Document of

The World Bank Fit l

FOR OFFICIAL USE ONLY

Report No. 2350c-IND

INDONESIA

APPRAISAL OF THE

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

July 18, 1979

Projects DepartmentEast Asia and Pacific Regional Office

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

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CURRENCY EQUIVALENTS

Currency Unit - Rupiah (Rp)

US$1 Rp 625Rp 100 = US$0.16

Rp 1,000,000 = US$1,600

WEIGHTS AND MEASURES

1 kilogram (kg) 1,000 grams (gm) = 2.205 pounds1 metric ton = 1,000 kg = 2,205 pounds = 0.98 long ton1 hectare (ha) = 10,000 square meters (sq m) = 2.47 acres

ABBREVIATIONS

APBD - Anggaran Pendapatan dan Belanja Daerah - Regional Budget forRevenues and Expenditures

APBN - Anggaran Pendapatan dan Belanja Negara - State Budget forRevenue and Expenditure

AARD - Agency for (Agricultural) Research and DevelopmentBAKOSURTANAL - National Coordinating Agency of Survey and MappingBAL - Basic Agrarian LawBAPPEDA - Provincial Development Planning AgencyBAPPENAS - Badan Perancana Pembungunan National, National Development

Planning AgencyBIMAS - Bimbingan Massal Swa Sembada Bahan Makanan, "Mass Guidance

Program for Self-Sufficiency in Foodstuffs" - a farm input-credit package program

BPPB - Balai Penelitian Perkebunan Bogor (Rubber Research InstituteBogor)

BPPM - Balai Penelitian Perkebunan Medan (Rubber Research InstituteMedan)

BRI - Bank Rakyat Indonesia - People's Bank of IndonesiaBULOG - Badan Mousan Logistik (rice procurement agency)BUUD - Badan Usaha Unit Desa - Forerunner of KUD as Village Unit

CooperativeCCL - Critical Consumption LevelCP - Cooperative Program

CRIA - Central Research Institute for AgricultureDGA - Directorate General of Agrarian AffairsDGE - Directorate General of EstatesDGFC - Directorate General for Food CropsDGH - Directorate General of HighwaysDIP - Daftar Isian Projek - Project Budget DocumentDPD - Dinas Perkebunan Daerah - Provincial Estate Crops ServicesDPUP - Provincial Public Works ServicesDRC - Dry Rubber ContentFAO - Food and Agriculture OrganizationGOI - Government of IndonesiaINPRES - Instruksi Presiden - "Presidential Instruction" - a special

programIPEDA - Iuran Pembangunan Daerah - Land TaxJMO - Joint Marketing Office

FOR OFFICIAL USE ONLY

ABBREVIATIONS (contd.)

KUD - Koperasi Unit Desa - Village Unit Cooperative

md - man daysMOA - Ministry of Agriculture

MOASS - Minister of Agriculture Supporting StaffMOLT - Ministry of Labor and TransmigrationMOTC - Ministry of Trade and CooperativesMPW - Ministry of Public Works and PowerMil. - MillionMSL - Minimum Subsistence LevelREPELITA I - First Five-Year Development Plan (1969/70-1973/74)REPELITA II - Second Five-Year Development Plan (1974/75-1979/80)REPELITA III - Third Five-Year Development Plan (1979/80-1984/85)PMU - Project Management UnitPMSU - Planting Material Supply UnitPNP - Perusahaan Negara Perkebunan, State-owned Estate EnterprisePPL - Field extension workerPT - Perseroan Terbatas - State-owned Corporation Operating Under

the Commercial Code with Limited LiabilityPTP - Perseroan Terbatas Perkebunan, State-owned Estate Enterprise

with Limited LiabilityPTPT - Directorate of land clearing for transmigration settlement in

Ministry of Public WorksRISPA - Research Institute of the Sumatra Planters' Association

GLOSSARY OF INDONESIAN TERMS

Adat - Body of traditional lawBupati - Kabupaten Chief

Department Kesehatan - Department of HealthDesa - Village

Dukuh - Hamlet of 25-30 housesGotong-royong - Community self-help projectHak Pakai - Individual's right of use or exploitation of assigned

landHak Milik - Right to full ownership of landKabupaten - DistrictKecamatan - Subdistrict

Lalang - A coarse grass, establishing itself after the slashand burn cycle

Marga - Community grouping under Adat LawMushalla - Small prayer housePuskesmas - Community Health Center, subdistrict level

GOVERNMENT OF INDONESIAFISCAL YEAR

April 1-March 31

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

INDONESIA

APPRAISAL OF THENUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

TABLE OF CONTENTS

Page No.

1. THE SECTOR AND SUBSECTOR .... . . . . . . . . . . . . . . . . 1

A. Background .I.. 1B. The Rubber Subsector .. 7C. The Palm Oil Subsector . ........ .. ....... . 9

2. PURPOSE, PRIORITY AND FORMULATION OF THE PROJECT . . . . . . . . 13

A. Project Objectives . ................... . 13B. Project Formulation ...... . . . . .. . * . *. .*. . 14C. The Project Areas .. .......... . 16

3. THE PROJECT .. . ...... . . . . . .. . ........ . . 22

A. Project Summary .... . . . . . . . . . . . . . . . . . . 22B. Project Costs and Financing Arrangements . . . . . . . . . 31C. Budgeting .... . . . . . . . . . . . . . . . . . . . . . 35D. Procurement . . . . . . . . . . . . . . . . . . . . . . . . 36E. Disbursements . . . . . . . . . . . . .. . . . . . . .. . 37F. Quality and Cost Controls ... . . . . . . . . . . . . . . 39G. Accounts and Audit .... . . . . . . . . . . . . . . . . . 39H. Cost Recovery .... . . . . . . . . . . . . . . . . . . . 40

4. ORGANIZATION AND MANAGEMENT ................... . 42

A. Borrowing/Executive Agency Functions . . . . . . . . . . . . 42B. Aspects of Project Implementation . . . . . . . . . . . . . 46C. The Environment .... . . . . . . . . . . . . . . . . . . 46

5. DEMAND AND MARKETING .... . . . . ...... . . . . . . . . 47-

A. Rubber .... . . . . . . . ..... . . . . . . . . . . . 47B. Palm Oil .... . . . . . . ...... . . . . . . . . . . 48C. Food Crops .... . . . . . . . . . . . . . . . . . . .. . 50

6. PRODUCTION ASPECTS, TECHNOLOGICAL FACTORS, AND FARM INCOMES . . 50

A. General ... ... 50B. Crop Recommendations ... . . .51C. Yields and Production.. . . . 52D. Farm Incomes .... . . . . . . . . . . . . ....... . 53

Page No.

7. COSTS, BENEFITS AND JUSTIFICATION . . . . . . . . . . . . . . . 55

A. Project Benefits and Justification . . . . . . . . . . . . . 55

B. Costs. ............... ..... 56

C. Financial Results ............... ..... 57

D. Economic Results ............ .. ...... 57

E. Project Risks ........... ......... 61

8. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS . . . . . . . . . . 61

List of Tables in Main Report

1.1 Indonesia Average Annual Rubber Production

1.2 Indonesian Oil Palm Production Data

3.1 Summary of Project Prefinance3.2 Annual Inflation Indices3.3 Project Cost Summary3.4 Sources of Project Finance6.1 Farm Income - Danau Salak New Settlement6.2 Farm Income - Rimbo Bujang Smallholders

7.1 Results of Financial Rate of Return Analysis

7.2 Results of Economic Rate of Return Analysis

ANNEXES

ANNEX 1 PROJECT PHASING, PROJECT COSTS AND EXPENDITURES, DISBURSEMENTS, ANDRENT AND COST RECOVERY

Table 1: Project PhasingTable 2: Project Cost - New Settlement - Danau Salak

Table 3: PTP XVIII - Nucleus Estate - Danau Salak

Table 4: Total Project Costs - PNP I

Table 5: Rimbo Bujang - Project Costs - Existing and New Settlement

Table 6: Technical Assistance to DGETable 7: Estimated Schedule of Project Expenditures

Table 8: Sources of Finance - Project Costs

Table 9: Estimated Schedule of DisbursementsTable 10: Proposed Allocation of Loan Proceeds

Table 11: List of Agricultural Machinery, Vehicles and Equipment

Table 12: Rent and Cost Recovery

ANNEX 2 DETAILS OF PROJECT PROCUREMENT

ANNEX 3 SMALLHOLDER FARM MODELS AND INCOME STATEMENTS

Table 1: Smallholders Rubber Yield Projections - Danau Salak

Table 2: Smallholder Rubber Yield Assumption - Rimbo Bujang

Table 3: New Settler Crop and Livestock Production from 0.15 ha

Garden Lot - Danau SalakTable 4: New Settler Crop Production from 0.8 ha Field Crop

Area - Danau Salak

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ANNEX 3 SMALLHOLDER FARM MODELS AND INCOME STATEMENTS (cont.)

Table 5: Farm Family Labor Availability and Labor Requirementsfor Proposed Development - Danau Salak

Table 6: Existing Settler Food Crop Area and Yield Projectionswith Project - Rimbo Bujang (pages 1-2)

Table 7: Farm Family Labor Availability and Labor Requirementsfor Proposed Development - Rimbo Bujang

Table 8: New Settler Farm Income Statement - Danau Salak (pages 1-2)

Table 9: Income Statement for Existing Settlers with Project -Rimbo Bujang (pages 1-2)

Table 10: Income Statement for Existing Settlers without Project -Rimbo Bujang (pages 1-2)

ANNEX 4

Table 1: Comparison of Development Costs per Family

ANNEX 5

Data Available in the Staff Working Papers (pages 1-2)

CHARTS

1. Organization Chart of Directorate General of Estates

2. Organization Chart of a Government-owned Estate Group (PTP)

3. Project Implementation Schedule - Smallholder Components

Main Activities - Danau Salak4. Project Implementation Schedule - Smallholder Components

Main Activities - Rimbo Bujang5. Smallholder Components - Organization Chart of the Flow of

Funds - Noncredit Items6. Smallholder Components - Organization Chart of the Flow of

Funds - Smallholder Development by the Nucleus Estates

7. Organization Chart of Provincial Government8. Organization Chart of Settlement Projects

FIGURES

1. Proposed Village Layout for the Danau Salak Area2. Basic House Design for Kalimantan Settlers - Danau Salak

3. Basic House Design for Javanese Settlers/Upland Areas - Danau Salak

4. Indicative Road Cross Sections - Danau Salak and Rimbo Bujang

MAPS. Nos. 14020R, 14099R, 14183R

This report is based on the findings of an appraisal mission composed of

Messrs. G.B. Fox, D.C. Carlier, P.R. Melkye, and Ms. A.L. Grossman (Bank)

and Messrs. R.R. Fuentes, C.T. Relf and J.B. McIntosh (Consultants) which

visited Indonesia in July/August and September/October 1978.

INDONESIA

APPRAISAL OF THENUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

1. THE SECTOR AND SUBSECTOR

A. Background

1.01 The Government of Indonesia (GOI) has requested Bank assistanceto develop 50,000 ha of rubber and food crop land to settle 4,000 land-less families in South Kalimantan province and improve the incomes of afurther 8,000 families in Jambi province, using the public sector estates PTPVI and XVIII as the development agent under the nucleus estate developmentscheme. Assistance is also sought to strengthen the PTP XVIII nucleus estateand to rehabilitate PNP I, the sole public sector estate in Aceh province, sothat it may be used to implement a future NES smallholder development scheme.

1.02 The project was identified by the GOI with Bank assistance.It gives expression to national needs and priorities as outlined in GOI'sSecond Five-Year Plan. The project was prepared by GOI and the Bank usingreports by the consultant firms PT Dian Utami in association with BookerAgriculture International Ltd., and PT Agriconsult International.

The Agricultural and Rural Sector

1.03 Objectives. The Government's major objectives for the agriculturaland rural sector are to: (a) create productive employment to raise theincomes of the rural poor; (b) increase domestic food supply to keep pace withrising demand; (c) expand agricultural exports, particularly of smallholdertree crops; and (d) ensure productive, sustainable use of Indonesia's land,water and other natural resources.

1.04 Role and Performance. Despite a 4% average annual growth rate ofagricultural production since 1968, the contribution of the agriculturalsector to GDP has declined from 40% to 30% over that period. Agriculture'srelative share in total exports has simultaneously declined from 45% to 33%,a result mainly of the markedly increased importance of oil exports./INevertheless, the agricultural and rural sector remains of overwhelmingimportance to the great majority of Indonesians in terms of employment,income, and food production. Nearly 80% of the population lives in ruralareas, agriculture still employs between 60% and 66% of the total labor forcedepending on the season, and about two-thirds of rural households and one-tenth of urban households continue to rely on agriculture as their majorsource of income. Except for oil palm and tea, agriculture is dominated bysmallholder production; there are nearly 16 million smallholder familiesproducing subsistence and cash crops on about 16 million ha. There are also1,800 estates occupying 2.2 million ha producing mainly rubber, sugar, tea,palm oil, and tobacco.

/1 Among agricultural exports the effects of slow growth in production of

several traditional export crops have been largely balanced by increasedtimber, fish and palm oil exports.

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1.05 .2loyment. The share of the total labor force employed in the

agricultural sector has apparently decreased over the past 15 years, althoughprecise estimation is difficult due to shifting survey definitions andseasonal timing of surveys. In spite of its declining share, agriculturehas remained by far the largest single source of new employment, accountingfor 46% of incremental employment during the period 1971-76. Furthermore,while the articulation and implementation of a strategy designed to promotelabor-intensive industry is critical to Indonesia's long-term development, thesuccess or failure of the Government's agricultural policies will have a muchgreater influence on employment in the immediate future. Outside Java, futureemployment prospects in agriculture appear quite promising, given the employ-ment potential for sustained increases in smallholder areas, land developmentand increased use of contract agricultural labor by the agricultural estates,and publicly sponsored and spontaneous transmigration. While the rehabilita-tion investments on Java which were responsible for the generation of signifi-cant employment opportunities in the last decade have been largely completed,there is still scope for significant intensification of agricultural produc-tion. In the short- and medium-term, the Government's rural works program isbeing used as an employment generation mechanism in the rural sector.

1.06 Food Crops Given the limited manpower and financial resourcesavailable, the Government's agricultural strategy over the past decade hasbeen to concentrate on increasing the production of rice, the preferredstaple food of the great majority of Indonesians. Rice production increasedrapidly (4.5% p.a.) between 1968 and 1974, chiefly due to intensified programsof irrigation rehabilitation and the provision to irrigated rice producers ofhigh-yielding variety seed, fertilizer, and short-term production creditthrough the BIMAS (agricultural credit) program. The growth rate slowedmarkedly to 1l7% over 1974-77, in the wake of restrictions on private sectorparticipation in the fertili-zer trade and subsequent severe declines infertilizer usage, successive seasons of untimely rainfall, and unprecedentedattacks by pests and diseases, principally the brown plant hopper andassociated viruses. In 1978, a record rice harvest was achieved, with betterweather, improved and liberalized fertilizer distribution, and a concertedeffort by BIYMAS officials and extension workers to distribute pest resistantrice varieties throughout the country. Over the same decade output ofsecondary food crops (maize, cassava, soybeans, peanuts, and sweet potatoes)grew more slowly, at a combined annual rate of 1.6% composed of a 1.1% averagedecline in area (much of this land shifting to irrigated rice) and a 2.7%increase in yield.

1.07 Unfortunately, these gains in food output did not keep pace withincreases in demand, stimulated by large increases in aggregate income. Overthe decade Indonesia became the largest rice importer in the world, withrecord imports of 2.3 million tons in the poor harvest year of 1977, decliningto about 1.3 million tons in 1978. Simultaneously, wheat imports rose to1.4 million tons in 1978, cassava exports nearly disappeared, and soybeans,maize, and coconut oil imports have grown in the past year. Thus the

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general food security prospect is not encouraging. A recent Bank study /1concluded that even assuming expanded Government capital investment in thefood crop sector (e.g., irrigation), improved technology, more efficientcredit and marketing systems, improved extension, and a consequent 3.5%annual growth rate of food production, Indonesia would continue to face abasic food deficit up to at least 1990, when the rice deficit alone could bebetween 2 million and 3 million tons.

1.08 Although relocation of inhabitants of potential reservoir sites andconflicting claims of other users may delay progress, major increases inrice-cropping intensity could be achieved through water storage projects. Inthe short- and medium-term, however, there is still ample scope for achievinghigher yields, conserving water, increasing cropping intensity in existingrice areas through construction of tertiary irrigation and drainage systems,and improving support services. In order to achieve this production increase,the recent Irrigation Program Review (Report No. 2027a-IND, dated October 16,1978) concluded that steps to strengthen the planning and implementationcapacity of the Directorate General of Water Resources Development would beneeded. These conclusions are currently being reviewed with the GOI. In theOther Islands there is considerable potential for new irrigation systems,including tidal and swamp land development. Yields of secondary food crops,both in Java and the Other Islands, remain far below potential. While theGovernment has over the last decade given considerable attention to programsdesigned to support increased rice production and marketing, it has notfocussed sufficiently on research or supporting services to increaseproduction of secondary crops. This would require, inter alia, attention tomarketing arrangements, price supports, and appropriate credit arrangements.

1.09 Tree Crops. Tree crop products have for decades been an importantsource of export income for Indonesia, and still generate about two-thirds oftotal nonoil export revenues. Tree crops occupy more than a third of totalcropped land, with coconuts and rubber accounting for 80% of tree crop stands.Smallholders account for 80% of the area under rubber, the remainder being inGovernment and private estates. Coconuts, coffee, cloves and pepper arealmost entirely smallholder crops, while tea is chiefly, and oil palm isentirely, cultivated on estates. Although Indonesia has profitted enormouslyfrom recent world price trends for its tree crops, production of rubber andcoffee stagnated between 1969 and 1976. For example, some 95% of smallholderrubber consists of unselected clones with yields half those of smallholderrubber in neighboring Malaysia. Only oil palm has shown sustained largeincreases in production due to large investment programs by Government andprivate estates. Deteriorating transport infrastructure and shipping in theOther Islands since the 1950s, increased marketing regulation and otherGovernment actions affecting private sector participation, and inadequatetree crop research, extension, and particularly, replanting programs forsmallholders contributed to this situation.

/1 Report No. 2374-IND, "Indonesia - Supply Prospects for Major FoodCrops," of March 3, 1979.

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1.10 Efforts to revitalize the tree crop sector are in their infancy.One of the new approaches (which would be supported under the proposedproject) has been to rely on public sector estates /1 with their proventechnical and managerial expertise to meet the demanding requirements ofsettlement and land clearing for tree and food crop production, to providesettlers with employment during the initial three years of settlement, andthereafter to assist them by purchasing and distributing inputs during theperiod of tree crop immaturity and by providing processing and marketing faci-lities. The crops which best lend themselves for development by nucleusestates at present are rubber, coconuts and oil palm. These crops havesatisfactory export potential; their returns to the farmer after provisionfor debt service are satisfactory; the production and processing techniquesare well known to many of the estates; and the crops are well suited to thepoorer soils of Sumatra and Kalimantan where there are large tracts of under-developed agricultural land available for settlement.

1.11 In addition to the nucleus estate approach, the Government hasprepared projects to plant and replant smallholder rubber and coconuts on anintensively managed block basis, financed through credit arrangements. Butthe largest and most important task, the institutionalization of easilyadministered low-cost replanting programs for existing smallholder stands,remains to be articulated. This is largely because no technically proven,low-cost systems of tree crop replanting have yet been identified and testedin Indonesia. This problem is particularly grave since the country has abacklog of nearly 400,000 ha of both smallholder rubber and coconuts, whichare overaged and unproductive. Given that the market prospects and employmentpotential for these crops are good, and various large regions in the OtherIslands have natural comparative advantages for these crops, the rapidexpansion of smallholder planting and replanting of tree crops is a highpriority.

1.12 Apart from foreign investment, especially for oil palm, andintensification of cropping on a few of the larger Indonesian-owned privateestates, there has been little development of the private estates whichcover some 430,000 ha (100,000 ha of which have foreign participation). Atleast half this area is abandoned but will become available when leases expireafter 1980.Limited domestic funds have been made available since 1977 toimprove up to 40,000 ha of locally owned and operated private estates. GOI isconsidering increasing incentives for additional foreign estate investment,and is seeking Bank Group support for private estate development and possibleuse of relinquished private estate land for smallholders.

1.13 Area Development and Transmigration. Certain critically poor areasof Java and productive areas available for settlement and development on theOther Islands have provided the focus for rural development programs to meetbasic needs and to generate employment, productivity and incomes. For Java,

/1 The estates enterprises (PNPs) are presently being converted by GOI intolimited liability companies (PTPs).

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the Government is preparing local rural works projects geared to strengtheningplanning and investment activities at the local level. Cultivable land in

Java is almost fully utilized, and in some areas, particularly the higherwatersheds of its silt-laden rivers, agricultural land use already exceeds

ecologically safe limits and is contributing to increasingly severe problemsof erosion, downstream flooding, and siltation of ports, dams, and irrigation

canal systems. The Government is preparing a program of watershed developmentand integrated development projects designed to address some of these

problems.

1.14 The primary vehicle for new area development in the Other Islands,as well as for creating employment and settlement nuclei for Javanese

migrants, is likely to be the transmigration program. Unfortunately, this

program has been hampered by unrealistic expectations of its potential forresolving Java's population problems and to stimulating large-scale regionaldevelopment, by overly ambitious targets, and by weak, uncoordinatedimplementation. Confronted by management problems, the Government reorganized

the management of the transmigration program in preparation for Repelita III.This culminated in a Presidential Decree which transfers responsibility forproject implementation to the appropriate line agencies. The revisedinstitutional arrangements will need to be supported by continued attention toa variety of technical and policy issues: these include the appropriatenessof land use for food crop production, appropriate target incomes, farm sizeand village plans, the extent of Government support to settlers, the provisionof adequate support service and marketing mechanisms and the potential role ofspontaneous migration in the transmigration strategy. The Second Trans-migration Project (Loan 1707-IND and Credit 919-IND, approved on May 29,1979), will address these issues.

1.15 The Role of Government. lhile the private sector should beencouraged to expand its role in agricultural inputs supply, marketing, andprocessing, the Government bears the major responsibility for the infra-structure, resource conservation, and other services, particularly outsideJava (para. 1.13). The capacity of the Indonesian Government to plan andimplement agricultural and rural development programs has improved over the

past decade. However, overly centralized procedures, weak regional planningand technical and managerial manpower constraints including difficulties in

attracting such personnel to remote rural locations have impeded agricultural

planning, programming and implementation. Further, the Government's concernfor area development has also increased the need to strengthen provincial andlocal planning capacities. Future programs responsive to the Government'sstated objectives will necessarily be more complex than those which theGovernment has followed up to now. They will require closely coordinatedprograms of agricultural research and extension, input supply, credit, landdevelopment, transportation, pricing policies and marketing arrangements. Itis, therefore, important that the Government continue to strengthen the key

rural development institutions, particularly through the education,recruitment, training, and retention of qualified technical manpower.

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1.16 Bank Group Lending Strategy. There is general agreement betweenthe Bank and the Government on the overall objectives and strategies proposedfor the rural sector. While views sometimes differ on the relative emphasisto be given to different investments and on the technical design of someprojects, such differences are not impeding Bank Group operations generallyand are usually resolvable following further analysis and dialogue. The BankGroup has devoted considerable staff time to various analyses of the ruralsector (e.g., employment and income distribution, irrigation development,agriculture support services and food crop production) to improve itsunderstanding of the needs of the sector and the Government's policies.

1.17 Since the first of 13 irrigation projects was approved in 1968, theBank Group has rapidly expanded its agricultural and rural lending to includesupport for estate and smallholder tree crops; fertilizer production anddistribution; sugar estates; agricultural research, extension, and training;transmigration; livestock; fisheries; and resource survey and mapping. In1978, a Sector Operations Review was issued on the Bank Group's agriculturalprogram in Indonesia (Report No. 2166, dated August 9, 1978), which concludedthat despite deficiencies in some projects, the Bank's portfolio in Indonesianagriculture was "of overall good quality and likely to contribute substan-tially to increased production." To further that aim within the context ofthe Government's overall agricultural strategy, Bank Group lending within thenext few years is expected to focus on:

(i) secondary crop production, e.g., through the second phase projectsfor agricultural research, extension, seeds and an initial agri-cultural credit project;

(ii) a diversified irrigation program designed to intensify rice crop-ping on Java and to extend water management to the Other Islands;

(iii) development of smallholder tree crop replanting programs designed

to complement the Nucleus Estate and Smallholders projects(paras. 111 and 112);

(iv) area development projects aimed at evolving a viable model of

watershed management to conserve soil and to ensure long-term

productivity in the densely populated areas of Java; developing

strategies for the integrated rural development of critical areas

on Java; and stimulating transmigration to the Other Islands.

These projects will be complemented by sector work. A cassava production and

marketing study planned for later this fiscal year will assist the Government

in developing a secondary food crop strategy. A transmigration program review

will be undertaken later this year which will, inter alia, identify strategies

to reduce cost per family and stimulate spontaneous transmigration. In

addition, a review of supply and requirements of technical and managerial

manpower for agriculture planned for early 1980 will examine short-term

training measures to alleviate critical manpower shortages.

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B. The Rubber Subsector

Crop Production

1.18 The Indonesian rubber industry, at one time the world's largestproducer of natural rubber, is currently second largest to Malaysia, produc-ing about 800,000 tons and exporting 770,000 tons in 1977/78 - 20% of totalworld exports. The third largest export commodity of Indonesia, naturalrubber, comprises 6% of total agricultural GDP, 7% of export earnings and16% of nonoil exports in 1977. The industry provides full-time employmentfor 2 million people and part-time employment for an additional 6-8 millionpeople.

1.19 Indonesia rubber production (Table 1) grew slowly from 1960 to1970. Average production in 1960-64 was 700,000 tons, increasing on average1.6% p.a. to 810,000 tons in 1970-74. Most of this increase can be attributedto expansion of the rubber area; average yields remained almost constant.From 1970-74 to 1975-78 average total production declined slightly (by about0.6% p.a.) reflecting a decrease in yields. The main reasons for this recentdecline in production appear to be the effects of: (a) a continuous, thougherratic, decline in prices which has discouraged tapping and planting; and(b) a failure to improve poor agricultural practices, particularly amongsmallholders and private national estates.

Table 1.1: INDONESIA AVERAGE ANNUAL RUBBER PRODUCTION, 1960-78

Calendar years1960-64 1965-69 1970-74 1975-78

Production ('000 ton)Smallholders 483 526 570 541Estates 220 223 238 250

Total 703 749 808 791

Area ('000 ha)Smallholders 1,506 1,661 1,839 1,875Estates n.a. 523 497 455

Total n.a. 2,184 2,336 2,330

Yield (kg/ha)Smallholders 342 317 310 290Estates n.a. 426 483 543

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Smallholders

1.20 About 70% of national production comes from smallholders who have80% of the total rubber area, with average rubber holdings of 1.5 ha. Small-holder production, of which 70% comes from Sumatra and 19% from Kalimantan,grew from an average 480,000 tons from 1960-64 to 570,000 tons in 1970-74, anaverage increase of 1.5% p.a. In the same period smallholder rubber areagrew on average 2.2% p.a. and rubber yields declined 0.8% p.a. In 1975-78average production was down to 541,000 tons, a decrease of 1.3% due entirelyto lower yields. This decline in smallholder production can be expected toaccelerate, since it is estimated that 30% of smallholder plantings date from1940 or earlier and 30% from 1940-50; all of these probably already havedeclining yields. In the last five years there has been very little evidenceof replanting by smallholders, most of the area being left to be rejuvenatedby poor quality self-sown seedling rubber. Smallholders do not have sufficientresources to plant and maintain the high yielding varieties of rubber necessaryfor them to receive an attractive return on their investment. In theabsence of Government-assisted settlement and rubber replanting programs, itis estimated that by 1990 the area of smallholder rubber will have dropped to1.1 million ha and production to about 270,000 tons.

1.21 Estate Production. There is a well-established estate rubbersector of 455,000 ha comprised of the PNPs and PTPs with 200,000 ha (44%),private national estates with 182,000 ha (40%), and private foreign estateswith 73,000 ha (16%). Total estate production in 1977 was 250,000 tons. Themain center of estate production is Sumatra (65%), followed by Java (30%)and Kalimantan (5%). Despite a decline in the area under rubber on Governmentestates from 225,000 ha in 1970 to about 200,000 ha in 1977, productionincreased from an estimated 118,000 tons to 145,000 tons, due to an increasein yields from 524 kg/ha to 725 kg/ha. Private foreign estate companies,despite a marginal drop in area (74,000 to 73,000 ha), increased productionin the same period from 40,000 tons to about 55,000 tons. The performanceof the private national estates has in many respects been similar to that forsmallholders. The area of these estates was estimated to be 182,000 ha in1976, production was 52,000 tons. The decline in estate rubber area is dueto abandonment of overaged trees and conversion of some areas into oil palm.Increased yields have resulted from improved management and replanting ofestates with clonal varieties. If the present trends for the estate sectorcontinue, it is expected that by 1990, total estate rubber area will declineto 315,000 ha, but total production will increase to 340,000 tons.

1.22 Future Prospects. The forecast of a substantial decrease in thefuture production of rubber has stimulated the Government to initiate an expan-sion program for rubber replanting and new rubber planting. The focus ofthis program is smallholder development, first to raise the productivity ofexisting holdings, and secondly, to assist poor and landless families toclear unused jungle and plant new rubber. In 1978, the Government initiated alarge scale Smallholder Rubber Replanting Program to be implemented by a newNational Rubber Replanting Unit in the DGE. The target is to replant 10,000ha in 1978/79, 30,000 ha in 1979/80 and about 50,000 ha annually thereafterto complete 300,000 ha by 1984/85 in line with the need to replant about

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60,000 ha p.a. so that the 1.8 million ha of smallholder rubber could be

replanted over the trees' 30-year production cycle. However, in view of the

organizational and administrative constraints, a more realistic goal for the

seven-year period would be 150,000-180,000 ha. The proposed IDA-assisted

Rubber Replanting Project would assist the replanting of the first 40,000 ha.

The objectives and detailed plans for the development of the estates sector

are expected to be clarified in the current planning for Repelita III.

It is clear however, that there will be an enlarged nucleus estate small-

holder development program to assist new settlement on tree crop smallholdings.

Such a program is essential not only to reverse the trend in declining export

crop production and foreign exchange earnings but also for immediately

benefiting the rural poor. Given Indonesia's comparative advantage in rubber

production and the prospects of stable prices at any reasonable rate of

expansion of natural rubber production (see para. 6.02), the prospects for a

successful smallholder replanting program are good if implementation capacity

can be developed.

C. The Palm Oil Subsector

1.23 Faced with a rapidly growing domestic demand for fats and oils -mainly because of population growth and increasing per capita incomes, and the

prospect of a slowly expanding coconut industry, the Government in the last

few years has started to look on oil palm as a major source of vegetable oil.

Modern refining techniques, particularly fractionation, have made palm oil

products acceptable to the Indonesian taste. At present there is insufficient

fractionation capacity of palm oil in Indonesia but current investment plans

indicate that the shortage will be overcome by 1980.

1.24 Oil palm is largely an estate crop in Indonesia, most production

coming from North Sumatra where soil and climatic conditions are ideal. At

present, public sector estates account for 66% of the area and the production

of oil palm projects (palm oil and palm kernels), the remaining third comes

from private estates (Table 1.2). The first smallholder plantings commenced

in 1975/76 but comprise less than 1% of the total area of oil palm in Indonesia.

About 85% of the present production is exported. The combined output of palm

oil and palm kernel oil is projected to reach 1.7 million tons by 1990 which

corresponds to an average annual growth rate of 9% for 1975-1990. According

to Bank projections, however, much of this increased production will be

consumed domestically (para. 5.05).

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Table 1.2: INDONESIAN OIL PALM PRODUCTION DATA

1970 1972 1974 1976 1978

Production ('000 tons)

Palm OilGovernment estates 147 189 243 294 327

Private estates 70 81 105 145 160

Smallholders - - - - 1

Total 217 270 348 439 488

Palm KernelGovernment estates 33 42 52 64 65

Private estates 15 17 21 31 32

Smallholders - - - - 0.2

Total 48 59 73 95 97.2

Area in Production ('000 ha)Government estates 62 72 87 95 105

Private estates 30 32 37 45 45Smallholders - - - - 1

Total 92 104 124 140 151

Yield (tons ffb/ha) 12.4 13.2 14.0 15.6 15.4

Institutions Involved in the Rubber Subsector

1.25 Ministry of Agriculture (MOA). MOA comprises five DirectoratesGeneral: Estates, Fisheries, Food Crops, Forestry and Livestock. The

Directorate General of Estates (DGE) regulates all private estates and small-

holdings involving tree crops and industrial crops which include rubber, coco-

nuts, oil palm, tea, coffee, tobacco, etc. DGE comprises three directorates

in Jakarta: Planning, Production and Means of Production (Chart 1). Extension

and project supervision at provincial and district levels are handled by theProvincial Extension Services (Dinas Perkebunan Daerahs - DPDs). The DPDs

are responsible technically to the DGE but administratively to the provincial

governments. The responsibility for public sector estates rests in MOA with

the Support Staff for Agricultural Enterprises Unit which reports to the

Minister. This Unit assists the Minister in policy formulation, coordination

of estate crop activities, estate inspection, estate budget approval and

control and monitoring of the operations of the public sector estates. Both

the MOA Support Staff and DGE have received technical assistance under the

Nucleus Estates and Smallholders I and II Projects, Loans 1499-IND and

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1604-'ND, respectively, in order to facilitate improved operation of thepublic estate system and to facilitate preDaration and implementation of small-holder development projects. Improved operations and project implementationnavxe resulted from this technical assistance. Extension services to treecrori sma3lholders, howevcr, continue to suffer because neither DGE nor theDPDe have adequate funds to improve the scope of extension to smallholdertree crop farmers or the nurnber of tree crop extension personnel. The firststep toward improving routine extension services for rubber smallholders areproposed for inclusion in the forthcoming Second Agriculture ExtensionProject.

