OFFICIAL DOCUMENTS LOAN NUMBER 8992-ID Loan Agreement (Realizing Education's Promise: Support to Indonesia's Ministry of Religious Affairs for Improved Quality of Education Project) between REPUBLIC OF INDONESIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 2 of 14 LN 8992-ID LOAN AGREEMENT AGREEMENT dated as of the Signature Date between REPUBLIC OF INDONESIA ("Borrower") and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT ("Bank"). The Borrower and the Bank hereby agree as follows: ARTICLE I - GENERAL CONDITIONS; DEFINITIONS 1.01. The General Conditions (as defined in the Appendix to this Agreement) apply to and form part of this Agreement. 1.02. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the General Conditions or in the Appendix to this Agreement. ARTICLE II - LOAN 2.01. The Bank agrees to lend to the Borrower the amount of two hundred fifty million United States Dollars (USD250,000,000), as such amount may be converted from time to time through a Currency Conversion ("Loan"), to assist in financing the project described in Schedule I to this Agreement ("Project"). 2.02. The Borrower may withdraw the proceeds of the Loan in accordance with Section III of Schedule 2 to this Agreement. 2.03. The Front-end Fee is one quarter of one percent (0.25%) of the Loan amount. 2.04. The Commitment Charge is one quarter of one percent (0.25%) per annum on the Unwithdrawn Loan Balance. 2.05. The interest rate is the Reference Rate plus Fixed Spread or such rate as may apply following a Conversion; subject to Section 3.02(e) of the General Conditions. 2.06. The Payment Dates are March 15 and September 15 in each year. 2.07. The principal amount of the Loan shall be repaid in accordance with Schedule 3 to this Agreement. 2.08. (a) If on any given day, the Total Exposure exceeds the Standard Exposure Limit (as said terms are defined in sub-paragraphs (b)(ii) and (b)(iii) of this Section), the Borrower shall pay to the Bank a surcharge at the rate of one half of one percent (0.5%) per annum of the Allocated Excess Exposure Amount (as defined in sub-paragraph (b)(i) of this Section) for each said day ("Exposure Surcharge"). The Exposure Surcharge (if any) shall be payable semi-annually in arrears on each Payment Date. 3 of 14 LN 8992-ID (b) For purposes of this Section the following terms have the meanings set forth below: (i) "Allocated Excess Exposure Amount" means for each day during which the Total Exposure exceeds the Standard Exposure Limit, the product of: (A) the total amount of said excess; and (B) the ratio of all (or, if the Bank so determines, a portion) of the Loan to the aggregate amount of all (or the equivalent portions) of the loans made by the Bank to the Borrower and to other borrowers guaranteed by the Borrower that are also subject to an exposure surcharge, as said excess and ratio are reasonably determined from time to time by the Bank. (ii) "Standard Exposure Limit" means the standard limit on the Bank's financial exposure to the Borrower which, if exceeded, would subject the Loan to the Exposure Surcharge, as determined from time to time by the Bank. (iii) "Total Exposure" means for any given day, the Bank's total financial exposure to the Borrower, as reasonably determined by the Bank. ARTICLE III - PROJECT 3.01. The Borrower declares its commitment to the objectives of the Project. To this end, the Borrower shall carry out the Project through the Ministry of Religious Affairs in accordance with the provisions of Article V of the General Conditions and Schedule 2 to this Agreement. ARTICLE IV - EFFECTIVENESS; TERMINATION 4.01. The Additional Condition of Effectiveness consists of the following, namely, that the Borrower has adopted the Project Operations Manual in form and substance satisfactory to the Bank. 4.02. The Effectiveness Deadline is the date ninety (90) days after the Signature Date. ARTICLE V - REPRESENTATIVE; ADDRESSES 5.01. The Borrower's Representative is its Minister of Finance. 5.02. For purposes of Section 10.01 of the General Conditions: (a) the Borrower's address is: Directorate General of Budget Financing and Risk Management Ministry of Finance Gedung Frans Seda Jl. DR. Wahidin Raya No. 1 Jakarta 10710 - Indonesia; and (b) the Borrower's Electronic Address is: Facsimile: +62-21-381-2859 4 of 14 LN 8992-ID 5.03. For purposes of Section 10.01 of the General Conditions: (a) the Bank's address is: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America; and (b) the Bank's Electronic Address is: Facsimile: 1-202-477-6391 AGREED as of the Signature Date. REPUBLIC OF DONESIA By .. Authorized Representative Name: LUl"Y ALFIRMAN OIIEcroKT UENEIAL OF (buDCIT Title: FINANCING AND a1sr M ANAcaMMENT Date: NOEfl 13 21 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMFNT