|Project Rationale and Linkage to Country/Regional Strategy
1. The proposed Project will result in increased agricultural productivity through improved management of irrigated agriculture in selected provinces and districts in Indonesia. The Project will address the following government priorities (i) increased rice production to achieve food security; (ii) diversified and higher value cropping to improve rural livelihoods, and (iii) more productive irrigation infrastructure and its sustainable management. The Project will deliver an integrated package of infrastructure, institutional reforms, and capacity development to catalyze sector advances. The Project builds from the Asian Development Bank (ADBs) previous Loans 2064/65 INO: The Participatory Irrigation Sector Project (PISP) that closed 31 December 2012.
2. Food security has been a significant government concern starting from the world price shocks of 2008. Presidential Decree 5 (2011) calls for increased surplus rice production of 10 million tons (about 15%) by 2015 to address food security through a policy of rice self-sufficiency. In 2011, Indonesia produced 65 million tons of rice of which, 95% came from irrigated lands. Overall, production has been growing slowly (about 1% annually) over the last ten years mainly from increases in irrigated area and cropping intensity. However, yields have been generally stagnant for the last 20 years, and productivity gains are slowing and inadequate to meet growing demand and government objectives. Deteriorating infrastructure further compromises productivity mainly due to inadequate O&M and its financing. Since 2005, the area of irrigated area with infrastructure in good condition has declined from 78% to less than 50% today. Additional challenges constrain productivity and include (i) weak and fragmented management among district, provincial and national governments with limited farmer participation ; (ii) underdeveloped planning and management capacity; (iii) ineffective agricultural services and commercialization of agriculture; and (iv) weak water management (irrigation uses 80% of developed water supply). The National Development Planning Ministry (BAPPENAS) and Directorate General of Water Resources (DGWR) support (i) increased investment for irrigated agriculture, and (ii) expanding, deepening and institutionalizing reforms initiated under PISP.
3. The ADB INO Country Partnership Strategy (CPS) 2012 to 2014 has two strategic pillars and both are supported by the Project: (i) inclusive growth and (ii) environmental sustainability with climate change adaptation and mitigation. Agriculture and natural resources (including irrigation) is a CPS sector focus. The ADB sector assessment, strategy and roadmap for agriculture, environment and natural resources states that ADB will (i) will support government food security objectives with investment and agricultural sector reforms, and (ii) support investments in rehabilitation and modernization of irrigation. The Project is consistent with the governments National Medium Term Development Plan 2015 to 2019, which prioritizes development of infrastructure (including irrigation) and food security. The governments master plan for the Acceleration and Expansion of Indonesias Economic Development 2011 2025, promotes (i) food security for consumption and production, (ii) crop diversification, and (iii) agricultural production off Java as key objectives. The Project will provide policy reforms and investment to realize these goals across Indonesia.
4. Lessons learned from the recent ADB supported PISP and other development partners projects in the irrigation subsector indicate that an integrated approach is needed to address above challenges. PISP introduced innovations including: (i) empowered farmer water user associations (WUAs) for management and contracting civil works; (ii) district irrigation commission and plans (RP2I) with asset management and improved budgeting (68% of irrigation is under district control); (iii) improved institutional and fund flow coordination at different levels of government; (iv) agricultural support services delivered through WUAs, and (v) improved water management and O&M practices. Based on PISP innovations the government is adopting the RP2I, contracting WUAs for civil works, and enhanced devolution of management as national policy. The reforms have resulted in improved quality and efficiency of civil works and increased government budgets for irrigation. Importantly, PISP resulted in large productivity increases. Average rice yields in the wet season increased from 5.45 t/ha to 6.53 t/ha (19.8%) and in the dry season from 5.03 t/ha to 6.06 t/ha (19.9%).
5. The government has requested ADB assistance to expand the reforms and rehabilitation across more districts and to include large, national irrigation systems (PISP addressed smaller systems and covered about 30% of the schemes within a district). The Project will continue in some PISP districts and provinces on Java, Sumatra, and Sulawesi to strengthen the WUAs and irrigation commissions and provide additional needed investment, but some districts will be dropped where irrigation was not prioritized and other districts and/or provinces added. The government wants to increase assistance and introduce the reforms in Eastern Indonesia where this has been lacking, so the Project will include a targeted eastern area. ADB has ongoing collaboration with the World Bank and other development partners for irrigated agriculture under government coordination