate or procurement of consultants for less than estimated in activity designs, activity approval financial records will reflect actual expenditure and commitments. This will enable accurate reporting of actual commitments in the period leading to 30 June 2011. Implementing this system will mean that that any TT approvals for potential activities beyond $A40M will continue to be monitored and managed - to ensure commitments are not made beyond the expenditure limit.

Figure 6 below/over maps forecast expenditure (cumulative and monthly) to end-June 201111. The expenditure projections reflect existing contractual commitments, in addition to estimated expenditure for new or proposed activities identified in this work plan (and yet to be submitted for Technical Team approval). At the time of preparing this report total (accrual) expenditure by June 2011 is forecast to be $A41.8 million, in excess of the total IFGI budget. This is a relatively modest level of over-programming that is likely to increase slightly in the near future as other activities are approved and implemented, but

11 Note that the projections shown below relate only to the $A40 million IndII Imprest Account. They do not take into account expenditures that will result from the

WSI Imprest Account, which is discussed separately.


32

provides programming room in the event some activities are delayed or do not proceed. Moving into the final five months of the current phase of IndII, co-operation between the TT, AusAID and the Managing Contractor to obtain activity approvals in a timely manner will be critical in achieving expenditure of the A$40 million IFGI Imprest account. Delays in activity approval are likely to cause an under-expenditure.

To ensure delays are minimised, IndII will apply the Adviser Remuneration Framework (ARF) to all new procurement and new contracts post-15 February 2011. This will apply to all individual advisers, sole trader companies and individual advisers engaged through management companies. It does not apply to large companies engaged on an outputs basis, i.e. those not providing individual advisers or teams of advisers.

Figure 6: IndII forecast expenditure – monthly and cumulative

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

$45,000,000

IndII Monthly and Cumulative Expenditure Forecast

Cumulative Total

Monthly Total

At this stage it is strategic to over-program the original $A40 million IFGI funds which, like WSI, are provided through an initiative that finishes in June 2011. IndII understands that funds unspent as of this date will be returned to consolidated government accounts in Australia, and will no longer be available to the original goal of both programs. To gain maximum benefit from the allocated budget, it is crucial to manage these funds for full expenditure by the end date.

Over-programming also takes into account activities which may have delayed starts; where completion takes longer than expected; or which may be discontinued during the early stages of implementation. This strategy allows IndII the flexibility to suspend, or not commence, activities where there is insufficient time for activity completion, and instead reallocate those funds to an activity with a shorter project life cycle, i.e., one where funds can be fully expended by June 2011. There are a number of activities, including some from the DGH roads program and the LG bus improvement IEGs, where timelines are extremely tight and a decision will need to be taken in the coming months on whether to continue with implementation, or if the activity should be postponed until advice is received concerning possible approval of the IndII facility extension.

The same pressures exist in relation to WSI in terms of the June 2011 end-date. The table (7) and figure (7) below/over map expected disbursements of the Hibah grant funds as well as the TA funds (associated with the city sanitation master plan and general TA support for the WSI program). IndII has a direct management or facilitation role for these activities. The disbursements of these WSI funds depend to a large extent on actions by LGs, and hence are exogenous to the IndII planning process. However at the time of writing, IndII remained confident that most, if not all funds, will be fully expended by June 2011. The WSI funds will be disbursed through three distinct mechanisms: a WSI Imprest Account operated by IndII for Technical Assistance components: a Bank Indonesia Imprest Account for the Water and Sanitation Hibah operated by GoI; and a World Bank Trust Fund for the Pamsimas component. The total allocation and breakdown of these

funds is shown in Table 8.


33

3.4.1 WSI Imprest Account

This account will be used to finance Technical Assistance components implemented directly by IndII in support of WSI or as main components of WSI. This includes the TA funds associated with the city sanitation master plan and general TA support for the WSI program. The disbursement of these funds is reasonably predictable, relying on programming of the activities by IndII alone.

Table 7: WSI activity approvals

MonthAusAID

Approval

Number of activities

commenced

Sep-10 $7,476,920 6

Oct-10 $7,500,920 7

Nov-10 $8,491,920 9

Dec-10 $8,491,920 9

Jan-11 $9,051,920 9

Feb-11 $9,471,920 9

Total approvals to date under the WSI Imprest Account are $A9.5 million, out of a total A$10.117 million anticipated expenditure. Of the $A9.5 million approved, $A9.2 million is contracted works to be completed by 30 June 2011.

