FILE COPY Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No. P-2203-BD

REPORT AND RECOMMENDATION

OF THE

PRESIDENT

OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

TO THE

PEOPLE'S REPUBLIC OF BANGLADESH

FOR A

JUTE PROJECT

January 17, 1978

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

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CURRENCY EQUIVALENTS

The Bangladesh Taka is officially valued at 26.70to the Pound Sterling. The Pound floats relative to theUS Dollar and consequently, the Taka US Dollar rate issubject to change. The rate below has been used through-out this report, except where stated to the contrary.

US$1 Tk 15.0Tk 1 US$0.067Tk 1 million = US$67,000

WEIGHTS AND MEASURES

1 acre (ac) 5 0.405 hectares (ha)1 mile (mi) 1.609 kilometers (km)1 square mile 640 ac (259 ha)

(sq mi)I maund (md) = 82.27 lb. (37.3 kg)1 metric ton (MT) - 26.8 md1 katcha bale jute = 4 mdI pucca bale jute = 5 md

FOR OFFICIAL USE ONLY

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

ADA - Assistant Director of AgricultureADB - Asian Development Bank

BADC - Bangladesh Agricultural Development Corporation

BJRI Bangladesh Jute Research InstituteBKB - Bangladesh Agriculture Development Bank

(Bangladesh Krishi Bank)DAJ - Directorate of Agriculture (Jute)DEM - Directorate of Agriculture (Extension and Management)

HYV - High Yielding VarietiesIJCS - Intensive Jute Cultivation Scheme

IRDP - Integrated Rural Development ProgramISO - Input Supply OfficerJEA - Jute Extension Assistant

JEO - Jute Extension OfficerJFA - Jute Farmers' AssociationKSS - Village Cooperative Society (Krishi Samabaya Samity)

SMS - Subject Matter SpecialistTCCA - Thana Central Cooperative Association

T&V - Training and Visit (extension system)

GLOSSARY

Block - Smallest unit in the Intensive Jute Cultivation

Scheme - 200 or 400 acres jute.District - Administrative unit in Bangladesh. There are

19 Districts in the country.Katchabale - Jute bale compressed by manually powered press,

weighs 4 maunds.Paddy - Unhulled rice.Puccabale - Jute bale compressed by hydraulic press, weighs

5 maunds.Thana - Administrative unit in Bangladesh. There are 413

thanas in the country.Unit - Intermediate unit in the Intensive Jute Cultivation

Scheme - formed by 5 to 10 blocks - about 2,000

acres jute.Zone - Largest unit in the Intensive Jute Cultivation

Scheme - formed by 25 units - about 50,000

acres jute.

FISCAL YEAR

July 1 to June 30

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

BANGLADESH

JUTE PROJECT

Development Credit and Project Summary

Borrower: People's Republic of Bangladesh

Amount: US$21 million equivalent

Terms: Standard

RelendingTerms : Part of the proceeds of the IDA Credit would be passed

on to Sonali Bank at a rate of 3% per annum.

Purpose: The proposed project, through the on-going Intensive Jute

Cultivation Scheme (IJCS), is intended to bring about:(a) a higher productivity in jute cultivation; and(b) better marketing for raw jute. The project would,over a five year period, aim at: (a) raising yields andreducing cost of production of jute on 1 million acresby improved extension activities (including provision ofhousing and transportation for jute extension workers)and credit; (b) establishing a pilot jute marketing schemeaimed at increasing farmers' returns; and (c) improvingproduction and marketing equipment (seed drills, handhoes, storage sheds, baling equipment, etc.). In addition,technical assistance would be provided through consultants;the project would include overseas training of staff, localtraining of selected farmers and project evaluationservices. Improved marketing practices, in particularthrough the pilot marketing scheme and ultimately throughthe establishment of intelligence and price managementmechanisms would contribute to stabilizing the supply ofjute fiber and goods around a level adequate to meet therequirements of local jute mills and for export at compe-titive prices. The increases in jute yields and reductionin production costs achieved through the project wouldenable Bangladesh to either: (a) maintain jute produc-tion at present levels and release approximately 400,000acres for paddy growing or alternatively, (b) use itsimproved competitive position to capture a larger shareof the world market for jute and its substitutes. Inpractice, the actual situation resulting from the projectwould presumably be a combination of these two alternatives,

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with some increase in the total jute production and somedecrease in the jute acreage in non-IJCS areas. The eco-nomic rate of return is sensitive to the level of juteprices on the world imarket. There is a risk that theproject might encourage production of raw jute beyond thelevel of which it can be sold at economic prices. Parallelefforts, designed to establish effective systems for pricemanagement and marketing, are intended to minimize this risk.

Project Costs: Local Foreign Total---- (US$ million) ----

I. Short-Term Credit 7.03 3.35 10.38

II. Implements 1.23 - 1.23

III. Extension Services 9.43 2.41 11.84

IV. Marketing Infrastructure 0.53 0.20 0.73

V. Technical Assistance 0.18 0.35 0.53

Base Cost Estimate 18.40 6.31 24.71

Physical Contingencies 0.56 0.24 0.80

Price Contingencies 5.69 2.08 7.77

Total Cost (withcontingencies) 24.65 8.63 33.28

Financing Plan: BangladeshGovernment Sonali Bank IDA Total------------------(US$ millions)---------------

5.82 6.46 21.00 33.28

Disbursements: -------------------- (US$ million)-------------------Bank FY 1978 1979 1980 1981 1982

Annual 0.1 3.4 4.0 6.5 7.0Cumulative 0.1 3.5 7.5 14.0 21.0

Rate of Return: Above 50%

AppraisalReport: No. 1587-BD, dated D)ecember 29, 1977

INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDITTO THE PEOPLE'S REPUBLIC OF BANGLADESH FOR

A JUTE PROJECT

1. I submit the following report and recommendation on a proposedcredit to the People's Republic of Bangladesh for the equivalent of US$21million, on standard IDA terms, to help finance a jute project.

PART I - THE ECONOMY I/

2. A Basic Economic Report on Bangladesh, entitled "Bangladesh:Development in a Rural Economy" (Report No. 455-BD dated September 15, 1974)was distributed to the Executive Directors on October 1, 1974. An economicmission was in the field in November 1976 and its report entitled "Bangladesh:Current Economic Performance and Development Policy Issues" (Report No. 1469-BD,dated May 19, 1977) was distributed on May 23, 1977.

Introduction

3. The Basic Economic Report described the obstacles to developmentin Bangladesh and outlined a course of action to maximize the developmentof the country's resources. The high ratio of population to natural re-sources, the slow development of the productive and infrastructural baseand the weaknesses of the administrative and institutional framework led theReport to project a growth rate of GDP of between 2% and 3.5% per year inreal terms over the five years 1973-78, the variations within that rangedepending on the appropriateness of the policy framework and on levels ofaid.

4. Overall economic progress since independence, however, has been in-adequate. Agriculture output remains insufficient for a population growing atclose to 3% a year. Industrial output, heavily dependent on imports, has beenaffected badly by scarcity of foreign exchange. State enterprises have beenhampered by management deficiencies, excessive government controls, shortagesand price regulation. Exports have been stagnant and finance less than halfof import needs. Bangladesh also has been severely affected by an adverseshift in its terms of trade since 1973. Trade problems are compounded bydependence on annual food imports of 1-2 million tons, even in years of favor-able weather, and by heavy reliance on imported industrial raw materials. Gov-ernment revenue has been insufficient to meet current and development expend-iture needs. Bangladesh has had to depend on large flows of external assist-ance to support its development effort.

1/ Parts I and II of this report are substantially the same as Parts Iand II of the President's Report for the Sixth Imports Program Credit(Report No. P-2155-BD), dated November 2, 1977.

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5. The present Government, in power since November, 1975, rules bymartial law. General Zia Rahman, the Army Chief of Staff, serves both asPresident and Chief Martial Law Adiministrator. The two chiefs of the otherdefense services serve as Deputy Chief Martial Law Administrators. Thethree service heads and fifteen civilians form a President's Advisory Council.Each of the members has responsibility for one or more ministries. GeneralZia Rahman's political program was endorsed by an overwhelming majority in areferendum held in May 1977. This program includes national elections inDecember 1978 and local elections, at the municipal and district levels, thisyear: municipal elections have already taken place, while district electionsare scheduled for December 1977 (Urnion Councils were elected in January 1977).

6. The current Government has introduced some economic reforms, such asa reduction of producer and consumer subsidies, a tax on agricultural income,liberalized imports and an improved climate for private investment and privatesector participation in domestic and foreign trade. Steps have also been takento disinvest about 300 industrial enterprises and to grant greater functionalautonomy to public corporations. In the financial field, the Bangladesh Gov-ernment (GOB) has continued to pursue prudent monetary and fiscal policies.However, the fundamental problems of the country - namely overpopulation, weakadministration, inadequate infrastructure, insufficient foodgrain output andinadequate resources for development - continue to confront Bangladesh.

The Current Economic Situation

7. On July 1, 1975, Bangladesh initiated a stabilization program inconjunction with a standby arrangem,ent with the IMF. Its principal elementsconsisted of a credit restraint program and elimination of deficit financing,combined with some import liberalization. This was preceded by a devaluationof 58% in May 1975, which subsequenitly, as a result of a link with the PoundSterling, has led to a cumulative de facto depreciation of 90%. The recordso far is that the credit restraint program has been a success: after anestimated rate of inflation of about: 80% in 1974, prices declined by 10% in1975, and price stability has continued to be a major objective in 1976 and1977. The import licensing program was relaxed during FY76; besides increas-ing allocations to an average of 95%' of entitlements, licenses were renewedon expiry and there is greater fungibility in the use of exchange allocationsfor selected categories of imports. Improvements in this area continued in±iY77: import requirements of all public corporations and high priorityprivate sector industries were fully met, the role of the Trading Corporationof Bangladesh was further reduced, and the list of items permitted under theWage Earners' Scheme for imports by the private sector was enlarged.

8. The economy of Bangladesh was relatively stable in FY77. Populationcontinued to grow at the high rate observed in recent years and the dependenceon food imports to meet internal deficits continued. Export earnings showeda modest increase. Adverse weather affected the rice and jute crops, reducingoutput. However, the impact on prices was mitigated by recourse to stocks.A drawdown of foodgrain stocks, in conjunction with imports, helped to moderatean escalation of foodgrain prices in the first half of 1977. Likewise, juteexports were maintained at about the previous year's level by utilizing jute

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stockpiled from previous years. Monetary and fiscal policies were designedto stimulate production and to moderate the rise in prices. Despite emergingshortages, therefore, the rate of inflation in FY77 was restricted to about12%. Increased incentives were offered for the export of non-traditional ex-ports and import liberalization was accelerated. Greater opportunities wereoffered for participation of private enterprise in economic activity. Overal7leconomic management continued to consolidate-albeit slowly-the progress thathas been evident in recent years.

9. The agricultural sector did quite well in FY76 with overall pro-duction increasing more than 10%. Favorable weather was essentially respon-sible for the good harvests. The output of foodgrains rose to a record levelof 13.0 million tons. This was reversed in FY77 when, as a result of cyclonesand floods, foodgrain output declined to an estimated 11.8 million tons. Thedeclines were concentrated in the autumn (Aman) and spring (Boro) crops. Asa response to the lower harvests domestic rice prices began to rise sharplyin the first quarter of 1977, prompting the Government to import about100,000 tons of foodgrains with its own foreign exchange resources. Sincethat time, the Government has imported a further 280,000 tons of foodgrains ata cost of US$70 million. While weather continues to be an important elementin the determination of harvests in Bangladesh, attention has to be paid tothe improvement of agricultural support institutions and input delivery serv-ices as well as marketing systems. The small-scale irrigation program (com-prising low-lift pumps, and shallow and deep tubewells) is a major input inthe improvement of farm productivity. The program needs to be designed toensure greater coverage, efficiency in the maintenance of equipment and punc-tuality in delivery of the service. Procedures for the allocation of fer-tilizer, though much improved, still require simplification. The Governmenthas expressed an intention as part of an approach to a comprehensive foodpolicy, to increase the procurement price for rice and reorganize and improvethe marketing, storage, and distribution network. It has also announced thatit would increase the price of foodgrains sold through ration shops, changethe proportions of ratinned rice and wheat in the ration system in favor ofwheat, and ensure greater selectivity in the distribution of rationed food-grains. In order to achieve a greater degree of food security which wouldhelp it to carry out these measures in a satisfactory fashion, the Govern-ment has announced that it wishes to increase its foodgrain stock to aboutI million tons by the end of June 1978, and to have a pipeline of imports ofabout 500,000 tons, to wiLisLaiid unfoteseen contingencies. The achievementof the target foodgrain stock will depend on the efficiency of the domesticfoodgrain procurement program, a satisfactory level of imports and appropriatepricing and distribution policies for rationed foodgrains.

10. The performance of the industrial sector has improved considerablyin recent years. Capacity utilization has increased as a result of an im-provement in the supply of raw material and spares, combined with a ration-alization of the retail distribution network. The managements of nationalizedenterprises now have greater autonomy with respect to operational matters.Inventory control has also been improved, and there is a closer relationshipbetween input and output prices. The jute industry, which accounts for asignificant share of total industrial output, as well as being a dominantforeign exchange earner, still continues to have problems relating to

efficiency in production. In FY77, as a result of a shortage of raw jute andbuoyant international demand for raw jute, the Jute manufacturing industry hadto pay very high prices for raw jute. This exacerbated the problem of profit-ability; the losses of the industry are estimated at Tk 533 million in FY77.

Balance of Payments

11. The impact of the good foodgrain harvests and the policies andmeasures instituted in FY76 were reflected in Bangladesh's FY77 balance ofpayments. The restrictive monetary and fiscal policies of FY76 were con-tinued in FY77 and they continued to restrain demand. This, plus reducedrequirements for food imports and lower import prices, reduced the value oftotal imports by 27%. Export earnings showed an increase of 5%. Exportsbenefitted from a favorable climate for non-traditional exports which, inaddition, were stimulated by a package of incentives. New items were addedto the list of export products elig:ible for export performance licenses;the income tax rebate on earnings derived from non-traditional exports wasdoubled; exporters were qualified for preferential credit and interest rates;and priority was accorded them in the issuance of import licenses for thepurchase of raw material and machinery. These incentives contributed sub-stantially to the large expansion, estimated at 36%, in the value of non-jute exports. Consequently, the tratde deficit is estimated to have declinedfrom US$909 million in FY76 to US$537 million in FY77. The current accountdeficit in the balance of payments is estimated to total US$512 million.However, since external aid disbursements in FY77 are estimated at US$572 mil-lion, inclusive of a cash grant of US$50 million, Bangladesh's internationalreserves are estimated to have risen by US$72 million to US$285 million atthe end of June 1977. This would be equivalent in value to about threemonths anticipated imports in FY78.

