CIRCULAtTING COPY

TO BE RETURNED TO REPORTS DESK

FILE Copy Document ofFILE COpy The World Bank

OR OFFICIAL USE ONLY

Report No, P-1842-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

RURAL DEVELOPMENT PROJECT

May 7, 1976

Thb 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 authoration.

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CURRENCY EQUIVALENTS -/

IS$1 Tk 13.0Tk 1 - US$0.077Tk 1 million US$77,000

GLOSSARY

aman - rice planted before the monsoon (June-October)and harvested in November or December

aus - rice planted in March and harvested in Juneor July

boro - winter rice planted in October or November andharvested in March or April

thana - administrative unit below districtunion - administrative unit below thana

PRINCIPAL ABBREVIATIONS USED

BADC - Bangladesh Agricultural Development CorporationBJSB - Bangladesh Cooperative Bank (Bangladesh Jatiya Samabaya Bank)BKB - Bangladesh Agricultural Development Bank (Bangladesh Krishi

Bank)HYV - High Yielding VarietyIRDP - Integrated Rural Development ProgramKSS - Village Cooperative Society (Krishak Samabaya Samiti)0 & M - Operation and MaintenanceRWP - Rural Works ProgramTAO - Thana Agricultural OfficerTCCA - Thana Central Cooperative AssociationsTEO - Thana Extension-OfficerTIP - Thana Irrigation ProgramTTDC - Thana Training and Development CenterUAA - Union Agricultural AssistantUMPCS - Union Multi-Purpose Cooperative SocietyUNDP .- United Nations Development ProgramVEA - Village Extension Agent

ac - acresmi - miles

FISCAL YEAR

July 1 - June 30

1/ The taka is officially valued at 28.10 to the pound sterling, havingbeen revalued on April 26, 1976 from its previous rate of Tk 30 to L 1.The pound now floats relative to the US Dollar and, as a consequence,the Taka-US Dollar rate is subject to change. The exchange rate usedin preparing the data for this report is Tk 13.0 to US$1, the rateprevailing at the time of preparing the report.

FOR OFFICIAL USE ONLY

INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND RECOMMENDATIO$i OF THE PRESIDENTTO THE EXECUTIVE DIIECTORS

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

RURAL DEVELOPMENT PROJECT

1. I submit the following report and recommendation on a proposeddevelopment credit to the People's Republic of Bangladesh for the equiva-lent of US$16 million on standard IDA tertis, to help finance a rural devel-opment project.

PART I - THE ECONOMY 1/

2. A Basic Economic Report on Bangladesh, entitled "Bangladesh:Development in a Rural Economy" (Report No. 455b-BD dated September 15,1974) was distributed to the Executive Directors on October 1, 1974. Anupdating report entitled "Bangladesh: Current Economic Performance andShort-Term Prospects" (Report No. 1038-BD, dated March 22, 1976), wasdistributed on March 29, 1976. Annex I contains country data sheets.

Background

3. The Basic Economic Report describes the obstacles to developmentin Bangladesh and outlines a course of action to maximize the country'slimited development prospects. The high ratio of population to naturalresources, the slow development of the productive and infrastructural baseand the weakness of the administrative and institutional framework led theReport to project a growth rate of GDP of between 2% and.3.5% per year inreal terms over the five years 1973-78, the variation within that rangedepending on the appropriateness of the policy framework and on levels ofaid.

4. Encouraging progress was made in the period immediately followingBangladesh's independence as an enthusiastic Government, supported by mas-sive external assistance, strove to overcome the devastation of the cycloneof 1970 and the struggle for independence in 1971. Large amounts of foodaid were distributed, refugees were resettled and vital port, road andrail facilities were brought back into operation. A new constitution wasadopted, and the first national elections, held in March 1973, broughtSheik Mujibur Rahman's Awami League party into power with an overwhelmingparliamentary majority.

5. Overall economic progress since independence, however, has beeninadequate. Agricultural output remains insufficient for a population growingat 3% a year. Industrial output, heavily dependent on imports, has beenbadly affected by scarcity of foreign exchange. State enterprises havebeen hampered by management deficiencies, excessive government controls,shortages and price regulation. Exports hlave been stagnant and barely

1/ Part I is substantially the same as in the-President's Report andRecommendation for the Second Technical Assistance Project (Credit No.622-BD, Report No. P1768-BD).

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authori2ation.

finance a quarter of import needs. Bangladesh has been severely affected byan adverse shift in its terms of trade since 1973. Trade problems arecompounded by dependence on annual food imports of 1-2 million tons, evenin years of favorable weather, and by heavy reliance on imported industrialraw materials. Government revenue has been insufficient to meet currentand development expenditure needs. Bangladesh has had to depend on largeflows of external assistance to meet the wide gap between national outputand expenditure.

6. On August 15, 1975 a military coup ousted the government of MujiburRahman replacing him as President with Khondaker Mushtaque Ahmed, formerlyMinister of Commerce and Foreign Trade. However, events beginning on November3, 1975 culminated in further political changes. President Ahmed resigned asfavor of a former Chief Justice of Bangladesh, A.S.M. Sayem. Martial law isin effect countrywide, with the new President serving as Chief Martial LawAdministrator. The three chiefs of the defense services are serving asDeputy Chief Martial Law Administrators. The three Deputy Chief Martial LawAdministrators and seven civilians have been appointed to form a President'sAdvisory Council and each of the members has a responsibility for one or moreministries. The new government has confirmed that it intends to introduceeconomic reforms such as subsidy reduction, agricultural taxation and importliberalization. Whatever its longer-term objectives and orientation mightbe, however, the fundamental problems of the country, namely over-population,weak administration, inadequate infrastructure and insufficient reservescontinue to confront Bangladesh.

Current Economic Picture

7. Given this background of fundamental weaknesses in economic struc-ture, inadequate economic progress since independence and political instabil-ity, Bangladesh's economic situation requires persistent efforts at efficienteconomic planning and implementation. On July 1, 1975, Bangladesh initiatedan economic stabilization program in conjunction with a standby arrangementwith the IMF. Its principal elements consisted of a credit restraint programand elimination of deficit financing combined with some import liberalization.This was preceded by a devaluation of 58% in May 1975. The record so far isthat the credit restraint program has been a success: after an estimated rateof inflation of about 80% in 1974, prices declined by 10% in 1975. The Gov-ernment has not merely avoided deficit financing, it has retired some of itsdebts to the banking system. The import-licensing program has been relaxedin the first half of 1975/76; besides increasing allocations to an average of95% of entitlements, licenses have been renewed on expiry and there is greaterfungibility in the use of exchange allocations for selected categories of im-ports.

8. At the beginning of 1975/76 the credit restrictions may have beentoo pervasive and insufficiently selective; jute purchases by tradingcorporations were hampered, productive credit was scarce, and importallocations could not be utilized. Measures have been taken to rectify

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this situation. Overall, however, the impact of the credit restraint pro-gram on the reduction of the rate of inflation has been salutary. It hasbeen reinforced by other factors:

(a) The recent Aman rice harvest is expected to amountto 7-7.5 million tons and output for 1975/76 may beabout 13 million tons, representing an increase ofabout 17% over 1974/75. Rice harvests in West Bengalhave also been exceptionally good and prices havebeen declining rapidly there.

(b) The border with India is being policed intensively andsmuggling has dwindled.

(c) The supply position for raw materials has improvedduring 1975/76. Larger import allocations have beenboosted by substantial declines in the prices of keyimports.

(d) Capacity utilization and output have increased in anumber of industries and inventories of finished goodsare higher.

9. The devaluation has made possible a reduction in the price of rawjute exports from the unrealistic level of £ 200 per ton (late 1974 and early1975) to f 150 per ton (from July 15, 1975), f.o.b. Chittagong, they nowstand at a level of f 166 per ton. This has led to an increase in sales ofraw jute. However, export earnings from manufactured jute goods are likely tofall in 1975/76 because the large decline in export prices has not been com-pensated by an increase in export volume. The problem is especially acute forjute manufactures because of the international economic recession, and becauseof increased competition from India which has reduced tariffs for some productsand provided export subsidies for others. Bangladesh's non-traditional exportshave derived benefits from the devaluation and as a result, these exports maybe expected to pick up in the course of 1975/76. The total value of merchan-dise exports is expected to be about US$350 million in 1975/76 compared toabout US$400 million in 1974/75. On the import side, improvements are notice-able in the licensing program, but import procedures continue to be compli-cated. In spite of recent measures to reduce the role of the Trading Cor-poration of Bangladesh it continues to monopolize a substantial part of theimport business. It is estimated that about 1.6 million tons of food valuedat about US$358 million (including shipping) will be imported in 1975/76.Sizeable imports of edible oil, cement, cotton, yarn, fertilizers and rawmaterials are also indicated. The total value of merchandise imports isexpected to approximate US$1,286 million in 1975/76, but import payments arelikely to approach US$1,420 million due to retirement of outstanding lettersof credit from 1974/75.

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10. For the first time since independence, the availability of externalresources was not a binding constraint on the Bangladesh economy in 1975/76.The year began with a relatively high level of foreign exchange reserves(US$265 million). Aid, bolstered by the agreement with the InternationalMonetary Fund, continued to be at a high level. Excluding IMF assistance(US$106 million), the commitment of foreign aid in 1975/76 was about US$945million, about two-thirds of which was in the form of food and commoditiesaid. The level of aid disbursement in 1975/76 (including IMF assistance) isexpected to be about US$1,011 million. In 1976/77 it is estimated that approxi-mately US$950 million of aid disbursements will be required.

11. The agricultural sector has done quite well in 1975/76 with over-all production increasing more than 10%; however problems remain. Thesmall-scale irrigation program (comprising low-lift pumps, shallow and deeptubewells) has again fallen short of its target; procedures for the allocationof fertilizer, though much improved, continue to be deficient, and credit isinsufficient and inadequately distributed. Because of the steep fall in thefree market price, Government procurement of rice has increased dramatically- procurement in 1975/76 is expected to approximate 400-450 thousand tons -although farmers are still hampered by the stringent moisture content require-ments and the unfamiliar payment procedures. This has led to farmers sellingtheir paddy at prices below the procurement price. This helps alleviate theGovernment's budget and storage problems but undermines the ability of theGovernment procurement program to provide a floor price for rice. Storagefacilities for foodgrain have been strained and problems arising from expo-sure of foodgrains to the elements are beginning to be of some significance.The Government is considering phasing imports of foodgrains; in the meantime,efforts are being made to rehabilitate approximately 200,000 tons ofderelict storage capacity.

12. In the industrial sector capacity utilization has improved in anumber of industries, especially fertilizer, and the supply of raw materialand spares is more stable. But stocks remain unsold in the case of anumber of consumer products primarily due to inflexible pricing policies;production of the wrong assortment (e.g. in textiles); competition fromimports under the Wage Earners' Scheme; and a reduction in consumer demand(partly as a result of dissaving that occurred during the preceding threeyears of inflation). With a few exceptions, public enterprises are stillgenerally deficient in management and labor productivity, and lack autonomyin the matter of staffing and pricing policies.

PART II - BANK GROUP OPERATIONS IN BANGLADESH

13. After Bangladesh became a member of the Bank and IDA in August,1972, Bank Group operations in Bangladesh concentrated initially on reacti-vation of IDA credits for uncompleted projects financed under credits toPakistan before the independence of Bangladesh. Eleven such credits in anaggregate amount of US$151.35 million (including US$44.1 million for the

repayment of amounts that had been disbursed under the corresponding previouscredits to Pakistan) have been made to Bangladesh. In addition, 14 newcredits have been made totalling US$431.7 million. Of these US$275.0 millionhave been for program credits. The project credits have emphasized agricul-tural development, but also included amounts for population, telecommunica-tions and transport. In October 1975 Bangladesh applied for membership inIFC. The Board of Governors have since passed a resolution approving thisapplication and Bangladesh is expected to become a member soon.

14. The debt service ratio in 1974/75 was 15.9 percent. For 1975/76,the ratio is estimated at nearly 20 percent. Negotiations are underwaybetween the Government of Bangladesh and the various bilateral and multi-lateral donors concerning the assumption by Bangladesh of a portion of thedebt contracted by Pakistan before Bangladesh became independent. Bangladesh'sdebt service ratio is therefore expected to increase further in the comingyears. With respect to the Bank Group, Bangladesh has agreed to acceptliability for certain debt for projects visibly located in Bangladesh andcompleted before independence. A consolidation loan of about US$54.9million and a consolidation credit of about US$31.0 million (based on theJanuary 1, 1960 exchange rate) were signed on February 14, 1975. The BankGroup's share of Bangladesh's outstanding external debt is not expected torise significantly over the next few years.

