Document of

The World Bank

Report No. T-6868-IND

TECHNICAL ANNEX

TO THE

MEMORANDUM OF THE PRESIDENT

REPUBLIC OF INDONESIA

TECHNICAL ASSISTANCE PROJECT

FOR

SOCIAL SECTORS STRATEGY AND CAPACITY BUILDING

April 17, 1996

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS(As of April 1996)

Currency Unit = Rupiah (Rp)RP I million = US$427US$ 1.00 = Rp 2,342

FISCAL YEAR

April 1- March 31

ABBREVIATIONS AND ACRONYMS

BAPPENAS - National Development Planning AgencyBappeda - Provincial Development Planning AgencyCAS - Country Assistance StrategyGOI - Government of IndonesiaDinas - Local Government Technical OfficeIBRD - International Bank for Reconstruction &

Dev elopmentIDA - International Development AssociationIMR - Infant Mortality RateJGF - Japan Grant FundKanwil - Provincial Sector OfficeOED - Operations Evaluation departmentPDPs - Project Documentation PackagesPIM - Project Implementation ManualPMU - Project Management UnitREPELITA - Five-Year Development PlanTA - Technical AssistanceTOR - Terms of Reference

INDONESIA

SOCIAL SECTORS STRATEGY AND CAPACITY BUILDING PROJECT

TECHNICAL ANNEX

TO THE

MEMORANDUM OF THE PRESIDENT

I. COUNTRY AND SECTOR BACKGROUND

1. Indonesia has just completed its first 25-year development plan in which itsaccomplishments included steadily rising income -- per capita GNP reached an estimatedUS$884 in 1994; a decline in poverty incidence from 60 percent (70 million persons) atthe beginning of the 1970s to 15 percent (27 million persons) in 1995; and considerablesuccess in making social services accessible. Universal primary education has beenachieved, secondary and tertiary enrollments have risen sharply and the adult illiteracyrate has fallen by almost two thirds. Infant mortality rate (IMR) declined from 142 deathsper 1,000 livebirths in 1968 to 57 deaths per 1,000 livebirths in 1994.

2. Looking ahead to the next 25-year development plan, Indonesia is setting itssights on more ambitious and appropriate objectives: continuing to sustain high rates ofincome growth, progressing in poverty reduction efforts while also addressinginequalities and improving quality of life and social services. For all of the above, thegovernment realizes the importance of the social sectors and has embraced humanresource development as a key instrument and objective in the current five-yeardevelopment plan (REPELITA VI) and in utilizing donor funds.

3. Yet despite the emphasis on human resource development and some recentimprovements in relevant indicators, major challenges to improve the effectiveness andefficiency of the social sectors remain. These challenges are evident in the slow pace ofIMR decline in the late 1980s, low utilization rates of health facilities, the continuinghigh drop out rate in primary education, and the slow increase in secondary educationenrollment. Indonesia has only now reached a stage of health development whichcountries like Malaysia and Thailand transcended 15-30 years ago. Addressing thesechallenges involves the adaptation to an increasing regional orientation while improvingthe coverage, efficiency and quality of social sector services, especially health andeducation. To this end, there is a need to ensure that government as well as privatespending responds to the need for additional resources for these sectors, that government

- 2 -

outlays be used to address market failures and to efficiently provide services that willbenefit the poor, and that enabling environments conducive to private service provisionsare established.

4. The Government's (GOI) ability to achieve its human resources objectives isimpeded by the lack of an overall framework and operational strategy to translateREPELITA VI goals into action. Because of this, the planned investments for the sectorrepresent only a small percentage of the REPELITA VI allocation --planned investmentsrepresent about one fifth and one quarter of the REPELITA VI allocations for health andeducation, respectively.

5. Several factors have contributed to the lack of a broad vision and tactical programfor the social sectors. First, capacity remains limited within the National DevelopmentPlanning Agency (BAPPENAS) and the planning units in the line ministries to carry outsector analysis, medium-term planning and priority setting and to develop operationalapproaches. This is due in part to the still limited experience of planning staff inidentifying the key issues facing the social sectors and analyzing existing data to assessneeds and priorities. In addition, those few staff with training and experience in policyand strategy development are utilized mainly for other functions like preparing projectsand coordinating donor activities. Second, there is no clear process for translatingREPELITA goals and objectives into an investment plan that is based on a carefulanalysis of alternatives and priorities. Existing approaches enable the identification ofvery broad sector goals but do not translate these into clear options and investments thatcould be implemented later. In addition, and partly as a consequence of the above twopoints, there are a number of analytic efforts that are urgently needed for the sectors tomove ahead (see Annex 1 for more details).

6. Strategies for human resource development also need to address emerging issues,especially decentralization, and to define clear processes for dealing with them. Till now,decentralization has been pursued slowly through discrete and incremental steps.However, the next phase requires a more clearly defined roadmap and framework.BAPPENAS, the line ministries and the provinces are in the process of changing theirroles, functions, and relationships with one another. This in turn will necessitate anassessment of alternatives and capacity to carry out the new roles, and an identification ofthe skills needed and the type of capacity building effort that should be planned.

7. GOI recognizes that overcoming the above constraints will have significantdevelopment impacts. A number of initiatives to address these have been undertaken.For example, integrated planning and budgeting for the health sector has been introducedat the provincial level, a pilot for decentralized decision making at the district level isunderway in 26 districts, and a number of provincial investments that build provincialcapacity in selected areas have been approved in the last 5 years. However, the variousmeasures have not coalesced into revised strategies for the social sectors and the pace ofimprovements in human resource indicators remains relatively slow. In response,

- 3 -

Indonesia is about to embark on an exercise to develop its sector strategies and build theneeded capacities to arrive at the desired outcomes in human resource development.

II. THE PROJECT

A. Institutional Setting

8. The project will provide support at the central level to: BAPPENAS (Deputy IV -Human Resource Development); and to planning bureaus and planning officers in the lineministries (Health, Education and Culture, Social Affairs and Religious Affairs). I At theprovincial level, support will be provided to institutions reporting to the ProvincialGovernor (Bappedas and Dinases) and to the line ministries (Kanwils). A description ofthe institutional settings of the main agencies involved in the project is presented below.

Central Level

9. BAPPENAS is a non-department institution that assumes a key role indevelopment in Indonesia. It was established in 1963 and is responsible for incorporatingnational development goals into medium-term development plans (REPELITA);allocation of resources within the economy and preparation of the National developmentbudget; coordination with donors, mobilization of foreign resources and allocation oflocal and foreign-sourced funds to finance the development budget; and monitoring ofmajor project implementation among others.

10. BAPPENAS is chaired by the State Minister for Development Planning with avice-chairman and eight Deputies for groups of economic activities (Fiscal and monetaryRegulation, Economic Development, Infrastructure Development, Human ResourceDevelopment, Regional Development, Fund Allocation and ImplementationManagement, Foreign Cooperation, and Administrative Affairs). Four or five BureauChiefs in charge of sub-sectors report to each Deputy Chairman. An organizational chartfor BAPPENAS is present in Chart 1. The project will largely support the Deputy forHuman Resource Development and his four Bureaus, especially those principallyconcerned with the health and education sectors.

11. Line Ministries. Within the line ministries, at the central level, planning activitiesare carried out by the Bureaus/units of Planning as well as by planning officers located inthe different Directorates. The Bureau of Planning is under the Secretary General'sOffice and is headed by a Bureau Chief, supported by several divisions (about 5 to 7).The Bureau of Planning is responsible for coordinating planning of all sector programsunder both the routine and development budgets as well as for monitoring and evaluationof sector programs. The Bureau also provides guidance to the Directorates on themethodology and techniques for planning and assists the Directorates in preparingprojects.

