world bank document...the districts would also play a major role in future implementation. further,...

Document ofThe World Bank

Report No: 18151-INDID-PE 36049

PROJECT A]PPRAISAL DOCUMENT

ONA

PROPOSED LOAN

IN THE AMOUNT OF US$ 21.5 MILLION

TO THE

REPUBLIC OF INDONESIA

FOR AN

EARLY CHILD DEVELOPMENT PROJECT

July 7, 1998

Education Sector UnitEast Asia and Pacific Region

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CURRENCY EQUIVALENTS

(Exchange Rate Designated for Negotiations June 24, 1998)

Currency Unit = Rqpiah (Rp)Rp 1 = US$0.0002

US$1.00 =Rp, 8,000

FISCAL YEARApril I - March 31

ABBREVIATIONS AND ACRONYMS

Bappeda I Provincial government's development planning agencyBappeda II District government's development planning agencyBappenas National development planning agencyBKB Bina Keluarga Balita or Parent-Child ProgramBKKBN National Family Planning Coordinating BqardCBO Community Based OrganizationsDikdas Directorate for primary education, MOECDiklusepora Directorate-general for out-of-school education, youth and sportsDinas Kesehatan Province and District Health agenciesDinas P dan K I Provincial government's education agencyDinas P dan K II District government's education agencyDinas PUK District government's public work's agencyECD Early Child DevelopmentIEC Information, Education and CommunicationKanwil (Depdikbud) Provincial office, MOECKandep Agama, Kandepag District religious affairs agency, MORAKandep or Kanin Dikbud District Education Agency, MOECLKMD Village development councilMOEC Ministrv of Education and CultureMOH Ministry of HealthMOHA Ministry of Home AffairsMORA Ministry of Religious AffairsPimpro Project ManagerPimbagpro Sub ProjectsManagerPosyandu Integrated Health Service Delivery PostSD Primary school, grades 1-6TK Taman Kanak-Kanak or KindergartenWFP World Food Program

Vice President: Jean-Michel'SeverinoCountry Director: Dennis de Tray

Sector Manager: Alan RubyTask Team Leader: Rozany Deen

IndonesiaEarly Child Development Project

CONTENTS

Page

A. Project Development Objective.........................................2B. Strategic Context .................................................... 2

1. Sector-related GAS goal supported by the project.......................22. Main sector issues and Government strategy...........................23. Sector issues to be addressed by i:he project and strategic choices .......... 4

C. Project Description Summary.........................................5

1. Project components..............................................52. Key policy and institutional reforms supported by the project............. 53. Benefits and target population.......................................54. Institutional and implementation arrangements ......................... 6

D. Project Rationale.....................................................8

1 . Project alternatives considered anid reasons for rejection................ 82. Major related projects financed by the Bank and/or

other development agencies........................................93. Lessons learned and reflected in lproject design.........................94. Indications of Borrower commitrnent and ownership .................... I115. Value added of Bank support in this project ........................... I11

E. Summary Project Analyses ............................................ 12

1 . Economic....................................................... 122. Financial........................................................ 123. Technical ....................................................... 124. Institutional ..................................................... 125. Social.......................................................... 136. Environmental assessment .......................................... 137. Participatory approach ............................................. 13

F. Suistainability and Risks................................................14

1. Sustainability .................................................. 142. Critical risks...................................................... 143. Possible controversial aspects ......................... I..............15

G. Main Loan Conditions ............................................................... 15

1. Effectiveness conditions .......................................................... 152. Others .......................................................... 15

H. Readiness for Implementation ............................................................... 16

I. Compliance with Bank Policies ............................................................... 16

Annexes

1 Project Design Summary .172 Detailed Project Description .......................................................... 203 Estimated Project Costs .......................................................... 284 Economic Analysis .......................................................... 295 Fiscal Analysis .......................................................... 446 Procurement, Disbursement and Financial Management Arrangements .......... ........ 47

Table A. Project Costs by Procurement Arrangements ............. ............... 48Table Al. Consultant Selection Arrangements ........................ .................. 50Table B. Thresholds for Procurement Methods and Prior Review .......... 51Table C. Allocation of Loan Proceeds ..................................................... 51

7 Project Processing Budget and Schedule .......................................................... 628 Documents in Project File .......................................................... 639 Statement of Loans and Credits ................... ....................................... 6510 Indonesia at a Glance .......................................................... 67

Map No. IBRD 29613

I

IndonesiaEarly Child Development Project

Project Appraiisal Document

East Asia and ]?acific RegionEducation 'Sector Unit

Date: July 7, 1998 Task Team Leader: Rozany DeenCountry Director: Dennis De Tray Sector Manager: Alan RubyProject ID: ID-PE-36049 Sector: Education Program Objective Category: PA, IDLending Instrument: SIL Program of Targeted Intervention: [X] Yes [ ] No

Project Financing Data [x] Loan [] Credit [ Guarantee [] Other [Specify]

For Loans/Credits/Others:

Amount (US$m/SDRm):US$21.5 millionProposed terms: [ Multicurrency [x] Single currency, specify

Grace period (years): 3 [] Standard Variable [x] Fixed [ LIBOR-basedYears to maturity: 15Commitment fee: 0.75%

Service charge: 0 %

Financing plan (US$m):Source Local Foreign TotalGovernment 3.9 0.1 4.0CofinanciersIBRD 19.3 2.2 21.5IDAOther (specify)

Total 23.2 2.3 25.5

Borrower: Republic of IndonesiaGuarantor:Responsible agency(ies): Ministry of Education and Culture (MOEC)

Estimated disbursements (Bank FY/US$M): 1999 2000 2001 2002 2003 2004Annual 1.1 9.4 8.2 2.0 0.6 0.2

Cumulative 1.1 10.5 18.7 20.7 21.3 21.5

Project implementation period: 6 years; Expected effectiveness date: November, 1998; Expected closing date: 3/31/2005

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A: Project Development Objective

1. Project development objective and key performance indicators (see Annex 1):

The project development objectives are to support the short and long-term early child development(ECD) needs of poor children between the ages of 0-6 in selected provinces in Indonesia. The projectwould ensure the provision of services to meet the health, nutrition and cognitive stimulation needs ofthese young children. An immediate and short-term response to the present economic crisis is theprovision of emergency complementary food to protect 6-24 month old infants against the debilitatingeffects of malnutrition, and its impact on their future cognitive, physical and social development. Thelonger-term interventions will increase access, quality and utilization of ECD programs targeted at thesepoor children. Special emphasis will be placed on early child education and improving their schoolreadiness skills, so they would benefit from GOI's strategies for improving the quality of basic education.A project extemality is the provision of enhanced employment opportunities to poor households throughvillage based construction activities.

B: Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1):

CAS document number: 1661-IND. Date of latest CAS discussion: July 10, 1997

The project will contribute to four major CAS objectives: poverty reduction, efficient delivery ofbasic services, participation in development planning and implementation and decentralization.

The most vulnerable groups in the current economic crisis are infants and young children frompoor families. The project, thus, supports an emergency feeding program targeted at infants from thesefamilies, particularly in IDT villagesl or villages "left-behind". It also ensures the more efficientdelivery of two major ECD activities by: i) integrating the village health post (Posyandu) and parent-childeducation (BKB)2 program; and ii) supporting kindergartens (TKs) with intensified health/nutritioninterventions, all focused on the same poor villages. The planning process for the project has beenbottom-up with substantial involvement of district staff in the preparation of proposals for funding, andthe districts would also play a major role in future implementation. Further, although institutionalcapacity at all levels (central, provincial and district) will be strengthened, particular focus would be onthe district level, to ensure the effective and decentralized delivery of the above ECD services. Theproject will cover 12 districts in 3 provinces - West Java, South Sulawesi and Bali.

2. Main sector issues and Government strategy:

The present economic crisis has resulted in diminishing purchasing power of households,particularly those in the rural areas. One of the groups most affected by the loss of household incomewould be infants, who would be deprived of essential nutrients as a result of the inability of the family topurchase food. Although adults can recover from transitory losses in terms of body weight, the ravagesof malnutrition in a young infant are irreversible especially during the peak phase of their growth andbrain development. Malnutrition in young children is already a major health problem in Indonesia withthe percent of young children under five who suffer from Protein Energy Malnutrition (PEM) estimated

' IDT or Inpres Desa Tertinggal is the terminology used for villages that conform to a poverty profile.2 The Posyandu provides promotive and preventive health and nutrition interventions while the BKB is intended as a cognitivedevelopment program directed to mothers of young children. The programs are community-based, and carried out by volunteercadres under the technical supervision of staff from the Ministry of Health (MOH) and National Family Planning CoordinatingBoard (BKKBN).

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at about 36.1%.3 - 40%4. Failure to protect this age group during the current crisis period, particularlythrough short-term support, may result in irreparable damage to their future development.

In response to this concern, GOI has requested assistance from the donor community to providefunding for a emergency food program that targets children between 6 -24 months. This has resulted in anational program that is now supported by UN].CEF, the Asian Development Bank, the Government ofJapan and the World Food Program.

Much remains to be done for poor and disadvantaged children for the longer-term as well. Manyof the long-term issues were identified in a national study on ECD5 which assessed the growth anddevelopment status of Indonesian children, but with special emphasis on early child education issues.The study noted the following:

Access to ECD services is low, particularly for the cognitive stimulation or early child educationprograms (BKB, TKs, day-care and play-groups). Consequently, there are growing disparities in school-readiness of children along income-lines. Only 16% of the children in the study sample reportedattending any form ofpre-schoolprograms and only 6% of households reported using BKBs. The onlyexception in the study was the Posyandus, where primary health care interventions and services areprovided free of charge. 89% of all households reported using Posyandus6. The study also indicated thatthe enrollment gap between poor and non-poor- children is large, and that demand in the highest incomequartile for TKs is double that of demand in the lowest quartile.

Lack of facilities, equipment and literacy materials (picture books, toys, stories, writing materialsand paper). The latter were particularly scarce in the early child education facilities with few exceptions(urban areas where there were expensive and i-ully equipped facilities). A rapid assessment of existingTKs in selected project districts showed that 90% had only the very basic requirements, and neededadditional equipment and material. Traditional educational toys of the community and books in the locallanguage which would be better for many children are rare. Equipment and materials in the Posyandus inthe sample were not as scarce, but were also insufficient for the effective delivery of services.

Pre- and in-service training programs are inadequate for both teachers and cadres. The ECDstudy found that many of the TK teachers required upgrading to a higher level of qualifications. Thestudy also found that inadequate training, discouragement, and boredom were evident in the Posyanduand BKB programs. Other studies suggest high-drop out rates from the programs. For example, Satoto(1992), found that 20-40% of BKB cadres dropped-out after the first year and another 10-30% wereinactive.

Lack of integrated ECD programs, although there exists a very strong relationship betweenchildren's health and nutrition and their cognitive development. Using a number of health and nutritionindicators (e.g. nutritional status measured by body weight, height and mid-arm circumference), the ECDstudy established that children's scores on performance tests are significantly influenced by their healthand nutritional status.

Lack of policies, and management and institutional capacity for integrated ECD. Currently, thereexists multiple policies for health, nutrition and early child education that allows for tremendous overlapof responsibilities among various agencies. It) addition, there is a also lack of necessary management and

3 National Health Household Survey, 1995, WHO/NCIS standard.4 Average for the period 1990-96, World Bank 1996.5 "Early Childhood Development Programs in Indonesia" Draft, July 1997.6 However, it should be noted that estimates of immunization coverage, much of which is said to occur through the Posyandu, islower (60%) than the participation rates and child weighing activities at the Posyandu are not very effective.

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institutional capacity for providing integrated ECD services. Although GOI has had considerableexperience in the health and nutrition sector, it has no previous experience in delivering ECD activitiesthat are closely coordinated and mutually reinforcing.

GOI has began to strengthen its approach to ECD beginning with the inclusion of a statement inthe GBHN (Basic Guidelines of State Policy), and a chapter for the next five year plan period - RepelitaVII (1998/99 to 2003/4) 7 supporting the development of an integrated policy framework for ECD. GOI'smore active support is anticipated to result in improvements, particularly greater coordination in theprovision of health, nutrition and early child education services, and further improvements in ECDservice delivery, including increased support for early child education. In line with Government's strategyfor poverty reduction many of the above improvements, particularly in the provision of ECD services,would begin to be implemented in the IDT villages.

3. Sector issues to be addressed by the project and strategic choices:

The project supports GOI's efforts to address several of the issues above, through:

Emergency Complementary Food as a short-term measure. To prevent child malnutrition andmortality, the project would provide an industrially produced, micronutrient fortified complementary(weaning) food through the Posyandu. The complementary feeding would ensure that adequate energy,protein and supplemental nutrients are added to infants' diets, to ensure their growth and development,after the initial six month period of exclusive breastfeeding. The program would be implemented in theproject districts for two years using targeting mechanisms such as the prevalence of underweight childrenat Posyandu weighings. Maximum flexibility would be provided to expand coverage, if funding isavailable, and it is estimated that between 249-346,000 infants could benefit from the program. Measureshave been proposed to prevent secondary markets, and detailed procedures to monitor inputs, processesand outcomes have been developed by UNICEF, which would be further strengthened under the project.

Improved access to ECD services for poor children. Funding would be directed at districts withespecially high concentrations of IDT villages and low service coverage (both in urban and rural areas).The project would support the construction and rehabilitation of facilities consisting of small multi-purpose ECD centers and TKs. The major construction activity would be building about 230 TKs in thethree project provinces, and rehabilitating an additional 110 existing TKs. This expansion in coveragewould benefit at least 44% of pre-school age children in the project districts. Small multi-purpose ECDcenters would also be constructed to support the Posyandu/BKB activities.

Provision of equipment and literacy materials. Educational materials would be provided toaugment existing programs. This would include, inter alia, learning modules, teaching guides,appropriate educational books and toys, and growth development and growth monitoring charts. All newfacilities built under the project will be fully equipped to ensure the delivery of quality ECD services.

Expansion and improved teacher and cadre training. The project specifically promotes thedevelopment of improved training methods and curricula in existing programs. In addition, the projectpromotes the development of enhanced pre- and in-service training; the latter using distance learningmethods as well as conventional ones. The project would support the upgrading of about 1255 existingTK teachers to DII-TK. In addition, the project would support the training to DII-TK and hire up to 460teachers, with three-year contracts, in order to ensure that the newly constructed TKs will have teachingstaff. Efforts are being made to rationalize and make more cost-effective the training for Posyandu andBKB cadre by supporting the integration of activities. More effective training to improve technical skillsof BKB cadre, who have not received any training for at least 10 years would be provided.

7 This was a result of the recommendations from the national ECD study.

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Support for integrated ECD programs. The Repelita VII policies under formulation support a moreholistic approach to ECD. The project will support interventions that are focused on early child educationand some health and nutrition activities as specified by the district proposals and based on a menu ofECD activities. The districts will identify their priorities for ECD services and request funding forprograms that support that area. Efforts would be made to provide integrated services e.g., the contractingof health workers for the provision of health services in kindergartens.

Focused policies, and enhanced management and institutional capacity for the convergence ofECD services. To address the former, the project includes a policy framework component whichfinances the assessment of current policies in the light of the new programs being introduced under theproject. With regard to the latter, there is a large institutional capacity building component in the projectto develop the capacity of the central, provincial and local governments in undertaking the project.Emphasis is being placed on improving the planning, management, supervision, community consultationand monitoring and evaluation of project progress.

Linkages between the short- and long-term issues. Although the feeding program is a short-termmeasure, there are linkages between the two sets of issues. The infant food would be provided throughthe Posyandu and it is expected that this would further increase Posyandu attendance, which is beingsupported under the project. Further, nutrition education messages that are provided through thePosyandu would reinforce the importance of improved feeding practices, as a long term sustainablestrategy. In addition, by preventing PEM, the infants' capacity for learning and their mental and cognitivedevelopment will not be impaired, and they could benefit from future project support for early childeducation interventions.

C: Project Description Summary

1. Project components (see Annex 2for a detailed description and Annex 3for a detailed costbreakdown):

Component Category Cost Incl. % of Bank- % ofContingencies Total financing Bank-

I(US$M) (US$M) financingECD Program Support Investments 22.7 89 18.9 83.3

Policy

ECD Management Capacity Institutional 2.8 11 2.6 92.8Building Building

Total 25.5 100 21.5 84.42. Key policy and institutional reforms supported by the project:

The project would encompass key policy and institutional development reforms. This wouldinclude i) the development of an integrated policy framework for ECD; ii) the gradual decentralizationof the management and implementation of cornprehensive ECD programs and services to the districts;and iii) the rationalization of existing ECD services, including the introduction of cost-effectivenessmeasures.

3. Benefits and target population:Project Benefits* Prevent the effects of malnutrition, resulting from the economic crisis, in infants 6-24 months

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* Increased enrollments in early child education programs, with consequent reduced late-entry, graderepetition and drop-out from primary schools

* Increased school readiness of children, which is broadly defined to include cognitive, motor and psycho-social skills

* Increased number of children attending Posyandus resulting in improved health status e.g. improvedimmunization rates

* Improved parenting and care-giver skills for child development* Enhanced management capacity of district and provincial government agencies to plan, implement and

monitor integrated ECD activities

The short- term interventions would largely be preventive. The longer- term ECD interventions wouldlead to improved schooling efficiency through a long causal chain that links early child development and laterproductivity in life which translates into higher economic benefits accrued to both households and thegovernment. ECD programs affect a child's early ability, which in turn affects later ability, educational andoccupational attainment. All of this affects adult productivity and, therefore, wages. There is a growing bodyof evidence to support this link, for example the High/Scope Perry Schooling Study. Preliminary estimates forIndonesia indicate internal rates of return of 15% (for a 30 year time horizon) for two years of kindergarten forchildren of low income families.8

Target Population:* Infants 6-24 months old affected by the current economic problems* Other economically disadvantaged children between the ages 0 and 6 (largely from IDT villages)• Parents of economically disadvantaged children between the ages 0 and 6 (largely from IDT

villages)* Community-based ECD workers in selected provincesi Government officials and agencies involved in ECD

4. Institutional and implementation arrangements:

Implementation Period: 6 years.

Geographical Coverage: The project will cover three provinces: South Sulawesi, West Java, and Bali,and twelve districts in these provinces. The provinces were selected for the ECD study and, subsequently, theproject, to illustrate the variety of ECD experiences in Indonesia, and the districts predominantly on the basisof the incidence of poverty, both rural and urban. The emergency food support would cover all twelve projectdistricts immediately. The other ECD activities would have a phased implementation approach. In the firstyear, implementation will occur in two districts in each province based on district proposals. Gradually, as theknowledge base on integrated ECD service delivery increases, implementation will be expanded to twoadditional districts in the provinces.

Executing Agencies: DIKLUSEPORA in MOEC has been nominated by GOI as the lead agency.However, given the need for interagency coordination, intersectoral teams and local government are essentialfor project implementation. Initially it is expected that there will be a heavy emphasis placed on the role of thecenter for technical guidance, because of the "newness" of the integrated approach to ECD in Indonesia. Whilethe main concepts, policies and regulations are in place, there remains a lack of implementation experience atthe provincial and district levels which requires adequate central guidance and technical assistance.

8This is based on the following assumptions: two years of kindergarten costs Rp.400,000; poor children have grade repetition rates twicethe average of the population as a whole; and the kindergarten program reduces grade repetition rates by 50% and decreases drop-out ratesby 20% for primary and junior secondary. It is also assumed that as a result of increased educational attainment, earnings increases by40% of the average earnings of primary school graduates after age 18 (Barnett, W. S. draft chapter for the Indonesia ECD study, 1997).

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The organizational structure (described below) for implementing this project has been determined by themain agencies: MOEC, MOH, BKKBN, MOHA and MORA and the province and district governments. It isbeing reflected in a joint Director-Generals' Decree (SKB).

Central level:

An ECD Central Steering Committee (CSC), chaired by BAPPENAS, and consisting of members from allconcerned agencies involved in ECD: MOEC (DIKLUSEPORA and DIKDAS), MOH, BKKBN, MOHA andMORA and other stakeholders would continue to provide policy leadership and be the main advisory body forthe proposed ECD project. It will also be respon,sible for the future development of the national ECD Program.It would formulate and revise national policies to be included in Repelita VIII, based on the findings andlessons learnt from the project.

A Central Project Management Unit (CPMV) established at DIKLUSEPORA, headed by the Director ofDikmas as a project coordinator, and consisting Df members from all concerned agencies involved in ECD,including a project manager (Pimpro) and sub-piroject managers (Pimbagpros).The CPMU would beresponsible for coordinating the activities relating to the development of the policy framework and other centrallevel activities. It would also coordinate provincial activities which includes the district components andconsolidate them into the national annual ECD work plans. The Pimbagpro from DEPKES, who would beresponsible for the nutrition component, would report to the CPMU.

Provincial level:

At the provincial level, a Provincial ECD C'oordination Committee (PCC) would be chaired by the Headof Bappeda, with similar intersectoral representation as the CSC above, including the Bappeda and DinasP&K (Level I) and Dinas Kesehatan (Level I). The PCC will consolidate the district proposals, andcoordinate them with the provincial activities and be responsible for the provincial plan to be submitted to theCSC through the Director General DIKLUSEPORA.