15. Bangladesh's severe balance of payments difficulties require thatincreased amounts of aid be given in a flexible, fast disbursing fashion.Program lending should therefore remain a feature of IDA assistance. Forthe next several years the requirements of existing productive capacitywill remain high for the types of goods - spares, components and rawmaterials - financed by IDA program credits. However, long-term improve-ment in the Bangladesh economy can be expected only if sound policies, pro-grams, and development projects are pursued. Thus, projects of the highestpriority must also be supported. Given its low per capita income, Bangladesh'sinvestment requirements cannot be met entirely from local resources. Inview of Bangladesh's difficult foreign exchange position, IDA credits shouldcover all foreign exchange costs. Taking into account the level of financingexpected to be available from other external lenders, and in order to directIDA lending to those sectors (such as agricultural and rural development)where the percentage of foreign exchange costs is relatively low, the financ-ing of local currency expenditures is also justified.

16. Annex II contains a summary statement of IDA credits and the Bankloan made to Bangladesh as of March 31, 1976 and notes on the status ofexecution of ongoing projects. After an initial slow start, disbursementperformance under the program credits has been good, keeping pace with theestimates made during appraisal. In contrast, disbursements under projectcredits have lagged far behind expectations. Reasons for this includeproblems associated with release of local funds, clearance of contracts,employment of consultants and appointment of needed staff. The Governmentof Bangladesh is aware of what the bottlenecks are and recently has takensteps aimed at eliminating the most pressing of them and speeding up the

implementation of projects, especially foreign aided projects. The releaseof local funds for projects to semi-autonomous government agencies nowrequires one application per year instead of the previous disruptive require-ment of quarterly applications. The approval of the President is no longerrequired for contracts and the ceiling for contracts which can be approveddirectly by the project implementing agencies has been raised from Taka700,000 to Taka 10 million. The requirements that the President approveall consultant's contracts has been waived. The responsibility now devolvesupon the parent ministries of project agencies to approve the appointmentof consulting firms for projects with National Economic Committee approval,or for project preparation activities. Finally, in the area of appointmentof staff recent changes require the Establishment Division and the Ministryof Finance to issue specific instructions making the authorization of the

appointment of staff automatic in the case of approved projects.

17. Long-term improvement in the Bangladesh economy can be expectedonly if sound policies, programs and development projects are pursued. IDArecognizes the prime importance of the agricultural sector and of effortsto close Bangladesh's food gap. In this connection the Population, AshuganjFertilizer, Barisal Irrigation and the Karnafuli Irrigation Projects aswell as the Agricultural and Rural Training Project which was recentlyapproved, all fit into the strategy of increasing food production and reducingthe food gap in the future. The proposed project also fits within this lastcategory of projects, and as such, it must be accorded a high priority. Other

priority projects are at an advanced stage of preparation - many of them inthe agricultural sector. These include irrigation works in the Muhuri areaand a shallow tubewell project. A development finance company project(Bangladesh Shilpa Bank Project) is also being considered by the ExecutiveDirectors. While development of the rural sector must have top priority, thegrowth of other sectors cannot be neglected. Particular emphasis should beplaced upon projects which provide infrastructure for the rural sector, or whichprocess or provide outlets for its products, or which reduce the strain onBangladesh's foreign exchange resources. Several sector studies supported byIDA - for example in industry and transportation (also assisted by the UnitedKingdom) - should help the Government and IDA to develop a suitable pipeline ofprojects consonant with mutual assessments of economic priorities. Furthereconomic studies will be oriented to the same goal. Finally, IDA has providedfunds under the Technical Assistance Credits to assist the Government in im-proving project preparation and implementation capabilities.

PART III - THE RURAL SECTOR

Agriculture in Bangladesh

18. Bangladesh is predominantly agricultural. The agriculture sectoraccounts for as much as 55% of GNP, 75% of all employment and over 80% ofall exports. It has, however, been unable either to feed adequately the

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country's rapidly increasing population or to provide gainful employmentto its largely unskilled and illiterate labor force.

19. Practically all 22.5 million ac of cultivable land are alreadyunder cultivation. The total cropped area in 1973/74 was about 30.5 mil-lion ac, giving a cropping intensity of some 136%. Of the cropped area,rice accounts for 24.4 million ac; jute 2.0 million ac and other crops 4.1million ac. Rice production in the 1960s increased at an annual averagerate of 2%, but lagged behind the population growth of close to 3% per year.Food imports have caused a heavy strain on the foreign exchange resourcesand have severely limited imports of other commodities.

20. Agricultural development in Bangladesh is constrained by risks offloods, lack of irrigation facilities, erratic weather conditions (cold spellsin November-December can seriously reduce the aman yield) and deficienttransportation for moving farm inputs and produce.

21. Almost as restrictive are the sociological and institutional con-straints. Some 30% of the village dwellers are landless. Among farmerswho own land, about 50% own 2.5 ac or less. Even the larger farmers aresmall by the standards of many developing countries, with over 80% of thecropped area occupied by farmers owning less than 12.5 ac. However, farmersin Bangladesh generally are hard working and receptive to proven improvedfarming practices.

Rural Administration and Programs

22. A number of Government ministries, institutions, departments andautonomous agencies are responsible for providing supporting services torural areas. However, these institutions, mostly staffed by insufficientlymotivated and trained personnel at the local level, and often dominated bylarger farmers, have generally failed to fulfill these key functions.Initially successful programs have deteriorated over the past decade. Im-pressive early gains under the Thana Irrigation Program (TIP), which startedin the mid-1960's and aimed at forming pump and tubewell irrigation groups,have not been sustained due to poor utilization of irrigation equipment.The Rural Works Program (RWP), which constructed many rural roads and em-bankments in the 1960s, has now lost its vitality due to poor project planningand implementation constraints.

23. Cooperatives. The cooperative movement began in the early 1900'sin Bangladesh (then part of British India) In the 1960's, 4,000 UnionMulti-Purpose Cooperative Societies (UMPCSs) were organized to extend creditand provide other services. However, the structure was not able to reachthe majority of farmers and instead the UMPCSs were dominated by the larger,more affluent farmers.

24. Starting in the late 1950's, a new approach to cooperatives wasdeveloped by the then Pakistan Academy for Rural Development. Using apilot project in the Comilla district, a new system was developed on the

theory that rural development must come from the grass roots up rather thanbeing imposed from the central administration downward. The rural people par-ticipated through locally elected councils. Village Cooperative Societies(KSSs) met once a week to discuss production plans, make savings deposits,arrange their crop credit needs and, annually, to elect a manager, anaccountant and a model farmer. These KSSs were in turn federated into ThanaCentral Cooperative Associations (TCCAs). The elected KSS representativeswent to the Thana Training and Development Center (TTDC) once a week forsupplies and services. This two-tiered approach was very successful andthe Comilla program received world-wide publicity. Based upon this expe-rience, the thana became the focus of activities during the late 1960's andit was planned to form a TTDC in each thana. All ministries and programsdealing with rural areas were to be represented at the TTDC. In 1970, theGovernment launched the Integrated Rural Development Program (IRDP) underthe Ministry of Local Government, Rural Development and Cooperatives toextend the Comilla type TCCA-KSS program throughout the country, as thebasic institutional framework for rural development. The IRDP had expandedto 152 thanas by June of 1974. There was a freeze in the extension to newthanas during 1974/75, but IRDP plans to expand to 250 thanas in the nearfuture.

25. While the Comilla approach remains valid,excessively rapid expan-sion, combined with the disruptive events of the 1970's, has caused seriousdeterioration in this program. New teaching materials have not been developed,the control of courses is erratic, and the courses are often repetitive.The TTDC buildings are sometimes diverted to other uses. There are stilltoo many agencies and officials for farmers to deal with, and inter-agencycooperation and coordination is often minimal. However, the IRDP strategystill appears to be well adapted to Bangladesh circumstances. Furthermore,its basic structure is already in existence, and it has a core staff whichis well-trained.

26. Rural Credit. Agricultural credit has been a major problem inBangladesh. It is estimated that 85-90% of all credit comes from non-insti-tutional sources. Loan recovery rates for institutional credit (except forthe initial years of the Comilla experiment) have been well below fifty per-cent in the past and most of the UMPCSs were overwhelmed by defaults andarrears. Often the defaulters were the larger farmers who had the repay-ment capacity, but who had enough political power to avoid being penalized.For instance, the Bangladesh Cooperative Bank (BJSB) had 68% of its loansin arrears in 1974. In addition to problems of arrears, the agriculturalcredit institutions, the BJSB and the Bangladesh Agricultural DevelopmentBank (BKB), lack sufficient trained manpower.

27. Because of the deficiencies in the BJSB and the BKB, the IRDPhas recently shifted its credit operations to the Sonali Bank, the largestnationalized commercial bank in the country. Loan recoveries under theSonali Bank have been much better, but it has limited resources. Adequatecredit for rural development will require rehabilitation of the entire cre-dit structure. To this end, the Association undertook a review of creditinstitutions, the findings of which were recently reviewed with the Govern-ment.

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28. Irrigation. The development of water resources in Bangladesh haspresented many difficulties involving irrigation, flood control, drainage,and protection from both saline intrusion and saline inundation. The needto maintain a minimum flow in the rivers during the dry season (both inorder to prevent saline intrusion and harmful effects on navigation andfisheries), constrains the potential for surface water irrigation. The flatterrain precludes the development of large storage reservoirs for eithercontrolling the impact of the floods or releasing water for irrigation inthe dry season. Partially for this reason, irrigation has been slow todevelop in Bangladesh.

29. Farmers in Bangladesh have for centuries used bucket-lift irriga-tion methods for cultivating their land near the numerous rivers, man-madechannels, and low-lying water bodies. Early in the 1960's small pumps (low-lift, diesel driven pumps of one or two cubic feet per second capacity) wereintroduced, and this was the key factor in expanding dry-season irrigationfrom 1 million acres in 1960 to over 2.5 million acres in 1974. However,the Government estimates that another 5-10,000 low-lift pumps will exhaustthe resources for this form of irrigation. Many areas in Bangladesh havethe potential for irrigation by tubewells - both shallow and deep. Thispotential is only now beginning to be exploited. Since independence)Bangladeshhas followed a strategy of placing more emphasis on this kind of quicker-yielding investment, rather than on longer-gestation, more capital-intensiveprojects, and it is expected that the next 5-10 years should see a majorexpansion in tubewell programs. IDA has supported this policy and theexisting tubewells project will, it is hoped, be followed by more projects,including a shallow tubewells project recently appraised.

30. Extension. Farmer Training and Agricultural Education. TheDirectorate of Agriculture (Extension and Management) of the Ministry ofAgriculture, the basic vehicle for providing technical advice to farmers,operates at the Division, District, Subdivision, Thana and Union levels. Itemploys about 4,200 Union Agricultural Assistants (UAAs) as field extensionworkers, who are supervised by 413 Thana Agriculture Officers (TAOs). Aseparate cadre of specialized jute extension assistants (JEA) has been de-veloped since 1971. The IRDP provides training at TTDCs, focusing on thetraining of leaders (model farmers and village cooperative managers) whoare expected in turn to train other members of the cooperatives. Otheragencies, such as the Ministry of Forestry, Fishery and Livestock, the WaterDevelopment Board and the Sugar Mills Corporation also employ extension staffs.

31. The extension service has a broad infrastructure but its programstend to be obsolete and diffuse, seldom focusing on specific attainableobjectives. The technical advice given by extension workers is often be-hind practical research findings. The staff is poorly trained and handicappedby a lack of transportation facilities, housing and training materials. Ex-tension workers are often used by other agencies for administrative work,such as the census, and statistical reporting. In particular, food procure-ment responsibilities have been extremely detrimental to creating a climateof confidence between farmers and extension agents.

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32. Improvements in extension materials, organization and staff train-ing are required. Realizing the present serious understaffing of fieldlevel extension officers, the Ministry of Agriculture has begun a sustainedprogram for training and employing increasing numbers of officers at thethana and union levels. The plan is to create two new levels of officers:Thana Extension Officers (TEOs) and Village Extension Assistants (VEAs) whowill eventually replaces the TAOs and UAAs respectively. The TEO would bebetter qualified than the existing TAO. The TEO would supervise the VEAswho, in turn, would each supervise several villages. During the transitionperiod, it is expected that the TAO would assist the TEO in his work andthat the VEAs would serve in priority rice growing areas, while the UAAswould reassigned to other areas.

33. Assistance from Japan and UNDP is helping Bangladesh improve itsfacilities and programs for extension staff. Furthermore, the Associationhas recently signed a credit for an Agricultural and Rural Training Project(Credit No. 621-BD) which will finance the construction of new or expandedtraining institutes, together with technical assistance and fellowships.Under the proposed credit, key measures will be taken to improve the qualityand effectiveness of the extension training organization.

34. In particular, the Government has established an interministerialNational Committee on Rural Training under the Planning Commission to inte-grate rural training policies with a view to adopting a more rationaldivision of responsibility among existing training institutions, whichshould result, inter alia, in greater coordination between extension andTTDC activities. The objective is to prepare a comprehensive and integratedlong-term plan to strengthen the rural training system, improve its effect-iveness and enhance its contributions to rural development.

