Docrmant of

The World Bank

FOR OmCAL USE ONLY

RePOrt No. 13628

PROJECT COMPLETION REPORT

INDONESIA

THIRD NATIONAL AGRICULTURAL EXTENSION PROJECT(LOAN 2748-IND)

OCTOBER 25, 1994

r~ . -- M :l :t--

Ty 1,,-:r7

Agriculture Operations DivisionCountry Department IIIEast Asia and Pacific Regional Office

This document has a restricted distribution and may be used bv recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency Units = Rupiah (Rp)

June 1986 US$1 = Rp 1,100June 1993 US$1 = Rp 2,074

Annual Average Exchange Rates of Rupiah to US$1

1987 1988 1989 1990 1991 19921,644 1,686 1,770 1,843 2,020 2,020

FISCAL YEAR

April 1 - March 31

WEIGHTS AND MEASURES

ABBREVIATIONS AND ACRONYMS

AAETE/AAET - Agency for Agricultural Education, Training and Extension, renamedin 1990 Agency for Agricultural Education and Training

AARD - Agency for Agricultural Research and DevelopmentAHP - Animal Health PostAIC - Agricultural Information CenterAISTC - Agricultural In-Service Training CenterAPBN - Amggaran Pendapatan dan Belanja Negara (National Income and

Expenditure Budget)ATP - Agricultural Training ProjectBAPPENAS - National Development Planning Agency in the Ministry of FinanceBIMAS - Bimbingan Massal Swa Sembada Bahan Makanan, "Mass Guidance for

Self-Sufficiency in Foodstuffs" - a farm production, input, and creditprogram

BKPI - Balai Keterampilan Penangkapan Ikan (Fisheries Training Center)BLPP - Balai Latihan Pegawai Pertanian (Agricultural In-Service Training

Center)BPLP - Balai Penataran dan Latihan Pertanian (In-Service Training Center)DGFCA - Directorate General of Food Crops AgricultureDGs - Directorates General (within MOA)DIKLATLUH - Pendidikan, Latihar dan Penyuluhan (Education, Training and

Extension)DINAS - Provincial/District Services of DirectoratesDIP - Daftar Isian Proyek (Budget Proposal for a Project)DITVA - Direktorat Tata Usaha Amggaran (Directorate of Budget

Administration)

FOR OFFICIAL USE ONLY

DJA - Direktorat Jenderal Amggaram (Directorate General of Budget)FKPP - Forum for Agricultural Extension CoordinationFTF - Field Training FacilitiesGOI - Government of IndonesiaICB - International Competitive BiddingIPM - Integrated Pest ManagementKPKN - Kantor Perbendahasaan Kas Negara (Office of the State Treasury and

Cash)KPP - Kordinasi Penyuluhan Pertamian Tingkat Kabupaten (Agricultural

Extension Coordination at District Level)KPPN - Kanisi Penyuluihan Pertanian Nasional (National Commission for

Agricultural Extension)KINA - Kontak Tani Nelayan Andalan (Master Farmer)KUD - Koperasi Unit Desa (Village Unit Cooperation)LAKU - Latihan dan Kunjungan (Training and Visit)MOA - Ministry of Agriculture (Departmen Pertanian)NAEP II - Second National Agricultural Extension Project (Credit 996-IND)NAEP III - Third National Agricultural Extension Project (Loan 2748-IND)NFCEP - National Food Crops Extension Project (Loan 1267-IND)NTB - Nusa Tenggara BaratNTT - Nusa Tenggara TimurP3H - Penugahan dan Pemberantasan Penyakit Hewan (Animal Disease

Prevention and Education)P4K - Proyek Peningkatan Pendapatan Petani Kecil (Small-Scale Farmers

Generating Income Project)PB BIMAS - Badan Pengendali BIMAS (Executing Board for Mass Guidance)PHP - Pengamat Hamat Penyakit (Pest and Disease Observer)PIMBAGPRO - Pimpinan Bagian Proyek (Provincial Project Leader)PIU - Project Implementation UnitPO - Petumjuk Operasional (Operational Guidelines)PPL - Penyuluh Pertanian Lapangan - field extension workerPPM/PPUP - Penyuluh Pertanian Urusan Programma - extension supervisorsPPS - Penyuluh Pertanian Spesialis - extension subject matter specialistREC - Rural Extension CenterREPELITA - Rencana Pemhanguanan Lima Tahun (Five-Year Development Policy)ROP - Rencana Operasional Proyek (Project Operational Plan)RSI - World Bank Resident Staff IndonesiaSAR - Staff Appraisal ReportSL-PHT - Sekolah Lapangan - Pengendalian Hama Penyakit (Farmer Field School

on Agribusiness)SL-UBA - Sekolah Lapangan - Usaha Tani Beronientasi Agribisnis (Farmer Field

School on Agribusiness)SPM - Surat Pemtah Membayan (Authorized Payment Instruction)SPP - Surat Permintaam Pembayaan (Authorized Application Withdrawal)TA - Technical AssistanceT&V - Training and Visit

This document has a restricted distribution and may be used by recipients only in the performance of theirofficial duties. Its contents may not otherwise be disclosed without World Bank authorization.

FOR OFFICLL USE ONLYTHE WORLD BANK

Washington, D.C. 20433U.S.A.

Off. if Dfr..tiGmrO~.tadgm Evakiadga October 25, 1994

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

Subject: Project Completion Report on IndonesiaThird National Agricultural Extension Proiect (Loan 2748-IND)

Attached is the Project Completion Report on Indonesia-Third National AgriculturalExtension Project (Loan 2748-IND). Parts I and m wre prepared by the East Asia and PacificRegional Office. Part II was prepared by the Borrower.

The project aimed to strengthen and expand subject coverage of the training and visitextension system in all provinces. The project could not be implemented as approved in 1986 andwas reformulated in 1988 with reduced scope and a simplified management structure.

The revised project achieved construction, recruitment and training targets, but failed toestablish the planned unified extension service for a range of commodities. The incomplete newmanagement system caused confusion and uncertainty, extension coordination and research-extension linkages were weak, participation by farmers' groups was limited, there were vehicleprocurement problems, and technical assistance staff were not recruited. Reallocation of someunused project funds to an integrated pest management program was beneficial and led to afollow-up project.

The monitoring and evaluation component was abandoned such that the project's impacton production is uncertain. The expanded extension service is seriously under-funded, ofdecreasing effectiveness, and faces an uncertain future following reorganization of the Ministry ofAgriculture.

The PCR gives a fair account of the project experience. It highlights familiar lessons onextension service design, including the importance of strong research-extension linkages (withfarmer participation), and the need for more cost-effective extension approaches.

The project outcome is rated as unsatisfactory (quality at entry was poor), and even thereduced project design is unlikely to be sustainable. Conversely, institutional development is ratedas marginal, despite the fact that large numbers of extension staff were appointed.

No audit is planned at this time.

Attachment

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

PROJECT COMPLETION REPORT

INDONESIA

THIRD NATIONAL AGRICULTURALEXTENSION PROJECT

(LOAN 2748-IND)

Table of Contents

Preface.. .. Evaluation Summary . . .. . .. . ... . .. . .. .. . .. . .. .. . . . .. .. . ii

PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE

Project Identity ....................... 1Background ....................... 1Project Objectives and Description ..................... 2Project Design and Organization ...................... 3Implementation Experience .......................... 4Project Results ................................. 5Sustainability ........... 7Bank Performance ........................ 8Borrower's Performance ......... .................. 9Project Relationships .............................. 10Consulting Services ............ .................. 11Lessons Learned .......... ...................... 12

PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

Introduction .................................. . 14Project Objectives and Description ......... . . . . . . . . .. . . 15Project Design and Organization ......... . .. . . . .. . . . . . 15Project Implementation .............. .. ... .. .. ... . . 16Details of Planned and Actual Implementation ...... . . . . . . . . 16Factors Affecting the Project Implementation ...... . . . . . . . . . 18Project Results ......................... ..... .. . 18Project Sustainability ............... ... ... ... ... . . 20Bank Performance ................... .... ... .... . 21Borrower's Performance ............. .. .. .. ... .. .. . 22Main Lessons from Experiences Relevant to the Future ..... . . . 24Consulting Services ................. .... ... ... .. . 26Project Relationships .. . .. . .. . .. . . . .. . . . .. .. ... . ... 26

PART III: STATISTICAL INFORMATION

1. Related Bank Loans/Credits . ....................... 282. Project Timetable .............................. 283. Loan Disbursements ... ........................ 284. Project Implementation - Key Indicators ..... ........... 295. Project Cost and Financing . ....................... 306. Project Results .............................. 317. Status of Loan Covenants . ......................... 318. Use of Bank Resources . ......................... 329. Status of Bank Group Operations ....... ............. 34

ANNEXES

1. List of Reports and Studies . ....................... 37

MAP: IBRD No. 25812

PROJECT COMPLETION REPORT

INDONESIA

TMIRD NATIONAL AGRICULTURALEXTENSION PROJECT

(LOAN 2748-IND)

PREFACE

This is the Project Completion Report (PCR) for the Third NationalAgricultural Extension Project (NAEP III) in Indonesia, for which a Bank Loan (2748-IND) of US$70 million was approved on July 29, 1986. The Loan was reduced to US$55million following project revision in 1988, and closed one and a half years behind scheduleon June 30, 1993. An amount of US$5.3 million out of the loan proceeds was providedfor bridging financing of the Integrated Pest Management (IPM) Program. As of June 30,1993, actual disbursement for both NAEP III and IPM activities amounted to US$53.19million representing 97 percent of the revised loan amount.

The PCR, prepared by Bank staff which carried out the last supervision ofthe NAEP III project in June 1993, is based on the initial and revised Staff Appraisalreport, Supervision Reports, and other relevant documents, discussions with keyGovernment officials responsible for project implementation and field visits, particularlyto East Java and Bali.

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PROJECT COMPLETION REPORT

INDONESIA

THIRD NATIONAL AGRICULTURALEXTENSION PROJECT

(LOAN 2748-IND)

EVALUATION SUMMARY

Background

i. Bank assistance to GOI in agricultural extension in Indonesia began in thelate 1960s when a version of training and visit (T&V) system was incorporated as acomponent of a number of irrigation projects. These were followed by several agriculturalextension projects. NAEP III followed the National Food Crop Extension Project(NFCEP, 1976) and NAEP 11 (1980). NFCEP introduced, in 13 provinces, the trainingand visit system (T&V) of extension in food crops, and constructed Rural ExtensionCenters (REC) staffed by extension programmers (PPUP) supervising field extensionworkers (PPL), with technical support from subject matter specialist (PPS), at provincialand district levels. NAEP II extended the program to the remaining provinces, includingtransmigration areas, and incorporated smallholder estate crops, animal husbandry and fishculture into the basic extension program, creating a unified extension service at field level,with AAET as the main coordinating agency. NAEP III was appraised in 1985 butbecause of deteriorating economic conditions, with consequent budgetary constraints, theproject was revised and scaled down about 14 months after it became effective in October1986. In addition and complementary to the agricultural extension projects the Bank, since1972, also supported agricultural education and training in a series of training projects.Under the Second Education Project (Cr. 288-IND) 14 existing senior secondaryagricultural schools were upgraded (one marine fisheries secondary school was upgradedwith FAO assistance) and curriculum development undertaken. Under a second Bankproject-the Second Agricultural Training Project (Ln. 1692-IND, 1979)-quality andnumbers of agricultural technicians were augmented through the expansion or rehabilitationof 42 existing pre-service (SPP) and in-service (ISTC) institutions; establishment of fivenew SPPs, seven ISTCs and eleven AICs and the provision of technical assistance for theSPPs, ISTSCs and AAETE to strengthen planning and management and to undertakestudies. The third phase of capacity building was continued under the Third AgriculturalTraining Project (Ln. 23431-IND, 1983), which supported government's long-termstrategy of improving and expanding pre-service and in-service agriculture sector training.