Table 8: WSI activity approvals and contract commitments

1 WSI TAP $66,000 $54,500

2 WWIMP Preparation Oversight $480,920 $436,125

3 WWIMP Package 1 $2,495,000 $2,349,340

4 WWIMP Package 2 $2,455,000 $2,440,000

5 WWIMP Package 3 $2,100,000 $2,087,000

6 Midterm and Verifications Watsan Hibah $491,000 $485,000

7 Wastewater Capacity Building TA $500,000 $500,000

8 Water Hibah Baseline Survey and Socialisation $300,000 $289,532

9 WSI Public Affairs and Communication $584,000 $547,000

Figure 7: IndII forecast expenditure – WSI - monthly and cumulative

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000

$10,000,000

IndII Monthly and Cumulative Expenditure Forecast

Cumulative Total

Monthly Total


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3.4.2 Bank Indonesia Imprest Account

(a) Water Hibah The WSI allocation for the Water Hibah is $A20 million. The full utilisation of the $20 million will be achieved, based on an average exchange rate of IDR 7,900. The planning for the Water Hibah assumed an exchange rate of IDR 8,250. This rate has fluctuated from 7,600 to 8,450 in the period January to July 2010. Should the Rupiah weaken, there is unsatisfied demand from the selected local governments of approximately IDR 76 billion or $A9.5 million. The current implementation mechanism allows for a mid-term reallocation of funds within the participating local governments to facilitate further uptake of funds. The funds for the Water Hibah are disbursed to a BI Imprest Account operated by GoI. Funds will be transferred in three tranches of $A8 million, $A6 million, and $A6 million. The first tranche of $A8 million was made on 8 June 2010. The anticipated drawdown of the Water Hibah Imprest Account is shown in Figure 7.

(b) Sanitation Hibah The committed funds for the Sanitation Hibah are not as firmly based as the Water Hibah. At the current exchange rate, approximately $A4 million is likely to be absorbed. The expenditure projection has assumed a further $A1 million will be achieved through greater use of localised sewer systems, although this will need to be confirmed by on-going field assessments and commitments for the proposed Batch 2 local governments to the program. The Sanitation Hibah funds will be disbursed through the same BI Imprest Account as the Water Hibah. The funds will be transferred in three tranches simultaneously with the Water Hibah: $A2 million, $A1.5 million, and $A1.5 million.

3.4.3 World Bank Trust Fund

The funds allocated for Pamsimas will be disbursed through a World Bank Trust Fund. At this stage the first tranche of $A13.2 million has been made. The second and final tranche of $A9.3 million will be made on or before the 31 May 2011. The use of these funds by the World Bank trust fund may extend beyond the closing date of IndII, and are only constrained by the closing date of the Trust fund: 31 December 2011.

Table 9: Total allocation and breakdown of World Bank Trust Fund

Cumulative Disbursement WSI Funds

2010 2011

May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Totals

Imprest Account 0 0 1,000 1,180 2,521 2,759 3,922 4,460 4,618 5,862 6,725 7,263 7,421 9,000 9,000

Water Hibah 0 0 0 0 0 3,000 4,440 4,440 10,440 12,480 13,980 13,980 18,680 20,000 20,000

Sanitation Hibah 0 0 0 0 0 700 700 1,500 2,200 2,700 3,600 3,900 4,400 5,000 5,000

Pamsimas 4,500 4,500 9,000 9,000 13,500 13,500 18,000 18,000 22,500 22,500

Total WSI 0 0 1,000 1,180 2,521 10,959 13,562. 19,400 26,258 34,542. 37,805 43,143 48,501 56,500 56,500


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4. MANAGEMENT SYSTEMS

During the work plan period under review there has been further progress in improving IndII’s management systems and plans, as a result of experience gained as the program grows; the requirements of an expanding and increasingly more complex program of activities; and the learning provided by the external audits of IndII systems (see below).

The systems and plans described below enable the managing contractor to improve its management of the rapidly increasing number of activities being implemented by IndII, and to report and provide key information to members of the broader IndII management structure.

The development of the Management Information System (MIS), the database, website and publications program supports IndII’s communications objectives. During the work plan period under review IndII has further strengthened its procurement management systems to enhance the effectiveness and efficiency of program implementation.