35. Supply of Inputs. The Bangladesh Agricultural Development Corporation(BADC) of the Ministry of Agriculture is in charge of the supply of key agri-cultural inputs. It imports, produces and distributes rice seed in Bangladesh.BADC has recently started a new seed production program with IDA Credit No.410-BD (Cereal Seeds Project) to produce about 10,000 tons of certified riceseed annually. Under this program, BADC will distribute certified seedthrough TCCAs as well as approved private dealers. BADC is also responsiblefor procurement and distribution of fertilizer. Distribution is made throughTCCAs and approved private dealers located in market places. Pesticidematerials and application equipment are ilaported by BADC and handed over tothe Plant Protection Division of the Directorate of Agricultural Extension.This Division is responsible for ground operation, which involves trainingof farmers, storage and cash distribution of pesticide materials, and storage,maintenance and use of application equipment.

ProJect Formulation

36. The proposed project was formulated to tackle the following majorconstraints to rural development:

(a) Poor information on which to base equitable distributionof inputs and credit.

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(b) Lack of clearly defined working procedures for implement-ing the various programs.

(c) Frequent side stepping of approved procedures at Districtand thana levels because of political pressures.

(d) Ineffective supporting services due to insufficientlymotivated, trained, organized and equipped field staff.

37. These constraints have hindered agricultural growth and led tochanneling of the bulk of development resources to the more prosperousfarmers. These farmers constitute the majority of the membershipof the Cooperative Management Committees, Ward Committees and UnionCouncils. They have been in a unique position to submit requests forinputs and credit in the name of the cooperative, a village, a ward ora union and to exert pressure on different levels of government officialsto direct such supplies in their favor. The proposed project would helpdisseminate inputs and services on a more equitable basis. Project fundsand equipment would be provided to reactivate rural works and minor irri-gation programs, and to enable all thana union officers to bring techni-cal services to the villages. Inter-agency coordination would be im-proved by clearly defining work procedures of all project components andresponsibilities of all thana officers,l and by channeling most of theproject works through the TCCA-KSS cooperative system. The joining ofTCCA-KSSs by small farmers would be made attractive, equitable distribu-tion of production inputs and rural credit would be fostered and coopera-tive discipline enforced.

38. The project covers seven thanas in the Bogra and MymensinghDistricts, out of the 413 thanas in Bangladesh. Its main objective isto serve as a model for revitalizing the rural development program. Itis designed so as to be easily replicable in other parts of the countryand, if the initial results of the program are favorable, it is expectedto lead to many similar projects in the near future.

39. The Government and IDA also are cooperating in other efforts toattack the constraints referred to above in paragraph 36. As already noted,the Agricultural and Rural Training Project will build up the extensionsystem. A complementary Minimum Package Project is being developed withassistance from the FAO/IBRD Cooperative Program to help disseminate newtechnologies through the revamped input distribution system. The creditreview mentioned above has led to technical assistance proposals forstrengthening the credit system which will eventually lead to preparation ofcredit projects suitable for external assistance.

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PART IV - THE PROJECT

40. The proposed project has been prepared by an Interdepartmental Gov-ernment Unit for Rural Development (IGU/RD) of the Bangladesh Government,with assistance from the FAO/IBRD Cooperative Program. In 1974, the IGU/RDcarried out project area surveys which were financed under the TechnicalAssistance Credit (Credit No 409-BD, 1973). An IDA appraisal mission visitedBangladesh in November - December, 1974 and a post-appraisal mission was therein February-March, 1975. Negotiations for the proposed Credit took place inWashington in February 1976. The Government of Bangladesh was representedby a team led by Mr. A.K.M. Ahsan, Member, Planning Commission, Ministry ofPlanning. Attached as Annex III is a Credit and Project Summary.

Description of the Project

41. The proposed project consists of a rural works program (ruralroads, drains, rural markets, and fish ponds), minor irrigation (low-liftpumps, shallow tubewells, and hand pumps), and thana facilities (officesand living quarters for thana officers, and cooperative godowns). Itwould also strengthen rural institutions and services (Comilla type coop-eratives, as well as extension, animal health services and fisheries, andcredit facilities). The project would contribute to achieving substantialincreases in agricultural production and income. The project would benefitfrom the Agricultural and Rural Training Project (Credit No. 621-BD) in theseven thanas.

42. Rural Works. The project would rehabilitate six mi of paved roadsand construct 9 mi of new roads to connect two thanas to their Districtheadquarters; improve 300 mi of earth dirt roads; rehabilitate 500 ac ofabandoned fish ponds; construct 40 paved and roofed rural markets; and im-prove 60 mi of drainage channels. These works would generate about fourmillion man-days of employment, primarily for landless people, over a five-year period.

43. Minor Irrigation. The project would replace about 805 existingoversized two cusec low-lift pumps with about 1,400 one cusec pumps overthree years; provide about 2,500 new 1/2 cusec shallow tubewells and about5,000 hand pumps. Low-lift pumps and shallow tubewell equipment would bedistributed by BADC to TCCA-KSS members. These powered pumps and wells areexpected to increase the irrigated rice area from 39,000 ac at present toabout 97,000 ac. BADC and the Bangladesh Agricultural Development Bank (BKB)have recently initiated programs to sell on credit shallow tubewells to farmersor cooperative groups. Since one of the aims of this project is to strengthenthe TCCA-KSS system, it is preferable not to have in the project area acredit arrangement for shallow tubewells that would compete with the TCCA/Sonali Bank system supported under the project. Thus, assurances have beenobtained at negotiations that BADC and BKB would not sell on credit anyshallow tubewells in the seven project thanas during project implementation(Section 3.09 of the Development Credit Agreement - DCA). This approachshould also enable BADC to concentrate on technical services, since, otherwise,the new BADC program would place an additional burden on the already heavyworkload of BADC's field staff.

- 13 -

44. Thana Facilities. The project would complete the construction offour TTDCs and four houses for the Thana Circle Officers (Development), con-struct 11 residential buildings for field officers, and build four new 3,200sq ft fertilizer warehouses and seven new 2,000 sq ft general stores at theTCCA headquarters.

45. Rural Credit. The project would provide about Tk 42 million ofshort-term credit and would finance equipment worth about Tk 70 million (netof price contingencies), through medium-term credit, over a five-year period.The credit would be channeled to the TCCA-KSS members through the Sonali Bank.The short-term credit would be for financing the cost of inputs (mainlyseeds, fertilizers and pesticides) used in crop production. Medium-term creditwould finance the purchase of shallow tubewells, hand pumps, and simpleprocessing equipment such as paddy driers and rice husking machines. Short-term loans would be made for a period of six months for all crops (exceptsugarcane which would require 14 months). Interest rate charges for short-term loans at the farmers' level would be 17.5%, of which 3.25% would be keptby the Bangladesh Bank for contribution to a Guarantee Fund for bad debts andanother 2.5% would be retained by the KSS, also as a provision for bad debts.Users of medium-term loans would put up 10% of the total cost as downpaymentand repay the rest in up to five annual installments. Interest rate chargesof medium-term credit at the farmers' level would be 13% per annum, of which1.5% would be kept by the Bangladesh Bank' for contribution to the GuaranteeFund and 2% retained by the KSS, as a provision for bad debts.

46. To help ensure credit discipline, it would be a condition of crediteffectiveness that the Government furnish to the Association guidelinessatisfactory to IDA for the repayment of outstanding institutional debtsincluding, where appropriate, the rescheduling of the debt to be repaid(Section 5.01(c) of DCA). TCCA-KSS members, in order to obtain funds fromthe proceeds of the proposed IDA Credit, and farmers, in order to be eligibleto join TCCA-KSSs, would have to make arrangements for repaying or reschedul-ing their debts in a manner consistent with these guidelines (Sections 4.05(a)(iv) and (v) of DCA). Since the TIP-KSS pump groups are to be reorganizedinto TCCA-KSS pump groups, TIP-KSS members would thus sign an agreement forrepaying or rescheduling their debts in accordance with the guidelines inthe first year, before their acceptance to the TCCA-KSS membership. Thosewho fail to comply would forfeit their right to belong to any pump group.The UMPCS members would be similarly processed when they want to transfertheir membership to TCCA-YSSs. Farmers not belonging to any cooperative andwithout outstanding cooperative debts would be recruited by TCCA-KSS outright.Loan processing, supervision and bookkeeping procedures of TCCA-KSS wouldbe improved to minimize willful defaulting. Also, an inventory of outstandinginstitutional debts by farmers in the project area would be made under thejoint supervision of the Registrar of Cooperatives and the Director-Generalof IRDP (Section 4.05(a)(i) of DCA).

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47. Rural Institutions and Services. The proposed project wouldstrengthen rural institutions and services by providing office, field, andlaboratory equipment and vehicles for field officers; improving working pro-cedures; and conducting short on-the-job training of departmental officers atthe District, thana and union levels, and of managers, accountants, modelfarmers and inspectors at the TCCA-KSS level. The expected improvements forthe various activities are summarized below:

(a) TCCA-KSS. The main purpose would be to strengthenTCCA-KSS operation and to promote and strengthenequitable input and credit distribution. This wouldbe achieved by: revising the membership registrationto include assets (land and draft animals) and lia-bilities (outstanding debts of members); improvingthe screening of applications for inputs and ruralcredit; following better financial and accountingprocedures; preparing land capability registers formembers; and coordinating the expansion of membershipthroughout the area. Low-lift pumps, shallow tube-wells, hand pumps, processing machines, and fish pondsprovided under the project would be exclusively forTCCA-KSS members. The TCCA-KSS would receive sched-uled visits by extension livestock and fishery officerswho would carry out the mass vaccination, and dewormingof draft animals and poultry.

(b) Agricultural Extension. The main task would be to makethe training of the TCCA-KSS model farmer more effec-tive. The training would emphasize field practiceinstead of classroom teaching. Extension officerswould visit TCCA-KSS villages on scheduled dates. AThana Extension Officer (TEO) would be assi ned to eachproject thana and at least 180 Village Extelsion Assis-tants (VEAs) would be assigned to the 90 project unions.Assurances have been obtained from the Government thatVEAs would be employed full-time on agricultural exten-sion work (section 4.06 of DCA). The objectives forthe next ten years would be to improve basic culturalpractices, and extend HYV on 75% of land identified assuitable for rainfed HYV aman and 50% for HYV aus. Spe-cial attention would also be paid to increase productionof jute and vegetables.

(c) Livestock Improvement. The main purpose would be toreduce the prevailing high mortality and disability bycontrolling major diseases and parasites. Also, demonstra-tions of improved forage and fodder crops would be carriedout.

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(d) Pond Fisheries. The primary objectives would be to bringderelict ponds into production and to provide an addi-tional source of income for landless people in the vil-lages. Some 500 ac of publicly-owned fish ponds wouldbe selected by the Thana Fishery Officers and reclaimedby the Rural Works Program (RWP). Landless people wouldbe organized into TCCA Fishery Cooperatives, to manage thereclaimed ponds. Thana Fishery Officers would operatedemonstration ponds, advise these Cooperatives on pondmanagement and supply fish fries.

(e) Training. The in-service training program, essentialfor strengthening rural institutions and services, wouldbe an extension of the IDA Agricultural and Rural Train-ing Project (Credit No. 621-BD) in the villages and wouldemphasize improved working procedures and content of theregular weekly training sessions for the TCCA/KSS staff.The trainees would include the District and thana IRDP,extension, livestock and fishery officers, and UnionAgricultural Assistants. These officers, in turn, wouldtrain the TCCA-KSS managers, accountants, inspectors andmodel farmers. New officers joining the project wouldalso be trained. Training costs are included under dif-ferent project cost categories.

48. Technical Assistance. The project would employ consultants forassisting the Ministry of Local Government, Rural Development and Cooperativesin implementing the rural works and thana facilities programs, as well asshort-term consultants for providing training to TCCA/KSS staff on ruralcredit operations and subsequent supervision. As need arises, for otherproject components, the Government would arrange for experts working oninternational and bilateral projects in Bangladesh to provide advice tothis project (Sections 3.02 (a) and (b) of DCA). The Central ProjectExecutive Committee (paragraph 58) would collate requests of participatingagencies for such technical assistance. Special training programs (bothin Bangladesh and abroad) would be arranged during project implementationfor key Government officers involved in project implementation.

49. Monitoring and Evaluation. Project implementation would involvea large number of agencies, and would require adherence to strict schedulesand working procedures (paragraph 60). Close supervision and monitoringwould be of crucial importance for coordinating the efforts of variousagencies and for spotting problem areas at an early date. The monitoringsystem for the project would be built into the regular progress reports bythe thana and District officers of the various agencies. Project ExecutiveCommittees (paragraph 58) at the various levels would compile and review thereports and recommend appropriate actions.

