Document of The World Bank FOR OFFICIAL USE ONLY LE Report No. 56 8 8 PROJECT COMPLETION REPORT INDONESIA: BALI TOURISM PROJECT (CREDIT 479-IND) June 5, 1985 - - - - (0 co U'l - East Asia and Pacific Regional Office This document has a restrlded distribution and may be used by recipients only in the performance of their oflclal duties. Its contents may not otherwise be disclosed without World Bank authorization. ' ~ ~--------------------------------------------------------------------------------~ PROJECT COMPLETION REPORT FOR OFFICIAL USE ONLY INDONESIA BALI TOURISM PROJECT (CREDIT 479-IND) TABLE OF CONTENTS Page No. Preface ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• i Basic Data Sheet•••••••••••••••••••••••••••••••••••••••••••••••••• ii Highlights .•..•.•.•.•.•••...•.••• ~ ••.••••.•...•....•.••.•..•.••••. iii I. INTRODUCTION •••••••••••••••••••••••••••••••••••••••••••• 1 II • PROJECT PREPARATION AND APPRAISAL••••••••••••••••••••••• 2 Project Description••••••••••••••••••••••••••••••••••••• 2 Executing Agencies•••••••••••••••••••••••••••••••••••••• 3 Project Preparation and Appraisal ••••••••••••••••••••••• 3 III. PROJECT IMPLEMENTATION•••••••••••••••••••••••••••••••••• 4 Project Revision •••••••••••••••••••••••••••••••••••••••• 4 Implementation Schedule••••••••••••••••••••••••••••••••• 5 Procurement ••••••••••••••••••••••••••••••••••••••••••••• 5 Costs and Disbursements••••••••••••••••••••••••••••••••• 6 Performance of Consultants and Contractors •••••••••••••• 7 Reporting ••••••••••••••••••••••••••••••••••••••••••••••• 7 IV. INSTITUTIONAL ASPECTS••••••••••••••••••••••••••••••••••• 7 v. FINANCIAL ASPECTS••••••••••••••••••••••••••••••••••••••• 9 VI. HOTEL AND MARKET DEVELOPMENT•••••••••••••••••••••••••••• 9 VII. ECONOMIC RE-EVALUATION•••••••••••••••••••••••••••••••••• 12 Cost and Benefit Assumptions•••••••••••••••••••••••••••• 12 Economic Rate of Return ••••••••••••••••••••••••••••••••• 13 Employment and Balance of Payments Effects •••••••••••••• 13 VIII. BANK PERFORMANCE•••••••••••••••••••••••••••••••••••••••• 14 IX • CONCLUSIONS ••••••••••••••••••••••••••••••••••••••••••••• 14 ., ANNEXES 1. Organizational Chart of BTDC•••••••••••••••••••••••••••• 16 2. Executing Agencies and Project Description •••••••••••••• 17 3. Compliance with Covenants••••••••••••••••••••••••••••••• 19 4a. Comparable Project Costs•••••••••••••••••••••••••••••••• 22 4b. Comparble Project Costs by Executing Agencies ••••••••••• 23 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. .. Table of Contents (cont'd.) Page No. Sa. Cumulative Schedule of Disbursements ••••••••••••••••••.•• 24 Sb. Disbursement of Credit by Executing Agencies •••••••••••• 25 6. Consolidated Balance Sheet of Bali Tourism Development Corporation ••••••••••••••••••••••••••••••• 26 7. Foreign Visitor Arrivals and Expenditures in Indonesia •• 27 8a. Visitor Arrivals in Bali•••••••••••••••••••••••••••••••• 28 8b. Foreign Visitor Arrivals in Bali •••••••••••••••••••••••• 29 9. Projected Foreign Visitor Arrivals and Hotel Room Requirements •••••••••••••••••••••••••••••••••••••••••• 30 lOa. Projections for Hotel Development at Nusa Dua ••••••••••• 31 lOb. Operating Projections for Hotel Development ••••••••••••• 32 lla. Operating Projectins for Bali Tourism Corporation ••••••• 33 llb. Assumptions for Operating Projections ••••••••••••••••••• 34 12. Financial Internal Rate of Return for Bali Tourism Corporation•••••••••••••••••••••••••••••••••••••••••• 36 13. Economic Rate of Return ••••••••••••••••••••••••••••••••• 37 ATTACHMENT Comments Received From Bali Tourism Development Corporation••••••••••••••••••••••••••••••••••••••••••• 38 <. • - i - PROJECT COMPLETION REPORT INDONESIA: BALI TOURISM PROJECT (CREDIT 479-IND) Preface This is a Project Completion Report (PCR) of the Bali Tourism Project for Indonesia, for which Credit 479-IND was approved in June 1974 in the amount of US$16.0 million. About US$1.4 million of the Credit was cancelled in October 1982. Final disbursement for the hotel credit of US$0.4 million was made in July 1984. Attached is the PCR prepared by the Urban and Water Supply Division of the East Asia and Pacific Regional Projects Department (AEPUW). The PCR is based on the findings of a mission in March 1984 and information provided by various Bank staff members involved with the project during its execution. In accordance with the revised project performance reporting procedures this report has been read in the Operations Evaluation Department (OED) but the project was not audited by OED staff. The draft Completion Report was sent to the Borrower for comments. These comments have been incorporated into the PCR and are shown as an attachment to the report. - ii - BASIC DATA SHEET Appr1iul Actual or 1ht Expechtion Currrnt Esti ute -----------·-----:.----------------------------------------------------------------------------------------------------------------------- Totil project cost !USt 1i IIi on! 36.1 37.3 Overrun Ill 3.0 Loa11 110111t IUS I 1i Ilion! 16.0 16.0 8ilbursrd 14.2 Ctnetlltd 1.4 latt pllysiul co1ponrnts cotpltttd 08178 Ob/82 Proportion coeplrted bv abovr date Ill 261 991 Proportion of tilt overrun m 1051 Econ01ic nte of return Ill 191 121 Financiill prrfor1ancr 6ood llnsiti shctory lnsti tuttoul perforunct &ood Ftir OTHER PROJECT DATA Origintl Actud or ltu Phn Revisions Current Estilitt Firit ltntion in tiuhblr January 72 6ovtrnlfnt application ICegotiations April 74 April 74 loard Approval 05/28174 06/04174 Loan agrtttent datt 06/10174 06114174 Efftcti venus dah 06/t4174 12/04174 ClosiniJ dah 08/31179 06130/81-06/30/82 12131/83 8orrowtr Rtpubllc of lndontsia Extcuti ng tgrnc its ITDC, lina ftarqa, Pru1hl, Dtpt. of Al)ricultun Fiscal ynr of borro11er IIISSIOII DATA llonth llo. of No of ftan- Datt of ltu St11t by Ytar 11Hk5 Persons llttks Rtport ------------------------------------------------------------------------------------------------------------------------------- ldtnti fication 04-72 1 2 2 05-04-72 Prepir tti on 1 09-72 I J I IG-12-72 Prrpar1tion 11 1G-72 .5 3 1.5 11-08-72 Preparation III 02-73 3 7 21 04-G3-73 Appr1i s,lJ 1 06-73 4 9 36 05-15-74 Appr•isll 11 ll-73 I 4 4 05-15-74 Tohl 10.5 26 65.5 Suptrvision I 05-74 1 1 1 Suptrvision II 06-74 2 I 2 Suptrvision lJI 07-74 2 3 6 08-27-74 Suprrvision IV 02-75 I 4 4 03-26-75 Supervision V 05-75 I I 1 06-19-75 Suptrvision VI 06-75 1 1 1 07-25-75 Suptrvision Yll 01-76 2.5 2 5 02-23-76 Suptrvision VIII 05-76 1 2 2 06-18-76 . Supervision IX 02-77 2.5 7.5 Ol-14-77 Super vision I 04-77 1.5 I 1.5 06-20-77 Suptrvision II 07-77 2.5 3 7.5 08-04-77 Supervision III 02-78 1 3 3 04-12-18 Suptrvision Ull ll-78 I 2 2 12-28-78 SuptrYision IJV 02·79 1.5 2 3 04-18-79 Suptrvision IV 05-79 I 3 3 06-18-79 Sup•rvision lVI 11-711 2 2 4 12-21-79 ::iUptrYU&on lVII 119·80 1.5 2 l 11-GS-80 Supervision IVlll 02-80 3 I 3 05-07-81 Supervision lll 06·81 2 2 4 08-28-81 Suptrvision n 01·82 1 I l Ol-19-82 Suptrvision Ill 03-82 2.5 I 2.5 04-21-82 Co•plttion 03-84 I 1 1 05-23-84 Tchl 35.5 42 68 CURRENCY EXCHAtlGE RATES Nut of currtny !abbrl!viation) Rupiah !R) ,Year: Appnisal USI1 415 lnttrvrning years avrrigl! usu 555 Co1pltti on yur averaq• ' I USS1 678 - iii - PROJECT COMPLETION REPORT INDONESIA: BALI TOURISM PROJECT (CREDIT 479-IND) Highlights The project, which was the first Bank tourism project in Indonesia, consisted of infrastructure to promote tourism development in Bali, including a 310 ha. tourism estate at Nusa Dua (capable of accommodating hotels with about 2,500 rooms), facilities for hotel training, an access road from the airport, road improvements outside Nusa Dua to serve both tourism and other transportation demands, and technical assistance for implementing the project and the master plan for tourism in Bali. The project's main goal was to develop international tourism in Bali, with the multiple objective of increasing foreign exchange earnings, creating employment, improving income generation and supporting regional development. The project also placed a great emphasis on the importance of protecting the unique social and cultural life as well as the physical evnironment on the island. (Para. 1.01 and 2.02). The project was completed in June 1982, about four years later than anticipated at appraisal. Project start-up was delayed almost two years by procurement problems, late appointment of consultnats and delays in completing the final design of project works. Project content was substantially modified during implementation to minimize overall cost increases. The combined effect of the changes in project design, delays in construction, inflation and the devaluation of the Indonesian Rupiah in 1978 contributed to a 38% overall cost increase as compared with the appraisal estimate. (Para.3.07). The hotel deve.Lopment at Nusa Dua bas been delayed considerably because of the unfavorable investment climate for hotel construction due to the world-wide economic recession following the energy crisis in 1973 and 1979, and also, due to substantial delays in construction of infrastructure for the project. Furthermore, the Government "one-gate" air access policy ·tor Bali has discouraged private investors' interest in hotel construction for the project. The first 450-room Nusa Dua Beach Hotel was constructed and opened for operation in May 1983. The construction of other two hotels for a total of 900 rooms was started with completion scheduled for end-1984 and 1985. In addition, the construction of another hotel with 350 rooms is due to start in mid- 1984. The current prospects for hotel development at Nusa Dua are good, with the opening of 1,700 rooms by 1986 and about 3,000 rooms by 1989. To achieve this target, the Government has been making considerable promotional efforts for the development of international tourism in Bali, including the improvement of air access by allowing international air carriers to fly to Bali, with both regular and charter flights. (Para. 6.01-6.03). - iv - Given the historical growth trends in overall foreign visitor traffic to Indonesia and taking into account the expected improvement of air access to Bali, the future foreign visitor traffic to the island has been projected at an average growth rate in the range of 6.5%-11.0% for the next ten years, 1984-93. The conservative projection indicates that foreign visitor traffic to Bali would increase by 6.5% on annual average to about 500,000 visitor arrivals in 1988 and further to 680,000 arrivals in 1993. (Para. 6.05). Because of the delays encountered in project implementation as well as a much slower development of hotels for the project than expected, and also due to much higher capital costs for hotel investment than anticipated at appraisal, the reevaluation (based on a 65% growth rate in foreign visitors) indicates a considerably low economic rate of return of 6% as compared with the 19% calculated in the appraisal. (Para. 7.06). The economic viability of