Full Report - Feasibility Study KSCS K-Exim

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia Korea is a country that has achieved its modernization in a short period of time, and during which, the multi-regional waterworks supply system was constructed. This has enabled Korean consultants to have hands-on experience in performing a construction supervision as well as designing with the latest techniques. If their expertise and experience are applied to the Indonesian water supply system, which contributes to the optimized system, maximum performance, and quality assurance, the Karian – Serpong conveyance system project will become one of the best waterworks systems. ④ To transfer technology in water supply system It is possible to learn theory and technology on construction and operation of water supply systems from textbooks, but it is not easy to learn dozens of practical cases that we encounter in the construction field. If international consultants have a one-on-one meeting with Indonesian consultants and perform tasks, Indonesian engineers will have a great opportunity to be engaged in on-the-job training throughout the entire process of designing, construction, and commissioning. It would be the best way of transferring and learning technology. ⑤ To facilitate smooth communication between project execution agencies and the KEXIM On detailed matters, there may be some differences in opinion between the project execution agency (PUSATAB, BBWS C3) and the KEXIM, if not on key issues. In practice, it will be difficult to have a meeting to iron out different views on minor issues every time they come up. Particularly on technical matters, Korean consultants will play the role of an interlocutor in helping to facilitate communication, to narrow down the differences, and to reach a rational settlement. All things considered, employing international consultants will lay the foundation for a successful implementation of this project and serve as a means of securing performance and quality. This will also provide an invaluable opportunity for the Indonesian project execution agencies where they learn on advanced water supply technology directly from international engineers. 6.5 Organization structure for project implementation This project is a large-scale project which requires a comprehensive performance assurance of the entire system. This means not only strict quality control of each element but also a stable operation of the system. To successfully implement the project, all the related organizations should closely cooperate one another from the technical and managerial aspects. <Figure 28> shows the organization for the implementation of the project. 58

Summary Report <Figure 28> Organization structure for project implementation Project execution agency - overall project management (PUSATAB/BBWS C3) - selection and employment of consultants report to higher authorities (PU, SDA): working process, controversial issues, - requirements for project implementation coordination with the Indonesian government agencies (Banten province, PLN) - report to KEXIM on provisions of the loan agreement - budget management, project working process supervision - review, management, and approval of tasks performed by consultants - consultants - working design - bidding preparation for the selection of contractors - construction supervision: process, quality, safety control - support reporting to the KEXIM - support overall project management Contractor - engineering work PUSATAB : Ground Water - supply materials and equipment and Raw Water Center - construction: civil/architectural BBWS C3 : Balai Besar Wilayah Sungai Cidanau, work. Mechanical/electric work Ciujung, Cidurian - commissioning - performance and quality assurance 7.0 Operation and maintenance system 7.1 Operation and maintenance organization The task of this project is comprised of the conveyance pipeline that takes raw water from the Karian dam and the booster pumping station. Booster pumps and water conveyance facilities need to be operated according to the demand and distribution amount of each water treatment plant by phase, but the operation of pump facilities has to be controlled by water levels at the Karian dam. Accordingly, the following plans are to be established by connecting the operation of the booster pumping station and the conveyance pipeline. ① an integrated operation organization for the Karian dam, pumping station, and conveyance system (integrated operation/maintenance); or ② separate operation organizations (separate operation/maintenance) for the pumping station and conveyance pipeline 59

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia Since understanding the overall system of the Karian dam such as seasonal conditions (rainy and dry seasons), quality of water source, and location of water intake is critical to the effective operation of the conveyance and pumping facilities, an integrated operation organization is chosen in this feasibility study. The planned operation/maintenance organizational chart is shown in <Figure 29>. <Figure 29> KSCS operation/maintenance organizational chart PUSATAB BBWS C3 Head manager of the Karian dam (0.5) Vice manager of the Karian dam (0.5) Operation department(7) Maintenance department(13) General staff (8) Security guard (6) Pumping station Maintenance team operation senior leader (1) manager (1) Pumping station (mechanical) Technical Tour guide (2) operator (6) technician (4) assistant (1) (electric) technician (4) (civil) technician (2) 60

Summary Report 7.2 Costs for operation and maintenance The sum of the operation/maintenance cost in the Karian – Serpong conveyance system project is shown in <Table 38>. The labor cost for the second phase equals to that of the first phase, so zero labor cost (0) in the second phase as shown in the table below means there is no additional labor cost. <Table 38> Cost for operation and maintenance Classification Phase Operation and maintenance cost Ratio Unit IDR/year Unit KRW/year Unit USD/year 7% Phase 1 5,697,364,820 455,789,186 422,027 0% 4% Labor cost Phase 2 - - - 71% 81% Electricity Subtotal 5,697,364,820 455,789,186 422,027 75% cost Phase 1 60,250,459,480 4,820,036,758 4,463,000 4% Phase 2 47,291,714,100 3,783,337,128 3,503,090 5% Maintenance Subtotal 107,542,173,580 8,603,373,886 7,966,090 4% cost Phase 1 8% Phase 2 3,457,477,055 276,598,164 256,109 9% Other Subtotal 2,867,282,121 229,382,570 212,391 8% expenses Phase 1 6,324,759,176 505,980,734 468,501 11% Phase 2 6,940,530,135 555,242,411 514,114 5% Raw water Subtotal 5,015,899,622 401,271,970 371,548 8% fees Phase 1 11,956,429,758 956,514,381 885,662 100% Phase 2 9,019,296,000 724,873,201 667,428 100% Total Subtotal 2,869,776,000 230,641,473 879,791 100% Phase 1 11,889,072,000 955,514,674 879,791 Phase 2 85,365,127,490 6,832,539,720 6,322,678 58,044,671,843 4,644,633,141 4,966,820 Total 143,409,799,333 11,477,172,861 11,2889,498 61

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia 7.3 Technology transfer plan The technology transfer plan for the Karian – Serpong conveyance system is shown in <Figure 30>. <Figure 30> Technology transfer plan Setting a target Curriculum Technology transfer ∙ Understanding of the General ∙ About the conveyance system system ∙ Practical training by facility ∙ About the facility ∙ Training on materials/equipment by ∙ System ⇨ To train a manufacturers and suppliers operation handful of ∙ Training on electricity/ ⇨ Professional operation instrumentation /control specialists equipment ∙ System analysis within a short period of time ∙ Training on the operation of the pumping station in an In site ∙ Operation of emergency the pump ∙ Operation of the automated system 8.0 Economic and financial feasibility analysis 8.1 Economic feasibility for KSCS only (1) Economic analysis Economic analysis for this feasibility study was conducted on two cases such KSCS project only and KSCS combined with Serpong WTP project to achieve benefits of KSCS project. <Table 39> Result of Economic analysis Case Discount Present value of Present value of NPV B/C Rate cost benefit (thousand Ratio (thousand USD) (thousand USD) USD) 1.19 KSCS only 9% 347,399 412,098 64,699 1.38 9% 512,613 707,075 KSCS + 194,461 Serpong WTP 62

Summary Report When the construction cost, operating cost, or benefits applied in the economic analysis changes, NPV, B/C ratio, and IRR also change as shown <Table 40>. <Table 40> Sensitivity analysis by B/C change Case Sensitivity NPV IRR(%) B/C Ratio (thousand USD) Base - 64,699 1.19 11.07 29,959 1.08 9.89 Case 1 10% increase in costs (4,959) 0.99 8.87 23,489 1.07 9.77 Case 2 20% increase in costs (17,721) 0.95 8.40 10% decrease in benefits (11,251) 0.97 8.66 KSCS only 194,461 1.38 13.40 Case 3 143,200 1.25 12.02 91,939 1.15 10.82 Case 4 20% decrease in benefits 123,754 1.24 11.87 53,493 1.10 10.27 Case 5 Combination of case 1 and 3 72,493 1.13 10.57 Base KSCS + Case 1 10% increase in costs Serpong Case 2 20% increase in costs Case 3 10% decrease in benefits WTP Case 4 20% decrease in benefits Case 5 Combination of case 1 and 3 (2) Analysis result To summarize the result of the economic feasibility analysis on the construction and operation of the Karain – Serpong conveyance system, the net present value of benefits is 64,699 thousand USD, the benefit/cost ratio is 1.19, and IRR is 11.07 percent. The discount rate that makes NPV zero, (that is, IRR at which the present value of benefit is equals to the present value of cost, or B/C ratio becomes one) is 11.07 percent, greater than the applied discount rate of 9 percent. So, this KSCS project is confirmed economically feasible. Furthermore, the economic result combined with KSCS and Serpong WTP is expected to be more feasible with NPV 194,461 thousand USD, B/C ratio 1.38, and IRR 13.40 percent. The investment cost for KSCS including construction as well as maintenance cost for 50 years is estimated 58% of the grand total investment cost including Serpong water treatment project. “Benefit” is distributed in accordance with the share of portion of investment cost to the KSCS project. But the result of economic analysis, B/C ratio for KSCS only is calculated 1.19 and 1.38 including Serpong water treatment plant project which doesn’t show significant difference considering portion of investment cost. 63

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia The reason is identified that the investment cost for Serpong water treatment plant project is smaller than KSCS at the beginning stage of project but the maintenance cost including chemical & electric cost is much higher than KSCS, but the discount rate is applied to the maintenance cost which highly affects to the “Cost” to Serpong water treatment project. 8.2 Financial feasibility In this project, the EDPF is basically limited to the Karian – Serpong conveyance system (KSCS) project, so the scope of this financial feasibility analysis also needs to be limited to the KSCS project. Nevertheless, the KSCS is not a project that seeks profits and its operating budget will be fully funded by the Indonesian government, therefore we do not conduct the financial feasibility analysis. 9.0 Environmental and social effect assessment 9.1 Environmental and social impact grading system As clearly specified in the EDCF Safeguard Policy and IFC Performance Standards (PS 1), the project execution agency of the recipient country shall identify environmental/social impact and risks in the initial stage of the project preparation, predict the likely magnitude and consequences of such impact and risks by thoroughly reviewing their types, sizes, and locations, and establish an environmental/social management measures corresponding to the prediction. This project is a massive civil engineering/construction project that has great environmental and social impact on the local economy, thereby requiring the resettlement plan. Which means that once this project is implemented, there will have irrevocable environmental and social impact. Therefore, it is fair to say that this project will be classified as Category A. 9.2 Planning and preparation of environmental and social impact assessment (1) Renewal and approval of AMDAL The AMDAL prepared for the main conveyance line connecting the Karian dam and the Serpong water treatment plant with the length of 47.9km is already expired. Under the relevant law amended in 2012, it is mandatory either to revise the existing AMDAL or to prepare a new one. (2) Current state of LARAP The latest LARAP was prepared in 2017 for the main conveyance pipeline with the length of 47.9km. It surveyed potential houses and area to be affected by the construction of the Karian – Serpong conveyance system to prepare for the land acquisition. The project execution agency submitted an integrated LARAP on the entire project route which includes the branch line with the length of 17.5km, in September 2018. 64

