document of international development association … · * 1. i submit the following report and...

34
FILE-COp DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. P-1606-BD REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE PEOPLE'S REPUBLIC OF BANGLADESH FOR THE BARISAL IRRIGATION PROJECT April 9, 1975 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

Upload: others

Post on 07-Dec-2019

4 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

FILE-COp

DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION

Not For Public Use

Report No. P-1606-BD

REPORT AND RECOMMENDATION

OF THE

PRESIDENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

TO THE

PEOPLE'S REPUBLIC OF BANGLADESH

FOR THE

BARISAL IRRIGATION PROJECT

April 9, 1975

This report was prepared for official use only by the Bank Group. It may not be published,quoted or cited without Bank Group authorization. The Bank Group does not acceptresponsibility for the accuracy or completeness of the report.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Page 2: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

CURRENCY EQUIVALENTS-(as of February 28, 1975)

Currency Unit = Bangladesh Taka (Tk)US$1.00 = Tk. 7.8Tk. 1 US$0.128Tk. 1 million = US$128,000US$ 1 million = Tk. 7,800,000

WEIGHTS AND MEASURES EQUIVALENTS

1 acre = 0.405 hectare (ha)1 mile = 1.609 kilometres1 sq. mile = 640 acres

= 259 ha1 foot = 30.5 centimetres1 maund (md) = 82.3 lbs.

= 37.3 kg.1 long ton = 1.016 metric tons

= 27.2 md1 cu. ft. per 3

second = 0.028 m /second

PRINCIPAL ABBREVIATIONS USED

BADC - Bangladesh Agricultural Development CorporationCEC - Central Evaluation CommitteeHYV - High Yielding Varieties (of rice)IPIC - Interdepartmental Project Implementation CommitteeIRDP - Integrated Rural Development ProgramTCCA - Thana Central Cooperatives AssociationTTDC - Thana Training and Development CenterWDB - Water Development Board

GLOSSARY

Aman - Rice planted before or during monsoon and harvestedin November or December.

Aus - Rice planted during March and April and harvestedduring July and August.

Boro - Rice planted in winter and harvested during the periodApril to June.

Thana - Smallest administrative unit of Bangladesh Governmentof which there are 413. Six or seven thanas form asub-division, three or four sub-divisions form adistrict, and there are 19 districts in the country.

FISCAL YEAR

ends June 30

The Taka is officially valued at 18.9677 to the pound sterling. Thepound now floats relative to the US Dollar with the result that theTaka - US Dollar rate is subject to change. The exchange rate usedfor the purposes of preparing data for this report is US$1 to Tk. 8.0,except where stated to the contrary.

Page 3: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT

TO THE PEOPLE'S REPUBLIC OF BANGLADESH FOR THEBARISAL IRRIGATION PROJECT

* 1. I submit the following report and recommendation on a proposeddevelopment credit to the People's Republic of Bangladesh for the equivalentof US$27 million on standard IDA terms, to help finance an irrigationdevelopment project in the vicinity of the city of Barisal.

PART I - THE ECONOMY

2. A Basic Economic Report on Bangladesh, entitled "Bangladesh:Development in a Rural Economy" (Report No. 455b-BD, dated September 15,1974) has been distributed to the Executive Directors. The Basic Reportand a follow-up mission in September 1974 delineated a number of criticalareas where the Government needed to take action in the short-run. Theseare discussed in the ensuing paragraphs. The first meeting of the Aid Groupfor Bangladesh in Paris on October 24 and 25, 1974 indicated that donors sharedthe Bank's view of the need for the Government of Bangladesh to take actionin these areas. An economic updating mission was recently in the field.It assessed the progress made in response to the views expressed by theBank at the Aid Group meeting. The mission's Report is expected to beavailable for distribution to the Aid Group and the Executive Directors inthe first half of April, 1975. Annex I contains the country data.

Background

3. The Basic Economic Report describes the obstacles to developmentin Bangladesh and outlines a course of action to maximize the country'slimited development prospects. The high ratio of population to naturalresources, the slow development of the productive-and infrastructural baseand the weakness of the administrative and institutional framework led theReport to project a growth rate of GDP over the next five years of between2% and 3.5% per year in real terms only, the variation within that rangedepending on the appropriateness of the policy framework and on levels ofaid. This compares with an expected population growth of about 3% per yearso that, even under the most optimistic assumptions, per capita GDP --already one of the lowest in the world -- is not likely to rise by more than0.5% per year during the period ending in 1977/78.

4. Encouraging progress was made in the period immediately followingBangladesh's independence as an enthusiastic Government, supported bymassive external assistance, strove to overcome the devastations of thecyclone of 1970 and the struggle for independence in 1971. Large amountsof food aid were distributed, refugees were resettled, vital port, road and

Page 4: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

- 2 -

rail facilities were brought back into operation, a new constitution was

adopted, and the first national elections, held in March 1973, broughtSheik Mujibur Rahman's Awami League party into power with an overwhelming

parliamentary majority.

5. But such achievements pall in the face of the problems which

remain to be solved. The country is desperately poor, with a per capitaincome of only about US$70, and overcrowded, with more than 1,400 people

per square mile. Continued population growth puts ever-Increasing strainson a nation lacking most basic resources. Bangladesh remains extremelyvulnerable to the devastations of both drought and flood. Stocks ofraw materials and spare parts are very low, many staple consumer items

continue to be scarce or simply not available, and inflationary pressures area serious continuing problem. Law and order deteriorated in both rural andurban areas during 1973 and early 1974. In March and April 1974 therewere civil disturbances in Dacca. The problem became severe again latein 1974 and contributed to the Government's decision to declare a State ofEmergency in December. On January 25, 1975, the Constitution was amendedto provide for a presidential system of government with greater powerconcentrated in the Office of the President. It was stated that one oftne reasons for the change was to be able to deal more effectively with thelaw and order situation.

6. With the attention of policy-makers focused on the immediateshort-term needs, especially on ensuring an adequate food supply, and onthe preparation of the First Five Year Plan, many fundamental policy decisions

concerning such issues as pricing of external resources and capital and thewidespread subsidies, on which realization of the Plan itself was based,were not taken. Drought and other natural factors also undermined recoveryefforts, bringing 1972/73 per capita GDP down to 80-85% of 1969/70 levels.Substantial increases in production during 1973/74 brought GDP closer tothe 1969/70 level. However, severe flooding in July-August 1974 reducedrice production. In addition, the foreign exchange crisis slowed down theflow of imports and thus industrial recovery. Output in 1974/75 is estimatedto be lower than in the previous year. Per capita income today stands at20% below the level attained in the late 1960's.

7. Even a healthy, well-managed economy would have been badly hurtby the adverse shift in the terms of trade which Bangladesh experiencedduring 1973/74. For Bangladesh the impact has been severe. As discussed in

more detail in paragraph 17 below, while the average prices of Bangladesh'simports rose by some 65%, the average price of exports rose by less than 6%and export volumes did not reach projected levels, so that the gap betweenforeign exchange expenditures and receipts widened rapidly. Early in the

summer of 1974, Bangladesh sought assistance from a number of donors toease this crisis and asked the Bank to form an Aid Group to raise additionalresources. The already critical balance of payments situation was made

far worse when floods of record levels struck the country, inflicting wide-spread human misery, decreasing crop production and increasing the need for.ood imports. At the Aid Group meeting held in Paris on October 24 and 25,1974, members gave indications of new aid they were prepared to commit for19 4/75.

Page 5: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

-3-

8. Bangladesh is in an extremely difficult situation. While importprices have risen much faster than export prices, Bangladesh, as theparagraphs below indicate, remains dependent on substantial food importseven in years of favorable weather. Meanwhile its volume of jute exportshas recently declined. The import-dependent industrial sector has beenstarved for raw materials and spare parts and must operate well below capa-city. During the October Aid Group meeting discussions took place concerningthe need for Government action to improve the farmgate price of jute vis-a-vis rice, accelerate implementation of aid financed projects and increaseinternal procurement of food for the ration system. The policy changescited above are critical to successful development in Bangladesh, but theiradoption will not reduce the dependence for the foreseeable future onsubstantial quantities of aid, especially program aid.

Agricultural Production

9. The gravest problem confronting the Government has been, and is,

the food situation. The 1970/71 crops were poor and the crop of December1971 was disrupted by the war. Large-scale foodgrain imports of about 1million tons during the first six months of 1972 prevented famine. Importscontinued at record levels during 1972/73, but as the table below indicates,drought reduced local production of rice, so that estimated per capitafoodgrain availabilities remained well below 1969/70 levels. This, combinedwith internal transport difficulties, and smuggling of foodgrains into India,led to a 50% rise in food prices over the year. Foodgrain production in1973/74 reached a near record of about 11.8 million tons, an increase ofabout 18% over 1972/73 levels, due primarily to very favorable weather andcontinued increases in the use of high-yielding varieties. Foodgrain pro-duction in 1974/75 was greatly reduced by the floods and by an acute shortageof urea fertilizer. It is expected to be substantially below the targetof 13.1 million tons and even below the 1973/74 crop.

FOODGRAIN PRODUCTION, IMPORTS AND AVAILABILITY

1969/70 1972/73 1973/74 1974/75

Production (mn. tons) 11.9 10.0 11.8 11.5

Net available (mn. tons) /a 10.7 9.0 10.6 10.3Imports (mn. tons) 1.5 2.8 1.7 2.3

Total available (mn. tons) 12.2 11.8 12.3 12.6 /b

Total available per capita(oz. per day) 17.1 15.4 15.6 15.7

/a Excluding seed, feed and waste; excludes changes in stocks, for whichaccurate data are not available.

/b This includes stock build-up of 0.2 million tons.

Page 6: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

-4-

10. In spite of the increase in foodgrain production in 1973/74, sub-stantial foodgrain imports were required both because production was notas great as anticipated and because the Government's domestic rice procure-ment program had little success, leaving the public rationing system almostentirely dependent on imported supplies. A build-up of domestic stocks byfarmers, hoarding by dealers and smuggling continued to reduce the amountsavailable on the open market. As a result, the domestic price of rice roserapidly in the early months of 1974, from Tk. 87 per maund (US$0.13 per lb.)in January to Tk. 130 per maund (US$0.20 per lb.) in April. The Government,in response, placed orders for large amounts of foodgrain (wheat) importsat prices some 90% higher than the previous year's. The composition ofavailable aid was such that much of these imports had to be financed fromthe Government's own cash resources. When the Government realized in May1974 the effect these orders were having on its foreign exchange reservesmany orders were postponed. Food imports in 1973/74 amounted to about 1.7million tons, significantly below 1972/73 imports, but which resulted indrawing down much more of the nation's foreign exchange than had been expected.The floods of mid 1974 exacerbated the situation, destroying 750,000 - 1.2million tons of grain. The lack of a buffer stock, the depletion of foreignexchange, the crop damage, the failure of aid shipments to arrive in time,and the increase in relief needs led to a famine situation and the deathsof 20,000-30,000 people. Since November 1974, foodgrain arrivals havepicked up and imports are expected to reach 2.3 million tons by the endof 1974/75. The Government launched a Special Agricultural RehabilitationProgram (SARP) to expand output of winter crops to moderate the effects ofthe floods but it was largely unsuccessful due to a failure to procure seedsin time.