1.26 Public Sector Estates. The Indonesian Estates Industry is domi-nated by the public sector estates comprising 28 estate groups which arelocated mainly in Northern Sumatra ard java with over 500,000 na of planta-tion crops excluding pine forests. Organization of the Government-ownedestates system is shown in Chart 2. CGovernment policy is now to converttheir fully owned estates enterprises, the PNPs,/1 into PTPs which arelimited liability companies operating under the Indonesian Commercial Code.This action grants the estates greater financial and managerial autonomy byputting the estates on a ful'ly commercial footing subject to Indonesian

commercial law including all commerci-.l taxation. The conversion to PTPdecentralizes much of the decision-making from the Ministry of Agr-culture tothe individual estates. The majority of these estates have now been converted.The importance of this vast estate enter)rise to the rural sector is that itemploys over 500,000 resident and seasonal labor, and it is estimated thatthe welfare of 3 million people is immediately dependent on the estatessystem. The quality of management on the estates has greatly improved sincethe 1960s and with such improvements, the estates are now able to facilitatesmallholder development. The Government has requested rehabilitation of PNP Iin the proposed project in order that it can be utilized as a viable nucleusestate for smallholder development in the future. Similarly, the proposedexpansion of the Danau Salak estate at PTP XVIII would assist the estatewith the required infrastructure, processing facilities, and developmentprogram to strengthen its role as a nucleus estate.

1.27 Bank Rakyat Indonesia (BRI). BRI provides short-term credit toagricultural cooperatives, farmers, fishermen and other agricultural enter-prises. BRI participates in the administration of the Mtass-Guidance (BIMAS)program of seasonal production credit, a national program to raise food cropproduction and farm income by supplying credit and cash inputs at subsidizedprices, mainly to rice farmers. This program, administered by the DirectorGeneral of Food Crops, is implemented through village units throughout Indonesiain each of which the BRI establishes a credit office. With the exception ofthe Tea Smallholders and Private Estates Project (Credit 400-IND), BRI hashad very little involvement in the provision of long-term credit necessaryfor tree crop financing. Under the IDA-assisted Rural Credit Project (Credit

/1 The PNPs, Perusahaan Negara Perkebunan, were classified in 1968 duringreorganization of the estate groups as PNP I-PNP XXVIlI; PTPs PerseroanTerbatas Perkebunan, are state-owned estate enterprises with limitedliability.

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827-IND) the BRI would expand credit operations to tree crop agriculture.Until such time as BRI is fully capable of handling tree crop credit operations,the BRI has agreed to utilize a simplified credit delivery system for adminis-trating rubber loans through nucleus estate contractors as presently imple-mented under the first and second Nucleus Estates and Smallholders Projects(Loans 1499-IND and 1604-IND).

Other Institutions in the Rubber Sector

1.28 Four other ministries are involved in the rubber industry. TheMinistry of Trade and Cooperatives determines policy on product specification,quality control and smallholder marketing; the Ministry of Industry licensesprocessors; the Ministry of Finance, with the approval of the NationalDevelopment Planning Agency (BAPPENAS), provides and arranges for collectionof funds for development through Bank Indonesia (BI); and the Ministry ofHome Affairs, through its Directorate General of Agraria, is responsible forthe granting of land titles (Hak Milik).

Rubber Research

1.29 Rubber research is conducted primarily by two institutions, bothin North Sumatra: the Research Institute of the Sumatra Planters' Associa-tion (BPPM) in Medan, for private estates, and the Rubber Research Center atTanjong Morawa, for Government estates. Three other units, all in Bogor,West Java, are also involved in rubber-related research: the ResearchInstitute for Estate Crops (BPPB) does rubber clone, fertilizer and rubbertechnology trials in Java and South Sumatra; the Soils Research Instituteworks on land capability; and the Central Agricultural Research Institutelooks after annual crops, including rubber intercrops.

1.30 A Rubber Research Institute is operating with World Bank financingat Sungei Putih in North Sumatra (Agricultural Research Loan 1179-IND). ThisInstitute will be responsible for applied research on rubber and intercropsfor estates and, especially, for smallllolders. The Institute will makerecommendations on: (a) clones and clonal seedlings; (b) fertilizer usage bysoil type; (c) the preparation and planting of nursery material; (d) plantprotection, exploitation and processing methods; and (e) cover crops andintercrops. The new Institute will absorb the rubber section of BPPM andwill take over the basic research being done by the Rubber Research Center,leaving the latter to concentrate on applied research.

Bank Lending for Rubber

1.31 Bank assistance for smallholder rubber has included Credit358-IND (North Sumatra Smallholder Development Project) US$5 million, Loan1499-IND (Nucleus Estates and Smallholders I Project, NES I) US$65 million andLoan 1604-IND (NES II) US$65 million. The oil palm and rubber replantingunder Credit 358-IND, now nearing completion, has been successful. Althoughproject costs have doubled, higher than anticipated selling prices and produc-tion have more than offset this. NES I, which became effective in January1978, has started slowly due to inadequate budgeting of local funds. TheNES II loan became effective in September 1978. Smallholder rubber development

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has also recently been started on a modest scale in South Sumatra under theTransmigration and Rural Development Project (Loan 1318-IND). Thl.e first RubberReplanting Project, subject to Eoard appproval, is intended to support the newnational Smallholder Rubber ReDlaXltinig Program to be implemented by a newNational Rubber Replanting Unit in the DGE. The rationale for each of theseprojects acknowledges that significant increases in national ruber productioncan only be achieved by massive planting in smallholder areas and new plantingsin smallholder settlement schemes.

1.32 Rubber rehabilitation on public-sector estates was financed underCredits 155, 194 and 319-IND. The recent project performance audit forCredits 155 and 194-IND rated both projects physically and financiallysuccessful. Credit 319-IND (Fourth Agricultural Estates Project) is aheadof schedule and rubber and oil palm plantings are good.

2. PURPOSE, PRIORITY AND FORMJLATION OF THE PROJECT

A. Project Objectives

Basic Objectives

2.01 GOI eccnomic objectives for the rubber subsector and for the re-gional devlopment which the project will contribute are to: (a) increasethe efficiency cf the subsector by raising yields and lowering unit costs ofproduction; (b) increase production of rubber leading to increased exportsand foreign exchange earnings; and (c) increase the supply of raw materialsfor local processing in the rapidly expanding industrial and urban areasoutside of Java, particularly in Sumatra and Kalimantan, thereby creatingsecondary employment. The proposed project is designed as a particularlye'-fec-ive means of helping to achieve GOI objectives for development of therubber subsector since the project will not only settle poor and landlessfamilies or, largely unproductive land while raising rubber output and exportincome, but will also minimize the drain on public resources through aninnovative system of cost recovery.

2.02 Socially the project wIll generate productive employment at arelatively low cost, raise family incomes of the landless or near landlesspoor, and stimulate small business in the project areas. The project will?rovide for basic health services for about 50,000 people including malariacontrol, improved water and sanitation and family planning. Primary andsecondary education facilities will be provided for children of 7,000lamilies. Regional needs will be served with new and upgraded roads toimprove transportation for about 200,000 people living in or near the projectarea. The project will establish at the end of the project period a high-yielding, permanent tree crop and provide a stable and proven agriculturalsystem respoasive to criteria for protection of the environment, particularlysince slhifting cultivation and indiscriminate forest clearing are seriousproblems. The project will assist in institution building with benefits forthe Directorate General of Estates in planning, implementation and evaluationof ongoing projects.

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2.03 GOI requires that public sector estates with their technical and

managerial expertise be utilized as nuclei to promote and guide smallholder

development. The use of public sector estates is an effective way to rea-

lize these stated GOI objectives since in an environment of scarce technical

and managerial skills, the GOI can rely on the PNP/PTPs to meet the demanding

requirements of settlement and rubber development in clearing jungle, provid-

ing employment to poor and needy families to be settled in the area, and

securing sufficient inputs and marketing facilities to ensure that settlers

become successful smallholder producers. The crops which best lend themselves

for development by nucleus estates at present are rubber, coconuts and oil

palm. These crops have satisfactory export potential; their returns to the

farmer are satisfactory; production and processing techniques are well known

in Indonesia; and the crops are well suited to the poorer soils of Sumatra

ancd Kalimantan where there are large tracts of undeveloped agricultural land

available for settlement.

B. Project Formulation

Constraints

2.04 The formidable number of poor farmers, landless people and the

growing number of underemployed and unemployed in the rural labor force and

the shortage of finance for development necessitates that the project be

designed to minimize the cost of settlement per family and yet provide suffi-

cient on-farm investment to assure their successful livelihood. The project

is therefore formulated to utilize fully the opportunities of farm family

self-help and to minimize Government expenditures on agricultural support,

social services and project infrastructure. Conceptually, the proposed

project is the same as the Nucleus Estates and Smallholders I and II projects.

Technical, organizational and financial details are, except in a few minor

cases, the same as in these projects.

2.05 The project components have been selected to give as much emphasis

to smallholder development as practicable while providing sufficient assistance

to strengthen the nucleus estates for their critical role in project implemen-

tation. The project site in South Kalimantan was chosen because there

are about 40,000 ha of unused, relatively uninhabited sheet lalang /1 land,

suitable for smallholder rubber development, alongside an existing, but

run-down rubber estate. The area is linked to the provincial capital by an

excellent road, it has excellent access to an adequate seaport and is

selected by Government to be a priority development area for new settlement.

The Rimbo Bujang transmigration settlement area in Jambi province with its

6,000 settlers is included in the project to provide each settler family

with a reliable cash crop which wil'l help diversify farm family income away

from its present total dependence on food cropping. The project will also

assist some 2,000 local families living in forest areas along the edge of

the transmigration area to develop a rubber cash crop and to share in the

development taking place around them.

/1 Imperata cylindrica: a coarse grass.

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2.06 PTPs XVIII and VI have been selected as the nucleus estates forsmallholder development since they have developed considerable skill in landclearing and tree crop development. To implement the proposed project it isessential that the nucleus estates have full authority over the resources,machinery, material inputs, training of labor and control of finance requiredto achieve and hand over to the settler, potentially high-yielding areas ofthree year old rubber. Project formulation is therefore aimed at making thenucleus estate responsible not only for clearing of land, rubber planting andmaintenance, but also the construction of roads, provision of building materialsand supervision of settlers' own construction of housing, the procurement andapplication of inputs for development during the entire rubber immatureperiod, the clearing of the food crop area and the provision of plantingmaterial for each new settler family. Rubber will be established in largeblocks of at least 500 ha so as to maximize economies of scale. The nucleusestates will be required to hire new settlers as laborers and providetemporary housing until settlers' own houses are constructed. Each estatewill be authorized to recruit casual labor whenever settler labor is insuffi-cient to meet demand.

2.07 The project is also designed to strengthen the capacity of thepublic sector estate PTP XVIII (South Kalimantan) for its role as the nucleusestate in the present project, and PNP I (Aceh) for its role in a forthcomingnucleus estate project. To achieve this objective, PTP XVIII and PNP I willbe assisted to improve their economic efficiency by increasing their areas ofnewly planted rubber and oil palm in the project areas, and in the case ofPNP I, increasing its rubber and oil palm processing capacity. Since there isno existing rubber estate near the Rimbo Bujang transmigration area, PTP VI,using its own financial resources, will establish a nucleus estate of about5,000 ha of rubber. It will also establish nurseries for the propagationand distribution of planting material to transmigrants and construct acassava processing plant of 1 mt/hr capacity to process surplus smallholderproduction in the project area.

2.08 The decision on farm size and the scope of farm development isbased on the need for farm families to generate sufficient farm income torepay the credit component. Farm plans for the new settlement in SouthKalimantan will result in the establishment of 3 ha of clonal rubber withina total farm size of 4 ha. This is a reduction of 1 ha from the 5 ha farmmodel in NES I and II. Provision is also made in the plan for production ofbasic family food supplies. In addition to the establishment of a small(0.15 ha) intensively cultivated home garden, each family will grow 0.8 haof field food crops. In the period of rubber immaturity, one member persmallholder family will be offered full-time employment as a rubbersmallholder-trainee employed by the nucleus estate.

2.09 The implementation schedule for Rimbo Bujang transmigration areais designed in such a way that at the time of development under thisproject each settler family will have been resident on their 5 ha holding forabout 3 years. They therefore will have a house and sufficient infrastructureavailable to them to allow omission of these investments in the present project.It is expected also that each holding will have about 2 ha of established

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crop land. The area of clonal rubber required to generate sufficient income

to meet family debt service obligations is therefore reduced to 2 ha.

Local Marga land people will also receive 2 ha of planted rubber since they

presently have a house and about 1 ha of food crop land. In both cases,

during the period of rubber immaturity, one member per faaily will also be

offered full time employment as a rubber smallholder-trainee employed by the

nucleus estate.

C. The Project Areas

Location and Land Use

2.10 There are three project areas: Danau Salak in South Kalimantan;

PNP I estates in Aceh Province (Sumatra) and Rimbo Bujang in Jambi Province

(Sumatra).

2.11 PTP XVIII: Danau Salak - South Kalimantan Province (Map 14020).

The project area commences at kilometer 67 on the main provincial highway

from Banjarmasin and extends north-northeast 42 km to Rantau and Tanjung.

In the southwest the smallholder area lies immediately adjacent to Danau

Salak estate owned by PTP XVIII. To the west it is bordered by the flood

plain of the Barito River and to the east by a ridge of low hills. The

project area is divided almost equally north and south by the town of Binuang.

The southern half lies in Kabupaten Banjar with Martapura the principal town,

and the northern half is in Kabupaten Tapin with Rantau the main town. Most

of the project area is under sheet lalang, comprising about 1,000 ha of old

rubber and 2,000 ha of sporadic village food cropland in the Transad and

Pantai Cabe settlements. The total gross land area available for smallholder

development is 23,700 ha, of which 20,000 ha will be required to settle 4,000

smallholder families.

2.12 PNP I - Aceh Province (Map 14183). The project area will be the

six estates of PNP I comprising a total concession of 47,131 ha. The total

planted area is 17,564 ha with 3,230 ha rubber, 9,034 ha oil palm, 5,250 ha

pine and 50 ha coffee. Three of the estates (Pulau Tiga, Kebun Lama and

Kebun Baru) are located in the south of the province close to the city of

Langsa. Two estates (Karang Inoue and Julu Rayeu) lie about 100 km north of

Langsa and the sixth estate, in northern Aceh, is some 400 km from Langsa.

The head office for the estate is at Langsa.

2.13 Rimbo Bujang Smallholder Development - Jambi Province (Map 14099).

Situated in the extreme northwest of Jambi Province, some 200 km from the

provincial capital Jambi, the project area is comprised of three parts, namely:

(a) Rimbo Bujang Transmigration Settlement. Located on a relatively low

basin or depression between the Bukit Barisan range in the east,

the Tiga Puluh mountains to the east and north, the project area is

neatly bounded by three rivers: the Batang Tebo in the south, the

Batang Hari in the north and the Batang Jujuhan in the west. There

are currently 15 settlement units occupying a gross area of 68,000

ha. By early 1979, some 6,000 families had settled in the scheme.

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(b) Marga Land. This area is bounded in the north by the Trans-SumatraHighway and in the south by the Batang Tebo River. It is broadlytriangular in shape since the highway and river diverge to the westfrom the Kabupaten capital, Muara Bungo. The nominal west boundaryis the road linking Paninjun to the highway about 37 km from MuaraBungo. The gross area is 8,000 ha of which 1,500 ha is used forrainfed and irrigated rice production, coconuts and mixed uplandcrops. The remaining 6,000 ha comprises primary forest, abandonedsenescent rubber and secondary forest. Of this area, about 4,200ha will be available for permanent settlement of 2,000 local families.

(c) PTP VI Nucleus Estate. The allocation for the nucleus estate is7,500 ha gross. It is contiguous with the Rimbo Bujang transmi-gration area and to the east with the new Alai Hilir transmigrationarea. Primary and secondary forest covers most of the area.

Climate

2.14 The climate is wet tropical. In Rimbo Bujang and PNP I the dryseason is normally June to August and in South Kalimantan June to October.Mean monthly rainfall figures for the project areas are provided in theProject Working Papers. Total annual rainfall in Danau Salak is 2,300 mm;in Rimbo Bujang 2,900 mm; in the northern area of PNP I 1,800 mm; and inthe southern area of PNP I 1,800 to 3,400 mm. The maximum and minimummonthly rainfall ranges from 300 to 90 mm in Danau Salak; 340 to 120 mm inRimbo Bujang; and about 380-60 mm on PNP I estates. Total rainfall and itsseasonality are suitable for growing rubber and food crops. Oil palm willbe grown in the higher rainfall southern estates of PNP I. The mean tempera-ture varies from 27 to 30 degrees C in Danau Salak, 26 to 28 degrees C inRimbo Bujang and 26-29 degrees C in PNP I. Wind velocities are low inproject areas and present no risk to tree crops.

Soils and Topography

2.15 Soils in most of the project areas are derived from tertiarysedimentary rock and are broadly classified as red-yellow podzolics andlatosols. In general they are of low to moderate fertility and are physicallysuited to rubber and oil palm development. Most project soils are deficientin nitrogen, extremely deficient in phosphorus and low in potassium. Theyare fairly acid and phosphate fixation could prove to be high. Heavy applica-tions of phosphate will be required in the initial stages of development.Details of the soil analyses are given in the Staff Working Papers. Topo-graphy in most of the project areas is flat to undulating, the slopes usuallybeing less than 15%.

Population and Incomes

2.16 In Rimbo Bujang 32% of the 6,000 settlers have cleared 1 ha ofjungle, 64% have 2 ha cleared and 4% have cleared between 2 and 3 ha. Thevariation is mainly the result of the staggered arrival of settlers over thethree years of settlement. Ninety-three percent of settlers who arrivedthree years ago have 2 ha of cleared cropland. Average incomes from on-farmand off-farm sources for the households with 2 ha cleared are Rp 250,000

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($400) year/family. In the Marga land total family incomes average Rp 320,000($512). Farm holdings in the transmigration area are 5 ha and in the Margaland about 6 ha, the latter varying considerably. There is considerable scopetherefore for additional crop development on each holding. The Danau Salakproject area is unpopulated except for two settlements, one near Binuang andthe other at the northeast corner of the project area. There is no questionof disturbing these settlers' tenure, but if they wish to they will beincorporated in the project.

Infrastructure

Roads

2.17 Danau Salak. The smallholder project area straddles the mainprovincial highway from Banjarmasin to Rantau. The alignment and asphaltsurface make it ideally suited to serve as the main access road to theproject area. The road network leading from the highway is fragmentedand generally of poor quality. In the north a rough but all-weather accessroad links the Pantai Cabe/Soato settlements to the provincial highway atTatakan. Access to the port of Banjarmasin is provided by the same highway.

2.18 PNP I. A good road connects the nucleus estate headquarters toLangsa 3 km away. The roads to smallholder areas surrounding the estate,particularly the development area at Aleu Iemerah are in poor condition,although constant improvements are being made.

2.19 Rimbo Buiang Smallholder Development Area. The most important roadin the project area is the Trans-Sumatra Highway. When completed, it willprovide excellent access to the ports at Jambi in the southeast and Padang inthe northwest. The main project access road leads off from the highway 14 kmwest of Muara Bungo and runs almost due north through the center of thesettlement area. There is a comprehensive network of roads in the existingsettlement area and most are in good condition. In the Marga land fourtrails cut north-south through the project area from the Trans-SumatraHighway and provide access to the scattered settlements along the banks ofthe Batang Tebo River. A fifth road, from the highway to Paninjan village,forms the western boundary of the Marga land and although of better qualitythan the other four roads, it is impassable during the wet season. The areaearmarked for development as the nucleus estate is almost bisected in aneast-west direction by a new all-weather road linking the Rimbo Bujangand Alai Hilir transmigration areas.

Water Transport and Port Facilities

2.20 Port facilities serving all three project sites are adequate forproject requirements. River transport with barges is also possible to Jambiand Banjarmasin ports.

Settlement Design Standards

2.21 Danau Salak. Of the land which will be included in the project,over 75% is within slope classes 1 and 2 (0-3 degrees and 4-6 degrees respec-tively). The remaining area has slopes to class 4 (13-18 degrees). Topography

- 19 -

is not a constraint to village development. A preliminary master plan forsettlement of the project area was prepared at appraisal (see Map 14020). Thevillage locations proposed are based mainly on considerations of the availa-bility of adequate and reliable sources of water for human consumption. Amaximum of 18 new villages will be required, accommodating a total of 4,000smallholder families, in villages ranging in size from 138 to 262 familieseach. Owing to the particular shape of the project area, no distinctionneeds to be made between central and satellite villages. Each village willbe sited on or adjacent to its foodcrop area and usually within 3 km of theextremity of its rubber area. Only in the case of two villages might it benecessary for rubber holdings to be approximately 4 km from the villagecenter. Village development will follow a nucleated pattern, each housestanding on a garden plot of 0.2 ha, these plots being arranged aroundone main and up to six subsidiary dukuh centers (see Figure 1).

2.22 Rimbo Bulang. The proposed project will not involve changes toongoing settlement plans in the transmigration area being implemented by theDirectorate General of Transmigration and the Transmigration Sub-Directorateof the Directorate General of Highways (PTPT). In the Marga land, 2 ha ofjungle will be cleared and block planted with rubber for each of 2,000 localsmallholder families. Since most of these families live in or close to theirfoodcrop land along the river, and since the Marga land is usually less than3 km in depth from the river to the Trans-Sumatra Highway, no resettlement ofthe local population is envisioned. Should it be found that a small numberof families have to be relocated, this being most likely for those familieslocated between 30 and 37 km from Muara Bungo, housing materials will beavailable for construction on the rubber plot. No additional foodcrop landwill be allocated to Marga land settlers.

Settler Housing

2.23 Danau Salak. Two basic designs are proposed to accommodate prefer-ences of settlers, one suitable for low-lying areas in the west of theproject area (Figure 2) and the other for villages located in the center andeast of the project area (Figure 3). Both houses provide an enclosed livingarea of 35 sq m with an open verandah on one side. They are all timber con-struction. Main roofs will be of locally manufactured hardwood shingles(sirap) while verandahs will be roofed with palm fronds (rumbia). The first500 houses will be built by local contractors and will cost about Rp 266,000(US$426 constant 1978). Thereafter, the settlers will build the housesthemselves in work units under the supervision of an infrastructure managementteam recruited by the nucleus estate. Materials to be provided for these3,500 houses will cost about Rp 205,000 (US$328).

Settlement Facilities

2.24 Danau Salak. Two sets of standards will be applied to communitybuildings in new villages. Village offices, main and secondary recreationhalls, mosques, mushallas and market buildings will be built by the nucleusestate and will be based on standards already established for such buildingson the estate itself. Other community buildings such as schools, nursery

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homes, polyclinics /1 and health centers (puskesmas) will be based on GOIstandard designs and will be constructed by existing provincial and/ordistrict agencies. Health and educational facilities will be planned toreflect target levels set in the Repelita III and will be implemented underthe INPRES (Rural Public Works) Program. Detailed planning for these build-ings will be carried out by the appropriate provincial and district agencieson information provided by the nucleus estate.

2.25 Rimbo Bujang. In the Rimbo Bujang transmigration area a rangeof settlement facilities is provided either directly by the Transmigra-tion Project authorities or by kabupaten and provincial agencies as part oftheir regular development programs. At mid-1978 there were 14 primaryschools, one junior high school, one village health center, several mosques,administrative offices, health posts and other smaller facilities. Since theRimbo Bujang transmigration area is classified a kecamatan (there being sixother kecamatans in the Muara Bungo Kabupaten), it has equal access withthe other kecamatans to the kabupaten development budget. An establishedprogram exists to construct one new village health center per kabupaten eachyear. Rimbo Bujang will therefore receive at least one new health center inthe five years between 1980 and 1984. Development of additional infrastructureis more tentative given the uncertainty of the size and nature of the annualbudget allocations from central government. In the interest of uniformdevelopment of the province, however, the project will rely on ongoing localand central government programs for further expansion of social infrastructurein the project area. To facilitate rubber planting, 15 small rubber develop-ment unit offices will be constructed under the project. These officeswill be built to the design standards set by PTP VI.

Road Development

2.26 General. The hierarchy of roads and tracks required to serve newvillages and rubber holdings will comprise:

(a) primary village roads in some places linking villages and rubberareas directly to the nucleus estate and in others forming spursfrom the main access road, in each case, providing all-weatheraccess to light passenger and goods vehicles;

(b) secondary village roads leading usually from individual villagesinto newly planted rubber areas and providing fair-weather accessto light vehicles and all-weather access to four-wheel drivevehicles and agricultural tractors; and

(c) rubber collection tracks through the newly planted rubber areas toprovide access for latex collection and estate maintenance vehicles.Tapping paths to each plot of smallholder rubber will provideaccess by foot or bicycle for tapping purposes.

2.27 Danau Salak. Proposed alignments for the road network areindicated on a preliminary master plan of the project area available in the

/1 Synonymous with subhealth centers.

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Staff Working Papers. Finalization of this plan will be undertaken when theresults of the planned hydrology survey become available [see para. 3.02A(a)(vi)]and detailed locations of new villages are known. Design standards for eachof the road types will differ slightly from those adopted in NES II owing todifferences in th_ pattern of road development required, the topography of theproject area and the main soil types found (Figure 4). Each primary villageroad will have a 6.0 m wide effective carriageway paved with 19 cm of gravelon an embankment whose crown height will be 25 cm above prevailing groundlevel and will have a camber of about 8%. Secondary village roads will havea 4.0 m earth carriageway with an embankment crown height of 20 cm. Rubbercollection tracks will have a 3.0 m wide carriageway with an embankment crownheight of 20 cm. The preliminary project master plan does not indicate thealignments of these tracks since they will be fixed at the discretion ofproject management during the course of rubber development work. Managementand supervision of construction of the road network in the project area iscovered in para. 4.07.

2.28 Rimbo Bujang. Proposed alignments for the road network are indicatedon a preliminary master plan of the project area (Map 14099). No additionalprimary or secondary village roads will be required in the Rimbo Bujang trans-migration area except to link the nucleus estate with Units VI and XV in thenorthwest and north respectively. The remainder of the new road network willbe required in the nucleus estate itself and in the Marga land. The designstandards will be similar to those for the Danau Salak component of the project.Management and supervision of road construction is covered in para. 4.07.

Selection and Recruitment of Smallholders

2.29 Priority will first be given to poor, rural families in theproject area, then to those residents of the province in which the project islocated, and finally to transmigrants from Java. Selection of families willgive priority to male heads of households between 20-40 years with familyincomes below Rp 220,000 (US$350). It is anticipated that more than half ofthe new settlers in Danau Salak will be transmigrants from Java. Recruitmentof new settlers will be carried out by the Project Manager of the NucleusEstate in cooperation with the Provincial Coordinating Committee (para. 4.05)under the guidance of DGE. Resettlement and transmigration to the projectsite will be the responsibility of the nucleus estate assisted by MOA andprovincial governments.

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3. THE PROJECT

A. Project Summary

3.01 The main project components are summarized below:

A. Danau Salak

(a) Smallholder Development

(i) block planting of 12,000 ha of rubber;

(ii) distribution of seeds and fertilizers for food crops forthe first year of settlement, covering 4,000 ha of gardenand field food crop land, and the establishment of a PlantingMaterial Supply Unit (PMSU) by PTP XVIII nucleus estate forsmallholder purchase of additional planting material in lateryears;

(iii) construction of about 18 villages, each with a villagecenter and construction of houses for 4,000 new settlers;/1

(iv) construction of education, health and community service facili-ties in each village;

(v) construction of 60 km of all-weather primary village road,the upgrading of 12.3 km of existing road to primary villageroad standard, construction of 55 km of secondary village roadand 300 km of rubber collection track; and

(vi) establishment and staffing of agricultural credit, exten-sion and cooperative services.

(b) PTP XVIII Estate Expansion

(i) block planting of 4,000 ha of rubber;

(ii) extension of existing crumb rubber factory from 6 mt/dayto 11 mt/day. Construction of a new 20 mt/day crumb factoryfor latex and low-grade rubber;

/1 The precise number of new settlers, hence the number of villages requiredto accommodate them will depend on how many existing settlers in thePantai Cabe/Soato schemes are willing to join the project. Preparatorywork designed to clarify this and facilitate the finalization of a masterplan is specified in Staff Working Paper No. III.

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(iii) construction of 480 new and the rehabilitation of 415existing single and double houses for estate employeefamilies for both smallholder and estate development; and

(iv) construction and rehabilitation of buildings for divisionaloffices, social services, garages, workshops and the provisionof technical assistance.

B. PNP I Estate Rehabilitation

(a) new planting of 6,790 ha of block rubber in the two northern estatesJulu Rayeu and Karang Inoue; rehabilitation of a further 2,356 haof existing rubber planting in the southern estates Kebun Lama andKebun Baru;

(b) new planting of 2,135 ha of oil palm on the southern group ofestates Kebun Lama, Kebun Baru, Pulau Tiga and rehabilitation of2,990 ha of existing oil palm plantings in Kebun Baru and PulauTiga estates.

(c) construction of 2 crumb rubber factories, one at Kebun Lama,the other at Julu Rayeu, each with a capacity of 20 mt/day.

(d) expansion of the palm oil factory at Tg Seumantoh by 30 mt ffb/hr;and

(e) construction of 2,064 single and double houses for estate employeefamilies and new construction and rehabilitation of estate buildings,garages and workshops.

C. Rimbo Bujang

(a) Smallholder Development

(i) block planting of 16,000 ha of rubber (12,000 ha in RimboBujang transmigration area and 4,000 ha in the Marga land);

(ii) supply of planting material and fertilizers to improve existingfood and cash crops through the establishment of a PMSU;

(iii) construction of 15 km of new primary village road, upgrading9.7 km of existing road and track to primary village roadstandard, the construction of 13.1 km of new secondary villageroad and up to 400 km of rubber collection track;

(iv) construction of 15 rubber development unit offices to facilitatethe smallholder rubber planting program; and

(v) establishment and staffing of agricultural credit, exten-sion and cooperative services.

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(b) Nucleus Estate - PTP VI

PTP VI at its own expense will establish a nucleus estate ofabout 5,000 ha of rubber contiguous with the smallholder area.It will establish nursery facilities for the propagation anddistribution of planting material to settlers, purchase equipmentand hire sufficient labor to implement the smallholder developmentprogram. A cassava processing plant of 1 mt/hr capacity willalso be built to process surplus smallholder production.

3.02 Detailed Features /1

A. Danau Salak

(a) Smallholder Development (US$34.5 million)

(i) Rubber Block Planting (US$21.4 million). Each smallholderwill receive 3 ha of block planted rubber. A total of12,000 ha will be planted with rubber in blocks of 500 ha

or more. Land will be cleared by PTP XVIII, which willsupply clonal planting material and fertilizer and employsmallholders on contract as trainee rubber farmers to plant,maintain, fertilize and weed rubber for a period of three years

after field planting. During this period PTP XVIII will haveauthority to centrally manage the trainee rubber farmers in a

grouped manner in accordance with normal estate managementpractices. After the three-year period, settlers will beresponsible for the operation of their individual rubber areas,but will receive guidance, training and advice through arrange-ments with the nucleus estate. During years 4 to 6, i.e., up to

rubber maturity, the nucleus estate will act as procurementagent for on-farm inputs and will provide processing andmarketing services.

(ii) Food Cropping (US$1.0 million). Within six months of entry tothe settlement, each family will receive conditional title to4 ha, the fourth hectare to be used for subsistence food crop

production. As part of the total subsistence package to be

provided to new settlers, PTP XVIII will clear 1.0 ha persettler family (US$0.5 million) to facilitate garden and fieldcrop establishment and will provide an initial cash payment tosettler families of Rp 30,000 (US$48) for food and transportationneeds (US$0.3 million). PTP XVIII will procure and provideinputs for food crop production and house and garden establish-ment including seed and fertilizer at US$40 equivalent perfamily (US$ 0.2 million).

/1 Project costs listed in the section are quoted in current prices andinclude price and physical contingencies.

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(iii) Planting Material Supply Unit (PMSU) (US$1.4 million). A PMSUwill be established at Tungkap in the center of the projectarea under the control of the nucleus estate. The PMSU willprovide, on a grant basis, inputs for food crop production toeach new settler on his arrival. Thereafter inputs will besold to settlers on a cash basis. The PMSU will develop extensionservices to assist settlers and establish model farms fordemonstration and applied research. The DGE will be respon-sible for requesting a sufficient number of PPL for food cropsto be allocated to the project area. An assurance was obtainedat negotiation that the nucleus estate operated PMSU willcontinue to supply food crop inputs for project settlersuntil such time as the BIMAS program is extended to theproject area [para. 8.01(a)].

(iv) Village Centers (US$0.4 million). Up to 18 new villageswill be built in the smallholder area to accommodate a totalof 4,000 settler families in village sizes ranging from 138and 262 families per village. No distinction will be drawnbetween central and satellite villages since the smaller newsettlements will share facilities of existing villages liningthe main access road. Appropriate allowances are shown inproject accounts for community buildings in these villages, butthe allocation of such buildings to specific villages will bemade in the process of finalizing details for village develop-ment (see Staff Working Paper No. III).

(v) Housing and Civil Works (US$2.5 million). The first 500 newsettler houses will be built by local contractors againsttenders issued by PTP XVIII. The remaining houses will bebuilt by the settler families themselves with materialsand construction supervision provided by PTP XVIII. The first500 houses will each cost about Rp 266,000 (US$426) while theremainder will cost about Rp 205,000 (US$328) each (excludinglatrines in each case). Upland and lowland houses will bedesigned for subsequent expansion by farmers in later years.Housing for some nucleus estate foremen, managers and laborers,and estate garages, workshops and project buildings (US$0.3million) will be constructed according to established PTPXVIII standards.

(vi) Water Supply (US$0.6 million). Hydrological informationalready available indicates that some difficulties may beencountered in finding adequate reliable sources of shallow ordeep groundwater in certain parts of the smallholder area. Inboth the western and eastern flanks of the area, however,there are more promising prospects for groundwater at depthsbetween 20 m and 40 m. An assurance was obtained atnegotiations that the DGE will contract with a firm ofinternationally recruited consultants on terms and conditionssatisfactory to the Bank, a detailed hydrology survey of the

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Danau Salak project area to test the quality and quantity ofgroundwater at each of the proposed village locations beforeDecember 31, 1979 [para. 8.01(d)]. Where existing groundwatercannot be reliably exploited, a water supply system relying onshallow dug wells surrounding small earthdammed reservoirswill be provided. Based on current estimates of groundwateravailability at different locations, provision is made for 90narrow bore tubewells each to be shared by 30-40 families, and15 dams together with 180 shallow dug wells to serve theremainder of the new settler population.

(vii) Health (US$0.1 million). The project's low cost health systemwill consist of subhealth centers and health centers (Puskesmas)operated under Government standards for Repelita III and willbe coordinated with the higher level facilities of the adminis-trative region. The health programs will provide for basichealth services, malaria control, family planning and a pitlatrine for each new settler family.