Objectives

ii. The major objective of both the originally appraised and revised projectswas to strengthen the extension services covering estate crops, livestock and fisheries, in

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addition to food and horticultural crops, in all provinces, under a unified extension servicecoordinated by AAET. The objective was achieved by expanding the existing services andstrengthening the RECs to become the focal points for localized extension planning andimplementation in all subsectors by a unified extension service. The project focusedparticularly on the key issues of funding, a clear line of command and improvedcoordination between implementing agencies. Institutional coordination covered nationallevel support of AAET, the DGs and BIMAS; provincial and district level guidance andsupport; and improved research-extension linkages based on clear lines of authority andcommunication. Project inputs included increased staff; additional buildings, facilities,equipment and materials; training of staff and farmers; improved staff mobility; andtechnical assistance.

Implementation Experience

iii. Although the project became effective in October 1986, it was not fullyimplemented until 1988. It was concluded in 1993, one and a half years behind schedule.The reason for the delayed implementation was the severe budgetary constraintsexperienced by GOI in funding the existing extension services, due to deterioratingeconomic conditions associated with a fall in oil prices which apparently were not foreseenat appraisal, and remaining organizational problems at field level. Soon after projecteffectiveness GOI and the Bank agreed to reformulate the project and, in early 1988,agreement was reached on a considerably reduced project which, however, addressed thesame objectives as the original project. While the project quickly gained momentum inachieving its targets in construction, staff recruitment and training, no significant progresswas made in the procurement of technical assistance and vehicles and in setting up aneffective monitoring and evaluation system.

iv. This situation prevailed for most of the duration of the project and affectedproject implementation. The Bank came close to declaring misprocurement of the vehiclesbut finally accepted GOI's provision of the required vehicles from its own sources. TAin extension, rural sociology and monitoring and evaluation was never acquired as agreedand, with Bank concurrence, funds provided for this were eventually used for aconsultancy to evaluate the project, and, based on this evaluation, to formulate a follow-upproject combining training and extension. An effective M&E system for major extensionprograms was never developed making an evaluation of the various extension activities andof the impact of the project difficult.

v. Other features which were to receive special attention during the revisedproject, such as special assistance to resource poor farmers, development of strongerresearch-extension linkages, more effective demonstrations and verification trials, andbetter coordination between various programs, projects and agencies never gained strongmomentum. Provincial sub-PIUs, established to provide stronger and more decentralizedprogram planning and administration and the efficient flow of funds, were slow inimproving the situation. Delayed operational funds remained a problem throughout theproject.

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vi. Thus, although physical targets were reached or exceeded, vital gaps inimplementation prevented the project objectives from being fully attained. In particular,the project's impact in developing an integrated, cost-effective extension service for arange of commodities, although considerable, fell short of expectations. Thus, the mainemphasis was still on rice, although significant inroads were also made on crops such asmaize and soybeans, and in other subsectors. Financial support given to IPM in the lastyear of the project, though not foreseen at appraisal, not only contributed to a successfulprogram, but resulted in a broader rethinking of extension methodology which is likely tohave significant impact. Because of reorganization within MOA, the project finishedamidst considerable uncertainty as to how to continue to serve the requirements of arapidly changing sector.

Project Results

vii. The project was the latest in a series that helped establish a largeagricultural extension force with supporting infrastructure, giving fairly complete coveragecountrywide, although the majority of its activities were still concentrated in the ricegrowing areas. Extension staff now number some 36,000, and an extensive network ofabout 2,000 RECs, the focal point of extension activities at field level, is now in operation.Staff are better trained and supervised, have better access to information and specialistback-up, work in a more disciplined and structural environment, and generally have gainedmore respect from farmers and are consequently more self-confident. Extension practiceshave moved largely from a "campaign" approach (e.g., BIMAS program for rice), to asystematic and structured service provided by MOA. Gradually, extension for subsectorsother than rice, and for other agro-ecologies, e.g., uplands, are being expanded andstrengthened and there is an emerging shift to a more integrated or farming systemsapproach. Technology transfer for crops other than rice, including conservation techniquesfor upland and marginal areas, is becoming increasingly more effective over wider areas.The overall result has been, in addition to increased productivity, an increased awarenessof farmers towards the environment and enhanced farmer skills in protecting theenvironment and conserving resources. Small-farmer groups have been rapidly increasing,particularly in relation to poverty eradication programs such as P4K and farrm womengroups increased at a yearly rate of almost 6 percent during the project.

viii. Apart from building the necessary infrastructure by the expansion in staff,facilities, training and so on, there are few accurate data, however, to demonstrate theextent to which the project improved the institutional efficiency, or the quality, relevanceand cost effectiveness of training and extension activities, in part since it failed in settingup a monitoring and evaluation system as projected. Failure to engage the technicalassistance as foreseen and to procure vehicles in a timely manner to provide crucial staffmobility are, on the other hand, evidence that important actions included in the project toimprove those aspects were not implemented and therefore these objectives were not metas intended.

ix. While physical targets have been reached, more effort should have goneinto improving the quality of training and the relevance of extension services. Research-extension linkages have only marginally improved, with the result that a lot of available

v

technology is not being applied because the formulation and approval of recommendationsfor location-specific conditions is a long and arduous process. Decentralizing of extensionservices initiated independently by GOI, started during the latter part of the project andplacing greater responsibility at provincial and local levels, has had mixed results becauselittle was done to prepare provincial and local staff, and, in any case, the funds still haveto come from the center.

x. Probably the most significant impact of the project, apart from creating acritical mass in staff and infrastructure, was the establishment of the REC as the focalpoint for extension planning and providing an integrated, unified extension service by amulti-disciplinary group of PPL under the direction of a PPUP. While such unificationand effective coordination was not achieved at national, provincial and district level, it wastaking hold at the REC level. However, with the decentralization of extension services,the management of RECs reverted to individual agricultural services of local governmentsupported by different DGs leaving the future use and operation and management of theRECs somewhat unclear.

Sustainability

xi. Overall, there is no doubt that the project-supported objectives aresustainable, although some activities which were time-bound will not sustain, and theremay be a temporary setback while, in the present MOA reorganization, questions ofresponsibility, ownership, O&M and operational funding are being ironed out. The criticalmass in staff and infrastructure build-up during NAEP III and preceding projects will besustained, however, as the basis of a reoriented and reformed extension system which acommitted MOA is in the process of thinking through and implementing. NAEP III wasan appropriate phase in a long-term program of evolution of a suitable agriculturalextension structure for Indonesia, and GOI will need further support in the next phase tomodify and strengthen it to respond to the needs of a rapidly changing sector at a crucialstage in the country's development.

xii. The sustainability of the nationwide extension service will depend on GOI'swillingness and ability to fund the operation and maintenance of the considerable assetsbuild up and to divest some of this responsibility to the private sector, and to upgrade andrestructure its staff and introduce new methodologies to meet changing requirements asfarmers become more sophisticated and commercial oriented, and as access to improvedmass communications becomes more widely available.

xiii. The extension service has been set up entirely in the public sector and willbe costly and a substantial strain on GOI's budget. Shortage of timely operational fundsand deteriorating facilities through lack of O&M have been, and are likely to be, recurringproblems, and it is extremely doubtful that the extension system, in its present form, canbe sustained without major changes in structure and GOI policy and strategy. Questionscan be raised whether the service should be sustained in its present form. A nationalsystem based on central oversight and, more or less, on a single approach (T&V), whileeffective and appropriate up until now, will have to be replaced by a more diverse andflexible system attuned to location-specific conditions and problems. GOI will need to

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invest more funds to upgrade present staff and to introduce new extension methodologiesin order to make extension more efficient and cost-effective and to extend the coverage ofextension services to all major commodities and agro-climatic regions.

xiv. Future extension efforts can only be sustained by being more decentralized,by greater farmer involvement and reliance on private sector participation, and bygradually introducing feasible cost recovery systems to ensure the level of funding thatGOI cannot provide in the long run. Future efforts would be directed at better educatedfarmers looking for specific information, making greater use of modem communicationtechniques and needing fewer but more highly qualified extension staff supported by fewerbut better equipped facilities and readily available funds.

Lessons

xv. The main lessons of experience from the project are:

(a) Building up and strengthening a large, dispersed national organization,involving many agencies and points of decision-making at different levels,requires adequate time to effect the necessary changes, and needs to bephased realistically in accordance with the institutional capacity to absorbthose changes. If support is provided in a series of projects, clear projectby project indicators of success are needed and inputs clearly defined inline with a long range institutional objective.

(b) Even though changes are introduced through a national project, there is acontinuous evolution of concepts and approaches within GOI outside theconfines of the project. If the project is not fully integrated in this processit losses effectiveness. If the Borrower does not make full use of resourcesthat can be provided under the project there is a danger that thesustainability of project elements may be effected.

(c) When creating a unified national extension service, it must be accepted thatdecentralized and dispersed decision-making is necessary because oflocation specificity of conditions to be addressed.

(d) Research-extension linkages must be established at local level rather thanthrough HQ organization, with direct connection between field level staffto ensure relevance and speed in technology transfer. Local farmercommunities must be directly involved in the process of problemidentification and solution.

(e) It is unlikely that in a country as large and diverse as Indonesia the publicsector can continue to completely support an adequate and efficientextension service as currently constituted. More cost-effective methods andapproaches, and greater private sector involvement, responsibility andinitiatives on the part of farmer communities themselves will be requiredto spread the cost.

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INDONESIA

THIRD NATIONAL AGRICULTURALEXTENSION PROJECT

(LOAN 2748-IND)

PROJECT COMPLETION REPORT

PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE

1. Project Identity

Project Name Third National Agricultural Extension ProjectLoan Number 2748-INDRVP Unit East Asia and Pacific RegionCountry Republic of IndonesiaSubsector Agricultural Extension

2. Background

2.1 Bank assistance to GOI in agricultural extension began in the late 1960swhen a version of the T&V system was incorporated as a component of a number ofirrigation projects. Subsequently, an effort was made to improve the training of extensionworkers by providing assistance to agricultural high schools and regional training centersunder an education project (Cr. 288), approved in 1972. This was followed by theAgricultural Research and Extension Project (Ln. 1179) in 1975, that established 11provincial AICs and a national center at Ciawi; and the National Food Crops ExtensionProject (NFCEP) (Ln. 1267) in 1976, that concentrated on developing the extensionactivities of the Directorate General for Food Crops Agriculture (DGFCA) in 12provinces. The key elements of NFCEP were the national introduction of the T&Vsystem, based on Rural Extension Centers (RECs), each staffed with two field extensionsupervisors (PPMs) and which acted as a training and resource base for 10-12 PPLs withassociated PPSs.

2.2 The second National Agricultural Extension Project (NAEP II), whichbecame operational in 1980, extended the activities of NFCEP to a further 13 provinces,established an integrated service for the transmigration areas, and expanded the areas ofactivity covered to include smallholder estate crops, livestock, and inland fisheries. Itdeveloped partially, a unified extension service based on the common use of the REC byall Directorates General, placed coordination of all extension activities eventually underAAETE, and created coordinating forums at government and district level which neverbecame very effective.

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2.3 The subsequent third National Agricultural Extension Project (NAEP III)was to continue to strengthening of those areas of extension not well developed underNFCEP and NAEP II, including food and estate crops, and livestock and inland fisheries,based on an integrated T&V system, and also complete the unification of the extensionservices started under NAEP II. A unified extension service had been the aim of the GOIand the Bank since the 1970s and to this end GOI came out with a number of decrees,particularly in late 1983 and early 1984, to prepare for the necessary institutional shifts.NAEP III was prepared by staff of AAETE and the four Directorates of Extension, inaccordance with the objectives of Repelita IV, in a climate which was judged arnendableto introducing a completely unified national agricultural extension service. The projectwas revised and scaled down about 14 months after it became effective.

