Document of

The World Bank FILE CEP(FOR OFFICIAL USE ONLY

Report No. P-2823-BD

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

TO THE

PEOPLE'S REPUBLIC OF BANGLADESH

FOR A

SECOND FERTILIZER IMPORTS CREDIT

May 21, 1980

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

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CURRENCY EQUIVALENT

In August 1979, the Bangladesh Taka was officiallydevalued relative to the Pound Sterling to a rate of Tk 34.7 to

the Pound. The Pound Sterling now floats relative to the US Dollarand consequently, the Taka-US Dollar rate is subject to change,although it has been fairly stable for sometime at around Tk 15.5per Dollar. The rate below has been used throughout this reportexcept where otherwise stated.

US$1.00 = Tk 15.5Taka 1 = US$0.0645Taka 1 million = US$64,516

ABBREVIATIONS AND ACRONYMS

BADC - Bangladesh Agricultural Development CorporationBCIC - Bangladesh Chemical Industries CorporationDAP - Diammonium PhosphateGOB - Government of BangladeshIFAD - International Fund for Agricultural DevelopmentHP - Muriate of PotashODA - Overseas Development Administration of the United KingdomTSP - Triple SuperphosphateUSAID - United States Agency for International Development

GLOSSARY

Agricultural Terms

Aman - Paddy planted before or during the monsoon(which begins in June) and harvested in Novemberor December.

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

Boro - Paddy planted in winter and harvested during Aprilto June.

FISCAL YEAR

July 1 - June 30

FOR OFFICIAL USE ONLY

BANGLADESH

SECOND FERTILIZER IMPORTS CREDIT

Credit Summary

Borrower: People's Republic of Bangladesh

Amount: US$25 million equivalent.

Terms: Standard

Purpose: To finance the import of fertilizer and fertilizer rawmaterials for FY81, to improve fertilizer distribution andmarketing, and to establish a more effective pricing systemfor fertilizer. The fertilizer imports portion of theCredit would be administered by the Bangladesh AgriculturalDevelopment Corporation. The fertilizer raw materials por-tion of the credit would be administered initially by theBangladesh Chemicals Industry Corporation and later by asuccessor company to be established to operate the Chitta-gong TSP factory. The allocation of funds between finishedfertilizer and fertilizer raw materials would be performedby the External Resources Division of the Ministry ofFinance. A ministerial level fertilizer coordinating com-mittee has been established to improve the planning forfertilizer procurement and distribution. There is a riskthat fertilizer consumption could be reduced below expectedlevels (e.g. due to flooding or drought reducing farmerdemand). In such circumstances, import arrivals would berephased to assist in meeting FY82 requirements.

Estimated US$ MillionDisbursements: FY81

First QuarterSecond Quarter 8Third Quarter 12Fourth Quarter 5

Total 25

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

- ii. -

Recommended Maximum Amount of

Categories the Credit that

and Ceilings: Category can be withdrawnUS$ Million

Finished Fertilizer 25.0Fertilizer Raw Materials(Rock Phosphate and Sulfur) 10.0

(i.e. subject to limits specified above, Bangladesh

is free to allocate US$25 million credit amount between

finished fertilizer and fertilizer raw materials).

AppraisalReport: None

INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND RECOMMENDATION OF THE PRESIDENT

TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDITTO THE PEOPLE'S REPUBLIC OF BANGLADESH FOR A

SECOND FERTILIZER IMPORTS CREDIT

1. I submit the following report and recommendation on a proposed

fertilizer imports credit to the People's Republic of Bangladesh for the

equivalent of US$25 million, on standard IDA terms.

PART I - THE ECONOMY 1/

2. An economic report entitled "Bangladesh: Current Economic Position

and Short-Term Outlook" was distributed to the Executive Directors on March 21,

1980.

Background

3. The first years of independence were difficult for Bangladesh.

With its economy already disrupted and its physical infrastructure severely

damaged by the struggle for independence, the country was afflicted by poorharvests in 1972/73 and by damaging floods in 1974. Foodgrain output fell

drastically during these troubled years and recovered to the pre-independence

level only in 1975/76; foodgrain imports averaging over 2.1 million tons per

year were required between FY72 and FY75 to maintain food consumption levels

near minimum standards. The terms of trade worsened considerably and the

production of jute, the predominant export commodity, declined sharply. Infla-tion, declining real wages, labor unrest and political instability added to

the difficulties. Relief, rehabilitation, the building of a national govern-

ment from a provincial administation, and the consolidation of Government

authority were unavoidably the paramount concerns of policy makers in thefirst half of the 1970s.

4. Economic improvements in recent years, together with greater poli-

tical stability, has led to a significant shift in the circumstances of

Bangladesh and have somewhat brightened its economic prospects. Although it

was not until FY75 that GDP recovered to the pre-independence level, between

FY75-79 GDP increased (in real terms) by about 25%--an average annual rate of

6% notwithstanding setbacks to agricultural production experienced in FY77 and

again in FY79. The late 1970s may, therefore, be characterized as a period of

consolidation and economic recovery following the shocks of the early 1970s.

In recognition of its need for a reorientation of policies, the Government

wisely chose to delay the preparation and implementation of a new Five-Year

Plan by two years. The current Two-Year Plan (FY79-FY80) was intended to give

the Government time to consider the development strategy and policies to be

incorporated in the next Five-Year Plan to begin in July 1980.

1/ Substantially the same as Part I of the President's Report for the

Fertilizer Industry Rehabilitation Project (Report No. P2781-BD) dated

April 24, 1980.

Recent Developments and Near-Term Prospects

5. From 1975 until March 1979, Bangladesh was governed under martial

law and without a parliament. In elections held in February 1979, 29 politi-

cal parties and groups contested 300 seats in the National Assembly. Roughly

two-thirds of the seats were won by the Bangladesh National Party (BNP) headed

by President Ziaur Rahman, who had won the presidential election held in

June 1978. Thirty additional seats, reserved for women, were subsequently

filled by the BNP. Martial law was lifted following the convening of the

new Parliament in March 1979, and a new cabinet was appointed at that time.

6. FY78 (July 1977-June 1978) was a relatively good one for the economy.

Mostly as the result of a record grain crop (13.1 million tons) and a 10%

increase in industrial output, GDP grew by nearly 8% in real terms, following a

2% rise in FY77. But the experience of the past two years has again demon-

strated the severe vulnerability of the Bangladesh economy. During this

period, economic developments were dominated and largely determined by the

consequences of unfavorable weather conditions, including droughts and floods.

These conditions affected adversely both the foodgrain crops (which represent

roughly one-third of GDP) and the quality of the jute crop; they also had

repercussions throughout the rest of the economy. Inflation, which was aggra-

vated by the shortfall in food production and consequent rapid rises in rice

prices, increased to a current rate of about 17%; GDP growth in FY79 slowed

sharply, and with population growing at 2.7% annually, real per capita income

rose only minimally. On the positive side, FY79 was characterized by a contin-

uing strong performance of the construction sector, improved budgetary perform-

ance, a substantial increase in development expenditures, the emergence

of stronger balance-of-payments and international reserves positions than had

been expected, further rapid growth in wheat production, and a number of

significant policy adjustments, most notably in the areas of exchange rate

management and public sector pricing. Due to the continuing effect of the

1978-79 drought, the outlook for FY80 is that GDP growth will be about 4-5%,

i.e., well below the rate of 7.3% projected by GOB in its FY80 budget.

7. The succession of three relatively poor Cr7OpS in a row (1978/79

aman, 1979 boro and aus) meant that foodgrain available from domestic produc-

tion during CY79 was considerably (7%) below the previous year's level.

Together with a serious slippage in the scheduled arrival of food aid during

the first half of CY79, this resulted in a fall in per capita availability of

food and in an increase in rice prices to levels unrecorded since the food

crisis of FY75. Meanwhile, low domestic foodgrain procurement from the small

crops and high offtakes from the public grain distribution system led to a

rapid depletion of public food stocks which fell to the dangerously low level

of only 209,000 tons at the end of June 1979.

8. To prevent a serious food crisis in the July-October 1979 lean sea-

son, Government authorities at the highest level took charge of the situation

and directed an all-out effort to import and distribute the massive volume of

foodgrains needed to supplement the reduced domestic crops. This effort was

remarkably successful. Almost 2 million tons of food, both aid-financed and

commercially purchased, were imported between July and December 1979. This

placed a heavy burden on the country's port handling capability, its internal

transport facilities, and its public administration and distribution system.

- 3 -

Although the disruptive impact of this massive effort on the other sectors

of the economy was held to a minimum, it could not be entirely avoided. The

internal movement of other bulk commodities and the shipment of exports were

impeded for some time during the peak months of foodgrain imports. Neverthe-

less, the authorities were able to unload and distribute this unprecedented

volume of foodgrain imports in a minimal amount of time, enabllng offtake to

be stepped up and stocks to be restored to a more comfortable level. By the

beginning of September 1979, therefore, rice prices had begun to ease and what

might have become an extremely serious food crisis was averted.

9. The slow growth of agricultural production has become the principal

focal point of concern among Bangladesh's political leadership and economic

planners. The Second Five-Year Plan is expected to give top priority--together

with population control--to agriculture, and especially to food production.

Meanwhile, the short-term food supply outlook is still problematic, although

the public stock position at the end of CY79 was adequate because of the

substantial imports between July 1979 and December 1979. The 1979/80 aman

crop, also affected by the drought, was no better than last year's, and pro-

curement from this crop--in spite of a recent procurement price increase--

was very small. In order to avert a repetition of the CY79 situation, consid-

erable additional imports will be needed in CY80. The prospects for the FY80

boro and wheat crops appear favorable, but efforts to ensure an adequate stock

of foodgrain to meet 1980 consumption and stock build-up requirements cannot

yet be relaxed. A special meeting of the Bangladesh Aid Group was convened in

late January 1980 to consider the country's food situation, import requirements

and policy measures needed to prevent future repetitions of the recent experi-

ence. A Bank report entitled "Bangladesh: Food Policy Issues," prepared for

consideration at that meeting, was distributed to the Executive Directors in

December 1979. 1/

The Balance of Payments

10. Repercussions of the 1979 food shortage were reflected also in the

balance of payments, as the need to finance commercial purchases of food

imports was evidently a factor underlying the Government's rather cautious

implementation of its import program. Other factors included a slow rate of

utilization of import licenses during the latter part of the fiscal year. As

a result, non-foodgrain imports in FY79 remained considerably below target.

Because of this and other factors, foreign exchange reserves increased, which

in turn added to the increase in money supply and further aggravated infla-

tionary tendencies. The reserve increase, however, was a temporary phenomenon.

Even at this higher than expected level, reserves at the end of FY79 were still

not quite sufficient to cover two months of merchandise imports at the projected

levels of FY80. A substantial increase in the current account deficit is

projected for FY80, primarily due to large increases in the volume and price of

foodgrain imports and to significant price increases for imported crude oil and

petroleum products and other imports. Reserves at the end of FY80 are likely

to be equivalent to scarcely one month's projected FY81 imports.

1/ Report No. 2761-BD, dated December 19, 1979.

11. Bangladesh's balance of payments continues to be characterized bya massive structural trade deficit and heavy dependence on foreign aid. Ex-port earnings in FY79 represented less than 7% of GDP and less than 40% of

the import bill. Moreover, Bangladesh's export structure continues to bedominated by raw jute and jute goods, which together account for approximately70% of total export earnings. Although exports increased by about 20% invalue in FY79 and the terms of trade improved somewhat during the year, thetrade deficit widened to $1 billion. The value of raw jute exports increasedby 47% over the previous year's receipts, reflecting increases in both volumeand prices. Export earnings from jute manufactures rose by 11% in FY79, as adecline in export volume was more than offset by an increase in unit prices.

Relatively large gains were also recorded in exports of leather, fish andshrimps and other non-traditional exports. Among the notable developments onthe import side in FY79 was the decline in food imports, owing mainly to thedelays in food aid arrivals noted above. Capital goods imports rose by 21% toUS$384 million; fertilizer imports nearly doubled in value, and there weresignificant increases also in imports of petroleum products and cement.

12. The current account deficit in FY79 was considerably smaller than thetrade deficit, owing mainly to the continued rapid growth of workers' remit-tances from the Middle East. These receipts are now the second most importantsource of foreign exchange earnings, exceeded only by jute goods exports. Anotable development was the US$100 million increase in project aid disburse-ments in FY79, reflecting in part the country's growing absorptive capacity.Total aid disbursements, which exceeded US$1 billion for the first time, wereequivalent to 63% of total merchandise imports. Debt service payments rose toUS$95 million, notwithstanding some debt relief measures undertaken by variousdonors, and the debt service ratio deteriorated from 13.5% in FY78 to 15.8% inFY79. 1/

13. Between August 1978 and August 1979, GOB undertook a series of ex-change rate adjustments whereby the Taka was devalued by about 24% againstthe Pound Sterling. These adjustments served to strengthen somewhat thebalance of payments and the allocation of resources within the economy. InJuly 1979, the IMF approved a Stand-by Arrangement for a period of one yearin an amount equivalent to SDR 85 million. Net of repayments, and includingprojected disbursements from the IMF Trust Fund and new SDR allocations, theIMF is expected to cover about US$59 million of Bangladesh's financing require-ments in FY80.

14. The terms of trade are expected to remain unchanged in FY80 asrising export prices for jute goods have helped to offset the impact of ris-ing petroleum and other import prices. Total FY80 merchandise exports areexpected to increase by about 24% and imports by over 50% in value; foodgrainand petroleum purchases alone will account for over three quarters of theincrease in imports. The FY80 current account deficit is expected to belargely covered by disbursements of approximately $400 million in food aid,$500 million in commodity aid and between $450-500 million in project aid--a total aid disbursement of about $1.4 billion (i.e., roughly 35% more thanin FY79). The FY81 balance of payments situation is likely to be quite

1/ Debt service as a percentage of merchandise exports.

- 5 -

difficult even if commodity aid availabilities increase substantially. Theterms of trade are projected to deteriorate markedly, reflecting mainly anexpected fall in jute goods export prices and a continuing rise in importprices. The FY81 current accout deficit, therefore, could well be on theorder of $1.8 billion.

Public Finance

15. The public finances improved in FY79 and are expected to improvefurther in FY80. In both years, the contribution of the current budget surplusto the development budget showed a rising trend, in absolute as well as rela-tive terms. Borrowing from the domestic banking system, which re-emerged as asource of budget financing in FY78, has since been avoided. Nevertheless,inflation has again become a serious problem, and the implementation of manyprojects, both aid-supported and non-aided, continues to be hampered by insuf-ficient or tardy allocation of domestic funds. Further improvements in themobilization of domestic resources are urgently needed if the ratio of publicinvestment to GDP is to be raised above the 8-10% level of recent years.

16. This task of raising additional domestic resources is wide-ranging,involving not only a strengthening of the tax effort, but in addition--andabove all--improved performance of the public sector business enterprises andutilities and reduction of the three key subsidies (on jute, food and agricul-tural inputs). Reflecting its growing awareness of the problem, the Govern-ment impaneled a Taxation Enquiry Commission and five special committees toreview various aspects of domestic resource mobilization. The five committeesreviewed, respectively: (i) gradual elimination of the food subsidy; (ii)rationalization of the rate structure of public transport agencies; (iii) eco-nomic pricing by public utilities; (iv) reduction in agricultural input sub-sidies, including the fertilizer subsidy; and (v) improvement in the financialperformance of public sector enterprises. The committees have concluded theirwork, and the final report of the Taxation Enquiry Commission was submittedto the Government in April 1979.

17. A start has been made in implementing some of the recommendationsof these advisory groups. Several of the measures suggested by the interimreport of the Taxation Enquiry Commission, especially those in regard to taxadministration, have been implemented gradually from FY78. In mid-1978 theGovernment increased railway fares, and in the course of FY79 and FY80 itraised foodgrain ration prices, several utility rates, and commodity salesprices of public sector enterprises. Fertilizer prices, for example, wereincreased by 9-29% in August 1979 and petroleum product prices by up to 45%in November 1979. In some cases these price adjustments only kept up withinflation, but in others they served to reduce the subsidy burden in realterms.

18. Development expenditures (in current prices) increased by almost 40%and total revenues by about 21% in FY79; development expenditures are projectedto increase by a further 29% and revenues by 21% in FY80. Increased develop-ment activity has also been reflected in the increased disbursement of projectaid, which rose by an estimated 35% in FY79 and is projected to rise by afurther 24% in FY80. As noted above, the Government abstained from domesticbudgetary deficit financing in FY79, and it plans to avoid doing so in FY80 as

well. But inflationary pressures, which re-emerged in FY78 (sparked primarilyby too rapid a creation of liquidity by the banking system) continued intoFY79, especially in the latter part of the year when rice prices rose veryrapidly. The cost of living (COL) index for urban consumers rose by anestimated 19% between June 1978 and June 1979 although the average COL indexfor FY79, pushed by a 48% increase in average rice prices, was only 9% abovethat for FY78. The outlook for FY80 is that the inflation rate for the year asa whole will be on the order of 15-16%, with liquidity rising by some 17-18%.

Development Planning and Policy Issues

19. FY79 and FY80 comprise the period of the Two-Year Plan, which wasmeant to provide an opportunity for policy re-appraisal and for preparationof the Second Five-Year Plan and a Twenty-Year Perspective Plan. In the pro-cess of preparing the plans, the planners have addressed themselves to thefactors underlying the slow development of the economy over the past decade.These include poor land use, insufficient irrigation and flood control, inade-quate administrative capacity, low domestic resource mobilization, and socialimpediments to change. The planners have also analyzed those problems posed bythe basic structural conditions of the economy: a unique environment prone tonatural disasters; poor physical capital stock; a high rate of populationgrowth; mass poverty; a highly-skewed distribution of income and land owner-ship; a high ratio of population to land; extreme fragmentation of landholdingsand growing landlessness of the predominantly rural population; high illiteracy;poor health and short life expectancy; high unemployment and underemploymentand scarce employment possibi.i.{ti.e outside agriculture; and a heavy dependenceon foreign aid, not only for investment financing, but also for food and otherrecurrent inputs.

20. Although the Second Five-Year Plan is still in preparation, it seemsclear that first priority in this Plan will go to agriculture and, withinagriculture, to the production of foodgrains. The potential for increasingfoodgrain output in Bangladesh is considerable, as yields and cropping inten-sity are low, and fertilizer use is still very modest. Except for last year,when it was adversely affected by the weather, fertilizer demand has beengrowing at a rapid rate. Wheat production has expanded quickly since FY75 andis likely to continue to grow significantly, and there seems to be a largeunsatisfied demand for irrigation. Precisely how rapidly food production canbe increased remains to be determined. The Plan's targets have yet to beannounced, but are expected to be very ambitious.

