ASIAN DEVELOPMENT BANK PPA: BAN 18045

PROJECT PERFORMANCE AUDIT REPORT

ON THE

SECOND AQUACULTURE DEVELOPMENT PROJECT (Loan 821-BAN[SF])

IN

BANGLADESH

December 2002

CURRENCY EQUIVALENTS

Currency Unit – taka (Tk)

At Appraisal At Project Completion At Operations Evaluation (August 1986) (December 1996) (October 2002) Tk1.00 = $0.033 $0.02372 $0.01726 $1.00 = Tk30.30 Tk42.15 Tk57.93

ABBREVIATIONS

ADB – Asian Development Bank BB – Bangladesh Bank BKB – Bangladesh Krishi Bank DOF – Department of Fisheries EIRR – economic internal rate of return OEM – Operations Evaluation Mission PCR – project completion report PP – project proforma SDR – special drawing rights SOE – statement of expenditure TA – technical assistance UNDP – United Nations Development Programme

NOTES

(i) The fiscal year (FY) of the Government ends on 30 June. FY before a calendar year denotes the year in which the fiscal year ends. For example, FY1990 begins on 1 July 1989 and ends on 30 June 1990.

(ii) In this report, “$” refers to US dollars.

Operations Evaluation Department, PE-613

CONTENTS Page BASIC DATA ii EXECUTIVE SUMMARY iii MAP vii I. BACKGROUND 1 A. Rationale 1 B. Formulation 1 C. Purpose and Outputs 1 D. Cost, Financing, and Executing Arrangements 2 E. Completion and Self-Evaluation 3 F. Operations Evaluation 3 II. PLANNING AND IMPLEMENTATION PERFORMANCE 4 A. Formulation and Design 4 B. Achievement of Outputs 4 C. Cost and Scheduling 5 D. Procurement and Construction 6 E. Organization and Management 6 III. ACHIEVEMENT OF PROJECT PURPOSE 7 A. Operational Performance 7 B. Economic and Financial Reevaluation 11 C. Sustainability 12 IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS 12 A. Socioeconomic Impact 12 B. Environmental Impact 13 C. Impact on Institutions and Policy 14 V. OVERALL ASSESSMENT 14 A. Relevance 14 B. Efficacy 14 C. Efficiency 15 D. Sustainability 15 E. Institutional Development and Other Impacts 15 F. Overall Project Rating 16 G. Assessment of ADB and Borrower Performance 16 VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS 16 A. Key Issues for the Future 16 B. Lessons Identified 17 C. Follow-Up Actions 18 APPENDIXES 1. Estimated and Actual Project Costs 19 2. International Training 22 3. Shrimp Culture Development 23 4. Carp Culture Development 30 5. Benchmark Survey of Demo and Non-Demo Farms 35 6. Credit Operations of the Project 43 7. Culture-Based Floodplain Fisheries Enhancement 49 8. Financial Reevaluation 59

BASIC DATA Loan 821-BAN(SF): Second Aquaculture Development Project

PROJECT PREPARATION/INSTITUTION BUILDING TA No. TA Name Type Person-

Months Amount1

($) Approval

Date 632 Second Aquaculture Development PPTA 20 330,000 4 Oct 1984 As per ADB KEY PROJECT DATA ($ million) Loan Documents Actual Total Project Cost 60.00 38.29 Foreign Exchange Cost 18.24 12.18 Local Currency Cost 41.76 26.11 ADB Loan Amount/Utilization 45.46 30.67 ADB Loan Amount/Cancellation — 24.91 KEY DATES Expected Actual Fact-Finding 4–18 Mar 1986 Appraisal 18 Jul–4 Aug 1986 Loan Negotiations 4–6 Nov 1986 Board Approval 16 Dec 1986 Loan Agreement Feb 1987 20 May 19872 Loan Effectiveness Jul 19873 8 Mar 1988 First Disbursement 14 Jan 19914 Project Completion 30 Jun 1992 31 Dec 1996 Loan Closing (amended Loan Agreement) 31 Dec 1992 15 Apr 1997 Months (effectiveness to completion) 60 106

ECONOMIC AND FINANCIAL INTERNAL RATES OF RETURN (%)

Appraisal PCR PPAR

Economic Internal Rate of Return 23.0 5 5 Financial Internal Rate of Return 31.0 5 5

BORROWER People’s Republic of Bangladesh EXECUTING AGENCY Department of Fisheries and Bangladesh Bank through Agrani Bank,

Bangladesh Krishi Bank, and Rupali Bank MISSION DATA Type of Mission No. of Missions No. of Person-Days Fact-Finding 1 42 Appraisal 1 60 Project Administration Review 22 205 Project Completion 1 14 Operations Evaluation6 1 57

— = not calculated, ADB = Asian Development Bank, PCR = project completion report, PPAR = project performance audit report, PPTA = project preparatory technical assistance, TA = technical assistance. 1 Represents the approved amount of TA. 2 The Loan Agreement was amended on 3 November 1987 after the Board approved ADB financing of consulting

services of $2.65 million, which the United Nations Development Programme had declined to finance. 3 Based on the amended Loan Agreement, the expected date of loan effectiveness was 2 January 1988. 4 The first actual release of funds, although an amount of $153,931 was recovered earlier by ADB from the loan

account upon loan effectiveness, representing a portion of the cost of prior TA. 5 At appraisal, economic and financial internal rates of return of investments of the credit line were calculated,

assuming upfront investments costs. In reality, the credit line largely comprised short-term working capital loans to existing aquaculture farms. Thus, no rates of return were calculated in the PCR and PPAR.

6 Comprising N. Bestari (Mission Leader), F. Asistin (Evaluation Analyst), D. Carles (Consultant/Aquaculture Specialist), and M. A. Siddiqui (Consultant/Socioeconomist).

EXECUTIVE SUMMARY

Bangladesh’s access to marine fish resources is limited, but the country’s inland fisheries resources are among the richest in the world. Situated in the delta of the Brahmaputra, Ganges, and Meghna rivers, the climate, water, and soil conditions of Bangladesh are favorable for inland and floodplain fisheries, as well as for aquaculture. The Second Aquaculture Development Project was approved by the Asian Development Bank (ADB) in December 1986, and originally targeted for completion in June 1992. However, the start of implementation was delayed by more than 3 years, and the Project was completed in December 1996.

The main objectives were to promote shrimp aquaculture production to generate foreign exchange earnings, increase the availability of fish for domestic consumption, and enhance incomes and employment in the rural areas. Designed to address slow transfer of technology and inadequate credit, the Project aimed at developing extension services for shrimp and carp culture development, providing complementary credit for aquaculture development, and piloting floodplain fisheries enhancement by introducing fish stocking in designated floodplains. In providing the extension services, the Project was to engage progressive farmers and develop their aquaculture ponds as demonstration (demo) farms to allow others to learn from these farms. The credit line was intended to help farmers upgrade or expand their existing ponds, and private operators establish associated facilities. The Department of Fisheries (DOF) was the executing agency of the Project, except for the credit line for which the Bangladesh Bank was designated as the executing agency. Bangladesh Bank channeled the credit line through three participating banks, namely Agrani Bank, Rupali Bank, and Bangladesh Krishi Bank.

Demo farms have served as the main media to showcase improved pond culture practices. A total of 116 shrimp demo ponds, 70 prawn demo ponds, and 1,498 carp demo ponds were established with an almost nationwide coverage of potential aquaculture areas. With improved aquaculture practices, achievements on demo ponds exceeded the targets established at appraisal for productivity improvements. The sociocultural conditions in the villages facilitated the dissemination of the introduced technology. Visits and access to demo ponds were made possible through neighbors, friends, relatives, and other local contacts. Each demo farmer was in close contact with at least 10 other farmers to share the knowledge of pond preparation and management learned from the Project.

Despite delays and some shortcomings in their establishment, the demo farms have gained and sustained impressive yield increases. The farmers have continued to act as informal extension agents, although they have received limited further support from DOF after project completion. Diffusion of information has been effective because the extension has relied on feasible, simple, and low-cost technology to improve aquaculture practices. Bangladesh’s aquaculture production and exports have gained significantly, although such achievements cannot be wholly attributed to the Project. Fish production, including carp species, has more than tripled since 1990. The volumes of shrimp and prawn exports have markedly increased since 1990, although there was a transitional setback in 1997 when Bangladesh had to comply with increasingly stringent food quality standards for exports.

The credit line was envisaged to complement the extension services to finance investments in aquaculture development. However, the assessment at appraisal of the credit demand was optimistic, relying on the expressed interest of the participating banks and the technical support built into the Project. Based on assessment in 1991 that the private sector outside the original project areas was capable of developing viable enterprises without aquaculture demo ponds, ADB approved a change of scope to allow credit delivery beyond the areas of the extension services. This decision detached credit delivery from the extension

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services. With limited experience in aquaculture, the participating banks were reluctant to lend. The credit line was unutilized until early 1994. Subsequently, credit approval increased progressively, but the original disbursement target was not met.

Although the project design had expected that 90% of the credit line would be used for investment loans, this expectation did not materialize. Credit delivery largely comprised short-term working capital loans. The switch to financing working capital was pragmatic: short-term lending reflected the risk-averseness of the participating banks and the demand for working capital among existing farms that did not require upfront investments. Loan recovery has varied between 50% and 90%. Without receiving appropriate advice, the subborrowers’ outputs were substandard. Disease outbreaks and major flooding negatively affected the financial viability of the subborrowers, despite the rescheduling of loan repayments in some cases. The interest rate for the project credit line was fixed for all clients with no distinction between short-term loans, long-term loans, working capital, or investments. This practice did not encourage the participating banks to incorporate risk assessment into their interest rate structure.

For the experimental floodplain fisheries enhancement, selected water bodies were utilized for fish seed nurseries and juvenile fish was released into the floodplains during inundation. Fish stocking was found financially attractive in the context of direct costs, fish recovery, and associated risks, but its design did not fully address the organizational and management requisites for sustaining floodplain stocking. Issues concerning sharing or distribution of costs and benefits emerged during implementation. The requirements on the transfer of management of the water bodies, and the development of leasing policies and a cost recovery system were not fulfilled. Fish stocking relied on seed supplies from private suppliers and existing government hatcheries, and because of delays in construction, the project-financed hatcheries served little purpose for the Project. The pilot floodplain fisheries enhancement did not foresee social preparation, community involvement, and common property management as key requisites. Nevertheless, the pilot initiative raised the awareness of DOF of pertinent issues, and this subsequently led to a more comprehensive attention to such enhancement.

The dissemination of improved fish culture techniques has benefited households and small farms. Nationwide, carp farming has become increasingly popular, benefiting at least 3 million people. It is not uncommon that households consume up to 25% of their backyard fishpond production, providing a significant source of animal protein and calcium to improve their nutrition. The availability of low-cost fish at local markets has helped increase fish protein intake among rural and urban consumers. The shrimp and prawn subsector has also provided significant employment opportunities. The Project promoted aquaculture practices that have yielded high financial returns to farms that have adopted such practices. The demo farms have continued to promote and disseminate aquaculture technology that provides higher incomes to farmers. There is strong evidence that an increasing number of farms have improved their productivity through better pond management and rational use of feed and inputs.

Despite the achievements in technology dissemination and uptake, the sustainability of aquaculture is affected by disease risks and their potentially devastating impacts on production. Disease prevention and food quality standards are important for securing export markets, while species diversification can enhance the product mix for exports. The spontaneous expansion of shrimp and prawn farms has posed environmental risks because of inadequate water management. In many cases, there are inadequate provisions for water supply and drainage facilities. Without adequate planning, an unbridled development scenario in shrimp and prawn culture has evolved, highlighting the need to develop a spatial plan for shrimp and prawn farming, taking into account production potential, technology options, environmental carrying capacity, and management requirements.

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Considering its major achievements against appraisal objectives and targets, as well as its shortcomings, the Project is rated successful. Several follow-up actions are recommended. First, DOF should allocate adequate resources to sustain operation of the project-financed hatcheries in the context of their current use as broodfish banks. Second, in policy dialogue with the Government and bilateral and multilateral agencies over the next 3 years, ADB should emphasize the issues concerning shrimp and prawn farming that are critically linked with the carrying capacity of the environment and its safeguards. ADB should use the ongoing regional technical assistance as an instrument for such dialogue with the Government. Third, Bangladesh Bank should request the participating banks to analyze the existing subloans in detail and classify the nonperforming subloans, including provisions for loan losses, by June 2003.

I. BACKGROUND

A. Rationale

1. The fisheries sector of Bangladesh provides livelihood to more than a million people and 10 million part-time fisherfolks, and fish makes up 80% of the animal protein intake of the population. Bangladesh’s access to marine fish resources is limited, but the country’s inland fisheries resources are among the richest in the world. Coastal tidal lands of 2.5 million hectares (ha) offer development potential for aquaculture. Situated in the delta of the Brahmaputra, Ganges, and Meghna rivers, the climate, water, and soil conditions of Bangladesh are favorable for inland and floodplain fisheries, as well as for aquaculture. At the height of the rainy season, as much as one third of the total land area in the country is submerged under water. After the monsoon, floods recede into rivers, haors, and beels.1 Inland fishers operate in the open waters during the floods, and when the floods recede they are engaged in harvesting fish from the beels. In the mid-1980s, fish harvest from floodplain fishing was reported to have declined because of heavy fishing that surpassed natural replenishment, and the reduction of inland water bodies due to flood control and irrigation schemes. In FY1985, fisheries exports amounted to Tk2.5 billion, or 10% of the country’s total exports. Frozen shrimp represented 81% of fisheries exports.2 Given the decline in fish production from the floodplains, opportunities to earn foreign exchange from shrimp exports, and the need to meet domestic demand for fish, the Government showed an increased interest in aquaculture development.

B. Formulation

2. The Second Aquaculture Development Project was approved on 16 December 1986 by the Board of Directors of the Asian Development Bank (ADB), following project preparation that commenced in 1984 with technical assistance (TA) to the Government3 and was completed with fact-finding in March 1986 and appraisal in July/August 1986. It was the second ADB-financed aquaculture project in Bangladesh with an almost nationwide coverage of potential areas for aquaculture development.

C. Purpose and Outputs

3. The main objectives were to (i) promote growth of shrimp production from pond culture to generate foreign exchange earnings, (ii) increase the availability of fish for domestic consumption, and (iii) expand employment and increase incomes in the rural areas.4 To meet these objectives, the Project was designed to resolve two key constraints affecting the aquaculture subsector: slow transfer of technology and inadequate credit to meet capital and operating cost requirements.

4. The Project aimed at developing extension services for shrimp and carp culture development, providing complementary credit for aquaculture development, and piloting initiatives for floodplain fisheries enhancement (see Map):

(i) Shrimp culture development. This component comprised extension services and the provision of a complementary credit line. The extension services focused on pond engineering, improved pond operation, and the handling and distribution

1 A beel is a small low-lying depression in a floodplain that may or may not dry up during the dry season. A haor is a

large low-lying depression in a floodplain that may be reduced during the dry season into a series of beels. 2 About 58% of shrimp exports went to Japan, 29% to Western Europe, and 11% to the United States. 3 TA 632-BAN: Second Aquaculture Development, for $330,000, approved on 4 October 1984. 4 ADB. 1986. Appraisal Report on the Second Aquaculture Development Project in Bangladesh. Manila.

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of shrimp fry. The Project was intended to engage progressive farmers and develop their shrimp ponds as demonstration (demo) farms. According to the appraisal report, 148 shrimp demo ponds in four districts were to be established over 5 years. The Project was designed to provide shrimp fry, fertilizers, feed, and other inputs to participating farmers with an agreement that required demo farmers to improve their aquaculture practices and allow others to observe and learn from their demo farms. The credit line was intended to help aquaculture farmers upgrade existing ponds, invest in new ponds, establish associated facilities, and provide working capital.

(ii) Carp culture development. This component comprised extension services and the provision of a complementary credit line. Similar to the shrimp culture development, the extension approach was based on the establishment of demo farms, with an emphasis on improved pond management practices. At appraisal, it was planned that 1,113 carp demo ponds would be established over 5 years in 21 districts. The credit line was primarily intended for fish farmers who were interested in constructing and upgrading fish nurseries and grow-out ponds, and developing holding facilities for fish fry collectors and distributors.5

(iii) Culture-based floodplain fisheries enhancement. This component was intended as a pilot initiative to stock hatchery-produced fish seed into water bodies as fish nurseries. Selected beels were designated for stocking with carp hatchlings and subsequently the larger fish fry and fingerlings were to be released from the beels into the floodplains during flooding. The Government was to establish carp hatcheries for operation in the designated floodplains.

(iv) General implementation and institutional support. This component comprised training for staff of executing agencies; the provision of equipment, transportation, and other facilities; and the provision of consulting services for project implementation.

D. Cost, Financing, and Executing Arrangements

5. At appraisal, the total project cost was estimated at $60.0 million, consisting of about $41.8 million in local currency costs and $18.2 million in foreign exchange (Appendix 1). ADB provided a loan of SDR38.308 million from its Special Funds resources. The loan was for 40 years, including a grace period of 10 years and a service charge of 1%. The executing agency for the Project was the Department of Fisheries (DOF) of the Ministry of Fisheries and Livestock, except for the credit line that was executed by the Bangladesh Bank (BB) through three participating banks, namely Agrani Bank, Bangladesh Krishi Bank (BKB), and Rupali Bank. Although the Project was approved by ADB in December 1986, its implementation did not actually begin until 1991 when the Government approved the project proforma (PP).6 The Loan Agreement, signed on 20 May 1987, was amended on 3 November 1987 to include additional ADB loan financing of $2.65 million for consulting services that had been intended for the United Nations Development Programme (UNDP) to finance (para. 14). Loan effectiveness was declared on 8 March 1988, when the relevant conditions were considered to be met, namely government approval of the PP, signing of a subsidiary Loan Agreement between the 5 Fish fry is defined as juvenile fish larger than newly-hatched fish or hatchlings, but smaller than fingerling, which is

defined as juvenile fish normally larger than 2.5 centimeters in length. 6 The PP is essentially a project implementation plan comprising description of the project components,

implementation schedules, investment costs, financing plan, and organizational and management arrangements. The common requirement has been for the Planning Commission to approve the PP prior to commencement of project implementation.

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Government and BB, and signing of participation agreements between BB and the participating banks. However, the initial PP proved to be insufficient for the commencement of implementation. The approval of the final PP experienced major delays because of requirements imposed by the Review Committee of the Planning Commission. The PP was eventually approved on 24 January 1991.7

E. Completion and Self-Evaluation

6. The project completion report (PCR) rated the Project generally successful.8 The PCR noted impressive increases in yields on the demo farms exceeding appraisal targets. While the PCR indicated that the appraisal target for the floodplain fisheries enhancement was not achieved, important lessons were drawn from the pilot fish stocking initiatives. The PCR emphasized that the administrative control of the beels was not transferred from the Ministry of Land to DOF as planned, and leases continued to have terms of not more than 3 years.9 The PCR also highlighted risks facing the sustainability of the floodplain fisheries enhancement as private operators showed their reluctance to invest in floodplain stocking, and the Government did not sustain funding for such stocking.10 The continuing administration of the water bodies by the Ministry of Land prevented DOF from developing a cost recovery system. The PCR pointed out that (i) epidemic diseases constrained shrimp farm development; (ii) most of the project credit line was used for working capital loans, contrary to the expectation that 90% of the credit would be for investment loans; and (iii) by 1994, delayed land acquisition and technical design caused the establishment of three carp hatcheries to be of limited use to the Project.11 The PCR emphasized that ADB and DOF should have cancelled the establishment of the hatcheries. The PCR recommended that extension efforts should be sustained by regular government funding; the Government should lease/sell the project hatcheries to private firms; and canal infrastructure should be developed for the shrimp culture areas to facilitate water supply to ponds and drainage.

F. Operations Evaluation

7. This project performance audit report is based on the findings of an Operations Evaluation Mission (OEM) that was fielded from 26 November to 14 December 2001 and a follow-up OEM from 12 to 20 February 2002. The latter made arrangements for an evaluation benchmark survey in March/April 2002 that assessed the performance of existing demo and non-demo farms. Analysis of the survey results was completed in August 2002. Comments received from DOF and ADB departments were considered in finalizing this report.

7 This PP was revised in April 1993, February 1995, and December 1996. 8 ADB. 1997. Project Completion Report on the Second Aquaculture Development Project in Bangladesh. Manila.

The rating system was then based on three categories: (i) generally successful, (ii) partly successful, and (iii) unsuccessful.

9 It was envisaged at appraisal that the administrative control of the beels would be transferred from the Ministry of Land to DOF that would, in turn, lease out such beels to private operators for at least 10 years. This arrangement aimed at developing long-term tenure and promoting cost recovery.

10 Fish stocking in open water bodies may also benefit fishers who do not invest in stocking. In the absence of operating arrangements in the floodplains, including benefit sharing and cost recovery among fishers, operators of beels showed reluctance to invest.

11 At appraisal, there was uncertainty as to whether new government-owned carp hatcheries would be needed and by 1989, DOF already had many carp hatcheries that were not operating efficiently.