this type of an integrated tourism project is very sensitive to changes in the worldwide economic situation. In this connection, the Bank should have been more cautious in its demand projections, more conservative in project design and obtained firmer assurances from private hotel investors before proceeding with such an ambitious project. (Para.8.03). In terms of goals and resource mobilization, the Bali Toursim Project constitutes an original and ambitious project. Its success will be measured in the coming five to ten years according to the actual growth of tourism accommodation capacity and tourist arrivals and revenues in the project area. Environmental control and integrated physical and economic planning stand out among the major project achievements and are instrumental to an optimal growth. To ensure that these achievements remain a lasting legacy of the project, it is essential that the institutions built for the project implementation stay in place and progressively shift from construction to monitoring and supervision activities. Government is aware of this need and is taking measures to this effect. (Para. 9.01 (f)). INDONESIA BALI TOURISM PROJECT (CREDIT 479-IND) Project Completion Report I. INTRODUCTION 1.01 The main goal of this project was to develop tourism in Bali, par~ ticularly international tourism, with the multiple objective of increasing foreign exchange earnings, creating employment, improving income generation and supporting regional development. The project also placed a great emphasis on the importance of protecting the unique social and cultural life as well as the physical environment on the island while maximizing the benefits from the expansion of the tourism industry in Bali. 1.02 At the time of appraisal in 1973, Bali's population of about 2.2 million was unevenly distributed, reflecting the community's dependence on agricultural land. While the population grew at a rate of about 2% per annum , the scope for additional agricultural production and employment was limited by the severe pressure of population on the land. In these circumstances, tourism had (and still has) high development priority for the island a s a principal means of expanding productive activity and employment in the future. Tourism in Indonesia 1.03 At appraisal, the development of tourism in Indonesia was still a t an early stage, although the number of visitor arrivals expanded from only some 26,400 in 1967 to about 300,000 in 1973. This rapid growth in the number of visitors (at a rate of 50% per annum during the period), was a result of the increased business traffic generated by expanded economic activity and a growing number of vacation visitors. About 22% of foreign visitors were from Western European countries, 20% from the United States, 11% from Japan, 10% from Australia and most of the balance from the neighboring countries, mainly Malaysia, Singapore and Hongkong. In 1973, gross foreign exchange earned f r om tourism in Indonesia amounted to about US$50 million or about US$37 million net (5% and 3% respectively of non-oil exports). 1.04 A lack of suitable hotel accommodation was a severe constraint on the growth of tourism; in 1972 the number of hotel rooms of international standard was limited to less than 1,300 in Jakarta, 450 in Bali and 100 in Jogjakarta. As a result of the expansion program in preparation for the Pacific Area Travel Association (PATA) conference, the number of rooms of international standard in these cities doubled by 1974 and the hotel industry prov·ded direct employment to about 8,000 people at this time. While many entrants to the industry were trained by the National Hotel Institute, suppor- ted by the Swiss Government and the UNDP/ILO, at Bandung which had suitable quarters, equipment and full-time staff, the other public and private hotel training schools in Jakarta and Bali were poorly equipped and were staffed by inadequately trained, part-time teachers. • 1 - 2 - Tourism 1n Bali 1.05 With the construction of the Tuban airport near Denpasar in 1967 and its upgrading in 1971 to handle jet aircraft, Bali had become more accessible to foreign visitors. The number of arrivals increased at an average rate of 27% per annum over the years 1969-73, reaching a level of nearly 100,000 in 1973; however, several constraints to further growth emerged including a lack of adequate first class hotel accommodation. At appraisal, it was determined there was a crucial need for additional hotel rooms to be built in order to meet potential tourist demand in Bali. 1.06 In the early 1970s major hotels were concentrated along the beach areas at Sanur and Kuta to the east and south-west of Denpasar, the provincial capital and main business center. There was no central planning of tourism development in Bali, however, and the tourism industry had expanded with little regard for the natural and human environment. In the absence of effec- tive zoning and building controls, the Sanur and Kuta areas were becoming over-crowded shabby and unsanitary; individual hotels had varying standards of construction and service; facilities for water supply and sewerage were par- ticularly inadequate. Moreover, in the face of such pressures a steady degradation of these communities, their properties, surroundings and social values was occuring; a particularly sad irony among a people renowned for their unique culture - the chief object of most tourists' visits. II. PROJECT PREPARATION AND APPRAISAL 2.01 In 1968, the Indonesian Government requested Bank Group assistance for tourism development. A project identification mission visited Indonesia in March 1969 and recommended the preparation of a tourism master plan for Bali and a related feasibility study for a first-phase development. The Government engaged French consultants (SCETO) to carry out a UNDP-financed study for which the Bank served as Executing Agency. The consultants prepared a tourism master plan for Bali which recommended that future tourism accommo- dation should continue to be developed at Sanur and Kuta but that the main focus of future development should be concentrated at Nusa Dua, a remote site on the Bukit Peninsula. After the completion, in June 1971, of the UNDP- financed Bali tourism master plan and feasibility study for the development of Nusa Dua, Japanese consultants (PCI), financed under the Third IDA Technical Assistance Credit (275-IND), conducted additional detailed site development studies during 1972 and 1973. The project was appraised in June/July 1973 and negotiations were held in Washington in April 1974. Project Description 2.02 The project consisted of supporting infrastructure and facilities for the largely self-contained Nusa Dua tourism estate (310 ha.) capable of accommodating about 2,500 hotel rooms and a hotel training school; an access road to the estate, the improvement of eleven roads in Central Bali and a Denpasar by-pass road; a 10 ha. demonstration farm; and technical assistance to the Ba l i Tourism Development Corporation (BTDC}, the Bali Tourism - 3 - Development Board (BTDB) and the Provincial Department of Agriculture. The total cost of the project was estimated at US$36.1 million, of which the Bank Group proposed to finance US$16 million to cover about 88% of the estimated foreign exchange component and about 44% of the total project cost. Executing Agencies 2.03 The following four agencies were responsible for the execution of the physical components of the project: (i) the Bali Tourism Development Corporation (BTDC) for the Nusa Dua estate and hotel training components; (ii) the Ministry of Public Works (Bina Marga) for the construction of roads out- side the estate; (iii) the National Telecommunications Authority (PERUMTEL) for the telecommunication component; and (iv) the Bali Office of the Ministry of Agriculture for the agriculture component. Apart from the above agencies, a Bali Tourism Development Board (BTDB) was established with the responsibil- ity for advising the provincial government on the implementation of the tour- ism master plan and coordinating the tourism activities of other government agencies, private hotel enterprises and local Balinese community organizations. Project Preparation and Appraisal 2.04 Because of uncertainties about the future impact of the energy cr1s1s of 1973 on international tourism, market demand analysis for the development of tourism in Bali proved difficult. Nevertheless, several pro- jections of visitor traffic to Bali were made and it was concluded that full development of the Nusa Dua estate, with 2,500 hotel rooms to be opened for operations by 1982, would be an achievable target, which would yield an acceptable economic rate of return. The prospects for hotel development at Nusa Dua were very positive at that time due to the level of interest expressed by potential investors and the corresponding prospects for favorable financial results for hotel investment at the estate. 2.05 Two key issues related to the project viability were discussed at appraisal; namely, the Government's air access policy and future hotel devel- opment outside Nusa Dua. The Government was seeking to negotiate with other countries reciprocal landing rights favorable to Garuda, the Indonesian national airline, and had announced a "one gate" policy, which could theoretically force all foreign scheduled airlines to terminate flights 1n Jakarta and thus make air travel to Bali much less convenient. Despite the Bank's concern at the possible effect of the Government's air transportation policies on the project, the Bank decided not to require a covenant on air access in the Credit Agreement, which could affect the Government's position in bilateral negotiations. With respect to the future hotel development outside Nusa Dua, the Government agreed that the number of hotel rooms in Bali of international standard outside Nusa Dua would be limited to 1,600 (both existing and newly built hotel rooms) until the project was fully developed. 