A Provincial Project Management and Implementation Unit (PPMIU) would be established at the KanwilDepdikbud (MOEC). The PPMIU will be headed by a project manager, and would be supported by education,planning, procurement and accounting services and staff of the provincial office. The unit would beresponsible for the provincial level activities. The unit would be supported by consultants and staff from theproject agencies and would: (i) provide assistance to the district in areas such as construction, IEC, training,procurement, and monitoring and evaluation; and (ii) evaluate district performance against agreed criteria. Theunit will also carry out regular reviews at the district level, including reviews of procurement and disbursement.

District:

The Bupati/Walikota (head of district/ city) will be accountable for implementing the district's ECDprogram, which would comprise the bulk of the ECD activities. At the district level, the Bupati will select aninter-sectoral District ECD Coordination Committee (DCC), with similar intersectoral representation as theCSC above, including the Bappeda and Dinas ]'&K (Level II). The DCC would be chaired by the Head ofBappeda Tk. II. It would be responsible for the district proposal, including project planning, budgeting,implementation, monitoring, and reporting at the district level.

Two Project Management and Implementation Units (PMIUs) will be established at the Dinas P dan K II,and district health office (Dinas Kesehatan II) respectively. Each PMIU, headed by a Pimbagpro, will beresponsible for procurement, disbursements, and accounting for the activities assigned to the district agencyconcerned. Funds for other local government offices will be provided as "tolok ukur" ( appropriated budgetallocations) as part of the DIP budget of Dinas P dan K 11.

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Implementation Arrangements

Implementation of the emergency food support would be based on targeting mechanisms, procurementprocesses to minimize transaction costs and detailed monitoring based on community surveillance systems.Implementation of the other ECD activities would be based on: (i) Planning and Budgeting (six-year rollingprograms and annual work-plans) at all levels (district, province, center). The major activities(Posyandu/BKB/TK) would be at the district level and would be coordinated by Bappeda II, among theparticipating agencies. An integrated annual district work-plan, reflecting the priorities of the district andincorporating the planned activities of each of the agencies, would be developed and submitted to the provinceunder the signature (responsibility and accountability) of the Bupati/Walikota. This would include: theidentification of district issues in ECD in comparison with national/provincial standards (e.g. drop-out andrepetition rates in grades I and 2 and attendance rates at BKBs and Posyandus); acceptable strategic districtproposals based on the menu of ECD activities provided, detailed funding requirements, and implementationplans and schedules for the year. This would be incorporated with the provincial activities (including mainlytraining, IEC and monitoring and evaluation) into the provincial proposal. The central level, would be largelyresponsible for activities relating to the policy framework and quality aspects which would include : revisionsin training curricula; preparation of the national IEC strategy and programs; training of trainers; and designingthe monitoring and evaluation activities. They would also be responsible for the major impact evaluation studyfor measuring project outcomes; (ii) Implementation would be undertaken at all levels by each agency, inaccordance with its responsibilities under the integrated annual work-plans. Funds would flow from nationaland local sources directly to the agencies concerned; (iii) Monitoring and reporting will be coordinated byBappeda II, Bappeda I and DIKLUSEPORA.

A computer program and project manual to illustrate and formulate district based proposals has beendesigned and was used to develop the initial district proposals. Geographical Information System (GIS) mapswill also be used to identify the target areas, sites for proposed facilities and for continuous monitoring ofimplementation.

Accounting, financial reporting and auditing arrangements [See Annex 6]

D: Project Rationale

1. Project alternatives considered and reasons for rejection:

Centralized vs. decentralized approach. A centralized approach was initially considered given boththe limited GOI experience in a holistic approach to ECD, as well as the small numbers of early childeducation programs. It was felt that the need for central guidance and technical assistance in the initialstages of the development of the program, including national awareness campaigns, may have justifiedsuch an approach. However, centrally directed programs have not been sufficiently responsive to localneeds and the need for community participation and involvement in ECD programs is vital. Thus, theproject supports a strong decentralized focus with a few key activities.

Early child education focus only. Given the low levels of understanding of the importance ofcognitive and psycho-social stimulation for a child's development, and the lack of access, utilization anddemand for such programs, a project alternative for consideration was a program only emphasizing earlychild education such as the Initial Education Program in Mexico. This alternative was rejected because ofthe importance of promoting a concept of ECD that incorporates health and nutrition interventions sincemany issues still remain in the child survival programs. The inclusion of the emergency nutritioncomponent has also strengthened the rationale for the rejection of a single-focus approach . In addition,such an approach would make it more difficult to promote integrated service delivery in the future.

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Health and Nutrition focus only. This alternative was rejected given the substantial assistance thehealth sector has received from the Bank and other donors over the years. Although many problems stillexist in providing adequate services and coverage for children in these areas, awareness, accessutilization and financial support is much higher for health and nutrition interventions than for early childeducation programs.

Coverage for children 0-8 years. The ECD study sample covered children 0-8 years since the periodbetween ages 7-8, when a child enters primary school, is also considered as a challenging transition for achild. However, it was decided to limit the support for ECD programs to children 0-6 years since, by law,children are expected to begin primary school by age 7. Further, since the proposed ADB supported ECDprogram provides for an "ECD enriched" curriculum for Grades 1 and 2 in primary schools, additionalBank support in this area is not envisaged.

2. Major related projects financed by the Bank and/or other development agencies (completed,ongoing and planned):

Latest Supervision (Form 590 Ratings)(Bank-financed projects only)

Sector Issue Projeci Implementation DevelopmentProgress (IP) Objective (DO)

Bank FinancedImproving community health Third Community Health andand nutrition interventions in Nutrition Project (Loan 3550-IND) S Sselected provincesTargeted programs for poor Water Supply and Sanitation forvillages for safe water supply Low Income Communities S Sand sanitation (Loan 3629-IND)Decentralized programs for Health III (Loan 3204-IND) S HSimproved health statusQuality assurance and health Health IV (Loan 390.5-IND) S SfinancingReductions in prevalence of Intensified Iodine Deficiencyiodine deficiency Control Project (Loan 4125-IND) S SDecrease maternal mortality Safe Motherhood Project S S

(Loan 4207-IND)Provision of quality inputs Primary Education Qualityinto primary schools Improvement Projecl: (Loan 3448- S S

IND)Improving access to Book and Reading Developmenttextbooks Project (Loan 3887-IND) S SAccess to basic education West Java Basic Educationand strengthen capacity (Loan 4038 -IND) N/A N/AOther Development AgenciesIn 1997, the ADB financed a Family Health and Nutrition Project.UNICEF in 1987 initiated the parent-child program 13KB (BinaKeluarge Balita).IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)Note: The economic crisis and the consequent lack of counterpart funds for implementation may have an adverseeffect on the above ratings in the future.

3. Lessons learned and reflected in the project design:

The key benefits of ECD are improved health and nutrition status; cognitive and psycho-socialdevelopment; higher enrollments and reduced repetition and drop-outs from primary schools. InIndonesia, the experience to date has been predominantly in the areas of health and nutrition, as in many

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other countries e.g. Kenya and India (Integrated Child Health). There is limited experience in early childeducation. Thus, lessons learned for the project include those from the health sector (15 projects in total)and other international experience (Colombia, Mexico, Turkey and Israel for example) that also providesome clear lessons for project design.

Lesson from International Experience:

Improved health and nutrition status and cognitive development as a result of participating in ECDprograms. The former is evident from the Integrated Child Development Service program, a community-based program in India which successfully reduced infant mortality, malnutrition, morbidity and schoolrepetition outcomes among 11.6 million children between the ages of 0-6 by providing an integratedpackage of health and nutrition interventions (feeding, distribution of Vitamin A and growth monitoring)(Tandon 1986, Hong 1989). The latter is illustrated in that children who participated in Colombia's Caliproject and Peru's Programa No Formal de Educacion Inicial scored higher, on average, on intellectualaptitude tests than did non-participants.

The poor and disadvantaged are the main beneficiaries of interventions in ECD so they should betargeted for the greatest impact. In Argentina,36% of rural children from low socio-economicbackgrounds repeated grades if they had preschool experience, compared to 77% for those without(Myers 1995). In India's Haryana project, for instance, dropout rates did not change significantly forchildren from the higher caste but fell a dramatic 46 percent for the lower caste (Chaturvedi et al 1987).

Early child education complemented by parental training programs improves the capacity ofparents and other child-care givers to provide a simulating environment at home and enhances the impactof early child education programs. A study of the Turkish Early Enrichment Program indicates that ofthree different models (educational day-care, custodial day-care and home-care groups) the largestimprovements in cognitive measures of school adjustment and achievements were found among childrenwho benefited from attending educational day-care and whose mother's had received training. Zuloagaand Winkler (1982) show that parental involvement in a Peruvian preschool program for 4 and 5 yearolds strengthened the positive impact of early child education.

The Lessons from Bank experience:

Program flexibility and local specificity increases impact. Both GOI and the donor communityhave found that imposing uniform standards in Indonesia has not been very successful. The diversity ofthe Indonesian culture calls for more local or province specific interventions that appeal to different targetaudiences and present them with messages that they can understand. Cultural diversity also impliesdifferences in parenting styles among various groups that need to be incorporated into project design.Flexible project designs are particularly helpful for decentralization.

The need for demand and supply-side interventions for greater effectiveness. Lessons from otherBank projects indicate that supply-side interventions alone do not suffice. The supply of infrastructure ortrained personal in themselves are insufficient to generate interest when introducing new ideas andconcepts into society. There is a proven need for demand interventions that help increase awareness andinterest among parents and other community members. In addition, special attention has to be given tothe communication skills of the trainers and their ability to effectively communicate with parents andchildren in the village.

Strong local government management, planning and technical capabilities are key fordecentralization. A comprehensive program to strengthen the managerial, planning and implementationcapabilities of the decentralized agencies is key. As local government agencies at the district level

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assume increased responsibilities in these areas, it is necessary that their capabilities are assessed andneeds are adequately realized during implementation or before.

Program design features that reflect lessons learned are as follows:

* program interventions in the project consists of supply-side interventions complemented by strongdemand-side interventions. Besides the nutrition component, which is very time specific, supply-sideinterventions include activities such as training, ECD program enhancement at the district level (civilworks, the provision of educational toys, children's book and materials, and teacher and care-giverrecruitment) while on the demand-side activiities are focused on the development of a national andlocal IEC campaigns.

* the project supports local governments so that they will take the lead in ECD program design andimplementation according to the needs in their district. In addition, the current structure of programdesign allows and encourages local government to adapt a generic model (as specified in the menu ofactivities) to local conditions.

* the menu of activities will include educational programs for children complemented by parentalclasses (BKB).

e institutional capacity building at all levels is one of key components in the project. Activities willfocus on strengthening the capacity of the central government to provide adequate technicalassistance. Staff from the local governments will participate in training workshops that will enhancetheir ability to manage, plan and design ECD programs. In addition, the project will also financeworkshops to be held annually for information-sharing of their implementation experiences amongdistricts.

4. Indications of Borrower commitment and ownership:

The Borrower's commitment and ownership is visible in that:

* GOI has already asked a number of donors including UNICEF, ADB and WFP for emergencysupport to protect vulnerable groups from the effects of the crisis;

* GOI has already undertaken and completed a comprehensive study of ECD, supervised byDIKLUSEPORA, examining several issues, namely: (a) the growth and developmental status ofchildren, with particular emphasis on early child education; (b) existing government policiesconcerning ECD; and (c) public and private ECD programs currently available;

* the study recommendations have been accepted as the basis for formulation of Repelita VII, policiesand agreed as the basis for the Bank's as well as other donor financed projects; and

* a menu of ECD activities for program development, proposal guidelines and appraisal criteria wasdeveloped as part of project preparation and utilized for project preparation.

5. Value added of Bank support in this project:

As part of a larger effort for the prevention of malnutrition among poor children during this crisisperiod, Bank funds will augment GOI's ability to provide coverage to a larger constituency of needychildren. In addition, with a long history of Bank lending in the education, health and nutrition sector andits credibility with BAPPENAS, MOEC, MOH, BKKBN and MOHA and MORA, the Bank is wellsituated to carry on a dialogue to initiate the development of ECD in Indonesia. The Bank hascontributed to the development of this sector especially given its current involvement in the recent ECDstudy financed under the Japanese Grant Fund. The main contributions include its ability to:

* incorporate lessons learned from other Bank projects in the education, health and nutrition sector andother international experience;

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* draw upon a pool of technical expertise among Bank staff to provide GOI with advice to beincorporated into project design so as to maximize the impact of the project;

* provide GOI with the necessary technical assistance to assist with the formulation of policy, addressprogram design and implementation issues at the various administrative levels taking intoconsideration the demand and supply side issues that need to be addressed; and

* provide funding at a critical time.

It should be noted that UNICEF has also provided substantial support in the development of theECD project, particularly in helping formulate the rapid response nutrition component.

E: Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)

1. Economic (see Annex 4 for afull discussion):

[X] Cost Effectiveness and Cost-Benefit Analyses: The nutrition intervention, when compared to similarcomponents in other developing countries is cost-effective, and the project introduces severalconstruction alternatives that have the potential to result in savings ranging between Rp. 46 million to Rp.79 million per unit built. The cost-benefit analysis focused on determining an internal rate of return forthe two year TK intervention and, even on conservative assumptions, estimated internal rates of returnrange between 13 percent to 15 percent.[X ] Other Analyses: Linkage to CAS and ESW, and demand for and supply of ECD services.

2. Financial: (See Annex 5)

3. Technical:

The technical interventions in child health, nutrition and early education that are to be supportedunder the project are all activities that have been tried and tested in Indonesia. The child health andnutrition programs, in particular, have made significant contributions to decreasing infant and childmortality and morbidity, although the early child education programs have been less successful. Currentdeficiencies in the latter interventions are largely attributable to a lack of adequate funding, but also lackof technical expertise and capabilities. Technical innovations such as simplifying curriculum (BKB);possibilities for greater integration of services (Posyandu/BKB), and cost-effectiveness measures(rationalization of kindergarten designs) to overcome these deficiencies will be piloted under the project,as well as training strategies developed to overcome skill gaps.

4. Institutional:

a. Executing agencies: Although this is a multi-sector, multi-agency (sector and regionalgovernment) project, individual agencies such as MOEC, MOH and BKKBN have long experience withimplementing Bank projects. However, inter-agency cooperation and collaboration, which is key for theprovision of integrated ECD services, is weak. Additionally, the district level capacity for implementingthe major portion of the activities needs improvement. The project interventions for coordination (below),training and technical assistance are designed to provide the needed inputs.

b. Project management: An effective project management structure which balancescoordination with efficiency is essential. Coordination would be achieved through the establishment ofECD Coordination Committees at each level, who will be responsible for the six-year rolling programsand integrated annual work -plans and for continuous monitoring of project progress and outcomes.Efficiency is to be achieved by establishing strong project management and implementation units, withthe key responsibility for overall implementation assigned to one agency (MOEC), with clearly definedroles and budgets for the other agencies in the integrated annual work-plans.

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5. Social:

Poverty

Recent research in education in Indonesia. clearly shows that problems of grade repetition, late-entry and drop-outs occur predominantly among the poor. Thus, the most significant factor influencingschooling inefficiencies is poverty. In addition, health studies also indicate that health and nutritionaldisparities exist between poor and non-poor children. A recent study has estimated that the prevalence ofmalnutrition is 38% in children in rural areas as against 27% in urban areas in 1992 ( Saadah et al.,1996). In addition, the national ECD study shows that currently the poor have limited access to most ofthe existing ECD services, particularly those for early child education. Clearly the poor are the mostdisadvantaged and programs that target this grou,p yield the highest benefits. During project preparation,extensive consultations were carried out with the staff of all ministries involved to ensure that districtswith a high concentration of IDT villages would be chosen as project sites.

Gender

In general, parental education programs including the BKB program focused on the role of themother as the main caregiver neglecting the father's role in child development. Parental classesdeveloped under the project will encourage the participation of the father and other family members. Thefocus on creating a nurturing family environment necessitates that the role of the father and all other care-givers be actively integrated into the parental eclucation program. The needs of working mothers forchild-care especially those in poor urban areas will be considered under the project as a researchinitiative.

6. Environmental assessment: Environmental Category: C The project does not have anysignificant environmental effects.

7. Participatory approach:

At the time of identification, plans were made for a participatory process of consultation designedto feed into program/project preparation. The prDcess involved consultation with beneficiaries,communities and all levels of government, but with particular emphasis on district governments. Thedistrict proposals, were predominantly "bottom-up", and involved continuous discussion and feedbackwith the relevant district officials. Activities being supported such as the Posyandu/BKB are largelycommunity-based. A further phase of consultation with beneficiaries to present and promote the finalproject and have them participate in its implementation is scheduled to take place at the project launchworkshops. During implementation, participatory elements also include the involvement of the localdevelopment council (LKMD), who will be largely responsible for the construction, rehabilitation andmaintenance of project facilities.

a. Primary beneficiaries and other affected groups:

The project would primarily benefit aboult 1.2 million children in the twelve districts in the threeproject provinces. The special emergency support would be targeted to very young children in thesedistricts (estimated at about 249,000 out of the total), but also provide flexibility for wider coverage in theprovinces. The project would also benefit teachers, care-givers and parents of these children, who wouldbe provided with training and/or improved knowledge on a child's growth and development needs. Theofficials of all concerned agencies would benefit from the capacity-building activities of the project.Finally, the district and village would benefit through the employment and income generation activitiescreated by the project e.g. construction of ECD facilities.

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b. Other key stakeholders:

Participatory Approach Preparation Implementation OperationBeneficiaries/community groups COL COL COL

Intermediary NGOs COL TBD TBDAcademic institutions CON COL COL

Local government COL COL COLOther donors COL/IS COL/IS COL/IS

Collaboration (COL); Consultation (CON); Information Sharing (IS).

F: Sustainability and Risks

1. Sustainability:

Institutional Sustainability. Long-term sustainability is being assured by strengthening the ability.of districts to effectively plan, design and implement integrated ECD programs, and by increasingawareness among parents, child-care providers, policy-makers and local govemments of theirimportance. This would be achieved through: i) the development of a sound policy framework for anintegrated approach to ECD; ii) a phased approach to the actual integration of services to allow for thenecessary attitudinal and behavioral changes and the accumulation of implementation experience; iii)significant institutional strengthening at all levels; and iv) local government's commitment by assigningthem responsibility and accountability for the programs. Although the emergency food support is a short-termn measure, it is hoped that as a result of both Bank and other donor support, improvingcomplementary feeding of infants would, in the future, be part of a multi-faceted long-term strategy toreduce infection, improve caring practices and increase the effectiveness of PEM reduction in pre-schoolchildren.

Financial Sustainability. Measures taken to ensure that local governments are able to financerecurrent costs in the future are: i) the adoption of affordable and cost-effective programs; and ii)increased budgetary allocations from all levels, with contributions from local budgetary resourcesexpected to increase over time. It is expected that the current economic crisis may have an immediateimpact on budget allocations and this is being minimized through a higher percentage of Bank cost-sharing.

Organizational. Through integrated planning and coordinated implementation, the ECD projectwould establish long-lasting working relationships among the district agencies involved in ECD. Byinvolving community development organizations in the construction, rehabilitation and maintenance ofECD facilities, the project would create a sense of ownership.

2. Critical Risks (reflecting assumptions in the fourth column ofAnnex 1):

PROJECT OUTPUTS TO DEVELOPMENT OBJECTIVES

Risk Risk Rating Risk Minimization Measure

1. Design and scope of quality M All proposed improvements result from the findings of ECDimprovements inadequate or study. Phased district implementation and clear performanceinappropriate for ECD. indicators, provides for continuous review and evaluation.

2. Difficulties in changing attitudes S Intense national and local campaigns particularly for earlyand behavior of parents. child education. As in family planning, increasing awareness

is a long-term program.

3. Lack of financial sustainability of H Proposals have been determined by resource availability.programs due to budgetary shortfalls Funding will be sought from all levels of government. The

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or other causes. Bank's share of project cost-financing has also been increased.PROJECT COMPONENTS TOOUTPUTS

1. Delays in GOI's formulation and L ECD study has already provided inputs. BAPPENAS taskacceptance of policy framework. force has provided a statement for GBHN and a draft chapter

for Repelita VII has been completed.

2. Lack of clarification in roles and L A Director Generals' Decree, specifying institutional andresponsibilities amongst all levels of implementation responsibilities of each participating agencygovemment and lack of decisions on has been agreed by GOI. This will also deternine the flow-of-funding flows following funds.decentralization policies.

3. Inadequate capacity of district S A district self-evaluation tool was developed and used to helpgovernments to implement. plan and implement district proposals. Institutional

assessments were also undertaken at the district level. TA andtraining is also being provided.

Overall Risk Rating SRisk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)

3. Possible Controversial Aspects:

The main resistance could arise from the need for inter-agency coordination and attitudinal changesrequired in integrating services for early child education, health and nutrition. Attempts to minimize thefears, but also rationalize the services being provided would be done through the gradual and phaseddevelopment of district proposals, and also the awareness raising on the importance and need for theintegrated provision of ECD services.

