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Water Supply and Sanitation ProjectPREPAREOBY:BLACKAND VEATCHPTE.LTD.,SINGAPOREPT ARKONINENGlNEERlNG MP, INDONESIAPT MULTITEHNIKTAMAPRAKARSA,INDONESIAPT WASECOTIRTA, INDONESIA

.ADB TA4411-IN0WSSPFinal ReportWater Supply and Sanitation ProjectFINAL REPORTDecember 8. 2005TABLEOF CONTENTSVOLUMEI:INTRODUCTION. 10General . . 10Objectives of the PPTA .10PROJECT RATIONALE AND DESCRIPTION . 12Project Rationale. . 12General .12Water Supply . 13. .Sanitat on.:. 14Key Stakeholders .16Local Stakeholders . 16Other Stakeholders. 1822Brief Description of Sub Projects .Locations22Water Supply . 23Sanitation.25Institutional and Organizational Development. 25Public Health and Hygiene . 26Estimated Project Cost . 26Implementation Schedule . 27Water Supply .27Sanitation. 28Institutional Development and Capacity Building . .:.2 870Loan Processing Schedule .-. .t-mancing Plan30. * .30Project Benefits and Beneficiaries .TECHNICAL ANALYSIS . :. 31General . 31Urban Planning and Population Projections .:. 31Existing Conditions . 32Water Supply .32Sanitation.36Proposed Project Works .38Water Supply . 38Sanitation .43Assessment of Technical Validity . 44Water Supply . 44. .Sanltatlon . 46INSTITUTIONAL DEVELOPMENT AND CAPACITY BUILDING. 48Institutional Arrangements General . 48Physical lnvesttronts are not fully effective without Appropriate Institutions . 48Objectives of the I stitutionalDevelopment and Capacity Building (IDCB) .48Concepts for IDCB .48IDCB Approach and Method . 55IDCB Work in the Wster Supply Sector . 56The Institutional Environment Assessment . 56Wator Supply - Findings with Respect to Institutional Aspects . 57Water Supply - Findings with Respect to Legal Framework.58IDCB Work in the Sanitation Sector. .59The Institutional Environmeni Assessment . 5 9Sanitation - Findings with Respect to the Institutional Aspects . 63Sanitation - Findings with Respect to Legal Framework .64Ld7'Black & Veatch .Arkonin -MTP.Waseco

.Final ReportWSSPE.1.2.3.4.5.F.1.2.3. G.1.2.3.4.5.H.I.1.2.3.4.5.v.A.B.C.1.2.3.4.D.VI .A.B.C.D.1.2.E.F.G.VII .A.B.1.2.C.?.2.D.1.2.3.4.E.1.2.3.4.Sector Reform Actions . 65Water Supply List.65The S u e Resultyand Sequencing .65Sanitation Action List . 69Approximate Cost of LIDAP . 71Approximate Timing for LIDAP Activities . 73Good Governance. 73Sector and Corporate Governance Sustain the Investment.73Sector Governance and the Stakeholder Committee . 74Corporate Governance of the PDAM. 76Financial and Operational Performance Improvement Plans (FOPIP) . 77Background and Objectives .77Approach and Method . 78Assessment of PDAM Organizational Practices . 80Approximate Cost of FOPlP . 92Approximate Timing of FOPIP . 93Outline of an Accreditation System. 94Review of Private Sector Participation. 9595Background.Instances of PSP Found . 95The Institutional Environment . 96The Legal / Regulatory Framework . 99The Way Forward .99102PUBLIC HEALTH AND HYGIENE .Background.102Current State of Public Health in WSSP Locations . 102Water and Environmental Monitoring Activities . 103Overview .103Drinking Water Quality .104Waste Water Quality .104Public Awareness and Education Programs. 105.Public Health and Hygiena- WSSP Initiatives. 105ENV1RONtV;Ei;TK !;&FACTA::ALYS;3 . 108lntroductiori .108Cescription of the Project . 108Description of The Environment. 108Screening of Potential Environmental Impacts and Mitigation Measures. 109Environmental Impacts . 10s110Mitigation Measures.Institutional Sequirements and Environmental Vonitoring Plan .112Public Consdltation and Information Disclosure .116Conclusion .116SOCIO-ECONOMIC ANALYSIS .117Introduction .117. .Object vesand Methodology. 117Objectives .117Methodology . 117Analysis and Comparison with BPS SUSENAS Data. 119General . 119120Overview of the Project Area . .Poverty Allev at on120120Definition of Poverty and Low income .?overty Levels In Indonesia . 120Provincial and District Level Poverty . 121Impact on Poverty. 122Gender Strategy . 125. 125Gender Analysis .Baseline Profile .126Water Supply Component . 131. .San tatlonComponent . 133 .December 2005.;Black & Veatch .Arkonin -MTP .\lVaseco