2.06 As mentioned above, special consideration was given during the project preparation to the establishment of a juridical and legistrative framework for formulating and implementing appropriate policies on the basis of the tourism master plan. First, the Bali Tourism Development Board (BTDB), - 4 - consisting of the Governor of Bali as Chairman and members drawn from the relevant government agencies, was established in March 1972 with the function of planning and implementation of zoning plans and building regulations for the overall development of tourism in Bali. Second, the Bali Tourism Develop- ment Corporation (BTDC), a state enterprise headed by a Pr~sident Director and comprising a Technical Operations and a Finance Division, was established with the function of developing a viable tourism estate at Nusa Dua. It was considered necessary to build up and strengthen the capacity of BTDB and BTDC in their operations through the provision of technical assistance under the project. III. PROJECT IMPLEMENTATION 3.01 The Credit Agreement was signed on June 14, 1974 and became effec- tive on December 4, 1974, 83 days after the original date of September 12, 1974. This delay was due to difficulties in concluding the subsidiary loan agreements between the Government and subborrowers (BTDC and Perumtel), and also in appointing project staff. The project was to have been completed by end-August 1978. Project Revision 3.02 Works on the infrastructure for the tourism estate were completed with a number of changes in design of various components. One of the most significant changes was the adoption of a recycled waste-water supply system to irrigate the green areas at Nusa Dua. This recycling system caused some increase in construction costs of the water supply and waste water components; however, the system was designed to economize on overall operations by reducing the demand for fresh water thereby minimizing operating costs of the treated water supply to beneficiaries over the long run. 3.03 Substantial changes from the original plan were also made in the scope and design of the amenity core. Because of a much slower development of the tourist market for the project in the first phase, as compared to the appraisal estimates, the scope of this component was reduced to some extent. At the same time, the overall design of the amenity core was revised to include the BTDC's office building and workshops in this component. 3.04 During project implementation, additional infrastructural works for the tourism estate were made; namely, works for the extension of the utility systems to the hotel site (N-6), of which development was originally planned for the second phase of the development, for the Club Mediteranee hotel project; and for the beach protection works to avoid erosion to the Nusa Dua beach. 3.05 The scope of the road component implemented by Bina Marga was reduced substantially through elimination of the multipurpose roads improve- ment program from the project. Due mainly to a substantial increase in construction costs of the Denpasar by-pass road and the estate access road, the multipurpose roads improvement program was deleted from the project and - 5 - included in a separate Government road betterment program with completion ~cheduled for mid-1985. 3.06 The telecommunication component for the tourism estate at Nusa Dua was fully financed by local funds through Government budgetary allocations and from Perumtel's own resources. Perumtel's reluctance to accept the terms of the subsidiary loan agreement with the Government on utilizing the proceeds of the Credit led to a decision to finance this component from its own resources and not to utilize the Credit funds. 3.07 The hotel training school was completed in March 1979 as scheduled in the original project plan. In the course of project implementation of this component, BTDC decided to construct a 50-room practice hotel adjacent to the hotel training school as an additional component for the Hotel and Tourism Training Center at Nusa Dua. The practice hotel was financed entirely by local funds and completed in April 1981, two years after the completion of the hotel training school. 3.08 As a result of the changes in project design, about US$1.8 million of the Credit remained uncommitted. However, in view of the difficulties the Government was encountering in attracting hotel investors (para. 6.01), at Government's request, the Bank agreed to reallocate the undisbursed funds to BTDC to participate in the construction of two hotels at Nusa Dua in joint ventures with private investors. The Credit Agreement was amended to reflect these changes in November 1978. In October 1982, about US$1.4 million of the Credit was cancelled and the remaining US$0.4 million is still expected to be disbursed for the hotel credit before the end of June 1984. Implementation Schedule 3.09 The physical components were completed in June 1982, about four years later than anticipated at appraisal. The delay in project implementa- tion was mostly due to slow preparation of the detailed engineering designs, starting with a delay in appointment of the consultants, and continuous, unpredictable delays in awarding contracts. Occasionally, project implementa- tion was delayed by coordination difficulties between BTDC and the other executing agencies (Bina Marga and Perumtel). Most major project components were completed with an average delay of two years, although a few infrastruc- ture works were not undertaken until the last two years, during a final project implementation phase. In retrospect, it is clear that the 48-month implementation schedule formulated at appraisal was overly optimistic, given the project's technical complexities and the fact that considerable changes in project scope and design were required throughout the project implementa- tion. Moreover, perhaps the Bank should not have proceeded with the financing of the project until the completion of detailed design; the construction delays, cost overruns and frequent changes in design all attest to this fact. Procurement 3.10 The executing agencies procured almost all Bank-financed goods and services through international competitive bidding procedures, in accordance with Bank guidelines. All large contracts were awarded to foreign firms. - 6 - Smaller contracts, amounting to about $2.0 million in total which would not • have been attractive to foreign firms, were awarded on the basis of local competitive bidding and prudent shopping procedures. Some minor work on beach erosion protection at Nusa Dua was carried out by force account. Costs and Disbursements 3.11 A detailed comparison of project costs as estimated at appraisal and upon completion is presented in Annex 4. These costs are summarized as follows: Appraisal Actual Increase or (Rp. billion) (US$ million) (Rp. billion) (US$ million) decrease % Trurism Estate: Water & ser,..-erage 3.13 7.55 2.68 5.05 -14 .Anerlty Core 0.96 2.32 2.29 4.32 139 Hotel Training Center 0.47 1.14 2.04 3.85 334 Larrl acquisition 0.42 1.01 0.98 1.85 133 Other canponents 3.95 9.49 6.39 12.05 62 Subtotal 8.93 21.51 14.38 27.12 61 ... Roads & Bridges: Nusa fua. access road 0.48 1.16 0.47 0.75 Denpasar by-pass road 1.42 3.42 5.72 9.15 303 Multi road improveialt 3.39 8.16 Subtotal 5.29 12.74 6.19 9.90 17 0.52 1.26 0.04 0.06 -92 ll:!mnstration fann 0.11 0.27 0.02 0.03 -82 BIDB technical assist. 0.13 0.32 0.09 0.22 -31 Subtotal 0.76 1.85 0.15 0.31 -81 Grarrl Total: 14.98 36.10 20.72 37.33 38 Exchange rates : Appraisal US$1.00 = Rp 415 Int ervening years average US$1.00 = Rp 555 Canpl etion years average US$1.00 = Rp 678 - 7 - · Project costs are not readily comparable because of the significant changes in project scope. Overall cost increases were minimized by the changes in pro- ject design. Despite suostantial changes made in the design for the amenity core and common facilities to minimize the cost increases, the final cost of the component was much higher than the appraisal estimates. This is due to the fact that the costs were considerably underestimated at appraisal. The high cost increase in the hotel training center was due to the additional costs for a 50-room training hotel (Hotel Bualu) which was not financed by the Bank. The road component by Bina Marga encountered the most significant cost increase for the Denpasar by-pass road due to a substantial delay in project design and because of the devaluation of the Indonesian Rupiah which came into effect in November 1978. Furthermore, additional costs due to the extra works claimed by the contractor mainly in dealing with unforeseen poor subsoil condi~ions and in meeting the completion deadline (December 1980) for the by- pass road also contributed to the high cost increase. A cumulative schedule of disbursements is presented in Annex 5. The original closing date was post- poned three times from August 31, 1979 to June 30, 1981, June 30, 1982 and finally to December 31, 1983, due initially to delays in project implementa- tion and subsequently because of delays in reaching agreement on the proposed amendments to the Credit Agreement in order to reallocate the undisbursed funds for hotel construction purposes. Performance of Consultants and Contractors 3.12 The performance of consultants employed for the preparation of the physical planning as well as the final engineering designs was generally satisfactory. During the later phases of implementation, it is notable that design and engineering was carried out by BTDC staff in-house competently with some assistance from local consultants. 3.13 Construction work completed by contractors throughout the project was of good quality and progress was generally satisfactory. A notable contribution was made by local contractors especially in the construction of traditional Balinese-style structures. The exception arose when interpreta- tion differed between the executing agencies and contractors on the responsi- bility for construction delays, the effect of price escalation formulas on the contract prices and the impact on contractors of an unpredictable reduction in construction quant1t1es. These problems were satisfactorily solved by the executing agencies without any major dispute. Reporting 3.14 In general, required reports were submitted 1n a timely fashion (Annex 3). IV. INSTITUTIONAL ASPECTS 4.01 The Bank Group's main contribution to institutional development through the project consisted in assisting the Indonesian Government in estab- lishing the Bali Tourism Development Board (BTDB) and the Bali Tourism Development Corporation (BTDC). ' i - 8 - . 4.02 The Board was established in March 1972 as a first step toward implementing the Bali Tourism Master Plan. With the assistance of an adviser, th~ Board played its role satisfactorily in formulating and promoting develop- ment policies for tourism in Bali based on the master plan. The appointment of an adviser to the Board was particularly effective in training local staff for the preparation and execution of zoning regulations and development controls for tourist areas. The training also covered the minor tourism proj- ect preparation and drafting of legislation for the protection of social and ~ultural environments. A significant function of the Board was in coordinat- i~g tourism sector activities between government agencies and private enter- prises as well as Balinese community organizations. However, the activities of the Board slowed down following the departure of the expert in August 1979 a~d its function was absorbed by the Regional Tourism Office in 1980. 