(viii) Roads (US$2.4 million). About 72 km of all-weather primaryvillage roads (including 12 km of existing road to beupgraded) and 55 km of secondary village road will be con-structed in two stages. A further 300 km of rubber collectiontrack will be formed as part of rubber development operationsand are costed as such in project accounts. The road componentis considerably less on a pro rata basis of smallholderdevelopment area than in NES II owing both to the existence ofa suitable main access road and to the possibility of a morecohesive village development pattern. This component alsoincludes US$0.2 million for routine annual maintenance ofsemi-completed sections of the road and completed sections ofthe road network during the period of Bank loan disbursement.

(ix) Vehicles (US$0.1 million). Vehicles required during projectimplementation will include pickup trucks and mobile agricul-tural equipment. Other transport vehicles including jeeps,motorcyles and service cars will be provided by PTP XVIII.

(x) Project Management (US$4.6 million). Project management ofthe smallholder components is described in Chapter 4. Theproject manager and the nucleus estate will be assistedby the Ministry of Agriculture Support Staff for the resettle-ment of Javanese to Danau Salak (US$1.6 million). Overheadsand management costs of the nucleus estate for rubber develop-ment are included in the costs of project management (US$3.0million).

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(b) Nucleus Estate Development: (US$17.5 million)

(i) Agricultural Development (US$11.4 million). The project willassist the establishment of 4,000 ha of rubber in the DanauSalak nucleus estate. Planting material will be budded stumps

and stumps in polybags. A leguminous cover crop will beestablished at the time of planting after lalang and noxiousweed eradication.

(ii) Physical Developments (US$5.3 million). The project willassist the construction of 480 houses (12 staff houses, 78single units, 390 double units) and the rehabilitation of415 existing houses (16 staff houses; 399 double units). PTPXVIII will also build 58 single and double houses associatedwith smallholder development. Other civil works will includeconstruction of divisional offices, garages, workshop andsocial utility buildings and the rehabilitation of existingbuildings on the nucleus estate. The existing crumb rubberfactory will be expanded from a capacity of 6 tons/day to11 tons/day by 1980. Construction of a new crumb rubber fac-tory for a capacity of 20 tons/day will be completed by 1983.

(iii) Corporate Operation (US$0.8 million). The corporate operationsof PTP XVIII are well managed and the company has demonstratedthe technical capacity to implement the proposed expansion of4,000 ha of new rubber based on previous development of itsJava estates. PTP XVIII is financially sound with assetsvalued at over Rp 8.8 billion (US$14.1 million), with virtuallyno long-term debt, and a net annual income after taxes in1978 of over Rp 1.6 billion (US$3.8 million). Expansion andrehabilitation of the Danau Salak estates will require thatPTP XVIII resettle existing personnel from its Java estates toKalimantan (US$0.2 million) and recruit additional labor inDanau Salak. Provision is also made to assist PTP XVIII

with technical assistance in the employment of an Infrastruc-ture Program Manager for the development of roads and villages

and a rubber processing and civil works engineer each for aperiod of three years (US$0.6 million). An assurance wasobtained at negotiations that both internationally recruitedtechnical assistants would be appointed by December 31, 1979,on terms and conditions satisfactory to the Bank [para. 8.01(b)]

B. Rehabilitation of PNP I - Aceh (US$50.5 million)

(a) Agricultural Development (US$29.4 million)

(i) Establish new and replanted rubber on 6,790 ha and rehabilitatea further 2,356 ha of immature rubber on the estates: JuluRayeu, Karang Inoue, Pulau Tiga, Kebun Lama, and Kebun Baru;

(ii) New oil palm will be planted on 2,135 ha and a further2,990 ha of oil palm will be rehabilitated on the PNP Iestates: Pulau Tiga, Kebun Baru, and Kebun Lama, and KarangInoue.

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(b) Physical Developments (US$19.1 million). Estate infrastructureincluding roads, bridges and housing is badly in need of replacementor renovation. The project will provide for the construction of2,064 houses (163 staff and head office houses; 381 single units;1,520 double units). Plans for rationalization of rubber processingfacilities include the construction of two rubber factories; one atKebun Lama, the other at Julu Rayeu each with a capacity of 20 mtFFB/day. The capacity of the recently constructed oil palm mill atTanjung Seumantoh will be increased from 30 tons FFB/hr to 60 tonsFFB/hr.

(c) Corporate Operations (US$2.0 million). The corporate operations ofPNP I have not been well managed in previous years. The companyhas suffered from low productivity and continued operating lossesas a result of non-productive rubber and oil palm areas planted priorto 1950. Replanting on a sufficient scale to alter PNP I's deterior-ating financial condition did not begin until 1974 and owing toinsufficient capital to fully finance a replanting program newplantings have suffered from the lack of sufficient fertilizersand agricultural inputs. PNP I presently is accruing losses ofover Rp 400 million (US$0.7 million) p.a. In order to financeworking capital requirements in the past and with increased annualborrowings for its rehabilitation scheme since 1974, PNP I hasaccrued insupportable long-term liabilities which will exceedRp 12 billion by mid-1979. Most of these liabilities are debts toother PNP/PTPs. PNP I's level of financial solvency requiresimprovement prior to Bank lending, particularly action taken toconvert existing liabilities to equity and thereby reduce repaymentobligations and free more of PNP I's own funds for financing itsrehabilitation program. Conversion of existing liabilities toequity will also reduce new loan funds required from Bank Indonesia.

As a condition met prior to negotiations, the Minister of Financeagreed that a total of Rp 11.0 billion (US$17.6 million) in existingliabilities will be converted to equity by the GOI, includingRp 1.0 billion which it is understood has already been converted,and Rp 2.9 billion of funds that are to be received by PNP I in1979 for completion of its new oil palm mill. Management guidancefor reorganization of all estate operations will be provided withthe employment by PNP I of three technical specialists in productionmanagement, finance, and estate engineering and processing for aperiod of three years (US$0.9 million). An assurance was obtainedat negotiations that these three internationally recruited consultantswill be employed by PNP I no later than December 31, 1979, on termsand conditions satisfactory to the Bank [para. 8.01(c)]. Thedevelopment program for PNP I also requires recruitment of about2,400 laborers to be settled in the Aceh area. Resettlement ofexisting Javanese estate laborers (US$1.1 million) will be carriedout with assistance from the Ministry of Agriculture Support Staff.

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C. Rimbo Buiang Smallholder Development (US$48.0 million)

(a) Rubber Block Planting (US$40.9 million). Each of the 6,000 existingtransmigrant settlers and 2,000 Marga land smallholders willreceive 2 ha of block planted rubber. Agricultural standards forrubber development will be the same as that detailed for newsettlement at Danau Salak [(para. 3.02A(a)(i)].

(b) Planting Material Supply Unit (US$0.6 million). PTP VI willestablish a commercial nursery to provide good quality high yieldingplanting material of both tree crops and field crops to smallholderson a cash basis (para. 4.09).

(c) Roads (US$0.7 million). A total of 24.7 km of all-weather primaryvillage roads (including 9.7 km of existing road to be upgraded)and 13.1 km of secondary village roads will be constructed(Map 14099). A further 400 km of rubber collection track willbe formed as part of rubber development operations and arecosted as such in project accounts. Road construction in thesmallholder area will be carried out by PTP VI using their ownconstruction equipment. The road construction budget also includesan allowance of US$0.1 million for routine annual maintenance ofsemicompleted and completed sections of the road network during theperiod of Bank loan disbursement.

(d) Vehicles (US$0.2 million). Vehicles provided under the projectwill include pick-up trucks and mobile agricultural equipment andsome jeeps and motorcycles directly involved in smallholder develop-ment. The majority of transport vehicles will be provided by PTPVI.

(e) Housing (US$1.1 million). A total of 260 single and double unitsrequired by the nucleus estate for smallholder development areincluded in smallholder project costs. All existing transmigrantsand Marga land smallholders presently have adequate housing.

(f) Village Infrastructure (US$0.1 million). Construction of 15 rubberdevelopment offices.

(g) Project Management (US$4.4 million). Project management includesboth overheads for rubber development and a management fee (US$4.4million) to be paid to the nucleus estate, PTP VI.

D. Program Support to the Directorate General of Estates (US$2.0 million)

About 100 man-months of consultant time will be provided to the DGE for60 man-months of inspection services (US$0.6 million) and 40 man-monthsto assist in village planning, pest and disease control, food cropmarketing, surveying, road engineering and project identification andpreparation for future NES projects (US$0.4 million). Assistance to theDGE will also be provided for the construction of housing and nurserydevelopment and the procurement of essential machinery for future NESprojects (US$1.0 million).

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Project Phasing

3.03 Project implementation schedules for smallholder settlement andnucleus estate development are shown in Charts 3 and 4. The physical compo-nents of project phasing are shown in Annex 1, Table 1. Each agency involvedin the implementation of the project will prepare annual work programsincluding cost estimates for budget approval which will detail project workfor the year ahead, including the recruitment and training of requiredpersonnel. Assurances were obtained from the Government at negotiationsthat each agency will prepare a program by October 31 each year and submitsuch programs to the Bank for review and comment [para. 8.01(f)]. Tofacilitate project start-up in 1979/80, prefinance is provided by PTP XVIII(US$ 0.9 million) to develop nurseries, commence essential land clearing andopen letters of credit for the purchase of essential machinery. PTP VI willprovide prefinance (US$0.4 million) to open letters of credit for thepurchase of machinery and commence the establishment of a budwood nursery.PNP I has received funds from the Ministry of Agriculture for prefinance(US$0.7 million) to purchase inputs, initiate land clearing and constructtemporary laborer housing. Total prefinance of Rp 1,273 million (US$2.0million) is required for the project (Table 3.1).

Table 3.1: SUMMARY OF PROJECT PREFINANCE

Project component Category Estimated cost(Rp million)

Estate DevelopmentPNP I Nurseries, land clearing and initial

laborers housing 427PTP XVIII Nurseries, land clearing and letters

of credit for machinery 571

Subtotal 998

Smallholder DevelopmentDanau Salak (PTP XVIII) Letters of credit-machinery 34Rimbo Bujang (PTP VI) Letters of credit-machinery 241

Subtotal 275

Total 1,273

GOI has requested retroactive financing estimated at about Rp 750 million(US$1.2 million) based on the disbursement percentages for the above items.GOI has agreed to present a schedule of project expenditures from November 1,1978 in support of the request for retroactive financing prior to loan signing.The Bank will review the procurement procedures followed by GOI for all itemsrequiring retroactive finance to ensure that they will be acceptable forreimbursement. Financing of these expenditures under the project is recom-mended.

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3.04 Project phasing has allowed for nursery start-up and the construc-tion of required roads, buildings and civil works to precede rubber planting.Consequently, smallholder rubber development has been delayed to the 1980/81planting season while nucleus estate development will begin in 1979/80. Inorder to more fully develop rubber for project beneficiaries, a six-yearproject and disbursement period is required.

B. Project Costs and Financing Arrangements

Project Costs

3.05 The project will be fully implemented over a ten-year period.

The Bank loan will assist with the financing over a six-year period.Table 3.3 summarizes the costs of the project over the first six years of

implementation. Project costs during these six years are estimated to be

US$152.5 million. The foreign exchange component is estimated at US$83 million(54% of total cost). Total cost at full implementation of the project over

the ten-year period is estimated to be US$240 million. Government will makeavailable the funds required from year 7 to project completion (US$87.5 million).Details of the project costs are presented in Annex 1, Tables 2 to 6 and in

the Staff Working Papers.

3.06 Base cost estimates in early 1979 prices were derived from detailedcost analyses of several public sector estates including the proposed nucleusestates PTP VI, XVIII and PNP I and from data gathered at appraisal. Theinvestment program and all operating costs for project components are incre-

mental. A physical contingency of 10% is allowed on all investment items and

on the number of man-days of management consultants and is considered sufficientgiven the detail of design standards and input requirements as measured in

other tree crop projects. The provisions for expected price increases havebeen computed and are given in Table 3.2.

Table 3.2: ANNUAL INFLATION INDICES

Annual inflation rate (%)1979 1980 1981 1982 1983 1984/85

Civil works 30 20 15 15 10 7

Equipment and services 7 7 7 7 7 7

The annual inflation rates for local civil works and imported equipment and

services were weighted as per their percentage in total project costs toderive the inflation rates applied to local and foreign costs of 15% in thesecond half of 1979, 13% for 1980, 10% for 1981 and 7% thereafter. Theestimated schedule of project expenditures is shown in Annex 1, Table 7.Because of the tax exempt status of the implementing agencies, the projectcosts do not include provision for local, provincial or national taxes.

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Table 3.3: PROJECT COST SUMMARY

(Rp million) (US$ million) % Foreign % ofLocal Foreign Total Local Foreign Total exchange base cost

I. Smallholder DevelopmentDanau Salak new settlement 6,463 6,404 12,867 10.34 10.25 20.59 50 21Rimbo Bujang smallholders 9,321 9,206 18,527 14.91 14.73 29.64 50 31

Subtotal 15,784 15,610 31,394 25.25 24.98 50.23 50 52

II. Public Sector Estate DevelopmentPNP I rehabilitation 7,839 13,241 21,080 12.54 21.19 33.73 63 35PTP XVIII expansion 3,045 4,232 7,277 4.87 6.77 11.64 58 12

Subtotal 10,884 17,473 28,357 17.41 27.96 45.37 62 47

III. Technical AssistanceProgram support for the Directorate

General of Estates 125 625 750 0.20 1.00 1.20 83 1

Base cost estimates 26,793 33,708 60,501 42.86 53.94 96.80 56 100

IV. ContingenciesPhysical 2,679 3,371 6,050 4.29 5.39 9.68 56 -Expected price increases 13,965 14,796 28,761 22.35 23.67 46.02 51 -

Subtotal 16,644 18,167 34.811 26.64 29.06 55.70 52 -

Total expected cost of project 43,437 51,875 95,312 69.50 83.00 152.50 54 100

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Project Financing Arrangements /1

3.07 The proposed Bank loan of US$99 million will finance 65% of totalproject costs for the first six years of project implementation. The BankGroup loan will include US$16 million for finance of about 23% of the totallocal costs. GOI will finance about US$53.5 million of the proposed project(35% of total costs) and will bear the foreign exchange risk in the proposedproject. Sources for all project finance are detailed in Annex 1, Table 8and are summarized in Table 3.4 below.

3.08 Smallholder Development. Project financing of smallholder components(US$82.5 million) has been simplified into two separate streams to avoid mul-tiple sources of funds and cumbersome procedures for allocation and release.Noncredit items for smallholders as carried out by the provincial governmentagencies (construction of village infrastructure, schools, and provision ofhealth services) as well as rubber development management fees payable to thenucleus estates will be financed solely by the GOI in annual budget sourcesand INPRES programs (US$4.3 million). The flow of funds for these noncredititems of expenditure is shown in Chart 5. All work to be carried out by thenucleus estates of PTP VI and PTP XVIII including the credit items of rubberdevelopment and settler housing and the noncredit items of resettlement andconstruction of PMSU will be financed by the Bank Group (US$56 million) andthe Ministry of Finance (US$22.2 million). The flow of funds for smallholderdevelopment as carried out by the nucleus estates is shown in Chart 6.

3.09 Bank and GOI finance for the credit and noncredit items to small-holders as implemented by the nucleus estates will be passed by Bank Indonesia,through BRI, acting as the handling bank, to PTP XVIII and PTP VI. Governmentwill make funds available to BRI quarterly and in advance of the expendituresto be made by the nucleus estates on behalf of smallholders. These fundswill cover the full cost of rubber development and civil works for which theBank Group will reimburse based on disbursement percentages (para. 3.19) andas certified in quarterly reports provided by the nucleus estates to the DGE.GOI will bear the risk on all funds passed to PTP XVIII and PTP VI forsmallholder development. The nucleus estates will develop each area of blockplanted rubber through Year 3, at which time development expenditures made bythe PTPs will be translated into standardized credit amounts for individualsettlers in credit agreements with the BRI. The completion of a satisfactoryFinancing Agreement between Bank Indonesia and BRI and satisfactory Subfinan-cing Agreements between BRI and PTP XVIII and BRI and PTP VI will be acondition for disbursement for the smallholder project components [para.8.02(a)]. Loans to the smallholders will be for 15 years in the case ofDanau Salak new settlers and 16 years for Rimbo Bujang smallholders, theloans to include a three-year grace period, repayment starting in the seventhyear after planting. Interest will be at 10.5% p.a. with capitalization ofinterest during the grace period.

3.10 Estate Components. Expansion of PNP I (US$50.5 million and for PTPXVIII (US$17.5 million) would be financed from self-generated funds of bothestates (US$12 million) and by funds on-lent to PNP I (US$42.5 million) andPTP XVIII (US$13.5 million) from Bank Indonesia under separate subsidiary loanagreemeLnts. Both loans will be made for 12 years including 6 years of grace andrepayable in 12 equal semi-annual annuities starting January 1, 1986.

/1 Project costs listed in this section are quoted in current prices andinclude price and physical contineenciea.

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Table 3.4: SOURCES OF PROJECT FINANCE(US$ million)

Sources of FundsGovernment Total

Ministry DGE and Bank PNP/PTP estimated

Project Component of Finance INPRES Indonesia own funds IBRD (%) cost

New settlement -Danau Salak 9.3 2.7 - - 22.5 65 34.5

Smallholder development -Rimbo Bujang 12.9 1.6 - - 33.5 70 48.0

PNP I rehabilitation - - 11.0 8.0 31.5 62 50.5

PTP XVIII expansion -Danau Salak - - 3.5 4.0 10.0 57 17.5

Program support - DGE - 0.5 - - 1.5 75 2.0

Total 22.2 4.8 14.5 12.0 99.0 65 152.5

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Interest will be 13.5% p.a. and payable from the date of signing the Subsid-

iary Loan Agreements. The signing of Subsidiary Loan Agreements between Bank

Indonesia and PNP I and PTP XVIII will be a condition of disbursement of the

Bank loan for each of these estate development components [para. 8.02(d)].

3.11 Interest Rates for On-lending. Government policy is to on-lend to

smallholders at 10.5% (para. 3.09), and to on-lend to public sector enterprises

at 13.5% (para. 3.10). These rates are fixed for all such loans in Indonesia

and cannot be considered sufficiently positive since average annual inflation

in the next three-year period may be as high as 20%. Past average annual

inflation over a three-year period has been about 11%. The interest rate for

on-lending to smallholders is concessionary but is justified since smallholder

beneficiaries in the proposed project are below the critical consumption

level and at this rate, the Government facilitates its development objectives

for the rural target population. Additionally, the GOI assists through

interest subsidy the expansion of key export oriented public sector enterprises.

3.12 The Bank loan of US$99 million will be lent to Government for 20

years, including 6 years of grace at the prevailing interest rate on the date

of circulation of the President's Report to the Executive Directors.

C. Budgeting

3.13 Categories of investment for the smallholder components which will

require GOI budget funds include all noncredit items (e.g., village infra-

structure, transportation and resettlement of families, management fees and

health services, etc.). Assurances were obtained at negotiations that

budget funds from APBD, and INPRES will be made sufficient in size to cover

noncredit expenditures during project implementation, and should these

sources be insufficient, the Borrower will make timely arrangements for funds

from other GOI sources to meet additional requirements [para. 8.01(g)]. The

Project M4anager assisted by the Provincial Coordinating Committee for each

project subcomponent will submit annual budgets for all noncredit expenditures

six months prior to the start of the fiscal year. The DGE will be responsible

for making its own budget allocation for transportation and resettlement of

families, technical assistance, and management fees to PTP XVIII and PTP VI

for smallholder development. The DGE will also make annual DIP requests to

the central government for construction of health facilities and the provision

of health services [para. 3.02A(a) (vii)]. Since a portion of the finance

for noncredit items will come from INPRES sources, the Chairman of Bappeda in

each of the two project areas will assist the Project Manager to secure

financial requirements with the provincial government (para. 4.04). This

responsibility will include coordination of finance from the INPRES Sekolah

for school facilities, the Puskesmas INPRES for village health, and gotong-

royong for village infrastructure. The DGE will review all annual budget

appropriations to coordinate noncredit development activities with the rubber

development as carried out by the nucleus estates. Bank supervision missions

will review with Government the annual budget allocation and work program of

GOI agencies participating in the implementation of the project.

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D. Procurement

3.14 Details of project procurement by category of investment for small-holders and estate development are contained in Annex 2 and are summarizedbelow./l

3.15 All agricultural machinery and vehicles (US$19.4 million) for rubberand oil palm development, food crop centers and equipment for road constructionand all processing plant machinery and equipment (US$12.2 million) will beprocured through international competitive bidding (ICB) in accordance withBank Guidelines. A preference limited to 15% of the cif price of theimported goods or the customs duty, whichever is lower, will be extended toqualified local manufacturers in the evaluation of bids. Procurement ofoffice equipment, workshop tools and building equipment (US$1.3 million) andprocurement for individual contracts of less than US$50,000 will be locallyprocured through prudent shopping involving the solicitation of at least threequotations. The total procured in this manner will be limited to the equiva-lent of US$350,000 for each nucleus estate, PTP VI and PTP XVIII and theestate development of PNP I and PTP XVIII. The total procured in this mannerin the project for all components will thus be US$1.4 million. A list of allagricultural machinery and other equipment is provided in Annex 1, Table 11.International competitive bidding in accordance with Bank Guidelines will beused for fertilizers and agrochemicals (US$19.6 million) including thepurchase of urea. Small lots of agrochemicals costing less than US$100,000annually will be procured following prudent shopping procedures with at leastthree quotations.

3.16 All civil works contracts for housing, project buildings andrelated infrastructure (US$15.3 million) will be awarded after local competi-tive bidding (LCB) among prequalified contractors in accordance with GOIprocedures which are acceptable to the Bank. This will include the first 500settler houses at Danau Salak each costing about Rp 266,000 (US$426).Subsequent settler housing, about 3,500 units, each costing Rp 205,000(US$328) will be built by smallholders working in nucleus estate supervisedwork units with materials procured by FTP XVIII under LCB. The standards forsettler housing are indicated in para. 2.23. Consultants located in the DGEunder Loan 1499-IND will provide recommendations on bid evaluation in casesof local procurement for civil works.

3.17 The detailed physical description of the work to be carried out toblock plant 28,000 ha of smallholder rubber with maintenance up to threeyears (US$52.0 million excluding agrochemicals and machinery and equipment)will be governed by a Smallholder Rubber Development contract betweenthe DGE and each nucleus estate. Total block planting and maintenance of4,000 ha of rubber by PTP XVIII (US$7.5 million) for estate development andblock planting, rehabilitation and maintenance of 14,268 ha of rubber andoil palm for PNP I estate development (US$16.4 million) will be specifiedunder the terms of Subsidiary Loan Agreements between the Borrower and PNP Iand PTP XVIII. Rubber and oil palm development involves the execution of aspecialized, integrated service of labor and machine services which cannot

/1 Procurement estimates do not include the noncredit items of villageinfrastructure and health services.

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be procured through a competitive bidding process. Supplies paid in localcurrency for the execution of these contracts will be procured in accordancewith current GOI procedures which are satisfactory to the Bank. PTP XVIIIand 1'it VI have demo~i-rated theiL ab±liLy to implement such a contract in acost effective manner. Unit cost information for rubber and oil palm develop-ment 's well 2stablished and will be used to monitor financial requirementsand guarantee quality control. Smallholder rubber development costs willinclude field overheads to be payable to the nucleus estates at the rate of10% of the direct costs of rubber establishment excluding machinery andequipment. Nucleus estates will also be paid a management fee of 5% of thedirect costs of rubber development from the DGE budget source based onsatisfactory completion of annual work as reported by a firm appointed forinspection services, and with the approval by the DGE. Other works whichwill not involve a competitive bidding process will include the initial landclearing by PTP XVIII of a one ha food crop area for each family at DanauSalak (US$0.4 million) and the construction and upgrading of rubber collectiontracks. These activities are not likely to attract foreign firms and sincethese works will be phased over an extended period of time, local competitivebidding is not desirable. Similar to block planting, details of landclearing for food crops, resettlement of smallholders, and village and farmroad construction will be specified under the terms of the Smallholder RubberDevelopment contract. PTP XVIII and PTP VI engineers will carry out sitesurveys, plan alignments and other engineering requirements and will beassisted by the technical specialist to be appointed for InfrastructureProgram Management [para. 3.02A (b)(iii)]. Recruitment and resettlement oflabor to PNP I and to PTP XVIII's Danau Salak estate, will be carried out bythe estates themselves with supervision from the MOA consultant specialistsappointed under Loan 1499-IND who will assist in arrangements and agree oncosts of resettlement with each of the estates.

3.18 Consultant specialists to be employed for PNP I (US$0.9 million)[para. 3.02B(c)] and for PTP XVIII (US$0.6 million) [para. 3.02A(b)(iii)] aswell as all consultants for short-term contracts to the DGE and a firm appointedby the DGE for field inspection services (US$1.0 million) will be engaged inaccordance with the Bank's Guidelines on terms and conditions approvedby the Bank. Internationally recruited consultants are costed at US$72,000per man-year (including international travel, housing allowances and localtransportation) on the basis of past experience in Indonesia./l

E. Disbursements

3.19 An estimated schedule of disbursements is shown in Annex 1, Table 9.Disbursement for smallholder development will be as follows: -

/1 Includes US$54,000 salary or US$4,500/month, US$12,000 housing, US$3,000international travel and US$3,000 domestic travel, and overheads.

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(a) civil works consisting of materials for housing, estate workshopsand garages at the rate of 70%;

(b) 100% of the cif cost of agrochemicals or 50% of urea procuredlocally on the basis of contracts awarded after internationalcompetitive bidding;

(c) 100% of the foreign exchange cost of directly imported agriculturalmachinery, vehicles and equipment, 95% of the ex-factory cost ofequipment manufactured locally and 65% for imported farm equipmentpurchased locally. Disbursement for the cost of a few vehiclesprocured locally for project start-up on the basis of prudentshopping will be at the rate of 40%;

(d) rubber development expenditures other than agrochemicals or vehiclesand equipment procured under (b) or (c) by the nucleus estate, roadconstruction and upgrading of primary village roads and new construc-tion of secondary village roads, and resettlement costs for DanauSalak new settlers, at the rate of 65% as certified in quarterlyreports provided by the nucleus estate to DGE.

3.20 Disbursement for the estate components will be as follows:

(a) 100% of the cif cost of agrochemicals and 50% of urea procuredlocally on the basis of contracts awarded after internationalcompetitive bidding;

(b) 100% of foreign expenditures of agricultural and processing plantmachinery, vehicles and equipment, 95% of ex-factory cost of equip-ment manufactured locally, and 65% of imported farm equipmentprocured locally. Disbursements for the cost of a few vehiclesprocured locally for project start-up on the basis of prudentshopping will be at the rate of 40%;

(c) 70% of all civil works costs including estate housing, buildings,garages, workshops, divisional offices and bridges;

(d) rubber and oil palm development expenditures other than agrochemi-cals or vehicles and equipment procured under (a) and (b) above atthe rate of 20% against certified quarterly reports by PNP I and PTPXVIII; and

(e) 60% of the resettlement costs for estate laborers as certified inquarterly reports provided by PNP I and PTP XVIII to the DGE.

3.21 Disbursement for consultants and technical assistance to the DGE andfor consultants employed by PNP I and PTP XVIII will be as follows:

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(a) 100% of foreign exchange cost of all consultant specialists, inspec-tion and technical services and 100% of local consultant fees and100% of project start-up expenditures (housing, nurseries andmachinery) in future NES projects.

Any savings from the project will be made available for financing additionalworks. Documents to support claims for rubber development expendituresincluding overheads and resettlement of estate labor and new settlers, and forroad construction not submitted for reimbursement will be retained in Indonesiaand made available for inspection and review by Bank supervision missions. Itis expected that disbursements will be completed within six years from loaneffectiveness. The proposed allocation of loan proceeds is shown in Annex 1,Table 10.

F. Quality and Cost Controls

3.22 Rubber development for new settlement and all civil works in theproject will require quality and cost control on a regular basis. Rubberdevelopment and other works carried out by PTP XVIII and PTP VI on a creditbasis will be checked for quality and cost control by the DGE staff assistedby technical advisors appointed under Loan 1499-IND and set by their agreedstandards. Certification of satisfactory completion of each year's developmentobjectives for rubber development and related annual expenditures will bemade by a firm appointed by the DGE for inspection services as a condition tomaking payments for an annual management fee to the nucleus estate. Based onapproval by the DGE of a satisfactory inspection report a management fee willbe payable at the rate of 5% of the direct expenditures of rubber developmentexcluding machinery and equipment and will be payable from the DGE budgetsource. Civil works and village development on a noncredit basis will bemonitored for quality and cost control by the Project Manager and the ProvincialCoordinating Committee and reviewed by the DGE. Monitoring and evaluation ofthe upgrading and construction of primary and secondary village roads will becarried out by the Infrastructure Management Consultant to PTP XVIII andother consultants under short-term contracts (para. 3.02A(b)(iii)] employedby DGE. Smallholder rubber plantings by PTP XVIII and PTP VI, and the estateplanting programs of PNP I and PTP XVIII will be subject to quality inspectionby an independent firm appointed for inspection services by the DGE incooperation with the MOA (para. 4.02).

G. Accounts and Audit

3.23 Smallholder Components. During negotiations assurances wereobtained that the nucleus estate in coordination with the BRI would keepseparate accounts of all expenditures channelled to the nucleus estates forsmallholder development [para. 8.01(h)]. The responsible agencies in theprovincial government in cooperation with the on-site project managers willbe required to keep accounts of expenditures made under the INPRES program.Bookkeeping for APBD funds for the noncredit categories of investment will bebased on existing regulations. The DGE, assisted by its technical advisorsprovided under this and former projects, will receive and keep all project

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accounts and consolidated statements of credit and noncredit expendituresmade under the project. These accounts will be in a form acceptable to theBank and furnished as part of a quarterly project report by the DGE tothe Bank within 30 days of the close of a quarter. During negotiationsassurances were obtained that these accounts, both separate and consolidated,will be audited by the State Auditor yearly and the audit will be submitted tothe Bank within six months of the close of each fiscal year [para. 8.01(h)].The Bank will reserve the right to request an audit from auditors otherthan the State Auditors and of either accounts maintained by the nucleusestate or project accounts of the DGE if the State Auditors prove to be unableto submit audits in time or in a form similar to that agreed between the DGEand the Bank. The BRI, following its normal procedures of accounts andaudit, will report to the DGE on expenditures made by the nucleus estate inthe quarterly reporting process.

3.24 Estate Components. PNP I and PTP XVIII will be required to submitto the Bank annual audited reports of accounts as carried out by indepen-dent auditors acceptable to the Bank within six months of the close ofthe fiscal year. Assurances to this effect were obtained at negotiations[para. 8.01(i)]. In order to facilitate further monitoring and supervisionof PNP I and PTP XVIII, assurances were obtained at negotiations that eachestate will submit budgets of the work program for expansion of the estate,each year to the Bank for review and comment before final approval bytheir Board of Supervisors [para. 8.01(i)].

H. Cost Recovery

3.25 Credit Delivery System. Project finance and the flow of funds inthe credit delivery system have been described in para. 3.09. Credit deliverywill be simplified with all credit expenditures in Years 1-3 incurred by thenucleus estate for which accounts will be maintained by the nucleus estateand the BRI (para. 3.24). Credit agreements between farmers and the BRI atthe end of Year 3 will include provisional estimates of total credit andwill be amended in Year 6 to include the actual funds to farmers for thecosts of establishing rubber to full maturity. Land titles, on the issuing of"Hak Milik" as described in para. 4.11 will be pledged as collateral withthe BRI to secure repayment obligations.

3.26 Cost Recovery. Since the BRI has had little experience in lendingfor smallholder tree crop development and has no facilities for credit opera-tions in the project areas, the GOI has proposed the adoption of a flexiblecost recovery system with repayments by smallholders made "in kind", the sameprocedure as in Loans 1499-IND and 1604-IND. Loan accounts fixed in financialterms will be standardized for all smallholders but will be payable inkilograms or dry rubber collected by the nucleus estate processing the rubber.Collection of rubber for debt service will be based on loan amounts calcu-lated at 10.5% interest on terms of 15 years for new settlers at Danau Salakand 16 years for smallholders at Rimbo Bujang, both loans with 3 years grace oninterest. On this basis credit amounts estimated at Rp 5.0 million for newsettlers at Danau Salak (3 ha of rubber) and Rp 3.7 million for Rimbo Bujangsmallholders (2 ha of rubber) will be repaid with 25% of annual rubber

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production collected over 12 years and 13 years respectively. The system of

rubber collection will be flexible so that deliveries can be adjusted to

reflect possible adverse or favorable rubber price changes or changes in

yields affecting smallholder incomes. Smallholders will be required to

deliver 25% of their production to nucleus estate collection agents, but

will be free to sell their remaining production to any processor. A price

formula will be set for rubber sold for debt service during project implemen-

tation, to be agreed by the Provincial Coordinating Committee and the DGE, in

consultation with the Bank. The price received by smallholders for the rubber

will be 70% of the fob value, allowing the nucleus estate to cover its

processing, marketing, collection and overhead charges (para. 5.03). It is

assumed that recovery of credit in the proposed project will be high since

most settlers will want to sell all their dry rubber production to the

nucleus estates owing to the more favorable price for rubber than traditionally

received at 40% of fob. Each nucleus estate will keep all records of rubber

received per smallholder with daily records of rubber prices. Records and

revenue from the nucleus estate will be sent to BRI weekly for which accounts

will be closed monthly or quarterly by converting the net amount of rubber

collected at the prevailing price minus 30% (estimated factory, tax and

overhead costs).

3.27 Rent and Cost Recovery Indices. Rent and cost recovery indices for

Danau Salak's new settlers and Rimbo Bujang's smallholders are shown in Annex

1, Table 12. All figures are in 1979 constant prices and in incremental

present values, discounted over the project period to reflect an opportunity

cost of capital in Indonesia of 10%.

3.28 An investment cost in 2 ha of rubber for Rimbo Bujang smallholders

and 3 ha of rubber for Danau Salak's new settlers will provide sufficient

project rent to allow beneficiaries to pay for project costs. Project rent is

45% of net cash income for Rimbo Bujang smallholders and 54% of net cash

income for Danau Salak's new settlers. The cost recovery indices are 74% and

82% for Rimbo Bujang and Danau Salak settlers respectively and are acceptable

given that project beneficiaries are presently below the critical consumption

level. Although there is some scope for more recovery the element of GOI

subsidy for these two groups of smallholders reflects the GOI decision to

maintain such project costs as schools, village infrastructure, resettlement,

and social schemes as noncredit items in public sector outlays for nucleus

estate and smallholder projects. Taxation might be considered by the GOI as a

means to achieving greater recovery. The GOI is presently considering raising

the export tax on rubber from its present level of 5% of the fob price. An

increase to 10% tax on the fob price will raise cost recovery indices to

above 100%. The interest rate for smallholders set at 10.5% by GOI reflects

Government policy to subsidize interest cost to smallholders to achieve its

objectives for the rural target population.