Summary Report 9.3 Follow-up requirements for implementation (1) Renewal and approval of the AMDAL for the entire route of this project The AMDAL prepared for the main conveyance line connecting the Karian dam and the Serpong water treatment plant with the length of 47.9km is already expired. Under the relevant law amended in 2012, it is mandatory either to revise the existing AMDAL or to prepare a new one. Since an AMDAL for the branch conveyance pipeline extending to four water treatment plants – Rangkas Bitung, Maja, Solear, and Parung Panjang WTPs has never been prepared, a new AMDAL needs to be written. (2) Application of international safeguard standards to the existing AMDAL and supplement Upon receipt of a new AMDAL report that is effective and valid, the KEXIM will review the report through consultations with the project execution agency; check if all the relevant environmental standards and safeguards including the Indonesian legislation and international safeguards (specifically, IFC PS 2, PS 4, PS 6, PS 7, PS 8) are applied and whether it is necessary to apply IFC EHS standards. If a significant gap is found, the KEXIM suggests mitigation/management measures per item and then prepares a comprehensive environmental and social management plan. Meanwhile, the installation of the branch conveyance pipeline is identified as the associated facilities in the future. Hence, it would be desirable that a comprehensive Area of Influence that includes such facilities be prepared and the corresponding impact assessment be conducted in enhanced/renewed LARAP and AMDAL reports. (3) Land acquisition and compensation Matters to be considered in land acquisition are as follows: - to prepare a LARAP and related documents to be submitted to the Governor of the Banten province - to implement land acquisition and assessment - to announce land acquisition - land compensation and resettlement of the affected residents The land acquisition process is as follows: the Banten province begins negotiations with the landowners in accordance with the location statement prepared by the project execution agency. As for the land whose negotiation is finished, the project execution agency compensates the landowners before the construction begins. It is ideal that a more specific implementation plan be established to comply with principles on land acquisition, compensation, and resettlement mandated by the EDCF Safeguard Policy and IFC PS5. A continuous monitoring is also essential to ensure the complete implementation of the plans across the board. 65

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia (4) Considerations for land acquisition and compensation (LARAP) of this project (phase 1 main conveyance line) When preparing an improved AMDAL report, it is recommended that the LARAP be enhanced to conform to international safeguard standards by considering the following items. 1) When tallying the number of affected households, those who do not have the legal ownership of the land need to be included. 2) When estimating the compensation amount, the principle of the full replacement cost needs to be reflected. 3) The compensation amount and policy need to be determined through rounds of consultations with residents. 4) The land for land (replacement land) compensation need to be considered and more livelihood assistance programs are needed. 5) The mechanism for handling civil grievance needs to be set up. 6) The monitoring system for project implementation and operation of the facility is needed. 7) Protection measures for the vulnerable including women are needed. 10.0 Conclusion and suggestion 10.1 Expected benefits for the recipient country Expected benefits for regions including Serpong WTP service areas (West Jakarta, Tangerang city, South Tangerang city), Parung Panjang WTP service area (Bogor regency), Solear WTP service area (Tangerang regency), Rangkas Bitung and Maja WTPs service area (Lebak regency), and the project area (Lebak and Tangerang regencies) are as follows: ∙ To meet the growing demand for domestic and industrial water in rapidly urbanized and industrialized regions ∙ To improve the living environment through a safe and clean water supply ∙ To boost industrial complexes located in the service areas through a stable supply of water ∙ To help create jobs for residents in the construction area ∙ To establish infrastructure for a stable production and supply of water ∙ To attract investment led by construction of infrastructure and contribute to the country’s sustainable growth and continuous implementation of national strategic plans 66

Summary Report 10.2 Expected benefits for the donor country ∙ To strengthen friendly cooperative relations through bilateral exchanges ∙ To enhance the reputation of South Korea’s water supply projects and the nation’s status through the transfer of its advanced technology ∙ To lay the foundation for bilateral cooperation in related industries and to promote bilateral trade ∙ To enhance the effectiveness of the official development aid (ODA) of the South Korean government and its Exim Bank. 10.3 Final conclusion The feasibility of the project for the Karian – Serpong Conveyance System under the EDPF has been reviewed through technical, economic, political and environmental analyses. The results of the analyses show the project plan needs to be modified technically and a number of factors related to socio-economic effect need to be settled, all of which can be solved well. Both the Indonesian and South Korean government officials are well aware of the urgency of this project as well as the need for promoting technical exchanges and friendly relationship between the two countries through the implementation of this project. Therefore, it is economically, politically feasible and imperative to implement this project. 67

Chapter 1. Overview Chapter 1. OVERVIEW 1.1 Project background 1.1.1 Project background Indonesia’s Ministry of Public Works and Housing has laid out a plan, where it sets the goal of attaining 100 percent of water supply, 0 percent of slum areas, and 100 percent of hygiene facility access. Under the 100-0-100 Plan, the ministry plans to achieve the 100 percent target of water supply by 2019. Especially, our service area, the JABOTABEK region (Jakarta, Bogor, Tangerang, and Bekasi) has seen an exponential growth in demand for water due to a rapid industrialization and urbanization. The ministry has pushed forward with plans to construct the Karian dam in Rangkas Bitung, the Ciwujung and Cidurian region to secure water resource, as well as to build a water treatment plant in Serpong to supply water to the project area. Financed by South Korea’s EDCF, the construction of the Karian dam is scheduled to be completed by the end of 2019. The conveyance system, initially planned to be implemented under PPP along with the water treatment plant and transmission/distribution pipeline, was however excluded from the PPP due to the inadequate feasibility. With the Karian dam expected to be filled with water by the end of 2020, the Indonesian government asked the South Korean government for an urgent financing, which has led to this feasibility analysis for the project to be financed by the EDPF. 1.1.2 Project development details and main schedule Details of how the Karian – Serpong Conveyance System construction project has so far developed are as follows. ● 1985: Feasibility study on the construction of the Karian multi-purpose dam – JICA ● 1989: Cisadane-Cimanuk Comprehensive water resource development plan – WB / SDA Mid-to-long-term water supply plan in the Jabotabek region ● 1993-1995: Study on Ciujung-Cidurian water resources management – JICA Development plan of four dams (including the Karian dam) and the Karian – Serpong conveyance system ● 2004-2006: Feasibility study and working design of the Karian dam construction – KOICA Feasibility study of the financing program for the Karian dam and water supply ● 2008: Feasibility study on the validity of water supply system using PPP fund – KEXIM 1-1

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia Feasibility study of the construction of the Karian dam and the follow-up waterworks projects ● 2011: The Korean and Indonesian governments singed a loan agreement for the construction of the Karian dam ● 2011: Master plan and feasibility study for the Karian–Serpong conveyance system – KOICA Including a detailed plan for a PPP funded water supply facility ● 2015: Master plan and PPP basic scheme for the Karian–Serpong conveyance system and water treatment plant - KEXIM Basic design and PPP investment plan for the construction of the conveyance pipeline, water treatment plant, transmission/distribution pipeline ● 2018: Feasibility study of the Karian – Serpong conveyance construction project – KEXIM Feasibility study on the validity of an EDPF-funded project 1.2 Project objective The objective of this project is to construct the conveyance system that will provide a stable supply of raw water to the Serpong WTP, which is to produce water to its service areas including West Jakarta, Tangerang city, and South Tangerang city. Along with the main conveyance pipelines, four branch pipelines that will be connected to four water treatment plants are to be installed during the 2nd phase. The four branch pipelines are to be connected to the Rankas Bitung WTP (service to Lebak regency), Maja WTP (service to Lebak regency), Solear WTP (service to Tangerang regency), and Parung Panjang WTP (service to Bogor regency), respectively. In accordance with the Indonesian government’s water resources management plan (POLA), the Karian – Serpong Conveyance System project plans to serve the following purposes: (1) To stably supply raw water to service areas ① Effective use of raw water sourced from the Karian dam To stably supply the raw water that will be sourced from the Karian dam, a multipurpose dam to be built and filled with water in near future to water treatment plants in service areas facing severe water shortage. ② Stable supply of raw water to the Serpong WTP To stably supply the raw water to the Serpong water treatment plant through which domestic water will be supplied to areas including West Jakarta, Tangerang city, and South Tangerang 1-2

Chapter 1. Overview city facing severe water shortage. ③ Stable supply of raw water to branch line WTPs in Banten province (phase 2) To stably supply the raw water to rural areas – Tangerang and Lebak regencies in Banten province and Bogor regency in West Java province – where the Karian dam is situated and the conveyance pipelines pass through. (2) To lay the groundwork for industrialization and local economy ① To stably supply industrial water To boost various industries by supplying industrial water to main industrial complexes in service areas where rapid industrialization is taking place. ② To lay the groundwork for income growth and long-term economic growth To promote income growth of the relevant residents and help grow the local economy in the long run (3) To improve living conditions, encourage balanced regional development, and lessen the heavy workload of women ① To prevent water-borne diseases and improve living conditions Supplying clean and hygienic water to urban areas prevents water-borne diseases, extends life expectancy, reduces healthcare costs, and improve overall living conditions. ② Balanced regional development between rural and urban areas Water supply service will help free many women in rural areas from heavy labor such as doing the laundry or drawing water, so they can enjoy leisure and cultural activities as those in urban areas. 1.3 Project scope 1.3.1 Location of the project area The project area encompasses Lebak and Tangerang regencies in Banten province, and Parung Panjang district in Bogor regency, West Java province. This region is located in the west of the Indonesian island of Java, a strategic location which connects Java and Sumatra. Geographically, it is located at between 105° 87′ and 106° 82′ east longitude and between 6° 10′ and 6° 99′ south latitude. The northern and western regions are surrounded by the Java Sea and the southern region has a range of mountains called Mount Halimun with an elevation of 1,929m. The map of the project area is as shown in <Figure 1.1>. 1-3

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia <Figure 1.1> Location map of the project area <Figure 1.2> Regional scope of the project Serang Tangerang Tangerang Lebak City West Jakarta West Tangerang City Bogor 1-4

