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Down to Earth IFIs Factsheet Series

No 26, October 2002



IFIs in Indonesia

This series of monthly factsheets on International Financial Institutions (IFIs) will include information on the World Bank Group, the International Monetary Fund (IMF) and the Asian Development Bank (ADB), focussing on their involvement in Indonesia.


World Bank's Projects in the Pipeline for Indonesia


The following are World Bank-proposed projects for Indonesia that may have impacts on the environment, natural resource management, and/or indigenous peoples. The information below is summarized from the World Bank's Monthly Operational Summary (MOS) available at http://www.worldbank.org/html/opr/procure/MOS/easia.html.

We are including initial indications of the potential concerns related to the projects. Closer scrunity and monitoring by the public and potentially affected groups is encouraged. The World Bank policies guarantees transparency and information as well as participation in the projects, including consultations with the public and affected groups. Civil society groups and potentially affected communities should ensure that their rights to information and participation are protected.

Indonesia receives two types of public financing from the World Bank Group. The soft-lending window, International Development Agency (IDA) provides loans at zero interest with a 10-year grace period and maturities of 35 to 40 years to the world's poorest countries for poverty combating activities. The International Bank for Reconstruction and Development (IBRD) gives loans to medium income and poorer creditworthy countries.


The World Bank has 4 environmental and social impact categories for the projects/programs it finances.

Category A
A proposed project is classified as Category A if it is likely to have significant adverse environmental impacts that are sensitive, diverse, or unprecedented. These impacts may affect an area broader than the sites or facilities subject to physical works. Environmental Assessment (EA) for a Category A project examines the project's potential negative and positive environmental impacts, compares them with those of feasible alternatives (including the "without project" situation), and recommends any measures needed to prevent, minimize, mitigate, or compensate for adverse impacts and improve environmental performance.

Category B
A proposed project is classified as Category B if its potential adverse environmental impacts on human populations or environmentally important areas—including wetlands, forests, grasslands, and other natural habitats—are less adverse than those of Category A projects. These impacts are site-specific; few if any of them are irreversible; and in most cases mitigatory measures can be designed more readily than for Category A projects. The scope of EA for a Category B project may vary from project to project, but it is narrower than that of Category A EA. Like Category A EA, it examines the project's potential negative and positive environmental impacts and recommends any measures needed to prevent, minimize, mitigate, or compensate for adverse impacts and improve environmental performance.

Category C
A proposed project is classified as Category C if it is likely to have minimal or no adverse environmental impacts. Beyond screening, no further EA action is required for a Category C project.

Category FI
A proposed project is classified as Category FI if it involves investment of Bank funds through a financial intermediary, in subprojects that may result in adverse environmental impacts.

Source: www.worldbank.org


The World Bank's Monthly Operational Summary (MOS) October 2002 indicates the following proposed projects related to ecological, natural resource management, and indigenous peoples issues:

Energy Sector
The project aims at supporting the government of Indonesia in its efforts to lay the foundation for a commercially-viable, financially-independent, operationally-secure and efficient power sector in Java-Bali, and at managing the subsidies for power development outside Java. It will do so by restructuring the state-owned power company, Perusahaan Listrik Negara (PLN) operations, including PLN's corporate and financial restructuring, and removing the most critical power system delivery constraints in Java-Bali. It will also include financing toward the management and financial information system required to establish commercially viable and operations efficient transmission, generation and distribution by successor companies in Java-Bali. The lending instrument of the project has been changed from an Adaptable Program Loan (APL) to a Specific Investment Loan (SIL) as its scope has narrowed from the power and gas sectors to include only the most immediate needs in the power sector.
Sector Power
Loan Amount (source) US$ 100.0 million (IBRD)
Env. Assessment Category A
Project Preparation Status Project preparation is under way
Potential concerns Focus on financial and commercial benefits of the energy sector may overshadow the hidden environmental and social costs that should be incorporated in the calculation of power sector sustainability. There is also a need to protect the rights of the affected groups as well as the relatively less-influential ordinary power customers.


Private Infrastructure Technical Assistance
The project will assist in (a) developing the policy, legal, regulatory and institutional foundations required to facilitate efficient, sustainable private investment in key infrastructure sectors, and (b) building broader public understanding of the need for and benefits of well-managed private infrastructure. The project will finance technical assistance services to support: (a) further development and implementation of the cross-sectoral framework for private participation; (b) improved accessibility of information relevant to private infrastructure provision; (c) strengthening of legal and regulatory frameworks for specific infrastructure sectors including transport, urban services, water supply and telecommunications; (d) institutional capacity building including for regulatory agencies; (e) conduct of sector-specific studies on topics including tariff and subsidy policy; and (f) preparation of pilot private participation projects. It is also expected to include a small training component.
Sector Private Sector Development
Loan Amount (source) US$ 16.6 million (IBRD)
Env. Assessment Category to be determined
Project Preparation Status Decision Meeting is scheduled for November 25, 2002
Potential concerns Privatization of public infrastructure should ensure the incorporation of social and environmental issues and responsibilities in the feasibility and sustainability of the projects. A comprehensive consideration of social and environmental issues – directly and indirectly related to the sectors – is required. Strong governance of the privatized sectors should be established for accountability.