21. Recent projections 1/ indicate that the population of Bangladesh,estimated at almost 90 million in January 1980, would total 145 million by theyear 2000. These projections imply that the population growth rate, currentlyestimated at about 2.5-2.7% per annum, would not decline very dramatically overthe next 15 to 20 years and that a net reproduction rate of 1 would not bereached until 2035--a grim but seemingly realistic prospect in view of the poorimplementation and limited success of birth control efforts in Bangladesh sofar. The implications of such a rate of population growth for the country's

1/ World Development Report (World Bank, August 1979), Table 17, pg. 158.

- 7 -

development prospects are staggering. The density of population on cultivable

land would increase from 3.8 persons per acre at present to over 6.2 persons

per acre by the end of the century. In a country where the mainstay of the

economy is agriculture and where food shortages are already serious, the

adverse consequences of such overcrowding are obvious. Annual foodgrain

requirements--even at the present low per capita consumption level of about

15.5 ounces per day, would increase from about 14 million tons at present to

roughly 23 million tons by the year 2000. Domestic production would almost

have to double from its record level of about 1.1.9 oll611,on tons (net of seed,

feed and waste) achieved in FY78 to meet this requirement. Substantial in-

creases in cropping intensity and in yields will be required, therefore, even

to maintain food consumption at a subsistence level.

22. A significant improvement in real incomes, the satisfaction of basic

needs and the provision of improved public services will also be extremely

difficult to achieve without a drastic reduction in the rate of population

growth. By the same token, it will become increasingly impossible to educate

the rapidly growing number of people and to provide gainful and productive

employment opportunities for them. In recognition of these factors, high

priority is being given by the Government to improving the performance of its

family planning program.

23. Emphasis in the next five years is also likely to be placed on the

satisfaction of a number of basic needs, including the provision of adequateclothing, universal primary education and rural electrification. The planners

recognize that it will take more than five years to meet these and other

targets, but strides will be made in the next plan period towards their

achievement.

24. A plan aimed at effecting a significant departure from past trends

will place a severe strain on domestic finance and managerial skills. Even

with the adoption of labor-intensive and low capital-cost techniques, a signi-ficant step-up in development spending will be required. This in turn will

require sizeable increases in both the mobilization of domestic and the inflow

of foreign resources. A critical factor will also be the extent to whichproject implementation capabilities are improved. Although immediate improve-

ments can be made in the ability oF i-h-e administration to expedite project

implementation, it is unlikely that the efforts of public agencies alone would

be adequate to achieve the targeted breakthrough. The Government recognizes

that in certain key areas, greater reliance will have to be placed on the

private sector. It also believes that, to a certain extent, activities such

as education and rural development should be carried out in a decentralizedfashion, with greater emphasis on local initiative and grass-roots participation.

The Case for Program Assistance

25. Even assuming that Bangladesh were to achieve far superior exportand savings levels than in the past, substantial external aid will continue

to be required for some time to finance a major part of its total development

expenditures. A large inflow of external capital has been, and will continueto be, required merely to achieve a modest growth of per capita incomes. The

level of investment is very low even by comparison with other low-income

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developing economies. As accounted in the budget, external assistance iscurrently financing about 75% of total public development expenditure, directlyor indirectly in the form of counterpart funds generated by food and commodityaid.

26. The corollary of the severe disequilibrium between domestic savingsand investment is the fundamental imbalance in the country's external paymentsposition outlined above. These structural characteristics, combined withserious administrative weaknesses, make it impossible in the short and mediumterm to transfer the amount of external assistance required solely by means ofproject financing--even if such financing includes substantial provisions forlocal currency expenditures. There are limits to the extent that componentsof any country's overall development program can be formed into projectssuitable for external financing; it is particularly difficult in the case ofBangladesh where an experienced and efficient development administration doesnot yet exist.

27. Given the severe imbalances in the country's foreign trade struc-ture, the requirements for imports of general commodities cannot be met byforeign exchange earnings alone. Without program assistance to financeimports of general commodities, the supply of non-agricultural goods to theeconomy would be greatly reduced. In particular, production in the industrialsector would have to be cut back substantially. Utilization of existingindustrial capacity has been improving and is now at an average level of about65%, compared with less than 50% in FY73 and about 70% in FY70. But even withinvestment in additional capacity since FY70, industrial production in FY79was only about 30% above the FY70 level.

PART II - BANK GROUP OPERATIONS IN BANGLADESH 1/

28. Bangladesh became a member of the Bank and IDA in 1972. Initially,Bank Group operations in Bangladesh concentrated on the reactivation of elevencredits, amounting to US$148.6 million, made originally to Pakistan before1971. In addition, as of April 30, 1980, 40 new credits have been approved,totaling US$1,146.7 million; of these, US$575 million have been for programcredits (eight import program credits and one fertilizer imports credit).Annex II contains a summary statement of IDA credits and disbursements as ofApril 30, 1980, and notes on the execution of ongoing projects. On June 18,1976 Bangladesh became a member of the IFC, and one investment for a ship-building and engineering company has been approved.

29. Bangladesh's debt service ratio was 15.8% in FY79. 2/ (If workers'remittances amounting to US$140 million are added to total merchandise exportearnings of US$602 million, the debt service ratio would drop to 12.9%.) While

1/ Substantially the same as Part II of the President's Report for theFertilizer Industry Rehabilitation Project (Report No. P2781-BD) datedApril 24, 1980.

2/ As a percentage of merchandise exports only.

- 9 -

the debt service ratio is not expected to exceed 20% before the mid-1980s, it

could do so thereafter, unless careful debt management policies are pursued

and aid is provided on appropriately concessional terms. Bangladesh's total

outstanding and disbursed external public debt amounted to just over US$3 bil-

lion as of Jrne 30, 1979, with IDA credits and the single IBRD loan accounting

for 25% of the total. In FY79, the Bank Group accounted for 9% of Bangladesh's

total debt service payments; because assistance is now entirely in the form of

IDA credits, debt service to the Bank Group will rise slowly.

30. The focus of IDA assistance in recent years has been on agriculture

(14 of the 31 new projects approved since independence, and one previous

lb fertilizer imports credit). This is consistent with the country's needs

and the Government's priorities. Particular emphasis continues to be placed

on projects that provide agricultural inputs, including in particular the

provision of adequate fertilizer supplies to farmers. Emphasis is also given

to the provision of irrigation, improved seeds, extension, credit and storage

facilities, which all tend to increase the demand for fertilizer.

31. Industry has been the main beneficiary of the eight import program

credits approved to date. For the reasons summarized in paragraphs 25-27,

program lending will continue to be a desirable component of IDA operations

in Bangladesh. The industrial sector has also benefited from two fertilizer

production projects (see pararaphs 60 and 62), and from DFC and small-scale

industry projects. A jute industry rehabilitation project has been submitted

to the Executive Directors for consideration May 29. IFC is currently in the

process of identifying further suitable investment opportunities.

32. The enormity of Bangladesh's population problem makes this an

extremely high priority sector as well, limited only by its absorptive capacity.

The first population project is now making encouraging progress, and a second

population project was approved in FY79. Improved education and availability

of trained manpower is also crucial, and lending in this field has emphasized

agricultural, technical and vocational training. IDA should continue to

provide assistance to critical infrastructural areas such as transportation,

energy and power, and telecommunications. A first power project was approved

in late FY79 and a second highway project was approved during FY80. A fer-

tilizer transportation project is currently under consideration.

33. Disbursement of the program credits has proceeded satisfactorily;

however, project disbursements initially lagged behind expectations, owing

largely to delays in the release of local funds, approval of contracts, employ-

ment of consultants, and appointment of staff. Underlying these delays were

serious constraints that included a shortage of qualified staff, overcentralized

bureaucratic procedures and organizational deficiencies. Some progress has

been made recently on these issues and the disbursement picture is improving.IDA and GOB have given increased emphasis to regular monitoring and supervi-

sion in order to identify and resolve potential problems. IDA is providing

assistance both under specific projects and under three technical assistance

credits (Credit 409-BD, 622-BD and 872-BD) to assist in improving planning,

project preparation and implementation capabilities.

34. In view of Bangladesh's difficult foreign exchange position, IDA

credits should continue to cover all foreign exchange costs; and in order to

- 10 -

direct IDA lending to those sectors--such as agricultural and rural develop-ment--where the percentage of foreign exchange costs is relatively low, thefinancing of local currency expenditures is fully justified.

35. Economic and sector work continues to provide the basis for adialogue between the Bank Group and the Government on development strategy.It is also designed to enhance coordination of external assistance withinthe framework of the Bangladesh Aid Group. Recent activities in this areahave concentrated on food policy, industrial investment strategy, andincreased domestic resource mobilization.

PART III - THE AGRICULTURAL SECTOR

General

36. Agriculture dominates the Bangladesh economy, accounting for 55% ofGDP, 75% of total employment and, directly or indirectly, over 90% of thecountry's exports. About 70% of agricultural value added is derived fromcrops and the rest from forestry (6%), fisheries (9%) and livestock (13%).Bangladesh has a gross area of about 35 million acres of which about 21 mil-lion acres are cropped at a cropping intensity averaging 150% in recent years.Rice, by far the most important crop, accounts for about 80% of the grosscropped area; jute, the principal export, for 6%, and a variety of other cropssuch as wheat, pulses, oilseeds, sugarcane, and vegetables for the remaining14%. Agricultural productivity in Bangladesh is among the lowest in the world;the average rice yield of about 0.5 ton per ac is barely half of that for Asiaas a whole.

37. The major objectives of the Government's agricultural developmentefforts are to achieve food self-sufficiency, create employment for the ruralpoor in order to improve incomes and nutritional standards, and to increaseexport earnings. The Government's strategy for the sector emphasizes strength-ening of rural institutions, improvement of farm input supplies, better utili-zation of existing irrigation facilities, and further expansion of irrigationfacilities through low-cost, short-gestation irrigation schemes.

Performance and Near-Term Prospects

38. During the 1960s, agricultural production grew at an annual rateof 2.5% and foodgrain production at an annual rate of 2.4%. However, bothlagged behind the population growth rate of about 2.8%. As a result, food-grain imports increased from less than 0.6 million tons in FY61 to over 1.5million tons in FY70. Due to adverse weather conditions as well as disruptionscaused by the war of liberation, production during the early 1970s remainedbelow FY70 levels, necessitating imports averaging 1.8 million tons per yearand accounting for about one-quarter of the total import bill. In FY78, dueto favorable weather conditions and the sharply increased supplies of fertil-izers and other agricultural inputs, foodgrain production reached a record13.1 million tons, some 10% above the 1970 level. Nevertheless, productionstill fell short of domestic consumption requirements by 1.6 million tons.

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39. Jute production also declined significantly during the early 1970s

and, despite a reversal of the declining trend, the average FY78-80 productionlevel remained about 10% below the pre-independence level. The production ofa number of minor crops (such as sugarcane, pulses, oilseeds and potatoes) has

also remained depressed. Wheat production, however, increased about five-foldbetween FY70 and FY79, and the FY80 wheat crop is expected to be more thandouble the 486,000 tons achieved in FY79.

40. Due to unfavorable weather and diesel fuel shortages (for the irri-

gated boro crop), foodgrain production in FY79--estimated at 13.0 million tons,

was below the FY78 level. The effects of the 1978/79 drought were felt wellinto FY80, and the combined FY80 aus and aman crops will be about 700,000 tons

below the FY79 level. As in FY79, Government procurement from the aman crop(the largest of the three rice crops) was again low in FY80 because of low

output and high market prices, while offtake from public grain stocks remained

exceptionally high. Total FY80 foodgrain production (at about 13.4 milliontons) is expected to be only slightly above the FY79 level, with higher (record)boro and wheat production offsetting the lower aus and aman production. In an

effort to restore both consumption and public stock levels from their depressedFY79 levels, the Government purchased commercially over one million tons offoodgrain imports to supplement the 1.9 million tons provided by aid donors--bringing total foodgrain imports for the year to an all-time record level of

nearly three million tons. Notwithstanding this level of importation, however,the Government is unlikely to be able to achieve its target of building up theend-June 1980 stocks to one million tons.

41. The principal auspicious agricultural development in both FY79 andFY80 has been the continued rapid growth of wheat production. Wheat outputrose by 42% in FY79 (from 343,000 tons in FY78 to 486,000 tons) and isexpected to reach a level of at least one million tons in FY80.

Constraints and Potential

42. Agricultural development in Bangladesh is constrained by the scarcity

of cultivable land, climatic hazards, insufficient irrigation facilities, andinadequate transport facilities for moving farm inputs and produce. On theother hand, Bangladesh has large areas of highly fertile deltaic soils, aclimate suitable for year-round cropping, and abundant groundwater resourcesfor dry season irrigation. Also, the development of high-yielding varieties(HYVs) of rice and wheat (which are suitable for cultivation in large areas of

Bangladesh even under rainfed conditions) has opened up the prospect of sub-stantial increases in production that can be brought about quickly and inexpen-sively. Much of this potential, however, has not been exploited.

43. An important constraint is the heavy pressure of population on land.Most land holdings in Bangladesh are small and fragmented--the average farmsize being about 2.5 acres split into seven plots. This constitutes an obsta-cle to efficient farm management and makes the organization of cooperativeirrigation systems difficult. An additional constraint is the agriculturaltenancy arrangements. Under the customary rental arrangements the tenant isnormally expected to provide all of the inputs, but receives only about half ofthe crop and has no right of occupancy. Such arrangements reduce the incentiveto develop land for irrigation or to improve farming practices.

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44. A number of organizational deficiencies also have affected growth

adversely. Generally, farmers in Bangladesh are receptive to proven innova-

tions. Their efforts, however, have been handicapped by the inadequate and

unreliable distribution system for farm inputs, such as HYV seeds, fertilizersand pesticides, and by the absence of an effective extension system. Adequate

marketing, processing, storage and credit facilities have also been lacking.

Agricultural planning has generally been based on an extremely poor data baseand with very little feedback from operating departments, resulting in unreal-

istic targets and inflexible programs. On the implementation side, the weak-nesses include excessive centralization of decision-making and cumbersome

administrative procedures. Despite these handicaps, the Government has madeprogress in promoting improved farming technologies. From 1970 to 1979, the

acreage irrigated by modern irrigation facilities increased by 1.4 million

acres (or 170%), fertilizer consumption increased from some 280,000 tons to

740,000 tons, and the acreage sown to high-yielding varieties of grains in-

creased from about 1.0 million acres to over 4.0 million acres.

45. Further growth in agricultural productivity is a prerequisite for

meeting many of the country's major economic objectives, including food self-sufficiency, increased domestic resource mobilization, and accelerated overall

growth. Some of the foundations for more rapid agricultural growth have been

laid. For example, measures taken in recent years to improve input availabil-ities and to maintain incentive output prices have been helpful in producing

the record grain crops of FY76 (12.8 million tons) and FY78 (13.1 milliontons), although much more can be done in these fields. Foodgrain procurementprices were raised twice in 1979 and appear adequate. Recent steps to free

the distribution of fertilizer and other inputs from bureaucratic constraints

are also positive developments, both in their expected short-term effects andas an indication of the Government's increased pragmatism in its efforts to

increase agricultural production. Other positive signs include a substantialstep-up in BADC's distribution of wheat seeds, expansion of the domestic food-

grain procurement system, the results of a joint Bangladesh/IDA review of the

Water Development Board (leading to official endorsement of a strategy empha-sizing small, quick-yielding, low-cost investments) and progress achieved ina joint Government/IDA exercise to produce a Medium-Term Food ProductionPlan. The Government's public commitment to achieving foodgrain self-

sufficiency during the Second Five-Year Plan period should in any event leadto an appropriate increase in the share of resources devoted to this sector.

The realization of such a target will require, above all, substantial improve-

ments in the country's capacity for implementing and monitoring programs for

delivering the various inputs and support services to the farm population.

46. In order to accelerate the growth of foodgrain production, substan-

tial increases in irrigated acreage and in fertilizer use will have to be

realized, the former both through improved utilization of existing capacity

and the fielding of additional low-cost, short-gestation facilities utilizingboth groundwater and surface water. In the short run at least, the resources

available will not be sufficient to permit a simultaneous development oflarge-scale, long-gestation projects, although projects of this type may bring

considerable benefits in terms of flood control and irrigation potential inthe long run. To increase foodgrain output from 13 million tons to about 20

million tons, for example, would require almost doubling the irrigated acreage

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(from the present 3.9 million acres to roughly 7.2 million acres) and a more-than-doubling of fertilizer consumption (from an estimated 850,000 tons inFY80 to about 2 million tons). Most of the increase in irrigation will have tocome from improved utilization of existing tubewells and low-lift pumps andfrom the fielding of additional facilities of this type. Given the constraintson the public sector, the success of the effort will call for a considerablyexpanded role at the private sector, as has already been done with respect tofertilizer distribution. Not only should pumps and wells be sold to privateowners, but there should also be increased privatization of fuel delivery,repair and maintenance operations. The fielding of smaller pumps and theinstallation of smaller deep tubewells would also help improve command areautilization, as pump groups will not have to be as large as for larger pumps.Similarly, the sale of pumps and tubewells to the private sector is likely tolead to an improvement in pump utilization, as private owners are likely toseek to obtain more benefit from their investment, especially at full costprices.

47. Such a substantially expanded program of supplying these inputswould not be feasible financially if the present rates of input subsidiesremain in effect. Neither can retention of these subsidies be defended interms of equity considerations; in times of short supply the main beneficiariesare not always the smaller farmers. If, as expected, the subsidies are to begradually phased out in the context of a program of increased supply, care willhave to be taken, however, to maintain incentive relationships between inputand output prices through effective output price support measures.

48. At the Government's request, IDA has been working with variousGovernment agencies to help prepare a Medium-Term Food Production Plan. Duringthe Plan preparation, special attention has been paid to: the reduction ofsubsidies to improve the Government's financial position; the foodgrain pro-curement system; marketing and the maintenance incentive prices to foodgrainsand other important crops; adequate and timely supply of fertilizer, dieselfuel, seeds and pesticides; improved provision of institutional credit; betterutilization of existing irrigation systems and equipment; expanding investmentsin labor-intensive irrigation, drainage and flood control works; development oflocation-specific HYVs adapted to the cropping seasons and hydrologic condi-tions of Bangladesh; strengthening of extension services and supportive appliedresearch; intensified and expanded in-service training; and improved projectplanning and implementation. To provide adequate and timely feedback on sectoralperformance and problems, particularly as regards production, farmgate pricesand input use, the Plan is expected to emphasize the establishment of monitoringand evaluation cells within appropriate agencies of the Government.