Chapter 1. Overview 1.3.2 Project scope (1) Regional scope of the project The Karian-Serpong Conveyance System, or KSCS, is a project which plans to build the main pipelines (1st phase) to convey raw water from the Karian dam to the Serpong WTP as well as to install four branch pipelines (2nd phase) to provide raw water to four other WTPs (Rankas Bitung, Maja, Solear, and Parung Panjang). The main conveyance pipelines extend from Lebak and Tangerang regencies. Branch pipelines connected to the Rangkas Bitung and Maja WTPs are in Lebak regency, a branch pipeline connected to the Solear WTP is located in Tangerang regency, and a branch connected to the Parung Panjang WTP spans across Tangerang and (Parung Panjang district) Bogor regencies. The regional scope of the project area is as shown in <Figure 1.2>. <Table 1.1> Contextual scope of the project Item Specification and dimensions Remarks Intake Self-standing: design intake water quantity 12.4m3/sec Excluded tower External diameter D9,600mm (internal diameter D6,000mm) from the project scope x height 30.1m (to be funded by EDCF) Conveyance Concrete tunnel: discharge capacity 12.4m3/sec tunnel Internal diameter D4,000mm x length 1,329m Booster Booster pump pumping - Booster pump 1.0m3/sec.unit station x phase 1: 7 units, phase 2: 6 units - Regulating pump 0.5m3/sec.unit x phase 1: 2 units, phase 2: 2 units - Rangkas Bitung pump 0.40m3/sec.unit x 2 units (phase 2) Electric power lead-in equipment, power substation Integrated monitoring and control system Main Route length L=47.9km conveyance - Phase 1 steel pipe D2,000mm, L=47.9km - Phase 2 steel pipe D2,000mm, L=36.0km pipeline D1,800mm, L=11.9km Branch Route length L=19.31km Phase 2 conveyance - Steel pipe D1,350mm, L=4.75km (Solear branch) - Steel pipe D600mm, L=8.56km (Rangkas Bitung branch) pipeline - Steel pipe D600mm, L=4.80km (Parung Panjang branch) - Steel pipe D350mm, L=1.20km (Maja branch) 1-5

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia (2) Contextual scope of the project To provide water resource obtained from the Karian dam to the water treatment plant, facilities such as intake tower, conveyance tunnel, conveyance pipelines, and pump facility need to be installed. According to the SDA’s plan, however, intake tower and conveyance tunnel are implemented under the Karian dam EDCF project, therefore they are excluded from this project scope. The Karian – Serpong Conveyance system consists of the main conveyance pipeline with the length of 47.93km, which connects the Karian dam to the Serpong water treatment plant; the branch conveyance pipeline to be installed in the second phase with the length of 19.31km, which connects the dam to four other WTPs; the Ciuyah booster pumping station; and subsidiary facility. According to the target year of this project (first phase by 2021and second phase by 2031), a phased construction plan for the conveyance pipeline and the pumping station is established. The contextual scope of this project is as described in <Table 1.1>. 1.3.3 Task scope The contextual scope and main tasks of this F/S are summarized as follows: ① Summary of the project overview ② Investigation of the current status and review of the existing materials – review of the existing accomplishments ③ Project implementation agencies and implementation system - Ground Water and Raw Water Center (PUSATAB), Directorate General of Water Resources (SDA), under the Ministry of Public Works and Housing, Project implementation organization, operation and maintenance organization ④ Basic direction for the project implementation – conveyance system, pumping station, criteria for the quality of the steel pipe, field welding and installation method, testing, and anti-corrosion of the steel pipe ⑤ Project cost estimation – construction costs, consulting fees, training and commissioning costs, land purchase and indirect costs ⑥ Feasibility analysis ⑦ Economic and financial feasibility analysis – impact on the financial feasibility of the PPP-funded WTP project ⑧ Environmental and social impact assessment - Gap analysis between the international standards and the Indonesian standards (AMDAL and LARAP whose validity are secured) ∗ The project execution agency has not secured the AMDAL’s validity during the given time of period for this feasibility study, so the AMDAL analysis is excluded from the 1-6

Chapter 1. Overview scope of the task in this feasibility study. ⑨ Other surveyed items for project implementation – need for materials produced in foreign countries and consulting service by international engineers 1.4 Project overview 1.4.1 Main index In planning a raw water allocation plan that will meet the target years of 2021 and 2031, the water demand by area and the Indonesian government’s water resources supply plan (POLA) are considered, and the details are shown in <Table 1.2>. <Table 1.2> Raw water allocation plan by region (Unit: m3/sec) Karian Karian dam + Pasir Kop dam Area Service area Total Planned WTP Phase2 Phase2 Phase2 Phase1 Karian PK Subtotal Total 17.9 14.6 0 3.3 3.3 Total 12.4 6.55 2.55 3.3 5.85 Subtotal 8.0 3.15 2.55 2.3 4.85 1.3 2.45 Solear Tangerang 3.6 1.15 1.15 regency 0.5 Right Banten South 0.5 side of province Domestic Tangerang 1.8 0.65 0.65 - water - 1.15 the city 1.0 Serpong Karian Tangerang 2.0 0.75 0.75 1.25 dam city Lebak 0.6 0.6 - - Rangkas regency Bitung/Maja West Bogor regency 0.2 0.2 - - Parung Java Panjang Jakarta West Jakarta 4.2 3.2 - 1.0 Serpong Total 5.5 8.05 -2.55 - -2.55 Subtotal 1.5 1.5 - - - Serang 0.7 0.7 - - Left Banten Domestic regency 0.3 0.3 - - - Not included side of province water Serang city 0.5 0.5 - - in the project - the Cilegon city area Karian - (Petir) dam - Channel flow for 4.0 6.55 -2.55 -2.55 Ciujung river maintenance 1-7

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia The raw water allocation plans by water treatment plant and by project phase are shown in <Table 1.3> and <Figure 1.3>, respectively. <Table 1.3> Raw water allocation plan by WTP Water allocation plan WTP Total Phase 1 Phase 2 Service area m3/sec m3/day m3/sec m3/day m3/sec m3/day Lebak regency Total 13.9 1,200,960 8.05 695,520 5.85 505,440 Lebak regency Tangerang regency Rangkas 0.4 34,560 0.4 34,560 - - Bogor regency Bitung Tangerang city, South Tangerang Right Maja 0.2 17,280 0.2 17,280 - - city, West Jakarta side of Solear Not included in this Parung 3.6 311,040 1.15 99,360 2.45 211,778 project (Serang city, the Panjang Serang regency, Karian 0.2 17,280 0.2 17,280 - - Cilegon city) dam Serpong 8.0 691,200 4.6 397,440 3.4 293,760 Left Petir 1.5 129,600 1.5 129,600 - - side of the Karian dam <Figure 1.3> Raw water allocation plan by project phase 1-8

Chapter 1. Overview 1.4.2 Facility overview <Table 1.4> shows the overview of the Karian – Serpong conveyance system, with the intake tower and conveyance tunnel excluded by the SDA. <Table 1.4> Overview of the project facility Phase Target Field Main facility year ① Civil works ∙ Main conveyance pipelines D2,000mm, L=47.9km ② Architectural works ∙ Booster pumping station 1 unit ③ Mechanic works ∙ Booster pump 1.0m3/sec. x 7 units Phase 1 2021 ∙ Regulating pump 0.5m3/sec. x 2 units ④ Electricity works ∙ Power incoming equipment 1 unit ∙ Power substation 1 unit ⑤ Instrumental & ∙ Integrated monitoring/control system 1 unit Control works ∙ Flowrate metering equipment 1 unit ① Main conveyance ∙ D2,000mm, L=36.0km pipeline ∙ D1,800mm, L=11.9km 47.9km in total Phase 2 2031 ② Branch conveyance ∙ D1,350mm, L=4.75km (Solear branch line) pipeline ∙ D600mm, L=8.56km 19.31km in total (Rangkas Bitung branch line) ③ Mechanic works ∙ D600mm, L=4.80km (Parung Panjang branch line) ∙ D350mm, L=1.20km (Maja branch line) ∙ Booster pump 1.0m3/sec. x 6 units ∙ Regulating pump 0.5m3/sec. x 2 units ∙ Rangkas Bitung system pump 0.40m3/sec. x 2 units ④ Electricity works ∙ Power substation 1 unit ⑤ Instrumental & ∙ Flowrate metering equipment 1 unit Control works 1-9

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia 1.4.3 Project cost estimation The estimated total project cost for the first phase, which includes direct construction cost, commissioning and training cost, costs for working design, bid application support, and construction supervision, and indirect cost, is shown as in <Table 1.5>. <Table 1.5> Total project cost (phase 1) Unit: thousand IDR (converted into USD) Classification Foreign EDPF Total Recipient Total currency Local country currency GOI1) 1. Construction cost 1,957,623,815 777,246,953 2,734,870,770 2,734,870,770 (145,009,171) (57,573,848) (202,583,020) (202,583,020) a. Temporary work - 21,591,509 21,591,509 21,591,509 b. Booster pumping (-) (1,599,371) (1,599,371) (1,599,371) station 153,089,757 219,009,137 372,098,898 372,098,898 c. Main conveyance (11,339,982) (16,222,899) (27,562,881) (27,562,881) pipeline 1,804,534,054 536,646,307 2,341,180,360 2,341,180,360 2. Commissioning (133,669,189) (39,751,578) (173,420,767) (173,420,767) 3.Consulting fee 4,777,772 9,146,939 13,924,710 13,924,710 (353,909) (677,551) (1,031,460) (1,031,460) a. Design/bidding preparation 157,179,150 45,065,325 202,244,475 202,244,072 (11,642,900) (3,338,172) (14,981,072) (14,981,072) b. Construction supervision 77,215,140 17,302,302 94,517,442 94,517,442 (5,719,640) (1,281,652) (7,001,292) (7,001,292) 4. Total direct cost (1+2+3) 79,964,010 27,763,024 107,727,034 107,727,034 (5,923,260) (2,056,520) (7,979,780) (7,979,780) 5. Contingency 2,119,580,736 831,459,216 2,951,039,952 2,951,039,952 a. Physical contingency (157,005,980) (61,589,572) (218,595,552) (218,595,552) (5% of 4) 150,267,763 88,978,608 239,246,271 239,246,271 b. Price contingency (11,130,938) (6,591,008) (17,721,946) (17,721,946) 105,979,037 41,572,967 147,552,003 147,552,003 (7,850,299) (3,079,479) (10,929,778) (10,929,778) 44,288,627 47,405,642 91,694,268 91,694,268 (3,280,639) (3,511,529) (6,792,168) (6,792,168) 6. Taxes and duties - 824,999,175 824,999,175 (-) (61,111,050) (61,111,050) a. VAT for L.C(10%) - 83,145,920 83,145,920 b. VAT for F.C(10%) (-) (6,158,957) (6,158,957) c. Import duties (25%) - 211,958,073 211,958,073 (-) (15,700,598) (15,700,598) 7. Project management cost (2% of 4) - 529,895,183 529,895,183 (-) (39,251,495) (39,251,495) 8. Land acquisition cost - 59,020,826 59,020,826 (-) (4,371,913) (4,371,913) - 278,817,805 278,817,805 (-) (20,653,171) (20,653,171) 9. Loan service charge (TBD) 10. Total project cost 2,269,848,399 920,437,814 3,190,286,223 1,162,837,805 4,353,124,028 (4+5+6+7+8+9) (168,136,918) (68,180,580) (236,317,498) (86,136,134) (322,453632) Note: GOI (Government of Indonesia) 1-10