1Ministries of Finance and Home Affairs will also have limited participation in project implementation.

-4 -

Provincial Level

12. At the provincial level, the provincial development planning agencies (Bappedas)are the main government agency for overall planning and coordination. They are underthe administration of the provincial Governor. Each Bappeda is headed by a chairmanassisted by a secretariat and five divisions responsible for: research; economic affairs;social and cultural affairs; physical facilities; and statistics and reports. Bappedas play animportant in role provincial planning including: formulation of the provincial five-yeardevelopment plan (Repelitada); preparation of annual implementation schedules for theprovincial programs; and coordination of development planning at provincial levels. TheBappedas also prepares the development budget for the province/district and monitor theprogress of program implementation.

13. Sectoral planning activities are carried out by the Kanwils, who are responsible tothe line ministries, and by the dinases responsible to the Local Government. The Kanwilis typically staffed by a chief assisted by a secretariat and several divisions, including onewhich is responsible for planning activities. Staff are funded from the budget of the lineministry. The Dinas is responsible for contributing to the provincial sectoral plan andtheir implementation. The distinction between the roles of the Kanwil and Dinas is notclearly defined.

B. Project Description

14. Project Objectives. The project would provide, over four years, support forconducting sector studies, formulating strategies and building institutional capacity forthe social sectors, especially health and education. More specifically, the project aims to

(a) develop sector strategies for social sectors, especially health andeducation;

(b) build capacity in BAPPENAS and planning bureaus/units of lineministries to develop concepts and strategies, plan, monitor and evaluatesector performance and programs; and

(c) build capacity of provincial staff -- Bappedas, provincial line ministries(Kanwil), and Dinas-- to design, prepare, implement, monitor and evaluateprograms.

15. In addition, the project will support provincial efforts to determine sectorpriorities and prepare investment plans, and support project design and feasibility studiesas well as pilot projects.

16. Project Components. The proposed project will provide support to BAPPENAS,line ministries (especially health and education) and the provinces. A description ofproject activities for the different implementing agencies is given below.

- 5 -

17. Support to BAPPENAS This component will assist BAPPENAS to

(a) formulate sector strategies and investment priorities including plans forfurther decentralization of the social sectors and design of enablingenvironments to encourage private sector development through theprovision of TA and support for key sector studies2;

(b) review the planning frameworks for social sectors and identify ways tostrengthen the linkage between REPELITA goals, strategy formulation,and program identification, design, and implementation;

(c) improve skills needed and processes used to review and appraiseinvestment plans, set priorities, monitor and evaluate sector performance;

(d) build in-house capacity needed to achieve the above activities, after carefulassessment of capacity building efforts. On-the-job training is likely to bean important element of this effort;

(e) develop and institutionalize training programs for planning andmanagement of social sectors, especially at the provincial effort3; and

(f) provide technical inputs for the mid-term review of REPELITA VI and theformulation of REPELITA VII.

18. Activities to be supported by this component will include: sector analysis andstudies, development of decentralization strategies, review of planning frameworks,assessment of staff skills and training needs, on-the-job training of staff; development oftraining programs for social sectors planning and pre-feasibility studies. This componentwill also support a limited number of advisors, who could be either in-house or providetechnical advice on demand to BAPPENAS.

19. Support to Line Ministries This component will assist the planning units in theselected line ministries (Health, Education and Culture, Religious Affairs, Social Affairs)to define and operationalize their sector strategies (covering public-private delivery andtargeting public interventions) and to carry out selected sector studies. The componentwill also include provisions to review and improve monitoring and evaluation systemsand capacities. Support for selective training programs to strengthen the capacity of theseunits and for carrying out a small number of pilot studies (e.g. operations research) andfeasibility studies will also be included.

2In addition, BAPPENAS staff have identified needed TA for assistance with strategy development forselected social issues like (1) gender and development; and (2) social welfare, especially the disabledindividuals and the isolated communities.

The proposed program is likely to be carried out by local universities (e.g., Ul and/or other institutes withsimilar capacities). The program design will also be linked to the capacity needs assessment plannedfor the first year of project implementation.

- 6 -

20. In addition, the Ministry of Home Affairs will participate in projectimplementation as a facilitator for provincial Bappedas, and Ministry of Finance staffwho deal with social sector issues will participate in selected training activities.

21. Support to Provinces. The main objective of the provincial component is to assistthe provinces in carrying out their emerging role in planning and designing andeventually financing programs. To this end the project will, after careful needsassessment and evaluation of current efforts, develop and implement training programsfor the provinces to improve skills in project design, implementation, management andmonitoring and evaluation. The training programs will be developed after careful needsassessment of the provincial staff needs and existing skills. The programs will includebasic training modules that will be implemented in all provinces and more specializedmodules that will be provided to provinces on demand. Further, the capacity buildingefforts need to be coordinated with the work that will be carried out at BAPPENAS andthe Bureaus of Planning to develop guidelines to assist the provinces in their new roles.A significant part of the capacity building effort will be for the Bappedas and provincialstaff (both Dinas and Kanwil) involved in the planning and delivery of social sectorservices.

22. The support for provinces will be carried out at two levels: (a) an intensifiedsupport for training, sector analysis, and preparation of investment plan in about fiveprovinces selected according to agreed criteria; and (b) general support for an additionalnumber of provinces (three to five) that consists of basic training as well as provision ofresources for pre-feasibility study proposals that could later be developed into projectdesign and feasibility studies.

23. Performance Indicators. The ultimate goal of the project is to improve socialsector indicators. However, these indicators should not be used to monitor and evaluateproject implementation and impact since there are a number of intervening variables, e.g.,the macro finance trends for the sectors, investments in other sectors, implementation ofother projects, that will affect and bias these measures. Accordingly, proximateindicators for monitoring the implementation and outputs of the project have beensuggested and are summarized in Annex 2.

24. These indicators have been identified for each project objective. The main criteriafor their selection was that they are relatively simple, easy to measure (and interpret), andreflect implementation progress and/or project outputs. Special attention has been givento measuring the implementation and effectiveness of training efforts aimed attransferring skills and building capacity.

- 7 -

25. The main indicators identified for monitoring project outputs are (Annex 2-Table1):

> number of completed sector studies of acceptable quality (including preparation ofREPELITA VII chapters for social sectors);

=> number of central and provincial investment plans (e.g., included in the "blue book");=> competency level of target staff (as defined by the capacity building needs

assessment);=> proportion/number of social sector proposals submitted to BAPPENAS of acceptable

quality; and> availability of key indicators for social sectors at the national and provincial levels.

26. In addition, project implementation will be monitored using the following inputsand process indicators (Annex 2-Table 2):

=> number of studies initiated/completed (3 months of expected date);=:> number of consultants hired (within 1-3 months of expected date);= number of investment plans (e.g., project design, feasibility studies)

initiated/completed at the central and provincial levels;7> number of staff trained;

= initiation/completion of the review of planning process(es);=> initiation/completion of training program development;=. identification of key sectors indicators; development of data systems for increasing

access to these indicators;

27. In addition to these indicators, the project management team will develop a moreextensive set of indicators to monitor project activities and ensure adequateimplementation. The project management unit (PMU) will furnish to the Bank quarterlyreports monitoring and evaluating progress achieved in project implementation, inaccordance with the identified indicators, starting no later than December 31, 1996.

