World Bank Document

Public Disclosure Authorized
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The Document
World of
Bank
FOR OFFICIAL USE ONLY
Public Disclosure Authorized
Report No. P-1819-IND
REPORT AND RECOMMENDATION
OF THE
PRESIDENT
Public Disclosure Authorized
OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
TO THE
EXECUTIVE DIRECTORS
ON A
PROPOSED LOAN
TO
THE REPUBLIC OF INDONESIA
FOR A
Public Disclosure Authorized
SECOND SHIPPING PROJECT
April 16, 1976
This document has a restricted distribution and may be used by recipients only in the performance of
their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
Currency Unit
=
Indonesia Rupiah (Rp.)
US$1.00
=
Rp 415
1 Rupiah
=
$0.002
1 million rupiah
=
$2,410
Government of Indonesia
Fiscal Year April 1 - March 31
FOR OFFICIAL USE ONLY
TNTERNA1IONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
REP'ORT AND RECOMME.NDATION OF THE PRESIDENT
TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN
TO THE REPUBLIC OF INDONESIA
FOR THE SECOND SHIPPING PROJECT
1.
I submit the following report and recommendation on a proposed loan
to the Republic of Indonesia for the equivalent of US$54.0 million to help
finance the Seconc Shipping Project. The loan would have a term of 15 years,
including three years of grace, with interest at 8-1/2 percent per annum.
About US$50 million of the proposed loan would be made available to P.T. PANN
(Pembangunan Armacda Niaga Nasional - National Fleet Development Company) half
as equity, half as debt.
The debt portion would carry interest at 12 percent
per annum and be repaid in up to 10 years including one year grace for the
procurement of used ships and up to 5 years including one year of grace for
ship rehabilitation. The Government would assume the foreign exchange risk.
The remaining US$L million of the proposed loan would be used by the Government
to cover about half of the cost of the technical assistance requirements of
the project.
Japan would provide US$25 million at 2-3/4 percent interest per
annum for 30 yearE, including 10 years of grace. Norway would make available
an export credit cf US$87.8 m[llion at 8-1/2 percent interest per annum, plus
a single fee of 1.9 percent for 15 years including a grace of 3 years and a
grant of about US$12.5 million. A consortium of banks organized by Den Norske
Credit bank of Norway would also provide up to US$12 million for 5 years at
an interest of 1-7/8 percent over the Eurodollar rate, plus management and
commitment fees of 3/4 of 1 percent each.
PART I - THE ECONOMY
2.
The latest economic report on Indonesia "Indonesia: Development
Prospects and Needs" of April 15, 1975 (708-IND) described and analyzed
the structure of production and incomes, the recent changes in the availability of resources, and the medium and longer-term outLook for the Indonesian economy. Country data are shown in Annex 1.
3.
In 1969, at the start of Indonesia's First Five-Year Plan, the per
capita income of the Indonesian population was probably no higher than half a
centurv ago.
A majority of the population lived below a minimum welfare
standard, especially on Java.
Most were dependent exclusively or primarily on
agriculture, where farms were generally very small. 1!nderernployment was
widespread.
While the inflation of the mid-1960s had been overcome, infrastructure was still in very poor condition.
4.
The Government's efforts during the First Five-Year Plan period
(April 1, 1969 - March 31, 1974) were successful in putting the economy
on the development road. Most physical objectives were achieved or nearly so,
and there was very substantial rehabilitaticn -rt ri,,-i-down infrastructure and
Government enterprises in agriculture and manufacturing. Foodgrain production
increased by 4 million tons during the Plan period Ar an average rate of 5
percent per annum. Investments increased at A verv fast rate, rising from 9
This document has a restricted distribution and may be used by recipients only in the performance
of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
- 2 -
to 19 percent of GNP. While 57 percent of Government development expenditures
were financed from abroad, the reliance on foreign financing was much less
than the level of nearly 80 percent foreseen in the Plan. Real GDP increased
at an annual rate of over 7 percent. GNP per capita in current prices reached
about US$130 1/ in 1973. The Government programs for the labor intensive
rehabilitation of infrastructure and other measures created substantial
incomes and employment. However, given the annual increase in the labor force
of about one million, one cannot be confident that the employment situation
improved during the First Plan period, and from available information it is
difficult to judge the extent to which the poorest sections of the population
shared in the gains of development.
5.
The Second Five-Year Plan (April 1, 1974 to March 31, 1979) builds
on the achievements of the First Plan.
While the First Plan dealt mainly with
the urgent needs for stabilization and rehabilitation under conditions of
great scarcity of resources, progress has been such that the Second Plan can
give much more weight to such problems as employment, increasing the productivity and incomes of the poorest sections of the population and the poorest
regions, population control, education and health. The Plan identifies a
number of specific low-income target groups and, in general, adopts an employment oriented development strategy. It aims at a continued growth in investment, needed both because capital intensity will tend to increase as the
rehabilitation phase draws to an end, and because more socially-oriented
investments will be made. Overall, the Plan expects GDP to grow at 7.5
percent per annum.
6.
Over the decade 1961-71, Indonesia's population grew by 2.1 percent a year. However, as a result of changes in the age, distribution and
declining mortality, the current growth rate is estimated at 2.5 percent.
Even under the most optimistic assumptions with regard to a decline in fertility, the growth rate would come down only gradually, and the population
would nearly double by the end of the century. While Indonesia still has
substantial unutilized land reserves in the Outer Islands, these are limited
in relation to the expected population increase. Since 1969, the Government
has been operating and gradually extending a successful family planning
program. The number of acceptors has been increasing rapidly. The Second
Plan foresees a progressively more vigorous and comprehensive attack on the
population problem.
7.
During the years 1976-79, average annual additions to the labor
force are estimated at 1.2 million, increasing to more than 1.4 million in
the years 1980-85. In addition, substantial underemployment exists, and
there is the risk that even relatively simple technological improvements
may adversely affect existing employment. The Second Plan's projections
show that employment growth would approximately keep pace with the growth in
the labor force, but even this may be too optimistic. Thus, the magnitude and
the employment content of the investment program needs to be further enlarged
and strengthened if an appreciable increase in employment and the real earnings of labor - and thus a wider spread of the benefits of development - is
to be attained.
I/
World Bank Atlas basis.
-3-
8.
Towards the end of 1973, when the Second Plan was being finalized,
prospects for resource availability improved dramatically. In line with
other OPEC countries, the Government raised the export price of oil in
successive stages from $3.70 per barrel in April 1973 to $12.60 per barrel
in July 1974. Early in 1974 (and again in 1975) the Governnent also successfully renegotiated the contracts with foreign oil companies, enabling
it to retain a greater share of the oil income. As a result, the net
contribution of the oil sector to the balance of payments and Government
revenues was expected to increase very considerably; a large increase in
foreign exchange reserves and a budget surplus were also anticipated for
1974/75.1/
By Octoer 1974, foreign exchange reserves had risen by $650 mil9.
lion from nearly $1.0 billion at the beginning of 1974/75 and Government
revenues were excEeding the levels originally estimated. The Government
authorized much higher levels of expenditures, mainly for development, which
reflected the improved revenue prospects. However, the recessionary conditions in the industrial countries began to affect the volume of oil exports
and production by the middle of the year. Indonesia's low sulphur oil tended
to become overpriced 2/ as world oil demand slackened and ouitput declined from
an average of 1.45 million barrels per day (bpd) in the first half of 1974 to
1.31 million bpd in the second half. Proceeds from non-oil exports also
started to decline as prices, and in some cases export quantities, feLl.
In October 1974 also, the first signs appeared of what turned out
10.
to be a substantial financial overextension by PERTAMINA, the national oil
company. PERTAMINA had undertaken a large and diversified investment program
In the third
financed to a substantial extent by short-term borrowing.
quarter of 1974/75, it started withholding part of the corporate oil tax it
had collected on behalf of Government from the foreign oil companies; by the
end of the fiscal year a total of Rp 346 billion ($830 million) had been so
Early in 1975,
withheld and used to meet PERTAMINA's financial obligations.
PERTAMINA failed to meet payments due to some foreign banks and the Government
stepped in and took decisive action. It banned all indepenclent foreign borrowing by PERTAMINA and other Government enterprises and gave Bank Indonesia
the sole authority to contract foreign obligations, instruct:ed Bank Indonesia
to provide the funds needed to meet PERTAIINA's external obligations, undertook a comprehensive review of the oil company's investment projects and began
the process of reducing and re-plannning the company's investment program and
of cancelling and renegotiating many of the related procurement contracts.
The combination, in the last half of 1974/75, of slickening
11.
receipts from exports of oil and other products and of the need to meet
PERTAIINA's short-term obligations resulted in a loss of the foreign exFy March 31,
change reserves gained in the first half of the fiscal year.
1/
Indonesian fiscal year April 1, 1974 - March 31,
2/
The premium
decision to
as compared
light crude
1975.
on1Indonesian oil has recently been reduced by the Government's
raise the price of its main crude by 1.5 percent (to $12.80)
with the 10 percent incrense in the price of Saudi Arabian
agreed at the meeting of OPEC in September 1975.
- 4 -
1975, these reserves were at the same level as at the beginning of April
1974.
12.
In the first half of 1975/76, Indonesia's foreign exchange reserves
declined by a further $480 million, despite substantial capital inflows,
which included two syndicated public cash borrowings (totalling $575 million)
from the international capital market.
With continuing recessionary conditions in Indonesia's principal markets, exports failed to increase while
imports rose again (about 30 percent on an annual basis). Debt service payments on behalf of PERTAMTNA were also very large (about $1.0 billion-)>
In
the second half of 1975/76, there was no appreciable change in export earnings, but imports and debt service payments were lower and there was only
a small reduction in capital inflows (two more cash loans, amounting to
$475 million, were raised). The country's foreign exchange reserve position
was therefore relatively stable in this period and the decline in the reserves for the year as a whole amounted to nearly $500 million.
13.
Balance of payments prospects for 1976/77 are on the whole good.
Recovery from the recession appears to be underway in most industrialized
countries, commodity prices seem to have bottomed out and oil exports from
Indonesia have been rising in recent months. The Government is in the process of negotiating an increase in its share of the oil income. Rice imports
are expected to remain at the average level of recent years (Government estimate is 1.4 million tons) but prices are likely to be considerably lower.
The country has sizeable stocks of fertilizer and only small amounts are expected to be imported.
However, there remains some uncertainty as to the
exact magnitude of payments due on account of PERTAMINA's financial obligations, and the outcome for foreign exchange reserves during 1976/77 at
this point is difficult to predict.
14.
Budgetary revenues in 1974/75 were much lower than had been anticipated at the middle of the year, partly due to the withholding of oil tax
revenues by PERTAMINA and partly to the shortfall in oil exports in the
second half of the year. The budget was, however, still in balance by year's
end as the Government reduced or deferred expenditures. The Government
revenue in 1975/76 also fell substantially short of the budget estimates,
mainly as a result of lower oil tax revenue. To keep the budget balanced,
both current and development expenditures were reduced. Revenues, as well
as current and domestically financed development expenditures, are now estimated to have been roughly 15 percent lower than originally budgeted.
15.
In spite of the shortfall in budgetary revenues, and the administrative difficulties involved in the implementation of some projects, total
development expenditures in 1974/75 were Rp 770 billion ($1.9 billion), about
60 percent higher than the level in the previous year.
In 1975/76 they are
estimated at Rp 1.27 trillion ($3.1 billion), including foreign project
financing totalling about $925 million and fertilizer subsidies amounting to
$320 million. This is more than two and one-half times the actual expenditure in 1973/74; when adjusted for price changes, it represents an Lncrease
of about 60 percent.
-5-
16.
Preliminary figures indicate that the high growth rate achieved
durlng 1969-73 was maintained in 1974. At constant 1973 prices, gross
domestic product rose by 7.5 percent in 1974. Partial indicators seem to
point to slower growth of output in 1975. The inflation rate wEas very high
in the flrst part of 1974 as, among other factors, world inflation was
transmitted through both export and import channels, but abated somewhat
later in the year, partly as a result of the Government's stabilization
measures in April 1974. Nevertheless, for the year as a whole it reached
40 percent. While still considerable, the average inflation rate for 1975
was reduced to 20 percent.
17.
In the aftennath of the PERTAMINA development, the Government is
faced with problems which, although serious, are surmountable. The reviewof PERTAMINA's projects has resulted in cancellation or renegotiation of
many contracts and reductions in project scope and size. 1/ The Government
has more recently-undertaken a broader review of projects initiated by
various Government departments and other State entities in an effort to
bring future expenditu;res in line with available resources and the priorities set out in the Second Plan.
It is screening very carefully any major
new programs or projecl:s, since considerable resources will be needed in the
next year or two for the completion of projects already initiated.
18.
A longer-term effect of the recent financial difficulties will be
on the country's external public debt service obligations during the rest of
the decade.
Debt service payments over the next several years will be much
larger than previously envisaged, as a result of the large borrowings by the
Government in 1975/76. Debt service in 1976/77 is now estimated at $700 million, which would be about 12 percent of the officially projected net oil and
other exports. Debt service payments on all loans contracted to December 31,
1975 is projected to reach about one billion dollars by 1978 before declining
as shorter-term maturities are paid off. This is about $500 million more per
year than the payments projected on the basis of debt outstanding at the end
of 1974.
With debt service obligations on these borrowings substantially
higher than expected earlier (about 13 percent of exports in 1978), the
margin for further borrowing on other than semi-concessional terms has now
become much more limited. The amounts, terms and purposes of future borrowing
therefore need to be kept under continuous careful review.
