Document of The World Bank ReportNo: 288364" PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDLOAN INTHE AMOUNT OF US$33.2 MILLION AND A PROPOSEDCREDIT INTHEAMOUNT OF SDR 15.7MILLION(US$23.0MILLIONEQUIVALENT) AND A GEF GRANT INTHEAMOUNT OF US$7.5 MILLION TO THE REPUBLIC OF INDONESIA FOR THE CORAL REEF REHABILITATION AND MANAGEMENT PROJECT (PHASE 11) May 3,2004 RuralDevelopment andNaturalResources Sector Unit East Asia andPacificRegion This document has arestricted distribution andmaybe usedbyrecipients only inthe performance o ftheir official duties. Its contentsmavnot otherwisebe disclosed without World Bankauthorization CURRENCY EQUIVALENTS (Exchange RateEffective as ofMarch 30,2004) Currency Unit = U S Dollar USD 1 = 8,500Rupiah 1,000 Rupiah = 0.12USD July 1 - June 30 FISCAL YEAR ABBREVIATIONS AND ACRONYMS ADB Asian DevelopmentBank AIG Alternative Income Generation AIJ Association ofIndependentJournalist APBD Budgetfor Provincial/District Level APL Adaptable ProgramLoan AusAID Australia Agency for International Development BAPPEDA Regional Planning andDevelopmentAgency BAPPENAS National DevelopmentPlanningAgency B M T L K M FaithBasedCredit and Savings System BPD Village Parliament BPKP NationalInternal Audit Agency BPS Agency for National Statistics Bupati District Head CAS Country Assistance Strategy CCE CoastalCommunity Empowerment CBA Cost Benefit Analysis CBM Community-BasedandCollaborative Management CCE CoastalCommunity Empowerment CBCM Community BasedCollaborative Management CDD Community DrivenDevelopment CFAA Country Financial Accountability Assessment CFs Community Facilitators C I ConservationInternational CMC CoastalManagementCoordination COFISH CoastalCommunity Development andFisheriesResourceManagement COREMAP Coral ReefRehabilitation and ManagementProgram CMU Country ManagementUnit CPAR Country ProcurementAssessment Review CPFA Country Profiles of FinancialAccountability CPMU Central ProgramManagementUnit CPUE Catch-per-unit effort CRITC Coral ReefResearchInformation andTraining Center CRMIS Coral ReefManagementInformation System CRMP/RPTK Village Coral ReefManagementPlans DGCSI Director General, Coasts and Small Islands DKP MinistryofMarine Affairs andFisheries Dinas Autonomous Agency at District Level Dinas KP Autonomous District Agency of Marine Affairs andFisheries DIP National Budget DIPP-LN CounterpartBudget for Foreign Funding DPIPs District ProgramImplementations Manuals FOROFFICIAL USEONLY DPMU District ProgramManagementUnit DPR House of Representatives DPRD District Parliament EA ExecutingAgency EEZ ExclusiveEconomicZone EIRR EconomicInternalRateo fReturn ESIMF Environmentand SocialImpactManagementFramework EOP Endof Project ESW Economic and Sector Work FIRR FinancialInternalRate ofReturn FMR FinancialMonitoringReport G8 Groupof Eight IndustrializedNations GDP Gross Domestic Product GEF Global EnvironmentFacility Go1 Government o fIndonesia IBRD InternationalBank for Reconstructionand Development IDA InternationalDevelopmentAssodiation IMA InternationalMarine Life Association IUCN InternationalUnion for ConservationofNature JICA Japan InternationalCooperationAgency KDP KecamatanDevelopment Project KEPPRES PresidentialDecree KIMPRASWIL Ministry of Settlement and Regional Infrastructure Km Kilometer KMK Ministry of FinanceOn-LendingDirective(Kebijakan MenteriKeuangan) KPKN MOF Treasury Office KSDA Nature Resources ConservationOffice KTP IDCard LIP1 IndonesianInstituteo f Sciences LIT Line-InterceptTransect MAC Marine Aquarium Council MCAs Marine ConservationAreas MCS Monitoring, Control, and Surveillance M & E Monitoring and Evaluation MCRMP Marine and Coastal Resources ManagementProject MMAF Ministry for Marine Affairs and Fisheries MAMTI Marine MarketTransformationInitiative MOF Ministry of Finance MPA Marine ProtectedAreas MOU Memorandum of Understanding NCB National CompetitiveBidding NCU National CoordinationUnit NGO Non-governmentOrganization NPIP National ProgramImplementationPlan NRM Natural ResourceManagement NSC National SteeringCommittee NTC National TechnicalCommittee OD OperationalDirective OM OperationManual OP OperationalPolicy PAD ProjectAppraisal Document PATA Pacific Asia Travel Association PCAR Procurement Capacity Assessment Report This document has a restricted distribution andmay be used by recipients only in the performance of their official duties. I t s contents may not be otherwise disclosed lwithout World Bank authorization. Perdu RegionalGovernment Regulation Perdes Village Ordinance PHKA DirectorateGeneralof ForestProtectionandNature Conservation PHRD Policy andHumanResources DevelopmentFund Pimbagpro ProjectManagerat DistrictLevel or MarineNational Park Pimpro NCU's Project Manager PIP ProjectImplementationPlan PIU ProjectImplementationUnit PKL PracticalFieldTraining Program PMM ProgramManagementManual PMU ProgramManagementUnit POM ProjectOperationalManual PRA ParticipatoryRapidAppraisal PROPENAS Government's Current Medium-term DevelopmentStrategy QCBS Quality and Cost Based Selection RRI RapidResource Inventories SK (Surat KeputusaH)DecisionLetter SET0 Senior Extensionand Training Officer SPM PaymentInstructions SPP PaymentRequests SUSENAS National CensusData for ProgramDistrictNationalSocio-economic Survey TA TechnicalAssistance TNC TheNature Conservancy TOR Terms of Reference USAID United States Agency for International Development U.U. Law VMs Village Motivators VSAT Very SmallAperture Terminal WRI World Resources Institute WSSD World Summit on Sustainable Development WWF World Wildlife Fundfor Nature Vice President: Jemal-ud-dinKassum, EAPVP Country Managermirector: Andrew Steer, EACIF Sector Managermirector: Mark D.Wilson, EASRD Task Team Leader/TaskManager: PawanG. Patil, EASRD INDONESIA CORALREEFREHABILITATIONAND MANAGEMENTPROJECT (PHASE 11) CONTENTS Page A. Strategic Contextand Rationale 1. Country and Sector Issues 5 2. Rationale for Bank Involvement 6 3. Higher LevelObjectives to which the Project Contributes 7 B. ProjectDescription 1. LendingInstrument 8 2. Project DevelopmentObjectiveand Key Indicators 11 3. Project Components 12 4. Lessons Learnedand Reflected inthe Project Design 14 5. Alternatives Considered and Reasonsfor Rejection 16 C. Implementation 1. Partnership Arrangements 16 2. Institutional and Implementation Arrangements 16 3. Monitoringand Evaluationof OutcomesiResults 19 4. Sustainability 20 5. Critical Risks and Possible ControversialAspects 21 6. Loan, Credit, and Grant Conditions and Covenants 22 D. AppraisalSummary 1. Economic and FinancialAnalyses 24 2. Technical 26 3. Fiduciary 27 4. Social 28 5. Environmental 29 6. SafeguardPolicies 29 7. Policy Exceptions and Readiness 30 TechnicalAnnexes Technical Annex 1: Country, Sector and Program Background 31 Technical Annex 2: Major Related Projects Financed by the Bank and/or Other Agencies 38 Technical Annex 3: Results Framework and Monitoring 39 Technical Annex 4: Detailed Project Description 50 Technical Annex 5: Project Costs 68 Technical Annex 6: Procurement, Financial Management and Disbursement 69 Technical Annex 7 : Anti-Corruption Plan 102 Technical Annex 8 : Economic and Financial Analysis 107 Technical Annex 9 : IncrementalCost Analysis 113 Technical Annex 10: Safeguard Policy Issues 118 Page Technical Annex 11: Project Processing 123 Technical Annex 12: Documents inthe Project File 125 Technical Annex 13: Statement o f Loans and Credits 128 Technical Annex 14: Country at a Glance 130 M A P (S) IBRD33105,33106,33107,33108,33109,33110,33111 Indonesia Coral ReefRehabilitation and Management Project (Phase 11) PROJECT APPRAISAL DOCUMENT EastAsia and Pacific Region EASRD Date: May 3, 2004 TeamLeader: PawanG. Patil Country Director: Mr.Andrew Steer Sectors: General agriculture, fishing andforestry Sector ManagedDirector: Mr.Mark D. Wilson sector (100%) Project ID: P071316/P071318 Themes: Other environment andnaturalresources Lendinginstrument: Adaptable ProgramLoan(APL) management (P), Decentralization(S), Civic engagement, participationand community driven development (S) Environmental screening category: B -Partial Assessment Source Local Borrower 10.9 10.9 IBRD/IDA 48.6 7.6 56.2 ~ Others/GEF 5.0 2.5 7.5 Total 1-- Foreign Total I74.6 Borrower: Republic of Indonesia Responsible agency Ministry of Marine Affairs andFisheries (MMAF). J1. MedanMerdeka Timur No.16, JakartaPusat-Indonesia. Tel: (62-21); 3519070 Fax: (62-21) 3522560/3522045. Does the project require any exceptions fromBank policies? oYes X N o Have these beenapprovedby Bankmanagement? oYes oNo I s approval for anypolicy exception sought from the Board? oYes o N o Does the project include any critical risks rated"substantial" or "high"? 1 1 .~ XYes o N o Does theproject meet the Regional criteria for readiness for implementation? XYes o N o 1 1 Programme/Project development objective The development objective of the CoralReefRehabilitationandManagement Program (COREMAP) Adaptable ProgramLoan (APL)is to establish viable, operational, and institutionalized coral reef management systems in priority coral reef sites in Indonesia. The development objective of COREMAP PhaseI1is that viable reefmanagement systems are establishedinat least six priority ParticipatingDistricts, through a financially sustainableprogramthat i s nationally coordinated but decentralizedinimplementation, inorder to empower andto support coastal communities to sustainably co- manage the use of coral reefs and associated ecosystemresources, which will revivedamaged or preserve intact coral reef ecosystems andinturn, enhancethe welfare of these communities inIndonesia. Project description The CoralReefRehabilitation andManagement Project (Phase 11)wouldbeimplementedthroughthree components: (A) InstitutionalStrengthening to enhance government institutionalresponsivenessto meet the needs of - coastal communities, insupport of collaborativemanagement of marinereserves and other marineprotected areas. (B) CommunityBased& CollaborativeManagement- to empower allcoastalcommunities andinstitutions throughout programdistricts to sustainably co-manage coralreefs andassociatedecosystems to increaseincomes which will inturn enhance community welfare. (C) Public Awareness, EducationandExtension- to promote societal awareness of the benefits of coralreef ecosystem conservation andsustainable use that leads to behavioralchange. Which safeguardpolicies are triggered, if any? EnvironmentalAssessment (OP 4.01, BP 4.01, GP 4.01) Natural Habitats (OP 4.04, BP 4.04, GP 4.04) Indigenous Pemles (OD 4.20) 2 Conditions ofNegotiations: I 0 Establishment o f N C U in MMAF, PIU inLIPI and PMUs insix proposed districts and appointment of qualified staff (including a qualified project manager inNCU, PIU and PMUs) in accordance with the institutionalstructure agreedto inthe DPIPs. 0 Adoption by NCU, PIU, and PMUs of Environmental and Social Impact Management Framework (ESIMF)andGovernance/Anti-CorruptionStrategy, satisfactory to the Bank. 0 Completion of draft Operational Manuals (Financial ManagemendProcurement Manual and CBM Manual), satisfactory to the Bank. 0 Completion of the Terms of Reference (TOR) for procurement and financial management capacity buildingconsultants, audit of project financial statementsreview firm, community facilitators and senior extension training officers, and other technical assistant consultants, satisfactory to the Bank. Conditions of LoadCredUGrant Effectiveness: 0Project financial management consultants to be selectedbasedonTORSapprovedby the Bank. 0All Implementation Manuals (CBM, Collaborative Enforcement, Research and Monitoring Protocols) adoptedby N C U andparticipatingDistrict PMUs and the NPIU. Covenants Applicable to ProgramImplementation: The Government of Indonesia (GOI) shall maintain until completion of the Project the National Coordination Unit with adequate funds and other resources and staffed by qualified and experienced personnel includinga N C U Director; an ExecutiveSecretary; a Program Manager assistedby personnel from the Ministry of Marine Affairs and Fisheries, LIPI, and from the Directorate General of Forest Protection andNature Conservation. The GO1 shall maintain until completion of the Project the National Program Implementation Unit in LIPI, the National Coral Reef Informationand Training Center, and the National Monitoring, Evaluation and Feedback Unit with adequate funds and other resources and staffed by qualified and experienced personnel. The Districts shall maintain untilcompletion of the Project a ProgramManagement Unit, with adequate funds and other resources and staffed by qualified and experienced personnel including a Head, a Secretary, a ProgramUnit Manager, a representative from the Dinas KP from such ParticipatingDistrict, and a representative from the National Marine Park or marine protected area and the Bappeda in such Participating District. The Districts shall establish a Coastal Community Empowerment Board, with representatives from the borrower and from civil society with terms of reference acceptable to the Bank. By June 30, 2005. the Districts shall establish until completion of the Project a District Coral Reef Info&tion and Training Center with adequate funds and other resources and staffed by qualified and experiencedpersonnel. The GO1shall adopt and apply inthe implementationof the Project, the Project Management Manual. By June 1, 2008, the GO1 shall establish an independent evaluation panel and cause such independent panelto carry out an evaluation of the Project by not later thanMarch 1, 2009; and furnish the results of the evaluation to the Bank andAssociation for comments. The GO1shall take all measures necessary to ensure that any development project proposed to be carried inshall only be carried if a satisfactory environmental study of said proposedproject shall have been completed and established that any potential adverse effect on the Project site will be avoided or mitigated. The GO1shall make Grants available to Participating Villages up to an aggregate amount not to exceed Rp. 10,000,000 and ensure that the works are carried out in accordance with the provisions of the Agreement andtheprovisions of the Village Grant Guidelines. 3 The GO1shall make Grants available to a ParticipatingVillage up to an aggregate amount not to exceed Rp. 50,000,000 and the adoption of a village plan for alternative income generation activities in accordance with the provisions of the Village Grant Guidelines; and ensure that a Subsidiary Loan Agreement, is entered into between the relevant Participating Village and the selected village financial institution. The GO1shall make Grants available to a ParticipatingVillage up to an aggregate amount not to exceed Rp. 50,000,000 upon the adoption by such Participating Village of a draft coral reef management plan; and ensure that the Sub-projects are carried out in accordance with the provisions of the Agreement and the provisions oftheVillage GrantGuidelines. The selected Sub-project by a Participating Village shall qualify as eligible for financing out of the proceeds of the Credit and the Loan only if the Sub-project is an investment project, is technically, socially and environmentally viable, and has been designed in accordance with the criteria and procedures set forth in the Village Grant Guidelines, and the Sub-project proposal has been publicly discussed among, and agreed to by, the villagers inthe ParticipatingVillage under the coordination of the LKMDor equivalentvillage institution. The Sub-project selected by a Participating District shall qualify as eligible for financing out of the proceeds of the Credit and the Loan only if the Sub-project is an investment project, is technically, socially and environmentally viable, and has been designed in accordance with the criteria and proceduresset forth inthe District Grant Guidelines. The GOI, in accordance with its commitment to the protection of the interests of Isolated Vulnerable People shall (a) take measures to protect customary user rights of Indigenous People; (b) ensure that the benefits receivedby the Indigenous People under the Project are inharmony with their economic, social and cultural preferences; (c) through a process of informed participation, to involve concerned Isolated Vulnerable People inthe design and implementationof coral reef management plans; and (d) mitigate or avoid adverse effects on IndigenousPeople caused or likely to be causedby the Project. By November 30,2006, the GO1shall furnishthe Bank and Associationfor commentsa draft plan for the establishment and implementation of the partial credit guarantee program, including the description of specific policies and procedures for the program, and the reporting requirements and accounting proceduresfor the bankinginstitution selectedfor the guarantee reserve account. Not later than March 1 in each year, commencing March 1, 2006, the GO1 shall provide recommendations of the studies carried out in the precedingyear and not later than September 30 ineach year, commencing September 30, 2006, prepare action plans for the implementation of the recommendations of the studies and the Bank's and Association's recommendations carried out in the precedingyear, and carry out each of such action plans. The GO1shall carry out with a training plan, the trainings, workshops, awareness activities, rapid rura: appraisal, study tours, and cross visits for community empowerment; and study tours for marine park support. The GOT shall (a) maintain policies and procedures adequate to enable it to monitor and evaluate on ar ongoing basis, prepare, under terms of reference satisfactory to the Bank and Association, (b) furnish or or about April 30, 2007, a report integrating the results of the monitoring and evaluation on the progresr achieved in the carrying out of the Project during the period precedingthe date of said report and setting out the measuresrecommendedto ensure the efficient carrying out of the Project and the achievement o! the objectives thereof during the period following such date; and (c) review with the Bank, by June 30 2007, or such later date the report and take all measures requiredto ensure the efficient completion 01 the Project and the achievement of the objectives base on the conclusions and recommendationsof tht said reportandthe Bank's andAssociation's views onthe matter. 4 A. STRATEGIC CONTEXT AND RATIONALE 1. Countryand sector issues Sector Importance. Indonesia is the world's largest archipelago, containing at least 2.6 million hectares of coral reefs. This is roughly 25 percent o f coral reefs inthe region and 8 percent of the world's coral reefs. The Indonesian coastal and marine sector, and in particular the small-scale fisheries supported by coral reef ecosystems, is a significant productive asset for the country and the millions of poor fishers dependent on them. Healthy coral reef ecosystems can annually produce marine products worth on average US$15,000 per square kilometer, and are an important source of food and livelihoods for roughly 9,969 coastal villages across the country. Government Sector Strategy. The Government of Indonesia (GOI) identified coral reef ecosystem management as a national priority in the mid-1990s and as a result, requested the Bank's assistance to finance the first phase o f a proposed three phase Adaptable Program Loan (APL) program, called the Coral Reef Rehabilitation and Management Program (COREMAP). Because of the importance of these coral reef ecosystems, the Government's current medium-term development strategy (PROPENAS) and the Guidelines of State Policy (1999-2004) support a coastal and marine sector policy which includes efficient and sustainable management of maritime resources, the rehabilitation of damaged coastal and marine ecosystems, and improvement o f the socio-economic conditions of coastal communities. Moreover, a new Ministry for Marine Affairs and Fisheries (MMAF) was established in 1999 with the mandateto ensure sustainable use of Indonesia's coastal ecosystems. Key Sector Issues and Institutional Constraints. Despite prioritizing the health of coral reef ecosystems and aiming poverty reduction and income-generation activities at marginalized coastal villages, the Indonesian coastal and marine sector, and more specifically the small-scale coral reeffisheries sub-sector, is still beset with the dual constraints o f pervasive poverty in coastal communities and extensive degradation of coastal resources. Currently, local government institutions lack the capacity to effectively work with communities to overcome these two sector constraints. More specifically, over 53% o f fisher families in the proposed program areas are poor and live below the poverty threshold of US$l/day. They are highly dependenton small-scale reef fishingfor their livelihood, with many claiming that their income from fishing is not sufficient to meet even their basic subsistence needs. Moreover, with the country's economic crisis, poor land-based agricultural farmers have taken to the sea to fish as a last resort for own-consumption. Faced with these pressures, destructive and illegal fishing methods (cyanide and blast fishing) are often used in an attempt to increase fish catches. The result is that almost two-thirds (65%) of Indonesia's coral reefs are now considered threatened fiom over- fishing, and almost half are considered threatened specifically from destructive fishing practices. In the past 50 years, the proportion o f degraded coral reefs inIndonesia has increased from 10 to 50 percent. As a result, many o f the small-scale coral reef fisheries in Indonesia have reached a level and mode of exploitation where the only way to increase future production and local incomes is to protect critical coral reef habitats and reduce fishing effort. However, coastal fishing communities need help to make these behavioral changes. Currently capacity at the District level to assist coastal fishing communities to sustainably manage this important resource is limited. This is the major institutional constraint facing the sector to be addressedby the proposed program. Government Response to Key Sector Issues and Constraints. GO1 has begun to address these sector constraints through recent policy shifts towards decentralized coastal resource management focused on collaborative partnerships between communities and government, and the use o f marine reserves and larger marine protected areas. A growing body of empirical evidence suggests that such marine reserves or `no take zones' can rejuvenate depleted fish stocks in a matter o f years and allow the coral reef ecosystems that support them to recover to healthy and productive levels. Based on this evidence, and with support from the COREMAP APL, GO1has made a sectoral policy shift toward decentralized and 5 collaboratively managed marine reserves (termed marine conservation areas (MCAs)) as an important tool inthe sustainable management of coral reef ecosystems and the fisheries they support. There is now agreement across the relevant line Ministries (Ministry of Marine Affairs and Fisheries (MMAF), responsiblefor coordinating efforts in coastalwaters outside of marineparks andthe Ministry ofForestry, responsible under law for managing national marine parks) that the establishment of marine reserves within larger marine protectedareas (MPAs), through a collaborative planning process with communities, will revive coral reef ecosystems and thereby rejuvenate small-scale reef fisheries, which will in turn, directly increase the welfare of these communities. This is now supported by a national strategic effort toward decentralized marine conservation areas management outside national parks, and building and strengthening co-managementpartnerships inside of national marine parks. COREMAP Phase I1reflects this strategic effort by shifting overall program responsibility to the recently established MMAF and implementation responsibilities directly to the districts. Moreover, the advent of decentralization (law 22/1999) makes collaborative partnershipsbetweenDistrict Governmentsand Communities possible. 2. Rationale for Bank Involvement Rationalefor Bank Involvement in the Sector. Based on the importance of healthy coral reef ecosystems to the livelihoods of fishers living in 9,969 coastal villages in Indonesia (approximately 15% of all Indonesian villages), the coastal and marine sector, and more specifically, the small-scale coral reef fisheries sub-sector, clearly represents the nexus between poverty and environment. This nexus is one pillar of the World Bank's new ruraldevelopment strategy, Reaching the Rural Poor (2002), providing a clear rationale for the Bank's continued involvement inthe coastal and marinesector inIndonesiathrough the Coral ReefRehabilitation andManagementProgram(COREMAP). Development Hypothesis for Bank Involvement in the Sector. The proposed Program's development hypothesis, also reflected in GOI's recent policy shifts (see section A.l: Country and Sector Issues), is that inorder to address this poverty-environmentnexus inthe coastaland marine sector, communitiesand local government institutions will have to collaboratetojointly identify and effectively co-manage marine reserves and larger marine protected areas. The Bank has played a critical role to this end. Through COREMAP Phase I,coral reef management systems were tested in pilot sites, with lessons learned contributing to this hypothesis. Moreover, these lessons emphasize the importance of placing the community at the center of coral reef ecosystem management (see Section B.4: Lessons Learned). In addition to COREMAP, the Bank has substantialexperience inplacing the community at the center of the development process, through the KecamatanDevelopment Project (KDP). Over the past five years, this project has focused on building participating villages' capacity for making choices regarding social capital improvements and on improving local level governance. Through adaptive learning, COREMAP Phase I1builds on both the many lessons from Phase Iand KDP village empowerment systems, and brings inatechnicalsupportcontext to further increase the development impact. This overall development hypothesis has wider endorsement beyondIndonesia. At the World Summit on Sustainable Development (WSSD), countries around the world set a target to establish representative networks of marine protected areas by 2012. More recently, the G8 countries and the Bank inthe May 2003 ministerial meetings in Evian, France concluded that "global sustainable development and poverty reduction requires healthier and more sustainably managed oceans and seas." The G8 and UN leaders promised to maintain the productivity and biodiversity of important and vulnerable marine and coastal areas. Moreover, the meeting stated that the "establishment of ecosystem networks of marine protected areas by 2012 intheir own waters and other regions is a priority." The G8 andUNleaders also pledgedto work with other countriesto help themestablishmarine protectedareas intheir own waters. Donor Activities in the Sector. The environment-poverty nexus in the coastal and marine sector in Indonesia is well recognized by the donor community. Since its inception, COREMAP has been supported by multiple donors, including the Global Environment Facility (GEF), the Asian Development Bank (ADB), and the Australian Agency for International Development (AusAID), in addition to the 6 Bank. Several donors (USAID and JICA), private sector organizations (Operation Wallacea) and a host of international, national and local NGOs directly and indirectly support the proposed COREMAP Phase I1program and its objective of establishing collaboratively managedand sustainable coral reefecosystem management systems. These partners are all very active in this sector and have helped to inform the proposed program design. ComparativeAdvantage of the Bank in the Sector. Inthe coastal and marine sector, the World Bank has a comparative advantage in (i) policy dialogue: to facilitate the needed reform in the management o f coral reef ecosystems; (ii)coordination: to enable collaboration between multiple donors to parallel and co- finance complementary activities; and (iii)convening power: to bring together stakeholders from community, district, province and national levels to reach consensus for resolving competing demands on coral reef ecosystem resources; and (iv) sustained commitment: to promote sector adjustments and policy reforms over the extended period of the COREMAP APL. Unique Contributions of The Bank's Involvement. Through COREMAP, the Bank has demonstrated its capacity to bring together various stakeholders concerned with Indonesia's coral reefs and associated ecosystems, and the coastal communities dependent on them for their livelihood. The World Bank is uniquely positioned to engage with regional and international initiatives in coral reef ecosystem conservation such as that of IUCN's World Commission for Protected Areas (Marine). Furthermore, the Bank is currently involved in two international efforts that specifically complement the proposed Phase I1 program, namely the Marine Market Transformation Initiative (MMTI) which is collaborating with external partners in finding solutions for the live reef fish trade, one o f the most significant threats to the health of Indonesia's coral reef ecosystems; and, (ii)the World BanWGEF Global Program of Targeted Research and Capacity Building for Coral Reefs, which seeks to build networks o f scientists from the developed and developing world to fill critical gaps in our knowledge about factors which determine resilience and vulnerability of reefs under various forms of stress. Together, the Bank and GEF are positioned to be seen as global leaders in knowledge development and program support o f the coral reef conservation and sustainable use effort. 3. Higher LevelObjectivesto whichthe ProgramContributes Contribution to GOI's Sector and Poverty Objective. This program significantly contributes to GOI's objectives of (i)sustainable utilization of the coastal ecosystem; (ii)decentralized natural resource management; and (iii)raising income levels and improving living standards in the coastal zone and on small islands, particularly in small-scale fishing communities, through marine reserves. Through collaborative management partnerships, Phase I1will help to rejuvenate coral reef fisheries and diversify the livelihood opportunities of participating program fishing communities. This, in turn, will increase their income and livingstandards, thereby contributingto GOI's anti-poverty objectives. Contribution to the Objectives of the CAS. The proposed Indonesia Country Assistance Strategy (CAS) sets the context for COREMAP Phase I1by moving away from concepts like protect thepoor to a focus on empoweringthepoor. With this focus, the new CAS seeks to address the core issue o f governance in Indonesia, throughout all sector projects and programs, as well as achieve two objectives: (i) improve to the investment climate, and (ii) make service delivery responsive to the poor. to Based on lessons learned from Phase I,this second APL phase has been designed to reflect the emphasis placed on empowerment in the new CAS, with proposed activities aiming to empower vulnerable coral reef-dependent communities to sustainably co-manage their coral reef fisheries resources. Furthermore, Phase I1seeks to directly address governance issues by (a) developing new methods to give a voice to these reef-dependent communities who are often excluded from development opportunities; (b) investing in human capital development by supporting activities in community and local government capacity buildingwith a strong emphasis on education; (c) assisting each of the 416 participatingvillages to create and sustain village financial management systems and train, accredit and elect a village financial manager 7 and bookkeeper that is consistent with the law; and (d) promoting a participatory process by which reef- dependent communities themselves identify their development needs and are responsible for implementing a development plan, agreed upon by the community and supported through a collaborative management arrangement with District government. Such collaborative management arrangements provide an innovative way to improve the accountability of local government in their support services to poor coral reefdependent communities, within the context ofthe decentralization framework. Inadditionto addressing the core issues of empowerment and governance inreef-dependent communities and their local governments, COREMAP Phase I1indirectly contributes to the following CAS objective: creating income opportunities for poor households. The program affected peoples' incomes are expected to stabilize as a result o f creating "fish banks" under this program (see Technical Annex 8: Economic and Financial Analysis). This second APL phase also seeks to mobilize traditional savings not currently utilized for productive activities through an extension of private business-oriented, faith-based savings and loans systems already operating inthe program area. Phase I1will support the CAS objectives through the platform of community-driven development (plus), by empowering coastal villages and communities to collaborate with local government to sustainably co- manage and rehabilitatethe fisheries resources, which will improve their livelihoods. B. PROJECTDESCRIPTION 1. Lendinginstrument Program Lending Instrument and Basisfor Selection. This Project is the second phase of a fifteen-year Adaptable Program Loan (APL), a lending instrument which was selected because community-level interventions to enhance capacity for resource management and change behavior from destructive to sustainable practices require significant time and adjustment basedon lessons learned over several phases. For this reason, the Government of Indonesia and the World Bank-Global Environment Facility are committed to a long-term programtoward sustainable coral reefand associatedecosystem management. Long-Term Objective. The long-term objective of the COREMAP APL is to establish a viable, operational, and institutionalized coral reef management system inpriority coral reef sites in Indonesia. Overview of APL Program Phases. Launched in May 1998, COREMAP is a fifteen-year program financed by multiple donors and implemented over three phases to cover priority locations in ten provinces in Indonesia (South, North and Southeast Sulawesi, Riau, North and West Sumatra, Maluku, Papua/Irian Jaya, and East and West Nusa Tenggara). These three phases (and implementation periods) were originally envisaged as: (1) COREMAP Phase I: Initiation (1998-2001); (2) COREMAP Phase 11: Acceleration (2001-2007); and, (3) COREMAP Phase 111: Institutionalization (2007-2013). The program began by testing or `initiating' coral reef management systems in four pilot sites, with the aim o f generating lessons learned that would allow these pilots to be modified and `accelerated' to cover a larger number of sites inPhase 11, and to be operational and fully `institutionalized' through Phase 111. The first `initiation' phase was much more ambitious and challenging than anticipated, resulting in three project extensions over a period from the original closing date o f October 31, 2001 to June 31, 2004. Inaddition, since its inception, the political landscape of Indonesia has changed from strong central government authority to decentralization. As a result, the implementationtime frame and institutional modalities have been adaptedto these changes. The programphasing is now envisaged as: Phase I:Initiation(1998-2004), Phase 11:Decentralizationand Acceleration (2004-2009), Phase 111:Institutionalization (2010-2015). Objectives,Basic Features, Estimated Costs,Duration, Phase 11Locations, andInstitutional Responsibilitiesfor EachAPL Phase, 8 The objective o f APL Phase I:Initiation (1998 - 2004); [Total Cost: US$33.1 million, US$6.9 million IBRD/IDA, US$4.1 million GEF, US$13.3 million Asian Development Bank and AusAID] is to establish a viable framework for a national coral reef system in Indonesia. This phase tested community-based coral reef ecosystem management pilots in priority sites and established the basis for a co-management framework for the COREMAP program. This initiation phase supported community-based ecosystem management and surveillance and enforcement activities in four pilot sites (Padaido Islands in Biak District, Papua Province; Taka Bone Rate National Marine Park in Selayar District, South Suluwesi Province, Riau, and SikkdGungua Palau Teluk Maumere Marine Park inNTT Province), as well as public awareness and policy reform activities at the national level. Phase Iwas executed by the Indonesian Institute for Sciences(LIPI). The objective o f APL Phase 11: Decentralization and Acceleration (2004 - 2009); [Total Cost: US$74.6 million, US$56.2 million IBRD/IDA and US$7.5 million GEF] is that viable reef management systems are established in at least six priority Participating Districts, through a financially sustainable program that is nationally coordinated but decentralized in implementation, in order to empower and to support coastal communities to sustainably co-manage the use of coral reefs and associated ecosystem resources, which will revive damaged or preserve intact coral reef ecosystems and in turn, enhance the welfare of these communities in Indonesia. The second phase expands the number of program sites to build upon the pilots tested inPhase I,adjusting the process of implementation to reflect the results and lessons learned, in particular, promoting collaborative management partnerships between communities and local governments. More specifically, the World Bank and Global Environment Facility will finance programactivities in -easternIndonesianparticipatingdistricts inPhaseI1[(Selayar/South SuluwesiProvince, six Pangkajene KepulauadSouth Suluwesi Province, ButodSoutheast Suluwesi Province, Sikka/Nusa Tenggara Timur (NTT) Province, BiakRapua Province, Raja AmpatPapua Province) and each of the associated nationalhegional marine parks located in the same districts, namely, Padaido Marine Recreation Park in Biak District, Papua Province; Kapoposang Marine Recreational Park in Pangkajene Kepulauan District, South Sulawesi Province; Teluk Maumere Recreational Park in Sikka District, NTT Province; Raja Ampat Marine Wildlife Conservation Areas in Raja Ampat District, Papua Province; and National Marine Parks such as: Marine Nature Reserve and Marine Recreational Park P. Misol Selatan, Marine Wildlife Reserve P. Misol Selatan, Marine Wildlife Reserve P. Sayang, Marine Wildlife Reserve and Marine Recreational Park P. Koflau, Marine Wildlife Reserve Kep. Ajoe.; the Asian Development Bank will finance a stand-alone project in westernIndonesia inparallelto this APL, and AusAID will not finance any aspect of COREMAP due to a change in their policy of engagement in Indonesia (see Technical Annex 1: Country, Sector and Program Background). The recently established Ministry o f Marine Affairs and Fisheries (MMAF) will be strengthened to coordinate the Program, with implementation occurring at each participating District. Research and Education activities will be coordinated by the Indonesian Institute for Sciences (LIPI), while program activities within national marine parks will be implemented through the park authorities under the jurisdiction o f the Directorate General of Forest Protection and Nature Conservation (PHKA), within Ministry of Forestry. The objective of APL Phase I11 (2010 - 2015) [Total Cost: US$85.0 million, US$60.0 million IBRD/IDA] is to create viable reef management systems that are established in priority sites, operational, and fully decentralized to local governments and institutionalized. By the end of the third and final phase, the C0,REMAP would be fully institutionalized at the National, Provincial, District and Community levels, with sustainability ensured through a combination of local government financing, specific block-grant transfers to local governments, and private sector financing. Phase I11 would continue to expand the program to other priority sites in eastern Indonesia, with a focus on capacity building o f the District Governments and Communities toward collaborativemanagement under strengthened national coordination. 9 Performance TriggedBenchmarks for the APL Program and for Each Phase. In the original specification of the COREMAP APL, key benchmarks were establishedto enable the Bank to assist the Indonesian government to prepare subsequent program phases (see Table B1: COREMAP APL At-A- Glance). 'ableB1: COREMAP APL At-A-Glance COREMAP Phase Z PhaseIZ Phase ZIZ Program Initiation Decentralization & Acceleration institutionalization Phases Years 1998-2004 2004 -2009 2010-2015 Development Viable Eramework for a Viable reef management systems liable reef Objective national coral reef system established in at least six priority nanagement systems in Indonesiaestablished. Districts, through a financially stablished inpriority sustainable programthat is nationally ites, operational, coordinatedbut decentralized in hlly decentralizedto implementation, in order to empower and egional govemments to support coastal communitiesto md institutionalized. sustainably co-manage the use of coral reefs and associatedecosystemresources, which will revive damagedor preserve intact coral reefecosystems and intum, enhance the welfare of these communities inIndonesia. 'rogram Key Program N a t k ~Program ~ l nstitutionalization Inputs framework and pilot site Expansionof site management md full management iecentralization Program Selayar district, S. 3elayer and Pangkjene Kepulauan, S. Locations Sulawesi province; Mawesi; Buton, S.E. Sulawesi ;Sikka, To Be Determined Biak district, Papua VTT; Biak and RajaAmpat, Papua province Benchmarks (la) National COREMAP :2a) Satisfactory institutional capacity at :3a) COREMAP for Subsequent Program strategY/PolicY irovincial and district levels programstrategy Adaptable discussed with key :2b) Compliance rates increasing incorporatedinto Loan and stakeholders; BAPPENAS :2c) Declining trends inmobile threats national policy Grant Ministerial Letter issued, md destructive practices (3b) Site planningand Financing recommendingstrategy to :2d) Coral reefplans implemented implementation involved agencies; satisfactorily accordingto program following program COREMAP I1sites ndicators in>60% of sites strategic priorities, designed inaccordance :2e) 75% of outputs and disbursements and fully with strategy eeached; COREMAP I1satisfactory decentralizedto (1b) Institutionalcapacity regions evaluated as sufficient to (3c) Program expand program sustainability ensured (1c)Compliance rates > (e.g. through block 10%inpilot sites grants to regional (Id) Community-based govemmentstied to management pilots local performance) evaluated as workable (3d) At 75% of sites, models coral reef (le) 75% of outputs and management plans disbursementsreached; endorsed by local COREMAP Isatisfactory authorities and implemented satisfactorily by local communities according to program indicators Based on a detailed assessment and review, an IUCN-led independent evaluation of the first phase (entitled Independent Evaluation Report: Coral Reef Rehabilitation and Management Program 10 (COREMAP) Phase 1) concluded that the above benchmarks for the first phase were sufficiently met, allowing for the Bank to assist inthe preparation o f the second phase. This conclusionwas based on the development and establishment of a comprehensive framework and program of national policy, monitoring, control and surveillance (MCS), public awareness, information and monitoring; and research insupport of coral reef management duringPhase I,which could guide and assist inthe implementation o f Phase 11. More specifically, the assessment indicated: (i)institutional capacity was sufficient to warrant expansion given the new context of decentralization; (ii)community-based management pilots were workable models and the lessons were incorporated into the design of Phase 11; (iii) over 75 percent of the outputs and disbursements were reached; (iv) a very high level of community involvement in coral reef resource management was achieved in a few pilot areas, resulting in a significant reduction in illegal and destructive fishing and coral mining in most of the pilot sites by more than 50%; (v) greater public awareness of the importance of coral reefresource management was generated; and (vi) stronger political will for coastal resource management and poverty reductionexisted at all levels o f government. Adaptive Learning Through COREMAP APL. The COREMAP APL represents the first time any developing country has initiated a program of such scale to target the sustainable management of coral reefs and associatedecosystems. For this reason, Phase Iwas designed to test approaches in several pilot sites, in order to generate lessons learned to inform the design of an expanded number of priority coral reef sites in Phases I1and 111. As such, Phase Igenerateda wealth o f information and experiences which are reflected in the design o f Phase I1(see Section B.4: Lessons Learned). In addition to adapting the design of Phase 11to reflect these lessons learned, significant institutional developments have taken place inIndonesia over the course of Phase I,in the form of decentralization. Decentralizationhas created an opportunity to adapt the approach for coral reef ecosystem management in Phase 11, placing greater emphasis on local government implementation and community responsibility than was originally envisaged at the outset of the APL. As a result, the national strategic framework for coral reef management inIndonesiais one o f collaborative management or eo-management,where communities are legally empowered to collaborate with local governments to sustainably manage coral reefs and associatedecosystems for which they are dependent on for their livelihood. 2. Project(Phase 11) Development Objective and Key Indicators The development objective of COREMAP Phase I1 is that viable reef management systems are established in at least six priority Participating Districts, through a financially sustainable program that is nationally coordinated but decentralized in implementation, in order to empower and to support coastal communities tosustainably co-manage the use of coral reefs and associated ecosystem resources, which will revive damaged or preserve intact coral reef ecosystems and in turn, enhance the welfare of these communities inIndonesia. This means changing the behavior o f coastal communities from destructive to sustainable use practices. In order to meet this development objective, Phase I1activities focus on achieving three key groups of outcomes, with several key indicators for each: (a) improved awareness, empowerment and sustainable management of coral reef ecosystems in program sites (management and empowerment indicators); (b) improved health of coral reef ecosystems (including replenishmento f coral reef fish and invertebrates) in program sites (biophysical indicators); and (c) enhanced community welfare (i.e. community development and economic diversification) o f coastal communities in program sites (socio- economic/poverty indicators). The key indicatorsfor measuringthe success of Phase I1activities toward achievingthese three groups of outcomes are (see Technical Annex 3: Results MonitoringFramework): 11 management and empowerment indicators: fully protected marine conservation areas (`no take zones') established and covering 10% of target district reefs by 2010; financial sustainability of ongoing coral reefmanagement activities at the end of Phase 11; and public awarenessabout the importance of coral reefs increased in all program districts. biophysical indicators: increased live coral cover (keystone indicator among a basket of additional reef health indicators); and increased catch per unit effort of key reef fish and invertebrates from baseline. socio-economic and poverty indicators: income and living standards in target coastal communities greater than non-program sites and pre-program conditions; and perceptions of fisherdbeneficiaries in program districts of the impact o f the program on their welfare and economic status. 3. Project(Phase 11) Components COREMAP Phase I1will support the following components, sub-components, and activities (with total base costs in millions of U.S. Dollars in parenthesis). Objectives of each sub-component and detailed descriptions of each activity identifiedbelow are found inTechnical Annex 4: DetailedDescription. (A) Institutional Strengthening (Base Cost - US$16.6m). The objective o f this component is to enhance government institutional responsivenessto meet the needs of coastal communities, in support of collaborative management of marine reserves and other marine protected areas. This component will provide technical assistance, human resource development, and legal input to support a paradigm shift from centralized to local management o f coral reefs and associated ecosystems enabled by laws U.U.22/99 and 25/99 and inaccordance with KMK 35. It strengthens decentralized and collaborative management of coral reefs and associatedecosystems. This component would support the following sub-components and key activities/outputs: (1) Program Coordination, M&E, and Training (Base Cost US$9.lm): (i)support for the National Coordination - Unit (NCU); (ii)support for national monitoring, evaluation, and feedback o f program activities; (iii) support for training coordination and national level workshops and training during the first 3 years of Phase 11; (iv) training to enhance management capacity of PMUs and coordination between N C U and PMUs; and (v) identification o f 6 additional Districts for Phase I11 participation; (2) Coral Reef Research and Monitoring--CRITC (Base Cost US$7.0m): (i)national CRITC support; (ii)district - reef health monitoring; (iii)district fisheries monitoring; (iv) socio-economic data collected, analyzed and disseminated; (v) support for local research; (vi) innovative grants; and (vii) coral reef education support; (3) Legal, Policy and Strategy Assistance (Base Cost - US$O.Sm): (i)support to legalize program structures; (ii)technical assistance to N C U for national policy assistance; (iii)technical assistance to Districts to assist the creation and implementation o f enabling legislation (perdus),technical assistance to communities to assist in the creation and implementation of enabling legislation (pedes); (iv) enhancement and dissemination o f the National Coral ReefManagement Strategy developed under Phase I;(v)developmentanddisseminationof aRegionalCoralReefManagementStrategyandaSustainable Reef Fisheries Management Strategy; and (vi) support for live reef fish trade (LRFT) policies, strategies and proposed program. 