Chapter 1. Overview 1.5 Project implementation period As for the first phase, it is expected to take 15 months to develop a detailed design works, including supporting activities for bid application and selection of constructors. It is expected to take 36 months for construction including commissioning test. So, the total project implementation period is planned to be 51 months. But the selection of consultants needs to be finished by the first year of project implementation before beginning design works. <Figure 1.4> shows the project implementation period for the first phase. <Figure 1.4> Project implementation schedule (phase 1) Classification Before- Year 1 Year 2 Year 3 Year 4 hand -6 -3 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 Construction for Karian dam 1. Selection of consultants 2. Working design 3. Selection of constructors 4. Construction EDPF 1) Booster PS 2) Main CS 5. Commissioning and training KSCS 6. Construction supervision 1. AMDAL approval 2. LARAP submission 3. LARAP GOI negotiation 4. LARAP compensation 5. Permission consultation 6. Permission Construction for Serpong WTP Note) 1. AMDAL approval refers to obtaining an approval from the Governor of Banten province to validify an AMDAL 2. LARAP submission refers to the formal receipt of a Location statement for land acquisition and resettlement compensation by the Governor of Banten province 3. LARAP negotiation means that negotiations on land acquisition and compensation are made by the Governor of Banten province and land owners, and the evaluation of the results are completed. 4. LARAP compensation refers to making the compensation for the land whose compensation negotiation is finished and wrap up the land acquisition to begin construction. 5. Permission refers to all activities related to obtaining an approval or permission required for construction (power lead-in, railroad or road crossing, and river occupation) from the competent authorities. 1-11

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia 1.6 Expected benefits (1) Expected benefits for the recipient country Expected benefits for regions including Serpong WTP service areas (West Jakarta, Tangerang city, South Tangerang city), Parung Panjang WTP service area (Bogor regency), Solear WTP service area (Tangerang regency), Rangkas Bitung and Maja WTPs service area (Lebak regency), and the project area (Lebak and Tangerang regencies) are as follows: • To meet the growing demand for domestic and industrial water in rapidly urbanized and industrialized regions • To improve the living environment through a safe and clean water supply • To boost industrial complexes located in the service areas through a stable supply of water • To help create jobs for residents in the construction area • To establish infrastructure for a stable production and supply of water • To attract investment led by construction of infrastructure and contribute to the country’s sustainable growth and continuous implementation of national strategic plans (2) Expected benefits for the donor country • To strengthen friendly cooperative relations through bilateral exchanges • To enhance the reputation of South Korea’s water supply projects and the nation’s status through the transfer of its advanced technology • To lay the foundation for bilateral cooperation in related projects and to promote bilateral trade • Enhancing the Effect of public aid on the Export-Import Bank of Korea and Republic of Korea 1-12

Chapter 2. General Status Chapter 2. GENERAL STATUS 2.1 General status and location Indonesia is the world’s largest island nation comprising of 17,508 islands dotted around Southeast Asia and Oceania, which neighbors Malaysia and the Philippines to the north, Papua New Guinea to the east, and Australia to the south. It is also the world’s fourth most populated country with the population of 238 million, followed by China, India, and the United States and the world’s most populated island country. Its main islands include Java, Sumatra, Sulawesi, Kalimantan, and Papua. Of which, Java is comparable in size to South Korea and a twentieth of the entire size of Indonesia, but it makes the most populous island in the world with 13.3 million people. Approximately 55 percent of Indonesia’s entire population lives on this island, where large cities like Jakarta, Bandung, and Surabaya are located. The island has the Solo River which is 600km in length and the Ciliwung River which passes through the capital city of Jakarta. <Figure 2.1> The location map of project area The project area encompasses Lebak, Tangerang, and Serang regencies in Banten province, and Parung Panjang district in Bogor regency, West Java province. This region is located in the west of the Indonesian island of Java, a strategic location which connects Java and Sumatra. Geographically, it is located at between 105° 87′ and 106° 82′ east longitude and 2-1

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia between 6° 10′ and 6° 99′ south latitude. The northern and western regions are surrounded by the Java Sea and the southern region has a range of mountains called Mount Halimun with an elevation of 1,929m. The map of the project area is as shown in <Figure 2.1>. 2.2 Natural environment 2.2.1 Topographical conditions In the project area for conveyance pipeline construction, three types of terrains are displayed: lowlands, hills and slopes, and volcanic zone. In the lowlands, a vast plain, which used to be called Van Bemmelen (1949), covers the northern part of the surveyed area and stretches to the east and west. To the south, there are hills with an elevation of 20m. The region is a river basin that includes branches of the Ciujung, Cidurian, and Cipayaeun Rivers. River levels get very low during the dry season, but there are some ponds filled with water. <Figure 2.2> The status map of project area Serang Tangerang Tangerang Lebak City West Jakarta West Tangerang City Bogor In the south of the lowlands are hills with a slope varying from 80 to 250m. This region has a water reservoir in the form of a parallel and steep valley, and in some parts, a clear volcano bank is displayed. The volcanic zone contains two volcanic cones, covering the western and northwestern parts of the surveyed area. The first volcano is a volcano group called Coral-Pulosari with an elevation of 1,778m, which is characterized by a pointy cone and flexure on the slope. The 2-2

Chapter 2. General Status second volcano is a volcanic Gede Mountain located in the northwestern region, which is characterized by gentle slopes formed by erosion. Body Mount Reef-Pulosari is observed in a caldera in the northern and eastern region. Caldera is mainly covered with a swamp or forest and contains a lava dome with a gentle slope and an elevation of 260m. G.Pinagi is part of this region. In the south of a railroad which connects Ciuyah and Serpong are multiple hills and highlands with an elevation of higher than 50m. In general, an altitude in the northern region varies from 35m to 59m. However, the highlands with an elevation of higher than 50m are formed between the right bank of the Cidurian River and the left bank of the Cimanceuri River. In some parts, there exist the lowlands with an elevation ranging from 25m to 30m along the waterway of the Cidurian, Cimanceuri, and Cisadane Rivers. The width of these lowlands is about 500m along the Cidurian River, and between 200m and 800m along the Serpong and Cisadane Rivers. A small valley with an elevation ranging from 20m to 40m is formed between the outlet of the Ciuyah watercourse and the Serpong water treatment plant. <Figure 2.3> The terrain map of Java island 2.2.2 Geological conditions General geological conditions for conveyance pipelines are obtained from a geological map of Serang and Jakarta Quadrangle Java with a scale of 1:100,000, which was created between 1991 and 1992 by the Indonesian Research and Development Center for mineral resources and geological features. The surveyed area consists of sedimentary rocks formulated in the Miocene and the Pliocene, volcanic rocks in the Miocene, strata in the Alluvial, and alluvial layer in the Holocene epoch. The Rengganis, Bojongmanik, Genteng, and Serpong strata, the sedimentary layer formed between the late Miocene and the Pleistocene epochs, are appeared from south to west, and 2-3

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia from the lower to upper structure in the order of epoch. The Genteng stratum of the surveyed area, which was formed in the late Miocene and Pleistocene, consists of tuffaceous sandstone and pumice stone that has volcanic gravel. The sedimentation of the Bojongmanik stratum in the Miocene began due to the shallow coast caused by the earth’s upthrow and downthrow and the environmental change of saltwater. With the ground subsidence in the early Pleistocene epoch coupled with the settling of the Genteng stratum, fragments of the Bojongmanik stratum and by-products from volcanic activities were formed. Then, this region was affected by the slowly uplifting ground that lasted until the early Pleistocene. A series of uplifts and sinks, accompanied by volcanic activities, continued until the Plio-Pleistocene. A continuously growing ground activity eventually led to a volcanic eruption of Danau and a subsequent formation of a caldera. During which, a huge extrusive rock was formed and is now called the Banten tuff. The Serpong stratum, an old river deposit, is stretching out to the northeastern region of the project area. Geological activities in the early Pleistocene epoch were young volcanic activities, consequently, following erosion and landslides formed the alluvial and the sedimentary layers. Continued erosion resulted in deposits or sediment along the river. The activity of the earth’s crust structure in the surveyed area is displayed in a faulted or folded stratum. Subsidence, in general, refers to a relatively minor activity of the crust with less than 30 degrees of slope. The axis of the folded stratum tilts from the northwest to the northeast while the fault and its line face toward the northeast. The fault is commonly seen in this region. The Indonesian islands are surrounded by several tectonic plates including the Eurasian continent plate, the Philippine Sea plate, the Pacific Ocean plate, and the India Australia plate. Java island is part of a thumb lake located above an active earthquake belt called the Benioff zone, which is located on the boundaries between the North Atlantic Ocean plate and the Eurasia plate. In the south of the island is Java Trench. Earthquakes typically occur in the shallow region, the middle region that connects south and north, and deep in the Java Sea whereas shallow earthquakes are observed in the Benioff zone. The stratum scope of the surveyed area ranges from old to young strata as follows. • The Langanis formation (Tmrs) is the oldest form of a stratum which consists of fine coarse-grained sandstone, pudding stone (or conglomerate), and sandstone formulated in the early Miocene epoch. • The Bojongmanik formation (Tmb) consists of cross-bedded sandstone, sandy clay, limestone, and tuffaceous sandstone in the upper part. Its epoch is not consistent with that of the Langanis formation. • The Genteng formation (Tpg) consists of pumiceous tuff, tuffaceous sandstone, 2-4