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II. PLANNING AND IMPLEMENTATION PERFORMANCE

A. Formulation and Design

8. Drawing on experience from its predecessor that had the same objectives but twice as many components,12 a less complex design was adopted. The project preparation also took into account potential credit demand, capacity of the participating banks, and the high incidence of nonperforming loans. Assessment of the credit demand relied on the expressed interest of the participating banks and the technical support built into the Project, but this expectation did not materialize (para. 26). Assessment of the capability of DOF to facilitate technology transfer within the original timeframe was also too optimistic, given the need to recruit and train a large number of new staff at the outset. While the Project capitalized on extension services that focused on demo farms and technology transfer, its design did not anticipate the need to safeguard the carrying capacity of shrimp culture development and avoid outbreaks of diseases. The OEM confirmed the PCR findings that the rapid expansion of shrimp ponds had not been accompanied with adequate water supply and drainage canals, making maintenance of water quality difficult. While credit was provided to complement the technology-transfer focus of the extension and promote investments, the extension services did not include initiatives to develop marketing skills of farmers, The link between extension and credit was not translated into clear guidelines to integrate advice, access to credit, and investments. The Project did not specify initiatives to improve marketing and food safety requirements for export markets.

B. Achievement of Outputs

9. Demo farms have served as the backbone for the extension services. A total of 116 shrimp (Penaeus monodon) demo ponds and 70 prawn (Macrobrachium rosenbergii) demo ponds were established, compared with the appraisal target of 148 shrimp ponds.13 The bulk of the pond development occurred from 1993 to 1996, although 37 demo ponds were established earlier. The selection criteria for the demo ponds were not fully developed until 1992. At appraisal, four districts (Cox’s Bazar, Satkhira, Khulna, and Bagerhat) were selected for shrimp culture development. Prawn culture was not included in the original project design, but during implementation two districts (Gopalganj and Pirojpur) were added and targeted for prawn culture development. Impressive yield increases were achieved on the shrimp and prawn demo farms. Based on project records, the productivity of shrimp demo farms in the four districts reached 166 kilograms (kg)/ha in 1991, 199 kg/ha in 1992, 272 kg/ha in 1993, 254 kg/ha in 1994, and 306 kg/ha in 1995, thus exceeding the appraisal target of 250 kg/ha. Prawn demo ponds also produced impressive results, averaging 550 kg/ha of prawn annually from 1992 to 1995.

10. Against the appraisal target of 1,113 carp demo ponds, a total of 1,498 carp demo ponds were established in 22 districts covering 183 upazilas14 over 9 years under the Project.15 With yields at over 4,400 kg/ha for more than 1,000 carp demo farms established between 1992 and 12 Loan 329-BAN(SF): Aquaculture Development Project, for $18 million, approved on 13 December 1977. ADB.

1989. Project Completion Report on the Aquaculture Development Project in Bangladesh. Manila. There were eight largely independent subprojects: (i) carp hatcheries, (ii) freshwater shrimp hatchery and farms, (iii) fish pens, (iv) fish cages, (v) brackishwater shrimp and fish culture, (vi) fishnet-making plant, (vii) fish salting and drying facilities, and (viii) ice plants. The project performance was not rated in the PCR. However, the PCR found that the project was based on optimistic assessments of technology potential that led to the selection of inappropriate technologies. The main constraint was the complexity of the multifaceted components and the related institutional ramifications.

13 In addition, 12 DOF ponds were established under the Project for capacity building and staff development. 14 An administrative government unit that was renamed thana on 30 June 1992. 15 The PCR quoted that the number of established ponds was 1,352. However, both counts exceeded the appraisal

target of 1,113 carp demo ponds.

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1996, the appraisal target of 2,100 kg/ha was exceeded. More than 28,000 farmers attended gatherings organized by DOF from 1994 to 1996 in more than 180 upazilas to promote small-scale pond carp culture.

11. The Project played a key role in developing the skills of DOF officers and demo farmers. The limited availability of trained DOF officers in shrimp and prawn culture led to initial difficulties in selecting ponds for demonstration and guiding the farmers. During implementation, more than 600 DOF and project staff were trained, in addition to the operators of demo farms. International training was provided to 128 DOF and BB staff between 1993 and 1996 (Appendix 2). The project consultants conducted in-house training for DOF staff, including newly-recruited extension staff, and produced numerous manuals and guidelines to promote and improve shrimp, prawn, and carp culture practices. Along with in-house training activities, these guidelines were instrumental in improving DOF’s extension services.

12. Until early 1994, the credit line was essentially unutilized. Credit delivery was constrained by the requirements imposed by the participating banks for loan collateral and by the inflexible interest rate of 16% per annum. With the reduction of the interest rate to 13% in 1994, coupled with information campaign on aquaculture, credit approval increased progressively. Credit disbursement by the participating banks rose from Tk8 million in 1993 to Tk282 million in 1996. The subloans amounted to a total of Tk623 million, of which ADB financed Tk561 million or about $14 million. It was expected that 90% of the credit would be used for investment loans, but 85% of the total was used for short-term working capital loans. Loan recovery has been poor to moderate, ranging from 50% for BKB to 91% for Rupali.

13. The floodplain fisheries enhancement target of 4,300 ha in 5 years was optimistic, as the initiative was experimental and DOF had limited experience. The area stocked over 6 years reached 2,487 ha, and the stocking level reached 905 ha in 1996 against the appraisal target of 1,600 ha for the fifth year. A total of 144 beels were stocked over 6 years with a total of 861 million hatchlings. Although lease arrangements for stocking-designated water bodies were reported to be in place in 1996 to cover more than 1,600 ha, social disturbances and strikes impeded logistical arrangements for the stocking activities. The three carp hatcheries that were designed for the floodplain stocking were not completed before 1996. With a total investment of about $3 million, these hatcheries served little purpose for the Project. Instead, the floodplain stocking had relied on hatchlings obtained from existing private suppliers and government hatcheries. With rehabilitation works that commenced in February 1993, a total of six fish seed multiplication farms were upgraded.

C. Cost and Scheduling

14. As the anticipated grant of $2.65 million from UNDP for consulting services did not materialize, the ADB financing was increased to replace it.16 Against an appraisal estimate of $60 million, the actual project costs amounted to $38.3 million, including foreign exchange costs of $12.2 million and local costs of $26.1 million (Appendix 1). The cost underrun of 36% was attributable to the low utilization of the credit line; reduction in the scope of the floodplain fisheries enhancement; and excessive provisions in the appraisal estimate for import duties, contingencies, and service charges during implementation. Loan cancellations totaled $24.9 million, or 45% of the loan amount. The substantial appreciation of the special drawing rights against the US dollar from the date of the Loan Agreement to the loan closing date contributed to the high cancellations.17

16 The ADB Board approved this additional loan on 2 September 1987 on a no-objection basis. 17 The original loan of SDR38.308 million ($45.46 million) was equivalent to $55.58 million at loan closing.

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D. Procurement and Construction

15. Recruitment of consultants was carried out in accordance with ADB’s Guidelines on the Use of Consultants, while procurement followed ADB’s Guidelines for Procurement. The recruitment of consultants was substantially delayed, as an agreement within the Government could not be reached promptly on the selection of the consulting firms. It took 3 years from the submission of the proposals for consulting services to the contract signing. The consultants did not start their services until February 1991 and there were frequent changes in their team thereafter. Until 1994, inadequate logistics (transport facilities and field equipment) hampered project implementation in general. On several occasions, delayed procurement of inputs for demo ponds, such as shrimp fry, fertilizers, fingerlings, and feeds, prevented demo farmers from fully adhering to technical guidelines. Delayed procurement of water testing kits prevented DOF field staff from conducting timely monitoring of water quality. Construction of the three fish hatcheries was delayed due to protracted land acquisition and a contract dispute between DOF and a domestic firm that was contracted for the design and construction supervision.18 Given the dispersed nature of the project sites, DOF organized its procurement of goods in small packages, allowing purchases in small quantities. There were numerous small contracts, and the statement of expenditure (SOE) procedure was used for loan withdrawal claims. Although the SOE procedure did not require full documentation to support loan withdrawal applications, the auditor’s reports on the annual financial statements confirmed that the use of the SOE procedure was adequate to support the applications.

E. Organization and Management

16. DOF staffing for project implementation was a recurring issue. The PP of December 1996 indicated that 863 persons were required, comprising 47 persons for the project management office, 109 persons for floodplain fisheries, and 707 persons for extension services. Although a large number of new staff had been recruited, not all positions could be filled. Newly-recruited staff had to be trained and many of them did not have adequate experience in aquaculture. DOF had to be first equipped with staff and the knowledge base to undertake the project activities. Consultants were utilized to fill skill gaps, support capacity building, and assist in implementation. A total of 167 person-months of domestic consultants and 194 person-months of international consultants was utilized. The consultants and their DOF counterparts produced practical manuals and guidelines to promote aquaculture practices. There were several changes in key management staff19 that, to some extent, affected the momentum of project implementation.

17. Major loan covenants were complied with, although with delays in the case of the establishment of the project management office and the project coordination committee, the submission of audited annual financial statements, and the preparation of training programs. The project coordination committee did not function effectively, as evidenced by its inability to ensure timely implementation. Cooperation between DOF and the participating banks was limited, particularly in the preparation of subloan applications, the provision of technical support to subborrowers, and the monitoring of the implementation of subprojects. Targeted equity increases to improve the capital structure of the participating banks were not met. Covenants related to the transfer of the management of water bodies to DOF and the development of leasing policies and a cost recovery system were not complied with.

18 A domestic consulting firm was contracted in February 1992, but its contract was terminated in December 1993.

Another domestic firm was hired in February 1994 to complete the engineering design. 19 The changes comprised four project directors, five joint directors for extension, four joint directors for floodplain

fisheries, and three joint deputy directors for monitoring and evaluation.

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III. ACHIEVEMENT OF PROJECT PURPOSE

A. Operational Performance

1. Shrimp, Prawn, and Carp Culture Development

18. Extension services for the development of shrimp and carp culture depended heavily on the demo farms as the main media to showcase improved pond culture practices. Shrimp and carp culture development under the Project are discussed in detail in Appendixes 3 and 4, respectively.

a. Benchmark Survey

19. As part of this evaluation, a benchmark survey was undertaken from March to April 2002 to assess the current conditions of demo and non-demo farms.20 Key survey results are given in Appendix 5. The survey area broadly covered 10 districts, where the average household size ranged from 5.3 to 6.0 persons. Using a stratified random sampling procedure, 647 farms were surveyed, comprising 447 demo farms and 200 non-demo farms. A three-stage stratified random sampling method was used: selection of upazilas, selection of villages, and selection of demo and non-demo farms. About 80% of the demo respondents were older than 40 years, compared to 61% of the non-demo respondents. Demo farmers were relatively well educated, with 63% of the respondents claiming to have more than 10 years of schooling, compared to 47% of the non-demo farmers. Aquaculture was the main occupation of 38% of the demo respondents and 36% of the non-demo respondents. Both demo and non-demo respondents reported to have relatively high incomes, with 59% of the demo respondents and 43% of the non-demo respondents claiming to earn more than Tk150,000 annually. Demo and non-demo fishponds were generally small, less than 1 ha in size. Shrimp and prawn ponds were larger: 88% of demo shrimp ponds and 48% of non-demo shrimp ponds exceeded 2.5 ha, while for prawn ponds the figures were 49% and 33%, respectively.

20. The majority of demo respondents confirmed that they had primarily acquired their skills for pond preparation and management from DOF extension staff: 83% of carp demo farms, 94% of shrimp demo farms, and 63% of prawn demo farms. Demo farmers advised other people aspiring to operate shrimp, prawn, or fishpond culture. The diffusion of technology to demo farmers, and in turn, to non-demo farmers was impressive. During interviews with numerous demo farmers, the OEM confirmed that each of them had been in close contact with at least 10 other farmers to share the knowledge of pond preparation and management learned from the Project. Complementary to DOF’s presence in the upazilas, demo farmers became informal extension workers, allowing neighbors, friends, and relatives to receive advice, exchange views, and observe their demo farms. The chain of knowledge dissemination expanded as new farmers, in turn, conveyed to others what they had learned, although the effectiveness of the technology transfer became diluted further down the chain of transmission. Non-demo respondents learned from demo farmers and DOF extension officers: (i) 36% of carp farmers confirmed that they acquired their skills on pond preparation and management from demo farmers and DOF, (ii) 63% of shrimp farmers learned from DOF, and (iii) 50% of prawn farmers learned from demo farmers and DOF.21 The benchmark survey also confirmed that the yield achievements of demo farms were sustained (paras. 9–10). Yields of demo farms in 2001 were

20 The survey aimed at establishing current benchmarks for measuring the performance of the project demo farms in

comparison with non-demo farms, both selected at random. 21 Other informal sources of information included seed suppliers, farmers in the neighborhood, and nongovernment

organizations. Hatcheries and fish seed multiplication farms also provided advice to seed buyers who often owned and operated nurseries or grow-out ponds.

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reported by the respondents to have exceeded the appraisal target of 250 kg/ha for shrimp and 2,100 kg/ha for carp, while prawn yields favorably ranged from 440 kg/ha to 515 kg/ha. In non-demo farms, shrimp and prawn yields were not significantly lower, but carp yields ranged only from 1,050 kg/ha to 1,200 kg/ha. As the performance of the sampled non-demo carp farms is comparable to yields of culturable fishponds in Bangladesh, the potential for improvement is significant for fish farming.22 The Project did not include specific initiatives to develop marketing skills of farmers. The survey indicated that farm sales occurred most frequently at pond sites and local markets, with limited direct sales to consumers. The role of market intermediaries was significant, with wholesalers and other intermediary agents dominating the marketing of fish, shrimp, and prawn. The majority of the respondents claimed that the Project contributed significantly to increased consumption of aquaculture products, higher income, employment generation, and improved nutrition.

b. Pathological Risks and Food Safety

21. The Project did not foresee the need for preventive actions against possible disease outbreaks and food quality hazards. Shrimp aquaculture in Bangladesh encountered viral diseases (white spot) in 1994, possibly through contaminated post-larvae. Diseases struck Cox’s Bazar in 1994 and Khulna in 1996, and recurred in 2000 and 2001. The rapidly expanding shrimp and prawn farming to increase exports gave rise to unbridled development in southwest Bangladesh, and posed serious risks to the environmental carrying capacity because of inadequate water management. There were inadequate provisions for water supply and drainage facilities.

22. Although quality control and safeguards for food quality are key export requirements, post-harvest handling and processing were not covered under the Project, and there were no specific initiatives to improve marketing, distribution channels, and export promotion. In July 1997, the European Union imposed an import ban on aquaculture products from Bangladesh. Triggered by this ban, there have been significant and rapid improvements in post-harvest handling from ponds to processing plants, including improvements in product quality control and processing facilities to meet hygiene and health requirements. Export shipments to the European Union resumed in 1998 after the certification of licensed processing plants. In parallel, DOF improved its quality control functions and inspection services to comply with international standards for controlling food safety hazards.

c. Handling of Shrimp and Prawn Fry

23. At appraisal, the extension services were also intended to improve handling and delivery of shrimp fry, but there has been limited achievement in this area. DOF informed the OEM that the mortality rate of shrimp and prawn fry was as high as 50% at project completion. The Project had limited influence on reducing the loss due to improper fry handling. However, handling of shrimp post-larvae improved significantly during 1999–2001, as air transportation and improved packaging of post-larvae were introduced by the private sector, thereby minimizing travel time and mortality from hatcheries in Cox’s Bazar to distribution points at Jessore. DOF reported that improved handling and air transport increased post-larvae survival rates to more than 80%. The reduced mortality has been an effective means of increasing shrimp fry availability. Concerns on the environmental impacts of wild post-larvae harvesting led the Government to issue a notification in September 2000 to ban fry collection from wild sources. Although hatcheries can supply enough shrimp and prawn post-larvae, the ban on wild fry collection in the estuary and

22 There are three classes of fishponds in Bangladesh: advanced and active pond management in cultured ponds,

moderate pond management in culturable ponds, and no management and neglect in derelict ponds.

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coastal waters has raised concerns of its social implications on the collectors and has proved difficult to enforce.

d. Aquaculture Development Nationwide

24. According to DOF, the combined shrimp and prawn production rose from 14,600 tons (t) in FY1986 to almost 65,000 t in FY2000, while pond areas increased from 87,300 ha to 166,700 ha. Shrimp and prawn have dominated fisheries exports. Frozen shrimp and prawn exports reached Tk16.1 billion in FY2000, representing 90% of the total fisheries exports of Tk17.8 billion. Nevertheless, pond density, inadequate soil and water management, and diseases pose risks to the sustainability of shrimp and prawn farming in Bangladesh.

25. DOF statistics indicate that fishpond production in Bangladesh sharply increased from 123,800 t in FY1986 to 308,000 t in FY1996, and to 561,000 t in FY2000. The average fishpond yields increased from 840 kg/ha in FY1986 to 2,440 kg/ha in FY2000. Although the sharp increase in the production of carp nationwide cannot be solely attributed to the Project, the carp development has benefited from sustained campaign including project-funded initiatives to promote carp culture in Bangladesh. Despite these achievements, funding for fisheries extension services in Bangladesh has remained fragmented and made available through separate projects rather than sustained on a program basis. For example, demo farms established under the Project have received limited support from DOF following project completion. Their potential for disseminating further advice and technology has not been optimized, although many of these demo farms have become informal extension agents.

2. Credit Line Operations

26. The Project provided credit with the intention to complement extension services for shrimp and carp culture development by financing investments and working capital for aquaculture development (Appendix 6). The appraisal assessment of the credit demand was optimistic, relying on the expressed keen interest of the participating banks, trend analysis, and the technical support built into the Project.23 In early 1991, the project consultants reviewed the assessment, concluding that there was a considerable expansion of private sector initiatives in aquaculture that were capable of developing viable enterprises without the benefit of the project demo program. Following this review, ADB approved a change of scope in December 1991 to allow the delivery of credit beyond the areas covered by the project extension services. This decision detached credit delivery from the extension services. In practice, the banks appraised and approved loan applications independently, and subborrowers were not obliged to seek advice on shrimp, prawn, or carp culture development from DOF or elsewhere. The banks were ultimately responsible for appraising the feasibility of subloan proposals and supervising the subprojects, with the flexibility to approve subloans within the free limit of $50,000 equivalent.24 With limited experience in aquaculture, banks were reluctant to lend to aquaculture farms. The credit line use was affected by land tenure and collateral issues. Multiple parties often controlled land tenure or ownership of the ponds and securing loans with land tenure was difficult. Participating banks were reluctant to lend without collateral.

27. With the participating banks’ reluctance to lend, coupled with administrative constraints affecting credit delivery, the credit line was essentially unutilized until early 1994. Subsequently, with the reduction of the interest rate and an information campaign, credit approvals gradually increased. In terms of amount, shrimp farming received about 77% of all subloans, carp farming

23 A financing gap of $60 million–$65 million for aquaculture investments during 1987–1991 was estimated at

appraisal. 24 Larger subloans required approval from ADB.

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22%, and other activities received the rest. While it was expected at appraisal that 90% of the credit line would be used for term investment loans, actual credit delivery largely comprised short-term working capital loans of up to 12 months. The switch to financing working capital needs by the participating banks was pragmatic. Short-term lending reflected the risk-averseness of the participating banks, as well as the demand for working capital among existing aquaculture farms that did not require upfront investments. Overall loan recovery was poor to moderate.25 Without receiving appropriate advice, subborrowers’ outputs had been substandard. The participating banks monitored the subprojects as part of the loan portfolios of individual branches. Thus, the banks did not conduct separate analysis for a consolidated project loan portfolio. The OEM could not obtain the breakdown of nonperforming subloans under the Project for reconciliation with loan classifications and loan losses. Recurring diseases and major flooding in 1998 aggravated the financial viability of the subborrowers’ farms, and affected loan recovery despite the rescheduling of loan repayments in some cases.

28. The project credit line undermined commercial lending principles. The participating banks did not have the flexibility to set their own interest rates based on lending risks. The interest rate was fixed for all clients with no distinction between short-term loans, long-term loans, working capital, and investments. There were no guidelines on the recycling of subloan repayment proceeds for relending that was possible, given the 15-year project financing facility to the participating banks and the predominantly short-term nature of credit delivery to aquaculture. The participation agreements did not stipulate monitoring of relending.

3. Culture-Based Floodplain Fisheries Enhancement

29. This component was experimental and its development concept depended on the utilization of selected beels as nurseries to be stocked with hatchery-produced carp hatchlings (Appendix 7). About 3 months into the growing period, the emerging fish fry and fingerlings would be automatically released into the floodplains when the floods inundated the beels. As water levels receded during the dry season, fisherfolks were expected to harvest or catch fish in deeper areas. Although the Project prescribed stocking of beels with hatchlings, fish stocking with fingerlings occurred on a limited basis mainly at Hail Haor floodplains. Other floodplain stocking initiatives also used fingerlings.26

30. The fisheries resources and socioeconomic baseline survey that was planned to take place at the commencement of project implementation was carried out only in 1995.27 The domestic consultant assigned for monitoring the floodplain initiatives was also fielded only in 1994. Although DOF monitored fish stocking in 1991–1993, monitoring did not take place fully until 1995 and was discontinued after project completion. DOF could not continue with the stocking program after 1996 because of lack of funds. Completed in 1996, the three project fish hatcheries served no purpose for the project interventions (para. 13). After operating at low capacity, DOF planned in 2001 to convert and operate these hatcheries for broodfish development.