12 (B) Community Based and Collaborative Management (Base Cost US%41.6m).The objective of - this component is to empower all coastal communities and institutions throughout program districts to sustainably co-manage coral reefs and associated ecosystems to increase incomes, which will in turn enhance community welfare. In Phase I1districts, coral reef resources (Le. fisheries) comprise one of the largest sources of potential revenue and food security available to coastal communities and local governments. Through replacing short-term exploitative practices with long-term sustainable economic benefits, communities and local governments can drive the development process, thereby reducing dependence on central government finance. For these reasons, this component will empower 416 coastalcommunities inthe first six districts to manage extensive and bio-diverse coral reef ecosystems in a cost-effective and sustainable way. Particularly, young and capable people both within communities, as facilitators and within government will be empoweredto drive this behavioralchange. The component would support the following sub-components and key activitiesloutputs: (1) Community Empowerment(Base Cost - US$14.0m):(i)sustainable coral reeffisheries training; (ii)social marketing of sustainablecoral reefmanagement, Programand rapid rural appraisal; (iii) community study tours and cross visits; (iv) village facilitation and technical assistance; (v) establishment of village coral reef information centers; and (vi) communication networks such as two-way radios; (2) Community-Based Coral Reef Management(Base Cost US$6.6m): (i) - detailed participatory village resourceassessments and mapping; (ii)preparation of scientifically supportedvillage Coral ReefManagementPlans and inter- village plans legalizedbyperdes '; (iii) establishmentof village sanctuaries supportingdistrict sustainable reef management plan; (iv) inventory of fishers, vessels, gear and holding facilities and development of fisheries management; (v) pilot decommissioningof destructive fishing gears in selectedvillages; (vi) on- going community monitoring of reefs and associated ecosystems; (vii) collaborative surveillance and enforcement (MCS); and (viii) strengthen and expand community based management areas; (3) Community Development (Base Cost - US%lO.lm): (i)establish and operate village financial management system to manage public funds; (ii)technical support to BMTLKM (or similar micro finance institution) to establish village branches in participating villages; (iii)support revolving credib'savings facilities in each participating village for livelihood and income generation activities; (iv) technical supportto review, revise and implementproposed income generationactivities; (v) block grants for village improvements; and (vi) provision of income opportunities outside program villages; and (vii) block grants to districts to support small and medium size enterprises(4) District Marine Conservation Area Management (Base Cost -US$7.lm): (i)support to formally establish and maintain District Coastal Community Empowerment Boards and Sub-District Committees; (ii) establish District Program ManagementUnitsto support co-management; (iii)develop District Marine Resources Strategic Plan and establish a protected areas network; and (iv) establish sustainable management of certified live reef species trade in two pilot areas, Spermonde islands and Buton; (5) Marine Park Support (Base Cost - US$3,7m): (i)strengthen PHKA capacity to support co-management of marine protected areas, (ii) learning exchanges between marine park managers; and (iii)strengthen national marine park and KSDA co-management, including (a) training, (b) technology support, (c) collaborative enforcementsupport, and (d) national parWKSDA management plans reviewed, revised, and socialized using participatory techniques. (C) PublicAwareness, Educationand Sea Partnership(Base Cost US$11.7m). The objectiveofthis - component is to promote societal awareness to the benefits of coral reef ecosystem conservation and sustainable use that leads to behavioralchange. This component aims to address the knowledge gap in Indonesiaof the benefits of sustainable coral reef managementand thereby support the realization of behavioralchange. Toward this end, PhaseI1will seek to empower children and youth through an education and scholarship program that will assist in moving away from reef destructive behavior, key stakeholders through advocacy, local government and communitiesthrough technical assistance and awareness campaigns. 13 The component would support the following sub-components and key activities/outputs: -(1) Public Awareness Campaigns (Base Cost - US%3.lm):(i)support to reproduce and disseminate existing successful materials (phase one, donor, NGO) to program provinces, districts and villages; (ii)create, produce and disseminate new materials supporting co-management and its reef-fisheries benefits to program provinces, districts and villages; (iii)establish and operate national, provincial, district and village awareness and advocacy programs; and (iv) support to independent journalists and media; (2) EducationProgram(Base Cost US$4.0m):(i) - develop and produce coral reef education materials for inclusion into the formal primary and secondary education curriculum in each program district; (ii) program district teacher training; and (iii)national reef education events for children and youth; (3) Sea PartnershipProgram(Base Cost US$4.5m):(i)establish and support National Sea Partnership office; - (ii)deploy advisory groupexpertise;(iii)universityfaculty secondedandplacedindistricts to support program activities; (iv) secondary, university and graduate scholarships and post-education placement to support program activities; (v) creation o f "think tanks" for responsive research at 5 universities/research centers; and (vi) expansion o f existing practical field training program to support village-based program activities; (4) Program Support Communications (Base Cost - US%0.2m): (i)phase two communication protocols (vision, logos, branding, letterhead); (ii)media training for key program representatives; (iii)internal communication system; (iv) info-sheets and newsletters; and (v) public relations to generate a clear and common understanding o f phasetwo programto targeted audiences. Basisfor Selection of (Phase II)Program Components & Key Sector Issues Addressed. The secondphase program components were selected in order to assist the Government o f Indonesia to address the two key sector issues identified in A.l: (i)the pervasive poverty in coastal communities; and (ii)the extensive degradation o f coastal resources, particularly coral reef ecosystems. The Community-Based and Collaborative Management (CBM) component (and supporting sub-components in the program's design) is the heart of the program's efforts to address these key sector issues. It absorbs roughly sixty percent o f the program's resources (see Technical Annex 5: Project Costs). The CBM component will advance the key strategy o f the government to assist rural coastal communities to implement effective and fully- protected marine conservation area management in coral reef ecosystems, which would both increasethe welfare of these communities and remedy the degradation of the coastal resource base. For this component to be effective, government institutions will needto be strengthened, through the Institutional Strengtheningcomponent. This component coordinates and provides decentralized support to rural coastal communities in program sites. Similarly, resource users and decision-makers at all levels need to be educated in collaborative coral reef ecosystem management. For this reason, the second phase program will be supported by a Public Awareness, Educationand Sea Partnership component. 4. LessonsLearnedand Reflected inthe Program(Phase 11) Design This second phase program directly reflects the lessons learned from Bank-financed operations such as COREMAP Phase I,Kecamatan Development Project, Kerinci Seblat Integrated Coastal Development Project and the Bank's ongoing analytic work on key themes such as Governance/Anti-Corruption,and Decentralization. The design also reflects innovations from a multitude o f non-Bank financed projects and programs. First, as the secondphase o f an adaptable program loan, this program is designedfrom the 60-plus lessons learned from COREMAP Phase I, as identified in the IUCN-led Independent Evaluation entitled Independent Evaluation Report: Coral Reef Rehabilitation and Management Program (COREMAP) Phase 1. This evaluation suggests that the limited geographical coverage o f Phase Iresulted in limited impacts on altering coral reef use patterns throughout the region, and improving institutional effectiveness to coordinate coral reef management. These results have been attributedto: (i)the inherent complexity of coral reef management and poverty reduction, particularly at the initial stages o f such initiatives; (ii) limited resources available for community-based management and alternative income-generating activities; (iii)the lack o f a supportive legal framework and weak enforcement o f regulations; (iv) 14 fragmented field implementation due to lack of cohesiveness between financing agencies and Project components; (v) the lack o f a strategic approach and capacity in local government agencies to meet their enhanced role under the Law 22/1999 for management o f inshore marine resources; and (vi) inadequate provision o f basic social services and few tangible returnsto poor coastal communities. Key lessons from phase one that have been included into the design of the secondphase include: (a) communities should be placed at the center of coral reef ecosystem management; (b) coral reef ecosystem management is most likely to be sustainable when local governments form partnerships with coastal communities (Le. collaborative management); (c) collaborative coral reef ecosystemmanagement is aprocess, and must be implemented as such, rather than in a compartmentalized or fragmented approach focused on individual components; and (d) as a result of the 1999 laws (laws 22 and 25) supporting decentralization, district governments should be charged with program implementation, with coordination and support from national government. This conclusion by the Phase IIndependent Evaluation that program implementation for Phase I1should be decentralized was supported by the OED Project Performance Assessment Report (PPAR) of COREMAP Phase Icompleted in January 2004. The PPAR noted (see para. 50, pg. 13) that extensive delays between community-level decisions and responses from the centralized project management in Jakarta were the most important source o f complaints recorded inthe evaluation of Phase I.As stated in the PPAR, the decentralized design for decision-making and approvals in COREMAP Phase I1 is expected to resolve this problem. Inaddition, the secondphase program also benefits from experiencesfrom the Bank-financedKecamatan DevelopmentProject (KDP) inIndonesia. Specifically, Community Empowerment is now the first step in the process towards introducing collaborative management in program sites, and energizing the coastal communities to work together to find solutions to local resource management problems. Furthermore, funds will be transferred directly to the communities to support the community side of collaborative management initiatives, based on the example set by KDP. The poor performance of the recently completed Bank-GEF financed Kerinci Seblat ICDP in Indonesia was due in large part to a lack of capacity and institutional constraints inthe park management authority. For this reason, COREMAP Phase I1has allocated a specific, but integrated sub-component designed to strengthenthe national marine park management authorities link to District government inprogram sites. Similar to COREMAP Phase I,Kerinci Seblat ICDP suffered from a lack o f integration between components and implementinginstitutions. The in-depth analytic work around anti-corruption issues in Indonesia [Anti-Corruption Guide: Developing and Anti-Corruption Program for Reducing Fiduciary Risksfor New Projects. Lessonsfrom Indonesia; Fighting Corruption in KDP; Fiduciary Managementfor Community-Driven Development Projects: A Reference Guide; INDONESIA: Corruption in Indonesia, A development Perspective] forms the basis of the program's Anti-Corruption Strategy (see Technical Annex 7). More specifically, the second phase program will develop transparent and accountable village-based financial management systems to allow funds to be disbursed directly to communities. The second phase also incorporates several key innovations outside of Bank programs. Information was collected from a wide range o f sources, including: Decentralized and Community driven Natural Resources Management initiatives currently being undertaken in Indonesia and South East Asia. These initiatives include lessons from the USAID supported Coastal Resources Management Projects in Philippines and Indonesia; Multi-donor initiatives in resource management and community participation in East Kalimantan, North Sulawesi, Lampung and Papua, UNESCO initiatives in Jakarta Bay, International NGO conservation initiatives inKomodo, Bali, Philippines and The Federated States of Micronesia and Fiji (World Wide Fundfor Nature, The Nature Conservancy, Locally ManagedMarine Area Network, International Maritime Alliance, Marine Aquarium Council); Initiatives in legal reform 15 led by the International Centre for Environmental Law, Transparency International, Indonesian Corruption Watch and Oxfam. The management tools promotedby the proposed Program are in line with internationalconsensus, COP V (South Africa) and the September 2003 G8 + UNResolution calling for sustainable marine resource managementthrough marine protected areas. 5. AlternativesConsideredand Reasonsfor Rejection Alternative Approaches Considered.The following alternative approaches were considered and rejected: 0 Top-down only:.CentralizedProgramImplementation. The Program considered maintaining a Program Management Office (PMO) and all key implementationresponsibilities at the National level. However, in light of the Government's directive and policy shift towards decentralization and based on Phase Ilessons learned, the approach for Phase I1emphasizes national coordination (through a National Coordination Unit--NCU), with program implementation responsibilities at the District level (inProgram Management Units--PMUs). Moreover, inline with the Ministry o f Finance directive KMK 35, 2003 any program implemented with the support of foreign loans, must be initiated by a program design originating from the district government, that is approved by both District Head(Bupati) and District Parliament (DPRD) bodies. 0 Bottom-uponly: Community-based Program Implementation. The Program also considered bottom-up approaches that emphasized placing all responsibilities for coral reef ecosystem management with coastal communities. However, lessons from Phase I, as well as good practices and experiences throughout East Asia and the Pacific Islands, have shown that for some key functions of coral reef ecosystem management, such as the legal authority to manage, monitoring ecosystem health, and support in reducing destructive fishing, communities do need help from external partners, generally local government. For this reason, the Phase I1Program's approach aims to establish a common ground between solely top-down or bottom-up approaches, by establishing partnerships between coastal communities and local government, to enable the two partners to collaboratively managethe associatedcoral reefecosystems. C. IMPLEMENTATION 1. PartnershipArrangements Although several donors funded individual but complementary program components in COREMAP Phase I(see Section A.2.), in the second phase, the Asian Development Bank (ADB) will finance Program activities in western Indonesia as a stand-alone project, while The World Bank and the Global Environment Facility (GEF) will finance all program activities in eastern Indonesia as well as a public awareness campaign. Both ADB project and Bank-GEF program, however, fall under the national COREMAP umbrella and are coordinated by the National Coordination Unit (NCU) in the Ministry for Marine Affairs and Fisheries and by BAPPENAS. 2. Institutionaland ImplementationArrangements COREMAP is a nationally coordinated and decentralized program in implementation. National Level Responsibilities. The Ministry of Marine Affairs and Fisheries (MMAF) is the Program's Executing Agency (EA). On 5 February 2003, the MMAF Minister issued a decision letter [Surat Keputusan (SK)] No. KEP.O3/MEN/2003 with endorsement from eight other Ministries and line agencies outlining the national institutional structure for Program coordination and implementation. This SK defines structures and duties as well as assigning government officers to positions. A National Steering 16 Committee (NSC), National Technical Committee (NTC) and National Coordination Unit (NCU) are formed, which are responsible to the MMAF Minister reporting through the Director General, Coasts and Small Islands (DGCSI), MMAF. These national committees provide oversight, technical advice and national coordination support to COREMAPPhase 11, respectively. National and Regional Marine Parks Authority. National marine parks in Indonesia have unique authority/status under decentralization. First of all, even though they fall under the institutional authority o f the Ministry of Forestry, they are allowed to solicit and receive funds directly from outside sources and use those funds to manage the national marine park, which are located at the District level. InPhase 11, 2 national marine parks and 4 regional parks (KSDA) will participate. The Ministry of Forestry will have qualified staff supported by full timejunior technical staff working inthe N C U as an Assistant Director, and there will be specific budget earmarked at the national level for support of the 2 national parks (each o f which will have apimbagpro to access these funds). Each o f the KSDAs have full time representation to the District PMU, which have a separate budget for KSDA park management activities through a Pinlak or PemegangUang Muka Kerja(PUMK) to access these funds (and subject to yearly evaluation). Provincial Level Responsibilities. The Provinces will play a facilitating and coordination role and will not be directly responsible for implementation. Provincial functions will focus on (a) monitoring, evaluation and feedback, (b) strengthening district government capacity through technical support, training and workshops, (c) public awareness support, (d) control and surveillance support, (e) developing provincial strategic plans for coral reefrehabilitation and management and based on the district plans, (f) developing local government regulations (perdas) to deal with destructive activities, (g) coordination o f Navy and Police in line with COREMAP Phase I1objectives, and (h) registering fishing vessels from 10-30 Death Weight Tons (DWT). District & Sub-District Level Responsibilities. In each District, a Coastal Community Empowerment Board (CCE Board) will be created through a Bupati SK and after demonstrated to be effective, it is encouraged to be legalized through a District Government Regulation (perda). CCE Board-mandated activities include: (a) oversight, (b) conflict resolution, and (c) review and endorsement o f annual implementation plans. The detailed program planning, implementation, and evaluation will be executed by a District Program Management Unit (PMU), comprising of key local institutions. The proposed institutional location o f each District PMU is as follows: Dinas DKP (Buton, Pangkep, Raja Ampat, Selayar and Sikka), Bappeda (Biak). EachPMU is responsible for program management and procurement for district activities. Each PMUhas a full-time procurement and financial management capacity-building technical assistance consultant. Sub-District Coastal Management Coordination Committees (CMC Committees) for productive and conservation activities will be established as deemed necessary by the districts. Village Level Responsibilities. Approximately 416 villages are likely to participate in Phase I1 implementation in six districts. Each village will be empowered through local ordinances to co-manage the coral reefs and associatedecosystems. Village institutions established under the program include: (a) financial management system for transparent and accountable record-keeping for all program funds earmarked to the village, including trained, certified and elected village financial manager and an assistandbookkeeper, (b) village reef watchers to collaboratively enforce village rules governing the village sanctuary and ensure no destructive fishing takes place, (c) faith-based savings and loans institution linkedto already established BMTsLKMs or equivalent institutional and accountability set-up for income generation groups, and (d) formal coral reef education program for children and youth. Implementation of Components. The N C U in MMAF will be responsible for coordinating the implementation o f Component A: Institutional Strengthening, although individual N C U member institutions will more directly implement and/or coordinate various sub-components. (e.g. LIP1will be responsible for coordinating the Coral Reef Research and Monitoring sub-component). The 6 District PMUs, National Marine ParksKSDAs and approximately 416 Communities will be responsible for the 17 implementation of Component B: Community-Based and Collaborative Management, across program Districts. Finally, MMAF and LIPI will be jointly responsible for oversight and coordinating the implementation of Component C: Public Awareness, Educationand Sea Partnership. MMAF will take the lead on Public Awareness and Sea Partnership. LIPI will take the lead in coordinating and implementing with the districts the Educationsub-component. Flow of Funds & Reporting. Funds will flow in accordance with the provisions set forth under Kepmen 35/2003 (KMK 35) - Regional Government ProjectsPrograms, that sets the framework for regional borrowing and grant financing. Under KMK35, the terms of the financing depend on the fiscal capacity of the receiving kabupatenwhich are categorizedas low, medium or high. It is proposedthat COREMAP Phase I1will operate in three designated low and three designated medium fiscal capacity kabupatens in eastern Indonesia.The KMK mechanism is an interim mechanismdeveloped by the Ministry of Finance, as they progress towards developing a meaningful intergovernmental fiscal managementkransfer framework for a newly decentralizedenvironment. Under the provisions of KMK 35, the investments proposed for COREMAP Phase I1are non-revenue generating, andhence do not attract cost-recoveryprovisions; project funds would therefore be transferred to local governments as a grant. Local Governments would, however, be required to contribute counterpart financing in accordance with the provisions of KMK 35 (10 percent for low and 40 percent for medium fiscal capacity). Provision has been made to ensure that those three districts designated as medium capacity are only required to provide 10 percent counterpart funds, with GEF-grant resources contributing to their remaining obligation under KMK35 (see Technical Annex 9: Incremental Cost Analysis). Generally, Bank-GEFfunds will flow directly from the Bank Indonesia(BI) SpecialAccount andthrough Bank Indonesia to a local bank where funds will be held to support the relevant national government institutions, district governments, and villages responsible for implementing 'specific components, sub- componentsand activities financed by the second phase program(See TechnicalAnnex 6B). At the National level, funds will flow from the World Bank to a Special Account for COREMAP Phase I1established in Bank Indonesia(BI) to a BIBranchbank account establishedto support activities of the national coordinating agency, MMAF-DGCSI to support activities of the NCU. In addition, funds will flow directly from a BI Branch bank account established to support other agencies represented in the NCU for them to coordinate and implement those activities for which they will be directly responsible. For example, funds will flow directly to LIPI to operate the National Coral Reef Information Training Center. Financial reporting is the responsibility of the NCU's Project Manager (Pimpro) in MMAF, in conjunction with the Coordinator for Monitoring, Evaluation and Feedback, and the Project Manager in the PIUinLIPI. According to design, Provincial Government plays a facilitating and coordination role and will not be directly responsible for implementation. A system has been designed by each district to request provincial skills on demand. This has been approved in principle by each province. Funds to support Provincial coordinationandtheir activities will come throughthe NCU, and particularly, MMAF/DKP. At the Districtlevel, Phase I1funds will flow from the BI Special Account through aNational BIBranch to a local Bank at the District usedto implement activities at the district level. The second phase program will support a district financial management specialist consultant in each PMU to advise on all financial and procurement arrangements made at the district and village levels. Financial reporting is the responsibility of the District Program Manager in the PMU. Quality control and review is the responsibility of the NCU. This supports the overall approach of the second phase program: a nationally coordinated, but decentralizedprogram in implementation. 18 At the Village level, funds will flow from the National Special Account through the National BIBranch to a local Bank account established for each participating village in order to support community income generation and co-management activities, and village mapping exercises. Financial reporting is the responsibility o f each program trained village financial management system head with oversight from the PMU. 3. Monitoringand Evaluationof Outcomes/Results The data for the second phase program's three key groups of outcomes and accompanying results indicators will come from different sources, depending on the specific outcome o f interest (see Section B.2. for the second phaseprogram outcomes). For the management and empowerment results indicators, the Phase I1 program will finance a monitoring and evaluation sub-component which will build the capacity for the National Coordination Unit (NCU) and PMUs to evaluate and document management effectiveness, as well as the National Marine Parks, and for the Community Facilitators (CFs) and Senior Extension and Training Officers (SETOs) to report on village-based management indicators. For the biophysical results indicators, the Phase I1program will finance the establishment of district reef health monitoring teams in each program district, with the capacity to collect and analyze biophysical indicator data for coral reef ecosystem health, based in part on data collected by village fisheries monitoring groups. For the socioeconomic andpoverty indicators, the Phase I1program will finance household surveys across selected participating program villages conducted by village facilitators and experts in survey methods. Moreover, the National Susenas and Census data will be analyzed to reflect changes in a range o f socio-economic indicators of participating and non-participatingvillages. The final repository for all results indicators is the National Coordination Unit's Results-Based Monitoring, Evaluation and Feedback Unit, which will report regularly to the Bank. However, all relevant information for each District will be posted at the PMU and for each Village at the program- financed village coral reef information centers. Capacity buildingefforts will include on the job training for the relevant staff o f the NCU, PIU, PMUs, district monitoring teams, and communities involved in program implementation. A baseline for each indicator will be in place by the end of the first year of program implementationfor the purpose of M&E. The mechanisms that will allow the indicators to be used by managers and policy-makers to assess the program's effectiveness during implementation and after the second phase program is completed is as follows: 0 Managementand Empowermentindicators. The management indicators will be collected from the PMUs and summarized by the N C U on an annual basis. An annual report will be usedto disseminate key results. 0 Biophysical indicators. The district reef health monitoring teams will analyze, summarize and disseminate the results from reef surveys and community-based monitoring to the NCU, PMUs and program extension teams on a regular basis. This data will inform the designation of marine reserves and guide their ongoing management by informing communities and stakeholders on the status of coral reef ecosystem health and the improvements, if any, in the coral reef fisheries. The district reef health monitoring teams will also distribute these results to the National Marine ParkKSDA Authorities, inorder to inform marine park management. 19 Socio-economic and Poverty indicators. Qualitative and quantitative data will be collected and analyzed with the assistance of the PMUs and district monitoring teams, and sent to the NCU for inclusion inannual program reports. Analysis of census data would be the responsibility of the PMU. 4. Sustainability The issue of sustainability is examined from the perspective of institutions, policies, finance, and partnerships. Institutional changes, supportive policies, finance arrangements, and key partnerships formed at each level (national, district and local) are all necessaryto ensure sustainability o f the reefs and o f this program. This is not easy to achieve. An incentive-based approach to sustainability is mainstreamed throughout the program, with the assumption that unless the program identifies appropriate incentives for all stakeholders to conserve coral reefs and associated ecosystems, it is unlikely to find much success. Institutions. Collaborative management of the reefs (a legal agreement between local government and coastal resource dependent communities, giving responsibility to these communities to manage reef resource areas with the commitment of local government responsiveness to their needs in this endeavor) through reserves is the pillar of COREMAP Phase 11. While their incentives for doing so vary, all key institutions (National, District, and Community-Based) subscribe to this. Policies. A Ministerial Decree issued by Ministry of Forestry and a Memorandum o f Understanding (MOU) between Directorate General of Forest Protection and Nature Conservation, Ministry of Forestry and Directorate of Coasts and Small Islands, Ministry o f Marine Affairs and Fisheries makes collaborative management the key mechanism with which to manage coral reefs and associated ecosystems. Regulations will be formulated at the village (perdes)and District (perdus) in support o f marine reserves and collaborative management. Moreover, the Fisheries Law (UU no. 9/1985), and The Conservation of Living Resources and their Ecosystems Act (UU No. 5/1990), includes a key Act on Coral Reef Conservation, as well as related existing Perdas that do not allow destructive fishing practices to be carried out. Finance. Through implementation, the financing share contributed by Districts toward coral reef conservation will increase, with the Bank-financed share proportionally decreasing. A similar decrease in the Bank's financing share exists as the program progresses to the third phase. Specifically, the Bank-GEF will finance the initial capital costs of collaborative coral reef ecosystem management in each program district (e.g. village public infrastructure, monitoring and enforcement infrastructure, initial costs o f promoting alternative livelihoods to fishing and economic diversification in coastal communities). Moreover, District governments will cover an increasing share o f the recurrent and operational costs. Many of the supported activities are scheduled to be completed before the completion of Phase I1of COREMAP, with all remaining components targeted to be affordable within existing District level finance. The Bank will assist them in identifying permanent budget structures to finance post-program activities and identify other permanent funding mechanisms. Partnerships. COREMAP cannot protect all o f Indonesia's important coral reef ecosystems alone. The program needs the help o f global, regional, and local partners to achieve the program's mission. The program will work with development banks, bi-lateral donors, national and local governments, civil society groups, communities, the private sector and research institutions. This program creates the national framework inwhich all partners can work together (interms of resource mobilizationand knowledge sharing) and toward achieving the program's overall objective. Fortunately, there are many partner organizations already working together in preparingthe second phase program. 20 5. Critical risksand possiblecontroversial aspects I Risks RiskMitigationMeasures RiskRatingwith Mitigation Toprogmm developmentobjective Riskthat program activities are Based on lessons learned from Phase I unable to change behavior o f coastal and good practices around the world, M communities from destructive to the program will provide significant sustainable coral reef use practices; amounts of technical assistance for facilitation, extension, consultation, legal support, education, and awareness raising activities. Riskofpoor coordination between The Bank-GEF will finance District N donors, and therefore donor-financed Program sites ineastern Indonesia and consultants, leadingto poor program ADB inwestern Indonesia as the management, coordination and equivalent of a stand-alone operations. performance. N C U established for national coordinationand harmonizationo f Bank and ADB-financed COREMAP projects; Districts responsible for implementation. Inherentfiduciary risks arisingfrom Continue country dialogue to expedite S weaknesses incountry control public financial management reforms environment and financial and introduce project specific measures accountability systems. such as enhanced financial reporting and additional payment validation Drocedures. To component resiilts A. InstitutionalStrengthening. Establishment of a District CCE Board M Riskof inadequatecoordination (insub-component 4 ofComponent B) between national marine park and Chairedby the Bupati (invitations authorities and district government in are sent from the Bupati's Office) that programsites leading to fragmented includes marine park authority and local implementationthat fails to provide government representatives (serviced by communities with the services that the PMU) to ensure coordination and they needto sustainably co-manage resolve any conflicts that might arise coral reefecosystems. with respect to issues ofjurisdiction. FulltimeNational Parkrepresentation inPMU. B. Community-Basedand Intensive public awareness and ColIaborativeManagement. education campaigns; empowering Risk ofa lack of interest, buy-inor communities to opt-in to program rather N willing participationby one or more than participation due to program pre- communities inprogram districts to selection; providing real benefitto sustainably manage coral reef communitiesto encourage participation. ecosystems. C. PublicAwareness,Education Establishment o f Public Awareness and Extension. Dueto national capacity at each PMU, providing N 21 level implementation, riskthat materials and technical support for the awareness materials: (i) do not reach program's Public Awareness and target audiences; (ii) do not Education components. District PA TA adequately address localneeds; (iii) will work closely with LIPI and the do not adequately or appropriately NCU, to ensure program extension present the monitoring data collected teams have appropriate andeffective by the district monitoring teams. awareness and educationmaterials. S Financialmanagement Risks arisingfrom weak internalcontrol Community disclosure andoversight systems andpayment validation mechanisms andmore intensive procedures. payment validationprocedures. 6. Loan/Credit/GrantConditions and Covenants Conditions ofNegotiations: 0 Establishment of N C U in MMAF, PTU in LIPI and PMUs in six proposed districts and appointment of qualified staff (includinga qualifiedproject manager inNCU, PIU andPMUs) in accordancewith the institutionalstructure agreedto inthe DPIPs. Adoption by NCU, PIU, and PMUs of Environmental and Social Impact Management Framework (ESIMF) andGovernance/Anti-Corruption Strategy, satisfactory to the Bank. 0 Completionof draft Operational Manuals (Financial ManagemenVProcurement Manual andCBM Manual), satisfactory to the Bank. 0 Completion of the Terms of Reference (TOR) for procurement and financial management capacity building consultants, audit of project financial statements review firm, community facilitators and senior extension training officers, and other technical assistant consultants, satisfactory to the Bank. Conditions of LoanlCredilGrant Effectiveness: 0 Project financial management consultants to be selectedbasedon TORSapprovedby the Bank. 0 All Implementation Manuals (CBM, Collaborative Enforcement, Research and Monitoring Protocols) adoptedby N C U andparticipating District PMUs andthe NPIU. CovenantsApplicable to ProgramImplementation: 0 The Government o f Indonesia (GOI) shall maintain until completion o f the Project the National Coordination Unit with adequate funds and other resources and staffed by qualified and experienced personnel including a N C U Director; an Executive Secretary; a Program Manager assisted by personnel from the Ministry of Marine Affairs and Fisheries, LIPI, and from the Directorate General of Forest ProtectionandNature Conservation. 0 The GO1 shall maintain until completion of the Project the National Program Implementation Unit in LIPI, the National Coral Reef Information and Training Center, and the National Monitoring, Evaluation and Feedback Unit with adequate funds and other resources and staffed by qualifiedandexperiencedpersonnel. 0 The Districts shall maintain until completion o f the Project a Program Management Unit, with adequate funds and other resources and staffed by qualified and experienced personnel including a Head, a Secretary, a Program Unit Manager, a representative from the Dinas KP from such Participating District, and a representative from the National Marine Park or marine protected area and the Bappeda insuch ParticipatingDistrict. 0 The Districts shall establish a Coastal Community Empowerment Board, with representatives fromthe borrower and from civil society with terms of reference acceptable to the Bank. 22 e By June 30, 2005. the Districts shall establishuntilcompletionof the Projecta District Coral Reef Information and Training Center with adequate funds and other resources and staffedby qualified and experiencedpersonnel. e The GO1 shall adopt and apply in the implementation of the Project, the Project Management Manual. e By June 1, 2008, the GO1 shall establish an independent evaluation panel and cause such independent panel to carry out an evaluation of the Project by not later than March 1, 2009; and furnishthe results ofthe evaluationto the Bank andAssociationfor comments. e The GO1shall take all measures necessary to ensurethat any development project proposedto be carried in shall only be carriedif a satisfactoryenvironmental study of saidproposedproject shall have been completed and establishedthat any potential adverse effect on the Project site will be avoidedor mitigated. e The GO1shall make Grants available to Participating Villages up to an aggregate amount not to exceed Rp. 10,000,000 and ensure that the works are carried out in accordance with the provisions of the Agreement and the provisions of the Village Grant Guidelines. The GO1shall make Grants available to a Participating Village up to an aggregate amount not to exceed Rp. 50,000,000 and the adoption of a village plan for alternative income generation activities in accordance with the provisions of the Village Grant Guidelines; and ensure that a Subsidiary Loan Agreement, is entered into between the relevant Participating Village and the selected village financial institution. The GO1shall make Grants available to a ParticipatingVillage up to an aggregate amount not to exceed Rp. 50,000,000 upon the adoption by such Participating Village of a draft coral reef management plan; and ensure that the Sub-projects are carried out in accordance with the provisions ofthe Agreement andthe provisionsof the Village Grant Guidelines. The selected Sub-project by a Participating Village shall qualify as eligible for financing out of the proceeds of the Credit and the Loan only if the Sub-project is an investment project, is technically, socially and environmentally viable, and has been designed in accordance with the criteria andproceduresset forth in the Village Grant Guidelines, andthe Sub-project proposalhas been publicly discussed among, and agreed to by, the villagers in the Participating Village under the coordinationofthe LKMDor equivalent village institution. The Sub-project selected by a Participating District shall qualify as eligible for financing out of the proceeds of the Credit and the Loan only if the Sub-project is an investment project, is technically, socially and environmentally viable, and has been designed in accordance with the criteria andprocedures set forth inthe District Grant Guidelines. The GOI, in accordance with its commitment to the protection of the interests of Isolated Vulnerable People shall (a) take measures to protect customary user rights of IndigenousPeople; (b) ensure that the benefits received by the IndigenousPeople under the Project are in harmony with their economic, social and cultural preferences; (c) through a process of informed participation, to involve concerned Isolated Vulnerable People in the design and implementation of coral reef management plans; and (d) mitigate or avoid adverse effects on Indigenous People caused or likely to be caused by the Project. By November 30, 2006, the GO1 shall furnish the Bank and Association for comments a draft plan for the establishment and implementation of the partial credit guarantee program, including the description of specific policies and procedures for the program, and the reporting requirements and accounting procedures for the banking institution selected for the guarantee reserveaccount. e Not later than March 1 in each year, commencing March 1, 2006, the GO1 shall provide recommendationsof the studies carried out in the precedingyear and not later than September 30 in each year, commencing September 30, 2006, prepare action plans for the implementation of the recommendationsof the studies and the Bank's and Association's recommendationscarried out inthe precedingyear, and carry out each of such action plans. 23 The GO1shall carry out with a training plan, the trainings, workshops, awarenessactivities, rapid rural appraisal, study tours, and cross visits for community empowerment; and study tours for marine park support. The GO1shall (a) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, prepare, under terms of reference satisfactory to the Bank and Association, (b) furnish on or about April 30, 2007, a report integrating the results of the monitoring and evaluation on the progress achieved inthe carrying out of the Project duringthe period preceding the date o f said report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof duringthe period following such date; and (c) review with the Bank, by June 30, 2007, or such later date the report and take all measures required to ensure the efficient completion of the Project and the achievement of the objectives base on the conclusions and recommendations o f the said report and the Bank's and Association's views on the matter. D. APPRAISAL SUMMARY 1. Economicand FinancialAnalyses Poverty-Environment Nexus. Indonesia's coral reefs form the key ecosystem on which about 9,969 coastal and islandvillages rely for food, income generation, construction materials, coastal protection and other economic activities. They are also of critical significance for science, education, pharmaceuticals, global conservation, heritage and tourism. Healthy reefs can produce marine products worth $15,000/km2/yr, and have a tourism value estimated at $3,000/km2/yr in low potential areas to $500,000/km2/yr in high potential sites. These economic and financial benefits have been the source of Indonesia's drive to revive coral reefs and associatedecosystems through COREMAP. COREMAP Phase I1seeks to place 4,725 square kilometers o f coral reef in6 eastern Indonesian districts, 2 national marine parks and at least 6 regional marine parks (under 4 regional marine park authorities) under sustainable community-driven collaborative management by 2009. This constitutes 9.2% of the country's total coral reef area and over 60% of the Indonesian coral reefs currently under threat from destructive practices considered by coral reef scientists as still worth `saving'. Not only does the program seek to revive coral reefs and thereby rejuvenate the small-scale fishery that live on or around them, but indoing so, will improve the lives of approximately 125,000 fishers (approximately 21% o fthe total population inthe six program districts and over 50% of whom are considered subsistence fishers and poor) and their families dependent on the coral reef fisheries for their livelihood by at least US$3/day from the time the coral reef ecosystem is stabilized. By stabilizing and/or rejuvenating the fishery, approximately 70,000 poor fishers, and their average per capita income per day will increase by approximately US$0.23, thereby risingover the US$l/day per capita poverty threshold. EconomicAnalysis: B P V @? 10% over 25 years is US$15.6m per District; EIRR= 18%] Cost Benefit Analysis (CBA) was carried out for the phase two program, based on actual data collected from each of the six program districts and given the unique conditions o f the coral reefs such as their current productivity levels. The CBA at the district level capturesthe following three mainquantifiable benefits: (i)benefits from improved fisheries, (ii)benefits from local products derived from sustainable coral reef activities, and (iii)associated ecosystem use (including recreation and tourism). Program benefits are carried forward 25 years, which is the evaluation time horizon for the analysis. Significant benefits are expected to come from the fisheries sector: the voluntary closure o f reef areas by communities is expected to stabilize reef fish yields compared to the `without project' scenario where yields are expected to gradually decline over time (see figure D 1 below). The graphs give both a central case as well as a more optimistic and a more pessimistic case, to mimic the uncertainties regarding the benefits of no-take zones. The overall results from the COREMAP CBA is presented in Table D1. The quantifiable economic internal rates o f return range from 8% in Sikka district to 22% in Raja Ampat 24 district. The differences can largely be explained from the relative size and health of the reefs in the different districts. While the EIRR for Sikka could be consideredlow, the inclusion of this district inthe program is important since migratory fishers from Sikkaare partly responsible for destructive practices in Selayar and Buton, and therefore directly affect the financial viability in these two second phase locations. Q Pangkap Selayar Buton RajaAmpat Biak Sikka EIRR'central' (%) 13 20 20 22 13 8 Sensitivity and Risk Analysis. These estimates are rather sensitive to the assumptions (an extensive discussion of the assumptions used in this analysis is presented in Technical Annex 9: Financial and Economic Analysis), especiallythose relatedto trends in fish yields over time. Ifthe co-managed no-take zones are less effective, (e.g. because of continued illegal and destructive fishing practicesinthese areas), the EIRRs decline significantly, which highlights the importanceof collaborativeenforcementofthe no- take zones. Over 125,000 fishers in the program area (6 districts) are involved inreef-related fishing and are among the Program's key stakeholders. Under the program, their incomeswill stabilize as compared to the 'without project' case, where incomes are decreasingevery year, with a 50% or more drop assumed over the next 25 years 'without' this program. Table02: EconomicRates of Returnfor the 6Project Districts ('central' estimateand sensitivity) Pangkap Selayar Buton RajaAmpat Biak Sikka EIRR'central' (%) 13 20 20 22 13 8 EIRRhigh (%) 25 44 40 51 26 16 EIRRlow (%) undefined undefined 4 1 undefined undefined FinancialAnalysis: [NPV @ 10%over 25 years is US$28,000 per village; FIRR = 29%] A detailed financial analysis was carried out for alternative income generationmicro-enterprises likely to be supportedunder the program. The financial analysis estimated requirementsfor: (i)capital investment and working capital; (ii)profit and loss statement; and (iii)financial planning cash flow. The financial rates of return range from 16 to 59 percent, with 29 percent for a representative package of micro- enterprise investments (i.e. cold storage facilities, small-scale fish culture, seaweed farming, mud crab added, the switching values - the values for which the FRR equals the opportunity cost of capital - were fattening, grouper cage culture, etc.). When risk factors over and beyond normal business risk were obtained at a 15 percent decrease inrevenues and at a 70 percent increase ininvestmentcosts. 25 Table03: Fisheries benefits assumedin economic analysis and associated loss of production over firs several years due to closures. 140 @ Lost Production $ 120 Y Altemative Income 3 E Q 20 0 ~ C 4 5 c3 2 s44,5t.$~@+ri--+ P U years E -0-without' +with' -central estimate Time +with' - highestimate --+-with' low estimate Catch-per-unit-Effort (CPUE) TheProfitability of the Reef Fisheries CPUEmeasuresthe fishharvested per unitof fishingeffort, i.e. the costs a fisher or group of fishers willincur to harvest an amount o ffish for wholesale or consumption. The more overexploited the reeffishery, the more effort (andcosts) a fisher willhaveto expendto capture a dwindlingamount (andreturns) of fish. However, reducingpressureonthe \,'... \./ fisheries and allowing fish stocks to recover T canhelp to increase CPUE, increasingthe profitability o fthe fishery and incomes o fthe EffectiveManagementWill Rehabilitate Fir fishers. 2. Technical The Program's approach emphasizes decentralized implementation and collaborative (or co-management) partnerships between coastal communities and local governments, for the purpose of empowering these communities to sustainably manage their associated coral reef ecosystems, particularly through establishment o f marine reserves. The wisdom o f this approach was confirmed by the Independent Evaluation of Phase I,as well as by numerous experiences and good practices from around the world, including examples f r o m India, the Philippines and Samoa as summarized in the draft World Bank Fisheries Approach Paper (2003). Furthermore, the impact o f collaboratively managed and fully-protected marine reserves and larger marine protected areas in replenishing fish populations and protecting coral reef ecosystems i s well documented. It is also the centerpiece of GOI's strategy for the coastal andmarine sector. 