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1 Public Disclosure Authorized Public Disclosure Authorized Report No. 305-IND FILE Appraisal of Fisheries Credit Project COPY CIFULATING COPY T0 BE RETURNED TO REPORTS DESK RETURN TO Indonesia REPORTS DESK WITHIN May 7, 1974 ONE WEEK Asia Projects Department Not for Public Use C-L Public Disclosure Authorized Public Disclosure Authorized Document of the International Bank for Reconstruction and Development Intemational Development Association This report was prepared for official use only by the Bdnk Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.

2 CURRENCY EQUIVALENTS US$ 1 Indonesian Rupiah (Rp) 415 Rp 1 US$ Rp 1 million US$2,410 WETCITS AND MEASURES Metric System ABBREVIATIONS ONI - Government of Indonesia BRI - Bank Rakjat Indonesla DGF - Directorate General of Fisheries PNM - PN State Fisheries Enterprise, Maluku FISCAL YEAR April 1st to March 31st

3 INDONESIA FISHERIES CREDIT PROJECT TABLE OF CONTENTS Page No. SUIMMARY AND CONCLUSIONS... i-vi I. INTRODUCTION II. BACKGROUND... 1 A. General B. The Fisheries Sector... 2 III. TRE PROJECT... 8 A. Definition B. Detailed Features C. Cost Estimates D. Financing E. Procurement F. Disbursement IV. ORGANIZATION AND MANAGEMENT A. Introduction B. Institutions C. Lending Terms and Conditions D. Accounts and Audit..... * V. PRODUCTION, MARKETS AND OPERATING RESULTS VI. ECONOMIC BENEFITS AND JUSTIFICATION VII. RECOMMENDATIONS SCHEDULE A - Project Lending Terms and Conditions This report is based on the findings of an appraisal mission which visited Indonesia in May/June The mission was composed of Messrs. S.J. Khoo, F. Kada, B. Macleod (IDA), A. Choksi, P. Mornement, and T. Yamamoto (Consultants).

4 -2- ANNEXES 1. Marine Fisheries Table 1-1 Number of Marine Fishing Vessels Registered in Tndonesia (1971) Table 1-2 Landings of Sea Fisheries, Table 1-3 Sea Fisheries Landings by Fishing Vessels from Java Island and Total Landings for Indonesia Table 1-4 Foreign Capital and Joint Venture Enterprises for Shrimp Fishing and Processing 2. Brackish Water Ponds Table 2-1 Area of Brackish Water Ponds by Principal Producing Areas, 1971 Table 2-2 Area, Average Size and Production of Fish Ponds in the Principal Producing Areas, Major Project Components and Their Specifications Table 3-1 Proposed Project Areas Table 3-2 Area to be Improved in 5 Years Table 3-3 Demonstration Ponds to be Constructed in.5 Years Table 3-4 Required Demonstration Pond Supervisors and Extension Workers Chart WB-8044 Example of Acceptable Design for 30 G.T. Wooden Skipjack Live Bait Pole and Line Fishing Vessel Chart WB-7843 Example of Acceptable Design for 100 G.T. Wooden Skipjack Carrier Chart WB-7841 Ambon Cold Store and Ice Plant Chart WBE-7839 Improvements to PNM Ship Repair Facilities at Ambon Chart WB-7842 Example of Acceptable Design for 30 G.T. Wooden Trawler Chart WB-7864 Typical Layout for 5 Ha Demonstration Fish Pond 4. Estimated Project Implementation Schedule 5. Unit Costs 6. Estimated Quarterly Schedule of Disbursements 7. Bank Rakjat Indonesia Table 7-1 Summarized Balanced Sheets at December 31 Each Year Table 7-2 Summarized Income and Expenditure Statements Table 7-3 Outstanding Loans and Arrears by Economic Sectors As at the End of 1972 Table 7-4 Organizational Chart of the Head Office of the Bank Rakjat Indonesia

5 - 3 - Table 7-5 Organizational Chart of the Provincial or Regional Offices of the Bank Rakjat Indonesia 8. PN State Fisheries Enterprise, Maluku (PNM) Table 8-1 Balance Sheets At Decenber 31 Each Year Table 8-2 Income and Expenditure Statements Table 8-3 Organization Chart 9. Directorate General of Fisheries Table 9-1 Fisheries Organization and Administration Table 9-2 Organizational Chart of the Directorate General of Fisheries Table Budget: Directorate General of Fisheries Table 9-4 Training Institutions Operated by the Directorate General of Fisheries Table 9-5 Provincial Fisheries Service, Central Java 10. Terms of Reference for Technical Assistance Personnel 11. Marketing and Prices Table 11-1 Export Volume of Fishery Products Table 11-2 Current Prices Table 11-3 Skipjack Monthly Average Ex-Vessel Price in Japan 12. Table 12-1 Projected Income Statement: P.N. State Fisheries Enterprise, Malukui Table 12-2 Projected Cash Flow: P.N. State Fisheries Enterprise, Maluku Table 12-3 Projected Income Statement: 30 G.T. Wooden Skipjack Boat Table 12-4 Projected Cash Flow: 30 G.T. Wooden Skipjack Boat Table 12-5 Projected Income Statement: Beach Seine Table 12-6 Projected Cash Flow: Beach Seine Table 12-7 Projected Income Statement: 30 G.T. Wooden Trawler Table 12-8 Projected Cash Flow: 30 G.T. Wooden Trawler Table 12-9 Projected Income Statement: South Sulawesi Development of Fish Pond: 5 Ha Table Projected Cash Flow: South Sulawesi Development of Fish Pond: 5 Ha Table Projected Income Statement: South Sulawesi Development of Shrimp Pond: 5 Ha Table Projected Cash Flow: South Sulawesi Development of Shrimp Pond: 5 Ha Table Projected Income Statement: Java Development of Fish Pond: 1 Ha Table Prolected Cash Flow: Java Development of Fish Pond: 1 Ha Table Projected Income Statement: Java Development of Shrimp Pond: 1 Ha

6 -4- Table Projected Cash Flow: Java Development of Shrimp Pond: 1 Ha Table Projected Income Statement: 5T Ice Plant/15 T Tce Store Table Projected Cash Flow: 5T Ice Plant/15 T Ice Store 13. Economic Rate of Return Calculations Table 13-1 Economic Rates of Return MAP IBRD-2853R IBRD-10570

7 INDrlNESIA FISHERIES CREDIT PROJECT SUMMARY AND CONCLUSIONS Objective i. The proposed project would assist the Indonesian Government's strategy to increase skipjack tuna landings, milkfish and shrimp production from existing brackish water ponds, and fish and shrimp catch by trawling. The purpose of these activities is to make fuller use of Indonesia's fisheries resources for domestic consumption and export. This is expected to result in increased employment opportunities and incomes for fishermen. The Project ii. The project, to be implemented over a five-year investment period, would comprise: (a) Skipjack tuna subproject involving the provision of: (i) about 20 pole and line fishing boats for skipjack fishing; (ii) two carrier vessels to increase fishing efficiency; and (iii) on-shore supporting facilities, including an icemaking, freezer and storage complex to preserve the quality of the skipjack tuna catch, two small jetties for provisioning the fishing boats and one for loading and unloading the carrier vessels, repair facilities (workshop and a slipway) to service project vessels, and about 54 lift or beach seine nets to catch live bait required for skipjack tuna fishing. (b) Fish pond subproject for the: (i) improvement of about 15,000 ha of existing smallholder brackish water ponds in Java and Sulawesi through the introduction of simple improvements to pond construction and techniques of fish culture; (ii) development of about 45 one to five-ha ponds to demonstrate the improvements; and (iii) establishment of about nine 5-ton ice plants to provide ice for the preservation of milkfish and shrimp from project ponds enroute to market.

8 - ii - (c) Trawler sib roiec involving the purchase of about 25 trawlers for the trawling of fish and shrimp in the Java Sea. (d) Technical assistance required for effective implementation of the project. iii. Under the Dro4j2ct, che Government of Indonesia (GOI) would make available part of the IDA credi: to the State Fisheries Enterprise at Ambon (PNM) for the purchase of ten pole and line skipjack fishing boats, two carrier vessels and about 27 lift or beach seine nets, and construction of on-shore facilities, including an ice making, freezer and cold storage complex, jetties, repair facilities and a slipway. GOI would also make available part of the credit to the Bank Rakjat Indonesia (BRI), one of five state-owned banks and responsible for lending in the agricultural sector, including fisheries, for on-lending to smallholder pond operators, fisheries cooperatives and other private entrepreneurs for pond improvements, and purchase of up to ten additional fishing boats, about 27 lift or beach seine nets for bait fishermeni trawlers and small ice plants. The provision of credit would include incremental working capital. PNM would purchase and market the catch of the cooperatives and private fishermen. The carrier vessels would be operated by PNM to supply the fishing boats with ice, fuel and supplies and transport the skipjack catches to the cold store facilities. Technical experts required for project implementation would be recruited and financed by the IDA credit. In addition these experts would train local personnel in the operation of the project. iv. Credit to smaltholder pond operators would finance simple improvements to ponds whicht with the use of fertilizers and pesticides, would increase yields of milkfish and shrimp about 4 times more than the present average yield for all ponds. About 15,000 ha of ponds in Java and South Sulawesi have been identified for this type of improvement, of which 8,000 ha would produce both milkfish and shrimp, and 7,000 ha would be primarily for milkfish production. Ponds producing both shrimp and milkfish would be in coastal areas with sufficientlv high salinity levels required for successful shrimp production. Pond development for milkfish alone would be carried out further inland. Investmient would be primarily for labor intensive canal excavation, sluice gate widening and relocation, pond levelling, and dike improvement. Incremental working capital needs for initial purchases by pond operators of fry, fertilizers and pesticides for their first season of production would also be financed. Investments would average about US$300 equivalent per ha for ponds producing both milkfish and shrimp, and US$150 equivalent per ha for ponds producing milkfish. Under the project, about 45 one to five-ha ponds would be developed to demonstrate the techniques for improved production to pond operators. Extension services in the project areas would be expanded and improved, and the Directorate General of Fisheries would employ, with funds provided under the project, three pond fisheries experts to develop the demonstration ponds, assist pond operators to carry out their improvements and train the fisheries extension officers.

9 - iii - v. Credit to fisheries cooperatives and private entrepreneurs would finance nine small ice plants each with a capacity of 5 tons of block ice per day and storage space for 15 tons of ice. These plants will be suitably located to supply ice for the marketing of project shrimp and milkfish. Credit would also be provided to finance the purchase by privatie fishermen and cooperatives of up to 25 trawlers to be used to increase the production of shrimp and fish from the rich trawling grounds of the Java sea. Organization vi. The Directorate General of Fisheries (DGF) would coordinate, supervise, and guide project implementation in addition to providing the project experts, demonstration ponds and extension services. vii. BRI's management is satisfactory and it has considerable experience in short-term lending in the agriculture sector. While it is competent to make financial appraisals, it lacks technical expertise in project evaluation. Therefore, in making sub-loans under the project, BRI would rely on the expertise of DGF and the project experts in carrying out the technical appraisal of sub-loans. Since BRI's appraisal of project sub-loans would involve close cooperation with the technical staff of DGF and PNM, BRI would employ for the duration of the project, a locally recruited fisheries officer on its staff to liaise with the project experts. Such an officer had recently been employed. Costs and Financing viii. Total project costs are estimated at US$12.9 million equivalent of which about US$3.8 million (30%) is the estimated foreign exchange component. Project Cost Summary (US$ million) Project Component Local Foreign Total Skipjack Tuna Sub-project Fish Pond Sub-project Trawlers Sub-project Contingencies ix. The proposed IDA credit of US$6.5 million equivalent would finance 50% of total project cost, including about US$2.7 million of local currency cost. The credit would supply about 58% of BRI support of the project, 53% of PNM's investment costs and 14% of GOI contribution to project cost. The investment cost of the demonstration ponds would be financed by GOI. x. The IDA credit would be on standard terms to GOI which would retain an amount to finance an estimated 80% of the costs of the project experts.

10 - iv - GOI would make available the remainder of the credit to BRI and PNM under subsidiary loan agreements acceptable to IDA. The credit to BRI would be at an interest rate of 4% per annum, and repayable as BRI received repayments from its sub-borrowers. BRI would extend loans to sub-borrowers at an interest rate of 12% per anntm. GOI lending to PNM would also be at 12% per annum. GOI would bear the foreign exchange risk. The project experts would be employed by GOI through DGF. Costs of the experts for the skipjack tuna subproject would be borne by PNM which would implement the major part of this subproject. To ensure that sufficient funds are available as needed for timely and efficient project execution, GOI would make available to DGF sufficient funds to cover the estimated expenditures for extension services, experts, training, demonstration pond development and other expenditures required to be made by DGF under the project. Funds to meet the estimated expenditures of each quarter would be available to DGF not later than the fifteenth day of such quarter. As a condition of effectiveness, the budget of DCF for project expenditures up to March 31, 1975 shall have been approved and ;'unds equivalent to US$200,000 will be available for project expenditures. xi. Loans to PNM and BRT sub-borrowers would be up to 85% (95% for lift or beach seine nets) of the cost of the investments, which would serve as collateral. In the case of project experts for the skipjack tuna subproject, an estimated 80% of their costs would be financed by the IDA Credit, with the remaining 20% to be financed from PNM's own resources. The terms and repayment of sub-loans would be appropriate to the investment made. BRI and PNM would maintain separate accounts of project transactions to be submitted (together with balance sheets and income statements covering their tctal operations) to IDA within four months of the close of each financial year. BRI would also submit to IDA progress reports of its operations under the project. BRI accounts are satisfactorily audited by Bank Indonesia. Disbursement and Procurement xii. Against appropriate statements, IDA disbursements would be: (a) For the project experts, 100% of foreign exchange expenditures or 100% of local expenditures against salaries. The proposed disbursement procedure would allow IDA to disburse a similar share of the cost of both foreign and local experts. (b) 58% of loan disbursements by BRI. (c) 50% of total expenditures by PNM. Disbursements would be made against required supporting documents except for reimbursements for sub-loans by BRI. Documentation for BRI sub-loans would be retained by BRI and be available for inspection by IDA supervision missions. xiii. Sub-borrowers for vessels would mainly be operators who already own several fishing boats. Additional vessels must be equipped in a manner compatible with the owner's fleet so as to minimize operations and maintenance costs. Therefore, the wooden hulls and the engines and other equipment would be procured separately. There are a number of qualified local shipyards capable of making the wooden hulls for the skipjack boats, carrier vessels and trawlers, and these will therefore be procured from pre-qualified local shipyards following local competitive bidding procedures acceptable to

11 IDA. Transportation difficulties and the need to match the equipment to be instaxlled would prohibit hull procurement from abroad. Manufacturers of vessel engines, fishing gear and other equipment are already well represented in Indonesia and provide adequate service facilities and spare parts. Therefore, PNM would order the make of equipment of its choice from suppliers previously pre-qualified through international advertisement. Other sub-borrowers would do this through BRI. To the extent practical, bulking of sub-loan applications would be arranged by BRI to effect cost savings. Shore facilities at Ambon for ice making, freezer, and cold storage complex, jetties and repair facilities would be procured and installed under a single contract and in accordance with international competitive bidding procedures. Improvement of the small, scattered fish ponds will be done over five years largely by manual labor provided in part by the pond operators themselves. This work would, therefore, not be suitable for bidding procedures and would be arranged on an ad-hoc basis by the pond operators and extension service staff. Similarly, lift or beach seine nets would, because of their small cost, be procured through prudent shopping by the sub-borrowers. The nine small ice plants will be procured through international competitive bidding. Benefits and Justification xiv. The proposed project would make an important contribution to GOI's development effort to increase fisheries production for domestic consumption and export. Implementation of the project would increase fisheries production by about 18,000 tons per annum. A significant proportion would be exported, including some 6,500 tons of skipjack tuna and the larger share of the shrimp valued at an estimated US$5.7 million at current prices. xv. The project would: (a) benefit about 9,000 fish pond operators and many fishermen (most of whom are engaged in small, mainly subsistence operations), either as members of participating fisheries cooperatives or individual entrepreneurs, and their dependents; (b) provide annually at full development, about 1,000 permanent jobs, part-time employment for about 1,100 bait fishermen, and some 3 million man days work as a result of pond improvements; and (c) employ about 10,000 man years of labor for construction activities over the 5-year development period. Through its provision of the demonstration ponds and technical expertise, the project would have a favorable demonstration effect on pond improvements outside the project and would also provide experience valuable to future fisheries operations, including the fisheries credit activities of BRI. The project ice plants would likewise promote the use of ice in the marketing of fish.

12 - vi - xvi. Incremental incomes and financial returns would be sufficiently high to make the proposed investments attractive. The financial rates of re:urn would range from 20% to 38%, and the economic rates of return are est:imated to be from 22% to 42%. xvii. The appropriate assurances having been obtained, the project would be suitable for an IDA credit of US$6.5 million.

13 INDONESIA FISHERIES CREDIT PROJECT I. INTRODUCTION 1.01 The proposed project would be the sixteenth Bank Group project for agricultural development in Indonesia, and the second in the fisheries subsector The on-going fisheries project at Aer Tembaga in North Sulawesi 1/ which seeks to develop and expand skipjack tuna landings in the region is off to a good start after substantial delays. The principal problems have been in the recruitment of qualified consultants and in the appointment of suitable local personnel. These problems have been resolved. All consultants have now been appointed and are in position. Suitable local personnel have also been appointed. Contracts for construction of the on-shore supporting freezer and cold store facilities have been awarded The proposed fisheries credit project was prepared with the assistance of the FAO/IBRD Cooperative Program which visited Indonesia during July/September 1972 and January/February This report is based on the findings of an appraisal mission which visited Indonesia during May/June 1973, and was composed of Messrs. S. J. Khoo, F. Kada (IDA), A. Choksi, P. C. Mornement, and T. Yamamoto (Consultants). Mr. B. MacLeod (YP) assisted the mission during appraisal. II. BACKGROUND A. General -/ 2.01 Indonesia is the world's largest archipelago. It comprises some 3,000 islands with a total land area of nearly 2 million km 2 scattered over a wide expanse of ocean (see attached Map IBRD-2853R). The country's population, which has been increasing at an annual rate of around 2% is estimated at about 121 million in mid 1972, and concentrated in the four most important islands of Java (64%), Sumatra (17%), Sulawesi (7%) and Kalimantan (4%). 1/ Indonesia Fisheries Project, Report No. PA-50a (June 22, 1970). Total project cost was US$4.3 million of which US$3.5 million would be financed by IDA. 2/ A detailed discussion of the present situation and prospects of the Indonesian economy is given in Development Issues for Indonesia, Report No. 25-IND, December 1, 1972; and The Indonesian Economy - Recent Developments and Prospects for 1974/75, Report No. 286-IND, November 26, 1973.

14 Since 1966, the Government of Tndonesia (GOI) has successfully carried out a program of economic recovery. It has stabilized the currency and reduced the rate of inflation. In contrast to the economic stagnation of the period prior to the mid 1960s, the gross domestic product in constant 1960 market prices, grew at an estimated annual rate of about 7% during Per capita gross national product in 1972 was estimated at about US$ In pursuing its central objective of increasing aggregate output and income, GOI has given priority to the development of agriculture and to rehabilitation of the economic infrastructure. IDA has made an important contribution to these efforts. Up to the end of April 1974, Indonesia had received 34 IDA credits amounting to about US$509 million, with financing of fifteen agricultural projects including one for fisheries (para 1.02), accounting for about 44% of the total. B. The Fisheries Sector Contribution to the Economy 2.04 In line with its objectives of broad based agriculture and rural development, GOI accords priority to expansion of fisheries production for local consumption and for export. Indonesia's total fisheries production in 1972 was estimated at about 1.27 million tons, of which landings from ocean waters accounted for some 66%, catches from inland waters (rivers and lakes) about 23% and fish and shrimp reared in ponds the remaining 11%. Currently, about a million fishermen, including fish pond operators, are engaged in fisheries production. They represent, together with their families, some 4-5% of the population Annual per capita consumption of fish is estimated at about 10 kg, which is low even by the standards of other less developed countries (comparable figures for Philippines and Malaysia are about 30 kg). Fish accounts for about 65% of the protein in the average Indonesian diet. Fisheries exports in 1972 totalled about US$26 million, the bulk of which was frozen shrimp shipped to Japan. Marine Fisheries (Annex 1) 2.06 As many as 200 varieties of fish are found in Indonesia's waters. The principal varieties being fished at present are sardine, mackerel, tuna, coral fish, sea bream, shark and ray and crustacea. Indonesia's untapped marine fisheries resources are considerable. FAO has estimated the potential annual fish catch from the five million km 2 of the Indonesia archipelago at about six million tons. 1/ This is seven times the estimated landings in 1/ FAO symposium on marine fisheries, 1968.

15 Within the archipelago, the more productive areas - the so-called Upwelling Area -comprising thie Java, Arafura, Flores and Banda seas and covering approximately 750,000 km 2, has a potential annual catch estimated at some four million tons, of which about two million tons are in the Java Sea With specific reference to skipjack tuna, FAO has estimated 1/ the potential annual catch of this fish in the tropical Western Pacific at about 250,000 tons, of which according to a recent GOI estimate, some 150,000 tons are in Indonesian waters. Skipjack tuna is found in great abundance in the Ceram, Banda and Maluku seas. The present annual catch of skipjack in Indonesia is only about 5,000 tons The Indonesian fishing fleet comprises about 281,000 sail boats and 7,000 motorized vessels manned by some 890,000 fishermen, mostly operating at a subsistence level. These fishermen landed an estimated 839,000 tons of fish in Most of the fish are caught within a few miles from the coast. The sail boats make daily fishing trips, relying on changing tides and wind. They do not have access to the substantial fisheries resources which lie more than 5-10 miles from the shore. As a result, the five-mile zone along the north coast of Java is overfished while the Java Sea beyond the reach of sail boats includes rich fishing grounds. These grounds are especially suitable for trawling given their relatively flat bottom and shallow waters. Inland Fisheries 2.09 Indonesian inland fisheries activities comprise fishing in inland waters (rivers, lakes and rice fields), and brackish and fresh water pond culture. Of the total pond area, brackish water ponds account for about 85%, and fresh water ponds the remaining 15%. Brackish water pond culture is mostly for milkfish (Chanos chanos). Brackish water shrimp cultivation takes place in milkfish ponds which are generally within 1 km of the coast where water salinity is sufficient for shrimp requirements. Shrimp fry are generally not introduced into the ponds by the pond operators but enter the ponds with the inflow of water from the sea. For most pond operators, the production of shrimp is in effect a byproduct of milkfish culture (para 2.13) There are about 184,000 ha of brackish water ponds in Indonesia, from which some 60,000 tons of milkfish, shrimp, crabs and other fish are harvested annually. The bulk of the ponds are located along the north coast of Java and South Sulawesi, with East Java accounting for 34%, West Java 16%, Central Java 14%, and South Sulawesi 21% of the total pond area. This is because these provinces have extensive estuarine swamp areas suitable for pond development, an abundance of milkfish fry, and proximity to large population concentrations which provide market outlets for milkfish. Most ponds are within 1 to 3 km of the sea, except in East Java where they may be up to 20 km. With a few exceptions, ponds vary in size from less than 1 1/ FAO, The Fish Resources of the Ocean, 1971.

