Document of

The World Bank

FOR OF:FICIAL USE ONLY

Report No.: 18085

IMPLEMENTAT:[ON COMPLETION REPORT

INDONESIA

YOGYAKARTA UPLAND AREA DEVELOPMENT PROJECT

(Loan 3305-IND)

June 26, 1998

Rural Development and Natural Resources Sector UnitEast Asia and Pacific Region

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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CURRENCY EQUIVALENTS

(November 1997)US$1.00 = Indonesian Rupiah (Rp) 2,300

WEIGHTS AND MEASURES

Metric System

FISCAL YEAR

April I - March 31

ABBREVIATIONS AND ACRONYMSAARD - Agency for Agricultural Research and DevelopmentAOP - Annual Operating PlanAPBD - Provincial BudgetAPBN - National BudgetBANGDA - Directorate-General of Regional DevelopmentBAPPEDA Provincial Development Planning AgencyBAPPENAS - National Development Planning AgencyBRI - Bank Rakyat IndonesiaCP - FAO/IBRD Cooperative ProgramGOI - Government of IndonesiaKabupaten - DistrictKecamatan - SubdistrictMOA - Ministry of AgricultureMOF - Ministry of FinanceMPW - Ministry of Public WorksNGO - Non-Government OrganizationSOE - Statement of ExpensesUNDp - United Nations Development Program

Vice President Jean-Michel Severino, EAP:Director :-Dennis de Tray, EACIFSector Manager E-Geoffrey B. Fox, EASRI)

:Task Manager -Willliam Cuddihy, EASRD

FOR OFFICIAL USE ONLY

IMPLEMENTATION COMPLETION REPORT

INDONESIA

YOGYAKARTA UPLANI) AREA DEVELOPMENT PROJECT(Loan 3305-IND)

Contents

PREFACE .......... ,i

EVALUATION SUMMARY ....................... ii

PART I: PROJECT IMPLEMENTATION ASSESSMENT .1A. Statement/Evaluation Of Objectives .............................................. IB. Achievement Of Objectives ...................... 2C. Implementation Record & Major Factors Affecting The Project ...............................9D. Project Sustainability .................. .9E. Bank Performance ................ 10F. Borrower Performance.0...............t 0G. Assessment Of Outcome ................ 10H. Future Operations ................ 11I. Key Lessons Learned ................. 11

PART II: STATISTICAL TABLES .13Table 1: Summary of Assessments .13Table 2: Related Bank Loans/Credits .15Table 3: Project Timetable .16Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual .16Table 5: Key Indicators for Project Implementation .17Table 6: Key Indicators for Project Operation .18Table 7: Studies Included in Project .18Table 8A: Project Costs .20Table 8B: Project Financing .20Table 9: Economic Costs and Benefits .21Table 10: Status of Legal Covenants .21Table 11: Compliance with Operational Manual Statements .23Table 12: Bank Resources: Staff Inputs .23Table 13: Bank Resources: Missions .23

APPENDICES

Appendix A: Mission's Aide-MemoireAppendix B: Government's CommentsMap IBRD 22421

This document has a restricted distribution and may be used by recipients only in theperformnance of their official duties. Its c:ontents may not otherwise be disclosed withoutWorld Bank authorization.

IMPLEMENTATION COMPLETION REPORT

INDONESIA

YOGYAKARTA UPLAND AREA DEVELOPMENT PROJECT(Loan 3305-IND)

Preface

This is the Implementation Completion Report (ICR) for the Yogyakarta Upland AreaDevelopment Project in Indonesia, for which Loan 3305-IND in the amount of US$15.5 million wasapproved in May 1991, and became effective in June 1991.

The Loan closed on 31 December 1997, compared with the original closing date of 31December 1996. Final disbursements will be, made up to 31 March 1998, bringing the cumulativetotal anticipated disbursements to US$13.8 mnillion, and the cancellation of US$1.3 million due tocurrency depreciation and savings generated (luring implementation.

The ICR was prepared by the staff of FAO/CP on behalf of EASRD Division of the AsiaRegion and reviewed by Messrs. William Cuddihy, Senior Agricultural Economist, EASRD, WirantoSoehendro, Senior Task Manager, EACIF ancl Mr. Geoffrey B. Fox, Manager, EASRD. The ICR wasprepared during the period February/March by a mission which visited Indonesia from February 4-19, 1998. It is based on material in the project files as well as the findings of the ICR mission in thefield.

IMPLEMENTATION COMPLETION REPORT

INDONESIA

YOGYAKARTA UPLAND AREA DEVELOPMENT PROJECT(Loan 3305-IND)

Evaluation Summary

Introduction

Since the early 1980s, one aspect of the Bank Group's lending to Indonesia has beenaimed at promoting equitable growth through the development of the least developed areas. While agood deal of attention has been given to the other islands, it has also focused on specific pocketswithin the islands of Java and Sumatra, the two most populous and productive islands of the country.A specific area of focus has been the upland areas in these- islands characterized by a severelyresource constrained environment. Development efforts have attempted multi-sectoral interventionsaimed at both easing the infrastructural constraints and increasing production and incomes. Onedimension of the effort has been strengthening the policy of decentralized administration bystrengthening the capacity of the provincial Governments and local level institutions to implementarea development programmes.

The Yogyakarta Upland Area Development Project was implemented in the upland areasof the four districts of Yogyakarta (Central Java). The 140 upland villages were defined as thosewhere at least 30% of the land had slopes exceeding 15%. These villages were spread across 26subdistricts of the Province. The project's obJective was to improve the incomes and living standardsof upland residents, mainly farmers, on a sustainable basis through better resource management.These were to include: effective and affordable soil and moisture conservation measures, increasedfarm productivity leading to higher farm incomes, essential social services infrastructure, andinstitutional support for planning and implementing site-specific change. The objectives wereconsistent with the Government's strategy for poverty alleviation and equitable regionaldevelopment, as well as with the Bank's overall country assistance strategy. The limited agriculturalpotential of the upland areas of the province, the shortage of proven improved technology forproduction, the limited institutional capacity for planning and implementing development initiativesand a poor physical and socio-economic infrastructure, justified the overall project objectives and thebalance between the components.

Project components were clearly focused on the objectives as well as on the keyconstraints to long-term improvements in srnallholder incomes. Thus, improving the technologicalbase for long-term sustainable productivity gains through micro-watershed stabilization based on run-off control and soil conservation and supported by research and testing of alternative technological"menus" was a primary component of the project. Physical access constraints, a significant elementfor the upland areas, were to be addressed through a roads and bridges improvement programmeaccounting for nearly a third of project costs. A very significant aspect of the project has been the

promotion of institutional development by directing financial and technical support, includingtraining, to provincial, district and subdistrict level agencies.

The relatively large number of interventions supported by the project was implementedat the provincial, district and subdistrict levels within existing administrative structures. A substantialinput, in the form of training, was provided so as to minimize the potential implementation risks dueto weaknesses in local level institutions. The relative independence of the different implementationunits of the different components, minimized the effect of any delay in one, acting on theimplementation of the other, or on the project as a whole.

Implementation Experience

The project loan was approved in March 1991 and became effective in June 1991.Project implementation was scheduled over a period of aboult five years with an original closing dateof December 31, 1996. Implementation during the initial years of the project was slow. However, thepace of implementation improved substantially thereafter and by the end of the project period, mostof the physical targets specified at appraisal had been substantially achieved or exceeded by theoriginal closing date. The principal justification for-the extension of the Bank loan was to allow theconsolidation and application of the physical, technical and organizational achievements andcapitalize on the momentum generated into effective programlme development.

Total project expenditure at completion, one year after the original closing date ofDecember 31, 1997, is estimated at about RP 44,792 million as against appraisal estimates of RP47,640 million or about 93% of total estimated expenditure. The depreciation of the Indonesianrupiah over the project implementation period however irnplies that in US dollar terms, actualexpenditures were of the order of some US$20.3 million as against the appraisal estimate of US$25.0million, or about 81% of anticipated total expenditures. Of the total loan of US$15.5 million providedby the Bank to GOI for the project, US$1.3 million was cancelled due to currency depreciation andsavings generated during implementation. Total disbursements at closing of the Loan Account isestimated to reach about US$13.8 million or about 97% of thc revised allocation.

The commitment to the project and measures undertaken by the Government for itsimplementation at the national, provincial, district and subdistrict levels have been impressive. Whatwas commendable also was the adequacy and relative timeliness of budgetary allocations from thenational as well as from the provincial levels. The Government was in compliance with all thecovenants of the loan agreement. Some of these covenants had implications for counterpart funding,as in the assurance by Government of the provision of adequate number of vehicles in a timelymanner and the maintenance of asphalt village roads by Distrlict Public Works, while others related tomanagement aspects such as the selection of subdistrict, village and hamlet projects, traininginstitutions and roads in accordance with criteria satisfactoiy to the Bank. Implementing agencieswere generally responsive to the recommendations of the supervision missions except in the case ofresearch and Technology Display Menus (TDM) where the responses were delayed.

The Bank's performance throughout the project cycle was satisfactory, particularly in itsorientation of support for decentralized decision-making. The project benefited from a high degree ofsupervision and monitoring and timely identification and resolution of implementation constraints byBank staff. Although there was a high turnover of task managers for the project, project supervisions

were well organized, systematic and consistent, recommending a number of evaluations on specificactivities. An exhaustive mid-term review was held at an appropriate time. Its findings however weresuperseded by subsequent substantive improvements in implementation. Implementing agencies weregiven considerable flexibility but responded to suggestions made by Bank missions.

Project Outcome, Future Operations and Key Lessons Learned

The overall outcome and achievements of the project have been satisfactory. In terms ofits goals of establishing the technical parameters for the conservation and utilization of the uplandareas based on a watershed basis, the project was well implemented. Using the watershed as the basicmanagement unit, the project has demonstrated that physical and vegetative measures can reduce thelevel of erosion substantially. The combinecl impact of the measures has resulted in an increase incrop yields, a small increase in the cropping intensity particularly in the dry season, and a consequentincrease in production and incomes. As against the appraisal target of 500 watersheds, the projectsuccessfully undertook measures on a total of 518 watersheds. Physical implementation of the othermeasures relating to technology display menus and hamlet nurseries were exceeded. However, theimpact on their stated objectives have been less than expected.

In terms of establishing its goals of strengthening local level institutions and furtheringthe Government's objective of decentralization, the achievement and impact of the project was muchgreater. Investments financed under Prokec (project kecamatan) and Prodes (project desa or village)included small village roads and bridges, small irrigation developments, construction of watersupplies and sanitation facilities, seedling distribution and cattle and goat distribution. In both casesachievements exceeded appraisal targets. The impact of these measures has been significant and hasalso resulted in increased levels of beneliciary contribution to the financing of sub-projects.Furthermore, the successful operation of the hamlet revolving funds, (produs), has provided the basisfor sustainable micro-finance operations, managed by villagers, with increased loanable fundsthrough accepting savings deposits from members. New loans using repayments from the revolvingfunds plus savings deposits have been utilized by beneficiaries for generating off farm incomes.