4.03 Because the development of an integrated tourism estate was a unique operation in the country, a new corporation (BTDC) was created in November 1973 as a Government-owned state enterprise with the overall responsibility for managing the execution of the project. BTDC performed its tasks satisfac- torily also with the assistance of an adviser under the project. The early appointment of an adviser to BTDC through the project was most effective in preparing and implementing its corporate objectives which included formulation and implementation of land use policies, promotional programs for hotel investment, financial planning and budgeting for BTDC's operations as well as construction management. 4.04 The organizational structure of BTDC is presented in Annex 1. BTDC is currently staffed with 240 permanent employees under the four departments (Commercial, Finance, Operation and General and Administration). The General and Administration Department is the largest with about 100 employees, of which almost one half are in the security force. Promotional activities for the Nusa Dua tourism complex are undertaken by the Commercial Department (Marketing and Public Relations Divisions) under the direction of the Presi- dent Director of BTDC and involve negotiations with potential investors on land leasing agreements for hotel sites and, also, concessional agreements for . other commercial establishments such as restaurants and shops in the com- ~lex. The Operation Department is the second largest with 70 employees engaged in maintenance and utility operations in the complex. These opera- tions are expected to be increased in the future once hotels are fully developed at Nusa Dua. The management of BTDC is capable of sustaining and expanding its tourism estate operations satisfactorily with the competent ~taff who have been trained under Bank financed technical assistance. 4.05 In retrospect, the institutional issues addressed at appraisal were appropriate and the arrangements whereby BTDB and BTDC acted as coordinating agencies for the sector and project activities, respectively, worked effec- tively. The contributions of the aqvisers to the project were very signifi- cant, particularly in the areas of training local staff and assisting the respective agencies to cope with the difficulties encountered in project implementation. - 9 - V. FINANCIAL ASPECTS 5.01 The financial statements of BTDC for the period ending December 31, 1983, are presented in Annex 6. As of December 31, 1983, BTDC's total assets amounted to Rp 17.2 billion. BTDC's investment in the construction of infra• structures and other facilities, including the hotel training center, amounted to Rp 14.5 billion, of which Rp 4.6 billion (US$8.7 million equivalent) was financed from the Credit, representing about 32% of the investment. The long- term liabilities on the Credit for the period ending December 1983 amounted to Rp 6.8 billion (US$13.5 million equivalent), including Rp 2.3 billion for capitalized interest in that period. The debt service payment is scheduled to start from mid-1985. The ability of BTDC to meet debt service and to recover the full capital and operating costs from income through its operation depends entirely on the development of hotels which are the principal sources of operating income for the services provided by BTDC. 5.02 The operating projections of BTDC for the period 1984-93 and the current schedule of hotel development for the project are presented in Annex 11. The operating assumptions are also attached to Annex 11. To ease the cash flow situation of potential hotel investors for the project, BTDC provides three types of rental fees for the ground lease based on the development periods for hotels, starting from construction to operational periods. (i.e. US$1,000 per year for each lot during construction, US$200 per year for each available hotel room for the first year of operation and rental fees based on a percentage of gross sales of each hotel from the second year of operation onward. Utilities (water, sewerage and solid waste) are metered and charged at current commercial rates. Maintenance and other services are charged on a pro-rata basis in the manner established by BTDC and the Nusa Dua Community Association. The projected operating costs are based on the budgets prepared by BTDC for its respective operating units, including payroll and administrative expenditures. 5.03 The prospects for the future hotel development at Nusa Dua are encouraging, with the expectation that 1,700 hotel rooms, including the first hotel with 450 rooms which opened in March 1983, would be in full operation by the end of 1986 and another additional 1,300 hotel rooms would be built in the following two-three years. On the basis of these forecasts, BTDC is expected to break-even in its operation in 1986 and to generate surpluses thereafter. The financial internal rate of return on BTDC's investment is calculated at 5% in real terms (Annex 12). VI. HOTEL AND MARKET DEVELOPMENT 6.01 The justification for providing infrastructure at Nusa dua was the prospect that potential investors and hotel companies would be prepared to build and operate hotels, which in turn would substantially increase tourism flows to the area. The appraisal team expected 800 hotel rooms to be in operation at Nusa Dua in 1978, all to be constructed by the private sector. This capacity was projected to expand up to 2,500 rooms in 1983. Partly - 10 - because of the unfavorable investment climate for hotel development due to the world-wide economic recession following the energy crises in 1973 and 1979, private investors were reluctant to commit themselves to hotel investment at Nusa Dua. The delay in construction of infrastructure at Nusa Dua also con- tributed to slow development of hotels. Furthermore, the Government "one gate" air access policy for Bali has discouraged private investors' interest in hotel construction at Nusa Dua. As a result, the start of hotel develop- ment for the project has been delayed by five years as compared with the appraisal estimates. 6.02 The following table shows the appraisal projections of hotel development, the actual building and current expectations. NUMBER OF HOTEL ROOMS Appraisal Actual Current Year projections buildup projections Ia (May '84) 1978 800 1979 1,300 1980 1,700 1981 2,000 1982 2,300 1983 2,500 450 450 1984 450 1985 850/b 1986 1,700/b 1987 1,975 1988 2,325 1989 3,000 Ia The prospects for hotel development at Nusa Dua given by the BTDC in April 1985 are slightly slower than the PCR's projections due to rescheduling of investments by indvidual developers. However, this current hotel development schedule for the project does not affect the rate of return calculation significantly. /b Two hotels for a total of 900 rooms are under construction and the construction of another hotel (350 rooms) is due to start in mid-1984. 6.03 Following the opening of the 450-room Nusa dua Beach Hotel in May 1983, the construction of two hotels; namely, Hotel Indonesia Inter- national (400 rooms) and Hotel Bali Sole (500 rooms), was started with comple- tion scheduled for end-1984 and end-1985, respectively. In addition, the construction of Bali Holiday Village (Club Mediteranee) with 350 rooms is expected to start in mid-1984 for completion in early 1986. Furthermore, - 11 - l~ase contracts for four hotel sites at Nusa Dua have been made between BTDC and potential investors to construct another 1,300 hotel rooms for completion in the years 1987-89. The current prospects for hotel development at Nusa Dua are good, with the opening of 1,700 rooms by 1986 and 3,000 rooms by 1989. To achieve this target, however, considerable promotional efforts for the further development of international tourism in Bali are required. One of the most important elements for such promotion would be to improve the current status of air access by allowing international air carriers to fly to Bali, with both regular and charter flights. 6.04 The Government agreement on the limitation of 1,600 hotel rooms in Bali of international standard outside Nusa Dua (both existing and newly built hotel rooms) has been kept satisfactorily. Average room occupancies of the existing hotels in Bali outside Nusa Dua declined from 80% in 1981 to 60% in 1983, reflecting the recent slow down in visitor traffic to Bali. Visitor traffic to the island declined by 7% between 1981 and 82, and remained almost unchanged in 1983, registering an estimated 434,500 arrivals in 1983. While overall visitor traffic to Indonesia grew by 6% on annual average in the years 1979-83 to reach 633,000 visitor arrivals in 1983, the proportion of the esti- mated foreign visitor arrivals in Bali to the total arrivals in the country also declined from 64% in 1981 to 58% in 1983. For the longer period, however, visitor traffic to Bali grew by 6% on annual average in the five year period 1979-83 and by 11% in the last decade 1974-83 (Annex 8). These growth trends are quite similar to the growth in overall visitor traffic to the country actually achieved for the correspondent periods, but much lower than the growth rates projected in the appraisal of 13% for 1979-83 and 19% for 1974-83. The Government is making efforts in taking special measures to promote international tourism for the country as well as for Bali by facilitating visa procedures for foreign tourists to the country and by allowing landing rights for foreign charter carriers to Bali. 6.05 The projections for foreign visitor arrivals in Bali over the next ten years (1984-93) are presented in Annex 9. The projections are based on the historical growth trends in overall foreign visitor traffic to the country which indicate an average annual growth rate of 13% in the years 1972-81, and of 11% ;in the years 1974-83. Given these growth trends in foreign visitor traffic to Indonesia and taking into account the expected improvement of air access to Bali, the future foreign visitor traffic to the island has been pro- jected at an average annual growth rate in the range of 6.5% - 11.0% for the next ten years, 1984-93. The most conservative projection indicates that foreign visitor traffic to Bali would increase by 6.5% on annual average to about 500,000 foreign visitor arrivals in 1988 and further to 680,000 arrivals in 1993. On the basis of these projections, it is required that a total of about 3,000 hotel rooms are built and become operational at Nusa Dua by 1988. - 12 - VII. ECONOMIC RE-EVALUATION Cost and Benefit Assumptions 7.01 As in the appraisal, the economic re-evaluation takes into account a larger program of investments than those specifically financed under the project itself. Investment costs include not only infrastructure works but also hotels, other tourist accommodations and other tourist enterprises, such as restaurants, recreational facilities and tourist shops, all made possible by the installation of the project's package of infrastructure. The gross benefits resulting from the tourism estate investment program are taken to be only the expenditures in Bali of tourists who stay in hotels at Nusa Dua. Because of the rather limited capacity of acceptable accommodation in the existing tourist areas in Bali, the benefits derived from the expenditures of tourists staying at Nusa Dua are incremental to the tourism sector as a whole and do not represent a diversion of traffic from existing destinations in the country. 