PART IV - THE FERTILIZER SUB-SECTOR

49. The policy problems affecting fertilizer marketing, distributionand pricing discussed below are being addressed by ongoing assistance programsof IDA and other aid donors. IDA current and proposed assistance includes:the Fertilizer Imports Credit 944-BD of June 29, 1979; the proposed credit; aproject to assist the Government to improve production in existing plants (the

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Fertilizer Industry Rehabilitation Credit approved by the Executive Directorson May 20, 1980); construction of a new plant (The Ashuganj Fertilizer Project,Credit 529-BD of 1975); and a proposed project to improve the marketing anddistribution infrastructure (Fertilizer Transport Project, under considerationfor a credit in FY81). Assistance to this sector has also been financed underthe First and Second Technical Assistance Credits (409-BD and 622-BD).

Fertilizer Use in Bangladesh

50. Chemical fertilizer was first used on a large scale in Bangladesh in1958 and its use spread rapidly, particularly after the establishment in 1962of the East Pakistan Agricultural Development Corporation, which later becamethe Bangladesh Agricultural Development Corporation (BADC). The principalfertilizers used in Bangladesh are urea (46% nitrogen nutrient), TSP (46%phosphate nutrient), MP (60% potassium nutrient), and the recently introducedDAP (18% nitrogen and 46% phosphate nutrient). At present, urea accounts for64%, TSP and DAP for 29%, and MP and micronutrient fertilizers for 7% of thefertilizer used. Urea's share of total commercial fertilizer use has beendeclining, a positive movement towards a more balanced application of nutrients.

51. Fertilizer is used by all categories of farmers in Bangladesh.Recent surveys 1/ indicate that fertilizer is used by as many as 64% to 68%of owner-cultivators and between 43% and 63% of tenants. Although there areno national data on the quantity used by different land tenure or farm sizecategories or on the intensity of use by farm size, regional surveys suggestthat more fertilizer per acre may be used on smaller than on larger farmsand that the frequency of use may be about equal on large and small farms.Although fertilizer use can be expected to increase as the reforms in theextension system currently being introduced under the IDA-assisted Extensionand Research Project become more widespread and as complementary inputs (irri-gation, pesticides, and improved seeds) become more available, inadequatedata for on-farm fertilizer use and for farm response functions remain aconstraint to planning and policy formulation. As a first step in improvingdata, the International Fertilizer Development Center (IFDC) has recentlybegun a detailed fertilizer adoption-demand study in four districts.

52. Since 1966, fertilizer sales have increased at an annual averagerate of about 16 to 17% (Annex IV, Chart 1). Domestic production has beenunable to keep pace with this increase and imports increased from about350,000 tons in FY76 to about 615,000 tons in FY79 and an estimated 570,000tons in FY80 (Annex IV, Table 1). The growth in sales has been steady exceptfor FY72, when the country was disrupted by the War of Independence, andFY75, when domestic supply was reduced by an explosion at the Ghorasal ureafactory. Between FY77 and FY78, there was a 39% increase in sales, to 715,000tons, due to improved paddy support pricing and the Government's promotionalefforts. Although sales during the first seven months of FY79 were 20% higherthan in FY78 and would have been still higher if not for the recurrence of

1/ Land Occupancy Survey of Rural Bangladesh, Bangladesh Bureau of Statis-tics (December 1978). Cost of Production Survey, 1978.

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supply shortages, sales dropped sharply for the remaining 5 months due tosevere drought. FY79 consumption for the full year was only about 740,000tons, an increase of 3.5% over FY78 and 18% below the earlier projected figureof 900,000 tons.

53. Fertilizer consumption continued to be depressed by drought condi-tions during early FY80, but sales have risen sharply in recent months and thetotal consumption for the year is expected to be about 850,000 tons, comparedwith the original BADC target of 1,000,000 tons.

54. Fertilizer consumption should continue to increase rapidly. Presentaverage application rates--about 24 lbs of nutrient per gross cropped acre--areamong the lowest in the world, and the incremental output response to fertilizeruse will remain high. It has been estimated that--based on current croppingpatterns, and with adequate flood control and irrigation--the application ofthe agronomically recommended optimal quantities of fertilizer in Bangladeshwould require between 4.5 and 5 million tons of fertilizer per year. Althoughthe incremental productivity of fertilizer rises with the provision of comple-mentary inputs, the increase use of HYVs, pesticides, irrigation and floodcontrol facilities--all of which are accorded high priority in the Government'sagricultural development efforts--an increase in fertilizer application alone,without any additional other inputs or changes in cultivation practices, willresult in substantial initial yield increases for more than half of the presentrice and wheat acreage.

55. IDA has been assisting GOB in preparing its Medium-Term FoodgrainProduction Plan. The production and input supply targets established in thiscontext take into account the sectoral potential and constraints as well as thepriority attached by GOB to the rapid acceleration in foodgrain production.The planning effort includes the disaggregation of national targets to thedistrict level as a first step toward eventual thana-level plans. Such disag-gregated estimates of targets and requirements are particularly essential inplanning fertilizer distribution (including transport and storage). Within thecontext of projected output targets and likely potential for the expansion ofirrigation and HYV use by district, but also of logistical constraints, aggre-gate fertilizer requirements for FY85 are estimated to be on the order of 2million tons--or 170% more than in FY78. Broad agreement has been reachedbetween IDA and GOB on the targets for foodgrain output and required inputsupplies under the proposed Medium-Term Foodgrain Production Plan which isexpected to be embedded in the Second Five-Year Plan now under preparation.The target for foodgrain output in FY85 in this scenario is 20 million tons;the fertilizer requirement for FY81 within this five-year program is 1.12million tons.

56. To sustain annual increases in fertilizer sales at projected levelsrequires that sufficient supplies be available both nationally and at the locallevel in time for each cropping season. Such increases in sales also dependon orderly and timely distribution of supplies. Given the irregularity inimports and present inadequacies in the distribution system, the total avail-able supply in the country should include adequate stocks to meet fertilizerrequirements for about five months. Half of this stock is needed for operat-ing inventory to ensure availability at the local level, while the other half

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would serve as a buffer against fluctuations in local production and import

arrivals and bottlenecks in internal transport. As expected improvements aremade in coordinating imports, domestic production, distribution and warehous-

ing, the ratio of stock levels to future offtake can be reduced gradually.

57. While the target for FY81 of 1.12 million tons, which has been

agreed between the Government and IDA, represents an increase of 32% over the

estimated actual offtake in FY80, it is on the long-term fertilizer growthtrend line (averaging out year-to-year fluctuations due to weather or supply

disruptions) and it is in line with projected increases in irrigated acreage.This target level is considered achievable assuming good weather and adequate

and timely supplies. IDA supports the Government policy which aims to obtaincommitments sufficient to support a high level of sales, rather than risk fore-going foodgrain production at a time of continuing shortages due to insuffi-

cient fertilizer supplies. If demand were to fall below projected levels,

e.g., due to flooding or drought, import arrivals could be rephased to assistin meeting FY82 requirements.

Domestic Fertilizer Production

Existing Plants

58. Fertilizer production started in Bangladesh with the Fenchuganjplant in 1961 to produce urea and ammonium sulfate. A second urea plant,

at Ghorasal, commenced production in 1970. Two triple superphosphate (TSP)units at Chittagong were completed in 1968 and 1970. These plants have a

combined installed capacity of 489,500 tons per year (tpy) of urea, 13,200

tpy of ammonium sulfate and 152,000 tpy of TSP. The nitrogen production isbased on domestic natural gas and the sulfate and phosphate production onimported sulfur, currently from Iraq, and rock phosphate, currently from Jordanand Morocco.

59. The Fenchuganj plant achieved close to 90% capacity during its first

nine years of operation but declined after 1971. Following a rehabilitationprogram completed in 1978, production improved substantially. It is currentlyproducing at over 80% of its original rated capacity. The Ghorasal plant faced

difficulties from the beginning and a serious explosion put it out of commis-

sion for most of 1975. After a complete overhaul in 1978, the plant is cur-

rently operating at over 70% of rated capacity. The Chittagong plant began

trial runs only in 1974 and 1975 and has experienced serious technical problemsand raw material shortages. Despite recent improvements, its annual productionis unlikely to exceed 60% of rated capacity until the improvements financed

under the Fertilizer Rehabilitation Project (paragraph 62) are made. All ofthese plants are operated by Bangladesh Chemical Industries Corporation (BCIC),

a semi-autonomous corporation responsible for management of major chemicalindustries in the public sector. Three successor companies are in the processof being established to operate the Fenchuganj, Ghorasal, and TSP factories.This decentralization and delegation of responsibility is expected to improve

their management efficiency and to permit more rapid decisions to be takenon the day-to-day requirements of individual units.

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Additional Capacity

60. Ashuganj Fertilizer Factory. A fifth plant is under constructionat Ashuganj, to be operated by the Ashuganj Fertilizer and Chemical Company(AFCC). This plant, designed to produce 528,000 tpy of urea, is beingfinanced by iDA (Credit 527-BD), ADB, USAID, ODA, Iran, KfW, Switzerland (theoriginal lenders) and EEC, IFAD, and OPEC Special Fund (the new lenders).The Ashuganj project encountered substantial delays and cost overruns andis currently expected to be completed in March 1981. The initially esti-mated foreign exchange cost was US$142.0 million which was financed with aUS$33 million credit from IDA and US$109 equivalent from the six other originallenders. The local currency cost of US$46.5 million (net of taxes and duties)and interest during construction of US$27.2 million was to be borne by theGovernment. Due to unforeseen construction requirements, additional equipmentneeds and delays (including in particular extra cost and delays resulting fromthe need to overcome the earthquake risk at the plant site), the foreignexchange cost has increased to about US$260 million equivalent and the localcost to about US$116 million (net of taxes and duties) plus about US$55 millionof interest during construction. In May 1979 IDA increased the amount of itscredit to US$62 million and all the original lenders other than the UnitedKingdom and Iran increased their lending proportionately. Additional financewas obtained from IFAD, the OPEC Special Fund and the EEC to complete theforeign exchange financing package. (For more details on the Ashuganj project,see Report P-2568-BD of May 18, 1979). Construction is now progressing satis-factorily and is expected to be completed within the revised time schedule(March 1981) and at a cost only slightly over the revised estimates presentedto the Executive Directors in May 1979.

61. Agreement has been reached with the People's Republic of China underwhich additional BCIC facilities would be set up at Ghorasal for the produc-tion of 110,000 tpy of urea, with Chinese technical and financing assistance.The plant is expected to come on stream by early 1984. The Government is alsoconsidering construction of another large fertilizer plant at Chittagong whichis to have an installed capacity of 561,000 tpy of urea. This project isexpected to be implemented by a new company with possible private equity, bothlocal and foreign. Donor assistance for the Chittagong project is beingcoordinated by ADB. IDA has indicated willingness, in principle, to considercofinancing the project if additional funds are required. IFC has also beenapproached by the Government to assist in identifying possible private equityparticipation. Engineering arrangements for the Chittagong urea project areexpected to be finalized by mid-1981 and the plant is scheduled to be inoperation by late 1985.

62. At the time of the Ashuganj appraisal, the need to identify and takemeasures to improve production from the existing plants was recognized and IDAfinanced studies for this purpose under the First and Second Technical Assist-ance Credits (409-BD dated June 29, 1973, and 622-BD dated April 8, 1976).The final recommendations, formulated by the consultants in August 1979,formed the basis for the Fertilizer Industry Rehabilitation Project approvedon May 20, 1980 (Report P-2781-BD of April 24, 1980). This credit of $29million will finance (i) rehabilitation of the plants at Ghorasal, Chittagongand Fenchuganj, (ii) the setting up of training facilities at Ghorasal, and

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(iii) essential spare parts, catalysts and chemicals for the fertilizer indus-try for a period of about two years. The project includes additions to, andreplacements of, equipment and plant modifications as well as the provisionof maintenance and other imported materials at the three fertilizer plants toenable them to operate at close to their rated capacities and to minimizelosses in production due to interruptions in plant operation.

63. With expected implementation of the above projects, Bangladesh couldhave an installed capacity of 1.1 million tons of urea in 1984 and 1.63 milliontons by the end of calendar 1985. Since the Chinese financed plant at Ghorasaland the Chittagong plant are expected to be ready only by 1984/85, they are notexpected to operate close to their capabilities in FY85 when domestic urea pro-duction may only be 0.93 million tons against projected demand of 1.13 milliontons and some urea import will be required. By FY87, when production from thetwo plants should reach full potential, marginal amounts of urea imports couldstill be required and it is unlikely that Bangladesh will have any exportablesurplus. Even assuming that urea consumption growth rates would slow down to10% per year after 1985, Bangladesh would need to have a further increase inurea capacity by about 1988. No increase is expected in Bangladesh's currentTSP capacity of 152,000 tons per year. Bangladesh would expect to continueto have to import substantial quantities of TSP/DAP. Since domestic TSP pro-duction would have to be based upon imported raw materials, no new TSP capacityis recommended beyond improving productivity of existing TSP facilities.

Production

64. Production in recent years has been erratic and below expectations,but should improve with the rehabilitation measures outlined above. Produc-tion and capacity utilization at the existing plants since FY77 and projectedfor FY80 are summarized in Annex IV, Table 2. Production has increased from265,000 tons (40% of capacity) in FY78 to 360,000 tons (55% of capacity) inFY79, and is expected to reach about 425,000 tons (65% of capacity) for FY80.For FY81, production is expected to reach over 500,000 tons (about 70% of ratedcapacity for urea and 60% of capacity for TSP). The significant factors tllatwill affect the performance of all the fertilizer plants in achieving highercapacity utilization rates are: (i) the removal of current bottlenecks toefficient production; (ii) the adequacy of the factory-gate fertilizer pricesto ensure reasonable cash flow; (iii) the availability of adequate foreignexchange to procure the required raw materials--rock phosphate and sulfur--and the spares and components needed to maintain the plants in good condition;and (iv) the availability of a well-trained and competent work force. Thesefactors are being addressed by the IDA Fertilizer Industry RehabilitationProject, by the IDA import program credits and by this proposed credit. Inaddition, under a UNDP-financed project, a contract has been signed with IJNICOInternational of Japan to provide operations assistance to the Ghorasal andChittagong plants. The UNDP-financed project provides technical and manage-ment assistance to develop management skills and will train managerial, super-visory, skilled technical and operating staff. The project includes advisersto assist BCIC in developing proposals for a training center, to be financedunder the IDA Fertilizer Industry Rehabilitation Project.

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Marketing and Distribution

65. The Bangladesh Agricultural Development Corporation (BADC), an auto-nomous agency under the Ministry of Agriculture and Forests, is responsiblefor the procurement, distribution and marketing of agricultural inputs,including fertilizers, pesticides, seeds, irrigation equipment and dieselfuel, and various types of agricultural machinery. Recently, measures havebeen taken to increase the role of the private sector in the distribution andmarketing of fertilizer (see paragraph 67), pesticides and irrigation pumps.

66. While the major constraint to increased fertilizer consumption hasbeen inadequate supply, the fertilizer distribution system has also been handi-capped by inadequate planning and coordination and the lack of transport andstorage facilities. An IDA-financed fertilizer marketing study, completed in1977, provided the basis for BADC to formulate a comprehensive and improvedmarketing and storage program. This program includes a USAID-financed projectfor construction of additional storage capacity and a phased program to developgreater private sector involvement in fertilizer distribution.

67. Until recently, BADC's marketing system limited private participa-tion to the retail level. In 1978, backed by the USAID Fertilizer Distri-bution Improvement Grant, BADC introduced wholesale and retail competitionamong fertilizer dealers--private and cooperative--in a pilot project in thefive districts of Chittagong Division which account for about a third of totalfertilizer consumption. The new system has since been extended to Dacca andKhulna Divisions and will be introduced in the remaining part of the country(i.e., Rajshahi Division) on July 1, 1980. Under the new system, BADC sellsprimarily to wholesalers at primary distribution points (PDPs), while retain-ing responsibility for sales to retailers in remote and inaccessible thanas.BADC sells at reduced wholesale rates for large quantity fertilizer purchasesat the PDPs and at lesser discounts to retailers at the thana warehouses. Theresale price is unrestricted up to the administered price to the farmer. Allprivate dealers and farmers' cooperatives are permitted to buy from all BADCwarehouses. Private movement of fertilizer is unrestricted except in the five-mile border area. USAID is financing consultants to assist BADC in settingup and monitoring the system.

68. The new marketing system has enjoyed a successful beginning. Salesfrom the primary distribution points account for most of total sales in theareas where the system is operating. This has reduced BADC's costs of multiplehandling, transport and losses. As private dealers take over the wholesaledistribution and sales are reduced at BADC's thana warehouses, these will beconverted to other uses, leaving in operation mainly those in remote thanaswhich have not attracted wholesalers. Retail prices have dropped in areasaround the PDPs and appear to be at or below official prices except at a fewremote locations. The new wholesalers are moving fertilizer cheaply andeffectively from surplus areas to those with unmet demand where they sell todealers and farmers, thus improving the distribution of fertilizer.

Fertilizer Pricing

69. Farmer demand for fertilizer depends largely on the ratio betweenthe expected output price at harvest time and the cost of fertilizer that will

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make fertilizer use sufficiently rewarding financially for the farmer to takethe risk of purchasing and applying it. In Bangladesh, droughts and floodsmake fertilizer use a more risky undertaking than in many countries. Theimpact of successive increases in fertilizer prices on the trend of farmersuse of fertilizer must be monitored carefully.

70. Since its introduction in Bangladesh, fertilizer has been subsidizedto promote its use. BADC purchases fertilizer at Government-fixed ex-factoryprices from BCIC and at actual CIF costs in the case of imports. Domesticand imported fertilizers are pooled and marketed by BADC at a price fixed bythe Government. BADC receives a subsidy from the Government to cover thedifference between its procurement and distribution costs and its salesrevenues. The subsidy thus defined 1/ has risen rapidly in recent years,as indicated in Table 1:

Table 1: FERTILIZER SUBSIDY

Fertilizer Subsidy Percentage of CostFY Taka Million Taka per Ton Subsidized

1973/74 28 74 9.31974/75 150 536 30.51975/76 485 1,060 46.31976/77 644 1,256 46.11977/78 1,200 1,677 50.01978/79 1,301 1,950 50.01979/80 (est.) 1,170 1,376 40.0

71. This rapid rise has occurred despite a tripling of domestic fer-tilizer sales prices during the period. The weighted average retail price offertilizer has risen from Tk 27/maund in 1973/74 to Tk 83/maund in 1979/80.The burden imposed on the Government by the subsidy is substantial, accountingin FY79 for about 75% of all development expenditures by the Ministry ofAgriculture and 10% of the Government's entire development budget. Governmentpolicy, agreed with IDA and USAID in the context of fiinancril, fertilizer andfoodgraLin imports, is to reduce the fertilizer subsidy gradually. As a firststep, average retail fertilizer prices were increased by about 28% in August1979.