Project support for improvements in physical access through improvements to roads andbridges also exceeded appraisal targets. Over 232 km of road and 39 bridges were improved asagainst appraisal targets of 173 km of roads and 22 bridges.

A significant outcome of the project has been in the area of institutional development. Itstrengthened subdistrict, district, provincial and national level institutions in their roles in planning,implementing and coordinating decentralized and multi-sectoral interventions. A large number ofstaff were trained and a substantial amount of national and international technical assistance wasprovided to the implementing agencies.

The project has directly benefited over 8,000 farm families on the watershed componentand over 175,000 families through the revolving fund component alone. The numbers benefitingfrom the investments under the village and kecamatan projects are also substantial. Under the currentvolatile situation of the country's exchange rate, the estimation of an economic rate of return for theupland stabilization component (no overall rate of return for the project was estimated at appraisal)becomes somewhat speculative. However, two scenarios have been used in the estimation of aneconomic rate of return as a basis for comparison. Using the rate of exchange prevailing before the

current financial crisis (i.e. an exchange rate of Rp 2,300 to US$1), the ERR is estimated at 9%,lower than the appraisal estimate of 12%. This lower rate is due to increased operational costs andlonger period to maturity than estimated at appraisal. However, using an alternative exchange rate (ofRp 5,500 to US$1), the ERR rises to 13%. This is due to the fact that a lower exchange rate raises theimport parity price and therefore the benefits of the major cotnmodities.

Sustainability of the development initiatives will be dependent as much on thebeneficiaries themselves as on continued support from the national and provincial budgets. As far asthe watersheds and community development projects, including village and hamlet projects, areconcerned, beneficiaries will continue their activities without any further support from the project orfrom government. However, sustainability of watershed development in newer areas will requirecontinued support from the Government. Support for research and the operation and maintenance ofsupport services will remain dependent on budgetary allocations from the national, provincial anddistrict budgets (APBD I and APBD II). The government's demonstrated support for the project andits commitment for poverty alleviation give reasons to believe that reasonable levels of funding willbe maintained. (At this stage, the longer term impact of the financial crisis is not known). Theincreased contributions of the communities in cost sharing investments at the local level providesanother reassuring confirmation for project sustainability.

The project has provided a number of useful llessons relating to technology, projectdesign, supervision and monitoring and evaluation. These are summarized as follows: (i) steeplysloping land should not be cultivated for annual crops but the Central Java population pressure offerslittle alternative and soil conservation measures should be applied; (ii) soil conservation measuresshould combine structures (bunds, terraces) with cultivation practices (contour ploughing), and mixedcropping (grass strips, fruit and fuelwood trees with paddy, corn, beans); (iii) soil conservation istechnology intensive and site-specific and needs to be supported by applied research and extension;(iv) soil conservation is labor intensive and needs to be supported by farm profitability studies andfarm credit to ensure adequate returns to farmers to make the extra effort worthwhile: (v) as theopportunity cost of farm labor rises with development, farmers move from food crops to treecropsand agricultural service institutions should be adept enough to support the change and not berestricted by their prime focus (e.g.,food crops), and, (vi) institutions for area development should besimplified and properly coordinated at the operational level to avoid high farm services delivery costsand duplication of effort.

In this project, there has been a greater focus on the development of the physical technologyand not as much of an effort on crops. While the current cropping pattern which includes theintegration of annual crops with fruit and multi-purpose tree species appears well suited to theenvironment, the prospects for further improvement need attention. There is need for a moreconcerted effort with a more direct involvement of research and extension both in the development ofalternative cropping menus as well as the dissemination of existing best practices among farmers.The support provided for village projects for interventions for common use such as water supplies,irrigation, roads, in combination with support for off-farm income generation through the provisionof the revolving fund proved to be a critical element for project success. However, in so pursuing theobjectives, the project attempted a large number of approaches and activities resulting in acomplicated organizational structure. Potential implementation problems were minimized by giving acentral role to the provincial and district BAPPEDAS in the planning, coordination and oversight oflocal level programmes with implementation responsibilities fully decentralized at the district and

subdistrict levels. An important feature of project design, which is expected to help sustain theimplementation arrangements, was that the project organization was built within the existingnational, provincial, district and subdistrict level structures. Untied block financial allocationsproved attractive due to their flexibility and facility to being demand responsive, but there was atendency towards an involvement in far too many, and often, disparate activities. There is a criticalneed for establishing specific criteria and parameters for selecting project activities. Thus, forinstance, local level (kecamatan and village) projects can and should be integrated into onecomponent. Project supervision was satisfactory but could have been improved by less frequentchanges in responsible project staff (task manager) both at the World Bank and at BANGDA. Theproject included a large number of studies on various aspects related to the project not all of whichhas been effectively translated into practice. Care should be taken to ensure that project-financedstudies are directly relevant to the project and that results are utilized.

IMPLEMENTATION COMPLETION REPORT

INDONESIA

YOGYAKARTA UPLAND AREA DEVELOPMENT PROJECT(Loan 3305-IND)

PART I: PROJECT IMPLEMENTATION ASSESSMENT

A. STATEMENT/EVALUATION OF OBJECTIVES

1. The main objective of the Yogyakarta Upland Area Development Project (YUADP) wasto improve the incomes and living standards of upland residents, mainly farmers, on a sustainablebasis through better resource management. Ais the sequel to an earlier upland development project(YRDP, CR. 946-IND), the project aimed at addressing the major needs of upland areas through:effective and affordable soil and moisture conservation measures, increased farm productivityleading to higher farm incomes, essential social services infrastructure, and institutional support forplanning and implementing site-specific change. The project's objectives were consistent with theborrower's strategy for poverty alleviation and equitable regional development, as well as the Bank'soverall country assistance strategy. Total project costs including contingencies were estimated atabout US$25.07 million or about Rp 47,671 million, of which US$5.22 million (Rp 9,923 million) orabout 21% was in foreign exchange. About 62%So of project costs was to be provided by the Bank andthe remaining 38% would be provided by the Government and participating beneficiaries.

2. The project included the following components/activities: (i) improve critical uplandarea soil conditions in selected key watersheds; (ii) introduce alternative technology options,"menus", of improved upland conservation agriculture technology from research programmes; (iii)strengthen participatory planning process mechanisms and improve community socio-economicconditions; (iv) improve the accessibility to isolated upland farming areas (rural roads and bridges);(v) strengthen local district institutions to support decentralization; (vi) institutionalize soil andmoisture conservation action research at the watershed level; and (vii) strengthen area developmentcapacity and capability in support of decentralization. The limited agricultural potential of the uplandareas of the province, the shortage of proven technology for improving production, the limitedinstitutional capacity for planning and implementing development initiatives and a poor physical andsocio-economic infrastructure, justified the ovrrall project objectives and the balance between thecomponents. Project components were clearly focused on the objectives outlined as well as on thekey constraints to long-term improvements in smallholder incomes. Thus, improving thetechnological base for long-term sustainable productivity gains through micro-watershedstabilization based on run-off control and soil conservation and supported by research and testing ofalternative technological "menus" was a primary component of the project. Physical accessconstraints, a significant element for the upland areas, were to be addressed through a roads andbridges improvement programme accounting for nearly a third of project costs. A very significantaspect of the project has been the promotion of institutional development by directing financial andtechnical support (including training, co-ordination and human development) to provincial, district

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and subdistrict (hamlet) level agencies to identify priorities for assistance under the project as well asto plan and implement them. The nature of the activities supported through the district andsubdistrict/local agencies covered a wide range of investments that were directly productive as wellstrengthened the social infrastructure.

3. The broad-based development approach required the involvement of a number ofagencies, making the organization and management of the project seem complex. The project wasdesigned for implementation within the existing administrative structure, without the establishmentof any special implementation unit established for the purpose. Project implementation wasundertaken at two levels: research and planning (including overall management) at the national level,and seven components at the provincial and district levels. The implementation of most elements ofthe programme at the provincial and district levels, within exisiting administrative structures, requiredthe organization of a large number of implementation focal points, giving the perception of acomplicated organization and management structure of the project. A substantial input, in the form oftraining, was provided so as to minimize the potential implementation risks due to weaknesses inlocal level institutions. The relative independence of the dlifferent implementation units of thedifferent components, ensured against the prospect of any delay in one, acting on the implementationof the other, or on the project as a whole.

B. ACHIEVEMENT OF OBJECTIVES

Financial Objectives

4. Total project expenditure at completion, one year after the original closing date ofDecember 31, 1997, is estimated at about Rp 44,792 million as against appraisal estimates of Rp47,640 million or about 93% of total estimated expenditure. The depreciation of the IndonesianRupiah over the project implementation period however implies that in US Dollar terms, actualexpenditures were of the order of some US$20.3 million as against the appraisal estimate of US$25.0million, or about 81% of anticipated total expenditures. Of the total loan of US$15.5 millionprovided by the Bank to GOI for the project, US$1.3 million was cancelled due to currencydepreciation and savings generated during implementation. Total disbursements at closing of theLoan Account is estimated to reach about US$13.8 million or about 97% of the revised allocation.

5. The relative composition and absolute amounts of project expenditures on the variouscomponents are substantially different from those stipulated at appraisal. The most significantdifferencesl are (a) substantially higher expenditures in three components covering AreaDevelopment Planning Support (SAR expenditures of RP 2486.2 million as against actualexpenditures of about RP 3196 million or an increase of about 28.5%), Kabupaten Planning andCoordination (RP 2715.2 million versus RP 3349.4 million or an increase of about 23.5%) includingthe Provincial Planning and Coordination component (RP 56211 million as against RP 6263 million orabout 11%) and the component of Community Mobilization encompassing training, village projects,kecamatan projects and hamlet revolving funds (RP 8741.4 million as against RP 10141.4 million oran increase of about 16%), and (b) lower expenditures in the components of CommunityDevelopment- training (RP 700.4 million versus actual expenditure of RP 283 million or a saving ofabout 60%), Upland Development Support Teams (RP 1528.5 million as against actual expenditures

I Actual project expenditures compared with SAR estimates of base costs.