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4. ORGANIZATION AND MANAGEMENT

A. Borrowing/Executive Agency Functions

4.01 The Borrower for the project will be the Government of Indonesia.Overall responsibility for execution of the project will rest with theDirector General of Estates. The smallholder components will be implementedby central government agencies (para. 1.20), the provincial governments ofJambi and South Kalimantan and the nucleus estates PTP XVIII and PTP VI. The

PNP I and PTP XVIII estates will be directly responsible to the Ministry ofAgriculture in Jakarta for their own expansion program under the proposedproject.

Smallholder Development

4.02 Directorate General of Estates (DGE)(Chart 1). Overall responsi-bility for project implementation, financing, monitoring and evaluation willbe vested in the DGE. Land clearing, tree crop establishment, maintenanceand provision of infrastructure will be the responsibility of the nucleusestates with provision of some of the required infrastructure by provincialgovernment agencies. The functions of the DGE for the proposed project willbe:

(a) project and village master planning, preparation of annualwork programs;

(b) advice to the Project Managers (para. 4.03) and Provincial Coordinat-ing Committees (para. 4.05) for recruitment of new settlers, designand supervision of smallholder participation agreements, crop pro-cessing and marketing arrangements;

(c) approval of project budgets, coordination and organization ofproject financing arrangements;

(d) advice on project procurement;

(e) formulation and execution of the contract between the DGE and thenucleus estate for rubber development, and at a later date for

extension, processing and marketing services; and

(f) project monitoring and evaluation with regular quality controlinspection services.

To ensure sound management of all project components and to monitor theprogress of project implementation particularly in regard to rubber establish-ment, housing and processing construction, an assurance was attained atnegotiations that the DGE will employ consultants to provide inspectionservices acceptable to the Bank for short-term inspection assignments,reporting to the DGE [para. 8.01(k)]. An assurance was also obtained thatthe Minister of Agriculture will cause the DGE by September 30, 1979 tostrengthen its project staffing through the establishment of a Team for

Assistance for Nucleus Estates and Smallholders Projects to further assistDGE with project planning and execution [para. 8.01(1)].

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4.03 Project Manager. In carrying out the functions in para. 4.02 the

DGE will coordinate its activities with members of the Provincial Coordinat-

ing Committee (para. 4.06). Each Project Manager appointed by the Managing

Director of the estate in consultation with DGE and the Bank will be

responsible to the Director General of Estates for preparation of action

programs and budgets, supervision and coordination of all project activities

undertaken by the nucleus estate and the Provincial Coordinating Committee.The duties of the project manager will be:

(a) preparation of an action program, subject to the approval of the

DGE, for implementation of master plans, and annual work programs;

(b) preparation of budgets for all functions other than rubber devel-opment and functions for which provincial government agencies are

responsible;

(c) supervision and coordination of the implementation of project and

village master plans by the nucleus estate and provincial govern-

ment agencies;

(d) design and supervision of settler participation agreements, land

transfers and allocation of food crop and rubber areas for newsettlers;

(e) recruitment of new settlers, selection, administration, and arrange-ments for smallholder training; and

(f) monitoring and reporting on project progress to the DGE, the BRI,

the provincial government and the Bank. i

4.04 The Provincial Governments. Since the provision of village infra-structure, health, education and provision of social services are complementary

and interdependent, organization of these services must be determined at the

provincial level. The Provincial Chairman of the Bappeda will be delegated

the task by the Provincial Governor of coordinating the Government agencies

involved in area development. The provincial government operates in a hier-

archy of regency, district and village organizations with central governmentdepartments represented at the provincial government. Organization of Indone-

sian provincial government system is shown in Chart 7.

4.05 Provincial Coordinating Committee (PCC). The organization of

smallholder project components is shown in Chart 8. The Chairman of Bappedais responsible to the Provincial Governor through a Provincial Coordinating

Committee of which he will be Chairman. The PCC will be stationed in the

provincial capital where the headquarters of the provincial government

agencies involved in implementation of the project are located. In additionto the Chairman of Bappeda, the Committee will comprise the Bupati, the head

of the Dinas Perkebunan Daerah as Deputy Chairman, the Project Manager, the

Nucleus Estates Sites Manager and representatives of the BRI and provincialgovernment agencies.

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4.06 The functions of the PCCs in implementation of the smallholderprojects will be:

(a) preparation of programs and budgets to assist the Project Managerfor implementation of provincial government functions in accordancewith a master plan;

(b) coordination and monitoring the activities of the provincialgovernment agencies concerned with provision of village infrastruc-ture, main access and village roads, health, educational andcommunity facilities, and the implementation of food croppingprograms;

(c) advice and assistance to the respective project managers insmallholder recruitment and administration; and

(d) determination from time to time of the rubber price to be paidby the nucleus estate to participating smallholders inagreement with the nucleus estate.

4.07 The Nucleus Estate. The nucleus estates selected for developmentof smallholder settlement are PTP XVIII and PTP VI. Full authority will begiven to these estates to operate resources, machinery, material inputs andfinance required to plant rubber and to develop and hand over to new settlerspotentially high-yielding areas of three year old rubber. Each nucleus estatewill appoint a Project Manager (para. 4.03) as well as the Nucleus Estate SiteManager responsible for rubber development. Under the terms and conditions ofa Smallholder Rubber Development Agreement with the DGE, each nucleus estatewill be responsible for the following services:

(a) For the Period up to Three Years after Planting. PTP XVIII will beresponsible for land clearing, planting of 3 ha of rubber, procure-ment and the supply of materials for settlers' own house construc-tion, water supply, construction of primary and secondary villageroads and rubber collection tracks, rubber maintenance, procurementand application of inputs for rubber development, land clearing forthe food crop area, the establishment of a PMSU, the provision offood crop seed and fertilizer in the first year of settler entryand initial cash payments to settlers. In rubber development onexisting smallholdings and Marga land, PTP VI will be responsiblefor land clearing, the planting of rubber and rubber maintenance,construction and maintenance of primary and secondary roads andrubber collection tracks and the procurement and application ofinputs for rubber development. PTP VI will also establish a PMSU.The nucleus estates will be responsible for all smallholder training.

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(b) For the Period from Three Years after Planting to Production.Procurement and application of inputs for both new and existingsettlers, the maintenance of primary and secondary village roadsand rubber collection roads, smallholder training in rubber tappingand arrangement for extension services.

(c) During the Productive Period. Extension services, organization oflatex collection for loan repayment and the provision of comprehensiveprocessing and marketing services.

A condition of disbursement will be that the nucleus estates will sign aSmallholder Rubber Development Agreement with the DGE and the contract willbe acceptable to the Bank for provision of the above services [para. 8.02(b)].

Bank Rakyat Indonesia

4.08 A description of BRI and its role in the agricultural sector isoutlined in para. 1.22. BRI will act as the handling bank for the Governmentto channel funds for rubber development to the nucleus estate (para. 3.09).During the period of loan repayment by the nucleus estate rubber processors,BRI will maintain settler loan accounts on behalf of the Government (para.3.26). The Government will bear all credit risks. For administration andhandling of settler loans, however, the BRI will split with Bank Indonesia 1%on the outstanding balance per annum on all smallholder credit funds.

4.09 Planting Material Supply Units. Although PTP VI and XVIII willhave primary responsibility for smallholder rubber training in the proposedproject, the DGE seeks to assist smallholders with food crop and cash cropproduction in the province through the supply of high quality plantingmaterials and other inputs, and the provision of technical information forsuccessful crop production. The units will be established and managed by PTPXVIII and PTP VI and adequately staffed to establish nurseries and provide aneffective extension service. A manager for each facility will be appointedby each nucleus estate prior to disbursement of funds for investments asso-ciated with each facility. Each manager and nucleus estate will arrange forthe recruitment of extension personnel, development of the training program,and improvements to the facility.

Expansion of PNP I and PTP XVIII

4.10 Ministry of Agriculture. The MOA has the major role of policyformulation and coordination responsibilities of the estate group activities,estate inspection, estate budget approval and control and provision of adviceto the Boards of the PNP/PTPs and the Directorate for Government LimitedLiability Companies (Directorate of PTPs) within the Ministry of Finance.Technical assistance has been provided under Loan 1499-IND to the MOA SupportStaff for Agricultural Enterprises for technical and financial guidance,monitoring and evaluation of the operations of the PNP/PTPs. To simplifyproject administration the DGE will be responsible for appointment of estateinspection services as well as inspection of smallholder components (para.4.02).

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B. Aspects of Prolect Implementation

4.11 Settler Land Title. The issue of certificates of Hak Milik will bemade by the Directorate General of Agraria in the Ministry of Home Affairs inJakarta. Assurances were obtained at negotiations that new settlers willreceive certificates of "conditional" Hak Milik for a four ha land areawithin six months of entry to the settlement project as a prospective settler.

Marga land settlers and existing transmigrants at Rimbo Bujang will receive"conditional" Hak Milik to two ha of land for rubber to be planted in theproject [para. 8.01(m)]. Each smallholder will work as a laborer in the

rubber area developed by the nucleus estates for three years and if hisperformance in this work is judged satisfactory by the Provincial CoordinatingCommittee, the settler will receive certificate of "full" Hak Milik withoutconditions at the end of Year 3. These titles including those obtained fromexisting settlers will, however, be retained by BRI until loan obligations ofeach smallholder has been fulfilled. The issue of certificate of "full" HakMilik requires a detailed plot survey which is the responsibility of theprovincial and district offices of Agraria.

4.12 Settler Training in Rubber Management. The nucleus estate willgive priority attention to training of smallholders in rubber management,initially during the settlers' period of employment as rubber laborers andlater as independent farmers. To ensure a high standard of rubber development,the nucleus estate will be responsible for procuring and supervising theapplication of fertilizers until the end of the immature phase. The nucleusestate will also operate a tapper training program.

4.13 Health. Arrangements for the project's low cost health deliverysystem will be the responsibility of the Provincial Medical Officer in theprovincial government. Arrangements for primary medical care will be madeprior to the entry of the first group of new settlers. The Provincial Medical

Officer for the settlement area will ensure malaria control by the Kabupatenhealth administration including supplies of DDT, chloroquine, house sprayingbefore settler arrival, and malariometric surveys. Under the existing GOIprograms mother and child health care, including nutrition and family planningwill be provided. Hygiene and sanitation are included in the project[para. 3.02 A(a)(vii)] in the construction of wells and latrines.

C. The Environment

4.14 The vegetation in the areas for new settlement is either secondaryjungle or coarse lalang with only scattered areas of primary forest. Both thesecondary jungle and lalang areas represent an uneconomic form of land use.Lalang is a particularly destructive weed to soil nutrients. Reforestationwith productive tree crops will replace large areas of pernicious lalang.Project design calls for rubber to be introduced on the more steeply slopingareas where the use of standard soil conservation practices, a leguminousground cover and the tree canopy, will prevent erosion and build up soilfertility. Food cropping will be confined to flat and gently undulatinglands on individual farm holdings rather than the poor economic and ecological

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pattern of shifting cultivation presently used in the project areas. Fertility

will be improved through establishment of tree crops, crop rotation, fallowing

and provision of adequate inputs. The new rubber and palm oil factories will

occupy a relatively small area and will not be sited in the vicinity of residen-

tial areas. The appropriate national standards for the disposal of liquid

effluent to ensure the health and safety of factory employees will be met.

5. DEMAND AND MARKETING

A. Rubber

Demand and Marketing Arrangements

5.01 Price Projections. World rubber consumption has increased by about

6.3% p.a. over the past 25 years (2.4 million tons in 1950 to 12.3 million in

1977). Over the same period, the rapid technological advance in synthetic

rubber (SR) production has lowered the average price of natural rubber (NR)

cif New York for RSS I from US$2.50/kg to US$1.08/kg (in constant 1978) prices.

Despite steady progress in NR technology, in the face of falling prices NR

output has grown by only 3.2% p.a. and its share of the market has fallen from

67% to 30%. Continuing technological advances in NR production together with

the increased cost of SR production following the large oil price increase in

1974/75 have, however, improved the outlook for NR production. The NR price

RSS I cif NY, which had fallen to US$0.81/kg in 1975 is expected to remain at

around $1.00 in December 1978 prices, through 1995. This price corresponds

to an fob Indonesia price of Rp 594/kg. World consumption of rubber is

expected to increase by about 5.3% p.a. through 1990 and NR production by

about 4.0% over the same period, i.e. from 3.7 million tons to 6.1 million

tons. The world market is expected to easily absorb the additional production.

5.02 Smallholder Rubber Price. The price structure for smallholder

rubber in Sumatra and South Kalimantan is difficult to trace given the wide

variation in the dry content of rubber (drc) received, the number of processors

and collecting agents and the extent to which they manipulate estimates of

drc, and the cost of transportation from area to area. The sequence of

marketing is usually from farm to collection agent, about 45% as unsmoked

sheet and 55% as slab and lump, and then to processor. In the project areas,

smallholders have been receiving 35 to 45% of the fob value of rubber or

about Rp 160/kg based on 50% drc of slab. The variations in margins for

middlemen in the procedure account for at least 5-10% of the fob value of

RSS I. Farmers could receive better prices than those presently obtained

with improvement in conditions of marketing their own rubber.

5.03 Under nucleus estate collection and processing where excessive

processor profits and the additional costs of middlemen are removed, it is

expected that farmers will be paid 70% of the fob value of Rp 780/kg drc in

1990 (1978 constant prices) even when depreciation and the capital cost of

processing is included in addition to the normal factory and collection

costs. GOI indicated for the proposed project that nucleus estate processors

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should collect rubber for smallholder repayment obligations and all otherrubber that project farmers choose to sell at a price about 70% fob. Assur-ances were obtained during negotiations that the borrower will cause thenucleus estates to pay about 70% of the prevailing fob price for rubberproduced by smallholder project farmers, excluding cases of large variation inthe dry rubber content received, or significant reduction in the fob price, orsignificant changes in processing or marketing charges of the nucleus estateprocessor [para. 8.01(n)].

5.04 Marketing of Rubber. Production of rubber by the nucleus estatewill be sold through the existing and well-established marketing organizationsincluding regulation and sales determination under joint marketing officesthroughout Indonesia. Smallholders are expected to produce latex and lowergrades from scrap and will be free to sell to any dealers/exporters in theproject area. However, the nucleus estates will process and market theamount of latex or slab required for debt repayment (para. 3.26). Owing tofavorable prices predetermined and paid to smallholders on the amount ofrubber collected for debt repayment, it is expected that most smallholderswill also sell their additional rubber production to the nucleus estate.The requirements for processing facilities for both smallholder and estaterubber to be financed in a second phase to the proposed project will bedetermined in the project Year 3 when expected yields, production and thedesirability for sheet versus block rubber will be more certain.

B. Palm Oil

Demand and Marketing Arrangements

5.05 Coconuts have traditionally supplied the bulk of the vegetable oilsconsumed in Indonesia, but supply has not kept pace with demand. Coconut oilproduction in Indonesia (both kelentik oil and commercially extracted coconutoil) is projected to increase by about 0.7% p.a. from its present level of580,000 tons, but the demand for edible oils now at 770,000 tons p.a. isexpected to increase by about 5.5% p.a. Indonesia, a net importer of edibleoils, is increasingly moving to replace coconut oil for domestic consumptionwith fractionated palm oil (palm olein). Indonesia presently exports approxi-mately 85% of its palm oil output, but even with a continued 9% p.a. growth inproduction of Indonesian oil palm, the share of locally consumed palm oilproducts is expected to increase from its present level of 15% of output toabout 40% by 1980.

5.06 Price Outlook. Although prices for fats and oils fluctuated widelyduring the past two decades (1958-78), they displayed no clear trend. Pricefluctuations reflect simultaneous increases or shortfalls in production andexports of major fats and oils. They are usually related to changes in thenormal weather patterns. The sudden increase of fats and oil prices during1973-74 was mainly the result of simultaneous production shortfalls in coconutoil and groundnut oil.

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5.07 A decline in real prices of fats and oils is projected during1979-90. The major assumptions underlying this projection are:

(a) An oversupply of fats and oils caused by:

(i) the rapid acreage expansion of oil-bearing tree crops inrecent years; and

(ii) the growing demand for oilseed meals.

(b) A declining market potential for fats and oils in developed coun-tries, where per capita consumption approaches the saturation level.Demand for fats and oils in these countries is likely to come mainlyfrom the development of new products or end-uses and populationgrowth.

5.08 Technological improvements in refining and manufacturing and theresultant increases in interchangeability of fats and oils have had threedistinct effects on prices. First, prices have become more important in themanufacturer's choice of oils (or fats). Second, price differentials amongfats and oils have declined. Third, the increased possibility of substitutionhas encouraged the use of cheaper oils, such as soybean oil and palm oil atthe expense of high-priced oils such as butter and olive oil. This has tendedto depress the general price level of high-priced oils.

5.09 The level of palm oil prices relative to those other fats and oilsdepends on the share of palm oil in total fats and oils exports. The effectof increased supply on palm oil prices is aggravated by the fact that themarket for soft oils expands faster than the market for hard oils (coconutoil, palm kernel oil, palm oil). Although it is physically possible tosubstitute hard oils for soft oils, the costs of dehydrogenation are high, andthe rapidly growing output of hard oils can be marketed only at lower pricesthan those of soft oils. It is projected, therefore, that there will be aprice differential of about 20% by 1985 between palm oil and its main compet-itor, soybean oil. International oil palm prices are projected by the Bank toremain in constant terms at or above their mid 1979 level until 1982 andsubsequently to decrease and become stable by 1990 at about 80% of theirpresent level. Prices of palm kernel oil are projected to increase until1982, decrease later on and to stabilize at a price about 11% higher by 1990.Soybean oil prices (in 1978 constant US dollars) are projected at US$529 perton (cif European ports) in 1990, whereas palm oil prices are projected atUS$430 for that year.

5.10 The declining trend of relative prices for palm oil (and other hardoils) can be reversed through: (a) a reduction in refining costs (easing theinterchangeability of these oils with the soft oils in known end-uses); and(b) the development of new end-uses.

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C. Food Crops

5.11 The farm plan proposed for new settlers and existing farmersis primarily based on rubber. Food crop production by rubber smallholdersin the project will largely be limited to such staple crops as upland rice,groundnuts, cassava, and beans, with some fruit tree crops, coffee and clovesand vegetables from garden lots. With the limited amount of production fromthese crops, farm families are expected to consume most of their food cropproduction. Some family surpluses in food crops may develop in later yearsof the project. In Rimbo Bujang an oversupply of cassava is already evidentwithout an immediate market available for existing smallholders. PTP VI hasagreed with GOI to construct and operate a cassava processing plant in theproject area and transport the processed cassava to the Jambi or Padangmarkets. Improvements in food crop marketing will be required in theproject areas from time to time and studies to that effect will be undertakenby the DGE in cooperation with the Directorate General of Food Crops (DGFC)and the nucleus estates. There is a ready market for cloves and coffee inboth project areas. Marketing studies for cassava will be undertaken in theproposed Transmigration II project.

6. PRODUCTION ASPECTS, TECHNOLOGICAL FACTORS, AND FARM INCOMES

A. General

6.01 Rubber will be the main crop cultivated in the project areas.Oil palm will also be planted in Aceh. Food crops (upland rice, cassava,sweet potato, groundnuts, beans, vegetables and fruit trees) will be grownto meet the smallholder family food requirement in all project areas.

6.02 Smallholder Rubber Production. Smallholder rubber establishment,upkeep and production techniques are underdeveloped in Indonesia. Theappropriate technology and economics of rubber production are well estab-lished but this knowledge is mainly confined to the public sector estates.Smallholder rubber has traditionally been grown under a regime with a lowlevel of farm inputs and smallholder management. Land in smallholder areasis generally not properly cleared causing a high incidence of root diseasesin rubber trees. Inferior, unselected seedlings are grown, resulting inwidely fluctuating growth and rubber production. Fertilizers are rarelyapplied. Weeding and maintenance standards during the immature period arepoor, resulting in very slow growth of the rubber trees and substantialdelays in rubber maturity. Soil conservation is rarely practiced. Small-holder rubber trees are overtapped and many dry up. Trees are often tappedfour days per week during nine months per annum with no stimulation tech-niques. Tapping standards such as bark conservation, slope of cut, andwounding are inadequate and cause heavily callused trees with incomplete barkrenewal.

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B. Crop Recommendations

6.03 Rubber. The clone GTI would be the dominant material used. In theMarga land forest areas of Rimbo Bujang land clearing will be done mechani-cally using crawler tractors tree pusher and chain saws. The nucleus estate(PTP VI) will review and examine ways in which to exploit any residualcommercial timber before commencing land clearing. Any incomes derived fromtimber sales will be used to reduce smallholder investment costs. In DanauSalak, due to fire problems with lalang eradication, land clearing will bedone mechanically by ploughing and harrowing using wheel tractors. PTPXVIII in its own expansion program will plant a wider selection of clonesbased on the recommendations of the Rubber Research Institutes in Medan andBogor and the Rubber Research Centers in North Sumatra and Cental Java. Theapproximate composition of the PTP planting program will be: GTI - 40%;RRIM 600 - 20%; AVROS 2037 - 10%; PR 255 - 5%; PR 261 - 5%; PR 107 - 5%; PR300 - 5%; PB 5/51 - 5% and GYT 577- 5%. Planting material will be raised inthe PTP managed nurseries. Bare-root, budded stumps will be used for theinitial planting and supplying will be done by using 2-3 whorl polybagbudded stumps. Planting density will be 500 trees/ha; the spacing willvary from 8 x 2.5 m to 6 x 3.3 m depending on the growth characteristics ofthe clone.

6.04 Shortening of the period of immaturity will be achieved by usingadvanced planting materials, establishing a leguminous cover crop after landclearing, adequate weed control and upkeep by the use of herbicides, and byadequate fertilizer applications based on soil and leaf analyses. Attentionwill be given to root disease control by poisoning any tree stumps left inthe field, and removing and burning infected wood during land clearing.

6.05 Modern tapping systems with the emphasis on low tapping frequencycombined with Ethrel stimulation will be introduced with the objective ofobtaining large increases in productivity per tapping and satisfactory barkconservation.

6.06 For well managed rubber production in the settlement areas, the PTPswill closely supervise lalang and mikania control and give attention toweeding practices, pest and disease control, and the rate of fertilizer appli-cation. One of the most important prerequisites for sound rubber managementis the proper organization of training for tapping and stimulation techniquesincluding the supervision of exploitation, such as monthly control of barkconsumption and tapping quality. The estates have demonstrated their abilityto supervise rubber establishment and exploitation.

6.07 Oil Palm. PNP I will develop oil palm planting in the SouthernEstates around Langsa. Planting material will be high yielding germinatedDura x Pisifera (D x P) produced by the Marihat Research Station in NorthSumatra (MRS). Planting density will be 143 plants per hectare using aspacing 9 x 9 m triangular system. Pre and main nurseries will be establishedin polybag on a flat area near a reliable water supply in a central locationserved by an all weather access road. A sprinkler system will be provided for

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the main nursery. Legume cover crops will be established after land clearingand adequate fertilizers will be applied based on oil and leaf analyses.Close attention will be given to weeding practices to control lalang, mikaniaand other noxious weeds. Assisted pollination will be necessary during thefirst five years of production.

6.08 Food Crops. Input requirements and production levels of rubbercan be estimated with considerable confidence, but since large-scale foodcropping is a new development in the project area, the optimum choice of foodcrops and the optimum use of inputs for sustained annual food cropping onred-yellow podzolic soils are difficult to define precisely. In addition to areview of the present research being undertaken in Indonesia, close liaisonduring the project will be maintained with the Bank's first Transmigrationand Rural Development Project (Loan 1318-IND) and the first and secondNucleus Estates and Smallholders Projects (Loans 1499 and 1604, respectively)to monitor the technical feasibility, the input-output relationships andlabor requirements of sustained annual food cropping on the red-yellowpodzolic soils.

6.09 In the project areas adequate attention will be given to foodcropping activities. The first year package of food crop inputs for eachnew settler family in Danau Salak will be supplied by the nucleus estate.At both Rimbo Bujang and Danau Salak planting material and food crop inputswill be supplied on a cash basis by the nucleus estate managed PMSUsin subsequent years. No difficulty is perceived in smallholders purchasingplanting material and other inputs since incomes from estate employment willbe sufficient to meet these requirements.

C. Yields and Production

6.10 Rubber. Smallholder rubber yields on existing holdings are rarelyabove 400 kg/ha p.a. With nucleus estate management, improved practices,and good settler response, peak yields for new settler rubber farmersshould reach 1,620 kg/ha p.a. and an average yield of 1,180 kg/ha over 25years. Expected rubber yields for smallholders are shown in Annex 3, Tables1 and 2. The estates themselves should produce rubber with peak yields of2,900 kg/ha or average rubber yields over a 25-year tapping period of 1,818kg/ha.

6.11 Oil Palm. Under PNP I management it is expected that harvestingwill start 30 months after planting to achieve peak yields at full maturityof about 18.5 tons ffb/ha with an oil extraction rate of 22%. High qualityoil will be produced through correct timing of harvest, careful handlingand rapid transportation of fresh fruit bunches to the mill.

6.12 Food Crops. Garden crops consisting of fruit trees, vegetables,and small amounts of cash crops for each new settler family (0.15 ha) will becontinuously and intensively cropped. On the subsistence food crop area (0.8ha), with much less intensive cropping, yields are expected to reach 1.2tons/ha by year 10 for padi, 0.8 tons/ha for beans and groundnuts, and 9tons/ha for wet cassava. Inorganic fertilizers and compost will be used to

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obtain the projected yields. Farm plans (detailed in Annex 3) show that newsettlers in the proposed project will be able to supply most of the food cropsubsistence needs for their own families. A small marketable surplus may begenerated.

6.13 Prices. The smallholder rubber price has been discussed in para.5.02. All prices for inputs and outputs in farm income analysis have beenexpressed in early 1979 constant terms, and where applicable, have beenadjusted for the recent devaluation from Rp 415 to Rp 625 to US$1.00. Otherprices used to estimate farm incomes are described as follows:

(a) Rice: Rice is bought and sold by BULOG, the GOI agency for ricepurchasing, at prices below the world market price. The GOI hassubstantially raised domestic padi prices to encourage rice produc-tion. At the same time there has been a fall in world prices forrice which has brought farmgate prices closer to world levels. Thefloor price for padi is now set at Rp 75/kg while an imputed economicprice would be about Rp 82/kg. The price used in financial analysishowever is based on the padi price in the project area of Rp 80/kg.The average price for rice in economic analysis was Rp 110 to 1990and about Rp 133 thereafter.

(b) Cassava, Groundnuts and Garden Crops: The current farmgate pricesin the project area for wet root cassava, Rp 8/kg, and unshelledbeans/groundnuts, Rp 300/kg, have been used in projections and areexpected to remain constant over the life of the project. Otherprices assumed in the analysis are Rp 15/kg for sweet potato,Rp 500/kg for coffee and Rp 2,000/kg for cloves.

(c) Fertilizers: The BIMAS prices of Rp 70/kg for both urea andTSP were assumed to remain constant throughout the project life.The economic analysis of farm models has used prices for fertilizerrequired in food and rubber production based on IBRD commodityforecasts and converted to farmgate prices. The prices for ureaand TSP were adjusted to Rp 132/kg and Rp 116/kg respectively to1990 and Rp 168/kg and Rp 150/kg thereafter.

D. Farm Incomes

6.14 Farm Incomes. Farm incomes for new settlers at Danau Salak andsmallholders at Rimbo Bujang are summarized in Tables 6.1 and 6.2. Familyincomes are shown in current terms and in constant 1979 prices to reflect theprojected payments for debt service and the relative price changes betweenrubber and the costs of production.

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Table 6.1: FARM INCOME - DANAU SALAK NEW SETTLEMENT

Year3 10 15 20 25----------- (Current US$)------------

Gross value of production of:Food and livestock production (1 ha) 727 1,383 2,648 3,715 5,215Rubber (3 ha) - 4,262 7,947 11,306 12,826

Total costs of production /a 421 1,493 2,186 3,075 4,164

Net on-farm income 306 4,152 8,409 11,946 13,877Total off-farm income 474 - - - -

Total income 780 4,152 8,409 11,946 13,877Debt repayments - 1,065 1,987 - -

Allowance for risk 117 623 1,261 1,792 2,082

Net income 663 2,465 5,161 10,154 11,796

Net income (constant 1979 US$) 414 959 1,434 2,011 1,664Incremental net income 100 1,560 3,894 8,376 9,299

Incremental net income(constant 1979 US$) 62 607 1,082 1,659 1,312

/a Includes IPEDA taxes.

6.15 New Settlement Danau Salak. The farm plan for new settlement has

been specifically designed to provide continuity of income to settlers with

estate wages paid until the rubber reaches maturity and thereafter from theirown farm production. Incomes during the development period will not be

seriously depressed in the event of food crop failures since off-farm employ-ment will constitute 70% of net family income. At rubber maturity, and afterdebt repayment amounting to about 25% of total income, net family incomes

will be greater than US$1,000 (Year 10) and the cash surplus after allowing$352 for family subsistence, will be in excess of US$600. In per capitaterms, incomes for Danau Salak smallholders will grow from about US$83 in

the initial years of the project to about US$285 at full development (Year

15). The positive cash flow and its magnitude from commencement of theproject will be sufficiently attractive to encourage active settler parti-cipation.

6.16 Rimbo Bujang Smallholders. Net family incomes for smallholders(after debt service) will grow from about US$320 at project start-up to

over US$1,000 by year 15. This represents growth in per capita incomes fromabout US$64 to about US$205 at full development (year 15). During the period

of rubber immaturity, farm families will have an assumed income from food

crop production supplemented with off-farm nucleus estate employment. There

will be a positive cash flow after debt service in all years of the project.The incremental cash income will be attractive to smallholder participation.

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Table 6.2: FARM INCOME - RIMBO BUJANG SMALLHOLDERS

Year3 10 15 20 25

---------- (Current US$) ---------

Gross value of production of:Food and livestock production(1 ha) 567 1,903 2,665 3,739 5,249Rubber (2 ha) - 2,583 5,153 7,820 7,185

Total costs of production /a 437 1,345 1,976 2,802 3,743N-et on-farm income 130 3,141 5,842 8,757 8,691Total off-farm income 474 - - - -Total income 604 3,141 5,842 8,757 8,691Debt repayments - 645 1,288 - -Allowance for risk 90 471 876 1,314 1,304Net income (current) 514 2,024 3,678 7,443 7,387Net income (constant 1979 US$) 321 787 1,022 1,474 1,042Incremental net income (current) 2 1,119 2,410 5,666 4,891Incremental net income

(constant 1979 US$) 1 435 669 1,122 689

/a Includes IPEDA taxes.

7. COSTS, BENEFITS AND JUSTIFICATION

A. Project Benefits and Justification

7.01 Employment and Production. The nucleus estate strategy for newsettlement and smallholder development will increase rubber and food cropproduction on a total of 50,000 ha of which 38,000 ha will represent new landdevelopment on unutilized and heretofore uneconomic secondary forest andlalang. The project will directly benefit 12,000 smallholder families orabout 60,000 people in the rural target population. About 4,000 of thesefamilies will be new transmigrants from Java. In creating two permanent jobsfor each smallholder family, employment will be generated for 24,000 people.Family labor requirements and labor availability is shown in Annex 3, Tables 5and 7. As a result of rehabilitation and expansion plans of PNP I and PTPXVIII, an additional 6,000 permanent estate jobs will be created of which3,000 will be transmigrants and resettled estate laborers from Java. Assuminga conservative estimate of 20% of the permanent jobs created for additionalregional employment in the project areas as a result of spread and multipliereffects, an additional 6,000 rubber related, secondary service and tradesmenjobs will result from the project. Total employment generated by the projectwill therefore amount to 36,000 jobs.

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7.02 A total of 64,000 mt of rubber will be produced at full developmentof which about 40,000 mt will come from new settlements and smallholdings.Incremental production of oil palm from PNP I will be about 14,000 mt.Food crop production from project smallholders is expected to be about12,000 mt. The total value of all project incremental production will beabout US$76.5 million p.a. (fob constant 1979) at full development in1995.

7.03 Projected Incomes. Projected incomes of Danau Salak new settlersand Rimbo Bujang smallholders have been discussed in paras. 6.15 and 6.16.Other benefits which have not been quantified include improved health andsanitation, the nutritional status of smallholders, improved transportation,and the multiplier effects on the regional economy of local capital formationand increased levels of consumption expenditure.

7.04 The rehabilitation of PNP I covering 14,271 ha of rubber and oilpalm development will reverse the company's present level of financialinsolvency [para. 3.02 B(c)] to a level of net income per annum after taxes ofabout Rp 10.9 billion (US$17.4 million current). Incremental net income perannum resulting from the project will be about Rp 9.5 billion (US$15.2million current) at full development. Existing liabilities of Rp 11.0 billion(US$17.6 million) will be converted to equity by the GOI [para. 3.02 B(c)]and PNP I through its diversification program will be financially secure tocontinue its own further expansion and carry out functions of a nucleus estateto smallholders in the Aceh area. The GOI will accrue benefits from PNP Ifrom corporation and other taxes over the entire life of the project amountingto Rp 267 billion (US$427 million) and from dividends estimated to total Rp97.5 billion (US$156 million).

7.05 Although PTP XVIII is financially sound [para. 3.02 A(b)(iii)]the financial position of the corporation will be substantially improved withthe project. Expansion and rehabilitation of the Danau Salak estate, whichhas previously experienced a net loss of about Rp 78 for each kg of dry rubberproduced, will develop its profitability at Danau Salak to a level comparablewith rubber on the Java estates of PTP XVIII where net profits per kg areabout Rp 90. Net incremental income for PTP XVIII resulting from the projectwill be about Rp 5.5 billion p.a. (US$8.8 million current) at fulldevelopment. Total PTP XVIII net profits at full development will beRp 25.4 billion (US$40.6 million current) by 1995. Incremental benefitsaccruing to the GOI in the form of taxes from PTP XVIII will be aboutRp 153.5 billion (US$245.6 million) over the life of the project. Detailedfinancial analyses of both PNP I and PTP XVIII including analysis of costprice relationships for various crops are contained in the Staff WorkingPapers.