16 -4- ha up to 7 ha, with the average ranging from about 1 ha in Central and West Java to 4-5 ha in East Java and South Sulawesi. Most are operator owned. These ponds do not have a more productive alternative use. Because their pond holdings are usually small and their methods of pond culture are traditional and of low productivity (para 2.12), most pond operators are operating on a subsistence basis Brackish water culture in Indonesia has a long tradition. It was initiated at least 600 years ago as a mangrove swamp fishery using traps. Gradually, the mangrove was removed, dykes were constructed, ponds built, and finally, the custom prevailed of stocking the ponds with milkfish fry caught at sea. Ponds were built simply by bunding the perimeter and le'ielling the bottom. Technical development has not advanced much beyond this stage The traditional methods of milkfish and shrimp culture practiced by most Indonesian pond operators are described in Annex 2. Under these methods, ponds are left under natural conditions with little control over salinity levels and water depths. Fertilizers, including organic manure, are rarely used. There is virtually no control of natural predators and pests (snails and worms) which compete with the milkfish and shrimp for food. Furthermore, fry stocking management to make effective use of the available feed is generally absent. As a result, production is low, averaging about 330 kg per ha annually, with milkfish accounting for less than half (40% - 50%) the output. Crabs, shrimp, mullet, tilapia and other fish, usually brought into the ponds by the inflow of water and not intentionally introduced, account for the remaining output. Most ponds are able to produce only a single harvest. The disproportionately small share of milkfish is indicative of the low level of technology applied Some pond operators have begun to adopt better practices. Improved control of salinity and water depth in ponds has been achieved through simple works, such as the raising of secondary dykes and ditches, deepening of pond bottoms and canals, and additional sluice gates. With some degree of water regulation and use of small amounts of fertilizers (about kg per ha) and in some instances pesticides, these operators have been getting substantially higher yields as well as two harvests a year. Most operators adopting these simple improvements are harvesting between kg of milkfish and kg of shrimp per year or about 4 times more than the average for all ponds. Near the coast, with higher salinity levels, progressive pond operators are giving increased emphasis to shrimp production. Shrimp thrive better in such ponds than in those away from the coast. Improved ponds near the coast have been getting about 300 kg of milkfish and between kg of shrimp per ha annually compared with about 150 kg and kg respectively for unimproved ponds Improved ponds are still few and concentrated in areas close to the main urban centres on South Sulawesi and Java. This is because many pond operators, especially those in remote areas, are simply not aware that substantial increases in production can be obtained through simple improvements, such as better water control to obtain improved pond water conditions,

17 - 5 - and use of fertilizers and pesticides. Lack of technical advice is another problem. Finally, shortage of credit on suitable terms is an important constraint. The proposed project would help accelerate the spread of improved ponds by providing credit and technical assistance to disseminate proven improvements. Marketin Sharp regional imbalances exist between fish production and consumption. For example, the island of Java, which accounts for about two-thirds of the Indonesian population, consumes some one-third but produces only about one-fifth of national fish production. An active inter-island fish trade thus exists between the other islands and Java. While fish from ponds is generally sold fresh or alive, most marine fish is sold dried and salted given the long distances involved and the high cost of ice and refrigerated transport. The marketing system is inefficient involving several intermediaries in the producing area as well as in the consuming centres. Margins between producer and retail prices are 50% or more (Annex 11). Fisheries Credit 2.16 Though most fishermen and fish pond operators depend on traders for financing, reliable data on the quantities and terms of such financing are not available. The Bank Rakjat Indonesia (BRI) is the main source of institutional credit for fisheries. Some of the other state-owned banks also finance this activity, mainly in the field of marketing and processing. Institutional credit for fisheries meets only a fraction of the requirements of fish pond operators, and purchases of equipment and machinery for marketing and processing (Annex 7). The interest rate on fisheries loans is 1%-2% per month. Fisheries Cooperatives 2.17 The National Federation of Indonesian Fishermen's Cooperative Society is the apex of 12 Provincial Unions of Fishermen's Cooperative Societies comprising 352 Primary Fishermen's Cooperative Associations with a membership of about 62,000 fishermen (6% of the fishermen population). The principal activity of the cooperatives has been the provision of fishing gear, particularly nets. They buy from the National Federation or, in the case of locally available items, make bulk purchases for resale to members. No credit is provided. The cooperatives also auction fish at the landing site on behalf of the fishermen, and collect an auction fee. In addition, several cooperatives are engaged in wholesale fish marketing and in catching bait fish. Fisheries Administration 2.18 The Directorate General of Fisheries (DGF) in the Ministry of Agriculture is responsible for the administration of the fisheries sector. It handles all fisheries matters - administration, development policies, research, training, extension, and control of the State Fisheries Enterprises (Annex 9). DGF's provincial and district offices are primarily

18 respons:ible for providing extension services for inland and marine fisheries. Both the quality and quantity of extension personnel are inadequate (para 4.05). Education and Trainiag 2.19 Trained manpower for substantial expansion in fishing operations is available. There are nine institutions concerned with fisheries training at various levels: a fisheries academy, three senior fisheries high schools, three junior fisheries high schools, two adult training centres, and fisheries departments within the faculties of agriculture in five universities. UNDP/FAO is funding a fisheries training centre at one of the senior fisheries high schools (Tegal) to provide practical training in fishing techniques, fishing gear assembly, net making and mending, and navigation. DGF plans to set up similar centres elsewhere. Indonesian fishermen are also currently being trained on many of the foreign fishing vessels operating under joint venture agreements. Research 2.20 A centre for brackish water fish and shrimp culture research is currently being developed at Jepara, Central Java, by DGF with UNDP support. The objective of the centre is to expand and increase the efficiency of pond culture of milkfish and shrimp on a national scale, through research on improved cultural techniques, and field testing and extension of the improved techniques among pond operators. The long range research and development work program of the centre would include: (i) Introduction of improved methods of milkfish culture, adapting them as necessary to local conditions, and development of new techniques for increasing the efficiency of operations. (ii) Undertake in the vicinity of Jepara, demonstration of successful techniques of milkfish culture, and training of field personnel, including extension workers, in the application of such techniques. (iii) Development of suitable methods of intensive and semiintensive culture of shrimp under local conditions, including the mass rearing of shrimp larvae. (iv) Undertake surveys and studies to determine distribution, and improve collection, handling, and transport of milkfish and shrimp fry. (v) Investigations on the effects and extent of pollution, and of pesticides and herbicides, on shrimp and milkfish culture, and to evolve suitable measures for controlling any adverse effects.

19 - 7 - The proposed project would make use of the centre's research results and training of extension workers (para 4.08). Development Program and Strategy 2.21 In view of the substantial potential for development (para ), GOI has sought international and bilateral assistance to formulate and finance fisheries projects, including facilities to improve fish marketing. GOI provides various incentives, mainly exemptions and reductions in taxes and import duties, to encourage private participation in fisheries development. Where private investment is not forthcoming, GOI through the DGF, sets up its own State Fisheries Enterprises to carry out projects In response to the incentives offered, there are a number of foreign, domestic and joint enterprises catching shrimp and tuna for export. GOI has been promoting the use of trawlers by its State Fisheries Enterprises and fisheries cooperatives. Private entrepreneurs have also begun to invest in trawlers to exploit the fishing grounds in the Java Sea beyond the reach of the small coastal fishing craft.(para 2.08). Although catches off the coast of Java are reported to be good, the little exploited waters off South Kalimantan offer potentially larger catches, including a higher percentage of shrimp. Credit needed to encourage further trawler acquisition to fish these waters would be provided under the project To make fuller use of its skipjack resource (para 2.07), GOI plans to operate three skipjack projects in Aer Tembaga (North Sulawesi), Ambon (Maluku), and Sorong (West Irian). The first is an ongoing IDA financed project (para 1.02). The proposed project would be the second. It would be operated by the State Fisheries Enterprise Maluku at Ambon (PNM), a GOI owned enterprise already engaged in skipjack fishing (para ). The third project would be financed by the Asian Development Bank. Projected total annual skipjack landings by the three projects are estimated at about 25,000 tons. This projected output together with the present catch, would constitute about 20% of the potential landings (para 2.07) In GOI's present 5-year Plan (1969/ /74), though the planned budget allocation for fisheries development was Rp 22 billion (US$67.7 million) 1/, or about 14% of the total budget for agriculture, the actual allocation made during the first four years was only about Rp 3 billion, and it is expected that no more than Rp 5 billion would be allocated during the whole of the Plan period. Deficiencies in administration and technical/managerial expertise, were mainly responsible for the short-fall between planned and actual allocations. Under the Second 5-year Plan (1974/ /79), DGF has planned to improve and expand all aspects of fisheries development. The proposed project, by providing the necessary finance, managerial and technical expertise required for effective project implementation, would contribute to this development. 1/ At the then exchange rate of Rp US$1.

20 - 8 - III. THE PROJECT A. Definition 3.01 The objective of the proposed project is to assist GOI's strategy to increase (a) skipjack tuna landi.ags, (b) milkfish and shrimp production from existing brackish water ponds, and (c) fish and shrimp catch by trawling. The purpose of these activities is to make fuller use of Indonesia's fisheries resources for domestic consumption and export. This in turn will provide increased employment opportunities and incomes for fishermen, most of whom are living at subsistence levels Over a 5-year investment period, the project would comprise: (a) Skipjack tuna subproject involving the provision of: (i) about 20 pole and line fishing boats for skipjack fishing; (ii) two carrier vessels to increase fishing efficiency; and (iii) on-shore supporting facilities, including an icemaking, freezer and storage complex to preserve the quality of the skipjack tuna catch, two small jetties for provisioning the fishing boats and one for loading and unloading the carrier vessels, repair facilities (workshop and a slipway) to service project vessels, and about 54 lift or beach seine nets to catch live bait required for skipjack tuna fishing. (b) Fish pond subproject for the: (i) improvement of about 15,000 ha of existing smallholder brackish water ponds in Java and Sulawesi through the introduction of simple improvements to pond construction and techniques of fish culture; (ii) development of about 45 one to five-ha ponds to demonstrate the improvements; and (iii) establishment of about nine 5-ton ice plants to provide ice for the preservation of milkfish and shrimp from project ponds enroute to market. (c) Trawler subproject involving the purchase of about 25 trawlers for the trawling of fish and shrimp in the Java Sea. (d) Technical assistance required for effective implementation of the project. Details on these various components are given in the following paragraphs.

21 - 9 - B. Detailed Features (Annex 3) Skipjack Tuna Subproject 3.03 The purpose of this subproject is to expand skipjack tuna fishing for export. The subproject would be based on Ambon island (see attached Map IBRD-10570) because the seas surrounding this island have abundant skipjack resources 1/ and its fishermen are experienced in the catching of this fish. Furthermore, PNM which is a suitable entity to implement the major pa:rt of this subproject, is located on Ambon, where it is already engaged in skipjack fishing for the local market. Details of PNM's operations are given in para The proposed 20 fishing boats and consequently the capacity of the supporting facilities for this subproject has been determined by the availability of bait fish. 1/ Under the subproject, credit would be provided to PNM to acquire ten of the fishing boats, the two carrier vessels, on-shore supporting facilities, and about 27 nets for catching bait fish (para 3.12). DGF would employ a management specialist, electrical/mechanical engineer, civil engineer, and naval architect/master boat builder (para 3.21), to assist in project implementation. Besides individual fishermen/entrepreneurs, there are several fisheries cooperatives in Ambon who operate skipjack fishing boats and are engaged in the netting of bait fish for catching skipjack. At least 5 of the fisheries cooperatives engaged in skipjack fishing have been operating successfully and would like to expand their operations. In view of this, credit would be offered to fisheries cooperatives and other private entrepreneurs at Ambon to acquire the remaining 10 subproject boats and bait fish nets Skipjack Fishing Boats and Carrier Vessels. The 20 skipjack fishing boats would be of 30 gross tons powered by a 150 hp diesel engine, with a perpendicular length of about 18 m and a draught of about 2 m. They would be designed for pole and line fishing using live bait, with insulated fish holds capable of storing up to 5 tons of skipjack. The boats would carry a crew of 30, and be equipped to communicate with the base and other vessels. Investment cost including incremental working capital is estimated at about Rp 24.0 million (US$57,800) a boat. Such boats have been operating successfully in Japan, Caroline Islands, and Indonesia, and are familiar to Indonesian fishermen engaged in skipjack fishing. They are of sufficient size to enable fishing to be carried out during the monsoon period when smaller boats would not be able to operate. 1/ An FAQ survey conducted during January 1971 to March 1972 found that skipjack is abundant in the waters around Ambon and that bait resources would be sufficient to sustain at least an additional 20 fishing boats of the type envisaged under the subproject.

22 lnstead of project fishing boats journeying to Ambon to unload skipjack catch and to load ice, fuel, and other supplies for the return trip to the fishing grounds, carrier vessels would be used. This would increase fishing efficiency by allowing the fishing vessels maximum time in their fishing operations. Two 100 gross ton carrier vessels would be provided by the project for this purpose. They would have a perpendicular length of about 25 m with a draught of 3 m and they would be powered by a 240 hp diesel engine. A 10 hp auxiliary would generate power for lighting and pumping when the main engine is not running. The vessels would have insulated fish holds of about 85 m 3 capable of storing up to 15 tons of skipjack with 15 tons of block ice in about 20 tons of sea water. They would also be equipped to communicate with the base at Ambon and other vessels, and carry a crew of 7. Investment cost of the vessels, including incremental working capital, is estimated at Rp 67.4 million (US$162,400) each. Skippers and other crew for the fishing and carrier vessels are available in Ambon Both types of vessel as well as the trawlers (para ) would have wooden hulls. Local timber suitable for hull construction is cheap and readily available. Steel hulls and imported wooden hulls would cost much more than locally made wooden hulls (para 3.30). The project naval architect/master boat builder (para 3.21) would provide the final design and specifications as well as supervise construction and installation of the engines and equipment of the skipjack fishing and carrier vessels, and the trawlers. Outline drawings and specifications of the vessels are given in Annex 3, Charts 8044, 7843 and Assurances were obtained that IDA would approve the final designs and specifications of the vessel types prior to construction Icemaking, Freezer and Cold Store Complex. The complex would include: cold storage rooms for 500 tons of frozen skipjack maintained at -25 C; brine tanks with a capacity of freezing 25 tons of skipjack a day to -25C; an ice plant capable of producing 50 tons of ice daily with adequate ice storage facilities; offices, and store-room; and three generator sets of some 1,250 KVA, including 33% standby capacity, to provide the necessary power. The complex of which a lay-out plan is shown in Annex 3, Chart 7841, would be of sufficient capacity to provide the ice, freezer and cold store needs required to preserve the skipjack tuna caught by project vessels. The two project engineers (para 3.21) would provide the final designs and specifications of the complex as well as supervise construction and installation. The civil engineer would be responsible for the civil works involved, and the electrical/mechanical engineer all other aspects of the establishment of the complex. Assurances were obtained that IDA would approve all final designs and specifications The proposed complex would be constructed on a site adjacent to PNM's present location. DGF authorities have assured that this site would be suitable as it has ample level ground, good water depth within a short distance off the shore (para 3.09), and plentiful supply of water (para 4.14) Jetties. The main subproject jetty would be constructed on the proposed cold store site, with a depth alongside in excess of 6 m, which

23 would be enough to accommodate a refrigerator vessel loading frozen skipjack for export. The jetty head would be about 60 m long and 6 m wide. The outer face would be used as a berth for all vessels and the inner face could be used by the carrier vessels when the outer berth was occupied by the refrigerator vessel, so that normal operations would not be interrupted. The jetty would be constructed by local contractors using local hardwoods The main skipjack fishing grounds would be in waters off the fishing villages of Hitu and Waai where food and drinking water is available and many bait fishermen are located (para 3.12). Under the subproject, small jetties would be constructed in the fishing villages to facilitate access by the skipjack fishing boats. The jetties would be about 3 m wide and would provide a minimum water depth of 3 m. They would be constructed in locally available hardwoods by local contractors experienced in building timber bridges. The project civil engineer with the assistance of the project electrical/mechanical engineer (para 3.21), would provide the final designs and specifications as well as supervise the construction of the jetties Repair Facilities. PNM has a small hand-operated slipway and workshop capable of servicing its existing boats and those of the fisheries cooperatives. However, the slipway would not be suitable for project carrier vessels and another would be needed. The project would therefore finance the construction of a new slipway and enlargement of the present workshop facilities. The new slipway would be constructed parallel to the existing one and an electrical uphauling winch would be provided capable of operating either slipway by means of a system of snatch blocks. The project civil engineer, naval architect, and electrical/mechanical engineer would be responsible for drawing up the final designs and specifications as well as supervising the construction of the slipway and extension of the workshop facilities. A site lay-out of the repair facilities is given in Annex 3, Chart Lift or Beach Seine Nets. The project would provide about 54 lift or beach seine nets which would be adequate to catch the required amount of bait fish. Credit for the purchase of these nets would be made available to PNM (para 3.03), fishermen, or fisheries cooperatives which are engaged in bait fishing. Fish Pond Subproject (Annex 2) 3.13 Pond Improvements. The purpose of this subproject is to increase the production of milkfish and shrimp from existing ponds by providing finance to pond operators for simple pond improvements and for purchase of fry, fertilizers and pesticides required to produce the first harvest from the improved ponds. Simple improvements would comprise primarily the raising of secondary dykes and ditches, deepening and levelling of pond bottoms and canals, and additional sluice gates, including their relocation. Details on the various investment items are given in Annex 5.

24 Investments would average about Rp 62,000 per ha for ponds producing milkfish and Rp 125,000 per ha f3r ponds producing both milkfish and shrimp (para 2.13). 1/ About 15,000 ha of ponds in Java and South Sulawesi would be improved under the subproject, of which 7,000 ha would be of the former type and 8,000 ha of the latter. The projected distribution of the two types of ponds among provinces and districts, the phasing of their development over a 5-year period, and the average pond size and number of pond operators involved, are given in Annex 3, Tables 3-1, and The subproject pond area would be restricted to Java and South Sulawesi because these two areas have a regional comparative advantage for brackish water pond culture. Ponds producing both shrimp and milkfish would be in coastal areas with sufficiently high salinity levels required for successful shrimp production. Pond development for milkfish alone would be carried out further inland. Project size has been determined by the availability of suitable pond areas, pond operator demand for such improvements, and with full account taken of the limited capacity of the fisheries extension services and of BRI's limited experience in fish pond lending In Taiwan, intensive production with annual yields of up to 2,500 kg of milkfish per ha have been achieved, through excellent water control, the adoption of adequate modern inputs (including fertilizers, pesticides and supplementary feeds), and advanced production and management practices. To try and raise Indonesian yields within a few years to the high levels prevailing in Taiwan would be unrealistic, because this requires a capital intensive technology and a management competence which the Indonesian pond operators (particularly small operators) cannot be expected to acquire rapidly. In view of this, the subproject aims at financing pond improvements at an intermediary level of technology (para 2.13), suitable for dissemination to small operators as an initial step in the long range development of more intensive pond culture in Indonesia Demonstration Ponds. Successful implementation of the subproject requires strengthening of the fisheries extension service and establishment of 45 one to five-ha demonstration ponds to demonstrate to pond operators the improved techniques and their benefits envisaged under the subproject (para 2.13). To assist in the further develbpment of pond culture in Indonesia (para 3.16), some of the ponds would also demonstrate more advanced techniques practiced in Taiwan as adapted for local application by the research centre for brackish water fish and shrimp culture currently being established (para 2.20). The proposed numbers and location of the demonstration ponds among the different provinces in the subproject area as well as the phasing of their development are given in Annex 3, Table 3-3. Investment cost for each pond, a typical layout of which is given in Annex 3, Chart 7864, would be about Rp 2 million. A breakdown of the cost of the individual investment items is given in Annex 5. The ponds would be developed among those owned 1/ The former type ponds would stock only milkfish, and the latter type both milkfish and shrimp.

25 by GOI or individuals. Three pond fisheries experts (para 3.21) would be needed for a period of two years, to develop the demonstration ponds, and train the required local fisheries extension officers who would help pond operators carry out their pond improvements. Details on the strengthening of the fisheries extension service and its function required under the subproject are given in para Ice Plants. The subproject would provide credit to fisheries cooperatives and private entrepreneurs for the purchase of nine small ice plants which would supply ice to preserve the quality of project fish and shrimp enroute to market (para 4.09). Subproject fish ponds are widely scattered. Several small ice plants to be located in production areas where ice is not available, would be preferable to a single large plant, because of the lack of suitable facilities to transport ice over long distances. Each of the small ice plants, costing about Rp 18.5 million (US$45,000), would have a capacity of 5 tons of block ice per day, storage space for 15 tons of ice, and be equipped with a generator set. Small plants of this capacity are already operating successfully in Java. The project electrical/mechanical engineer would provide the final design and specifications and supervise the installation of the equipment. Trawler Subproject 3.19 The Java Sea, especially off South Kalimantan, possesses rich trawling grounds. The estimated 150 trawlers presently operating there are exploiting only a small proportion of the potential catch (para ). There is consequently a growing demand for trawler financing The project would finance about 25 trawlers. Available evidence suggests that they would easily be taken up by potential borrowers. The trawlers of 30 gross tons would have a perpendicular length of about 19 m, with a 2 m draught, and powered by a 120 hp diesel engine. They would have insulated fish holds for about 6 tons of fish and shrimp. The trawlers would also be equipped with a radio set for communication, and a pair of side roller winches. This size vessel is presently operating successfully in the Java Sea. It is able to travel from the north coast of Java to the fishing grounds off South Kalimantan and to carry out 3-4 day fishing trips. The project naval architect would design and supervise construction of the trawlers (para 3.06), each of which would carry a crew of ten. The required crews would be available locally. The investment cost of each trawler, including incremental working capital, is estimated at about Rp 22.9 million (US$55,200). Technical Assistance 3.21 The project would finance up to seven experts (17 man years) required for effective project implementation. They would comprise three specialists for pond development (2 man years each), a management specialist (4 man years) (para 4.13), an electrical/mechanical engineer (3 man years), a civil engineer (1 man year) and a naval architect/master boat builder (3 man years). Terms of reference, qualifications and experience required

26 are given in Annex 10. All the experts, e(xcept for the civil engineer, would be internationally recruited. Civil engineering services required for the on-shore complex (para 3.07) would be obtained from a local engineering firm and financed by the project which includes the cost of such services. Competent civil engineering services are readily available locally. Project Implementation Schedule 3.22 The project would be implemented over a 5-year period as shown in Annex 4. Full development period for individual investments would range from one to five years. C. Cost Estimates 3.23 The total cost of the project is estimated at Rp 5,351.7 million (US$12.9 million), of which 30 percent, or Rp 1,595.0 million (US$3.8 million) would be foreign exchange.

27 Project Cost Estimate /a -----Rp Million US$' % Foreign Local Foreign Total Local Foreign Total Exchange A. Skipjack Tuna Subproject 1. Fishing Vessels , (20) 2. Carrier Vessels (2) 3. Ice-Making, Freezer and Cold Store Complex ,193 1, Jetties Repair Facilities (Workshop & Slipway) Lift or Beach Seine Nets (54) Technical Assistance (11 man years) Incremental Working Capital Sub-Total , ,997 2,080 4, B. Fish Pond Subproject 1. Pond Development (15,000 ha) 1, , ,980-2, Demonstration Ponds (225 ha) 92.3 _ Ice Plants (9) Technical Assistance (6 man years) Incremental Working Capital _ Sub-Total 1, , , ,3S5 11 C. Trawlers Subproject 1. Trawlers (25) , Incremental Working Capital Sub-Total , , D. Contingencies 1. Physical (5%) *2. Price (26%) , , , Sub-Total , , , Total 3, , , ,052 3,843 12, /a Totals may not add up due to rounding.

28 Detailed cost estimates are shown in Annex 5. Estimates are based on current prices, including the costs of installation. Price 1/ and physical contingencies of 26% and 5% respectively have been added to project costs. The contingency allowances would be adequate. The price contingency allowance is based on the projected price increases on the estimated amounts that would be disbursed. D. F_iancing 3.25 The total project cost would be financed from the following sources: Bank Total Pro- Sub-Borrowers Rakjat Indonesia Government Ject Cost IDA Rp % of Rp Z of Rp % of Rp Rp Invest-- Invest- Invest- Investment ment ment ment Items Million Items Million Items Million Items Million Million A. Skipjack Tuna Subproject Fishing vessels Carrier vessels On-Shore Facilities (ice-making, freezer and cold store complex; jetties; and repair facilities) , Lift or Beach Seine Nets B. Fish Pond Subproject Pond Development , , Demonstration Ponds Ice Plants C. Trawler Subproject D. Technical Assistance Fish Pond Experts Other Experts Total T , _=N - A _ 1/ The price contingency is based on: (a) projected prices for equipment and civil works provided by IBRD's Projects Advisory Staff (Memo on Revised Interim Guidelines on Treatment of Project Cost Increases dated March 29, 1974), and (b) annual increases of 8% for all other investment costs.

