The World Bankl fileDocument of The World Bankl FOR OFFICIL USE ONLY Report No. 12353 PROJECT COMPLETION REPORT MALAYSIA DEVELOPMENT FINANCE PROJECT (LOAN 2770-2771-MA)

Document of

The World Bankl

FOR OFFICIL USE ONLY

Report No. 12353

PROJECT COMPLETION REPORT

MALAYSIA

DEVELOPMENT FINANCE PROJECT(LOAN 2770-2771-MA)

SEPTEMBER 27, 1993

Industry and Energy Operations DivisionCountry Department IEast Asia and Pacific Region

This document has a restricted distribution and may be used bv recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EgUIVALENTS

Currency Unit - Malaysian Ringgit (M$)

Average 1991: US$1.0 - 2.750 M$1.0 - 0.364Average 1990: US$1.0 - 2.705 M$1.0 - 0.370Average 1989: US$1.0 - 2.709 M$1.0 - 0.369Average 1988: US$1.0 - 2.619 M$1.0 - 0.382Average 1987: US$1.0 - 2.520 M$1.0 - 0.397Average 1986: US$1.0 - 2.581 M$1.0 - 0.387Average 1985: US$1.0 - 2.483 M$1.0 - 0.403

FISCAL YEAR

January 1 - December 31

ACRONYMS AND ABBREVIATIONS

AJDF - ASEAN-Japan Development FundBKPM/BIM - Bank Kemajuan Perusahaan Malaysia Berhad/

Bank Industri Malaysia BerhadBNM - Bank Negara Malaysia (central bank)CPS - Currency Pooling SystemDFI - Development Finance Institution/IntermediaryDFP - Development Finance ProjectERR - Economic Rate of ReturnGOM - Government of MalaysiaMIPS - Malaysian Industrial Policy StudiesNIF - New Investment FundPFIs - Participating Financial InstitutionsSAR - Staff Appraisal ReportSDB - Sabah Development Bank BerhadSSEs - Small Scale EnterprisesUNDP - United Nations Development Programme

FOR OFFICIAL USE ONLYTHE WORLD BANK

Washington, D.C. 20433U.S.A.

Office of Director-GeneralOperations Evaluatlon

September 27, 1993

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on Malaysia -

DeveloDment Finance Project (Loans 2770 and 2771-MA)

Attached is the Project Completion Report on Malaysia - Development Finance Project (Loans2770 and 2771-MA) prepared by the East Asia and Pacific Regional Office. Part II was prepared by theBorrowers.

The PCR is of satisfactory quality. It gives a clear account of the project experience and thereasons for its mixed outcome. According to the PCR, the risks envisaged in the SAR were unfortunatelyrealized. The availability of highly subsidized funds under the New Investment Fund (NIF)-establishedby the Government of Malaysia and aimed at promoting investment in the priority sectors in order tocounteract the economic slowdown in 1985--and the Asean-Japan Development Fund, led to a much lowerdemand for the Bank funds and the subsequent cancellation of the more than 65 % of the total loan amount.The PCR states that while the impact of NIF on the demand for loan proceeds "posed an intractableproblem and led to postponement of loan negotiations from February 1986 to October 1986", the projectwas, nevertheless, submitted to the Board and approved in December 1986. Moreover, the financial healthof one of the participating financial institutions remains a cause of concern.

Although the project partially succeeded in assisting both participating financial institutions withtheir institutional development, given its meager achievements and low disbursement, it is rated asunsatisfactory with uncertain sustainability.

No audit of this project is planned.

Attachment

7This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contentsmay not otherwise be disclosed without World Bank authorizaion.

FOR OFFICIAL USE ONLY



Table of Contents

Paze No.

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

Evaluation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . ii-iii

I. PROJECT REVIEW FROM BANK'S PERSPECTIVE . . . . . . . . . . . . 1

1. Project Identity. 1

2. Project Background . . . . . . . . . . . . . . . . . . . . 13. Project Objectives and Description . . . . . . . . . . . . 24. Project Design and Organization . . . . . . . . . . . . . 35. Project Implementation . . . . . . . . . . . . . . . . . . 46. Project Results . . . . . . . . . . . . . . . . . . . . . 57. Project Sustainability. 88. Bank Performance. 89. Borrowers Performance. 910. Project Relationship. 911. Project Documentation and Data . . . . . . . . . . . . . . 912. Main Lessons . . . . . . . . . . . . . . . . . . . . . . . 10

II. PROJECT REVIEW FROM BORROWERS' PERSPECTIVE . . . . . . . . . . 11

III. STATISTICAL INFORMATION . . . . . . . . . . . . . . . . . . . 18

1. Related Bank Loans . . . . . . . . . . . . . . . . . . . . 182. Project Timetable . . . . . . . I . . . . . . . . . . . . 183. Cumulative Estimated and Actual Disbursements . . . . . . 194. Status of Bank Covenants . . . . . . . . . . . . . . . . . 205. Use of Bank Resources . . . . . . . . . . . . . . . . . . 22

A. Staff Inputs . . . . . . . . . . . . . . . . . . . . . 22B. Missions . . . . . . . . . . . . . . . . . . . . . . . 22

6. Project Implementation . . . . . . . . . . . . . . . . . . 236.1 BIM: Industrial Subsector and Regional Distributions of

Subprojects . . . . . . . . . . . . . . . . . . . . . 236.2 BIM: Financial Characteristics of Subprojects . . . . 246.3 BIM: Economic Contribution/Performance of Subprojects 256.4 SDB: Financial and Economic Characteristics/Performance of

Subprojects . . . . . . . . . . . . . . . . . . . . . 267. BIM's Financial Performance . . . . . . . . . . . . . . . 27

7.1 Summarized Balance Sheets, 1986-1991 . . . . . . . . . 277.2 Profit and Loss Accounts, 1986-1991 . . . . . . . . . 28

8. SDB's Financial Performance . . . . . . . . . . . . . . . 298.1 Balance Sheet (Actual), 1986-1992 . . . . . . . . . . 298.2 Balance Sheet (Projected), 1986-1992 . . . . . . . . . 308.3 Income Statement (Actual), 1986-1992 . . . . . . . . . 318.4 Income Statement (Projected), 1986-1992 . . . . . . . 328.5 Financial Highlights and Indicators (Actual), 1986-1992 338.6 Financial Highlights and Indicators (Projected), 1986-1992 348.7 Domestic/Foreign Currency Resource Mobilization,

1986-1992 . . . . . . . . . . . . . . . . . . . . . . 358.8 Summary of Loan Portfolio, 1986-1992 . . . . . . . . . 36

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

MALAYS IA



Preface

This is the Project Completion Report (PCR) for the Development FinanceProject (DFP) in Malaysia for which Loan 2770-2771-MA of US$65.00 millionequivalent was approved by the Board on December 16, 1986 at the standardvariable interest rate. The Loan 2770-MA was made to Bank Kemajuan PerusahaanMalaysia Berhad (BKPM)l for an amount of US$20.00 million for 15 years includingthree years grace, and the Loan 2771-MA to Sabah Development Bank Berhad (SDB)for an amount of US$45.00 million for 13 years including four years grace. Theseloans were guaranteed for repayment by the Covernment of Malaysia (GOM) for a onetime front end fee of one percent. Both these loans were closed, as scheduled,on December 31, 1991, but with cancellations of US$7.55 million and US$35.00million respectively. Thus, the net loan amounts of US$12.45 million andUS$10.00 million have been fully disbursed. The final disbursement dates wereJune 10, 1991 and January 23, 1992 respectively. Each Borrower has made the halfyearly repayments to the Bank in accordance with its amortization schedule (asof January 15, 1993).

The PCR (Preface, Evaluation Summary, Parts I and III) was prepared asa desk study in the Industry and Energy Operations Division, Country Department1, East Asia and Pacific Region (EAlIE). Part II was prepared by the twoBorrowers, which also supplied part of the statistical information required forPart III.

This PCR is based on the Staff Appraisal Report (SAR); the Loan andGuarantee Agreements; supervision reports; internal Bank memoranda andeconomic/sector reports; correspondence between the Bank and the Borrowers; BIM'sand SDB's audited annual financial statements; SDB's quarterly progress reports;and the subproject data supplied by the Borrowers.

l The name was subsequently changed to the Bank Industri Malaysia Berhad(BIM):

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MALAYSIA



Evaluation Summary

1. Proiect Objectives. Th.e Project had two broad objectives: sectoraland institutional. In the sectoral (policy) context, as a follow-up of theMalaysian Industrial Policy Studies (MIPS), the Project aimed at continuing theconstructive policy dialogue in the financial and industrial sectors between theGovernment and the Bank. In the institutional (credit) context, the overallapproach was at: (a) improving institutional efficiency and broadening theactivities of the two participating financial institutions (PFIs): government-owned Bank Industri Malaysia Berhad (BIM) and Sabah Development Bank (SDB);(b) broadening the PFIs' resource base and reducing their dependence ongovernment funding; and (c) improving their resource allocation efficiency bystrengthening their long-term project based lending. (paras. 3.1-3.4).

2. ImDlementation Experience. Actual project implementationsignificantly differed from planned implementation. In terms of disbursed loanamounts, out of the total of US$65.0 million, only US$22.5 million was disbursedwith BIM canceling US$7.6 million (out of US$20.0 million), and SDB US$35.0million (out of US$45.0 million). The large cancellations were noteworthy sincethe Bank's first two supervision missions were particularly optimistic aboutPFIs' promising pipeline of subprojects. The projected disbursements failed tomaterialize because of: (a) the continued lack of competitiveness of the Bankloan due to its relatively high relending rate compared with the NationalInvestment Fund (NIF) and ASEAN-Japan Development Fund (AJDF); (b) the downturnin the economy of Sabah; and (c) changes in Malaysia's balance of paymentscurrent account from deficit to surplus. Although the Project risks wereapproriately identified, there was no way the Bank could forsee the eventualuncompetitiveness of its funds. The Bank conceived two risks: (a) an adequatenumber of eligible subprojects might not materialize; and (b) the PFIs mayexperience financial difficulties. Both risks materialized as the availabilityof highly subsidized funds under the NIF and AJDF led to a much lower demand forBank funds, and as SDB's financial condition continued to deteriorate (paras.5.1-5.3).

3. Proiect Results. The Project had mixed results in achieving itsmultiple objectives. ImRact of Term Credit. The Project had only limitedsuccess in providing term credit, since more than 65% of the total loan amountwas canceled. The Project contributed towards a successful diversification ofBIM's operations but had very limited discernible impact on SDB's institutionalstrengthening. BIM's lending of M$34.0 million to 17 subprojects led to aninvestment of M$151.0 million and creation of 73 jobs, whereas SDB's lending ofM$27.0 million to four subprojects led to an investment of M$312.0 million andthe creation of 1,649 jobs. Three out of six subprojects above the "free limit"were experiencing losses and the quality of PFI's subloan portfolio under theProject was not satisfactory. Industrial Policy. The Project was not actuallyused as a vehicle to discuss industrial policy due to GOM's reluctance to engagein these discussions through a lending operation. However, a dialogue was

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carried out through the Bank's sector work, after which the GOM initiatedsubstantial industrial, investment and trade policy reforms (paras. 6.1-6.6).

4. Project Sustainability. Given the basic problem with the selectionof financial intermediaries, it is not possible to make a conclusive statementabout the Project's sustainability. The implementation of the Project has notbeen satisfactory. BIM is searching for and taking steps to improve its lendingprogram by extending its role in promoting high technology and export-orientedindustries. SDB, on the other hand, is facing more complex and uncertainconditions. Likewise, the sustainability of subproject benefits is difficult toassess due to inadequate information. But from the available information, it canbe inferred that several subprojects might not be financially sound and theeconomic benefits might not be sustainable (paras. 7.1 and 7.2).