12. The balance of payments gap is expected to worsen in FY78 as a resultof a marked increase in the trade deficit. Export earnings are expected tomaintain the momentum of recent years and increase further to about US$425million, principally due to a further increase in non-traditional exports.However, the supply of jute is likely to be constrained as a result of a lowlevel of stocks, while the scope for further increases in export prices islimited by competition from synthetic substitutes. The value of imports isprojected to rise by US$337 million i(36%) over FY77. This is principally aresult of food imports of 1.6 - 1.7 million tons (double that of the previousyear) and an expansion in imports of raw material and other consumer goods.In FY77, certain basic stocks were run down, especially of such items ascotton, rock phosphate, cement clinker, pulp, soda ash, steel scrap, andcrude soya bean oil. Increased capac:ity utilization in industry and thedrive to contain inflation will necessitate larger imports in FY78. TheGovernment has also accelerated the liberalization of imports: essentialindustries are now permitted to import raw materials and spares to meet 8 to11 months of requirements. Further, for the first time, items such as cottonyarn, coconut oil, tires and tubes, and dyes and chemicals can be importedunder open general license. The amortization of external debt will alsorise in FY78. Bangladesh will have to repay approximately US$30 million tothe IMF over and above its normal debt service. Hence, despite a 45% increaseto US$816 million in anticipated disbursements from external aid, Bangladeshexpects to reduce its international reserves by about US$32 million in FY78.

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BALANCE OF PAYMENTS ESTIMATES(million US$)

FY75 FY76 FY77 FY78(Actual) (Actual) (Actual) (Projected)

Merchandise Imports (c.i.f.) -1,402 -1,290 /b -937 -1,274Merchandize Exports (f.o.b.) 358 381 400 425

Trade Balance -1,044 -909 -537 -849

Other Current Account 7 1 25 15

Current Account Balance -1,307 -908 -512 -834

Other Receipts and Payments (net) 272 /a 122 46 50

Amortization: Long-term debt -25 -78 -21 /c -13

Short term capital movements(net) (including IMF) 62 -13 /d -51

Changes in Reserves (-=increase) -196 50 -72 32

External Capital Disbursements 924 814 572 816of which:

Food 389 307 128 286Commodity 386 378 220 300Project 145 129 174 230Cash 4 - 50 -

/a Includes US$260 million of outstanding letters of credit./b Includes an estimated settlement of US$24 million of outstanding

letters of credit carried over from FY75./c Including repayment of US$6 million on USSR Wheat Account.jd Including refund of a deposit of US$21 million made by the Kuwait

Central Bank.

Source: Bangladesh Planning Commission and Bank estimates.

The Medium Term Development Focus

13. In its memorandum for the July 1977 Bangladesh Aid Group Meeting,GOB spelled out the focus of its development strategy for the medium-term.

Agriculture continues to be the cornerstone of its program. Within agri-culture, the emphasis will be on an intensified Rural DevelopmeiaL Strategywhich seeks "growth with equity" in the distribution of benefits. Strongefforts are being made to include many of the landless and unemployed inworks related to the building of rural infrastructure. Efforts are being

made to expand the acreage of high yielding varieties of seed, to intensify"Food for Work" programs, to step up agricultural input programs and toimprove the efficiency and capability of agricultural support institutions.An intensive production program to increase output by 500,000 tons has beenlaunched in connection with the forthcoming Aman crop and programs to increasethe output of pulses, oilseeds, tobacco, sugarcane and tea-are being planned.It is too early to say to what extent the Government's intentions will be

translated into realistic programs of action, but they represent an essential

recognition of priorities.

14. In the industrial sector, capacity utilization has improved in anumber of industries and the supply of raw materials and spares has improved.The Government has started to reorganize public enterprises, which accountfor a major share of industrial output, in order to improve management andlabor productivity through, among other measures, providing them with moreautonomy in matters such as staffing.

15. The weak administrative framework, the frequent overlapping offunctions, and insufficient decentralization of authority have been importantreasons for delays in the execution of projects. The Government has indicatedits intention to remedy these defects and has taken positive steps to reduceadministrative bottlenecks impeding project execution. Discussions are under-way with the Government concerning provision of technical assistance (withIDA funding) to the Planning Commission in the fields of overall planning andproject preparation. Project preparation and implementation cells are beingset up in Ministries and Public Sector organizations to identify, develop,and monitor projects. A study to determine measures to strengthen the capa-bilities of the Ministry of Agriculture and the Bangladesh AgriculturalDevelopment Corporation is under way, with assistance from IDA.

16. Despite a substantial fiscal effort in recent years, Bangladeshcontinues to depend heavily on foreign assistance, to finance the bulk ofits development expenditures. The Government has indicated its intentionto reduce this dependence and to imiprove its efforts to mobilize domesticresources. In FY77, total revenue is estimated to have increased by 11%,about twice the projected rate of growth of GDP. Some new taxes and reduc-tions in subsidies have been introduced: (a) a tax on urban non-agriculturalland and a tax on agricultural land holdings in excess of 8.4 acres; (b) awater charge levied at 3% of the gross increased benefit accruing to bene-ficiaries of the Ganges-Kobadak, North Bengal Deep Tubewell, and Dacca-Narayanganj-Demra Projects; and (c) a 20% increase in the price of fertilizer.

17. Population planning is being given high priority and is an integralpart of the Government's economic growth strategy. The Government, with theassistance of IDA and other donors, has developed a program which emphasizesa multisectoral approach including motivation, communication, and education.This involves a major effort in training medical and para-medical personnel,in co-ordinating several agencies and in devising programs for research andevaluation.

18. The policies and measures initiated by the Government represent agood start. Yet they are no more than a beginning in tackling the majorproblems of expanding the output of foodgrains, increasing domestic resourcemobilization, promoting exports and improving administration. Successfulimplementation of the measures already initiated and formulation of additionalmeasures are necessary in FY78.

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PART II - BANK GROUP OPERATIONS IN BANGLkDESH

19. Bangladesh became a member of the Bank and 11)A in Augitst 1972.Initially, Bank Group operations in Bangladesh concennrrl-ed on rpartivationof IDA credits for uncompleted projects financed under credits to Pakistanbefore the independence of Bangladesh. Eleven such credits in an aggregateamount of US$148.55 million (including US$44.1 milliorn for the repayment ofamounts that had been disbursed under the corresponding previous credits toPakistan, and net of cancellations) were made to BangladcGh. In addition.as of November 30, 1977. 22 new credits, excluding the consolidation creditof US$31 million referred to in paragranh 20. have bef,ade totallingUS$674.3 million. Of these US$425.0 million have beern fLo Lf-ve programcredits. The project credits have emphasized agricuilt"rA. levei.pii,. 7 1

also included amounts for population, telecnmuni_tn transport andindustry. On June 18, 1976 Bangladesh became the 105th member of IFC. IFCis currently considering several possible proiects and a request fron theGovernment to provide technical assistance in developii-, a capital ruarket.

20. Agreement has been reached between the- v ,r-.t-t and most of thebilateral and multilateral donors concerning the assutmption by Bangladesh ofportions of the debt contracted by Pakistan before Bangladesh became indepen-dent. This will lead to some increase in debt service from the levels nowprevailing. Currently, the debt service tatio is abur 1L%. A1ill_ it is notexpected to exceed 20% over the next several years, iL nay do so by the Lid1980s unless careful debt management policies are pursued and aid providedon appropriately concessional terms. With respect to the Bank Group,Bangladesh has agreed to accept liability for certain debt for projectsvisibly located in Bangladesh and completed before independence. A consol-idation loan of about US$54.9 million and a consolidation credit of aboutUS$31.0 million were signed on February 14, 1975. The Banlk Group's Rhare ofBangladesh's outstanding external debt is not expected to rise significantlyover the next few years from the present level of about 22~'.

21. Annex II contains a summary statement of IDA credits and the Bankloan made to Bangladesh as of November 30, 1977 and notes on the execution ofongoing projects. Present disbursement performance unlder the program creditsis satisfactory. In contrast, disbursements uinder nroiecr credits nave laggedfar behind expectations. Reasons for this include d_Lays in the release oflocal funds, clearance of contracts, employment of consultants and appointmentof needed staff. The Government has taken steps aimed at eliminating the mostpressing of the bottlenecks and it is hoped that this will lead to acceleratedproject implementation. The release of local funds for projects to semi-autonomous government agencies now requires one application per year insteadof the previous requirement for quarterly applications. The approval of thePresident is no longer required for contracts; the ceiling for contracts whichcan be approved directly by the proiect implementing qpencies has been raisedfrom Taka 700,000 to Taka 10 million. Similarly, the requirement that the

President approve all consultants' contracts has been waived; this responsi-bility now devolves upon the ministries responsible for the project agenciesconcerned. Finally, the authorization of the appointment of staff is beingmade automatic in the case of approved projects.

22. The IDA project lending program increasingly has concentrated onthe rural sector, and specifically on food production. The Ashuganj Fertilizer,Barisal Irrigation, Karnafuli Irrigation, Rural Development, Agricultural andRural Training, Muhuri Irrigation, Shallow Tubewells and Extension and ResearchProjects as well as the proposed project, all fit into this strategy. Otherpriority projects at an advanced stage of preparation include a foodgrainstorage project. While development of the rural sector must have top priority,the growth of other sectors cannot be neglected. Particular emphasis shouldbe placed upon projects which provide infrastructure for the rural sector,which process or provide outlets for its products, or which reduce the strainon Bangladesh's foreign exchange resources. Finally, emphasis must be placedupon improving Bangladesh's project preparation and implementation capability.Given its low per capita income, Bangladesh is heavily dependent on foreignassistance to help finance its investment requirements. In view of Bangladesh'sdifficult foreign exchange position, IDA credits cover all foreign exchangecosts. Taking into account the level of financing expected to be availablefrom other external lenders, and in order to direct IDA lending to those sec-tors (such as agricultural and rural development) where the percentage offoreign exchange costs is relatively low, the financing of local currencyexpenditures is also justified.

PART III - THE AGRICULTURAL SECTOR

23. Agriculture dominates the economy. About 90% of the populationlives in rural areas mostly dependent on agriculture. The sector accounts for55% of GNP, 75% of all employment an,d over 80% of all exports. In recent years,the sector has been unable to feed the rapidly increasing population, expandexport earnings significantly and provide adequate employment to the largelyunskilled and illiterate labor force.

24. Practically all the cultivable area of 22.5 million acres is alreadyunder cultivation and future production gains will require more intensive landuse and higher yields. Total cropped area was 30.1 million acres in 1974/75,a cropping intensity of 134%. Rice, the most important food crop, covered24.2 million acres and jute, the most important cash crop, 1.4 million acres.

25. While soils are fertile ancd temperatures allow year round cropping,agricultural development is constrained by serious natural difficulties. Thecountry is dominated by the delta of the greatest system of rivers in the worldwhich, together with monsoon rains (75% of total precipitation falls in threeto four months), cause widespread flooding during part of the year. IThilc5.5 million acres are flooded annually, only about 2.5 million acres are irri-gated during the dry season from November to May. The rivers make transportdifficult, and facilities for moving farm produce and inputs are inadequateand expensive. In addition, cyclone disasters are frequent. Perhaps even

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more restrictive are socio-economic factors. Some 30% of village dwellers arelandless. Among farmers who own land about 50% cultivate 2.5 acres or less,fragmented into four or five plots. Even large farmers are small by worldstandards.

26. Generally, Bangladesh farmers are hardworking and receptive toproven improved farming practices. However, their efforts are often frus-trated by inadequate agricultural research and advice, and inadequate suppliesof inputs and credit. The Intensive Jute Cultivation Scheme (IJCS) developedby the Ministry of Agriculture has shown encouraging success in increasingyields by delivering correct advice, credit and inDuts to jute farmers. Ittherefore forms the basis for the proposed project.

Jute Production Trends

27. Jute has been an internationally traded commodity for more than180 years. Jute is mainly used for packaging, carpet backing, ropes and wallhangings. However, demand, which expanded steadily until the mid 1960's, hasdeclined since then, due to changes in packaging technology and competitionfrom synthetic substitutes. More recently, jute exports suffered from therecession in the industrialized world. World production of jute expandedfrom the mid-1950's to the mid-1960's at a rate of over 4% per year, but withmarked yearly fluctuations. Since that time, world jute production has tendedto stagnate, although it has continued to fluctuate widely from year to year.Keen competition for cultivable land for food crops has kept the acreage underjute from expanding significantly in the two largest producing countries -India and Bangladesh; that situation is unlikely to change in the foreseeablefuture. At the same time, jute yields in India and Bangladesh have remainedessentially unchanged over a long period of time.

28. Bangladesh's share of the world jute market represents about 75%for raw jute and 45% for jute goods. Jute plays a crucial part in theBangladesh economy. Almost half of Bangladesh's farmers grow jute. Jute pro-vides about 80% of export revenue and is the raw material for the most import-ant industry. Bangladesh's ability to compete in the world fiber market isaffected seriously by low levels of productivity of land under jute and byyear to year fluctuations in production that result from variations in thejute/paddy price relationship and changing weather conditions. Moreover,because the productivity of jute cultivation has been low and the marketingsystem weak, jute mills have been able to buy raw jute only at relatively highprices which have affected their ability to compete with synthetic products.This has been a major cause for the losses sustained by the jute mills.

29. There is a strong case for trying to eliminate these weaknesses,in particular by concentrating efforts on improving productivity of jutecultivation and marketing of raw jute. Measures are also needed to improvethe efficiency of jute manufacturing; steps for improving-jute manufacturehave been taken under the Fourth, Fifth and Sixth Imports Program Credits(Credits 591-BD, 676-BD and 752-BD).

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Jute Production

30. The climate and most of the soils of Bangladesh are particularly

suitable for jute production. Ample water supplies for growth and for rettinggive the country an advantage over others in the quality of its jute. Varie-

ties of both Capsularis and Olitorius species are grown. The former resistLflooding and constitutes about 60%-70% of the crop. On average, a total of

about 1.7 million acres is under jute. About 0.5 million acres of lo'vlandis sown to jute every year because other crops are not competitive there.

Another 0.5 million acres come under jutc as part of the pattern of croprotation. Beyond this base of I million acres, the acreage planted to jutefluctuates according to the jute/rices price relatinnship.

31. Jute areas are grouped into three regions: the Jat, Northern and

District (see map). The heaviest jut'e producing adlinistrative districts

are Mymensingh (Jat), Rangpur (Northern) and Faridpur (District). Becauseof better soil and plentiful retting facilities, jute in the Jat area gives

higher yields and is of higher qualit:y than jute grown in other areas. Theproposed project would concentrate oni expanding improved jute cultivation in

the Jat areas and in Rangpur and Fariidpur districts which together containabout three fourths of the total jute acreage. Because of a higher proportionof seasonally flooded and water logged land, about 80% of the jute in the Jatand Northern areas is Capsularis, whereas it comprises only 40% of the totalin the District with a higher proportion of well drainsd soils. In parts

of the Northern and District areas retting water is scarce and this factordepresses fiber quality. In addition, the Northern area lacks storage andbaling facilities and is remote from the jute manufacturing and fiber ex-porting centers, so that jute farmers there have greater difficulties with

jute marketing than in other areas. The pilot marketing component of theproposed project would therefore pay particular attention to this area.

32. Since most farmers have continued to use traditional methods forjute production, yields have stagnated for decades at about 3 bales per acre.Yields up to 6 bales per acre have however been obtained by farmers who have

adopted Bangladesh Jute Research Institute (BJRI) recommendations.