By A re ntative Name: : _ _ _ _ _ _ Title: Date: ~~ oc 5 of 14 LN 8992-ID SCHEDULE 1 Project Description The objective of the Project is to improve the management of primary and secondary education services under the Ministry of Religious Affairs. The Project consists of the following parts: Part 1. Nationwide Implementation of Electronic School-based Performance Budgeting System and Grants to Schools (a) Provision of support and technical assistance to measure achievements of the NES by MORA Schools, consisting of: (i) development of a school quality scorecard assessment system based on the NES; (ii) training of MORA staff at the central, provincial and district levels, including supervisors and representatives from MORA Schools, on NES assessment system and the utilization of NES assessment results for planning and budgeting at education institutions for which they are respectively responsible; (iii) improvement of ability of supervisors and district and provincial offices of MORA to assess NES of MORA Schools; and (iv) analysis and dissemination of district-level results of NES self-evaluation. (b) Provision of support and technical assistance to the districts and provinces to analyze and report data based on the e-RKAM, consisting of: (i) training of MORA staff the central, provincial and district levels, including supervisors and representatives of MORA Schools, on the e- RKAM performance-based planning and budgeting system; (ii) development of e-RKAM implementation plans for MORA Schools; (iii) monitoring of MORA Schools; and (iv) provision of technical support from central level to provincial- and district-level offices to analyze the school planning and budgeting information. (c) Provision of Performance Grants for the successful implementation of e-RKAM and increased achievement of NES. (d) Provision of Grants to Under-performing MORA Schools to increase achievement of NES. Part 2. Implementation of a National, Census-based Student Assessment in Fourth Grade Development, piloting and implementation of a student assessment system in the form of an age-appropriate competency test to assess student learning outcomes in fourth grade. Part 3. Policy and Continuous Professional Development for Teachers, Directors, and Education Personnel of MORA Schools (a) Strengthening of - and expansion of access to - peer working groups for teachers, directors, and supervisors of MORA Schools, consisting of: (i) development and adoption of policies, regulations, and manuals to enable on in-service training and the operation of peer working groups; (ii) identification of priority capacity building needs for teachers, directors, and supervisors of MORA Schools and deployment of a teacher competency test; and (iii) scaling up of the provision of Block Grants to peer working groups of teachers, directors, and supervisors of MORA Schools for in-service training. 6 of 14 LN 8992-ID (b) Development, piloting and rollout of face-to-face in-service training for educational personnel (including training directors, teachers, supervisors, librarians and laboratory technicians) at MORA Schools in remote locations. (c) Design and development of key in-service training courses, resources, and materials, consisting of: (i) modules for counselling guidance teachers, librarians, and science laboratory technicians; (ii) on-line teacher competency test; (iii) educational resources/materials for use in peer working groups, provincial in-service training events and stand-alone online learning courses; and (iv) online continuous professional development pilot program. (d) Capacity strengthening of key educational personnel, consisting of: (i) review and improvement of the regulatory framework and organizational structure of training centers (pusdiklat and balai diklat keagamaan) to support peer working groups for teachers and teaching personnel; (ii) training of educational personnel (trainers) and staff of training centers to strengthen delivery of training programs for teachers and education staff and enable effective ongoing participation in peer working groups activities; (iii) training of core teachers at the national, provincial, and district levels to become key resource persons in peer working groups activities; and (iv) assessment of baseline to identify contributing and inhibiting factors faced by female teachers to become directors of MORA Schools. Part 4. Strengthening of Systems to Support Quality Improvement (a) Strengthening of MORA data system, consisting of: (i) deployment of hardware, software, and/or online services, as well as provision of technical solutions, to resolve deficiencies in the system and enable operators to upload data without interruption; (ii) establishment