FILE COPY CIFULATING COPY C-LReport No. 305-IND

Appraisal of Fisheries T0 BE RETURNED TO REPORTS DESK

Credit Project RETURN TO

Indonesia REPORTS DESKWITHIN

May 7, 1974 ONE WEEKAsia Projects Department

Not for Public Use

Document of the International Bank for Reconstruction and DevelopmentIntemational Development Association

This report was prepared for official use only by the Bdnk Group. It may notbe published, quoted or cited without Bank Group authorization. The Bank Group doesnot accept responsibility for the accuracy or completeness of the report.

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CURRENCY EQUIVALENTS

US$ 1 Indonesian Rupiah (Rp) 415Rp 1 US$0.-0024Rp 1 million US$2,410

WETCITS AND MEASURES

Metric System

ABBREVIATIONS

ONI - Government of IndonesiaBRI - Bank Rakjat IndoneslaDGF - Directorate General of FisheriesPNM - PN State Fisheries Enterprise, Maluku

FISCAL YEAR

April 1st to March 31st

INDONESIA

FISHERIES CREDIT PROJECT

TABLE OF CONTENTS

Page No.

SUIMMARY AND CONCLUSIONS ............................. i-vi

I. INTRODUCTION .............................. 1..........

II. BACKGROUND ............ 1

A. General ......... .......................... 1

B. The Fisheries Sector ........ ............ 2

III. TRE PROJECT ........ 8

A. Definition ...... ..................... 8

B. Detailed Features .................. .. 9

C. Cost Estimates ..... ....................... 14D. Financing ................................. 16

E. Procurement ..... .......................... 18

F. Disbursement ..... ......................... 20

IV. ORGANIZATION AND MANAGEMENT ..... ..................... 20

A. Introduction ..... ......................... 20

B. Institutions .............. .. ............... 21

C. Lending Terms and Conditions .............. . 24

D. Accounts and Audit ........... .. * ........... 26

V. PRODUCTION, MARKETS AND OPERATING RESULTS ......... ... 26

VI. ECONOMIC BENEFITS AND JUSTIFICATION ................. . 29

VII. RECOMMENDATIONS ................... ................... 30

SCHEDULE A - Project Lending Terms and Conditions

This report is based on the findings of an appraisal mission which

visited Indonesia in May/June 1973. The mission was composed of Messrs.

S.J. Khoo, F. Kada, B. Macleod (IDA), A. Choksi, P. Mornement, and T. Yamamoto

(Consultants).

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ANNEXES

1. Marine Fisheries

Table 1-1 Number of Marine Fishing Vessels Registered inTndonesia (1971)

Table 1-2 Landings of Sea Fisheries, 1967-1972Table 1-3 Sea Fisheries Landings by Fishing Vessels from

Java Island and Total Landings for IndonesiaTable 1-4 Foreign Capital and Joint Venture Enterprises

for Shrimp Fishing and Processing

2. Brackish Water Ponds

Table 2-1 Area of Brackish Water Ponds by Principal ProducingAreas, 1971

Table 2-2 Area, Average Size and Production of Fish Pondsin the Principal Producing Areas, 1971

3. Major Project Components and Their Specifications

Table 3-1 Proposed Project AreasTable 3-2 Area to be Improved in 5 YearsTable 3-3 Demonstration Ponds to be Constructed in.5 YearsTable 3-4 Required Demonstration Pond Supervisors and

Extension WorkersChart WB-8044 Example of Acceptable Design for 30 G.T. Wooden

Skipjack Live Bait Pole and Line Fishing VesselChart WB-7843 Example of Acceptable Design for 100 G.T. Wooden

Skipjack CarrierChart WB-7841 Ambon Cold Store and Ice PlantChart WBE-7839 Improvements to PNM Ship Repair Facilities at

AmbonChart WB-7842 Example of Acceptable Design for 30 G.T. Wooden

TrawlerChart WB-7864 Typical Layout for 5 Ha Demonstration Fish Pond

4. Estimated Project Implementation Schedule

5. Unit Costs

6. Estimated Quarterly Schedule of Disbursements

7. Bank Rakjat Indonesia

Table 7-1 Summarized Balanced Sheets at December 31 Each YearTable 7-2 Summarized Income and Expenditure StatementsTable 7-3 Outstanding Loans and Arrears by Economic Sectors

As at the End of 1972Table 7-4 Organizational Chart of the Head Office of the Bank

Rakjat Indonesia

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Table 7-5 Organizational Chart of the Provincial or RegionalOffices of the Bank Rakjat Indonesia

8. PN State Fisheries Enterprise, Maluku (PNM)

Table 8-1 Balance Sheets At Decenber 31 Each YearTable 8-2 Income and Expenditure StatementsTable 8-3 Organization Chart

9. Directorate General of Fisheries

Table 9-1 Fisheries Organization and AdministrationTable 9-2 Organizational Chart of the Directorate General

of FisheriesTable 9-3 1973-74 Budget: Directorate General of FisheriesTable 9-4 Training Institutions Operated by the Directorate

General of FisheriesTable 9-5 Provincial Fisheries Service, Central Java

10. Terms of Reference for Technical Assistance Personnel

11. Marketing and Prices

Table 11-1 Export Volume of Fishery Products 1967-72Table 11-2 Current PricesTable 11-3 Skipjack Monthly Average Ex-Vessel Price in Japan

12. Table 12-1 Projected Income Statement: P.N. State FisheriesEnterprise, Malukui

Table 12-2 Projected Cash Flow: P.N. State Fisheries Enterprise,Maluku

Table 12-3 Projected Income Statement: 30 G.T. Wooden SkipjackBoat

Table 12-4 Projected Cash Flow: 30 G.T. Wooden Skipjack BoatTable 12-5 Projected Income Statement: Beach SeineTable 12-6 Projected Cash Flow: Beach SeineTable 12-7 Projected Income Statement: 30 G.T. Wooden TrawlerTable 12-8 Projected Cash Flow: 30 G.T. Wooden TrawlerTable 12-9 Projected Income Statement: South Sulawesi

Development of Fish Pond: 5 HaTable 12-10 Projected Cash Flow: South Sulawesi Development

of Fish Pond: 5 HaTable 12-11 Projected Income Statement: South Sulawesi

Development of Shrimp Pond: 5 HaTable 12-12 Projected Cash Flow: South Sulawesi Development

of Shrimp Pond: 5 HaTable 12-13 Projected Income Statement: Java Development of

Fish Pond: 1 HaTable 12-14 Prolected Cash Flow: Java Development of Fish

Pond: 1 HaTable 12-15 Projected Income Statement: Java Development of

Shrimp Pond: 1 Ha

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Table 12-16 Projected Cash Flow: Java Development of ShrimpPond: 1 Ha

Table 12-17 Projected Income Statement: 5T Ice Plant/15 TTce Store

Table 12-18 Projected Cash Flow: 5T Ice Plant/15 T Ice Store

13. Economic Rate of Return Calculations

Table 13-1 Economic Rates of Return

MAP

IBRD-2853RIBRD-10570

INDrlNESIA

FISHERIES CREDIT PROJECT

SUMMARY AND CONCLUSIONS

Objective

i. The proposed project would assist the Indonesian Government'sstrategy to increase skipjack tuna landings, milkfish and shrimp productionfrom existing brackish water ponds, and fish and shrimp catch by trawling.The purpose of these activities is to make fuller use of Indonesia'sfisheries resources for domestic consumption and export. This is expectedto result in increased employment opportunities and incomes for fishermen.

The Project

ii. The project, to be implemented over a five-year investment period,would comprise:

(a) Skipjack tuna subproject involving the provision of:

(i) about 20 pole and line fishing boats for skipjack fishing;

(ii) two carrier vessels to increase fishing efficiency;and

(iii) on-shore supporting facilities, including an ice-making, freezer and storage complex to preservethe quality of the skipjack tuna catch, two smalljetties for provisioning the fishing boats and onefor loading and unloading the carrier vessels, repairfacilities (workshop and a slipway) to service projectvessels, and about 54 lift or beach seine nets to catchlive bait required for skipjack tuna fishing.

(b) Fish pond subproject for the:

(i) improvement of about 15,000 ha of existing smallholderbrackish water ponds in Java and Sulawesi through theintroduction of simple improvements to pond constructionand techniques of fish culture;

(ii) development of about 45 one to five-ha ponds to demonstratethe improvements; and

(iii) establishment of about nine 5-ton ice plants to provideice for the preservation of milkfish and shrimp fromproject ponds enroute to market.

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(c) Trawler sib roiec involving the purchase of about 25trawlers for the trawling of fish and shrimp in the JavaSea.

(d) Technical assistance required for effective implementa-tion of the project.

iii. Under the Dro4j2ct, che Government of Indonesia (GOI) would makeavailable part of the IDA credi: to the State Fisheries Enterprise at Ambon(PNM) for the purchase of ten pole and line skipjack fishing boats, twocarrier vessels and about 27 lift or beach seine nets, and construction ofon-shore facilities, including an ice making, freezer and cold storagecomplex, jetties, repair facilities and a slipway. GOI would also makeavailable part of the credit to the Bank Rakjat Indonesia (BRI), one of fivestate-owned banks and responsible for lending in the agricultural sector,including fisheries, for on-lending to smallholder pond operators, fisheriescooperatives and other private entrepreneurs for pond improvements, andpurchase of up to ten additional fishing boats, about 27 lift or beach seinenets for bait fishermeni trawlers and small ice plants. The provision ofcredit would include incremental working capital. PNM would purchase andmarket the catch of the cooperatives and private fishermen. The carriervessels would be operated by PNM to supply the fishing boats with ice, fueland supplies and transport the skipjack catches to the cold store facilities.Technical experts required for project implementation would be recruited andfinanced by the IDA credit. In addition these experts would train localpersonnel in the operation of the project.

iv. Credit to smalTholder pond operators would finance simple improve-ments to ponds whicht with the use of fertilizers and pesticides, wouldincrease yields of milkfish and shrimp about 4 times more than the presentaverage yield for all ponds. About 15,000 ha of ponds in Java and SouthSulawesi have been identified for this type of improvement, of which 8,000 hawould produce both milkfish and shrimp, and 7,000 ha would be primarily formilkfish production. Ponds producing both shrimp and milkfish would be incoastal areas with sufficientlv high salinity levels required for successfulshrimp production. Pond development for milkfish alone would be carried outfurther inland. Investmient would be primarily for labor intensive canalexcavation, sluice gate widening and relocation, pond levelling, and dikeimprovement. Incremental working capital needs for initial purchases bypond operators of fry, fertilizers and pesticides for their first seasonof production would also be financed. Investments would average aboutUS$300 equivalent per ha for ponds producing both milkfish and shrimp, andUS$150 equivalent per ha for ponds producing milkfish. Under the project,about 45 one to five-ha ponds would be developed to demonstrate the techniquesfor improved production to pond operators. Extension services in the pro-ject areas would be expanded and improved, and the Directorate General ofFisheries would employ, with funds provided under the project, three pondfisheries experts to develop the demonstration ponds, assist pond operatorsto carry out their improvements and train the fisheries extension officers.

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v. Credit to fisheries cooperatives and private entrepreneurs wouldfinance nine small ice plants each with a capacity of 5 tons of block iceper day and storage space for 15 tons of ice. These plants will be suitablylocated to supply ice for the marketing of project shrimp and milkfish.Credit would also be provided to finance the purchase by privatie fishermenand cooperatives of up to 25 trawlers to be used to increase the productionof shrimp and fish from the rich trawling grounds of the Java sea.

Organization

vi. The Directorate General of Fisheries (DGF) would coordinate,supervise, and guide project implementation in addition to providing theproject experts, demonstration ponds and extension services.

vii. BRI's management is satisfactory and it has considerable experiencein short-term lending in the agriculture sector. While it is competent tomake financial appraisals, it lacks technical expertise in project evaluation.Therefore, in making sub-loans under the project, BRI would rely on theexpertise of DGF and the project experts in carrying out the technicalappraisal of sub-loans. Since BRI's appraisal of project sub-loans wouldinvolve close cooperation with the technical staff of DGF and PNM, BRI wouldemploy for the duration of the project, a locally recruited fisheries officeron its staff to liaise with the project experts. Such an officer had recentlybeen employed.

Costs and Financing

viii. Total project costs are estimated at US$12.9 million equivalentof which about US$3.8 million (30%) is the estimated foreign exchangecomponent.

Project Cost Summary

(US$ million)Project Component Local Foreign Total

Skipjack Tuna Sub-project 2.0 2.1 4.1Fish Pond Sub-project 3.9 0.4 4.3Trawlers Sub-project 1.0 0.4 1.4Contingencies 2.2 0.9 3.1

9.1 3.8 12.9

ix. The proposed IDA credit of US$6.5 million equivalent would finance50% of total project cost, including about US$2.7 million of local currencycost. The credit would supply about 58% of BRI support of the project,53% of PNM's investment costs and 14% of GOI contribution to project cost.The investment cost of the demonstration ponds would be financed by GOI.

x. The IDA credit would be on standard terms to GOI which would retainan amount to finance an estimated 80% of the costs of the project experts.

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GOI would make available the remainder of the credit to BRI and PNM undersubsidiary loan agreements acceptable to IDA. The credit to BRI would beat an interest rate of 4% per annum, and repayable as BRI received repaymentsfrom its sub-borrowers. BRI would extend loans to sub-borrowers at aninterest rate of 12% per anntm. GOI lending to PNM would also be at 12% perannum. GOI would bear the foreign exchange risk. The project experts wouldbe employed by GOI through DGF. Costs of the experts for the skipjack tunasubproject would be borne by PNM which would implement the major part of thissubproject. To ensure that sufficient funds are available as needed fortimely and efficient project execution, GOI would make available to DGFsufficient funds to cover the estimated expenditures for extension services,experts, training, demonstration pond development and other expendituresrequired to be made by DGF under the project. Funds to meet the estimatedexpenditures of each quarter would be available to DGF not later than thefifteenth day of such quarter. As a condition of effectiveness, the budgetof DCF for project expenditures up to March 31, 1975 shall have been approvedand ;'unds equivalent to US$200,000 will be available for project expenditures.

xi. Loans to PNM and BRT sub-borrowers would be up to 85% (95% forlift or beach seine nets) of the cost of the investments, which would serveas collateral. In the case of project experts for the skipjack tuna sub-project, an estimated 80% of their costs would be financed by the IDA Credit,with the remaining 20% to be financed from PNM's own resources. The termsand repayment of sub-loans would be appropriate to the investment made.BRI and PNM would maintain separate accounts of project transactions to besubmitted (together with balance sheets and income statements coveringtheir tctal operations) to IDA within four months of the close of eachfinancial year. BRI would also submit to IDA progress reports of itsoperations under the project. BRI accounts are satisfactorily audited byBank Indonesia.

Disbursement and Procurement

xii. Against appropriate statements, IDA disbursements would be:(a) For the project experts, 100% of foreign exchange expenditures or 100%of local expenditures against salaries. The proposed disbursement procedurewould allow IDA to disburse a similar share of the cost of both foreign andlocal experts. (b) 58% of loan disbursements by BRI. (c) 50% of totalexpenditures by PNM. Disbursements would be made against required supportingdocuments except for reimbursements for sub-loans by BRI. Documentation forBRI sub-loans would be retained by BRI and be available for inspection by IDAsupervision missions.

xiii. Sub-borrowers for vessels would mainly be operators who alreadyown several fishing boats. Additional vessels must be equipped in a mannercompatible with the owner's fleet so as to minimize operations and main-tenance costs. Therefore, the wooden hulls and the engines and otherequipment would be procured separately. There are a number of qualified localshipyards capable of making the wooden hulls for the skipjack boats, carriervessels and trawlers, and these will therefore be procured from pre-qualifiedlocal shipyards following local competitive bidding procedures acceptable to

IDA. Transportation difficulties and the need to match the equipment to beinstaxlled would prohibit hull procurement from abroad. Manufacturers ofvessel engines, fishing gear and other equipment are already well representedin Indonesia and provide adequate service facilities and spare parts. There-fore, PNM would order the make of equipment of its choice from suppliers pre-viously pre-qualified through international advertisement. Other sub-borrowerswould do this through BRI. To the extent practical, bulking of sub-loanapplications would be arranged by BRI to effect cost savings. Shore facilitiesat Ambon for ice making, freezer, and cold storage complex, jetties and repairfacilities would be procured and installed under a single contract and inaccordance with international competitive bidding procedures. Improvement ofthe small, scattered fish ponds will be done over five years largely bymanual labor provided in part by the pond operators themselves. This workwould, therefore, not be suitable for bidding procedures and would be arrangedon an ad-hoc basis by the pond operators and extension service staff.Similarly, lift or beach seine nets would, because of their small cost, beprocured through prudent shopping by the sub-borrowers. The nine small iceplants will be procured through international competitive bidding.

Benefits and Justification

xiv. The proposed project would make an important contribution to GOI'sdevelopment effort to increase fisheries production for domestic consumptionand export. Implementation of the project would increase fisheries pro-duction by about 18,000 tons per annum. A significant proportion would beexported, including some 6,500 tons of skipjack tuna and the larger shareof the shrimp valued at an estimated US$5.7 million at current prices.

xv. The project would:

(a) benefit about 9,000 fish pond operators and manyfishermen (most of whom are engaged in small, mainlysubsistence operations), either as members ofparticipating fisheries cooperatives or individualentrepreneurs, and their dependents;

(b) provide annually at full development, about 1,000 per-manent jobs, part-time employment for about 1,100 baitfishermen, and some 3 million man days work as a resultof pond improvements; and

(c) employ about 10,000 man years of labor for constructionactivities over the 5-year development period. Throughits provision of the demonstration ponds and technicalexpertise, the project would have a favorable demonstrationeffect on pond improvements outside the project and wouldalso provide experience valuable to future fisheriesoperations, including the fisheries credit activities ofBRI. The project ice plants would likewise promote theuse of ice in the marketing of fish.

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xvi. Incremental incomes and financial returns would be sufficientlyhigh to make the proposed investments attractive. The financial rates ofre:urn would range from 20% to 38%, and the economic rates of return areest:imated to be from 22% to 42%.

xvii. The appropriate assurances having been obtained, the project wouldbe suitable for an IDA credit of US$6.5 million.

INDONESIA

FISHERIES CREDIT PROJECT

I. INTRODUCTION

1.01 The proposed project would be the sixteenth Bank Group project foragricultural development in Indonesia, and the second in the fisheries sub-sector.

1.02 The on-going fisheries project at Aer Tembaga in North Sulawesi 1/which seeks to develop and expand skipjack tuna landings in the region is offto a good start after substantial delays. The principal problems have beenin the recruitment of qualified consultants and in the appointment of suitablelocal personnel. These problems have been resolved. All consultants have nowbeen appointed and are in position. Suitable local personnel have also beenappointed. Contracts for construction of the on-shore supporting freezerand cold store facilities have been awarded.

1.03 The proposed fisheries credit project was prepared with theassistance of the FAO/IBRD Cooperative Program which visited Indonesiaduring July/September 1972 and January/February 1973. This report isbased on the findings of an appraisal mission which visited Indonesiaduring May/June 1973, and was composed of Messrs. S. J. Khoo, F. Kada (IDA),A. Choksi, P. C. Mornement, and T. Yamamoto (Consultants). Mr. B. MacLeod(YP) assisted the mission during appraisal.

II. BACKGROUND

A. General -/

2.01 Indonesia is the world's largest archipelago. It comprises some3,000 islands with a total land area of nearly 2 million km2 scattered overa wide expanse of ocean (see attached Map IBRD-2853R). The country'spopulation, which has been increasing at an annual rate of around 2% isestimated at about 121 million in mid 1972, and concentrated in the fourmost important islands of Java (64%), Sumatra (17%), Sulawesi (7%) andKalimantan (4%).

1/ Indonesia Fisheries Project, Report No. PA-50a (June 22, 1970).Total project cost was US$4.3 million of which US$3.5 million wouldbe financed by IDA.

2/ A detailed discussion of the present situation and prospects of theIndonesian economy is given in Development Issues for Indonesia, ReportNo. 25-IND, December 1, 1972; and The Indonesian Economy - RecentDevelopments and Prospects for 1974/75, Report No. 286-IND, November26, 1973.

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2.02 Since 1966, the Government of Tndonesia (GOI) has successfullycarried out a program of economic recovery. It has stabilized the currencyand reduced the rate of inflation. In contrast to the economic stagnationof the period prior to the mid 1960s, the gross domestic product in constant1960 market prices, grew at an estimated annual rate of about 7% during1968-72. Per capita gross national product in 1972 was estimated at aboutUS$80.

2.03 In pursuing its central objective of increasing aggregate outputand income, GOI has given priority to the development of agriculture andto rehabilitation of the economic infrastructure. IDA has made an importantcontribution to these efforts. Up to the end of April 1974, Indonesia hadreceived 34 IDA credits amounting to about US$509 million, with financingof fifteen agricultural projects including one for fisheries (para 1.02),accounting for about 44% of the total.

B. The Fisheries Sector

Contribution to the Economy

2.04 In line with its objectives of broad based agriculture and ruraldevelopment, GOI accords priority to expansion of fisheries production forlocal consumption and for export. Indonesia's total fisheries production in1972 was estimated at about 1.27 million tons, of which landings from oceanwaters accounted for some 66%, catches from inland waters (rivers and lakes)about 23% and fish and shrimp reared in ponds the remaining 11%. Currently,about a million fishermen, including fish pond operators, are engaged infisheries production. They represent, together with their families, some4-5% of the population.

2.05 Annual per capita consumption of fish is estimated at about 10 kg,which is low even by the standards of other less developed countries (com-parable figures for Philippines and Malaysia are about 30 kg). Fish accountsfor about 65% of the protein in the average Indonesian diet. Fisheriesexports in 1972 totalled about US$26 million, the bulk of which was frozenshrimp shipped to Japan.

Marine Fisheries (Annex 1)

2.06 As many as 200 varieties of fish are found in Indonesia's waters.The principal varieties being fished at present are sardine, mackerel, tuna,coral fish, sea bream, shark and ray and crustacea. Indonesia's untappedmarine fisheries resources are considerable. FAO has estimated the potentialannual fish catch from the five million km2 of the Indonesia archipelago atabout six million tons. 1/ This is seven times the estimated landings in

1/ FAO symposium on marine fisheries, 1968.

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1972. Within the archipelago, the more productive areas - the so-calledUpwelling Area -comprising thie Java, Arafura, Flores and Banda seas andcovering approximately 750,000 km2 , has a potential annual catch estimatedat some four million tons, of which about two million tons are in the JavaSea.

2.07 With specific reference to skipjack tuna, FAO has estimated 1/the potential annual catch of this fish in the tropical Western Pacific atabout 250,000 tons, of which according to a recent GOI estimate, some150,000 tons are in Indonesian waters. Skipjack tuna is found in greatabundance in the Ceram, Banda and Maluku seas. The present annual catchof skipjack in Indonesia is only about 5,000 tons.

2.08 The Indonesian fishing fleet comprises about 281,000 sail boatsand 7,000 motorized vessels manned by some 890,000 fishermen, mostlyoperating at a subsistence level. These fishermen landed an estimated 839,000tons of fish in 1972. Most of the fish are caught within a few miles fromthe coast. The sail boats make daily fishing trips, relying on changingtides and wind. They do not have access to the substantial fisheriesresources which lie more than 5-10 miles from the shore. As a result, thefive-mile zone along the north coast of Java is overfished while the JavaSea beyond the reach of sail boats includes rich fishing grounds. Thesegrounds are especially suitable for trawling given their relatively flatbottom and shallow waters.

Inland Fisheries

2.09 Indonesian inland fisheries activities comprise fishing in inlandwaters (rivers, lakes and rice fields), and brackish and fresh water pondculture. Of the total pond area, brackish water ponds account for about85%, and fresh water ponds the remaining 15%. Brackish water pond cultureis mostly for milkfish (Chanos chanos). Brackish water shrimp cultivationtakes place in milkfish ponds which are generally within 1 km of the coastwhere water salinity is sufficient for shrimp requirements. Shrimp fry aregenerally not introduced into the ponds by the pond operators but enter theponds with the inflow of water from the sea. For most pond operators, theproduction of shrimp is in effect a byproduct of milkfish culture (para 2.13).

2.10 There are about 184,000 ha of brackish water ponds in Indonesia,from which some 60,000 tons of milkfish, shrimp, crabs and other fish areharvested annually. The bulk of the ponds are located along the north coastof Java and South Sulawesi, with East Java accounting for 34%, West Java16%, Central Java 14%, and South Sulawesi 21% of the total pond area. Thisis because these provinces have extensive estuarine swamp areas suitablefor pond development, an abundance of milkfish fry, and proximity to largepopulation concentrations which provide market outlets for milkfish. Mostponds are within 1 to 3 km of the sea, except in East Java where they maybe up to 20 km. With a few exceptions, ponds vary in size from less than 1

1/ FAO, The Fish Resources of the Ocean, 1971.

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ha up to 7 ha, with the average ranging from about 1 ha in Central and WestJava to 4-5 ha in East Java and South Sulawesi. Most are operator owned.These ponds do not have a more productive alternative use. Because theirpond holdings are usually small and their methods of pond culture aretraditional and of low productivity (para 2.12), most pond operators areoperating on a subsistence basis.

2.11 Brackish water culture in Indonesia has a long tradition. It wasinitiated at least 600 years ago as a mangrove swamp fishery using traps.Gradually, the mangrove was removed, dykes were constructed, ponds built,and finally, the custom prevailed of stocking the ponds with milkfishfry caught at sea. Ponds were built simply by bunding the perimeter andle'ielling the bottom. Technical development has not advanced much beyondthis stage.

2.12 The traditional methods of milkfish and shrimp culture practicedby most Indonesian pond operators are described in Annex 2. Under thesemethods, ponds are left under natural conditions with little control oversalinity levels and water depths. Fertilizers, including organic manure,are rarely used. There is virtually no control of natural predators andpests (snails and worms) which compete with the milkfish and shrimp for food.Furthermore, fry stocking management to make effective use of the availablefeed is generally absent. As a result, production is low, averaging about330 kg per ha annually, with milkfish accounting for less than half (40% -50%) the output. Crabs, shrimp, mullet, tilapia and other fish, usuallybrought into the ponds by the inflow of water and not intentionally introduced,account for the remaining output. Most ponds are able to produce only asingle harvest. The disproportionately small share of milkfish is indicativeof the low level of technology applied.

2.13 Some pond operators have begun to adopt better practices. Improvedcontrol of salinity and water depth in ponds has been achieved throughsimple works, such as the raising of secondary dykes and ditches, deepeningof pond bottoms and canals, and additional sluice gates. With some degreeof water regulation and use of small amounts of fertilizers (about 100 -150 kg per ha) and in some instances pesticides, these operators have beengetting substantially higher yields as well as two harvests a year. Mostoperators adopting these simple improvements are harvesting between 500-600 kgof milkfish and 100 - 150 kg of shrimp per year or about 4 times more thanthe average for all ponds. Near the coast, with higher salinity levels,progressive pond operators are giving increased emphasis to shrimp production.Shrimp thrive better in such ponds than in those away from the coast.Improved ponds near the coast have been getting about 300 kg of milkfishand between 250-350 kg of shrimp per ha annually compared with about 150 kgand 20-60 kg respectively for unimproved ponds.

2.14 Improved ponds are still few and concentrated in areas close tothe main urban centres on South Sulawesi and Java. This is because manypond operators, especially those in remote areas, are simply not aware thatsubstantial increases in production can be obtained through simple improve-ments, such as better water control to obtain improved pond water conditions,

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and use of fertilizers and pesticides. Lack of technical advice is anotherproblem. Finally, shortage of credit on suitable terms is an importantconstraint. The proposed project would help accelerate the spread ofimproved ponds by providing credit and technical assistance to disseminateproven improvements.

Marketin8

2.15 Sharp regional imbalances exist between fish production and consump-tion. For example, the island of Java, which accounts for about two-thirdsof the Indonesian population, consumes some one-third but produces onlyabout one-fifth of national fish production. An active inter-island fishtrade thus exists between the other islands and Java. While fish from pondsis generally sold fresh or alive, most marine fish is sold dried and saltedgiven the long distances involved and the high cost of ice and refrigeratedtransport. The marketing system is inefficient involving several inter-mediaries in the producing area as well as in the consuming centres. Marginsbetween producer and retail prices are 50% or more (Annex 11).

Fisheries Credit

2.16 Though most fishermen and fish pond operators depend on traders forfinancing, reliable data on the quantities and terms of such financing arenot available. The Bank Rakjat Indonesia (BRI) is the main source of insti-tutional credit for fisheries. Some of the other state-owned banks alsofinance this activity, mainly in the field of marketing and processing. Insti-tutional credit for fisheries meets only a fraction of the requirements offish pond operators, and purchases of equipment and machinery for marketingand processing (Annex 7). The interest rate on fisheries loans is 1%-2% permonth.

