WEST JAVA TRANSMISSION PROJECTS I AND II; LOANS 497-H-028 AND 497-W-032; USAID/INDONESIA

TWO TWO LOANS PROVIDED THE STATE ELECTRICITY AUTHORITY (PLN) WITH FUNDS FOR EXPANDING AND REHABILITATING TRANSMISSION AND DISTRIBUTION FACILITIES IN WEST JAVA. AUDIT INCLUDED REVIEW OF DOCUMENTATION, SITE VISITS, AND DISCUSSIONS WITH RESPONSIBLE OFFICIALS. HIGH INFLATION FORCED PLN TO REDUCE PROJECT SCOPE. THE ELIMINATED PARTS OF BOTH LOANS WERE SUBSEQUENTLY FINANCED BY OTHER DONORS (FRENCH, DANISH, AND IBRD). PROJECT HAS SUFFERED CONSTRUCTION DELAYS, COST OVERRUNS, MATERIAL DELAYS, HIGH TURNOVER OF KEY PERSONNEL AND PROBLEMS IN ACQUIRING RIGHTS-OF- WAY FOR TRNSMISSIONS LINES. THESE DETRIMENTAL FACTORS, WHILE COMMON TO SUCH MASSIVE INFRASTRUCTURE PROJECTS, DO INDICATE THAT (1) PLANNERS HAVE NOT BEEN VERY REALISTIC IN DISCOUNTING THE CAPACITIES OF INVOLVED INDONESIAN ORGANIZATIONS, AND (2) MANAGERS HAVE NOT BEEN PERSISTENT ENOUGH IN MINIMIZING IMPEDIMENTS, PARTICULARLY AT A TIME WHEN INFLATION PLACES A PREMIUM ON REACHING OBJECTIVES ON SCHEDULE. PROJECT COMPLETION DATES HAVE BEEN REVISED TO 4/80 FOR PHASE I AND 7/81 FOR PHASE II. PROJECT IS THUS EXPECTED TO BE COMPLETED 4 YEARS LATE, WITH A REDUCED SCOPE, AND AT A HIGHER COST. AUDITORS RECOMMEND THAT USAID/INDONESIA (1) STUDY THE TECHNIQUES USED BY THE PRINCIPAL CONTRACTOR (CTM OF BOSTON, MA) TO EXPEDITE IMPORTATION OF MATERIALS AND EXTEND THIS TECHNIQUE TO ALL OTHER MATERIAL-INTENSIVE PROJECTS IN INDONESIA; (2) DEVOTE MORE TIME TO RESOLVING THE RIGHTS-OF-WAY BOTTLENECK; (3) URGE PLN TO AUDIT CTM TIMEKEEPING RECORDS AND OTHER DIRECT COSTS; (4) PRODUCE A MASTER CHECK LIST TO ENSURE THAT ALL DOCUMENTS AND REPORTS REQUIRED BY THE 2 LOAN AGREEMENTS ARE SUBMITTED ON TIME; (5) ASK PLN TO REDUCE ITS CONNECTION CHARGE SO THAT IT IS WITHIN THE MEANS OF THE RURAL CONSUMER; AND (6) URGE PLN TO INTENSIFY ITS LINE TAPPINGS PREVENTION PROGRAM. IN ADDITION, AUDITORS RECOMMEND REVISING FUTURE LOAN AGREEMENTS SO THAT THEY FOLLOW THE GENERAL FORMAT USED BY OTHER DONORS IN INDONESIA, PARTICULARLY WITH RESPECT TO INSISTING ON CERTAIN BASIC FINANCIAL DISCIPLINES.