The World Bank 1818 H Street N.W. (202) 473-1000 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS CONFORMED COPY Letter No. CD-051/JRF/II/2011 February 21, 2011 Ms. Sabine Markert Country Director GIZ – Gesellschaft fuer Internationale Zusammenarbeit GIZ Office Jakarta Menara BCA, 46th floor Jl. MH Thamrin no.1 Jakarta 10310 H.E. Sri Sultan Hamengkubuwono X The Governor of Yogyakarta Special Province Komplek Kepatihan; Jl. Malioboro, Yogyakarta 55213 - Indonesia. Facsimile : 62 274 586884 H.E. Bibit Waluyo Governor of Central Java Province Jl. Pahlawan No. 9, Lt. 11/12 Semarang 50243- Indonesia Facsimile: 62 24 8318890 Dear Ms. Markert / H.E. Governor Hamengku Buwono X / Governor Waluyo: Re: Grant No. TF093853-IND Indonesia - Java Reconstruction Fund Yogyakarta and Central Java Earthquake: Livelihood Recovery Project Amendment to the Grant Agreement We refer to the Grant Agreement for the above-referenced Project (the “Project�) among the International Bank for Reconstruction and Development/International Development Association, acting as administrator of grant funds provided by the multi-donor Java Reconstruction Fund (collectively the “World Bank�), the GIZ – Gesellschaft fuer Internationale Zusammenarbeit, (the “Recipient�) and the Republic of Indonesia, represented by the Yogyakarta Special Region and the Central Java Province, dated February 23, 2009, (the “Grant Agreement�), which incorporated the Project Performance Indicators. It is known by all parties hereto that the Recipient, formerly called Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH has been renamed as Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH in January 2011. We also refer to the Recipient’s letter, dated September 28, 2010 requesting the World Bank to increase the available Grant funds to facilitate the implementation of the Project and amend certain relevant section of the Grant Agreement. We further refer to the letters from the Yogyakarta Special Region, dated July 29, 2010 and December 15, 2010 and the Central Java Province, dated September 7, 2010 and December 17, 2010 endorsing the Recipient’s request mentioned above. ISEB Tower 2, Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190 • Telephone (62-21) 5299 3000 • Facsimile: (62-21) 5299 3110 P.O. Box 1324/JKT, Jakarta 10013 • Telex: IBRDIA 60086 • Headquarters: The World Bank, Washington DC, USA 2 of 7 TF093853 February 21, 2011 The World Bank concurs with this request. Accordingly, the World Bank, the Recipient and the Republic of Indonesia, represented by the Yogyakarta Special Region and the Central Java Province, have agreed to amend the Grant Agreement and the Supplemental Letter as set out below. 1. Section 1.01 of the Grant Agreement is amended as follows to reflect the revised Standard Conditions: “1.01. The Standard Conditions for Grants Made by the World Bank out of Various Funds, dated July 31, 2010 (“Standard Conditions�) constitute an integral part of this Agreement. 2. Section 3.01 of the Grant Agreement is amended as follows to increase the available Grant funds by five hundred thousand United States Dollars (US$500,000): “3.01. The World Bank agrees to extend to the Recipient, on the terms and conditions set forth or referred to in this Agreement, a grant in an amount equal to eleven million two hundred fifty five thousand eight hundred United States Dollars ($11,255,800) (“Grant�) to assist in financing the Project.� 3. The following sub-paragraphs are added in Section I.A of Schedule 2 (Project Execution) to the Grant Agreement as follows: “3. The Recipient shall ensure that the Project is carried out in accordance with the provisions of the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants�, dated October 15, 2006 (“Anti-Corruption Guidelines�), with the modifications set forth in Section II of the Appendix to this Agreement, and the Anti-Corruption Action Plan. 4. (a) The Recipient shall take or cause to be taken all such measures as the World Bank may reasonably request to identify publicly the Donors’ support for the Project. (b) For the purposes of Section 2.09 of the Standard Conditions, the Recipient shall, upon the World Bank’s request, take all measures required on its part to enable the representatives of the Donors to visit any part of the Republic of Indonesia’s territory for purposes related to the Project.