28. Selection of Project Activities. Terms of reference for key activities that willstart during the first year of project implementation were discussed and agreed duringnegotiations. A list of those activities is presented in Annex 3. Other activities may beselected during project implementation.

29. Review Process. Guidelines about informing potential beneficiaries, review, andapproval of Sub-projects (e.g., sector studies, design and pre-feasibility studies) at theprovincial and central level have been prepared and will be included in the projectimplementation manual. Criteria and procedures for reviewing and approving Sub-projects were agreed to at negotiations and will be further detailed in the projectimplementation manual. Moreover, the PMU will furnish to the Bank for approval Sub-projects proposals and training programs to be carried out during the next fiscal year, byno later than September 30 of each year starting no later than September 30, 1996.

- 8 -

II1. PROJECT IMPLEMENTATION AND MANAGEMENT

30. Project Management. The project will be executed at provincial and districtplanning offices and at central planning bureaus of the ministries of health and ofeducation and culture and will be coordinated overall at BAPPENAS. The projectmanagement structure (see Chart 2) is briefly described below.

a Steering Committee (SC) that is chaired by the vice chairman of BAPPENASand that includes members from Echelon I representatives from the various lineministries involved in the project (Health, Education and Culture, Religion, HomeAffairs, Social Affairs, and Finance) and Deputy IV of BAPPENAS. The mainrole of the SC is to provide policy guidance on implementation of the project.The SC should meet at least twice a year;

* a Project Director who will be the Deputy Chairman for Human ResourcesDevelopment (Deputy IV) BAPPENAS. The Director will be responsible for theoverall guidance of the project implementation and will liaise with the SC onpolicy related matters related to the project;

* Technical Committee(s) (TC) that are chaired by the Project Manager (seebelow) and comprise Bureau chiefs under Deputy IV, BAPPENAS; chiefs ofBureaus of Planning of line ministries; chairmen of provincial Bappedas; andtechnical experts (as needed). The TC will assist the Project Manager onsubstantive matters related to the project and screening of the various TAsproposed by the executing agencies (EAs). The TC should have a flexiblestructure depending on the needs of the project and should meet at least four timesa year and upon the request of the Project Manager. One meeting to be heldbefore annual World Bank review;

* a Project Manager who is a qualified experienced staff appointed full-time to theproject. The Project Manager is responsible for overall project implementationand is assisted by a Project Management Unit and a Treasurer. The ProjectManager will also act as secretary to the SC;

* a Project Management Unit (PMU): Management support directly to the ProjectManager. Membership consists of a Technical Support Team (TST) comprisingexpatriate and national technical experts in selected sectors and administrativesupport unit. Counterparts for the TST members will be at three levels: 1)atBAPPENAS - division heads from designated bureaus in BAPPENAS; 2) at theline ministries - designated staff form Bureaus of Planning; and 3) at theprovinces - the Bappeda. The counterparts should assign adequate time forworking on the project;

* Provincial Project Secretariats (PPSs): Chaired by chief division ofsocial/cultural affairs of Bappedas and comprising Kanwil and Dinas staff of

- 9 -

selected sectors in selected project provinces (i.e., those where major social sectorinvestment plans will be prepared- estimated number is about five). The mainrole of the PPS is to facilitate provincial level studies and capacity buildingefforts.

31. The main objective of the PMU is to promote the effective planning andmanagement of the TA and training activities so that TA objectives are met in a costeffective and timely manner. The PMU will assist the different executing agencies (EAs)in the planning, procurement, monitoring, evaluation, and follow-up action of TA andtraining services. In support of this, the PMU develop a Project Implementation Manual(PIM) by April 30, 1997 which standardizes all activities related to the preparation ofproject documentation packages (PDPs) and terms of reference (TORs), the evaluation ofproposals, the negotiations of fees with selected consultants, the contracting proceduresand monitoring of TA services. The PIM should be consistent with the Bank Guidelinesfor the Use of Consultants by World Bank Borrowers and by The World Bank asExecuting Agency (August 1981). The PMU will also be responsible for collecting andanalyzing data on performance indicators and will furnish to the Bank for review andcomment quarterly reports monitoring and evaluating progress achieved in projectimplementation starting no later than December 31, 1996. In addition, by July 30, 1998,the PMU will carry out a mid-term review of the project based on a progress reportfurnished to the Bank by April 30, 1998. TORs and staffing of the PMU were agreed toduring negotiations. Procedural aspects for the establishment of the PMU is a conditionof disbursement for consultant services for BAPPENAS and the line ministries.

32. Bank Supervision. In view of the range of activities and the need for flexibility,individual projects will be reviewed through periodic consultations between GOI and theBank. In view of the nature of technical assistance expected to be financed under thisproject, considerable inputs are likely to be required from headquarters (HQ) staff andconsultants, especially for reviewing TORs and study proposals. A team of experts willbe identified (both inside and outside the Bank) who will assist in reviewing andcommenting on TORs and study design. Although this is likely to increase the cost ofsupervision, it is essential for the first 18 months of project implementation. In addition,a major review of project implementation and progress towards objectives will beconducted two years after implementation starts (mid-term review). A tentative schedulefor supervision mission has been outlined in Annex 4.

33. Project Costs and Financing. The overall project cost is estimated at US$ 25.0million equivalent including local taxes amounting to US$ 1.4 million equivalent andUS$ 1.2 million equivalent of contingencies. Detailed costs for the different projectcomponents are estimated as follows:

- 10-

Central Level US$ MillionCapacity building for policy, strategy, and 6.15planningProject design and feasibility studies 3.10Training

Development of training programs 1.20Local training 0.45Short-term overseas 0.60

Equipment 0.30Subtotal 11.80

Provincial LevelCapacity building for policy, strategy, and 1.25planningProject design and feasibility studies 4.65Training

local 2.51short-term overseas 0.30

Equipment 0.30Subtotal 9.01

Project Administration 3.0

Total Base Cost 23.81Contingencies 1.19Total Project Cost 25.00

34. The Bank Loan of US$ 20 million equivalent will finance 100 percent of thestudies and consultant services at the provincial level and 80 percent of those at thecentral level4 ; 40 percent of the local training, 100% of overseas training costs, and 100%of project management costs. Equipment will be financed at 100% by GOI. GOI'scontribution will be used mostly for local expenditures. In addition, a significant part ofGOI's share in project costs will be in kind in the form of counterpart staff and infacilities and services provided to manage and implement the project.

Procurement and Disbursement

35. Procurement of consultants. All consultant services will be procured inaccordance with Bank Guidelines for the Use of Consultants. In particular, fee levels andoverhead expenses will be negotiated to reflect the nature and length of the assignmentand the level of expertise required. Also, budgets, short lists, selection procedures, letters

See Annex 5 for a breakdown of consultant services by type.

- 11 -

of invitations, proposals, evaluation reports and contracts would be subject to Bank'sprior review for all contracts estimated at US$ 100,000 equivalent per contract or morewith consulting firms and US$ 50,000 equivalent or more with individual consultants.The Standard Form of Contract for Consultant's Services will be used.

36. Contracts that are estimated below US$100,000 equivalent with consulting firmsor US$50,000 equivalent with individual consultants would be subject to random post-review. However, these exemptions to Bank prior review shall not apply to: (a) terms ofreference for such assignments; (b) single source selection of consulting firms; (c)assignments of a critical nature, as reasonably determined by the Bank, (d) amendmentsto contracts for the employment of consulting firms raising the contract value to US$100,000 equivalent or above, or (e) amendments to contracts for employment ofindividual consultants raising the contract value to US$ 50,000 equivalent or above.