Chapter 2. General Status sandstone, pudding stone, andesite, and breccia and its epoch is estimated to be the early Miocene. • The Chipaka formation (Tpc) consists of pumiceous tuff, tuffaceous clay, pudding stone, and marl. The estimated epoch is the late Pliocene and is not consistent with that of the Genteng formation. • The Serpong formation (Tpss) consists of pudding stone, sandstone, siltstone, organic materials, pumice pudding stone, and tuffaceous claystone. • The Banten formation consists of tuff, pumice tuff, and tuffaceous sandstone. • The Bojongmanik formation consists of sandy marl, clayey, and tuffaceous sandstone. Volcanic rocks found in this region are classified into two groups: the old volcanic rock extruded from the Danau and Gede Volcanoes and the young volcanic rock extruded from the Karang and Palosaari Volcanoes. The old and young extrusive rocks are dated at the Pleistocene and the Alluvial epoch, respectively. The young extrusive rock (Qv) consists of breccia, volcanic deposit, calcareous breccia, and tuff. The alluvial fan (Qav) consists of fine tuff, sandy tuff, and pudding stone. Formed by river deposits and neritic deposits, it is widely distributed over the northern part of the surveyed area and a swamp in Danau located in the center of the map. The intrusive rocks found here are similar to basalt in terms of their makeup. The intrusive activity is estimated to have gone through three stages. The southern region of the surveyed area was affected by the oldest stage and as we go north, more intrusive rocks are observed in the northern region. (1) Route between Ciuyah and Cisoka (Conveyance) The basement beneath this section mostly falls under the Genteng formation (Tpg) and consists of pumiceous tuff, pudding stone, and breccia. Other parts of this section are formed by the Banten formation, consisting of tuff, pumiceous tuff, and tuffaceous sandstone. At present, it is formed by the alluvia of the Ciujung River, consisting of gravel, sand, silt, and clay. The distance between the Karian Dam and Cisoka is about 20.6km. (2) Route between Cisoka and Parung Panjang (Conveyance) The geological terrain that trails along the conveyance pipelines is covered by the Genteng formation from Cisoka to Parung Panjang and consists of pumiceous tuff, pudding stone, and breccia. Other parts formulated by the Bojongmanik (Tmb) formation consist of sandstone, claystone, and calcium compounds. At present, this region is formed by the alluvia of the Cimanceuri River, consisting of clay, silt, sand, gravel, and stone. The distance between Cisoka and Parung Panjang is about 15.4km. (3) Route between Parung Panjang and Serpong (Conveyance) 2-5

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia The geological terrain that leads to Serpong along the conveyance pipelines is covered by the Genteng formation and consists of pumiceous tuff, pudding stone, and breccia. Other parts formulated by the Bojongmanik formation consist of sandstone, claystone, and calcium compounds. The geological condition of the extended conveyance pipelines is formed by the alluvia of the Cisadane River, which consists of clay, silt, sand, gravel, and stone. The distance between Parung Panjang and Serpong is about 11.9km. 2.2.3 Water resources (1) Groundwater The volume of groundwater resources in Indonesia is estimated at 455km3/year, however, with 90 percent of the groundwater flowing into the river, groundwater resources in the country is very limited. (only a small fraction of the resources is used in some parts of cities and countryside.) The excessive intake of groundwater is also causing a lot of serious problems. For instance, as much as 32.6 million m3 of the Jakarta’s groundwater was used in 1993, which resulted in saline groundwater penetrating into the bedrock at a depth of 10km and ground subsidence with the rate of 2 to 34 cm per year in the eastern region of Jakarta. This has become the main culprit behind serious flooding in the region. (2) Lakes and dams Most lakes are formed during volcanic eruptions. Lake Toba is the largest volcanic lake in the world with a surface area of 1,100 km2 and a volume of 1,258 km3. As of 1995, Indonesia has 82 dams. Its largest dam has the capacity of 15.83km3 and it is, theoretically, capable of generating hydroelectric power of 3,388Gwh/year. The total installed capacity stood at 2,061MW in 1991, which means 16.28 percent of the entire power came from hydroelectric power stations. As of 1990, 69.24km3 of water resources was used in agriculture, 4.73km3 in domestic water, and 0.38km3 in industrial water, and mostly used for irrigation, domestic and industrial water, and energy generation. (3) Development of irrigation water A modern irrigation system was introduced in the mid-19th century, and the first comprehensive water resources development project was the Jatiluhur project. Proposed in 1948, the project was the first and the biggest one aiming to supply water for irrigation, hydroelectric power, and residence in Jakarta. In 1969, a five-year development plan called Repelita was launched. In the Repelita project, the Indonesian government focused on developing the overall irrigation system to renovate the existing irrigation facility, expand the irrigation area, develop related technologies, and maintain infrastructure capabilities. As part of an effort to do so, it introduced special operation/maintenance techniques, implemented efficient and sustainable operation/maintenance management, and strengthened functions of irrigation association. 2-6

Chapter 2. General Status Over the first 25 years, five rounds of the Repelita project were carried out, and this period is called PjPI. During the PjPI, the government placed great importance on agriculture and supported other industries. As a result, a new irrigation facility of 1,440,000ha was installed and the existing facility of 3,360,000ha was renovated. Thanks to the project, Indonesia has become self-sufficient in rice production since 1984, and the number of people living in poverty dramatically fell from 54 million (44 percent) in 1969 to 26 million (13 percent) in 1993. The national irrigation capacity as a whole is estimated at 10,860,000ha, and a land area of 4,430,000ha is in the state of complete or incomplete irrigation. Currently, there are 638 reservoirs, 1,017 dams for irrigation, 1,192 pumping stations, 6,792 intake facilities. (4) Rivers The main river in the project area is the Ciujung River, which is an integral of the region’s water resources. The Ciujung River starts in a 2,000-m elevation range of mountain in the south, passes through the west of the project area, and flows into the Java Sea. The main features of the Ciujung River are described in <Table 2.1>. <Table 2.1> Feature of the Ciujung River Basin area Average flow Average flow Depth Water (mm) quantity Location (km2) rate (m3/s) rate per area (106m3) (l/s/km2) 3,447 Kragilan district in 1,562.70 109.00 69.76 2,206 Serang regency 1,363.90 69.90 51.25 1,621 2,210 Cijiro and Rangkas Bitung in Lebak regency 2.2.4 Climate Indonesia is a typical tropical climate, which is hot and humid. Its season is a monsoon climate characterized by the dry and rainy seasons. The precipitation from December to March is high while it is low from July to September. April and May, and October and November are in between seasons. Such climate conditions, particularly dry and rainy seasons, needs to be taken into account when establishing the construction plan. The average precipitation is 2,300mm, which is regarded as quite a high amount of rainfall. The average precipitation varies by region and terrain, ranging from 1,500mm in the northern coastal region to 5,000mm in the southern region of Gunung Endut and near Gunung Halimum. 2-7

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia The monthly average temperature varies by altitude. However, the monthly average temperature in the northern coastal region stands at 25 to 28 degrees Celsius all the year round. The relative humidity is very high reaching 80 to 89 percent all the year round although it drops to 77 percent around August. The wind mostly blows from the north with the monthly average wind speed of 1.4m/s to 4.5m/s. The monthly average evaporation loss is 5.0mm. The monthly average climate data and weather conditions are shown in <Table 2.2> and <Table 2.3>. <Table 2.2> Monthly average climate data and weather conditions (Serang observatory) Classification Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg. Temperature (ﾟC) 27.2 26.9 27.3 27.4 27.8 27.4 27.2 27.5 27.7 28.1 27.8 27.5 27.5 Relative 83.8 85.3 83.1 83.5 83.2 83.0 82.8 77.9 78.3 80.0 81.7 80.7 81.9 humidity (%) Wind speed 2.4 2.4 1.8 1.8 1.4 1.4 1.2 1.6 1.8 1.8 2.2 2.6 1.9 (Knot) Wind N N NN NN NNNNNW - direction Precipitation 321 351.1 112.9 93.5 142.8 100.8 106.9 18.1 47.5 112.3 153.5 240.1 150.0 (mm) * Source: Badan Meteorologi, Klimatologi, Dan Geofisika <Figure 2.4> Monthly average temperature and precipitation (Serang observatory) 500 29.0 Precipitation (mm) Temperature(ﾟC) 400 28.0 300 27.0 Precipitation Temperature (mm) 200 26.0 (ﾟC) 100 25.0 0 24.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2-8

Chapter 2. General Status <Table 2.3> Monthly average climate data and weather conditions (Budiarto observatory) Classification Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg. Temperature 26.6 25.9 26.5 26.8 27.2 26.9 26.7 26.9 27.1 27.3 27.1 26.9 26.8 (ﾟC) Relative 85.5 89.9 85.8 85.9 86.1 84.7 84.65 79.3 80.8 83.4 83.7 82.4 84.3 humidity (%) Wind speed 5.0 2.8 3.0 3.4 1.8 2.0 1.6 2.0 2.2 2.0 4.0 5.4 2.9 (Knot) Wind N N N N N N N N N N N N - direction Precipitation 242.8 247.3 191.8 277.7 187.9 158.3 252.8 65.6 198.5 202.7 134.0 160.1 193.3 (mm) * Source: Badan Meteorologi, Klimatologi, Dan Geofisika <Figure 2.5> Average temperature and precipitation (Budiarto observatory) 500 29.0 Precipitation (mm) Temperature(ﾟC) 400 28.0 300 27.0 Precipitation Temperature (mm) 200 26.0 (ﾟC) 100 25.0 0 24.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2.2.5 Land use An analysis conducted based on a land registration map of the surveyed area shows the existing land use is classified into shrubberies at 50%, forest at 20%, plantation at 10%, paddies at 17%, residential area at 2%, and fields at 1% as shown in <Table 2.4>. <Table 2.4> Current state of land use of project area Dry Sum Classification Shrubs Forest Plantation Wetlands Residence region Area (ha) 14,455 5,782 2,795 4,848 528 402 28,800 Ratio (%) 50% 20% 10% 17% 2% 1% 100% *Source: Indonesia national geographic institute (Bakosurtanal) 2-9

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia 2.2.6 Disasters Indonesia has a large area of land, and its territory goes from the east to west. Therefore, its precipitation shows a clear difference by terrain. The amount of rainfall drops to 1,000mm as we go to the southeast, and the climate becomes extremely dry like in India during the dry season. Being located between the Eurasian plate and the Australian plate, the country has more than 150 active volcanoes, including the 2004 Sumatra earthquake killing and injuring more than 167,736 people and the 2006 Yogyakarta earthquake. The <Figure 2.6> below shows the number of natural disasters and the casualties occurred between 1815 and 2012. Floods top the list in terms of the number of occurrences whereas tsunami earthquakes (an earthquake that causes a tsunami) cost the most casualties. These two types of natural disasters can be categorized as water-related disasters, and the annual damage caused by water-related disasters is as shown in <Figure 2.7>. The number of occurrence and casualties have significantly increased since 2000, therefore, countermeasures against natural disasters are urgently needed. <Figure 2.6> The number of natural disasters occurrence (1815-2012) and casualties by disaster type Occurrence Casualties <Figure 2.7> Natural disasters by year Occurrence Terror Flood Landslide Tsunami Earthquake Earthquake and Tsunami Insect Pest Fire Industrial Disaster Car Accident Drought Epidemic Social Anxiety Volcanic Eruption Typhoon Landslide Tsunami Casualties Occurrence Casualties Occurrence Casualties 2-10