31. The 1995 baseline survey indicated that artificial stocking of fish in the floodplains was technically feasible and socially acceptable. Fish stocking was found financially attractive in 25 Agrani Bank’s loan recovery experienced difficulties and reached 77% by December 2001. Rupali had focused

almost entirely on short-term lending to the shrimp industry, and its loan recovery reached 91% by October 2001. BKB dominated lending to carp farms, and its loan recovery was poor at only 50% loan recovery by September 2001.

26 The World Bank-financed Third Fisheries Project (CR-2146-BD), approved on 29 May 1990, promoted stocking of floodplains with fingerlings instead of using hatchlings.

27 Department of Fisheries. 1996. Baseline Survey and Floodplain Stocking Evaluation. Second Aquaculture Development Project. Dhaka.

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the context of the direct costs of stocking, fish recovery, and associated risks. The survey indicated that floodplain fishing could benefit landless people who fished in open water bodies, individual lessees of beels, and lessees of nonstocked beels because of fish migration from stocked beels during the inundation. The design of the pilot fish stocking did not fully address the organizational and management requisites for sustaining floodplain stocking. At appraisal, it was expected that the beels would be transferred from the Ministry of Land to DOF that would, in turn, manage these beels for at least 10 years and develop a cost recovery system. The transfer did not happen because of resistance by the Ministry of Land whose role in generating income for the Government would have been reduced. Without this transfer, DOF had no authority and control over the beels, and could not develop and promote cost-recovery measures. The administration of the water bodies remained with the Ministry of Land during project implementation, and auctions were used to award leases to bidders for terms of up to 3 years.

B. Economic and Financial Reevaluation

32. The project credit line was originally intended to finance investments in aquaculture, and accordingly, the appraisal presented 11 enterprise investment models including new construction of aquaculture farms and establishment of private hatcheries. The economic internal rate of return (EIRR) of the credit line was estimated at 31%, based on aggregated enterprise investments that were then considered to represent the investments to be financed by the Project. The overall EIRR of the Project was estimated at 23%, simply by adding the costs of the noncredit components to the investment costs of the subprojects of the credit line without further incorporation of benefits. In reality, the appraisal expectation did not materialize, as the credit line was used mostly for financing working capital needs of existing shrimp, prawn, and carp farms, with no major upfront investments. The PCR did not recalculate the EIRR of the Project for there was no comparable basis to do so, but it presented undiscounted financial benefit-cost ratios of the annual operating income statements of the demo farms. The OEM concurs with the PCR findings that the floodplain fisheries enhancement was a pilot experiment that contributed to capacity building and provided a learning experience rather than serving as an economic investment.

33. In the OEM's view, a reassessment of the financial benefits due to the improved aquaculture practices is appropriate for illustrating the benefits derived from the project extension services. The OEM has reassessed the financial performance of shrimp, prawn, and carp farms based on current conditions as evidenced by the benchmark survey undertaken in March/April 2002. Appendix 8 provides indicative financial farm budgets of shrimp, prawn, and carp farms that have adopted improved aquaculture practices as compared with the performance of unimproved ponds. These budgets reasonably illustrate the financial feasibility of improved aquaculture practices that allow higher survival rates of seeds and higher stocking to increase yields. An extensive shrimp (P. Monodon) culture, with improved post-larvae survival and an acclimatized stocking density of 15,000 post-larvae, can generate a net income before debt service of Tk21,500/ha in 7 months, with modest yields of 275 kg/ha including 25 kg of incidental species (Appendix 8, Table A8.1). This net income represents an annualized return of 67% over the total operating expenses excluding debt service. As most of the pond management improvements occur on existing ponds, and such improvements do not require major upfront investments, these annual financial returns serve as a good proxy for financial returns on investments given the seasonal nature of the aquaculture operations. In comparison, an unimproved extensive shrimp pond, typically with a low post-larvae survival rate and less stocking, can generate a net income before debt service of only Tk2,200/ha annually (Appendix 8, Table A8.2). This shows that the improved shrimp pond preparation and management can increase net farm incomes by almost 10 times. An extensive prawn culture,

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mixed with carp, can provide a net income before debt service of Tk39,000/ha in 7 months, with modest yields of 375 kg of prawn and 200 kg of fish (Appendix 8, Table A8.3). This net income represents an annualized return of 77% on the operating expenses or the total working capital required to sustain the farm. An unimproved prawn culture can yield a net income before debt service of only Tk11,800/ha (Appendix 8, Table A8.4). Similarly, carp culture can provide a net income of about Tk106,000/ha before debt service over 12 months, but farm size holdings are generally smaller (Appendix 8, Table A8.5). Typically, small farmers operate improved carp ponds, gaining an annualized return of 58% on the working capital excluding debt service. In comparison, an unimproved carp culture performs poorly and generates a net income before debt service of only Tk18,300/ha (Appendix 8, Table A8.6).

C. Sustainability

34. The demo farms were established by attracting influential people and relatively wealthier farmers as role models. The benchmark survey indicated that the demo farmers maintained their farms and disseminated technology effectively because they could afford to do so, and the adopted practices were low-cost, practical, and relatively simple. The sociocultural conditions have facilitated information dissemination. However, the sustainability of shrimp farming faces disease risks and their potentially devastating impacts on production (para. 21). The pathological implications of importation of post-larvae, juveniles, and breeders of shrimp and prawn species can be serious without safeguards that include adoption of aquaculture health management guidelines for transboundary movements of live aquatic animals through health certification, quarantine, and diagnostic procedures. Disease prevention and food quality improvement are equally important (para. 22). Species diversification may substantially reduce the virulent effects of disease outbreaks and enhance the product mix for exports. Without adequate planning, an unbridled development scenario in shrimp and prawn culture has evolved. There is a need for a spatial plan for shrimp and prawn farming, taking into account production potential, technology options, carrying capacity, and management requirements. This plan can serve as a guide for developing and managing sustainable aquaculture farms.

IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS

A. Socioeconomic Impact

35. The beneficiaries of the shrimp and prawn culture development were farmers, laborers, and market agents involved in the marketing of farm inputs and outputs. Shrimp and prawn farming altered the local farming systems, and issues concerning access to land and water became prominent, including the distribution and management of water supply and their effects on downstream and adjacent farms. Most of the demo farmers were influential people of the local elites whom farmers were most likely to respect and learn from. The sociocultural conditions in the villages facilitated the dissemination of the introduced technology. Visits and access to demo ponds were made possible through neighbors, friends, relatives, and other local contacts.

36. The dissemination of improved fish culture techniques benefited households and small farms with ponds of generally less than 0.5 ha in size. Nationwide, carp farming has become increasingly popular, directly benefiting at least 0.5 million households with 3 million people in FY2000.28 It is not uncommon that households consume up to 25% of their backyard fishpond production, providing a significant source of animal protein and calcium to improve human nutrition. The increased availability of low-cost fish at local markets has also contributed to fish protein intake among rural and urban consumers. The shrimp and prawn subsector also 28 There were 230,000 ha fishponds in FY2000 with a total production of 561,000 t.

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provides significant employment opportunities. The Bangladesh Center for Advanced Studies has estimated that more than 300,000 people earn at least part of their income from shrimp-related business, including 266,000 unskilled and relatively poor people.29

37. The importance of social preparation, community involvement, and common property management for the floodplain fisheries enhancement was not foreseen at appraisal. Issues concerning sharing or distribution of costs and benefits emerged during project implementation. Lessees of beels were reluctant to pay for the preparation and stocking of their beels, as benefits derived from fish stocking could also benefit nonpaying fishers in the floodplain due to fish migration. In the absence of organizational arrangements involving user groups, issues concerning cost and benefit distribution discouraged private initiatives to finance fish stocking in semi-closed water bodies and open waters. The Project raised the awareness of DOF of pertinent issues, and this successfully led to a more comprehensive attention to floodplain fisheries enhancement beyond the project initiatives.30 The OEM observed that a number of lessees stocked their leased beels with group arrangements for cost and benefit sharing.31 The issues of increased productivity, lease costs, tenure, affordability, and access to fishing for poor fishers have become critical in developing floodplain fisheries. Leaseholders may allow access to any number of fishers by imposing rental fees. They often operate as an investor who can afford the rising costs of the lease arrangements, and recover their lease investment by operating the leased water bodies as a rental ground for surrounding fishers. Competing uses of water resources also give rise to conflicts among water users in the floodplains on some occasions.

B. Environmental Impact

38. The Project promoted aquaculture practices designed to minimize harmful environmental impacts on vegetation, water and soil salinity, and cropping patterns. The recommended quantities of fertilizers and feed supplements were low. Nevertheless, the spontaneous expansion of shrimp and prawn farms has posed serious environmental risks because of inadequate water management. In many cases, there are inadequate provisions for water supply and drainage facilities. In the case of prawn farming, the spontaneous use of snail meat as part of the feeding ration (a practice not recommended under the Project) has led to heavy exploitation of snails. With excessive feeding, organic loads are heavy in the ponds, posing additional stress on the carrying capacity. This feeding regime can cause adverse impacts on the snail population, ecology, and the biodiversity of the floodplains from which these snails were taken. With external assistance, DOF has intensified efforts to improve the long-run sustainability of prawn farming.32 In the case of carp farming, there have been no adverse environmental impacts. The technology promoted by the Project helps maintain water quality in fishponds and promote efficient use and recycling of nutrients. Farmers frequently use the water from fishponds for household purposes and personal hygiene. This multipurpose use of the fishponds provides an incentive for pond owners to safeguard the water quality.

39. The use of beels as nurseries for hatchlings and the application of target-specific chemicals (such as rotenone) in limited amounts to eradicate predators in the beels prior to

29 Bangladesh Center for Advanced Studies. 2001. The Costs and Benefits of Shrimp Farming in Bangladesh: An

Economic, Financial, and Livelihood Assessment. Dhaka. 30 Issues concerning floodplain fisheries enhancement and inland fisheries management have continued to dominate

the development agenda of DOF, and this agenda has received support from multilateral and bilateral agencies. 31 The OEM visited several such beels in Kishoreganj, Sylhet, and Moulvi Bazar districts. Lessees showed preference

for fingerlings because of their ready availability and greater survival, and did not use hatchlings for stocking. 32 Through Greater Options for Local Development through Aquaculture (GOLDA) project initiatives implemented by

CARE Bangladesh and funded by the Department for International Development of the United Kingdom. Measures include the promotion of sustainable feeding rations and environmental protection.

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stocking became a contentious issue during project implementation. The potential impacts of such chemicals on the floodplains were alleged to be serious.33 However, DOF and the project consultants reported there were no adverse impacts on the environment given the targeted and limited use of such chemicals. Application rates were of low concentration, the duration of the chemical agent effectiveness was short (measured in hours), and inundation further diluted the concentration of chemicals to levels that were deemed harmless to nontargeted organisms. Nevertheless, inappropriate applications and inadequate supervision of the use of chemicals for beels preparation could potentially cause unwarranted effects. For this reason, the stocking of water bodies with fingerlings was preferred, as there would be no need to use chemical agents to eradicate predators. Subsequently, DOF did not promote hatchlings for floodplain stocking.

C. Impact on Institutions and Policy

40. When the Project was designed, DOF officers were primarily oriented to freshwater and carp culture with limited knowledge of shrimp and prawn farming. DOF went through a steep learning curve to cope with the demand to develop and deliver demo-based extension services. The Project served as a learning-by-doing vehicle for DOF and was instrumental in developing the capacity of DOF staff. The recruitment of new staff for the extension services (para. 16) and the continuing staff constraints for fisheries extension showed the importance of human resources development for DOF. Among those who received international training under the Project, several became later part of DOF’s senior management. DOF’s experience with the Project, including the complex issues affecting the floodplains, has contributed to greater recognition of the need to develop participatory approaches. Inland fisheries development has moved towards finding technical solutions for stock enhancement, promoting alternative measures to restore and conserve natural fish population, and developing community-based approaches.

V. OVERALL ASSESSMENT

A. Relevance

41. The rationale and purpose of the Project were relevant, taking into account the (i) export markets, (ii) potential for expanding carp culture to meet local demand and offset the decline in inland fisheries, (iii) need to introduce fish stocking to improve yields of floodplains, and (iv) potential for income and employment generation. The rationale for the credit line was only partly relevant, as its usage for investments was limited. The enhancement of floodplain fisheries has remained relevant, and recent approaches have emphasized stakeholder participation, social preparation, and management options. The Government’s current development strategy continues to support aquaculture exports, fish culture, and inland fisheries enhancement for domestic consumption. Overall, the Project is assessed as relevant.

B. Efficacy

42. The Project emphasized information dissemination to promote and improve aquaculture technology. In this context, the Project established demo farms that adopted improved aquaculture practices. Despite operational shortcomings including significant delays, these demo farms have gained and sustained impressive yield increases and acted as extension agents in their respective locations. Although they have received limited further support from DOF after project completion, the demo farms maintain their operation. The productivity of

33 Although the Project did not recommend the use of such chemicals in ecologically sensitive areas, pilot stocking of

beels with hatchlings and the use of chemicals for beels preparation received serious criticisms in 1992 from the Asian Wetland Bureau of the University of Malaya, Malaysia.

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shrimp, prawn, and carp farms nationwide has improved progressively despite drawbacks in some areas due to the onset of diseases. Fish production, including carp species, has more than tripled since 1990. The volumes of shrimp and prawn exports have markedly increased since 1990, although exports suffered from a setback in 1997 due to the strict imposition of food safety standards. Although Bangladesh’s aquaculture production and exports have gained significantly, such achievements cannot be wholly attributed to the Project. The Project has been instrumental in enabling DOF to demonstrate and effect technology transfer, and the uptake has been significant. Despite the various shortcomings, limitations, and delays in its implementation, the Project is assessed as efficacious in the overall achievement of its purpose.

C. Efficiency

43. The Project promoted aquaculture practices that have yielded high financial returns to farms adopting such practices. The demo farms continue to promote and disseminate aquaculture technology that provides higher incomes. There is strong evidence that an increasing number of farms have improved their productivity through better pond management and rational use of feed and inputs. However, a large number of farms that obtained credit from the Project experienced financial difficulties and defaulted on debt service. Despite the shortcomings in credit delivery, the extension services have generated impressive results for the demo farms and others that have adopted good aquaculture practices. Overall, the Project is assessed as efficient.

D. Sustainability

44. The Project faces environmental risks because of inadequate spatial and water management in shrimp and prawn farming. Safeguards need to be put in place to prevent potentially devastating impacts of pathological incidents. Demo farms continue to act as informal extension agents, but funding constraints prevent DOF from providing substantial further support to the demo farms to ensure their continued effectiveness as agents of technology transfer and future upgrades. The pilot experiment on the floodplain fisheries enhancement did not result in an immediate replication, fish stocking discontinued, and the associated hatcheries contributed little to the Project. However, the benefits of the floodplain fisheries and its enhancement can be tapped and sustained once issues concerning the management, access, and tenure rights of water bodies are resolved with arrangements to allow the distribution of costs and benefits. Although feasible, the arrangements for the floodplain fisheries enhancement are complex, requiring stakeholder partnership that suits local conditions. Overall, the Project's sustainability is assessed as less likely, unless appropriate actions are taken (paras. 50 and 60).

E. Institutional Development and Other Impacts

45. The institutional development and other impacts of the Project are assessed as significant. The Project has been instrumental in strengthening DOF's capacity, particularly in human resources development, by recruiting a cadre of staff in extension services (albeit with some limitations). The project initiatives increased DOF's awareness of the critical importance of institutional, organizational, and management arrangements for sustaining extension services and floodplain fisheries. Project experience enabled DOF to improve its development strategy by addressing the constraints facing aquaculture and floodplain fisheries. Despite its slow start and extended implementation period, the Project provided excellent learning opportunities. The Project contributed significantly to human nutrition, incomes, and employment of the rural population as fish farming gained unprecedented popularity. Aquaculture products, particularly

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shrimp and prawn, contributed significantly to fisheries exports and rural employment, and frozen shrimp and prawn exports more than doubled between FY1986 and FY2000.

F. Overall Project Rating

46. Based on the above five performance evaluation criteria, the Project is rated successful,34 though near the lower bound of this category given the significant environmental and pathological risks, major drawbacks in credit delivery, and limited further support for the demo-based extension services.

G. Assessment of ADB and Borrower Performance

47. From preparation to implementation, ADB provided significant staff and financial resources to the Project. Despite some shortcomings, such as the overoptimistic estimate of credit demand, the appraisal was thorough. The need to safeguard the environmental carrying capacity of shrimp farming was not anticipated and no preventive measures to avoid diseases were introduced. The link between extension and credit was not translated into practical guidelines to integrate advice, credit, and investments. The change of scope unraveled the intended link between advice and credit. Although ADB closely supervised implementation, with 22 review missions fielded between 1987 and 1996, its assessment of the hatcheries did not stop their construction to avoid unnecessary investment. Overall, ADB performance is rated partly satisfactory. The Government did not take appropriate actions to prevent major delays in the start-up of project implementation. Two critical loan covenants that aimed at the sustainability of the floodplain fisheries enhancement were not complied with, namely the management transfer of water bodies to DOF, and the development of leasing policies and a cost recovery system. The Government failed to provide adequate funding for the operation and maintenance of the hatcheries. Although the demo farms have been effective as informal extension agents, DOF has not been allocated funds to provide further support to these demo farms to ensure their continued effectiveness. Overall, the performance of the Government is rated partly satisfactory.

VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS

A. Key Issues for the Future

48. The Government will continue to support the development of shrimp and prawn farming by providing policy, technology, and other support.35 As shrimp and prawn farming depend on the carrying capacity of the environment and its safeguards, there is urgent need for an integrated spatial plan that balances land use, production potential, technology options, and water management requirements.

49. Fish production requires good quality seeds. DOF’s current efforts to improve the quality of broodfish by establishing broodfish banks can improve the genetic pool of broodfish for carp hatcheries. Sustained government support is required for the establishment of the broodfish banks, as such a strategic initiative cannot be expected to emerge spontaneously from the operation of numerous private hatcheries.

50. In the context of floodplain fisheries, arrangements for the management, access, and tenure rights of water bodies will continue to dominate the discussion in the future. Critical development issues include co-management of water bodies with the sharing of responsibilities 34 Using the current four-category rating system (highly successful, successful, partly successful, and unsuccessful). 35 Ministry of Fisheries. 1998. The National Fisheries Policy. Dhaka.

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between the Government and user groups, common property management approaches that suit local conditions, property rights and tenure security of floodplain fisheries, access and legal rights of fishers in semi-closed and open waters, habitat protection, and biodiversity in wetlands. The role of nongovernment organizations to facilitate the formation and involvement of user groups is expected to gain further recognition. With external assistance, DOF is addressing an array of management measures for the floodplain fisheries enhancement, including the involvement of beneficiaries and nongovernment organizations in the design, site selection, and management of the interventions.36 Environmental safeguards are required to prevent indiscriminate use of chemical agents for predator control in floodplain fish stocking and thus protect biodiversity and environmentally sensitive areas.

B. Lessons Identified

51. The start of project implementation was delayed by premature loan effectiveness and protracted recruitment of consultants. As the PP is an administrative requirement of the Government, future project preparation should promote strong country ownership with clear responsibilities for counterpart government agencies to provide administrative clearances or approval on a timely basis, including compliance with ADB’s Guidelines on the Use of Consultants.

52. Extension services for aquaculture development can be highly effective when supported with trained and adequately equipped staff to demonstrate improved aquaculture techniques to private farmers. Diffusion of information has been effective when the extension has relied on feasible, simple, and low-cost technology to improve aquaculture practices. Rather than compartmentalizing the funding for fisheries extension services through various project initiatives, the Government should support the role and functions of DOF in such services by providing the necessary funds on a program basis.

53. Fish stocking is an attractive option for sustaining inland fish production, but effective arrangements for sharing of costs and benefits among users and stakeholders are required. Apart from technical feasibility, organizational, management, and social aspects of fish stocking should be addressed. Participatory processes should be followed that require the involvement of stakeholders including beneficiaries from the planning stage.

54. Risks of diseases and their potential devastating impacts on aquaculture production should be considered during project preparation. Aquaculture health and sanitation management, including issues concerning diagnostics, health certification, and quarantine, is equally important to minimize risks of epidemics.

55. Food safety and hygiene are key requisites for sustaining exports. Appropriate legal instruments for and enforcement of environmental protection and sanitation, and harmonization of standards for food safety are essential for sustained aquaculture operations.

56. The poor credit recovery generally reflects the current conditions affecting the banking sector in Bangladesh which has suffered from inadequate capitalization and nonperforming loans. Although these systemic conditions were recognized during project preparation, the use of loan covenants to mitigate risks has not been effective. The targets specified in loan

36 The World Bank's Fourth Fisheries Project, for $28 million, approved on 20 July 1999, and cofinanced by the

Global Environmental Facility ($5 million) and the Department for International Development of the United Kingdom ($15.5 million). See also International Center for Living Aquatic Resources Management. Community-Based Fisheries Management Policy Research on User-Based Management: The Case of Inland Openwater Fisheries of Bangladesh. Dhaka.