5. Bank/Borrowers Performance. Overall, the performance of the Bank inrespect of the Project was adequate. The Project concept was a standard DFI typecredit operation. However, the Project was implemented during an uncertaineconomic climate in Malaysia and the Bank loan with its variable interest ratehad to compete with highly subsidized foreign funds at fixed rates from the AJDFand local funds at subsidized rates from NIF. Due to the availability ofalternative sources, the two PFIs used the Bank loan essentially as a standbyline of credit. On the one hand, BIM's performance could be consideredsatisfactory as it sought international exposure and institutional strengtheningthrough the Project, and partly utilized the Loan, notwithstanding itscomplexities and relatively unattractive terms. On the other hand, SDB'sfinancial performance is less than satisfactory (paras. 8.1-8.2 and 9.1).

6. Main Lessons Learned. The main lessons learned are: (a) therelending interest rate under a Bank project should be market-oriented and theLoan should be demand-driven; (b) a credit operation should be carried out in anoverall context of the financial sector taking into account the issues ofdirected credit programs and interest rates; (c) DFI has not been an effectivevehicle for addressing financial sector issues; (d) Bank should allow adequatetime to learn the lessons from the operational experience of previous projects;(e) the quality of retail-level institutions is crucial to the success of acredit operation (para. 12.1).

MALAYSIA



PART I. PROJECT REVIEW FROM BANK'S PERSPECTIVE

1. Proiect Identity

Project Name Development Finance ProjectLoan Nos. 2770-MA and 2771-MARVP Unit : East Asia & Pacific RegionCountry MalaysiaSector IndustrySubsector Development Finance

2. Project Background

2.1 During the early 1980s Malaysia's economic growth was led byexpansionary fiscal policy together with a property boom, and the rise in realwages was coupled with an appreciation of the real exchange rate, which waseroding the international competitiveness of the Malaysian manufacturing industryrelative to other East Asian countries'. The GOM and the Bank evolved an actionplan for the Bank's long-term involvement in the industrial/manufacturing sector.The Bank's principal objective was to support GOM efforts at efficient industrialdevelopment through investment under an appropriate industrial and financialsector policy framework. To achieve this objective, the Bank's operationalstrategy was to have a constructive macroeconomic and industrial sector policydialogue with the GOM, while developing innovative and increasingly complexprojects. As a prelude to this dialogue, the Bank undertook industrial sectorwork, culminating in the UNDP-financed/Bank-executed Malaysian Industrial PolicyStudies (MIPS), which were completed in early 1985. Moreover, during 1985 theBank conducted a study of development finance institutions (DFIs) and exportfinance institutions. The Bank approved its first industrial finance (sector)operation: the Small-Scale Enterprise (SSE) Project (Loan 2471-MA) in 1984 toprovide institutional investment credit for SSEs through two DFIs.

2.2 As a result of an unusual combination of external and internalfactors, the Malaysian economy was hit by a severe recession during 1985 and1986: a simultaneous fall in prices of Malaysia's export commodities (petroleum,palm oil, rubber, sawlogs, tin, and cocoa); the bursting of the property marketbubble; and the downturn in the overall business cycle. To promote investmentin the priority sectors of manufacturing, agriculture and tourism, and therebycounteract the economic slowdown, the central bank, Bank Negara Malaysia (BNM),

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announced in September 1985 the establishment of a New Investment Fund (NIF)1

of M$1.0 billion (US$403 million). The impact of the NIF on the demand forBank's credit under the Development Finance Project--appraised in October 1985--and the financial health of Sabah Development Bank (SDB) posed an intractableproblem and led to a postponement of loan negotiations from February 1986 toOctober 1986. Nevertheless, the Project was submitted to and approved by theBoard in December 1986. In retrospect, both these concerns adversely affectedthe implementation of the Project (see paras. 5.1 to 5.3).

3. Project Obiectives and Description

3.1 Objectives. The Project had two broad objectives: sectoral andinstitutional. In the sectoral (policy) context, as a follow-up of the MIPS, theProject aimed at continuing the constructive policy dialogue in the financial andindustrial sectors between the GOM and the Bank. In the institutional (credit)context, the overall approach was at: (a) improving institutional efficiency andbroadening the activities of the two participating financial institutions (PFIs);(b) broadening the PFIs' resource base and reducing their dependence ongovernment funding; and (c) improving their resource allocation efficiency bystrengthening their long-term project based lending. The Project also aimed athelping improve the country's foreign debt profile and BNM in its debt managementby providing long-term foreign exchange funds to substitute for short-termprivate sector borrowings.

3.2 Description. The Project had a credit and policy component. In thepolicy front, the Project aimed to provide a vehicle for the Bank to support theGOM in modifications of its industrial policy in the light of MIPS'recommendations and its privatization program in the context of the IndustrialMaster Plan and the Fifth Five Year Plan. The Project thus aimed to supportefficient industrial development through investment under a framework ofappropriate industrial and financial sector policies.

3.3 The Project's credit component aimed to finance a broad range ofmedium- and medium-to-large scale subprojects--essentially in privatemanufacturing, transportation, tourism, and agro-industry/commercial agriculturesectors-- but the bulk of the financing was meant for the manufacturing sector,with an emphasis on economically justified import substituting and exportpromoting subprojects. Financing for consumer real estate, ocean-going shippingand cocoa growing was excluded. Initially, five PFIs--three DFIs, one commercialbank and one merchant bank--were envisaged for the credit component. However,only two fully-government owned DFIs, Bank Industri Malaysia Berhad (BIM) andSabah Development Bank (SDB), actually participated, as both banks and the thirdprivately-owned DFI opted out. The merchant and commercial banks found theBank's loan unattractive while MIDF (a private DFI) had no need for additionalBank funds. BIM and SDB borrowed the equivalent of US$20.0 million and US$45.0million, respectively.

3.4 In consultation with the GOM (including BNM), the Bank selected BIM

The NIF, channeled through commercial banks, had a maximum term of fiveyears and a relending rate not to exceed 1.25 percent above the baselending rate (BLR) of the two Government-owned leading domestic banks.

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and SDB for the Project. The Project intended to act as a catalyst in redefiningBIM's role as an independent, diversified DFI. It supported the strategicchanges incorporated in BIM's Statement of Future Operational Strategies. SDBalso aimed at becoming an independent DFI by discontinuing and divesting thefinancing of "nominated projects", and by raising an increasing proportion of itsresources from private domestic and foreign capital markets. These goals wereincorporated in SDB's Strategy Statement.

4. Project Design and Organization

4.1 Partly because the GOM itself was actively involved in developing anappropriate policy framework, the Project design did not provide guidelines orsteps for the policy dialogue, nor did it provide a mechanism to monitor theprogress of such a dialogue. The Project design also did not provide adequatemonitoring and evaluation devices to measure the Project's effectiveness inimproving institutional and resource allocation efficiencies (see para. 3.1).The Project design and appraisal did not benefit from past operationalexperiences as the maiden SSE Project (see para. 2.1) had just entered into itsimplementation stage. While the roles and responsibilities of the PFIs werewell-defined, the Bank's procedures and financial charges and the GOM's role werenot well understood by the PFIs. Further, the Project design did not require thefurnishing of periodic progress reports, and the supervision mission's attemptsto solicit them was only partly successful.

4.2 A loan of US$20.0 million (equivalent) was made to BIM for 15 yearsincluding three years grace, and US$45.0 million (equivalent) to SDB for 13 yearsincluding four years grace. Both loans were in accordance with the standardvariable interest rate system (as amended effective July 1, 1989). The GOMcharged a one time fee of 1% up front for guaranteeing the repayment of the Bankloan and the availability of foreign exchange thereafter. The amortizationperiod of subloans was expected to average about 10 years; longer amortizationswere, however, allowed to enable PFIs to use second generation funds for similarpurposes and in similar conditions. The subloans were denominated in Ringgit(M$). The onlending rate was determined by PFIs in relation to the domesticmarket interest rates and the degree of risk involved for an individualsubborrower, which, in turn, was expected to cover PFIs' cost of funds andprovide an adequate margin. The domestic rates were, generally, free andsubstantially positive in real terms, and responsive to changes in internationalinterest rates. There was no subsidy either to PFIs or to final beneficiaries.The PFIs were expected, over the life of the Bank loan, to get an annual spreadof 3% to 4%, and the final beneficiaries were expected to pay a real interestrate of about 9% on the Bank funds.

4.3 The Loan proceeds were to finance both direct and indirect foreignexchange costs: (a) 100% of foreign expenditures on goods and 60% of localexpenditures for other items procured locally; (b) 45% on civil works; and(c) 100% of foreign expenditures on professional fees. However, the PFIs andtheir subborrowers found this financing procedure too cumbersome, and the Bankagreed to their requests to amend Schedule 1 of the respective loan agreementsas follows: (a) with SDB in January 1988, to finance 65% of all expendituresunder the subloans and investments; and (b) with BIM in August 1988, to finance100% of foreign expenditures or 65% of all local expenditures under the subloansand investments.

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4.4 Both PFIs had the same "free limit" of US$700,000 equivalent, andtheir total commitments were not to exceed 50% of their respective (original)total loan amounts. Moreover, no subloan was expected to exceed 10% of their(original) total Bank loan; but, as discussed in para. 5.1, this limit was waivedfor BIM. Each PFI was required to keep its long-term consolidated debt/equityratio below 5:1. Reimbursements of expenditures incurred under free limit"subloans were made on the basis of Statement of Expenditures (SOEs). Tofacilitate disbursements, both PFIs established special accounts (US$1.5 millionfor BIM and US$3.5 million for SDB) which have been fully recovered. SDB did notutilize the account since all its disbursements were made for reimbursement.During the negotiations both PFIs agreed to the following requirements for allsubprojects above the "free limit": (a) calculation of Financial Rates of Return(FRRs) and Economic Rates of Return (ERRs); and (b) explicit consideration ofenvironmental implications.

5. Project Implernentation

5.1 Critical Variances in Project Implementation. Actual projectimplementation significantly differed from planned implementation. In terms ofdisbursed loan amounts, out of the total of US$65.0 million, only US$22.5 millionwas disbursed with BIM cinceling US$7.6 million (out of US$20.00 million), andSDB US$35.0 million (out of US$45.0 million). The large cancellations werenoteworthy since the Bank's first two supervision missions were particularlyupbeat, reporting that: (a) BIM had substantial commitments within six monthsof the Loan effectiveness and the entire loan amount was expected to be fullyutilized by December 1988; and (b) SDB had committed about two-thirds of itstotal loan amount by November 1987 and had a promising pipeline for the rest.Despite the Bank's agreeing to a more flexible disbursement procedure, raisingBIM's authorization limit from US$2.0 million to US$7.5 million, and allowing SDBto retroactively finance subprojects up to one year before receipt ofapplication, the PFIs only started to disburse on the Loan in August 1988 andJanuary 1990, respectively. The projected disbursements failed to materializebecause of: (a) the continued lack of competitiveness of the Bank loan due toits relatively high relending rate compared with the NIF and the ASEAN-JapanDevelopment Fund (AJDF); (b) the downturn in the economy of Sabah which led toreduced SDB lending operations and increased liquidity; and (c) changes inMalaysia's balance of payments current account from deficit to surplus during1987 and 1988.