11. Estimates of the Aman rice crop by the Ministry of Agricultureput the yield at about 6 million tons. This would be below last year's cropby about 700,000 tons. The Government has intensified its procurementdrive and taken punitive measures against hoarding and smuggling. It isestimated that procurement out of the Aman crop may equal 140,000 tons(double that of 1973/74) while it may be possible to procure another 60,000tons out of the Boro crop. Rice prices however have not declined from thevery high levels that obtained in early 1974/75. They had increased fromTk. 168 per maund in July to over Tk. 200 per maund (US$0.31 per lb.) inearly August 1974, and to Tk. 360 per maund (US$0.56 per lb.) by October1974, but by early November they had declined to Tk. 280 per maund (US$0.43per lb.). This decline was reversed recently and the price of rice hasalready climbed to Tk. 330 per maund in January and February 1975 and maynot fall during the remainder of the current fiscal year. High levels offoodgrain imports seem to be inevitable for the next few years, representinga considerable drain on the foreign exchange resources of the country. Inthe longer run, productivity should be increased by increasing fertilizeruse, better water control, more research and use of new high-yieldingvarieties, and improvements in farm extension work.

12. The rapid increase in the price of rice over the past two and ahalf years has increased the profitability of cultivating rice relative to

Page 7: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

-5-

jute, Bangladesh's second most important crop-and the source of about 85%of its foreign exchange earnings. Consequently, farmers have shifted outof jute into rice cultivation, bringing production of jute and similarfibers in 1973/74 down to about 6.0 million bales, well below the 1972/73level of 6.6 million bales. The relative price of jute continued todeteriorate throughout 1973/74, and as a consequence the 1974/75 jute cropwas about 4.2 million bales. Because of the large-stock carryover into1974/75, there has been no supply shortage of raw jute and as jute goodsproduction and exports have fallen, a carryover of 1.4 million bales willbe available-for 1975/76. To prevent a further reduction in raw juteproduction in 1975/76, steps are needed to increase the domestic. juteprocurement price. However, the Government's jute policy announced inMarch 1975 does not set a minimum price for jute. Jute problems are com-pounded currently by inadequate primary and secondary collection centers,a serious lack of and deterioratioft in storage space, and shippingdifficulties. In the longer run more effective extension of improved jutecultivation techniques and an intensive research effort will be essentialif jute is to become competitive with rice cultivation at home and syntheticsubstitutes abroad.

Industrial Production

13. Many components of the industrial- sector registered substantialincreases in output during 1973/74, due primarily to increased availabilityof essential imported raw materials and spare parts and to reduced laborunrest. Program lending by IDA and other donors was instrumental in makingadditional imports available. Nevertheless, production for most industrieswas well below 1973/74 targets and for many industries even below 1969/70actual levels. Towards the end of 1973/74 shortages of raw materials andspare parts emerged again, bringing monthly production rates in many indus--tries below those achieved earlier in the year. With imports constrainedand with continuing inflation threatening to upset an uneasy peace withlabor, the outlook for the industrial sector in 1974/75 looks far from bright.During the first half of 1974/75 industrial production did not show muchimprovement over the previous year and capacity utilization rates remainquite low. As a result of the balance of payment crisis experienced duringthe first half, actual industrial imports during the second half may beadversely affected. In particular, the jute industry, employing about200,000 workers and contributing more than half of Bangladesh's exportearnings, is now in dire financial straits due to rising domestic costs andsluggish world demand for jute products. The low level of industrial outputhas been one of the major factors contributing to high levels of inflationin the country. Although limited availability of imported spare partsand raw materials has been detrimental to industry recovery, other factorshave equally contributed to poor performance. The inadequacy of infra-structure facilities, especially power and transportation, continue tohamper efficiency in most industries.

Page 8: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

- 6 -

The First Five Year Plan and the 1974/75 Annual Plan

14. The changes in Bangladesh's terms of trade in the past year and

the effects of last year's floods have rendered the First Five Year Plan's

financial and economic projections and development program almost completely

out of date. The Five Year Plan, however, remains useful as an indicator

of broad policy options. Within this broad framework major revisions will

have to be made. The 1974/75 Annual Plan, prepared in the midst of the

emerging crisis, provides no specific guideline for restructuring the

development program in the light of the dramatic change in the terms of

trade. Already, however, the implications of the past year are clear: a

much less ambitious development program (and hence rate of growth) will

require more resources, foreign and domestic, than projected for the

original, larger program. Foreign resources are not the only constraint.

Domestic resources have not been mobilized at anything like the levels

envisaged in the Five Year Plan, while rapid domestic price increases have

raised the requirements for domestic finance for both the current and

development budgets. As a result, substantial deficit financing (Tk. 1.8

billion as opposed to the planned Tk. 0.2 billion) was required in 1973/74

merely to achieve a level of development expenditures lower in current prices,

and far lower, in real terms, than originally projected. In fact, the level

of development expenditures in 1973/74 was some 28% below that of 1972/73 in

real terms. The budgetary deficit has in turn contributed to the nearly 20%

expansion in money supply during the year and further fueled domestic infla-

tion. It seems now that development expenditures in 1974/75 are unlikely

to exceed 1973/74 levels in nominal terms and thus would be much lower in

real terms.

Trade and Balance of Payments

15. During 1973/74, the average cost of imports rose by about 65% over

that of the previous year, so that the import bill of US$920 million bought

less, in real terms, than the US$680 million spent on imports in the depressed

year of 1972/73. The volume of non-food imports, while greater than in 1972/

73, continued to be inadequate to lift industrial production back to 1969/70

levels. Export performance was also far from satisfactory. W4hile export

prices began to rise in the latter part of the year, they did not rise as

fast as import prices and because most of Bangladesh's exports are shipped

on a deferred payment basis, their impact on earnings was postponed. More-

over, export volume did not improve substantially. Aa a result, the total

value of exports in 1973/74 amounted to only about US$318 million, in con-

trast to the target of US$400 million.

16. As the gap between Bangladesh's imports and exports grew during

1973/74, reserve_ dropped sharply despite substantial, short-term borrowings

and a drawing of US$35 million from the IMF. When the emerging foreign

exchange crisis became evident in May 1974, the Government sharply restricted

imports which, while easing the short-term crisis, implied low levels of

Page 9: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

-7-

industrial production in the near future as supplies of imported inputsdwindled.

17. Exports in 1974/75 are estimated to be about US$354 million, dueprimarily to export price increases. A 'minimum' import program for the yearwas originally estimated to be about US$1400 million with an additionalUS$50 million for fertilizer imports as a result of a shortfall in productionresulting from the explosion at the Ghorasal fertilizer plant. This importprogram was based on a modest US$185 million for imports of capital goods(primarily for aid-financed projects); food imports of 2.3 million tons(about US$514 million); and other non-capital goods imports totalling aboutUS$700 million (representing an increase of less than 10% over the 1973/74volume).

18. The Government now feels that as a result of the stringent licens-ing program imports may not exceed US$1300 million in 1974/75. It alsoestimates disbursements to be about US$983 million. In addition, Bangladeshhas received US$61.8 million from the IMF under the terms of the Oil Facility.Hence international reserves may increase by about US$48 million in 1974/75.A significant part of this increase is however attributable to depositswith the Bangladesh Bank and other special transactions of a short-termnature.

19. The basic balance of payments position of Bangladesh is, neverthe-less, still a weak one and a cause for concern and corrective action.

BALANCE OF PAYMENTS ESTIMATE 1974/75(US$ Million)

Merchandise Imports -1300Merchandise Exports 354

Trade Balance - 946

Other Current Account (net) - 21

Current Account Balance - 967

Amortization - 45Other Receipts and Payments 15IMF Oil Facility 62

Gap - 935

Financed by:Disbursements: 983

Food Aid (384)Project Aid (149)Commodity Aid (450)

Change in Reserves(-= increases) - 48

Source: Planning Commission, Govern-ment of Bangladesh.

Page 10: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

-8-

External Assistance to Bangladesh

20. Tit is clear that Bangladesh depends on a substantial increase in

aid merely to prevent the economy trom retrogressing, let alone achieving

any significant growth. Roughly US$983 million of aid disbursements could

be obtained in 1974/75 from the pipeline existing on July 1, 1974 and from

newcommitments so far made in 1974/75. This includes a sum of US$61.8 million

Bangladesh has obtained from the IMF oil facility. Bangladesh has not yet

reached agreement with the IMF on the terms and conditions of additional

credit tranches under the Regular Facilities. If an agreement were reached,

it could have access to about US$75 million. An IMF mission is currently

in the field for consultations with the Government. The composition of the

new commitments and disbursements is, however, as important as their level;

much more finance is required for food and other commodities than for

capital goods, which are already we.l1 covered by a pipeline of project aid.

While new project aid is required, it will need to be restricted to projects

of the very highest priority. At the Aid Group meeting in Paris there was

considerable evidence that donors were fully seized of this problem and a

number of delegations emp1hasized that they would endeavor to structure

their aid to maximize early disbursement.

21. About a year ago, Bangladesh's economic situation justified a

sharply different view of aid priorities; then it appeared that commodity

assistance would be an important but diminishing part of the aid package

as an increasing portion of aid would be used to finance the development

projects outlined in the First Five Year Plan. But the events of the past

year have altered that view. The shift in Bangladesh's terms of trade,

combined with the effects of the flood, make necessary substantial increases

in food and other commodity aid merely to maintain last year's relatively

low level of both food consumption and non-food imports in real terms. The

Bangladesh Government, shortly after the payments crisis emerged, indicated

to major donors its desire to shift the composition of foreign assistance

from project to commodity or program aid, and donors hiave already responded

to this request. In an effort to raise the additional resources it requires

and to achieve better coordination of aid, the Government in July 1974 took

steps to establish an Aid Group of countries and institutions which are

interested in Bangladesh's development. The first meeting of the Group was

held in Paris on October 24 and 25, 1974; the second meeting will take place

from June 3 to 5.

