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Document of
The World Bank
FOR OFFICIAL USE ONLY FILE COPY
Report No. P-2705-MA
REPORT AND RECOMMENDATION
OF THE
PRESIDENT
OF THE
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
TO THE
EXECUTIVE DIRECTORS
ON A
PROPOSED LOAN
TO MALAYSIA
FOR A
KELANTAN LAND SCHEMES REHABILITATION PROJECT
August 7, 1980
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS
Currency unit = Ringgit (M$)
M$1.00 = $0.47$1.00 = M$2.15
M$1,000,000 = $465,116
WEIGHTS AND MEASURES
1 acre = 0.405 ha
I mile = 1.6 km
ABBREVIATIONS
AFNP - Applied Food and Nutrition ProgramBPM - Bank Pertanian Malaysia (Agricultural Credit Bank)FELCRA - Federal Land Consolidation and Rehabilitation AuthorityFELDA - Federal Land Development AuthorityICU - Federal Implementation Coordination UnitKEMAS - Department of Community Development (Min. of Agriculture)PWD - Public Works Department
RISDA - Rubber Industry Smallholder Development AuthorityTAKDIR - Kelantan Darul Naim Land Development and
Rehabilitation Corporation
GOVERNMENT OF MALAYSIA
FISCAL YEAR
January 1 - December 31
FOR OFFICIAL USE ONLl
MALAYSIA
KELANTAN LAND SCHEMES REHABILITATION PROJECT
Loan and Project Summary
Borrower: Government of Malaysia
Beneficiary: State of Kelantan
Amount: $25 million equivalent
Terms: 17 years with 4 years grace at 9.25%.
RelendingTerms: $14.5 million would be relent to the State of Kelantan,
repayable in 25 years including 10 years grace at the sameinterest rate as in the Bank loan to the Government. The
foreign exchange risk will be borne by the Government. Thebalance would be provided to project agencies as grant.
ProjectDescription: The principal objective of the proposed project is to
increase incomes and improve the living conditions andwell-being of 7,500 low income rural households in the Stateof Kelantan by:
(a) assisting 5,700 existing settlers on Kelantan DarulNaim Land Development and Rehabilitation Corporation(TAKDIR) land settlement schemes to complete thedevelopment of their holdings and to replant orrehabilitate their existing perennial crops (principallyrubber);
(b) settling and assisting about 1,800 households to developlandholdings on the schemes;
(c) completing basic infrastructure on the schemes; and
(d) strengthening TAKDIR to provide adequate support tosettlers and to coordinate its activities with otheragencies.
About 75% of the beneficiaries would be rural householdswhose present incomes fall below the poverty line. Atfull development, the project would enable these benefi-ciaries to more than double their incomes. The projectfaces no special risks, although realization of the expectedbenefits would depend heavily on the ability of TAKDIR tostrengthen and expand its staffing.
This document has a mstricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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Estimated Cost: The table below summarizes the total cost of the project.
Local Foreign Total($ million)--
Rubber:New planting 12.7 4.0 16.7Rehabilitation 0.4 1.8 2.2Replanting 2.0 0.7 2.7
Other agriculture 0.7 0.7 1.4Settler housing 3.8 1.6 5.4Roads and tracks 8.0 6.2 14.2Social infrastructure 1.7 0.9 2.6Management 3.3 1.6 4.9Road construction study 0.2 0.8 1.0
Subtotal: base cost 32.8 18.3 51.1
Physical contingencies 4.0 2.2 6.2
Expected price increases 8.4 4.5 12.9
Total project cost /L 45.2 25.0 70.2
Financing PlanGovernment 36.0 - 36.0State 3.5 - 3.5RISDA 5.7 - 5.7Bank - 25.0 25.0
Total 45.2 -25.0 70.2
EstimatedDisbursement: Bank FY 1981 1982 1983 1984 1985 1986 1987
Annual 0.4 4.4 5.0 5.9 4.1 3.6 1.6Cumulative 0.4 4.8 9.8 15.7 19.8 23.4 25.0
Rate of Return: 17%
Staff Appraisal Report: No. 2845-MA, dated July 25, 1980.
/1 Including $3.5 million of taxes and duties.
REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE
EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO MALAYSIA
FOR A KELANTAN LAND SCHEMES REHABILITATION PROJECT
1. I submit the following report and recommendation on a proposedloan to Malaysia for the equivalent of US$25.0 million for a Kelantan landschemes development project. The loan would have a term of 17 years,including 4 years grace, with interest of 9.25% p.a. Of the proceeds of theloan, US$14.5 million would be relent to the State of Kelantan for a periodof 25 years, including 10 years grace at the same interest rate as in theBank loan to the Government. The foreign exchange risk will be borne by theGovernment.
PART I - THE ECONOIY /1
2. The latest economic report, "Malaysia: New Perspectives on theThird Malaysia Plan" (No. 1594-MA), is dated October 14, 1977. Since thatreport was circulated, a book has been prepared at the request of theGovernment, which reviews the overall performance of the Malaysian economysince 1960, discusses current issues and assesses future prospects.Entitled "Malaysia: Growth and Equity in a Multiracial Society." The bookwas published in July 1980. Detailed data on Malaysia's economy are shownin Annex I.
3. By most economic indicators, Malaysia has done well in the past.The per capita income of US$1,090 in 1978 is among the highest in Southeast
Asia. During the past two decades, the Malaysian economy achieved anaverage real growth of GNP of about 7% a year. This sustained high growthrate is basically a reflection of the country's wealth in natural resources,especially its ample reserves of cultivable land; an outward-oriented growthstrategy; good, albeit cautious, economic and financial management; and, notleast, stable social and political institutions. Three specific factorswere important: sharp rises in productivity in the rubber sector - riseswhich cushioned the effects of steep price declines and helped maintainthe Malaysian share in the world rubber market; a big push for exportdiversification through rapid expansion of the production of palm oil andthe extraction of timber; and rapid manufacturing growth, which has averagedabout 13% a year since 1968 and has been increasingly oriented toward exports.
4. A look beyond the macroeconomic aggregates reveals that Malaysiahas been trying to overcome a serious poverty problem. Since 1960, signi-ficant improvements have been made in raising production in agriculture,diversifying output and improving social services. However, the impact ofthese improvements on the incomes of the poor has been offset to a
/1 Part I is essentially the same as the corresponding section of thePresident's Report No. P-2715-MA, dated February 22, 1980 on the NinthPower Project (Ln. 1808-MA), which was approved on March 13, 1980.
significant extent by other factors. Continuing rapid population growth hassubstantially reduced the impact of production increases on per capitaincomes. In addition, Malaysia suffered a serious and sustained terms oftrade loss during the 1960s which further reduced average real income growthduring the period. As a result, a serious poverty problem persists: theGovernment estimates that almost 40% of the population has incomesinsufficient to provide minimum requirements of food, shelter, clothing andother basic needs. Further, this problem is complicated by considerableracial inequalities in income and employment. Malay income on average isonly about 40% the income of Chinese and about two thirds the income ofIndians. Malays still predominate in employment in agriculture andnon-Malays in the industry and services sectors.
5. Because the problems of poverty and racial inequalities are bothserious and persistent, the Government has given top priority to solving them.Thus, the twin objectives of the New Economic Policy, introduced by theGovernment in 1971, are to eradicate poverty and to reduce the racialimbalance in income, employment, and the ownership of assets. Morespecifically, it is targeted that by 1990 the incidence of poverty will bereduced by two-thirds, that the pattern of employment will reflect theracial composition of the population, and that the share of bumiputras /1 inthe ownership of the corporate sector will increase from 2% in 1970 to atleast 30% in 1990. The New Economic Policy emphasizes the need for rapidgrowth in the industrial and services sectors as the principal means bywhich these objectives will be attained. The Government's long-term plan isbased on the requirement that about 2 million, or almost 90%, of the newjobs to be created during 1975-90 would be in industry and services. Thisrequirement implies a substantial reduction in the share of agriculturalemployment. It also implies a net shift out of agriculture of more than amillion jobs from the number that would be employed if present employmentpatterns were to persist.
6. If the targets of the New Economic Policy are to be reached, theeconomy must maintain a long-term GNP growth rate of at least 8% a year.The growth of the manufacturing sector will have to be even more rapid.Without the expansion, employment growth of more than 3% a year will notmaterialize if rural incomes are to be significantly increased. A moremoderate growth rate would substantially reduce the creation of new employ-ment in the modern sector and make it more difficult to achieve thetargets for restructuring employment and reducing poverty.
7. Malaysia's strong natural resource base together with a favorableoutlook for the prices of her major commodity exports should provide theeconomy with sufficient financial resources to achieve rapid growth. Aside
/1 Bumiputra literally means "son of the soil." The word is used to referto Malays and other indigenous groups.
from short term fluctuations, th-e balance of payments current account shouldcontinue in surplus for the foreseeable ftuture enabling an adequate level otreserves to be maintained together with a moderate l.evel of debt service.The elasticity of tax revenues should also enable the Government to finance anexpanded development prcgram. Thus the availability of resources, whichhas not been a serious problem in the past, is expected to be even less of aconstraint in the future. Compared with most other developing countries,Malaysia is fortunate in this respect.
8. Although Malaysia appears to have the financial capacity to achieverapid growth, the economy will no longer be able to rely so heavily on rapidgrowth of primary production. While Malaysia is rich in natural resources,which will provide a reliable base for the expansion of the economy, thegrowth rates of the prodluction of such commodities as rubber, palm oil-,petroleum and forest products are all likely to be lower than in the past.With growth decelerating in the resource sectors, rapid industrial growthwill increasingly become essential to successful economic performance. Thisimperative arises not only from the viewpoint of production and the creationof real incomes but also from the viewpoint of employment and its racialrestructuring.
9. In addition to rapid industrial growth, successful achievement ofthe targets of the New Economic Policy will require a concerted effort toaccelerate the pace ot rural develcpment. Most of the poor live in ruralareas. Although rapid growth of indust:rial employmient can ease the problemof rural poverty by absorbinig migrants from rural areas, poverty willcontinue to be a largely rural phenomenon. Thus, even if there is rapidsustained growth of employment in industry and services, the projections ofthe Third Malaysia Plan indicate that more than three-quarters of Malaysia'spoor will be in rural areas in 1990. An expansion of income and employmentopportunities for rural Malaysians is of high priority. Furthermore, theexpected decline in the growth rates of the production of rubber and palm oilmakes expansion of government programs even more necessary, for example,accelerating land development programs, increasing settler participation inthose programs, expanding programs of replanting for rubber smallholders,expanding extension and credit for rice farmers, intensifying efforts topromote intercropping by coconut smallholders and improving the access ofpo,nr families to such basic services as education, housing, electricity andwater supply - all of vwich deserve priority because of the substantialimpact they can have in reducing poverty. The greater availability ofpublic resources will enable the Government to undertake that expansion.But the main constraint on mounting a more effective attack on rural povertyappears to be the capacity of the public sector to identify and prepareprojects that can affect large numbers of rural poor.
10. The Government does not have the direct control over privateinvestment that it has over public investment, but it can play a strong rolein providing a policy framework conducive to vigorous growth in the private
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sector. Because the more obvious areas of import substiltutiori have beenexhausted, sustained rapid growth in manufacturing will have to relyincreasingly on export expansion. Policies will therefore havie to ensure afavorable export environment. With regard to institutional factors, theGovernment has already acted to alleviate fears in the private comnffllityabout the Industrial Coordination Act and the Petroleum Developmenit Act.The Government has also stressed that it will implement the IndustrialCoordination Act in a flexible and pragmatic manner so as to encourageinvestment and growth. Because much of the concern in the private sectorhas been over how that Act will be implemented, flexible implementation bythe Government should help to ease the concern in the business community.
11. In summary, the prospects appear to be good for achieving rapidgrowth and for ameliorating the twin problems of poverty and racial im-balances. Certainly there should be no serious constraints imposed by theavailability of resources. To achieve the targets of the New EconomicPolicy will nevertheless require vigorous action by the Government along anumber of fronts. The policy framework will have to be readjusted to ensuresustained growth of the industrial sector. A pragmatic attitude will beneeded in interpreting and implementing the quantitative restructuringtargets to ensure that sight is not lost of the overall goal of improvingthe racial balance. Growth in the supply of technically trained manpowerwill require close scrutiny to ensure that it does not constrain therestructuring potential made possible by rapid economic growth. Finally,larger and more effective programs to reduce poverty by direct action willrequire a concerted effort to expand the capacity of the public sector toprepare and implement such programs.