G: Main Loan Conditions

1. Effectiveness Conditions: Standard

2. Other:

The main loan conditions are that the Borrower will:

I. Maintain the ECD Steering Committee and a Central Project Management Unit at the central level,and establish and thereafter maintain Coordination Committees and Project Management andImplementation Units at provincial and district levels respectively;

2. Carry out the Project in accordance with the Implementation Agreement and Implementation,Guidelines;

3. Review with the Bank annual ECD integrated work-plans for the project provinces and the centerby October 31 of each project year, and make such adjustments to the plans as discussed and agreed withthe Bank;

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4. Carry out the agreed annual teacher and cadre training, and management capacity developmentprograms, and employ contract teachers in accordance with conditions agreed with the Bank;

5. Acquire land and select locations for the construction of TKs and other ECD facilities inaccordance with agreed criteria, including the Community Participation Manual;

6. Enter into implementation arrangements for the construction or rehabilitation of TKs and otherECD facilities with the relevant LKMD for the selected location under terms and conditions satisfactoryto the Bank; and

7. Employ the key consultants necessary for the project not later than April 1, 1999 except for theassessment of the policy framework for integrated ECD who should be appointed not later than July 1,2001; and

8. Establish an adequate monitoring and evaluation of project inputs and outputs according to agreedmodalities and performance indicators.

H. Readiness for Implementation

[x] The procurement documents for the first year's activities are under preparation and will be ready forthe start of project implementation.[x] The draft Project Implementation Plan (PIP) has been appraised and found to be realistic and ofsatisfactory quality.[x] The Specific Procurement notice for expressions of interest for the supply of the complementaryfood has been issued.[ ] The following items are lacking and discussed under loan conditions (Section G): NA

1. Compliance with Bank Policies

[x] This project complies with all applicable Bank policies.

[signature]Task Team Leader/Task acLRozany Deen

[signature]Sector Manager/Director: Alan Ruby

[signature]Country Manager/Direct nn e Tray

17Annex 1

Indonesia: Early Child Development ProjectProject Design Summary

Narrative Summary Key Perfornance Indicators Monitoring and Supervision Critical Assumptions andRisks

CAS OBJECTIVE NAEnhancing human resourcesdevelopment throughinvestment projects andadvice aimed at improvingthe quality and efficiency ofeducation services.

................................................................ .................................................................. ....................................................................... .........................................PROJECT (Development Objectives toDEVELOPMENT CAS objectives)OBJECTIVES

Formulation and Completed GBHN statement Review Implementationimplementation of an and Repelita VII chapter9 experience for the necessaryintegrated ECD policy future revisions of policies.framework.

Improved quality, access 80 % utilization of Baseline , Mid-term, Project-and utilization of existing functioning ECD facilities in end -surveys. RisksECD programs targeted at project villages by end of thethe poor. project (urban/rural). I.The ECD program is

insufficient to reduce latePreventive measures for 80% of children receiving Baseline, Mid-term, Project- entry, grade repetition andmalnutrition through complementary feeding end -surveys..MOH MIS drop-out in primary school.emergency feeding under the Project have special surveys.

improved the weight for their 2.Transfering responsibilitiesage on KMS charts by to local government has notFY2000/01. (Baseline: Mid- Baseline, Mid-term, Project- resulted in improvedterm: Project End) end -surveys. efficiency in implementation.

Supplementary data fromPerformance test scores. Pre MOH.and post-tests will beadministered to children Baseline, Mid-term, Project-entering early child education end -surveys.programs.'" By end of project Tracer studies to be conductedstandardized achievement throughout life of project.test scores should haveincreased significantly

60% improvement in the Annual project review. Annualparticipation rates of parents district implementation plans.and children in BKBs andPosyandus (urban/rural) byend of project

75% of target number of

9The GBHN statement and the draft chapter for Repelita VII were the direct results of the national ECD study e.g., it wasrealized that a statement in the GBHN was essential, to get the overall policy framework, if an integrated approach to ECD is tobe adopted in Indonesia.10 Tests would be specially conducted in the areas of language development (receptive and productive language) and cognition.Tests developed for the ECD study by the Psychology Faculty of the University of Indonesia and IEA tests adapted to theIndonesia context will be used.

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teacher support clusters aremeeting on a regular basis bythe end of the project

Signing of at least 70% oftargeted annual contractswith LKMD by the third yearof the project and 70% byfourth year for the twoproject phases

85% of fellowships awardedby third year of the project

85% of ECD work planshave been implementedannually.

PROJECT OUTPUTS

Policy framework for ECD ECD policies included in * GBHN documentformulated. GBHN and Repelita VII. * Repelita VII document

Evaluation of policies for * Repelita VIII draft and finalRepelita VIII. document

Risks:Improved training program * Completion and adoption * Annual Reviews of districteffective. of curriculum for plans and progress reports. I .Design and scope of quality

Posyandu/BKB and teacher * Training evaluation forms. improvements inadequate ortraining (in-service) in each * Special surveys inappropriate for ECD.of the provinces* # kindergarten teacherstrained* # BKB and Posyanducadres trained

Effective provision of * # of children's booksbooks, educational toys, and published 2. Difficulties in changingother materials. * # of ECD programs fully attitudes of poor parents,

equipped with necessary particularly in rural areas onbooks, educational toys and the importance and need forother materials early child education.

IEC campaign developed * TV and radio programs * Annual Reviews of district 3. Lack of financialand implemented at the aired plans and progress reports. sustainability of programsnational and local level. * Dissemination of other * Special Survey due to budgetary shortfalls or

media messages other causes, includingrepercussions of currenteconomic and monetarycrisis.

ECD programs as requested * # staffed and equipped * Annual Reviews of districtin district proposals fully ECD centers servicing plans and progress reports.

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costed and operational. children in local commtnity * Special surveys* # of BKB sessions in eachdistrict. # of fully equipped andstaffed Posyandu sessionsheld in each district* % of ECD centers withcontract health worker....... ....................................................... .................................................................. ....................................................................... ........................................

ECD program management * # of fellowships completed * Annual Reviews of districtstrengthened. . # of workshops held plans and progress reports.

* # of research studies * Management reportscompleted* improved inter-agencycoordination* established monitoring andevaluation system _Inputs/Resources (Components to Outputs)

PROJECTCOMPONENTS Risks.

ECD Program Support US$ 22.0 million (base cost) Quarterly and Annual Progress I.Delays in GOI'sReports. Disbursement Reports. formulation and acceptance

1. Policy Framework of policy framework.

2. Quality Improvements 2.Lack of clarification inroles and responsibilities

3. Demand Generation amongst all levels ofgovernment and lack of

4. Access decisions on funding flowsfollowing decentralization

ECD Management Capacity US$ 2.5 million (base cost) policies.Building

3.1nadequate local1. ECD Management government support.

2. Project Management 4.1nadequate capacity at thedistrict level to implement.

5.Lack of adequate inter-agency coordination.

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Annex 2Indonesia: Early Child Development Project

Detailed Project Description

Introduction

The development objectives of the project are to ensure the provision of the short and long-termearly child development (ECD) needs of poor children between the ages of 0-6 in twelve districts in theproject provinces of West Java, South Sulawesi and Bali. Specifically the project would: (i) protectchildren between the ages of six months and two years against the effects of malnutrition and enhancesuch children's growth and development; and (ii) improve the access to and the quality and utilization ofthe Government's ECD programs.

The immediate and short-term response to the present economic crisis is the provision ofemergency complementary food to protect children 6-24 months, against the debilitating effects ofmalnutrition and its impact on their future cognitive, physical and social development of the child. Thelonger-term interventions will increase access, quality and utilization of ECD programs targeted at thepoor. It will also retain gains from the past provision of ECD services and maintain the benefits for thefuture. An externality is that the project would provide substantial employment to poor communitiesthrough village-based construction activities using community participation procedures. The incomegenerated from such employment would help offset some income losses as a result of the effects of thecrisis.

Prior to the crisis, GOI had recognized that its policies for ECD are highly fragmented andaccepted the need for a policy framework that integrates the policies for child survival (health andnutrition ) and cognitive and psycho-social development (early child education). GOI has formulatedmeasures for the GBHN (Basic Guidelines of State Policy) and a draft chapter for the next plan periodRepelita VII (1998/99-2003/4). The project supports the formulation and implementation of this policyframework and, within this context, supports an emergency feeding program for two years and two ECDactivities: (1) integrating the health service delivery post (Posyandu) and parent-child program (BKB);and (2) supporting kindergartens (TK) with health/nutrition interventions. Access for these serviceswould be improved through the provision of facilities and the necessary educational books, toys andmaterials and operational support. Quality would be improved through curriculum reform and provisionof training. Utilization would be improved through media and other campaigns that would increaseawareness of the importance and need for ECD services.

The project is also designed to improve the institutional capacity at all levels (central, provincialand district) to ensure the effective delivery of the above ECD services. Particular emphasis is placed onstrengthening the district level, where the bulk of the ECD activities will be implemented. The twelvedistricts covered under the project are Pandeglang, Indramayu, Tangerang and Lebak (West Java),Gowa, Bulukumba, Bone and Moros (South Sulawesi), and Buleleng, Karam Asam, Denpasar andKlungklung (Bali).

The Package of ECD Services

ECD services will be provided in 12 districts in the three project provinces -- West Java, SouthSulawesi and Bali -- to children 0-6 years largely in IDT villages. The project supports two main ECDservices as follows:

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1. Posyandu (Integrated Health Service L)elivery post) and Bina Keluarga Balita (BKB) (Non-Formal parent-child program) target children 0-6 years

Posyandu - Child Survival Programs: The Posyandu provides basic preventive and promotive healthcare and nutrition interventions to young children. The most important programs are the ExpandedProgram of Immunization (EPI) which immunizes against tetanus, tuberculosis, typhoid, diphtheria,polio, and measles; the Diarrhoeal Disease Control program, which promotes and provides oralrehydration therapy as a palliative treatment fDr diarrhea, and the growth monitoring and nutritioneducation interventions which provides iron, iodine and vitamin A supplements to children (and mothers).It is a monthly community event to which the mothers take their children, and where the services areprovided by health staff with the support of trained cadres (volunteers). Facilities used are highly varied,and range from the home of the village head to the general community center.

Bina Keluarga Balita (BKB) - Child Cognitive and Psycho-Social Development: The non-formal parent-child program is intended to provide training and promotion for parents in how to provide effectivecognitive development and psycho-social stimulation for their young children. It is particularly directedto mothers of young children from lower income groups, so that they can prepare their children forschool. It is also implemented by community-based cadres, who are volunteers.

The Posyandu and BKB programs will be integrated, rationalized, and made more cost-effectiveunder the project since their target audience is the same, and very often the services are implemented bythe same cadres, but under different agencies and programs. The emergency feeding program will alsobe implemented by the Posyandu.

2. Kindergartens (Taman Kanak -Kanak orK.

This provides Pre-School Education for children aged 4-6. There are several kinds of TKs; thoseoperated by the Government, the Community Based Organizations (CBO's), and those offered by Islamicagencies. The education is based on a curriculum and teacher training programs designed to meetchildren's physical and psychological needs and develop their mental potential. The TKs provides thenecessary inputs for improving the school readiness of the child or their subsequent entry into the primaryschool (Sekolah Dasar- SD). Access to the Tk s will be expanded and their quality improved under theproject.

Outline of the Project

The project consists of two broad components: (i) ECD Program Support; and (ii) ECD ManagementCapacity-Building.

Component 1: ECD Program Support (base cost of US$ 22.0 million)

The project supports the following:

1. ECD policy framework. The pro ject is based on an ECD study supported by a Japan Grant.A major conclusion was the need for an integrated policy framework for ECD to cater for the holisticneeds of the child (health, nutrition and early child education). A policy framework was designed,including a menu of ECD activities that are crucial to the growth and developmental needs of children(0-6 years). A statement was also formulated for the GBHN, and a draft chapter on ECD completed forincorporation into the next national plan, Repelita VII. The project would provide support through

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technical assistance, both national and international, for the continuous review and updating of the policyframework, including incorporating infornation on the latest developments in the field of ECD andreviewing the project lessons of experience.

2. Quality Improvements. Technical assistance has been provided to date to review all ECDtraining programs and their curricula. The project would provide further technical assistance to complete:(i) the simplification and rationalization of the BKB modules of program activities and field-test thechanges before they are implemented in the project districts; and (ii) the integrated training program forthe Posyandu and BKB cadre. This is expected to be completed in Year 1. In addition, the project wouldsupport the development of in-service training programs for kindergarten teachers to be upgraded to DII-TK, either through distance learning or more conventional face to face training programs. It would alsosupport the review and evaluation of the TK curriculum, including improved teacher/child interaction, aswell as the further evaluation and design of the current assessment tests for young children.

3. Demand Generation. This activity would develop an Information Education and Communication(IEC) program for supporting an integrated approach to ECD. It would support specific advocacy andgeneral IEC to promote optimum ECD related behavior e.g. greater involvement of parents in the overalldevelopment of their children ( e.g. IEC campaign that encourages parents to talk and read to theirchildren). It would also support the development of IEC strategies, plans, messages and campaigns;development production and distribution on IEC material at the central level and prototypes foradaptation at the local level; conduct IEC campaigns and activities; and monitor and evaluate IECmaterials and activities.

4. Access. This includes civil works and the provision of necessary educational materials, toys andequipment and other operational support; and teacher and cadre recruitment and training.

The activities would be based on district proposals, developed by the staff of local governmentsand including community participation. Funds for the project district proposals would be awarded on thebasis of detailed annual implementation plans, within an acceptable five year rolling proposal. Inaddition, annual performance reviews on districts program progress would be conducted by the provincelevel.

Two main ECD services would be supported - (A) Posyandu/BKB; and (B) TKs. An emergencynutrition component has been added as a response to the economic crisis and drought, with thePosyandu as the focal point for the distribution of the complementary food for infants.

A. Posyandu/BKB.

The Posyandu/BKB would be the first 'integrated institution" for achieving the goals of ECD,since the target group of Posyandu and BKB are mothers of young children and informnation provided inboth programs are complementary. Both programs are based on community participation using trainedcadres.

The project would support the current defacto integration into a single service that providesmothers and young children with appropriate health, nutrition and child development information andservices. It is expected that over time, the two services can be brought together nationally with theintegration of these activities reducing duplication and making the activities more cost-effective.Integration will begin at the community level.

I. Construction and Rehabilitation of ECD centers. The project provides about 340 commonfacilities for the Posyandu/BKB. In some areas, this would be a simple new facility of about 46 m2

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(estimated cost $4000 per facility) for which architectural designs have been provided, and in others itwould merely be an extension of an existing facility comprising about 14 m2 e.g. the Banjar in Bali. Theproject also provides support for the rehabilitation of about 50 existing facilities.

2. Equipment and Furniture. A limited amtount of furniture and equipment would be provided forthe above facilities including cupboards for the storage of educational toys and books (see below).

3. Educational Materials and toys. The project would support, through the provision of learningmodules and teaching guides, the implementation of the curriculum revisions for the BKB program.These include: (i) simplifying and revising the activities into three groups of children 0-1 year, 1-3 yearsand 4-6 years and extension of the program to cover the children who do not go into TK; (ii) providing amore simplified growth development chart (KKA),which would also be extended because currently thereis no instrument for the older children; and (iii) providing the APE or educational toys required for theprogram. The project would also provide materials, including the provision of the growth monitoringchart (KMS chart), for the Posyandu.

4. Cadre training and support. The quality improvement activities require the provision of moreintensive training than currently provided to the cadre working in both Posyandu and BKB. Effortswould be made to limit the cadre to 5 ( currently the minimum requirement is 1O for the BKB programand 5 for the Posyandu) and every effort made to have common cadre for the integrated program. Theproject would support improved training for up to 10 days in the year, and which could incorporate thecurrent health center training for the Posyandu cadre (currently nutrition education, KIA (mother/childhealth), environment, dental, and community edlucation). The project would also support the increase inBKB/Posyandu meeting to four times a month where feasible. Financing would also be provided toincrease the current involvement of the Bidan di desa (village mid-wife) and the proposed futureinvolvement of the TK teacher (below) in the BKB/Posyandu as motivators andfacilitators. Trainingwould be done using a cluster model and competencies for trainers, teachers and cadres are beingdeveloped.

5. Complementary Food for infants 6-24 nnonths old. The project would support complementaryfood short-term emergency measure for about two project years. Funds would be provided for anaffordable, industrially produced, micronutrient fortified complementary food for infants between 6-24 months of age and the provision of this food would protect one of the most vulnerable groups inthis current crisis against Protein Energy Malnutrition (PEM). Preference would be given to theinfants in the IDT villages in the project districts, and also infants in other rural areas of the projectprovinces if the funding is available. Maximum flexibility will be provided to enable as large anumber as possible of needy infants in the project provinces to be provided with the complementaryfood.

The nutritional profile of the complimentary food would follow UNICEF/DEPKESspecifications. Cost estimates vary between a cost of Rp.4500 a month/per beneficiary including thetransportation and other costs (US$9/beneficiary/per year) to a unit cost of Rp. 15 ,000 per month/perbeneficiary excluding other costs (US$30/beneficiary/per year)." I

The targeting mechanism would follow UNICEF methodology which has been discussed andagreed inter-sectorally. UNICEF uses sub-district level data from the Nutrition Directorate on theprevalence of underweight children from the Posyandu weighings and this has been used to identifytarget kecamatan. Their experience also indicates that implementing target criteria for differentiatingbetween households within a given village is unworkable and as a general rule of thumb, the average

At an exchange rate of Rp.60001$1.

24

village requirement is about IMT/month. Future refinements to the targeting mechanism would beundertaken.

The food would be procured using ICB procedures. It will be procured by central DEPKES.The food will be provided in packets and delivered directly by the supplier to the district warehouseof Dinas Kesehatan TKII (province by-passed) on a monthly basis. From the warehouse it would goto the health center (puskesmas) to be distributed at the Posyandu. This would greatly decrease thetransaction and distribution costs. This is the distribution mechanism being used by other donors forsimilar food aid.

Procurement would be done on an annual basis, but the delivery only once a month. Thiswould ensure that large quantities of supplies can be avoided at any one time in a district and wouldimpede secondary markets since the food would be provided at greatly subsidized rates. The foodpackages would also be clearly labeled "Tidak dijual bebas" (or "Not to be sold freely"), whichagain would attempt to curtail the development of secondary markets. The package labeling mayindicate a nominal price (currently about Rp.500 for food provided by UNICEF), which would becollected by the PKK who would distribute the food at the Posyandu. UNICEF experience is thatthe complementary food is more valued by the recipients when they pay a low nominal price. Itcould also contribute to Posyandu revitalization, which is being supported under the project.

U1NICEF has prepared detailed procedures to undertake the monitoring of the inputs,processes and outcomes of this initiative in selected sub-districts. This would be used, but alsoexpanded to provide for an on-going monitoring system for the three years of project funding. Inparticular, Technical Assistance will be provided to DEPKES to support a community basedsurveillance system that will establish baseline measures of nutritional status in the 6-24 monthinfant populations, with the surveillance repeated regularly throughout the three years of the project.The methodology would include a careful selection of a representative sample of communities and,in the selected communities, both quantitative and qualitative data would be collected to determinecoverage, cost and impact of the complementary food.

B. Kindergartens (TKs)

The project would support the provision of Kindergartens (TKs) in the project districts. Theorganization, curriculum, and training systems for the TKs are well established and currently about40,000 TKs are in existence, catering to about 1.6 million children or 1 1% of the population of 4-6 yearolds.

I . Construction and Rehabilitation of TKs. A number of alternative and cost-effective TK designsfor different areas and locations have been developed. The designs are based on the accommodationprovided in a standard 3 classroom primary school building, and the site provided for a standard desa orvillage kindergarten was agreed with DIKDAS as being at least 1500m2. In urban situations, where landof the correct size maybe unavailable, it may be necessary to build a 2 storey kindergarten and designshave also been developed for this using a land area of 800 m2. About 230 new TKs, including adequatewater supply, will be constructed in the three provinces. All land required would be provided by thelocal governments. This could be done through voluntary contributions, contributions againstcompensation or purchased, particularly in the urban areas, at market prices. Rehabilitation of existingfacilities (about 110 TKs) from the private sector would also be undertaken. Criteria have been agreedfor such construction and rehabilitation, including the location of kindergartens using GIS maps. TheLKMD would be responsible for all work for the above facilities.

25

2. Equipment and Furniture. The project would provide furniture and equipment for the new andrehabilitated TKs. With respect to the furniture the following activities will be undertaken- (a) existingdesigns for classroom furniture will be reviewed and the size of furniture required in existing and futurekindergartens will be established through a simple anthropometric survey of kindergarten age children inthe three provinces; (b) standard designs for TK furniture will be prepared in a range of sizes to suit theage groups of pupils in TKs; and (c) the furniture would be designed, if possible, for manufacture at thevillage level.

3. Educational materials and assessments. The project would provide educational books, toys andequipment purchased on the basis of existing and agreed curriculum and material lists available atMOEC. The materials are expected to be in small quantities and of great variety and would not beexpected to be procured in bulk. Tests for monitoring the students outcomes have already been developedbut these would be further evaluated during the life of the project.