22. For the foreseeable future, program lending is likely to be a

major feature of development aid to Bangladesh. At the same time, however,

a carefully selected group of priority projects needs to be implemented,

in a phasing consistent with available resources, which will reduce the

country's dependence on imports (e.g. by increasing production of food and

fertilizer and by reducing the rate of population growth) and promote

exports. For this approach to contribute to the long-term development of

Bangladesh, it will be increasingly important for the Government to adopt

an appropriate policy framework. The administrative system will have to

deal more effectively with the development tasks ahead. While the events

Page 11: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

-9-

of the past year have severely disrupted planning efforts, in the currentfiscal year, the Government has taken a number of difficult economic decisions.Interest rates were increased in June 1974, with the central bank's lendingrate rising from 5% to 8% and the commercial banks' lending rate rising froma maximum of 10% to about 13%. New taxes have been levied which the Govern-ment projected would increase revenues by 50% over 1973/74 levels. Stepshave been taken to reduce subsidies, particularly those for rationed fooditems, fertilizer and pesticides. A major change in industrial policy hasgreatly increased the scope for private investment by raising the ceilingon private investment in industry from US$330,000 to nearly US$4 million.The army has been posted on the borders to restrict smuggling and an anti-corruption drive has led to the removal of a number of officials. Concernswith population programs have resulted in better coordination of the workof different ministries. A separate Bureau has been established to facilitateProject Implementation and monitor progress.

23. If Bangladesh is to survive its present difficulties without evengreater human tragedy than the past has witnessed, many more difficult stepswill have to be taken to bring the economy to grips with the realities ofthe world economy and to increase the effectiveness of the administration.Of particular importance will be efforts to improve the competitive positionof jute, to restructure the subsidized food distribution system and reduce itsdependence on imports, todmobilize domestic_resources and to improve theperformance of the public sector enterprises. If appropriate action is takenin such areas and if the world community responds to Bangladesh's needs withadequate amounts of aid of the proper composition, then Bangladesh stands achance of passing through the current situation and establishing the founda-tions for future economic development.

PART II - BANK GROUP OPERATIONS IN BANGLADESH

24. After Bangladesh became a member of the Bank and the Associationin August 1972, Bank Group operations in Bangladesh concentrated initiallyon reactivation of IDA credits for uncompleted projects financed undercredits to Pakistan before the independence of Bangladesh. Eleven suchcredits in an aggregate amount of US$151.35 million (including US$44.1million for the repayment of amounts that had been disbursed under thecorresponding previous credits to Pakistan) have been made to Bangladesh.In addition, nine new credits have been made, totalling US$258.6 million:US$50 million for the Reconstruction (First) Imports Program Credit; US$7.5million for the Cereal Seeds Project; US$4.0 million for the TechnicalAssistance Project; US$4.1 million fot the Inland Water Transport Rehabil-itation Project; US$50.0 million for a (Second) Imports Program Credit;US$20.0 million for a Second TeiecommunicationE. Froje, US$75.0 millionfor a (Third) Imports Program Credit; US$33.0 million for the AshuganjFertilizer Project; and US$15.0 million for the Population Project.

Page 12: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

- 10

25. Negotiations are underway between the Government of Bangladesh

and the various bilateral and multilateral donors concerning the assumptionby Bangladesh of a portion of the debt contracted by Pakistan beforeBangladebhi becarme iLdepenadeit. Until such negotiations are cv.nplete, itis not possible to estimate precisely Bangladesh's total public indebted-ness, or its total debt service. With respect to the Bank Group, Bangladeshhas agreed to accept liability as of Julv 1, 1974 for about US$92.4 millionof debt with respect to projects in Bangladesh completed before independence.Agreements for a Consolidation Loan of about $54.9 million and a Consolida-tion Credit of about $31.0 million (based on January 1, 1960 exchange rate)were signed on February 14, 1975.

26. Annex II contains a summary statement of IDA credits and Bank loanmade to Bangladesh as of February 28, 1974, and notes on the status of exec-ution of ongoing projects. Bangladesh is not a member of IFC. After aninitial slow start, disbursement performance under the program credits hasbeen good, exceeding the pace of the appraisal estimates. This improvementrepresents the results of efforts by the Government to uncover and eliminateprocedural bottlenecks, and efforts by IDA staff to familiarize Governmentofficials with IDA procurement requirements and disbuirsement procedures. In

contrast, disbursements under project credits has lagged far behind expecta-tions. Out of US$142.8 million of effective project credits (excluding repay-ments of amounts disbursed under corresponding credits to Pakistan) onlyabout US$24.0 million has been disbursed since independence. This poorperformance is attributable to a combination of factors including Government

procedures for hiring consultants and for awarding procurement and civilworks contracts, and shortages of construction materials such as cement.

Various ways of improving this situation are being discussed with the Gov-ernment. Monthly meetings to discuss project issues were initiated inJanuary 1975, both in Washington and in Dacca. Recent signs of progressinave included some improvements in Government procedures for revising tenderawards and consultants contracts, and the establishment in the Office of thePresident of a Project Implementation Bureau, to monitor the progress of

projects and to assist in breaking bottlenecks. While it is too early toexpect these efforts to have a noticeable effect on disbursement performance,it is hoped that the results will soon become as noticeable as the effectsof the earlier efforts with respect to program credits. The recent allevia-tion of shortages of construction materials in Bangladesh should also leadto improved progress in project implementation in the near future.

27. As the analysis in paragraph 21 above indicates, Bangladesh'ssevere balance of payments difficulties require that increased amounts ofaid be given in a flexible, fast disbursing fashion. Program lending musttherefore remain a necessary feature of IDA assistance, and the amount

should be commensurate with Bangladesh's needs and performance. For thenext several years the requirements ot existing productive capacity willremain higlh for the types of goods - spares, components and raw materials -

financed by IDA program credits. However, long-term improvement in the

Bangladesh economy can be expected only if sound policies, programs, anddevelopment projects are pursued. Thus, projects of the highest priority

Page 13: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

must also be supported. Given its low per capita income, Bangladesh'sinvestment needs cannot be met from local resources. Taking into account

the level of financing expected to be available from other external lenders,

and in order to direct IDA lending to those sectors (such as rural develop-

ment) where the percentage of foreign exchange costs is relatively low, the

financing of local currency expenditures is justified. The Associationrecognizes the prime importance of the agricultural sector and of efforts to

close Bangladesh's food gap. The recently approved Population Project fitswithin the strategy of reducing the food gap in the future. The Ashuganj

Fertilizer Project and the currently proposed Barisal Irrigation Project are

designed to assist in increasing food production in the more immediate future.

28. Other priority projects are at an advanced stage of preparation -many of them in the agricultural sector. These include irrigation works in

the Muhuri and Karnafuli river areas, and Rural Training and Rural Devel-

opment projects. The growth of other sectors, particularly as they provide

infrastructure for, or process or provide outlets for the products of, the

rural economy, is also important. Several sector studies supported by the

Association - for example in industry and transportation (also assisted by

the United Kingdom) - should help the Government and the Association to

develop a suitable pipeline of projects consonant with mutual assessmentsof economic priorities. Further economic studies will be oriented to thesame goal. Finally, the Association has provided funds under the TechnicalAssistance Credit to assist the government in preparing development projectsfor financing by the Association and other lenders.

PART III - THE AGRICULTURAL SECTOR

29. Agriculture is clearly Bangladesh's most important economic sector,on whose development growth as well as welfare depend. Agriculture producesmore than 55% of the nation's GDP and 80% of employment. The rice crop,

which covers approximately 75-80% of the cultivated area, provides most of

the country's foodgrain requirements. Wheat acreage is still relativelysmall, though it is likely to become a more significant part of foodgrainsupply. Between 1969/70 and 1974/75 jute cultivation earned between 75 and

87% of Bangladesh's foreign exchange, either directly, through the exportof raw jute, or indirectly through the export of jute goods. At the same

time, jute manufacturing is Bangladesh's most importan, industry.

30. Bangladesh lies on a deltaic plain of 33 million acres, of whichapproximately 22.5 million acres are cultivated. Most of the soils are

fertile. It has a tropical monsoon climate with high rainfall (over 50inches a year). About 80% of the rainfall is concentrated in the monsoonmonths of June to October, with the remainder occurring primarily during

the period March to May. In areas with adequate moisture, many farmersplant two or more crops, resulting in a relatively high cropping intensity(about 140% in recent years). There are, however, many problems inherent

Page 14: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

- 12 -

in the agricultural sector: few opportunities exist for expanding the

area under crops; as much as one-third of the country is threatened by

severe annual floods; during the dry season some 80% of the land remains

fallow due to lack of water; severe cyclones periodically afflict farms

near the coast; with Bangladesn's extremely high population density, farms

are generally small and fragmented, and agriculture is characterized largely

by subsistence farming. As a result of these facters, while population has

grown at about 3% per year during the last ten years, foodgrain production

has increased by less than 1% per year, which resulted in a growing gap

between foodgrain supply and demand and a consequent need for large-scale

foodgrain imports.

31. Faced with these problems the Government is evolving a development

strategy which concentrates on increasing agricultural (particularly food-

grain) production through the rapid spread of new high-yielding rice var-

ieties (HYV), with provision, where possible, of irrigation by low-lift

pumps and tubewells. Irrigation has thus become of crucial importance to

increase cropping intensity and yields, and to decrease uncertainties and

wide fluctuations in the farmers' production. The reality is, however,

that, even with improved and expanded irrigation facilities and an increase

in crop production, Bangladesh will continue to require substantial food-

grain imports for a number of years.

Irrigation in Bangladesh

32. The development of water resources in Bangladesh has presented

many difficulties involving irrigation, flood control, drainage, and pro-

tection from both saline intrusion and saline inundation. The need to

maintain a minimum flow in the rivers during the dry season (both in order

to prevent saline intrusion and harmful effects on navigation and fisheries),

constrains the potential for surface water irrigation. The flat terrain

precludes the development of large storage reservoirs for either control-

ling the impact of the floods or releasing water for irrigation in the dry

season. Partially for this reason, irrigation has been slow to develop in

Bangladesh.

33. Farmers in Bangladesh have for centuries used bucket-lift irriga-

tion methods for cultivating their land near the numerous rivers, man-made

channels, and low-lying water bodies. Early in the 1960s small pumps (low-

lift, diesel driven pumps of one or two cubic feet per second capacity)

were introduced, and this was the key factor in expanding dry-season irri-

gation from 1 million acres in 1960 to over 2.5 million acres in 1974.