26 Scientific evidence suggests that such marine reserves help to replenish adjacent fishing areas in coral reef ecosystems in two ways: (i)by increasing health and quantity of broodstock, leading to increased larvae availability and survival, and (ii)by larval and adult export to surrounding areas enhancing neighboring fisheries. One particular study examined the various characteristics of 76 marine reserves, established between two and twenty years. The study found that on average, abundance of fish stocks (measured in density) approximately doubled, biomass increased to 2.5 times the biomass of nearby fished areas, average fish body sizes increased by approximately one third, and the number of species presentper sample increased by one third [(Halpern(2002) inRoberts et al, 2001)]. Based on experiences in various marine reserves around the world, scientists recommend that marine reserves are most effective in increasingthe long-term yields of over-exploited fish species when they cover approximately 20 to 40 percent of fishing area (Roberts et al, 2001). These principles have been taken into account in the preparationof the second phase of COREMAP, and as a result, GO1has set an ambitious target of placing ten percent of each participating District's coral reef ecosystem areas under full protection as marine reserves that are collaboratively managed by resource dependent coastal communitiesby 2010, twenty percentby 2020, andthirty percent by 2030. 3. Fiduciary:FinancialManagementand Disbursement A financial management assessment of this project was carried out between May and October 2003 and has involved an assessment of financial management capacity at the key implementing agencies and an evaluation of the adequacy of financial management arrangements proposed for the project, including accounting systems for project expenditures and underlying internal controls (see project files for Financial ManagementCapacity Assessment and ProcurementCapacity Assessment). Recent Bank experience in other projects executed by the several Ministries and a consideration of the Country Financial Accountability Assessment report suggest that financial management capacity at these central agencies is likely to be generally low. Further, a significant part of the project expenditurewill be managed and accounted for at the district governments and by the communities at village levels. In districts, there is an even greater shortage of financial management skills, and financial management systems are generally weaker than at the center. Villagers are not expectedto have financial management skills. An analysis of project specific risks indicates that substantialrisks may arise from severalother features. Overall, the project will be influenced to some degree by the weak overall control environment in the country, as diagnosed by the Country Financial Accountability Assessment completed in April 2001. Since the completion of that report, progress on country financial management reforms have been slow. The lead execution agency (MMAF) has prior experience in managing Bank projects. Risks arise from geographical spread of PMUs and use of multiple agencies and community organizations. The geographical spread of project activities to over 400 villages and inherently weak and variable financial management capacity in the regions imposes substantial risks on financial accounting and reporting. Community based management comprises a significant 40% of project expenditure, and will financial management of these will present challenges. Validation of payments is traditionally a weak area and vulnerable to malfeasance and fraud. Based on these factors financial management risks inherent in the project entity and risks specific to project design have been rated as substantial. Several measures have been designed to mitigate these risks, These include deployment of trained financial management consultants in villages and districts to assist inthe preparationofproject financial statements and more intensive paymentvalidation procedures, including community disclosure and oversight mechanismswhere applicable. A series of these measures and other operating authorities and procedures for each project activity are expected to be clearly documentedinthe ProjectManagementManual and Technical Annex 7: Anti-Corruption Plan. Financial 27 Monitoring reports have been prescribedfor reporting purposes. Full details of these measures are given inTechnicalAnnexes 6A, 6B, and7. Funds for the project are expected to be channeledthrough a Special Account opened for the purpose. Fund flows for community based management activities under this project will utilize `force account' mechanismsdeveloped for other decentralizedprojects. Disbursements into these accounts will be made through Special Account procedures by central treasury offices. Replenishments will be based on traditional simpler Statements of Expenditure (SOE) initially. Once capacity and track record has been establishedto issue reliable quarterly FMRs, FMR-baseddisbursements will be introduced. 4. Social There are many opportunities for the program to accomplish its objectives arising from the current socio- cultural and political context. First, in terms of the socio-cultural context, the program targets those coastal communities dependent on the coral reef ecosystem for their livelihood. Therefore the program beneficiaries have a key incentive to achieve sustainable management of coral reefs and the small scale fisheries they support. Second, in terms of the political context, the new Coasts and Small Islands Act currently being prepared for legal adoption recognizes adat (customary) systems of coastal resource management. Bothassist communitiesto effectively collaboratively managethe coral reefs. However, there are many risks and constraintsto the program arising from the socio-cultural context too, including: (i)pervasive poverty in coastal areas, (ii)destructive practices such as reef bombing and cyanide poisoning, due to limited economic opportunities and public awareness to the impact of such practices in remote sites; (iii)dependence on the "boss" system for credit; (iv) dependence on traders and middlemen for marketing products; (v) limited capacity of local communities to enforce user rights against external fishers; (vi) limited capacity of village financial management institutions to manage and implement field activities; (vii) ethnic and cultural heterogeneity among resident fishing populations in several proposed sites (Buginese and Bajo communities); and (viii) conflicting demands on the same resources - potential for internal conflict within and between neighboring communities on access to limited reef resources. Each of these challenges has been analyzed and approaches designed on experienceto maximizethe possibility for these issues to be addressed and overcome. Participation of Key Stakeholders in Program Preparation. This program was prepared based on a highly participatory and consultative process that occurred in several stages throughout the design phase. First,the GO1PreparationandConsultantTeams conductedDistrict consultationsonthe proposedPhase I1program in each participating District. Moreover, consultations were conducted in thee provincial capitals of Makasaar, Kendari, and Jayapura. In total, over 350 stakeholdersparticipated in discussions for which minutes were recorded and prepared as a volume for the Bank's review. These stakeholders included District Executives and their staff, Local legislature (DPRD) head and faction leaders, District government agencies (Dinas) including fisheries (Dinas DKP), planning (BAPPEDA), forestry and others, Non-government organizations (NGO's), National and other parks authorities; the private sector and other relatedparties (Le., communities, Bank RakyatIndonesia, etc.). Second, a team of facilitators conducted a participatory design workshop in each of the COREMAP Phase I1districts. Each of the six pre-selected program districts formed a COREMAP Phase I1design team, by order ofSKBupati (District Executive decree), comprising of relevant government departments, NGO and the private sector. These teams invited participants from coastal and island communities, village heads, BPD members, fishers, women, Camats, local and International NGO's and the private sector to guide the development ofthe COREMAP Phase I1programand organizethe district government departments for the workshops. Each of the six three-day workshops involved between 50 and 70 active participants approximately half from coastal communities and half from government services, NGO's, local Universities or the private sector. 25 members of the National Design team participated in at least one of the workshops as resource persons. The workshops were completed betweenMarch 24-April 12, 28 2003. Based on the input from the workshops, the results of the first consultation visit, the socio- economic survey and other available literature, draft Program Implementation Plans were prepared for each District and consultations around these PIPs are on-going. Third, a final round of consultations occurred in each of the six districts to discuss the draft PIPs, and finalize them for DPRD approval, and MOF-BAPPENAS and Bank Appraisal. Participation of Key Stakeholders in Program Implementation. This is a community-driven development type program, and therefore communities are at its center. As highlightedinthe Critical Risks Matrix (see section CS), without community engagement Phase I1will not succeed. Over 500,000 coastal inhabitants in416 villages are envisaged to participate inthe first three years of this program, with special activities designedto target vulnerable groups (e.g. widows, indigenous peoples such as Bajo, etc.). They are the key stakeholders. These key stakeholders will be integral partners in creating collaboratively managed marine reserves, participating in the identification, design, mapping, management and enforcement of these reserves, and incollectingdata to monitor coral reef ecosystemhealth. Indigenous People in Phase 11Locations. Since the provisions of the World Bank's indigenous peoples policy apply to COREMAP Phase I1 in its entirety, the preparation process has closely followed the policy's strategy that issues pertaining to indigenous peoples must be addressed based on informed participation o f the indigenous people themselves. The preparation process for COREMAP I1centered around a series of participatory stakeholder consultations throughout the six districts where Phase I1will be implemented, in order to ensure participation of indigenous peoples in the design. Furthermore, a detailed social assessment o f indigenous ethnic minorities in Phase I1districts (entitledDeveloping Ethnic Specific Strategies for Marine Conservation and Coastal Resource Management: Assessing Local Capacity in Relation to the Bajo Peoples of Buton, Southeast Sulawesi available in the Program Files) was conducted duringthis preparation process. Approximately 8,000 Bajo will benefit from the Program inButon District and another 1,600 households inthe remaining five districts (see Technical Annex 10: Safeguards: Indigenous Peoples Assessment) for more detail. Monitoring of Social Impacts. The Research and Monitoring (CRITC) sub-component is designed to monitor and measure the program's main social impacts, through: (i)regular surveys of stakeholder perceptions o f the program's performance and impact; (ii)poverty and socioeconomic assessments, and (iii)analysis ofNational SUSENASand other nationaldata. District monitoringteams andprogram extension teams will work with key stakeholders to collect these data and the indicators for social impacts and social development outcomes. All summary evaluations will be posted in each village's coral reef information center as well as at each District and at the N C U (COREMAP website) to allow the key stakeholders to track the program's progress towards meetingits intended outcomes. 5. Environmental Because the Program aims to implement a process that empowers coastal communities in targeted districts to sustainably co-manage coral reef ecosystems, in part through the establishment o f an institutional framework in each district for decentralized resource management, most o f the activities are expected to have benign, if not positive, impacts on the environment. These environmental benefits will be monitored through program sub-components focused on monitoring and evaluation, and the regularly collected scientific data on coral reef health. The impacts of improved and transparent coral reef ecosystem management on livelihoods in coastal communities will be monitored through these sub- components as well. 6. Safeguard policies Safeguard Policies applicable to COREMAP Phase 11: 29 Safeguard Policv Auulicabilitv Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) Yes Natural Habitats(OP 4.04, BP 4.04, GP 4.04) Yes Forestry (OP 4.36, GP 4.36) No Pest Management(OP 4.09) No Cultural Property(OPN 11.03) No IndigenousPeoples (OD 4.20) Yes Involuntary Resettlement(OP/BP 4.12) No Safety of Dams(OP 4.37, BP 4.37) No Projects inInternational Waters (OP 7.50, BP 7.50, GP 7.50) No Projects inDisputedAreas (OP 7.60, BP 7.60, GP 7.60)* No SafeguardScreeningCategory: S2 Environmental ScreeningCategory: B Key Safeguard Policy Issues. While the safeguard policies listed above apply to the Program, they will not necessarily be triggered. These safeguard policies may be triggered in the case of site-specific, community-determined micro-projects that will be designed throughout the course of program implementation. As these micro-projects have not yet been determined, COREMAP Phase I1 has prepared an Environmental and Social Impact Management Framework to guide program staff to assist communities in the design of micro-projects. This Framework includes criteria that automatically prohibits involuntary land acquisition (see Technical Annex 10: Safeguards Policy Issues), and hence involuntary resettlement, using program funds, and provides a process for determiningwhether proposed micro-projects trigger any of the above safeguards. If triggered, the Framework includes a process by which the NCU and PMUs would design Terms of Reference for an independentEA consultant to assist communities to conduct an Environmental Impact Assessment of proposed micro-projects triggering any of the above safeguards applicable to the program, and to assist these communities to create an Environmental ManagementPlanto mitigate any adverse environmental impacts, prior to the approval of micro-projects for funding. The PMUs will have technical specialists funded by the Program, with the capacity to implement the Environmental and Social Impact Management Framework and assist communitiesand Community Facilitators inthis process. The Environmental and Social Impact Management Framework was designedbased on the feedback and consultations from the District and Village stakeholder consultations conductedin each Program District in the preparation of COREMAP Phase 11. The Framework was made available by the National Coordination Unit in the Ministry of Marine Affairs and Fisheries on October 2, 2003, and to the InfoShop on December 15,2003. 7. Policy Exceptionsand Readiness The proposedprojectrequiresno exceptionsfrom Bank policies. Counterpartfunds budgetedreleaserequirementswere confirmed during negotiations; Operational ManuaVFinancial Management Manual and Community Based and Collaborative Management Manual were prepared in draft and endorsed by GO1 prior to negotiations and confirmed by the Bank at negotiations; The first 1.5 year procurement plan was prepared by GO1 and confirmed by the Bank at Negotiations; and All Safeguard documents (Environment and Social Impact Mitigation Framework) related to the program were prepared and formally endorsed by GO1 prior to negotiations, and reviewed and confirmed by the Bank at negotiations. 30 Technical Annex 1: Country,Sector and Program Background INDONESIA: Coral ReefRehabilitation & ManagementProject (Phase 11) Country and Sector Background Indonesia is the world's largest archipelagic nation with more than 13,000 islands and an 81,000 kilometer (km) coastline rich in coral reefs, seagrasses and mangroves. The nation has a marine area of 5.8 million square kilometers (km2),comprising 3.1 million km2of territorial and archipelagic seas and 2.7 million km2of exclusive economic zone (EEZ). Incontrast, its land mass occupies an area equivalent to only a third of its sea space (i.e., 1.9 million km2). Indonesian seas are a center o f global biodiversity containing over 2,500 species of mollusks, 2,000 species of crustaceans, 6 species of sea turtles, 30 marine mammal species and over 2,000 fish species. Coral reefs are extensive covering 25,695 km2 equivalent to about 10% of the world's coral reef area'. Indonesia is also the coral biodiversity center of the world with about 70 generaand 450 species ofcorals2. Largely due to their breeding and nursery functions, coral reef and associated ecosystem health has a direct impact on fisheries production. Fisheries are clearly important to the nation's social and economic well being. The total product of coastal and marine economic activities is estimated at 15 percent of Indonesia's gross domestic product (GDP), providing employment for about 28.5 million people. In addition, about 75 percent of the nation's population, equivalent to 140 million people, live within 60 km of the sea; and, consequently, are at least indirectly effected by the coastal environment. Since coral reefs are habitats for about 90 percent of the fish caught by coastal fishers and since fish compose about 60% of the average Indonesian's animal protein intake, coral reef health is especially crucial to support basic nutrition, healthand community welfare. Despite the importance of coral reef ecosystems to Indonesia's economy, environment and biodiversity, unfortunately these resources have not been managed sustainably. Resource exploitation has led to extensive coastal resource degradation, primarily through the destruction of coral reefs and associated seagrass and mangrove ecosystems, depletion of fish stocks, water pollution and biodiversity loss. Coral reefs are deteriorating rapidly, mainly because of intensive human activities such as over fishing, sedimentation, coral mining, blast and cyanide fishing and pollution. Since 1994, global warming and associated coral bleaching, plus increased reliance on coastal fishing, have further damaged the nation's reefs. The coastal environment has been further affected by land-based activities. Watershed deforestation and erosion have ledto increased sedimentation on fringing coral reefs. Industrial and urban wastes and runoffcontainingchemicals and pesticides from agricultural land have polluted coastal waters. All these stresses impair the ecological capacity of coral reefs to serve as nursery and breedinggrounds for marine aquatic resources. Surveys conducted in 2000 by the Program's Coral Reef Information and Training Center (CFUTC) found that less than 30 percent of the nation's corals remain in good condition. The urgentmanagement interventions begununder COREMAPPhaseIcontinue to be warranted. The impact of marine resource loss on human populations can be severe. Coral reef degradation, accompanied by over-fishing, has depleted fisheries resources in many areas. Serious reduction of fisheries resources can be found along the coasts of Sumatra, North Java, and the straits of Malacca and Makassar. However, although declines in fisheries yields can be documented for these areas, resource depletion is probably not limited to these regions alone. A COREMAPPhase Istudy inthe Program area of Kabupaten Sikka also demonstrated very low fish populations near coral reefs, due for the most part to over exploitation. Such degradation limits income from marine resources and constrains coastal communities from improving their economic well being. Landsat 7 data consolidated bythe PHRD PreparationTeam. Veron. C. 1995. Coralsofthe Indo-Pacific. 31 Coral reef degradation and environmental problems in the coastal zone have affected the livelihoods of coastal people, particularly small scale (artisanal) fishers. Artisanal fishing is the occupation of last resort for many poor people due to population growth, decreased availability of farmland and uncontrolled access to fisheries resources. Consequently, the number of coastal fishers has increased by more than 50 percent over the past decade. Because of a deteriorating fisheries resource base, fish catch per unit of effort has been steadily declining, often adversely affecting incomes. The average income of coastal fishers is below the national average level. Various studies show that coastal fishing communities are among the poorest segments of society inthe country. They often lack access to basic social infrastructure such as clean water, sanitation, health care, roads, and transportation. Fishers and their families also have difficulty improving their living standards due to limitedaccess to any form of credit or savings. Despite the gravity o f the situation, the government actions prior to 1998 were limited. This was due in part to responsibility for the sector divided amongst at least five major government agencies ministries (fisheries, forestry, environment, police, navy). In addition, the most directly effected ministry, fisheries, was very much focused on increasing capture fishery production. Sector Constraintsand ClientActions to Address Constraints GovernmentPolicies: Beginningin 1999, the situation began to change with Indonesia embarking on a series o f major reforms o f social, political and economic policies. To effect these reforms, government processes and institutions were significantly revised. Strategic priorities now emphasize national unity; macroeconomic policies to support economic recovery, poverty reduction, agricultural and rural development; and support for small and medium-size enterprises, decentralization and good governance. State Policy Guidelinesfor 1999-2004 states that natural resources should be managedto insure that their carrying capacity is preserved for the welfare of present and future generations and to protect biodiversity. These guidelines require enabling legislation to provide for the delegation of authority for managing natural resources to the local level. They also give special attention to the empowerment of local communities, traditional institutions and non-government organizations (NGOs) for natural resources management. Recognizing the potential of marine resources, the Government has established marine resource management as a priority area. The Government created the Ministry o f Marine Affairs and Fisheries (MMAF) in 1999, with a vision to place the sea at the center of the nation's future. MMAF's mandate covers: (i)efficient and sustainable management of maritime resources; (ii)rehabilitation of damaged coastal and marine ecosystems; (iii)sustainable development of coastal zone and territorial waters through improved spatial planning; (iv) improvement of resource databases and modernization of information and data exchange and dissemination facilities; (v) improvement o f the socio-economic conditions of coastal communities; and (vi) promotion o f the maritime concept to the public and other stakeholders. MMAF was structured to fulfill its policy mandate. A directorate was specifically created to concentrate on the implementation of coastal and small island policies. This directorate contains divisions for spatial planning, conservation, community empowerment and small island development. The Indonesian Institute of Sciences (LIPI) retains the mandate for both technical and socio-economic coral reefresearchand related data gathering and dissemination. Under COREMAP Phase I,a National Policy and Strategy for Coral Reef Management in Indonesia (National Policy and Strategy) was prepared. The National Policy and Strategy was developed through a broad based public consultation process, which included two national and seven provincial level workshops. In 2002 national policy and strategy documentation was disseminated to all major stakeholders. The National Policy and Strategy is designed to guide the management of coral reefs for conservation and sustainable use nationwide. It seeks to: (i)balance intensity and different uses with the carrying capacity of the environment; (ii)develop management systems which involve all parties to consider national economic priorities, local communities and the conservation o f coral reef resources; (iii) implement formal and informal regulations; and (iv) create incentives for equitable and balanced 32 management. The policy is a recent initiative and its impact to date is limited. COREMAPPhase I1will continue to promote and develop the National Policy and Strategy further at national, regional and local community levels. The Program will also seek to harmonize national and local policies and strategies with relevant international initiatives. A framework of national strategies was drawn up to implementthe policies. These strategies focus on: (i) empowering coastal communities to manage coral reef ecosystems; (ii)reducing the rate of coral reef degradation; (iii)managing coral reefs on an ecosystem basis in consideration of their utilization potential, legal status and coastal community's wisdom; (iv) formulating and coordinating action programs of government agencies, private sector, and communities; and (v) strengthening the commitment of all parties to implementmanagement of coral reefs through capacity building, awareness raising, and strengthening the legal environment. COREMAPPhase I1design is based on this strategic framework. It is envisagedthat the Program will be the principal vehicle for planning, organizing, and coordinating the plans envisaged underthe National Policy and Strategy. Legal Environment.The IndonesianConstitution requires that naturalresources be managed to achieve the greatest possiblebenefit for the people. A number of lawsrelevant to coral reef ecosystems have been passedby the national legislature (DPR). The three primary laws are: (i)FisheriesAct No. 9 of 1985; (ii) Conservationof Living Resources and their Ecosystems Act No. 5 of 1990; and the (iii) ForestryAct No. 41 of 1999. Other important laws include: (i)Spatial Planning Act UU No. 24/1992; and (ii) Environmental Management Act No. 23 of 1997. In addition, Indonesia is a signatory to a number of international declarations on natural resources and environmental management, and has issued laws ratifying some of these declarations. These include: (i)the Convention on International Trade in Endangered Species; (ii)UN Convention of the Law of the Sea (UNCLOS) (1982); (iii)International Maritime Organization laws on marine pollution (1969, 1971, 1989); (iv) the Global Program of Action for the Protectionofthe MarineEnvironmentfrom Land-BasedActivities; and (v) the Global Convention on Biological Diversity (1992). These agreements have been supplemented by regulations setting out basic sector policies on mining, fisheries, forestry, and environment. The Regional Autonomy Act No. 22 of 1999 (Act No. 22/99) provides a new dimension to the legal framework for natural resources planning. Act No. 22/99 aims to decentralize most government services. For example, it devolves responsibility for marine and coastal resources within Indonesia's territorial waters to regional governments. As stated in Act No. 22/99, districts are granted control over waters stretching from the shoreline to 4 nautical miles (nm) offshore, provinces from 4 to 12 nm offshore and the national government for waters more than 12 nm distant from shore. Furthermore, districts may authorize smaller local units (e.g., villages) to exercise authority over the adjacent sea space within the district waters. Act No. 22/99 thus provides incentives to local governments for sustainable management of natural resources within their respectivejurisdictions. These new responsibilities require drafting of new legislation as well as revision of some existing laws and regulations. There are, in addition, customary local (adat) laws and rights governing the allocation and use of natural resources. During the recent past, adat laws were seldom applied. However, under the new autonomy era, adat laws are being accorded increasingattention. In some Program areas, such as Raja Ampat and Biak, adat rights are honored and of significant importance. However, the actual legal mechanismsused to incorporate customary rights into formal laws are still evolving. COREMAPPhase Iundertook pioneering work in this field through integrating adat rights into a new district law (perda) on the Managementof Land, Coastal and Marine Resources inEast Biak and Padaido. This draftperda is under considerationby the Biak regent(Bupati) and local legislature(DPRD). The national legislature is currently considering passage of both new Fisheries and National Coastal Management Acts. The new Fisheries Act is currently under consideration by the DPR. It incorporates clauses supportive of better coral reef management such as those banning the possession of destructive fishing substances @e., poisons, explosives, etc.) and fish captured through destructive means. The 33 National Coastal Management Act is also expected to address many o f the lacunae in the legal systemthat hinder many COREMAP activities including marine zonation. This act supports Act No. 22/99 and provides for decentralization of authority over coastal zone use to regional governments. It allows for the promulgation of locally tailored coastal laws and regulations. The law also includes provisions for both process and content standards for certification of regional and district programs. Consideration of the law is expected in 2003. Duringthe preparation of COREMAPPhase 11, assistancewas rendered by the PHRD consultant attorney to the Government teams drafting the National Coastal Management Act. Legal support for Programrelated legislation is envisagedto continue under COREMAPPhase I1implementation. Two COREMAPdistricts, Selayar and Buton, have portions of their Program area located innational parks, Taman National Taka Bone Rate and Wakatobi respectively. Within national parks, a complex maze of special laws, rules and regulations apply. Generally, the districts control the legal instruments, which apply to residents and the park those, which apply to natural resources. However, ultimate authority for activities conducted within the park is at the discretion and jurisdiction o f the park authorities. Consequently, donor activities occurring with national parks require careful coordination between both park and district officials. Within national parks, the Program seeks to build on partnership arrangements with park authorities, local government, NGOs and the communities through co-management mechanisms. Improvement in Indonesia's weak enforcement o f laws and regulations is considered a major challenge for the nation as a whole. Deficiencies in the law enforcement, legal andjudicial systems are pervasive, cannot easily be corrected and impact on the entire social and economic fabric of the nation. Overcoming the legal systems problems are well beyond the Program's scope and will require improved transparency, elimination of corruption and strengthened institutional capability, especially of the judiciary. Due to a mix of past heritage, weak legal environment and confusion over decentralization issues, resource allocation and use decisions are often taken by the Government at all levels without adequate consideration of sustainability, legality or significant public consultation. PlanningFramework. Due to the complexity o fthe sector, BAPPENAS has encouraged many agencies to be involved in regulating and promoting the use, protection and management o f coral reef ecosystems. This has sometimes resulted in a lack of coordination between government institutions. Many resource management issues are addressed by ministerial decrees, but provide only partial solutions because the ministry concerned has limited jurisdiction. Decrees may be inconsistent with one another and hence difficult to implement. The Spatial Planning Act No. 24 of 1992 was aimed at reducing conflicts over the use o f land and sea resources by providing strong legislation for resource allocation and management based on spatial considerations. However, institutionalweaknesses and lack o f political will have failed to sufficiently institutionalize the spatial planning concept in managing marine and terrestrial resources. At the same time, NGOs are playing an increasingly significant role in promoting and facilitating the establishment of conservation and sustainable development programs. Over the past decade, there has been a shift in emphasis, with measures introducedfor resource values to be taken into account in preparing development plans. Projects have been implemented to enhance the capabilities of government agencies for resource management, data acquisition and exchange and resource assessment. These include World Bank funded projects such as: (i)COREMAPPhase T3; (ii) Kerinci Seblat4; (iii)Western Java Environmental Managements; and (iv) Decentralized Agriculture and Forestry Extension6. Similar ADB funded projects are: (i)Land Resource Evaluation and Planning (LREP), (ii)Second Land Resources Evaluation (LREP II), (iii)Marine ResourcesEvaluation and Planning (MREP), (iv) Coastal Community Development and Fisheries Resources Management, (v) Loan4305-05 for USS6.9 million IBRDand GEF TF-28373 for US$4.1 million GEF LoanTF-28312 for US$13.8 million Loan4612/3519 for US$l8.0 million Loan4510/3280-0 for $18.0 million 34 Coral Reef Rehabilitation and Management (COREMAPPhase I), Coastal Community Development (vi) and Fisheries Resource Management (COFISH), and (vii) Marine and Coastal Resources Management (MCRMP). Other bilateral projects like those of JICA and USAID's Natural Resources Management Program (NRMP) and Project Pesisir also have a similar formats. An important contribution of these programs and projects is the heightened awareness created among government planners of the need for sustainable use o f resources, including coral reefs. However, most projects affect only a small part of Indonesia's land and marine areas, and a considerable program of sustained effort will be required to make a significant difference to the ways in which the country's natural resources, including coral reefs, are regarded and managed. Under Act 22/99, sectoral agencies have responsibility for planning within their respective sectors and areas ofjurisdiction. The capacity of provincial and district agencies to plan and manage marine resources and to enter into co-management arrangements with local communities, however, is still beingdeveloped. Significant strengthening is needed for local institutions to be effective in contributing to the rehabilitation and management of coral reef ecosystems and facilitating coastal community development. In additionto the sectoral agencies operating under either the Governor or Bupati, it is envisagedthat the DPRDs will play an increasingly important role in the management o f marine resources. For example, their approval is required for the legislation requiredto legalize spatial plans and zoning developed by communities with Dinas support. AdaptableProgramLoan Changes to the Program's Approachin Phase 11. As mentioned in Section B.l of this document, the COREMAP APL representsthe first time any developing country has initiated a program of such scale to target the sustainable management of coral reefs and associatedecosystems. For this reason, Phase Iwas designedto test approaches in several pilot sites, inorder to generate lessons learned to informthe design o f an expanded number of priority coral reef sites in Phases I1and 111. As such, Phase Igenerated a wealth of information and experiences which are reflected in the design of Phase I1(see Section B.4: Lessons Learned). In particular, the independent evaluation of Phase Isuggested that coral reef ecosystem management activities supported by the COREMAP program should take a greater development focus, placing community needs as the focus o f coral reef ecosystem management, rather than a pure conservation approaches. As a result of this lesson learned from the Phase Ipilots as well as good practices worldwide, Phase I1 is designed to proactively engage with communities in order to provide them with a more central role in managing coral reefecosystems. In addition to adapting the design of Phase I1to reflect these lessons learned, significant institutional developments have taken place in Indonesia over the course o f Phase I,in the form o f decentralization. As mentioned previously in this Annex, the Regional Autonomy Act No. 22 o f 1999 (Act No. 22/99) devolves responsibility for marine and coastal resources within Indonesia's territorial waters to regional governments, with districts controlling waters stretching from the shoreline to 4 nautical miles (nm) offshore. The changes to the program's approach inPhase I1have come as a result o ftwo other factors inaddition to the lessons learned and decentralization: e Duringthe first phase the Government of Indonesia established a new Ministry for Marine Affairs and Fisheries (MMAF), which now has the responsibility for managing the country's coastal and marine resources. As a result, MMAF will take over the program coordination responsibilities from LIPI; and 0 Duringthe first phase several donors collaborated through the program ineachsite, including the Asian Development Bank, AusAID and the World BanWGEF, with different donors responsible for different components of the project. The Independent Evaluation concluded 35 that a lack of coordination in pilot sites resulted in fragmented implementation, and emphasized that establishing coral reef management systems is a process. In Phase 11, the Asian DevelopmentBank will be responsible for implementingall aspects of this process in program sites in western Indonesia, while the World Bank will be responsible for all aspects in the six priority districts in eastern Indonesia, essentially implementingtwo `stand-alone' projects. Due to a change in implementationpolicies in Indonesia, AusAid will no longer be directlyfinancingsites inthe COREMAP program, and areas previously fundedduringPhase IwillbecomepartoftheWorldBanWGEF-financedPhase11. However, while the lessons learned from Phase Iand the impact of decentralization(as well as the creation o f MMAF and shifting responsibilities of donors) have resulted in changes in the program's approach in the second phase, the overall program and Phase I1 objectives remain substantially unchanged. Rather, the fact that the design of Phase I1has evolved from the first phase to reflect these factors is a testamentto adaptive learning. The PhaseI1design reflectsexogenouschanges to the politicaland lendingenvironment: CORE Issue Phase I PhaseI1 ProgramApproach Se Karang!; TerumbuKarang Sehat,Ikan "Save The Reefs" Berlimpah; Conservation "Healthy CoralAbundant Fish" Cons.thru Co-Management Decentralization NationalImplementation District& Community Implementation Role of Donors WorldBank-GEF Enforcementand Awareness WB-GEFstand-alone inEast components and 2 Sites inEast; ADB Monitoringand 2 Sites inWest ADB stand-alone inWest AusAID NationalTrainingUnit and Site AusAID Out. WB finances AusAID site Other Key Roles Role of NGOs @ site &highly involved highly involved Role of Private Sect. NoneKrowdedOut Highly involved A key outcome to these changes inthe design of Phase I1is that the scale of the overallprogramhas been revisedupwards. At the time ofthe last Boarddiscussion(March 4, 1998), World Banklendinghadbeen projectedat US$66.9 million, towards an overall program size of US$105.3 million. This has now been revisedto reflectthe new requestedprogramfinance. 36 IBRD/IDA. GEF and GO1PhaseI1ProgramFinancing.Estimates(US$ MillionEquivalent); [ ] indicatedrevisedloadcreditrequest. ( ) indicatesGEFco-financingthat will berequestedat MTRas per GEFrequirements 1PhaseI1 25.0 7.5 10.0 42.5 2001-2007 [56.2] [10.91 [74.6] [2004-20091 Phase I11 35.0 0 15.0 50.0 2007-20 13 [60.0] (10.0) [15.01 [85.0] [2010-20151 Total 66.9 11.6 26.8 105.3 1998-2009 j123.11 [21.6] [27.7] [172-41 [1998-10151 37 1 d cn 0 W VI W 0 0 0 0 0 Q\ 2cn2 2 0 0 n 0 I p;' p;' 7 C C W v) W 0 C n fl C ?cn20 cn 0N 2 0 N I -0 B -.E .M m e, ma Ea m0 WB c P z E a n d 3 a I r; Technical Annex 3: ResultsFrameworkand Monitoring INDONESIA:Coral Reef Rehabilitation& ManagementProject (Phase 11) L. Results Framewo Intervention Logic Objectively Verifiable Indicators sources of Critical rlerification I Assumptions Program ImpactlOutcome Indicators: I Development Objective: Jlanagement & Empowerment Indicators: i) District,MMAF annual MMAF and Districts 'eports (ii) district laws, continueto accept To establishviable reef 0 Collaborativelymanagedmarineconservation areas cover iillage ordinances(iii) marine conservation managementsystems 10 % of program district reefs by EOP ioundary demarcations (iv) areas as a fisheries in at leastsix priority 0 70 %of operating costsof program activities fully integrated ndependent evaluations of management tool districts, through a into target district Government programs and funded VlCA mgt. effectiveness" financially sustainable independent of COREMAP IIby EOP District, localgov. programthat is 0 Awareness aboutthe importanceof coralreefs increasesto 3udget reportsfor operating counterpartswill nationally coordinated and/or maintainedat 70 % in all program districts' :osts from District increaseshare of but decentralizedin BiophysicalIndicatiors: Sovernments and PMUs program funding by implementation,in EOP order to empower and 0 Livecoralcover inprogramdistricts increases by 5 YO ndependent surveys at Y1 to support coastal annually until levels are reached and maintainedcomparable nid-point, EOP (ie. A.C. No significant coral communitiesto to those of similar reefs in well-managed or pristineareas' Nielsen) bleachingevents occur sustainably co-manage Q Avg. catch-per-unit-effort(CPUE) for early-breedingindicator as a result of climate the use of coral reefs species harvested by each of the main sustainablefishing Annual reportsby District variation andlor and associated techniques in program districts increases 35% by EOP, CRlTCs change ecosystem resources, while avg. CPUE for medium-sizeindicatorspecies which will revive harvestedby each of the main sustainablefishing Annual reportsby District Spilloverof reef fish damaged or preserve techniques in program districts increases by 10%by EOP9 monitoringteams, Dinas from fully-protected intact coral reef Socio-economic and PovertyIndicators: DKP MCAs is significant ecosystems and in turn, 0 Total income receivedfrom, andthe total numberof people enough to substantially enhance the welfare of receivingtheir income from, sustainablereef-basedand (i) Annual SUSENASdata increasefish catch these communitiesin reef-substituteactivities" in program districts increasesby (ii) householdsurveys Indonesia 10 % by EOP Adequate incentives Q At least 70% of fishers/beneficiariesin coastal communities Householdsurveys of for sustainable in program districts perceivethe program has had a positive representativesamples of alternativesto reef- impact on their welfare and economicstatus, by EOP coastal communities in based extraction program districts at mid- activitiesexist in term and EOP coastalcommunitiesin program districts 'A.C. Nielson inCOREMAP Ireportedthat the awarenessabout the importanceo f coral reefs increasedto levels o f63 to 71 % inprogram districts. This keystoneindicator is representativeofa basketof coral reef health indicatorswhich will be monitoredandwhich in aggregate, will be assessedto represent improvementsin coral reefecosystemhealth inprogramdistricts, including: Abundanceof indicator benthosspecies and fish (categorizedby genera, trophic group and market category) Size class (and subsequently biomass) of indicatorfish and benthosspecies lncreasein incidenceof reef damage inprogramdistricts Early-breeding indicator species are those that reachmaturity in 1 to 2 years, while medium-sizespecies are those that reachmaturity in 5 to 6 years, and late-breedingindicator species are the highestpredators(e.g, sharks). Inaddition to the targetsabove, for late-breeding indicator species the target would be for CPUE to stabilize by EOP. The targets for key indicator species are basedon Roberts and Gill (2001), summaries of experiencesand resulting fisheries benefits from marine reservesaroundthe world and growthratesfor these species groups, as well as experiencesfrom marineconservationareas inIndonesia. lo Reef-substituteactivities refer to alternative livelihoods to reeffishing promotedby the program, as well as general economic diversification away from reef-basedextractionactivities. Managementeffectivenesso fMCAs can be independentlyevaluatedand measuredagainst set criteria for (MPA) managementeffectiveness (LMMA, 2002). Evaluations should includeanalysis ofdataheld in participating villages. 39 Results for each Result Indicators per Component: Component: By End-of-Project Component 1: Sub-component I.I :Program Coordination, M&E, Establishment of program units Institutional and Training with trained staff in each (6) Strengthening 0 NCU establishedand operated M&E feedback reports" district, as well as NCU and Government 0 M&E Feedback Unitestablished and operating within M&E Feedback Unit at the institutional NCU at MMAF Workshop, training evaluation national level, is a necessary responsiveness to 0 Program ManagementUnitstaff and consultants from materials pre-condition for initiation of meet the needs of all (6) target districts trained for program management program activities coastal and activities communities is Sub-component 1.2: Coral Reef Research & enhanced, in Monitoring--CRITC support of 0 Coral reef health baselines conducted, and indicators Summary reports on reef Information will be used to collaborative collected (by district monitoring teams) annually, in (6) fisheries (CPUE) produced by gauge the impact of program management of program districts district PMU / CRTIC and activities on reef health, and to marine reserves 0 Communities in program districts are trained to conduct Dinas KP disseminated guide community and district and other marine coral reef health and fisheries monitoring (in monthly to each program reef resource management protected areas conjunction with Dinas KP) village (Based on analyses of measures 0 Results of coral reef health, fisheries and socio- Village Reef Fisheries economic monitoring disseminated regularly to PMUs, Monitoring) sub-districts and communities Sub-component 1.3: Legal, Policy and Strategy SK Bupati endorsed by Assistance Ministrial Decree that include 0 Districtlaws (SK Bupatiendorsedby Ministrial Decree) at least Enactment and adoption of for enabling co-management of reef fisheries and 70% of suggestions from district laws (SK Bupati establishment of MCAs enacted and adopted in (6) coastal villages within the endorsed by Ministrial Decree) program districts district and strategies will enable and P National Reef Fisheries Strategy developed support co-management National Reef Fisheries activities in communities Strategy Component 2: Sub-Component 2.1: Community Community- Empowerment Course evaluation reports Based & 0 Self-learningmaterials train 300 COREMAP IIdistrict I Collaborative stakeholders (Dinas staff, PMU, etc.) Workshop reports from each Staffing and training of Management stakeholders and extension CI Social marketing workshop conducted for 180 people PMU teams in program districts will Coastal from the 6 program districts Village attendance lists, village allow for initiation of many of communities and 3 Awareness campaignconducted in 80 % of coastal the co-management activities institutions villages in all (6) program districts by 20 alumni of baseline reports and strategic of component 2 throughout program social marketing workshop, involving at least 50% of maps districts are the pop. in each village Village baseline reports and empowered to National workshop reports, 0 50 Sr. Extension& Training Officers (SETOs), and 208 strategic resource maps will sustainably co- SET0 reports Community Facilitators (1 for every two coastal serve to inform the district laws manage coral reef villages) recruited and trained and fisheries management associated 0 416 Community-BasedManagement Information strategies to support co- ecosystems to Reports from village Centers established in each coastal village in the increase incomes institutions management and establish a program network of MCAs which will in turn enhance community 0 Radio and FMsystems operational for all (416) coastal FM/radio licenses villages in program districts l2Quarterly reports by the PMUin each (6) district to the district boards (CCEs) and annual nationalreport 40 Sub-component 2.2: Community-BasedCoral Reef Management 0 Village ResourceAssessmentsconductedin 100%of lillage resourcemapswill be participating coastalvillages /illage resourcemaps sed as a planningtool for 0 Coral ReefManagementPlans(CRMPlRPTKs)created :RMPs endorsed and :ommunities to create CRMPs by village communitygroups, endorsed by the village ipproved heads and approved by the village parliament in 75% of The CRMPs will establish the participatingcoastal villages in programdistricts dCAs and local reef fisheries 0 All small-scalefishingvessels registeredat the Dinas Jessel registrationstatistics at nanagement measures,as a KP in each program district linas KP )re-conditionfor communities 0 At least 50%of undercoveranti-destructivefishing o be eligible for program operations/districtby EOP are successful (Le. results in 'olice, MCS unit &judicial grants prosecution) ,eports 0 Numberof infringementsoffishingrulesand regulations observed per unit of patrolling effort by patrols/Sis~asmas'~decreases by 10% per year over Jolice &judicial reports the period of the program (after the baseline year) P At least 10%of coral reefsin(6) programdistricts established & demarcated as `no-take' MCAs 3oundary markers Sub-component 2.3: Community Development Verificationthat transparent 0 Transparentfinancialmanagementsystems Financialbookkeepingby financialmanagement systems established in all program (416) coastal villages dillages are in place in coastal villages will allow for programfunds to 0 At least300 alternativeincomegeneration(AIG)pilots 4nnual reportsfrom the PMU ir supportAIG pilots initiated, of which 75% becomefinancially viable each programdistrict (FIRR>IO%) by EOP in all participatingcoastal villages Information on AIG pilots, diversification of fishing in programdistricts Annual reportsby SETOs, households and disbursement 0 15 % offishers/householdsaffectedby establishment PMUs of village crediffsavings funds of MCAs diversify into other occupationsoutside the will help to gauge the reef fisheries Annual reportsfrom local program`s impact on poverty in 0 At least300savingshredit facilitiesestablished or lenderdfinancialmanagement coastal communities in expanded in coastal villages in programdistricts; with atinstitutions program districts least 75 % repayment rate; at least 30% shareholding by women Sub-component 2.4: District Marine Conservation Area Management SKslperdas, meeting District fisheries management P Program units(6 DistrictBoards,50 Sub-district attendance lists & minutes strategies will identify & Boards)established and operating in each (6) district establish district-scale 0 District MarineResourcesStrategicPlanscreatedand District Marine Resources networks of MCAs, which will enacted in (6) program districts Strategic Plans published and be used to support 0 Networkidentifiedand establishedof MCAs in program distributed to villages, buoy implementation and/or districts markers in place expansion of community-scale 0 Sustainablelivecoral reeffish certificationprograms MCAs established in 2 pilot program districts Relevant certifications issued l3 Community-managedsurveillance o fthe reeffisheries. 