37. As for training activities financed by the project, those will be reviewed by theBank on annual basis. Administrative costs for travel, per diem, allowances, supplies,maintenance and office accommodations for project administration will be based onGOI's administrative procedures.

38. Disbursement. Disbursement percentages for each category of TA and fortraining are given in Schedule B of the Memorandum of the President (MOP). A SpecialAccount (SA) will be set up in Bank Indonesia or a commercial bank with initialauthorized allocation of US$2.00 million for all expenditures.

39. Disbursement procedures include:

(a) one copy of the final contract and two copies of the English ContractSummary would be submitted prior to the first disbursement applicationfor TA contracts subject to prior review by the Bank;

(b) the evaluation report, one copy of the final signed contract and two copiesof the English Contract Summary would be submitted together with thefirst application for withdrawal for TA contracts subject to post review bythe Bank; and

(c) Statement of Expenditures (SOE) procedures would apply to expendituresfor: (i) training and administrative expenditures; and (ii) contracts foremployment of consulting firms valued at less than $ 100,000 equivalenteach and contracts for the employment of individual consultants valued atless than $ 50,000 equivalent each. Contracts would be retained by thePMU and made available for review by visiting Bank missions.

40. Reporting. The PMU would prepare and submit quarterly reports starting no laterthan December 31, 1996. In general, the report should provide data on project inputs andimplementation indicators (see Annex 2 for more details).

- 12-

41. Audit of Accounts. The PMU would maintain separate project accounts in a formsatisfactory to annual audits. These accounts, including the Special Account, would beaudited annually by an independent auditors acceptable to the Bank and would includeopinions on all expenditures, including those made against SOEs. The PMU wouldsubmit the audited accounts to the Bank for review no later than six months after theclosing of each fiscal year.

42. Technical Audits. During negotiations, agreement was reached that technicalaudits of selected major assignments would be carried out by independent experts in amanner satisfactory to the Bank, to review performance of consultants and of trainingprograms and their institutional development impact.

IV. PROJECT BENEFITS, RISKS AND SUSTAINABILITY

43. Benefits. The project will assist GOI in formulating clear sector strategies forimproving the performance of the social sectors. This is essential if Indonesia wants toreach a stage of human resource development attained by some of its neighboringcountries like Malaysia and Thailand and increase its competitiveness. Building capacityfor development planning within BAPPENAS, the line ministries and the provinces willimprove overall sector performance. The special attention given to building capacity andencouraging innovation at the provincial level will be key for improving the quality ofsocial sector programs and for ensuring their sustainability as decentralization proceeds.Further, the emphasis on monitoring and evaluation needs is key for improving theeffectiveness and efficiency of the social sectors. The project will also strengthenBAPPENAS's focus on strategic issues, assist the transition to decentralization, andencourage innovation at the provincial level. Finally, the proposed activities will assist indeveloping investment plans for the sectors that will generate more resources for thesesectors from both GOI and donor sources.

44. Risks. The main risk is that the different activities supported by the project willnot coalesce to produce the desired impact on social sector strategies. Strong ownershipby the GOI team, expected effective management of project implementation as well as acommitment to adequate supervision by the Bank will minimize this risk. Riskspertaining to slow appointment of consultants would be minimized by the role the PMUwould play in providing assistance to various implementing agencies. The risk that toomany studies may be managed at the central level has been foreseen and resources forprovincial level studies have been specifically allocated. The risk of poor ownership hasbeen minimized by a demand driven process for proposal selection and identification ofTA.

45. Sustainability. Sector strategies and project design and feasibility studies to besupported by the project will enhance the quality at entry of projects and thereforeenhance the overall sustainability of the sectors. In addition, the project has a number offeatures that will enhance its sustainability. These include: (a) institutionalization oftraining program(s) needed for building capacity to ensure that these programs can

- 13 -

continue after the project closes; (b) reviewing and initiating planning processes that willcontinue beyond the period of the project; (c) developing approaches and models forcarrying out social sector plans at the provincial level, models which would be replicatedin other projects and provinces; and (d) developing monitoring systems and indicators forsector performance at the central and provincial levels. These systems will be maintainedafter the project and will have a significant impact on the overall performance of thesectors.

V. ENVIRONMENTAL, SOCIAL AND POVERTY IMPACT

46. The proposed project does not have any environmental impact and has beenclassified in environmental Category C. The project strengthens poverty alleviationefforts by addressing some of the strategic issues and possible solutions to improvetargeting of human resource services to the poor.

-15- ANNEX I

INDONESIA

SOCIAL SECTORS STRATEGY AND CAPACITY BUILDING PROJECT

HEALTH AND EDUCATION SECTORS:

BACKGROUND AND KEY ISSUES

I. HEALTH SECTOR

1. Despite significant improvements in health status and the provisions of healthservices in Indonesia during the past 25 years, much remains to be done to respond to thechanging disease patterns and improved socioeconomic circumstances of Indonesians.The unfinished agenda includes increasing the total resources available to health,improving the effectiveness of the delivery system and decentralization of health services.However, the ability of the government to address these issues is limited by theinstitutional capacity for translating goals into sector strategy, policy analysis, prioritysetting and development of operational plans. The proposed project aims to provideresources to build the required institutional capacity at the central and provincial levelsand to carry out crucial policy analysis and sector studies.

2. Twenty-five years ago the health status of the Indonesian people wascharacterized by:

* high infant and child mortality due largely to infectious diseases;* superimposed on, and contributing to, high rates of protein-energy and

micronutrient malnutrition;* relatively low rates of non-communicable diseases in adults; and* inefficient health services which were not widely accessible to the population.

3. Since 1970, overall health status has improved significantly:

* despite a possible plateau in the 1980s, IMR has fallen from approximately 90 per1000 livebirths in 1970-74 to 57 in 1994 and CMR from 166 to approximately 80;

* acceptance of family planning has risen dramatically and the population growthrate has shown a corresponding decrease; and

* the prevalence of protein-energy malnutrition has decreased significantly.4. Over the same period, while there have been significant increases in total publicspending on health, it has basically kept pace with inflation and the increase inpopulation:

* in the 1970s public spending on health was 0.2% of GDP and is currently 0.7% ofGDP and 4% of total government expenditures;

-16- ANNEX I

* nevertheless, real per capita public spending in 1991/92 was only 6% higher thanin 1982/83;

* in the 1 990s total expenditure on health was approximately $12 per capita (2% ofGDP) of which one-third came from public expenditure and two-thirds fromprivate sources:

* consequently, per capita government expenditure on health in India and Chinaexceeded that in Indonesia, while outlays in Thailand and Malaysia are largemultiples of the Indonesian figure.

5. Despite these chronically low levels of public spending, there has been anincrease in the number and improved distribution of public health facilities, as a result ofwhich there has been a very significant increase in accessibility to modem healthservices.