4. Contract teachers and training. To ensure that the TKs constructed under the project will haveteaching staff, the project would support the hiring of up to 460 teachers on three year contracts. Thecontract would be for assignment to a specific TK and would be discontinued if the teacher leaves thatTK or does not meet contractual requirements. Although the contracted teachers would not expect to begiven assurance of permanent appointment to the civil service upon completion of their contract,DIKDAS has indicated its intention of absorbing the teachers at the end of the contract period. All TKsto be constructed under the project would have identified the potential teachers prior to construction offacilities. Some would be recently graduated DII-TK teachers from the STIKIPs or the teacher trainingcenters. However, currently, the bulk of the TK teachers identified only have SPG-TK qualifications,while others that may be available have SPGSD .DII. The former is less than the required minimum Dll-TK qualification required for TK teachers, but while the latter is adequate, it is not training for TKs and,consequently, some in-service training in TK subject matter would be required. The upgrading of TKteachers to DII level would be supported either through the provision of fellowships, or in-servicetraining through face-to-face or distance education. Additionally, existing TK training systems, which arebased on the school cluster or Gugus system, will be supported under the project. The project would alsosupport the upgrading of about 1255 existing TK teachers to DII-TKI from the private sector facilitiesbeing rehabilitated under the project.

5. Integration of health and nutrition activities. The above in-service training programs includetraining in health and nutrition subjects. These would be continued. Periodic visits from the Puskesmas(health center) personnel to the TKs to examine the children about twice a month would also be fundedunder the project.

Component 2: ECD Management Capacity 3uilding (base cost of US$ 2.5 million)

The project would support management capacity-building at the province, district and centrallevels. The component will comprise two sub-components: ECD program management; and projectmanagement.

A. ECD management

The project would provide funding for the following:

1. Capacity assessment and development (district, province and center). The balance assessments ofneeds at the district, province and center to support the implementation of the project would be made,following the methodology already developed and used in some districts in West Java and Bali. Theassessment would be the basis for annual training activities focused on acquisition of specializedtechnical knowledge for key staff involved in the project (specializations already identified in the projectprovinces include developmental psychology, early child education, education planning, statistics, and

26

community health, and nutrition) and project management (planning, budgeting, procurement, financialcontrol, monitoring). A management consultant would complete the institutional assessment and alsohelp link personnel with the appropriate training courses available locally and internationally. The projectwould support the technical assistance, training fees, and local fellowships.

2. Integrated annual planning and budgeting (district and province). Planning and budgetingworkshops would be conducted yearly following an agreed schedule for the annual technical andbudgetary plans. This would involve MOEC, MOH, BKKBN, and MOHA district offices, and otherconcerned agencies, under the coordination of Bappeda I and II. The workshops would be residential for3-5 days during which the strategies and activities necessary to meet the targets set and agreed in the five-year program proposal would be discussed, annual progress monitored and future programs detailed. Theproject would support technical assistance costs as well as transportation, accommodation, materials andrelated costs incurred during the meetings.

3. Impact evaluation. The project would finance a major impact evaluation study. This would be alongitudinal study commencing in Year 1, and with data being collected continuously during the life ofthe project. The study focus would be the long-term effects of pre-school education on primaryschool outcomes through the establishment of experimental and control groups. Similarly, the impactsand effectiveness of the PosyandulBKB interventions would also be studied as there would be atraditional structure (untouched by the project) and an improved structure benefiting from the project.The impact evaluation study, when completed, is expected to provide major inputs into the formulation offuture ECD policies. The project would support the necessary technical assistance, possibly a jointventure between an international and national institutions, for the study.

4. Other Studies and special initiatives. Proposals for special initiatives to address specific ECD needsin the different provinces and districts would be encouraged. Support would be available to test theappropriateness of daycare centers and playgroups in poor areas. Other examples include training inwriting children's literature, or developing designs and prototypes for education toys appropriate to thelocal context. Support for research to enable selected universities to develop as centers of excellence inECD is also included in the project.

B. Project management

The project provides for operational support to all levels in the form of office equipment and supplies(e.g. computers and fax machines), technical assistance and other operational support.

1. Monitoring, reporting, evaluation. An implementation monitoring system will be developed under theproject. It will consist of an accounting system to monitor the financial progress of the project as well asa non-financial information system. The non-financial system will track the progress of the project basedon the key outputs and performance indicators provided in the project implementation plan.

Monitoring and evaluation activities will be carried out by designated staff at the province and districtProject Management Implementing Units (PMIUs). Funding will be provided for the monitoring activitiesthrough allocated budgetary support. Staff assigned to monitoring tasks would receive a travelingallowance and per-diem (fully financed by GOI) The reporting system would consist of two stagesoccurring at the district and then the consolidation and verification stage at the province level. Specificactivities at the district level are regular on-site monitoring of rehabilitation, construction, teacher trainingand management training activities, data collection and compilation, and regular preparation ofmonitoring reports. Activities at the provincial level include regular monitoring visits by provincial staffto districts to observe, among others, the progress of construction and teacher training activities andreviewing of district-level work programs and budgets, aggregating district level reports to produceprovincial totals. The Balai Pengembangan Kegiatan (BKB) and Sanggar Kegiatan Belajar (SKB) wouldbe Technical Assistance Providers and support in monitoring and evaluation. The consolidation of all

27

reports would be done at the center (CPMU) at I)IKLUSEPORA.

Responsibilities of the various government agencies and officials involved in the monitoring,reporting and evaluation process would be clearly identified in the SKB. The Impact Evaluation Studywill provide an independent assessment of project implementation and outcomes.

2. Technical audits. In addition to the monitoring and evaluation activities conducted within the project,external consultants will also be hired to conduct independent audits in the areas of construction, qualityand management annually. The consultants will prepare detailed reports to be submitted to the ProvincialProject Coordination Unit and the Central Project Coordination Unit in Jakarta. This approach to projectmonitoring has been used under other Bank projects and is found to be very effective. The Banksupervision of the proposed project will be based on the findings of the Technical Audits, the annualevaluation of performance at the national level and periodic visits to the provinces.

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Estimated Project Costs

Summary by Project ComponentLocal Foreign Total

-US$ million-----1. ECD Program SupportCentral Activities

Policy Framework, Quality and IEC 0.5 0.1 0.6

Province/District ActivitiesHealth/Nutrition & Parent-child program (Posyandu/BKB) 2 - 2.0Early Child Education (Kindergarten) 8.6 0.2 8.8Complementary Food 9.5 1.1 10.6

Subtotal: ECD Program Support 20.6 1.4 22.0

2. Management Capacity BuildingCapacity Building

Improvement of central management capacity 0.1 - 0.1Improvement of provincial management capacity 0.3 0.3 0.6Improvement of district management capacity 0.5 - 0.5

Subtotal: Capacity Building 0.9 0.3 1.2

Project managementMonitoring and Evaluation 0.2 - 0.2Impact Evaluation 0.1 0.5 0.6Operational Support 0.5 - 0.5

Subtotal: Project Management 0.8 0.5 1.3

Subtotal: Management Capacity Building 1.7 0.8 2.5

Total Baseline Costs 22.3 2.2 24.5Physical ContingenciesPrice Contingencies 0.9 0.1 1.0

Total Project Costs 23.2 2.3 25.5

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Economic Analysis

I. INTRODUCTION

In the last 12 months, the economic situation in Indonesia has changed dramatically. Indonesia iscurrently faced with a severe economic crisis that has lead to increased poverty and economic stressamong households nationwide. Consequently, the situation for Indonesian children has deteriorated ashouseholds face a considerable loss in purchasing power and are unable to afford many of the basicnecessities. For example, between August 1997 and February 1998, the price of rice increased by 50percent resulting in the reduction the income of the bottom 30 percent of the population by 12.5 percent(World Bank draft, 1998). As household purchasing power decreases, children face the threat ofmalnutrition.

Investments in early child development in Indonesia have existed since the 1970s. Programs suchas the village health post (Posyandu), and parental education (BKB) have long existed, however, GOIcontinuously faces the challenge of effective service delivery. There are no new programs that have beendeveloped under the project The focus is on rationalizing and strengthening existing programs to provideimproved services. The only new element in the project is the introduction of an emergency foodsupplementation intervention. Within this context, the two main themes of the economic analysis are to(i) provide "economic justification" of interventions or activities that have been undertaken by theproject; and (ii) rationalize the nutrition intervention in terms of timing, targeting and cost-effectiveness.

II. CURRENT SITUATION AND ISSUES

The longer-term priorities of ECD in Indonesia remain the reduction of high grade repetition anddrop-out especially at the primary level. These cannot be neglected despite the short-term crisis.However, because Indonesia is currently experiencing a severe economic crisis, the threat of childmalnutrition is an urgent priority demanding immediate action. In addition, the intervention has to bewell targeted to ensure that the most needy receive treatment in a timely manner.

How serious is the problem of malnutrition? Indonesia's child malnutrition rate has alwaysbeen relatively high. Even before the crisis, malnutrition was averaging about 40 percent for the period1990-96 (World Bank 1996) or 35 percent for 1992 using SUSENAS data (Saadah et al., 1996). This isrelatively high in comparison to other developing countries. In total an estimated 9.3 million childrenbetween the age 0 and 5 were malnourished in 1995. During the period 1990-1996, 40 percent ofIndonesian children under 5 years of age were malnourished while approximately 16 percent of Chinese,7 percent of Brazilian and 13 percent of Thai children were malnourished (See Graph 1).

Who are at risk? The most vulnerable group are poor children in rural areas between the ages of6-24 months. This is evident from the body of literature that current exists in Indonesia. Elfindri (1996)

Saadah et al., (1996), and Frankenberg, (1995) show that:

* Malnutrition increases significantly after 6 months of age. After the first 12 months, malnutritionincreased to as much as 59 percent for rural boys and 44 for rural girls in 1989 (Elfridi,1996). Datafrom 1992 show similar results that child malnutrition increases fourfold after the first 5 months(Saadah et al., 1996).

* Wealth Effect is strong. Both descriptive and multivariate analysis show that the wealth effect onchild malnutrition in Indonesia is strong. In 1992, 42 percent of children bom into families in thelowest quintile were malnourished, this was twice the percentage of children in the highest quintile

30

where 21 percent were malnourished (Saadah et al., 1996). Similarly, Frankenberg (1995) also findsa positive wealth effect in her analysis"2.

40 Olndonesia EChina

N 35 | EBrazil OThailand

5 30

c' 25-

s 20

10 25

0

Graph 1: Comparison of Malnutrition

Source: World Bank, 1996.

Urban/Rural disparities are large. Rural children are more likely to suffer from malnutrition.Data from 1989 show that 33 percent of urban female children suffer from malnutrition incomparison to 42 percent of rural female children. For male children, the differences are similar, 43percent of urban in comparison to 56 percent of rural male children were malnourished (Elfindri,1996).

Why Is Immediate Action Essential? Immediate action is necessary because the long-termeffects of malnutrition on child development and later life productivity are severe. Malnourished childrennot only suffer lifetime disabilities and weakened immune systems, but they also lack the ability forlearning. The Carnegie Task Force Meeting on the Needs of Young Children in 1994 found that: braindevelopment before age one is more rapid and extensive than was previously realized and although cellformation is virtually complete before birth, brain maturation continues after birth; and braindevelopment is more vulnerable to environmental influence than was suspected. Inadequate nutritionbefore birth and in the first years of life can seriously interfere with brain development and lead to suchneurological and behavioral disorders as learning disabilities and mental retardation; and the influence ofearly environment on brain development is long lasting (Young, 1996). (Note: For cost-effectivenessanalysis please see Section IV)

Long-term early child development problems. An analysis of the education indicators show thatat the primary level both grade repetition and drop-out are problematic. The problem of repetition isespecially acute in the first and second grade where repetition is as high as 14 and 9 percent respectively(See Table below). Translated into absolute numbers, this implies a total of about 600,000 grade onerepeaters and 400,000 grade two repeaters per year. In total about 1.8 million children repeat a gradeevery year at the primary level.

Why is school repetition in primary school high? Evidence from Indonesia suggests thathousehold expenditure (the wealth factor) and the share of over-aged new entrants are both significantpredictors of the repetition rate in primary school (Boediono and Dhanani, 1996). Poorer children tend tohave lower school readiness skills. This is primarily due to a combination of factors such as the lack ofany cognitive stimulation and psycho-social skills combined with poor health and nutrition. With lowschool readiness skills, children experience difficulties when transitioning into primary school. The

12 Frankenberg finds a significant positive effect of wealth on malnutrition for those households that are above the median.

31

second effect is late-starting. It is shown that children who enter school late are more likely to repeat agrade than those who do not.

Table I :Repetition rate by grade for the school year 1995-96Indicators/Grades I II III IV V VI

Repetition rate ( 13.66 8.92 7.60 5.71 4.03 0.54percent)Number of repeaters 667,239 412,528 343,762 246,632 165,074 20,073(Ministry of Education and Culture, 1997)

The other problem that persists in Indonesia is that of drop-out. Over the past decade, the drop-outrate at the primary level has remained at about I million children who have consistently dropped-out ofthe school system each year. Despite increased investments in primary education the drop-out rate hasnot fallen. Why is this? A study examining the determinants of drop-out and repetition indicates thatrepetition is the most important predictor of the drop-out rate (Boediono and Dhanani, 1996). Schoolrepetition and drop-out have been found to be highly inter-correlated, therefore a reduction in repetitionwould reduce school drop-out. Thus, combining the above finding with research from other developingcountries that suggest that early child development interventions help reduce repetition, an ECD projectin Indonesia would be necessary to reduce both grade repetition and school drop-out.

Economic Cost of Repetition and Drop-out. The economic costs of drop-out and repetition inIndonesia are substantial. The budget impi[ications of wastage per year amounted to about US$250million in 1995/96 (Boediono and Dhanani, 1996). This does not include the private cost to householdsfor school expenditure. The wastage per year to Indonesian household is estimated at US$139 per child,thus about US$9 million is lost each year due to drop-out and repetition. In total US$259 million is lostdue to repetition and drop-out.

III. SERVICE DELIVERY

At present, there are several programs that provide Indonesians with the basic ECD services.These include for Early Child Education: kindergartens, play-groups and to a limited degree day-carecenters; for parental education the BKB program; and for health/nutrition the posyandu, puskesmas andpuskesmas pembantu, and public hospitals.

Of these programs, the project concentrates on the use of the posyandus, BKBs and kindergartensas the primary sources of ECD service delivery at the village level. Thus, as opposed to developing newmechanisms (which is less cost-effective due to the added start-up cost), the project focuses onstrengthening existing mechanisms to increase efficiency and the quality of service delivery. Thequestion is how? How can these programs be improved so as to delivery services to the poor ofIndonesia? To effectively address this question, it is necessary to understand several elements of theservice delivery mechanism namely: Are the programs reaching the poor or is there a problem oftargeting? What are the other problems that need to be addressed?

A. PosyanduThe Posyandu program is a voluntary program run at the village level by mothers for other

mothers. It is village-based where mothers; bring their children once a month for specific health andnutrition interventions. There are 5 main functions are: weighing and growth monitoring, nutritioneducation, immunization, family planning, diarrheal disease control through ORT and maternal care. Themeetings are facilitated by nurses from nearby puskesmas who administer immunizations and provide

13 In 1995, the household cost of education at the primary level average Rp66,000. We use an exchange rate of Rp8,000: US$ 1.

32

some basic nutritional education.

i. Coverage. The effectiveness of Posyandu (similar to the BKB) depends on level of cadreactivity in the village, area and target population. At present there are 196,000 Posyandus that provideservices to about 9.8 million children between the ages 0 and 5. National coverage is low at 21 percentwith large provincial variation. Provinces on the island of Sumatra and Bali have higher participationthan others. The problems areas are East, West and Central Java See table below). Despite the fact thatoverall coverage is low, at the village level, the Posyandus have been well targeted to poor villages wherethe need is greatest. Most of the Posyandus that are available are located in rural villages (about 77percent). However, the single largest service delivery problem has been access in extremely rural andremote areas. Access to rural and remote villages is measured by examining the average distance in thatmothers have to travel to obtain services. These distances increase in the outer-islands where remotenessand the lack of basic infrastructure make traveling difficult. The average distance that women travel inIrian Jaya for example to get to a Posyandu is almost 14 km.

iii. Demand Who users Posyandu services? A probit analysis was conducted to examine thefactors that influence household demand for Posyandu services. The findings indicate that:

* Age of child. Posyandu services are most frequently used for younger children. The probabilityof usage decreases by 1 percent for each additional year in child age. The services provided at thePosyandu focus primarily on the lower age group 0-3 years of age, for example, children should befully immunized within the first 24 months of birth. The equipment provided is also generally for theyounger age group, the weighing scale is not appropriate for the older children (4-6 years).

Table 2: Supply of PosyandusProvince Number of Posyandu Number of Coverage

children (percent)'40-5

U Urban Rural

DKI Jakarta 3,134 - 156,700 19West Java 11,231 28,525 561,550 11Central Java 7,741 28,146 387,050 11Yogyakarta 1,544 2,956 77,200 29East Java 8,915 27,822 445,750 5

Aceh 232 4,346 228,900 46North Sumatra 2,863 6,620 474,150 31West Sumatra 938 4,599 276,850 47Riau 782 2,278 153,000 29Jambi 318 1,993 115,550 38South Sumatra 1,082 4,658 287,000 31Bengkulu 186 1,331 75,850 40Lampung 474 5,529 300150 36

West Kalimantan 335 2,200 126750 27Central Kalimantan 139 1,292 71550 37South Kalimantan 395 2,419 140700 39East Kalimantan 1,122 1,528 132500 43

North Sulawesi 306 1,791 104850 35

'1 Assuming that each Posyandu covers 50 children on average, coverage is defined as (number of Posyandu clusters *50)1 child populationbetween 0 and 5

33

Central Sulawesi 1.40 1,911 102550 38South Sulawesi 1,177 6,161 366900 39South-East Sulawesi 153 1,426 78950 32

Maluku 240 1,482 86100 32Bali 673 3,074 187350 62NTB 468 2,839 165350 31NTT 304 4,555 242950 43Irian Jaya 199 1,092 64550 22Timur-timur 57 673 78950 51National 45148 151246 9,819,700 21(Source: Estimated from PODES 1993 data)

* Wealth. Household wealth has a significant negative effect on the demand for Posyandus.Wealthier households are less likely to use Posyandu services than poorer households. This isbecause they can afford to higher user fees and commonly prefer to other more expensive substitutes.Posyandus are substitutes when other health services offered at the puskesmas are difficult to obtainbecause mothers have to large travel distances to the nearest center. In many remote areas, it is theonly source of preventive health care.- Mother's education and age. Other characteristics of household usage include the age andeducation of the mother where the younger and more educated mothers are more likely to usage suchservices. The more educated the mother the more likely she is to realize the benefits of the servicesprovided by the Posyandu service and consequently the more likely she would be to attend. TheDHS (1994) survey also reports a similar finding where mothers who received a secondary educationor higher were more likely have their child immunized than mothers who had no education (71percent vs. 25.5 percent). Similarly younger women with higher levels of literacy and exposure toeducation are more likely to understand the benefits associated with these interventions.

B. BKBThe BKB or mother-child program first began in 1982. The program was designed to provide

mothers (and other caregivers) with child development information and some limited training to enablethem to help stimulate their child's gross and fine motor activities, cognitive, social and emotionaldevelopment and supervise the overall growth of their child. There is a total of about 119,000 BKBprograms throughout Indonesia. The estimated participation rate' for the nation averages 21 percent. Itranges from as low as 5 percent in East Kalimantan, Jakarta and the outer island to 66 percent inYogjakarta. The variation is partially dues to the lack of adequate funding and other factors which haverestricted expansion over the last few years.

At present, the most important element of the BKB program is the participation of the cadres. Thecadres/program volunteers drive the BKB program in the village, without active participation of cadresthe BKB program will not continue. As such it is important to focus on the level of cadre participation.To examine the level of activity or interest in the village, we use as a proxy or program effectiveness theaverage number of cadres per BKB clusters in each province.

The analysis indicates that the high cadre requirement is not being met. The present programdesign requires that participation of 10 cadres, 5 of which are for providing instruction to the mothers andthe other 5 for child-care purposes. On average, only 3 cadres participate in BKB meetings. Theimplication of this finding is twofold: the cadre requirement is too high and the BKB curriculum in it'spresent form is not being implemented successfully in the field.

Field visits and other studies indicate that main problems in the implementation of the BKBactivity are : the lack of adequate supplies (especially the educational toys (APE); inappropriate levels of

34

training for the cadres; difficult curriculum that cadres find to implement resulting in boredom, disinterestand high drop-out. While the unit cost of the activity is very low at an estimated at Rp. 2 million percluster or Rp. 40,000 per participant per year (costs cover the instructional and training materials, APE oreducational toys and the cost of training the cadre and BKKBN field workers) the sustainability of theactivity with it high cadre requirements and inadequate training activity remains is also low.

Table 3: Supply of BKB and Participation ratesProvince BKB Average of participants" Participation rate'

DKI Jakarta 815 40,750 5.0West Java 16,238 811,900 16.6Central Java 31,244 1,562,200 45.6Yogyakarta .3,511 175,550 66.6East Java 33,755 1,687,750 18.7Aceh 3,433 171,650 34.6North Sumatra 4,754 237,700 15.5West Sumatra 2,216 110,800 18.9Riau 814 40,700 7.7Jambi 2,069 103,450 33.8South Sumatra 3,037 151,850 16.5Bengkulu 871 43,550 22.9Lampung 2,052 102,600 12.2West Kalimantan 1,299 64,950 14.0Central Kalimantan 519 25,950 13.3South Kalimantan 2,168 108,400 30.1East Kalimantan 311 15,550 5.1North Sulawesi 1,461 73,050 24.3Central Sulawesi 887 44,350 16.3South Sulawesi 2,138 106,900 11.2South-East Sulawesi 829 41,450 16.9Maluku 914 45,700 16.8Bali 1,860 93,000 30.9NTB 685 34,250 6.4NTT 703 35,150 6.2Irian Jaya 423 21,150 7.3Timur-timur 475 23,750 15.2National 119,481 5,974,050 21 percent(Source: BKKBN 1997)

C. What Needs To Be Done (Posyandu/BKB Programs)It is clear that the Posyandu and BKB activity have several similar characteristics and problems,namely:

* coverage is not comprehensive at present. Large provincial variation exists;* there is difficulty in the provision of services in rural and remote areas;* the target populations are the same - poor children less than 5 years old and their parents;* services are provided free of charge to households;* both are volunteer programs and these volunteers are generally the same mothers in each village;

and* low unit costs.