34. In view of the favorable response of the farmers to low-lift

pump irrigation, the -overnment is giving prioritv to proiects which would

create suitable conditions for this type of development. The area near

the city of Barisal in the Bakerganj District is one of the more favorable

areas in the country for rapid expansion of agricultural production by low-

lift pumps. Wet-season flooding levels over much of the area do not inhibit

Page 15: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

- 13 -

the cultivation of high-yielding rice varieties in the monsoon season, andexisting channels provide a natural distribution system for pump irrigationin the dry season.

PART IV - THE PROJECT

35. The proposed project was prepared by an Interdepartmental Govern-ment Unit (IGU) responsible to the Planning Commission, with assistance fromthe FAO/IBRD Cooperative Program. The IGU was comprised of seniQr technicalofficers of the Water Development Board (WDB), the Bangladesh AgricultureDevelopment Corporation (BADC), the Ministry of Agriculture, and the Inte-grated Rural Development Program (IRDP). An Association mission appraisedthe project in October/November 1973 and negotiations were held in July,1974. The Government's negotiating team was led by Mr. M. Syeduzzaman(Secretary to the Ministry of Planning). It was agreed during negotiationsthat, prior to presenting the proposed credit to the Executive Directors ofthe Association, the project implementation organization would be established.The Government's agreement on the negotiated draft legal documents was re-ceived in September, 1974, but the establishment of the project implementationorganization was not completed until January, 1975. However, during thisperiod project cost estimates had risen and the project financing plan neededto be revised. In March, 1975 agreement on a revised allocation of creditproceeds was reached. The appraisal report (No. 449a-BD, dated April 9, 1975)on the proposed project is being circulated separately. Annex III providesa credit and project summary.

Description of the Project

36. The project would provide reliable irrigation water supply in fourThanas of the Bakerganj district in the Southwest Region of Bangladesh. Thefour Thanas have a gross area of 207,000 acres, and a net agricultural areaof 147,000 acres. Irrigation facilities provided by the project would com-mand about 140,000 acres. Dry season irrigation would primarily take placein areas suited to boro rice and this crop is expected to expand from 13,000acres at present to 112,000 acres. In the wet season, areas free from deepflooding and suited to transplanted aman would be irrigated, and this is ex-pected to result in a shift to high yielding varieties from local varietieson about 87,000 acres. About 2,500 5HP diesel-powered low-lift pumps, orother devices, each serving an area of 40-60 acres will irrigate the areafrom an extensive network of natural channels. This is a mode of develop-ment which has already been adopted on a large scale in Bangladesh in areaswhere the natural channels carry water throughout the year. A distinctivefeature of this project, however, is that small pump irrigation will beextended to about 90,000 acres where year-round irrigation cannot presentlybe practiced because the creeks are non-perennial (carrying water only inthe wet season), or semi-perennial (dry-season water available only at hightides). In these areas, the project will provide about 750 sluice structures

Page 16: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

- 14 -

constructed on the creeks. About 100 primary pump stations will be providedto raise water from the perennial channels to the creek storage ponds. Sec-

ondary pumps will raise water to the farmers' fields from perennial rivers

and from the creek storage ponds. In addition to pumps and civil works, the

project would provide supporting facilities and equipment, and the necessaryoperation and maintenance services.

37. Two pilot primary units of about 400 acres each would be developed

in the 1975/76 dry season to allow experience to be gained in the operationof primary pumps and secondary pump groups, and to serve as a guide for

project planning and design. Possible improvements in on-farm development

and water distribution in the secondary units would also be explored. Thepilot areas would be formed by constructing temporary earth dams and deploy-

ing pumps already available to BADC.

38. The Directorate of Extension in the Ministry of Agriculture will

maintain offices in each Tliana, and Village Extension Agents (VEAs) in each

village, and will assign one VEA to about 1,000 farmers in the project area.The IRDP, in association withi the Directorate of Extension, will conduct atthe Thana Training and Development Centers (TTDCs) periodic one-day courses

for VEAs and selected farmers from each pump group. The project will pro-vide offices, office equipment, agricultural implements for demonstration

purposes, and vehicles for the thana extension officers. In agreement withthe farmers' groups, two secondary pump units near each of the four TTDCs

will be designated as demonstration areas to serve as focal points for train-

ing VEAs and farmers under practical conditions. A detailed program for

agricultural services and training in the project area will be prepared forreview with the Association within one year of signing of the proposed credit

(see Section 3.09 of the dratt Development Credit Agreement).

Project Execution

39. The inter-agency approach adopted by the Government in the prep-

aration of this project will be continued for its implementation. During

the construction period the responsibility for each aspect of projectimplementation will remain with the individual agencies normally involved

in such matters, the WDB handling construction of sluices and creek exten-

sion, BADC handling pump procurement and maintenance, the Ministry of Agri-

culture handling extension and IRDP handling cooperatives and credit. An

Interdepartmental Project Implementation Committee (IPIC) headed by a gov-

ernment official appointed as project officer (titled'Executive Director)will be responsible for expediting execution of the project. The Executive

Director would report, through the Member, Planning and Implementation, WDB,

to a Central Evaluation Committee, under the Chairmanship of a senior

representative of the Government, which would meet periodically to review

project progress and resolve any major coordination problems. Proposalsfor Project Management and interagency coordination have been agreed upon;

and the Government has appointed the Executive Director and designated the

representatives of WDB, BADC, IRDP and the Ministry of Agriculture on the

IPIC and the Central Evaluation Committee (see Sections 3.02 and 6.01 of

the draft Development Credit Agreement).

Page 17: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

- 15 -

40. The Government will retain a consulting firm to advise and assistthe Executive Director and the IPIC in the drawing up of annual work programsfor each agency, the preparation of designs and contract documents, cons-truction, supervision, and preparation and establishment of operation andmaintenance procedures, and to assist the extension services in the projectarea. Proposals for consulting services have been obtained, and the appoint-ment of such consultants is a condition of effectiveness of the Credit (seeSections 3.03 and 6.01 of the draft Development Credit Agreement).

41. The Government intends that, as soon as practical, farmers' asso-ciations in the project area, under the direction of Thana Central Coopera-tive Associations (TCCA's), would assume the responsibilities for operationand management of most of the project facilities. This would be accomplishedgradually after managers and technicians have received training and gainedsignificant experience on each job. In the transitional period BADC wouldretain responsibility with respect to operation and maintenance of pumps andsluice gates. The Government has undertaken to prepare and submit to theAssociation within two years from the date of the Agreement, and annuallythereafter, for review and comment, detailed proposals for the operationand maintenance organization (see Section 3.08 of the draft DevelopmentCredit Agreement).

Cost Recovery

42. The Government's Five-Year Plan proposed a gradual decrease innationwide subsidies to farmers for low-lift pumps. The Government alsointends that farmers benefitting from primary project installations willpay their operating and maintenance costs and eventually repay as much ofthe investment costs as practicable. It has been agreed that during thenext two years the Government would formulate and submit to the Ass6ciationproposals for the recovery of project operation and maintenance costs, andas large a proportion of project capital costs as appears compatible with themaintenance of adequate incentives for participating farmers. In preparingthese proposals, consideration would be given to arrangements for the purchaseby farmers groups of low-lift pumps on terms within their means (see Section3.10 of the draft Development Credit Agreement).

Project Cost and Financing

43. The project is estimated to cost US$46 million equivalent, in-cluding US$2.5 million of taxes and duties, with a foreign exchange com-ponent of US$20.5 million. The proposed IDA credit of US$27 million wouldfinance the foreign exchange costs plus some of the local costs, or 62%of project costs, net of taxes. The remaining US$19 million would be con-tributed by the Government through annual budget appropriations.

Page 18: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

- 16 -

Procurement

'44. Con' racLs for civil works (sluice structures, creek excavation,

buildings, a,i st-j age facilities, estimated to cost US$11.6 million), are

not suitable fc- internaLional competitive bidding, because they involve

many small operations, scattered over a wide area, which can only be under-

taken in the dry season. The WDB policy is to supply materials and equip-

ment so that the contractor's main input is labor and management. Unit-

price contracts, which might typically cover three or four sluices, would

be awarded after local competitive bidding. The bidding and evaluation

procedures to be followed for civil works contracts would be submitted

to IDA for review and comment. Mlaterials such as sand, bricks and timber

would be procured on the basis of competitive bidding advertised locally

under procedures which are satisfactory. Contract documents relating to

civil works and locally procured construction materials would be retained

by the Borrower and would be available for inspection by IDA in the course

of project supervision.

45. Vehicles, equipment, and importecl materials would be procured

after international competitive bidding in accordance with Bank Group

Guidelines. A 15% preference margin, or the prevailing customs duty if

lower, would be extended to local manufacturers of vehicles and equipment

in the evaluation of bids. Off-the-shelf items costing less than US$5,000

each which are not suitable for international tendering would be purchased

througlh normal government procurement procedures which are satisfactory.

The aggregate cost of such items would not exceed US$100,000.

Disbursements

46. The credit would be disbursed over a period of 6 years. Disburse-

ment from the proposed credit would be made at 100% of the c.i.f. cost of

directly imported vehicles, pumps, gates, cement, steel and other equipment;

at 100% of the ex-factory price of equipment manufactured locally; and at

65% of the off-the-sihelf price of locally procured imported equipment, cement

and reinforcing steel. For expatriate consultants' and specialist services,

and for overseas training, disbursements would cover the total costs (foreign

and local). Disbursements for civil works executed under contract, and for

locally procured materials, other than cement and reinforcing steel, would be

at 50% of expenditures.

Economic Justification

47. The primary benefit of the project would be increased rice produc-

tion. This would lessen the burden on the balance of payments, and help

raise farm incomes in the Project area. Because of the limited scope for

expanding the area of land being cultivated in Bangladesh, any increased

rice production must come from greater productivity of land already under

cultivation. The project would achieve this by introducing shifts in the

cropping calendar, thus enabling the cultivation of higher yielding varieties.

Page 19: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

- 17 -

The project would expand dry season rice cultivation, and allow high-yieldingrice varieties to replace local varieties over most of the project area inthe wet season by providing better water control and the necessary agricul-tural supporting services. The project area has an estimated population of650,000, including about 110,000 farm households averaging 5.5 members, andabout 14,000 families of landless wage-earners or non-agricultural propertyowners. Virtually all the agricultural land in the4project area is owned bythe farmers. More than half of the farms in the area are less than one acre,and most of the holdings are fragmented into five or more plots which aver-age about 0.20 acres in size. Taking a range of farm sizes in the projectarea, from 0.5 acres to 3.0 acres, present annual farm incomes which rangefrom Tk. 420-2,050 (US$52-256) - depending on the size - would rise toTk. 1,110-5,050 (US$139-631) at full project development. Rice productionin the area would increase from its present 143,000 tons per year to about345,000 tons per year at full development. The economic rate of return onthe project would be about 28%. Foreign exchange savings of about US$15million per annum are expected, and farm employment opportunities are expectedto increase by about 20% as a result of the project.