6. Nevertheless, despite these overall gains there are significant differences in healthstatus and the utilization of health services between socioeconomic groups and regions ofthe country:

* there are differences in IMR and CMR between provinces (in Java/Bali the IMRin West Java at 72 per 1000 livebirths is significantly above that of Jakarta andYogyakarta at 24 per 100 livebirths and there are similar differences betweenprovinces in other regions);

* the IMR of groups of lower socioeconomic status are still significantly higher andhave fallen at a slower rate than those of higher socioeconomic status (over theperiod 1970-74 to 1990-94 the IMR of children born to mothers with primaryeducation fell from 95 to 55 per 1000 livebirths while the rate for those born tomothers with no education decreased from 115 to 85);

* maternal mortality remains high in many parts of the country; and* utilization of health services by the poor increased to reach 54% by 1987 but then

fell to 44% in 1992.7. At the same time the epidemiologic transition has proceeded with an increase inthe importance of chronic non-communicable diseases of adults and a decrease in theburden due to infectious disease in children.

8. Nevertheless, the health system in Indonesia has significant problems

* despite the increases which have occurred, total expenditure ($12 per capita) islow compared to other countries in the region (e.g., in Asia (excluding India andChina) total expenditure at $61 per capita represents 4.5% of GDP;

=> as with total expenditure, both public and private spending on healthservices are much lower than in other countries in the region,

=> it is estimated that provision of the limited package of public health andclinical interventions recommended for low income countries in the WorldDevelopment Report (WDR, 1993) on health would cost $10 per capita -thus adoption of this basic package would require a considerable increasein public spending as well as reallocation within the current outlays,

-17- ANNEX I

* in addition, public spending is biased against the poor and in favor of the non-poor;

=: utilization of public health services by the poor (as compared to thenonpoor) is low and decreasing - this is particularly true for hospitals andless so for health centers,

=> consequently, the public subsidy is more available to the nonpoor,> further, recent trends have increased the proportion of public funding

allocated to hospitals (from 42% of government health expenditure in1984 to nearly 50% in 1991) and decreased the proportion allocated tohealth centers (from 40% of total government health spending in 1984 to35% in 1991), deepening the bias in public spending against the poor,

z> in addition, the pipeline of public investment in the health sector involveseven further emphasis on hospitals and will lead to even further biasagainst the poor.

* overall, the health system is not responding to meet the challenges contained inthe new situation,

=> overall, the response is still in terms of centrally-directed blank-etapproaches which ignore local variation in disease patterns and serviceneeds,

= the response to changing disease patterns (for example the fall in infantmortality and rise in non-commullicable diseases of adult in the moredeveloped areas of the country) has been slow and inadequate,

= the staffing patterns and skills are inappropriate,=> the administration of the public healtlh services (including personnel and

budget procedures) continues to be centrally driven and frequentlyunresponsive to the provincial and local situation.

z and the bias against the poor continues and deepenis.9. While the h.ealth systcmi as a wNhole has not responided to these challenges, someHiitiltives have been talkeni:

* government has promoted limited healttl Iisurance.* increased cost recoverv h1as beeni introduced in soIm1e health f'acilities,* integrated budgtets at the provincial level have beeni introdduced for several

provinces.* there have beeni incremental moves to decceilralizationi in some provinices,* other projects have responded to specif'ic disc.:se challenges.

10. These initiatives notwithstanding, the overdfl esponse of the system has beenslow and inadequate.

11. An important aspect of'the limited abilitv of the tovernmenit to respond to thecurrent health situation is the institutionial setting, and particularly the capacity of thegovernment to analyze the situation, design and implement projects and monitor change.At the government level this involves -

-18- ANNEX 1

* the Five-Year Development Plan or REPELITA, an indicative plan whichtranslates and elaborates the main objectives and priorities of developmentcontained in the GBHN,

+ the annual National Budget which is the instrument for detailed development tomeet the goals and targets of the REPELITA,

* BAPPENAS, the key central government institution in development in Indonesia,whose mandate covers coordination, implementation and monitoring of alldevelopment planning,

* the central Ministry of Health where the Planing Bureau has responsibility forpolicy analysis and strategic planning within the sector,

* at the provincial level> the Bappeda, whose main function is to provide coordination of all

provincial development planning, monitoring and evaluation> the Dinas Kesehatan, responsible for delivery of health services.

12. Each of these areas of governnent is limited in its ability to respond to the currentchallenge.

i while laudable goals for the sector are set through the REPELITA there is nocoherent strategy and framework which identifies realistic instruments forreaching the goals through changes in the sector,

* at BAPPENAS there is a limited ability for policy analysis or for conceptualizingprojects and most staff are tied up with routine matters. As a result, plannedinvestments for health represent only one-quarter of the REPELITA allocationand do not necessarily reflect government priorities,

* in general, the Ministry of Health remains committed to increasing the extent ofthe public system without due attention to improved quality or increased privatefunding of health expenditure,

* at the Bureau of Planing, where preparation of health project currently occurs islimited by staff availability and skills. There is no capacity for analysis of issues,medium term planning and priority setting and development of operational plansin the sector or for articulation of an overall sector vision and forging acommitment to it,

* provincial capacity is even more limited and there is no clear plan for preparingthe Bappeda or the Dinas Kesehatan through building their capacity for policyanalysis and implementation, a critical issue as decentralization proceeds andprovinces need to play a larger role in developing their own programs,

* while there is a general goal of decentralization there is no clearly definedframework and timetable through which it will be implemented.

-19- ANNEX I

13. Thus the critical policy issues are

* how to increase the ability of the sector to carry out policy analysis, and plan andimplement change through building capacity at the central and provincial levels.The most important questions to be addressed in policy analysis and planning forchange are -

+ how to increase the total resources available to the health sector (from both publicand private sources) with emphasis on -

=> delivery of basic packages of health services, with emphasis on the poor,> increased private contribution by the middle and upper income groups,

with particular attention to cost recovery and health insurance,z harnessing and stimulating service providers in the private sector;

* how to improve the effectiveness of the delivery system through> reallocation of public expenditure away from hospitals to health centers

and sub-centers,> promotion of locally appropriate responses to the prevailing health

services and health situation,> improved quality of health services at all levels,

7> improved productivity,=> improved staffing of health services, including the provision of more

appropriate training;+ how to decentralize the health services including attention to

, promotion of health service structures and interventions which areappropriate to the local situation,

7> an overall plan, transition strategy and timetable for decentralization,= clarification of the roles of the center, provinces and districts in a

decentralized system,z> reform of planing, personnel and budgetary procedures including

provision for transfer of funds through block grants and transfer of controlover staff,

=> assistance to the provinces and districts to strengthen their ability tomanage services.

II. EDUCATION SECTOR

14. This annex reviews changes in education status and provision of educationservices in Indonesia in the last 20 years and concludes that while there have beendramatic improvements, Indonesia is now at another cross-roads in the development of itshuman capital. The challenges it faces are substantial and include enhancing quality ofprimary education and reaching the very poor who are still outside the system, providingnine-years of basic education to the 50% cohort not currently enrolled, and bringing abouta paradigm shift in higher education. The ability of the government to address theseissues is limited by the institutional capacity for translating goals into sector strategy,policy analysis, priority setting and development of operational plans. The proposedproject aims to provide resources to build the required institutional capacity at the central

-20- ANNEX 1

and provincial levels and to carry out crucial policy analysis and sector studies.

15. Indonesia has made significant achievements in education in the past two decades:

* While 60% of adults were illiterate in 1970, by 1993, illiteracy was reduced to15%;

* At the basic education level, gross enrollment rates increased rapidly between1973-1993 from 60% (13 million students) to 97% (30 million students) inprimary, and 17% (1.5 million) to 54 % (7.1 million) in junior secondary;

+ Enrollments at senior secondary and tertiary are comparable to countries withtwice Indonesia's per capita income: 35% (4.2 million) at senior secondary and11% (2 million) in tertiary.