4.1 Communications

IndII’s communications program consists of a number of interconnected elements, including a website, Activity Updates, Success Stories, e-mail blasts, a quarterly journal, technical and M&E reports, books, events public outreach programs and collateral material.

4.1.1 Website

IndII’s website continues to provide visitors with an overview of IndII’s goals, structure, and current activities, as well as offering partners, consultants and technical staff tools such as templates, sample contracts, and a style guide. It also serves as a clearinghouse for almost all IndII publications. A multimedia component allows site visitors to watch and/or download videos of key speeches made at IndII workshops and events. The number of technical and M&E reports on the website is growing, with 30 uploaded as of this report date.

During the period August 2010 to February 2011: the IndII website attracted some 5,158 unique visitors; 37 percent of these represented new visits; there were 12,755 separate visits from 92 countries; 8,947 website visits came from Indonesia; 862 from Australia; and 1,485 from the Netherlands,

Hong Kong, the US, and Singapore; 60,684 pages were viewed - an average of 4.76 pages per visit; and the average time spent on the IndII site was 4.45 minutes.

The Partner Access only section of the website saw a total of 107 visits including one from CMEA, 22 from the MTR team, 30 from AusAID and 54 from Bappenas. The multimedia and programs’ sections of the website are in the process of being redesigned to make them more user friendly and better reflect IndII’s activities.

4.1.2 Activity Updates and Success Stories

IndII has produced and disseminated 36 Activity Updates. These one-page documents briefly explain a particular challenge or problem that IndII is addressing and describes an event or remedial action (such as workshops, roundtables, site visits, etc.) that IndII has undertaken with its partners to respond to the problem. IndII has now published two Success Stories. These documents are similar to an Activity Update but focus on a concrete, external benefit resulting from IndII’s work. Additional Success Stories are in the preparation stage.

4.1.3 E-mail blasts

On an ad-hoc basis (usually every six to eight weeks), IndII sends “e-mail blasts” to a distribution list that has grown from approximately 500 to more than 900 partners and stakeholders in the Indonesian government and other organisations. These blasts feature abbreviated versions of Activity Updates and Success Stories, and allow readers to link to the full text on the website - in Bahasa as well as English. To date IndII has distributed seven blasts.


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The e-blast design was recently overhauled, giving it a fresh new look that will draw in readers. IndII’s website and quarterly journal Prakarsa now have a ‘sign up for e-blast’ feature that will help the e-blast readership to grow further.

4.1.4 Quarterly journal

To date, IndII has published five issues of its bilingual quarterly journal Prakarsa: recent themes include “Expanding Access to Water” (October, 2010) and “Road Development” (January 2011). The April 2011 and July 2011 issues will feature urban mobility and sanitation themes, respectively.

Prakarsa continues to receive positive feedback from readers and indications that its material is widely disseminated. For example, ARRB Group, Ltd, a transport research and consulting firm, will be republishing material from the Road Development issue of Prakarsa.

4.1.5 Books

IndII has recently published two books, in partnership with its counterparts or in support of their efforts:

Making Indonesia's Roads Safer: An Australia-Indonesia Partnership in Road Safety Engineering, published in English and Indonesian in December, 2010. This book offers both an overview of the scope of the road safety problem in Indonesia and an introduction to how low-cost measures can be implemented to reduce the number and severity of accidents, through the use of design audits and site inspections.

Petunjuk Praktis Keselamatan Jalan Pada Zona Kerja di Jalan (A field guide for traffic control at roadworks), published in Indonesian in February, 2011. IndII assisted the Road Safety Section, Directorate General of Highways, Ministry of Public Works to prepare this guide as a reference on good road safety practice for consultants and contractors in good road safety practice. EINRIP and other roadwork sites are will use the guide as a resource.

Efforts are now underway to produce a book (expected publication in May / June 2011) featuring highlights and updates from the issues of Prakarsa published during the lifetime of the IndII Phase I project. The book will be published in both English and Bahasa and, in addition to IndII’s standard distribution list, will be sent to academic institutions in both Indonesia and Australia for inclusion in their libraries.

4.1.6 Public diplomacy program

IndII has launched a major campaign to inform low-income citizens throughout Indonesia of the benefits of piped water. The campaign began with a pilot effot in Karawang, West Java in October 2010 that reached 16 villages. This approach will be duplicated in up to 25 locations across many provinces in the period February - June 2011. Components of the campaign will include: interactive radio talk shows, educational activities in the villages, human interest articles in local media, educational leaflets, posters and banners, stickers on the homes of participating families, and a ceremony to celebrate the connections brought to the villages as a result of the Water Hibah. The elements of the Karawang campaign will be duplicated in other communities as the Water Hibah continues to make piped water accessible to a growing number of low-income citizens.