5.2 By June 1988, however, it was apparent that the Project could havesubstantial cancellations of the Loan amounts as the local market interest rateshad fallen from about 12.0% to 7.0%, as compared to the Bank's onlending rate of7.7%, and relending rate of about 10.7%. The third supervision missionrecognized the problem but did not propose remedial actions. SDB experienceddifficulties in implementing the Project because it could not blend low costfunds (NIF or AJDF) with Bank funds. BIM, however, had more success because ofits better access to cheaper funds (e.g., AJDF at 3.5%), more aggressive bankmanagement, and the strong recovery of the peninsular economy. By June 1989,BIM's line of credit was largely committed, as noted in the fifth supervisionmission--which even suggested a follow-up operation. The optimism was short-lived, however, as BIM canceled US$5.3 million in December 1989 and US$2.2million in December 1991, largely due to its access to funds at highlyconcessionary rates. As a result of major loan cancellations, the expected

disbursement period of five years was actually reduced to two to three years, andthe 50 to 60 estimated total number of subprojects financed was reduced to 21.

5.3 Project Risks. The Project risks were appropriately identified, butthere was no way the Bank could foresee the eventual uncompetitiveness of itsfunds. Although the SAR indicated that there was "no major risk", it conceivedtwo which it considered "relatively minor and manageable.,, They were: (a) anadequate number of eligible subprojects might not materialize; and (b) the PFIsmay experience financial difficulties, loan portfolio deterioration or theinability to raise long-term resources. The availability of highly subsidizedfunds under the NIF and AJDF led to a much lower demand for Bank funds and thesubsequent cancellation of more than 65% of the total loan amount. The secondrisk, as applied to SDB, did materialize. SDB's financial condition remains acause of serious concern since the ratio of total arrears to total loanoutstanding remains very high (the ratio exceeded 24% at December 31, 1992, ofwhich arrears above 12 months were almost 76%).

6. Project Results

6.1 Achievement of Project Objectives. The Project had mixed results inachieving its multiple objectives of provision of term credit, institutionbuilding, and industrial policy dialogue. While it was apparent that theseobjectives would not be met, there was no attempt to modify them during theProject implementation.

6.2 Impact of Term Credit. The Project had only limited success inproviding term credit, since more than 65% of the total loan amount was canceled(as discussed in paras. 5.1-5.3). The availability of highly subsidized fundsfrom alternative sources led to the uncompetitiveness of Bank funds and reduceddemand for their utilization. Detailed results of the operation are highlightedbelow.

(a) Main Characteristics of Subprojects. BIM used M$34.0 million(US$12.45 million equivalent) to finance 17 subprojects, as comparedto SDB which used M$27.0 million (US$10.0 million equivalent) tofinance four subprojects--all above the "free limit". BIM financedonly two subprojects above the "free limit" of which one wasexceptionally large: a M$20.0 million subloan with a total projectcost of M$127.0 million. Both BIM subprojects were for newinvestments in the manufacturing sector. In addition, three other newsubprojects and 12 expansion projects in the manufacturing sector,mostly for import substitution, were also financed by BIM as "freelimit" subloans. These subprojects were mostly located in the FederalTerritory and Selangore State. SDB financed one new subproject inJohore State and three in Sabah.

(b) Performance of Subprojects. Only limited information is available onsubproject performance. BIM's lending of M$34.0 million led to aninvestment of M$151.0 million and the creation of 1056 jobs, whereasSDB's lending of M$27.0 million led to an investment of M$312.0million and the creation of 1,649 jobs. SDB financed two labor-intensive subprojects--expansion of Kota Kinabalu Port under the SabahPort Authority and expansion of a joint venture engaged in planting/

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cultivation of land into oil palm, which respectively contributed tothe increase in the export of sawn timber and the yields of palm oil.SDB also financed expansion of a company providing logistic supportservices and facilities for the oil and gas industry. This company'srevenue and profit continue to be far below the projections, and itis considered to be vulnerable. Finally, SDB financed a new factoryto manufacture acids and glycerine, which had cost overruns of almost50% and was unable to service its debt due to continued losses andserious cash flow problems. (See Part II, pages 6-7 for details.)Although SDB did not provide ERR estimates, BIM provided suchestimates for all subprojects, which varied between 19.0% and 38.3%.However, the three subprojects experiencing losses had impressiveERRs: 25%, 31% and 38% (see Tables 6.3 and 6.4 for details).

(c) PFIs' SubDroject Terms and Conditions. BIM's onlending rate,generally at 8.5%, left a very thin gross margin for BIM, since theBank's lending rate, besides being adjustable semi-annually, remainedrelatively high at around 7.7% (excluding the interest charge waiverand commitment charge). SDB, however, had a gross margin of 1.5% to4.0%. Both PFIs had determined the amortization period (includinggrace) on a case-by-case basis, which varied between 5 and 10 years.

(d) PFIs' SubRroject Portfolio. The quality of BIM's subloan portfoliounder the Project was not satisfactory: four subprojects had overduepayments of M$1.5 million. Out of 13 subprojects for which profit(loss) data were available, the total loss incurred by three farexceeded the total profit made by the remaining ten: M$6.4 millionvs. M$2.1 million. The portfolio's loss was dominated by the M$5.5million loss incurred by the public sector enterprise: Sabah Shipyard(engaged in offshore fabrication). Similarly, the quality of SDB'ssubloan portfolio also was not satisfactory: one subproject (out offour) had arrears of both principal and interest as of December 31,1992.

6.3 Institution Building.

(a) BIM. After more than 12 years of operation, BIM is still redefiningits role. Originally the Bank Kemajuan Perusahaan Malaysia Berhad,BIM was established in 1979 as a government-owned DFI to providefinancing for large-scale capital intensive projects. However,because of the GOM's budgetary constraints at the time when BIMstarted operations, the required funds for intended projects were notprovided. BIM therefore concentrated on financing coastal shipping,small shipbuilding and ship repair industries, mostly at less thanmarket rates of interest. BIM's total assets amounted to M$622.4million in December 1991, an increase of 13% from 1990. Of this,loans and guarantees accounted for 58% (M$161.8 million), an increaseof 8.8% from the previous year. The engineering sector was thebiggest borrower at 41%, followed by export/import finance (37%) andshipping and shipyard (22%). On account of BIM's rapid growth inlending, its debt:equity ratio increased from 2.9x in 1990 to 3.4x in1991. Operating revenues during the year increased by 26% from 1990

-7-

levels to M$30.9 million, while net profit jumped by 31% to M$10.6million.

(b) SDB. SDB was established in 1977 as the principal DFI for the Stateof Sabah, although it can, by its statute, invest anywhere inMalaysia. It was a conduit for GOM funds for projects nominated bythe state government, besides financing private sector projects.SDB's total assets of M$1,054.4 million in December 1990 decreased by6.7% in 1991, to M$983.9 million. In 1990, SDB recovered most of thelending volume that it lost in 1989, due to increased borrowing fromthe state government and reduced holdings of bonds. In 1991, however,this recovery was halted when the state government decided to reduceits deposits in SDB by M$73.1 million, from M$655 million to M$582million. As a result, SDB had to again curtail its lending operationsin 1991 by 7%, from M$614.9 million to M$573.2 million. In 1991, theagriculture sector accounted for 41% of SDB's total loans, with realestate (23%), manufacturing (12%) and others (24%) accounting for therest. On the other hand, while the state government reduced its longterm deposits in SDB, it also converted M$48.9 million of that intoSDB share capital in 1991. Consequently, the debt:equity ratioimproved from 4.2x in 1990 to 2.8x in 1991. Despite its fundingproblems and reduced income from non-performing loans, SDB managed toregister annual profits over M$10 million from 1987 to 1991. The netprofit in 1991 of M$12.6 million was a 17% increase from 1990.

6.4 The Project contributed towards a successful diversification of BIM'soperations: from financing shipbuilding industries to financing of engineeringindustries and equipment leasing, export credit and import trade financing,besides establishing venture capital operations leading to technology-orientedmanufacturing, and launching a technical consultancy program. By 1990, theengineering sector overtook shipbuilding as BIM's largest recipient of loans, andthe Project funds were used mainly to finance high technology investments(including computer numerically controlled and other advanced machinery). Theavailable information suggests that the quality of BIM's overall portfolio hasimproved in recent years with non-performing loans accounting for 6% of totalloans outstanding as of June 30, 1991.

6.5 The Project seems to have had very limited discernible impact on SDB'sinstitutional strengthening. About 90% of SDB's assets are funded by the stategovernment and its liquidity depends on the continued patronage of the state.This continued dependence on government funds continued to be a key constraint,particularly now in times of political tensions with the Federal Government andthe bleak prospects of Sabah's economy. SDB also continued to have excessivelyhigh arrears and non-performing loans: out of a total of 141 outstanding loans,70 were non-performing, which accounted for almost 29% (including arrears above12 months) of total loans outstanding as of December 31, 1992.

6.6 Industrial Policy. The Project was not actually used as a vehicle todiscuss industrial policy due to the GOM's reluctance to engage in thesediscussions through a lending operation. However, a dialogue was carried outthrough the Bank's sector work, after which the GOM substantially liberalized thelicensing requirements, reduced administrative delays, and reoriented the intentof industrial licensing to monitor industrial development rather than regulate

- 8 -

it. Moreover, licensing became an integral part of the GOM's overall industrialpolicy that increasingly focused on industrial restructuring, for which it hadalso created an Industrial Adjustment Fund. Malaysia has a sound industrialpolicy and has succeeded in attracting direct foreign investment, whichfacilitated access to advanced technology and international markets and theintroduction of modern management practices.

7. Project Sustainability

7.1 Given the basic problem with the selection of financialintermediaries, it is not possible to make a conclusive statement about theProject's sustainability. The implementation of the Project has not beensatisfactory. BIM is searching for and taking steps to improve its lendingprogram by extending its role in promoting high technology and export-orientedindustries, besides its traditional role of promoting the rapid expansion ofdomestic shipping fleet, replacing and modernizing ageing vessels, and increasingthe capacity of Malaysian shipyards. The enhanced role of BIM in Malaysia'scontinued rapid industrialization will, however, require sustained follow-upactions to ensure further improvement in the quality of BIM's portfolio. SDB,on the other hand, is facing more complex and uncertain conditions. Inparticular, SDB needs to focus on cost control, adopt productivity improvementprograms to enhance optimal use of its resources, seek investment opportunitiesoutside Sabah State, increase its loan loss provision, rehabilitate its non-performing loans, and mobilize resources from non-government sources.

7.2 Likewise, the sustainability of subproject benefits is difficult toassess due to inadequate information. But from the available information, it canbe inferred that several subprojects might not be financially sound and theeconomic benefits might not be sustainable.

8. Bank Performance

8.1 The performance of the Bank in respect of the Project was adequate ingeneral. The Bank's contribution at the stage of preparation was a positive oneas it diligently pursued the completion of MIPS and promptly followed-up the ideaadvanced by BNM regarding a Bank project requiring no additional budgetaryoutlays. The Project concept was a standard DFI type credit operation. However,the Project was implemented during an uncertain economic climate in Malaysia andthe Bank loan with its variable interest rate had to compete with highlysubsidized foreign funds at fixed rates from the AJDF and local funds atsubsidized rates from NIF. As a result of the availability of alternativesources, the two PFIs used the Bank loan essentially as a standby line of credit.