WSSP"Final ReportADB TA 441 1-IN0Next Steps . 135Land Acquisition and Resettlement Impacts. :. 136I.Introduction . 1362.Land Acquisition and Resettlement. 136G. Indigenous People . 140H.Impact on Labor . :. 141VIII .FINANCE AND ECONOMICS . 143A.Introduction . :. 143B.Loan Project Costs and Financing.1431.Assumptions .1432.Project Costs .145Project Financing . 1473.C.Regional Government Finance . 1511.Recent Financial Performance .151Outstanding Debt . 154D.E.Regional Government Borrowing Capacity . 154Need To Estimate PemDa (RG) Borrowing Capacity. 1541.2.Legislated Borrowing Restrictions . 1543.APBD Budget Forecasts.1554.Borrowing Capacity. 1555. - Municipal Creditworthiness Improvement Programs. . . 157F.PDAM Recent Financial Performance. 158.GPDAM Financial Forecasts .1611.System and Coverage Analysis. 1612.Incomes and Consumption . 1623. . Price Elasticities, Capacity Changes and Alternatives . 1624.PDAM Tariffs . :. 164. .5.PDAM Consumption Forecasts . . :.1686.PDAM Financial Forecasts . 169H.Financial Management Assessment .171. .1 . . Purpose . ;.171. . .4 732.' Background.;. . . . . . . '. . . . . . . . . . . . . . . . . . . . .1-:-'.--.'. 1723.Actions Taken .* . . ! 1724.Results - PDAM .iiesults - RG . :. .:.'. .:.'. 1735.6.Conclusions .174I.Water Supply Sub-project Financial Analysis . . 175Water Supply Sub-projects . 1751.2.Demand For Identified Projects. :. 1763.Water Sub-project Financial Evaluation. :.178J.Sanitation Sub-projects . :. . 179.1.Identifled Sub-projects. 1792.Sanitation Sub-project Costs and Financing.1 .1803.Sanitation Sub-project Financial Evaluation .180K.Sub-project Economic Analysis .1821.Water Sub-projects.182. ordabihty Analysis .187. . .M. Sensitivity Tests .188.N.Summary of Financial and Economic Analysis189IX.IMPLEMENTATIONARRANGEMENTS. . .1: . . . . . . . 192. 192A.Organ zation1.Project Structure .192Contract Packaging and Procurement.;., . 194B.C. Technical Assistance . :. --- . 1941.General . .;. 1942. . Development Consulting . :.1953.Project Management and Quality Control Consulting . 1964.Institutional Development and Capacity Building Consulting .:. 1975.Technical Assistance Costs. 1985.F. L1.:;December 2005la& B. e a t c h.Arkonin -MTP2 Waseco