Kabupaten Governance And Reform Initiatives
The purpose of the project is to pull together a group of "reformers" at the kabupaten (district) level to initiate a reform process, and develop a district-level system of checks and balances, increasing local accountability and transparency. The concept proposes a "learning-by-doing" mode of implementation, working with a combination of reform-minded local governments and civil society, building on existing initiatives. The project will be prepared and designed to include an extensive process of participation by civil society groups, professional organizations and DPRD members through a series of workshops and forms that engage these groups directly in policy reform dialogue and investment allocation. The project will focus on regulatory policy, procurement, financial management, trade and taxes. The processes undertaken to develop the core set of reforms mentioned above will also allow the opportunity to experiment with reform in other areas. The second area will be kabupaten-level dialogue to reach consensus on pro-poor investment priorities based on civic participation. The dialog will be guided by local expenditure reviews, and various techniques of poverty assessment such as poverty mapping. The final area will be investments identified through the poverty assessments. These might include budgetary support sub-project investment in a variety of sectors.
Sector Public Sector Management
Loan Amount (source) US$ 50.0 million (IBRD)
Env. Assessment Category B
Project Preparation Status Project preparation is under way
Potential opportunities and concerns Civil society groups should ensure that the project provides opportunities for civil society groups to ensure that social and environmental concerns are sufficiently considered in the policy reforms and investment allocation. It should also provide the potential for a wider participation of stakeholders in the process.


Coral Reef Rehabilitation and Management II (COREMAP II)
The project will support the second phase of the 15-year COREMAP where its overall goal is for the protection, rehabilitation and sustainable use of coral reefs and associated ecosystem which will, in turn, enhance the welfare of coastal communities. The goal of COREMAP II is to establish viable coral reef management systems at the community level in priority sites.
Sector Rural Development
Loan Amount (source) US$ 42.5 million (IBRD).
Env. Assessment Category B
Project Preparation Status Concept review was scheduled for October 2002
Potential concerns Lessons learned from the first COREMAP should be incorporated in the second stage of the project. One potential issue could be in the effeciency and effectiveness of the funds earmarked for this project, from the points of view of the outcome to achieve relative to the amount of funds required, local ownership as well as sustainability on the ground.


Land Management and Policy Development
The objective of LMPDP will be to promote equity and good governance by supporting (a) the transition to decentralized land administration in selected locations in Indonesia; (b) the allocation and registering of land rights through an improved land certification program (systematic, sporadic, and swadaya); (c) building capacity of local governments to deliver land administration services responsive to community demand for these services; (d) testing the feasibility of implementing land administration processes for communal land; (e) continued land policy development and related activities; (f) development of a fair and transparent process for community participation and consultation in administration of land; (g) the acceleration of legal reform in land matters; (h) development of efficient and equitable land transaction mechanisms, including dispute resolution; and (i) the development of fiscal incentives and taxation system on land.
Sector Rural Development
Loan Amount (source) US$ 50.0 million (IBRD)
Env. Assessment Category A
Project Preparation Status Project preparation is under way
Potential concerns As expressed in the earlier project similar to this, the Land Administration Project, concerns lie in the adverse impacts to pluralistic land administration systems that many indigenous peoples groups have had for centuries. Homogeneous land administration will make it easier for business interests to acquire land that was previously communally owned.


Water Resources and Irrigation Sector Management Program
The objectives of the project are to (a) develop and build the capacity of Irrigation Water User Associations (WUAS) and District Irrigation Agencies; (b) establish local Irrigation Improvement Funds for irrigation facilities and for rehabilitation and completion of canals for irrigation schemes; (c) support an irrigation and agricultural extension program; (d) build the capacity of River Basin Management Units; and (e) finance river improvement work.
Sector Rural Development
Loan Amount (source) US$ 250.0 million (IBRD)
Env. Assessment Category B
Project Preparation Status Project preparation is under way
Potential concerns The proposed new water resource and irrigation sector management will put the responsibility for the sector's management in the hands of water user associations (WUAs). Readiness of the WUAs to assume the responsibilities may vary, potentially causing gaps and problems in the overall management of the sector. The WUAs' capacity to manage the sector should include a comprehensive incorporation of environmental and governance principles and issues.


Second Eastern Indonesia Region Transport
The project consists of: (a) civil works that cover a three-year slice of transport needs in the Eastern Indonesia Region (EIR) with emphasis on provincial and kabupaten roads and river transport; (b) road safety, including civil works for accident black spots, vehicle weights and dimensions, and addressing the needs of vulnerable groups; (c) implementation support comprising extension of the services of the core team consultants, regional team consultants and design and supervision consultants under the current Eastern Indonesia Region Transport Project; and (d) technical assistance, tentatively expected to include additional environmental studies regarding socioeconomic impacts of roads and isolated vulnerable indigenous people, development of comprehensive transport plans for some of the eastern islands (probably Kalimantan and Papua), support of the road transport industry, phase 2 of training for both the construction industry training center (PUSLATJAKONS) and the Directorate General of Regional Infrastructure (DGRI), and technical support for the provinces and kabupatens/ kotas in the EIR
Sector Transport
Loan Amount (source) US$ 200.0 million (IBRD)
Env. Assessment Category A
Project Preparation Status Project preparation is under way. A PCD review meeting was scheduled for September 24, 2002.
Potential concerns The already-identified potential impacts to vulnerable indigenous peoples should be closely monitored and adequately mitigated throughout the project preparation and implementation. Meaningful consultation with potential affected groups should also take place.


Contacts:
Civil Society Group: International NGO FORUM on Indonesian Development info@nusa.or.id
World Bank office in Jakarta: Andrew Steer asteer@worldbank.org, Indonesia Country Director.


This IFI factsheet is published by Down to Earth, the International Campaign for Ecological Justice in Indonesia.

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