Fisheries Cooperatives

2.17 The National Federation of Indonesian Fishermen's CooperativeSociety is the apex of 12 Provincial Unions of Fishermen's CooperativeSocieties comprising 352 Primary Fishermen's Cooperative Associations witha membership of about 62,000 fishermen (6% of the fishermen population). Theprincipal activity of the cooperatives has been the provision of fishing gear,particularly nets. They buy from the National Federation or, in the caseof locally available items, make bulk purchases for resale to members. Nocredit is provided. The cooperatives also auction fish at the landing siteon behalf of the fishermen, and collect an auction fee. In addition, severalcooperatives are engaged in wholesale fish marketing and in catching bait fish.

Fisheries Administration

2.18 The Directorate General of Fisheries (DGF) in the Ministry ofAgriculture is responsible for the administration of the fisheries sector.It handles all fisheries matters - administration, development policies,research, training, extension, and control of the State Fisheries Enter-prises (Annex 9). DGF's provincial and district offices are primarily

respons:ible for providing extension services for inland and marine fisheries.Both the quality and quantity of extension personnel are inadequate (para4.05).

Education and Trainiag

2.19 Trained manpower for substantial expansion in fishing operationsis available. There are nine institutions concerned with fisheries trainingat various levels: a fisheries academy, three senior fisheries high schools,three junior fisheries high schools, two adult training centres, and fisheriesdepartments within the faculties of agriculture in five universities. UNDP/FAOis funding a fisheries training centre at one of the senior fisheries highschools (Tegal) to provide practical training in fishing techniques, fishinggear assembly, net making and mending, and navigation. DGF plans to set upsimilar centres elsewhere. Indonesian fishermen are also currently beingtrained on many of the foreign fishing vessels operating under joint ventureagreements.

Research

2.20 A centre for brackish water fish and shrimp culture research iscurrently being developed at Jepara, Central Java, by DGF with UNDP support.The objective of the centre is to expand and increase the efficiency of pondculture of milkfish and shrimp on a national scale, through research onimproved cultural techniques, and field testing and extension of theimproved techniques among pond operators. The long range research anddevelopment work program of the centre would include:

(i) Introduction of improved methods of milkfish culture,adapting them as necessary to local conditions, anddevelopment of new techniques for increasing theefficiency of operations.

(ii) Undertake in the vicinity of Jepara, demonstration ofsuccessful techniques of milkfish culture, and trainingof field personnel, including extension workers, in theapplication of such techniques.

(iii) Development of suitable methods of intensive and semi-intensive culture of shrimp under local conditions,including the mass rearing of shrimp larvae.

(iv) Undertake surveys and studies to determine distribution,and improve collection, handling, and transport of milk-fish and shrimp fry.

(v) Investigations on the effects and extent of pollution,and of pesticides and herbicides, on shrimp and milkfishculture, and to evolve suitable measures for controllingany adverse effects.

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The proposed project would make use of the centre's research resultsand training of extension workers (para 4.08).

Development Program and Strategy

2.21 In view of the substantial potential for development (para 2.06 -2.07), GOI has sought international and bilateral assistance to formulateand finance fisheries projects, including facilities to improve fish market-ing. GOI provides various incentives, mainly exemptions and reductions intaxes and import duties, to encourage private participation in fisheriesdevelopment. Where private investment is not forthcoming, GOI through theDGF, sets up its own State Fisheries Enterprises to carry out projects.

2.22 In response to the incentives offered, there are a number offoreign, domestic and joint enterprises catching shrimp and tuna for export.GOI has been promoting the use of trawlers by its State Fisheries Enterprisesand fisheries cooperatives. Private entrepreneurs have also begun to investin trawlers to exploit the fishing grounds in the Java Sea beyond the reachof the small coastal fishing craft .(para 2.08). Although catches off thecoast of Java are reported to be good, the little exploited waters offSouth Kalimantan offer potentially larger catches, including a higherpercentage of shrimp. Credit needed to encourage further trawler acquisitionto fish these waters would be provided under the project.

2.23 To make fuller use of its skipjack resource (para 2.07), GOIplans to operate three skipjack projects in Aer Tembaga (North Sulawesi),Ambon (Maluku), and Sorong (West Irian). The first is an ongoing IDAfinanced project (para 1.02). The proposed project would be the second.It would be operated by the State Fisheries Enterprise Maluku at Ambon(PNM), a GOI owned enterprise already engaged in skipjack fishing (para 4.10- 4.14). The third project would be financed by the Asian Development Bank.Projected total annual skipjack landings by the three projects are estimatedat about 25,000 tons. This projected output together with the present catch,would constitute about 20% of the potential landings (para 2.07).

2.24 In GOI's present 5-year Plan (1969/70 - 1973/74), though theplanned budget allocation for fisheries development was Rp 22 billion(US$67.7 million) 1/, or about 14% of the total budget for agriculture, theactual allocation made during the first four years was only about Rp 3billion, and it is expected that no more than Rp 5 billion would be allocatedduring the whole of the Plan period. Deficiencies in administration andtechnical/managerial expertise, were mainly responsible for the short-fallbetween planned and actual allocations. Under the Second 5-year Plan(1974/75 - 1978/79), DGF has planned to improve and expand all aspects offisheries development. The proposed project, by providing the necessaryfinance, managerial and technical expertise required for effective projectimplementation, would contribute to this development.

1/ At the then exchange rate of Rp 325 - US$1.

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III. THE PROJECT

A. Definition

3.01 The objective of the proposed project is to assist GOI's strategyto increase (a) skipjack tuna landi.ags, (b) milkfish and shrimp productionfrom existing brackish water ponds, and (c) fish and shrimp catch bytrawling. The purpose of these activities is to make fuller use ofIndonesia's fisheries resources for domestic consumption and export. Thisin turn will provide increased employment opportunities and incomes forfishermen, most of whom are living at subsistence levels.

3.02 Over a 5-year investment period, the project would comprise:

(a) Skipjack tuna subproject involving the provision of:

(i) about 20 pole and line fishing boats for skipjack fishing;

(ii) two carrier vessels to increase fishing efficiency; and

(iii) on-shore supporting facilities, including an icemaking,freezer and storage complex to preserve the quality ofthe skipjack tuna catch, two small jetties for provisioningthe fishing boats and one for loading and unloading thecarrier vessels, repair facilities (workshop and a slipway)to service project vessels, and about 54 lift or beachseine nets to catch live bait required for skipjack tunafishing.

(b) Fish pond subproject for the:

(i) improvement of about 15,000 ha of existing smallholderbrackish water ponds in Java and Sulawesi through theintroduction of simple improvements to pond constructionand techniques of fish culture;

(ii) development of about 45 one to five-ha ponds to demonstratethe improvements; and

(iii) establishment of about nine 5-ton ice plants to provide icefor the preservation of milkfish and shrimp from projectponds enroute to market.

(c) Trawler subproject involving the purchase of about 25 trawlersfor the trawling of fish and shrimp in the Java Sea.

(d) Technical assistance required for effective implementationof the project.

Details on these various components are given in the following paragraphs.

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B. Detailed Features (Annex 3)

Skipjack Tuna Subproject

3.03 The purpose of this subproject is to expand skipjack tuna fishingfor export. The subproject would be based on Ambon island (see attachedMap IBRD-10570) because the seas surrounding this island have abundantskipjack resources 1/ and its fishermen are experienced in the catchingof this fish. Furthermore, PNM which is a suitable entity to implementthe major pa:rt of this subproject, is located on Ambon, where it is alreadyengaged in skipjack fishing for the local market. Details of PNM's opera-tions are given in para 4.10 - 4.14. The proposed 20 fishing boats andconsequently the capacity of the supporting facilities for this subprojecthas been determined by the availability of bait fish. 1/ Under the sub-project, credit would be provided to PNM to acquire ten of the fishingboats, the two carrier vessels, on-shore supporting facilities, and about27 nets for catching bait fish (para 3.12). DGF would employ a managementspecialist, electrical/mechanical engineer, civil engineer, and navalarchitect/master boat builder (para 3.21), to assist in project implementa-tion. Besides individual fishermen/entrepreneurs, there are several fisheriescooperatives in Ambon who operate skipjack fishing boats and are engaged inthe netting of bait fish for catching skipjack. At least 5 of the fisheriescooperatives engaged in skipjack fishing have been operating successfullyand would like to expand their operations. In view of this, credit would beoffered to fisheries cooperatives and other private entrepreneurs at Ambonto acquire the remaining 10 subproject boats and bait fish nets.

3.04 Skipjack Fishing Boats and Carrier Vessels. The 20 skipjack fishingboats would be of 30 gross tons powered by a 150 hp diesel engine, with aperpendicular length of about 18 m and a draught of about 2 m. They would bedesigned for pole and line fishing using live bait, with insulated fishholds capable of storing up to 5 tons of skipjack. The boats would carrya crew of 30, and be equipped to communicate with the base and other vessels.Investment cost including incremental working capital is estimated at aboutRp 24.0 million (US$57,800) a boat. Such boats have been operating success-fully in Japan, Caroline Islands, and Indonesia, and are familiar to Indone-sian fishermen engaged in skipjack fishing. They are of sufficient size toenable fishing to be carried out during the monsoon period when smallerboats would not be able to operate.

1/ An FAQ survey conducted during January 1971 to March 1972 found thatskipjack is abundant in the waters around Ambon and that bait resourceswould be sufficient to sustain at least an additional 20 fishing boatsof the type envisaged under the subproject.

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3.05 lnstead of project fishing boats journeying to Ambon to unloadskipjack catch and to load ice, fuel, and other supplies for the return tripto the fishing grounds, carrier vessels would be used. This would increasefishing efficiency by allowing the fishing vessels maximum time in theirfishing operations. Two 100 gross ton carrier vessels would be provided bythe project for this purpose. They would have a perpendicular length ofabout 25 m with a draught of 3 m and they would be powered by a 240 hp dieselengine. A 10 hp auxiliary would generate power for lighting and pumping whenthe main engine is not running. The vessels would have insulated fish holdsof about 85 m3 capable of storing up to 15 tons of skipjack with 15 tonsof block ice in about 20 tons of sea water. They would also be equipped tocommunicate with the base at Ambon and other vessels, and carry a crew of 7.Investment cost of the vessels, including incremental working capital, isestimated at Rp 67.4 million (US$162,400) each. Skippers and other crew forthe fishing and carrier vessels are available in Ambon.

3.06 Both types of vessel as well as the trawlers (para 3.19-3.20)would have wooden hulls. Local timber suitable for hull construction ischeap and readily available. Steel hulls and imported wooden hulls wouldcost much more than locally made wooden hulls (para 3.30). The projectnaval architect/master boat builder (para 3.21) would provide the finaldesign and specifications as well as supervise construction and installationof the engines and equipment of the skipjack fishing and carrier vessels,and the trawlers. Outline drawings and specifications of the vessels aregiven in Annex 3, Charts 8044, 7843 and 7842. Assurances were obtainedthat IDA would approve the final designs and specifications of the vesseltypes prior to construction.

3.07 Icemaking, Freezer and Cold Store Complex. The complex wouldinclude: cold storage rooms for 500 tons of frozen skipjack maintainedat -25°C; brine tanks with a capacity of freezing 25 tons of skipjack a dayto -25C; an ice plant capable of producing 50 tons of ice daily with adequateice storage facilities; offices, and store-room; and three generator sets ofsome 1,250 KVA, including 33% standby capacity, to provide the necessarypower. The complex of which a lay-out plan is shown in Annex 3, Chart 7841,would be of sufficient capacity to provide the ice, freezer and cold storeneeds required to preserve the skipjack tuna caught by project vessels. Thetwo project engineers (para 3.21) would provide the final designs andspecifications of the complex as well as supervise construction and installa-tion. The civil engineer would be responsible for the civil works involved,and the electrical/mechanical engineer all other aspects of the establishmentof the complex. Assurances were obtained that IDA would approve all finaldesigns and specifications.

3.08 The proposed complex would be constructed on a site adjacent toPNM's present location. DGF authorities have assured that this site wouldbe suitable as it has ample level ground, good water depth within a shortdistance off the shore (para 3.09), and plentiful supply of water (para 4.14).

3.09 Jetties. The main subproject jetty would be constructed on theproposed cold store site, with a depth alongside in excess of 6 m, which

would be enough to accommodate a refrigerator vessel loading frozen skipjackfor export. The jetty head would be about 60 m long and 6 m wide. The outerface would be used as a berth for all vessels and the inner face could beused by the carrier vessels when the outer berth was occupied by therefrigerator vessel, so that normal operations would not be interrupted.The jetty would be constructed by local contractors using local hardwoods.

3.10 The main skipjack fishing grounds would be in waters off thefishing villages of Hitu and Waai where food and drinking water iSavailable and many bait fishermen are located (para 3.12). Under the subproject,small jetties would be constructed in the fishing villages to facilitateaccess by the skipjack fishing boats. The jetties would be about 3 m wideand would provide a minimum water depth of 3 m. They would be constructedin locally available hardwoods by local contractors experienced in buildingtimber bridges. The project civil engineer with the assistance of the projectelectrical/mechanical engineer (para 3.21), would provide the final designsand specifications as well as supervise the construction of the jetties.

3.11 Repair Facilities. PNM has a small hand-operated slipway andworkshop capable of servicing its existing boats and those of the fisheriescooperatives. However, the slipway would not be suitable for projectcarrier vessels and another would be needed. The project would thereforefinance the construction of a new slipway and enlargement of the presentworkshop facilities. The new slipway would be constructed parallel to theexisting one and an electrical uphauling winch would be provided capableof operating either slipway by means of a system of snatch blocks. Theproject civil engineer, naval architect, and electrical/mechanicalengineer would be responsible for drawing up the final designs and specifi-cations as well as supervising the construction of the slipway and extensionof the workshop facilities. A site lay-out of the repair facilities isgiven in Annex 3, Chart 7839.

3.12 Lift or Beach Seine Nets. The project would provide about 54 liftor beach seine nets which would be adequate to catch the required amount ofbait fish. Credit for the purchase of these nets would be made availableto PNM (para 3.03), fishermen, or fisheries cooperatives which are engagedin bait fishing.

Fish Pond Subproject (Annex 2)

3.13 Pond Improvements. The purpose of this subproject is to increasethe production of milkfish and shrimp from existing ponds by providingfinance to pond operators for simple pond improvements and for purchaseof fry, fertilizers and pesticides required to produce the first harvestfrom the improved ponds. Simple improvements would comprise primarilythe raising of secondary dykes and ditches, deepening and levelling of pondbottoms and canals, and additional sluice gates, including their relocation.Details on the various investment items are given in Annex 5.

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3.14 Investments would average about Rp 62,000 per ha for pondsproducing milkfish and Rp 125,000 per ha f3r ponds producing both milkfishand shrimp (para 2.13). 1/ About 15,000 ha of ponds in Java and SouthSulawesi would be improved under the subproject, of which 7,000 ha wouldbe of the former type and 8,000 ha of the latter. The projected distribu-tion of the two types of ponds among provinces and districts, the phasingof their development over a 5-year period, and the average pond size andnumber of pond operators involved, are given in Annex 3, Tables 3-1, and3-2.

3.15 The subproject pond area would be restricted to Java and SouthSulawesi because these two areas have a regional comparative advantagefor brackish water pond culture. Ponds producing both shrimp and milkfishwould be in coastal areas with sufficiently high salinity levels required forsuccessful shrimp production. Pond development for milkfish alone would becarried out further inland. Project size has been determined by the avail-ability of suitable pond areas, pond operator demand for such improvements,and with full account taken of the limited capacity of the fisheries extensionservices and of BRI's limited experience in fish pond lending.

3.16 In Taiwan, intensive production with annual yields of up to 2,500kg of milkfish per ha have been achieved, through excellent water control,the adoption of adequate modern inputs (including fertilizers, pesticidesand supplementary feeds), and advanced production and management practices.To try and raise Indonesian yields within a few years to the high levelsprevailing in Taiwan would be unrealistic, because this requires a capitalintensive technology and a management competence which the Indonesian pondoperators (particularly small operators) cannot be expected to acquirerapidly. In view of this, the subproject aims at financing pond improvementsat an intermediary level of technology (para 2.13), suitable for dissemina-tion to small operators as an initial step in the long range development ofmore intensive pond culture in Indonesia.

3.17 Demonstration Ponds. Successful implementation of the subprojectrequires strengthening of the fisheries extension service and establishmentof 45 one to five-ha demonstration ponds to demonstrate to pond operators theimproved techniques and their benefits envisaged under the subproject(para 2.13). To assist in the further develbpment of pond culture inIndonesia (para 3.16), some of the ponds would also demonstrate more advancedtechniques practiced in Taiwan as adapted for local application by the researchcentre for brackish water fish and shrimp culture currently being established(para 2.20). The proposed numbers and location of the demonstration pondsamong the different provinces in the subproject area as well as the phasingof their development are given in Annex 3, Table 3-3. Investment cost foreach pond, a typical layout of which is given in Annex 3, Chart 7864, wouldbe about Rp 2 million. A breakdown of the cost of the individual investmentitems is given in Annex 5. The ponds would be developed among those owned

1/ The former type ponds would stock only milkfish, and the latter typeboth milkfish and shrimp.

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by GOI or individuals. Three pond fisheries experts (para 3.21) would beneeded for a period of two years, to develop the demonstration ponds, andtrain the required local fisheries extension officers who would help pondoperators carry out their pond improvements. Details on the strengtheningof the fisheries extension service and its function required under thesubproject are given in para 4.05 - 4.08.

3.18 Ice Plants. The subproject would provide credit to fisheriescooperatives and private entrepreneurs for the purchase of nine small iceplants which would supply ice to preserve the quality of project fish andshrimp enroute to market (para 4.09). Subproject fish ponds are widelyscattered. Several small ice plants to be located in production areaswhere ice is not available, would be preferable to a single large plant,because of the lack of suitable facilities to transport ice over longdistances. Each of the small ice plants, costing about Rp 18.5 million(US$45,000), would have a capacity of 5 tons of block ice per day, storagespace for 15 tons of ice, and be equipped with a generator set. Smallplants of this capacity are already operating successfully in Java. Theproject electrical/mechanical engineer would provide the final design andspecifications and supervise the installation of the equipment.

Trawler Subproject

3.19 The Java Sea, especially off South Kalimantan, possesses richtrawling grounds. The estimated 150 trawlers presently operating thereare exploiting only a small proportion of the potential catch (para 2.06 -

2.08). There is consequently a growing demand for trawler financing.

3.20 The project would finance about 25 trawlers. Available evidencesuggests that they would easily be taken up by potential borrowers. Thetrawlers of 30 gross tons would have a perpendicular length of about 19 m,with a 2 m draught, and powered by a 120 hp diesel engine. They would haveinsulated fish holds for about 6 tons of fish and shrimp. The trawlerswould also be equipped with a radio set for communication, and a pair ofside roller winches. This size vessel is presently operating successfullyin the Java Sea. It is able to travel from the north coast of Java to thefishing grounds off South Kalimantan and to carry out 3-4 day fishing trips.The project naval architect would design and supervise construction of thetrawlers (para 3.06), each of which would carry a crew of ten. The requiredcrews would be available locally. The investment cost of each trawler,including incremental working capital, is estimated at about Rp 22.9 million(US$55,200).

Technical Assistance

3.21 The project would finance up to seven experts (17 man years)required for effective project implementation. They would comprise threespecialists for pond development (2 man years each), a management specialist(4 man years) (para 4.13), an electrical/mechanical engineer (3 man years),a civil engineer (1 man year) and a naval architect/master boat builder(3 man years). Terms of reference, qualifications and experience required

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are given in Annex 10. All the experts, e(xcept for the civil engineer,would be internationally recruited. Civil engineering services requiredfor the on-shore complex (para 3.07) would be obtained from a localengineering firm and financed by the project which includes the cost ofsuch services. Competent civil engineering services are readily availablelocally.

Project Implementation Schedule

3.22 The project would be implemented over a 5-year period as shownin Annex 4. Full development period for individual investments wouldrange from one to five years.

C. Cost Estimates

3.23 The total cost of the project is estimated at Rp 5,351.7 million(US$12.9 million), of which 30 percent, or Rp 1,595.0 million (US$3.8 million)

would be foreign exchange.

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Project Cost Estimate /a

-----Rp Million------ -------US$'000------- % Foreign

Local Foreign Total Local Foreign Total Exchange

A. Skipjack Tuna Sub-project1. Fishing Vessels 300.0 150.0 450.0 723 361 1,084 33

(20)2. Carrier Vessels 100.0 24.0 124.0 241 58 299 19

(2)3. Ice-Making,

Freezer andCold StoreComplex 195.9 495.2 691.1 472 1,193 1,665 72

4. Jetties 64.9 1.5 66.4 156 4 160 35. Repair Facili-

ties (Workshop& Slipway) 15.5 26.2 41.7 37 63 100 63

6. Lift or BeachSeine Nets (54) 6.7 20.3 27.0 16 49 65 75

7. TechnicalAssistance (11man years) 36.5 146.1 182.6 88 352 440 80

8. IncrementalWorking Capital 109.2 - 109.2 263 - 263 -

Sub-Total 828.7 863.3 1,692.0 1,997 2,080 4,077 51

B. Fish Pond Subproject1. Pond Development

(15,000 ha) 1,236.8 - 1,236.8 2,980 - 2,980 -2. Demonstration

Ponds (225 ha) 92.3 _ 92.3 222 - 222 -3. Ice Plants (9) 47.7 118.8 166.5 115 286 401 714. Technical Assis-

tance (6 manyears) 19.9 79.7 99.6 48 192 240 80

5. Incremental Work-ing Capital 212.1 - 212.1 511 - 511 _

Sub-Total 1,608.8 198.5 1,807.3 3,877 478 4,3S5 11

C. Trawlers Sub-project1. Trawlers (25) 375.0 150.0 525.0 904 361 1,265 292. Incremental Work-

ing Capital 48.4 - 48.4 117 - 117 -

Sub-Total 423.4 150.0 573.4 1,021 361 1,382 26

D. Contingencies1. Physical (5%) 143.0 60.6 203.6 345 146 491 30

*2. Price (26%) 752.8 322.6 1,075.4 1,814 777 2,591 30Sub-Total 895.8 383.2 1,279.0 2,159 923 3,082 30

Total 3,756.7 1,595.0 5,351.7 9,052 3,843 12,895 30

/a Totals may not add up due to rounding.

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3.24 Detailed cost estimates are shown in Annex 5. Estimates are basedon current prices, including the costs of installation. Price 1/ and physical

contingencies of 26% and 5% respectively have been added to project costs.The contingency allowances would be adequate. The price contingency allowance

is based on the projected price increases on the estimated amounts that would

be disbursed.

D. F_iancing

3.25 The total project cost would be financed from the following sources:

Bank Total Pro-

Sub-Borrowers Rakjat Indonesia Government Ject Cost IDA

Rp % of Rp Z of Rp % of Rp RpInvest-- Invest- Invest-

Investment ment ment mentItems Million Items Million Items Million Items Million MillionA. Skipjack

Tuna Sub-projectFishingvessels 101.3 15 286.9 85 286.9 85 675.1 330.6Carriervessels 26.7 15 - - 151.4 85 178.1 87.2On-ShoreFacilities(ice-making,freezer andcold storecomplex; jetties;and repairfacilities) 171.2 15 - - 970.1 85 1,141.3 558.9

Lift orBeach SeineNets 1.9 5 17.7 95 17.6 95 37.2 20.3

B. Fish PondSubprojectPond Dev-elopment 271.8 15 1,540.0 85 - - 1,811.8 887.2Demonstra-tion Ponds - - - - 126.5 100 126.5 -Ice Plants 36.4 15 206.5 85 - - 242.9 119.0

C. Trawler Sub-project 115.3 15 653.1 85 - - 768.4 376.3

D. TechnicalAssistanceFish PondExperts - - - - 130.7 100 130.7 104.6

OtherExperts 47.9 20 - - 191.8 80 239.7 191.8Total 772.5 14 2704.2 3T 1 875.0 35 5,351.7 675.9

_=N - A_ __ _

1/ The price contingency is based on: (a) projected prices for equipment and

civil works provided by IBRD's Projects Advisory Staff (Memo on RevisedInterim Guidelines on Treatment of Project Cost Increases dated March 29,

1974), and (b) annual increases of 8% for all other investment costs.

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3.26 GOI would re-lend part of the proceeds of the IDA credit to BRI foron-lending to sub-borrowers for pond improvements and to acquire all the iceplants and trawlers, and about 10 skipjack fishing boats and 27 lift or beachseine nets. BRI's sub-borrowers would be individual pond operators and fisher-mei, fisheries cooperatives and private entrepreneurs. The remainder of thecredit would be used by GOI to finance the costs of the experts and foron-lending to PNM for the construction of the on-shore complex and purchaseof two carrier vessels and about 10 skipjack fishing boats and 27 lift orbeach seine nets (para 3.03).

3.27 Sub-borrowers would on average contribute about 14% of investmentrequirements, including incremental working capital. Individual minimumcontributions for the different project items would be 5% for lift or beachseine nets and 15% for other investments. In the case of project expertsfor PNM, 20% of their costs would be financed from PNM's own resources.Most of the participants in pond improvements would be small farmers owningfrom 1 to 5 ha ponds and the bulk of their investment contributions wouldbe in the form of family labor. In addition to financing the cost of theservices of the project experts and the investment costs of the demonstra-tion ponds, GOI would provide the necessary funds to PNM and the fisheriescooperatives in redeemable equity to help meet their investment contributions(para 4.22). It is essential to ensure that the incremental working capitalnecessary to produce the initial output and sales from project investmentsbe available. The financing arrangements therefore, stipulate that theincremental working capital would be provided by GOI and BRI if not availablefrom other sources. Assurances on this were obtained during negotiations.

3.28 The proposed IDA credit of Rp 2,675.9 million (US$6.5 million)would finance 50% of total project cost, and would supply about 58%(Rp 1,558.0 million) of BRI support of the project, 53% (Rp 1,013.3 million)of PNM's investment requirements, and 14% (Rp 104.6 million) of GOI contri-bution to project cost. The investment costs of the demonstration pondswould be financed by GOI. IDA would finance foreign exchange costs amountingto Rp 1,595.0 million or about 60% of its total contribution while the balanceof Rp 1,080.9 million would be local currency financing.

3.29 The IDA credit would be on standard terms to GOI which would retainan amount to finance an estimated 80% of the costs of the project experts.GOI would make available the remainder of the credit to BRI and PNM (para3.26) under subsidiary loan agreements acceptable to IDA. The credit toBRI would be at an interest rate of 4% per annum and repayable as BRIreceived repayments from sub-borrowers. This credit together with BRI'sown contribution would be extended to sub-borrowers at an interest rate of12% per annum in compliance with the present GOI policy on this type oflending. GOI lending to PNM would also be at 12% per annum (para 4.19).GOI would bear the foreign exchange risk. The project experts would beemployed by GOI through DGF. Costs of the experts for the skipjack tunasubproject would be borne by PNM. The cost of the PNM experts financed fromthe IDA credit, would be repaid by PNM at the same interest rate and repay-ment period as its loans from GOT under the project. GOI would bear thecost of the pond fisheries experts which it would provide to DGF. To ensure

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that sufficient funds are available as needed for timely and efficientproject execution, GOI wouid make available to DGF sufficient funds to cover

estimated expenditures for extension services, experts, training, demons-

tration pond development and other expenditures required to be made by DGF

under the project. Funds to meet the estimated expenditures of each quarter

would be made available to DGF not later than the fifteenth day of suchquarter. As a condition of credit effectiveness, the budget of DGF forproject expenditures up to March 31, 1975 shall have been approved and funds

equivalent to US$200,000 will be available for project expenditures.

Assurances on these arrangements were obtained during negotiations.

E. Procurement

3.30 Procurement for the wooden hulled vessels (20 fishing boats, 25

trawlers and two supporting vessels for the fishing boats) would be separated

into (i) wooden hull procurement and (ii) procurement of equipment such as

engines, fishing gear and other equipment since:

(a) individual operators may already own several fishingboats and therefore aim at standardization of theirequipment to reduce the need for costly inventoriesof spare parts and additional training of personnel;and

(b) individual operators are in the best position to deter-mine the make of the equipment most suited to theirneeds based on their existing equipment and personnel.

These considerations, common to credit type projects, preclude bidding

for fully equipped vessels. The project naval architect would therefore

establish design criteria for wooden hulls for the three types of project

vessels. Because wood suitable for hull construction is cheap and readily

available in Indonesia and the local shipyards have low labor and freightcosts, these shipyards have considerable advantages over any foreign sup-

pliers and offer the lowest cost source for such hulls. The local shipyards

have the necessary expertise and experience as well as the capacity to carry

out such construction. Bulking of the hulls to attract foreign supplierswould not be practical since some variation in hull design and construction

would be required to accommodate the individual sub-borrower's choice of

vessel engine and equipment, and also because the hulls would be acquired

over a three year period. The vessel hulls therefore would be procured

from prequalified local shipyards following local competitive biddingprocedures acceptable to IDA.