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of about RP 470.7 million or a saving of about 70%) and Upland Watershed Action Research (RP6052.8 million versus actual expenditures of 3678.3 million or a saving of about 40%). Increasedexpenditures on community mobilization encompassing training, village projects, kecamatan projectsand hamlet revolving funds were due to the combined impact of an increase in the numbers ofvillages supported, an increase in the unit costs of support to each village (from RP 7.5 million to RP10 million) and an increase in the number of years of project support from two to three years for eachvillage. There were considerable variations iin expenditures within the component as well. Thus,within community mobilization, hamlet projects suffered a 42% cost overrun due to the need foradditional inputs for micro-watersheds (micro-DAS) such as multi-purpose terrace strengtheningplants, additional assistance for the maintenance of village nurseries and increasing the number ofmicro-DAS coverage.

6. The implementation of the project's financial expenditure objectives proceeded well.Actual disbursements exceeded appraisal targets during the first two years, stabilized roughly alongappraisal targets in the following two years and fell slightly behind towards the end of theimplementation period. No serious delays in the release of local funds were experienced. However,the project's physical targets exceeded appraisal estimates in almost all major categories. Theprincipal justification for- project extension by one year was to allow the consolidation andapplication of the physical, technical and organizational achievements and capitalize on themomentum generated into effective programme development. The extension of project activitieswas limited to specific elements of the project and did not apply to all project activities.

Increasing Farm Incomes

7. Upland Productivity and Stabilization. The project has been successful in establishingthe basic technical physical parameters for soil stabilization and conservation in the upland areas.Using the watershed as the basic managemenit unit for soil stabilization and production technology(identified as micro-DAS), the projecthas demonstrated that the use of rain C Icomes/hawater run-off control structures, Without Projct t Projectterrace rehabilitation using vegetative..(RP^00 0 (p0)measures and limited physical earth Rice 7 1,455moving and ground cover Maiza 400 777improvement through higher annualCsav.42206crop plant density involving the use of oae 4 785mulches, grasses and more appropriate Godn (Ws Sao 440" 4 1,340land use in perennial cropping, G d (Dr Ss 28 * 540 reduces the levels of erosion. Thecombined impact of the measures has encouraged a greater use of manure and fertilizer, which inturn has resulted in a significant increase in crop yields (from an estimated 1.0 ton/ha to 2.0 ton/ha inthe case of rice), a small increase in the cropping intensity (from 164% to 180%), particularly in thedry season, and a consequent increase in production and incomes as can be seen from theaccompanying table. A further indication of the positive impact has been the increase in the numbersof livestock holdings by participants given the increased availability of fodder. The critical elementhas been in the selection of the watershed; where erosion problems were significant, the measureshave had a visible impact. The enthusiasm and participation of the beneficiaries was notable.However, despite the positive impact and support to increase the outreach of the technology, the rate

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of adoption among non-participating farmers in the adjacent areas has not been significant because oftwo reasons. First, the technology is labor-intensive and many non-participants earn much, if notmost, of their family income from off-farm employment and are not willing to reduce wage laborincome to practice improved farming techniques. Second, initial subsidies and promotion activitesare required to induce farmers to accept the risk that returns will be commensurate with the extrawork involved.

8. Technology display menus (TDM) were designed with the objective of presenting anarray of alternative technology options allowing farmers to choose the elements of the package bestsuited to their own specific financial and labour requirements. There has however been very limitedimpact from the TDM measures. The concept of the TDM component was not clearly understood andwhile some TDM plots displayed elements of soil conservation management measures, there waslittle difference in the technology between them and the average farms and there was no display ofany alternative technology/crop options. While there was a iFocus on the physical aspects of soilconservation there was not much emphasis on the crops side. The implicit expectation that TDMswould reflect the joint effort of research and extension was not realized in practice. While the futureprospects for improvements in the cropping technologies fiom a research perspective must berecognized, it must also be acknowledged that the current cropping pattern is well suited to theenvironment. The integration of perennial and horticultural tree species into the cropping system,carried out as part of watershed development, is likely to have the most direct effect on the productmix and incomes. The full impact of the integration would however have to wait until the fruit andmulti-purpose tree species reach maturity. However, the large scale introduction of what is arelatively new crop to the area makes them vulnerable to a wide range of pests and diseases. Therehas been a lack of plant protection services specifically for the horticultural tree species and there is aneed to remedy the situation if the full impact is to be achieved and sustained.

9. Established with the objective of being the principal source for planting material forconservation measures, hamlet nurseries (KBD) contributed little to the project. The quality of plantmaterials produced by the nurseries and the performance of the groups were poor and project impacthas been marginal. Planting materials required for the watershed component were provided largelyby private producers. A very small quantity from these nurseries were provided for the villageprojects.

10. Upland Community Development. Matching its relative success on the technologicalside, the project has been equally successful in implementing an impressive array of activitiesthrough the participation of communities at the local level. P'roject funds supplemented resourcesalready made available to communities under the Desa programme and have been used in activitiesthat reflected the felt needs of the people. Investments financed under Prokec (project kecamatan)and Prodes (project desa or village) included small village roads and bridges, small irrigationdevelopments, construction of water supplies and sanitation fac ilities, seedling distribution and cattleand goat distribution. The impact of these measures has been significant and has not only covered alarger number of kecamatans and desas than originally envisaged but has also resulted in increasedlevels of beneficiary contribution to the financing of sub-projects. In addition, while a largeproportion of the interventions were for the development and establishment of common use resources(roads and water supplies, etc.), an increased demand for an in-kind revolving fund based onlivestock distribution (over 17,000 heads of goats) reflected the importance given by beneficiaries to

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direct income generation. However, it is noted that while the activities and participants for bothProkec and Prodes were the same, two different institutional arrangements for channelling fundswere used and could have been avoided to reduce overhead costs.

I. In terms of its impact on incomes, one of the most significant success of the project hasbeen the operation of the hamlet revolving iFunds (Produs). Starting with an initial capital of Rp700,000, each group was allowed to set its own credit terms. Interest rates ranged at between 2-3%per month for a period of 5-7 months with amounts ranging between Rp 10,000 - Rp 200,000 with amodal figure of about Rp 25,000. The rate of interest paid by borrowers are higher than theinstitutional lending rate of 33% (I1/2% per month) for the collaterised Kupedes scheme, andcompares favourable with up to 50% for other targeted credit programmes (PHBK, Micro-credit) and80-100% or higher on the semi-formal or informal market. The default rate, according to a recentstudy, is estimated at about 11%. While most groups required a joining fee, the requirement forcompulsory savings varied between groups. With capital growth rates of between 11-28% per year,partly dependent on whether savings mobilization is included, the project has laid the foundation fora local level credit operation that has the potential of being the driving force of future development ofthe area. Credit funds have been used for income generating activities in home industry includingprocessing, 16%, small business activity, about 25%, agricultural input related activities, about 37%,and livestock related activities about 22%. There are however two points that need to be made. First,the wide range in capital growth rates indicates that a portion of the Produs groups have notfunctioned well and there is a need to identify and remedy the causes for their inadequateperformance. Second, both due to increased demand by other participants and to compensate forinflation, produs groups have resorted to credit rationing due to their inability to increase the size oftheir capital. There is scope and a need to link better performing groups with existing institutionalfinancial sources for the programme to remain sustainable. This could include the BUKP (BadanUsaha Kredit Pedasan programme) at the kecamatan level as well as the P4K programme of BRIboth of which provide for non-collaterised credit. Given the nature of the distribution of activitiesfinanced through credit, it would be prudent however to recognize that sustainability for the future,with increasing participation of the people, will require increasing complementary investments inactivities that implicitly increase market access and size, i.e. through the provision of roads andmarkets aimed at linking other areas.

12. Upland Watershed Systems Action Research. The project was successful inestablishing the essential physical infrastructure and programmes for upland research by establishinga permanent research station for upland agriculture. Research has focused mainly on the economicand agronomic responses of multiple cropping patterns to fertilizer (both organic and inorganic), theimpact of various grasses on erosion control, the establishment of various perennial crops and fruittrees, the production of forage to support the integration of livestock and the establishment of on-farm reservoirs to support high value vegetable production and seedlings and livestock waterrequirements in the dry season. A total of 162 research topics were undertaken. Surveys includedtopographic mapping, detailed soil mapping, agro-economic base line studies, slope stabilizationstudies, fodder and cover crop research, and pests and diseases research. While the project hasdeveloped technological packages for increasing agricultural productivity and farm incomes for theupland areas, the limited interaction with extension has restricted a widespread adoption of theresults. A closer interaction between research and extension will remain a critical issue to ensure awidespread diffusion of the technologies generated by the project.

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13. Economic Rate of Return. Given the massive fiall and volatility in the value of theIndonesian Rupiah and the inability to establish a stable exchange rate over the medium term, therecalculation of the ERR for the project's upland productivity and stabilization component becomes afunction of the rate of exchange assumedl. To permit a comparison with the appraisal estimate, theERR for the project's upland productivity and stabilization component (excluding the researchcomponent) was recalculated using the exchange rate prevailing before the current financial crisis, atRp 2,300 to the US Dollar, as a base case. The recalculated ERR estimated at about 9% was lowerthan the appraisal estimate of 12%. This was primarily due to high operational costs and a longerperiod to maturity. The lower return does not include significant, but non-quantifiable externalbenefits from the avoidance of siltation downstream. However, using the actual rate of exchange overthe project implementation period (of about Rp 2,300 to the US Dollar) and an alternative rate of Rp5,5002, over the remaining 23 year project life, the recalculated ERR was estimated at about 13%.This provides an indication of the sensitivity of the ERR to the exchange rate assumed. No overalleconomic analysis for the project was undertaken largely because a significant part of the project'ssupport and training services for upland community development would extend beyond the project'sactivities. No attempt was made to re-calculate the ERR for the roads component which wasestimated at 15% at appraisal. This was because the estimation of benefits from reduced transportcosts, improved access to markets particularly in the rainy season, less spoilage, improved extensioncoverage and therefore better production, easier access to health, credit services and employmentopportunities, and the stimulation of non-agricultural activities were considered too speculative forquantification. The project has directly benefited over 8,000 farm families on the watershed and over175,000 families through the revolving fund components alone. The numbers benefiting from theinterventions in the village and kecamatan projects are also substantial.

Physical Objectives

14. The project's physical achievements were substantial and impressive, as shown in Table5. In a large number of cases it exceeded appraisal targets. Most appraisal targets were achieved bythe original closing date; the extension accorded by the Bank was primarily for enhancing thedevelopment impact and sustainability of project actions and consolidating the key projectinterventions. Physical achievements under the prokec and prodes components, although notspecified at appraisal covered an impressive list of activities, directly productive as well assupportive investments in socio-economic infrastructure.

15. For the key component of upland productivity and (watershed) stabilization, the projectsucceeded in completing conservation measures in 518 watersheds (micro-DAS) as opposed to atarget of 500. Physical conservation measures included bench and contour terraces, improvedwaterways and drop structures, infiltration pits and terrace risers. Similarly, of a total of 140 TDMplots to be implemented in 140 villages, the project had completed work in about 150 villages. Thetarget of 80 hamlet nurseries (KBD) was also exceeded and a total of III nurseries have beenestablished.