Intensive Jute Cultivation Scheme (IJCS)

33. This scheme startcd to ftmcticn in 19J73 and by. 1971 covered about0.3 million acres. It is executed by the Directorate of Agriculture (Jute)(DAJ) of the Ministry of Agriculture which arranges credit and inputs forparticipants and teaches them improved practices including: (a) use of goodseed of recommended varieties; (b) seed dressing to prevent plant disease;(c) line sowing and improved weeding methods; (d) correct sowing and harvest-

ing times; (e) correct fertilizer use; and (f) plant protection mainly againstinsect pests. The IJCS extension service is separate from the general exten-sion service, which is concerned with all crops other than jute and alsocomes under the Ministry of Agriculture. The IJCS extension service has beenusing, with suitable adjustments to meet the particular requirements of thecrop, the Training and Visit (T & V) extension system, a system which hasbeen implemented successfully in several other countries and which has recentlybeen adopted by the general extension service in Bangladesh. The T & V system

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relies on regular visits to farmers by field extension agents, close super-vision and control at all levels and regular in-service training.

34. In 1976, IJCS was organized into nine zones (each headed by anAssistant Director of Agriculture-ADA), which in turn are subdivided into 150units of about 2,000 acres (each supervised by a Jute Extension Officer-JEO),and 1,500 jute blocks of 200 acres (each with a Jute Extension Assistant-JEA).Farmers are organized into Jute Farmers' Associations (JFAs), each coincidingwith a block, to provide a focus for extension and to facilitate the distri-bution of inputs and credit by DAJ. JFAs have formed committees at unit,zonal and national level to exchange experience and to discuss problems.Only JFA members can participate in the IJCS.

35. The combination of concentrated extension services and effectivedistribution of inputs and credit through JFAs has been successful. A Gov-ernment evaluation, confirmed by a sampre survey in which the Bank assisted,showed that jute yields of participants in 1975 averaged 4.5 bales per acrecompared to 2.9 bales outside the scheme, whereas net returns per acre wereestimated at Tk 765 and Tk 330 respectively. The National Economic Councilof Bangladesh approved the scheme in 1976, thus establishing high priorityfor funding IJCS.

36. Implementation targets have not been achieved. As'against the goalof covering 0.7 million acres by 1976, only 0.3 million acres were in factcovered. Inadequate finance and lack of personnel have been the main con-straints. The situation has improved recently and there is now adequate stafffor the 0.5 million acres that IJCS is presently estimated to cover. Somemajor handicaps remain. JEAs lack accommodation and transport, and farm im-plements are not available in sufficient quantity. Extension officers are notas effective as they could be because they have to spend considerable time onadministrative tasks and lack technical back-up experts. Finally, for expan-sion on a larger scale, the credit program needs strengthening. The proposedproject would address these deficiencies.

Research

37. The Bangladesh Jute Research Institute (BJRI) under the Ministry ofJute is organized into three Directorates -- Agricultural Research, TechnologyResearch and Seed Multiplication. The Agricultural Research Directorate, witha staff of 40 scientists, carries out plant breeding and research into culti-vation practices, plant protection and retting. There have been few advancessince a package of improved practices was identified over ten years ago. Workhas been handicapped by lack of land at BJRI but a new main research farm isnow under development. The Asian Development Bank (ADB), through the JuteSeed Project, and the UNDP, through the related Jute Seed Research and Produc-tion Project, are helping to finance development of research farms, equipment,transport, experts and overseas training. This should help to step up researchactivities and no additional investment is needed for the time being. BJRI isalready providing training for IJCS staff, but linkages between research,extension and farmers is inadequate. The proposed project would seek tostrengthen this link.

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Inputs

38. The Seed Directorate of the BJRI is responsible for production anddistribution of certified jute seeds. Its present annual capacity is about750 tons of seed, enough for about 200,000 acres under jute. The entire supplyis reserved for IJCS. Seed quality is satisfactory, but because seed pro-cessing facilities are inadequate, supplies are subject to weather conditionsat harvesting time and therefore fluctuate from year to year. In the currentseason, for instance, supplies have been inadequate. The ongoing ADB Jute

Seed Project aims at providing processing facilities and expanding productionto 2,000 tons of seed per annum which would be enough to renew all jute seedonce every three years. Implementation has been slow to date, but the projectis forecast to be in full operation by 1979.

39. The Bangladesh Agricultural Development Corporation (BADC), whichalso comes under the Ministry of Agriculture, has developed an efficientfertilizer supply system for IJCS. Jute staff inform BADC of the require-ments, which are delivered by a BADC subagent appointed for each jute block.When fertilizers were scarce, BADC gave priority to meeting IJCS requirements.However, at present, fertilizer stocks are plentiful and BADC is expandingits storage facilities, with help from USAID. The fertilizer supply system

is considered to be adequate over the next few years to satisfy the needs ofthe proposed project. For the longer run, IDA is financing a fertilizer mar-keting and distribution study to help BADC to reorganize and strengthen itsdistribution network and to identify investment requirements to cater for ex-pected increases in fertilizer demand for all crops. If additional facilitiesare warranted, IDA would be prepared to consider providing finance for them.

40. Pesticides are stocked at thana level by the Directorate of Agri-culture (Extension and Management) of the Ministry of Agriculture and sold tofarmers at half the cost. The Government is investigating the possibility ofinvolving the private sector in the pesticide trade as a means of improvingformulation and packaging of materials according to farmers' requirements.Such a change would be acceptable to IDA. However, deliberations are at anearly stage and the outcome is as yet uncertain. In the meantime, the exist-ing system is serving IJCS farmers adequately.

Credit

41. A recent IDA Agricultural Credit Review mission to Bangladeshpointed out that operations of the two main agricultural credit agencies --

the Bangladesh Cooperative Bank (BJSB) and the Bangladesh Agriculture Devel-opment Bank (BKB) -- are seriously constrained by the large amount of outstand-ing loans in default. IDA, in cooperation with ADB, is providing technicalassistance to the Government to help strengthen these two institutions andtheir operations, as well as make the whole system of agricultural credit moreeffective.

42. To improve the availability of institutional credit to farmers pend-ing a reform of the whole system, the Government has asked commercial banks,which are owned by Government, to provide agricultural credit. Sonali Bank,

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the largest commercial bank, has taken the lead in this field. As part of itsagricultural credit operations, Sonali Bank is, against Government guarantee,already providing inputs credit to IJCS (amounting to Tk 4.7 million in 1976)by lending to DAJ, which onlends to farmers. Loans are for six months andrecovery in 1976 was 90%. Loans are only made to JFA members and credit dis-cipline is imposed by the provision that no new credit can be obtained bymembers of any JFA for which the repayment rate falls below 75%.

43. With its strong deposit base, large and expanding branch networkand experience in agricultural lending, Sonali Bank would be well qualified tomeet all IJCS credit requirements as is envisaged under the proposed project.The Sonali Bank's management is keenly interested in expanding assistance ofthis type to smallholders and is prepared to extend US$6.5 million equivalentof its own funds as credit to IJCS.

44. In another move, the Government has recently decided that all insti-tutional credit for agricultural development, both short and medium term, carryinterest at about 12%. This decision brings to an end the wide disparitiesin interest rates that existed previously between various agricultural programsthat were causing considerable difficulty to those institutions charging inte-rest at higher rates and the farmers served by them. The current outlook forinflation in Bangladesh suggests that, at the nominal level proposed, interestin real terms would be positive. The review of the agricultural credit system,which has just been initiated (with assistance from IDA and ADB - paragraph 41),will examine what it costs the institutions engaged in agricultural credit tomake such credit available and recommend what arrangements should be made toensure that such costs are adequately covered.

World Market Prospects

45. With 85% of Bangladesh jute production exported in roughly equalquantities of fiber and manufactured goods, the share Bangladesh obtainsof the world market for jute and similar fibers essentially determines howmuch jute the country should grow. Assuming continuing technology changes,competition from synthetics, and unchanged jute/synthetics price relation-ships and supply conditions, world jute consumption is projected to growvery slowly up to 1985. This overall projection is the combined resultof forecasts of substantial growth in consumption in producing countriesand of some decline in the volume traded internationally.

46. Short term export prospects for Bangladesh remain reasonably favor-able. In the longer term, however, the size of the jute market will dependin large measure, first, on Bangladesh's ability to stabilize the supply ofraw jute - thus avoiding the recurrent shortages, and consequent sharp priceincreases that have hurt jute in its competition with synthetics - and toreduce the cost of production through increases in productivity; and, second,on the success of research and development efforts to find new uses for tra-ditional products as well as new uses for jute. Without taking account ofthe beneficial effects of improvements in these directions, Bangladesh's shareof the market for the 1980's has been projected by the Bank, at 0.5 million MT

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fiber and 0.5 million MT goods, equivalent to about 5.5 million bales. Withabout 0.5 million bales required for domestic use, total jute production ofabout 6 million bales would be needed to meet market demand. At this levelof production, in 1985, Bangladesh -jute exports would fetch an estimated priceof US$344 per ton of raw jute (in 1977 constant dollars). With an increasein productivity there are opportunities for Bangladesh for reducing the cur-rent acreage under jute. With 1 million acres under the IJCS, 6 million balescould be produced on an area roughly 0.4 million acres less than that currentlyunder jute. It is not possible now to say how the acreage potentially avail-able for other uses will most economically be employed. The proposed projectwould lower jute production costs by about 23% in financial terms and by about31% in economic terms. Tentative analysis conducted by the Bank indicatesthat by lowering the export price by 10%, which would be possible with thelower farm production costs, Bangladesh may be able to expand exports by upto 20% to an equivalent of 6.6 million bales. Thus, if the internationalmarket develops as now forecast, it may well be desirable on economic groundsfor at least part of the potential surplus in acreage now under jute to con-tinue to produce jute. Alternatively, the supply situation for rice, domes-tically and internationally, may be such as to make it more economic for thisacreage to be transferred to paddy cultivation. In any event, the fact thatthe supply of cultivable land in Bangladesh is so limited will ensure thatany land available for release from jute will be used productively.

Domestic Jute Marketing

47. In order to strengthen the competitiveness of jute in the inter-national fiber market, domestic marketing, in particular, requires attention.Domestic marketing involves farmers, a variety of jute traders, jute mills andGovernment corporations. Most farmers sell small, ungraded lots of jute atvillage markets to village middlemen. The product may change hands a numberof times, as it is assembled into larger lots before it reaches large tradersor Government corporations in secondary markets. The Government declares aminimum farmgate price, the present level of which is adequate as an incen-tive to jute growers. However, the Government has been unable to ensure thatfarmers receive no less than the minimum price. Government jute corporationsunder the Ministry of Jute are meant to be active at all stages of marketing.By purchasing from farmers, they are supposed to ensure that the farmer receivesat least the minimum price. However, the corporations have too few centers(only 280) to reach farmers; in 1975, less than 2% of corporations' purchaseswere directly from farmers. The corporations have also suffered from severemanagement and financial problems. In an attempt to solve these, in early1976, GOB amalgamated four corporations into two. However, problems havepersisted, and the corporations are failing in their task of providing effec-tive competition to the private sector. The failure of the Government toenforce the minimum purchase price of raw jute has exacerbated fluctuationsin production from year to year. In particular, when there is a heavy crop,most farmers have to sell at lower prices to middlemen; as a consequence,farmers tend to switch acreage from jute to paddy, with the result that thefollowing year the jute crop is short- of existing demand so that prices risesharply, thus setting in motion another cycle of over- and under-production.

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48. In addition, there are other weaknesses in the present systemof marketing jute in Bangladesh that have the effect of either diminishingthe incentives to farmers for economically efficient production or makingraw jute more expensive to the end user than it need be. Short weighingand down-grading by middlemen are widespread and often the quality of juteis adulterated by middlemen by adding water and sand so as to increase theweight at sale to the Government corporations or large traders. Also, lutemarketing is constrained by inadequate storage and baling facilities in theproduction areas; movement of large quantities of ungraded and unbaled juteoverburdens the limited transportation system and increases the marketingcost. Furthermore, the present pricing system makes only small allowancefor grade differences, so that there is little incentive for farmers toimprove jute quality.

Jute Marketing and Pricing Mechanism

49. Stabilization of jute supplies, to ensure that production is in linewith market requirements, would be a key requirement for the success of IJCS.For this purpose the Government should design an effective jute and paddypricing mechanism based on supply and demand information, production andmarketing costs and the interrelationship of jute and paddy prices. An IDAFoodgrain Price Policy Review Mission has recently examined the requirementsfor a foodgrain pricing mechanism, and has recommended establishment of ahigh level interdepartmental Food Policy Commission that would advise theGovernment on all policy aspects that affect foodgrain production and supplies.Jute price and production policies affect foodgrain supplies and it might beappropriate to have jute also covered by the Commission. The Commission wouldonly be effective if adequate services were established to monitor and analyzefarmgate prices and for collecting data of cost and returns on crop productionas well as marketing. Alternatively, the Government may prefer to establish aseparate but equally high level jute policy commission which could commissionand supervise market and cost studies and would advise the Government ondomestic and export prices and market opportunities. Such commission wouldneed to collaborate closely with the Food Policy Commission. Besides havingregard to the alternative use of land for paddy production, pricing policiesfor jute should be aimed at maintaining export prices at stable and competi-tive levels vis-a-vis synthetics while maximizing long-run economic benefitsthrough achievement of an economically optimal mix between raw jute and jutegoods exports, through prices that, throughout the chain from producers,through traders, to exporters of raw jute and jute mills, are commensuratelyattractive. The policies should allow for prices to be flexibly adjusted inresponse to short-run changes in demand and supply conditions without disrupt-ing the long-term objectives. Further, while the policy should be aimed atensuring adequate and stable supplies of raw jute to mills and for export, itshould also provide growers with an adequate return and jute mills with reason-able raw material costs after taking farm-to-mill marketing costs into account.A study of the pricing policies and internal marketing of raw jute and jutegoods, and world export markets for the same products, is expected to beundertaken shortly. The aim of this study would be to establish an effectivemarketing intelligence and price management mechanism for raw jute and jutegoods (paragraph 59).

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PART IV - THE PROJECT

50. In June/July 1975 an IDA mission visited Bangladesh to undertakea crop sector review, which included jute. The mission's main conclusion wasthat significant increases in agricultural production could be achieved byreorganizing and strengthening the extension services and agriculturalresearch. The proposed project was prepared subsequently by the Governmentstaff with the help of the Bank's Resident Mission in Dacca. The project wasappraised in November/December 1976. Negotiations for the proposed Credittook place in Washington, D.C. in October 1977. The Appraisal Report(No. 1587-BD, dated December 29, 1977) on the project is being distributedseparately. Attached as Annex III is a supplementary Project Data Sheet.Also attached is a project map (IBRD map 12761).

51. Project Concept. The proposed project is intended to cope with theproblems outlined in paragraphs 28-29, 36-37 and 47-48. Thus, the project,through the on-going Intensive Jute Cultivation Scheme (IJCS), is intendedto bring about (a) higher productivity in jute cultivation and (b) bettermarketing for raw jute. Specifically, the project would aim at: (a) raisingyields and reducing cost of production of jute on I million acres by improvedextension activities and credit; (b) establishing a pilot jute marketingscheme to increase farmers' returns; and (c) improving production and market-ing equipment. Improved marketing practices, in particular through the pilotmarketing scheme and ultimately through the establishment of intelligence andprice management mechanisms would contribute to stabilizing the supply of jutefiber and goods at a level adequate to meet the requirements of local jutemills and for export at competitive prices. Production on the 1 million acresunder the project (which include the 0.5 million acres estimated to be pre-sently under IJCS - paragraph 36) is projected to increase from about 3.7million bales to about 5 million bales per year, thus providing the bulk ofthe country's jute supply. To help avoid overproduction of jute, the Govern-ment has provided assurances that, before undertaking any expansion of IJCSbeyond 1 million acres, it would ensure that such expansion: (a) is economic-ally justified, on the basis of medium- and long-term world supply and demandprospects for raw jute and jute goods; and (b) would not adversely affect theoperation of the proposed project (Section 4.04 of the Development CreditAgreement - DCA).