3.31 The naval architect would also establish technical performancecriteria and standards for the various equipment items. PNM and other sub-

borrowers would order equipment, with the make of their choice, from supplierspreviously pre-qualified through international advertisement (para 3.32).BRI would do this for its sub-borrowers. To the extent practical, bulking

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of sub-loan applications for equipment would be arranged by BRI. By followingthese procedures, requirements of individual operators will be accommodatedwithout foregoing the economies of bulk orders made possible by the project.

3.32 Engines and other equipment for the vessels are not manufacturedin Indonesia, but suppliers from several countries, mainly Japan, U.S.A.,and the U.K., are already established there. Through international adver--tisement, other suppliers would be encouraged to establish themselves andprovide adequate service facilities and spare parts inventories, and themarket would be opened to suppliers meeting project standards and specifi-cations. The advertisement, to be issued at least three months before pricequotations for the equipment were invited, would indicate the approximatetype of equipment and total quantity required and potential suppliers wouldquote prices on various quantities of each type of equipment. PNM and BRI,assisted by the naval architect, would then order the make of equipmentand quantity needed depending on sub-loan applications and individualoperator's choice and have it installed on the hulls.

3.33 Procurement and installation of the Ambon on-shore facilities -the ice-making, freezer and cold storage complex, jetties and repairfacilities, would be under a single contract and in accordance with inter-national competitive bidding procedures (para 3.37).

3.34 Formal bidding procedures for the fish pond improvements and liftor beach seine nets would not be appropriate because only small investmentitems would be required, and improvements would be on scattered small fishponds spread over wide areas and over 5 years. Moreover, a significantpart of the improvements would be carried out by manual labor, which in mostcases, would partly be provided by the owners themselves. Pond improvementswould consequently be arranged by the pond operators and extension servicestaff. Similarly, the nets would be procured through prudent shopping bythe sub-borrowers.

3.35 The nine small ice plants would be procured through internationalcompetitive bidding.

3.36 Appointment of the project experts would be subject to IDA approvaland would be made on terms and conditions acceptable to IDA.

3.37 Procurement and installation of the on-shore facilities wouldbe under a single contract as it would be essential that one contractortake overall responsibility to synchronize installation of equipment andcivil works. The project engineers would prepare design, layout anddetailed engineering and tender documents. They would also visit construc-tion sites to ensure that construction conformed to contract standards.During negotiations, assurances were obtained that the procurement proceduresoutlined above would be followed and the contract awards for vessels, exceptthose procured through BRI, on-shore facilities and small ice plants wouldbe subject to IDA approval.

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F. Disbursement

3.38 IDA disbursements are expected tD extend over 5 years (Annex 6).Against appropriate statements, disbursements would be: (a) For the projectexperts, 100% of foreign exchange expenditures or 100% of local expendituresagainst salaries. The proposed disbursement procedure would allow IDA todisburse a similar share of the cost of both foreign and local experts. Suchdisbursements are expected to amount to about 80% of the total cost of theexperts. (b) 58% of loan disbursements by BRI. (c) 50% of total investmentexpenditures by PNM. Disbursements would be made against the requiredsupporting documents except for reimbursements for sub-loans made by BRI.The documentation for BRI sub-loans for reimbursement would be retained byBRI and be available for inspection by IDA project supervision missions. Anysavings would be used to finance further fish pond development.

IV. ORGANIZATION AND MANAGEMENT

A. Introduction

4.01 The Directorate General of Fisheries (DGF) would coordinate, guideand supervise project implementation, and would employ full-time a competentand experienced senior officer assisted by adequate and competent supportingstaff for this purpose. An assurance on this was obtained at negotiations.DGF would also provide fish pond experts, demonstration ponds and extensionservices; employ the experts required by PNM; provide technical staff, ifneceasary, to fisheries cooperatives for the operation of ice plants; andassist BRI in-the technical appraisal of project loans (para 4.04 - 4.09).

4.02 The P.N. State Fisheries Enterprise, Maluku (PNM) would own andoperate ten fishing boats and about 27 lift or beach seine nets, two carriervessels and the on-shore supporting facilities under the skipjack tunasubproject (para 3.03). For project implementation, it would employ anaccountant, and through DGF, experts to be internationally recruited, whowould prepare and evaluate bids, supervise construction of boats and on-shorefacilities, and train local staff (para 4.12-4.13).

4.03 Bank Rakjat Indonesia (BRI), one of the five state-owned banks,and the lending bank for three on-going IDA projects, 1, would be thechannel for financing the pond improvements, ice plants, trawlers, and aboutten fishing boats and 27 lift or beach seine nets, and responsible forappraising loans made under them, with assistance from DGF and PNM. BRIhas appointed a fisheries expert to its technical staff to liaise with theDGF and PNM experts.

1/ Beef Cattle Development Project, Report No. PA-153a (November 1972).

2/ North Siuatra Smallholder Development Project, Report No. PA-140a(January 1973).

3/ Smallholder and Private Estate Tea Project, Report No. 124a-IND(May 1973).

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B. Institutions

Directorate General of Fisheries

4.)4 Details of DGF's organization and operations are given inAnnex 9. For the skipjack tuna subproject, it would assist PNM in (a)finding suitable export markets (para 5.03) through the collection ofmarket intelligence and facilitating negotiations with foreign buyers, and(b) employing the experts required by PNM. The experts would be seconded toPNM which would bear the cost of their services (para 3.29). The subprojectrequires advance planning to synchronise timing of the various activities,particularly to ensure the on-shore facilities were ready when the vesselswere delivered. The advance planniag would require the active participationof the experts. Consequently they should be internationally recruited assoon as possible. The management specialist would be appointed and in positionbefore credit effectiveness and the other two experts within six months followingcredit effectiveness, and their qualifications and experience, and terms andconditions of employment would be approved by IDA (para 4.13). Assurances onthese conditions were obtained at negotiations.

4.05 For the fish pond subproject, the present 17 inland fisheriesextension officers in the subproject areas (para 3.14) would be inadequate.The ratio is currently one officer for 680 ha of ponds, whereas the sub-project would require one for about 300 ha. 50 officers would thus beneeded for the 15,000 ha of ponds, together with 45 for the demonstrationponds (one at each pond). Assurances were obtained at negotiations thatDGF would make available the required 95 officers for this subproject,in accordance to the schedule given in Annex 3, Table 3-4, and that theofficers would hold the equivalent of a diploma from a senior inlandfisheries high school.

4.06 Every loan application for pond improvement would be appraised byan extension officer, who would prepare a plan indicating the requiredimprovements, their phasing and cost, and expected financial return. Theloans, after approval by BRI, would be disbursed in appropriate instalmentsafter the officer had certified that the previous instalments had beenused according to the plan. An assurance to this effect was obtained atnegotiations.

4.07 Three pond fisheries experts would be required to develop thedemonstration ponds and to train the 95 local extension officers. Theirqualifications, experience, and terms and conditions of employment would besubject to IDA approval. An assurance was obtained at negotiations thatat least one expert would be appointed and in position before credit effective-ness and the other two experts within six months following credit effectiveness.

4.08 In cooperation with the centre for brackish water culture researchand development (para 2.20), DGF, through the pond fisheries experts, wouldprepare and implement a suitable program, satisfactory to IDA, for thetraining of the project extension officers at the centre. The program wouldinclude training of the extension officers in the regions and under conditions

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in which they would be working, primarily through on-site experiencewith the demonstration ponds. The allocation of the extension officersamong the subproject areas is given in Annex 3, Table 3-4. In additionto demonstrating pond improvements at an intermediary level of technology,some of the demonstration ponds would demonstrate more advanced pond culturepractices for intensification of milkfish and shrimp production based onthe findings of the centre (para 3.17). DGF would also agree that thedemonstration ponds and the required extension officers would be maintained,and that both the demonstration ponds and the availability of trainedextension officers would precede the scheduled project pond improvements.Assurances were obtained that DGF would comply with these conditions.

4.09 On the advice of the pond fisheries experts, DGF would determinethe siting of the small ice plants (para 3.18). Before loans for them tothe fisheries cooperatives were approved, DGF would ensure that eachcooperative was viable and capable of operating such a plant. Assuranceson these points were obtained at negotiations.

PN State Fisheries Enterprise, Maluku (PNM)

4.10 Details of PNM's organization and operations are in Annex 8.Established in 1961, it is one of six enterprises set up by DGF tooperate fisheries projects. Up to 1967, PNM operated a passenger service,and a slipway and facilities to service private vessels. In 1967 it startedskipjack fishing with five vessels, and has since operated at a profit.

4.11 PNM is managed by a 3-member board, one of whom is the ChiefExecutive Director, who directs operations. Major decisions and policymatters rest with DGF, including the appointment of board menbers, andresponsibility for PNM's financial condition. However, this has nothampered PNM's progress, which is largely due to competent and enterpris-ing management and autonomy in operations. An assurance was obtainedat negotiations that IDA would be consulted concerning any changes in theappointment of the Chief Executive Director.

4.12 At the end of 1972, PNM's resources were about Rp 43 million, ofwhich borrowings were only about Rp 7.7 million, mainly from the IndonesiaIndustrial Development Bank (Bapindo). The rest was capital, accumulatedprofits and reserves. Most of these resources have been used for fixedassets, mainly land, buildings, fishing vessels, repair facilities andvehicles, but Rp 4.3 million was cash and bank deposits. However, PNM'saccounts have not been adequately maintained. Costs and returns of eachdifferent activity are not available, so their individual performancecannot be evaluated. The accounting and reporting systems would be improvedto provide adequate information to aid management's decision making, and aseparate account would be opened for project transactions (para 4.25). Toensure satisfactory financial control and accounting, a qualified accountantshould be appointed as soon as possible. Assurances were obtained duringnegotiations that disbursements to PNM would be subject to the priorappointment of a qualified accountant by PNM.

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4.13 Although its staff is adequate for current operations, PNM doesnot have the necessary expertise to implement effectively its part of theproject. Three experts would be internationally recruited, and comprise amanagement specialist, electrical/mechanical engineer, and naval architect.Civil engineering services required for the on-shore complex would beobtained from a local civil engineering firm (para 3.21). The managementspecialist would advise and assist PNM's management in the planning, or-ganization and operation of the subproject, including training of localpersonnel and the supervision and coordination of the other experts, whowould be responsible for planning, designing, preparing tender documentsand evaluating bids, and supervising the construction and installation ofequipment in the vessels and on-shore facilities. They would also trainlocal personnel in the operation of the facilities (para 4.04). An assurancewas obtained at negotiations that PNM would provide the necessary localcounterparts to be trained by the experts, Terms of reference, qualifica-tions and working experiences of the expexts are given in Annex 10.

4.14 PNM would acquire by purchase or long lease a suitable siterequired for the cold storage complex and main jetty (para 3.08). Anassurance was obtained at negotiations that acquisition of the site by PNMwould be a condition of disbursements to PNM or for any sub-loan for theskipjack tuna subproject.

Bank Rakjat Indonesia (BRI)

4.15 BRI is described in detail in Annex 7. Non-agricultural loansaccount for about one half of its lending, but BRI is assuming an increasingrole in the financing of agriculture, including fisheries. It provides ex-tensive coverage of the country through a wide network of branch offices,and village and mobile units. It would be the most suitable lendinginstitution for this project.

4.16 BRI's operations are directed by a 4-member Board of Directorsappointed by GOI. It has .6 administrative and 7 operational bureaus. Underone of the bureaus is a Department of Fisheries. While this department iscompetent to make financial appraisals, it lacks the necessary technicalexpertise to appraise project loans competently, and would rely on theexpertise of DGF and PNM's experts for their technical appraisal. Anassurance on this was obtained at negotiations. The qualifications of thefisheries officer which BRI would recruit to liaise with DGF and PNM wouldbe equivalent to a graduate of the Academy of Fisheries, Jakarta, with aminimum of two years experience in fisheries management and administration.An assurance was obtained at negotiations that such a fisheries officer hadrecently been appointed and is in position.

4.17 At the end of 1972, BRI's resources were about Rp 113 billion, ofwhich about 10% was capital and reserves, 54% deposits, and 31% borrowings(mainly from Bank Indonesia, the central bank). Loans accounted for about65% of BRI's use of its resources and about 45% of these for expansion anddevelopment of agriculture. Total arrears were about 30% of loans out-standing. This relatively high level is in part due to a GOI-sponsored

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rapid expansion of credit for rice production prior to 1970, withoutadequate attention to the recipients' repayment ability. It is also relatedto a fairly widespread drought early in 1972. Doubtful debts were aboutRp 8 billion at that date, and are covered by BRI's reserves. BRI's loanrecovery performance is much better following 1970 than in earlier years.

4.18 BRI has recently received assistance from the Asian DevelopmentBank to modernize and improve its ozerations, particularly its accountingand reporting systems. In November, 1973, a FAO/IBRD Cooperative Programmission assisted BRI to prepare a rural credit project for subsequent IDAfinancing. The project is expected to include provisions to strengthenBRI's capacity to extend credit to farmers, including a staff trainingprogram. Immediate short-term technical assistance to BRI to help inimplementing the on-going IDA smallholder tea, rubber and beef cattleprojects is included in these projects (see footnote to para 4.03). Thetea project also provides funds for internationally recruited consultantsto recommend improvements in BRI's medium- and long-term credit operationsand to help implement these recommendations.

C. Lending Terms and Conditions

4.19 Project lending terms and conditions are set out in Schedule A.Assurances were obtained at negotiations that they would apply to all project.sub-loans. GOI would make available the IDA credit to BRI at an annualinterest rate of 4%. This credit, together with BRI's own contribution,would he passed on to sub-borrowers at 12%. The IDA credit and GOI lendingto PNM would be at an interest rate of 12% per annum. These follow currentrates on investment funds provided by GOI. These are standard rates whichare also applicable to recent IDA financed agricultural projects. Subsidiary,loan agreements acceptable to IDA, would be entered into between GOI andBRI, and between GOI and PNM (incorporating these and other terms andconditions specified in para 3.29), and the execution of these agreementswould be a condition of credit effectiveness. BRI's average gross marginon project subloans would be about 7% 1/, which would be adequate for adminis-trative expenses and overheads, leaving a sufficient margin for bad debts.

1/ During 1972, the average cost of funds to BRI was about 6.2% per annumwhereas the average interest earned by it on its loans, investmentsand bank balances was 10.2% per annum. BRI, therefore, earned anaverage margin of 4%. Under the project, the margin earned by BRIwould be about 7%, considering that the margin earned on IDA fundswould be 8% per annum (12% less 4%) and that on its own resources5.8% per annum (12% less 6.2%) and that the ratio between IDA fundsand its own resources would be 49:51. BRI has been working at aprofit on an overall margin of 4%.

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4.20 The period of each sub-loan would be determined by the repaymentcapacity of the sub-borrower. Financial models for typical sub-loans arein Annex 12, and indicate that loan repayment schedules need not exceed thelimits shown below:

Grace Period of TotalSub-Loan Period Repayment Loan Period

----------------Years---------------

1. Loans for Skipjack Componentto the State FisheriesEnterprise (PNM) 3 9 12

2. Ski-:jack Fishing Vessels toCooperatives 2 10 12

3. Lift or Beach Seine Nets - 10 10

4. Fish Ponds:(a) Java Fish Pond 2 10 12(b) Java Shrimp Pond 2 7 9(c) Sulawesi Fish Pond 3 6 9(d) Sulawesi Shrimp Pond 3 6 9

5. Trawlers 1 10 11

6. Ice-Plants 1 10 11

4.21 PNM and sub-borrowers' minimum contributions would be: 25% forprivate entrepreneurs operating trawlers and small ice plants, 5% for baitfishermen, 20% for consultants to PNM (para 3.27), and 15% for all others.BRI normally makes advances up to 70% of the collateral offered, but hasdiscretion to advance more. Under the project it would not always obtainsecurity up to its normal requirements, but would generally lend up to 85%of the project investment, which would be the collateral offered, and 95%for lift or beach seine nets. For fish ponds the collateral would be theponds themselves, which would be more than adequate for the loans.

4.22 PNM and the cooperatives do not have sufficient unencumberedassets to provide even the 15% proposed as down payment. PNM would requireabout Rs 214 million as its contribution to project costs. Assurances wereobtained at negotiations that GOI would provide PNM and the cooperatives withthe required funds, which would be in redeemable equity.

4.23 To facilitate loan recovery, PNM would, on behalf of BRI, deductappropriate amounts of its daily purchases of skipjack and bait fish fromproject cooperatives and bait fishermen, and BRI would in turn creditsub-borrowers accounts. An assurance was obtained at negotiations thatan agreement to this effect would be entered into by the parties concerned.

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D. Accounts ard Audit

4.24 BRI's accounts are audited by Bank Indonesia, and the audit issatisfactory. BRI would maintain a separate project account which wouldbe audited annually and sent to IDA, together with a copy of the auditedbalance sheets and accounts covering the whole of its transactions withinfour months after the close of each financial year. BRI would also forwardto IDA quarterly reports covering the project's progress. Assurances ontlhese two points were obtained at negotiations.

4.25 PNM would maintain a separate project account. This, togetherwith its full accounts would be audited annually by an independent auditoracceptable to IDA, and copies sent to IDA within four months after the closeof each financial year. An assurance on this was obtained at negotiations.

V. PRODUCTION, MARKETS AND OPERATING RESULTS

Production

5.01 The proposed skipjack fishing vessels and trawlers would produceannually about 12,000 tons of fish and shrimp, including 6,500 tons ofskipjack tuna. The fish pond component would increase annual production atfull development by about 3,600 tons of milkfish and 2,500 tons of shrimp.Details on these estimates are given in Annex 3. This component, whichwould involve the improvement of some 15,000 ha of ponds belonging to about9,000 small operators, would enable the latter to obtain much higher yields,thereby making more productive use of their ponds.

Markets (Annex 11)

5.02 Most of the skipjack tuna caught by project vessels would beexported. Of smaller size and darker meat than the yellowfin tuna, skipjackhas recently been subject to increasing international demand as yellowfinresources are over-exploited. Because skipjack has a much shorter lifespanthan vellowfin, it contains smaller concentrations of mercury. Wideracceptance of skipjack's darker meat and its increasing use for mixing withthe lighter meat of the yellowfin and other tuna has added to the demand.The price of skipjack has accordingly been on an upward trend (para 5.04).Because the present favorable export market can be expected to continue intothe future, and a suitable export outlet can easily be arranged (para 5.03),no difficulty in exporting the entire project catch is envisaged.

5.03 There are several representatives of foreign companies involved infisheries in Indonesia which have indicated a keen interest in buying tuna.A purchasing contract could easily be obtained. Negotiated prices would begeared to world market prices. Alternatively, PNM itself could arrange tohave the catch from all project vessels shipped (through chartered freezervessels) to consuming countries and sold there through appointed selling orcommission agents.

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5.04 The price used in calculating project returns to PNM is based onthe present c.i.f. price in the U.S. (West Coast) less shipping, handlingand other related costs. This net price works out to an estimated US$400 aton. At this price, PNM would in turn be able to pay project cooperativesUS$220 a ton (Rp 90 per kg), and the difference would be sufficient tocover all its operating costs as well as provide for depreciation and areasonable rate of return to project investments. The price of Rp 90 per kgwould likewise give the cooperatives an adequate rate of return (para 5.09).Because world prices are expected to rise, prices to project cooperativeswould reflect a fair share of the increases in export prices received by PNMwhich would buy all skipjack offered by the cooperatives. Assurances to thiseffect were obtained during negotiations.

5.05 The export demand and price prospects for shrimp are also favorable.There are several shrimp processing companies in Indonesia, both domesticand foreign owned, which are buying all the shrimp they can get locally forprocessing and export. Export demand has been outstripping availablesupply. These companies have an extensive network of buying agents invirtually every primary market to which the fishermen sell their catch.Project output of shrimp can therefore be easily marketed. Prices offeredby buyers are competitive and rising. However, current prices have beenused for calculating project returns (para 5.08).

5.06 Based on present trends in population and income growth, Indonesianconsumption demand for fish has been projected to increase by about 4%annually during the Second 5-Year Development Plan, 1974-78. The projectedincreases, averaging some 70,000 tons a year, would be substantially largerth;an the average annual output increase of about 27,000 tons during the recentfour year period 1968-72. The annual increment from project trawlers andfish ponds, estimated at about 11,000 tons at full development, would there-fore be easily absorbed by the domestic market.

5.07 Java with about two-thirds of the total population accounts for onlyabout 20% of the total fish output in Indonesia. With a lower annual percapita consumption estimated at some 5 kg or about haif the national average,the island imports very substantial quantities (some 100,000 tons) from otherparts of the country to meet its consumption needs. However, most of the fishcomes to Java in dry and salted form because of poor transport and lack offacilities for fresh fish preservation. The result is a scarcity of freshfish in the large urban consuming centers, particularly those some distanceaway from the coast. The output from project trawlers and fish ponds can infact be easily accommodated by the Javanese market alone. The large marketpotential for fish in Java is also indicated by the fact that in order tobring fish consumption in the island up to the national average, an estimated500,000 tons per annum would be required in addition to present supplies.

5.08 Current prices have been used in estimating project returns.These prices and some details on marketing are given in Annex 11.

Operating Results

5.09 A summary of the financial benefits, derived from representativeinvestment models, is given in the following table, while the details arepresented in Annex 12.

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TrawlerSkipjack Tuna Subproject SubprojectI II III IV

On-shore Faci-lities, Carrierand Fishing Ves-sels Operated by Cooperativethe State Fish- la Fishing Beach

Investment Model eries Enterprise!- Vessel Seine Trawler

Investment Cost(Rp '000) 1,425,100 23,988 500 22,939

Net Income(p._ '000)At presentAt Full Develop-ment 584,785 6,681 150 6,030Increament 584,785 6,681 150 6,030Debt Service 252,002 3,812 84 3,640Increment AfterDebt Service 332,783 2,869 66 2,390

Financial Rate ofReturn (%) 34 20 36 20

Fish Pond SubprojectV VI VII VIII IX

1 ha Fish 1 ha Shrimp 5 ha Fish 5 ha Shrimp Ice-/b /b Ic Ic

Investment Model Pond- Ponda Pond- Pond- Plant

Investment Cost(Rp '000) 62.7 125.5 298.8 597.6 19,333

Net Income(Rp '000)At Present 7.4 14.5 50.0 50.0 -

At Full Development 22.9 67.1 142.5 240.0 6,300Increment 15.5 52.6 92.5 190.0 6,300Debt Service 10.6 26.1 73.7 138.3 3,256Increment AfterDebt Service 4.9 26.5 18.8 51.7 3,044Increment (includingreturns to familylabor) After DebtService 41.1 140.1 228.8 316.0

Financial Rate ofReturn (%) 22 38 22 26 30

la Including the services of the experts.lb Java./c South Sulawesi.

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5.10 Incremental incomes and financial returns would be sufficientlyhigh to make the proposed invest;ments attractive. In the case of theproject ponds where most of the labor requirements are usually accountedfor by family labor, incremental incomes, including returns to family laborwould be significantly higher as shown in the above table. The financialrates of return would range from 20% to 38%. In calculating these returns,;urrent prices for both inputs (including value of family labor imputed atcurrent wage rates, see para 6.02) and outputs were assumed to continue attheir present levels. The time to reach full development would vary fromthe year of investment up to 5 years for PNM's operations. In general,fisheries is a risky activity because control over catch is uncertain andfish pond yields are affected by pests and diseases. Therefore the sensi-tivity of the returns for fishing vessels (trawlers and skipjack boats) andfish ponds have been tested assuming a 15% decline in operating income.This resulted in rates of return ranging from 157% to 32% which aresatisfactory.

5.11 The value of total incremental production would be about US$8.1million per annum at full development. Based on present tax rates,incremental income tax returns would amount to about US$0.6 millionannually. The level of investments and expansion in output can ba expectedto generate substantial increases in employment, both family and paid labor(para 6.03).

VI. ECONOMIC BENEFITS AND JUSTIFICATION

6.01 Under the project and at current prices, estimated annual landingsof the skipjack vessels would be about 6,500 tons of skipjack tuna valued atUS$2.6 million, and trawlers 5,300 tons of fish (including some 5 percentshrimp) valued at US$1.3 million. Estimated annual incremental output ofmilkfish and shrimp at full development from project ponds would be about6,200 tons with a value of about US$4.0 million. Proposed small ice-plantswould provide ice valued at about US$0.2 million annually. It is envisagedthat practically all of the project skipjack tuna and about 1,600 tons ofshrimp would be exported annually. The value of these exports would amountto about US$5.7 million.

6.02 After making the necessary adjustments and based on currentprices, the economic rate of return would range from 22% for skipjackfishing vessels and trawlers to 42% for beach seine nets (Annex 13).A sensitivity analysis shows that increasing the cost of project investmentsby 30% without increasing the value of the benefits, the rate would befrom 15% to 29%. The figures would be 16% to 31% if the value of the netbenefits were to decline by 20%. These rates of return are satisfactory.

6.03 At full development, the new permanent jobs generated by theproject would be about 860 for the skipjack fishing boats, trawlers andcarrier vessels, 80 for the cold store complex and other on-shore facilities,and 70 for the small ice plants. The lift or beach seine nets would provide

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part-tinie employment for about 1,100 fishermen. The fish pond componentwould generate some 10,000 man year equivalent (3 million man days annually)of work at full development mostly for family labor presently underemployed.Further, during the development period spread over 5 years, constructionactivities for the total project would provide employment opportunitiesestimated at some 10,000 man years. kdditional employment resulting fromexpanded marketing activities would also add to project benefits.

6.04 A significant share of the project's incremental production,particularly the milkfish from the ponds and fish catch from the trawlers,would be consumed in the domestic market and this in turn would improve thelocal diet (para 2.05). The provision of ice would likewise improve thequality of shrimp and fish enroute to market. Small fishermen and fishpond operators who belong to the lowest income group, would also benefitto a large extent, as they are likely to comprise the majority of projectbeneficiaries. Finally, through its provision of technical expertise,the project would provide experience valuable to future fisheriesoperations, including the fisheries credit activities of BRI.

6.05 To evaluate the financial and economic benefits which will actuallyresult from the project, an assurance was obtained at negotiations that DGF inconsultation with IDA would establish and maintain an adequate program tomonitor and evaluate the financial and economic benefits resulting from theproject.

Ecology

6.06 Many fish ponds are downstream from intensive rice productionareas which use pesticides (including herbicides) for crop protection.Though the pesticide runoff, if any, does not seem to have had any visibleadverse effect on the production of the ponds which would include thoseparticipating under the project, it would be prudent and therefore necessaryfor DGF, through its centre for milkfish and shrimp research (para 2.20),to monitor the flow of pesticides into project ponds and to institutesuitable measures for conttolling any adverse effects where they may occur.An assurance on this was obtained at negotiations. Project pond use ofpesticides would not likely alter significantly the ecology of the surroundingareas as the amounts to be applied would be small.

VII. RECOMMENDATTONS

7.01 During negotiations agreement was reached on the followingprincipal points:

(a) GOI would provide sufficient funds to cover estimatedexpenditures required to be made by DGF under the project.Funds to meet the estimated expenditures of each quarterwould be made available to DGF not later than the fifteenthday of such quarter (para 3.29);

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(b) the agreed procurement procedures would be adheredto (para 3.37);

(c) the agreed lending terms and conditions detailed inSchedule A would be followed (para 4.19); and

(d) GOI would provide the necessary funds to PNM andcooperatives to enable them to contribute to projectcosts (para 4.22).

7.02 Conditions of disbursement would be:

(a) a qualified accountant for PNM would be appointed beforedisbursements to PNM can be made (para 4.12); and

(b) PNM would acquire a suitable site for the on-shorecomplex before disbursements to PNM or for any sub-loansfor the skipjack tuna subproject can be made (para 4.14).

7.03 Conditions of credit effectiveness would be:

(a) the budget of DGF for project expenditures up to March 31,1975 shall have been approved and funds equivalent toUS$200,000 will be available for project expenditures(para 3.29);

(b) at least one pond fisheries expert and the managementspecialist be appointed and in position (paras 4.04 and4.07); and

(c) subsidiary loan agreements acceptable to IDA have beenentered into between GOI and BRI, and GOI and PNM(para 4.19).

7.04 Subject to these conditions, the project is suitable for an IDAcredit of US$6.5 million.

May 7, 1974

SCHEDULE APage 1

INDONESIA

FISHERIES CREDIT PROJECT

Project Lending Terms and Conditions

The following lending terms and conditions would be used in im-plementing the project and would not be altered without the prior agreementof IDA.

1. GO0 would bear the foreign exchange risk.

2. GOI to PNM4:

(a) Interest rate at 12% per annum;

(b) PNM contribution to project costs: a minimum 20%for consultant services and 15% for all otherinvestments;

(c) Repayment period: maximum of 12 years, including agrace period of 3 years.

3. GOT to BRI:

(a) Interest rate at 4% per annum;

(b) Repayable as BRI received repayments from its sub-borrowers.