Chapter 2. General Status 2.3 Socio-economic conditions 2.3.1 Administrative division Indonesia consists of 17,508 islands including Java, Sumatra, Kalimantan, Sulawesi, Papua, Bali, Nusa Tenggara archipelago, and Maluku archipelago. Its administrative division has a total of 34 provinces, where five special states – Nanggroe Aceh Darussalam, Yogyakarta Special Region, West Papua, Papua, and its capital Jakarta Special Capital Region - are included. Detailed information about the Indonesian administrative division is as shown in <Table 2.5>. <Table 2.5> Indonesia’s 34 provinces No. Island Province Provincial capital 1 Nanggroe Aceh Darussalam Banda Aceh 2 North Sumatra Medan 3 West Sumatra Padang 4 Riau 5 Riau island Pekanbaru Jambi Tanjung Pinang Sumatra Bengkulu 6 South Sumatra Jambi 7 Bangka-Belitung Bengkulu 8 Lampung Palembang 9 Pangkal Pinang 10 Jakarta Special Capital Region Bandar Lampung 11 Banten 12 Jakarta 13 West Java Serang Central Java Bandung Java Yogyakarta Special Region Semarang 14 Yogyakarta 15 East Java Surabaya 16 Bali Denpasar 17 Bali Mataram 18 Kepulauan Nusa West Nusa Tenggara Kupang 19 Tenggara East Nusa Tenggara Pontianak 20 Palangkaraya 21 West Kalimantan Banjarmasin 22 Kalimantan Central Kalimantan Samarinda 23 South Kalimantan Tanjung Selor 24 East Kalimantan North Kalimantan 2-11

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia No. Island Province Provincial capital 25 North Sulawesi Manado 26 Gorontalo 27 Gorontalo Palu Central Sulawesi Kendari Sulawesi South East Sulawesi Makassar 28 South Sulawesi Mamuju 29 West Sulawesi Ambon 30 Ternate 31 Maluku Jayapura North Maluku Kepulauan Maluku Manokwari 32 Papua 33 West Papua Papua 34 Water conveyance pipelines pass through areas including Maja in Lebak; Solear, Tigaraksa, Jambe, Legok, Pagedangan, and Cisauk in Tangerang; and Serpong and Setu in South Tangerang. South Tangerang city was separated from Tangerang regency in October 2008, and Serang city was separated from Serang regency in November 2007. The current status of the administrative division of the project area is as shown in <Table 2.6>. <Table 2.6> Current status of administrative division of project area Project area District (s) Town(s) Area (km2) Serang city 32 352 1,704.12 Cilegon city 8 43 175.5 Lebak regency 28 340 3,044.72 Tangerang regency 29 28 1,110 Tangerang city 13 104 164.54 147.19 South Tangerang city 49 5 3.044.72 West Jakarta 44 267 * Source: www.wikipedia.com, Master Plan by DPD Perpamsi 2-12

Chapter 2. General Status 2.3.2 Population and water supply (1) Tangerang regency The following <Table 2.7> shows the trend of the population and water supply of Tangerang regency from 2005 to 2013. Its population dropped between 2009 and 2013 compared to the period between 2005 and 2008 due to South Tangerang city’s separation from the regency in 2009. <Table 2.7> Population and water supply in Tangerang regency 1,600,000 57.0 1,400,000 Population of service area (s) 56.0 Service ratio of the service area (%) 1,200,000 55.0 Service 2005 2006 2007 2008 2009 2010 2011 2012 54.0 ratio Population of 1,000,000 of service area 800,000 53.0 the (s) service 600,000 52.0 area 400,000 (%) 200,000 51.0 50.0 2013 Classification 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total population (s) 4,854,575 4,916,796 5,268,938 5,116,935 2,565,279 2,834,376 2,960,474 3,050,929 3,157,780 Population of service 828,508 827,070 873,619 859,099 922,815 1,200,276 1,253,675 1,254,242 1,298,169 area (s) PDAM service 432,715 443,110 455,005 466,385 491,765 635,968 664,261 696,261 723,029 population (s) Service ratio against 8.91 9.01 8.64 9.11 19.17 22.44 22.44 22.83 22.90 total population (%) Service ratio of the 52.23 53.58 52.08 54.29 53.29 52.99 52.99 55.54 55.70 service area (%) * Source: Central Bureau Statistics (BPS) & PDAM Kabupaten Tangerang (2014) The population of Tangerang regency increased by 23 percent, from 2,656,000 in 2013 to 3,157,000 in 2009, however, the water supply ratio within the service area stands merely at 22.9 percent despite the population of 1,298,000. The regency’s PDAM, Tirta Kerta Raharja (TKR) is relatively in better shape compared to service providers in other regions, in that it provides a stable supply of water to Palyja and Tangerang city. As of 2013, TKR supplies water to 22.9 percent of the population of Tangerang regency (55.7 percent in the service area), 10 percent of the population of South Tangerang city, and 24.2 percent of the population of Tangerang city. 2-13

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia (2) Tangerang city Tangerang city’s population shows an annual growth of 1.81 percent from 2009 to 2013, with its population reaching 1,952,000 in 2013. The current status of the city’s population and water supply is as shown in <Table 2.8>. Tangerang city’s PDAM, Tirta Benteng (TB) supplies water to 27,445 households (account for 8.35 percent of the city’s population) whereas Tangerang regency’s PDAM, TKR supplies water to 69,000 households (24.2 percent of the city’s population.) As of 2013, 96,445 households, or 32.5 percent of the city’s population are supplied with water. <Table 2.8> Population and water supply of Tangerang city 28.0 2,400,000 26.0 2,000,000 Population of service area (s) Service Service ratio of the service area (%) 1,600,000 24.0 ratio Population of of the service are1a,200,000 22.0 service (s) 800,000 area (%) 20.0 400,000 18.0 0 16.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 Classification 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total population (s) 1,537,244 1,481,591 1,508,414 1,531,666 1,652,590 1,798,601 1,847,341 1,918,556 1,952,396 Population of service 1,537,244 1,481,591 1,508,414 1,531,666 1,652,590 1,798,601 1,847,341 1,918,556 1,952,396 area (s) PDAM service 270,000 270,000 270,000 270,000 270,000 270,000 270,000 270,000 330,148 population (s) Service ratio against 21.33 22.39 22.20 22.17 20.56 19.21 21.94 21.94 26.09 total population (%) service ratio of 21.33 22.39 22.20 22.17 20.56 19.21 21.94 21.94 26.09 service area (%) * Source: Central Bureau Statistics (BPS) & PDAM Kabupaten Tangerang (2014) 2-14

Chapter 2. General Status (3) Palyja (West Jakarta) The following <Table 2.9> shows the current status of the population and water supply in West Jakarta (Palyja). As of 2013, Palyja supplies water to 4,893,000, or 63.5 percent of the region’s population. It has already achieved one of the eight-millennium development goals (MDGs) aiming at 60 percent of water supply service ratio by 2015, its service ratio is on the rise proportionate to the population growth. 5,000,000 <Table 2.9> Population and water supply in Palyja 66.0 4,800,000 Population of service area (s) 64.0 Service ratio of the service area (%) 4,600,000 Service Population 62.0 ratio of service area of the (s) 4,400,000 service 4,200,000 60.0 area (%) 58.0 4,000,000 56.0 3,800,000 54.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 Classification 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total population(s) 4,382,764 4,397,320 4,414,993 4,435,865 4,460,024 4,564,640 4,671,709 4,781,290 4,893,441 Population of service 4,382,764 4,397,320 4,414,993 4,435,865 4,460,024 4,564,640 4,671,709 4,781,290 4,893,441 area (s) PDAM service 2,425,972 2,486,878 2,630,278 2,743,414 2,851,400 2,915,267 2,979,134 3,023,001 3,086,858 population (s) Service ratio against 55.0 57.0 60.0 62.0 64.0 64.0 64.0 63.0 63.0 total population (%) Service ratio of 55.0 57.0 60.0 62.0 64.0 64.0 64.0 63.0 63.0 service area (%) * Source: Central Bureau Statistics (BPS) & Palyja (2014) 2-15

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia (4) Parung Panjang, Bogor regency The population of Parung Panjang is on a gradual rise, which increased from 83,000 in 2005 to 119,000 in 2013 whereas its waters supply ratio remains stagnant. This is due to the declining water quantity of its main water source, the Cisadane River. The district is currently looking for a new water intake source. The current status of the population and water supply of the district is as shown in <Table 2.10>. <Table 2.10> Population and water supply in Parung Panjang 60,000 Population of service area (s) Service ratio of the service area (%) 56.0 55,000 54.0 50,000 Service Population 45,000 of 52.0 ratio service area of (s) 40,000 the service 35,000 50.0 area 30,000 (%) 48.0 46.0 25,000 20,000 44.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 Classification 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total population(s) 83,023 100,851 93,476 93,558 101,699 94,112 94,392 117,068 119,914 Population of service 42,747 43,843 44,967 46,120 48,417 49,948 51,528 53,158 54,839 area (s) PDAM service 23,124 23,500 23,836 24,272 24,692 25,100 25,515 25,937 26,366 population (s) Service ratio against total 51.49 43.47 48.11 49.30 47.61 53.07 54.59 45.41 45.73 population (%) Service ratio of service 54.10 53.60 53.01 52.63 51.00 50.25 49.52 48.79 48.08 area (%) * Source: Central Bureau Statistics (BPS) & PDAM Kabupaten Bogor 2-16

Chapter 2. General Status (5) Lebak regency The population of Lebak regency is on a growing trend with the annual growth rate of 1.25 percent, which increased from 1,176,000 in 2005 to 1,247,000 in 2013. As of 2013, the population of the service area reached 240,000 (accounting for 8 percent of the regency’s population) and is growing annually at a growth rate of 2.45 percent. However, the service ratio is only 8.38 percent of the regency’s population and 42.7 percent within the PDAM service area, which falls far behind in achieving the MDG target of 70 percent. The reason is that the region lacks water supply sources and is mostly underdeveloped rural areas. The current status of the population and water supply of the regency is as shown in <Table 2.11>. <Table 2.11> Population and water supply of Lebak regency 350,000 Population of service area (s) Service ratio of the service area (%) 44.0 300,000 40.0 Service 250,000 ratio Population of of 36.0 the service area 200,000 service (s) area 150,000 32.0 (%) 100,000 28.0 50,000 24.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 Classification 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total population(s) 1,176,350 1,183,184 1,202,909 1,219,033 1,234,459 1,204,095 1,221,067 1,239,660 1,247,906 Population of service 179,306 213,096 230,929 231,669 237,477 249,000 284,400 285,877 244,992 area (s) PDAM service 64,040 67,885 71,310 74,595 77,920 81,000 100,962 103,257 104,610 population (s) Service ratio against 5.44 5.74 5.93 6.12 6.31 6.73 8.27 8.33 8.38 total population (%) Service ratio of 35.72 31.86 30.88 32.20 32.81 32.53 35.50 36.12 42.70 service area (%) * Source: Central Bureau Statistics (BPS) & PDAM Kabupaten Lebak (2014) 2-17