8.2 Although the Project supervision was adequate in terms of itsfrequency, the comprehensiveness and analysis was generally lacking. Forinstance, neither the supervision reports nor other documents in the Projectfiles contained discussions regarding the policy objectives of the Project. TheProject files also did not reflect the required explicit assessments of theenvironmental impact for above the "fr:ee-limit" subprojects. Furthermore, in themajority of cases, information about the Bank's review of subloan appraisalreports is not available.

-9-

9. Borrowers Performance

9.1 On the one hand, BIM's performance could be considered satisfactoryas it sought international exposure and institutional strengthening through theProject, and partly utilized the Loan as a stand-by credit, notwithstanding itscomplexities and relatively unattractive terms. Institutionally, BIM'sachievements seem impressive. It almost doubled the cumulative gross loanapprovals during 1988-90, diversified its loan portfolio and contributed towardsthe upgrading of technology (para. 6.3). On the other hand, SDB's financialperformance is less than satisfactory. SDB's funding capabilities is seriouslyaffected by Sabah's deteriorating economic condition, the Federal Government'sexclusion of SDB from most of its special funds, and the reluctance of banksfrom peninsular Malaysia to invest in SDB. Consequently, its lending operationshas been seriously affected not only by this funding constraint but also by thelack of few rewarding projects in Sabah. Furthermore, SDB's occasional lendingin peninsular Malaysia has not been regarded favorably by the state government.The financial condition of SDB is also problematic as it continued to have a poorloan portfolio quality (paras. 5.3 and 6.5). Both BIM and SDB effectivelymaintained their long-term debt-equity ratios well below the covenanted ratio of5:1, although requiring a capital injection by the GOM.

10. Proiect Relationship

10.1 The relationships between COM, the two PFIs and the Bank were overallreasonable. The PFIs kept the Bank informed, as in the case of their intent touse alternative sources of funds while the Bank promptly and positively respondedto BIM's proposal regarding a venture capital subsidiary. The collaborationbetween the Bank, GOM officials and DFI's dealing with the industrial sectorbrought about closer contacts and facilitated Bank's future operations. Theamicable and businesslike working relationship among the parties have beenmaintained throughout the Project cycle. BIM and SDB seem to have maintainedgood relationships with the subborrowers.

11. Project Documentation and Data

11.1 The Project documents, i.e. , Loan and Guarantee Agreements, SAR andthe President's Memorandum were adequate in the light of the Project objectivesand in providing a useful framework for reviewing project implementation. TheSAR and the President's Memorandum were quite adequate compared to the otherproject documents. For instance, while both documents proposed the holding ofannual consultations with the Malaysian counterparts on interest rates, theMinutes of the Negotiations, as well as subsequent supervision reports, however,did not indicate any such discussion. As far as institutional data is concerned,SDB Progress Reports were useful in evaluating financial and economic impact ofits subprojects. BIM, however, did not provide the Bank with Progress Reports.The data supplied by BIM and SDB for preparation of Part III of the PCR wasinsufficient and required further reconciliation with Bank's records. On theother hand, the Bank's management of subproject and disbursement documentationwere not satisfactory. The Bank's documentation were not also readily availablefor most "above the free limit" subloans.

- 10 -

12. Main Lessons

12.1 The main lessons learned or again confirmed, with implications forother Bank financed projects, are s=mmarized below:

(a) The relending interest rate of a Bank project should be market-oriented and the Loan should be demand-driven.

(b) A credit operation should be carried out in an overall context of thefinancial sector taking into account the issues of directed creditprograms and interest rates.

(c) DFI has not been an effective vehicle for addressing financial sectorissues. A more broad based financial intermediary operation shouldhave been considered.

(d) Bank should allow adequate time to learn the lessons from theoperational experience of previous projects. A new project usuallywill try to correct for the shortcomings of preceding project(s), andits preparation by definition requires analysis of the ongoingoperation. Therefore, compromises made to meet lending targets andthe tendency to let the current project proceed without major inputfrom earlier projects should be avoided.

(e) The quality of retail-level institutions is crucial to the success ofa credit operation. This Project did not provide useful lessons onfinancial intermediation in Malaysia because the Bank was left withPFIs that were marginal in the overall context of the financialsector.

- 11 -

Page 1

LOAN 2770-MADEVELOPMENT FINANCE PROJECT


BANK INDUSTRI MALAYSIA BERHAD

A. IqNTODUCTION

Under this project the International Bank For Reconstruction and Development

(IBRD) extended a loan of US$20,000,000 to Bank Industri Malaysia Berhad

(BIMB) for the financing of investment projects in March 1987. The loan was

trminated in December 1989 with the cancellation of the balance of

US$5,300,000. The cancellation was made as the loan was no longer attractive

when compared to the loans granted by the Japanese banks.

B. PERFORMANCE OF IBRD AND BIMB

During the evolution and implementation of the project, there were no major

hitches. The loan agreement, disbursement and replenishment of funds were

carried out expeditiously. For this, credit must be accorded to [BRD for the

smooth implementation of the project.

As for BIMB, no major problems were encountered. Upon securing of the loan,

sub-loans were granted to a number of local companies. The majority of these

companies have grown in size and prospered. BIMB was able to stimulate

growth in the core sectors of the Malaysian economy and upgrade the technology

of these sectors. The availability of the loan from this project has given BIMB

the impetus in its quest to become a financier of high technology investments.

During this period, the IBRD and BIMB has maintained a good and professional

relationship in implementing the project.

- 12 -

Part 11Page 2

C. LESSONS LEARNED

Despite the smooth and successful implementation of the project, BIMB's

performance in term of earnings from the granting of sub-loans was less than

satisfactory. BIMB had fixed the interest rate for most of its sub-loans between

8.0 - 8.5% per annum whereas IBRD rate to BIMB was variable and highest rate

recorded was 7.92%. Hence the margin to BIMB was very thin. In addition,

there was a commitment fee of 3/4% on the unutilised portion of the loan.

As BIMB's lending rates were fixed, the project would have been more attractive

if the interest rate charged by the IBRD was also fixed like the loans extended

by the Japanese banks to BIMB.

D. CONCLUSION

This loan has enabled BIMB to finance 17 projects, the bulk of which were for

the purchase of computer numerically controlled (CNC) and other advanced

machinery. This has to some extent contributed to the upgrading of the overall

level of technology of the core sectors of the economy, which is vital for the

industrialisation of the country.

PREPARED BY: BANK INDUSTRI MALAYSIA BERHAD

JANUARY 1993

- 13 -

Part HPage 3

LOAN NO 2771-MADEVELOPMENT FINANCE PROJECT


SABAH DEVELOPMENT BANK

Borrower: Asian Supply Base Sdn Bhd (ASB)

I. IMPLEMENTATION OF THE PROJECT

ASB, wholly owned by Sabah Energy Corporation, (a statutory body owned bythe Sabah State Government) is an offshore supply base providing centralizedlogistic support services and facilities to meet the requirements of the oil and gasexploration, development and production activities around the region.

The consortium loan of RM43.0 million was granted to ASB in July 1987 to partfinance Phases I and II of the expansion and modification of the supply base withSDB's participation of RM7.0 million in the above loan sourced from the WorldBank line.

The implementation of Phases I and II west smoothly and were completed in May1988. The actual project cost of RM93.7 million was slightly higher than theestimated cost of RM91.0 million. This, however, did not deter the completionof the project. The term loan was fully drawn down in March 1988 and is nowin repayment stage. Debt servicing is considered good with prompt paymentfrom ASB.

H. RELATIONSHIP WITH SDB

ADB does not have a direct relationship with SDB as all dealings are through theAgent Bank, Namely Aseambankers Malaysia Bhd. Nevertheless, therelationship with SDB can still be considered good. Submissions of accounts andproject status reports from ASB have been prompt.

- 14 -

EAPLUPage 4

Borrower: SABAH PORTS AUTHORITY

IMPLEMENTATION OF THE PROJECT

The Kota Kinabalu Port Expansion Project was completed under the supervisionof a foreign engineering consultant firm and was completed without any majorproblems.

The total project cost for the above project was estimated at MR109 million ascompared to the original cost of around MR61.9 million. The increase in thecost is partly due to the construction of the project on a turn-key basis i.e.payment is only to be made upon completion of the project. The payment datewas fixed on May 23rd, 1988. Besides that, the method of payment of theproject was fixed on two currencies i.e. Malaysian Ringgit and Japanese Yen.During the construction period, the Japanese Yen appreciated and eventuallydoubled the Malaysian rate, this resulting a loss in foreign exchange for SPA.

II. RELATIONSHIP WITH SDB

A syndicated loan of MR85 million was lead-managed by Sabah DevelopmentBank Bhd and provided by a consortium of local banks. The syndicated loan wasrefinanced for a more favorable interest rate in 1989 and under the same year,the Authority made a prepayment of MR10.5 million. Servicing of thesyndicated loan is in accordance to the payment schedule.

III. OPERATIONAL PROBLEMS

The project is running smoothly, infact, it has contributed to the increase in theexport of sawn timber through Kota Kinabalu port because of the hugh openspace on the wharf being created. The south jetty under this project is alsorunning smoothly since it completion.

- 15 -

Part HPage 5

Borrower: DESA TALISAI SDN BHD


The syndication of the RM20.0 million term loan took about 19 months (Nov 87- June 89). The unanticipated delays in the syndication would be attributed to thefollowing:

1) negotiation on terms and conditions of the loan both at the initial andduring documentation stages; and

ii) clarification on legal status of one of the shareholders in givingundertaking to meet shortfall in working capital of the borrower.

Nevertheless, the development of the oil palm estate was not interrupted by thedelay in loan syndication. This was made possible partly with bridging financeamounting to RM5.0 million by Sabah Development Bank Bhd pendingfinalisation of the syndication.

The bridging loans were repaid with the first disbursement of the syndicated termloan.

H. RELATIONSHIP BETWEEN BANK AND BORROWER

SDB has been considerate and understanding in responding to borrower requestson interest revision and changes in disbursements schedule.

In February 1990, the interest pricing for non World Bank tranche was reducedin line with current market rates.

In September 1990, allocation for 1991 was brought forward to 1990 in order toallow earlier drawdown to meet additional cost for the accelerated developmentof infrastructure (housing).

m. OPERATIONAL PROBLEMS

Due to unavailability of detailed topographical map, the cost of land preparationwas slightly under estimated particularly in terms of terracing and drainage.

Owing to lack of data in oil palm yield projection in Sabah, the production of oilpalm turned out to be better than anticipated. Yields of oil palm have so far beenabove projections.

- 16 -

Page 6

Borrower: TWENTY FIRST CENTURY OLEOCHEMICALS SDN. BHD. (TFCO)


In the early 1990, Twenty First Century Oleochemnicals Sdn Bhd (TFCO)undertook the establishment of an Oleochemical plant in Pasir Gudang Johor.

However, the Agent Bank of the syndicated loan namely Rakyat MerchantBankers Bhd (RMB) failed to conclude the loan syndication. As a result,International Finance Corporation (IFC) was brought in as a shareholder (RM2.0million) as well as to provide additional term loan to the project.

The project cost was revised to RM53.26 million which were financed by equity(RM10.0 million), term loan from TFC (RM9.25 million) and term loan fromIFC (RM20.935 million, syndicated term loan from SDB and RMB (RML1.0million) and working capital loan from RMB (RM2.075 million). the increasein project cost was mainly due to provision of escalating and contingency cost.(RM6.3 million), provision of working capital (RM4.0 million) and provision ofinteresting during construction period (RM1.5 million).