Based on the above characteristics and additional several other factors, the project proposes to

"Assuming that each BKB meetings accomadates 50 children.6 Assuming that there are a total of 50 mothers attending each Posyandu and that the children between 0-5 years belong to different households,

we divise the follow formula. Average participation = Total number of mothers attending / Total number of children aged 0-5.

35

integrate the Posyandu and BKB activities where training and service delivery mechanisms will becombined as a cost effective measure for program expansion. These factors include the following:

* the service delivery problems of both programs are similar, cadre drop-out is high incurring costof re-training;* at present the BKB activities requires the participation of 10 cadres in each cluster, however, theanalysis shows that average number of cadres that participate is far less. Thus, by reducing thenumber of required cadres and recruiting those who are already participating in ECD through thePosyandu program, the local cost of cadre recruitment reduces substantially; and* the number of Posyandu clusters in Indonesia exceed that of BKB clusters by about 60 percent.Thus integration of these activities, will reduce the additional start-up cost of establishing newclusters adding an extra impetus for the integration of the programs.

D. Cost-Benefit of Integration vs. Segmented Implementation.The integration of the Posyandu and BKB programs is predominantly the integration of the training

of cadres and monitoring and evaluation. This implies that certain overhead costs can be dramaticallyreduced. The cost-benefit analysis presented here focuses on the difference between integrating theprograms and implementing them as two separate activities.

The training structure for the programs are identical cluster models beginning with thedevelopment at the central level, followed by the training of the provincial and district personnel who areresponsible for training the cadres. At every level of training, the overheads that are incurred include:cost of renting or obtaining a building, administrative cost of organizing the program, transportation ofthe trainers and participants preparation and printing of training materials. The unit cost of training thePosyandu/BKB cadres is about Rp72,000 per day under the first altemative (See table 4). If the programsare not integrated the unit cost of training increases by as much as 25 percent to about Rp9O,000 per day.Thus, integration is the more cost-effective than non-integration.

Table 4: Cost of an Integrated F'osyandu/BKB program vs. Non-integrated programIntegrated Non-integrated

Unit cost of training per cadre Rp 72,000 per day Rp 90,000 per day

E. Summary.Problems Interventions

Inappropriate curriculum (BKB program) Review, evaluation and revision of BKB program to simplifycurriculum

High cadre requirements Rationalization and integration of Posyandu/BKB programs to metcadre requirements

Revision of curriculum to lower cadre requirement for BKB programs(from 10 to 5)

Lack of adequate equipment (specifically the Provision of equipment as requested in district proposalsweighing scale and growth monitoring chart)

Inadequate training Provision of comprehensive training for cadres which lasts 10 daysinstead of 2-4 days per year

D. KindergartenIncreased gross enrollments at the kindergarten level is important since kindergartens are the

primary means of delivery of early child education services directly to children between the ages 4 and 6.Sufficiently high enrollments signify that children are exposed to early child education interventions and

36

consequently the probability of grade retention and drop-out should be reduced.

This is not the case in Indonesia. Gross enrollments are low at 18 percent in 1996. Despite thevast gains made in the last two decades, where gross enrollments rose from 6 percent in 1970 to 18percent in 1996 in relation to other developing countries, Indonesia still lags behind. A cross-culturalanalysis indicates that gross enrollment is much lower than other populous countries such as China andBrazil. Gross enrollment in Indonesia is at 19 percent while in China it is 28 percent. When compared toother east-Asian countries, again Indonesia appears to have a much lower gross enrollment rate thanmany others. Indonesia's gross enrollment is about a third of gross enrollments in Japan, Malaysia andThailand.

Table 5: Comparison of pre-primary gross enrollment rates1 7

Country Gross Enrollment Rate Population'8 (millions) GNP per capita (US$)Indonesia 19.2 190 880

Other populous Third World countriesIndia 4.8 914 2.9Brazil 57.6 159 2,970China 28.7 1,191 530

Other Asian CountriesMalaysia 59.0 20 3,480Korea 84.9 44 8,260Japan 48.7 125 34,630Thailand 57.8 58 2,410

Source: Gross enrollment rates (Unesco, database), 1997.Per capita GDP and population, World Development Report, 1997.

Why are gross enrollments low so low in Indonesia? To determine the low rate of grossenrollment in Indonesia, we isolate the underlying demand and supply factors. On the supply-side:

1. Supply. An examination of the gross enrollment rate and distribution of kindergartensshows that the intra-provincial gap is varied and large. The provinces in Indonesia can be divided intothree main groups: those with high enrollment that require very limited additional resources, those withlow enrollments and low population densities and those with low enrollments and high populationdensities. For example, Yogjakarta would fall into the first category with a high enrollment rate of nearly50 percent and consequently a small service delivery gap. On the other hand, many of the outer-islandprovinces would fall into the second category, where the need is the greatest, the service delivery gap isalso very small due to low population density. In Irian Jaya for example, an estimated 1,250kindergartens would have to be built to increase gross enrollments to about 100 percent. The third andmost problematic type of provinces are those with higher density populations and low gross enrollmentssuch as West Java. The enrollment rate for West Java was extremely low at 5.1 percent, to increaseenrollments to 100 percent, an additional 21,000 kindergartens are needed.

Supply in rural areas is highly inadequate and the urban-rural disparity is large. Only 32 percent ofall rural villages have kindergartens while 82 percent of urban areas have at least one kindergarten ineach administrative area. An estimated 42,000 villages and urban cities still do not have at least onekindergarten in them.

At present, the primarily supplier of services has been the private sector. Public kindergarten are

" The total enrollment in education preceeding the first level, regardless of age, divided by the population of the age-group corresponding to thenational regulations for this level of education in 1995.Is 1994 data

37

very few in number and tend to be concentrated in the urban areas. The data shows that Indonesianchildren attend private kindergartens more, than they do public. More than 95 percent of students enrolledin kindergarten were enrolled in private facilities.

Table 6: Supply of kindergartens both Public and Private for Selected ProvincesProvince Gross Number of Province Gross Number of

Enrollment Schools Enrollment SchoolsRate Rate

South Sumatra 5.2 527 North Sulawesi 19.0 1139Bengkulu 8.2 247 Central Sulawesi 12.0 501

Central Java 21.5 10900 South Sulawesi 9.0 1113Yogyakarta 48.6 1819 Maluku 7.4 322Irian Jaya 6.7 209 Bali 19.1 660

Timur-timur 2.9 58 NTB 8.4 537(Source: Ministry of Education, 1997)

ii. Demand An examination of supply-side factors is insufficient because low awareness anddemand. The factors that prohibit household demand include:

* Fees. Kindergartens unlike other institutions such as primary school and junior secondary schoolhave a lower direct cost to households because the only expense is school fees. Text-books are notpart of the curriculum and uniforms often are not mandatory. On average, kindergarten fees areabout Rp3,000 per month or Rp36,000 per year. However, variation is extremely large as expensiveurban kindergartens charge fees of about Rpl 5,000 per month while many foundations runkindergartens without charging any fees at all in poor villages. While Rp3,000 does not represent alarge percentage of household per capita income, it still serves as an income constraint whenresources are under severe pressure.

* Opportunity Cost. Children attend kindergarten in the fifth and sixth year before they enterprimary school. These young children are generally unable to travel to school without beingaccompanied by their parents or some designated adult. Consequently, part of the cost of enrolling achild in kindergarten is the opportunity cost of the parent's time as they have to send the child toschool daily. Given that the average wage rate in Indonesia is Rp464'9 per hour and the averagetravel time is an hour per day, the cost per month would increase fourfold to about Rpl4,000 permonth. The opportunity cost of parental traveling time far exceeds that of school fees. Thus, it isimportant to ensure that kindergartens are located in areas where households accessibility and traveltime is reduced significantly.

* Awareness. The benefits of kindergarten education such as school readiness are not known to allparents, many regard kindergartens more in terms of play and custodial care rather than development.The younger generation however, is increasingly beginning to recognize the benefits of kindergarteneducation for their children. A recent study (Baptist 1998) shows that younger mothers are morelikely than older mothers to enroll their children in kindergartens.

iii. Quality. While access issues remain central, another aspect is the of quality. Are existinginstitutions providing children with high quality care. Due to data limitations we rely on two keyindicators student to teacher ratio, and the availability of equipment, furniture and educational materials.In addition, this information is supplemented with on-site classroom visits to kindergartens in the selectedprovinces.

9 Average hourly wages as reported in "Indonesia: Dimensions of Growth" was Rp5O7 for non agriculture and Rp421 for agriculture workers.The above is an average of the two.

38

Student-teacher ratio. The data shows that there is no evidence of over-crowding inkindergartens in Indonesia and that the students per teacher ratio is sufficiently low to ensure that childrenreceive the appropriate amounts of attention in the classroom. The student teacher-ratio in Indonesiaaverages about 21 students per teacher in private kindergartens and students 19 per teacher in publickindergartens. Variation among provinces seems low with one exception in public kindergartens in IrianJaya where the ratio is about 40 students per teacher in public kindergartens.

Table 6: Student/teacher ratio by provinceProvince Student/Teacher ratio Province Student/Teacher ratio

Private Public _ Private PublicDKI Jakarta 18 11 West Kalimanatan 16 12West Java 18 22 North Sulawesi 16 17

Central Java 21 23 Central Sulawesi 17 23Yogyakarta 13 8 South Sulawesi 18 18East Java 23 31 Maluku 12 9

NTT 19 19 Bali 16 12Irian Jaya 18 14 NTB 22 15

National Average: 21 19(Source: PODES 1993)

Equipment, furniture and educational materials and toys. A rapid assessment was used in thesix of the project districts to identify the needs of the existing kindergartens. The results indicate thatmany of the poorer kindergartens reported that they were lacking adequate furniture, equipment andsupplies. On average, 65 percent reported lacking tables and chairs while nearly 100 percent reportedinadequate supply of the basic educational materials (toys and books) for instructional use. A simplecorrelation was conducted and high correlation was found between the amount of school fees charged andthe supply inadequacies. Field observations also showed that there was a severe shortage of educationalmaterials and toys which hampered the implementation and expansion of the curricula in the classroom(World Bank, 1997). Many of the kindergartens in the project districts were not receiving funding fromthe government but were financing the operational costs from the school fees that they charged thechildren.

Field Observations.20 The quality of learning in the classroom was assessed based on anexamination of the overall curricula for the programs and the application of child development theory.The following deficiencies were found:

* The activities for children were most often product-oriented work and teachers did not focuson the on the learning inherent in the activity, but rather on whether the child correctlyfollowed the model.

* Implementation and expansion of the curricula is hampered by lack of materials in manyprograms.

* Emergent literacy materials were particularly scarce at all age levels. Items such as pictureand story books, writing materials and paper were scare especially in Bahasa Indonesia.

iv. What needs to be done in Early child Education andproject interventions? The servicedelivery gaps in Indonesia can be summarized as the following: low access to kindergartens in general,high cost for poor households, high travel cost, low awareness, and inadequate equipment, furniture andeducational materials in existing kindergartens reducing the quality of education.

20 World Bank, 1997. Taken from Aide Memoire for Early Childhood Development dated July 23 1997. This work was produced by EllenFrede.

39

Problems Project Intervention

Low supply of kindergartens in rural Construction of 331 new kindergartens (predominantly inareas rural ][DT villages)

High fees Kindergartens under the project will provide services free tochildren in poor IDT villages.

High travel time (cost exceeds that of Construction of kindergartens in rural IDT villages so thatthe average school fees) parents do not have to travel large distances to send their

children to school.

Low parental awareness IEC campaigns at the national and local level

Lack of equipment and furniture Provision of grants to existing kindergartens

Lack of educational materials and Provision of grants to existing kindergartenstoys

IV. COST-EFFECTIVENESS

This section consist of two main parts, a section on the nutrition component and another whichdescribes several cost-effective models for various building designs that were introduced and agreedupon by the GOI. The models in the second parit seek to maximize the effectiveness of kindergartens andthe Posyandu/BKB activity in service delivering within the parameters of cost-minimization.Kindergarten designs proposed and agreed upon adhere to the strict rule that sufficient space should beallocated for children's activities.

A. Nutrition InterventionIs the nutrition intervention cost-effective? Despite the fact that the nutrition intervention to supply

supplementary feeding was designed in a short period of time, efforts have been made to ensure that it iscost-effective for the Government of Indonesia especially during times of economic crisis when publicfunds are scarce and needs are overwhelming. The estimated cost of the nutrition intervention for thisprogram is estimated at US$15 per child per year. The unit cost of the nutrition component is US$0.18per 1000 calories delivered. In comparison to other food supplementation interventions of a similarnature2", the nutrition intervention that is being introduced under the project is extremely cost effective(See table below). The per unit cost (includes both procurement and all other distribution costs) is lowerthat the sample average of US$0.20.

Table 7: Comparison Of ECD Nutrition Intervention Against Similar Interventions In Other Countries.Year Cost per 1000

Country calories delivered

Bolivia 1988 0.12India 1982 0.20Honduras 1988 0.36Ecuador 1988 0.21Guatemala 1988 0.33Paraguay 1988 0.90Peru 1988 0.32

21 The sample consist of MCH and feeding programs only.

40

Uruguay 1988 0.24ECD project 1998 0.1822

Source: Jamison et al., 1993 for all estimates except those for the ECD project.Estimates for ECD project were calculated by the author.

B. Access To Posyandu/BKB ProgrammesAs described in Annex 1, Posyandu/BKB programs are at present held in a variety of locations:

the house of the polindes (the village mid-wife); in Bali in the Banjar (the village meeting place); inthe village poskesdas (clinics); or in purpose built centers of various sizes.

During project preparation, it was found that some communities required a Posyandu/BKB centerwith the following dimensions: a covered (but not necessarily enclosed) meeting space large enoughto accommodate 25 mothers; a room for consultations, simple examinations and storage of toys andequipment; and a small waiting area. Thus to accommodate these needs and increase Posyandu/BKBattendance the project will build in a selected number of villages (where the need is greatest) centers.However, to efficiently allocate resources as required various altematives have been explored:

* an extension to a Polindes or to an existing meeting place such as a Banjar in Bali or a villageoffice in West Java; or

* the construction of a new center if the land is available in the villages.2"

Table 7: Comparative costs of Posyandu/BKB CentersType of Building CostPosyandu/BKB Center Rpl8,768,000Extension to Existing Building Rp 7,140,000

Total savings Rpl 1,628,000

The cost of extending an existing building is about 40 percent of the total cost of building a newPosyandu/BKB center. The total savings would be about Rpl 1.6 million for each center constructed. Itcan be seen therefore that the most cost-effective way to provide increased access to the Posyandu/BKBprogram would be to extend existing buildings.

C. Access To Kindergartens24

To increase access to kindergartens in Indonesia using the most cost effective measures, the projectproposes the following: alternative facility designs; urban trade-off; and use of vacant SD schools.

i. Allowing For Alternative Facility Designs. The first measure which has already beenimplemented is the reduction of GOI's requirements for the construction of kindergartens. Thegovernment standard was set at 2,000m2 . During pre-appraisal, discussions were held with GOI todetermine the cost-effectiveness of these requirements. As a result, it was agreed that the requirementwould be reduced so that to l,500m2 and even less in certain circumstances (see below) to accommodatethe needs in rural areas (where the density of children is lower) and also to reduce the land requirementsthat the villages would have to provide under the project and the allocation of financing in urban areassuch as Denpasar and Tanggerang where land is at a premium, expensive and scarce. This alternative

I The exchange rate used was Rp8,000: US$1.23 In addition, it has been determined that the square metre cost of constructing a complete new Posyandu/BKB centre would not be the same asbuilding the standard single storey (type D) building because the structure would not have all walls, windows or doors. Consequently, the perunit cost would be reduced by a factor of 20 percent resulting in an average cost of Rp408,000per m2. If a consultation/storage room and waitingarea is added, the unit cost of this area would however be the same Rp5 10,000 per m2 as walls, doors and windows would have to be built.

24 This section is taken from a report produced by Nigel Wakeham, 1998.

41

allows for savings of up to a quarter of total construction costs or Rp.79,050,000 per unit built.

a~~ ~ IL B 4 .A 5O~cC S_ W lW--

.. . .._. . ,

' - * 0KD1 1 fl *; '*- A - T v

Drawing 1: Standard kindergarten proposed under the project (1 500m2)

ii. The urban trade-off Urban trade-off. In the projects' urban districts, issues of landscarcity could arise. Consequently, it would be necessary to either reduce the size of the kindergarten;reduce the size of the external playground; or build the kindergarten on two-stories. As a result, therewould be two main options to choose from: a single-story facility on 1500m2 (the standard option) or amodified alternative of a double-story building on I 000m2 of land. Which is most cost-effective? Theanswer depends on the differences between the per m2 per of

Table 8: Urban Trade-off"Costs Kindergarten Double-story

kindergarten

Land 270,000,000 180,000,000Construction 116,280,000 133,608,000Total 386,280,000 313,608,000

land and the per m2 price of construction. To illustrate the trade-off we use the example of Denspasarwhere land is at a premium and costs approximately Rpl8 million per 10Om2 . Thetotal cost of the first option is Rp386,280,000 while the second is Rp313,608,000 per facility. In fact thesecond option is cheaper because land is so expensive thus making option two a more cost-effective one.The total savings on each facility would amount to Rp73 million.

iii. Use of vacant SD schools. An alternative to constructing new kindergartens would be touse existing primary school classroom units that are no longer required. Through the school-mappingexercise, many SD schools have been consolidated leaving facilities vacant. The cost of renovating anexisting kindergarten is far lower than that of building a standard new facility. The potential savingsaccrued per unit built amount to approximately Rp46,000,000. As a result, this project activelyencourages districts to convert abandoned primary school buildings into kindergartens because of therelative cost-effectiveness of this intervention.

iv. Conclusion. Of the three options, the most cost effective way of providing new

25 Calculated using construction costs of the project districts (an average was taken of all 12 districts).

42

kindergartens is through the use of surplus primary school buildings and this option should be thoroughlyexplored when preparing the detailed district plans. Where these buildings are not available, the secondcost-effective option is the single-storey villages kindergarten. In urban situations however, the sitesavailable could be too small for a single-story building and a two-story kindergarten will have to be builteven though these cost a great deal more.

V. COST BENEFIT26

The cost-benefit analysis focuses on determining the IRR or internal rate of return forinterventions associated with a two year early child education intervention. The analysis is based onthe following assumption: first, two years of kindergarten or some other program is provided at a unitcost of Rp 200,000 per year; second, poor children (e.g., the lowest income quintile) have graderepetition rates that are twice the average for the population as a whole (a reasonable assumption basedon international data); and third, the preschool program reduces their grade repetition rates by 50percent (Barnett, in press; Myers, 1992). In addition, two alternative approaches were used to estimateeffects on earnings. One assumed that earnings are increased by 40 percent of the average earnings ofprimary school graduates after age 18 (based on findings by Barnett, 1996). The other calculated theearnings increases associated with increased educational attainment assuming a set of plausible changesin educational attainment (primary school completion rates rise from 60 percent to 80 percent, juniorsecondary completion rates rise from 25 percent to 45 percent, and senior secondary completion ratesrise from 10 percent to 20 percent).

The first approach produced a projected internal rate of return of 15 percent, the second aninternal rate of return of 13 percent. Note that these estimates make no provision for potentialadditional economic returns due to increased health, household productivity, reduced crime, and otherbenefits found to accrue to early education and increased educational attainment generally. Thus, thispreliminary analysis indicates that education programs for poor children ages 5 and 6 and costingaround Rp 200,000 per year have the potential to be sound economic investments in Indonesia.

VI. PROJECT COVERAGE

The project targets children in 12 districts located in 3 main provinces in Indonesia. Thedistricts that were chose include: Bali - Denspasar, Buleleng, Klungklung and Karamasam; SouthSulawesi - Gowa, Maros, Bulukumba and Bone; West Java - Pandelgang, Lebak, Tangerang andIndramayu. The total population of children in these districts collectively is about 690,000 between theages of 0 and 5 (estimates from SUSENAS 1995). Within the districts, the main beneficiaries of theproject interventions are children in poor IDT villages. The target group for each of the interventionsvaries, for specific interventions such as the supplementary feeding program, the target group ischildren between 0 and 2, for kindergartens the target group are children between 4-6 and the BKB andPosyandu programs both target the widest age group of 0 and 5 year olds in the 12 districts. Wepresent below the coverage of the two single largest project interventions.

i. Nutrition. The nutrition intervention is part of a large GOI/UNICEF coordinatedinitiative to target as many poor children in Indonesia as possible. The participants of this initiativeinclude: AUSAID, the World Food Program, the Asian Development Bank, the Government of Japanand the World Bank. This project will target approximately 249,055 children in the IDT villages andrural areas of the 12 districts. This implies that about 72 percent of the children in the 12 projectdistricts will receive the intervention.