4.1.7 Events

IndII has recently organised several events to disseminate information on its work: Launch ceremony for the Water Hibah Program in Karawang As a result of Water Hibah, which offers grants to local governments based on new water connections, the Karawang regency has successfully completed 3,000 new connections benefiting low income citizens. This was celebrated at an event in October, 2010, attended by representatives from AusAID, the local water company, IndII and beneficiaries.

Launch ceremony for the Road Safety Book IndII held an end-of-year event in December, 2010, featuring the launch of its new road safety book. Indonesia’s Minister for Transport, Australia’s Minister for Infrastructure and Transport, Australia’s Ambassador to Indonesia, and the Minister Counsellor AusAID all took part in the event, which was attended by officials from key national and local government agencies, international donors, and universities, media and IndII consultants and staff.


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4.1.8 Other components of IndII communications strategies

IndII designed and disseminated a 2011 calendar, sent to government counterparts and other stakeholders, that promotes the involvement of Australia, through IndII, in bringing benefits to Indonesian citizens through improved infrastructure. Each month features a different photo with a caption that describes one of the ways that that Indonesia and Australia are working together.

In the interests of sourcing and distributing up-to-date information regarding the infrastructure sectors with which the Facility is working in Indonesia, IndII has started collecting relevant infrastructure-related news articles from the major dailies, translating them, and distributing them daily. Efforts are underway to build a database of daily news articles on IndII’s website to enable easy public access to infrastructure news and information.

IndII was one of the exhibitors at the Indonesia Water and Wastewater Expo and Forum (IWWEF) held in Jakarta in January 2011. IWWEF provided a valuable platform for IndII to share information about its activities in water and sanitation, particularly the Water Hibah program that currently covers 35 locations in Indonesia. IWWEF was presented by the Indonesia Water Supply Association (Perpamsi) in cooperation with the Indonesia Society of Sanitary and Environmental Engineers (IATPI) and supported by the International Water Association (IWA).

The communications team continues to refine the bilingual glossary of technical terms related to infrastructure and policy it is developing (for example, public private partnership, output-based grant, performance based contract, etc.). As perfecting the glossary has proven somewhat more complex than originally anticipated, the glossary currently remains restricted to internal use, although the goal is to prepare a document that can be shared on the website.

IndII has recently produced a brochure that informs readers of IndII programs, and prepared a roll banner that can be displayed at IndII supported events.

4.2 Risk management/ Gender/ Environment

IndII’s Risk Management, Gender and Environment Plans are now fully incorporated into activity designs and all consultant contracts. Both the Risk Management and Gender Plans have been reviewed and updated during the past six months. In accordance with these plans, all incoming consultants are briefed by IndII with regard to their compliance and reporting obligations. The plans are available on the IndII website for the guidance of sub-consultants and for use in contractual documents, while mobilisation briefings ensure that all consultants are aware of the policy requirements and their application.

IndII is currently developing an activity proposal for gender mainstreaming with the Ministry of Women’s Empowerment and Child Protection as a potential new activity to be introduced in Phase II with a view to reinforcing IndII’s efforts to achieve better outcomes in infrastructure developments for women and children.

IndII is also preparing plans to significantly increase its attention to the environmental aspects of infrastructure development during Phase II. This will include a more integrated approach to environmental screening as part of the activity design and implementation processes, and as part of the further development and expansion of the IEG and Hibah components during Phase II.

4.3 Administration and management

4.3.1 Staffing and office expansion

IndII has now filled all approved positions, as shown in the attached organisation chart (Annexe 1). Concomitant with the inclusion of the WSI component and the significant growth in the numbers and complexity of IndII activities, staffing resources have grown and demands on staff have increased significantly. To meet these changing needs, IndII has recently leased and rented additional workspace on the third floor of the E-Trade building to provide additional work stations and another large meeting room. This additional floor space became available for use in February 2011. The management of the three floors has been incorporated within existing IndII arrangements - and office and administrative services are shared. All team members share the same IT and telephone systems.