29 GOI would re-lend part of the proceeds of the IDA credit to BRI for on-lending to sub-borrowers for pond improvements and to acquire all the ice plants and trawlers, and about 10 skipjack fishing boats and 27 lift or beach seine nets. BRI's sub-borrowers would be individual pond operators and fishermei, fisheries cooperatives and private entrepreneurs. The remainder of the credit would be used by GOI to finance the costs of the experts and for on-lending to PNM for the construction of the on-shore complex and purchase of two carrier vessels and about 10 skipjack fishing boats and 27 lift or beach seine nets (para 3.03) Sub-borrowers would on average contribute about 14% of investment requirements, including incremental working capital. Individual minimum contributions for the different project items would be 5% for lift or beach seine nets and 15% for other investments. In the case of project experts for PNM, 20% of their costs would be financed from PNM's own resources. Most of the participants in pond improvements would be small farmers owning from 1 to 5 ha ponds and the bulk of their investment contributions would be in the form of family labor. In addition to financing the cost of the services of the project experts and the investment costs of the demonstration ponds, GOI would provide the necessary funds to PNM and the fisheries cooperatives in redeemable equity to help meet their investment contributions (para 4.22). It is essential to ensure that the incremental working capital necessary to produce the initial output and sales from project investments be available. The financing arrangements therefore, stipulate that the incremental working capital would be provided by GOI and BRI if not available from other sources. Assurances on this were obtained during negotiations The proposed IDA credit of Rp 2,675.9 million (US$6.5 million) would finance 50% of total project cost, and would supply about 58% (Rp 1,558.0 million) of BRI support of the project, 53% (Rp 1,013.3 million) of PNM's investment requirements, and 14% (Rp million) of GOI contribution to project cost. The investment costs of the demonstration ponds would be financed by GOI. IDA would finance foreign exchange costs amounting to Rp 1,595.0 million or about 60% of its total contribution while the balance of Rp 1,080.9 million would be local currency financing The IDA credit would be on standard terms to GOI which would retain an amount to finance an estimated 80% of the costs of the project experts. GOI would make available the remainder of the credit to BRI and PNM (para 3.26) under subsidiary loan agreements acceptable to IDA. The credit to BRI would be at an interest rate of 4% per annum and repayable as BRI received repayments from sub-borrowers. This credit together with BRI's own contribution would be extended to sub-borrowers at an interest rate of 12% per annum in compliance with the present GOI policy on this type of lending. GOI lending to PNM would also be at 12% per annum (para 4.19). GOI would bear the foreign exchange risk. The project experts would be employed by GOI through DGF. Costs of the experts for the skipjack tuna subproject would be borne by PNM. The cost of the PNM experts financed from the IDA credit, would be repaid by PNM at the same interest rate and repayment period as its loans from GOT under the project. GOI would bear the cost of the pond fisheries experts which it would provide to DGF. To ensure

30 that sufficient funds are available as needed for timely and efficient project execution, GOI wouid make available to DGF sufficient funds to cover estimated expenditures for extension services, experts, training, demonstration pond development and other expenditures required to be made by DGF under the project. Funds to meet the estimated expenditures of each quarter would be made available to DGF not later than the fifteenth day of such quarter. As a condition of credit effectiveness, the budget of DGF for project expenditures up to March 31, 1975 shall have been approved and funds equivalent to US$200,000 will be available for project expenditures. Assurances on these arrangements were obtained during negotiations. E. Procurement 3.30 Procurement for the wooden hulled vessels (20 fishing boats, 25 trawlers and two supporting vessels for the fishing boats) would be separated into (i) wooden hull procurement and (ii) procurement of equipment such as engines, fishing gear and other equipment since: (a) individual operators may already own several fishing boats and therefore aim at standardization of their equipment to reduce the need for costly inventories of spare parts and additional training of personnel; and (b) individual operators are in the best position to determine the make of the equipment most suited to their needs based on their existing equipment and personnel. These considerations, common to credit type projects, preclude bidding for fully equipped vessels. The project naval architect would therefore establish design criteria for wooden hulls for the three types of project vessels. Because wood suitable for hull construction is cheap and readily available in Indonesia and the local shipyards have low labor and freight costs, these shipyards have considerable advantages over any foreign suppliers and offer the lowest cost source for such hulls. The local shipyards have the necessary expertise and experience as well as the capacity to carry out such construction. Bulking of the hulls to attract foreign suppliers would not be practical since some variation in hull design and construction would be required to accommodate the individual sub-borrower's choice of vessel engine and equipment, and also because the hulls would be acquired over a three year period. The vessel hulls therefore would be procured from prequalified local shipyards following local competitive bidding procedures acceptable to IDA The naval architect would also establish technical performance criteria and standards for the various equipment items. PNM and other subborrowers would order equipment, with the make of their choice, from suppliers previously pre-qualified through international advertisement (para 3.32). BRI would do this for its sub-borrowers. To the extent practical, bulking

31 of sub-loan applications for equipment would be arranged by BRI. By following these procedures, requirements of individual operators will be accommodated without foregoing the economies of bulk orders made possible by the project Engines and other equipment for the vessels are not manufactured in Indonesia, but suppliers from several countries, mainly Japan, U.S.A., and the U.K., are already established there. Through international adver-- tisement, other suppliers would be encouraged to establish themselves and provide adequate service facilities and spare parts inventories, and the market would be opened to suppliers meeting project standards and specifications. The advertisement, to be issued at least three months before price quotations for the equipment were invited, would indicate the approximate type of equipment and total quantity required and potential suppliers would quote prices on various quantities of each type of equipment. PNM and BRI, assisted by the naval architect, would then order the make of equipment and quantity needed depending on sub-loan applications and individual operator's choice and have it installed on the hulls Procurement and installation of the Ambon on-shore facilities - the ice-making, freezer and cold storage complex, jetties and repair facilities, would be under a single contract and in accordance with international competitive bidding procedures (para 3.37) Formal bidding procedures for the fish pond improvements and lift or beach seine nets would not be appropriate because only small investment items would be required, and improvements would be on scattered small fish ponds spread over wide areas and over 5 years. Moreover, a significant part of the improvements would be carried out by manual labor, which in most cases, would partly be provided by the owners themselves. Pond improvements would consequently be arranged by the pond operators and extension service staff. Similarly, the nets would be procured through prudent shopping by the sub-borrowers The nine small ice plants would be procured through international competitive bidding Appointment of the project experts would be subject to IDA approval and would be made on terms and conditions acceptable to IDA Procurement and installation of the on-shore facilities would be under a single contract as it would be essential that one contractor take overall responsibility to synchronize installation of equipment and civil works. The project engineers would prepare design, layout and detailed engineering and tender documents. They would also visit construction sites to ensure that construction conformed to contract standards. During negotiations, assurances were obtained that the procurement procedures outlined above would be followed and the contract awards for vessels, except those procured through BRI, on-shore facilities and small ice plants would be subject to IDA approval.

32 F. Disbursement 3.38 IDA disbursements are expected td extend over 5 years (Annex 6). Against appropriate statements, disbursements would be: (a) For the project experts, 100% of foreign exchange expenditures or 100% of local expenditures against salaries. The proposed disbursement procedure would allow IDA to disburse a similar share of the cost of both foreign and local experts. Such disbursements are expected to amount to about 80% of the total cost of the experts. (b) 58% of loan disbursements by BRI. (c) 50% of total investment expenditures by PNM. Disbursements would be made against the required supporting documents except for reimbursements for sub-loans made by BRI. The documentation for BRI sub-loans for reimbursement would be retained by BRI and be available for inspection by IDA project supervision missions. Any savings would be used to finance further fish pond development. IV. ORGANIZATION AND MANAGEMENT A. Introduction 4.01 The Directorate General of Fisheries (DGF) would coordinate, guide and supervise project implementation, and would employ full-time a competent and experienced senior officer assisted by adequate and competent supporting staff for this purpose. An assurance on this was obtained at negotiations. DGF would also provide fish pond experts, demonstration ponds and extension services; employ the experts required by PNM; provide technical staff, if neceasary, to fisheries cooperatives for the operation of ice plants; and assist BRI in-the technical appraisal of project loans (para ) The P.N. State Fisheries Enterprise, Maluku (PNM) would own and operate ten fishing boats and about 27 lift or beach seine nets, two carrier vessels and the on-shore supporting facilities under the skipjack tuna subproject (para 3.03). For project implementation, it would employ an accountant, and through DGF, experts to be internationally recruited, who would prepare and evaluate bids, supervise construction of boats and on-shore facilities, and train local staff (para ) Bank Rakjat Indonesia (BRI), one of the five state-owned banks, and the lending bank for three on-going IDA projects, 1, would be the channel for financing the pond improvements, ice plants, trawlers, and about ten fishing boats and 27 lift or beach seine nets, and responsible for appraising loans made under them, with assistance from DGF and PNM. BRI has appointed a fisheries expert to its technical staff to liaise with the DGF and PNM experts. 1/ Beef Cattle Development Project, Report No. PA-153a (November 1972). 2/ North Siuatra Smallholder Development Project, Report No. PA-140a (January 1973). 3/ Smallholder and Private Estate Tea Project, Report No. 124a-IND (May 1973).

33 B. Institutions Directorate General of Fisheries 4.)4 Details of DGF's organization and operations are given in Annex 9. For the skipjack tuna subproject, it would assist PNM in (a) finding suitable export markets (para 5.03) through the collection of market intelligence and facilitating negotiations with foreign buyers, and (b) employing the experts required by PNM. The experts would be seconded to PNM which would bear the cost of their services (para 3.29). The subproject requires advance planning to synchronise timing of the various activities, particularly to ensure the on-shore facilities were ready when the vessels were delivered. The advance planniag would require the active participation of the experts. Consequently they should be internationally recruited as soon as possible. The management specialist would be appointed and in position before credit effectiveness and the other two experts within six months following credit effectiveness, and their qualifications and experience, and terms and conditions of employment would be approved by IDA (para 4.13). Assurances on these conditions were obtained at negotiations For the fish pond subproject, the present 17 inland fisheries extension officers in the subproject areas (para 3.14) would be inadequate. The ratio is currently one officer for 680 ha of ponds, whereas the subproject would require one for about 300 ha. 50 officers would thus be needed for the 15,000 ha of ponds, together with 45 for the demonstration ponds (one at each pond). Assurances were obtained at negotiations that DGF would make available the required 95 officers for this subproject, in accordance to the schedule given in Annex 3, Table 3-4, and that the officers would hold the equivalent of a diploma from a senior inland fisheries high school Every loan application for pond improvement would be appraised by an extension officer, who would prepare a plan indicating the required improvements, their phasing and cost, and expected financial return. The loans, after approval by BRI, would be disbursed in appropriate instalments after the officer had certified that the previous instalments had been used according to the plan. An assurance to this effect was obtained at negotiations Three pond fisheries experts would be required to develop the demonstration ponds and to train the 95 local extension officers. Their qualifications, experience, and terms and conditions of employment would be subject to IDA approval. An assurance was obtained at negotiations that at least one expert would be appointed and in position before credit effectiveness and the other two experts within six months following credit effectiveness In cooperation with the centre for brackish water culture research and development (para 2.20), DGF, through the pond fisheries experts, would prepare and implement a suitable program, satisfactory to IDA, for the training of the project extension officers at the centre. The program would include training of the extension officers in the regions and under conditions

34 in which they would be working, primarily through on-site experience with the demonstration ponds. The allocation of the extension officers among the subproject areas is given in Annex 3, Table 3-4. In addition to demonstrating pond improvements at an intermediary level of technology, some of the demonstration ponds would demonstrate more advanced pond culture practices for intensification of milkfish and shrimp production based on the findings of the centre (para 3.17). DGF would also agree that the demonstration ponds and the required extension officers would be maintained, and that both the demonstration ponds and the availability of trained extension officers would precede the scheduled project pond improvements. Assurances were obtained that DGF would comply with these conditions On the advice of the pond fisheries experts, DGF would determine the siting of the small ice plants (para 3.18). Before loans for them to the fisheries cooperatives were approved, DGF would ensure that each cooperative was viable and capable of operating such a plant. Assurances on these points were obtained at negotiations. PN State Fisheries Enterprise, Maluku (PNM) 4.10 Details of PNM's organization and operations are in Annex 8. Established in 1961, it is one of six enterprises set up by DGF to operate fisheries projects. Up to 1967, PNM operated a passenger service, and a slipway and facilities to service private vessels. In 1967 it started skipjack fishing with five vessels, and has since operated at a profit PNM is managed by a 3-member board, one of whom is the Chief Executive Director, who directs operations. Major decisions and policy matters rest with DGF, including the appointment of board menbers, and responsibility for PNM's financial condition. However, this has not hampered PNM's progress, which is largely due to competent and enterprising management and autonomy in operations. An assurance was obtained at negotiations that IDA would be consulted concerning any changes in the appointment of the Chief Executive Director At the end of 1972, PNM's resources were about Rp 43 million, of which borrowings were only about Rp 7.7 million, mainly from the Indonesia Industrial Development Bank (Bapindo). The rest was capital, accumulated profits and reserves. Most of these resources have been used for fixed assets, mainly land, buildings, fishing vessels, repair facilities and vehicles, but Rp 4.3 million was cash and bank deposits. However, PNM's accounts have not been adequately maintained. Costs and returns of each different activity are not available, so their individual performance cannot be evaluated. The accounting and reporting systems would be improved to provide adequate information to aid management's decision making, and a separate account would be opened for project transactions (para 4.25). To ensure satisfactory financial control and accounting, a qualified accountant should be appointed as soon as possible. Assurances were obtained during negotiations that disbursements to PNM would be subject to the prior appointment of a qualified accountant by PNM.

35 Although its staff is adequate for current operations, PNM does not have the necessary expertise to implement effectively its part of the project. Three experts would be internationally recruited, and comprise a management specialist, electrical/mechanical engineer, and naval architect. Civil engineering services required for the on-shore complex would be obtained from a local civil engineering firm (para 3.21). The management specialist would advise and assist PNM's management in the planning, organization and operation of the subproject, including training of local personnel and the supervision and coordination of the other experts, who would be responsible for planning, designing, preparing tender documents and evaluating bids, and supervising the construction and installation of equipment in the vessels and on-shore facilities. They would also train local personnel in the operation of the facilities (para 4.04). An assurance was obtained at negotiations that PNM would provide the necessary local counterparts to be trained by the experts, Terms of reference, qualifications and working experiences of the expexts are given in Annex PNM would acquire by purchase or long lease a suitable site required for the cold storage complex and main jetty (para 3.08). An assurance was obtained at negotiations that acquisition of the site by PNM would be a condition of disbursements to PNM or for any sub-loan for the skipjack tuna subproject. Bank Rakjat Indonesia (BRI) 4.15 BRI is described in detail in Annex 7. Non-agricultural loans account for about one half of its lending, but BRI is assuming an increasing role in the financing of agriculture, including fisheries. It provides extensive coverage of the country through a wide network of branch offices, and village and mobile units. It would be the most suitable lending institution for this project BRI's operations are directed by a 4-member Board of Directors appointed by GOI. It has.6 administrative and 7 operational bureaus. Under one of the bureaus is a Department of Fisheries. While this department is competent to make financial appraisals, it lacks the necessary technical expertise to appraise project loans competently, and would rely on the expertise of DGF and PNM's experts for their technical appraisal. An assurance on this was obtained at negotiations. The qualifications of the fisheries officer which BRI would recruit to liaise with DGF and PNM would be equivalent to a graduate of the Academy of Fisheries, Jakarta, with a minimum of two years experience in fisheries management and administration. An assurance was obtained at negotiations that such a fisheries officer had recently been appointed and is in position At the end of 1972, BRI's resources were about Rp 113 billion, of which about 10% was capital and reserves, 54% deposits, and 31% borrowings (mainly from Bank Indonesia, the central bank). Loans accounted for about 65% of BRI's use of its resources and about 45% of these for expansion and development of agriculture. Total arrears were about 30% of loans outstanding. This relatively high level is in part due to a GOI-sponsored

36 rapid expansion of credit for rice production prior to 1970, without adequate attention to the recipients' repayment ability. It is also related to a fairly widespread drought early in Doubtful debts were about Rp 8 billion at that date, and are covered by BRI's reserves. BRI's loan recovery performance is much better following 1970 than in earlier years BRI has recently received assistance from the Asian Development Bank to modernize and improve its ozerations, particularly its accounting and reporting systems. In November, 1973, a FAO/IBRD Cooperative Program mission assisted BRI to prepare a rural credit project for subsequent IDA financing. The project is expected to include provisions to strengthen BRI's capacity to extend credit to farmers, including a staff training program. Immediate short-term technical assistance to BRI to help in implementing the on-going IDA smallholder tea, rubber and beef cattle projects is included in these projects (see footnote to para 4.03). The tea project also provides funds for internationally recruited consultants to recommend improvements in BRI's medium- and long-term credit operations and to help implement these recommendations. C. Lending Terms and Conditions 4.19 Project lending terms and conditions are set out in Schedule A. Assurances were obtained at negotiations that they would apply to all project. sub-loans. GOI would make available the IDA credit to BRI at an annual interest rate of 4%. This credit, together with BRI's own contribution, would he passed on to sub-borrowers at 12%. The IDA credit and GOI lending to PNM would be at an interest rate of 12% per annum. These follow current rates on investment funds provided by GOI. These are standard rates which are also applicable to recent IDA financed agricultural projects. Subsidiary, loan agreements acceptable to IDA, would be entered into between GOI and BRI, and between GOI and PNM (incorporating these and other terms and conditions specified in para 3.29), and the execution of these agreements would be a condition of credit effectiveness. BRI's average gross margin on project subloans would be about 7% 1/, which would be adequate for administrative expenses and overheads, leaving a sufficient margin for bad debts. 1/ During 1972, the average cost of funds to BRI was about 6.2% per annum whereas the average interest earned by it on its loans, investments and bank balances was 10.2% per annum. BRI, therefore, earned an average margin of 4%. Under the project, the margin earned by BRI would be about 7%, considering that the margin earned on IDA funds would be 8% per annum (12% less 4%) and that on its own resources 5.8% per annum (12% less 6.2%) and that the ratio between IDA funds and its own resources would be 49:51. BRI has been working at a profit on an overall margin of 4%.

37 The period of each sub-loan would be determined by the repayment capacity of the sub-borrower. Financial models for typical sub-loans are in Annex 12, and indicate that loan repayment schedules need not exceed the limits shown below: Grace Period of Total Sub-Loan Period Repayment Loan Period Years Loans for Skipjack Component to the State Fisheries Enterprise (PNM) Ski-:jack Fishing Vessels to Cooperatives Lift or Beach Seine Nets Fish Ponds: (a) Java Fish Pond (b) Java Shrimp Pond (c) Sulawesi Fish Pond (d) Sulawesi Shrimp Pond Trawlers Ice-Plants PNM and sub-borrowers' minimum contributions would be: 25% for private entrepreneurs operating trawlers and small ice plants, 5% for bait fishermen, 20% for consultants to PNM (para 3.27), and 15% for all others. BRI normally makes advances up to 70% of the collateral offered, but has discretion to advance more. Under the project it would not always obtain security up to its normal requirements, but would generally lend up to 85% of the project investment, which would be the collateral offered, and 95% for lift or beach seine nets. For fish ponds the collateral would be the ponds themselves, which would be more than adequate for the loans PNM and the cooperatives do not have sufficient unencumbered assets to provide even the 15% proposed as down payment. PNM would require about Rs 214 million as its contribution to project costs. Assurances were obtained at negotiations that GOI would provide PNM and the cooperatives with the required funds, which would be in redeemable equity To facilitate loan recovery, PNM would, on behalf of BRI, deduct appropriate amounts of its daily purchases of skipjack and bait fish from project cooperatives and bait fishermen, and BRI would in turn credit sub-borrowers accounts. An assurance was obtained at negotiations that an agreement to this effect would be entered into by the parties concerned.

38 D. Accounts ard Audit 4.24 BRI's accounts are audited by Bank Indonesia, and the audit is satisfactory. BRI would maintain a separate project account which would be audited annually and sent to IDA, together with a copy of the audited balance sheets and accounts covering the whole of its transactions within four months after the close of each financial year. BRI would also forward to IDA quarterly reports covering the project's progress. Assurances on tlhese two points were obtained at negotiations PNM would maintain a separate project account. This, together with its full accounts would be audited annually by an independent auditor acceptable to IDA, and copies sent to IDA within four months after the close of each financial year. An assurance on this was obtained at negotiations. V. PRODUCTION, MARKETS AND OPERATING RESULTS Production 5.01 The proposed skipjack fishing vessels and trawlers would produce annually about 12,000 tons of fish and shrimp, including 6,500 tons of skipjack tuna. The fish pond component would increase annual production at full development by about 3,600 tons of milkfish and 2,500 tons of shrimp. Details on these estimates are given in Annex 3. This component, which would involve the improvement of some 15,000 ha of ponds belonging to about 9,000 small operators, would enable the latter to obtain much higher yields, thereby making more productive use of their ponds. Markets (Annex 11) 5.02 Most of the skipjack tuna caught by project vessels would be exported. Of smaller size and darker meat than the yellowfin tuna, skipjack has recently been subject to increasing international demand as yellowfin resources are over-exploited. Because skipjack has a much shorter lifespan than vellowfin, it contains smaller concentrations of mercury. Wider acceptance of skipjack's darker meat and its increasing use for mixing with the lighter meat of the yellowfin and other tuna has added to the demand. The price of skipjack has accordingly been on an upward trend (para 5.04). Because the present favorable export market can be expected to continue into the future, and a suitable export outlet can easily be arranged (para 5.03), no difficulty in exporting the entire project catch is envisaged There are several representatives of foreign companies involved in fisheries in Indonesia which have indicated a keen interest in buying tuna. A purchasing contract could easily be obtained. Negotiated prices would be geared to world market prices. Alternatively, PNM itself could arrange to have the catch from all project vessels shipped (through chartered freezer vessels) to consuming countries and sold there through appointed selling or commission agents.

39 The price used in calculating project returns to PNM is based on the present c.i.f. price in the U.S. (West Coast) less shipping, handling and other related costs. This net price works out to an estimated US$400 a ton. At this price, PNM would in turn be able to pay project cooperatives US$220 a ton (Rp 90 per kg), and the difference would be sufficient to cover all its operating costs as well as provide for depreciation and a reasonable rate of return to project investments. The price of Rp 90 per kg would likewise give the cooperatives an adequate rate of return (para 5.09). Because world prices are expected to rise, prices to project cooperatives would reflect a fair share of the increases in export prices received by PNM which would buy all skipjack offered by the cooperatives. Assurances to this effect were obtained during negotiations The export demand and price prospects for shrimp are also favorable. There are several shrimp processing companies in Indonesia, both domestic and foreign owned, which are buying all the shrimp they can get locally for processing and export. Export demand has been outstripping available supply. These companies have an extensive network of buying agents in virtually every primary market to which the fishermen sell their catch. Project output of shrimp can therefore be easily marketed. Prices offered by buyers are competitive and rising. However, current prices have been used for calculating project returns (para 5.08) Based on present trends in population and income growth, Indonesian consumption demand for fish has been projected to increase by about 4% annually during the Second 5-Year Development Plan, The projected increases, averaging some 70,000 tons a year, would be substantially larger th;an the average annual output increase of about 27,000 tons during the recent four year period The annual increment from project trawlers and fish ponds, estimated at about 11,000 tons at full development, would therefore be easily absorbed by the domestic market Java with about two-thirds of the total population accounts for only about 20% of the total fish output in Indonesia. With a lower annual per capita consumption estimated at some 5 kg or about haif the national average, the island imports very substantial quantities (some 100,000 tons) from other parts of the country to meet its consumption needs. However, most of the fish comes to Java in dry and salted form because of poor transport and lack of facilities for fresh fish preservation. The result is a scarcity of fresh fish in the large urban consuming centers, particularly those some distance away from the coast. The output from project trawlers and fish ponds can in fact be easily accommodated by the Javanese market alone. The large market potential for fish in Java is also indicated by the fact that in order to bring fish consumption in the island up to the national average, an estimated 500,000 tons per annum would be required in addition to present supplies Current prices have been used in estimating project returns. These prices and some details on marketing are given in Annex 11. Operating Results 5.09 A summary of the financial benefits, derived from representative investment models, is given in the following table, while the details are presented in Annex 12.

40 Trawler Skipjack Tuna Subproject Subproject I II III IV On-shore Facilities, Carrier and Fishing Vessels Operated by Cooperative the State Fish- la Fishing Beach Investment Model eries Enterprise!- Vessel Seine Trawler Investment Cost (Rp '000) 1,425,100 23, ,939 Net Income (p._ '000) At present At Full Development 584,785 6, ,030 Increament 584,785 6, ,030 Debt Service 252,002 3, ,640 Increment After Debt Service 332,783 2, ,390 Financial Rate of Return (%) Fish Pond Subproject V VI VII VIII IX 1 ha Fish 1 ha Shrimp 5 ha Fish 5 ha Shrimp Ice- /b /b Ic Ic Investment Model Pond- Ponda Pond- Pond- Plant Investment Cost (Rp '000) ,333 Net Income (Rp '000) At Present At Full Development ,300 Increment ,300 Debt Service ,256 Increment After Debt Service ,044 Increment (including returns to family labor) After Debt Service Financial Rate of Return (%) la Including the services of the experts. lb Java. /c South Sulawesi.