26 Extracted from analysis conducted by Steve Barnett (1997).

43

H. Kindergartens. Approximately 230 kindergartens will be build and 110 rehabilitated inthe target area. This implies access to kindergairtens will be increased for at least 34,000 childrenbetween the ages of 4 and 6. In addition approximately 1255 teachers will received re-trainingfellowships to increase their credentials to the D1-I level. Thus, approximately, 44 percent of childrenbetween the age of 4-6 will benefit from the various kindergarten related interventions in the 12districts.

44


Fiscal Analysis

A. Introduction

In the last year, the economic situation in Indonesia has changed rapidly. After a long period ofstrong economic growth, the economy is on the brink of collapse with a GDP decline of about 8.5 percentin the first quarter of 1998 and an expected reduction of about 7.5 percent in the second quarter (See tablebelow). Consequently, GOI is now faced with a situation of reduced resources and increased demands onthese resources. The public expenditure budget as a percentage of GDP will begin to rise substantially inthe coming fiscal year.

Table 1: Macroeconomic Framework

1996/97 1997/98 1998/99 1999/00 2000/01

Growth Rate 7.8 1.0 -12 0.0 3.0

GovernmentExpenditure/GDP 13.9 16.7 24.2 18.0 17.0(percent)

(Source: World Bank, draft June 1998)

Under these circumstances, it becomes extremely important to examine the fiscal implications ofthe proposed project and interventions to ensure that the fiscal burden on GOI is manageable andrecurrent expenditure can be easily absorbed into the development or routine budget after projectcompletion.

The key element of the fiscal analysis is the Early Child Development (ECD) budget which is notreadily available in Indonesia. In addition, estimating the total ECD budget is also extremely difficultbecause these programs are implemented independently of each other by three different ministries andhave fragmented budgets. ECD activities are currently being carried out by the Ministry of Health(Posyandu program), the National Family Planning Coordinating Board (BKB program) and the Ministryof Education (kindergartens). In the case of kindergartens, the budget is known. For the other twoprograms, it is less clear as Posyandus are part of the community health centers and BKKBN conductsmany activities that are related to the BKB program that the overlap is immense. Consequently, due tothese data limitations, this analysis uses pooled estimates of the individual budgets for the three programs,the framework of which is presented in the first part of the analysis and which is followed by theestimation of the budget for the subsequent 8 years, and finally issues of sustainability are examined.

B. Budgets2"

The budgets allocated for the three programs have been extremely small. The largest allocation ofresources to ECD activities has been in the health sector. The total health budget allocated forcommunity health services in 1997/98 was Rpl47 billion, of this amount 70 percent was for communityhealth centers (including the Posyandu program) which was RplO3 billion. For FY96/97, the estimatedamount was Rp 143 billion of which Rp 100 billion was for community health centers including theposyandu. The actual allocation for posyandu activities is difficult to estimate because much of theallocation at the village level is in-kind. Thus, as an approximation assumed that about 50 percent of thecommunity health center budget is for posyandu allowing for Rp51.5 and Rp50 billion in FY97/96 andFY96/97 respectively.

27 Budgetary data was obtained from the individual ministries during pre-appraisal.

45

Similarly, the budget for the BKB program is small. The total BKKBN budget for the BKBprogram in FY96/97 is estimated at about Rp2 billion. In addition, the BKB program receives fundingfor multiple sources at the provincial level mainly because the budget allocated through BKKBN isinsufficient for the necessary activities. For exarnple, in Bali 0.01 percent of the 1997/98 budget receivedby BKKBN provincial office was for the BKB program. Although supplemental budgets were allocatedthrough the APBD I these additions also insubstantial. In Bali, the sum total of financing allocated fromthe provincial budget did not exceed Rp3,000,000.

The kindergartens budget for the fiscal year 1996/97 was roughly about 0.3 percent of the totaldevelopment budget allocated for education or Rpl4 billion. And the budget for routine expenditureswas Rp27 billion in 1996/97 or 0.6 percent of the total education budget. Thus, the total kindergartenbudget was approximately Rp41 billion or 0.4 percent of the total education budget for Indonesia.

Budget data is complete for FY96/97 and 'the total ECD budget for that year amounts to aboutRp93 billion (See table below). The estimated ECD budget for the coming fiscal year 1998/99 is stillundetermined. Therefore an estimated budget is derived using the FY96/97 budget figures andemploying the assumption that the ECD budget will remain constant (in real FY96/97 terms). The resultis an estimate of Rp2O9.35 billion for Early Child Development activities in FY98/99.

Table 2: ECD budget for FY96/97 and the estimated budget for FY98/99(in illions of Rp)

Health BKB Kindergartens Total(posyandu)

FY96/97 50 2 41 93Estimated - - - 209.2528FY98/99

C. Sustainability

The issue of sustainability is examined using the following indicators: fiscal burden of project coston ECD budget, and fiscal burden of recurrent cost (of project) on ECD budget. The assumptions used inthis model are: inflation increases to 80 percent: in FY98/99, a further 20 percent in FY99/00 andremains at 7 percent thereafter; the growth rate of GDP contracts by 12 percent in FY98/99, remains at 0for FY99/00 and begins to increase thereafter at a rate of 3-6 percent; and GOI with a commitment toprotecting the social sectors maintains the budget constant in real throughout the period FY98/99-2005/06(in FY96/97 terms).29

The analysis shows that the burden of the investment costs on the GOI budget increases in thesecond, third and fourth year of implementation. In these years, the project will increase GOI's ECDbudget by as much as 60 percent (See table below). This is predominantly due to the nutrition componentwhich is a three year intervention that will occuIr between FY98/99 and FYO0/01. Both counterpart-funding and sustainability are non-issues as the financing ratio for this expenditure (nutrition) because itis financed 100 percent by through the loan and the component is designed as emergency support.

28 Estimated using inflation rates of 25 percent for FY97/98 and 80 percent for FY98/99.29 implies that the budget increases at a constant rate of inflation.

46

Table 3: Fiscal Analysis -No growth in real-terms (in billions of Rp)Year/Item 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06Growth rate -12 0.00 3 3 3 4 5 6Inflation rate 80 20 7 7 7 7 7 7Real growth of ECD 0 0 0 0 0 0 0 0budget

<------------------------Implementation Period------------------> After project

Total ECD Budget 209.3 251.1 268.7 287.5 307.6 329.1 352.2 376.8(nominal values)

Total Project Costs30 36.1 153.2 159.0 39.7 12.5 4.4Total Project Recurrent 0.03 0.20 0.67 1.2 1.2 1.2 1.2Costs

Total Project Cost/Total 17.24 61.0 60.0 13.1 4.1 1.3ECD Budget (percent)Total Project Recurrent 0.01 0.07 0.23 0.4 0.4 0.3 0.3Cost/Total ECD Budget(percent)

For the other components, sustainability is determined by the level of recurrent expenditure. Inthis case, recurrent expenditure as a total of the early child development budget remains low throughoutthe project cycle and beyond. It increases from 0.01 percent to a high of 0.4 percent by the end of theproject cycle. Thus, even if the ECD budget does not grow in real terms, the burden of the recurrent costson the GOI budget is a non-issue. The expected recurrent costs at the end of the project life is smallenough so that it will be absorbed by increases in the ECD budget.

Conclusion. The analysis indicates that the GOI will not experience increased budgetary pressureduring implementation and counterpart-funds should not be an issue because the non-crisis relatedexpenditures are small. In addition, sustainabilty is also not an issue as the recurrent costs are smallenough so that they can be easily absorbed by the GOI after project completion.

30 Total project costs used in these models are an aggregate of all categories of expenditure excluding TechnicalAssistance. Project cost however does include price and physical contingencies, and taxes.

47


Procurement, Disbursement and Financial Management Arrangements

Procurement methods

All procurement of goods and works funded under the Bank loan will be carried out in accordancewith the Bank's Guidelines for Procurement uinder IBRD Loans and IDA Credits dated January 1995, andrevised in January and August 1996 and Septernber 1997. The procurement of consulting services willfollow procedures prescribed in the Guidelines on Selection and Employment of Consultants by WorldBank Borrowers dated January 1997, revised September 1997. Table A summarizes the procurementarrangements, showing the items, their respective cost estimates and proposed method of procurement,while Table B presents the prior review thresholds.

Organization and Management of Procurement. Most of the procurement actions for theproject will not constitute large single contracts. Construction and rehabilitation of the ECD centers andTKs, which comprises the largest amount of works would consist of many small and scattered contracts.Similarly the purchase of furniture, educational toys and materials and teaching materials, and otherequipment will largely comprise small purchases of mostly locally acquired material.

The Project Management and Implementation Units (PMIUs) in each district would be in charge ofprocurement for the project related activities in their respective districts. Guidance will be provided bythe Provincial Project Management and Implernentation Unit (PPMIU) at the provincial capital, who willalso be responsible for procurement of project related activities at the provincial level. The CPMU wouldbe responsible for all procurement required for the central component, which would largely consist ofhiring international and national consultants.

Procurement procedures shall follow the Bank's guidelines. In the event of any conflict between theBank guidelines and Kepres 16/1994 or any other GOI regulations, the requirements of the Bankguidelines will govern. The Government will waive such unacceptable procedures in a supplementalletter to the Loan Agreement.

Community civil works (US$ 5.0 million equivalent for TKs and US$ 0.7 million forBKB/Posyandu, including contingencies). The works would be small in size and scattered over the 12districts in the three project provinces. These works will be procured following community participationprocedures agreed with the Bank during negotiations.. The works will be managed by the villagecommunity development council (LKMD) and be supervised by the Dinas P dan K and assisted by DinasPUK and construction engineers. The works would consist of construction, rehabilitation or extension ofsmall ECD centers, particularly for Posyandu/13K.B activities, and rehabilitation and construction of newTKs. The works would be phased. Phase I would cover 6 districts beginning in Year 2 of the project,and Phase 2 would cover the following 6 districts beginning in Year 3 of the project. The costs of themulti-purpose ECD centers would not exceed Rp.20 million (US$,2500 equivalent) per unit for newconstruction, Rp.8 million (US$1000 equivalent) for an extension and about Rp. 5 million (US$ 625equivalent) for the other rehabilitation works. The unit cost of constructing new TKs would be about Rp.129 million (US$16,500 equivalent) and cost of rehabilitating an existing TK would be about Rp.96million (US$12,000 equivalent). This would include the provision of water supply and toilets and theconstruction of the new TKs would be based on revised and more cost-effective designs than the standardGOI models. All sites would be illustrated on maps using the Geographical Information System (GIS)and sites for Phase I program have largely been agreed but require detailed site surveys.

48

Table A: Project Costs by Procurement Arrangements(In US$ millions equivalent)

Expenditure Category Procurement Method Total Cost(include.

contingencies)

ICB NCB Others* N.B.F.

1. Community civil works

(a) Posyandus/BKB 0.7 0.7(0.7) (0.7)

(b)Kindergartens 5.0 5.0(TKs) (5.0) (5.0)

2. Goods 0.8 0.6 1.4(0.8) (0.5) (1.3)

3. Food (including 9.8 1.0 10.8distribution costs) (9.8) (0.8) (10.6)

4. Fellowships and 1.9 1.9Training (1.9) (1.9)

5. Services of Contract 0.2 0.2Teachers (0.2) (0.2)

6. Project Management 0.5 0.5(0.4) (0.4)

7. Consultant Services and 1.4 1.4studies (1.4) (1.4)

8. Maintenance 0.2 0.29. Land Acquisition 3.4Total 9.8 0.8 11.3 3.6 25.5

(9.8) (0.8) (10.9) (21.5)

* Community participation, national shopping, direct contracting, Government's administrative proceduresacceptable to the Bank, and consultant selection procedures acceptable to the Bank.NBF = Not Bank-financed. Figures in parentheses are the amounts to be financed by the Bank loan.

Goods (US$ 1.4 million equivalent, including contingencies). Furniture and equipment for ECDcenters and TKs, and offices, (US$0.9 million) would be procured on an annual basis in accordance withthe phasing of project activities. Each package of goods is not expected to exceed US$200,000 butpackage exceeding US$50,000 would be procured through NCB procedures acceptable to the Bank, andequipment and furniture costing less than US$50,000 would be procured on the basis of nationalshopping procedures acceptable to the Bank up to an aggregate of US$600,000. Quotations must beobtained from at least three qualified suppliers on the basis of a detailed description and quantity ofgoods, as well as the desired delivery time and place. Educational materials and Information, Educationand Communication (IEC) Materials (US$ 0.5 million) would consist of educational books, learningmaterials and toys for ECD programs (including the APE toys for the BKB program), teaching modules,teaching aids, and training materials. They would be procured by the Dinas P & K at the district level,acknowledged by Kandep/Kanin Dikbud and/or Kandep Depag, through direct contracting of proprietaryitems or NCB procedures acceptable to the Bank. The procurement will be based on lists of appropriate

49

educational books, materials and toys that are already available and agreed with the Bank. The IECactivities would consist of the development, production and distribution of materials through a variety ofmedia, and the conduct of IEC campaigns. No packages are expected to exceed US$200,000 butpackages exceeding US$50,000 would be procured on the basis of NCB procedures, acceptable to theBank, up to an aggregate of US$800,000. All packages below US$50,000 will be procured on the basisof national shopping procedures.

Food (including distribution costs) for infants 6-24 months (US$ 10.8 million equivalentincluding contingencies). This will be a micronutrient fortified cereal-legume blend which meets therequirements of the Codex Alimentarius and the World Food Program and UNICEF guidelines forcomplementary foods for infants. The complennentary food will be "ready to serve". The product will bepackaged in quantities of 500 g and metallic packaging will be used to ensure shelf-life under varyingstorage conditions. Complete specifications on the raw materials, production processes and finishedproduct have been provided by UNICEF/DEPIES. The food will be procured on the basis of ICBprocedures by Central Depkes' pimbagpro over a two year period. The food delivered directly by thesupplier to the district warehouse of Dinas Kesehatan TKII on a monthly basis. From the warehouseit would go to the health center (puskesmas) to be distributed at the Posyandu. This would greatlydecrease the transaction and distribution cost:s. Procurement would be done on an annual basis, butthe delivery only once a month

Fellowships and Training (US$ 1.9 million equivalent, including contingencies). Fellowships forteachers and relevant officials would be awarded in accordance with annual plans agreed with the Bankand following Government administrative procedures acceptable to the Bank. Training (US$ 1.6) for TKteachers, supervisors, and Posyandu/BKB cadres will be carried out by trainers who will receive trainingfrom consultants who will be hired following procedures set forth in the Bank's Guidelines for theSelection of Consultants. The trainers would conduct training activities in accordance with Governmentadministrative procedures (including those governing staff travel and subsistence allowances, provisionof consumable materials, and other training-related activities) acceptable to the Bank and based on theagreed annual work programs. Similarly, the t:raining of management and staff of the district andprovincial agencies will be carried out by consultants who will be hired in accordance with the aboveBank guidelines and who will conduct training under plans agreed with, and Government proceduresacceptable to the Bank.

Services of Contract Teachers (US$ 0.2 million equivalent, including contingencies) would beselected in accordance with criteria agreed with the Bank, following Government procedures andappointed by the district head (Bupati/Walikoi:a).

Project Management (US$ 0.5 milliom equivalent, including contingencies) support for projectmanagement activities including honoraria, provision of office equipment and materials (excluding travelexpenses and per diem allowance which would be financed by GOI) would be provided in accordancewith Government administrative procedures azceptable to the Bank.

Consultants Services and Studies (USS 1.4 million equivalent, including contingencies). Thesecontracts would cover technical assistance for policy reviews, special studies and surveys, curriculumreview, and a major impact evaluation study. Recruitment would follow procedures prescribed in theGuidelines. Letters of invitation and terms of reference for all consultancies and single source contractswill be subject to prior review by the Bank for contracts valued at US$100,000 equivalent or moreawarded to firms or US$50, 000 equivalent or more awarded to individuals. The consultants would bechosen based on QCBS procedures. The Bank's Standard Form of Contract (SFC) for Consultant'sServices will be used. Consulting assignments valued at more than US$200,000 equivalent will beadvertised in Development Business. The Standard Request for Proposals, including standard contracts,dated July 1997 and revised in April 1998 will be used for all consultant assignments.

50

Table Al: Consultant Selection Arrangements

Selection Method Total CostConsultant Services (includingExpenditure Category contingencies

QCBS QBS SFB LCS CQ Other N.B.F

A. Firms 1.2 1.2

(1.2) (1.2)

B. Individuals 0.2 0.2

(0.2) (0.2)

Total (1.2) (0.2) 1.4

Note:: QCBS = Quality- and Cost-Based Selection CQ = Selection Based on Consultants' QualificationsQBS = Quality-based Selection Other = Selection of individual consultants (per SectionSFB = Selection under a Fixed Budget V of Consultants Guidelines)LCS = Least Cost Selection

Prior Review Thresholds

Table B summarizes the threshold for procurement methods and Bank review.

Contracts for works for TKs and ECD centers would be awarded to the LKMD in accordancewith criteria agreed with the Bank. Prior review of all contracts may not be practicable, however the Bankwould do random ex-post review of a sample of approximately 20 percent.. Contracts for fellowships,training, services of contract teachers and all other consultant contracts not subject to prior review wouldbe subject to random ex-post reviews.

About 30 percent of all contract awards would be subject to prior review.

51

Table B: Thresholds for Procurement Methods and Prior Review

Expenditure Contract Value Procurement Contracts Subject toCategory Threshold Method Prior Review

1. Community civil worksTK construction and Community First contract fromrehabilitation participation each district each year

List of TKs agreed bythe Bank.

ECD centers, construction and Community List of ECD centersrehabilitation participation agreed by the Bank

2. GoodsEquipment and furniture, Less than US$200,000 but NCB First contract fromeducation materials, and IEC more than US$50,000 National Shopping each district each year

US$ 50,000 or lessFood (Complementary) More than US$200,000 ICB Prior review3. ServicesConsultant contracts for Equal to or more than QCBS Prior reviewimplementation and studies US$100,000Consulting services by Equal to or more than Individual consultants TORs, qualifications,individuals US$50,000 draft contract

Training, Fellowships Proposal to include Prior review ofsubject, types of proposalparticipants, period oftraining, cost

Services of Contract teachers Regular government Criteria agreed by theprocedures Bank

4. MiscellaneousProject Management Regular government Criteria agreed by the

procedures. BankTotal value of contracts subject to prior review: US$ 13.0 million

Allocaltion of Loan ProceedsTable C: Allocation of Loan Proceeds

Expenditure Category Amount Financing Percentagein US$ million

(I) Community civil works 100%a. Posyandu/BKB 0.7 100%b. Kindergarten 4.5

(2) Goods. 1.1 100% of foreign expenditures, 100 % of localexpenditures (ex-factory) and 80% of localexpenditures procured locally

(3) Food, including distribution 100% of foreign expenditures, 100% of localcosts expenditures (ex-factory) and 80% of local(a) FY 1998/1999 2.1 expenditures procured locally.(b) FY 1999/2000 5.3(c) FY 2000/2001 3.2

(4) Fellowships and Training 1.7 100%(5) Services of Contract Teachers 0.2 100%(6) Project Management') 0.4 100%(7) Consultant Services and Studies 1.3 100%(8) Unallocated 1.0

Total 21.5*Includes expenditures for honorarium, equipment and materials necessary for project implementation (excluding travel and

per diem)

52

Disbursements

Use of Statements of Expenditures (SOEs). Disbursements for all food contracts and contracts ator above US$200,000 for goods, US$100,000 for consulting firms, and US$50,000 for individualconsultants would be fully documented. Disbursements for all other expenditures, would be againststatements of expenditure, whereby supporting documentation is to be retained by the implementingagencies and made available to the Bank for review during supervisions.

Special Account. To facilitate project implementation and disbursement, a Special Account (SA) inUS currency in the amount of US$2.15 million will be established by the Directorate General (DG) ofBudget at Bank Indonesia on terms and conditions acceptable to the Bank. The SA would cover theBank's share of eligible expenditures in all disbursement categories, and is based on 4 months estimatedexpenditures. The DG Budget will submit applications for replenishment of the Special Account on amonthly basis, or when the account is drawn down to within 20% of the initial deposit, whichever occursfirst. In addition to the supporting documents being kept at the PIUs, the DG Budget will also retaincopies of the relevant supporting documents against which applications for disbursements are prepared.

Flow of Funds. The Pimpro/Pimbagpro at the CPMU/PPMIU/DPMIUs will be responsible forauthorizing the project expenditures in accordance with the agreed budgets under the existing governmentprocedures. They will submit their payment requests to their respective MOF Treasurer (KPKN) whowill issue payment remittance orders (SPM) to Bank Indonesia to credit payees' accounts at the latter'srespective banks and to debit the project Special Account. For expenditures in small amounts and foractivities managed by the units themselves (swakelola), sufficient cash advance funds will be provided byKPKN to the Treasurer of the units. Each month or when required earlier, the units will account for theirexpenditures and report to the KPKN who will replenish the respective account, based on the PIUreports; the KPKN will the request reimbursement from the project Special Account.