16. With respect to community development, the project provided support for 584 villages asagainst a target of 475 villages under prodes (village projects) and 99 kecamatans (subdistrict)

The import parity price of rice, for instance, becomes a function of the rate of exchange assumed.2 This is to be seen against an actual current market rate of between Rp 8,500-11,500.

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against a target of 92 under the prokec programmes. While no projections had been made of theexact investments to be supported under the two approaches, the achievements were impressive. Theactual physical achievements under both the approaches covered activities of seedling distribution(approximately 1.5 million), livestock distribution (about 300 cattle and over 17,000 goats),improvement to rural roads (232 km of new road and 545 km of maintenance of existing roads) andbridges and culverts (about 113 units including 39 bridges), shopping kiosks (95 units),improvements to irrigation/water supply (about 17 km), and improvement to sanitation and wastedisposal (nearly 700 units). Although the average number of participants in the hamlet revolvingfunds (produs) varied, it is estimated that a total of over 175,000 farm families have benefited fromthe programme. The majority of the beneficiaries in the programme were women.

17. The project rehabilitated a total of about 232 km of roads and improvements to 39bridges as against SAR targets of 173 km and 22 units, an increase of about 44% and 77%respectively. Some support for office construction was also provided for the Public WorksDepartment at the kabupaten level.

Institutional Objectives

18. Implementation arrangements for YUADP were designed to operate within the structureand functions of existing government institutions, rather than through new project specificinstitutions. Project implementation was undertaken by a total of some 24 focalcoordination/management units, four each in the four districts/kabupaten, seven at the provinciallevel and one at BANGDA at the naticnal level. Despite a concern expressed at MTR, the sub-management units reflected existing functional responsibilities in provincial and districtadministration and they performed well. While a large part of the actual implementation wasundertaken by project beneficiaries, the p:roject was somewhat Government staff intensive.

19. However, in the desire to strengthen local level institutions, project design focused onstrengthening existing institutions rather than on reorganizing and simplifying them to best fit theinterventions themselves. As a consequence, both the village projects and kecamatan projects, at twodifferent decision levels, supported the irnplementation of the same activities (such as village roads,small irrigation/water supplies, and goat distribution) for and by the same set of people, i.e. thevillages. The bifurcation of responsibilities between the villages and the kecamatans for the sameinterventions amounted to a duplication that would have been best avoided.

20. The decision not to specify local level interventions has allowed the interventions to bedemand driven, responding to the felt needs of the people. However, it has also involved aGovernment line agency in the operation of a revolving fund of animals (goat distribution) in whichit has little capability. The current system of operating through contractors and village sub-groups forimplementation raises questions about beneficiary criteria, animal recoveries and sustainability. Theinvolvement of an NGO to organize the goat distribution would have been a much better alternativeas it has been undertaken in similar other projects in Indonesia.

21. The project made significant contributions towards achieving the objective ofstrengthening local level institutions and improving multi-sectoral planning at the provincial anddistrict levels. Virtually the only nationally implemented component was the research component.The other national level component was that of overall coordination and implementation of the field

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programme and the establishment of a national level MIS by BANGDA (SIMBANGDA). In point offact however, the establishment of SIMBANGDA was not achieved and the role of BANGDA waslargely limited to that of providing the necessary budgetary indent/authorization for the provincialagencies. Decentralized implementation both at the Provincial level and more importantly at theDistrict and subdistrict level worked well and resulted in noticeable improvements in the capabilitiesof local level institutions in programming, implementing, reporting and monitoring of projectactivities.

22. The project's successful achievement of its overall objective of nurturing community-based development has been reflected in the gradual increase in the financial contribution bycommunities under both the village and kecamatan project components. The community'scontribution in the village projects reached nearly 37% with the remaining 63% being financed underthe project while under the kecamatan projects the community participation was at about 31%. Theimplication of this in the overall design of rural development projects is profound.

23. Project objectives of institutional strengthening and human resource development weresupported by a major emphasis on training both for community leaders, farmers and Governmentstaff involved in implementation. In fact, training was implemented within eight of the ninecomponents; the only exception being that of the research component. A total of over 36,000community leaders, farmers and staff of different line agencies of the Government were providedtraining on a very wide range of subjects that included leadership training for village and hamletdevelopment councils, technical training for planning of watersheds, technology display menus andvillage seedling nurseries, training in book keeping for project staff and management of the hamletrevolving funds, planning methodology courses, project management and management informationsystems, training in monitoring and evaluation, in computer applications as well as English languagetraining. An external study tour to the Philippines involved provincial level managers and sub-managers and key responsible persons such as the District Chiefs (Bupati) and the heads ofBAPPEDA at both the district and Provincial levels. Training was also provided at the national levelat BANGDA covering subjects as Environmental Protection and Management, Public PolicyEvaluation and Planning, City Planning and Urban Affairs ancl general assessment of BANGDASoperational strengths and weaknesses. There is no doubt that training has had an impact onimplementation. However, training was frequently poorly organized and coordinated. For instance,the same training, covering village and hamlet level activities, was provided by different agenciesleading to a dispersion in focus. While the overall responsibility of coordination of BANGDA isrecognized, the training provided to it was not directly relevant to project implementation.

24. -. a total of about 246 man-months of national and expatriate technical assistance, theproject successfully provided about 208 man-months of specialist services in a variety of areas.Technical specialists were provided for: (a) community development - training; (b) uplanddevelopment support team (UDST); (c) provincial planning coordination and support; and, at thenational level, (d) for area development planning support. The slpecialist services were rendered in atimely fashion and were fully supported by the borrower. A large number of reports were preparedand utilized during the implementation period.

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C. IMPLEMENTATION RECORD & MAJOR FACTORS AFFECTING THE PROJECT

25. YUAPD was prepared under the FAO-World Bank Cooperative Programme in 1989 andwas appraised in February 1990 and approved in March 1991. The project became effective in June1991 and was to be implemented over a period of five years. There were some initial delays inproject implementation because of slow recruitment of consultants for technical assistance andinadequate budgetary provision. Implementation however soon improved substantially andaccelerated after the mid-term review of the project and actual implementation at the end of theproject exceeded appraisal targets in a majority of categories. The one year extension was justified soas to allow the implementing agencies to: (a) strengthen and consolidate the project's successful andinnovative technical and institutional approaches for upland agricultural development and soilstabilization programmes; (b) institutionalize project monitoring'and evaluation programmes morefirmly; (c) carry out an impact evaluation; and (d) prepare plans for post-project operation.

26. An important implementation approach has been the continuous evaluation of all projectactivities, particularly in their development impact and relevance to farmer needs. As a direct resultof such evaluation, the distribution of cattle was stopped and an emphasis given to goats for the in-kind distribution programme. While the village and kecamatan projects covered a wide variety ofinterventions, there was a justified focus on activities that improved income prospects directly orindirectly. The approach to annual work programming provided local level agencies an opportunityto learn the art of establishing work priorities as well as improved the development impact andsustainability of project interventions.

D. PROJECT SUSTAINABILITY

27. The structure of the project is such that sustainability of the development initiativeswould largely be the responsibility of the beneficiaries themselves. Thus, farmers within thewatersheds would continue to undertake conservation-based measures aimed to continue theirproduction objectives. The operational activities that would need to be financed by the Governmentrelate primarily to the research component, the maintenance of roads and honorariums and incentivepayments to staff, office supplies, utilities and other operational expenditures. The Government'scommitment to poverty alleviation gives reason to believe that reasonable levels of funding would bemade available in the future. (The longer- run impact of the financial crisis is not clear at this time).The fact that budgetary allocations have been made to provide funds for the continuation of activitiesduring the remaining period of the fiscal year despite the Bank loan having closed on December 31,1997, supports the above conclusion.

28. While the traditional sources of funds for the Provinces originate out of national transfersto the Provincial and District budgets (APDB I and APDB II) as well as through the allocation of thevarious INPRES funds, the increased contribution of the communities in cost sharing investments atthe local level provides a reassuring confiirmation for project sustainability. The financial needs forsustaining the research component has to be seen from a long term perspective and specificallocations will need to be made not only to continue the beginnings achieved but also to develop awider basis for research in such environments. Financing of these requirements is likely to beprovided in the context of the Government's decentralization plans and plans for the establishment ofone research station in each region of the country.

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29. Growth in the upland areas is a function both of increased productivity of the land andincreased opportunities for off-farm income generation. The project has put in place a workingmechanism for credit operations that has played a crucial role in the generation of off-farm incomeand has improved farm productivity. The groups established under the project have shown that theyare able to function as micro-finance intemediaries. However, the financial resources they canmobilize are quite small and theses groups should be linked to an appropriate financial institution.

E. BANK PERFORMANCE

30. The Bank's performance throughout the project cycle was satisfactory, particularly in theorientation of its support for decentralized decision making. The project benefited from a high degreeof supervision and monitoring and timely identification and resolution of implementation constraintsby Bank staff. During the extended implementation period of six years, a total of 11 supervisionmissions visited the project. It is surprising however, to find that given the lack of performance of thenurseries component but the positive contribution of the private nurseries in the development effort,no statement for abandoning the effort was made by any of the missions. Although there was a highturnover of task managers for the project, project supervisions were well organized, systematic andconsistent, recommending a number evaluations on specific activities. The mission's aide-mdmoirebrought out the key implementation and development issues and provided clear recommendations forfollow-up actions. An exhaustive mid-term review was held at an appropriate time. Its findingshowever were superseded by subsequent substantive improvements in implementation. Implementingagencies were given considerable flexibility but responded to suggestions made by Bank missions.

31. Relationships between the Bank and the Government, both at the Centre and in theProvinces and the Kabupatens were cordial, yet effective throughout the implementation period.

F. BORROWER PERFORMANCE

32. The commitment to the project and measures undertaken for its implementation at thenational, provincial, district and subdistrict levels have been impressive. Although the officialresponsibility for coordinating the project was at the national level, effective implementation at theprovincial level protected the project from any impact of a high raete of staff turnover (5 coordinatorsin five years) at the national level. What was commendable however was the adequacy and relativetimeliness of budgetary allocations from the national as well as from the provincial levels. TheGovernment was in compliance with all the covenants of the credit agreement. Implementingagencies were generally responsive to the recommendations of the supervision missions except in thecase of research and TDMs where there was a tendency for a delayed response. Government staff atthe Provincial and District levels including staff from the BAPPE,DAS and the Dinases contributedactively to the mission's activities.