18

covenants were too ambitious given the systemic and far-reaching problems afflicting the banking sector. An aquaculture project cannot be expected to resolve such problems.

57. Channeling a credit line through the banking system requires a rigorous examination of the capacity of the participating banks to act as effective financial intermediaries. The credit line should provide flexibility to participating banks in setting their lending interest rates to reflect credit risks of the respective clients. An assessment of credit demand should be rigorous, taking into account analyses of lending risks, risk averseness of banks, and requirements for secured lending including collateral coverage and its implications on the targeted potential clients. The credit demand assessment should not be simply based on the estimation of financing gap of projected investments and the expressed interest of participating banks.

58. There should be operating guidelines for the recycling of subloan repayments by the participating banks. The use of the credit facility for such recycling should be monitored to prevent uses for purposes other than those intended by the project.

C. Follow-Up Actions

59. The PCR recommendation for the Government to sell or lease out the three project hatcheries to the private sector was not acted upon. Nevertheless, DOF decided in 2001 to refurbish these hatcheries and make them part of its network of broodfish banks. Adequate resources should be allocated by the Government to DOF to sustain the operating requirements of these hatcheries.

60. During policy dialogue on the fisheries sector with the Government and bilateral and multilateral agencies over the next 3 years, ADB should emphasize the importance to address the issues concerning shrimp and prawn farming that are critically linked with the carrying capacity of the environment and its safeguards, including the need for an integrated spatial plan that takes into account the overall land use, production potential, available technology options, and water management requirements. ADB should use a component of the ongoing regional TA 594537 as an instrument for such dialogue with the Government, and should assist the Government in translating the national fisheries policy (footnote 35) into an appropriate action plan.

61. BB should request the participating banks to analyze the existing subloans in detail (including by their age and the number of times they have been rolled-over or rescheduled), classify the nonperforming subloans, and make provisions for loan losses by June 2003.

37 Study on Strategies and Options for Increasing and Sustaining Fisheries and Aquaculture Production to Benefit

Poor Households in Asia, for $1.1 million, approved on 17 October 2000. Expected to be completed in 2004, this TA, cofinanced and implemented by the International Center for Living Aquatic Resources Management, covers nine countries, including Bangladesh. The TA helps the countries (i) formulate strategies and an action plan for increasing fish production, improving nutrition and income, and protecting fisheries resources; (ii) determine the most viable and sustainable aquaculture and fisheries practices that are of critical importance to poor fish farmers, fishers, and low-income consumers; (iii) analyze fish production and consumption to evaluate the market potential for alternative fish products; (iv) identify fisheries management options for increased participation by small-scale fishers; and (v) strengthen the capacity of the participating fisheries institutions in monitoring the impacts of changes in policy, technologies, and markets on poor households.

ItemForeign Local Total Foreign Local

Shrimp Culture DevelopmentExtension Services 254 232 486 273 664 937Credit 5,158 14,497 19,655 3,789 10,891 14,680

Carp Culture DevelopmentExtension Services 891 278 1,169 759 1,221 1,980Credit 1,831 6,203 8,034 1,083 3,112 4,195

Culture-Based Floodplain Fisheries Enhancement 2,208 5,534 7,742 1,419 4,589 6,008

General Implementation and Institutional SupportConsulting Services and Fellowships 2,782 1,148 3,930 2,162 381 2,543Training and Engineering Support 715 1,390 2,105 2,030 3,599 5,629

Import Dutiesa 3,660 3,660 0 1,656 1,656

Physical Contingency and Price Escalation 2,892 6,823 9,715 0 0 0

Recovery of Technical Assistance in Excess of Grant 174 174 154 0 154Service and Other Charges During Implementation 1,339 1,991 3,330 505 0 505

Total 18,244 41,756 60,000 12,174 26,113 38,287

a Excludes import duties applicable to procurement by subborrowers.

Appraisal EstimateTotal

Actual

Appendix 1 19

ESTIMATED AND ACTUAL PROJECT COSTS

Table A1.1: Project Costs by Component($'000)

ItemForeign Local Total Foreign Local Total

A. DOF Component

1. Civil Worksa. Floodplain Fisheries Enhancement 1,099 3,043 4,142 619 3,094 3,713b. Institutional Development 180 620 800 485 2,515 3,000

2. Equipment, Materials, Supplies, and Vehiclesa. Shrimp Culture Development 53 8 61 155 3 158b. Carp Culture Development 68 1 69 582 36 618c. Floodplain Fisheries Enhancement 573 181 754 611 220 831d. Institutional Development 781 411 1,192 485 249 734

3. Consulting Services 1,739 204 1,943 2,097 347 2,444

4. International Training and Fellowships 600 0 600 911 0 911

5. Operating Costsa. Shrimp Culture Development 201 224 425 118 661 779b. Carp Culture Development 824 277 1,101 177 1,185 1,362c. Floodplain Fisheries Enhancement 564 2,308 2,872 189 1,275 1,464d. Institutional Development 95 1,290 1,385 149 835 984

6. Duty and Land Acquisition 0 3,660 3,660 0 1,656 1,656

7. Physical and Price Contingencies 2,892 6,823 9,715 0 0 0

Subtotal 9,669 19,050 28,719 6,578 12,076 18,654

B. Bangladesh Bank Component

1. Fellowship and Training 72 16 88 65 34 992. Credit 6,990 20,699 27,689 4,872 14,003 18,875

Subtotal 7,062 20,715 27,777 4,937 14,037 18,974

C. Other Expenditures

1. Service Charges 1,339 1,991 3,330 505 0 5052. Recovery of TA in Excess of Grant 174 0 174 154 0 154

Subtotal 1,513 1,991 3,504 659 0 659

Total 18,244 41,756 60,000 12,174 26,113 38,287

DOF = Department of Fisheries, TA = technical assistance.Source: Asian Development Bank. 1997. Project Completion Report on the Second Aquaculture Development

Project in Bangladesh. Manila.

20 Appendix 1

($'000)

Appraisal Estimate Actual

Table A1.2: Project Costs by Expenditure Account

ItemForeign Local

Government of Bangladesh 0.00 4.78 4.78 0.00 2.34 2.34Bangladesh Bank 0.00 2.59 2.59 0.11 0.31 0.42Participating Banks 0.00 1.60 1.60 0.28 0.81 1.09Subborrowers 0.00 5.57 5.57 0.97 2.80 3.77

ADB-Financed 15.92 26.89 42.81 10.81 19.86 30.67

UNDP 2.32 0.33 2.65 0.00 0.00 0.00

Total 18.24 41.76 60.00 12.17 26.12 38.29

ADB = Asian Development Bank, UNDP = United Nations Development Programme.Source: ADB. 1997. Project Completion Report on the Second Aquaculture Development Project

in Bangladesh . Manila

Appendix 1 21

TotalForeign Local TotalAppraisal Estimate

($ million)

Actual

Table A1.3: Project Costs by Financing Source

Item Institution Periodand of

Country Training

A. Department of Fisheries

1. Long-Term TrainingFish Culture, Master's Degree 3 20.00 60.00 AIT, Thailand Jan 1994Aqua Engineering, Master's Degree 2 20.00 40.00 AIT, Thailand Jan 1994Fisheries Management, Master's Degree 4 20.00 80.00 AIT, Thailand Jan 1994

Subtotal 9 180.00

2. Short-Term TrainingManagement Training 2 1.00 2.00 Auburn University, USA Nov 1993Fisheries Management/Statistics 4 2.25 9.00 Auburn University, USA Nov 1993Computer Management 4 2.25 9.00 Auburn University, USA Nov 1993Prawn Hatchery Culture 3 3.00 9.00 NACA, Thailand Apr 1995Extensive Shrimp Culture 4 3.00 12.00 NACA, Thailand Apr 1995Shrimp Hatchery Management 6 3.00 18.00 NACA, Thailand Apr 1995Planning and Monitoring 5 2.00 10.00 NACA, Thailand Jul 1995Carp Culture 16 2.00 32.00 AIT, Thailand Sep 1995Fisheries Management-Study Tour 4 0.50 2.00 Thailand, Viet Nam, PRC Nov 1995Shrimp Culture 12 2.50 30.00 NACA, Thailand Mar 1996Prawn/Shrimp Hatchery Management 9 2.50 22.50 NACA, Thailand Apr 1996Prawn Culture 12 2.50 30.00 NACA, Thailand Apr 1996

Subtotal 81 185.50

B. Bangladesh BankAquaculture and Banking 38 0.25 9.50 AIT, Thailand Sep 1995

Total 128 375.00

Source:

Total Trainee-Months

Asian Development Bank. 1997. Project Completion Report on the Second Aquaculture Development Project inBangladesh. Manila.

22 Appendix 2

AIT = Asian Institute of Technology, NACA = Network of Aquaculture Centers in Asia-Pacific, PRC = People's Republic ofChina, USA = United States of America.

INTERNATIONAL TRAINING

Numberof

Trainees

Duration(months)

Appendix 3 23

SHRIMP CULTURE DEVELOPMENT A. Formulation and Design 1. The shrimp culture development aimed to increase shrimp (Penaeus monodon) production from pond culture to generate foreign exchange earnings, expand employment, and increase incomes in rural areas. These objectives have remained relevant as crustacean exports (shrimp and prawn) represent Bangladesh’s third largest foreign exchange earner,1 allowing opportunities to expand rural employment, although no targets were established at appraisal for prawn (Macrobrachium rosenbergii) farming. In the four districts (Cox’s Bazar, Satkhira, Khulna, and Bagerhat) selected at appraisal, shrimp farming has been practiced since the early 1980s. Average yields of shrimp were reportedly low because of inadequate pond and water management techniques, and problems related to harvesting and handling of wild shrimp post-larvae.2 Extension services were designed for shrimp farmers, fry collectors, and fry handlers in the four districts covering 24 upazilas3 to improve extensive shrimp culture, train shrimp farmers in farm management, and demonstrate fry collection, handling, and transportation to improve survival. The appraisal reported a rapid expansion of shrimp culture, from less than 20,000 hectares (ha) in FY1981 to 52,000 ha in FY1983, with further expansion in later years. While the aim was to increase pond productivity, the appraisal did not prescribe an overall improvement of the spatial and water management for shrimp farming. B. Outputs and Achievements 2. In addition to the four districts, two districts (i.e., Gopalganj and Pirojpur) were added during the implementation of the Project for prawn culture demonstration (demo) because of their potential for prawn farming. Yields from shrimp demo ponds were reported to exceed the appraisal targets.4 A total of 186 private demo ponds (116 for shrimp and 70 for prawn) and 12 ponds of the Department of Fisheries (DOF) were established. The bulk of the pond development occurred from 1993 to 1996. Although a number of demo ponds were established earlier (5 in 1989, 17 in 1991, and 15 in 1992), selection criteria for these ponds were not developed until 1992. About 60% of the demo ponds were established in Khulna and Satkhira. According to project records, the yearly productivity of shrimp (P. monodon) demo farms in the four districts reached 166 kilograms (kg)/ha in 1991, 199 kg/ha in 1992, 272 kg/ha in 1993, 254 kg/ha in 1994, and 306 kg/ha in 1995, and the total annual yields (including other shrimp species) reached 195 kg/ha in 1991, 291 kg/ha in 1992, 314 kg/ha in 1993, 302 kg/ha in 1994, and 347 kg/ha in 1995.5 The prawn-fish polyculture demo ponds produced impressive results, averaging 550 kg/ha of prawn (M. rosenbergii) annually from 1992 to 1995, and peaking at

1 In FY2000, Bangladesh export earnings from the fisheries sector amounted to Tk17.8 billion, of which about 90%

or Tk16.1 billion comprised shrimp and prawn exports. 2 The aim was to increase the annual shrimp pond productivity from 90 kilograms (kg)/hectare (ha) to 250 kg/ha.

However, monitoring of productivity levels was difficult. Production data combine shrimp and prawn, without systematic distinction between culture and capture operations. Available data suggest that in 1986 shrimp culture productivity ranged from 136 kg/ha in Cox’s Bazar, 140 kg/ha in Bagerhat, to 264 kg/ha in Khulna.

3 An administrative government unit that was renamed thana on 30 June 1992. 4 Asian Development Bank (ADB). 1997. Project Completion Report on the Second Aquaculture Development

Project in Bangladesh. Manila. The project completion report indicated that (i) against an appraisal target of 250 kg/ha, average yields of 115 shrimp demo farms reached 258 kg/ha; and (ii) yields from prawn demo farms reached more than 500 kg/ha, although there were no targets established for prawn at appraisal.

5 ADB. 1996. Shrimp Culture Component. Second Aquaculture Development Project, Final Report Volume 3. Manila.

24 Appendix 3

778 kg/ha (ranging from 675 kg/ha to 913 kg/ha) in 1995. These polyculture demo ponds also produced an average of about 760 kg/ha of fish per year from 1992 to 1995.6 C. Major Constraints and Issues 3. When the Project was designed, DOF officers were primarily oriented to freshwater and carp culture, and farmers had little knowledge of shrimp farming techniques. The selection criteria for demo ponds for shrimp and prawn were good, but implementation in the field was inevitably influenced by individual judgment of DOF officers whose skills progressively improved with the Project. The limited availability of trained DOF officers in shrimp and prawn culture led to initial difficulties in selecting ponds for demo, and guiding the farmers. In-country training and workshops were broadened to cover new areas that were not included at appraisal.7 The Project played a key role in developing the skills of DOF officers and demo farmers. Procurement delays affected the demo, as supplies were not always available on time. Until 1994, inadequate logistics (transport and essential field equipment) hampered field officers in project implementation and supervision. 4. Shrimp aquaculture in Bangladesh encountered viral diseases (white spot), possibly through importation of contaminated post-larvae in 1994. Disorganized pond development and limited safeguards for environmental protection amplified pathological risks. Diseases were reported to have struck Cox’s Bazar in 1994 and Khulna in 1996. Recurring diseases also affected a large number of farms in 2000 and 2001. The appraisal did not foresee the need for vigilance and measures for disease avoidance. The scope of the consulting services was later amended to allow for a study on disease problems on shrimp and prawns. Other calamities (cyclones and tidal bores in 1991, 1994, and 1995) damaged some farms. Demo and non-demo farmers reported significant yield losses due to disease outbreaks and natural disasters. The 1998 flood caused serious losses in some areas. 5. Although post-harvest handling and marketing were recognized to be inadequate at appraisal, no specific initiatives were prescribed by the Project to improve marketing and distribution channels. In recent years, there have been significant improvements in post-harvest handling (from farms to processing plants) due to increased awareness among producers and processors to improve quality and avoid excessive spoilage. Improvements in product quality control and processing facilities were triggered by the imposition of an import ban on 30 July 1997 by the European Union (EU) due to hygiene and health requirements. Health and sanitation features of private processing plants were quickly enhanced with government support and, as early as 1998, a number of processing plants resumed exports to EU destinations.8 In recent years, DOF has improved its quality control functions and inspection services to comply with international standards for hazard analysis critical control point (HACCP).9 However,

6 These figures were derived from one crop per year. Most of the demo ponds produced one crop of rice (5 months)

alternated with one crop of prawn-fish polyculture (7 months). 7 The expanded training included prawn farming, hatchery techniques, post-harvest handling, semi-intensive shrimp

farming, diseases, and post-larvae collection. Training manuals and extension booklets were produced for field use.

8 By December 2001, 62 processing plants were in operation in Bangladesh, and 48 of these plants were certified to produce products for exports to EU countries.

9 HACCP encompasses a systematic approach to the identification, evaluation, and control of food safety hazards. The hazard analysis involves the assessment of the critical control point defined as the step at which control can be applied and is essential to prevent or eliminate a food safety hazard or reduce it to an acceptable level. The process of collecting and evaluating information on hazards associated with the food under consideration to decide which are significant must be addressed in the HACCP plan.

Appendix 3 25

operational limitations and challenges remain in ensuring quality control at small-scale aquaculture farms. 6. Project achievements in reducing the mortality rate of shrimp post-larvae through improved handling and transportation were limited. The mortality rate of shrimp and prawn fry was estimated at about 50% at project completion by DOF. Harvesting of wild post-larvae by collectors was done by means of fine mesh hand-trawled net, thereby trapping a large number of fry, post-larvae, and eggs of other species, inducing pressure on the coastal environment, and decreasing the commercial fisheries potential.10 Increasing concerns on the environmental impacts of post-larvae harvesting led the Government to issue a notification on 21 September 2000, in accordance with provisions of the Fish Act (1950), to ban shrimp fry collection from wild sources. The supply of shrimp post-larvae from hatcheries has significantly increased in recent years. Handling and transportation of shrimp post-larvae by air from hatcheries in Cox’s Bazar to Jessore have improved post-larvae survival rates to between 80% and 90%, and thus effectively increased the supply of hatchery-produced post-larvae.11 The ban on wild fry collection has, however, raised new concerns on its social implications. Debates have focused on measures to ease the social costs as a result of the loss of employment among fry collectors. Nevertheless, the countrywide ban on the collections of fry or post-larvae of fish, shrimp, and prawn in the estuary and coastal waters of Bangladesh has proved difficult to enforce. D. Social and Environmental Considerations 7. The principal beneficiaries of the shrimp culture development were mainly farmers, hired labor, and market intermediaries. Although the distribution of project benefits was not monitored, the subsector provided significant employment opportunities.12 Shrimp farming has evolved over the last 2 decades, and brought significant changes to land use, cropping patterns, and livelihoods. Rice farmers benefited from alternate uses of their lands for prawn-fish polyculture. As shrimp and prawn farming has evolved in the context of the localized farming systems, issues concerning access to land and water became more prominent, including distribution and management of water supply and their effects on downstream and adjacent farms. 8. The Project promoted shrimp and prawn culture practices with features to minimize adverse environmental impacts on vegetation, water and soil salinity, land use, and cropping patterns. The prescribed quantities of fertilizers and feed supplements for the aquaculture system were low. The use of fertilizers in agriculture remains the main source of nitrogen and phosphorus compounds in the water bodies of Bangladesh. Pesticide use in agriculture can seriously affect shrimp culture, as crustaceans are sensitive to these products. 9. While the intention was to increase pond productivity with an extensive production system, the rapidly expanding shrimp and prawn farming gave rise to unbridled and spontaneous development in southwest Bangladesh. The extent of the development has posed serious risks to the environmental carrying capacity because of inadequate pond and water 10 Existing estimates indicate that about 200 other fry, post-larvae, or eggs are destroyed for every P. Monodon post-

larvae captured. 11 In 2000, a total of 44 shrimp hatcheries were estimated to be able to produce about 4 billion post-larvae against an

estimated annual demand of 4.2 billion post-larvae. 12 Bangladesh Center for Advanced Studies. 2001. The Costs and Benefits of Shrimp Farming in Bangladesh: An

Economic, Financial, and Livelihood Assessment. Dhaka. About 308,000 people were estimated to earn at least part of their income from shrimp-related business, including 166,000 people in production and 120,000 fry collectors, and about 266,000 people of the total 308,000 people engaged in the shrimp subsector comprised unskilled and poor people. According to the study, the total wages and earnings for the entire supply chain amounted to Tk7.35 billion of which about 61% accrued to the unskilled poor, 27% to the semi-skilled and middle-income group, and the remaining 12% to the skilled and wealthier people.

26 Appendix 3

management. In many cases, there are inadequate provisions for water supply and drainage facilities. There is no spatial plan that can be used to rationalize pond development and management. 10. The use of snail meat as part of the feeding regime for prawn farms has led to an unabated heavy exploitation of snails. The Project did not recommend the use of snail as feed in prawn farms. With excessive feeding, organic loads are heavy in ponds used for prawn farming, posing additional stress on the carrying capacity of the ponds.13 This feeding practice can cause adverse impacts on the snail population, ecology, and the biodiversity of the floodplains from which these snails were harvested. This issue has caught the attention of environmental observers in Bangladesh.14 Continued proactive extension services are required to encourage prawn farmers to alter their feeding regime and avoid using excessive snail meat during the rainy season. Overfeeding has also jeopardized prawn production with decaying organic matter, leading to diseases that have led to soft-shelled and small-sized prawns with necrosis symptoms. With external assistance, DOF intensified efforts to improve the long-run sustainability of shrimp and prawn farming.15 To address the environmental concerns and the sustainability of aquaculture, the Asian Development Bank, in collaboration with the Network of Aquaculture Centers in Asia-Pacific, provided technical assistance to several countries including Bangladesh to assist them in formulating policy guidelines for environmentally sustainable aquaculture development, and for the private sector in controlling environmental deterioration at the farm level.16 E. Key Issues for the Future 11. The Government will continue to support the development of shrimp and prawn farming by providing policy, technology, and other support.17 Production rose from 14,600 tons in FY1986 to almost 65,000 tons in FY2000, while pond areas correspondingly increased from 87,300 ha to 166,700 ha (Table A3.1). Yields in the Khulna region reached an average of 205 kg/ha of shrimp and 500 kg/ha of prawn in FY2000. Shrimp and prawn have dominated fisheries exports, and frozen shrimp exports (including prawn) reached Tk16.1 billion in FY2000, representing 90% of the total fisheries exports of Tk17.8 billion (Table A3.2). Nevertheless, increasing pond density, inadequate soil and water management, and outbreaks of diseases have jeopardized the sustainability of shrimp farming in Bangladesh. Water management in shrimp farms remains an important issue for the majority of farmers, and much improvement in canal infrastructure is required. The potential for expansion of shrimp culture in Bangladesh was promising at project appraisal. However, without adequate planning, an uncontrolled development scenario in shrimp and prawn culture had evolved, with serious repercussions on the estuarine environment. It has become urgent to safeguard the operation of farms and hatcheries by taking into account factors that influence their sustainability. There is a need to develop a spatial plan for shrimp and prawn farming that captures production potential, appropriate technology options, environmental carrying capacity, and management

13 The Operations Evaluation Mission interviewed prawn farmers in December 2001 and observed cases of

excessive feeding of snail meat. These farmers were largely unaware that the excessive use of snail in the feeding rations was inefficient, producing 200 kg/ha of prawn per crop. Many of these farmers erroneously believed that large quantities of snail meat could lead to high prawn yields.