41 iub-Component 2.5: Marine Park Support 3 Improvedmanagement effectiveness(including board meetingdminutes, Revised and socializedpark establishmentof Park Advisory Boards in each) of 2 svised and/or socializedpark management planswill guide National Marine Park Authorities (TakaBone Rate and llans and boundary program-supported co- Wakatobi) and 4 KSDAs (Raja Ampat, Padaido, Sikka lemarcations, stakeholder management activities within and Kapoposang)in the protectionof biodiversity of urveys,Annual MPA the park global significance,as indicatedby MPA Scorecard icorecard I1 Numberof infringementsofParkrulesandregulations Numberof infringements will observed per unit of patrollingeffort by park ranger Aedia, police andjudicial indicateability of park teams decreasesby 5% per year over the periodof the eports, stakeholderfeedback management to prevent program destructivepractices :omponent 3: Sub-component 3.1: Public Awareness Jublic Campaigns PMU, monitoring and media iwareness, reportswill be usedto gauge Iducation and trainings/localawareness campaigns conducted Projectmonitoringreports the progress of awareness $eaPartnership annually for target groups in program districts and coastal villages activitiesand campaigns iocietal awareness Media (posters, brochures, leaflets,billboards,news designedto influence the PMU, media reports if the benefits of behaviorof coral reef resource stories, puppets, etc.) advocating coral reef :oral reef users conservationand community-basedmanagement !cosystem produced in 6 program districts and 50 sub-districts, :onsetvationand advertisingcampaigns conducted at nationaland JMU records Independentsurveys by EOP ustainable use is provincial level (e.g. press, radio,television,etc.) will help verify if the program womoted, leading has improved the willingness o behavioral Video cameras, video projectorsand computers (equippedfor video editing and CD writing) to independentsurveys at Y1, of stakeholdersin all (6) :hange documentCOREMAP IIactivities installedin each nid-point, EOP program districts to participate program district (including FM radio in selectedsub- in sustainablemanagement of districts) coral reefecosystems Stakeholders(Le. coral reef resource users in the 6 program districts) are more willing to participatein the sustainablemanagementof coral reef ecosystems, 20 % above baseline of survey responses Sub-Component 3.2: Education Programs Trainings and materialswill 0 Coralreefecosystem conservationmaterialsincluded Educationmaterials (books, indicatethat teachers have in the formal Indonesianelementary educationsystem teachers manuals, posters, scientificteaching tools for (Le. MULOK (Muatan Lokal) or SAINS UNTUK etc.) coral reefecosystem topics WILAYAH PESlSlR and schoolchildrenare aware 0 75 %ofteachers incoastalvillages/regionsof program Workshop reports/ evaluations of these topics and practicing districts attend training workshops and receivecredit environmentalfriendly points behaviortowards coral reef ecosystems Sub-component 3.3: Sea Partnership Program 3 NationalSea PartnershipOffice established 3 12 university stafflyr placed in localgov. offices in (6) Sea Partnership annual report Student distributionof program districts community-based coral reef 3 12 students from program districts receive university PKL reports managementinformation scholarships per/yr, and work in program sub-districts packetswill indicatethe extent for a subsequent year District government reports to which program activities and 3 9 students/program sub-district receivehigh school awareness can be expanded scholarship/yr and work in program communitiesfor a beyond program sites subsequent year 3 60 students per/yr distribute community-basedcoral reel management informationpackets in coastal villages 42 Sub-component 3.4: Program Support Distributionof program Communication informationpackets will serve 0 Program informationpacketsdistributedto all(6) as an indicatorof impact that program sub-districts,as well as program newsletters Informationpackets, programstaff are informed of newsletters , 43 n 2, d d Q 9 'p .-C W z" C a a a a a a & v1 $ a s sa2 3 z 3 z 3 E 3 2 3 2 2a 0 0 0 0 I Y 8 9 B L2 3 8 0 Y .-E .m -m ,a0 vr I e e 0 0 .-ea 0 Technical Annex 4: Detailed Project Description INDONESIA: CoralReefRehabilitation& Management Project(Phase 11) A. ProgramSummary The COREMAP Phase 11 Program's objective (purpose) is that viable reef management systems are established in at least six priority Participating Districts, through afinancially sustainable program that is nationally coordinated but decentralized in implementation, in order to empower and to support coastal communities to sustainably eo-manage the use of coral reefs and associated ecosystem resources, which will revive damaged or protect intact coral reef ecosystems and in turn, enhance the welfare of these communities in Indonesia. The programconsistsof three major components: 0 Institutional Strengthening(US$16.6 million-base cost or total cost excluding contingencies) Community-Basedand CollaborativeManagement(US$41.6 million) Public Awareness, Educationand Sea Partnership(US$ll.7 million) This Annex provides a broad description of the components and activities of the COREMAP Phase I1 program. This description is based on the national and district Program Implementation Plans (PIPS), and is essentially a summary of these PIPs. After an extensive stakeholder consultationprocess, each (6) program district prepared a PIP for all Phase I1activities in that district, and these activities and the entire Phase I1 program were summarized in a national PIP. Thus, more detail on the institutional structures, specific activities and implementation modalities of COREMAP Phase I1can be found in the national and district PIPS. B. ProgramDescriptionby Component Component 1.InstitutionalStrengthening (US$I66million-total cost excluding contingencies) The objective of the Institutional Strengtheningcomponent is to enhance government institutional responsivenessto meet the needs of coastalcommunities, insupport of collaborative management of marine reserves and other marine protected.areas.There are three sub-componentsenvisaged: Sub-component(1) ProgramCoordination,M&E,and Training (US$9.lm) The objective of this sub-component is to ensure that institutional structures for national program coordination and decentralized program management are established and sustained. Toward this objective, the second phase program will fund technical assistance, training workshops, equipment and operational support(for the NCUinMMAF). Specific activities will include: Activity 1.1. Support for the National Coordination Unit (NCU). Because the program is nationally coordinated but decentralized in implementation, the executing agency at the national level (MMAF) will house a National Coordination Unit (NCU), rather than a Program Management Office (PMO). This NCU has already been formally established, through a decision letter (SK) issued by the Minister of MMAF in February, 2003.14 The NCU will be responsible for overall program coordination and day-to-day management, budgeting, financial administration and monitoring, while the targeted districts will be responsible for program implementation. Through this activity, the program will support the NCU by training, technical assistance, equipment and operating funds. (For more details on the institutional structure and functions ofthe NCU, see the national PIP, pgs. 24 -27). l4SKNo.: KEP.O3/MEN/2003 50 Activity 1.2Supportfor National Monitoring, Evaluation, and Feedback of Program Activities. The program will support the establishmentand operationof a Monitoring, Evaluation and Feedback Unitwithin the NCU. This unit will be responsible for consolidating and publishing the results of outcome monitoring activities undertaken in program districts, as well as program performance monitoring and financial management reporting. These results will be published in an annual report on the program (see national PIP, Annex 2: Monitoring Indicators for more details). Activity 1.3 Supportfor Training Coordination in the NCU to Oversee National Workshops and Training to Develop Key Strategies. Through this activity the program will support national training coordination in the NCU. A Training Team will be directedby atraining coordinator from MMAF and a deputy from LIPI. The Training Team will be integral to the NCU and support all the components via existing and future training needs analysis, procurement of local and internationaltraining expertise and production of high quality and appropriatetraining materials. It will work closely with district and communities. The NCU Training Team will focus attention on the Training Needs Assessment (TNA) system and train national and district governments in its use. The Training Team is supported by technical assistance and operating funds. It will also oversee national workshops and training activities to assist the Governmentand stakeholders to develop key strategiesfor the management of coralreef and relatedecosystem resources, including: 0 Coral reeffisheries management; 0 Marine conservation areas; and 0 Marine biodiversity. Activity 1.4 Training to Enhance Management Capacity of Program Management Units (PMUs), and Coordination between the NCU and PMUs. The program will support national workshops to train staff and consultants from the ProgramManagementUnits (PMUs) in each Phase I1district. These workshops will be aimedat buildingthe capacity ofthe PMUs for program management, training staff inprogram objectives and activities, and establishingcoordination linkages betweenthe NCU and PMUs. Activity 1.5 Identijication of 6 Additional Districts for Phase 111 Participation. After year three of implementation, the program is envisaged to expand activities to 6 additional districts for Phase 111. This activity will support a nationalworkshop to help identify districts interestedinparticipating in Phase111. Sub-component(2) CoralReefResearchandMonitoring--CRITC(US$7.0m) The objective ofthis sub-componentis to ensure timely provision of directedresearch, monitoring results and management information necessary to support collaborative coral reef management. Toward this objective, the second phase program will fund technical assistance, local research grants, ongoing reef health surveys and fisheries monitoring activities in each of the program districts, as well training and technical assistance support at the national level. Specific activities will include: Activity 2.1 National Coral Reef Information and Training Center (CRITC) Support. Under COREMAPPhase I,LIPIwith Asian DevelopmentBank(ADB) financial support, developedanationalCRITC network comprised of a national headquarters at the LIPI COREMAPbuilding linked to regional CRITC branches. Building upon these activities, ADB will continue to provide major assistance to the CRITC for activities at the national level and also in areas of Western Indonesia. Through this activity, the programwill enable the national CRITC to provide support to the (6) district CRITCs, as well as coral reef research activities of national interest not covered by ADB-financed programs. In order to implement this activity, LIPI will establish4 posts in the national CRITC in the fields of CRITC administration, GIS, research and monitoring, and information systednetwork and programming. LIPI will provide for staffing of these positions and ensure that career advancement is available for these staff. Throughthis activity, the programwill: 0 Complement ADB's support to allow the CRITC to conduct international outreach. The program provides support to the national CRITC for international outreach, including the establishment of an 51 office in the national CRITC dedicated to conducting international searches of coral reef and related ecosystem information networks including websites and access to online abstract services. The international outreach office will be staffed with one domestic International Outreach consultant for 18 months, supported by full time LIP1personnel. The consultant will seek out information usefulto the COREMAP I1Program which would then be translated and forwarded to Phase I1stakeholders including the district CRITCs, MMAF, PHKA and local government. The international outreach office will coordinate with MMAF's Public Awareness efforts. The international outreach program will also supply information to overseas institutions and individuals about COREMAP11, potentially making use of information developed under the Program Support Communication sub-component. Improved communications should result in the program and its stakeholders being invited to participate in a wider range of internationalinitiatives, scholarships and research. Produce and distribute key coral reef ecosystem materials created by the CRITC. Under Phase Ia range o f coral reef materials were produced, however there was insufficient funding to allow for production and distribution of many of these materials (e.g., Marine Atlas, Manuals, etc.). The Phase I1program will provide support to allow for production and dissemination of selected COREMAP products and usefulmaterials from other donors and NGOs. Key outputs from both COREMAPPhases IandI1willbeevaluated,printedre-printedanddistributedtobenefitstakeholdersatlocal,regional, national and internationallevels. Develop a coral reef management information system (CRMIS). The CRITC Management and Information Technology (IT) consultants will undertake a needs assessment for the data needs and formats required by District PMUs. Based on consultant input, COREMAP IIwill contract an IT company who will develop a web-based application to allow data from communities and program districts to be entered into the national monitoring and evaluation data base and for them to be able to access information from both national CRITC and other data sources through medium speed internet access. e Establish a VSAT communications system for Eastern Indonesia. The program component will invest in the establishment and operation of a satellite base station in Jakarta at the national CRITC. The program will also support VSAT connection bases in each (6) district. An IT company will install and maintainthe communication network for the full six years of the Phase I1program. The IT service will include hosting large amounts of data as follows: the COREMAP homepage; organizational information system; MCSIS; socioeconomic monitoring data base; metadata information systems; reef health monitoring information systems; community-led fisheries catch monitoring; CRITC hotmail; human resources and training information system; library catalogue interface; on line training modules and a project management information system. The IT contract will include training o f district staff including the district-based IThetwork specialists. e Support baselinehitial rapid resource inventory (RRI) surveys in eachprogram district. Two teams of experts will be created and fundedthrough the national CRITC, inorder to conduct baselinehitial RRULITsurveys ineach(6) program district, along with the district monitoringteams. e Supportfollow-on RRI and line-intersect transect (LIT) monitoring as needed in program districts. These same teams will continue to assist the district monitoring teams (coordinated by the Research and Monitoring Specialist in each district CRITC) to conduct annual RRI/LIT surveys, until they judge that each district team is adequately trained to independently carry out the surveys. Even after this stage, the Research & Monitoring Specialist in each district CRITC will continue to draw from the survey budget at the national CRITC to fundthese district teams. e Support for scientific MCA monitoring by a specialized team covering selected sample sites throughout Indonesia. Once the district monitoring teams are trained to carry out the RRVLIT 52 surveys independently (generally by two years time), the role of the two teams of experts from the national CRITC will be reducedto quality assurance activities to ensure consistency of results across the sites. LIP1 will develop a simple yet scientifically valid format for MCA monitoring and also form an MCA monitoring team from these experts. This team will monitor selected MCAs throughout Indonesia, as well as review the field monitoring protocols issued. The national CRITC will then produce handbooks and training protocols for community based monitoring to be establishedinthe COREMAPPhaseI1districts. Supportfor research on the benefits of MCAsfor reeffisheries production and management. There will be a budget at the national CRITC for experts to analyze the results of the scientific MCA monitoring over the course of Phase 11, in order to assess the benefits of MCAs for reef fisheries production and management. The aim of this assessment would be to determine the impact of establishing MCAs (as well as other coral reef ecosystem management activities sponsored by the Program) on coral reef fisheries and the livelihoods of the communitiesdependent uponthem, andthe findings would be summarized in a comprehensivestudy or report directly to the Dinas KP, MMAF, communities, NGOs and other Programstakeholders, and publishedwhere appropriate. Training. The national CRITC would conduct training for the district CRITCs and other stakeholders, and in addition to the on-the-job training the district monitoring teams would receive in participating in the RRI/LIT surveys, there would be budget available at the national CRITC for an expert to train the district CRITC staff for one month at the beginning of the Program in the use and operation of the CRMIS. Conference Attendance. Funds are provided to allow attendance at national and international conferences, including workshops and trainings at the GEF-funded Center in the Philippines for the Coral Reef Targeted Research Initiative. Attendance will allow for technology transfer from participantsto the CRITC and as amediumfor the CRITC to disseminateinformation. 0 Research. CRITC is provided a budget to support national level research studies. Proposals will be solicited from scientific investigators throughout the country on topics relatedto co-management of coral reefs, based on criteria set by the National CRITC Proposals can be offered not only by academic research institutions and government agencies but also from the private sector, NGOs and communities. However, all proposals will be held to a high standard of quality. To insure wide participation, the availability of these research grants will be publicly advertised in mass media (e.g., newspapers, newsletters, Program's public support communications, etc.). A multi stakeholder panel chaired by the CRITC will select and award the funds to conduct the studies. The same panel will insure wide spread distribution of results. The research and study topics would be consistent with meetingthe program's objective. Activity 2.2 District Reef Health Monitoring. The district level is the primary focus of the COREMAP I1 research and monitoring activities. In each (6) program district, a district CRITC will be established as a subunit of, and receive funding through, the PMU (in Phase Idistricts, this will mean expandingthe existing CRITC as a subunit of the PMU, and in new Phase I1districts establishing a CRITC inthe PMU). Although each district CRITC will have unique requirements, all will have a standard Coral Reef Management Information System (CRMIS) established(including office equipment, Vsat network link, local area network, software programs, etc.), which will be linkedto the national CRITC. In addition, each district CRITC will be staffed by a Research and Monitoring Specialist and an Information Systems Specialist. The Research and Monitoring Specialist will be responsible for coordinating annual =IT surveys of the district reefs (including coordination of the analyses of the results and their entry into the CRMIS), dissemination of the results in the district, coordination of ongoing training of local stakeholders (communities, schools) in reef healthmonitoring, and coordination of collection and analysis of socioeconomic data every three years. The Information Systems Specialist will provide maps and assist the CBM and MCARisheries Specialists to 53 manage databases in the PMU and Dinas KP generally and ensure data entry, processingand retrieval meets the needs ofthe Program. Through this activity, the programwill: Monitor local coral reef ecosystem health. A team of several experts from the national CRITC will conduct a baselinehitial RRVLIT survey in each district, working with a local district reef health monitoring team coordinated by the Research and Monitoring Specialist (e.g. recruited from local universities), as well as local stakeholders. The experts from the national CRITC will also enter the data into the CRMIS and analyze the results, training the district reefhealthteam inthe data entry and analysis as well.I5 The RRILIT surveys will be repeated in each district annually, and for the first two to three years the national experts will returnto the district to continue to supervise the district monitoring team, until the team is ready to independentlyconductthe surveys. While the budget for these surveys will rest at the nationalCRITC, the Researchand Monitoring Specialist will coordinate the contractingand implementationof the surveys by both the nationaland district teams. Inaddition, an expert from the nationalCRITC will come to the district for a durationof one month soon after the completion and entry of the data from the baselinehnitial W I T survey, in order to train the Research and Monitoring Specialist and the district reef health monitoring team in the use of the CRMIS inthe district CRITC. Export national information needsfor Benefit Monitoring and Evaluation (BME), Coral Reef Spatial Information System (CRSIS) and other programs. The data and results from the regular RRILIT surveys, as well as all socioeconomic data and any other information needs would transmittedvia the network connectionto the nationalCRITC. e Provide useful information for area decision makers and stakeholders including district and subdistrict government, village heads, communities andfishers. The two district CRITC specialists will work with other program staff to disseminate key results from the RRI/LIT surveys. From the baselinesestablishedinYear 1, the district CRITC will provide analysis of change over time inareas that remain unmanaged and areas that undertake community management initiatives. Processed data will feed back to the communities, become part of the District Marine Resources Strategic Plan and feed into the Program's Public Awareness component. Inaddition, the two district CRITC specialists will be active in determininginformation needs and supply ofrequireddata, maps and materials to the local government and community programs. They will be taskedto produce andtest varied formats of information (maps, charts, etc.) to produce locally usefulmaterials and work with the CBM program to disseminate information down to the community level. Small information centers will be established inselected villages throughout the districts for material distribution. Activity 2.3 District Fisheries Monitoring. One of the best indicators of the impacts of program activities towards improving the management and health of coral reef fisheries in program districts, as well as the welfare of the communities dependent upon them, is an increase in the catch of reef fish per unit of fishing effort (CPUE). Throughthis activity, the program will support community-basedreef fisheries monitoring to track changes in CPUE. More specifically, the program will provide training for Dinas KP staff in community-based fisheries monitoring, as well as program extension teams (i.e. SETOs, Community Facilitators and Village Motivators). The SETOs, CFs and VMs would then be supported to train volunteer fishers in villages throughout the district to record catch and effort data (as well as survey fishers at key landing sites). The programwill also support these volunteer fishers and community members inthe ongoing collection of fisheries catch data (CPUE), and the extensionteams and Dinas KP inthe regular consolidation of this data (i.e. collecting log books and consolidating data) at the village (by the Village Motivators and IsThe national experts from LIP1would be ready uponProgrameffectivenessto conduct the baselinehnitial RRILIT surveys, depending on weather and travel conditions. Ifthe Research& Monitoring Specialist has not yet beenrecruited andthe district CRITC hlly established, the data, analyses and results would be entered into the district CRITC's CRMIS during the initial training of the Research& Monitoring Specialist. 54 Community Facilitators), sub-district (SETOs) and district (by Dinas KP) level. Finally, Dinas KP will be supported to analyze the data and disseminate the results widely throughout the district to stakeholdersand policy-makers, as well as to the NCU. Activity 2.4 Socio-Economic Data Collected, Analyzed and Disseminated. The Research and Monitoring Specialist in each district CRITC will have a budget to fund the collection and analysis of national census (SUSENAS) data for the district (where available), once every three years. In addition, the program will support regular beneficiary surveys in households throughout targeted districts to assess the perceived impact of the program on community welfare, as well as the impact of program activities on public awarenessof the need for coral reefecosystem conservation. Activity 2.5 Support for Local Research. The district CRITC (with the rest of the PMU) will develop a research agenda based on the results of the initial Program socialization and other available information. Basedon this agenda, the district CRITC will solicit proposals for research through advertisementsinregional media, and a joint committee of district CRITC and LIP1 experts will select from the proposals received, ensuring technicians with correct field experience are deployed to support the research. Expectation is that funds can be released quickly for the local research with most researchwill be directedat piloting AIG pilot projects. All solicitation, evaluation, selection and funding processes will be conducted in a transparent manner. Activity 2.6 Innovative Researchand Studies. The programwill also support innovative research and studies conducted by stakeholders, and based on proposalas reviewed and agreed to by a committee as described in the operationalmanual in each program district. These studies and research would support the development of new technology and techniques for sustainable fishing livelihood opportunities which would serve as alternatives to coral reef exploitation. District research and studies would assist experimentationof fishing methods that open up new access to non-traditional fisheries that reduce the pressure on the reef fishery (e.g. deep water prawn pots, or midwater pelagic fishing pots associated with FAD's). This research would be coordinatedby the District CRITC ineachPMU. Linkageswith the GEF-funded Coral Reef Targeted ResearchInitiative. Independentofthe COREMAP I1 Program, the GEF is funding a global initiative for targeted research on coral reefs, with centers of excellence establishedinuniversitiesand research institutes aroundthe world, focusing on key themes suchas climate change, connectivity, etc. One center will be establishedinthe Philippines, and will provide training on various topics of coral reef research and management. The COREMAP I1program will provide a budget at the national CRITC for selected experts to liaise with the center in the Philippines and undertake study tours there on topics relevant to the Program. Likewise, there will be additional budget in each district PMU for local experts to attend study tours at the center on Program topics. These study tours would establish an ongoing dialogue and exchange of information and lessons between the COREMAP I1Program and the Targeted Research Initiative. Sub-component (3) Legal, Policyand Strategy Assistance (US$O.Sm) The objective of this sub-component is to legalize program structures, formalize community authority to collaboratively manage coral reef and associated ecosystems, and support the development of key national strategies. Toward this objective, the second phase program will provide technical assistance at the national, district and village levels. Specific activities will include: Activity 3.1 Support to Legalize Program Structures. Through this activity, the program will support the legalization of co-management structures in the program districts, such as the CCE Boards. In addition, where necessarythe programwill assist in the formalization of the CoastalManagementCommittees, as well as the district reef healthmonitoring teams. Activity 3.2 Technical Assistance to NCUfor National Policy Assistance. Through a small provision of resources, the programwill support the NCU to hold workshops to meet with a wide array of stakeholdersin 55 the coral reef fisheries o f Indonesia, in order to build consensus around national policies for reef fisheries management. Activity 3.3 Technical Assistance to (6) Districts to Assist the Creation and Implementation of Enabling Legislation (Perdas), technical assistance to Communities to assist in the Creation and Implementation of Enabling Legislation (Perdes). Co-management requires legal support to formalize communities' right to manage coral reef ecosystems and related resources. For this reason, the program will provide legal assistanceto the districts (to the CCE Boards and PMUs) to create and implement district legislation (Perdas) to enable communities to collaborate with local government in the management of the reef resources. This legal assistance to the districts will include specific terms of reference for drafting and passing regulations in each district to address the live reef species trade and the use of cyanide inreef fisheries. Lastly, the program will provide legal assistance to support coastal communities in program districts to create and implement village-level legislation (Perdes) to formalize community management plans and measures, such as the establishment of village MCAs. Activity 3.4 Sustainable Coral Reef and Reef Fisheries Management Strategies. Through this activity, provide technical assistance and support for workshops to MMAF. After revisions, support is provided for the dissemination o f the enhancedNational Coral Reef Management Strategy developed under Phase I.New policies and strategies are developed for two initiatives: (i)Regional Coral Reef Management and (ii) Sustainable ReefFisheries. After completion, assistance is available to distribute results. Activity 3.5 SustainableLive Reef Fisheries Management Strategies. At the national level, three actions will be taken: (i)input regarding live reef fish will be provided as a part of the Reef FishManagement Strategy; (ii)astudythat outlines acomprehensive programofactivitiesto changethe incentive structure (i.e. the pricing) of the live reef food fish; and (iii)a scientific study into the dangers o f eating cyanide caught fish. Coordination will be made with pilot related activities inPangkep and Buton districts. Component2. Community-Basedand CollaborativeManagement (US$41.6million-total cost excluding contingencies) The objective o f this component is to empower all coastal communities and institutions throughout program districts to sustainably co-manage coral reefs and associated ecosystems to increase incomes which will in turn enhance community welfare. This component provides the resources needed to create and implement a District Marine Resources Strategic Plan for each program district. Activities under this component are generally more defined for the first year o f program implementation, with the expectation that each district CCE Board will develop successive year work plans, based on evaluation of program successes and failures to best achieve realization of the goals o f COREMAP Phase 11. There are five sub-components envisaged: Sub-component(1) CommunityEmpowerment(USU4.0m) The objective of this sub-component is to ensure that all communities throughout program districts are organized and empowered to undertake co-management of the coral reefs and associatedecosystem. Toward this objective, the second phase program will fund technical assistance and extension activities to coastal villages, village consultations and awareness-raising, trainings, construction of coral reef information centers in coastal villages, and provision of management equipment such as two-way radios. Specific activities will include: Activity 1.I.Sustainable Coral Reef Fisheries Training. Through this activity, the program will support the PMU in each district to undertake a series of short, informal and multi-media supported training courses for all COREMAPI1staff and key stakeholders at the district level. These courses will explain why management is needed, what benefits are obtained by coral reef management and introduce how management can be implemented, based on real examples from Indonesia and other tropical countries. The first participants will be the PMU staff, several local journalists and the field-team recruited to undertake the initial program socialization/information-gathering activity (Activity 1.2) in each program community. This training/ 56 workshop will then be adapted and conducted in a suitable form for other key stakeholders (DPR-D, DKP, Bappeda, NGO's etc) at the district level over the first six months ofthe program implementation. Activity 1.2 Social Marketing of Sustainable Coral Reef Management, Program and Rapid Rural Appraisal (RRA). The field team and PMUstaff will be provided with COREMAP Phase Iand other materials prepared to socialize the COREMAP Phase I1program. Through this activity the program will support a social marketing workshop to develop locally appropriate approaches to engage all different target stakeholders at the village level (including village heads, BPD, Religious and cultural leaders, `Tokoh masyarakat and Tokoh Nelayan, women, children fishers, reef gleaners, fish traders and teachers). Fieldteams of 4 or 5 people will visit each coastaland islandcommunity and spend at least a week ineach village, undertakingmany activities to engage each target group. The teams will socialize the COREMAP I1program and raise awareness/ impart information about sustainable reef fisheries management. As well as socializing the program, the field teams will use Rapid Rural Appraisal (RRA) and other techniques to gather baseline information about the fishers and fishery, local importance and perception of the communities towards the reef, reef fishery and management possibilities and collect input into what the communities feel needs to be done to allow them to better manage their reef resources. A target for these socialization activities will be to contact at least 50 percent of the people from each community. The results of this RRA and community sketch maps will be processed by the PMU, combined with other available data (NGO surveys, university research, existing data sets at district government etc) to draft the current situation of the reef fisheries for each district. This information will be processed by the PMU, Bappeda and DKP, to produce the District Marine Resources Strategic Plan (see Activity 4.3) a visualization of the district where fisheries management in realized and achieves maximum sustainablefisheries benefit and conservationof marinebiodiversity. Activity 1.3 Community Study Tours and Cross Visits. In addition to socialization of coral reef management techniques, the field teams will beginto identify stakeholdersineach village who influence fishers. These key stakeholderswill be engaged, andthrough dialogue and discussionseveralwill be selected to undertakestudy tours and cross visits to sites implementinggood coral reefmanagement in Indonesiaand overseas. These key stakeholders will be encouraged to remain engaged in COREMAPI1program activities as resource people for program field teams. To reinforce the benefit of study tours, each study tour will be fully documented with video and photographsand VCDs of the visits will be producedand distributedto the communities. Activity 1.4 Village Facilitation and Technical Assistance. Communities interested to participate in the program and willing to commit to undertake coral reef ecosystem management activities will be provided with intensive facilitation for approximately 2 % years. Through this activity, the program will support the district PMUto recruit the best of the initial Field Team members as Senior Extension and Training Officers (SETOs) and Community Facilitators to live with the communities. The SETO's will attend a National COREMAPI1CBM training, to review and harmonizetraining materials preparedto supportthe CBM process. Additional staff will also be recruited to ensure sufficient human resources to provide intensive support for co-management activities. These people will participate in a sustainable coral reef fisheries and social marketing training, after being deployed to work at the village level. SETO's will be tasked over the following six months to repeat the contents of the COREMAPI1CBM training at the community level with Village Motivators and Community Facilitators. These facilitation teams (assisted by short-term technical assistance in fisheries resource assessments, law, public awareness, micro-finance management and other fields as needed) will work with the village head, BPD, and all other stakeholders to facilitate the uptake of effective coral reefco-management ineach participating village. The facilitation teams will undertake the in- village COREMAPI1CBM training that include facilitation skills; gender role in development; organizational analysis/institutional strengthening; basic financial management; community-based management(theory and practice) and analysis of economic activity at the community level. These trainings will be strengthenedby ongoing mentoring of male and female Village Motivators (VM's), who will eventually take-over the facilitation role, allowing the Community Facilitators and SETO's to move to another village. Activity 1.5 Establishmentof Village Coral Reef Information Centers. Communitiesrequestingfacilitation to manage their reef resources will be encouraged to choose an existing communal building to be the 57 information center for coral reef management activities. The programwill assist communities to make a plan and budget to rehabilitate the building together. Labor will be voluntary, as will the collection of locally available resources, but the program will support the purchase of cement or zinc roof sheets as needed. The aim is that through this work, the community will see the amount that can be achieved by working together and the benefit of makingtransparentandcomprehensivebook-keeping.All activities supportedby COREMAP Phase I1will need to be managed in this transparent and open way. The information in this center will be continually renewed with local and general information about coral reef management and COREMAP.Each village will receive a grant of approximatelyRp 10,000,000 for this purpose. Activity 1.6 Communication Networks such as Two-way Radios, The coral reef resources utilized by a community are often also used by other communities. In order to establish effective management, use patterns and agreements between users will need to be established between villages. For this reason, the training program will undertake all activities on a rotational basis between adjacent villages, increasingthe contacts betweenvillagers within an area. Based on common needs and issues the program extension teams will facilitate the resolution of issues through dialogue and consensus building within and betweenvillages. One of the major successes in COREMAPPhase I was the establishment of radio communication networks betweenvillages. COREMAPPhase I1will builduponthis success to ensure that all participating villages have radio equipment and communication, thus linking villages, community facilitation team members and the PMU. In areas that receive FM radio coverage, the local radio stations will be engaged to disseminate information about COREMAP11-relatedissues. Sub-component(2) Community-BasedCoralReefManagement(US$6.6m) The objective of this sub-component is to ensure that coastal communities inprogram districts formulate and implement effective coral reef and associated ecosystems co-management. Toward this objective, the second phase program will fund detailed village resource assessments and mapping exercises, as well as consultations and technical assistance to prepare resource management plans, management equipment for marine sanctuaries, surveillance and enforcement operations, fishing gear inventories and pilot decommissioning activities, as well as support for ongoing village management operations. More specifically, program support will be given for concrete steps taken by communities and districts to improve the condition of coral reef ecosystems and related resources. The focus of this sub-component is reducing destructivepracticesand promoting activities that have direct benefitto the reefs and contributeto sustainable reef fisheries. Communities will be trained in simple methods for making baseline surveys and measuring change. This information will feed into a community dialogue to determine whether management interventions implemented by the community are successful in reversingthe current downward trend inreef and fisheries quantity and quality and thereby lead to a stable and eventually improving condition. Specific activities will include: Activity 2.1Detailed Participatory VillageResourceAssessments andMapping: The program will support training for communities to undertake manta tows and visual fish census. Through undertaking underwater mapping and other land-based participatory resource assessment (PRA) activities, whole communities will understandcurrent situation and historical trends in coral reef and relatedresources. Projecting the future from this trend, communities will be facilitated to develop strategies for ensuring maximum long-termbenefit from the reefand relatedresources. Activity 2.2. Preparation of scientijkally supported village Coral Reef Management Plans and inter-village plans legalized by perdes: Communities will process the data gathered in the underwater surveys and discuss where optimum sites for various use areas should be located. The District Marine Resources Strategic Plan (see Activity 4.3), the results o f the RRI and other available scientific information will be incorporated to ensure local MCA's maximize fisheries benefit/ fishery management requirements and contribute to critical biodiversity conservation. Communities will be encouragedto assign considerable areas of each reef relatedecosystem as no-take zones. Support will be given to ensure these areas are viable and contribute to the realization of the 58 district strategy. Many resources are utilized by morethan one community, the radio network and community meetings and workshops will focus on resolving user issues to make progress towards the district strategic plan. Agreements made by individual communities in program districts and between communities can be formalized by either locally-binding agreements or the passageof village ordinances (Perdes). Activity 2.3. Establishment of village sanctuaries supporting district sustainable reef management: As the initial RRA results are processed and the situation in the district clarified on maps, the field teams will distribute these to the communities and through an iterative process support the development of the District Marine Resource Strategic Plan. This plan will represent a schematic road-map for achieving the maximum sustainable benefit from the reefs and relatedecosystems whilst ensuring management of all key biodiversity assets (endemics, high biodiversity areas, key resilient reefs, breeding sites). The program will support the installation of MCA marker buoys and dissemination of MCA coordinates through waterproof schematic maps for fishers, radio announcements, newspaper articles and annual calendars to maximize knowledge and understanding of the areas under management. In key, high-value locations at risk from anchor damage, mooring buoys can be also be supportedby the program. Activity 2.4. Inventory of fishers, vessels, gear and holding facilities and development of fisheries management: Inadditionto establishingaresilient network ofviable MCAs, the programwill supportthe adoptionof other reef fisheries management tools in program districts by strengtheningthe district MMAF offices (Dinas KP). COREMAPPhase I1 will support the Dinas KP in each program district, and the communities, to optimize fishing effort on the reef ecosystem. In particular, small-scale fishing vessels and gear will be registered to assist communities in regulating access to local coral reef areas especially MCAs. For this reason, the program will provide technical assistance, training and operational support to the Dinas KP agencies in each program district, to strengthen these agencies' capacity to support sustainable co-management of coral reef ecosystems and to register and license small-scale fishing vessels. Through program support for registration, licensing and generating an intrinsic value to these licenses, fishers and DKP will together develop fisheries management on a broader scale. Activity 2.5 Pilot decommissioning of destructivefishing gears in selected villages: In one area that successfully completes the licensing process, COREMAPwill support the controlled decommissioning of gear that although legal is known to be destructive (e.g. reef-based wall nets, compressors, etc). This activity would commence with a study with recommendationsthat would then be implemented. This pilot activity will be evaluated and if successful (ecologically and cost effective) will become a management tool for COREMAPPhase 111. Activity 2.6. On-going community monitoring of reefs and associated ecosystems: The program will build on successful community monitoring protocols (Reefwatch, RRI, Manta Tows, Visual Fish Census and CREEL surveys) to establish teams of volunteers in each participating village who will be trained to undertake ongoing monitoring activities. Initial training will be given by National CFUTC and follow-up support given from District monitoring teams to ensure data is regularly gathered and analyzed within each community to quantify change from management initiatives. One key process indicator is the timely display of this information inthe community coral reef information center ineach participating village and the level of awareness of the results significance in the participating community. Communities will be encouraged to monitor and protect their MCAs and resolve infringements within existing and traditional social systems. Activity 2.7. Collaborative surveillance and enforcement 0 : IfcommunitiesrequestsupportinenforcingtheirmanagementplanandMCA'sCOREMAPwillsupportthe infrastructureneededto establish communicationnetworks (Activity 1.6.) and a rapid response service. Local MCS unit with existing local law enforcement have access to appropriate vessels to undertakejoint patrols and respond to community requests for help. Destructive fishing practices undertaken by non-local fishers exploiting a coral reef ecosystem for immediate and large returns (e.g. large fish catches from bomb fishing) 59 will be addressed through this response service to increase the effectiveness of local management. This activity will support a cost-effective and decentralized system of surveillance and enforcement in each program district, whereby appropriate local government authorities are equipped with response boats and communications to respond to community-basedReef Watchers, These Reef Watchers will maintain fishing logbooks and also note illegal fishing activities, reporting them to local authorities. Inareas where destructive fishing is highly institutionalized, as needed a National MCS assistance team comprising senior officers from Directorate General PSDKP MMAF and when needed officers from other relevant enforcement agencies will be deployedto ensure resolutionofdistribution chains. Activity 2.8.Strengthenand expand community based management areas: The programwill offer additional support to communities optingto increase the area under management. This support will include additional resources for facilitation, marker buoys, legal drafting and socialization o f the changes in managed areas. Through this iterative process it is expected that each program district will move towards realizationof the District Marine Resource StrategicPlan. Sub-component(3) CommunityDevelopment(US$lO.lm) The objective of this sub-component is to ensure that coastal communities' incomes are increased and diversified through transparent, accountable and financially viable livelihood opportunities with greater access to capital. Toward this objective, the second phase program will fund technical assistance, village block grants for (i)village improvements, and (ii)village revolving funds. More specifically, activities inthis sub-component will include provision of skills and activities that contribute to a general improvement in welfare in the target communities. These activities will be implementedto encouragehewardconcrete steps undertaken by communities towards achievement of the District Marine Resources Strategic Plan, MCA establishment, community-based monitoring and other COREMAPPhase I1 goals. Specific activities will include: Activity 3.1.Establish and operate villagejnancial management system to managepublic funds: The program will support the strengthening of village financial management systems in two ways. Existing financial managers/bookkeepers and other community members who are assessedas having potential will be selected to attend basic training in money management and test for accreditation. Candidates that show potential will be further trainedto expand existing micro-finance management systems through BMTs/LKMs or other similar institutions (see Activity 3.2). Activity 3.2. Provide technical support to well-functioning BMTs/LKMs(or similar institutions) to establish a village branch inparticipating villages: The program will provide incremental support to existing District-basedBMTs/LKMs or similar institutions (financial intermediaries)that are appraised as well-functioning and financially sustainable. The support will allow these financial intermediaries to provide technical assistance to program villages, in coordination with program facilitators, to set up village branch BMTs/LKMs or similar institutions. BMTs/LKMs