G. ASSESSMENT OF OUTCOME

33. On the whole, the overall outcome of the project has been satisfactory and has laid thefoundations for future development. First, it has established the technical parameters for theconservation and utilization of the upland areas and thereby provided the building blocks forimproved agricultural production and farm incomes on a sustainable basis. This is a very significant

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outcome since the technological base for addressing the problems of agricultural development underconditions of poor and diverse natural resource endowment and harsh agro-ecological environmenthad not been convincingly established. However, prospects for further improvement on thetechnological/crop side still remains and research would have to focus on the application of existingresults at the farm level and its further refinement. Second, the project has strengthened local levelinstitutions in multi-sectoral planning and implementation of development programmes, particularlythe capabilities of provincial and district EIAPPEDAS for overseeing, monitoring and evaluating suchdecentralized development initiatives. This has furthered the objectives of decentralized developmentadministration of the Government's. It has also provided a mechanism for increased beneficiaryparticipation in prioritizing investments at the local level. Third, the project has laid the frameworkfor a local level non-collaterised credit operation as a precursor to an eventual possible integrationwith institutional sources of finance, and fourth, it has fostered awareness and motivation amongbeneficiaries and a feeling of purpose among staff in the line agencies by its emphasis on humanresource development and the creation of a pool of expertise.

H. FUTURE OPERATIONS

34. The Bank is already implementing projects in other parts of the country (Nusa TenggaraAgriculture Area Development Project, Sulawesi Agriculture Area Development Project) that havebeen based on principles established under this project. At the same time, three other regional/areadevelopment projects are under various stages of processing (preparation/appraisal/negotiations) inMaluku, Bengkulu and Kalimantan. The basic principles outlining the on-going and proposedprojects include further strengthening of the decentralization planning process and implementation atthe district and subdistrict levels including improving the framework for effective and broad-basedbeneficiary participation as well as integrating gender sensitivities, improving the technicalparameters for the development of agriculture through the establishment of farming systems basedtechnologies consistent with agro-ecological and socio-economic diversities that are betterintegrated with livestock and available water resources, improving the data-base for more focusedfarming systems research, improved agritcultural support services and improving the prospects ofemployment and income generation based initially on the provision of non-collaterised credit.

I. KEY LESSONS LEARNED

35. Key Lessons. These are (i) steeply sloping land should not be cultivated for annualcrops but where population pressure offers little alternative, soil conservation measures should beapplied; (ii) soil conservation measures should combine structures (bunds, terraces) with cultivationpractices (contour ploughing), and mixed cropping (grass strips, fruit and fuelwood trees with paddy,corn, beans); (iii) soil conservation is technology intensive and site-specific and needs to besupported by applied research and extension; (iv) soil conservation is labor intensive and needs to besupported by farm profitability studies and farm credit to ensure adequate returns to farmers to makethe extra effort worthwhile: and, (v) as the opportunity cost of farm labor rises with development,farmers move from food crops to treecrops and agricultural service institutions should be adeptenough to support the change.

36. Technology. A watershed management strategy that includes run-off control and soilconservation, and farm planning and diversification, can provide the elements for agricultural

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development in the upland areas. However, the full potential of the technological changes developedby research has yet to be translated into reality on the ground. There has been a greater focus on thedevelopment of the physical technology and not as much of an effort on crops. While the currentcropping pattern including the integration of fruit and multi-purpose tree species appears well suitedto the environment, the prospects for further improvement cannot be ignored. There is a need for amore concerted effort with a more direct involvement of both research and extension in thedevelopment of alternative cropping menus suitable for adoption by farmers. While the developmentof more tree crops is a likely possibility, plant nursery material should be procured from privatenurseries at the local level rather than attempting to establish group nurseries.

37. Project Design. A conservation-based strategy for the development of upland areasworks best when it is combined with efforts to provide social investment capital and measures toincrease off farm incomes. The support provided for village projects for interventions: for commonuse such as water supplies, irrigation, roads, in combination with support for off-farm incomegeneration through the provision of the revolving fund proved to be a critical element for projectsuccess. However, in so pursuing the objectives, the project attempted a large number of approachesand activities resulting in a complicated organizational structure. Potential implementation problemswere minimized by giving a central role to the provincial and district BAPPEDAS in the planning,coordination and oversight of local level programmes with implementation responsibilities fullydecentralized at the district and subdistrict levels. An important feature of project design, which isexpected to help sustain the implementation arrangements, was that the project organization was builtwithin the existing national, provincial, district and subdistrict level structures. Although projectimplementation despite the complexity proceeded reasonably well, this could reflect the particularsituation of the province of Yogyakarta with its historical and educational background andconclusions on its replicability in the other provinces in Indonesia will have to be made with somecaution.

38. While block financial allocations are attractive due to their flexibility and facility tobeing demand responsive, such as in the village and kecamatan projects, there is a tendency towardsan involvement in far too many, and often, disparate activities. One divisive issue has been thechoice between social investments (development of common property resources) and those thatdirectly improve incomes. Although some criteria in the selection of activities were provided theywere inadequate and not applied effectively. There is a critical need for establishing specific criteriaand parameters for selecting project activities. Thus, for instance, local level (kecamatan and village)projects can and should be integrated into one component.

39. Supervision, Monitoring and Evaluation. The project benefited from a high degree ofsupervision and monitoring despite several changes in responsible project staff (task manager) bothat the World Bank and at BANGDA. The project has undertaken a large number of studies on variousaspects related to the project not all of which has been effectively translated into practice. Projectmonitoring has been particularly elaborate and commendable and considerable data have beencollected. However, the data has not been adequately analysed. Project supervision has beensystematic and consistent, recommending a number of evaluation of specific activities beforedeciding to curtail or strengthen them. The focus on appraisal goals dominated supervision efforts.Attention to component/activities impact would have revealed, early, the inadequacy and non-sustainability of some of the interventions (such as the nurseries and TDM) so that appropriateactions could be taken.

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PART II: STATISTICAL TABLES

Table 1: Summary of Assessments

A. Achievement of objectives Substantial Partial Negligible Not Applicable(4) (w) (X~~) 0i

Macro policies []Sector policies

Financial objectives liiiInstitutional development

Physical objectives

Poverty reduction II]Gender issues 2z

Other social objectives F F z

Environmental objectives F] TI

Public sector management FT I K

Private sector development K K K K

Other (specify) K K K K

B. Project sustainability Likely Unlikely Uncertain(NI) (NI) (NI)

HighlyC. Bank performance satisfactory Satisfactory Deficient

(NI) (NI) (NI)Identification IT] K]

Preparation assistance K] K]Appraisal K] E °Supervision K K K

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HighlD. Borrower performance satisfactory Satisfactory Deficient

(4) (4) (4)Preparation F

Implementation E F 7

Covenant compliance LI I Operation (if applicable) z z J

Higl HighlyE. Assessment of outcome satisfactory Satisfactory Unsatisfactory unsatisfactory

(4) (4) (4) (4)LIO WG LI

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Table 2: Related Bank Loans/Credits

Loan/credit title Purpose Year of Status_ _______________________ approval

Preceding OperationsI Yogyakarta Rural Development Improve (i) the incomes and living 1979 Closed

Project standards of the people and thesocio-economic and physicalinfrastructure in two of the poorestKabupaten in province; (ii)promote soil conservationmeasure; and (iii) strengthen locallevel institutions and frameworkfor community participation.

2 Upland Agriculture and To increase farm production and 1985 ClosedConservation Project incomes, while minimizing soil

erosion, in densely populateduplanct area in Java by improvingfarming systems, farm technologyand management.

3 Nusa Tenggara Agriculture Support To raise smallholder incomes, 1986 ClosedProject promote equitable regional

development, strengthen local-level institutions and improvemulti-sectoral planning andimplementation at both the nationaland local levels.

Following OperationsI Nusa Tenggara Agriculture Area To raise smallholder incomes, 1996 Ongoing

Development Project strengthening local levelinstitutions and foster broad-basedparticipation at the grassroots level.

2 Sulawesi Agriculture Area To reduce the incidence of poverty 1996 OngoingDevelopment Project in the provinces of Central and

Southeast Sulawesi through theincrease of rural incomes, thepromotion of equitable regionaldevelopment.

3 Maluku Regional Development NegotiatedProject

4 Bengkulu Area Development AppraisedProject

5 Kalimantan Area Development UnderProject Preparation

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Table 3: Project Timetable

Steps in project cycle | Date planned f Date actual/latest estimate

Identification (Executive Project Summary) April-May 1986

Preparation April 1988-Sept. 1989

Appraisal February 1990

Negotiations 10 December 1990 28-30 January 1991

Letter of development policy (if applicable)

Board presentation 19 March 1991

Signing 3 May 1991

Effectiveness I April 1991 24 June 1991

First tranche release (if applicable)

Mid-term review (if applicable) June 1993 15 April 1994

Second (and third) tranche release (if applicable)

Project completion

Loan closing 31 December 1996 31 December 1997

Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual(US$ thousands)

FY91 FY92 FY93 FY94 FY95 FY96 FY97

Appraisal estimate 0 1,000 3,646 7,516 10,696 13,632 14,195Actual 1,000 1,669 3,521 7,028 9,913 11,993 13,800Actual as % of estimate 1000 167 96.6 93.5 92.7 87.5 97Date of finaldisbursement 31 March 1998

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Table 5: Key Indicators for Project Implementation

ActualKey Indicators Unit SAR Number

Target1. COMMUNITY MOBILIZATION

(a) Dusun Revolving Funds hamlet 1,400 1,586 113(b) Village Project unit 475 585 123(c) Potensi Desa Survey village 140 230 164

2. SLOPE STABILIZATION(a) Technology Display Menu unit 140 150 107(b) Village Nursery (KBD) unit 82 85 104(c) Micro-DAS unit 500 518 104(d) Outreach Program ha n.a. 793

3. VILLAGE ROAD & BRIDGES(a) Road Construction/Rehab. km 173 232 134(b) Bridge Construction unit 22 39 177

4. KAB, PLANNING & SUPPORT(a) Kecamatan Project unit 92 119 129

5. COMMUNITY DEV. TRAINING(a) Mgt. & Bookkeeping Training person 1,400 2,007 143(b) Community/Leader Training person 10,110 28,649 283(c) Kabupaten Staff _ _

- Extension Field & Staff Training person 1,110 3,248 293- PU Staff Training person 119 55 46- Vill. Pot/Mon Ev. Survey Training person 350 1,110 317

(d) Cent. & Prov. Staff Mgt. Training person 1,365 1,108 81(e) Local Consultants m/m - 8 l

(f) Intemational Consultants ni/m 10 9 906. UPLAND DEVELOPMENT SUPPORT TEAM

(UDST)(a) Local Consultants m/m 41 15 37(b) International Consultants ni/m 32 26 81(c) RRA: Baseline Data Village n.a. 54