19.
While the recent balance ot payments and budgetary difficulties
have upset some of the Government's plans, the long-term prospects for
Indonesia's development remain good. The country has a substantial potential for further productive investment, employment and income growth. In
agriculture, a vigorous pursuit of on-going programs in irrigation, development of new plant varieties and technical services, provision of credit
and current inputs, etc., promises to yield high returns. In addition,
there are opportunities for the development of new areas, of food and tree
crops - partly in conjunction with a rapidly growing transmigration program.
1/
The planned capacity of the Krakatau Steel plant, for example, was
reduced from 2,000,000 to 500,000 tons per year and the existing
supply contracts were reduced by $750 million.
- 6 -
The industrial potential is good, both for modern capital-intensive natural
resource-based activities and for more labor-intensive, partly export-oriented
industries.
PART II - BANK GROUP OPERATIONS IN INDONESIA
20.
As indicated in Part I, Indonesia's plans emphasize a need to
undertake a large investment and development program designed to provide
productive work opportunities (with resultant increased incomes) for its
presently underemployed and growing labor force. Substantial external
financing, on concessional and semi-concessional terms, as well as a considerable volume of technical assistance, is also required. The Bank is planning
to increase its lending to Indonesia and, in particular, to support projects
designed to: improve agricultural credit, research and extension; rehabilitate and expand irrigation systems; increase the production and distribution
of fertilizer; assist transmigration and nucleus estates; increase non-agricultural employment in small towns and rural areas by the establishment of
small-scale industries; and rehabilitate and expand urgently needed transportation and other infrastructure.
21.
As of April 15, 1976, Indonesia had received 37 IDA credits totalling $561.8 million and 12 Bank loans amounting to $628.0 million. At that
date, IFC investments totalled $58.4 million. At the end of 1974 the Bank
Group accounted for about 4 percent of Indonesia's total outstanding public
debt; by 1978 it is expected to acccount for 12 percent of total outstanding
public debt and 5 percent of public debt service obligations. A summary
statement of IDA credits, Bank loans and IFC investments as of February 29,
1976 and notes on the execution of ongoing projects, are contained in Annex
II. This is the fifth loan proposed for Indonesia this year and, if approved,
would bring total IBRD commitments since June 30, 1975 to $302 million.
22.
To date, agriculture accounts for just over one-third of all Bank
lending to Indonesia, including four IDA credits for estate rehabilitation,
six for the rehabilitation and expansion of the irrigation systems, two for
fisheries, and one each for seeds, beef cattle, sugar and smallholder tea and
rubber. In the industrial sector, the Bank Group has assisted in three
projects to expand PUSRI's fertilizer production capacity, three for development finance companies (Government-owned and private) which play a major role
in fostering the growth of industrial enterprises, and one for the Pulo Gadung
industrial estate. Loans and credits have also been extended to the transportation, education, telecommunications, tourism, power, population, urbanization and water supply sectors, and four credits have been made for technical
assistance to aid the Government in preparing and formulating its development
programs and projects.
23.
The Bank's previous assistance in the transport sector consisted of
three credits and one loan totalling $206 million for highway projects, one
credit of $8.5 million for inter-island fleet rehabilitation, one loan of $48
million for the Indonesian railways project and one loan of $68 million for
fertilizer distribution project. Technical expertise has also been financed
-7 -
under the technical assistance credits to Indonesia. Progress in most of these
projects has been slow, but no major difficulties have arisen. A proposed
project to expand the countries principle general cargo port (in Jakarta)
has been appraised and may be ready for financing early in the next fiscal
year.
24.
Bank lending to Indonesia started with an IDA Credit in 1968 for
irrigation rehabilitation; almost half of all loans and credits have been
made since mid-1972, with lending on Bank terms commencing in June 1974. Disbursements on loans and credits are now at satisfactory levels. The Indonesian
authorities have become increasingly aware of the delays in project execution
caused by cumbersome procedures and the need to establish an effective conLrol
system in BAPPENAS (The National Development Planning Agency). At the Government's request, the Bank has arranged for assistance under the Fourth Techical
Assistance Credit (Cr. 451-IND) to help set up a monitoring and control system
which it is hoped will lead to better project administration.
25.
Future Bank lending gives high priority to the agricultural sector
through support of projects to increase rice and other crop production in
the Inner and Outer Islands, and the expansion of resettlement efforts on
the latter. In addition, the program provides for further socially-oriented
projects in the fields of urban development and population. Projects for
agricultural extension, ports, power, fertilizer production, irrigation and
nutrition are expected to be ready for presentation in the next few months.
PART III - THE TRANSPORT SECTOR
26.
For Indonesia the balanced growth of its island economy rests heavily
on improvements in the transport sector. Much of the nation's road and rail
systems are concentrated, like its population, on Java which has 33 percent
and 70 percent of the respective total networks. Roads provide the basic
links on the individual islands outside Java though the density of these networks is much lower than in Java. There are a few railway lines in Sumatera.
Where rivers are navigable (South Sumatera, Kalimantan, West Irian), they carry
significant volumes of traffic. There are also about 450 km of petroleum
pipelines in operat-Lon or under construction in south-central Java. Freight
movements among the islands are made by marine transport which also carries
some traffic between points on the same islands.
Air transport is developing
rapidly but is almost exclusively for passenger use, both inter- and intraisland. The largest single item in freight transport, measured in ton-km,
is the movement of petroleum products by domestic shipping; without this
traffic, road and sea traffic are roughly equal and each about three times
rail traffic. Road transport accounts for more than half of total passenger-km, with rail contributing the second largest share.
27.
The contribution of transport to GDP virtually stagnated for most
of the 1960's, but grew at nearly 11 percent a year (in constant prices)
over the First Plan period. The Government's policy in the First Plan emphasized rehabilitation of transport facilities. Highway traffic has since
- 8 -
increased substantially, one indicator being that 70 percent more registered
vehicles are on the roads today than in 1970. In addition, some fleet expansion took place, particularly in road transport and aviation.
The primary
aim of the Government's Second Plan in the transport sector is to create
substantial capacity increases both by additional investment and by improved
productivity, through completion of unfinished rehabilitation work and further strengthening of sectoral institutions and organizations.
28.
As a result of its enlarged oil income, the Government has expanded
expenditure under the 1974/75 and 1975/76 development budgets over the levels
projected in the Second Plan. The increase for transport is almost the same
as for the budget as a whole and, other than differential acceleration of
expenditures in some transport activities, the Government has not indicated a
shift in its sectoral strategy. Over the Second Plan period, investments for
transport in the public sector (assuming continuation of development expenditures at increased levels) and by the private sector are estimated at about
Rp 1,800 billion ($4.3 billion), in 1973 prices, roughly 17 percent of total
investments; about 56 percent of this will flow through the public sector
under various central and local government development budgets with the
remainder being financed privately, particularly for the purchase of road
and other transport vehicles.
Transport Planning, Policy and Coordination
29.
Responsibility for planning and policy formulation in the transport
sector is divided at the national level between the Department of Public Works
and Power (DPW) for Highways and the Department of Transport, Communications
and Tourismi (DOC) for other modes. Investment proposals are formulated
at the modal level in these departments and then submitted to BAPPENAS for
review and approval.
30.
Planning of highways in the DPW's Directorate-General of Highways
(DGH) has been significantly strengthened in recent years with the assistance
of the UNDP-financed Highways Planning Advisory Team (HPAT). Railway planning will be improved under the recent Bank loan for the railways, and national ports planning, which is urgently needed, will be given special attention in a proptosed project for the port of Jakarta. Effective transport
planning is now hindered by limited and irregular-flow of data; the Government is pursuing several means to improve the availability of information,
among them the provision of an expert financed under the Technical Assistance Credit 275-IND to work with DOC on data problems.
31.
The Government largely controls the operation of the transport
system, not only through the provision of infrastructure and the ownership
of important transport enterprises in all modes, but also through rate
setting and other regulatory activities. While it has not formulated an
explicit transport policy, the Government has identified areas requiring
special attention, particularly financial objectives and the control of
public sector transport firms and pricing policv. At present, accounting
systems vary widely among sectoral enterprises and means are not available
to compare financial performance or to set standards.
Frequently, Government decisions on rates has to be made without anaLysis of costs, demand
- 9 -
factors or the effect on competing modes.
Experts, financed under the Technical Assistance Credit, are now advising DOC in these areas in order to
make the Government"s activities more consistent and effective, improve the
return on its investments in the sector and ensure that all relevant economic factors are considered in transport pricing.
The Maritime Sector
32.
The Indonesian shipping fleet, excluding some sailing craft, consists of about 1,055 registered vessels having a total deadweight tonnage
(dwt) of 1,159,000. In addition, the operating fleet includes ships acquired
on hire purchase and charter, particularly oil tankers and oiL industry supply vessels. The records for mid-1974 show that Indonesia had 57 oceangoing vessels owned by 7 major and a number of minor companies; 423 local
vessels with an average of 200 dwt and 336 inter-island registered ships of
500 dwt and over, totalling some 426,000 dwt and owned by 56 companies. Of
the inter-island ships, 200 totalling 220,000 dwt owned by 47 companies,
were licensed in the Regular Liner Service (inter-island) (RLS) fleet.
33.
Studies of short-term port requirements have been carried out by
consultants and the main ports are being improved with assistance from the
Asian Development Bank (ADB), the Netherlands and Japan. Mast:er plans have
been prepared by consultants (Sir William Halcrow, U.K.) for t:he ports of
Surabaya, Belawan and Panjang with financing from UNDP with ADB as executing
agency. A master plan study of Tanjung Priok (Jakarta), the largest general
cargo port (handling about 30 percent of the country's total traffic) was
completed in September 1975 by consultants (Swan Wooster Engineering Co.,
Canada) financed under Credits 216-IND and 275-IND. The Government recognizes
the importance of imoroving port operations and a project designed to improve
ADB and bilateral agencies are
Tanjung Priok has been appraised by the Bank.
considering a project for other ports. Measures to improve cargo
handling and reduce port time are included in the project.
34.
In 1975, the RLS system consisted of 28 trunk or main routes, 20
feeder routes and 18 routes which serve Singapore. About 140 ports are
served with varying frequency and regularity. The RLS section of the interisland fleet is dominated by the Government-owned company, P.T. Pelayaran
Nasional Indonesia (PELNI), which owns 40 percent of the total tonnage. Many
RLS companies own only a few ships. A large part of the RLS fleet is overage; in 1974, 35 percent of the ships was over 20 years old, a further 53
percent between 11 and 20 years old and only 12 percent under 10 years old.
Due to poor maintenance, frequent breakdowns and long repair times, it is
estimated that about half of the total fleet is operated less than 200 days
per year. The poor productivity of these ships is further reduced by inordinately high port time and delays.
35.
Indonesia has about 300 ports scattered over the archipelago but
about 70 percent of traffic volume is concentrated in ten of them. The
major ports are in Java, Sumatera, Sulawesi and Kalimantan. Port operations
and customs procedures present a serious impediment to transport flow and
improvements could result in significant increases in port capacity and
a reduction in shipping costs.
However, due to institutional rigidities,
major improvements cannot be expected to be achieved quickly.
-
10
-
36.
During the period from 1960 to 1970 the maritime sector had become disorganized, ill-maintained and obsolete. A three-year fleet rationalization program starting in 1972 was planned by the Government in connection with the Inter-Island Fleet Rehabilitation Project financed under Credit
318-IND.
37.
This program, in addition to emphasizing the enforcement of marine
regulations, and providing technical assistance to ship repair facilities,
was expected to improve the RLS route service by rehabilitating ships and by
scrapping obsolete ships. It was also expected to improve shipyards and shore
facilities and, through conditions attached to rehabilitation sub-loans, the
operational performance of RLS shipping companies. Although the tonnage of
licensed ships in the RLS fleet has been reduced by 20 percent since early
1972, lax enforcement of safety standards delayed the ship scrapping program.
The upsurge of traffic in 1973 and 1974, and the Government's need to secure
shipping for the emergency transport of rice during the 1972/73 drought caused
additional delays. Progress has been made in consolidating and improving the
operations of shipping companies through formation of groups designed to
improve operations. Port operations, particularly in the main ports, were
also improved. Three main shipyards which received technical assistance under
Credit 318-IND have improved their operations and have participated in the
rehabilitation work on RLS ships. Considering the difficulties of implementing planned changes and the short time involved, progress made in executing
the fleet rationalization program is encouraging and the Inter-Island Fleet
Rehabilitation Project is in general being satisfactorily implemented even
though the total tonnage to be rehabilitated has been greatly reduced because
of severe costs increases. Much remains to be done, including further physical rehabilitation and more effective enforcement of shipping safety
regulations.
38.
Rapid increases in investment and production activity in Indonesia
in recent years have resulted in growing volumes of ocean and inter-island
trade; the RLS traffic rose from 1.9 million tons in 1971 to 2.5 million tons
in 1973. By early 1974, shippers were offering premiums on freight rates
in order to obtain service. With the current slow-down of economic activity,
a temporary over supply of shipping capacity may reappear. But even if port
operations and customs procedures are improved, thereby increasing average
ship productivity, there would still be a growing shortage of shipping during
the next five years and beyond. To overcome this shortage, the Government
has drawn up an inter-island fleet development program based on the reportLong Term Fleet Development (LTFD) of November 1974, prepared by consultants
(Mlaritime Research Centre, the Hague) retained as required under Credit
318-IND. To act as the financial intermediary in carrying out this investment
program the Government has established a National Fleet Development Company
(P.T. Pembangunan Armada Niaga Nasional - PANN), which will procure and then
make available ships to operationally competent but financially weak RLS
shipping companies. In order to encourage the development of reliable interisland shipping which is of vital economic and political importance, the
Government has decided to keep freight rates as low as possible. This in
turn will require PANN to charge interest on its ships sales and leases at
-
11
-
no more than 10 percent per annum, which is five percentage point below the
prevailing long ternm interest rate of State Banks (currenctly 15 percent).