14 Gain, Phillip. 1998. Shrimp Attacks Snail and Environment. Earth Touch: 24–25. 15 Through Greater Options for Local Development through Aquaculture (GOLDA) project initiatives implemented by

CARE Bangladesh and funded by the Department for International Development of the United Kingdom. 16 TA 5534-REG: Regional Study and Workshop on Aquaculture Sustainability and the Environment, for $600,000,

approved on 1 June 1993. This technical assistance ended in 1998. 17 Ministry of Fisheries and Livestock. 1998. The National Fisheries Policy. Dhaka.

Appendix 3 27

requirements. This plan can serve as a guide for programming, developing, and managing sustainable shrimp and prawn farming. 12. The sustainability of shrimp farming has faced serious risks from diseases and their impacts on production. Risk reduction and management need focused attention and, in this context, the Government should review the pathological implications of importation of post-larvae, juveniles, and breeders of shrimp and prawn species; and adopt and implement aquaculture health management guidelines for transboundary movements of live aquatic animals through health certification, quarantine, and diagnostic procedures. Diversification should be encouraged in order not to rely on one specie (i.e., P. monodon), including options to culture and promote endemic shrimp species (such as Fenneropenaeus indicus, Penaeus semisulcatus, and Fenneropenaeus merguiensis). Species diversification can substantially reduce the virulent effects of disease outbreaks and enhance the product mix for export market diversification.

Fiscal Year Totala Yielda Yieldc Yieldd

Khulna Chittagong Production Nationwide Shrimp PrawnRegion Region (ton) (kg/ha) Khulna Khulna

(kg/ha) (kg/ha)

1984 32,239 19,531 51,8121985 39,976 23,437 64,2461986 62,448 24,781 87,300 14,648 1681987e 15,4351988 69,053 24,781 94,010 17,889 1901989 80,418 27,514 108,280 19,020 1761990e 19,2541991e 19,9011992e 21,7921993e 25,0421994e 28,7301995 104,624 29,792 137,996 34,231 2481996 110,000 30,000 140,000 32,860 2351997e 30,000 158 4001998e 61,612 179 4501999 107,962 29,792 141,353 63,164 447 200 4752000 136,655 30,118 166,773 64,647 388 205 500

ha = hectare, kg = kilogram.a Numbers include both brackishwater shrimp and freshwater prawn.b Total include minor areas outside Khulna and Chittagong regions.c

d

e

Sources: Various issues of Fishery Statistical Yearbook of Bangladesh, Department of Fisheries; and DistrictFisheries Office, Khulna.

28 Appendix 3

Average yields of shrimp culture (excluding prawn) from 1997 to 2000 of six upazilas (Paikgacha, Dakop, Koira,Dumuria, Batiaghata, and Rupsha).Average yields of prawn culture (excluding shrimp) from 1997 to 2000 of six upazilas (Paikgacha, Dakop, Koira,Dumuria, Batiaghata, Rupsha, Tero Khada, Digholia, and Full Tola).

Table A3.1: Shrimp and Prawn Farm Area, Production, and Yields in Bangladesh

There are no estimates of production areas for these years and, therefore, average yields cannot be reliablyderived.

Production Area (ha)a

TotalbBangladesh

FiscalYear

1986 13,631 2,693.1 5,017 365.0 786 100.6 23,048 3,562.51987 16,275 3,417.5 4,046 354.1 402 49.0 23,761 4,540.51988 15,023 3,611.7 4,191 283.5 475 66.9 23,423 4,541.21989 15,386 3,820.5 2,427 225.9 567 138.9 21,719 4,718.91990 17,505 4,143.1 3,484 255.8 1,278 234.0 23,339 4,787.71991 17,985 4,512.2 5,702 414.0 427 57.5 26,109 5,266.21992 16,730 4,557.3 2,604 301.0 892 141.1 22,080 5,243.51993 19,224 6,040.3 2,704 383.1 1,042 122.6 26,607 7,002.91994 22,054 7,877.3 3,125 511.8 2,473 418.3 31,835 9,209.61995 26,277 10,456.7 9,267 1,802.6 521 83.9 41,686 13,069.41996 25,225 11,063.9 8,827 1,766.2 182 30.5 38,929 13,409.41997 25,742 11,889.1 8,754 1,767.4 427 79.2 41,549 14,574.11998 18,630 11,814.8 8,836 1,516.6 233 31.1 30,158 13,878.11999 20,086 11,622.1 6,382 1,539.2 137 22.3 28,477 13,793.32000 28,514 16,121.5 5,272 1,069.5 215 36.5 35,134 17,813.2

Average AnnualGrowth, % 3.7 5.9 0.3 4.7 (19.0) (12.5) 2.5 5.7

(1986–2000)

a Includes other fish products.Source: Department of Fisheries, Bangladesh.

Quantity(ton)

Value(Tk million)

Quantity(ton)

Value(Tk million)

Quantity(ton)

Value(Tk million)

Appendix 3 29

Table A3.2: Major Fisheries Exports of Bangladesh

Frozen Shrimp Frozen Fish Dry Fish TotalaQuantity

(ton)Value

(Tk million)

30 Appendix 4

CARP CULTURE DEVELOPMENT A. Formulation and Design 1. The design of the carp culture development focused on the introduction of a more advanced fish culture method to increase fish production for domestic consumption, expand employment, and increase rural incomes. These objectives were consistent with the Government’s priorities at appraisal, and have remained relevant to date. The Project aimed to facilitate the technology transfer by using a demonstration (demo) method as an extension instrument to introduce and disseminate carp aquaculture technology to fish farmers. The design called for the establishment of 1,113 carp culture demo ponds in 21 districts over 5 years. These districts comprised 176 upazilas1 in five regions, and posed a serious challenge for the Department of Fisheries (DOF) to implement the initiatives. The selection of the demo districts was initially inadequate as it included several districts where inundation during the monsoon season was frequent, and the prospect for the demo technology to expand in these areas was consequently limited. With assistance from the project consultants, DOF found 46 upazilas unsuitable for the demo, and later reselected the demo sites. Fish yields were targeted to increase from 900 kilograms (kg)/hectare (ha) to 1,800 kg/ha in a year, and to 2,100 kg/ha thereafter. The appraisal estimated that 48,500 carp farmers would benefit from the Project, and the intervention would lead to an incremental fish production of 33,000 tons (t) annually. B. Outputs and Achievements 2. Against the appraisal target of 1,113 demo ponds, a total of 1,498 demo ponds were established in 22 districts covering 183 upazilas over an extended period of 9 years.2 The project completion report quoted that the number of established ponds was 1,352.3 Both counts exceeded the appraisal estimate. Based on a survey conducted in 1995, annual fish yields from these demo carp farms surpassed the appraisal targets, averaging 3,760 kg/ha from FY1990 to FY1996, 4,450 kg/ha from FY1993 to FY1996, and reaching 5,035 kg/ha in FY1996.4 The appraisal predicted that at full development, the Project would lead to an incremental carp production of 33,000 t per year, comprising 26,000 t from floodplain fisheries enhancement and 7,000 t from carp culture. DOF statistics indicate that fishpond production in Bangladesh sharply increased from 123,800 t in FY1986 to 308,000 t in FY1996 and to 561,000 t in FY2000, and average annual yields nationwide correspondingly increased from 840 kg/ha to 2,440 kg/ha (Table A4.1).5 Production performance among the different categories of fishponds varies, with 1 An administrative government unit that was renamed thana on 30 June 1992. 2 Asian Development Bank (ADB). 1996. Carp Culture Component. Second Aquaculture Development Project, Final

Report Volume 2. Manila. A total of 1,498 ponds: 106 ponds in FY1990, 74 ponds in FY1991, 81 ponds in FY1992, 158 ponds in FY1993, 254 ponds in FY1994, 312 ponds in FY1995, 259 ponds in FY1996, and 254 ponds in FY1997. According to the consultant’s assessment, about 10% of the demo farmers were able to transfer fish culture technology directly to surrounding farmers to attain similar fish production levels. Around 40% of the demo farmers were expected to transfer about 80% of acquired fish culture technology to the surrounding farmers. About 10% of the implemented ponds were deemed to have failedfarmers followed few or none of the project guidelines and did not cooperate with field officers. The remaining demo ponds could serve as extension pondssurrounding farmers could acquire some of the promoted fish culture technology and attain 20%–80% of the production level achieved in the demo ponds.

3 ADB. 1997. Project Completion Report on the Second Aquaculture Development Project in Bangladesh. Manila. 4 These results were based on a survey conducted in 1995, with a sample of 135 demo farms established from

FY1990 to FY1996, representing 11% of the existing demo farms. More than 90% of the sampled farmers indicated that they continued to follow the carp culture technology introduced by the Project.

5 At appraisal, the Project was expected to produce an incremental carp production of 7,000 t from carp culture. The incremental yield of 3.5 t/ha from the demo farms alone resulted in an incremental production of 5,000 t in FY1996.

Appendix 4 31

average yields ranging from 1.2 t/ha to 3.2 t/ha for different categories of ponds in FY2000 (Table A4.2). Although nationwide production increases cannot be attributed solely to the project initiatives, the popularity of carp aquaculture to meet domestic demand has stemmed from strong government support and sustained campaign, including project-funded initiatives to promote carp culture in Bangladesh.6 The Project trained more than 600 DOF and project staff, in addition to the operators of demo farms. More than 28,000 farmers attended gatherings organized from 1994 to 1996 in more than 180 upazilas to promote small-scale pond carp culture. C. Major Constraints and Issues 3. The recruitment of project consultants was significantly delayed, and the full complement of consulting services for carp culture development was not in place until September 1991. By June 1992, DOF had established a total of 261 demo ponds on their own without advice from the consultants. With assistance from the consultants, DOF subsequently improved the selection criteria and operating arrangements for the demo ponds. The consultants produced technical working papers and guidelines that were used for training DOF staff and demo farmers. These guidelines were instrumental for improving the DOF’s extension services. 4. DOF support for the demo ponds was constrained with limited staff and inadequate travel budget to reach widely dispersed demo locations, leaving a number of upazilas largely unsupervised. By June 1995, eight districts remained without extension officers. Frequent job rotation affected continuity of advisory services in the field. Although in-house efforts to improve staff skills continued progressively, formal training of 16 DOF officers at the Asian Institute of Technology in Thailand for carp culture development did not take place until September 1995.7 5. On several occasions, delayed procurement of inputs such as fertilizers, fingerlings, and feeds for the demo ponds prevented demo farmers from adhering fully to the project technical guidelines, and undermined extension efforts in the field. In addition, delayed procurement of water testing kits and other equipment did not allow DOF field staff to conduct adequate and timely monitoring of water quality, as well as of fish survival and growth. D. Social and Environmental Consideration 6. Most of the demo farmers were influential people of the local elites whom farmers were thought most likely to respect and learn from. Owners and operators of the demo farms were the main direct beneficiaries of the Project. Dissemination of improved fish culture techniques benefited small farmers with ponds of generally less than 0.5 ha in size. The social structure in the villages facilitated the dissemination of the introduced technology. Visits and access to demo ponds were made possible through neighbors, friends, relatives, and local contacts. 7. There have been no adverse environmental impacts of carp farming. The technology promoted by the Project is environmentally friendly, as it helps to maintain water quality in ponds and to promote efficient use and recycling of nutrients. Farmers often use the water from fishponds for household purposes. This multipurpose provides strong incentives for pond owners to safeguard the water quality. Carp ponds are drained once a year, generating effluent 6 Popular species include catla (Catla catla), Rohu (Labeo rohita), mrigal (Cirrhinus mrigala), silver carp

(Hypophthalmichthys molitrix), grass carp (Ctenopharyngodon idellus), and mixed carps. 7 Three DOF officers obtained a 20-month graduate training (Master’s degree) on fish culture at the Asian Institute of

Technology in Thailand, and 16 DOF officers received 32 person-months of short-term training on carp culture technology at the Institute.

32 Appendix 4

that has been treated by the pond ecosystem itself. The Operations Evaluation Mission visited numerous carp ponds during field visits in November–December 2001, and confirmed that there was no evidence of improper use of inputs among the carp farmers interviewed. The risk of environmental degradation in the ponds and surrounding areas because of overfeeding is minimal. Feeds are mainly carbohydrate-based compounds with low levels of nitrogen and phosphorous contents. E. Key Issues for the Future 8. Sustained carp production requires good quality seeds (hatchlings and fingerlings). DOF’s current efforts to improve broodfish quality through the establishment of broodfish banks will improve the genetic pool of broodfish for carp hatcheries. This initiative will improve broodstock management and the quality of available seed significantly, thereby assuring the production of robust hatchlings and fingerlings. Sustained government support is required for the establishment of these broodfish banks, as such strategic initiatives cannot be expected to emerge from the operation of numerous and individual private hatcheries on their own. 9. Disease prevention and safeguards for fish quality improvement have gained increasing attention, considering that Bangladesh has numerous fishponds nationwide and the risks of disease propagation cannot be underestimated. Disease prevention and control capability, including diagnostic and treatment facilities, will need to be developed and sustained, and the Government should adopt and operationalize aquaculture health management guidelines for transboundary movements of live aquatic animals through health certification, quarantine, and diagnostic procedures. 10. The extension system for fish culture development can be highly effective, when supported with trained and adequately equipped staff to demonstrate improved aquaculture techniques to private farmers. However, funding for fisheries extension services is compartmentalized and made available through separate initiatives rather than on a program basis. With the growing importance of aquaculture for rural livelihood in Bangladesh, the Government should pay increased attention to the role and functions of DOF in extension services and their funding requirements, especially in the context of the national fisheries policy (1998) that outlines the basis for fish culture development, including an array of required improvements in hatcheries operation, fish farm nurseries, post-harvest handling, quality control, and safeguards for sanitation and hygiene to protect consumers.

Fiscal Year

1984b — 80,830 1,1611985c 151,000 — 250–9001985d — 111,567 —1986 146,890 123,804 8431987 146,890 142,876 9731988 146,890 149,423 1,0171989 146,890 155,012 1,0551990 146,890 163,730 1,1151991 146,890 181,018 1,2321992 146,890 195,034 1,3281993 146,890 202,167 1,3761994 146,890 222,542 1,5151995 146,890 267,282 1,8201996 146,890 307,974 2,0971997 215,000 403,830 1,8781998 215,000 483,416 2,2481999 215,000 499,590 2,3232000 230,000 561,050 2,439

— = no data available, ha = hectare, kg = kilogram.a

b

c

d Department of Fisheries, Bangladesh.Sources:

Appendix 4 33

Fish Production(ton)

Fish Yield(kg/ha)

Pond Area(ha)a

Table A4.1: Fish Farm Area, Production, and Yields in Bangladesh

Available data did not show any variation in pond areas from 1985/1986 to 1995/1996,and from 1996/1997 to 1999/2000. This makes yield estimates per ha unreliable,although the data show a consistent trend in production increases from year to year.Asian Development Bank (ADB). 1986. Second Aquaculture Development Project . Final Preparation Report. Manila.ADB. 1986. Appraisal Report of the Second Aquaculture Development Project inBangladesh. Manila.

Various issues of Fishery Statistical Yearbook of Bangladesh, Department ofFisheries.

76,643 242,905 3,169 44,812 53,192 1,187 25,435 11,877 467 146,890 307,974 2,097112,187 311,270 2,775 65,597 75,315 1,148 37,216 17,245 463 215,000 403,830 1,878112,187 361,843 3,225 65,597 91,702 1,398 37,216 29,871 803 215,000 483,416 2,248112,187 373,935 3,333 65,597 94,780 1,445 37,216 30,815 828 215,000 499,530 2,323127,187 404,466 3,180 65,597 112,245 1,711 37,216 44,339 1,191 230,000 561,050 2,439

ha = hectare, kg = kilogram.a

Source: Various issues of Fishery Statistical Yearbook of Bangladesh, Department of Fisheries.

tonkg/ha kg/haDerelict Ponds Total

kg/haCulturable Ponds

ha hatonton

There are three classes of ponds in Bangladesh: advanced and active pond management in cultured ponds, moderate pond management in culturableponds, and no management and neglect in derelict ponds.

1996199719981999

34 Appendix 4

Table A4.2: Fish Farm Area, Production, and Yields

Fiscal Year

2000

in Cultured, Culturable, and Derelict Ponds in Bangladesha

ha ton kg/haCultured Ponds

ha

Appendix 5 35

BENCHMARK SURVEY OF DEMO AND NON-DEMO FARMS (Selected Statistical Tables)

Table A5.1: Population of the Survey Areas

Name of No. of No. of Population Total Household District Upazila Households

('000) Male ('000)

Female ('000)

Population ('000)

Size (person)

Dinajpur 13 443 1,222 1,149 2,371 5.4 Bogra 11 531 1,429 1,370 2,799 5.3 Kishoreganj 13 430 1,213 1,175 2,388 5.6 Comilla 12 710 2,148 2,115 4,263 6.0 Chittagong 20 971 3,066 2,678 5,744 5.9 Barisal 10 425 1,175 1,124 2,299 5.4 Cox's Bazar 7 228 785 717 1,502 6.6 Bagerhat 9 282 761 728 1,489 5.3 Satkhira 7 298 842 817 1,659 5.6 Khulna 14 388 1,119 1,011 2,130 5.5

Total 116 4,706 13,760 12,884 26,644

Source: Population Census 2001, Bangladesh Bureau of Statistics.

Table A5.2: Sample Size of Demo and Non-Demo Farms Name of No. of Demo Farms Total No. of Non-Demo Farms Total Grand District Carp Shrimp Prawn Carp Shrimp Prawn Total Dinajpur 72 72 32 32 104 Bogra 36 36 15 15 51 Kishoreganj 38 38 17 17 55 Comilla 69 69 31 31 100 Chittagong 48 48 22 22 70 Barisal 37 37 16 16 53 Cox's Bazar 21 21 9 9 30 Khulna 21 20 41 9 9 18 59 Bagerhat 18 35 53 16 8 24 77 Satkhira 30 2 32 2 14 16 48

Total 300 90 57 447 133 27 40 200 647

Source: Operations Evaluation Mission Benchmark Survey, April 2002.

36 Appendix 5

Table A5.3: Respondents by Age, Education, and Main Occupation Indicators Demo Farms Non-Demo Farms Total

No. % No. % No. % A. Age (years) <20 2 0.4 7 3.5 9 1.4 20–<30 10 2.2 21 10.5 31 4.8 30–<40 78 17.4 50 25.0 128 19.8 40–<50 160 35.8 65 32.5 225 34.8 50 and above 197 44.2 57 28.5 254 39.3 Total 447 100.0 200 100.0 647 100.0 Mean age (years) 47.9 42.5 45.2 B. Education (years of schooling) Illiterate 16 3.6 8 4.0 24 3.7 1–5 years 63 14.1 35 17.5 98 15.2 6–9 years 88 19.7 63 31.5 151 23.3 10–11 years (secondary school certificate) 75 16.8 40 20.0 115 17.8 12–13 years (higher secondary certificate) 90 20.1 29 14.5 119 18.4 University 115 25.7 25 12.5 140 21.6 Total 447 100.0 200 100.0 647 100.0 C. Primary Occupation Agriculture 91 20.4 44 22.0 135 20.9 Services 74 16.6 19 9.5 93 14.4 Cottage Industry 2 0.4 0.0 2 0.3 Agricultural Labor 0.0 3 1.5 3 0.5 Business/Entrepreneurs 87 19.5 33 16.5 120 18.5 Casual Labor 0.0 5 2.5 5 0.8 Aquaculture 169 37.8 72 36.0 241 37.2 Others (including dependents) 24 5.4 24 12.0 48 7.4 Total 447 100.0 200 100.0 647 100.0

Source: Operations Evaluation Mission Benchmark Survey, April 2002.