2.4 In addition and complementary to the agricultural extension projects theBank, since 1972, also supported agricultural education and training in a series of trainingprojects. Under the Second Education Project (Cr. 288-IND) 14 existing senior secondaryagricultural schools were upgraded (one marine fisheries secondary school was upgradedwith FAO assistance) and curriculum development undertaken. Under a second Bankproject-the Second Agricultural Training Project (Ln. 1692-IND, 1979)-quality andnumbers of agricultural technicians were augmented through the expansion or rehabilitationof 42 existing pre-service (SPP) and in-service (ISTC) institutions; establishment of fivenew SPPs, seven ISTCs and eleven AICs and the provision of technical assistance for theSPPs, ISTSCs and AAETE to strengthen planning and management and to undertakestudies. The third phase of capacity building was continued under the Third AgriculturalTraining Project (Ln. 23431-IND, 1983), which supported government's long-termstrategy of improving and expanding pre-service and in-service agriculture sector training.

3. Project Objectives and Description

3.1 The major objective of both the originally appraised and revised projects wasto strengthen the extension services covering estate crops, livestock and fisheries, inaddition to food and horticultural crops, in all provinces under a unified extension servicecoordinated by AAETE. The objective was achieved through the following components(the figures in brackets represent the revised project):

(a) an increase in extension staff by about 6,000 (3,450) PPLs, 3,000 (1,150)PPMs (later PPUPs), 1,000 (600) PPSs and 200 animal health officers;

(b) construction of 400 (230) new RECs, 210 houses for PPLs, 200 animalhealth posts and expansion of about 1,400 (490) existing RECs;

(c) procurement of furniture, equipment and materials, 3,206 (3,828) motorcycles, 124 (64) four-wheel drive vehicles, 45 animal health mobile units,and 11 (16) audiovisual mobile units;

(d) training of staff and key farmers through a limited number of overseascourses and fellowships, and a large number of local training courses;

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provision of related facilities and establishment of verification trials anddemonstrations;

(e) 6 (4) person-years of long-term consulting services in extension training,rural sociology, monitoring and evaluation; about 4 person-years short-termconsultancies for reviewing and revising extension recommendations andlocal consultancy services for engineering design and supervision of projectcivil works in the original project were reduced to 15 person-months ofspecialist services in the revised project; and

(f) monitoring, evaluation and studies.

3.2 The revised project placed relatively greater emphasis on institutional andoperational efficiency. Total project cost was initially estimated at US$136.2 millionfinanced by a Bank loan of US$70.0 million (60 percent of project cost excluding vehiclesand taxes and duties) and GOI budgetary funding of US$66.2 million (40 percent). AnADAB grant of US$2.15 million did not eventuate. Total project cost was later reviseddownward to US$100 million, as explained below, financed by a Bank loan of US$55million (55 percent including vehicles and taxes and duties) and the rest by GOI.

4. Project Design and Organization

4.1 The project was basically designed to continue and consolidate activitiesstarted under NAEP II and preceding projects. Project design supported the continuedexpansion of a public sector extension service in an overall development program whichreflected GOI policy and objectives for Repelita IV with investments in civil works,additional staff, vehicles, equipment, materials and training. Project implementation wasfacilitated by a PM at central level and in the reformulated project by sub PM's atprovincial level.

4.2 Institutionally, the design reflected the organizational changes decreed byGOI in 1983 and 1984 in order to prepare for the creation of a unified service,implementation of which had already been started under NAEP II. Thus AAETE, inaddition to its training function, was responsible for coordinating all extension activitieswith technical support of the DGs, and administrative support from BIMAS, and generaloversight by the Agricultural Extension Commission at national level and by an extensioncoordinating forum at both provincial and district levels. This organization had beenevolving during the previous projects and was considered able to provide the properclimate for a unified service. In fact, there was little improvement in agency coordinationat all levels, and lines of responsibility were still too diffuse for the implementation of wellfocused integrated extension activities, particularly because there was no clear responsibleentity for implementing the coordinating forums' decisions and recommendations.

4.3 Project reformulation addressed this issue which resulted in the creation inthe revised project of a single line of command through the Head of AAETE at provinciallevel and the Secretary of BIMAS at district level. However, this was not immediatelyfollowed by revised job descriptions and clear instructions, and, in the resulting confusion

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and uncertainty, was not effective during the project. The issuance of a decree in 1990by GOI placing the technical responsibility for coordinating and implementing extensionactivities in the agriculture Kanwil's office at provincial level and with the Chief of oneof the agriculture services (designated by the Bupati) at district level, while at the sametime devolving administrative control of field extension staff and facilities to provincial andlocal government, added to prevailing uncertainties and further delayed quick adoption ofa simpler more direct chain of command. As indicated elsewhere (see para. 7.5) the newemphasis on decentralization also tended to reverse some of the gains made incoordination, particularly at REC level.

4.4 It is clear that at project design phase, in particular during the projectreformulation, the organizational issues were adequately identified and project inputs weredeliberately designed to overcome identified institutional weaknesses. These inputscontinued to receive attention during supervision. The time needed to effectivelyimplement the required organizational reforms in a complex institutional envirorunent was,however, very much underestimated while certain events in GOI's other initiatives inreorganization and their effect on the project could not have been foreseen. It can thus beconcluded that major issues were correctly identified during project formulation andaddressed in project design. It was, however, not possible to foresee at the time ofappraisal the budget constraints that were experienced later. To get parties fully involvedwas more difficult which was reflected in the delays in effectively implementing the agreedchanges. Equally it was unrealistic to expect that, in a large and dispersed organizationwith parties at differently levels with different responsibilities, goals and interests, thechanges as foreseen would take effect in just four years.

5. Implementation Experience

5.1 Although the project became effective in October 1986 it was notimplemented until 1988. The reasons for the delayed implementation was the severebudgetary constraints experienced by GOI in funding the existing extension services, andremaining organizational problems at field level. The project was concluded in 1993, oneand a half years behind schedule to give time for project preparation and, due in part tothe decision to use US$5.3 million of loan funds as bridging financing for the IPMprogram, while a project to support IPM was being prepared.

5.2 Soon after project effectiveness GOI and the Bank, therefore, agreed toreformulate the project and, in early 1988, agreement was reached on a 26 percent reducedproject (see above) which, however, addressed the same objectives as the original project.Assurances on minimum levels of operational funding were obtained from GOI and asingle line of command, with the head of AAETE at provincial level, and the Secretaryof BIMAS at district level being responsible, was created to ensure the implementation ofintegrated extension activities. While the project quickly gained momentum in achievingits targets in construction, recruitment and training, no significant progress was made inthe procurement of technical assistance and vehicles and in setting up an effectivemonitoring and evaluation system.

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5.3 This situation prevailed for most of the duration of the project and affectedits implementation. Vehicles-the project provided for procurement of vehicles (4-wheeledand motor-cycle) through ICB. The acceptance of ICB procedures in the reformulatedproject was a departure by GOI from its usual practice of providing project vehicles underreserved procurement procedures. During implementation PIU complied with the agreedprocedures but was unable to obtain clearance from relevant Ministries to enable thewinning bidder to import the 4-wheeled vehicles since GOI regulations prohibited importof vehicles which were available from local sources. The Bank came close to declaringmisprocurement of the vehicles but finally accepted GOI's provision of the requiredvehicles from its own sources. The Bank thus disbursed only the payment for 1,500motorcycles. The remaining vehicles were provided by GOI through reserve procurement.TA in extension, rural sociology and monitoring and evaluation was not acquired due toa difference of view between MOA and BAPPENAS. With Bank concurrence fundsprovided for this were eventually used for a consultancy to evaluate the project, and, basedon this evaluation, to formulate a follow-up project combining training and extensions.An effective M&E system for major extension programs was not developed making anevaluation of the various extension activities and of the impact of the project difficult.

5.4 Other features which were to receive special attention during the revisedproject, such as special assistance to resource poor farmers, development of strongerresearch-extension linkages, more effective demonstrations and verification trials, andbetter coordination between various programs, projects and agencies never gained strongmomentum, and some, like the demonstration program were not funded beyond the start-up period. Provincial sub-PIUs, established to provide stronger and more efficientprogram planning and administration and to facilitate liaison between national and locallevels and the efficient flow of funds, were very slow in demonstrating a marked increasein project implementation efficiency. Because of delays experienced in submission ofdisbursement applications, operational funding remained a problem throughout the project.

5.5 Thus, although physical targets were reached or exceeded vital gaps inimplementation prevented the objectives from being fully achieved, particularly, theproject's impact in achieving the broader objectives of developing an integrated, cost-effective extension service for a range of commodities, fell short of expectations.Financial support given to IPM in the last year of the project, though not foreseen atappraisal, not only contributed to a successful program, but resulted in a broaderrethinking of extension methodology which is likely to have significant impact. Becauseof reorganization within MOA, the project finished amidst considerably uncertainty.

6. Project Results

6.1 The project was the latest in a series that helped establish a strongagricultural extension force with supporting infrastructure, giving fairly complete coveragecountrywide, although the majority of its activities was still concentrated in the ricegrowing areas. Extension staff now number some 36,000 and an extensive network ofRECs, the focal point of extension activities at field level, is now in operation. Staff arebetter trained and supervised, have better access to information and specialist back-up,

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work in a more disciplined and structural environment, and generally have gained morerespect from farmers and are consequently more self-confident.

6.2 Extension practices have moved from largely a "campaign" approach (e.g.,BIMAS program for rice), to a systematic and structured service provided by MOA.Gradually, extension for subsectors other than rice, and for other agro-ecologies, e.g.,uplands, are being expanded and strengthened and there is an emerging focus on a moreintegrated or farming systems approach. Technology transfer for crops other than rice,including conservation techniques for upland and marginal areas, is becoming increasinglymore effective over wider areas. The overall result has been, in addition to increasedproductivity, an increased awareness of farmers towards the environment and enhancedfarmer skills in protecting the environment and conserving resources. Small-farmer groupshave been rapidly increasing, particularly in relation to poverty eradication programs suchas P4K and farm women groups increased at a yearly rate of almost 6 percent during theproject.

6.3 While there are undeniable indicators that the project significantlycontributed to all this, and it is easy to quantify the expansion in staff, infrastructure,training and so on, it is more difficult to demonstrate the extent to which it improved theinstitutional efficiency, or the quality, relevance and cost-effectiveness of training andextension activities, in part since it failed in setting up a monitoring and evaluation systemas agreed. Failure to engage technical assistance as planned and to procure vehicles in atimely manner to provide staff mobility are, on the other hand, evidence that importantactions included in the project to improve those aspects were not implemented andtherefore these objectives were not achieved as planned.

6.4 The inability or unwillingness of GOI to implement these important actionscould be construed as a lack of commitment and interest beyond the more mechanicalactions of expanding staff and infrastructure and training, even though they had beenrecognized as being an important part in the design of the project. It also reflects thecontinuing organizational complexity and number of actors, and therefore different (vested)interests and diffuse decision-making and responsibility, complicating implementation ona national scale. Despite considerable attention being given by MOA to reorganizing thetraining and extension services to increase their effectiveness and to make them moreresponsive to the changing requirements of the sector, and efforts under the project tosimplify lines of command, the involvement of many agencies at different levels andcontinuing complex organizational relationships still, result in a lack of clarity ofresponsibilities, and this continues to interfere with the smooth, efficient provision oftraining and extension services.

6.5 While physical targets have been reached, and a number of efforts went intoimproving the quality of training and the relevance of extension services, research-extension linkages have only improved marginally, with the result that a lot of availabletechnology is not being applied because the formulation and approval of recommendationsfor location-specific conditions is a long and arduous process. Decentralization ofextension services, started during the latter part of the project and placing greaterresponsibility at provincial and local levels, has had mixed results because little was done

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to prepare provincial and local staff, and, in any case, funds still have to come from thecenter.

6.6 Probably, the most significant achievement of the project, apart fromcreating a critical mass in staff and infrastructure, was the establishment of the REC as thefocal point for extension planning and the provision of an integrated, unified extensionservice by a multi-disciplinary group of PPLs under the direction of a PPUP. A unifiedextension apaproach and effective coordination among the four DGs and AAET was notachieved at national, provincial and district level, but it did take hold at the REC level.However, with the decentralization of extension services, the management of RECsreverted to individual DGs, leaving the future use and operation and management of theRECs somewhat unclear.