16. The above gains have been achieved by maintaining a sound expenditure policy:* Public expenditure on education over the past two decades averaged 3% and 14%

of GDP and total government expenditures, respectively;* The share of primary education was maintained at 45% of the total education

budget, with secondary and tertiary receiving 25% and 13%, respectively. Again,this reflects the pattern adopted by Indonesia's successful East Asian neighbors;

* The combination of high public sector shares in provision of primary schoolingand variations in age composition across income groups have resulted in a pro-poor bias of public spending on primary education.

17. Another strong point of the Indonesian education system is the relatively highlevel of private participation in education, particularly beyond the primary level.

* More than 50% and 70% of enrollment at the secondary and tertiary levels,respectively are provided by private schools and universities;

* Households spend about 1.5% of GDP on education, demonstrating a significantprivate contribution to human capital development.

18. Notwithstanding the progress achieved to date, the education sector faces someformidable challenges in the medium to long term.

* Increasing retention and access of the rural poor, particularly in the OuterIslands to quality primary education.

=> Still only 84% of primary school-aged children from the poorest 20% ofhouseholds enroll in primary school and most of these not attending areconcentrated in the Outer Islands;

= Overall retention rates in primary schools are approximately 75% with theOuter Islands averaging 60% and some of the poorest provinces as low as40%;

=> Tests of cognitive ability show that student learning abilities are weak. Onaverage, less than 50% of the curriculum is absorbed by students, andIndonesian students performed low in international comparisons ofreading achievement tests.

-21- ANNEX I

* Expanding quality basic education (three years beyond primary) to the 50% oJftheage-group who are currently not enrolled and who are primarily the ruralpopulation and some urban poor.

z There are significant differences in enrollment among income groups andurban-rural residents: net enrollment rates among the lowest quintile is25% compared to 66% for the top quintile; and 33% for rural childrencompared to 62% for urban;

=> High costs, both direct (official and unofficial fees, uniforms, books, etc.)and indirect (high travel time, foregone earnings) of junior secondaryeducation constitute a deterrent for poor households;

=> Achieving the nine-year basic education policy objective will requiresignificant outlays of public resources to school construction, upgrading ofteachers, textbooks and learning materials, scholarships to poor children.and subsidies to private schools for quality improvements. This implies asignificant level of recurrent costs to sustain the system once the programis fully implemented (in approximately 15 years). Effective delivery ofbasic education will require more focused analyses of education needs andimply the identification of issues at lower (provincial, district) levels,addressing those issues through flexible, locally specific strategies.

z> An important issue in achievement of the nine-year policy is what role theprivate sector can continue to play and how. It currently enrolls 40%,serves an important equity consideration (a higher proportion of the poorattend private schools), but is of relatively lower quality than publicschools. The level of savings of public resources is very high if theexpansion is done with the private sector, not underestimatingadministrative difficulties.

- Rationalization of the v ocational ind technicail senior secontlary stream.= The VTE stream currently enrolls about 30% of senior secondary students.

The current system is costly andi the labor market outcomes it provides forits graduates are indistinguishable from those in the general stream.

> The government's plan to increase the VTE enrollment share to close to50% should be carefully analyzed in light of the above and other sectoralpriorities.

* Development of i coherent frameuwork./or a large and diferentiated highereducation system.

= With enrollment rates at high levels (11%) for a country of Indonesia's percapita inicoimie, and in light of the government's priority to achieveuniversal ninie-years of education in the next 15 years, there is need to shiftfrom quantity expansion to quality improvements throughout the highereducation system, and to continue the high levels of reliance on privatefinancing.

-22 - ANNEX 1

=> GOI is beginning a paradigm shift in this sector from a highly centralizedsystem to one that grants financial and academic autonomy to publicinstitutions while simultaneously establishing a clear framework ofaccountability for their performance. The main elements of the "NewParadigm" for the public sector include: (i) greater decentralization ofmanagement; (ii) provision of higher education in less-developed regionsand in high-priority fields; (iii) increased emphasis on economicconsiderations in determining public fund investments; and (iv) significantrole in enhancing quality in both public and private institutions.

=> For the more than 1,300 private institutions, there is need for qualityenhancement through the establishment of a workable accreditationmechanism.

19. In order to meet the challenges it is facing in primary and junior secondaryeducation, Indonesia would probably need to allocate a higher proportion of GDP toeducation. This would also bring it closer to the regional average of 4%. But increasingresources is only one side of the story and by itself will not automatically produce moreand better educational services. Accompanying resource increases there is need forcontinuous analysis, planning, implementation, monitoring and evaluation of programs atall levels of government.20. An important aspect of the ability of the government to carry out these aspects isthe institutional setting. This involves:

* The Five-Year Development Plan or REPELITA, an indicative plan whichtranslates and elaborates the main objectives and priorities of developmentcontained in the GBHN,

* The annual National Budget which is the instrument for detailed development tomeet the goals and targets of the REPELITA,

* BAPPENAS, the key central government institution in development in Indonesia,whose mandate covers coordination, implementation and monitoring of alldevelopment planning,

* The central Ministry of Education and Culture (MOEC) where the PlanningBureau has responsibility strategic planning within the sector and Balitbang hasresponsibility for policy analysis; and the central Ministry of Religious Affairs(MORA) which is becoming a larger player in providing education services;

* At the provincial level: The Kanwil MOEC whose functions are (i) to providecoordination of education strategy, planning, monitoring and evaluation includingcoordination with MOHA and MORA; and (ii) delivery of education services; andthe Dinas MOHA, who is responsible for delivery of primary education.

21. Each of these areas of government is limited in its ability to respond to the currentchallenge:

* While laudable goals for the sector are set through the REPELITA there is needfor a more coherent strategy and framework which identifies realistic instrumentsfor reaching the goals through changes in the sector;

-23 - ANNEX I

* At BAPPENAS there is a limited tire of experience in policy analysis or forconceptualizing projects and most staff are tied up with routine matters. As aresult, planned investments for education represent only one-quarter of theREPELITA allocation and do not necessarily reflect government priorities;

+ At the Bureau of Planing and the line departments within MOEC and MORA(where preparation of education projects currently occurs) there is limitedcapacity for analysis of issues, medium term planning and priority setting anddevelopment of operational plans in the sector or for articulation of an overallsector vision and forging a commitment to it;

* Provincial capacity is even more limited and, while there are plans beingdeveloped under the current Secondary Education Projects for preparing theKanwils, it is one of the first of such initiatives and will require carefulmonitoring to draw lessons for future projects;

+ While there is a general goal of decentralization there is no clearly definedframework and timetable through which it will be implemented. This requires:

n promotion of education service structures and interventions which areappropriate to the local situation;

=> an overall plan, transition strategy and timetable for decentralization;= clarification of the roles of the center, provinces and districts in a

decentralized system;=> reform of planning, personnel and budgetary procedures including

alternatives for transfer of funds and transfer of control over staff;=> assistance to the provinces and districts to strengthen their ability to

manage services.

