Dommt of The World Bank FOR OFFICIAL USE ONLY Report No. 6403 PROJECT PERFORMANCE AUDIT REPORT INDONESIA BANK PEMBANGUNAN INDONESIA (LOANS 1054, 1437 and 1703-IND) September 10, 1986 Operations Evaluations Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AND ACRONYMS ADB - Asian Development Bank ASKRINDO - P.T. Asuransi Kredit Indonesia (Credit Insurance Company of Indonesia) BARANA - P.T. Bahana Pembinaan Usaha BAPINDO - Bank Pimbangunan Indonesia BI - Bank Indonesia (central bank) DFI - Development Finance Institution(s) DMB - Deposit Money Bank(s) GOI - Government of Indonesia IDF - Industrial Development and Finance Kelayakan - Credit program for small indigenous entrepreneurs Kepres 14A - Short-term credit program for indigenous suppliers/contractors KfW - Kreditanstalt fdr Wiederaufbau KIB - Kredit Investasi Besar (Large Investment Credit Program) KIK - Kredit Investasi Kecil (Small Investment Credit Program) KMKP - Kredit Modal Kerja Permanen (Small Permanent Working Capital Credit Program) PCR - Project Completion Repcrt PDFCI - Private Development Finance Company of Indonesia PPAM - Project Performance Audit Memorandum PPAR - Project Performance Audit Report RDB - Regional Development Bank(s) SAR - Staff Apppraisal Report SSE - Small Scale Enterprise(s) UNDP - United Nations Development Programme UPPINDO - Usaha Pembiayaan Pembangunan Indonesia EXCHANGE RATES Name of Currency (Abbreviation): Rupiah (Rp) Average Exchange Rates During the Period: 1970 US$1 = Rp 363 1971 US$1 = Rp 392 1972-1977 US$1 = Rp 415 1978 US$1 = Rp 442 1979 US$1 = Rp 623 1980 US$1 = Rp 627 1981 US$1 - Rp 632 1982 US$1 = Rp 661 1983 US$1 = RP 909 1984 US$1 = Rp i026 1985 US$1 = Rp 1111 FISCAL YEAR BAPINDO January 1 - December 31 Government April 1 - March 31 THE WORLD BANK FOR OFCIA US ONLY Washington, D.C. 20433 U.S.A. Office of Directar-Cerral Operations Evaluation September 10, 1986 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Performance Audit Report on Indonesia - Bank Pembangunan Indonesia (Loans 1054, 143T and IT03-IND) Attached, for information, i a copy of a report entitled "Project Performance Audit Report on Indonesia - Bank Pembangunar Indonesia (Loans 1054, 143T and 1703-IND)" prepared by the Operations Evaluation Department. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT INDONESIA BANK PEMBANGUNAN INDONESIA (LOANS 1054, 1437 AND 1703-IND) TABLE OF CONTENTS Page No. Preface.......................... ...... *e*.. ............... ....... I Basic Data Set.......................... 1 Evaluation Summary ................................................. viii PROJECT PERFORMANCE AUDIT MEMORANDUM The Economy.................................................. 1 The Industrial Sector........................................ 1 The Financial Sector......................................... 2 Bank Pembangunan Indonesia (BAPINDO)......................... 3 II. PROJECT OBJECTIVES............................................ 4 III. UTILIZATION OF BANK FUNDS... ................................. 4 Timeliness of Utilization..................................... 4 Subproject Performance........................................ 5 IV. INSTITUTIONAL DEVELOPMENT....... .............................. 8 V. OPERATIONAL AND FINANCIAL PERFORMANCE......................... 12 Operations.................................................... 12 Financial Performance......................................... 12 VI. IMPACT OF THE BANK'S ASSOCIATION WITH BAPINDO................. 14 VII. SUSTAINABILITY.s............................. 19 VIII. CONCLUSIONS................................................... 22 ATTACHMENTS 1. Approvals and Disbursements of Loans and Investments 1975-1985... 25 2. Summarized Balance Sheets, as of December 31, 1978-1985.......... 26 3. Summarized Income Statements for the Years Ending December 31, 1978-198............ ............................................ 28 4. Financial Indicators and Ratios 1975-1985....................... 29 5. Indicators of P^rtfolio Performance 1975-1985.................... 30 6. Synopsis of Main BAPINDO Action/Improvement Programs............. 31 7. Comments Received from the Borrower ............................. 34 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. TABLE OF CONTENTS (continued) PROJECT COMPLETION REPORT PCR Page No. I. Introduction......... .... ................................ 43 III. BAPINDO and Bank Loan's Objective............................. 46 IV. Utilizacion of the Bank Loans................................. 48 V. Institutional Aset...*****.****................... . 51 VI. Operating and Financial Performance........................... 54 VII. Summary and .onclusions..............................*...*...... 59 ANNEXES 1. Interest Rate Structure....................................... 61 2. BAPINDO's Organizational Structure............................ 62 3. Schedule of Estimated and Actual Disbursements................ 63 4. Summarized Data on Subprojects................................ 64 5. Operational Details on Subprojects Financed................... 65 6. Sectoral and Geographical Distribution of Projects Financed... 68 7. Financial Perf,.rmance of Subprojects.......................... 72 8. Economic Performance of Subprojects........................... 75 9. Current Status of Subloans................ .................. 78 10. Projected and Actual Lending Operations and Financial Results 1978-83.................................. 85 11. Characteristics of Industrial Loans........................... 89 12. Details of BAPINDO's Equity Investments....................... 93 13. Analysis of Term Portfolio.................................... 96 14. Domestic Resource Mobilization................................ 97 15. Foreign Currency Resource Mobilization........................ 98 PROJECT PERFORMANCE AUDIT REPORT INDONESIA BANK PEMBANGUNAN INDONESIA (LOANS 1054, 1437 AND 1703-IND) PREFACE This is a performance audit under Loans 1054-IND, 1437-IND and 1703-IND to the Bank Pembangunan Indonesia (BAPINDO) through the Government of Indonesia. Loans 1054-IND and 1437-IND in the amount of US$50 and US$40 million were approved in November 1974 and May 1977, respectively. The final disbursements were made in January 1979 and December 1981. Loan 1703-IND in the amount of US$50 million was approved in May 1979. The final disbursement was made in January 1985 and a small amount was cancelled. Disbursements, although lagging behind forecasts in the early stages, were completed within the original closing dates for Loans 1054-IND and 1437-IND, whereas the closing date for Loan 1703-IND was extended by nine months. A fifth loan to BAPINDO for US$209 million was approved in May 1983, bringing the total of Bank Group lending to BAPINDO to US$359 million. The Project Performance Audit Report consists of the Project Performance Audit Memorandum (PPAM) prepared by the Operations Evaluation Department and the Project Completion Report (PCR) prepared by the East Asia and Pacific Regional Office of the Bank. The PCR is based on data provided by BAPINDO. The PPAM is based on the attached PCR, the Staff Appraisal and President's Reports, the loan documents, sector, economic and special reports, the summaries of the Board disenesions, study of the project files, and discussions with Bank staff. An OED mission visited Indonesia in March 1986 and discussed the effectiveness of the Bank's assistance with BAPINDO, Government officials and a sample of BAPINDO's clients. Their kind cooperation and valuable assistance in the preparation of this report is gratefully acknowledged. The PCR ably describes the experience with the three projects, providing an analysis of the use of the Bank's funds and discussing B'PINDO's institutional development and operational and financial performance. The PPAM updates the PCR in some respects, elaborates on particular aspects of the institutional development of BAPINDO, assesses its sustainability as a financial intermediary, dwells on the Impact of the Bank's association with BAPINDO over the years, and draws lessons from the ,roject experience. Comments received from the Borrower have been taken into account in finalizing the report and are reproduced as Attachment 7. - Li - PROJECT PERFORMANCE AUDIT REPORT INDONESIA - BANK PEMBANGUNAN INDONESIA (Loan 1054-IND) BASIC DATA SHEET (AMount in US aillions) LOAN STATUS As of 05/31/86 Original Disbursed Cancelled Reaid OutstandinR Loan 1054-IND 50.00 50.00 0.00 27.89 22.11 CUMULATIVE LOAN DISBURSEMENTS FY74 FY75 FY76 FY77 FY78 FY79 (i) Planned 6.0 24.0 47.5 50.0 50.0 50.0 (ii) Actual 0.5 13.3 38.1 46.4 49.9 50.0 (iii) (ii) as % of (1) 8% 55% 80% 93% 99.8% 100% OTHER PROJECT DATA Original Actual Board Approval - 11/12/74 Loan Agreement - 11/20/74 Effectiveness 01/20/75 01/14/75 Final Subproject Submission 12/31/76 12/31/78 Closing Date 12/31/78 12/31/78 Last Disbursement 12/31/78 01/19/79 Borrower Republic of Indonesia Executing Agency Bank Pembangunan Indonesia MISSION DATA No. of No. of Date of Month/Year Weeks Persons Manweeks Report Identification - - - - Appraisal 04/74 3.0 3 9.0 10/22/74 Supervision I 07/75 3.0 2 6.0 02/13/76 Supervision II /a 04/76 3.0 3 9.0 06/29/76 Supervision IIITb 10/76 2.5 2 5.0 05/09/77 Supervision IV fe 08/78 2.0 3 6.0 10/04/78 Completion 02/84 2.0 1 2.0 07/30/84 /a Pre-appraisal of Loan 1437-IND. 7b- Appraisal of Loan 1437-IND. 7-c Appraisal of Loan 1703-IND. - ii - STAFF INPUT F77M f74 FT75 M!6 FM7 F278 F279 VM8 MI8 FM2 F293 F284 2~aI Prep~ration 21.2 18.6 39.8 4prasal 22.4 16.7 39.1 Ngotiation 7.1 7.1 a opern1sto 0.2 25.7 80.3 10.1 2.5 6.0 - 0.3 - - 4.8 129.9 Totals 21.41.0 9.5 W i.T 2. 5 0 0.3 4 215.9 - iv - PROJECT PERFORMANCE AUDIT REPORT INDONESIA - BANK PEMBANGUNAN INDONESIA (Loan 1437-IND) BASIC DATA SHEET (Amount in US$ millions) LOAN STATUS As of 05/31/86 Original Disbursed Cancelled Repaid Outstanding Loan 1437-IND 40.00 40.00 0.00 15.90 24.10 CUMULATIVE LOAN DISBURSEMENTS FY78 FY79 FY80 FY81 FY82 (i) Planned 8.6 30.1 39.2 40.0 40.0 (ii) Actual 2.5 17.5 31.8 37.8 40.0 (iii) (ii) as Z of (i) 29% 58% 81% 95% 100% OTHER PROJECT DATA Original Actual Board Approval - 05/31/77 Loan Agreement - 06/06/77 Effectiveness 09/06/77 09/23/77 Final Subproject Submission 09/30/79 09/30/81 Closing Date 09/30/81 09/30/81 Last Disbursement 09/30/81 12/08/81 Borrower Republic of Indonesia Executing Agency Bank Pembangunan Indonesia MISSION DATA No. of No. of Date of Month/Year Weeks Persons Manweeks Report Identification 04/76 3.0 3 9.0 06/29/76 Appraisal 10/76 2.5 2 5.0 05/09/77 Supervision I 07/77 1.0 1 1.0 07/27/77 Supervisio. II /a 08/78 2.0 3 6.0 10/04/78 Supervision III7b 01/79 2.0 1 2.0 05/07/79 Supervision IV 05/80 3.0 1 3.0 08/07/80 Supervision V 05/81 2.0 2 4.0 06/04/81 Completion 02/84 2.0 1 2.0 07/30/84 /a Appraisal of Loan 1703-IND. 7-b Post-appraisal of Loan 1703-IND. STAFF INPUT (manweeks) FY75 FY76 FY77 FY78 FY79 FY80 FY81 Totals Preparation 0.2 0.6 0.1 0.9 Appraisal 1.1 35.3 36.4 Negotiation 8.3 8.3 Supervision 3.4 10.7 0.8 1.0 1.1 17.0 Totals 0.2 1.7 47.1 10.7 0.8 1.0 1.1 62.6 - vi - PROJECT PERFORMANCE AUDIT REPORT INDONESIA - BANK PEMBANGUNAN INDONESIA (Loan 1703-IND) BASIC DATA SHEET (Amount in US$ aillions) LOAN STATUS As of 05/31/86 Original Disbursed Cancelled Repaid Outstanding Loan 1703-IND 50.00 49.77 0.23 9.38 40.39 CUMULATIVE LOAN DISBURSEMENTS FY80 FY81 FY82 FY83 FY84 FY85 (i) Planned 5.0 20.9 46.6 50.0 50.0 50.0 (ii) Actual 0 17.3 39.1 41.1 46.7 49.8 (iii) (ii) as % of (i) - 83% 84% 82% 93% 99.6% OTHER PROJECT DATA Original Actual Board Approval - 05/17/79 Loan Agreement - 06/01/79 Effectiveness 09/04/79 09/25/79 Final Subproject Submission 09/30/81 12/31/81 Closing Date 09/30/83 06/30/84 Last Disbursement 09/30/83 01/29/85 Borrower Republic of Indonesia Executing Agency Bank Pembangunan Indonesia MISSION DATA No. of No. of Date of Month/Year Weeks Persons Manweeks Report Identification - - - - - Appraisal 08/78 2.0 3 6.0 10/04/78 Supervision I /a 01/79 2.0 1 2.0 05/07/79 Supervision II 05/80 3.0 1 3.0 08/07/80 Supervision III 05/81 2.0 2 4.0 06/04/81 Supervision IV 03/82 0.5 2 1.0 04/26/82 Supervision V /b 08/82 3.0 5 15.0 04/13/83 Supervision VI 10/83 1.0 1 1.0 11/18/83 Supervision VII 06/84 3.0 2 6.0 07/19/84 Completion 02/84 2.0 1 2.0 07/30/84 Supervision VIII 03/85 3.0 2 6.0 04/18/85 Supervision IX 11/85 2.0 2 4.0 01/09/86 /a Post-appraisAl of Loan 1703-IND. 7- Appraisal of Loan 2277-IND. - vii - STAFF INPUT tmanwees) FY78 FY79 FY80 FY81 FY82 FY83 FY84 FY85 Totals Preparation 1.6 0.6 2.2 Appraisal 40.6 40.6 Negotiation 6.2 6.2 Supervision 2.8 18.9 14.7 2.6 1.0 4.7 1.7 46.4 Totals 1.6 50.2 18.9 14.7 2.6 1.0 4.7 1.7 95.4 FOLLOW-ON PROJECT Loan 2277-IND for US$209 million was approved on May 10, 1983. - viii - PROJECT PERFORMANCE AUDIT REPORT INDONESIA BANK PEMBANGUNAN INDONESIA (LOANS 1054, 1437 AND 1703-IND) EVALUATION SUMMARY Introduction The Bank Pembangunan Indonesia (BAPINDO) was established in 1960 as a fully state-owned institution, absorbing an existing industrial lending institution. The first ten years of its existence were spent in attempting to determine its role in the economy and the means to carry that out. The Bank then began working with the Government on a plan for BAPINDO's financial and functional restructaring. After about three years of consultations and preparatory work, in 1972 an IDA Credit of US$10.0 million (No. 310-IND) was granted to BAPINDO to help finance industrial projects and a comprehensive technical assistance program was begun (para. 8; PCR, para. 3.01). This was followed by four Bank loans, the first three of which are the subject of this report. Objectives The principal objectives of the three loans were basically the same: (a) institution building to transform BAPINDO over time into an effec- tive financial intermediary; and (b) the transfer of foreign exchange re- sources to assist the development of the industrial sector (para. 10; PCR, paras. 3.04-3.05). Implementation Experience Loan 1054-IND was committed to 24 subprojects after the terminal date for subproject submission was extended by two years. It was fully disbursed without extending the Closing Date. Loan 1437-IND was committed to 17 subprojects but again after a two-year extension to the subproject submission deadline. It also was fully disbursed without extending the Closing Date. Loan 1703-IND was committed to 52 subprojects, including 37 small scale enterprises (SSEs), after the terminal date for subproject submission was extended by three months. It was fully disbursed after a nine-month extension of the Closing Date (paras. 12-14; PCR, paras. 4.01- 4.03). BAPINDO has made some progress in terms of institutional develop- ment since 1971-72 when it started restructuring almost all areas of its cor- porate set-up and functions. However, the progress has been erratic and short of the Bank's expectations, and the achievements to date are not com- mensurate with the large expenditure of manpower and funds allocated for this purpose-by the Bank, BAPINDO and the third parties involved (paras. 19-28; PCR, paras. 5.01-5.04). - ix - Results Of the 66 subprojects for which there are data, only twelve earned a profit in the second year of full operation equal to or better than the appraisal estimate, while 32 sustained losses. At the end of 1985, even after heavy rescheduling of the subloans, about half were in arrears for more than three months with half of these being in arrears for over twelve months (paras. 15-18; PCR, paras. 4.04-4.07). However, the subprojects for which there are data created some 9,110 new jobs at an average cost varying from US$82,800 equivalent (Loan 1054-IND) to US$18,960 equivalent (Loan 1703-IND, which included an SSE component) (para. 14; PCR, para. 4.05). In 1977, as part of the Bank-instigated Action Program and because of the mounting arrears on these projects, BAPINDO trans-erred most of the Government-sponsored projects to a managed fund. It also rescheduled a large number of other loans. As a result, the portion of BAPINDO's portfolio af- fected by arrears of over three months dropped from 59 percent in 1976 to 15 percent in 1977. By 1985, however, in spite of substantial annual reachedul- ings and write-offs, this percent had increased to 52 (para. 33; PCR, paras. 6.06, 6.10). BAPINDO's overall financial position remains unsatisfactory. It would have been untenable had not the Jovernment agreed early in 1986 to provide substantial financial assistance. The financial restructuring which is now underway with the assistance of the Government can be expected to avert, for the time being, a financial collapse (para. 34; PCR, para. 6.08). Sustainability BAPINDO does not appear sustainable in its present form. The most important change that needs to be made is in its relationship with the Government; BAPINDO must be given real autonomy in operational decisions, self-reliance and accountability. BAPINDO also needs a differently composed and independent Board of Directors. The present collective decision-making system should be changed to a management style which emphasizes individual responsibility and authority. At this point, though, the financial rescue efforts underway need to be given top priority (paras. 46-53). Findings and Lessons Neither the objective of institution building nor that of suc- cessful use of resources has been achieved. Despite progress in some areas, BAPINDO continues to be an institution with serious weaknesses of leadership and management, organization, systems and procedures, and with a very high proportion of its loans -and investments suffering from serious problems (paras. 54--55). The PCR, which was prepared two years earlier, reaches a more positive conclusion (PCR, para. 7.01). The Bank's experience with BAPINDO over the years leads to a number of observations and adds new emphasis to lessons learned in other operations relating to state-owned DFCs. These are presented in paragraph 56. PROJECT PERFORMANCE AUDIT MEMORANDUM INDONESIA BANK PEMBANGUNAN INDONESIA (LOANS 1054, 1437 AND 1703-IND) I. BACKGROUND The Economy 1. Indonesia, with a population of over 155 million and an estimated GNP per capita of US$560, has a diversified resource base, with plentiful primary energy resources (especially oil and gas), significant mineral depos- its, and a developed system of agriculture. The share of agriculture dropped from 47% of GDP in 1970 to 26% in 1985, but it is still significant. Indus- try, including mining and energy, accounted for about 38% of GDP in 1985, up from 18% in 1970, but down from 43% in 1980. The dominant development over the past decade has been the huge expansion of the energy sector, and the resulting foreign exchange earnings from the export of oil and LNG. In the 1970s, and through 1981, real GDP growth averaged 8% per annum; but GDP suffered a severe setback in 1982, when it declined by about 0.2%. The turnaround was the result of the protracted international recession and the accompanying decline in export earnings, especially from oil. The years 1983 and 1984 saw some improvement in GDP growth (4.7% and 6.5% respectively), falling off again in 1985 to under 2%. The Industrial Sector 2. In the 1970s, industry became Indonesia's fastest growing economic sector with an average annual growth rate of about 11%. Value added in manu- facturing also grew at the Impressive rate of 11.5% between 1967 and 1982, although from a very low base. This growth occurred in essentially two stages. During the first phase, before 1975, the relatively labor-intensive consumer goods industry grew at a rapid rate of 16.5% p.a. As the possibili- ties of efficient Import substitution in this segment of industry became less easy, a gradual shift took place towards import substitution of technologically more complex, upstream, products. 3. In the second phase, after 1975, production of intermediate goods increased at the rate of nearly 18% p.a., again from a low base, on the strength of domestic demand and protection. Toward the latter part of the period, there were major increases in the production of capital goods; but shielded from foreign competition, production costs for many products were high by international standards. As a result, exports of manufactures became relatively narrow-based and did not grow significantly in the 1970s. Some new export products began to emerge in the early 1980s, especially plywood - 2 - and textiles. Manufactured exports experienced a sharp increase in 1983/84 (over 80% in constant prices); however, they slowed down to an estimated 15% in 1984/85. 4. Excess capacity is a pervasive problem, especially in such indus- tries as cement, steel, tires, television sets, automobiles, motorcycles, textiles and plywood. These are predominantly domestic market oriented industries that developed rapidly under quantitative import restrictions and were forced to reduce output after the onset of economic slow-down in 1981. Another nagging problem is the relative inefficiency of many large, capital- intensive, industries, often state owned. Current industrial policy emphasizes, inter alia, the restructuring of industries and reduction of excess capacities, employment generation, and the promotion of labor- intensive manufactured exportso A pervasive objective remains the encourage- ment and promotion of indigenous enterprises. The Financial Sector 5. The financial system is still at an early stage of development and is dominated by the banking system. The capital market is unsophisticated and limited in scope. The banking system ccnsists of Bank Indonesia (BI), the nation's central bank, controlling 42% of total gross financial assets, 113 deposit money banks (DMBs) controlling another 54%, and numerous rural and savings banks and various non-bank financial institutions with 4-5% of the financial assets. Five state commercial banks account for about 69% of the DMB assets and some 80 private banks (of which 21 foreign) for about 22%. Included in the DMBs are 28 development finance institutions (DFIs), of which BAPINDO, a state DFI, is by far the largest; the other 27 are regional development banks (RDBs). There are also three rather small, special- purpose, institutions-two joint-venture development finance companies (PDFCI and UPPINDO) and a very small venture capital company (BAHANA).1/ 6. Until 1983, the financial system was tightly controlled by BI, which set the deposit and lending rates of the state banks, established credit ceilings for all banks, and guided the allocation of credit through a liquidity credit mechanism. In 1983, the authorities introduced major reforms in the financial sector to stimulate private savings, improve resource allocation and reduce the banks' dependence on BI liquidity credits. State banks (including BAPINDO), along with private banks, became free to set their deposit and most lending rates; credit ceilings were eliminated; and the number of special priority programs qualifying for BI liquidity credits was substantially reduced. 1/ See also PCR, para. 2.04. 7. The Bank's financial sector review2/ points out that these reforms have had a dramatic impact on the banking system. Nominal and real deposit rates paid by state banks have increased sharply, and so did deposits in DMBs. Nominal lending rates of state banks on non-priority (general) loans have risen from a range of 13-13.5% earlier to 18% for term loans and 21-24% for working capital, representing real lending rates in the 9-15% range. Real lending rates of private banks are even higher, ranging from 15-19%. Although these changes are believed to be beneficial for the deve&-pment of the financial system in the long run, they have nonetheless created strains in the short term. The high real rates of interest, in conjunction with a less favorable market outlook, have affected investment activity and the financial position of many companies, especially those that rely heavily on debt financing. The rise in the cosc of funds and the reduced access to BI liquidity credits have also created funding problems for the DFIs and have reduced the availability of medium and long-term loans. Bank Pembangunan Indonesia (BAPINDO) 8. BAPINDO was established in 1960 to succeed Bank Industri Negara. The early years of its operations present a somewhat checkered picture. During the first few years, it served mainly as a conduit for public funds to specific gNvernment-designated projects. In 1966, BAPINDO started to engage in short-term credit and other commercial banking functions; but, in 1970/71, it ceased to engage in new term lending for almost two years under instruc- tions from BI. This was at a time when the Bank was working with the Govern- ment on a plan for BAPINDO's financial and functional restructuring. The result of about three years of consultations and preparatory work was that BAPINDO would become a DFI specializing in long term finance with indepen- dence in decision-making based on thorough project appraisals, and that the Bank, together with other external technical assistance agencies, would help it to undertake the necessary organizational, procedural and personnel changes to strengthen it as a financial entity. BAPINDO would continue to make working capital loans, but only for projects it financed. A comprehen- sive technical assistance program would be funded jointly by UNDP, the Bank, and the Governments of Australia and Japan, with the Bank acting as the Executing Agency. 9. With this background, Credit 310 for US$10 million was approved in May, 1972. The audit for this Credit (PPAR No 2563, dated June 17, 1979), dealt in detail with the early phases of the BAPIND,/Bank association, until about 1978. The audit was critical of the Bank's reluctance to respond speedily and enthusiastically to the Government's request for assistance to BAPINDO and of the lengthy project preparation phase. It concluded that "BAPINDO (thus] took longer to reach maturity than what a more willing and energetic role by the Bank Group might have achieved". At the same time, the PPAR stressed the need--this was in 1979--for substantial further strengthen- ing of BAPINDO as an institution, and for the Bank to keep it under very intensive supervision. 