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A.I.D. LOAN NO. 497-T-083

LOAN NO. 497-T-083A

LOAN NO. 497-T-083B

LOAN NO. 497-T-083C

A.I.D. PROJECT NO. 497-0311

AMENDMENT NO. 3 TO

LOAN AGREEMENl

BETWEEN THE

REPUBLIC OF INDONESIA

AND THE

UNITED STATES OF AMERICA

FOR

UPLAND AGRICULTURE AND CONSERVATION

This AMENDMENT NO. 3, is entered into between the REPUBLIC OF

INDONESIA ("Borrower") and the UNITED STATES OF AMERICA, acting

through the AGENCY FOR INTERNATIONAL DEVELOPMENT ("A.I.D.").

WHEREAS, the Borrower and A.I.D. entered into an Upland

Agriculture and Conservation Project Loan Agreement designated as

A.I.D. Loan No. 497-T-083 on July 30, 1984, which was amended on

September 21, 1984 and on December 24, 1984 ("Loan Agreement"),

whereby A.I.D. agreed to lend to the Borrower up to Thirteen Million

Nine Hundred Thousand United States ("U.S.") Dollars ($13,900,000)

("Loan"); and

WHEREAS, the Borrower and A.I.D. desire to amend the Loan

Agreement to decrease the Borrower's contribution to the Project, to

revise the Agreement's Financial Plan, and to make related changes;

NOW THEREFORE, the Borrower and A.I.D. hereby agree as follows:

1.

Section 3.2., Borrowers Resources for the Project, paragraph

(b) is revised to read as follows;

"(b) The resources provided by the Borrower for the Project

will be not less than the equivalent of U.S.$11,622,000, including

costs borne on an "in-kind" basis."

2.

Pages 5, 11 and 12 of Annex I, Amplified Project

2

-3.

A revised Financial Plan is attached to this Amendment as

Attachment 1 to Annex I.

4.

Except as amended herein, the Loan Agreement remains in full

force and effect in accordance with all of its terms.

IN WITNESS WHEREOF, the Borrower and the United States of

America, each acting through its respective duly authorized

representative,

have

caused this Amendment No. 3 to be signed in

their names and delivered as of the date first written above.

REPUBLIC OF INDONESIA

Signed

Moeslim Sja'roni

Acting Director General

for Foreign Economic Relations

Department of Foreign Affairs

UNITED STATES OF AMERICA

Signed

David N. Merrill

Director

with necessary materials (such as grasses, seed, fertilizer and

pesticide) for the initial year's production. Appropriate inputs will be provided during the second year according to the needs of the farming system the farmers adopt. Subsidies will be provided for approximately two years. Funding for farm inputs, after the initial subsidy period, will be in the form of credit from other sources. The Parties to this Agreement will focus their credit activities on the project areas and on the problem of upland management.

AID funds may be used for equipment and farm inputs, and other approved local currency costs. The IBRD will also finance a portion of

local costs for this component.

C. Human Resources Development

This component includes workshops, intensive technical courses, newsletters, technical visitations, demonstration visits and handbooks for extension workers, farmers, community leaders and technical and managerial staff. In addition, approximately 40 field extension agents will receive diplomas in Upland Farming Extension and Soil Conservation from Indonesian schools; 20 project personnel will be trained in Upland management and farming systems to the M.S. level at Indonesian universities and 16 project personnel will be trained abroad to the M.S. level. During the first year of the Project an assessment will be made of skills needed. At the same time, a personnel management system that maintains up to date information on individuals' experience and training will be instituted.

Training will emphasize practical applications of technology and will utilize field exercise as the primary instruction mode. The

training effort will be implemented by utilizing existing facilities, experienced staff and trainers, and on-going programs when possible. The Project also includes support for these elements if necessary. IBRD and AID funds will be used for this activity.

D. Conservation Access Roads

Access roads are required to facilitate the movement of materials into demonstration farms and expansion areas, and the movement of farm production out of these areas to markets. Approximately 475 kilometers of access roads will be constructed or upgraded in the eight project districts during the life of the Project. The location and rate of construction of access roads in the designated areas will depend on the rate of development in these areas. In addition to construction within the project areas, the Project includes funds to link the

expansion area roads to the existing road net and to upgrade sections of the existing road net that inhibit movement from expansion areas to markets.