52. Extension Staff. The project would continue the "Training andVisit" (T&V) system of extension work hitherto successfully organized by JEAsvisiting Jute Farmers Association groups on a fixed day once every two weeks.JEAs are supervised by Jute Extension Officers (JEOs) who also tour on a fixedschedule. JEAs would now cover 400 acres each, instead of 200 acres, whichwould be possible given the back-up support that the project would providethem; thus no additional JEAs, over and above the existing 2,500, would beneeded. The extension methods applied for the project would be acceptableto IDA (Section 3.20 of DCA). The project would, over five years, supportthe additional administrative, technical and extension staff needed to expandIJCS to 1 million acres, and to deal with distribution of equipment, credit,agricultural inputs and field research and demonstrations. The project

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would emphasize the expansion of middle level IJCS personnel required toimplement the T&V extension system. The incremental IJCS staff would include:9 senior administrative and technical staff for headquarters, 11 AssistantDirectors of Agriculture (ADA), each with a deputy ADA at the zonal level,and 250 JEOs and support staff. In addition, to relieve extension staff ofadministrative burdens, 500 Input Supply Officers (ISOs) would be employedto deal with distribution of equipment, credit and inputs. Also, 40 SubjectMatter Specialists (SMSs) would be appointed, two to each zone (a plantprotection specialist and an agronomy/extension specialist), to providetechnical back-up to other field staff, conduct field research and demon-strations and participate in training of JEOs and JEAs.

53. Housing, Offices and Transport. The ability of Jute ExtensionAssistants (JEAs) to serve jute farmers adequately is impeded by lack ofhousing in the villages in the project area and inadequate transport facil-ities. The project, therefore, includes construction of 2,500 houses toenable extension workers to live in the area of their extension responsi-bility, and vehicles, motorcycles and bicycles to provide adequate mobilityto field extension workers and supervising staff. Each house would includea small office/store as well as a meeting place where the JEA would meetgroups of farmers. Assurances have been obtained from GOB that these houseswould be built in accordance with construction standards acceptable to IDA(Section 3.07 of DCA). A local consulting firm would be employed to designthese houses, assist the Government with the preparation and evaluation oftenders for materials and help supervise construction. The consulting firmwould also help refine DAJ's basic design for the storage sheds and assistDAJ in supervising the construction of these sheds. This firm, with quali-fications and experience acceptable to IDA, would be hired by April 1, 1978(Section 3.02 of DCA). The Government has agreed to provide adequate fundsfor the maintenance of the JEA houses (Section 4.02 of DCA). In addition,250 sets of office furniture for the JEO offices, including typewriters andcalculators, would be purchased. The motor vehicles would be departmentallyowned, but motorcycles and bicycles would be purchased by the staff on credit.Since the bicycles and motorcycles would be used for official work and toprovide enough incentives to DAJ staff to purchase these vehicles, the Govern-ment has agreed to provide interest free credit for their financing. Assuranceshave been obtained that the terms and conditions of this credit program wouldbe acceptable to IDA (Section 3.12 of DCA). In addition, assurances have beenobtained from the Government that appropriate travel and daily allowances wouldbe provided by the Government to DAJ staff in the project area (Section 4.05of DCA).

54. Demonstration and Field Research Materials and Equipment. Theproject would provide funds for inputs for at least one field demonstrationor field trial per jute block each year. The demonstrations and trials wouldbe designed by SMSs in close collaboration with BJRI staff; coordination ofthe jute research program at the national level would be ensured by theCentral Coordination Committee (paragraph 67). Tile project would alsoprovide extension staff with teaching materials such as charts, leaflets,posters, projectors and slides.

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55. Production Credit. Credit: would be provided to enable farmers to

purchase sprayers, fertilizer, pestiLcides and other agricultural inputs andto hire labor for weeding and harvesting. The Government would onlend US$7.8million from the Credit proceeds to the Sonali Bank at a rate of interest of3% per annum. Together with US$6.5 million of its own resources, Sonali

Bank would have US$14.3 million equivalent for lending to jute farmers forproduction purposes. The bulk of the funds would be lent through DAJ, thepresent channel. In 10 thanas covered by the Rural Development Project (IDA

Credit 631-BD) and a similar Asian Development Bank project, cooperatives(KSSs) under the Integrated Rural Development Program (IRDP) would be thechannel. Sonali Bank would on-lend at 10.50% interest to DAJ and7.57interestto IRDP; the ultimate sub-borrowers, the farmers, would pay 12% interest.Special arrangements (to be adopted by March 1, 1978) would be made to assistsubsistence farmers in joining the cooperatives involved in the project(Section 3.15 of DCA). The current measures to establish credit discipline(paragraph 42) would be maintained. In particular, a farmer would be excludedfrom future loans, (a) if he is on default on any of his jute loans, and (b)

if he belongs to a JFA or KSS with a recovery rate on previous jute loansbelow 75% (Section 2.02 of Project Agreement). These credit arrangements areconsidered to be appropriate for a transitional period given the successfulrepayment results to date and the inability of the cooperative system toexpand quickly enough to meet project requirements. However, it has beenagreed that, no later than September 1, 1980, the Government would provide toIDA a review of the effectiveness of the two credit systems employed in theproject and recommendations concerning improvements in the arrangements forsupplying credit to jute farmers (Section 3.16 of DCA).

56. Equipment. Under the project, 25,000 seed drills and 20,000 hand-pushed hoes would be supplied to IJCS. DAJ would own the equipment andwould distribute it to farmers' associations. The design of the seed drillrequires improvement to ensure a more even sowing rate; such improvement isexpected to result from the on-going Jute Seed Project which is beling assistedby ADB. The Government's Directorate of Agriculture (Extension and Mlanagement)(DEM) carries a large stock of hand sprayers and assurances have been obtainedfrom the Government that DEM would supply, under arrangements satisfactory toIDA, the 20,000 units estimated to be required for pest control for the project;these units would be of a design and in condition satisfactory to the Directorof Agriculture (Jute) (Section 3.06 of DCA).

57. Pilot Jute Marketing Scheme. The proposed project, through themarketing scheme, seeks to reduce costs, offer farmers an alternative salesoutlet to village middlemen, and give incentives for improving grades (para-graphs 47-49). The project would include construction of a total of 50 stor-age sheds, each equipped with a baling press to be owned and, except possiblyin the 10 Rural Development thanas (see below), operated by DAJ. Farmers woulddeliver jute to the storage sheds. At that time, they would receive paymentin an amount equivalent to the Government's minimum price. Since DAJ has noworking capital to finance stocks it holds between the purchase of jute fromfarmers and its sale to exporters or jute mills, this initial payment wouldbe in the form of short-term credit. Such credit would be provided by SonaliBank, in accordance with the arrangements employed for production credit

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(paragraph 55). The project would include Tk 30 million (US$2.0 million) forthis purpose; of this amount, US$1.1 million would be provided out of theproceeds of the Credit to be on-lent to Sonali Bank and the balance would comefrom the Bank's own resources. DAJ would then grade, bale and sell the jutepurchased from farmers. At that time it would calculate, on the basis of theprice it obtained, the amount due to the farmer, deduct the credit advancedwell as interest due on the credit and a service charge (as well as a marginfor profit), and pay any balance remaining to the farmers. In the 10 RuralDevelopment thanas (paragraph 55), cooperatives operating under the IntegratedRural Development Program (IRDP), would have the choice of either letting DAJoperate the jute stores as in non-IRDP areas or of leasing the stores andpresses from DAJ and operating them themselves. The fees and charges to belevied for the use of DAJ sheds would be set at a level acceptable to IDA andreviewed annually (Section 3.13 of DCA).

58. The aim would be to recover full capital and operating costs (plusa reasonable margin for profit) based on the average expected use of theproject facilities, with throughput expected to build up over 15 years. Bysetting its charges at such level, DAJ would avoid unfair competition with theprivate traders. This is important because the intention is merely to elimi-nate some of the weaknesses associated with the present system, not altogetherto supplant the private trade, which now performs a vital function and willhave to continue to do so. It needs to be recognized, too, that there is noassurance that the pilot marketing scheme, although addressing an importantproblem, will be a success, because it does pose difficult problems of orga-nization and management which, despite the strong technical back-up to beprovided under the project, may prove to be beyond the capacity of DAJ. Con-sequently, the marketing scheme would be kept to 50 sheds (of which ten wouldbe ready by 1979), to handle 30,000 tons of raw jute (about 3% of forecastproduction for the project area). If successful, a large scale marketingscheme would be considered for a followup project.

59. Technical Assistance. Two internationally recruited experts wouldassist the Director of Agriculture (Jute)--a project management expert and amarketing specialist, each for 24 months. The cost of such assistance isestimated at US$5,000 per man-month. The Government has given assurances thatthe consultants would be appointed on terms and conditions agreed with theAssociation, not later than April 1, 1978 in case of the management expertand July 1, 1978 for the marketing specialist (Section 3.08 of DCA). In addi-tion, a suitably qualified research institute would carry out a detailed eva-luation under terms and conditions agreed with IDA (Section 3.09 of DCA andparagraph 72). The Government expects to obtain financing from the UnitedKingdom for a study of pricing policies and internal marketing of raw jute andjute goods, and of the world market for jute goods and jute fiber (paragraph49). IDA is consulting with the United Kingdom on the terms of reference forthis study. Assurances have been obtained from the Government that it wouldhave such a study initiated by March 1, 1978 and that, by December 31, 1978,based on the findings of this study, the Government would provide to IDA forreview, a plan (including an implementation timetable) for establishing a juteprice mechanism (Section 4.03 of DCA).

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60. Training. The project would also include 48 weeks of overseastraining for project staff and selected bankers, in particular to improvestaff experience in commodity marketing. Overseas training proposals wouldbe subject to IDA approval (Section 3.18 of DCA). In addition, one day train-ing sessions would be arranged fortnightly for JEAs and JEOs and longer pre-season courses for all field staff. The training program would be drawn upand coordinated by the headquarters' Training Officer. Bangladesh JuteResearch Institute (BJRI) would conduct courses for senior staff, Sonali Bankwould assist in teaching administrative and credit procedures while the JuteMinistry would train staff in jute grading. Assurances have been obtained thatthe Government will cause this in-service training program to be carried out(Section 3.18 of DCA). While most JEAs have no preservice qualifications,this has not proved to be an impedimtent to their performance because in-service training has been adequate. It has however, limited the promotionalopportunities for JEAs. This would be corrected by sending groups of JEAs toAgricultural Training Institutes (ATIs), or other suitable institutions, fordiploma training. Details of the most appropriate syllabus and length ofcourse needed to bring JEAs to full diploma level are being considered bythe Government. Assurances have been obtained that, by March 31, 1978, thesyllabus and duration of training for JEAs at ATIs would be decided (Section3.19 of DCA). IDA Credit 621-BD for the Agricultural and Rural TrainingProject currently supports the strengthening of the ATI program.

Project Costs

61. Total project costs are estimated at US$33.3 million, includingphysical and price contingencies and about US$3.8 million in taxes and duties.Foreign exchange costs would represent US$8.6 million. Excluding physical andprice contingencies, the costs of the various components would be as follows:incremental short term credit (both for production and marketing), US$10.4million; implements, US$1.2 million; extension services (buildings and officeequipment, transport, materials and equipment, and salaries for incrementalstaff), US$11.8 million; marketing infrastructure, US$0.7 million; and tech-nical assistance, US$0.5 million. Physical contingencies (US$0.8 million intotal) amount to 10% for civil works and 5% for transport, extension materialsand technical assistance. Price contingencies (US$7.8 million in total) havebeen applied to staff pay and allowances at 6% a year; to civil works at 9% ayear and to all other costs at 7.5% a year from 1977 to 1979. Total contin-gencies would amount to US$8.6 million or 26% of total costs.

Budgetary Impact

62. The annual operating and maintenance cost after completion of thefive year development period would be small - about US$0.77 million, equiv-alent to US$0.77 per farm family benefitting from the scheme. This additionalrequirement compares with the Government budgetary allocations in 1976/77 ofUS$199.3 million for agricultural development projects and US$511 million fortotal current expenditures. Additional public revenues accruing from the ex-port tax on raw jute and improvements in the financial position of Government-owned jute mills resulting from any reduction in the cost of raw jute arelikely to exceed the project's operating and maintenance costs.

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Financing

63. The proposed IDA Credit of US$21 million would finance about 71%of the total project cost (net of taxes and duties), representing the foreignexchange costs of US$8.6 million and US$12.3 equivalent of the local currencycosts (for justification of local currency financing, see paragraph 22).The Government, which would contribute US$5.8 million to the project, is ex-pected to recover from the users the costs of bicycles and motorcycles soldon credit (paragraph 53) and ultimately the capital and operating costs of thestorage sheds (paragraph 54). Sonali Bank is expected to contribute US$6.5million from its own resources (paragraph 43). The Government and SonaliBank are expected to recover their respective components of production andmarketing credit.

Procurement

64. DAJ would be authorized by the Government to carry out all projectprocurement directly. Seed drills, hand hoes and office furniture would beof local design and manufacture and would be purchased after local competitivebidding using the Government's procedures. These are satisfactory to IDA.Extension materials, mostly charts, posters, pamphlets, blackboards, etc. wouldbe purchased locally, while fertilizers and pesticides for field trials wouldbe purchased from the Government agencies which are the sole importers. Motorvehicles, motorcycles, bicycles, baling presses and office equipment would bepurchased over a four-year period and would be widely dispersed in rural areas.It would therefore be difficult to ensure adequate maintenance and spares fora small number of a variety of imported vehicles and equipment. They wouldthus be procured on the basis of competitive bidding advertised locally inaccordance with procedures acceptable to IDA; there are in Bangladesh enoughlocal firms and representatives of foreign firms to ensure a sufficient degreeof competition and to provide adequate services for maintenance and spares.Small off-the-shelf items, costing less than US$10,000 each, could be pur-chased by prudent shopping through normal commercial channels. Such purchaseswould be limited to US$300,000 in total.

65. Civil works would each be small (none exceeding US$20,000 in value),scattered over a wide area and would be constructed over a five year period.These works would not be suitable for international competitive bidding andcontracts would be awarded on the basis of competitive bidding advertisedlocally, following procedures acceptable to IDA. DAJ may have to provide somematerials such as cement, iron sheets and timber to contractors. DAJ wouldprocure such materials on the basis of competitive bidding advertised locallyin accordance with procedures acceptable to IDA; the cost advantages fromdirect importing, if any, would be offset by storage, security and distribu-tion problems. For all contracts exceeding US$100,000 in value, draft tenderdocuments and bid evaluations would be submitted for IDA review before issueand award, respectively.