Environmental Impact

48. The project woul-d have no adverse environmental effect during thewet season (May-October) when all gates on the creek control sluices wouldbe fully open and the natural water regime would be unchanged. Since fishenter the creeks and flooded paddy fields to spawn during May, June andJuly, the project would not affect their breeding cycle and, in fact, theperennial habitat created by maintaining water in presently non-perennialcreeks during November-April could improve the growth potential and decreasethe mortality rate of the fish. Bilharzia is not present in Bangladesh. Thedaily replenishment of water in the creeks, during the dry season, should-offset any toxic effects which might result from increased return flows fromfields under intensive dry season cultivation using fertilizers and pesti-cides.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

49. The draft development Credit Agreement between the People'sRepublic of Bangladesh and the Association, the Recommendation of theCommittee provided for in Article V, Section 1 (d) of the Articles ofAgreement of the Association and the text of the Resolution approving theproposed Credit are being distributed separately to the Executive Directors.

50. Features of the draft Development Credit Agreement of specialinterest are referred to in paragraphs 38 through 42 of this report. Inaddition to these special features: (a) dissolution or disestablishment ofWDB, BADC or IRDP have been added as events of suspension (Section 5.02 ofthe draft Development Credit Agreement); and (b) representation of certain

Page 20: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

- 18 -

agencies on the IPIC and CEC, and the appointment of Consultants have beenmade additional conditions of effectiveness of the Credit (paragraphs (a)and (b) of Section 6.01 of the draft Development Credit Agreement).

51. I am satisfied that the proposed credit would comply with theArticles of Agreement of the Association.

PART VI - RECOMMENDATION

52. I recommend that the Executive Directors approve the proposedcredit.

Robert S. McNamaraPresident

April 9, 1975

Page 21: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

Pape 1 of 3 papas

ODUNTRY DATA - BANGlADEM

kmE POPULATION 51STT131Wu k.s2 72.-5million (mid-1972)84 Pe 2farbead

SOCIAL DIDICAIVRSNe,PfesersaCntries

ON? ER APITA USM(TSBsi)a. 70 /a90 /a noI0 (jOA

DREMORAPHICrRu'd-Elrrth rate(per thea.ad) 4.7/b c (../2(48I 38/cAn 3 /.dCrude deathrate (per thosasd) 20 tj 21

19ta. 1 6~ 77

1eInfant mortality rate (par thousand liva births) .. 140 c . 120-14.0 4 (.1Lit. expactancy at birth (years) 4.(8 7? 48 50 59

Oross reproduction ratse/i 3 .5 /b 3:1 I3:2 ~ 2/9 2.740 ~~~~~~~~~Population grocti rats j2C- 2: I 2329Pnpolation grauth rats - urban . 5Z 4 (.Age strctura (peroent)

04b 4.7 /h 4.5/cl 4.5/c (.2 4.3/d15-64 4.9 527T 53 7; 55 53 7165 and ovac 4.7 3 !27-1 34(7aD-ndandecy ratis 1.6 wl 1.57 1.4 7. 1.2 /~j,w 2.3 7a.Urban population as peroant of total ... 17 20 /lo 29 /d Family planning: N.On! accaptors cumulative (ihous.) *. 175 . 220 -4No..of ussr, (% of nurriad -ean) 15. . .i 71

Toalbl r br (thousands) 17,100 L. 22,300 L 4.(0,100/c 221,000 ,.i3,200 /dPercentags employed in agriculture 76 71 63 71 h (5 71Percentage oneoployad ... 2 .8 71INcOOE DISTIBUDTION

Percent ofnational i.oose renaiod by highest 5% 19/ r 17 c .. 22 /. 22 /r t uPercent of netional incose reci-d by highant 20% 4.5 42 an .4(8 / 52 7 tP.r.snt ofnationa income received by lowest 20% 7/, 9 /r.a. . 8 47tTt'Percent Of nationul incom.ecacivad by lowest (.0% 18 22 20 /2j - .. 19 __ 12 7ttfMSTRIBUTION OF LAND OWdENSHIP

% ownd by top 10% o7ownrs .. 34 /v% nend by smallest 10% Of owners .1 77NEAITH AND NUTRITION

Population par physician 10,000 /c 7,600 /ic 27,650 (.,800 3,860/dcPopulation per nursing person 110,000 7; 72,030 zt 8,oi 5,110 l,08o ____Population per hospital bed ll,00 Bcl0 /r. 1,2 ,2 /.. 3

Per capita calorie supply as % of requirsenots/... 82 /c 87 /ab 91. /d sPer capita protein supply, tots]l (grass per dey)L U2. . .7 49 7- (.9Of which, animal and pulse .. 14/ 16 1t 2 0 7tDeath rate 1-4 yearn /2 .. .. 6 _ERONCATION

XAaFstd /8 primary school enrollssnt ratio (.2 /ad as 50 /ahbaae 71 79 laf 89 /dAdjusted 7;scnaysholerlmn ai 8 7 ~ 15 /a,g 12 28 7.? 31. 71Te.ar of lihooling provided, first and eso..nd level 10 10 7iF 12 12 13 71Vc-atinonl enrollment an % Of sac, school enrollemot ... 28 6 /ai 3 Adult literacy rats % ... 56 djan,an .36 T_.L 89

;g;tSINOAve-rape No. of persnone per roos (urban)...Percent of Occupied units wtthsut piped cater...Access in elecoicity (as % of total population)...Percent of taal popolatiim connocted in electricity .

_0T.Mr i~...per 1000 population . 114 21 5Passenger cars per 10D ppulation ... 2 12Electric poser cosmption (loc p.o 3 11 19 III 366Newsprint consumption p.o. log per yeara. 0.2 0.3 3.8WaNotes, Figure rsfer either to the loteat periods or to asosunt Of eovlromnetal temprature, bndy weights, andthe latest yearn, latest periods roto in principle to distribution by age as] sex of nationa populations.the years 1956-60 or 1966-70; tie latest yeara in prit.- /6 Protein standards (requirement.) for all countries - aeteb-ciple in 1960 and 1970. loled by USDA Esonsocin Roeasarch Dervise provide for amimu/I Ths Per Copito GNP estinate is at aarot prices fur allowance of 60 greats of total protein par day, and1 20 greams ofyoaro other than 1960,calculated by the non convrs-ion animal and palses protein, of which 10 grass should he animaltechnique as the 1972 World Bach Atlas. protein. These standards are as ,hats 1owe than thoe. of 7512 Avera.ge nuber of daughters per onna of reproductive greao of total protein and 23 grass, of animal Protein as anage. average for the world, propose.d by PAO In the Third World Food2 Population growth reten ar for the decodes .nding in Sur,rey.

1960 and 1970. /2 Son studies hove suggested that crude death rates of childrenAL Ratio Of under 15 and 65 and o-r age brodlketo t ages 1 through i nay be used asafirst appronimation Index Ofthoseinaortn brackoet of og.a 15 through 61.. malnutrition./2 AO rference toodorde re-Present physiologiosa re- /8 Percentage enrolled Of co-repuading population of school agequirescnte for or-ea activity and health, taking an defined for each nuotry.

19722 A 1961; /0 Estimate; /d West Malaysmia; /a Registered. sonly; If PJojection, 1973; I 1 965-70;196o-61;7 /1 1960-72; LI Municipalities, regency capitals and other places with urban characteriatics; A Pordafinitinm of urban me UN Densr a o Tearbolok 1972 p). 154j a2 1972-731 Lm Ratio Of populatien under .15 and 65and over t to ital laor force; /-ai oulto ue 15 and 65 and, Over to total labor force in age group 15-59;/o Gomatted a.reas of 10,00 or mnore irhbitants; /P AITD estimate of labor force in ag group 15-59; IBRD report gives afigure of 180.4 sillion based On the 1971 populatimn census. The difference is due is changes in the definition Ofacorloer. Is the 1971 census, persons were classified only son the baois of their main activities; thin led to theexclusion of several categorios, such as housewives; L/ 1963-64; /r Houu..hold.; /s 1964-65; At 1969;

/u Towns; /v 1967-68, geographical interpolation; /wMmber so the r-egister, not all. ;.rkong In tIn country;.r.ars insgovene- srvcscIy; lyovovenentChospitals Only; /z 1968; /a. Including rural hospitals;4 99-70; /a 1964.-66; /ad 1959-60; /00 ApproxImate enrolment as- percentage of population In 6-10 age groop;71? Estimate w Icincludes overage students; -aj Approximate enrollment as prerentage Of population in 11-15 age group;7Z Up to sod of second level; /ai 1965; /aJ 15 years and over; /ako Population of 10 year~s and over based Oc one

percent sample data of 1971; _7a1 1960;/am Definition of literacy unkonown; /j 1971; Lii. 1966-67.

aSelection of Molaysia as an objective country ie hosed on Malaysia's success in ea.totaling a high rate Of ec.onoicgrowth and adequate level of welfare conourrently with diversifying itin economic structure.