At this level of interest charges, competent shipping companies should be
able to earn an adequate rate of return on new capital to be invested in
the shipping industry.
PART IV - THE PROJECT
General
39.
The consultants retained by the Government to determine the scope
of the inter-island shipping requirements during Repelita II, (1974/79) prepared a Long-Term Fleet Development (LTFD) Report in November 1974 which
recommended an investment program consisting primarily of new ships at a
cost of about $587 million. A Bank Mission discussed the LTFI) Report with
the Government in December 1974 and proposed that the program should be
restructured to include used ships and divided into two phases to take
account of the government's difficult financial situation, the need for
further studies to determine the optimum size of the fleet ancl uncertainties
surrounding the rate of traffic growth that was assumed in the Report.
The
proposed project was therefore designed to meet primarily the existing acute
shortage during Repelita II, through the continuation of the rehabilitation
program and procurement of used cargo ships and new cargo and cargo-passenger
ships. Over-age and technically deficient ships which are too costly to repair
would be scrapped.
iraining and technical assistance programs related to the
acquisition of ships and improvement of ship operations would also be included in the proposed project.
40.
The project was appraised in December 1974 but the Government delayed its decision on the specific composition of the project and its financing and another mission visited Indonesia in June 1975 for further discussions.
A general understanding with the Government on these issues was reached in
October 1975 and negotiations were held in Washington between March 8 and
March 17, 1976; the (Government delegation was led by Dr. Julianto Moeliodiardjo,
Director General of Monetary Affairs, Department of Finance.
Project Description
41.
The projecl: is part of the first phase of the Government's InterIsland Fleet Development Program for the period 1974-1979 and is designed
to modernize, expand and improve the efficiency of the inter-island fleet.
The project consists of the following elements:
(a)
rehabilitat:ion of 54,500 dwt of existing inter-island
ships, where such rehabilitation is economically justified;
-
12 -
(b)
procurement of about 47 used cargo ships totalling about
52,000 dwt in the 1,000, 1,500, and 2,500 dwt classes
(about 41, 4 and 2 in each class, respectively);
(c)
procurement of about 47 new standard cargo and cargopassenger ships totalling about 50,250 dwt in the 750,
1,000 and 1,500 dwt classes (about 13, 21 and 13 in
each class);
(d)
scrapping of about 70,000 dwt of existing inter-island
ships of over 500 dwt which cannot be economically rehabilitated;
(e)
a technical assistance and training program, designed to
support and improve inter-island fleet operations and
planning, and the training of marine officers and
engineers; and
(f)
a study to determine the shipping requirements during the
remainder of Government's Second Five Year Plan (REPELITA
II) and the period up to 1990.
A loan and project summary is attached as Annex III.
Organizations Involved in the Project
The major organizations involved in the maritime sector are the
42.
following:
(i)
P.T. PANN (P.T. Pembangunan Armada Niaga Nasional)
The National Fleet Development Corporation (FANN) was organized in
May 1974 on the advice of the LTFD report to procure and sell or lease ships
Its authorized capital is Rp. 40 billion
to financially weak RLS shipowners.
of which only Rp. 2.0 billion ($4.8 miLlion) has been paid in, 60 percent by
the Government and the remaining 40 percent by BAPINDO. Under PANN's charter
a board of supervisors (Dewan Komisaris) sets overall policy and oversees its
operations, while day-to-day operations are managed by a board of management,
or Direksi. PANN's management will be assisted in the execution of the project by internationally recruited naval architect-surveyors, legal counsel as
well as shipbrokers, resident financial and technical advisors, all appointed
with the agreement of the Bank (Section 3.02(b) of the draft Loan Agreement).
The major policies and procedures to be applied by PANN in its operations
have been agreed with the Bank and are set out in a "Policy Statement for
PANN" which has been adopted by the Dewan Komisaris.
(ii)
BAPINDO
BAPINDO, the state-owned development finance company, would play
Applications for the
an important role in the execution of the project.
would be analyzed
rehabilitation
purchase of new and used ships or for ship
- 13 -
and appraised by EAPINDO, in consultation with PANN, before PANN would decide
on the eligibility of the applicants for lease or sale of ship(s) under the
project. BAPINDO would carry out this task through its Maritime Credit
Department (MCD) which was established to implement the first Inter-island
Fleet Rehabilitation Project financed under Credit 318-IND. The MCD is
staffed with competent personnel and is assisted by advisors in ship finance
and repair. MCD's operations in the last three years have been satisfactory
and the contracts of the advisors financed until February 1976 by UNDP have
been extended and would now be covered by the proposed loan. As of December
31, 1975 about Rp. 1,043 million or 10 percent of BAPINDO's maritime loan
portfolio is in arrears, of which about Rp 554 million on loans to PELNI.
The Government has agreed to make the necessary arrangements to enable PELNI
to settle its arrears to BAPINDO by March 31, 1977.
(iii)
SEACOM
The Directorate General of Sea Communications (SEACOM) within the
Department of Communications is responsible for all maritime operations. In
this capacity SEACOM will have the overall supervisory responsibility for the
project.
(iv)
P.T. PELNI (P.T. Pelayaran Nasional Indonesia)
The largest inter-island shipping company in Indonesia is the
Government-owned P1.LNI, which would also be the major beneficiary of the
proposed project. This company carries about two-thirds of RLS passengers
and 40 percent of cargo traffic.
For the past three years the Netherlands
has provided a team of six advisors to help improve PELNI's management and
operations. Although there have been some improvements, the company still
suffers from managerial and operational weakness and is not expected to make
a profit until 1979. The on-going technical assistance from the Netherlands
would therefore continue and would be supplemented by an internationally
recognized management consultant financed under the proposed loan to review
further the company's procedures and operations and to recommend a plan of
action.
Technical Assistance
43.
During the past three years a substantial technical assistance and
training program has been underway in the maritime sector. The Association
(under Credit 318), UNDP, ADB and bilateral lenders, have contributed towards
financing this program which included advisory services to Biro Klasifikasi
Indonesia (BKI-Indonesian Ship Classification Society), SEACOM, BAPINDO and
PELNI as well as improvement of navigational communications and the provision
of navigational aid equipment and ship repairing facilities.
It is expected
that most of these programs except those financed by the UNDE' would continue
under the same or aLternative arrangements satisfactory to the Bank during
the implementation of the proposed project; funds are included in the proposed loan for advisory services to SEACOM, PELNI and BAPINDO for their
respective technical assistance requirements.
- 14 -
44.
In addition, the project provides for some new technical assistance and training activities: training of marine officers and engineers;
strengthening of financial, administrative and operational capabilities of
the shipping enterprises; review of PELNI's management; specialist services
for shipboard maintenance and repairs for PELNI; a study of future RLS
shipping requirements; revision of Indonesian shipping safety regulations
and provision of naval architects-surveyors, legal counsel, as well as
resident financial and technical advisors for PANN. In order to maintain
contact with the international market for used ships, PANN would also retain
shipbrokers. All these specialists, advisors and technical personnel would
be appointed on terms and conditions satisfactory to and with the agreement
of the Bank. The Inter-Governmental Maritime Consultative Organization
(IMCO) is expected to help the Government carry out the training program for
marine officers and engineers and funds from bilateral sources are likely to
be available for some of the technical assistance requirements.
45.
Out of the Norwegian financing totalling about $110.3 million (see
para 49), about $2.2 million would be used to meet the requirements of the
following technical assistance programs:
financial and technical advisors
to PANN, advisory services for the revision of shipping regulations, overseas training for the staff of SEACOM, PANN and PELNI, and instructors and
equipment for a shipyard training centre. The proposed Bank loan includes
$3.8 million to meet the foreign exchange cost of the technical assistance
and training not financed from other sources. A total of 570 man/months
consultant services, at a cost of $64,000 per man/year, would be financed
under the proposed loan.
Cost Estimates
46.
The total project cost is estimated at $195.2 million of which
$189.8 million or 97 percent would be in foreign exchange. The following
table summarizes the estimated cost of the project:
Local
Rehabilitation
Used Ships
New Ships
Delivery Costs
Technical Assistance to:
(a) PANN
(b) Government
Total
5.7
41.2
124.2
8.5
9.5
41.2
124.2
8.5
0.4
0.3
5.7
0.3
6.1
4.2
185.6
189.8
Expected Price Increases
Physical Contingency
1.2
-
1.7
2.5
2.9
2.5
Total Project Cost
Interest During Construction
5.4
0.2
189.8
6.1
195.2
6.3
Total Finance Required
5.6
195.9
201.5
Base Cost
3.8
US$ Million
Foreign
- 15 -
The prices of new ships are based on fixed price contracts already signed with
Norwegian, Japanese and Indonesian shipyards. Used ship prices are expected
to remain stable during the procurement period to mid-1977, and no provision
for price increases has therefore been made for new and used ships. Costs
of rehabilitation, mainly to be undertaken in Indonesia, are assumed to
increase by 15 percent in 1976, 10 percent in 1977 and 1978 and by 7.5 percent in 1979. Delivery costs are estimated at a fixed amount of $120,000
per ship. Physical contingencies are estimated at $2.5 million.
Financing Plan
The proposed financing plan for the project is summarized below:
47.
Total
Japan
Project Cost (OECF)
Rehabilitation
Used Ships
New Ships
Delivery Cost
12.4 a/
41.2
124.2
8.5
-
-
25,0
Norway
Ln/Grant BAPINDO
4.0 b/
-
93.8
3.7
5.6 c/
5.4 c/
-
Proposed
PANN (Govt. Loan
7.3
1.1 b/-
-
Total
12.4
35.6
41.2
124.2
4.8
8.5
Technical Assistance to PANN
0.3
-
0.3
-
-
-
6.1
-
1.9
-
-
0.4
-
0.3
3.8
6.1
Technical Assistance to Govt.
Physical Contingency (used
ships)
Total Project
Cost
-
_ 2.5
195.2
25.0
99.7
-_
-
15.0
1.1
0.4
-
6.3
-
7.4
0.4
2.5
54.0 195.2
Interest during
Construction d/ _ 6.3
Total
Financing
Required
a/
b/
c/
d/
e/
201.5
-
25.0
-
99.7e/ 15.0
-
6.3
54.0 201.5
This total includes $2.9 million for expected price increases.
Local currency.
For ships already ordered and to be built in Indonesia; these may
be financed from Loan 1054-IND.
From PANN's cash generation.
Includes funds from a consortium of Banks organized by Norway
(Para. 49).
-
16
-
48.
The Japanese Overseas Cooperation Fund (OECF) has made a loan of
$25 millon to the government at an interest rate of 2-3/4 percent per annum
repayable over 30 years including 10 years of grace. This loan would finance
seven new ships, 750 dwt each, presently under construction in Japan and five
new ships of about 1,000 dwt each likely to be constructed by Indonesian
shipyards. The Government considers the prices of these ships, about $2,000
per dwt, reasonable, when the financing terms are taken into account.
49.
Norway is making available to Indonesia a total of $110.3 million
equivalent of which about $99.7 million would be used to help finance the
project; the balance $10.6 million would be used to finance the purchase of
one used ships, six tug-boats and some technical assistance which are not not
included in the project. The Norwegian financing is composed of three elements:
(i) a grant of about $12.5 million to cover the cost of delivering
new ships built in Norway to Indonesia, to train in Norway the Indonesian
crews who would bring these new ships to Indonesia and to provide instructors
and equipment for a shipyard training centre in Indonesia. The grant would
also include funds amounting to about $2.2 million to finance certain technical assistance components of the proposed project (see para. 45); (ii)
a
loan of about $87.8 million from the Norwegian export credit bank, A/S
EXPORTFINANS, to the government of Indonesia repayable over 15 years including a grace period of 3 years at an interest rate of 8-1/2 percent per annum,
plus a single fee of 1.9 percent. The Indonesian Government would use the
proceeds of the loan to finance 90 percent of the cost of 20 new ships to be
constructed in Norway (10 ships in the 1,000 dwt class and 10 ships in the
1,500 dwt class) and the total cost of 6 new ships to be built by the
Indonesian shipyards (3 ships in the 1,000 dwt class and 3 ships in the 1,500
dwt class); (iii) a loan of up to $12 million from a consortium of banks organized by den Norske Credit Bank to the Indonesian Government repayable over
5 years ending on June 15, 1981.
This loan carries an interest rate of 1-7/8
percent over the rate quoted on Eurodollar deposits, plus management and
commitment fees, of 3/4 of 1 percent each. The Government would use the
proceeds of this loan to meet the required down payment of 10 percent for
the 20 new ships to be purchased in Norway. Given the terms of the Norwegian
financing package, the prices of the new ships which would be built in Norway
under contracts based on fixed prices is reasonable.
50.
The proposed Bank loan of $54 million would finance 28 percent of
total cost and 29 percent of the foreign exchange cost and would be used to
finance the cost of most of the used ships ($35.6 million) and of the ship
rehabilitation program ($7.3 million), the delivery cost ($4.8 million) of
the used ships financed under the proposed loan, about half of the technical
assistance requirements of the project ($3.8 million) and the physical contingencies ($2.5 million) provided for modifying the used ships financed under
the proposed loan to adapt them for Indonesian shipping services. The proposed loan would be made to the Government at 8-1/2 percent interest per
annum for 15 years including 3 years of grace.