7.02 All costs and benefits in this analysis are given in end-1983 prices. In addition to the investment costs of infrastructures and related tourism facilities for the Nusa Dua tourism complex (US$31 million in 1983 prices), the average cost of hotel construction is estimated at US$70,000 per room on the basis of the proposed investment programs for hotel construction in the project area. Given the current schedule of hotel development for the project, including the first 450-room hotel mentioned above, the total hotel investment is estimated to be US$210 million for 3,000 hotel rooms to be built and in operation by the end of 1989. Investment costs for non-hotel super- structure facilities are estimated at approximately US$1 million. 7.03 Revenue assumptions are based on an average daily expenditure per v1s1tor of US$75, including accommodation (US$31); food and beverages (US$25); shopping (US$7); tours and transportation (US$6); and entertainment and recreation (US$6). Hotel revenues assume an average length of stay of 3.5 days, a double-occupancy factor of 1.7 persons per room, and an annual room occupancy rate for each hotel of 50% in the first year, rising to 75% by the fourth year of operations. These assumptions of hotel room occupancies and rate of increase in hotel operations are much lower and slower than appraisal projections. Gross operating profits of the hotels and other superstructure facilities are estimated on the basis of the experience of similar facilities currently in operation in Bali. For the economic benefit calculation, gross operating profits of the hotels have been estimated to be 27% of the gross hotel revenues for 1984 increasing to 39% for 1993 (Annex 10). 7.04 Economic costs of operating the Nusa Dua tourism complex are derived from the actual and projected financial accounts of hotels, restaurants, shopping center and other facilities. The operating and maintenance costs for the non-revenue earning infrastructure items such as roads, street lighting and landscape maintenance are included in the calculation of operating and maintenance costs for the project operating unit (BTDC). Revenue earning infrastructure such as electricity, water and sewerage is included in the rate of return calculations for the project since the gross revenues of these - 13 - utilities are part of the operating costs of the hotels and other superstruc- ture facilities. 7.05 Both the appraisal and the reevaluation exclude benefits to the local population of the investment in infrastructure and to this extent the economic return is understated. Also, the costs and benefits from inter- national air travel and tour operations are likewise excluded in both sets of calculations. However, whereas the appraisal assumed that these benefits would mostly accrue to foreign airlines and travel agents, in fact domestic airlines, Garuda and others, and Indonesian-owned tour operators have expanded their operations considerably. The exclusion of these benefits probably leads to a further understatement of the economic return. Economic Rate of Return 7.06 Given the current assumptions on hotel development and market prospects for the Nusa Dua tourism complex, the reevaluation indicates an internal economic rate of return of 6% on the investment program, considerably lower than the 18.7% calculated in the appraisal. The major contributing factors are; (a) delays in project implementation for the tourism complex; and (b) slow progress in hotel development at the project area. 7.07 The analysis was tested for sensitivity to a 15% reduction 1n total gross operating profits from 1984 onwards. Such ~ reduction could result from lower occupancy rates than assumed, lower hotel prices, an increase in operating costs as percentage of revenues, or combinations of these factors. In this case, the rate of return would be 4% as compared with the best estimate of 6% (Annex 13). Employment and Balance of Payments Effects 7.08 Approximately 8,000 man-years of employment were created during the eight years of construction of the infrastructural works. In 1983, there were about 1,000 employees working in the first hotel and the hotel training center at Nusa Dua. When in full operation, the program of investments will have generated about 4,000 additional permanent hotel jobs. The program will, also, have generated an additional 1,000 jobs in tourism enterprises outside the hotels in the tourism complex, for a total increase in direct employment of about 6,000 persons, and further indirect employment of about 3,000 persons in activities providing goods and services to the tourists and tourism enter- prises. Finally, substantial employment for hotel construction in the project area will be generated. 7.09 Gross foreign exchange revenues attributable to the program of infrastructure and superstructure investments are estimated at about US$65 million (in 1983 prices and rates of exchange) in 1990 when all facilities in the tourism complex are expected to become fully operational. This is roughly the same amount in 1983 prices as projected in the appraisal for 1985 (the year then scheduled for full operations); namely, about US$48 million in 1979 prices and exchange rates. Allowing for operating costs in foreign exchange and annual debt service and profit repatriation on foreign investments, net foreign exchange earnings in 1990 are calculated at about US$44 million (in 1983 prices and rates of exchange), or 67% of gross earnings. - 14 - VIII. BANK PERFORMANCE 8 . 01 Besides providing financial assistance, the Bank helped the Indonesian Government to conceive and plan the tourism infrastructure development within the framework of a comprehensive sectoral approach. The Bank was also instrumental in the enactment of legislation regulating the development of tourism ih Bali, particularly for the protection of social and cultural environments, and in the creation of the Bali Tourism Development Corporation (BTDC) for promoting hotel investment as well as maintaining and operating the Nusa Dua tourism complex. 8.02 Because the project included an unusually wide range of infrastruc- ture facilities, the project coordinating agency (BTDC) benefited from the assistance of several Bank project divisions in supervising the implementatio of specific project works such as improvement of the road networks in the early stage of project implementation and improvement of the agricultural programs in the final phase. Following from this project, the Bank's agriculture division has continued to undertake technical assistance to the Regional Department of Agriculture in Bali to enhance the improvement of agricultural products and distribution systems. 8.03 This type of an integrated tourism project should have been prepare more carefully in terms of project concept and design from the economic aspects of the project. Since the economic viability of the touri~m project is very sensitive to changes in the world-wide economic situation, the question remains as to whether the Bank should have been more cautious in its demand projections, more conservative in project design and obtained firmer assurances from private hotel investors before proceeding with such an ambitious project. The project was also financed prematurely in terms of readiness of designs. IX. CONCLUSIONS 9.01 The delays encountered in project implementation as well as the slowdown in the development of international tourism following the 1973-74 an the 1979/80 energy crises resulted in a much slower development of accommoda- tion facilities in the project area than expected. Consequently, a comprehen sive evaluation of the project needs to be postponed to a later stage when a hotels and other tourist facilities are in place and operational. However, i 1s already possible to formulate a number of observations: (a) The project has achieved its objective by introducing and promoting new development policies for tourism in Bali to correct the uncon- trolled growth of tourism facilities which took place during the early 1970s and threatened the qualities that provide Bali with its unique attractions for tourists. In particular, the selection of Nusa Dua for future development of tourism facilities was appro- priate in the light of the objectives of protecting the unique social and cultural life as well as the physical environment on the - 15 - island while maximizing the benefits from the expansion of th~ · tourism industry in Bali. (b) In terms of physical accomplishment, the project fulfilled its goal within a reasonable cost, although it took longer than the original schedule for completion. Part of the delay was caused by initial delays in project start-up which could have been avoided by advanc- ing the preparation of final engineering for the project infrastruc- ture before project appraisal. The present Bank policy requiring substantial completion of final engineering before Board presenta- tion stems from similar problems experienced in many of the Bank's infrastructure projects. (c) The project has been adversely affected by the worldwide economic setbacks in the 1970s and the investment climate for hotel develop- ment at Nusa Dua deteriorated substantially because of the relative stagnation in the development of international tourism after 1973. (d) The development of accommodation facilities is the most important element to stimulate the potential market for tourism to a new tourist destination. The project was designed to accommodate international-standard hotels which require a relatively large capital investment, but the economic slow down made it more difficult for potential hotel investors to mobilize capital funds. It might have been desirable for the project design to have been more flexible, in order to include much simpler accommodation facilities which could attract both foreign and domestic tourists. (e) Project financing was limited to basic infrastructural facilities. It would have been desirable to have provided adequate funds in the early stage of project implementation as seed capital for the initial hotel development under the project. (f) In terms of goals and resource mobilization, the Bali Tourism Project constitutes an original and ambitious project. Its success will be measured in the coming five to ten years according to the actual growth of tourism accommodation capacity and tourist arrivals and revenues in the project area. Environmental control and inte- grated physical and economic planning stand out among the major project achievements and are instrumental to an optimal growth. To ensure that these achievements remain a lasting legacy of the project, it is essential that the institutions built for the project implementation stay in place and progressively shift from construc- tion to monitoring and supervision activities. Government is aware of this need and is taking measures to this effect. I._SIA - laU Tmle " ' ' " ' I --UAIU I IJIIUI i lftiiiAL u.n I I J I DJYUICII I -- I ru&~Da I I Clf&l.l~l- I I 11111&1. I I I 1··---1 ·I I I I I I l l 1 I l ..... • I I i i I ! R 10 DIIIIIC* B i . ~ Q il II i I i II ~~ 1•1 !a§ ~s 6-- .. ~ 5_ E ~.._ 0 r: l~~J. ~n -- J:!l s i-1 II 1: Ill~ i I .. a I' I ii H i .. .3 &· ~ - ..