12. Assuming a continuing 7-8% rate of economic growth during the1980s, Malaysia's balance of payments is projected to remain in modestsurplus. The cumulative current account surplus is projected to averageabout 1.0% of GDP during the 1980s. Net direct investment medium- andlong-term loans equivalent to about 4.0% of GDP would be required tomaintain a reasonable level of reserves and to offset short-term and otheroutflows. At present about 15% of public debt outstanding and disbursed isfrom the World Bank; this percentage may increase somewhat during the early1980s. Debt service is expected to be maintained at a level equivalent toabout 4% of exports. The Bank's share of debt service is currently about10% and may increase to about 20% by the end of the decade.
13. In general, over the next few years, it is likely that theGovernment will need less external capital than previously forecast, largelybecause of strong commodity prices and oil earnings. At the same time,Malaysia has a serious income distribution and poverty problem. Thecountry needs technical assistance and expertise to help develop povertyalleviation programs and to assist in designing and packaging projects thatreach out directly to low-income families. The Malaysians believe stronglythat project borrowing, particularly from development institutions such as
the World Bank, is necessary to assist them to mount an effective attack on
poverty. Bank lending is therefore focused on strengthening government
efforts to reduce poverty directly.
PART II - BANK GROUP OPERATIONS IN MALAYSIA
14. The Bank has made 47 loans to Malaysia, totaling $1,102.5 million
for projects in agriculture, education, population, power, water supply,
sewerage, telecommunications, ports, railways, roads, and urban transport.
Although in a number of cases disbursements have been slower than expected,
the execution of Bank projects in Malaysia has generally been satisfactory.
As of May 31, 1980, the effective loans to Malaysia held by the Bank
amounted to $909.71 million. Nineteen loans have been fully disbursed.
Annex II contains a summary of Bank Loans and IFC investments, as well as
notes on the execution of ongoing projects.
15. Since Malaysia is currently a resource surplus country, the need is
past for Bank lending for infrastructure projects. The Bank-s present
lending strategy in Malaysia is to support the Government-s programs to combat
the deep-rooted problem of poverty in the country, particularly in the rural
areas. The thrust of this strategy is not simply to provide financial support
to poverty alleviation projects but to develop an institutional and policy
framework to enable the Malaysians eventually to design and implement
antipoverty programs independently. With this in mind, the Bank has proposed
to undertake projects with relevant institutions, such as the Agricultural
Credit Bank (BPM), the Federal Land Consolidation and Rehabilitation Authority
(FELCRA), the Rubber Industry Smallholders Development Authority (RISDA), and
area and state development agencies in the poorer states in Malaysia, which
should broaden their experience in the designing of projects and serve as a
basis for building managerial and technical skills within these institutions.
Technical assistance of this nature with a financial underpinning is
considered to be the most effective way in which the Bank can best support the
Malaysian development at present.
16. Malaysia's own commitment to assist its low-income groups has
strengthened significantly in the past few years. The Bank has been heavily
involved in helping Malaysia identify and prepare projects geared toward the
rural poor. Prior to 1975, this was done primarily through expansion of
irrigation and land development as means of expanding output, raising incomes
and creating employment opportunities. To reach more rural households,
greater emphasis has since been given to programs designed to raise produc-
tivity in existing smallholder areas. The number of rural development
projects recently financed and in the current pipeline is impressive. Six
rural development projects were financed in the last three years, which
include improvement of irrigation and drainage systems, rehabilitation of
tree crops, national extension and research. At least 16 additional rural
development projects have been identified for possible Bank support in the
coming 5 years.
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17. The Government's capability to develop such projects, however,remains weak, largely because of a shortage of trained manpower. With thehelp of the UNDP-financed and Bank-executed State and Rural DevelopmentProject, which provides technical assistance to selected federal and stateagencies, the Bank is helping the Government to develop further its programsand projects for reducing paverty. The proposed project is a significant steptowards establishing an effective institutional framework in Malaysia insofaras it will be the first Bank project in that country to be implemented by astate agency, the Kelantan Darul Naim Land Development and RehabilitationCorporation (TAKDIR)./1
18. As part of its lending strategy, the Bank proposes to continue itsinvolvement in the education sector in Malaysia by concentrating more heavilyon technical and skill training. It is also seeking new initiatives inproviding support to the manufacturing sector in Malaysia, especially inpromoting the growth of small-scale industries, in order to enable theGovernment to realize its growth, employment and restructuring objectives.Assistance to infrastructure will be selective, concentrating on providingaccess to rural areas and rural electrification.
19. IFC has made six investments in Malaysia totalling $8.69 million.The total investments held by IFC as of May 31, 1980 amounted to $1.14 million(Annex II).
PART III - THE AGRICULTURAL SECTOR
Background
20. Malaysian agriculture has a strong comparative advantage in tropicaltree crops, which explains the dominance of rubber, coconut palm and oil palm.Altogether, 8 million acres have been brought under cultivation in PeninsularMalaysia, of which almost 6 million are devoted to rubber and oil palms.Nearly two thirds of the rubber acreage is in smallholdings. The only othermajor crop is padi, with one million acres. Other crops (all below 100,000acres each) are pineapple, cocoa, cassava, sugarcane, tobacco, coffee andgroundnuts.
21. Over the past decade and a half, physical output in the sector hasgrown strongly, but because of adverse terms of trade, this growth has notbeen matched by growth in the value of cutput. Rubber output has expandedby 100% and oil palm by 300%. In addition, rice output has expanded by 90%
/1 Formerly known as the Kelantan State Land Development Board (KSLDB).
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due largely to improved irrigation and double cropping; on average, riceimports have fallen to oily about 10% of annual consumption. The averageannual growth of 5t5% for the sector in real terms has been among thehighest in the world. HoDwever, this compares with a real growth rate of7.5% for the economy as a whole. The sector will continue its gradualdecline in relative importance as industrialization proceeds. For thepresent though, agriculture remains extremely important in the overalleconomy, providing about 29% of GDP, 44% of employment, and 40% of exportearnings in 1978. However, its dualistic development has resulted in theabsolute poverty of about 55% of MalaysiaTs agricultural households (25% ofthe national population).
22. In the past, the Bank has provided extensive assistance fordeveloping and settling large new land areas, which have been primarilyplanted with rubber and oil palm. The program has not only contributed toraising production and income of the settlers recruited from among the ruralpoor, but it has also helped to reduce the pressure of population on existingagricultural land. Nearly 50% of the land development effort over the pasttwo decades has been undertaken by FELDA, which has been the Bank-s princi-pal vehicle for agricultural assistance and is now a mature organizationcapable of managing its programs independently. However, the land develop-ment picture is now changing. In Peninsular Malaysia, the principalopportunities for large-scale land development projects - of the type theBank has financed with FELDA - are running out. Although at least 3-4 millionacres potentially suitable for agriculture remain undeveloped in thePeninsula, this land is principally in smaller blocks. Besides, stategovernments, which under the constitution control land alienation, arebecoming increasingly reluctant to allow concessions for further landdevelopment by a Federa.l Agency. It is for these reasons, and because somany of the poor rely on traditional agriculture, that for the future wepropose to emphasize an improvement in productivity and incomes in existingsmallholdings rather thani the development of new lands. The proposedproject is the first in which the Bank would assist in financingrehabilitation and deve:Lopment of existing land settlement schemes.
23. A Prolect Performance Audit Report on the First and Second JengkaTriangle Land Settlement Projects (Loans 533-MA and 672-MA) (No. 2122)dated June 30, 1978 and a Project Performance Audit Report on Loan 672-MA(No. 3240) dated June 11, 1980 examine the activities of FELDA under thesetwo projects. The reports describe the development program under FELDA asremarkably successful and FELDA as one of the few land development agenciesin the world which has succeeded in reaching all its settlement and incomeobjectives. Mos of the comments deal with FELDA-specific issues. However,some lessons can be applied to the proposed project:
(a) Delays occurred in the settlement program principally due todifficulties encountered by the Public Works Department inkeeping up with FELDA's schedule. The Road Construction SectorStudy being undertaken under this project (and the subsequentRoad Construction Sector Project proposed for FY82) will addressinter alia the improvement of Federal and local PWDs.
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(b) Under the first two FELDA projects self-help was rejected asill-suited and unworkable. The report suggests that perhapsFELDA had not properly tested the limits of what the settlerscould be asked to contribute. In later FELDA projects the self-help issue seems to have received better response. Under theproposed project, groups of settlers will be organized forhousing construction and farm labor will largely be suppliedfrom within the farm household.
(c) The Bank's insistance on reforms in financial administrationand accounting benefited all FELDA activity, equipped theinstitution to handle its greatly increased load, and earnedthe respect of FELDA management. Under the proposed project,institution building, with special attention to accountingprocedures, constitutes a major component of the project.
Objectives and Strategies
24. The main objectives of the Government's agricultural policy are:(a) to increase incomes in agriculture as rapidly as possible; (b) toalleviate rural poverty and to redress interregional and intergroup incomedisparities; (c) to maintain a reasonable relationship between agriculturalincomes and incomes earned in other sectors; and (d) to generate employmentopportunities for new entrants to the rural labor force.
25. The Government's efforts to pursue the above objectives involvethe following five major strategies: (i) the absorption of surplus and lowproductivity labor from agriculture into more productive jobs in theindustrial and service sectors. To this end, the Government is pursuing apolicy of rapid economic growth and investment in human resources parti-cularly within rural areas; (ii) new land development in order to generateadditional employment within agriculture at adequate income levels; (iii)increased emphasis on raising productivity and incomes in existingtraditional smallholder agriculture; (iv) increasing transfer payments torural people, if moving them out of agriculture or increasing their incomesfrom agriculture are not feasible; and (v) increasing export earnings,especially from tree crops, to finance the industrial and other investmentsneeded to achieve rapid economic growth. The project is designed to meet theGovernment's objectives (a) and (b) above, through increasing productivityand incomes in traditional smallholder agriculture. New land development isincluded under the project and rubber exports will incidently be increased.
26. Field operations of agricultural programs in existing smallholderareas are vested in state departments of agriculture and several single-purpose federal agencies, e.g., Rubber Industry Smallholder DevelopmentAuthority (RISDA), Federal Land Consolidation and Rehabilitation Authority(FELCRA), Livestock Development Authority and Fisheries DevelopmentAuthority. Major emphasis is being placed on improving coordination among
these entities and increasing their individual capacity for effectiveimplementation. In addition, because of its increased emphasis on raisingproductivity within areas of traditional agriculture, the Government isplacing greater reliance on general purpose agencies such as the Farmers'Organization Authority (FOA) and service agencies such as the Bank PertanianMalaysia (BPM).
PART IV - THE PROJECT
27. The project was prepared by the Kelantan State Government, based ona consultant feasibility study; Bank preparation missions assisted the StateGovernment. The project was appraised in September/October 1979. A StaffAppraisal Report entitled "Kelantan Land Schemes Rehabilitation Project" (No.2845-MA, dated July 25, 1980) is being distributed separately. Supplementaryproject data are provided in Annex III. Negotiations were held in Washingtonfrom June 9 to 11, 1980, with the Malaysian delegation led by Duleep Singh,Under-Secretary, the Treasury.
Project Area
28. The project would be carried out in the southern region of the Stateof Kelantan. Except for the northern coastal plain, which covers less than20% of its area, the State is predominantly mountainous and 75% of the area isstill forested. The climate is hot and humid; rainfall averages 2,700 mm peryear, with a peak during the September-January northeast monsoon. Soils aretypical of inland Malaysia, moderately to well drained, and subject to erosionon exposed slopes. The project area is best suited to perennial crops,particularly rubber.