-
17 -
51.
BAPINDO would make a loan of about $15 million equivalent to PANN
at 15 percent interest for up to 15 years for the purchase of new ships,
up to 10 years for used ships and up to 5 years for ship rehabilitation,
all including one year of grace; BAPINDO would use the proceeds of Loan 1054IND and Credit 3113-IND as well as BAPINDO's own funds when making available
this loan of $15 nillion to PANN for the purposes of the project.
Contributions from the Government to the project would be small ($0.4 million) because the local cost component of the project is very low (about 3 percent).
to provide for
PANN would be able to generate cash from its own operations
interest during construction and part of the rehabilitation costs, amounting
to $7.4 million, over the period 1975-1979.
52.
Additional funds for the purchase of inter-island ships may become
available in the future from bilateral lenders and foreign credits and could
However, due to unbe applied to a subsequent project if it is identified.
certainty about traffic growth and cargo handling capabilities, procurement
of inter-island ships in excess of 12,000 dwt over those included in the
project would only take place with the prior agreement of the Bank (Section
3.07 of the draft Loan Agreement).
On-Lending and Relending Terms
53.
It is envisaged that PANN would have an initial debt/equity ratio
of about 50:50 which may change to 65:35 in future. To achieve this, about
half of the funds borrowed abroad by the Government from Japan, Norway and
the Bank would be made available to PANN as equity. The other half would
be relent to PANN at an interest rate of 12 percent per annum apart from
Funds borrowed by PANN for the purchase of new ships would
BAPINDO funds.
be for up to 15 years including one year of grace, for the purchase of used
ships up to 10 years including one year of grace and for rehabilitation of
existing ships up to five years, including one year of grace. The terms of
the relending would be set out in a financing agreement between the Government and PANN and 3APINDO, respectively, which would be signed before the
proposed Bank loan becomes effective (Section 6.01 of the draft Loan Agreement).
The Govermnent would make its equity contributions directly to PANN
but it would use Bank Indonesia and BAPINDO, for a service fee, to administer
the Goverrunent's loan contributions to PANN.
54.
PANN's present paid-in capital is Rp 2.0 billion of which 60 percent is owned by the Government and 40 percent by BAPINDO.
As the Policy
Statement of BAPINI)0 includes certain limits for BAPINDO's equity or loan
contributions to a single enterprise, in determining the size of its equity
participation and loan contribution to PANN, BAPINDO would at all times be
bound by the- ceilings included in its Policy Statement.
55.
PANN will sell or lease the ships it will acquire under the project to qualified Indonesian operators deemed to be operationally capable
after an appraisal by BAPINDO's MCD and PANN.
The terms of the new ship sale
contracts would be as follows:
a minimum of 10 percent cash deposit and a one
-
18 -
percent commitment fee, for a maximum repayment period of 15 years, including
six months of grace after the delivery of ship and at an interest rate of 10
percent per annum. Used ships of up to 10 years of age would be sold to
shipping companies with 10 percent downpayment and 20 percent on delivery of
the ship for a maximum repayment period of 10 years, including six months of
grace after the delivery of the ships at an interest rate of 10 percent and
one percent commitment fee. Leases of new ships would be for varying periods
of time, with a maximum of 15 years, calculated at an interest rate of 10
percent with a commitment fee of one percent. Leases of used ships would be
on similar terms to those for new ships except that the term would be a
The length of PANN's lease contracts would be flexible
maximum of 10 years.
so that PANN will be able to revalue its assets when the leases are renewed.
The costs of rehabilitating ships will be recovered from ship operators over
up to five years, including three months of grace after the completion of
rehabilitation of the ship, with an interest rate of 10 percent per annum and
a commitment fee of one percent (Schedule to the Project Agreement).
Forecast of Financial Position of PANN
PANN commenced operations early in 1975 and has made commitments
56.
for the purchase of nine new and seven used ships by using its equity funds
and the proceeds of the Japanese loan. It is expected to acquire a total of
On the basis of its projected
47 new and 47 used ships under the project.
of
about 4 percent on its equity
revenues PANN is estimated to earn a return
over the life of the project. Depreciation has been calculated on a straigthline basis and therefore PANN's financial statements do not show any net
income until 1979 although it will be generating cash from 1976 onward. By
1980 PANN's debt service coverage is forecast to be 1.5, its current ratio
1.9 and its debt will be about 38 percent of combined debt and equity. These
ratios are satisfactory.
Tariff Implications of the Project
The RLS freight tariff is a cost-based commodity tariff using
57.
It applies to ship operations
a constant factor plus a mileage allowance.
only and has been calculated to produce about an 8 percent return on total
capital invested in a modern efficiently operated ship of a representative
As costly new assets are being
size operating over a representative route.
introduced into the fleet and leased to RLS companies, the cash requirements
of these companies have increased sharply. Tariffs on freight were therefore
raised by 20 percent in 1973, 20 percent in 1974 and 25 percent in July 1975.
The Government has agreed to continue to review tariffs annually and to make
adjustments, if necessary, to enable shipping companies to earn adequate
returns on their investment (Section 3.04(a) of the draft Loan Agreement).
Scrapping of Existing Ships
In order not to create excess shipping capacity in Indonesia, the
58.
Government would synchronize the acquisition of new and used ships with a
Ships which are technically
program of ship rehabilitation and scrapping.
-
19
-
deficient or more than 20 years old or cannot be rehabilitated at a reasonable cost, would 'be recommended for scrapping. Given the age structure of
the existing fleet and the scheduled delivery dates of new and used ships
included in the project, the Government would scrap, by December 31, 1979
about 70,000 dwt of existing inter-island ships of over 500 dwt. The
Government has already established a committee within SEACOM to prepare
criteria for scrapping and annual scrapping programs; it would by August 31,
1976 inform the Bank of the actual tonnage of ships scrapped between January 1,
1975 and July 31, 1976 and the future scrapping schedules (Section 3.03 of
the draft Loan Agreement).
59.
The Government would also promulgate legislation providing for registration of mortgages on ships acquired overseas by PANN and sold prior
to delivery. Before this legislation has been promulgated, PANN would not
sell its ships until they arrive in Indonesia, where mortgages can be registered. It will however be able to lease ships overseas since in this
case PANN would retain the title to the ship.
Procurement
60.
New ships will be procured under separate bilateral arrangements
between Indonesia and Norway and Japan, respectively. The specifications
for these ships which were developed by naval architects, Bureau Voor
Scheppsbouw (BVS) (The Netherlands) and financed by the Netherlands, are
acceptable to the Bank.
61.
Used ship procurement is more complex because the ships are likely
to be located far from Indonesia and be available for inspection only on short
notice. Each such purchase is unique and has to be individually negotiated
following detailed inspection. Some ships will also need repairs or modifications before they can be used for Indonesian service. Instead of using
international competitive bidding, which would be inappropriate, PANN's consultants, includinly naval architect/surveyors, shipbrokers (exclusively
representing PANN), resident financial and technical advisors, and legal
counsel will assisi: PANN in canvassing the international market to identify
appropriate used ships and in negotiating appropriate purchase contracts and,
any necessary repai'rs. PANN's used ship procurement contracts would be based
on documents satisiactory to the Bank and PANN will buy a used ship only after
the Bank has approved PANN's detailed appraisal report of the ship operator
and the purchase price of the ship and after the ship has been properly
inspected.
62.
International competitive bidding is also impractical in the case of
ship rehabilitation, because the cost of each repair is relatively small and
is likely to involve the purchase of a wide variety of proprietary parts.
After a survey by PANN and BAPINDO of the repair needs of the ships to be
rehabilitated, rehabilitation will be carried out under a negotiated contract
between PANN and the shipyard concerned, this procedure is identical to that
followed under Credit 318-IND. Rehabilitation work will be undertaken mainly
- 20 -
in Indonesian shipyards.
Funds for shipyard improvement are available from a
variety of sources, including Loan 1054-IND. The Norwegian grant also provides
for instructors and equipment for a shipyard training centre in Indonesia and
for overseas training in shipyard operations.
63.
The proposed loan also includes provision ($1.0 million) for specialized equipment suitable for a maritime training school. It is expected that
procurement of this equipment will be undertaken by IMCO as procurement agent
of the Government using procedures agreed with the Bank including, where
appropriate, international competitive bidding or international shopping.
Disbursement
64.
The proposed loan would be disbursed on the following bases:
(a)
100 percent of the foreign expenditures for used ships; delivery of used ships, training equipment and foreign consultants;
(b)
100 percent of the foreign expenditures or 60 percent of local
expenditures for ship rehabilitation or modification; and
(c)
80 percent of local expenditures for Indonesian consultants.
65.
Conditions for disbursement from the proposed loan would be as follows: When requesting the Bank's authorization to make withdrawals from the
Loan Account for the purchase or rehabilitation of a ship, the Government
would furnish to the Bank:
(i) an appraisal by BAPINDO and PANN of the
technical, operational and financial conditions of the shipping enterprise
concerned and its ships; (ii) a statement from SEACOM indicating which ships,
if any, of the shipping enterprise concerned are to be rehabilitated or
scrapped; (iii) a certified copy of the contract (development agreement)
between PANN and the shipping enterprise concerned executed pursuant to the
provisions of the Schedule to the Project Agreement; and (iv) (a) in respect
of the purchase of a used ship, a description of the ship, certified copies of
the purchase contract and the bill of sale, a certificate issued by SEACOM
that the ship meets the Government's licensing requirements and will be
registered, a deletion certificate transferring ownership of the ship from
the seller to the buyer, confirmation by PANN that the ship is acceptable, and
a certificate issued by an internationally recognized ship classification
society acceptable to the Bank that the ship meet the recognized classification
standards; or (b) in respect of the rehabilitation of a ship, a description of
the rehabilitation works to be carried out, a certified copy of the contract
between PANN and the shipyard that would carry out the works, and certificates
issued by SEACOM and BKI showing that the rehabilitation works are designed to
meet at least the Government's shipping regulations and BKI's classification
standard (paras. 4(b) and 5 of Schedule 1 to the draft Loan Agreement).
66.
In order to expedite project implementation some of the consultants
would be employed before the signing of the Loan Agreement.
It is therefore
proposed that expenditures estimated at about US$200,000 equivalent made
after January 31, 1976 for such consultants be reimbursed from the proposed
loan.
-
21 -
Economic Benefits and Justifications
67.
Implementation of many programs in REPELITA II depends to a large
The transmigration of people from Java
extent on improved shipping services.
to other islands, improved agriculture and development of agriculture-based
industries in the outer islands, and exchange of processed goods and raw
In
materials between Java and the other islands, all depend on shipping.
this regard, providing adequate and reliable inter-island shipping services
in Indonesia is similar in importance to the maintaining of adequate land
transport facilities-in many other countries.
68.
Inter-island cargo traffic is expected to increase at a rate of
between 10 percent and 15.5 percent per annum in the period 1974-79 reaching
4.4-5.8 million tons in 1979 compared to about 2.5 million tons in 1973.
In the same period passenger traffic could grow from about 365,000 to
976,000 or by about 18 percent per year provided ships are available and
can render reliable services. The project would help meet the growing demand
for shipping by adding new and used ships to the existing fleet and by increasing the productivLty of existing ships through rehabilitation of useable
old ships and scrapping of others.
This is expected to result in an increase in the number of days a
69.
ship is in service, i.e. an average ship productivity increase from only 9 to
10 cargo tons per dwt Ln 1972 to at least about 15 tons per dwt in 1979.
70.
In addition, the proposed project would help improve management
capabilities of public or private organizations involved in the maritime
sector through technical assistance and training programs and provide a firm
basis for future investment decisions in the further expansion o[ the interisland fleet through monitoring of traffic developments with the assistance
of SEACOM's advisors and other studies included in the project.
The economic rate of return on the overall project wouLd be about
71.
18 percent; 19 percent on used ships costing $41.2 million and 15 percent on
new ships totalling $124.2 million. The return on the rehabilitation component
costing $12.4 million would be well over 100 percent. Although the rate of
return on used ships would be higher than that on new ships, the Government
included new ships in the project in order to utilize external funds which
would be available mostly for the purchase of such ships. A program mixture
of new and used ships and rehabilitation would also allow the Government to
begin ship standardization, improve the age distribution of the existing fleet
and to provide work for Indonesian shipyards.
Project Risks
72.
In the past, i:he enforcement of safety regulations and classification standards has been lax. Should this situation continue under the project, the result would be a reduced ship scrapping and rehabilitation program and continued operation of many obsolete and unsafe vessels. Owners
operating such ships having little or no book value would be able to undercut
- 22 -
the official freight rates which would need to be set at levels providing
adequate revenues to enable ship operators to pay for new ships. This
would reduce the incentives for ship operators to participate in the project.
In order to help deal with these problems the following measures, in addition
to proposed enforcement of safety standards, would be taken:
(a)
the provision of substantial financial incentives to
ship operators, through lower interest rates and
increased freight rates determined on the basis of
the costs of efficient operation;
(b)
implementation of the scrapping and rehabilitation programs under a specific schedule related to new ship
acquisition;
(c)
new administrative orders issued by SEACOM calling for timely
and proper ship inspection and reducing the dispensation
period permitted until next inspection;
(d)
ensuring proper physical maintenance of ships under PANN's
supervision and the improvement of shipping companies'
operations through training as a lease or loan contract
requirement;
(e)
a technical assistance program for training ship crews,
reviewing safety regulations, maintaining navigational
aid equipment, and for the provision of advisory services
to SEACOM, PELNI, PANN, BAPINDO and BKI.