of disaster recovery policies for all relevant data systems; (iii) development and adoption of an educational management information system policy and regulations; (iv) re-establishment of the core central data architecture of MORA data systems to ensure the use of common unique identifiers across systems and minimization of duplication in data collection and storage; and (v) adoption and implementation of disaster recovery policies across the system. (b) Provision of technical assistance for additional systems-strengthening activities, consisting of: (i) research and consultations to strengthen policies and regulations on private educational provision; (ii) workshops to enable the use of student assessment data to improve learning and mobilize support for schools lagging in NES achievement; (iii) research, and technical and vocational education and training to formulate a strategy on investment in technical and vocational education and training; (iv) research on the current teachers recruitment system and recommendations for improvement; (v) support to the central level for planning and budgeting of performance-based education and strengthening of financial and procurement systems; and (vi) operational support to the Project Management Unit for Project implementation, monitoring and evaluation. (c) Data collection for impact assessment of the Performance Grants provision. 7 of 14 LN 8992-ID SCHEDULE 2 Project Execution Section I. Implementation Arrangements A. Institutional Arrangements. 1. The Borrower shall vest the overall responsibility of Project implementation in MORA, through its Director General responsible for Islamic education. 2. The Borrower, through MORA, shall establish, not later than September 30, 2019, and thereafter maintain throughout the Project implementation period, a Project Management Unit (PMU), with a mandate, composition and resources satisfactory to the Bank. Without limitation to the foregoing, the Project Management Unit shall be responsible for day-to-day implementation, management and reporting of the Project 3. The Borrower, through MORA, shall establish, not later than September 30, 2019, and thereafter maintain throughout the Project implementation period, a Steering Committee, with a mandate, composition and resources satisfactory to the Bank. Without limitation to the foregoing, the Steering Committee shall: (a) be chaired by the Director General responsible for Islamic education; (b) include representatives from relevant units/directorates in MORA; and (c) be responsible for, inter alia: (i) providing overall strategic and policy guidance on all activities carried out under the Project; and (ii) facilitating coordination for the implementation of Project activities. B. Implementation Arrangements 1 . Project Operations Manual. The Borrower shall: (a) prepare a manual, in form and substance satisfactory to the Bank, for the purpose of ensuring proper implementation of the Project. The said manual shall contain detailed arrangements and procedures for: (i) institutional coordination and day-to-day execution of the Project; (ii) disbursement and financial management; (iii) procurement; (iv) environmental and social safeguard management; (v) monitoring, evaluation, reporting and communication; (vi) provision and use of Performance Grants and Block Grants; and (vii) such other administrative, financial, technical and organizational arrangements and procedures as shall be required for the Project (provided, however, that in the event of any conflict between the arrangements and procedures set out in the Project Operations Manual and the provisions of this Agreement, the provisions of this Agreement shall prevail); and (b) (i) furnish to, and exchange views with the Bank on such manual promptly upon its preparation; (ii) adopt such manual as shall have been approved by the Bank ("Project Operations Manual"); and (iii) thereafter implement the Project in accordance with the Project Operations Manual; and (c) not amend, abrogate or waive any provision of the Project Operations Manual unless the Bank has provided its prior no-objection thereof in writing. 