Al Jonury 2, 1975

Page 22: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

ANNEX INARLADESH Page 2 of 3 Pagea

EONIOOMIC I IPO ITATA(Aounta in illon ofU.. oUe

EAST PAKISTAN BANGLADESH

Actual "a' 1/Proi-cted 19 - 19 60f- 1965 - 19 74 - 190 74 951965 1970 1973 ' 1994 975 1976 19,_ 15 9701197

NAT_IOAL ACCCGIMnT___ __ ___ __

;jYc rAs..raget 16- ~196 9 Prices8 & ExchaneIoe A-erage Aa.us Groth Rates As ?-r-et of GDYGros. Do-etic Pr-duc t 570 75 ,0 ,6 ,0 ,8 .7 3.0 3.2 101.6 102.0 103.2Gains from Terms of Trade Cc) 21 -97 0 -127 -194 -130 -1.6 -2.0 -3.2

rotD.oc-tic Incom 5-,324 6,7054 5,7-02 233 T,01 6,5 5.6 2.6 -- 00.1 1TO00.0 100.0

Import (incl. NFl) 64 508 727 592 643 712 20.6 -4.7Ex sr ts (Impot 5515 ity 485 334 358 247 201 290 12.3 7.7Resource Gap *T-3Tn3 -= -- -77 Z5542

Cosa. =ptiss Epe-ditures 4,948 5,514 5,806 6,320 6,234 6,789 5.7 2.2In,est-et (Scsi.cl stocks) 531 712 265 258 223 387 13.3 6.0

D-restic las-lgs. 376 536 -104 -87 -219 -135 4.3 7.4 ..Ratiosal Sa-Ings 258 525 -99 -93 -212 -130 8.7 15.2

MERCHANDISE TRADE Annoual Oats at lo-rrent Prices As P-eret of Total

lnportsCapit.a1 goods 176 105 155 165 250 30 17 14Tsternediate goods (mt2.,foeis) -- 117 250 239 350 421 27 26 27Fools aod related materialsof whIch: Petrolesso II1 25 87 98 132 2 7 8

Connsmvtios goods ~~~~ ~~239 352 436 667 510. 41 48 *.J,Tital MercR. Tmpsrts (clf) - -77 m T' 1,313 -10D0 100o 100

ExportsPrimary prsdsct3 (excl. f'iels) - 212 150 120 1210 11.2 41 38 34Puel. and related materialsor which: Petrolean

7issof.stured goods 301 208 198 224 280 59 62 66Total Merch. Exports (fob) 51 5 1 54 32,- ~Tourism end Hocrer Trace -1 38 -1 34 -9

Merchandise Trade Tndices Average 1967- 69- i~OOExport Price Sodsa 95 89 100 107 119 120 -1.4Import Price Index 71 167 100 162 210 191 18.7Term .i Trade la,d- 134 53 100 66 57 63 -20.0Exports Vslux Index 505 118 100 83 83 91 3.0

VALUE ADDED BY SECTOR A=opsl Data at 1967- W9rices end EKchaLnge Rates Average Annual Growth Sates As Percent of Total

Agrlsuit... 2.904 3.458 3,402 3,788 3,460 3,946 3.5 1.5 56 60 56M-nf..tsrimp & Miming 601 783 412 494 498 528 5.5 4.5 31 3Other 1,605 1,870 1,8 2.07 _LL5_ 2AIQ 3.1 5.5 -? -Total 5.110 6.111 5,702 6,360 6.209 6,784 3.-6 3T.2 100 105 100

PlUBL.IC FIVANCE As Percent of~ GDP)FtestO. Go-ermet)

Curret Receipts 318 286 472 627 4.9 5.7 4.8Curr. ont Expenditures 148 389 576 771 2.3 7.0 5.9Buo!G,tctsy las,logs 170 -:-10-3 -104 -144 -2.6 -1.3 -1.1Other Public SectorP.blic Sector Investment 389 250 284 400 6.0 3.4 3.0

UTS $ million 2i/CUJRRENT EXPENDITURIE DETAILS Actual. Eat. Budget ProJ. rETAIL IN At end 19 7 2 P sod Eli

As % Total Current Expend.) iT97 1)72/3 19/74 19)74/75 19 PUBLIC SECTOR Fir-t Plan of Total.Education I1TT8 T 19.1 IRVESTl03f PRIORASI (197 3 /74 9 977 /7~Other Social Services 4.0 3.3 4.5 Social Sectors 758 15.3Agriculture & Other Agriculture 1,302 26.4Eronoale Sereicee 11.2 10.7 5.9 Industry and Mieing 1,024 20.7Ad.linitr.tion end Defene 67.4 68.0 61.4 Poser 529 10.7UIther 2.7 3.1 9.1 Transport and csonunicmtiomo 802 16.3Total Csseret Expenditures 100.0 o 100.0 F 10.0O Other 524 10.6

_______________________________________________________________________________ Total ExpExpendeturesw100.0

SELEC TED INDICATORS 1960- 1965- 1970- 1973- PINANCINRG(Calcsl.lted from 3-Year aveaged data) 196S 1970 1975 1978 Dnewetic Borrowln 784 15.9Averge ICOB 3.74 . 2.2 Public Sector Savngs 2,022 40.9Import Elasticity 1.29 Pro6 r-aid nOuntepart

PR,ginAl Domestic Savinge Rae0.22 Foreign rjctAdHM4arginal National Savings Rate 0.35 T...ftaL Financing 4,940 o00,0

IAW0 FORCE AND Total Labor Porce Value Added Per Worker (l96e746~9 Prices & Eacc. Rates)OUTPUT PER WORKER In B4ifliona % o1 Total 191-73 I lS.Dollars Percent ofAerg9 -

1-9-60/6 1-972/73 619 1973 1r9hRt 90 93' ~ j, Growth Bate

Agriculture 16.1 20.5 85 78 2.0 . 166 76industry 1,0 1.8 5 7 5.0 . 229 105Rervlce 1.8 3.9 10 15 6.7 . 484 __ 222

Total ~~~~ ~ ~~~~~~~18.9 26.2 100 100 2.8 246 218 100

1/ Seta up to 1969/70 pertain ts erstwhile East Pakistan.2/ 1972/73 onwards ace ann,ual data, in0 1972/73 prices end exchange race and hence are not atrictly comparable to data of the prevlnos ypsas.3/ These are original Plan targets, which are sot of reach in the present circ-statnces.

NBet: All fig.res are on fiscal year ha.sI July 1 - Jane 30.

not applicable - nil or negligibhlenot available 1--8lssthan half the

asmallest unIt show

Page 23: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

Page 3 of 3 pages

BALaNCE OF PAYMENTS, EXTERN7 ASSISTANCE AND DEDT7amculnts in m-llions of U.S. dollars at current prices)

ESTiIAFED FOR EAST PAKISTAN BANGLADESH Avg. AnmualActual Estimated Projected Orowth Rate

1l%6,67 1%7/68 l958/b9 l-T9-/70 197 2/7 3 ja93J74 197_4 75 IZ.i76 1.9 19._ 19 1965-1970

SUMMARY BENCE OF PAYMENTS

Exports (incl. NFP) 447 403 446 485 358 339 389 410Io,Do~rts(i.ic3.I~~cl.N9i)-566 -540 -616 -694 -727 -958 -1,367 -137 ___0hesorce balancNe 1(X)-M) -119 -137 -150 -209 -369 -619 - 978 - 966

Intermst (net)Direct Investment Income 30 10 11 20Workers RemittanceCurrent Transfers (t)3alance on Currert Accounts - 60 - -

-339 -609 -967 -946Private Direct Inves tmentOfficial Capital Grants 183 204 335 200

Public M&LT LoansDisbursements 67 297 648 300

-Repayments -10 45 -89 Net Disbursements

Other M1LT LoansDisbursements

-Rpymets

Actusl EstimatedCapital Transactions n.e.i. 108 75 77 19 T 19 13 9 1975Shanwe in Not Reeervee (+-IIncrease)B+19 33BT AND DEBT SERVICE-Gros3 Reserves (ena year) 157 Public Debt Out. & Disbursed 37.1 137.4 490.8 771.0

GRANT AND LOAN C3OMMIINTSOfficial Grants & Brant-like 168 Interest on Public Debt .. . 7.1 10.8

Repayments on Public Debt .. .. 10.2 44.5Public 3,.T Inane Total Public Debt Service .. . 17.3 55.3GBRD Other Debt Service (net) ..

TDA 212 Total Debt Service (net)OtherOther Multilateral 16 Burden on Export Esrnings (S)Governments 104Suppliers 47 Public Debt Service .. .. 5.1 14.2Financial Insti tutions 6 Total Debt ServiceBonds TDSaDirect Invest. Inc.Public loans n.e.i.

Total Public FM&L5i--ns 385 Average Terrs of Public Debt

1/ Actual Debt Outetanding on Dec. 31,1974 Tnt. as % Prior Year D3&DK3TNAL DIEH - Daburzed Only Percent Amort. as % Prior Tear DO&DWorld Bank -IDA 204.0 26.2 3RiD Debt Out. & DisbursedOther P6sltilateral 5.6 0.7 n as % Public Debt 0&DGoverriments 369.2 47.5 as % Public Debt ServiceSuppliers 119.6 15.4Financial Institutions 23.8 3 1 IDA Debt Dat. & Disbursedhorids _ l as % Public Debt O&DPublic Debts n.e.i ' as % Public Debt ServiceTotal Public M&LT Debt 777.T 100.0

Other M&LT DebtsShort-term Debt (disb. only) 27.2

n cot applicable e staff estimatenot available - nil or rngligible

... not available separately -- less than half thebut included in total smallest unmt show,

1/ Negotiations ate ondervay between the Government of Bangladesh and various bilateral and multilateral donors concerning the assumption of a portion of the debt contracted by Pakistanbefore Bargladesh became independent. Until such negotiations are complete it is not possible to estimate precisely Bangladesh total public debt or debt service.

Page 24: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

ANNEX IIPage 1

BANGLADESH

STATUS OF BANK GROUP OPERATIONS

As of February 28, 1975

A. IDA Credits to Bangladesh

Credit US$ MillionNumber Year Purpose Amount Undisbursed

339 1972 Cyclone Area Reconstruction(replaces Credit No. 228-PAK of 1971) 25.0 19.0

340 1972 Chandpur Irrigation II (replacesCredit No. 184 of 1970) 13.0 10.1

341 1972 Tubewells (replaces Credit No. 208-PAKof 1970) 14.0 11.4

343 1972 Telecommunications (replaces partof Credit No. 145-PAK of 1969) 7.3 5.1

345 1972 Reconstruction Imports 50.0 2.9353 1973 Small-Scale Industry (replaces

Credit No. 192-PAK of 1970) 3.0 0.6367 1973 Chittagong Water Supply (replaces

Credit No. 42-PAK of 1963) 7.0 2.5368 1973 Dacca Water Supply and Sewage (replaces

Credit No. 41-PAK of 1963) 13.2 3.9S-14 1973 Irrigation Engineering (replaces

Credits Nos. S-8-PAK and S-1-PAKof 1969 and 1970) 3.15 0.1

381 1973 Foodgrain Storage (replaces CreditNo. 83-PAK of 1966) 19.7 0.8

407 1973 Education (replaces Credit Nos. 49-PAKand 87-PAK of 1964 and 1966) 21.0 12.0

408 1973 Higihways (replaces Credit No. 53-PAKof 1964) 25.0 18.6

409 1973 Technical Assistance 4.0 3.5410 1973 Cereal Seeds 7.5 7.5424 1973 Inland Water Transport Rehabilitation 4.1 3.8458 1974 Imports Program 50.0 11.1487 1974 Second Telecommunications 20.0 20.0515 1974 Third Imports Program 75.0 58.8527 1975 AShug,nj Ferti]jzer 33.0 33.0529 1975 Consolidation Ciedit 31.0 31.0533 1975 Population 15.0 15.0