72. The Government's foodgrain procurement program is also being strength-ened to ensure attractive foodgrain prices to the farmers so that fertilizerapplication continues to be economic despite increases in fertilizer retailprices. The present paddy/fertilizer price ratio of 1.3 to 1 in Bangladeshcontinues to make the use of fertilizer attractive (for comparison, thepresent ratio in India is 0.60 to 1, and in the Philippines 0.80 to 1). In

1/ The economic subsidy based on the CIF costs of free market imports wouldbe somewhat different since the CIF price of tied bilateral ai.d is 15-20%above the international market price, the average ex-factory price ofdomestically produced urea is about half of the CIF free market price andthe ex-factory price of domestically produced TSP is marginally belowthe free market price.

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periods of scarcity, significant amounts of fertilizer are reported sold at

black market prices substantially higher than the official prices. The fer-

tilizer price has a relatively small impact on foodgrain production costs, and

past increases in fertilizer prices have not had a noticeable effect on fertil-

izer offtake; as noted above (paragraph 69), however, the impact of future

price increa6es must be evaluated on a continuing basis. Past reductions in

the rate of fertilizer consumption growth below the 17% average have been

related almost entirely to weather factors and supply and distribution prob-

lems. There appears to be scope for further reductions in the fertilizer sub-

sidy without adversely affecting the growth rates of fertilizer sales and use.

Transportation and Bulk Handling

73. The transportation system has been a constraint to fertilizer avail-

ability and use. GOB has been taking various steps to improve transport

operations but the extent of the problem makes it unrealistic to expect more

than gradual improvements, particularly with railways. In order to expedite

fertilizer movement and distribution and to increase the efficiency and capa-

city of the transport sector so that future fertilizer transport demand is

efficiently met, IDA agreed with GOB in connection with the Fertilizer Import

Credit (944-BD) on various measures to improve transport coordination and con-

tracting procedures. Further assistance is under consideration in a proposedFertilizer Transport Project which would be expected to include: (i) improve-

ment of ports--landing and storage facilities at Baghabari and Shiromoni,

channel dredging at Chittagong and engineering studies at Chalna; (ii) unit

block trains--rehabilitation of wagons, improvement of rail wagon ferry serv-

ices, improvement of railroad sidings and establishment of an operations

control center; and (iii) further improvement of contracting procedures.

74. Since nearly all the fertilizer distribution is handled by contract,

the improvement of contracting procedures is essential to the improvement of

the fertilizer distribution system. BADC has already taken several steps to

improve contracting conditions, with technical assistance by USAID-financed

consultants. These steps include: introduction of an estimated rate system;

establishment of a claims cell to process pending claims; elimination of

transit loss allowances to contractors; discontinuation of the practice of

making partial or advance payments; use of several contractors at main dis-

tribution points; and introduction of a new system to make contractors

responsible for rail shipment in exchange for a 20% surcharge on rail rates.

75. The feasibility of bulk handling and bagging facilities for imported

fertilizer has been under review for some time, since ocean shipping and port

handling in bulk form would give significant savings. An IFAD Fertilizer

Sector Program Loan approved in December 1979 includes financing of a pilot

project at Chittagong which, at low cost, should quickly upgrade existing

jetty facilities to handle small bulk ships, lighters, mini-bulkers and, if

the river were dredged, large bulk ships. Since imports of fertilizer at

Chalna are also expected to increase substantially, the proposed IDA Fertilizer

Transport Project is expected to include funds for a review of past proposals

and final engineering for a bulk handling facility there.

- 22 -

Storage

76. BADC bases its present and future storage needs on having inven-tories equivalent to five months of expected offtake. Thus, at the end ofthe current fiscal year, it projects closing stocks at nearly 500,000 tonsto support projected overall FY81 offtake of 1.12 million tons. The stock-holding requirement would rise to 600,000 tons by the end of FY82 and to about850,000 tons by the end of FY85 if consumption develops as estimated andrequired in the context of the Medium-Term Foodgrain Production Plan (seeparagraph 55). At present (February 1, 1980), BADC has district storage(thana, intermediate, and primary distribution point) with an aggregate ratedcapacity of 333,360 tons, of which over 200,000 tons is rented, and transitstorage capacity (at Chittagong, Khulna, and Narayanganj) of 68,615 tons,giving a total storage capacity of 401,975 tons. In addition to BADC-controlledstorage, the fertilizer factories have total storage capacity of 85,000 tons.BADC's physical storage capability is supplemented also by products in transit(on trucks, barges, coasters, railwagons and on vessels discharging at ports).During FY80, an estimated average of 50,000 tons has been in transit in thecountry at any given time. Thus, BADC and the factories should be able to holdstocks of up to about 535,000 tons, an amount theoretically sufficient overallto meet this year's estimated requirements.

77. BADC has under construction 31 godowns with a total capacity of49,500 tons, about half financed with its own funds and half under the USAIDPhase I Program. Much of this construction is virtually completed and shouldhelp to meet requirements during FY80 and FY81. A USAID-financed Phase IIProgram may add 173,000 tons by the end of FY82 and would give BADC total ownedwarehouse capacity of about 425,000 tons. In addition, the recently approvedIFAD Fertilizer Sector Loan will finance some 25,000 tons of low-cost storagein the three districts of its program area. Total storage capacity available(including rented and factory capacity, but excluding supplies in transit)would be about 735,000 tons.

78. The above figures of rated capacity give a somewhat misleadingimpression of the adequacy of storage facilities to meet the national market-ing system's demand. About half of the existing total storage capacity is atthana level. It is almost impossible and very expensive to move stocks fromone thana to another. In addition, the implementation of the new marketingsystem is placing a greater burden on intermediate and primary distributionpoints to service the private fertilizer wholesalers and retailers, so thatsubstantial additions are needed at this level. (The Phase I and Phase IIUSAID Programs are directed to helping to meet this need).

79. As transportation capacity improves and as more of the total urearequirement is met from domestic production rather than from imports, it shouldbe possible to reduce the amount of buffer stocks that need to be kept withinBADC warehouses. To continue to provide storage equivalent to five months ofthe rising levels of offtake which are being projected would place a costlyburden on the distribution system. Furthermore, additional private storageshould become available with greater reliance on private wholesalers under thenew marketing system. Therefore, BADC is reevaluating its storage needs asthe distribution system develops and in light of the sort of system it wishes

- 23 -

to develop in the longer run. Already the decision has been made to reducethe urea storage requirement to three months offtake once Ashuganj has reachedfull production. The need for additional storage capacity will also be keptunder review by IDA and USAID.

Credit

80. Generally, availability of institutional credit does not appear tobe a major constraint to increased fertilizer use. The Bangladesh Bank fol-lows a liberal credit policy for the agricultural sector. Institutional creditfor fertilizer is provided primarily by six commercial banks and one agricul-tural bank under a liberalized short-term credit program introduced in FY78and designed to increase the use of agricultural inputs. It is based on crop-hypothecation rather than collateral. Short-term farmer credit is providedat 11% per annum. Onlending to participating institutions is at 2% below theBank Rate subject to a minimum of 6%. Loans in the program amounted to Taka608 million in CY1977, Taka 535 million in CY1978, and Taka 237 million up toJune of CY1979. About 80% of the 1977 loans have been recovered, but recoveryof the 1978 and 1979 loans has been much lower, roughly 45% in each year, dueto the effects of the drought. The share of the program going to small farmershas proved less than originally intended. To increase access to credit by smallfarmers, the banks have opened more rural branch offices and have improvedstaff training. The Government has also employed consultants, financed underthe First and Second IDA Technical Assistance Credits (409-BD and 622-BD), torecommend measures for longer-term improvements in the agricultural creditsystem. Several experimental projects to provide credit to small farmers andsharecroppers are in progress, but their results are not yet available. Anagricultural credit project is currently being prepared for IDA consideration.

PART V - THE CREDIT

81. The proposed Credit was appraised by a mission which visitedBangladesh from February 19 to March 4, 1980. Negotiations were held inWashington in May 1980. The Government of Bangladesh was represented by ateam led by Mr. A. Samad, Chairman of BADC.

82. As noted in Part IV of this report, IDA is currently assistingBangladesh in reducing its fertilizer import requirements through financingthe 520,000 tpy Ashuganj Fertilizer Project, which is expected to begin pro-duction on or before March 1981, and by the Fertilizer Industry RehabilitationProject. Until the Ashuganj factory completes its breaking-in period and isoperating near capacity, Bangladesh will need to import a major share of itstotal fertilizer requirements in order to maintain the momentum of its agri-cultural development efforts. The proposed $25 million credit is the secondfor financing such imports. The first credit (944-BD, dated June 29, 1979)provided $25 million for fertilizer imports in FY80. It was fully committed byFebruary 1980 and has financed imports of about 70,000 tons of urea and 34,000tons of TSP. In addition, during FY80, IDA financed 20,000 tons of TSP importsunder the Seventh Import Program Credit.

- 24 -

83. The proposed credit will help to finance imports of finished fer-tilizer and fertilizer raw materials (rock phosphate and sulfur) required forthe agreed offtake program for FY81. Measures to be undertaken under the newcredit will reinforce the policy measures taken under the first fertilizerimports credit, which are aimed at laying a sound basis for a sustained increasein fertilizer use. Together, these credits support a program of action whichincludes:

(a) reducing the fertilizer subsidy;

(b) maintaining incentive procurement prices for foodgrains;

(c) separating the fertilizer subsidy from the agriculturaldevelopment budget;

(d) establishing a high-level fertilizer coordination committee;

(e) taking measures to encourage the private distribution offertilizers;

(f) taking action to improve the performance of the domesticfertilizer industry;

(g) reviewing contracting procedures for private fertilizertransport carriers and taking additional actions basedupon the results of ongoing consultants' studies to increasethe efficiency of Bangladesh's fertilizer transport anddistribution systems; and

(h) taking all necessary action--including the use of theGovernment's own foreign exchange, if necessary --to ensureavailability of sufficient fertilizer to meet an agreedfertilizer consumption target.

The actions taken in conjunction with the first credit and those which areproposed under the second fertilizer imports credit to carry out this programare reviewed below.

84. Reduction in the Fertilizer Unit Subsidy. In connection with thefirst fertilizer imports credit, the Government indicated its intention todecrease the fertilizer subsidy progressively over time and to eliminate itbefore the end of the Second Five-Year Plan period (June 30, 1985). As a firststep, and in conformity with Section 4.01 of the Development Credit Agreementfor Credit 944-BD, the Government increased its fertilizer sales prices inAugust 1979 by an average of about 28%. As a result, the subsidy during FY80is expected to be held to about Taka 1.2 billion, compared with Taka 1.4 bil-lion the previous year, despite the increase in total sales and substantialincreases in the price of imported fertilizers. As a percentage of the cost,the subsidy was reduced from 50% to about 40%. In view of possible furtherincreases in the price of imported fertilizer or in shipping costs and possi-ble increases in the cost of domestically-produced fertilizer, the Governmentand IDA will at the request of either party, but at least once a year, review

- 25 -

the effect of fertilizer price movements on the level of the subsidy so as toensure continued progress in reducing the total cost of the subsidy (Section3.07(a) of DCA 944-BD and Section 3.06(a) of the proposed DCA). As a resultof an initial review carried out in connection with the appraisal of the pro-posed credit, the Government will implement further sales price increases ofabout 24% prior to credit effectiveness (Section 4.01 of DCA). These increasesare expected to reduce the percentage of the cost covered by the subsidy froma projected FY81 level of about 48% to 36%. (Assuming three months of salesprior to effectiveness the average subsidy level for FY81 would be maintainedat about 40%.) Without the increase, because of the 32% increase expected involume of sales and the substantial increases which have been taking place inthe prices of imports, the subsidy in FY81 would reach about Taka 2.4 billion.With the increase in fertilizer sales prices, the subsidy will amount to aboutTaka 2.0 billion.

85. Maintenance of Incentive Foodgrain Procurement Prices. In thefuture, the Government will set foodgrain procurement prices at levels judgedto provide adequate production incentives to farmers and to review whetheror not such prices might require adjustment at the time of each increase infertilizer prices (Section 3.07(b) of DCA 944-BD and Section 3.06(b) of theproposed DCA). In June 1979, the ratio of the paddy and wheat procurementprices to the fertilizer sales price was about 1.4 to 1. With the increasein procurement prices in November and the increase in fertilizer prices inAugust 1979, the ratio became 1.3 to 1. With the proposed increase in thefertilizer price, and no change in foodgrain procurement prices, the ratiowould be reduced to 1.1 to 1. This is considered adequate to maintain farmerincentives.

86. Removal of the Financial Provision for Fertilizer Subsidies from theDevelopment Budget of the Ministry of Agriculture. The fertilizer subsidy ispaid out of the agricultural allocation in the development budget. All fertil-izer imports, including those under foreign grants which are cost-free to theGovernment, are counted at full cost in the subsidy calculation and are forthis purpose treated the same as commercial imports. As was done in connectionwith the first fertilizer imports credit, the Government will continue tomaintain a separate account for the fertilizer subsidy, so that any increasesin the actual amount of the subsidy over that budgeted for this purpose wouldnot reduce funds available for other agricultural development projects. TheGovernment also undertook to examine the advantages and disadvantages of alter-native methods for budgeting of, and accounting for, any fertilizer subsidyand to inform the Association of the results (Section 3.08 of DCA 944-BD).The Planning Commission has completed the study and has indicated that forthe Second Five-Year Plan, it would treat the fertilizer subsidy as a non-investment expenditure in the total development outlay for the agriculturalsector.

87. Establishment of a High-Level Fertilizer Coordination Committee. Inconnection with the first fertilizer imports credit, the Government expandedthe terms of reference of the Council Committee on Food (consisting of thePresident as Chairman, the Prime Minister, and the Ministers for Food, Irriga-tion, Foreign Affairs, Planning, Finance, Agriculture, Commerce, Industry, and

- 26 -

Ports and Shipping) so as to cover fertilizer as well as food. The Committee

is charged with coordinating policies relating to fertilizer, including:

(i) production, availability and import requirements; (ii) pricing policy;

(iii) marketing and distribution policy; (iv) requirements for transportation,

storage and related facilities; and (v) financing policies, including prepara-tion of the fertilizer budget. The Council Committee is assisted by a Food

Planning and Monitoring Unit, which includes a technical secretariat to

service the Committee on matters relating to fertilizer. Provision of a

staffing plan and administrative authorizations for the required staff posi-

tions were conditions of effectiveness of the first credit. This unit has

recently been provided with an initial staffing for fertilizer work, con-

sisting of two professionals, one research officer and support staff. Asecond research officer is expected to join shortly. This unit will prin-

cipally review, analyze and reconcile the inputs of various other agencies

concerned with the fertilizer sector, including BADC, BCIC and the Transport

Coordinating Committee. One of its most important functions will be to assess

on a continuing basis the effects of subsidy reduction and fertilizer priceadjustments on fertilizer use and productivity, farm income, farmer incentivesand crop production. It would also be an appropriate agency for carrying out

the review of stock requirement policy (paragraph 92).

88. Measures for the Encouragement of Private Fertilizer Distribution.

In the policy statement given at the time of the first credit, the Governmentindicated its intention to expand the private sector marketing system whichit had begun in the Chittagong Division to cover the entire country during

FY80. As indicated in paragraph 67, the system was extended to two additional

Divisions at the end of 1979 and will be extended to cover the rest of the

country at the end of the present fiscal year.

89. Measures for Improvement in Domestic Fertilizer Production. As

described in Part IV, various measures are being taken with IDA, UNDP, USAID

and IFAD assistance to increase the production of Bangladesh's domestic ferti-

lizer industry. Under the first fertilizer imports credit, the Government

prepared a plan for such improvements for discussion with IDA. This plan

served as the basis for appraisal of the Fertilizer Industry RehabilitationProject (see paragraph 62). With these various measures, the industry is

expected to be able to operate at over 80% of design capacity upon completionof the Fertilizer Industry Rehabilitation Project. Financing under this pro-

posed credit of raw materials for the TSP plant would help to ensure timely

supplies and, thus, to avoid curtailing or stopping production as has fre-quently occurred in the past. FY79 production was equivalent to only 41%

of rated capacity, although during days when the plant was operating, produc-

tion averaged 75%-80% of the daily rated capacity. Equipment failures and

maintenance problems accounted for most of the total lost days. Shortagesof raw materials were responsible for 37% of downtime in FY79 and 27% of

downtime during FY74-78. Power supply interruptions and difficulties in

moving fertilizer were also factors. Production during the first six months

of FY80 was only about 23,000 tons, mainly due to shortages of raw materials.The plant requires about $20 million per year of imported rock phosphate and

sulfur to achieve production at 80% of capacity. In addition, about US$4

million of imported spare parts, catalysts and chemicals are now required

annually by the existing fertilizer plants. IDA has, in a series of import

- 27 -

program credits, provided foreign currency to finance the import of fertilizer

raw materials, spares and components. As part of the Eighth Program Credit,

approved in February 1980, the Association will provide up to US$10 million

for this purpose (to meet a portion of the estimated US$24 million annual

requirements for FY81). 1/ The US$10 million available for TSP raw materials

under the currently proposed credit would assist in meeting a portion of the

remaining foreign exchange requirements for this purpose. The Government

would have the option to use these funds for importing either raw materials

or finished fertilizer, depending upon the financing available from other

sources. The allocation would be made by the External Resources Division

of the Ministry of Finance.

90. Measures for Improving the Fertilizer Transportation System. USAID

is financing consultants to assist BADC in improving fertilizer transport and

distribution. IDA is also financing consultants to review general require-

ments for improving inland water transportation. Under the first fertilizer

imports credit, the Government reviewed its procedures for contracting with

road and inland water transport fertilizer carriers, including the adequacy

of penalties for poor performance, and of carrier prequalification standards

and the possibilities of incentives for better than expected performance.

This review was discussed with BADC during appraisals of the proposed credit

and of the proposed Fertilizer Transport Project (paragraph 73), and a plan

of action on contracting procedures was developed. Action already taken is

noted in paragraph 74. Further improvements are under consideration inconnection with the proposed Fertilizer Transport Project, which would also

finance investments to improve the system. The new marketing system, by

giving greater responsibilities in fertilizer transport to private whole-

salers, is adding greater flexibility in distribution. The Government

continues to give fertilizer priority second only to food in the allocation

of Government transport resources. In addition, the IFAD project (paragraph

75) is financing bulk handling and bagging facilities to be constructed at

Chittagong. BADC is already experimenting with bulk shipment, with bagging on

board as a first step toward purchasing and shipping its import requirements

in bulk.

91. Assurance of Adequate Fertilizer Supply. The Government annually

provides the Association with a draft of its program for fertilizer supply

and distribution in time for the Association to comment on it (Section 3.09

of the DCA for Credit 944-BD). The program for FY81 calls for distribution of

1.12 million tons and, as noted above, is in line with the Medium-Term Food

Production Plan input requirements. To meet this demand and provide closing

stocks sufficient to support the projected FY82 distribution of 1.250 million

tons, FY81 supplies will need to total 1.66 million tons. Opening stocks are

estimated at 500,000 tons and domestically produced fertilizer is expected to

amount to 505,000 tons as a result of improvements in production at the exist-

ing plants and initial production at the Ashuganj plant. Thus, during FY81,

imports of some 650,000 tons will be required (Annex IV, Table 3). As of

1/ In addition, the Fertilizer Industry Rehabilitation Credit includes

$8.3 million equivalent to finance estimated spare parts requirements(but not raw materials) for FY82 and FY83.