INDONESIA

SOCIAL SECTORS STRATEGY AND CAPACITY BUILDING PROJECT

Table 1: Project Output/Outcome Indicators

Main Objective Output Indicator Expected Outputs

Sector studies and strategies (including Number of completed sector At least 75% of studies financed by theDevelopment of * REPELITA VII for social sectors) studies of acceptable quality project are relevant to policies &strategies in social (including REPELITA VII programs (to be determined by ansectors, especially in chapters on social sectors) external panel).health and education

C> CEPrograms and investment plans Number of central and provincial At least 10 provincial and 4 central social

investment plans (included in the sectors investment plans preparedBlue Book)

Capacity building at:Target staff with acquired needed Competency level of target staff Increase in the competency levels of

* provincial level skills (planning, preparation, .optnylvlo agtsafIces ntecmeec eesobappedvica, kl,ve skimplemntaion, monp'r.iong (as defined by the capacity target staff by a agiven proportion (todiap) kni im> levalation o soi stors pam building needs assessment). be defmed by the baseline survey).dinas) evaluation of social sectors programs)

* central level(BAPPENAS, C>BPlNnin o Proportion/number of social sector Increase (proportion and total number) of

selected line proposals submitted to social sector proposals accepted annuallyministries eC BAPPENAS of acceptable quality into BAPPENAS pipeline

Institutionalized enabling environment'V and support system for capacity C> Availability of key indicators for Kr

building social sectors at the national and Key social sectors indicators areprovincial levels accessible to the central and provincial

Development of monitoring and staff planning staff.evaluation systems for social sectorsplanning (including identification ofindicators)

INDONESIA

SOCIAL SECTORS STRATEGY AND CAPACITY BUILDING PROJECT

Table 2: Monitoring Project Implementation(Input and process Indicators) 1

Project Outputs Project Activities (interventions) Indicators

=>, | Carry out sector studies | r | No. of studies initiated/ completed ( within 3 months ofC* nouscortdis expected date)

Sector studies and strategies;REPELITA VII chapters on social sectors

_______________________________________ |,.~ No. of consultants hired (within 1-3 months of expected¢ Provide TA V date)

Programs and investment plans tdentify sub-projects/ investment plans No. of investment plans initiated/completed at the centratUprovincial levels

Target staff acquire needed skills (planning, Conduct training programs No. of staff trainedpreparation, implementation, monitoring and |inevaluation of social sectors)

| Review planning process Initiation/completion of the review of planning

Institutionalized enabling environment andsupport systems for capacity building Design! prepare training program(s) Initiation/completion of training program development

Monitoring systems for social sectors(including identification of indicators) Identify indicators and develop monitoring E Identification of key sector indicators/ development of

( i a nsystem(s) data systems o

The indicators should be reported by project component (if applicable. The PMU reporting and recording system is likely to be the main data source for these indicators.Moreover, the PMU will also report data on procurement, disbursement as well as project management performance.

INDONESIA

SOCIAL SECTORS STRATEGY AND CAPACITY BUILDING PROJECT

Summary of Activities to be Initiated in the First Year of Project Implementation

Activity Expected Output Resources Responsible TimeframeAgency

Mid-term review of Assessment of achievements to date, action needed for the A panel of specialists in key BAPPENAS 8 monthsREPELITA VI and initial second phase of REPELITA VI, review of the planning process, health, education, and other socialpreparation of REPELITA identification of key information gaps; preparation of an outline sectors. Estimated budget isVIl for social sectors chapter in REPELITA VII. US$200,000- 500,000.

Preparation of health sector Provision of technical assistance to MOH to review functioning A number of short term MOH 12 monthsstrategy and preparation of and effectiveness of the health system and formulating future international and national TA tosector inputs to REPELITA strategy and direction (with special attention to health financing assist MOH teamVIl and private sector role). The effort will also provide TA to Estimated budget is about US$

senior officials at MOH for the preparation of REPELITA VII. 150,000-250,000.Review of strategic directions Review of present priorities and disease control programs in Support is needed for a local team MOH 12 monthsfor the health sector light of major changes in the disease burden. Two key outputs to carry out the planned review asdevelopment in response to are expected: well as international consultantsthe epidemiologic transition * policy recommendations for overall disease control who would provide advice on

activities, including non-communicable diseases; and specific topic. Estimated budget* an investment plan for the implementation of the proposed is US$350,000.

strategy.Analysis of quality of 9-year Analysis of issues and constraints facing the 9-year basic A team from MOEC assisted by MOEC/ 12 monthsbasic education education sub-sector. The study should provide special attention international and national MORA

to (1) the effective coverage of primary and junior secondary consultants would carry out theschools in the project areas; (2) dropouts in the primary schools proposed analysis. Estimatedand the main determining factors; (3) determinants of the quality budget is US$ 500,000of basic education and possible interventions to address them.Pilot efforts and investment plans to address these issues shouldbe outlined by the study.

Provincial health sector Provision of technical assistance and other resources to A provincial team with local and Provincial 16 monthsstudies and investment plans * carry out health sector analysis and prepare provincial selected international technical Government

health strategy; assistance (with good command of (bappeda,* document and identify efforts needed to strengthen the Bahasa Indonesia) will prepare kanwil, dinas)

provincial and district level ability to design, prepare, the sector analysis and theimplement, monitor and evaluate programs and projects; investment plans. About 2and provinces will start in the first

* prepare investment plan(s) to implement the proposed year. Estimated budget isstrategy. US$400,000-500,000 perstrategy________________ ._____________________________________ I province.

Activity Expected Output Resources Responsible TimeframeAgency

Provincial education sector A similar effort to that for the provincial health sector (see Same as above Provincial 16 monthsstudies and investment plans above). Government

(bappeda,kanwil, dinas)

Capacity building needs Assessment of the skills required, skill levels of existing staff, A consulting team to work with BAPPENAS, 8 monthsassessment and strategies (including training programs) to fill the identified the PMU to carry out the line

skill gaps. The target groups for the assessment would be assessment in collaboration with ministries,:provincial and district staff; staff of Bureaus of Planning at the the line ministries and the provincesline ministries, and BAPPENAS staff under Deputy IV. The provinces. Estimated budget isassessment should provide an analysis of the constraints and US$300,000-500,000.reasons for the limited capacity at the different levels (i.e.,central, provincial, and district). The output of the assessment isa strategy for improving the capacity of the different levels.Finally, the assessment should provide baseline data andexpected targets for the training programs.

Development of a training Development of a training program to develop the capacity and Local universities with BAPPENAS 12 monthscourse for social sectors practical skills for social sectors planning. The main target international and nationalplanning and management groups for the training program are the provincial planners, technical assistance. Estimated

especially the Bappedas (levels I and II) and, as appropriate, budget is US$300,000-500,000.planning staff from the line ministries. The main objective of 00the activity is to institutionalize training programs for socialsectors planning that would help prepare the provinces for theirincreasing role in this area.

Review of budgetary process Review of existing approaches to prepare budgets for social International and national TA to BAPPENAS/ 12 monthsfor the social sectors sectors at central level and identification of ways to increase work with BAPPENAS staff. MOF

efficiency of the process (e.g., automation). The expected Estimated cost: US$ 150,000 -outputs are: a proposal outlining steps needed to improve the 200,000process; and possible pilot effort in one unit in the second yearof the project .

Review of social welfare Review of current approaches for dealing with isolated International and national TA to BAPPENAS/ 12 monthsissues communities and identification of strategies for increasing the work with BAPPENAS staff and MOSA

participation of these communities in the development process. MOSA. Estimated budget US$The review will also examine issues related to the prevalence of 100,000- 150,000.disability (physical and mental) in Indonesia and steps neededfor developing strategies to addressing the needs of the disabledindividuals.