B. Costs

7.06 GOI investment costs per family have been computed as shown inAnnex 4, Table 1. The total smallholder costs of development for Danau Salaknew settlers will be US$6,216 per family (constant 1979) and for Rimbo

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Bujang smallholders, US$4,312. Credit costs of development for rubber estab-lishment, overheads, machinery and equipment, settler housing and the sub-sistence package are about 85% of total costs for Danau Salak smallholdersand about 93% of total costs for Rimbo Bujang smallholders.

7.07 With two permanent jobs created on each smallholding, the costof individual job creation by GOI for this project will be about US$3,108(constant 1979 US$) at Danau Salak and about US$2,156 at Rimbo Bujang. Thesecosts include village development and health services which might be legiti-mately charged to regional development. This cost compares favorably with jobcreation in average small-scale industry in Indonesia estimated at aboutUS$6,500 in medium to large-scale industry at about US$17,000. Permanent jobcreation and absorption of surplus labor at PNP I in the initial years of theproject will include about 4,300 permanent laborers including the 2,400laborers to be transmigrated from Java. The average cost of job creationwill be about US$7,800 (constant 1979). PTP XVIII will employ about 1,700workers at full development including 607 which will be resettled on DanauSalak from Java. The cost of permanent job creation at PTP XVIII's DanauSalak estate will be about US$6,850 (constant 1979).

C. Financial Results

7.08 Results of financial cost benefit analysis are summarized in Table7.1. Financial rate of return analysis was not carried out for smallholdercomponents since farm families do not invest their own funds in the project.The financial rate of return for rehabilitation of PNP I is estimated at 17%(after taxes). The rate of return for individual crops at PNP I, after taxesbut excluding corporate allocations such as bonus payments is estimated to be18% for rubber and 20% for oil palm. The rate of return for PTP XVIII develop-ment at Danau Salak is estimated at 19%. The rates of return for the estatesare excellent owing to the large capital outlays for rehabilitation of planta-tion and infrastructure.

7.09 Sensitivity Analysis. Effects on the financial rates of returndue to changing prices, yields, export duties, investment costs and delayedbenefits are also presented in Table 7.1. The estate development programsare fairly sensitive to changes in the majority of these tested variables,particularly in reduction of expected prices or yields. A 20% drop in therubber price/yield will lower the rate of return for the Danau Salak estatefrom 19% to 11% and for the PNP I rehabilitation from 17% to 10%. Should theGovernment raise the export tax on rubber from its present level of 5% of fobto 20% of fob comparable with the new export tax on oil palm, all rates ofreturn would remain satisfactory.

D. Economic Results

7.10 The economic rate of return for the project was calculated inconstant 1979 prices, net of taxes, duties and subsidies, taking into accounta standard conversion factor and shadow wage rates. The economic prices for

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Table 7.1: RESULTS OF FINANCIAL RATE OF RETURN(X)

Rubber exportFinancial Crop price/yield changes duty increased

rate of return -20 -10 +10 +20 to 20% fob

FaRtate Development

I. PNP I Rehabilitation - Langsa 17 10 14 19 22 12II. PTP XVIII Expansion - Danau Salak Estate 19 11 15 21 23 13

Investment Costs Price/YieldsInvestment cost -25 +25 Benefits delayed-25 +25 -10 +10 -10 +10 one year

Estate Development

I. PNP I Rehabilitation - Langsa 21 14 16 27 10 17 17II. PTP XVIII Expansion - Danau Salak

Estate 22 16 19 25 13 18 18

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fertilizers and rice used in the analysis are described in para. 6.13. Thefob prices for rubber and oil palm were used in the calculation of projectbenefits. Other assumptions used in the analysis were:

(a) Local costs were adjusted by the standard conversion factor forIndonesia of 0.85 to bring all local costs to border prices sinceimport taxes and quantitative restrictions understate the economicvalue of foreign exchange of Rp 625=US$1.00;

(b) Taxes such as the corporation tax (45% of net income) and tree cropexport duties (5% of fob) were eliminated from the estate components.Export duties were also eliminated from the price received forrubber by smallholders. IPEDA taxes were eliminated in calculatingthe net value of smallholder production;

(c) Farm Labor. The financial wage to be paid to smallholders by thenucleus estates and the available wage in the project areas whenwork is available is about Rp 650/day. This wage overstates themarginal productivity of labor in these areas since most familyoperated rubber smallholdings have low productivity and becausethere are a considerable number of landless families in these areas.For these reasons, labor utilization is only about 50%. The marginaleconomic value of the farmer's labor (the shadow wage rate) hastherefore been set at Rp 325/day. Skilled permanent labor is costedat the full prevailing wage rates, averaging Rp 1,100/day for estate- =skilled labor and Rp 1,500/day for foreman and equipment operators;

(d) Investment costs are net of taxes and transfer payments. Indetermining their economic cost, local costs were adjusted using thestandard conversion factor of 0.85. Investment costs have beenadjusted to reflect the economic value of the unskilled laborcomponent in tree crop development. Costs include an allowance of10% for physical contingencies but exclude price contingencies;

(e) Roads, village and social infrastructure were fully costed in theeconomic rate of return. In addition, all technical assistance costshave been included in the estimated economic rate of return for theproject.

7.11 Economic Rate of Return. Using the above assumptions and discountingcosts and benefits over 31 years, the estimated economic rate of return is29%. The economic evaluation of all project components is summarized in Table7.2 below.

7.12 Sensitivity Analysis. The project's economic viability is expectedto be fairly resilient to changes in costs and benefits associated withproject investments. Sensitivity of project components were also tested tovariables in price/yield changes. Investment cost increases of 25% willreduce the economic rate of return to 24% and will have little effect on theoverall viability of the project. Rates of return for all project components

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Table 7.2: RESULTS OF ECONOMIC RATE OF RETURN ANALYSIS(%)

Investment CostsInvestment Income frbm production

Economic cost -25 +25 Benefits delayedrate of return -25 +25 -10 +10 -10 +10 one year

Estate Development

I. PNP I Rehabilitation 31 44 24 25 38 17 33 27

II. PTP XVIII Expansion DanauSalak Estate 28 33 24 31 35 23 26 25

Smallholders Development

III. Danau Salak New Settlement 19 22 17 20 24 16 19 17

IV. Rimbo Bujang Smallholders 14 17 12 14 19 10 14 12

Total Project 29

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are not significantly affected when benefits are delayed by one year toaccount for delayed farmer participation. With the exception of the estimatedrate of return for Rimbo Bujang smallholders, adjusted for investment costincreases of 25% and an unlikely decline in rubber prices by 10% over the lifeof the project (ROR 10%), all rates of return are satisfactory.

E. Project Risks

7.13 The first Nucleus Estates and Smallholders Development Project(Loan 1499-IND) has been sufficiently implemented since late 1977 to identifysome risks for project implementation. Implementation of the second project(Loan 1604-IND), signed on July 12, 1978 is not sufficiently advanced toidentify particular project risks. In the former project no particulartechnical or economic risks are evident but financial and managerial problemshave slowed project implementation of the smallholder components. Owing to

difficulties in budget preparation by the DGE and development of financialprocedures between the project managers, the nucleus estates, the DGE, and theMinistry of Finance, coupled with inadequate allocation of budget funds in theprevious Government fiscal year, allocations of finance for smallholder develop-ment was delayed for about six months. With insufficient funds, the nucleusestates have not reached the planting program targets set for smallholderdevelopment. Difficulties with budgeting and allocation of finance have beenremedied and all financial reporting and budgeting is now carried out throughthe DGE. The GOI brought to negotiations evidence of allocation of requiredcredit and noncredit funds for start-up for the proposed project.

7.14 Delays in project finance have delayed housing construction for

smallholders in Loan 1499-IND and hence the recruitment of settlers toadequately provide a labor supply for project developments. Moreover, theresponsibilities of project management and those of the nucleus estate sitemanager have not always been effectively coordinated, since each manager hasbeen responsible to separate project entities. To minimize the risk in toomuch diffusion of management responsibility between the provincial governmentand the nucleus estate, both the project manager and the nucleus estate sitemanager in this project will be appointed by, and made responsible to, thenucleus estate. It is anticipated that this change in management willbetter meet the objectives of integrating such components as rubber develop-ment with village infrastructure, road construction, recruitment of settlersand the development of social services.

8. AGREEMENTS AND RECOMMENDATIONS REACHED

8.01 The following assurances were obtained during negotiations:

(a) the nucleus estates operated Planting Material Supply Units willcontinue to supply food crop inputs for project settlers until suchtime as the BIMAS program is extended to the project area (para.3.02 A(a)(ii));

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(b) two internationally recruited technical specialists including aninfrastructure program manager and a rubber processing engineerwill be appointed by PTP XVIII before December 31, 1979, acceptableto the Bank on terms and conditions satisfactory to the Bank [para.3.02 A(b)(iii)];

(c) three internationally recruited technical specialists includingan estate processing engineer, a production management specialistand a financial manager will be appointed by PNP I beforeDecember 31, 1979, acceptable to the Bank on terms andconditions satisfactory to the Bank (para. 3.02 B(c));

(d) the DGE will contract with a firm of internationally recruitedconsultants acceptable to the Bank and on terms and conditionssatisfactory to the Bank to carry out a detailed hydrologysurvey of the Danau Salak project area to test the quality andquantity of groundwater at each of the proposed village locations,prior to December 31, 1979, and to be completed within 12 months(para. 3.02 A (a) (vi);

(e) a schedule of project expenditures from November 1, 1978 will beprovided by GOI in support of the request for retroactive financingprior to loan signing (para. 3.03);

(f) annual work programs for project implementation will be sentby DGE to the Bank for review and comment before October 31each year (para. 3.03);

(g) Government budget funds from APBD and INPRES sources will besufficient in size to cover noncredit expenditures during theproject but should the services be insufficient, the Borrower willmake timely arrangements satisfactory to the Bank to meetadditional requirements (para. 3.13);

(h) accounts for smallholder development both separate and consolidated,will be audited by the State Auditors yearly and the audit will besubmitted to the Bank within six months of the close of eachfiscal year (para. 3.23);

(i) PNP I and PTP XVIII will submit to the Bank annual auditedreports made by independent auditors within six months of the closeof the fiscal year (para. 3.24);

(j) each estate will send budgets of the work program for expansionof the estate, each year to the Bank for review and commentbefore final approval by their Board of Supervisors (para. 3.24);

(k) the DGE will employ consultants providing inspection servicesacceptable to the Bank and on terms and conditions satisfactoryto the Bank for short-term inspection assignments and reportingto the DGE, to monitor the progress of the project with respect tofield conditions, housing, infrastructure, and finance for allproject components (para. 4.02);

- 63 -

(1) the Borrower through the Minister of Agriculture will cause the DGE,not later than September 30, 1979, to strengthen the presentproject staffing in DGE responsible for project implementation tobe organized as the Team for Assistance for Nucleus Estates andSmallholders Projects to further assist the DGE in the implementationof projects, in particular, the planning, execution, monitoring andexecution of such projects (para. 4.02);

(m) copy of the certificate of "conditional" Hak Milik for 4 ha of landwill be received by each new settler family at Danau Salak and thesimilar title will be received by Marga land settlers for a 2 haland area, both within six months of entry to the project (para.4.11);

(n) GOI will cause the nucleus estates PTP VI and PTP XVIII asrubber processors to pay about 70% of the fob price for dry rubberproduced by smallholder project farmers, except in cases of:

(i) significant reduction in quality of rubber received,or a significant reduction in the fob price from thatprevailing at the date of the Loan Agreement;

(ii) significant increase in collection, processing and marketingcharges of the nucleus estate processor from those prevailingat the date of the Loan Agreement (para. 5.03);

8.02 The following are conditions for disbursement for the respectivecomponents of the project:

Smallholder Development

(a) signing of a Financing Agreement between the Borrower andBRI and Subfinancing Agreements between BRI and PTP XVIIIand BRI and PTP VI in form and substance satisfactory to theBank (para. 3.09);

(b) signing of Smallholder Rubber Development Agreements betweenthe DGE and PTP XVIII and the DGE and PTP VI to specifywork to be carried out for smallholder development in formand substance satisfactory to the Bank (para. 4.07);

(c) a manager for each PMSU would be appointed by each nucleus estateprior to disbursement of funds for investments associated with eachunit (para. 4.09).

PTP XVIII and PNP I Estate Development

(d) signing of a Subsidiary Loan Agreement between the Borrowerand PNP I and the Borrower and PTP XVIII in form and substancesatisfactory to the Bank (para. 3.10).

8.03 With the above assurances and conditions, the project will besuitable for a Bank loan of US$99 million, with repayment over 20 yearsincluding 6 years of grace. The Borrower will be the Government of Indonesia.

ANNEX 1Table 1

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

Project Phasing

Activity Unit 1979 1980 1981 1982 1983 1984 Total

I. Danau Salak SettlementRubber planted ha - 1,250 2,500 2,750 2,750 2,750 12,000Total settler families No. - 417 833 917 917 916 4,000Village development No. - 2 4 4 4 4 18

II. Danau Salak Nucleus EstateRubber planted ha 800 800 800 800 800 - 4,000

III. PNP IRubber planted ha 500 825 1,765 1,800 1,900 - 6,790Oil palm planted ha 500 864 771 - - - 2,135Rubber rehabilitation ha 2,356 - - - - - 2,356Oil palm rehabilitation ha 2,987 - - - - - 2,987

IV. Rimbo Bujang (existing transmigrants)Rubber planted ha - 2,000 2,750 2,500 2,750 2,000 12,000

V. Rimbo Bujang (Marga Land)Rubber planted ha - 500 750 750 1,000 1,000 4,000

- 65-ANEX I

NUCLEUS UTATES MID SIMLQOLD= III PIJ5CT

Pr-lnot Co-t . S.. 5n;c1.nt

DU SAL"

1980 298 2982 1963 L 1983 I5 .- 1 tovL

L. 0..m.... Co..t

b6.b.r D.vlo.prnt4agna 168.8 . 453.9 . 653.8 . 760.8 841.1 . 547.1 - 3,425.5 - 3,425.5(Iran . _ 2.2 2 2 8.6 8.6 18.4 18.4 29.7 29.7 41.9 .1.9 100.8 200.9 202.6Oth0. fnn6222n.1./oh.t12a . 44.8 - 106. - 153.4 _ 201.5 . 21.0 . 20Z.5 959.4 9i9.4

O-ht arrl... 73.6 73.6 149.1 L49.1 168.5 168.5 174.4 176.4 280.6 260.6 24.9 24.9 771.1 771.1 1252.2

016. to d p 6D.0 6.3 129. 18.5 25. 26.9 218.4 26.8 ; I 3 875.4 745.37

Sobio1ta 024.4 278.1 622.5 386.4 049.4 493.4 979.3 284.5 1.078.3 679.7 640.8 384.4 4,40L.7 2 706.2 7. 20.2

HOhnIl.ry and Loulm.n2n /-Asrlool6-r-l nochlr.r7 27.4 325.9 12.6 217.5 4.5 74.1 2.3 35.2 1.9 30.3 2.6 39.3 51.3 722.3 773.6Tn..po.. and v.h;.l. ._ 9.6 21.5 0.0 2.8 _ 2 1.2 2.7 _ - 11.6 26.0 37.6

S.bto.,l 27.4 325.9 22.2 239.0 5.3 75.9 2.3 35.2 3.1 33.0 2.6 39.3 62.9 740.3 822.2

road 12a0.on-E.nt (aCivLI .014. 28.7 71.1 45.9 84.5 65.2 120.0 48.7 89.9 44.0 80.7 _ 242.5 446.2 688.7hachtn.ry 27.5 184.5 10.9 84.5 - - - . . 28.4 269.0 297._

56.2 255.6 56.0 169.0 65.5 120.0 48.7 89.9 44.0 90.7 _ _ 70 9 729.2 976.2

Ooato.z *nd 22.20 . 0r4.Aa2tlnr haov.2n 33.3 77.6 31.2 179.5 56.4 131.6 56.4 131.6 56.3 131.4 2 _ 253.6 591.7 84i.3Othtr ho.aLn5 2.7 6.3 21.2 46.7 4.7 11.1 0.8 1.9 6.9 15.9 _ _ 36.3 81.9 118.2

S.b6-.1 36.0 83.9 72.4 166.2 61.1 142.7 57.2 133.5 63.2 247.3 _ _ 289.9 673.6 962.5

Sub.2.t.nc. Pack... (aCans pay7_nc. 6.2 6.2 22.5 12.5 13.8 13.8 13.8 5.8 2. 13.8 L . 6081 60.1 120.2S.ed od fnrttlla..

2f -t. *.r 3 6.1 7.3 6.2 14.7 6.8 16.2 6.8 16.1 6.8 26.1 _ _ 29.7 70.3 200.02nlLi.2 I-rd l ... in8 6.9 6.9 13.8 13.8 15.1 15.1 15.1 15.1 15.1 15.1 - 66.0 66.0 232.0

S.bt.-.l 16.2 20.4 32.5 41.0 35.7 45.0 35.7 45.0 30.7 45.0 _ 155.8 296.4 352.2

Food Crop Canc.r(8.nkatln. /aFPdt. r.......... I 9nt" 21.7 26.2 23.3 52.1 25.7 57.5 25.7 57.5 25.7 57.5 1 _ 212.1 250.7 362.88a420n.ry(eqoipn.or 9.9 71.8 1.0 13.4 - _- 8 5 _ 20.9 85.2 96.1Gi2i2 vqka 23.6 55.5 2.1 5.1 - _ - _ - - _ 25.7 60.6 86.3

S.bcot.L 45.2 153.4 26.4 70.6 25.7 57.5 25.7 57.5 25.7 57.5 _ 148.7 396.5 545.2

Vill... Infraa.r.t- ... 5.5 12.8 10.0 23.3 10.5 24.6 11.4 26.7 7.6 17.6 _ _ 45.2 105.3 250.0

d.26th Co.ponnnt L. 9.6 6.4 12.4 15.9 25.5 34.2 53.9 74.7 24.7 20.6 . 126.4 141.7 268.1

Tot-l Inv1 nn6 428.5 1.036.5 844.2 1.211.4 1,078.7

393.2 1.214.2 1.047.0 L.282.3 1.071.4 643.4 423.7 5 5OI 5 .83-2 1.2 18&.5

b. Op .a..n8 C 2!659-ithold. 2-.ttl.n... 26.1 38.2 52.3 76.1 57.4 83.7 57.4 83.7 57.4 83.6 - - 250.6 365.2 615.8R.bb"r d.o-.-- .o.r...d. 21.0 21.0 49.9 49.9 67.2 "7.2 78.2 58.2 87.9 87.9 5l.3 51.3 355.4 355.4 710.88.0a.gnt fIn /b 21.2 - 49.9 - 67.2 - 78.2 - 7 5.3 - 355.4 355.4

T.t-2 oo r.tin9 .. t6 68.2 59.2 152 1 226.0 192.6 250.8 213.8 261.9 233.2 172.5 102.6 51.3 961.4 720.6 1,682.0

C. Total 8... C0..t 506.6 1.095.6 996.3 12237.4 1.270.3 2 L44.0 1.428.0 1,208.9 1.515.5 1.242.9 746.0 475.0 6.462.7 6.403.8 12.SD6.5

D. Con...In...ntPh".421 50.7 109.6 99.6 123.7 127.0 124.4 142.8 220.9 151.6 124.3 74.6 47.5 646.3 640.4 1 256.7Prti 117.0 253.0 383.6 476.4 656.7 591.4 895.3 757.9 1.127.6 1.089.3 648.3 412.8 35828.5 3.580.8 7,429.3

6,46,6.2 167.7 362.6 403.2 600.2 783.7 705.8 1,038.1 878.8 1,279.0 1,213.6 722.9 460.3 4.474.8 4.221.2 8,696.0

r. Prosnot Cot.t . Nnn Snlt2.n.ntIIn. uCa S t 674.3 L.458.2 .479.5 I 837.5 2.054.0 2.S49.8 2L4". 2.087.7 2.794.7 2456.3 1468.8 935.3 10.937.5 10.625.0 1562.5

-.dJ7a.d for dnoa2M.620n.7S Ovnnb.d- 2 10. of robb-r do.-o.Pn-t .o.. n6th 50% 2880; fnn.o fan 3 52 16bb6. d ... n1.-t 100I IqcU;

oo.Vha.da a-. cr.d1t ... .t6 hil. -n-g-nt 2. non-... dit.

- 66 -

ANNEX 1Table 3

INDOHESIA

NUCLEUS ESTATES AND SHIALLIOLDE8S III PROECT

PTP XVIII

Nucl... EaaCte - DWna. Sal5lk

!isoLSot os LS(Up cilion)

1979 1980 1981 1982 1983 1984 1985 ---- Total co.ts ---Ihswelo3ment costs Local Forelgn Local Focelgn Local Forign Local Foreign Local Foreign Local Foreign Local Foreign Local Foreign Total

lobber dOVlop_nc- direct coat 213.7 325.4 295.5 145.0 337.2 173.2 365.6 202.9 395.4 232.2 210.6 137.2 128.8 117.6 1,946.8 13133.5 3.080.3- estate charges 33.9 - 47.2 - 59.3 - 70.2 - 78.0 - 78.0 - 65.3 - 431.9 - 431.9

Subtotal 247.6 125.4 342.7 145.0 396.5 173.2 435.8 202.9 473.4 232.2 288.6 137.2 194.1 117.6 2.378.7 1,133.5 3,512.2

Agricultural machinery - - 50.3 382.0 0.2 3.6 2.0 32.8 0.6 9.9 2.5 39.0 3.4 49.5 59.0 517.3 576.3trasport 6 production

eq.uip"& 3.2 46.8 - - - - 0.7 9.2 - - 3.2 37.7 3.0 46.1 10.1 139.8 149.9Vehicle. 20.1 30.6 9.6 38.2 9.0 36.6 4.6 30.5 3.7 8.4 4.4 10.1 9.7 27.1 61.1 181.5 242.6lubber proeeaiag 3.3 44.0 358.0 977.8 - - - - - - - - - - 16t.3 1.021.8 1.183.1Moselag and buildings - - 205.6 480.8 36.4 87.6 33.3 27.1 10.4 24.4 1.1 2.5 0.8 1.9 265.8 624.3 890.1brckahop - - 7.8 38.2 - 13.1 - 9.8 - 2S.6 7.8 28.0 - - 15.6 114.7 130.3Ottic. equip uem - - 2.7 167.3 2.9 0.9 0.5 33.8 3.0 0.9 1.0 2.9 - - 10.1 205.8 235.9Labor reettlteInt 24.3 35.1 6.7 9.8 7.1 11.1 3.4 4.8 4.1 6.0 0.6 0.6 0.4 0.6 46.6 68.0 114.6technical smastesc - - 12.4 75.0 12.4 75.0 12.4 75.0 - - - - - - 37.2 225.0 262.2

Total 8aseCosts 298.5 301.9 795.8 2,314.6 464.5 401.1 470.9 40S.9 495.2 307.4 309.2 258.0 211.4 242.8 3,045.5 4,231.7 7,277.2

CoatisNeclasPrice 29.9 30.2 79.6 231.5 46.5 40.1 47.1 40.6 49.5 30.7 30.9 25.8 21.1 24.3 304.6 423.2 727.8Ihycical 23.0 23.2 183.8 534.7 178.9 154.4 243.5 209.9 310.5 192.7 231.3 193.0 166.4 287.2 1.337.4 1,595.1 2,932.5

Total Contin-gences 52.9 53.4 263.4 766.2 225.4 194.5 290.6 250.5 360.0 223.4 262.2 2i8.8 187.5 313.5 1,642.0 2,018.3 3,660.3

Total Costs 353.4 355.3 1,059.2 3,080.8 689.9 595.6 761.5 656.4 855.2 530.8 571.4 476.8 398.9 554.3 4,687.5 6,250.0 10,937.5

/a Costs are poet-devaluation.

- 67 -

ANNEX 1Table 4

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III FtOJECT

PHI I

Total Project Costs /a( p *illion)

1979 1980 1981 1982 1983 1984 Total costCost item Local Foreign Local Foreign 1ocal Foreign local Foreiga local Foreign Local Foreign Local Foreign Total

Plastation development S82 791 729 649 950 608 928 529 1,011 713 819 584 5.019 3.874 8,893Tr sport equipment 34 129 94 159 68 135 15 135 22 248 39 209 272 1.015 1,287Agricultural equipment 48 269 13 219 23 324 - 46 - 44 47 282 131 1,184 1,315Factory equipmntRaw - - 609 1,863 40 60 40 60 17 26 105 592 811 2,601 3,412apliacwaent - - - - - - - - 96 217 96 217 192 434 626

Infrastructure 16 38 28 65 38 87 22 51 23 54 12 28 139 323 462Mousing 112 261 408 951 389 908 53 124 11 26 4 11 977 2,281 3,258atate buildings 29 66 46 104 25 61 9 21 5 15 1 2 115 269 384

Need otfice - - is 41 11 25 - - - - - - 29 66 95llicellancous equipment 11 146 20 277 1 17 I 9 I 11 - - 34 460 494Trasport tranmigrants 6 35 31 189 32 195 - - - - - - 69 419 488Technical assistance - - 17 105 17 105 17 105 - - - - 51 315 366

Total IBae Cost 838 1,735 2,013 4,622 1 594 2,525 1,085 1,080 1,186 1,354 1,123 1.925 7.839 13,241 21,080

Contingencies

Physical 84 174 201 462 159 253 109 108 118 136 113 193 784 1,326 2,110Price 65 134 465 1,068 614 973 561 558 743 849 804 1.539 3,252 5,121 8,373

Total Contingencles 149 308 666 1,530 773 1.226 610 666 861 985 917 1,732 4,036 6,447 10,483

Total Cost 987 2.043 2.679 6.152 2,367 3,751 1.755 1,746 2,047 2,339 2.040 3.657 1875 j 19 ,688j a1563

USl 19.0 31.5 50.5

LA Adjustments for devaluation aer Included ink base costa on this table.

- 68 - ANNEX 1Table 5

IMIU S=S AJA t MD SWIM III U2C?

roct Coots - ietino and Na SottimoWto La.(MP milion)

ISSO HU 1194 19SZ 19Si3 _ 19 1985 Total CoatLocal Foreign Local Forign Local Foreisn Locl Foreign Local ForeIig Local Foreign Local F-r1Si Total

A. Tr-etrc-t Coot.

Rff'e, DroelorreantWa;oo 487.6 - 893.9 - 1,036.5 - 1,294.2 - 1,229.9 - 701.9 5,644.0 - 5,644.0irco - - 6.5 6.5 17.6 17.6 30.7 30.7 46. 6.1 60.3 60.3 161.2 161.2 3 7 4E,t:.r foetiloror, ahbaicae - 53.3 - 115.8 - 177.1 - 257.2 7 317.6 - 316.5 - 1,237.5 1 237.5

tan. i.e orrvic- 275.1 275.1 388.4 388.4 367.1 367.1 428.8 428.8 353.4 353.4 29.9 29.9 1,842.7 1 842.7 3.655.4Adjnotuout for dero-lution - 166.1 - 255.1 - 275.4 - 347.1 - 339.6 - 175.3 - 1,558.6 1,Si4.6

Subtotal 762.7 494.5 1.2S . 765.82 1 .421.2 637.2 1753.7 1.063.8 1.629.4 1.056.7 792.1 7.647.9 4.8O.0 12 447.9

Y.ac7. Lute' and EtulerrtnAgriooltora1 eobinery ab 171.1 2,317.0 57.7 778.3 1.6 21.8 2.3 31.9 1.7 23.6 - 234.4 3,172.6 3,407.0Treosport vohiclee / 12.7 14.2 9.8 11.4 12.5 15.1 5.0 6.2 5.0 6.6 2.4 3.2 47.4 56.7 104.1

Subtotal I S3 27331.2 67.5 7l9.7 14.1 3 .73 lA.1 6 .L l Ad L. I AU 3.229.3 3.511.1

Rood De-velooc-t La 9.1 16.9 8.6 15.7 34.1 63.0 19.7 36.4 16.8 31.0 - - 8.3 163.0 251.3

FOOd Cry, Cert-rl.tirktine AForti.icr,/cro do/pl nto 11.5 10.1 16.9 14.0 14.4 12.3 ,l.8 14.0 11.5 10.1 - - 649.4 60.5 129.9

Agricultural oqole nt 3.7 31.0 0.3 4.8 - - _ _ _ _ - _ 4.0 35.8 39.9Civil uork 21.1 63.9 1.5 3.5 - - - - -_ _ _ 22.6 67.4 90.0

Subtotal 36.3 105.0 17.9 22.3 14.4 12.3 16.0 14.0 11.5 10.1 96.0 163.7 259.7

Other Civil Wrks

iouaing and buildLg. ab 13.8 32.0 45.3 105.6 29.2 68.2 11.6 27.0 12.6 29.6 10.0 23.4 122.5 285.8 4Ci.3

Voll.os Irfr.otocotore Ld 1.7 3.8 2.4 3.7 2.4 5.7 2.4 3.7 3.2 7.6 - - 13.0 28.5 40.5

Tot4l onvetots 1.007.3 2.9ti3.4 1.430.4 170 5 a5 1.ii5.4 1,023.3 I.S10.1

118l 1R.6.I2 1165.2 i Mfl60.6 s.248.5 8670.3 16.918.1

I -atir, CootoRlbber devrlrpnent ovadde Ll 48 5 48.5 83.0 83.0 4 84.9 121 1 121.1 11999 119.9 48.7 68.7 5361 536.1 1,0372.2Wlaugocet cooo L 48.5 - 83.0 - 946.9 - 121.:1 - 119. - 68.7 5336. 1 - 536.1

Subtotal 97. 4S.5 166.0 83. Ills! S w 9 i49 .i 121.1 239.8 119.9 U7.4 68.7 1.073.2 536.1 1,40S.3

C. T.otl Zr.. Loto 1.104.3 3.031.9 1.596.4 1.787.5 I.W5.2 1118.2 .0852.9 1.306.1 1.920.0 205.1 94L. 677.3 9.370.7 9.206.4 18.5:7.1

. Coetioorrctre: Phyolcal 110.4 303.2 159.6 178.8 178.5 111.8 205.3 130.6 192.0 128.5 94.2 67.7 932.0 920.6 1,852.6Prtce 255.1 708.3 614.6 668.3 881.6 578.1 1,287.2 818.9 1,436.2 961.2 897.6 201.2 5,372.3 4,249.0 9,670.3

Subtotal 365.5 1.003.5 7742 o61 L!052.1 fS. 1.492. 949j5 14628f2 I.OS9.7 991.11 % 6.304.3 5.16S.6 11472.9

i. Protect Code - Rirbo BoSonRS:allboldrr Serelomoet l!."9.5 4A035.4 2id!0.6 2l654.9 2.757.3 .lOSI 3 A54 2.52255.6 3.54S.2 2.374 a 1.933.7 1.246.2 15.625.0 14.375.0 30 .07.0

a Ineludoc derelepeent pregr fer 6,000 trne.0rnt f_ilieo and 2,000 filiee for - oettleot Ia the mara land.b Ad5wted for drcaluntie./ Vill00 road dcvl-n1 t in e-ga land.

L riftM r bber d -veocont unit office. in Rimbo B0J 1g built by FrP VI.L O-erheodo A lot of rbb-e development cact oith 50 IBR0; °aget fo.e 0 St rbber dlop_.t 100l lecl;

vovl,.ada a. .co.dit .oete obli -na -t 1. son-nradlt.

ANNEX 1- 69 - Table 6

INDONESIA

NUCLEUS ESTATES AND SMALLHOIDERS III PROJECT

Technical Assistance to the Directorate General of Estates(Rp million)

1980 1981 1982 1983 1984 Total CostsLocal Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local Foreign Total

Technical Assistance /aShort-term consultants (100 n/months) 12.5 62.5 12.5 62.5 12.5 62.5 12.5 62.5 12.5 62.5 62.5 312.5 375.0

Pre-project Construction Fund /b 12.5 62.5 12.5 62.5 12.5 62.5 12.5 62.5 12.5 62.5 62.5 312.5 375.0

Subtotal 25.0 125.0 25.0 125.0 25.0 125.0 25.0 125.0 25.0 125.0 125.0 625.0 750.0

Contingencies /c

Physical 2.5 12.5 2.5 12.5 2.5 12.5 2.5 12.5 2.5 12.5 12.5 62.5 75.0Price 28.2 28.9 32.0 48.1 35.3 64.6 38.2 46.6 41.2 61.8 174.9 250.0 424.9

Subtotal 30.7 41.4 34.5 60.6 37.8 77.1 40.7 59.1 43.7 74.3 187.4 312.5 499.9

Total Costs (current) 55.7 166.4 59.5 185.6 62.8 202.1 65.7 184.1 68.7 199.3 312.4 937.5 1,249.9

/a Costed at US$6,000 per month with $1,000 per month in local costs.lb To be utilized for construction of housing, nursery development and procurement of essential machinery

in future NES projects./c Contingencies are applied here irregularly to balance total project costs and IBRD loan amount.