41 Incremental incomes and financial returns would be sufficiently high to make the proposed invest;ments attractive. In the case of the project ponds where most of the labor requirements are usually accounted for by family labor, incremental incomes, including returns to family labor would be significantly higher as shown in the above table. The financial rates of return would range from 20% to 38%. In calculating these returns, ;urrent prices for both inputs (including value of family labor imputed at current wage rates, see para 6.02) and outputs were assumed to continue at their present levels. The time to reach full development would vary from the year of investment up to 5 years for PNM's operations. In general, fisheries is a risky activity because control over catch is uncertain and fish pond yields are affected by pests and diseases. Therefore the sensitivity of the returns for fishing vessels (trawlers and skipjack boats) and fish ponds have been tested assuming a 15% decline in operating income. This resulted in rates of return ranging from 157% to 32% which are satisfactory The value of total incremental production would be about US$8.1 million per annum at full development. Based on present tax rates, incremental income tax returns would amount to about US$0.6 million annually. The level of investments and expansion in output can ba expected to generate substantial increases in employment, both family and paid labor (para 6.03). VI. ECONOMIC BENEFITS AND JUSTIFICATION 6.01 Under the project and at current prices, estimated annual landings of the skipjack vessels would be about 6,500 tons of skipjack tuna valued at US$2.6 million, and trawlers 5,300 tons of fish (including some 5 percent shrimp) valued at US$1.3 million. Estimated annual incremental output of milkfish and shrimp at full development from project ponds would be about 6,200 tons with a value of about US$4.0 million. Proposed small ice-plants would provide ice valued at about US$0.2 million annually. It is envisaged that practically all of the project skipjack tuna and about 1,600 tons of shrimp would be exported annually. The value of these exports would amount to about US$5.7 million After making the necessary adjustments and based on current prices, the economic rate of return would range from 22% for skipjack fishing vessels and trawlers to 42% for beach seine nets (Annex 13). A sensitivity analysis shows that increasing the cost of project investments by 30% without increasing the value of the benefits, the rate would be from 15% to 29%. The figures would be 16% to 31% if the value of the net benefits were to decline by 20%. These rates of return are satisfactory At full development, the new permanent jobs generated by the project would be about 860 for the skipjack fishing boats, trawlers and carrier vessels, 80 for the cold store complex and other on-shore facilities, and 70 for the small ice plants. The lift or beach seine nets would provide

42 part-tinie employment for about 1,100 fishermen. The fish pond component would generate some 10,000 man year equivalent (3 million man days annually) of work at full development mostly for family labor presently underemployed. Further, during the development period spread over 5 years, construction activities for the total project would provide employment opportunities estimated at some 10,000 man years. kdditional employment resulting from expanded marketing activities would also add to project benefits A significant share of the project's incremental production, particularly the milkfish from the ponds and fish catch from the trawlers, would be consumed in the domestic market and this in turn would improve the local diet (para 2.05). The provision of ice would likewise improve the quality of shrimp and fish enroute to market. Small fishermen and fish pond operators who belong to the lowest income group, would also benefit to a large extent, as they are likely to comprise the majority of project beneficiaries. Finally, through its provision of technical expertise, the project would provide experience valuable to future fisheries operations, including the fisheries credit activities of BRI To evaluate the financial and economic benefits which will actually result from the project, an assurance was obtained at negotiations that DGF in consultation with IDA would establish and maintain an adequate program to monitor and evaluate the financial and economic benefits resulting from the project. Ecology 6.06 Many fish ponds are downstream from intensive rice production areas which use pesticides (including herbicides) for crop protection. Though the pesticide runoff, if any, does not seem to have had any visible adverse effect on the production of the ponds which would include those participating under the project, it would be prudent and therefore necessary for DGF, through its centre for milkfish and shrimp research (para 2.20), to monitor the flow of pesticides into project ponds and to institute suitable measures for conttolling any adverse effects where they may occur. An assurance on this was obtained at negotiations. Project pond use of pesticides would not likely alter significantly the ecology of the surrounding areas as the amounts to be applied would be small. VII. RECOMMENDATTONS 7.01 During negotiations agreement was reached on the following principal points: (a) GOI would provide sufficient funds to cover estimated expenditures required to be made by DGF under the project. Funds to meet the estimated expenditures of each quarter would be made available to DGF not later than the fifteenth day of such quarter (para 3.29);

43 (b) the agreed procurement procedures would be adhered to (para 3.37); (c) the agreed lending terms and conditions detailed in Schedule A would be followed (para 4.19); and (d) GOI would provide the necessary funds to PNM and cooperatives to enable them to contribute to project costs (para 4.22) Conditions of disbursement would be: (a) a qualified accountant for PNM would be appointed before disbursements to PNM can be made (para 4.12); and (b) PNM would acquire a suitable site for the on-shore complex before disbursements to PNM or for any sub-loans for the skipjack tuna subproject can be made (para 4.14) Conditions of credit effectiveness would be: (a) the budget of DGF for project expenditures up to March 31, 1975 shall have been approved and funds equivalent to US$200,000 will be available for project expenditures (para 3.29); (b) at least one pond fisheries expert and the management specialist be appointed and in position (paras 4.04 and 4.07); and (c) subsidiary loan agreements acceptable to IDA have been entered into between GOI and BRI, and GOI and PNM (para 4.19) Subject to these conditions, the project is suitable for an IDA credit of US$6.5 million. May 7, 1974

44

45 SCHEDULE A Page 1 INDONESIA FISHERIES CREDIT PROJECT Project Lending Terms and Conditions The following lending terms and conditions would be used in implementing the project and would not be altered without the prior agreement of IDA. 1. GO0 would bear the foreign exchange risk. 2. GOI to PNM4: (a) Interest rate at 12% per annum; (b) PNM contribution to project costs: a minimum 20% for consultant services and 15% for all other investments; (c) Repayment period: maximum of 12 years, including a grace period of 3 years. 3. GOT to BRI: (a) Interest rate at 4% per annum; (b) Repayable as BRI received repayments from its sub-borrowers. 4. BRI to Sub-borrowers: (a) Interest rate at 12% per annum; (b) Sub-borrowers' contribution (including own labor and other contributions in cash and in kind): a minimum of 15% of the cost of investment, including incremental working capital, subject to the following exceptions: (i) Bait fishermen 5%; (ii) Private entrepreneurs operating trawlers and small ice plants 25%; (c) Repayment periods to be based on the repaying capacity of the investments, but not to exceed:

46 SCHEDULE A Page 2 (i) 12 years for cooperatives operating skipjack fishing vessels including 2 years of grace; (ii) 10 years without any grace period for bait fishermen for the purchase of lift or beach seine nets; (iii) 11 years, including one year of grace, for trawlers and small ice plants; (iv) 9 years, including a grace period of 3 years, for fish and shrimp ponds in South Sulawesi; 12 years including a grace period of 2 years for fish ponds in Java; and 9 years, including a grace period of up to 2 years for shrimp ponds in Java. (d) BRI will lend up to 95% of investment cost for lift or beach seine nets, 75% for trawlers and small ice plants operated by private entrepreneurs, and 85% for all other investments. (e) Tnvestments would be evaluated in terms of incremental returns resulting from the additional investments under the project. May 7, 1974

47 ANNEX 1 Page I INDONESIA FISHERIES CREDIT PROJECT Marine Fisheries 1. Marine sources account for about two-thirds of Indonesia's annual fisheries production (estimated at 1.27 million tons in 1972). The Indonesian archipelago spread over an area of some 5 million km 2 comprises many islands, the larger ones of which include Java, Sumatra, Kalimantan, Sulawesi and the Lower Sunda Islands. Indonesia has about 37,000 km of coastline (see Map). 2. The waters of Indonesia can be roughly divided into four major fishing areas, each with its distinct characteristics. For all areas, the general pattern of water circulation varies seasonally under the influence of the monsoons. The continental shelf of Western Indonesia is characterized by its shallow waters and by its South China Sea fauna. The area is exploited mostly by traditional fishermen, and intensive exploitation is found along the north coast of Java and the islands surrounding Singapore. Traditional fishing gear designed to catch small pelagic fish such as scad and Indian mackerel is used, although trawlers have recently been introduced to catch demersal fish. The deep waters and coral reef areas of Eastern Indonesia contain fauna of the Pacific Ocean, including yellowfin and skipjack tuna. Traditional fishermen fish mostly around the coral reefs with lines, traps, or lift nets. The continental shelf of West Irian is considered the best fishing ground for shrimp, although it also contains important resources of demersal fish. The waters of the Indian Ocean along Nusa Tenggara Islands, Java and Sumatra have virtually no continental shelf and instead are enriched with nutrients by upswellings off the Australian coast and by western currents. The main fish resources are pelagic and include skipjack, little tuny, frigate mackerel and kingfish along the coast of Sumatra, the sardine Sardinos melanostricta in the Bali Strait, and the yellowfin tuna. 3. FAO estimated the potential catches from these waters at some six million tons annually, or about seven times the present annual landings (Table 1-2). The potential for shrimp catch is an annual 125,000 tons. The more productive areas - the so-called Upwelling Area - comprising the Java, Arafura, Flores and Banda seas and covering about 750,000 km 2, has a potential annual catch estimated at about 4 million tons. The Java Sea alone has an estimated potential of 2 million tons. 4. FAO also estimated the potential skipjack tuna resource in the tropical Western Pacific at 250,000 tons, of which some 150,000 tons are in Indonesian waters. The present annual catch of skipjack is about 5,000 tons. Annual landings by the on-going IDA financed skipjack operations in Sulawesi (10,000 tons), and the proposed project at Ambon (6,500 tons) would be considerably less than the potential catch.

48 ANNEX 1 Page 2 5. According to Indonesian Governmenti estimates, a total of 839,000 tons of marine fish were caught during 1972, by approximately 281,000 sailing boats and 7,000 motorized boats, manned by 890,000 fishermen (Table 1-1). The sailboats were located primarily in Sulawesi (37%), Java (15%), Sumatra (15%), and Maluku (12%). The number of motorized vessels increased by 23% from 1970 to 1971, and 65% of the total were located in Sumatra, principally Riau Province. Marine fishermen were distributed most heavily in Sulawesi, Java and Sumatra. 6. About 95% of the total fish catch is salted, dried or smoked, with the remaining 5% sold as fresh fish. The distribution, marketing and pricing of marine fish are taken up under Annex Although fish accoumts for about 65% of the protein in -the Indonesian diet, annual per capita consumption is only about 10 kg which is low even by the standards of other less developed countries (comparable figures for Philippines and Malaysia are about 30 kg). In recent years, efforts have been made to improve production through the establishment of State Fisheries Enterprises and of joint ventures with foreign capital. The joint ventures process and export their catch, primarily shrimp, and now operate 70 fishing vessels (Table 1-4). In addition, marine fisheries development is encouraged through the introduction of modern fisheries gear, tax incentives, and through increased training facilities and extension services. Private domestic enterprises, most of which operate shrimp trawlers, are also encouraged. 8. Present marine fishing operations are confined mostly to shallow, protected waters a short distance from the coast, which is the only area accessible to small traditional fishing vessels. The traditional methods of coastal fisheries are inefficient, resulting in low levels of production per unit of effort. A great variety of fishing gear, including hook and line, numerous types of fishing traps, lift nets, gill nets, and seines, are used. Synthetic fibre netting is now commonly employed for all types of nets. Lamps are often used to concentrate the fish before they are caught in traps or nets. In addition to traditional fishing gear, otter trawlers are used by a number of small motorized trawlers operating in inshore areas. 9. Total marine fish production in recent years has increased slowly. Production rose from an estimated 785,000 tons in 1969 to 839,000 tons in 1972, an average annual increase of about 2%. The fishermen in Java caught less over the period. This is because the coastal waters, particularly the five-mile zone along the north coast of Java, has over the years been overfished by sail boats using traditional gear and fishing methods (para 8), though the Java sea beyond the reach of these boats provides rich fishing grounds (para 3), especially for trawling, due to its relatively flat bottom and shallow waters. As a result, private entrepreneurs have begun to invest in trawlers in recent years. The Government has likewise been promoting the use of trawlers by its State Fisheries Enterprises and fisheries cooperatives. Although catches off the Java coast are reported to be satisfactory, the little exploited waters off South Kalimantan offer potentially larger catches.

49 ANNEX 1 Page Decreased production on Java is particularly serious, since Java represents about two-thirds of the country's population and one-third of its total fish consumption. To contribute towards improved production, tnerefore, twenty-five 30 GT trawlers would be provided under the project, to be based in the ports of North Java and to fish in the relatively unexploited waters off South Kalimantan. In addition, provision would be made under the project to exploit the abundant resources of skipjack tuna for export (para 4). This would involve development of a small skip- Jack tuna industry in Ambon, including provision of twenty 30 GT skipjack tuna fishing vessels and two 100 GT carrier vessels, and construction of onshore supporting facilities, including icemaking, freezer and storage units. April 24, 1974

50

51 ANNEX 1 Table 1-1 INDONESIA FISHERIES CREDIT PROJECT Numb- Or Marine Fishinp, Vessels Registered in Indonesia (1971) 1" Sailing Boats Motorized Vessels Fishermen 3- U1n~ t.~ rh 4L ;602 4, ,344 41, ,763 Kr,7' In rnt.qn 18,021. 1,163 40,826 's IS<] ~ 1-?w as 104, ,459 N -s Ten9rara Isl3ands 26, ,004 Malulni And West Trian 4 1 8, ,365 Total 280,927 6, ,761 /I Prtliminary data. Sour-'e Dire.ct.orate General of Fisheries.

52 ANNEX 1 Table 1-2 INWNETA FISHERIES CEIT PROJECT Landin-gs Of Sea Fisheries (Thousands Tons) / 191/ Siuna.trR Java Kalima,ntan Sulawesi X9.0 Nuisa Tenggrn.a Islands ) ? 32.1 ManIliku and Weest Trian 2R Total it==d ==in =s 2 - == =' _ in P^1 itt >)rmv data. So3ir-?: Di reo'torat< Gen-eral of 7Psheries

53 ANNEX 1 Table 1-3 INDONESIA FISHERIES CREDIT PROJECT Sea Fisheries Landings By Fishing Vessels From Java Island And Total Landings For Indonesia Island of Java All Indonesia Total Number Number Total of Landings Of Landings Year Vessels (000 tons) Vessels (000 tons) , , , , jOoo , t,0o , ;/ 43, , / 43, , Source: Directorate General ot' Fisheries. 1/ Preliminary data.

54 ANNEX 1 Table 1-4 INDONESIA FISHERIES CREDIT PROJECT Foreign Capital And Joint Venture EntqrPrises For Shrimp Fishing And Processing Number of Name Fishing Area Vessels Production Ex-ports (and base) (19 n )/Z (1971) -( _ i,ons P.T. Tofico Z West Kalimantan West Irian IC P.T. Misaja Mitra East and South Kalimantan P.T. West Irian Fishing Industries West Irian (Sorong) A 1,009 1,009 P.T. Irian Marine Product Development West Irian (Sorong) ll P.T. Nusantara West Irian (Ambon) P.T. Mina Kertika West Irian (Ambon) l Capital of this company is 100% Japanese; other enterprises are Japanese-Indonesian joint ventures, 12 Vessels are in the 90(T to 30(rrT range, except for those of Misaja Mitra which has (1971) 22 vassels of 2OGT, 9 vessels of 6OGT and one vessel 4OOGT. Son'"- DI "+,ate Gn-nera. of' Fiqshertes.

55 ANNEX 2 Page 1 INDONESIA FISHERIES CREDIT PROJECT Brackish Water Ponds 1. Brackish water pond culture of milkfish and shrimp represents the principal type of fish culture in Indonesia.1/ Milkfish or Chanos chanos are found in the warm (20-33C) coastal waters of the Red Sea and the Indian and Pacific Oceans. Despite its wide distribution, milkfish are cultured on a large scale only in Indonesia, the Philippines and Taiwan. Small scale culture occurs in a few other Asian countries because of limited availability of milkfish fry and the impossibility of spawning the species in captivity. Fully grown milkfish in its natural habitat reach weights of up to 20 kg, though cultivated specimens are much smaller. 2. Penaeid shrimp are found throughout much of the tropical world. Although adaptable to a wide range of water temperatures, they are most suited to C. Penaeid shrimp generally breed at sea and subsequently drift or swim into shallow coastal waters or estuaries, where they remain for some time before returning to deeper waters. White shrimp (several Penaeid species) and tiger shrimp (Penaeus monodon) are the two varieties of marine shrimp most commonly found in Indonesia. Their life span is about one year, during which they can be expected to grow to a maximum of about 40 and 70 grams respectively, when confined to a pond and not allowed to return to sea. 3. There are about 184,000 ha of brackish water ponds in Indonesia, the bulk of which are located along the north coast of Java and south coast of Sulawesi. This is because these two regions have extensive estuarine swamp areas suitable for pond development, greater abundance of milkfish fry, and proximity to large population concentrations which provide market outlets for the milkfish. Of the total. pond area, East Java accounts for 34%, Central Java 14%, West Java 16%, and South Sulawesi 21% (Table 2-1). Most ponds are within 1 to 3 km of the sea, except in East Java where they may be up to 20 km. Ponds vary in size from less than 1 ha up to 7 ha with the average ranging from about 1 ha in Central and West Java to 4-5 ha in East Java and Sulawesi. Most are operator-owned. These ponds do not have a more productive alternative use. 4. Brackish water culture in Indonesia has a long tradition. It was initiated at least 600 years ago as a mangrove swamp fishery using traps. Gradually, the mangrove was removed, dykes were constructed, ponds built, 1/ Brackish water ponds account for about 85% of the total pond area, with fresh water ponds the remaining 15%.

56 ANNEX 2 Page 2 and finally, the custom prevailed of stocking the ponds with milkfish fry caught at sea. Individual ponds were built simply by bunding the perimeter and levelling the bottom. Technical development has not advanced much beyond this stage. Present Fish Culture 5. Though there are some minor differences in the technique employed in milkfish culture among the major producing areas on Java and Sulawesi, the following general cultural practices prevail. A pond area is usually divided by secondary dykes into a nursery pond and one or more rearing ponds. The first step in preparing for fry stocking is to drain the nursery pond and allow it to dry for about a week. The dry bottom soil is then loosened and levelled by raking and tilling following which the pond is filled with water to allow a growth of blue green algae to develop on the bottom of the pond. Fry, which the pond operator usually buys from a fry dealer, are then introduced into the nursery pond. The fry would remain in the pond between days feeding on the bottom algae and growing to fingerling size of 5-7 cm long, at which time they would be transferred to rearing ponds. Preparation of the rearing ponds is similar to that for the nursery ponds. The fingerlings would in turn remain in the rearing ponds for days feeding on the bottom algae and plankton and attaining a size of grams when they would be harvested and sold in a nearby market, usually by the pond operator himself. The cycle then repeats itself. 6. Some fry may be captured in ponds near the coast by merely opening the sluice gates on the incoming tide, but this is not an adequate means of obtaining stock for culture. Most pond operators therefore purchase fry from dealers. The main fry collecting areas are the north shore of Java and along the coast of South Sulawesi. Abundant fry are caught by fishermen in these areas and sold to fry dealers who in turn sell to pond operators. Fry supplies are readily available and can easily be increased when needed. 7. All brackish water shrimp cultivation takes place in milkfish ponds which are generally within 1 km of the coast where water salinity is sufficient for Panaeid shrimp requirements. Shrimp fry are generally not intentionally introduced into the ponds by the pond operators but enter the ponds with the inflow of water from the sea, though there are some pond operators, mainly in South Sulawesi, who do stock their ponds with shrimp fry caught at sea. For post pond operators, the production of shrimp is in effect a byproduct of milkfish culture. In addition, other fish such as mullet and tilapia, and crabs are also brought into the ponds by the inflow of water, and they are harvested as byproducts of milkfish production. Panaeid shrimp are carnivorous, feeding on dead snails, crabs and insects off the pond bottom, and therefore co-exists with milkfish in the same pond. 8. Because milkfish is primarily a bottom algae feeder and, to a lesser extent, a plankton feeder, promoting and maintaining maximum growth

57 ANNEX 2 Page 3 of this algae is essential. This has to be done by applying to the pond bottom fertilizers and organic manure to provide adequate nutrients required by the algae, and pesticides to eliminate algae pests and predators (worms and snails) which compete with milkfish for food. Algae and milkfish growth are affected by water conditions in the pond such as salinity levels, water depth, and temperature. These conditions are in turn determined by proper pond construction, including dykes, canals, and sluice gates, which regulate the flow of water in and out of the ponds. Sunlight is required for algae growth and the penetration of sunlight to the pond bottom would be determined by the depth and clarity of the water. Another important factor affecting the output of milkfish and the time required to reach marketable size would be the extent by which stocking management would be able to prevent over-grazing of the available natural food either through fish population control or supplemental feeding. 9. The majority of Indonesian pond operators do not use fertilizers, including organic manure, and pesticides. Where organic manure is applied, many use green manure of leaves and grass which are poor in nutrients required by the algae. Moreover, many pond areas have very little control if any, over water conditions, especially salinity levels and water depths, because of poor pond construction, low dykes, narrow and shallow canals, and incorrect positioning of the sluice gates, which do not permit effective regulation of the flow of water in and out of the ponds. In many instances, the number of these various water controlling devices are also inadequate. Furthermore, fish stocking management for an effective use of the available feed is virtually absent. In view of the above, pond yields are low, averaging about 330 kg per ha annually, with milkfish accounting for less than half (40-50%) the output. Crabs, shrimp, mullet, tilapia and other fish, not usually intentionally introduced into the ponds, account for the remaining output. The disproportionately small share of milkfish is indicative of the low level of technology applied to the culture of this fish. Another indication is that the majority of pond operators are able to produce only a single harvest of milkfish a year. Table 2-2 shows the total area, production, yields and average size of ponds in the two main producing areas of Java and South Sulawesi. Improved Fish Culture 10. Though most Indonesian pond operators practice a low level of milkfish culture, some of them have in recent years begun to adopt improved cultural practices. Some control of water conditions in ponds have been achieved through simple improvements, such as the raising of secondary dykes and ditches, deepening of pond bottoms and canals, and additional sluice gates. With some degree of water regulation and use of small amounts of fertilizers (about kg per ha) and in some instances pesticides, these operators have been getting substantially higher yields as well as two harvests a year. In some instances, instead of just nursery and rearing ponds, transition ponds have been built, in which fingerlings from nursery ponds are introduced to be better cared for before they are transferred to

58 ANNEX 2 Page 4 rearing ponds. Most operators adopting these simple improvements are harvesting between kg of milkfish and kg of small shrimp per ha per year, as well as some crabs, mullet, tilapia and other fish. The milkeish yield would be about four fold larger than the average for all Indonesian ponds (para 9). The estimated cost of these improvements: excavation of canals, ditches and pond bottoms, raising of secondary dykes (including additional ones for transition ponds), and additional sluice gates would vary up to about Rp 100,000 per ha depending on the condition of the pond area to be improved, though for most, an average of about Rp 60,000 would be sufficient. 11. For ponds near the coast with higher salinity levels, increased emphasis is being given to shrimp production in addition to the culture of milkfish. Shrimp thrive better in such ponds than in those away from the coast with lower salinity levels. The emphasis on shrimp production, especially of larger (exportable) size, has been increasing in recent years as a result of strong export demand and high prices offered for this commodity. Milkfish as well as shrimp fry which are readily available, are purchased from fry dealers for stocking in the ponds. Shrimp fry are also purchased by pond operators since such fry brought into ponds by the inflow of sea water would neither be adequate nor satisfactory for the purpose of stocking. Pond preparation and the various stages of rearing for milkfish which have been described earlier, also applies to ponds which emphasis both milkfish and shrimp production, except for the following: (a) Prior to their introduction into common transition and rearing ponds, milkfish and shrimp fry are put in separate nursery ponds to prevent possible predation of milkfish fry by the shrimp fry. Predation would be very unlikely once the milkfish fry attains fingerly size; and (b) compared to milkfish, shrimp requires better water conditions as well as water of higher salinity. This means more effective water control for ponds culturing both milkfish and shrimp production than for those which culture only milkfish. Most pond operators culturing both milkfish and shrimp production and who have carried out simple improvements similar to those described earlier (para 10), have together with the use of fertilizers, organic manure and pesticides, been getting about 300 kg of milkfish and between kg of shrimp per ha annually compared with about 150 kg of milkfish and kg of shrimp before the improvements were made. The cost of the improvements has been estimated at about Rp 100,000 per ha. 12. Ponds with such technical improvements are few and concentrated in areas close to the main urban centers on South Sulawesi and Java. Though increasing, the spread in their number has been slow. This is because many pond operators, especially those in remote areas, are not aware that substantial increases in yields can be obtained through simple improvements, such as better water control to obtain improved pond water conditions, and use of fertilizers and pesticides. Shortage of credit is another important factor mitigating against the rapid spread of pond improvement.