Table A5.4: Gross Annual Income of Respondents

Annual Income Demo Farms Non-Demo Farms Total (Taka) No. % No. % No. % 0–50,000

21 4.7 18 9.0 39 6.050,001–100,000 76 17.0 46 23.0 122 18.9100,001–150,000 85 19.0 51 25.5 136 21.0150,001–200,000 51 11.4 31 15.5 82 12.7200,001–250,000 59 13.2 14 7.0 73 11.3250,001–300,000 30 6.7 8 4.0 38 5.9300,001 and above

125 28.0 32 16.0 157 24.3

Total

447

100.0

200

100.0

647

100.0

Source: Operations Evaluation Mission Benchmark Survey, April 2002.

Table A5.5: Gross Annual Income of Respondents by Farm Types

Annual Income Demo Farms Non-Demo Farms Total (Taka) Carp Shrimp Prawn Carp Shrimp Prawn Carp Shrimp Prawn

No. % No. % No. % No. % No. % No. % No. % No. % No. %

0–50,000

20 6.7 1 1.8 13 9.8 4 14.8 1 2.5 33 7.6 4 3.4 2 2.150,001–100,000 63 21.0 10

11.1 3 5.3 29 21.8 6 22.2 11

27.5 92 21.3 16 13.7 14 14.4

100,001–150,000 73 24.3 4 4.4 8 14.0 40 30.1 5 18.5 6 15.0 113 26.1 9 7.7 14 14.4150,001–200,000 41 13.7 7 7.8 3 5.3 22 16.5 2 7.4 7 17.5 63 14.6 9 7.7 10 10.3200,001–250,000 40 13.3 7 7.8 12 21.0 10 7.5 1 3.7 3 7.5 50 11.6 8 6.8 15 15.5250,001–300,000 19 6.3 5 5.6 6 10.5 4 3.0 1 3.7 3 7.5 23 5.3 6 5.1 9 9.3300,001 and above

44 14.7 57

63.3 24 42.1 15 11.3 8 29.7 9 22.5 59 13.6 65 55.6

33 34.0

Total 300

100.0

90

100.0

57

100.0

133

100.0

27

100.0

40

100.0

433

100.0

117

100.0

97

100.0

Appendix 5

Source: Operations Evaluation Mission Benchmark Survey, April 2002.

37

38

Appendix 5

Table A5.6: Pond Size Distribution of Respondents (Demo Farms)

Size Group Carp Shrimp Prawn (hectare) A B C D E F Total G H I J Total G H I J Total

% % % No. No. No. 0–0.5

64 25 36 64 42 26 257 87.0 1 1 1.80.5–1.0 8 8 2 4 5 8 35 11.0 2 1 3 3.3 1 7 8 14.01.0–1.5 1 1 2 4 1.0 2 2 2.2 2 5 7 12.31.5–2.0 1 1 2 0.5 1 1 1.1 3 1 2 6 10.52.0–2.5 1 1 0.3 4 1 5 5.6 1 6 7 12.32.5 and above

1 1 0.3 21 19 10 29 79 87.8

13 15 28 49.1

Total 72

36

38

69

48

37

300

100.0

21

21

18

30

90

100.0

20

35

2

57

100.0

A = Dinajpur, B = Bogra, C = Kishoreganj, D = Comilla, E = Chittagong, F = Barisal, G = Cox's Bazar, H = Khulna, I = Bagerhat, J = Satkhira. Source: Operations Evaluation Mission Benchmark Survey, April 2002.

Table A5.7: Pond Size Distribution of Respondents (Non-Demo Farms)

Size Group Carp Shrimp Prawn (hectare) A B C D E F Total G H I J Total G H I J Total

% % % No. No. No. 0–0.5

32 7 14 29 18 10 110

82.7 1 1 2 7.4 4 1 1 6 15.00.5–1.0 3 3 2 3 5 16 12.0 5 5 18.5 1 3 5 9 22.51.0–1.5 3 1 4 3.0 1 1 3.7 1 1 4 6 15.01.5–2.0 1 1 0.8 2 2 7.4 1 1 2.52.0–2.5 1 1 0.8 2 2 4 14.8 1 2 2 5 12.52.5 and above

1 1 0.8 6 5 2 13 48.2

8 1 1 3 13 32.5

Total 32

15

17

31

22

16

133

100.0

9

16

2

27

100.0

9

9

8

14

40

100.0

A = Dinajpur, B = Bogra, C = Kishoreganj, D = Comilla, E = Chittagong, F = Barisal, G = Cox's Bazar, H = Khulna, I = Bagerhat, J = Satkhira. Source: Operations Evaluation Mission Benchmark Survey, April 2002.

Appendix 5 39

Table A5.8: Method of Demo Farmers' Skill Acquisition for Pond Preparation and Management

Learned Carp Shrimp PrawnFrom A B C D E F Total G H I J Total G H I J Total

% % % No. No. No. • Other Demo

Farmers 8

3 15 17 16 35 94 31.3 1 2 4 2 9 10.0 16 21 37 64.9

• DOF Extension

70 35 35 62 44 4 250 83.3 20 20 17 28 85 94.4 14 20 2 36 63.2

Totala 300

100.0

90

100.0

57

100.0

A = Dinajpur, B = Bogra, C = Kishoreganj, D = Comilla, DOF = Department of Fisheries, E = Chittagong, F = Barisal, G = Cox's Bazar, H = Khulna, I = Bagerhat, J = Satkhira. a The total number does not add up as farmers may respond to more than one question or opt not to respond. Source: Operations Evaluation Mission Benchmark Survey, April 2002.

Table A5.9: Method of Non-Demo Farmers' Skill Acquisition for Pond Preparation and Management

Learned Carp Shrimp PrawnFrom A B C D E F Total G H I J Total G H I J Total

% % % No. No. No. • Demo

Farmers

11 16 2 3 32 24.1 0 0.0 2 2 5.0

• DOF Extension

1 14 1 16 12.0 7 8 2 17 62.9 6 9 3 18 45.0

Totala 133

100.0

27

100.0

40

100.0

A = Dinajpur, B = Bogra, C = Kishoreganj, D = Comilla, DOF = Department of Fisheries, E = Chittagong, F = Barisal, G = Cox's Bazar, H = Khulna, I = Bagerhat, J = Satkhira. a The total number does not add up as farmers may respond to more than one question or opt not to respond. Source: Operations Evaluation Mission Benchmark Survey, April 2002.

40 Appendix 5

Table A5.10: Yields of Demo and Non-Demo Farms in 2001

(kg/ha)

District Demo Farm Non-Demo Farm A. Fish Farms

Dinajpur 3,298 1,056 Bogra 1,880 1,140 Kishoreganj 3,063 1,065 Comilla 3,897 1,038 Chittagong 2,481 1,209 Barisal 2,406 1,175

B. Shrimp Farms

Cox's Bazar 270 Khulna 250 225 Bagerhat 280 275 Satkhira 300 260 C. Prawn Farms Cox's Bazar 300 Khulna 440 400 Bagerhat 515 425 Satkhira 475 510

ha = hectare, kg = kilogram. Source: Operations Evaluation Mission Benchmark Survey, April 2002.

Table A5.11: Demo Farmers' Marketing of Produce Farm Output Location of Sales Mode of Transport Buyers Pond Local

Site Market Distant Market

Total Rick-shaw

Moto- rized

Cart OnHead

Total Whole- Retailersaler

Consumer Trader

Total

A. Carp No. 38 247 15 300 104 166 9 21 300 250 16 1 33 300 %

12.67 82.3 5.0 100.0 34.7 55.3 3.0 7.0 100.0 83.3 5.3 0.3 11.0 100.0

B. Shrimp No. 29 56 5 90 9 60 4 17 90 26 25 1 38 90 %

32.2 62.2 5.6 100.0 10.0 66.7 4.4 18.9 100.0 28.9 27.8 1.1 42.2 100.0

C. Prawn No. 24 33 57 2 39 16 57 32 2 1 22 57

%

42.1 57.9 100.0 3.5 68.4 28.1 100.0 56.1 3.5 1.8 38.6 100.0

Source: Operations Evaluation Mission Benchmark Survey, April 2002.

Table A5.12: Non-Demo Farmers' Marketing of Produce Farm Output Location of Sales Mode of Transport Buyers Pond Local

Site Market Distant Market

Total Rick-shaw

Moto- rized

Cart OnHead

Total Whole- Retailersaler

Consumer Trader

Total

A. Carp No. 20 106 7 133 35 89 2 7 133 118 7 8 133 %

15.0 79.7 5.3 100.0 26.3 66.9 1.5 5.3 100.0 88.7 5.3 6.0 100.0

B. Shrimp No. 11 12 4 27 2 14 1 10 27 15 2 10 27 %

40.7 44.4 14.8 100.0 7.4 51.9 3.7 37.0 100.0 55.6 7.4 37.0 100.0

C. Prawn No. 20 19 1 40 19 21 40 15 6 19 40

%

50.0 47.5 2.5 100.0 0.0 47.5 0.0 52.5 100.0 37.5 15.0 47.5 100.0

Appendix 5

41Source: Operations Evaluation Mission Benchmark Survey, April 2002.

42 Appendix 5

Table A5.13: Benefits Confirmed by Demo Farmers

Benefits Response Carp Demo Farmers Shrimp Demo Farmers Prawn Demo Farmers No. % No. % No. %

Increased Own Consumption 287 95.7 73 81.1 57 100.0 Increased Income 291 97.0 81 90.0 56 98.2 Employment Generation 253 84.3 64 71.1 41 71.9 Improved Nutrition 248 82.7 81 90.0 52 91.2

Total Demo Farmers 300 100.0 90 100.0 57 100.0

Source: Operations Evaluation Mission Benchmark Survey, April 2002.

Table A5.14: Benefits Confirmed by Non-Demo Farmers

Benefits Response Fish Non-Demo

Farmers Shrimp Non-Demo

Farmers Prawn Non-Demo

Farmers No. % No. % No. %

Increased Own Consumption 95 71.4 26 96.3 32 80.0 Increased Income 105 78.9 25 92.6 35 87.5 Employment Generation 47 35.3 16 59.3 25 62.5 Improved Nutrition 57 42.9 14 51.9 29 72.5

Total Non-Demo Farmers 133 100.0 27 100.0 40 100.0

Source: Operations Evaluation Mission Benchmark Survey, April 2002.

Appendix 6 43

CREDIT OPERATIONS OF THE PROJECT

A. Formulation and Design 1. The Project focused on extension services for shrimp and carp culture development, floodplain fisheries enhancement, and the provision of credit to complement shrimp and carp culture development to finance investments and working capital for aquaculture development. The Department of Fisheries (DOF) was the executing agency for all project components, except for the project credit line, which was administered by Bangladesh Bank (BB) through three participating banks namely Agrani Bank, Bangladesh Krishi Bank (BKB) and Rupali Bank.1 The original design for the credit delivery stipulated the importance of cooperation between DOF and the participating banks in the selection of eligible subborrowers. The Loan Agreement stipulates that DOF shall assist each participating bank in identifying subborrowers, helping with subloan applications, providing technical support to subborrowers, and monitoring the implementation of the subprojects. The upazila2 fisheries officers, together with the credit officers of participating banks, were expected to visit project sites to assess the feasibility of proposed subprojects or aquaculture operations. BB, in coordination with DOF, was required to organize workshops to familiarize staff of the participating banks with aquaculture technology and operation to promote lending to the sector. In addition to the establishment and operation of demonstration (demo) farms for extension, potential subborrowers were envisaged to attend training workshops on technology adoption and credit availability. The use of nationalized banks as conduit or intermediary channels for the project credit line raised serious concerns during the project preparation. The generally unsatisfactory loan recovery performance in Bangladesh, and the slow loan disbursement of the preceding Asian Development Bank (ADB)-financed fisheries credit were recognized during project preparation. BKB was financially weak.3 B. Outputs and Achievements 2. The project credit scheme financed 80% of the costs of individual subprojects, and the subborrowers financed the remaining 20% of the subproject costs. The participating banks administered this credit line, with a refinancing facility from BB to cover 92.8% of the subloans disbursed.4 This refinancing facility was made available to the participating banks in the local currency for 15 years with a grace period of 5 years at an interest rate of 8.5% per annum that was subsequently reduced to 6% per annum.5 The subloans carry a penalty of 6% per annum on overdue loan amounts. The interest spread (the difference between the refinancing rate and the interest rate of the subloans) for the participating banks was capped, and there was no distinction for short- and long-term loans. There was no provision for participating banks to charge varying interest rates based on risk assessment, types of lending, and credit worthiness, while the banks had to bear the full lending risks. 1 The credit line was covered under several agreements: (i) Project Agreement between the Asian Development

Bank (ADB) and BB (amended on 3 November 1987), (ii) subsidiary Loan Agreement between the Government and BB (21 December 1987), (iii) Project Agreement between ADB and the participating banks (amended on 3 November 1987), (iv) Participation Agreement between BB and Agrani Bank (21 December 1987), (v) Participation Agreement between BB and Rupali Bank (24 December 1987), and (vi) Participation Agreement between BB and BKB (13 January 1988).

2 An administrative government unit that was renamed thana on 30 June 1992. 3 The financial conditions of BKB did not improve. BKB continued to incur losses that amounted to a total of

Tk10.9 billion from 1996 to 2000. 4 This refinancing facility received funds from ADB at 90% of the subloans and from BB at 2.8% of the subloans. The

participating banks used their own resources to cover 7.2% of the subloan disbursements. 5 In accordance with the subsidiary Loan Agreement, the Government bears the foreign exchange risk, and BB pays

an interest of 6% per annum to the Government (through the Ministry of Finance) over a period of 15 years, including a grace period of 5 years.

44 Appendix 6

3. The appraisal assessment of the credit demand was optimistic, relying on the expressed keen interest of the participating banks, trend analysis, and the technical support built into the Project. The appraisal (1986) expected a credit financing gap of $60 million–$65 million over 5 years for aquaculture investments. Following the delay in project implementation, the project consultants conducted an assessment in early 1991, concluding that there was a considerable expansion of private sector initiatives in aquaculture and that they were capable of developing viable enterprises without the benefit of demonstration programs. Following this assessment, ADB approved a change of scope for the credit component to allow the delivery of credit beyond the areas covered by the project extension services.6 This assessment was again optimistic, and the change of scope practically detached the extension services from credit delivery. However, until early 1994, the project credit line was essentially unutilized. 4. Credit delivery was constrained by the requirements imposed by the participating banks for loan collateral. Other major factors that constrained the operation of the credit line included (i) its inflexible interest rate of 16% per annum for subloans was set in 1987 as compared to evolving market conditions that led the prevailing interest rates to reach 13% per annum in 1994; (ii) delays in the preparation of farm models to illustrate different aquaculture schemes as a guide for the participating banks to use in appraising and processing subloan applications; (iii) delayed preparation of subloan processing procedures, including a common loan application form that could be used by the participating banks; (iv) indecision and misunderstanding on the allocation between investment loans and working capital loans, while the credit line was largely meant for investment loans and the participating banks desire to lend short-term for working capital;7 and (v) lack of public information on the availability of the credit line, as the responsibility and funding to conduct publicity campaign through the mass media was unresolved. In September 1993, the standard loan application form was finalized. Nevertheless, the participating banks were allowed to use their own forms, as there were delays in distributing the standardized forms. The initial plan for the participating banks to charge an interest rate of 16% per annum to subborrowers was amended in 1994, and the interest rate was reduced to 13% to align it with the prevailing interest rates. 5. There was no systematic link between the extension services and the delivery of credit. The participating banks appraised and approved loan applications independently, imposing no conditions on subborrowers to seek advice on shrimp, prawn, or carp culture development from DOF or elsewhere. Credit recipients were largely unsupervised and not required to improve their technology and pond management practices. Ultimately, the banks were solely responsible for appraising the feasibility of subloan proposals, and supervising the operation and financial conditions of the subprojects. The banks had the flexibility to approve subloans within the free limit.8 But, with limited experience and modest technical knowledge in aquaculture, banks were reluctant to lend to aquaculture farms. Subsequently in 1995, training activities were conducted to familiarize staff of participating banks with technical aspects and the economics of aquaculture. With the reduction of the interest rate in early 1994, coupled with information campaign on investing in aquaculture, credit approval increased progressively. Credit disbursement by the participating banks rose from Tk7.51 million in 1993 to Tk52.08 million in 1994, Tk224.97 million in 1995, and Tk281.8 million in 1996. With further credit disbursements of Tk56.4 million in 1997, the

6 The change of scope was effective 29 December 1991, based on the Borrower’s formal request dated

19 November 1991. 7 Misunderstanding arose concerning the types of aquaculture businesses that could be financed under the credit

line, and whether hatcheries, seed nurseries, and ice plants were beyond the project scope although the appraisal report of the Project did not specify such restrictions. ADB clarified the issue in late 1994 that credit financing could be made available for associated production facilities, but discouraged financing of semi-intensive shrimp culture that was considered of high risk because of the prevalence of shrimp diseases.

8 The free limit was set at below $50,000 equivalent. Subloans of $50,000 and above required approval from ADB.

Appendix 6 45

subloans amounted to a total of Tk622.76 million by project completion, and ADB refinanced a total of Tk560.48 million or $13.59 million (Table A6.1). 6. Based on the amount of credit disbursed, shrimp farming received 76.9% of all subloans, carp farming received 22.3%, and other related business activities received less than 1% of the subloans. Contrary to the expectation at appraisal, 84.5% of the total credit comprised short-term working capital loans. The appraisal had expected that about 90% of the credit line would be used for term investment loans. There were 5,480 subloans: 61.3% with BKB, 35.5% with Agrani Bank, and the remaining with Rupali Bank. Overall loan recovery rates for the credit disbursed under the Project varied, amounting to 90.7% of Rupali Bank, 76.5% of Agrani Bank, and only 50.3% of BKB (Table A6.2). 7. The banking sector in Bangladesh has generally faced inadequate capitalization and large proportions of nonperforming loans to total loans. Recent efforts have focused on enhancing asset quality, and improving loan classification, prudential control, and bank supervision.9 In the case of the nationalized commercial banks (including Agrani Bank and Rupali Bank), classified loans as a proxy of nonperforming loans rose from 31.0% at end of 1995 to 45.6% by December 1999, and declined to 38.6% by December 2000. 8. Agrani Bank disbursed a total of Tk274.5 million, or 44.1% of the total credit disbursed by the participating banks. Agrani’s lending for shrimp culture comprised 91.5% of its total lending under the Project. Short-term lending made up 93.9% of Agrani’s credit disbursement. Agrani’s overall loan recovery under the Project reached 76.5% as at 31 December 2001: 82.5% from shrimp farms, 34.9% from carp farms, and only 22.6% from other subborrowers. 9. Rupali Bank’s credit disbursement under the Project amounted to Tk99.5 million or 16.0% of the total credit disbursed by the participating banks. Rupali Bank had been cautious with its lending, and its project credit portfolio almost entirely concentrated on short-term lending to the shrimp industry. Rupali Bank provided only Tk0.4 million to carp farms. It approved a total of 172 loans. Loan recovery reached 90.7% on 31 October 2001, with 100% loan recovery from carp farms. 10. BKB approved 3,361 subloans, amounting to Tk248.8 million or 39.9% of the total credit disbursed by the three banks. With an average subloan of Tk74,000, the subloans were distributed almost equally in amounts to shrimp farming (51.7%) and carp farming (48.3%). Under the Project, BKB dominated lending to carp culture, contributing to 86.4% of the total credit disbursed by the participating banks to carp farms. However, BKB’s performance on loan recovery has been poor, with 53.1% loan recovery from shrimp farms, and 42.4% from carp culture farms. C. Major Constraints and Issues 11. Lending to aquaculture operators under the Project was not accompanied with advisory services to ensure that subborrowers adopt aquaculture practices that the Project aimed to improve. While DOF delivered extension services through demo farms, the participating banks, with limited experience in the aquaculture business, conducted their lending without much coordination with DOF. The project design feature that required cooperation between the banks and DOF did not materialize. A large number of the subborrowers were inexperienced operators, leading to substandard outputs. Shrimp diseases and the severe flood in 1998 affected many aquaculture farms, including those of the subborrowers. Production losses caused difficulties in debt service and affected loan recovery despite rescheduling of loan repayments.

9 International Monetary Fund. 2002. Bangladesh: Selected Issues and Statistical Appendix, Country Report 02/114.

46 Appendix 6

12. The participating banks did not have the flexibility to determine their own interest rates based on credit worthiness of potential clients and lending risks. The interest rate of the project credit line was fixed for all project clients without any distinction between short- and long-term loans. This practice did not encourage banks to incorporate risk assessment into their interest rate structure. However, there were no guidelines on the use of subloan repayment proceeds for relending. In practice, the banks had used subloan repayment proceeds for relending, given the 15-year refinancing facility made available by the Project when the banks had focused on short-term lending. The banks did not specifically monitor relending activities from the recycling of funds of the subloan repayment proceeds. The extent to which relending had occurred in aquaculture is unknown. The participation agreements did not prescribe monitoring requirements for relending. 13. Training to familiarize personnel of participating banks with aquaculture was delayed. The limited experience of the banks, and the inadequate cooperation between DOF and the banks had undermined the credit component. The intended cooperation between DOF and the banks in providing extension services to support credit delivery should have emphasized to underscore the importance of complementary initiatives on credit, demo farms, and advisory services. BB should have been more proactive in its role to promote the credit component. Delays in the preparation of farm models, loan application forms, and the criteria for lending constrained credit delivery.