SUBTOTAIL, 440.95e 27O.7

B. IBRD Lcans to Bangladesh

1087 1975 Consoli.dation Loan 54.9 54.9'I OTAL 495.85 325.6

Page 25: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

ANNEX IIPage 2

B. PROJECTS IN EXECUTION

Cr. No. 339 Cyclcne Area Recontruct5on. Project; I!S$25.0 Million

Credit of October 18, 1972; Closing Date: June 30, 1976

Credit became effective January 17, 1973. Implementation of the

original project, financed under Credit No. 228-PAK of 1971, had not commenced

prior to the suspension of disbursements. Earthwork has been completed for

fifty-four miles of primary roads, and 60 cyclone shelters are under construc-

tion. However, progress has been slow due to the severe shortages of construc-

tion materials in Bangladesh. For the other subprojects (inland water trans-

port, telecommunications, feeder roads, coastal fisheries and cyclone warning)progress has been mainly limited to the preparation and floating of tendersand ordering of equipment and materials. Project completion is expected to

be about two years behind the schedule anticipated at appraisal. In June

1974, the Government submitted to the Association a proposal for reducing the

scope of the project in order to cope with the sharp increase in construction

costs since the Project was appraised. The proposal involved reductions in

the feeder roads to be financed by the Credit (a proposal for financing theseroads is under discussion with the World Food Program), reductions in thefisheries subproject, and minor reductions in other project items. Given

the very early stage of procurement under the project, it was decided notto formally amend the project at this stage. Meanwhile it was agreed that

the Government's proposals for reducing the project provided a reasonable

basis for proceeding for the time being. By about June 1975, based upon

revised cost estimates and experience concerning the success of the various

project components, a decision will be made concerning the amendments required

under the credit.

Cr. No. 340 Chandpur Irrigation II Project; US$13.0 Million Credit of

October 18, 1972; Closing Date: December 31, 1977

Credit became effective January 17, 1973. The Project is far

behind schedule and continues to be plagued with problems. Major flooding,

work stoppages caused by 100% increase in construction labor costs, short-

ages of cement and operable construction equipment, ineffective management,

inadequate provision of local funds and general inflation are factors which

affect the project adversely. Recent procurement of 1,600 tons of cement

has slightly eased the shortage. Spare parts are now available for repair

of construction equipment, but the lack of trained medhanics and repair

facilities will delay getting the equipment into operation. Manufacture

of the electrical and mechanical equipment for the regulators and pumping

plant has been completed, but no delivery has been made. The low-lift pump

specifications are being finalized by WDB and the consultants. The award of

contracts is scheduled for the second quarter of 1975. EsGentil m_echanicalequipment (particularly embedded parts) is not yet on site. Borrow pit canaland Khal improvement excavation has commenced. Since establishment of the

Project Implementation Bureau there has been improvement in WDB staff per-

formance and diesel fuel deliveries to site. Continuing inflation and other

adverse factors are expected to increase the Project costs to more than 50%

above the latest estimate.

Page 26: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

ANNEX IIPage 3

Cr. No. 341 Tubewells Project; US$14.0 Million Credit of November 6, 1972,

Closing Date: December 31, 1976

This project was originally financed by IDA Credit No. 208-PAK of

1970 and credits from Sweden and Canada. Although bids had been received

in 1971, no contracts were awarded before the disturbances. The present

Credit, again in conjunction with a US$6 million Credit from Sweden and a

construction on this project began during January, 1974. In April 1974,

IDA approved award of the contract for supply of the well pumps and engines.

However, completion of the contract documents were delayed. The draft con-

tract has now been received and our comments have been sent to the Government.

Due to initial delays, present implementation is about one year behind sched-

ule, and new dates have been agreed for the completion of the activities on

which original deadlines have passed. Due to increases in project costs the

Government has requested a reallocation of credit proceeds, reducing the

amounts allocated to local currency financing. We are consulting with Sweden

concerning this request. In January 1974, the Government and the engineering

consultants signed a revised contract providing for the addlional engineer-

ing and agriculture consulting services needed for the project. In February

1974, the agricultural consultants (who were under sub-contract to the en-

gineering consultants) withdrew from the project, stating that the salary

scales in the revised contract signed by the engineering consultants were

inadequate to attract staff of the calibre required for the project. The

Consultants also noted the lack of progress by the Government in making

necessary preparations for implementation of the agricultural development

component of the project. While progress on implementation of the agricul-

tural component has meanwhile improved, the Government has remained unwilling

to pay the agricultural consultants more than had been agreed in the contract

with the engineering consultants. The engineering consultants have now sub-

mitted proposals for new arrangements to provide the required agricultural

consulting services.

Cr. No. 343 Telecommunications Project; US$7.3 Million Credit of

November 15, 1972; Closing Date: December 31, 1975

Credit became effective January 17, 1973. The project was origi-

nally financed as part of Credit No. 145-PAK of 1969, and goods and services

valued at about US$2.2 million were received in Dacca prior to suspension of

disbursements. Most of the suppliers for the remaining equipment required

under the project were willing to renew their prior contracts with Pakistan,

at no increase in cost. These items are expected to be delivered shortly.

However, the coaxial cable supplier expressed his inability to supply equip-

ment at the original price due to increases in the price of copper and lead.

Due to this cost increase and the changes in currency parities, the credit

amount was no longer adequate to complete the project. Consequently, it

was decided that the coaxial cable systems would be replaced by microwave

systems and that financing of the Bogor-Rangpur section would be transferred

to the second telecommunications project. The amendments to the first tele-

communications project are incorporated in the credit agreement for the sec-

ond telecommunications project. Due to the need for a new tender for the

microwave equipment, an extension of the Closing Date will probably be neces-

sary.

Page 27: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

ANNEX IIPage 4 -

Cr. No. 345 Reconstruction Imports Project; US$50.0 Million Creditof November 30, 1972; Closing Date: August 31, 1975

Credit became effective January 30, 1973. As of February 28,1975, disbursements were US$47.1 million and, in addition, letters ofcredit guaranteed by IDA had been opened for US$2.1 million. Of theremaining -US$0.8 million, approximately US$0.3 million is required asa reserve against currency fluctuations affecting .he guaranteed lettersof credit. Thus about US$0.5 million is available to reimburse theGovernment to eligible items paid for after the signing of the credit.The Bangladesh Bank is now preparing these applications. Due to initialdelays, the Credit had no impact on production in 1972/73, and its impacton production only began to be felt during 1973/74. Due mainly to theabove-mentioned initial delays, and subsequent delays in finalizing con-tracts with suppliers and arranging shipping for the imported goods, theCredit was not fully disbursed by-August 31, 1974, the original closingdate. Delays in the manufacture of certain items and in arranging forshipments continued into 1975, and suppliers requested extensions of thedeadlines on their letters of credit. The Association agreed on February 28to second extension of the Closing Date for this Credit from March 31, 1975to August 31, 1975.

Cr. No. 353 Small-Scale Industry Project; US$3.0 Million Creditof January 19, 1973; Closing Date: June 30, 1976

Credit became effective May 14, 1973. The project was originallyfinanced by IDA Credit No. 192-PAK of 1970. The Credit has financed notionalrepayment of amounts previously disbursed under Credit No. 192-PAK (US$187,000)and payment of outstanding amounts for consulting services performed underCredit No. 192-PAK (US$12,000). Disbursements for new activities up toFebruary 28, 1975 amounted to approximately US$2.2 million. Projects pipe-line requirements now exceed available foreign exchange resources during1975/76. A UNDP/UNIDO technical assistance project is expected to help BSICreorganization during 1975/76.

Cr. No. 367 Chittagong Water Supply Project; US$7.0 Million Creditof April 9, 1973; Closing Date: June 30, 1975

Credit became effective June 7, 1973. The project was originallyfinanced by IDA Credit No. 42-PAK of 1963. By December 1971 when disburse-ments were suspended, US$4.4 million had been disbursed. The project, asreappraised in 1972, is now about 65% completed. Construction progress hasbeen slow due to problems with land acquisition, poorly performing and default-ing contractors and suppliers, and the shortage of supplies and materials.Construction and material prices have risen sharply. Construction progressis expected to improve as materials become available, but extension of theclosing date by at least two years may be required. Management, labor andunion problems are diminishing following appointment of a new Chairman ofthe Chittagong Water and Sewerage Authority. While collection performancehas improved recently, financial operations and financial management remainweak. The Water Authority and the Planning Commission are currently pre-paring proposals for revising tariffs, billing and collection procedures andarrangements for capital financing.

Page 28: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

ANNEX IIPage 5

Cr. No. 368 Dacca Water and Sewerage Project; US$13.2 Million Credit

of April 9, 1973; Closing Date: June 30, 1975

Credit became effective June 7, 1973. The project was originally

financed by IDA Credit No. 41-PAK of 1963. By December 1971, when disburse-

ments were suspended, US$6.0 million had been disbursed. The water supply

portion of the project, as reappraised in 1972, is now about 60% completed

and the sewerage portion about 30% completed. Construction progress has

been slow due to problems with land acquisition, poorly performing and

defaulting contractors and suppliers, and the shortage of supplies and

materials. Construction and material prices have risen sharply. Construc-

tion progress is expected to improve as materials become available, but

extension of the closing date by at least two years may be required. Man-

agement, labor and union problems continue. The financial operations and

financial management are weak. The Water and Sewerage Authority is cur-

rently preparing proposals for revising tariffs and capital financing.

Cr. No. 381 Foodgrain Storage Project; US$19.7 Million Credit

of May 18, 1973; Closing Date: December 31, 1975

Credit became effective July 17, 1973. The project was originally

financed by a US$19.2 million IDA Credit No. 83 of 1966 and a 25 million

Kronor credit from the Kingdom of Sweden. The project is almost completed

and 95% of the new IDA and Swedish credits were used for repaying the pre-

vious credits. The remaining funds (US$1.25 million from IDA and about

US$0.25 million equivalent from Sweden) are being used to pay outstanding

bills for work completed prior to the war, completion of some supporting

facilities for the grain storage silos, replacement of spares and equipment

damaged during the war, and a feasibility study for a second grain storage

project. The closing date has been postponed by one year to December 31,

1975 due mainly to delays in reaching agreement with the consultants who

are designing modifications for the jetty at Chittagong and with the con-

sultants preparing the feasibility study for a second stage project. The

designs for the jetty modifications are expected shortly and will be fol-

lowed by invitations to tender for the construction. The draft final report

for the feasibility study was completed in December and is being reviewed

by IDA and the Government. A supervision mission which visited in November

reported serious deterioration in the silos mechanical equipment due to in-

adequate maintenance. In addition, delays in ordering spare parts (for

which funds are available under the credit) increased the risk of break-

down. Measures to be taken to alleviate these probleTis are under discuss-

ion with the Government.