50. Due to the importance of this project to rural development inBangladesh, the impact of the various project components would need in-depth evaluation. Particular emphasis would be placed on assessing the

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impact of the project on small farmers and on landless rural people. Evaluationwould be conducted twice -- at the mid-point and at the end of project imple-mentation. Socio-economic data from the 1974 survey by IGU/RD, supplementedas necessary, would be the benchmark. The evaluation would be conductedby an independent agency acceptable to IDA. The Government has agreed tosubmit to IDA for concurrence, within six months of credit effectiveness, adetailed plan for project evaluation (Section 4.04 of DCA).

Project Cost

51. Total project costs are estimated at US$24.7 million equivalent,including US$1.6 million in taxes and duties. The foreign exchange compo-nent is estimated at US$7.7 million or 31% of the total. The project costsinclude about US$1.0 million for physical contingencies (unforeseen expend-itures) and about US$7.2 million for price contingencies (expected futureinflation).

Project Financing

52. The proposed IDA credit of US$16 million would finance about 69%of the total project costs (net of taxes and duties), representing the fullforeign exchange cost and about 50% of local currency costs. Funds equivalentto US$1.6 million would come from the Sonali Bank which, in addition to itspresent portfolio, would provide half of the incremental short-term creditneeds of the project area farmers. Users of medium-term credit would putup US$0.8 million as down payment and would provide another US$2.3 millionas installment payments during the project implementation period. TheGovernment would finance the remaining project costs of US$4.0 million (in-cluding US$1.6 million in taxes and duties). To ensure prompt availabilityof funds for local expenditures, the Government has agreed to establish tworevolving funds -- a Rural Credit Fund for the rural credit component anda Project Fund for all other components -- and to replenish these funds atthe beginning of each month to maintain balances adequate to cover theestimated requirements for the following three months (Section 3.07 of DCA).

Procurement

53. Except for common items such as vehicles and office equipment,each agency would be responsible for its own procurement under the projectand would submit all documents to the Central Project Executive Committee.The Committee would be responsible for procuring common items, and formaintaining records of all equipment and services procured under the proj-ect. Equipment and supplies, estimated to cost about US$4.4 million (netof contingencies), would be procured after international competitive bidding,in accordance with IDA Guidelines. In the evaluation of bids, domesticmanufacturers will be given a preference of 15 percent or the existing rateof import duties, whichever is lower. Vehicles (estimated to cost US$0.2million) would be procured through local competitive bidding under Governmentprocedures satisfactory to IDA, since the number of vehicles involved is

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small and, therefore, it would be difficult to attract foreign bidders forthese contracts. Procurement of off-the-shelf imported items costing lessthan US$10,000 each would be purchased through normal Government procurementprocedures. Such purchases would, however, be limited to US$200,000 intotal. Goods financed with short-term credit would be procured throughcommercial channels.

54. Because most of the civil works, amounting to US$4.7 million (netof contingencies), would be individually very small, labor intensive, scat-tered over a wide area, restricted to seasonal construction, and could notbe grouped into large contracts, they are unsuitable for international, andin some cases for local, competitive bidding. With the exception of theearth works part of the rural works and thana facilities programs, civilworks would be carried out on the basis of local competitive bidding underGovernment procedures satisfactory to IDA. The earth works for the ruralworks and thana facilities programs would be carried out on a force accountbasis as is the usual practice of the Ministry of Local Government, RuralDevelopment and Cooperatives.

Disbursements

55. Disbursements from the proposed IDA Credit would be made as follows:(a) civil works - 70% of expenditures; (b) vehicles, equipment and materials -100% of foreign expenditures if directly imported or 100% of local expend-itures (ex-factory) if manufactured locally or 70% of local expendituies iflocally procured; (c) short-term rural credit - 50% of net incremental loandisbursements; 1/ and (d) consulting services, technical assistance and pro-ject evaluation - 100% of foreign expenditures and 70% of local expenditures.The Central Project Executive Committee (paragraph 58) would be responsiblefor collating, preparing and sending applications for reimbursement to IDA.Each fiscal year, the projects account would be audited by auditors acceptableto IDA. In particular, the audit of the rural credit component would continueuntil all loans provided during the implementation of the project are repaid(in principle, five years after disbursements are complete).

Project Organization and Implementation

56. Agency Responsibilities. The Ministry of Local Government, RuralDevelopment and Cooperatives, has four agencies participating in the project:

(a) Integrated Rural Development Program - IRDP wouldbe responsible for organizing and supervising theoperation and management of TCCA-KSSs. IRDP offi-cers serve as secretaries of the Project ExecutiveCommittees (paragraph 58).

1/ Increase in lending at any time over that of the highest Aman lendingvolume previously. For year one, it would be the increment over the1975 Aman loans made by Sonali Bank in the project area.

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(b) Rural Works Program - A Joint Secretary of theMinistry, with an engineering staff, is in chargeof the RWP. The RWP District Engineers would pre-pare designs and estimates, issue tenders, selectbids and supervise the construction of roads aswell as make payments to contractors.

(c) Department of Cooperatives - The Department ofCooperatives would be responsible for makinginventory of outstanding debts by members oftraditional cooperatives, rescheduling andcausing such debts to be collected and forcooperating with IRDP in re-organizing theexisting non-TCCA low-lift pump and shallowtubewell groups into TCCA-KSSs. It would alsoregister all new cooperatives, including TCCA-KSSs.

(d) Local Government Department - Supervised by the LocalGovernment Department, the Deputy Commissioners ofthe two Districts, and the Circle Officers (Development)would serve as Chairmen of the District and Thana Proj-ect Executive Committees respectively (paragraph 58).The Thana Circle Officer (Development) would be respon-sible for the construction and rehabilitation of earthdirt roads and rural markets, fish ponds, and drains.

The Ministry of Agriculture has two agencies participating in the project:

(a) BADC - BADC would be in charge of procurement anddistribution of low-lift pumps and sha,llow tubewellequipment. The BADC Thana Irrigation Officerswould be responsible for selecting sites, installingthe equipment, supplying oil and fuel, and training,operators. The BADC thana workshops would be respon-sible for maintenance of pumps and equipment. Fertil-izer for TCCA-KSSs would also be allocated and distributedthrough BADC.

(b) Directorate of Agriculture (Extension and Management)The Directorate would be responsible for revitalizingthe model farmer training and extension programs.

The Ministry of Forestry, Fishery and Livestock has two agencies partici-pating in the project:

(a) Livestock Department - The Livestock Department wouldsupply the vaccines, serum and veterinarians, andimplement vaccination and forage/fodder demonstrationprograms.

(b) Fishery Department - The Fishery Department wouldimplement the fish pond component of the project.

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The Sonali Bank would be responsible for extending both the short-term andmedium-term credit to TCCA-KSS members.

57. Coordination. As the previous paragraph shows, a large number ofagencies, at all levels of administration (from Central level down to villagelevel), would participate in the implementation of this project. Thus,ensuring proper interagency coordination is of critical importance for thesuccess of this project. To this end, a number of coordinating committeeshave already been established.

58. Project Executive Committees. There are seven Thana ProjectExecutive Committees, two District Projec; Executive Committees and aCentral Project Executive Committee. These committees are in charge ofday-to-day project follow-up and execution. Thana Circle Officers (Devel-opment) serve as the Thana committee chairmen, and District Deputy Commis-sioners chairmen of the District committees. The Director-General ofIRDP will be the chairman of the Central Project Executive Committee (Section3.03(b) of DCA). IRDP officers serve as executive secretaries of the committeesat all three levels. All participating agencies are, represented on the threelevels of committees, thus maintaining their respective chains of command. Inparticular, the Central Project Executive Committee would be responsible foroverall project execution, and for reporting progress to IDA. The Committeewould review the annual work programs of the various participating agencies.It would also manage the two revolving funds to be established for the proj-ect. The IRDP Director for Extension and Training serves as the secretaryof the committee.

59. Central Project Coordination Committee. A more senior committee,the Central Project Coordination Committee, would be established under theco-chairmanship of the Secretaries of Agr.Lculture and of Local Government,Rural Development and Cooperatives (Section 3.03(a) of DCA). Its membersinclude: Chief of Rural Institutions Division, Planning Commission; JointSecretary Ministry of Forestry, Fishery and Livestock; Chairman of BADC;Director, Agricultural Credit Department of Bangladesh Bank, and Director-General of IRDP, who would also serve as the secretary. The Committee wouldsettle policy issues. The Committee would see to it that Government projectfunds will be allocated to the implementing agencies according to the projectbudget, that major coordination problems are resolved and it would correspondwith IDA on policy matters related to the project.

60. Implementation Procedures. The project would focus on providing areplicable pattern of interagency coordination at the field level, not onlyby delineating the areas of responsibility for the various participatingagencies, but also by establishing clear work procedures. The Central Proj-ect Coordination Committee would approve detailed work procedures submittedby the Central Project Executive Committee. Approved procedures would beissued as official orders by the ministries concerned (Section 3.03(c) ofDCA). Issuance of the relevant orders is a condition of credit effectiveness(Section 5.01(b) of DCA). The Government has agreed to implement the variousproject components in accordance with procedures and timetables acceptable

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to IDA (which would include, inter alia, the provision of necessary additionalstaff) (Section 3.08 of DCA).

61. Operation and Maintenance. The estimated operation and main-tenance (O & M) expenditures, during the five-year implementation period,for equipment and vehicles for the various participating agencies have beenincluded in the project cost estimates. Once the implementation of theproject is completed, the Government would provide adequate funds for 0 & Mcosts through its regular budgetary appropriations to the concerned agencies.The 0 & M costs of low-lift pumps, shallo-w tubewells, processing machines,fish ponds, and rural markets would be borne by the users. The maintenancecost of thana facilities, roads, and drains would be borne by the Government.It is expected that the TCCA-KSSs will be financially self-sufficient by thethird year of project implementation.

62. The BADC-owned low-lift pumps would be rented to user groups. Inaddition, the pump group would pay for diesel oil, spares and the pump driver.These charges would cover only about 50% of the overall cost of pump irrigation.They would represent a substantial improvement, however, since in the past,BADC used to pay for the spares and the driver as well.

63. Currently, vaccination of animals and poultry is provided freeof cost. This policy reflects in part the ineffectiveness of the currentprograms. To promote a rapid acceptance of the mass vaccination and deworm-ing programs proposed under the project, the existing policy would have tobe followed until the project has produced a visible impact at the villagelevel. It has been agreed that within three years of credit effectiveness,the Government would review the situation and propose a fee collection planfrom the users to recover at least the 0 & M cost of the equipment andvehicles in use for the livestock disease control program, as establishedunder the project (Section 4.03(b) of DCA).

64. The Government has agreed to present to IDA for its concurrence,within one year of credit effectiveness, proposals for the management ofrural markets to be constructed under the project with a schedule of feesto be collected from the users of these rural markets (Section 4.03(a) ofDCA).

Implementation Schedule

65. Project implementation would take five years. All operationalequipment would be procured in the first year. The construction of projectbuildings would be completed in two years; the construction of paved roadsand replacement of low-lift pumps in three years. Other project works wouldbe spread over five years in line with the growth of TCCA-KSSs.

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Environmental Impact

66. The project would enhance the environment by improving land drain-age, rehabilitating stagnant fish ponds, and providing water supply to ruralmarkets and road access for rural health services. The extension servicewould teach farmers the safe use of pesticides.

Benefits and Justification

67. There would be substantial foreign exchange savings (about US$15.0million per year) through increased rice production (75,000 tons of rice).The project would also help increase the draft animal power supply and pro-duction of fish (which forms 80% of the protein supply in the Bengali diet).The cultivators in the project area would benefit from increased farm in-comes. One of the most important (and possibly most difficult to attain)aims of the project would be to ensure that the larger farmers would not mono-polize the rural institutions supported under the project. Through betteroperation of the rural institutions, more efficient and equitable distributionof inputs, better and more frequent contact between field workers and farmers,and more credit discipline, small farmers would be expected to become moreactive in, and benefit more from, rural institutions. The landless laborersand the underemployed marginal farmers would benefit from increased employmentopportunities, from intensified agricultural and fishery activities, ruralworks programs, and secondary services such as transportation, marketing andprocessing. The rural population in the area would also benefit from improve-ments in social infrastructure such as village markets and roads. Perhapseven more important is the role of this project as a prototype for strengthen-ing and revitalizing the country's rural institutions which are vital toimproving the conditions of the rural people.

68. The project's economic rate of return is estimated to be over 40%.The rather high returns estimated for this project are due to the fact that,in contrast to the conventional capital intensive projects, the primaryemphasis in this project is to achieve increased production by promotingpractical and better technology (such as rainfed HYV cultivation) throughmarginal (capital) investments and institutional improvement. It should benoted though, that the preparation and implementation of projects such asthis require mobilization of all field level officers to perform theirduties effectively and in a coordinated and disciplined manner. Althoughthe project harbors chances of spectacular success, given the difficultiesin project coordination and implementation in this field in Bangladesh, therisks of failure are also considerable. However, these risks are well worthtaking because of the importance of the project to Bangladesh's future ruraldevelopment.