59 ANNEX 2 Page 5 The ProJect 13. The proposed project would accelerate the spread of improved practices by providing credit to pond operators to improve their ponds, and to purchase fry, fertilizers and pesticides for the first harvest. Details on the various investment items are given in Annex 5. The cost of the improvements would on average be Rp 60,000-Rp 62,000 per ha for milkfish ponds, and Rp 100,000-Rp 125,000 per ha for milkfish and shrimp ponds. About 15,000 ha of ponds in South Sulawesi and Java would be improved under the project, of which 7,000 ha would be the former type and 8,000 ha of the latter. The projected distribution of the two types of ponds among provinces and districts, the phasing of their development over a 5-year period, and the average pond size and number of pond operators involved, are given in Annex 3, Tables 3-1 and 3-2. The project area would be restricted to Java and South Sulawesi because these two areas have a regional comparative advantage for brackish water pond culture. Ponds producing both shrimp and milkfish would be in coastal areas with sufficient salinity levels for successful shrimp production. Pond development for milkfish alone would be carried out further inland. Project size has been determined by the availability of suitable pond area, pond operator demand for such improvements, and with full account taken of the limited capacity of the fisheries extension service and of Bank Rakjat Indonesia's (BRI) limited experience in fish pond lending 14. Successful implementation of the project requires strengthening of the fisheries extension service (para 16) and establishment of 45 one to five-ha demonstration ponds to demonstrate to pond operators the techniques for improved production and their benefits. The proposed numbers and location of the demonstration ponds among the different provinces in the project area as well as the phasing of their development are given in Annex 3, Table 3-3. Investment cost for each pond, a typical layout of which is given in Annex 3, Chart 7864, would be about Rp 2 million. A breakdown of the cost of the individual investment items is given in Annex 5. The ponds would be developed among those owned by the Government or individuals. There would be no difficulty in arranging with individual owners to use their ponds for demonstration purposes. 15. Under the project, the Directorate General of Fisheries (DGF) would provide the demonstration ponds and strengthen its fisheries extension service. To assist in this task, DGF would need the services of three pond fisheries experts for a period of two years. The experts would develop the demonstration ponds, train the required local fisheries extension officers who would help pond operators carry out their pond improvements. Terms of reference, qualifications and experience required of the experts are given in Annex In Sulawesi and Java, where the project ponds would be located, the number assigned by DGF to inland fisheries extension work represents one extension officer for about 680 ha of ponds and is inadequate. An

60 ANNEX 2 Page 6 appropriate coverage would be about 300 ha. There are at present 17 extension officers in the project pond areas. Ninety-five would be needed for appropriate coverage, one to develop and supervise each of the 45 demonstration ponds and one to provide extension and loan appraisal services to about 300 ha of ponds. The proposed number of extension officers and their allocation among the different provinces over the project period are giien in Annex 3, Table 3-4. All extension officers would be required to hold the equivalent of a diploma from a senior inland fisheries high school. The appraisal of loan applications for pond improvements would be carried out by the extension officer concerned, who would prepare a plan for each pond indicating the improvements needed, their phasing and costs, and expected financial returns. BRI would sanction loans on the basis of such plans submitted by the extension officers and would disburse the loan in appropriate installments. It would ensure that a second or subsequent installment was not disbursed without certification from the extension officer concerned that the previous installment had been fully used according to the plan. Because successful implementation of fish pond improvement depends on the provision of the experts, trained extension officers and demonstration ponds, DGF would undertake that the experts would be appointed and in position as soon as possible, and the extension officers and ponds made available at least for the duration of the project. The qualifications and experiences, as well as terms and conditions of employment of the experts, would be approved by IDA. In cooperation with the center for brackish water culture research and development (para 19-20), the experts would prepare and implement a suitable program, satisfactory to IDA, for the training of project extension officers at the center. Each extension officer would also be trained in the region and under conditions in which he would be working, primarily through on-site experience with the demonstration ponds. Both the establishment of the demonstration ponds and the availability of trained officers would precede the scheduled pond improvements. Assurances were obtained that DGF would comply with the above conditions. 17. The project would provide credit to fisheries cooperatives and private entrepreneurs for the purchase of nine small ice plants which would supply ice to preserve the quality of project fish and shrimp enroute to market. Project fish ponds are widely scattered. Several small ice plants to be located in production areas where ice is not available, would be preferable to a single large plant, because of the lack of suitable facilities to transport ice over long distances. The siting of the ice plants would be determined by DGF on the advice of the pond fisheries experts (para 15). Each of the small ice plants, costing about Rp 18.5 million (US$45,000), would have a capacity of 5 tons of block ice per day, storage space for 15 tons of ice, and equipped with a generator set. Small plants of this capacity are already operating successfully in Java. Before project loans for the ice plants could be given to fisheries cooperatives, DGF would appraise their management capability. Where this capability is deficient, DGF would require that a trained manager be posted to run the cooperatives (as it has done for many fisheries cooperatives), and that trained technical staff be made available to operate the ice plant effectively.

61 ANNEX 2 Page 7 Advance Fish Culture 18. In Taiwan, intensive production with annual yields of up to 2,500 kg of milkfish per ha have been achieved, through excellent water control and the adoption of adequate modern inputs (including fertilizers, pesticides and supplementary feeds), as well as advanced production and management practices. To obtain excellent water control would in most instances require the use of large canals, gates and high dykes involving mechanized equipment and heavy construction expenditures. In contrast, Indonesian pond culture practices are traditional and of low productivity. To try and raise the yields within a few years to the high levels prevailing in Taiwan would be unrealistic, because this requi.res a capital intensive technology and a management competence which the Indonesian pond operators (particularly small operators) cannot be expected to acquire rapidly. In view of this, the project aims at financing pond improvements at an intermediary level of technology suitable for dissemination to small operators, as an initial step in the long range development of more intensive pond culture in Indonesia. With this long range development in mind, the project demonstration ponds would demonstrate improvements envisaged under the project, as well as more advanced pond culture practices for intensification of milkfish and shrimp production based on the future findings of DGF's center for brackish water fish culture research, currently being developed with UNDP support at Jepara, Central Java. Research 19. The objective of the Jepara center for brackish water pond culture is to expand and increase the efficiency of pond culture of milkfish and shrimp on a national scale, through research on improved cultural techniques, and field testing and extension of the improved techniques among pond operators. The long range research and development work program of the center would include: (a) Introduction of improved methods of milkfish culture, adapting them as necessary to local conditions, and development of new techniques for increasing the efficiency of operations. (b) Undertake in the vicinity of Jepara, demonstration of successful techniques of milkfish culture, and training of field personnel, including extension workers, in the application of such techniques. (c) Development of suitable methods of intensive and semi-intensive culture of shrimp under local conditions, including the mass rearing of shrimp larvae.

62 ANNEX 2 Page 8 (d) Undertake surveys and studies to determine distribution, and improve collection, handling, and transport of milkfish and shrimp fry. (e) Investigations on the effects and extent of pollution, and of pesticides and herbicides, on shrimp and milkfish culture, and to evolve suitable measures for controlling any adverse effects. 20. Since improved techniques and other research findings of the center will of necessity have to be tested under various environmental conditions, project demonstration ponds would play a useful role by 4Mplementing the improved techniques for both the purpose of field testing and demonstration to pond operators. The center would also be able to assist in the training of the extension officers required by the project (para 16). November 16, 1973

63 ANNEX 2 Table 2-1 INDONESIA FISHERIES CREDIT PROJECT Area of Brackish Water Ponds By Principal Producing Areas, 1971 Province ha Area East Java 63, West Java 28s Central Java 25, South Sulawesi 37, Others (rest of Indonesia) 28, Total 183, Source: DGF

64 ANNEX 2 Table 2-2 INDONESIA FISHERIES CREDIT PROJECT Area, Average Size and Production of Fish Ponds in the Principal Producing Areas, 1971 South East Central West Sulawesi Java Java Java Total Area (ha) 37,697 63,229 25,771 28,935 Total Production (tons) 15,100 16,200 9,900 10,900 Of Which: Milkfish 6,0oo 8,100 3,000 4,400 Shrimp 650 3,000 1,300 1,000 Average Total Production Per Ha (kg) Average Size of Fishpond Farm (ha) Milkfish Cropping Intensity 30% of the 4o% of the 20% of the 30% of the area cropp- area cropp- area cropp- area cropping twice a ing.twice a ing twice a ing twice year year year a year Annual Milkfish Fry Catch (million) Milkfish Production Phasing: (days) Nursery ponds ho Rearing ponds

65 ANNEX 3 Page 1 INDONESIA FISHERIES CREDIT PROJECT Major Project Components and their Specifications Ambon Subproject 1. Indonesian waters have been known, since before World War II, for their abundant resources of tuna,. The yellowfin tuna, Thunnus Albacares, has been in high demand and has long been exploited by Japanese longliners. Demand and price of this species have been rising continuously, while catch per unit of effort has diminished. Skipjack tuna, Euthynnus Pelamis, a species of smaller size and darker meat - is found in great abundance in the Ceram, Banda and Maluku seas (Annex 1, para 4). It has recently been subject to increasing international demand, as the yellowfin tuna resources are overexploited and increasingly contaminated by mercury. Wider consumer acceptance of the skipjack's darker meat and its increasing use for mixing with the lighter meat of other tuna has added to the demand. The price of skipjack has accordingly been on an upward trend. The exvessel price in Japan during the first 3 months of 1974 at about US$530 per ton, is about double that in In view of this, the Government of Indonesia has decided to exploit its skipjack tuna resources more fully, and essentially for export. The proposed project would greatly assist in this effort. 2. Under the project, it is proposed to develop skipjack tuna fishing based on Ambon island, through the provision of twenty 30 GT pole and line fishing boats; two 100 GT carrier vessels for transporting ice and fuel to the fishing boats and bringing the catch back to Ambon; on-shore supporting facilities, including icesaking, freezer, and storage units, 2 small jetties for provisioning the fishing boats, a jetty for loading and unloading the carrier vessels and loading a freezer vessel with frozen skipjack for export, and repair facilities and slipway for the carrier vessels and fishing boats; about 54 lift or beach seine nets for bait fishing; and technical assistance. About half of the fishing boats and nets, the two carrier vessels and on-shore supporting facilities would be owned and operated by the State Fisheries Enterprise at Ambon (PNM), a suitable entity to implement the subproject. Surrounded by the Ceram, Banda, and Maluku seas, and with fishermen many of whom have for many years been engaged in catching skipjack for the local market, Ambon would be a suitable location for the proposed project. An FAO study (test fishing) of bait fish resources for skipjack fishing in Ambon waters carried out during January 1971 to March 1972, concluded that there would be sufficient bait to sustain at least an additional 20 fishing boats of the type envisaged under the project (para 3), which in turn would determine the size of the supporting facilities.

66 ANNEX 3 Page 2 3. The 20 skipjack fishing boats which would be of the 3OGT class powered by a 150 hp diesel engine, and with an overall length of about 18 m and a depth of approximately 2 m, would be designed for pole and line fishing using live bait. They would be provided with insulated fish holds capable of storing up to 5 tons of skipjack (Chart 8044). Each boat would carry a crew of 30. These type boats have been operating successfully in Japan, Caroline Islands, and Indonesia, and are familiar to Indonesian fishermen engaged in skipjack fishing. They are also of a desirable minimum size to enable fishing to be carried out during the monsoon period in Ambon waters where smaller craft would not be able to operate. Instead of project fishing boats journeying to Ambon to unload skipjack catch and to load ice, fuel, and other supplies for the return trip to the fishing grounds, it would be more efficient and profitable to use carrier vessels to perform these functions and to allow fishing vessels maximum time in their fishiirg operations. Two 100 GT carrier vessels to be provided by the project would be suitable for this purpose. Powered by a 240 hp diesel engine, the carrier vessel would have an overall length of about 25 m and a depth of approximately 3 m, with insulated fish holds capable of storing up to 15 tons of skipjack preserved in 15 tons of ice in about 20 tons of sea water (Chart 7843). Each vessel would be manned by a crew of 7. Investment costs including incremental working capital are estimated at about Rp 24 million (US$57,800) per fishing boat and Rp 67.4 million (US$162,400) per carrier vessel. All vessels would have wooden hulls, as wood is cheap and readily available locally. Skippers and other crew for the fishing and carrier vessels would be available at Ambon. 4. The icemaking, freezer, and cold storage complex would include cold storage rooms for 500 tons of frozen skipjack maintained at -25*C, brine tanks with a capacity of freezing 25 tons of skipjack a day to -25 C; an ice plant capable of producing 50 tons of ice daily with adequate ice storage facilities, offices and store room, as well as three generator sets of some 1250 KVA, including 33% standby capacity to provide the necessary power (Chart 7841). This size complex would be sufficient for project needs. Total investment cost for the complex is estimated at approximately Rp 691 million (US$1.665 million). The complex would be located on a site adjacent to PNM's present location. This site would be suitable for the complex as it has ample level ground, good water depth within a short distance off the shore, and a plentiful supply of fresh water. The main jetty would be constructed on the same site, using local contractors and local hardwoods, and would be about 60 m long and 6 m wide. The outer face would be used as a berth for all vessels and the inner face could be used by the carrier vessels when the outer berth is occupied by the freezer vessel, so that normal operations would not be interrupted. The main skipjack fishing grounds would be in waters off the fishing villages of Hitu and Waai where food and drinking water would be available. Small jetties, approximately 3 m wide and long enough to allow a minimum water depth of 3 m, would be constructed in the fishing villages to facilitate access to food, drinking water and bait supplies by the skipjack fishing boats. Costs of the jetties are estimated to be Rp 41.5 million (US$100,000) at the proposed cold store complex site and Rp million (US$30,000) each at Hitu and Waai.

67 ANNEX 3 Page 3 5. Other investments under the skipjack fishing subproject include construction of a new slipway and enlargement of the present workshop facilities to be located at the present PNM site, and estimated to cost Rp 41.7 million (US$100,000). These facilities would be required to service project vessels. In addition, credit would be provided for the purchase of about 54 lift or beach seine nets by PNM, fishermen and fisheries cooperatives to catch sufficient bait fish for the skipjack fishing operations of the project. The cost of each net would be about Rp 500,000 (US$1,200). 6. Each of the 20 skipjack boats - about 10 to be owned by PNM and the remainder by the fisheries cooperatives - would be fishing approximately 250 days per year and catching an average 1.3 tons per day for an annual total of 325 tons. Average fishing activity would be 21 days per month and would account for the 5 days of full moon when bait is unavailable and for other contingencies. Due to various contingencies, it would also be expected that only 16 of the 20 boats would be operating at any one time. With a catch averaging 1.3 tons per fishing day for each boat, the 16 boats would accordingly land about 21 tons daily (para 7). Each boat would require 300 liters of diesel fuel and 1.3 tons of ice each day. The jetties at Hitu and Waai would be used to take on food, water, crew and bait. 7. The two carrier vessels would simultaneously service the 20 fishing boats. The trip from the port of Ambon to the fishing grounds off Hitu and Waai would be approximately 5 hours. Each vessel would leave Ambon Bay in the early morning with approximately 4,800 liters of diesel fuel, 48 liters of lubricating oil, and 22 tons of ice and would return the same evening with about 10 tons of skipjack tuna. The two carrier vessels would have fish holds capable of storing up to 30 tons of skipjack (para 3). The skipjack upon arrival at the jetty at Ambon (Halong), would be transported by trolley to the freezing and cold storage complex, where it would be frozen in a brine solution for 12 hours and then preserved in cold store rooms. The carrier vessels and all on-shore facilities would be owned and operated by PNM. The 500 ton capacity of the cold storage rooms could accommodate approximately 1 month's catch. This would include the catch of the cooperatives, which would be purchased by PNM according to the terms of a negotiated contract. PNM would also arrange for a purchasing contract with one of the several foreign companies involved in Indonesia fisheries. A purchasing contract could easily be obtained. Negotiated prices would be geared to world market prices. PNM could alternatively arrange to have the catch shipped through chartered freezer vessels to consuming countries to be sold through appointed selling or commission agents. 8. The 54 lift or beach seine nets to be provided under the project would be used to net daily approximately 2 tons of bait fish required to catch the daily landings of some 20 tons of skipjack. The nets would be owned by PNM and by groups of fishermen who would operate in the areas of Ambon Bay, Hitu, and Waai where bait is available. These fishermen would be grouped into cooperatives wherever practical. About 20 fishermen would operate each net during 25 days of the month, and would catch approximately 40 kg per day for a total of 1 ton' per month. They would be paid 100 Rp/kg

68 ANNEX 3 Page 4 (current price) by PNM and skipjack fisheries cooperatives for their bait fish. 9. The new slipway and expanded workshop, under the ownership and operation of PNM, would be used for needed repair and maintenance of vessels (see Chart 7839). All project vessels would require 2-3 days maintenance every 6 months when vessel bottoms would be scraped and their engines overhauled. The new slipway and existing one would be provided with an electric uphauling winch, and the workshop with the necessary carpentry and machine tools. The project vessels of the cooperatives would be assessed a service charge for use of these facilities. 10. PNM would, under the proposed project, invest in and subsequently operate about 10 skipjack tuna boats and 27 lift or beach seine nets, 2 carrier vessels and all proposed onshore facilities, including ice making, freezing and storage units, slipways, workshop, offices and jetties. Moreover, it would assume responsibility for the processing, preservation and export of skipjack caught by both its own vessels and those of the cooperatives. It would commit itself to purchase all skipjack caught by the project vessels for sale to export markets. Four experts would be required to assist PNM to undertake these new responsibilities and substantially expanded operations. The type of experts and their periods of employment are given in Annexes 4 and The project would provide credit for about ten fishing boats and 27 lift or beach seine nets to fishermen and existing fisheries cooperatives. As many as 7 cooperatives would be involved, and most of them are already engaged in skipjack fishing. Trawler Subproject 12. The Java Sea provides rich trawling grounds. Its bottom is relatively flat (continental shelf) and its waters are shallow. However, fish resources of parts of the Java Sea have been subject to overexploitation. In particular, the five-mile zone along the north coast of Java has over the years been overfished by sail boats using traditional methods. As a result, private entrepreneurs during recent years have begun to invest in trawlers to exploit the fish resources beyond the reach of the sail boats. Although catches are reported to be satisfactory, the little exploited waters off South Kalimantan offer potentially larger catches. Both areas contain mainly demersal fish, including pomfret, croaker, red snapper, sole and shrimp. However, the size of catch, as well as the percentage of shrimp in each catch, are said to be higher in the waters off South Kalimantan. For these reasons, the trawlers to be provided under the project would be expected to fish primarily these waters. 13. The estimated 150 trawlers presently operating in the Java Sea would be exploiting only a small proportion of the potential catch. There is consequently a growing demand for such vessels. The project would finance 25 trawlers. Available evidence suggests that they would easily be taken up by potential borrowers (private entrepreneurs and fisheries cooperatives). The trawlers of the 30 GT class with wooden hulls would be

69 ANNEX 3 Page 5 powered by 120 hp diesel engines (see Chart 7842). They would be about 19 m long and 2 m deep and would be provided with insulated fish holds capable of accommodating about 6 tons of fish and shrimp, a pair of side roller winches, and a radio set for communication. This type of vessel is presently operating successfully in the Java Sea. Each would carry a crew of ten. Trained crew for the trawlers would be available locally. For each trawler, the investment cost including incremental working capital is estimated at about Rp 23 million (US$55,200) Estimated annual catch of the 25 trawlers is 5,250 tons or 210 tons per trawler. The trawlers would be based in the principal ports of the North Java coast - Surabaya, Jakarta, Probolinggo, Semarang, Tuban, Sidoardjo, Tegal, Cirebon, or Pekalongan, where water depth is sufficient, adequate markets exist and facilities for processing shrimp are available. The trawlers would undertake trips of about three days to the waters off South Kalimantan. About 12 hours would be required for travel to and from the area, and the remaining two days would be spent to catch an estimated average of three tons. Each vessel would make approximately 70 trips per year. Fish Ponds Subproject 15. Under the project, it is proposed to finance simple improvements on 15,000 ha of milkfish and shrimp ponds on Java and Sulawesi, and establishment of demonstration ponds and small ice plants. The project would also provide technical assistance to help pond operators carry out their pond improvements, develop demonstration ponds and train local fisheries extension officers. Details of the project are given in Annex 2. Tables 3-1 and 3-2 show the projected distribution of project ponds among the provinces and districts, the phasing of their development, and the average pond size and number of operators involved. The proposed numbers and location of the demonstration ponds among the different regions as well as the phasing of their development are given in Table 3-3. Table 3-4 shows the number of extension officers required under the project and their allocation among the different provinces over the project period. A typical layout of a demonstration pond is illustrated in Chart April 24, 1974

70

71 ANNEX 3 Table 3-1 INDONESIA FISTERIES CEFDITT PROJECT Proposed Project Areas (ha) Provinep Shrim Pond Fish Pond Total South Sulawesi (mainly in Penghap and Yavos Pistricts) 1,000 2,000 3,000 East Java (main] JSidoarjo and Surabaja Districts) 2,500 2,500 5,000 Central Java (mainly Pati, KXnda I, Pemalang, and Brebes Districts) 3,000 1,500 4,500 West. Java (mainly Cirebon District) 1,500 1,000 2,500 Total 8 7,000 15,000

72 INDOBNP IA FISHERIES CREDIT PROJECT Area To Be Improved in 5 Years (ha) Year Ave. Size Nc. of TOTAL (ha) Farmers S. Sulawesi 4oo 1,000 1, , East Java 800 1,600 1,600 1,,000 5, ,250 Central Java 500 1,000 1,000 1,000 1,000 4, ,500 West Java , ,500 TOTAL 2,200 4,100 4,100 3,100 1,500 15,000 8,850 'D 5.

73 ANNEX 3 Table 3-3 INDONESIA FISJFRIES CMEbIT PROJECT Pemonstration Ponds to be Constructed in 5 years h 5 TOTAL S. FIu}hwesi Pst Javw %pn+.ral Java? i5 West Java? TOTAL Total Construction Cost* htu (Ts- '00 r) * US. %,OOO ver Dond.

74 INDONESIA FISHERIES CREDIT PPOJECT Required Demonstration Pond Supervisors and Extensi.on Workers Year h 5 Total Required Demonstration Pond Supervisors S. Sulawesi JO E. Java C. Java C W. Java TOTAL 9 Th 15 7 c Required Extension Workers S. Sulawesi _ 10 E. Java C. Java W. Java TOTAL _ 5 ALL TOTAL Existing Extension Workers 17 Additional Extension Workers Required 78

75 Annex 3 INDONESIA FISHERIES CREDIT PROJECT EXAMPLE OF ACCEPTABLE DESIGN FOR 30 G.T. WOODEN SKIPJACK LIVE BAIT POLE AND LINE FISHING VESSEL PRINCIPAL PARTICULARS LENGTH BREADTH DEPTH GROSS TONNAGE (ABT) MAIN ENGINE M 3.90 M 1.80 M 30.0 Tons 150 H.P. SERVICE SPEED 8.5 Knots FISH HOLD CAPACITY M 3 FUEL OIL TANK 2.81 M 3 FRESH WATER TANK 1.44 M 3 COMPLEMENT 30 Persons SCALE 1/70 World Bank-8044

76

77 INDONESIA FISHERIES CREDIT PROJECT EXAMPLE OF ACCEPTABLE DESIGN FOR 100 G.T. WOODEN SKIPJACK CARRIER 4nnemx 3 PRINCIPAL PARTICULARS LENGTH M BREADTH 5.10 M DEPTH 2.60 M GROSS TONNAGE (ABT) Tons MAIN ENGINE 240 H.P. SERVICE SPEED 8.0 Knots FISH HOLD CAPACITY 85.0 M 3 FUEL OIL TANK 13.6 M 3 FRESH WATER TANK 1.8 M3 COMPLEMENT 7 Persons SCALE 1/200 A CREWS SPACE B ENGINE ROOM C = FISH HOLD World Bank

78

79 INDONESIA FISHERIES CREDIT PROJECT AMBON COLD STORE AND ICE PLANT POSSIBLE FUTURE EXTENSION i I I l ~ ~ ~ ~~~~~~~ ~ I~ ~ ~ ~ ~ ~ ~~( FHEEzING STOREz FISH. * COLD u TAEZNKS *E- No. 2 ECONDENSERS, O ICE TAN KS, ETC. O MAKING OFFICES, /~~~~~I. i LN s_ *$~~' 1 I WOR KSHOPS, CO LD \ v > ~~~~~~~~No. 3 TANLKL * C,z. ~~~~~G EN ERATORS OFFICE ICE SCALES ' STORE DAILY STOS. STORE ICE LOADING TAK * IWorld Bank-7841

80

81 Anmt 3 INDONESIA FISHERIES CREDIT PROJECT IMPROVEMENTS TO P.N SHIP REPAIR FACILITIES AT AMBON (GALALAM EXITIN C/ STO BE REBUILT REPAIR SHOP//, / / / } / ~~~AS 9 < / / / \ ~~~~~~~~~~~~~ M NEW ELECTRIC / I I I I i WINCH / I / DERELICT \ \ / / / OFIC /~~EXSTIG l <EEAND GEERLSTR ~~~EXISTING METAL SHOP EXliING SW MLL IYCIKDnCEr EXISTING COLE) STORE AND GENERAL STORE AMBON 4km HALONG 2km World Bank-7839

82

83 INDONESIA FISHERIES CREDIT PROJECT EXAMPLE OF ACCEPTABLE DESIGN FOR 30 G.T. WOODEN TRAWLER PRINCIPAL PARTICULARS LENGTH BREADTH DEPTH M 4.11 M 1.90 M GROSS TONNAGE (ABT) 30.0 Tons MAIN ENGINE 120 H.P. SERVICE SPEED 7.5 Knots FISH HOLD CAPACITY M 3 FUEL CIL TANK 4.64 M 3 FRESH WATER TANK 1.00 M 3 COMPLEMENT 10 Persons SCALE 1/100 Wiorld Bank-7842

84

85 INDONESIA FISHERIES CREDIT PROJECT TYPICAL LAYOUT FOR 5 HA. DEMONSTRATION FISH POND Annex 200m I~~~~~~~~ I> I RP r..,. I RP! z. ' Ha. 1.0 Ha. _ 11 < o 1t > ~~~~~~~LEGEND: - ( ). J r---- R.P. M REARING POND LO = _. T.P. TRANSITiON POND NURSERY POND r I I l,,, ~~~~~~~~N.P. RP firp PL. PLATFORM (FOR HOUSE ETC,) 1.0 Ha. 1.0 Ha.!,,.. ', z ~~~~~~~~~MAIN GATE -nr _SECONDARY GATE 02Ha. PL 0.2 Ha. WAVE PROTECTION NP i <_ ) l / Z&P;A, (MANGROVE OR BAMBOO) _ ~ ~ X Scale 1:2000 MAIN RIVER OR CREEK 7m 7m 1Om 7m 7m 4 4W 08m 1G0m 1.5m SECTION THROUGH MAIN CANAL, DYKES AND DITCHES World Bank-7864