Disbursements

66. Disbursements from the proceeds of the proposed Credit would bemade for: (a) short term credit: 55% of net incremental loan disbursements;

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(b) pay and allowances for incremental staff: 55% of total expenditures;(c) construction materials and civil works: 100% of foreign expendituresand 70% of local expenditures; (d) vehicles and equipment: 100% of foreigncosts for goods imported directly, or 100% of local expenditures (ex-factorycosts) for goods manufactured locally, or 70% for other local expendituresfor goods procured locally; and (e) consultants, overseas training and mon-itoring: 100% of total expenditures.

Project Organization and Management

67. Coordination. DAJ, Sonali Bank and IRDP would be project ir,pleern-tation agencies. A Central Coordination Cornmittep wnolu coordinate the workof these agencies and review progress of the project. The Committee. whichwould meet at least every two months, would consist oL representatives of theMinistry of Agriculture (Chairman), Ministry of Finance, Ministry of Planning,Ministry of Jute, IRDP, Jute Research Institute, Sonali Bank, and the Bangla-desh Jute Association. The Director of Agriculture (Jute) would be secretary.

68. In addition, the work of the national Coordination Committee wouldbe assisted by Coordination Committees at zonal level. These Committees wouldcomprise the Assistant Director of Agriculture (Jute)(chairman), representativesof Sonali Bank, BADC, Directorate of Agriculture (Extension and Management),Bangladesh Jute Association, Jute Trading Corporation or Jute Marketing Cor-poration, JFA and IRDP (if participating in the project in the zone). Thezonal Committee would meet monthly and send records of its meeting to thenational Coordination Committee. All the above Coordination Committees wouldbe established as a condition of Credit effectiveness (Section 6.01 (g) ofDCA), and assurances have been obtained that the Government would maintainthese Committees with membership and terms of reference satisfactory to IDA(Section 3.11 of DCA).

69. DAJ. The Directorate of Agriculture (Jute) directs and ianages theIJCS, including its expansion, purchase of extension implements, transportand equipment, housing construction, employment and training of staff, pro-vision of credit to farmers as well as the pilot marketing scheme. By May 1,1978 additional headquarters staff would be appointed (Section 3.21 of DCA).The DAJ Director (presently there is an acting Director with rank of AdditionalDirector), who is responsible to the Secretary of Agriculture, would be assistedby a Project Unit headed by a Deputy Director. There wouild be working groupsdealing with supervision, administrative, technical and marketing matters.The Project Unit would be assisted by a Construction Engineer and two inter-nationally recruited advisors for project management and marketing, respec-tively. Appointment of the Director and the Deputy Director would be a con-dition of Credit effectiveness (Section 6.01(f) of DCA). The ConstructionEngineer, an Administrative/Procurement Officer and a Finance/Accounts Officerwould be appointed by March 1, 1978. The Government would consult withIDA on the functions and responsibilities of, and qualifications and experiencerequired for, these three positions (Section 3.21 of DCA). To ensure promptpayment of local currency expenditures, the Government would establish a proj-ect revolving fund to be operated by the DAJ Director. This fund would bereplenished quarterly to maintain balances adequate to cover expenditures for

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the ensuing three months (Section 3.10 of DCA). Opening of this fund with aninitial deposit of Tk 2 million would be a condition of Credit effectiveness(Section 6.01(c) of DCA).

70. Sonali Bank. As described in the proposed Project Agreement, theSonali Bank would channel production and marketing credit to farmers throughDAJ or IRDP (paragraphs 55 and 57). In addition, signing of a Subsidiary LoanAgreement, satisfactory to the Association, between the Government and SonaliBank would be a condition of effectiveness for the proposed Credit (Section6.01(b) of DCA). Sonali Bank already has branches in 124 of 185 projectthanas and has plans to open branches in the remaining 61 thanas. It intendsto post an agricultural graduate officer to each regional office and one fieldassistant per branch in the project area to deal with credit activities.Sonali Bank would also train Input Supply Officers and IRDP staff to appraiseand monitor project credit and to keep adequate records. Its own staff wouldappraise loans and monitor credit utilization. Sonali Bank would arrange forloan repayment using mobile facilities, where necessary. Its experience inagricultural lending makes Sonali Bank a particularly useful partner inexecuting the credit components.

71. Input Supply. To ensure sufficient and timely supply of inputs forthe project, assurances have been obtained from the Government that it wouldinstruct (a) BADC to continue to supply IJCS fertilizer requirements on apriority basis; (b) the Seed Directorate of BJRI to meet IJCS seed require-ments; and (c) the Directorate of Agriculture (Extension and Management) tostock adequate supplies of pesticides (Section 3.14 of DCA).

Monitoring and Evaluation

72. Overall project evaluation would be the responsibility of thePlanning Cell of the Ministry of Agriculture assisted by a local researchinstitution (with qualifications and experience, and on terms and conditionssatisfactory to IDA) to work with the Project Unit in project evaluation.By March 1, 1978, the Government would hire such a firm and furnish to IDA forapproval a program for project evaluation (Section 3.09 of DCA). By March 1,1978, the formats for monitoring the various project components would be sentto IDA (Section 3.17 of DCA).

Proiect Benefits and Risks

73. About 1 million farm families would benefit from improved juteproduction which would increase jute yields, reduce production cost per unitof jute and consequently improve farmers' income. Nearly all would be smallfarmers, over 90% owning 2 acres of land or less. Up to 100,000 familieswould benefit from the trial marketing scheme which is expected - directlyand, by providing competition to private traders, indirectly - to enablefarmers to obtain higher prices than they would otherwise receive. Theproject would mitigate fluctuations in the supply of raw jute and attemptto help Bangladesh maintain its share of the world jute market.

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74. The project would increase jute yields and reduce production costs.This would enable Bangladesh to either maintain jute production at presentlevels and release approximately 0.4 million acres for paddy growing (Alter-native I) or, by retaining the present jute acreage and increasing production,use its improved competitive position to capture a larger share of the worldmarket for jute and its substitutes, by reducing prices (Alternative II). Inpractice, the actual situation resulting from the project would presumably bea combination of these two alternatives, with some increase in the total juteproduction and some decrease in the jute acreage in non-IJCS areas. The ratesof return of the two alternatives are both above 50%.

75. The proposed project faces organizational and management risks(related to the expansion of IJCS from 0.5 million acres to I million acres)which are common to most development projects in Bangladesh. In addition,the economic rate of return is sensitive to the level of jute prices on theworld market. For instance, under Alternative II, if Bangladesh decreasedthe price of jute exports by 10% in order to increase its share of the market,the benefits to the economy, although still over 50%, would be less than underAlternative I. Obviously, Bangladesh will be able only up to a certain limitto expand export sales and still obtain an economic price. There is a risk thatthe project may encourage iute production to increase beyond that limit. Theworld market price could also drop for exogenous reasons. If the internationalprice dropped by 15%, the rate of return under Alternative II would be reducedto 20% (while a similar price decline in the case of Alternative I would stillresult in an economic rate of return of over 50%). At very high productionlevels, there could also be a fall in domestic prices which would damage theposition of IJCS farmers. This could also lead to the continuation of largefluctuations in the jute/paddy price relationships and, consequently, in out-put. Parallel efforts, designed to establish effective systems for price man-agement and marketing (paragraphs 49 and 59), are intended to minimize thisrisk.

76. Accounts and Audit. The Sonali Bank, Directorate of Agriculture(Jute) and IRDP would be responsible for disbursements, and would maintainseparate accounts for the project, which would be audited annually by inde-pendent auditors acceptable to IDA. Certified copies of audited accounts andauditors' reports would be sent to the Association within six months of theclose of each fiscal year (Section 4.01 of DCA). Commercial auditors satis-factory to IDA, for the project accounts under the responsibility of the SonaliBank, would be appointed as condition of effectiveness (Section 6.01(e) of DCA);the Government's Auditor General is expected to undertake the other auditsrequired for the project.

PART V - LEGAL INSTRUM4ENTS AND AUTHORITY

77. The draft Development Credit Agreement between the People's Republicof Bangladesh and the Association, the draft Project Agreement between theAssociation and the Sonali Bank and the Recommendation of the Committee

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provided for in Article V, Section I (d) of the Articles of Agreement arebeing distributed to the Executive Directors separately.

78. Features of the draft Development Credit Agreement which are ofspecial interest are referred to in Annex III of this report.

79. Special conditions of effectiveness (Section 6.01 of DCA) are:(a) the signing by the Government of a Subsidiary Loan Agreement, satisfactoryto IDA, with Sonali Bank; (b) the ratification of the execution of ProjectAgreement on behalf of Sonali Bank; (c) the approval by the Government of theProject Proformas (a PP is a Government document necessary for the alloca-tion of funds and creation of staff positions for development projects) forthe project; (d) the appointment of auditors, satisfactory to IDA, for theSonali Bank; (e) the appointment of the Director and Deputy Director to DAJ;(f) the opening of a project revolving fund for local currency payments, withan initial deposit of Tk 2 million; and (g) the establishment of the projectCommittees. A condition of disbursement (Schedule 1, 4 of DCA) for the market-ing credit component would be that marketing and rental fees for the storagesheds have been agreed with IDA.

80. 1 am satisfied that the proposed Credit would comply with theArticles of Agreement of IDA.

PART VI - RECOMMENDATION

81. I recommend that the Executive Directors approve this proposedCredit.

Robert S. McNamaraPresident

January 17, 1978

ANNEX I

BANGLADESH - SOCIAL INDICATORS DATA SHEET Page 1 of 4LAND AREA (THOU KM2) ---------------------------------------------------------------- BANGINDESH REFERENCE COUNTRIES (1970)

TOTAL 144.0 MOST RECENTAGRIC. 97.1 1960 1b/0 ESTIMATE BURMA THAILAND MALAYSIA***

GNP PER CAPITA (US$) 50.0* 80.0* 110.0 */a 70.0* 210.0 * 440.0 *

POPULATION AND VITAL STATISTICS

POPULATION (MID-YR, MILLION) 53.9 70.8 80.4/a 27.0 36.3 10.B

POPULATION DENSITYPER SQUARE KM. 374.0 492.0 558.0/a 40.0 71.0 33.oPER SQ. KM. AGRICULTURAL LAND 566.0 730.0 828.01w 253.0 263.0 1B5.0

VITAL STATISTICSCRUDE BIRTH RATE (/THOU, AV) 49.8 50.3 49.5 41.3 44.3 42.2CRUDE DEATH RATE (/THOU,AV) 27.2 22.9 28.1 19.3 13.7 12.9INFANT MORTALITY RATE (/THOU) .. 140,0 130.0 * 80.0 40.8/aLIFE EXPECTANCY AT BIRTH (YRS) 38.7 43.3 35.8 47.5 55.5 56.7

GROSS REPRODUCTION RATE 3.5 3.1 .. 2.7 3.2 2.6/a

POPULATION GROWTH RATE (2)TOTAL 2.7 2.8 2.1 2.2 3.1 2.9URBAN . 6.2 7.4 3.7 4.9 3.2

URBAN POPULATION (% OF TOTAL) 4.8 6.4 B.8 19.9 15.0 26.9

AGE STRUCTURE (PERCENT)0 TO 14 YEARS 44.7 .. 45.2 40.0 45.1 44-7/a

15 TO 64 YEARS 50.1/a *- 49.1 /b 57.0 51.8 52.1 a

65 YEARS AND OVER 5.2fl .. 5.7 7F 3.0 3.1 3.27a-

AGE DEPENDENCY RATIO 1.0 .. 1.0 0.8 0.9 0.9/aECONOMIC DEPENDENCY RATIO 1.6/b *- 1.4/C 1.1/a 1.1/a 1.67

FAMILY PLANNINGACCEPTORS (CUMULATIVE, THOU) ., ,. 133.0/a .. 470.0 222.2USERS (% OF MARRIED WOMEN) . .. 4. -/ag 10.0 B.0

EMPLOYMENT

TOTAL LABOR FORCE (THOUSAND) 19400.0 24500.0 26200.0 10920.0 16700.0 /b 2900.0/a

LABOR FORCE IN AGRICULTURE (X) 87.0 86.0 78.0 70.0 79.0 43.:OjUNEMPLOYED (X OF LABOR FORCE) .- .-

1 5 . 0/d .. . . 6.07,b

INCOME DISTRIBUT.ION

X OF PRIVATE INCOME REC'D BY-HIGHEST 5X OF HOUSEHOLDS 19.3 /c 18.7 /a .. .. 22.0 /C 28.3HIGHEST 20% OF HOUSEHOLDS 44.5 7c 42.3 7 . 51.1 71 56.0LOWEST 20X OF HOUSEHOLDS 6 9 7c 7.9 7 - 5.6 7 3.5LOWEST 40% OF HOUSEHOLDS 17.9 7 19.6 f , ,, 14.3 7 11.2

DISTRIBUTIUN OF LAND OWNERSHIP

X OWNED BY TOP 1OX OF OWNERS ,- 34.0 /b .. .. .X OWNED BY SMALLEST 10% OWNERS .. 1.0 7 .. .. .

HEALTH AND NUTRITION

POPULATION PER PHYSICIAN 10000.0/d 7600.0/C .. 8970.0 7970.0POPULATION PER NURSING PERSON 110000.07 f72030.0 7 6B390.0/e 7540.0 /b 6650.0POPULATION PER HOSPITAL BED 11000.0oW 8120.Otj 7120.0 1200.0 890.0 270.0/a

PER CAPITA SUPPLY OF -CALORIES (X OF REQUIREMENTS) .. 88.0/e 92.0 101.0 103.0 110.0 /cPROTEIN (GRAMS PER DAY) .. .. 40.0 49.0 52.0 49.o 7?

-OF WHICH ANIMAL AND PULSE .. .. ,, 13.0/C 17.o/d 20.0 _1

DEATH RATE (/THOU) AGES 1-4 . . .. ,.. . , 5.5

EDUCATION

ADJUSTED ENROLLMENT RATIOPRIMARY SCHOOL 42.0 /f 80.0 /f 71.0 111.0 81.0 99.0/aSECONDARY SCHOOL 8.0 7W 15.0 7W 25.0 21.0 16.0 34.07a

YEARS OF SCHOOLING PROVIDED(FIRST AND SECOND LEVEL) 10.0 10.0 10.0 10.0 12.0 13.0/a

VOCATIONA. ENROLLMENT(X OF SECONDARY) ,. 1.0 ,, 0.8 14.0 /e 3.o/a

ADULT LITERACY RATE (X) . . 23.0 .. 79.0 55.0

HOUSI NG

PERSONS PER ROOM (URBAN) .. .. . , , , , 2.3/a

OCCUPIED DWELLINGS WITHOUTPIPED WATER (X) . . . . . 65.0 /a,d

ACCESS TO ELECTRICITY(X OF ALL DWELLINGS) .. .. .. .. .. 43.0 /a

RURAL DWELLINGS CONNECTEDTO ELECTRICITY (%) .. .. .. .. .. 30.0 /a

CONSUMPPTION

RADIO RECEIVERS (PER THOU POP) . 6.0 . 15.0 78.0 41.0PASSENGER CARS (PER THOU POP) . 0.4 .4/f 1.0 5.0 27.0ELECTRICITY (KWH/YR PER CAP) 4.0 20.0 22.0 22.0 124.0 392.0NEWSPRINT (KG/YR PER CAP) .. 0.1 0.2 0.6 1.0 4.0

SEE----------NOTES-------------AND----------DEFINITIONS--------------__------__--ON-------REVERSE-____ --------

SEE NOTES AND DEFlNITIONs ON REVERSE

_ANYEX Page 2 of 4

NOTES

jnless orvoi-e noted, dact for 1960 refer to soy year berw-en 19i9 and 1961, for 1970 between 1998 end 1970, and for Most Recent Estfiate between

1973 and 1975.