7. Sustainability

7.1 NAEP III, following on the preceding projects, succeeded in providing themanpower and infrastructure for a nationwide extension service. The sustainability of thisservice will depend on GOI's ability to operate and maintain the considerable assetsacquired during the project and to divest some of this responsibility to the private sectoras the willingness to upgrade and restructure its staff and introduce new methodologies tomeet changing requirements as farmers become more sophisticated and commerciallyoriented, and as access to more effective means of mass communication becomes morewidely available.

7.2 Until now, the extension service has been a public sector activity and in itspresent form will be a costly and substantial drain on GOI's budget. The greater part ofexpenditure now comes from the development budget (rather than the routine budget, thebulk of which is for salaries) under various donor-supported projects. Shortage of timelyoperational funds and deteriorating facilities through lack of O&M are likely to berecurring problems, and it is extremely doubtful that the present extension system can besustained from Indonesia's own resources without major changes in structure and GOIpolicy and strategy.

7.3 In addition to adequate funds for O&M of the considerable existinginfrastructure and staff operational expenses, GOI will also need additional investment toupgrade present staff and to introduce new extension methodologies in order to makeextension more efficient and cost-effective and to extend the coverage of extension servicesto all major commodities and agro-climatic regions. A national system based on centraloversight and, more or less, on a single approach (T&V), while effective and appropriateat the time, will have to be replaced by a more diverse and flexible system attuned tolocation-specific conditions and problems.

7.4 Future extension efforts can only be sustained by being more decentralized,by greater farmer involvement and reliance on private sector participation and by graduallyintroducing feasible cost recovery systems to ensure the level of funding that GOI cannotprovide in the long run. Future efforts would be directed at better educated farmerslooking for specific information, making greater use of modern communications

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techniques, and needing fewer but more highly qualified extension staff supported by betterequipped facilities and readily available funds.

7.5 Changes in this direction, particularly decentralization and staff upgrading,and greater farmer involvement, are already occurring or being contemplated. However,in the transition, some of the changes being implemented are threatening to cause setbacksto the achievement of important institutional developments introduced under NAEP III,particularly the achievement of a more unified and integrated service. In thedecentralization process, the RECs have been returned to individual DGs for technicalcontrol while administration, including funding, now rests with the district. This so far,has had the result of breaking up the unified approach, with many PPLs returning to theoffices of the provincial services supported by respective DGs, and has also led to underuse of some RECs. Unless corrected, this may cause a setback in developing the extensionservices as a result of the very process of making them more efficient and responsive tonew needs.

7.6 Overall, there is no doubt that the project is sustainable, although some partswhich were time-bound will not sustain and there may be a temporary setback while in thepresent organization questions of responsibility, ownership, O&M and operational fundingare being ironed out. The critical mass in staff and infrastructure build-up during NAEPIII and preceding projects will sustain, however, as the basis of a re-oriented and reformedextension system which a committed MOA is in the process of thinking through andimplementing. NAEP III was an appropriate phase in a long-term program in theevolution of a suitable agricultural extension structure for Indonesia, and GOI will needfurther support in the next phase to modify and strengthen it to respond to the needs of arapidly changing sector at a crucial stage in the country's development.

8. Bank Performance

8.1 Bank performance, in general, can be considered satisfactory. Althoughfrom project appraisal through completion the project had five different Task Managers,there was reasonably good continuity in other staff supervising the project. As this projectwas one in a series and Bank staff had been engaged in an ongoing dialogue with GOI onextension matters, issues were clearly identified at appraisal and project design benefittedfrom lessons of experience from the previous projects.

8.2 Because deteriorating economic conditions dictated the reformulation of theproject soon after effectiveness, the project received more attention than usual for a follow-up project during appraisal, and was subject to intense and protracted discussion to ensureagreement on solutions to key issues, particularly funding, a single line of command, andcoordination between the DGs in MOA.

8.3 Supervision was carried out regularly and, at least initially, with greaterintensity than normal. Soon after implementation, during project reformulation, the projectwas supervised heavily and almost continuously from RSI for a period of about six monthsafter which Bank supervision missions were carried out at roughly 10-month intervals.Some attempt was made to coordinate supervision missions with those of the Bank-

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supported Agricultural Research Management project in order to encourage GOI staff togive more attention to the improvement of research-extension linkages.

8.4 The Bank showed itself flexible, particularly in finding ways to overcomeoperational funding problems and in setting up a project management structure to facilitatethe smooth and timely flow of funds and rapid disbursements. It also readily agreed toproject extensions and the provision of project funds for follow-up project preparation andthe support of IPM activities not foreseen at appraisal.

8.5 Supervision repeatedly brought to the attention of GOI and implementingauthorities serious omissions adversely affecting implementation, such as failure to engageconsultants and to procure vehicles in a timely fashion, and to set up an adequatemonitoring and evaluation system. It closely monitored funding to ensure satisfactoryimplementation and placed considering stress on finding ways to improve identifiedweaknesses in demonstration/verification trials, quality and relevance of training, andresearch-extension linkages.

8.6 Despite considerable effort on the part of the Bank little progress was madein these because of the slowness of the organizational machinery to adapt to the changesrequired, the continued lack of coordination between agencies, and the absence of groundrules in implementing the coordinated programs involving several agencies. Satisfactorysolutions to GOI's failure to recruit technical assistance, procure vehicles and establish aM&E system were never found although the Bank did accept certain compromises.Stronger insistence and action on the part of Bank that these project actions be carried outas agreed might have caused temporary delays but resulted in a better project.

9. Borrower Performance

9.1 With minor changes, and the appointment of a new Project Director earlyin the project, the PIU within AAET responsible for NAEP II continued to implementNAEP III. Since many elements of NAEP III were a continuation of what was startedunder NAEP IT the project profited from having a relatively experienced projectmanagement unit from the start. Thus, despite the economic squeeze and budgetconstraints necessitating a downsizing of the project, physical targets in civil works,staffing and training were achieved more or less according to schedule.

9.2 GOI officials and project staff were less able to ensure the flow of adequateand timely operational funds to the dispersed project sites, even though the Bank agreedto finance a greater share of those expenditures during project reformulation, affectingparticularly field extension activities. Disbursement was also slow because of the inabilityto set up an efficient system in the field to obtain the necessary accounts anddocumentation to support disbursement applications to ensure quick turnover of funds.The provincial sub-PMs, established to facilitate the flow of funds and documentation, onlymarginally improved this situation, which remained problematic throughout the project.

9.3 From the Bank's perspective, GOI's handling of the recruitment of long-term consultants, the procurement of vehicles and the establishment of a suitable M&E

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system was less than satisfactory. These were recognized and agreed to at appraisal asimportant actions required to fully achieve the project's objectives, and failure to executethem on time or at all severely detracted from the project's effectiveness and resulted inimportant activities such as the evaluation and comparison of major extension programsand different extension methodologies never being carried out.

9.4 Despite the specific provisions under the project, GOI was not able tomaterially improve the coordination between AAETE and the DGs, and the linkagebetween research and extension. AAETE being the lead agency there was a tendency toplace too much emphasis on training. Even increasing the role of, and funding to the DGsduring project formulation did not appear to significantly improve coordination or theirparticipation. The verification trials/demonstration program, first carried out by AAETand later transferred to the DGs, which should have been an important focal point inresearch-extension linkage and technology transfer, lacked quality, relevance andeffectiveness, as pointed out by various Bank supervision missions, again through theinability of the various agencies to fully participate and coordinate their activities. Thislack of coordination was also a major reason for the apparent lack of progress instrengthening the quality, relevance and focus of training in general.

9.5 GOI's tardiness in issuing job descriptions and clear instructions preventedthe full and immediate implementation of a single line of command under the project, andits decision to transfer RECs to individual agricultural services of the local government hasbeen, at least temporarily, a setback to the development of an integrated, unified extensionservice.

9.6 Toward the end of the project, GOI constituted a MOA-wide SteeringCommittee and working group to guide and work with the consultants in the evaluation ofNAEP III and the preparation of a follow-up project building upon NAEP III experienceand responding to the requirements of a changing agriculture sector. This work was notwell synchronized with reorganization and policy planning proceedings in other parts ofthe ministry and GOI, resulting in a project proposal which was too narrowly focused andwhich did not adequately address the fundamental issues of human resource developmentand extension in the sector. MOA is now in the process of addressing these issues morecomprehensively through a series of round table discussions, but this will delay a follow-up project.

10. Project Relationships

10.1 An excellent understanding and working relationship existed throughout theproject period between the Borrower and the Bank despite certain inconsistencies inimplementation and periodic difficulties experienced in communication as, for instance,during procurement of long-term consultants and vehicles. Apart from these instances, theBorrower generally responded promptly to the Bank's observations and recommendationson how to improve project execution and the Bank showed sufficient flexibility to acceptsuggested changes (sometimes compromises) in order to improve, or at least maintain themomentum of implementation.

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10.2 Staff continuity and intensive and continuous inputs from the ResidentMission staff played an important part in maintaining this relationship and mutual respect.Despite the good relationship at project level and the ongoing dialogue on broader policyand strategy issues, the Borrower did not fully involve, or consult with the Bank in theconsiderable planning for reorganization and modernization of the agricultural extensionservices taking place outside the project with MOA and GOI generally during the periodof implementation of the project.

10.3 Relationships between the various implementing agencies and entitiesinvolved in agricultural education, training, research and extension were, and continue tobe weak. This resulted in little progress being made in coordination of overall programimplementation by securing timely inputs by all parties required for providing balance inextension for various subsectors and for strengthening research-extension linkages and theprocess of technology transfer. Agency coordination generally was better at local ratherthan higher levels, and was weakest at national level. Generally, the relationship withbenefitting farmers was characterized by a "top-down" approach, although a gradualincrease in farmer participation became evident towards the end of the project.

11. Consulting Services

11.1 Studies carried out or completed under the project by consultants werecompleted to GOI's and the Bank's satisfaction and contributed to further policy andstrategy development for agricultural extension. Results of the one relatively majorconsultancy for the evaluation of NAEP III and the Third Agricultural Training Projectwere not so satisfactory. The reports went through a number of drafts before finally beingaccepted by GOI and the consultancy had to be extended beyond the originally agreedcontract period. The evaluation did not yield the information and insights expected andthe proposal for a new project was rejected by the Bank as inadequate and not addressingthe fundamental issues and needed reforms to serve a fast growing and rapidly changingsector.

11.2 The unsatisfactory outcome of this consultancy was not entirely due to theconsultants' performance but was influenced by external circumstances over which theconsultants had no control. The evaluation, particularly that of NAEP III, suffered froma lack of information and baseline data, as pointed out in the consultant's report. Sincea comprehensive M&E system was not established under the project, partly due to thefailure of the project to hire long-term consultants who were to assist in creating thesystem, adequate data were not available and could not be completely replaced by surveysconducted by the consultants.

11.3 The formulation of the new project coincided with a period of intensediscussion and planning within GOI and MOA for the second 25-year long-termdevelopment plan and the sixth five-year development plan, including organizationalchanges required in the public sector to serve agriculture. Due to uncertainties as to theoutcome of this planning process at the time, the Steering Committee and Working Groupguiding and assisting the consultants, which comprised representatives of MOA's PlanningBureau, the DGs and BAPPENAS, was unable to give firm directions to the consultants

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within the context of the pending changes. Instead, individual members of the Committeetended to give advice, often conflicting, according to their own interests and interpretationof events, leading to some confusion on the part of the consultants.

11.4 In retrospect, it would have been better to delay project formulation untildetails of future directions and reorganizations were better known. However, had it beenpossible for the consultants to play a more integral part in the discussions and planning atthe time at the inter-agency level, the resulting proposal might have been closer to themark. As it was, they appeared to work in relative isolation, and since AAETadministered the contract and provided most of the members of the Working Group, theproposal was too narrowly focused with the result that a lot of time and effort was wastedand implementation of a follow-up project is likely to be delayed.

12. Lessons Learned

12.1 The main lessons of experience from the project are:

(a) Building up and strengthening a large, dispersed national organization,involving many agencies and points of decision-making at different levelsrequires adequate time to effect the necessary changes, and need to bephased realistically in accordance with the institutional capacity to absorbthose changes. If support is provided in a series of projects, clear projectby project indicators of success are needed, and inputs clearly defined inline with a long-range institutional objective.