8 of 14 LN 8992-ID 2. Grants Manual. (a) Without limitation to Section I.B.1 of this Schedule, in carrying out Parts 1(c), 1(d), and 3(a)(iii) of the Project, the Borrower shall: (i) adopt, and thereafter ensure that the activities are implemented in accordance with, the Grants Manual, in form and substance satisfactory to the Bank, containing detailed arrangements and procedures for the implementation of Parts 1(c), 1(d), and 3(a)(iii) of the Project, including: (A) institutional coordination and implementation; (B) disbursement and financial management; (C) reporting requirements; (D) criteria for the determination of Eligible Expenditures and activities to be financed out of the Grants; (E) selection of Grants' recipients; and (F) such other administrative, financial, technical and organizational arrangements and procedures as shall be required for the implementation of Parts 1(c), 1(d), and 3(a)(iii) of the Project; and (ii) not amend, abrogate or waive any provision of the Grants Manual unless the Bank has provided its prior no-objection thereof in writing. (b) In the event of any conflict between the provisions of: (a) the Project Operations Manual; (b) the Grants Manual; and (c) this Agreement, the provisions of this Agreement shall prevail. 3. Annual Work Plans and Budgets. (a) The Borrower shall ensure that the Bank is furnished, not later than one (1) month before the beginning of each Fiscal Year during the implementation of the Project (or such later date as the Bank may agree) for the Bank's no-objection, a consolidated Annual Work Plan and Budget containing all Project activities and Eligible Expenditures proposed to be included in the Project in the following Fiscal Year. (b) The Borrower shall ensure that the Project is implemented in accordance with the Annual Work Plans and Budgets (provided, however, that in the event of any conflict between an Annual Work Plan and Budget and the provisions of this Agreement, the provisions of this Agreement shall prevail) and shall provide, promptly, as needed, its share of the Project financing as specified in the Annual Work Plans and Budgets. (c) The Borrower shall not make or allow to be made any change to an Annual Work Plan and Budget without prior no-objection in writing by the Bank. 9 of 14 LN 8992-ID C. Environmental and Social Standards. 1 . The Borrower shall ensure that the Project is carried out in accordance with the Environmental and Social Standards, in a manner acceptable to the Bank. 2. Without limitation upon paragraph I above, the Borrower shall ensure that the Project is implemented in accordance with the Environmental and Social Commitment Plan ("ESCP"), in a manner acceptable to the Bank. To this end, the Borrower shall ensure that: (a) the measures and actions specified in the ESCP are implemented with due diligence and efficiency, and as further specified in the ESCP; (b) sufficient funds are available to cover the costs of implementing the ESCP; (c) policies, procedures and qualified staff are maintained to enable it to implement the ESCP, as further specified in the ESCP; and (d) the ESCP or any provision thereof, is not amended, revised or waived, except as the Bank shall otherwise agree in writing and the Borrower has, thereafter, disclosed the revised ESCP. In case of any inconsistencies between the ESCP and the provisions of this Agreement, the provisions of this Agreement shall prevail. 3. The Borrower shall: (a) take all measures necessary on its part to collect, compile, and furnish to the Bank through regular reports, with the frequency specified in the ESCP, and promptly in a separate report or reports, if so requested by the Bank, information on the status of compliance with the ESCP and the management tools and instruments referred to therein, all such reports in form and substance acceptable to the Bank, setting out, inter alia: (i) the status of implementation of the ESCP; (ii) conditions, if any, which interfere or threaten to interfere with the implementation of the ESCP; and (iii) corrective and preventive measures taken or required to be taken to address such conditions; and (b) promptly notify the Bank of any incident or accident related to or having an impact on the Project which has, or is likely to have, a significant adverse effect on the environment, the affected communities, the public or workers, in accordance with the ESCP, the instruments referenced therein and the Environmental and Social Standards. 4. The Borrower shall maintain and publicize the availability of a grievance mechanism, in form and substance satisfactory to the Bank, to hear and determine fairly and in good faith all complaints raised in relation to the Project, and take all measures necessary to implement the determinations made by such mechanism in a manner satisfactory to the Bank. 10 of 14 LN 8992-ID Section II. Project Monitorin2 Reporting and Evaluation The Borrower shall furnish to the Bank each Project Report not later than forty-five (45) days after the end of each calendar semester, covering the calendar semester. Section III. Withdrawal of Loan Proceeds A. General. Without limitation upon the provisions of Article II of the General Conditions and in accordance with the Disbursement and Financial Information Letter, the Borrower may withdraw the proceeds of the Loan to finance Eligible Expenditures; in the amount allocated and, if applicable, up to the percentage set forth against each Category of the following table: Percentage of Amount of the Loan Expenditures to be Allocated financed Category (expressed in USD) (inclusive of Taxes) (1) Goods, non-consulting services, 137,500,000 100% consulting services, Training, and Incremental Operating Costs for the Project (2) Performance Grants under Part 112,500,000 100% of the amounts 1(c) of the Project Grants to Under- disbursed performing MORA Schools under Part 1(d) of the Project, and Block Grants under Part 3(a)(iii) of the Project TOTAL AMOUNT 250,000,000 B. Withdrawal Conditions; Withdrawal Period. 