·-11

Other contracts, generally under $100,000, for management information and evaluation studies and for other activities supporting project

implementation will also be required. The project may also contract with Indonesian-based financial consultants to assist in the development of appropriate financial management systems and to carry out training of project staff in the application of these systems.

b. Commodities. Commodities such as office equipment, data processing equipment, agriculture processing equipment, vehicles, etc. will be financed by AID.

c. Training. Training, both in-country and international, will be financed by IBRD and by AID as appropriate. Use of IBRD funds will follow IBRD financial procedures. Use of AID funds will follow AID

procedures. The government will utilize direct payments from donor funds when beneficial for effective implementation, otherwise training will be prefinanced. Direct payments are deemed effective for formal academic training, overseas short courses, international travel, preparation for overseas training, etc.

d. Construction. All in-country construction for facilities associated with the Farming Systems Research and Sustainable Upland Farming Systems components will be financed by the IBRD and the

Government, and will follow applicable IBRD financial procedures. In addition, the Conservation Access Road component will be financed by the IBRD and the Government. Road construction will be pre-financed by the Government. It is anticipated that up to 60% of costs will be reimbursed by the IBRD.

e. Joint IBRD/AID Local Currency Financing. Local currency costs for three project components, Farming Systems Research, Sustainable Upland Farming Systems Pilot Projects and Human Resources Development, will be jointly financed by AID, IBRD and the Government. The financial management procedure to be applied for each component is described below.

(1) Farming Systems Research (FSR). It is anticipated that IBRD will finance up to 50% of the annual operational research budget for FSR. AID and the Government will provide the remainder of the budget. AARD will 100% pre-finance the annual research budget, and the donors will reimburse the amounts agreed upon in Project Implementation Letters.

(2) Sustainable Upland Farming Systems Pilot Projects (SUFS). AID and IBRD will jointly finance the annual subsidy provided for

demonstration farms and expansion activities under the SUFS component on a reimbursement basis.

(3) Human Resources Development (HRD). Both IBRD and AID will fund costs at amounts agreed to in Project Implementation Letters.

Government will prefinance local costs, with the exceptions of direct payments by the donors for academic training and preparation (See

, .-,

for specific training activities when necessary. It is anticipated that IBRD will fund up to 60% of the total HRD program. AID and Government will fund the remainder.

f. Project Innovation Fund (PIF). AID will finance the PIF costs from the grant. Disbursements under the PIF will be made upon certification by the AID project officer. Separate accounts will be maintained by recipient institutions in a manner acceptable in form and

content to AID and the GOI.

g. National Executive Secretariat (EXSEC). AID funds will finance part of the operational costs of a joint support staff for the EXSEC.

h. Policy Studies. AID funds will finance policy studies. Host country contracts will hire Indonesian and foreign technical assistance to carry out the studies. AID loan funds will be used for host country contracts following the procedures of AID Handbook 11.

B. Budget

The following is an illustrative financial plan. Adjustments may be made between line items by the representatives of the Parties named in the text of the Agreement without formal amendment of this

Agreement so long as (a) the Borrower/Grantee's contribution as stated in the text of the Agreement is not decreased a nd (b) AID's contribution as stated in the text of the Agreement is not increased. Future

ANNEX I

Attachment 1

(Revised)

FINANCIAL PLAN

UPLAND AGRICUL1URE AND CONSERVATION PROJECT

(in US Dollars 000)

---L I F E

0 F

P R O

J

E

C T

I

Project Component

A ID

I

GOI

I

IBRD

I

TOTAL

I

Grant

I

Loan

I

I

Loan

I

I

I

I. Institutional DeveloEment

I

4400

8110

I

1962

I

0

I

14472

I

National Level Executive

I

I

I

-

I

- -

I

Secretariat

I

2C5

I

132

I

I

337

I

Provincial Level Org. &Mgt.

I

377

I

745

I

I

1122

I

District Level Org. &Mgt.

I

328

I

963

I

I

1291

I

Technical Assistance

I

4400

6279

I

0

I

I

10679

I

Soil Survey

I

621

I

122

I

I

743

I

Policy Studies

I

300

I

0

I

I

300

I

I

I

I

I

I

II.

Farming Ststems Research

I

707

I

1000

ｉｾ＠

I

3507

I

lnvestmen

171 --0 l51

Research, Training and

I

I

I

I

Recurrent Costs

I

536

I

1000

1720

I

3256

I

I

I

I

I

III. SUFS Pilot Projects

I

3120

I

4715

2900

I

10735

I

Recurrent Costs

I

- 0 1 3150

I

3150

I

SUFS Investment and Subsidy

I

3120

I

1565

2900

I

7585

I

I

I

I

I

IV. Human Resources DevelO£ID.

I

400

531

1400

I

2331

I

I

I

I

v.

Conservation Access Roads

I

70

1731

-,

noo

I

4501

I

I

..

VI. Project Innovation Fund

500

I

500

I

,.._ t

I

I

VII. Contingencies/Others

100

1493

1683

2500

I

5776

I

I

VIII. TOTAL PROJECT COSTS

5000

13900

11622 11300

41822

I