4. BRI to Sub-borrowers:

(a) Interest rate at 12% per annum;

(b) Sub-borrowers' contribution (including own labor andother contributions in cash and in kind):

a minimum of 15% of the cost of investment, includingincremental working capital, subject to the followingexceptions:

(i) Bait fishermen 5%;

(ii) Private entrepreneurs operating trawlers and smallice plants 25%;

(c) Repayment periods to be based on the repaying capacity ofthe investments, but not to exceed:

SCHEDULE APage 2

(i) 12 years for cooperatives operating skipjack fishingvessels including 2 years of grace;

(ii) 10 years without any grace period for bait fishermenfor the purchase of lift or beach seine nets;

(iii) 11 years, including one year of grace, for trawlersand small ice plants;

(iv) 9 years, including a grace period of 3 years, for fishand shrimp ponds in South Sulawesi; 12 years includinga grace period of 2 years for fish ponds in Java; and9 years, including a grace period of up to 2 years forshrimp ponds in Java.

(d) BRI will lend up to 95% of investment cost for lift or beach

seine nets, 75% for trawlers and small ice plants operatedby private entrepreneurs, and 85% for all other investments.

(e) Tnvestments would be evaluated in terms of incrementalreturns resulting from the additional investments underthe project.

May 7, 1974

ANNEX 1Page I

INDONESIA

FISHERIES CREDIT PROJECT

Marine Fisheries

1. Marine sources account for about two-thirds of Indonesia's annualfisheries production (estimated at 1.27 million tons in 1972). The Indonesianarchipelago spread over an area of some 5 million km2 comprises many islands,the larger ones of which include Java, Sumatra, Kalimantan, Sulawesi and theLower Sunda Islands. Indonesia has about 37,000 km of coastline (see Map).

2. The waters of Indonesia can be roughly divided into four majorfishing areas, each with its distinct characteristics. For all areas,the general pattern of water circulation varies seasonally under theinfluence of the monsoons. The continental shelf of Western Indonesiais characterized by its shallow waters and by its South China Sea fauna.The area is exploited mostly by traditional fishermen, and intensiveexploitation is found along the north coast of Java and the islandssurrounding Singapore. Traditional fishing gear designed to catch smallpelagic fish such as scad and Indian mackerel is used, although trawlershave recently been introduced to catch demersal fish. The deep watersand coral reef areas of Eastern Indonesia contain fauna of the PacificOcean, including yellowfin and skipjack tuna. Traditional fishermen fishmostly around the coral reefs with lines, traps, or lift nets. The continen-tal shelf of West Irian is considered the best fishing ground for shrimp,although it also contains important resources of demersal fish. The watersof the Indian Ocean along Nusa Tenggara Islands, Java and Sumatra havevirtually no continental shelf and instead are enriched with nutrients byupswellings off the Australian coast and by western currents. The mainfish resources are pelagic and include skipjack, little tuny, frigatemackerel and kingfish along the coast of Sumatra, the sardine Sardinosmelanostricta in the Bali Strait, and the yellowfin tuna.

3. FAO estimated the potential catches from these waters at somesix million tons annually, or about seven times the present annuallandings (Table 1-2). The potential for shrimp catch is an annual125,000 tons. The more productive areas - the so-called Upwelling Area -comprising the Java, Arafura, Flores and Banda seas and covering about750,000 km2, has a potential annual catch estimated at about 4 million tons.The Java Sea alone has an estimated potential of 2 million tons.

4. FAO also estimated the potential skipjack tuna resource in thetropical Western Pacific at 250,000 tons, of which some 150,000 tons arein Indonesian waters. The present annual catch of skipjack is about5,000 tons. Annual landings by the on-going IDA financed skipjack operationsin Sulawesi (10,000 tons), and the proposed project at Ambon (6,500 tons)would be considerably less than the potential catch.

ANNEX 1Page 2

5. According to Indonesian Governmenti estimates, a total of 839,000tons of marine fish were caught during 1972, by approximately 281,000sailing boats and 7,000 motorized boats, manned by 890,000 fishermen(Table 1-1). The sailboats were located primarily in Sulawesi (37%),Java (15%), Sumatra (15%), and Maluku (12%). The number of motorizedvessels increased by 23% from 1970 to 1971, and 65% of the total werelocated in Sumatra, principally Riau Province. Marine fishermen weredistributed most heavily in Sulawesi, Java and Sumatra.

6. About 95% of the total fish catch is salted, dried or smoked,with the remaining 5% sold as fresh fish. The distribution, marketingand pricing of marine fish are taken up under Annex 11.

7. Although fish accoumts for about 65% of the protein in -theIndonesian diet, annual per capita consumption is only about 10 kg whichis low even by the standards of other less developed countries (comparablefigures for Philippines and Malaysia are about 30 kg). In recent years,efforts have been made to improve production through the establishment ofState Fisheries Enterprises and of joint ventures with foreign capital.The joint ventures process and export their catch, primarily shrimp, andnow operate 70 fishing vessels (Table 1-4). In addition, marine fisheriesdevelopment is encouraged through the introduction of modern fisheriesgear, tax incentives, and through increased training facilities andextension services. Private domestic enterprises, most of which operateshrimp trawlers, are also encouraged.

8. Present marine fishing operations are confined mostly to shallow,protected waters a short distance from the coast, which is the only areaaccessible to small traditional fishing vessels. The traditional methodsof coastal fisheries are inefficient, resulting in low levels of productionper unit of effort. A great variety of fishing gear, including hook andline, numerous types of fishing traps, lift nets, gill nets, and seines,are used. Synthetic fibre netting is now commonly employed for all typesof nets. Lamps are often used to concentrate the fish before they arecaught in traps or nets. In addition to traditional fishing gear, ottertrawlers are used by a number of small motorized trawlers operating ininshore areas.

9. Total marine fish production in recent years has increasedslowly. Production rose from an estimated 785,000 tons in 1969 to 839,000tons in 1972, an average annual increase of about 2%. The fishermenin Java caught less over the period. This is because the coastal waters,particularly the five-mile zone along the north coast of Java, has overthe years been overfished by sail boats using traditional gear and fishingmethods (para 8), though the Java sea beyond the reach of these boatsprovides rich fishing grounds (para 3), especially for trawling, due toits relatively flat bottom and shallow waters. As a result, privateentrepreneurs have begun to invest in trawlers in recent years. TheGovernment has likewise been promoting the use of trawlers by its StateFisheries Enterprises and fisheries cooperatives. Although catches offthe Java coast are reported to be satisfactory, the little exploitedwaters off South Kalimantan offer potentially larger catches.

ANNEX 1Page 3

10. Decreased production on Java is particularly serious, sinceJava represents about two-thirds of the country's population and one-thirdof its total fish consumption. To contribute towards improved production,tnerefore, twenty-five 30 GT trawlers would be provided under the project,to be based in the ports of North Java and to fish in the relativelyunexploited waters off South Kalimantan. In addition, provision would bemade under the project to exploit the abundant resources of skipjacktuna for export (para 4). This would involve development of a small skip-Jack tuna industry in Ambon, including provision of twenty 30 GT skipjacktuna fishing vessels and two 100 GT carrier vessels, and construction ofonshore supporting facilities, including icemaking, freezer and storageunits.

April 24, 1974

ANNEX 1Table 1-1

INDONESIA

FISHERIES CREDIT PROJECT

Numb- Or Marine Fishinp, Vessels Registered in Indonesia (1971) 1"

Sailing Boats Motorized Vessels Fishermen

3- U1n~ t.~ rh 4L ;602 4,364 135,344

41,997 768 221,763

Kr,7' In rnt.qn 18,021. 1,163 40,826

's ~ IS<] 1- ?w as 104,004 153 259,459

N -s Ten9rara Isl3ands 26,459 25 62,004

Malulni And West Trian 418,844 247 174,365

Total 280,927 6,720 893,761

/I Prtliminary data.

Sour-'e Dire.ct.orate General of Fisheries.

ANNEX 1Table 1-2

INWNETA

FISHERIES CEIT PROJECT

Landin-gs Of Sea Fisheries 1967 - 1972(Thousands Tons)

1967 1968 1969 1970 1971 1/ 191/

Siuna.trR. 275-8 288.1 336.9 356.1 370.1 376.5

Java 138.7 155.8 154.4 147.4 135.5 138.1

Kalima,ntan 88.0 98.2 97.2 98.0 93.2 95.3

Sulawesi 117.0 112.2 123.3 125.0 135.8 11X9.0

Nuisa Tenggrn.a Islands 30.0 32.6 3)4.7 36.5 29.? 32.1

ManIliku and Weest Trian 2R.5 31.1 38.8 39.0 46.2 47.2

Total 678.0 718.7 785.3 802.0 810.0 838.5iT==D ==in =s 2 - == =' _

in P^1 itt >)rmv data.

So3ir- ?: Di reo'torat< Gen-eral of 7Psheries

ANNEX 1Table 1-3

INDONESIA

FISHERIES CREDIT PROJECT

Sea FisheriesLandings By Fishing Vessels From Java Island

And Total Landings For Indonesia

Island of Java All IndonesiaTotal

Number Number Total

of Landings Of Landings

Year Vessels (000 tons) Vessels (000 tons)

1967 35,000 138.7 240.,000 678.0

1968 40,000 155.8 282,000 718.7

1969 40jOoo 1 54.4 284,000 785.3

1970 44t,0o0 147.4 289,000 802.0

19712;/ 43,000 135.5 288,000 810.0

1972-/ 43,000 138.1 285,000 838.5

Source: Directorate General ot' Fisheries.

1/ Preliminary data.

ANNEX 1Table 1-4

INDONESIA

FISHERIES CREDIT PROJECT

Foreign Capital And Joint Venture EntqrPrises For Shrimp Fishing And Processing

Number ofName Fishing Area Vessels Production Ex-ports

(and base) (19 n )/Z (1971) -(19711___-_ i,ons -------

P.T. Tofico Z West KalimantanWest Irian IC 649 649

P.T. Misaja Mitra East and South Kalimantan 32 223 207

P.T. West Irian FishingIndustries West Irian (Sorong) A 1,009 1,009

P.T. Irian Marine ProductDevelopment West Irian (Sorong) ll 320 320

P.T. Nusantara West Irian (Ambon) 5 462 466

P.T. Mina Kertika West Irian (Ambon) 6 509 381

l Capital of this company is 100% Japanese; other enterprises areJapanese-Indonesian joint ventures,

12 Vessels are in the 90(T to 30(rrT range, except for those of Misaja Mitrawhich has (1971) 22 vassels of 2OGT, 9 vessels of 6OGT and one vessel 4OOGT.

Son'"- DI "+,ate Gn-nera. of' Fiqshertes.

ANNEX 2Page 1

INDONESIA

FISHERIES CREDIT PROJECT

Brackish Water Ponds

1. Brackish water pond culture of milkfish and shrimp represents theprincipal type of fish culture in Indonesia.1/ Milkfish or Chanos chanosare found in the warm (20-33C) coastal waters of the Red Sea and theIndian and Pacific Oceans. Despite its wide distribution, milkfish arecultured on a large scale only in Indonesia, the Philippines and Taiwan.Small scale culture occurs in a few other Asian countries because of limitedavailability of milkfish fry and the impossibility of spawning the speciesin captivity. Fully grown milkfish in its natural habitat reach weights ofup to 20 kg, though cultivated specimens are much smaller.

2. Penaeid shrimp are found throughout much of the tropical world.Although adaptable to a wide range of water temperatures, they are mostsuited to 25-28°C. Penaeid shrimp generally breed at sea and subsequentlydrift or swim into shallow coastal waters or estuaries, where they remainfor some time before returning to deeper waters. White shrimp (severalPenaeid species) and tiger shrimp (Penaeus monodon) are the two varietiesof marine shrimp most commonly found in Indonesia. Their life span isabout one year, during which they can be expected to grow to a maximum ofabout 40 and 70 grams respectively, when confined to a pond and not allowedto return to sea.

3. There are about 184,000 ha of brackish water ponds in Indonesia,the bulk of which are located along the north coast of Java and south coastof Sulawesi. This is because these two regions have extensive estuarineswamp areas suitable for pond development, greater abundance of milkfishfry, and proximity to large population concentrations which provide marketoutlets for the milkfish. Of the total. pond area, East Java accounts for34%, Central Java 14%, West Java 16%, and South Sulawesi 21% (Table 2-1).Most ponds are within 1 to 3 km of the sea, except in East Java where theymay be up to 20 km. Ponds vary in size from less than 1 ha up to 7 hawith the average ranging from about 1 ha in Central and West Java to 4-5 hain East Java and Sulawesi. Most are operator-owned. These ponds do nothave a more productive alternative use.

4. Brackish water culture in Indonesia has a long tradition. It wasinitiated at least 600 years ago as a mangrove swamp fishery using traps.Gradually, the mangrove was removed, dykes were constructed, ponds built,

1/ Brackish water ponds account for about 85% of the total pond area,with fresh water ponds the remaining 15%.

ANNEX 2Page 2

and finally, the custom prevailed of stocking the ponds with milkfish frycaught at sea. Individual ponds were built simply by bunding the perimeterand levelling the bottom. Technical development has not advanced muchbeyond this stage.

Present Fish Culture

5. Though there are some minor differences in the technique employedin milkfish culture among the major producing areas on Java and Sulawesi,the following general cultural practices prevail. A pond area is usuallydivided by secondary dykes into a nursery pond and one or more rearingponds. The first step in preparing for fry stocking is to drain the nurserypond and allow it to dry for about a week. The dry bottom soil is thenloosened and levelled by raking and tilling following which the pond isfilled with water to allow a growth of blue green algae to develop on thebottom of the pond. Fry, which the pond operator usually buys from a frydealer, are then introduced into the nursery pond. The fry would remainin the pond between 20-60 days feeding on the bottom algae and growing tofingerling size of 5-7 cm long, at which time they would be transferred torearing ponds. Preparation of the rearing ponds is similar to that for thenursery ponds. The fingerlings would in turn remain in the rearing pondsfor 120-150 days feeding on the bottom algae and plankton and attaining asize of 250-350 grams when they would be harvested and sold in a nearbymarket, usually by the pond operator himself. The cycle then repeatsitself.

6. Some fry may be captured in ponds near the coast by merely openingthe sluice gates on the incoming tide, but this is not an adequate meansof obtaining stock for culture. Most pond operators therefore purchase fryfrom dealers. The main fry collecting areas are the north shore of Javaand along the coast of South Sulawesi. Abundant fry are caught by fishermenin these areas and sold to fry dealers who in turn sell to pond operators.Fry supplies are readily available and can easily be increased when needed.

7. All brackish water shrimp cultivation takes place in milkfishponds which are generally within 1 km of the coast where water salinity issufficient for Panaeid shrimp requirements. Shrimp fry are generally notintentionally introduced into the ponds by the pond operators but enterthe ponds with the inflow of water from the sea, though there are somepond operators, mainly in South Sulawesi, who do stock their ponds withshrimp fry caught at sea. For post pond operators, the production ofshrimp is in effect a byproduct of milkfish culture. In addition, otherfish such as mullet and tilapia, and crabs are also brought into the pondsby the inflow of water, and they are harvested as byproducts of milkfishproduction. Panaeid shrimp are carnivorous, feeding on dead snails, crabsand insects off the pond bottom, and therefore co-exists with milkfish inthe same pond.

8. Because milkfish is primarily a bottom algae feeder and, to alesser extent, a plankton feeder, promoting and maintaining maximum growth

ANNEX 2Page 3

of this algae is essential. This has to be done by applying to the pondbottom fertilizers and organic manure to provide adequate nutrientsrequired by the algae, and pesticides to eliminate algae pests and predators(worms and snails) which compete with milkfish for food. Algae and milkfishgrowth are affected by water conditions in the pond such as salinity levels,water depth, and temperature. These conditions are in turn determined byproper pond construction, including dykes, canals, and sluice gates, whichregulate the flow of water in and out of the ponds. Sunlight is requiredfor algae growth and the penetration of sunlight to the pond bottom wouldbe determined by the depth and clarity of the water. Another importantfactor affecting the output of milkfish and the time required to reachmarketable size would be the extent by which stocking management would beable to prevent over-grazing of the available natural food either throughfish population control or supplemental feeding.

9. The majority of Indonesian pond operators do not use fertilizers,including organic manure, and pesticides. Where organic manure is applied,many use green manure of leaves and grass which are poor in nutrientsrequired by the algae. Moreover, many pond areas have very little controlif any, over water conditions, especially salinity levels and water depths,because of poor pond construction, low dykes, narrow and shallow canals,and incorrect positioning of the sluice gates, which do not permit effectiveregulation of the flow of water in and out of the ponds. In many instances,the number of these various water controlling devices are also inadequate.Furthermore, fish stocking management for an effective use of the availablefeed is virtually absent. In view of the above, pond yields are low,averaging about 330 kg per ha annually, with milkfish accounting for lessthan half (40-50%) the output. Crabs, shrimp, mullet, tilapia and otherfish, not usually intentionally introduced into the ponds, account for theremaining output. The disproportionately small share of milkfish isindicative of the low level of technology applied to the culture of thisfish. Another indication is that the majority of pond operators are ableto produce only a single harvest of milkfish a year. Table 2-2 shows thetotal area, production, yields and average size of ponds in the two mainproducing areas of Java and South Sulawesi.

Improved Fish Culture

10. Though most Indonesian pond operators practice a low level ofmilkfish culture, some of them have in recent years begun to adopt improvedcultural practices. Some control of water conditions in ponds have beenachieved through simple improvements, such as the raising of secondary dykesand ditches, deepening of pond bottoms and canals, and additional sluicegates. With some degree of water regulation and use of small amounts offertilizers (about 100-150 kg per ha) and in some instances pesticides,these operators have been getting substantially higher yields as well astwo harvests a year. In some instances, instead of just nursery and rearingponds, transition ponds have been built, in which fingerlings from nurseryponds are introduced to be better cared for before they are transferred to

ANNEX 2Page 4

rearing ponds. Most operators adopting these simple improvements areharvesting between 500-600 kg of milkfish and 100-150 kg of small shrimp

per ha per year, as well as some crabs, mullet, tilapia and other fish.

The milkEish yield would be about four fold larger than the average forall Indonesian ponds (para 9). The estimated cost of these improvements:excavation of canals, ditches and pond bottoms, raising of secondary dykes

(including additional ones for transition ponds), and additional sluicegates would vary up to about Rp 100,000 per ha depending on the condition

of the pond area to be improved, though for most, an average of aboutRp 60,000 would be sufficient.

11. For ponds near the coast with higher salinity levels, increasedemphasis is being given to shrimp production in addition to the culture of

milkfish. Shrimp thrive better in such ponds than in those away from the

coast with lower salinity levels. The emphasis on shrimp production,

especially of larger (exportable) size, has been increasing in recent years

as a result of strong export demand and high prices offered for this com-

modity. Milkfish as well as shrimp fry which are readily available, arepurchased from fry dealers for stocking in the ponds. Shrimp fry are also

purchased by pond operators since such fry brought into ponds by the inflowof sea water would neither be adequate nor satisfactory for the purposeof stocking. Pond preparation and the various stages of rearing for milk-

fish which have been described earlier, also applies to ponds which emphasisboth milkfish and shrimp production, except for the following: (a) Prior

to their introduction into common transition and rearing ponds, milkfish

and shrimp fry are put in separate nursery ponds to prevent possiblepredation of milkfish fry by the shrimp fry. Predation would be veryunlikely once the milkfish fry attains fingerly size; and (b) compared to

milkfish, shrimp requires better water conditions as well as water ofhigher salinity. This means more effective water control for ponds cultur-

ing both milkfish and shrimp production than for those which culture only

milkfish. Most pond operators culturing both milkfish and shrimp productionand who have carried out simple improvements similar to those described

earlier (para 10), have together with the use of fertilizers, organicmanure and pesticides, been getting about 300 kg of milkfish and between250-350 kg of shrimp per ha annually compared with about 150 kg of milkfish

and 20-60 kg of shrimp before the improvements were made. The cost of

the improvements has been estimated at about Rp 100,000 per ha.

12. Ponds with such technical improvements are few and concentratedin areas close to the main urban centers on South Sulawesi and Java. Though

increasing, the spread in their number has been slow. This is because many

pond operators, especially those in remote areas, are not aware that substan-tial increases in yields can be obtained through simple improvements, such

as better water control to obtain improved pond water conditions, and useof fertilizers and pesticides. Shortage of credit is another importantfactor mitigating against the rapid spread of pond improvement.

ANNEX 2Page 5

The ProJect

13. The proposed project would accelerate the spread of improvedpractices by providing credit to pond operators to improve their ponds,and to purchase fry, fertilizers and pesticides for the first harvest.Details on the various investment items are given in Annex 5. The costof the improvements would on average be Rp 60,000-Rp 62,000 per ha formilkfish ponds, and Rp 100,000-Rp 125,000 per ha for milkfish and shrimpponds. About 15,000 ha of ponds in South Sulawesi and Java would beimproved under the project, of which 7,000 ha would be the former typeand 8,000 ha of the latter. The projected distribution of the two typesof ponds among provinces and districts, the phasing of their developmentover a 5-year period, and the average pond size and number of pondoperators involved, are given in Annex 3, Tables 3-1 and 3-2. The projectarea would be restricted to Java and South Sulawesi because these twoareas have a regional comparative advantage for brackish water pondculture. Ponds producing both shrimp and milkfish would be in coastalareas with sufficient salinity levels for successful shrimp production.Pond development for milkfish alone would be carried out further inland.Project size has been determined by the availability of suitable pondarea, pond operator demand for such improvements, and with full accounttaken of the limited capacity of the fisheries extension service and of BankRakjat Indonesia's (BRI) limited experience in fish pond lending

14. Successful implementation of the project requires strengtheningof the fisheries extension service (para 16) and establishment of 45 one tofive-ha demonstration ponds to demonstrate to pond operators the techniquesfor improved production and their benefits. The proposed numbers and locationof the demonstration ponds among the different provinces in the projectarea as well as the phasing of their development are given in Annex 3,Table 3-3. Investment cost for each pond, a typical layout of which isgiven in Annex 3, Chart 7864, would be about Rp 2 million. A breakdown ofthe cost of the individual investment items is given in Annex 5. The pondswould be developed among those owned by the Government or individuals.There would be no difficulty in arranging with individual owners to usetheir ponds for demonstration purposes.

15. Under the project, the Directorate General of Fisheries (DGF)would provide the demonstration ponds and strengthen its fisheries extensionservice. To assist in this task, DGF would need the services of threepond fisheries experts for a period of two years. The experts would developthe demonstration ponds, train the required local fisheries extensionofficers who would help pond operators carry out their pond improvements.Terms of reference, qualifications and experience required of the expertsare given in Annex 10.

16. In Sulawesi and Java, where the project ponds would be located,the number assigned by DGF to inland fisheries extension work representsone extension officer for about 680 ha of ponds and is inadequate. An

ANNEX 2Page 6

appropriate coverage would be about 300 ha. There are at present 17extension officers in the project pond areas. Ninety-five would be neededfor appropriate coverage, one to develop and supervise each of the 45 de-monstration ponds and one to provide extension and loan appraisal servicesto about 300 ha of ponds. The proposed number of extension officers andtheir allocation among the different provinces over the project period aregiIen in Annex 3, Table 3-4. All extension officers would be required tohold the equivalent of a diploma from a senior inland fisheries high school.The appraisal of loan applications for pond improvements would be carriedout by the extension officer concerned, who would prepare a plan for eachpond indicating the improvements needed, their phasing and costs, andexpected financial returns. BRI would sanction loans on the basis of suchplans submitted by the extension officers and would disburse the loan inappropriate installments. It would ensure that a second or subsequentinstallment was not disbursed without certification from the extensionofficer concerned that the previous installment had been fully used accord-ing to the plan. Because successful implementation of fish pond improvementdepends on the provision of the experts, trained extension officers anddemonstration ponds, DGF would undertake that the experts would be appointedand in position as soon as possible, and the extension officersand ponds made available at least for the duration of the project. Thequalifications and experiences, as well as terms and conditions of employ-ment of the experts, would be approved by IDA. In cooperation with thecenter for brackish water culture research and development (para 19-20),the experts would prepare and implement a suitable program, satisfactoryto IDA, for the training of project extension officers at the center. Eachextension officer would also be trained in the region and under conditionsin which he would be working, primarily through on-site experience with thedemonstration ponds. Both the establishment of the demonstration ponds andthe availability of trained officers would precede the scheduled pondimprovements. Assurances were obtained that DGF would comply with the aboveconditions.

17. The project would provide credit to fisheries cooperatives andprivate entrepreneurs for the purchase of nine small ice plants which wouldsupply ice to preserve the quality of project fish and shrimp enroute tomarket. Project fish ponds are widely scattered. Several small ice plantsto be located in production areas where ice is not available, would bepreferable to a single large plant, because of the lack of suitable facil-ities to transport ice over long distances. The siting of the ice plantswould be determined by DGF on the advice of the pond fisheries experts(para 15). Each of the small ice plants, costing about Rp 18.5 million(US$45,000), would have a capacity of 5 tons of block ice per day, storagespace for 15 tons of ice, and equipped with a generator set. Small plantsof this capacity are already operating successfully in Java. Before projectloans for the ice plants could be given to fisheries cooperatives, DGF wouldappraise their management capability. Where this capability is deficient,DGF would require that a trained manager be posted to run the cooperatives(as it has done for many fisheries cooperatives), and that trained tech-nical staff be made available to operate the ice plant effectively.

ANNEX 2Page 7

Advance Fish Culture

18. In Taiwan, intensive production with annual yields of up to2,500 kg of milkfish per ha have been achieved, through excellent watercontrol and the adoption of adequate modern inputs (including fertilizers,pesticides and supplementary feeds), as well as advanced production andmanagement practices. To obtain excellent water control would in mostinstances require the use of large canals, gates and high dykes involvingmechanized equipment and heavy construction expenditures. In contrast,Indonesian pond culture practices are traditional and of low productivity.To try and raise the yields within a few years to the high levels prevail-ing in Taiwan would be unrealistic, because this requi.res a capital inten-sive technology and a management competence which the Indonesian pondoperators (particularly small operators) cannot be expected to acquirerapidly. In view of this, the project aims at financing pond improvementsat an intermediary level of technology suitable for dissemination to smalloperators, as an initial step in the long range development of more inten-sive pond culture in Indonesia. With this long range development in mind,the project demonstration ponds would demonstrate improvements envisagedunder the project, as well as more advanced pond culture practices forintensification of milkfish and shrimp production based on the futurefindings of DGF's center for brackish water fish culture research, currentlybeing developed with UNDP support at Jepara, Central Java.

Research

19. The objective of the Jepara center for brackish water pond cultureis to expand and increase the efficiency of pond culture of milkfish andshrimp on a national scale, through research on improved cultural techniques,and field testing and extension of the improved techniques among pondoperators. The long range research and development work program of thecenter would include:

(a) Introduction of improved methods of milkfish culture, adaptingthem as necessary to local conditions, and development of newtechniques for increasing the efficiency of operations.

(b) Undertake in the vicinity of Jepara, demonstration of success-ful techniques of milkfish culture, and training of fieldpersonnel, including extension workers, in the applicationof such techniques.

(c) Development of suitable methods of intensive and semi-intensiveculture of shrimp under local conditions, including the massrearing of shrimp larvae.

ANNEX 2Page 8

(d) Undertake surveys and studies to determine distribution, andimprove collection, handling, and transport of milkfish andshrimp fry.

(e) Investigations on the effects and extent of pollution, and ofpesticides and herbicides, on shrimp and milkfish culture,and to evolve suitable measures for controlling any adverseeffects.

20. Since improved techniques and other research findings of thecenter will of necessity have to be tested under various environmentalconditions, project demonstration ponds would play a useful role by 4M-plementing the improved techniques for both the purpose of field testingand demonstration to pond operators. The center would also be able toassist in the training of the extension officers required by the project(para 16).

November 16, 1973

ANNEX 2Table 2-1

INDONESIA

FISHERIES CREDIT PROJECT

Area of Brackish Water PondsBy Principal Producing Areas, 1971

AreaProvince ha

East Java 63,229 34

West Java 28s935 16

Central Java 25,771 14

South Sulawesi 37,697 21

Others (rest of Indonesia) 28,167 15

Total 183,799 100

Source: DGF

ANNEX 2Table 2-2

INDONESIA

FISHERIES CREDIT PROJECT

Area, Average Size and Production of Fish Ponds inthe Principal Producing Areas, 1971

South East Central WestSulawesi Java Java Java

Total Area (ha) 37,697 63,229 25,771 28,935

Total Production (tons) 15,100 16,200 9,900 10,900Of Which:

Milkfish 6,0oo 8,100 3,000 4,400Shrimp 650 3,000 1,300 1,000

Average Total ProductionPer Ha (kg) 400 260 380 380

Average Size of FishpondFarm (ha) 5 4 1 1

Milkfish Cropping Intensity 30% of the 4o% of the 20% of the 30% of thearea cropp- area cropp- area cropp- area cropp-ing twice a ing.twice a ing twice a ing twiceyear year year a year

Annual Milkfish Fry Catch(million) 117 110 2 2

Milkfish Production Phasing:(days)

Nursery ponds 60 20-ho 50-60 60Rearing ponds 120-150 120-150 120-150 150

ANNEX 3Page 1

INDONESIA

FISHERIES CREDIT PROJECT

Major Project Components and their Specifications

Ambon Subproject

1. Indonesian waters have been known, since before World War II,for their abundant resources of tuna,. The yellowfin tuna, ThunnusAlbacares, has been in high demand and has long been exploited by Japaneselongliners. Demand and price of this species have been rising continuously,while catch per unit of effort has diminished. Skipjack tuna, EuthynnusPelamis, a species of smaller size and darker meat - is found in greatabundance in the Ceram, Banda and Maluku seas (Annex 1, para 4). It hasrecently been subject to increasing international demand, as the yellowfintuna resources are overexploited and increasingly contaminated by mercury.Wider consumer acceptance of the skipjack's darker meat and its increasinguse for mixing with the lighter meat of other tuna has added to the demand.The price of skipjack has accordingly been on an upward trend. The ex-vessel price in Japan during the first 3 months of 1974 at about US$530per ton, is about double that in 1967. In view of this, the Government ofIndonesia has decided to exploit its skipjack tuna resources more fully,and essentially for export. The proposed project would greatly assist inthis effort.