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4.3.2 Management Information System (MIS)

IndII’s Management Information System, based on the IndII activity database, is now operational. The new MIS presents an intranet application which allows for integrated activity portfolio management, and monitoring and evaluation, and can provide enhanced strategic information. The MIS has been integrated with SMECNet financial management systems, and thus facilitates improved scheduling, cost and budget monitoring, management of deliverables, document management, dashboard management displays and alerts and reminder facilities.

4.4 Facility management and procurement systems

4.4.1 The IndII Phase II Extension Assessment Mission

An AusAID-led Phase II Extension Assessment Mission was conducted in October 2010. The mission found that IndII should be extended for a further four years, and that the focus on Water & Sanitation and Transport sectors should be continued. This accords with the recommendations of the Mid-term Review (April 2010) that also recommended IndII continue its primary focus on Water & Sanitation and Transport.

4.4.2 Procurement systems

IndII’s procurement systems are now near fully developed and documented. Further training for Facility staff will be conducted in March 2011. IndII is presently developing new protocols for low-value procurements that will enhance and promote greater efficiency and effectiveness during Phase II.

Related to procurement systems is the release of the Adviser Remuneration Framework (ARF). The ARF applies from 15 February 2011 to all new contracts for individual advisers and advisers engaged through management companies. IndII’s procurement systems are being modified to ensure full compliance with the framework. This will include specifying discipline groups and job levels for all adviser positions, including remuneration rates and reimbursable contract conditions in all approaches to market to fill adviser positions.

Procurement for output-based services and contracts with large companies will continue as normal, as the ARF only applies to individual advisers, sole trader companies and individual advisers provided by management companies.

Critical to IndII meeting its expenditure targets during the remainder of Phase I will be AusAID’s timely review and approval of activity designs and budgets, whether for advisers at fees consistent with the ARF, or output-based contracts with large companies that are not covered by the ARF.

In preparing for the proposed Phase II, IndII will also re-tender the IndII consultant pool to ensure all consultants registered on the pool are within the daily and monthly fees specified in the ARF.


39

ANNEXE 1: IndII organisational chart


40

ANNEXE 2: Key results matrix

Capacity Building Initiatives

Internal audit at MPW: One-hundred officers (36% women) received in-house training; Of these, 21% of women and 29% of men participants obtained above-average scores in the post test. The training will provide recognition to participants who wish to pursue accreditation as Certified Internal Auditors – CIA (a recognised qualification of the Institute of Internal Auditors – IIA). QA (by senior staff and Inspectors) is improving as a result of better documentation of Audit Plans, programs and work papers.

Road Safety: Seven women officers (of 24 participants from DGH, DGLT, Bappenas, Police, and the University of Indonesia) were given the opportunity to participate in a fact-finding mission to Melbourne, thus providing a sound foundation for their career development. The mission resulted in higher awareness of road safety issues among key stakeholders including DGH, DGLT, Bappenas, and Police.

MVP pilot program/CBO: Training on gender issues for activity implementers has resulted in better integration of gender principles into project cycles.

Radio Spectrum: The Directorate of Spectrum Management (DSM) was able to prepare its own public consultation white paper on cellular license fee reform from the support provided under IndII technical assistance.

MVP pilot program/CBO: Improved institutional and community empowerment for 18 CBOs in East Java resulted in CBO self-assessment to review suitable institutional legal entities to increase “bankability”.

Papua and West Papua capacity building: GPS training and education in spatial planning provided to Bappeda staff has identified the need for further training in planning methods and equipment, to consolidate outcomes.

BRT/BIP: As a result of capacity building activities, officers are now more mindful of basic issues such as route planning, service frequencies and bus stop spacing. Officers are also aware that high technology measures (e.g. GPS, electronic ticketing systems) may improve a bus service, but are not a substitute for getting the basics right in the first place. The multi-sector approach in the LG proposal planning showed that IndII intervention to establish BRT team involving various local agencies, has had a significant impact on local integrated planning capacity.

Access

Baseline survey: A baseline technical survey in 22 cities has identified 88,843 poor households that have no access to household water connection; these will be selected to gain Hibah (the first step of a long-term intervention aimed at improving access to water infrastructure)

Umbulan Spring Project: An MoU between GOEJ (Government of East Java) and MPW is a fundamental foundation to implementing the activity which will provide additional drinking water to estimated 2,880,000 residents in East Java.

Policy Setting and Implementation

Radio spectrum: DSM is starting to adopt bandwidth-based pricing reforms for the cellular mobile industry, which will lead to significant microeconomic efficiency improvement.