__ ''· ....._ 1--- ._ - 17 - ANNEX 2 Page 1 INDONESIA BALI TOURISM PROJECT (CREDIT 479-IND) PROJECT COMPLETION REPORT Executing Agencies and Project Description A. Bali Tourism Development Corporation (i) Construction of an internal road and street network within the resort area itself. (ii) Construction and equipping of tourism infrastructures and facilities in Nusa Dua resort and in the villages Bualu and Benoa, including stormwater drainage networks, landscaping of the Nusa Dua resort, a plant nursery with an irrigation system, and facilities for the villages of Bualu and Benoa (street improvements and some sanitary services). (iii) Construction and equipping of a water supply system for Nusa Dua comprising water wells, pumping stations, a treatment plant, a service storage, transmission pipeline and a distribution network. (iv) Construction and equipping of a sewerage system for Nusa Dua resort with a sewage collection network, an intermediate pumping station, a main lift station and oxydation ponds located at the shoreline of the unland bay. (v) Construction of a sanitary landfill site for the disposal of solid waste, acquis1t1on of a small bulldozer for operation of the dump, and acquisition of refuse trucks for collection solid waste. (vi) Provision of electrical installations and lighting of the str~ets at Nusa Dua resort area. (vii) Construction, furnishing and equipping of a hotel training center. ( viii) Technical assistance for the development of corporate objectives, the establishment of lease policies, and technical as well as financial aspects. B. Bina Marga, Ministry of Public Works (i) Construction of an access road of about 8 km from the airport to Nusa Dua. (ii) Construction of a by-pass road on the east of Denpasar of about 19 km in length. - 18 - ANNEX 2 Page 2 C. Perumtel, Ministry of Communications Construction and equipping of telecommunication facilities for the Nusa Dua resort comprising a telephone exchange with '600 lines and telex facilities, overhead cable connection to the Denpasar exchange and a network of underground cables within the resort area. D. Bali Tourism Development Board (i) Technical assistance for the preparation of a regional development plan for the Island of Bali, an urban development plan for Denpasar, and zoning and building regulations for both the Island and Denpasar. (ii) Technical assistance for devising appropriate methods to improve the level and distribution to the Balinese communities of the benefits from tourism development. E. Ministry of Agriculture Setting up and development of a demonstration farm for improvement of vegetable production on the island of Bali and for giving advice to local farmers. For the initial period of running the farm, technical assistance would be provided through the employment of agricultural experts. - 19 - ANNEX 3 Page 1 of 3 INDONESIA BALI TOURISM PROJECT (Credit 479-IND) PROJECT COMPLETION REPORT Compliance with Covenants Credit Agreement Reference Covenant Requirement Status and Remarks 3.03 (a)-(e) Appointment of consultants. Socio-culture expert & physical planning advisor (BTDB) for Bali Tourism completed their assignments. BTDC's senior advisor and management advisor worked with the terms ending December 1981. Agriculture expert completed his assignment. 3.04 (a) Preparation and submission Completed and submitted in December of critical path network by 1974. BTDC (by December 1974). (b) Contracts for the civil Completed. works in Parts A, B and C. (c) Statement of project Submitted in December 1974. objectives by BTDC. (d) Statement of ground lease Submitted in December 1975. policies and proposed model lease forms. (e) Decree promulgating Issued in March 1975. appropriate zoning regulations for the Bukit Peninsula. (f) Implementation schedule of Submitted in December 1974. the hotel training center and the curricula, student selection criteria and staffing plan for the center. - 20 - ANNEX 3 Page 2 of Credit Agreement Reference Covenant Requirement Status and Remarks (g) Provision of credit to Government decided to include th is farmers for a poultry and component in a Bank agricultural egg production program in project. Bali. (h) Preparation and submission of organization plan for Submitted tn December 1975. BTDC's estate operation. 3.06 Submission of the designs, Submitted as required. specifications, contract documents and implementa- tion schedules. 3.07 Actions to acquire land and Completed in December 1975. rights in respect of land for the project. 4.01 (a) Establishment of a system Completed in December 1975 and of commercial accounts and accounts have been kept satisfac- bookkeeping practice for torily. BTDC's operations. (b) Auditing of BTDC's accounts Satisfactory. and financial statements by independent auditors and submission of audited financial statements. 4.03 (b) Appointment to the BTDC of Completed in December 1976. the Chief of the Technical Field Unit. 4.04 Establishment of an Completed in December 1976. advisory committee of BTDC Hotel School Division on the operations of the training center. 4.05 Maintenance of the limit on Satisfactory. international standard hotel capacity outside Nusa Dua to 1,600 rooms until 1985. - 21 - ANNEX 3 Page 3 of 3 Credit Agreement Reference Covenant Requirement Status and Remarks 4.06 Limitation until 1985 of Satisfactory the BTDC's incurrence of debt other than that incurred to finance the project under its loan agreement with the Government. 4.07 Rate structure of water tariffs was Establishment and mainten- established in January 1983 and has ance by BTDC of tariffs for been adjusted for 1984. water supply, dewerage and waste disposal which would produce an overall rate of return of 11% by the time the estate hotels are in full operation. 4.08 (a) Function of the BTDB to Function of the BTDB was halted as a realize its purpose and result of lack of funding. assist the Province of Bali in the development of tourism on Bali, supported by adequate Government funding. (b) Establishment of a Completed in 1975 but BTDB was Secretariat to the BTDB, dissolved in 1979. adequately staffed with qualified personnel. - 22 - INDONESIA·! BALI_TOURISM f~REDIT 479-IND> ANNEX ------- · tOt!PARABLE PROJECT COSTS ------------------- Appraisal Estisates Actual Cash Bali Tourist Corporation ----------------- Rps (til) uss ('000) --------------- Rps (sil> uss ('000) ----------- ---- --------- ------ ------ ;jit1r "1Ur,Jly 2436 5871 1915 3612 Sewerage Systea o97 1678 762 1437 Solid Waste Disposal 145 349 118 ??"7 -~ Landscape Irrigation 232 559 276 521 Landscaping 14SS 3S85 571 !077 Start Water Drainage 312 752 22 41 Internal Roads and Streets 496 1196 424 aoo Electrical Jnstallations 653 1573 518 977 ~Alinity Core~ Coee. Facil. 962 2317 2285 4310 Bualu/Benca Renewal 115 277 Hotel Training Center 474 1142 1055 1990 Technical Assistance 249 601 554 1045 Project Adainistration 249 600 818 1543 Land Acquisition ('000) (lillian) a.t.D.c. 8379 3477 8M3 4567 JINA KARGA 3621 1503 5329 3345 J,T.D.B. 200 83 215 at UNALlOCATED 3800 1577 . ·TOTAL: 16000 6640 14187 . 8101 ; • Exchanse Rates: ~;raisal USS.l.- =RP, 415 Intervenins Years AYera•e: USt 1.- sfbt, 564 a.t.o.c. uss 1.- =Rtt. 528 USt 1.- =RP. 628 USS 1.- =RP• 416 ' l JHIOIESIAI JM.I TMISII PRO.ECT CaDIT 479·18) PIIO.ECT tolflEJIIIIREPCitT Cantolidlted l1llra Sheet of 1111 Tourtu Dlwl.._.\ l:orNrdl• __., _____ for U. Hriod tndlruJ Deetlbtr 3h 1913 ___.. UBI C'OOO) .... - c.uu..n, USt C'OOO) -- · Catlltan Dl'R£Nl ASSETSI DIIDIT LJAIILITl£11 Cash on Hand 25 13 Accrued bNnstl 225 119 Cuh in Bar.k 421 223 TIX PIHblt 13 7 [tePOsi t. in lri. 1143 606 Insurance Pnilblt 9 s hoaisurv Hot.e 943 500 Short-tar• L01n1 494 262 Accourat. Receiviblt 457 242 PrePaid ExPensts 66 35 Jo\1l Curre\ Ulblll\ln 742 393 Others Jobl Curren\ AIH\1 3055 1619 J, T.a.c. CoaPilml Acc:CMI\\ 81 43 ------------ FIXEI ASSETS: 1.11&-TEIIILJAIILITI£81 N ---------- lind Risht. 11155 983 .JIA Cndi\C479-JIII) I6SO 4567 "' luildird I Other Strudurt 13372 7087 Jn\trn\ Pniblt C479-llll) 4915 2614 CCua•Jlat.ive DePftel'iition) -1925 -1020 Goodf1ith DtPosi\ 17 9 Hachinerv I EtuiPienl CCutYlat.ive DePreciation) 284] ·-8&2 1507 -457 OPlion to ltiH 977 :ua Office EauiPient 998 529 Tol1l LIT Ltlbill\111 14559 7708 CCuaulativt DIPreciition) -483 -256 Hotor Vthidt 55] \ 291 CCuaulative DePreciation) -402 -2ll Uur•. in Pro~resi 1119 593 Total Net Fixed Assets --- 17068 --- 9046 OTIIR ASSEJS: -------- red Chu!lti ~Jeter 10140 5374 C.ITILI CCut•Jhhve A1ort.iz1tion) -1728 -916 Gov'\ EIUi\v Can\rtbu\1• 19883 10538 Interest CaPitalized 3790 2001 Olhtr loY'\ CIPi\11 1042 552 Mandala Wisab 53 28 Ret.lin Etrnius Cor lois) -3764 ·1995 Central TelePhon Aut.aa1t fatal Net Olher As11t1 --- 4 12258 2 6489 Total CIPl\11 17160 ton I 0. - 27 - ANNEX 7 INDONESIA BALI TOURISM PROJECT (CREDIT 479-I~D) PROJECT COMPLETION REPORT Foreign Visitor Arrivals and Expenditures in Indonesia Calendar Visitor Expenditures per years arrivals Expenditures visitor arrival (in US$ million) (in US$) Pelita I 1969 86,100 10.8 125.44 1970 129,319 16.2 125.27 1971 178,781 22.6 126.41 1972 270,303 27.6 102.11 1973 221,195 40.9 184.90 Peli ta II 1974 313,452 54.4 173.55 1975 366,293 62.3 170.08 1976 401,230 70.6 175.96 1977 433,393 81.3 187.59 1978 468,614 94.3 201.23 Pelita III 1979 501,320 188.0 374.93 1980 561,178 289.0 514.99 1981 600, 151 309.1 515.04 1982 592,046 358.8 606.03 1983 633,000 383.4 605.69 Average Annual Growth Rate (%) 1972-81 13 30 15 1974-83 11 25 13 Sources: Ministry of Justice (Immigration Office). Ministry of Finance/Bank of Indonesia. Ministry of Tourism (Director General of Tourism). - 28 - ANNEX 8a INDONESIA BAll TOURIS" PROJECT (CREDIT 479-IND) PROJECT CO"PLETION REPORT VISITOR ARRIVALS IN BAll (in '000) ------------------------------------- Annuil Int'l Doustic Incrust Tear Flights Flights Total (1) --------------------------------------------------------------------------------- 1971 u.oo 34.00 80.00 1972 64.40 39.60 104.00 2~ 1973 45.50 103.20 148.70 45 1974 53.80 113.10 166.90 18 1975 124.90 77.60 202.50 36 1976 134.70 130.50 265.20 63 1977 119.10 166.50 285.60 20 1978 133.70 194.60 328.30 43 1979 133.40 214.10 347.50 19 1980 152.10 235.50 387.60 40 1981 157.00 300.00 457.00 69 1982 153.00 275.10 428.10 -29 1983 164.80 269.70 434.50 6 Avera9e