Page 1 ISEB Tower 2, Jl. Jend. Sudirman Kav. 52- 53, Jakarta 12190 • Telephone (62-21) 5299 3000 • Facsimile: (62-21) 5299 3110 P.O. Box 1324/JKT, Jakarta 10013 • Telex: IBRDIA 60086 • Headquarters: The World Bank, Washington DC, USA CONFORMED COPY S tefan G . S tefan G. Koeberle Country Director, Indonesia Letter No. SK-537/ILGR/XII/2010 December 15, 2010 Mr. Rahmat Waluyanto Director General of Debt Management Ministry of Finance Jalan Lapangan Banteng Timur 2-4 Jakarta 10710 Dear Mr. Waluyanto: Re: Loan No. 4790-IND and Credit No. 4078-IND: Initiatives for Local Governance Reform – Amendments to the Development Credit Agreement and Loan Agreement I am pleased to refer to (i) the Loan Agreement (Loan No. 4790-IND), between the Republic of Indonesia and the International Bank for Reconstruction and Development (the Bank) (the Loan Agreement); and (ii) the Development Credit Agreement (Credit No. 4078-IND), between the Republic of Indonesia and the International Development Association (the Association, and together with the Bank, the World Bank) (the Development Credit Agreement); all dated October 11, 2005 and as amended on September 29, 2009. I refer also to your letter dated November 11, 2010 and the subsequent minutes of amendment discussions dated December 1, 2010 pursuant to which you requested the World Bank to consider amendment and reallocation of the Loan Agreement and the Development Credit Agreement to allow the use of the proceeds of the Loan for the purposes of financing activities under Part C of the Project previously co-financed under the technical assistance grant (TF055913). I am pleased to inform you that, after due consideration, the World Bank concurs with your request and accordingly proposes to hereby amend the Loan Agreement and the Development Credit Agreement as set out in the attachment to this letter (the Amendment). Page 2 Mr. Rahmat Waluyanto 2 December 15, 2010 Ministry of Finance ISEB Tower 2, Jl. Jend. Sudirman Kav. 52- 53, Jakarta 12190 • Telephone (62-21) 5299 3000 • Facsimile: (62-21) 5299 3110 P.O. Box 1324/JKT, Jakarta 10013 • Telex: IBRDIA 60086 • Headquarters: The World Bank, Washington DC, USA Please confirm your agreement with the Amendment, on behalf of the Republic of Indonesia, by signing and dating both originals of this Amendment letter and returning one original to us for our records. Upon receipt by the World Bank of one of the originals of this amendment letter duly countersigned by you, the Amendment shall be deemed to have been effective as of the date of the countersignature. Very truly yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION /s/ Stefan G. Koeberle Country Director, Indonesia CONFIRMED AND AGREED: REPUBLIC OF INDONESIA /s/ Rahmat Waluyanto By : _______________________ Authorized Representative Rahmat Waluyanto Name: _______________________ Director General of Debt Management Title: _______________________ December 22, 2010 Date: _______________________ Page 3 Mr. Rahmat Waluyanto 3 December 15, 2010 Ministry of Finance ISEB Tower 2, Jl. Jend. Sudirman Kav. 52- 53, Jakarta 12190 • Telephone (62-21) 5299 3000 • Facsimile: (62-21) 5299 3110 P.O. Box 1324/JKT, Jakarta 10013 • Telex: IBRDIA 60086 • Headquarters: The World Bank, Washington DC, USA ATTACHMENT Loan No. 4790-IND; and Credit No. 4078-IND: Initiatives for Local Governance Reform Project Amendments to the Development Credit Agreement and Loan Agreement A. Amendments to the Development Credit Agreement . The Association and the Bank have agreed to amend the Development Credit Agreement and the Loan Agreement, respectively, as set out below. 