(b) Even though changes are introduced through a national project, there is acontinuous evolution of concepts and approaches within GOI outside theconfines of the project. If the project is not fully integrated in this processit loses effectiveness. The Borrower does not make full use of resourcesthat can be provided under this project and there is a danger that thesustainability of project elements may be affected.

(c) When creating a unified national extension service, it must be accepted thatdecentralized and dispersed decision making is necessary because of locationspecificity of conditions to be addressed. The approach must be flexibleand relevant to localized social and resource situations which range fromsophisticated Java to newer, more remote and marginal areas recentlysettled in the Outer Islands. A simple T&V approach may be suitable forthe latter whereas a more integrated farm management approach such asused in IPM may be better from the former.

(d) Human resource development planning for MOA and sector should becarried out at the Ministry and DG level and not be left to AAET only.AAET must focus more on its real function which is in-service training.

(e) Research-extension linkages must be established at local level rather thanthrough HQ organizations, with direct connection between field level staff

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to ensure relevance and speed in technology transfer. Local farmercommunities must be directly involved in the process of problemidentification and solving.

(f) It is unlikely that in a country as large and diverse as Indonesia the publicsector can continue to completely support an adequate and efficientextension service as currently constituted. More cost-effective methods andapproaches, and greater private sector involvement, responsibility andinitiatives on the part of farmer communities themselves will be required tospread the cost.

(g) The strategy to increase farmers income requires the development oftechnical recommendation that are location specific. Technicalrecommendations must be based on regional potentials based on the agro-ecological conditions.

(h) Agriculture extension requires adaptive research in line with the localpotentials and the transfer of relevant technology supported by bettermarketing strategies, and an increased role of rural economic institutions(KUD). The relationship between SMS and research staff and also theeconomic and marketing field staff of each agricultural service of the localgovernment (food and plantation crops, livestock and fisheries) and otherinstitutions needs to be integrated.

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PROJECT COMIPLETION REPORT

INDONESIA

TIIRD NATIONAL AGRICULTURAL EXTENSION PROJECT

PART II PROJECT REVIEW FROMTHE BORROWER'S PERSPECTIVE

INTRODUCTION

1. In order to support step up rice production, the World Bankhas approved NFCEP (Loan 1267-IND), managed by DGFC, 1977-1981, covering 13provinces, by introducing the LAKU system. The project is continued by NAEPII (Cr. 996-IND), 1980-1986, covering 26 provinces by continuing the LAKU(T&V) System for food crops extension including smallholder estate crops,livestock and fish culture. This project was transferred to AAETE in 1984.NAEP III (LA 2748-IND), managed by AAET, was approved on September 4, 1986,and was completed on June 30, 1993 after reformulation and two extensions.

2. A fundamental concept is that the project is designed toimplement rationally agricultural extension through the integration of PPLs,PPUPs and PPSs of each subsector in a unified extension drive. Thisfundamental concept is also right, because: (i) the extension workers of allsubsectors have been managed by the BP BIMAS (1986), whereas the farmersgenerally have integrated farm businesses; and (ii) the REC, being a home basefor the PPLs, has five kinds of PPUP with one agricultural extension programcovering all subsectors. Project revision was carried out to accommodatechanges occurring in the course of the project implementation, relating topolicy problems in conducting agricultural DIKLATLUH, project implementationplan, or project implementation procedure. The time needed for revision ofthe SAR was up to four months, the DIP up to three months, the PO up to sevendays, and the ROP up to fifteen days. Thus the time-consuming projectrevision had delayed or hindered the project implemented activities.

3. In accordance with the reformulation, the closing date of theproject was advanced by one year from December 31, 1991 to December 31, 1992.Since there were overseas fellowship programs which would not be completeduntil December 1992, and besides the NAEP III/ATP III Evaluation and theFormulation of NATEP, was not be completed until July 1992, the closing datewas extended by one year to December 31, 1992. And in view of the approval ofthe use of the remaining funds of US$5,300,000 as a bridging fund for the IPMprogram managed by the BAPPENAS from July 1992 through June 1993, the closingdate was extended further to June 30, 1993. As a result of the projectextension, the provision of the APBN also increased for project administrative

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and extension activities, the loan funds for which had been exhausted,including the operation of SL-UBA in ten provinces.

PROJECT OBJECTIVES AND DESCRIPTION

4. Objective. NAEP III is aimed to strengthen the extensionservices of estate crops, livestock, fisheries, food crops, includinghorticultural crops, covering 27 provinces by continuing to apply the LAKUSystem. The project covers: (i) addition of extension personnel, (ii)addition of equipment, REC, vehicles and houses for PPL; (iii) agriculturaltraining and education; (iv) agricultural extension; and (v) technicalassistance and studies.

5. Issues and Approaches. There are three issues in theimplementation of relevant projects, namely: (i) the availability of extensionbudget outside the project; (ii) the implementation of integrated extensionthrough agricultural extension coordination; and (iii) effective projectorganization in each province (Sub PIU). The recommended approaches are: (i)the availability of specifically local technical recommendations, related toinstitutional credits and marketing access according to the ability of farmersub groups so that it is able to improve income and job opportunities in therural areas: and (ii) the improvement of the extension organization efficiencyof the national, provincial and district level.

PROJECT DESIGN AND ORGANIZATION

6. The project design covered all physical, financial and projectimplementation aspects. The reformulation did not bring about design changes;there were only changes in the composition of the physical and the financialcomponents. In the subsequent implementation of the project, there were nosignificant changes; there were only additional IPM activities resulting fromthe use of the remaining funds and the finishing of the remaining contractpayment for the ATP III training vessels (LA 2341-IND).

7. Project organization at the national level (PIU) as stated inthe SAR was under the AAETE/AAET. The project was initially guided for theperformance of its tasks by the instructions issued by the KPPN. As a resultof the changes in the KPPN organization (1991), subsequent projectimplementation was based on the instructions of the AAET. Whereas the sub-PIUwith the Kuasa Pimpro system, which was initially established at a RegionalOffice (1987/1988 through 1989/1990), for the sake of smooth projectimplementation had been transferred to the technical implementation unit ofthe AAET with the PIMBAGPRO system (starting in 1990/1991).

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PROJECT IMPLEMENTATION

8. Loan Agreement 2748-IND/NAEP III was signed on September 4,1986 and became effective on October 21, 1986. For the sake of the effectiveuse of loan funds, the loan agreement needed to be reformulated because: (i)as a result of the devaluation of the rupiah against the dollar in November1986, the amount of the loan for the project became excessive, therebyrequiring a cancellation of US$15,000,000 in accordance with the agreementdated April 18, 1987; (ii) the activities of the project covering all areasand all subsectors needed to be supported with the provision of efficienttechnology on a continuous basis; (iii) the activities of the project have tobe emphasized on the development of human resources to improve the quality ofagricultural extension activities; and (iv) the construction of physicalfacilities which support extension activities needed to be given priority inareas outside Java and Bali for servicing coastal areas, dry land andtransmigration sites.

9. The reformulation proposal which was submitted on October 31,1987 was approved by the Bank on June 27, 1988 with a loan agreementamendment, whereas the SAR was revised earlier on February 26, 1988. Thereformulation which took a considerable period of time substantially affectedthe implementation of the project because: (i) the 1987/1988 DIPimplementation had to be put off with the exception of the Category IIIactivities, while the DIP had to be revised in accordance with the revisedSAR; (ii) the realization of the fiscal year 1987/1988 project reached only73.4% in the case of the physical implementation, 56.5% in the case of thefinancial implementation which meant that 25.4% of the APBN had to be unused,and 44.7% of the loan was transferred to fiscal year 1988/1989, whereasdisbursement reached only 8.1% of the 21.8% target; and (iii) the extensionactivities could not be included in the fiscal year 1987/1988 budget.

DETAILS OF PLANNED AND ACTUAL IMPLEMENTATION

10. Category I

As a result of the reformulation, the initial buildingconstruction target of 2,612 units was reduced to 1.130 units, but therealization reached 1,357 units, i.e. an increase of 20.0%. The 90% loan ofUS$30.0 million initially provided was reduced to US$10.4 million and therealization was US$9.5 million, i.e. a decrease of 8.07%. Whereas the 10%counterpart funds, which initially amounted to US$5.4 million decreased toUS$1.2 million and the realization reached US$2.5 million.

11. Category II

Prior to the reformulation, the furniture/equipment andvehicle procurement plan called for 6,415 units. The quantity was reduced to5,836 units, while the realization reached 5,962 units, i.e. a 2.1% increase,which was partially accomplished through the reserved procurement plan and theagreement of the Bank with the BAPPENAS. The 100% loan for import goods, 95%

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for factory purchasing goods, and 65% for local purchasing goods, which wasaltogether provided for US$6.0 million, was increased to US$7.4 million andthe realization was US$4.86 million, i.e. a 34.32% decrease. The 0%, 5% or35% counterpart funds which had to be provided for US$1.4 million decreased toUS$0.8 million, while the realization reached US$3.0 million.

12. Category III

The plan for training and TA/Studies prior to thereformulation respectively called for 140,456 persons, 72 mm and 21 mm. Thefigures were subsequently get lowered to 114,765 persons, 63 mm and 30 m. Therealization reached 197,110 persons, i.e. a 71.8% increase, 151 mm, i.e. a139.7% increase, and 9 m, i.e. a 70% decrease, with the addition of 36 unitsof supplementary IPM activities. The 100% loan funds, which were initiallyplanned to amount to US$27 million, went down to US$23.1 million, and therealization reached US$27 million, went down to US$23.1 million, and therealization reached US$36.8 million, i.e. a 46.5% increase. Whereas thecounterpart funds which provision was unclear initially amounted US$6.7million, at last became unuseful, on the contrary the counterpart budgetshould be provided for addition of 300 persons of D3 program funded by GOI,and the realization achieved US$4.0 million.

13. Category IV

This activity that served as an incremental operationcomprising project support activities and related activities, was initiallyplanned to amount to US$43 million in the form of counterpart funds. As aresult of the reformulation, there were additional activities for extensionmaterial procurement and extension activities, but the amount of the funds wasreduced to US$36.7 million comprising counterpart funds of US$30.0 million andplanned loan funds of US$6.7 million with a 100% portion for activities beforeApril 1, 1989, a 75% portion for activities before March 31, 1990, and a 50%portion for activities after that date. The physical use of the funds wasplanned to cover 2,080,133 units and the realization reached 2,151,730 units,i.e. a 34% increase. The loan funds used reached US$4.9 million and thecounterpart funds amounted to US$36.3 million.

14. Land Acquisition.

The funds for land acquisition originating from the 100%counterpart funds were initially planned to amount to US$9.5 million. afterthe reformulation, the amount was reduced to US$5.8 million. The realizationof the land acquisition funds reached US$7.8 million, i.e. a 34.5% increase.

15. Unallocated Funds.

These funds, which were initially provided for physicalcontingencies, amounted to US$7.2 million, comprising loan funds of US$7.0 andcounterpart funds of US$0.2 million. After the reformulation, the use of thefund for physical contingencies and price contingencies amounted to US$14.6million, comprising loan funds of US$7.4 million and counterpart funds ofUS$7.2 million. The realization of the loan funds was transferred to CategoryIII to finance additional activities, among others for the IPM program, while

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the counterpart funds were transferred to Category IV to support the paymentof salaries of the PPLs/PPUPs/PPSs including Animal Health Officers and toCategory II for reserved procurement.

FACTORS AFFECTING THE PROJECT IMPLEMENTATION

16. Operational Policy.

Factors largely affecting the project implementation that isform policy changes related to the setting up of the agricultural DIKLATLUHprogram. These factors included: (i) efficiency in the use of agriculturalDIKLATLUH funds; (ii) the continuation of the D3 extension program; (iii) theapplication of mobile training and integrated training methods; (iv) theapplication of the extension method in the form of an agricultural extensionforum and the application of agricultural technology packages; (v) changes inthe organization of the KPPN, the FKPP I and the FKPP II; (vi) the applicationof the SL-PHT system; and (vii) reserved procurement for animal health mobileunits and their equipment.