29. Kelantan has the lowest per capita income in Malaysia. In 1978, GDPper capita was estimated to be only 38% of the national average. The popula-tion is heavily Malay, rural, and dependent upon agriculture, particularlyrice and rubber. Population concentration in the northern plain is heavy, andfarm size small. The State has traditionally been isolated from the rest ofthe country, with no direct surface access to the West Coast and major ports.The resultant high transport costs have hindered both agricultural andindustrial development. Public amenities and social services are also lesswell developed than in the rest of Peninsular Malaysia.
30. The State of Kelantan initiated small self-help land developmentschemes in the late 1950s to provide land for rural families who were landlessor who had very small holdings. TAKDIR /1 was established in 1960 to beresponsible for this effort; 26 schemes based on rubber totalling 71,000 acreshad been established by 1971. The schemes were located in progressively moreremote areas in the south of the State (Map 14768R). TAKDIR activities havebeen restricted by the general financial constraints facing the State. tIostof its small headquarters staff are not professionally qualified, and the
/1 See footnote on page 6.
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agency has been able to provide little more than general guidance to settlers.Access to the schemes and living conditions on them have been poor. By mid-1978, only four schemes could be reached by allweather access roads, threehad a piped water supply and six had clinics. An Accelerated Rural RoadsProgram is underway which will provide allweather access to schemes, and 16water supply systems and two clinics are under construction. Poor access hasresulted in restricted and high priced food supplies and infrequent service bygovernment agencies, e.g. extension and health services, consequently settlerswere reluctant to move onto the schemes.
Project Objectives
31. The main objectives of the project are to assist 7,500 settlerfamilies to increase their incomes and improve their living conditions andwell being by: (a) improving or completing development of their holdings, andimproving housing and the physical and social infrastructure on these schemes;and (b) strengthening TAKDIR so that it can provide adequate support directlyto settlers, or improve coordination with other state and federal agenciesproviding services to settler households. A strengthened TAKDIR could subse-quently undertake additional smallholder land settlement schemes in Kelantan,either in new land development or rehabilitation. The proposed project wouldbenefit 5,700 existing and about 1,800 new settler families on the 26 TAKDIRrubber schemes. The area involved would be about 76,000 acres: 71,000 acresare within the existing 26 schemes and an additional 5,000 acres of adjacentstate land would be alienated by the State of Kelantan (Section 2.08 of thedraft Project Agreement).
Criteria for Participation in the Project
32. The current occupants will qualify as bona fide settlers if they:(a) have begun development of a significant proportion of their plots bySeptember 1980; and (b) maintain reasonable agricultural standards on theirplots. The 1,800 additional settlers to be recruited would need to meet thefollowing criteria: (a) resident in Kelantan; (b) 21-45 years old; (c)married; (d) he and his immediate family owning less than 2 ac of cultivatedland; (e) have a low income /1; and (f) prepared to live with his wife andfamily on a TAKDIR scheme.
Detailed Features of the Project
33. Agricultural Development. By mid-1979 about 5,700 plots had beentaken up on the schemes. Each plot comprises a 6 acre lot for rubber, 2 acresfor mixed fruits or other perennials and a 1/4-acre houselot. Twenty eightthousand acres of rubber and about 5,000 acres of other crops had been plantedon the 26 schemes. However, due to lack of support and supervision, thequality of many plantings is low. Settlers often had difficulty obtaining
/1 At most a household income of $250 per capita per annum; typicallyincomes are below about $175 per capita per annum.
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good planting material, used few inputs, and carried out inadequatemaintenance. As a result, most rubber plantings show below average densities,
poor growth and low yields; to earn acceptable incomes, most settlers resortto overintensive tapping. It is estimated that about half of the rubberstands and 60% of the fruit crops are in good enough condition to warrantimprovement. Development of fruit lots has been slow largely because of
marketing uncertainties. In fact, many settlers would prefer to plant these
areas to rubber and the State of Kelantan has agreed to permit settlers to
do so, where technically feasible.
34. The proposed project would improve about 26,000 acres of the
existing perennial crop area of 32,800 acres by:
(a) rehabilitating about 14,000 acres of rubber through intensive
fertilizer application, chemical weed control and improved tappingmethods. Credit assistance of up to $140 per acre would beprovided;
(b) rehabilitating about 3,000 acres of mixed fruit crops throughfertilizer application, chemical weed control, some replacement ofinferior stock, and improved management. Grant assistance in kindof up to $140 per acre would be provided;
(c) replanting about 7,200 acres of rubber. Grant assistance of $560per acre in materials and cash would be provided over a six-yearperiod under the national replanting program; and
(d) replacing about 1,800 acres of mixed fruits with rubber.
The most viable alternative for the remaining existing crop area (6,800 acres)would be continued rubber production without undertaking any improvements.
35. The proposed project would support new crop planting on about27,800 of the remaining project area of 43,200 acres by:
(a) establishing about 26,800 acres of rubber. Some existing settlerswould qualify for grant assistance from RISDA for new plantingof rubber./l These settlers would receive cash, materials andservices of $560 per acre over a six-year period to plant about5,500 acres. Planting on the balance of about 23,100 acres(including the 1,800 acres is referred to in para. 31(d)) would befinanced by credit assistance from TAKDIR in the form of materialsand cash, amounting to about $834 per acre over a six to seven yearperiod. Where appropriate, land clearance would be performed bycontractors. However, much of the undeveloped area is in scatteredplots and will have to be cleared by the settlers: credit paymentswould be made on a predetermined schedule and charged to thesettlers loan account; and
/1 Those qualifying would be established smallholders with mature rubber withlandholdings of less than 10 acres, of which less than 7 acres in rubber.
- 12 -
(b) establishing about 1,000 acres of mixed fruit. Settlers wouldreceive grant assistance of up to $140 per acre in the form ofplanting materials, fertilizers, and chemicals.The balance of the project area (about 15,400 acres) would be leftas wasteland/public areas, or used for houselots.
36. Intercropping hybrid coconuts with robusta coffee has been suggestedas an alternative to rubber for parts of the project area. However,experience with this crop in the area is lacking. The proposed project wouldtherefore provide for trial plantings of 250 acres of interplanted hybridcoconuts on 5 sites with soil conditions representative of inland Kelantan(Section 3.04, Loan Agreement).
37. Fish constitutes a major source of protein in the Kelantanese diet,but supplies of fresh sea fish are limited in inland areas. To Improvelocal fresh fish supplies, the project would assist in the development of 300acres of fishponds. Settlers would construct ponds of about 1/4 acre, andgrant assistance of $581 per pond (for ponds of 1/4-1/2 acre size) would beprovided as materials and cash. Farmers applying for the fish pond grantswould need to have suitable sites and demonstrate that family labor isavailable for pond maintenance.
38. Infrastructure and Services. Each of the 26 schemes has a desig-nated village site in which the settler is allocated a houselot. Eighteenvillages have already been provided with, or have easy access to, a primaryschool. The proposed project would provide for the construction of eightprimary schools to serve the remaining schemes, and one secondary school.Similarly, the proposed project would include the construction of 11 localclinics and 8 gravity-fed water supply systems to complete provision of theseservices where they are required. Materials would also be provided for theself-help construction of 24 small community centers. Partially prefabricatedmaterials would be made available on a credit basis to settlers for construc-tion of 3,850 settler houses.
39. The ongoing Accelerated Rural Roads Program will provide all-weather access to all but two schemes which will remain accessible only byboat. Under the proposed project, roads and tracks would be constructedto provide field access to support agricultural development and to provideinternal access within village areas. A total of 645 miles of agriculturalroads and tracks would be provided on the basis of minimum accepted standardsfor perennial crop development in Malaysia of 1 mile per 100 acres. The moreheavily used sections (about 20% of the total) would be surfaced to enableall weather use. Within village areas, 85 miles of surfaced roads would beconstructed to provide access to settler houselots.
40. Significant nutrition/health problems have been a constraint ondevelopment in the project areas. Close attention was paid to these issues
- 13 -
as part of the conceptual design and preparation of the project. The project
would fund approximately 36 man-months of local professional expertise to
undertake a baseline nutrition/health survey and supervise subsequent
monitoring (Section 3.06, Loan Agreement). Nutrition related programs (home
gardens, poultry and freshwater fish production, supplemental child feeding),
largely coordinated under the Applied Food and Nutrition Program (AFNP),
would be applied in the project area as required. The collective and
synergistic effects on nutrition of provision of basic social infrastructure
(water supply, clinics) and improved access, together with the application and
strengthening of nutrition related programs, are expected to be significant,
and would be in direct response to specifically identified needs. Further,
the project would provide two man-years of technical assistance to the Federal
Implementation Coordination Unit (ICU) to assist in strengthening the capacity
for effective formulation, implementation and evaluation of the AFNP.
41. Institution Building. TAKDIR would be substantially expanded and
strengthened. Specifically, the project would:
(a) create a position for a Deputy Director who would take charge
of TAKDIR's field operations. This post would be filled
by an experienced professional, whose employment would be a
condition of effectiveness (Section 6.01(c) of the Loan
Agreement);
(b) provide for up to 165 field level staff (excluding scheme super-
visors) to supervise and record field operations and for three
additional agricultural assistants at the regional level, who
would provide general oversight of field operations; provision
would also be made for three man-years of technical assistance
in agricultural development;
(c) provide a small headquarters engineering staff responsible for
supervision of engineering, design and construction of project roads
and TAKDIR facilities, and three regional units responsible for
maintenance of project roads and minor construction. Staffing would
total 58 and each regional unit would be supplied with a bulldozer,
grader, loader, roller and trucks;
(d) provide funds for engaging consultants to make proposals for
implementing an improved accounting system that incorporates
individual sector accounts, managing the implementation of this
system for the first three years of the project, and train TAKDIR
staff. Employment of these consultants would be a condition of
effectiveness (Section 6.01(c) of the Loan Agreement). TAKDIR s
own staff would be augmented with two qualified accountants, one
with experience in materials procurement and contract procedures;
- 14 -
(e) establish a small settler services staff with the principalfunctions of liaising with other agencies to ensure effectivedelivery of services to settlers, assisting scheme supervisors inestablishing settler organizations, and helping settlers to obtainoff-scheme enployment until their rubber crops mature;
(f) establish a planning and budgeting capability; and
(g) provide expanded office facilities at the regional level, housingfor additional field staff, central and field level storagefacilities, a tractor/trailer at each scheme, 6 four-wheel drivevehicles, 6 pick-ups, motorcycles for field assistants, and a boatto improve transportation to the schemes inaccessible by road.
42. RISDA would establish a separate unit, with a staff of 30, in itsKelantan office to be responsible for its extension activities within TAKDIRschemes (Section 3.03(b) of the Loan Agreement). For RISDA, this wouldrepresent an experimental approach to providing extension services to small-holders, and the project would provide support through additional funding forthree man-years of technical assistance in extension and training. Provisionof materials and supervision of replanting and new planting would be byRISDA's existing field inspectorate.
43. Road Construction Sector Study. In recent years, Malaysia'scapacity to plan, design, construct and maintain its road network, includingrural roads as well as primary highways, has been under severe strain. Delaysin road construction have been a principal Implementation bottleneck in landdevelopment projects. The commitment of funds to road construction hasoutstripped the capability of the public sector, while the private roadconstruction sector does not yet have the capacity to undertake a major shareof the program. To address this problem the Government wishes to undertake acomprehensive study of the road construction sector (public and private)throughout Malaysia. The study's objectives would be to investigate thepresent situation in detail, identify reasons and causes for the observedimplementation problems in this sector, and recommend solutions and actionsnecessary to modify government policies, and organization(s), and to removeexisting constraints, so that the present trend may be reversed. The projectwould provide approximately 80 man-months of consultancy services to theEconomic Planning Unit (EPU) to undertake the study.
Organization and Management
44. Overall responsibility for implementing the proposed project wouldrest with the State of Kelantan. The project would be carried out throughTAKDIR. The Board of TAKDIR has been strengthened to include Governmentrepresentation. It is chaired by the Chief Minister of Kelantan and includesrepresentatives from the Federal Ministries of Finance, Lands and RegionalDevelopment, and Agriculture, EPU, and FELCRA, and the State Deputy ChiefMinister, the State Secretary, State Financial Officer and the State Directorof Lands and Mines. The Board would provide overall guidance in implemen-tation and set policies.