2/ Report No. 5501-IND entitled "Indonesia - Policies and Prospects for Long Term Financial Development", July 10, 1985. II. PROJECT OBJECTIVES 10. The three projects under review had the same two basic objectives: institutional building and resource transfer. Just as institution building was the central objective of the project supported by the 1972 Credit, so it remained with these three projects and the one that followed. The precise focus varied under each project, though improving operating procedures in general was a constant theme. For example, the first project under review included the expansion of BAPINDO's supervisory board as well as increasing its equity. The second project involved a comprehensive action program aimed at correcting the worsening arrears position and enhancing BAPINDO's develop- ment impact as well as improving the quality of appraisal work. Under the third project emphasis was put on project promotion and US$240,000 of the loan was earmarked for institutional improvements (PCR, para. 3.04). The second major objective of the three projects, foreign exchange resource transfer, was aimed at assisting the development of the industrial sector by financing the import requirements of sound projects identified by BAPINDO (PCR, para. 3.05). III. UTILIZATION OF BANK FUNDS 11. The PCR (paras. 4.01-4.07 and Annexes 3-9) describes and assesses fairly comprehensively the utilization of Bank funds under the three loans under review. In the following, only some specific aspects of this area of BAPINDO's performance are discussed and commented upon. Timeliness of Utilization 12. Commitment of Loans 1054 and 1437 got off to a slow start, and the commitment period for both had to be extended for another two years. This was largely due to the slow development of BAPINDO's processing capacity - the average processing time for a loan application being around 400 days in the mid-1970s. On the other hand, the timely commitment of the Loan 1703 (1979) can be ascribed primarily to BAPINDO's subsequent efforts to reduce subloan processing time (see also para. 40). The Bank showed good judgment during the appraisal and negotiation of Loan 1437 in 1977, when it reduced the amount from the initially contemplated US$75 million to US$40 million, or almost by half. Had it not done so, the lag in commitments and disbursements would no doubt have been considerably longer. The pattern of disbursements of the three loans followed more or less that of commitments but the delays were generally shorter, especially during BAPINDO's three peak growth years of 1980-82. Except for Loan 1703 for which the original Closing Date was extended by nine months, Loans 1054 and 1437 were disbursed on schedule. -5- Subproject Performance 13. Time and cost overruns have been within acceptable limits in all three loans. Of the 66 sibprojects supported by the three Bank loans for which data are available, more than half (35) were completed on time or with minor delays of up to three months, and three-fourths (49) within six months of the estimated completion date. Similarly, average cost overruns of about 10% under Loan 1054 and 4% under 1437 should be tolerable. Of course, there were exceptions, mentioned in the PCR, where serious problems developed, but not to such an extent that they change BAPINDO's overall good rating for estimating costs and subproject completion time. It is probable that BAPINDO's habitually slow evaluation process accounts for some of the marks- manship on cost and timing, since a good number of subprojects at the time of BAPINDO's approval must already have been at an advanced stage of execution, thus leaving less margin for error in the estimates. Delays, as well as cost overruns to the extent that occurred, were caused by a variety of factors, including deficient planning, lack of equity capital, changes in project design and delays in the delivery of equipment. 14. The sectoral distribution of the subprojects supported by the three Bank loans was satisfactory. However, the geographic distribution indicates heavy concentration in the areas of Java and Bali, which account for 77% in number and 80% in total amount disbursed (PCR, Annex 6, Tables 1-4). The capital intensity of subprojects (range of cost-per-job created and the mean and median values) are shown in the Table below. No. of Cost-per-job Created /a Subprojects Data (US$) Loan Financed Available Maximum Minimum Average Median 1054 24 16 384,070 10,220 82,805 77,915 1437 17 16 262,380 9,050 34,965 41,070 1703 52 49 441,265 2,925 18,955 17,230 (1703/SSE) (37) (34) ( 64,100) (1,925) ( 5,600) ( 9,615) /a Appraisal estimates. Source: PCR, Annex 8, Tables 1-3. The figures suggest support of subprojects ranging from very high to very low capital intensity. But the mean and median values indicate declining costs per job over time, and assistance to a good number of fairly labor-intensive projects, considering that the bulk of the subprojects approved were for modernization/expansion (PCR, Annex 11, Table 1) which usually have limited employment generation possibilities. Under Loan 1703, 30% (US$15 million) - 6 - was earmarked for small and relatively labor-intensive enterprisesli/ through BAPINDO's participation in special credit schemes4/ which were actively promoted by the Government and designed to encourage the growth of indigenous entrepreneurs. Although a number of SSE subprojects were well above the stipulated threshold of US2,000, the majority did not exceed that level. 15. With regard to the financial results of the subprojects, the emerg- ing picture is very disconcerting. Of the 66 subprojects, only 12 turned a profit in the second year of full operation equal to or better than the appraisal estimate, and only 9 showed a return of at least 15% on net worth.5/ As many as 32 subprojects-one-half--sustained losses, some moderate, but 345% and 213% of net worth in the two worst cases and between 50-100% in at least five additional cases. Such a significant shortfall sug- gests little resiliency to withstand economic downturns or other adversities. Results under the earlier Loans 1054 and 1437 are somewhat better, underscor- ing the sharply deteriorating quality of BAPINDO's appraisals from 1979 on. In view of the poor financial performance of the subprojects, little credi- bility can be attached to BAPINDO's ex ante calculation of economic rates of return (ERR), which exceeded 12% in all instances. ERRs have not been recal- culated, but it is safe to assume that they would be significantly lower than the appraisal estimates. The most frequent problem mentioned by BAPINDO as the main culprit in poorly performing subprojects has been the quality of the sponsor's management. This is not surprising, as the dearth of experienced managers is generally acknowledged in Indonesia, and suggests that training and development of managers is a matter of high priority. This, of course, is a task that goes beyond BAPINDO's capacity to tackle.6/ Other problems 3/ Enterprises with fixed assets not exceeding US$1 million equivalent, or projects generating employment at a fixed investment cost-per-job not greater than US$12,000 equivalent. 4/ Kelayakan loans are term loans up to Rp 75 million to small indigenous entrepreneurs with easier conditions regarding collateral requirements and capital contributions to the projects which are judged viable. Kepres 14A are short-term loans for indigenous suppliers or contractors who require bank financing of up to Rp 200 million to fulfill orders from Government agencies. KIK/KMKP are investment/working capital loans up to Rp 15 million each, with 75% insurance against credit risk pro- vided by P.T. ASKRINDO. 5/ A low minimum expectation of return considering an average annual inflation rate of about 17% between 1971-84. 6/ For a detailed study on this subject, see Bank Report No. 4965-IND, "Indonesia - Management Development" (in three volumes), May 20, 1985. - 7 - cited relate to demand, overcapacity, inefficiencies in the production pro- cess and technical problems.7/ 16. The large number of troublesome or non-successful subprojects also reflects on the uneven quality of BAPINDO's subproject appraisals and weak supervision. The shortcomings so frequently referred to in Bank reports were indeed real and allowed too many weak subprojects to go forward. The more frequent and persistent weaknesses found in appraisals pertain to shallow market analysis, unrealistic or over-optimistic assumptions made in forecast- ing, and inadequate risk and sensitivity analysis. The Bank, by increasing the "free limit" from US$100,000 (Credit 310) to US$500,000 (Loan 1054), to US$1 million (Loan 1437), and to US$1.2 million (Loan 1703),8/ may have placed more stock in the quality of BAPINDO'' appraisals than they merited. On the other hand, it should be recognized w.hat desk reviews by the Bank of DFIs' appraisals, however thorough, cannot make up for shortcomings in the quality of project planning and preparation, or for less than satisfactory, first-hand, appraisal by competent professionals of a well-managed DFI. 17. The heavy rescheduling and the arrears situation of the subloans, as reflected in Annex 9 to the PCR, raises questions about the soundness of the subprojects supported by the three Bank loans. At 1983 year-end, 24 of 47 "A" subloans,9/ or one out of every two, had been reachedtled; at 1985 year-end, the number of rescheduled subloans had risen to 34, or almost three out of every four. In 1983, only 10 "A" subloans were shown to be in arrears of over three months; in 1985, the corresponding number, reschedulings notwithstanding, had risen to 26, or more than half of all "A" subloans. By December 31, 1985, of a total of 108 subloans, "A" and "B", 51, or close to hL_f, were in arrears for more than three months and at least 26 had arrears exceeding 12 months. Under another classification, in 1983, 26 "A" subprojects, or more than one out of every two, had problems ranging from moderate to very serious; at the end of 1985, this number had risen to 37, or about three out of every four. These figures clearly reflect the progressive deterioration of the Bank financed subloan portfolio which, at present, is of low and unsatisfactory quality. Subloans under Loan 1703 which was approved later (1979) are generally in poorer condition than those of the earlier two loans. (The Bank financed subloan portfolio, of course, reflects the overall condition of BAPINDO's general loan portfolio.) 18. In light of these developments, the pattern of subloan reschedul- ings seams to suggest that, if undertaken without a complete reappraisal of the financial viability of the enterprises involved, they serve only to post- pone the financial consequences for both the borrower and the lender and, 7/ See also Attachment 7, para. II, 1. 8/ Under Loan 2277-IND (1983), the free limit was increased further to US$2 million. 9/ Subloans above the "free limit". - 8 - more often than not, will allow the underlying fundamental problems to become more intractable. Apparently, temporary solutions to the arrears problem have been resorted to in a good many cases. IV. INSTITUTIONAL DEVELOPMENT 19. BAPINDO has made some progress in terms of institutional develop- ment since 1971-72 when it started restructuring almost all areas of its corporate set-up and functions. But, as the record shows, the progress has been erratic and short of the Bank's expectations. Moreover, the achieve- Ments to date are not commensurate with the large expenditure of manpower and funds--by the Bank, BAPINDO and the third parties involved--allocated for this purpose. The modest progress achieved over the years raises a number of disconcerting questions. Were the measures and remedies agreed upon between BAPINDO and the Bank well chosen and well advised in the first place? Has BAPINDO's management been sufficiently vigorous and effective in instituting the changes and ensuring their sustainability? Has the Bank been sufficient- ly firm and effective in monitoring the progress made? Has the Bank been ressonably consistent in assessing the progress made and in reinforcing the process? 20. The Bank's 1974 appraisal (Loan 1054) was quite laudatory about the institutional progress made over the preceding three or four years, calling it "remarkable". Apparently, this view was heavily weighted by the presence of no less than six expatriate advisers whom the Bank had found for BAPINDO in 1971/72, and who were deemed to have performed creditably. In fact, the Bank was so satisfied with BAPINDO's progress that it agreed that all advisers could be phased out over the period 1974-76. At the same time, the appraisal mission pointed to the need for further improvements in areas related to organization and management, project appraisal and supervision, and high arrears on loans, among others. The record indicates that Bank staff and management did not hesitate to recommend a US$50 million loan, as compared with the first (1972) Credit of US$10 million. An Executive Director wondered, however, "whether the absorptive capacity of the country, and of BAPINDO in particular, made this further Bank loan of US$50 million appropriate." L/ He was reassured by the staff, who felt confident that BAPINDO could handle the expanded scale of operations. 10/ Four for development banking, two for maritime operations. Three of the development banking advisers were either seconded Bank staff or former Bank Group staff. The lead adviser was an experienced commercial banker from Japan. 11/ Summaries of Discussions at Meeting of the Executive Directors of the Bank and IDA, November 12, 1974. 21. By contrast, the Bank's 1976/77 appraisal (Loan 1437) of BAPINDO turned up a number of serious institutional and financial problems and sparked off a lively debate within the Bank. By that time, all but one of the advisers had left BAPINDO and, whether coincidentally or not, weaknesses and problems over almost the entire spectrum of BAPINDO's set-up and modus operandi began to surface. Project appraisals were found to be of "uneven" or low quality, and were taking far too long to process (360-400 days, on average). Overall institutional and staff efficiency was rated poor. Supervision of subprojects was found to be lacking, and arrears on loans were increasing rapidly. A special problem area was loans made to state en- terprises (or parastatals) at the Government's behest, apparently with little or no appraisal by BAPINDO, or without regard to such appraisal. Much of the portfolio of such loans was defaulting on repayment. In 1975, overall, only slightly more than 47.5% had been collected on all billed repayments, after reschedulings--an alarmingly low proportion. Questionable, or inappropriate, practices were found to be common. For example, "interim loans" were made before the completion of project appraisal, and equity investments, without proper appraisal, were made as rescue operations to alleviate loan servicing difficulties experienced by some borrowers. 22. Bank staff, at all levels, became concerned. A high-level manage- ment memoranduml2/ characterized the situation as a "disappointing lack of progress in institutional improvement coupled with a portfolio in a state of disarray" and as "an appalling level of loans in default" (about 77% of the industrial loans for which amortization had started). Processing of loan applications, the memorandum went on, was "almost unbelievingly slow." These concerns were brought forcefully to the attention of BAPINDO's management as well as the Covernment. As a result, a comprehensive "Program of Action" (Attachment 6) was hammered out and agreed upon with BAPINDO and the Govern- ment, designed to address and remedy the main problems and shortcomings identified. In particular, sub-standard projects financed by BAPINDO for the Government at its "behest" would henceforth be separated out into a "managed funds" account, for which the Government itself would be liable. This was done. 23. The Bank's concern was also reflected in the size of the proposed loan. The Loan Committee reduced it from US$75 million to US$30 million and finally agreed to US$40 million after difficult loan negotiations. The uneasiness about this loan also carried into the Board's discussion of the proposal. Thus, one Executive Director wondered if the Bank should not arrange for BAPINDO to receive more technical assistance in view of its difficulties. The Board was informed that a team of well-known outside management consultants had underway "a comprehensive organizational study 12/ "Yellow Cover SAR" memorandum, March 24, 1977. - 10 - [to] recommend measures for improvement" (SAR, para. 4.24). The staff felt this should be sufficient for the next few years.13, 24. The next appraisal, in 1978/79 for Loan 1703, seemed almost lacking of issues. Internal Bank documents reported that BAPINDO and the Government had "vigorously implevented the Program [of Action]" and that "tangible ta- provements on a broad front" were in evidence.14/ Apart from statements that there was "further room for improvement", no major institutional issues were raised, and a loan for US$50 million was approved by the Board. In fact, because of the perceived swIft recovery and general improvement in BAPINDO's situation, it was found appropriate to prod BAPINDO to become more promotionally active, and to finance more small scale, labor-intensive, projects, for which US$15 million, or 30% of the Loan, was earmarked, though no special SSE technical assistance was provided by the Bank or other sources. 25. With hindsight, it is at this juncture that one wonders whether the Bank, eager to test the results of its many years of hard efforts, was over- looking the real extent of institutional Improvement and, especially, about the depth and strength of the institution's management and staff, and its capacity for taking on new, more difficult tasks and responsibilities. There is a certain incongruity to the fact that little more than a year had elapsed between the now "tangible improvements" and the earlier references to "disap- pointing lack of progress", "portfolio ... disarray", "appalling level of loans in default", and "almost unbelievingly slow" loan processing. Some im- provements (e.g., the placement of Government behest loans into a managed fund) were no doubt real. But, as had been strongly represented by key Bank staff in 1977, institutional development is a long-term process, and problems and progress must be judged in an equally long-term perspective. In this context, one or two years was a very short time. 26. Apparently, nominal changes in processes and procedures were giv- en more weight than they deserved, while effectiveness in implementation was overlooked. Clearly, it was too soon for BAPINDO to take on new operational responsibilities, however well-intended and meritorious. There can be little doubt about the forces that combined and led to the proposal that BAPINDO get involved in small-scale enterprise promotion and financing at this time. One, the view shared by the Government and the Bank that BAPINDO ought to di- versify its operations geographically and to support indigenous enterprises; and, two, the very strong general drive in the Bank at the time for including a significant portion of SSE financing in as many DFC-type loans as possible. Indeed, when the loan proposal was presented to the Board, an Executive Director, referring to the 30% of the loan earmarked for SSE, inquired wheth- er "this rather small proportion of labor-intensive activities" had been de- termined by the absorptive capacity of BAPINDO's management for dealing with 13/ Summary of Discusions at Meeting of the Executive Directors of the Bank and IDA, May 31, 1977, paras. 38, 39. 14/ Issues Paper, October 12, 1978. - 11 - projects of this kind. The staff replied in the affirmative, saying that "even the 30 percent was achievable only if BAPINDO significantly intensified its promotional efforts."15/ The SAR reflects the same idea by stating (para. 3.27), in the context of developing labor-intensive projects, that "the entire management team and staff of BAPINDO will become more actively involved in project promotion." It is doubtful that either was ready for it. 27. Subsequent developments conspired to seriously overstretch BAPINDO's capabilities. Between 1978 and 1982, the number of loans approved surged from 139 to 1,303, an average annual increase of 75%. In 1978, the average loan size was about Rp 261 million (about US$590,000); by 1985 it had increased to Rp 429 million (about US$649,000). However, 1,003 of the ap- provals in 1982 averaged only about Rp 36 million each, or approximately US$55,000, suggesting that too much too soon was expected of BAPINDO. Right- ly so, the PCR refers to the issue of BAPINDO's thinly stretched management as one of its continuing main problems. Following the reforms and remedial actions of 1977/78, BAPINDO should have been allowed more time for staff training and consolidation of insitutional reforms. In the event, whatever progress had been made seems to have eroded rapidly under the strain of ever- increasing responsibilities. 28. This, however, in no way detracts from the responsibility of BAPINDO itself to plan ahead and strengthen staff and management in a timely and orderly fashion, But the management structure of BAPINDO has been weak, as described in para. 5.02 of the PCR. BAPINDO's Board of Policy has only two members, both nominees of the Government. In that sense BAPINDO has no independent Board of Directors. Instead, most executive authority is dele- gated to a Management Committee (the Board of Managing Directors) whose deci- sions, even on matters of lesser importance, are made collectively. This structure has remained unchanged since 1972 (or earlier), and the time for change is overdue (see paras. 46-53). The Borrower agrees that the mechanism of collective decision-making needs to be reviewed. It is perhaps under- standable, but nevertheless unfortunate, that the Bank did not taise this crucial issue with the Government in a serious manner until 1984. Without reforms at the top, there is little hope that BAPINDO can be strengthened as an institution. It is heartening to note that the Government now seems to be addressing this issue. For example, a new President has recently been appointed and BAPINDO's Board of Managing Directors, at the urging of the Bank, is now considering changes in the allocation of responsibilities among themselves. Support, in the form of advisers and consultants, on specific matters or problem areas can be of value; but they cannot substitute for strong management. Apparently, the Bank has attached far too much importance to the potential contribution of the former, and not enough to that of the latter. 15/ Summaries of Discussions at the Meeting of the Executive Directors of the Bank and IDA, May 17, 1979. - 12 - V. OPERATIONAL AND FINANCIAL PERFORMANCE Operations 29. The PCR (paras. 6.01-6.10) decribes in detail the evolution of BAPINDO's operations, especially in the 1978-83 period. Attachment 1 pre- sents BAPINDO's approvals and disbursements of loans and equity investments for the 11-year period 1975-85, in current rupiahs and adjusted for infla- tion. Until the end of 1978, performance in terms of number of subprojects and amounts involved was unimpressive. In fact, the sum of 1977 and 1978 approvals was just about half (in constant prices) of total approvals in the previous two years, 1975 and 1976. By contrast, 1979 was the first of four years of dramatic growth in the volume of operations. Approvals by amount (adjusted for inflation) rose by 63%, 78%, 112%, and 32%, respectively, in each of the years 1979 through 1982, or at a compound annaal growth rate of 69% for the four years 1979-82. BAPINDO's impressive growth coincided with a period when the economy, buoyed by rising oil prices, experienced a rapid overall growth of almost 8% per annum, while manufacturing grew by at least 14% per annum. In terms of total number of subprojects approved, BAPINDO's expansion in the 1978/82 period was even more spectacular, with an 75% annual growth rate. Most of this growth was due to the SSE loans BAPINDO began mak- ing in 1980: 176 in 1980, 609 in 1981, and 990 in 1982. However, regular medium and large size long term loans and investments also increased appreci- ably, from 139 in 1978 to 313 in 1982, or close to 23% p.a. on average. 30. After 1982, economic conditions began to deteriorate, and BAPINDO's loan and investment approvals declined dramatically. In 1983, they stood at about one-fifth of 1982's level, dropping from Rp 469 billion to Rp 97 billion in constant 1980 Rupiahs, and to a little more than one-third by number (from 1,303 to 498). This released some of the heavy pressure BAPINDO had been under for more than four years. But the damage, in qualitative terms, had been done, as the portfolio deteriorated and continued to do so ever since (paras. 