Evaluation Data Village n.a 407. PROV. PLAN. COORD. & SUPPORT

(a) Local Consultants n/m 50 61 122(b) International Consultants m/m 35 53 151(c) Local Training Officer tn/m 54 48 89(d) Overseas Training person n.a. 20(e) Land-Use & Certification:

- Micro-DAS maps unit 500 292 58- Erosion Survey village 82 82 100- Special Maps unit 40 116 290- Land Certification unit 8,000 12,010 150

8. UPLAND RESEARCH (AARD)(a) Topographic Mapping unit 21 8 38(b) Detailed Soil Mapping unit 21 7 33(c) Agro-econ. Baseline Study unit 21 1 1 52(d) Slope Stabilization Research unit 21 32 152(e) Fodder & Cover-Crops Research unit 18 4 22(f) Pest & Diseases Research kab. 18 5 28(g) Farm Analysis & Marketing 7 kab. 21 20 95(h) Recruitment of TA unit 13 10 77

9. AREA DEV. PLANNING SUPPORT(a) Local Consultants Mnim 25 4 16(b) Intemational Consultants m/m 6 5 83(c) MIS Local Consultants n/m 18 10 56(c) MIS Intemational Consultants ninm 16 7 44

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Table 6: Key Indicators for Project Operation

Operating Indicators SAR Targets Actual1. Community Mobilization

(a) Hamlet Revolving Funds n.s. Capital growth rate: 10-11% p.a.(b) Village Projects n.s. Beneficiary contribution: +3 1%

2. Slope Stabilization n.s. (i) Improved Erosion Index.(ii) Increased livestock holding

0.3 f 0.7 cattle1.1 f 2.5 goat/sheep

3. Roads and Bridges n.s. (i) Improved allocations fromprovincial authorities.

(ii) Construction of roads under_____ __ _ village projects.

4. Upland Research n.s. 162 Research topics covered.

Table 7: Studies Included in Project

Purpose as definedStudy at appraisal/reclefined Status Impact of study

1. Proyek Pengembangan Wilayah Perbukitan Kritis Completed Used in projectYogyakarta (YUADP/Bangun Desa II), Laporan Survei Data implementationDasar Evaluasi Mikrodas TA 1992/1993, Volume I & II, (Micro-Das).Pemerintah Propinsi Daerah Istimewa, Badan PerencanaanPembangunan Daerah, Yogyakarta, Maret 1993. (SurveyReport on Micro Das Evaluation, 1992-1993, BAPPEDA.

2. Suyadi, Ag. Ir., Menghiting Erosi Tanah Dengan Metoda Completed Used in projectUSLE, Bag. Pro. Fendukung Kawasan Perbukitan Kritis implementationDaerah Istimewa Yogyakarta, 1993. (Erosion Methodology (Micro-Das).Study, 1993)

3. Bambang Agus Sudarmo, Metoda Inderosi, Bag. Pro. Completed Used in projectPendukung Kawasan Perbukitan Kritis Daerah Istimewa implementationYogyakarta, 1993. (Guideline for Erosion Index (Micro-Das).Measurement)

4. Yayasan Desa Mandiri Yogyakarta, Survei Data Dasar, Completed Used in projectLaporan Akhir Evaluasi Mikro-Das (RRA), BAPPEDA I D.l. implementation.Yogyakarta, April 1994. (Micro-Das Evaluation, RRA)

5. Yayasan Desa Mandiri Yogyakarta, Pemahaman Pedesaan Completed Used in projectSecara Cepat (RRA) Calon Lokasi Proyek Bangun Desa II implementation.Tahun Anggaran 1994/1995, BAPPEDA I D.I. Yogyakarta,February 1995. (RRA for Selected Villages)

6. Yayasan Desa Mandiri Yogyakarta, Laporan Akhir Completed Used in projectPemahaman Pedesaan Secara Cepat (RRA), Monitoring dan implementation.Evaluasi Proyek Bangun Desa 11 Tahun Anggaran 1993/1994,BAPPEDA I D.I. Yogyakarta, January 1996. (Final Report forRRA on Monitoring Evaluation)

7. Yayasan Desa Mandiri Yogyakarta, Laporan Akhir Completed Used in projectPemahaman Pedesaan Secara Cepat (RRA), Loasi Proyek implementation.Bangun Desa 11 Tahun Anggaran 1995/1996, BAPPEDA ID.I. Yogyakarta, January 1996. (Report RRA)

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Purpose as definedStudy at appraisal/redefined Status Impact of study

8. Yayasan Desa Mandiri Yogyakarta, Laporan Akhir Kaji Completed Used in projectUlang Pelaksanaan TDM dan KBD, BAPPEDA I D.I. implementationYogyakarta, February 1996. (Study on TDM & KBD) (Micro-Das).

9. Area Development Advisor, Laporan Akhir Pelaksanaart Completed Used in projectTugas (Final Report) pada Proyek Bangun Desa II (YUAEDP), implementation.PT Intersys Kelola Maju, October 1996.

10. Community Development Advisor, Outreach Program Completed Used in projectDesign Specialist and Land-Use Water Management Advisor, implementation.Appendices to Final Report 1992-1993, DevelopmentAlternative Inc. and MacDonald Agricultural Services Ltcl.,April 1993.

11. Richard Gnagey, Manual Konstruksi Jalan Pada Completed Used in projectPembangunan dan Pemeliharaan Jaltan Proyek Bangun Desa 11 implementation.(YUADP), BAPPEDA I D.l. Yogyakarta, 1995. (Manual forRoad Construction and Maintenance)

12. Local Management Specialist, YUADP, Mid-Term Completed Used in projectAssignment Report, PT. Intersys Kelola Maju, February 1.993. implementation

(Training).

13. Kabul Santoso, Pemahaman Pedesaan Dalam Waktu Completed Used in projectSingkat (RRA), BAPPEDA I D.l. Yogyakarta, February 1992. implementation.

14. Local Area Development Advisor, Review on Project Completed Used in projectOrganizational Structure and Management of YUADP, implementationBAPPEDA I D.I. Yogyakarta, February 1994. (O&M).

15. International Training Specialist, Final Report, Completed Used in projectDevelopment Alternatives Inc., MacDonald Agricultural implementationServices Ltd., PT. Intersys Kelola Maju, March 1994. (Training).

16. Yayasan Desa Mandiri Yogyakarta, Laporan Akhir Completed Used in projectEvaluasi dan Analisis Proyek Kecamatan, Proyek Desa dan implementationProyek Bantuan Dusun 1991/92-1995/96, Direktorat (M&E).Pembangunan Masyarakat Desa Propinsi D.I. Yogyakarta,April 1996. (Evaluation and Analysis on Prokec, Prodes ;ndBandes)

17. International Training Advisor, Project Training Completed Used in projectAssessment, Development Alternatives Inc.; MacDonald implementationAgricultural Services Ltd.; PT. Intersys Kelola Maju, February (Training).1994

18. International Road and Bridge Advisor, Technical Completed Used in projectAssistance Final Report, Development Alternatives Inc.; implementationMacDonald Agricultural Services Ltd.; PT Intersys Kelola (Research).Maju, July 1994.

19. Jurusan Tanah Fakultas Pertanian Universitas Gajahinada, Completed Used in projectEvaluasi Mikro DAS dan dampaknya, Jurusan Tanah Fakultas implementation.Pertanian Universita GAMA bekerja sama dengan BagianProyek Pendukung Pengembangan Kawasan Perbukitan KritisPropinsi D.I. Yogyakarta, December 1996. (Micro DasEvaluation and lmpact)

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20. International Area Development Advisor, Technical Completed Used in projectAssistance, Final Report, Development Altematives Inc., implementation.MacDonald Agricultural Services Ltd., PT. Intersys KelolaMaju, 1994

21. Local Management Specialist, Technical Report, Final Completed Used in projectReport, Development Alternatives Inc., MacDonald implementationAgricultural Services Ltd., PT. Intersys Kelola Maju, 1993. (O&M).

22. International Training Specialist, Recommendations for Completed Used in projectImproving Training in the YUADP, Technical Assistance, implementationDevelopment Alternatives Inc., MacDonald Agricultural (Training).Services Ltd., PT. Intersys Kelola Maju, 1994.

23. Local Area Development Advisor, Fungsi Ekonomi dan Completed Used in projectKeragaan Pelaksanaan Mikro-Das Tantangan Pelaksanaan implementation.Ushatani Konservasi pada Lahan Kering Miring Berbukit,Development Alternative Inc., MacDonald AgriculturalServices Ltd., PT. Intersys Kelola Maju, 1994. (EconomicPerformance of Micro Das Implementation: Challenge forSoil Conservation Farming in Upland Areas).

Table 8A: Project Costs

Appraisal Estimate (US$'000)) Actual Estimate (US$'000)Component Local Foreign Total Local Foreign Total

Cost Cost Cost CostCommunity Mobilization 4,802.3 78.2 4,880.5 4,517.0 83.7 4,600.7Slope Stabilization 1,125.4 338.6 1,464.0 925.7 295.9 1,248.6Rural Roads & Bridges 6,017.8 2,243.3 8,261.1 4,864.7 1,830.3 6,695.0Kab. Planning & Coord. 1,268.4 199.0 1,467.4 1,297.8 196.8 1,494.6Comm. Dev. Training 222.5 161.3 383.8 76.5 54.8 131.3Upland Dev. Support Team 416.9 441.7 858.6 99.3 110.3 209.6Prov. Planning & Coord. 2,192.7 896.0 3,088.7 1,990.4 848.0 2,838.4Upland WSA Research 2,904.3 363.4 3,267.7 1,414.0 207.4 1,621.4Area Dev. Planning Support 904.2 499.5 1,403.7 948.9 524.2 1,473.1Total Costs 19,854.5 5,221.0 25,076.5 16,161.3 4,151.4 20,312.7

Table 8B: Project Financing

Appraisal Estimate (US$'000) Actual Estimate (US$'000)Component Local Foreign Total Local Foreign Total

Cost Cost Cost CostIBRD 15,500.() 12,960.8Domestic contributions- Central Government n.a. n.a. - - - 5,120.7- Provincial Government n.a. n.a. - - 139.9- Distict Government n.a. n.a. - - 1,204.9- Inpres Desa n.a. n.a. - - 886.2Sub-total Domestic 9,576.5 - - 7,351.7Total 19,855.4 5,221.1 25,076.5 - - 20,312.5

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Table 9: Economic Costs and Benefits

Appraisal Estimate ActualComponent l

ERR Direct Benefit ERR Direct BenefitUpland Productivity 12 % n.q. 9% / 13%" 8,000 ff 2/

and Stabilization 175,000 ff3 'Rural Roads and 15% n.q. n..q. n.q.Bridges

1/ 9% - using import parity prices based on US$1=Rp 2,300; 13% - using import parity prices based onUS$1= Rp 5,500.