86

87 ANNPR INDONESTA FISHERIES CREDIT PROJECT Estimated Project ImPlementation Schedule Year I 5 Total 1. Project Experts (% of Total Time): Management Adviser Cold Store (Electrical/ Mechanical) Engineer Civil Engineer Naval Architect Fish Pond %recialists On-Shore Farllities Cold Store Complex, and Repair Facilities * JettiPs (no.) Pnrriper Vps.]s (no.) Ski.njack Vessels (no.) Trawlers (no.) Tce Plants (no.) Demonstration Ponds (no.) I Pond Improvements (ha) 2,200 14,100 4,100 3,100 1,500 15, Lift Nets/Beach Seines (no.)_ L * Com1peted in Year 2 Aupur+, 1, 197

88

89 ANNEX 5 Page 1 INDONESIA FISHERIES CREDIT PROJECT Unit Costs I. Ambon Sub-project A. Skipjack Vessel Investment Costs E 1. Wooden hull including equipment 15,000, Diesel engine including stern gear and propeller 7,500,000 Annual Operating Costs Total 22,500,000 3, Commissions 2,926, Catch bonus 7,503, Fuel and lubricants 1,315, Maintenance and repair 1,125, Ice 3,900, Insurance 1,350, Overhead 1,200, Bait 3,250,000 B. Beach Seine Investment Costs Total 22,569, Beach seine net with 6 lamps 500,000 Annual Operating Costs 2. Lamp oil 6, Maintenance and repair 6, Wages 768,000 Total 780,000

90 ANNEX 5 Page 2 C. Carrier Vessel Rp Investment Costs 1. Wooden hull includ: t ng equipment 50,000, Diesel engine including stern gear and propeller 12,000,000 Annual Operating Costs Total 62,000, Fuel and lubricants 2,458, Insurance 3,720, Maintenance and repair 3,100, Wage 1,050, Overhead 1,200,000 D. On-Shore Facilities Total 11,528,000 Investment Costs 1. Engineering Investigations and Design: Local assistance 15,000, Landing facilities: Jetty Ambon 41,500,000 Jetties Hitu and Waai 24,900, Fish Freezing and Storing and Ice Plant: (i) Machinery and Equipment: Generators 124,400,000 Refrigeration machinery 96,400,000 Ice making equipment 56,500,000 Piping, wiring, etc. 32,300,000 Loading & unloading equipment 20,700,000 Miscellaneous 35,000,000

91 ANNEX 5 Page 3 Rp (ii) Buildings, etc.: Cold store & ice plant building 123,000,000 Cold store & ice plant insulation 42,300,000 Land acquisition and fencing 62,000,000 Site works (building foundations, levelling, roads, hardstanding, septic tanks) 34,400,000 (iii) Freight and Insurance: Materials for ice plant/cold store 49,100, Repair Yard and Slipway: Total 676,100,000 Building extension 6,200,000 Repair equipment 14,500,000 Slipway - civil works 10,000,000 Slipway - mechanical and electrical 11,000,000 Total 41,700,000 Total ,200,000 Annual Operating Costs 1. Landing Facilities, Cold Store, Ice Plant and Freezing: (i) Local staff 2,900,000 (ii) General overhead 2,000,000 (iii) Insurance on structures, buildings & equipment 6,400,000 (iv) Generator running costs 18,000,000 (v) Lubrication 700,000 (vi) Ammonia 1,000,000 (vii) Salt 2,100,000 (viii) Maintenance and repairs 2,500,000 (ix) Labor (a) Regular 7,600,000 (b) Loading refrigerator vessel 1,500,000 (x) Jetty maintenance 3,300,000 (xi) Protective clothing, etc. 2,000,000 Total 50,000,000

92 ANNEX 5 Page 4 Rp 2. Slipway and Boat Repair Yard: (i) Permanent staff 1,050,000 (ii) Insurance on structures, buildings & equipment 400,000 (iii) Generator running costs 50,000 (iv) Maintenance of slipway & equipment 1,500,000 Total 3,000,000 II. Trawler Sub-project Investment Costs 1. Wooden hull including equipment 15,000, Diesel engine including stern gear and propeller 6,000,000 Annual Operating Costs Total 21,000, Commission 969, Wage 1,500, Fuel and lubricants 1,346, Fishing gear 850, Maintenance and repair 1,050, Ice 840, Food and water 1,120, Salt 1,400, Insurance 1,260, Catch bonus 1,808, Overhead 1,200,000 Total 13,343,000 III. Fish Pond Sub-project A. Typical Milkfish Pond Improvement - Java (1 ha) Investment Costs 1. Dykes and ditches 43, Canals 11, Gates 3,700 Total 58,700

93 ANNEX 5 Page 5 Annual Operating Costs 4. Harvesting and maintenance 30, Fish fry 22, Fertilizer 7, Insecticide 4, Miscellaneous 2,000 B. Typical Shrimp Pond Improvement - Java ( ha) Investment Costs Total 66, Dykes and ditches 70, Canals 23, Gates 7, Equipment 4,700 Annual Operating Costs Total 105, Harvesting and maintenance 76, Shrimp fry 17, Milkfish fry 9, Fertilizer 9, Insecticide 4, Miscellaneous 4,000 C. Typical Milkfish Pond Improvement South Sulawesi (5 ha) Investment Costs Total 120, Dykes and ditches 208, Canals 52, Gates 17,40 Total 278,500

94 ANNEX 5 Page 6 Rp Annual Operating Costs 4. Harvesting and maintenance 180, Fish fry 37, Fertilizer 30, Insecticide 25, Miscellaneous 5,000 D. Typical Shrimp Pond Improvement South Sulawesi (5 ha) Investment Costs Total 277, Dykes and ditches 318, Canals 106, Gates 31, Equipment 21,260 Annual Operating Costs Total 477, Harvesting and maintenance 325, Shrimp fry 112, Milkfish fry 22, Fertilizer 50, Insecticide 25, Miscellaneous 15,000 E. Milkfish Pemonstration Pond (5 ha) Total 550,000 Investment Costs 1. Main channel and dykes 750, Perimeter and ditch 675, Nursery and transition ponds 150, Secondary dykes 300, Master gates 80, Secondary gates 96,000 Total 2,051,000

95 ANNEX 5 Page 7 Rp Annual Operating Costs 7. Harvesting and maintenance 339, Fish fry 140, Fertilizer and insecticide 70, Miscellaneous 5,000 F. Shrimp Demonstration Pond (5 ha) Investment Costs Total 554, Main channel and dykes 750, Perimeter and ditch 675, Nursery and transition ponds 150, Secondary dykes 300, Main gates 80, Secondary gates 96,000 Annual Operating Costs Total 2,051, Harvesting and maintenance 489, Milfish and shrimp fry 375, Fertilizer and insecticide 70, Miscellaneous 15,000 G. 5T Ice Plant/15 Ton Ice Store Investment Costs Total 949, Generator and control gear 2,800, Ice plant 8,000, Cold store 3,900, Buildings 2,800, Tubewell and water tank 1,000,000 Total 18,500,000

96 ANNEX 5 Page 8 AnnWual Opegrating Costs (1,500 tons ice production) 6. Local staff 700, General overhead 200, Insurance on plant 200, Generator running costs 900, Lubricants, amonia 100, Maintenance and repair 200, Labor 400,000 Total 2,700,000 November 5, 1973

97 ANNEX 6 INDONESIA FISHERIES CREDIT PROJECT Estimated Quarterly Schedule of Disbursements Cumulative Disbursements Quarter Ending Rp Million US$ Million 1974/75 September 30, 1974 December 31, March 31, June 30, /76 September 30, December 31, March 31, June 30, , September 30, , h December 31, ,643.0 h.0 March 31, , June 30, , /78 September 30, , December 31, , March 31, , June 30, , /79 September 30, , December 31, , March 31, ,64h June 30, , April 18, 1974

98

99 ANNEX 7 Page 1 INqDONESIA FISHERIES CREDIT PROJECT Bank Rakiat Indonesia General 1. The Bank Rakjat Indonesia (BRI) is the principal source of institutional credit for fisheries in Indonesia. However, its present and projected operations in this field account for a small proportion of its total operations. As on December 31, 1972, its total outstanding loans amounted to Rp 73.4 billion, of which loans for fisheries accounted for Rp 1.3 billion or less than 2% of the total. If the proposed fisheries project is sanctioned, it will add about Rp 3 billion to its outstanding loans for fisheries over the next 5 to 6 years. As its other loans will also grow, it is unlikely that the importance of fisheries in the distribution of its loans will increase significantly as a result of the project. 2. BRI is one of five state-owned banks. Though non agricultural loans account for about one-half of its lending, BRI is assuming an increasing role in the financing of agriculture, including fisheries, and other rural economic activities. Through a wide network of branch offices, village and mobile units, BRI is able to provide an extensive coverage of the country. It is through these units that most of their agricultural lending, principally to smallholders is being channelled. BRI would be the most suitable lending institution for the proposed project, and in fact is the lending bank for three on-going IDA financed projects.1/ Historical Perspective 3. BRI has a long history dating back to the end of the 19th century. It functioned mainly as a commercial bank in earlier years, financing the working capital requirements of middle sized entrepreneurs in trade and industry, including those of village traders. In 1960 it became a Government-owned bank for cooperatives, farmers, and fishermen. In 1965, when all Government banks, including the central bank of the country, were merged into one bank, namely, the Bank Negara Indonesia (BNI), BRI was 1/ (a) Smallholder and Private Estate Tea Project, Report No. 124a-IND (May 1973). (b) Beef Cattle Development Project, Report No. PA-153a (November 1972). (c) North Sumatra Smallholder Development Project, Report No. PA-140a (January 1973).

100 ANNEX 7 Page 2 designated as Unit II of the BNI. By Act No. 21 dated December 31, 1968, however, the constituent units of the BNI were split up. The central bank of the country was designate1 as the Bank Indonesia (BI) and the BNI Unit II as the BRI. Financing of agriculture and allied activities, including fisheries, as well as rural small-scale industries and trade, was to be the main function of the bank. For historical reasons, however, the financing of middle-sized entrepreneurs in trade and industry has continued to account for a substantial proportion of its lending, notwithstanding the fact that under the 1968 reorganization, the Bank Dagang Negara with 49 branches was designated as the commercial trade bank and the Bank Negara Indonesia 1946 with 188 branches and 43 sub-branches as the industrial bank. Results of Operations 4. Summarized balance sheets and income and expenditure statements of BRI for the last three years are given in Tables 7-1 and 7-2. The capital of the bank was Rp million of which Rp 300 million was contributed by the Government. The other sources of funds of the bank as at the end of 1972 were: deposits Rp 61.2 billion, borrowing from Bank Indonesia Rp 32.5 billion, other liabilities Rp 9.0 billion, and reserves and retained earnings Rp 10.4 billion, making-a total of about Rp billion. 5. The deployment of BRI's resources during the same period showed that loans accounted for Rp 73.4 billion, which were in excess of its deposit resources, reflecting mainly the Government's policy of providing funds to the bank through Bank Indonesia for specified purposes as, for example, for the import of fertilizers (Rp 15.0 billion), for rice production under the Bimas program (Rp 10.3 billion) and for investment credit (Rp 6.5 billion). The rest of the resources of BRI were used mainly for investments in securities (Rp 7.2 billion), deposits with the Bank Indonesia and other banks (Rp 19 billion), and cash in hand (Rp 5.2 billion). Though BRI was required to maintain 30% of the deposits it received in the form of liquid assets, the latter amounted to over Rp 31 billion as against the requirement of Rp 18 billion. BRI had therefore excess liquidity. Capital Base of BRI 6. BRI recently proposed that the Government increase its capital contribution from the present Rp 300 million to Rp 11 billion. However, the Government is not likely to accede to the proposal in view of BRI's already excess liquidity position and the Government's budgetary constraints. Moreover, the Government has found it nore convenient to augment BRI's resources through credits from the Bank Indonesia, particularly for priority sectors, rather than through equity participation.

101 ANNEX 7 Page 3 7. Because BRI's present capital and accumulated reserves would be considered adequate in relation to the magnitude of its borrowings and deposit liabilities, this may be another reason for the Government's reluctance to increase its capital contributions as proposed by BRI. Loans by Purpose 8. The distribution of BRI's loans by purpose is given in Table 7-3. The share of agriculture including livestock was about 45%, including some 2% for fisheries. Trade, service (mainly investment) credit, industry, and other types of advances accounted for 24%, 17%, 9% and 5%, respectively. 9. A breakdown of BRI's advances for fisheries at the end of December 1971 is given below: Amount % of Arrears Purpose Outstanding Arrears to Outstanding ----(Rp Millions) 1. Inland Fisheries Marine Fisheries Processing Marketing Salting Export Others Total The most important single purpose of loans in the fisheries sector was inland fisheries which included fresh water as well as salt water fish ponds. Loan arrears for inland fisheries were lower than those in most other fisheries activities. This illustrates the superior bankability of fish pond farmers who can offer their ponds as security. In the case of sea fisheries, the main security which the fishermen can offer is their boats and gear. To facilitate loan recovery, it would be desirable to institute some arrangement for crediting a part of the sale proceeds of fish after each fishing trip towards loan repayment. BRI's operations in the field of marketing/processing were small and not very successful as judged from the large arrears. The recovery performance in respect of credit for the export of fish was relatively better, as it mainly involved interim accommodation against bills of lading, etc. until the receipt of remittance from foreign buyers. Profits 10. BRI ended the year 1972 with a net profit of Rp 578 million, which was small in relation to its working capital of Rp billion at the end of the year. The low level of profitability was attributable

102 ANNEX 7 Page 4 mainly to its excessive liquidity, high administrative costs, and a relatively large volume of arrears. Arrears 11. The amount of loans under arrears as on December 31, 1972, was shown to be Rp 21.4 billion, or 30% of total outstanding loans (Table 7-3). Loans issued for the 1972 paddy crop (May-October) which had not fallen due for repayment appear to have been included as overdue. The arrears data reveal the following important features: in terms of amount, the arrears were the largest under agriculture, but as stated above, there might be some overestimation in the reported figures. More importantly, the arrears under the Government sponsored Bimas program (largely confined to paddy) amounting to Rp 5.7 billion out of a total outstanding loan amount of Rp 13.3 billion, included a sum of about Rp 2.5 billion in respect of loans issued prior to , that is, prior to the present improved Bimas program and the setting up of Village Units of BRI. It was understood that the Government of Indonesia had agreed to assume full responsibility for these old arrears. Thus, whereas under the Bimas program, the amount of arrears was about 43% of the corresponding outstanding loan amounts (Table 7-3) the loan recoveries under this program since 1971 has been more encouraging as indicated below: Year and Season in Amount of Loans Percentage of which Loans were Amount of Recovered at Loans Recovered issued under the Loans End of to Total Loans Bimas Program Issued April 1973 Issued (Rp billion) (May-Oct.) (Nov.-Apr.) (May-Oct.) The decline in recoveries of the May-October 1972 crop loans was due to a fairly widespread drought during that season, and BRI expects to make good recoveries from the paddy season. Under the Bimas program prior to , only about 100,000 paddy growers were being financed each year and the bulk of the amount advanced remained overdue, year after year. This was because BRI had no effective machinery for loan appraisal, supervision and recovery under the old program, and depended largely upon the village head or the Lura for this purpose. Since 1971, however, BRI embarked upon a program of opening Village (or Desa) Units on a large scale, staffed by its own employees, each Unit covering a group of villages to give it a loan business large enough to render the Unit economically viable. BRI had opened about 1400 Village Units by June, 1973, and had reportedly provided credit from these Units to about 2 million paddy growers during the season. Judged against the rapid expansion in its loan business under the improved Bimas program, its recovery performance would appear to be quite impressive, particularly as compared to

103 ANNEX 7 Page 5 that prior to the introduction of this improved program. Of the total arrears of about Rp 21.4 billion as on December 31, 1972, about Rp 8.1 billion were classified as dubious loans, which are covered by reserves. 12. BRI has recently received assistance from the Asian Development Bank through a project to modernize and improve its operations, particularly through its accounting and reporting systems. In November 1973, a FAO/IBRD Cooperative Program mission assisted BRI to prepare a rural credit project for subsequent IDA financing. The project is expected to include provision to strengthen BRI's capacity to extend credit to farmers, including a staff training program. Immediate short-term technical assistance to BRI to help in implementing the on-going IDA smallholder tea, rubber and beef cattle projects is included in these projects. The tea project also provides funds for internationally recruited consultants to recommend Improvements in BRI's medium and long-term credit operations and to help implement these recommendations. Interest Rates 13. BRI's schedule of its lending rates and rates paid by it on deposits and borrowings is indicated below:

104 ANNEX 7 Page 6 Lending Rtates Annual Rate of Interest Group I. A. 1) Bimas program for paddy 12 2) Import financed by PL 480, excluding foodstuff 12 3) Imports of fertilizer and insecticide 12 B. 1) Other crops and Bimas program for poultry 15 2) Production for export 15 Group II. Group III. 1) Production and distribution of goods and services not included in Group I 18 2) Building construction 18 3) Professional services 18 Other Activities not included in Groups I and II Rates Paid on Deposits and Borrowings.Savings Deposit 9-15 Demand Deposit Time Deposit 6-15 Funds from Central Bank for: -Bimas Program 4 -Rural Credits 12 -Import of Fertilizer 6 -Investment 4 Funds from foreign banks for pre-export financing 8 Margin Earned on Interest Received and Paid 14. During 1972, the average cost of funds to BRI was 6.17% per annum whereas the average interest earned.by it on its loans, investments and ba.nk balances was 10.17% per annum. BRI, therefore, earned an average margin of 4%. Under the project, the margin earned by BRI would be 7.1%, considering that the margin earned on IDA funds would be 8% per annum (12% less 4%) and that on its own resources 5.83% per annum (12X less 6.17%) and that the ratio between IDA funds and its own resources would be 49:51. As

105 ANNEX 7 Page 7 BRI has been working at a profit on an overall margin of 4X, the margin available to it under the project would be adequate to meet its operating costs, particularly as it would get the support of the extension staff in processing the loan applications from fish pond farmers. Collateral 15. BRI usually issues loans up to 70% of the value of collateral. However, its policy in this regard has been flexible. Depending upon the standing of the party, or whether the loan was for an activity covered by one of the priority sectors, etc., the margin requirements in relation to collateral have been varied. Under the project, BRI will have to finance up to 85% of the value of collateral (95% in the case of lift or beach seine nets), as the borrowers' equity would generally be limited to 15% of the cost of investment and they would not be in a position to provide any collateral other than the investments made under the project, excepting the fish pond borrowers whose ponds would be more than adequate security for their loans. Maintenance of Accounts 16. Though BRI's branches, regional offices, and head office maintain proper accounts of their transactions, the present reporting system is slow and the accounting system does not provide adequate management information necessary for decision-making. However, measures are underway to improve the operations of BRI, including its accounting and reporting systems (para 12). BRI's accounts are audited by Bank Indonesia, and the audit is satisfactory. Management and Organization 17. The Board of Managing Directors of BRI comprise four members, including the President. One of the Managing Directors is in charge of lending operations for agriculture, including fisheries. 18. BRI has seven operational and six administrative bureaus. There are four credit bureaus under one of which is a Fisheries Department. This Department is a relatively small one, comprising its head, three officers and other clerical staff. The appointment of a fisheries expert to this Department, particularly to liaise with the technical staff of the Directorate General of Fisheries and PNM has been recommended under the project. An organizational chart of BRI's head office is given in Table BRI has 13 regional offices, 219 branches, 77 sub-branches, 509 mobile units and about 1,400 village units. The regional offices exercise control over branches in their jurisdication and arrange for the remittance of funds to and from branches according to need. An organizational chart of BRI's regional office is given in Table 7-5. The branches of BRI are the main instruments for the collection of

106 ANNEX 7 Page 8 deposits and lending of funds. The sub-branches and the mobile units are primarily extensions of the branches for the collection of dues and disbursement of loans. They do not collect deposits or sanction loans. The recently opened village units, however, are authorized to sanction loans. 20. As the village units were opened mainly with a view to financing cultivators under the Bimas scheme for increasing the production of paddy, these units were authorized to sanction loans up to Rp 100,000 per borrower under this scheme. The branches were authorized to sanction loans up to Rp 1 million and regional offices up to Rp 5 million. Loans above Rp 5 million have to be sent to the head office for sanction. 21. The total staff of BRI at the end of 1970 was about 10,000. As a result of the opening of a large number of village units (each having 5 to 6 employees) and the general expansion in staff, the total staff would be about 20,000 at present, with some 1,500 at BRI's head office. December 12, 1973

107 ANN2X 7 Table 7-1 INDONESIA FISHERIES CREIIT PROJECT Bark Rakjat Indonesia Summarized Palance Sheets At December 31 Each Year Rp billion Current Assets Cash on hand!8t Canks (deposits and loans) 7.h Govt. and other Secu&ties RflPpivables Total OrtstardinE, Loans / / Pixed and Other Assets Total Assets TTARTIT.TIES Cuirrent Liabilities A^e,otnts npyabie Demand deposits b Total Fixed DeLosit and Savings Pank Tndonesia Borrowings Ca r i. +.-al I2-Y/ - 2/0.30 P,serPTes and Retained Earnings Q.38 Other Liabilities L Total liabilities / Less provisions for doubtnul debts. 9/ 1 DT's lauthorized capital of Rs 300 million not paid in. So.r". rlt

108 ANNE 7 Table 7-2 INDONESIA FISHERIES CREDIT PROJECT Bank RakJat Indonesia Summarized Income and Expenditure Statements Rp million Income Loan interest, provisions and other charges 8,373 10, ,904 Other income Total Income 8,642 10, Expenditures Interest on borrowings and deposits 3,675 4,910 6,136 Salaries and other personnel expenditures 2,767 3,430 3,781 Administrative and general charges 1,235 1,694 1,849 Other expenses Total Expenditures 7, ,855 Earned Surplus After Provisions for Bad Debts and Depreciation Source: BRI.

109 ANNEX 7 Table 7-3 INDONESIA FISHERIES CREDIT PROJECT Bank RakJat Indonesia Outstanding Loans and Arrears by Economic Sectors As at tie End of 1972 Arrears F.ronomic Sector OutstandingrLoans Amount % of Outstanding Loans 7R illion) (Rp billion) Agriculture : l.bimas Others Total Li-vestock Fisheries h68 37 Industry Trade Service h Other Economie Activities Total

110 INDONESIA FISHERIES CREDIT PROJECT Organisational Chart of the Head Office of the Bank RakJat Indonesia Inspectors I C---! t ~~~~~~~~~~~~~~~~~~~~~~~Cao Body of Staff LeAdethip/Hployee Liquidity =_ Invest- Adminis- Research Control and Funds Credit BIMAS General Mont Foreign Opera- tration and (Supervi- Person- General Secretarial Mobilisa- Bureau Bureau Credit Credit (Affairs) tional and Statis- sory) nel (Affairs) Bureau tion =I Bureau Bureau Bureau Bureau B oou Bureau Bureauureu Bure u Bureau BurJ u i i l i i i I I ~~~~~~~~~~Bokeein Bureau l i 1pingBureau kl Br1 Provincial or Reglonal Offices Branch Offices I'1

111 INDONESIA FISHERIES CREDIT PROJECT Organizational Chart of the Provincial or Regional Offices of the Bank Rakiat Indonesia Manager - Secretary Loan Dept, Financial Dept. Service Dept. Control and Veri- at. E4lDeP fication Dt Research Credit Accounting Administration Liquidities Verificatio Report *nd andnd and Logistics Section Section Statistics Reports kkee Reports E Funds_X_L Education Adm./Report dministration Secretary Report~~~~~~~~~~~~~~~~~~~J% Lfl-

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113 ANNEX 8 Page 1 INDONESIA FISHERIES CREDIT PROJECT PN State Fisheries Enterprise, Maluku (PNM) General 1. Established in March 1961, PNM is one of six State Fisheries Enterprises set up within the Directorate General of Fisheries (DGF) by the Government to carry out some of its fisheries projects. Though major decisions and policy matters rest with DGF, including the appointment of PNM's board of management and assumption of responsibility of its financial condition, this has not hampered PNM's progress which is the result of competent management and autonomy in operations. Between 1961 and 1967, PNM provided slipway, workshop and sawmill facilities to service privately owned vessels and a passenger vessel service. In 1967, DGF provided PNM with 5 fishing vessels mainly for skipjack fishing to supply the local market. From 1968, PNM has been working at a profit. Financial Position 2. The balance sheets and income and expenditure statements of PNM for the years 1970, 1971 and 1972 are given in Tables 8-1 and 8-2. The resources of PNM and their deployment at the end of 1972 were as follows: Resources (Rp '000) Deployment (Rp '000) Capital 12,329 Vessels 1,800 Accumulated Profits 15,332 Vehicles 300 Profits for ,810 Land 2,500 Depreciation Reserve 2,996 Building and Office 23,750 Loan from Bapindo 7,683 Furniture/Fixture 736 Inventories 8,552 Cash and Bank Balances 4,330 43,150 41,968 The difference between the resources and their deployment represented mainly the amount receivable by PNM from traders on account of sale of skipjack.