33, 34). Financial Performance 16/ 31. Profitability. BAPINDO was allowed to charge interest rates and other fees sufficient to cover administrative costs, build up some reserves and provisions, and show a very modest profit (PCR, Annex 10, Table 4). Until about 1978, the Bank was concerned about the high administrative costs, and the 1977 Action Program (Attachment 6) included a commitment by BAPINDO to reduce these costs. This effort was successful, in that costs dropped from 3.7% of average total assets in 1978 to about 2% in 1984 and 1985. The combination of lower administrative costs, reduced annual provisions against 16/ Attachments 2 and 3 present BAPINDO's summary financial statements from 1975 through 1985, Attachment 4 various financial indicators and ratios, and Attachment 5 indicators of portfolio performance for the same years. - 13 - losses, and a somewhat improved interest spread resulted in a net profit which, as a percentage of average net worth, increased from 3% in 1980 to 7.1% in 1982. However, net return on equity fell to 5.8% in 1983, 4.5% in 1984, and to an estimated 0.7% in 1985, although even this notional profit could be eliminated because of understated provisions (para. 34). The main factors accountable for such poor profit performance--negative in real terms given an average inflation rate of 14% during 1980/84 -- were basically the strictly controlled lending rates at levels much below market rates and the low yield of BAPINDO's equity investment portfolio. 32. In this context, the question arises whether the drive for lower relative administrative costs was applied judiciously. To the extent that this resulted in higher efficiency, the effort can only be lauded. But it would seem that BAPINDO became so cost-conscious that it failed to build up and train the requisite number of professional staff for project appraisal and supervision to handle effectively its rapidly expanding activities since 1979. This, in turn, led to lower standards and the financing of a large number of weak enterprises, thereby resulting in serious deterioration of the portfolio quality. 33. Financial Position; Quality of Portfolio. In 1977, as part of the Bank-instigated Action Program, BAPINDO transferred most of the Government sponsored portion of its portfolio to a managed fund. Also, a large number of other loans were rescheduled and thus, were removed from the arrears. As a result of these actions, the portion of BAPINDO's portfolio affected by arrears over three months fell dramatically, from 59% in 1976 to 15% in 1977 of loans in the repayment stage. By 1980, this percentage had come down fur- ther to slightly below 7%. From 1981 on, despite substantial annual reached- ulings and write-offs-6-11% of the average loan portfolio each year-the percentage of loans affected by arrears grew worse year after year: from 8% in 1981 to 52% at the end of 1985. Over the same period, the collection ratio dropped precipitously from 72% in 1981 to 41% in 1985. The economic recession of the early 198As contributed significantly to the rapid deteri- oration of 5APINDO's portfolio.17/ But the PCR, rightly so, also points to deficiencies in appraisal and supervision of subprojects as another major factor. Too many weak enterprises were financed during the boom years 1979-82. Subproject supervision was lacking depth and consistency, and there was no effective monitoring and central management information system in operation in this area of such essential importance. 34. BAPINDO's financial position remains unsatisfactory. And it would have been untenable had not the Government agreed early in 1986 to provide financial relief in various forms to the tune of Rp 183 billion (approximate- ly US$165 million equivalent) with immediate effect, to reschedule BAPINDO's outstanding debt, and to convert part of the debt into equity. In these cir- cumstances, BAPINDO's current ratio, which had improved from a low 0.8 in 17/ See also Attachment 7, para. II, 1. - 14 - 198218/ to a notional 1.2 in 1984, has little meaning. Its debt service can also only be met with the assistance of the Government and BI. At the end of 1984, actual arrears stood at almost 7% of the total loan portfolio, while provisions against losses were approximately 1.8%. According to a recent consultants' study, provisions as of June 30, 1985 should be at least tripled (by an amount of Rp 113 billion, or US$102 million) to sustain probable losses.19/ This suggests that BAPINDO's equity is severely impaired to the point where the long term debt/equity ratio, as defined under the fifth Bank Loan Agreement (2277-IND/1983), would be very much in excess of the maximum 6:1 agreed upon. However, the financial restructuring which is now underway with the assistance of the Government and BI can be expected to restore BAPINDO's capital structure and liquidity, and avert, for the time being, a financial collapse. For the longer term, however, BAPINDO would have to establish a strategy of self-reliance and sustainability. VI. IMPACT OF THE BANK'S ASSOCIATION WITH BAPINDO 35. The Bank's long (seventeen years) association with BAPINDO has had some benefic-al impact. However, this is not to say that results have matched expectations nor, necessarily, that the Bank's guidance and recommen- dations were always well focussed. At the outset of the relationship-the two or three years preceding the first Credit in 1972-the Bank was urging BAPINDO to undertake two major structural reforms. One was to discontinue short-term lending, which had been the mainstay of BAPINDO's activities since its creation and almost its only activity since 1966. The other was to close down as many as possible of its 20 branch offices. The PPAR on Credit 310 was rather critical of both these recommendations, contending, inter alia, that "the Bank's concern about overloading BAPINDO management seemed to be inappropriate to the local context" (para. 38). 36. In actuality, BAPINDO did not dismantle its branches. Rather, it made some changes in their staffing and scope of operations, and renamed a few of them "representative offices". With regard to short-term lending, while this more or less ceased in 1975, BAPINDO continued to make working capital loans and, from time to time, short-term "raw cotton loans" under the financial umbrella of the Government. For these operations, the branches have been most useful, possibly indispensable. Moreover, the value of branches has come to be increasingly recognized by the Bank in such contexts as promotion of small-scale indigenous enterprises, geographical diversifica- tion and supervision of sub-projects. It is clear that BAPINDO would not have been able to fulfill effectively its role as a development finance 18/ Below the covenanted minimum of 1.15 under Bank Loan 2277-IND of 1983. 19/ This estimate does not make any allowances for the liquidation value of the collateral held by BAPINDO, which would therafore be accounted for at a later date as income retrieved against earlier write-offs. - 15 - institution in the fragmented archipelago of Indonesia without a well-fune- tioning network of branches. Furthermore, it is an open question whether concentration exclusively on medium and long-term financing is the best long term strategy for BAPINDO, and whether a diversification of activities might not be in its own best interest as well as that of the country. However, the Bank's overriding concern in the early 1970s about the limitations of BAPINDO's institutional and managerial capabilities was certainly not mis- placed, especially since many of these concerns persist. 37. Could the Bank have foreseen that BAPINDO's human resources would be seriously over-stretched in the 1979-82 great expansionary period, and could it have done anything to forestall this over-extension and the atten- dant consequences? In early 1979 (Loan 1437), the Bank had projected that BAPINDO' s term loans and equity approvals would grow at an average annual rate of 13% for the five-year period 1979-83. By contrast, annual growth in approvals over the 1979-82 four-year period was 77%. The Bank, along with most other forecasters at the time, did not (and probably could not) foresee the boom in the Indonesian economy to be set off, in significant part, by the rise in oil prices later in 1979. Admittedly, the 1977 Loan (1437) dealt resolutely with a great number of shortcomings through the agreed Program of Action. But the follow-up was tentative and colored with excessive sanguin- ity in terms of BAPINDO's earlier improvements and real processing capacity. As mentioned elsewhere (para. 26), it is questionable whether the Bank exercised prudent judgment when, in 1978/79, it urged BAPINDO to engage aggressively in promotion and SSE financing. BAPINDO was not yet ready for this demanding task and, when the economic and investment upturn started shortly thereafter, it found itself facing a dilemma. It could hold back on volume and insist on quality, at the risk that this might be interpreted by the authorities as defiance; or, as it actually did, it could take shortcuts and compromise on appraisal and follow-up, hoping that the momentum of economic activity would sustain even weak enterprises and investments. 38. The PCR (paras. 4.03, 5.03) makes a valid point in asserting that the Bank should have taken a more critical stance toward BAPINDO, both in the review of subprojects submitted to the Bank for funding and toward its appraisal work in general. The sank was familiar with BAPINDO's uneven stan- dards in this area, as well as in the area of supervision, partly due to inadequate quality control and partly due to the insufficient number of trained staff. When the pace of approvals started to quicken in 1980 and 1981, one would have expected the Bank to caution BAPINDO in the course of its supervision and subproject reviews. Rather, the Bank seems to have been quite impressed with BAPINDO's "General Improvement Program" of 1981, and gave it-perhaps for too long-the benefit of the doubt. Bank supervision reports produced between 1979 and aid-1983, while voicing concerns and sug- gestions for "further improvement", were generally generous to BAPINDO. Most notably, in August 1982 the Bank appraised BAPINDO for a fifth Loan (2277), and in May 1983 approved a Loan in the- impressive amount of US$209 million- more than four times the previous loan.20/ 20/ Throughout the period under review, BAPINDO has relied heavily on official domestic and foreign resources (PCR, Annexes 14, 15). - 16 - 39. There is no evidence to suggest that the Bank seriously questioned BAPINDO's capacity to process and disburse such a large loan, although the SAR did call attention (para. 5.09) to the risk that "BAPINDO could resume a rapid expansion of its operations program before the completion of the exten- sive staff upgrading and institutional reforms envisaged under the project over the next two years", i.e. that it might over-extend itself. In actual fact, BAPINDO already had.21/ 40. The various "action programs" or "general improvement programs" in- spired or instigated by the Bank22/ have had some beneficial impact upon BAPINDO and its operations. As a result, many organizational changes were made, appraisal and supervision were upgraded (at least on form), staff training programs were initiated, promotional efforts (especially SSE) were made, branch offices were given greater responsibility for follow-up work, and the accounts of many poorly performing state enterprises were transferred to "managed funds."23/ But there were also failures, despite the 1jank's and BAPINDO's best efforts. Thus, apparent improvements in the arrears situation appear to have been more cosmetic (e.g., largely resulting from reschedul- ings) than actual, and turnqd out to be of transient nature. In the area of appraisal work, average processing time of loan applications, reportedly about 400 days in 1976, improved dramatically to 109 days in the first eight months of 1978. However, by 1982 it was back up to "over 300 days," on aver- age. This begs the question of whether the reported improvement in 1977 and 1978 was real and, if it was, whether the improvement was coincidental rather than systemic. There seem to have been good grounds for the statement made in the SAR for Loan 2277 (1983)24/ that "... much remains to be done to transform BAPINDO into a more dynamic and self-sustaining institution." Whether it was also true that "BAPINDO has performed well with the Bank's assistance...", as the first part of the same statement went, may be debat- able, especially since only a very substantial infusion of fresh funds from the Government can prevent BAPINDO's financial demise. 21/ In conjunction with Loan 2277-IND, another Action Program (for 1983/84) to improve institutional efficiency was drawn up. It emphasized train- ing of staff (at a cost of US$1.3 million). Another US$1.5 million out of the Loan would be used to finance a five-person team of advisors for a period of two years (or 120 man-months). 22/ Inter alia: "Program of Action", April, 1977; "General Improvement Program", April, 1981; "List of Monitorable Actions for April 1, 1983 - March 31, 1984", March, 1983; "Program of Action 1983/84"; "Development Strategy of BAPINDO, 1983-1985"; "Program of Action 1983-85". See Attachment 6. 23/ Whether, in the follow-up of this reform, non-conforming "behest" projects have been consistently treated in this manner, as agreed, is open to question. 24/ Report No. 4286-IND, dated April 13, 1983, para. 1.29. - 17 - 41. One prominent aspect of the Bank-BAPINDO relationship has been the extended use of advisers and consultants. The first team of six advisors brought in by the Bank in 1971/72 were gradually phased down from mid-1974 through 1976, although the Special Senior Adviser to the President and the maritime advisers stayed on until 1978. There seems to be a general consen- sus that the advisers did well, and that they helped to improve procedures, management systems and the quality of operations. Nevertheless, in June 1978, BAPINDO, with the Bank's encouragement, found it necessary to commis- sion a consulting firm to carry out a study of BAPINDO's organization, personnel procedures, reporting, accounting, budgetary processes and admin- istrative cost structure. Except for the fact that administrative costs eventually did come down as a percentage of total assets (paras. 31, 32), the most direct offshoot of this study was the "General Improvement Program" BAPINDO adopted in March/April 1981 (Attachment 6). This called for exten- sive organizational changes, both at the head office and the branches. 42. Apparently, the reorganization created almost as many problems as it solved. Thus, the issue came again to the forefront during the negotia- tions of the Bank's fifth Loan 2277 (1983), and BAPINDO agreed to hire a man- agement consulting firm to help individual operational units implement the "List of Monitorable Actions" (the 1983/84 Action Program; Attachment 6). Four experts25/ would review over a two-year period BAPINDO'S organization and management structures and make recommendations for remedial action. Fur- thermore, BAPINDO would engage, also for two years, the services of a development banking adviser "to advise the Board on general operations and corporate strategy, and assist in supervising the implementation of the 1983/84 Action Program, particularly those aspects relating to improving project appraisal and supervision."26/ 43. Throughout the years, the Bank has been carrying out its in situ supervision of BAPINDO at fairly regular intervals, highlighting and advising on BAPINDO's "financial and managerial" problems. For the most part, BAPINDO was reported on as an institution suffering from "moderate problems" but with an "improving" trend. 27/ Although supervision reports were regularly call- ing attention to areas of persisting old and, on occasion, new problems, the Bank was lenient in its assessment of BAPINDO's institutional and operational 25/ Disciplines: (1) Personnel, human resource development and training; (2) corporate planning; (3) management information systems; and (4) consultancy services. 26/ Later on (October 1983), it was decided that the Special Promotions Adviser whom BAPINDO had engaged in 1982 would fill the position. He is still with BAPINDO. 27/ Somewhat surprisingly, in the period between early 1982 and mid-1983, BAPINDO was given an almost clean bill of health as being problem-free or having only minor problems, the trend being toward further improvement. - 18 - performance, and slow in appreciating and bringing out forcefully and clearly the increasingly disconcerting possibility that BAPINDO was suffering from structural deficiencies transcending concerns over internal organization, procedures, and related institutional issues. It was not until October 1983 that a supervision mission, belatedly, called attention to "alarming signals that [the] quality of BAPINDO's portfolio is deteriorating." As the follow- up letter to BAPINDO28/ correctly warned, "These [signs of portfolio deteri- oration) are alarming signala of a potential problem of a major magnitude and significance." The letter went on to reiterate, inter alia, the need for a new Action Program to upgrade appraisals, supervision and follow-up on de- faulters. 44. The question whether BAPINDO had the innate strength and ability to function effectively as a financial intermediary, even with heavy injections of technical assistance, did not receive due attention. For example, would BAPINDO's weak Board and management structure ever be able to provide strong leadership? Do Government salary scales make it possible to attract and retain the kind of high-quality management and staff the institution needs?29/ As civil servants, are the staff in a position to deal effective- ly with their counterparts--also civil servants-in state enterprises? Do management and staff feel it necessary to apply the same criteria and stan- dards to state enterprises as to private enterprises? By 1983, it should have become clear that the Bank's prescriptions and palliatives for BAPINDO had provided only temporary relief and that, in the absence of drastic changes, it would be only a question of time before the same problems recur, only more difficult each time. It was not fully appreciated that the funda- mental underlying problem throughout the years has been one of management. No number of advisers or consultants can substitute for imaginative, dynamic and independent management. It is hard to believe that the Bank failed to fully appreciate this problem early on and to find a way to get to the root of the cause, and that, instead, it continued the rather symptomatic treat- ment of BAPINDO's many ailments. 45. Because of this tentative stance, the impact of the Bank's associa- tion on BAPINDO's institutional development has been much less than it could or should have been, and not commensurate with the great efforts expended in the process. In this regard, the question can be raised whether the Bank's planned and timed approach to lending, perhaps inadvertently, influenced un- duly its otherwise soand judgment and realization of the deep-rooted nature of BAPINDO's problems. There is no evidence to rule out such a possibility. 28/ Letter dated November 18, 1983. 29/ The Region points out that salaries do not appear to be a major problem. Instead, the pool of talent from which BAPINDO can recruit is extremely limited. It is for this reason that consultants to train staff remain important. - 19 - VII. SUSTAINABILITY 46. In dealing with BAPINDO, the Bank has implicitly viewed this insti- tution as being sustainable.30/ Otherwise, it would not have supported BAPINDO with more than US$350 million over the past 14 years. Critical views have been expressed from time to time about BAPINDO's relatively low level of institutional efficiency and doubts have been raised as to whether its accom- plishments justified the considerable efforts and costs required to sustain it. This question was raised explicitly in the 1979 PCR on the first BAPINDO project (Credit 310). But there was also a strong undertone of such doubts in the Bank's 1977 appraisal for Loan 1437. Thus, prior to negotiations, the Bank seriously considered to "insist upon some measureable improvement before making the next loan, i.e. defer the present operation;"31/ but in the end, it settled for the Action Program. The 1979 PCR concluded that the persist- ing problems of BAPINDO should not be construed as a failure, but rather seen as underscoring the long-term nature of institution-building. It enjoined upon all concerned the need to set realistic goals as to expected improve- ments and the capabilities of BAPINDO's project management. 47. These were poignant observations, and the Bank would have been well advised to have paid greater attention to them. However, that very same year (1979), the Government and the Bank proceeded to place new and demanding responsibilities upon BAPINDO by emphasizing the promotion and financing of small scale enterprises. BAPINDO buckled under the combined burden of this very staff- and management-intensive task, which coincided with the onset of its most expansionary period of overall operations. 48. In its present financial, organizational and managerial circum- stances, it is not clear that BAPINDO is sustainable. (The Borrower/BAPINDO are of the firm view that BAPINDO is sustainable). Certainly, it would not be creditworthy if the infusion of funds in 1986 by the Government did not take place. What, then, can be a meaningful course of action? On the finan- cial side, a review of the rapidly faltering portfolio of loans and invest- ments has been undertaken by outside consultants which formed the basis for financial restructuring of BAPINDO. To address problem loans and investments on a case by case basis BAPINDO has formulated a portfolio rehabilitation plan comprising of: (a) formation of six task forces supervised by a Reha- bilitation Committee headed by a Managing Director; and (b) a program of hiring foreign consultants to provide specialist advice on specific sub- sectors. However, it is essential to ensure vigorous follow-up and maintain a momentum. With a decormined effort, many companies may be able to overcome their present problems and resume profitable operations. Others, including a number of state enterprises, are probably beyond rescue and should be liqui- dated. It is doubtful whether BAPINDO will be able to make these decisions 30/ For the Borrower's views on this subject, see Attachment 7, para. IV. 31/ "Yellow Cover SAR" memorandum, March 24, 1977. - 20 - and carry them out without special assistance. It is already clear that the write-offs and losses far exceed BAPINDO's own resources, and that only new infusions of capital by the Government can keep BAPINDO solvent and restore an acceptable capital structure. 49. Beyond this, however, lie other fundamental, albeit difficult and painful issues. One set concerns institutional attitude, management and own- ership. It is apparent that BAPINDO has not yet developed a sufficiently strong attitude of self-reliance in an institutional sense. Through the years, a considerable number of advisers and consultants have served BAPINDO for various periods of time and, while they were there, institutional per- formance seems to have somewhat improved. however, once they left, many of the problems of the past resurfaced. This suggests that advisers and consul- tants have not managed to leave behind a legacy of lasting, institutionally ingrained improvements, reflecting the presence of structural and internal inadequacies, including management problems. In turn, this raises the ques- tion as to whether BAPINDO's existing structure and the environment within which it operates are conducive to taking impartial decisions, to attracting the top-rate managers BAPINDO needs, and to facilitating the necessary renewal of management echelons. 50. The structure and composition of BAPINDO's Board of Directors are essential factors in its effectiveness and for professional and impartial decision-making. BAPINDO's Managing Board is made up solely of Government appointees who are at the same time day-to-day executives of the institu- tion. This renders their duties and responsibilities as directors ambiguous, creates the perception that in their policy making role they are vulnerable to more narrow operational pressures and influences, and tends as such to detract from their objectivity and effectiveness. It is essential, there- fore, that BAPINDO's Board be reconstituted so as to make it a more indepen- dent, judicious and professional decision-making body. (see para. 28). T4e majority of its members should be drawn from outside the ranks of BAPINDO's management, and should include qualified representatives from the private sector. 51. In discussions with BAPINDO's staff, Bank missions have at times sensed a worrisome, almost all-pervasive belief that, one way or another, especially as far as state enterprises are concerned, the Government would make the necessary financial sacrifices to ensure BAPINDO's liquidity and solvency. In itself, such an attitude-to the extent that it exists-is not healthy. It certainly raises strong doubts whether BAPINDO can be effective vis-&-vis other state enterprises. And, if complacency is manifest in deal- ing with parastatals, the risk is high that it might well spill over and impact also on BAPINDO's relations with its private clients. 