- 28 -

April 1980, firm or reasonably firm aid financing appears to be available tocover about 512,000 tons of this requirement, including that to be financedby the proposed credit, leaving a balance of 138,000 tons to be financed.Some part of this should be covered by assistance from other past donors fromwhom no FY81 commitment has yet been obtained. The balance requiring financeis entirely for urea, since all MP and TSP/DAP requirements are covered. Atexpected prices, this would represent additional assistance amounting to aboutUS$35 million. The Government will take all necessary action, including theuse of its own foreign exchange to the extent that sufficient external financ-ing is not available, to ensure availability of sufficient fertilizer inBangladesh at the appropriate seasons to support a fertilizer consumptiontarget for FY81 of 1.12 million tons (or such alternative target as may beagreed with the Association during FY81 in light of weather or other extraneousevents) and to end the fiscal year with adequate stocks to support the pro-jected offtake during the initial months of FY82 (Section 3.07 of the DCA).IDA will assist Bangladesh in its efforts to mobilize additional fertilizerassistance at the Bangladesh Aid Group meetings. In addition, donor meetingsin Dacca are to be scheduled regularly to review the fertilizer supply situa-tion, the adequacy of the Government's fertilizer policies and programs, andthe possible need for additional imports. These meetings will also continueefforts to coordinate the assistance being provided by various agencies tothe fertilizer sector.

92. Future Stock Requirements. The Government is reviewing its policyof requiring stocks equivalent to five months of projected offtake--in lightof increased domestic production, improved transportation and proposedchanges in the distribution system--and has undertaken to review with IDA byDecember 31, 1980 its proposed policy for requirements for stocks of eachproduct during the Second Five-Year Plan period (Section 3.08 of the DCA).Any technical assistance required for this review could be considered forfinancing under the IDA Technical Assistance Credits.

Administration of the Credit

93. BADC would be the principal agency responsible for project imple-mentation except for import of raw materials for the TSP plant which wouldbe the responsibility of BCIC and the successor company established to oper-ate the TSP factory (see paragraph 59). BADC has proved capable of procuringand distributing increasingly large volumes of fertilizers, despite constraintsin transportation (including the priority which has had to be given to movingsubstantial grain imports in recent years). Improvements in its distributionsystem are being undertaken and technical assistance has been arranged in anumber of areas related to organization, planning, accounting and managementin order to assist BADC in reducing distribution costs and further improvingefficiency.

94. Under the ongoing USAID Fertilizer Distribution Improvement Project,BADC has retained the International Fertilizer Development Center (IFDC) asconsultants to assist in the introduction of the New Marketing System. Underthe Third Technical Assistance Credit (Credit 872-BD), IDA is financing con-sultants to assist BADC in improving its financial management and accounting.Since 1977, the Ford Foundation has been financing an expert to advise BADC on

- 29 -

management information systems. ODA (UK) is providing assistance for the BADC

Staff Training Institute. IFAD is financing technical assistance to BADC in

warehouse and inventory management, marketing, and for mid- and senior-level

management training. These programs should help to improve BADC's capabilityto manage the proposed project.

95. As noted earlier, UNDP is financing a program of managementassistance and training for the fertilizer industry (see paragraph 64) and

arrangements are underway to restructure BCIC fertilizer operations through

the establishment of three independent entities with adequate powers to facili-tate more rapid decisions on day-to-day operations and improved entrepreneurial

initiative (see paragraph 59). With these arrangements the company operatingthe TSP factory should be capable of making satisfactory use of the rawmaterial imports financed under the proposed credit.

Procurement and Disbursement

96. Procurement of fertilizer by BADC would be through internationalcompetitive bidding in accordance with Bank Group guidelines. Because of thelimited number of suppliers, rock phosphate and sulphur for the TSP plant maybe procured by international shopping in accordance with procedures satisfac-

tory to the Association. The proposed credit would finance the foreignexchange cost of fertilizer and fertilizer raw material imports. The Govern-ment will deposit Taka funds equivalent to the amounts disbursed by the Asso-ciation for the materials financed from the proceeds of the proposed Creditinto an account currently maintained with the Bangladesh Bank and will usethese funds entirely to finance its development programs (Sections 3.04(a)and (b) of the DCA). The credit is expected to be fully disbursed by June 30,1981.

Economic Benefits and Costs

97. The project will help to meet the demand for fertilizer by increas-ing the national supply and thereby help to increase food and other agricul-tural production. It would thus contribute towards meeting the nationalobjectives of achieving food self-sufficiency and creating employment in ruralareas. The project has a high benefit/cost ratio, is quick-yielding, simple,and relatively risk-free.

98. Various studies in Bangladesh have indicated that one unit of ferti-lizer increases foodgrain production by at least three units. Valuing ferti-lizer and rice at international market prices, the benefit/cost ratio wouldbe about 4.8 (i.e., fertilizer imports of c.i.f. value of US$100 would reducerice imports by the equivalent of US$480). Even allowing for the costs ofother inputs which complement fertilizer use, and for the possible inefficien-cies of fertilizer use in Bangladesh, this ratio indicates a high return tothe economy from increased fertilizer use. Alternatively, if the additional

paddy is valued at the price received by Bangladesh farmers, the benefit/cost ratio is 3.66. The fertilizer imports to be financed under the proposedcredit would be expected to permit a reduction of between about US$50 million

and US$120 million in foodgrain imports, depending upon whether imports of

- 30 -

wheat or rice (or a mixture) are reduced. In any case, it is clear that theshort-term benefits of increased fertilizer availability are substantially inexcess of the cost.

99. While construction of new TSP manufacturing facilities in Bangladeshbased on imported rock phosphate and sulfur probably would not be an economicinvestment, maintenance of existing facilities in production is economicallyjustified. At currently feasible levels of production, the annual economiccosts of TSP production in Bangladesh are lower than the import costs byUS$4.5 million (in 1979 prices). After the improvements being financed underthe Fertilizer Industry Rehabilitation Credit (see paragraph 62), the savingswould increase to about US$6.7 million per year (in 1979 prices).

100. The proposed credit would provide significant benefits to smallerfarmers, tenant farmers, and to landless laborers. A 1978 survey showed thatthe proportion of sharecroppers using fertilizer is virtually the same as thatof owner-cultivators. Various pilot agricultural censuses have indicated thatmore fertilizer per acre tends to be used by small than by large farmers.Finally, in times of scarcity, a frequent situation in recent years, thesmaller farmers and sharecroppers are most sensitive to high fertilizer pricesand are least able to pay the artificially high price for fertilizer thatdevelops. Thus, in times of scarcity, available fertilizer is likely to reachthe larger farmers in disproportionally large amounts. Accordingly, the smallerfarmers are expected to be major beneficiaries of the increased fertilizeravailability made possible by the proposed credit. In addition, labor require-ments per acre will rise as more fertilizer is applied since more weeding isneeded and increased grain production requires more work in harvesting andthreshing. The USAID cost of production surveys have found that high levelfertilizer users have a labor requirement 60% higher than farmers who use nofertilizer. While some of this additional labor will be provided by thefarmers' own families, additional employment will also be created for thelandless. Multiplier effects may also act at a local level as greater farmerincomes generate demand for other goods and services and generally boost thelocal economy, providing employment and income for those for whom farm produc-tion alone cannot provide an adequate livelihood.

Risks

101. There is a risk that fertilizer consumption could be reduced belowexpected levels due to flooding or drought. In such circumstances, importarrivals would be rephased to assist in meeting requirements after FY81.There is also a risk that plant response to the fertilizer could be reducedbelow the expected levels due to incorrect application. Even so, the responselevels would be sufficient to more than justify the use of the fertilizer.

- 31 -

PART VI - LEGAL INSTRUMENTS AND AUTHORITY

102. The draft Development Credit Agreement between the People's Republicof Bangladesh and the Association, and the Recommendation of the Committeeprovided for in Article V, Section 1 (d) of the Articles of Agreement arebeing distributed to the Executive Directors separately. An additionalcondition to the effectiveness of the Development Credit Agreement would beenactment of an increase in the domestic fertilizer price (paragraph 84).

103. 1 am satisfied that the proposed credit would comply with theArticles of Agreement of the Association.

PART VII - RECOMMENDATION

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

Robert S. McNamaraPresident

May 21, 1980

-32 - ANNEX I

TABLE 3ASAV0L6ES - S0C7 L LiDICAYOEU DASA SURl

LA AIW0 )u.cx SmoPS (AJUT1)D AV uumu UZ& (TUOCIJ 80. m. - lIDS! ICDS! ESYmAU

TOTAL 144.0 MU12 S KaAORCULTOUAL 99.9 * DSS RCUT GOIIAPRIUC DCO11 DC

1940 tb 1970 /EIbAY A UGiO LL GROUP M 0ro0 co

OR rn CAPPITA (8 40.0 60.0 90.0 191.1 209.6 467.5

NCI COQSUWTION M CAPITA(E GIAMS Of COAL *IYITALUT) .. .. 33.0 69.1 83.9 262.1

POPlLATION AND VITAL SUTISTICSPPOMATIOD. KID-TM (MILL1OUS) 51.4 68.3 81.20U26 POPMATIDN (PUCUI O TOSL) 5.2 7.6 9.3 13.2 16.2 24.6

POPULAION PKOJUCTIOUSPOPMLAZTO II Y*A 2000 OJL.LIOUSl 145.0SrATYOnAY POPULATION 010.U8) 334.0YR STTIOARY POPMATION IS UCUD 2165.0

POPULATION DENSITYPU SQ. E. 357.0 474.0 564.0 ".6 49.4 45.3PU SQ. EK. AGRICUCTULL LAND 540.0 683.0 813.0 330.2 252.0 149.0

POPULaTION AG SSRuCCuSz (PUCUT)0-14 YnS. 44.3 46.4 46.0 44.3 43.1 45.2

15-64 YnS. 52.5 51.0 51.0 52.4 53.2 51.965 YRS. AND ABOVE 3.2 2.6 3.0 3.1 3.0 2.8

POPULATIOU GCOWSd RDAT (PUUT)TOTAL 2.4 2.9 2.5 2.4 2.4 2.7UN . . 6.7 6.3 4.1 4.6 4.3

CRDZ 3AWNI RAT! (PL TUOUSAD) 49.0 48.0 46.0 44.4 42.4 39.4CLUDE DEATh RATZ (PZU ThOUSAND) 23.0 20.0 18.0 16.4 15.9 11.7GROSS REPRODUCTION RAUT 3.5 3.1 3.2 3.2 2.9 2.7FAMILY PLANING

ACCEPOS. ANNRUAL (TWOUSUDS) *- 345.6 1103.1usEss (PzScIaT OF 9AnIZ waN) .. .. 8.9 7.9 12.2 13.2

FOOD AND NUTRITIONlIDEX OP FOOD PRODUCTION

PM CAPITA (1969-71-100) 107.3 101.0 98.0 99.4 9S.2 99.6

PZR CAPITA SUPPLY OFCAL0RIS (PRCENT OF

REQUIRDMATS) e9q.OL 89.0 93.0 93.0 93.3 94.7PROTEINS (GRAMS PER DAT) 42.6/f * 58.5 56.1 52.1 54.3

OF WHICH ANIMAL AND PULSZ 9.2L .. 8.0 10.4 13.6 17.4

CHILD (AGES 1-4) MORTALITY RATE 29.0 25.0 23.0 19.2 18.5 11.4

HEALTHLIFE EVDCTANCY AT BIRTH (TERS) 42.0 45.0 47.0 49.1 49.3 54.7INFANT WORTALITT RATE (PRThOUSAND) .. 153.0 140.0 . 105.4 68.1

ACCESS TO SAFE WATER (PERCENT OFPOPULATION)

TOTAL *- 45.0 53.0 31.5 26.3 34.4URBAN *- 13.0 15.0 63.9 58.5 57.9RURAL .. 47.0 55.0 20.1 15.8 21.2

ACCESS TO ESCRZTA DISPOSAL (PERCENTOF POPULATION)

TOTAL *- 6.0 5.0 15.7 16.0 40.8URBAN .. .. 40.0 66.8 65.1 71.3RURAL .. .. .. 2.5 3.5 27.7

POPULATION PER PEYSICIAN .. 7600-.OL 11350.0 7107.9 11396.4 6799.4POPULATION PER NURSING PERSON .. 72030.OL& 53700.0 12064.0 5552.4 1522.1POPULATION PER HOSPITAL 3ZD

TOTAL 11000.O/h 8120.Lh 4430.0 2738.4 1417.1 726.5'RBAN .. .. .. .. 197.3 272.7RURAL .. .. .. .. 2445.9 1404.4

ADMISSIONS PER HOSPITAL BED .. .. .. .. 24.8 27.5

HOUS INGAVERAGE SIZE OF HOUSEROLD

TOTAL .. .. .. 5.3 5.4URBAN .. .. .. .. 4.9 5.1RURAL .. .. .. .. 5.4 5.5

AVERAGE NUMBER OF PERSONS PER ROOM30TAL .. .. ..URBAN .. .. ..RURAL .. .. ..

ACCESS -O ELECTRICITY (PERCENTOF 3WELLINGS)

TOTAL .. .. .. .. . 28.1URBAN * * 3.0/r *. 7-.8 45.1RURAL .. . .. .. .. 9.9

- 33- ANNEX IPaae 2

TABLE 3A3ANGLADESH - SOCIAL INDICATORS DATA SHEET

BANGLADESH REFERENCE GROUPS (ADJUSTED AyEACES- tiOST RECENT ESTIMATE) -

SAME SAME NEXT HICHERMOST RECENT GEOGRAPRIC INCOME INCOME

1960 /b 1970 /b ESTIMATE /b REGION /c GROUP /d GROUP /e

EDUCATIONADJUSTED ENRC -'ENT RATIOS

PRIMARY: TOTAL 47.0 61.0 83.0 59.5 63.3 82.7MAUE 66.0 80.0 106.0 74.9 79.1 87.3FEMALE 26.0 42.0 60.0 43.7 48.4 75.8

SECONDARY: TOTAL 8.0 19.0 i3.0 19.5 16.7 21.4MALE 14.0 30.0 34.0 27.8 22.1 33.0FEMLE 1.0 8.0 11.0 10.0 10.2 15.5

VOCATIONAL ENROL. (C OF SECONDARY) 1.0 1.0 1.0 1.3 5.6 9.8

PUPIL-TEACHER RATIOPRIMARY *- 49.0 55.0 42.2 41.0 34.1SECONDARY .. 26.0 24.0 .. 21.7 23.4

ADULT LITERACY RATE (PERCENT) 21.6/1 .. 22.0 25.5 31.2 54.0

CONSUMPTIONPASSENGER CARS PER THOUSAND

POPULATION .. 0.4 0.4/i 2.3 2.8 9.3RADIO RECEIVERS PER THOUSAND

POPULATION .. 6.0 .. 15.5 27.2 76.9TV RECEIVERS PER THOUSAND

POPULATION .. .. .. .. 2.4 13.5NEWSPAPER ("DAILY GENERALINTEREST") CIRCULATION PERTHOUSAND POPULATION .. .. 5.0 6.2 5.3 18.3CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. .. .. 1.1 2.5

LABOR FORCETOTAL LABOR FORCE (THOUSANDS) 18516.0 23402.0 29900.0FEMALE (PERCENT) 15.2 16.5 17.0 21.4 24.8 29.2AGRICULTURE (PERCENT) 86.8 85.9 78.0 66.3 69.4 62.7INDUSTRY (PERCENT) 3.3 3.5 7.0 9.6 10.0 11.9

PARTICIPATION RATE (PERCENT)TOTAL 36.0 34.6 34.4 35.8 36.9 37.1MALE 58.7 55.8 55.3 52.3 52.4 48.8FEMALE 11.4 11.8 12.1 15.7 18.0 20.4

ECONOKIC DEPENDENCY RATIO 1.3 1.4 1.3 1.3 1.2 1.4

INCOME DISTRIBUTIONPERCENT OF PRIVATE INCOMERECEIVED BY

HIGHEST 5 PERCENT OF HOUSEHOLDS 18.3/1 16.7/k .. .. .. 15.2RIGHEST 20 PERCENT OP HOUSEHOLDS 44.573 42.37Tk .. .. .. 48.2LOWEST 20 PERCENT OF HOUSEHOLDS 6.91 7.97k .. .. .. 6.3LOWEST 40 PERCENT OF HOUSEHOLDS 17.9L 19.67k .. .. .. 16.3

POVERTY TARGET GROUPSESTIMATED ABSOLUTE POVERTY INCOMELEVEL (USS PER CAPITA)

URBAN .. .. 110.0 86.5 99.2 241.3RURAL .. .. 91.0 74.2 78.9 136.6

ESTIMATED RELATIVE POVERTY INCOMELEVEL (USS PER CAPITA)

URBAN .. .. .. .. 91.9 179.7RURAL .. .. .. 50.4 54.8 103.7

ESTIMATED POPULATION BELOW ABSOLUTEPOVERTY INCOME LEVEL (PERCENT)

URBAN .. .. 55.0 44.3 44.1 24.8RURAL .. .. 74.0 52.4 53.9 37.5

Not availableNot applicable.

NOTES

la The adjusted group averages for each indicator are population-weighted geometric means, excluding the extremevalues of the indicator and the most populated country in each group. Coverage of countries among theindicators depends on availability of data and is not uniform.

/b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969and 1971; and for Most Recent Estimate, between 1974 and 1977.

/c South Asia; /d Low Income ($280 or less per capita 1976); /e Lower Middle Income (S281-550 per capita,1976); /f Av. 1961-65; /g Registered, not all practicing in the countrv; /h Govt. establishmentsonly; /i 1972; /i 1963-64; /k 1966-67; /1 1962; /n 1973.

nost Recent Estimate of SNP per capita is for 1978.

August, 1979

-34 - Ammx Ipsui01M 07 $0CrAL MICAdPoDs

Notes: Althbough the data are dreen fromi sources generally judged the mat authorititive and reliable, It shou~ld alsoc he Doted that they way not he intern.-tofi. onsrale be 'ss of the lad of etandad1oed defniticos end oonepte used by differet countries. IcLletn the data. The date r,notee

a du to .dsribe orders of magnItude, Ldiate trends, end oh-aretrins -rab major d.iffersooa het.ea. countries.