114 ANNEX 8 Page 2 3. The income, expenditure and profits of PNM during 1972 were as follows: Expenditure (Rp '000) Income (Rp '000) Workshop 9,496 Sale of skipjack plus Vessels (skipjack) 9,611 revenue from passenger Vessel (passenger boat) 1,076 boat 26,791 Overhead 6,829 Workshop 5,182 Slipway 451 Slipway 251 Profit 4,810 Miscellaneous 49 Total 32,273 Total 32,273 The main source of income of PNM was from the sale of skipjack, though a breakdown of income from this source and from the passenger boat was not available. 4. PNM earned some income from its workshop and slipway for the first time in However, the expenditure on workshop and slipway had not been allocated according to the work done on PNM's own vessels and that done on other vessels. PNM earned a net profit of Rp 4.8 million during 1972, as compared to Rp 3.5 million in 1971 and Rp 3.3 million in The growth of PNM over the three years ending 1972, as reflected in its balance sheets, comprised mainly the acquisition of land, construction of an office building and a jetty, and improvements to its slipway and workshop. The value of these fixed assets increased from an estimated Rp 7.9 million in 1970 to Rp 26.2 million in PNM financed the expansion from its accumulated profits and reserves, a loan of Rp 12 million from the Indonesian Development Bank (Bapindo), and an increase to its capital of Rp 2.5 million (from Rp 9.8 million in 1970 and 1971 to Rp 12.3 million in 1972). The loan from Bapindo was due to be repaid by the end of 1972 but PNM had asked for an extension up to the end of The main reason for seeking an extension was that PNM required funds for meeting its working capital expenditure. It had, however, not arranged for a separate line of credit for this purpose, and hence was using the investment loan taken from Bapindo to meet its working capital requirement. PNM was also building a 5-ton cool room, for the purpose of preserving skipjack for sale in the local market. 6. PNM's accounts were maintained in a very rudimentary way and did not permit an evaluation of the cost/benefits of its different activities. As these activities would grow in volume and diversity under the project, the appointment of a qualified accountant in PNM, has been recommended.

115 ANNEX 8 Page 3 Organization and Management 7. PNM has a three-member Board of Directors, including the Executive Director. Though only the Executive Director was in position at the time of the mission's visit, he has managed PNM's operations competently. PNM has separate departments or sections for fisheries, passenger boat, workshop and slipway, sawmill, navigation, cool room and administration. The total staff employed was 71, including the Executive Director. An organization chart of PNM, with details of staff employed in each section, is given in Table PNM has succeeded in establishing itself in skipjack fishing and marketing and has acquired valuable experience as well as expertise in this type of fisheries. However, the volume of its operations has been small compared to that envisaged under the proposed project. PNM will therefore need strengthening, including an expansion in its staff, recruitment of expatriate technical and management experts and an increase in its equity capital, for the purpose of the project. With the necessary strengthening, PNM will be a suitable agency for the development of skipjack fishing for export based on Ambon, through the provision of additional fishing and carrier vessels, on-shore cold store and other supporting facilities. Details on the proposed project to be implemented by PNM are given in Annex 3. November 16, 1973

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117 ANNEX 8 Table 8-1 INDONESIA FISHERIES CREDIT PROJECT PN State Fisheries Enterprise, Ambon (PNM) Balance Sheets at December 31 Each Year ASSETS Rp thousand- 1. Cash- 1,016 5'15 1, Bank Balances , Accounts Receivable 7,389 5,673 12, Work in Process 7,850 10,693 ( a/ 5. Mechanical Workshop and Saw Mill 7,906 9,811 (29, Inventory 7,488 8,013 8, Other Assets 4,514 2, LIABILITIES AND CAPITAL 37, , Accounts Payable 36 1,813 6, Loan from Indonesia Development Bank (Bapindo) 12,000 7,683 7, Depreciation 780 1,848 2, Other Liabilities 2,586 1,053 4, Capital 9,845 9,845 12, Accumulated Profits 11,785 15,331 20,142 37,032 37,573 54,968 Source: PNM. a/ Includes mainly buildings (office, workshops), land, vessels and vehicles.

118 ANNER 8 Table 8-2 IN ESIA FISHERIES CREDIT PROJECT PK State Fisheries Enterprise, Ambon (PNN) Income and Expenditure Statements Rp thouand Income Sale of skipjack and revenue from passenger boat 13,027 14,026 26,791 Workshop 5,182 Other income , Operating Expenditures Workshop 5,296 7,279 9,496 Vessels ,687 Administration and overhead costs h42 7,280,9736. MAN 27,463 Profit 323,54 4,810 Source: PNH.

119 INDONESIA FISHERIES CREDIT PROJECT PN State Fisheries Enterprise 1 Ambon (PNM) Organization Chart Chief Executive Director Directo and dminiotrtion for Finnce Director fcor Operation Passenger Vessel General Amsonnistretion Sales Administration Slpway and Workshop 1 skipper and Accounting Section 2 assistant skipper. supervisor 1 supervisor 1 1 engineer 1 supervisor 2 assistant 1 adm.{nistrator 6 workers 9 labour 2 assistant engineer.fish Vesse1 Personnel Sectrion Administration sawmill ~~~~~~~~~~~~~~~~Cool Room 1 surpervisor _ 1 supervisor I supervisor 2saerisor 1 assistant t8 labour 1 engineer t i 1~~~~~~~~~~~~~~~~~ processor 1 worker Passenger Fsh Vessel Technical Administration Administration x Section (1^.torkshop-Sawmill) 5 skipper 1 supervisor 5 engineer A! 1 supervisor I assistant 5 assistant engineer ac 1 assistantl

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121 ANNEX 9 Page 1 INDONESIA FISHERIES CREDIT PROJECT Directorate General of Fisheries 1. The Directorate General of Fisheries (DGF) is the agency responsible for the administration of fisheries in Indonesia. Although its head office is located in Jakarta, most of its staff and offices are found at the provincial, district and sub-district levels. As indicated in Table 9-1, it is one of five Directorate Generals located within the Ministry of Agriculture. Table 9-2 contains an organizational chart of the Directorate General of Fisheries at its head office. Of particular importance to the proposed project is the Directorate of Fisheries Enterprise Development. It has responsibility for State Fisheries Enterprises and thus supervises the State Fisheries Enterprise, Maluku at Ambon (PNM). It also has responsibility for technical advice to fishermen's cooperatives, and therefore assists the skipjack cooperatives at Ambon and the cooperatives that might operate the proposed ice plants and trawlers. 2. The annual budget of DGF for is Rp million for routine expenditures and Rp million for development expenditures (see Table 9-3). Approximately Rp 180 million of this routine budget is allocated to the various research and training institutes established by DGF. These include the Marine Fisheries Research Institute, Riau; the Fishing Craft Institute, Jakarta; the Fisheries Technology Institute, Jakarta; the Inland Fisheries Research Institutes at Jakarta, Surabaya, Palembang and Makasar; the Academy of Fisheries, Jakarta; the Senior Inland Fisheries High School, Bogor; the Senior Marine Fisheries High Schools at Tegal and Menado; the Junior Marine Fisheries High Schools and training centers at Singaraja, Ambon and Belawan and the Fisheries Training Center, Sukabumi (Tables 9-3 and 9-4). Training at the three junior high schools relates primarily to trawler operations, at the senior high school at Bogor to inland fisheries, and at the remaining two senior high schools to marine fisheries. Of particular significance is the fisheries training center established at Tegal with UNDP/FAO assistance to provide practical training in fishing techniques, fishing gear assembling, net making and mending and navigation. Similar centers are planned by DGF for other parts of Indonesia. In addition, a number of fellowships and training programs have been instituted under UNDP funding. Finally, Indonesian fishermen are now being trained on many of the 70 foreign fishing vessels operating under joint venture agreement. 3. The research institutes are dealing, respectively, with marine resources research, fishing equipment technology, fish processing technology and inland fisheries research. However, the impact of this research

122 ANNEX 9 Page 2 on fisheries development in Indonesia has thus far been negligible. Under UNDP/FAO auspices, research on brackish water shrimp and milkfish culture is now also underway (Annex 2, para 19-20). The collection of statistical data, which falls primarily under the responsibility of DGF, is extremely deficient and requires substantial improvement. 4. Fisheries administration at the provincial level falls under the direction of the Provincial Fisheries Services (PFS). Typically, the PFS is organized at its head office into sections on planning, education and research, technical and administration. The PFS in Central Java, for example, has a total staff of 188, of whom 15 are in the planning section, 61 in the education and research section, 32 in the technical section and 74 in the administration section. Table 9-5 provides an organizational chart of this office and indicates the specific responsibilities of its personnel. 5. The PFS interacts most directly with both marine and inland fishermen through the extension services provided by its district and subdistrict offices. These offices are widely scattered throughout each province; for example, 24 district offices can be found in the province of West Java. The offices of the District Fisheries Services are typically manned by a staff of about 25, of whom are extension officers. These extension workers provide the direct and regular contact with the local fishermen. They also act as the principal channel through which improved methods can be passed on to the fishermen. November 16, 1973

123 INDONESIA FISHERIES CREDIT PROJECT Fisheries Organization and Administration Ministry of Agriculture Minister of Agriculture Secretary General General Bureau Bureau of Organization and Methods Bureau of Personnel Bureau of Finance Bureau of Materials Bureau of Law Bureau of Planning Bureau of Economic and Foreign Relations Directorate of Directorate of Directorate of Directorate of Directorate of Inspector Agriculture Fisheries Veterinary Forestry Estates General Services

124 INDON1B3IA FISHEIW, CREDIT PROJECT ORGANIZATIONAL CHiART OF THE DA UVo,RA--GCENFRAL O' FISHERIES DIRECTOR-4ENERAL OF FISHERIES I Personnel Division _. Director of Director of Director gf Fisheries Director of Directu.r of Planning - Production Enterprise Development Extension Work Resourcs F tadii.tion. Divieion _,"* Statistics Divisiom Fishing Technique Division Enterpriso Development Fich InCormation Reoource Mwagement Division Division Division Plan/Progrsmme Water Pollution Finance Division Prccessing Division Fish Culture Division Oredit Scheme Division Extension Work Division Prevention t.iviaion Legal anid Or&anisa- Infrastructure Enterprise Analysis and Education er-d Training Cor.-',rvat on Facilities Planrin:q Divis.on Fish Marketing Division Legialation Division Diviojon Mnr.anement Divitsion tin ivso - F - _. Programme Evaluation Fish Proceesinp Fisheries Cooperatives Division Techniology Div:sion Division Secretariat Secretariat Foreign Relation Divieoion -X.enretariat Secretariat Secretariat Documentation and Public Relation Division >:-3 11 SI'X'Il.'-IS P.l. I '!f i I.l:lzl l (D X~~~~~~~~~~ >s;~

125 INDONESIA ANNEX 9 Table 9-3 FISHERIES CREDIT PROJECT Budget: Directorate General of Fisheries Routine Budget R I. Office of Directorate General of Fisheries (salaries, equipment, maintenance, travel) 1134,h40,800 II. Research and training institutions A. Jakarta: Office of Inland Fisheries Research 65,482,800 Institute, Office of Fishing Craft Institute, Office of Fisheries Technology Institute, Academy of Fisheries B. West Java: Bogor Senior Inland Fisheries High School, 45,182,400 Sukabumi Fisheries Training Center, Bogor Office of Inland Fisheries Research Institute C. Central Java: Tegal Senior M4arine Fisheries High School, 26,920,100 Office of Fisheries Research Institute D. East Java: Surabaya office of Inland Fisheries Research Institute 2,482,000 E. South Sumatra: Palembang office of Inland Fisheries Research Institute 2,529,500 F. Riau: Tanjong Pinrang office of Marine Fisheries Resear$h Institute 2,311,000 G. North Sumatra: Belawan Fisheries Training Center 7,079,000

126 ANNEX 9 Table 9-3 Rou ne Budget H. North Sulawesi: Menado Senior Marine Fisheries High School 8,171,000 I. South Sulawesi: Makasar office of Inland Fisheries Research Institute 2,933,000 J. Maluku: Ambon Junior Marine Fisheries High School 9,036,000 K. Bali: Singaraja Junior Marine Fisheries High School 8,160, ,286,800 Total 293,727,600 Development Budget Fisheries Infrastructure 89,799,000 Research 259,463,000 Extension work 95,000,000 Planning 52,350,000 Education 244,300,000 Physical Infrastructure 50,000, ,912,000 Equity capital for Benoa State Fisheries Enterprise 100,000,000 Total 890,912,000

127 INDONESIA FISHERIES CREDIT PROJECT TRAINING INSTITUTIONS OPERA,TED BY THE DIRECTORATE GENERAL OF FISHERILJS No. Name of Institu-tion Location Duration of Study Established Academic Ultimate Number of Level Application Graduates 1. Fisheries Academy Jakarta 3 years 1962 University Government; 278 Private Enter- (Fishing prise; State Technique Enterprise - 184; Technology - 94). 2. Fisheries Senior High Tegal, Central 3 years; 2-6 months* 1950 High School Government; 263;142* School* Java Private Enterprise 3. Fisheries Senior High Menado, North 3 years 1958 High School Government; School Sulawesi Private Enterprise Fisheries Senior High Bogor, West 4 years 1968 High School Government 204 School Java 5. Junior Fisheries High Singaraja, Bali 3 years; 3 months* 1962 Pre-High Government; School* School Private 166; 27* Enterprise 6. Junior Fisheries THigh Belawan, North School* Sumatra 3 years; 3 inonths* Pre-Hligh Government; 78; 19* School Private Enterprise 7. Junior Fisheries High Ambon, Maluku 3 years; 3 months* 1958 Pre-High Government; 204 h 3 School* School Private Enterprise ( Note * Refers to separate short-term training component offered by some of the above institutions.

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129 TNDONFSIA FISHERIES CR-DTT PROJECT Provincia2 Fisheries Serviee Central Java Secretaries 2 Public Relations 3 Coordinator of District Fisheries Services 1 Director I I I. Administration Plannine Technical Education and Research i) Head 1 i) Head 1 i) Inland Fisheries 8 i) Head 1 ii) Financing Section 1 ii) Statistics and ii) Marine Fisheries 9 ii) Education 19 Docxumentation 8 iii) Personnel Section 12 iii) Physical and iii) Marketing 4 iii) Docks and Slipways 13 Financial 3 iv) Law and Regulation 3 iv) Project Evaluation 3 iv) Processing 3 iv) Marine Fisheries 17 v) Office Management 4 4 v) Cooperatives 8 v) Inland Fisheries \10\

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131 ANNEX 10 Page 1 INDONESIA FISHERIES CREDIT PROJECT Terms of Reference for Technical Assistance Personnel Introduction 1. Technical assistance would be required to assure the effective implementation of the project. Seven experts would be provided for a total of 17 man years. These experts would comprise: (a) a management specialist to advise the Executive Director of the PN State Fisheries Enterprise at Ambon (PNM) on the planning, organization, and operation of the skipjack subproject. He would also supervise and coordinate the work of the project engineers and naval architect, and initiate the training of local personnel. His services would be needed for 4 years; (b) an electrical/mechanical engineer, responsible for the planning, design, and construction supervision of the ice making, freezing, and cold storage complex and the small ice plants. His services would be required for 3 years; (c) a civil engineer responsible for the planning, design and construction supervision of project civil engineering and building works. His services would be required for a year; (d) a naval architect/master boat builder responsible for the planning, design, and construction supervision of all project vessels and, in collaboration with the two project engineers, of the additional repair facilities needed under the skipjack project. His services would be required for 3 years; and (e) three fisheries specialists for fish pond development responsible for development of the demonstration ponds, training of the required fisheries extension officers and, assistance to pond operators in carrying out the necessary pond improvements. Each specialist would be required for 2 years.

132 AIOEX 10 Page 2 Specific Responsibilities 2. The management specialist would: (a) be responsible to the Executive Director of the PNM in an advisory rather than executive capacity; (b) establish general requirements for the project, including type, number and size of fishing vessels and fishing gear, the siting and requirements of the landing facilities, the capacity and operational layout of the ice plant/freezer/ cold store complex and of the repair shop and the methods of fish handling; (c) establish a suitable organizational structure for the PNM and train personnel for the various functions required. Arrangements for sepcialized courses would be included where necessary. In addition, special attention would be given to the training of fishermen in the use of ice; (d) establish suitable policies and procedures for all activities of the PNM, particularly in operations, marketing and accounting; (e) advise the fisheries cooperatives involved on all relevant policies and procedures relating to the project and provide for a satisfactory working relationship and proper channel of communication between the PNM and the cooperatives; and (f) coordinate and supervise the work of the civil engineer, the electrical/mechanical engineer, and the naval architect/ master boat builder. 3. The civil engineer, the electrical/mechanical engineer, and the naval architect/master boat builder would each advise on his individual expertise. Specifically, the civil engineer would provide the necessary expertise relating to the construction of the letties, and the additional slipway. He would also be responsible for the foundation, building and other civil works associated with the main cold store complex and workshop at Ambon, and the small ice plants. The electrical/mechanical engineer would provide the relevant expertise required for the cold store complex and the small ice plants, and the naval architect/master boat builder, expertise for the twenty skipjack vessels, the two carrier vessels and the twenty-five trawlers. 4. Each of the three experts would be responsible for a number of common functions as they apply to his area of concern, including: (a) planning and design of required facilities;

133 ANNEX 10 Page 3 (b) preparation of specifications, drawings and bills of quantity, and advice on appropriate contract conditions to enable competitive quotations to be obtained; (c) assessment of quotations and advice on terms of acceptance including negotiation of any modifications necessary; (d) arrangement of procurement procedures; (e) supervision of construction; (f) guidance in the operation, repair and maintenance of the facilities concerned; and (g) training of appropriate Indonesian counterparts. 5. The three pond fisheries specialists would: (a) be responsible to the Directorate General of Fisheries; (b) each assume responsibility for the improvement of project ponds in South Sulawesi, East Jalva, and Central and West Java respectively; (c) select areas which would benefit most from the proposed improvements and arrange, as far as possible, for these areas to be developed first; (d) assess the salt and fresh water supply flows in the project areas and determine improvements to channels and sluice gates to enable better water control to be achieved; (e) examine the size and layout of the existing dykes, platforms and ditches in fish ponds and determine the improvements that should be made to give a better relationship between areas of nursery ponds, transition ponds and rearing ponds to enable higher yields to be achieved; (f) study the soil composition in the pond bottoms with particular reference to the proportion and nature of the organic matter in it, and determine the type and quantity of fertilizer and pesticide that should be applied to create better conditions for the growth of benthic algae, and the timing and method of application of the fertilizer and pesticides; (g) designate the type of culture to be practiced in the individual ponds (i.e. milkfish or shrimp), the density of

134 ANNEX 10 Page 4 stocking and the timing of the release of the fingerlings into the transition and rearing ponds; (h) study the existing harvesting and marketing arrangements and recommend improvements, including selecting suitable sites for the location of small ice plants where the provision of an increased supply of ice would materially improve the quality of the fish to the consumer; (i) select suitable sites for the establishment of demonstration ponds; design dykes, channels and gate layouts for them and arrange for their construction; (j) prepare and execute a program to train the 95 extension personnel required to supervise the demonstration ponds and to provide the extension services for project pond improvements; (k) study the feasibility of increasing yields significantly higher than that envisaged for project ponds through heavy investment in infrastructure to permit more exact salinity control, and use of intensive farming methods; and (1) examine the possible adverse effects upon fish pond production of upstream agricultural practices and recommend possible remedial or preventive actions. Qualifications 6. The management specialist would be a graduate from a recognized university or technical college, with at least 10 years experience in a fishing company, and not less than 2 years practical experience, in a senior managerial capacity, in skipjack operations, including fishing, handling and export marketing. 7. The civil engineer would be a graduate in civil engineering from a recognized university or technical college, possessing not less than eight years experience in the planning and design of civil engineering works, of which not less than two years shall have been spent on the design of port and harbor works. He would also have had at least two years experience on civil works in a tropical country. In addit~ion, he would have adequate experience in building construction and foundation, surveys and soils investigation, water supply, minor site works, and construction in timber. 8. The electrical/mechanical engineer would be a graduate in mechanical and/or electrical engineering from a recognized university or technical college, possessing at least ten years experience in design and supervision of construction of heavy mechanical and electrical installations of

135 ANNEX 10 Page 5 which not less than one year shall have been spent on refrigeration machinery, ice plants and cold stores, including preparing designs and tender doe~uments in a tropical developing country, approving working drawings and admdnistering contracts, and supervising building construction and installation of equipment. 9. The naval architect/master ship builder would be a graduate in naval architecture of a recognized university or technical college, possessing not less than ten years practical experience in boat construction, including not less than two years in: (a) small wooden boat construction; (b) fishing boat construction and supervision in tropical countries; and (c) preparing documents to enable tenders to be invited for boat construction. 10. The pond fisheries experts would be graduates from a recognized university or technical college in marine biology, fisheries, or an associated discipline, possessing not less than seven years practical experience in aquaculture, preferably under tropical conditions. 11. All experts would be fluent in English and would preferably have a working knowledge of Indonesian. November 16, 1973

136

137 ANNEX 1 1 Page 1 INDONESIA FISHERIES CREDIT PROJECT Marketing and Prices Introduction 1. Total fish production in Indonesia was estimated at 1,268,000 tons in 1972, of which approximately 839,000 tons, or 66%, were marine fish, 289,000 tons, or 23%, were inland fish and 140,000 tons, or 11%, were cultured fish. About 3% of total production was exported, including shrimp valued at some $22 million. In addition, small amounts of a wide range of fisheries, including dried fish, frozen fish fillets, sea weeds and shellfish, were exported. Though fish is the maln source of protein for the Indonesians, annual consumption is low, at approximately 10 kg per capita. The separation of principal producing areas from the main consuming centers poses a major marketing problem because of poor transportation and handling facilities. Sumatra, comprising 17Z and Sulawesi 7% of the total population, accounted for about 45% and 18% respectively of marine fisheries production, while Java with approximately 64Z of the total population and 30% of domestic fish consumption, is responsible for only 16% of the marine catch (20% of total fish production). Kalimantan accounted for about 58% and Sumatra 24% of the fish catch from inland rivers and lakes. Java produced about 73% and South Sulawesi about 12% of the fish reared in ponds. 2. Fish is processed for the domestic market under a variety of methods - dried, salted, smoked, cooked, canned or frozen. The highest percentage is sold as heavily salted dried fish shipped from the producing areas in covers of straw and leaves. For example, cargo boats that take miscellaneous merchandise to the various islands of the Indonesian archipelago often carry dried and salted fish as-return cargo. However, in spite of the loss of weight and the additional cost of salt, the producer receives little or no more per kilo for salted fish than for fresh fish. Dried fish is transported inland with other dry cargo, as is canned and smoked fish. It is sold with other food and household goods in markets and local stores, and is thereby assured a wide distribution. Smoked fish is often sold by the same retailers that sell dried fish, but always in small quantities. 3. Consumer surveys indicate that consumption of fresh fish in Java would greatly increase if more were available and are of good quality. However, the transport of fresh fish preserved in ice is costly because of inadequate suitable transportation facilities, which together with the lack and often misuse of ice, results in a significant proportion of the fish being spoiled by the time they reach the inland markets. Consequently, these markets usually have small amounts of good quality fresh fish on sale

138 ANNEX 11 Page 2 at relatively high prices. In contrast, at the coastal markets and villages, fresh fish is regularly sold and consumed. Local fishermen's cooperatives usually conduct the auction sales of fish. 4. Fish is also marketed alive or frozen. In addition to local sales, live fish is also sold principally in Jakarta and Bandung. The principal marketing problem is the lack of adequate transportation from the producing areas to the consuming centers. Frozen fish including shrimp and lobsters is sold in several supermarkets in Surabaya, Bandung, and Jakarta. Prices are generally 50 to 100% more than those bought fresh in the public market, and the consumers are usually foreigners. 5. Fisheries exports have been increasing during recent years (see Table 11-1). In 1967 the export of frozen shrimp was only 82 tons; in 1972 it was about 22,000 tons. The export of frozen tuna in 1967 was 1,119 tons; in 1971 it was 3,500 tons. Other fish products preserved by drying, canning and smoking have also been exported in increasing volume. About 32,000 tons of fish products valued at US$26 million were exported in The marketing of the most important exports - frozen shrimp and tuna - is largely handled by foreigners who are partners in locally-based processing operations with Indonesian nationals. Shrimp and Milkfish 6. Approximately 6,000 tons of shrimp and 22,000 tons of milkfish were produced in ponds in Java and South Sulawesi in The principal urban consuming areas are Makasar (South Sulawesi), Surabaya (East Java), and Bandung (West Java). Present retail prices for milkfish range from Rp per kg, and for small pond shrimp Rp per kg. Table 11-2 shows the current prices received by pond operators for milkfish and shrimp. 7. The marketing system typically consists of the subcollectors, and main collectors in the producing areas and the wholesalers, brokers and retailers in the consuming centers. The average amounts of milkfish handled daily by each of them are small, ranging from kg for the subcollector and retailer to kg for the main collector and broker, and about 100 kg for the wholesaler. Current prices for milkfish average about Rp 150 kg to pond operators and Rp 250 kg to consumers. Credit is often provided by the main collector to the pond operator and by the broker to the retailer. Catch from Trawlers 8. Fish would comprise about 95% and shrimp the remaining 5% of the catch by trawlers. The fish would be classified into first, second, and third grades. The first grade is table fish, including pomfret, croaker, sole, snapper and others, which is packed in ice after it is caught, and is sold fresh for about 65 Rp per kg. The second grade fish, which constitutes the bulk of the catch, is salted on board and sold for approximately 45 Rp per kg. The third grade fish is generally considered inedible and is sold for fish meal. The composition of the catch varies according to the season.