- 15 -
45. A Technical Coordinating Committee has been established which is
chaired by the State Chief Minister and comprises the Deputy Chief Minister,
State Financial Officer, Director of the State Economic Planning UUnit,
representatives of the Federal Ministries of Finance, Agriculture, and Lands
and Regional Developnent, FELCRA, and RISDA, and the Director of TAKDIR. This
committee will take steps to ensure adequate Federal-State and inter-agency
coordination and would act on behalf of the Board as a Steering Committee
for the project. The Director of TAKDIR would act as Project Manager and
be responsible for day-to-day implementation of the project. He would report
monthly to the Technical Coordinating Committee.
46. Specific responsibilities of individual agencies would be as
follows:
(a) TAKDIR: overall scheme management; supervising new rubber
planting (TAKDIR will provide credit for new rubber planting for
settlers not qualifying for RISDA grants); and rehabilitation
activities for which it provides credit; procuring required
materials and inputs; supervising construction of scheme roads,
offices and facilities; procuring materials, and supervising
construction of settler housing; providing credit to settlers and
maintaining individual accounts;
(b) RISDA: replanting, and new planting of rubber covered by RISDA
grants; procuring required materials and inputs; and overall
extension activities for rubber cultivation and exploitation;
(c) DOA (Department of Agriculture): supervising new planting andreplanting of fruit crops; providing plant materials and inputs;
extension for fruit and annual crops (including garden crops); and
developing 250-acre pilot project of hybrid coconut and coffee
(with assistance from the Malaysian Agriculture and Research and
Development Institute on statistical layout and analysis);
(d) PWD (Public Works Department): constructing schools, clinics
and water supply facilities; providing engineering staff to
TAKDIR for the duration of the project; and
(e) the Departments of Fisheries, Veterinary Services, Health and
Education would staff facilities to be constructed under the
proposed project and provide appropriate assistance and extension
to project participants as a part of their normal programs.
Project Costs and Financing
47. Total project costs (inclusive of $3.5 million of taxes and duties)
are estimated at $70.2 million, of which $25.0 million or 36% represent
foreign exchange. Physical contingencies of 10% on agricultural development,
housing materials, vehicles and equipment, administration and management, and
20% on roads and public facilities have been added to base costs. Price
- 16 -
increases were assumed at 9% for 1980, 8% for 1981 and 7% thereafter.Expected price increases amount to 23% of base costs plus physical contingen-cies. The proposed Bank loan of $25.0 million would finance the fullforeign exchange cost of the project, equivalent to 37% of project costsexclusive of taxes and duties.
48. Project financing would be as follows:
(a) $11.9 million of the proceeds of the Bank loan would be relent tothe State of Kelantan, together with $18.3 million of FederalGovernment loans, for onlending to settlers to finance farmdevelopment;
(b) $7.2 million of the proceeds of the loan, together with $11.4 mil-lion of Federal Government funds, would be provided to the State ofKelantan as a grant to finance construction of roads and tracks;
(c) $6.0 million of Federal Government funds would be provided as grantsto Federal line agencies for provision of social infrastructure, andagricultural support, including grant-aided programs such as orchardimprovement;
(d) $2.6 million of the proceeds of the loan would be relent to theState of Kelantan to finance facilities, vehicles and equipment,and technical assistance for TAKDIR, and would be combined with$3.5 million of State Government funds which would finance thebalance of TAKDIR's administrative costs;
(e) $2.3 million of the proceeds of the loan would be providedto RISDA as a Treasury grant and would be combined with $5.7 mil-lion of RISDA's own funds to finance RISDA's activities under theproject; and
(f) $1.0 million of the proceeds of the loan, and $0.3 millionof Government funds, would be provided to EPU to financethe road construction sector study.
49. The Government would ensure that adequate funds are made availableto complete the project (Section 3.01(a), Loan Agreement). The beneficiarieswould also supply noncash inputs, mostly in the form of settler labor, to anestimated value of $9 million. The production and extension advisoryservices, financial management and assistance in nutritional monitoring areestimated to require about 192 man-months of professional expertise at atotal cost of about $1.0 million. The average manmonth cost (based on theindividual fees, travel and local allowances) is expected to be about $4,840.The average local man-month cost is $3,200 (96 man-months) and the averageexpatriate man-month cost is $6,500 (96 manmonths). In addition, the cost ofthe baseline and post-project nutrition health survey, including field staffand laboratory testing is estimated to be $70,000. Engineering design andconstruction supervision for the roads and tracks would be carried out bydomestic consultants. The lump sum contract cost, which is estimated to be$1.2 million, is based on 10% of the estimated construction cost. The RoadConstruction Sector Study will require about 90 man-months of specialist
- 17 -
consultancy services in engineering, management and finance. The averageman-month cost, including salary, costs, fees, international travel andsubsistence is expected to be about $10,000. In addition to these personnelcosts the estimated cost includes the cost of vehicles, local transportationand office expenses and other minor items.
Relending Terms
50. The Government would bear the foreign exchange risk. It wouldrelend approximately $14.5 million of the proceeds of the loan to the Stateof Kelantan, at the Bank interest rate and with a maturity of 25 years with 10years grace, for onlending to settlers and for financing TAKDIR-s facilities,equipment, and technical assistance. Government funds would be onlent to theState on terms averaging 5-1/2% p.a. for 25 years with 10 years grace and nointerest in the first 5 years. Onlending terms to settlers would be atprevailing rates for similar land settlement schemes in Malaysia at 6-1/4%p.a. For new planting of rubber, terms would be the same as under currentFELDA rubber schemes, i.e. loans would have a maturity of 24 years with 9years grace with interest compounded during the grace period. Borrowings forother purposes, e.g., rubber rehabilitation, would have a shorter maturity,based on the borrower's expected capacity to service debt. The inflation rateover the past three years has averaged about 5% and is expected to remain atthat level for the next few years. The proposed rates are positive andcompare favorably with current commercial rates for agricultural borrowing,which are 9-11%. No material changes would be made in relending terms withoutprior consultation with the Bank (Section 3.03, Project Agreement). Theseterms would be incorporated in a Subsidiary Loan Agreement between the Federaland State Governments. It would be a condition of effectiveness that thisSubsidiary Loan Agreement has been executed between the Federal Government andthe State of Kelantan (Section 6.01(b), Loan Agreement).
Procurement
51. Vehicles and equipment amounting to $2.0 million would be procuredunder international competitive bidding in accordance with Bank Group guide-lines. A 15% preference margin, or the prevailing customs duty if lower,would be extended to local manufacturers of these items. Off-the-shelf itemscosting less than $40,000 each and limited to a total of $800,000, would beprocured locally through normal government procedures. Materials foragricultural development and housing amounting to $24.2 million would beprocured by local competitive bidding. There are numerous suppliers, foreignfirms are well represented, bids would be accepted from foreign suppliers andcompetition is adequate. Civil works ($23.5 million) would be relativelysmall and scattered for most of the construction subprojects. Competitivebidding in accordance with local procedures, involving no domestic or otherpreferences, would be appropriate for the work to be executed under contract.
Disbursement
52. Disbursements for vehicles, equipment, fertilizers, and chemicalsfor TAKDIR would be at the rate of 80% of total costs, or 100% of foreign
- 18 -
exchange costs. F'o;r nroctbin of roads and related engineering services,
disbursement would be at the rate of 40X of total costs. Disbursement forTAKDIR facilities and housing materials would be at the rate of 50% of totalcosts. Disbursement for technical assistance and consulting services (exceptengineering) would be at the rate of 80% of total costs, or 100% of foreign
costs. For rubber development financed by RISDA, disbursement would be at therate of 100% of the Treasury grant payment to RISDA, amounting to 34% ofRISDA's field development expenditure during the project period. Normal
supporting documents would be submitted for vehicles, materials and civilworks. Certified statements of expenditures, audited by the Auditor-General,would be submitted for RISDA payments. To allow key project staff, includingfinancial consultants, to be recruited immediately, and project activities tobe undertaken as planned for the 1980/81 clearing and planting season, retro-active financing of $500,000 from January 1, 1980 is proposed (Schedule 1,para. 4 of the Loan Agreement). It is expected that disbursements would becompleted by June 30, 1987, approximately 18 months after the end ofconstruction.
Accounting and Auditing
53. TAKDIRs existing financial condition is weak and its accountingsystem inadequate to meet the needs of the proposed project. The appointmentof a financial consultant to implement an improved accounting system, thatincorporates individual settler s accounts, would be a condition of loaneffectiveness (Section 6.01(c) of the draft Loan Agreement) and TAKDIR-s over-all accounts would be audited by the Auditor-General or independent auditorsapproved by the Auditor-General and acceptable to the Bank (Section 3.02 of
the draft Project Agreement).
Cost Recovery
54. Government-s total commitment to the project over its life would beabout $85 million. About $30 million would be in the form of loans made overa period of 12 years to settlers for development of rubber and housing, whichwould be fully recovered at an interest rate which is positive. The balancewould comprise $10 million in grant assistance for agricultural development,$20 million for economic and social infrastructure and $28 million for manage-ment, administration and maintenance, and would be borne directly by theGovernment, the State of Kelantan and RISDA. The project would generateexport duties and taxes amounting to about $180 million over its life.Historically, RISDA's revenue from the replanting cess has been fully adequateto cover the replanting grants paid to smallholders.
Impact on Women
55. The project would substantially increase the labor input required by
farm holdings in the project area. It is anticipated that, in line withexperience on other settlement schemes in Malaysia, this labor will be largelysupplied from within the farm household and that in a typical household, while
- 19 -
the husband would undertake the major burden of farm work, the wife wouldassist in the rubber tapping and latex collection task, and in maintenance andweeding operations. The proposed child care centers would assist in relievingthe burden of infant care during these work periods. The project, throughfinancial ass-stance for housing and land development, and provision ofinfrastructure, would reduce the need for extended absences by the head of thehousehold and would increase cash incomes. Women would play the major role inthe development of home gardens and small livestock in the new settlements.TAKDIR settler services staff would coordinate the activities of relevantdepartments in order to assist in timely development of these home foodsources, and in application of supplemental nutrition programs, withparticular emphasis on pregnant and nursing mothers and young children.
Environmental Impact
56. It is estimated that 50% of the area to be developed will beterraced in order to prevent runoff and erosion. The scattered nature of thedevelopment will limit the impact of such increased runoff and of dissolvedplant nutrients. No major processing facilities for rubber are proposedwithin the project area. Increasingly stringent standards for effluent fromagricultural processing have been introduced by GOM, and these and existingregulations controlling land development, would ensure that implementation ofthe project would not result in an adverse environmental impact.
Project Benefits and Risks
57. The project is designed primarily to generate increased incomes for7,500 existing settlers on the TAKDIR schemes and to provide for the settle-ment of another 1,800 low-income rural families. The incomes of existingsettlers are generally below the accepted poverty income level of $1,600 peryear per household, largely because of the lack of support they have receivedin the past. It is projected that incomes of existing settler householdswould rise from an annual average of $1,160 to $2,580 at full development (theaverage of years 11 to 20). New settlers are estimated to have preprojectincomes of $840, which would also rise to $2,550 per year. These higherincomes reflect both increased productivity and reduced underemployment.Labor input would increase by about 65% for new settlers and 35% for existingsettlers. Returns per day worked on the holding would be more than double forexisting settlers.
58. The project is expected to yield several benefits which cannot bequantified. The completion of public infrastructure, schools, clinics andwater supply facilities and the provision of assistance in housing construc-tion would enable families to move onto the schemes at a much earlier stagethan in the past, thus hastening the development of viable communities.In addition, nutrition programs, together with improved access and consequentgreater availability and lower prices for food, would reduce the incidence ofmalnutrition, particularly among children.
- 20 -
59. At full dev,01drTfenIL. ,he pr :posed project would induce annual pro-duction of rubber (all of which would be exported) amounting to about $24million. In addition, production of fruits, fish, coffee and coconut, to thevalue of about $1 million per annum would be generated for domestic consump-tion. During the develol-nent period about 3,000 man-years of employment intotal would be generated in construction and at full development additionalfamily labor requirements of about 6,000 man-years per annun would begenerated.