2/ From watershed stabilization.3/ From revolving funds.

Table 10: Status of Legal Covenants

[Indonesia][Yogyakarta Upland Area Development Project]

Original fulfillment RevisedAgreement Covenant Present date fulfillment date Description of

Section type if status 2/ covenant Comments

Art. 4.01 (B (II) 1 C 31 Dec. 2000 Account and Special account Fulfilled;audits submitted to the Bank FY95/96 SA auditnine months after end of FY. received August

19/96

Art. 4.01 B (111) I C 31 Dec. 2000 Submit unaudited accounts four Fulfilled.months after end of fiscal year.

Sch. 1.3 B (1) 4 C 30 April 2000 31 August 2000 Budget allocation 1995/96 for In compliance.road maintenance will bemaintained.

Sch. 5.1 10 C I April 1993 Upgrade Agric. Research Completed byfacilities in Yogyakarta to full June 1992.capacity.

Sch. 5.2 5 C n.a. Select subdistrict, village and In compliance.hamlet project in accordancewith criteria satisfactory to theBank.

Sch. 5.3 10 C n.a. Hamlet funds to be onlent at In compliance.annual interest rates not lowerthan BRI's Kupedes scheme.

Sch. 5.4(a) 3 C n.a. At least 40% of resources In compliance.allocated under the loan forroads to be provided toGn.Kidul.

Sch. 5.4(b) 5 C n.a. Village roads to be selected in In compliance.accordance with criteriasatisfactory to the Bank.

Sch. 5.4(c) 9 CD 31 Dec. 1991 30 Sept. 1992 Provincial Public Works Complied by Sept.authorities to develop and apply 1992a system to monitor costs andphysical progress of villageroads, satisfactory to the Bank.

Sch. 5.4(d) 9 CD 31 Dec. 1991 30 Sept. 1992 A system and related action Complied by Sept.plan, satisfactory to the Bank, of 1992.

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Original fulfillment RevisedAgreement Covenant Present date fulfillment date Description of

Section type " status 2' covenant Comments

rnonitoring requirement ofmnaintaining village road to beestablished.

Sch. 5.4(e) 4 CP n.a. District Public Works In compliance.authorities to maintain asphaltvillage roads.

Sch. 5.4(f) 6 C n.a. Realignment of roads cutting Complied; so farinto slopes to be preceded by only I sitesatisfactory Environmental required EIA.lmpact Assess.

Sch. 5.5 10 CD 30 June 1993 31 March 1994 Mid-Term Review to be carried Completed byout. April 1994.

Sch. 5.6 5 C n.a. Training institution to be In compliance.selected in accordance withcriteria satisfactory to the Bank.

Sch. 5.7 4 C n.a. GOI to ensure that adequate In compliance.number of vehicles are availablein timely manner.

Sch. 5.8 5 C n.a. Provincial Working Group on In compliance.watershed system actionsresearch to be maintained.

Sch. 5.9(a) 5 CD 30 Nov. 1991 Completion of design of courses In compliance.for (i) hamlet council micro-watershed planning; (ii) micro-watershed activity groupmobilization; and (iii) villagelevel planning and management.

Sch. 5.9(b) 10 CD 30 Nov. 1991 By 30 Nov. 1991 have in place: Complied by(i) a land and water January 1992.management advisor; (ii)outreach programme specialist;(iii) research methodologyspecialist; (iv) socio-economist;(v) upland agronomist/soilconservation planner; (vi) areadevelopment advisor; and (vii)village development monitoringadvisor.

"Covenant types:

I = Accounts/Audits 8 = Indigenous people2 = Financial perfonmance/revenue generation from beneficiaries 9 = Monitoring, review and reporting3 = Flow and utilization of project funds 10 = Project implementation not covered by categories 1-9

4 = Counterpart funding 11 = Sectoral or cross-sectoral budgetary or other resources allocation

5 = Management aspects of project or executing agency 12 = Sectoral or cross-sectoral policy/regulatory/institutional action

6 = Environmental covenants 13 = Other7 = Involuntary resettlement

21 Status:

C = covenant complied withCD = complied with after delayNC = not complied withSOON = compliance expected in reasonably short timeCP = complied with partiallyNYD = not yet due

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Table 11: Compliance with Operational Manual Statements

Statement number and title Describe and comment on lack of compliance

There are no OMS relevant to the project that have not been complied with and/or been acted against.

Table 12: Banlk Resources: Staff Inputs

Stage of Planned Revised Actualproject cycle

Weeks US$ Weeks US$ Weeks US$

Preparation to. n.a. n.a. n.a. n.a. n.a. n.a.appraisal

Appraisal n.a. n.a. n.a. n.a. n.a. n.a.

Negotiations through n.a. n.a. n.a. n.a. n.a. n.a.Board approval

Supervision n.a. n.a. n.a. n.a. n.a. n.a.

Completion n.a. n.a. n.a. n.a. n.a. n.a.

TOTAL n.a. n.a. n.a. n.a. n.a. n.a.

Table 13: Bank Resources: Missions

Performance rating

Stage of Number D Specialized Implemen- Develop-project cycle Month/ of Days In staff skills tation ment Types of

year persons field represented status objectives problems

Through appraisal Feb. 90

Appraisal through Mar. 91Board approval

Supervision

I - June 91 4 10 2

2 Oct.91 3 7 2 1

3 July 92 2 4 2 1

4 Nov. 92 1 4 2 1

5 Feb.93 4 8 HS 2

6 July 93 3 6 S HS

7 Nov. 94 1 6 HS HS

8 May 95 2 5 S S

9 May 96 4 6 5 S

10 Jan.97 1 4 S S

1I Aug.97 2 5 S S

1/ 1 = no problems; 2 = satisfactory; S = satisfactory; HS = highly satisfactory.

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IMPLEMENTATION COMPLETION REPORT

INDONESIA

YOGYAKARTA UPLAND AREA DEVELOPMENT PROJECT(Loan 3305-IND)

Appendix A

Mission's Aide-Memoire

A. INTRODUCTION

1. The following represents the provisional conclusions of a mission1 from the FAOInvestment Centre which visited Indonesia from 4 to 18 February 1998. After initial discussionswith BANGDA in Jakarta, the mission visited the project areas in Yogyakarta where it reviewedthe extent of project implementation and held discussions with relevant Governmentimplementing agencies and farmers in the project areas. At the end of the mission's stay, twowrap-up meetings were held, one with Government project personnel in Yogyakarta and the otherunder the chairmanship of BANGDA at Jakarta and participated by all relevant agencies ofGovernment where the mission's conclusions were outlined. This aide-memoire summarizes theagreed conclusions of the meeting.

2. The mission would like to record its appreciation for the support provided by the staffof BAPPEDA (TKI and TKII) and the various Dinases as well as the Camats and Kades of theKecamatans and Desas visited by the mission.

B. SUMMARY OF FINDINGS AND RECOMMENDATIONS

Project Implementation

Financial

3. The project, which is a follow-up to the previous Yogyakarta Rural DevelopmentProject, became effective in June 1991 and was to be implemented over a period of six and a halfyears; original closing date - December 31, 1996. Project implementation proceeded well, actualdisbursements exceeded appraisal targets during the first two years, stabilized roughly alongappraisal targets in the following two years and fell slightly behind towards the end of theimplementation period. The project was provided with one extension and closed on 31 December1997. The principal justification for project extension was to allow the consolidation andapplication of the physical, technical and organizational achievements and capitalize on themomentum generated into effective program development. The extension of project activities

1. Sobhan, Mission Leader/Economist and M. Manzoor Khan, Agronomist (Consultant). The mission wasjoined in the field by Wiranto Soehendro, Task Manager and W. Cuddihy, Senior Economist of the WorldBank.

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was limited to specific elements of the project and did not apply to all project activities. Totalproject expenditure as of September 1997 was estimated at about IDR 44,792 million as againstSAR estimates of IDR 47,670 million or about 93% of total estimated expenditure. Thedepreciation of the Indonesian rupiah over the project implementation period however impliesthat in US dollar terms, actual expenditures were of the order of some US$20.3 million as againstthe SAR estimate of US$25.0 million, a saving of about 20%. Of the total loan of US$15.5million provided by the Bank to GOI for the project, US$1.3 million was cancelled due tocurrency depreciation and savings generated during implementation. Project expenditure from theloan is estimated to reach about US$13.8 mnillion or about 97% of the revised allocation.

4. The allocations of project costs between components varied significantly from thoseenvisaged at appraisal. There have been significant cost overruns in three component categories.The component of community mobilization encompassing training, village projects, kecamatanprojects and hamlet revolving funds hacl a cost overrun of about 16%. This was due to thecombined impact of an increase in the number of villages supported, increase in the unit cost ofsupport to each village (from IDR 7.5 million to IDR 10 million) and an increase in the number ofyears of project support from two to three years for each village. Thus for instance, withincommunity mobilization, hamlet projects suffered a 42% cost overrun due to the need foradditional inputs for micro-watersheds (miicro-DAS) such as multi-purpose terrace strengthening,additional assistance for the maintenance of village nurseries and expansion of the micro-DASmodel into expansion areas. The component of Kabupaten Planning and Coordination alsosuffered a cost overrun of nearly 25% largely as a consequence of the inclusion of communitydevelopment - training within this component. There was also a small increase in the ProvincialPlanning and Coordination component. T he component of Area Development Planning Supportimplemented by BANGDA suffered a cost overrun of about 30%. This was due to an effort toestablish a national MIS at BANGDA which was unforeseen at the time of appraisal. These costoverruns were adjusted against savings in the components of community development - training,upland development support team, and upland watershed action research. A revised allocation ofproject costs financed by the loan was made with the agreement of the Bank.

Physical

5. The project's physical performance has been impressive. The project has achievedand, in a large number of activities, sigrlificantly exceeded appraisal targets. This is despite theprojects involvement in a large number of separate activities. The most significant of these are theimplementation of watershed conservation and improvement measures, support for village andkecamatan projects and the provision of hamlet revolving funds. In all of these cases targets havebeen exceeded, often significantly. The only component which failed to achieve its target was theprovision of an MIS by the national agency, BANGDA. The comments of a Mid-Term Review,conducted during the third year of project implementation, with respect to the need for a revisionof the project's physical targets was overtaken by the speed with which project activities weresubsequently implemented.

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Organizational/Institutional

6. In as much as the project's technical focus related to the establishment of theparameters of watershed management, it also had an equally important institutional focus ofstrengthening local level institutions. The project was structured at two levels; there were twocomponents at the national level, research and planning support, and seven components at thedistrict and provincial level. Reflecting the objectives of dLecentralization, the project has beenimplemented virtually entirely by the Provincial and District administration. Decentralizeddecision making did not stop with Government agencies alone but included the involvement ofbeneficiaries directly by allowing them virtual freedom in the choice of activities in the use offunds allocated to them. The involvement of the national agency envisaged for overallcoordination and implementation of the field program was in fact limited to that of providing thenecessary budgetary indent/authorization for the provincial agencies.