69. An important issue is the financial, administrative and technicalfeasibility of replicating the project in other areas. The model developedin this project would be suitable for most of the country. Financially,the project represents an investment of about US$100 per rural family,spread over a five year period. However, this low per family investment

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should not hide the fact that extending the project to the estimated 10million rural families in Bangladesh would still represent a cost of aboutUS$1 billion, a large amount for Bangladesh. In addition to existing staff,the project would require about 300 Government officers, involving US-0.1million equivalent in salaries per year. Expanding the project to the restof Bangladesh would entail about US$5.5 million equivalent in salaries peryear. Thus, besides the need to overcome Bangladesh's obvious administrativeconstraints, substantial further foreign assistance will have to be enlistedif the project is to be replicated throughout the country. Administratively,the project, which supports on-going rural programs, is designed to make themaximum use of rural institutions and organizations and to strengthen andimprove them. It is hoped that the improved working procedures applied inthis project would be transferable, in total or in parts, to other areas inthe country. The on-the-job training programs emphasized in great detail inthis project should produce a fairly large cadre of middle-level fieldstaff, well versed in the planning and implementation of such projects.Finally, the project is essentially based on the promotion of HYV cultivationunder rainfed conditions and of better utilization of surface and groundwaterthrough minor irrigation schemes. Both of these have a large potential inmost parts of Bangladesh, thus making the project experience applicable ona country-wide basis.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

70. The draft Development Credit Agreement between the People'sRepublic of Bangladesh and the Association, the Recommendation of theCommittee provided for in Article V, Section 1(d) of the Articles ofAgreement, and the text of the draft resolution approving the proposedDevelopment Credit Agreement are being distributed to thke ExecutiveDirectors separately.

71. Features of the draft Development Credit Agreement which are ofspecial interest are referred to in paragraphs 43, 46, 48, 50, 52, 58, 59, 60,63 and 64 of this Report. The establishment of the Rural Credit Fund andthe Project Fund and the deposit of an initial amount of Taka 4.0 millionin each Fund, the issuance by the Government of the necessary orders tothe Central, District and Thana Project Executive Committees on thedetailed procedures, acceptable to IDA, for the implementation of theproject and the submission to IDA of guidelines, acceptable to IDA, fortotal or partial repayment of outstanding debts, are additional conditionsof effectiveness of the Credit (Section 5.01 of DCA).

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

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PART VI - RECOMMENDATION

73. I recommend that the Executive Directors approve the proposedCredit.

Robert S. McNamaraPresident

May 7, 1976

ANNEXIPage I of 4 pages

TABLE 36R*AIILAOESN SOCIAL INDICATORS OATA SHEET

............... S~~~~~ANOLADESH REFERENCE COUNTRIES (1970)

TOTAL 182.84 MOST RECENTAOgIC. 97.1 1960 1970 ESTIMATE INDONESIA INDIA MALAYSIA

GAP PER CAPITA(U) So.O O.0; 00100 1 4.

POPULATION AND VITAL STATISRICS

9OPULATION (MIT)&tR. 4lLl.ION) 53. i.6 74.0 115,6 536.1 10.9

POPULATION DENSITYAER SQUARE NM4. 37. 9b.0 538.0 61,0 166.0 33.0

PER SQ. KH. AGRICULTURAL LAND .* 745.0 .

VITAL STATISTICSCRUDE BRTRHI RATE PER THOUSAND £47.0 40.1 47.0 A2.0 38,0 34.0 f

CRUDE DEATH RATE PER THOUSAND 10.0 21.0 17.0 21.0 16.0 7.0 77-INFANT M4ORTALITY RATE 1/THOU) .. 40.0 3300.0.0 .0 414 0 7!a

LIFE EXPECtANCY AT BIRTH CYRS) 4. oB, 58.0 07.4 50. 6 O4.07

GROSS REPRODUICTION RATE 3.5 3 .1 . 3.2 2.9 0. 8

5OPULATInN GROWTH RATE (1)TOTA-L .. 2.7 2 .6 0.0 2. 3 3 .1

URBA * , , 3.6 a.I

JR5*N POPULATION It OF TOTAL)... 7.0 17.0 20.0 09.0 I

AGE STRUCTURE (PERCENT)0 TO 14 YEARS 47,0 .. 44.9 44.1 42.0 45.0/a

is TO 68 YEARS 4IQ.t .. 2.2 S3.4 55.0 S2.o77

65 YEARS AND OVER 3. 9 2.9 0.5 3. 0 3.077

AGE DEPENDENCy RATIO 1.0 .. 0,9 0,9 0.8 0 ,£9 a

ECONOMIC DEPENDENCY RATIO I .6 ..a 1.4 /a 1.?Ila I1.777

FAMILY PLANNINGACCEPTORS (CUJMULA0IAE, THOIJI .... 2 59.3 11308.0 220.1

USERS (S OP MARRIED OOMEN) ... .*8.Il/a

EMPLOYMENT

TOTAL LABOR FORCe (THOUSAND) 17100,0 22300.0 26 2 0 0 .0 2 2 10 00a.0 lb 2900.0/a

LABOR FORCE IN AGRICULTURE (t) 76,0 71.0... 71.0 47.077.

JNEMPLOYED 01 OP LABOR FORCE) ... 15.0/b 00I 3.0 Ic 6.077a4

INCOME DIStRIBUT1JN

I OF PRIVATE INCOME REC'D BY-HIGHEST St OF HOUSEHOLDS 18,3 /b 16.7 Ia . 25.0 Id 28B. 3

HIGHEST 20t OF HOUSEHOLDS 40.57?m 02 .377 53.t 7-d? 560

LOOEST l0t OF HOUSEHOLDS 6,9 7? ,7.977 .. . uoT 3.5

LOMEST A0t OF HOUSEHOLDS t7,97 7-b 19.677 I. .3. If7l 11.2

DISTRIBUTION OFr LAND OWNERSHIP

I OWNED Ay TOP 10% OF OWNERS ,. 3oSlb .

t OMNED BY SMALLEST 101 COWNERS .. I.7F .. q.

HEALTH AND NU7RITION

POPULATION PER PHYSICIAN 10000 c 600I 10000.0 27614.0 41800.0 3860,0/.c

POPULATION PER NURSING PERSON 11 0000:00 le 7243,,00 577. 77780o: 0 1010 80 .0

POUATD ER HOSPITAL BED 11000 sz do 6790:0 40100 5110.0 170.

PER CAPITA SUppLY OF-CALORIES It OIF REQUIREHENTS) .. , eo 89.0 93,0 93. OL±

PROTEIN tGB6 Ms pER DAY)... 40,0 43,0 530 09 0/a a

-OF AHICH ANMLADPULSE ,.... 0, lb:. in _

)EASH BATE C/THOU) AGES 1.0 ,.,*.....

EDUCATION

ADJUSTED ENROLLMENT RATIOPRIMARY SC4OOL 42.0 le 50.0 Ia 56,0 69.o 68.0 89.1a l

SECONSARY SCHOOL &.E 1.7 .3. 60 3.7

YEARS OF SCHOOLING PROVIDED(FIRST AND SECOND LEVEL) 1o.o 10.0 10.0 12.0 12.0 13.Oo.-

VOCATIONAL ENROLLMENTu% Or SECONDARY) I. .0 .. 28,0 6.0 /e a,/a

ADULT LITERACY RATE (tZ.. 2.$... 7.7

HOJSINAG

--;MS;NS PER R0D4 (AVERAGE) 2a. a ,. .3

OCCIUPIE DWELLINGS VITH0UTPIPED MATER ES ., . ,, 50

ACCESS TO eLECTRICITO 50/

(Z OF ALL OWELLING9) ... .. . 43.0

RURAL DWELLINGS CONNECTEDTO ELECTRICITY (X1. .. . . 3.

CONSUMPTION

RADIO RECEIVERS (PER THOU POP) . 6.0 1 14,0 at0 410

PASSENGER CABS (PER THOU POP) ,, 10 1.0 0040 2.

ELECTRICITY (KWH/YR PER CAP) 3,aa0¶202. 1110 360/

NEWSPRINT (KG/YR PER CAP) ... 02.2034.0

SEE NOTES AND DEFINITIONS ON REVERSE..............

ANNEX. IPa-ge2 of Co pages

NOTES

Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961, for 1970 between, 1968 end 1970, and for Most Recent Eotionte between1971 end 1973.

onSejection, of Malaysia as an objective country is based on Malaysia's oucceos ir -oltining a high rate of econnoc. growth and an adequtte1e-1 of welfare concurrently with diveraifing its econoic structure .

RANGIAIESN 1960 /a Ratio of popolation under 15 and 65 and over to total labor force; /b 1963-6-; In Registered, not allpracticing to the country; /d Government hospital establishnets OEtY; /b Apps;Fiiste enrolloent 00 percentage ofpopulation in 6-10 and U1-iS age groops respectively.

1970 /a 1966467; /b 1967-68i &g Re 0aiarxed, out all practicing in the country; /d Ooveeet hospiteal eetablishne±to only;/a ApprexL=te enrollaent en percmentge of population in 6-10 and n.-is age groups respectivelyv.

MOST RECENlT ESTIMAT'E: L. kaio of population under 15 and 65 ann ove.r to total labor force; /b Mainoly oeoployed workers ..eeklog

their firet job.

INDONESIA 1970 /a Registered applicants for sorb.

INDIA 1970 /. kaio of population under 15 and 60 and nest to labor force age 15-59 years; /b AID estmoate of labor force in geggroup 15-59. IBRD report giveo a figure of 180.1, sllion lamed on 1971 population ceneus. The difference io due tochanges in the definition, of a workcer. In the 1971 census, persons were classified only on the basis of their mi.oactivities. This led to the exclusion of oeveral categories such on housewives; /c Registered applicants forwork; /d 1967-68 ; /e 1965.

MALAYSIA 1970 /a West Malaysia; /b Registered applicante for worh; /g Registered, cot .1f practicing in the country; /d Governmetonly; /e 196b-66; If 1967; Ig Piped water inside.

N7, April 3O, 1976

…-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --I - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -DEPINITIONS OP SOCIAL INDICATORS

Lasd Area (thou he Populatio ocpr oursing person, - Population divided by smeof practicingTotal -Totol sorfoce area camprising land are.aond island waters. mal aed female graduate nurse, "tr-i-sd" or 'certified" nurses, wed

Aei.-Moot rece.nt estimate of ogricultorol orea mend temporarily or per- oumilinry perocoel with traimino or eaperisocs.--netly for crope, paw torso, cachet & bitchen gardena or to lie fallow. Population per hospital bed - Popolati.n divided by nuber of hospital

bedo available io public and private general1 aad opecialised hospitalGNspeor capita (US$) - GNiP per capita sotbotee at market Prices, calco- end rehabilitation centers; eocluden noroing homes end establiohitset

laced by sam conversion method as World Beob Atlas (1972-74 basis). for custodia1 and preventive care.per capit.a.ppsly of ca1-ien ft of resoir--ets) - Coopoced from

Population and vital otatistice energy equivalent of net food supplies available to country perPPoplation, (old-yr. million) - An of July firer, if not availebls, average capita per day; available aupplieo conprine domestic prodoction , imports

of two emd-_year estimates. le.. sporto, and changes in tcoch; nor uppliso soclude asmal tend,seeds, quantitlon owed in food prceniog and b ..ean in diotribution;

Ppopl.ti-s demaity - cot 0000rc ho - Mid-yost population pint square kilo- requirmanto were eatimated by PAO based on Physiological needs formeter (100 hebarters) of total area, no 1a activity and health considering omviros-omtal tsaprature, body

Population density - per assre koe of agric. lend - Computed as above for weighto, age and sea distribotions of population, and allowing lit foragnicult-rl land only. waste at honsehold level.