II. RELATIONSHIP BETWEEN THE BANK AND ALL PARTIES CONCERNED

The working relationships amongst all parties concerned are consideredsatisfactory except for RMB, the Agent bank, we find that they are at time slowin delivering TFCO's requests to us and also our request for information.

Except for the project cost overrun, the implementation of the project was in timeand was satisfactory. Our working relationship with borrower are consideredcordial and satisfactory.

- 17 -

Part TPage 7

mll. OPERATION PROBLEM

The actual project cost incurred was RM61.5 million. The project cost overrun(RM8.2 million) was due to increase in the cost of main process plant (RM4.9million) and auxiliaries (RM3.2 million) which were caused by the appreciationof US dollars exchange rate against RM. The project cost overrun was financedby an additional term loan of RM6.0 million from Perwira Habib Bank (PHB)and raw materials suppliers.

TFCO started trial production in July 1991 and commercial production inFebruary 1992. During the first year of production, TFCO faced teethingproblems on quality relating to:

i) Odour/colour stability for TPSA.ii) Fatty acid & tester for glycerine.iii) Chain length & colour for C8 + CIO.C) Higher purity of fatty acid and fractionated products like C12 & C14.

On Management, there was a high turnover on the key management members ofTFCO (which including the chief executive and the senior financial manager)over the implementation period.

TFCO has requested indulgence from the bankers to reschedule the repaymentof all the loans (from 3 years to 5 years). At the same time, TFCO proposes tobring in additional cash injection of about $4.0 million to take care of their cashflow requirement. A decision of our end has yet to be reached.

- 18 - PART IIITables 1 and 2

PART III. STATISTICAL INFORMATION

1. Related Bank Loans

Title Purpose Year of Statusl ___________ Approval

Small-Scale To provide institutional investment credit for October Closed (JuneEnterprise Project small-scale enterprises (SSEs), primarily owned 1984 1990)(Loan 2471-MA) by Bumiputera, through two development finance

banks (BPMB and MIDF), and to expand andrationalize the technical assistance (TA)programs for SSEs through six participatingagencies.

2. Project Timetable

Item Date Planned Date Revised Date Actual

1. Industrial Development Finance Project

Identification November 1984 November 1984

Initiating Project Brief February 1985 - February 13, 1985

Preparation February/March 1985 - March 1985

Project Brief May 1985 - September 24, 1985

Preappraisal Mission July 1985 - July/August 1985

Appraisal Mission July/August 1985 September/October October 6-27, 19851985

2. Development Finance Project

Issues Paper November 1985 - November 11, 1985

Decision Memo November 1985 - December 6. 1985

Loan Negotiations March 1986 August 1986 October 14-16, 1986

Board Approval February 1986 April/June 1986 December 16, 1986

Loan Signature March 13, 1987

Loan/Guarantee March 1987 - May 22, 1987Effectiveness

Loan Closing September 30, 1991 December 31, 1991 December 31, 1991

Project Completionja December 31, 1991 June 30, 1992 December 31, 1991

L Deadline for presentation of subloan or investment applications was December 31, 1989.

- 19 - PART IIITable 3

3. Cumulative Estimated and Actual Disbursements(US$ '000)

BIM (Loan 2771-MA) SDB (Loan 2771-MA) Total

Year & Estimated Actual A Estioated Actual A Estimated Actual ASemester OE OB QE

(%'c) OriWal Rev( Rovised ( Original Rvise I__ _ _ _ __ _ __ _ _ _ (1) 1 (2) _ _ _ _ _ _ _ d _ _ _ _ _ _ _

1987 2nd 400 = = 900 1100 = =

1988 1st 1,400 3,150 1,000 4,5501988 2nd 4,000 1,500 375 9,000 9,400 13,000 5,800 1,500 115

1989 ist 7,600 2,624 34.5 17,100 21,000 24,700 10,800 2,624 10.61989 2nd 11,200 3.706 33.1 25,200 32,800 1,500 6.0 36,400 16,800 5,206 14.3

1990 1st 14,200 5,187 36.5 31,950 43,800 3,500 1,500 4.7 46,150 24,800 6,687 1451990 2nd 16,600 5,985 36.1 37,350 6,500 3 ,38 8.7 53,950 31,300 9,223 17.1

1991 Ist 18,200 6,700 36.8 40,950 - 10_,00 9,722 225 59,150 36,800 16,422 27.81991 2nd 19,200 12,449 64.8 43,200 14,000 9,722 23.7 62,400 40,000 22,171 355

1992 1st 20,000 /a 12,449 62.2 45,000 17,500 9,722 21.6 65,000 - 22.171 34.11992 2nd - - - 45,000 lb 20,000 10,000 22.2 65,000 _ 22,449 345

Date ofFinal June 10, 1991 January 23, 1992Disburse-

ment

/a Loan amount of S5.30 million was cancelled as of December 28, 1989 and S2.25 million was cancelled as of December 31, 1991.lb Loan amount of S25.0 million was cancclied as of June 8, 1988 and S10.0 million was cancelled as of August 29, 1989.

I A = ActualOE = Original Estimate

- 20 - PARTMTable 4Page 1 of 2

4. Status of Bank Covenants

IX'-;S-- eityX X 0V'on0 08 t;;- Stab- 0 -X0Subje Remarks

Loan Agreement BIM (,oan 2770-MA) _

2702(c) Borrower shall open and maintain a special account i a Compliedfully convertible currency on terms and conditionssabifactory to the BankR

2.03(c) Borrower shal present subloa/investment appction on Compliedor before December 31, 1989

4.02(aXii) Borrower shal unih to the Bank audited financul Complied with slight delay.gtatements and Special Account within six months of end ofeach fi ar _

4.02(b) Borrower shal mauntain (and retain until at klt one year For complianceafter the Bank ha receied the audit report) separaterecords and acuts reflecting SOEs

4.04 Bornoner sh mantai its long-term consolidated debt- In compliance, rtio well below the limitequity ratio within 5:1

4.07 Bank and Borrower shafl exchange vws with regald to the In complianceadministtion, operatons and finanl condition of theBorrower

4.09(b) Borrower shall recycle the payments received in enxces of For complianceits repayment obligations from subborrower in accordancewith the Statement of Operational and Funancial Policies

Schedule 1 (as Withdrawal of the Proceeds of the Loan Compled, as amended on August 12 1988amended)

Schedule 5 Terms and Conditions of Subkan and Investments Complied. last annual interest rate rceew wasin June 1989, and deadline for subloanapplications was December 31, 1989.

- 21- PART mTable 4Page 2 of 2

Sectioti Sublje Remaks

Loan Agreement: SDB (Loan 2M-MA)

2.02(c) Borrower shall open and maintain a speial account in a CompbiedfuUly convertible currency on terms and conditionssatisfactory to the Bank

2.03(c) Borrower shall present subloan/investment applications on Compliedor before December 31, 1989

4.02(a)(ii) Borrower shall furnish to the Bank, audited fmancial Complied with slight delay.statements and special account within nine months of endof each fiscal year.

4.02(b) Borrower shall maintain (and retain until at least one year For complianceafter the Bank has received the audit report) separaterecords and accounts reflecting SOEs

4.04 Borrower shall maintain its long-term consolidated debt- In compliance, ratio well below the limit.equity ratio within 5:1

4.07 Bank and Borrower shall exchange views with regard to the In complianceadministration, operations and finAnciA condition of theBorrower

4.09(b) Borrower shall recycle the payments received in excse of For complianceits repayment obligations from subborrowers in accordancewith the Statement of Operational and Fiancial Policies

Schedule I (as Withdrawal of the Proceeds of the Loan Compled, as amended on January 7, 1988.amended)

Terms and Conditions of Subloans and Investments Complied, last annual interest rate review wasSchedule 5 in July 1990, and deadline for subloan

applications was December 31, 1989.

Minutes of Discontinuation of nominated projects In complianceNegotiations _

Guarantee Agreement

2.02 Guarantor shaU charge each Borrower a fee of 1%. Complied

2.03 Guarantor shall review with the Bank and each of the CompliedBorrowers the interest rates on the subloans

- 22 - PART m

Table 5

5. Use of Bank Resources

A. Staff InRuts(in Staff Weeks)

Task FY83 FY4 FY5 FY86 FY FM FY89 FY90 FY91 FY92 FMY3 TOl

Project Preparation .5 32 39.9 22.3 - 65.9

Projet Apprisal - 25 5 4. 29.7

Project Negotiations _ _ = 1.1 _ =

Lending Devtlopment 1 = | - - - L6 = = 16

Lending Operation 13 5.7 17 4.9 - - 13.6

Supervsion L - - 18 10.1 6.7 5.0 2.3 14 - 27.3

PCR Preparation _.1 - - 5 0 51

Projet Adiin = 11

Advice&Review h - 8 4 - - - 1.2

Total 5 4.5 45.7 50.4 12.5 10.1 8.3 5.1 2.3 1.4 50 145 7

B. Misjsons

Stlg of Project Month/Yeat No. of Peulru Days i Field Spedalization Pcrfornmance Types ofCydl __ Represented Rating Satus Problemg

11/84 2 14 4 a/d

03/85 7 14! La d

Tbrough Appnial 07185 2 14 /d |

10/85 3 21 /a /d

01/86 2 12 1d

Appraisal though 04/86 1 15 lb Dcv. Ftnance

Board Approval 6-7/86 1 22 L Dcv. Fnance

Board Approval . .

through Effectiveness

Supervision I 11/87 3 17 /a1 Minor NoDisbursements I

11 02/88 /e 1 5 Dcv. Fmnance Moderate NoDisbursements

Im 06/88 2 5 la /d Moderate DcvclopmentImpact, andOverIlI Status

IV 03/89 Lf 1 7 /a Dcv. Finance Moderate DevelopmentObjective,

V 6/89L 1 3 Dcv. Finance PrrjcctManagement,

VI 10/90 2 11 lb /d and Overall

vII 08/91 1 5 L Economist Status

/a Combined with Superviion of Small-Scale Enterprisc (SSE) Project|b Combined vith SuperUViion of SSE Project and Preparation for the Study of Development Fance Institutions.| Combined with Dceveopment Finance Institutions Study, and general industriai sector lending discusions.|d Mission comprised of at leat one economist and one development finance specialist.|l Msion cowered only SDB.IL MiAon covered only BIM.