The W4qfj. k,y35 far each ind4oator ar papulation-eighted geometric mesas, exaludlog the acres v-lues of the iodicator and the mast populatedcosuneyinaah goup.Iso. o lak of abs,poop averae of all Indicators far Capibal Surplus Oil aparters ad of indicators of Access toWtr and xreabDIPi -as, Reusing, lnonm Distribution end Poverty for other bocntay groups ar populAtica-eighted ge~atric seas oithout ecoluico of the extreme values andthe nst populated Country. Snethe co v rac f ooonrie egth IndIcators deten on. aalahiity of dta ad is not uniform osati-n must he exero icedin_relatiaa_acsacesof_n Indiao osohr la vrgsaesgl sfla aprciaiccofeetd'vlues ehan oceOsri the values Of oneLndiostar at a tim ase, The c.-try and refrence crocucs.

1%AR Ii Ctbhsuend sqm.). Access to ticreta Ditspsa (oreto ouaIon) - total. urbn ed rura t=f Pealsrface area comprising land are sad inland veters. Muhro p(P tte,we,Sorra)svebycrtadpsladariCultural - Moet rest estimate of agriocultural are used taapoorarly psroentegs of thei r repective pouain, cE-ta. disposal Include

or permanetly for cropa, pasturee, maket and kitchen gardensa or is the collec tion nd dipsmal, cith or cithout treatmnet, of hua suevetolie falloe. -an t-te by o6ttr-horn sYstem or the use of pit privies and c.ila-

( )- 07 par o&pit. estimates at cren-t market prices, -_ci - Poputlatin d ivdd bY otoher of practiclog pbwysiciansabiidifliid iiiii cavrsio method us Wcald B-sk Atlas (1916- 78 basis); an med cal aico at univrsdity leel1960, 1910 , ad L1978 data. iduai a usin Person -Polaindivided boy nosir of practicing sale

SEMI C7SIRGI0N P CAPTA - nnualcosmtio ofomsoadun fml rdascress, practical ouea,sd aseostact nurses.-cal so lgnte perlem natural -aaed. bydro-, oulear end ga-Ponu.ation per Hoceita1 Dad - totalt-ubanp ed rura - Populationtoal ircc,thesl. eectrcity in iloasmsof cal auvaentPercpta 0, and rural) divided by their resetv uhro oPit-l .eds -calaie i

1970, and 1976 data. puiblic end private general end apecialiced bostpital end reth1bllitation -eter.dospitale are eetahliehaenta permnetly staffed by at l.eat one piyeici-oPOMJIATI0II An VITki StATSTIC 70is Ztablishmen.ts pruvidLag pricoipally custodial oe ar ict ibluded. Rurli

Tota Ppaic Pd-erelco) As of July L; 196G, 1970,sd hospitals, -hovr, Include health and medical ost-r tot permeneotly atf fed1977 data, ~~~~~~~~~~~~by apbysiciao(hoot by a mdical uajsstat, nurse, nldoife, etc.) chib offer

Oman Population (prteot of total) my atiffec orbs to total Population; in-patient ~baocdaticn sod provide a limited. renge of medical facolitie..different definitions;."t of ura ra s fetoWbraility of data idmiss,inee oar RoeitalBe - Total nobhr of adniasl.os to or discihrgee fr..

among coanris :i!960, 1970, end 1975 data. h.spitala dividd by thti tutor of bado.

1 - C.,rret pepLlatico prjacticee -r basd Id RfttClltOta" p atln by agad se sod their sartality end fertility Averese Sioc of Housahoid (prceper ihusoId).- totl -rban and rura -rates. Projection parster for sortality rates com prise of three A tooehoid comits of a grop of iodivtidualsi shar igquarte- andIevele asnmiog lifa eopeotaoy at birthI isre -ing cith coutry1e thair ala enl.A boardar or Lodger sq v nay out bv iJoblatd Ic theper capita ince leve, end femal life expectancy otahilioing at ivsho.Ld for attistloal puPose...77.5 Years. The paretare for fertility rate aln hav tires la.-I. Acareo wihr fceenspr rom-ttl ra.ad rua - Average vinieacensiog deline 1a fertility acording to in.anme level and past of per..on Perrom- ura,an:alocpied ..... otti-oldolosfamily olennlng performace. ech coutryIs then sosipnd on of thes res..pectively, Dnelliogo occlude no-eraet otrcur and uoloccptedpononine cmbinations of -otality and fertility trande for projection Access to ilectrility cretof idoellingn) - total, orh. and rura - Coo-purpose. "'-tio-al damiliogo ci elecricty o lIving quorer er percentage osttaioanr poPolatico - in a taticory population then is eo gpooch total, urban, and rurL dallinge epoleysioce the birth rate is equal to tic death rate, and alec the agestructu,e reaccntant, fhie is acieved only after fertility rntoe OPEa TO

dacli.a to the veplaceee la-1 If unit not reproduction r.to ch.. hAcavd tE-ole-t Raticoseach gesortion oftc replace Itself eetLy. Ths stationery puPa- Prinary ccl -toal,t ml n eml ro -totl, ole and feale enrol-Lotio aieca esimated on tho bale of the projected chareterletive enofalgeat tia riry levei as prcntage of ree p-tive prianryof the pcaa Idci toe year PyE, and the rat of dsclioe of fertility ecoeepopulIations; oremally inoludes chiliren ged ti-li yaro cut

rttorepaeetlvl adjuted for different lengths of prisery education;fo c_-toiv- ithYou tatiZ ay pultion i roachad - h ertnsainr oplto nvra dcto eeri..ot sap exceed 100 perc..ct iove 0000 pupil,

si-e ha been reached, arbalo or ahov tho official ach..! ago.Ftvulatico De"city icodr1col-ttl ueadfeae-Cnoe on.c;cvnio

Per. Rn. - Mid-Year population per aqoar kilc... tr (li ht-iovre) of edooatiooveo.qireentYoo or er f approved princr icct_unt:total araprtid.e general vctonl rteahor traicig icotr..ot.oco foo po.oLFor nc. th gricultursl land - Conputed as aic- for agriculturl land usull of 12 to 17 yoare of age; -- repccdec- e. o ..c ore. dce-ily

o.!y. . eluded.P=poatlcdeirutr prcet) - Children i0-i4 y-r), -kridg-age Ocaicleaoctpor-et of oe--ce.roo .i L-ct-iov :ctict.t .n."4bcAyeas) actdtre.tire (is year ad -cv) aa perotnage of old-year _ techical, lodutroal, or otter pr-gren ouch o eroe oPe.vtlorn

Population; 1960, 1910, and 1977 data. depar-t.et of ... o.dr_Y io-tJtt-ioooPcoulation Growth Rate Percent) - 'toa - Annal growth rates of total mid- Pupi-teahe ratio - orim and s--cd.r - Pctal ot'.i-ot c-oloinI

yerppcono for i95pco,lt-7,ad 1970-77. prmay-n oecod ev ls iided by -anev o.f t-aher to tOeonocP,= ,alo dcccth Rat _j2eroet) - urban - Aoo-Ia groeth ratec of urban opninLcec

popuatics fo 193-00,193070, soo 1971-7 Adult litereo rate Lpe-Vct) -L enadulIto nilo tova anoite) Crode Parth Raco 'c- thousand) A-Iu a IIoe births Per thousad of xid- apeo-v-ntog of total adult populatio,, sgr 15 year nod ove.year populatIo; L 3, 1971, end 1977 data.Crude Doath tal "per9bttua-d) - Anonal deethc Per thoooand of cid-yea COiIO'

iroesHeorductca Rte-Averag nohe of da-ghter a cs ill tear -etig Lac than eight cerec..; ocloodec anclaov-, oche- and viLouotobar por..L reproductive p-ariod f seeprecspeetae ei

specifte fertility rae;oaal five- earavrae eeicg10i: yT9, hal eevr e iocn coLto)-ALL nypec of -wei- for dii970, sd 1I5 brcodoaotu ogoclpoi.e iuooo oonon clln.iLvtcFesily P"1500g ~- dovet-re inoa (th-tosde) - Annual tiie vf reeoriouticsdt vo bccgitotr.fccictttoourveptore of birth-octrvi devices under aupice of naoni eyefetat ffccreec crt s-l. cot ye onep-ribl conv- 0.,,t .ttsp,iacic progrnoa n.iosied lice.n. Ag.

Faitly PaionIoc - rre' Iret of Ynrolod ocea) -Percen.tage of maried TV Receivers, Iper tIhuo_d popuiati_t,.Y/ce... e-t for b-vosoto t~ geteniatone of oild-earoo age 5-' year) co bs hr'th-co-trci doci.e. piite tPouandponlctioi; e-oludenocieoe T -eecet.voitrov

to all maried one 0sm ge grop, and in yea chen -egiotrti.o of IV neto oatN-.spacr Cir-ulati-c oertihuand pe ,lti-? Sh- thheov overge oioolat4oc

FOCI An1 NITRhTTICt r'al . 1t~ W - -it-lir of foo 7Prduction Per acptIc i199-71-iiO) - Lodec of Per capita eoe rsrl t evdc eea en. rcon idp dt.b llyannua prcdcctico of al fond coditi-n Prcd-ctioa cludan cod and if itopad Ia estfu onsae

fved and is nv -dar year basin. -cditienvocer prienry goods ice AnooP' ttend-tce cc otorco-xr 0teviir: oo'e.. oesoae istad f nga) hlc ae eibe ad cntiootreeo.Iii during he year, -coluog -oisoiv- to rv-m ic-otr noLd -tZt

tOce:.g. toffee and ten are e-Iuded). Aggrcsste produotioc If eah voentry -ito.

Lu_basdncaio averag Prducer pric -cigbto.Per apoa rvol7ofv_lro t IpreofCeornct) .Cputed from LALR FOtRCE

rer-gy eqoiicleot oret food o_ppliec _a.blanl it voocypr nia Ttl ao oo 'ticoiaads) -cnaclyatite -eron, i-olodi ar-ePer day. Acnomaiie oppiie cpie etcprdoiv o "Port' leso oroonand-ovPloyvo io- votI.diog houreo-ie, soet t ei'

ea -t,ad obangee In oo. se- Wt cupplec c-ci,de aniel feed, oecda, 10 cainue cointroc- ace .tot -p-bsle.qostities -nd io fond provecciog, and in coo ociitriboto.ce. Require- Foa (ecn)-PeaoLbrfret percentage of totaL inhr frce

ent or oisated by YAO baeonphyoooicgical ccstocra yiitr"3oet ao force o fbI niog, -tornt1 , htintin nodactivItY ond tesIth -coonidertiZ oco ae tal tePrtoe::' egi ioi * eroetage of total labor foo._

ag ad scourioin f popolato, us hon L uuc for" Icu-try veproct) r. mo- foo- c iciog,octrt:,ccfetogto-ate ut h-ceod evlIee trooty cacsd gas a pcc-ttge o totl cco'cve

Peronptn uppy o ortei crn pe Icy) - Footeosocetec of per PatilaicPaeodot-toa ae n -Icil -Poioptocoonpita vet upply of food per do. 0et soppiY of food is aeficed asacinity ran. ac -cputed astotal, -o, cod f-nle Lobor 'con er-above. Pqoireneto for ll occityicvtabiished by 1CrA proide forfa vetage of -totl, cle and feenie rppoaiot if all uge-oeacoctiomici-m al1oanc of Io g000 of toti prtoi .Per lap aco P0 gonn of L7 197, pod 1975 dtac. The- r _loprtontooonteoofleticg

oisa ad Pulneccoteic, of aich IC grnu -old be asias protein. g-sec structure of Ocr poPolotio, and 1-9g nie -cd. A -fcointvThese otadards ar Lonr than those of "5 g Is f total Prtiannr from notional .. 0c.PS grin of animal pro tec anY an averag fr the ocrld, proposeid by FAR .E ~

2 0 ~ pdon"' t -bti.of -pvouioto coder 15 and o5 and o-ertio tbe Third World Food il_e. the o forve Fic ago g ..op of 15f. -" an

Per onpita rtic- pi- fo oosi.tolor Protein supply of foot

7ttid ceec I--i Motlt Rt pr had? ,.oouI deatha Per thiou.aid Perccoga of PrivatetIcona toc 001. oaoh &ad 0n00 - R eoccodtby cicoetg0 agedopiIfs,tohIetic thic poe grc-p; foo -st ocre- 5porenn, ricoes ..pecct oet jO p.evoet, an pooret a percent

opiog ooocvo.ec ota derivd fry lfe voile, if b.-ooo lde.

lf petao 0bIrh :yenrs) - Average senior of Years of Life E.toatlie AbncLote Poverty foo -Lve '00$ 0c- oncit.) - ipsob o im ceao.o,a atditbo193, b7t ad 1977. cc.iAcic oet cc iee i-ic coe ee ~Ici hioctoio'.:co

Infant Mrtaity Onto e thouad) . Aooual Oc-tho of infata unoer one totrtMicea lL c...q.ate oit pos setnl-vcfc snomt Opea of age Per thoo.oan Live biotb- nffocdci.IAcceen t laYs Raer peroet of puulntion.- total rban, ad mora - IoiardRltvePvry -ooe leL tjU.9 ber capita) - orh and cur

1i

taho ofccvpe 'toolora,ndualcity .easnale ceon hral r-lct ove Povery inoon lOve -0o.htld of ovr-eMe, nptcafe ancr oupply IcoluIdes trencec o-face eaters or t inreate cot Peroa bccro u ooty Ihi Leve to leo -d fron toe -roa Le-e_.oncteeovoated cater -hc as otho from protected ebolce epringa, otn edj-tonen for higie coat of `lvng: rbec rsesod nitr echo11) -s preroe. ages of hict -ep-oti-e popui_icc.. 7 Eto-totd ocint_o Belo- Abcolt.c Povrty oon Le-i percet) - urna and

anioan area a puhlio foutootol or stendpont located noot mare thanroa Perv-t of pcpolo-o- urha -ac rural hb. o-ennb- tc-200 _sters fro a hous oy hr ocasidere a beog oitihd oavnbleanvesnIf thatouo o ualues esoai -cas coud implthat t he -$.aeife or mahrIf the hicu..bhld do cot have to openyd a cna ad3-oool beta Li-ticodiuprop-tin..t- part of the icy in fatohiag the f-alyly caner oecds Eoonomic Alysoc and P-jecti-o Loep--ert

Aug9o 1979

- 35 -ANNEX IPage 4

BA24GLADESE

ECONOMIC INDICATORS

Population: 89.5 million (July 1980)GNP Per Capita: US$90 (FY80)

Amount Average Annual Increase (2) Share of GDP at Market Prices (2)(million US$ (in constant FY75 prices) (in current prices)

Indicator in current prices)FY79 FY60-70 FY70-75 FY75-80 FY60 FY70 FY75 FY80 La

NATIONAL ACCOUNTSGross domestic product lb 9,512.5 4.0 -0.6 6.3 100.0 100.0 100.0 100.0

Agriculture lb 5,174.0 3.1 -1.3 4.3 59.9 56.9 63.6 51.9Industry lb 1,170.2 7.9 -3.2 8.9 7.7 9.6 8.6 12.5Services /b 3,168.3 4.9 3.3 6.6 30.1 30.0 25.0 28.8

Consumption 9,187.5 4.4 -0.7 6.7 92.4 92.8 100.0 102.1Gross investment 1,330.0 10.9 -10.9 13.5 6.9 11.3 7.0 15.0Exports of goods & nfs 603.0 0.8 -11.7 4.3 10.0 8.3 3.1 7.1Imports of goods & ufs 1,603.0 8.8 -12.0 14.4 9.3 12.5 10.1 24.3

Gross national savings 465.0 26.5 -17.7 ... 0.9 6.1 0.9 -0.4

Composition of Merchandise Trade (2)(in current prices)

FY73 FY75 FY79 FYBO

MERCHANDISE TRADEMerchandise exports 603.0 100.0 100.0 100.0 100.0

Primary 217.0 41.9 31.4 36.0 30.1Manufactures 386.0 58.1 68.6 64.0 69.9

Merchandise imports 1,603.0 100.0 100.0 100.0 100.0Food 250.0 44.1 42.2 15.6 29.5Petroleum 186.0 3.2 11.1 11.6 17.6Machinery & equipment 382.0 13.8 9.6 23.8 25.8Other 785.0 38.9 37.1 49.0 27.1

FY74 FY75 FY76 FY77 FY78 FY79

PRICES AND TERMS OF TRADE (1972/73-100)GDP deflator,Exchange rate (Tk/US$) 7.9661 8.8759 14.8521 15.4667 15.1215 15.2193

Export price index 104.6 132.9 108.7 117.7 136.7 168.9Import price index 156.9 215.4 195.8 189.1 180.2 214.2Terms of trade index 66.7 61.7 55.5 62.2 75.8 78.9

As I GDP(at current prices)

FY73 FY75 FY77 FY79

PUBLIC FINANCECurrent revenue 5.0 5.4 9.5 10.3Current expenditure 6.5 4.5 7.8 7.8Surplus (+) or deficit (-) -1.5 40.9 +1.7 +2.6Capital expenditure 8.8 3.1 9.8 11.4Foreign financing 7.1 2.4 7.8 8.5

1960-70 1970-75 1975-80

OTHER INDICATORSGNP growth rate (M) 4.2 -0.7 5.7GNP per capita growth rate (2) 1.5 -3.3 3.0Energy consumption growth rate (2)

/a At constant FY78 prices.lb At market prices; components are expressed at factor cost and will not add due to exclusion of net indirect taxes and subsidies.

not available- not applicable

ASADDMay 1, 1980

- 36 -

iMLACE OF PAThMtfS. E3!R2M AL CAPITAL AND DET8

(million uS9 in current prices)

Aectul Prolectedrfy74 nf75 y76 FY77 FY78 F9Y7s9 m0 ry1 nY82 F83

5ALAhR OF PAYIfNISmet sxports of goods 6 *rvic.s -535.7 -696.4 -847.4 -340.3 -786.0 865.0 -610.0 -1718.0 -2057.0 2271.0

taportS of goode 6 services 418.6 502.7 507.6 610.0 643.0 819.0 993.0 1123.0 1176.0 1276.0reports of goode & services 984.3 1199.1 1353.0 950.3 1429.0 1684.0 2603.0 2841.0 3233.0 3547.0

Not trsnsfers

Curraet ecount balance -565.7 -696.4 -847.4 .340.3 -786.0 865.0 -1610.0 1718.0 -2057.0 -2271.0

Dirwet pri-et. iGVetcuant - ' ' - 12.0 U5.0 20.0 23.0 30.0 35,0L.LT loans (not) 274.4 508.2 502.9 246.0 399.0 465.4 861.5 950.0 995.0 1143.0Crnrt & grant-like flows 347.0 395.6 244.5 229.7 388.1 495.2 504.5 810.0 950.0 1100.0Other capital flo.e (tot) 2.0 -358.0 153.1 -216.1 14.0 13.4 88.0 -45.0 153.0 59.0