1. Schedule 1. The Table in paragraph 1 of Section I.A of Schedule 1 to the Development Credit Agreement, is amended to add an expenditure category of “Goods, consultant services, workshops and training” and reallocate the Loan as set out below: Category Amount of the Credit Allocated (Expressed in SDR Equivalent) Amount of the Loan Allocated (Expressed in Dollars) % of Expenditures to be Financed (1) Grants for Sub-projects 9,670,000 12,136,500 100% (2) Incremental operating costs 250,000 981,000 100% (3) Front-end Fee - 72,500 Amount due under Section 2.04 of the Loan Agreement (4) Goods, consultant services, workshops and training under Part C of the Project - 1,310,000 100% (5) Unallocated - - TOTAL 9,920,000 14,500,000 2. Schedule 1. A new paragraph 2A of Section I.A of Schedule 1 to the Development Credit Agreement is added to include the definition of “workshops and training” as follows: “2A. For the purposes of this Schedule, the term “Workshops and training” means reasonable expenditures incurred by the Recipient in connection with the holding of training or workshops, as the case may be, under Part C of the Project, including: (i) travel costs, accommodation, meals and honoraria of trainers, organizers, facilitators and resource persons; (ii) accommodation and meals of trainees and workshop participants; (iii) rental of facilities and equipment; and (iv) acquisition of training or workshop materials, as the case may be, but excluding the staff salaries and honoraria of workshop participants and trainees and any civil servants of the Borrower.” 3. Schedule 3. Section I of Schedule 3 to the Development Credit Agreement is amended to add the procurement of consultant services as follows: “A. All goods, works and services (other than consultants’ services) required for the Project and to be financed out of the proceeds of the Loan shall be procured in accordance with the requirements set forth or referred to in Section I of the “Guidelines for Procurement under IBRD Loans and IDA Credits” dated May 2004 and revised in October 2006 and May 2010 (the Procurement Guidelines), and the provisions of this Schedule. Page 4 Mr. Rahmat Waluyanto 4 December 15, 2010 Ministry of Finance ISEB Tower 2, Jl. Jend. Sudirman Kav. 52- 53, Jakarta 12190 • Telephone (62-21) 5299 3000 • Facsimile: (62-21) 5299 3110 P.O. Box 1324/JKT, Jakarta 10013 • Telex: IBRDIA 60086 • Headquarters: The World Bank, Washington DC, USA B. All consultants’ services required for the Project and to be financed out of the proceeds of the Loan shall be procured in accordance with the requirements set forth or referred to in Section I and IV of the “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” published by the Bank in May 2004 and revised in October 2006 and May 2010 (the Consultant Guidelines), and the provisions of this Schedule. C. The capitalized terms used below in this Schedule to describe particular procurement methods or methods of review by the Association of particular contracts, have the meaning ascribed to them in the Procurement Guidelines.” 4. Schedule 3. Section III of Schedule 3 to the Development Credit Agreement is amended to: (i) add a new Section III on “Particular Methods of Procurement of Consultants’ Services”; and (ii) renumber existing Section III as “Section IV” as follows: “Section III . Particular Methods of Procurement of Consultants’ Services A. Quality- and Cost-based Selection . Except as otherwise provided in Part B of this Section, consultants’ services shall be procured under contracts awarded on the basis of Quality- and Cost-based Selection. B. Other Methods of Procurement of Consultants’ Services . The following table specifies the methods of procurement, other than Quality and Cost-based Selection, which may be used for consultants’ services. The Procurement Plan shall specify the circumstances under which such methods may be used. Procurement Method (a) Selection based on Consultants’ Qualifications (b) Single-source Selection (c) Procedures set forth in paragraphs 5.2 and 5.3 of the Consultant Guidelines for the Selection of Individual Consultants (d) Sole Source Procedures for the Selection of Individual Consultants Section IV . Review by the Association of Procurement Decisions The Procurement Plan shall set forth those contracts which shall be subject to the Association’s Prior Review. All other contracts shall be subject to Post Review by the Association.” B. Amendments to the Loan Agreement . Pursuant to Section 3.01 of the Loan Agreement, the amendments to the Development Credit Agreement set out in this letter are incorporated by reference in the Loan Agreement.