Annual Growth Rate ('1) --------------- 1974 - 83 14.00 ·1o.oo 11.00 11.00 1979 - 82 5.00 7.00 6.00 6.00 INDONESIA: BALl TOURISM PROJECT (CREDIT 479-INDl PROJECT CmfPLETION REPORT . Poretan Visitor Arrivals tn Ball 1981 1982 1983 Bl air 7a Bl a1r ]a Bl air 7a International Domestic By sea Total International Oo:aestlc By sea Total International Domestic By .ea Total January 12,475 23,405 2 35,882 12,517 23,467 157 36,141 12,378 20,430 6 32,814 February 11,090 21,623 2 32,715 10,026 21 '336 398 31,760 11,040 15,851 l 26,894 March 12,980 22,404 932 36,316 l't,552 " 20,837 122 35,511 12,907 17,956 1,673 32,536 Aprll 12,110 25,001 201 37,312 13.596 17,358 637 31,591 11,310 16,850 482 28,642 N May 13,365 21,690 35,055 9,604 22,568 9 32,181 11,970 20,491 434 32,895 \0 June 14,498 23,216 37,714 12,359 25,500 37,859 10,978 22,134 33,112 July 15,379 27,468 9 42,856 14,827 29,029 11 43,867 14,395 30,452 44,847 August 15,296 28,279 43,575 17,302 26,899 25 44,226 17,794 27,690 44 45,528 September 10,379 24,158 34,537 10,434 20,575 23 31,032 18,458 23,108 1,050 42,616 October 15,371 27,538 7 42,916 12,508 21,909 24 34,441 15,370 21,070 36,440 November 10,534 28,000 38,534 12,817 19,870 5 32,702 13,525 21,7ll 35,238 December 13,479 26,072 39,551 12,206 23,533 35.739 14,665 28,278 42,944 Total 156.956 298.854 hill. 456.963 152.758 272 1 Rh 1 l.alli. 427.050 164.790 266.024 '•692 434.506 Foreign visitor arrlvala 156,956 224,140 1,153 382,294 152,758 204,661 1,411 358,830 164,790 199,518 3,692 368,000 Pt!rcentage of vhltor arrivals in Indonesia 64% 61% 58% ~ International - By internatlonnl flights, of which visitors arrived in Denpasar directly froa origtnatinR pointe abroad. Oomeatlc - By do11estic flights, of which ohouot 75 were eati11ated for foreign visitors. 00 0' - 30 - ANNEX 9 INDONESIA: SALI TOURISH PROJECT PROJECTED------------------------------- FOREIGN VISITOR ARRIVALS AND HOTEL ROOK REQUIREMENTS --------------------..----------- IY AIR IY AIR IY AIR In\'1 - Total Local Visitors Int.'l Total local Visitors In\'1 Total YEARS: Locil Visitors 1981 --- ------- ---- 156956 224HO 381096 ........__.__ 156956 ----- --- 224HO 381096 ---- ----- ----- 156956 224140 381096 1982 152758 20~661 3S7U9 152758 204661 357419 152758 204661 357419 1983 16~790 199518 364308 164790 199518 364308 164790 199518 364308 1984 177973 209494 387467 181269 215479 396748 184565 219470 404035 1985 192211 219969 412180 199396 232718 432114 206713 241417 448129 1996 207598 230167 438555 219335 251335 470671 231518 265558 497077 1987 224195 242515 466710 241269 271442 512711 259300 292114 551415 198a 242131 25~641 496772 265396 293157 558553 290416 321326 611742 1989 261501 267373 526874 291936 316610 608546 325266 353458 678725 1990 282421 280742 563163 321129 341939 663068 36.. 298 388804 7531u2 1991 305015 294779 599794 353242 369294 722536 408014 427685 835699 1992 3294B 309518 638934 388566 398837 787404 456976 470453 927429 1993 355769 324994 680763 427423 430744 859167 511813 517498 1029311 Annual Averase &rowt.h Rate: 8% 51 6.5% 10% 8% 9.0% 12% 10% u.oz HOTEL ROOMS REQUIREMENT --- 19~4 ~128 4227 4305 1985 4H3 43~3 4504 1986 4326 4643 4904 1987 4287 4709 5065 1988 4338 4878 5495 1989 4544 5229 5832 1990 4546 5352 6079 19?1 4565 5499 6360 1992 4727 5826 6862 1913 4901 6178 7410 1?94 ProJected hotel rooas reouired are based on the followin~ assu&Ptions: i) Avera~e length of sta~ Per vi~itor is 3.5 ni~hts; b) Avera~e double occu~anc~ is 1.8 persons Per ro03; t) Averase root occuPancies are based on th~ Projectlons for hotel develoPteni at Husa Dua' increasins froa SO% in 1984 to iS% in 1994. - 31 - ANNEX lOa IIDGIIESIA: laU Touri11 ProjKt UND-479) Projtctlant for Hottl Dtvtlapltnt at N11., Dua · C<ndu Ytus 1984 1985 lft6 1987 1988 1989 1990 1991 1992 1993 !99.; IJptnting Ytll'l 1 I 10 11 IIDttl Colp~till J 2 J 4 ' ' lo. of Hottl R0011 in Optritian ' P.T. lutit lisa Hottl lSARUDA) 49 ------ P.T. Mottl lndcntsi• laternatiaaal 400 P.T. Suralaya-Ciali Salt) 5t) P.T. 1111 Holld1y Yill19t lClub RtdJ 3SO P.T. Pari Nusantara (Sofltetl 27S P.T. DYI Nusa CHilton) JSO P. T. ld i Nan lnd1h lHariZDft) 400 P.T. Pus1k1 lali 275 ~·· DtvtlD~IIftt 450 400 850 215 m --- 67S Total Roaas Avail1blt Per D1y 1700 1975 2325 3000 3000 3000 3000 300(; ·~ 850 3000 Tatal Raoas Av1iliblt Ptr Year ~-- P.T. Jutit lusa Hottl l&ARUDA) 164250 P.T. Hattl lndcDttil lnttrn•tionll 146000 P.T. Sural1ya IIlli Salt) 1moo P.T. 81lf Holidly Villiqt lClub "tdl 12775) P..T. Purl Nusanh:n CSofitee) 100375 ~.T. DIU Nun (Hilton) 1277~ P~T. lali Nus• lndlh (Horizon) 146000 P.r. Pus•t• a.ii 100375 ·--------------__,____ Tatil 164250 310250 620~00 7208, 848625 109~000 1095000 1095000 1095000 1095000 109~00 ~) Total Raaas Occupied Per Yt&r P.T. Butit Nusi Hotel IGARUDAl 82125 90338 985~0 106763 114975 1l31SB 123188 123188 l~l1SB 123188 !2313~ P.T. Hotel Indontsil Inttrnltion•l 73000 80300 97&00 94Cf00 102200 109~00 109500 109500 109500 1C9~0 :· P.T. Surala~a 95000 llvfrne Roo• Oc:uFanc~(%) 50 so SJ 54 sa 61 62 60 70 n 74 ToYl Rooa~ Oc~1ed 82125 82125 164-\33 335070 ~18108 517661 676900 722700 76~0 798-\00 810300 Toul Hotel RevenuesiUS$'000! 4400 7466 14948 30-\61 38010 47060 61718 65700 69682 71673 73664 &ross O,trtins F'rohtsWS$'000! 1100 2001 4096 8590 11593 147n 20058 22798 25573 27092 28655 - 33 - . .. ANNEX lla INDOHESIA! BALI TOUR!S~ PF; Q.Jt~T m :£DIT 479-I~D> -----------------------·----- PROJECT COKPLETION REF QfPh 107 224 448 914 1140 ' 1412 -1852 1971 2090 215oj 2210 Connedion Cha~"Ses 79 0 70 149 48 61 118 0 0 ll 0 Annual Service Char!H 114 149 m 609 760 941 1234 1314 1394 14!3 1473 . WI. Tohl: 429 746 1455 2856 3400 4186 5493 5717 6059 6233 6406 BUillu Hotel 115 639 677 690 741 779 792 843 894 m 945 Tohl Rtwnues: 544 1384 2132 3546 4141 4966 6285 6560 6954 71SJ Tl52 Ell1enses: Wat.er SuP1>l ~ 95 157 314 640 7~8 998 1296 1380 1463 1m 1547 CoMectlon Cost 71 0 60 126 41 52 100 0 0 0 0 Pa~roll I Related ExP. 354 540 567 595 625 656 689 724 760 m 838 Adainist'n I ProaOt!on 12'1 75 145 286 340 419 549 ___.___ 572 606 cZ3 641 Sub. Total!s 649 771 1086 . 1647 1804 2115 2635 2675 2829 2~~ 30:!5 tualu Hotel 422 575 596 586· 593 584 594 632 671 690 709 TotJl Exl'rnses! 1071 1346 1682 2233 2397 2i00 3229 3307 3500 3616 3734 &ross 0Periltins Profit! -527 38 450 1312 1744 2266 3056 3253 3454 3Sl7 3617 (Lf'l.S) Dt,. rtci ation 648 708 708 708 708 708 708 708 708 7~ 708 ~ortizition 208 358 358 ~8 358 358 358 ~8 3S8 358 358 Totil DePre. I Aaorl'n 856 1066 1066 1066 1066 1066 1066 1066 1066 1C·60 1066 . Incoae before Interest -ll83 -1028 -616 246 679 1200 1990 2187 2388 2471 2551 Inttr~st an ·~ 613 1009 985 942 907 837 802 767 732 Inct~~t before Tax -1996 -1663 -1625 -739 -264 293 1118 1350 1586 1704 1819 Mtt Incote ROJECTlOHS FOI'< HOTEL DE 1JELOf'MEHT ----------------· ------------------ ·· 50 50 53 54 58 61 62 60 70 n 74 82125 16~~33 335070 ~ta1oa 517661 678900 72~700 76b500 iSe4oo 810300 ToYl Rooes Oc~1ed 82125 7466 14948 30461 38010 47060 61718 65700 69682 71673 73664 Toul Hotel Revenues\USJ'OOOl 4400 2001 4096 8590 11593 147n 20058 22798 25573 27092 28655 &I'Oss 0Ptrlins F'rofits\USJ'OOO> 1100 .. jl - 33 - ... ANNEX lla INDOHESIA! BALI TQUR!S~ F'F; QJf~T m :£DIT 479-HtD> ----------------------------- PROJECT COKPLETIOH REF·Nenses : Water SuP1' 1~ 95 157 314 640 798 998 1296 1380 1463 1515 1547 CoMectlon Cost 71 0 60 126 41 52 100 0 0 0 0 PllHOll I Related ExP, 354 540 567 595 625 656 689 724 760 m 838 Adainist'n I Prceot~on 129 75 145 286 340 419 549 ___..___ 572 606 c23 641 Sub. Total !s 649 771 1066 1647 1804 2115 2635 2675 2829 2926 30:.:5 Builu Hotel 422 m 596 586· 593 584 59~ 632 671 690 709 Tot1l ExPt'nses: 1071 13~6 1082 2233 2397 2i00 3229 3307 3500 3616 373. &ross OPerating Prt~ht! -527 ' 38 450 1312 17•4 2266 3056 3253 3~54 3S37 3617 Dtl" l'tCi ati on 648 708 708 708 708 708 708 708 708 7~8 708 Alortization 208 358 358 ~8 3S8 358 358 ~8 358 3S8 358 Tot.il DePrt. I Aeort ' n 856 1066 1066 1066 1066 1066 1066 1066 1066 1C·66 1066 . Incoee (or Loss) befort Interest -1383 -1028 -616 2~6 678 1200 1990 2187 2388 2471 2551 Interest 613 635 1009 985 942 907 en 837 802 767 732 Incoee before Tax -1996 -1663 -1625 -739 -26~ 293 1118 1350 1586 1704 1819 Met I~oee -1996 -1663 -1625 -739 -264 293 1118 1350 1586 1704 1819 ~ Culuhtiw : -1996 -3659 -528~ -6022 -6286 -5993 -4876 -3526 -1940 - 236 1583 - 34 - ANNEX llb Page 1 of 2 I~O~Sll BALI TOURISM CORPORATION (CREDIT 0479-I~) PROJECT COMPLETION REPORT Assumptions for Operating Projections Revenues \~) Land Rent: 3.5% of total gross revenues (b) Rent on Commercial and Residential Areas: Commercial Center (947 sq m): US$5.00/sq m/month Art Shop (856 sq m): US$2.50/sq m/month Food & Beverage Outlet (160 sq m): US$2.50/sq m/month Residential Area (1,000 sq m): US$2.00/sq m/month (c) Rater Supply & Sewerage: Potable water: 2.4 cum/occupied room/day at US$0.25/cu m Irrigation water: 0.3 cu m/available room/day at US$0.15/cu m Sewerage 60% of potable water consumption at US$0.06/cu m (d) Utility Connection Charges: Potable water: US$100.00/available room Irrigation water: US$25.00/available room Sewerage: US$50.00/available room (e) Annual Service Charges: 2% of hotel gross revenues (f) Bualu Hotel (Training Hotel): 50 hotel rooms with projected average room occupancies (from 50% in 1984 to 74% in 1993) at an average room rate of US$35.00 per day and other hotel revenues at US$35.00 per occupied room per day. - 35 - ANNEX llb Page 2 of 2 Expenses: (g) Water Supply and Sewerage: 10% of revenues from water and sewerage operations. (h) Utility Connection Costs: 85% of connection charges (i) Payroll & Related Expenses: Average monthly expense at US$150.00 per employee for a total of 300 employees which is assumed to be increased by 5% annually in real terms. (j) Administration & Promotion: 10% of total revenues from tourism estate operations, excluding revenues from Bualu Hotel. (k) Bualu Hotel: Operating expenses are assumed to be 90% of its hotel revenues in 1984 and decreased to 75% by 1988, the year Bualu Hotel is expected to achjeve an average annual room occupancy of 61%. Depreciation and Amortization: Properties, Plants & Equipment are annually depreciated over their estimated useful lives assuming the follow- ing annual depreciation rates on a straight line basis: Buildings and related fixed structures 5% Office and recreational equipment 20% Machinery equipment 10% Furniture and fixtures 20% Deferred expenses are scheduled to be amortized annually over 15 years. Interest: BTDC obtained the proceeds of the Credit for a total of Rp 4,567 million (US$4.26 million equivalent) as of December 31, 1983, bearing interest rates of 15% and 13.5% per annum for the credit withdrawn for the period ending February 1, 1978 and for the period thereafter, respectively.- Interest during the grace period ending December 31, 1983 has been capitalized, while the repayment of principal and capitalized interest, as initially scheduled for start:f.ng from August 1, 1980, was amended to starting from August 1, 1985. - 36 - ANNEX 12 INDONESIA:_.