52. Another aspect of the viability question concerns the specialized long-term nature of BAPINDO. Such specialization is of course organization- ally and functionally simpler. However, it may also tend to encase or insu- late BAPINDO from the flow of business and from business trends, and to put it in last place, among financial creditors, when borrowers are short of funds to meet their various financial obligations. Moreover, specialization - 21 - makes BAPINDO more vulnerable to business fluctuations.32/ BAPINDO gener- ally has expressed its concurrence with this approach and points out that a "diversification strategy can be programmed carefully to minimize operational disequilibrum and organizational instability."33/ 53. At this juncture, the "first thinge sirst" principle dictates that the financial rescue efforts underway be given top priority. It would be un- realistic in the prevailing circumstances to suggest that BAPINDO should right away launch new activities that would add to its responsibilities and would entail far-reaching operational readjustments. On the other hand, now is the time to look beyond the immediate and urgent financial issues, to re- view afresh its role, functions and set-up, and to work out a viable and sus- tainable long-term strategy. (BAPINDO has recently started a five-year plan- ning process). In so doing, the emphasis should be on such fundamental issues as autonomy, attitude, relationship of board and management with the Government end, ultimately, scope of functions and broadening of activities. As a corollary to these issues, there is a very strong need for BAPINDO to develop from within effective internal systems and procedures34/ rather than relying excessively on outsid-rs on short-term assignments, and for the Government to consider modifications in the civil service rules and regula- tions that will enable BAPINDO to employ Lnd retain highly qualified staff. Along with such strengthening, there is a need to set new and considerably more stringent criteria for projects deserving BAPINDO's financing, and for these to be rigorously respected. Without the adoption and effective imple- mentation of such pervasive measures it is difficult to see how BAPINDO could 32/ Some of the views expressed here may appear to be at variance with some of the views found in the July 10, 1985, Bank economic report entitled "Indonesia - Policies and Prospects for Long Term Financial Development" (Report No. 5501-IND). That report, while recognizing the need for financial restructuring or rehabilitation of development banks in Indonesia, and other forms of strengthening, maintains that it is desirable to retain the specialized nature of the DFIs, rather than converting them into "general purpose banks", since short-term lending is already in adequate supply in Indonesia, and since a wider scope of operations would further strain the capacities of skilled staff and managers. While these arguments are valid in a short-term perspective, as applied to BAPINDO, they may not necessarily apply equally in a long-term scenario. In any event, a long-term solution must, as suggested by the above-cited report, be considered in the full context of the structure of the financial system. Inter alia, it would have to be decided whether consolidation and reduction in number of the numerous DMBs, savings banks, and other financial institutions supplying short- term credit would not be more effective than the presently fragmented banking system. 33/ See Attachment 7, para. IV, B. 34/ Measures the Borrower has recently taken to strengthen its appraisal and supervision processes are described in Attachment 7, para. IV, A, 3, - 22 - become sustainable in the long run. There can be no question that BAPINDO's restitution calls for difficult decisions, strong political will and commit- ment, and determined efforts by both the Government and BAPINDO. As noted in para. 28, some efforts in this respect have already begun. A concerted approach by BAPINDO's official creditors may also be warranted and helpful in resolving these long-standing issues.35/ The Borrower has indicated its acceptance of the joint efforts of its creditors, but has cautioned that such efforts should avoid interference with internal matters.36/ VIII. CONCLUSIONS 54. The Bank's seventeen-year association with BAPINDO has been a dif- ficult one. Despite great efforts on both sides, and the usually accommodat- ing support of the Government, the expectations and objectives of institution building and effective resource transfer have not been met, by a rather wide margin.37/ The most readily observable manifestations of unfulfilled expec- tations are the preponderance of poor quality loans and investments in BAPINDO's portfolio, the existence of a large number of enterprises financed in varying degrees of trouble, and the financially precarious situation of BAPINDO itself.38/ It is notable that the importance and urgency attached to the objective of institution building, as well as the assessment of the progress made, have varied considerably in staff appraisal and supervision reports over the years. The impression is given that the Bank has had some difficulty in laying down, and in applying, consistently meaningful criteria for assessing the extent to which reported institutional progress was real and lasting. This impression is reinforced by the fact that present institu- tional weaknesses are by and large identical to those of the early (1972-77) period of the Bank/BAPINDO relationship. 35/ The Region points out that recently ADB has been working in concert with the Bank. 36/ See Attachment 7, para. III, 4. 37/ The Region suggests that, although it is true that BAPINDO's performance continues to be disappointing, the PPAM (as the one before it) does not take sufficient cognizance of the state of disarray of the institution prior to Bank involvement. Nor does the PPAM ask the somewhat rhetori- cal, but still valid, question of where BAPINDO would have been today if it had not had the benefit of the Bank's assistance. The dearth of man- agement talent, the peculiar confines of the culture and the turbulence of the times with varying signals being given to BAPINDO may also have led to unwarranted expectations. 38/ The Borrower discusses its philosophy of service in Attachment 7, para. V, 2. - 23 - 55. Considerable technical assistance notwithstanding, BAPINDO has not been able to build up a strong, cohesive organization and staff, and to establish sound, consistently applied, procedures of project appraisal and supervision. The Bank, despite a number of corrective actions and well-de- signed Action Programs, has been tentative in BAPINDO's supervision, sanguine when assessing its progress in performance and capabilities, and overly ambi- tious in setting goals. The recession took its toll; but it also brought to light fundamental weaknesses in enterprises financed as well as shortcomings in BAPINDO's appraisal, supervision and collection procedures. The Govern- ment appears to have demanded too much from BAPINDO in terms of level of op- erations, and left it too little room for making decisions based on indepen- dent assessment. Predictably, the Government found itself forced to act as BAPINDO's rescuer in times of financial distress. These actions have not promoted in the ranks of the management and staff of BAPINDO a sufficiently responsible attitude of independence and self-reliance. The Government has perhaps also not acted with sufficient resolve and determination in its emi- nent domain to ensure that BAPINDO's management, especially at higher levels, would always be adequate to its tasks. 56. The Bank's experience with BAPINDO over the years leads to a number of observations and add& new emphasis to les,ons learned in other operations relating to state-owned DFCs.39/ (a) Lack of autonomy tends to erode performance standardsand self- reliance. It is, therefore, of paramount importance to establish clear rules and guidelines for the relationship between a public DFC and the government authorities and agencies concerned. (b) The degree of autonomy, composition, the kinds of issues on which effort is concentrated, and the extent of delegation are determin- ing factors of a Board's effectiveness. (c) Just as lack of continuity in top management may result in insta- bility and absence of direction, extended tenure, can also cause institutional stagnation. (d) Technical assistance can hardly substitute for strong, effective management. The recurrent need for technical assistance, in basic- ally the same areas of concern and over long periods of time, is in itself a clear signal of innate managerial and organizational weak- nesses that no transitory arrangements, however competently exe- cuted, are likely to overcome. (e) There is need to develop a more effective bank-client relationship between the DFC and its parastatal subborrowers to enable the lend- ing institution to provide guidance, instill financial discipline, and have an impact on their operations and performance when cirum- stances warrant such intervention. 39/ The Borrower's views on several of these lessons are given in Attachment 7, para. III. - 24 - (f) The Bank needs to appreciate the fact that, indeed, institution building is a long term process. This should translate into set- ting realistic goals, commensurate with the actual rather than hoped-for institutional and administrative capability of the DFC. To this end, the Bank should not hesitate to defer temporarily lending when there are strong and well-substantiated doubts about the capability of the project entity to execute the project compe- tently, until there is convincing evidence of sustainable progress in implementing agreed upon action programs. BAPINDO's experience seems to indicate that the disadvantages by going ahead prematurely with the project can be far greater than holding it up. (g) When a financial intermediary is also supported by other interna- tional financing agencies, concerted efforts to devise and imple- ment action programs focussing on institution building may be help- ful in achieving maximum effectiveness and impact. (h) Strong political will and commitment, as evidenced by concrete ac- tions, are crucial preconditions for bringing about institutional reforms. (i) Tentativeness and adoption of palliatives or fitful measures by decision-makers only help to perpetuate a morbid situation, to postpone the hard political choices that inevitably will have to be made, and to make the eventual decisions even tougher. 一25一醒雙纏醒匹么 _,.,；〕〕〕〕〕〕〕〕〕〕！-!. PPAM% INDONESIA - LUM PEMBAWGUXAM INDONESIA (Loam 1034, 1437 and 1703-IND) Summarized Balance Sbeets as 0! comber 31. 1978-1985 (Rp U1111 1979 1979 1980 1981 1982 1983 1994 1985 /a (Rp blln7s) ASSETS CURRENT ASSETS cash an and due from banks 6.430 9,521 9,294 7,792 10,577 9,625 20.638 13.2 Due from Bank Indonesia 8,163 4,560 12,458 19,553 22.772 24,051 26,017 20.8 *Arrant maturities of portfolio 17,099 33,104 41,761 71,581 %,204 124,599 197.170 191.6 Marketable securities 7.958 8.085 16,272 5,400 4.100 100 7,523 35.9 Short-term raw cotton 1 279 150 90 24 - - - - Accrued Interest on loam 4,408 5,746 7,405 7,733 14,938 32,202 54,496 70.0 Provisions for losses on interest (2,269) (4,830) (5,082) (6.009) (10,579) (16,478) (26.431) (10.5) Other current "sets 3,113 3,656 7,364 14.492 9,219 7,383 7,776 59.3 /b Total Current Assets 45,191 59."2 $9,552 120,566 147,131 181,482 287,191 300.3 Loan Portfello Worklas Capital Loans Industry 17,"? 35,333 52,695 91,152 126.430 147,397 181.712 259.8 Maritime 1,529 3,886 4,142 9,907 11,015 11,348 13.308 13.6 Subtotal 19,436 39,219 $6,837 101,039 137,445 158,747 195,020 273.4 Investment Loom Indust 63 3" 91,420 114.112 179,535 399,986 501.170 "3.964 615.9 Syndleation 3,519 2.512 6.929 14,892 13,969 24,809 32,155 23.0 YATItime 20,749 29,814 43,"8 64,736 85,158 93,120 103,834 111.0 Subtotal $7,657 122,746 164.6" 239,153 439,113 619.0" 739,953 749.9 CofinswIng with RDBs 7,865 6.494 7.034 10,549 13,813 14,223 11,943 9.8 Government Loans 2,484 2,494 2,484 2.321 1.658 995 331 - Total Loan Portfolio 117,442 170,943 231.0" 373,OW 592,029 793,062 947,247 1,033.1 Laos provisions for lose" (4,443) (5,269) (9,266) (10,203) (15.318) (16,896) (16.382) (45.5) Less current maturities (17,099) (33,104) (41,761) (71,561) (96,204) (124.599) (197,170) (191.6) Laos portion of *that banks and financial Institutions - - (17,541) (17,517) (21,038) (20,769) (20,279) (21.4) Not L*m Portfolio 95,900 132,570 162,476 273,781 "5.673 630,797 713,416 774.6 Equity investments 2,980 3.346 5,504 28.697 41,630 43,294 45,205 51.7 Laos provisions for lose" (733) (733) (1,075) (1,138) (1,30) (2.028) (3.513) (3.3) Not squity portfolio 2,247 2,813 4,429 27,559 40,082 41,216 41,692 48.2 ftsed Assets 1,426 1,563 1,729 2,023 2,818 3.169 4,217 4.9 Deferred Cbsues, - - - - - 347 260 - TOM ASSETS 1".754 1%.938 238,184 423,929 657,704 837,011 1,046,777 1,208.0 Managed rand /c a" cotton 1 23,092 23,333 10,227 9,"3 9,704 9,922 10,498 11.1 project aid Foreign *=bmg* loans 61,"2 95,961 gi.5.%7 106.137 102,5% Local currency loans 1,728 2,039 2,041 2,041 4.S74 107,420 143,894 91.6 other assets 2,"g 2,121 1,725 3,450 3.354 6.7 Total Vanagad, Vand 89,821 123,435 109,M 121.5" 120,406 117,342 154.3ft 109.4 1978 1979 1980 1981 1982 1983 1984 1985 /a (Rp billions) LIABILITIES AND EQUITY CURRENT LIABILITIES Cash in banks with credit balance 1 176 363 240 14,274 12,809 15,403 25.5 Demand deposits 2,112 3,053 5,574 9,191 Time deposits /d 8,962 10,031 24,987 24,987 54,525 60,830 85,120 133.9 Short-term borrowings for raw cotton 111 100 73 - - - - Short-term borrowings from Bank Indonesia - - - 20,083 27,743 27,731 33,423 71.5 Accounts payable and accrued expenses 3,700 7,937 15,140 15,743 Customers' deposits on letters of credit 465 1,082 2,628 4,228 20,110 2,892 735 11.5 Income tax payable 968 1,037 1,899 3,304) 5,586 6,317 352 0.6 Current maturities of long-tern loans payable 10,732 12,681 12,275 31,706 62,911 56,098 100,324 101.8 Due to Managed Fund 2,299 2,121 2,479 4,732 3,533 2,088 2,040 0.5 Notes payable - - - 3,550 1,950 15,000 - - Total Current Liabilities 2 38.218 65,418 117,764 190.632 183,765 237,397 345.3 Long-Term Liabilities Special and time deposits /d 3,000 18,000 32,000 76,437 102,136 117,902 142,753 152.9 Government loans 938 494 647 494 494 494 624 0.7 Bank Indonesia loans 23,054 47,442 40,159 96,130 242,435 405,999 493,423 536.0 State bank loans 9,696 4,943 4,893 6,562 11,651 12,593 11,852 9,5 TDA/IBRD/ADB/KFW loans 26,002 35,789 51,576 69,223 75,690 63,608 93,051 70.2 Bonds payable (net) - - - - - 20,133 24,385 25.0 Total Long-Term Liabilities 62,740 106,668 129,275 248,846 432,406 620,729 706,088 794.3 Less current maturities (10,732) (12,681) (12,275) (31,706) (62,911) (56,098) (100,324) (101.8) Net Long-Term Liabilities 52,740 93,987 117.000 217,140 369,435 564,631 665,764 692.5 Total Liabilities 81,358 132,205 182,418 334.904 560,127 748,396 903.161 1,037.8 9qui$1 Paid-up capital 59,981 59,981 70,091 80,091 80,091 90,851 127,643 153.0 Retained earnings 3,415 4,752 5,786 9,044 15,596 17,764 15,973 17.2 'Total Mquity 63,3% 64,733 Z5,76 e9,o25 95,577 10615 1416 107.2 Lb TOTAL LIABILITIES AND EQUITY 18.754 196.938 258.185 423.92 655,704 857,011 1,046,777 1,208.0 Managed Fund Ic short-term borrowins for raw cotton 19,483 18,940 8,637 8,330 9,721 11.1 Project and fund: o Foreign exchange cost 55,620 89,936 88,238 96,058 106,111 U.a. n.S. 91.6 4.6 Local currency cost 1,133 1,133 1,133 1,132 4,574 6.7 Interest payable 13,583 13,446 11,572 16,075 Total Managed Fund 89.821 123,455 109.580 121,595 120,406 117.342 154,392 109.4 /a Provisional, unaudited accounts, prior to financial restructuring. b Excluding GOI funds contribution of Rp 183 billion paid in 1986 as part of financial restructuring scheme. Managed on behalf of Bank Indonesia and Bank Export-Import Indonesia. 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G01 to make state enterprises repay BAPINDO all existing arrears. GOI to enable BAPINDO to collect delinquent state enterprise accounts without inordinate delays, BAPINDO to undertake vigorous campaign to Improve the serious situation of arrears. Administrative costs In relation to total assets to be gradually reduced, I.&. by reducing "staff surplus* and closing down some branch offices. Branch offices to be given greater responsibility for supervision of projects and in granting working capital loans. Branch network to be studied to determine (a) closings; (b) new branches; (e) appropriate staffing. Appraisal and supervision staff to be increased by two-thirds during 1977/78. Promotion Department to be strengthened. Time of project appraisal to be reduced from 400 to 150 days, on average. Quality of project appraisals to be improved, especially in are" of economic evaluation* Provisions against losses to be increased to at leaet 5% of total portfolio. BAPINDO to finance more mediumv-sized projects (less than $1 million financing), whether public or private. BAPINDO to adopt "Development Strategy." - 32 - ATTACHMENT 6 Page 2 of 3 II. 1981 General Improvement Program Mainly organizational changes. Inter alia: At the Read Office: (a) a separate department (Credit Department III) was set up to handle special credits for small firms; (b) a new Funds Department was established to be primarily responsible for resource mobilization; (c) supervision of projects in difficulties was transferred to a new Special Debtors Supervision Department; (d) the training function was separated from the Personnel Department and a new Education and Training unit was created; (e) electronic data processing was transferred to a new unit; and (M) the unit handling technical matters was abolished and its functions transferred to the Research Department. In addition, a new Planning and Budget Committee was formed to consolidate and screen annual work programs and budgets*before presentation to the Board. The main change at the branch level associated with this reorganization was the upgrading of eight subbranches to branches. The reorganization raised the number of Read Office Departments from 14 at the end of 1980 to 18 by March 1981, and the number of full-fledged branches from 10 to 18 during the same period. The responsibilities of the credit departments and supervision departments were streamlined. III. 1983/84 Program of Action - BAPINDO to foster closer relations with external entities, e.g. Z&ambers of Commerce, technical ministries, other financial institutions. - BAPINDO's top management (*Board of Directors") to delegate more authority to Department heads and Branch Managers. - Duplication of functions in organizational units to be reduced and communication amongst them improved. (Supplemented by specific action intended.) - Membership numbers in some of BAPINDO's standing internal committees to be greatly reduced. - Proportion between operational and non-operational staff to be changed in favor of the former, and new recruitment to focus on operational staff. - 33 - ATTACHMNT 6 Page 3 of 3 - Personnel management system to be strengthened in various ways. - Training of staff and career planning to be improved. - Management Information Systems to be improved. - Computerization program to be sped up. - Branches to be better integrated into overall planning and activities of BAPINDO. - Planning Department and planning processes to be strengthened. - Project appraisal to be improved through - stricter criteria - reducing duplication of efforts - simplifying loan application procedures - shortening appraisal reports - reducing total processing time. - Project supervision to be improved, with more emphasis on preventative action, inter alia. IV. 1983-1985 Development Strategy Inter alia: - Priority industrial subsectors specified. - Credit operations outside Java to be proportionately increased. - Loan syndication to be more used. - BAPINDO to engage in capital market activities through underwrit- ing, bond issues, trading and trusteeship. - Domestic resources to be raised from GOI, central bank, deposits from the public and financial institutions, and bond -%fferings. - Project promotion, especially outside Java, to be intensified. - Cooperation with and technical assistance to RDBs to continue. - "To strengthen its internal operational procedures and staff capa- bility during 1983-85 BAPINDO will implement a Program of Action relating to management and organization, staff development aad training, project appraisal and supervision, branch operations and technical assistance to RDBs. To assist in implementing the pro- gra of Action In the above atsas during the period, BAPINDO will engage the services of a senior development banking advisor and a management consulting firm." COMMENTS RECEIVED FROM THE BORROWER Attachment 7 MINISTRY OF FINANCE OF THE REPUBLIC OF INDONESIA Page 1 of 8 DIRECTORATE GENERAL FOR INTERNATIONAL MONETARY AFFAIRS Jalan Lapwagn Banteng Timur 2 - 4 P.O. Box 3329 JAKARTA Jakarta, June 0?0 ,1986 No: ~ 2i,../9Q. IN1ERNATIONAL BANK FCR RE(DNSTRUCTIOI AND DEVELOPMENT 1818 H. Street, N.W. Washington DC. 20433 U.S.A. Att, Mr. Otto Maiss, Re : Project Perfomance Aidit Report-Indonesia-Bank Pembangunan Indonesia (Loans 1054, 1437 and 1703-IND). Dear Mr. Miss, Please find attached Bapindo's Position Paper which contains the views and oments of Bapindo on the draft Project Performance Aidit report-Indonesia-Bank Pembangunam Indonesia dated May 14,1986, We hope that Bapindo's yiews and corfments would be reflected in the conclusions of the said perfomance audit report, Regards ni o r4 rf ternal Pund Min of Finance, Sc,c. : President Bapindo. Xp.ML.21/ML.213/86 - 35 * sitmo S POSITION PAPER ON THE DRAFT Attachment 7 TMBD PROJECT PERFORPANCE AUDIT REPORT Page 2 of 8 (dated 14 May 1986) 1. Main Positiv Comments about Bapindo Bapiado appreciates the PPAR's recognition of a few positive items about the implementation of the past IBRD loans to Bapindo, such as the fo2loving: 1. Loans 1054 and 1437 were disbursed on schedule. Even though there were time and cost overruns on the other loans, they were within acceptable limits. 2. The sectoral distribution of subprojects supported by the IBRD loans was satisfactory. 3. A good number of labor-intensive projects have been assisted. 1I. Main Negative Coamenta, and Bapin6o'a Responses lapindo understands that the PPAR is primarily addressed to the IMD itself. However, it also manages to criticise the Indonesian government, Bapindo, and the ISRD Division handling the Bapindo loans, on the basis of insufficient information, analysis, and insights. Therefore, in fairness to the parties concerned, Bapindo feels obliged to make the clarifications and viewpoints contained In this Position Paper. 1. Portfolio deterioration, and low quality of.ampraisal ad supervision. Bapindo is willing to admit the extent of the deterioration of its loan portfolio. Nowever, Bapindo cannot agree that such a situation has been brought about mainly by Bapindo's internal weaknesses, as the PPAR seems to Imply. In Bapindo's experience, projects fail due to any or all of the following categories of causes a) unfavorable developments in the business sector and Already reflected acro-economic enviroment; in PPAM patas. 15 b) internal weaknesses in the project itself, such as in and 3 3. its management, systems, structures, etc.; a) weaknesses in Bapindo's project appraisal and/or supervision process. The PPAR would have been more enlightening and fair if the writer has bad enough time and opportunity to discern the approximate proportion of the problem projects resulting from each of the 3 causes mentioned above. Uafortunately, the earlier Portfolio Review report of the FWA consulting firm did not shed enough light on those distinctions, either. And since the PPAR merely looked at the present situation as Indicated by existing reports and financial statements about Bapindo, it could not avoid concluding without an adequate and analytically respectable analysis of the underlying causes of project Attachment 7 -36 - Page 3 of1 failure. Io this sense, the PPAR is relatively long on conclusions and short vn analysis and direct evidence, particularly when it makes .se*e* g qualitative judgment$. Nevertheless, Bepindo's project files contain individual In*4epth analyses of the wrojeets' problems, it only the PPAR writer was Interested io looking at the specifi causes, rather tha generalities. **t of the files abo that the lingering recesseon and weak asnagement In the client projects were the common causes of failure. These are evident especially in the saritime, textile, cement, and wood sectors, which comprise a large portion of spiado's projects in difficulty. Of course. Bapindo must share part of the blame. We admit that Seaindo's aptrsisal and supervision capabilities have been stretched too thinly by our rapid operational growth in 1979-82. Still, the analytical depth and sense of fairness of the PPAR would have been significantly increased if an effort was exerted to discern whether the problem projects have indeed been unviable since the appraisal stage, or whether they only became onviable because of the recession or other events that could net have been foreseen during appraisal. 2. Institutional autonoy and Independ*nce Loans to parasta- The PPAR asserts with a tooe of certainty that "government pressures" were exerted upon lapindo to approve 2oans to pareataUalat tals are referred many of which are now in difficulty. apindo wonders whether the to as loans made PPAR has any factual basis for such an assertion, which simultaneously at th Govrnmet 'aindicts the Indonesisn government for undue interference, and 3spindo atfor succumbing to external pressures. behest (see paras, 22hs (e 2 It should be pointed out that apindo enjoys enough Independence 21, 2 &25.in its day-to-day operations and decision-making. Sam of the paratatals are in difficulty not because they wer bad croects sine the beginning, but because of subsequent developments. For example, one client company overexpanded by borrowing from other banks. Its overexpansion jeopardied the profitability of the first phase of the project, which Sapindo financed. Prior to the expansion, the copany was quite profitable. But now, apindo's loan is in arrears. And yet, the appraisal of the Phase I was good, and so "government pressure" was ever exerted upon Bapiudo. In terms of fund sourcing, however, It uset be admitted that bapindo is still heavily dependent on official sources. And due to the sheer volume of the present funds coming from official sources, it will take a fairly long tin before Papindo can reduce its financial dependence to 1esa than 501~. 