1. Notwithstanding the provisions of Part A above, no withdrawal shall be made: (a) for payments made prior to the Signature Date; or (b) Under Category (2) until the Borrower has adopted the Grants Manual in form and substance satisfactory to the Bank. 2. The Closing Date is December 31, 2024. 11 of 14 LN 8992-ID SCHEDULE 3 Amortization Repayment Schedule The following table sets forth the Principal Payment Dates of the Loan and the percentage of the total principal amount of the Loan payable on each Principal Payment Date ("Installment Share"). Principal Payment Date Installment Share On each March 15 and September 15 Beginning March 15, 2026 through March 15, 2032 7.14% On September 15, 2032 7.18% 12 of 14 LN 8992-ID APPENDIX Definitions "Annual Work Plan and Budget" means the plan and budget which have received the Bank's no-objection in accordance with Section I.B.3 of Schedule 2 to this Agreement; as said plan and budget may be modified from time to time with the prior written no-objection of the Bank; and "Annual Work Plans and Budgets" means, collectively, all such plans and budgets. 2. "Anti-Corruption Guidelines" means, for purposes of paragraph 5 of the Appendix to the General Conditions, the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised in January 2011 and as of July 1, 2016. 3. "Block Grant" means a grant to be financed out of the Loan proceeds and designed to be provided to a peer working group of teachers, directors, and/or supervisors of MORA Schools for the purposes of carrying out in-service training, all in accordance with the Grants Manual; and "Block Grants" means, collectively, all such Block Grants. 4. "Category" means a category set forth in the table in Section III.A of Schedule 2 to this Agreement. 5. "e-RKAM" means Rencana Kerja dan Anggaran Sekolah Penerima BOS Dibawah Kemenag Berbasis Elektronik, the Borrower's electronic performance-based planning and budgeting system for MORA Schools. 6. "Environmental and Social Commitment Plan" or the acronym "ESCP" means the Borrower's environmental and social commitment plan, acceptable to the Bank, dated May 29, 2019, which sets out a summary of the material measures and actions to address the potential environmental and social risks and impacts of the Project, including the timing of the actions and measures, institutional, staffing, training, monitoring and reporting arrangements, and any instruments to be prepared thereunder; as the ESCP may be revised from time to time, with prior written agreement of the Bank, and such term includes any annexes or schedules to such plan. 7. "Environmental and Social Standards" means, collectively: (i) "Environmental and Social Standard 1: Assessment and Management of Environmental and Social Risks and Impacts"; (ii) "Environmental and Social Standard 2: Labor and Working Conditions"; (iii) "Environmental and Social Standard 3: Resource Efficiency and Pollution Prevention and Management"; (iv) "Environmental and Social Standard 4: Community Health and Safety"; (v) "Environmental and Social Standard 5: Land Acquisition, Restrictions on Land Use and Involuntary Resettlement"; (vi) "Environmental and Social Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources"; (vii) "Environmental and Social Standard 7: Indigenous Peoples/Sub-Saharan Historically Underserved Traditional Local Communities"; (viii) "Environmental and Social Standard 8: Cultural Heritage"; (ix) "Environmental and Social Standard 9: Financial Intermediaries"; (x) "Environmental and Social Standard 10: Stakeholder Engagement and Information Disclosure"; effective on October 1, 2018, as published by the Bank at http://www.worldbank.or,-en/proiects-operationsenvironmental-and-social-framework. 13 of 14 LN 8992-ID 8. "Fiscal Year" means the Borrower's fiscal year commencing January I and ending December 31 of the same year. 9. "General Conditions" means the "International Bank for Reconstruction and Development General Conditions for IBRD Financing, Investment Project Financing", dated December 14, 2018. 