2. Under the project, it is proposed to develop skipjack tuna fishingbased on Ambon island, through the provision of twenty 30 GT pole and linefishing boats; two 100 GT carrier vessels for transporting ice and fuel tothe fishing boats and bringing the catch back to Ambon; on-shore supportingfacilities, including icesaking, freezer, and storage units, 2 smalljetties for provisioning the fishing boats, a jetty for loading andunloading the carrier vessels and loading a freezer vessel with frozenskipjack for export, and repair facilities and slipway for the carriervessels and fishing boats; about 54 lift or beach seine nets for bait fishing;and technical assistance. About half of the fishing boats and nets, the twocarrier vessels and on-shore supporting facilities would be owned andoperated by the State Fisheries Enterprise at Ambon (PNM), a suitable entityto implement the subproject. Surrounded by the Ceram, Banda, and Malukuseas, and with fishermen many of whom have for many years been engaged incatching skipjack for the local market, Ambon would be a suitable locationfor the proposed project. An FAO study (test fishing) of bait fishresources for skipjack fishing in Ambon waters carried out during January1971 to March 1972, concluded that there would be sufficient bait tosustain at least an additional 20 fishing boats of the type envisaged underthe project (para 3), which in turn would determine the size of thesupporting facilities.

ANNEX 3Page 2

3. The 20 skipjack fishing boats which would be of the 3OGT classpowered by a 150 hp diesel engine, and with an overall length of about18 m and a depth of approximately 2 m, would be designed for pole andline fishing using live bait. They would be provided with insulated fishholds capable of storing up to 5 tons of skipjack (Chart 8044). Each boatwould carry a crew of 30. These type boats have been operating successfullyin Japan, Caroline Islands, and Indonesia, and are familiar to Indonesianfishermen engaged in skipjack fishing. They are also of a desirableminimum size to enable fishing to be carried out during the monsoon periodin Ambon waters where smaller craft would not be able to operate. Insteadof project fishing boats journeying to Ambon to unload skipjack catch andto load ice, fuel, and other supplies for the return trip to the fishinggrounds, it would be more efficient and profitable to use carrier vesselsto perform these functions and to allow fishing vessels maximum time in theirfishiirg operations. Two 100 GT carrier vessels to be provided by the projectwould be suitable for this purpose. Powered by a 240 hp diesel engine, thecarrier vessel would have an overall length of about 25 m and a depth ofapproximately 3 m, with insulated fish holds capable of storing up to15 tons of skipjack preserved in 15 tons of ice in about 20 tons of sea water(Chart 7843). Each vessel would be manned by a crew of 7. Investment costsincluding incremental working capital are estimated at about Rp 24 million(US$57,800) per fishing boat and Rp 67.4 million (US$162,400) per carriervessel. All vessels would have wooden hulls, as wood is cheap and readilyavailable locally. Skippers and other crew for the fishing and carriervessels would be available at Ambon.

4. The icemaking, freezer, and cold storage complex would includecold storage rooms for 500 tons of frozen skipjack maintained at -25*C,brine tanks with a capacity of freezing 25 tons of skipjack a day to -25°C;an ice plant capable of producing 50 tons of ice daily with adequate icestorage facilities, offices and store room, as well as three generator setsof some 1250 KVA, including 33% standby capacity to provide the necessarypower (Chart 7841). This size complex would be sufficient for projectneeds. Total investment cost for the complex is estimated at approximatelyRp 691 million (US$1.665 million). The complex would be located on a siteadjacent to PNM's present location. This site would be suitable for thecomplex as it has ample level ground, good water depth within a short distanceoff the shore, and a plentiful supply of fresh water. The main jetty would beconstructed on the same site, using local contractors and local hardwoods,and would be about 60 m long and 6 m wide. The outer face would be usedas a berth for all vessels and the inner face could be used by the carriervessels when the outer berth is occupied by the freezer vessel, so thatnormal operations would not be interrupted. The main skipjack fishinggrounds would be in waters off the fishing villages of Hitu and Waai wherefood and drinking water would be available. Small jetties, approximately 3 mwide and long enough to allow a minimum water depth of 3 m, would be con-structed in the fishing villages to facilitate access to food, drinking waterand bait supplies by the skipjack fishing boats. Costs of the jetties areestimated to be Rp 41.5 million (US$100,000) at the proposed cold storecomplex site and Rp 12.45 million (US$30,000) each at Hitu and Waai.

ANNEX 3Page 3

5. Other investments under the skipjack fishing subproject includeconstruction of a new slipway and enlargement of the present workshopfacilities to be located at the present PNM site, and estimated to costRp 41.7 million (US$100,000). These facilities would be required toservice project vessels. In addition, credit would be provided for thepurchase of about 54 lift or beach seine nets by PNM, fishermen and fisheriescooperatives to catch sufficient bait fish for the skipjack fishing operationsof the project. The cost of each net would be about Rp 500,000 (US$1,200).

6. Each of the 20 skipjack boats - about 10 to be owned by PNMand the remainder by the fisheries cooperatives - would be fishingapproximately 250 days per year and catching an average 1.3 tons per dayfor an annual total of 325 tons. Average fishing activity would be 21 daysper month and would account for the 5 days of full moon when bait isunavailable and for other contingencies. Due to various contingencies,it would also be expected that only 16 of the 20 boats would be operatingat any one time. With a catch averaging 1.3 tons per fishing day for eachboat, the 16 boats would accordingly land about 21 tons daily (para 7).Each boat would require 300 liters of diesel fuel and 1.3 tons of ice eachday. The jetties at Hitu and Waai would be used to take on food, water,crew and bait.

7. The two carrier vessels would simultaneously service the 20fishing boats. The trip from the port of Ambon to the fishing grounds offHitu and Waai would be approximately 5 hours. Each vessel would leaveAmbon Bay in the early morning with approximately 4,800 liters of dieselfuel, 48 liters of lubricating oil, and 22 tons of ice and would returnthe same evening with about 10 tons of skipjack tuna. The two carrier vesselswould have fish holds capable of storing up to 30 tons of skipjack (para 3).The skipjack upon arrival at the jetty at Ambon (Halong), would be transportedby trolley to the freezing and cold storage complex, where it would be frozenin a brine solution for 12 hours and then preserved in cold store rooms. Thecarrier vessels and all on-shore facilities would be owned and operated byPNM. The 500 ton capacity of the cold storage rooms could accommodateapproximately 1 month's catch. This would include the catch of the coop-eratives, which would be purchased by PNM according to the terms of anegotiated contract. PNM would also arrange for a purchasing contractwith one of the several foreign companies involved in Indonesia fisheries.A purchasing contract could easily be obtained. Negotiated prices wouldbe geared to world market prices. PNM could alternatively arrange tohave the catch shipped through chartered freezer vessels to consumingcountries to be sold through appointed selling or commission agents.

8. The 54 lift or beach seine nets to be provided under the projectwould be used to net daily approximately 2 tons of bait fish required tocatch the daily landings of some 20 tons of skipjack. The nets would beowned by PNM and by groups of fishermen who would operate in the areas ofAmbon Bay, Hitu, and Waai where bait is available. These fishermen would begrouped into cooperatives wherever practical. About 20 fishermen wouldoperate each net during 25 days of the month, and would catch approximately40 kg per day for a total of 1 ton' per month. They would be paid 100 Rp/kg

ANNEX 3Page 4

(current price) by PNM and skipjack fisheries cooperatives for their baitfish.

9. The new slipway and expanded workshop, under the ownership andoperation of PNM, would be used for needed repair and maintenance of vessels(see Chart 7839). All project vessels would require 2-3 days maintenanceevery 6 months when vessel bottoms would be scraped and their engines over-hauled. The new slipway and existing one would be provided with an electricuphauling winch, and the workshop with the necessary carpentry and machinetools. The project vessels of the cooperatives would be assessed a servicecharge for use of these facilities.

10. PNM would, under the proposed project, invest in and subsequentlyoperate about 10 skipjack tuna boats and 27 lift or beach seine nets, 2 car-rier vessels and all proposed onshore facilities, including ice making,freezing and storage units, slipways, workshop, offices and jetties. More-over, it would assume responsibility for the processing, preservation and ex-port of skipjack caught by both its own vessels and those of the cooperatives.It would commit itself to purchase all skipjack caught by the project vesselsfor sale to export markets. Four experts would be required to assist PNMto undertake these new responsibilities and substantially expanded operations.The type of experts and their periods of employment are given in Annexes 4and 10.

11. The project would provide credit for about ten fishing boats and27 lift or beach seine nets to fishermen and existing fisheries cooperatives.As many as 7 cooperatives would be involved, and most of them are alreadyengaged in skipjack fishing.

Trawler Subproject

12. The Java Sea provides rich trawling grounds. Its bottom isrelatively flat (continental shelf) and its waters are shallow. However,fish resources of parts of the Java Sea have been subject to overexploitation.In particular, the five-mile zone along the north coast of Java has overthe years been overfished by sail boats using traditional methods. Asa result, private entrepreneurs during recent years have begun to investin trawlers to exploit the fish resources beyond the reach of the sailboats. Although catches are reported to be satisfactory, the littleexploited waters off South Kalimantan offer potentially larger catches.Both areas contain mainly demersal fish, including pomfret, croaker, redsnapper, sole and shrimp. However, the size of catch, as well as thepercentage of shrimp in each catch, are said to be higher in the waters offSouth Kalimantan. For these reasons, the trawlers to be provided underthe project would be expected to fish primarily these waters.

13. The estimated 150 trawlers presently operating in the Java Seawould be exploiting only a small proportion of the potential catch. Thereis consequently a growing demand for such vessels. The project wouldfinance 25 trawlers. Available evidence suggests that they would easilybe taken up by potential borrowers (private entrepreneurs and fisheriescooperatives). The trawlers of the 30 GT class with wooden hulls would be

ANNEX 3Page 5

powered by 120 hp diesel engines (see Chart 7842). They would be about19 m long and 2 m deep and would be provided with insulated fish holdscapable of accommodating about 6 tons of fish and shrimp, a pair of sideroller winches, and a radio set for communication. This type of vessel ispresently operating successfully in the Java Sea. Each would carry a crewof ten. Trained crew for the trawlers would be available locally. For eachtrawler, the investment cost including incremental working capital isestimated at about Rp 23 million (US$55,200).

1.4. Estimated annual catch of the 25 trawlers is 5,250 tons or 210tons per trawler. The trawlers would be based in the principal ports ofthe North Java coast - Surabaya, Jakarta, Probolinggo, Semarang, Tuban,Sidoardjo, Tegal, Cirebon, or Pekalongan, where water depth is sufficient,adequate markets exist and facilities for processing shrimp are available.The trawlers would undertake trips of about three days to the waters offSouth Kalimantan. About 12 hours would be required for travel to andfrom the area, and the remaining two days would be spent to catch anestimated average of three tons. Each vessel would make approximately70 trips per year.

Fish Ponds Subproject

15. Under the project, it is proposed to finance simple improvementson 15,000 ha of milkfish and shrimp ponds on Java and Sulawesi, and estab-lishment of demonstration ponds and small ice plants. The project wouldalso provide technical assistance to help pond operators carry out theirpond improvements, develop demonstration ponds and train local fisheriesextension officers. Details of the project are given in Annex 2. Tables 3-1and 3-2 show the projected distribution of project ponds among the provincesand districts, the phasing of their development, and the average pond sizeand number of operators involved. The proposed numbers and location ofthe demonstration ponds among the different regions as well as the phasingof their development are given in Table 3-3. Table 3-4 shows the numberof extension officers required under the project and their allocation amongthe different provinces over the project period. A typical layout of ademonstration pond is illustrated in Chart 7864.

April 24, 1974

ANNEX 3Table 3-1

INDONESIA

FISTERIES CEFDITT PROJECT

Proposed Project Areas(ha)

Provinep Shrim Pond Fish Pond Total

South Sulawesi(mainly inPenghap andYavos Pistricts) 1,000 2,000 3,000

East Java(main] JSidoarjoand SurabajaDistricts) 2,500 2,500 5,000

Central Java(mainly Pati,KXnda I, Pemalang,and BrebesDistricts) 3,000 1,500 4,500

West. Java(mainly CirebonDistrict) 1,500 1,000 2,500

Total 8 7,000 15,000

INDOBNP IA

FISHERIES CREDIT PROJECT

Area To Be Improved in 5 Years (ha)Year Ave. Size Nc. of

1 2 3 4 5 TOTAL (ha) Farmers

S. Sulawesi 4oo 1,000 1,000 600 - 3,000 5 600

East Java 800 1,600 1,600 1,,000 5,000 4 1,250

Central Java 500 1,000 1,000 1,000 1,000 4,500 1 4,500

West Java 500 500 500 500 500 2,500 1 2,500

TOTAL 2,200 4,100 4,100 3,100 1,500 15,000 8,850

'D 5.

ANNEX 3Table 3-3

INDONESIA

FISJFRIES CMEbIT PROJECT

Pemonstration Ponds to be Constructed in 5 years

1 2 3 h 5 TOTAL

S. FIu}hwesi 3 3 2 - 10

Pst Javw 3 3 4 - - 10

%pn+.ral Java ? 5 5 3 - i5

West Java ? 3 3 2 - 10

TOTAL 9 11 15 7 - 5

Total Construction Cost* htU 70 75 35 - 225(Ts- '00 r)

* US.¢ %,OOO ver Dond.

INDONESIA

FISHERIES CREDIT PPOJECT

Required Demonstration Pond Supervisors and Extensi.on Workers

Year 1 2 3 h 5 Total

Required Demonstration Pond Supervisors

S. Sulawesi 2 3 3 2 - JO

E. Java 3 3 - 10

C. Java 2 5 5 3 - C¢

W. Java 2 3 3 2 - 10

TOTAL 9 Th 15 7 c

Required Extension Workers

S. Sulawesi 1 3 2 _ 10

E. Java 2 6 5 4 - 17

C. Java 2 3 4 3 3 15

W. Java 2 2 1 2 1 8

TOTAL 7 15 13 11 _ 5°

ALL TOTAL 16 29 28 18 4 95

Existing Extension Workers 17

Additional Extension Workers Required 78

Annex 3

INDONESIAFISHERIES CREDIT PROJECT

EXAMPLE OF ACCEPTABLE DESIGN FOR 30 G.T.WOODEN SKIPJACK LIVE BAIT POLE AND LINE FISHING VESSEL

PRINCIPAL PARTICULARS

LENGTH 17.50 M

BREADTH 3.90 M

DEPTH 1.80 M

GROSS TONNAGE (ABT) 30.0 Tons

MAIN ENGINE 150 H.P.

SERVICE SPEED 8.5 Knots

FISH HOLD CAPACITY 28.79 M3

FUEL OIL TANK 2.81 M3

FRESH WATER TANK 1.44 M3

COMPLEMENT 30 Persons

SCALE 1/70

World Bank-8044

4nnemx 3

INDONESIAFISHERIES CREDIT PROJECT

EXAMPLE OF ACCEPTABLE DESIGN FOR 100 G.T.WOODEN SKIPJACK CARRIER

PRINCIPAL PARTICULARS

LENGTH 25.40 M

BREADTH 5.10 M

DEPTH 2.60 M

GROSS TONNAGE (ABT) 100.0 Tons

MAIN ENGINE 240 H.P.