3. Farnagtment The management structure of Bapindo has been judged as weak by the PPAR. towever, by claiming that apindo does not have an indepnt- dent hoard of Directors, the PNR seems to compare the Indonesian oard of tanaging Directors (Dirkdi) with the oard of Directors in the American corporate system. Actually, the Indonesian Diroksi is an executive Board, which directs the daily activities of the fire. Attachment 7 Page 4 of 8 3 fn the other hand, the American board is a more detached policy-makiar and ev&luative Board. The Dewer Penrawas or Yonisaris of indonesia functions more like the American Poard of Directors. but this is a minor point. The PPAR's major point about the inherent structural weaknesset Reflected in PPAM, of the Direksi as an organ is well-taken. Its observation about the president of Bapindo not hevinr enough chief executive powers te be para. 28 effective and authoritative is adritted. Bapinde arreet with tht PIJ 8tha the rechanisr of cc,*ect:vt dec5sion-makint ir the Pirekri structure Leeds to be ret.eved te inrove efficiency, speet of decisiot-makin., sense of individual responsibility, clarity in the line of command, and to minimise suboptimal compromising in decision- making amont the members of the Direksi. 1II. Lessons Identified and Recommendations In general, Bapledo agrees with many of the lessons enumerated by Reflected in foot- the PPAR. Of course, it is much easier to learm a lesson after the note 39 to PPAM, fact, with enough hindsight, than to have predited the outcome at para. 56. an earlier time when a decision bad to be made. Specifically, we recognise the wisdom of the following lessons, and the present management of Bapindo commits to use them as guide- lines in their future policies and decisions: 1. Inastitution-building is a long-ters process. Therefore, we should not expect instant results. Ironically, however, despite this profound statement by the PPAR, it seems to turn around and express disappointment at the lack of immediate visible results from the technical assistance components of some of the IBRD loans. 2. Too fast and unplanned growth unduly strained Bapivdo's institutional capabilities (i.e., people and systems) in 1979-82. The present leadership of Sapindo is committed not to repeat the same mistake by seriously undertaking a corporate planning effort which integrates its corporate objeqives, long-term strategies, and the short-term action programs of the departments and branches. This planning exercise aims at synchronizing Dapiado's operational growth with its staff and financial capabilities. 3. There is a need for clearer guidelines and more effective bank-clicnt relationship between Bapindo and its client parastatals. Indeed, Bapindo hopes to cultivate more ,usiness-like relationships with all its clients, private or parastatals. 4. The PPAR advocates "concerted efforts among Bapindo's Reflected in PPAM, international creditors to design and implement action programs on institution-building." This is acceptable. Indeed, Bapindo has recently committed itself to a set of short-term action plan under a coordinated supervision and monitoring by the ADB and ISRD. In this regard, however, Bapindo respectfully suggests that enough care be exercised by the international parties concerned to avoid outright maddling in the operational activities of Bapindo. We are confident that there is enough goodwill arong Bapindo's international creditors to make it possible to find -roper and mutually-acceptable limits to such intervention throurh "stror.y-sugrested" action programs. - 38 - Attachment 7 Page 5 of 8 Iv. Sorindo's Sustainability and Viability The PPAI expresses doubts about Barindo's viability and sustain. Reflected in ability, based on the writer's abort (2 weeks) and first-tie visit to Bapindo, torether with a reading of existing reports on Bapindo. tacidentoly. some of the reports cited as basis seer to be internal PPAMs Waa. 46. IBR, documents whict Sapindo has never seen, so we cannot refute t)er AE if it it not enough to sar that BapindC say not be viable Para. 48 of the at present, the PPAR even raises doubts about Bapiado's credit- PPAM has been worthiness in the past. Bapindo's view is that such a retroactive judgment based on a eveeping observation of the present situation is modified. a bit unfair. For all the unfairness of the PPAR, Bapindo does not want to blame the writer. During his 2-week stay in Jakarta, he could not have had sufficient access to valuable data, information, insights, and perspectives about Bapindo and its clients to arrive at a sore justifiable and fairer iudgent about such long-tern criteria as viability and sustainability. Still, it is very tempting to compare this matter to a medical case whereby a doctor looks at a patient, glosses over the medical file, and without a thorough examination of the internal organs, concludes that the patient will die soon. Worse, he concludes that past medications were usels-a In all modesty and objectivity, the new management of Bapindo believes in its viability, given enough breathing spell to consolidate its operations, rehabilitate its portfolio, and strengthen its systems, structures, and staff. Some of its reasons for this conviction may not have been known by the PPAR writer during his abort visit to Bapindo. At any rate, below are some of the reasons why Bapindo believes in its own future. A) Reform Measures to Enhance Its Viability and Sustainability. 1. Financial health and cavability Reflected in PPAM, Bapindo has iust received An infusion of new equity and 48. loan funds from the government, through the Ministry of Finance and the Bank Indonesia, amounting to a total of Rp. 183 billion. This serves to restore the financial liquidity and solvency of Bapindo. 2. Portfolio rehabilitation " Reflected in PPAM, Starting on 16 June 1986, Bapindo has embarked on a para. 48. comprehensive rortfolio rehabilitation program, consisting of the followiuF elements: a) Formation of six (6) special rehabilitation task forces, whose members have beer. chosen frot Bapindo's more experienced credit staff. These teams are supervised by a high-level rehabilitation committee headed by a t'anaging Director. The rehabilitation committee and the 6 tears will have their own budeet and enough authority to enable th.er to short-ut procedures and expedite critical decisions and actions. - 39 - Attachment 7 Page 6 of 8 b) Fore2rr and domestic consultants will be hired shortly to serve as sectoral e"ecialists for specific subsectors and assist the new rehabilitation machinery to Bapindo. 3. AMraisa and sumervision systes Just recertl7, bepido has adopted the fellowtr measurer to strerther its a'raisfi apd eurervisiot proreset. Reflected in a) A tev, more exhaustive checklist for appraistl, to be seed by all the credit teas, department heads, ad lon footnote 34 committees. to PPAM, para. 53. b) Reorganised the loan ad equity investment committees, who now have permanent members, as well as appropriate authorities and responsibilitles. c) A new, practical quality control system, consisting of quality checkpoints at four levels, samely: .branches, where pro$ect selection to done and through which all loan applications enter; .credit department level; .loan and equity investment committee; .Board of Managing Directors. 4. Quality of staff a) apiado has just started an aggressive recruitment program for more experienced professionals. This will Include attracting ready-made NBAs graduated by management institutes in Jakarta. At present, four of its staff are studyiag for their maateral degrees in the USA, Japan, and Australia. b) More ob-relat#V short-term training courses have been drawn up, to be taken in-house and outside Bapindo. Specific programs, shebdules, and trainees are submitted to the IRD every quarter for evaluation and approval. 3) Long-terr Scenario for Ba-pado S,plado has started a new corporate planning process whose Reflected in PPAMs outlook is 5 years forward, and which is reviewed at least once a year para. 53. to adjust to rapid chances in its environment. An interestint question raised by the PPAR regarding Bapindo's future is whether it should remain specialized or diversify its Reflected in PPAM, operations. The PPAR argues that Bapindo will become more self-reliant 52. and less vulnerable to business cycles it it were a more diversified para. 5financial institution. In principle, Bapindo teds to agree with this viewpoint, especially under the present deregulated banking syster of Indonesia. Anyway, any diversification strategy can be programmed carefully to ir.iise operational disequilibriu and organisational instability. - 40 - Attachment 7 Page 7 of 8 6 v. ConcluAinr conerts fror Bauindo 1. PPAV Bias The PPAV writer seemed to have made up his mind about Bapindo's condition and oustainability prospects even before his visit with us. These footnotes His short visit was seemirnly made only to look for dots to support hit a priori concutions. This irpression is encourared by the writer's renoniit tecr.ieve of p:ttirr iteme favora!!e tc T eayndc revtly at tion not available 'feotnctes to rinivise their neutralizinr effect on bis corcluesone in to the writer. They main text. have now been incor- Below are two examples of such a biased style: porated in the text. ) ae 19: Writer's conclusion in text: "Without reforms at the top, there is litti hope that Bapindo can be strengthened as at institution. /t* Tootate I: "The Region zotes that the Government is now addressing this issue. For example, a new President has recently been appointed and Bapindo's Board of Hanaging Directors, at the urging of the Bank, is now considering changes in the allocation of responsibilities among themselves." b) p Writer's conclusion: "In its present financial, orranisational,and manaterial circumstances, it is not clear that Bapindo is sustain e. Certainly, it is not creditworthy, if it ever waa.Vt Footnote "0: "The Region notes that a substantial infusion of new funds took place in 1986 which Is expected to improve the attuation." There are at least two thiugs that indicate bias in the above style, as follows: 1. By putting as a footnote a significant evidence that can dilute or aeutralite a predetermined conclusion, the impact of the evidence is reduced. Vot everybody reads footnotes. A less-biased report would have integrated the footnotes in the text, in order to provide the reader a more balanced perspective. 2. The style of starting the footnotes in the form of "The Region notes....", instead of a direct statement froz the writer who knows its veracity anyway, dilutes even further the impact of such statemetts which are favorable to Bapindo but not supportive of the writer's summary judgrent. - 41 - Attachment 7 Page 8 of 8 7 2. Philosophy of service and mission of development financing Overall, the PPAR seems to assert that Bapindo failed to take good care of itself as an institution. For example, the PPAR claims that Bapindo accommodated too many small-scale enterprises (SSE), to the detriment of its own profitability, capital structure, and staff resources. Reflected in Bapindo appreciates the PPAR writer's concern for Bapindo's footnote 38 welfare. Rowever, Bapindo believes that it exists for a more noble purpose than to preserve itself. Its primary concern is to render service to Indonesia's entrepreneurs and their pro3ects. If BapiAo merely wanted to increase its assets and net worth, it could have foreclosed its client projects right away at the first sign of difficulty, *e1 the collaterals, and recover its exposure. But such an attitude would have been too selfish and anti-4evelopmental. In the final analysis, the basic issue may be summarised as follows: Should a DrI like Bapindo assume the attitude of a risk- averse commercial bank in order to preserve its financial resources? Should it avoid risking its own capital? Should self-preservation be emphasised at the expense of service orientation? Bapindo's philosophy is that as a DFI, it should continue to push the frontiers of industrial development to the riskier but more needy areas, even though they are usually short in capable managers and experienced entrepreneurs. In the pursuit of this philosophy of service, Bapindo might financially suffer due to lose provisions, non-repayment, and low profitability. Be that as it may, the present management of Bapindo believes that it is better to face those risks than the embarrassment of a "pawnshop mentality." Bank Peabanguman Indonesia Jakarta, Indonesia 20 June 1986 PROJECT COMPLETION REPORT INDONESIA BANK PEMBANGUNAN INDONESIA (BAPINDO) (Loans 1054, 1437 and 1703-IND) June 1984 IDF Division East Asia and Pacific Regional Office - 43 - PROJECT COMPLETION REPORT INDONESIA BANK PEMBANGUNAN INDONESIA (BAPINDO) (Loans 1054, 1437 and 1703-IND) I. INTRODUCTION 1.01 Since the start of its relationship with BAPINDO in the late 1960s, the World Bank Group has provided BAPINDO with funds totalling US$367.4 mil- lion. In 1972, two IDA credits (Cr. 310-IND of US$10.0 million for financing industrial projects and Cr. 318-IND of US$8.5 million for financing the rehabilitation of inter-island shipping) were extended to BAPINDO. Subsequent operations were on Bank terms; Ln. 1054-IND made in 1974 for US$50 million, Ln. 1437-IND for US$40 million made in 1977, Ln. 1703-IND for US$50 million in 1979 and Ln. 2277-IND for US$208.9 million made in 1983 (of which only US$203.3 was directly for BAPINDO). All these loans were for the purpose of financing industrial projects. In 1979 OED issued a Project Performance Audit Report (No.1 563 dated June 29, 1979) covering the first IDA Credit (310-IND) to BAPINDO.- In accordance with the general guidelines for preparing PCRs the present report covers the evolution of BAPINDO and the Bank Group's relationship with it particularly over the last five years, that is, the period 1979-1983. Special attention is given to projects financed under the second, third and fourth loans (Ln. 1054-IND, Ln. 1437-IND and Ln. 1703-IND). Relevant information on the loans under review is given below: 1/ A PPAR for Cr. 318-IND was issued separately. This covered mainly the transport sector effects of that credit. - 44 - Ln 1054-IND Ln 1437-IND Ln 1703-IND Loan Amount US$50.0 mln US$40.0 mln US$50.0 mln Board Approval 11/12/74 05/31/77 05/17/79 Loan Signing 11/20/74 06/06/77 06/01/79 Effectiveness 01/14/75 09/23/77 09/25/79 Free Limit US$0.5 mln US1.0 m1n US$1.2 mln Aggregate Free Limit US$15.0 mn US$10.0 m1 US$15.0 mn Maximum Subloan Size - US$3.0 mn - Interest Rate 8% 8.2% 7.9% Actual Terminal Date 06/30/78 12/31/79 12/31/82 Original Closing Date 12/31/78 09/30/81 09/30/83 Actuall Closing Date 12/31/78 09/30/81 06/30/84 Amount Disbursed 50.0 40.0 50.0 Amount Cancelled - - - Number of A Subprojects Financed 19 12 16 Number of B Subprojects Financed 5 5 42 Average Subloan Size US$2.1 m US$2.35 m US$0.8 m Number of Projects Cancelled after Approval by IBRD 2 2 5 a/ Final closing date taking into account extensions. II. THE ENVIRONMENT General 2.01 Over the 1970s and up to 1981 Indonesia experienced strong and diversified economic growth with GDP rising at a rate of almost 8% per annum. In 1980 CDP growth rate reached 9.9%, due partly to higher oil prices and to a 13.3% increase in rice production. In 1982 however there was a sharp deterioration in the economic outlook with real GDP stagnating (showing a 0.1% drop in constant 1981 prices) - the lowest growth rate in a decade. Total export revenues fell by 15% while imports recorded an increase of 9% over the previous year. The decline in oil prices into early 1983 accentuated these difficulties. To address the balance of payments problem and enable continued economic growth on a sustainable basis Government took a number of steps including the llowing: in March 1983 it devalued the Rupiah by 28% against the US dollar,- in May 1983 it announced the rephasing of many projects to 2/ From US$1.00 = Rp 700 to US$1.00 = RP 970. ~ 45 - reduce imports and in June 1983 it deregulated the financial sector by freeing lending (except for selective priority programs) and deposit rates and eliminating credit ceilings. 2.02 The Manufacturing Sector. Following the 1973 increase in oil prices the industrial sector, including mining and energy, became the fastest growing sector in the economy with an average annual rate of growth between 1971 and 1980 of 11%. Industry now accounts for 33% of GDP (compared to 20% in 1970). The manufacturing sector increased at an even faster rate of 12.8% from 1970 to 1980. In 1980/81 this rate of growth averaged 16%. In 1982/83 manufacturing output continued to expand but at a considerably slower pace because of depressed domestic and external demand. Manufacturing exports which in the late 1970s and early 1980s grew rapidly from a very low base, now account for 14% of non-oil exports or about 5% of total exports. The indus- trial sector accounts for about 12% of total employment with manufacturing accounting for three quarters of this i.e. 9% of total employment. Small enterprises account for about 80% of total employment in the sector. However, medium- and large-scale capital-intensive enterprises, which employ about 13% of the labor force in the sector, contribute about 80% of the total value- added. 2.03 During the 1970s industrial policies were inward-oriented, favoring import substitution with a high level of protection and quantitative restric- tions and government-sponsored large capital investments. As a result the manufacturing sector underwent some structural changes since the mid-1970s. Traditional industries (such as food, beverage and textiles) declined relative to modern capital-intensive industries (such as chemical products, iron and steel, and metal products) which increased their contribution in terms of number of persons employed, gross output and value-added. Between 1970 and 1980 public sector investment in industry and mining grew by 17.5% per annum - compared to a growth in gross domestic investment of 8.9% p.a. over the same period. The industrial sector that resulted from these policies did not generate sufficient employment opportunities or export revenues, and is today characterized by the relative inefficiency of many large capital-intensive often state-owned firms. The early 1980s saw a shift in Government sectoral policies. The third five-year development plan (1979/80-1983/84) places greater emphasis on the manufacturing sector and gives priority to four objec- tives: developing the structure and pattern of industry; generation of employment opportunities; protection of fledgling entrepreneurs; and the promotion of labor-intensive manufactured exports. Some progress in initiating this shift has already taken place particularly in the trade sector. Besides the Rupiah devaluation (para. 2.01) Government introduced over the past two years initiatives in the areas of export finance, guarantees, credit and insurance. Terms of payment of export were liberalized and exporters' access to working capital eased. Other initiatives in trade policy were also started. 2.04 The Financial Sector. The financial sector in Indonesia consists mainly of Bank Indonesia (BI), which is the country's central bank, 5 state- owned commercial banks, the state-owned development bank (BAPINDO), 79 private national commercial banks, 10 foreign banks, 3 development finance companies and 26 Regional Development Banks (RDBs). Despite the apparent diversity of - 46 - financial institutions the financial sector is characterized by poorly developed capital markets, asset concentration (the five state-owned commer- cial banks account for almost 80% of the assets of all deposit money banks and BAPINDO for 33% of outstanding term loans to the industrial sector), and by a dearth of long-term credit. The degree of monetization is lower than that in comparable LDCs and access to banking facilities outside urban areas is limited. Until recently, the sector was tightly controlled by BI with a regulated interest rate structure for both deposits and loans (with interest rates generally being lower than prevailing inflation rates), credit ceilings and special rediscounting windows for a number of Government-sponsored credit programs which accounted for about 25% of credit outstanding. Although this system generally satisfied credit demand and succeeded in channeling resources to priority sectors and programs, it depended on continuing windfall oil profits and did not encourage incentives for mobilizing financial savings. In June 1983 Government introduced a far-reaching financial reform including the liberalization of interest rates for the majority of deposits and lending and the abandonment of credit ceilings to determine the rate of expansion and allocation of credit for most lending. The scope of rediscounting facilities was reduced and rediscounting rates unified at 12%. These moves resulted in a sharp rise in interest rates, an increase in time deposits of the banking system and in substantial capital inflows. At least in the short term, however, these measures have increased the cost and reduced the availability of term credit for investment purposer. Government is aware that the issues raised by the reforms, particularly interest rates, resource mobilization, etc. nted to be evaluated in a sector-wide context and the Bank agreed to a Government request to provide assistance, in the form of a financial sector review mission which took place in May/June 1984. III. BAPINDO AND BANK LOANS' OBJECTIVE Background and Bank Group Support 3.01 BAPINDO was established in 1960 as a successor to Bank Industrial Negara which had been in existence since 1951. The Bank Group's association with BAPINDO dates back to 1969, when a Bank mission, at Government's request, undertook a detailed examination of BAPINDO which revealed a number of institutional weaknesses. In 1970 Government and the Bank agreed on a program for the organizational and financial restructuring of the institu- tion. Following a number of Bank missions to BAPINDO, IDA, in May 1972, made a first credit of US$10.0 million for industrial financing. In June 1972, IDA made a second credit (US$8.5 million) for financing inter-island shipping projects through BAPINDO. At the time of the first IDA credit and as part of its reorganization, BAPINDO also received a technical assistance program financed by UNDP, the Bank and the Governments of Australia and Japan with the Bank acting as the executing agency. 3.02 The first IDA credit to BAPINDO became effective in August 1972 and was fully committed by February 1975 as projected. It was closed after two extensions at the end of December 1977, after US$9.55 million had been dis- bursed and US$0.45 million had been cancelled. In June 1979, OED prepared a - 47 - "Project Performance Audit Report" (Report No. 2563, dated June 27, 1979) in respect of the first credit which was based on a Project Completion Report (prepared by the East Asia and Pacific Regional Office). The PCR and the PPAR covered in detail the evolution of the Bank Group's relationship with BAPINDO and institutional developments from the time of initial discussions with BAPINDO to late 1978. The PPAR stressed the need for continued strengthening of BAPINDO's institutional capability, project appraisal and supervision procedures and the need to maintain BAPINDO's operational autonomy. 3.03 The support provided by the World Bank Group since the IDA credits, besides the funds provided (US$348.9 million), includes four appraisal missions, several supervision missions and reviews of more than 50 subprojects over the free limit. The Bank Group provided ongoing advice in the adoption of a "Policy Statement," on institutional developments and on reorganization and procedures. This institution-building support continued with the fifth Bank loan (Ln. 2277-IND) which provided US$2.8 million to BAPINDO to enable it to recruit a top-level advisor and a management consultant team to review its organization and procedures and to finance overseas training of its staff. Role of BAPINDO and Objectives of Bank Loans' 3.04 When, in the late 1960s, the Indonesian Government sought the Bank's help for BAPINDO, it was not just to secure financial support for the institu- tion, but also to assist in reorganizing and strengthening it, to transform it over time into an effective financial intermediary, intended to be the main source of finance for the industrial sector in the country. Thus, the three Bank loans under review, as the first IDA credit, had institution building as their major objective. Within the context of the second Bank loan (Ln. 1054-IND), agreement was reached to increase the size of BAPINDO's equity base, expand the supervisory board, and strengthen general operating procedures. At appraisal of the third BAPINDO loan (Ln. 1437-IND) a comprehensive action program was agreed upon to tackle a worsening arrears situation, improve the quality of loan appraisals and loan processing, and to enhance BAPINDO's developmental impact by the adoption of a Development Strategy outlining specific development objectives. (This was formalized in 1977.) Although BAPINDO made considerable progress in implementing this program of action at the appraisal of the fourth loan (Ln. 1703-IND) (May 1979) the Bank found that further improvements were needed to accelerate project promotion, shorten the project processing cycle, improve monitoring of problem projects and intensify training of staff. Both the Ln. 1437-IND and the Ln. 1703-IND provided funds specifically earmarked to assist BAPINDO improve its institutional capabilities (US$240,000 and US$100,000 respectively). 