Cr. No. 407 Education Project; US$21.0 Million Credit

of June 29, 1973; Closing Date: June 30, 1978

Credit became ef-fective September 27, 1973. The project was

originally financed by two IDA credits, Credits Nos. 49-PAK and 98-PAK.

By December 1971, when disbursements were suspended, US$7.7 million had

been disbursed out of US$17.5 million, the aggregate total of the two

former credits. The credit adds US$3.5 million to the total of the

original credits, in order to help the government meet part of the in-

crease in total project cost. Progress on the agricultural university

Page 29: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

ANNEX IIPage 6

portion of the project has been delayed due to difficulties in reachingagreement with the consultant architects on a revised contract. Thesedifficulties have now been finally resolved. Construction has also beendelayed due to shortage of building material, delays in the preparationof equipment lists, and furniture designs. Implementation is about 15months behind the appraisal schedule in the case of BAU and 10 monthsbehind for the TIs. There are some signs of improvement. Cement is nowstarting to become available and some equipment lists have been preparedand approved. Due to the rapid increase in civil works costs, projectcosts have increased by over 60% since appraisal.

Cr. No. 408 Highways Project; US$25.0 Million of June 29, 1973;Closing Date: December 31, 1977

The Credit Agreement became effective on September 27, 1973. Theproject was originally financed by IDA Credit No. 53-PAK. By December 1971,when disbursements were suspended, US$3.62 million had been disbursed, outof the original credit of US$22.5 million. The new credit adds US$2.5million to the original credit amount, in order to help the Government meetpart of the increase in total project cost as a result of currency realign-ments. Four construction contracts were signed in September 1973 for theSitalakhya Bridge and the Feni Section of the Dacca/Chittagong road worthabout US$9.2 million. A fifth contract with consultants for constructionsupervision was signed in February 1974 but they were in the field earlier.The progress of the project is slow but it is improving and the outlook,generally, is satisfactory. The major problems are shortage of essentialsupplies, like cement and steel, and rising prices. The Government ismaking its best efforts to make materials available for the execution ofthe project and, at least for the present construction season, no disruptionof the work is anticipated. A cost overrun is likely as prices continue torise. A supervision mission was in the field in February/March and new costestimates are currently being prepared.

Cr. No. 409 Technical Assistance Project; US$4.0 Million Creditof June 29, 1973; Closing Date: December 31, 1975

Credit became effective August 20, 1973. Consultants contractshave been signed for an inland water transport study, technical advisoryservices for preparation of the fertilizer project, a study of areassuitable for rainfed HYV rice and for preparation of a fisheries project.Discussions are under way concerning several other subproject proposals.

Cr. No. 410 Cereal Seeds Project; US$7.5 Million Creditof June 29, 1973; Closing Date: December 31, 1977

Credit became effective January 30, 1974. A contract for con-sultants services has been signed and the consultants (specialists inseed production, seed legislation and certification, and farm machinery)commenced their duties in Bangladesh March 1974. Bids for the major itemsto be purchased (farm equipment and processing plants) are expected to bereceived early in 1975.

Page 30: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

ANNEX IIPage 7

Cr. No. 424 Inland Water Transport Rehabilitation Project; US$4.1 Million

Credit of August 10, 1973; Closing Date: December 31, 1975

Credit became effective September 27, 1973. Detailed investiga-

tions have indicated that the damage to the Chittagong offshore oil terminal

was more severe than previously believed. Consultants appointed late in 1973

to study several alternative technical solutions sulmitted their findings and

recommendations to the Government in late January. The government has re-

quested the Association's agreement to a modification of the project descrip-

tion to enable the implementation of a proposed alternative solution which

will require more foreign exchange than has been provided in the Credit.

This is presently under review. The Association has cleared, after some

modifications, the lists of spare parts, tools and equipment submitted by

the Bangladesh Inland Water Transport Authority, Bangladesh Inland Water

Transport Corporation, Chittagong Port Trust and Bangladesh Engineering and

Shipping Corporation for financing under the Credit. The lists submitted

may have to be reduced to remain within the credit allocations.

Cr. No. 458 Imports Program; US$50 Million Credit of February 7, 1974;

Closing Date: March 31, 1976

Credit became effective February 13, 1974. By June 1974 licenses

for the full amount of the credit had been issued to the various eligible

industries. As of February 28, 1975 disbursements amounted to US$38.9 mil-

lion and, in addition, letters of credit guaranteed by IDA had been opened

for US$7.6 million. Import arders have been placed for the balance. and

the credit is expected to be fully disbursed by December 31, 1975.

Cr. No. S-14 Irrigation Engineering Project; US$3.15 Million Credit

of April 9, 1973; Closing Date: July 31, 1975

Credit became effective July 8, 1973. When IDA suspended dis-

bursements under the original credits to Pakistan (Credits Nos. S-8 and

S-10) in December 1971, the Dacca Southwest feasibility studies were com-

pleted and the Karnafuli-Muhuri studies were about three-quarters completed.

Interim financing from Sweden allowed the work to continue. The feasibility

studies for the Muhuri and Karnafuli projects are now completed. A prelimi-

nary draft report for the Comilla-Noakhali project (Dakatia Unit) was

submitted, but the Government decided not to proceed with the project at

this time. Funds remaining in the Credit are being used to finance detailed

engineering and preparation of contract documents for the Muhuri project

by the Consultant.

Cr. No. 487 Second Telecommunications Project; US$20.0 Million Credit

of June 26, 1974; Closing Date: June 30, 1979

Credit became effective on July 23, 1974. Tender documents for

the microwave systems and multiplex equipment have now been prepared and

approved by the Association for tendering. Proposed legislation for estab-

lishment of a teleconmunications board has been prepared and submitted to

Page 31: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

ANNEX IIPage 8

the Minister of Coimnunications for approval. Consultants proposals foraccounting services have been submitted and are being reviewed by the Tele-communications Department.

Cr. No. 515 (Third) Imports Program; US$75 Million Creditof October 9, 1974; Closing Date: December 31, 1976

Credit became effective on October 10, 1974. Provision was madeto reimburse the Government for up to US$10 million for eligible importspaid for after July 1, 1974, but prior to the date of the credit. Disburse-ments amounted to US$16.2 million as of February 28, 1975, and in additionletters of credit guaranteed by IDA amount to US$16.9 million. The Creditapproved on October 9, 1974 was for US$50 million, but after the Fourth IDAReplenishment Agreement became effegtive, an amendment increasing the creditamount was approved on February 27, 1975. The Amending Agreement was signedon March 10, 1975 and became effective on April 7, 1975. The Government hasallocated the full amount of the Credit among the various eligible industries,and import orders are being processed. It is expected that by July 31, 1975a significant amount of the Credit will be committed by the Bangladesh Bank.

Cr. No. 527 Ashuganj Fertilizer Project; US$33 Million Creditof February 11, 1975; Closing Date: December 31, 1982

Credit is not yet effective.

Cr. No. 533 Population Project; US$15 Million Creditof February 25, 1975; Closing Date: December 31, 1980

Credit is not yet effective.

Page 32: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

ANNEX IIIPage 1

BANGLADESH

BARISAL IRRIGATION PROJECT

Credit and Project Summary

Borrower: People's Republic of Bangladesh

Amount: US$27 million

Terms: Standard

Project Description: The project includes:

(a) Construction of 750 sluice structures to control

water levels and provide storage in the dry

season, and permit drainage and movements of

boats in wet season;

(b) widening and deepening of creeks, where necessary,

to facilitate water distribution;

(c) installation of 100 primary pumps to raise

water from the perennial channels to the creek

storage ponds;

(d) installation of 2,500 secondary pumps or other

devices to raise water to farmers' fields from

perennial rivers and from the creek storage

ponds;

(e) provision of storage and distribution

facilities for fuel and fertilizers;

(f) provision of equipment and spares for workshops

which will maintain and repair the low-lift pumps;

(g) construction of offices and housing for project

staff;

(h) procurement of vehicles and construction equip-

ment and equipment for agricultural extension

centers and demonstration areas;

(i) consultant services to assist in project planning,

design, supervision of construction, and in the

strengthening of agricultural extension services.

Page 33: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

ANNEX IIIPage 2

Estimated Cost: US$46 million equivalent of which US$20.5 millionis expected to be in foreign exchange and US$25.5million in local currency.

ForeignLocal Foreign Total Exchange

(US$ Million) (%)

Land Acquisition 0.7 - 0.7 0Civil Works 9.0 2.6 11.6 22Materials, Equipment

and Vehicles 1.7 10.8 12.5 86Consulting Services 0.3 0.6 0.9 67Engineering and

ConstructionManagement 2.8 - 2.8 0

Base Cost Estimate 14.5 14.0 28.5 49

Contingencies

Physical 1.0 1.0 2.0 50Price 10.0 5.5 15.5 35

Sub-Total 11.0 6.5 17.5 37

Total Project Cost 25.5 20.5 46.0 44.5

EstimatedDisbursements: Fiscal Annual Accumulated

Year Disbursements Disbursements(US$ Million)

1976 1.2 1.21977 4.8 6.01978 6.0 12.01979 6.5 18.51980 6.0 24.51981 2.5 . 27.0

Page 34: DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION … · * 1. I submit the following report and recommendation on a proposed development credit to the People's Republic of Bangladesh

ANNEX III

Page 3

Procurement: (a) Civil works (sluice structures, creek excavation,

buildings and storage facilities) involve many

small operations scattered over a wide area and

would not be suitable for international competi-

tive bidding. These works would be carried out

under unit-price contracts to be awarded after

local competitive bidding under procedures which

are satisfactory. Materials, such as sand,

bricks and timber, would be procured locally

after competitive bidding.

(b) Vehicles, equipment and imported materials

would be procured after international compe-

titive bidding. Procurement of off-the-shelf

items costing less than US$5,000 each whose

aggregate would not exceed US$100,000 would

be through normal government procurement pro-

cedures which are satisfactory. A preference

limited to 15% of the c.i.f. price of imported

goods would be extended to local manufacturers

in the evaluation of bids.

Consultants: Consultants would be retained to advise and assist

in the preparation of work programs, designs and

contract documents; supervision of construction,

preparation and establishment of operation and

maintenance procedures, and the development of

extension services in the project area. About

120 man-months of consultant services would be

provided.

Rate of Return: 28%.

Appraisal Report: Report No. 449a-BD dated April 9, 1975.

South Asia Department