- 23 - Part IIITable 6.1

6.1 BIM: Industrial Subsector and Regional Distributions of Subprojects

ISUBPROJEC 1 REGIONAL

NO NAME OF SUBPROJECT ISECTOR DISTRIBUTION

A-1 !LOH KIM TEOW ENG. SON BHO IMOULD AND DIE 'PENANG

A-2 SABAH SHIPYARD SON BHD ISHIPYARD ,SABAH

A-3 METTUBE (MI SDN BHD ISTEEL MILL iSELANGOR

B-1 ,C.S YAP ENGINEERING SDN BHD MACHINE SHOP :SELANGOR

B-2 IGALLANT PRECISION TOOL & ENG . MOULD AND DIE ISELANGOR

I SDN BHD

B-3 !TECHNOPRO CORPORATION SON BHOELECTRICAL & ELECTRONIC FEDERAL TERRrTORY

B-5 PERFECT AUTO INDUSTRY SON BHD I COMPONENTS MANUFACTURING I FEDERAL TERRITORY

B-7 SUN TONG SENG MOULD-TECH IMOULD AND DIE SELANGOR

SON BHD

B-B ALLOY AUTOMOTIVE SDN BHD !COMPONENTS MANUFACTURING IFEDERAL TERRITORV

B-9 !D-R ENGINEERING SDN BHD MOULD AND DIE IFEDERAL TERRITORY

B-10 KIEN HING INDUSTRY SDN BHD MACHINE SHOP ;SELANGOR

B-i NGA CHEONG METAL IND.SDN BHD IMACHINE SHOP !SELANGOR

B-12 FORDEX SON BHD IFABRICATION ISELANGOR

B-13 IP&S MECHANICAL ENG.SDN BHD jMOULD AND DIE ISELANGOR

B-14 ISUM HING ENG. WORKS SON BHD I MOULD AND DIE !FEDERAL TERRITORY

B-15 'GE SUNNY DALE IND. SDN BHD FCOMPONENTS MANUFACTURING ISELANGOR

B-17 IMICASTER SDN BHD IFOUNDRY ISELANGOR

0.2 BIM: Financial Characteristics of Subprojects Part III

Table 6.2

|5LPIKMEC - -iiNAE F 8lTPE ASSETg PAO.Cr LOAN _ _UIEST LODTE4O SOLO3 OF LOAN DiSBURSMD

fO SUJPAO&CtT OWHERSHIP f PRttECT BEFORE MWW4G Cr tSW RATIE PX.ACE FWR4 REMARKS soKUCE: w

___ __ _ (" __ ^ ("_ __ _ _M_ a A) APPF,OX.MSOOO

A-tI t OA KIM TEOWV ENG SONSH11D PRfIVAE ExPAtNSION 1 °23000 1.155,650 0 55.;5 805% 9 Vy.., 1rd - 8217% 253884 o-d.. | 64Intosmol Fund - 1I 3%

A 2 .AHAh SUISIPYARD SDN 8d11 1'IIIVAIE FxfPANSiC N 8') 6t(6 0m 5 338 574 2.706.570 8 5v 85 - . 18)RD - 95% 2,162.nt.,n.I Fund - 15% No A,,..,.

A M It I lf11 (f,4 I) 'PI fi i JOINT r t I -t411 127( iltt)1 20f) (X)n a TAI 10 n-" Equ-ty 28 35% NoN.A ,, 19,9378RD0- 15 75%

Con,rn B.n1 - 55 11%'1.

a I C S YAI' UNG 5D1) 11 11) 'RIVAIE f XPAr .1Mr 121 7,7 I 94A 175, 5lX(XIJ 8 Yv a 25 V..,. lHD - 72% lu A,...,, 510I,t.r,,.I F-nd 27H .

8 72 .Al I 11111 1- llfl(I 1 '4G ;fHl HHD 'IhiVAI FXIPAW1,trI 195 ',4A 617; 177 4'1J 271 8 57,7 5 15 y..u" BR0 - 78 7% t3 7 7, I ond,. 505Equity -21.3%

H -1 rI CNIItiOPO C P(ri) flAIO N S )t111110 lIRIVAIE f 4w N4i1 E.50,000 2() 9X 80 8 5% V..,. 48R0-3-30 6% CGomw.ny u 199

IDB - 38 4% I.g1o cI.on

Internal Fund - 30 8%

a 5 PFIlFFCC AUIOIN7DISIly SDN HI8D PRIVATl F XPATISI7)r4 7,28d8 975,01) 777 524 85% S 75 Y..,. ID -81 0% Lo.,, -. sf,IIy,.p. 781Int.,nsl Fund - 19 04.

8 7 SIIN Tt0N4 SFr4N. MfI 1r) TFCH PRIVAIF FIlPClDtorI 8135.753 S16 042 6'0.(00 8 01% 7 5 V-,l IB0 - 75 3% No A..... 694

SDN 1HD Inte-nal Fund - IS 0%

O_rdnr7t - 7 3%

R 8 Al I OY AtlIIOMO1IVE SON M0ID IPRIVATIF FXIPAWI1414 2517.043 2,060(000 1.539,525 80U. 8 a *Yors fBRD-77 7% NoA. r. 1,555

Intrn.I Fund - 1150%. 0%

0,,wdrftl - 73%

a-8 0 A ENrINEERINCG SDN RHD PRIVATF fVXPANl()I4 37,588 1 060,000 7rn,0Cn 85%'. GY..,. I4R80-66% No A..,. 713

Equity - 30 7%

Ov*nd,att - 3 3%

e-aO ELITI1ir1. i"Njuj,lIlR 1 .1DH Lru() I'iIVAIIL L zI'A1A,I0tI4 2 2z) W1J 648 LILr 4H8e 02 8 5q a YV.,. IBR0 - 73 5% 1No A...s 495

Ow..d,.tt - 23 1%

R I I NC.AI CI IFPIW- Mf I AI NAO SON RND )PRIVATE r XF'At4'WI1t4 152 4JI 7319 0n0) 520 95,4 8 0 52 5 Y-re, ISRO - 73 5% No A...,. 558Intafnal Fund - 13 0%

Ov.rd,.fl - 13 5%

H 12 1 a)141)t x SI)TN Bi l XlilVA II I* I *. tilt 2 57T Ct) 1.714 411 8 57 8 5 V..,6

lR8 - 76 0% Ulde, l.g.I *IlI 1,388

Equity - 24 0% J3276 oe.,du.

tl 13 T i A S f (IAiAIWAI I 4, ';[)N RU110 li4IVAli I 111AW1,41 rrj 946 510 ((an 4(0 232 8 0C 8 Y..,. fRD - 76 5% No A.,.. 415

Intmn.I Fund 273 5%

8 14 'IJAl 1ING Er,114i wl1i(S SID01Rtt1 PRIVAI E(XPAI 4;,, 81,7,57 117,( I W 00] Q1 n)or 85% 8Y? V-. IB R0-87% N.oA .... 908

Intwfnel Fund 13%

a 15 GF& SUNiNY DAL L Iri1) SDN1 Bll[) ilIiVAI r f v Nil 2.,525 (x 1,1I1. 23] 800 6 YV,. IRD - 50 5% No A..... 1,203

Etfuity - 4n S5%

nI1 MICA'; If 1i RIN . 1 'it RfilVA I r 141 NIlt 27,2Ys,on 1.053.415 8 5% 7 5 Y,. IBRD- 53 7% 716.747 ov,du. 952

Equity - 30 0%?

O.mrdtut: - 14 3%

I WINC,C1 I M At A V SIA Ill M)

TOTAL 33,939

Part III

6.3 BIM: Economic Contribution/Performance of Subprojects Table 6.3

SUBPAOJECi AE OF TYPE: Foe N EXCH. *4EICTAL BPOY 4VIEST. COST ECO. RATE

NO SlMPROJECT PRODUCT LINE IMPORT SUSJS)W'ORTS EARfAVED ESTIMATEDACTUAL PER JOB TOTAL PROFTT OF REtJRN

A-l LOHKIA TEOWENG SDNBHD PRECISIONTOOLSANDDtFS EXPORTS N/A 25 46.226 118,661 30 0%

A-2 SABAH Sli1PYARD SDN HOD OFFSHORE FAHRICATION N/A N/A 496 (5,542,429) 3fJ 3%

A-3 METTURE (M) SDN BHO COPPER TLlBES IMPORT SUBSTITUTION N/A 210 23.451 19 0%

B-I C S YAP' ENGINEERING SDN HHD PRECISION MACHINING

COMP. AND FORGED PARTS IMPORT StJBSTITUTION N/A 4 173G689 70.382 22 8O.

0 2 GALI ANT IVRECISION TI001 ENG PRECISION MOUI OS AND DIES IMPORT SUBSTITUTION N/A 7 90,740 (76h,49) 25 3%

SDN BHD

B-3 IEC1INOPto COlHPOUATION PRINTED CIRCLJIT BOAFlD IMI'Oii SUJRSliTUIION N/A 13 N/A 30 0%

SON BHO

H-5 PERFEC-T AlltO INDUSTRV AIRCONDAtION COMPONFNlS IMPlR I StJRSTITUTION N/A 8I 121.875 N/A 2n 30%

SDN RHD

B-7 SUN TONG SENG UOtJI D-TECH PRECISION MOUt D)S AND DIES IMPORT SUBSTITUTION N/A 3 305.341 104,844 33 2% FUI

SDN 8HD

B 8 At LOV AUTOMOTIVE SDON BHO ALUMINIUM ALLOVS WIIEELS EXPORTS N/A 14 147.143 135,7 27 1%

B-9 D-R ENGINEFRING SDN 8110 PRECISIOH MOUI l)S AND DIES IMPOR T SUIRST17UTION N/A 5 212.00 265,532 23 7%

B -10 IFN IIING INDIISTRY SON fIID PRESS PARTS AND

PRECISION MACHINING IMPaORT SUBSTITUlION N/A 100 9.17.C, 3/6%

R 11 tlI,Al M 111 CIO U MlAt IND St)N flH PRECISION4 OIf SETS

ANDPRESSEDPAIIIS IUMORI StJBSTITUTION N/A 4 184,150 301.084 363%

8-12 f ORDEX SON 8RHV STEEL FURNITURE IMPOnT SUBSTITUTION N/A 36 - N/A 25 2%

8-13 P & S MECHANICAL ENG SDN OHD PRECISION MOUt DS IMPORT SUBSTITUTION N/A 3 170,0:0 6,230 27 9%

8-14 SUM HING ENG WORKS SDN BHD TYRE MOULDS IMPORT SUBSTITUTION N/A 36 - 146.370 28 9%

e-15 GE SUNNY DALE IND SDN BHD EARPHONES A SHAVERSCREEN EXPORTS N/A a - (768.176) 30 8%

8-17 MICASTER SON 811D METAL CASTING IUPORT SUBSTITUTION N/A 36 - N/A 24 1%

RINGGIT MALAYSIA (RM)

Pat IIITable 6.4

6.4: SDB: Financial and Economic Characteristics/Performance of SLibprojects La

Subprojeo Subpmjeet Ownership S9tor Natvrt Asset Ske Pojcct Cost Amount of Loan Effetive Amortization

Nunber Namne before (MS million) (MS million) Intwreat (Years)

financing Rate (%): : (MS nih) 0 Estimated Actual Total of Which

: _ _ _ _ ::_ _ _ _ _ __ __ 0 : : : : ::TBRD _ ._ ___

A.2 lb Asian Supply Base Public Misc. Erpansion 61.75 90.96 93.73 43.00 8.73 11.75 8

AA4 fb Sabah Port Public Port Expansion 320.80 107.6(, 109.00 19.00 5.35 9.69 9

A.6 lb Desa Talisai Joint Agri/Palm Oil Expansion 1034 41.52 47.90 20.00 12.17 10.50 5

A.9 L Oleochemicals Private Manufacturing New nil 41.0 61.48 46.05 0.75 1.5 5over coSt

Total 392.89 281.18 312.11 128.05 27.00

Subproct Sakcs/ Net Sbare Sources of Finncing l*) Inremental Employment invenint Cost Total

Nar Rev enue Profit Capital per Job Employment

1991 (ko-) (M$ nil) Equity Ternm Loan $y.ndikation Estimated Actual (M$'OOOa)

:: (MS0: 0;;t : ;0:; ) 5 0 ; : 0 :::SDB i t:0 :;0 : O thers _ _ _ _ _ _ _ _ _ _ _ _ __Dth

Asian Supply 26.85 2.69 23.99 n.a. n.a n,a n,a. n.a. 63 509 184

Sabah Port 81.12 11.28 156.27 15.9 7.6 11.2 65.3 n.a. 897 n.a. na.

Dea Talisai 4.78 1.49 20.00 43.7 9.7 29.6 17.0 800 579 65 n a.