3.05 The other related major objective of sustained Bank Group support to BAPINDO has been the transfer of foreign exchange resources to assist the development of the industrial sector in Indonesia by financing the import requirement of BAPINDO-assisted projects. It was estimated at appraisal of the second, third and fourth Bank loans that they would cover 50%, 57% and 63% respectively of BAPINDO's projected foreign currency approvals over the periods 1974-1976, September 1977-September 1978 and mid-1979 to mid-1981. - 48 - 3.06 The Bank loans have successfully achieved the set objectives of resource transfer and institution building. However, given the rapid growth of BAPINDO and the increased diversity of operations and consequently of its institutional needs, BAPINDO's organization and procedures need further strengthening and modification to enable them to meet BAPINDO's present requirements and future challenges. IV. UTILIZATION OF THE BANK LOANS 4.01 Rate of Utilization. Annex 3 gives the schedule of estimated and actual disbursement of Loans 1054, 1437 and 1703-IND. All three loans were committed and disbursed at a slower pace than estimated at appraisal. The terminal date for submission of subprojects had to be extended for all three loans to permit full commitment of the loans: by two years in the case of Ln. 1054 and Ln. 1703-IND and by 3 months in the case of Ln. 1437-IND. The average disbursement delay was about 6 to 9 months. Despite this lag both Ln. 1054 and Ln. 1437-IND were fully disbursed by the time of the original closing date. Although the initial pace of commitment and disbursement of Ln. 1703-IND was quite sluggish, it picked up rapidly in FY81 and FY82. In FY83, however, it dropped again, mainly because of the slow rate of utilization of the US$15 million component earmarked for relatively small labor-intensive projects. This was partly due to the smaller margin (2.5%) allowed BAPINDO by the Government on small loans (compared to the margin of 4% on large indus- trial loans) and the availability of cheaper sources of funds for small proj- ects. Because of these delays, the closing date of this loan was extended, to June 30, 1984 to permit full disbursement. Subproject Characteristics 4.02 Annex 4 gives summarised data on subprojects financed out of the three loans under review. Annex 6 (Tables 1-5) gives the sectoral and geogra- phical distribution of projects financed. About 9 subprojects (2 each out of Lns. 1054 and 1437 and 5 out of Ln. 1703-IND) were cancelled after the Bank had approved them. Out of the 99 subprojects financed, 76, representing 81% by amount of the Bank loans, were located in Java and Bali reflecting the overall concentration of population and industry in Indonesia. This relative concentration was higher under the second and third loans when 90% and 931 respectively of the bank loans (by amount) went to projects in that region (Java and Bali) compared to about 76% under the fourth loan. This reflects BAPINDO's effort to support government policy to promote development in other regions. Industry accounts for about 57% of the subloans financed (by amount), out of both the second and third loans and for 48% of subloans financed out of Ln. 1703-IND. The maritime transportation sector accounts for about 43% (by amount) of Ln. 1054 and 1437-IND and for 44% of loans financed out of Ln. 1703-IND. Lending for construction and hotels makes up the remain- ing 8% of lending out of Ln. 1703-IND. Within industry subprojects financed out of the total of the three loans show a broad subsectoral distribution with paper and printing being the most important (11%); metal products (9.8%), chemicals (8.7%) and rubber products (5.4%). The utilization of Ln. 1703-IND shows a greater sectoral and subsectoral diversity than the two previous - 49 - loans, reflecting the increasing emphasis by BAPINDO on financing medium-sized labor-intensive projects. Of all the "A" (above free limit) subprojects financed out of the three Bank loans in the industrial sector 11 were majority state owned. These received a total of US$41.2 million out of the three loans under review. Allocation of the Loans 4.03 Ln. 1054 was used to finance 24 sub-projects, of which 19 (for a total of US$48.98 million) were above free limit. The average subloan size was US$2.1 million. The two largest subloans amounted to US$6.0 million each. Because of BAPINDO's weak financial situation and to ensure a wider distribution of Bank funds, a maximum subloan size limit of US$3.0 million was established under Ln. 1437-IND. Under this loan 17 subprojects were financed, of which 12 were above free limit (amounting to US$37.71 million). The average subloan size was US$2.35 million. Six projects, of which the largest 4 accounted for 60% of the loan amount, exceeded the maximum subloan size with Bank approval. Even though these subprojects were justified on their own merits, in retrospect, it appears that the overriding consideration behind the Bank's waiving of the maximum subloan size was to ensure timely utilization of the loans and that a stricter enforcement of the maximum subloan size could have, staff constraints permitting, induced BAPINDO to start giving priority to medium-sized projects earlier than it did. To support and encourage BAPINDO's efforts to increase financing of medium-sized, labor-intensive projects, in accordance wih BAPINDO's Program of Action adopted in 1977 and the Development Strategy (1977/78), 30% of the foth Bank loan (Ln. 1703-IND) was earmarked for financing this type of project. A maximum subloan size of US$3.0 million was also set. A total of 58 projects were financed out of this loan; of these 16 were "A" subprojects amounting to US$34.0 million. The average subproject size was $0.86 million. Two projects exceeded the maximum subloan size (with Bank approval). The Bank reviewed all the "A" subprojects but from a sample of subprojects files reviewed it appears that there was a tendency to accept, with little or no comment, BAPINDO's assertions and judgments. A more critical approach would probably have helped improve BAPINDO's appraisal standards, although it could also have slowed down the rate of utilization of the loan. Operational and Economic Performance of Projects 4.04 Annex 5 provides operational details on the subprojects financed under the three Bank loans under review. Cost estimates made by BAPINDO in its appraisal estimates were generally accurate. However, 12 projects financed under Un. 1054-IND and Ln. 1437-IND had cost overruns ranging from 2% to 36% with an average cost overrun of 10% for Ln. 1054-IND and 4% for Ln. 1437-IND. Of the projects financed out of Un. 1703-IND and completed by 3/ These (medium sized labor-intensive projects) were defined as either (a) enterprises with fixed assets not exceeding US$1.0 million equivalent or (b) projects generating employment at a fixed investment cost-per-job not greater than US$12,000 equivalent. - 50 - end 1983, 6 had cost overruns, all minor except for a pharmaceutical company (54%), a saw mill (48%) and a floor tile factory (60%). Two projects, a cement plant and a wire rope factory, both financed under Ln. 1054-IND account for the bulk of the overrun. Most subprojects for which data are available were completed within six months of the estimated completion date except for; a nut and bolt factory that is not as yet finished, the wire rope factory and an ice making plant financed under Ln. 1054-IND and both of which had delays in excess of 20 months, and four subprojects (a shipyard, a hotel, a shipping company and a civil works contractor) financed under Ln. 1703-IND which had delays ranging up to a year. The delays were caused by various factors, including lack of equity, changes in project design and delays in the delivery of goods. About 20 subprojects financed out of Ln. 1703-IND have not yet been completed. Total sales generated in the second year of operation by 27 proj- ects for which data are available (financed out of Ln. 1054-IND and Ln. 1437-IND - no project financed out of Ln. 1703-IND project has been fully in operation for more than a year or so) amounted to Rp 139.2 billion compared to Rp 145.8 billion estimated by BAPINDO at appraisal. BAPINDO's profit- ability forecasts turned out to be much more optimistic; 9 companies out of the 27 sustained losses. Profits by these projects were about 40% of the amount forecasted at appraisal by BAPINDO. BAPINDO does not calculate ex-post FRRs. Profit as a percentage of average net worth varied from 45% to a negative of 90%. 4.05 ERR's calculated at appraisal for most subprojects financed out of the three loans were well above 15%. However, BAPINDO's ex-pout analysis of the economic impact of subprojects it finances is rather weak (mainly because client companies do not furnish all the required data). Ex post ERRs are not, in general, calculated and value-added data is collected on a very limited basis. Data on employment generated is available for 65 subprojects financed out of the three Bank loans under review. These subprojects created 9,108 jobs (higher than the appraisal estimate of 8,632). Subprojects financed out of Ln. 1054 and Ln. 1437-IND had an investment cost-per-job of about Rp 42 million (lower than estimated at appraisal of Rp 47.5 million and Rp 48.0 million respectively). The subprojects financed out of Ln 1703-IND had a lower investment cost-per-job of Rp 39.0 million although this was still above the appraisal estimate of Rp 32.1 million. This reflected the increased emphasis BAPINDO put on smaller and more labor-intensive subprojects in the utilization of the fourth loan. Since BAPINDO keeps its estimates in local currency, and investments took place over a period of time, it is difficult to get accurate US dollar values. However it appears that in US dollars the investment cost per job for subprojects financed out of Ln. 1703-IND was significantly lower (by about 20-25% in real terms) than for those financed out of either Ln. 1054 or Ln. 1437-IND. Most subprojects financed by BAPINDO were for import substitution. BAPINDO's data show that only four subprojects exported over 50% of their total output. Status of Subloans 4.06 Annex 9 presents details of the current status of subloans as of December 31, 1983. Of the subprojects financed under Ln. 1054-IND, 4 had been repaid (although BAPINDO had made other loans to these 4 clients which are still outstanding), 9 rescheduled and 4 were in arrears. Of the 12 subpro- - 51 - jects financed out of Ln. 1437-IND, none has so far been completely repaid, 6 have been rescheduled and 1 is in arrears. Of the 16 subprojects financed under Un. 1703-IND and which are no longer in the grace period, 6 have been rescheduled and 3 are in arrears. 4.07 Of all the free-limit subprojects financed out of the three Bank loans, 8 had moderate problems and 9 had major problems of a structural nature. Four subborrowers with fundamental problems (a state-owned tire manu- facturing concern, two state-owned paper factories and a private shipping company) accounted for about 60% of the total amount in arrears (of Bank financed subprojects). The total BAPINDO exposure on these 4 borrowers at the end of 1983 amounted to about Rp 60 billion (US$60 million equivalent). V. INSTITUTIONAL ASPECTS Overall Perspective 5.01 BAPINDO has made substantial progress in terms of its institutional development in recent years and it is today Indonesia's most important development finance institution with established experience in term lending. Perhaps the most important aspect of BAPINDO's development has been the dramatic growth in operations (approvals rose from Rp 35 billion by amount in 1978 to Rp 599 billion in 1982) and in assets (from Lp 144 billion in 1978 to Rp 857 billion in 1983. (See Annex 10 tables 1-4).A BAPINDO's operations have also become more diversified as its involvement increased in large projects (cement, textiles, plywood, paper and shipping) which required complex financing and technical assistance packages. At the same time, and particularly since 1980, BAPINDO rapidly expanded its lending to small indus- tries under special credit progr-ms. During this period of fast growth BAPINDO's professional staff increased by only 13% and staff training was not able to increase the number of skilled personnel in line with the expanding volume of operations. Thus, despite improvements in staff efficiency and productivity, the rapid growth of operations placed considerable strains on the organization as a whole. As early as 1980/81, BAPINDO's management felt the need for extensive institutional reform and sought the assistance of a management consultancy firm to advise on the changes necessary in organiza- tion, operations and procedures in order to improve efficiency. Based in part on the consultant's recommendations in March 1981, BAPINDO adopted a General Improvement Program (GIP) covering far-reaching changes in the organizational structure, streamlining of operational procedures and staff training. The implementation of the GIP posed a number of difficulties, however, relating to the lack of coordination among the newly established units, inadequate staff- ing and ill-defined areas of responsibility for various operational units and branches. Moreover, during period of implementation of the GIP (i.e., in 4/ Approvals in 1983 were Rp 138 billion (US$138 million equivalent). This fall relative to 1982 was due to the weak economic situation in Indonesia. - 52 - 1981/82), the size of BAPINDO's operations virtually doubled, necessitating further organizational changes to enable BAPINDO to manage this growth satisfactorily. Thus, in 1982 BAPINDO embarked on a new action program for implementation in 1983/84 designed to: (a) strengthen project appraisal and supervision; (b) intensify staff training and development; (c) improve BAPINDO's planning process and Management Information System (MIS); and (d) improve communication within BAPINDO and with outside agencies and in particular its assistance to Regional Development Banks (RDBs). This action program which constitutes an important element of BAPINDO's development strategy, is designed to give BAPINDO an organizational structure and proce- dures that are appropriate to its present size and expected future growth. The Bank, within the context of its fifth loan to BAPINDO (Ln. 2277-IND) pro- vided technical assistance funds to enable BAPINDO to employ consultants to assist in the implementation of this program. Progress to date on this work has been satisfactory. Moreover the close collaboration between the consul- tants and their counterparts in BAPINDO, together with the setting up of a corporate planning process in BAPINDO should avoid many of the difficulties which arose during the implementation of the GIP (in 1981/82) and also ensure that BAPINDO's organizational needs are reviewed regularly. The Bank should, however, continue, through close supervision, to monitor the progress of this work and the manner and timing of implementation of the recommendations made. Management/Organization/Staffing 5.02 Despite the significant changes in the size and nature of BAPINDO, its management structure has remained unchanged since 1972. BAPINDO's organ- izational chart is given in Annex 2. A two man Supervisory Board representing the Ministry of Finance and the Central Bank sets general policies and other guidelines, the five man Board of Managing Directors, headed by the President Director, is responsible for all operational decisions and each of the Managing Directors supervises the day-to-day activities of four departments and a number of the branches. At middle management BAPINDO has a core of experienced professionals which are, however, stretched thin. In general, the present setup suffers from a number of weaknesses; the Board of Managing Directors is more of a management committee but lacks the detachment that a more independent board, made up in part of outside directors, could bring; the organizational structure is too complicated with the rationale for the differ- ent areas of responsibility largely revolving around the concern to ensure equal power and responsibility amongst the Managing Directors rather than to avoid overlap of functions and preserve accountability; it appears that the organization is overstructured with many echelons and small units. BAPINDO's management expects that with the assistance of the outside consultants it will, over the coming years, be able to introduce institutional changes to address these problems. The consultants will also help BAPINDO improve its corporate planning capabilities which until now have been limited. These changes will take time to institute however, and BAPINDO needs to resort quickly to some effective interim measures to enable it to address the immediate problem of a rapidly deteriorating loan portfolio (para. 6.10). A Bank supervision mission in May/June 1984 suggested in particular that because of the relatively small number of trained and experienced analysts available, BAPINDO should consider creating two or three problem-solving teams to visit, in collaboration with the staff from the branches, all big projects with - 53 - problems over the next six months or so and to advise on any actions which might be necessary to improve project performance and loan collections. Procedures and Standards 5.03 Project Appraisals. Despite the imprvvement in project appraisals since 1971, the Bank, during the appraisal of Ln. 1437-IND, identified project appraisal as one of the main areas where BAPINDO needed to make improve- ments. Consequently, the Bank helped BAPINDO adopt measures to speed up and improve appraisals, including the calculation of ERRs for all projects requir- ing BAPINDO financing for US$1.0 million or more. The Bank also, .through supervision missions and review of subprojects, provided ongoing advice and encouragement to BAPINDO to help it raise appraisal standards. In recognition of this effort, and improved appraisals, the free limits under Bank loans were consistently increased. The quality of appraisal reports is now generally good. ERRs and FRRs are routinely calculated on all loans of US$1.0 million and above. However, there still appear to be some weaknesses particularly regarding market analysis, which could be improved, financial forecasts which have at times tended to be too optimistic and the analysis of risks associated with a project which should be more realistic. BAPINDO recognizes these problems, which arise partly because of inadequate quality control by middle management and the relative inexperience of many of its newly recruited appraisal staff, and it is carrying out an extensive training effort to remedy these weaknesses. To improve appraisal significantly however, given present staffing constraints, BAPINDO needs to review its project appraisal process. Appraisal teams should be clearly accountable for their recommendations, and management of the Credit Departments strengthened to ensure full review of appraisals at departmental level before proceeding to the Credit Committee. The Credit Committee should be given the authority to reject projects which do not meet the required standArds, rather than as at present merely comment on projects before forwarding them to the Board of Managing Directors. It would also be useful if the composition of the Credit Committee were reviewed to include one or two full-time members who have the time necessary to study in detail all projects brought to the committee. In retrospect, it also appears that a more critical attitude by the Bank in its subproject reviews in the past could have spurred BAPINDO to earlier efforts to improve the quality of appraisal. 5.04 Project Supervision. The Credit Departments at the Head Office have responsibility for project supervision during the implementation phase, while the branches have responsibility for projects in operation, except those problem projects which are monitored by the Special Debtors Supervision Department at Head Office. Because of the rapid growth in the portfolio in recent years, the supervision workload has become much heavier and has severely taxed BAPINDO's existing staff resources. Coordination between Head Office and the branches has also been a problem. These difficulties have become more acute in recent months as the portfolio has shown increasing signs of rapid deterioration. At appraisal of the fifth loan (Ln. 2277-IND), BAPINDO agreed with the Bank on a comprehensive action program to improve its supervision efforts by, inter alia, assigning additional staff to supervision units, strengthening coordination of supervisory functions and improving reporting and follow-up systems on subprojects. Since then, newly recruited - 54 - professional staff have been assigned to the Supervision Department. However, given the rate of portfolio growth and quality deterioration in 1982/83 (para. 6.10), BAPINDO cannot wait until this staff is trained (particularly since the training effort also diverts experienced analysts from other casks) and in the short-term at least needs to develop a "firefighting" approach with two or three experienced supervision teams focusing actively on the larger projects with problems. The Special Debtors Supervision Department, while it has handled various difficult problems well, is probably not by itself capable of this task in its present form since it has been operating more or less in the same way as the other credit supervision department, and does not appear sufficiently aggressive and mobile. VI. OPERATING AND FINANCIAL PERFORMANCE Operations 6.01 BAPINDO's operations consist of: (a) term Loans for fixed asset financing; (b) permanent working capital loans associated with term loans; (c) loan syndications with other financial institutions; (d) equity investments; (e) special credit schemes to assist small scale enterprises; and (f) cofinancing with, and technical assistance to, the Regional Development Banks (RDBs). 6.02 As shown in Annex 10, Table 1 (Projected and Actual Lending Operations for the period 1978-83) BAPINDO's operations expanded at a very fast pace between 1978 and 1982. Annual new approvals of loans and equity investments increased from 123 by number and Rp 35 billion (US$50 million) by amount in 1978 to 1427 by number and Rp 559 billion (US$799 million) by amount in 1982, i.e., at an average annual growth rate of 103%. Thus loans and equity investments outstanding rose from Rp 120 billion (US$171 million) in 1978 to Rp 578 billion (US$826 million) in 1982. In 1983 however, the overall weakness of Indonesia's economy and particularly the tight monetary situation depressed general credit demand and BAPINDO's level of approvals of loan and equity investments fell to 490 by number and Rp 138 billion (US$138 million) by amount. The bulk of the growth in operations, between 1978 and 1982, came from investment loans to industry. Maritime loans, which between 1978 and 1980 accounted for about 18% of total approvals, declined below 10% after 1981. Lending for SSEs and local contractors increased very significantly from a low base, in percentage terms, but still accounted for only about 6.5% of total approvals by 1983. 6.03 During the period under review, BAPINDO's operations became also more diversified and complex. BAPINDO participated actively in special credit - 55 - schemes (Kelayakan, Kepres 14A and KIK/KNKP)I/ aimed at promoting indigenous (pribumi) SSE entrepreneurs. These special loans accounted for 50% of the total number but only 4% of loan amounts. In addition BAPIUDO extended tech- nical assistance to 18 out of 26 RDBs. All these labor-intensive and relatively low remuneration activities severely stretched BAPINDO's resources of trained manpower and its organizational capacities. Industrial Loan Characteristics 6.04 The characteristics of industrial loans committed through December 1983 are given in Annex 11. BAPINDO's investment loans have been well diver- sified in various sectors, with a relatively higher exposure in recent years in textiles, plywood and cement due to a number of large projects in these sectors. These projects, financed mainly between 1979 and 1982, reflected the then Government preference for large "lumpy" investments. They also influ- enced the average size of subloans. Thus, the average size of industrial investment loan commitments increased from Rp 379 million (US$0.54 million) in 1978 to Rp 3,935 million (US$5.6 million) in 1982. 