Per capita awpsly of protein Coron per day) - Protein content of pee

Vital statistics capita net supply of food Per day, met supply of food is defined esCrudo birth rate per thenoand - Annu al live births per thounand of aid-year above, reqoirenento for all countries entablished by ESDA gEo-oic

population; usually fine-year averages ending in 1960, 1970 and 1975 inc Rese..rch Services provide for a minimu allowance of 60 gram of totaldeveloping coutrien. protein per day, and 2D gr-n of animal and pubs. protein, of which

Crude death rete per thooseod - Acanal deatho per thousand oi mid-year 10 grams h-u1d be animal protein; the.e trandardo are lower thanpopulation; ensually five-year averagen ending in 1960, 1970 and 1975 for those oi 75 gran of total protein anod 21 gra-o of animal protein asdeveloping coutris,an average for the world, proposed by FAO in the Third World Food

Imfast oortalitv rate /hu -A A.mua deatha of inf-nte onder one year of SurveY.ege per thounand live birthe. Per capita protein enpply frto animal and poles - Protein aupply of

Life espectaocV or birth Cyr.) - Average nuber of yearn of life remaining fond derived frun a-ima1 and pu1.os is gram per day.at birth, ossally five-year averagno coding in 1960, 1970 and 1975 for Dosath rate C/tbou) ages 1-4 - Annual deatha per thounood is ags group 1-4daveloping countrine.. yeara, to children in this aeg group; augges ted aamindicator of

groso reprodoction rate - Averoge muber of live daughters o woman will ma1ntrition.bear in hsr norma reproductive Period if she epenionces present age-opecifin fertility rates; oualIly five-year averageo ending to 1960, 1970 Edeca.tio.and 1975 for developing contire. Adlunt.d enrollmet ratio - primary school - Enrollment of all agew an

Population growth rate Cl) - total - Compound anmoal growth rateo oi mid- percentage of primary school-age population, include, children oged

year population for 1950-60, 1960-70, aod 1960 to most recen.t year. 6-11 years hut adjusted for different lengths of primary education;Populatio- growth rate it) - urban - Cemputed like growth rate of total f or -outeiro with universal .do.ati-a, nsrollsot coy conesd 100%

popoletios; differont defiaitiona of urban areas may affect tempera- since omen popile ore below or above the official ochonl age.ility of dat amog coutr ie.. Adjusted enrol1nmt ratio - secondary school - Cemputed ao above,

Ulrba population f% of total) - Ratio of urban to total popuIlaion, diffe- socondary educa.tion requires or least four yeara of approved primaryrent de finititona of urba .-ea. may afiet comparability of data among iostrution; providee general, vocatiosal or teacher training

countries. ~~~~~~~~~~~~~~~~intruc tions for popila of IS to 17 yearo of age, correopondenceAnn otructure (perc-t) - Childrem (0-li years), worbing-age (15-64 years) couroes are generally eocloded.

adrtired (65 years and over) on percentages of eId-year popalation. Yeoro of sehoolino provided Crtenaecond levels) - Total yearn ofAge,d1eonode-cy ratio - Ratio of popolation umdr 15 ond 65 and over to scooin;etseonay evl voatinald srcinmyb atal

those of agea 15 through 64. or completely encluded.Uco-oic dependency ratio - Ratio of population, under 15 and 65 and over Vocational enrollment t of -aecndary) - Vocotiono1 in,titutieen

to the lbo freiaggouof1-64 yeara. include technical, induntrial or other prugrams which, operate iode-PoiyPamn-7-AS..on cmlaie to)- Comulativo sonber of pendontly or a. depa-m-nto of secondary institutions.

oc eptore of birth-control davices under au.pi... of national folly Adult literacy rate Ct) - Literate oduIte Cable to red sod write) 00planning program wince ine.ption. percentage of total adelt population aged 15 yearn mid over.

Fonily planning - usera ft of married wumn) - Percentages oi marriedwo-.o of child-bearing age (15-44 years) who one birth-control devices Hmsoingto all married w-e in soam age group. Persons per roum (average) - Average moocer of Persona, per room in

occu pied convetional dwellings in urban areas; dwellings .ealude non-Pooploymeet pe-maset oIructures and unoccopied parts.Total labor force (theunasd) - Ecomoically active persons , icoluding Occupied dwellings without piped woter (%) - Occupied conve -ntional

armd forces and umonployed hot eacludiog housewives, students, etc. dwellings in urb-an sd rural arson without inside or outside pipeddefinitions in variun coutries re not comparable. water facilitieo so perc...tage of all occu pied dwellings.

Labor fores in ariculture % -Ariutua labor force (is facoig, Access to electricity (% of all dwlins - Convestio-al dwellings withforeotry, bunting and fishing) as percestage of total labor force, electricity in living qunrters as percent of total dwellings in urban

Unemployed Ct of labor force) - Unemployed are usually defined as person and total areas.who are able and wi lling to take a job, out of a job on a gives day, Rural dwellings connected to electricity (t) - Conputed aso above forremained out of a job, and ..eebing work for a specified minm- period cral. dwellings only.not "exeding one week; may not be comparable between couentries don todif feren t definition of unemployed and source of data, e.g., employ- Consumptionsent office sta titics, nemple surveys, conPulsory uneployment insurance. Radio receivera (per thojpop) - All types of receivers for radio broad-

caste to general public per thousand of population, eacludes unlicensedInc-m diotrihution - Percentage of private incomse (both in cash and kind) receivers is co0atrien and in yearn when regintratios oi radio setews

re..si-ad by rioheat 51, richoat 201, poorest Sit, and ponr.et 40% of to eifeot, date for recant years say not ho onparable itcs mosthouseholda. coontries abolished Icens..ing.

Distrib.tion of land - h~~~~~~~~~~ Passe.nger ears iper thou pop) - Passenger cars cmprise umter,.ara seatingnioriboron o lan ow Erai - Percentages of land owned by wealthiest lees than eight persons; ...cludes ambulonces, hearses sod ailitary

10T nTIj _r_eiFTf0 of lend owner.. vehicles.

IL-Ith Ind Nutriti- ~~~~~~~~~~~Electricity Cloh/yr per cop) - Annual comnonption of induatrial, cnr-Oealth sod Nutrition ~~~~~~~~~~~cial, public sod private electricity is kilowatt hours per capita,

Ppoplation per physician - Population, divided by number of practicing generally honed on production, data, without allowance for losses ispbysiciase quoalified item a edical school at univereity level, grids but allowing for imports and esporto of electricity.

Newsprint (kg/yr per cap) - Per capita sonal consuption in kilogramsestimeted from dometic production plus met imports fUeeeprint.

ANNEX I

ENOfOD EWPMK! DALTA Page 3 of 4 Pages(Amount. imn millilon. of u7.s. dollars)

Av.196769 19 -Actual Proete 19 60., 19 65 -1 19 73- 17- Av.Av.96-691972/73 19 73/74 1475 19 5 36 19 65/ 19 70/ _97 97 16-91 3/7419 75/76NATIONALL ACCOUNTS19776f767 7j 195 197 -

In Constant 1972/1973 Prices & Exchange Rates Averae Annual Growth Rates As Percent of GDYGross Domestic Product 6,012 5,663 6,201 6,325 6,800 7,100. . . 5.7 5.9 98.5 101.8 101.6Gains from Terms of Trade (+) 89 - -109 -83 -106 -118 1.5 -1.8 -1.6Gross Domestic Income 6,101 5.r 6,092 r424 *TM M 5.6 2.5 5.0 5.8 17~ TU TT

Import (mncl. NES) 879 747 617 687 817 777 20.6 6.8 -4.1 6.3 14.4 10.1 12.2Exports "(import capacity) 598 373 220 252 246 279 12.3 -14.6 -17.8 5.2 9.8 3.6 3.7Resource Gap 281 374 397 4r35 491 -77 -98.5

Consumption Extpenditures 5,668 5,800 6,226 6,424 6,870 7,158 5.7 3.6 5.2 5.6 92.9 102.2 102.6Investment (mncl. stocks) 714 237 263 253 395 326 13.3 8.8 3.3 13.5 12.9 4.3 5.9

Domestic Savings 433 -137 -134 -182 -176 -172 4.3 10.0 -15.3 2.9 7.1 -2.2 -2.6National Savings 416 -113 -99 -153 -148 -132 8.7 20.5 -16.4 7.7 6.8 -1.6 -2.2

MERCHANDISE TRADE Annual Data at Current Prices As Percent of Total

Imports .. 100 135 135 155 210 . .. 12.9 23.2 .. 16.9 12.1Capital goods .. 176 237 379 388 411 . .. 46.7- 4.1 .. 25.8 30.2Intermediate goods 6wsLfues1)Fuels and related materials

of which: Petroleum . 23 87 155 145 152 . 159.6 6.0 . 9.5 11.3Corsntion goods 428 4A39 733 598 577 30.9 -8.8 .. 47.8 46.5

Tota Msrch. Torts (cif) 547 727 918 1,402 1,286 T3 . . 89 -. 0. 0.

ExportsPrimar~y products (emol. fuels) .. 146 153 113 130 166 -12.0 21.2 .. 41.1 39.2Fuels and related materials

of which: Petroleum2.Mnfcued goods .. 193 219 246 202 239 12.9 2.6 .. 58.9 60.8

Tota Mac .E9ports fob) 3J 2 iY- 307 2.9 8.8Tourism and Border' TradGe10. 10.

Merchandise Trade Indices 1972/73 100Export Price Index 61 100 108 130 114 122 14.0 -3.1Import Price Index 52 100 156 191 172 189 . 38.2 -0.5Terms of Trade Index 118 100 69 68 66 65 -17.5 -2.2Exports Volume Index 148 100 102 84 91 103 -8.3 10.7

VALUJE ADDED BY SECTOR Annual Data at 19 72/73 Prices and Exchange Rates Average Annual Growth Rates As Percent of Total.

Agriculture 3,542 3,402 3,788 3,713 4,100 4,200 . .. 4.5 6.4 59 61 60Industry and Mining 42 412 472 467 495 530 . . 6.5 6.5 3Z 31 3Service 2,83 18 4 1.941 ..2..145 2,205 2,37 7.7 5.1 -

Total 6,012 5,663 6,201 6,325 6,800 7,100 5.7 5.9 100 10 10

FUD3LIC FINANCE As Percent of GDP(Central Government)

Current Receipts 317 280 400 471 576 615 29.7 14.3 5.3 6.5 8.5N :n ~~~~~~365 364 450 420 534 555 7.4 15.0 6.1 7.2 7.8

Bogtr avings -48 -84 -50 51 42 60 0.0 -0.7 0.7Other Pablic Sector . . ... ...

Public Sector Investment 421 213 237 220 280 270 1.,6 10.8 7.0 3. 4.1

us $ million LACURPENT EXPENDITURE DETAILS Actual Eat. Proj. DETA-IL ON At end 1972/Z.P and ER

As % Total Current Expend.) 196 9

/7

192/73

1973/74 1974/75 1975/76 PUTBLIC SECTOR First Plan %Of TPtalEducation 1.. 14. 7 I~ -- T.3 T3T INVESTMENT PROGRAM (19 7 3/74 - 1977 /78)Other Social Services . 4,0 3.8 4.3 4.7 Social Sectors 758 15.3Agriculture and Agriculture 1,302 26.4other Economic Services . 11.2 8.4 7.2 7.1 Industry and Mining 1,024 20.7

Administration and Defense . 67.4 69.0 68.0 66.7 Power 529 10.7OYther . 2.7 4.1 5.0 6.5 Transport and consamicationa 802 16.3Total Current Expenditures 10 0. 0 10 0.0 T100. 0 100.0 Other 524 10.6

_____________________________________________________________________ Total Expenditures 4,940 100.0

SELECTED INDICATORS 1960- 1965- 1970- 1973- FINANING(Calculated from 3-year averaged data) 1965 1970 175 1978

Average ICOR .. 3.74~ ~~~~~~~~ .. 188 public Sector Sav-ings 784 1.Import Elasticity . 1.29 .. . Program aid counterpart 2,022 40.9Marginal Domaestic Savings Rate . 0.22 .. . Foreign Project Aid 1:009 20.4Marginal National Savings Rate . 0.35 . Total Financing 4,940 100.0

IABOR FORCE AND Total Labor Force Value AddedPe Wore (172/23 Pric es& ExC Ra~tes)OUTPUT PER WORKER In Millions _%_of Total 1961 - 73 In U.S.Dollars Pekrcekntoil iverage 170 -73

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

Agriculture 16.1 20.5 85 78 2.0 .. 166 .. 76Industry 1.0 1.8 5 7 5.0 .. 229 .. 105Service 1.8 3.9 10 15 6.7 .. 474 .. 222Total 18-.9 =2. 2 0 T 00 2h9 -I= =2 -4.9

not applicable - nil or negligiblenot available -- less than half the

smallest unit shownNotes: Figures are on fiscal year basis (july 1-june 30). Oats prior to 1972/73 pertain to eartwhile East Pakistan.1/ These are original Plan targets.