Establishment of the project Selection of BAPPENAS staff as well as a consulting team to Estimated budget is US$750,000 BAPPENAS ongoingmanagement unit (PMU) staff the PMU. An essential activity for project implementation. per year. _

Dissemination of project Conducting of a number of workshops and seminars to brief and Part of the PMU budget PMU 6 monthsinformation to potential inform the potential beneficiaries of the project about its Zbeneficiaries objectives and how they could participate in its implementation. X

- 29 - ANNEX4

INDONESIA

SOCIAL SECTORS STRATEGY AND CAPACITY BUILDING PROJECT

SUPERVISION PLAN

Mission Timing Objective Staffing - ResourcesAugust, 96 Project Launch: Health specialist;

* review of project management staffing and skills; education specialist;* review TORs for initial activities RSI

December, 96 Review mission: ;* focus on project implementation;* needs assessments for training programs;* needs assessment for data/ indicators at the different

levelsJuly, 97 Review mission:

* focus on progress in submission and quality ofprovincial proposals;

* adequacy of the review process,* identify any implementation bottle necks especially

in relation to the recruitment of consultantsDecember ,97 Review mission:

* update data on performance indicators;* prepare for project's mid-terms review in July 98,* review implementation of the different components;* assess quality of completed studies and proposals

July, 98 Mid-term review mission:* comprehensive review of project implementation and

assessment of project's ability to achieve its specifiedobjectives;

* update/analyze data on performance indicators toassess overall achievements

December, 98 Review mission: ;* follow-up the recommendations et forward by the id-

term review team;* update data on performance indicators

July, 99 Review mission: ;* prepare for ICR mission;* update data on performance indicators;* assess feasibility of completion of planned project

activitiesDecember, 99 ICR mission- prepare implementation completion report

for the project and provide analytic assessment of itsperformance

- 30 - ANNEX5

INDONESIA

SOCIAL SECTORS STRATEGY AND CAPACITY BUILDING PROJECT

CONSULTANTS TO BE FINANCED UNDER THE PROJECT

Staff Months Estimated Cost (US$)Consultant Local International Local Foreign Total Implementing Agencies

consultants consultants

Policy Development a/ TBD TBD 0.8 1.6 2.5 BAPPENAS, Line ministries,Provincial Governments

Capacity Building b/ TBD TBD 1.6 3.3 4.9 BAPPENAS, Line ministries,Provincial Governments

Implementation Support c/ TBD TBD 0.6 1.1 1.7 BAPPENAS

Total 3.0 6.0 9.1

a/ The required expertise include: Health financing, decentralization, public sector management, private sectordevelopment, health promotion, monitoring and evaluation, & policy analysis for social sectors among others

b/ The required expertise include: Data-base management, development of training programs, training specialistsin: monitoring & evaluation, sector analysis, program formulation, & implementation among others

c/ The required expertise include: (i) a technical support team (e.g., health specialist, education specialists);& (ii)Administrative support team (procurement, reporting/recording, financial/accounting etc.)

TBD: To be determined

- 31- CHART 1

INDONESIA

SOCIAL SECTORS STRATEGY AND CAPACITY BUILDING PROJECT

ORGANIZATION STRUCTURE OF THE STATE MINISTRY FOR DEVELOPMENT

PLANNING/BAPPENAS

| Chairman of Bapens

| Vice-Chairmant

DEPUTY~~~~~~~~Rsore DEUYIIFiscal & Monetay Huma EU Foreign Cooperation

Econ. Analysis & Stat. Relig, Educ , Culture & Sponr Multilateral Econ Cooperation

Monetar. & State Fin | Social Welfare, Health & Nutrit. Bilateral Ecos. Cooperation

| Balanee of Payment l Popul. Fam Plan., Foreign Eeon Coop. Adminus |1 1 1 ~~~~~~~~~~Women's Role & Youth | 1_

| Macro Econ Plan & Studies l | Marine, Aerospace, Environment, Monitor. Foreign Ecoa. Coop

1 I 1 ~~~~~~~~~~~Science & TechnologY I 11

DEPUTY 1 DEPUTY V DEPUTY VIIIEconomic Affairs Regional & Area Administration

[| ndustry& Mining Regional Dev. I Development Adrninistration

0 Agric., Food & Forestry l X Regional Dev. 11II 0 Law, Soc. Communication & Inform.

-| Trade, Coop. & Business l j Urban, Settlemt .......... & Housing l ...... 0 Educ & Training Administration

Manpower & Job Opportunity | Area Dcv. & Tranantigration Dais Process. & Information

y IIIIl | DEPUTY Il1l Spatial & Environment General Administration

Infrastructure

DEPUTY VI

caon & Tansport Funding & Imp Control

| Tourisrn, Post & Telecom. l H Project Prep & Analysis

Water Supply & Imigation | Budget & Project Admnu

Electric Power & Energy Monitor., Project Implement

Unit Prtce Analysis and O&M4

- 32 - CHART2

INDONESIA

SOCL41 SECTORS STRATEGY AND CAPACITY BUILDING PROJECT

PROJECT MANAGEMENT STRUCTURE

PROJECT DIRECTOR [ STEERING COMMITTEE' ADVISOR(s)

PROJECT MANAGERPROJECT TECHNICAL

MANAGEMENT COMMITTEE(s)UNIT (PMU)

SECRETARIAL SUPPORT|

ADMINISTRATIVE SUPPORT TECHNICAL SUPPORT TEAMTEAM

Finance and Accounting Studies

Procurement/Implementation Training

Reporting and Recording Monitoring and Evaluation

Other Other

BAPPENAS PROVINCES LINE MINISTRIES

BUREAUS UNDER BAPPEDA DINAS KANWILS BUREAUS OFDEPUTY IV PLANNING/DG(s)

>-" THALAND IIT sle lINDONESIA

@ ' ' > PHILIPPINES '- SOCIAL SECTORS STRATEGY ANDBRUNFI HI/ CAPACITY BUILDING PROJECT

CW- MALAYSIAMedon MALAYSIA \ Aif ) ~ j S PROVINCE HEADQUARTERS

/ * J I @ NATIONAL CAPITAL

- PROVINCE BOUNDARIFS

j MALAYSIA 7 / _ _ INTERNATIONAL BOUNDARIES

, .oSINGAPORE L /

t POnllu~~~~lqu S~V HU

JAWA RARAT S,

Ki D K J AKARTA ng: y

JAWA TENGAH I'D OGYAKARTA P !

B ~ Z~~JJ~LAMPUN RI. -- -E AA

SUMATERA SELATAN B.,do, 7RIAU pg ~R AL®

SMATERA BARATDMATER UTARA JAKARTA

KIMANTAN BARAT B. go,., e Cd ang __

KALIMATAN TENGAH 9) d.. g /KA " KAIATAN SELATAtl,

_MANTAN TIMURLXWESi TENGAH,

SULAWESI STARR / Melorom /SLAWEI SEI-ATAN jl/ULAWES ENGGARA Dno

NUSA TENGGARA bARAT R \o _NUSA TENGGARA TIMUR Ku,.,,g \I

_ ^MALUKU (3 1 .'IRIAN JAYA The L-udore.-,, -1-denmpfosndnilhrfrmfO t

3 TIMOR TIMUR h., h, "P d -t Ipo y P W dorMek,o, AUSTRALIA'^ oro,y.,,dornm 'f such ib .0 d.-

C:z

(OD

Z-O

zo0

Z 4-)

F S~~~~4 -

< CZ, CI):27 a. >,