are faith- based credidsavings institutions that mobilize savings among members for productive income generatingand social benefit purposes. Thus, village branch BMTs/LKMs will serve as credithavings facilities for participating program villages. COREMAPPhase I1boats and communication systems (i.e. radios) will be the primary mechanisms used to deliver technical support to communities to undertake savings and credit systems. Activity 3.3. Support in theform of a village grant for revolving credit/savingsfacility in eachparticipating villagefor livelihood and income generation activities: Once village savings and credit systems are established and operating, program resources can be applied to viable groups (i.e. small micro-enterprises) on a revolving basis and through a subsidiary loan from the participating village to the village BMT/LKM which is on-lent to the micro-enterprise. Sub-loans from the participating village must not exceed 40% to any single village BMTLKM. Moreover, BMTs/LKMs would on-lendto small enterprises for alternative income generatingactivities and no more than 40% ofthe sub-loan to a BMT/LKM can be usedto on-lend to a single micro-enterprise. Micro-enterprises would be eligible for 60 securing a loan through the BMTLKM and from the Village only if the proposed enterprise was income generating and directly or indirectly took pressure off the coral reefs and associated ecosystems. A target of 30% involvement of women is set for all COREMAPPhase I1 activities including staffing, trainings and specifically revolving funds and alternative income generating activities. Each participating village will receivea grant of Rp. 50,000,000 for this purpose. Activity 3.4. Pilot Credit GuaranteeScheme to Increase CommunityDevelopmentImpact: It is likely that over the program implementationperiod, village micro-enterprisesmay require more capital than the village facilities can provide. Studies suggest that village-based micro-enterprises in project areas have limited and oftentimes no access to private credit due to market failures and this is one reason for (i) limited economic growth in coastal areas and (ii) engagement by coastal communities in income generating activities that are destructive to coral reefs and associated ecosystems (blast and poison fishing). In an effort to overcomethis constraint, the borrower would establish a pilot credit guarantee scheme to increase access to private capital for coral reef dependent communities that have limited or no access to private capital due to market failures. The partial credit guarantee scheme would provide a local rural bank with such guarantee so that the rural bank could lend to small enterprises at a lower interest rate. The guarantee scheme would be implemented on a pilot basis in at least three pilot districts (Pangkep, Selayer, and Sikka) and financed by GO1as counterpart contribution to the Bank loadcredit. Moreover, there is provision to assist District and village-based credithavings facilities to utilize the technical expertise of the International Finance Corporation (1FC)-supported business development facilities in Indonesia (PENSA), in order to issue such partial credit guarantees and assist local small and mediumenterprisesto grow. Activity 3.5. Technical support to review, revise and implement proposed income generation activities: The program will support alternative income generation (e.g. income-generating activities which provide an alternative to fishing and extractive uses of the coral reefecosystems) inthe communitiesinprogram districts. More specifically, through this activity the program will focus on the provision of technical support from the private sector to assist in the analysis of alternative income generating activities. Community initiatives analyzed as viable, from economic, environmentaland marketing aspects and not contrary to the safeguards policy may be supportedwith longer term technician level support. As long as business plans can demonstrate viability, including paying-back initial investment and sustainability, programs such as village power, drinking water or small scale industry that does not conflict with safeguards policy could be provided technical support. In order to coordinate the alternative livelihood activities of this sub-component, the program will also provide additional technical assistance through a Business Development Service Officer who will work with each (6) district, on an as neededbasis through each PMUto ensure that alternativesare available as villages begin to reduce reef fishing effort. The objective of this assistance would be to provide (i)the minimum level of training to new enterprises inthe technical aspects ofproduction(e.g. seaweed farming), and (ii)training in preparation of a business plan to guide the enterprise and to facilitate applications for credit, training on management of cash flow and accounting, marketing and sales. Activity 3.6.Block Grantsfor Village Improvement: The program will provide block grants (approximately up to Rp. 100,000,000 (US$lO,OOO) per village) to each participating village for social goods purposes agreed to by the community through a consultative and highly participatory process ledby Community Facilitators (e.g. small-scale infrastructure,etc.). These grants are awardedto communities subject to ratification of coral reef management plans (see Sub-component 2). Activity 3.7.Provision of income opportunities outsideprogram villagepilots. The program will support employment agents from each program district or Provincial capital to make periodic visits to remote island communities. During these visits they will look for work opportunities suitable for fishers and reef gleaners. At mid-term review, this activity will be evaluated to estimate the results and an assessmentmade of its cost effectiveness. Activity 3.8, District Block Grant. Approx. Rp. 300,000,000 per year up to 4 years, not exceeding 1,200,000,000 per district to lend to small and medium size entrepreneurs to undertake pilot alternative 61 income generating (AIG) activities that would directly generate income for project beneficiaries in project areas and reduce pressure off the coral reefs and associated ecosystem, and in accordance to the guidelines provided inthe OperationalManual. Sub-component(4) DistrictMarine ConservationArea (MCA) Management (US$7.1m) The objective of this sub-componentis to ensure that all participating district governments are strengthened and equipped to effectively support MCAs through co-management of coral reef and associated ecosystems. Toward this objective, the second phase program will fund technical assistance and operational support to establish and maintain district-level boards, as well as a PMU in each district. In addition, this sub- component will also fund village baseline reports and surveys in each district in order to create a District Marine Resources Strategic Plan, as well as pilot programs to train villages to sustainably capture live reef species. Specific activities will include: Activity 4.I Support toformally establish and maintain District Coastal Community EmpowermentBoards . Within each targeted district, the program will support the establishmentand operation of Coastal Community Empowerment (CCE) Boards or similar agency (e.g.: Dewan Maritim Daerah) consisting of policy-makers and stakeholders in the coral reef ecosystems. These CCE Boards will be responsible for consensus-building and policy-making to support co-management of coral reef and associated ecosystems. EachCCE Board will be chaired by the head (Bupati) of the district and composedof about 20 members, about halfof which will be drawn from civil society. The Bupati's office would issue the invitation to the quarterly board meetings. The Board will undertakea range of responsibilitiesincluding: Provide inputto district policies and strategies; Review and endorse proposed annual workplan of the PMU, prior to submission to the local legislature(DPRD); Provide recommendationsfor implementationof COREMAPPhase I1activities; e Analyze progressand public opinion concerningCOREMAPPhase11; e Provide input for revision of district strategic plans as relatedto the COREMAP PhaseI1Program; e Coordinate and mobilize local government support; e Superviseeffective procurementfor goods and services at the district level; e Coordinate with other relatedprojects and programs; e Monitor district implementationprogress; and 0 Provide management informationto the DPRD. Activity 4.2 Establish District Program Management Units (PMUs) to Support Co-Management. The implementation of program activities within the districts, under the direction of the CCE Boards, will be undertaken by a PMU established within the local government in each program district. These PMUs will have coordination, procurement, implementation and monitoring functions, and will be provided with technical assistance, equipment and operating support under this activity of the program. The community extension program of Sr. Extension and Training Officers (SETOs), Community Facilitators (CFs) and Village Motivators (VMs) will be managed through the PMU, as well as assisting the district with the identification and establishment of a network of effectively managed MCAs. The PMU will likely be active over a 3.5 year period, longer indistricts phasingin-fieldactivities. Activity 4.3 Develop a District Marine Resources Strategic Plan and Establish MCA Network. This activity will support the PMUs in each (6) district (and Dinas KP), under the direction of the CCE Board, to create a District Marine Resources Strategic Plan to guide villages in the selection of MCAs and build towards a network of community-basedMCAs that would achieve the program objective of having no take zones cover 10 percent of district reefs by 2010. This Plan would be based on the district reef health monitoring (RRIsLITs), village participatory resource assessments and other ecological and socioeconomic information, and would include fishing grounds, fishery type, season, users and status, current knowledge on status of the reefs, spawning and nesting sites, migratory routes for fish and marine mammals, reefs utilized by fishers and other private sector, fishing communities by size level of technology used and dependence on fisheries, 62 destructive fishing communities and fishing facilities, ice plants, and processing plants markets. The Plan would be draftedin map form and socializedthroughout the district, so that village-establishedMCAswould be selected basedon broadparametersset by the Planand map (Le. broadareas highlightedas potentialareas for location of MCAs), in order to ensure that these MCAs will generate the fishery benefits the Phase I1 Program aims to achieve. The Plan will also include guidelines to assist villages in the selection of and establishment of MCAs, inorder to maximize the potentialbenefits. Activity 4.4 Establish Sustainable Management of Certified Live Reef Species Trade in Two Pilot Areas, SpermondeIslands and Buton. Capture of live reefspecies (for live reef food fish markets and for live reef aquarium species markets) constitutes one of the most valuable and readily available export commodities generatedby small-scalecoral reeffisheries inmany of the sites for COREMAPPhase11. While the trade in live reef food fish products and live reef aquarium species products represents a tremendous opportunity for coastal communities, in many cases it can also present a tremendous threat to the sustainability of the resources, both in terms of encouraging overfishing, and the use of reef-damaging cyanide in the capture of live species. In terms of the live reef food fish trade, available program documentation suggests that any attempts to address the sustainability o f this industry will be unlikely to succeed without changing the incentive structure so that the market pays a premium for cyanide-free and sustainably harvested live reef food fish. For this reason, the programwill focus ontwo pilot districtsfor the first three years of PhaseI1and documentthe nature of the trade inthese areas, detailingevery aspect of the supply chainfrom the collectors to the importers, in order to plan long-term measures that could be implemented after mid-term o f the program. More specifically, the programwill support: in-depthassessment of the live reef food fish trade in two pilot districts (Pangkep and Buton)to advise the development of a comprehensiveprogramto changethe incentivestructure ofthe live reeffoodfishtrade (see Component 1, Activity 3.5). Interms of the live reefaquarium trade, the programwill support collaborationwith the GEF-fundedMarine Aquarium Market Transformation Initiative (MAMTI). The MAMTI project aims to operate in the two COREMAP I1 districts of Buton and Pangkep, linking fishers and collectors sustainably harvesting live aquarium species to premium export markets through certificationby an independentthird party. Inorder to take advantage of this livelihood opportunity for coastal villages, the program will support the following activities to create an enabling environment for fishers and collectors in Buton and Pangkep to produce certified live aquarium products for premium prices: (i)reprinting and distributing certification education materials produced by MAMTI, (ii)contracting MAMTI capacity-buildingteams to train interested fishers and collectors in sustainable harvesting, handling and transport methods, and (iii)conducting a cyanide detection methodology survey, including developingsampling protocols for live reef specimens. Through a GEF partnership arrangement betweenCOREMAPPhaseI1and MAMTI, the MAMTIwould earmark funds to work along side Phase I1financedtechnical assistance to meet these objectives. This partnership would benefitlocal communitiesthroughthe transfer of knowledge. Sub-component(5) Marine Park Support (US$3.7m) The objectiveof this sub-component is to ensure that each participatingmarine parWprotectedarea authority is strengthenedand equipped to effectivelyengage in collaborativemanagement. Towardthis objective, the second phase program will fund technical assistance, management and enforcement equipment and operational support, study tours and learning exchanges, and training workshops. Specific activities will include: Activity 5.1 StrengthenPHKA Capacity to Support Co-Managementof Marine ProtectedAreas. Throughthis activity, the program will provide technical assistance, equipment and operational support for PHKA to implementa nationalpolicy for co-management of marineprotectedareas. Activity 5.2 Learning Exchanges between Marine Park Managers. There are individualexamples of national marine parks that have successfully implemented co-management systems for the coral reef ecosystems within the park (e.g. Bunaken National Marine Park, Komodo National Marine Park), to the benefit of the boththe welfare of coastal communities near or within the parkas well as the healthofthese reef ecosystems. 63 For this reason, the program will support learning exchanges for managers of marine parks to conduct study tours of these successfulexamples, effectively establishingthem as centers of excellence. Activity 5.3 StrengthenNational Marine Park and KSDA Co-Management.Inall of the six program districts, there are marine protectedareas establishedas either National Marine Parks or smaller marine protectedareas (KSDAs). In each case, the program will support the park management authorities to strengthen their capacity to sustainably manage the coral reef ecosystems within the park in collaboration with the local communities and stakeholders. The program will provide support for formation of advisory boards, training, technology and collaborative enforcement support to eachNational Marine ParMSDA, as well as assistance to review, revise (if necessary) and socialize park management plans throughout the area using participatory techniques to ensure that local communities and stakeholders feel a sense of ownership inthe management of the park's coral reefecosystem resources. Component3. PublicAwareness, Educationand Sea Partnership (US11.7 million-total cost excluding contingencies) The objective of this component is to promote societal awareness of the benefits of coral reef ecosystem conservation and sustainable use that leads to behavioral change. Behavioral change is realized through a phased process of information dissemination, knowledge growth, concept approval and acceptance, intention to act, behavioral change and advocacy to others. Public awareness activities are designed to support the Phase I1 program and fully integrated into the Program sis a whole. There are four sub-components envisaged: Sub-component(1) PublicAwareness Campaigns (US$3.lm) The objective of this sub-component is to support behavioral change for sustainable coral reef co- management through provision of public awareness materials, campaigns and advocacy at the international, national, provincial, district, sub-district and village levels. Toward this objective, the second phase program will fund the production and provision of awareness materials and technical assistance and operational support for awareness and advocacy campaigns. Campaigns will be crafted to illustrate a direct benefit between coral reef health and sustainablefisheries production. This will encourage responsiblemanagement coral reefs and related ecosystems, decrease the incidence of poverty in program areas and improve community welfare. Specific activities will include: Activity 1 1 Support to Reproduce or Modifi and Disseminate Existing, Successful Materials to Program ~ Provinces, Districts and Villages. Public awareness under Phase Iproduced a wide range of excellent, award winning materials. Examples include educational games, mascots (UkdIki), radio and music spots and TV ads. In addition, other donor projects (e.g., USAID's NRM and Project Pesisir, ADB's MCRMP and COFISH, etc.) and NGOs (e.g., TNC, CI, WWF, IMA, MAC, etc.) all have excellent awareness products. In most all cases, these development partners are enthusiastic to share their materials. After consultationwith development partners and LIPI, the DKP awareness team will develop a selection matrix and then using the matrix choose materials for reproduction and distribution to program areas. Focus will be on program districts and villages, as well as provinces. Districts new to the program can especially benefit from Phase I and other messages, which can be disseminatedat Phase I1inception. Activity 12. Create, Produce and Disseminate New Materials Supporting Co-Management and its Reef- ~ Fisheries Benefts to Program Provinces, Districts and Villages, and at the national level. New public awareness materials will focus on behavioral change outcomes in key target groups at district and village levels (e.g., fishers, resource users, decision makers, etc.) rather than general awareness raising. Carefully tailored messages provided through selected channels will be developedto reach specific target groups based on backgroundsand interests. Materials will be largely created and produced at the districts with support, as needed, from the national level. New materials will be designed for distribution through a range of mediums. Muchofthe new materialwill be acceptable for use outside the confines of programareas, extending even to internationalforums. 64 Activity 1.3 Establish and OperateProvincial, District and VillageAwareness, and also at the national level and Advocacy Programs. Public awareness activities are fully integrated into the program. For example, public awareness will be designed to help position MCS as a helpful tool to protect vulnerable resources. Also, an official Phase I1launch will take place at each level with a `kick-off designed to coincide with an event of local importance. The `kick-off will be supported by provision of materials to all local media. Thereafter and throughout the implementationperiod, technical support and infrastructure will be provided to allow for implementation of public awareness activities at the provincial, district, sub-district and village levels. Awareness materialswill be distributedthrough a range of mediums including events, games, dances, competitions, displays, billboards, print, radio, video and television. Materials will be produced at the level closest to communities commensurate with capacity. Special programs will be designed to involve destructive fishers, vulnerable groups and migrant fishers from outside Phase I1districts, who utilize marine resources inside program areas. Special emphasis will be given to advocacy at all levels to government, religious, traditional and cultural leaders, NGO's, law enforcement agencies and the judiciary. National and district baseline studies will be conductedthrough an independentresearch company and repeated every two years. Activity 1.4 Support to Independent Journalists and Media. Phase I1will provide contracts to local media and Assoiciation of IndependentJournalists to produce news and generalinterest stories for national and local consumption, which promote sustainable management of coral reefs and related ecosystems and highlight program success. It will also serve as an important part of independentmonitoring of the program activities and the impactson beneficiaries. Sub-component (2) EducationPrograms(US$4.0m) The objective of this sub-component is to insure that coral reef conservation and sustainable use is mainstreamed into participating Districts' education systems. Toward this objective, the second phase programwill fund teacher trainings, development andproduction of educationmaterialsand educationevents. Specific activities will include: Activity 2.1 Develop and Produce Coral Reef Education Materialsfor Inclusion into the Formal Primary and Secondary Education Curriculum in each Program District. Phase I1 will continue the work begun under Phase Iby LIP1with the Department of Educationto develop local educationpackages for school classes Ito VI. Materials are currently under development at the national level and when complete will be distributed to program districts for inclusion under their local content programs. Assistance is provided to ensure the expandedvision of PhaseI1is presented inthe curriculum. Activity 2.2. Program District Teacher Training. After local content materials are available, workshops to train district teachers inuse ofthe materials and methodology will be provided. Credit points will be awarded to the teachers who attend these workshops. Teacher workshops will be carried out in the inter-year break. Student books, teacher manuals and posters will be distributed ready for all interested coastal schools/students. The CF's and VM's will support the implementation of this education program in the community, insuring teachers undertake the field programs and homework components as well as the class- basedcomponents of the training. Activity 2.3 National Reef Education Eventsfor Children and Youth. Building on the success of national educational activities from Phase Isuch as Duta Karang (Reef Ambassador), Innovator Muda (Young Innovators) and Forum Matabuka (Scientific Communication Forum), Phase I1 will continue and expand national reef education events to include the new district participation. Students from each district will be encouraged to participate inthe national educational activities, which will give them exposure to the national level. 65 Sub-component(3) Sea PartnershipProgram(US$4.5m) The objective of this sub-component is to pilot a system to provide technically qualified human resources to programdistricts to support collaborativemanagement. Towardthis objective, the second phaseprogramwill fund technical assistance and operational support for a National Sea PartnershipOffice, faculty secondments, educationscholarships andpractical field studies for students. Specific activities will include: Activity 3.1 Establish National Sea Partnership Ofice. A central Sea Partnership office will be established and supported at MMAF. It will provide information first to programdistricts, and if successful inthe future all coastal districts, about programs and services available under the Sea Partnershipprogram. Requests for Sea Partnership support will be forwarded from applicants (e.g., individuals, districts) to the national office. The nationaloffice will matchrequestswith availableresources. Activity 3.2Advisory Services. Under the Program, support is given for intermittentuse of specializedforeign and domestic expertise to prepare a detailed design and implementation plan (including an operational manual) to support activities defined under this component and to assist the Government in effectively coordinating, managing and implementing the partnership program. Similarly, a sustainability plan will be prepared by the advisory service to suggest ways to support the Sea Partnership Program after Phase I1 completion. A technical assistance budget is provided for these advisory services over the first three years of operations. Expectation is that the services will be used to bolster the Sea Partnershipprogram especially in the areas of institutional support, designof initial programsand unique technical needs. Initialdetermination of expertise required will be made by MMAF Sea Partnership management in concert with the Sea PartnershipAdvisor. Activity 3.3 University Faculty Secondedand Placed in Districts to Support Program Activities. PhaseI1will seek to enhance the capacity of district government agencies (i.e,, Dinas KP, Bappeda, KSDA, Tourism, etc.) through technical assistance from university faculty. The rapid pace of decentralizationhas granted many responsibilitiesto district governmentswithout sufficient time to develop the necessary human resources. At the same time, the nation has many talented university staff whose work is confined primarily to academic research. The Sea Partnershipprogram will link university skills with district needs. A budget is provided to hire university faculty with expertise in coral reef related ecosystem management and dispatch them to requestingdistricts. The university faculty will work ina part time capacity at the Dinas during those times of year when free from university responsibilities. Activity 3.4 Secondary, University and Graduate Scholarships and Post-Education Placement to Support Program Activities. Scholarshipswill be providedto students whose centraltheme of studies is coral reefand related ecosystem management or relatedtopics. After completion of studies, secondary graduates will have the option to work in program villages with VMs, university graduates with program districts' in PMU sanctionedactivities and post graduates with program-relatedgovernmentagencies. Activity 3.5 Responsive Research. The Program will help support the development at 5 Eastern Indonesia universitieshesearchstations of marine related "think tanks". These "think tanks" will undertake research in response to requests from Program stakeholders. The national Sea Partnership will provide information to Program stakeholders about the responsive research program. Requests for responsive research will be forwarded from the Programstakeholdersto the national office. The national office will matchrequests with "think tank" expertise. The chosen institution will then undertakethe researchandsendthe results to boththe requestingstakeholderandthe national Sea Partnershipoffice. Activity 3,d Expansion of Existing Practical Field Training Program to Support Village-Based Program Activities. University students, under the PracticalField Training program (Praktek Kerja Lapangan (PKL)), spend approximately 4 months ina village performing community work. The COREMAP Phase I1program will make use of the existing PKL program to include practical field training of students to promote sustainable coral reef management in program villages through the provision of fellowships. Students who have majored in appropriate fields (e.g., fisheries, biology, community development, etc.) and have already 66 developed plans for field programs appropriate to coral reef and related ecosystem management will be selected to participate. The activity will be managedthrough the existing PKL structure with coordinationby the national Sea Partnershipoffice. Eachstudent, their practical field training programandthe village selected will need approval by the national Sea Partnership office. The PKL students will undertake their field programs inCOREMAP I1programvillages andthen draft reports and disseminate results. PKL students will also carry with them and show the COREMAP I1program's self-learningvideos and informationpackets. Sub-component(4) ProgramSupportCommunication(US$0.2m) The objective of this sub-component is to ensure that program philosophy, objectives, activities, outputs and outcomes are effectively communicated to all program staff, partners and key stakeholders. Toward this objective, the second phase program will fund technical assistance and the production of communication materials. The intention is to create a common and clear understandingof the COREMAP Phase I1program. Specific activities will include: Activity 4.1 Phase 11CommunicationProtocols (Vision, Logos, Branding, Letterhead). Phase I1institutions will develop the methodologies, protocols and systems to most effectively use existing program materials. Issues such as which materials are most effective, copyright rules and institutional responsibility will be defined. The PhaseIlogo will be retired and revisedto incorporate better "Feng Shui" principals. A decision will be made on translating the program name into Indonesian. Also special communication materials including information kit and press releases will be developed. Activity 4.2 Media Training for Key Program Representatives. Special strategic public relation activities including lobbying, interpersonalapproaches, courtesy calls, media and advocacy workshops are provided for all Phase I1managers at the district and national levels to clearly annunciate the vision, mission and goals of Phase11. Activity 4.3 Internal Communication System. Communication protocols for internal program management and provision of materials including information kit and press releases developed to address any important and sensitive issues arising from program implementation. Essentially, this is an informational system to respondto PhaseI1questions, comments, concerns and criticisms. Activity 4.4 Info-Sheets and Newsletters. Information sheets and newsletters specifically explaining the program's vision, mission, structure, benefits and activities will be producedand disseminated. Activity 4.5 Public Relations to Generate a Clear and Common Understanding of Phase 11Program to Targeted Audiences. A comprehensive public relations program to explain COREMAP Phase I1 goals, objectives and activities is included. The aim is to create trust, support and commitment from stakeholders andpartners at all levels. 67 Technical Annex 5: Phase II Project Costs INDONESIA: CoralReefRehabilitation& ManagementProject(Phase 11) The total cost o f the Project is estimated at US$74.3 million equivalent, comprising US$9.8 million in foreign exchange and US$64.4 million equivalent in local currency. The estimates include the provision o f US$6.7 million equivalent in taxes and duties. The total cost to be financed is US$74.6 million, with includes the Bank's front-end fee. A summary o f the project cost estimates is given inthe table below. A complete set o f detailed cost estimates appear the program files. Indonesia COREMAPPhase I1 (WBIGEF) (US$ '000) Components Project Cost Summary % % Total Foreign Base Local Foreign Total Exchange Costs A. InstitutionalStrengthening 1. ProgramCoordination,M&E and Training 7,084.2 2,051.3 9,135.5 22 13 2. Coral Reef Researchand Monitoring -CRlTC 5,943.4 1,031.0 6,974.4 15 10 3. Legal, Policy and Strategy Assistance 425.4 42.1 467.5 9 1 Subtotal Institutional Strengthening 13,453.0 3,124.4 16,577.4 19 24 B. Community Based and Collaborative Management 1.Community Empowerment 12,493.5 1,528.7 14,022.2 11 20 2. Community-BasedResourceManagement 4,964.2 1,590.6 6,554.8 24 9 3. Community Development 10,004.6 116.1 10,120.7 1 14 4. District MarineConservationArea Management 6,395.9 760.5 7,156.3 11 10 5. Marine Park Support 3,278.1 453.8 3,731.9 12 5 Subtotal Community Based and Collaborative Management 37,136.3 4,449.7 41,585.9 11 60 C. Public Awareness, Education and Sea Partnership 1. PublicAwareness Campaigns 1,586.2 1,508.5 3,094.7 49 4 2. EducationProgram 3,853.4 110.6 3,964.0 3 6 3. Sea PartnershipProgram 4,459.1 44.0 4,503.1 1 6 4. ProgramSupport Communications 75.5 76.6 152.1 50 0 Subtotal Public Awareness, Education and Sea Partnership 9,974.2 1,739.7 11,713.9 15 17 TOTAL BASELINE COSTS 60,563.5 9,313.8 69,877.2 13 100 Physical Contingencies* 138.9 189.5 328.4 58 0 Price Contingencies** 3,729.8 315.6 4,045.4 8 5 TOTAL PROJECTCOSTS 64,432.2 9,818.9 74,251.1 13 105 Front-endFee*** 0.0 332.0 332.0 100 1 TOTAL COSTS TO BE FINANCED 64,432.2 10,150.9 74,583.1 14 106 ***Estimatedat 6 percent ofbasecosts for goods/equipment. Calculated on the basisofa PPPexchangerateover the projectperiodwith US$l.OO = Rp 8,500 during data collection, a US$inflation of2% and a Rp. inflation of 8.0% over the entire project period; At negotiations, MOF requestedthat price contingenciesbecapped at 5%. ***Calculated on the basis of 1% of the total amount borrowedfrom IBRD. Total IBRDappliedto this projectis approximatelyUS$33.2million. 68 Annex 6(A): Procurement Arrangements INDONESIA: CoralReefRehabilitation& ManagementProject(Phase 11) Procurement 1. ProcurementCapacityAssessment. The last Country Procurement Assessment Report for Indonesia was issued in February 2001. With respect to this project, a separate Procurement Capacity Assessment Report (PCAR) has been prepared with the following summary: (i) There are a few large consultant contracts and procurement o f gooddequipment at the central level (procured by the National Coordination Unit, the Ministry o f Marine Affairs and Fisheries (MMAF/DKP), and the National Project Implementation Unit (NPIU) (Le., National Science InstituteLIPI)) and Project Management Units (PMUs) at the district level. The procurement o f good / equipment for KSDA (Konservasi Sumber Daya A l a d a t u r a 1 Resources Conservation Office) through PMU in coordination with KSDA. The NCU also will procure goods / equipments for the National Parks. Expenditures will be made by PMUs at the district level and communities at the village level. This PCAR was prepared based on an assessment at the central and district government levels only since specific communities have not yet been selected at the time o f the assessment. (ii) Based on experience in the previous project (COREMAP Phase I,LN 4305-IND), the following is observed: a. The capacity o f MMAF and LIP1 (as executinglimplementing agencies at the central level) in carrying out procurement is low. There are individuals within those organizations, who are procurement proficient, however, it is unclear whether those staff will be taking the role o f supervising or carrying out procurement. b. In COREMAP Phase I,most o f the contracts were carried out at the central level, the contract packages were o f large, and mostly involved the recruitment o f consultants and purchases o f equipment for the entire Project. This, coupled with high turnovers o f the procurement team members, resulted in a number o f significant procurement delays. c. The required procurement documents could have been more clearly defined and documented upfront to the respective implementing agencies. d. The inspection o f the delivered gooddequipment did not include a sufficient level o f physical testing, and therefore, in some cases, it was very difficult to verify the conformity o f the gooddequipment with the technical specifications. (iii) The capacity o f the district governments in carrying out procurement is also very weak. They are only experienced in carrying out simple procurement following Keppres 18/2000, and are unfamiliar with the newly issued Keppres 80/2003, and they are not familiar with procurement under foreign financed projects. From the Bank's experience in dealing with community based procurement, it is very likely that the community under this Project will lack the experience o f carrying out procurement or managing expenditures. GO1will ensure that, during implementation, these community groups will have adequate capacity to carry our procurement according to procedures contained in the project manuals (Project Management Manual, and an Operations Manual). (iv) To minimize procurement and corruption risks, the following actions have been agreed: 69 The NCU, NPIU and DKP will be responsible for procurement at the central level. Therefore, at least one procurementqualified personat LIPI, andtwo people at DKP will be included in the implementationteam. These procurementproficient staff will be retained in the Project up to the completion of the Project, and changes of procurementstaffwill be subjectto the Bank's review. A Procurement Report for the entire Project will be prepared and submitted to the Bank as part of FMR, in which the procurement delays will be closely monitored. There will be a Project ManagementManual and an Operations Manualto streamline all required procedures and requirements under the Project, including procurement.It is expected that these documents will be issued as part of the Ministry of Finance's decree, DGBudget, andtherefore will serve as an adequate anchor for enforcementat the implementing agencies. Prior to the Loan Effectiveness, the Bank will also provide a special session for procurement training for the staff of implementing agencies. There will be a procurementqualified personplacedinthe District PMU, who will be involved on day to day basis in carrying out procurement, and will provide monitoring and assistance to the communities in carrying out procurement. This personwill be hired by the PMUand as part of the TA Team for assistingaparticular district. NCB contracts of value less than equivalent US$ 100,000 carried out by the District PMU, which are not subject to the Bank's prior review, will be post reviewed by NCU. Inaddition, a specific technical audit firm will be hiredto randomly verify the quality of the goods/servicesdelivered by the community, as well as those procured by the NCU, NPIU and DKP. The TOR for the said firm will be agreed with the Bank prior to Negotiation. The TOR and qualification ofthe members of the inspectionteam will be agreedwith the Bankprior to Negotiation. Specific provisions on.NCB will be included in the legal documents. These provisions will serve as the basis for conditions for the use of Keppres 80/2003 in place ofNCB. The procuring units may also follow the Keppres 80/2003 "Pemilihan Langsung" procedures inplace of the Bank's shopping procedures, subject to the clarification as will be included inthe MinutesofNegotiation. All contracts and expenditure carried out by the community are required to be announced in a public domain, and at a minimum level, in the public meeting at the respectivevillages. The Assessment also found that the overall procurement risk is high. The prior review thresholds, as indicatedinthis Annex, are basedon this capacity assessment. 2. Guidelines Procurement of consultants shall follow the Guidelines for Selection and Employment of Consultants by World Bank Borrowers edition of May 2004 (the Consultant Guidelines). Procurement of works, goods, and related services funded wholly or partly by the World Bank inthis Projectshall follow the Guidelinesfor Procurement under IBRD Loans and IDA Credits edition ofMay 2004 (The ProcurementGuidelines). 3. ProcurementPlan, Strategy, and StandardDocuments A draft Procurement Plan for the First 18 Months providing a timeline for each step of the procurement for the first 18 months of implementation has been included in the Project Management Manual (PMM). This Procurement Plan will be updated annually (including one carried out by community), and will require the Bank's prior no objectionby endof October eachyear. 70 A Project Management Manual(PMM) - streamliningthe procedures for various implementing agencies in managing the project, and an Operations Manual (OM) - streamlining procedures and requirements for carrying out the implementation of project - is developed in draft and will be agreed with the Bank prior to Negotiations. Both Manuals constitute as Project Manuals. The following documents will be used and attachedto the PMM, and agreedwith the Bankprior to negotiation: The Bank Standard Bidding Documents (SBD) for Procurement of Goods ( January 1995, Revised March 2000, January 2001, March 2002 and March 2003) for contracts under International CompetitiveBidding (ICB) procedure; The Bank Sample Bidding Documents'6for Procurement of Goods in Bahasa Indonesia ( Edisi Percobaan, December 2003 ) for contracts to procured under National Competitive Bidding (NCB) procedure; The sample Request for Quotations in BahasaIndonesia, for contracts to procuredunderNational Shopping; The Bank's standard Request for Proposals Selection of Consultants (July 1997, Revised April 1998, July 1999, and March 2002) for contractvalues more than equivalent US$200,000; and The Bank Sample Request for Proposals for Selection of Consultants' for contract values less than equivalentUS$200,000. 4. Goods, Equipment,Services (IBRD/IDA:US$4.0m equivalent; GEF: US$1.8m) The goods/equipment/servicesto be purchased under the Project includes the office furniture and equipment (computers, audio visual equipment, mobile telephones, UPS, photocopy machines, office furnishings, etc) to support the establishment and operation of NCU (including its National Monitoring Evaluation and Feedback Unit/NMEF), and to support the operation of LIPI, DKP and Ditjen PHKA (at the Ministry of Forestry). NCB procedures will be used for fisheries management kits, self learning materials and production of television spots. In addition, there will be procurement of cyanide detection minilabs, with portable equipment to detect residual cyanide or blast. Procurement of these minilabs will follow NCB procedures. Other items are expected to be small, not to exceed US$50,000 equivalent per contract, and therefore shoppingprocedureswill be followed. LIPI will also need to develop and print some information materials, and to contract out for CRIMS Application for development, implementationand maintenanceof web-based CRMIS applications; including technical support for network infrastructure. Except for Printing and Dissemination of Formal Educational Materials (which is of large contract), the procurement of others will follow Shopping or NCB procedures acceptable to the Bank. LIPI will also be responsible for procurement of equipment for the CRTIC office at the national level.. This would include the procurement of broadband data communication equipment and related network software, photocopy machine, and other office furnishings. These contracts will be divided into several packages based on practicality, and due to small value (less than US$50,000 per package) the procurement will follow shoppingprocedures. At the district level, the District PMUwill manage and carry out the procurement, including contractsthrough the following units: (i) Procuredby the District PMU: Purchase of office equipment, local CRITC equipment, small F M stations and dive equipment rental agreements. The single contract package for these items runs from US$30,000 equivalent up to a maximum of US$140,000 equivalent. Developedby World Bank Office, Jakarta 71 In addition to the above, the District PMU will also procure equipment for the Collaborative Surveillanceand Enforcement(MCS) Unit of each district: responseboats, MCS equipment and other parts of equipment. The single contract package for the procurement by this Unit is from US$8,000 up to US$160,000 equivalent. Procuredfor the KSDA of eachdistrict: simple materials ofthe existingequipment (the contract package is expected very small, less then US$lO,OOO equivalent), and Park management equipment, which includes: radio, ultra-light aircraft services contract, boats, and observation posts. The contract packages for this equipment is expected to run from US$30,000 up to US$ 150,000 equivalent. Procured by the District Park Authority under the jurisdiction of the Directorate of Protected Areas (PHKA), within Ministry of Forestry: for small materials with an aggregate amount of equivalentto US$ 10,000. The District PMUwill also print and distribute leaflets and other coralreefpublic awarenessand educationmaterials, which are expectedto be very smallcontracts less thanUS$50,000 each. There will be a large procurement of gooddequipments under ICB procedure to be carriedout at the central levelfor the first 18 monthsofthe ProcurementPlantas follows: NCU will procure radio system, district boats and trailers (whose total estimated amount is equivalent US$ 1.7 million) to be distributed to the district levels, whereas LIP1 will procure printing and dissemination curriculummaterials for the formal education(whose total estimatedamount is US$O.8 million equivalent). Except for QCBS and IC for consulting services, procurement by the District PMUs will follow NCB proceduresand Shopping. 5. CommunitySupportServices (IBRDDDA: US$6.5m equivalent;GEF: US$2.0m) Procurement,which will be carriedout by Community,includesthe following: (i) Villageworkshops (ii) Establishment/rehabilitationof Information Centers for Coral Reef Management in each Community (iii) DetailedVillageResourceAssessmentsthroughParticipatoryRuralAppraisal (iv) Purchase of the Marine Conservation Area (MCA) markers, installation costs of markers, and markersmaintenance. Agreement betweenthe District PMU and the Communitywill be governed by a contract, which is standard and found inthe projectmanuals. Prior to signingthe Agreement with the Community,the DistrictPMUwill ensure that the Community are technically capable, and therefore, the contracts will include the type and frequency of technical supervision by the District PMU verifying the quality o f the works/goods/services performed by the community. For this purpose, an annual technical audit will also be performed by a reputablefirm hiredby the NCU. Procurement will be managedby communitiesusingforms and procedures that will be agreed with the Bank, and included in the project manuals. The NCU will also hire consultant firms to assist the DistrictPMUin monitoringthe contracts implementedby the community, and also to assist the community. This consultant firms will be hired by procedures as described separately under "Technical Assistance" below. The followingobservation is noted: There will be Community Facilitators(CF) and Senior ExtensionandTrainingOfficers(SETOs), who will be hired directly by each District PMU. The selection process of the individuals will be conducted on competitivebasis andDirect Contractingand is designatedas Community Support Services. 72 A summary of the agreed guidelines for procurementinvolving community are the following: 5.1 CommunityParticipationfor Works under the Sub-Projects. For renovation of offices and other small works (less than US$50,000 equivalent), works may be conducted through contributions from communities, which may be in the form of labor and materials, but may also include land. For contribution of labor, communities may choose to include full or partial labor cost in the proposals and/or pay salaries for work done on the project. Whenever construction materials are procured from suppliers, these shall follow the procedures of procurementof goods outlined below. Constructionusing a labor-intensivearrangement with community members is subjectto the following provisions: (a) The architectural plans and engineering designs for the above very small civil works shall be based on Government-approvedplans and designs. (b) The implementationlsubprojectagreement covering these works shall include the following: (i)specified lump-sum, fixed price amount based on a written estimate of work to be renderedby identified laborers from the community; and (ii)description in reasonable detail, including basic specifications, required completion date, and relevantdrawings where applicable. (c) The wage rate for community labor shall follow Government standards for the location and type of labor as establishedby the Ministry of Settlement andRegionalInfrastructure(Kimpraswil). Inareas where the community does not have the capacity to constructworks themselves, the community may (with GO1 prior agreement as established in the subproject implementation agreement) procure small civil work contracts (for individual contracts less than US$50,000 equivalent) following procurement of small works procedures. These contracts will be contractedunder lump-sum, fixed price contracts awarded on the basis of quotations obtained from three qualified contractors in response to a written invitation. The invitation includes basic specifications, required start and completion dates, an agreement format acceptable to the Bank, and relevant drawings. The quotations will be opened in public meetings and read aloud. The award will be made to the contractor who offers the lowest price quotation for the works. No restrictions on participation inthe bidding is allowed. 5.2 CommunityParticipationfor Goods under the Sub-Projects. Goods procured under the Community Grants includes purchase of construction materials for construction works under Community Participation, and other purchase of goods/equipment as agreed in the subproject implementationagreement. Goods shall be procuredusing simplified Shoppingprocedures, Le., written quotations obtained from at least three reputable local suppliers. The request for quotation includes a basic description and quantity of the goods, required date and place of delivery, and an agreement format acceptable to the Bank. The quotations will be opened in public meetings and read aloud. The award will be made to the supplier who offers the lowest price quotation. No restrictions on participation in the bidding is allowed. For subprojects located in remote areas where it is not economicalto obtainprices from suppliers locatedfar from project sites, less than three quotations is acceptable, as is direct contracting. The group proposingthe subproject, however, needs to justify these methods, andverifications by project staff must be placedon recordfor Bank supervision. Goods and materials for construction valued at less than Rp 15 million each (US$1,760 million equivalent) may be purchasedfrom local suppliers/stores after conducting a price comparison `survey' by visiting at least three local suppliers. Price comparisonof less than three is acceptable whenever there is a lack of alternative suppliers. The price survey shall be conducted by two members of the community who are trusted by the community as havingthe requiredindependenceand integrity. Subprojectsmay also includethe purchase of goods provided/installed by the community or other community groups (acting as "suppliers"). These shall have reasonable rates as compared to prices of similar goods obtained from other stores nearby. The District PMU shall provide acceptable technical specificationsto the "suppliers" and allow adequate time for delivery and installation. 