Al.~~~~~~~~~~~~~~~~~~

ri~~~~~~~~~~~~~r

F uflo 1 NS ol,% 1P

; $ q ' | | X> r |

j ~~ ~~~ b | N |g

s-n w t1 s nat ::1:A

ANNEX IIPage 1 of 11

BANGLADESH

STATUS OF BANK GROUP OPERATIONS

As of March 31, 1976

A. IDA Credits to BangladeshUS$ Million net of

Credit Exchange AdjustmentNumber Year Purpose Amount Undisbursed

339 1972 Cyclone Area Reconstruction(replaces Credit No. 228-PAK of 1971) 25.0 12.3

340 1972 Chandpur Irrigation II (replacesCredit No. 184 of 1970) 13.0 8.4

341 1972 Tubewells (replaces Credit No. 208-PAKof 1970 14.0 5.5

343 1972 Telecommunications (replaces partof Credit No. 145-PAK of 1969) 7.3 1.7

345 1972 Reconstruction Imports 50.0 0353 1973 Small-Scale Industry (replaces

Credit No. 192-PAK of 1970) 3.0 0.4367 1973 Chittagong Water Supply (replaces

Credit No. 42-PAK of 1963) 7.0 1.9368 1973 Dacca Water Supply and Sewage (replaces

Credit No. 41-PAK of 1963) 13,2 1.8S-14 1973 Irrigation Engineering (replaces

Credit Nos. S-8-PAK and S-10-PAKof 1969 and 1970) 3.15 0

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

407 1973 Education (replaces Credit Nos. 49-PAKand 87-PAK of 1964 and 1966) 21.0 9.5

408 1973 Highways (replaces Credit No. 53-PAKof 1964) 25.0 16.4

409 1973 Technical Assistance 4.0 3.0410 1973 Cereal Seeds 7.5 6.7424 1973 Inland Water Transport Rehabilitation 8.7 6.6458 1974 Imports Program 50.0 0487 1974 Second Telecommunications 20.0 19.1515 1974 Third Imports Program 75.0 11.8527 1975 Ashuganj Fertilizer 33.0 31.1529 1975 Consolidation Credit 31.0 0533 1975 Population 15.0 15.0

ANNEX IIPage 2 of 11

BANGLADESH

STATUS OF BANK GROUP OPERATIONS

As of March 31, 1976

A. IDA Credits to BangladeshUS$ Million net of

Credit Exchange AdjustmentNumber Year Purpose Amount Undisbursed

542 1975 Barisal Irrigation 27.0 27.0591 1975 Fourth Imports Program 100.0 70.6605 1976 Karnafuli Irrigation 22.0 19.2621 /a 1976 Agricultural and Rural TRaining 12.0 12.0622 1976 Second Technical Assistance 7.5 7.5

SUBTOTAL 614.05 288.30Principal Repayment 0.20Credits held by Association 613.85

B. IBRD Loans to Bangladesh1087 1975 Consolidation Loan 54.9 0

TOTAL 668.75 288.30

/a Credit signed March 25, 1976, not yet effective.

ANNEX IIPage 3 of 11

C. PROJECTS IN EXECUTION 1,

Cr. No. 339 Cyclone Area Reconstruction Project; US$25.0 Million Creditof October 18, 1972; Effective Date: January 17, 1973;Closing Date: June 30, 1976

Implementation of the original project, financed under Credit No.228-PAK of 1971, had not commenced prior to the suspension of disbursements.Progress on the implementation of the Inland Water Subproject under thisCredit has been slow. Only 78% of the funds have so far been disbursed,compared with an estimate of 100% by June 30, 1974 at the time of appraisal.Repair and construction of terminals have been delayed because of lack ofmaterials and slow land acquisition; but by September 1975 all contracts oncivil works were awarded, except one minor contract which was withdrawn, andall works are now expected to be completed by late 1976. A contract forthe construction of five service-support vessels amounting to US$3.5 millionwas awarded in December 1974, and all have been received. Contracts have beensigned for all equipment component of the telecommunications system. Earthworkhas been completed for about 50% of primary roads, and 70 cyclone shelters areunder construction or complete. Activation of the cyclone warning system isexpected soon. Progress was slow initially due in part to administrativedelays and the severe shortages of construction materials in Bangladesh.Construction materials are now available, progress has improved somewhat.Project completion is expected to be about two years behind the scheduleanticipated at appraisal. In June 1974, the Government submitted to theAssociation a proposal for reducing the scope of the project in order to copewith the sharp increase in construction costs since the Project was appraised.The proposal involved reductions in the feeder roads to be financed by theCredit (financing for these roads has been obtained from the World FoodProgram), reductions in the fisheries subproject, and minor reductions inother project items. Given the very early stage of procurement under theproject, it was decided not to formally amend the project at that stage,and it was agreed that the Government's proposals for reducing the projectprovided a reasonable basis for proceeding for the time being. A revisedproposal from the Government based upon revised cost estimates, concerningthe amendments required in the project description and allocation of theamounts of the credit to each subproject has been received and is underreview.

1/ These noted 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 not purport to present a balanced evaluation ofstrengths and weaknesses in project execution.

ANNEX IIPage 4 of 11

Cr. No. 340 Chandpur Irrigation II Project: US$13.0 Million Credit ofOctober 18, 1972; Effective Date: January 17, 1973;Closing Date: December 31, 1977

The Project is far behind schedule and continues to be plagued withproblems. Major flooding, work stoppages caused by 100% increase in con-struction labor costs, shortages of cement, fuel, and operable constructionequipment, ineffective management, inadequate provision of local funds andgeneral inflation are factors which have delayed project construction. Thereis some improvement in construction recently. Outstanding contractor claimshave recently been resolved. Manufacture of the electrical and mechanicalequipment for the regulators and pumping plant has been completed, anddelivery is being made to the sites. Delays in finalizing the low-liftpump specifications by WDB retarded procurement. Tenders have now beenissued. Continuing inflation and other adverse factors are expected toincrease the Project costs substantially over the appraisal estimate.

Cr. No. 341 Tubewells Project; US$14.0 Million Credit of November 6, 1972;Effective Date: January 13, 1973; Closing Date: December 311976

This project was originally financed by IDA Credit No. 208-PAK of1970 and credits from Sweden and Canada. Although bids had been received in1971, no contracts were awarded before Bangladesh independence. The presentCredit is again in conjunction with a Credit from Sweden and a grant fromCanada. Construction on this project began during January 1974. In April1974, IDA approved award of the contract for supply of the well pumps andengines. Due to initial delays, present implementation is about 18 monthsbehind schedule. Drilling of the tubewells has progressed satisfactorilyin the past construction season. Much greater efforts are required in thedesign and construction of the water distribution systems to make maximumuse of the tubewells. The project agricultural development plan, crop trialsand development of demonstration farms are also behind schedule. A programto assist in these areas as part of an ongoing UNDP project is under considera-tion.

Cr. No. 343 Telecommunications Project: US$7.3 Million Credit of November15, 1972: Effective Date: January 17, 1973; Closing Date:

June 30, 1978

The project was originally financed as part of Credit No. 145-PAKof 1969, and goods and services valued at about US$2.2 million were receivedin Dacca prior to suspension of disbursements. Three out of the four micro-wave systems in the Project are under installation and are scheduled to becommissioned by March 1976, and about one year behind schedule. The fourthsystem is a replacement of a coaxial cable system in the original project.This change was agreed to by IDA and was caused by price increases demandedby the original contractor which made the choice of a microwave system moreeconomical. The bid invitation for this system has been included with thebids that have already been invited for other microwave systems underCredit 487-BD. Even so, the system is scheduled to be commissioned inlate 1977 or early 1978. The Closing Date for this Credit has been extendedfrom December 31, 1975 to June 30, 1978.

ANNIEX IIPage 5 of 11

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

The Project was originally financed by IDA Credit No. 192-PAK of1970. The Credit has financed notional repayment of amounts previously dis-bursed under Credit No. 192-PAK (US$187,000) and payment of outstandingamounts for consulting services performed under Credit No. 192-PAK(US$12,000). Disbursements for new activities up to January 31, 1976amounted to approximately US$2.4 million. However, outstanding orderswhich would commit the remaining available funds were not expected to befinalized before original closing date. IDA therefore agreed to extendthe closing date by nine months to allow for disbursements under outstand-ing letters of credit. A UNDP/UNIDO technical assistance project has madesome limited progress toward the reorganization of BSIC.

Cr. No. 367 Chittagong Water Supply Prolect; US$7.0 Million Credit ofApril 9, 1973; Effective Date: June 7, 1973Closing Date: June 30, 1976

The project was originally financed by IDA Credit No. 42-PAK underwhich US$3.3 million was disbursed. The work has progressed at a slow rate,but will improve now that several civil works contracts are under way. Phys-ical progress had been curtailed by laclc of cement, slow delivery of pipe,and slow preparation of designs and contract documents. While the immediaterequirements for pipe and cement are on hand, several supply and construc-tion contracts are yet to be tendered. WASA has been requested to hastenthe preparation of contract documents and the tendering for this work. Man-agement, labor and union problems are now being better addressed followingthe appointment of the new Chairman. While collection performance has im-proved, financial operations and financial management remain weak. The Gov-ernment has increased the water rates by 5n percent effective July 1, 1975.However, unless the performance in billing and collection improves and leak-age is reduced, further rate increases would be necessary to meet the finan-cial covenants of the Credit Agreement. rhe Association has agreed to extendthe Closing Date by one year to June 30, 1976. At that time a decision willbe made, based upon the progress over the year in meeting the financial cov-enants, as to whether or not to extend the Closing Date for the additional1 to 1-1/2 years required to complete the project.

Cr. No. 368 Dacca Water and Sewerage Project; US$13.2 Million Credit ofApril 9, 1973; Effective Date: June 7, 1973Closing Date: June 30, 1976

The project was originally financed by IDA Credit No. 41-PAK of1963. By December 1971, when disbursements were suspended, US$6.0 millionhad been disbursed. The work has progressed at a slow rate but will improvenow that several civil works contracts are under way and tubewell materialsand equipment have been delivered. Right-of-way acquisition and contractorperformance continue as major problems. Management and labor problems con-tinue, and financial operations and the financial condition of the WASA

NNEX II?age 6 of 11

remains weak. The Government has increased the water rates by 50 percent,effective July 1, 1975. However, unless performance in billing and collec-tion improves and leakage is reduced, further increases would be necessaryto meet the financial covenants of the Credit Agreement. The Associationhas agreed to extend the Closing Date by one year to June 30, 1976. At thattime a decision will be made, based upon the progress over the year in meet-ing the financial covenants, as to whether or not to extend the Closing Datefor the additional 1 to 1-1/2 years needed to complete the project.

Cr. No. 381 Foodgrain Storage Project; US$19.7 Million Credit of May 18,1973; Effective Date: July 17, 1973;Closing Date: December 31, 1975

The project is also financed by a credit from the Kingdom ofSweden of 25.0 million Kroner. The project was originally financed byUS$19.2 million IDA Credit No. 83 of 1966 and a 25 million Kroner creditfrom the Kingdom of Sweden. The project was almost completed at the timeof Bangladesh's independence and 95% of the present IDA and Swedish creditswere used for repaying the previous credits. The remaining funds (US$1.25million from IDA and about US$0.25 million equivalent from Sweden) are beingused to pay outstanding bills for work completed prior to the war, comple-tion of some supporting facilities for the grain storage silos, replacementof spares and equipment damaged during the war, and a feasibility study fora second grain storage project. The designs for the jetty modifications havebeen approved and we are awaiting receipt of proposed arrangements for con-struction. The feasibility study for a second grain storage project wascompleted in October 1975. Supervision missions have reported serious deterio-ration in the silos mechanical equipment due to inadequate maintenance. Themanagement and staffing of the Directorate of the Silos is inadequate. Delaysin ordering spare parts (for which funds are available under the Credit)increase the risk of breakdown. The Government has agreed interalia (i) toemploy consultants to improve foodgrain storage management, (ii) to releaselocal funds required for ancillary civil works for the project, (iii) to fillall managerial, technical, and administrative vacancies by June 30, 1976 and(iv) to finalize the contract award for jetty construction by June 30, 1976.Based upon these assurances the Association agreed that the Closing Date forthis Credit which had originally been December 31, 1974 be extended for asecond time from December 31, 1975 to June 30, 1976. The Government wasinformed that any further extensions of the Closing Date required to completethe project would be considered only if the Government has met its commitmentsconcerning steps to be taken to improve silo maintenance and operations.Since January 1976 significant progress has been made in constructingancillary civil works, staUfing the project agency, putting one silo backinto operation, issuing invitations for firms to submit proposals for con-sulting services, and offering a tender for the Chittagong silo jetty.

ANNEX IIPage I of 11

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

The project was originally financed by two IDA Credits 49-PAK and98-PAK. By December 1971, when disbursements were suspended, US$7.7 millionhad been disbursed out of the US$17.5 million aggregate total of the twoformer credits. The Credit 407-BD added US$3.5 million to the total of theoriginal Credits, in order to help the Government meet part of the increasesin total project cost. Progress on the Agricultural University portion ofthe project was delayed initially due to difficulties in reaching agreementwith the consultant architects on a revised contract. Construction has alsobeen delayed due to shortage of building material, delays in the preparationof equipment lists, and furniture designs. The recent devaluation of theTaka has considerably reduced the cost overruns. Without including priceand physical contingencies, the cost of the project is now estimated at 58%over the appraisal estimates in Taka terms, but only 10% when expressed inUS dollar equivalent. The Government has submitted to IDA proposals formodification of the project to meet the cost overrun. These proposals arecurrently under review. Implementation is about 24 months behind theappraisal schedule. Progress on the technical education portion of theproject is about 12 months behind the appraisal schedule. The graduates arefacing severe problems of unemployment, and the curriculum needs revision tomake it more relevant to job requirements. The Government will be makingrecommendations on the development plan of the Agricultural University shortly.