SERVICE SPEED 8.0 Knots

FISH HOLD CAPACITY 85.0 M3

FUEL OIL TANK 13.6 M3

FRESH WATER TANK 1.8 M3

COMPLEMENT 7 Persons

SCALE 1/200

A CREWS SPACE

B ENGINE ROOM

C = FISH HOLD World Bank---7843

INDONESIAFISHERIES CREDIT PROJECT

AMBON COLD STORE AND ICE PLANT

POSSIBLE FUTURE EXTENSION

~~~~~~~ I~ ~ ~ ~ ~ ~ ~ ~~(

i I I

l ~ ~ ~ _____ _____ __ …___

FISH . | * COLD u

FHEEzING STOREz

TAEZNKS *E- No. 2 ECONDENSERS,|

O ICE TAN KS, ETC. O MAKING

OFFICES , i LN

WOR KSHOPS , CO LD

\ v > ~~~~~~~~No. 3

TANLKL ,z * C . ~~~~~G EN ERATORS

/~~~~~I .

s_ *$~~'___1________ I

OFFICE ICE

SCALES ' STORE DAILYSTOS . STORE ICE LOADING6 01 5

TAK * IWorld Bank-7841

Anmt 3

INDONESIAFISHERIES CREDIT PROJECT

IMPROVEMENTS TO

P.N SHIP REPAIR FACILITIES AT AMBON (GALALAM

I / DERELICT \ \ / / / /~~EXSTIG OFIC

EXITIN C/ STO BE REBUILT} / ~~~AS REPAIR SHOP// ,°/ / /

<EEAND GEERLSTR

9 < / / / \ ~~~~~~~~~~~~~0 5 10 15 20 25M

| NEW ELECTRIC / I I I I

i WINCH /

l ~~~EXISTING METAL SHOP EXliING SW MLL

IYCIKDnCEr

EXISTING COLE) STOREAND GENERAL STORE

AMBON 4km HALONG 2km

World Bank-7839

INDONESIAFISHERIES CREDIT PROJECT

EXAMPLE OF ACCEPTABLE DESIGN FOR 30 G.T.WOODEN TRAWLER

PRINCIPAL PARTICULARS

LENGTH 18.97 M

BREADTH 4.11 M

DEPTH 1.90 M

GROSS TONNAGE (ABT) 30.0 Tons

MAIN ENGINE 120 H.P.

SERVICE SPEED 7.5 Knots

FISH HOLD CAPACITY 25.34 M3

FUEL CIL TANK 4.64 M3

FRESH WATER TANK 1.00 M3

COMPLEMENT 10 Persons

SCALE 1/100

Wiorld Bank-7842

Annex

INDONESIAFISHERIES CREDIT PROJECT

TYPICAL LAYOUT FOR 5 HA.DEMONSTRATION FISH POND

200m

I~~~~~~~~ I>

…r.., '---..I RP . ! z .RP I

1.0 Ha. 1.0 Ha.

r I

_ 11 < o 1t > ~~~~~~~LEGEND:

- ( ---------- ) . J r---- M R.P. REARING PONDLO = _. T.P. TRANSITiON POND

I , l , , ~~~~~~~~N.P. NURSERY POND

RP fiRP PL. PLATFORM (FOR HOUSE ETC,)1.0 Ha. 1.0 Ha.

! , , . . ' , z ~~~~~~~~~MAIN GATE

-nr _SECONDARY GATE

02Ha. PL 0.2 Ha. WAVE PROTECTION

NP <_ i ) l / Z&P;A, (MANGROVE OR BAMBOO)

_ ~ X ~ Scale 1:2000MAIN RIVER OR CREEK

7m 7m 1Om 7m 7m

4 4W

08m 1G0m 1.5m

SECTION THROUGH MAIN CANAL,DYKES AND DITCHES World Bank-7864

ANNPR

INDONESTA

FISHERIES CREDIT PROJECT

Estimated Project ImPlementation Schedule

Year 1 2 3 I 5 Total

1. Project Experts (% ofTotal Time):Management Adviser 15 25 25 25 10 100Cold Store (Electrical/Mechanical) Engineer 20 30 30 20 - 100Civil Engineer 50 50 - - - 100Naval Architect 20 30 30 20 - 100Fish Pond %recialists 25 50 25 - - 100

2. On-Shore FarllitiesCold Store Complex,

and Repair Facilities *JettiPs (no.) - 3 - - - 3

3. Pnrriper Vps.]s (no.) - 1 3 - - 2

1. Ski.njack Vessels (no.) - 2 18 - - 20

5. Trawlers (no.) - 12 5 8 - 25

6. Tce Plants (no.) - 3 3 2 1 9

7. Demonstration Ponds(no.) I3 14 15 7 - 45

8. Pond Improvements (ha) 2,200 14,100 4,100 3,100 1,500 15,000

9. Lift Nets/Beach Seines (no.) _ 4 50 - - 5L

* Com1peted in Year 2

Aupur+, 1, 197

ANNEX 5Page 1

INDONESIA

FISHERIES CREDIT PROJECT

Unit Costs

I. Ambon Sub-project

A. Skipjack Vessel

Investment Costs E

1. Wooden hull including equipment 15,000,000

2. Diesel engine including stern gearand propeller 7,500,000

Total 22,500,000

Annual Operating Costs

3, Commissions 2,926,0004. Catch bonus 7,503,0005. Fuel and lubricants 1,315,0006. Maintenance and repair 1,125,0007. Ice 3,900,0008. Insurance 1,350,0009. Overhead 1,200,00010. Bait 3,250,000

Total 22,569,000

B. Beach Seine

Investment Costs

1. Beach seine net with 6 lamps 500,000

Annual Operating Costs

2. Lamp oil 6,0003. Maintenance and repair 6,0004. Wages 768,000

Total 780,000

ANNEX 5Page 2

C. Carrier Vessel Rp

Investment Costs

1. Wooden hull includ:tng equipment 50,000,000

2. Diesel engine including stern gear

and propeller 12,000,000

Total 62,000,000

Annual Operating Costs

3. Fuel and lubricants 2,458,0004. Insurance 3,720,000

5. Maintenance and repair 3,100,000

6. Wage 1,050,0007. Overhead 1,200,000

Total 11,528,000

D. On-Shore Facilities

Investment Costs

1. Engineering Investigations and Design:Local assistance 15,000,000

2. Landing facilities:Jetty Ambon 41,500,000

Jetties Hitu and Waai 24,900,000

3. Fish Freezing and Storing and Ice Plant:

(i) Machinery and Equipment:

Generators 124,400,000

Refrigeration machinery 96,400,000Ice making equipment 56,500,000Piping, wiring, etc. 32,300,000Loading & unloading equipment 20,700,000Miscellaneous 35,000,000

ANNEX 5Page 3

Rp

(ii) Buildings, etc.:

Cold store & ice plant building 123,000,000Cold store & ice plant insulation 42,300,000Land acquisition and fencing 62,000,000Site works (building foundations,

levelling, roads, hardstanding,septic tanks) 34,400,000

(iii) Freight and Insurance:

Materials for ice plant/coldstore 49,100,000

Total 676,100,000

4. Repair Yard and Slipway:

Building extension 6,200,000Repair equipment 14,500,000Slipway - civil works 10,000,000Slipway - mechanical and electrical 11,000,000

Total 41,700,000

Total 1-4 799,200,000

Annual Operating Costs

1. Landing Facilities, Cold Store,Ice Plant and Freezing:

(i) Local staff 2,900,000(ii) General overhead 2,000,000(iii) Insurance on structures,

buildings & equipment 6,400,000(iv) Generator running costs 18,000,000(v) Lubrication 700,000(vi) Ammonia 1,000,000

(vii) Salt 2,100,000(viii) Maintenance and repairs 2,500,000

(ix) Labor (a) Regular 7,600,000(b) Loading refrigerator

vessel 1,500,000(x) Jetty maintenance 3,300,000(xi) Protective clothing, etc. 2,000,000

Total 50,000,000

ANNEX 5Page 4

Rp

2. Slipway and Boat Repair Yard:

(i) Permanent staff 1,050,000(ii) Insurance on structures,

buildings & equipment 400,000(iii) Generator running costs 50,000(iv) Maintenance of slipway & equipment 1,500,000

Total 3,000,000

II. Trawler Sub-project

Investment Costs

1. Wooden hull including equipment 15,000,0002. Diesel engine including stern gear

and propeller 6,000,000

Total 21,000,000

Annual Operating Costs

3. Commission 969,0004. Wage 1,500,0005. Fuel and lubricants 1,346,2506. Fishing gear 850,0007. Maintenance and repair 1,050,0008. Ice 840,0009. Food and water 1,120,00010. Salt 1,400,00011. Insurance 1,260,00012. Catch bonus 1,808,00013. Overhead 1,200,000

Total 13,343,000

III. Fish Pond Sub-project

A. Typical Milkfish Pond Improvement - Java(1 ha)

Investment Costs

1. Dykes and ditches 43,8002. Canals 11,2003. Gates 3,700

Total 58,700

ANNEX 5Page 5

Annual Operating Costs

4. Harvesting and maintenance 30,3005. Fish fry 22,0006. Fertilizer 7,6257. Insecticide 4,6258. Miscellaneous 2,000

Total 66,550

B. Typical Shrimp Pond Improvement - Java( ha)

Investment Costs

1. Dykes and ditches 70,1002. Canals 23,4003. Gates 7,0004. Equipment 4,700

Total 105,200

Annual Operating Costs

5. Harvesting and maintenance 76,5006. Shrimp fry 17,5007. Milkfish fry 9,0008. Fertilizer 9,7009. Insecticide 4,00010 Miscellaneous 4,000

Total 120,700

C. Typical Milkfish Pond ImprovementSouth Sulawesi (5 ha)

Investment Costs

1. Dykes and ditches 208,9002. Canals 52,2003. Gates 17,40

Total 278,500

ANNEX 5Page 6

Rp

Annual Operating Costs

4. Harvesting and maintenance 180,0005. Fish fry 37,5006. Fertilizer 30,0007. Insecticide 25,0008. Miscellaneous 5,000

Total 277,500

D. Typical Shrimp Pond ImprovementSouth Sulawesi (5 ha)

Investment Costs

1. Dykes and ditches 318,2502. Canals 106,0703. Gates 31,8204. Equipment 21,260

Total 477,400

Annual Operating Costs

5. Harvesting and maintenance 325,0006. Shrimp fry 112,5007. Milkfish fry 22,5008. Fertilizer 50,0009. Insecticide 25,000

10. Miscellaneous 15,000

Total 550,000

E. Milkfish Pemonstration Pond(5 ha)

Investment Costs

1. Main channel and dykes 750,0002. Perimeter and ditch 675,0003. Nursery and transition ponds 150,0004. Secondary dykes 300,0005. Master gates 80,0006. Secondary gates 96,000

Total 2,051,000

ANNEX 5Page 7

Rp

Annual Operating Costs

7. Harvesting and maintenance 339,0008. Fish fry 140,0009. Fertilizer and insecticide 70,00010. Miscellaneous 5,000

Total 554,000

F. Shrimp Demonstration Pond(5 ha)

Investment Costs

1. Main channel and dykes 750,0002. Perimeter and ditch 675,0003. Nursery and transition ponds 150,0004. Secondary dykes 300,0005. Main gates 80,0006. Secondary gates 96,000

Total 2,051,000

Annual Operating Costs

7. Harvesting and maintenance 489,0008. Milfish and shrimp fry 375,0009. Fertilizer and insecticide 70,00010. Miscellaneous 15,000

Total 949,000

G. 5T Ice Plant/15 Ton Ice Store

Investment Costs

1. Generator and control gear 2,800,0002. Ice plant 8,000,0003. Cold store 3,900,0004. Buildings 2,800,0005. Tubewell and water tank 1,000,000

Total 18,500,000

ANNEX 5Page 8

AnnWual Opegrating Costs(1,500 tons ice production)

6. Local staff 700,0007. General overhead 200,0008. Insurance on plant 200,0009. Generator running costs 900,00010. Lubricants, amonia 100,00011. Maintenance and repair 200,00012. Labor 400,000

Total 2,700,000

November 5, 1973

ANNEX 6

INDONESIA

FISHERIES CREDIT PROJECT

Estimated Quarterly Schedule of Disbursements

Cumulative DisbursementsQuarter Ending Rp Million US$ Million

1974/75September 30, 1974 _ _

December 31, 1974 55.0 0.1March 31, 1975 120.0 0.3June 30, 1975 214.0 0.5

1975/76

September 30, 1975 378.0 0.9December 31, 1975 598.0 1.4March 31, 1976 876.0 2.1June 30, 1976 1,205.0 2.9

September 30, 1976 1,424.0 3.hDecember 31, 1976 1,643.0 h.0March 31, 1977 1,862.0 4.5June 30, 1977 2,174.0 5.2

1977/78September 30, 1977 2,267.0 5.5December 31, 1977 2,360.0 5.7March 31, 1978 2,453.0 5.9June 30, 1978 2,562.0 6.2

1978/79September 30, 1978 2,590.0 6.2December 31, 1978 2,617.0 6.3March 31, 1979 2,64h.0 6.4June 30, 1979 2,675.9 6.5

April 18, 1974

ANNEX 7Page 1

INqDONESIA

FISHERIES CREDIT PROJECT

Bank Rakiat Indonesia

General

1. The Bank Rakjat Indonesia (BRI) is the principal source ofinstitutional credit for fisheries in Indonesia. However, its presentand projected operations in this field account for a small proportion ofits total operations. As on December 31, 1972, its total outstanding loansamounted to Rp 73.4 billion, of which loans for fisheries accounted forRp 1.3 billion or less than 2% of the total. If the proposed fisheriesproject is sanctioned, it will add about Rp 3 billion to its outstandingloans for fisheries over the next 5 to 6 years. As its other loans willalso grow, it is unlikely that the importance of fisheries in thedistribution of its loans will increase significantly as a result of theproject.

2. BRI is one of five state-owned banks. Though non agriculturalloans account for about one-half of its lending, BRI is assuming anincreasing role in the financing of agriculture, including fisheries, andother rural economic activities. Through a wide network of branch offices,village and mobile units, BRI is able to provide an extensive coverage ofthe country. It is through these units that most of their agriculturallending, principally to smallholders is being channelled. BRI would bethe most suitable lending institution for the proposed project, and infact is the lending bank for three on-going IDA financed projects.1/

Historical Perspective

3. BRI has a long history dating back to the end of the 19th century.It functioned mainly as a commercial bank in earlier years, financing theworking capital requirements of middle sized entrepreneurs in trade andindustry, including those of village traders. In 1960 it became aGovernment-owned bank for cooperatives, farmers, and fishermen. In 1965,when all Government banks, including the central bank of the country, weremerged into one bank, namely, the Bank Negara Indonesia (BNI), BRI was

1/ (a) Smallholder and Private Estate Tea Project, Report No. 124a-IND(May 1973).

(b) Beef Cattle Development Project, Report No. PA-153a (November1972).

(c) North Sumatra Smallholder Development Project, Report No. PA-140a(January 1973).

ANNEX 7Page 2

designated as Unit II of the BNI. By Act No. 21 dated December 31, 1968,however, the constituent units of the BNI were split up. The central bankof the country was designate1 as the Bank Indonesia (BI) and the BNI Unit IIas the BRI. Financing of agriculture and allied activities, includingfisheries, as well as rural small-scale industries and trade, was to bethe main function of the bank. For historical reasons, however, thefinancing of middle-sized entrepreneurs in trade and industry has continuedto account for a substantial proportion of its lending, notwithstandingthe fact that under the 1968 reorganization, the Bank Dagang Negara with49 branches was designated as the commercial trade bank and the Bank NegaraIndonesia 1946 with 188 branches and 43 sub-branches as the industrial bank.

Results of Operations

4. Summarized balance sheets and income and expenditure statementsof BRI for the last three years 1970-1972 are given in Tables 7-1 and 7-2.The capital of the bank was Rp 300.4 million of which Rp 300 million wascontributed by the Government. The other sources of funds of the bank asat the end of 1972 were: deposits Rp 61.2 billion, borrowing from BankIndonesia Rp 32.5 billion, other liabilities Rp 9.0 billion, and reservesand retained earnings Rp 10.4 billion, making-a total of about Rp 113.4 bil-lion.

5. The deployment of BRI's resources during the same period showedthat loans accounted for Rp 73.4 billion, which were in excess of itsdeposit resources, reflecting mainly the Government's policy of providingfunds to the bank through Bank Indonesia for specified purposes as, forexample, for the import of fertilizers (Rp 15.0 billion), for riceproduction under the Bimas program (Rp 10.3 billion) and for investmentcredit (Rp 6.5 billion). The rest of the resources of BRI were usedmainly for investments in securities (Rp 7.2 billion), deposits with theBank Indonesia and other banks (Rp 19 billion), and cash in hand (Rp 5.2billion). Though BRI was required to maintain 30% of the deposits itreceived in the form of liquid assets, the latter amounted to over Rp 31billion as against the requirement of Rp 18 billion. BRI had thereforeexcess liquidity.

Capital Base of BRI

6. BRI recently proposed that the Government increase its capitalcontribution from the present Rp 300 million to Rp 11 billion. However,the Government is not likely to accede to the proposal in view of BRI'salready excess liquidity position and the Government's budgetary constraints.Moreover, the Government has found it nore convenient to augment BRI'sresources through credits from the Bank Indonesia, particularly forpriority sectors, rather than through equity participation.

ANNEX 7Page 3

7. Because BRI's present capital and accumulated reserves wouldbe considered adequate in relation to the magnitude of its borrowings anddeposit liabilities, this may be another reason for the Government'sreluctance to increase its capital contributions as proposed by BRI.

Loans by Purpose

8. The distribution of BRI's loans by purpose is given in Table 7-3.The share of agriculture including livestock was about 45%, including some2% for fisheries. Trade, service (mainly investment) credit, industry,and other types of advances accounted for 24%, 17%, 9% and 5%, respectively.

9. A breakdown of BRI's advances for fisheries at the end ofDecember 1971 is given below:

Amount % of ArrearsPurpose Outstanding Arrears to Outstanding

----(Rp Millions)…

1. Inland Fisheries 488 138 282. Marine Fisheries 201 109 543. Processing 62 39 634. Marketing 51 51 1005. Salting 11 6 556. Export 79 21 277. Others 13 3 23

Total 905 367 40

The most important single purpose of loans in the fisheries sector wasinland fisheries which included fresh water as well as salt water fishponds. Loan arrears for inland fisheries were lower than those in mostother fisheries activities. This illustrates the superior bankability offish pond farmers who can offer their ponds as security. In the case ofsea fisheries, the main security which the fishermen can offer is theirboats and gear. To facilitate loan recovery, it would be desirable toinstitute some arrangement for crediting a part of the sale proceeds offish after each fishing trip towards loan repayment. BRI's operations inthe field of marketing/processing were small and not very successful asjudged from the large arrears. The recovery performance in respect ofcredit for the export of fish was relatively better, as it mainly involvedinterim accommodation against bills of lading, etc. until the receipt ofremittance from foreign buyers.

Profits

10. BRI ended the year 1972 with a net profit of Rp 578 million,which was small in relation to its working capital of Rp 113.4 billion atthe end of the year. The low level of profitability was attributable

ANNEX 7Page 4

mainly to its excessive liquidity, high administrative costs, and arelatively large volume of arrears.

Arrears

11. The amount of loans under arrears as on December 31, 1972, wasshown to be Rp 21.4 billion, or 30% of total outstanding loans (Table 7-3).Loans issued for the 1972 paddy crop (May-October) which had not fallendue for repayment appear to have been included as overdue. The arrearsdata reveal the following important features: in terms of amount, thearrears were the largest under agriculture, but as stated above, there mightbe some overestimation in the reported figures. More importantly, thearrears under the Government sponsored Bimas program (largely confined topaddy) amounting to Rp 5.7 billion out of a total outstanding loan amountof Rp 13.3 billion, included a sum of about Rp 2.5 billion in respect ofloans issued prior to 1970-71, that is, prior to the present improvedBimas program and the setting up of Village Units of BRI. It was understoodthat the Government of Indonesia had agreed to assume full responsibilityfor these old arrears. Thus, whereas under the Bimas program, the amountof arrears was about 43% of the corresponding outstanding loan amounts(Table 7-3) the loan recoveries under this program since 1971 has beenmore encouraging as indicated below:

Year and Season in Amount of Loans Percentage ofwhich Loans were Amount of Recovered at Loans Recoveredissued under the Loans End of to Total Loans

Bimas Program Issued April 1973 Issued----- (Rp billion)----------

1971 (May-Oct.) 1.93 1.67 871971-72 (Nov.-Apr.) 6.58 5.72 871972 (May-Oct.) 2.10 1.48 70

The decline in recoveries of the May-October 1972 crop loans was due to afairly widespread drought during that season, and BRI expects to make goodrecoveries from the 1972-73 paddy season. Under the Bimas program priorto 1970-71, only about 100,000 paddy growers were being financed each yearand the bulk of the amount advanced remained overdue, year after year.This was because BRI had no effective machinery for loan appraisal, super-vision and recovery under the old program, and depended largely upon thevillage head or the Lura for this purpose. Since 1971, however, BRIembarked upon a program of opening Village (or Desa) Units on a largescale, staffed by its own employees, each Unit covering a group ofvillages to give it a loan business large enough to render the Uniteconomically viable. BRI had opened about 1400 Village Units by June, 1973,and had reportedly provided credit from these Units to about 2 millionpaddy growers during the 1972-73 season. Judged against the rapid expansionin its loan business under the improved Bimas program, its recovery per-formance would appear to be quite impressive, particularly as compared to

ANNEX 7Page 5

that prior to the introduction of this improved program. Of the totalarrears of about Rp 21.4 billion as on December 31, 1972, about Rp 8.1 bil-lion were classified as dubious loans, which are covered by reserves.

12. BRI has recently received assistance from the Asian DevelopmentBank through a project to modernize and improve its operations, particularlythrough its accounting and reporting systems. In November 1973, a FAO/IBRDCooperative Program mission assisted BRI to prepare a rural credit projectfor subsequent IDA financing. The project is expected to include provisionto strengthen BRI's capacity to extend credit to farmers, including a stafftraining program. Immediate short-term technical assistance to BRI tohelp in implementing the on-going IDA smallholder tea, rubber and beef cattleprojects is included in these projects. The tea project also provides fundsfor internationally recruited consultants to recommend Improvements in BRI'smedium and long-term credit operations and to help implement these recom-mendations.

Interest Rates

13. BRI's schedule of its lending rates and rates paid by it ondeposits and borrowings is indicated below:

ANNEX 7Page 6

Lending Rtates

Annual Rateof Interest

Group I. A. 1) Bimas program for paddy 122) Import financed by PL 480,

excluding foodstuff 123) Imports of fertilizer and

insecticide 12

B. 1) Other crops and Bimas programfor poultry 15

2) Production for export 15

Group II. 1) Production and distributionof goods and services notincluded in Group I 18

2) Building construction 183) Professional services 18

Group III. Other Activities not includedin Groups I and II 18-24

Rates Paid on Deposits and Borrowings

.Savings Deposit 9-15Demand Deposit 3- 4.5Time Deposit 6-15

Funds from Central Bank for:-Bimas Program 4-Rural Credits 12-Import of Fertilizer 6-Investment 4

Funds from foreign banks for pre-export financing 8

Margin Earned on Interest Received and Paid

14. During 1972, the average cost of funds to BRI was 6.17% per annumwhereas the average interest earned.by it on its loans, investments andba.nk balances was 10.17% per annum. BRI, therefore, earned an averagemargin of 4%. Under the project, the margin earned by BRI would be 7.1%,considering that the margin earned on IDA funds would be 8% per annum (12%less 4%) and that on its own resources 5.83% per annum (12X less 6.17%) andthat the ratio between IDA funds and its own resources would be 49:51. As

ANNEX 7Page 7

BRI has been working at a profit on an overall margin of 4X, the marginavailable to it under the project would be adequate to meet its operatingcosts, particularly as it would get the support of the extension staff inprocessing the loan applications from fish pond farmers.

Collateral

15. BRI usually issues loans up to 70% of the value of collateral.However, its policy in this regard has been flexible. Depending upon thestanding of the party, or whether the loan was for an activity covered byone of the priority sectors, etc., the margin requirements in relation tocollateral have been varied. Under the project, BRI will have to financeup to 85% of the value of collateral (95% in the case of lift or beach seinenets), as the borrowers' equity would generally be limited to 15% of the cost ofinvestment and they would not be in a position to provide any collateralother than the investments made under the project, excepting the fish pondborrowers whose ponds would be more than adequate security for their loans.

Maintenance of Accounts

16. Though BRI's branches, regional offices, and head office maintainproper accounts of their transactions, the present reporting system is slowand the accounting system does not provide adequate management informationnecessary for decision-making. However, measures are underway to improvethe operations of BRI, including its accounting and reporting systems(para 12). BRI's accounts are audited by Bank Indonesia, and the auditis satisfactory.

Management and Organization

17. The Board of Managing Directors of BRI comprise four members,including the President. One of the Managing Directors is in charge oflending operations for agriculture, including fisheries.

18. BRI has seven operational and six administrative bureaus.There are four credit bureaus under one of which is a Fisheries Department.This Department is a relatively small one, comprising its head, threeofficers and other clerical staff. The appointment of a fisheries expertto this Department, particularly to liaise with the technical staff of theDirectorate General of Fisheries and PNM has been recommended under theproject. An organizational chart of BRI's head office is given inTable 7-4.

19. BRI has 13 regional offices, 219 branches, 77 sub-branches,509 mobile units and about 1,400 village units. The regional officesexercise control over branches in their jurisdication and arrange forthe remittance of funds to and from branches according to need. Anorganizational chart of BRI's regional office is given in Table 7-5.The branches of BRI are the main instruments for the collection of

ANNEX 7Page 8

deposits and lending of funds. The sub-branches and the mobile unitsare primarily extensions of the branches for the collection of dues anddisbursement of loans. They do not collect deposits or sanction loans.The recently opened village units, however, are authorized to sanctionloans.

20. As the village units were opened mainly with a view tofinancing cultivators under the Bimas scheme for increasing the productionof paddy, these units were authorized to sanction loans up to Rp 100,000per borrower under this scheme. The branches were authorized to sanctionloans up to Rp 1 million and regional offices up to Rp 5 million. Loansabove Rp 5 million have to be sent to the head office for sanction.

21. The total staff of BRI at the end of 1970 was about 10,000.As a result of the opening of a large number of village units (each having5 to 6 employees) and the general expansion in staff, the total staff wouldbe about 20,000 at present, with some 1,500 at BRI's head office.

December 12, 1973

ANN2X 7Table 7-1

INDONESIA

FISHERIES CREIIT PROJECT

Bark Rakjat Indonesia

Summarized Palance Sheets

At December 31 Each Year

1970 1971 1972---- Rp billion------

Current AssetsCash on hand !8T 4.02 5.21Canks (deposits and loans) 7.h9 7.56 18.97Govt. and other Secu&ties 4.03 6.01 7.17RflPpivables 2.48 4.98 2.841

Total 18.41 22.57 34.19

OrtstardinE, Loans 48.891/ 58.941/ 73.38

Pixed and Other Assets 2.148 4.36 5.83

Total Assets 69.78 85.87

TTARTIT.TIES

Cuirrent LiabilitiesA^e,otnts npyabie 4.414 5.09 5.77Demand deposits 24.29 2b..02 40.99

Total 28.73 29.11 46.76

Fixed DeLosit and Savings 6.23 13.16 20.22

Pank Tndonesia Borrowings 31.81 36.37 32.52

Ca r i. +.-al I2-Y/ - 2/0.30

P,serPTes and Retained Earnings 1.75 5.97 1Q.38

Other Liabilities L.26 1.26 3.22

Total liabilities 69.78 85.87 113.40

1/ Less provisions for doubtNul debts.9/ 1 DT's lauthorized capital of Rs 300 million not paid in.So.r"¢. rlT

ANNE 7Table 7-2

INDONESIA

FISHERIES CREDIT PROJECT

Bank RakJat Indonesia

Summarized Income and Expenditure Statements

1970 1971 1972-…----Rp million------

Income

Loan interest, provisions andother charges 8,373 10, 6 14 11,904

Other income 269 258 529

Total Income 8,642 10,872 12.433

Expenditures

Interest on borrowings anddeposits 3,675 4,910 6,136

Salaries and other personnelexpenditures 2,767 3,430 3,781Administrative and generalcharges 1,235 1,694 1,849

Other expenses 69 29 89

Total Expenditures 7,746 10.063 11,855

Earned Surplus After Provisionsfor Bad Debts and Depreciation 53 268 578

Source: BRI.

ANNEX 7Table 7-3

INDONESIA

FISHERIES CREDIT PROJECT

Bank RakJat Indonesia

Outstanding Loans and Arrears by Economic

Sectors As at tie End of 1972

ArrearsF.ronomic Sector OutstandingrLoans Amount % of Outstanding Loans

7R illion) (Rp billion)

Agriculture : l.Bimas 13.255 5.687 43

2.Others 17.725 3.176 18Total 30.980 8.863 29

Li-vestock 557 179 32

Fisheries 1.263 h68 37

Industry 7.006 3.555 51

Trade 17.426 5.006 29

Service 12.470 3.036 2h

Other EconomieActivities 3.682 280 8

Total 73.384 21.387 29

INDONESIA

FISHERIES CREDIT PROJECT

Organisational Chart of the Head Office of theBank RakJat Indonesia

C--- ! t | | ~~~~~~~~~~~~~~~~~~~~~~~Caonultative Body of|Inspectors I Staff |LeAdethip/Hployee|

Liquidity =_ Invest- Adminis- Research Controland Funds Credit BIMAS General Mont Foreign Opera- tration and (Supervi- Person- General SecretarialMobilisa- Bureau Bureau Credit Credit (Affairs) tional and Statis- sory) nel (Affairs) Bureau

tion =I Bureau Bureau Bureau Bureau B oou Bureau Bure u BureauBureau l i i i l i i i I I ~~~~~~~~~~Bokeein Bureauureu Br1

BurJ u kL 1pingBureau

Provincial orReglonal Offices

Branch Offices

I'1

INDONESIA

FISHERIES CREDIT PROJECT

Organizational Chart of the Provincial orRegional Offices of the Bank Rakiat Indonesia

Manager | -

|Secretary|

|Loan Dept,| Financial Dept.| Service Dept. |Control and Veri-|at. E4lDeP| fication Dt

Research Credit Accounting Administration Liquidities Verificatio Report*nd andnd and Logistics Section Section

Statistics Reports kkee Reports E Funds_X_L

Education Adm./Report

dministration Secretary

Report~~~~~~~~~~~~~~~~~~~J%

Lfl-

ANNEX 8Page 1

INDONESIA

FISHERIES CREDIT PROJECT

PN State Fisheries Enterprise, Maluku (PNM)

General

1. Established in March 1961, PNM is one of six State FisheriesEnterprises set up within the Directorate General of Fisheries (DGF) bythe Government to carry out some of its fisheries projects. Though majordecisions and policy matters rest with DGF, including the appointment ofPNM's board of management and assumption of responsibility of its financialcondition, this has not hampered PNM's progress which is the result ofcompetent management and autonomy in operations. Between 1961 and 1967,PNM provided slipway, workshop and sawmill facilities to service privatelyowned vessels and a passenger vessel service. In 1967, DGF provided PNMwith 5 fishing vessels mainly for skipjack fishing to supply the localmarket. From 1968, PNM has been working at a profit.

Financial Position