Total

Participating Banks

1. Agrani Bank 27,463 129,590 110,514 6,878 274,445 2. Bangladesh Krishi Banka 214 12,675 78,890 107,476 49,524 248,779 3. Rupali Bank 7,300 11,945 16,485 63,805 99,535

Subtotal 7,514 52,083 224,965 281,795 56,402 622,759

Subborrowers 1,879 13,021 56,241 70,449 14,101 155,690

Total 9,393 65,104 281,206 352,244 70,503 778,449

Financing Composition

1. Asian Development Bank 6,763 46,875 202,469 253,616 50,762 560,483 2. Bangladesh Bank 210 1,458 6,299 7,890 1,579 17,437 3. Participating Banks 541 3,750 16,197 20,289 4,061 44,839 4. Subborrowers 1,879 13,021 56,241 70,449 14,101 155,690

Total 9,393 65,104 281,206 352,244 70,503 778,449

a Bangladesh Krishi Bank operates on a fiscal year basis ending 30 June.

Sources: Reports submitted by participating banks and Bangladesh Bank, and Asian Development Bank records.

Appendix 6 47

Source

Table A6.1: Annual Disbursement Under the Credit Component(Taka '000)

1993 1994 1995 1996 1997

Item

Amount % Amount % Amount % Amount %

Total Amount of Subloans Disbursed 274.45 44.1 99.54 16.0 248.78 39.9 622.76 100.0Lending by Type of Business

Shrimp Farming/Hatchery 251.08 91.5 99.16 99.6 128.59 51.7 478.83 76.9Carp Farming/Hatchery 18.47 6.7 0.38 0.4 120.19 48.3 139.04 22.3Others 4.90 1.8 4.90 0.8

PB's Share of Lending to Shrimp Culture Development 52.4 20.7 26.9 100.0PB's Share of Lending to Carp Culture Development 13.3 0.3 86.4 100.0PB's Share of the No. of Subloans Approved (no. of loans, % of total) 1,947 35.5 172 3.1 3,361 61.3 5,480 100.0

Shrimp Culture Development 1,630 40.0 168 4.1 2,272 55.8 4,070 100.0Carp Culture Development 314 22.3 4 0.3 1,089 77.4 1,407 100.0Others 3 100.0 3 100.0

Sources of Funds for the SubloansOwn Sources of PB 19.76 7.2 7.17 7.2 17.91 7.2 44.84 7.2Bangladesh Bank 7.68 2.8 2.79 2.8 6.97 2.8 17.44 2.8Asian Development Bank 247.00 90.0 89.58 90.0 223.90 90.0 560.48 90.0

Distribution Between Short- and Long-Term LoansShort-Term (less than 12 months) 257.58 93.9 99.54 100.0 169.35 68.1 526.47 84.5Long-Term (more than 12 months) 16.87 6.1 - 79.43 31.9 96.30 15.5

Subloan Recovery-Shrimp Culture DevelopmentRecovered 241.66 104.56 159.46 505.68 Outstanding 51.36 10.82 140.84 203.03 Loan Recovery Rate 82.5 90.6 53.1 71.4

Subloan Recovery-Carp Culture DevelopmentRecovered 12.36 0.14 43.61 56.11Outstanding 23.04 0.00 59.34 82.38Loan Recovery Rate 34.9 100.0 42.4 40.5

Subloan Recovery-Other Loans Recovered 1.21 0.33 0.55 2.09Outstanding 4.14 0.00 0.84 4.98Loan Recovery Rate 22.6 100.0 39.6 29.6

Total Loan RecoveryRecovered 255.23 105.03 203.63 563.88Outstanding 78.54 10.82 201.02 290.38Loan Recovery Rate 76.5 90.7 50.3 66.0

PB = participating bank.a Agrani Bank (status as at 31 December 2001).b Rupali Bank (status as at 31 October 2001).c Bangladesh Krishi Bank (status as at 30 September 2001).Source: 2001 financial statements and reports from PBs. Figures may not add due to rounding.

48 Appendix 6

Bangladesh KrishiBankc

Total

Table A6.2: Summary of Project Credit Operations by Participating Banks(in Taka million, unless stated otherwise)

Agrani Banka Rupali Bankb

Appendix 7 49

CULTURE-BASED FLOODPLAIN FISHERIES ENHANCEMENT A. Formulation and Design 1. The project initiatives for culture-based floodplain fisheries enhancement were developed in the context of the need for Bangladesh to compensate for the declining inland capture fisheries because of increasing anthropogenic pressures due to overfishing, urbanization, agriculture development, irrigation, and other competing uses of water resources. Fish constituted 80% of the animal protein intake of the Bangladesh population. Floodplain fishing provides a major share of the country’s fish production. Excluding ponds and ditches, inland water bodies cover a vast area of about 4 million hectares (ha), including seasonal floodplains of about 2.8 million ha. Floodplain fish production declined from 201,000 tons (t) in FY1984 to 184,000 t in FY1987, while the total inland capture fisheries production correspondingly declined from 472,000 t to 431,000 t (Table A7.1). 2. The underlying development concept for this component depended on the utilization of selected beels1 as nurseries to be stocked with hatchery-produced carp hatchlings. About 3 months of growing period after stocking, the emerging larger fish fry and fingerlings would be automatically released into the floodplains once the floods inundated the beels.2 As water levels fall during the dry season, fishers would gradually catch fish as they move to deeper areas of the water bodies. The Government was expected to establish and operate carp hatcheries in designated floodplains. The floodplain fisheries enhancement initiative was designed to be pilot-based. The Project supported the establishment of three carp hatcheries, each with a planned annual spawning capacity of 250 kilograms of hatchlings, and the rehabilitation of fish seed multiplication farms to meet the project requirements for hatchlings. The floodplain fisheries enhancement hinged on a pilot stocking program to increase fish harvest. B. Outputs and Achievements 3. The appraisal targets for the floodplain stocking were not met (Table A7.2). In hindsight, the appraisal target of phased piloting to cover 4,300 ha in 5 years was overoptimistic, in view of the experimental nature of the initiatives, limited previous experience, and that the Department of Fisheries (DOF) staff faced a steep learning curve. The beels selection criteria developed by DOF and the project consultants were ready by the end of 1991. The cumulative area of fish stocking over a period of 6 years reached 2,487 ha, and the stocking level peaked at 905 ha in 1996 against the appraisal target of 1,600 ha for the fifth year.3 A total of 144 beels were stocked over 6 years with a total of 861 million hatchlings (Table A7.3). Although lease arrangements for stocking-designated water bodies were in place in 1996 to cover areas of more than 1,600 ha, social disturbances and national strikes (hartal) were reported to have impeded stocking activities. 4. Three carp hatcheries were constructed to produce hatchlings for the floodplain stocking. The construction of these hatcheries was not completed until 1996, too late to be useful for the Project. Instead, the floodplain stocking relied on hatchling supplies from private suppliers and existing government hatcheries. The upgrading of the six existing fish seed multiplication farms 1 A beel is a small low-lying depression in a floodplain that may or may not dry up during the dry season. A haor is a

large low-lying depression in a floodplain that may be reduced during the dry season into a series of beels. 2 Fish hatchlings were expected to grow to a size of 5 centimeters or longer within 45–60 days after stocking, and

would be dispersed in the floodplains when the beels are inundated during the rainy season. 3 The cumulative total of hatchlings stocked during the project implementation was estimated at 861 million,

compared to 800 million targeted at appraisal for the fifth year of the stocking program.

50 Appendix 7

(located at Sylhet, Habiganj, Moulvi Bazar, Kishoreganj, and Netrokona districts) did not start before February 1993.4 These farms have remained operational to date, and in 2000 produced a total of 1.5 million fingerlings (Table A7.4). The construction of the hatcheries was delayed due to protracted land acquisition and problems related to contracting a suitable domestic engineering firm. Civil works did not start until 1994, and after commissioning in 1996, the hatcheries operated at low capacity until 1999 (Table A7.5). Thereafter, these hatcheries ceased to operate and have practically remained idle. Investments of about $3 million on these facilities have yielded minimal returns. Operating budgets were not adequately made available to these hatcheries, payment arrears on utilities escalated, and the electricity supply was ultimately cut off. The hatcheries were without adequate maintenance since their completion. The need for these hatcheries was debatable from the outset when the Project was prepared. TA 632-BAN5 did not recommend additional carp hatcheries for DOF. By early 1994 when their construction had not started, it would have been advisable not to proceed with the investments to construct the hatcheries. Nonetheless, DOF recently took steps to address the problem of having idle hatcheries. These hatcheries were subsequently included in 2001 under the DOF’s broodfish development initiative, with plans to refurbish and operate these hatcheries as broodfish banks. 5. While the pilot floodplain stocking benefited beels operators and fishers of open and public water areas in the selected water bodies, DOF could not continue with the stocking program after 1996 because government funds were not made available to sustain these activities.6 The project design required the transfer of management and control of all selected nursery beels from the Ministry of Land to DOF with the intention to develop long-term tenure arrangements for users and a sustainable cost recovery system. This transfer did not take place, and leases as administered by the Ministry of Land continued to have terms of not more than 3 years. The lease arrangements relied on auctions to award leases to eligible highest bidders. At appraisal, it was expected that the beels would be handed over to DOF that would, in turn, manage these beels for at least 10 years. Without this transfer, DOF had no authority and control over the beels, and could not develop and promote cost-recovery measures. The administrative transfer of the control over the beels would have reduced the role of the Ministry of Land in generating income for the Government, and the project design did not foresee the interagency sensitivity and the administrative resistance to the envisaged undertaking. 6. Baseline survey in 1995 indicated that artificial stocking of fish in the floodplains was feasible and socially acceptable.7 Fish stocking was found financially attractive and favorable in the context of its direct costs of stocking, fish recovery, and associated risks. A number of factors influenced the feasibility of fish stocking, including (i) the timing of inundation of the beels

4 The small-scale fish seed multiplication farms (Khadimnagar, Golapgonj, Shayestagonj, Moulvi Bazar, Kishoreganj,

and Netrokona) produced over 5 years from 1996 to 2000 a total of 965 kilogram of spawn per farm, and their productivity far exceeded the almost idle hatcheries built by the Project.

5 TA 632-BAN: Second Aquaculture Development, for $330,000, approved on 4 October 1984. Carp hatchery output had grown dramatically, and carp spawn was not a major constraint to the expansion of carp culture. The appraisal also noted that by 1985 about 40 private hatcheries were producing two thirds of the hatchlings produced in the country, and seed supplies were adequate to meet the requirements of the cultured ponds in the country.

6 Although the appraisal prescribed stocking of beels with hatchlings, the Project also stocked water bodies directly with fingerlings on an experimental basis. Direct stocking with fish fingerlings was conducted mainly in Hail Haor, the second largest floodplain in Bangladesh, where a total of about 12.3 million of fingerlings were released from 1991 up to 1996. About 1.6 million of fingerlings were also stocked in other beels: 1.2 million fingerlings in 1993 at Aral, Ariel, Chunia Kamaika, Hawagoalia, Kuri, Nalia, and Rathna; and 0.4 million fingerlings in 1994 at Rupsha. The total fingerling stocking undertaken by the Project amounted to about 13.9 million fingerlings.

7 Department of Fisheries. 1996. Baseline Survey and Floodplain Stocking Evaluation. Second Aquaculture Development Project. Dhaka.

Appendix 7 51

and the time needed for fish fry/fingerlings to reach a certain size prior to their release to the open water to avoid predators and survive, (ii) site accessibility, (iii) the choice between hatchlings and fingerlings to facilitate transportation, and (iv) safeguards to prevent premature harvesting of stocked fish.8 Fishers reported increased harvests of stocked fish. Floodplain fishing benefited three categories of beneficiaries: landless people who fish in open water bodies, individual lessees of beels that were stocked as nurseries, and lessees of non-stocked beels because of fish migration from stocked beels during the inundation. C. Major Constraints and Issues 7. The fish stocking initiatives were hampered on several occasions with delays in the procurement of supplies. Delayed beels preparation and stockings were reported to shorten the grow-out period for the hatchlings in the beels prior to inundation. This increases mortality rates, as undersized fingerlings were more susceptible to predators in the open water. 8. The fisheries resources and socioeconomic baseline survey that was planned to take place at the outset for the Project was carried out only in 1995 (footnote 7). The stocking program began with limited knowledge of the carrying capacity of the beels, ecology of the floodplain systems, hydrology, and other features related to the limnology of the floodplains. Unavailability of data on existing fishing had made it difficult to estimate the impact of fishing on seasonal and annual variation in fish catches. The domestic consultant assigned for monitoring the floodplain initiatives was also fielded only in 1994, although DOF conducted limited monitoring for the stocking in 1991–1993. Monitoring did not take place fully until 1995. DOF field staff informed the Operations Evaluation Mission that with no further funding, there had been no systematic monitoring of the project sites after project completion. 9. The requisites for community development and social preparation for the floodplain fisheries enhancement were not foreseen at appraisal. Issues concerning stakeholder participation, community organization, and common property management for sharing of costs and benefits subsequently emerged during project implementation. In retrospect, the Project brought an evolutionary series of experiences and DOF gained substantial experience from it. Although the Project did not directly address these issues, the Project raised the awareness of DOF of pertinent and broader issues affecting rural fishery livelihood in the floodplains, and such awareness propagated a more comprehensive attention to floodplain fisheries enhancement beyond the project initiatives. To date, issues concerning floodplain fisheries enhancement and inland fisheries management have continued to dominate the development agenda of DOF, and this agenda has received support from multilateral and bilateral agencies. D. Social and Environmental Consideration 10. According to the 1995 survey (footnote 7), the largest share of the benefits from fish stocking went to the lessees because of their tenancy and control over designated water bodies. Other fishers in surrounding areas could not easily benefit from the stocking initiatives, as lessees imposed strict restrictions on open access to fishing in and around their stocked water bodies. Nevertheless, lessees of beels were reluctant to pay for the preparation and stocking of their beels, as benefits derived from this stocking could potentially benefit nonpaying fishers in

8 Ahmed M.N. 1999. Fingerling Stocking in Openwaters. Sustainable Inland Fisheries Management in Bangladesh,

edited by H.A.J. Middendorp, P., Thompson, and R.S. Pomeroy. International Center for Living Aquatic Resources Management (ICLARM) Conference Proceedings 58. This article confirmed that financial benefit-cost ratios ranged from 4.6 to 7.6 based on a sample of 15 sites stocked in 1995.

52 Appendix 7

the floodplain due to fish migration. Without community organizational arrangements involving user groups, issues concerning cost and benefit distribution constrained private initiatives to fund fish stocking in semi-closed water bodies and open waters. However, since the completion of the Project, an increasing number of lessees have initiated and sustained fish stocking of their leased beels with fish fingerlings, with group arrangements for cost and benefit sharing.9 11. The rise in fish productivity as an outcome of fish stocking increased the rental or lease costs of beels. For example, the lease values of the main beels of Hail Haor doubled between 1991 and 1992 as a result of stocking with fingerlings.10 The issues of increased productivity, rising lease costs, tenure and control, affordability, and access to fishing for poor fishers have become critical issues in developing the management options for floodplain fisheries.11 Competing uses of water resources also gave rise to conflicts among water users in the floodplains on some occasions. For example, conflicts occurred between rice farmers and fishers because of their differences over water gates (inlets/outlets) to regulate filling, retention, and draining of water from the fields. 12. The use of beels as nurseries for hatchlings, and the application of target-specific chemicals (such as rotenone) in limited amounts, to eradicate predators in the beels prior to stocking, became a contentious issue during the project implementation.12 The potential impacts of such chemicals on the floodplains were alleged to be serious.13 DOF and project consultants reported that there were no adverse impacts on the environment given the targeted and limited use of the chemicals for fish nursery preparation. Application rates were of low concentration, and the effectiveness duration of the chemical agent was short (measured in hours), and inundation further diluted the concentration of chemicals to levels that were deemed harmless to nontargeted organisms.14 Nevertheless, the risks of inappropriate applications and inadequate supervision of the use of chemicals for beels preparation could potentially cause unwarranted effects. For this reason, the stocking of water bodies with fingerlings was then preferred and considered more environmentally friendly, for there would be no need to use rotenone, or similar agents to eradicate predators. The fingerlings, because of their larger size, are less vulnerable to predators. Subsequently, DOF has not used hatchlings for floodplain stocking. Based on available records, DOF confirmed that it did not use herbicides (such as sonar or floridone) for

9 The Operations Evaluation Mission visited several beels in Kishoreganj, Sylhet, and Moulvi Bazar districts that had

been privately stocked by lessees, with group arrangements for sharing the costs and benefits among shareholders of the leased beels. Lessees showed their preference for fingerlings because of their ready availability and greater survival, and had not used hatchlings for stocking.

10 Department of Fisheries. 1992. Impact of Stocking on the Fisheries of Hail Haor. Second Aquaculture Development Project. Dhaka.

11 Leaseholders may allow access to any number of fishers by imposing rental fees. Leaseholders often operate as an investor who can afford the rising costs of the lease arrangements as successful bidders, and recover their lease investment by operating the leased water bodies as a rental ground for surrounding fishers.

12 Of the 7 carp species stocked by the Project, 3 were endemic and widely present in the floodplains, and 4 other species (3 Chinese carps and 1 common carp) had been cultured in Bangladesh since the 1960s. The area actually stocked as nurseries (about 900 ha in 1996) represented less than 2% of the total dry-season water bodies in the targeted project areas.

13 Although the Project did not recommend the use of such chemicals in ecologically sensitive areas, pilot stocking of beels with hatchlings and the use of chemicals for beels preparation received serious criticisms in 1992 from the Asian Wetland Bureau of the University of Malaya, Malaysia.

14 The use of rotenone was at low concentration (2 parts per million or 2 milligrams per liter), and the application was target specific, killing gill-breathing fish, and sparing crustaceans at cush low concentration. The application of pesticides (such as sumithion at 0.1–0.2 parts per million) was also specific and targeted, and organo-phosphate compounds could biodegrade. The high dilution and subsequent flooding further reduced the concentration of the pesticides.

Appendix 7 53

vegetation control in the beels stocked by the Project. Removal of water aquatic plants on some occasions was done manually with hands, causing no serious environmental impacts. 13. The Project did not pay sufficient attention to the possibilities of pathogen transmission to wild stocks due to stocking of diseased hatchling or fingerlings. Although there had been no major outbreaks of diseases in the targeted beels, the inadequate genetic pool among small-sized breeders used at numerous private hatcheries and nurseries for producing hatchlings and fingerlings could pose disease risks. Epizootic ulcerative syndrome was reported to have caused major losses in the floodplain areas in the early 1990s. E. Key Issues for the Future 14. The arrangements for the control, management, access, and tenure rights of water bodies will continue to dominate in the future, considering the complexity of the issues related to public and common property management, and its implications on fishery constituencies and stakeholders. An array of development issues that have been considered critical for the floodplain fishery development include (i) the legal environment governing the water bodies; (ii) community-based management principles; (iii) co-management options for water bodies with the sharing of responsibilities between the Government and user groups; (iv) common property management approaches and their implications on property rights; (v) security of fishery tenure, access, and legal rights of fishers in water bodies; and (vi) habitat protection and biodiversity in wetlands.15 15. With the exception of the project pilot initiatives, fish stocking in Bangladesh has been largely done with fingerlings instead of hatchlings. Although stocking with hatchlings was found technically feasible, socially acceptable, and potentially profitable, the use of hatchlings posed substantial risks because of their high mortality and susceptibility to predation. Practices for beel preparation with the use of chemicals can potentially cause adverse environmental impacts if safeguards are not in place. Nevertheless, artificial fish stocking of floodplains remains an attractive option for sustaining inland fish production in Bangladesh, requiring continued attention for its improvement, along with the development of legal, organizational, and management arrangements for sustained sharing of costs and benefits among users and stakeholders. Options for community-based management, involving the direct participation of users and beneficiaries, may offer sustainable arrangements for the operation and maintenance of the water bodies. The role of nongovernment organizations to facilitate the involvement, formation, and capacity building of users groups at the community level is expected to gain further recognition.

15 Middendorp, Hans, Paul Thompson, and Robert Pomeroy, eds. 1999. Sustainable Inland Fisheries Management in

Bangladesh. ICLARM Conference Proceedings 58.

207,766 7,783 51,373 4,057 200,616 471,595213,057 6,825 45,893 2,700 194,130 462,605199,600 7,112 45,258 2,433 187,396 441,799195,117 6,035 42,077 3,981 183,796 431,006183,817 8,066 45,610 4,068 182,037 423,598181,140 6,416 47,019 3,439 186,126 424,140173,410 6,396 46,594 3,713 193,762 423,875135,355 6,651 47,923 4,392 249,083 443,404124,843 6,297 49,201 4,216 295,185 479,742138,746 6,939 53,019 4,412 329,573 532,689143,425 7,127 55,592 6,635 360,597 573,376152,782 6,951 58,298 5,556 367,558 591,145165,637 7,265 60,768 6,148 369,333 609,151159,660 9,225 62,798 5,764 362,453 599,900156,894 7,031 67,812 5,932 378,280 615,949151,301 11,134 69,850 6,689 410,436 649,410167,478 12,235 81,886 8,135 402,045 671,779

Source: Department of Fisheries, Bangladesh.