60. The risks associated with the project are limited. Rubber produc-tion technology is well known in Malaysia. Market prospects for rubber arefavorable. The economic rate of return for the proposed project is estimatedto be 17%, calculated on the basis of comparing, at economic prices, forecastagricultural production <ad related costs with the project and the expectedsituation without the project. A reduction of 20% in price would reduce therate of return for the project from 17% to 14%. The major risk associatedwith the project is that of delayed agricultural development because of poorperformance on the part of the major implementing agency, TAKDIR, but thiswould not have a substantial impact on the rate of return. For example,delaying the agricultural development of the project by three years andconstruction by one year would reduce the rate of return to 15%.
PART V - LEGAL INSTRUMENT AND AUTHORITY
61. The draft Loan Agreement between Malaysia and the Bank, the draftProject Agreement between the State of Kelantan and the Bank, and the Reportof the Committee provided for in Article III, Section 4 (iii) of the Articlesof Agreement are being distributed separately to the Executive Directors.Special conditions of this loan are listed in Section III of Annex III.
62. I am satisfied that the proposed loan would comply with the Articlesof Agreement of the Bank.
PART VI - RECOMMENDATION
63. I recommend that the Executive Directors approve the proposed loan.
Robert S. McNamaraPresident
Washington, D.C.August 7, 1980
ANNEX I- 21 - Page 1 of 5
TALE 3AMLLAYSIA - SOCIAL INDICATORS DATA SHEET
MALAYSIA REFERENCE GROUPS (WEIGHTED AVERAGESLAND AREA (THOUSAND SQ. KM.) - MDST RECENT ESTIMATE)-li
TOTAL 329.8AGRICULTURAL 65.1 MOST RECENT MIDDLE INCOME MIDDLE INCOME
1960 /b 1970 /b ESTIMATE /b ASIA & PACIFIC LATIN AMERICA & CARIBBEAN
GNP PER CAPITA (US$) 240.0 450.0 1090.0 894. 8 1384.1
ENERGY CONSUMPTION PER CAPITA(KILOGRAMS OF COAL EQUIVALENT) 242.0 469.0 716.0 842.4 1055.9
POPULATION AND VITAL STATISTICSPOPULATION, MID-YEAR (MILLIONS) 8.0 10.7 13.3URBAN POPULATION (PERCENT OF TOTAL) 25.2 27.0 28.8 39.1 63.4
POPULATION PROJECTIONSPOPULATION IN YEAR 2000 (MILLIONS) 20.0STATIONARY POPULATION (MILLIONS) 30.0YEAR STATIONARY POPULATION IS REACHED 2070
POPULATION DENSITYPER SQ. KM. 24.0 32.0 40.0 376.1 28.1PER SQ. KM. AGRICULTURAL LAND 152.0 185.0 204.0 2350.4 81.7
POPULATION AGE STRUCTURE (PERCENT)0-14 YRS. 45.1 45.4 42.2 40.4 41.4
15-64 YRS. 51.3 51.5 54.4 56.2 54.765 YRS. AND ABOVE 3.6 3.1 3.4 3.4 3.9
POPULATION GROWTH RATE (PERCENT)TOTAL 2.5 2.9 2.7 2.4 2.7URBAN 5.5 3.6 3.6 4.1 4.1
CRUDE BIRTH RATE (PER THOUSAND) 39.1 32.6 29.0 28.7 34.8CRUDE DEATH RATE (PER THOUSAND) 9.1 6.8 6.0 7.9 8.9GROSS REPRODUCTION RATE .. .. 1.9 1.9 2.5FAMILY PLANNING
ACCEPTORS, ANNUAL (THOUSANDS) .. 56.0 80.4USERS (PERCENT OF MARRIED WOMEN) .. 7.0 36.0 39.0
FOOD AND NUTRITIONINDEX OF FOOD PRODUCTION
PER CAPITA (1969-71-100) 85.0 99.0 107.0 116.9 106.9
PER CAPITA SUPPLY OFCALORIES (PERCENT OF
REQUIREMENTS) 105.0 113.0 117.0 108.9 107.4PROTEINS (GRAMS PER DAY) 48.0 51.0 57.0 60.3 65.6
OF WHICh ANIMAL AND PULSE 16.0 18.0 22.0 18.8 33.7
ChILD (AGES 1-4) MORTALITY RATE 9.0 5.0 3.0 5.3 8.4
HEALTHLIFE EXPECTANCY AT BIRTH (YEARS) 57.0 64.0 67.0 63.0 63.1INFANT MORTALITY RATE (PERTHOUSAND) 75.0/c 41.0 31.0 52.8 66.5
ACCESS TO SAFE WATER (PERCENT OFPOPULATION)
TOTAL .. .. 62.0 42.4 65.9URBAN .. .. 93.0 62.1 80.4RURAL .. .. 49.0 29.7 44.0
ACCESS TO EXCRETA DISPOSAL (PERCENTOF POPULATION)
TOTAL .. 59.0 60.0 52.8 62.3URBAN .. 100.0 100.0 71.1 79.4RURAL .. 43.0 43.0 42.4 29.6
POPULATION PER PHYSICIAN 6937.0 4260.0 4347.0 4120.1 1849.2POPULATION PER NURSING PERSON 1776.0/d 1246.0 1079.0 2213.6 1227.5POPULATION PER HOSPITAL BED
TOTAL 265.0/e 285.0 306.0 819.4 480.3URBAN .. 86.0RURAL .. 1900.0
ADMISSIONS PER HOSPITAL BED .. .. 17.2 28.8
HOUSINGAVERAGE SIZE OF HOUSEHOLD
TOTAL 5.9 5.6/eURBAN 5.9 5.9/eRURAL .. 5.5/e
AVERAGE NUMBER OP PERSONS PER ROOMTOTAL 3.0 2.6/.URBAN 2.3 2.3/.RURAL .. 2.8/e
ACCESS TO ELECTRICITY (PERCENTOF DWELLINGS)
TOTAL .. 43.0/eURRAN 82.9 84.72 ..RURAL .. 30.0/e
- 22 - ANNEX IPage 2 of 5
TABLE 3AMALAYSIA - SOCIAL INDICATORS DATA 5HEET
MALAYSIA iEFERENCE GROUPS (WEIGHTED AVEItES- MOST RECENT ESTIMATE)A
MOST RECENT MIDDLE INCOME MIDDLE INCOME1960 /b 1970 /b ESTIMATE fb ASIA & PACIPIC LATIN AMERICA & CARIBBEAN
EDUCATIONADJUSTED ENROLLMENT RATIOS
PRIMARY: TOTAL 96.0 91.0 93.0 98.6 99.7MALE 108.0 95.0 94.0 99.2 101.0FEMALE 83.0 87.0 91.0 97.7 99.4
SECONDARY: TOTAL 19.0 35.0 43.0 55.5 34.4MALE 25.0 40.0 47.0 60.7 33.5FEMALE 13.0 29.0 38.0 49.9 34.7
VOCATIONAL ENROL. (2 OF SECONDARY) 5.0 3.2 2.9 13.7 38.2
PUPIL-TEACHER RATIOPRIMARY 28.0 31.0 32.0 34.6 30.5SECONDARY 38.0 26.0 27.0 28.5 14.5
ADULT LITERACY RATE (PERCENT) 53.0 55.0 ,, 85.8 76.3
CONSUMPTIONPASSENGER CARS PER THOUSAND
POPULATION .. .. .. 9.0 43.0RADIO RECEIVERS PER THOUSAND
POPULATION .. .. .. 118.9 243.3TV RECEIVERS PER THOUSAND
POPULATION 3.2 18.0 45.0 39.4 84.2NEWSPAPER ("DAILY GENERALINTEREST") CIRCULATION PERTHOUSAND POPULATION 61.0 65.0 87.0 . 63.3CINEMA ANNUAL ATTENDANCE PER CAPITA 16.0 9.4 9.1 4.9
LABOR FORCETOTAL LABOR FORCE (THOUSANDS) 2745.3 3622.2 4789.0
FEMALE (PERCENT) 27.0 31.4 33.0 36.8 22.2AGRICULTURE (PERCENT) 63.1 56.0 50.0 51.9 37.1INDUSTRY (PERCENT) 11.7 14.0 16.0 21.9 23.5
PARTICIPATION RATE (PERCENT)TOTAL 34.2 33.8 33.9 39.1 31.5MALE 48.8 45.7 45.9 48.5 48.9FEMALE 18.9 21.5 21.5 29.6 14.0
ECONOMIC DEPENDENCY RATIO 1.4 1.5 1.3 1.1 1.4
INCOME DISTRIBUTIONPERCENT OF PRIVATE INCOMERECEIVED BY
HIGHEST 5 PERCENT OF HOUSEHOLDS .. 27.0HIGHEST 20 PERCENT OF HOUSEHOLDS .. 56.6LOWEST 20 PERCENT OF HOUSEHOLDS .. 3.3LOWEST 40 PERCENT OF HOUSEHOLDS .. 10.6 ..
POVERTY TARGET GROUPSESTIMATED ABSOLUTE POVERTY INCOMELEVEL (US$ PER CAPITA)
URBAN .. .. 279.0RURAL .. .. 252.0 192.1 190.8
ESTIMATED RELATIVE POVERTY INCOMELEVEL (US$ PER CAPITA)
URBAN .. .. 313.0 .. 474.0RURAL .. .. 283.0 182.5 332.5
ESTIMATED POPULATION BELOW ABSOLUTEPOVERTY INCOME LEVEL (PERCENT)
URBAN .. .. 16.0RURAL .. .. 46.0 33.2
Not availableNot applicable.
NOTES
L The group averages for each indicator are population-weighted arithmetic means. Coverage of countriesamong the indicators depends on availability of data and is not uniform.
Lb Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969and 1971; and for Mosc Recent Estimate, between 1974 and 1978.
7c 1957; /d 1962; /e West Malaysia.
April, 1980
- 23 - ANNEX IPage 3 of5
REtfPNTtOaIS OP SOCIAL tOlaICATnOt
Notes: Although the date se dtce tro core generally judged the sst authoritatIve nd reliable, it should ale be ntetd abet they any not he tee--eatienall1y o-pse-ble hetanse at the leot of etoderdiced def.toirina ad concepts need hy di fferent .o.etetee to -niletieg the data, The dare are, none-thelega. neetal tn descolbe nWde of eagattoda, tdi-eta tacoda, end oh-cticcttatn maor ditfer-os hetaveen.. annaie..
Th' reeeeo gon. are (1) our sate ona-y groa of the cubject rona.try cad f It a...ntry ncanp altO sutehur hialrrav--ge Ieco than the an...rry anoucof the sbjeot .... aty tear..Pt f-o 'Cail Surpln Oitl Ep-rre-s grop hee Middle tints North Afrtta cad Middle taut tc ah.c.- hbaen at strager-iata-rat 1a otf 'ietic). Ira the ref-reno greup deic the a -oge r popuait- reighted arithtocto asea fur auth i~daetur ned shun only abet atIsg..r halt of the nnast a goon lass d.ta for abet indi.et-r Si..e the -neasofourte aa the nisusdyoen t~he_ vuiabIlity atde- gad Is not n-tf-rt nattn ot hr saraiscd In relating s-rgs. of ane lodtctnr to nnabe. Th.ce e-ercc areary asetof ~ truproartcna-lnat ncldiono. t a Ita sang the tont"nr end raf-.n.no Arous.