139 ANNEX 1_ Page 3 Shrimp for Export 9. Host exportable shrimp is currently purchased by and processed in local plants and subsequently exported as frozen shrimp to Japan. Indonesia is the second largest supplier of shrimp to Japan, after India. Table 11-1 shows the rapid rise in Indonesian shrimp exports in recent years. Skipjack Tuna 10. The demand for skipjack tuna has increased in recent years. Because yellowfin tuna has become over-exploited, fishermen are turning to the greatly under-exploited resources of the skipjack tuna - a smaller fish of darker meat. Moreover, because the skipjack has a considerably shorter lifespan than the yellowfin tuna, it contains smaller concentrations of mercury and is blended with yellowfin to reduce overall mercury levels. The skipjack resources of Indonesian waters have only begun to be fished for export, from Aer Tembaga in North Sulawesi. Foreign demand for tuna, including skipjack, has been rising faster than the available supplies and this is reflected in rising trend in prices (Table 11-3). April 24, 1974

140

141 ARMEX U1 Table 11-1 INDONESIA FISHERIES CREDIT PROJECT Export Volume of Fishery Products (tons) Shrimp Shrimp Fresh Ornamental Year Fresh Processed Fish Frog Fish Others Total , ,408 7, * 2,961 hlh 3, ,376 19, * 5, , h2 13,387 2], ** 5, , ,769 18, ** 13, , ,503 28, ** 22,000 n.a. n.a. n.a. n.a. n.a. 32,000 Note: * Revised data *3F Preliminary data n.a. Source: = Not available Central Bureau of Statistics

142 ANNEX 11 Table 11-2 TI)ONDOTA FISHMIES CREDIT PROJECT Current Prices Current prices used in calculating project returns are as follows: Rp per Ton Skinjack Tuna (paid to the State Fisheries Enterprise) 166,000 Skipjack 'una (paid to cooperatives) 90,000 Tee (ex-factory) 6,000 Assorted Fish (paid to trawlers) 45h,000 Exixrt Shrimp (paid to trawlers) 1,000,000 Milk Fish (ex-pond) 150,000 Sma)l Shrimp (ex-pond) 100,000 r3rp'e Shrimp for Exoort (ex-pond): S'ulawesi 600,000 Java 800,000

143 ANNEX 11 Table 11-3 FI8H3~ZRS CIEJIT PROJECT lkipiack Konthl& A,waM. btvessol. Price in J!Ma (at Taisu Port) ZsS. Mot u$ Per Ton h h5o Januar 511 February 535 )b:h 551 ourcoi ITsiu Tish Xarkt*s, 3hisuoks-Pre., Japan..

144

145 INDONESIA FISHERIES CREDIT PROJECT Projected Income Statement: P.N.: State Fisheries Enterprise. Maluku (Rp Thousands) NET REVENUES Year Fish Sales , ,000 1,079,000) Ice Sales - - 9,000 33,000 39,000) Constant Income from Repair Facilities - - 2,200 4,500 4,500) TOTAL , ,500 1,122,500 1,122,500 1,122,500 1,122,500 1,122,500 1,122,500 1,122,500 1,122,500 1,122,500 OPERATING COSTS Purchase of Fish from Coop , , ,500) 10 Skipjack Boats (P.N.) - - ) 56, , ,295) Constant 2 Carriers (P.N.) Shore Facilities ,670 47, ) TOTAL , , , , , , , , , , ,795 OPERATING INCOME , , , , , , , , , , ,705 Depreciation , , , , , , , , , ,320 62,274 Interest , , , ,943 1_,O576 91, , 318 GROSS INCOME - - (33,484) 209, , ,722 Of which exempted from Tax: (750) (31,240) (57,410) (57,410) (56,660) (26,170) Taxable Gross Income , , , , , , , , , ,431 Tax , , , , , ,094 NET INCOME 196, , , , , , , , , ,337 Financial Rate of Return: 34 % &3

146 INDONESIA FISHERIES CREDIT PROJECI Projected Cash Flow: F.N.: State Fisheries Enterprise. Maluku (Rp Thousands) SOURCES OF FUNDS Year TOTAL 1. Funds Generated , , , , , , , , , , ,611 4,296, Project Loan 40, , ,007 78,773 7,055 1,340, Equity , , 765 TOTAL SOURCES OF FUNDS 148, , , , , , , , , , , , ,611 5,850,918 APPLICATION OF FUNDS 1. Project Investments 48,200 1,330, , ,200 33,200 8, Tncresnental Working Capital ,300 (94,300) 3. Debt Service Amortization , , , , , , , , ,773-1,340,410 Interest , , , , , ,020,371 Total Debt Service , _ , , , ,091 2,360,781 TOTAL APPLICATION OF FUNDS 48, , , , , , , , , , , ,091 (94,300) 3,691,581 NET INFLOW (OUTFLOW) (a) Annual 100,185 (95,269) 97, , , , , , , , , , ,911 (b) Cumulative 100,185 4, , , , , ,636 1,119,075 1,280,769 1,433,788 1,577,092 1,715,426 2,159,337 2,159,337 DEBT SERVICE RATIO ,56

147 INDONESIA FISHERIES CREDIT PROJECT Projected Income Statement: 30 GT Wooden Skipjack Boat (Co-op)-One Unit (Rp Thousands) Year NET REVENUES FROM SALES - 22,050 24,750 29,250 29,250 29,250 29,250 29,250 29,250 29,250 29,250 29,250 OPERATING COSTS: Fuel & Lubricants - 1,315 1,315 1,315) Ice - 2,940 3,300 3,900) Bait - 2,450 2,750 3,250) Wages - 5,655 6,348 7,503) Constant Commissions - 2,205 2,475 2,926) Repair & Maintenance - 1,125 1,125 1,125) Insurance - 1,350 1,350 1,350) Overheads - 1,200 1,200 1,200) TOTAL OPERATING COSTS - 18,240 19,863 22,569 22,569 22,569 22,569 22,569 22,569 22,569 22,569 22,569 OPERATING INCOME - 3,810 4,887 6,681 6,681 6,681 6,681 6,681 6,681 6,681 6,681 6,681 Depreciation - 2,250 2,250 2,250 2,250 2,250 2,250 2,250 2,250 2,250 2,250 - Interest - 2,584 2,584 2,437 2,272 2,087 1, ,388 1, GROSS INCOME - (1,024) 53 1,994 2,159 2,344 2,551 2,783 3,043 3,334 3,659 6,274 Taxes - _ NET INCOME - (1,024) 53 1,789 1,727 1,875 2,041 2,226 2,434 2,667 2,927 5,019 Financial Rate of Return: 20% M1I t.3 X

148 INDONESIA FISHERIES CREDIT PROJECT Projected Cash Flow: 30 GT Wooden Skipjack Boat (Co-op)-One Unit (Rp Thousands) SOURCES OF FUNDS Year TOTAL 1. Funds Generated - 3,810 4,887 6,476 6,249 6,212 6,171 6,124 6,072 6,014 5,949 5,426 63, Project Loan 19,125 2, , Equity 3, TOTAL SOURCES OF FUNDS 22,723 6,223 4,887 6,476 6,249 6,212 6,171 6,124 6,072 6,014 5,949 5,426 88,526 APPLICATION OF FUNDS 1. Project Investments 22, , Incremental Working Capital - 1, (1,488) - 3. Debt Service Amortization - - 1,228 1,375 1,540 1,725 1,932 2,164 2,424 2,715 3,040 3,395 21,538 Interest ,584 2,437 2,272 2, ,648 1,388 1, ,156 Total Debt Service - 2,584 3,812 3,812 3,812 3,812 3,812 3,812 3,812 3,812 3,812 3,802 40,694 TOTAL APPLICATION OF FUNDS 22,500 4,072 3,812 3,812 3,812 3,812 3,812 3,812 3,812 3,812 3,812 2,314 63,194 NET INFLOW (OUTFLOW) (a) Annual 223 2,151 1,075 2,664 2,437 2,400 2,359 2,312 2,260 2,202 2,137 3,112 (b) Cumulative 223 2,374 3,449 6,113 8,550 10,950 13,309 15,621 17,881 20,083 22,220 25,332 25,332 DEBT SERVICE RATIO I

149 INDONESIA FISHERIES CREDIT IROJECT Projected Income Statement: Beach Seine-One Unit (Rp Thousands) Year NET REVENUES FROM FISH SALES 900 1,020 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 OPERATING COSTS: Lamp Oil 6 6 6) Repair & Maintenance 6 6 6) Constant Wages ) TOTAL OPERATING COSTS ,050 1,050 1,050 1,050 1,050 1,050 1,050 1,050 OPERATING INCOME Depreciation Interest GROSS INCOME Taxes _- NET INCOME Financial Rate of Return: 36% Mu

150 INDONESIA FISHERIES CREDIT PROJECT Proiected Cash Flow: Beach Seine-One Unit (Rp) SOURCES OF FUNDS Year Total 1. Funds Generated 120, , , , , , , , , ,000 1,450, Project Loan 475, , Equity 25, ,000 TOTAL SOURCES OF FUNDS 620, , , , , , , , , ,000 1,950,000 APPLICATION OF FUNDS 1. Project Investments 500, , Incremental Working Capital Debt Service Amortization 27,075 30,324 33,963 38,039 42,604 47,716 53,442 59,855 67,038 74, ,000 Interest 57, , , ,750 Total Debt Service ,075 84,075 84,075 84,075 84, ,075 84,075 84, ,750 TOTAL APPLICATION OF FUNDS 584,075 84,075 84,075 84,075 84,075 84,075 84,075 84,075 84,075 84,075 1,340,750 NET INFLOW (OUTFLOW) (a) Annual 35,925 45,925 65,925 65,925 65,925 65,925 65,925 65,925 65,925 65,925 (b) Cumulative 35,925 81, , , , , , , , , ,250 DEBT SERVICE RATIO v fd

151 INDONESIA FISHERIES CREDIT PROJECT Projected Income Statement: 30 GT Wooden Trawler-One Unit (Rp Thousands) Year NET REVENUES FROM FISH SALES - 17,435 19,373 19,373 19,373 19,373 19,373 19,373 19,373 19,373 19,373 OPERATING COSTS: Commission ) Fuel & Lubricants - 1,346 1,346 1,346) Ice ) Salt - 1,260 1,400 1,400) Wage - 2,984 3,308 3,308) Repair & Maintenance - 1,050 1,050 1,050) Constant Water _ ) Food - 1,050 1,050 1,050) Fishing Gear ) Insurance - 1,260 1,260 1,260) Overhead - 1,200 1,200 1,200) TOTAL OPERATING COSTS - 12,698 13,343 13,343 13,343 13,343 13,343 13,343 13,343 13,343 13,343 OPERATING INCOME - 4,737 6,030 6,030 6,030 6,030 6,030 6,030 6,030 6,030 6,030 Depreciation - 2,100 2,100 2,100 2,100 2,100 2,100 2,100 2,100 2,100 2,100 Interest - 2, X70 1,994 1,796 1,574 1, GROSS INCOME ,602 1,760 1,936 2,134 2,356 2,603 2,881 3,192 3,541 Of which exempted from tax (5% of investment for 4 yrs) - (1,050) (1,050) (1,050) (1,050) TAXABLE GROSS INCOME - (881) (329) ,134 2,356 2,603 2,881 3,192 3,541 Tax (45% of GI) ,060 1,171 1,296 1,436 1,593 o F-Ix NET INCOME ,589 1,537 1,174 1,296 1,432 1,585 1,756 1,948 Z Financial Rate of Return: 20%

152 INDONESIA FISHERIES CREDIT PROJECT Projected Cash Flow: 30 GT Wooden Trawler-One Unit (Rp Thousands) SOURCES OF FUNDS Year TOTAL 1. Funds Generated - 4,737 6,030 5,859 5,631 5,070 4,970 4,859 4,734 4,594 4,437 50, Project Loan 17,850 2, Equity 20, _441_ TOTAL SOURCES OF FUNDS 21,291 7,456 6,030 5,859 5,631 5,070 4,970 4,859 4,734 4,594 4,437 74,931 APPLICATION OF FUNDS 1. Project Investments 21,000-21, Incremental Working Capital - 1,936 (1,936) 3. Debt - Service Amortization - 1,172 1,313 1,470 1,647 1,845 2,066 2,314 2,592 2,903 3,251 20,573 Interest - 2, , ,795 1, , ,827 Total Debt Service L640Q TOTAL APPLICATION OF FUNDS 21,000 5,576 3,640 3,640 3,640 3,640 3,640 3,640 3,640 3,640 1,704 57,400 NET INFLOW (OUTFLOW) (a) Annual 291 1,880 2,390 2,219 1,991 1,430 1,330 1,219 1, ,733 (b) Cumulative 291 2,171 4,561 6,780 8,771 10,201 11,531 12,750 13,844 14,798 17,531 17,531 DEBT SERVICE RATIO t,j F- I M M

153 INDONESIA FISHERIES CREDIT PROJECT Projected Income Statement: South Sulawesi: Dwvelopment of Fish pond: 5 ha (Rp Thousands) Year ol/ SALES OF FISH AND SHRIMP OPERATING COSTS: Fish Fry ) Fertilizer ) Labor )Constant Miscellaneous ) _ TOTAL OPERATING COSTS OPERATING INCOME INCREMENTAL OPERATING INCOME Depreciation Interest GROSS INCOME GROSS INCREMENTAL INCOME (11.6) (11.1) Gross income exempted from tax Taxable Gross Income (6.6) (6.1) Tax NET INCOME NET INCREMENTAL INCOME (11.6) (11.1) Financial Rate of Return: 22% NOTE: 1/ Pre-investment period I- H,

154 INDONESIA FISHERIES CREDIT PROJECT Projected Cash Flow: South Sulawesi: Development of Fish Pond: 5 ha (Rp Thousands) SOURCES OF FUNDS Year TOTAL 1. Funds Generated , Project Loan Equity TOTAL SOURCES OF FUNDS ,526.0 APPLICATION OF FUNDS 1. Project Investments Incremental Working Capital (20.3) 3. Debt Service Interest Amortization Total Debt Service TOTAL APPLICATION OF FUNDS (20.3) NET INFLOW (OUTFLOW) (a) Annual (b) Cumulative DEBT SERVICE RATIO I-

155 INDONESIA FISHERIES CREDIT PROJECT Projected Income Statement: South Sulawesi: Development of Shrimp Pond: 5 ha (Rp Thousands) Year ol/ SALES OF FISH AND SHRIMP OPERATING COSTS: Fish Fry ) Fertilizers ) Labor ) Constant Miscellaneous ) TOTAL OPERATING COSTS OPERATING INCOME INCREMENTAL OPERATING INCOME Depreciation Interest GROSS INCOME GROSS INCREMENTAL INCOME Gross Income exempted from tax Taxable Gross Income Tax NET INCOME NET INCREMENTAL INCOME Financial Rate of Return: 26% NOTE: 1/ Pre-investment period. IH?_

156 INDONESIA FISHERIES CREDIT PROJECT Projected Cash Flow: South Sulawesi: Development of Shrimp Pond: 5 ha (Rp Thousands) Year TOTAL SOURCES OF FUNDS 1. Funds Generated , Project Loan Equity TOTAL SOURCES OF FUNDS ,186.3 APPLICATION OF FUNDS 1. Project Investments Incremental Working Capital (120.2) 3. Debt Service Interest Amortization _ _ Total Debt Service TOTAL APPLICATION OF FUNDS (120.2) 1,443.8 NET INFLOW (OUTFLOW) (a) Annual (b) Cumulative , , ,742.5 DEBT SERVICE RATIO I-3 -

157 INDONESIA FISHERIES CREDIT PR3JECT Projected Income Statement: Java: Development of Fish Pond: 1 ha (Rp Thousands) Year 1/ SALES OF FISH AND SHRIMP OPERATING COSTS: Fish Fry ) Fertilizer ) Labor ) Constant Miscellaneous ) - - TOTAL OPERATING COSTS OPERATING INCOME INCREMENTAL OPERATING INCOME Depreciation Interest GROSS INCOME GROSS INCREMENTAL INCOME (3.5) Gross income exempted from tax Taxable Gross Income Tax NET INCOME NET INCREMENTAL INCOME (3.5) Financial Rate of Return: 22% NOTE: 1/ Pre-investment period. X w > LO-

158 INDONESIA FISHERIES CREDIT PROJECT Projected Cash Flow: Java: Development of Fish Pond: 1 ha (Rp Thousands) Year TOTAL SOURCES OF FUNDS 1. Funds Generated Project Loan Equity TOTAL SOURCES OF FUNDS APPLICATION OF FUNDS 1. Project Investments Incremental Working Capital (4.0) 3. Debt Service Interest Amortization Total Debt Service TOTAL APPLICATION OF FUNDS ln.6 (4.0) NET INFLOW (OUTFLOW) (a) Annual (b) Cumulative DEBT SERVICE RATIO >e

159 INDONESIA FISHERIES CREDIT PROJECT Projected Income Statement: Java: Development of Shrimp Pond: 1 ha (Rp Thousands) Year SALES OF FISH AND SHRIMP OPERATING COSTS: Fish Fry ) Fertilizer ) Labor ) Constant Miscellaneous ) TOTAL OPERATING COSTS OPERATING INCOME INCREMENTAL OPERATING INCOME Depreciation Interest GROSS INCOME GROSS INCREMENTAL INCOME Gross Income exempted from tax Taxable Gross Income Tax NET INCOME NET INCREMENTAL INCOME Financial Rate of Return: 38% NOTE: 1/ Pre-investment period. I-.4

160 INDONESIA FISHERIES CREDIT PROJECT Projected Cash Flow: Java: Development of Shrimp Pond: 1 ha (Rp Thousands) Year TOTAL SOURCES OF FUNDS 1. Funds Generated Project Loan Equity TOTAL SOURCES OF FUNDS APPLICATION OF FUNDS 1. Project Investments Incremental Working Capital (20.3) - 3. Debt Service Interest Amortization Total Debt Service TOTAL APPLICATON OF FUNDS (20.3) NET INFLOW (OUTFLOW) (a) Annual (b) Cumulative DEBT SERVICE RATIO "3 M I- tz* m td >

161 INDONESIA FISHERIES CREDIT PROJECT Projected Income Statament: 5T Ice Plant/15T Ice Store: One Unit (Rp Thousands) Year SALES OF ICE - 9, , , , , , , , , ,000.0 OPERATING COSTS: Staff Salary ) Insurance ) Generator Running Costs ) Lubricants, Ammonia, Salt ) Constant Maintenance & Repair ) Labor ) Overheads ) TOTAL OPERATING COSTS - 2, , , , , , , , , ,700.0 OPERATING INCOME - 6, , , , , , , , , ,300.0 Depreciation - 1, , ,850,0 1, , , , , , ,850.0 Interest , , , , , GROSS INCOME - 2, , , , , , , , , ,101.7 Tax J NET INCOME - 2, , , , , , , , , ,896.6 Financial Rate of Return: 30% r,i

162 INDONESIA FISHERIES CREDIT PROJECT Projected Cash Flow: 5T Ice Plant/15T Ice Store: One Unit (Rp Thousands) Year TOTAL SOURCES OF FUNDS 1. Funds Generated 6, , , , , , , , , , , Project Loan 16, , , Equity 2, _ 7 _ 2,8987 TOTAL SOURCES OF FUNDS 19, , , , , , , , , , , ,779.2 APPLICATION OF FUNDS 1. Project Investments 18, , Incremental Working Capital (833.0) 3. Debt Service Interst - 2, , , , , , , ,160.9 Amortization , , , , , , , , ,397.5 Total Debt Service - 3,256.43, , TOTAL APPLICATION OF FUNDS 19, , , , , , , , , , , ,058.4 NET INFLOW (OUTFLOW) (a) Annual (8.0) 4, , , , , , , , , ,677.1 (b) Cumulative (8.0) 4, , , , , , , , , , ,720.8 DEBT SERVICE RATIO ,88 o-z 0-0

163 ANNEX 13 Page 1 INDONESIA FISHERIES CREDIT PROJECT Economic Rate of Return Calculations 1. The economic rates of return from the project investments have been calculated as shown in Table The following assumptions have been made: (a) Current prices have been used to estimate benefits; (b) Current price levels net of import, excise, and sales taxes have been used for investments and in calculating operating costs, with allowance for cost increases excluded; (c) The labor component has been costed at the prevailing wage rate; (d) Cost of the experts (the two engineers, naval architect and management specialist) were charged to PNM's operations; and (e) Costs of the three pond fisheries experts and demonstration ponds were not charged to the pond improvement component of the project. 2. Based on these assumptions, the economic rates of return would range from 22% to 42%. To test the project components against changes in investment costs and production results, a sensitivity analysis has been carried out. By increasing the cost of investments by 30% without increasing the value of the benefits, the rates would be from 15% to 29%. The figures would be 16% to 31% if the value of the net benefits were to decline by 20% without changing the costs of the investments.

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165 INDONESIA FISHERIES CREDIT PROJECT Economic Rates of Return (Rp Thousands) Year P.N. State Fisheries Enterprise, Maluku Net Incremental Income , , , , , , , , , , ,204 Capital Investment 48, , ,500 33,200 8,300 - Net Incremental Flow (48,200) (667,900) (549,892) 449, , , , , , , , , ,204 Economic Rate of Return: 347b GT Skipjack Fishing Vessel (Coop) Net Incremental Income - 3,823 4,900 6,694 6,694 6,694 6,694 6,694 6,694 6,694 6,694 8,182 Capital Investment 22,500 1,488 - Net Incremental Flow (22,500) 2,335 4,900 6,694 6,694 6, ,694 6,694 6,694 6,694 8,182 Economic Rate of Return: 22% 3. Beach Seine Net Incremental Income Capital Investment 445 Net Incremental Flow (325) I Economic Rate of Return: 42% GT Trawler Net Incremental Income - 4,775 6,043 6,043 6,043 6,043 6,043 6,043 6,043 6,043 7,979 Capital Investment 21,000 1,936 Net Incremental Flow (21,000) 2,839 6,043 6,043 6,043 6,043 6,043 6,043 6,043 6,043 7,979 Economic Rate of Return: 22% 5. Ice Plant/Ice Store Net Incremental Income - 6,309 6,309 6,309 6,309 6,309 6,309 6,309 6,309 6,309 7,142 Capital Investment l-, Net Incremental Flow (19,333) 69 6,309 6,309 6,309 6,309 6, ,309 6,309 7,142 Economic Rate of Return: 31% 6. Java: Fish Pond: I Ha Net Incremental Income Capital Investment Net Incremental Flow (59.0) ,1 Economic Rate of Return: 237, 7. Java: Shrimp Pond: I Ha Net Incremental Income , Capital Investment Net Incremental Flow (114.5) Economic Rate of Return: 39!. 8. South Sulawesi: Fish Pond: 5 Ha Net Incremental Income , Capital Investment Net Incremental Flow (296.8) Economic Rate of Return: 24% 9. South Sulawesi: Shrimp Pond: 5 Ha Net Incremental Income Capital Investment Net Incremental Flow (581.8) , Economic Rate of Return: 28%

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169 127 30; 12. 5wXtHAILAND. r 9 < 04t4, P OCI can M.IOAPORE -v ~~~KALIMANTAN IRtAN A ~~~~(BORNEO) {ti S A c CERAM WS 30 INDIAN VE OCEAN JakartaJAAFOE B towmatn i( R onal Bloundaries g/ bolnrio_ en> :;he- :hi unnl -JOnu 7he boundaries shon -m ihis map do sot.iply endorsement or acceptance by the World Bank and its affiliates KANG <<2 t ~~~~~~~~~~~~~C E R A M Piru Bay 3030' INDONESIA X waaioh AU SAPARUA FISHERIES CREDIT a NUSA LAUT PROJECT E t ~~~~~AIRPORT X moa ala B A IV D A S F A LOCATION -OF FACILITIES AT AMBON Third Class Roads Provincial Roads j o e is II L ~~~~~~KILOMETERS 0 to20 30 MILEs <6 12r ' 120 0