6.05 The overall regional distribution of industrial loans continues to be concentrated in Java, which, during the period under review, accounted for about 66% of all commitments. However, with the emphasis on developing resource-based industries, there is a gradual shift to projects in other regions. The average maturity of BAPINDO's investment loans has remained around 8 years; that for working capital loans around 6 years. About 80% of the number of projects, representing 52% of the amount of loans committed during this period was for expansion/modernization purposes. The bulk of industrial loans approved between 1978 and 1983 (90% by number of projects and 77's by amount) was for majority private entities. Managed Funds 6.06 In 1977, at the World Bank's instigation, due to mounting arrears on state-owned projects in its portfolio, BAPINDO set up a "Managed Fund" mechanism for Government-sponsored priority projects which exceeded BAPINDO's investment limits or were not covered under its normal investment criteria. The funds for such projects were provided by the Government, and BAPINDO did not assume any credit risk, but charged a fee for handling. As of December 31, 1983, the total amount of managed funds stood at Rp 117.3 billion. Within the context of preparation for the fifth Bank loan, BAPINDO incorporated in its Policy Statement, a provision specifying (a) that it would apply normal appraisal procedures to all projects presented to it for financing and would 5/ Kelayakan loans are term loans up to Rp 75 million to small indigenous entrepreneurs with lower collateral and equity requirements to projects considered viable; Kepres 14A are short-term loans for indigenous sup- pliers or contractors who require bank financing of up to Rp 200 million to fulfill orders from Government agencies; KIK/KMKP are investment/ working capital loans up to Rp 15 million each with 75% insurance against credit risk provided by P.T. ASKRINDO. - 56 - only accept those projects that meet its established economic, financial and technical criteria and (b) that it would administer especially provided Government funds for "Managed Fund" type projects as an agent without assuming any credit risks and that it would receive an adequate fee for this service. Equity Investments 6.07 Details of BAPINDO's equity investments as of December 31, 1983 are given in Annex 12. The principal objectives of these investments were to strengthen the equity base of private pribumi enterprises and to increase the local Indonesian share in joint-venture companies and thus hasten the indigen- ization of the industrial sector. In principle, BAPINDO considers most of these investments temporary since it expects to sell its shares in the capital market when the companies become profitable. BAPINDO's net equity portfolio increased from Rp 2.2 billion in 1978 (US$2.9 million equivalent) to Rp 41.2 billion (US$ 41.2 million) by the end of 1983. With four exceptions, BAPINDO's share of equity in a project does not exceed 25% of total. BAPINDO's equity investments have been low yielding. During the period 1982- 83, shareholdings amounting to Rp 1.2 billion were sold and provisions total- ling Rp 900 million were constituted against the equity portfolio. BAPINDO has now decided to slow down its equity investment operations. Financial Performance 6.08 Financial Position. A comparison of BAPINDO's financial statements and ratios for 1978-83 with those forecast at appraisal of Loans 1054, 1437 and 1703-IND is given in Annex 10, Tables 2-4. As a result of slower than expected growth of lending operations until 1980 (ref. Annex 10), BAPINDO's total assets were less than the levels expected. Between 1978 and 1980 total assets grew by about 40% per annum in nominal terms, representing an average real rate of growth of about 23%. In 1981 BAPINDO's total assets grew at a faster pace of about 50% per annum in nominal terms, representing real growth of about 35% a year, and overtook forecasts made at appraisal of Un. 1703-IND. Thus, as of December 31, 1983, BAPINDO's total assets, excluding managed funds stood at Rp 857 billion (about US$857 million). Over the period under review, BAPINDO's net term investment loan portfolio (excluding current maturities on term debt) increased from Rp 87.6 billion in 1978 to Rp 594.3 billion in 1983 representing an average annual compounded real rate of growth of about 35%. In the same period, working capital loans increased eight-fold in nominal terms. BAPINDO's net equity investments grew from Rp 4.4 billion in 1980 to Rp 41.2 billion in 1983. By all accounts, BAPINDO's rate of growth between 1980 and 1983, both in nominal and in real terms was extremely high. The expansion in BAPINDO's assets was mainly financed by an increase in long-term debt which (including current maturities on term debt) increased from Rp 62.7 billion in 1978 to Rp 575.0 billion in 1983. Bank Indonesia was the largest creditor of BAPINDO (68% of long-term debt in 1983). Government was the next most important creditor (20% of long- term debt in 1983). International creditors, including the World Bank accounted for about 10% of BAPINDO's outstanding term debt by end 1983. BAPINDO's equity increased by 71% in nominal terms between 1978 and 1983 reaching Rp 108.6 billion by December 31, 1983. BAPINDO's long-term debt/equity ratio which stood at 1.0:1 in 1978 gradually increased to 2.8:1 by - 57 - 1981 and 4.5 by 1982. Within the context of negotiations of the fifth Bank loan to BAPINDO in early 1983 the Bank agreed to raise the debt/equity ratio limit from 3:1 (applicable under the previous loans) to 6:1. At end 1983, BAPINDO's (unconsolidated) debt/equity ratio stood at about 5.3:1. In 1982, BAPINDO's liquidity position deteriorated due to its policy of making initial loan disbursements out of its own resources in anticipation of funding by its creditors. At negotiations of the fifth Bank loan, BAPINDO undertook to maintain a minimum current ratio of 1.15. Following the financial reforms in 1983, BAPINDO's liquidity position deteriorated below this required minimum. Overall, for the period under review BAPINDO maintained a sound financial situation. 6.09 Profitability. BAPINDO's level of revenue and profits from 1979 to 1983 was consistently higher than forecasted at appraisal of Ln. 1703-IND. Total revenue increased from Rp 17.4 billion in 1978 to Rp 92.1 billion in 1983 representing a real rate of growth of about 23% p.a. Profit after tax grew at a faster pace of almost 50% p.a. in real terms, increasing from Rp 1.1 billion in 1978 to Rp 6.5 billion in 1982. This increase in profitability was generated by the increase in earning assets, lower relative administrative costs (which fell from 3.7% in 1978 to about 2.5% in 1982 of average total assets), and by a fall in the average cost of total debt from 10.1% to 7.3% over the same period. Net profitability however fell to Rp 5.9 billion in 1983 mainly due to an Rp 5.9 billion loss on an uncovered foreign exchange position. BAPINDO's profitability has been, and remains, poor in real terms. Net profit as a percentage of average net worth, although up from 1.8% p.a. in 1978 to 7.3% p.a. in 1982 (and 5.8% in 1983) is still negative in real terms. The main reasons for this are: (i) until recently BAPINDO's onlending rates were strictly controlled at levels much below the market rate; (ii) BAPINDO has maintained a policy of high provisions against possible portfolio losses; and (iii) the low yield on its equity investment portfolio. However, the recent deregulation of interest rates could lead to an improvement in BAPINDO's profitability particularly if it is also able to increase its efficiency and if its portfolio quality improves. Quality of BAPINDO's Portfolio 6.10 As of December 31, 1983, BAPINDO's outstanding term loan portfolio amounted to Rp 793 billion. Of this, Rp 594.3 billion were investment loans, of which Rp 501.2 billion were industrial loans and Rp 93.1 billion were maritime loans. The quality of BAPINDO's portfolio (ref. Annex 13), after showing some improvement in 1979-81 started deteriorating in 1982, when arrears over three months more than doubled from Rp 5 billion in 1981 to Rp 11-3 billion by end 1982 after rescheduling of Rp 26.8 billion. In 1982, arrears as a percentage of the long term loan portfolio increased to 2.1% from 1.5% in 1981. Loans affected by arrears (of over three months) increased to 9.7% (1981 = 5.3%; 1980 = 4.4%). The collection ratio was about 74% - about the same as in 1981. In 1983, the deterioration continued. Despite rescheduling of Rp 45.7 billion in loans (representing 6% of the outstanding loan portfolio) by December 1983 the percentage of loans affected by arrears had increased to 13.9% and total arrears as a percentage of total loans outstanding reached 3.1%. The collection rate fell to 68.8%. (Annex 13 gives details of the arrears situation.) In early 1984, the situation worsened - 58 - further. The bulk of the arrears is between three months to a year indicating the rapidity of the deterioration, and also Lhe fast pace of recent portfolio growth. Although BAPINDO has five large problem projects (two paper projects, a tyre manufacturing project, a shipping company and an engineering/ construction group - all but one of which are state companies) the number of problem projects (about 25% of total) shows rather widespread deterioration. The maritime portfolio appears to be of a poorer quality than the industrial portfolio. Other parts of the portfolio are equally affected. For example, 24.3% of the total portfolio of working capital loans is affected by arrears over three months. The total amount of arrears represents 7.6% of the outstanding working capital loans portfolio. Over 30% of the total special credit portfolio (KIK/KMKP, Kelayakan/Keppres) is affected by arrears over 3 months. Arrears represent about 20% of that portfolio. Several factors account for this widespread deterioration: the depth and duration of the economic recession; the financial policy changes which affected the availabil- ity and cost of credit; and the prohibition on the export of logs which affec- ted several of BAPINDO's maritime loans. However, the quality of BAPINDO's appraisals with optimistic cash flow forecasts, weak assessment of the risks associated with a project and of the capability of the entrepreneur, together with the emphasis on appraisal and promotion in recent years, to the detriment of systematic supervision also probably contributed to the problem. BAPINDO, with the assistance of consultants and the Bank now needs to quickly evolve a short-term strategy to halt this portfolio deterioration and a longer-term strategy to improve the fundamental quality and viability of its portfolio. An active supervision program focussed on the main problem projects needs to be instituted as soon as possible and a Bank supervision mission which took place in May/June 1984 discussed with BAPINDO at length the further actions needed to improve the situation. Resource Mobilization 6.11 Until June 1983, BAPINDO had preferential access to sufficient rediscounting facilities and other official funding sources so that resource mobilization never posed an issue to BAPINDO. In these circumstances, BAPINDO followed the policy of applying a spread which was sufficient to provide it with nominal, but not with real profitability. Under the new policies BAPINDO is now able to set its own interest rates and is required to raise part of its resources (net of World Bank funds) from the market. At present this proportion is about 15% of total. This has required BAI-iNDO to formulate its own interest rate policy and to develop an active appropriAte resource mobilization strategy (for the first time). BAPINDO has since looked at the possibility of raising term resources through bond issues. The difference between current interest rates and BAPINDO's lending rates, however, seems to limit the viability of this as a major funding source and BAPINDO is now reviewing other possibilities such as gaining preferential access to pension fund deposits etc. While this could be a viable proposition, BAPINDO should also look into other possibilities e.g. adopting an adjustable interest rate policy, the issue of certificate of deposits (maybe of a bearer nature) and the issue of bonds or debentures for sale to pension funds (since they would be exempt from paying tax on interest earned on BAPINDO debt instruments). The financial sector mission which took place in May/June will be making recommendations in this regard. - 59 - VII. SUMMARY AND CONCLUSIONS 7.01 Despite the problems facing BAPINDO, the progress it has made in terms of institution-building and contribution to the Indonesian economy has been very significant and meets the objectives set at appraisal of Lns. 1054, 1437 and 1703-IND, and amply justifies past and continued Bank Group and Government support to the institution. The early to mid-1970s saw BAPINDO establish itself as a creditworthy institution with sound financial and operating procedures and with a considerable degree of operational autonomy; BAPINDO became the most important development finance institution in Indonesia, although it was still somewhat small and narrowly focused. After 1979, however, BAPINDO grew very rapidly in size and diversity of operation. In a period of strong economic growth, it provided about a third of all term loans to the industrial sector and helped finance significant domestic resource-based projects; it also participated actively in the special credit programs (KIK/KMKP), which were partly funded with Bank assistance, designed to promote labor intensive industries. BAPINDO also made efforts to promote industrial development in the relatively lesser developed regions of the country. 7.02 BAPINDO's present difficulties therefore (viz. deterioration in portfolio quality, need for improved supervision and better organizational structures etc.) stem, not from lack of institutional progress, but rather from the problems associated with managing rapid change in the size and diver- sity of operations - and consequently in the complexity of the organization. In retrospect, it appears that the Bank could tave provided greater advice, through more intensive supervision, to BAPINDO. Following the appraisal of Ln. 1703-IND in August 1978, the intensity and duration of supervision was reduced. For example, whereas BAPINDO supervision missions spent 15 staff- weeks in the field in 1975/1977, in 1980 and 1981 there were only 6 staff- weeks (including travel), during which the missions also carried out other assignments. Also during this period, Bank reviews of subprojects were not as critical as they might otherwise have been. More timely advice to BAPINDO's thinly stretched management in a period of rapid change might have enabled potential problem areas to be identified at an earlier stage. 7.03 Although BAPINDO's basic financial condition remains sound, the quality of its loan portfolio has shown increasing signs of deterioration. This has been partly due to the quality of appraisals, which were often too optimistic, relatively weak supervision and also to the depth and duration of the economic recession in Indonesia. BAPINDO urgently needs to formulate and implement action to prevent further erosion in portfolio quality. BAPINDO should also proceed with the longer term organizational and procedural improvements now being developed with the assistance of outside consultants under Ln. 2277-IND (technical assistance component) financing. These changes are necessary to enable BAPINDO to become a more efficient and effective development finance institution, that is able to thrive in a more competitive and less regulated environment. 7.04 The Bank loans under review did not have any direct policy objectives. Given the importance of institutional issues and the need to - 60 - improve procedures it is understandable that no effort was made to establish explicit policy linkage. The fifth loan to BAPINDO also sought to address these institutional issues. Continued Bank Group support to BAPINDO, however, helped to enhance ongoing discussions on macro policy issues, and although perhaps at a slower pace than desired by the Bank, significant policy initia- tives in the areas of export promotion and financial policy improvements have taken place in the past two years. Moreover, the Indonesian authorities have become increasingly receptive to the Bank's macro policy views and have recently actively solicited Bank assistance to help formulate further finan- cial sector policy reform. 7.05 As the main term lending financial intermediary for the industrial sector, BAPINDO has played an effective and useful role in the industrial development of Indonesia. However, in the regulated financial environment prevailing up to mid-1983 and given the shallow and poorly developed financial markets, BAPINDO was not able to contribute significantly to promoting the development of capital markets in Indonesia. The June 1983 financial sector deregulation measures, and particularly the drastic reduction in preferential rediscounting possibilities and the freeing of most interest rates, have radically changed the environment in which BAPINDO operates. BAPINDO now needs to adopt an active domestic resource mobilization strategy and to examine if it can, or should remain a relatively specialized institution focusing on term lending or whether (and to what extent) it should broaden the scope of its future activities. BAPINDO is now carrying on an in-house review of these aspects and it intends to review its findings with the Government and the Bank in the near future. (These issues were also to be studied by the Bank financial sector mission (May/June 1984) as part oi the review of the role of development finance institutions in Indonesia and their capacity to mobilize resources and relend them with an adequate margin.) Future Bank support to enable BAPINDO to adopt and adjust to new roles is likely to remain critical in ensuring the continued effectiveness of the institution. -61- 1 INDONESIA SANK PENBANGURAN INDONESIA (LOAN 1703-IND) PROJICT COMPLETION REPORT IAPIDO's Leading Interest Rates and other Charges as of March 31, 1984 (Annual rates In X) INTEREST 03 LOANS ate Domestic Currency Loans Investment loans - Industrial 18 - Maritime 18 Working capital loans - Industrial 18 - 21 - Maritim 18 - 21 - Export Credit 9 18 a Small Industry loans through RDB's - Small investment credit (SIR) + Non IK (above XIX) 12 * Permanent working capital credit (KP) * Non IMP (above blKP) 12 - Zepres 14A - Investment 12 - Working capital (according to category/type of loan) 21 - Small industry loans/SAPINDO's Financing - Small investment credit (RIK) 12 - Permanent working capital credit (IMP) 11 Foreign currincy loans Interest spread Rate IDA Credit No.310- IND 3.23 10.5 - 13.5 IDA Credit No.318-IND 3.252; 42 9.23 (maritime loans) IBD Loan No.1054-IND 2.52; 42 10.5 - 13.5 IBID Loan No.1437-ND 2.32; 3.82; 42 10.5 - 13.5 IBD Loan No.1703-MbD 2.62; 42 13.5 - 18.0 IBD Loan No.2277-IMD 4.02; 18.0 Comaitment Charges (on long & medium term loans) On investaent loans 0.5 On working capital loans 1.0 Penalty charges On investment 1eans 9.0 On working capital loans 21.0 Before export realisation - 18%. b Ask for rats of other banks. 寡吃 甘才 ’一砌一‘·。 jeumb vig ýaoumb rq 4633,6ab løj 06001 9*0 ilte Wo c*96 $*0 PC 9*0 m 9*et CLOC ZICG **i 9*01 Wg VGi * 0*& $*96 CL% toff $19 0*001 99,1 0*tv Vts 995 69% "60 Vw 90*1 9*it 9*09 Tro øltt r#t t*06 CO#o m 1666 **n t*11ý g*06 LC*l 0*901 g*0. vq 0*91 **t g*** CL*t £la 9*0 m erlot rt f#*u Trt tot# 6*0 0*t oot rU SLIT VU f**? zqumb Fag rig 4*1 oltø 9,9 9*gt Nu 9*st q» 9*cc Oro Cog »Umb pat rtt W? rVI g*£ 3~ M 9669 W£ SITC t*ft C*9 89*0 $*19 **t 4633=b q39 lirel 1,91 £*t 00*901 *0 a~ Pac fi*# 0*t Z6,66 wo sw~ m Vc Vi W66 wc an~ i% 96*06 tilo 00,001 or*o a~=b vat "006 95*0 OV" a** jrumb IK*ø OL*9 99*u Wi Wg£ £9#tl W56 09*og wt wU 96*It m W" WI: w*u WL m 99*tt 09419 09*9 99,59 W$ w*" Orc f#r** "I wet W's pq 9569 9£10 W#i OD*t ZVO wti oelt OVC Fc mamb rq 34kumb 4 %t *An 3M1-11 x 9414 3unow x 941% 3010-1 g &an -91~ m. Wvf~ rumleg IM-w - Gia-tOU UWI CM-401 ovn uv" ala-COLI FM Løl IMI uumr; juj va"M~ øg Iman F0m13q J5 4, os rimrøll w 151 Mol $w) M~ M~ C9 -64- AS 4 18DONESZA ANK PEMGWAN INDONESIA (f0ANS 1054, 1437 AND 1703-IND) PROJECT COMPLETION REPORT Suizarised Data on.Subgro4ects Loan 1054-1SD Loan 1437-IND Loan 1703-IND/b Eat. Actual Est. Actual Est. Actual Total auber of subprojects - 24 - 17 - 58 Of which: A subprojects (above free limit) * 19 12 - 16 I subprojects (below free limit) - 5 * 5 - 40 Awarage subloan size (US$ million) - 2.1 * 2.35 * 0.86 Total project cost (Rp million) 98,564 108,680 46,852 489653 121,054 4.. Total BAPINDO financing (Rp million) - 43,424 - 32,527 - 79,126 2 financed by BAPInDO out of local currency resources - 55 42 - 62 Z financed by BAPUDO out of Bank loan - 45 - 58 - 38 BaINDO inancing as a of total cost - 40 67 - 65 Total incremental employment 3,490 3,446 2,127 2,758 5,154 0.e. Investment cost per job (Ip million) /a 28.2 31.5 22.0 17.6 23.5 a.e. Total s les (Rp million) &a 94,347 68,593 60,698 51,986 139.354 U.. .L Where data were not available, appraisal estimates were used. .L Actual data on total project cost and sales not available since a substantial uamber of projects are still undet construction. DAUK PUNBANCOUNA NDOunUrt (10AN 1054-ND> Oi.raeterlstice. of Subproject Fineed IIador Inoa 1056-t80 ro coAPDO 2taaneaga Project copletta dat Prect tottaatd actu1 1880 Ug resource. Total 1 of Varlaaten ne. . rrewer .atureo subprject -- (p*000) ($'000> - ap'000> --- maeal c~t sattatd Actemå ta tasbc A-1 Pl herkab Stataap Be.ndra fg Shipptag- - - - - - - - - å-2 T Stanr T.ran8 het and 8nt= 1,615.437 - ,573.44 386,587.97 1,041,138 - Jan 1976 - - Å-3 pm Igla• lottle 4,027,022 - .993.62 91,436,020.16 2,265,367 - #ar 1976 - - 4-4 r 1n1sari Jara ä utrt rap 2,508,322 3,466,000 1,660.35 1,434,211.54 2,125.000 61.28 he 1974 Do 1976 24 &-5 Perm Korta cau. Paper 3,870,181 3,870,181 3,687.73 925,907.24 2,460,000 65.08 Ag 1976 Ont 8976 2 A-6 PT Anktka L~4e. 1. k4ppag 2,935,700 2,935,700 5.667.25 - 2,350,000 80.00 Aug 1975 Oct 3975 2 4-7 era zertag haukt Pachat Paper • 2,580,949 2,580,949 1,592.50 1,952,036.00 1,614,515 62.55 rar 1976 Jul 1976 3 A-8 T Sen Grelt keme 47,852,820 63,548,603 6,000.00 5,227,789.00 7,723,789 12.55 mar 1978 J~n 1978 2 A-9 Pr Aneka ca# Indutrt 6as 6,612,000 6,713,583 2,796.97 3,101.461.47 4,265,000 63.36 A~g 1976 Dee 1978 4 A-l0 P Kram leces laper 9,517,248 7,843,486 5,993.74 4,291,259.94 6,784,656 71.29 Jan 1977 hoi 1977 5 A-1 P? Andika Line* I 1hipptag 936,000 936,000 1,768.50 - 732,000 78.20 Jan 1976 As 1976 2 A-ta PT ac1ka Unes 111 hipptg 1,144,000 1,144,000 2,142.51 - 887,000 77.53 Occ 1976 Det 1976 2 A-13 Pt Adika L~ns I9 shipptg 1,809,600 1,809,600 3,38.64 - 1,400,000 77.36 Jan 1977 Ir 1977 2 4-14 P lada War* . caatte ~0a 1,903,085 1,858,450 1,735.53 811,103.64 1,533,085 '82.49 Hev 1982 'Feb 1983 3 A-t5 BT Adaral Ltmns 1 saipplag 988,000 988,000 1,909.18 - 70.000 77.53 reb 1977 Apr 1977 2 A-M4 el Adelral Ues II .aIPptg 1,237,600 1,237,600 2,391.50 - 990,000 80.00 reb 1977 Apr 1977 - 2 a-87 Pt Staba %gara Une. shippl9g 679,000 705,500 1,306.28 - 543,000 77.36 reb 1977 Feb 1977 - A-8 PT rban V Palm a11 3,555,231 3,061,145 892.74 2,575.368.28 .2,946,750 - Aug 1975 Da 1978 .4 A-19 fl hlaeka Li.s ShIppuag 957,000 957,000 1,733.33 - 717,000 , 74.92 Nov 1977 Jan 1978 2 D-1 P h~pItå Elcky phuery 516,905 517,453 310.78 103,947.40 232,920 45.01 Aug 1975 Apr 1976 21 8-3 ?T Colde Eagla toym 666,138 670,023 135.50 378,769.28 435,000 64.92 Apr 1976 Jaa 1976 2 8-5 Ia. Cmuaraug land tranp~rate 73,447 71,250 76.13 22,362.30 53,655 75.58 Jua 1974 Ja 3974 - 8-6 C Cabaya ala Samm11 1,728,200 - 346.72 845,111.23 989,000 - - - 8-7 pr Ihatta Styptag 81,780 82,780 144.65 - 60,000 72.48 Feb 1978 Nar 1978 1 *j5 Dat.a.get..&tab.. Ik Haambed by tke specte m ekor mepor.ietm hydtaemt. f- TmannRsTA 1ANK ?IUnAnGUAM inma'slA (1011 1437-18>} fl0JSCT cOMPLET10 88nRT . mracetettea åt gébptoieet Vinace Lader Iaan 1437-USS PPINM0 ftlm roSagt eolettoi date rejet imaed actual 180 ip gasoere.s Tota Z of Vrlatten s, leiruer atur.et .2 ubprojeet. -- (Ip'000) --- ($*000) -- (Up'000) -- actual, tast Eatated actual ta mostiba A-I fl PartatuaanV P ala ett 3,5$5,231 3,061,145 2,268.95 2,002,688.55 2,946,750 96.26 Aug 8978 Sae 1978 4 A-2 fT Iaka ae Iadneset as6,612,000 6,731,583 5,104.00 1,975,366.00 . 4,265,000 *63.36 Aug 1978 feb 1979 • 5 A-3 98 Seda itkm Castte soda 2,2S5,000 2,624,964 8,578.39 93,390.93 1,580,000 10.19 Jan 1978 i, 8978 2 6-4 fl Sarodta Iaya hSpptag 1,992,000 1,992,000 3,617.39 - 1,494,000 75.00 Oil 1977 itar 1978 .5 A-5 fl Mew lm ates ' Teattle veavtag 2,194,905 Z,2S1,000 1,623.06 270,985.64 944,178 43.03 Nov 1979 Sap 1979 -2 6-6 fT Nonasag Jaya Ut,. rop. 4,908,000 - 1,106.45 2,783,136.42 3,35,000 - Nev 1978 - - A-7 fT aaka LI... Uhipptag 1,768,000 2,624,000 3,007.31 431,66.21 ~1,680,000 64.02 Uew 1978 Ja. 8979 2 A-4 P Adaire.1 1 Mm..* mipptag 2,437,500 2,437,500 3,276.80 - 2,048,000 84.98 8ar 81979 Hiny 1979 2 6-9 fl Arpmat ?ratea OcaLasam Us. ,PPtag+ 2,588,000 2,598,000 2,529.50 *- '1,586,000 61.28 Apr 1979 Jaa 1979 2 g 6-10 IT tatihab fire. 8,106,000 - 6,447.21 2,676,415.68 5,62$,000 - Rse 1980 - - 6-18 PI s?edte s Sbtpptag a 3.386,000 3,648,000 . 4,064.00 - 2,540,000 69.63 Da. 1979 Feb 1980 3 A-12 It aauat Noattle amavta 2,629,173 2,593,200 1,910.94 876,918.24 1,670,000 64.40 tSap 1981 Jern 1981 1 8-I 1T Admyana UhIpptag 557,000 557,000 944.54 - 390,000 70.00 Sap 1977 • Jas 1978 4 8-3 fl Umuang seose lHast pmaenm . 1,140,300 1,213,755 740,00 382,160.00 690,000 56.85 Jan 1978 Sap 1978 4 8-4 tir. Elas . - - •• - - - - - 8-5 1T UbratraUmq Ea amera Priattag 997,000 - 356.00 470,076.51 693,000 -- -l - 8-6 fl Astag SeOshh7a me iSjised 1,728,150 3,323,373 *469.79 853,567.36 1,049,000 45,15 Ntay 1980 Sep 1980 4 lør~ a«m c«% gåt=ted &C~ øt1 IM08881A 8ANK w8uämnu tgutgA (L.oa# u703-88) OgaetarIettee of Ssiprtoject ftaeaned Unader 8... 1703-11D Proet coes DAP7ND0 ftn*nctag Pro ect complettog date Prj26siatd Ata 88 Up reaources Total X of Variation no. morramer måatr of ubprojot - - (pooo) - (c000 - - (p'00 -- atual cot Esttatad Aetnal to néGtbe A-2 pr Prroedte ay* *shipptag - - - - - - &-3 PT leärte and ethere teel pipa 15,944,230 - 5,843.97 3,792,381.70 7,4s7,000 - HMr 1983 0.C. - A-4 "l ~laapla hotam* Abragtve papet 3,326,320 3,321,320 2,431.15 598,373.00 2,130,000 64.13 Kov 1981 mat 1982 4 A-s PT Karana Linea .hIpptog 11,084,000 11.014,000 3,000.00 5,314,000.00 7.204,000 63.77 Aug 1980 Aug 1980 - A-6 PT matral Unam Shipptag 3,109,000 3.109,000 3.708.00 - 2,021,000 65.00 Jan 8980 Aug 1980 2 A-7 T Arpemt Prata» Ocena Lmia oupptng 2,015,000 2,015,000 2,080.00 - 1,310,000 65.01 Jul 1980 Sep 1980 2 A-8 f7 ahana-.taa Linea Shipping 5,405,000 3,619,000 3,064.23 1,280,005.00 3.203,000 57.00 wIay 1981 Jtn 1981 2 A-9 r? Wahaa.Samdra Ippt98 1,834,000 1,771,600 2,645.26 134,178.31 1,804.000 101.83 Jul 1981 Jul 1981 - A-10 Pen Korta G~O. Paper 9,909,000 - 3,873.70 5,527,647.44 8.000.000 - JuD 1982 .C. - Å-tt PT Pacifi ited Indutry P~yunod 10,741,000 • 3,012.84 4,497,615.70 6,387,000 - JUn 1981 D.C. A-et PT Sattaan R Saa Sport abm 1,66,900 - 1,097.00 397,900.00 1.100,000 - har 1993 .C. - A-13 Pr ozygef plant Gag 1,880,000 - 1,200.00 400,000.00 1,480.000 - Dec 8982 c.C. - 1-14 PI lamedo Tämmr Jayo Loather profetfta 336,766 336,766 72.65 159,774.0 207.000 61.83 Sep V981 - A-l$ PT faltanatan Ratac Rattan 3.988,000 - 906.98 3,901,837.00 2,945,000 - Ju 1983 1.C. - 8-t Project fromette- - 189.00 - - - - - 8-2 pT Mhatta It9ppi4g 742,000 742,000 764.80 236,000.00 714.000 96.23 Feb 1980 mar 8980 1 8-3 PT Simher Jaya armo narnets *1.424,782 1,385,865.8 776.48 337,000.00 855,000 61.69 tr 1981 Sep 1981 6 8-4 Pl Stotabaroftt Uena. Hotel 4,485,000 - 1,200.00 2,144,000.00 2,900,000 - Jul 1981 .C. 8-1 PT Zta sefngkanytt Dockyard 5,096,000 - 435.23 3,022,057.79 3,297,000 - Sep 1982 X.C. - 8-6 PT PIErdata toot shipptag 400,000 400,000 480.19 739,450.00 100.000 - Jul 1980 Iay 1981 31 8-7 CP Ceerlan Land tranportatiom 225,000 225,000 205.25 39,720.00 160,000 74.67 Oct 1980 Mov 1980 1 8-6 dastralian crbon - • 660.00 - - - - - 8-9 CM T&rn. Land tranaportagta 91,000 93,000 7S.01 21.688.00 70.000 75.29 No 1990 Jan 8es1 2 8-t0 PI MSOtt~MRng ~da Ptitterg PrItera 320,000 269,443 82.72 98.300.00 350,000 55.67 rob I982 Feb 1982 - 8-tt YT Cobtpharancentteal 712,334 1,177,763 483.10 197,101.60 500,000 42.45 mar 1988 Jern 1981 3 8-82 PT A8nel. vod Java samali 250,000 376,500 849.97 89,900.00 185.000 49.14 ?ar 1981 mar 1981 - 8-13 PT stbaya flectronte Electronte eqgpot 2,00,000 2,754,500 452.86 2,514,596.00 2,800,000 101.65 tear 1981 ter 1981 - 8-14 PT Sallad. 