7. Project implementation was undertaken by a total of some 24 focalcoordination/management units, four each in each of the four districts/kabupaten, seven at theprovincial level and one at BANGDA at the national level. Despite a concern expressed at MTR,the sub-management units which reflected existing functional responsibilities in provincial anddistrict administration performed well. However, given that components such as the villageprojects and kecamatan projects both supported the implementation of the same activities (such asvillage roads, small irrigation/water supplies, and goat distribution) by the same set of people, i.e.the villages, the bifurcation of responsibilities between the villages and the kecamatans amountedto a duplication that would have been best avoided.

Project Impact

8. The project reflects an effort to establish a long term strategy for the development ofareas where the environmental resource base acts as a major constraining factor. In terms of itsgoals of establishing the technical parameters for the conservation and utilization of the uplandareas based on a watershed basis, the project was well implemented. In terms of establishing itsgoals of strengthening local level institutions and furtheriing the Government's objective ofdecentralization, the achievement and impact was much greater. There has been a commendableincrease in contributions to project activities not only by provincial authorities but also by projectbeneficiaries themselves. The two national components however had limited impact on theproject or the beneficiaries. Upland action research failed to establish the appropriate linkageswith extension, specifically for instance with the technology display menu activity, and remainedsomewhat segregated from the total project. The planning support to be provided by BANGDAparticularly through the establishment of an MIS was not achieved and this too remainedsomewhat isolated from the project. Project impact has been assessed through the performance ofseven key indicators reflecting the combined impact of the different project components at thefield or district and provincial level. A summarized review of project impact based on thoseindicators is as follows:

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Micro Watershed Stabillization (micro-DAS). There is little doubt that thebasic technical physical dimension underlying the project, watershedconservation measures and farming demonstrations, have had an impact onproductivity of the farms through its effect on reducing soil erosion. This hasbeen measured through irnproved scores on the quality of physical conservationmeasures (such as bench and contour terraces, improved waterways, dropstructures, infiltration pits and strengthening of terrace risers) and reducedestimates of erosion levels measured through an estimation of an erosion index.The critical element has been in the selection of the watershed; where erosionproblems were significant, the measures have had a visible impact. Apart fromthe introduction of some perennial and horticultural tree species there hashowever been little change in the cropping pattern, although yields haveimproved significantly. Wrhile the full impact of the measures would have towait until the fruit and multi-purpose tree species reach maturity, monitoringsurveys indicate positive results from about 75% of the watersheds. An indexof the positive impact has also been the increase in the numbers of small stockby watershed members. hIowever, there has been limited impact on farmersoutside the watershed areas.

Technology Display Menus (TDM). There has been little or no impact fromthe TDM measures undertaken by the project. Designed with the objective ofdemonstrating alternative and new technologies, TDM plots lacked theanticipated link with research. As a consequence, the plots remained largely areflection of the farmners own fields and have had little bearing for the projector the farmers.

Hamlet Nurseries (KBD). Established with the objective of being theprincipal source for planting material for conservation measures, the nurseriescontributed little to the project. Planting materials required for the watershedcomponent was provided largely by private producers. A very small quantity ofplanting materials from these nurseries were provided under the villageprojects. The quality of plant material produced by the nurseries and theperformance of the groups were poor and the impact on the project has beenmarginal.

Rural Roads and Bridges (JALTAN). The difficulty of the terrain,particularly in the rainy season, imply a significant impact from the provisionof roads under the project. Project impact would obviously be greater as andwhen the full potential of tlhe area is realized.

Subdistrict Project (PROKEC) and Village Project (PRODES). Differingprincipally in the operational modality in the channelling of funds, overallproject impact assessed th[rough these two indicators has been very positive.While the interventions supported provide a measure of the needs of the people,an equally important elemrent has been the establishment of a process thatresponds to the demands of the people. The institutional strengthening hasallowed agencies at the local level to formnulate operational plans and budgets,furthering the goal of decentralized development. Although initially intended tobe different, investments financed under Prokec and Prodes covered essentially

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the same set of activities for the same set of people. These activities covered awide range such as small village roads and bridges, small irrigation, watersupplies and sanitation, seedling distribution and cattle and goat distribution.Project impact has been significant and the enthusiasm generated has beentranslated into increased beneficiary contribution for the sub-projects.

Hamlet Revolving Funds (PRODUS). One of the most significant impact ofthe project has been the operation of the hamlet revolving funds. Theestablishment of a successful local level credit operation has the potential ofbeing the driving force of future development for the area. Given the nature ofthe distribution of activities financed through credit, it would be prudenthowever to recognize that sustainability for the future, with increasingparticipation of the people, will require increasing complementary investmentsin activities that implicitly increase market access and size, i.e. through theprovision of roads and markets aimed at linking other areas.

Lessons Learned

Technology

9. The technological basis for a conservation focused watershed based strategy for thedevelopment of upland areas has been shown to be partially successful. A watershed managementstrategy which includes run-off control and soil conservation and farm planning anddiversification can provide the elements for agricultural development in the upland areas.However, long run sustainability in agriculture for those areas can be achieved if changes in thecropping pattern also take place at the same time. Marginal changes which include improved cropmanagement and the introduction of some perennial fruit and multi-purpose tree species havebrought about increases in income. However, there is an acute need for the development of a croptechnology to support the physical technology developed under the project. The lack of success inthe development of crop technology indicates first, the need for a more concerted effort with amore direct involvement of both research and extension in the development of alternativecropping menus suitable for adoption by farmers, and second, while the development of more treecrops is a likely possibility, plant nursery material should be procured from private nurseries atthe local level rather than attempting to establish group nurseries.

Project Design

10. A conservation based strategy for the development of upland areas works best whenit is combined with efforts to provide social investment capital and increase off farm incomes.The support provided for village projects for common use such as water supplies, irrigation,roads, in combination with support for off-farm income generation through the provision of therevolving fund proved to be a critical element for project success. However, in so pursuing theobjectives, the project attempted a large number of approaches and activities resulting in acomplicated organizational structure. This runs counter to the requirement of simplicity in thedesign of rural development projects. Although project imnplementation despite the complexityproceeded reasonably well, this could reflect the particular situation of the province ofYogyakarta with its historical and educational background and may not be conducive for

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replicability in the other provinces in Indonesia. Local level (kecamatan and village) projects canand should, for instance, be integrated into one component.

II. While block financial allocations are attractive due to their flexibility and facility tobeing demand responsive, such as in the village and kecamatan projects, there is a tendencytowards an involvement in far too many, and often, disparate activities. Although some criteria inthe selection of activities were provided they were inadequate and not applied effectively. Thereis a critical need for establishing criteria and parameters for selecting project activities.

Supervision, Monitoring and Evaluation

12. The project benefited from a high degree of supervision and monitoring despiteseveral changes in responsible project staff (task manager) both at the World Bank and atBANGDA. The project has undertaken a large number of studies on various aspects related to theproject not all of which have been effectively translated into practice. Project monitoring has beenparticularly elaborate and commendable and considerable data have been collected. However, thedata has not been adequately analyzed. Project supervision has been systematic and consistent,recommending a number of evaluation of specific activities before deciding to curtail orstrengthen them. The focus on appraisal goals dominated supervision efforts. Attention tocomponent/activities impact would have revealed, early, the inadequacy and non-sustainability ofsome of the interventions (such as the nurseries and TDM) so that appropriate actions could betaken.

Operational Plan

13. The project closed on 31 December 1997. The mission was pleased to note that theGovernment had provided sufficient funds for the continuation of project activities to the end ofthe Indonesia financial year at the end of March 1998. This is an index of the importance andcommitment attached by the Government as well as the District and Provincial authorities. Thefinancing of operational activities beyond tlhe project will largely be carried out by projectbeneficiaries. Government support would be required only for the research component and themaintenance of roads established under the project. The proportion of funds required forsupporting maintenance/operational expenditures would be a small percentage of total resourcesavailable at the Provincial level for each Kabupaten. A commitment for such support has beenprovided both at the national, BANGDA, level and at the Provincial/District, BAPPEDA, levels.

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APPENDIX B

YOGYAKARTA UPLAND AREA DEVELOPMENT PROJECT

COMMENTS ON THE ICR REPORT

(Report No. 98/027 Cl?-INS)

In general we fully accept and very much appreciate with the report presentation, becausethe report has submitted a comprehensive understanding and evaluation concerning theessence of Project's success. And the fact that the findings and the evaluation results ofthe ICR Preparation Study done by Project (1997), in this case it's conducted byDirectorate General of Regional Development, has been well considered in this Bank'sreport.

2. This Bank's report had obviously noted that many Project's goals have been wellachieved and implemented, and some key lessons had learned, beside there are someactivities had not been carried out properly. The facts still should be given seriousattention.

3. As mentioned in the SAR that the Project would be a model of the kinds, and also as it isdescribed in the report para 34, the similar projects as regional/area development projectsare at status of on-going in Nusa Tenggara and Sulawesi, and three other regional projectsare under various stages of project's processing (preparation/appraisal/negotiations) inMaluku, Bengkulu and Kalimantan. It is remarkable important and for the benefit ofthose projects, if this Bank's report could also appraise more detail and specificconcerning the success factors of YUADP which could be adopted for a model in similarother projects in the provinces outside Yogyakarta. The appraisal is also important inpreparing project's guidelines which would be prepared by the Ministry/DirectorateGeneral of BANGDA.

IBD 22421

INDONESIAYOGYAKARTA UPLAND AREA DEVELOPMENT PROJECT

(BANGUN DESA II)

IM Project Area Elevations in, meters:

Landform Classes 2900

Isolsyets in mm/yr 10500

Railroads 200

Subdistrict IKecamatanl Boundlareis

District IKabapateal Boundaries La r,Classes:J A W A ~~~~~~~Province Boundaries

Woncsori Plaias (1 5% slope)\ T E N GAH 0 5I n1 20 Karst (Land of a thousand hills)_ _ _ _ _ _ _ _ _ _ _ _ _ ~~~~~~~~~~~~~>15% slope, internally drained

KILOMETERS ~~~~~~~Unstable Uplands (>1 5% slope)

)( Irrigated Rice Plains

Volcanic Sail Uplands1> 15% slope)

S Volcanic Soil Dryland

A,~~~~~~~~~~~~~~~~~~~~~mo

OCEAN D Ar (> QO •Dh I - >

WAM~~~~,z ASAI

;P, ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 0