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia (6) Serang regency The population of Serang regency increased from 1,345,000 in 2009 to 1,450,000 in 2013. The regency’s service ratio stands at 17 percent of its total population and 33 percent within the service area, which falls far behind achieving the MDG target of 70 percent by 2015. The current status of the population and water supply of the regency is as shown in <Table 2.12>. <Table 2.12> Population and water supply of Serang regency 900,000 Population of service area (s) Service ratio of the service area (%) 40.0 800,000 36.0 700,000 Population Service of 32.0 ratio service area of (s) 600,000 the service 500,000 28.0 area (%) 24.0 400,000 20.0 300,000 16.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 Classification 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total population(s) 1,866,512 1,786,223 1,808,464 1,332,914 1,345,560 1,402,818 1,423,714 1,448,966 1,450,894 Population of service 512,624 608,592 621,633 631,099 640,566 741,816 752,866 729,937 737,847 area (s) PDAM service 104,755 125,550 128,030 125,095 117,675 232,257 235,717 232,828 248,238 population (s) Water supply ratio against total 5.61 7.03 7.08 9.39 8.75 16.56 16.56 16.07 17.11 population (%) Water supply ratio of 20.44 20.63 20.60 19.82 18.37 31.31 31.31 31.90 33.64 service area (%) * Source: Central Bureau Statistics (BPS) & PDAM Kabupaten Serang (2014) 2-18

Chapter 2. General Status 2.3.3 Environment and health (1) Population with utilities service (public services like water supply, sanitary facilities, drainage, sewerage, electricity, etc.) The service population for water supply increased to 87 percent of the entire population in 2015 from 85 percent in 2012, which means currently 94 percent of the urban population and 79 percent of the rural population have access to safe drinking water. A report (IDHS, 2012) shows three in four households in Indonesia are using the improved water resources. As of 2014, main drinking water sources include mineral water (29.88%), preserved wells (21.08%), and pumps (15.62%). According to the data released by Indonesia Statistic in 2015, 70 percent of Indonesians have their water treated appropriately before drinking water, mostly through boiling water. The service population for sanitary facilities increased to 61 percent of the entire population in 2015 from 59 percent in 2012, still, there is a huge gap between the service population in urban areas and in rural areas, which stands at 72 percent and 42 percent, respectively. Around 68 percent of households use individual bathrooms (toilets) account and 10 percent use public restrooms. Of which, 59.6 percent of households have a septic tank. Still, 23 percent of households use toilets of conventional type (5.3%), outdoors (3.1%), and waters (12.1%) with no sanitary toilet facilities. (2) Other basic public service related to firefighting and emergency management (floods, earthquakes, chemicals) 1) Disaster prevention Following the 2004 Indian Ocean earthquake and tsunami that took a huge toll on the country, the Indonesian government set up a governmental agency and a comprehensive mechanism to better cope with natural disasters through prevention and response measures. Established in 2008, the National Disaster Management Authority (BNBP) is in charge of natural disaster management, emergency responses, and disaster recovery. The agency publishes newsletters and issues alerts on a regular basis on tropical cyclones, floods, wildfire, earthquakes, tsunami, and volcanic activities in a bid to raise public awareness about the risks of potential calamities. It also creates a map of risk classification for disaster management planning and monitoring while making a report on countermeasures and relief efforts. The National Poisons Information Center designed to respond to a chemical spill or radioactive contamination is located in Jakarta. 2) Public hygiene emergency responses The International Health Regulations (IHR) are a legally binding instrument of international law, which all 196 member states of WHO are subject to. The IHR was established aiming to assist the international community to prevent and respond to public health risks that endanger 2-19

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia lives and entered into force on June 15, 2007. Countries around the world are required to immediately report any outbreak of a certain disease or public health risk to the WHO. The authority conducts an assessment of the country’s capabilities in detecting, evaluating, monitoring, and handling of public health emergencies of international concern, including MERS, H1N1 influenza, and Ebola epidemic. (3) Housing supply: building codes and non-resident population Now that building codes are legislated (Law of the Republic of Indonesia No. 28 of 2002), it is possible to formally enforce international guidelines and regulations when constructing a building or house in Indonesia in accordance to the law. Before the enforcement of the law, 70 percent of 320 local governments has its own local building regulations, but only 20 percent have regulatory technical provisions. As a result, there exist a number of buildings built without the construction permit and even buildings that were given a construction permit fall short of the minimum technical requirements in terms of fire safety, seismic design, and accessibility for the disabled. Therefore, the government plans to enforce a more simplified and substantially effective law to ensure the safety of a building throughout the whole process from giving a construction permit to confirming a style of architecture to assessing an environmental impact. (Buidono, 2007) As of 2014, the population living in a privately-owned residence makes up 79.99 percent and 8.37 percent for the population living in a temporary residence, and 11.86 percent for the population living in other types of residence. (4) Number/ratio of registered vehicles per 100,000 people The number of registered vehicles on the road network of 508,000km stretching throughout 34 provinces is tallied at 112.88 million. Among the registered vehicles, motorbikes top the list with 92.52 million units, followed by cars (12.26 million), trucks (4.7 million), and public buses (2.2 million). Java has the largest number of motorbikes registered. 2.3.4 Industry Manufacturing is the biggest industry in Indonesia, which accounts for 18 percent of the national GDP as of 2016, followed by the dairy/forestry/fishery with14 percent, the trade/hotel/restaurant business with 13 percent, the construction with 10 percent, and the mining with 7 percent. On the manufacturing front, the textile/sewing industry has been Indonesia’s leading industry, however, in recent years, it has been experiencing a downturn due to the wage hike, outdated equipment, and lacking infrastructure. Television sets, mobile phones, and refrigerators are the main products in the electronics industry, led mostly by Korean and Japanese companies like Samsung, LG, Toshiba, Panasonic, and Sharp; Indonesian brands 2-20

Chapter 2. General Status like Polytron, Maspion, and Sanken; and Chinese Midea. Japanese brands made in Indonesia dominate the automotive industry with a market share of 95 percent. In particular, the country’s climate, road conditions, and government favorable tax system boosted the sales of passenger vans. Domestic sales of automobiles are on a steady growth as the country’s middle class with high purchasing power is expanding. On the agriculture front, palm, rubber, cacao, coffee, rice, and corn are the main agricultural products. Indonesia is the world’s biggest producer of palm oil, the second largest producer of rubber and cacao, and the fourth largest producer of coffee. On the construction front, since the new administration took office in 2014, the country’s construction industry has grown exponentially, notably driven by foreign investment. As of 2017, a series of massive infrastructure projects are either in progress or in course of preparation over the past three years, therefore, demand for related businesses is expected to grow more. The growth rates by industry over the past years indicate that the mining industry posted negative growth due to the decreased demand for commodities amid the global economic downturn. The manufacturing and trade sectors also saw a slowdown whereas the service and financial industries continue to grow buoyed by increasing domestic demand stemming from the improving income levels of Indonesians. Indonesia is one of the ASEAN countries that have a service industry growing at the fastest rate with great potential for further growth in terms of a market size. Although the proportion of a higher value-added business is still low, the outlook for distribution, ICT, and logistics services is promising. The GDP growth rate by industry is as shown in <Table 2.13>. <Table 2.13> Indonesia’s GDP growth rates by industry (from 2013 to 2016) Industry 2013 2014 2015 2016 Agriculture, livestock, 4.2 4.24 3.77 3.25 forestry, fishery 1.06 Mining 2.53 0.43 -3.42 4.29 5.39 Manufacturing 4.37 4.64 4.33 5.22 3.93 Electricity, gas, water 5.23 5.9 0.9 7.74 8.9 Construction 6.11 6.97 6.36 7.8 Trade, hotel, restaurant 4.81 5.18 2.59 Transportation, logistics 6.97 7.36 6.68 Finance 8.76 4.68 8.59 Service 6.4 8.93 8.08 * Source: Statistics Indonesia (National Statistical Handbook, March 2017) 2-21

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia Industries in Banten province are evenly growing across the board. Banten’s economy takes up 3 percent of the nation’s GDP. On the economic front, the province’s economy relies on a variety of sectors including agriculture, industry/trade, tourism, and mining/exploration as well as abundant and varied natural resources. Especially, its natural resources are expected to help boost the local economy in the future. On the industrial front, 17 private owned industrial complexes account for more than 52 percent of the province’s total GRDP. Except for the agricultural sector on the decline, all industries and infrastructure in Banten have continued to make a remarkable growth. 2.3.5 Taxes Indonesia has a progressive tax system. The individual income tax rates range from 5 percent with an annual income of 50 million IDR up to 30 percent with an annual income of more than 500 million IDR. Companies have been taxed at a flat rate of 25 percent since 2010. The Value-Added Tax rate is 10 percent. The Indonesian government announced its plan to grant a period of tax exemption and tax breaks to attract more foreign investment. Under the tax exemption provisions that took effect in August 2011, companies are given corporate tax exemption for five to ten years if they make an investment worth more than 1 billion IDR or run a business in one of five industrial sectors. Those who make a specific amount of investment, hire local employees, and meet relevant requirements will be given a five percent of corporate tax breaks for the several years to come. (1) Corporate Income Tax Tax Rate 25% Normal rate Tax Rate 20% Public company with >40% of its shares traded on the IDX Tax Rate 12.5% Companies with a gross turnover below IDR 50 billion Tax Rate 1% Companies with a gross turnover below IDR 4.8 billion (2) Individual Income Tax Tax Rate 5% Up to IDR 50 million Tax Rate 15% Over IDR 50 million to IDR 250 million Tax Rate 25% Over IDR 250 million to IDR 500 million Tax Rate 30% Over IDR 500 million (3) Withholding Tax (for payments to residents) Tax Rate 15% For interest, dividends & royalties Tax Rate 2% For services Tax Rate 10% For land and building rental (final tax) 2-22