_ _ _ _ ~~~~~~A A _ _ _ _ __ _ _ _ __ __

Oleochemicals 1132 (0.63) 10.00 17.8 8.9 8.9 64.4 n.a. 110 559 110

Total 124.07 14.83 210.26 1,649

/a ERRs are not available.Lb No repayment arrears were due as of December 31, 1992.

L Cortnaneed by IfC loan of MS 19.8 million or 353 percent of total financing. Interst in arrears as of December 31, 1992 was MS 341,933. In addition, the principal installment has been overdue since

December 20, 1992. The sales and profit/lm data reate to eight months between July 1991 and March 1992.

Id Relates to 1990, the latest year ivailabic.e Relatea to only nine months January-September 1992.

Note: n-. is not available.

- 27 - Part III

IIAP M1m MALAVMA U .fD Table 7.1

ei t FL*" A LUJTES

Smm cu7 p" 50M0,0 0,0 = 60,440,0 60.4,b.0 120,440,4D0 12.,41,b40

Rom* lips10,114,219 10,114,219 10,114.219 10,11 14.2 70,174,219 t0,7 14,21.0Uv_ppruprw1 Pfi1 3 701,t08 5 Z77,MS 9 G,W l,rx e..7;,824 i0,576,.5

Trot &_% .o *m' tuna w3s:,7 36011,7m 7t6,5,T2! 77,0ffT,4 130,610,:W 141.140,2

Tmm Mans 1 74,4,34 22,2,43*,22 3MIS,84I 416,71,03T

Dwrr*d Wi1 -m - - m,o0 119,006

63,310,375 213,am7,¶40 2S7,eW7,3U 290,5=,01 1 40,251,24 57,971,3

C U%N9f LIIKTZ3Two Lmen 143=,28 228,:04 24,U0S= t;&. 31,I14A,4 35,M, 10

Lon kw ECJ. - A31,42 1,415Z?9 1 Xw2w 51,1201S 18,448,194

Into pg"i ae 049 90,064 1 r25,67 2,=,4*W 3 ,0mt, ^ 4A=,3

Othw ~We mLnd scru&Jt 19@,019 77t,1 1,12,010 2=,463 1,2258310 2..J2UI

Tm tmi p b 2,8777t 1,4d06,t - 19s6o. awu0. 3,0486,31,

ToJ current lTtbilbItt 148 651,MS 25,W6,767 20.5&4,005 33.T2744 4a,5790 t 64.30,7

Acc.p4.nc., r s .nd cod W ont.Vc" of cui e't"per wntm 8,710,000 0,473.T2o 20,44,821 6,1,s 14,M,77 7,14t

Z21,118,711 2,015.l,644 2M,SW,t 39,7tM 9W,Btt1278t t22,374,340

F t) t ,ETS 210,470 25a,75 25.653. 25,640,040 21&,t 517 26,210.172

MALAQt (t#"VAtHT SECEA.JTIEs 9."7U.LDO 10,0t.Of 21,297.D7 20 27.5t 2 x2t,5006 20;.2,5xm

1 45 OOrs S s.x - -_

SWSWjB RY COMPAIE - - 19,40,9W 20,513,231 1Z,SM,6..e 120.783,757

A3O02ATEV CO"-^MY - - - - 72,4215 74,W*

LOAN DEBTORS - 74,727.517 71.796,323 1s3,9(M,71¶ 21' 916,534 253,12t,5

ClRENT ASEsCSiA enn tenk twtano 292,U77 4d&0,¶ I I ,Z3,25 7,751,967 6,313,196 2,044,W

L) 4ts *no c6nfmnf incurIl.s 0e604.0W0 1O,703,311 77,90,347 17,213,04S 8l"1,56 71,M0, 1

Loen eDeora 1CIJ,711, 1s 32,43.,7%a 41,DW0,021 00,301,t . 9=t,43 a1r7,474,.

intwrnm nr1v.sl 2,5iB,51f 2,754,913 3,544,100 3.013,15 t,014,21 6,,77064

Ot8r,w dobaor. one piepsynts 2,02298 4.290. ,075,T9 3,341 167 4 o,821 5B,qw

177,2 1 8s 149,57 6 0 125 1X.21 112,=21,53 145213,57 190.51,Wl21

LhADWTXS OC CUSTOME "c AAO 'TAr#CEsOJAMTES AND TrIH CMLJCATKM5 Po COfTfRA S r10,0 MA q r3 20 434.821 98.51 ,M 14,mG T? 7,140

271.116,7¶11 250, I64.4 25.wJ6,OW 33 9,70,71 2506 S 0,Z70M OX74,340

Part III- 28 - Table 7.2

PROFTT AND LOW AOCOUNT

R he yew En 1 Sat DOOMMwsit. I 86-i M

Qporettng rovenu 10,705,510 14,147,655 14,005,783 16,206,952 24,56,407 30,a51,382

Proti tbeforttXntion 5,907,527 2,937,567 (015,870) 1,006,030 3.210,094 5,355.512Taxation (2,679,72M) 11,400,11T7 12,296 (850,000) O1,069,000) (2.330,000)

prollt jiter taatlon 3,027,799 1,576,390 (003,580) 3W,030 1.22,,94 2,525,312-xtrawrdirary Item - - 1,307,000 - _ _

Profit .wr taxation end extraordinary item - - 703.420U rupptopsd profIt at benlnring ot yesr 4,374,513 _ 5,27.548 5,900,966 e,523.730 8,046,24Prior yoar adjutment - - 184,734 - -

,A remtatd - - 5.277.546 6 165.700

Proflt lMlnDb tor approprmtion 7,402,312 1.570,390 - -

Tranufer to rewrve 3,701,158 3,701.156 - -

unapproprited profit at and of year 3,701,158 5,277,540 5.990,966 8.52n,730 8,046, 624 10,575,56

Part IIIS ABAH DE VELO0PM ENT B AN K BE RH AD Table 8.1I

8 A L A N C E S H E E T (A C T U A L)

hj-Liaudited)* 1~~~~~TEMSE 1992 1991 1990 1989 1999 1987 19866

:ASGSETS

Cash and Short Term Pru-nds 73335,14 : 1 . I 3. 75A 4 264., .OIt 24.76,30 218,191.422 17~W.U 6 .6Inv.estme~nts 106.470.:315: 134.153~,e84 132,824.7413 161.640.375 162,416.937 : 78.234.351 90.555.040Loans and Adi/ances Recei.,able: 5522.482,861t : S3.237 .879 : 614.9-28.359 5W,1,614.77C0 676.181.B67 : 85.965.919 : 904,257.993Subsidiaries 7,191,(56 1 7.7&89.598 7.279.154 7.278,331 7,272,159 7,271,330 7.295.C043Fie Assets 1 791,3j4l 1,116,046 1 1.514.010 799,681 1702,6185 2 14, 066 1 1.321,523Ott-er Assets 27.5?4,917 :-6.447,63~4 :,1.582,388 31.525.650 41.244.974 : 51.453.652 72.388.716

TOJT(l ASSETS 898.488.654 1 9.43755 : .r'54.433.724 984,698.11 I : 1,106.010.044 1.0Y50.788.2-99 1.101.844,378

:LIABILITIES Pt]DSHAREEI)1EERS' FIJJUSa

Denosits froin cuistomrs 4231,990,828: 524,?734.597 65R.763;.720 658,092.952 61e,1856.13-6 474,478.445 417.166,2t55Long Term Borrowings 92,950. 249 t P:).9;74,57-, 141.6H2.657: 91,454,B809 290.1836,146 386.937.763: 501.763,515Shorrt Term Borrowings I B,cV) ,(X%) I 0 0 0 0 10.443,300 15 COO. OC()Othe~r Liabilities : 483,642,0--94 1 9. '1.38 4~. ER9), 949 4 '5.139,385 1 33.1i3,1 91 32,105,282 26.182.692

Total Liabilities63,3111 725,117,5':O( E 85r0.326,826 794.687,146 942,227,37 903.964.796 960.112.462

Share Capital -Z ,0; :00 151 .5CO.(Cor 143,300,000 1 123.300.000 1 110,000,000 11,00X0, 000 Fk-,Ewves ~~~~64,90.5.523 1 58,766,2147 52,606.898 46.710,965 1 40,482,671 36.823-.5C03 : 31,73-1.916

:Total Shar-eholders' h-nd% 264.905,523, 2.58,766,247 -2)4,106,898 190,010,965 163,782,671 1 146,823.503 141,731,916

:TOTA L-IABILITIES ANDSI-kE"ILDERGS RI11)- 898.488.654 : 983-,,833.759 : 1.054.43,3.724 : 984.698,111 1.106.010.044 I.CY50,788.2-99 :1.101.644,3,78

ICOMMlITM'ENTS AM) CONTINGENCIES : 11,590.629 1 5,457,344 1 2-9,774,160 : 23,805,733 1 17.613,678 51,34A2.845 50.452.249

Part III

S AB A H DE V EL O PM ENT B AN K BE RH AD Table 8.2B A L A N C E S H E E T (P R O J E C T E D)

…-----.…~~~~~~~~~- - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - -- -

(tO:t:l) 1992 1991 : 1989 1988 1987 198b6

:~~~~~~~~~~~~~~~~===-- ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ -------- -----ASSE TS

Cash and Short Term Furnds 7t.t 1144147 127,721 42,552 5.901 O.,501 53,60?

Investments : 15),575 125,135 142,666 224,787 64,249 61,833 85,719

Loans and Advances Receivable: 576,062 57L,407 666,462 t 531,242 t 802,641 791,154 908,683 1

Subsidiaries 7.789 7.2BO1 7,274 7,278 7,271 1 7.271 7,295

Fixed Assets 963 2,120 1673Z 623 704 740 1,268 1

Other Assets 8,185 12,591 34,330 32,156 19,820 7 3,412 . 29,923=- -====_ == …=====…_==== - -=----==---__ 8------=_ -= ====… ===- … =====-

TOTA ASSETS 813,642 - 832,725E) 980.126 e38638 900,586 924,911 1,08634954 1

:LIABILITIES 14D:'SHPFREHOLDERS' F W DS:

Deposits from customers 336.922 365.996 491,453 445,035 322,667 271,917 397,213

Lcng Term nBorrrowinqs 90,113: 156,CR9 199.295 169,929 381,091 462,985 514,527

ShDrt Term Borrowings : 90 , ':K): 20),(c) 0 0 1,778 11,000 4,175

Other Liabilities M3..76 5,5 40.162 30,769 32,790 28,963 72,949:-- -- - - ----- -------- :-- - --- - - - - -- - -- - ------ -- _----- ---------- _-__--__________________.