PART V - LEGAL INSTRUMENTS AND AUTHORITY
73.
The draft Loan Agreement between the Republic of Indonesia and the
Bank, draft Project Agreement between PANN, BAPINDO and the Bank, the Report
of the Committee provided for in Article III, Section 4(iii) of the Articles
of Agreement of the Bank, and the text of a draft resolution approving the
proposed loan are being distributed to the Executive Directors separately.
74.
Features of the draft Agreements of special interest are referred
to in paragraphs 42, 52, 53, 55, 57, 58 and 65 of this report. A special
condition of effectiveness would be that a financing agreement specifying
on-lending terms has been signed between the government, PANN and BAPINDO.
75.
I am satisfied that the proposed loan would comply with the Articles
of Agreement of the Bank.
- 23 -
PART VI - RECOMMENDATION
76.
I recommend that the Executive Directors approve the proposed loan.
Robert S. McNamara
President
Washington, D.C.
April 16, 1976
ANNEX 1
Page I of'
pages
TABLE
SOIA
1 960
3A
NDCOSDAASHEET
.....
REFERENCE COUNTRIES (1970,
MOST RECENT
1 9170 ESTIMATE
BANGLADESH
I NDIA
PHILIPPI1NES
600
100. 0
MILLION)
95.4
115.6
POPULATION DENSITY
PER SQUARE KM.
PER SQUARE KM. ARABLE LANr)
50 .0
INDONESIA
LANDO AREA
TOTAL
AR4BLE
(THOU CM2).....
--------------5904.3
279.8
~~~~~~INDONESIA
;0P POR CAP ITk CUSS)
COPUL4TION
AND VITAL
POPULATION
(MID-YR.
POPULATION GRONTH RATE
TOTAL
UR1AUN
(I
11I.0
124 .4
70.8
5 3 8.1
61 .0
65.C
4...
I26.o
96. 0
84 .0.
1 698.0
35 0.0
42.0
4 2 .0
21.0
4 .0
21.0
140.
'48.0
3.1
308.
0
16.0
1 0C
NO.0
:0
2 .9
2 20. 0
STATISTICS
VITAL STATISTICS
CRUDE BIRTH RATE PER THOUSAND
CRUDE DEATH RATE PER THOUSAND
INFANT MORTALITY RATE (/THOU)
LIFE EXPECTANCY AT BIRTH (YRS)
GROSS REPRODUCTION RATE
URBAiN POPULATICN
80.0
a3.
43.00 ak
10O2.
1 25 .0
a b
'.8.0
2.0a
..
3 6 .9
1 23. 0
.5.0
12.0
8o.0
56.:0
3. 3
4 7.0
3 .2
51.0
3.1
'.0
3.6
2.0
3.2
2.7
..
..
2.3
4.0
1.0
4.0
1 5 .0
11.0
18.0
..
0 .1
32. 0
42 .1
5 5.4
2.5
4 4.1
1. 4
2.51
4 4.1
5 3.
2.5
4 2 .0
5 5 .0
3.0
43. 1
5 3.4
3.9
0.8
1 .3
0. 9
0.9
1 .5
..
34.2
(1)
OF TOTAL)
AGE STRUCTURE (PERCENT)
0 TO 14 YEARS
Ii TO 64 YEARIS
65 YEARS AND OVCR
AGE DEPENDENCY RATIO
ECONOMIC OEPENOENCY RATIO
FAMILY PLANNINGACCEPTORS (CUMULATIVE,
THOU)
USEPS CX 01 MARRIED WiOMEN)
2.1
.
.4
.
.2
.1
4008.2
0.
0
.
/a
276.'
.)
...
...
A.
1.5
..
EMPLOY4ENT
TOTAL LA3RO FORCE (THOUSAND)
LABOR FORCE IN AGRICULTURE CZ)
UNEMPLOYED (S OF LAROR FORCr)
!4600.0..
68.0
5.4
.
2. 0
40tCC.0
62.0
5.4
22 30 0.0
11.0
2 2 1C(I .0 /b
?11.0
3 0
. /c
12100.0
51.0
2.*
INCOME DISTRIBUTION
1 OF PR IVATE INCOME RECO0 BYHIGHEST
51 CF POPULATION
HIGHEST 201 CF POPULATION
LOW EST
2 O1 OF POPULATION
LOW~EST
4 01 EF POPULATION.
.
I....
6.?
4 2.:3
..
....
a
.19
19.6
.
25.
d
53.1~
4.7 /
13.1I
DIS TR ISU TITDN Of LAND OWNERSHIP
X OWNED BY TOP IOZ OF OWNERS480/
1
YSMALLEST
WE
101 OANEPS
34.0
..
3.I.
.10
HEALTH AND NUTRITION
POPULATION PER PHYSICIAN
POPULATION PER NURSING PERSON
POPULATION PER HOSPITAL RED
PER CAPITA SUPPLY OF CALORIES CZ OF REQUIREMENTS.'
PROTEIN (DRAMS PEN DAY)
'OF WHICH ANIMAL AND PULSl:
CEATH RATE (/THOU)
AGES 1-4
61000.0
1050.0
21650.0
8010. 0
1720.0
23880.0
696 0.0
1450.0
1600.0
72 03.0
90210.0
48C.0.
511 0.0
1620.3
89.0
43.0
15.0
09.0
43.0
14.0
03 .0
38.0
..
93 .0
3.0
16.0
.
.
..
..
050.0
8 5.04
45.0
22.0
7.0
..
EDUCATION
ADJUSTED ENROILLMENT RATIOPRIMARY SCHOOL
SECONDARY SCHOOL
YEARS OF SCHOOLING PROVIDED
(PIRST AND SECONO LEVEL)
VOCATIONAL ENROLLMENT
(X OF SECONDARY)
ADULT LItERACY RATE CI)
/
r710
1.
80.0
601.
s0.0
d
19.
290
12.0
12.0
12.0
10.0/,
12.0
20.0
47.0
28. 0
28.0
60.0
40.
6.0
.
1kb.
0.0
6.0 /e
11 9.0
4.
10.0
10.0 /a.b
HOUSING
PER-;ONS PER ROOM (AVERAGE)
OCCUPIED DWELLINGS WITHOUT
PIPED WATER C?)
ACCESS TO ELECTRICITY
(I OF ALL DWELLINGS)
MURAL DWELLINGS CONNECTED
TO ELECTRICITY (I)
I. .6
..
44.01
..
64.0C..
..
.
66. 0b
2 3.0 /b
3..9.0
6.
6. 0.
CONSUMPT ION
RADIO RECEIVERS (PER THOU PD)P)
PASSENGER CNRS (PER THOU POP)
ELECTRICITY (RAN/YR PER CAP)
NEWSPRINT (KQG/YR PER CAP)
-I-------------------------------------SEE NOTES AND DEFINITIONS ON REVERSE
7.0
1 .0
19.0
0.2
114.0
2.0
20.0
0. 2
.
3.0
2 3.0
0.2
6.
1.0
11.0
.0
:.............
21.0
1.0
111I.0
.3
45.0
8.0
235. 0
1.2 /
pgofL pageB
NOTES
Unless otherwiae noted, date for 1960 refer to any year between 1959 and11961, for 1970 between 1968 end 1970, and for Most Recent Eatimas.e between
1971 & 1973.
-0
The Philippine. baa been selected as an objective country for its geographical similarity end bsoaUae Of ite apparent advaced stage of
ecoooaic developmet.
INDONESIA
1%
/
Excludes West Iran;
197(0
/a
Registered applicants for work.
CDST
flCENT FSTIM&TEz
/a
1963;
/c
i961-6.3.
Unesployed workers seeking their first job;
/b 10 years and over, ability to ream and write in eitber
Latin or nom-tatin characters;
& Inside only.
NANOA&DESH 1970
/a
1966-61, househotds;
/b Registered, not all pmacttcing to ttn country;
jc G-ovrnment hospital eatablioh.snts
Only;
/d Akpproximate esrolleet as percentage of population in, i-1n, end 11-is age groups reopecti-esty;
/e Up
to end of socco d level.
INDIA
1971;
/a
RMtto of population under 19 and 60 and Over to labor force age 15-59 yeara;
Lb kIi eetleate of labor force t
age group 15-59. lBRD report gives a figure of 180.9 sillion baeod on 1971 poplation cenas.. The difference is
doe to changes in the defInition of a worker. In the 1971 census, persons were classified only on the basis of their
nato activities. lhis led to the exclusion of several categories sock as, houseaivee;
c Regiaterod applicanto
for work;
/d 1967-66, households;
/o 19,65.
FRIIPPINES
1970
A
Public education only;
/b
1967;
/c
Imports only.
El0, April 21, 1976
IENFTNTIIONS
OF SOCIALINEEICAI'RS
boAdArea (to
o'
TOta -TotalsOurface
.,ares oprisinc
.
Land area end inlaod
aters,
ha-ric. - msgctrecent ontias te of anioco
-aeused t-opor-rfly on perna-etty for crps, p-scure, corkc &hitohos gardens or to Ho. fallow.
GNP
is
0$ - GNP per capita estimates at market prices, colo-.
saTEl7conSversion method an World Bonk Atlas (1972-7h bavis).
9ptppl n 8nd vital statistics
P~jlionni-m
rA
ortcn-year cc tee..
of July first; if not Available, overage
Ponbator dest
prsu
reo
Mid-year population per oqaekilometer
of total
100erra.
hectaree)
opulatioc dnIy
eruuoa- in oagric. land - Compvuted
oo above for
agictr;Lnd only
Octal statistics
r"de hire]; rate pert,
thuad - Anusa Lice births per thousand of midyear populainusly
fime-yenr averages ending to 19,60, 1977 and
1975 for davloping countries.
trde death rate per thous,-d - inmos maths per thousand of odd-year
nP. le"" n
usual fleyear avereagesending in 1960, 1970 and 1975
for developing countries,
Enfest =ootall5y.te,Jf59u -1 Annual doaths of tofants under one year
of age petflvirho
th
Lifeq- Ocyat birth ,rs) - verage number of years of life remainicg t bfrthr; usually rves-year --srge ending in 1960, 1970 and 1975
for developing co
e.ntrition.
Grssrerduction rte - Average number of line daughters a woman.
will
boor in her norsoal reproduc tive periodi If she excperienneo present ages,pecific fertility rules; usually five-year averages ending In 1960,
1970 and 1979 for developing
countries,
P.P opltion growth rat, 8
oa
Compoundannual growth.rates of midyear populato
fr1564-O, 96-70, and 1960 to mast receni year.
Populeation crowth rate (%) - urban - Competedlike growth rate of total
ppltton; different defrinlons of urban areasomay affect copr-Adluoteenolmnt
hirity
pof
data amongcountriescred
Ura 'ppltion( of total - Ratio of urban to total population;
different defiovitin or urban areasmay affect comparability of Ants
amn countries.
11-:1s
ctu, iercnt)- Childre (0)-lb years), woking age (25-64 years),
and retired (65 yearn andl over) amspercentages of mld-yea population,
Age dependecy ratio-Raiofppltnude15nd6
and over to
those Mfaes 19trugh 69.
Economic d.epedec~yratiog- gRatio of population under 19 aod 69 and over
to the labo foc
nae groupof 15-64 years.
Pan,i1vnlam ajo- acceDtors (m-osati-re tho.u) - Cumulative nssaber of
acceptorn of birth conto device unAr auspices of national. family
planning program since inception.
familyplanning - users (%
of married women) - Percetages of maried
womonof child-bearing age (15-Li ye=rs who use birth-control devices
to all married womanIn same,ago group.
TE!fSrfor,e,(jthousand) - Economically active persons, including
armed forcs ad nemloed but excluding housewives, students, etc.;
definitionsin vorioun countries are sot comparable.
lbrforce in agEiculture
) - Agricultural labor force (in farsuing,
foretry7
rintingiEandishing) as percentage cf total labor force,
of. bordforce)p -oUnemployed are usually defined as persons
whoare a
)iHillIgceto takesaAob,noutofs.job ona gIvenday.
remained out of a o,sdsekn
okfr
a specified miniennnn
period not exceedng 000 week; may not be comparable between countries
due to different definitions of unemployed and source of data, e.g.,
employment Office etatistics, sample survoys, compulsory neriploymnset
insurance,
jn94A,dgtriho t4gp - Paeretage of private income (both An cash sodasince
k(ind)Yecaiiveby richest 9%,ricbest 20%, poorest 20%. andf poorest
40% of households.
Distribottion ofdlen owo hers - Percentages of lend ownedby wealthtest 10%and poorst 10%f land owners.
Health and Nutritipn
tion
-r
oplaio dviedbynube o pacicn
"tyIdihI quail? ted from a medical school at university level.
ouelnnrnrievra
ouaicdivided by number Of practiclgsleFifao
raduae nores-, "trained" or "c.ertified" nurses,
and auxiliary personnel witht training or empenience.
Populetlo por hospital led - Popolotirn divided by number of bospital
beds available in public and pri-te geosro cod speciali-ed hospital
sod rehabilitation centers; emolodes nurstog hor neosd sotablisheents
for custodial end preventive core
Per capita supl of
frocenno VoAis(
optdfo
.nerr equivalen'T.ofne roodsupplie snaeilble in country per
capita per day: available supplies comprtoe dosestic prod.ntion,
imports less s,pOrto, a.l chances in stock; net sopplisose-uodo
an mal feed, .. sda, q-atities o-d it foo.d proceostog and loose
to distribution; requiremnets worn estlivoted by FAObased on ph9'slneeds for normL activity ond health conidering socorunmental temperature, body weighto, age end smc distributiono of pop.lation,and allowing10% for waoie ot boweohcldlevel.