Lot SA(thousand aq,t.) .uneoa er'vdcia .oouta auiur fnnurn aaoainpTotl Total eartuo e-e capoteieg land eo aed jaland eate., etaca- qua1if.od .oe a ..edleleh.o tudoroylrAgritltura - Ecasa f atcgi-ultn-l area need esaporatly ur pentnetly PnatuorturigPcn -Populetion dinided hranhe f.poat.tiaogfoe noos. pastun.. cahtk sad kiteoha gandea -r ta Lie fauna; 1977 data, ale and totele graduat nree, p-ctit.l a...e.a *ed -seletanarec
1015PSICAPTA fSt)-GIP per a-pi-a ectista ct ...... o .en p.irs, -l- ura,sdrrl iie ythe it -Psntio ancho of huepitaI badeo-se b e areiun marina cc Woald lb-. Atitia fi976-7a bhciu); 19601 anaichin. in pablir and Pi-tat genera and cycoinled hncpitcl cad e-19)0 .ad 1978 date, habtlitati-eoete.- HPiteainle an tblet hllsaut Pere-etir staffedby at -at one Phaycirie. Ecteblistaccte sennidiag prieip.lly ouctnd1elENERGY CONSoTIeONu PtER CAPITA-Anna cuumrnoa e oiieeg fonI acereet iroludad. aru1 hapiteals, incense itnlud heslth ned edirl"and lignite' . -erac,at 1a gc. end hydn-, nuolec and geurbarcaelco- re -r u permeectly crafted by a Phyetilcn that by a adica sutocntricity) in kilugrecs of oo.al eqoivant per aepita; 1960, 1970, and 1978 rsesidrift, atc.) hbiab uff icr -p.tiar eo--detin and proVide
dare. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Iitoard raga at eadica1 taciliti-c Par statistical purp-e -rbr h-c'-tale includ b'OO principalg ..nra sa d pyctiulicd huepitale, and ruraPOpttLATIttt 0011 VITAL SIAIISTICO hocyituls 1oat on .. rua b-paral nod sediru1 ad coterityaa--r-TatalPonulalue.Mid-tco (clliun) -Ah of July 1; 1960, 1970. and 1978 daeonortoyaled-Total ... rber of adnia...n ra iort hcoergedaafothsiasdvddb rh o anhe ot beds.lrba Posolarir (Erneo-t f_ut ana - tatia of arhan to taral yapulctiae;
dffenear dfiebiane of urban arose cay affet -pt-rbility at darn HnUIoiGasng ontie;1960, 1970. and 1970 den. a,ueA Seicei oshl snoesnbnead ua,uhn e ed
________________________ ~~~~~~~A hanasbold -n-a-ic.t. of gru-p of iadLvidais attn shreliviag qIrrPoalain i ynr IP -Cuten ppuatOapraeoinc rebeed n 98 .ad their coin ac A hoarder or 1de saY orsY at be n_iided Inrlpopulation by age and sen ed abeir -utulity sad fertility oce. the he..e.hold for etaticti-I parpasOa.Prutaj,iluep Ocrceo fur -nrolity rains -omane of ihrac Is...cl,aseov-EE A-ecenbro esn e an-o~ oa.ndrrl -ovrge urletlif npettenct atbth ino-nieg wintaneyspeinPits Ionte b-o of Parc... panrot I I ura,adrrl coidcoeti ... l1n-1, ard fct1i lite noytiuny stbiliniut at 77.5 yean- The pare- doelinasg, recyonionly. -1liraenlde e-eena -tn ureadmicra fur fertiliy .rtealo baca abree level -eanmd.delior In .noot-pied part-fertility .... nrdin
0 to Incote mod ned Pas fis PIa... pleotn p-rfontac.. An tu ale-trll ieoeto ell -ian)-naa.uhe.ad uafE-h -nutoy Ic ohm sige orof thnee nine onbiontiune of -oeritay onnaltld_elinaauithlrc inity ~In livig quarter .cc t8and fer tility t-ede fn- projeatina Pariancra. of total, urbar, nod rura deeIliigcr-yetoivalY.Otatnoen anniio-tIo.us.ratinanr population thoe I. no genth sincethe birth rate Ic aqua in tie death rare, and also iba age nanto- o- EfDUCATIONsame _ontiat. ThaIa Is abin-ad only utte fCeriuity rtet dsnlia_ to duae Enoal1an Rtimeibe .repaceen 1-e of unit era r-pr-dutaiooaat, ala. an..h g ... netiat Pinyahn oa. b noaae-O a tota, onla ned retaI
.t.to b vr20,adaert o elu tfrilpre anh.i.. . j Io osla-yue u duhd o ifr lopheto pri hiyldnotie tar611titeal larni. anunarleauitbualversaledataiinn earo, ptity ..- llylant sa'y eand ill peneI
Sean eatitnan pruerian s reated -The Year uh-. atationay popuItile:ttna nicene roith ur n or. ebon rho atfatta :achoa ag.' ..ine hasb. .enreahe. Stanyaoa d. . aend eae - oputed aabov;sandyPFclaio lntoeuainrqiaut acforynrof approved ptic-ry i-strutina;Pen e. Iak- Mid-y-nypunii e qurn kilnaino (100 h-a-ar) at provides g-nrIa...tetianal. or tenhr tatninio i-t-tutaitot to P-pi).taia1 are. -eouly nf 12 an 17 yare of a o; correepond.once couse ar 9 ... ralIY
Poolatiln Anearuture (rerien Children 70-101 yntrs), eahn-g 15 ald aatk eucro,o thrpora hich .t uprin desen-hi ean),an mlte ty per ad nie nprrt so i-year .poP dentlyora depart-tai of a-andarylctuto.lation; 1960. 1907, and 1970 data. Poliabrrto-oiao sdaancy-Ttlnue "arle it LPonuatio OturtlaRun feeceno - ite A-..tIa ga-wa raonf tonal nid- piryndscaayenldiaddhatroofteaher- n hyearPnyuniinu fr 190-h. 190-f..cd 1970,4,a7r8oaitteea
Pnlio Rocith cRepnrt)-ea- Annu groanh roar atuban pup- Adut lireno ai- (ecet Li- tirnndult. fablat edndeoictioe funt 1950-6.9h-i ne 190-78. naprett yailautpplto ed1 ytnr and none.Crude B10th Rit. "Iee ah"n d) - Annu line birtha Per ibo-d at aid-feaCpopuletiot; 1900, 1970.R ad 1970 tat,.COtlilMOPTitiCrde tenh Ptun InPo thauand),-E Manua Ide-t per thbana.d of cod-yea Oaenn ae rcouud oosot - Paeano'
0rrcar onepriar ent-populatui-; 196O, 1910, and 1970 data, care nanitg lees than eigt p-raon; -,nodsa -bhul.otac, h--ue andGaeat erdutu ii-A-eoaoe onchcr of daughaero- aauill bea- Itillitary -hlicl-abin -- rIa ry-d-taiv- period ifih abeepertino preeo tepcIIr let idia k..vrelr.aosndrylair All tYPra ofreevsInrdttility mono.; -nully f_in-yc -ncrgec rndtn In 9 191970,. and17. boacs to generl publap0hondofyPulto;aair eoFanily Platoio&A-Acetnre A...uu thauca. -~ ..oe inu-ho of ... octttor aasdccvr t onoe o nyer o rf eraaaa ai eon irb-annurci-1- devices under nupio-a of -co_na ic_ily Poun..ing progrun. on .i ftf-nt dote foo .mann Prare nay an be oapurable tonic easPotty Pua r-fDuec (nernociefmartird .- Ae) - Pe-onnlag of "lrie couirie ubaliabd 1i i...niog,cerof hilid-b-aio nor (11-AS y_st) ahan birth-anttro devites tO 7 J..ev .r .notohuad eIuai)- TV reaive- for broudocat_taall,I r_Id neoIn a age orp. gana pbi Par_h.u..d population; -uludes ooliate-d OrPiv_ra
tOOlDta AND TRITin coo -trire nod it yeara oh.n engiea-tit of TV notnuec ~a._praducain at all tad noesnootlee. prduocina icludes n-d cud teed ead lic-ian devoted prisarily to .raodfi gara om Iti. In o-ide-dIn ondoa erbtn Cu-edIt,tienr.r petiacy gooda tog. uga-an to be "dully" if irapyaseant leant taut tienanekinut_ud of sga) ohiph ar edfib nod ootoinoatrtente te,g. coffee ard loeaAta tedueynCni e er-Ssd at the unth oftaoin onldd.Aao9-aat p-d-ati- af oath a-atry is ban n..i.ir sold .d-ru O er taldr ae .f. o ro-i ionationa averge produce prie grta ; 1961-65S. 1970, and 1978 data, and nobile unto,
e gy pqoivlet if art toad supp1i-ec-iiben anutry P., taptin LBOt FOREPen day. va-ilblo ropplirs -npolo- d-melio p-od-toaro imyote : lain tril ijpo~ Parpd(a_b_o...odut - Etanorirully uti-e Persona, it-ludinil
duati in au I fod ooesia, nd oas v ienisaia.Ocuio- Oriniit nvriu unr ate ice anep...ble; 19i0. 1970 andetcueatIcuied by FAl bear.d at physiolatital aeedc. for noma nata- 7970 dora.oily ndboib Pieidrn rvr dnna ta1 prarue, bdyI aIg to a eca oant-frl lah- far tpre tog ... tota-antren-od uhodlu 196baOr 65n ponaln,ndulnig1 errofranea broulua nta)- ao tui Inb tauit tI roy btlghanchol levl; 961-f,i970, and 1927 dam,. fl~ioaa nyraeg nmn aa om o9f0,i7y nod 1978 darn.Pat -aI-u. annol~ orf ro(cs ta-a) rou -oaa of per cyi-o todotry itrniI- LOor form In nina. artutn,r fetctno-apply of find Per duy. let supply if feud in done icne e o lirily ue a o tpoolot ftta ao otr 90qnirnantu lot all a-tti-t ectebliebod by 2000A ycneide Ont soian17 a 17 calracof it ran of tainPttcriei por day etA 20 uSue ofnaa nad 'ciouiomttean otl ee o eae-rtlli na
coda ate One or nun1th. th,:, of 5 cuc o -iicnrn d 23 areas yrnoaaof total, tale a female pupulnain.oaf ellgroayecvi-animal tnteln c ciavaage fa ohe nrd, prFo.nud by tAp it the Third 19600 1970, nod 1971 data. Theasero. 1Li'e pecticiyaioo -- tn ceflecoigWtold Food nu,-ny; 1961-iS, 1970 cod 1977 dtta. o frtoaraooo the PpayletOno, ocd long. ti.. att..d f_retIPar nenito ceniria eunolo fine animal and puinn- ptteia suPply ef fond de- mate ae ra a-too...l e--e.oivd en animain and pois.. In grte Par day;19..-..., 19170 cad 1977 d--. in.tl eednt ai toni of pnrulcooaa under tI nid iS tad -- r
aga group 1-4 year, to ahildreu in this afe oc_p; fan nea developingaenacice data dnrlv-d fran life tables; 19b0, 1970 ond 1977 duta. INTOME DISTRIBUTION
REALM Lo~~~~~~~~~~~~~~~~~freroo Piuet_cr (btho In at.. nod hia) - R.i-aod by rlah-ittEAf.T S ceroat, niceer 70 etanat,ponanna70 prca'rt, ad --oeu 40 pnrie-life tnrsaianca at Orab (recta) - Avera.ge n a.beto fatatlift rhata at ...nehold-.