Total Liabilities 553,0:2 577,638 730.910 645,733 738,326 774,865 948,864

: ……- a _________________ - _- - --- - -------- - ------------- - - --- - -…

Share Capital : 2tvX),oX' 2:%,OCK) 2C0,000 151,500 126,000 120,000 110,000 1Reserves 59,840 54,942 49,216 41,405 I 36,260 30,046 27,631

-- - - - - --- I - - - - - - - - - - - - - - ---- - - -- ---- -: 1 ---- - - - - - - - -

:Total S[areholders funds 259.840 254,942 249,216 192,905 162,260 150,046b 137,631

:TOTAL LIABILITIES ANDM :SH1 DERS FLI4DS 813.642 :825 1c - 980, 126 838,638 900,56 6 924,911 1,086,495

:COMI1TMENTS AND CONTINGEUCIES : 2.5395 7,(KX 1 33,000 12,545 26,498 16,753 87,480==__=====8__ ===============-…--…---- ==-===== =====.== ===-=--'8__ _ 8====== ====_====…==…

(1)

Part IIITable 8.3

S ABA H DE V EL O PM ENT R AN K BE RH AD

I N C 0 M E S T A T E M E N T (A C T U A L)

: (unaudited)ITEMS : ?192 : 19I : 99':' 1989 1988 1987 198b6

:IIN:CJ-E ; 7s 29.'945., ,: 23.:4 . '' .i883.724 : '. .- 19 3C),.66.908 27,546,2.67 : .)27,B.'6

IEXFENDITUIRE :(IC0,381.152): 1_.' 50.257)l (I1. 262,04 I): (21.952.437): tl6,1810,030): (16,969,2='): ( 15,426,5-b6):

:PRffIT EF-ORE TAXA11IN: 19.564.5-3, .T5.l 13.,726.68, 18,040.682 14.186,878 10.577,C)84 4.831.300

:Ia>ation: (6.925.3:(6): :.5'E.458: (?cI7,(yY)) (7.155..3'8): (6.627,710): (5,485,497): 319.141

:r4EI PRCFIT t 12,6h9.277 l1o.69.34? : 0.819.683, 10,8B5,544 7.559,168 5,091.587 5.150.441

:RETAINED PFFIT ' :8ROJIGHT FORWARD 16,066.246 : 15.4t:6.696 : 15,010,965 12.482,671 : 13,223,503 8,731,916 3,581.475

:PROFIT AVAILAaLEFOR APRORIATION : 28,7o5.523 23.066.247 -25.83V.648 23.368,215 21,382,671 13,823.503 8,731,916

:Transfer to General Reserve (6.3(x).(::'): r(5.5(ix,CKX)0): (3.700,000): (5,000,000): 0 0 :

:Interim Dividend of : : : :5%. less Tax (6.500.(v.A:,): (6.5:0,CK):0): (4.923.750): (4,657,250): 43,900,000): 0 0 :

:RETAINED PROFIT BROUGHTFCORPD : 15,9Q3,523 t6,0566,247 15,406,698 15.010,965 12,482,671 13,823,503 8,731,916

(2)

EawITable 8.4

S ABA H DE V EL O PM ENT B AN K BE RH ADINC OM E ST ATE MEN T (PRO J EC T ED)

(RI 000) : 199^ :192 91 : 19'0 1989 1988 1987 1986

1rCE(JE 2?,7,61T.:? 2.1 31.272e 24.400j 1t.(5

E iXPEJD ITURE~ (15.6:30): 17. IC'): 1?. t*1 (16,358): (17.315): (823:(14,625)1

MPROFIT BEFORE TAXATION 1.1 12.521 16.496 :15,960 :13,957 :6,277208

Taxatio (5,1 4): 4.699): (7.29r: (6,875): (7,732): (3,862): (1,059):

NET PROFIT 9 : 7,8 : 8.667 : .035 6225 : 2.45: 1021…- - - - - -- - - - - - - - - - - - - - - - -

:RETAINED PROFIT: Anoi FtR*4D 14,51: 16,421 15.346 9,244 13,035 4,603 : ,582

:PRFIT AVAILARE: PPPROPRIATION 22.64' : 4,243 24.015 18.329 19,260 7016 : 4,60

:Transfer to General Reserve :===.=======: 7==== =. : (3.500): 0 = =0= : = 0=

rIterim Dividpnd of : 85: less Tax :6,5X'(66.CK.: 6 ): 4,924): 0 0 : 0

:RETAINED FPRFIT BRJ-TF:OROUGHTD II 440 13.843 12.515 9,905 19,260 7,018 :4,603 :

-:- - - = : :-- - - - - - - ~-- - - : - - - I - --:- - - : :-- - - := : = = - - - - - - - *--2

:Transer toGenerl Resrve : 5.74^::): 3,WX-) {5.<>~w~l 13,50) 0 O(:)

Part IIITable 8.5

S AB AH DE VELUP MEN T B ANK BE RHAD(A C T U A L)

(uniaudited) *

I TEMS * 1992 1991 1990 1989 19BB 1987 1986

Operating Ir.ccsre 73,8GM,23 76.073.C.69 71 .9&L0.255 64.284.20A 70,859,738 66,906.973 62,218,8B3B

I Operatinwg Expenses 5 4.290,655 tl7,715,262 5S.23z,572 66,243,3322 56,672,868 56,329,B69 57. 87,53B8

Profit Befowr- ray 19.5b4.taT I6. :57. 807 IF].726.68 1 22040,8B2 1 14.186,878 I 10.577,064 4.B31,300 I

IPr-ofit After Tay. 12,639,2-7 12~,65;?.349 10,819.61E3 10,5865.544 1 7,559,1618 1 5,091,5187 1 5,130,441 11-

1 Petained Profit 1 15,905,523 t6,0--66,247 15.406,898 15,010,965 12,482,671 13.8223,503 B ,731,916I

Gerneral FL-serve I 49,04X~),(KX0 42,7oo,CK(K 37.200,,000 31,700,000 I 218,000,000 1 23,000,000 23.000,000 I

Paid-up Capital 2C((:E)$Xo0,)0 1 C_K)0K:i,C0W 151 ,500,000 143,300,000 1 123,300,000 1 IIC,000,000o I 1o,000,000

1Total Assets 1 696,48B,654 1 93,8813,755 1,054,433,724 984,698,111 1 1,106,010,044 11,050,786B,299 11,101,1344,376 I

Loans and Advances I ciutstanding(before Provision for I

Ifor Bad arid Dix,utful Debts) 1 563,128,430 1 612,916,366 1 656,726,387 I 572,535,333 I 701,290,470 1 823,6392,242 1 932,003,499 I

Total Deposits 483,990,628 584.934,597 658,763,2220 6513,092,952 I 618B56,136 474,478.445 417,166,2= W

1CERTIONP. INDICAT88S 11

:Eamning Per Share befare Iax(cents)1 9.78 19.31 12.70 113.53 112.16 19.62 I4.39

:Earning Pe-r Share after- Tax (cents).' 6.332 7.20 I 7.34 1 .17 16.498 4.63 4.68 1

.Pre-Tax Return an Average ... IShareho~lders'Fun,ds I.) ?.5 7.9.5: 10.2: 9.1 7.3: 3.5 :After-Tax Return an Aver-age *I:

Paid-upCapital Y.) *6.3: 7.2: 7.3: 8.21 6.5 1 4.6: 4.7 1lAfter-Tax Returm an Average

I I ToWa Aets WV I 1.3 11.2 11.1 11.0 2 0.7 1 0.5 10.5 I

(3)

Part IIITable'8.i6

S ABAH DE VE LOP MEN T B ANK BE RHAD

(P R 0 J E C T E D)

* ~~~~~(AM'1Cto)1 1992 : 1991 1 1990 1989 1 1988 1907 19B6 -- --- - - -- - - -- - - -- - - - - - - - - -------- -- - - -- -- -- -- - -- -- -- - --

;FINANCUL~. &ulG-tIo-nS

I Uler-ating Income .7s. Ob9 73S.542 1 6.767 62.319 167.494 1 70.635 59.5371

Opcerating Expenses .1~.47-I t. )2l 60.2-71 46,359 153.537 164.358 157.457

Profit Before Tax t 14. 322, 1'2.521 16.496 15.9601 13,957 16,277 2.080 1

Prnfnt After Tax 17,822 6,667 9.005 6,225 2.415 1,021

le-tained Profit I I . W', 13,64-2 .569,905 7,260 7.018 4,60)3

IGeneral ReIserve ,48,4(i) 41 , t(t) 1 36.7(i) 31I.500) 1 29,00 1 23,028 23.0281

Paid-up Capital I wriEr:fv, ) 0,(K0 151,500 1126.000 1) 120, .(ti) I110.000 1

Total Assets. 8137,6421 8,32.5801 980. 126 B38,638 900, 5861 924.911 1.0866495

Loans and Alcvances IIIaIcautstanding(before Provision for *III

Ifor Bad and Doubtful Debts) 1 62, 727 1 620,455 710,246 1559,534 E 823,700 1824,001 :937,766II.

1Total Deposits . 33,6,922 1 365,9961 491.4531 445,0351 322,6671 271.917 397,213 I

1FlN0flC1[t PM)*

lEamning Per Share befor-e Taxwcents): 7.16 16.26 138.25 10.53 111.08 5.23 : .89 I

:Earning Per Share after Tax (cents): 4.56 1 ,.911 4.33, 6.00 4.941 2.011 0.93

:Pre-Tax Returni on Aver-age .aS

1Sharetnilders' Funds (l:5s : 5.0 :7.5 9.0 B .9 4.4 1.5

:flfter-Tax Retur n o Av~erageI* Paid-up Capital (7I) 4.6 1 3.91 4.9 7.1 1 5.11 2.11 0.91

'Af ter--Tax Retur n i Average1 I111ITotal Assets W LI: 0,91 1.01 1.01 0.71 0.2 0.1 I

&OWH DEVELC.[- M+, BM-AP Part III"ESTIC/FCOEIGN CU.FEJCY RESJIFM MoBILIZATION Table 8.7

AS AT 31 DEEEMEER ()'

1986 1987 1989 1989 1990 1991 1992

r .ctIr r-es

-a.d tp Cazpital & pes<rve 141.,7'1,916 146.BCf )' 16-.782,671 190,010,965 2(i4,106,89e 256.766.247 h64.905,523Wvecmnet Lnans 81,414,51 81,883,13) 68. 38,2B2 732910,359 115,482,561 76,243,123 70,t0.790un3D FIom.ting Rate Wtes 10C36E),-) 2.)637,9,P - -Ftreiw, Finaincial Sources 2V4.444, ', 1P99 4334594 13S15.0(M) -Urgustic fiLeolvinq Loan5 112, -*Xt) 61.iM8, -DbnEstic DerpositS 41, 1t 256 474,470,445 618,(356,1^o 6 95-2 65B,763.2210 5e4,9-.94.597 463,990,R28lAkx-ld P.il I-oans - -~ 4.0C9.45') 26.2C0).C196 24.731,445) 22,399,419

1.*'6" 661 ,*86 1 ,(KZ3 2 ;9, 711 1 "1 , 62.953 99,5CEI.726 1,004.E552.775 994.675,417 E41 ,H46,5iO

Itcbbilizaticn of REswrces

Fi :r-d fAssets - t¢t 1 .- 21 -, 814.066 702.6SS 799.681 1.514,010 1. 1 16,46 791,3S41Investments 9Co),i 1 -I42 78.2374.3-1 162,416,9337 161,640,375 132,824,743 1S4.15S,884 10f-6.470,Z15Loars an-d Advances Receivahle 9f)4,, -7,.99 81F.965.919 676,181,867 533,684.770 614,92E.359 573. 27 H79 522,482,,881I1okri ncz C-pital 5-7.2.2 C36 115.954.045 226.251,305 236,IS569 248,C016,5CF9 228.378,C605) 204,310,9679bbsidiaries 7 29 n42 7.271.330 7.272,159 7.276.331 7,279,154 7.7W9.fE 7,791,56 I

1,(060,661.686 1.C0B.239,711 1.)72.624.953 939,55B,726 1,0O4.52,775 944,675.417 B41,846,56)0 u

Documents

The World Bankl fileDocument of The World Bankl FOR OFFICIL USE ONLY Report No. 12353 PROJECT COMPLETION REPORT MALAYSIA DEVELOPMENT FINANCE PROJECT (LOAN 2770-2771-MA)