Per capita spZ
of rot:F (,rams per da)- Protoin contentiof per
caiantspl
ffo
e
a;ot supply of food io dfind a
above; requiremnets for all countries esoabliahed by U1SIAEconomic
Research Services provide fun a mionion alloanc of 60 groomsof total
proteto per day, and 20 grams cf animal And puloe proteio, of which 10
gram.oshould ho ani-1 protein; tiss stadards or eIlowe than those
of 75 grass of tonal1 protein -,d 23 gram Of animal protein asa
-vrage for th. world, proposed by FAOton the Third World Fond Survey.
Per capita prEoteinsplyfo animal.
Ian pulse -Protein supply of fond
deie
rmaiasadpl
ngasper dy
rate
t
lthou aeso 1-9 .- Annual doath. per thoosand in age group 1-4c
7bears
cl&ninT
il
ge group; suggested as
ntdioatr of sal-
~~ologloa1
Education
Adjuste enol ent ratio
rImr shool, -Enrollnent of all ages as
pecnaeo
roaysho-g
ouaion; Includes ohildrsn aged
6-il years but adlustod for different lengths of primary educatios,
for countries with universal edarati-o, enrollment may -exed 100%
since some pupils are below or above the Official school oge.
rti
secndrOsYchool - Cooputed as above; secondto rquest.latfr
years of approved primary instruction; pmroides geerni., vocational or teacher training instruction for
pupi-ls of 12 in 17 yeoarsof age; correspondence cour.- are generally
exlded.
Years f schooling provided (first and second ees)
- Total years of
schooling; at secondary level, Vocational intution nay he porctioly
or completely excluded.
Vocational enrollment (8 of secoodaf) - Vocational isotitutiosm Include
techomica.l, industrial or other programo which operate todependently
or aso departmenta of sec ondry Institutione.
Adult9Alitegyrae 1
-literate
adult. (able to red and wrnte) On
3uThji.Tli
adlt population aged 15 years and oner.
Housing
Persona oer room av-era
- A-arge number of persons per roos to Occupied
convEentional
dwelings In urban areas; dwellingo exlude non-parelnent
structures and unoccupied pats.
Occupied healinas wlotu Piped water (% O-ccupiad convetional dwellIng; i urb n an rua
reas withiout Inside or outside piped water
facilities as pewceontageof all ocoupied dwellings.
Access to electricity (%
of all dwellings) - Umaventional dw,lltcgn with
electricity in living quarters as percent of total dwellings in urban
sod rural areas.
Rural dwsllingpsm otdtelcriy
)-Cmuedashvfrrrl
dwellns nY.
9gp
ti74n
WC[4jjj7_iverzjpp tio2a_2)
- All types of receivers for radio broadcasts to generai po blc per thousand of population; exccludes onlicensed receivers in countries aend in years when regintretion of
radio sets was in, effect; data fur recent years May not be comparable
suet countries shlinhed licensing.
Passe.er care
sr thouho) - Passenger oars cosprise entor care seating less tesight persona; excudes ambulances, imar~ses and
Elmrcitvc(kwh/iM'Dr t
- Annual consumption of indestrial, cornerE3I7ilhIpublic d privsts eleCtricity in kllowq.tt boors per capita;
generallyhosed on productiondata,withoutallowancefor lossesto
grids but allowing for impor ts and exPorts of electrIcity.
IRpi9g..Eg_: ap) - Per capita Annual concsumption in kilogramls
itsiefidhestic
production plus net imports of newsprint.
ANNX I
Page 3 of 4 pages
ECONOMIC INDICATORS
GROSS NATIONAL PRODUCT IN 1974
GNP at Market Prices
Gross Domestic Investment
Gross National Saving
Current Account Balance
Exports of Goods, NFS
Imports of Goods, NFS
ANNUAL RATE OF GROWrH (%, constant prices)
US$
*Lr
22479
43:30
4336
6
6755
5527
100.0
19.3
19.3
0.0
30.0
24.6
196° -65
%
1965 -70
1974
1.9
3.3
5.8
4.9
11.5
5.1
5.6
19.2
64.8
1.5
0.2
7.8
10.9
0.5
33.2
OUTPUT, LABOR FORCE AND
PRODUCTIVITY IN 1971
Value AddedU-S' Mln.
,Hln.
Labor Force-/
%
V. A. Per Worker
US--$
J_
Agriculture
14221
44.8
30.5
69.0
138
Industry
Services
Unallocated
Total/Average
65
1915
3.79
20.3
34.9
3.0
8,3
2.4
6.8
18.8
5.4
638
395
300
185
-
.
-0
I
797
1000
4.
100.0
0:
21-1
100.0
GOVERNMENT FINANCE
Central Government
( RD) BLn.
(1q974E75
1974
ofoGDP
TM7
Current Receipts
1759
17.9
Current Expenditure
1001
10.2
10.8
7.7
-14.2
Current Surplus
15.0
Capital Expenditures
966
9.8
7.3
External Assistance (net)
234
2.4
3,2
MONEY.
CREDIT and PRICES
1970
Money and Quasi Money
Bank credit to Public Sector
Bank Credit to Private Sector
330
57
306
1971
(Billimn
469
129
451
1972
1973
1974
Rp. outstanding end periodT
695
58
987
555
936
37
-
1452
2
1126
1975
une
-
1776
29
1837
(Percentages or Index Numbers)
Money and Quasi Money as % of GDiP
General Price Index(Sept. 1966"1O0)
Annual percentage changes ins
General Price Index
Bank credit to Public Sector
Bank credit to Private Sector
-
9.9
612
12.8
638
15.2
680
14.6
891
114.8
1253
12.3
5.0
4.2
126.3
6.6
- 55.0
23.0
31.0
- 36.2
68.6
40o6
0
20.3
77.9
47.4
All conversions to dollars in this table are at the average exchange rate prevailing during the period
covered.
1/ Conversion at an exchange rate of Rp. 390 = US$1.
2/ Total labor force; unemployed are allocated to sector of their normal occupation.
"Unallocatedit consists
mainly of unemployed workers seeking their first job.
NOTE:
not available
not applicable
TRADE PAYMENTS AND CAPITAL FLOWS
BALANCE OF PAYMENTS
MERCHANDISE EXPORTS (AVERAGE 1972-7 4)
1972
1973
1974
(Millions US $) Est.
Exports of Goods, NFS
Imports of Goods, NFS
Resource Gap (deficit = -j
Interest Payments (net)
Workers' Remittances
Other Factor Payments (n t s
Net Transfers
Balance on Current Account
Direct Foreign Investmenit
Net MLT Borrowing
Disbursements
Amortization
Subtotal
Capital Grants
Other Capital (net)
Other items n.c.i
Increase in Reserves (+)
Gross Reserves
Net Reserves
(end year)
(end year)
1757
2957
3170
1875
-M
-77
-
-
46
- 318
- 361
- 482
258
1447
-
7C
377
C)
US $ Mili
Oil
6755
5527
rimber
Palm Oil
TibI
T78
-
6Offee
- 543)
-593
-7
T
lll.5
i222
.
290
471
62-1
1072
231
841
..
628
- 138
All other commoditie-s
Total
°
..
181
98
1432
486
..
208,1l
)
325
574
8RN6
1)
'73I
458
783
1473
14
Petroleum
2
Petroleum
877
877
9LXTERNAL DEBT, DECEMBER 31.
1/
9.4
l3.4
2.4
2.7
814
2.2
IlC1
3823
100.0
l008
1974
US $ MLn
Public Debt, Lncl. guaranteed
Non-Guaranteed Private Debt
Total outstanding & Disbursed
5895
.,
690
oDEBT SERVICE RATIO for 1974Public Debt. Lncl. guaranteed
Non-Guaranteed Private Debt
Total outstanding & Disbursed
7.7
4
2
1348
1348
1
i455
4',56
IBRD/IDA LENDING, (,Kar.
31
1976) (Million US $)
IBRD
RATE: OF EXCHANGE
-hro 1971
h Jul.
Throuplh Jul) 1971
ilS9 1.00 =
-P.
375
1.00 = US $0.0027
59.1
-
l'ue1 and Related Materials
1mports
of which:
Exports
of which:
2260
359
513
93
104
Rubber
_
D
since Aurrnat ~
Since Augrtl
1971
US $ l.OO =FP. 415
1.00 = US $0.0024
Outstanding & Disbursed
Undisbursed
Outstanding incl. Undisbursed
Ratio of Debt Service to Exports of Goods and Non-Factor Servicesp
witF oil exports net of factor payments and imports of the oil sector
. not available
. not applicable
April , I , 1976
93.8
367.2
461.
IDA
332.0
229.8
ANN3X II
Page 1 of 14
A.
THE STATUS OF BANK GROUP OPERATIONS IN INDCNESIA
STATEKENT OF BANK LOANS AND IDA CREDITS ( as of February 29,
Loan/
Credit
Number
Fiscal
Year
US $ Million
Amount (less cancellation)
IDA Undisbursed
Bank
Purpose
11.0
28.0
Three credits fully disbursed
'Highway
1969
154
155
165
1969
1970
193
1970
194
195
1970
1970
210
211
219
1971
1971
Second Agricultural Estates
Second Irrigation Rehabilitation
releconmunications Expansion
Fisheries
1971
Education
220
1971
Third Irri.gation Rehabilitation
246
1971
Seeds
259
260
1971
1971
Tea
275
1972
'Third Technical Assistance
288
289
1972
1972
300
310
1972
1972
318
1972
319
334
355
358
1972
1973
1973
1973
387
1973
388
1973
399
1973
400
405
1973
428
1973
1974
436
1974
451
1974
1974
1974
479
480
514
1975
1976)
16.0
15.0
35.0
Agricultural Estates
Electricity Distribution
'JSRI Fertilizer
0.1
17.0
2.4
18.5
12.8
1.0
0.2
G.2
3.5
4.6
14.5
7.5
15.0
34.0
Second Highway
0.2
0.2
0.2
0.6
1.8
2 5
4.2
5.1
4.0
1.0
Second Education
Fourth Irrigation Rehabilitation
6.3
12.5
4.7
Population
]Development Finance Co. (BAUINDO I)
Enter-Island Fleet Rehabilitation
13.2
10.0
8.2
1.5
8.5
4.3
Fourth Agricultural Estates
Second Electricity Distribution
11.0
hO.0
6.8
16.5
3.6
5.0
2.4
3.1
13.5
10.9
1.4.0
7.2
32.9
Beef Cattle Development
lNorth Swuatera Smallholder Development
'third Education
Third Highway
jiest Java Thermal Power
.1ballholder and Private Estate Tea
3ugar Industry Rehabilitation
lulo Gadung Industrial Estate
Private Development Finance Co.
EIburth Techdical Assistance
Bali Tourism
Fisheries Credit
J'atiluhur Irrigation Extension
(PDFCI)
46.o
7.8
50.0
16.5
1.0.0
5.0
16.0
6.5
30.0
2.0
7.3
32.1
14.7
8.2
4.2
15.3
6.3
29.5
ANNEX II
Page 2 oi: 1
(Continued)
Loan/
Credit
Number
Fiscal
Year
1005
1040
1049
1974
1054
1975
1089
1975
1100
1127
1139
1179
1975
1975
1976
1976
1197
1976
1975
1975
US $ Million
Amount (less cancellation)
Bank
IDA
Undisbursed
Purpose
Railway
Jakarta Urban Development
Five Cities Water Supply
Development Finance Co.
(BAFPINDO II)
Second Fertilizer Expansion
Sixth Irrigation
Fourth Power
Fertilizer Distribution
Agricultural Research and
Extension
National Resource Survey
and Mapping
TOTAL
of which has been repaid
Amount Sold
of which has been repaid
0.1
0.0
48.0
46.6
25.0
18.5
14.5
13.6
50.0
46.4
115.0
57.3
65.0
64.7
41.0
41.0
68.0
64.4
21.5
13.0
13.0
21.5
461.0
561.8
624.8
-
-
-
461.0
561.8
0.1
Total now held by Bank and
IDA (prior to exchange
adjustment)
460.9
561.8
Total undisbursed
387.0
237.8
624.8
=====
==p==
=3===
a/ Approved in FY 1975 but signed in FY 1976.
ANNEX II
Page 3 of 14
S-ATEMAT (OF IFC INVESTMENTS (as of February 29. 1976)
Fiscal
Year
Lpan
US $ MEllion
Equity
Total
1971
P.T. Semen C:Lbinong
Cement
10.6
2.5
1971
P.T. Urdtex
Textiles
2.5
0.8
3.3
1971
1971
1972
P.T. Primate.co Indonesia
P.T. Kabel Iidonesia
P.T. Daralon Textile
Manuf. C,orp.
P.T. Jakarta Int. Hotel
P.T. Semen CiLbinong
P.T. Primatexco Indonesia
P.T. Monsanto Pan
Electrorics
P.T. PDFCI
P.T. Kamaltexc
P.T, Semen Cibinong
Textiles
Cable-
2.0
2.8
0.5
0.4
2.5
3.2
Textiles
Tourism
Cement
Textiles
h.5
11.0
5.4
2.0
1.5
0.7
0.3
6.0
11.0
6.1
2.3
0.9
0.5
3.0
6.5
1973
1973
1974
1974
1974
1974
1974
13.1
Electronics
Devlp. Fin. Co.
Textiles
Cement
2.4
.5.