__............,. ........... BALI TOURISM P?.OJECT CCREDIT _______________ ____ 479-IND> ...,.._.._. PROJECT COMPLETION REPORT ------------------------ Financiil Interr.al Rate of Return for Bali Tourisa Corporation Un USS "illion) IN'JESTHErn ·--------------------------- GROSS NET ·SEtiSITIYITY ANALYSIS· COST OPERATING BENEFIT PRDFJT (60Pl SOP.-10% SOP +10% ______ _.._,__._ ________ -~ 1976 1.60 -1.60 -1.60 -1.60 1977 1. '0 -1.90 -1.90 -1.90 1978 . 4.40 -4.40 -4.40 -4.-tO 1979 3.80'" -3.80 -3.80 -3.80 1980 5.20 -5.20 -5.20 -5.20 1981 2.70 -2.70 -2.70 -2.70 1982 3.60 -3.60 -3.60 -3.60 1983 3.30 -o.53 -3.93 -1.78 -3.88 1984 0.80 0.04 -o.76 -0.76 -o.76 1985 0.45 0.45 0.41 0.50 1986 1.31 1.31 1.18 1.44 1987 1.74 1.74 1.57 l. 91 1'99 2.27 2.27 2.04 2.50 1989 3.06 3.06 2.75 3.37 19Cl0 3. 25 3.25 2.93 3.58 1991 3.45 3.45 3.11 3.80 .1992 3.54 3.54 3.19 3.89 1993 3.62 3.62 3.26 3.98 1994 3.71 3.71 3.34 .f.08 1995 3.71 3.71 3.34 4.08 1996 3.71 3.71 • 3.14 4.08 1997 3.71 3.71 3.34 4.08 1998 3.71 3.71 3.34 4.08 1999 3.71 3.71 3.34 4.08 2000 3.71 3.71 3.34 4.08 2001 1.71 3.71 3.34 4.08 IJITERNAL RAli OF RETUR:~ 4.~% 3.9% 5.41 - 37 - ANNEX 13 ___ INDONESIA: BALI TDURISK PROJECT tCREDIT 479-IND> ......__.___ PROJECT C0~1LETION REPORT ~~----------~ Econcaic Rite of Return --- ---- US "IU:IDN --- ---------- NET -------SENSITIVITY ANALYSIS----- COST BENEFIT BENEFIT IEN.+JS% BEl~.-151 COST -!Sl COST +151 INFRA. HOTEL 1976 1.60 -1.60 -1.60 -1.60 -1.60 -1.60 1977 1.90 -1.90 -1.90 -1.90 -1.90 -1.90 1978 4.40 -4.40 -4.40 -4.40 -4.40 -4.40 1979 3.80 -3.80 -3.80 -3.80 -3.80 -3.80 1980 5.20 -5.20 -5.20 -5.20 -5.20 -5.20 1981 2.70 -2.70 -2.70 -2.70 -2.70 -2.70 1982 3.60 -3.&0 -3.60 -3.60 -3.60 -3.60 1983 3.30 31.50 1.10 -33.70 -33.54 -33.87 -28.98 -38.43 1984 o.eo o.oo 2.00 1.20 1.50 0.90 1.20 1.20 1985 28.00 4.10 -23.90 -23.29 -24.52 -19.70 -29.10 1986 59.50 8.60 -50.90 -49.01 -52.19 -·U.99 -59.83 1987 19.20 11.60 -7.60 -5.96 -9.34 -4.72 -10.48 1988 24.50 14.90 -9.70 -7.48 -11.92 -6.02 -11.37 1989 47.20 20.11) -27.10 -24.09 -30.12 -20.02 -34.18 1990 22.80 22.80 26.22 19.38 22.20 22.80 1991 25.60 25.60 29.44 21.76 25.60 25.00 1992 27.10 27.10 ~1.17 23.04 27.10 27.10 1993 28.70 28.70 33.01 24.40 28.70 29.70 1994 28.70 28.70 33.01 24.40 29.70 28.70 1995 2e.1o 28.70 33.01 24.40 28.70 29.70 1996 28.70 28.70 ll.Ol 24.40 29.70 28.70 1997 28.70 28.70 33.01 24.40 28.70 28.70 · 1998 28.70 28.70 33.01 24.40 29.70 28.70 1999 28.70 28.70 33.01 24.-'0 28.70 28.70 2000 28.70 28.70 33.01 24.40 29.70 28.70 ~001 28.70 29.70 . 33.01 24.-'0 29.70 28.70 -------------------~------- ECDNDniC RATE OF RETURN t..ll 8.21 4.21 e.tl 4.8% - 38 - ATTACHMENT (Page 1 of 6) Apr i 1 · 19 , 19 8 5 No. : UO/Dir/Pr.PPB/IV/85. Mr. Yukinori Watanabe Director Operations Evaluation Department World Bank 1818 H Street, N.W. Washington D.C. 20433 U • S • A • Re Project Completion Report on Bali Tourism Project - Credit 479-IND Thank you for your letter of January 28, 1985. We are transmitting herewith, via the World Bank Regional Office in Jakarta our comment on the Project Completion Report. We hope that our comments would be helpful to you. P.T. (Persero) Pengembangan Pariwisata Bali· Bali Tourism Development Corporation (B.T.D.C.) Head office : Nusa Dua ; P.O. Box. 187, Denpasar, Bali, Indonesia Tel. : 5101, 51q2 ; Cable : BTDC. Telex : 35197 BTDC NO. Jakarta Office : Hotel Wisata International, Gamma Building, Jl. M.H. Thamrin, Jakarta, Indonesia Tel : 322973, 320308 Ext. 271 & 273. Cable : P.T. BTDC, Telex: 46787. Wisata Jkt. - 39 ATTACHMENT (Page 2 of 6) . COMMENTS ON THE PROJECT COMPLETION :REPORT OF niE BALI TOURISM · PROJECT. FOR INDONESIA INTRODUCTION As stated in the Appraisal, the main objectives of the Nus a Dua tourism estate project, are · · to develop international tourism in Bali with the multiple objectives of increasing foreign exchange earning,creating empl~ymen t, improving the :lncome generating and also supporting the .regional development; protecting the unique social and cultural life as well as the physical environment of the island. Abovementioned objectives have partly been fulfilled following the operation of ~ 1,375 hotel rooms mid 1985. Delays encountered in project implementation, as well as the slower development hotel construction, for reasons already described in the PCR, were deterrents for the achievements of promising results of the large investment (US$ 37.9 millions equivalent to Rp. 20.756 millions) for the next 5 years. This does not imply the inactiveness of BTDC; whereas attempts have been made to improve the ·balance sheet in the year 1984 and the projections for the year 1985 (enclosed),and together with the Government to increase the number· of tourist arrivals. We will limit our comments on the PCR only to the extent concerning the role and performance of BTDC, and mainly those aspects closely related to the following : - infrastructure - hotel investments - BTDC operation. INFRASTRUCTURE The construction of the infrastructure followed the guidelines of appraisal but some discrepancies arose during its irnple - mentation in connection with : - 40 - ATTACHMENT (Page 3 of 6) 1. Additional project components i.e. : Training Hotel, Recycle water system, NS- N6 Utility extension, beach protection. 2. The revision of the Amenity Core design. 3. The cancellation of the multi purpose road. We believe that the PCR should also describe the considerations for among others . 1. The practical needs of additional project components as : ~. The Training Hotel in conjunction with the Hotel Traming Centre. b. · The revision of the Amenity Core de_sign to the development of the idea to have an own BTDC Office and a workshop. c. The beach protection, as was badly required to avoid further disastrous erosion to the beach. d. NS - N-6 Utility Extension as a facility to provide the infrastructure for the Club Mediterranee, who has chosen a hotel lot reserved for the second phase development. 2. Saving obtained with the adoption of a recycle water system. 3. The need for future development as the requirement of land for the Golf Course, public facilities and housing for Nusa Dua employees. Since the telecommunication sys~em was financed withlocal funds, (Perumtel), hope the present STO system is not performing satisfactoryly and a digital system is necessary. Meanwhile another project component : The Demonstration Farm was not developed in accordance with the plan. The Agricultural Dept of The Republic of Indonesia was in charge of the project and the field activities were done by the Agricultural office of Bali who were the local counterparts in cooperation with BTDC who provided the finance from the IDA Credit as well as the Rupiah fund. STO (Automatic Telephone Station) ~ ; . - 41 - ATTACHMENT (Page 4 of 6) No visibly results were achieved because physically a demonstration farm was never realized and only experimental planting in various places were undertaken without any traces left as soon as the experiment was completed. In general, the infrastructure was completed and ready for investments at the end of 1982, four years behind schedule , since : there was a delay in completing the design ; delay in awarding contracts to contractors, because the World Bank's and Government's approvals were required for tenders using international competitive bidding ; technical matters in the field. The investment cost amounted to Rp. 2 0, 7 56 millions or equivaient to US$ 37.4 millions. Total investment in Rupiah was 38% higher than estimated while the US Dollar equivalent was 3.4% higher than estimated. The high cost increase in Rupiah equivalent was among others the result of the Rupiah devaluation in November 1978. As a result the cost of project components which were bidded and completed after the year 1978 considerably increased especially the foreign exchange component. Moreover, the cost for the experts also increased in concurrence with the extended project completion. HOTEL INVESTMENT With the start of i~frastructure construction, BTDC startedalso its efforts in attracting hotel investors. Various methods were utilized but it appeared that the project was not as attractive for hotel investors, whereas the number of tourist arrivals closely related to the air policy, was very important to them. - 42 ~ ATTACHMENT (Page 5 of 6) As a result the hotel investment and the availability of hotel room as estimated in the appraisal· (2,500 rooms) were not met in 1983, but most probably to be reached in 1989. With reference to latest development, total available rooms will be as follows 1985/1986 1,375 rooms 1987 1,790 rooms 1988 2,140 rooms 1989 2,415 rooms 1991 2,740 rooms 1992 3,075 rooms : Any improvement in the air policy, where international . lines are allowed to land directly in Bali, would increase the foreign investors arrivals, and based hereon would assure the requiranent and construction of the above ·estimated total of rooms. BTDC'S OPERATION a. BTDC income entirely depends on the total of hotel rooms in operation in Nusa Dua. In order to attract hotel investors, in particular at the beginning (up to 1983), a revision to the land rent was introduced. This has caused a decrease in income. b. An extensive construction period together with the extension of the grace period resulied in an increase at the total cost of investment. On the other hand, delay in hotel construction has brought financial consequences to the company's income at the start of its operations (1983) and this will maintain during the next 8 years. c. BTDC will reach the break-even point position when 1,700 rooms will be in operation. This will be achieved in 1987 if there is no delay in the completion of the Club Mediterranee Village. . . .,- - 43 - ATTACHMENT (Page 6 of 6) d. The financial internal rate of return on BTDC's investment is estimated at 5%, provided that all hotels are in operation according to schedule. Above mentioned figure will become even smaller when ever an economical depression occurs influencing investors intention to participate in Nusa Dua. e. Increase of the internal rate of return appears difficult due to our commitment to the present land rent system. Should an adjustment, as stipulated in the appraisal to accept payment for a certain period in advance be adopted, this measure will however not help to increase the IRR. It will only improve the cash flow since the accounting treatment on advance payments . will not consider that income as the total income. f. The solution to overcome the low IRR and at concurrently also the continuining loss in the short-run, is to defer the present rent system to one or two hotel lots, and apply instead the acceptance of payments for the usage and utilization of that particular hotel lot for the period of 30 or SO year ("restricted sale"). L •