tofnt oraliy ore(yt tuoand -Ao.,,ul dentha of it aai onden oar y-u POVEtn TARGET GOnoaS4of age P yth o..u.a Live births. tainr banlin... Paety aa Love
1(il per -Piat) -oban aid rural-
hoccato at Haerisrrer f ocuatont- ota, rbn, ndrurl Aaciteyanco lcon lvnlIntSr lcae lve blnonu o tarIM~aer f papi (ttal uran,endenrl) ub nooibl urewain afn aaao ±ntu. ..... I itcueectil o-odnqtccraa oesnrupl lelde ceod an c wtrsO eteae htanoraire ffrobowae uh sta fa rtcodbchne,cnig,adcoieycel)c Atbre elt ynPonrytim LnI(i e eet)-iba o no
pecaeotuge of thei t-ep-iti-epnuao Lo.Ina bchn nteac.pulic tota -enive invetty nt ee ta-iedo vrg e ptf...etaia or steadpct Ioac-d not mar at,an 200 nact. fromah.uc. may be Peono..al manna of the r--try. Urb-t level I0 deni-d flnonh tie -uraconsidered sa being alohin r...a..nble -- ara of that boe,it rura arena level olth udletne.t f orhigh-n aunt of livit In urbanranun..lhi.urcesaunaid toi y that thobunc -n at-nm-r of ihi househol.d Croae uoaioOlnAelt oen naeLnl acn)-radontIhave to sped adiapropon Iun.n. parVt of the doy it ftobig tbo nod -- o----l --P-c--nt n- pup---ot-no (o hat- an -- r----- ae- aboltepor"
disposal an Pre.recicce ut itir respecti-etaoct E-.-prr die- -aauit ted Soaia1 Dtet DivisionPn.a ca y Include the anlletiun and duIlytia, eibh or aitlh-tca ;tnana nlpoin and PnofJttiaa Dleputnnt..tof h_ _neoroaad ..ast_-_le by caerba...e cys- at tie ace of 'Apri, 119807Pii pelaion and clail-rineltns
-24 - ANNEX 1Page 4 of 5
COUNTRY DATA - MALAYSIA
GROSS NATIONAL PRODUCT IN 1979: ANNUAL RATE OF GROWTH(% in constant _rices and M$)
US$ Mln % 1961-70 1970-76 1977 1978 1979
GNP at Market Prices 19,370 100.0 6.4 7.7 7.1 7.0 8.3Gross Domestic Investment 5,082 26.2 6.7 9.4 19.7 9.5 10.5Gross National Saving 6,173 31.9 .Exports of Goods, NFS 11,744 60.6 6.0 7.9 3.9 7.9 10.1Imports of Goods, NFS 9,774 50.5 2.9 6.9 13.7 13.9 18.3
OUTPUT, LABOR FORCE ANDPRODUCTIVITY IN 1978
Outout Employment Output Per WorkerUS$ Mln % Mln x % %
Agriculture 4,041 25.6 2.0 43.9 2,049 58.5Industry 5,017 31.8 0.9 20.0 5,568 159.0Services 6,701 42.5 1.6 36.1 4,188 119.6
Total/Average 15.759 100.0 4.5 100.0 3.502 100.0
GOVERNMENT FINANCEGeneral Government
M$ Mln Z of GDP1979 1979 1971-75 1976/78
Current Receipts 12,424 28.0 24.0 27.5Current Expenditures 9,875 22.3 22.5 24.5Public Authorities Surplus 369 0.8 0.8 1.1Current Surplus 2,918 6.6 2.3 4.1Development Expenditures 5,544 12.5 10.8 12.4Foreign Borrowing (net) 754 1.7 2.3 1.8
MONEY, CREDIT AND PRICES 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979
(Million M$ outstanding end period)
Money and Quasi-Money 4,131 4,666 5,770 7,574 8,729 10,001 12,769 14,861 17,520 21,738Bank Credit to Public
Sector 833 1,045 1,186 1,375 1,746 2,148 3,036 3,583 3,379 3,873Bank Credit to Private
Sector 2,246 2,572 3,014 4,586 5,278 6,084 7,471 8,970 11,627 14,109
(Percentages or Index Numbers)
Money and Quasi-Moneyas % of GDP 33.3 36.0 40.4 40.0 37.8 45.1 46.4 46.4 48.0 49.0
Consumer Price Index(1967 = 100) 101.3 102.9 106.2 117.4 137.8 144.0 147.7 154.8 162.4 168.3
Annual PercentageChanges in:
Consumer Price Index 1.9 1.6 3.2 10.5 17.4 4.5 2.6 4.8 4.9 3.6Bank Credit to Public
Sector -8.4 25.5 13.5 15.9 27.0 14.6 41.3 18.0 -5.7 13.7Bank Credit to Private
Sector 21.9 14.6 17.2 52.2 15.1 15.3 22.8 20.1 29.6 21.3
not applicable
NOTE: All conversions to dollars in this table are at the average exchange rate prevailingduring the period covered.
- 25 - ANNEX I
Page 5 of 5
TRADE PAYMENTS AND CAPITAL FLOWS
BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1976-79)(US$ Million)
1977 1978 1979(US$ million) _
Exports f.o.b. 6,038 7,295 10,857 Rubber 1,561 21.2Imports f.o.b. 4,467 5,749 7,860 Timber 1,235 16.8Nonfactor Services (net) -505 -651 -1,027 Petroleum 1,058 14.4Resource Gap (deficit) 1,066 895 1,970 Tin 820 11.1Factor Services (net) -517 -606 -880 Palm Oil 800 10.9Net Transfers -32 -42 -53 All Other Commodities 1,880 25.6Balance on Current Account 517 247 1,037
Total 7,360 100.0Direct Foreign Investment 477 542 594Net MLT Borrowing /a
Disbursements 644 1,044 978 EXTERNAL DEBT, DECEMBER 31, 1978Amortization 318 558 245Subtotal 326 486 733 US$ Mln
Other Items n.e.i. -644 -464 -1,121 Public Debt, incl. Guaranteed 2,671Increase in Reserves (-) -199 -269 -1,244 Nonguaranteed Private Debt
Total Outstanding & Disbursed 2,671International Reserves 2,973 3,243 4,487
(end year)DEBT-SERVICE RATIO FOR 1979
Fuel and Related Materials x
Imports 578 634Exports 854 1,010 Public Debt, incl. Guaranteed 4.0
Of which: Crude Petro- Nonguaranteed Private Debtleum 770 969 Total Outstanding & Disbursed 4.0
RATE OF EXCHANGE IBRD/IDA LENDING (MAY 31, 1980)(US$ million)
Average rate during period:IBRD
M$ per US$ US$ per M$Outstanding & Disbursed 465.2
1971 3.05 0.33 Undisbursed 514.11972 2.82 0.35 Outstanding incl. Undisbursed 979.31973 2.44 0.411974 2.41 0.411975 2.40 0.421976 2.54 0.391977 2.46 0.411978 2.32 0.431979 2.19 0.46
/a Medium and long-term capital flows are obtained from World Bank debt data and are notcomparable with balance of payments estimates.
not available
-26 - ANNEX II
Page 1 of 14 pages
THE STATUS OF BANK GROUP OPERATIONS IN MALAYSIA
A. STATEMENT OF BANK LOANS (AS OF MAY 31, 1980)
Amount inUS$ million
(Less cancellations)Loan No. Year Borrower Purpose Bank Undisbursed
Nineteen loans fully disbursed 361.00810 1972 Malaysia Education (II) 15.50 1.43880 1973 Malaysia Population 5.00 1.61885 1973 Malaysia Land Settlement 25.00 0.73908 1973 Malaysia Water Supply (II) 13.50 0.17931 1973 Malaysia Highway (II) 19.50 3.92967 1974 Malaysia Land Settlement 40.00 8.62973 1974 Malaysia Agricultural Development 45.00 31.34974 1974 Malaysia Education (III) 19.00 10.091044 1974 Malaysia Land Settlement 36.00 20.541115 1975 Malaysia Agricultural Research
and Extension 20.50 13.841178 1975 National
ElectricityBoard Power (VII) 35.00 8.50
1213 1976 Malaysia Sewerage 21.50 15.891214 1976 Malaysia Urban Transport (II) 26.00 14.281294 1976 Malaysia Rural Development 21.00 18.511329 1976 Malaysia Education (IV) 35.00 31.301376 1977 Malaysia Highway (III) 35.00 21.091443 1977 National
ElectricityBoard Power (VIII) 22.00 17.80
1444 1977 Malaysia Irrigation 39.00 34.641493 1978 Malaysia National Extension 19.00 18.281522 1978 Malaysia Agricultural Development 26.00 24.621580 1978 Sabah Ports
Authority Ports (II) 13.00 12.611590 1978 Malaysia Land Settlement 28.00 27.391608 1978 Malaysia Population (II) 17.00 16.901618 1978 Malaysia Coconut Smallholders Dev. 19.50 18.111632 1978 Malaysia Agricultural Development 26.50 24.621657 1979 Malaysia Education (V) 38.00 37.741717 1979 Malaysia Irrigation 31.00 29.481808 1980 National
ElectricityBoard Power IX /a 50.00 50.00
Total loans (less cancellations) 1,102.50of which has been repaid 123.16
Total now outstanding 979.34
Amount sold 44.57of which has been repaid 24.94 19.63
Total loans now held by Bank 959.71
Total undisbursed 514.05
/a Not yet effective.
- 27 -ANNEX IIPage 2 of 14 pages
B. STATEMENT OF IFC INVESTMENTS (AS OF MAY 31, 1980)
Type of Amount in US$ millionYear business Loan Equity Total
1964 Malaysian Industrial Development DevelopmentFinance Ltd. (MIDF) financing - 1.31 1.31
1966 Tasek Cement Ltd. Cement 1.28 0.28 1.56
1968 Malayawata Steel Ltd. Steel 2.45 1.01 3.46
1969 Malayawata Steel Ltd. Steel - 0.23 0.23
1970 India-Malaysia Textiles, Ltd. Textiles 1.25 0.25 1.50
1974 Malaysian Industrial Development DevelopmentFinance Ltd. (MIDF) financing - 0.63 0.63
Total gross cammitment 4.98 3.71 8.69
Less: repayments, sales, cancellations,terminations and write-offs 4.09 3.46 7.55
Total cnmmitments now held by IFC 0.89 0.25 1.14
Total undisbursed ____
- 28 - ANNEX IIPage 3 of 14 pages
MALAYSIA
C. PROJECTS IN EXECUTION /1
GENERAL AGRICULTURE
Loan No. 885 Third Jengka Triangle Land Settlement Project; US$25.0 MillionLoan of March 30, 1973; Effective Date: June 22, 1973; ClosingDate: December 31, 1981
The project consists of the third and last stage of the JengkaTriangle program (under which overall 62,000 acres of palm oil and 35,000acres of rubber will be established and 10,000 families will be settled).
Under the project, about 22,600 acres of oil palm and 16,600 acresof rubber have been planted. Planting and maintenance standards are satisfac-tory. A severe drought in 1976 and 1977 caused heavy losses in rubber plantedin schemes 21 and 22. A major program to supply replacements was completed inApril 1979. Oil palm on schemes 15, 17, 18, 19 and 23 has been brought intoproduction. Good progress has been made in village development but settlerintake is generally 2-2.5 years behind appraisal estimates because of earlierdelays in construction of access roads. So far, about 3,400 houses have beencompleted and about 2,700 settlers moved into schemes 15-20, and 23. Settlerintake in schemes 21-23 is expected to be completed in 1981. Water suppliesare now satisfactory on all schemes but delays are still being experienced inschool and clinic construction. Oil palm mill construction in scheme 18 hasbeen completed and the plant is operative.
Loan No. 967 Johore Land Settlement Project; US$40.0 Million Loan ofFebruary 27, 1974; Effective Date: May 16, 1974; ClosingDate: June 30, 1982
The Project consists of clearing of 81,000 acres of land andplanting about 65,000 acres of oil palms, construction of 5 palm oil mills,8 villages, roads and provision for power and water and settlement of6,500 families.
Clearing of 80,900 acres has been completed and 69,800 acres oilpalm have been planted. Planting and maintenance standards are satisfactory.All schemes except one are now in production and production has recovered
/1 These notes are designed to inform the Executive Directors regarding theprogress of projects in execution, and in particular to report any prob-lems which are being encountered and the action being taken to remedythem. They should be read in this sense, and with the understanding thatthey do not purport to present a balanced evaluation of strengths andweaknesses in project execution.
- 29 - ANNEX II
Page 4 of 14 pages
from initially disappointing levels. A major resupplying program to replacelosses to game is under way and boundary trenches have been completed. Dueto delays in infrastructure developnent, village development is one to threeyears behind schedule. About 3,400 settler houses have been constructed and3,100 families settled. Rising timber prices and labor shortages are alsocreating difficulties for contractors. Regular coordination committeemeetings have improved interagency relationships, but shortfalls inconstruction of water supply and access roads will cause some furtherslippage. The third and the fourth oil mills were completed in June 1979.
Loan No. 1044 Keratong Land Settlement Project; US$36.0 Million Loan ofOctober 3, 1974; Effective Date: January 9, 1975; ClosingDate: June 30, 1983
The project consists of clearing about 63,000 acres of land andplanting and maintenance of about 55,000 acres of oil palms; constructionof three palm oil mills and establishment of two urban settlements for about5,500 families.