0.5
o.6
1.5
TOTAL
49.1
9.3
58.4
20.2
1.5
21.7
28.9
7.8
Less:
sold or
repaid and
cancelled
TOTAL now held
Undisbursed
ncluding participant's portion)
0.9
-
~=
5.4
=__
1.5
36.7
,=_
_
6.9
ANNEX II
Page 4 of 14
PROJECTS IN EXECUTION 1/
Cr. No. 127:
Irrigation Rehabilitation: US$5 Million Credit of
September 6, 1968; Effective Date: March 25, 1969;
Closing Date: December 31, 1976.
All civil works were completed on March 31, 1976. Additional
drainage work will be carried out under Loan 1100-IND. The proposed Irrigation
VII Project would provide funds for tertiary development under this project
and other on-going irrigation projects. The closing date has been postponed
by one year to allow for payment of late accounts. The adequacy and timeliness
of operation and maintenance of completed irrigation rehabilitation projects
has been recently discussed with the Government. As a result the Government
has allocated for operation and maintenance for the present fiscal year an
amount double that of last year's budget.
Cr. No. 154:
Highways: US$28 Million Credit of June 20, 1969;
Effective Date: October 2, 1969; Closing Date:
December 31, 1975.
Rehabilitation work, of acceptable quality, has been
completed,. The work accomplished exceeded the project's original target.
The program for improved highway maintenance included in the project has
been completed. A project completion report is being prepared for issuance
before June 30, 1976.
Cr. No. 155:
Agricultural Estates: US$16 Million Credit of June 20,
1969; Effective Date: December 10, 1969;
Closing Date: December 31, 1976.
With improvements in management and much higher international prices, particularly for palm oil, prevailing in 1974, the
financial position of the estate groups has improved. The field and
factory standards have now been raised to a good technical level and
the managements have been advised to concentrate on cost control in order
to prepare for the time when produce prices may become less attractive.
The combined efforts of the management, consultants and IDA missions
to review project implementation are yielding good results. The closing
date has been postponed to December 31, 1976 to enable payment to consultants for services for other rubber estates.
1/
These notes are designed to inform the Executive Directors regarding
the progress of projects in execution, and in particular to report
any problems which are being encountered, and the action being taken
to remedy them. They should be read in this sense, and with the
understanding that they do not purpcrt to present a balanced evaluation of strengths and weaknesses in project execution.
ANNEX II
Page 5 of 14
Cr. No. 165:
Electricity Distribution: US$15 million Credit of
October 29, 1969; Effective Date: June 1, 1970i
Closing Date: December 31, 1975.
The closing date was postponed to December 31, 1975, to
allow for payment of small amounts outstanding. The project completion report will be prepared in conjunction with that for Credit No. 334.
Cr. No. 193:
PUSRI Fertilizer: US$35 Million Credit of June 15,
1970 (as amended May 21, 1973); Effective Date:
January 15, 1971; Closing Date: December 31, 1976.
The urea plant has successfully passed its performance
test and is operating at close to rated capacity. The gas gathering
and transmission system is also completed and sufficient gas is being
delivered to the plant. The closing date has been postponed to December
31, 1976 to allow for delivery and installation of remaining equipment.
Cr. No. 194:
Second Agricultural Estates: US$17 Million Credit of
June 15, 1970; Effective Date: February 9, 1971;
Closing Date: June 30, 1976.
After initial delays, there have been considerable
improvements in management and these, combined with high prices, particularly for palm oil, have resulted in the two estate groups being put in a
much stronger financial position. On the rubber group (PNP IV) more effort
is necessary to improve agricultural standards and tapping methods. With
the rapid expansion of -investment of the palm oil group (PNP VI), there is
a need to employ expertise in financial planning, control and management,
which are now the main constraints to efficient development. This estate
group is undertaking act:ion in this respect. The closing date has been
postponed by one year to allow payment for remaining equipment, civil
works and consultants' contracts.
Cr. No. 195:
Second Irrigation Rehabilitation:
of JurLe 15, 1970; Effective Date:
Closirng Date: November 30, 1976.
US$18.5 Million Credit
December 31, 1970;
Problems of quality and progress of construction still
exist, but the project etntity assisted by the consultants are tackling
these vigorously, and the situation is improving, although not sufficiently
to make up for earlier delays. Costs are likely to be double the overall
appraisal estimate, due to inflation, but the Government will provide any
additional funds required. Completion of disbursements will be about two
years behind the original schedule.
Cr. No. 210:
Telecommunications Expansion: US$12.8 Million Credit
of July 13, 1970; Effective Date:
February 18, 1971;
Closing Date: June 30, 1976.
The project has been completed except for the installation
of the telex exchange at Medan, which is now expected to be in service by
ANNEX II
Page 6 of 14
June 1976. The delay in completion of the Medan telex exchange was due to
late completion of a building to house the exchange. The closing date of
the Credit has been extended up to June 30, 1976, which should be sufficient to allow for payments of outstanding contracts. The audit of financial statements for FY1973 is expected to be completed in May 1976 and
efforts are being made to ensure timely audit in future.
Cr. No. 211:
Fisheries:
US$3.5 Million Credit of July 13, 1970;
Effective Date: January 15, 1971; Closing Date:
June 30, 1976.
The project is about two years behind the original schedule due
to delays in engaging consultants and in executing contracts for the shore
facilities. There has been a substantial project cost increase but the
project is still expected to be financially viable due to the greatly
increased skipjack prices. Government has recently appointed new project
management. The first stage of operation of project facilities is expected
to start shortly.
Cr. No. 219:
Education:
US$4.6 Million Credit of November 6, 1970;
Effective Date: January 29, 1971; Closing Date:
December 31, 1976.
Project implementation in the Department of Education
is satisfactory.
Civil works for the five Technical Training Centers
(TTCs) have been completed. About 90 percent of the equipment has been
purchased and about 60 percent delivered and installed. All TTCs will
operate at full capacity by January 1976 when the new academic year begins.
Over 500 technical teachers have completed or are about to complete their
training. Technical assistance financed by the U.K. for the project is
also satisfactory.
Disbursement has improved considerably. Revised
total project cost is now about 40 percent above appraisal estimate. The
Government will finance the cost overrun. The project is expected to be
completed about three months ahead of schedule.
Cr. No. 220:
Third Irrigation Rehabilitation: US$14.5 Million Credit
of November 6,1970; Effective Date: May 28, 1971;
Closing Date:
June 30, 1977.
Construction remains about two to three years behind
schedule. The problems which caused this delay - difficulties in preparation
of contract document, late financial allocations, heavy rains in the 1973 construction season and, more recently, slow response by GOI to high inflation
rates and consequent civil works costs overruns - have been mainly overcome,
but time lost cannot be regained. Estimated project cost is 50 percent above
the appraisal estimate, but with higher rice prices on the world market, the
project's economic rate of return remains over 20 percent. The closing date
has been postponed by 18 months as a result of project delay.
ANNEX II
Page 7 of 14
Cr. No. 246:
Seeds: US$7.5 Million Credit of May 19. 1971;
Effective Date: December 7, 1971; Closing Date:
September 30, 1977.
Significant progress has been made in the construction
of the irrigation infrastructure and in land development at the National
Seeds Corporation (NSC). Construction is proceeding satisfactorily and is
now 70 percent completed. The inadequacy of NSC management at the operational level is reflected in technical production problems, low yields of
seed and high costs of production. Increasing nation-wide production problems caused by prevalent disease, pests and insect losses has resulted in
government authorities now giving certified seed production high priority.
Cr. No. 259:
Tea: US$15 Million Credit of June 24, 1971; Effective
Date: September 17, 1971; Closing Date: June 30, 1978.
Agricultural achievements to date have far exceeded
appraisal expectations necessitating construction and rehabilitation
of three additional factories. Project completion, estimated for December
1977, can probably be advanced by up to one year. Rising costs are creating
pressure on available funds and the main challenge for the two PTPs will
be to reduce working capital requirements, as well as overhead and indirect
costs, and improve labor productivity.
Cr. No. 260:
Second Highway: US$34 Million Credit of June 24, 1971;
Effective Date: August 10, 1971; Closing Date:
December 31, 1976.
Construction work is about 80 percent finished and should
be completed by August 1976, about one and a half years behind schedule.
The delay was caused largely by slow progress in mobilizing contractors,
difficulties in equipment delivery, heavy rains and landslides. The closing
date has therefore been postponed by 15 months to December 31, 1976. Design
standards for the road sections have been slightly lowered and some savings
have been achieved, which, together with other savings have partly offset
construction cost increases of 12 percent.
Cr. No. 275:
Third Technical Assistance: US$4.0 Million Credit of
December 29, 1971; Effective Date: February 25,
1972; Closing Date: December 31, 1976.
Progress 6n this project is satisfactory. The closing
date has been postponed by another year to complete disbursements for
ongoing studies.
Cr. No. 288:
Second Education: US$6.3 Million Credit of March 9,
1972; Effective Date: June 7, 1972;
Closing Date: December 31, 1976.
This agricultural training project, being implemented
by the Department of Agriculture, is about 16 months delayed because of
ANNEX II
Page 8 of 14
late appointment of consultant architects, lack of counterpart funds, delays
in bid analysis and in awarding contracts. As a result, civil works,
which were to be completed already, have not commenced. Furniture and
equipment procurement have therefore been deferred. Unlike the physical
aspects of the project, the educational aspects are generally on schedule.
Total project costs are now estimated to be 90 percent higher than the
original estimate. Government has budgeted for the cost overrun. Disbursement, which has been slow, should improve since civil works contracts have
now been awarded.
Cr. No. 289:
Fourth Irrigation Rehabilitation:
of March 9, 1972; Effective Date:
Date: June 30, 1977.
US$12.5 Million Credit
May 5, 1972; Closing
Civil Works and equipment purchases for the main project,
Pekalen-Sampean, are proceeding but completion of civil works will be
about two years behind schedule. Due to inflation, project costs are
likely to be substantially higher than appraisal estimates. Consultants
for the various studies are at work with their counterparts. Disbursements
are also on schedule.
Cr. No. 300:
Population: US$13.2 Million Credit of April 20, 1972;
Effective Date: November 2, 1972; Closing Date: June 30,
1978.
Progress of this project is generally satisfactory.
Steps are being taken to improve preparation and implementation of project
components concerned with commtnications, research and evaluation. All
vehicles have been procured and good progress is being made with equipment
procurement. The civil works section of the Project Implementation Unit
functions well but is underutilized because of delays in making policy
decisions. Construction costs will exceed appraisal estimates by 135
percent. Population Education is now being introduced into school curricula
after a successful trial. Despite its limitations, the national family
planning program, of which the project is an integral part, is expanding
annually and showing good results.
Cr. No. 310:
Development Finance Co. (BAPINDO I): US$10 Million Credit
of June 7, 1972; Effective Date: August 10, 1972;
Closing Date: December 31, 1976.
This credit is fully committed.
Cr. No. 318:
Inter-Island Fleet Rehabilitation: US$8.5 Million
Credit of June 28, 1972; Effective Date: October 19,
1972; Closing Date:
September 30, 1977.
Progress on this project is slow but funds are expected to
be fully committed by September 30, 1977. Due to substantial cost increases,
only about half of the anticipated tonnage will be rehabilitated.
ANNEK II
Page 9 of 14
Cr. No. 319:
Fourt:h Agricultural Estates: US$11 Million Credit of
June 28, 1972; Effective date: January 30, 1973;
ClosiLng Date: June 30, 1981.
The physical progress of the project is ahead of the
appraisal schedule. The financial position of the estate group is difficult due to an unsatisfactory debt/equity ratio. Measures to improve
the situation are under review.
Cr. No. 334:
Second Electricity Distribution: US$40 Million Credit
of September 29, 1972; Effective Date: March 12, 1973;
Closing Date: December 31, 1976.
The Jakarta distribution program financed from Credits
165-IND and 334-IND (together $55 million) encountered implementation delays
due to procurement protlems and cumbersome management procedures. As a result
the project is two years behind the original schedule. These diEficulties
have been resolved and recent progress is encouraging. No further delays
are therefore expected.
Cr. No 355:
Beef Cattle Development: US$3.6 Million Credit of
January 31, 1973; Effective Date: May 30, 1973;
Closing Date: March 31, 1980.
Several problems have seriously delayed project implementation.
Government's budget allocation has been insufficient; and financial management and coordination have been weak. The last supervision
mission undertook a thcrough project review and its recommendations, which
include major changes in project scope and objectives, are presently under
discussion with Government.
Cr. No. 358:
North Sumatra Smallholder Development: US$5 MLllion
Credit of February 14, 1973; Effective Date: August 13,
1973; Closing Date: December 31, 1981.
Project performance, which had suffered from severe finnancial and organizational difficulties, has improved greatly. Physical
progress is encouraging; rubber planting and rice intercropping are now
on schedule. There is some room for improvement in financial management,
in which consultants are assisting. Total project costs are now estimated
at about three times the original estimate of US$10 million. Disbursements
are expected to be completed ahead of schedule.
Cr. No. 387:
Third Education: US$13.5 Million Credit of June 1,
1973; Effective Date: August 29, 1973;
Closing Date: December 31, 1981.
The project is about 10 months behind schedule, mainly due
to insufficient top management staff and paper shortages last year. The paper
ANNEX II
Page 10 of 14
shortage has been overcome and about 32 million text books will be printed by
January 1976, about four months behind schedule. Steps are being taken to
strengthen project management and to improve arrangements for expert services.
Measures to improve project implementation have been discussed and agreed with
the Government. The book testing and teacher training programs are on schedule,
but their results have not yet been evaluated. Procurement of instructional
equipment will be completed by early 1976.