14d8, Ikoort 3., 9,.2 42.14 212,824.90 294.WmO 83.64 sep, 1<80 sep 19St 12 8-as t Jaca Htta* Shipping 400,000 400,000 458.60 - 288,000 72.00 Jan 1988 1hy 1981 4 8-16 el Adoyan shipping 789,000 789,000 814.29 - 513,000 65.02 Aug 1981 Apr 1982 8 8-t7 ce tita. Uströad attea 357,738 - 208.00 132,176.00 263,000 - Mar 1981 - &-IS fT Sareto rinmtt guua 9lywood 584,100 630,924 56.99 297,151.ss 333.200 51.23 Kav 1982 Jun 1982 2 8-19 P Jtadt mut. oartata ratt 1,6/8,481 1,3f0,030 240.74 578,332.00 730,385 53.70 Jul a988 Jul 8988 - 8-20 ft It oya #kt floor ttle a06,822 1,497,800 211.02 366,516.00 500,000 33.38 Var 1982 Jan 1982 3 8-28 PT Porr* Ina Allo Perro Dill~.. 11,659,691 - 1,204.96 6,818.592.00 7,600,000 - Feb 1983 U.C. - 8-22 PT Kanla Sart Todab Uleettanie qumlnat 5,274,000 5,274,000 477.54 2,949,151.50 3,250.000 68.62 Sep 1988 tar 1982 6 8-23 PT Candarta pood Industry rood 1,163,285 1,020,261 288.34 412,755.00 590.000 57.83 Jul 1962 Aug 1962 1 8-25 PT ekaraga botal 243,597 258,345 8.99 181,409.00 177,309 68.67 Har 1982 Jul 1982 2 8-26 t Itjaya Putra motat 709,000 - 321.00 300,288.00 506.400 - mar 1982 U.C. - 8-27 PT Det&Mt Cormanto 407,209 406,846 94.67 156,047.00 216,160 53.13 Jan 1962 Apr 1982 3 8-2 PT Ptra, Iatter Sara Shipping 1,563,000 1,563,000 838.73 994,600.00 1,523.000 97.44 Jul 1982 Uov 1982 4 8-29 M P,rur Ardit note 440.6S8 399,651 186.10 864,326.00 282,500 70.69 Jan 1982 >ar 1982 2 8-30 ft Sdaya Pratam Ploor titan 441,500 - '221.86 161,020.00 301,900 - Har 1983 y.e. - 8-31 PT ila sejohtera Land transportation 1,28.405 - 617.69 432,600.00 823,600 - Kay 1983 U.C. - 9 8-32 PT Puter* Kalbar %aju Shippiag 323.100 - 464.45 149,000.00 443,000 - Jul I982 tr 1983 a 8-13 PT Daeis. .et 338,000 - 281.60 22,070.00 156,240 - HIar 1982 U.C. 8-34 PT majhål catractor 1,084,000 - 692.17 282,280.00 727,000 - NKw 1981 Har 1982 12 < < 8-35 PT Imogari Germetsa 829,047 829,047 246.27 383,394.13 545,000 65.74 Jun 1982 Sep 1982 3 8-36 ft Atatya waju Sbtre Iabel 660,200 660,200 865.66 362,320.00 470,000 71.19 Sep 1982 Dat 8982 3 w \JI 8-37 PT Integreen Eteate ocolate p aesta 837,958 - 183.71 284,262.00 400,000 - mar 1983 c.c. - 8-38 PT P erTalakaana Kochinery 983.410 - 406.57 235,730.00 500,000 - - 8-40 f Tsamn rådab hemica tadetry 306,970 - 155.99 124,605.00 226,000 - Jun 1983 .C. - U.C. - onder construction. -68 - INDONESIA BANK PEMBANGUNAN INDONESIA (LOAN 1054-IND) PROJECT COMPLETION REPORT Sectoral Distribution of Subprolects % of Amount - Number of total disbursed 2 of total Sectoral distribution subprojects number (US$ m) disbursement Industry_ Food and beverages 2 8.33 1.20 2.40 Textile and leather - e - Wood and wood products 1 4.17 0.35 0.70 Paper and paper products, printing and publishing 3 12.50 11.27 22.55 Chemicals and chemical products 2 8.33 4.53 9.06 Rubber products - - - - Plastic products - - - - Nonmetallic mineral products 2 8.33 8.00 15.98 Metal products 2 8.33 3.23 6.46 Electrical machinery and appliances - - Transport equipment 1 4.17 0.14 0.28 Other industries - - - - Subtotal '13. 54.16 28.72 57q43 Tranportation Land transportation 1 4.17 0.08 0.16 Maritime 10 41.67 21.20 42.41 Subtotal 11 45.84 21.28 42,57 Construction - e - Hotels Others - - - - Total 24 100.20 50.00 100.00 ANU 6 * -69 - INDONESIA BANK PEMANGUNAN INDONESIA (LOAN 1437-IND) PROJECT COMPLETION REPORT Sectoral Distribution of Subprojects . of Amount Nuber of total disbursed 2 of total Sectoral distribution subprojects number (US$ amn) diabursement Endustry * Vod and beverages 2 11.77 2.81 7.02 Textile and leather 2 11.77 3.35 8.38 Wood and wood products 1 5.88 0.35 0.88 Paper and paper products, printing and-publishing 1 5.88 0.35 0.88 Chemicals and chemical products 2 11.77 7.09 17.72 Rubber products 1 5.88 7.31 18.28 Plastic products - a m Nonmetallic mineral products - - am Ihtal products 1 5.88 1.15 2.87 Electrical machinery and appliances - * Transport equipment - * Other industries - . * Subtotal 10 58,183 22.41 5.03. Transportation Land transportation - - * - maritime 6 35.29 17.48 43.70 Subtotal 6 35.29' 17.48 43.72 Construction - - - - Hotels - - - Others 1 5.88 0.11 0.27 Total 17 .1-. . 1oo.oo -70 - . AMK PEMBANGUNAN INDONESIA (LOAN 1703-IND) PROJECT COMPLETION REPORT Sectoral Distribution of Subprojects Z of Amount Rmber of* total disbursed Z of total Sectoral distribution subprojects amber (US$ ala) disbursement IndustIy -Food and beverages 4 * 7.27 0.50 1.23 Textile and leather 5 9.09 1.32 3.25 Wood and wood products 4 7.27 3.22 7.94 Paper and paper products, printing and. publishing 1 1.82 3.87 9.54 Chemicals and chemical products 3 5.45 0.57 1.41 Rubber products 2 3.64 0.21 0.52 Plastic products - - - - Nonmetallic mineral products 2 3.64 0.43 1.06 Metal products 7 12.73 9.30 22.93 Electrical machinery and appliances 3 5.45 - Transport equipment - - Other industries - - - Subtotal 31 56.36 19.42 47.88 Trans22rtation Land transportation 3 5.45 0.80 1.97 Maritime 13 23.64 18.02 44.43 Subtotal 16 29.09 18.82 46.40 Construction 1 1.82 0.69 1.70 Hotels 6 10.91 1.51 3.72 Others . 1 1.82 0.12 0.30 Total 55j 100.00 40.56/a 100.00 /a US$9.44 million still to be disbursed. Data for 3 subprojects (23 - 1A) approved in May/June 1985 not included. 'ANE 6 . -71 - INDONESIA DUK PELBANGUNAN INDONESIA (LWANS 1054, 1437 AN» 1703-IND) *OJECT 0OPLETION REPORT .egraphical Distribution of Sbpro Jeets Z of Amount Nuber of total disbursed Z of total subroiects number (Us$ min) disburseeat Loan 1054-ID Java and Balt 20 83.33 44.99 89.99 -Suatera ..........2 - 8.33 0.96 1.92 . laaatan 4.17 0.35 . 0.70 Sulavest and Maluku 1 4.17 3.69 7.39 Total 24 100.00 49.99 100.00 -Loal 1437-IN» Java and 1ai 15 88.24 37.38 93.45 Sumatera 1 5.88 2.27 5.68 Kalimantan 1 5.88 0.35 0.87 Sulawesi and Naluku - - - - .&._o.talb .1.}0,0. 40.,00 100:.0 Lan1703-In Java and Bali 41 71.00 30.81 La. 75.96 Sater's . 7 12.00 --1.50 3.70 Kalimantan 6 10.00 4.19 10.33 Suøaesl and Kaluku 4 7.00 4.06 10.01 1,.. 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PvBT ans0LETian ~S$a6 Basset maparte m ernte. tauenuel Iusest fusegt. Uomttttee eml.s 0ate Pe . erest knor1am~4gu sladåte a Re test #'ettr Jted taCnt u~ " ~ r,f!' fi *m ~astb...a - - - - - - 883 63,372 86,127 5,72,000 - 89.40 - - *-l W 08.k Ge. uedte - - - - • • 40 63 865,300 6,10 3.13,.000 - 27.9 - 32.3 - 03 IS lede morm - - - - - - 22 90 99,402 *4,326 2,310,000 - 86.0 • 33.$ - A-4 fP. eoedtes.lays I - - - - - - 844 - 13,033 • 316,600 • 83.9 - 8s.5 - fr PT -e tilmtam - - • - - - 303 451 1,708 4,96? 620,080 - 86.8 - - - 06 I? lae rt .8*p. - - - - - - 383 - 82,081 - 01,1.98 • - - - - f-7 "908i*. bles • • • • - - 60 • 29,166 - 433,300 - 12.64 - 8s.90 - å-5 Pt AduBral86.m - - - - - 29 - 24,012 - 18.80 - 16.70 - "-9 Pt a Pr.te - - • - - - $3 - 48,830 - 618,400 - 82.93 - 16.36 • A-t0 Pt letteu6 - - - - • t 803 856 M8,699 6,391 6,126,0e .• 28.9 - 13.7 - A-§8 PtVaedfs.8yeIt - - - - - - 52 - 61,811 - 826,300 - .4.30 - 1t.80 - A-82 PT leugasAteM - - - - - - 402 314 6,940 ,08$ 20,000 233,08 1.05 132.1 - - 8-8 Pt Aae - - - - • 25 - 22,200 - 89,840 - 12.4 - 13.8 - 3-3 Pr *mases t. s - - - - - - tis - 9,986 - 82,49 - 17.6 - *. - u4 ter.83we • - - - - - - - -- - -- -- 9-3 PT bsetr Repa Okser. - - - - - - 00 U 82,462 - 366,000 - 20.9 - - 04 Pt 0ste.g Cee le# - - • • - - 87? 313 80,803 6,"39 132,000 30.4 - 11.8 - øI> Þ Þ< ::’…‘………鲜；‘卿；，……叫 ………扮……………”&& 它。T明玉 仑X泣犯W一乙乙－ INDONESIA LAW PEMBANGUMAN INDONESIA gLOAN 1054-IND) PROJECT COMPLETION REPORT Status of A Subloans as of December St. 1983 Outstanding Reached Pros Subproject as of 12/31/83 Arrears uled Nature of'problem pacts La- (Rp bla) (Rp bla) A-1 PT Berkab Rintang /b 221 31 yes Market/saaagament C A-2 PT Sinar Terang 663 663 wanagement/technical C A-3 PH Igtas 2v7fi0 2 A-4 PT Wonosarl Jaya, 3*350 yes Techalcal a A-3 Penm Kertas Cows 110710 yes Inefficient productlon. C A- 6 PT Andhika Lines 53,921 yes A OD A- 7 Perum Kertes Basutt Rachmat 6fil 197 3 1 A-9 PT Seman Crealk 10610 A A-9 Anaka Cas Industries 29864 A A-10 Kertes Leces 90619 Yes Inefficlency/mana.$*meat C A-11 PT Andh1ka Lines 11 A-12 PT Andhika Lines III as A-6 Yes A A-13 PT Andh1ka Lines IV A-14 PM goda Waru 29995 yes 3 A-15 PT Admiral Lines 1 90100 Yes 3 A-16 PT Admiral Lines It A-17 PT Rimba Segara Lines 773 A A-18 PT Parkebunan V 20060 A A-19 PT RhIneks Lines 29769 86 Too Management - A - good; 3 - moderate; C - poor, b Project mw In liquIdatlono INDONESIA BANK PEMBANMUNAN INDONESIA (LOAN 1437-IND) PROJECT COMPLETION REPORT Statue of A Subloans as of Deeber 31, 1983 Outatanding lesched- , Pros- subproject as of 12/31/83 Artears uled Nature of probleme pecte cp bin) (Rp bin) A-1 PT perkebuan V 2,060 - - - A A-2 PT Amka Cas Industry 2.864 - Yes - A A-3 Pu Soda varu 2,993 - - - A-4 PT Porodisa Raya 3,822 - les xanagement C A-3 PT N Ninatex 2,359 - - - A A-6 PT Vonosart Jaya 3,350 - yes - A-7 PT Ibhieka Lines 2,769 86 tes - A-8 PT dotra Lines 9,100 - - Hanagement A-9 PT Arpe t Prataa 1,727 - - - A A-10 PT Inttrub 16,659 - Tes Managemnt/iuefficiency C A-11 PT Porodisa Raya 3,821 - Tes management C A-12 PT esgawantex 1,510 - - A l A good; a n moderates C - poor. c> INDONESIA BANK PEKBANGUNAN INDONESIA (LOAN 1703-IND) PROJACT COMPLETION RVEMpT Status of A Subloans as of December 31. 1983 Outstanding Reached- Pros- Subproject as of 12/31/83 Arrears uled Nature of problem pects /a (Rp bln) (Rp bln) A-2 PT Porodisa Raya 3,821 - Yes Management C A-3 PT BakrIe and Brothers 11,388 - - - A A-4 PT Hamplas Butama 2,294 - Yes Inefficiency C A-5 PT Wareans. Lines l 6,823 1,128 Yes - C A-6 PT Admiral Lines 9,100 - - Management z o A-7 PT Arpeni Pratae 1,727 - - - A. A-8 PT Bahasa Utam 9,794 - Yes marketing B A-9 PT Whas. Samudra 1,771 154 Yea Management C A-10 Permu Kertas Gowa 11,710 - Yea Inefficient production C A-11 PT Pacific Wood Industry 8,008 - - A A-12 PT Rachman and Sos /e - - - A-13 PT Oxygen Plant 11 - - A A-14 PT Koaodo Ti r Jays 205 29 - - a A-15 PT tertalakaana 446 - - - A A-16 PT Tnan m a dab 236 - - - - A-17 PT Kalimantan Rotan 1,769 - - - * A * goodl - moderatel C poor. b Project now in liquidation. No disbursements. -81- ANEX 9 Tab le 4 INDONESIA BANK PEMBANGUNAN INDONESIA (LOANS 1054. 1437 AND 1703-IND) PROJECT COMPLETION REPORT Loan Deartment I (UPS) - Loan Arrears as of December 31, 1983 Arrears amount ('0002000 Sub- *3-6 6-9 9-12 12+ No project Borrower mnths aonths mnths months arrears In Impleastation Loan 1054-IND - * * * - Loan 1437-IND - * * * - Loan 1703-IND A-I PT Bakrie and Brothers - - - - I A-2 PT Rachman and Sons - * - - X A-3 PT Kowedo Timor Jaya - 29 - A-4 PT Singabarong Kencana - - - * K A-5 PT Ferro Tam Alloy 45 - * - Ar6 PT Wijaya Putera - - - - x A-7 PT Sadays Pratamas - * - 13 - Subtotal 425 - 42 (Number) r2)( (4) In Operation Loan 1054-IND 1-8 PT Aneka Gas Indonesia - - - * K Loan 1437-IND 1-9 PT Intirub - - * Loan 1703-IND 1-10 PT Sibaja Electronics - - * * X 1-11 PT 10ealasart Indah - x * * 1-12 PT ila Sejahtera. - - - * X B-13 PT tertalaksana * - * X Subtotal - 4 * * (Number) () () () () (6) Total 425 - * 42 -71Gber) 11 'M() Y (10) A18lB 9 -82 - INDONESIA WANK PEMANGUNAN NDONESIA (LOANS 1034. 1437 A0D 1703-ND) PROJECT CONPLETZON MIORT Loan Departumnt I (UD) • LoA Arreats as of Decelber 31, 1983 Arreas amnunt (W08p' 000 Sub- .6 6-9 9-12 12+ No project Borrover =ntbs maths ufftha uths arrears In Impleuentation Loss 1054-IND - - - - - Loa 1437-IND - - - - - Loan 1703-tID A-1 Perum Kertas cowa - - - A-2 PT Oxygen Plant x A-3 ?T Kaliautan Rotan - - - - X A-4 PT Intan Sekuaytt - - - - x A-5 PT Taman Indah x Subtotal - - - (Nuber) Ñ 9 9() (5) Tn Operation Loaa 1054-ID •• - - - Loan 1437-IND - - - - - Loan 1703-IID0 - - - - Subtotal - - - - (Number) ) ) ) (-) Total - - -83- _ !UDO0UESZA BAKPMNUAj11 ND0ESZA (LGANS 1054, 1437 AND 1703-IND) PRMJEMT C ONPLETION REMn Supervision Departusat (138K) - Loea Areras, of December 31. £983 Arrears amout (i) <31) -84- AMU 9 INDONESIA BANK PEBANGUNAN INDONESIA (LOANS 1054. 1437 AND 1703-IND) PROJECT COMPLETION REPORT Special Debtor Supervision Department (UDK) - Loan Arrears as of December 31, 1983 Arrears ameunt (Rp'000000 Sub- 3-6 6-9 9-12 12+ No project Borrower mnths mnnths months months arrears A-i PT Berkah Bintang Samadera - 31 - A-2 PT Sinar Terang - - 663 - A-3 PT Wonosari Jaya - - * - x A-4 PN Kertas Leces - - - - x A-5 PT Puspita Nicky - - - 72 A-6 PT Kenang Food - - - I A-7 PT Bhratara Karya Aksara - - - - x A-8 PT Hampelas Rutama - - * 288 - A-9 PT Malinda Indah - 17 - - A-10 PT Rinjani - - - 727 - A-11 PT Iaogari - - - 855 - Total - 48 - 2 605 TNumbr) () E ) ) (4) -85- *ANE 10 INDONESIA BANK PEMBANGUNAN INDONESIA (LOANS 1054, 1437 AND 1703-ID) PROJECT COMPLETION REPORT Comparative Operations (Forecast and Actual), 1978-83 (Rp million) 1978 1979 1980 1981 1982 1983 Approvals - Total Actual 35,284 79,321 167,152 390,206 599,106 138,009 Ln 1054 forecast (1974) 83,280 n.a. n.ea. n.a. .ae. .a. Ln 1437 forecast (1977) 90,000 103,600 116,700 n.e. 4.. a.a. Ln 1703 forecast (1979) 36,300 78,400 79,300 85,100 101,500 119,200 Of Which Investment Loans Actual 21,709 51,676 94,860 271,438 432,991 114,092 La 1054 forecast (1974) 25,980 n.a. u.a. n.a. u.a. n..a L 1437 forecast (1977) 65,100 74,400 83,800 n.ae. n.. .a. Lu 1703 forecast (1979) 21,700 54,400 51,700 62,900 75,100 88,400 Commitments - Total Actual 30,786 76,225 119,796 301,314 546,599 120,902 La 1054 forecast (1974) 82,675 n.a. n.ea. n.a. n.a. n.a. La 1437 forecast (1977) 85,700 99,800 112,700 n.ea. n.a. n.e. La 1703 forecast (1979) 30,900 96,800 59,300 81,000 96,200 113,100 Of Which Investment Loans Actual 17,656 48,522 75,968 202,468 416,872 90,126 La 1054 forecast (1974) 25,740 n.a. n.ea. n.a. n.a. .a. La 1437 forecast (1977) 63,700 73,600 82,500 n.a. n.e. n.a. Lu 1703 forecast (1979) 17,600 71,100 33,400 58,500 70,200 83,000 Disbursements - Total Actual ' 38,086 68,595 87,337 202,413 314,229 253,601 La 1054 forecast (1974) 80,245 n.. n.ea. n.ea. n.ae. n.. La 1437 forecast (1977) 76,800 89,900 103,400 n.a. n.a. n.e. Ln 1703 forecast (1979) 38,100 76,700 81,400 73,900 84,800 100,400 Pt Which Investment Loans Actual 26,686 43,091 52,957 110,839 208,625 219,468 Ln 1054 forecast (1974) 25,060 n.a. n. n.ea. a.. n.a. Ln 1437 forecast (1977)* 56,200 65,000 74,500 n.e. .ea. .a. Lu 1703 forecast (1979) 26,700 56,000 46,200 50,200 61,100 72,900 -86- ANNEX 10 INDONESIA .BAWK PEMANGUNAN INDONESIA (LOANS 1054, 1437 AND 1703-LND) PROJECT COMPLETION REPORT Comparative Balance Sheet Items (Forecast and Actual), 1978-83 (Rp million) 1978 1979 1980 191 1982 1983 To Assets AC_ asa 144,754 196,933 258,184 423,929 655,703 857,010 La 1054 forecast (1974) 249,459 n.a. n.a. n.a. n.a. u.a. Lu 1437 forecast (1977) 212,961 275,370 342,334 n.a. n.a. a.a. La 1703 forecast (1979) 144,800 201,400 260,000 307,500 359,100 413,500 Working Capital Loans Actual 19,436 39,219 56,837 101,059 117,395 158,744 La 1054 forecast (1974) n.a. n.ea. n.a. n.. n.a. n.a. Lu 1437 forecast (1977) 27,183 34,419 41,647 n.a. n.e. n.a. La 1703 forecast (1979) 19,400 29,400 54,400 63,600 68,700 74,200 Investment Loans Actual % 87,657 122,746 164,689 259,153 443,695 594,291 . u 1054 forecast (1974) 164,433 n.a. U.a. n.a. .a. n.a. Lu 1437 forecast (1977) 158,561 207,230 259,523 2.a. n.a. n.a. Lu 1703 forecast (1979) 90,100 137,100 168,300 193,800 237,900 285,400 Zquity Investments, Actual 2,247 2,813 4,429 27,559 40,082 41,215 - Ln 1054 forecast (1974) 4,710 n.a. n.. n.a. n.ea. n.a. Lu 1437 forecast (1977) 6,121 8,621 11,621 n.a. u.a. U.a. Lu 1703 forecast (1979) 3,000 6,300 8,700 11,500 15,300 19,700 Term Debt Actual 62,740 106,668 129,275 248,846 -432,966 575,017 Ln 1054 forecast (1974) 163,954 n.a. n.a. n.a. -n.a. n.a. Lu 1437 forecast (1977) 148,069 209,848 275,540 n.a. a.a. n.a. Ln*1703 forecast (1979) 62,600 120,100 175,900 221,000 270,000 -320,600 Total Shareholder Funds Actual 63,396 64,733 75,767 89,025 95,577 108,614 La 1054 forecast (1974) 51,602 n.a. n.a. a.a. n.a. n.a. Lu 1437 forecast (1977) 53,835 54,380 55,246 a.a. n.a. U.a. Lu 1703 forecast (1979) 63,500 64,400 67,200 69,600 72,200 .76,000 -87- . ME10 INDONESIA BANK PEMBANGUNAN INDONESIA (LOANS 1054, 1437 AND 1703-IND) ?ROJECT COMPLETION REPORT Comparative lncome Statement Items (Forecast and Actual), 1978-83 (Rp million) 1978 1979 1980 1981 1982 1983 Total Revenue Actual 17,419 20,881 30,770 44,135 72,249 92,151 La 1054 forecast (1974) 32,430 n.a. u.a. n.a. n.a. a.a. On 1437 forecast (1977) 29,073 38,305 48,608 n.a. a.a. u.a. La 1703 forecast (1979) 17,400 21,200 29,700 32,400 37,800 44,400 71nancial Exenses Actual 6,746 7,889 13,357 19,005 31,857 48,521 Lu 1054 forecast (1974) 4,206 n.a. n.a. n.a. u.a. a.a. La 1437 forecast (1977) 13,642 20,236 26,913 n.a. n.a. n.a.. La 1703 forecast (1979) 6,800 8,100 12,200 15,200 18,800 22,100 Ad4nistrative Exoenses Actual 5,033 5,798 7,820 9,182 13,500 21,712 Lu 1054 forecast (1974) 6,365 n.a. n.a. n.a. n.a. n.a. Lu 1437 forecast (1977) 7,324 8,733 10,335 u.a. n.a. n.a. .Ln 1703 forecast (1979) 5,000 6,000 .6,400 7,000 7,500 8,000 Provisions for Lcses 'Actual 3,569 4,758 5,558 8,536 14,783 9,692 La 1054 forecast (1974) 1,672 '.a. n.a. U.a. n.a. n.a. La 1437 forecast (1977) 4,949 6,450 8,055. n.a. n.a. a.. In 1703 forecast (1979) 3,600 5,200 7,500 6,000 6,900 8,200 Profit Before Tax Actual 2,071 2,436 4,035 7,412 -12,119 12,224 Ln 1054 forecast (1974) 8,122 n.a. n.a. n.ea. n.a. n.. La 1437 forecast (1977) 3,158 2,886 3,305 n.a. n.a. . n.. .La 1703 forecast (1979) 2,000 1,900 3,600 .4,200 4,600 60100 Profit After Tax Actual 1,103 1,398 2,136 4,108 6,551 5,906 Lu 1054 forecast (1974) 4,468 n.a. n.a. n.a. n.a. n.a. L n1437 forecast (1977) 1,737 1,587 1,818 n.a. n.a. n.a. Lu 1703 forecast (1979) 1,100 1,000 2,000 2,300 2,500 3,400 ANNE 10 - 88 - ____ INDONESIA BANK PEMBANGUNAN INDONESIA (LOANS 1054, 1437 AND 1703-IND) PROJECT COMPLETION REPORT Comparative Financial Ratios (Forecast and Actual), 1978-83 1978 1979 1980 1981 1982 1983 Income From Term Loans as X-of Average Term Loans Actual 12.8 12.5 12.7 13.4 14.0 13.4 Ln 1054 forecast (1974) 14.3 U.a. n.a. n.a. U.a. n.a. Lu 1437 forecast (1977) 15.9 16.0 16.0 n.a. U.a. U.a. Lu 1703 forecast (1979) 12.7 12.5 12.6 12.1 12.2 12.3 Cost of Debt as Z of Average Total Debt Actual 10.1 8.3 9.6 7.2 7.3 9.5 L n 1054 forecast (1974) 9.9 n.a. n.a. n.a. n.a. U.a. Lia 1437 forecast (1977) 7.4 8.4 8.8 n.a. n.a. n.a. La 1703 forecast (1979) 10.1 6.9 6.4 5.9 5.9 5.6 Admigtstrative Costs as.', of Average Total Assets Actual 3.7 3.4 3.4 2.7 2.5 3.0 La 1054 forecast (1974) 2.9 n.a. n.s. n.a. n.. n.a. Ln 1437 forecast (1977) 7.2 8.3 8.7 n.a. n.a. n.a. Lu 1703 forecast (1979) 3.7 3.5 2.8 2.5 2.3 2.1 Reserves /b and Provisions as % of Outstanding Portfolio Actual 17.3 9.5 10.3 8.0 9.8 9.5 La 1054 forecast (1974) 9.5ja n.a. n.a. n.a. n.a. n.a. On 1437 forecast (1977) 9.3/a 9.8/a 10.6 a.a. n.a. n.a. Ln 1703 forecast (1979) 17.3 13.9 12.6 12.8 12.8 12.8 Net Profit as % of Average Net Worth Actual 1.8 2.2 3.0 5.0 7.3 5.8 Ln 1054 forecast (1974) 9.4 n.a. n.a. n.a. n.a. n.a. Ln 1437 forecast (1977) 3.3 2.9 3.3 n.a. n.a. n.a. La 1703 forecast (1979) 1.8 1.6 3.0 3.4 3.5 4.6 Trm Debt/Equity Actual . 1.0 1.65 1.71 2.9 4.5 5.3 La 1054 forecast (1974) 3.2 n.a. n.a. n.a. n.a. a.a. La .1437 forecast (1977) 3.0 4.1. 5.2 n.a. n.a. aa. La 1703 forecast (1979) 0.9 . 1.9.. .2.7 3.2 3.8 4.3 A Includes reserves. Includes all reserves and retained earnings. 콥 . 걋 & ’· . & · & .，·［--[-,／·1-[-.[.)-／·；.-[---,,-.: O . 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PT Ketun sungs, Milk Powder 1974 37.5 37.5 201.5 12.5 Commercial and Profitable 5, PT Rajin Steel tubes 1976 65.0 65.0 97.7 2.2 Commercial and Profitable 6* PT Dine Agro Swakarya Sugar mill 1976 ISO 01160.0 63,2 20.0 Bapindo's share will be saled 1980 10:0 7,s PT Panca Dina Sea Consultant 1977 15.0 1978 10.0 120.0 73.9 17.1 Commercial & Logo 1981 95.0 8, PT Dbratara Rorys. Aka, Printing 1978 73.0 73.0 31.0 11.7 Commet-cial & Loss 9. PT Bell Sanur Bungalows -Hotel 1978 167-.1 167.1 254.1 23,2 Commercial and Profitable 10. PT Bhinn6ka Line shipping 1978 442.0 442.0 (13.1) 50.4 Co-arcial. & Lose 11. PT Magah Ampub Body car 1979 221,0 221.0 (73S..3) '23.0 Cbmaerclal & Ldse pressing 12, PT Pollad Papper all 1979 120 0 15810 (120.9) 25.0 Commercial & Lose 1942 38:0 * 2 3 4 5 6 7 8 --- Rp 13. PT Kalalo Corrugated box 1979 102.0) 1980 7.0) 165.0 8.2 24.0 Commercial & Loss 1981 28.0) 14. PT Bakrie Pipe Steel pipe 1979 945.0) Industries 1980 575.0)1,904.9 1,969.7 39.1 Commercial and Profitable 1981 384.9) I5. PT Allied Pacific Textile Dye- 1980 141.5 (148.2).. 15.0 Dyechem stuff 1981 200.0* * Agreement being finalized 16. PT Hamplas Rutaa Abrasives 1980 200.0 200.0 200.0 20.0 Trial run production 17. PT Purana Sakti Hotel 1980 8./0 8.0 4.1 10.0 Commercial &.Loss 18. PT International Tim- Timber 1980 6,719.2) - . As of 1980 : Profitable ber Corp. Ind. 1981 3.182.5}8,979.9 6,103.1 59.6 1981-83 t Lose 19. PT Semen Andalas Ind. Cement 1980 4,421.2 4,421.2 3,618.1 9.7 Commercial & Lose 1983 1,940.0* * Agreement being finalized. i 20, PT Semaen Kupang Cement 1980 566.0) 1981 1,834.0)4,200.0 4,200.0 43.8 Under construction 1980 1,800.0 21. PT Upprindo Utama Leather 1981 100.0) As of 1981 t Loss 1982 75.0) 175.0 159.5 24.3 1982-83 : Profitable 22. PT Admiral Lines Shipping 1981 1,042.0 1,042.0 1,414.9 17.6 Commercial and Profitable 23. PT Cisitu's Hotel 1981 99.0 99.0 86.5 21.9 Commercial & Lose 24. PT Sangkulfrang Bhakti Logging 1982 382.0 382.0 356.9 10.3 Comiercial & Loss 25. PT Inofcon Work shop & 1981 355.0 355.0 419.8 10.0 As of 1981 i Profitable storage 1982 t Loss 1983 s Profitable. 26. PT Sarana Bernama Pea- Pinancial 1981 670.0 670.0 270.0 10.0 blayaa Indonesia Institution 27. PT PPM Nusateaggara Shipping 1981 1.5 1.5 6.9 0.3 Commercial and Profitable 1 2 3 4 5 6 7 8 Rp - I 28. PT Maramin Jay& Hotel 1981 172.5 172.5 (130.9) 24.5 Commercial & Loss 29. PT Hoechst Cilegon Dyestuff 1981 1,039.5 1,039.5 1,039.5 15.0 Under construction xiala 30. PT Dehatex Textile 1981 602.0 602.0 336.9 18.2 Commercial & Loss 31. PT Muttara Ketcana Hotel 1981 105.0 105.0 104.5 18.8 1981 : Profitable 1982-83 t Loss 32. PT Ferrotams Alloy Silicon 1981 700.0 700.0 700.0 17.2 Under construction Indonesia 33. PT Haranu City Hotel Hotel 1981 552.0 552.0 552.0 25.0 Under construction 34. PT Eke Dura Indonesia Palm oil 1981 387.0 387.0 400.8 25.0 Commercial and-Profitable 35. PT Mega Concrete Concrete blocks 1981 180.0 180.0 146.7 24.9 Commercial & Lo-s 36. PT Karya Celcon Cellular 1981 280.0 280.0 280.0 20.2 Under construction concrete 37. PT Mafha Bor Oil drilling 1981 228.0) 346.0 574.6 19.7 Commercial and Profitable Indonesia 1982 118.0) t4 38. PT Trikos Lloyd Shipping 1982 6,450.0 6,450.0 (1,958.7) 20.0 Commercial & Loss 4 39. PT Bhaita Laju Tanker Shipping 1982 344.0 344.0 345.1 22.9 Commercial and Profitable 40. PT Bhatta Shipping 1982 76.0 76.0 165.7 13.4 Commercial and Profitable 41. PT Industrial Gases Cas 1982 1,075.1 1 075.1 1,289.3 24.6 Commercial and Profitable Indonesia 1983 354.7* * * Agreement being finaltsed 42. PT Borma Sport shoes 1982 468.0 468.0 468.0 20.9- Under construction 43. PT Perdata Laot Shipping 1982 738.0 738.0 1,168.2-' 30.4 Commercial and Profitable 44. PT Ossiana Sakti Rubber manufac- 1982 303.0 303.0 303.0 21.4 Under construction Enterprises turing & Tyre * Road Recond- tioning 45. PT Pulan Laut Shipping 1982 264.0 264.0 23114- 25.0 Commercial & Lose 46. PT Sangkullrang Timber 1981 554.4) 835.1 25.0 . Conrcial and Profitable 1982 280.7) 46,659.843,243.3 27,491.6 Notes Book valuez a. Commercial * Column 7 x Net worth b. Under construction - Column 5. /.．··．「·．.．…。·．,.&(1·4·．··‘·＊&．··‘…·…―.!--&-[[-―·―--;-i‘··겯．& am P&KZANW~ Im~Slå (Loma 10541 1437 AND 1703-IND) NOMr Mffiffilm Bmw Domastla Resource Roblittattan. (Rg MM~ Tem Katur- Interest rate st lp,a.) Res~co IW4 197S 1976 1977 1978 1979 1980 agat 1982 1983 (years) Ity 1974-77 1~ 3 Lona tara Rank Indonesta 8,1% 10.356 18,536 11.547 23.054 47,442 52.818 109.9M 200.610 372.39 3-15 3-15 11.25 3. 4, 6. 9.3 Other state hanks 158 1.724 6,629 9,667 9,6,96 4,943 4,891 6.561 11.651 12,591 1-15 3-15 6-10 13.5 covernmont (opectal 559 594 555 3,344 3,556 18,638 32,647 ",208 102,631 118,397 3-15 3-15 a 7. a - - - - - - - - - 25,ODO 5 5 - 15,5 ~tt Tara Dank la~ ta 30 541 14,850 18.872 97 16 50' 73 20,083 41,803 33,689 1-3 1-3 10,25 3, 4, 6, 9.5 Other state badm 5:760 4.964 3.400 215 95 50 - - - 1-3 &-3 65&0 13.5 Dce~ depoelt 1,680 1,687 2.526 3,539 2,112 3.053 5.574 9,191 14.2; 12,8% 1-3 1-3 "15 LJk-3 ?IM depostts 1,757 3,285 5,169 10,941 8,962 10.031 24,9M 42,710 54.525 60.930 1-3 1-1 15. 21. 24 9, 12. 15 -98 - INDONESIA BANK PEMBANGUNAN INDONESIA (LOANS 1054, 1437 AND 1703-IND) PROJECT COMPLETION REPORT Foreign Currency Resource Mobilization, 1974-83 (US$ million) Term Interest rate Date fully Loan Year Source Currency Amount (years) (% p.a.) disbursed 310 1972 IDA US$ 10.0 39.5 8.0 Nov 1977 318 1982 IDA US$ 7.0 39.5 7.25 Feb 1980 1054 1974 IBRD US$ 50.0 14.5 8.0 Jan 1979 K?W 1976 KFW DM 11.0 30.0 2.0 Jun 1983/a 1437 1977 IBRD US$ 40.0 18.0 8.2 Dec 1981 ADB 1977 ADB US$ 30.0 17.0 8.3 Dec 1982 1703 1979 IBVD US$ 50.0 18.0 7.9 Sep 1984/a 2277 1983 IBRD US$ 203.3 18.0 11.0 Jun 1988/a