� 4. The Project Performance Indicators mentioned in paragraph 1 of Section II.A of Schedule 2 to the Grant Agreement are amended to read as set out in Annex 1 to this letter of amendment. 5. Paragraph A.1(a) of Section III of Schedule 2 to the Grant Agreement is amended as follows to reflect the revised Consultants and Procurement Guidelines: “(a) Section I of the “Guidelines for Procurement under IBRD Loans and IDA Credits� published by the World Bank in May 2004 and revised in October 2006 and May 2010 (“Procurement Guidelines�), in the case of goods, and Sections I and IV of the “Guidelines: Selection and Employment of Consultants by World Bank Borrowers� published by the World Bank in May 2004 and revised in October 2006 and May 2010 (“Consultant Guidelines�), in the case of consultants’ services; and� ISEB Tower 2, Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190 • Telephone (62-21) 5299 3000 • Facsimile: (62-21) 5299 3110 P.O. Box 1324/JKT, Jakarta 10013 • Telex: IBRDIA 60086 • Headquarters: The World Bank, Washington DC, USA 3 of 7 TF093853 February 21, 2011 6. Section IV of Schedule 2 to the Grant Agreement is amended by replacing the table in paragraph 2 of Section IV.A with the following table: Category Amount of the Grant Percentage of Allocated Expenditures to be (expressed in Dollars) Financed (inclusive of Taxes) (1) Credits 4,820,000 100% (2) Consultants’ Services and 2,702,800 100% Goods (3) Training and Workshops 1,102,300 100% (4) Operating Costs 100% (a) Staff costs 1,243,300 (b) Other 700,400 (5) Overheads 687,000 100% TOTAL AMOUNT 11,255,800 7. The following revisions are made in the Appendix to the Grant Agreement: (a) The definitions set out in the Appendix to the Grant Agreement hereby constitute Section I of the Appendix by changing the title of the Appendix from “Definitions to “Section I. Definitions�. (b) A new Section II is added to the Appendix to the Grant Agreement as set out in Annex II to this letter of amendment. 8. In addition to the forgoing amendment, all references throughout the Grant Agreement to “Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH shall be deemed to refer to the “Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH�. Except as specially amended hereby, all other provisions of the Grant Agreement remain in full force and effect. Please confirm the agreement, on behalf of the Recipient and the Republic of Indonesia, represented by the Yogyakarta Special Region and the Central Java Province to the amendments set forth in this letter of amendment, by signing and dating the form of confirmation set forth below, and returning one fully signed original of this letter of amendment to us. Upon receipt by the World Bank of one of the originals of this letter of amendment duly countersigned by the Recipient and the Republic of Indonesia, represented by the Yogyakarta Special Region and the Central Java Province ISEB Tower 2, Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190 • Telephone (62-21) 5299 3000 • Facsimile: (62-21) 5299 3110 P.O. Box 1324/JKT, Jakarta 10013 • Telex: IBRDIA 60086 • Headquarters: The World Bank, Washington DC, USA 4 of 7 TF093853 February 21, 2011 this letter of amendment shall be deemed to have been effective as of the date of countersignature by all parties hereto. Sincerely yours, /s/ Franz Drees-Gross Acting Country Director, Indonesia CONFIRMED: GIZ – GESELLSCHAFT FUER INTERNATIONALE ZUSAMMENARBEIT By: /s/ Sabine Markert_____________ By: /s/ Ashok Malkarnekar__________ Authorized Representative Authorized Representative Name: Sabine Markert_____________ Name: Ashok Malkarnekar__________ Title: Country Director GIZ Indonesia & Title: Project Manager/Principal Advisor Date: February 24, 2011___________ Date: February 24, 2011___________ CONFIRMED: YOGYAKARTA SPECIAL REGION By: /s/ Ir. Tri Harjun Ismaji MSc_____ Authorized Representative Name: Ir. Tri Harjun Ismaji MSc_____ Title: Sekretaris Daerah Provinsi DIY Date: March 3, 2011_____________ CONFIRMED: CENTRAL JAVA PROVINCE By: /s/ Dr. Ir. Suprayoga Hadi, MSP___ Authorized Representative Name: Dr. Ir. Suprayoga Hadi, MSP___ Title: Director for Special Areas and Disadvantaged Regions Date: June 17, 2011_______________ ISEB Tower 2, Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190 • Telephone (62-21) 5299 3000 • Facsimile: (62-21) 5299 3110 P.O. Box 1324/JKT, Jakarta 10013 • Telex: IBRDIA 60086 • Headquarters: The World Bank, Washington DC, USA 5 of 7 TF093853 February 21, 2011 Annex 1 PDO Project Outcome Indicators Use of Project Outcome Information 1) 10,000 assisted MSMEs restore Determine during the mid- Contribute to the efforts of their income to pre-earthquake term review if project the Government of Indonesia level assistance strategies/activities to support the recovery of 2) 500 debtors/SMEs re-establish need adjustment. MSMEs affected by the their creditworthiness and the Baseline data collection see earthquake to revitalize their participating BPRs improve below businesses and to re-integrate their portfolio quality affected low income 3) 45 assisted medium-sized communities back into enterprises increase economic life. employment Intermediate Outcomes Intermediate Outcome Use of Intermediate Indicators Outcome Monitoring Component 1 Enhanced MSEs access to 1) At least 60% of 10,000 MSEs 1) Project monitoring team finance and/or technical increase their net business conducts income analysis assistance contributes to an income 6-12 months after loan 6-12 months after increase in their income. disbursement. intervention. Component II Defaulting-loan “work out� 1) At least 80% of 500 BPR 1) Baseline: BPRs report on strategies reduce the number debtors/SMEs repay their loans their loan portfolio when of NPLs, increase the or resume regular loan service applying for funds from capacity of/strengthen MFIs and re-establish their credit PNM to provide loans, and enhance worthiness. 2) Quarterly BPR report on SMEs access of new finance. number of loan recovery 2) Strengthening BPR: The proposals. quality of the earthquake- 3) Quarterly BPR report on affected loan portfolio of number of renewed assisted BPR improves. contracts. 4) Loan portfolio quality scoring based on BI’s rating system (collectability) of focus BPR Component III Enhanced MEs access to 45 assisted medium sized 1) Baseline: date of loan finance linked to technical enterprises increase employment disbursement assistance contributes to (including employment in value 2) Report from ME/Report increased employment. chain). from BPR ISEB Tower 2, Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190 • Telephone (62-21) 5299 3000 • Facsimile: (62-21) 5299 3110 P.O. Box 1324/JKT, Jakarta 10013 • Telex: IBRDIA 60086 • Headquarters: The World Bank, Washington DC, USA 6 of 7 TF093853 February 21, 2011 Component I, II & III Gender: Training for Financial intermediaries do not Financial institutions report on financial intermediaries apply discriminative practices number of female/male integrates creation of when granting loans: applicants for credits and awareness for gender issues actual credit users. * The overall number of Sustainability: MFI female/male credit users is Project monitoring team management capacity monitored by financial reports on number of building: upgrading of intermediaries. training/workshops held for management capacities government capacity building. (including information * In case of credits for couples systems) of the participating both wife and husband must MFIs, training workshops for sign loan application selected non-participating MFIs. 30% of overall number of credit Government Capacity users is female building: Training workshops Management capacities (incl. for government officials information systems) of at least 20 MFIs that have obtained refinancing under the Credit Fund have been strengthened. Management capacities of at least 10 MFIs that have not yet been able to access refinancing from the Credit Fund have been strengthened. At least 20 trainings/ workshops involving government officials. Component IV Project Management, Project targets and delivery Monitoring overall project Monitoring and Evaluation schedule met. progress and specific Efficient implementation of deliverables to determine the Project Impact Study delivered. efficiency of project Lessons learned documented. coordination. Adjustment made to ensure project targets and milestones are met. ISEB Tower 2, Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190 • Telephone (62-21) 5299 3000 • Facsimile: (62-21) 5299 3110 P.O. Box 1324/JKT, Jakarta 10013 • Telex: IBRDIA 60086 • Headquarters: The World Bank, Washington DC, USA 7 of 7 TF093853 February 21, 2011 Annex 2 Appendix to the Grant Agreement A new Section II to the Appendix to the Grant Agreement is added as follows: Section II. Modifications to the Anti-Corruption Guidelines 1. Section 5 is re-numbered as Section 5 (a), and a new Section 5 (b) is added to read as follows: “…(b) These Guidelines also provide for the sanctions and related actions to be imposed by the Bank on Borrowers (other than the Member Country) and all other individuals or entities who are recipients of Loan proceeds, in the event that the Borrower or the individual or entity has been debarred by another financier as a result of a determination by such financier that the Borrower or the individual or entity has engaged in fraudulent, corrupt, coercive, or collusive practices in connection with the use of the proceeds of a financing made by such financ ier.� 2. Section 11 (a) is modified to read as follows: “… (a) sanction in accordance with prevailing Bank’s sanctions policies and procedures (fn 13) a Borrower (other than a Member Country) (fn 14) or an individual or entity, including (but not limited to) declaring such Borrower, individual or entity ineligible publicly, either indefinitely or for a stated period of time: (i) to be awarded a Bank-financed contract; (ii) to benefit from a Bank-financed contract, financially or otherwise, for example as a sub-contractor; and (iii) to otherwise participate in the preparation or implementation of the project or any other project financed, in whole or in part, by the Bank, if at any time the Bank determines (fn 15) that such Borrower, individual or entity has engaged in corrupt, fraudulent, collusive, coercive, or obstructive practices in connection with the use of loan proceeds, or if another financier with which the Bank has entered into an agreement for the mutual enforcement of debarment decisions has declared such person or entity ineligible to receive proceeds of financings made by such financier or otherwise to participate in the preparation or implementation of any project financed in whole or in part by such financier as a result of a determination by such financier that the Borrower or the individual or entity has engaged in fraudulent, corrupt, coercive, or collusive practices in connection with the use of the proceeds of a financing made by such financier.� Footnotes: “13. An individual or entity may be declared ineligible to be awarded a Bank-financed contract upon completion of sanctions proceedings pursuant to the Bank’s sanctions policies and procedures, or under the procedures of temporary suspension or early temporary suspension in connection with an ongoing sanctions proceeding, or following a sanction by another financier with whom the Bank has entered into a cross-debarment agreement, as a result of a determination by such financier that the firm or individual has engaged in fraudulent, corrupt, coercive, or collusive practices in connection with the use of the proceeds of a financing made by such financier.� “14. Member Country includes officials and employees of the national government or of any of its political or administrative subdivisions, and government-owned enterprises and agencies that are not eligible to bid under paragraph 1.8 (b) of the Procurement Guidelines or participate under paragraph 1.11 (c) of the Consultant Guidelines.� “15. The Bank has established a Sanctions Board, and related procedures, for the purpose of making such determinations. The procedures of the Sanctions Board sets forth the full set of sanctions available to the Bank. In addition, the Bank has adopted an internal protocol outlining the process to be followed in implementing debarments by other financiers, and explaining how cross-debarments will be posted on the Bank’s website and otherwise be made known to staff and other stakeholders.� ISEB Tower 2, Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190 • Telephone (62-21) 5299 3000 • Facsimile: (62-21) 5299 3110 P.O. Box 1324/JKT, Jakarta 10013 • Telex: IBRDIA 60086 • Headquarters: The World Bank, Washington DC, USA