0 GNP per e-pita dote ore based on the Acrld Ban. Arlia osthldriogy (1974-76 bhsoi).

-* Tho 1970-75 population gro.th rare in absovIolly low doe to the effeot_ of the nor of iodependence end mass populston l ovements across the

borders dring that period. Pro-ently, the aoerego popuistion growth rote is nstrfated at 2.8% per snoe.

000 Seler-on of mal-etia ab so obje-tf-e -ountry Is bhsed on Nelsynies ster-e in naintaititg a high tern of etconui fOteth end adeqa-te letel

of welfare concurrtly nith divr-rifying its -ononie stroctue.

BAdGLADESH 1960 /a *e groop 15-59 and 60 and oart eepectivsly; Lb Ratio of pePolotion ceder 15 sod 60 apd over to total ibhor force;/n 1963-6h; 'd Re8istered not sIl prs-ticigg in the counrry; /e G-ov ent hoepitnl esthblish.. t oly;

T Approximft

e enreillenct n per-notage of populatien in 6-10 and 11-15 ape groupt re-petiy ely.

1970 Ia 1966-67; /b 1967-68; /i R.gigerert not o11 praotitieg in tho coontry; /d foover- ent hospital setahblilhentnoely; /e Ahroage 1969-71; /f Apprenivato enrollennt as Percentage of popuatiaon in 6-10 and 11-15 age gronpe

reopen tiveTy.

MœOST giRECT ESID'ATI: ja 1976; /b Age groap li-59 and 60 and over r-spootinely; In Ratio of pupslatiio nndet 15 and 60and aver to retal ahbr iorce; /d 7ianly anemployed -erkhrn seeking their flirt (ob; Le Tooloding

invo; if 1972; Ig Percent of faea.le .poplati-e

BLeRMA 1970 /a Rati of popol.nrJ- tnder 15 and 65 and oIr to total lahbr force; /b Personnel in goovertent sorfoseoly;/c 1964-66.

fH-ILrND 19 7 0 -intR of populatio -. ,oe 16 end 65 aed eve teeoenninsily sotive popalatino one 11 yearo ned over; Lb So-oni-eIlynotive popoltin ago 1I year o and ever; /c urin only; /d 1964-66; In Ptbhlic nchtoi, ohith inclodeg

tehni-l edocotion at tha pot-secondary level.

MALAYSIA 1970 a hoot MIalaysia; Lb Rgioot.red applioants for cork; / 1964-66 /d Piped aster inside.

RII, Octobot 6, 1977

DPFNITI(ONS OP SOCIAL INDICATORS

LgSa...hrts..&hblc 1052 Ponslesfon Oet note le peonn - popsianiot divided by nosher of pracnicp

Total - Total surfa-e zaroa cmprising land ares ond inlana warsos male and inoale graduats nurses, trained" or "Certified' nuraea, and_gtt Attn _n e t ino ttlaten Of agricuilnural eros usssa nenpoarily or pets's- esmilfary reranted vitnh tra fnlngeor enpersnce

nently for trops, pnsnures, marken A kItchen gardens or to lie fallow. Pooltstuie Per bsepiral bed - Population divided by suber of hospital bedsnaiehble in publi and private general sod specielined hospital and

GNp net -anfta (20$) - CNP per napita antisotes t -r- rventn,rket prioes, rehabilitatimn centers: emolode I totsilg homes atd esatahfishents fot

stisalculd by same nonversior o tvbed as Woeld Bnk Altles (1973-75 bnais); __oondial and preventive ears1960; 1970 and 19/5 dar.e Per caeita evenly ot esloriseif of re-sire eis p - fmpted from engergy

tqovalan ofnetfod aspefI avIailable in -otry per .. pita par dsy;Pooulaticn sod viral tranleroc available topplies csmptise dome-tis prodoonien, imporna iet-s pepo.t-, and

Populanion (old-year nillion) As of Ja1v fitn: if not -vailable, overage changr- in stock; net spplio- encIsde anisia fesd, seeds, qoantites useedof two snd-year ostivatei; 1(60, 1970 sod 1975 dta. in food pree.sting and losses is diasribtion; requirents were estimated

by FAlO based o physiological needs Iot sornal activity and health -onsid-fopeatio deeity- po soiats r -Mid-yea pepulatis p-r sqare kilomter ntip envrenetaI t-p-taer, body omighte, age end ... distribsti-t of

100 he ters) of total area popolatien, ed allowing l0i flr waste It hooebsid lev.-IPeoplation deontry-per ennate kn of pgrl, land - CPnpuced as shove for Per caoita supply of Protein "orane per day) - Fr-enin ne-teot of per "ep"na

agricult-ral lsnd enly. net spply af ftod per day; nort pply of foed is defined asbove;requir--eote for all -oonriee eathblished by USDA Eloomnic Rn..eaerh Se-oi-es

Vital tant.srnnn provide for a oifninu slbosoe- of 60 Srts of total p-ntin per day, endCrodo bhith rato per th-ssod average - Atnnul iIoe birtha per thoo-and of 20 grn-a ef -niml and pnlse protein, of ohich 10 grsi ehould be animal

old-year population; rnn-yaee arithmentic -eotgon ending tn 1960 nod 1970, protn; thone ntaodnrds Ott iowan then thoea of 7I gras sf total protein

and fie-year antregoonding in175formostreenitstimae and 23 Uraafs of animal protei hs -anarage fortbewrid, propoed by FAOCondo droth rate po thhonsand. averae- - Annual deaths per thousand nf aid-vert in the Third W-old Food Srvey.

population; nn-year arithmetic avernges ending in 19f0 and 1970 snd five. Per caita Protein snelI fromA onioal IAd plroe - Protein supply of foodyear average ending in 1975 tnt nest teents estins.e derived from aninsia and palateIsi gtns per day.

InfIat mortality rate A/thau - unnual death- of itfans- onder one year of age Dlath rote Gthos) gspe 1-h - Annuol de-oho pet tho-sand in age group 1-4per thoatond live births, yearn, t children in thio ago group; snggeserd as an indicator of

7ife enfeerrney so birth fort) - Overage numbet af yetar of life remaining ot melnatrition.birth; -ussily five-year avera_ en ending in 1960, 1970 and 1975 for dtewiop-log counttiens EducatioD

i_ he n rm tio - -aro At ctagenii-ebt of lire daShtera . on. n . ill bhar Adlvted enroilent ratio°o - peSe ro scool -ifnt deeht of all ege as p-erin hnrnoona repodustive Pero. f seePe.ionet p...ont age-apeiffo netgeo pelm-y soeo-ae oplaio; nni he oIden- aged h-il ye-t

fertility raven asually five-yost averages ending in 1960, 1970 and 1975 hot sdj-tted for different lengtha of primaty edsation; for cowtriss withPet deoolopi,agnowotrieO. oniversol ednuntion, en-oloment nay tensed lilT since some papile are below

P_.olotiv_ grpvth rate 501 - total - Cpmpoond a.nnal growth ratea of oid-year en sbhve the offlcial tsbo- age.popuIltio for 1950-60, 1960-70 and 1970-75. Adinsted enrollpent rtio - ae-I2darv anhool - -pred as above seeand-ty

Ponolatti_ growth rate (Ti - urban - computed hits growth tets of totl educationeequires at least sfo- years of approved prim ay itntrootin;PoPulation Iiffstest definonioma of orban reso may sife-t omprshbilit, of provides g-nerals eocatiomal or tescher training in-tsrotio, fPer pepiledata anOng enuntreai of 12 to 10 year- of age; correspondeee c .orees are generally ecloded.

Urbap poPclatieo fT of total) - Rlati of urbat to ttotl poplation; difforee Tes Yt of schooling erovidsd (first and secnd leyels) - Tosal yare ofdettitloen of orbasoen areas may ffent conpahability of dana among -ofnbeif achooling at sec-odary level, osa nise-l iFtruetion euy be partially 00

completely exeluded._______________-_______;n -oo yearn), wotking-age (15-64 yearn), Vocational enroiLsent (7. of se-agdarn) - nowani56al in-titosion- insclodeand retired ifs vt ra end over) as perrenteos of nid--oar popolaion. technical itdoa trial or other pr-grm7s wOhO operate ildspe-den-tI or as

gedeed vtari - ears of populationounder 15 atd 65 ard over to thos dop-m-ents of o-onnd-tv ifstitutionsof ages 1l itroogh 4. Ldult literary rare (f) - Literates dolts (able to read and write) as per-

iconooomfedeoetdssranio-RatioofpopI.larin -dr 15 ad 65 nd .o.rto nondage ofstodolnporniomased15yearsandoverthe labor torte in agn crop of i5-b4 yearsy

foiyplni - acceptora feonslerlon. then) - Cnmulativr numb,er of acceprots Honsiocof bitth-eaoteol dovices -nder a-spi-ts of nat-ioal farily platoing progre= Persoan pee room (lrhanl - Anetase nusber of pere-e- per root inaoncpiedsiIoe inception conientiotal dwellings in urban steen d-el ings e-clade pn-pepaen

pa-ily . - sers (7 of married enton) - Perrontages of married women of strzctorte end unotccpied parts.nhild-bhori.t ago (15-44 yeast) vh. 000 bihth- -ontrol devises to all married nnE_d doelltootithPut eieed osier fli - Ot-oeled o ventlovsl deelasnos

nomen somo age grnp. In orbat od rarol areas vithoot inside oe ouiafde piped nAter fatilliie-

as percentage of all econpied dwellina.Rpploymnet Scoese no elcntrititv (2 of all dwiite - Conventoanal dwellings vith

lerel lahot force ftbousand) - Economically actire persona, inclnding sarsed elentritity to living oarteropas portent of betel dvellinpe is orhtn sodforces end rnem.pln.td htt -luding Aoeciven, studenrs, cr detinition- ornrl 5te5.

ilnarin -ceottrt-s are net -ps-hble. Rrai doeilfnoa coonnted to electrinity (T) - Computed as above for totsl

labor force it sotto'ltnre 10) - ,tgricu_tos al sleto fo-ct fit farming, forestry. dweilinga oniyhunting and fiahing) en pettentage of total labot f-rce

Unen-pioed fT of labor forte) - Unesployed are utualiy defined a persons vha fonotionore ahle snd oilli,,g to take a ob, eut of a job an a eives day, remined not Radio teceivets fee thfos pop) - Oil typee oP receiver- far redis htoadsssts

of a job, ated Ierhlrp voth for a speoffid nynlo period not excneding 000 topgenerel phUbic per tbosand of pptlani_m; enclodes unlicnserd -e-i,-s

teek; may st he <rm 1,arahle betweenocoInrti- dn-, to dilftrtnt definitfons in ceomtrien and in years sheen'.gtstrstfa of radio aere v- in effent;of une pley-d end aorta of data, e_g, _splovoo,,t offi-e s .s -Po.cs, asp e dana for --cer: y-era nap rot be -nparsble eince most countries abolished

entreye, sozipoleor-y ,,omploynemsn insoranne. licenineg.Passenget czaps (per thon RoP2 - Paeans per eats somprise motor oars see ring

Inae discr-'Uinrs - 1'-e-egtace of poioars finsam (bforh in oash and kled) Ises than eight petsna; eelodes nboiaoces bearse and military

receivod by rifhe-t '5,, richrst 20%, poose-t 0'7_ ard poorerIt 40% of nae- vehicles.holds. lectrisitCY (lh/vr Y ee nap- - Aneual coIe-sptiom of ind-etrial, c-o1serclas,

pnblf and privat elecrct io kilart boors Per -spint. ge-ar11iiSetrlbotOoo of mond tserethie -i ercettages ef lard -eed by onaithi-et 10% a-ed an prodoetian 4ta, viithoot l tt for os ses caist grrds hot allo-

and psoreoc 157/. of land -nera. leg for imports and epertt of electricity.

ties-teIt (ko/r no net) - Pso nepits e-Ia tsop io " foilopta-health and Nutiltio- estimted/ Era deais pdocti-o plu net imports Of oewspeietPopulatiso per ohyafelso - PPpsl-niom divided by number of practioing

physi, /so qualified from a ned-cal Ihroel atniversity lvel.

ANNEX I

Page 3 of 4 PagesECONOMIC DEVELOPUNrT DATA

(Amounts in millions of U.S. dollrs)

Av.Actual Es--957timated 1960- 1965- 1973- 1967-69 1974/75 19 76/77

Av.1967..69 1972/73 1974/75 17/6 1976/77 1965 1970 1977

NATIONAL ACCOUINTS __ ___

In Constant 1972- 19,-73 Pr,ices & Exchange Rultes Axerage Annual Growth Rates As Percent of GIlS

Or;> f-Dmestic Procuct 7616,012 583 614725 ,61.7 3.3 6.7 - 3--r1iTrTU2T

G'ains from Terms of Trade -- 89 - -117 -145 -148 1.5 -1.8 -2.0

Gross~ Domestic In,come 6,1 01 597!fl C!3§97 7,150 7,1T.6 25 6.2 TW:e ThFi 100.

Impo,rt (incl. NF'S) 879 747 703 646 500 20.6 6.8 -7.4 14.4 11.0 6.7

Exp,ts " (import capacity 598 369 197 200 210 12.3 -14.6 -12.6 9.6 3.1 .2.8!

Re,source Sap 281 378 506 446 290 4.6 7.9 3.