,WSSP6.D.X.A.B.1.2.3.C.D.1.2.3.4.E.ADB TA 441 1-IN0Final ReportFlow of Funds . 199Implementation Schedule . 200PROJECT FRAMEWORK AND RISK .201201General .Basis- Identification of a Sector Performance Problem or Opportunity . 201Water Supply . 201Sanitation . :. 202Institutional Development and Capacity Building . 202Inputs and Activities Required to Deliver Design Outputs . 202Project Performance Monitoring System . 205The Elements of the System . 205Water Supply Indicators of Outputs . 206Sanitation Indicators of Outputs . 206Good Governance Indicators. 207Project Assumptions and Risks . 208TABLESSummary of Water and Sanitation Conditions in Selected Countries. 12Table 1:Sub-project Locations .22Table 2:Scope of Project Water Supply System Expansions in WSSP . 23Table 3:Estimated Project Cost - US Million in Base Prices . 27Table 4:30Summary Financing Plan - US MillionTable 5:Populations in WSSP Water Supply Project Service Areas . 31Table 6:Existing PDAM Coverage . :. 32Table 7:Household Water Sources for Non-PDAM Customers in Project Area . 33Table 8:Data on PDAM Existing Systems . :. 34Table 9:Household Toilet and Bathroam Facilities.:. 36Table 10:Existing Sanitation Treatment Systems . 37Table 11:Septic Sludge Management in the Project Area . 38Table 12:Table 13:House Connections 2005 to 2015 . 43Water Sources Utilized in WSSP . 44Table 14:Water System Design Review. 45Table 15:Table 16':Sanitation treatment units - design criteria . ;:-: . *fi. .Sewer pipes - mlnlmum slopes . 47Table 17:Suggested 1ndica:ors of Performance of the Sanitation Sector . 63Table 18:Table 19:List of Actions for Institutional Development in Water Supply and Priorities . 66Table 20:Entry Points based on Expected Resistance to Change . :. 67Perceived Need for Change of Key Practices I Problems . 68Table 21:Table 22:Suggested "Entry Points" for Institutional Development - Water Supply . 69Table 23:Long List of Institutional Development Actions for Sanitation . 70Table 24:Local Perceptions of Institutional Practices. 70Table 25:Estimated Cost of a Typical LIDAP for Water Supply and Sanitatioil Sector . 72Table 26:Summary of Costs of a Typical LIDAP .73Tabie 27:The Good Corporate Governance Index for PDAMs .77Table 26:Priority Categories for Action, according to POAM Personnel .81Table 29:Top Priority Practices within Categories .82Table 30:Summary of Evaluation and Possible Management and OperationalImprovements . ::. -.:.'a3Table 31: . Consolidated Recruitment and raini in Needs. (Indicative). 85Table 32:Action Plan / FOPlP for the PDAM.87Table 33:Summary of Costs and Inputs for the FOPIP . 92Table 34:FOPlP Costs Breakdown Summary . 93Table 35:Perceptions - Is the Institutional Environment Conducive to PSP? . 97Table 36:Legal / Regulatory Framework and Credit Enhancements . 100Table 37:Fact - Is the Institutional Environment Conducive to PSP?. 101Table 38:Cases of Water Related Diseases in Project Area 2003 .per 1,000 persons . 103Table 39:Public Health and Hygiene Programs (Rupiah Millions) . 106Table 40:Environmental Monitoring Plan .:.:. 113Table 41:Frequency of Environmental Monitoring . :. 115Table 42:Screening for AMDAL . 116 .December 2005Black & Veatch .Arkonin -MTP.Waseco4

Final ReportWSSPOrganizations and Agencies Represented on the Stakeholder Committee. 118Table 43:Population and Growth Rate of Six Provinces Affected by Project. 120Table 44:Poverty Level in Indonesia'Comparedto Other Countries in Region . 121Table 45:Comparative Poverty Levels-forProvinces in Project compared'to-DKIJakartaTable 46:and Indonesia, 2003 .:. 121Comparative Population Poverty &'Monthly Household Expenditures All ProjectTable 47:Towns and Districts . 122Proportion of Respondents Poor or Vulnerable In Project Areas . 123Table 48:Impact of WSSP Project on Poverty Alleviation . :. 123Table 49:Ability to Pay Measured by 4% Benchmark of Total Monthly Expenditure. 125Table 50:Distribution of Male and Female Survey Respondents. 126Table 51:Table 52:Percentage of Female Headed Households .127Retention Rates in Senior High School Project Towns and Districts 2000-2003Table 53:127Classification of Unpaid Family Labor in Project Towns and Districts 2001 -2003Table 54:I28Monthly and Per Capita Expenditures by Target Group (Rupiah) . 129Table 55:Total Monthly and Per Capita Household Expenditure by Sex of Respondent129Table 56:Monthly Household Income By Sex of Respondent. 130Table 57:Results of Chi-square Statistical Analysis of Monthly lncome Differences by SexTable 58:and Disaggregated by Region.:. :.-. x. .;. :. 130Percentages of Water Carried and Average Distance by Sex and FamilyTable 59:Structure Public Tap Customer Target Group . 131Table 60: Reasons for Not Connecting to PDAM . 132Table 61:Areas of Land to be Acquired . 137Table 62:Status of Ownership and Occupation of Land to be Acquired . 137Impact of the WSSP Project on Unskilled Labor . 141Table 63:Project Cost Summary (US Million). 145Table 64:Nominal Project Costs by Sector (including taxes, contingencies and IDC). 145Table 65:Table 66:Project Costs by Type and Currency . 146Project Costs by Type and Year (Rp Million) . 146Table 67:Project Costs by Secto and Place (Nominal Prices Including Taxes) . 147.Table 68:Table 69: . .Project Financing Summary (Nominal Prices) . :. :. 147: . 1 .148Project Financing by Sector and Source (Nominal Prices) .'X.Table 70:Project Financing Details (Nominal Prices). 148 . . .Table 71:Project Funding Details by Source and Regional Government (Nominal RpTable 72:Million) 149Table 73:Project Funding Details by Source and Regional Government (Nominal RpMillion) - Continued.150Regional Government Expenditures Constant 2005

water supply and sanitation project prepareo by: black and veatch pte. ltd., singapore pt arkonin englneerlng mp, indonesia pt multi tehniktama prakarsa, indonesia pt waseco tirta, indonesia