73 5.3 CommunityParticipationfor Selectionof Consultantsunder the Sub-projects Selectionof consultants under Community Grantsmay involve hiringof individual expertdengineersor firms through service delivery contracts. If there are cases, these will involve very small contracts (up to US$ 1,000 equivalent per contract), therefore competitionhas no addedvalue. Individuals will be hired following the Selection of Individual Consultants, and Single Source Selection procedures for firms. All services contracts should reviewed by the communities and performance evaluated. If performance is found unacceptable, communitieswill have the right to terminatethe contracts. 5.4 Workshops Conductedby Communities Communities will held several workshops for training purposes, and the expenditure and accountability will follow Governmentown SOE proceduresbased on actual receipts, acceptable to the Bank. 6. Workshops and Training (IBRD/IDA:US$8.7mequivalent; GEF: USW7m) It is expected that a number of workshops and training will be conducted by the NCU and all other implementing agencies. The expenditurewill be based on SOE, and government proceduresacceptable to the Bankwill apply. 7. Consultants'Services (IBRDDDA:US$8.0mequivalent; GEF: US$l.Om) The consultingservices packages under this Project includethe following: (i) TechnicalAssistancefor Researchand Studies. (ii) Financial Management and Procurement ,hired by the NCU to assist at the National level and each District PMU(less than US$2.5 million per contractpackage). (iii) Technical and Capacity BuildingConsultants. (iv) Public Awareness Consultant. (v) External TechnicalAudit. (vi) Individual experts. The following observation is noted: (i) The contracts for services for Strengthening of Village Financial Management Systems and Operational Support for Employment Agent are expectedto be below US$lOO,OOO. Therefore, the selectionprocess will follow the SelectionBasedonConsultant's Qualification (CQ). (ii) LIP1 and/or district will hire individuals to do RRI and LIT Sampling: once a year for each district (note: In year 6, one LIT Sampling will be combined with RIU Survey). Since the assignment is small (less than US$50,000 per contract package), and the TOR is expectedto be very clearly defined, in which the cost is more of an important paramount, the selection process will follow IC. (iii) A technical audit firm will be hired to verify the quality of the gooddequipment, and the quality of implementationby communities. 8. Studiesand Surveys (IBRDDDA:US$3.2mequivalent; GEF US%O.O5m) This Category will include hiring firms/universities/NGOs for carrying out the survey, research and monitoring of the surveillance and training. The single contracts are expected to be less than US$140,000 equivalent. The selectionprocess will follow CQ procedures.There will be a Socio Economic Survey for each District, which will most likely be conducted by acquiring SUSENAS (National Socio-Economic Survey) data from BPS (Agency for National Statistics). Inaddition, the District PMUs will also conduct several study tours, in and out of country. The expenditure will be basedon SOE following government procedures acceptable to the Bank. 74 9. IncrementalOperatingExpenses(IBRD/IDA: US$7.6m equivalent; GEF: US$0.9m) The Bank will cover 78 % of the Operating Expenses, which includes provisions for office operation supports, communications, and meetings with stakeholders. The expenditure will be based on the actual receipt following the government standard procedures acceptable to the Bank. The incrementalcost for staff will be financed separatelyby GOI, and will follow the standard government procedures. 10. Fellowshipsand Scholarships(IBRD/IDA: US$2.5mequivalent) Fellowships/Scholarships are provided through various projects under the Project on competitive basis. Village Grants are provided for a range of local activities including operational support to private employment agencies, for their support for out-migration for fishers willing to leave the ProjectAreas. Grants are also available through the District AIG funds, and the Credit Seed Funds. GO1will ensure competitive and transparent process. Detailed procedures and guidelines for fellowships/scholarships will be made available at the time ofthe Sea PartnershipProgram's initiation in2005. 11. Awareness and EducationalServices(IBRDADA: US$6.5mequivalent) This Category includes the public awareness, campaign, and education of the COREMAP on the media. This could be conducted through selected advertisements on the nationalhnternationalprinted media, or through electronic media (such: TV and Radio). Several workshopshraining will also be conducted, including the production of awareness materials. For this purpose, the NCU will hire a public awareness firm (whose contract is estimated at US$ 1.66 million) to assist and manage all activities under this Category. The selection of consultants will follow QCBS procedures. The production of awareness materials will be procuredfollowing shoppingor NCB procedures, and this will be included inthe Consultants' contracts. In addition, the District PMUs will also conduct local events, such as: beach cleaning, essay and drawing comp, which will be basedon SOE. 12. Districtand Village Grants(IBRD/IDA: US$7.9mequivalent) District and Village Grants are grants made available by the Borrower out of the proceeds of the Credit and the Loan to a Participating Village for the financing of one or more Sub-projects as set out inthe Village and District Grant Guidelines. There are three sub-projectsthat these grantswould support: (i)BlockGrantsforVillageImprovement:Theprogramwillprovideblockgrants(approximatelyuptoRp. 100,000,000 (US$lO,OOO) per village) to each participating village for social goods purposesagreed to by the community through a consultative andhighly participatory process ledby Community Facilitators (e.g. small- scale infrastructure, etc.). These grants are awarded to communities subject to ratification of coral reef management plans (see Sub-component2). (ii) Granttosupportvillagerevolvingcredithavingsfacilityineachparticipatingvillageforlivelihood Block and income generation activities. Once village savings and credit systems are established and operating, program resources can be applied to viable groups (Le. small micro-enterprises) on a revolving basis and through a subsidiary loan from the participating village to the village BMTLKM which is on-lent to the micro-enterprise. Sub-loans from the participating village must not exceed 40% to any single village BMTLKM. Moreover, BMTsLKMs would on-lend to small enterprises for alternative income generating activities and no more than 40% of the sub-loan to a BMT/LKM can be used to on-lend to a single micro- enterprise. Micro-enterprises would be eligible for securing a loan through the BMTLKM and from the Village only if the proposedenterprise was income generating and directly or indirectly took pressure off the coral reefs and associated ecosystems. Each participating village will receive a grant of Rp. 50,000,000 for this purpose. 75 (iii)DistrictBlockGrant. Approx.Rp.300,000,000 peryearupto4years,notexceeding1,200,000,000 per districtto lendto small andmediumsize entrepreneursto undertakepilot alternative income generating (AIG) activitiesthat would directly generateincome for projectbeneficiaries inprojectareasandreducepressure off the coral reefs and associated ecosystem, and in accordance to the guidelines provided in the Operational Manual. Table A COREMAP Phase II (WBIGEF) [Expenditure CategoryIProcurement Method] International National Otherll Competitive Competitive Shopping Consulting SOEIGov. Bidding Bidding Services Procedure Total 1. GoodslEquipmentlServices 2,806.9 1,696.0 2,422.0 1,031.6 7,956.5 (1599.7) (774.2) (1,115.1) (516.7 (4005.8) {740.0} I354.6) (516.5) {239.0 {1850.0} 2. Community Support Services 9,322.1 9,322.1 (6,495.8) (6,495.8) (2,0001 -- (2,000) 3. Workshops, Training 11,118.4 11,118.4 (8,690.5) (8,690.5) {I,700.0) {I,700.0) 4. Consultants'Services 9,301.5 - 9,301.5 (7,976.9) (7,976.9) { I,000.0) {I,OOO.O} 5. Studies and Surveys 3,244.73 3,244.7 (3,194.7) (3,194.7) {50.0) {50.0} 6. Incremental Operating Expenses 11,264.5 11,264.5 (7,597.7) (7,597.7) {goo} {goo} Incremental Staff 3,721.5 3,721.5 (0.0) (0.0) 7. Fellowships and Scholarships 2,503.9 2,503.9 (2,503.9) (2,503.9) 8. Awareness and EducationalServices 6,501.3 6,501.3 (6,501.3) (6,501.3) 9. Districtand Village Grants 8,348.7 8,348.7 (7,924.1 (7,924.1) 76 10. Front End Fee 332.0 332.0 (332.0) (332.0) 11. Unallocated 968.0 968.0 (968.0) (968.0) 2,806.9 1,696.0 2,422.0 18,623.6 49,034.6 74,583.1 Bank FinancingRequired (1,599.7) (774.2) (1,115.1) (14,472.7) (38:229.0 (56,190.8) GEF FinancingRequired I7401 {354.6} (516.5) (3,000) {2,889) {7,500.0} NOTES: Figures in '( )' parenthesisare the respectiveamounts financed by World Bank Figures in '{ parenthesisare the respective amounts financed by GEF I1 Other: this includes communityparticipationas described in this annex. *Bank-financedconsultantsare approximately 10% of the total project costs *'Total ProjectCost ($74.6 million) includes 10%VAT Consultant Services Selection Method Expenditure Category QCBS QBS SFB LCS CQ Other NBF Total Cost A. FIRMS 8,165.8 1,135.7 9,301.5 (6,952.9) (1,024.0) - (7,976.9) B. INDIVIDUAL 9,322.1 9,322.1 - (6,495.8) - (6,495.8) TOTAL 8,165.8 1,135.7 9,322.0 18,623.6 (6,952.9) - (1,024.0) (6,495.8) - (14,472.7) Note: Figures in '( )' parenthesis are the respectiveamountsfinanced by World Bank 77 . Prior review thresholds (Table B) It is expectedthat about 25 % oftotalexpenditureswould be subjectto prior review. The Ministryof Financehas issueda decree to state that the exchange rateto be usedfor determiningthe threshold for prior review is at IDR8,50O/US$. This understandingwill be updatedfromtime to time with Bank's prior agreement. The followingprior reviewthresholds havebeenestablished: Due to the "high" risk rating for this assessment, the following prior review thresholds and supervisionplanare proposed: (i) Procurement of Goods: (i)To all contract packages whose contract value equal to or above the equivalent of US$ 100,000; and (ii)to the first contract package o f contract value less than the equivalent ofUS$ 100,000 to eachofthe implementingagency. (ii) Selection of Consultant Services: To all contract packages whose contract value equal to or above the equivalent of US$lOO,OOO for the consultant firms, and to all contract packages whose contract value equal to or above the equivalent of US$50,000 for the individual consultants.All TORSshall be review by the Bank regardlessofvalues. (iii) Community Contracts: To the first contract package of each District PMU regardless of value. Frequency of procurement supervisions proposed:Every six months(note: post-review/auditsevery I year). The contracts which are subject to prior review shall be determinedfrom Procurement Plans acceptable to the Bankthat are updatedby October eachyear for implementationfor the followingGO1fiscal year. All contracts below the above thresholds are subject to random post review conducted annually by the Bankto cover at least 20 % o fcontracts implementedinthat period(including2 % which are carried out by the communities). The sampling shouldbe selected suchthat prioritybe givento those implementing agencies (including subprojects) with more procurement problems and in need o f more assistance. In addition,the NCUis required : (i) to post review the NCB contracts procured by District PMUs (and all their subsidiary units) that are not subjectto the Bank's prior review; and (ii) to randomly review contracts implemented by communities which are NOT subject to the Bank's prior review. The following issuesshouldbe addressedregularlyduringthe Bank's supervision: (i) Thecapacityandcapabilityofestablishedprojectstaffinimplementingprocurement (ii) Thelevelofenforcementoftheagreedproceduresanddocuments. (iii) The effectiveness of provinces/districts in solving procurement problems, including complaintresolutions. (iv) An assessment o f the effectiveness of the Borrower's monitoring and supervision implementationwith respectto procurement. 78 Table 8: Thresholds for Procurement Methods and Prior Review Contract Value (C)Thresholds ContractsSubject to ExpenditureCategory (in US$ ,000) ProcurementlSelection Methods Prior Review Thresholds (in US$ '000) Goodslequipments ->200 IC6 3,944.56 50 5 C < 200 NCB Goods/SmallWorkdother Services < 50 SH ConsultingServices (Firms) ->400 QCBS (SL Int.firms) 11,801.89 200 5 C < 400 QCBS (SL Nat.firms) < 200 CQ ConsultingServices (Individuals) < 50 IC Studies etc. : 200 (Firms); < 50 (Individuals) CQ/IC 358.62 CBM Contracts 1st contract to each IA CP Workshops,Training etc. SOE Awareness and Education : 200 (Firms); < 50 (Individuals) CQllC 2.803.52 Operating Expenses SOE IncrementalStaff SOE Fellowships SOE Grants t TOTAL VALUE OF CONTRACTS SUBJECT TO PRIOR REVIEM Ia.9oa.s The Post Review Intensit 20% of Contrack Abbreviation: ICB = InternationalCompetitiveBidding CQ =Consultants' Quality BaseSelection NCB =National CompetitiveBidding IC = IndividualConsultant SH=Shopping/Small Works IA = ImplementingAgency QCBS =Quality Cost-based Selection SOE = Statement of Expenditures CP =CommunityDevelopmentProcedure Overall Procurement Risk Assessment HIGH Frequencyof procurementsupervisionmissionsproposed: two every one year (includes special procurementsupervisionfor post-review/audits) 79 Attachment 1 Clarificationof NCB Procedures 1. General The procedures to be followed for national competitive bidding shall be those set forth in Presidential Decree No. 80/2003 of the Republic of Indonesiawith the clarifications and modifications described in the following paragraphs required for compliance with the provisionsofthe "Guidelines for Procurement under IBRDLoans and IDA Credits" (the Guidelines). 2. Registration (a) Bidding shall not be restricted to pre-registered firms and shall not be a condition for participation inthe bidding process. (b) Where registration is required prior to award of contract, bidders (i) shall be allowed a reasonable time to complete the registration process, and (ii)shall not be denied registration for reasonsunrelatedto their capability and resources to successfully perform the contract, which shall beverified through post-qualification, 3. Pre-Qualification Pre-qualification shall not used for simple goods and works. Normally, post-qualification shall be used. Pre-qualification shall be required only for large or complex works with the prior `no objection' of the Association. When pre-qualification shall be required: (a) eligible bidders(both nationaland foreign) shall not be deniedpre-qualification, and (b) invitations to pre-qualify for bidding shall be advertised in at least one widely circulated national daily newspaper a minimum of 30 days prior to the deadline for the submission ofpre-qualification applications. 4. Joint Ventures A Bidder declaredthe lowest evaluatedresponsivebidder shall not be requiredto form ajoint venture or to sub-contract part of work or part ofthe supply of goods as a condition ofawardofthe contract. 5. Preferences (a) No preferenceof any kind shall be given to national bidders. (b) Regulations issued by a sectoral ministry, provincial regulations and local regulations, which restrict national competitive bidding proceduresto a class of contractorsor a class of suppliers shall not be applicable to procurement procedures under the Loadcredit Agreement. 6. Advertising (a) Invitations to bid shall be advertised in at least one widely circulated national daily newspaper allowing a minimum of 30 days for the preparation and submission of bids 80 and allowing potentialbidders to purchase bidding documents up to 24 hours prior the deadline for the submissionof bids. (b) Biddocumentsshall be madeavailable, by mailor inperson, to all who are willingto pay the requiredfee. (c) Bidders domiciled outside the area/district/province of the unit responsible for procurement shall be allowed to participate regardless of the estimated value of the contract. (d) Foreignbidders shall not be precludedfrom bidding.Ifa registrationprocess is required, a foreign firm declared the lowest evaluated bidder shall be given a reasonable opportunity for registering. 6. Bid Securitv Bid Security, at the bidder's option, shall be in the form of a letter of credit or bank guarantee from a reputable bank. 7. BidODenine;andBidEvaluation (a) Bids shallbe openedinpublic, immediatelyafter the deadline for submissionof bids, and ifbids are invitedintwo envelopes,bothenvelopes(technicalandprice) shall be opened at the same time. (b) Evaluationof bids shall be made in strict adherence to the criteriadeclared inthe bidding documentsandcontracts shallbe awardedto the lowest evaluatedbidder. (c) Bidders shall not be eliminated from detailed evaluation on the basis of minor, non- substantialdeviations. (d) No bidder shall be rejected merely on the basis of a comparison with the owner's estimate andbudget ceilingwithoutthe Bank's prior concurrence. 8. Rejectiono f Bids (a) All bids shall not be rejected and new bids solicited without iALeBank's prior concurrence. (b) When the number of responsive bids is less than three, rebiddingshall not be carriedout without the Bank's prior concurrence. 81 Attachment 2 Clarificationof "PemilihanLangsung" Procedures The proceduresset forth inthe Keppress 18/2000 as "Pemilihan Langsung" may be consideredas satisfyingthe Shoppingprocedures as defined inthe "Guidelines for Procurementunder IBRDLoans and IDA Credit" (the Guidelines), subjectto the following clarification: Bank Guidelines Keppres 18/2000 (National Shopping) Pengadaanbarangdan iasa" 1. Applicability Simple and rapid procurement Does not specify the types of normally for offthe shelf items goods as long as the contract smount is less than IDR 50 million (US$5,000 equivalent) ~ 2. Advertisement Not required Not required 3. Principles Comparingat least three Comparingprices from three quotations from reputable invited firms. Ifany of the suppliers invited firms does not submit quotations, and itturns out that there are less than three suppliers interested,then re-invitation shall be sought. Ifafter second trial, the procurementteam fails to come up with at leastthree firms, thanthe use ofDirect Contract is allowed. 4. Registration Not required Requiredas part of the shopping (erroneously called pre process prior to evaluationof qualification) quotations. It is requiredthat all national firms have the certificate ofpre qualification from the respectivelocal governmentstating inwhich kindofbusiness areas that the firms are eligible to do business 5. Firms to be invited Reputable, well established,and No specific requirementsfor the are suppliers ofthe goods or firms to be invited, as long as the services beingpurchasedas part certificate of pre qualification o f oftheir normal business the invited firms is inthe supply ofthe goods or services being purchased. It is normalthat firms are certified for various lines of business but inreality do not actually engage insuch kindof business. Also there is a I requirementto give priority to iniite firms within the respective 82 districts where the procurement processtakes placebefore seekingfirms from outside those districts. 6. Form of requests By means of a simple Request By means of a standardbidding o f Quotationincluding the documents which are normally descriptionand quantity ofthe usedfor nationalcompetitive goods, as well as the required biddingprocess delivery time and placefor the goods or services, including any installationrequirements,as appropriate.The request indicatesthe date by which the potations are needed. Not required Required Prices for goods suppliedfrom No specific requirementon within the country (including pricesand currencies. As normal previously imported items) are practice, since shoppingis requestedto be quotedEXW intendedfor small contracts (ex works, ex factory, ex (below USD5,000 equivalent) warehouse ex show room or then offthe shelfprices inlocal off-the-shelf, as applicable), currency are used. including all customduties and sale and other taxes already paid or payableonthe raw materialsand components.For goods offered from abroad(i.e., not previously imported), prices are requested CIF or CIP. Prices can be quotedinany currency ofthe Bank-member countries. There is no requirementfor Time for submissionof quotations strict time and date for quotationsshall be specifiedin submissionof quotations, but the "bidding documents", and if normally requests for quotes a firm does not submit the indicatethe expecteddate of quotationsby the specifieddate, I submissionof quotes, within then its quotationsshall be one or two weeks of the initial rejected. No verification process I request. Inother cases, ifthe is allowed to late quotations. purchaser has not receivedat least three quotations within the time set, it verifies with the missing suppliers whether they intendto do so andhow soon. Unless there is extreme urgency or there are already three or more quotations available, the client may give a reasonable 83 amount of additionaltime, say three more days, to get additional quotations. At this point the client may proceed with the comparisonof the proposalsreceived. 10. Public openingof Not required Required quotations 11. Evaluationcommittee Not required Required, and no requirementto includeatechnically qualified personinthe field of goodslservicesbeing purchased 12. Evaluation criteria Lowest price with some Lowest price flexibility as long as stated in the Requestfor Quotations 13. Negotiation Not allowed Requiredwith the firm offering the lowestprice 84 Technical Annex 6 B INDONESIA: CoralReef Rehabilitation& ManagementProject(Phase 11) FinancialManagement& Disbursement Arrangements Summary of FinancialManagementAssessment 1. A financial managementassessment of this project was carriedout between May to October 2003 and has involved an assessment of financial management capacity at the key implementing agencies and an evaluation of the adequacy of financial management arrangements proposed for the project, including accounting systems for project expenditures and underlying internal controls. This assessment covered project activities financed by all sources, includingIBRDDDA andGlobal EnvironmentFund(GEF). 2. A summary of the observationson financial management capacity is as follows: (a) The recently established National Coordination Unit (NCU) housed within the DG-Coasts and Small Islands (DGCSI), Ministry of Marine Affairs and Fisheries (MMAF) will be primarily responsible for coordinating the Program, with implementation and program management occurring within each of 6 participating Districts. Scientific Coral ReefResearchand Coral Reef Education activities will be coordinated by the Indonesian Institute for Sciences (LIPI), while program activities within national marine parks will be implementedthrough the park authorities under thejurisdiction ofthe Directorateof ProtectedAreas (PHKA), within Ministry of Forestry, and specifically, under the responsibility ofthe NCUAssistant Director for Marine Parks. Recent Bank experience in other projects in the concerned Ministries, the shortage of financial management skills in the IndonesianCivil Service generally and a consideration of the Country Financial Accountability Assessment report suggest that financial management capacity at these centralagencies is likely to be generally low. b) A significant part of the project expenditure will be managed and accounted for at the district government level and by the communities at village levels. In districts, there is an even greater shortage of accounting skills, and financial management systems are generally weaker than at the center. Villages are not expected to have financial management skills, although the program is anticipatedto train them in order to create a more effective village financial management system. 3. An analysis of project specific risks indicates that substantial risks may arise from several features. Overall, the project will be influencedto some degree by the weak overall control environment in the country, as diagnosed by the Country Financial Accountability Assessment completed in April 2001. Since the completion of that report, progress on country financial management reforms have been slow. The executing agency (MMAF) has prior experience in managing multilateral Bank-financed projects, and LIPI, the EA for Phase Ihas experiencetoo. Risks arise from geographicalspread of PMOS and use of multiple agencies and community organizations. The geographical spread of project activities to over 416 villages and inherently weak and variable financial management capacity in the regions imposes substantial risks on financial accounting and reporting. Community Based and Collaborative Management comprises a significant 59% of program expenditure, activities for which financial management will present challenges. Validation of payments is traditionally a weak area and vulnerable to malfeasance and fraud. 4. Several measures have been designed to mitigate these risks. These include deployment of financial management consultants in villages and districts to train Borrower staff and assist in the preparation of project financial statements and applying more intensive payment validation procedures, 85 including community disclosure and oversight mechanisms where applicable. A Coastal Community Empowerment Board (CCB) comprising of a wide range of stakeholders and Chaired by the Bupati will ensure that program budgets are reviewed and reconciled in an open and transparent way. A series of these measures and other operating authorities and procedures for each project activity are expected to be clearly documentedin a comprehensiveProject ManagementManual. Moreover, a Governance, or Anti- Corruption Strategy has been prepared for the program, including a Complaints Handling System (see Technical Annex 7). 5. Based on these factors, financial management risks inherent in the program entity and risks specific to program design have been rated as substantial. The financial management arrangements that have been proposed for this program include specific actions summarized below, that would mitigate these risks and are therefore consideredadequate. Summary of Program Description 6. The financial management and disbursement arrangements have been designedkeeping in mind the risks notedabove andthe following programdesign features: 7. The Coral Reef Rehabilitation and Management Program (COREMAP) is a 15-year program designed as an Adaptable Program Loan (APL) and aimed at establishing "a viable framework for a national coral reef management system in Indonesia'' based on community and collaborative management.Phase Iaimed to establish over six years (1998-2004) a pilot national system for coral reef management to be followed by two phases of six years each intendedto first expandthe programto other sites and then to consolidate the programnationally on a sustainablebasis. The objective of the Phase I1of the program (2004 - 2009) is to accelerate the program by establishing a financially sustainable program that is nationally coordinated but decentralized in implementation, in order to empower and to support coastalcommunities to sustainably co-manage the use of coral reefs and associated ecosystem resources, and revive damaged coral reefs, which will in turn, enhance the welfare of these communitiesinIndonesia. The second phasewill expandthe number of program sites, adjusting the process of implementation to reflect the lessons learned from Phase I,in particular, promoting collaborative management partnerships between communities and local governments. The World Bank and Global Environment Facility will finance up to 6 program sites in Phase 11. Total Cost is expectedto be approximately US$74.6 million, of which US$56.2 million will be from IBRD/IDA and US$7.5 million from GEF. A summary of expenditure proposed under each category is stated elsewere in this document, including Techcnial Annex 6A. Project Organization Proposed 8. The project organizationproposedis summarizedbelow: 9. At the national level, the program will be coordinated by a National Coordinating Unit (NCU), which will be housed inthe Ministry of Marine Affairs and Fisheries, and comprise representativesof all implementingagencies, viz., (a) Ministry of Marine Affairs and Fisheries(MMAF); (b) IndonesianInstitute of Sciences, (LIPI) which is wholly owned by the Government; (c) The Ministryof Forestry, Directorate General of ForestProtectionandNatural Conservation(PMKA); and (d) Ministry o fHome Affairds. 10. The NCU will provide the needed and adequate support for the District PMU's to implement COREMAP Phase I1 activities. Also at the national level, there will be a Coral Reef Information and 86 Training center (CRITC), which will coordinate and support the activities implemented by the district CRITCs. The Marine Parks subcomponent of the program will be managed by Directorate General of ForestProtectionand NatureConservation. 11. At provincial level, relevant agencies (DKP, Bappeda), and Police, NGOs, Universities, and the private sector will backstop the district on demand, particularly in the provisions of technical expertise. They will also play a functional role inmonitoring and evaluationof districts. 12. The Program will be implemented at the district level by a Program Management UnidOffice (PMU), accountable to a multi-stakeholder district board, which will chaired by the Bupati. Within a Marine National Parkjurisdiction a similar board will be established under the chair of the Manager of the Marine National Park. These two boards will function in a similar way, and support the implementation of community-based and collaborative management (CBM) programs. The multi- stakeholder Board will be establishedby means of an SK issued by the Bupati. Within a year or two of the Boardbeing established, the functions of the multi-stakeholder Board should be formalized by means of a decree passedby the regional parliament(DPR-D Perdu). This is not inconsistentwith the amount of time taken to establishsimilar boards inNorth Sulawesi. 13. The District PMU will be staffed by at least three qualified government technical personnel, seconded full-time to the COREMAP Phase I1Program. These staff will be from, and represent Dinas KP, KSDA / TamanNasional, and BAPPEDA. Moreover, the PMUs will appoint a programmanager and support staff, The PMU will be supported by several consultants, including: (i)Marine Conservation Areflisheries Management Specialist, and (ii) CBM Specialist. Also working under the PMU, there will be a team of senior, extensionand training officers (SETOs), who will coordinate community facilitators (CFs) responsible for the implementationof CBM activities. 14. Sub-District and Village Level. SETOs will coordinateat sub-district level with the Camat, Dinas extensionofficers, religious and traditional organization, local NGOs and media. CFs will work with the head of village, BDP, various other community organizations, and village motivators, to be appointedby the villages. Community organizations will also be formed for management of the Community Development activities under Component B. ComponentsA and C will be managed largely by the NCU with some parts initiated and managed in the districts. Individual consultants will be appointed for assistingparticipating governmentagencies, includingNCU, in financial accounting. Strengthsand Weaknesses 15. The program design has the following strengths and weaknesses from the financial management perspective. These have been taken into account in assessing risks, as summarized inTable 2 below, and indesigningthe financial management arrangements discussed below. (a) A significant 67% of the total project amount will be spent on "soft" areas, such as Technical Assistance Consultancies, Training, Workshops, Community based support services, Awareness campaigns and Fellowships. This will be carried out at both central and district levels. Such expenditure is often vulnerable to fraud and internal control lapses, as it is sometimes difficult to measure and verify outputs realized, and to establish or verify satisfactory completion of work. The Monitoring, Evaluation and Feedback (ME&F) framework for this program must therefore be very carefully designed and implemented to provide regular feedback on what such significant expenditures are realizing by way of outputs and outcomes., and clear sanctions when serious lapses are found. (b) The Phase I1Program is a follow-on project from COREMAP Phase Ithat closes on June 30, 2004. Phase 1was for an authorized amount of onlyUS$6.9 million, whereas the proposedPhase 2 has been 87 scaled up dramatically, to a total donor funding of US$74.0 million. Thus, while the concerned Institute that implementedthe earlier project has had recent experience in executing Bank financed projects, the scale and size o f the current one would require substantially scaled up resources and capacitieswithin Ministry of MarineAffairs where the NCU is located. This is soughtto be addressed by financial management and procurement consultants who will assist implementation at both the center andthe districts. (c) The decentralizedactivities will be carriedout at pre-selected6 districts. Ofthe proposed6 Districts, 3 districts were also involved in implementing COREMAP Phase I,and therefore have some prior experience in project implementation would be useful. The total amount per district is however dramatically increasing under this project, ranging from an average project expenditure of US$5.0 million in Sikka to US$9.0 million in Buton. These are substantial funds to be absorbed at district level. (d) Community based and collaborative management activities will be a significant 59% of the total outlay, which will include grants and funding for community economic activities. The financial accountability arrangements will require simplicity and yet adherence to minimal documentationto ensure fiduciary standards are met. The use of financial management consultants is planned to help address this, and to train Borrower staff to build their capacity. The use of the CCB and NGOs or other community organizations will also be utilized to provide community, and multi-stakeholder oversight, a usefulanti-corruption measure. (e) Activities under component B of this project will be carried out substantially in the 6 districts and within 416 villages. Activities have elements that will be designed and implemented by the communities themselves. These include activities such as community based resource management, establishingvillage sanctuaries, as well as livelihood and income generating pilots for coastal poor communities and support for poor women and migratory fishers. These components are expectedto aggregate about 35% of the total amount of US$40 million earmarked for component B. All these activities will present challenges for financial management. Fund flows will have to be tailored to service remote areas and island communities that are not fully served by central or district government treasury offices, using "Force Account" models developed in other CDD projects in the country. Evenbasic book keepingskills are unlikely to be available at these villages, increasingrisks to financial accountability. To mitigate these risks, the project provides for intensive training in simplified book methodsandwill train selected community members as village financial management specialists. The project design has innovative features for community oversight that are being documentedin a project manual. ( f ) One such innovative feature is the constitution of a Coastal Community Empowerment Board in each participating District that will include members of various stakeholders, such as project management staff, NGOs and local community members. This Board will be legally constituted by the region's head and will provide oversight of the functioning of the district project management offices. Further supportwill be provided by the mediaby involving the AssociationofJournalists. (g) The project proposes to engage a large number of individual facilitators, consultants, motivators and extensiodtraining officers. It is anticipatedthat each participating village will have one or more of such individuals at work for the duration of the project period. Payment of salaries, honorarium and allowances to these individuals will be outside the civil service salary administrationsystem. Payment of such monies through project implementing units in the district could provide opportunities for extortion by unscrupulous project managers, which has been suspected in some other projects. To overcome this risk, the project proposes to utilize commercial banking services to channel payments 88 to these beneficiaries at a modest service charge. The effective functioning o f this system will be centrally monitored. Internal controlsand risk analysis 16. A detailed analysis o f risks arising from the country situation, the proposedproject entities and specific project features and related internal controls has been completed duringthe assessment, and is summarized below. These risks have been rated on a scale from High, Substantial,Moderate and Low. Table2 Summary Commentsand Risk Mitigation Measures. A. Inherent Country Risks Budgetaryprocedures Substantial CFAA diagnostic completed in2001 ratedcountry control environment as weak, White Paper has beenpreparedby GovernmentinMay 2002 to address reform issues. New State Finance law has beenpassed, but the laws on Treasury and Audit are yet to be legislated. Slow progressin implementation of CFAA recommendations. Public Sector Accounting Substantial National accounting continues on a single entry and cashbasis with a partially computerizedsystem. Public expenditure accounting standards not yet issued, though an Accounting Standards Board has been constitutedand a long term strategyto move towards accrual accounting is being prepared. Auditing Arrangements Moderate BPK now has legal mandate for externalaudit of regional governments,though coverage is currently very limited due to resource constraints. Institutional Development Plan for BPK under implementation. BPK Audit reports are not publicly disclosed. OVERALLINHERENT C O W R Y " 5 RISK ., ~~~ B. ProjectEntityspecific risks 1. Implementing Entity Substantial Lead implementing agency has prior experience in managingBank Organization projects.But risks arise from geographicalspread of PMOS and use of multiple agencies and community organizations. Risk mitigation possiblethrough clear documentationof operating authorities and proceduresfor each project activity inthe Project Manual. 2. Accounting capacity, Substantial Generally poor accountingcapacity in the provincial and regional staffing. offices. Mitigation through use ofproject financial management consultants. 3. FundsFlow Moderate Project likelyto be classified as "decentralized" under KMK 35. Risks may arise from inherentweaknesses and chronic delays in budget approval systems of GOI. Capacities of regional government budgeting systems not yet tested. 4. Audit arrangements Moderate Risks arise from capacity constraintsin internal and external audit agencies of GOI. 5. Information systems. Substantial Risks arise from manualaccounting systems in government Reporting and monitoring. agencies, and lack of monitoringo fphysical parametersof developmentactivity. 89 OverallEntityspecific Risk Substantial C.PROJECTSPECIFIC RISKS 1. ORGANIZATION STRUCTURE Substantial Operatingrole and authorities of different agencies and entities involved inproject activities needto be clarified inProject ManagementManual so that overlaps are removedand accountabilities are clear. 2. COMPLETIONOFPROJECT Substantial Some sub-project activities are not yet fully defined, especially on WORKS & SERVICES what is eligible, which increasesrisks. Substantial expenditure expectedin"soft" areas such as TA, and workshops, which are traditionally vulnerable. Mitigationthough appropriate internal controls prescribedin Project ManagementManual. 3. RECEIPT OF PROJECTGOODS Substantial Procurementof goods likely indistricts, mostly computers and & EQUIPMENT communication equipment. 4. PAYMENTVALIDATION Substantial Traditionally a weak area in Bank financedprojects, further corroboratedby audit reportsof previous COREMAP Iproject. To mitigate risks, additional documentationand internal control requirementswill be prescribed inProject ManagementManualto enhance documentarytrails. These are summarizedbelow. 5. DISBURSEMENT FUND AND Substantial Risks arise from use of remotenessof some project locations and FLOWS geographically dispersedoffices ofKPKN for disbursements, which could leadto vulnerability inoverall reconciliation o f Special Accounts. Responsibility for SpecialAccount management to be decentralizedto CMU at MMAF. Transaction SOE disbursements proposed initially, FMR baseddisbursementto be considered later. Delays in release of funds to community groups experienced in earlier project. Inherentrisks are also inherent in use of "force accounts". 6. PROJECTMONITORINGAND Substantial Geographicalspread of spendingunitsand chronic delays in REPORTING approval ofDIP warrants could increase risks for project implementation. FMR reporting will be introduced from inception, even of not immediately used for disbursements. 7.ACCOUNTING Substantial Geographical spread of accounting locations and poor capacity increase risks. Use o ftrained F Mconsultantsproposed. 8, EXTERNALAUDITS Moderate Jurisdiction of BPKP for project audit inregionscan become Overall Project Specific Risks Program Financial ManagementArrangements 17. Organization. For purposes o f financial management the following project organization is proposed: A. Payments Drocessing. A total o f 15 Project Management Offices (PMO) offices are likely to be involved in project financial management, including financial accounting and maintenance o f financial controls, and will be identified in the Project Implementation Plan. Teams o f project managers (Pimpros) and project treasurers will be formally appointed at each PIU, both at the center in Jakarta (MMAFDPK, PHKA, LIPI) and in the participating regions. Payment requests (SPP) will be prepared and validated by project treasurers at each PMO. 90 Payment validation procedures are identified as a key risk. To mitigate this, detailed procedures for validation of payments are being developed for each kind of project activity.. Financial controls requirementsfor each of these activities are different and payment validation procedures will be based on the following principles and best practices, designed to strengthencontrols and reduce risks of fraud and corruption. These measurestake into account experience gained inproject supervision inother projects as well as feedback from recent audit reports: 0 All decentralizedproject activities will be reviewedquarterly by community basedorganizations, certified ,by them and publicly disclosed in the villages concerned, in places such as local mosques or village notice boards. 0 A list of all project officials who are authorizedto commit funds and approve payments and their financial limits will be similarly publicly disclosed. For technical assistance, workshop and training activities the agency or agencies receiving training will be required to certify satisfactory completion before training expenses are reimbursedto the provider. Direct and original evidenceoftraining impartedand relatedexpenses such as travel incurredwill be requiredbeforepayments to contractorsare authorized. 0 For community drive developmentexpenditure, individual proposals approvedwill be publicized in local mosques or village notice boards. Community groups eligible to receive project funds will be legally constituted and trained to keep simple accounting records for all receipts and expenditures, including supportingdocumentation. These will be subject to annualaudit. Detailed formats for this will be prescribedinthe Project Manual. 0 Withdrawals of funds from each village force account will require at least 2 signatories from community members. All transactions in Bank statements must be reflected in accounting records. 0 All decentralized and village accounting records will be kept at a common location and be accessible under supervision to community leaders, auditorsand visiting Bank staff. A summary of these proposedmeasures is given below, with specific minimal documentsrequiredbefore payments can be authorized, other than authorized and valid contracts. These documents should be retained at PMU and attached to payment voucher (SPP) for audit purposes, and copies submitted to KPKN for issue of payment instructions (SPM). Full details of these will be included in the Project ManagementManual. 91 Kind of Expenditure Paymentvalidationprocedure Purchaseof goods and equipment: -Officeequipment,computers, 3riginal supplier invoices on letterheads with full snorkelequipment, and dive master iddresses andtax numbers. equipment procuredat Districts. Tax invoices. - Boats, watcher boats, Surveillance (MCS) equipment, cyanide detection Copies of warranty cards minilab. Technical specifications sheet. - Park managementequipment, which includes: radio, ultra-light aircraft, Evidenceof delivery (packing list or transportation boats, and observationposts documents or `suratjalan') and acceptance. For imported goods, certificate of origin. Books/journals/otherpublication materials for LIP1and CRTIC offices. Original supplier invoiceson letterheads with addresses and tax numbers. Tax invoices. Village workshops List of participantswith names, signaturesand addresses Agenda and output reports, where applicable. ~ Expenses on establishment of Original invoicesfor purchase of goods or serviceson Information Centers for Coral Reef letterheads. Management in each Community. Radio stations invoices, tax receipts. Expenses on establishment of Training and Information ExchangeNetworks (including Infrastructure)between Communities: including F M Broadcastingradio Credit and Savings Systems Legal incorporation document Full name, addresses and IDnumbers of initial depositors Contractualagreement betweenthe District PMUand other small works -CD the Community 92 Copies of Architectural plans andengineeringdesigns implementation/subproject agreement covering these works shall includethe following: (i)specified lump- sum, fixed price amount basedon a written estimate ofwork to be renderedby identifiedlaborersfrom the community; (ii)description inreasonable detail, includingbasic specifications, requiredcompletion date, andrelevantdrawings where applicable. For constructionmaterials, original tax invoices or invoices on vendor's letterhead. Individual consultants Formal contractwith consultant, clearly stating consultant's name, address and Bank accountNo. Copy of IDcard (KTP) Workshops and training Original hoteltax invoiceswhere events are held List of participants with signatures Agenda and output reports where applicable. Originaltravel tickets stubs, approveditinerary, with boardingpassesiftravel by air. Public awareness, campaign, and Copies of advertisementsinprinted media. educationofthe COREMAP on the media Copies of posters, brochures Original invoicesfrom mediaand production company, on letterheads with full addresses. Fellowships/Scholarships List of beneficiaries,Bank account details, copies of IDcards, specimen signatures B. Accounting. The geographicalspread of project implementationat District offices will likely imposea strain on project financial accounting and hence could disrupt preparation of acceptable consolidated financial statements. several implementing agencies will be involved for parts of the project. At the center, at least 3 Ministries will initiate and account for their respective components (MoHA, Bappenas, Ministry of Forestry& MMAF). In addition, distinct implementing roles have beenassigned to LIP1each of the 6 district governments. It is proposed to hire individual financial management consultants at the central and district project offices, who will be tasked with ensuring that project financial accounting reports and FMRs are prepared accurately and at regular quarterly intervals at each district and a consolidatedone at central level. 18. Accounting policies and procedures. Project management Offices will be required to maintain financial accounting for all project resources and expenditure on a cash basis in line with existing 93 Government accounting standards. Each PMO will budget for project funds and activities, and will therefore prepare financial accounting reports for submission to the National Coordination Unit, where consolidated reports will be prepared, including quarterly Financial Monitoring Reports and a single set of annualfinancial statements which will be audited. 19. Annual audited consolidatedfinancial statements will be provided to the Bank within 6 months after the end of each fiscal year. The budget realization reports currently prepared by Ministries and Government agencies for internal financial reporting to the Government do not include reporting for project expenditure per activities or components, and hence would not be suitable for the reporting needs for this project from the point of view of effective project management. The formats for project financial statements prescribed by the Bank will include accounting for categories as specified in the Loan Agreement as well as components as stated in the PAD. Procedures will be agreed with project management to reconcile project financial accounts with budget realization reports to local and central governmentson a quarterly basis. 20. Financial Monitoring Reports (FMRs) will be requiredfrom the Project on a quarterly basis, to be submitted to the Bank within 45 days of the quarter-end, initially for reporting purposes only, and subsequently to support Withdrawal Applications also. These reports will comprise information on procurementactivity, implementationprogress, sources and uses of funds and a forecast of funds required. for the project. Detailedformats for these will be agreed before negotiations. A single set of FMRs, which include Special Account Activity Statements, will be prepared for the project reflecting each funding source, viz., GEF and IBRDDDA. Funds for project expenditurethat are advancedto community groups for CBCM will be accountedfor as expenditure when these are disbursed, and not when these are actually expended by communities and recorded in village book keeping records. Village book keeping records will however be audited on a sample basis by project auditors. 21, Audit Arrangements.The national internalaudit agency (BPKP) will be accepted as auditorsfor this project. Terms of Reference for these audits will be agreedbeforenegotiations, leading up to a single audit opinion on the project financial statements, Statements of Expenditure(SOE) and SpecialAccounts for both IBRD/IDA and GEF. It is intendedthat audit reportswill be submitted by ProjectManagementto the Bank no later than 6 months after the end of the project fiscal year. Central directives would therefore be required to ensure that BPKP is provided unrestricted access to all project activities for purposes of audit. PIUs will be encouraged to publicly disclose audit reports. The TOR for audit will include the following as additional scope, inrecognition of the specific project risks: 0 Commenton the adequacy of and satisfactory operation of internal controls over community basedmanagement activities, including book keeping(Component B). Verification of outputsrealizedfrom expenditureunder ComponentC. 