- 70 -

ANNEX 1INDONESIA Table 7

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

Estimated Schedule of Project Expenditures /a(Rp million)

Total Costs1979 1980 1981 1982 1983 1984 1985 (ftp m) (s$ m)

I. Smallholder Development

A. New Settlement - Danau SalakCredit: fertilizers, agrochemicals - 151 386 572 769 1,001 763 3,642 5.8

other rubber development costs - 508 1,317 1,865 2,215 2,703 1,255 9,863 15.8rubber development overheads - 56 148 217 270 325 202 1,218 1.9machinery and equipment - 837 505 127 65 59 83 1,676 2.7

:vehicles - - 46 4 - 7 - 57 0.1civil works - 275 365 330 329 389 - 1,688 2.7roads (excluding machinery) - 146 194 299 239 231 - 1,109 1.8

Non-credit: resettlement costs - 86 191 227 244 261 - 1,009 1.6village infrastructure - 24 49 57 66 47 - 243 0.4health, water sanitation - 21 42 97 222 65 - 447 0.7management fee - 28 74 109 135 163 101 609 1.0

Subtotal - 2.132 3.317 3.904 4.554 5.251 2.404 21.562 34.5

B. Smallholder Development - Rimbo BujangCredit: fertilizers, agrochemicals - 135 322 530 824 1,091 1,172 4,074 6.5

other rubber development costs - 1,568 2,775 3,169 4,095 3,916 1,535 17,058 27.3rubber development overheads - 129 247 307 418 443 271 1,815 2.9machinery and equipment - 3,358 1,249 38 59 47 - 4,751 7.6vehicles - 34 29 40 17 18 3 141 0.2civil works - 174 232 157 67 78 66 774 1.2roads (excluding machinery) - 35 36 157 97 88 - 413 0.7

Non-credit: village infrastructure - 7 12 13 14 20 - 66 0.1: management cost - 65 123 154 209 222 135 908 1.5

Subtotal - 5.505 5.025 4.565 5.800 5.923 3.182 30.000 48.0

II. Public Sector Estate Rehabilitation

A. PNP I Rehabilitation - LangsaFertilizers, agrochemicals 668 485 455 624 662 641 - 3,535 5.6Other plantation development 950 1,349 1,860 1,732 2,315 2,016 - 10,222 16.4Machinery and equipment 750 1,041 844 333 563 1,066 - 4,597 7.4Processing equipment - 3,290 148 162 615 1,867 - 6,082 9.7Civil works 614 2,211 2,293 453 231 107 - 5,909 9.4Transport transmigrants 48 293 337 - - - - 678 1.1Technical assistance - 162 181 197 - - - 540 0.9

Subtotal 3.030 8.831 6.118 3.501 4.386 5.697 - 31.563 50.5

B. PTP XVIII Expansion - Danau SalakFertilizers, agrochemicals 36 66 113 169 230 243 221 1,078 1.7Other rubber development 413 573 692 833 988 619 548 4,666 7.5Machinery and equipment 50 586 47 105 18 77 104 987 1.6Processing equipment 55 1,512 - - - - - 1,567 2.5Vehicles 83 64 68 24 21 27 72 359 0.6Civil works - 913 184 62 60 7 5 1,231 2.0Other equipment - 288 25 71 51 73 - 508 0.8Labor resettlement 70 22 27 13 18 2 2 154 0.2Technical assistance - 116 130 141 - - - 387 0.6

Subtotal 707 4.140 1.286 1.418 1.386 1.048 952 10.937 17.5

III. Technical AssistanceProgram Support - DGE (200 man-days) - 222 245 265 250 268 1,25 2.0

Total Costs 3,737 20.830 15.991 13,653 16,376 18,187 6,538 95.312 152.5

(US$ million) 6.0 33.3 25.6 21.8 26.2 29.1 10.5 152.5

/a Including all contingencies.

ANNEX 1Table 8

INDONESIA

NUCLEUS ESTATES ASSD SMALLHOLDERS III PROJECT

Sources of Finance - Project Costs /a

Total Cas$tRp US$ % of

1979 1980 1981 1982 1983 1984 1985 (million) (million) Total costs

A. SMALLOLDERS COMPONENTSNew Settlement - Danau Salak

Financing Agreenent/PTP XVIII /b: IBRD - 1,587 2,247 2,514 2,857 3,280 1,578 14,063 22.5 15: GOI - 438 829 1,036 1,176 1,592 725 5,796 9.3 6

Provincial Goverenaent/DOE/non-credit /c: GOI - 107 241 354 521 379 101 1,703 2.7 2

Subtotal - 2.132 3,317 3.904 4.,554 5,251 2,404 21,562 34.5 23

Snoilholder Development - Rinbo BojangFinancing Agree,sent/PTP VI /b: IBRD - 4,385 3,539 2,957 3,782 3,910 2,363 20,936 33.5 22

: OI - 1,048 1,351 1,441 1,795 1,771 684 8,090 12.9 8

Provincial Goverssneet/DGE/non-credit /c: GOI - 72 135 167 223 242 135 974 1.6 1

Subtotal - 5505 5,025 4,565 5,00 5.923 3.182 30,000 48.0 31

Total Smallholder Developnent - 7,637 8,342 8,469 10,354 11,174 5,586 51,562 82.5 54

B. PUBLIC SECTOR ESTATE DEVELOPMENTFNP I Rehabilitation

IBRD contribution 2,043 6,152 3,751 1,746 2,339 3,657 - 19,688 31.5 20GOI contribution (Bank Indonesia) 987 2,679 2,367 842 - - 6,875 11.0 7PNP I ow- funds - - - 913 2,047 2,040 - 5,000 8.0 6

Subtotal 3.030 8.831 6,118 3,501 4,386 5.697 31,563 50.5 33

PTP XVIII ExpansionIBRD contribution 355 3,081 596 656 531 477 554 6,250 10.0 7PTP XVIII own funds - - - 676 855 571 398 2,500 4.0 3GOI contribution (Bank Indonesia) 352 1,059 690 86 - - - 2,187 3.5 2

Subtotal 707 4.140 1,286 1,418 1,386 1,048 952 10,937 17.5 12

Total Estate Develop,ent 3.737 12.971 7,404 4.919 5,772 6,745 952 42,500 68.0 45

C. TECHNICAL ASSISTANCEProgram Support - DGE: IBRD contribution - 167 186 202 184 199 - 938 1.5 1

t10OI contribution - 55 59 63 66 69 - 312 0.5

Subtotal - 222 245 265 250 268 - 1,250 2.0 1

D. TOTAL SOURCES OF FINANCE 3,737 20.S30 15,991 13,653 16,376 18,187 6,538 95,312 152.5 100

of whicb: IBRD losn 2,398 15,372 10,319 8,075 9,693 11,523 4,495 61,875 99.0 65*GO credit funds - 1,486 2,180 2,477 2,971 3,363 1,409 13,886 22.2 14GOI non-credit funds: - 734 435 584 810 690 236 2,989 4.8 3

of shich DGE DIP: - 148 256 326 410 454 236 1,830 2.9 2Bank Indonesia loan 1,339 3,738 3,057 928 - - - 9,062 14.5 10Estate own funds - - - 1,589 2,902 2,611 398 7,500 12.0 8

(S shown by calendar year./b For credit expenditures of on-farm development, machinary, housing, roads, subsistencn package and the soc-credit eapenditurns for

the PMSU, resettlement costs, estate housing and vehicles, all a0 carried out by the nucleus estate./c Village infrastructure, social services as provided by Provincial Goverisent and for management fees, payable by DGE.

ANNEX 1Table 9

- 72 -

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

Estimated Schedule of Disbursements

US$ MillionQuarter Quarterly Cumulative % of

Year ending disbursement disbursement total loan

1979 December 1.2 1.2 1

1980 March 6.3 7.5 8June 7.0 14.5 15September 6.5 21.0 21December 7.5 28.5 29

1981 March 5.5 34.0 34June 4.0 38.0 38September 3.5 41.5 42December 3.5 45.0 45

1982 March 3.0 48.0 48June 3.5 51.5 53September 3.0 54.5 55December 3.5 58.0 59

1983 March 4.0 62.0 63June 3.5 65.5 66September 3.5 69.0 70December 4.5 73.5 74

1984 March 5.0 78.5 79June 4.5 83.0 84September 4.5 87.5 88December 4.5 92.0 93

1985 March 4.0 96.0 97June 2.0 98.0 99September 1.0 99.0 100

Closing date: December 1986.

ANNEX 1- 73 Table 10

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

Proposed Allocation of Loan Proceeds

Loan proceeds (US$m)

Part A of the Project

I. Smallholder Development - Danau SalakNew Settlement and Rimbo Bujang Smallholders /a

A. Civil works 1.9B. Agrochemicals 5.0C. Machinery and equipment 7.7D. Rubber development, road construction and

resettlement 23.2

Subtotal 37.8

Part B of the Project

II. Estate Development - PNP I and PTP XVIII /b

A. Civil works 6.6B. Agrochemicals 4.8C. Agricultural, processing plant machinery

and equipment 13.8D. Rubber and oil palm development 3.7E. Resettlement 0.9F. Consultant services 1.0

Subtotal 30.8

Part C of the Project

III. Program Support - DGE

A. Consultants, inspection services, start-upvehicles and assistance for Part C ofthe Project 1.1

IV. Unallocated 29.3

Total 99.0

/a From 3.01 A(a) and 3.01 C(a) of the Project Summary./b From 3.01 A(b) and 3.01 (b) of the Project Aummary.

74 ANNEX 1Table 11

Page 1.

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

List of Agricultural Machinery and Vehicles Equipment

I. PTP XVIII - Danau Salak Development /a

Unit Cost Total CostItem Quantity Rp million Rp million US$'000

Crawler 200 HP 3 59.4 178.2 429.4Tree pusher 3 3.9 11.7 28.2Rake blade 3 6.6 19.8 47.7Subsoiler 1 7.7 7.7 18.5Wheel tractor 10 7.80 78.0 188.0Disc plow 3 0.8 2.4 5.8Disc harrow 3 0.8 2.4 5.8Truck (3.5 tons) 14 4.8 67.2 161.9Chain saw 35 0.360 12.6 30.4Mounted road grader 1 2.6 2.6 6.3Compactor 1 12.0 12.0 28.9Sprayer 93 0.036 3.4 8.2Trailer (3 tons) 8 2.8 22.4 54.0Tanker trailer 18 4.3 77.4 186.5Portable water pump 8 0.3 2.4 5.8Sprinkler system 1 - 12.0 28.9Tanker truck (3.5 tons) 5 6.8 34.0 81.9Jeeps 17 5.30 90.1 217.1Motorcycle 70 0.505 35.3 85.0Service car 3 6.0 18.0 43.4

Total 689.6 1,661.7

/a Purchases by PTP XVIII for their own development.

75 - ANNEX 1Table 11Page 2

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

List of Agricultural Machinery and Vehicles Equipment

II. Danau Salak New Settlement /a

Unit Cost Total CostItem Quantity Rp million Rp million US$ '000

A. Rubber Development

Crawler 200 HP /a 1 59.4 59.4 143.1Wheel tractors 38 7.8 296.4 714.2Disc plough 32 0.8 25.6 61.7Disc harrow 32 0.8 25.6 61.7Chain saw 23 0.360 8.3 20.0Trucks 3.5 tons 6 4.8 28.8 69.4Trailers 3 tons 12 2.8 33.6 81.0Mounted road grader 1 2.6 2.6 6.3Compactor 1 12.0 12.0 28.9Sprayers 161 0.036 5.9 14.2Tanker trailer 7 4.2 29.5 71.1Portable water pipe (5HP) 6 0.3 1.8 4.3Jeeps 3 5.3 15.9 38.3Motorcycles 14 0.505 7.0 16.9Bus 1 6.0 6.0 14.4

Subtotal 558.4 1,345.5

B. Road Construction

Crawler and equipment 1 73.0 73.0 175.9Road grader 2 40.8 81.6 196.6Wheel tractor 2 7.8 15.6 37.6Tractor rollers 2 14.4 28.8 69.4Truck (3 tons) 2 4.0 8.0 19.3

Subtotal 207.0 498.8

C. Food Crop Center

Wheel tractors 1 7.8 7.8 18.8Disc plough 1 0.8 0.8 1.9Disc harrow 1 0.8 0.8 1.9Trucks (5 tons) 2 5.4 10.8 26.0Trailers (3 tons) 2 2.8 5.6 13.5Sprayers 10 0.036 0.4 1.0Portable water (7.5 HP) 4 0.500 2.0 4.8Water pump (30 m3/hr) 1 2.8 2.8 6.7

ANNEX 1- 76 - Table 11

Page 3

Unit Cost Total CostQuantity Rp million Rp million US$ '000

Sprinkler system 1 3.5 3.5 8.4Generator set (100 KVA) 1 8.7 8.7 21.0Jeep 1 5.3 5.3 12.8Motorcycles 1 0.505 0.5 1.2Water tank 1 2.0 2.0 4.8Deep well 1 10.0 10.0 24.1

Subtotal 61.0 147.0

Total 826.4 1,991.3

/a To be purchased by PTP XVIII.

/b Crawler equipment from nucleus estate.

-77 - ANNEX 1Table ;1Page 4

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

List of Agricultural Machinery and Vehicles Equipment

III. PNP I Development

Unit Cost Total CostItem Quantity Rp million Rp Million US$'000

Crawler tractor 140 Hp 8 40.8 326.4 786.5Wheel tractor 75 Hp 6 7.6 45.6 109.9Wheel tractor 100 Hp 6 8.0 54.0 130.1Wheel tractor with mountedroad grader 12 10.0 120.0 289.1

Ditch digger 12 10.26 123.2 296.9Chain saw 252 0.250 63.1 152.0Hand sprayer 2,680 0.035 93.8 226.0Trailers 24 2.8 66.8 161.0Tipper truck 71 7.5 532.5 1,283.1Tanker truck 8 8.4 67.0 161.4Flatbed truck 20 6.23 124.4 300.0Alluminum tank (1.2 m 3) 9 0.4 3.6 8.7

JeepHardtop 19 4.35 82.7 199.3Canvas top 7 + 3 3.3 33.0 79.5Long base 5 6.7 33.5 80.7

Service carPickup 7 3.43 24.0 57.8Ambulance 3 5.0 15.0 36.1Minibus 2 5.0 10.0 24.1Motocycle 43 0.505 21.7 52.3

Sprinkler system 22.3 53.7Collection Center Platform 1.5 3.6

TOTAL 1,864.1 4,491.8

- 78 -ANNFX 1Table 11Page 5

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

List of Agricultural Machinery and Vehicles Equipment

IV. Rimbo Bujang Smallholder Development /a

Unit Cost Total CostItem Quantity Rp million Rp million US$ '000

Crawler 300 HP 8 95.45 763.6 1,840.0Crawler 200 HP 17 66.40 1,128.8 2,720.0Rake blade 17 6.6 112.2 270.4Tree pusher 8 3.9 31.2 /5.2Chain and ball 8 12.45 99.6 240.0Chain saws 90 0.350 31.5 75.9Wheel tractor 75 HP 2 7.8 15.6 37.6Mounted road grader 2 8.85 17.7 42.7Compactor 2 12.0 24.0 57.8Truck (5 tons) 11 7.0 77.0 185.6Trailers (3 tons) 4 2.8 11.2 27.0Hand sprayer 158 0.036 5.7 13.7Trailer tanker 5 4.3 21.5 51.8Portable water pump 5 0.3 1.5 3.6Jeeps 10 5.3 53.0 127.7Motorcycle 46 0.505 23.0 55.4Service car 1 6.0 6.0 14.4

Total 2,423.1 5,838.8

/a To be purchased by PTP VI.

ANNEX 1- 79 - Table 12

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

Rent and Cost Recovery(Constant 1979 Rp '000)/a

Per Farm FamilyRimbo Bujang Danau SalakSmallholders New Settlement

1. Gross intremental value of farm production 7,175 10,3252. Less: production (cash) costs 2,122 2,1143. Equals net cash income 5,053 8,2114. Less: depreciation 1,113 1,4445. Less: imputed value of family labor /b 1,019 1,1276. Less: allowance for risk/uncertainty /c 636 1,2327. Less: general taxes - -8. Equals: project rent 2,285 4,408

9. Rent as % of net cash income 45 54

10. Debt recovery /d 926 1,300

11. Benefit taxes /e 637 939

12. Total direct recovery/taxes 1,563 2,239

13. Rent recovery index (12 . 8)-% 68 51

14. Public sector outlays 2,109 2,734

15. Cost recov7ry index (12-14)-% 74 82

16. Farmer income per capita 128 179

17. Estimated critical consumption level (CCL) /f 59 59

18. Estimated national per capita income 118 118

/a All values in lines 1 to 15 discounted at opportunity cost of capitalfor Indonesia of 107%; values represent incremental benefits and costs.

/b Discounted value of Rp 220,000 per family per annum.

/c 15% of net cash income.

/d Discounted values of recovery at 25% of annual rubber production for13 years for Rimbo Bujang Smallholders and 12 years for Danau SalakNew Settlers.

/e Ipeda tax and rubber taxes as direct benefits of recovery from project.

/f Valued at one-half of national per capita income.

/g National per capita income of Rp 118,000 or equal to l!S$189.

- 80- ANNEX 2Page 1

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

Details of Project Procurement

Smallholder Components

1. GOI would finance 100% of all noncredit categories of investment forthe smallholder components with the exception of the cost of resettlement ofJavanese families to Danau Salak for which the GOI contribution would be about40%. The standards for civil works and equipment associated with health,school, and village development would be set by the present GOI regulations.In cases where costs or standards required for the project exceed limits ofthe present INPRES regulations, INPRES would be supplemented by APBD and APBNfunds (para. 3.13). In cases where the provincial governments are not capableof fully carrying out the vilage and social development, PTP XVIII and VIwould be provided with additional funds from the Ministry of Finance to carryout these responsibilities. Procurement guidelines for PTP XVIII and PTP VIin the credit categories of investment and noncredit costs for resettlementand rubber development management fees would be as follows:/l

(a) Rubber Development (US$59.8 million). Total block planting of28,000 ha of rubber in both project areas with maintenance for up tothree years would be implemented under the terms of a FinancingAgreement between Bank Indonesia and the BRI and SubfinancingAgreements between BRI and PTP VI and PTP XVIII. Detailed physicaldescription of work to be carried out would be governed by a Small-holder Rubber Development Contract between the DGE and each nucleusestate. Rubber development involves the execution of a specialized,integrated service which cannot be procured through a competitivebidding process. PTP XVIII and PTP VI have demonstrated theirability to implement such a contract in a cost-effective manner.Unit cost information for development is well established and wouldbe used to monitor financial requirements and guarantee qualitycontrol. Supplies paid in local currency for the execution of thecontract would be procured in accordance with current GOI procedureswhich are satisfactory to the Bank. Initial land clearing ofthe 1 ha food ,crop area for each family at Danau Salak (US$0.4 mil-lion) would also be covered in the terms of the Rubber DevelopmentContract and would not involve a competitive bidding process. Agro-chemicals (US$12.3 million), including fertilizer for the firstyear subsistence crop development at Danau Salak and fertilizers

/1 Procurement estimates do not include the noncredit items of villageinfrastructure and health services.

ANNEX 2

- 81 - Page 2

utilized by the food crop centers at Danau Salak and Rimbo Bujang

would also be procured by the estates, using international competi-

tive bidding in accordance with the Bank's guidelines on procurement.

Agrochemicals costing less that US$100,000 annually would be procured

following prudent shopping procedures with at least three quotations.

Subsistence cash payments for Danau Salak new settlers (US$0.3 mil-

lion) have been costed at Rp 30,000 (US$48) per farm family entering

the project. Cash payments would be made by PTP XVIII to families

approved for new settlement by the Project Manager and Provincial

Coordination Committee. The credit item of rubber development field

overheads at Danau Salak and Rimbo Bujang (US$4.9 million) are

included in rubber development costs and would be payable to PTP's

VI and XVIII at the rate of 10% of the direct expenditures made for

rubber development, excluding machinery and equipment. Non-credit

managmeent fees for PTP VI and PTP XVIII would be payable at therate of 5% of the direct expenditures made for rubber development

and would be payable from the DGE DIP source based on satisfactory

completion of the annual work program as reported by inspection

services and approved by the DGE. PTP's VI and XVIII would be

allowed to draw on the loan funds for both rubber development

overheads and management fees only at the end of each year based on

their satisfactory performance for clearing and planting as judged

by the inspection services appointed by the DGE. Accounts, satis-

factory to the Bank, would be maintained by PTP's VI and XVIII, of

all development expenditures for each of the smallholder components;

(b) Agricultural Machinery, Vehicles and Equipment (US$10.6 million).

All agricultural machinery and vehicles for rubber development and

food crop centers, equipment for the construction of primary and

secondary village and rubber collection roads to be built by PTP's

VI and XVIII would be procured through international competitive

bidding (ICB) in accordance with Bank Group guidelines. A prefer-

ence limited to 15% of the cif price of the imported goods or the

customs duty, whichever is lower, would be extended to qualified

local manufacturers in the evaluation of bids. All procurement for

contracts of less than US$50,000 would be locally procured through

prudent shopping involving the solicitation of at least three

quotations. The total procured in this manner would be limited to

the equivalent of US$350,000 for each nucleus estatge, PTP VI and

PTP XVIII.

(c) Civil Works (US$3.9 million). The construction of new settler

housing at Danau Salak would be carried out as part of the Financing

Agreement and Subfinancing Agreement for PTP XVIII similar to the

arrangements for rubber development. Materials to be provided for

3,500 settler houses, each costing about Rp 205,000 (US$328 constant

1978) for each family, would be provided based on standards for:

(i) a core house with a minimum area of 35 sq m; (ii) timber frame

construction with hardwood shingle roofs (sirap) and a verandah

ANNEX 2Page 3

- 82 -

with palm front roofing (rumbia). The first 500 settler houses atDanau Salak each costing Rp 266,000 (US$426), the 58 houses at theDanau Salak estate and the 260 houses at the Rimbo Bujang nucleusestate required for smallholder development, as well as some projectbuildings, would be constructed under contract after local competi-tive bidding among prequalified contractors in accordance with GOIprocedures which are acceptable to the Bank. Consultants located inthe DGE under Loan 1499-IND would provide recommendations on bidevaluation in cases of local procurement for civil works.

(d) Road Construction (US$2.4 million). Responsibility for constructionand upgrading of 97 km of primary village roads, 68 km of secondaryvillage roads and about 700 km of rubber collection track in all thesmallholder areas would rest with the nucleus estates PTP VI and PTPXVIII under the terms of the Smallholder Rubber Development Contracts,Financing Agreement and Subfinancing Agreements for the two nucleusestates. International competitive bidding would not be appropriatefor construction of village or farm type roads and are not likely toattract foreign firms. Both PTP VI and PTP XVIII have the abilityto carry out the proposed road construction program and given theimportance of phasing these roads over an extended period withrubber and other village development, local competitive biddingwould not be desirable. Design standards for these roads arecontained in paras. 2.27 and 2.28. PTP VI engineers would carry outsite surveys, plan alignments, and other engineering requirements.PTP XVIII engineers would be assisted by the technical specialist tobe appointed for Infrastructure Program Mangement [(para. 3.02A(b)(iii)].

2. Estate Development Components. Procurement for PNP I rehabilitationand PTP XVIII expansion would be:

(a) Rubber and Oil Palm Development (US$31.2 million). Total blockplanting and maintenance of 4,000 ha of rubber by PTP XVIII(US$7.5 million) and block planting, rehabilitation and maintenanceof 14,268 ha of rubber and oil palm by PNP I (US$16.4 million) wouldbe carried out under the terms of the Subsidiary Loan Agreementsbetween the Borrower and PNP I and PTP VI. Most of the work requiredfor block planting involves the integration of labor and machineservices which cannot be procured through ICB. Supplies paid inlocal currency for the execution of the contract would be procuredin accordance with current GOI procedures which are satisfactory tothe Bank. International competitive bidding in accordance with BankGuidelines would be used for fertilizers and agrochemicals(US$7.3 million) including the purchase of urea. Small lots ofchemicals costing less than US$100,000 annually would be procuredfollowing prudent shopping procedures with at least three quotations.

ANNEX 2- 83 - Page 4

(b) Agriculture and Processing Plant Machinery, Vehicles and Equipment(US$22.6 million). All agricultural machinery, vehicles and equip-ment for PNP I (US$6.6 million) and for PTP XVIII (US$2.2 million),and all processing plant machinery and equipment for PNP I (US$9.7 mil-lion) and PTP XVIII (US$2.5 million) would be procured throughinternational competitive bidding in accordance with Bank GroupGuidelines. A preference limited to 15% of the cif price ofimported goods or the customs duty, whichever is lower, would beextended to qualified local manufacturers in the evaluation of bids.All office equipment for PNP I (US$0.5 million) and PTP XVIII(US$0.5 million), and all workshop tools and buildings equipment forPNP I (US$0.3 million) and PTP XVIII (US$0.3 million), and procure-ment for contracts of less than US$50,000 would be made locallythrough prudent shopping involving the solicitation of at leastthree quotations. The total procured in this manner would belimited to the equivalent of US$350,000 for PNP I and PTP XVIII.

(c) Civil Works (US$11.4 million). All civil works contracts forhousing, project buildings and related infrastructure at PNP I(US$9.4 million), and at PTP XVIII (US$2.0 million) would be awardedafter local competitive bidding among prequalified contractors inaccordance with GOI procedures which are acceptable to the Bank.Consultants located in the MOA under Loan 1499-IND would providerecommendations on bid evaluation in cases of local procurement forconstruction of garages, workshops and project offices.

(d) Consultant Specialists and Labor Resettlement (US$2.8 million).Consultant specialists employed for PNP I (US$0.9 million) (para.3.04) and for PTP XVIII (US$0.6 million) (para. 3.02 D) would beengaged in accordance with the Bank's Guidelines on terms andconditions approved by the Bank. Recruitment and resettlement oflabor to PNP I (US$1.1 million) and resettlement of labor to DanauSalak from PTP XVIII headquarters at Semarang (US$0.2 million) wouldbe carried out by the estates themselves with supervision from theMOA. Consultant specialists to the MOA under Loan 1499-IND wouldassist in arrangements and agree on costs of resettlement with eachof the estates.

3. Program Support (US$2.0 million)

(a) Technical Assistance (US$1.0 million). Short-term contract forconsultants and technical services including a firm appointed forfield inspection services which would be provided under the projectare detailed in para. 3.02 D. Consultants would be engaged inaccordance with the Bank's Guidelines on terms and conditionsapproved by the Bank. Internationally recruited consultants havebeen costed at US$72,000 per man-year (including internationaltravel, housing allowances and local transportation) on the basisof past experience in Indonesia.

(b) Assistance for the construction of housing and nursery developmentand procurement of essential machinery for future nucleus estateand smallholder projects would be provided to the DGE (US$1.0 mil-lion).

ANNEX 3Table 1

- 84 -

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

Smallholders Rubber Yield Projections

DANAU SALAK

Planting Tapping Density Number of Gm/tree/year year trees/ha tapping days tap day Kg/ha/year Kg/ha cum

6 1 360 113 11 4407 2 400 113 15 680 1,1208 3 410 113 19 880 2,0009 4 400 113 22 1,000-- 3,000

10 5 390 113 25 1,100 4,10011 6 380 113 27 1,160 5,26012 7 370 113 32 1,340 6,60013 8 360 113 34 1,380 7,98014 9 350 113 36 1,420 9,40015 10 340 113 38 1,460 10,86016 11 330 113 40 1,490 12,35017 12 320 113 45 1,620 13,97018 13 310 113 45 1,570 15,54019 14 300 113 45 1,525 17,96520 15 290 113 45 1,470 18,53521 16 285 113 45 1,450 19,98522 17 280 113 42 1,320 21,30523 18 275 113 42 1,300 22,60524 19 270 113 40 1,220 23,82525 20 265 113 40 1,190 25,01526 21 260 113 37 1,080 26,09527 22 255 113 35 1,000 27,09528 23 250 113 33 930 28,02529 24 245 113 30 830 28,85530 25 240 113 27 730 29,585

Average yield per ha year - 29,585 1,183 kg/ha.

25

ANNEX 3Table 2

- 85 -

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

Smallholder Rubber Yield Assumption

RIMBO BUJANG

Planting Tapping Density Number of Grm/tree/ Kg/ha/ Kg/hayear year trees/ha tapping days tap day year Cumulative

6 1 360 113 11 4407 2 400 113 15 .680 1,12Q.8 3 410 113 19 880 2,0009 4 400 113 22 1,000 3,00010 5 390 113 25 1,100 4,10011 6 380 113 27 1,160 5,26012 7 370 113 32 1,340 6,60013 8 360 113 34 1,380 7,98014 9 350 113 36 1,420 9,40015 10 340 113 38 1,460 10,86016 11 330 113 40 1,490 12,35017 12 320 113 45 1,620 13,97018 13 310 113 45 1,570 15,54019 14 300 113 45 1,525 17,96520 15 290 113 45 1,470 18,53521 16 285 113 45 1,450 19,98522 17 280 113 42 1,320 21,30523 18 275 113 42 1,300 22,60524 19 270 113 40 1,220 23,82525 20 265 113 40 1,190 25,01526 21 260 113 37 1,080 26,09527 22 255 113 35 1,000 27,09528 23 250 113 33 930 28,02529 24 245 113 30 830 28,85530 25 240 113 27 730 29,585

Note: Average yield per ha per year - 29,585 - 1,183 kg/ha.25

ANNEX 3- 86- Table 3

CICUS ITAnTIS MID 0196LU1016s1 III 60JI0C7

M .. S1.WlI. C..p wd Uo.oIok c4t- 4.ll U Fh.e 0.15 h. Crd.a I0L

V1I.d POo.90C-o Fop t -IL . - 0 A 2 3 4 5 6 a 1 9 10 if 12 13 14 15 _o. o._* (09)

P.10 T...Jook Cool, 1 -1- p9100 no 3.3_00C 3.600 4.200 4.500 4. WU 5,700 6.500 6.000 6 900 7,200 1,500Eoo.o. 20 1-2 b..h-- 350 - 5.0C0 7.500 IO.0UO 10.000 10.000 10.000 10.000 10.000 10.000 10.000 100003 10.000 *0000 :OC0 0.000I6... 6 5-1 a hoMl. 100 - - - - .00 400 .00 .00 600 600 600 .00 .00 .00.000 6. 0001.p y. 1 20 pioo. 40 - 000 0,000 .000 0000 0.00 *000 4.000 *,000 4,000 4 000 *.000 4.000 4.0D0 4.000 4.000P1...ppl.. 1oo I pi.-. 7 0 000 1.n00 3,000 I.000 I 000 3. 000 I.000 3.000 3.00 3,000 I.000 3.000 3.000 3.000 3.000

Soholo1 - 9,U1 11, 17.000 20.000 24,000 21.000 2 2.100 23?.3 23.000 26.100 29.300 2 29,00 30.20 500

C.- Iez i z-6 0 10so - 3.100 £3,200 k9.800 26.600 33.200 39,00 I 1.050 44.200 47.150 49.30D St.000Clo.. 6 0.15-4.25 4a d,y 2.500 - - - - 700 1.580 23.00 .600 7.100 0.500 11.000 20.000 251750 20.500 40.000 40.000CO l.S 1o 0.2-0.6 km so - - - - - 4,000 6.640 9.300 8. 60 12. 00 10.240 13.680 12,600 10.000 21.000 24.000

9"bhIoO. _ _ _ _ 1003 6.6 22.6U0 25.400 426,260 54,500 1.440 75,3100 12.1SO 93.250 1109 19 iS.OM

LIwn tookPooltoy - 16-36 1.000 16.000 31.000 26.000 36.000 36.000 36.000 36.000 36.000 36.000 S6.000 36.000 36,000 36.000 1h,l.00 36.000Ia. 96-100 30 - 2u0.0 3 4,320 4o320 .120 4 320 4 32 320 4 320 4 320 44320 4.320 4.320 4.320co.o. 2 10.000 - - 2 0,00 20 000 20 000 20.000 20.000 20 000 20 0. 0 20 000 20.000 20.000 200 000 20,000 20,000 20,000

6600._ _- 16,100 17,000 52,320 0320 6 0,300 320 60.3 20 6020 0.320 0,320 60,20 60,320 60,320 60 320 50.320 00,320

Tht01 V.1l. .1 lOodotllo -_ 24,480 90700 69,220 01,020 93 000 106.100 112,420 130,0110 142.62 150,460 164,50 172, 60 103,470 200.620 205,820

CoL of Fr-d4otlF..C t1... 1,400 2,600 3.190 5.100 6,000 7,200 1.660 0,010 8.250 86,360 6610 0.390 6,010 0.910 *,6 O ,150C0.6 .,.P. 9.340 9.0 ,40 9,140 9,100 9.140 4.300 6.700 *.100 6.100 6,300 6.100 6.100 6,700 6,700 6.,0011,001C0k - 9,800 12,800 17,000 21.600 21,600 21,600 21.600 21.600 21,600 21.600 21.600 21,600 21.600 21.600 24,600

T1.0. IC...f t -d-lOP 11.180 22,420 26,530 31.J4 27.340 28.560 31.900 36.31 36.550 36.640 %,j0 37,00 3.17,0 31.230 5 7450

6.t Volo of P.doeoloa (11.180) 2.060 63,710 33,480 43,600 5 2460 72 120 76.110 913.53 1052 112 120 17," 115,490 146,200 163,460 10,37

- 87- -

* OKNIA ANNEX 3Table 4

NUCIWS SATIS ANM 8NLLVOLS III JICT

Na, Settler Crop Frodotln Frose 0.8 ha Field Ccop Area(Constant 1979 Np)

Crop O /_ I 2 3 4 5 6 7 a 9 10 I1 12 13 14 15+

Area Planted (be)Padi 0.3 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5C nc.6 0.4 0.3 - 0.2 0 1 - 0.3 - 0.2 - 0.3 - 0.2 - 0.3 -MaIze (yello.) 0.1 0.3 0.3 - 0.2 0.1 0,) 0.3 - 0.1 0.3 0.3 0.1 0.3 0.3Vegetables 0.1 0.2 0.1 0.1 0.1 0. 1 0.1 Sti 0.1 0.1 0.1 0.1 0 0 1 0 1Peeo..t - 0.4 0.5 0.3 0:4 - 0.4 0.5 0.3 - 0.4 0.5 0.3 0.4 0.5Svoot potato - - 0.1 - a01 0.1 - 0.1 - 0.1 0 - 0.1Soybean - - - 0.5 - 0.3 - - - 0.3 - - - 0 1PaUnov - - 0.3 0.5 - - 0.5 0.5 - - 0.5 0.5

Tfeld Pe rlanted AreaP.d8 (,g) - 300 5000 0 500 550 550 550 550 550 575 575 575 575 575 575Ca.sa- (kg et) - 3.200 2.400 - 1,600 880 - 2.640 - 1,848 - 2,772 - 1,848 - 2,772Mai.e (kg) - 120 360 360 - 264 132 396 396 - 140 416 416 - 140 41.Ve.gtablee (kg) - 200 400 200 220 220 220 220 220 230 230 230 230 230 230 230Peanuts (kg uvebelled) 280 350 210 30b - 308 385 242 - 323 385 242 - 323 385Swaet potato (kg get) - - 700 - - 770 - 770 - 810 - 810 _ 810 - I10Soybean (kg ry) - - - 400 - 260 - - - 280 - - - 244 - -

Value of Prodctioe Podl _ 24,000 40,000 40,000 40.000 44,000 44,000 44,000 44,000 44,000 46,000 46.000 46,000 46,000 46.000 46,000Ceocava - 34,800 18,000 - 12.000 6,600 - 19,800 - 13,860 - 20,790 - 13,860 - 20,790Maize - 7I200 21,600 21,600 - 15,940 7,920 23.760 23.760 - 8.*00 24.960 24.960 - 8.600 21,96'1Vogetables - 30,000 60,000 30,000 33,000 33.000 33,000 33.000 33.000 34.500 34.500 34.500 34,500 34,500 34.500 34,500PeaootC - 84.000 105,000 63,000 92,400 - 92,400 115,500 72,600 - 96,900 115.500 72,600 - 96,900 115,5()SWeet potato - - 10,500 - - 11,550 - 11,550 - 12,150 - 12.150 - 12,150 - 12,150Soybean _ - - 60.000 - 39,000 - - - 42,000 - - - 42,000 - -

Total Val.. of Frodvetlo _ 169.200 255,100 214,600 177,400 149,990 177,320 247L610 173,360 146,510 185,800 253,900 178,060 148,510 185,800 253,900

Cost of ProduttlonPadi 16.110 26,850 26.850 26,850 26,850 26,850 26,850 26,850 26,850 26,850 26,850 26,850 26.850 26,850 26,850 26,850

oossaa W20,620 15.450 - 10,300 S,15O - 15,450 - 10,300 - 15,450 - 10,300 - 15,450 -MaICe 3.920 11,760 11,760 - 7,840 320 0 11,740 11.760 - 3,920 11,760 11.760 - 3,920 11,760 11,760Vegetables - 8,520 17,040 8,520 8,520 8,520 8,520 8,520 8.520 8,520 8,520 8,520 8,520 8,520 8,520 8,520Penote - 21.800 27.250 16.350 21.800 - 21,800 27.250 16.350 - 21,800 27.250 16.350 - 21.800 27.250Sweet potato - - 4.590 - - 4.590 - 4,590 - 4,590 - 45590 - 4*590 - 4,590Soybean - - - 17,300 - 10,380 - - - 10,380 - - - 10,380 - -

Total Coot of Frodctleda 40.630 84,380 87.490 79.220 70.160 54,260 84,380 78.970 62,020 54,260 84,380 78.970 6Z.020 54,260 84,380 78,970

Nat Valo- of Frodowti (40.630) 84,20 167.610 135.380 .107.240 95,730 92.940 16.640 111,340 92,250 101,420 174,930 116,040 94,250 101,420 174,930

/a apree.ts plotte perlod of 6 eeetba.Prlce (4/ha): P.i. 80t coswa_, 6.5 ees. 80; tabl, a.reag 150; peanut:, 3001 Swaat potato. 15S

or,. 150

ANNEX 3Table 5

- 88 -

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

Farm Family Labor Availability and Labor Requirement for Proposed Development

DANAU SALAK

Year: 0 1 2 3 4 5 6 7 8 9

Farm Labor Availability /aAverage Age

Husband 32 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0Wife 26 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6Child 10 0.2 0.3 0.4 0.4 0.5 0.5 -0.6 0.6 0.7 0.8Child 6 - - - - 0.2 0.3 0.4 0.4 0.5 0.5Child 4 - - - - - - 0.2 0.3 0.4 0.4

Total Family Labor Units 1.8 1.9 2.0 2.0 2.3 2.4 2.8 2.9 3.2 3.3

Total Man-days perFamily /b 540 570 600 600 690 720 840 870 960 990

annual Labor Requirement(Man-days) /c

Rice 42 71 71 71 71 71 71 71 71 71Cassava 50 37 - 25 12 - 37 - 25 -Maize 13 40 40 - 27 13 40 40 - 13Vegetables - 16 30 16 16 16 16 16 16 16Peanuts - 60 75 45 60 - 60 75 45 -Sweet potato - - 9 - - 9 - 9 - 9Soybean - - - 65 - 39 - - - 39Rubber 285 285 285 285 285 285 220 220 220 220Fruit trees 10 10 10 10 10 10 10 10 10 10Livestock 2 8 80 80 115 115 115 115 115 115

Total Labor Requirement 402 527 600 597 596 558 569 556 502 493

Family surplus labor 138 43 0 3 94 162 271 314 458 497

/a Man is 1 labor unit; woman 0.6 labor units, children variable according to age./b Assuming 300 man-days/year for 1 labor unit./c Crop growing season does not coincide with calendar year.