Cr. No. 388:
Third Highways:
Effective Date:
June 30, 1977.
US$14 Million Credit of June 1, 1973;
June 25, 1973; Closing Date:
Construction work on the two North Sulawesi road sections
in the project was started early in 1974 under two contracts and is now 60
percent completed. Construction has been delayed mainly because of long
mobilization periods and heavy rains. Project costs will likely exceed
original estimates (including contingencies) by 57 percent mainly due to
sharply escalated prices. The training program has been completed successfully.
Cr. No. 399:
West Java Thermal Power: US$46 Million Credit of
June 22, 1973; Effective Date: August 28, 1973;
Closing Date: June 30, 1978.
Bids received for the first two 100 mw units at Muara
Karang were about 65 percent higher than estimated at the time of appraisal.
This, together with construction cost increases, has resulted in an increase
in the total project cost of more than 100 percent. Government will provide
the additional funds required. PLN has satisfactorily met the initial targets
in its financial recovery plan provided for under the terms of the Credit
Agreement.
Cr. No. 400:
Smallholder and Private Estate Tea:- US$7.8 Million
Credit of June 22, 1973; Effective Date: November 30,
1973; Closing Date: March 31, 1982.
Planting is presently slightly behind schedule but
it is expected that targets will be achieved or even exceeded by the end
of the 1975/76 planting season. Project nurseries are well organized
and field work is proceeding well. Also non-participating farmers have
benefitted from the project. Total project costs are estimated to be
double the amount originally envisaged and project management is attempting
to achieve cost reductions. Due to the high prices for tea (about twice
the level expected at the time of appraisal), the economic rate of return
is still satisfactory.
ANNEX II
Page 11 of 14
Cr. No. 405:
Sugar Industry Rehabilitation:
June 26, 1973; Effective Date:
Clos3ing Date: June 30, 1979.
US$50 Million Credit of
April 22, 1974;
In riew of the rapid and continuing increase in the cost
of sugar factory machinery and the more recent shortage of budgetary funds,
the scope of the above-mentioned project has been reduced by the deletion of
six minor rehabilitations from the project description. The revised project
consists of the major rehabilitation of two factories and the construction
of a new factory. Credit funds have been reallocated from the minor to
the major rehabilitatlon and to the new construction.
Cr. No. 428:
Pulo Gadung Industrial Estate: US$16.5 Million Credit
of September 14, 1973; Effective Date: November 13,
1973; Closing Date: December 31, 1978.
Despite an increase in construction costs, the project
remains financially viable because revenues from the sale of plots has
risen proportionately.. Construction has fallen behind schedule due to
land acquisition prob]ems, but developed land is being occupied as fast
as it is made availabl.e. While there is still a backlog of applications
for industrial plots, the rate of new applications has fallen off during
recent months and the estate is intensifying its promotional efforts.
Cr. No. 436:
Private Development Finance Company of Indonesia
(PD_CI): US$10 Million Credit of November 2, 1973;
Effective Date: March 6, 1974; Closing Date:
December 31, 1978.
After a long start-up period and difficulties in finding
and recruiting qualified local staff, PDFCI has now reached the operating
stage. Commitments have started and are expected to increase rapidly
as PDFCI's own operational capability improves.
Cr. No. 451:
Fourth Technical Assistance: US$5 Million Credit of
January 2, 1974; Effective Date:
February 15, 1974;
Closing Date:
December 31, 1976.
Progress under the project is satisfactory.
Cr. No. 479:
Bali Tourism:
US$16.0 Million Credit of June 14, 1974;
Effective Date:
December 4, 1974; Closing Date:
August 31, 1979.
Project implementation has improved after initial difficulties. Tender documents for all major infrastructure works were issued
in January 1976. The earliest possible completion date has shifted from
February 1979 to October 1979. Budgetary allocations as requested by the
Bali Tourism Development Corporation for FY76/77 are satisfactory. Negotiations with one group of investors are in progress but otherwise investor interest appears to be low. Promotional efforts to attract additional investors
have been intensified in 1976.
ANNEX II
Page 12 of 14
Cr. No. 480:
Fisheries Credit: US$6.5 Million Credit of June 14, 1974;
Effective Date: January 8, 1975; Closing Date: June 30, 1979.
Lending for fishponds is now on schedule and the contract for
construction of shore facilities at Ambon has been awarded. There may however be some delays in skipjack vessel construction due to procurement problems. Although significant cost increases are envisaged, the project is
still expected to be financially viable because of increases in fish prices.
Cr. No. 514:
Jatiluhur Irrigation Extension: US$30 Million Credit
of October 3, 1974; Effective Date: January 10, 1975;
Closing Date: December 31, 1980.
The consultants are designing works and preparing contract
documents. The first civil works contract is expectd to be let in August 1976,
about one year behind the original schedule.
Loan No. 1005:
Railway: US$48.0 Million Loan of June 14, 1974;
Effective Date: August 16, 1974; Closing Date:
December 31, 1978.
Procurement of material and equipment, which had been
slow due to poor organization and inadequate budget allocation, has now
improved. Bids have been received for most items and the bulk of the contracts should be signed soon. Passenger traffic in 1975 is slightly lower
than in 1974, but still higher than forecast; freight traffic has continued
to decline due mainly to poor maintenance and inadequate motive power, which
should improve towards the end of 1976. Although tariffs were raised in May
1975, increasing passenger revenues by about 25 percent and freight revenues
by about 10 percent, the operating ratio is likely to deteriorate further, as
operating costs have continued to rise at a faster rate.
Loan No. 1040:
Jakarta Urban Development: US$25 Million Loan of
September 27, 1974; Effective Date: January 15, 1975;
Closing Date: December 31, 1977.
Progress on the Kampung Improvement Program has been
very good; costs were less than estimated, allowing additional work to be
undertaken. Execution of the Klender Sites and Services Scheme is one year
behind schedule due to disagreements about site boundaries. Most consultant
contracts commenced early in 1976.
Loan No. 1049:
Five Cities Water Supply: US$14.5 Million Loan of
October 31, 1974; Effective Date: May 21, 1975;
Closing Date: June 30, 1980.
Due to administrative and managerial problems the
project is running 8-10 months behind schedule. This delay together
ANNEX II
Page 13 of 14
with higher rates cf inflation than anticipated is expected to increase
project costs 20-25 percent above the appraisal estimate. Water Enterprises
have now been established in each of the five cities and good progress has
been made in their staffing. The anticipated interdepartmental decree which
would govern the relationship of the Water Enterprises to the Central Government's Directorate of Sanitary Engineering has not been issued; it is now
proposed to clarify this relationship in a Presidential Decree which is
being drafted.
Loan No. 1054:
Development Finance Co. (BAPINDO II): US$50 Million
Loan of November 20, 1974; Effective Date: January 14,
1975; Closing Date: December 31, 1978.
Commitments and disbursements initially were slower
than expected, but they should increase in the second half of FY76. The
progress of this project is satisfactory.
Loan No. 1089:
Second Fertilizer Expansion: US$115 Million Loan of
February 28, 1975; Effective Date: April 29, 1975;
Closing Date: August 31, 1978.
WDrk on the PUSRI III project is proceeding according to
schedule. Work on the related gas pipeline is experiencing delay, but steps
are being taken to expedite impiementation.
Loan No. 1100:
Sixth Irrigation: US$65 Million Loan of April 10,
1975; Effective Date: June 20, 1975; Closing Date:
June 30, 1982.
Consultants for the project and technical assistance advisors
have been selected. Construction work is about five months behind schedule
due to the delay in selection of consultants.
Loan No. 1127:
Fourth Power: US$41 Million Loan of June 17, 1975;
Effective Date: October 23, 1975; Closing Date:
Jume 30, 1980.
The options for a third 100 MW unit at Muara Karang, which
were included in the tenders for the first two units financed under Credit
399, have been excercised. The project is on schedule and expected to be
completed during 1978.
Loan No. 1139:
Fertilizer Distribution: US$68 Million Loan of
July 10, 1975; Effective Date: August 28, 1975;
Closing Date: December 31, 1978.
Progress design is satisfactory. About 60 percent of the
equipment and materials required for the project have been ordered.
ANNEX II
Page 14 of 14
Loan No. 1179:
Agricultural Research and Extension: US$21.5 Million
Loan of December 19, 1975; Effective Date: February 23,
1976; Closing Date: December 31, 1981.
This loan became effective on February 23, 1976.
Loan No. 1197:
National Resource Survey and Mapping Project: US$13.0
Million Loan of February 5, 1976; Effective Date: April 2,
1976; Closing Date: December 31, 1981.
This loan became effective on April 2, 1976.
Loan No. 1236:
Fourth Highway Project: US$130 million Loan of April 15,
1976; Closing Date: December 31, 1980
This loan is expected to become effective on August 13, 1976.
Loan No. 1237:
Fourth Education Project: US$37 million Loan of April 15,
1976; Closing Date: December 31, 1980.
This loan is expected to become effective on July 14, 1976.
ANNEX III
Page 1 of 3 pages
INDONESIA - SECOND SHIPPING PROJECT
LOAN AND PROJECT SUMMARY
Borrower:
Republic of Indonesia
Beneficiary:
P.T. PANN (Pembangunan Armada Niaga Nasional-National
Fleet Development Company)
Amount:
US$54.0 million.
Terms:
15 years including three years of grace, at an interest
rate of 8-1/2 percent per annum.
Relending Terms:
About US$50.0 million of the loan would be made available
to P.T. PANN half as equity, half as debt. The debt
portion would be on-lent at 12 percent interest per annum
for up to 10 years, including one year of grace for used
ships and for up to 5 years, including one year of grace,
for ship rehabilitation. The remainder US$4.0 million
would be used for technical assistance.
Co-lenders:
OECF of Japan, Norway and a consortium of banks organized
by Norway. OECF is provided $25 million for 30 years including a grace period of 10 years at a 2-3/4 percent
interest per annum. Norway is providing a total of $100.3
million of which $12.5 million would be grant and $87.8 million in the form of an export credit. The export credit
would be for 15 years including 3 years of grace at 8-1/2
percent interest per annum, plus a single fee of 1.9 percent. The consortium of banks would provide up to $12
million for 5 years at an interest of 1-7/8 percent over
the Eurodollar rate, plus management and commitment fees
of 3/4 of 1 percent each. Out of the Norwegian grant,
export credit and consortium banks loan, only $99.7 million would be used to finance the project, the balance
would finance items not included in the project.
Project
Description:
The project would provide for:
(a) rehabilitation
of about 54,500 dwt of existing inter-island ships; (b)
procurement of about 52,000 dwt tons of used cargo ships;
(c) procurement of about 50,250 dwt of new standard cargo
and cargo-passenger ships; (d) scrapping of about 70,000
dwt of existing inter-island ships; (e) a technical assistance and training program to support and improve interisland fleet operations and planning and to train marine
ANNEX III
Page 2 of 3 pages
officers and engineers; (f) a study to determine further
needs for RLS shipping during Repelita II and beyond.
The proposed loan would finance the procurement of most
of the used ships and ship rehabilitation and about half
of the foreign exchange cost of the technical assistance.
Project Costs:
The estimated cost of the project is about $195 million
of which about $190 million or 97 percent is in foreign
exchange. This total includes delivery cost of $8.5
million and provisions for price increases ($2.9 million)
and physical contingencies ($2.5 million).
Financial Plan:
The proposed loan of $54.0 million would finance 28 percent of total foreign exchange cost, excluding interest
during construction. The remainder of the financing required for the project will be provided by Japan ($25
million), Norway, including a consortium of banks organized by Norway ($99.7 million), Government ($0.4 million) and BAPINDO ($15.0 million).
Interest during construction and part of the rehabilitation cost will be
covered from PANN's cash generation.
Estimated
Disbursements:
Procurement:
Bank FY
1977
1978
1979
1980
Total
Annual
35.4
Cummulative 35.4
15.1
50.5
2.8
53.3
0.7
54.0
54.0
For the procurement of used ships financed by the Bank,
international competitive bidding is inappropriate.
Instead, PANN's consultant naval architect-surveyor,
shipbrokers and resident advisors will assist in convassing the international market, identifying and procuring appropriate used ships and in negotiating purchase and as necessary, repair contracts for them.
The appraisal report of PANN and the prices of used
ships will be approved by the Bank and the ships must
be inspected before PANN purchases used ships. International competitive bidding is also impractical in
the case of ship rehabilitation, and instead the procedures established under Credit 318-IND will be used.
Special equipment for training included in the technical
assistance component financed by the Bank will be procured following international competitive bidding, in
accordance with the Bank's Guidelines for Procurement
or through international shopping.
ANNEX III
Page 3 of 3 pages
Technical
Assistance:
Economic Rate
of Return:
Appraisal
Report:
The technical assistance component of the project, of
which the Bank will finance $3.8 million, provides
for the continuation of the following existing programst
(i) advisory services to BAPINDO, PELNI and SEACOM; (ii)
training of crews. It also provides for the following new
programs:
(i) training of marine engineers and deck
officers and procurement of special training equipment;
(ii) provision of specialist services to the shipping
industry, including those of domestic consultants;
(iii) management consultant services for a review of
PELNI operations; and (iv) an economic study of future
requirements of fleet development in Indonesia.
The overall economic rate of return for the project is 18
percent; 19 percent for used ships, 15 percent for new
ships and over 100 percent for rehabilitated ships.
No. 982a-IND dated April 15, 1976-East Asia and Pacific
Projects Department
IBRD 11493
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