Change in reserves (- * ineresse) -57.e 151.3 -53.1 80.7 -25.2 -124.0 136.0 -22.0 -71.0 -50.0

twero.ciou&I reserves (end of period) 115.0 266.3 213.2 293.9 268.7 393.0 257.0 279.0 350.0 400.0Reserves as eonthb of iports of nat year 1.iJ 2.36 2.69 2.47 1.91 1.81 1.09 1.04 1.18 1.26

FY74 Ff7s mY76 FY77 Tm8 FY7

CROSS DI030RS8TENiofftciol grant. 347.0 395.6 244.5 229.7 386.1 495.2Gros. diaborseaet. of ML.7 loas 285.1 529.1 569.3 276.1 434.4 520.8Concengionol 201.5 468.0 538.9 244.7 399.8 500.3silatwral 82.4 305.6 357.3 117.3 237.3 226.8IDA 51.0 112.5 128.2 86.1 8S.2 152.5other oltilattral 68W. 49.9 53.4 41.3 74.3 121.0

Non-.ootaeslon&L 83.7 61.2 30.5 31.5 34.5 20.4official eport cr-dits 40.6 43.3 16.3 4.2 1.7 3.3IBRDOther Wultilateral 5.4 0.3 1.2 0.5 0.5 0.1private 37.7 15.6 12.8 26.8 32.3 17.0

XT7NALi DEBTDe4 64tstandino sd disbursed (end of period) 490.6 1359.2 1806.5 2068.1 2581.8 3005.1Official 383.3 1240.9 1701.8 1951.8 2442.3 2856.4-IBRD - 54.9 54.9 54.9 54.9 54.9IDA 105.6 255.3 379.8 46.9 554.2 706.7Other 277.7 930.7 1267.1 1431.0 1833.3 2094.8

Priatet 107.3 118.3 104.7 116.3 139.4 148.7Undisbureed Debt 590.2 1033.2 952.7 1011.0 1316.2 1647.5

013? OiORV7ICITotal debt service paym_ts 18.0 31,0 88.3 58.5 67.4 95.4IntereSt 7.3 10,1 21.9 28.4 32.1 40.1

Paymenre as ? eaports 4.3 6.2 17.4 9.6 10.5 11.6Pay to as % CNIP 0.2 0.3 1.3 0.9 0.9 1.2

Averag* Intreat rate o new loan (') 3.2 2.0 1.7 1.6 1.5 1.7OfficiAsl 2.9 2.0 1.6 1.3 1.4 1.6Privat 4.6 2.3 7.8 6.4 6.2 6.1

Average rturity of n lo ans (yers) 25.7 35.3 41.7 40.1 37.8 34.7OfficiAl 28.3 35.8 42.2 40.8 38.1 35.1Privete 13.4 15.2 11.3 11.0 9.5 14.8

eA0 ROU?° EXOSURE t%3)28I0 E0 0./toDal D- 4.0 3.0 2.6 2.1 1.8111D dlobuc- rt./totl Irse. disbucntS - _ _ _ _

IJRD debt service/total debt servica e . 1.8 5.6 5.0 4.0IDA WD /total DOD 21.5 18.7 21.0 22.5 21.4 23.5IDA diebor_nre/totl gro.s di.br_w.st. 17.8 21.2 22.3 31.1 20.3 29.2IDA debt service/total debt Service 1.1 3.2 2.4 5.2 5.6 4.6

As I of Debt O.totandingat Lnd of FY79

TiOM StRUCTUER

Maturity structure of debt outtanding (1)Iaturitie de within 5 years 12.0Maturities due within 10 yers 32.7

Interest structure of debt out.tanding (7)Interest due within first y ar 1.7

ASADDMay 1, 1980

- 37 -ANNEX IIPage 1

THE STATUS OF BANK GROUP OPERATIONS - BANGLADESH

A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of April 30, 1980)

US$ Million /aAmount

Loan or - (less cancellations)Credit Un-Number Year Borrower Purpose Bank IDA disbursed

One loan and 12 credits fully disbursed 54.9 428.28 -

339 1972 Bangladesh Cyclone Area Reconstruc-tion (replaces CreditNo. 228-PAK of 1971) 25.00 0.87

340 1972 Bangladesh Chandpur Irrigation II(replaces Credit No.184-PAK of 1970) 13.00 0.35

341 1972 Bangladesh Tubewells (replacesCredit No. 208-PAKof 1970) 14.00 1.59

343 1972 Bangladesh Telecommunications (re-places part of CreditNo. 145-PAK of 1969) 7.30 0.16

407 1973 Bangladesh Education (replacesCredit Nos. 49-PAKand 87-PAK of 1964 and1966) 21.00 3.50

408 1973 Bangladesh Highways (replaces CreditNo. 53-PAK of 1964) 25.00 4.03

410 1973 Bangladesh Cereal Seeds 7.50 3.91424 1973 Bangladesh Inland Water Transport

Rehabilitation 8.70 0.21487 1974 Bangladesh Second Telecommunications 20.00 9.02527 1975 Bangladesh Ashuganj Fertilizer 62.00 19.52533 1975 Bangladesh Population 15.00 8.68542 1975 Bangladesh Barisal Irrigation 27.00 18.47605 1976 Bangladesh Karnafuli Irrigation 22.00 12.96621 1976 Bangladesh Agricultural and Rural Training 12.00 7.30622 1976 Bangladesh Technical Assistance II 7.50 3.39631 1976 Bangladesh Rural Development 16.00 13.83632 1976 Bangladesh Bangladesh Shilpa Bank 25.00 8.35

- 38 - ANNEX IIPage 2

A. Bank Loans and IDA Credits to Bangladesh (Cont'd)

US$ MIillion /aAmount

Loan or (less cancellations)Credit Un-Number Year Borrower Purpose Bank IDA disbursed

724 1977 Bangladesh Shallow Tubewells 16.00 13.76725 1977 Bangladesh Muhuri Irrigation 21.00 18.41729 1977 Bangladesh Extension and Research 10.00 7.96735 1977 Bangladesh Inland Water Transport II 5.00 3.78752 1977 Bangladesh Imports Program VI 75.00 3.05765 1978 Bangladesh Jute 21.00 16.84787 1978 Bangladesh Foodgrain Storage II 25.00 24.96825 1978 Bangladesh Small Scale Industry II 7.00 6.97828 1978 Bangladesh Agricultural Research 6.00 5.50864 1978 Bangladesh Drainage and Flood Control 19.00 17.58866 1978 Bangladesh Imports Program VII 75.00 4.48872 1978 Bangladesh Technical Assistance III 10.00 9.85890 1979 Bangladesh Oxbow Lakes Fisheries 6.00 5.84912 1979 Bangladesh Vocational Training 25.00 25.00921 1979 Bangladesh Second Population &

Family Health 32.00 32.00934 1979 Bangladesh Bangladesh Greater Khulna

Power Distribution 28.00 27.93941 1979 Bangladesh Bangladesh 2nd Dacca Water

Supply & Sewerage 22.00 21.77944 1979 Bangladesh Bangladesh Fertilizer Imports 25.00 6.94955 1979 Bangladesh Small Scale Drainage and

Flood Control 25.00 25.00 /b964 1979 Bangladesh Second Highway 10.00 10.00 /b980 1980 Bangladesh Imports Program VIII 50.00 50.00990 1980 Bangladesh Low-Lift Pump 37.00 37.00 /b1001 1980 Bangladesh Second Chittagong Water

Supply 20.00 20.00 /b

Total, 54.9 1,326.28 510.77of which has been repaid 0 0.40 -

Total now held by Bank and IDA 54.9 1,325.88

Total undisbursed 0 510.77 510.77

/a Prior to exchange adjustments.lb Not effective.

- 39 -ANNEX IIPage 3

B. PROJECTS IN EXECUTION 1/

Multi-Sector ProjectCr. No. 339 Cyclone Area Reconstruction Project: US$25.0 Million Credit

of October 18, 1972; Effective Date: January 17, 1973;Closing Date: June 30, 1980

After a very difficult start, the project is expected to be com-pleted by early 1980, about four years behind schedule. Parts A, F, and G(Inland Water Transport, Coastal Fisheries, and Cyclone Warning System) havebeen completed for some time. IDA financed portions of Parts D and E (Primaryand Feeder Roads) have been substantially completed. Some feeder roads orig-inally scheduled to be financed under the Credit have been financed by WorldFood Program as part of an agreed program to meet cost escalation. TheGovernment has requested WFP finance for additional feeder roads. Thisrequest is currently under consideration. Work on the completion of Part Band C (Telecommunications and Cyclone Shelters) is reported to have beensubstantially completed, except for some minor telecommunications equipmentscheduled to arrive shortly. The credit is expected to be fully disbursedby June 30, 1980.

Agricultural Projects

Cr. No. 340 Chandpur Irrigation II Project: US$13.0 Million Credit ofOctober 18, 1972; Effective Date: January 17, 1973;Closing Date: July 31, 1980

The project provides flood protection to a gross area of about 130,000

ac and irrigation, by means of low lift pumps, to about 60,000 ac. Drainageand water control is provided by a main regulator in the south of the projectarea on the S. Dakatia River and irrigation water is provided by a pumpingstation to the north of the area on the same river. Both structures are comple-ted and the project includes improved agricultural extension, equipment andvehicles, housing and technical assistance. Cropping intensity is expected torise from 165% to 230%.

After a poor start, due to war, natural disasters, delays in landacquisition, and weak administration and management, the project has beensubstantially completed except for arrival of some additional maintenanceequipment, completion of about six miles of channel remaining to be improved

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

- 40 - ANNEX IIPage 4

as well as 2,000 ft of borrow pit canal, held up by a land dispute. Projectbenefits have been obtained over part of the area and production has increased

from 69,000 tons in 1976/77 to 97,000 tons in 1978/79 and at full development

in 1982183 it is expected to be up to 203,000 tons. The fisheries improvement

program in the project area (financed under Credit 605-BD) is making satisfac-

tory progress.

Cr. No. 341 Tubewells Project; US$14.0 Million Credit ofNovember 6, 1972; Effective Date: January 17, 1973;Closing Date: December 31, 1982

All 3,000 deep tubewells have now been drilled and will be commis-

sioned in FY80. Approximately $1.2 million from the project and $0.7 million

from the Extension and Research Project (Credit 729-BD) will be consolidated

to fund the Command Area Development (CAD) of the deep tubewells in theNorthwest of Bangladesh.

Cr. No. 410 Cereal Seeds Project: US$7.5 Million Credit of June 29, 1973;

Effective Date: January 30, 1974; Closing Date: September 30,1980

There has been some improvement in the Bangladesh Agricultural Dev-

elopment Corporation (BADC) component; the last installment of processing

equipment will be installed for processing the current season's wheat crop;

all of the revised program of civil works and land development with theexception of the recently agreed 8,000 tons of additional storage has been

completed. BADC will undertake the construction of these stores on a priority

basis for completion by December 31, 1980. The Seed Certification Agency

(SCA) and Bangladesh Rice Research Institute (BRRI) components are behind

schedule due to insufficient budgetary release of funds. The main positive

aspect of the project continues to be the success of the contract grower

scheme. Wheat seed sales remain good, but paddy seed sales are well below

appraisal targets. The main problem preventing increased paddy sales are poor

marketing arrangements and lack of suitable improved seeds for multiplication.Improvements in seed distribution and marketing are in hand and marketing

consultants have been engaged for this purpose. The Seed Certification Agency

continues to be weak, however, and an intensive training programme is currently

under preparation. Future propsects have improved as a result of GOB's recent

strong commitments to stimulate foodgrain production and support intensive

seed production efforts. Closing date at present is September 1980 andextension to June 30, 1981 would be decided once 1980/81 ADP provisions are

known for SCA and BRRI.

Cr. No. 542 Barisal Irrigation Project: US$27 Million Credit of April 29,1975; Effective Date: September 30, 1975; Closing Date:December 31, 1980

Project civil works continue to make good progress and are expected

to be completed within six months of schedule. Poor quality work is being

remedied by contractors at no cost to the project. The 60 primary pumpunits are in various stages of arrival and about 30 are in store and ready for

issue. The target for the FY80 boro season is 1,100 pumps in the field or44,000 acres planted.

- 41 - ANNEX IIPage 5

Cr. No. 605 Karnafuli Irrigation Project: US$22 Million Credit ofJanuary 28, 1976; Effective Date: February 24, 1976;Closing Date: December 31, 1981

The project is now making good progress having been behind scheduledue to initial delays in hiring project consultants. The consultants for theirrigation portion of the project began work in September 1976, but theireffectiveness was limited by delays in procurement of vehicles and equipmentand in the assignment of local consultants to assist in the design work. Thishas been resolved. After a period of good progress, project civil works haveagain slowed down due to shortages of local Taka and a payment dispute withthe contractors. The payment dispute was settled in January 1980 and workshave resumed at normal pace.

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

The project was designed as a pilot application of the rural devel-opment approach pioneered at the Comilla Academy in the mid-sixties. Itaims at introducing accelerated agriculture and rural development in seventhanas in Bogra and Mymensingh Districts. It provides financing inter aliafor rural roads, minor irrigation, buildings, storage, rural credit andstrengthening of rural cooperatives. Initially, despite some teething prob-lems, the project was progressing satisfactorily. But by June 1977, thefollowing weaknesses became apparent: (i) lack of cooperation between thevarious ministries and agencies involved; (ii) lack of effective organizationand ineffective supervision of the project by the implementing agency, theIntegrated Rural Development Program (IRDP); (iii) basic deficiencies in thecooperative system (complex regulations and procedures); (iv) inadequatetraining of project personnel; and (v) conflicting government policies in thefield of rural credit. In November/December 1977, IDA, in association withIRDP, undertook a comprehensive review of the project, and an Aide Memoire,setting out an action program to overcome these problems, was presented to theGovernment in December 1977.

The Government has made a concerted effort to implement the recom-mendations of the Aide Memoire prepared in December 1977. A full-time ProjectManager has been appointed who is assisted by three assistants responsible forcredit, cooperatives and training, respectively. International recruitmentis being used to obtain for IRDP technical assistance in project management,supervision, and monitoring. At the field, two district managers, for Bograand Mymensingh, have been appointed to work full time on project activities.Budgetary and procedural changes have been introduced to enable participatinggovernment agencies to be fully responsible for the implementation of theproject's subcomponents. This, together with a revitalized coordinatingcommittee of Secretaries of the Ministries concerned has greatly improvedcooperation. Implementation of the physical aspects of the project such as

- 42 -ANNEX IIPage 6

rural works is proceeding satisfactorily but project beneficiaries are, sofar, yet to receive tangible benefits in the form of increased farm inputs orfarm equipment. A proposal has recently been approved to amend the CreditAgreement to finance incremental fertilizer needs for the project instead ofincremental credit for fertilizer.

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

There has been satisfactory progress in procurement of engines andpumps, tools and equipment, office equipment and part of the transports. Salesof shallow tubewells will be to both individuals and groups. The project hasprocured in its first phase 2,050 pumpsets which have been distributed byJanuary 1980. Procurement for the second order of about 5,000 shallow tube-wells will be based on farmers' preference system. The construction of work-shops is proceeding with only minor delays.

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

Overall progress, judged by the progress of construction of the FeniRegulator which is the single most important component of the project, is about18 months behind schedule due to delays in recruiting the Implementation Assis-tance Team (for the contractor) and weak project management (Water DevelopmentBoard and its Consultants). After many attempts to remove bottlenecks andimprove the management, the performance is beginning to improve. The contrac-tor has resumed the construction and expects to place a substantial quantityof concrete for the regulator this season. The revised cost estimate indicatespossibility of higher project cost than given in the Appraisal Reports duemainly to necessary design changes and additional access roads as well asprice escalation.

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

Project implementation has improved. Most of the vehicles have beenprocured and Phase I civil works construction is nearing completion. Contactfarmer attendance has increased by 600 to 100% in most areas. Main achieve-ment of the extension service has been in expanding wheat cultivation through-out Northwest. Key problem remaining is the revision of Project Proforma (PP)

- 43 - ANNEX IIPage 7

Cr. No. 765 Jute Project: US$21 Million Credit of February 8, 1978;Effective Date: April 14, 1978; Closing Date: June 30, 1983

The Jute Project has been very successful in getting the projectfarmers to use higher quantities of fertilizer, resulting in higher yields.Partly as a result of this, raw jute stocks are high, but the price of deshi(white) jute variety (70% of area) is low. Even then, the average projectfarmer would make a profit, but non project jute farmers would not, and someof latter are expected to switch to paddy production as was envisaged in theproject. To maintain jute production levels, further intensification of theproduction in the project area will be necessary. Steps for ensuring suchintensification was discussed and agreed with GOB.

Cr. No. 787 Foodgrain Storage II Project: US$25 Million Credit of April 12,1978; Effective Date: September 29, 1978; Closing Date:December 31, 1982

Project actions are proceeding steadily: Batch I of constructioncontracts have been awarded; for batch II, administrative approval has beenaccorded and for batch III, PWD is preparing the estimates. Evaluation reportfor purchase of pest control equipment has been finalized and consultant forpest control has been selected. Consultant for the monitoring cell has notyet been appointed.

Cr. No. 828 Agricultural Research Project: US$6 million Credit ofJune 16, 1978; Effective Date: November 15, 1978;Closing Date: December 31, 1984

The overall progress of the project is satisfactory. Constructioncontracts have been awarded for Bangladesh Agricultural Institute (BARI)research stations and Bangladesh Agricultural Research Council (BARC) head-quarters building. Procurement of building materials and equipment is inprogress. Reports from BARC Technical Working Groups (outlining researchsubprojects), a National Research Plan, and a Five-Year Plan for BARI havebeen produced and reviewed by IDA. A total of 16 Ph.D students have beenplaced in overseas universities. The appointment of a consultant for researchmonitoring has not yet been made. The unsuccessful in-country M.Sc. trainingprogram should be redesigned.

.

Cr. No. 864 Drainage and Flood Control Project: US$19.0 million Creditof December 22, 1978; Effective Date: October 19, 1979;Closing Date: June 30, 1984

Effectiveness was delayed primarily due to delays by the Govern-ment in approval of the project budget and staffing plan. In ChenchuriBeel (CCB) and Kolabashakhali (KBK) two regulators have been completed andin Brahmaputra Right Bank (BRE) a large program of contracts has been prepared,which are scheduled to start in 1980.

- 44 - ANNEX IIPage 8

Cr. No. 890 Oxbow Lakes Fishery Project: US$6 million Credit of April 3,

1979; Effective Date: February 13, 1980; Closing Date:

June 30, 1984

This credit has only recently been declared effective. Fisheries

and engineering consultants have been engaged and are expected to commence

field operations by April 1980. A detailed Project Action Timetable has beenprepared.

