Grant Recipient:Ministry of Finance, Government of Indonesia
Responsible Agency: Ministry for the Development of Disadvantaged Areas (KPDT) and Government of Aceh
Address: Jl. Abdul Muis No. 7 Jakarta Pusat, 10160
Contact Person: For KPDT: Ir. Rachmat Tatang Bachrudin, Deputy Minister for Economic and Private Business Development
For Government of Aceh: Prof. Munirwansyah, Head of BAPPEDA (Regional Body of Planning and Development in Aceh Province))
Estimated disbursements (FY/US$ 50 million)
Project implementation period:January 2009 End: June 2012
Expected closing date: Jun 30, 2012
Does the project depart from the CAS in content or other significant respects? [ ]Yes [ X ] No
Does the project require any exceptions from Bank policies? [ ] Yes [ X ] No
Have these been approved by Bank management? [ ] Yes [ X ] No
Is approval for any policy exception sought from the Board? [ ] Yes [ X ] No
Does the project include any critical risks rated “substantial” or “high”? [X ]Yes [ ] No
Does the project meet the Regional criteria for readiness for implementation? [ X]Yes [ ] No
Project development objective: To promote post-tsunami economic recovery and foster sustainable equitable long-term economic development in Aceh in line with the GoA’s own plans for economic development (RPJMD).
Project description: The project will support sub-project initiatives for the economic development of Aceh and provide assistance in project management and capacity building.
Which safeguard policies are triggered, if any? Environmental Assessment (OP. 4.01)
Significant, non-standard conditions, if any: None
aceh- economic development financing facility project
The devastation of the December 2004 Tsunami coupled with the preceding years of civil unrest contributed to high unemployment and poverty in Aceh. A large share of the Aceh population remains vulnerable with average consumption just above the poverty line, so that a small shock such as the end of the reconstruction effort could send some of them back into poverty. The Tsunami not only caused tremendous loss of life, but ended the prospects of long term employment for many people. Some 80,000 small and medium sized enterprises, providing employment to some 140,000 people were destroyed. The reconstruction has created new job opportunities in some sectors (construction, transport), but these jobs have been closely linked to the availability of reconstruction funds and are not likely to be sustainable in the long run.
The Government of Indonesia (GOI) and the provincial Government of Aceh (GoA) have committed to building the community of Aceh back to being stronger and better than it was pre-Tsunami. Both have identified economic growth and development as essential elements of recovery from the Tsunami. The GoA, in its Medium Term Development Plan (RPJMD), has identified key factors hampering Aceh’s economic development as weak government institutions, damaged infrastructure and low investment levels. It has elaborated its strategic framework for economic development which identifies three lead economic sectors-- agriculture, trade and services, key because of their contribution to both regional production as well as employment. The GoI, through BAPPENAS has likewise produced a broad blue print for the future development of Aceh.
The current reconstruction effort, estimated at approximately US$7.7 billion spread over a five years period (2005-2009), is one of the largest such efforts in a developing country. The generosity of donors and the reconstruction program have been lifting Aceh’s economy in the short run. The reconstruction effort has been creating a construction boom in some parts of the province. Aceh’s economy is dominated by oil and gas production, which accounts for 28 percent of regional GDP (2007) and over 90 percent of the province’s exports. However, the mining and related manufacturing sectors have been declining for several years and known gas reserves are projected to decline to near zero by 2014. This together with current growth trends, concentrated in sectors linked to the availability of large funds for reconstruction reinforces concerns regarding Aceh’s economy beyond 2009. Therefore, new efforts are needed to create conditions for sustainable long term economic recovery and development in Aceh’s economy in order to create jobs and reduce poverty.
The proposed Economic Development Financing Facility project (EDFF), a MDF Grant consisting of two main components to be implemented during January 2009-June 2012 period, will support initiatives to promote sustainable economic growth and job creation in the whole of Aceh, in line with the GoA’s RPJMD and BAPPENAS’ blueprint. Component One (US$44.5 million) will support sub-projects that address critical issues affecting economic development in Aceh by contributing to economic recovery post-tsunami and building a more competitive and supportive business environment necessary to create broad based private sector job opportunities and growth, targeting the poor and other vulnerable groups. Component Two (US$5.5 million)will fund project management and capacity building including an international consultancy to assist the project management.
The sub-projects to be supported under the project should contribute to the following development objectives identified by the GoA as key for sustainable economic recovery and development in Aceh: (i) development of job-creating, market-driven enterprises engaged in value-added processing and manufacturing, especially in agriculture and fisheries; (ii) sustainable improvement of production quality and value in agriculture, fisheries and estate crops that contributes to alleviation of poverty; (iii) increase in international trade, especially direct exports; and (iv) increased domestic and foreign investment in Aceh. To achieve these goals, the EDFF will support sub-projects in the following broad areas: (i) Improving the business environment; (ii) Private Sector Support; and (iii) Public Infrastructure.
The State Ministry for Disadvantaged Areas (KPDT) will be the GOI’s lead implementingagency at the central level. The implementation of the project rests with the GoA thru BAPPEDA Aceh, which will house the Project Management Unit (PMU) with support by an international consultant management firm. The sub-projects will be implemented by different entities (such as NGOs (local and international), private sector organizations and international aid agencies). They will prepare the sub-project application and be responsible for tracking performance of their individual sub-project consistent with the agreed upon milestones and performance indicators. The progress in achieving the project's objectives will be measured through a comprehensive monitoring and evaluation system. The World Bank will serve as the partner agency under the MDF legal framework and will be responsible for EDFF project supervision. The World Bank will conduct implementation reviews, as part of its normal supervision, on a semi-annual basis, supplemented by more frequent reviews during the initial implementation period.
The project faces several risks, the most important of which are: that the GoA is not able to fulfill its role in overseeing the implementation of the project; weak governance and capacity at various levels impact the timely implementation of sub-projects; and the risk that conflict may recur. The mitigation measures identified are either currently underway, or are built into the project design. An Anti-Corruption Action Plan has been designed for the project, during implementation; World Bank team will monitor the elements of this Action Plan.
Procurement will be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004 as amended in October 2006, “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004 as amended in October 2006, and the provisions stipulated in the Grant Agreement. The accounting policies and procedures will substantially follow GOI’s financial management procedures, strengthened where appropriate. Grant expenditures and activities will be reported to the World Bank on a quarterly basis.
The EDFF is classified as a B category project as defined in the World Bank Operational Policy. As such, all sub-projects to be financed by the EDFF must be in compliance with national environmental rules and regulations, as well as with environmental policies of the World Bank. The sub-projects that will be financed by the EDFF are small and medium scale and as such the level of associated social risks is limited. It is anticipated that none of the World Bank social safeguards policies will be triggered. There is a need to ensure that the project will benefit both men and women and takes women’s special needs into account, strengthening their participation in the economy and considers constraints to their participation. This will be addressed and monitored at the subproject level.