17. Operational Planning.

The factor that largely hindered the project implementationwas the inferior arrangement of the planning and the preparation of theexecution itself. This could be noted from the frequent occurrence of: (i)unit cost changes; (ii) site changes; (iii) changes of technicalspecifications of equipment; (vi) schedule changes caused by the long periodof time required for the preparation of construction and equipmentprocurement; and (v) schedule changes caused by the long period of time neededfor the preparation of education, training, extension and studies.

PROJECT RESULTS

18. The purpose of the project, namely to strengthen extensioncovering estate crop, livestock, fisheries, and food crop activities includinghorticulture crops, had in general been achieved properly, in spite of thefact that the implementation of the project was in the end highly affected bythe new policy stipulated in the Joint Decree of the Minister of AgricultureNo. 539/VII/1991 and the Minister of Home Affairs No. 65/1991. The projectscope comprising the recruitment of extension workers including animal healthofficers, the procurement of extension facilities and infrastructure, theimplementation of training and extension, and support activities had beenachieved, even exceeding the target. The SAR target could be exceeded becauseof several revised activities or the addition of new activities agreed upon bythe BAPPENAS and the Bank. Actual budget utilization reached US$53,185,145.34so that the remaining fund balance of the loan stood at US$1,814,854.66whereas the counterpart fund reached US$53,600,000 or up by US$8,600,000.

19. Distribution of REC by Location. The construction of REC wascompleted only in 1991/92, with sites for each province. Sites of the 260

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RECs, have been determined by FKPP I in accordance with the province'srequirement and evenly distributed as follows: (i) dry land, 134 units(51.5%); (ii) coastal areas, 79 units (30.4%); and (iii) transmigration areas,47 units (18.2%). By the completion of REC construction outside Java and Baliwhich was supplied with basic extension equipment/furniture and a specialequipment for food crops, estate crops, livestock or fisheries, extensionactivities in dry land, coastal areas and transmigration areas in that regionwas gradually increase.

20. Animal Health Posts and Agricultural Extension. From 200 AHPwhich were constructed in cattle densed population areas, many have beenequipped with furniture, animal health technical equipment and sufficientoperating expenses. The AHP which was headed by a veterinarian assisted bytwo paramedics, supported the implementation of animal disease prevention anderadication (P2H), which in certain activities it made use of an animal healthmobile unit, causing an impact related to the extension program. With theimprovement of perception, knowledge and skills in P3H the farmer haveimplemented activities including P3H aspects, so that they were able to reducethe loss of livestock due to animal disease. This resulted in an increase oflivestock productivity and farmers income.

21. Special Training Material. In line with the agriculturaldevelopment policy, four types of special training material have beenintroduced, namely: (i) special PPL basic training which contained seafisheries material for 510 PPLs who already had a basic education inagriculture and transformed into PPL for fisheries (1992/1993); (ii) specialskills training for up to 2,100 contacts farmer and heads of village, who weregiven additional material in co-operatives and Supra Insus (1989/1990); (iii)special skills training in commodities oriented towards the agribusiness forup to 510 PPLs/technical workers and 3,060 contacts farmer (1992/1993); and(iv) management training in farm business for 200 young farmers in East Timor(1992/1993).

22. Development of Agricultural Training Methods. In the contextof speeding up the transfer of technology for the farmers, four types ofeffective training methods have been introduced and developed, namely: (i) anapprenticeship system for 210 farmers-fishermen in East Timor in various farmbusinesses belonging to farmers in NTT, NTB, Bali, East Java and Yogyakarta(1989/1990 and 1990/1991); (ii) mobile training for 1.650 PPLs in RECs withtrainers from BLPPs so that the PPLs did not have to leave their post(1990/1991); (iii) an integrated training package for 810 PPLs in BLPPs whichwas followed by a course for farmers held in the farmers areas and at IslamicCenters for 4,680 farmers, with the PPLs as trainers (1992/1993); and (iv) afarmer field school on agribusiness, with 80Pl-Is (instructors, PPS andtechnical workers). These guides, after having been trained in BPLP Ciawiearlier, became trainers for 280 PL-IIs and for 300 Mantri Tani's in BLPP/BKPIfrom 10 provinces. The PL-IIs and Mantri Tani's then implement a fieldsschool for 12,000 farmers in the latter's own farm businesses (1993/1994).

23. Development of Agricultural Extension Methods and Programs.The efforts to speed up the improvement of the farmers' abilities have beenmade by increasing the participation of various parties concerned by means of:(i) agricultural extension forum, being a meeting-based method in which 1,035

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KTNA personnel discussed a farm business development program with theauthorities concerned (1990/1991); (ii) an agricultural technology packageapplication as a meeting-based method which involved seven parties, namely upto 5,387 farmers, researcher, extension officers, trainers/instructors,teachers in agriculture, entrepreneurs/KUD and banking officials (1990/1991,1991/1992 and 1992/1993); (iii) a co-ordination meeting for the agriculturalprogram implementation, as a meeting to discuss the relation betweenagricultural extension policy, with agricultural development program andagricultural technology in order to support the agricultural extension programat the provincial and district levels, involved 3,120 members of KPPN, FKPP I,FKPP II, Provincial Coordinator PPSs, District Coordinator PPSs and relatedinstitutional officials concerned (co-operatives, rural development, trade andindustry in 1990/1991 and 1991/1992).

24. Additional Integrated Pest Management. Utilization of theremaining funds for IPM has had a special impact and cannot be separated fromagricultural extension. There were five IPM activities, namely: (i) trainingin nine FTFs, which involved 894 PHPs, 4,465 PPLs and 45,500 farmers; (ii) IPMsupport activities in the form of 32 researchers and four seminars; (iii) Diprogram implementation for 1,192 PHPs; (iv) IPM's implementation anddevelopment for upland vegetables which involved 2,450 persons; and (v)technical assistance in co-operation with FAO for 111 mm.

PROJECT SUSTAINABILITY

25. Agricultural Extension and Increasing Human ResourcesProductivity. The agricultural extension has successfully enhanced theperception, knowledge, and the attitudes of the farmers in respect ofagricultural technology and they will be able to apply it appropriately intheir farm business to increase their income. Considering that the sector ofagriculture is expected to become a reliable base for the development of thenon-agricultural sector, the management of agricultural extension should becontinued. The mcre so if the matter is related to the efforts to increasethe productivity of the labor force in the sector of agriculture so that thetransformation of the labour force to the sector of non-agriculture will runsmoothly.

26. Net Benefits, Outcome and Risk Factors. Projectsustainability is affected by a high level of benefit from: (i) agriculturalextension in respect of behavioral change and work productivity improvement offarmers; (ii) implementation of decentralized extension by the regions withthe support of the national; and (iii) institutionalization of IPM related tothe agricultural extension program. While the outcome of agriculturalextension is much affected by: (i) the agricultural development program; (ii)the organization and management of agricultural extension; and (iii) theparticipation of farmer groups. While real agricultural extension projectrisks is not significant, except the problems caused by the impossibility tocover the beneficiary contact as a result of the large extension area and theagricultural extension policy implementation which has not yet enhancedagricultural extension effectiveness.

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27. Institutionalization of Integrated Pest Management andAgricultural Extension Program. The IPM Program has had a beneficial impacton the sector of agriculture, particularly in the food crops as implemented todate. In the efforts of institutionalization a more extensive IPM, the IPMProgram needs to be integrated into the agricultural extension program in theregions. This matter will be even firmer if the said IPM program isintegrated in a program for the increasing of farm business in each subsectorincluding PB BIMAS.

BANK PERFORMANCE

28. Approval and Revision Procedures. The approval by the Bank ofany activity/procurement of goods and services in the form of a "no objectionletter" was often too late and this was particularly the case since fiscalyear 1989/1990. However, with the increase of the SOE threshold value fromless than USZ50,000 to less than US$100,000, the delay could be overcome,because for any contract value below US$100,000, a no-objection letter fromthe Bank was no longer required.

29. The revision of any activity did not encounter any significantproblem as long as the proposal for such revision was submitted in a completeform with appropriate justifications. However, the loan reallocation processtook a considerable time to finalize (2-3 months). It was for this reasonthat any borrower should be given an automatic right of reallocation, providedthat: (i) the funds to be reallocated were still available (i.e. not exceedingthe total loan amount); and (ii) if there should be an overdrawn of onecategory, the borrower concerned was automatically entitled to use anyunallocated budget.

30. Withdrawal of Proceeds. The availability of deposits in aSpecial Account at Bank Indonesia did indeed facilitate the GOI's effort toprovide the necessary funding for those activities payable in rupiah. In thisway, the GOI would not be necessary to provide any funds for prefinancingpurposes, especially after the amount of the initial deposit had been raisedfrom US$3 million to US$5 million. The replenishment to the special accountby the Bank often run into problems, especially for the reimbursement of fundsrelated to activates payable by definitely charged expenditures, because thesupporting documents among others contract and minutes thereof received fromregional-level sub-project implementation units were often incomplete. Toovercome the problem, it was suggested that the attachment of a paymentinstruction letter should be the only requirement to be fulfilled whensubmitting any replenishment application.

31. The determination of the amount of percentage, specificallyfor categories II and IV, should actually have followed the guidelines of thedisbursement procedure along with the explanation thereof, but thoseguidelines were not issued until 1990. As a consequence thereof, a great dealof the applications were not payable in full because they were consideredineligible; the Bank was not at all flexible in its judgement, if any of therecommended applications should turn out to be overdrawn, the amount overdrawnwas directly deducted without giving any consideration to the fact that the

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overall balance of the loan was in fact still sufficient to pay out the fullamount of the overdrawn application.

32. Bank Supervision. The Bank supervision schedule was wellplanned beforehand as indicated by the fact that, before the arrival of itssupervision team, it had given due notice to the Indonesian Government, inthis case the AAET/NAEP. The span of control was generally quite extensive interms of direct supervision on NAEP III or the exercise of agriculturalextension generally. Under such the Bank supervision, quite a few problemsactivities of the project could duly be resolved and new activities approved,even though the project should give clarification or justification. Mattersthat were approved by the Bank during the exercise of the supervision were:(i) additional 30 buildings for REC in ten provinces; (ii) transforming thestudies into an evaluation activity of NAEP III/ATP III and formulating ofNATEP; (iii) reserved procurement for 45 animal health mobile units; (iv)balance of loan amounting to US$5.3 million for the IPM Program; and (v)making funding available for the procurement of vessels for ATP III (LA 2341-IND).

BORROWER PERFORMANCE

33. Distribution of Project Activities. With the project widelyscattered all over the provinces of Indonesia, numerous problems wereencountered by PIU, relating to such things as project administration, projectimplementation, monitoring and project supervision. Although measures hadbeen taken solve the problems, such as through instituting sub-PIUs under thesystem of Kuasa Pimpro (1987/1988-1989/1990 fiscal years) and through thesystem of Pimbagpro (1990/1991-1993/1994 fiscal years), somehow they could notas yet be overcome completely.

34. The existing approved DIP/PO/ROP were often revised due tochanges occurring in the volume and composition of the activity and cost.Loan reallocation was frequently carried out with the intention to maximizethe use of the loan available for each Category.

35. Organization of the Project. The organizational structure ofthe project had changed over the years with suitable form in line with thechanges of policy. The favorable impacts of such changes on itsorganizational structure were: (i) the funds withdrawal and financialaccountability process in each province was thereby very much smoothly; (ii)operational decisions in the field proceeded much more smoothly because thedecision from the National Project Director was no longer required; and (iii)the capability and responsibility of Pimbagpro could speedily be upgraded dueto their good responsibility in the management of their respective sub-Project. On the other hand, the negative effects thereof included such thingsas: (i) the frequent rotation of the Pimbagpro and sub-PIU treasurers didhamper the smooth implementation of the project because it took time for themto get used to the management procedure and mechanism of project funded byforeign loans; (ii) as a consequence of the varying skills of the Pimbagproand treasurers, it frequently happened that payments which had already beenmade by the KPKN were later declared by the Bank to be ineligible expenditure;

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and (iii) loan disbursement was somewhat delayed because the DITUA requiredthe supporting documents for the application, which should first be collectedfrom every sub-Project.