Chapter 2. General Status These withholding taxes are considered corporate tax prepayments. Withholding tax calculated on sales/revenue is considered a final tax. (4) Withholding Tax (for payments to non-residents) Normal rate (can be reduced by using tax treaty provisions, or exempt services that qualify as business profits) Tax Rate 20% (5) Value-Added Tax (VAT) Tax Rate 10% Normal rate 2.3.6 Infrastructures (1) Roads and transportation The road network in Banten consists of the 490km-long national highway, the 327km-long provincial highway, and the 600km-long roads used for maintenance of military and water roads. Its national highway, which is a part of the Asian Highway Network, is the main artery of the province connecting Java and Sumatra. Its routes included Serang, Cilegon, Jakarta, and Merak. To improve traffic congestion, an additional two-lane road runs along with this highway. The provincial road is an asphalt pavement, which links Cilegon and Anyer, and stretches from Bogor, Pandeglang, and Rangkasbitung, to Banten in the south. Aside from the provincial road, there is a small network of roads widely used, but its conditions and functions are not in good shape. The rail service is provided for cargo and commuters. Port of Merak, located on the northwestern tip of Java or a gateway to Sumatra, is one of the most frequently used seaports in Indonesia. Cikiding port and other nearby ports are used for transportation of fuels and raw materials to PT. Krakatau steelworks. Port of Banten is a small harbor in a shallow bay, mainly used for domestic transportation of timber and fishery. Soekarno-Hatta International Airport is the main airport serving passengers and cargo transportation from home and abroad. There are other airports including Pondok Cabe Airport, Tangerang Airport, Budiarto Airport, and Gorda Airport. Of which, Pondok airport is used for general aviation, Budiarto serves the purpose of training, and Gorda is intended to serve the military purpose. (2) Electric power supply A 2,800MW-thermoelectric power plant in Sura Raya is a major source of electrical power in the project area. PLN, an Indonesian state-owned utility provider, supplies electricity to major cities and regions through the 70KV-transmission lines that covers Bogor, Rangkasbitung, Pandeglang, and Serang. Small diesel-electric generators are used for power production in some rural areas with a less stable supply of power. A 400MW-power plant run by PT. Krakatau is the largest private-owned power station. 2-23

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia (3) Water supply The majority of Indonesians get water from wells and surface water. Some urban areas including Tangerang, Serang, Pandengglang, and Rangkasbitung have water supply system via a network of pipes. A PDAM, an authorized water service provider in each region, is in charge of supply of water within its jurisdiction whereas private companies operate water treatment plants in other regions where PDAM is unable to supply water. For instance, Tangerang’s PDAM supplies water to South Tangerang city that has no its own PDAM. Demand for water across the whole Tangerang region is increasing, however, lacking water resources and the financially-strapped PDAMs are hindering sufficient supply of water. Cilegon and Sura Raya are equipped with water supply facilities serviced by PT. Krakatau steelworks. The PT. Krakatau steelworks has its own water supply facilities including Cidanau dam, pipelines, raw water reservoir, Krenceng water treatment plant, and distribution facility. 2.3.7 Politics and economic trends (1) Political system Indonesia is a democratic republic under the presidential system. The incumbent Joko Widodo president continues to be in power until 2019. Indonesia is a single nation with a centralized system of government where the administration or executive branch holds power and the government exercise executive power. The legislative body belongs to the government and the two People’s Representative Councils whereas the judicial branch is independent of the executive and the legislative. The President of Indonesia is both head of state and head of government and of a multi-party system. The president, as commander in chief, is responsible for democratic governance, policy making, and diplomacy. The president and vice president are elected by the people for five-year terms, and the president has the authority to form a cabinet and appoint ministers. The highest representative institution in Indonesia is the People’s Consultative Assembly (MPR) which has the authority to impeach the president. DPR and DPD serve as the House of Representatives, and DPR has the law-making power that all legislative procedures must be approved by DPR. Now the Indonesian parliament is a two-chamber legislature after DPD became the second chamber with more regional representatives in 2004. Indonesia’s highest court is the Supreme Court, or Mahkamah Agung, which is led by the Chief Justice appointed by the president. Before going to the high courts, all dispute cases are brought to the public courts and there are many specialized courts in the Indonesian judicial system, including commercial courts for resolving bankruptcy or insolvency; administrative courts involving government officials or organizations; the constitutional court for dealing with constitutionality, political party, elections, state authority; and religious courts. The judiciary has the three levels of courts: The Supreme Court, High Court, and District Court and in independent Constitutional Court. 2-24

Chapter 2. General Status (2) Diplomatic exchanges with South Korea - February 2000 : President Wahid state visit to Korea - November 2000 : President Kim Dae-jung state visit to Indonesia - March 2002 : President Megawati state visit to Korea (both South and North - October 2003 Koreas) - November 2004 : President Roh Moo-hyun attends ASEAN+3 Summit in Bali : Presidents Roh Moo-hyun and Yudhoyono Summit (ASEAN+3 - January 2005 Summit, Binetian) - November 2005 : Prime Minister Lee hae-chan and President Yudhoyono Summit - March 2006 - December 2006 (ASEAN Emergency Summit on the aftermath of earthquake and - July 2007 tsunami, Jakarta) - March 2009 : President Yudhoyono attends APEC Summit in Busan - June 2009 : Speaker of national assembly Kim Won-ki visits Indonesia : Presidents Roh Moo-hyun state visit to Indonesia - November 2010 : President Yudhoyono state visit to Korea - December 2010 : President Lee Myung-bak state visit to Indonesia : President Yudhoyono attends ASEAN- South Korea Summit in - November 2011 Jeju - March 2012 : President Yudhoyono attends G-20 Summit in Seoul - October 2013 : President Lee Myung-bak attends Bali Democracy Forum in - October 2013 Indonesia - December 2014 : President Lee Myung-bak attends ASEAN Summit in Indonesia : President Yudhoyono attends Nuclear Security Summit in Seoul - April 2015 : President Park Geun-hye attends APEC Summit in Indonesia : Presidents Park Geun-hye and Yudhoyono Summit in Jakarta - May 2016 : President Joko Widodo attends Special ASEAN- South Korea - March 2017 Summit in Busan : Deputy Prime Minister Hwang Woo-yea attends the 60th - November 2017 Anniversary Asian African Conference in Bandung : President Joko Widodo state visit to Korea : President Joko Widodo attends Indonesia-South Korea Business Summit in Jakarta : President Moon Jae-in state visit to Indonesia at the invitation of President Joko Widodo 2-25

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia (3) Economic trends According to data released by the Indonesian central bank, Indonesia’s economy is projected to grow 5.01 percent earlier this year in 2017, 5.1 percent in the second quarter, and 5.2 percent in the latter half of the year. Amid the stagnant domestic demand and public expenditure which accounts for 70 percent of the country’s GDP, Indonesia’s economic growth, over the past five years, dropped to the 4 percent level from the 6 percent level but rebounded to the 5 percent level in the first quarter in 2017. The rebound from 4.94 percent in the fourth quarter a year earlier is attributable to the stable growth in exports and public expenditure. With the global economy on a strong recovery, Indonesian export growth picked up in the first half of 2017, supported by an increase in exports of coal and rubber products. Although Indonesia’s inflation rate is expected to rise due to the electricity rate hike in 2017, the central bank said it would set the inflation target of 4 percent. Amid weak demand from China, Indonesia’s largest export market, and a decrease in prices of commodities, Indonesian economy has slowed down in recent years, but it is showing signs of recovery in the fourth quarter of 2015. Expanding public expenditure, rising trend in prices of commodities such as CRB index, and relatively stable foreign exchange rates have all contributed to getting the economy back on track. Indonesia’s quarterly growth rate peaked in the fourth quarter of 2014 at 6.8 percent but it had been on the downward trend until it rebounded to 5.02 percent after hitting 4.7 percent in 2015. Analysts forecast the Indonesian economy will be slowly recovering with a growth rate of 5 to 5.3 percent. By industry, the mining production decreased due to falling demand for commodities led by the global economic downturn in 2015. However, the industry quickly bounced back in 2016, posting a growth rate of 1.06 percent. What is notable is that public utility industry including electricity, gas, and water, has grown 5.39 percent, up 4.49 percent year-on-year, thanks to the Indonesian government initiatives in building infrastructures. In addition, transportation and logistics posted a growth rate of 7.74 percent, the highest figure in the past four years. 2.4 Review of national development-related plans Indonesia has a 20-year development plan for a long-term economic development (RPJPN), a 5-year development plan for a mid-term (RPJMN), and an annual development plan for a short-term economic development strategy (REPETA). 2.4.1 Mid-term national development plan (RPJMN 2015~2019) The Indonesian government plans to introduce foreign loans of 39.9 billion dollars in total for 29 development programs, which include mostly infrastructure projects (88%) on road, railroad, electricity and other non-infrastructure projects (12%) on education, health, and governance. 2-26

Chapter 2. General Status <Table 2.14> Foreign capital projects under the Indonesian government’s mid-term national development plan (unit: million dollars) Area/program Amount Toll road program 2,025.0 Bridge development and improvement program 1,500.0 Railroad development program 6,815.3 Drinking water development program 1,197.7 Waste water management program 3,583.0 Irrigation development and management program 3,257.5 Water supply and management program 63.9 Dam development program 2,133.8 Water-related disasters mitigation program 1,152.6 Water resources infrastructure management program 650.0 Electricity infrastructure development program 4,906.6 ICT and broadcasting infrastructure development program 1,076.0 Solid waste management program 250.0 Housing program for low-income households 500.0 Slums improvement program 3,614.7 Infrastructure 35,286.1 * Source: Minister of National Development Planning (BAPPENAS, 2015) 2.4.2 National economic development plan (MP3EI 2011~2025) The Master Plan for Acceleration and Expansion of Indonesian Economic Development (MP3EI) places great importance on an economic zone of Java’s northern coastal region, which links Jakarta, Semarang, and Surabaya, as a key area for economic development. Having a variety of industrial infrastructure and a dense population, Java’s northern coastal region has great growth potential. Therefore, it is urgent to construct an infrastructure management system that will help manage risks of natural disasters in a more systematic manner from the early stage of planning to prevent human injuries and minimize property damages caused by disasters. In the economic zone on the Java island, the Indonesian government and international bodies are working together on multiple projects related to water resources, floods forecast, and warning. (1) MP3EI Key strategies ○ To develop the potential of local economies of the six economic corridors ○ To strengthen regional and national connectiveness ○ To enhance human resource capability and scientific technology to support growth of the economic corridors 2-27

Feasibility Study for Karian – Serpong Raw Water Conveyance System (KSCS), Indonesia <Figure 2.8> MP3EI’s status <Figure 2.9> MP3EI’s levels Indonesia Prosperous Vision2025 Indonesia MP3EI 1. Support for 22 Major Economic Activity Strategic 2. Operation for National Plan to Improve Execution 3. Development for Economic Base MP3EI Major Development Strengthen Strengthen Strategic of Economic National Human Potential Connections Resources and Technology MP3EI Base Principles for Promoting and Principle Expanding Economic Development 2-28