- 89 - ANNEX 3

Table 6

INDONESIA Page 1

NUCLEUS ESTATES AND SMALLHOLDERS III PROJET

Existins Settler Food Crop Area and Yield Projections Witk lProject

51I180 SUJANG

Product 0a 1 2 3 4 to 91 it 12

Crops (ba)Padi 0.9 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0Mixed crops, lb 1.2 1.2 1.2 1.4 1.5 1.5 3.5 1.5 3.1 3.5 1.5 1.5 1.5Fruit trees R0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.2S 0.25Coffee 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05Clove 0.1 0.3 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.3 0.1 0.1 0.3Coconuts 0.1 0.1 0.1 0.3 0.1 0.1 0.1 0.1 0.1 O.1 0.3 0.1 0.1Rubber - 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0Fellow 0.55 0.15 0.55 0.35 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25Reserve land 2.75 0.75 0.75 0.15 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75

LivestockFowl 2 4 5 5 7 9 3t 13 31 Is 15 35 15Ducks - - - 3 2 2 2 2 3 3 3 3 3Gant* 2 2 2 2 2 2Cow/buffalo - - - - - - - I3 I I I

YieldsCrop (ha/yr)Pedi: dry Cut) 1.0 1.2 1.5 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0Cassava. dry (at) 3.0 3.0 3.5 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0matte (ut) 0.6 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.1 0.5 0.8 0.8sweet potato: wet Cut) 5.0 6.0 7.0 8.0 8.0 8.0 8.0 a.0 8.0 8.0 8.0 8.0 8.0Coffee: dry (at) - - - - - - 0.1 0.2 0.3 0.45 0.6 0.6 0.6Clove: dry (at) - - - - - - 0.031 0.03 0.073 0.35 0.3 0.3 0.3coconuts: copra Cut) - - - - - 0.3 1.0 1.5 2.0 2.5 2.5 2.5 2.5Rubber (kg/ha/yr) - - - - - *. - 440 880 880 1.000 1*100 1,160

Livestock Productionper YearPoultry - 1 10 8 I) 1S 22 2s 35 35 35 35 35Eggse 45 335 180 180 270 335 405 495 585 585 585 581 585Goats - - - - - - - - I333

/a Year 0 free July 1. 1979 - Deceaber 30. 3979.lb Duuble cropping of padi area: Cassava 28Z mixed crop area

Maize (white) 4.31 mixed crop area,Sweet potato 151 mixed crop areaVegetables 341 mixed crop area: 402 area aro.Wadeut yieldieg shelled 0.8 at/ba; 201 beans yielding

0.8 ut/ha; 41 chilli yielding 0.6 at/ha; 41 spinach yielding0.2 ut/be; 41 eggplant yielding 0.7 at/ba; otber 281 yietding0.2 ut/ke.

/c Range of annual production free fruit trees 0.25 ha; bananas 60-80 bunchies; OOPeyO 30 pieces; pineapples 80-120 pieces;citrus 250-300 piecesi; ianbutan 150-500 bundles; jackfrult 75-150 piaces.

-90- ANNEX 3Table 6Page 2

INO1NESIA

NUCLEUS ESTATES AND SHALLUOLDERS III PR1JECT

Existing Settler Food Crop Area and Yield Projections Withi Project

gIMBO BUJANG

Y e a rProduct 13 Lo 14 15 16 17 18 19 20 21 22 23 24 25-30

Crops (ha)Padt 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 I.0Mized crops /b 3.5 I.5 1.5 3.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5Fruit trees __ 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 U.25 0.25Coffee 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.0)Clove 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1Coconuts 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.ORubber 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.uFallow 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25Reserve land 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75

LtvestockFowl Is 15 15 15 Is 15 15 is I5 IS IS IS ISDucks 3 3 3 3 3 3 3 3 3 3 3 3 3Coats 2 2 2 2 2 2 2 2 2 2 2 2 2Cow/buffalo I I I I I I I I I I I I I

YieldsCrop (ha/yr)Padi : dry (at) 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0CAssava: dry (at) 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0maize (Mt) 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8Sweet potato: wet (at) 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0Coffee: dry (ut) 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6Clove: dry (mc) 0.4 0.5 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 *1.6Coconuts: copra (Ct) 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5Rtubber (kg/ha/yr) 1,340 1,380 1,420 1,460 1,490 3,620 1,570 1,525 3,470 1.450 1,320 1.300 3,000

Livestock Productionper YearPoultry 35 35 35 35 35 35 35 35 35 35 35 35 35Eggs 585 585 585 585 585 585 585 585 585 585 585 585 58'5Cuats I I I I I I I - I I I I I

ANNEX 3Table 7

- 91 -

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDEBS III PROJECT

Farm Family Labor Availability and Labor Requirement for Proposed Development

RIMBO BUJANG

Year: 0 1 2 3 4 5 6 7 8 9

Farm Labor Availability /aAverage Age

Husband 32 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0Wife 26 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6

Child 12 0.4 0.4 0.5 0.5 0.6 0.6 0.7 0.7 0.8 0.8

Child 9 0.1 0.2 0.3 0.4 0.4 0.5 0.5 0.6 0.6 0.7

Child 6 - - - 0.1 0.2 0.3 0.4 0.4 0.5 0.5

Total Family Labor Units 2.1 2..2 2.4 2.6 2.8 3.0 3.2 3.3 3.5 3.6

Total Man-days perFamily /b 630 660 720 840 840 900 960 990 1,050 1,080

Annual Labor Requirement(Man-days) /cRice (187 md/ha) 166 187 187 187 187 187 187 187 187 187Mixed crops (120 md/ha) 144 144 144 168 180 180 180 180 180 180

Fruit trees (66 md/ha) 10 10 10 10 10 10 10 10 10 10

Coffee (130; 148 md/ha) 5 6 6 6 6 6 7 7 7 7

Cloves (91; 179 md/ha) 9 9 9 9 9 9 18 18 18 18

Coconuts (87; 150 md/ha) 9 9 9 9 9 15 15 15 15 15

Rubber 285 285 285 285 285 285 131 131 131 131

Livestock 2 8 10 10 14 18 60 100 200 200

Total Labor Requirement 630 658 660 684 700 710 608 648 748 748

Family surplus labor 0 2 60 156 140 190 352 342 302 332

/a Man I labor unit; woman 0.6 labor units, children variable according to age.7T Assuming 300 man-days/year for 1 labor unit./c Crop growing season does not coincide with calendar year.

-92- ANNEX 3Tabl1e 8

IlllXENt3L . E~~~~~age 1rtICUS ESTATIC MM s_AI I .HS.511 Ir I P9Jt T

Oh.m tt11r .- I-tn.n_nt

DAMWI SAltA

r .., o /a 1 2 3 4 5 6 7 8 9 10

CrG. V lof, I.o Pluctl,nW.d.n 1.1 _ 33.3 135.3 110.9 138.5 170.2 213.2 236.0 291.4 342 2 386.8F-.d "ro' roc - 230.1 380.1 343.4 303.4 274.5 347.5 520.0 388.4 351 6 477.5x.u.br - _ _ - - - 176.8 941.4 1,277.9 1,515.0 1,76S.8Post d-.Io-ttoo &dJ-twat - - - - - - 291.9 475.8 646.6 766.0 tt95.0

S.bt.t.I -_ 263.4 515.4 454.3 441.9 444.7 1,429.4 2.172.2 2.604.2 2,974.8

3.52S.

C".t. ..1 Prxlu-tinICrd. .It 19.1 43.6 56.4 72.8 91.2 100.8 100.9 108.9 117.0 125.5 135.6

Food crop ore- 69.6 164.2 186.5 181.2 171.6 142.1 236.5 237.2 198.6 186.3 310.2tubbbrk - - - - - - 266.8 286.0 304.9 326.6 349.8

Sobtotol 88.7 207.8 242.9 253.0 262.8 242.9 604.2 632.1 620.5 638.4 795.6

Net Vml.e of Productlo. (88.7) 55.6 272.5 201.3 179.1 201.8 825.2 I.4.1 1.983.7 2.336.4 2.732.5

Oth.r incomeS.b.lt.n- -ash poy-nt 36.0 -Off-lore soplIoyc.nt 111.1 222.0 276.1 296.5 316.9 339.1 363.2

S.btot.1 147.1 252.0 276.1 296.5 316.9 339.1 363.2 -

Tot.1 Ineoes 58.4 307.6 548.6 497.8 496.0 540.9 1.188.4 1.540.1 1.983.7 2.336.4 2.732.5

L...; IPEDA t1 x - 2.8 13.6 10.1 8.9 10.0 41.3 77.0 99.2 116.8 136.6

lnc. after tax 58.4 304.8 535.0 487.7 487.1 530.8 1.147.1 1,463.1 1,886.5 2,219.6 2,595.9

Leos: All-..o. for .1.k - 45.7 80.3 73.1 73.1 79.6 172.1 219.5 282.6 332.9 389.4

Not toe. before debt seriec 58.4 259.1 454.7 414.6 414.0 451.2 975.8 1,243.6 t0t1.9 1.886.7 2,206.5

Debt Servic - - - - 217.2 354.1 48.1 570.3 665.9

Not tocm. 58.4 259.1 454.7 414.6 414.0 451.2 757.8 U89.5 1,120.8 1,316.4 1,540.6(US1 c.cralt) 93.0 414 727 663 662 722 1.212 1.423 1.793 2,106 2.4U5(US$ ooatant 1979) 93.0 304 488 414 387 . 395 610 678 8O0 877 959

7eereental Not Cash Incme. (73.6) (40.1) 126.9 62.6 37.8 48.6 326.6 427.5 628.0 7U8.4 975.2(US$ corrent) (82.0) (64) 203 100 60 78 522 684 1,005 1,261 1.560(U0 Constant 1979) (82.0) (47) 136 63 35 43 266 326 449 525 f07

11 12 13 14 15 16 17 18 19 20 I

.ross V.l. of Pr-ductionCG,d.n lot 453.8 . 507.7 .470.0 676.7 740.9 794.4 847.9 907.6 971.4 1,039.3 1,113.4Food crop are. 698.2 523.6 467.8 626.1 914.0 980.1 1,046.1 1,119.7 1,198.4 1,282.2 1,373.6Rubber 2,004.5 2,468.3 2,720.0 2,f99.0 3,29811 3,817.4 4,199.0 4,347.3 4,533.8 4,692.2 4,9161.0Post deselotlos adjstont 1,014.3 1,248.9 1,376.3 1,517.5 1,668.8 1,930.6 2,124.6 2,199.7 2,294.1 2,374.2 2,502.7

S.btotal 4.170.8 4.748.5 3.134.1 5.819.3 6.620.8 7,523.5 8.217.6 8.574.3 8.997.7 9-387.9 9.931.7

Cost of ProductlonC.rd.n,lot 145.9 156.4 168.0 180.2 193.1 207.1 220.9 236.5 253.1 270.8 29:1.!F- d crop are 314.6 260.7 244.5 406.7 406.7 436.0 465.5 498.2 533.2 570.6 611.2Robber 374.3 400.1 428.7 458.6 489.9 525.3 560.8 600.2 642.4 687.3 736.3

3ubtotal 834.8 817.2 841.2 1;045.5 1.089.7 1.168.4 1.247.2 1.334.9 1.428.7 1,528.7 1.637.6

N.t Val.. of Productton 3,336.0 3,931.3 4,292.9 4,773.8 5,532.1 6,355.1 6,970.4 7,239.4 7,569.0 7,859.2 8,29h.1

Oth- Ic..emSoIl, Istooc. cst, po^mnt- - - .- - . .-SLf.tam . .ployhe nt - - - - - -- - - - - -

Subtotl - - - - - - - - . -

Total Incoee 3.336.0 3.931L3 4,292.9 4.773.8 5,532.1 6,355.1 6.970.4 7.239.4 7,569,0 N,1859.2 8,298.1

L.s.: IPEDA tax 166.8 196.6 214.6 238.7 276.6 317.7 348.5 361.9 378.4 392.9 414.9

Income after tao 3,169.2 3,734.7 4,078.3 4,535.1 5,255.5 6,037.4 6,621.9 6,877.5 7,190.6 7,466.3 7,881.2

L..' ; AIl .- fr risk 475.4 560.2 611.7 680.3 788.2 905.6 993.3 1,031.6 1.011H.6 1,I12'.0 1,18!.5

Not Income before debt or&mei 2,693.8 3,174.5 3,466.6 3.854.8 4,467.3 5,131.8 5,628.6 5,845.9 6.112.0 6.346.3 6,700.7

Debt -eroice 754.7 929.3 1,024.1 1,129.1 1,241.7 1,437.0 1,580.9 .

Net Inc..e 1,939.1 2,245.2 2,442.5 2,725.7 3,225.6 3,694.8 4,047.7 5,845.9 6,112.0 6,346.3 6.700.7(USS corrent) 3,103 3,592 3.908 4,361 5,161 5,912 6,476 9,353 9,779 10,14 ln.721(US$ Constanc 1979) 1,128 1,222 1,241 1.294 1,434 1,532 1.572 2,121 2.072 2,011 1,982

Incrmentrl Net Cash, tcco. 1.334.1 1,598.4 1,749.5 1,984.3 2,433.6 2.W,5.6 3,141.3 4,N75.7 5.073.6 5,215.3 5,511. 5(111$ c-rrn..) 3 2,135 2,557 2,71'9 3,175 3,M94 4,5 1 Sn,026 7,801 8,118 8,376 8,917Olsr;; r... e 1979) 776 8701 8h9 42 1,0112 1,1 51 1,220 1,769 1,720 1,659 1,629

/c Refers to six Msths.

93~ -ANNEX 3Table 8Page 2

22 23 24 25 26 27 28 29

Gross Value of ProductionGarden lot 1,191.6 1,273.9 1,362.4 1,459.1 1,560.0 1,671.1 1,786.3 1,911.9Food crop area 1,470.1 1,561.6 1,680.8 1,800.2 1,924.6 2,061.7 2,203.9 2,358.7Rubber 4,815.4 5,081.7 5,098.4 5,322.9 5,174.2 5,124.0 5,091.8 4,870.4Post devaluation adjustment 2,436.6 2,571.3 2,579.7 2,693.4 2,618.1 2,592.7 2,576.4 2,464.4

Subtotal 9,913.7 10,498.5 10.721.4 11,275.6 11,276.9 11,449.5 11,658.4 11,605.5

Costs of ProductionGarden lot 310.4 331.9 355.1 380.2 406.5 435.4 465.5 498.1Food crop area 654.1 699.3 747.9 800.9 856.3 917.3 980.6 1,049.5Rubber 788.1 842.5 901.0 965.0 1,031.7 1,105.3 1,181.4 1,264.5

Subtotal 1,752.6 1,873.7 2,004.0 2,146.1 2,294.5 2,458.0 2,627.5 2.812.1

Net Value of Production 8,161.1 8,624.8 8,717.4 9,129.5 8,982.4 8,991.5 9,030.9 8,793.3

Other IncomeSubsistence cash payment - - - - - - - -Off-farm employment

Subtotal -_ _ _ _ -

Total Income 8,151.1 8,624.8 8,717.4 9,129.5 8,982.4 8,991.5 9,030.9 8,793.3

Less: IPEDA tax 408.1 431.2 435.9 456.3 449.1 449.6 451.5 439.7

Income after tax 7,753.0 8,193.6 8,281.5 8,673.2 8,533.3 8,541.9 8,579.4 8,353.6

Less: Allowance for risk 1,162.9 1,229.0 1,242.2 1,301.0 1,280.0 1,281.2 1,286.9 1,253.0

Net income before debt service 6,590.1 6,964.6 7,039.3 7,372.2 7,253.3 7,260.7 7,292.5 7,100.6Debt Service - - - - - - - -Net income 6,590.1 6,964.6 7,039.3 7,372.2 7,253.3 7,260.7 7,292.5 7,100.6

(US$ current) 10,544 11,143 11,263 11,796 11,605 11,617 11,668 11,361(US$ constant 1979) 1,821 1,800 1,701 1,664 1,531 1,431 1,344 1,223

Incremental Net Cash Income 5,316.3 5,602.8 5,582.9 5,812.4 5,585.7 5,474.3 5,382.9 5,056.8(US$ current) 8,506 8,964 8,933 9,299 8,937 8,759 8,613 8,091(US$ constant 1979) 1,469 1,448 1,349 1,312 1,179 1,079 992 871

-94 ANNEX 3111DONS&A ~~~~~Table 9

MCMSAM O aMLWM II FWOOJ Page 1

26- oLo I 2 3 4 3 7 I 1o 22 12

v.81 - 4. 123.4 161.6 236.0 2.3 701 2.6 309. 131.7 354.7 379.3 405.701-d.. p.op 36.3 63. 69.9 90.9 20. 1.5 256o4. 4. 361130 17. 0.lo..hl t . .. 23.2 37.3 " 042 67.2 983 05.2 212.7 120.6 262. 14016.19.232CoIl.. - -.. 4.9 20.: 24.a 27. 38.6 41.3 44.1c2oo.. - - - 5.9 2433.4 730 142 167.0 214.4

O2ooo.o..1 . . - . . ~~~~ ~ ~~~~ ~ ~~~~ ~ ~~~~ ~ ~~~~~~~~~~~11.0 39.2 3.0.6 1.0 12. 37. 1.0A.M6.. 163.1.td for9 .o. oI.Lm) .- .- 610.9 .... 2 1 I,330.1 "1,4.4 1,900.4 2,143.3

S.btOL.1 41.7 203.4 253.9 327 486.3 334.0 l.242.4 jJ 1 j 2.216.9 2.644.7 3,007.7 3.320.4.

WollY- 9. 14.9 22.8 22.22 34.8 43.1 3867. 4090.0 94.3 102.91660 2,~~~~~~~~~~~~10 6.4 9.4 p2. 16.2 30.1 27.6 34. 43. 492 2.7 56.4 40.3

Cool. . - - . . - ~ ~ ~~~~ ~ ~~~~ ~ ~~~~ ~ ~~~~ ~ ~~~~~~~~~~~~~~~~~~~- 16.0 10.0 20.3 20.6 22.1

0.61t.1 .0 2. 24. 3 22.9 A_4 $4. 20.9 "3.2 241. fl124.73.3 103.3

,...., 0.,... .0 PoodolIlo. ~~62.7 222.3 280.2 334.6 4 jj.1 &lz i.J7Lk L.M1.i IflLI 2.0. 3.161.0 3.305.?

9.41 30.3 63.1 69.1 74.2 79.3 06. 90.9 63.9 70.3 73.4 60.7 66.4 9.flood 10.21,6 63.9 70.0 07.? 107.2 1230. 236.3 143.9 233. 164.4 2I6.0 I"0. 20.Vo.2 ,0. . . 4.2 1.4 . . . ..2 2lo0. 32.6 12.4 13.3"

olf.2. 4. 3. 3.3. 4.3 9.4 10.1 I0. 1132. 33 14.1C2oo.. 2.4 3.4 6.0 6.4 6.0 6.1 0.4 9.2 9.9 10.6 11.3 22.1 22.9~~~~~~~~~I 0 616 -

Coooo.2.5 .7 6.3 6. .2 2. 11.0: 12.4 13.4 26.4 34331.08o -.o leofod 000p0 (43n3 35.5 42.3 69.1 0.0 916 168 11. 0. 13. 123.4 13.5114 3.1

0.66.o - - - - - - 333.0 297.6 322.0 229.7 233.1 232.4~~~~~~~~~~~~~~~~~~~~~~~~~~~I2229 197 2512508o1.o .1 -b.66. (3013 - - -) 70.3 39.3 66.7 63.9 70.3 71.:4

0.bt0.1. 127.9 207.0 229.6 264.0 304.7 j" 377.2 664.6 40. 1 1j 723.0 776.0 029.4

0.0.1107 ~~~~ ~~~~ ~~~0.1 2.6 2.2 2.9 4.6 6.1. . 0.1 200 1.6 12.4 13.2Cool. . . - - 0.2 ~~~~ ~~~~ ~~~~ ~~~~~~~~ ~~~~~~~~~~~~~~~~~~0.62 02 0. .203 0303

0.111. . - - . . . - . 0.4 0.3 0.3 0.6 6.6~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~04,O. 0 0 1.

0.61o10I ~~~~~~~~,j- Li6 2.2 2.9 4_6 2-As7. 9.7 20.7 J,j,_5 22.4 au. j4J,

201.2 Cool of loo8.ollo,0 ~~~~~~~~~~~~ 222.0 240.9 309.3 383.0 67. 630.6 711.2 737.4 70.3 843.5

f. ... 9008011. (33.9) 21.9 48.2 85.7 173.2 1M.3 244.9 643.0 1.236.8 2,439.9 2,046.3 2,392.7 2.467.7

Other loom

011-.20..pIpo. 131,1 232.0 276.1 296.3 316.9 139.1 363.2 - - - -

Too. 2o.. 3.2 263.9 324.3 362.2 "C. I 525.4 h..I. au. 12Oj. 1,436.9 L.0OI 2,302.7 7.642,7

its"2704I. (313) - 0.4 2.4 4.3 0.7 9.3 22.2 32.3 62.0 02.0 203.2 329.4 133.1

10 -1.15 5.2 323.0 322.9 377.9 401.4 316.1 393.0 629.9 1.273.0 1.374.1 1,963.0 2.272.1 7.329.I

4... 1-a..t. f8 1..2 40.9 48.3 36i.7 72.2 77.4 09. 94.5 276.2 236.1 294.4 340.1 379.4

0.1 0. loom hofoedb 8.61 .16 47.0 276.9 273.6 321.2 409.2 A38.7 306.3 333.4 900. 1,238.0 1,666.6 1,932.0 2,149.7

flbO00.1. - . 132.7 247.0 233.6 403.6 477.1 330.3

0.0 1000.. ~~~~~~~~~~47.0 274.9 273.6 321.2 409.2 A38.7 306.5 382.7 731.0 1.103.4 1,243.0 1.454.9 1,613.410.1 "oo..1) 73 443 437 514. 639 203 603 4612 1,392 1.403 2.024 2,320 21Sol(US$ -00-t0 1079) 63 326 293 321 Ms3 383 413 291 237 669 707 844 670

2,oro .l 60 .44 loom 51,0 4.9 (24.4) 1.2 330 36.1 75.3 (.33 236.2 475.4 699.4 040.9 960.6103)eo t.1 136 0 (39) 2 53 30s 121 (1273 4.13 742 1,129 1. 360 1. 547

(03 01.00 1979) 113 4 (26) 1 32 32 62 160) 104 317 421 494 320

I. 00... t 10010 000144 of 0e -tho.

AN~NEX 3Table 9

95 - ~~~~~~~~Page 2

20 24 IS 54 52 0 It 20 25 22 ZS 24 25 24 2 7 20 29

7542 ~~~~~~ ~~~~~~454.7 465.5 494.6 532.7 540.4 0.6. 651.4 444.9 744.6 799. 454.2 913.6 073.4 5,4.0. 5.520.4 .,II7. 2.1202,

05.4-d s. 202. 216.4 231.1 247,6 264.5 23I. 505.0 524.2 347.3 372.7 597.4 455.0 455.2 -66.4 521. I5. ~... ~~~~~220.4 244. 541.0 2 79.9 290.27 39.7: 342.22 544. 592.2 419.0 "1: 440.0"4:0. I040 9. 540. 429.5 4763.5

02.... 209.0 202.2 2~~~~~54. 0 5. 272 24. 9.2 330 324.4 54.4 3751.4 397.2 425.4 454.0 432.2 520.0 574557.5 5*., 50.2 595.0 20.0 220.5 5'30.0O 252.5 27.5 M.$ .5 331.0 S5. 7. 2. 3. 4.

0.24.. ~~~~~~~~~~2.452.0 2,924.1 3.220.4 2,755.5 3.077,5 4,505.7 4,430.2 4,307.3 5,054.5 5.3)0.0 5,130.5 5,454.4 4.4*0.8 4,320.0 5,544.0 5.49C. 239.

-1-,5* 3 950.0 4 275.2 4.5. 5.298.4. 5,524.5 6,6. 4S7.87, G.M)j 2.196.7 LULl. 7.454.? mom 7.524.4. 7,059.7 L,39I 0.92..2 9.fr