The DG Budget will provide KPKN with guidelines and criteria for eligible project expenditures, inaccordance with the Loan Agreement. All the required forms necessary to submit payment request andthe relevant documentation are standard and are currently applicable to all foreign-funded projects.KPKN will provide copies of the payment remittance orders (SPM) and other supporting documents tothe DG Budget regularly, against which the applications for disbursement will be prepared.

Financial Management System

The details of the project's financial management system, derived from the Project ImplementationPlan (PIP) prepared by the Borrower, is outlined below. The Borrower and the project implementingentities maintain financial management systems-including accounting, financial reporting, and auditingsystems-adequate to ensure that they can provide to the Bank accurate and timely information regardingproject resources and expenditures.

Internal Control System. The Government's internal control system--consisting of an institutionalframework (project organization), accounting system, and control procedures-- has been reviewed.included the adequacy of staff to carry out the project, and the adoption of internal controls by theagencies involved under the project. DIKLUSEPORA and the DG of Community Health at the centrallevel and the Kanwil Dikbud at provincial level have adequate capacity and experience in implementingWorld Bank projects. The limited experience and possibly inadequate levels of staff skills for carryingout project activities in the districts agencies will be addressed at the beginning of the project through: (i)assignment of skilled staff to the district agencies concerned from other, cooperating agencies; (ii)issuance of implementation guidelines (Juklak) and technical guidelines (Juknis); (iii) provision oftraining on project administration and management; and (iv) deployment of cons consultants who willprovide guidance during project implementation.

Project organization and Staffing. The project covers three provinces each with four participating

53

districts. Each district would have two Project Management and Implementation Units. One would beat Dinas P&K TK 11 responsible for TK and EC D centers rehabilitation and construction; and, it will alsoinclude Kandep Dikbud TK 11 who is responsible for other education components. The other would be atDinas Kesehatan TK 11 and be responsible for the nutrition component. At the provincial level, aProvincial Project Management and Implementation Unit (PPMIU) will be established in the KanwilDikbud. At the central level, a Central Project Management Unit (CPMU) will be established in theDIKLUSEPORA. The CPMU includes a pimpro at Dikmas for the ECD activities implemented at thecenter and a pimbagpro at DG Community Health for the ECD nutrition sub-component. The projectorganization for the ECD project is consistent with the DIP budgeting mechanisms provided for theproject. The district PMIU is managed by Pimbagpro (project sub-manager) responsible to carry outactivities and execute expenditures as planned under the coordination of PPMIU at the provincialKanwil Dikbud who will act as the Pimbagpro (project sub-manager).

Each district PMIU will have a pimbagpro, Treasurer, Procurement Officer, Financial Officer, anda small team of technical staff. The PPMIU and the CPMU in Jakarta will include positions of assistantsin finance, implementation, programming, and monitoring and evaluation. The qualification requirementsfor Pimpro/Pimbagpro and Treasurer are as fol lows:

Pimpro/Pimbagpro Treasurer* Competent staff of the agency * Competent staff of the agency• University degree (SI) or three-year * Diploma (D2 or D3)

diploma (D3)* Minimum staff level III/c for Central, Ill/b * Minimum staff level 11/c

for Province and III/a for District* Attainment of project management course * Attainment of treasury course certificate or

certificate or equivalent equivalent* Two years working experience in * One year working experience in

government projects government projects

Financial Statements. The project financial statements showing the financial position of the projectduring the fiscal year ended on March 31 will be comprised of the following:

(a) Financial Statement of Project Account: Each PMIU will maintain separate sub-projectaccounting records, on cash basis, for each source of funds. The provincial PMIU and the CPMUwill maintain similar accounting records for activities executed at provincial and central levels,respectively. All relevant supporting documents will be kept for annual audit and randominspection by the Bank. The Dinas P&K will consolidate PMIUs' financial reports within thedistrict and submit to then to the provincial PPMIU on a quarterly basis. The PPMIU willconsolidate all districts reports. The overall financial project accounts will be prepared by CPMU,i.e., Statement of Project Expenditures and Financing (SPEF).

(b) Financial Statement of Special Account and SOE: The DG Budget, as custodian of the projectSpecial Account and responsible for disbursing funds from the Bank, will prepare the financialstatements of the Special Account and the SOE (Statements of Expenditures). The financialstatements in standard formats (developed from June 1992) will include the following:

* Deposits and replenishments to special account received from the Bank* Withdrawals from the Special Account, including all SOEs (both from SA and other

accounts) used as the basis for submission of withdrawal applications* Remaining balance at the end of fiscal year* Reconciliation between amount received by SA and amount disbursed by the Bank

Financial Management Reporting Requiirements. As part of the monitoring system, progress offinancial status will be reported on quarterly basis. All PMIUs will submit progress reports two weeks

54

after the end of quarter. The PPMIU will compile and consolidate the provincial report for submission tothe CPMU where it will be integrated with the progress report at central level, into the overallconsolidated reports for submission to project management and the Bank one month after the end ofquarter.

All financial reports will follow the agreed formats provided in the PIP, which include the following:* Statement of Project Expenditures and Financing (SPEF)* Progress Report of Project Expenditures and Financing (PRPEF)* Summary of Sources and Uses of Funds (SSUF)* Cost Variance Report (CVR)* Unit Variance Report (UVR)* Variance Analysis Report (VAR)* Project 6 Month Forecast (P6MF)* Contract Expenditures Report (CONREP)* Non-Contracted Expenditures Report (NCONREP)* Project Expenditures and Financing by District (LOCPEF) - consolidated report only* Status of Loan Disbursements (STATLN) - consolidated report only

In order to facilitate preparation of the above reports, all expenditures will be recorded in the"Worksheet for Project Expenditures and Financing" (WSPEF) format provided in the PIP. This wouldbe a detailed description of expenditures for each component, expenditure categories, financing sourcesand the relevant implementing agencies.

Auditing Requirement. The quarterly progress reports would be used for the basis of preparing thefinancial statement of project account (namely SPEF) to be submitted to the BPKP for annual audit. Theannual audit reports shall be furnished to the Bank not later than six months after the end of theGovernment's fiscal year, i.e., not later than September 30 each year.

The annual audit at district and provincial level would be carried out by the BPKP regional office, basedon the provincial consolidated account prepared by the PPMIU. The CPMU will prepare the overallconsolidated accounts combining the provincial account and the central level account for audit by BPKPhead office which will provide the audit opinion to the overall accounts on the basis of audit findings bythe BPKP regional office and its own audit activities. Likewise, the BPKP head office will also audit thefinancial statement of Special Account and Statement of Expenditure (SOE) prepared by DG Budget. Theaudits by BPKP auditors would be in accordance with the term of reference for the audit of projectaccounts, Special Account, and SOEs acceptable to the Bank.

55

Annex 6 Attachment IIndonesia: Early Child Development Project

Terms Of Reference For The Audit Of Project Account, Special Account AndStatement Of Expenditures

Objective

The objective of the audit of the project financial statement is to enable the auditor to express aprofessional opinion on the financial position of Early Child Development Project at the end of eachfiscal year and of the funds received and expended for a certain accounting period ended (March 31 ,yy),as reported in the financial statements of the Project Account, Special Account and Statement ofExpenditures.

The books of account provide the basis for preparation of the financial statement and areestablished to reflect the financial transactions in respect of the project, as maintained by the projectimplementing agencies under Ministry of Education, Ministry of Health, District Local Governments, asconsolidated by the Central Project Management Unit (CPMU) at DIKLUSEPORA, MOEC).

Scope

The audit will be carried out in accordance with International Standard of Auditing, and willinclude such tests and controls as the auditor considers necessary under the circumstances. In conductingthe audit, special attention should be paid to the :Following:

(a) All external funds have been used in accordance with the conditions of the relevant financingagreements, with due attention to economy and efficiency, and only for the purposes for which thefinancing was provided. Relevant financing agreement is Loan No. _ _-IND (Loan Agreement);

(b) Counterpart funds have been provided and used in accordance with the relevant financingagreements, with due attention to economy and efficiency, and only for the purposes of which they wereprovided;

(c) Goods and services financed have been procured in accordance with the relevant financingagreement;

(d) All necessary supporting documents, records, and account have been kept in respect of all projectventures (including expenditures reported via SOEs or SA). Clear linkages should exist between thebooks of account and reports presented to the Bank.

(e) Where Special Account have been used, they have been maintained in accordance with theprovisions of the relevant financing agreement.

(f) The financial statement have been prepared in accordance with consistently applied InternationalAccounting Standards and give a true and fair view of the financial situation of the project at (mm/dd/yy)and of resources and expenditures for the year ended on that date.

Project Account

The Project Account should include:

(a) a Summary of Funds received, showing the World Bank, project funds from other donors, and

56

counterpart funds separately;

(b) a Summary of Expenditures shown under the main project headings and by main categories ofexpenditures, both for the current fiscal year and accumulated to date; and

Special Accounts

In conjunction with the audit of the Project Account, the auditor is also required to audit theactivities of the Special Accounts associated with the project. The Special Accounts usually comprise:

* deposits and replenishments received from the Bank;* withdrawals from the special account; and* the remaining balances at the end of each fiscal year

The auditor must form an opinion as to the degree of compliance with the Bank's procedures andthe balance of the Special Account at year-end. The audit should examine the eligibility and correctnessof financial transactions during the period under review and fund balances at the end of such a period, theoperation and use of the SA in accordance with the financing agreement, and the adequacy of internalcontrols for this type of disbursement mechanism. The auditor should also prepare a reconciliationbetween the amounts shown as "deposited to the SA from the World Bank" and that shown as beingdisbursed by the Bank.

Statement of Expenditures

The auditor is also required to audit all SOEs (paid from SA and other account) used as the basisfor the submission of withdrawal applications. The auditor should apply such tests and control as theauditor consider necessary under the circumstances. These expenditures should be carefully comparedfor project eligibility with the relevant financing agreements, and with reference to the Project AppraisalDocument for guidance when considered necessary. Where ineligible expenditures are identified ashaving been included in withdrawal applications and reimbursed against, these should separately noted bythe auditor. A schedule listing individual SOE withdrawal applications by specific reference number andamount must be annexed to the audit report The total withdrawals under the SOE procedure should bepart of the overall reconciliation of Bank disbursements described above.

Audit Report

The audit report shall contain the auditor's opinion on the fair presentation of the financialstatement. It should be received by the Bank no later than six months after the end of the accountingperiod to which the audit refers. The auditor should submit the report to the borrower's implementingministry/agency who should then promptly forward one copy of the audited accounts and report to theBank.

The audit opinion on the Special Account should include a separate paragraph commenting onthe accuracy and propriety of expenditures withdrawn under SOE procedures and the extent to which theBank can rely on SOEs as a basis for loan disbursement.

57

Management Letter

In addition to the audit reports, the auditor will prepare a "management letter," in which theauditor will:

(a) give comments and observations on the accounting records, systems, and controls that wereexamined during the course of the audit;

(b) identify specific deficiencies and areas of weakness in systems and controls and makerecommendation for their improvement;

(c) report on the degree of compliance of each of the financial covenants on the financing agreementand give comments, if any, on internal and external matters affecting such compliance;

(d) communicate matters that have come to attention during the audit which might have a significantimpact on the implementation of the project, and

(e) bring to the borrower's attention any other matters that the auditors considers pertinent.

General

The auditor should be given access to all legal documents, correspondence, and any otherinformation associated with the project and deemed necessary by the auditor. Confirmation should alsobe obtained of amounts disbursed and outstanding at the Bank.

58

Annex 6 Attachment 2Indonesia: Early Child Development ProjectOrganizational Structure and Flow-of -Funds

ECD STEERING COMMITTEE

Center CPMU

PROJECT SUB-PROJECTMANAGER MANAGER

(Dit Dikmas) (Dit CommunityNutrition)

j.. _I

I Ir - - - - - - - - - - -,

I I

| | ~GOV1ERNOR|

rovince ECD COORDINATION COMMITTEE

, ~~~PPMIU

ECD Sub-Project Manager 3

s . _ > (Dikmas, Kanwil, MOEC)

* I

I I

* I

I I

DISTRICT HEAD/MAYOR

, II

. I

District/ ECD COORDINATION COMMITTEEMunici aXitv DPMIU

ECD Sub-Project Nutrition Sub-Manager Project Manager

Kev:_ _ _ +; Flow of Funds

- Coordination

EI l>overnment administrative Level

Annex 6 Attachment 3Indonesia: Early Child Development Project

Implementation Plan

ACTIVITIES 1998 1999 2000 2001 2002 2003 20042 14 1 6 1 8 1012 24264 81012 2 4 6 810 2 4 6 8112 24 81012 2 4 6 81012 2 4 6 81012

CENTRAL ACI-vITIESAl Development of Policy FrameworkA2 Quality ImprovenentsA3 Developrnent of IEC StrategyB Complementary Food ProgrammC Institutional Capacity Building (Training,

workshop, upgrading & fellowship)D Impact EvaluationE Project Management. M&E (MIS)F Extemal Technical Audit

PROVINCIAL AClIVITIESA IEC strategy, Training and ProgramB Institutional Capacity (training and fellowships)

- Provision of Equipment & FumitureC Project Managernent, M & E (MIS) , a

D Training for cadresn&tewcheraEl Provision of TA (CES)E2 Provision of TA (JEC & Training Specialist)

DISTRICTACTIVITESA MappingB Land AcquisitionC Construction /Rehabilitation of TK ECD etrsD Provision of Fumiture & Education Materials E *. lE Contract of Kindergarten teachersF Training for cadres, teachers, and faciltators.G Institution Capacity Building (training, fellowships and

provision of equipment).H Project Management, M & E (MIS) > b .- ^I IEC - Program implementation & campaignsJ Maintenance

60

Annex 6 Attachment 4Indonesia: Early Child Development Project

Construction Implementation Agreement For Rehabilitation/Construction Of TK/ Posyandu/BKB

NO.:IN VILLAGE/KECAMATAN/KABUPATEN: ..................................

NO.: /19DATE:

A. We, the undersigned:1. NAME :

TITLE : Pimbagpro , DinasADDRESS :

hereafter referred to as the FIRST PARTYAuthorized to act on behalf of the Government Dati II as Employer, by assignmentletter dated No.

2. NAME :TITLE : (Ketua I, LKMD)ADDRESS:

hereunder referred to as the SECOND PARTY

B. Both parties agree:a.Type of Works : (Detail Plan and Drawing Attached)b. Location :c.Description :d.Value of Agreement : Rpp .e. Execution period : calendar days from the date of signing the

agreement, without warranty period.f. Payment : First payment of Rp. (.... %) as initial advance.

Subsequent payments would be in accordance with work progress andthe expenditures incurred

g. Condition of execution: As stated in the attached General Condition of Agreement.

SECOND PARTY FIRST PARTY Acknowledged by

Ketua I LKMD Pimbagpro Village Head Camat Head( )(........................ . . . . . . . .... .. . . . . .. . . . . . .. .. .. .. .. .. .. ..

Certified by:

District Construction Engineer(. )

61

GENERAL CONDITIONS OF IMPLEMENTATION AGREEMENT

1.1 Duties of the Construction Engineer, acting for Dinas Pimbagpro:a. Assist with preparation and certify the work plan of LKMDb. Supervise and certify implementation of works,c. Assist LKMD with expenditures reports, payment documentation for works performed,d. Accept completed works.

1.2 Duties of LKMD:a. Implement the works in accordance with the agreed specification/plan and Technical Guidelines for

Works provided by the Construction Engineer,b. Procure materials, equipment and hiring labors from the village, in accordance with the Technical

Guidelines,c. Provide local management (team leader, foreman, administration) and pay at appropriate cost..

1.3 The works shall not be sub-contracted.

1.4 The LKMD must obey existing rules and regulations, and respect local customs.

1.5 Force Majeure is an event outside the control of the LKMD which obstructs or damages the works. Such anevent must be reported to the Construction Engineer within 7 days. The Construction Engineer may agree tocosts resulting therefrom, and prepare an agreement addendum if needed.

1.6 Differences of opinion that may occur between the LKMD and the Construction Engineer should be broughtfor discussion with the District Construction Engineer. Settlement of such differences shall be decided bythe District Construction Engineer and be based on factual evidence and the Agreement. If they entail costsjustified in the opinion of the District Construction Engineer due to changes of original specifications, thenan Agreement addendum has to be prepared.

1.7 Non-compliance by LKMDThe LKMD shall be judged negligent if it does not comply with clauses 1.2 or 1.4 or does not obey thewarning of the Construction Engineer. The Construction Engineer shall give written notice to the BP-3 ofany non-compliance and send copy to the District Construction Engineer.

1.8 Sanctions.a. In relation to negligence of the LKMD under Clause 1.7, payments to the LKMD shall be postponed

until the cause of negligence is corrected and accepted by the Construction Engineer in accordance withthe Agreement.

b. If within 15 days of receiving a warning under Clause 1.7 the LKMD takes no corrective action, thenthe Construction Engineer may propose to the Pimbagpro to appoint an alternative team leader or toappoint a third party to carry out the works.

1.9 Payment for the works shall be based on the amount of works certified by the Construction Engineer inaccordance with the Agreement or addendum if any.

I .10 Reporting byLKMD. The LKMD should prepare a progress report when requesting payment using a formprovided by the Pimbagpro. The report should include the progress of physical works including variation works, ifany, and financial report of the works.

62


Project Processing Budget and Schedule

A. Project Budget Planned Actual(US$000)

At Final PCD stage (10/97) $213.9 $107.4As of 6/30/98 $427.4 $362.2

B. Project Schedule Planned Actual(At final PCD stage)

Time taken to prepare the project (months) 24.0First Bank mission (identification) 06 /26 /1996 05 /27 /1997Appraisal mission departure 05/20 /1998 05 /14 /1998Negotiations 05/ 18/1998 06 /24 /1998Planned Date of Effectiveness 09 / 01 /1998 10/01/1998

Prepared by: Ministry of Education and Culture (MOEC)

Preparation assistance: PHRD Grant No.TF029181Bank staff consultants who worked on the project included:Name SpecialtyRozany Deen Sr. Project EconomistJacqueline Baptist Economist (Consultant)Basilius Bengoteku Operations OfficerBridie Champion Disbursement OfficerNat Colletta Manager, Social Development (Peer Reviewer)Judith Evans Early Child Development SpecialistEllen Frede Early Child Development Specialist (Consultant)Jacques Van der Gaag Lead Economist (Peer Reviewer)Titie Hadiyati Financial Management Specialist (Consultant)Husein Abdul Hamid Statistician, (Consultant)David Klaus Principal Human Resources Specialist*Preben Jensen Sr. Procurement AdvisorDorothy N. Judkins Sr. Staff AssistantSamuel Lieberman Education and Health Sector CoordinatorBetty Mardanus GIS Specialist (Consultant)Mieko Masuda Project and Procurement Analyst (Consultant)Karin Nordlander Sr. CounselYogana Prasta Sr. Disbursement OfficerAntonio Pereira Sr. Education Specialist*Sachi Takeda Economist*Manuel Vera Sr. Education SpecialistNigel Wakeham Architect (Consultant)Mary Eming Young Sr. Public Health Specialist

* Former Task Team Leaders

63

ALnnex 8Indonesia: Early Child Development Project

Documents In The Project File

A: Project Implementation Plan

Five Year Proposals from 6 districts in the Provirnces of West Java, South Sulawesi and Bali

Project COSTAB file*

Project Procurement Plan*

Project Implementation Plan*

Project Preparation Guide - including instruction manual for the Early Child Development ComputerProgram for the Development of district proposals

Geographic Information System (GIS) maps illustrating sites, catchment areas, social indicators for twoproject districts Pandeglang (West Java) and Buleleng (Bali) (March 1998, to be expanded to otherdistricts)

B. Bank Staff Assessments

Abdul-Hamid, Husein (1997) "Design of an ECiD Decision Support Tool", The World Bank,Washington DC

Baptist, Jacqueline and Deen, Rozany " Household demandfor early child development services" (inprocess), The World Bank, Washington DC

Deen, Rozany, Parker, Mari, and Horiuchi, Kiyormi (1996) " Early Child Development Programs inIndonesia: An assessment", The World Bank, Washington, DC, Typescript, 30 pages.

Eming-Young, Mary (1996) "Early Child Development: Investing in the Future ", The World Bank,Washington DC

Hadiyati, Titie, and Prasta, Yogana (Junel998) "Financial Management System", Typescript. 5pages+tables, flowchart, sample reporting forms.

Parker, Mari (1996) "Indonesia: Rationale and Options for Integrated Early Child Development", DraftPaper, The World Bank, Washington DC

Saadah, F., Heywood, P. and Horiuchi, K (1996), " Undernutrition in Young Children", IndonesiaWatching Brief, Health Sector Patterns and Trends, The World Bank, Washington DC

Van der Gaag, Jacques and Tan, J-P (1997) "The Benefits of Early Childhood Development Program: AnEconomic Analysis", The World Bank, Washington DC,

64

C. Other

Studies done during preparationAtmodiwirjo, E., Tambunan, S. M., and Patmonodewo, M (1998) " Implementation of the Early ChildDevelopment Project" Draft Report, Jakarta 1998

Bamett, S., Baptist J., Evans, J., Setijadi, Satoto A., Tanyong, A. (1997) "Early Child DevelopmentPrograms in Indonesia", Draft Report

Das Gupta, Mita and Moesim, Faisal (March 1998) "Village Level Management", Typescript 6 pages,UNICEF, Jakarta

Frede, Ellen (1996) " Systems for Upgrading Current ECD Educators and Providing Continued Trainingand Supervision" Typescript 5 pages

Frede, Ellen (1 997) " Field Report on ECD Program Practices", Typescript 7 pages

Tangyong, Agus F. (February 1998) "Socialization of the Communities for Early Child Development",Ministry of Education and Culture, Jakarta, Indonesia

Wakeham, N (May 1998) " Construction of Kindergartens & BKB/Posyandu Centers - ImplementationSpecialists Report"

Other referencesBundy, Don (1996) "Health and Early Child Development. " Paper prepared for World Bank'sconference on Early Child Development: Investing in the Future

Elfindri (April 1996) "Child Malnutrition in Indonesia. " Bulletin of Indonesian Economic Studies(Australia) 32: 97-111,

Frankenberg, Elizabeth. ( December 1995) "Nutritional status in Indonesia: Evidence from the 1993Indonesian family life survey ". Rand Working Paper Series / Labor and Population Program.