Cr. No. 955 Small Scale Drainage & Flood Control Project; US$25.0

Million Credit of October 30, 1979; Closing Date:

December 31, 1984

Effectiveness of this credit has been delayed due to delays in

Government approval of the project budget and establishment of the joint

project fund.

Cr. No. 990 Low Lift Pump Project: US$37.0 million Credit of April 4,

1980; Closing Date: December 31, 1984

This credit is not yet effective.

Industry and Imports Program Credits

Cr. No. 527 Ashuganj Fertilizer Project: US$62.0 Million Credit ofFebruary 11, 1975, as amended by Amending Agreement of June 18,

1979; Original Credit Effective Date: December 19, 1975;

Supplementary Credit Effective Date: August 1, 1979:

Closing Date: June 30, 1985

The project is being cofinanced by the Asian Development Bank, KfW,

EEC, IFAD, the OPEC Special Fund, and the Governments of Iran, Switzerland, UK

and US, providing a total of about US$190 million equivalent in addition to

the IDA credit. Site preparation work including the necessary dredging and

filling was completed on schedule. However, based on the soil analyses under-

taken by two specialist consulting firms, further preparation of the site

was undertaken to protect the plant against earthquake risks. Currently the

project is about 32 months behind schedule due primarily to the additional

site preparation and initial slow progress in (a) placing orders for time-

critical items and (b) planning for construction. Due to the need for

additional site work, the delays and currency fluctuations, supplemental

financing was required. The required financing has now been obtained. The

soil compaction and foundation work has been completed and plant construc-

tion is now progressing satisfactory. Some additional delays are being

encountered due to delays in the manufacture and delivery of some materials,

but these delays are still within the margin for contingencies provided

in the schedule shown at the time of IDA supplementary financing.

- 45 - ANNEX IIPage 9

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

As of April 30, 1980, Bangladesh Shilpa Bank (BSB) has committedabout US$24.6 million from the credit, for 122 subprojects. Disbursementswere about US$16.7 million and Qualified Agreements to Reimburse lettersof credit (QAR) had been outstanding for US$2.6 million.

Cr. No. 752 Sixth Imports Program: US$75 Million Credit of November 30,1977; Effective Date: December 13, 1977; Closing Date:March 31, 1980

As of April 30, 1980 disbursements were US$72.0 million and QARhad been outstanding for US$1.3 million.

Cr. No. 825 Small Scale Industry II Project: US$7 million of June 16,1978; Effective Date: September 15, 1978; Closing Date:March 31, 1983

There has been good progress in training commercial bank staff, dis-tributing circulars to commercial bank branches describing project procedures,and advertising the availability of funds for small industry loans. TheProject appraisal and processing capabilities of the implementing Banks havedeveloped rapidly, and the Project is expected to be completed ahead ofschedule. Staff of the Small and Cottage Industries Corporation have begunpreparation of subsector and area studies for small industry promotion.

Cr. No. 866 Seventh Imports Program: US$75.0 million Credit ofDecember 22, 1978; Effective Date: January 8, 1979;Closing Date: December 31, 1980

As of April 30, 1980 disbursements were about US$70.5 million andQAR had been outstanding for US$2.9 million.

Cr. No. 944 Fertilizer Imports Project: US$25 million Credit of June 29,1979; Effective Date: August 29, 1979; Closing Date: June 30,1980

As agreed, fertilizer prices have been increased by an averageof about 28%. A staffing plan and administrative authorizations have beencompleted for the provision of staff for the secretariate of the fertilizercoordinating committee. Credit funds have been fully committed.

Cr. No. 980 Eighth Imports Program: US$50 million Credit of April 4, 1980;Effective Date: April 21, 1980; Closing Date: February 28, 1982

This credit has only recently been declared effective.

- 46 - ANNEX IIPage 10

Education Projects

Cr. No. 407 Education Project: US$21.0 Million Credit of June 29, 1973;Effective Date: September 27, 1973; Closing Date:December 31, 1980

The project finances completion of the construction of the Bangla-desh Agricultural University (BAU), building of five new and equipping ofeight existing technical institutes (polytechnics). The BAU component isnow 80% complete and is expected to be completed by December 1980. However,construction has stopped since March 1979 due to lack of Taka funds. TheExternal Resources Division (ERD) of the Ministry of Finance informed theResident Mission that the allocation of the required funds (approx. 40 millionTaka) would be released in March 1980. In such case, the project could besubstantially completed by the current closing date, December 31, 1980. Thefellowship program is nearly complete. Civil works associated with the tech-nical education component, although 30 months behind schedule are virtuallycomplete and the polytechnics are now operating. About 75% of all equipmenthas been procured, installed and is being used by students. Project costs (indollar terms) are close to appraisal estimates due to currency devaluation.Most local cost overruns are caused by taxes imposed on imported goods.

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

Implementation of civil works which until the end of 1978 was aboutthree months ahead of schedule had slowed down in 1979 due to shortage oflocal funds. However Funds have now been made available and completion isstill expected within the Credit Closing Date. Training of teachers for theAgricultural Training Institutes (ATI's) has been set back by transferof instructors to the extension staff due to downgrading of salaries.Little progress has been made on the recruitment of technical assistanceexperts, the development of revised curriculum, or the in-service training ofextension staff. The Bank is reviewing the project to determine the relevanceof the technical assistance component, since it appears that the studies ofAgricultural Extension Service (AES) seem to be no longer necessary after theTraining and Visit Sytem (TNV) of extension has been established.

Cr. No. 912 Vocational Training Project: US$25.0 million Credit ofMay 31, 1979; Effective Date: November 2, 1979;Closing Date: June 30, 1985

The project has recently been declared effective after having met thefour conditions of effectiveness. The Project Implementation Unit manager andarchitect are in post. All sites for project buildings have been made available.The equipment and office furniture lists are under preparation and master listsof Technical Training Center equipment are ready to be submitted for IDA appro-val. Curricula in ten trades have been prepared at Technical Training Center(TTC). Courses for 110 training officers in on-the-job training have beenconcluded. Existing ILO/UNDP experts are assisting project development.

- 47 - ANNEX IIPage 11

Population Project

Cr. No. 533 Population Project: US$15 Million Credit of March 10,1975; Effective Date: September 25, 1975; Clos-vig Date:December 31, 1980

The project is being cofinanced by six co-lenders providing a totalof US$25 million equivalent in addition to IDA credit. Program performancehas improved; and the internal reorganization of the Population Control andFamily Planning Division (PCFPD), as recommended by the management study,is underway. This reorganization will not be effective in improving programimplementation unless the PCFPD is able to: (a) fill its large number ofvacant technical, managerial and supervisory positions; and (b) simplify theadministrative, financial and recruitment procedures. Actions have beenassured by the Government on both counts. A program has been started for theretraining of field workers which should improve their performance. Whilethe pace and quality of construction of 80 Family Welfare Centers, builtthrough community participation, has been encouraging, the progress on otherbuildings in the project has been slower than expected. Due to the slow paceof construction, disbursement of the credit has also shown less than expectedimprovements.

Cr. No. 921 Second Population and Family health Project: US$32.0million; Credit of May 31, 1979; Effective Date: April 1,1980; Closing Date: December 31, 1983

This Credit has only recently been declared effective.

Transport Projects

Cr. No. 408 Highways Project: US$25.0 Million Credit of June 29, 1973;Effective Date: August 7, 1973; Closing Date: June 30, 1980

The closing date of the credit has been extended to June 30, 1980,by which time all works will be completed and the Credit is expected to befully disbursed. Reinstatement of shoulders on the Feni Bypass, opened topublic traffic on July 1, 1979, is virtually complete and repair of isolatedpavement failures was to be completed by the end of February 1980. Finishingworks on the RHD Headquarters building are nearing completion and the buildingis largely occupied. The revised final report on the Surma River crossingis still awaited. The arbitrators appointed to deal with the contractor'sclaims on the Sitalakhya Bridge were unable to reach agreement and the matterhas now been referred to the umpire. No further problems are anticipated withthe project.

- 48 - ANNEX IIPage 12

Cr. No. 424 Inland Water Transport Rehabilitation Project: US$8.7 MillionCredit of August 10, 1973, as amended by Amending Agreementof October 17, 1975; Original Credit Effective Date:September 27, 1973; Supplementary Credit Effective Date:March 19, 1976; Closing Date: December 31, 1979

Procurement of spare parts and equipment under the original credithas been completed. Under the Supplementary Credit, two used lighteragetankers and the new pontoon berth are being utilized for unloading of crudeoil at Chittagong for the Eastern Refinery.

The oil transfer operations have continued to show a marked improve-ment over previous operations, due to the sustained drive and initiative ofthe new BSC Technical Director, the tankers' crews efforts, the improved co-operation between the respective agencies and the effective utilization ofthe two mechanical engineers provided under technical assistance.

The total amount disbursed to date is US$8.25 million (97% of theCredit). Processing of bills and submission of withdrawal applications forthe remaining balance of the credit are currently underway.

Cr. No 735 Inland Water Transport II Project: US$5.0 Million Credit ofSeptember 30, 1977; Effective Date: March 13, 1978;Closing Date June 30, 1980

The Credit became effective on March 13, 1978 three and a halfmonths behind the original schedule. Lists of spare parts for BIWTA vessels,navigation aids and for hydrographic equipment, and for BIWTC cargo vesselshave already been prepared and most items agreed. All consultants' contractshave now been signed and work is underway, after initial delays.

Cr. No 964 Second Highway Project: US$10.0 Million Credit of December 21,1979; Closing Date June 30, 1984.

The Borrower has made good progress in calling equipment tenders andin inviting proposals from approved short-listed consultants. Appointment ofconsultants and ECNEC approval of the project proforma are conditions ofCredit effectiveness. Credit Agreement Effectiveness has been extended fromMarch 20, to June 30, 1980. No major problems are foreseen at this time.

Telecommunications Projects

Cr. No. 343 First Telecommunications Project: US$7.3 Million Credit ofNovember 15, 1972; Effective Date: January 17, 1973; ClosingDate: June 30, 1980

Of the four microwave systems provided for under the project threeare completed and in operation. The fourth system required rebidding due toprice changes during the period when the project was interrupted by Bangladesh's

49 - ANNEX IIPage 13

independence war. Thereafter there were delays due to building construction

and tower erection difficulties; it was due to be commissioned by December

1979, completing the project about four and a half years behind schedule. Theclosing date was extended until June 30, 1980 to allow for retention payments.

Cr. No. 487 Second Telecommunications Project: US$20.0 Million Credit ofJune 26, 1974; Effective Date: July 23, 1974; Closing Date:June 30, 1980

The project is behind schedule largely due to delays in procurement,

civil works, and reduced output of the domestic switching equipment factory,

combined with difficulties in ordering such equipment and in completing localconstruction/installation works due to budgetary difficulties. About two-

thirds of the Credit was committed up to October 1979. The remaining corres-ponds to national trunk and international automatic switching equipment stillto be procured. TTB and Government have decided on the technique to be adoptedfor such equipment (not manufactured locally) and corresponding commitment isto be made in 1980 for delivery by mid-1982. The rate of physical installa-tions during FY1979 was about 13,000 lines, showing no improvement from theprevious year. A new ordinance for the Telegraph and Telephone Board (TTB)was issued in February 1979 and the board was re-instated to function as a"Government Board" effective from April 1979. The regulations governing thefunctioning of the Board, its powers and responsibilities and relations withthe Government, have recently been drafted, and are being reviewed. Govern-ment has stated that the decisions in this matter are being worked out activelyand should be made effective in early 1980. In the absence of satisfactoryaccounts, it is difficult to assess the financial positions of the beneficiary,but estimates indicate it may have to be improved, in particular in considera-tion of TTB's present and future development requirements.

Technical Assistance Credit

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

Twenty-two subprojects have been approved for financing under thiscredit thus committing the total amount of the credit. However, due to theextremely slow rate of commitments during the early years of the credit, anextension of the Closing Date will have to be considered to complete theagreed subprojects. The subprojects financed are expected to have a signi-ficant beneficial impact on strengthening IDA's lending program to Bangladesh.

Cr. No. 872 Third Technical Assistance Project: US$10.0 million Creditof December 22, 1978; Effective Date: January 19, 1979;Closing Date: June 30, 1982

Implementation of this project has just begun, with 13 subprojectstotaling about $4.2 million having been approved. Seven further subprojectstotaling about $3 million have been approved in principle, and would be

- 50 - ANNEX IIPage 14

expected to be committed within the next few months. The project is pro-gressing well with no major problems.

Power ProJects

Cr. No. 934 Greater Khulna Power Distribution Project: US$28.0 MillionCredit of June 18, 1979; Effective Date: November 20, 1979;Closing Date: June 30, 1984

This Credit has only recently been declared effective. Consultantshave been appointed as scheduled to begin design work.

Water Supply and Sewerage Projects

Cr. No. 941 Second Dacca Water Supply and Sewerage Project: US$22.0 MillionCredit of June 29, 1979; Effective Date: November 30, 1979;Closing Date: June 30, 1983

This Credit has only recently been declared effective. Consultantshave been engaged to begin design work as scheduled.

Cr. No. 1001 Second Chittagong Water Supply Project: US$20.0 Million Creditof April 4, 1980; Closing Date: December 31, 1985

This Credit is not yet effective.

- 51 -

ANNEX IIIPage 1

BANGLADESH

SECOND FERTILZIER IMPORTS CREDIT

Section I: Timetable of Key Events

(a) Time taken by the country to prepare project

The credit is the second in a series, and utilizessubstantially the preparation effort for FertilizerImports I, updated to the present. 1/

(b) Agency which prepared project.

Government of Bangladesh (GOB) and IDA.

(c) Project first presented to IDA.

September 1978; (original request to finance twoyears imports was divided into two credits).

(d) First IDA mission to review project.

October 1978.

(e) Departure of Appraisal mission:

February 1980.

(f) Completion of negotiations:

May 1979.

(g) Planned date of effectiveness:

90 days after signature.

Section II: Special IDA Implementation Actions

IDA is assisting the Government in the preparation of amedium term Agricultural Production Plan (paragraph 48).

1/ Credit preparation benefitted from fertilizer sector work performed overseveral years, starting with a fertilizer marketing and distributionstudy financed in July 1975 under the First Technical Assistance Credit(409-BD).

- 52 -

ANNEX IIIPage 2

Assistance to the Government in coordination of aidfor any fertilizer program will be provided through theBangladesh Aid Group and local coordination meetings inDacca (paragraph 91).

Section III: Special Conditions

(a) The Government and IDA would consult with eachother on domestic fertilizer pricing to ensurecontinued progress in reducing the total costof the subsidy (paragraph 84);

(b) Foodgrain procurement prices would be set at levelsdesigned to provide adequate production incentivesto farmers (paragraph 85);

(c) All necessary action would be taken, includingutlization of Bangladesh foreign exchange ifnecessary, to ensure availability of sufficientfertilizer to meet an agreed FY81 consumptiontarget (paragraph 91);

(d) The Government would review with the Association byDecember 31, 1980, the results of its ongoing studyto determine appropriate policies concerning fertil-izer stock levels for the Second Five Year Planperiod (paragraph 92);

(e) Taka funds equivalent to the amounts withdrawn fromCredit proceeds will be deposited in an accountbeing maintained in the Bangladesh Bank and wouldbe utilized for financing of development expenditures(paragraph 96);

(f) A special condition of effectiveness would be:

enactment of increases in the domestic fertilizerprice (paragraph 84).

- 53 -ANNEX IVTable 1

BANGLADESH

Fertilizer Imports

. Year 1,000 Tons

1972/73 185

1973/74 141

1974/75 289

1975/76 348

1976/77 37

1977/78 387

1978/79 614

1979/80 (estimated) 570

Source: BADC

BANGLADESH - FERTILIZER INDUSTRY REHABILITATION PROJECT

BCIC - FERTILIZER PRODUCTION AND CAPACITY UTILIZATION a/(In '000 tons per year)

FY77 FY78 FY79 FY80 ProjectedDesign Operating Operating Operating Operating

Plant Product Capacity Production Rate as % Production Rate as % Production Rate as % Production Rate as %

Fenchuganj Urea 115.5 77.5 67 61.4 53 59.5 52 95.0 82

Sulfate 13.2 9,3 70 9.6 73 5.3 40 9.0 68

Chorasal Urea 374.0 208.0 56 151.0 40 236.1 63 240.0 64

Chittagong

No. 1 TSP 32.0 041.3 27 62.3 41 80.0 52

No. 2 TSP 120.0 48.0 40

Total 654.7 342.8 52 263.3 40 363.2 55 424.0 64

a/ Based on 330 operating days for Fenchuganj and Ghorasal, and 300 operatingdays for the TSP plants at Chittagong according to industry practice.

Industrial Projects DepartmentMay 14, 1980 X

'-c

BANGLADESH

Projected Fertilizer Balance

FY80 FY81 FY82

Urea TSP/DAP MP Total Urea TSP/DAP MP Total Urea TSP/DAP MP Total

A. Opening Stock (July 1, 1979) 223 105 41 369 312 137 51 500 320 160 55 550

B. Domestic Procurement 330 80 410 410 95 505 615 95 710

C. ImportsSaudi Grant 88.1 88.1

USAID Grant 40 40

FRG Grant 17 16.7 33.7

CIDA 59.7 59.7

IDA (7th Import Credit) 20 20

IDA (Credit 944-BD) 70 34 104

EEC 70 10 80

IFADNetherlands 20.5 45 65.5

DANIDA 15 15

Bulgaria (barter) 16.4 16.4 V

OPEC (Sp. Loan Fund) 22 22

Japan Grant 5 4 9

6th Yen Credit 12 12

Belgium 1.3 1.3

NORAD 3.5 3.5

ADB

Total Imports 309.0 201.5 59.7 570.2 303 273 74 650 45 320 65 430

D. Sales Projections 550 250 50 850 705 345 70 1120 775 400 75 1250

E. Estimated Closing Stock 312 136.5 50.7 499.2

F. Stock Requirements 290 145 50 485

G. Shortfall (excess) (22) 8.5 (0.7)(14.2) 320 160 55 535 215 180 45 440

H C4

BANG LAD ESHFERTILIZER SECTOR PROJECT

TOTAL FERTILIZER OFFTAKE IN BANGLADESH, FISCAL YEARS, 1965-81'000 L. Tonsof Product

1200-

1,100.01100P.M

1000

715.4700

600

5126 ' Ia,500 77

457.2

400 379.8-~~~~~~~~~~~~~~~~~ 304.4~~~~~~~~~-

300 7T 79.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 43~~~~~~~~~~~~~_

100 938 106.2 . I

100 ~~~~~~ ~~11

Year 165 1966 97 16 1969 1970 1971 1972 197 19497 178 99 180 91

Change 13.2 +52.6 +30.2 +6.7 +20 +98 -99 +73 -. 264 635 121 +96 34 +49 +94

Source: BADC VVorld Bank - 20206