1222222 55~~~~~~~~~10.3 550.0 52.2 55. 542 154.4 245,2 574.0 I39. 02. 7 254.7 535.7 54A. 24I5.5 " 28. 303. II25.2

~~~~20* ~~~~~~~~44.4 Go.1I 75.0 P9.: 04.5 90.4 04.0 103:.5 550.9 11:.7 52.9 535.7 24. 5. 4. 7.9 290.434.2. ~~~~~~~~~~~23. 25.3 27.0 79,0 30. 9 33.5 55.4 57. 40.4 4.43 444 .7 53.2 54.9 40. 45.5 49.7

5.42,2.5 j!~~~ ~~~~L9A 252.4 724.0 243.2 259.4 277.9 Z97.4 j11_ 3- 9 36.6 39 417.2 _44.7 4 7_76 552.4 544.3 515.3

252.2* f2 7250442159 4 4,485.6 4M,0.3 5,541.4 5,203.9 6,544.3 4,020.2 7,724.0 7,537.6 7,0. I.044,7 0.517,4 7.7,7. 5 05317.3 5,U01.2 !.513.0 1ALAEI.9

Li.22 .21 22 01. 25 I 2

2.5...2.,4 55.5 54.2 27.5~~~~~~~~~~I 20.5 359.6 25.2 25 242 2.0 2. 29.:5.3 4. 5:4.4 5. 27 4.*43,.55,2 2,2 a.aS.aslosi 055.5i: 260,0 2017. 30. 52. 50. 505 40. 455 44.6 45.7 520.0 3545. 40. 447. 492. 742.

22... .2p4.25. IL4 976.2 1,042.9 J4,5Lg 1,593.4 1.277,5 1,367j 5,42.0 I-361j 1,677.1 i1d7. 50517.4 I L_ 2 195.27 2,352.0 2,524.4 2.491,0

0.2 7.2*5f ?23-5511 2. MIO 5.5094 3.0245.4 4,423.5 4.Q. 5.244, 5.502. 5.261,2 5,970.5 4.515.0 4,0.25, 6Liin 5.?57.4 5,21.64 ,4. 6,9. 7.495.9

2,2.5 5..... 5~~~~~,197.0 j.0. 3,643.4 4.425,5 L2.5.1 5.244,0 35.02,9 5,205.2 5,a79. 4.312.0 4 255.7 G.O. 5.574 25.4 5,549.2 6."!!! 7.490.9

(SV 264 . 251 59. 575,4 592.5 5251.2 229,5 243.3 275.5 50.5I 290.9 555.4 352.4 550,0 705.0 J04.5 572. 5499 57...

f-,50* -5 5,037.2 5,334.0 3,5.)L 4.202,3 4.361,0 S.003,5 5.227,8 5.473.1 5 472,0 5.997,2 5,959.1 6j7J. 5 45.7 5.015,5 47225.7 4.440,7 2540

C.,429252 5 2254 455.2 9NO.5 547.7 430.5 454,1 750.5 704.2 825,0 050.0 099.4 090.9 940.5 024.0 672.5 935.2 997.1 I ,4,

P.,20 Ss42... h 4- .. 4 ss."I 2,502.0 L,0a" 5,205.4 5.572,0 5.706 .9 4,25530 4,4435 4,450 1 4,321.2 5.097,6 5"0912 5,529.5 4,654.9 4,943.2 5.230.5 5,651.4 6.055 4

245252.2. 44.31 752.5 009.2 954.9 609.4 2,525,3 1,571.4 . .

Is I.. 2,5.5 2102.4 2,2"0. 5,5. ,5. ,7. ,7.,55.5 4,....5,.7. I 5,644.5 5,29. 4,454.9 4,945.2 5,249.5 5,451.4 6.055 4(055 ..... ,2 5 5.025 5,544 5.~~~~~~~670 4.213 4.300 5,005 5,35 7.445 7,714 0,155 6,077 0.527 7.? 7,909 ,4.42 9,5 9,0

(.55 95.5 9792 975 996 5.025 5,091 5.905 I.5m 5,209 1.474 1.456 5,409 5.509 5,53 2,042 5,045 1,042 2.045 1,042

2,422255 652 05.4 55, 5,~~~1220.5 5,505.0 5,50.5 5,705.9 2,355.2 2,554.9 5,55.4 2,545.5 5,435.0 5,15. 5.16,4 2,072.5 5:,0.5 5,275.5 5.502.1 2 5,42.5 4:.05 4(255 .I 'J 2 5,57 5,40 2.654 5.90 5,45 5,574 5,664 5.80 4,250 5.3 4,0 4.5 ,54 5.9 5,97 445

(.S$ 1..52 979) 025 444 49 759 750 737 757 5,522 2,075 5,094 92 954 409 495 69 495 491

- 96 - ANNEX 3Table 10

JlMiSIA Page 1kuCLEuS ESTATES ANID SNALUIOLDERS 111 PROJECT

Incoeo 86.04,51 for Elaisint 6 ttlers: Without 4'ro ectcCurrent Rp0 CO

Post-De-slustion RIHIO UJJANG

Year& 0 1 2 3 4 5 6 7 a 9 40 it 42 13 44 I5

CGo. Value of ProductionCrop.

Pedl - 112.6 138.9 165.6 194.8 227.3 243.4 260.8 271.2 298.1 319.2 341.6 365.1 391.2 418.6 447.1Mised crops 47.5 107.6 123.8 133.0 145.4 156.5 167.6 179.6 191.5 209.5 224.4 240.1 256.7 275.0 294.2 314.3Fruit trees 27.0 61.2 67.1 72.0 96.3 105.2 112.7 120.8 128.6 174.0 186.3 199.4 213.2 228.4 244.3 264.0Coffee - - - - - 22.9 24.5 18.8 112.0 210.0 257.0 378.1 441.0 551.3 631.9 1244.4Cloves - - - - - - 9.8 21.0 56.0 l08.0 179.9 247.5 323.4 376.0 404.4 432.0Coconut - - - - - - - - - 12.0 25.7 55.0 73.5 94.5 151.1 180.0Rubber - - - - - - - - - - - 86.4 91.1 193.1 204.9 21b.1

Subtotal 74.5 261.6 329.8 370.6 438.5 511.9 558.0 661.0 766.5 1,011.6 .1,92.5 1.548.1 1.764.0 2.111.5 2.350.0 2,571.1

LIvestockPoultry - 9.5 14.9 12.8 22.2 34.8 43.1 58.8 78.4 64.0 90.0 96.3 102.9 110.3 118.0 126.0Kass 1.0 6.4 9.4 10.1 16.2 20.1 27.8 36.3 45.9 49.2 56.7 56.4 60.3 64.6 69.1 73.8Goats - - - - - - - - - - 49.3 20.6 22.1 23.6 25.3 27.U

Subtotel 1.0 15.9 24.3 22.9 38.4 54.9 70.9 95.1 124.3 133.2 466.0 173.3 145.3 198.5 212.4 226.8

Total Vlus ot Productioo 75.5 297.5 354.4 393.5 476.9 566.8 628.9 756.1 890.8 1.144.6 1,358.5 1.721.4 1,949.3 2,310.0 2,562.4 2,7979

Cost of ProductionCrops

PEsL 28.8 32.6 35.8 33.4 41.0 43.9 41.0 50.4 53.6 57.6 61.7 66.0 10.6 75.6 80.9 86.4NAiad crops 2.6 6.1 6.1 7.2 7.9 6.4 9.0 9.7 10.3 11.0 11.8 42.7 13.5 14.5 15.5 16.6Fruit trees 0.1 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.5 0.5 0.6 0.6 0.6 0.7 0.1Coffee 10.7 - 13.3 14.2 15.2 0.4 0.4 0.8 1.3 1.9 2.1 2.2 2.4 2.5 2.1 2.9Cloves - 5.3 - 6.2 6.7 0.1 0.6 1.7 2.5 2.6 2.8 3.0 3.2 3.5 3.7 4.0Coconut - - 5.8 - - 7.1 - 8.2 - 0.5 O.S 0.6 1.2 1.3 2.0 2.2Rubber - - - - - - 14.7 - 16.8 - - 40.5 11.2 12.0 12.8 43.1L4vestock 0.4 0.8 1.2 1.3 1.9 2.6 3.3 4.2 5.2 5.5 5.9 6.3 6.8 7.2 1.8 8.3Adljtent for devsluatioa 16.2 17.1 23.9 25.7 27.7 24.1 28.7 28.6 34.3 30.2 32.4 38.7 41.6 44.5 47.9 51.2

Totsl Cost of Productloa 58.8 62.2 81.0 93.3 400.1 67.6 104.3 104.0 124.6 409.8 117.7 140.6 454.4 464.7 174.0 186.0

Net Valu of Production 16.7 235.3 261.1 300.2 376.2 479.2 524.6 652.1 166.2 1,035.0 1,240.8 1,580.8 1,796.2 2,148.3 2,368.4 2,t!i.9

Other Inco_e0ff-fare employ .et 42.1 95.5 104.6 112.3 120.0 128.5 - - - - - - - - -

Total IDcoUe 58.8 330.8 371.7 412.5 496.2 607.7 524.6 652I 166.2 1.()35.0 1,240.8 I.,8:8 1,796.2 j2,14.3 2,388.4 2ibIl:9

Loso: IPtDA tax (5) 0.8 11.8 13.3 45.0 18.8 24.0 26.2 32.6 38.3 51.7 62.0 79.0 89.9 107.4 119.4 130.6

Inc-_ After Tax 58.0 319.0 356.4 397.5 477.4 56.1. 498.4 619.5 121.9 983.3 1_17b.8 I,5UI.h 1.708.3 2,04U.9 2,26_9u 2,48hl.J

Le..: Alolance for risk (151) 8.7 47.8 53.8 59.6 71.6 87.6 74.8 92.9 109.2 147.5 116.8 225.3 256.2 3U6.1 3444.4 172.2Subsistence labor 144.0 272.0 298.0 320.0 376.2 402.6 431.2 462.0 492.6 528.0 565.4 605.0 646.8 693.0 741.4 792.0

"at Cash Inca. BefoieOcbh Service (94.7) (0.8) 6.6 17.9 29.6 93.5 (7.6) 64.6 25.9 307.8 436.6 614.5 ROS.A I )

41.8 1

6181.2 1 4,2 :

-97 - ANNEX 3Table 10Page 2

Y arl 11 17 as I9 20 21 22 23 24 2S 26 27 28 29

Gross Value of ProductionCrops

PM8l 419.4 511.7 541.1 546.2 621.2 671.9 1S.1 7tO.11 822.2 880.6 941.4 1.00b.5 k,076.1 1.153.8

Hlied crops 317.0 359.7 38S.0 412.0 440.9 472.3 50S.S 540.4 517.9 619.0 *61.1 706.9 137.8 811.0

Fruit trees 279.9 2SS.7 319.7 342.2 366.1 392.2 419.8 448.5 480.0 514.0 549.6 SU4.7 629.3 *13.S

Coffee 772.0 824.0 U2.0 944.0 1,010.0 1,082.0 1,191.0 1,234.0 1,124.0 1.418.0 1.516.0 1,624.0 1,736.0 1,838.0

Cloes 463.2 494.4 529.2 568.4 6.0 849.2 694.8 142.8 194.4 850.9 909.6 974.4 1,041.6 1.114.d

Coconut 231.6 247.2 264.6 283.2 303.0 324.6 347.4 371.4 397.2 425.4 454.6 467.2 520.8 557.4

Rubber 229.4 242.9 257.2 273.2 290.1 309.5 331.S 399.3 379.5 408.5 435.2 465.5 497.6 532.9

Subtotal 2,792.5 2,97S.6 3,135.4 3,407.2 3.643.3 3,901.7 4,176.1 4,465.3 4,171.2 5,114.3 S,4U8.3 5,051.2 6,261.2 6,701.4

LivestockPoultry 133.1 144.2 154.4 189.2 176.8 189.4 202.7 218.7 231.7 246.2 289.3 284.2 303.8 125.2

Eggs 79.1 84.9 90.4 98.8 303.5 110.9 118.7 128.9 139.1 145.3 199.4 388.9 177.9 190.4

Costs 29.0 30.9 33.1 35.4 37.9 40.8 43.4 48.4 49.7 53.2 58.9 80.9 65.3 69.7

Subtotal 243.2 259.8 277.9 297.4 318.2 340.9 384.0 390.0 417.1 446.1 477.8 911.8 948.8 5U.3

Total Value of Production 3,035.7 3,230.2 3,463.3 3,704.6 3,961.5 4,242.6 4,540.9 4,8S5.3 S,192.3 S,561.0 5,945.9 .3688.8 *,80l.0 7,286.7

Cost ot ProductionCrops

FPet 92.8 98.9 103.8 113.3 121.2 129.8 139.0 148.8 158.9 173.2 181.9 194.9 208.3 223.0

Hixed crops 17.8 19.0 20.3 21.7 23.2 24.9 28.8 28.9 30.9 32.8 34.9 317.4 39.9 42.7

Fruit trees 0.8 0.8 0.9 0.9 1.0 1.1 1.2 1.2 3.3 1.4 1.S 1.8 1.7 1.9

Coffee 3.1 3.3 3.5 3.8 4.0 4.3 4.8 9.0 5.3 5.7 8.1 8.9 8.9 7.4

Cloves 4.2 4.S 4.9 S.2 9.8 8.0 8.4 8.8 7.3 1.8 5.3 8.9 9.5 10.2

Coconut 2.3 2.5 2.8 2.5 3.0 3.2 3.5 3.7 4.0 4.3 4.5 4.9 5.2 5.6

Rubber 14.7 15.7 16.4 17.9 19.2 20.6 22.0 23.5 29.2 26.9 28.8 30.9 33.0 35.3

Livestock 8.9 9.5 10.1 10.9 11.6 12.4 13.3 14.2 15.2 16.3 17.4 18.7 20.0 21.4

Adjustoent for devaluation 54.8 54.6 82.6 67.1 71.7 16.9 82.3 02.0 94.1 100.7 107.7 115.4 123.3 132.1

Total Cost of Produttlee 399.2 212.8 227.5 243.6 260.5 279.2 298.9 339.9 341.6 36S.9 391.1 439.2 447.8 419.6

Het Valu of Production 2.636.5 3,025.4 3,235.8 3,461.0 3,701.0 3,93.4 4,242.0 4,535.8 4,90.5 5,395.1 5,554.8 9,949.6 6,360.2 6.8071.

Other IcomOff-farm employment - - - - - - _ _ _ _ _ _ _ _

Total Incom 2,36.5 3.02S.4 3.235.S 3,UI.0 3,101 3.9U.4 4,242.0 4,535.8 4,860.5 5.195. 5,554.8 5,949.8 6.380.2 6.80l.!

L .an: IptA tra (S1) 141.8 ISI.2 161.8 173.0 185.0 198.1 212.1 228.8 242.5 259.7 271.7 297.5 318.0 34u.3

Income After Tax 2,694.7 2,814.2 3,0174.0 1281.0 3,516.0 3,715.3 4,029.9 4,309.0 4,60.0 4,935.4 S,277.1 5,652.1 6.042.2 64b6.8

Less; Allowance for risk (151) 404.2 431.1 461.1 491.2 521.4 S64.7 604.4 648.3 691.2 740.3 91.6 847.8 908.3 910.U1

Subsistence labor 849.2 906.4 970.2 1.038.4 1,111.0 1,390.2 1,213.S 1,361.8 1,459.4 3,999.8 3.,87.6 1.784.4 1,909.6 2.043.,

Net Cani, Inroe SeforeD.bt Sr.ice 1,441.3 3,936.7 1.642.7 1,156.4 1,877.6 2,010.4 2.9151.1 2,3uO.9 2,Utl:4 2,U3S.3 2,817.9 3,017.9 3,226.3 3,451.0

ANNEX 498 Table 1

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

Comparison of Develovment Costs per Family(Constant 1979 USq)

Rimbo Bujang Smallholder Danau Salak

Development /a New Settlement /bCategory Credit Non-credit Total costs Credit Non-credit Total costs

Rubber DevelopmentDirect costs 3,017 - 3,017 3,654 - 3,684Machinery 680 - 680 307 - 307

Cverheads (10%) 301 - 301 368 - 368

Subtotal 3.998 3.998 4.359 - 4.359

Subsistence PackageInitial land clearing (1 ha) - - - 53 - 53

Cash payment - - - 48 - 48Seed/fertilizers - - 40 - 40

Food crop center/marketing - 52 52 - 218 218

Subtotal - 52 52 141 218 359

RoadsMachinery -- (marga land only)--- 120 - J?n

Civil works 275 - 275

Subtotal 395 - 395

Settler Housing - - 425 - 425

Village Infrastructure --- (marga land only)--- - 60 60

Health Services - - - 107 107

OthersBuildings/civil works - 86 86 - 48 48

Equipment/vehicles - 20 20 - 13 13Resettlement cost - - - 248 248

Subtotal - 106 106 - 309 309

Project Mana8ementManagement fee - 150 150 - 186 186Dinas Perkebunan Dearah - 6 6 ^ 16 16

Subtotal - 156 156 - 202 202

Total Base Costs per Family 3,998 314 4.312 5,320 896 6.216

Contingencies /cPhysical 400 31 431 532 90 622Price /d 1,587 154 1,741 Z,117 358 2,475

Subtotal 1.987 185 2.172 2.649 448 3,097

Total Costa per Family 5.985 499 6,484 7,969 1,344 9,313

La Two ha of rubber establishment for existing tranamigrants and local population; 8,000family beneficiaries.

/b Three ha of rubber for 4,000 families.T Contingencies on families for new settlement in 1980-81./d Assumed on revised inflation for civil works of 25% in 1979, 22% in 1980, 10% in 1981

and 7% thereafter; equipment at 7% from 1979 onwards.

ANNE 4Table 2

INDaItSIA

NUCLEUS ISTATXS AND SMiLL30LDUIS III PIOJICT

Icon-'ic Rete of Rturn Totsi Projct(constant ItP *111io55 - 1979)

1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

Vsl.U of ProductionPTP XVIII developo..t - D.neu S.15k 209 283 294 311 309 374 608 961 1,605 2,404 3,704 4,266 6,251 7,052 7,616 8,166PNP I d-v-lopnt - L.ng.a 5,661 7,835 10,077 14,012 15,047 15,258 15,014 15,993 17,073 18f,458 19,970 21,348 22,152 22,718 72,510 21,970Sallholdno derelop,not - Usnso S-l-k, - - 222 697 892 929 985 3,245 4,746 5,570 6,099 6,795 7,468 8,253 8,480 8,882S_tnIlholder devalopmeot - Ri.bo b.u-g - 56 511 935 1,560 2,472 2,560 2,744 5,816 7,793 9,344 10,680 11,377 11,832 13,175 13,553

Total benefits 5.870 8.174 11.104 15,955 17.808 19 033 19.167 22,943 29,240 34.225 39.117 43,089 47,248 49,855 51,781 52,571

Cost of ProductionPTP XVIII dev lop--nt - D.n.u S1*1k 378 2,625 624 510 543 420 443 983 559 618 1,223 1,213 1,104 1,422 1,240 1,290PNP I develop. ent - Len.S 6,761 12,293 11,371 12,653 13,784 14,639 13,083 13,264 14,353 14,177 35;027 13,549 13,708 13,126 12,769 12,602Salholder d-oelopment - Dan.u Sl.!k - 670 930 1,277 1,345 1, 741 1,609 1,849 1,815 1,733 1,705 1,973 1,936 1,840 1,810 1,977Stllholdec d .elop.pent - Ri.bo Buj.ng - 1,535 1,629 1,776 2,516 3,320 3,617 3,409 4,681 4,697 5,281 5,921 6,376 6,625 6,904 7,096Technical assi.tnce - 251 251 196 196 196 _ _- - - - - - - -

Total -t. 7 139 17 374 14.805 16,412 18,384 20.316 18.752 19 505 21,405 21,225 23,236 22,656 23,124 23,013 .2,723 22,965

Net project benfits Netproj;ct c..h fl (1.269) (9.200) (3,701) (457) (576) (1,283) 415 3.438 7.832 13.000 15,881 20,433 24,124 26,842 29,058 29,606

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

V.lue of ProductionPTP XVIII de-e1op.ent - D.... Slolk 8,618 9,413 10,097 10,599 10,974 11,155 10,790 10,345 10,018 9,723 9,353 8,926 8,501 8,178 7,810PNP I devolop.ent - L-nSg- 22,399 22,942 23,743 24,909 25,909 26,018 23,582 21,347 19,550 18,436 17,204 15,623 14,281 13,545 14,437Sbalholder de-lopoent - D.nau S-l.k 9,469 9,709 10,525 10,338 10,172 9,945 9,835 9,113 8,999 8,553 8,384 7,769 7,324 6,934 6,372S.eliholder d-velop.n.t - Ribho Nuj.nS 13,928 14,321 14,632 15,720 15,464 15,249 14,945 14,801 13,841 13,681 11,313 11,313 11,313 11,313 11,313

Total be-efits 54,414 56,385 58.997 61,566 62,519 62,367 59.152 55.605 52,408 50,393 46,254 43.631 41,419 39,968 39,932

Cost of ProductionPTP XVIII develop-ent - D..so Sla!k 1,445 1,688 1,370 1,431 1,888 1,960 1,449 1,552 1,352 1,368 1,462 1,637 1,245 1,153 1,557PNP I de-elopeent - L.ngsa 12,455 11,754 12,071 11,800 11,824 10,897 8,769 7,439 3,437 3,666 3,176 3,122 2,543 2,214 2,090Sn-liholdor development - D....u S.llk 1,936 1,936 1,936 1,936 1,936 1,936 1,936 1,936 1,936 1,936 1,936 1,936 1,936 1,936 1,936Snaliholder develop..ent - Rimbo Bbjang 6,683 7,281 7,281 7,281 7,281 7,288. 7,281 7,281 7,281 7,281 7,281 7,281 7,281 7,281 7,281Technical esisltance - - _ - - - - - - - - - - - -

Total .o.ts 22.519 22659 22,658 i2,j48 22,929 22,074 19,435 18.208 14.006 14,251 13,855 13,976 13,005 12,584 12.864

Net project benefits -fcconoic .. sh flow 31,895 33,726 36,339 39.118 39,590 40.293 39,717 37,397 38,402 36,142 32,399 29,655 28 414 27 384 27,068

Economic R-te of Return, 29.

- 100 - ANNEX 5INDONESIA Page 1

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

Data Available in the Staff Working Papers

7OLUME A - DANAU SALAK - PTP XVIII NUCLEUS ESTATE AND SMALLHOLDER DEVELOPMENT

Nucleus Estate Danau Salak Development Tables

A.O Project Description (text)

A.1 Physical Data

1. Rubber Planting Program, Area Statement, Rainfall 1.1 - 1.7Record and Soils Analysis

2. Rubber Field Establishment and Upkeep 2.1 - 2.193. Rubber Yield, Production and Exploitation Cost 3.1 - 3.74. Personnel and Labor Requirement 4.1 - 4.95. Housing, Agricultural, Transport and Processing 5.1 - 5.9

Equipment Requirement

A.2 Total Project Cost and Financial Analysis

1. Project Cost 1.1 - 1.202. Financial Analysis - Danau Salak with Project 2.1 - 2.183. Financial Analysis - Danau Salak without Project 3.1 - 3.134. Financial Analysis - PTP XVIII - Java Estates 4.1 - 4.85. Financial Analysis - Java Estates and Danau Salak 5.1 - 5.2

without Project6. Financial Analysis - Java Estates and Danau Salak 6.1 - 6.3

with Project

A.3 Cost - Benefit Analysis 1.1 - 1.2

Danau Salak Smallholder Development

A.4 Basic Physical Data

1. Rubber Planting Program, Area Statement 1.1 - 1.32. Rubber Field Establishment and Upkeep 2.1 - 2.93. Rubber Yield and Production 3.1 - 3.24. Village Infrastructure, Housing and Roads 4.1 - 4.65. Transport and Agricultural Equipment Requirement 5.1 - 5.26. Food Crop Center at Tungkap 6.1 - 6.67. Farm Model 7.1 - 7.8

A.5 Project Cost and Financial Analysis

1. Project Cost 1.1 - 1.19

A.6 Cost - Benefit Analysis 1.1 - 1.2

- 101 -

ANNEX 5.VOLUME B - NUCLEUS ESTATE DEVELOPMENT - PNP I Page 2

B.0 Project Description (text) Tables

B.1 Rubber Development

1. Area Statement 1.1 - 1.92. Rainfall Record and Soil Analysis 2.1 - 2.63. Nursery and Field Establishment 3.1 - 3.224. Yield and Production 4.1 - 4.55. Tapping and Processing .5.1 - 5.86. Personnel and Housing Requirement 6.1 - 6.77. Agricultural Equipment and Vehicles Requirement 7.1 - 7.128. Rubber Project Cost 8.1 - 8.209. Sales, Profit and Loss, Inventory Variations 9.1 - 9.10

B.2 Oil Palm Development

1. Area Statement (ha) 1.1 - 1.112. Rainfall Record 2.1 - 2.43. Nursery and Field Establishment 3.1 - 3.104. Yield and Production 4.1 - 4.75. Harvesting, Upkeep and Processing Cost 5.1 - 5.66. Personnel and Housing Requirement 6.1 - 6.77. Agricultural and Transport Equipment Requirement 7.1 - 7.118. Oil Palm Project Cost 8.1 - 8.179. Sales, Profit and Loss, Inventory Variation 9.1 - 9.15

B.3 Total Project Cost and Financial Analysis 1.1 - 1.13

B.4 Cost - Benefit Analysis 1.1 - 1.6

VOLUME C - RIMBO BUJANG SMALLHOLDER DEVELOPMENT - PTP VI

C.0 Project Description (text)

C.1 Basic Physical Data

1. Rubber, Planting Program, Area Statement, Rainfall 1.1 - 1.52. Rubber Field Establishment and Upkeep 2.1 - 2.183. Rubber Yield and Production 3.1 - 3.64. Personnel and Labor Requirements 4.1 - 4.145. Housing, Vehicles and Agricultural Equipment Requirement 5.1 - 5.46. Food Crop Center 6.1 - 6.57. Roads 7.1 - 7.3

C.2 Physical and Financial Data

1. Farm Model without Project 1.1 - 1.42. Farm Model with Project 2.1 - 2.6

C.3 Project Cost and Financial Analysis 1.1 - 1.15

C.4 Cost - Benefit Analysis 1.1 - 1.2

- 102 -

INDONESIA CHART 1NUCLEUS ESTATESAND SMALLHOLDERS III PROJECT

ORGANIZATION CHART OF DIRECTORATE GENERAL OF ESTATES

| INISTEROFAGRICULTURE

IPRO>JECT MANAGEMENT BOARO DIRECTOR GENERAL

OF ESTATES - - - - - - - -_ ADVISORY BOARD.COMM ODITY APPROACHI

SECRETARIAT DIRECTORATE DIRECTORATE DIRECTORATE ORAOF PLANNING OF PRODUCTION OF MEANS OF OPERATION

BAFPENAS RESEARCI AND. M.N. OF N FIANCE. AGAD EPENS | EVELOPMENT | | RIA. IRI. ETC. |

________________________ U,,.cIJ.ncl.O,

- - - - - -I- - ---

PROVINCIAL PROVINCIALCOORDINATING COORDI ATI

COMMITTEE COMMITTEE

World Bank - 19975

- 103 -

INDONESIA CHART 2NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

ORGANIZATION CHART OF A GOVERNMENT OWNED ESTATE GROUP (PTP)

CHAIRMAN OFSHAREHOLDERSMEETING

BOARD OFSUPERVISORS

FIRSTDIRECTOR

_ OINT

r | | ~~~~~~~~~~~~~~~~~~~~~~~~~~MARK ETI NG

PRDUTODUTONOMECA

World Bank -17280

- 104 -

INDONESIANUCLEUS ESTATES AND SMALLHOLDERS IlIl PROJECT CHART 3

Project Implementation ScheduleSmaliholder Components Main Activities - Danau Salak

1979 1990 1981 1982 1983 1984

Activities 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

Directorate General of Estates

Initiate Hydrology Survey

Approve Project Budgets _ _ _1_

Arrange SLA to Nucleus Estate

Contract with Nucleus Estate

Appoint Pro-jct Manager _

Appoint Resident Consulants

Submit Annual Work Progrant

Inspect Settlement _ - - - -Coordinate Project Financial Requirements _

Arrange for Initial Budwood 1111

Pr-oincial Gover-me-t

Alienation of Latd (Stage 1, South}_

Alienation of Land (Stage II Northl

Establish Project Orgatia.tion

Prepare Project Budget

Commence Implementatio-

Arrange Recruitment Procedures

Recruit Settlers -

xtend mas Pro ram_g_Nocl... Estate (FTP XViI I

Inuestigatiuts at Pantai Cabe/Soato

Recruit Infrastructure M-nagement Team

Finance Master Plan and Stake Out Roads

Land Clearing Program o s _ n _Intiate Nursery Development and Procurement

Rubber Planting Program

Road Constr-ction Program _egal_

Village Development Program _ _ m _

BRI

Establish Project sank Account

Set Up Village Units

Establish Settler Accounts

Submit Financial Statements to DGBEGovern ment__ ____

Sign Financing and Sub-Finagcing Agreements

World Bank - 19764

- 105 -

INDONESIANUCLEUS ESTATES AND SMALLHOLDERS III PROJECT CHART 4

Project Implementation ScheduleSmaliholder Components Main Activities - Rimbo Bujang

1979 1980 1981 1982 1983 1984ACTIVITIES- --

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4Direcr,ar.e General ft Est-e

Approve Proi-c1 BudgetsArrange SLA to Nucleus EstateContract with Nucleus EstateAppoin- Project ManagerAppoint Resident Consltants Submit Annual Work ProgramInspect Settlement and Planrrg ProgramCoordinate Project Financial RequirementsArrangr for Initial Budwood

Proateetan Gvernenseet

Preparatory Censue of Marga LngdAl,enation ot Marga LandEstablish Protect Organ-zationPrepare Prolect BudgetCommence tmplementation_Finaliat Reallocation of Merge LandEtend Bm-s Program

Nucleus Estate IPTP VI)

Physical inuvesigations of Main Protrut Are-Initiatr Nursery D-uelopment and ProcurementTrave-rs and Commence Allocation of Marge LandFinalize Master PlanSu.mbt Annual Work Program/AccountsLand Clearing ProgramRubbrr Planting PrograRoad Construction Progam_Vdiiagr Development Program

BRI

Esta-bith Prompt Bark AccountSet up V1Sage UnitsEtlabihsh Settler AccountsSubmit Fin-cia Stat,emet to DGE

Geoternente_e_t

Sign Financing and Sub-Finarcing Agreements

World Bank 1 9955

- 106 -

CHART 5

INDONESIANUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

SMALLHOLDER COMPONENTSORGANIZATION CHART OF THE FLOW OF FUNDS - NON CREDIT ITEMS

GOVERNMENTOFINDONESIA

DEPARTMENTS OF THE CENTRAL GOVERNMENT

GovernorBupatis PROVINCIALMayors GOVERNMENTCamat SYSTEMLurahs

(SNTTO, ,- 1 ,-, IPUSKESMAS SEKOLAH KABUPATEN GOTONG ROYONG 1

IINPRES INPRES INPRES (VILLAGE(SANITATION, WATER, HEALTH) (SCHOOLS) (ROADS) INFRASTRUCTURE)

1 Community self-help projects.

World Bank - 17285

- 107 - CHART 6

INDONESIANUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

SMALLHOLDER COMPONENTSORGANIZATION CHART Oie FLOW OF FUNDS

SMALLHOLDER DEVELOPMENT BY THE NUCLEUS ESTATES /a

GOVERNMENTOFINDONESIA

MINISTRY

FINANCE |

BANK INDONESIAl l

- -r- - - - IBRD

REKENING ^ IBRDElI NV ESTASIi FUNDS

BRI

NUCLEUS ESTATES

PTP VI PTPXVIII

Rimbo Buiang Danau SalakSmaliholder Development Smaliholder Development

World Bank - 17281

/a Includes some non-credit expenditures for resettlement, constructionof planting material supply units, transport vehicles and some estatebuildings. These expenditures would be deducted from smallholdercredit accounts by the BRI.

- 108 -

INDONESIANUCLEUS ESTATES AND SMALLHOLDERS III PROJECT CHART 7

ORGANIZATION CHART OF PROVINCIAL GOVERNMENT

TO DEPARTMENT ~~~~~~~~~~~~TO CENTRAL_ _ _ ___ ~~~~~~~~~~~~~~~~~~~~~~0 OF OE AFFAIRS GO_-_NNTD ENTRA

G-ER-S ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~OVRMN

I DlRecTOR OF [ | C L l ~~~~~~~~~REGIONAL DEPARTMENTS OFCENTRAL G-ERRNMENTLY

RE T IA MENTl l PROVINCI AL

P..ELl PRO-_ = DEPARTMENTS E ~l E ~ l GOVERNMENTS

_~~~ ~ ~ -------__ _____ ____ -----------------PLNANNPIRELTUNROVINCIA AESARTMTNTT

ES BN TATA

| LOCAL GOVERNMENT | | LAW l l l l l l l l , ] K~~~~~~~~~~~~~~~~~A8UPATEN AND

SUB- DIRECTORATE AN O AND ORDER OEVELOPMENT FINANCE [ ECONOMICS

_GJENERAL 4 _ MAINTENANCE BASSET _ ENERAL SOCIALADMINISTRATION - FESEARC. - 8 DGET ~~~~~~~~~~DCOOMVASPECTS

.RE-KDO.N _ -VILLAGE RELIGION.R ADMINISTRATION DEFENSE PLANNING ACCOUNTING LC ATURL

_ GELERA- _ CONTROL - TREASURER WELFARE

_(ECLODING SECTIONS AND SUB-SECTIONS _

PIANNING LRA_DS

OPEIC ER t~~ sDESA (VILLAGE UNITSI

!/ SeVp'VIlaIIS SCUS hAwIng dUnSIbiIIW.

- 109 - CHART 8

INDONESIANUCLEUS ESTATES AND SMALLHOLDERS III PROJECTORGANIZATION CHART OF SETTLEMENT PROJECTS

MINISTEROF GOVERNORAGRICULTURE

DIRECTOR CHAIRMAN OFDIRECTOR ~~~~~~~~~BAPPEDAGENERAL BOF - - PROVINCIALESTATE - COORDINATION

- COMMITTEE

// ~~~~~~~~~~~~~~~~~~~~~I/

HEAD OFPROJECT REGENCYMANAGER (Inpres project

manager)

APBN AND INPRESCREDIT AND APBDPORTION PORTION

NES III PROJECT

direct/function line

--- _ _ _coordination line

World Bank - 17283

- 110 -

INDONESIA FIGURE 1

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

PROPOSED VILLAGE LAYOUT FOR THE DANAU SALAK AREA

I I

j1--- --- PRIMARY VILLAGE ROAD

3161

HOUSE AND GARDEN

SECONDARY VILLAGE ROADS AND

HOUSING ACCESS TRAC KS

31ft

|~~~~~~HLS ANDGADEN/ PLOT : 21m . 10Om _

100m IODm lOOm 300m ZU. (VAR lAIL

DC DUKUH CENTRE (With recreation ae, common gazing round and shed tubili

VC VILLAGE CENTRE (With large recreation area, community buildinv end central tulewaNi

NOTES The village layout shown vwould accomodate 254 famiii around oe main and 6 aabddwry dukuh centesThis _um_e a wmtr upply sysem relying on one tub_ll in each dukuh centre so that no hour nedbe furthwr thn approximately 1

70m from a source of pote water. It shouid be noted, howver, that

the layout shown reprsnts a schemntc modal only. In prwctbe, coniderable adaptation of the bixc modelwould be new wry in ordwr to plan individual vnIa around optimal tubiwall locatioru and to mtch theprevailing topography in each cae Viaie planning would have to be caIe out spatey for wtar supply

yan raling on hallow waIls end erthdammed reaarvoir

- III -

INDONESIA FIGURE 2

NUCLEUS ESTATES AND SMALLilOLDERS III PROJECT

Basic House Design for Kalimantan Settlers-Danau Salak

- 112 - FIGURE 3

INDONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJECT

Basic House Design for Javanese Settlers/Upland Areas-Danau Salak

A--I--…---

1- - -!

PLAN__

for vetitlIaidon

iot Side

Scale Icmn Im

- 113 - FIGURE 4

{fi ~ ROW DANAU SALAK 12m"

< />-- ~~~~~~~~~~~RIMSD BUJAG 160m /

1.5m 6.Om 1.5m

0 02f t tm,;

1Ocrm GRVLO

| LATERgTE SLOPE 1:1

PRIMARY VILLAGE ROAD

DANAU SALAK aOMROW RIMBO BUJANG 12AOm

1.25m 4.Om 1.25m

0 2s5.,

SLOPE 1:1

SECONDARY VILLAGE ROAD

ROW 6.Om

4 ~~~~~SLOPE 1 :1

RUBBER COLLECTION TRACK______________________

INDONESIA INDICATIVE MOAD CROSS SECTN NOVEMER 1978

NUCLEUS ESTATES AND

SMALLH4OLDERS III PROJECT DANAU SAMA AND RPMO SUJA IBRD WASHINGTON

IBRD 14020RI r HAI44uS LANS 0f F Bb \4V JULY 1979

t <~~~~S. R, A t t> ><&< ': , \

ALAYSI Sooth LAYS

-s Sc IC 7 >5 'oio -- iir tfs ArrOcacn <, 6~~~tArns$ _.AY i3... /;--..ts\t4YvXDflPt

-~~~ -'- '-,~Z~et

SUMAT ~~~ KALIMANTAN 2h '

I NDCNESIA .- I

NUCLEUS ESTATES AND SMALLHOLDERS El PROJECT - , >PonolDANAU SALAK PROJECT AREA a/ @ \PRELIMINARY MASTER PLAN N N

13/,~~~~~ "\\

0 i/- r

Poject \ /Boundory

/ o 't X - - - , 1 ;$ } V~~~~~~~~~~Ep lalge Settlement With Wlalge Nuimbe, and Families

f I > / ' / ~rr_ - Bounddorn Assigned to New Village

r i> vV / ! / 51 t- Z ~~~~~~~~~~~~~~~~~Land U,,su,table For Development

Ti - \ No~~~~~~~r' En eExising uclAsrEsate

/ t /)tX tr S _ - Existing Khosu peenRoads

__________________________N_Prm__ ary Vdiage Roads

4s.~~~~~~~~~~~~~~e Seod.yVlag od

INDONESIA ~ ~ ~ ~ ~ ~ ~ ~~~~~~~MIE

/ AJr ~~~~~~~~~~~~~~~~~~~~~~~bound.,iies sh-w on this map do not-sply, on the patt of the Nodrd Srnk and ,t,

T.io -b _gnama/ ept-enc ofsu-h b-urdaese

X ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Th.s -op has bee prepard by the yWorld bank' ostff -esrSi-ely for a ~ Q~p C r PII

the report to wb,ch il attahed. The de--nsnat-oUs used and the i N L ESTysEnboundar,e- sho- on th,s -ep gl~sAIG A AI

S~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~d .t -p, u i. 0, th p.t f M.B UA O O N

WorWd Ba.k ad,to UfIhX.t-s .any , 2 4 6R|dg-\t n the Sepal st at usI I As 17 NO i

P\~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~<Morgo~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- Londl Setlmei \+s Sf v

UNIT X I ~~~~~~~~~~~~INDONESIANUCLEUS ESTATES

L) N IT: ~~~~~AND SMALLHOLDERS III PROJECTRIMBO BUJANG COMPONENT

----- Boundory of Lond Assigned lo New Vliloge ffi MUARA TEBO _~~~~~~~~~~LO ETRS ___________________

0 2 4 Er 8

........ ...... Primcory V llage Roods Upgroding / >~~~~~~~~~~~~~~~UIT 0

-i Foresl Reserves-_

===~ R,sors-_

- Ssowr oh ad Areas s

IBRD 14183RJULY 1979

IN DONESIA

NUCLEUS ESTATES AND SMALLHOLDERS III PROJ ECT

zo e~ e tPNP I ESTATE CONCESSIONS ACEH PROVINCE

N O R T H i 0 5 10 15 20 25KILOME-TERS

A C E H Peudaw X \ o t _ MILES 6 si lbf 1

%t. H ~~JULU' /

t X ,| :: 8),/ESTA E) tATE \

ADIN~~~~~~~~~~~~s

~~~~~~~~~~~~~ar Estrae<a!R

E A S TV -, A C \ E 8AR KEfgt5W

Estate Concession Area F Headquarte . Tulag cut

Estate Rocads LAMA

, Rodwcays ( ESTATE XJ \I

Zzz,- Rivers K a

- - - - --- ,Sub - District Boundaries c5 pong

- . - D,str,ct Boundaries

- - - riternotiaral Boundories / *\ -

hs eap hsa been pbep -ed b, the World d- s -sl ffescusaer heo ISO 0 (K Lara Estate)of the reader so Sthe,epo,Istoh,Ofl II sIWtcfed he dett,,tlo,,s arysed amtS he UA Io71OOtttdottefSlhowottOt ths Otpdo 01 ttmpt. on thepfn of the Wo,idhaltkf ts0 I \I./

h- i, lerotfgnlo.aieiego,sta'ss fa at ICttIotof ' TIGAet Oti SOIOt

LrNpl4tlLks'ir 5zzyTh 8E_ tf >,LiPPItrPS 1 \8. ~~~i~ i p \ L A N G K A T

, 'S ., * <? | ) D ~~~~~~~I S T R I C T

/AthS Ku ,f iMrinu N E - I\

| 5 to n C=DWS. LA )