36. Implementation of the Indonesia Government's Assurance. TheGOI's assurance in the implementation of extension had been carried out withthe Instruction Letter of the Minister of Agriculture No. 03/1988 datedFebruary 28, 1988 concerning the improvement of agricultural extension co-ordination in the regions. Given that the role of agricultural extension wasvery decisive in ensuring the success of the agricultural development program,the assurance of the GOI to allocate agricultural extension budget, out ofthat provided under the project, with the amount of Rp 15 billion annuallystarting from 1988/1989 was in fact exceeded every year.

37. The assurance of the GOI relating to project implementationhad duly been fulfilled such as for: (i) annual operational plan; (ii) annuallong-term education program; (iii) counterpart funding for incrementaloperating costs; (iv) a study on the cost effectiveness of animal healthmobile units and audio-visual mobile units, in 1989/1990 fiscal year did seequite significant results; (v) the procurement of 1500 motorcycles by ICB;(vi) land acquisition for construction provided by the RegionalAdministration; and (vii) compilation of extension materials at province andnational levels. In the meantime, those GOI assurance that had been modifiedand already been agreed upon by and between BAPPENAS and the Bank were: (i)procurement of animal health mobile units (45 units) to be borne by theIndonesian Government because it came under the reserved procurement category;(ii) the remaining budget of motorcycle procurement (2,328 units) and four-wheel vehicle procurement (64 units) to be met by the BP BIMAS and for theaudiovisual mobile unit procurement by ATP (LA 2341-IND); and (ii) hiring ofextension, monitoring, evaluation and rural sociology consultants to bereplaced by the evaluation of NAEP III/ATP III and the formulation of NATEPfor 1991/1992.

38. Disbursement Realization. Disbursement realized by theclosing date stood at US$53.18 million or 96.7% of the total funds. Therather low disbursement rate of the loan could be attributed to the combinedproblem of co-ordination, fund withdrawal speed from the KPKN/DITUA,application process and replenishment from the Bank. The actual disbursementsstill failed to reach the set target. The principal obstacles standing in theway of the disbursement reaching the intended target were as follows: (i)construction of many of the REC and the procurement of their equipment werebehind schedule and the payments would accordingly have to held back, becauseland acquisition for the purpose in regions could not be acquired on time;(ii) the payment schedule lagged behind, due to the loan reformulation withthe subsequent consequence that the activity schedule would have to be putback; (iii) the payment process was slowed down because the approval from theBank was often late in coming; (iv) the payment procedure through a SpecialAccount, on the one hand, facilitate the implementation of payments but, onthe other, raise some problems with respect to the application/replenishmentof it; the reason was because, in this procedure, any new payment instruction(SPM) could only be applied if it was indeed covered in the Special Account sothat all SPMs which were temporarily borne by the State Treasury Account couldnot as yet be applied before a SPM was issued by the DITUA; and (v) the

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exchange rate of the U.S. dollar tended to increase continuously from year toyear; as a consequence, the rupiah amount paid out earlier by the KPKN/DJA,when later applied, would not get the same dollar amount from the Bank as thatbased on the exchange rate estimated in the Special Account.

39. Monitoring and Evaluation of Project. The hiring of a projectmonitoring/evaluation consultant, whose assignment was earlier to draw up asystem and assist with the implementation of the project monitoring/evaluation, was in fact abandoned. Project monitoring/evaluation was insteadbeing carried out by a combination of four methods: (i) the submission ofreports on a periodic basis (monthly, quarterly, semi-annually and annually),which cost little but was quite effective, although punctuality often seemedto be the problem; (ii) visits to the sites, which cost a lot but were alsoquite effective, although not all the sites, could be visited with adequatefrequency; (iii) evaluation meetings concerned twice a year, which also cost alot but were just as effective and could deal adequately with all the aspectsinvolved; and (iv) special studies being conducted as necessary on suchmatters as evaluation of the LAKU system and extension method, and evaluationof NAEP III/ATP III and formulation of NATEP.

40. In the meantime, the supervision on extension co-ordinationaimed at promoting and guiding the implementation of agricultural extensionco-ordination as carried out by the KPPN, the FKPP I and FKPP II was not asyet so successful. No significant improvement was observable, even after theKPPN was reorganized, the FKPP I transformed into KPP I and the FKPP II intoKPP II beginning in 1991.

41. A special report on the evaluation of the LAKU system andextension method conducted in 1988/1989 did state that the system of was quiteeffective, but it should be backed up by adequate infrastructure andfacilities, and its execution should be modified to accommodate the locallyprevailing farming system. On the other hand, the recommendations put forwardin the training and visit system evaluation report were not so practical andthe professional application thereof would not have any wide-ranging impacts.As far as the evaluation results of NAEP III/ATP III were concerned, althoughnot every fundamental aspect of evaluation was as yet touched on. Therecommendations given were indeed very instrumental in formulating the NATEPwhich focussed on the development of human resources within the agriculturalsector through the system of field schools.

MAIN LESSONS FROM EXPERIENCES RELEVANT TO THE FUTURE.

42. Implementation of Agricultural Extension Decentralization.The decentralization of agricultural extension was introduced by a jointMinisterial Decree (Minister for Agriculture No. 539/VII/1991 and Minister ofHome Affairs No. 65/1991) which shall be the full responsibility of theprovinces and implemented in accordance with established policy. However, itsimplementation to date had not yet proceeded in accordance with the set policyguidelines, so that the quality and intensify of agricultural extension in theprovinces did in fact decline. Some of the contributing factors were: (i)widely varying perception, insight and knowledge regarding the significance

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and the role of agricultural extension in the development of agriculture; (ii)limited skills of the personnel in term of the management of agriculturalextension, including the allocation of funds for extension work; and (iii)weaknesses in agricultural extension among the various sub-sectors.

43. Co-ordination of Agricultural Extension. The co-ordination ofagricultural extension to date was still very weak and difficult to improve sothat it remained a dominant factor hampering the success of agriculturalextension. This condition did also affect unfavorably the smoothimplementation of the project to date. For this reason, hope was still beingexpressed that a unified organization and management of agricultural extensioncould somehow be instituted one day.

44. Effectiveness of Research-Extension Linkage. The exercise ofresearch function in agriculture still appeared to be as yet unrelated to theexercise of extension function and, therefore, a dichotomy did still existhere. A researcher conducting a research program as a component ofagricultural development, did not have many direct contacts with any of thePPSs, PPLs nor with the farmers groups and, therefore, did not know much aboutthe sort of problems being encountered by the farmers. On the other hand, thePPSs and PPLs who were fully conversant with the materials relevant to theirrespective locality were not involved in any of the research programs. Asituation thus arose where the technology being introduced was not the kindrequired by the local farmers, the flow of technology proceeded rather slowly,and so was the slow adoption of technology by the farmers.

45. Participation of Farmers Groups. The very limited success ofagricultural extension to date could be attributed among other things to thevery limited activities on the part of farmers groups to upgrade their skillsand knowledge, and take full advantage of whatever they already had to improvetheir attitude. In addition, the application of the LAKU system with aparticipatory approach was not meaningfully developed as yet, whereas thefarmer group approach which constituted one of the most effective way ofworking with the farmers was not as yet consistently pursued by the PPLs.

46. REC's Function and Role. Most of the functions of the RECshad changed their role as agricultural extension center in their respectiveregion had vanished. The problem here was because no definite policy as yetexisted which revamped the function and role of REC such that these centerscould be used as centers for rural community development in line with theeffort to step up regional participation in agricultural development.

47. Changes of Agricultural Extension Policy. The existingchanges of extension policy relating to the decentralization of agriculturalextension which are attributable to the decreasing agricultural extensioneffectiveness in the regions that has not hitherto been overcome. Likewise,the changes for organizing the agricultural extension co-ordination at thenational, provincial, and district levels also continue to be unable toenhance the effectiveness of the agricultural extension co-ordination.

48. Organization and Management Agricultural Extension. Thesuccess of a widely disseminated extension is highly affected by theeffectiveness of the organization and management of the extension to date.

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The factors that decreases the success include: (i) the weak agriculturalextension co-ordination; (ii) the absence of one line of command; (iii) thelarge of agricultural extension administrative areas, particularly thoseoutside Java/Bali; (iv) the weak application of decentralization ofagricultural extension; and (v) the relationship of the extension-researchfunctions which is still dichotomic.

49. Agricultural Extension Decentralization and Central Gover nentSupport. The weakness in managing the decentralization of the extension inthe regions is attributable to the decreasing effectiveness of theagricultural extension in the regions. In order to properly run theagricultural extension in the regions, it is necessary to get the support ofthe central government. Hence the management for the execution of theintegrated agricultural extension will be better guaranteed.

50. NATEP. Successful and shortcomings in the implementation ofNAEP III need to serve for consideration in the preparation of new/nextproject (NATEP). Besides, change of policy and agricultural developmentprogram orientation in Pelita VI should be taken into account.

CONSULTING SERVICES

51. Consultants' and Contractors' Performance. The Consultants'and Contractors' role in supporting the project and its performance was moresufficient. The performance weaknesses vary from one consultant andcontractor to the other, although it was generally similar with respect toafter service. The studies consultants, who assisted the project inrespectively undertaking: (i) the evaluation of the LAKU system and extensionmethod; (ii) the evaluation of NAEP III and ATP III and formulation of NATEPhad done a good job in accordance with the contract. However, as it relatedspecifically to the formulation of NATEP, the contract concerned would have tobe extended to enable the formulation to be readjusted to the agriculturaldevelopment policy set for the Pelita VI. Meanwhile, the financial reportconsultant, who assisted the project in preparing the annual financial reportduly audited by the BPKP, also did a good job according to the contract.However, the consultant did run into a problem in collecting accuratefinancial data from all the sub-PIUs.

PROJECT RELATIONSHIPS

52. Bank Relationship. The relationship between the Bank withBorrower (MOF, BAPPENAS and Executing Agency including the DirectoratesGeneral, AARD and MOA) was good. Any weakness in general was related topolicy implementation in accordance with the respective functions. The workrelationship between the Bank and the Executing Agencies (AAET, including NAEPIII) in organizing the project was quite good (93% rating) and the project wasthereby greatly facilitated. The snag in this working relation (7Z) wasmainly caused by the rather limited skills on the part of personnel in theprovinces and the frequent rotation/replacement of sub-project manager and

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treasurers of sub-PIUs as well as lack of adequate work facilities. Besidethat, the staff assigned to the Bank's supervision mission were generallytechnical people with a very limited knowledge of administration and so anyadministrative issues which could arise in the field could not be tackeddirectly.

53. Executing Agency Relationship. The relationship of theExecuting Agency with the Directorates General, AARD and Farmer Groups was

good enough. Any weakness was due to internal policy implementation which isnot yet in line with the institution's expectations.