2. The balance sheets and income and expenditure statements ofPNM for the years 1970, 1971 and 1972 are given in Tables 8-1 and 8-2.The resources of PNM and their deployment at the end of 1972 were asfollows:

Resources (Rp '000) Deployment (Rp '000)

Capital 12,329 Vessels 1,800Accumulated Profits 15,332 Vehicles 300Profits for 1972 4,810 Land 2,500Depreciation Reserve 2,996 Building and Office 23,750Loan from Bapindo 7,683 Furniture/Fixture 736

Inventories 8,552Cash and Bank Balances 4,330

43,150 41,968

The difference between the resources and their deployment represented mainlythe amount receivable by PNM from traders on account of sale of skipjack.

ANNEX 8Page 2

3. The income, expenditure and profits of PNM during 1972 were asfollows:

Expenditure (Rp '000) Income (Rp '000)

Workshop 9,496 Sale of skipjack plusVessels (skipjack) 9,611 revenue from passengerVessel (passenger boat) 1,076 boat 26,791Overhead 6,829 Workshop 5,182Slipway 451 Slipway 251Profit 4,810 Miscellaneous 49

Total 32,273 Total 32,273

The main source of income of PNM was from the sale of skipjack, though abreakdown of income from this source and from the passenger boat was notavailable.

4. PNM earned some income from its workshop and slipway for thefirst time in 1972. However, the expenditure on workshop and slipway hadnot been allocated according to the work done on PNM's own vessels andthat done on other vessels. PNM earned a net profit of Rp 4.8 millionduring 1972, as compared to Rp 3.5 million in 1971 and Rp 3.3 million in1970.

5. The growth of PNM over the three years ending 1972, as reflectedin its balance sheets, comprised mainly the acquisition of land, constructionof an office building and a jetty, and improvements to its slipway andworkshop. The value of these fixed assets increased from an estimatedRp 7.9 million in 1970 to Rp 26.2 million in 1972. PNM financed theexpansion from its accumulated profits and reserves, a loan of Rp 12 millionfrom the Indonesian Development Bank (Bapindo), and an increase to itscapital of Rp 2.5 million (from Rp 9.8 million in 1970 and 1971 toRp 12.3 million in 1972). The loan from Bapindo was due to be repaid bythe end of 1972 but PNM had asked for an extension up to the end of 1976.The main reason for seeking an extension was that PNM required funds formeeting its working capital expenditure. It had, however, not arranged fora separate line of credit for this purpose, and hence was using the invest-ment loan taken from Bapindo to meet its working capital requirement. PNMwas also building a 5-ton cool room, for the purpose of preserving skipjackfor sale in the local market.

6. PNM's accounts were maintained in a very rudimentary way anddid not permit an evaluation of the cost/benefits of its different activi-ties. As these activities would grow in volume and diversity under theproject, the appointment of a qualified accountant in PNM, has beenrecommended.

ANNEX 8Page 3

Organization and Management

7. PNM has a three-member Board of Directors, including theExecutive Director. Though only the Executive Director was in positionat the time of the mission's visit, he has managed PNM's operations com-petently. PNM has separate departments or sections for fisheries,passenger boat, workshop and slipway, sawmill, navigation, cool room andadministration. The total staff employed was 71, including the ExecutiveDirector. An organization chart of PNM, with details of staff employedin each section, is given in Table 8-3.

8. PNM has succeeded in establishing itself in skipjack fishingand marketing and has acquired valuable experience as well as expertise inthis type of fisheries. However, the volume of its operations has beensmall compared to that envisaged under the proposed project. PNM willtherefore need strengthening, including an expansion in its staff, recruit-ment of expatriate technical and management experts and an increase in itsequity capital, for the purpose of the project. With the necessary strength-ening, PNM will be a suitable agency for the development of skipjack fishingfor export based on Ambon, through the provision of additional fishing andcarrier vessels, on-shore cold store and other supporting facilities.Details on the proposed project to be implemented by PNM are given inAnnex 3.

November 16, 1973

ANNEX 8Table 8-1

INDONESIA

FISHERIES CREDIT PROJECT

PN State Fisheries Enterprise, Ambon (PNM)

Balance Sheets at December 31 Each Year

1970 1971 1972-Rp thousand-

ASSETS

1. Cash- 1,016 5'15 1,9342. Bank Balances 869 147 2,3963. Accounts Receivable 7,389 5,673 12,1924. Work in Process 7,850 10,693 ( a/5. Mechanical Workshop and Saw Mill 7,906 9,811 (29,0866. Inventory 7,488 8,013 8,5527. Other Assets 4,514 2,721 808

37,032 37.573 54,968

LIABILITIES AND CAPITAL

1. Accounts Payable 36 1,813 6,9562. Loan from Indonesia Development Bank

(Bapindo) 12,000 7,683 7,6833. Depreciation 780 1,848 2,9964. Other Liabilities 2,586 1,053 4,8625. Capital 9,845 9,845 12,3296. Accumulated Profits 11,785 15,331 20,142

37,032 37,573 54,968

Source: PNM.

a/ Includes mainly buildings (office, workshops), land, vessels and vehicles.

ANNER 8Table 8-2

IN ESIA

FISHERIES CREDIT PROJECT

PK State Fisheries Enterprise, Ambon (PNN)

Income and Expenditure Statements

1970 1971 97-----Rp thouand --------

Income

Sale of skipjack and revenuefrom passenger boat 13,027 14,026 26,791

Workshop 5,182Other income 300

13,027 14.026 32.273

Operating Expenditures

Workshop 5,296 7,279 9,496Vessels 639 734 10,687Administration and overhead costs 3.801 2h42 7,280

,9736. MAN 27,463

Profit 323,54 4,810

Source: PNH.

INDONESIA

FISHERIES CREDIT PROJECT

PN State Fisheries Enterprise 1 Ambon (PNM)

Organization Chart

Chief Executive Director

| Directo for Finnce and dminiotrtion | |Director fcor Operation|

Passenger Vessel

General Amsonnistretion Sales Administration Slpway and Workshop 1 skipperand Accounting Section 2 assistant skipper

. 1 supervisor 1 supervisor 1 engineer1 supervisor 2 assistant 1 adm.{nistrator 6 workers 9 labour 2 assistant engineer

.Fish Vesse1Personnel Sectrion Administration sawmill

_ _ ~~~~~~~~~~~~~~~~Cool Room1 surpervisor _ 1 supervisor I supervisor2saerisor 1 assistant t8 labour 1 engineer

t i 1~~~~~~~~~~~~~~~~~ processor1 worker

Passenger Fsh VesselTechnical Administration Administration xSection (1^.torkshop-Sawmill) 5 skipper

1 supervisor 5 engineer A! 1 supervisor I assistant 5 assistant engineer aC

1 assistantl

ANNEX 9Page 1

INDONESIA

FISHERIES CREDIT PROJECT

Directorate General of Fisheries

1. The Directorate General of Fisheries (DGF) is the agency respon-sible for the administration of fisheries in Indonesia. Although its headoffice is located in Jakarta, most of its staff and offices are found atthe provincial, district and sub-district levels. As indicated in Table 9-1,it is one of five Directorate Generals located within the Ministry ofAgriculture. Table 9-2 contains an organizational chart of the DirectorateGeneral of Fisheries at its head office. Of particular importance to theproposed project is the Directorate of Fisheries Enterprise Development. Ithas responsibility for State Fisheries Enterprises and thus supervises theState Fisheries Enterprise, Maluku at Ambon (PNM). It also has responsibil-ity for technical advice to fishermen's cooperatives, and therefore assiststhe skipjack cooperatives at Ambon and the cooperatives that might operatethe proposed ice plants and trawlers.

2. The annual budget of DGF for 1973-74 is Rp 293.7 million forroutine expenditures and Rp 890.9 million for development expenditures (seeTable 9-3). Approximately Rp 180 million of this routine budget is allocatedto the various research and training institutes established by DGF. Theseinclude the Marine Fisheries Research Institute, Riau; the Fishing CraftInstitute, Jakarta; the Fisheries Technology Institute, Jakarta; the InlandFisheries Research Institutes at Jakarta, Surabaya, Palembang and Makasar;the Academy of Fisheries, Jakarta; the Senior Inland Fisheries High School,Bogor; the Senior Marine Fisheries High Schools at Tegal and Menado; theJunior Marine Fisheries High Schools and training centers at Singaraja,Ambon and Belawan and the Fisheries Training Center, Sukabumi (Tables 9-3and 9-4). Training at the three junior high schools relates primarily totrawler operations, at the senior high school at Bogor to inland fisheries,and at the remaining two senior high schools to marine fisheries. Ofparticular significance is the fisheries training center established atTegal with UNDP/FAO assistance to provide practical training in fishingtechniques, fishing gear assembling, net making and mending and navigation.Similar centers are planned by DGF for other parts of Indonesia. Inaddition, a number of fellowships and training programs have been institutedunder UNDP funding. Finally, Indonesian fishermen are now being trainedon many of the 70 foreign fishing vessels operating under joint ventureagreement.

3. The research institutes are dealing, respectively, with marineresources research, fishing equipment technology, fish processing tech-nology and inland fisheries research. However, the impact of this research

ANNEX 9Page 2

on fisheries development in Indonesia has thus far been negligible. UnderUNDP/FAO auspices, research on brackish water shrimp and milkfish cultureis now also underway (Annex 2, para 19-20). The collection of statisticaldata, which falls primarily under the responsibility of DGF, is extremelydeficient and requires substantial improvement.

4. Fisheries administration at the provincial level falls under thedirection of the Provincial Fisheries Services (PFS). Typically, the PFSis organized at its head office into sections on planning, education andresearch, technical and administration. The PFS in Central Java, forexample, has a total staff of 188, of whom 15 are in the planning section,61 in the education and research section, 32 in the technical section and74 in the administration section. Table 9-5 provides an organizationalchart of this office and indicates the specific responsibilities of itspersonnel.

5. The PFS interacts most directly with both marine and inlandfishermen through the extension services provided by its district and sub-district offices. These offices are widely scattered throughout each pro-vince; for example, 24 district offices can be found in the province ofWest Java. The offices of the District Fisheries Services are typicallymanned by a staff of about 25, of whom 18-20 are extension officers. Theseextension workers provide the direct and regular contact with the localfishermen. They also act as the principal channel through which improvedmethods can be passed on to the fishermen.

November 16, 1973

INDONESIA

FISHERIES CREDIT PROJECT

Fisheries Organization and Administration

Ministry of Agriculture

Minister of Agriculture

SecretaryGeneral

General Bureau

Bureau of Organization and Methods

Bureau of Personnel

Bureau of Finance

Bureau of Materials

Bureau of Law

Bureau of Planning

Bureau of Economic and Foreign Relations

Directorate of Directorate of Directorate of Directorate of Directorate of InspectorAgriculture Fisheries Veterinary Forestry Estates General

Services

INDON1B3IA

FISHEIW, CREDIT PROJECTORGANIZATIONAL CHiART OF THE DA UVo,RA--GCENFRAL O' FISHERIES

DIRECTOR-4ENERALOF FISHERIES

I Personnel Division _ . Director of Director of Director gf Fisheries Director of Directu.r ofPlanning - Production Enterprise Development Extension Work Resourcs

F tadii .tion.

| Divieion _,"* Statistics Divisiom Fishing Technique Division Enterpriso Development Fich InCormation Reoource MwagementDivision Division Division

Plan/Progrsmme Water Pollution

Finance Division Prccessing Division Fish Culture Division Oredit Scheme Division Extension Work Division Prevention t.iviaion

Infrastructure Enterprise Analysis and Education er-d Training Cor.-',rvat on Facilities

Legal anid Or&anisa- Planrin:q Divis.on Fish Marketing Division Legialation Division Diviojon Mnr.anement Divitsion

tin ivso - F - _ .

Programme Evaluation Fish Proceesinp Fisheries CooperativesDivision Techniology Div:sion Division Secretariat Secretariat

Foreign RelationDivieoion -X

.enretariat Secretariat Secretariat

Documentation and|Public Relation Division >:-3

1 1 SI'X'Il.'-IS I i I (D >s;~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(P.l. '!f .l:lzl l X~~~~~~~~~~~~

ANNEX 9

Table 9-3INDONESIA

FISHERIES CREDIT PROJECT

1973-74 Budget: Directorate General of Fisheries

Routine Budget R

I. Office of Directorate General of Fisheries(salaries, equipment, maintenance, travel) 1134,h40,800

II. Research and training institutions

A. Jakarta:

Office of Inland Fisheries Research 65,482,800Institute, Office of Fishing CraftInstitute, Office of Fisheries TechnologyInstitute, Academy of Fisheries

B. West Java:

Bogor Senior Inland Fisheries High School, 45,182,400Sukabumi Fisheries Training Center, BogorOffice of Inland Fisheries ResearchInstitute

C. Central Java:

Tegal Senior M4arine Fisheries High School, 26,920,100Office of Fisheries Research Institute

D. East Java:

Surabaya office of Inland FisheriesResearch Institute 2,482,000

E. South Sumatra:

Palembang office of Inland FisheriesResearch Institute 2,529,500

F. Riau:

Tanjong Pinrang office of Marine FisheriesResear$h Institute 2,311,000

G. North Sumatra:

Belawan Fisheries Training Center 7,079,000

ANNEX 9Table 9-3

Rou ne Budget

H. North Sulawesi:

Menado Senior Marine Fisheries High School 8,171,000

I. South Sulawesi:

Makasar office of Inland Fisheries ResearchInstitute 2,933,000

J. Maluku:

Ambon Junior Marine Fisheries High School 9,036,000

K. Bali:

Singaraja Junior Marine Fisheries High School 8,160,000

180,286,800

Total 293,727,600

Development Budget

Fisheries Infrastructure 89,799,000

Research 259,463,000

Extension work 95,000,000

Planning 52,350,000

Education 244,300,000

Physical Infrastructure 50,000,000

790,912,000

Equity capital for Benoa StateFisheries Enterprise 100,000,000

Total 890,912,000

INDONESIA

FISHERIES CREDIT PROJECT

TRAINING INSTITUTIONS OPERA,TED BY THE DIRECTORATEGENERAL OF FISHERILJS

No. Name of Institu-tion Location Duration of Study Established Academic Ultimate Number ofLevel Application Graduates

1. Fisheries Academy Jakarta 3 years 1962 University Government; 278Private Enter- (Fishingprise; State TechniqueEnterprise - 184;

Technology- 94).

2. Fisheries Senior High Tegal, Central 3 years; 2-6 months* 1950 High School Government; 263;142*School* Java Private

Enterprise

3. Fisheries Senior High Menado, North 3 years 1958 High School Government;School Sulawesi Private

Enterprise 181

4. Fisheries Senior High Bogor, West 4 years 1968 High School Government 204School Java

5. Junior Fisheries High Singaraja, Bali 3 years; 3 months* 1962 Pre-High Government;School* School Private 166; 27*

Enterprise

6. Junior Fisheries THigh Belawan , NorthSchool* Sumatra 3 years; 3 inonths*- 1962 Pre-Hligh Government; 78; 19*

School PrivateEnterprise

7. Junior Fisheries High Ambon, Maluku 3 years; 3 months* 1958 Pre-High Government; 204 h 3School* School Private

Enterprise (

Note* Refers to separate short-term training component offered by some of the above institutions.

TNDONFSIA

FISHERIES CR-DTT PROJECT

Provincia2 Fisheries Serviee Central Java

Director

Secretaries 2

Public Relations 3

Coordinator of DistrictFisheries Services 1

I I I .

Administration Plannine Technical Education and Research

i) Head 1 i) Head 1 i) Inland Fisheries 8 i) Head 1

ii) Financing Section 1 ii) Statistics and ii) Marine Fisheries 9 ii) Education 19

Docxumentation 8iii) Personnel Section 12 iii) Physical and iii) Marketing 4 iii) Docks and Slipways 13

Financial 3iv) Law and Regulation 3 iv) Project Evaluation 3 iv) Processing 3 iv) Marine Fisheries 17

v) Office Management 4 4 v) Cooperatives 8 v) Inland Fisheries 11

714 15 32 61

\10\

ANNEX 10Page 1

INDONESIA

FISHERIES CREDIT PROJECT

Terms of Reference for Technical Assistance Personnel

Introduction

1. Technical assistance would be required to assure the effectiveimplementation of the project. Seven experts would be provided for atotal of 17 man years. These experts would comprise:

(a) a management specialist to advise the Executive Director ofthe PN State Fisheries Enterprise at Ambon (PNM) on theplanning, organization, and operation of the skipjack sub-project. He would also supervise and coordinate the workof the project engineers and naval architect, and initiatethe training of local personnel. His services would beneeded for 4 years;

(b) an electrical/mechanical engineer, responsible for theplanning, design, and construction supervision of the icemaking, freezing, and cold storage complex and the smallice plants. His services would be required for 3 years;

(c) a civil engineer responsible for the planning, design andconstruction supervision of project civil engineering andbuilding works. His services would be required for a year;

(d) a naval architect/master boat builder responsible for theplanning, design, and construction supervision of all projectvessels and, in collaboration with the two project engineers,of the additional repair facilities needed under the skip-jack project. His services would be required for 3 years;and

(e) three fisheries specialists for fish pond development res-ponsible for development of the demonstration ponds, train-ing of the required fisheries extension officers and, assis-tance to pond operators in carrying out the necessary pondimprovements. Each specialist would be required for 2 years.

AIOEX 10Page 2

Specific Responsibilities

2. The management specialist would:

(a) be responsible to the Executive Director of the PNM in anadvisory rather than executive capacity;

(b) establish general requirements for the project, includingtype, number and size of fishing vessels and fishing gear,the siting and requirements of the landing facilities, thecapacity and operational layout of the ice plant/freezer/cold store complex and of the repair shop and the methodsof fish handling;

(c) establish a suitable organizational structure for the PNMand train personnel for the various functions required.Arrangements for sepcialized courses would be includedwhere necessary. In addition, special attention would begiven to the training of fishermen in the use of ice;

(d) establish suitable policies and procedures for all activi-ties of the PNM, particularly in operations, marketing andaccounting;

(e) advise the fisheries cooperatives involved on all relevantpolicies and procedures relating to the project and providefor a satisfactory working relationship and proper channelof communication between the PNM and the cooperatives; and

(f) coordinate and supervise the work of the civil engineer,the electrical/mechanical engineer, and the naval architect/master boat builder.

3. The civil engineer, the electrical/mechanical engineer, and thenaval architect/master boat builder would each advise on his individualexpertise. Specifically, the civil engineer would provide the necessaryexpertise relating to the construction of the letties, and the additionalslipway. He would also be responsible for the foundation, building andother civil works associated with the main cold store complex and workshopat Ambon, and the small ice plants. The electrical/mechanical engineerwould provide the relevant expertise required for the cold store complexand the small ice plants, and the naval architect/master boat builder,expertise for the twenty skipjack vessels, the two carrier vessels and thetwenty-five trawlers.

4. Each of the three experts would be responsible for a number ofcommon functions as they apply to his area of concern, including:

(a) planning and design of required facilities;

ANNEX 10Page 3

(b) preparation of specifications, drawings and bills of quantity,and advice on appropriate contract conditions to enable com-petitive quotations to be obtained;

(c) assessment of quotations and advice on terms of acceptanceincluding negotiation of any modifications necessary;

(d) arrangement of procurement procedures;

(e) supervision of construction;

(f) guidance in the operation, repair and maintenance of thefacilities concerned; and

(g) training of appropriate Indonesian counterparts.

5. The three pond fisheries specialists would:

(a) be responsible to the Directorate General of Fisheries;

(b) each assume responsibility for the improvement of projectponds in South Sulawesi, East Jalva, and Central and WestJava respectively;

(c) select areas which would benefit most from the proposedimprovements and arrange, as far as possible, for theseareas to be developed first;

(d) assess the salt and fresh water supply flows in the projectareas and determine improvements to channels and sluice gatesto enable better water control to be achieved;

(e) examine the size and layout of the existing dykes, platformsand ditches in fish ponds and determine the improvementsthat should be made to give a better relationship betweenareas of nursery ponds, transition ponds and rearing pondsto enable higher yields to be achieved;

(f) study the soil composition in the pond bottoms with partic-ular reference to the proportion and nature of the organicmatter in it, and determine the type and quantity of fer-tilizer and pesticide that should be applied to createbetter conditions for the growth of benthic algae, and thetiming and method of application of the fertilizer and pes-ticides;

(g) designate the type of culture to be practiced in the indi-vidual ponds (i.e. milkfish or shrimp), the density of

ANNEX 10Page 4

stocking and the timing of the release of the fingerlingsinto the transition and rearing ponds;

(h) study the existing harvesting and marketing arrangementsand recommend improvements, including selecting suitablesites for the location of small ice plants where theprovision of an increased supply of ice would materiallyimprove the quality of the fish to the consumer;

(i) select suitable sites for the establishment of demonstra-tion ponds; design dykes, channels and gate layouts forthem and arrange for their construction;

(j) prepare and execute a program to train the 95 extensionpersonnel required to supervise the demonstration ponds andto provide the extension services for project pond improve-ments;

(k) study the feasibility of increasing yields significantlyhigher than that envisaged for project ponds through heavyinvestment in infrastructure to permit more exact salinitycontrol, and use of intensive farming methods; and

(1) examine the possible adverse effects upon fish pond produc-tion of upstream agricultural practices and recommendpossible remedial or preventive actions.

Qualifications

6. The management specialist would be a graduate from a recognizeduniversity or technical college, with at least 10 years experience in afishing company, and not less than 2 years practical experience, in asenior managerial capacity, in skipjack operations, including fishing,handling and export marketing.

7. The civil engineer would be a graduate in civil engineering froma recognized university or technical college, possessing not less thaneight years experience in the planning and design of civil engineeringworks, of which not less than two years shall have been spent on thedesign of port and harbor works. He would also have had at least twoyears experience on civil works in a tropical country. In addit~ion, hewould have adequate experience in building construction and foundation,surveys and soils investigation, water supply, minor site works, andconstruction in timber.

8. The electrical/mechanical engineer would be a graduate in mech-anical and/or electrical engineering from a recognized university or tech-nical college, possessing at least ten years experience in design and super-vision of construction of heavy mechanical and electrical installations of

ANNEX 10Page 5

which not less than one year shall have been spent on refrigeration mach-inery, ice plants and cold stores, including preparing designs and tenderdoe~uments in a tropical developing country, approving working drawings andadmdnistering contracts, and supervising building construction and installa-tion of equipment.

9. The naval architect/master ship builder would be a graduate innaval architecture of a recognized university or technical college, possess-

ing not less than ten years practical experience in boat construction,including not less than two years in:

(a) small wooden boat construction;

(b) fishing boat construction and supervision in tropical coun-tries; and

(c) preparing documents to enable tenders to be invited for boatconstruction.

10. The pond fisheries experts would be graduates from a recognizeduniversity or technical college in marine biology, fisheries, or an asso-ciated discipline, possessing not less than seven years practical experiencein aquaculture, preferably under tropical conditions.

11. All experts would be fluent in English and would preferably havea working knowledge of Indonesian.

November 16, 1973

ANNEX 1 1Page 1

INDONESIA

FISHERIES CREDIT PROJECT

Marketing and Prices

Introduction

1. Total fish production in Indonesia was estimated at 1,268,000 tonsin 1972, of which approximately 839,000 tons, or 66%, were marine fish,289,000 tons, or 23%, were inland fish and 140,000 tons, or 11%, werecultured fish. About 3% of total production was exported, including shrimpvalued at some $22 million. In addition, small amounts of a wide range offisheries, including dried fish, frozen fish fillets, sea weeds and shell-fish, were exported. Though fish is the maLn source of protein for theIndonesians, annual consumption is low, at approximately 10 kg per capita.The separation of principal producing areas from the main consuming centersposes a major marketing problem because of poor transportation and handlingfacilities. Sumatra, comprising 17Z and Sulawesi 7% of the total population,accounted for about 45% and 18% respectively of marine fisheries production,while Java with approximately 64Z of the total population and 30% of domesticfish consumption, is responsible for only 16% of the marine catch (20% oftotal fish production). Kalimantan accounted for about 58% and Sumatra 24%of the fish catch from inland rivers and lakes. Java produced about 73%and South Sulawesi about 12% of the fish reared in ponds.

2. Fish is processed for the domestic market under a variety ofmethods - dried, salted, smoked, cooked, canned or frozen. The highestpercentage is sold as heavily salted dried fish shipped from the producingareas in covers of straw and leaves. For example, cargo boats that takemiscellaneous merchandise to the various islands of the Indonesian archi-pelago often carry dried and salted fish as-return cargo. However, inspite of the loss of weight and the additional cost of salt, the producerreceives little or no more per kilo for salted fish than for fresh fish.Dried fish is transported inland with other dry cargo, as is canned andsmoked fish. It is sold with other food and household goods in marketsand local stores, and is thereby assured a wide distribution. Smoked fishis often sold by the same retailers that sell dried fish, but always insmall quantities.

3. Consumer surveys indicate that consumption of fresh fish in Javawould greatly increase if more were available and are of good quality.However, the transport of fresh fish preserved in ice is costly becauseof inadequate suitable transportation facilities, which together with thelack and often misuse of ice, results in a significant proportion of thefish being spoiled by the time they reach the inland markets. Consequently,these markets usually have small amounts of good quality fresh fish on sale

ANNEX 11Page 2

at relatively high prices. In contrast, at the coastal markets and villages,fresh fish is regularly sold and consumed. Local fishermen's cooperativesusually conduct the auction sales of fish.

4. Fish is also marketed alive or frozen. In addition to local sales,live fish is also sold principally in Jakarta and Bandung. The principalmarketing problem is the lack of adequate transportation from the producingareas to the consuming centers. Frozen fish including shrimp and lobstersis sold in several supermarkets in Surabaya, Bandung, and Jakarta. Pricesare generally 50 to 100% more than those bought fresh in the public market,and the consumers are usually foreigners.

5. Fisheries exports have been increasing during recent years (seeTable 11-1). In 1967 the export of frozen shrimp was only 82 tons; in 1972it was about 22,000 tons. The export of frozen tuna in 1967 was 1,119 tons;in 1971 it was 3,500 tons. Other fish products preserved by drying, canningand smoking have also been exported in increasing volume. About 32,000 tonsof fish products valued at US$26 million were exported in 1972. The marketingof the most important exports - frozen shrimp and tuna - is largely handledby foreigners who are partners in locally-based processing operations withIndonesian nationals.

Shrimp and Milkfish

6. Approximately 6,000 tons of shrimp and 22,000 tons of milkfishwere produced in ponds in Java and South Sulawesi in 1971. The principalurban consuming areas are Makasar (South Sulawesi), Surabaya (East Java),and Bandung (West Java). Present retail prices for milkfish range fromRp 200-300 per kg, and for small pond shrimp Rp 150-200 per kg. Table 11-2shows the current prices received by pond operators for milkfish and shrimp.