Consumption Expenditures 5,666 5,617 6,403 7 ,06 2 7,230 5.7 3.6 5.6 92.9 100).1 97.6

Investment '1 (tori. stocks) 714 394 499 534 473 13.3 8.8 6.7 12.9 7.8 7.4

Domestie Savings 433 16 -6 88 183 4.3 10.0 81.0 6.8 -0.1 2.4

National Savinigs 416 32 10 110 200 8.7 20.5 57.0 7.1 0.2 2.6

MEPCHANLISE TRADE Annual Data at Current Prices As Perceot of Total

ImportsC'apital goods . 100 135 213 268... 25 .7 . 16.8 28.6

Int-ermediate goods nfel) . 176 386 336 250 . 12.8 . 30.4 26.7

P'lels and related materialsof which: Petroleum . 23 155 126 144.. .. 49.8 . 10.0 15.4

Consumption goods , 428 726 541 275... -6.6 4Z..B 252-1

Total Merch. Imports (ntf) 547 727 1,402 1-,26r6 9376. 100.0 100.0

ExportsPrimary produicts (eml. fuiels) . 145 119 156 168 .. . 2.9 40.9 42.0

Fuets sod related materialsof which: Petroleum

Manufactured goods 195 239 225 242 ... .4 59.1 58.0

Total Merch. Exports (fob 81 340 358 381 400 3.8 100.0 100.0

Tourism and Border Trade

Merchandise Trade indices Average 1972- 73 *100

Export Price index 61 100 153 109 1ill . 2.4

Import Price index 52 100 215 195 189... 16.3

Terms of Trade Index 118 100 62 56 59.. .. -11.7

Exports Volume Index 148 100 80 106 123... 3.9

VALUE AIDED BT SECTOR Annual Data at 1972- 73Pcices and Exchange Rates Average Annual Growth Rates As Percent of Total

Agriculture 3,542 3,403 3,712 4,078 4,140 59. .5.8 57

Industry and Mining 420 412 466 527 567 4. .. 77.88

Soroice 2,050 1,848 2,146 2,333 2,504 34 3824 35

Total 6,012 5,663 6,324 6,938 7,211 6.1 lo( 100 100

PUBLIC FINANCE As Percent of GDP

TCentral Gov~ernment)Current Feceipts 317 280 469 775 877 .. 5.3 7.2 11.2

Current Expenditures 365 364 419 600 686 . 34.2 6.1 6.4 8.7

Budgetary Saviogs -48 -84 50 175 11. 168 -0,8 0.8 2.5

OtEer Public SectorPutlic Sector Investment ~~421 239 248 295 350 . . 10.3 7.0 3'.8 4.9

OS $ millionl-

CUERENT EXPENDITURE DETAI-LS Actual -Estimated CETATIL ON At Av. 1972/73 P and ER

As 9 Total Current Expend.) 1969/70 1972/73 1974/75 19-75/76 1976/T77 PUBLIC SECTOR. F4,rst Plan 9, of Total

Education . 14.8 15.5 13.6 13.3- INVESTMENT PROGRAM (1973/74 - 1977/ 78

Other Social Services .. 4.C 4.2 4.4 4.2 Social Sectors 758 15.3

Agriculture and Agriculture 1,302 26.4

Other Ecmonmic Services .. 11.2 7. 2 6.8 6.7 Industry and Ilining 1,024 20.7

Administration and Defense .. 67.4 68.1 68.8 68.9 Power 529 10.7

('tier 2.7 5.0 6.4 6.9 Transport and conaunicati-ons 802 16.3

Total Current Expenditures T00. 100.0o -1700.0 100.0 Other 524 10.6

____________________________________________________________________________ Total ExpendItures 4,940 100.0

SELECTED INDICATORS i960- 1965- 1973- FINANIClNO

(Calculated from 3-year averaged data) 1965 1970 1976 D7omestic Borrowing 784 15.9

Average ICOR . 3.74 0.89 Public Sector Savings 2,022 40.9

Imepsrt Elasticity . 1.29 1.11 Program, aid counterpart 1,009 20.4

Srginial Domestic Savings Rate .. 0.22 Q.Q5 Foreign Project Aid 1.125 22.8

Marginal National Savings Rate .. .ss 0.05 Total Financing 4,940 100.0

I.ABOR FORCE ANt Total Labor Force Value Added Per Worker (1972 73 Plrices & Exec. Rates)

OUTPUT PER WORKER In Millions 7, of Total 1961 - 73 In U.S.Dollars Percent of Aver:ge 19 70 - 73

1960/61 19 72/ 73 1960/61 1972/73 Growth Rate 1969/70 19 72/ 73 1969/70 1972/ 73 Growth Rate

Agriculture 16.1 20,5 85 78 2.0 .. 166 .. 76

Industry 1.0 1.8 5 7 5.0 229 ., 105

Service 1.8 3.9 10 15 6.7 .. 484 ., 222

Total 1-8.9 26.2 100 1700 2.8 248 217 100 100 -41.9

not applicable -nil or negligiblenot available -- lees than half the smallest unit shows

Note: Figures are on fiscal year basis (July 1-June 30). Data prior to 1972/73 pertain to erstwhile East Pakistan

/I These are criginal plan targets.

: OzcHHHIHI OH Hm 0P w0 H0 0,- .0 0 01 0-00 0- t o=EoHI o110 0.01 X 03aI 0z00xMw nOraz7 S rf l o tI r- W 0 |

oC 00 H 00- 000°70 r= O H -o O to0

00- z- =F 00 00 o~ r 0-1 r" z- g 0-

F~ ~ ~~~~~~~~~4.t o Kr |ott |H- | || rovV

v, W iHO 0 H | 'gw, , ,oH 2 I o °1 e vI¢M11- | S

°0° ° .= ro oH 20 0 = 0 _

a~~~~~~~~~~~~~~7t oo 20 1

O- 0' 0 *Gal

00 7. to o.

v . n n 7 H It. O 00W nt o H o . . I I t . H

0' g0 '00000 =0 t t^&

I~~~~~~~~0 I 01' ::oo

o~~~~ ~~~~~ oU v47 H

r ~ ~~~~~~~ 000Ooj 0/ u4 to 2W90

VM~~~~~~~~0 0 0 00 0 _ *0.. 40g00-*

!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ to 00 w -' O

|~~~~ 0 H w 10 > 0 w P <' W ~ 000 H-

ANNEX IIPage 1 of 11

BANGLADESH

STATUS OF BANK GROUP OPERATIONS

As of November 30, 1977

A. IDA Credits to Bangladesh

US$ Million Net of

Credit Exchange Adjustment

Number Year Purpose Amount Undisbursed(net of

cancellations)

Five Credits Fully Disbursed 206.4 -

339 1972 Cyclone Area Reconstruction (replacesCredit No. 228-PAK of 1971) 25.0 7.6

340 1972 Chandpur Irrigation II (replaces

Credit No. 184-PAK of 1970) 13.0 4.2

341 1972 Tubewells (replaces Credit No.208-PAK of 1970) 14.0 2.2

343 1972 Telecommunications (replaces partof Credit No. 145-PAK of 1969) 7.3 1.3

353 1973 Small-Scale Industry (replaces

Credit No. 192-PAK of 1970) 3.0 .2

367 1973 Chittagong Water Supply (replacesCredit No. 42-PAK of 1963) 7.0 .7

368 1973 Dacca Water Supply and Seweragereplaces Credit No. 41-PAK of1963) 13.2 .7

381 1973 Foodgrain Storage (replaces Credit

No. 83-PAK of 1966) 19.7 .3

407 1973 Education (replaces Credit Nos.49-PAK and 87-PAK of 1964 and1966) 21.0 7.3

408 1973 Highways (replaces Credit No. 53-PAKof 1964) 25.0 12.7

409 1973 Technical Assistance 4.0 1.6

410 1973 Cereal Seeds 7.5 5.8

424 1973 Inland Water Transport Rehabilitation 8.7 1.9

487 1974 Second Telecommunications 20.0 18.2

527 1975 Ashuganj Fertilizer 33.0 22.7

533 1975 Population 15.0 13.2

542 1975 Barisal Irrigation 27.0 25.7

591 1975 Imports Program IV 100.0 .6

605 1976 Karnafuli Irrigation 22.0 18.1

ANNEX IIPage 2 of 11

BANGLAD ESH

STATUS OF BANK GROUP OPERATIONS

As of November 30, 1977

A. IDA Credits to Bangladesh (CON'D)

US$ Million Net ofCredit Exchange AdjustmentNumber Year Purpose Amount Undisbursed

621 1976 Agricultural and Rural Training 12.0 11.6622 1976 Technical Assistance II 7.5 7.0631 1976 Rural Development 16.0 15.8632 1976 Bangladesh Shilpa Bank 25.0 24.4676 1977 Imports Program V 75.0 41.2724 1977 Shallow Tubewells 16.0 16.0725 1977 Muhuri Irrigation 21.0 21.0729 1977 Extension and Research 10.0 10.0735 1977 Inland Water Transport II 5.0 5.0*752 1977 Imports Program VI 75.0 75.0

SUBTOTAL 854.3 372.3Principal Repayment 0.4Effective Credits held by Association 853.9

B. IBRD Loans to Bangladesh

1087 1975 Consolidation Loan 54.9 0

TOTAL 908.8 372.3

*Not yet effective

ANNEX IIPage 3 of 11

C. PROJECTS IN EXECUTION1/

Cr. No. 339 Cyclone Area Reconstruction Project: US$25.0 Million Creditof October 18, 1972; Effective Date: January 17, 1973;Closing Date: June 30, 1978

Project performance has improved and, although still 2-1/2 yearsbehind schedule, it is no longer falling further behind. Following reevalua-tion of the design, the cyclone shelter program is now moving ahead with 124modified shelters expected to be completed between mid-and-end 1978. Strength-ening of the shelters already constructed will commence shortly. Arrangementsfor supervision of shelter construction still need to be strengthened. Four ofthe five primary roads are now finished with the fifth road scheduled forcompletion in 1978. The IDA financed portion of the feeder road program isnearing completion. Construction of towers for the telecommunications sub-project is behind schedule but was to be completed by December 1977. Thefisheries subproject, including distribution of boats to groups of localfishermen has been completed. Work on the repair or new construction ofinland water transport terminals is almost completed.

Cr. No. 340 Chandpur Irrigation II Project: US$13.0 Million Credit ofOctober 18, 1972; Effective Date: January 17, 1973;Closing Date: April 30, 1978

The project should be completed by December 1978. Delays have beendue to major flooding, labor problems, shortages of materials, equipment,breakdowns, ineffective management, and delays in provision of local funds.While problems remain, substantial progress has been made recently both inphysical construction and agricultural extension. The main regulator is nowoperational, although utilization of the irrigation works will be delayeddue to land acquisition problems (now resolved) which interfered with workon irrigation channels. A four month extension of the Closing Date has beenagreed to allow additional time for project audits and proposals for therecovery of water charges to be prepared. A further extension of the ClosingDate will be considered when these have been received.

1/ These notes are designed to inform the Executive Directors regardingthe progress of projects in execution, and in particular to report anyproblems which are being encountered, and the action being taken toremedy them. They should be read in this sense, and with the under-standing that they do not purport to present a balanced evaluation ofstrengths and weaknesses in project execution.

ANNEX IIPage 4 of 11

Cr. No. 341 Tubewells Project; US$14.0 Million Credit ofNovember 6, 1972; Effective Date: January 13, 1973;Closing Date: March 30, 1979

Because of a slow start, project implementation is about 18 monthsbehind schedule. Completion of the Project is expected within a year. About90% of the wells under contract have now been drilled, and verticalitv prob-lems have largely been corrected by the contractors. BADC has decided torecontract for 285 wells not yet drilled. Pumphouse construction and engine/pump installation is proceeding satisfactorily. The agricultural developmentcomponent of the project, also behind schedule, has been incorporated in theExtension and Research Project. Project audits are not being received in atimely fashion. Arrangements for extending consultantsr services have beenagreed. The Closing Date has been extended to March 30, 1979.

Cr. No. 343 Telecommunications Project; US$7.3 Million Credit ofNovember 15, 1972; Effective Date: January 17, 1973; ClosingDate: June 30, 1978

The Project was originally financed as part of Credit No. 145-PAKof 1970, and goods valued at US$2.2 million had been received prior to sus-pension of disbursements. Three of the four microwave systems have beencommissioned, two years behind schedule. The contract for the fourth micro-wave system (which substitutes the coaxial cable system in the originalproject) has been awarded together with contract for similar systems underCredit 487-BD. This system is expected to be commissioned by June 1978.The Closing Date has been extended from December 31, 1975 to June 30, 1978.

Cr. No. 353 Small-Scale Industry Project; US$3.0 Million Credit ofJanuary 19, 1973: Effective Date: May 14, 1973;Closing Date: December 31, 1977

The Project is administered by the Bangladesh Small and CottageIndustries Corporation (BSCIC) and a consortium of commercial banks. In early1976, the Closing Date was extended to March 31, 1977 to allow for disburse-ments under outstanding letters of credit. To permit all credit funds to bedisbursed, a further extension of the Closing Date, from March 31, 1977 toDecember 31, 1977 was agreed. A second project involving BSCIC and commercialbanks under revised institutional arrangements was appraised in July/August1977.

Cr. No. 367 Chittagong Water Supp1_Y Projecti__ US$7.Q Million Credit ofApril 9, 1973; Effective Date: June 7, 1973Closing Date: October 31, 1978

After very little moovement during the first two years because oforganizational and procurement difficulties, the progress of work in thepast three years has been satisfactory and disbursements on the project areexpected to be comnpleted by November 1978, some three years behind the

ANNEX TTPage 5 of 11

schedule established in 1973. WASA has been in default of the financialcovenant (Section 4.03 (a) of the Credit Agreement dated April 9, 1973),which stipulates that rates are to provide sufficient revenue to: (i)cover operating expense, depreciation and interest; (ii) to meet repay-ment of long-term debt to the extent that such repayments exceed deprecia-tion charges; and (iii) finance normal extensions of the systems and pro-vide a reasonable portion of the cost of future major extensions. GOBapproval of a tariff increase was given on November 3, 1977. This willincrease annual revenue by about 38 lakhs Taka and should, with othermeasures being taken, provide Chittagong WASA with sufficient revenue toenable it to meet the earnings covenant for FY78. A fourth extension ofthe Closing Date to October 31, 1978 was recently agreed.

Cr. No. 368 Dacca Water and Sewerage Project; US$13.2 Million Credit ofApril 9, 1973; Effective Date: June 7, 1973, Closing Date:October 31, 1978

Project progress and the Dacca WASA's financial problems are similarto those of Chittagong under Credit 367-BD above. A fourth extension of theClosing Date to October 31, 1978 was recently agreed.

Cr. No. 381 Foodgrain Storage Project; US$19.7 Million Credit of May 18,1973; Effective Date: July 17, 1973; Closing Date:September 30, 1977

The project, originally financed by US$19.2 million IDA CreditNo. 83 of 1966 and a 25 million Kroner credit from the Kingdom of Sweden, wasalmost completed at independence and 95% of the reactivated IDA and Swedishcredits was used for repaying the previous credits. Substantial delays oc-curred in hiring consultants and in design and construction of ancilliarycivil works. In addition, there was serious deterioration in the silosmechanical equipment due to inadequate maintenance and management, understaffing in the Directorate of Silos and delays in ordering spare parts.After January 1976, however, significant progress was made in accordance withan action program agreed with IDA/SIDA, particularly in constructing ancillarycivil works and staffing the project agency; one silo was put back into opera-tion, consulting services for a silo maintenance improvement program have beenobtained and jetty rehabilitation started in February 1977. The Associationagreed to a third extension of the Closing Date to September 30, 1977. Theproject was completed on June 30, 1977 and a mission to prepare a projectcompletion report will visit Bangladesh soon.

Cr. No. 407 Education Project; US$21.0 Million Credit of June 29, 1973;Effective Date: September 27, 1973; Closing Date: June 30,1978

This project was originally financed by Credits 49-PAK and 98-PAKand by December 1971, when disbursements were suspended. US$7.7 million hadbeen disbursed. Progress on the Agricultural Univcrsity portion of the proj-ect is about 30 months behind schedule due to initial difficulties in reaching

ANNEX IIPage 6 of 11

agreement with the consultant architects on a revised contract and shortagesof building materials and delays in the preparation of equipment lists andfurniture designs. However, significant progress has been made beginning inlate 1976. The academic buildings now under construction are expected tobe completed by June 1978 and the remlaining works by December 1979. TheUniversity has taken steps to improve the relevance of its agricultural train-ing and research programs to Bangladesh's practical problems in agriculturaland rural development but further progress in this direction is needed. Thetechnical education portion of the project is about 30 months behind scheduledue to past delays, but is expected to be completed by July, 1978. Thegraduates are facing severe problems of unemployment and a committee has beenestablished to revise the curriculum to make it more relevant to job require-ments.