Pinstrup-Andersen, P., Burger, S., Habicht, J-P., and Peterson, K "Protein-Energy Malnutrition" inJamison, D., Mosley, W.H., Measham, A. R, Bobadilla, J-L Disease (1993) Control Priorities inDeveloping Countries, Oxford Medical Publications

World Bank, (1996) Health, Nutrition and Population Statistics

World Bank, June 1998 (draft). " The Poor in Indonesia's Crisis : Impact of Crisis and PublicInterventions. "

World Bank, June 1998 (draft). "Supplement to the Report and Recommendation of the President on aProposed Indonesia Policy Reform Support Loan ".

* Electronic file available at EASED

CAS Annex B8Annex 9 Generated: 07/07/98

Indonesia: Early Child Development Project

Status of Bank Group Operations in IndonesiaIBRD Loans and IDA Credits in the Operations Portfolio

DifferenceBetween expected

Original Amount in US$ Millions and actual Last ARPP

Loan or Fiscal disbursements a/ Supervision Rating b/

Project ID Credit Year Borrower Purpose

No. IBRD IDA Cancellations Undisbursed Orig Frm Rev'd Dev Obi Imp Prog

Number of Closed Loans/credits: 460

Active LoansID-PE-36956 IBRD 42070 98 GOI SAFE MOTHERHOOD 42.50 0.00 0.00 41.15 .32 0.00 S S

ID-PE-41894 IBRD 4095A 1987 GOI SUMATRA SEC EDUC 94.65 0.00 0.00 91.04 2.21 0.00 S S

ID-PE-3960 IBRD 3209A 1990 GAS UTILIZATION 24.15 0.00 0.00 14.98 15.02 13.44 S S

ID-PE-3922 IBRD 3340A 1991 GOI SULAWESI/IRIAN JAYA 4.17 0.00 0.00 2.17 2.15 0.00 S S

ID-PE-3977 IBRD 3246A 1991 GOI THIRD JABOTABEK URB 13.41 0.00 0.00 11.69 11.69 .97 S S

ID-PE-3916 IBRD 3501A 1992 SURALAYA THERMAL 88.17 0.00 0.00 71.55 148.78 54.09 U S

POWERID-PE-3969 IBRD 3496A 1992 GOI PRIMARY SCHOOL TEACH 8.47 0.00 0.00 7.02 7.02 0.00 S S

ID-PE-3997 IBRD 3482A 1992 GOI TELECOM IV 148.13 0.00 0.00 129.95 119.93 0.00 HS uS

ID-PE-3940 IBBD 3448A 1992 GO! PRIMARY EDUC QUALITY 13.40 0.00 0.00 11.45 11.35 0.00 S S

IMPROVEID-PE-3966 IBRD 3431A 1992 GOI NON-FORMAL EDUC III 5.94 0.00 .27 3.98 4.25 -. 25 S S

ID-PE-3928 IBRD 3402A 1992 GOI AGRICULTURAL FINANCI 39.06 0.00 0.00 38.86 38.87 0.00 S S

ID-PE-3990 IBRD 3629A 1993 GOI WTR & SANI FOR LOW I 43.23 0.00 0.00 40.33 35.02 16.49 S S C7

ID-PE-4007 IBRD 3602A 1993 GO POWER (CIRATA II) 61.44 0.00 0.00 57.81 53.34 0.00 U S en

ID-PE-4018 IBRD 3589A 1993 GOI FLORES EARTHQUAKE RE 2.95 0.00 0.00 1.47 1.49 0.00 S S

ID-PE-3999 IBRD 3588A 1993 GOI GROUNDWATER DEVT. 11.91 0.00 0.00 10.55 13.76 .33 U U

ID-PE-4009 IBRD 3586A 1993 GOl INTEGRATED PEST MGMT 13.28 0.00 0.00 10.84 10.34 0.00 S S

ID-PE-4006 IBRD 3579A 1993 GOI E.INDONESIA KABUPATE 21.20 0.00 0.00 15.95 15.92 0.00 S S

ID-PE-3914 IBRD 3550A 1993 GOI THIRD COMM HEALTH & 30.74 0.00 0.00 26.89 10.38 0.00 S S

ID-PE-3954 IBRD 3762A 1994 GOI JAVA IRR IMP & W R M 108.27 0.00 0.00 98.45 42.86 0.00 S S

ID-PE-3910 IBRD 3761A 1994 GOI SUMATERA & KALIMAN P 216.28 0.00 0.00 201.49 117.90 0.00 U S

ID-PE-3937 IBRD 3755A 1994 GOI INTEGRATED SWAMPS 38.42 0.00 0.00 34.54 12.35 0.00 S S

ID-PE-4017 IBRD 3754A 1994 GOI UNIV.RESEARCH FOR GR 33.12 0.00 0.00 29.58 10.63 0.00 S S

ID-PE-3890 IBRD 3749A 1994 GOI SEMARANG-SURAKARTA U 110.67 0.00 3.67 93.00 54.79 1.89 S S

ID-PE-4010 IBRD 3742A 1994 GOI DAM SAFETY 38.25 0.00 0.00 35.02 20.74 0.00 S S

ID-PE-4020 IBRD 3732A 1994 GOI KABUPATEN ROADS V 25.59 0.00 0.00 18.19 8.19 0.00 S S

ID-PE-3998 IBRD 3726A 1994 GOI SURABAYA URBAN 113.14 0.00 0.00 106.38 67.84 4.96 S S

ID-PE-3952 IBRD 3721A 1994 GOI SKILLS DEVELOPMENT 10.24 0.00 0.00 8.04 12.95 5.54 S S

ID-PE-3945 IBRD 3712A 1994 GOI HIGHWAY SECTOR II 196.44 0.00 0.00 180.37 146.21 0.00 S S

ID-PE-3985 IBRD 3658A 1994 GOI WTRSHED CONSERVATION 44.22 0.00 0.00 43.31 19.36 0.00 HU U

ID-PE-3860 IBRD 3464A 1994 GOI TREECROPS SMALLHOLDE 27.12 0.00 0.00 24.00 18.59 0.00 S HS

ID-PE-39754 IBRD 39136 1995 TA FOR INFRA. II 28.00 0.00 0.00 24.46 13.26 0.00 S S

ID-PE-3965 IBRD 39056 1995 GOI HEALTH IV:IMPR HEALT 87.00 0.00 0.00 75.42 13.42 0.00 S S

ID-PE-3965 IBRD 3905S 1995 GOI HEALTH IV:IMPR HEALT 1.00 0.00 0.00 0.00 13.42 0.00 S S

ID-PE-4001 IBRD 39046 1995 GOI TELECOM SECTOR MODER 325.00 0.00 0.00 296.71 121.71 0.00 HS HS

ID-PE-34891 IBRD 38886 1995 GOI VILLAGE INFRASTRUCTU 47.10 0.00 0.00 3.69 .79 0.00 HS HS

ID-PE-3968 IBRD 38876 1995 BOOK & READING DEV 130.40 0.00 0.00 113.42 8.52 0.00 S S

ID-PE-3968 IBRD 3887S 1995 BOOK & READING DEV 2.10 0.00 0.00 .10 8.52 0.00 S S

ID-PE-3972 IBRD 38866 1995 GOI AG. RESEARCH II 61.00 0.00 0.00 53.06 24.81 0.00 S S

ID-PE-3951 IBRD 3854A 1995 GOI KALIMANTAN UDP 77.43 0.00 0.00 65.85 45.34 0.00 S S

ID-PE-3979 IBRD 3845A 1995 GOI RURAL ELECT II 252.09 0.00 0.00 203.03 176.85 0.00 U S

ID-PE-3988 IBRD 3825A 1995 GOI PHRD II 40.57 0.00 0.00 36.81 8.65 0.00 S S

ID-PE-4019 IBRD 3801A 1995 GOI ACCOUNTANCY DEV II 18.64 0.00 0.00 17.33 14.15 0.00 S S

ID-PE-3984 IBRD 3792A 1995 GOI LAND ADMINISTRATION 56.45 0.00 0.00 49.52 15.19 0.00 S S

ID-PE-4016 IBRD 40540 1996 REPUBLIC OF INDONESIA STRATEGIC URB. RDS I 86.90 0.00 0.00 76.59 20.39 0.00 S S

ID-PE-4004 IBRD 4043A 1996 GOI HIGHER EDUC SUP.(III 56.80 0.00 0.00 50.78 -. 99 0.00 S S

ID-PE-37097 IBRD 4042A 1996 GOI E.JAVA SEC.EDUC. 96.50 0.00 0.00 93.77 9.34 0.00 S S

Generated by the Operations Information System (OIS)

CAS Annex B8Genermld: 07/07/98

DifferenceBetween expected

Original Amount in US$ Millions and actual Last ARPPLoan or Fiscal disbursements a/ Supervision Rating b/

Project ID Credit Year Borrower PurposeNo. IBRD IDA Cancellations Undisbursed Orig Frm Rev'd Dev Obj Imp Prog

ID-PE--41896 IBRD 4030A 1996 GOI HR CAPACITY BUILDING 19.31 0.00 0.00 19.11 6.11 0.00 S UID-PE-39312 IBRD 4017A 1996 GOI SECOND E. JAVA UDP 129.64 0.00 0.00 128.43 74.54 0.00 S UID-PE-4014 IBRD 4008A 1996 GOI KERINCI SEBLAT ICDP 18.47 0.00 0.00 18.44 4.20 0.00 S SID-PE-4011 IBRD 4007A 1996 GOI SULAWESI AGRI AREA 23.97 0.00 0.00 22.63 1.17 0.00 S SID-PE-4008 IBRD 3984A 1996 GOI NUSA TENGGARA DEV. 24.80 0.00 0.00 23.86 3.97 0.00 U UID-PE-39643 IBRD 39810 1996 GOI STD/AIDS 24.80 0.00 0.00 22.79 14.75 0.00 S UID-PE-4003 IBRD 3979A 1996 GOI SECONDARY SCHOOL TEA 54.40 0.00 0.00 51.30 21.81 0.00 S SID-PE-4021 IBRD 3978A 1996 GOI POW. TRANS & DIST II 362.74 0.00 0.00 348.96 176.50 .30 U UID-PE-3978 IBRD 3972A 1996 GOI IND'L TECHNOLOGY DEV 40.08 0.00 0.00 35.92 21.55 0.00 S UID-PE-42882 IBRD 41980 1997 GOI RENW. ENER SMAL PW P 66.40 0.00 0.00 66.40 1.34 0.00 U UID-PE-49051 IBRD 41940 1997 BEPEKA AUDIT MODER P 16.40 0.00 0.00 15.31 1.21 0.00 S UID-PE-40195 IBRD 41930 1997 GOI QUAL OF UNDERGRAD ED 71.20 0.00 0.00 66.26 .73 0.00 S SID-PE-36047 IBRD 41550 1997 GOI BALI URBAN INFRAST. 110.00 0.00 0.00 106.80 2.34 0.00 S SID-PE-35544 IBRD 41320 1997 GOI SOLAR HOME SYSTEMS 20.00 0.00 0.00 20.00 2.32 0.00 U UID-PE-42540 IBRD 41250 1997 IODINE DEF. CONTROL 28.50 0.00 0.00 26.46 .76 0.00 S SID-PE-4026 IBRD 41060 1997 GOI/PERUMKA RLWY EFFICIENCY 105.00 0.00 0.00 105.00 12.67 0.00 S UID-PE-36053 IBRD 4105A 1997 GOI SULAWESI UDP II 149.58 0.00 0.00 146.70 39.05 0.00 S SID-PE-40521 IBRD 41000 1997 GOI VILLAGE INFRA II 140.10 0.00 0.00 103.53 23.84 0.00 S SID-PE-3987 IBRD 4062A 1997 C.INDONESIA SEC.EDU. 101.14 0.00 0.00 100.10 16.07 0.00 S SID-PE-45337 IBRD 43300 1998 GOI KECAMATAN DEV FUND 225.00 0.00 0.00 225.00 0.00 0.00ID-PE-39644 IBRD 43080 1998 GOI W.JAVA BASIC EDUC. 103.50 0.00 0.00 103.50 0.00 0.00 S SID-PE-3993 IBRD 43070 1998 GOI N.SUMATRA REG. ROADS 234.00 0.00 0.00 234.00 0.00 0.00 S SID-PE-37095 IBRD 43060 1998 GOI MALUKU REG. DEV 16.30 0.00 0.00 16.30 0.00 0.00ID-PE-36048 IBRD 43050 1998 GOT CORAL REEF MGM REHAB 6.90 0.00 0.00 6.90 0.00 0.00ID-PE-40061 IBRD 42900 1998 GOI BENGKULU REG DEV 20.50 0.00 0.00 20.50 .40 0.00 S SID-PE-55755 IBRD 42550 1998 REPUBLIC OF INDONESIA BANKING REFORM ASST. 20.00 0.00 0.00 18.25 -.58 0.00 S UID-PE-48715 IBRD 42440 1998 IIDP 34.50 0.00 0.00 33.25 1.42 0.00 S S

Total 5,162.77 0.00 3.94 4,706.29 1,953.79 97.76

Active Loans Closed Loans TotalTotal Disbursed (IBRD and IDA): 468.15 18,322.93 18,791.08

of which has been repaid: 0.00 7,817.68 7,817.68Total now held by IBRD and IDA: 5,229.41 10,543.25 15,772.66Amount sold : 0.00 88.08 88.08

Of which repaid : 0.00 88.08 88.08Total Undisbursed : 4,706.29 38.05 4,744.34

a. Intended disbursements to date minus actual disbursements to date as projected at appraisal.b. Following the FY94 Annual Review of Portfolio performance (ARPP), a letter based system was introduced (HS - highly Satisfactory, S = satisfactory, U - unsatisfactory,

HU = highly unsatisfactory): see proposed Improvements in Project and Portfolio Performance Rating Methodology (SecM94-901), August 23, 1994.

Note:Disbursement data is updated at the end of the first week of the month.

Generated by the Operations Informnation System (OIS)

67


Indonesia at a glance 1/28/98

Lower-POVERTY and SOCIAL East middla-

ndonesia Asia incomie Development diamond

Population mid-1996 (milbons) 197.1 1,726 1,125 IGNP percapita 1996 (US$) 1,090 890 1,750 Life expectancyGNP 1996 (bi/bons US$) 213.4 1,542 1,967

TAverage annual growth, 1990-96

Population (%) 1.7 1.3 1.4Labor forme (%) 2.5 1.3 1.8 I GNP Gross

per -~ pnmMost recent estimate (latest year available since 1989) capita enrollment

Poverty: headcount index (% ofpopulaton) 11 Urban population (% of total populahton) 36 31 56Life expectancy at birth (years) 64 68 67Infant mortality (per 1,000 ive bifths) 51 40 41 Access to We waterChild malnutrition (% of children under 5) 11Access to safe water (% of populaton) 62 49 78Illiteracy (% of,popubation age 15+) I 17 -Gross primary enrollment (% of school ge population) 11i 117 104

Male 117 120 105 Lower-middle4ncome groupFemale 113 116 101

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1975 1981i 1995 1996

GDP (bilhons US$) 32.1 87.2 201.2 225.8Gross domestic investmentlGDP 23.7 26.1 31.1 31.8Exports of goods and services/GDP 24.0 23.0 26.4 26.2 Openness of economyGross domestc savings/GDP 26.6 28.6 32.3 33.2Gross national savings/GDP 24.7 25.6

Current account balance/GDP -3.5 -3.6Interest payments/GDP 1.0 2.3 2.5 2.3 Savings InvestmentTotal debt/GDP 35.8 42.1 61.8 57.1Total debt service/exports 30.1 36.0Present value of debt/GDP 55.4Present value of debt/exports 209.6 Indebtedness

197545 1986-96 19S5 1996 1997-05(average annual growth) -IndonesiaGOP 7.0 7.9 8.2 7.6 6.6 Lower-middla-ncome groupGNP per capita 4.3 6.1 5 7 5.8 5.1Exports of goods and services -1.0 8.9 8 6 6.3 7.6

STRUCTURE of the ECONOMY1975 19#11 1995 1996

(% of GDP) | Growth rates of output and Investment(%)Agriculture 30.2 23.2 17.2 16.3 20TIndustry 33.5 35.9 41.5 42.7

Manufacturing 9.8 16.0 24.2 25.2 1Services 36.3 40.9 41.4 41.0

Private consumption 64.3 59.6 59.9 59.2 D1 92 03 54 95 goGeneral govemment consumption 9.0 11.8 7.9 7.7 -GOI GDPImports of goods and services 21.0 2C.5 25.2 24.9

197645 198646 1995 1996(average annual growth) Growth rates of exports and Imports (%)Agriculture 4.2 3.4 4.2 1 9 30Industry 7.0 11.9 10.4 1015 1

Manufacturing 14.5 11.2 10.8 110 1 20Services 9.0 11.0 7.7 6.9

Private consumption 10.0 7.2 9.6 7.4General govemment consumption 10.5 4.4 1.3 38 0Grossdomesticinvestment 12.1 10.8 135 11.8 9S 92 93 .4 98 96Imports of goods and services 8.8 9.4 15.8 9.6 -6e -Gross national product 6.5 7.9 7.4 7.5

Note: 1996 data are preliminary estimates.* The diamonds show four key indicators in the country (in bold) compared with its income-group average. If date are missing, the diamond wil

be incomplete.

68


Indonesia

PRICES and GOVERNMENT FINANCE1975 1985 1995 1996 1

Domeslic pHces Inftlation (%)(% change) 1,0

Consumer prices 19.1 4.7 9.4 8.0 IImplicit GDP deflator 11.2 4.3 9.4 8.7 I V.Government finance(% of GDP) oCurrent revenue 19.2 15.5 15.3 91 92 93 94 ss 9s

Current budget balance . 6.0 6.4 .. |GPdef. COverall surplus/defticit . -3.2 -0.2 1.0

TRADE1976 1988 1995 1996

(millions US$) Export and import levels (mill. US$)Total exports (fob) 18,823 44,792

Fuel 12,804 8,638 IRubber 714 1,554 -4000 1Manufactures .. 2,287 23,487 =0.000

Total imports (cif) .. 14,058 41,286200Food .. 812 868Fuel and energy .. 2.870 3,841 i0osoeCapital goods .. 5,394 16,712

Export prioe index (1987=100) .. 121 137 90 91 92 93 94 95 96Import price index (1987=100) 85 127Terms of trade (1987=100) 143 108

BALANCE of PAYMENTS1975 1985 1995 1996

(millions US$S Current account balance to GOP ratio (%)Exports of goods and services .. .. 53,154 58,317Imports of goods and services .. .. 47,871 52,822 9

9 [ ! 93i r iResource balance . .. 5,283 5,495 1 ij I j

Net income .. .. -,799 -68094 I ! iNet current transfers .. .. -6,471 -7,470 .

Current account balance,before ofrfcial capital transfers .. .. -6987 -8,069 -3

Financing items (net) .. .. 9,548 11967Changes in net reserves .. .. -2,561 -3.898 1 l

Memo:.

Reserves induding gold (mill. US$) 592 13,184 26,139 27,519Conversion rate (localUS$) 415.0 1,110.6 2,248.6 2,342.3

EXTERNAL DEBT and RESOURCE FLOWS1976 1985 1995 1996

(millions US$) Composition of total debt, 1998 (mill. USS)Total debt outstanding and disbursed 11,498 36,715 124,398 129,033 A

IBRI 57 3,590 12.503 11,139 11139 aIDA 318 844 756 736 G 736 D

Total debt service 1,060 5.823 16,419 21,462 j37sIBRD 2 384 1,875 2,249IDA 2 12 26. 26

EComposition of net resource flows 28911

Offical grants .. .. 249 190Officlalcredioro 515 980 1,115 -805Private creditors 1,749 154 2,314 6,971Foreign direct investment .. .. 4.348 7,960Portfolio equity .. .. 4.873 3,099 F

World Bank program j0542Commitments 311 1,068 1,312 1,194 A-IBRD E-BltateralDisbursements 164 T77 1.046 905 8 gIDA D- Other multlatenl F- PrivatePrincipal repayments 0 133 975 1,429 C -IMF G -Short-ermNet flows 164 644 69 -523 i

Interest payments 3 262 926 846Not transfers 160 382 -867 -1,370

Development Economics 1J28/98

Note: Government finance and trade fiscal year (April to March).

MAI SECTION

V AN io 1

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13 PH UPPIN EARLY CHILD DEVELOPMENT PROJEC~1 edon ALAYJ PRUN V Provinces&overed Under the Project

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