Cr. No. 408 Highways Project; US$25.0 Million of June 29, 1973;Effective Date: September 27, 1973Closing Date: December 31, 1977

The project was originally financed by IDA Credit No. 53-PAK. ByDecember 1971, when disbursements were suspended, US$3.62 million had beendisbursed, out of the original credit of US$22.5 million. The new creditadds US$2.5 million to the original credit amount, in order to help theGovernment meet part of the increase in total project cost as a result ofcurrency realignments. Four construction contracts were signed in September1973 for the Sitalakhya Bridge and the Feni Section of the Dacca/Chittagongroad worth about US$9.2 million. A fifth contract with consultants forconstruction supervision was signed in Felruary 1974 but they were in thefield earlier. Shortage of spare parts, administrative delays and deficien-cies in some contractors performance have delayed certain elements of theproject. Construction of the 1300-foot bridge over the Sitalakhya Riverpreviously on schedule is now likely to be completed two years behindschedule, in mid-1978 due to technical difficulties compounded by poorcontractor performance. However, the twenty-mile Feni bypass road construc-tion project is well on the way to completion and plans for paving the roadare now under preparation. The estimated cost of civil works has increasedby about 60%, in line with worldwide trends. However, the total overallproject cost increase is considerably less, being about 25%. Disbursements,which in the past have been slow, show signs of improvement.

ANNEX IIPage 8 of 11

Cr. No. 409 Technical Assistance Project; US$4.0 Million Credit ofJune 29, 1973; Effective Date: August 20, 1973;Closing Date: December 31, 1977

After a slow start, the Government has recently begun to takeadvantage of the funds available under this credit for preinvestment plan-ning, feasibility studies and technical assistance for agencies involved inproject planning and implementation. Contracts have been signed with con-sultants for seven projects with an allocation from this Credit of about $1.3million. These studies have played a key role in the preparation of theAshuganj Fertilizer Project and three other projects which are under con-sideration for FY76 and FY77. Another six subprojects involving $2.3 mil-lion of credit funds have been recently approved and arrangements for selec-tion of consultants are underway. Credit funds are expected to be fullycommitted by June 30, 1976, but some of the studies financed will take upto two years to complete. The Closing Date for this Credit has been extendedfrom December 31, 1975 to December 31, 1977.

Cr. No. 410 Cereal Seeds Project; US$7.5 Million Credit of June 29, 1973;Effective Date: January 30, 1974;Closing Date: December 31, 1977

The project is about 20 months behind appraisal schedule. Follow-ing a year of virtual stagnation, the Seed Certification Agency has beenestablished, seed legislation has been drafted and procurement of equipmentand construction of buildings has started. However, serious staffing, pro-curement and financial problems remain. The Government has been trying toobtain additional bilateral financing to help meet the cost overrun. However,the Government has now agreed to proceed with the full project, and to meetthe full cost overrun if other financing does not become available. Mean-while, recruitment of key personnel has been extremely slow due to thelengthy procedures required by the Government; appointments are required inparticular for the head of the Seed Certification Agency and for the generalmanager (field) of Bangladesh Agricultural Development Corporation (BADC).A full-time official in charge of coordination in the Ministry of Agriculturehas just been designated. Procurement of farm machinery has been held upbecause of the bidders' failure to comply with tender specifications and bythe Government's unsuccessful efforts thereafter to arrange for bilateralfinancing.

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

The Amending Agreement of October 17, 1975 increased the amountof the credit from US$4.1 million to US$8.7 million to finance the new oiltransfer system at Chittagong. The implementation of the original project

ANNEX IIPage 9 of 11

has been slow. Only 54% of funds have been disbursed, compared with anestimate of 100% by June 30, 1975 at the time of appraisal. Delays weredue to: (i) the initial lack of familiarity of the agencies with IDAprocedures; (ii) the difficult international situation in 1974; and (iii)slow preparation of required documentation for procurement by variousoperating agencies. Currently, 93% of funds allocated for procurement ofspare parts and equipment in the original credit have been committed, andorders are expected to be completed by mid 1976. Regarding the repair ofthe Chittagong off-shore oil terminal, detailed investigations indicated thatthe damage was more severe than previously believed. Consultants wereappointed late in 1973 to study alternative technical solutions. AnAmending Agreement modifying the project description in line with the con-sultants' recommendations, and providing a supplementary credit of US$4.6million, was approved by the Executive Directors on September 16, 1975 andsigned on October 17, 1975. The project director and project officers wereappointed by January 1976 but there were delays in approval of the projectdocuments by the National Economic Council, agreement on onlending and pro-ject documents by the National Economic Council, agreement on onlendingand project implementing arrangements between the Government and projectagencies, and appointment of consultants, which were conditions of effect-iveness of the Amending Agreement. The Amending Agreement became effectiveon March 19, 1976. The consultants are now at work. Based on their recom-mendations, contracts for procurement of used tankers would be awardedon the basis of quotations obtained for suitable vessels from internationalbrokers.

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

Credit became effective July 23, 1974. Procurement work is wellin hand with the major orders expected to be placed by March 1976. Localtelephone expansion has lagged about a year behind schedule due to slowerthan expected deliveries from the local factory (hampered by labor unrest).However, the factory production is now picking up and the shortfall inproject targets is expected to be made up by 1977. According to presentcost estimates, foreign costs are likely to be within the original estimates.The local costs will increase from Tk 470 million to Tk 680 million due tohigher labor and construction costs and the imposition of a 20% tax on allimported goods. Under the Credit Agreement, BTT is to establish a modernaccounting system and is to be transformed into a Board with adequate auton-omy. Accounting consultants have been appointed. The Board was legallyestablished before the June 30, 1975 deadline, but the ordinance was revokedalmost immediately thereafter. A new ordinance establishing a Telecommunica-tion Board was recently promulgated. We are waiting further information onthe regulations under which the new Board will operate.

ANNEX IIPage 10 of 11

Cr. No. 515 Third Imports Program; US$75 Million Credit of October 9,1974; Effective Date: October 10, 1974;Closing Date: December 31, 1976

Provision was made to reimburse the Government for up to US$10 mil-lion for eligible imports paid for after July 1, 1974, but prior to the dateof the credit. Disbursements amounted to US$63.2 million as of March 31,1976, and in addition letters of credit guaranteed by IDA amount to US$6.9million. The Credit approved on October 9, 1974 was for US$50 million, butafter the Fourth IDA Replenishment Agreement became effective, an amendmentincreasing the credit amount was approved on February 27, 1975. The Amend-ing Agreement was signed on March 10, 1975 and became effective on April 7,1975. The Government has allocated the full amount of the Credit among thevarious eligible industries, and import orders are being processed, and thecredit is expected to be fully disbursed by the Closing Date.

Cr. No. 527 Ashuganj Fertilizer Project; US$33 Million Credit ofFebruary 11, 1975; Effective Date: December 19, 1975;Closing Date: December 31_1982

Project is being cofinanced by Asian Development Bank, KfW, andthe Governments of Iran, Switzerland, UK and US, providing a total of $109million equivalent in addition to the IDA credit. Site preparation work isproceeding on schedule, but, overall, the project is about six months behindschedule due primarily to delays in awarding the General Engineering andManagement Assistance Contracts. These contracts were signed in lateNovember/early December and the firms are expected to commence work inBangladesh early in 1976. Commencement of commercial production is nowexpected by February 1979.

Cr. No. 533 Population Project: US$15 Million Credit of February 11,1975; Effective Date: September 2 5 _1 9 7 5 ;Closing_ate_: December 31, 1982

Project is being confinanced by six co-lenders providing a total ofabout $25 million equivalent in addition to the IDA credit. Notwithstandingthe delay in declaring the Credit effective, the Government has made substan-tial progress in project implementation. The organizational structure ofthe Population Control and Family Planning Division (body responsible for thepopulation program) has been defined and its staff is being placed in position.The Population Program Officers, who are responsible for the populationprograms of five non-health ministries, have been trained abroad and haveinitiated the schemes of their respective ministries. A contract witharchitectural consultants for the Building, Planning and Design Unit of theMinistry of Health has been signed. The Government is proceeding with theselection of required consultants and advisors for other parts of the project.However, because of institutional problems, the implementation of a few projectcomponents is some months behind schedule. In particular, the Government hasstill to formally appoint a number of key personnel.

ANNEX IIPage 11 of 11

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

Project consultants are mobilizing staff. Procurement of localconstruction materials and construction of office and storage accommodationin Barisal is proceeding.

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

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

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

Credit not yet effective.

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

ANNEX IIIPage 1 of 3 pages

BANGLADESH

RURAL DEVELOPMENT PROJECT

Development Credit and Project Summary

Borrower: People's Republic of Bangladesh.

Amount: US$16 million equivalent.

Terms: Standard.

Purpose: To help the government carry out a rural developmentproject in seven thanas of the Bogra and MymensinghDistricts. The project consists of a rural worksprogram (rural roads, drains, rural markets, fish pounds),minor irrigation (low-lift pumps, shallow tubewells,hand pumps), thana facilities (office and living quartersof thana officers, cooperative godowns), and strengthen-ing of rural institutions and services (Comilla-typecooperatives, as well as extension animal healthservices, fisheries and credit facilities).

ANNEX IIIPage 2 of 3 pages

Estimated Costs:

/nItems Local Foreign Total-/

…--- (US$ million)-----

Rural Works 3.42 0.51 3.93Minor Irrigation 3.01 3.37 6.38Thana Facilities 0.59 0.14 0.73IRDP/TCCA-KSS Program 0.26 0.11 0.36Agricultural Extension 0.08 0.05 0.13Livestock 0.36 0.16 0.52Fisheries 0.26 0.06 0.32Technical Assistance 0.04 0.09 0.13Monitoring & Evaluation 0.10 0.01 0.11Rural Credit 2.58 1.23 3.82

of whichShort-term credit (2.20) (1.08) (3.28)Medium-term credit /b (0.38) (0.15) (0.54)

Base Cost 10.70 5.71 16.42Physical Contingencies 0.85 0.16 1.01Price Contingencies 5.46 1.77 7.23

Total Project Cost 17.01 /c 7.65 24.66Financing Plan:

Government of Bangladesh 8.66 - 8.66

IDA 8.35 7.65 16.00

Total Project Cost 17.01 7.65 24.66

/a Figures in US Dollars derived from the corresponding figures in Takas.Small discrepancies are due to rounding.

/b Cost of shallow tubewells and hand pumps (Base cost: US$4.80 million)to be financed under the medium-term credit is included in minorirrigation.

/c Includes about US$1.62 million equivalent in taxes and duties.

ANNEX IIIPage 3 of 3 pages

Procurement: With the exclusion of the earth works part of the ruralworks and thana facilities programs, civil works, amountingto US$4.7 million (net of contingencies), would be carriedout on the basis of local competitive bidding under Govern-ment procedures satisfactory to IDA. The earth works forthe rural works and thana facilities programs would becarried out on a force account basis. Vehicles (estimatedto cost US$0.2 million, net of contingencies) would also beprocured on the basis of local competitive bidding underGovernment procedures acceptable to IDA. Equipmentand supplies (estimated to cost about US$4.6million, net of contingencies) would be procured afterinternational competitive bidding in accordance withIDA Guidelines. In the evaluation of bids, domesticmanufacturers will be given a preference of 15 percentor the existing rate of import duties, whichever islower. Procurement of off-the-shelf imported itemscosting less than US$10,000 each would be purchasedthrough normal Government procurement procedures.Such purchases would, however, be limited to US$0.2million in total. Goods financed with short-termcredit would be procured through commercial channels.

TechnicalAssistance: A. Consultants would be retained for (i) the

implementation of the project's rural worksand thana facilities programs and (ii) trainingof TCCA-KSS staff in rural credit operations.

B. Short-term services of consultants employedunder other projects supported by multilateraland bilateral sources are included in the pro-ject.

C. Special training (both in Bangladesh and abroad)of selected Government officers involved in theimplementation of the project is also part of theproject.

EstimatedDisbursements: ----------------(US$ million)----------------------

FY1977 FY1978 FY1979 FY1980 FY1981 FY1982

3.5 4.0 3.5 3,5 1.3 0.2

Rate of Return: Economic Rate of Return: 40%

AppraisalReport: Bangladesh-Appraisal of a Rural Development Project

Report No. 877a-BD, dated April 28, 1976.Irrigation and Area Development Division,South Asia Projects Department