20 PDAMs: PDAM Lombok Timur has obtained an approval/umbrella agreement with MOF for subsidised lending under Perpres 29/2009, to result in 30,000 new household connections.

Lead Adviser DGH: The Lead adviser has guided DGH in considering and accepting several policy shifts including: a trans-regional corridor approach to planning and trunk route development; modification of technical policy (pavements design and performance measurements etc); organisational and performance reviews; and a greater emphasis on road safety.

Road safety: Improved collaboration between DGH, Police, DGLT and Bappenas has resulted in new government regulation(s) related to road safety. IndII also provided oversight and guidance on the establishment of the Road Safety Engineering Unit (RSEU), which has resulted in official status and recognition within DGH.

PSO: The GOI endorsed the draft Policy and Guideline Structure and issued a document with an agreed set of principles for PSO and pioneer services

Master plan for waste water treatment: A contextually sensitive ToR has been developed that includes a “generic institutional development strategy”, which will lead to improved coordination in policy development and evaluation.


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Designing grant system: The draft revision of GR 57 was successful; the draft was sent for review to the Ministry of Law and Human Affairs; an appropriate SOP to support demand-driven grant system was developed and will be converted into an operational manual, available to all users.

Internal audit at MPW: Implementation of MPW Regulation # 6 (Technical Audit Guidelines); # 7 (Comprehensive Audit Guidelines, which includes Administrative, Performance and Financial matters); and # 8 (Special Audit Guidelines) has commenced.

National Railway Master plan: Seven working papers and a consolidated report have been prepared through various stakeholder consultations, and will be used as a basis for establishing a 20-year NRMP, as mandated by Law 23/2007 on railways.

Water Hibah and waste water design: Signing NPPH/grant agreements between MoF and 25 LGs has supported the implementation of PMK 168/169.

PAU-MOT: A Licensing Reform process is to be inaugurated; a decree on Licensing Reform Task Force has been issued (KP No. 293/2010), dated 8 June 2010; the PAU team will become the main supporting unit for these reform activities (further legal support will be required from IndII to assist the existing team in developing mechanism and strategy for the activities).

ATCS: Guidelines and standards were provided for traffic signal control infrastructure; there is a clear commitment by Surabaya City Government to incorporate improvements to pedestrians and public transport in the design and implementation of the ATCS.

Partnership Building and Performance

20 PDAMs: New partnership(s) have been established between PDAMs and commercial banks and improved partnerships between LG (as owner) and PDAMs – are evidenced through two case studies.

Road Safety: New partnership between Police, DGH, DGLT, and Bappenas resulted in the development of joint road safety program. There is evidence that the agencies are working together to reduce crashes on Menteng black spots and are collaborating in drafting government regulation related to traffic and road safety.

MVP pilot program/CBO: New partnerships are being established between 25 CBOs and BNI, including a commitment from BNI to fund the “bankable” CBOs.

Designing grant systems: MOF recognises the need for external support because of the lack of Indonesian experience in designing and managing demand-driven grant systems.

Umbulan Project: The MoU between GOEJ (Government of East Java) and MPW has been signed, and is subject to signing the MoU between GOEJ and five local governments; it will be followed by the Cooperation Agreement; the MoU will enable project delivery, previously prevented by lack of central government support, to occur.

Water Hibah and Wastewater design: NPPHs (Naskah Perjanjian Penerusan Hibah)/Grant Agreements between MoF and 25 LGs have been signed. These agreements will improve the partnership between LGs and PDAMs, by imposing LG investment in PDAMs.

Lead Advisor in DGH: A strong relationship has been established between IndII and all DGH directorates, and has resulted in the successful development of a comprehensive IndII Road Sector Development Program to improve transport infrastructure at the national and sub-national level (to date, 11 road activities within DGH have been approved).

BRT: IndII intervention to set up BRT team within various local agencies has enhanced local integrated planning and coordination.

PAU: A partnership between IndII and MoT has been established which resulted in an increase in the numbers of MoT activities supported by IndII, including the planned MOT-AUSAID and IndII joint publication program.

IT Strategy (Radio Spectrum): A productive partnership has been established to enhance planning capacity and methodology within DSM, and to guide the development of an information technology strategic plan. Strategies, including joint problem solving and closer coordination across DSM personnel, consultants and IndII, are enhancing the partnership.

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