Haors

Table A7.1: Bangladesh Inland Capture Fisheries Production(metric ton)

KaptaiLake

Floodplains

54 Appendix 7

Total FishProduction

Rivers andEstuaries

Sundarban Beels and

19992000

199419951996

19981997

1990199119921993

198719881989

Fiscal Year

198419851986

Year

1 200.0 23.2 100.0 13.82 400.0 402.0 200.0 125.53 800.0 81.2 400.0 32.54 1,300.0 618.1 650.0 204.95 1,600.0 457.5 800.0 145.76 0.0 905.0 0.0 338.9

Total 4,300.0 2,487.0 2,150.0 861.2

ha = hectare.

(million hatchlings)

Actual Stocking

(million hatchlings)

Area to be Stocked

(ha)

Area Stocked

(ha)Appraisal Actual Appraisal

Appendix 7 55

Actual

Table A7.2: Targeted and Actual Floodplain Stocking

Targeted Stocking

23.2 8 40.0 13.8 31.6 4.4402.0 28 362.2 125.5 23.6 29.6

81.2 11 93.3 32.5 24.0 7.8618.1 39 594.7 204.9 24.8 50.8457.5 21 430.0 145.7 48.6 70.8905.0 37 978.1 338.9 49.1 166.4

2,487.0 144 2,498.3 861.2 38.3 329.8

ha = hectare, kg = kilogram.Source:

(million)

Hatchlings

StockedBeels (kg)

EstimatedHatchling

Area Stocked(ha)

No. of

Asian Development Bank. 1996. Second Aquaculture Development Project (Floodplain EnhancementComponent), Consultant's Final Report (Vol. 4). Manila.

1991199219931994

EstimatedFingerlings

56 Appendix 7

19951996

Total

Table A7.3: Floodplain Stocking, 1991–1996

Fiscal Year

(million)

HatchlingSurvival

(%)

55.4 335.0 6.5 203.0 10.0 13.0 35.2 303.0 29.0 416.0 16.5 153.0 152.6 1,423.047.0 307.0 10.0 300.0 28.1 136.0 40.1 279.0 35.0 330.0 16.5 138.0 176.7 1,490.040.9 311.0 10.3 328.0 47.4 220.0 65.4 404.0 42.0 376.0 31.5 440.0 237.5 2,079.041.5 404.0 10.0 300.0 60.9 514.0 83.9 445.0 47.0 270.0 5.0 122.0 248.3 2,055.040.6 402.0 10.0 300.0 51.7 102.0 15.2 492.0 24.0 204.0 8.0 46.0 149.5 1,546.0

225.4 1,759.0 46.8 1,431.0 198.1 985.0 239.8 1,923.0 177.0 1,596.0 77.5 899.0 964.6 8,593.0

kg = kilogram.Source: Department of Fisheries, Bangladesh.

Appendix 7 57

Fingerling('000)

Fiscal

Spawn(kg)

Fingerling('000)

Spawn(kg) ('000)

(Hobiganj District)Moulvi Bazar

DistrictSpawn Spawn

(kg)Fingerling

('000)(kg) ('000)Spawn

(kg)Fingerling

('000)

Total

20001999199819971996

Khadimnagar(Sylhet District)Year

Fingerling(kg) ('000)

Total

Spawn FingerlingSpawn(kg)

Fingerling

Table A7.4: Production Data of Upgraded Fish Seed Multiplication Farms

(Sylhet District)Shayestagonj Netrokona

DistrictKishoreganj

DistrictGolapgonj

4.8 288.0 — 66,000 0.5 207.0 — 59,300 — 400.0 — —102.4 744.0 12,000 385,000 29.2 868.0 5,700 297,000 — 400.0 — —130.8 202.0 168,000 332,000 21.7 300.0 91,400 272,000 — 380.0 — —

29.1 65.0 25,000 72,500 23.1 298.0 — 127,600 — 420.0 — —— 164.0 38,000 72,500 — 442.0 146,700 166,600 — 400.0 — —— 400.0 86,000 91,000 — 365.0 101,000 143,500 — — —

267.1 1,863.0 329,000 1,019,000 74.3 2,480.0 344,800 1,066,000 — 2,000.0 — —

— = no data available, kg = kilogram.Note: Staff wages are not included in the total expenditures.Source: Department of Fisheries, Bangladesh.

58 Appendix 7 (Taka)

FiscalTotal

Expenditure(Taka)

Spawn(kg)

Fingerling('000) Expenditure Income

Spawn(kg)

Table A7.5: Production Data of Carp Hatcheries

Fingerling Income

Total(kg) ('000)

Total Spawn FingerlingYear Total

(Taka)

19961997

Total TotalIncome

(Taka)('000)

(Taka)

Total

Katiadi (Kishoreganj District) Kurshi Nobiganj (Hobiganj District) Shantigonj (Sonamgonj District)

199819992000

Expenditure(Taka)

2001

Item UnitVariable Tk

Assumptions: Shrimp Culture (1 Month Preparation, 6 Months Grow-Out)Farm Size ha 10Expected Yield, P. monodon a kg/ha 250Expected Yield, Incidental Species kg/ha 25Expected Production, P. monodon kg 2,500Expected Production, Incidental Species kg 250Farmgate Price, P. monodon (Head-On), At Pond Site Tk/ha 300Farmgate Price, Mixed Species, At Pond Site Tk/ha 100Price of Shrimp PL, Delivery to Pond Site Tk/'000 PL 1,500Stocking Requirement, Acclimatized PL PL/ha 15,000PL Purchase Requirementb PL/ha 20,000Pond Lease Cost Tk/ha 10,000Pumping Rental, Pond Preparationc Tk/ha 1,000Lime Application kg/ha 250Price of Lime Tk/kg 7Price of Rotenone Tk/kg 750Urea Application kg/ha 300Price of Urea, On Site Delivery Tk/kg 6TSP Application kg/ha 100Price of TSP, On Site Delivery Tk/kg 12

RevenuesExpected Revenue, P. monodon 750,000Expected Revenue, Incidental Species 25,000Subtotal 775,000

Operating ExpensesPurchase of Shrimp PLb 300,000Pond Lease Cost 100,000Pump Rental Cost for Pond Preparationc 10,000Lime and Rotenoned 18,175Fertilizers, Urea, and TSP 30,000Screens 10,000Labore 30,500General Maintenancef 10,000Miscellaneous Expenses 10% 50,868Subtotal 559,543

Net Income Before Interest Payments 215,458

ha = hectare, kg = kilogram, PL = post-larvae, TK = Taka, TSP = triple super-phosphate.a

b Based on PL mortality rate of 20% due to losses during transportation and acclimatization before stocking.c Based on 5 hours per ha.d

e

f Allowance for maintenance of pond dikes, gates, and miscellaneous structures and equipment.

A full-time guard at Tk2,500/month for 8 months, and 150 person-days of labor at Tk70/day for pondpreparation, maintenance, and harvest.

Improved Culture

FINANCIAL REEVALUATION

Appendix 8 59

Based on an average survival rate of 50% for acclimatized PL. Stocking density is 15,000 acclimatized PL perha, yielding 7,500 shrimps at harvest with an average weight of 33 grams per piece.

The use of rotenone is restricted to the remaining water pockets after pumping for pond preparation to eradicatepredators. The application rate of rotenone is at 3 milligrams per liter of water on about 30 cubic meters of waterper ha.

Table A8.1: Financial Farm Budget10-Hectare Improved Extensive Shrimp Culture (Penaeus monodon)

(2002 constant prices)

Item UnitVariable Tk

Assumptions: Shrimp Culture (None Pond Preparation, 7 Months Grow-Out)Farm Size ha 10Expected Yield, P. monodon a kg/ha 112Expected Yield, Incidental Species kg/ha 10Expected Production, P. monodon kg 1,120Expected Production, Incidental Species kg 100Farmgate Price, P. monodon (Head-On), At Pond Site Tk/kg 300Farmgate Price, Mixed Species, At Pond Site Tk/kg 100Price of Shrimp PL, Delivery to Pond Site Tk/'000 PL 1,500Stocking Requirement, Acclimatized PL PL/ha 7,000PL Purchase Requirementb PL/ha 11,667Pond Lease Cost Tk/ha 10,000Pumping Rental, Pond Preparationc Tk/ha 0Lime Application kg/ha 0Price of Lime Tk/kg 7Price of Rotenone Tk/kg 750Urea Application kg/ha 0Price of Urea, On Site Delivery Tk/kg 6Organic Fertilizer (Cow Dung) kg/ha 1,000Price of Cow Dung, On Site Delivery Tk/kg 1

RevenuesExpected Revenue, P. monodon 336,000Expected Revenue, Incidental Species 10,000Subtotal 346,000

Operating ExpensesPurchase of Shrimp PLb 175,000Pond Lease Cost 100,000Pump Rental Cost for Pond Preparationc 0Lime and Rotenonec 0Organic Ferlilizer (Cow Dung) 10,000Screens 0Labord 7,000General Maintenancee 2,500Miscellaneous Expenses 10% 29,450

Subtotal 323,950

Net Income Before Interest Payments 22,050

ha = hectare, kg = kilogram, PL = post-larvae, Tk = Taka.a

b

c No pond preparation under unimproved extensive shrimp culture.d One hundred person-days of labor at Tk70/day for pond maintenance and harvest. e Allowance for maintenance of pond dikes and miscellaneous small structures and equipment.

60 Appendix 8

Based on an average survival rate of 40% for stocked/acclimatized PL. Stocking density is 7,000 acclimatized PLper ha, yielding 2,800 shrimps at harvest with an average weight of 40 grams per piece.Based on high PL mortality rate of 40% due to losses during transportation and stocking (no acclimatization beforestocking).

Unimproved Culture

Table A8.2: Financial Farm Budget

(2002 constant prices)10-Hectare Unimproved Extensive Shrimp Culture (Penaeus monodon)

Item UnitVariable Tk

Assumptions: Prawn-Carp Polyculture (1 Month Preparation, 6 Months Grow-Out)Farm Size ha 1Expected Yield, M. rosenbergii a kg/ha 375Expected Yield, Carp, Average Survival Rate of 70% for Fingerlings kg/ha 200Expected Production, M. rosenbergii kg 375Expected Production, Carp Species kg 200Farmgate Price, M. rosenbergii (Head-On), At Pond Site Tk/ha 300Farmgate Price, Mixed Carp Species, At Pond Site Tk/ha 60Price of Prawn PL, Delivery to Pond Site Tk/'000 PL 2,000Stocking Requirement, Acclimatized PL PL/ha 15,000PL Purchase Requirementb PL/ha 20,000Price of Carp Fingerlings (size 10–13 cm) Tk/piece 5Stocking Requirement, Fingerlings (size 10–13 cm), Expected Survival Rate to Harvest 70% pieces 850Pond Lease Cost Tk/ha 0Pumping Rental, Pond Preparationc Tk/ha 15,000Lime Application kg/ha 400Price of Lime Tk/kg 7Price of Rotenone Tk/kg 750Urea Application kg/ha 500Price of Urea, On Site Delivery Tk/kg 6TSP Application kg/ha 160Price of TSP, On Site Delivery Tk/kg 12Feed Application, Wheat Bran Feed kg/ha 600Price of Wheat Bran, On Site Delivery Tk/kg 7Feed Application, Home-Made Pellets kg/ha 150Price of Home-Made Pellets, On Site Delivery Tk/ha 5

RevenuesExpected Revenue, M. rosenbergii 112,500Expected Revenue, Carp Species 12,000Subtotal 124,500

Operating ExpensesPurchase of Prawn PLb 40,000Purchase of Fingerlings (size 10–13 cm) 4,250Pond Lease Cost (No Leasing, Ponds Generally Owned by the Farmers) 0Pump Rental Cost for Pond Preparation c 15,000Lime and Rotenoned 3,475Ferlilizers, Urea, and TSP 4,920Feed 4,950Labore 3,500General Maintenancef 2,000Miscellaneous Expenses 10% 7,810Subtotal 85,905

Net Income Before Interest Payments 38,596

cm = centimeter, ha = hectare, kg = kilogram, PL = post-larvae, Tk = Taka, TSP = triple super-phosphate.a

b Based on PL mortality rate of 20% due to losses during transportation and acclimatization before stocking.c Based on 120 hours of pumping per ha, as ponds generally have no outlets. Variations depend on rainfall and evaporation.d

e Fifty person-days of labor at Tk70/day for pond preparation, maintenance, and harvest.f Allowance for maintenance of pond structures and equipment.

Appendix 8 61

Based on an average survival rate of 50% for acclimatized PL. Stocking density is 15,000 acclimatized PL per ha, yielding 7,500shrimps at harvest with an average weight of 50 grams per piece.

The use of rotenone is restricted to the remaining water pockets after pumping for pond preparation to eradicate predators. Theapplication rate of rotenone is at 3 milligrams per liter of water on about 100 cubic meters of water per ha.

Improved Culture

Table A8.3: Financial Farm Budget

(2002 constant prices)1-Hectare Improved Extensive Prawn Culture (Macrobrachium rosenbergii)

Item UnitVariable Tk

Assumptions: Prawn-Carp Polyculture (None Pond Preparation, 7 Months Grow-Out)Farm Size ha 1Expected Yield, M. rosenbergii a kg/ha 140Expected Yield, Carp, Average Survival Rate of 50% for Fingerlings kg/ha 200Expected Production, M. rosenbergii kg 140Expected Production, Carp Species kg 200Farmgate Price, M. rosenbergii (Head-On), at Pond Site Tk/kg 300Farmgate Price, Mixed Carp Species, At Pond Site Tk/kg 60Price of Prawn PL, Delivery to Pond Site Tk/'000 PL 2,000Stocking Requirement, Acclimatized PL PL/ha 7,000PL Purchase Requirementb PL/ha 11,667Price of Carp Fingerlings (size 10–13 cm) Tk/piece 5Stocking Requirement, Fingerlings (size 10–13 cm), Expected Survival Rate to Harvest 50% piece 1,200Pond Lease Cost Tk/ha 0Pumping Rental, Pond Preparationc Tk/ha 0Lime Application kg/ha 0Price of Lime Tk/kg 7Price of Rotenone Tk/kg 750Urea Application kg/ha 0Price of Urea, On Site Delivery Tk/kg 6Organic Fertilizer (Cow Dung) kg/ha 2,000Price of Cow Dung, On Site Delivery Tk/kg 1Feed Application, Wheat Bran Feed kg/ha 400Price of Wheat Bran, On Site Delivery Tk/kg 7Feed Application, Home-Made Pellets kg/ha 100Price of Home-Made Pellets, On Site Delivery Tk/ha 5

RevenuesExpected Revenue, M. rosenbergii 42,000Expected Revenue, Carp Species 12,000Subtotal 54,000

Operating ExpensesPurchase of Prawn PLb 23,333Purchase of Fingerlings (size 10–13 cm) 6,000Pond Lease Cost (No Leasing, Ponds Generally Owned by the Farmers) 0Pump Rental Cost for Pond Preparationc 0Lime and Rotenonec 0Organic Ferlilizer (Cow Dung) 2,000Feed 3,300Labord 1,750General Maintenancee 2,000Miscellaneous Expenses 10% 3,838Subtotal 42,222

Net Income Before Interest Payments 11,778

cm = centimeter, ha = hectare, kg = kilogram, PL = post-larvae, Tk = Taka.a

b Based on high PL mortality rate of 40% due to losses during transportation and stocking (no acclimatization before stocking).c No pond preparation under unimproved extensive prawn culture.d Twenty five person-days of labor at Tk70/day for pond maintenance and harvest.e Allowance for maintenance of pond structures and equipment.

62 Appendix 8

Based on an average survival rate of 40% for acclimatized PL. Stocking density is 7,000 acclimatized PL per ha, yielding 2,800prawn at harvest with an average weight of 50 grams per piece.

Unimproved Culture

Table A8.4: Financial Farm Budget

(2002 constant prices)1-Hectare Unimproved Extensive Prawn Culture (Macrobrachium rosenbergii)

Item UnitVariable Tk

Assumptions: 1 Month Preparation, 11 Months Grow-OutFarm Size ha 1Stocking Requirement, Fingerlings (size 10–13 cm) pieces 10,000Expected Survival Rate of Fingerlings (size 10–13 cm) to Harvest % 80Expected Average Weight of Fish at Harvest gram/fish 600Expected Yield, Carp, Average Survival Rate of 70% for Fingerlings kg/ha 4,800Expected Total Farm Production, Carp Species kg 4,800Farmgate Price, Mixed Carp Species, At Pond Site Tk/ha 60Price of Carp Fingerlings (size 10–13 cm) Tk/piece 5Pond Lease Cost Tk/ha 0Pumping Rental, Pond Preparationa Tk/ha 26,000Lime Application kg/ha 250Price of Lime Tk/kg 7Price of Rotenone Tk/kg 750Urea Application kg/ha 250Price of Urea, On Site Delivery Tk/kg 6TSP Application kg/ha 500Price of TSP, On Site Delivery Tk/kg 12Organic Fertilizers (Cow Dung) kg/ha 6,000Price of Cow Dung Tk/kg 1Feed Application, Wheat Bran Feed kg/ha 4,900Price of Wheat Bran, On Site Delivery Tk/kg 7Feed Application, Mustard Oil Cake kg/ha 2,450Price of Mustard Oil Cake, On Site Delivery Tk/ha 10

RevenuesExpected Revenue, Carp Species 288,000Subtotal 288,000

Operating ExpensesPurchase of Fingerlings (size 10–13 cm) 50,000Pond Lease Cost (No Leasing, Ponds Generally Owned by the Farmers) 0Pump Rental Cost for Pond Preparationa 26,000Lime and Rotenoneb 1,975Fertilizers, Urea, TSP, and Manure 13,500Feed 58,800Laborc 11,200General Maintenanced 4,000Miscellaneous Expenses 10% 16,548Subtotal 182,023

Net Income Before Interest Payments 105,978

cm = centimeter, ha = hectare, kg = kilogram, Tk = Taka, TSP = triple super-phosphate.a Based on 200 hours of pumping per ha, as ponds generally have no outlets.b

c One hundred sixty person-days of labor at Tk70/day for pond preparation, maintenance, and harvest.d Allowance for maintenance of pond structures and equipment.

Appendix 8 63

The use of rotenone is restricted to the remaining water pockets after pumping for pond preparation to eradicatepredators. The application rate of rotenone is at 3 milligrams per liter of water on about 100 cubic meters of water perha.

Table A8.5: Financial Farm Budget

Improved Culture

(2002 constant prices)1-Hectare Improved Carp Culture

Item UnitVariable Tk

Assumptions: None Pond Preparation, 12 Months Grow-OutFarm Size ha 1Stocking Requirement, Fingerlings (size 10–13 cm) piece 2,850Expected Survival Rate of Fingerlings (size 10–13 cm) to Harvest % 50Expected Average Weight of Fish at Harvest gram/fish 700Expected Yield, Carp, Average Survival Rate of 50% for Fingerlings kg/ha 998Expected Total Farm Production, Carp Species kg 998Farmgate Price, Mixed Carp Species, At Pond Site Tk/kg 60Price of Carp Fingerlings (size 10–13 cm) Tk/piece 5Pond Lease Cost Tk/ha 0Pumping Rental, Pond Preparationa Tk/ha 0Lime Application kg/ha 0Price of Lime Tk/kg 7Price of Rotenone Tk/kg 750Urea Application kg/ha 0Price of Urea, On Site Delivery Tk/kg 6TSP Application kg/ha 0Price of TSP, On Site Delivery Tk/kg 12Organic Fertilizers (Cow Dung) kg/ha 6,000Price of Cow Dung, On Site Delivery Tk/kg 1Feed Application, Wheat Bran Feed kg/ha 1,000Price of Wheat Bran, On Site Delivery Tk/kg 7Feed Application, Mustard Oil Cake kg/ha 500Price of Mustard Oil Cake, On Site Delivery Tk/ha 10

RevenuesExpected Revenue, Carp Species 59,850Subtotal 59,850

Operating ExpensesPurchase of Fingerlings (size 10–13 cm) 14,250Pond Lease Cost (No Leasing, Ponds Generally Owned by the Farmers) 0Pump Rental Cost for Pond Preparationa 0Lime and Rotenonea 0Organic Ferlilizer (Cow Dung) 6,000Feed 12,000Laborb 3,500General Maintenancec 2,000Miscellaneous Expenses 10% 3,775Subtotal 41,525

Net Income Before Interest Payments 18,325

cm = centimeter, ha = hectare, kg = kilogram, Tk = Taka, TSP = triple super-phosphate.a No pond preparation under unimproved carp culture.b Fifty person-days of labor at Tk70/day for pond maintenance and harvest.c Allowance for maintenance of pond structures and equipment.

64 Appendix 8

Table A8.6: Financial Farm Budget

Unimproved Culture

(2002 constant prices)1-Hectare Unimproved Carp Culture