0 Comment on implementationof intensified payment validation proceduresspecified inthe Project Manual. 94 Audit Report Duedate # -` Project financial statements (consolidated), with appropriate 30thJune of disclosures on Statement of Expenditure ,SpecialAccount 1following year. (IBRDADA) and SpecialAccount (GEF) I #After theproject becomes effective, if in thejrstjscal year of operation theproject is in operationfor less than 12 months, . for thatjrst fiscalyear the audit report will cover aperiod that is less than oneyear, Le,, the actualperiod of operation. Thereafter the audit will cover thefullfiscal year eachyear Theproject is expectedto close on December 31, 2009. Fundflows and Disbursements 22. Fund flows for project expenditure will follow traditional Government budgeting and payment mechanisms(DIP for expenditure at central Ministriesand DIPP-LN for decentralizedproject locations in districts). These will have to be included in corresponding budgets every year by each respective PMU. The clear segregation of the activities and corresponding budgeting locations and accountability arrangements will be elaboratedinthe Project Implementationplan and ProjectManual. 23. Existing government budgeting and payment mechanisms will be used for both these disbursement streams. Central Government's treasury mechanismsand correspondingadministrative and operational procedures will apply for central components and activities. Payments from KPKN offices will be basedon duly approvedpayment requests (SPP) and contracts, and payment vouchers (SPMs) will be sent to project (PMU) offices for accounting purposes. For payments under the decentralized components, the appraisal and validation of payments will be done by PMOSat district offices, and the payment instruction (SPMU) issued with full supportingdocumentsto KPKN for disbursementof funds. 24. Fund flows to community organizations will be channeled to the bank accounts ("force account procedures") of eligible community groupswho satisfy at leastthe following conditions: (a) The community groups are registered for the purposes of the project and meet the eligibility criteria specified in the Project Management Manual. The acceptance and eligibility of these groups should be recordedand approvedby the Village Headinaddition to the ProjectManager. (b) Proposedactivities of the groups are eligible under the project, approved by the project manager and publicized. (c) Internal operating authorities of the community groups are available in writing, in particular operationof bank accounts in a designatedlocal Bankjointly by at least 2 elected members. 25. Special Account management and replenishments. A special Account will be opened in Bank Indonesiawith an authorized allocation of initial deposit about US$2.0 million and increasedgradually to US$ 5 million. The actual size of the initial deposit within this allocation will be determined prior to negotiations in consultation with the Borrower. The expenditures eligible for GEF financing have been identified in the Project Appraisal Document and will be notified in the Budget Allotment Documents (DIPP).Withdrawal from the Special Account will be based on payment orders by the KPKN offices once these have been approved by project managers. Replenishments into the Special Account will be based on Withdrawal Applications supported by Statements of Expenditures (SOE). For payments in excess of prior review thresholds, "summary sheet" procedures will be used. Financial Monitoring 95 Reports (FMRs) based disbursements will be introduced later inthe project, after satisfactory introduction o f FMRreporting in line with bank guidelines. Withdrawal Applications for replenishment o f the Special Account will be prepared by the CMU at MMAF, and submitted to the Ministry o f Finance (Director General Budgets) for approval and submission to the Bank. Conclusion & Action Plan 26. The financial management arrangements as outlined herein are considered acceptable for the purposes o f the project, subject to the satisfactory completion of the next steps and action plan summarized below: Table3 Issue Action required Responsibility Due Date DCA Ref. 1. Organizational Project financial NCUProject Director DCA 6.01 (g) arrangements management consultants Before loan to be identified based on :ffectiveness TORSapprovedby the Bank. Qualified staffto be NCU Project Director Completed identified for project financial accounting at NCU, PIU and at each PMO. NCUProject Director Completed(FMM) Detailedjob descriptions 0 ofthe financial management consultants, facilitators and Senior Extension and Training Officers (SETO). 2. Accounting Formats for Financial NCU Project Director Completed (FMM) Monitoring Reports (FMRs) to be agreed with Bank. 3. Audit Directive to participating NCU Project Director Before loan DCA 6.01 (f) ~~ regionsto provide full effectiveness access to BPKP for project audits. TOR for audit o f project financial statements to be NCU Project Director Completed agreedwith Borrower. Mechanisms for public NCU Project Director Completed (FMM) disclosureof all audit reportsto be agreed with Bank. 4. Project Draft Project Management NCU Project Director Completed Implementation Manual, including DCA 6.01 (b) Financial Managementand Grant Operationsmanual, to be agreed with Bank. A document laying down \TCUProject Director Zompleted governance and operating rules for the District Boardstobe agreed with the Bank and issuedby district governments. Formatsfor contracts NCU Project Director Zompleted(CBM betweencommunity Manual) Id groups and Dinas agencies laying down the duties and obligations of each in managingproject implementation to be agreed with Bank and operationalizedthrough SK Bupati. Format and proceduresfor NCU Project Director Completed book keeping at village Id level for community activities underthe project to be finalized. Procedures for intensified NCU Project Director Completed paymentvalidation proceduresfor project expenditure (see illustrative list above) to be included inthe Project ManagementManual. ' Operating ruleand NCU Project Director Completed (CBM proceduresfor operation Manual) o f credit micro finance funds in districts and villages to be prepared . 27. A Project Management Manual (PMM) giving in detail approved procedures for various implementing agencies in managing the project, and a Grant Operational Manual (OM) with corresponding procedures and requirements for carrying out the project at the community level with Grant funds will be developed and agreed with the Bank at Appraisal. The following documents will be used and attachedto the PMMand OM, and agreed with the Bank prior to negotiation: Terms o f Reference for audit o f the financial statements for the project, and the Special Account and Statement o fExpenditure. Formats for Financial Monitoring Report to be brought into use by the project management upon commencement o f implementation. Fundflow mechanisms inschematic diagrams describingthe flow o f loan and grant funds to each group o f beneficiaries, including contractors for centrally procured items, contractors for decentralized procurement and community organizations. A document laying down agreed governance and operatingrules for the District Boards. Detailed job descriptions o f the financial management consultants, facilitators and Senior Extension and Training Officers (SETO). 97 Formats for contractsbetweencommunity groups and Dinas agencies laying down the duties and obligations of each in managingproject implementation. Measures necessary to make the project audit reports and audited financial statements available to the public. Formats and procedures for book keeping at village level for community activities under the project. Procedures and relevant formats for preparation of Withdrawal Applications from the Special Account, as agreed with Ministry of Finance. Agreements with selected Banks to administerthe honorariaof consultantsand SETOs. Procedures for intensifiedpayment validation procedures for project expenditure.(See illustrative list above) Operatingrule and procedures for operationof credit micro finance funds indistricts andvillages. SupervisionArrangements 28. Given the geographic spread and complexity of the project, and its overall risk classification, financial management supervision will be undertaken through supervision visits by Bank F M staff undertaken annually. Since Audit TORS provide for strengthened SOE reviews, these will not be conducted by Bank staff. Such supervision work will include review of internal controls surrounding project activities and expenses inthe regions. Quarterly FMR reports will be reviewed regularly through the year where financial, procurementand contract management issues will be reviewed. Risk ratings at appraisalwill be refreshedannually following supervision. The need for SOE reviews infuture years will be reviewedsubsequently basedon feedback receivedfrom earlier reviewsand audit reports. 29. Allocationof Loan(IBRD/IDA) Proceeds(Table C) Amount of the Credit Allocated Amount of the (Expressed in LoanAllocated %of SDR (Expressedin Expenditures Catevorv Equivalent) Dollars) to be Financed (1) Goods, Equipment (a) Under Part B.l(e) and 750,000 1,300,000 80% of foreign (f),B.2(g), B.4(b) of the expenditures, 80% Project of local expenditures (ex- factory cost), and 60% of local expenditures for other items procuredlocally (b) Under other Parts of 480,000 900,000 100%of foreign the Project(except Part expenditures, B.5) 100%of local expenditures (ex- factory cost), and 80% of local expenditures for other items procuredlocally (2) Community Support Serv. 1,700,000 4,000,000 80% 98 Amount ofthe Credit Allocated Amount of the (Expressed in LoanAllocated O hof SDR (Expressed in Expenditures Category Eauivalent) Dollars) to be Financed (3) Workshop, Training (a) Under Part B.l (a), (b) 750,000 1,900,000 80% and(c) of the Project (b) Under other Parts ofthe 1,900,000 2,900,000 100% Project (except Part B.5) (4) Consultants' Services: (a) Under Part B.4 (b) ofthe 750,000 2,100,000 80% Project (b) Under other Parts ofthe 1,840,000 3,700,000 100% Project (except Part B.5) (5) Studies and Surveys 950,000 1,800,000 100% (except Part B.5 of the Project) (6) IncrementalOperating 2,110,000 4,500,000 100% in FY 2004, Expenses (except Part B.5 FY 2005 and FY of the Project) 2006, 80% in FY 2007 and FY 2008, and 60% thereafter (7) Fellowships and 820,000 1,300,000 100% Scholarships (8) Awareness andEducational 1,840,000 3,800,000 100% Services (9) District andVillage Grants 1,770,000 3,700,000 100% o f Grant amount disbursed (10) Front-endFee 332,000 Amount due under Section 2.04 ofthe LoanAgreement (11) Unallocated 968,000 TOTAL 33,200,000 99 Allocation of GEFProceeds(Table D) Amount of the GEF Trust Fund %of ExpendituresTo ExpenditureCatePorv Grant Allocated (Expressed inUS BeFinanced Dollars) (1) Goods, Equipment (a) Under Part B.l(e) and (f), B.2(g), B.4(b) of the Project 600,O 00 20% (b) UnderPart B.5 ofthe Project 1,250,000 100%of foreign expenditures, 100%of local expenditures (ex- factory cost), and 80% of local expendituresfor other items procured locally (2) Community Support Services 2,000,000 20% (3) Workshop, Training (a) Under PartB.1(a), (b) and (c) of the Project 1,000,000 20% (b) Under PartB.5 ofthe Project 700,000 100% (4) Consulting Servicesunder Part B.4 (b) ofthe Project 1,000,000 100% (5) Studies and Surveys under PartB.5 ofthe Project 50,000 100% (6) IncrementalOperatingExpenses 100%inFY2004, FY Under Part B.5 ofthe Project 900,000 2005 and FY 2006,80% inFY 2007 andFY 2008, and 60% thereafter Total 7,500,000 100 * BB ; B I " I 4 I 4 II f 1 I 1 I I I I I I I II PC II Z S I; 8$ S i t I I1 II I I d I I I I I I I I I I I I I II I I I I Technical Annex 7: Anti-Corruption Plan" INDONESIA: Coral ReefRehabilitation & Management Project (Phase 11) Summary The COREMAP Phase I1Program is nationally coordinated but decentralized in its implementation. It is comprehensive in scope, involving many connected activities, diverse stakeholders and covers 6 districts in 4 provinces, up to 416 villages, 2 National Marine Parks, and 4 local protected areas (KSDAS). As such, the Program is considered high risk in terms o f corruption and fraud and many transactions are vulnerable to irregularities. The geographical spread of project activities and inherently weak and variable financial management capacity in the districts imposes substantial risks on financial management and accounting, and hence increases the fiduciary risk. The main risks are related to financial management issues, such as: inadequate payment validation procedures, and procurement issues, such as: collusion and improper billing practices. Additionally, significant amounts of the total program costs are spent on technical assistance consultancies, training, workshops awareness campaigns and fellowships. World Bank experiences have shown that such expenditures are often vulnerable to fraud and internal control lapses, as it is difficult to measureoutputs. A well-designed and implemented anti-corruption plan addressing the incentives o f corruption and fraud i s therefore essential to reach the development objective o f the program. Hence, the objective of this Anti- corruption Plan" i s to: (i)identify corruption risks, and (ii)suggest mitigation measures beyond the standard control systems employed by the Bank. This plan will be reviewed at least every 6 months at the national, district and village level, and modified basedon lessons learned. Recognizing the challenges o f implementing a decentralized Program, the National Coordination Unit (NCU) at the Ministry o f Marine Affairs and Fisheries, the Program Management Units (PMUs) in the district Governments and other implementing agencies plan to address corruption risks by enhancing the project design, and by strengthening internal controls and mechanisms for transparency and accountability inthe procurement process.The following sevenkey action areas have beenidentifiedbythe Government of Indonesia to mitigate corruption risks inthe Program: (i) ParticipationandEmpowerment, (ii) Enhanced Disclosure Provisions and Transparency, (iii) CivilSocietyOversight, (iv) StrengthenedProcurement Policies and Procedures, (v) Payment Validation and Accountability Measures, (vi) Complaints Handling System, and (vii) Clear Sanctions and Remedies. This annex also analysesthe incentives andrisks of corruption and fraud inherent inthe Program structure in more detail through corruption mapping. Finally, appropriate mitigation measures are suggested for each o fthe risks identified. l7This anti-conuptionstrategydrawsuponawiderangeofresourcesandexperienceswithin Indonesia,mostnotably:theCoralReef RehabilitationandManagementProgram(COREMAP)Phase IEvaluationReport; CoralReefMonitoring, Controland Surveillance: the COREMAP Experience; theThirdKecamatanDevelopmentProgram(KDP); the Water Resources& IrrigationSector ManagementProgram; the HealthWorkforceand ServicesProgram; andthe LandManagementand Policy DevelopmentProgram. Inaddition,the strategy drawsuponthe Anti-Conuption Guide: DevelopingandAnti-ConuptionProgramfor ReducingFiduciaryRisksfor NewPrograms; Lessons fromIndonesia; FightingCorruptionin KDP; FiduciaryManagementfor Community-DrivenDevelopment Programs.A Reference Guide; Corruptionin Indonesia,A DevelopmentPerspective. This planshouldbe considered as a supplement to the specificcontrolsystemsalreadyoutlined in TechnicalAnnex 6(A):Procurement Arrangements, andTechnical Annex 6(B): FinancialManagement& DisbursementArrangements ofthe ProjectAppraisal Document. 102 CorruptionMapping As outlined in the Procurement Capacity Assessment Report, the overall risk of collusion, leakage and fraud in the procurement process has been assessed as "high". This is due to the following reasons: (i) inadequate financial expertise at the District level, (ii) uncertainty because o fthe move to decentralization, (iii)the innovativenatureofthisprogram, (iv) lackofeffective enforcement,(v) theunfamiliarity of implementing agencies with the new National Procurement Guidelines (Keppres), and new World Bank's Procurement Guidelines, and (vi) the general procurement environment in Indonesia is weak. As a result o f these circumstances inthe procurement environment, the following risks for corruption are triggered: 0 Risk for improper billing practices. Services can be over billed or not provided according agreed plans and financial statements.Risk for improper utilization o f salaries and travel allowances, and risk of price fixing between technical assistance consultants and local government (including village heads). 0 A high dependency on local government staff in the bidding process, especially at the district level, which can leadto collusion. 0 Contract awards could be "directed" to favored companies, regardless o f qualifications or experience and over-billing and over-design is possible. 0 Riskthat materials can be procured inconsistent with specification and the implementationteams can pocket the difference. 0 Riskof "kick-backs'' where funds are irregularly channeled back to a supplier as part o fa deal. 0 Risk of local elite capture. Additionally, inadequate payment validation procedures have been identifiedas a key risklg,as a result of: 0 The geographical spread o f project activities inup to 416 villages, 6 districts and 4 provinces and inherently weak and variable financial management capacity in the regions, which imposes substantial risks on financial management and accounting, and can limit appropriate payment validation. 0 The Program's plan to spend a significant amount on technical assistanceconsultancies, training, workshops, awareness campaigns and fellowships. These activities will be carried out at national, district and village levels. Such expenditures are often vulnerable to fraud and internal control lapses, as it is difficult to measure outputs realized, and to establish or verify satisfactory completion o f work. Mitigationmeasures 1.Participation and Empowerment. The Program aims to legalize the rights of communities to collaboratively manage coral reefs and associated ecosystems. Moreover, the Program will provide funds directly to each of the up to 416 villages participating in the program. Through active participation in the implementation, the Program believes there is a greater likelihood that communities will demand services o f the district governments and ensure that resources earmarked for effective management and improved livelihoods are accounted for inatransparent manner. The most important actions that will be taken include: 0 The constitution o f a Coastal Community Empowerment Board in each participating district that will include members o f various stakeholders, such as program management staff, local government, civil society, private sector representatives, traditional leaders, etc. (members varies by District) and will be chaired by Bupati. 0 Substantial community empowerment and capacity-building activities to ensure that public support is effective and sustainable beyond the life o f the program, such as: basic social services, social infrastructure, and income-generating opportunities to balance environmental and resource managementwith socioeconomic development. l 9 Technical Annex 6(A): Procurement Arrangements, andTechnicalAnnex 6(B): FinancialManagement & DisbursementArrangements of the ProjectAppraisalDocument. 103 e The provision of two-way radios and a special frequency for each village to communicate with other communities and other districts in the program, which will give the beneficiaries the opportunity to increasethe level of communication and thereby increasethe level o f transparency inthe programandwith their participation. 2. EnhancedDisclosure Provisionsand Transparency. The program will ensure disclosed materials are produced in a format appropriate for communities and readily available for public display at the information centers established in each participating program village. As such, informed community participationwill ensure transparency and accountability o f funds use. The most important actions that will be taken include: Public information centers in each participatingprogram village will be established to ensure that the simplified informationis available to beneficiaries. All final audit reports andthe mid-termreview will be madepublicly available. All annual procurement plans andscheduleswill be made publicly available. All bidding documents will be made publicly available in accordance with the World Bank procurement guidelines. All short lists of consultants will be made publicly available in accordancewith the World Bank consultant guidelines. The summary of the evaluation of all bids will be available to all bidders and parties submitting proposals for specific contracts, promptly after the notification o f award to the successful bidder. Representativeso f the end-users of the goods or works being procured at the District level will be able to attend the public bidopenings. All bid openings will be public. All information regarding contracts awarded will be publicly disclosed. 3. CivilSociety Oversight. The Program recognizes that greater oversight by civil society is essentialto ensuring fulltransparency in the implementationof activities. As such, the Program involves a high degree o f formal participation by NGOs, the private sector, and traditionalladat and religious leaders, through membership in the Coastal Community Empowerment Boards established ineach of the six participatingdistricts. Moreover, the majority o f the 50 Senior Extension and Training Officers (SETO's) and 200 Community Facilitators (CF's) will likely come from civil society. The most important actions to ensure civil society oversight that will be taken include: e Members of civil society will participate in fiduciary monitoring activities andjoint surveillance patrols as well as independent evaluations. e An independent monitoring plan, involving CSO's (NGOS, universities and the local media) will be designed during the earliest stage o f COREMAP Phase I1to support national level monitoring (ME+Funit). e The Program will encourage participation of the `end users', or community representatives, as witnesses inthe district level procurement process inorder to increase the degree o f transparency inthe procurement process. 4. StrengthenedProcurement Policies andProcedures In order to ensure transparent and well-advertised procurement, the Program has proposed the procurement procedures inTechnical Annex 6 (A). The most important o fthese procedures include: e All goods to be procured will require at least three quotations to limit monopoly. e The following procurement policies will be implemented: (i)wider advertising in national and regional newspapers, (ii) removal o f geographic and other restrictions, (iii)qualification which allows participationby all bidders inaccordancewith the World Bank procurement guidelines (iv) complaints accommodated and adequately addressed, and (v) mis-procurement maybe declared for any deviations from agreedpolicy. 104 0 Independent technical assistance and capacity building specialist consultants, for procurement and financial management, will be hired in each district and at the national level to support NCU. They will work alongside the Programs national and district managers or "Pimpros" to ensurethe timely preparation o f contracts, review o f proposals for funding, and the smooth execution o f biddingprocedureslcontracts. Moreover, the Program will finance a financial managementlmicro- credit consultant to assist each program village creating a FMsystem. 0 The Program will initiate financial management and procurement learning programs on all levels and additionally support the learning process with workshops and supervision and monitoring to point and correct mistakes as early inthe program cycle as possible. 5. Payment ValidationandAccountability Measures Inadequate payment validation procedures have been identified as a key risk. To mitigate this, detailed procedures for validation of payments have been developed for each kind o f Program activity (see Project Manual). Financial control requirements for each o f these activities are different and payment validation procedures will be designed to strengthen controls and reduce risks o f fraud and corruption. Actions that will be taken include: All community project activities will be reviewed quarterly by community-based organizations, and related information will be publicly disclosed in the villages concerned through the village information center. A list of all project officials who are authorized to commit funds and approve payments and their financial limits will be similarly publicly disclosed. For technical assistance, workshop and training activities or agencies receiving training, the participants will be required to confirm completion before training expenses are reimbursed to the provider. For community driven development activities, individual proposals approved will be disclosed through the village info center. Community groups eligible to receive program funds will be legally constituted and trained to keep simple accounting records for all receipts and expenditures, including supporting documentation. These will be subject to annual audit. Detailed formats for this will be described inthe ProgramManual. Withdrawals o f funds from each village's force account will require at least 2 signatories from community members.All transactions inBank statements must be reflectedinaccounting records. The Program will set up a village financial management system, including bookkeeping, where village accountants will be trained and accredited. This system can account for village funds ina transparent and accountable way for the years o fthe program and for decades thereafter. 6. Complaints Handling System A Complaints Handling System (CHS) will be established that provides all stakeholders with the opportunity to file a complaint when suspicion about corruption occurs. The exact procedure for complaints handling is described in more detail in the Program Manual. The most important actions that will betaken include: 0 The CHS is designed to encourage local complaint resolution. This provides the opportunity to resolve the corruption issueon the same level (local, district, national) as where the complaint was filed. However, the actions, sanctions and remedies decided to mitigate the corruption issue are scrutinized by the levels above, and ultimately the ME&F are responsible for sound corruption mitigation on all levels. All complaints are reported to ME&F who maintain a comprehensive database o f complaints. Each complaint needs to be proven, and if it is proventrue, further action will be executed. 0 An extensive financial and auditing system has been prepared as part of the Financial Management and Disbursement Agreements. Any suspicion about corrupt activities found in the existing auditing and reporting system will be reported through the Complaints Handling System. 0 The program will have a monitoring system that is both internal and external. Internally the villagers themselves, field consultants, national level program staff, local government officials, and World Bank staff on supervision trip will monitor the program. An independent monitoring plan, involving CSO's (NGOs, universities and the local media) will be designed during the 105 earliest stage of COREMAP Phase I1 to support national level monitoring (ME+F unit). Any suspicionabout misuse will feed into the Complaints Handling System. 7. Clear Sanctions & Remedies The most important sanctions andremediesare: Any individual can be prosecuted if relevant, competence, material, and sufficient evidence is available. Inall procurementcontracts, evidence of corruption, collusion or fraud will result intermination of the relevant contract, possibly with additional penalties imposed (such as fines, blacklisting, etc.), inaccordance with Bank requirementsand Government laws and regulations. Disbursementto any given location can be frozen or stoppedcompletely ifcases of abuse are not dealt with effectively. Furthermore, anyone hired under the program, including contractors and facilitators, will be given instantdismissal ifprovenguilty of corruption, collusion or fraud. Program implementation activities (components, subcomponents and activities) and the order in which they will be implementedwill be phased, and will be outcome-orientedrather than driven solely by a set implementationtime schedule. 106 TECHNICAL ANNEX 8: ECONOMICAND FINANCIAL ANALYSIS INDONESIA: Coral ReefRehabilitation& ManagementProject(Phase 11) OVERVIEW Indonesia's coral reefs form the key ecosystem on which the majority of the coastal inhabitants o f Indonesia rely for food, income generation, construction materials, and coastal protection. They are also o f critical significance for science, education, pharmaceuticals, and global conservation and heritage. Healthy reefs can produce marine products worth US$15,000/km2/yr, and are an important source of food and economic opportunities for about 9,969 Indonesian coastal villages. According to the Food and Agriculture Organization o f the United Nations (FAO), coastal and marine economic activities have been estimated to contribute some 25-30% to Indonesia's gross domestic product (GDP) and provide employment to about 20 million people. The reefs also play an important role in marine-based tourism, attracting divers and providing the source o f white sand for beaches. The tourism value o f coral reefs has been estimated at US$3,000/km2/yr in low potential areas to US$500,000/km2/yr in high potential sites. Fringingcoral reefs also play key roles in dissipating wave energy, thereby protecting coastal lands from storms and wave erosion. The net benefits o f coastal protection are estimated at US$25,000- US$550,000 per km2of reef, depending on the value of the infrastructure. For districts experiencing collapse of reef fisheries (e.g. Pangkep, South Sulawesi), this benefit will be real and quantifiable. For districts still in pristinecondition the investment is to ensure prevention ofthe degradation and loss o f revenuegenerating renewable natural resources. Global biodiversity values are typically quite high but are difficult, if not impossible, for countries to evaluate. Estimates for Indonesia suggest that the reference values for global biodiversity are inthe order o f US$717/halyr for intact mangroves and US$8,529/ha/yr for coral reefs. After adjustment, the incremental benefit values for global biodiversity attributable to intact mangroves and coral reefs are US$43/ha/yr and US$2,808/ha/yr, respectively. Estimates o f the global biodiversity incremental benefits are basedon 4725km' of reef and related ecosystems directly targeted by the Program. These benefitsare assumed to peak only after the 12" year o f Program implementation. The detailed economic analysis based on tourism, fisheries and other local products is presented in Technical Annex 9. In the analysis, coastal protection benefits were not taken into account and nor were the global biodiversity benefits, which are difficult to quantify. However, these can be considered as additional economic justifications for the program. A. ECONOMIC ANALYSIS :[NPV @ 10% over 25 years is US$15.6mper District; EIRR= 18%] Background:The Value of Reefs. Coral reefs andtheir associatedecosystems (Le. small scale coral reef fishery, mangrove habitat, etc.) are the source o f livelihood for hundreds o f thousands o f Indonesian subsistence fishers, and a source o f food security for unemployed agriculturalists in times of economic hardship. As mentioned above, the reefs serve many ecological and welfare improving functions. A recent World Resources Institute paper (Burke et al, 2002) estimated the potential sustainable annual economic net benefits o f healthy reefs in Southeast Asia. The results per square kilometer o f reef are given inTable 8.1. 107 Table 8.1: Potential Sustainable Annual Economic Net Benefits per Km-Sq. of healthy coral reef in SoutheastAsia. RESOURCE USE PRODUCTION POTENTIAL ANNUAL NET (DIRECT AND INDIRECT) RANGE BENEFITS (US$) (RANGE) Siintainahle fisheries (local consumntion\ i o - w t si 2.000-3fm-m Sustainable fisheries (live fish export) 0.5 - 1t $2,500 -5.000 Coastal protection (erosion prevention) $5.500 - 110,000 Tourism and recreation 100- 1000persons $700 - 111,000 Aesthetic/biodiversitv value (WTP) 600- 2000 persons $2,400 - 8,000 Total (fisheries & coastal protection only) $20,000 - 151,000 Total (including tourism potential) $23,100 -270.000 Source: Reefs at Risk in Southeast Asia (Burke et al. 2002) Yet, despite their high potential values, the quality o f coral reefs in Indonesia is declining rapidly. Even remote reefs in unpopulated areas are not free from man-induced deterioration. At the moment, only 29 percent o f Indonesian reefs are in good condition (that is, with more than 50 percent live coral cover). In most areas, a variety of human-induced threats are responsible for the degradation o f reefs. The relative importance and the type of threats vary tremendously per location. Powerful economic forces are driving the observed destructive patterns o f coral reef use, often rendering short-term economic profits, sometimes very large, to selectedindividuals. Measures for coral reef protection are often presumed to conflict with economic development, and are said to require a sacrifice of economic growth. However, this perception stems mainly from a failure to recognize the magnitude o f costs to the present and future economy resulting from reef degradation. Table 8-2 adapted from Cesar et al. (1997) shows the benefits to individuals and losses to society from each square kilometer o f coral reef destruction, providing an economic rationale for preventive or remedial efforts. For coastal protection and tourism losses, both 'high' and a 'low' scenario estimates are presented, dependingon the types of coastal construction and tourism potential. "High" cost scenarios are indicative o f sites with high tourism potential and coastal protection value. "Low" cost scenarios are indicative o f sites with low tourism and coastal protectionvalue. Some o f the most important values of coral reefs, such as those to future generations and intrinsic values, cannot be quantified. However, since the economic benefits from reef destruction are often usedto justify continuation o f these destructive practices, quantifying the costs associated with coral reef degradation is important to make a balanced assessment o fthe benefits and costs o f various threats. The analysis is mainly based on observable data such as the value o f the decline of fish catch or expenditures by hotels on groins to temporarily prevent beach erosion. Total costs should thus be interpreted as rough estimates o f the lower range o f true costs associated with reef destruction. The numbers in Table 8.2 are generated on the basis of available data, using hypothetical examples of sites subject to one individual threat. 108 Table 8.2: Total Net Benefits and Losses Due to Threats to Coral Reefs in SEAsia (Net Present Value in US$OOOper km-sq.)Net Benefits =====a=== Net Losses to Society ==------== Total Net Fishery Coastal Sustainable Others (e.g. Threats Benefitsto Protec- Tourism biodiversity) ( Individuals tion PoisonFishing 33 37 n.q. 3-409 n.q. Blast Fishing 15 80 8-170 3-450 n.q. Coral Mining 121 87 10-226 3-450 67 Sediment (logging) 98 81 n.q. 192 n.q. Overfishing 39 102 Source Adapted from H Cesar et a1,"Indonesian Coral Reefs --n.4.EconomicAnalysis n.q. n.q. An ofa Preciousbut ThreatenedResource," AMBIO 26, l(1997) 345-358 Notes -- nq =not quantified ;The data presentedaboveare for SoutheastAsia (Table 8-1) and for Indonesia(Table 8-2) as a whole For the program, acost benefit analysis (CBA) was carriedout for the 6 target districts The advantageof an analysis at a district level is the actual use of real site data, ratherthan havingto rely on generalregion-wide data Analytic Framework & Assumptions. A cost benefit analysis (CBA) was carried out for the program, and based on analysis of each o f the six proposed districts for inclusion in phase two. The CBA at the district level captures the following three main quantifiable benefits: (i) benefits from improved fisheries, (ii)benefits from local products derived from sustainable coral reef activities, and (iii)associated ecosystem use (including recreation and tourism). Program benefits are carried forward 25 years, which is the evaluation time horizon for the analysis. Significant benefits are expected to come from the fisheries sector: the voluntary closure o f reef areas by communities is expected to stabilize reef fish yields compared to the `without project' scenario where yields are expected to gradually decline over time. This rationale is in line with the recent literature on the economics o f no-take zones, or fish sanctuaries or fish banks, as summarized inRoberts et al. (2001). Funds demarcatedto each village for alternative income generating activities are assumedto ensure that fishingpressurein the areas outside the no-take zones is not increasing with the closure o f specific areas. This analysis conservatively hypothesizes in the `central' estimate, that current reef fish yields will be maintained over time, after an initial drop due to the introduction o f no-take zones. However, it is clear that in well managed reefs areas, the fishery production significantly increases. Inthe `without` program scenario, the fisheries benefits decline gradually over time until 50% o f current fish catch levels. At 50% o f current levels inprogramareas, the fishery is assumedto have collapsed and is no longer able to sustain local populations. Due to lack o f reliable reef fisheries yield data (except in Wakatobi National Marine Park, Buton District) where the Bank financed the collection o f 10 months o f catch data), these data were calculated based on total reef area per district, local reef quality and assumed yields per level o f reef quality basedon data from well managed reefs o f similar type elsewhere inthe world. Reef Oualitv (and therefore reef fisheries catch) is indexed from 1 (poor quality) to 4 (pristine) based on expert scientific assessment and relevant data available such as that found in (McAllister, 1998). Fisheries Values (metric tons/km2/year). It is assumed that a low reef value o f 1 corresponds with a catch of 5 metric-tons/km2/year, while a level 2, 3 and 4 correspond with catches o f 15, 25 and 35 mtih2/yr,respectively. Tourism levels were estimated for each of the districts. Tourism is assumed to increase at 5% per year inthe 'central' estimate based on the enhanced attraction o f the area due to the marine parks and marine tourism parks inthe districts, Benefit Transfer was used to estimate the value o f `other local products' (see Ruitenbeek, COREMAP-ABD: Financial and Economic Analysis, 2002). 109 The data are summarized below inthe below table. Table 8.3: Economic Data used in Economic Valuationfor the 6 Program Districts Pangkep Selayar Buton Raja Ampat Biak Sikka Total District Program Costsa (US$ million) for 6 years 6.6 7.1 10.0 7.9 8.2 6.8 Fisheries Value (2003) inmill. US$ 2.4 8.1 7.3 17.2 3.6 0.8 Local Products (2003) in mill. US$ 1.5 4.4 5.6 5.2 1.7 0.5 Tourism Value (2003) in mill. US$ 0.1 0.4 1.6 0.2 0.1 0.2 ReefArea (km2) 374 1098 1402 1300 424 128 Reef quality index (scale 1-4) 1.8 2.0 1.6 3.2 2.3 1.7 Number o f fishers 35,000 18,100 60,700 10,700 21,000* 4,300 a $millions, excludingdistrict monitoring; *District estimate Bank-GEF financed COREMAP Phase I1in eastem Indonesia involves nearly 5,000 km2 o f some o f the most pristine reefs in Indonesia. Hence, apart from quantifiable benefits, there are a host o f other benefits, such as global biodiversity that are difficult to quantify. While global benefits due to enhanced biodiversity conservation have not been used in the above estimates, Ruitenbek (1999) estimates the benefits o f maintained or improved marine biodiversity at .US$8,500 per hectare, far exceeding those values used inthis analysis and presentedinthe abovetable. The overall results from the COREMAP District CBA is presented in Table 8.4. The quantifiable economic internal rates range from 8% in Sikka district to 22% in Raja Ampat district. The differences can largely be explained from the relative size and health o f the reefs in the different districts. As the benefits vary much more than the costs of addressingthe problems, project management o f the relatively smaller, less intact reefs has a much lower rate o f return than larger, more pristine areas. As a result o f this analysis and discussions with Sikka District government, a less intense (and costly) program is designed to maximize the benefits per unitarea o f reef.. Table 8.4: Economic Rates of Returnfor the 6Project Districts ('central' estimate) Pangkap Selayar Buton Raja Ampat Biak Sikka EIRR'central' (%) 13 20 20 22 13 8 Sensitivity and Risk Analysis. These estimates are rather sensitive to the assumptions, especially those related to trends in fish yields over time. Ifthe co-managed no-take zones are less effective, (e.g. because o f continued illegal and destructive fishing practices inthese areas), the EIRRs decline significantly. This analysis also highlights the importance of sustainable enforcement o f the no-take zones. Over 100,000 fishers in the program area (6 districts) are involved in reef-related fishing and are among the Program's key stakeholders. Under the program, their incomes will stabilize as compared to the 'without project' case, where incomes are decreasing every year, with a 50% or more drop assumed over the next 25 years without this program. The detailed CBA results are available inthe program files. Table 8.5: Economic Rates of Returnfor the 6 Project Districts ('central' estimateand sensitivity) Pangkap Selayar Buton Raja Ampat Biak Sikka EIRR'central' (%) 13 20 20 22 13 8 fi EIRRhigh (%) 25 44 40 51 26 16 EIRRlow (% Undefined undefined 1 undefined Undefined 110 B. FINANCIAL ANALYSIS: "pV @ 10%over 25 years is US$21,600 per village; FIRR =29%] A detailed financial analysis was carried out for alternative income generation micro-enterprises likely to be supported under the project. The financial analysis estimated requirements for (i) capital investment and working capital; (ii)profit and loss statement; and (iii)financial planning cash flow. The financial rates o f return range from 16 to 59 percent, with 29 percent for a representative package o f micro- enterprise investments. When risk factors over and beyond normal business risk were added, the switching values - the valuesfor which the FRR equals the opportunity cost of capital were obtained at a - 15 percent decreaseinrevenuesand at a 70 percent increase in investment costs. Provided that user rights and collaborative reef management regimes can be effectively sustained, reef management can yield benefits relatively quickly through increased reef fisheries productivity. Reef sanctuaries can typically benefit surrounding fishing areas within a period of 3-7 years, depending on the species. The financial rate of returnfor average reef sanctuaries inthe Philippines is 28 percent, indicating that recurrent expenditures are more than offset by management benefits. Nonetheless, reef sanctuaries result in closures o f 20-30 percent o f the reef area, imposing short-term costs to traditional fishers. In Taka Bone Rate National Marine Park, these losses are estimated at an equivalent o f US$28,000 per village over a period of six years, using conservative assumptions of reef recovery. Hence, an initial subsidy equivalent to the projected loss per village for alternative income generation and reef-caring infrastructure, as determined by the program is consideredjustified. C. FISCAL IMPACTANALYSIS An analysis of financial soundness including an examination of the fiscal sustainability of the proposed program (including incentives for maintaining and operating the program effectively) was undertaken. This includes an evaluation of the impact of the program on government finances, taking into account (a) the incremental taxes and subsidies that would result from the program; (b) the increase in recurrent costs resulting from the program and the prospects for financing these; (c) each district government's current fiscal situation; and (d) the availability and certainty o f counterpart funds for the project (see Technical Annex 7: Sustainability for a detailed estimate o f local government's financial responsibilities leading to the endo fthe second phase). In accordance with KMK 35, each of the proposed 6 Districts for inclusion into the program's first three years prepared detailed district programs. With the initial injection of program capital and based on the success o f effective collaborative managemento f reefresources, each district is likely to derive significant positive fiscal benefits as conveyed inthe final column o fTable 8.6. Besides, there will be additional fiscal advantagesto the district from potential increasedtourism revenues in the sites. Tourism is expected to increase with over 220% over the coming 25 years if the marine protected areas are managedeffectively. Each district will contribute at least 10% o f total district program costs, a share that would increase after three years o f program participation. This amounts to approximately US$0.5 million per district. District officials: District Head (Bupati) and District Parliament (DPRD) have officially agreed to the counterpart budget required to co-finance the Bank-GEF funds. Central Government Ministries will finance approximately US$lO.O million (10%) of total program costs. Most o f GOIs contribution will be in the form o f central Government expenditures and thus is not expected to result in a significant fiscal impact. Shouldthere be an extreme devaluation o f the currency -75 percent from the negotiationperiod estimates, GO1 and the Bank would consider, at mid-term review, whether to cancel the unutilized funds or to re- allocate themto incremental program outputs. 111 District Reef and related Degraded fisheries Managed Approximate $ ecosystem area yield per year fisheries benefit from (K2) (5 Tkd) yield per year managing fisheries (30Tkd) (25T @ $1,972. T-') Note: T = tons 112 Technical Annex 9: Incremental Cost Analysis INDONESIA:Coral ReefRehabilitation & Management Project (Phase 11) Context and Broad Development Goals Indonesia is at the epicenter of global biodiversity of corals, reef fish, mollusks and crustaceans. It also has the largest coral reef area o f any country in the world with around 18% o f the world's total (Wilkinson, 2002). The quality of Indonesian reefs has, however, declined over the last decade. Recent monitoring data from 520 stations throughout Indonesia indicate that 66% of Indonesia'sreefs are in poor to fair condition (Wilkinson, 2002). Also, a recent study indicated that 47% o f Indonesia's reefs are at high to very high risk (WRI, 2002). Threats include overfishing, destructive fishing (cyanide and bombing), pollution, sedimentation and uncontrolled tourism development. Studies financed by COREMAP Phase Igenerally confirm these findings. Yet, there are signs of improvement. Taka Bone Rate, one o f the two COREMAP GEF Phase Isites, witnessed a significant increase in coral cover by 6.3% from 23.8% to 30.1% over a 2 year monitoring period due to the engagement of communities o f settingaside no-take zones. Such increases in coral cover go hand in hand with improvements in fishery production (and therefore community livelihoods) that reefs provide, as well as biodiversity. Global biodiversity values are typically quite high but are difficult, ifnot impossible, for countries to evaluate. Estimates for Indonesia suggestthat the reference values for global biodiversity are in the order o f US$717/ha/yr for intact mangroves and US$8,529/ha/yr for coral reefs. After adjustment, the incremental benefit values for global biodiversity attributable to intact mangroves and coral reefs are US$43/ha/yr and US$2,808/ha/yr, respectively. These numbers would justify significant internationalgrant financing. The COREMAP Program consists of three phases, implemented over 15 years. GEF supported the first phase, and will scale up activities in the second phase. The incremental cost analysis discussed here is specifically for proposed GEF-financing o f Phase 11. By the thirdphase, institutionalization o f the project should have reached a level where GEF financing along the lines proposed for Phase I1 is likely, particularly since Phase I1 is addressing financial sustainability up-front (see revised objectives since Phase I). COREMAP is consistent with Indonesia's Biodiversity Action Plan, Agenda 21, the Convention on BiologicalDiversity, GEF's Operational Program on Marine, Coastal, and Freshwater Ecosystems, and guidance from the three Conference of Parties. It specifically responds to the Jakarta Mandate stressing conservation and sustainable use o f marine ecosystems with has wider endorsement from the G8 plus UN Organizations (see PAD Section A.2). Baseline Scenario for Phase I1 Scope and Costs: Under the baseline scenario, it is anticipated that GO1 would begin implementation o f COREMAP initiatives at the national level and in 6 districts (Pangkep, Selayar, Buton, Raja Ampat, Biak and Sikka), including 2 National Marine Parks and at least 4 KSDAs in these districts. This baseline (borrowed funds plus GOIs, including local governments' own resources) sets the tone for behavioral changes o f communities away from reef destructive activities, from which GEF resources would be used to further strengthen. Moreover, the Baseline Scenario would focus on interventions having direct or indirect impact on livelihood opportunities for reef-dependent local communities. The baseline scenario has three major elements: (a) Institutional Strengthening, supporting a National Coordination Unit (NCU) at the national level that coordinated all program activities in 2 national marine parks and 6 districts (Pangkep, Selayar, Buton, Raja Ampat, Biak and Sikka). Key activities financed include mechanisms to better coordinate a national program and strengthening national marine park and KSDA authorities to collaboratively manage marine protected areas. Moreover, legal support to prepare and enact perdas' and perdes' empowering 113 communities legal rights to collaboratively managecoral reefs and associatedecosystemsis provided. The baseline costs for this component are estimated at approximately US$ 17.0 million. No GEF financing is anticipated to support this component. However, it sets up the rationale for GEF-incremental financing for the next component. (b) Community Based and Collaborative Management, supporting a comprehensive program to engage and empower up to 416 villages (over 750 communities/sub-villagesldesuns) located in 6 districts that contain reefs that have globally significant marine biodiversity. Moreover, 2 national marine park authorities and 4 KSDA authorities would be strengthenedto work inpartnership with district government and empowered communities and plan for sustainable use o f coral reef ecosystems (and halt destructive practices). Multi-sectoral District Program Management Units (PMUs) are also supported under this component. This component would finance collaborative management training for key stakeholders, community support services such as facilitation and extension for villages, sub-district workshops, support to prepare coral reef management plans for each participating village, support to create a participatory district marine conservation plan that builds from the coral reef management plans, surveillance equipment (such as boats, etc), an extensive radio/communication network for all villages, support for community facilitators, senior extension training officers, and village motivators. The baseline costs for this component are estimated at US$ 36.6 million. All GEF resourceswill be applied as co-financing this component. (c) Public Awareness, Education and Sea Partnership program, both at the national and district level. This component would include mass-media campaigns, outreach programs and materials, dissemination o f COREMAP guidelines and awareness building workshops. It builds upon the award winning public awareness campaign financed in COREMAP Phase I.Baseline costs for this component are approximately US$13.O million. Benejts. Implementation o f the Baseline Scenario investment program will be important to ensure minimumcommitment to conservation of Indonesian coral reef resources, bothat the site level as well as for the country in general. The Baseline Scenario would also lead to greater institutional capacity, general public awareness, and a stronger framework for coordinated reef management inIndonesia. The Baseline Scenario would, however, be insufficient to ensure the effective conservation and collaborative management o f the national and regional marine parks-- sites o f high biodiversity importance (according to comprehensive scientific investigation financed through project preparation and independently confirmed by internationally renown conservation NGOs such as TNC, WWF and CI, as well as coral reef areas o f significant global biodiversity found outside o f these marine parks. The reason i s that from local communities and regional governments' perspectives, the development priority i s around hard income generation activities, which are not perceived to come from effective conservation measures. The program aims to change this misperception. The Baseline, therefore, would not be sufficient to ensure that high priority coral reef conservation areas are included in national COREMAP program strategies. The Baseline Scenario would also be insufficient to ensure effective enforcement in sites o f high biodiversity importance, an effective involvement o f NGOs in field activities, and a public dissemination o f lessons o f experience, particularly amongst non-governmental stakeholders. Global EnvironmentalObjective The global environmental objective of the GEF Alternative is to protect, rehabilitate, and achieve sustainable use o f coral reefs and associated ecosystems in eastern Indonesia. The proposed GEF Alternative project (co-financing the larger program) aims to address the management-related underlying causes o f biodiversity loss and degradation by investinginthe management o f two marine protected areas and three marine tourism parks, and their buffer zones, key priority districts (Sikka, Selayer, and Raja Ampat) as well as in crucial workshop/training and technical assistance in conservation and sustainable use of globally significant coral reef resources. 