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PART m: STATISTICAL INFORMATION

Table 1: RELATED BANK LOANS/CREDirS

rTte Purpose FY of Status Commentsapprovjal

National Food Crop The improvement of field 1975 Closed PCR issued inExtension Project (Loan extension services for food 12/31182 June 19831267-IND) crops

Agriculture Research and Strengthen national production 1976 Closed PCR issued inExtension (Ln. 1179-IND) agricultural research programs 12/31/82 May 1983

in communities of importance

Second National To expand Food Crops 1980 Closed PCR issued inAgriculture Extension extension service 3/87 February 1989(Credit 946-IND)

Table 2: PROJECT TIMETABLE

Item Planned Revised Actual

Identification - - September 1984Preparation - - November 1984Appraisal Mission - - March 1985Loan Negotiations - - May 1986Board Approval - - July 29, 1986Loan Signature - - September 4, 1986Loan Effectiveness - - October 21, 1986Project Completion June 30, 1992Loan Closing December 31, 1991 June 30, 1993 June 30, 1993

Table 3: LOAN DISBURSEMENTSCumulative Estimated and Actual Disbursements in US$ million

World Bank Fiscal Year 1987 1988 1989 1990 1991 1992 1993

Appraisal Estimate 13.0 26.0 24.0 36.0 52.0 65.0 70.0Revised Estimate 0 12.0 28.0 43.0 52.0 55.0Actual Disbursement 0 6.5 15.4 26.6 35.4 44.5 53.2Actual as % of Appraisal Estimate 0 25.0 64.2 73.9 68.1 68.5 76.0Actual as % of Revised Estimate 0 54.2 55.0 61.9 68.1 80.9

Date of last Disbursement: October 31, 1993

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Table 4: PROJECF IMPLEMENTATION

Key Indicators - Physical Targets

Appraisal Revised ActualIndicators Estimates Estimate (or PCR Estimate)

Extension Staff 6,000 3,450 9,573(Under NAEP III) (Under NAEP III)

Rural Extension 400 230 260Center (REC) (req. in 1991) (req. in 1991)

Expansion of 1,400 490 490Existing RECs

Vehicles 125 four-wheel 64 four-wheel 64 four-wheeldrive vehicles; drive vehicles; drive vehicles

3,200 motorcycles 3,830 motorcycles 45 AHMU45 AHMU 16 AVMU16 AVMU 2,328 motorcycles la

1,500 motorcycles Lh

La Required vehicles from Government source.Lb Procured by loan.

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Table 5: PROJECr COST AND FINANCING

A. Project Cost

ARoraisal Estimate Revised Estimate ActualLocal Foreign Total Local Foreign Total Local Foreign Total

------------------ (US$ million) -------------------

Civil Works 30.7 6.5 37.2 8.8 2.8 11.6 2.0 10.0 12.0Vehicles, furniture,and equipment 7.2 5.4 12.6 7.6 3.8 11.4 2.6 5.0 7.6Training 20.1 4.6 24.7 19.4 2.6 22.0 2.9 32.3 35.2TA and Studies 2.1 1.4 3.5 0.5 0.6 1.1 0.2 1.7 1.9Incremental Operating

Cost 28.3 1.0 29.3 32.2 1.3 33.5 37.3 5.0 42.3Land Acquisition - - - 5.8 - 5.8 7.8 - 7.8

Total Base Costs 88.4 18.9 107.3 74.3 11.1 85.4 52.8 54.0 106.8

Physical Contingency 5.9 1.3 7.2 4.5 0.7 5.2 - - -

Price Contingency 18.6 3.1 21.7 8.2 1.3 9.4 - - -

Total Project Cost 112.9 23.3 136.2 87.0 13.0 100.0 52.8 54.0 106.8

B. Project Financing

Source Planned Revised Actual

IBRD 70.0 55.0 53.2

GOI 66.2 45.0 53.6

Total 136.2 100.0 106.8

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Table 6: PRoJEcT RESuLTS

A. Direct Benefits La

B. Economic Impact La

C. Financial Impact La

D. Studies

Strengthening of Agricultural Extension Services.

1. Evaluation of T&V System and Extension Method

2. Evaluation of NAEP III/ATPE III and NATEP Formulation

3. Integrated Pest Management contracted with FAO.

La This is an extension project, and therefore it is theoretically and empirically difficult tomeasure any economic benefit calculation.

Table 7: STATUS OF COVENANTS

Section Description of Covenants Status

3.02 (b) The Borrower shall employ consultants for technical Not inassistance in extension, monitoring and evaluation and compliance Larural sociology, commencing not later than 09/30/88.

3.03 Borrower shall furnish by November 1 of each year an In compliance.annual operation plan (AOP), starting 11/01/88.

3.04 Borrower shall in June/July 1989 carry out a detailed In compliance.review of the organizational structure.

3.05 The Borrower shall prepare, or cause to be prepared, by In compliance.March 31, 1989 an improved monitoring and evaluationsystem for the project (both physical and financialaspects) as well as for the overall extension program.

3.06 With respect to Schedule 2, Part 3, the Borrower shall In compliance.purchase five animal health mobile units for FY88, andshall purchase the animal health mobile units and audio-visual mobile units for subsequent years of the projectonly after an evaluation of the units purchased initially.

La The funds provided for these consultants were used, with Bank concurrence, for evaluationof NAEP III and preparation of NATEP.

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Table 8: USE OF BANK RESOURCES

A. Staff Inputs (staffweeks)

LENP LENA LENN SPN PCR Total

1984 6.1 - - - - 6.11985 47.9 13.9 - - - 61.81986 - - 14.2 - - 14.21987 - - 0.1 16.0 - 16.11988 - - - 32.4 - 32.41989 - - - 19.3 - 19.31990 - - - 19.2 - 19.21991 - - - 7.9 - 7.91992 - - - 9.9 - 9.91993 - - - 4.9 - 4.91994 - - - - 2.7 2.7

Total 54.0 13.9 14.3 109.6 2.7 195.5

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B. Missions

Month/ No. of Days in Specialization Performance Types ofActivity Activity Persons Field Repres. La Rate Status Problems

Preparation 10/84 6 18Appraisal 03/85 2 15BoardApproval 07/86Supervision 03/87 1 10 LO 4 Adequate funding.

02/88 4 10 A,A,A,PO 3 Adequate funding.10/88 3 15 A,A,A 2 Procedural changes.

caused by restructuringand reorganization ofresponsibilities.

07/89 3 14 A,A,A 2 Late approval and releaseof funds and inadequateplanning and implemen-tation capability.

03/90 4 11 A,A,A,TS 2 Delays in submission ofaccountability reports toH.Q.

10/90 2 6 A,A 2 Need for clarification ofPresidential andMinisterial decrees.

03/92 2 3 A,A 2 Evaluation of extensionservices and trainingprogram.

06/93 2 15 A,A 2 Adequate funding.

La PO = Project Officer; TS = Training Specialist; A = Agriculturist; LO = Loan Officer.

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STATUS OF BANK GROUP OPERATIONS IN INDONESIA

A. STATEMENT OF HANK LOANS AND IDA CREDITS la(as of March 31, 1994)

Amount (USS$ niilion)Loan/ Barnk IOA

Credit Fiscal Original principal Urnd-

Number Yeer (l.os cancellaton) burved

One-hundred-nineteen loans and 9,906.39 - 901.60fourry-eight credits fully disbursed

Of which SECALS, SALs and Program Loans lb

2780 1987 Trade Policy Adjustment 300.002937 1988 Second Trade Policy Adjustment 300.003080 1989 Private Sector Development 350.003267 1991 Second Private Sector Development 250.00

Subtotal: 1,200.00

2431 1984 Second Swamp Reclamation 64.00 3.242543 1985 Kedung Ombo Multipurpose Dam 156.00 2.63

and Irrigation2547 1985 Second University Development 147.00 2.482632 1986 Second East Java Water Supply 43.19 1.472638 1986 Nusa Tenggara Agriculture Support 33.00 6.512690 1986 Gas Distribution 34.00 8.552705 1986 Manpower Development and Training 58.10 4.762773 1987 Fisheries Support Services 20.00 5.942881 1988 Second Rural Roads Development 190.00 18.432930 1988 Forestry Institutions & Conservation 30.00 9.062932 1988 Jabotabek Urban Development 150.00 41.222940 1988 Accountancy Development 113.00 29.402944 1988 Higher Education Development 140.30 7.082992 1989 Tree Crops Human Resource Development 18.40 4.16

/a The status of the projects listed in Pert A is described in a seperatereport on all Bank/IlDA-financed projects in execution, wich is updatedtwice yeariy and circulated to the Executive Oirectors on April 30 andOctober 31.

/b Approved during or after FY90.

- 35 -

Amount (US$ nititon)Loan/ Bank IDA

Credit Fiscal Original Piinaipl Undb.-

Number Year (less cancullation) bured

3000 1989 Tree Crops Processing 102.70 55.283031 1989 Agriculture Research Management 35.30 7.383040 1989 Industrial Restructuring 283.60 60.423041 1989 Small & Medium Industrial Enterprise 100.00 8.853042 1989 Third Health 43.50 14.403097 1989 Power Sector Efficiency 337.00 106.253098 1989 Paiton Thermal Power 354.00 101.953112 1990 Public Works Institutional 36.10 8.73

Development & Training3133 1990 Highway Sector 350.00 64.113134 1990 Professional Human Resource Development 117.50 18.843158 1990 Second Secondary Education 154.20 91.183180 1990 Rural Electrification 329.00 134.193182 1990 Third Telecommunications 350.00 159.243209 1990 Gas Utilization 86.00 72.803219 1990 Second Jabotabek Urban Development 190.00 122.463243 1990 Second Forestry Institution 20.00 14.04

and Conservation3246 1991 Third Jabotabek Urban Development 61.00 46.473249 1991 Second BRI/KUPEDES Small Credit 125.00 23.953282 1991 Fertilizer Restructuring 221.70 58.443298 1991 Fifth Population 104.00 57.323302 1991 Provincial Irrigated Agriculture 125.00 97.58

Development3304 1991 East Java/Bali Urban Development 180.30 117.303305 1991 Yogyakarta Upland Area Development 15.50 9.843311 1991 Second Higher Education 150.00 74.323340 1991 Sulawesi-irian Jaya Urban Development 100.00 69.443349 1991 Power Transmission 275.00 219.473385 1991 Technical Assistance Project for 30.00 25.20

Public and Private Provisionof Infrastructure

3392 1992 Second Irrigation Subsector 225.00 82.193402 1992 Agricultural Financing 106.10 80.153431 1992 Third Non-Formal Education 69.50 53.273448 1992 Primary Education Quality Improvement 37.00 32.713454 1992 BAPEDAL Development 12.00 10.843464 1992 Treecrops Smallholder 87.60 73.593482 1992 Fourth Telecommunications 375.00 349.12

- 36-

Schtduie 0Pe. 3 ot 4

Amount (USS nillion)Loani Bank IOACtedit Fiscal Odigne Principai Und.-

Number Year (less cancellation) buned

3490 1992 Third Kabupaten Roads 215.00 128.703496 1992 Primary School Teacher Development 36.60 31.633501 1992 Suralaya Thermal Power 423.60 417.543526 1993 Financial Sector Development 307.00 198.073550 1993 Third Community Health & Nutrition 93.50 86.883579 1993 E. Indonesia Kabupaten Roads 155.00 134.193586 1993 Integrated Pest Management 32.00 30.193588 1993 Groundwater Development 54.00 54.003589 1993 Flores Earthquake Reconstruction 42.10 34.993602 1993 Cirata Hydroelectric Phase II 104.00 104.003629 1993 Water Supply & Sanitation for 80.00 78.00

Low Income Communities3658 1994 National Watershed Management and 56.50 56.50

Conservation /a

Total 17,891.28 901.60of which has been repaid 3,932.32 109.36

Total now held by Bank and IDA 13,958.96 792.24Amount sold 88.08

of which repaid 76.47

Total undisbursed 4,020.94

/a Not offecuve as of March 31, 1994.

-37 ANNEX

PROJECT COMPLETION REPORT

INDONESIATHIRD NATIONAL AGRICULTURAL EXTENSION PROJECT

(Loan 2748-IND)

LIST OF STUDIES 1/

Report Author Results

1. Evaluation of NAEP Pusat Pengembanam Not fully satisfactoryIII, ATP III and Agilusmis because it did not addressFormulation of NATEP some of the organizational

changes; therefore it couldnot be used as a projectpreparation document asintended.

2. Evaluation of T&V Pusat Pengembanam Studies carried out orSystems Agilusmis completed under the project

by consultants werecompleted to GOI's and theBank's satisfaction andcontributed to further policyand strategy developmentfor agricultural extension.

1/ There were two other studies planned in the original SAR which were not carried out because onewas not approved by the Bank and the other was not approved by BAPPENAS. Agreement wasfinally obtained to replace these studies with 1. above.

NI I ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~IBRD 2581 2

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- NTERNATIONAL BOUNDARIES

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APRIL 1994