Cr. No. 408 Highways Project; US$25.0 Million of June 29, 1973;Effective Date: September 27, 1973; Closing Date:December 31. 1979

Several project elements are now nearing completion, including theSitalakhya Bridge, ferry improvements and the Keane Bridge which was officiallyopened in June 1977. However, the Feni bypass is still seriously behindschedule and completion is unlikely before mid-1979. Construction of theRoads and Highways Directorate building has commenced. An action programcalling for a review of project progress against agreed targets was estab-lished for purposes of approving an extension of the Closing Date toDecember 31, 1979.

Cr. No. 409 Technical Assistance Project; US$4.0 Million Credit ofJune 29, 1973; Effective Date: August 20, 1973; ClosingDate: December 31, 1978

Contracts have been signed with consultants for thirteen sub-projects amounting to about US$3.9 million. Completed studies have playeda key role in the preparation of projects for IDA financing. Due to delaysin initial commitment of credit funds, disbursements are 2 to 3 years behindinitial estimates. The Closing Date for this Credit was extended initiallyby two years, to December 31, 1977 and a second extension, to December 31,1978 was agreed recently to permit full disbursement of the credit.

Cr. No. 410 Cereal Seeds Project; US$7.5 Million Credit of June 29, 1973;Effective Date: January 30, 1974; Closing Date: December 31,1979

Although the project is about 20 months behind schedule,implemen-tation has improved considerably in riecent months. Orders for farm machineryand laboratory equipment have recently been placed. After contract negotia-tions with the lowest bidder for the seed processing plants broke down,proposals for simplification of plant design were agreed and tenders are nowbeing processed. After substantial initial delays, work is now proceedingon improvements at the seed multiplication farms and production of seed,especially wheat, is increasing. The Closing Date was recently extended toDecember 31, 1979.

ANNEX IIPage 7 of 11

Cr. No. 424 Inland Water Transport Rehabilitation Project; US$8.7 MillionCredit of August 10, 1973, as amended by Amending Agreementof October 17, 1975; Original Credit Effective Date:September 27, 1973; Supplementary Credit Effective Date:March 19, 1976; Closing Date: June 30, 1978

Procurement of spare parts and equipment under the original creditwas slow initially but credit proceeds are almost fully committed with 88% ofavailable funds disbursed. Under the Supplementary Credit, two used light-erage tankers have been procured, necessary repairs and modifications havebeen completed, and the tankers delivered to Chittagong. Delivery of pipesfor connecting the oil mooring to the ERL refinery has been delayed, but anadjacent berth is being utilized in the meantime for unloading of crude oil.Due to delays in the procurement of fenders, commencement of oil transferoperations was delayed, and was finally attempted by the Bangladesh ShippingCorporation (without fenders and against the IDA-financed consultant'sadvice) in July, 1977 during the monsoon. Both lighterage tankers weredamaged, one having to be taken out of service and replaced by a charteredvessel. Additional technical assistance has been proposed to assist BSC,which is expanding its fleet at a rate beyond its managerial, operational,technical and crewing capabilities. This would require the Closing Date tobe extended by nine months to March 31, 1979, if the Credit is used to financethis technical assistance.

Cr. No. 487 Second Telecommunications Project; US$20.0 Million Credit ofJune 26, 1974; Effective Date: July 23, 1974; Closing Date:June 30, 1979

The project is about two years behind schedule due to delays inprocurement. About 30% of the Credit has so far been committed; the balanceis expected to be committed in 1978. About 60% of the appraisal targets forlocal network expansion for first three years has been achieved. Work onlong-distance telephone exchanges has still to commence. A Telegraph andTelephone Board has been established, a year behind schedule. Consultantsfinanced under the Credit are assisting the T&T Board in establishing acommercial accounting system and valuation of assets.

Cr. No. 527 Ashuganj Fertilizer Project; US$33 Million Credit ofFebruary 11, 1975; Effective Date: December 19, 1975;Closing Date: December 31, 1982

The project is being cofinanced by the Asian Development Bank, KfW,and the Governments of Iran, Switzerland, UK and US, providing a total ofUS$109 million equivalent in addition to the IDA credit. Site preparationwork including the necessary dredging and filling was completed on schedule.However, based on the soils analyses undertaken by two specialist consultingfirms, further preparation of the site is being carried out to protect theplant against earthquake risks. Site preparation should be completed inMarch 1978 after which construction can commence. Currently the project is

ANNEX IIPage 8 of 11

about two years behind schedule due primarily to the additional site prepara-tion and initial slow progress in (a) placing orders for time-critical itemsand (b) planning for construction. Revised cost estimates are being finalized.Allowing for the additional site work and the delays, costs are expected to besignificantly higher than lender funds currently available. Discussions withGovernment on means of providing the project with sufficient foreign exchangeare under way.

Cr. No. 533 Population Project: US$15 Million Credit of February 11,1975; Effective Date: Septeminber 25, 1975; Closing Date:December 31. 1982

The project is being colinUanced by six co-lenders providing a totalof about US$25 million equivalent in addition to the IDA credit. Notwithstand-ing the delay in declaring the Credit effective, the Government has made sub-stantial progress in project implementation. The organizational structure ofthe Population Control and Family Planning Division (body responsible for thepopulation program) has been defined and its headquarters staff has been placedin position; most field staff is being recruited. Population programs in fivenon-health ministries are underway. The Building, Planning and Design Unit ofthe Ministry of Health, with the assistance of consultants, has completed amaster plan for the project's construction program and contracts for construc-tion of project buildings are being awarded. Preliminary drafts of a studyon Population legislation and a management study for the Ministry of Health,Population Control and Family Planning have been completed. Most of therequired consultants and advisors for, other parts of the project have beenappointed.

Cr. No. 542 Barisal Irrigation Project; US$27 Million of April 29, 1975;Effective Date: February 24, 1976; Closing Date: Decem-ber 31, 1980

The project is behind schedule due to initial delays in hiringproject consultants and in assignment of Water Development staff members tothe project, and delays in land acquisition. The staffing position hasimproved and field survey and design activities are now progressing satis-factorily. Principal field activitie!s have been survey work, procurementof materials and housing and office construction. Two pilot areas havebeen developed which have been useful in testing the project concept and inidentifying potential problems. Constrturtion of irrigaLion channels had beendelayed by problems of land acquisition but these have now been resolved.

Cr. No. 591 Fourth Imports Program,; US$100 Million of November 25, 1975;Effective Date: December 29, 1975; Closing Date:September 30, 1977

This credit was fully disbursed in December, iv77.

ANNEX IIPage 9 of 11

Cr. No. 605 Karnafuli Irrigation Project; US$22 Million of January 28, 1976;Effective Date: February 24, 1976; Closing Date: December 31,1980

The project is behind schedule due to initial delays in hiring proj-ect consultants. The consultants for the irrigation portion of the projectbegan work in September 1976, but their effectiveness was limited by delaysin procurement of vehicles and equipment and in the assignment of localconsultants to assist in the design work. Work is now underway to prepareconstruction contract documents and to facilitate equipment procurement. Thefisheries component of the project made virtually no progress until recently.Key staff have now been appointed and a contract with a fisheries consultingfirm has been signed.

Cr. No. 621 Agricultural and Rural Training Project; US$12.0 Millionof March 25, 1976; Effective Date: June 30, 1976; ClosingDate: June 30, 1981

Progress on preparation for construction is about five months aheadof schedule. Most sites have been selected and acquired. Progress has alsobeen achieved in the preparation of sketch plans for project buildings and theGovernment has been working on revised, more economical plans for the BograRural Development Academy. The inservice training program supported underproject has been delayed due to delays in allocation of local funds; delaysare also being experienced in hiring consultants for the project.

Cr. No. 622 Second Technical Assistance Project; US$7.5 Million ofApril 8, 1976; Effective Date April 14, 1976; ClosingDate: June 30, 1980

Five subprojects have been approved amounting to about $4 million.Other subprojects are under consideration.

Cr. No. 631 Rural Development Project; US$16.0 million of May 20, 1976;Effective Date: August 3, 1976; Closing Date: December 31,1981

The reorganization of pump groups into cooperatives under theIntegrated Rural Development Program is being completed, and adequate progresshas been achieved in rescheduling loans. As part of a nationwide effort torevitalize the extension system, modifications are being introduced to theproject's agricultural extension system. Procurement under various projectcomponents, benchmark and fish pond surveys, land and draft animal registrationare in progress. After some initial delays, the construction of feeder roadsand thana buildings is proceeding on schedule. However, the project hasexperienced some implementation problems in part due to lack of proper coor-dination among the various implementing agencies, inadequate supervision offield level staff, and inconsistencies which have developed among variousongoing rural development programs. A mission visited Rangladesh in November,1977 to review the implementation of this project and discuss with the Govern-ment institutional and policy issues affecting rural development in general.

ANNEX IIPage 10 of 11

Some modifications are expected to be made to the project on the basis ofthe mission's recommendations.

Cr. No. 632 Bangladesh Shilpa Bank PrJject; US$25.0 Million of May 20,1976; Effective Date: November 8, 1976; Closing Date:June 30, 1981

As of December 31, 1977, IDA had committed $7.7 million and $0.6million had been disbursed. It is anticipated that the Credit will be fullycommitted by December 1980 and that disbursements will be completed by theClosing Date.

Cr. No. 676 Fifth Imports Program; US$75 Million of January 25, 1977Effective Date: February 24, 1977; Closing Date:December 31, 1978

As of December 31, 1977, disbursements were US$39.5 million. Inaddition about US$9.0 million of letters of credit are outstanding.

Cr. No. 724 Shallow Tubewells; US$16 Million of July 1, 1977; EffectiveDate: December 9, 1977; Closing Date: December 31, 1981

Tender documents for enginets and pump sets for all 10,000 wellshave been agreed. A consultant for workshop management has been designatedand the preparation of tender documents for workshop tools and machineryis at an advanced stage. The preparation of Thana Irrigation Maps isexpected to be completed by March, 1978.

Cr. No. 725 Muhuri Irrigation; US$21.0 Million of July 1, 1977; EffectiveDate: January 6. 1978; Closing Date: June 30, 1983

Delays have occurred in obtaining Government approval of the projectbudget, establishing the project fund, completing arrangements for hiring theengineering consultants, and signing a contract with the Contractor who willconstruct the Feni Regulator.

Cr. No. 729 Extension and Research Project; US$10 Million of July 1, 1977;Effective Date: January 6, 1978; Closing Date: April 30, 1981

The effectiveness deadline for this project, originally September 29,1977 was extended twice to January 6, 1978 to allow the Government more timeto complete conditions of effectiveness (approval of the project budget,appointment of key management personnel, submission of the legal opinion,and establishment of revolving fund) and to work out arrangements concerningthe role of field level extension personnel in some new agricultural develop-ment programs.

ANNEX IIPage 11 of 11

Cr. No 735 Inland Water Transport II Project; US$5.0 Million Credit ofSeptember 30, 1977; Closing Date June 30, 1980; Credit notyet effective.

Lists of spare parts for BIWTA vessels and navigation aids, andfor BIWTC cargo vessels have already been prepared and BIWTC lists for spareparts for hydrographic equipment and specifications for new mobile cranes areunder preparation. Discussions have taken place with the respective agenciesinvolved about the specialist services required, and procedures for initiatingenquiries and selection of suitable specialists agreed. Operational specia-lists are now expected to be appointed by end April 1978 - four months behindthe original schedule due to the late signing of the Credit Agreement. Con-ditions of effectiveness have yet to be complied with.

ANNEX IIIPage 1

BANGLADESH

JUTE PROJECT

Supplementary Project Data Sheet

Section I: TimptahIp of Key Events

(a) Time taken to prepare project:

About 12 months

(b) Preparation by:

Government of Bangladesh assisted by IDAResident Mission Staff

(c) First IDA Mission:

Crop Sector Review Mission in field June 1975

(d) Appraisal Mission departure:

November 1976

(e) Negotiations:

October 1977

(f) Planned date of effectiveness:

April 1978

Section II: Special IDA Implementation Actions

The draft terms of reference for the studies of theworld jute market for jute goods and jute fiber, andon the pricing policies and internal marketing of rawjute and jute goods were prepared and agreed to inprinciple prior to negotiations.

ANNEX IIIPage 2

Section III: Special Conditions of IDA Credit

(a) Special conditions of effectiveness are: (a) thesigning by the Government of a Subsidiary Loan Agree-ment, satisfactory to IDA, with Sonali Bank; (b) theratification of the execution of the Project Agree-ment on behalf of Sonali Bank; (c) the approval bythe Government of the Project Proformas (a PP is aGovernment document necessary for the allocationof funds and creation of staff positions for develop-ment projects) for the project; (d) the appointmentof auditors, satisfactory to IDA, for the SonaliBank; (e) the appointment of the Director and DeputyDirector to DAJ; (f) the opening of a project revolv-ing fund for local currency payments, with an initialdeposit of Tk 2 million; and (g) the establishment ofthe project Committees (paragraph 79);

(b) Before undertaking any expansion of IJCS beyond1 million acres, the Government would ensure thatsuch expansion: (a) is economically justified, onthe basis of medium- and long-term world supply anddemand prospects for raw jute and jute goods; and(b) would not adversely affect the operation ofthe project (paragraph 51);

(c) A condition of disbursement for the marketing creditcomponent would be that marketing and rental fees,for the storage sheds have been agreed with IDA(paragraph 79);

(d) The Directorate of Agriculture (Extension and Man-agement) would supply adequate numbers of sprayersof design and in condition satisfactory to the DAJDirector and to be provided to jute farmers underarrangements satisfactory to IDA (paragraph 56);

(e) Bicycles and motorcyles would be made available tostaff of the Ministry of Agriculture under arrange-ments satisfactory to IDA (paragraph 53);

(f) The following consultants would be appointed promptlywith qualifications and experience and on terms andconditions satisfactory to IDA: (i) Project Manage-ment Advisor by January 1, 1978; and (ii) MarketingSpecialist by July 1, 1978 (paragraph 59);

(g) The Government would maintain specified projectCommittees (paragraph 68);

ANNEX IIIPage 3

(h) Additional project and DAJ headquarter staff wouldbe appointed by February 1, 1978 and April 1, 1978respectively (paragraph 69);

(1) The Government would instruct: (i) BADC to continueto supply IJCS fertilizer requirements on a prioritybasis; (ii) the Seed Directorate of the BangladeshJute Research Institute to meet IJCS seed requirements;and (iii) the Directorate of Agriculture (Extensionand Management) to stock adequate supplies of pesticidesand sprayers (paLragraph 71);

(j) The syllabus and. duration of the training for JEAsat Agricultural Training Institutes, or at othersuitable institutions, would be decided by March 31,1978 (paragraph 60);

(k) The Government would conduct a review of the project'scredit operations by October 1, 1980 and would agreewith IDA on any change in the IJCS credit systemduring project implementation (paragraph 55);

(1) A farmer would be excluded from future loans: (i)if he is in defaiult on any of his previous loans andinterest; or (ii) if he belongs to a JFA or KSSwith a recovery rate on previous loans below 75%(paragraph 55);

(m) Studies of the world market for jute goods andjute fiber, and on the pricing policies and in-ternal marketing of raw jute and jute goods, withterms and conditions satisfactory to IDA, wouldcommence by December 1, 1977 (paragraph 59); and

(n) By December 31, 1.978, the Government would submit toIDA for review a plan, including an implementationtimetable, for establishing a jute price mechanism(paragraph 59).

, ~~~~~~~~~~~~~BRD 127( RI

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