10. "Grant to Under-performing MORA School" means a grant to be financed out of the Loan proceeds and designed to be provided to a MORA School that falls under the criterion of the lowest-performing schools for the purposes of carrying out activities related to the achievement of NES (including textbooks procurement, teacher training, and school operation costs as well as medium rehabilitation and repair works to support learning needs), all in accordance with the Grants Manual; and "Grants to Under-performing MORA Schools" means, collectively, all such Grants to Under-performing MORA Schools. 11. "Grants" means, collectively, the Block Grants, the Performance Grants, and the Grants to Under-performing MORA Schools. 12. "Grants Manual" means the manual to be adopted by the Borrower and referred to in Section I.B.2 of Schedule 2 to this Agreement, as said manual may be modified from time to time with the prior written no-objection of the Bank. 13. "Incremental Operating Costs" means the reasonable costs incurred by the Borrower under the Project for the purposes of Project management, implementation and monitoring and evaluation, based on the Annual Work Plans and Budgets, including office supplies and consumables, utilities, bank charges, communications, information and communication campaigns, mass media and printing services, vehicle rental, operation, maintenance and insurance, office space rental, building and equipment maintenance, travel, lodging and subsistence allowances, and salaries of contractual and temporary staff, but excluding salary and salary supplements of staff of the Borrower's civil service. 14. "Ministry of Religious Affairs" or "MORA" means the Borrower's ministry responsible for religious affairs, including religious schools, or any successor thereto. 15. "MORA School" means a primary and/or secondary school under MORA's authority, which receives a school operational assistance from MORA; and "MORA Schools" means, collectively, all such schools. 16. "NES" or "National Education Standards" means the Borrower's education standards to measure the attainment of education quality of a school, as mandated by the Borrower's law no. 20 of 2003 and established pursuant to the Borrower's government regulation no. 13 of 2015. 14 of 14 LN 8992-ID 17. "Performance Grant" means a grant to be financed out of the Loan proceeds and designed to be provided to a MORA School as an incentive for the successful implementation of e-RKAM and/or increased achievement of NES for the purposes of carrying out activities related to the achievement of NES, all in accordance with the Grants Manual; and "Performance Grants" means, collectively, all such Performance Grants. 18. "Procurement Regulations" means, for purposes of paragraph 85 of the Appendix to the General Conditions, the "World Bank Procurement Regulations for IPF Borrowers", dated July 2016, revised November 2017 and August 2018. 19. "Project" means the project described in Schedule 1 to this Agreement for which the Loan is extended, as the description of such project may be amended from time to time by agreement between the Bank and the Borrower. It is noted that in Borrower's own documents submitted its for internal approval process the project is titled "Madrasah Education Quality Reform". 20. "Project Management Unit" means the unit referred to in Section I.A.2 of Schedule 2 to this Agreement, or any successor thereto which the Bank has confirmed in writing is acceptable for the implementation of the Project. 21. "Project Operations Manual" means the Borrower's manual referred to in Section I.B. 1 (b)ii of Schedule 2 to this Agreement, as said manual may be modified from time to time with the prior written no-objection of the Bank; and such term includes any schedules, annexes and attachments to the Project Operations Manual. 22. "Signature Date" means the later of the two dates on which the Borrower and the Bank signed this Agreement and such definition applies to all references to "the date of the Loan Agreement" in the General Conditions. 23. "Steering Committee" means the committee referred to in Section I.A.3 of Schedule 2 to this Agreement, or any successor thereto which the Bank has confirmed in writing is acceptable for the implementation of the Project. 24. "Training" means the reasonable costs incurred by the Borrower for domestic and/or overseas training activities under the Project, based on the Annual Work Plans and Budgets, and directly attributable to seminar, workshops and study tours, along with travel and subsistence allowances for training participants, course fees, services of trainers, rental of training facilities, preparation, acquisition, distribution and reproduction of training materials, and other activities directly related to course preparation and implementation.