7. The marketing system typically consists of the subcollectors,and main collectors in the producing areas and the wholesalers, brokersand retailers in the consuming centers. The average amounts of milkfishhandled daily by each of them are small, ranging from 20-30 kg for thesubcollector and retailer to 50-70 kg for the main collector and broker,and about 100 kg for the wholesaler. Current prices for milkfish averageabout Rp 150 kg to pond operators and Rp 250 kg to consumers. Credit isoften provided by the main collector to the pond operator and by the brokerto the retailer.

Catch from Trawlers

8. Fish would comprise about 95% and shrimp the remaining 5% of thecatch by trawlers. The fish would be classified into first, second, andthird grades. The first grade is table fish, including pomfret, croaker,sole, snapper and others, which is packed in ice after it is caught, and issold fresh for about 65 Rp per kg. The second grade fish, which constitutesthe bulk of the catch, is salted on board and sold for approximately 45 Rpper kg. The third grade fish is generally considered inedible and is soldfor fish meal. The composition of the catch varies according to the season.

ANNEX 1_Page 3

Shrimp for Export

9. Host exportable shrimp is currently purchased by and processed inlocal plants and subsequently exported as frozen shrimp to Japan. Indonesiais the second largest supplier of shrimp to Japan, after India. Table 11-1shows the rapid rise in Indonesian shrimp exports in recent years.

Skipjack Tuna

10. The demand for skipjack tuna has increased in recent years.Because yellowfin tuna has become over-exploited, fishermen are turning tothe greatly under-exploited resources of the skipjack tuna - a smaller fishof darker meat. Moreover, because the skipjack has a considerably shorterlifespan than the yellowfin tuna, it contains smaller concentrations ofmercury and is blended with yellowfin to reduce overall mercury levels.The skipjack resources of Indonesian waters have only begun to be fishedfor export, from Aer Tembaga in North Sulawesi. Foreign demand for tuna,including skipjack, has been rising faster than the available supplies andthis is reflected in rising trend in prices (Table 11-3).

April 24, 1974

ARMEX U1Table 11-1

INDONESIA

FISHERIES CREDIT PROJECT

Export Volume of Fishery Products 1967-72(tons)

Shrimp Shrimp Fresh OrnamentalYear Fresh Processed Fish Frog Fish Others Total

1967 82 170 1,119 - 3 6 ,408 7,782

1968* 2,961 hlh 3,416 - 23 13,376 19,717

1969* 5,129 508 2,332 28 h2 13,387 2],1126

3970** 5,687 259 1,157 637 97 10,769 18,606

1971** 13,781 331 3,500 500 1.00 10,503 28,755

1972** 22,000 n.a. n.a. n.a. n.a. n.a. 32,000

Note: * Revised data*3F Preliminary data

n.a. = Not availableSource: Central Bureau of Statistics

ANNEX 11Table 11-2

TI)ONDOTA

FISHMIES CREDIT PROJECT

Current Prices

Current prices used in calculating project returns are as

follows:

Rp per Ton

Skinjack Tuna (paid to the State Fisheries Enterprise) 166,000

Skipjack 'una (paid to cooperatives) 90,000

Tee (ex-factory) 6,000

Assorted Fish (paid to trawlers) 45h,000

Exixrt Shrimp (paid to trawlers) 1,000,000

Milk Fish (ex-pond) 150,000

Sma)l Shrimp (ex-pond) 100,000

r3rp'e Shrimp for Exoort (ex-pond):S'ulawesi 600,000Java 800,000

ANNEX 11Table 11-3

FI8H3~ZRS CIEJIT PROJECT

lkipiack Konthl& A,waM. btVessol. Price in J!Ma(at Taisu Port)

ZsS. Mot u$ Per Ton

1969 326

1970 373

1971 h48

1972 h5o

1973 497

1974 Januar 511

February 535

)b:h 551

ourcoi ITsiu Tish Xarkt*s, 3hisuoks-Pre., Japan..

INDONESIA

FISHERIES CREDIT PROJECT

Projected Income Statement: P.N.: State Fisheries Enterprise. Maluku(Rp Thousands)

Year 1 2 3 4 5 6 7 8 9 10 11 12 13

NET REVENUES

Fish Sales - - 249,000 913,000 1,079,000)Ice Sales - - 9,000 33,000 39,000) ConstantIncome from Repair Facilities - - 2,200 4,500 4,500)

TOTAL - - 260,200 950,500 1,122,500 1,122,500 1,122,500 1,122,500 1,122,500 1,122,500 1,122,500 1,122,500 1,122,500

OPERATING COSTS

Purchase of Fish from Coop. - - 67,500 247,500 292,500)10 Skipjack Boats (P.N.) - - ) 56,468 172,845 192,295) Constant2 Carriers (P.N.)Shore Facilities - - 18,670 47,750 53.000)

TOTAL - - 142,638 468,095 537,795 537,795 537,795 537,795 537,795 537,795 537,795 537,795 537,795

OPERATING INCOME - - 117,562 482,405 584,705 584,705 584,705 584,705 584,705 584,705 584,705 584,705 584,705

Depreciation - - 51,046 113,320 113,320 113,320 113,320 113,320 113,320 113,320 113,320 113,320 62,274Interest - - 100,000 160,006 149.914 137,663 123,943 1_,O576 91,365 72.088 50498 26, 318

GROSS INCOME - - (33,484) 209,079 321,471 333,722

Of which exempted from Tax: (750) (31,240) (57,410) (57,410) (56,660) (26,170)Taxable Gross Income - - 28,785 264,811 307,552 347,442 362,809 380,020 399,297 420,887 445,067 522,431

Tax 12.953 119,165 138.398 156,349 163,264 171,009 179.684 189.399 200,280 235,094

NET INCOME 196,126 202,306 195,324 191,093 199,545 209,011 219,613 231,488 244,787 287,337

Financial Rate of Return: 34 %

&3

INDONESIA

FISHERIES CREDIT PROJECI

Projected Cash Flow: F.N.: State Fisheries Enterprise. Maluku(Rp Thousands)

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 TOTAL

SOURCES OF FUNDS

1. Funds Generated - - 117,562 469,452 465,540 446,307 428,356 421,441 413,696 405,021 395,306 384,425 349,611 4,296,7172. Project Loan 40,970 572,631 641,007 78,773 7,055 1,340,4363. Equity 107.415 - 106,350 - - - _ _213, 765

TOTAL SOURCES OF FUNDS 148,385 572,631 864,919 548,225 472,595 446,307 428,356 421,441 413,696 405,021 395,306 384,425 349,611 5,850,918

APPLICATION OF FUNDS

1,330,8001. Project Investments 48,200 667,900 573,200 33,200 8,3002. Tncresnental Working Capital - - 94,300 (94,300)3. Debt Service

Amortization - - 90,670 102,088 114,339 128,059 143,426 160,637 179,914 201,504 219,773 - 1,340,410Interest - - 100,000 160,006 149.914 137,663 123.943 108,576 91.365 72.088 50,498 26-318 1,020,371

Total Debt Service - - 100000 250,676 252.002 252_002 252,002 252.002 252,002 252,002 252.002 246,091 2,360,781

TOTAL APPLICATION OF FUNDS 48,200 667,900 767,500 283,876 260,302 252,002 252,002 252,002 252,002 252,002 252,002 246,091 (94,300) 3,691,581

NET INFLOW (OUTFLOW)

(a) Annual 100,185 (95,269) 97,419 264,349 212,293 194,305 176,354 169,439 161,694 153,019 143,304 138,334 443,911(b) Cumulative 100,185 4,916 102,335 366,684 578,977 773,282 949,636 1,119,075 1,280,769 1,433,788 1,577,092 1,715,426 2,159,337 2,159,337

DEBT SERVICE RATIO 1.77 1.70 1.67 1.64 1.61 1.57 1,56

INDONESIA

FISHERIES CREDIT PROJECT

Projected Income Statement: 30 GT Wooden Skipjack Boat (Co-op)-One Unit

(Rp Thousands)

Year 1 2 3 4 5 6 7 8 9 10 11 12

NET REVENUES FROM SALES - 22,050 24,750 29,250 29,250 29,250 29,250 29,250 29,250 29,250 29,250 29,250

OPERATING COSTS:Fuel & Lubricants - 1,315 1,315 1,315)Ice - 2,940 3,300 3,900)Bait - 2,450 2,750 3,250)Wages - 5,655 6,348 7,503) ConstantCommissions - 2,205 2,475 2,926)Repair & Maintenance - 1,125 1,125 1,125)

Insurance - 1,350 1,350 1,350)

Overheads - 1,200 1,200 1,200)TOTAL OPERATING COSTS - 18,240 19,863 22,569 22,569 22,569 22,569 22,569 22,569 22,569 22,569 22,569

OPERATING INCOME- 3,810 4,887 6,681 6,681 6,681 6,681 6,681 6,681 6,681 6,681 6,681

Depreciation - 2,250 2,250 2,250 2,250 2,250 2,250 2,250 2,250 2,250 2,250 -Interest - 2,584 2,584 2,437 2,272 2,087 1,880 1.648 1,388 1,097 772 407

GROSS INCOME - (1,024) 53 1,994 2,159 2,344 2,551 2,783 3,043 3,334 3,659 6,274

Taxes - _ - 205 432 469 510 557 609 667 732 1.255

NET INCOME - (1,024) 53 1,789 1,727 1,875 2,041 2,226 2,434 2,667 2,927 5,019

Financial Rate of Return: 20%

M1It.3 X

INDONESIA

FISHERIES CREDIT PROJECT

Projected Cash Flow: 30 GT Wooden Skipjack Boat (Co-op)-One Unit(Rp Thousands)

Year 1 2 3 4 5 6 7 8 9 10 11 12 TOTAL

SOURCES OF FUNDS

1. Funds Generated - 3,810 4,887 6,476 6,249 6,212 6,171 6,124 6,072 6,014 5,949 5,426 63,3902. Project Loan 19,125 2,413 - - - - - - - - - - 21,5383. Equity 3,598 - - - - 3.598

TOTAL SOURCES OF FUNDS 22,723 6,223 4,887 6,476 6,249 6,212 6,171 6,124 6,072 6,014 5,949 5,426 88,526

APPLICATION OF FUNDS

1. Project Investments 22,500 - - - - - - - - - - - 22,5002. Incremental Working Capital - 1,488 - - - - - - - - (1,488) -3. Debt Service

Amortization - - 1,228 1,375 1,540 1,725 1,932 2,164 2,424 2,715 3,040 3,395 21,538Interest - 2584 2,584 2,437 2,272 2,087 1.880 1,648 1,388 1,097 772 407 19,156

Total Debt Service - 2,584 3,812 3,812 3,812 3,812 3,812 3,812 3,812 3,812 3,812 3,802 40,694

TOTAL APPLICATION OF FUNDS 22,500 4,072 3,812 3,812 3,812 3,812 3,812 3,812 3,812 3,812 3,812 2,314 63,194

NET INFLOW (OUTFLOW)

(a) Annual 223 2,151 1,075 2,664 2,437 2,400 2,359 2,312 2,260 2,202 2,137 3,112(b) Cumulative 223 2,374 3,449 6,113 8,550 10,950 13,309 15,621 17,881 20,083 22,220 25,332 25,332

DEBT SERVICE RATIO - - 1.28 1.7 1.64 1.63 1.62 1.61 1.59 1.58 1.56 1.43

4I

INDONESIA

FISHERIES CREDIT IROJECT

Projected Income Statement: Beach Seine-One Unit(Rp Thousands)

Year 1 2 3 4 5 6 7 8 9 10

NET REVENUES FROM FISH SALES 900 1,020 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200

OPERATING COSTS:Lamp Oil 6 6 6)Repair & Maintenance 6 6 6) ConstantWages 768 878 1.038) _ _

TOTAL OPERATING COSTS 780 890 1,050 1,050 1,050 1,050 1,050 1,050 1,050 1,050

OPERATING INCOME 120 130 150 1-50 150 150 150 150 150 150

Depreciation 50 50 50 50 50 50 50 50 50 50Interest 57 54 50 46 41 36 31 24 17 9

GROSS INCOME 13 26 50 54 59 64 69 76 83 91

Taxes - -- - - - - - -_-

NET INCOME 13 26 50 54 59 64 69 76 83 91

Financial Rate of Return: 36%

Mu

INDONESIA

FISHERIES CREDIT PROJECT

Proiected Cash Flow: Beach Seine-One Unit

(Rp)

Year 1 2 3 4 5 6 7 8 9 10 Total

SOURCES OF FUNDS

1. Funds Generated 120,000 130,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 1,450,0002. Project Loan 475,000 - - - - - - - - 475,000

3. Equity 25,000 - - - - - - - - - 25,000

TOTAL SOURCES OF FUNDS 620,000 130,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 1,950,000

APPLICATION OF FUNDS

1. Project Investments 500,000 - - - - - - - - - 500,000

2. Incremental Working Capital - - - - - - - - - - -3. Debt Service

Amortization 27,075 30,324 33,963 38,039 42,604 47,716 53,442 59,855 67,038 74,944 475,000

Interest 57,000 53.751 50.112 46.036 41.471 36,359 30.633 24.220 17.037 9,131 365,750

Total Debt Service 84.075 84,075 84,075 84,075 84,075 84,075 84.075 84,075 84,075 84,075 840,750

TOTAL APPLICATION OF FUNDS 584,075 84,075 84,075 84,075 84,075 84,075 84,075 84,075 84,075 84,075 1,340,750

NET INFLOW (OUTFLOW)

(a) Annual 35,925 45,925 65,925 65,925 65,925 65,925 65,925 65,925 65,925 65,925(b) Cumulative 35,925 81,850 147,775 213,700 279,625 345,550 411,475 477,400 543,325 609,250 609,250

DEBT SERVICE RATIO 1.55 1.78 1.78 1.78 1.78 1.78 1.78 1.78 1.78

v

fD

INDONESIA

FISHERIES CREDIT PROJECT

Projected Income Statement: 30 GT Wooden Trawler-One Unit

(Rp Thousands)

Year 1 2 3 4 5 6 7 8 9 10 11

NET REVENUES FROM FISH SALES - 17,435 19,373 19,373 19,373 19,373 19,373 19,373 19,373 19,373 19,373

OPERATING COSTS:

Commission - 872 969 969)

Fuel & Lubricants - 1,346 1,346 1,346)

Ice - 756 840 840)

Salt - 1,260 1,400 1,400)

Wage - 2,984 3,308 3,308)

Repair & Maintenance - 1,050 1,050 1,050) Constant

Water _ 70 70 70)

Food - 1,050 1,050 1,050)

Fishing Gear - 850 850 850)

Insurance - 1,260 1,260 1,260)

Overhead - 1,200 1,200 1,200)

TOTAL OPERATING COSTS - 12,698 13,343 13,343 13,343 13,343 13,343 13,343 13,343 13,343 13,343

OPERATING INCOME - 4,737 6,030 6,030 6,030 6,030 6,030 6,030 6,030 6,030 6,030

Depreciation - 2,100 2,100 2,100 2,100 2,100 2,100 2,100 2,100 2,100 2,100

Interest - 2,468 2.328 2-X70 1,994 1,796 1,574 1,327 1.049 738 389

GROSS INCOME - 169 1,602 1,760 1,936 2,134 2,356 2,603 2,881 3,192 3,541

Of which exempted from tax

(5% of investment for 4 yrs) - (1,050) (1,050) (1,050) (1,050)

TAXABLE GROSS INCOME - (881) (329) 381 886 2,134 2,356 2,603 2,881 3,192 3,541

Tax (45% of GI) - - - 171 399 960 1,060 1,171 1,296 1,436 1,593 o|F-IxNET INCOME - - - 1,589 1,537 1,174 1,296 1,432 1,585 1,756 1,948 Z

Financial Rate of Return: 20%

INDONESIA

FISHERIES CREDIT PROJECT

Projected Cash Flow: 30 GT Wooden Trawler-One Unit(Rp Thousands)

Year 1 2 3 4 5 6 7 8 9 10 11 TOTAL

SOURCES OF FUNDS

1. Funds Generated - 4,737 6,030 5,859 5,631 5,070 4,970 4,859 4,734 4,594 4,437 50,9212. Project Loan 17,850 2,719 20,5693. Equity 3.441 - ___ __ ____3_441_ 3.441

TOTAL SOURCES OF FUNDS 21,291 7,456 6,030 5,859 5,631 5,070 4,970 4,859 4,734 4,594 4,437 74,931

APPLICATION OF FUNDS

1. Project Investments 21,000 -21,0002. Incremental Working Capital - 1,936

(1,936) -3. Debt ServiceAmortization - 1,172 1,313 1,470 1,647 1,845 2,066 2,314 2,592 2,903 3,251 20,573Interest - 2,468 2.327 2,170 1.993 1,795 1,574 1.326 1,048 737 389 15,827

Total Debt Service - 3.640 3.640 3640 3.640 3L640Q364 3. 640 3.6400

TOTAL APPLICATION OF FUNDS 21,000 5,576 3,640 3,640 3,640 3,640 3,640 3,640 3,640 3,640 1,704 57,400

NET INFLOW (OUTFLOW)

(a) Annual 291 1,880 2,390 2,219 1,991 1,430 1,330 1,219 1,094 954 2,733(b) Cumulative 291 2,171 4,561 6,780 8,771 10,201 11,531 12,750 13,844 14,798 17,531 17,531

DEBT SERVICE RATIO 1.66 1.61 1.55 1.39 1.37 1.33 1.30 1.26 1.22

t,j

F- IM M

INDONESIA

FISHERIES CREDIT PROJECT

Projected Income Statement: South Sulawesi: Dwvelopment of Fish pond: 5 ha(Rp Thousands)

Year ol/ 1 2 3 4 5 6 7 8 9 10-16

SALES OF FISH AND SHRIMP 137.5 185.0 222.5 280.0 420.0 420.0 420.0 420.0 420.0 420.0 420.0

OPERATING COSTS:Fish Fry 25.0 19.0 22.5 22.5 37.5)Fertilizer - 20.0 30.0 45.0 55.0)

Labor 62.5 90.0 90.0 120.0 180.0)ConstantMiscellaneous - 5.0 5.0 5.0 5.0) _

TOTAL OPERATING COSTS 87.5 134.0 147.5 192.5 277.5 277.5 277.5 277.5 277.5 277.5 277.5

OPERATING INCOME 50.0 51.0 75.0 87.5 142.5 142.5 142.5 142.5 142.5 142.5 142.5

INCREMENTAL OPERATING INCOME - 1.0 25.0 37.5 92.5 92.5 92.5 92.5 92.5 92.5 92.5

Depreciation - - 18.6 18.6 18.6 18.6 18.6 18.6 18.6 18.6 18.6

Interest - - 18.0 30.0 36.4 31.9 26.9 21.3 15.0 8.0 -

GROSS INCOME 50.0 51.0 38.4 38.9 87.5 92.0 97.0 102.6 108.9 115.9 123.9GROSS INCREMENTAL INCOME - 1.0 (11.6) (11.1) 37.5 42.0 47.0 52.6 58.9 65.9 73.9

Gross income exempted fromtax 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0

Taxable Gross Income 5.0 6.0 (6.6) (6.1) 29.8 47.0 52.0 57.6 63.9 70.9 78.9

Tax 0.5 0.6 - - 3.0 4.7 5.2 5.8 6.4 7.1 7.9

NET INCOME 49.5 50.4 38.4 38.9 84.5 87.3 91.8 96.8 102.5 108.8 116.0NET INCREMENTAL INCOME - 0.4 (11.6) (11.1) 34.5 37.3 41.8 46.8 52.5 58.8 66.0

Financial Rate of Return: 22%

NOTE: 1/ Pre-investment period

I- H,

INDONESIA

FISHERIES CREDIT PROJECT

Projected Cash Flow: South Sulawesi: Development of Fish Pond: 5 ha(Rp Thousands)

Year 1 2 3 4 5 6 7 8 9 10-15 16 TOTAL

SOURCES OF FUNDS

1. Funds Generated 0.4 25.0 37.5 89.5 87.8 87.3 86.7 86.1 85.4 84.6 84.6 1,177.92. Project Loan 254.0 30.5 13.1 5.7 - 303.33. Equity 44.8 - - - - 44.8

TOTAL SOURCES OF FUNDS 299.2 55.5 50.6 95.2 87.8 87.3 86.7 86.1 85.4 84.6 84.6 1,526.0

APPLICATION OF FUNDS

1. Project Investments 278.5 - - - - 278.52. Incremental Working Capital 20.3 - - - - (20.3)3. Debt Service

Interest - 18.0 30.0 36.4 31.9 26.9 21.3 15.0 8.0 - - 187.5Amortization - - - 37.3 41.8 46.8 52.4 58.7 65.7 - - 302.7Total Debt Service - 18.0 30.0 73.7 73.7 73.7 73.7 73.7 73.7 - - 490.2

TOTAL APPLICATION OF FUNDS 298.8 18.0 30.0 73.7 73.7 73.7 73.7 73.7 73.7 (20.3) 768.7

NET INFLOW (OUTFLOW)

(a) Annual 0.4 37.5 20.6 21.5 14.1 13.6 13.0 12.4 11.7 84.6 104.9(b) Cumulative 0.4 37.9 58.5 80.0 94.1 107.7 120.7 133.1 144.8 652.4 757.3 757.3

DEBT SERVICE RATIO 1.29 1.19 1.18 1.18 1.17 1.16

-I-

INDONESIA

FISHERIES CREDIT PROJECT

Projected Income Statement: South Sulawesi: Development of Shrimp Pond: 5 ha(Rp Thousands)

Year ol/ 1 2 3 4 5 6 7 8 9 10-16

SALES OF FISH AND SHRIMP 137.5 360.0 495.0 692.5 790.0 790.0 790.0 790.0 790.0 790.0 790.0

OPERATING COSTS:Fish Fry 25.0 56.5 93.5 112.5 135.0)Fertilizers - 45.0 50.0 60.0 75.0)Labor 62.5 180.0 180.0 325.0 325.0) ConstantMiscellaneous - 15.0 15.0 15.0 15.0)

TOTAL OPERATING COSTS 87.5 296.5 338.5 512.5 550.0 550.0 550.0 550.0 550.0 550.0 550.0

OPERATING INCOME 50.0 63.5 156.5 180.0 240.0 240.0 240.0 240.0 240.0 240.0 240.0INCREMENTAL OPERATING INCOME - 13.5 106.5 130.0 190.0 190.0 190.0 190.0 190.0 190.0 190.0

Depreciation - 31.8 31.8 31.8 31.8 31.8 31.8 31.8 31.8 31.8Interest - - 68.3 68.3 68.3 59.9 50.5 39.9 28.1 14.9 -

GROSS INCOME 50.0 63.5 56.4 79.9 139.9 148.3 157.7 168.3 180.1 193.3 208.2GROSS INCREMENTAL INCOME - 13.5 6.4 29.9 89.9 98.3 107.7 118.3 130.1 143.3 158.2

Gross Income exempted fromtax 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0

Taxable Gross Income 5.0 18.5 11.4 34.9 94.9 103.3 112.7 123.3 135.1 148.3 163.2

Tax 0.5 1.9 1.1 3.5 9.5 10.3 11.3 12.3 13.5 14.8 16.3

NET INCOME 49.5 61.6 55.3 76.4 130.4 138.0 146.4 156.0 166.6 178.5 191.9NET INCREMENTAL INCOME - 11.6 5.3 26.4 80.4 88.0 96.4 106.0 116.6 128.5 141.9

Financial Rate of Return: 26%

NOTE: 1/ Pre-investment period.

IH?_

INDONESIA

FISHERIES CREDIT PROJECT

Projected Cash Flow: South Sulawesi: Development of Shrimp Pond: 5 ha(Rp Thousands)

Year 1 2 3 4 5 6 7 8 9 10-15 16 TOTAL

SOURCES OF FUNDS

1. Funds Generated 11.6 105.4 126.5 180.5 179.7 178.7 177.7 176.5 175.2 173.7 173.7 2,527.7

2. Project Loan 508.0 61.0 - - - - - - - - - 569.0

3. Equity 89.6 - --------- 89.6

TOTAL SOURCES OF FUNDS 609.2 166.4 126.5 180.5 179.7 178.7 177.7 176.5 175.2 173.7 173.7 3,186.3

APPLICATION OF FUNDS

1. Project Investments 477.4 - 477.4

2. Incremental Working Capital 120.2 - (120.2)

3. Debt ServiceInterest - 68.3 68.3 68.3 59.9 50.5 39.9 28.1 14.9 - - 398.2Amortization _ _ _ 70.0 78.4 87.8 98.4 110.2 123.4 _ - 568.2

Total Debt Service - 68.3 68.3 138.3 138.3 138.3 138.3 138.3 138.3 - - 966.4

TOTAL APPLICATION OF FUNDS 597.6 68.3 68.3 138.3 138.3 138.3 138.3 138.3 138.3 - (120.2) 1,443.8

NET INFLOW (OUTFLOW)

(a) Annual 11.6 98.1 58.2 42.2 41.4 40.4 39.4 38.2 36.9 173.7 293.9(b) Cumulative 11.6 109.7 167.9 210.1 251.5 291.9 331.3 369.5 406.4 1,448.6 1,742.5 1,742.5

DEBT SERVICE RATIO 1.31 1.30 1.29 1.28 1.28 1.27

I-3 -

INDONESIA

FISHERIES CREDIT PR3JECT

Projected Income Statement: Java: Development of Fish Pond: 1 ha

(Rp Thousands)

Year 1/ 1 2 3 4 5 6 7 8 9 10 11 12 13-16

SALES OF FISH AND SHRIMP 27.3 41.0 59.5 73.5 89.5 89.5 89.5 89.5 89.5 89.5 89.5 89.5 89.5 89.5

OPERATING COSTS:Fish Fry 10.3 8.0 12.0 16.0 22.0)Fertilizer - 6.0 8.5 9.7 12.3)Labor 9.6 14.7 22.5 25.5 30.3) ConstantMiscellaneous - 1.5 1.5 1.5 2.0) - -

TOTAL OPERATING COSTS 19.9 30.2 44.5 52.7 66.6 66.6 66.6 66.6 66.6 66.6 66.6 66.6 66.6 66.6

OPERATING INCOME 7.4 10.8 15.0 20.8 22.9 22.9 22.9 22.9 22.9 22.9 22.9 22.9 22.9 22.9

INCREMENTAL OPERATING INCOME - 3.4 7.6 13.4 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5

Depreciation - - 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9

Interest - - 7.2 7.2 6.8 6.3 5.8 5.2 4.6 3.9 3.1 2.2 1.1 -

GROSS INCOME 7.4 10.8 3.9 9.7 12.2 12.7 13.2 13.8 14.4 15.1 15.9 16.8 17.9 19.0

GROSS INCREMENTAL INCOME - 3.4 (3.5) 2.3 4.8 5.3 5.8 6.4 7.0 7.7 8.5 9.4 10.5 11.6

Gross income exempted fromtax 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0

Taxable Gross Income - - - - - - - - - - - - - -

Tax - - - - - - - - - - - - - -

NET INCOME 7.4 10.8 3.9 9.7 12.2 12.7 13.2 13.8 14.4 15.1 15.9 16.8 17.9 19.0

NET INCREMENTAL INCOME - 3.4 (3.5) 2.3 4.8 5.3 5.8 6.4 7.0 7.7 8.5 9.4 10.5 11.6

Financial Rate of Return: 22%

NOTE: 1/ Pre-investment period. X

w >LO-

INDONESIA

FISHERIES CREDIT PROJECT

Projected Cash Flow: Java: Development of Fish Pond: 1 ha(Rp Thousands)

Year 1 2 3 4 5 6 7 8 9 10 11 12 13-15 16 TOTAL

SOURCES OF FUNDS

1. Funds Generated 3.4 7.6 13.4 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 225.92. Project Loan 53.3 6.4 - 59.7

3. Equity 9.4 - - ____ ___-- _____ ___ 9.4TOTAL SOURCES OF FUNDS 66.1 14.0 13.4 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 295.0

APPLICATION OF FUNDS

1. Project Investments 58.7 - 58.72. Incremental Working Capital 4.0 - (4.0)

3. Debt ServiceInterest - 7.2 7.2 6.8 6.3 5.8 5.2 4.6 3.9 3.1 2.2 1.1 - 53.4

Amortization - - 3.4 3.8 4.3 4.8 5.4 6.0 6.7 7.5 8.4 9.5 - 59.8

Total Debt Service - 7.2 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 - 113.2

TOTAL APPLICATION OF FUNDS 62.7 7.2 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 ln.6 (4.0) 171.9

NET INFLOW (OUTFLOW)

(a) Annual 3.4 6.8 2.8 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 15.5 19.5

(b) Cumulative 3.4 10.2 13.0 17.9 22.8 27.7 32.6 37.5 42.4 47.3 52.2 57.1 103.6 123.1 123.1

DEBT SERVICE RATIO 1.26 1.46 1.46 1.46 1.46 1.46 1.46 1.46 1.46 1.46

1 >e

INDONESIA

FISHERIES CREDIT PROJECT

Projected Income Statement: Java: Development of Shrimp Pond: 1 ha(Rp Thousands)

Year 0 1 2 3 4 5 6 7 8 9 10-16

SALES OF FISH AND SHRIMP 41.3 87.0 115.5 149.8 187.8 187.8 187.8 187.8 187.8 187.8 187.8

OPERATING COSTS:Fish Fry 11.3 17.0 17.4 21.5 26.5)Fertilizer - 4.2 7.3 9.9 13.7)Labor 15.5 37.5 44.5 55.0 76.5) ConstantMiscellaneous - 3.0 3.0 4.0 4.0)

TOTAL OPERATING COSTS 26.8 61.7 72.2 90.4 120.7 120.7 120.7 120.7 120.7 120.7 120.7

OPERATING INCOME 14.5 25.3 43.3 59.4 67.1 7.1 67.1 67.1 67.1INCREMENTAL OPERATING INCOME - 10.8 28.8 44.9 52.6 52.6 52.6 52.6 52.6 52.6 52.6

Depreciation 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0Interest - - 14.3 14.3 12.9 11.3 9.5 7.6 5.3 2.8 -

GROSS INCOME 14.5 25.3 22.0 38.1 47.2 48.8 50.6 52.5 54.8 57.3 60.1GROSS INCREMENTAL INCOME - 10.8 7.5 23.6 32.7 34.3 36.1 38.0 40.3 42.8 45.6

Gross Income exempted fromtax 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0

Taxable Gross Income - - - - 2.2 3.8 5.6 7.5 9.8 12.3 15.1

Tax - - - - 0.2 0.4 0.6 0.8 1.0 1.2 1.5

NET INCOME 14.5 25.3 22.0 38.1 47.0 48.4 50.0 51.7 53.8 56.1 58.6NET INCREMENTAL INCOME - 10.8 7.5 23.6 32.5 33.9 35.5 37.2 39.3 41.6 44.1

Financial Rate of Return: 38%

NOTE: 1/ Pre-investment period.

I-.4

INDONESIA

FISHERIES CREDIT PROJECT

Projected Cash Flow: Java: Development of Shrimp Pond: 1 ha(Rp Thousands)

Year 1 2 3 4 5 6 7 8 9 10-15 16 TOTAL

SOURCES OF FUNDS

1. Funds Generated 10.8 28.8 44.9 52.4 52.2 52.0 51.8 51.6 51.4 51.1 51.1 753.62. Project Loan 106.6 12.8 - 119.43. Equity 18.8 - - 18.8

TOTAL SOURCES OF FUNDS 136.2 41.6 44.9 52.4 52.2 52.0 51.8 51.6 51.4 51.1 51.1 891.8

APPLICATION OF FUNDS

1. Project Investments 105.2 - 105.22. Incremental Working Capital 20.3 - (20.3) -

3. Debt ServiceInterest 14.3 14.3 12.9 11.3 9.5 7.6 5.3 2.8 78.0Amortization 11.8 13.2 14.8 16.6 18.5 20.8 23.3 119.0

Total Debt Service 14.3 26.1 26.1 26.1 26.1 26.1 26.1 26.1 197.0

TOTAL APPLICATON OF FUNDS 125.5 14.3 26.1 26.1 26.1 26.1 26.1 26.1 26.1 (20.3) 302.2

NET INFLOW (OUTFLOW)

(a) Annual 10.7 27.3 18.8 26.3 26.1 25.9 25.7 25.5 25.3 51.1 71.4(b) Cumulative 10.7 38.0 56.8 83.1 109.2 135.1 160.8 186.3 211.6 518.2 589.6 589.6

DEBT SERVICE RATIO 1.72 2.01 2.00 1.99 1.98 1.98 1.97

I- tZ*"3 M

m

tD >

INDONESIA

FISHERIES CREDIT PROJECT

Projected Income Statament: 5T Ice Plant/15T Ice Store: One Unit

(Rp Thousands)

Year 1 2 3 4 5 6 7 8 9 10 11

SALES OF ICE - 9,000.0 9,000.0 9,000.0 9,000.0 9,000.0 9,000.0 9,000.0 9,000.0 9,000.0 9,000.0

OPERATING COSTS:Staff Salary - 700.0)

Insurance - 200.0)

Generator Running Costs - 900.0)

Lubricants, Ammonia, Salt - 100.0) ConstantMaintenance & Repair - 200.0)

Labor - 400.0)

Overheads - 200.0)

TOTAL OPERATING COSTS - 2,700.0 2,700.0 2,700.0 2,700.0 2,700.0 2,700.0 2,700.0 2,700.0 2,700.0 2,700.0

OPERATING INCOME - 6,300.0 6,300.0 6,300.0 6,300.0 6,300.0 6,300.0 6,300.0 6,300.0 6,300.0 6,300.0

Depreciation - 1,850.0 1,850.0 1,850,0 1,850.0 1,850.0 1,850.0 1,850.0 1,850.0 1,850.0 1,850.0

Interest - 2.207.7 2,081.9 1,940.9 1,783.1 1.606.3 1,408.2 1,186.5 938.1 659.9 348.3

GROSS INCOME - 2,242.3 2,368.1 2,509.1 2,666.9 2,843.7 3,041.8 3,263.5 3,511.9 3,790.1 4,101.7

Tax - 112.1 118.4 125.5 133.3 142.2 152J1 163.2 175.6 189.5 205.1

NET INCOME - 2,130.2 2,249.7 2,383.6 2,533.6 2,701.5 2,889.7 3,100.3 3,336.3 3,600.6 3,896.6

Financial Rate of Return: 30%

r,I

INDONESIA

FISHERIES CREDIT PROJECT

Projected Cash Flow: 5T Ice Plant/15T Ice Store: One Unit

(Rp Thousands)

Year 1 2 3 4 5 6 7 8 9 10 11 TOTAL

SOURCES OF FUNDS

1. Funds Generated 6,187.9 6,181.6 6,174.5 6,166.7 6,157.8 6,147.9 6,136.8 6,124.4 6,110.5 6,094.9 61,483.0

2. Project Loan 16,426.3 1,971.2 18,397.5

3. Equity 2,898.7 - 2 7_ _ _ _ 2,8987

TOTAL SOURCES OF FUNDS 19,325.0 8,159.1 6,181.6 6,174.5 6,166.7 6,157.8 6,147.9 6,136.8 6,124.4 6,110.5 6,094.9 82,779.2

APPLICATION OF FUNDS

1. Project Investments 18,500.0 18,500.0

2. Incremental Working Capital 833.0 (833.0)

3. Debt ServiceInterst - 2,207.7 2,081.9 1,940.9 1,783.1 1,606.3 1,408.2 1,186.5 938.1 659.9 348.3 14,160.9

Amortization - 1.048.7 1,174.5 1,315.5 1,473.3 1,650.1 1,848.2 2,069.9 2,318.3 2,596.5 2902.5 18,397.5

Total Debt Service - 3,256.43,256. . 4 256.4 3.256.4 3256.4 3,256.4 3.250.8 32.558.4

TOTAL APPLICATION OF FUNDS 19,333.0 3,256.4 3,256.4 3,256.4 3,256.4 3,256.4 3,256.4 3,256.4 3,256.4 3,256.4 2,417.8 51,058.4

NET INFLOW (OUTFLOW)

(a) Annual (8.0) 4,902.7 2,925.2 2,918.1 2,910.3 2,901.4 2,891.5 2,880.4 2,868.0 2,854.1 3,677.1

(b) Cumulative (8.0) 4,894.7 7,819.9 10,738.0 13,648.3 16,549.7 19,441.2 22,321.6 25,189.6 28,043.7 31,720.8 31,720.8

DEBT SERVICE RATIO 1.90 1.90 1.89 1.89 1.89 1.88 1.88 1,88

o-z

0- 0

ANNEX 13Page 1

INDONESIA

FISHERIES CREDIT PROJECT

Economic Rate of Return Calculations

1. The economic rates of return from the project investments havebeen calculated as shown in Table 13-1. The following assumptions havebeen made:

(a) Current prices have been used to estimate benefits;

(b) Current price levels net of import, excise, and sales taxeshave been used for investments and in calculating operatingcosts, with allowance for cost increases excluded;

(c) The labor component has been costed at the prevailing wagerate;

(d) Cost of the experts (the two engineers, naval architectand management specialist) were charged to PNM's operations;and

(e) Costs of the three pond fisheries experts and demonstrationponds were not charged to the pond improvement component ofthe project.

2. Based on these assumptions, the economic rates of return wouldrange from 22% to 42%. To test the project components against changes ininvestment costs and production results, a sensitivity analysis has beencarried out. By increasing the cost of investments by 30% without increas-ing the value of the benefits, the rates would be from 15% to 29%. Thefigures would be 16% to 31% if the value of the net benefits were todecline by 20% without changing the costs of the investments.

INDONESIA

FISHERIES CREDIT PROJECT

Economic Rates of Return(Rp Thousands)

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

1. P.N. State Fisheries Enterprise, MalukuNet Incremental Income - - 117,608 482,574 584,904 584,904 584,904 584,904 504,904 584,904 584,904 584,904 679,204

Capital Investment 48,200 667,900 667,500 33,200 8,300 -

Net Incremental Flow (48,200) (667,900) (549,892) 449,374 576,604 584,904 584,904 584,904 584,904 584,904 584,904 584,904 679,204

Economic Rate of Return: 347b

2. 30 GT Skipjack Fishing Vessel (Coop)Net Incremental Income - 3,823 4,900 6,694 6,694 6,694 6,694 6,694 6,694 6,694 6,694 8,182

Capital Investment 22,500 1,488 -

Net Incremental Flow (22,500) 2,335 4,900 6,694 6,694 6,694 69 6,694 6,694 6,694 6,694 8,182

Economic Rate of Return: 22%

3. Beach SeineNet Incremental Income 120 130 150 150 150 150 150 150 150 150

Capital Investment 445

Net Incremental Flow (325) I 150 150 150 150 150 150 150 150

Economic Rate of Return: 42%

4. 30 GT TrawlerNet Incremental Income - 4,775 6,043 6,043 6,043 6,043 6,043 6,043 6,043 6,043 7,979

Capital Investment 21,000 1,936

Net Incremental Flow (21,000) 2,839 6,043 6,043 6,043 6,043 6,043 6,043 6,043 6,043 7,979Economic Rate of Return: 22%

5. Ice Plant/Ice StoreNet Incremental Income - 6,309 6,309 6,309 6,309 6,309 6,309 6,309 6,309 6,309 7,142

Capital Investment l-,333-- - -

Net Incremental Flow (19,333) 69 6,309 6,309 6,309 6,309 6,309 09 6,309 6,309 7,142

Economic Rate of Return: 31%

6. Java: Fish Pond: I HaNet Incremental Income 3.7 8.0 13.9 16.1 16.1 16.1 16.1 16.1 16.1 16.1 16.1 16.1 16.1 16.1 16.1 20.1

Capital Investment 62.7 --

Net Incremental Flow (59.0) 8.0 13.9 16.1 16.1 16.1 16.1 16.1 16.1 16.1 16.1 16.1 16.1 16.1 16.1 20,1

Economic Rate of Return: 237,

7. Java: Shrimp Pond: I HaNet Incremental Income 11.0 29.2 45.4 53.3 53.3 53.3 53.3 53.3 53,3 53.3 53.3 53-3 53.3 53.3 53.3 73.6

Capital Investment 125.5 - - - - - - - - - - - - -

Net Incremental Flow (114.5) 29.2 45.4 53.3 53.3 53.3 53.3 53.3 53.3 53.3 53.3 53.3 53.3 53.3 53.3 73.6

Economic Rate of Return: 39!.

8. South Sulawesi: Fish Pond: 5 HaNet Incremental Income 2.0 26.5 39.8 95.3 95.3 95.3 95.3 95.3 95.3 95.3 95.3 95.3 95,3 95.3 95.3 115.6

Capital Investment 298.8

Net Incremental Flow (296.8) 26.5 39.8 85.3 95.3 95.3 95.3 95.3 95.3 95.3 95.3 95.3 95.3 95.3 95.3 115.6

Economic Rate of Return: 24%

9. South Sulawesi: Shrimp Pond: 5 HaNet Incremental Income 15.8 109.0 133.0 193.8 193.8 193.8 193.8 193.8 193.8 193.8 193.8 193.8 193.8 193.8 193.8 314.0

Capital Investment 597.6 - -- -

Net Incremental Flow (581.8) 109.0 133.0 193.8 193.8 193.8 193.8 193.8 193.8 193,8 193.8 193.8 193.8 193.8 193.8 314.0

Economic Rate of Return: 28%

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