114 GEF Alternative in PhaseI1 Scope and Costs. Under the GEF Alternative, an expanded program would be undertaken, comprising activities focusing on empowering communities to sustainably co-managethe coral reef ecosystems. This implies providing an incentive for them and local governments to do so, namely, focusing on a two-fold approach o f coastal poverty alleviation through the sustainable use o f reef resources (generating domestic benefits), as well as protection o f coral reef ecosystems o f global significance. It is envisaged that that the GEF alternative would supplement the components of the Baseline Scenario through the following additional activities: (1) Overall, provision o f resources to support incremental activities in two national marine parks and 4 KSDAs, in addition to three key districts (Raja Ampat-considered the bulls-eye o f global coral reef biodiversity, Sikka, and Selayer) where it has been scientifically validated that reefs o f global biodiversity significance exist outside o f the park boundaries. While GEF resources are applied across all Phase I1 sites, a significant proportion o f these funds are applied to the abovementioned districts to serve as counterpart financing in order for the program to maintain its decentralized implementation structure, maintain compliance with KMK35 as well as compliance with the Independent Evaluation's key recommendation: to support a nationally coordinated and decentralized collaborative managementproject. The incremental funds only support those activities that satisfy GEF criteria. Moreover, without use of these funds, these key districts would not be able to participate inthe project. The incremental allocation for these districts are as follows: Table 9.1 FinancingArrangementsfor 3 Phase I1DistrictsMapped as Medium FiscalCapacity Assuming Non-Cost Recovery8z On-Granting Scheme District Total Cost to % District % oftotal cost financed by Total District be Financed Counterpart GEF Grant (as counterpart Counterpart By District for District) RajaAmpat $6.lm 10 30 40% Sikka $5.3m 10 30 40% Selayer $5.2m 10 30 40% District Total Cost to $ PaidBy $ cost financed by GEF Total District be Financed District As Grant (as counterpart for Counterpart More specifically, GEF financing is applied to support the following incremental activities: (2) Surveillance and enforcement equipment to reduce destructive coral reef fishing practices (US$0.39 million); (3) Communication equipment (radios) and Goods (office furniture, computers, and database) to support surveillance efforts and connect villages, districts, and national coordination units (US$0.46 million); (4) Technical assistance to national and district levels through a marine protected areas specialist: (US$0.41 million); (5) Key studies to underscore the ecological importance o f key coral reef areas (US$0.04 million); (6) Community Support Services in the form o f community facilitators, 115 motivators, and senior extension and training officers to build upon the empowerment model tested in Phase I(US$2.85 million); (7) Improved community based and collaborative resource management through: (i)enhanced collaborative enforcement; (ii) support for cyanide detection mini-labs; and (iii) legal expenses (e.g. support for community law drafting), (iv) learning exchanges, workshops, on thejob training, local and international study-tours, cross exchanges with GEF-financed Targeted Coral (8) Reef ResearchInitiative (TR) based inPhilippines to support the development o f village coral reef management plans, setting up community no-take areas, collaborative management, and supporting awareness of coral reef biodiversity conservation and the link to fisheries production (US$ 1.26 million); (9) .Establishment o f park advisory boards in 2 national and at least 4 regional marine parks under the project, including support for national and district marine park policies, basedon reassessingpark zonation, and preparation o f district marine conservation area plans; (10) Operational Support for effective management and operation ofthe 2 marine parks and 4 marine tourism parks (US$l .O million). Benefits In addition to the national benefits associated with the Baseline Scenario, global benefits of the GEF Alternative include (i)protection o f globally significant biodiversity in 6 priority coral reef ecosystems; (ii)pilot demonstrations, replicable elsewherein Indonesia and Southeast Asia; and (iii)improved collaborative management of 2 marine tourism parks, 1 marine wildlife reserve, at least 4 marine tourism parks areas of global coral reefbiodiversity outside o fthese parks. Incremental Cost Matrix The total costs of the Baseline Scenario are estimated at US$66.8 million in Phase 11. The GEF Alternative is estimated at US74.3 million for the same phase. The incremental costs o f the GEF Alternative are therefore estimated at US$7.5 million is therefore requestedto support the program. Table 9.3 Incremental Cost Table Component1 Cost Category PhaseI1 Domestic Benefit GlobalBenefit Sub-component USD$million A. Inst. Strengthening Baseline 17.1 With GEF Alt. 17.1 Incremental n B.Community Based Baseline 36.6 & Co-Management With GEFAlt. 44.1 Incremental 7.5 B1. Community Baseline 35.0 See DB Baseline 1 Empowerment B2. Community With GEF Alt. 40.0 See GEF Alt 1 SeeGB 1 BasedResourceMgmt I I B3. Community Incremental 5.0 Development B5. MarinePark Baseline 1.7 See DB Baseline2 support With GEFAlt. 4.2 See GEFAlt 2 See GB 2 Incremental 2.5 C. PublicAwareness, Baseline 13.0 116 Education and Sea With GEF Alt. 13.0 Partnership Incremental 0 Total Baseline 66.8 Total GEF Alt. 74.3 Total Incremental: 7.5 DB Baseline 1: Activities to support community empowerment, community-based resource management and community development in6 districts to enable better livelihoods and better coral reef conservation; GEF Alt 1: Support for ensuring collaborative management approach is adopted and mainstreamed outside of national marine parks; Additional SET0 and Facilitator funding to boost awareness and enhance socialization process; Support for village coral reef information centers to increase the support for coral reef management and no-take zones; Improved collaborative enforcement in all sites to increase the effectiveness of no-take zones; Additional support for cyanide detection mini-labs to increase the effectiveness o f managing the live food fish trade and aquarium fisheries; Enhanced legal expenses (e.g. support for community law drafting); Global Benefit 1: Protection and collaborative management o f exceptional globally significant biodiversity inall sites; DB Baseline 2: Enhanced national, provincial, and district level government (and NGO) institutional responsivenessto meet the needs o f coastal communities andto support collaborativemanagement GEF Alt 2: Improvedmanagementoftwo marine parks (Taka Bone Rate inSouth Sulawesi and Wakatobi in Southeast Sulawesi) and four marine tourism parks (Kapoposang Protection Area in South Sulawesi, Raja Ampat in Papua, Padaido Islands in Papua, Marine Park in Sikka, NTT) thereby improving the livelihoods o f poor local communities in these parks and buffer zones; Additional technical support for marine parks to enact collaborative management; Additional money for training and workshops on marine conservation, biodiversity, sustainable reef fisheries, etc. Global Benefit2: Protection o f exceptional globally significant biodiversity in2 national marineparks and at least 4 KSDAs;Pilot demonstrations, replicable elsewhere in Indonesia and SoutheastAsia; 117 TECHNICAL ANNEX 10: SAFEGUARD POLICY ISSUES INDONESIA: Coral Reef Rehabilitation & Management Project (Phase 11) COREMAP Phase I1is a program in which the specific safeguardapplicable activities to be financed cannot be known at the time o f Appraisal. Their impacts, therefore, cannot be fully analyzed during project preparation. In such cases, the Bank requires a framework document that sets out the policies and procedures to be followed during program implementation to insure safeguards compliance. An Environment and Social Impact Management Framework (ESIMF) has been prepared by GO1 and is included as an Annex to the Government's national Program Implementation Pl9n (national PIP). This framework has been reviewed and found generally acceptable for COREMAP Phase I1by the Bank task team. It is envisaged that this framework can be utilized as the main vehicle for communicating the safeguards requirements ofthe program. The ESIMF is the roadmap for review of program activities as well as screening procedures to insure application o f sound environmental practices. Formally, overall environmental oversight o f the program i s legally to be undertaken by the State Ministry for Environment. However, in actuality, practical management o f Safeguards compliance will be the responsibility o f each District Program Management Unit(PMU), with oversight from theNationalCoordinationUnit(NCU) inJakarta. TheNCUwill insure that the ESIMF is applied by each District PMU and other institutions undertaking investments at the village level (e.g., village government, communities, BMTs). Subprojects at all levels will only be approved after confirmation is made that the subproject is incompliance with the ESIMF. Inaddition, the independent monitoring and evaluation contractor supported by the program will review safeguards compliance and report findings to the Bank and the NCU. The ESIMF provides detailed informationon the followingtopics: Proceduresto be followed for the environmental assessment process; Institutional responsibilities for undertaking environmental assessments; Indicative list o f subprojects likely to be financed (Le., positive list); Potential adverse environmental impacts o f indicative subprojects; Possible mitigation measuresfor adverse environmental impacts of indicative subprojects; Types subprojects ineligible for support underthe program(Le., negative list); Provision o f an environmental assessmentframework to guide program implementation; Explanation o f Bank subproject categorization, terminology and methodology; Detailed information o f specialized Bank safeguardpolicies inregardto: (i)naturalhabitats; (ii)forestry; (iii)pestmanagement; (iv) cultural property; (v) indigenous peoples; (vi) involuntary resettlement; (vii) dams; (viii) internationalwaters; (ix) disputed areas; and (x) social considerations; Methods to incorporate environmental assessments into subproject design; Recommended monitoring and evaluation program; and Draft environmental assessment check list for subproject evaluation. COREMAPPhase I1 has been classified in Safeguards Category S2 and Environmental Assessment Category B. A few safeguard policies are triggered, but effects are limited in their impact and are technically and institutionally manageable. Some environmental analysis may be needed. However, a full environmental assessment is not required. Apart from Operational Policy (OP) 4.0 1 on Environmental Assessment, the Program triggers the following safeguard policies: Natural Habitats (OP 4.04); and Indigenous Peoples (OD 4.20). The justification for the application o f these policies and remediation is summarized below, andwere further reviewed at a Safeguards Review Meeting on October 28,2003. Environmental Assessment. Some o f the small-scale infrastructure and alternative income generating (AIG) subprojects that could be financed have the potential to cause adverse impacts, albeit limited in 118 extent and significance. The safeguards screening process will be applied insuring avoidance o f any major adverse environmental impacts. The screening process excludes large scale subprojects, which in any case exceed village funding capacity. Consequently, subprojects are not expected to have any major significant, complex or irreversible adverse environmental impacts. Also no works will be undertaken that could affect protected or vulnerable natural habitats. Natural Habitats. Bank policy prohibits conversion o f valuable natural habitat except under very unusual circumstances. The program seeks to protect coral reefs and associated ecosystems, which are currently underthreat from destructive practices. Thus, the entire program is designedto strengthen natural habitat management basedon sustainablecommunity management. Indigenous Peoples. Isolated vulnerable peoples, such as migratory Bajo fishers, are known to be in the program area. The program designtakes their cultural uniqueness, local languages and needs for access to resources into consideration. In fact, the program has already engaged the Bajo people in Buton District in a meaningful way. They have beenincluded inprogram formulation and their unique educational and livelihoodneeds are addressedthrough programactivities. As mentioned previously, mechanisms to monitor safeguards are included within the program design. The PMU will be responsible for supervising the implementation and monitoring o f the safeguards framework. The Senior Extension Training Officers (SETOs), Community Facilitators (CFs) and Village Motivators (VMs), who report through to the PMU, will instruct communities on the use of the Safeguards Framework and then monitor the implementation o f community proposals. These facilitators will ensure that communities follow appropriate guidelines. Progress reports, provided to both the Bank and the NCU, will include a review of any potential environmental and social issues and mitigation measures taken or recommended. The NCU will review the reports. If deficient, it will provide appropriate recommendations to PMU, which will pass on instructions to the facilitators. While there is no requirement for consultation with stakeholders on frameworks for Category B projects, extensive consultation has taken place because COREMAP Phase 11's success, including safeguards compliance, depends so much on bottom-up planning and ownership at the district and community levels. The ESIMF has been reviewed by each District PMU and was formally endorsed by each participating District's Legislative Assembly (DPR) inDecember 2003. Environmental Impacts of ExternalProjects Most commonly discussion o f environmental impacts focuses on managing a project's potential impacts on the social and natural environment. O f perhaps greater concern for COREMAP Phase I1 is the possibility that public or private sector developments undertaken in the vicinity o f COREMAP sites could have negative impacts that would detract from, or completely offset, improvements in coral reef management and conservation. Mining operations, refineries and major port facilities are examples o f such developments. Under COREMAP Phase I,provisions were included in the legal documents and the Project Appraisal Document (PAD) to afford enhancedprotection for the program sites. Similar measuresadjusted to be: (i) consistent with the decentralization o f the authority for environmental assessment, investment project approval, and impact management; and (ii)more strongly worded are recommended for inclusion under COREMAPPhase I1 GO1regulations require that any proposed investment activity adjoining a coral reef area, or changing its characteristics, regardless o f its scale, be subject to a full environmental assessment (ANDAL). To strengthenthis requirement, the following procedures are recommended as a covenant in COREMAP Phase I1loan and grant documents: (i) GO1willnotifyallagenciesattheprogramsitesoftheANDALrequirement; (ii) BAPPENASwillreceivecopiesof ANDAL terms o f reference and reports for review by the NCU and the Bank; (iii) Localofficials, representativesofcivilsocietyandNGOswillbeinvitedtoANDALreviews; 119 (iv) NCU will insure that ANDALs cover any possible impacts on program sites and that appropriate quantitative techniques are used; and (v) any development project for which an ANDAL indicates adverse impacts on a Program site, which cannot be effectively mitigated, will be denied; and Bank and NCU approval will be required for ANDAL approval. INDIGENOUS PEOPLES COREMAP Phase I1 Focus on Coastal Indigenous Peoples. The World Bank's operational policies (O.D. 4.20) are designed to ensure that indigenous peoples benefit from development projects, and the second phase o f the COREMAP program is aimed squarely at empowering coastal indigenous peoples of Indonesia to more sustainably manage their coral reef ecosystems and fisheries. According to World Bank policy, indigenous peoples (or indigenous ethnic minorities) are defined as social groups with a social and cultural identity distinct from the dominant society that makes them vulnerable to being disadvantaged in the development process. Because indigenous ethnic minorities (Indonesian Bajo communities) meetingthis definition are intendedto be direct beneficiaries o f the second phase program, the provisions ofthe Bank's operational policy (OD 4.20) apply to COREMAP PhaseI1inits entirety. Since the provisions o f the World Bank's indigenous peoples policy apply to COREMAP Phase I1in its entirety, the preparation process has closely followed the policy's strategy that issues pertaining to indigenous peoples must be addressed based on informed participation o f the indigenous people themselves. The preparation process for COREMAP I1 centered around a series of participatory stakeholder consultations throughout the six districts where Phase I1 will be implemented, in order to ensure participation o f indigenous peoples in the design. Furthermore, a detailed social assessment o f indigenous ethnic minorities in Phase I1 districts (entitled Developing Ethnic Specific Strategies for Marine Conservation and Coastal Resource Management: Assessing Local Capacity in Relation to the Bajo Peoples o fButon, Southeast Sulawesi) was conducted duringthis preparation process. According to this and other social assessments conducted during the preparation o f COREMAP Phase 11, the sea-dwelling Bajo peoples are an indigenous ethnic minority living in self-contained and often geographically isolated coastal communities in each o f the 6 Phase I1 districts and throughout much o f eastern Indonesia. For example, in the Phase I1district o f Buton, land dwelling communities are almost exclusively peoples o f Butonese origin, whereas the Bajo peoples in this district are migratory and landless, tending to buildtheir villages on shallow intertidal marine flats located away from the Butonese populations. These Bajo communities are characterized by their dependence upon coral reef ecosystem resources as well as the destructive fishing practices they often use, and the subsequent reef degradation, declining fish returns and subsequent downward spiral o f poverty. Thus, these indigenous ethnic minorities in coastal areas o f Indonesia, the Bajo, are both the most dependent upon coral reef ecosystems and the greatest threats to reefs. For this reason, the Bajo peoples are also the greatest hope for realizing the objectives o f the secondphase of COREMAP, because they have the greatest stake in sustainably managing the coral reef ecosystems and can most directly reduce many o f the threats these systems face. The second phase o f COREMAP will target activities directly to the Bajo peoples in Phase I1 districts, based on Bajo Action Plans developed for each district, such as the one developed for the District o f Buton during preparation. Buton District: An Example of COREMAP 11's Focus on Indigenous Peoples. According to the Bajo Action Plan for Buton (one o f the six districts where the Phase I1 program will be implemented), in the Wakatobi National Marine Park there are a total o f five Bajo communities, all o f which vary tremendously in ways such as size, level o f political representation, economic well being and fishing practices. Despite these differences, the Bajo peoples o f Wakatobi also share a common history and each of the communities are linked both by close familial ties and frequent travel and trade that is known to take place. The table below gives a more detailed summary o f some o f the characteristics o f the Bajo communities inthe Wakatobi National Marine Park inButon: 120 Bajo Community # Households Population GeneralCharacteristics Mola Approx. 1,000 Est. 6,000 Diverse array o f fishing practices, with fishers traveling widely throughout easternIndonesia. Large component o f the populationremains highly dependent on reefs, despite collapse o fmany commercial reefspecies and significant decline o f fishstocks inwaters immediately surrounding the villages. Mantigola Approx. 200 Est. 800 1" Bajo settlement inthe areaand still a spiritual base for Bajo peoples in Wakatobi. Fishing still undertaken using traditional boats where families may go on fishingtrips to outer reefs for months at a time. Sampela Approx. 300 Est. 1,000 Community is mostly dependent on reef resources found locally. Localized overfishing i s a problem, although fishers will also make seasonaltrips to the outer reefs. Destructive fishing practices are a problem for the community. Lohoa Approx. 30 Est. 100 Regarded as an off-shoot of Sampela, with frequent movements betweenthe two communities. There are several fishers operating from Lohoa using destructive practices such as bomb fishing. Approx. 30 Est. 100 More than any other Bajo community in ~ Lamangau the Wakatobi National Marine Park, this Bajo village has sought to integrate itself with the local non-Bajo population, with whom they live in close association. Phase I1Activities to Target IndigenousPeoples.Inthe district ofButon, as well as other districts such as Sikka-NTT where the secondphase of COREMAP will operate, the program will target many activities specifically to the Bajo peoples and communities. These include: 0 Establishing a Bajo Management Team of local Bajo experts to help ensure that program activities inBajo communities are culturally appropriate (at least one member o f this team would likely participate on the district-level Coastal Community Empowerment Board); 0 Employ Bajo people as Community Facilitatorsto Bajo communities ifpossible; and 0 Support a team o f respectedelders and individuals within each Bajo community to work with the Community Facilitatorsto implement the objectives of the program inthe that community. SPECIAL GUIDELINES FORLANDAND ASSET DONATIONS Objectives. The project will not finance any activitiesthat could involuntarily displace people. 1. Landor other assets may be donatedthrough: (a) Voluntary contributions. Inaccordancewith traditional practices, villagers may elect to voluntarily contribute land or assets andor relocate temporarily or permanently from their land without compensation; and (a) Contributions against compensation. A contributor considered "affected" will be eligible for compensation from the village, basedontheir agreement. 121 These guidelines provide principles and instructions to compensate affected persons under 1b above, to ensure that all such persons affected, regardless o f their land tenure status, will be assistedto improve, or at least to restore, their living standards, income earningor production capacity to pre-project levels. 2. CompensationPrinciples The LKMDBPD shall ensurethat any o fthe following means o f compensation are provided inatimely way to affected persons (the village grant cannot be usedto pay compensation): (a) replacement land with an equally productiveplot or other equivalent productive assets; (b) materials and assistance to replacefully solid structures that will be demolished; (c) replacement of damaged or lost crops, at market value; (d) other acceptable in-kind compensation. Summary Amount of Compensation Agreement Reached Land (m') Plots: area affected (m2) houses or other structures to be demolished (units,m2) Treedcrops affected Other affected assets: list Other assets: A record of any complaints raised by affected persons must be kept and a map of the disputed area (showing affected areas and replacement areas). The Community Facilitator (CF) shall provide a copy o f the Minutes to affected persons and confirm in discussions with each of them their requests and preferences for compensation, agreements reached, and any eventual complaint. Copies will be recorded and submittedto the DistrictPMU via the SETOs and be available for review at supervision. 6. Complaintsand Grievances All complaints should first be negotiated to reach an agreement at the village level. If this fails, complaints and grievances about these Guidelines, implementation o f the agreements recorded in the Village Minutes or any alleged irregularity in carrying out the project can also be addressed by the affected persons or their representative at the kecamatan level. If this also fails, the complaint may be submitted to the Bupati for a decision. 7. Verification The Village Minutes and evidence ofcompensation having beenmade shall be provided to the SET0 and to the DPMU assistingthe village, supervising engineers, auditors and socio-economic monitors when they undertake reviews under the project. 122 Technical Annex 11: Project Processing INDONESIA:Coral ReefRehabilitation& Management Project(Phase 11) 1. Timetable 2. Key Institutions& Project Grants The key institutions involved inpreparing this program include: Ministryof MarineAffairs and Fisheries, Indonesian Institute o f Sciences, Ministry o f Forestry, Police and Navy and 6 District Government preparation teams. A Japan PHRD grant for US$740,000 (TF026662) was received and used for project preparation by the recipient to contract consulting services for the following preparation o f COREMAP Phase I1activities: (a) definition o f the project's expected inputs, outputs, and key performance indicators; (b) design o f a institutional strengthening component, (c) design o f a community based and collaborative management subcomponent, (c) design o f a public awareness, education and extension subcomponent, (d) design od 6 district programs; (e) carrying out social and environmental assessments and multiple stakeholder workshops; (f) support for project management, including training for procurement, financial management, and (g) preparation of a Project ImplementationPlan. The grant was successfully executed by the Project Implementing Agency. All planned outputs were completed and consultant performance was satisfactory, with significant transfer o f technical knowledge to the client. Both the client and stakeholders benefited from training programs and consultative workshops carried out by consultants, as well as gaining experience in program management and administration, the establishment of separate project financial management systems, and international procurement. The Grant was approved for an extension from October 31,2003 to December 31,2003.The mainpurpose o f the extension was to allow use o f these funds to assist inthe final stages o f preparation for COREMAP Phase I1and particularly those aspects to support KMK 35, namely the finalization o f District Program Plans endorsedby the Bupati and to be approved by the DPRD in each o fthe six participating districts. 123 3. Bank Staff & Consultants STAFF NAME POSITION UNIT PawanPatil TaskTeam Leader EASRD Thomas Walton Safeguards EASES JohnVirdin Co-Management ARD KathyMacKinnon Biodiversity ENV KarinNordlander Lawyer LEGEA Anthony Toft Lawyer LEGEA GiovannaDore NRMInstitutions EASES RobinBroadfield EAPGEF FocalPoint EASES Rajiv Sondhi FinancialManagement EACIF RizalRivai Procurement EACIF WilliamHardi Procurement EACIF YoganaPrasta Disbursement EACIF Kasper Svarrer Governance EASRD Steve Burgess Governance EACIF ShobhaShetty Economist EACIF Cecilia Belita ProgramAssistant EASRD CynthiaDharmajaya ProgramAssistant EASRD Sri Asih Wohon Team Assistant EACIF KarenA. Jones ProgramAssistant LEGEA RahulRaturi SectorManager EASRD MariaHatziolos Peer Reviewer ENV WilliamLane Peer Reviewer AFTS2 No. Position Name PHRD Consultant Team 1, PreparationSpecialist Mr. CharlesGreenwald 2. CBMExpert Mr.WilliamMarsden 3. Economist Dr.HermanCesar 4. FisheriesIMPA Management Mr. RichardMounsey 5. MarineParkManagement Dr.Arthur Mitchell 6. Social MarketingIAwareness Ms.ItaMucharam 7. HumanResources/Training Ms.MelodyKemp 8. CRITC Mr. BrianLongMr. MohammadIlyas 9. AIG Specialist Dr.NasruddinBudiman I O . MCS Expert Mr.NursamranSubandi 11. InstitutionalExpert Dr.Abdul Ghofar 12. LegalExpert Dr. RoniTitaheluw 13. FinancialAnalyst/Costing Dr. HamdaniSyah 14. Monitoring& Evaluation Dr. ZhibinLin 15. ExtensionSDecialist Dr. SoemitroArintadisastra 124 Technical Annex 12: Documentsinthe ProjectFile INDONESIA: Coral Reef Rehabilitation & Management Project (Phase 11) ADB COREMAPPhase IConsultant's Draft Final Report, March 1999-October 2002. AMSAT, Jakarta, 2002. A CollaborativeTest ofLocally-ManagedMarine Areas as a Biodiversity Conservation and Fisheries Management Tool inthe Indo-Pacific Region. The World ResourceInstitute and Foundations o f Success, January 2001. Aide Memoire's COREMAPPhase I,Supervision Mission. The World Bank, 1998-2003. Annual Training Plan 2003 and 2002 Training Effectiveness. IndonesiaCoral ReefRehabilitation and Management Project -Capability Buildingand Training Sub Project. ACIL Australia Pty Ltdin association with AMSAT Pty Ltd, AusAID, Jakarta, 2003. A RapidMarine Survey ofthe NorthernRajaAmpat Islands. M.V Erdmann andPet-Jos S, Henry FoundatiodTheNature Conservancy/NRM/EPIQ. June 2002. Best Practice Guidance for the Core Handling, Husbandry, andTransport International Performance Standardfor the Marine Aquarium Trade, Marine Aquarium Council, July 2001. Biak Numfor dalam Angka. Kerjasama BP3D Kabupaten Biak Numfor denganBPS Kabupaten Biak Numfor, Biak, 2001. BukuPanduanPengelolaanBerbasisMasyarakat (PBM) COREMAP.LIPI, Jakarta, 2001. BukuTahunan Statistik Perikanan Budidaya. Dinas Kelautandan Perikanan,Propinsi Sulawesi Tenggara, December 2002. COREMAPBME Report 1: Designo f Coremap BenefitMonitoringand EvaluationSystem. AMSAT Ltd., Jakarta, August, 2001 COREMAP BME Report 2: Survey DesignOptimization for MonitoringReefHealth. AMSAT Ltd., Jakarta, September, 2001 COREMAPBMEReport 3: FieldManual on Coral ReefHealthMonitoring, AMSAT Ltd., Jakarta, September, 2001 COREMAP BMEReport 5: FieldManual on Community-based Fisheries Monitoring, AMSAT Ltd., Jakarta, February, 2001 COREMAPPhase I1Preparation Project Design Report, Volume I.AMSAT Ltd., Jakarta, May 2002. COREMAP Phase I1Preparation BackgroundPapersProject DesignStudies, Volume 11.AMSAT Ltd, Jakarta, May 2002. COREMAP I1Taka Bonerate MCS Manual. COREMAP, February 2003. COREMAPI1Padaido Islands, Biak, West PapuaMCS Manual. COREMAP, February 2003. COREMAP I1RajaAmpat, West Papua, MCS Manual. COREMAP, February 2003. COREMAP I1Orientation and Reef Watch Training Manual. COREMAP, February 2003. COREMAP I1MCS Manual. COREMAP,February 2003. Core Ecosystem and Fishery Management InternationalPerformance Standard for the Marine Aquarium Trade. Marine Aquarium Council, July 2001. Draft Final Report COREMAPPhase I,February 1999- October 2002. Acil Pty. Ltd, Jakarta, 2002 Draft PedomanUmumProyekRehabilitasi dan Pengelolaan Terumbu KarangiCoREMAP Fase 11, Departemen Kelautandan Perikanan, edisi Agustus 2003. Data Dasar Aspek Sosial TerumbuKarang Indonesia. Studi Kasus :KampungBoni, DistrikWaigeo Utara, Kabupaten Sorong, Propinsi Papua. Pusat Penelitian Kependudukan -LIPI, 2002. Data Dasar Aspek Sosial TerumbuKarang Indonesia. Studi Kasus: DesaMola Utara, KecamatanWangi-wangi, Kabupaten Buton, Propinsi Sulawesi Tenggara. Pusat Penelitian Kependudukan-LIPI, 2002. Desa Action Plan Koja Doi. AusAID, Maumere, 2003. Destructive fishing practices in South Sulawesi Island, East Indonesia and the role o f aquaculture as a potential alternative livelihood: a case study for the APEC sub-project "Improving coastal livelihoods through sustainable aquaculture practices". Matthew R.P. Briggs, STREAM. Fundamentals of a Sea Grant ExtensionProgram. Baird, C. Ronald, National Sea Grant College Program, 2002 125 Guidelines COREMAP I1Design. DesignTeam incooperation with DKP, LIP1and BAPPENAS, Jakarta, September 2002. Kabupaten Buton dalam Angka 2001. Badan Pusat Statistik Kabupaten Buton, Buton, 2001 Kabupaten Pangkep dalam Angka Tahun 2001. Kerjasama BAPPEDA dengan BPS Kabupaten Pangkajene dan Kepulauan, Pangkep, 2001 Kabupaten Sorong dalam Angka. Kerjasama Kabupaten Sorong denganBadan Pusat Statistik Kabupaten Sorong, 2000. Kabupaten Selayar dalam Angka. Kerjasama Bainstada dan BPS Kabupaten Selayar, 2001. Kabupaten Sikka dalam Angkat. Kabupaten Sikka, 2001. Kecamatan Kaledupa dalam Angka 2001. BPS Kecamatan Kaledupa, Buton, 2001. Kecamatan Binongko dalam Angka 2001. BPS Kecamatan Binongko, Buton, 2001. Laporan UmumHasil Penelitian marine RAP di Kepulauan Raja Ampat, Sorong, IrianJaya. Muh.Farid and SaSuryadi, Conservation International Indonesia Program IrianJaya, Jayapura, 2001. Laporan Registrasi Nelayan Kabupaten Sikka. Dinas Perikanan Kabupaten Sikka, Maumere, 2000. Laporan Hasil PengamatanLapangan dan PengawasanWilayah Laut dan Pesisir Propinsi Sulawesi Tenggara. Proyke Koordinasi PenunjanganCoremap dan Maremap Tahun Anggaran 2002, BAPPEDA Sulawesi Tenggara, Kendari, Desember2000. LaporanTahunan PembangunanKelautan dan Perikanan Tahun Anggaran 2000. Dinas Kelautandan Perikanan, Sulawesi Tenggara, Kendari, 2001. LaporanAkhir InstitutionalFramework and Institutional Arrangement for COREMAP.PKSPL-IPB, Bogor, M e i 2003. Laporan Tahunan 2001. Dinas Kelautan dan Perikanan Kabupaten Pangkajene dan Kepulauan, 2001. LaporanTahunan UnitTaman Nasional Taka Bonerate Tahun Dinas 2001. DepartemenKehutanan, Benteng, Desember 2001. Laporan Akhir PelaksanaanKegiatan Proyek PengembanganEkonomi Masyarakat Pesisir di Kabupaten Butontahun 2001. Konsultan ManajemenPusat Studi PengembanganSumberdaya Perikanan, Fakultas Perikanan Universitas Dayanu Ikhsanuddin, Bau-bau. LaporanExpedisiNapoleon Idi Kawasan Pulau Sagori -Kabaena Kabupaten Buton - Sulawesi Tenggara. Kerjasama Longkoe Diving Club-Perikanan Unhaludengan BAPPEDA Propinsi Sulawesi Tenggara, 2001. Laporan KegiatanHari Bhakti Departemen KehutananXX dan HariBumidi Kecamatan Tomia Kabupaten Buton Propinsi Sulawesi Tenggara. Departemen Kehutanan, Balai Taman Nasional Kepulauan Wakatobi, April 2003. Learning Framework for the Locally-Managed Marine Area (LMMA)Network. A Foundations o f Success LearningPortfolio, September 2002. Manual -CRITC. Coral ReefInformation andTraining Center (CRITC). PusatPelatihan danInformasi TerumbuKarang (PPITK), 2001. MCS CHAPTER, COREMAP I1ImplementationManual. COREMAP, February 2003. Mid-TermEvaluation Report, 1998-2000. Coral ReefRehabilitation & Management Program Phase I: Independent Report to the COREMAPProgram Management Office. Peter Hunnam, Jakarta, November 2000. Metadata -CRITC. Coral Reef Information and Training Center (CRITC). Pusat Pelatihan dan Informasi Terumbu Karang (PPITK), 2001 North Sulawesi: A Natural History Guide.Margaret F Kinnaird, Wallacea Development Institute. Project Appraisal Document on a Proposed Loan inthe Amount o f US$6.9 Millionand a Grant from the Global Environment Facility Trust Fundinthe amount o f SDR 3.1 Million(US$4.1 Million Equivalent) to the Republic of Indonesia for a Coral ReefRehabilitationand Management Project inSupport ofthe FirstPhaseofthe Coral ReefRehabilitation and Management Program. Rural Development and Natural Resources Sector Unit.Indonesia Country Management Unit.East Asia and Pacific Region, The World Bank, March, 1998 Project Appraisal Document on a Proposed Loadcredit inthe amount o fUS$70 Million Equivalent to the Republic o f Indonesia for the Water Resources and Irr.Sector Management Program inSupport o fthe FirstPhase o f the Water Resourcesand Irrigation Sector Program. Rural Development and Natural Resources Sector Unit.EastAsia & Pacific Region, The World Bank, 2003 126 PenilaianEkosistemKepulauan Spermonde, Kabupaten Pangkep, Propinsi Sulawesi Selatan. Pusat Studi Terumbu Karang, Universitas Hasanuddin, Januari 2002. Pedoman Teknis PelaksanaanProyekPengelolaan SumberdayaPesisir dan Laut, MCRMP 1770-IN0 (SE). Ditjen Pesisir dan Pulau-pulauKecil, DKP, Jakarta, Maret 2002. Pedoman UmumPelaksanaanProyekPengelolaan SumberdayaPesisir danLaut, MCRMP 1770-IN0 (SE). Ditjen Pesisir dan Pulau-pulauKecil, DKP, Jakarta, Maret 2002. Profile o f DestructiveFishing in Spermonde Islands 2003. Destructive Fishing Watch Indonesia and COREMAP, 2003. Proposed Communication Strategy 2002-2003. John Hopkins University, Center for Communication Programs, Indonesia Country Office, Proyek Pesisir, March 2002. Profil Kabupaten Biak Numfor. Pemerintah Daerah Kabupaten Biak Numfor, Propinsi IrianJaya, 2001. Pengelolaan Wilayah Pesisir dan Pulau-pulau Kecil secaraTerpadu. Modul Pelatihan bagi Perencanadan Pengambil Keputusan. Ir.Darmawa, MA, Jurusan PemanfaatanSumberdayaPerikanan, Fakultas Perikanan dan IlmuKelautan, IPB, Bogor, 2002. PerencanaanStrategik PembangunanKelautandan Perikanan KabupatenPangkajenedan Kepulauan tahun 2002-2004. Pemerintah Kabupaten Pangkajenedan Kepulauan, Dinas Kelautan dan Perikanan. Petunjuk Teknis PengawasanPenangkapandan PengangkutanIkan di Propinsi Sulawesi Tenggara. Dinas Kelautan dan Perikanan, Propinsi Sulawesi Tenggara, Kendari, 2002. Ringkasan EksekutifInstitutional Framework and Institutional Arrangement for COREMAP. PKSPL-IPB, Bogor, Mei 2003. Rencana Strategis Pengelolaan Sumberdaya Wilayah Pesisir dan Laut Sulawesi Tenggara 2002 -2006. Pemerintah Propinsi Sulawesi Tenggara, Agustus 2002. RencanaPengelolaan Taman NasionalTaka Bonerate (1992 -2022). Proyek PengembanganTaman Nasional Laut Taka Bonerate, Departemen Kehutanan, UjungPandang, Mei 1997. Rencana Kegiatan Balai Taman Nasional Wakatobi Tahun Dinas 2003. DepartemenKehutanan, Bau-bau, November 2002. Rencana Strategis Balai Taman Nasional Wakatobi tahun 2003-2007. Departemen Kehutanan, Bau-bau, September 2002. Rencana Strategi Tahun 2002 -2006 Dinas Pariwisata Kabupaten Selayar. Dinas Pariwisata, Kab. Selayar . Rencana Strategik PembangunanPerikanan dan Kelautan Kabupaten Selayartahun 2001-2005. Dinas Perikanan dan Kelautan, Kabupaten Selayar, 2001. Rencana Strategis Dinas Kelautan dan Perikanan Kabupaten Sikka 2001 -2005. Dinas Kelautan dan Perikanan, Kab. Sikka, Maumere, 2001. RencanaStrategis Pengelolaan SumberdayaWilayah Pesisir dan Laut Sulawesi Tenggara 2002 - 2006. Pemerintah Propinsi Sulawesi Tenggara, Agustus 2002. Rencana Strategik Kabupaten Selayar tahun 2002 - 2006. Bappelitbangda Kabupaten Selayar. RencanaKarya Lima Tahun Pengelolaan Taman Nasional KepulauanWakatobi tahun 2000-2004. Proyek PengembanganPengelolaanKawasan Konservasi Perairan di Taman Laut Wakatobi Ta. 199912000, Departemen Kehutanan, Bau-bau, Maret 2000. Second Water Supply and Sanitation for Low Income Communities Project (WSSLIC-2). GO1WSSLIC-2 Project Preparation Consultant Team, March 3 1,2002. Socioeconomic Assessment in Spermondeand Sembilan Island, Soudh Sulawesi, Book 2. Sembilan Islands. Working Group COREMAPSouth Sulawesi, Makassar, 2002. Southeast Sulawesi, Islando f Surprises. Judyth Gregory-Smith, Department o f Tourism, Art and Culture, Southeast Sulawesi. Studi Inventarisasi Potensi Sumberdaya Perikanan dan Kelautan KecamatanKepulauanKabupaten Selayar. Pemerintah Kabupaten Selayar dan Dinas Perikanan dan Kelautan, Desember 2002. The FisheryEffects ofMarine Reservesand Fishery Closures. FionaR. Gel1and CallumM.Roberts, WWF, Washington, DC. The Coral ReefRehabilitationand Management Program. PhaseIEvaluation Report. IUCN-The World Conservation Union, June 2002. 127 Technical Annex 13: Statement of Loans and Credits INDONESIA: Coral Reef Rehabilitation & Management Project (Phase 11) and actual OriginalAmount in US$ Miliions disbursements' Prqect ID FY Purpose IRRD IDA GEF Cancai Undisb Orig FrmRev'd Po59031 x O 3 ID-Walr Re6curces & lrr S e " Ugl Prcg 45 00 25 00 000 003 7009 000 000 PDj3913 x 0 3 IDJma BallPar Seclor (L Slrenglh 141GO 0.00 0.00 0.03 141.00 0.00 0.00 POT3772 2033 IDHralh Workforce 8 Serno6s(PHP%, 31 10 74.50 0.00 0.03 110.73 4.31 0.00 PO73156 2033 IDThird Kecamalan Uwslqment Proled 206 30 45.50 0.00 0.m zdrJ.38 0.04 0.00 PO76271 2033 IWPITA 17 10 0.00 0.00 0.03 16.01 1.Ql 0.00 Po40578 xO2 IDEaslern lncbmso RegwnTranhprl 200 00 0.00 0.00 0.03 84.25 -0.76 0.00 PO72852 xO2 ID-URMN POYERTV II 29 50 70.50 0 00 0.m 91.51 3.66 0.00 POP3370 xO2 ID GLOML OEV LEARNING(LIL) 2 66 0.00 0.00 0.03 2.13 1.16 0.00 PW5298 to31 ID'NJAVA EN'v%lTUGMT 1170 5.75 0.00 0.03 15.61 8.97 0.00 Pod9530 2031 1D.PROMNCRL HEALTH I1 63 20 40.00 0.00 0.63 103.61 57.34 0.00 PO73025 to31 IDSECONDKECM4TAN DEtELOPMENT PROJ 208 90 111.30 0.00 0.03 22316 -111.54 0.00 p-0 a331 II)-LIRRARY DEVELOPMENTPROJECT -LIL 0 GO 1.16 0.00 0.03 2.21 1.07 0.00 P W 5 1 2031 ID-GEFW JAVAENM IdChlT 0 00 0.00 2.56 0.03 2.69 5.83 0.00 Po59030 2030 IDDECHT AGRICULTURALFORESTRY EXT 1300 5.00 0.00 0.03 5.80 2.97 0.00 Po5Q477 2.330 IDbmsLICII 0 00 77.40 0.00 0.03 62.58 -212 8 0.00 Pods545 2030 IDPROVINCIAL HEALTHI 0 00 38.00 0.00 0.03 25.34 7.41 0.00 PCed1198 l M 9 IDWATSAL 300 00 0.00 0.00 0.m 150.00 15c1.00 150.00 P r A i a a 192g IDSUIAWESI EASICEDUC 47 90 15.93 0.00 o m 20.13 20.88 0.00 PCdO196 1939 IDSUM4TR4 BASICEDUCUATION 54 50 20.10 0.00 0.03 10.87 9.33 0.00 PO?XUS 1939 IDEARLY CHILODEVELOPMENT 21 50 0.00 0.00 10.65 2.78 13A4 13.44 Po55321 lCA9 ID.URBAN POVERTY 0 00 103.00 0.00 0.03 2045 20.03 19.94 P W 6 7 1480 IDFIFTH HEALTH PROJECT 44 70 0 00 0.00 5.01 10.85 15.M 0.00 P W 0 3 1m8 ID-SUMATRAREGL RDS 234 00 0.00 0.00 50.03 20.74 6519 -7.26 P O W " 19298 ID. CORAL REEF IdGbl REME 6 90 0.00 4.10 0.63 0.69 0.69 0.69 P0??56 W398 IhSAFE l4OTHERHMD 42 50 0.00 0.00 9.15 3.76 12.82 6.92 P C P W loY8 ID W JAVA R m l C EDUCATION 10350 0 00 0.00 3.76 1.79 4.05 0.00 Pod0361 1W8 ID BENGKULU REGIONALDEVELOPMENT 20 50 0.00 0.00 5.03 8.77 13.77 a n Pod0362 l W 8 ID. CORAL REEF#GMT R E M 0 00 0.00 4.10 0.03 0.53 0.42 1.91 Pop8715 1938 Indfflesle llDP . 34 50 0.00 0.00 8.50 2.32 10.82 2.32 p m e 7 19p7 IDCENTRALINDONESIASEC EDU 10400 0.00 0.00 0.03 11.37 11.37 0.00 P W 0 2 6 1917 IDRsihus, Efhency 10500 0.00 0.00 47.33 3.51 50.83 -5.56 P o m 4 7 19)7 ID-WLIURRANINFRA 11000 0.00 0.00 36.03 9.12 45.15 2.76 PM1894 1917 lD.SUlu14lRA SECONDARYEDUCATION 98 00 0 00 0.00 0.23 4.51 5.74 0.00 PaoSOSl 1-81 EEPEMALlDlT blGDERNIZATIONPROJECT 1640 0.00 0.00 1.17 212 4.19 3.29 P"97 la36 IDEJAVA SEC EDlJC 39 00 0.00 0.00 3.m 0.13 12.04 0.00 Tot4 241036 633.13 10.74 181.33 l4m.36 m . 3 9 187.11 128 Viyi-. -p_3r!ic 0.00 0.nn 0.00 0.00 0.m 23.71 0.00 0.53 0.00 0.M) 0.00 3.5'1 0.00 0.00 12.24 ?.OS 14.24 0.00 12.24 16.9.7 8.92 0.00 0.00 16.93 0.a1 c1.w ?1.00 0.00 5.00 O.0U 1.88 0.00 0.00 0.011 53.40 1.65 0.00 0.00 53.4'1 1'J.5c) 4.50 0.00 U.OO 19.50 2.09 O.m ?0.00 15.00 0.00 2 . w 0.00 2.61 0.00 0.i1o 0.OcI 5.25 2.50 0.00 0.(10 5.53 7.6.3 0.00 0.00 5.03 0.00 0.00 1.82 0.00 (HI0 0.011 0.00 5.00 rr.00 0.00 (].(HI 5.00 0.1)O I I . ~ o.on 0" 0.00 3.00 0.00 o.o(i 14.58 15.63 0.00 0.00 11.58 O.cII, o.nn c1.m 4 :4 n.OO 0.00 0.00 0.00 0.00 O.li0 7.85 12.41 (1.00 0.00 7.85 0.W 14.00 IJ.00 11.00 U.O(r 0.M 0.00 15.36 0.00 0.00 0.i.N 0.i)O t1.00 11.00 Kilil 2.fJI 2.01 rJ.00 0.00 2.01 0JJ.l IJ.00 U.32 0.00 0.l.lil 10.M) 5.35 0~00 0.00 1.62 0.w 0.00 b.08 0.00 0.00 0.00 n.00 2.20 0.00 0.(111 4.00 10.15 0.00 o m 4.00 O.[Xf 0.00 1.29 0.00 0.1)11 178.62 160.38 76.I)Y 14.53 172.27 129 Technical Annex 14: Country At A Glance INDONESIA: Coral Reef Rehabilitation & Management Project (Phase 11) East POVERTY and SOCIAL Asla & Low- Indonesia Paclflc income Developmentdiamond. 2002 Population,midyear (millions) 211.7 1,838 2,495 Life expectancy GNI per capita (Atlas method, US$) 710 950 430 GNI (Atlas method, US$billions) 149.9 1,740 1,072 Average annual growth, 1996-02 T Population (%) 1.3 1.o 1.9 Labor force (%I 2.2 1.2 2.3 GNI Gross per primary Most recent estimate (latest year available, 1996-02) capita nroilment Poverty (% ofpopulation belownationalpoverfyline) 16 Urban population (% of totalpopulation) 43 38 30 Life expectancyat birth (years) 67 69 59 1 Infantmortality (per 1,000live births) 34 33 81 Child malnutrition (% of chiidren under51 25 15 Access to improvedwater source Access to an improvedwater source (% ofpopulation) 78 78 76 Illiteracy(% ofpopulation age 75+) 12 13 37 Gross primaryenrollment (X of school-agepopulation) 110 106 95 =- lndonesla Male 111 105 103 Low-incomegroup Female 109 106 87 KEY ECONOMIC RATIOSand LONG-TERMTRENDS 1982 1992 2001 2002 1Economic ratios' GDP (US$ billions) 94.7 139.1 141.3 172.9 Gross domestic investment/GDP' 27.8 30.5 21.8 20.2 Exportsof goods and seNiceJGDP 25.3 27.9 42.3 35.4 Trade Gross domestic savingsiGDP 29.0 33.4 24.9 21.1 Gross national savingsiGDP 21.4 22.8 17.1 T Current account balance/GDP -5.6 -2.0 4.9 4.3 Domestic interest paymentsiGDP 1.6 2.7 3.2 1.8 savings investment Total debtlGDP 26.5 63.3 94.2 74.5 Total debt serviceiexports 18.1 32.6 25.9 23.7 Present value of debtlGDP 93.0 Presentvalue of debtlexports 235.5 indebtedness 1982-92 1992-02 2001 2002 2003-07 (averageannual growth) I - lndonesia GDP 6.9 2.5 3.4 3.7 3.9 GDP Der caoita . . 5.0 1.1 2.1 2.3 2.4 Low-income group ~ STRUCTURE of the ECONOMY I (% of GDP) Agriculture 23.9 18.7 17.0 17.5 2o industry 37.9 39.8 45.6 44.5 Manufacturing 11.9 22.0 25.0 25.0 -20 Services 38.2 41.7 37.5 38.1 4o Private consumption 59.5 57.8 67.3 70.7 -601 General governmentconsumption 11.5 8.0 7.8 8.2 Importsof goods and services -GDI -O-GDP 1982-92 1992-02 2001 2002 (averageannualgrowth) Agriculture 3.8 1.6 1.o 1.7 industry 9.2 3.2 3.3 3.7 Manufacturing 12.6 4.7 4.1 4.0 Services 6.5 2.3 4.6 4.4 Private consumption 4.4 5.2 4.4 4.7 General governmentconsumption 4.9 0.4 9.0 12.8 Gross domestic investment 9.6 -4.7 6.3 -12.5 Importsof goods and services 3.0 1.9 8.1 -8.3 130 PRICES and GOVERNMENT FINANCE 1982 1992 2001 2002 (9B) Doniosbcprices I ($6 dmqe) 80 Ccnsumer prices 7.6 115 119 00 lmpliclt GDPdeflator 6 1 5 4 108 7 2 '40 Governmentfinance 20 (ab af GDP itzivdes current w n l d 0 Current rawnue 207 189 g7 96 Ee M ai 0 Current budget balance 0 0 0 6 Owrall surplus/defict -2 8 -1 7 -GDP deRalor - r C C P I TRAUE (US3 "nsl Tokl @worts@ob) . 33,796 57,364 58,817 w,cm Fuel 10671 12648 12 139 Rubber 684 872 1,238 am Uanufaclurss 14.224 22,275 19 119 Total impsrts (cf) 27.280 M,68 35,805 F a d 1.274 2,497 2852 Fuelandenemy 2 104 5.523 6558 Capitalquads 11 700 9.050 8606 a Exportprim index (f995=1001 eB 97 B 99 m 01 m Impart vice index (?995=fixTI (DExports Import6 Terms oflrade (Ig05=ffXX BALANCEof PAYMENTS (US$mi#luns) Exportsof aocds and sewices 20.251 33.187 62.864 64,004 lmcats uf floods and S~ M C ~ S 22,716 3.874 50.54g 51,498 Resourcs balance -2,465 2.313 12,315 12,506 Netincome -2.a3 -5.664 -8,143 4.508 Netcurrant transfers 134 57 1 2,728 1.453 Current acmunt balance -3,324 -2.780 6.900 7,451 Financingitems(net) 3,471 4.850 -8.278 -3.430 Changes innet resews 1,&3 -2,070 1,378 1.021 Memo. Rewrvesincludingadd IUSS nM!msi .. 27,8@ 31,911 Cmwrsion rate ( O K lucabUS$J 661.4 2.029.9 10.260.9 8.311.2 EXTERNAL DEBT and RESOURCE FLOWS 1982 1992 2001 2002 - - _ _ 1 I (US3mr~i0ilS) compositionor 2002 debt (us$mlit 1 Total debtcuktandinq anddisbursed 25,133 e5,002 133.072 128,765 IBRD 1,735 10.640 11.435 10.729 k 10.729 IDA 7U3 814 722 7 w G: 21,128 u 7a1 Total debt service 3,856 12,457 14,445 13.893 IRRD 237 1.515 1.753 1,005 IDA 8 22 32 33 Ccmpositionof net resourceflwa Offinalgrants B2 298 0 0 Offiaalcreditors 1,067 3.097 GI5 -440 Pnrate creditors 1,401 2.655 4$1SQ -2.915 Foreiqndired investvent 225 1,777 -5,877 -7 066 POftfUllOeauitv 0 146 1.145 1,243 World Bank pogram Commitments 977 1.256 645 103 A-IBRD E .Bilateral Disbursements 583 1003 585 419 B-IDA D-Mhermulttlstaral F-Pnrste Pnnat?al repavmenk 82 692 853 1,065 C-IUF G Shat-tern - Notflown 0 1 311 -268 -646 Inkrest pwments 133 845 932 873 Net transfers xa -533 -1.200 -15 1 ~ 131