About 60,100 acres have been planted and 49,800 acres planted tooil palm. On four schemes, 25% of palms were damaged by game. Perimetertrenches are being dug and seedlings resupplied. So far, 1,900 houses havebeen completed and 1,800 settlers moved in in schemes 1, 2, 4, and 5. TheBahau Keratong highway has been opened for all traffic and the project areais no longer isolated.
Loan No. 1115 Agricultural Research and Extension Project; US$20.5 MillionLoan of May 30, 1975; Effective Date: October 21, 1975;Closing Date: June 30, 1984
The project is designed to expand and strengthen research programsand establish an Extension Liaison Unit in the Department of Agriculture.
The project was restructured in July/August 1979 and the loan agree-ment was substantially amended to cover all agricultural research programs ofthe institute, substantially reduce the manyears of consultants, reduce theloan from $28.5 million to $20.5 million, and extend the closing date to June1984.
Loan No. 1493 National Extension Project; US$19.0 Million Loan of January 10,1978; Effective Date: September 8, 1978; Closing Date:December 31, 1983
This project is designed to strengthen agriculture extension andrelated services on a national basis in Malaysia. An uncertain federal/staterelationship continues to constrain implementation. Specifically, the mainconstraints are (a) the federal supernumerary status of project posts, and(b) the inability of the Public Works Department to prepare timely civil works
- 30 - ANNEX IIPage 5 of 14 pages
designs. However, the interest and enthusiasm in the T&V extension methodol-ogy has spread among the staff and the farmers, and pilot programs have beenimplemented in all Peninsular States. Sabah and Sarawak have not yet acceptedfederal control of staff; physical implementation is proceeding satisfactorilyin Sarawak.
Loan No. 1590 FELDA VI Land Settlement Project; US$28.0 Million Loan ofAugust 11, 1978; Effective Date: March 9, 1979; ClosingDate: June 30, 1985
The project consists of land clearing, planting and maintenanceof 62,000 acres of rubber and up to 10,000 acres of cocoa and 500 acres ofexperimental plantings in Pahang and Negri Sembilan, recruitment andsettlement of 6,200 rubber smallholders and 1,500 hired labor and construc-tion of necessary housing and infrastructure facilities.
Clearing and planting operations are seriously delayed in PahangState due to delayed forest clearances by the State. FELDA is preparingproposals to include the expansion of the project area in Negri Sembilan inthe project to offset slow development in Pahang. Planting and maintenancestandards are satisfactory. The cocoa planting program has been tentativelypostponed till 1983 pending further soil and climatological studies. Astart has been made (100 acres) with the crop diversification experimentalprogram. Some fruit and annual food crops will be grown on areas 5 to 50acres each.
Loan No. 1618 Coconut Smallholders Development Project; US$19.5 MillionLoan of October 24, 1978; Effective Date: February 23, 1979;Closing Date: March 31, 1984
The project consists of rehabilitation of about 44,200 acres oftraditional MT Coconuts and intercropping with cocoa, coffee, fruits, etc;replanting of about 17,000 acres with hybrid coconuts and associated cashcrop gardens in the initial years; the provision for the importation of about6,400 crossbred dairy animals for the development of about 3,340 integrateddairy and beef operations; and the strengthening of support services for cropand dairy production.
Physical implementation has exceeded the appraisal targets foryear 1 of the project. About 2,000 farm families have received assistanceto rehabilitate 3,600 acres of coconut and 1,500 acres were scheduled forreplanting in 1979. Contracts have already been let for purchase of 6,600cross-bred heifers and delivery will commence in the last quarter of 1980.The only problem encountered has been general concern about supernumeraryposts; however, prospects for continued satisfactory achievements under theproject are very good.
- 31 - ANNEX ITPage 6 of 14 pages
IRRIGATION AND RURAI, DEVELOPMENT
Loan No. 973 Western Johore Agricultural Development Project; US$45.0 MillionLoan of April 5, 1974; Effective Date: August 14, 1974;Closing Date: June 30, 1980
The project includes main and feeder drains, farm roads, coastalembankments and tidal gates to improve drainage and access in an area of about135,000 ha in southwest Peninsular Malaysia, as well as an integrated agri-cultural development program to introduce intercropping and other changes incropping patterns, construction of farmers development centers, and improve-ments in research, extension, and crop processing. Civil works got off to aslow start and are about 3-1/2 years behind schedule, but progress is nowaccelerating. Staffing and land acquisition problems have been largelyovercome. Work is progressing on drainage and farm road contracts. Construc-tion of the Macap Dam began in October 1979. Progress on the agriculturalside is generally satisfactory, particularly in developing an integratedagricultural service system to coordinate the efforts of the crop-baseddevelopment agencies with the extension activities in the project area. Workis also proceeding on the preparation of a second phase project. The Govern-ment has been contacted regarding the extension of the Closing Date toJune 30, 1983.
Loan No. 1294 North Kelantan Rural Development Project; US$21.0 MillionLoan of July 21, 1976; Effective Date: October 28, 1976;Closing Date: December 31, 1981
The project includes drainage and flood protection for 30,000 haand intensive irrigation for 12,000 ha of padi land; construction of 190 km ofrural roads; 15 small irrigation schemes service 1,300 ha; construction,rehabilitation and equipment of 25 Farmers Development Centers; and establish-ment of an agricultural extension service. Implementation of civil works hasfallen about 2-1/2 years behind schedule, due mainly to staffing shortages,particularly at DID headquarters for design and tendering. Construction offlood bunds has been slow due to delays in land acquisition and the need forstudies to define the final alignments. Shortages of agricultural extensiontechnicians has delayed the implementation of the T&V extension system;progress in the first two districts is good, but introduction of the progressin the two other districts is behind schedule due to staff shortages. A goodstart has been made in the pilot credit programs.
Loan No. 1444 National Small-Scale Irrigation Project; US$39.0 MillionLoan of August 3, 1977; Effective Date: October 25, 1977;Closing Date: March 31, 1983
This project includes construction of small irrigation systems witha total irrigable area of about 54,000 ha distributed throughout Malaysia;technical assistance and training for DID; procurement of equipment and afeasibility study for the Rompin-Endau irrigation project. Construction isproceeding satisfactorily and most schemes should be completed on scheduleby the end of 1982, although some work may extend into mid-1983. Of the195 proposed schemes to be implemented under the project, 53 schemes have
- 32 - ANNEXIIPage 7 of 14 pages
been rejected/deleted by the Preparation and Evaluation Team and 18 newschemes have been added; the revised number of schemes proposed under theproject is now 160. Of these, 96 have been approved by the Bank for inclu-sion in the project following appraisal by the Preparation and EvaluationTeam. Construction of nine schemes has been completed and 67 schemes areunder construction as of December 31, 1979. The final draft of the feasi-bility report for the Rompin-Endau Project has been submitted by theConsultants to the Goverment in December 1979.
Loan No. 1522 Northwest Selangor Integrated Agricultural Development Project;US$26.0 Million Loan of March 8, 1978; Effective Date:June 21, 1978; Closing Date: December 31, 1983
The project includes intensification of irrigation network for20,000 ha of padi; drainage work for 77,000 ha of tree crops and facilities,equipment, and training to support an intensified program of agriculturalservices for the Northwest Selangor region's smallholders. The projectstarted out about one year behind schedule due primarily to staff shortages,but significant progress has not been made on staffing, design and tenderingof structural tertiaries, and planning, survey and design of drainage works.Progress on the agricultural component is satisfactory. A draft agriculturalservices operation manual has been prepared. Total project cost is now esti-mated at about US$104 million, or about 70% above appraisal estimate, duemainly to cost increases in irrigation and drainage works. The project isexpected to be completed by end 1983, about one year behind appraisalschedule.
Loan No. 1632 Krian-Sungei Manik Integrated Agricultural Development ProjectUS$26.5 Million Loan of December 13, 1978; Effective Date:March 6, 1979; Closing Date: December 31, 1984
The project will provide Improved drainage and irrigation facili-ties, access roads, training and intensifed agricultural supporting servicesin two separate areas, covering a total of about 30,000 ha of padi land inthe state of Perak. Despite Government action before loan signing to createadditional positions for DID engineers and district land offices, thesepositions are only now being filled, with the result that the project isstarting off more slowly than planned.
Loan No. 1717 Muda II Irrigation Project; US$31.0 Million Loan ofJuly 30, 1979; Effective Date: September 4, 1979;Closing Date: December 31, 1984
The project is the first phase of tertiary irrigation and drainagedevelopment in the Muda irrigation area, whose storage facilities and maincanal system were constructed under a previous Bank-financed project(Loan 434-MA) during the period 1965-70. The project will provide tertiaryirrigation canals, drainage channels, and farm roads to serve nearly 25,000 ha
- 33 - ANNEX IIPage 8 of 14 pages
of padi land, representing about 25% of the total commaind area. It also
includes establishment of a highly organized extension system, improvement of
operation and maintenance facilities, drainage and coastal protection works
serving the entire 98,000 ha area, and two studies, one dealing with the
development of groundwater resources and the other to prepare a phasedintegrated rural development project. Despite staff shortages, mostly at the
technician level, and the recent cost increases and difficulties in the
delivery of construction and materials, progress in civil works is
satisfactory. Good progress is being achieved on most aspects of theagricultural development program.
EDUCATION
Loan No. 810 Second Education Project; US$15.5 Million Loan of April 5,1972; Effective Date: July 7, 1972; Closing Date:December 31, 1980
The project provides for: (a) educational television in Peninsular
Malaysia, (b) a national curriculum development center, (c) a science
university and (d) technical and vocational secondary schools. Constructionand procurement is practically cmpleted, about three years behind schedule.Delays in appointing consultant architects, completion of design, delays inobtaining approvals of designs and making contract awards, slow performance by
contractors and understaffing of the implementation unit were the main causesof delays. The implementation staff has been strengthened and disbursementsare nearing completion. Closing date extensions beyond the current December31, 1980 date are not envisaged.
Loan No. 974 Third Education Project; US$19.0 Million Loan of April 5,1974; Effective Date: June 26, 1974; Closing Date:December 31, 1980
The Project includes eight general secondary schools, four teacher
training colleges and one polytechnic institute in Peninsular Malaysia andeducation mass media in Sabah/Sarawak. Project implementation is aboutthree years behind schedule because of site selection problems, slow designand tendering, poor performance by contractors and shortages of buildingmaterials and labor. The implementation staff has been expanded andstrengthened and construction is in progress at all project locations.Disbursements are slow but improving. A two-year extension of the Closing
Date is expected to be required.
Loan No. 1329 Fourth Education Project; US$35.0 Million Loan ofNovember 18, 1976; Effective Date: January 14, 1977;Closing Date: June 30, 1982
The project provides for: (a) improved planning and construction of
approximately 850 primary schools in seven most disadvantaged states of
- 34 - ANNEX IIPag Of 14 pages
Malaysia; (b) establishment of four educational resource centers and oneteacher training college; (c) expansion of two and establishment of threeindustrial training institutes; and (d) further study of community educationneeds. The pace of primary school construction program (75% of project total)is satisfactory; over 300 schools have been completed and another 310 areunder construction. Although none of the educational resource centers orindustrial training institutes is more than 10% completed, steps are beingtaken to accelerate implementation.
Loan No. 1657 Fifth Education Project; US$38.0 Million Loan of March 14,1979; Effective Date: May 7, 1979; Closing Date: June 30,1985
The project provides for: (a) construction and equipment for 76lower secondary schools to be located in areas of poor access to education;(b) establishment of administrative training institutes for headmasters andother educational officers; (c) a new central campus and three regionalcenters to expand the capacity and improve the program of the national publicadministration academy; and (d) assistance to long-range planning of occupa-tional training. Implementation performance is good and the project is onschedule.
ENERGY
Loan No. 1178 Seventh Power Project; US$35.0 Million Loan of December 17,1975; Effective Date: March 10, 1976; Closing Date:June 30, 1981
Loan No. 1443 Eighth Power Project; US$22.0 Million Loan of August 3,1977; Effective Date: January 9, 1978; Closing Date:June 30, 1982
Extension of Prai Power Station under the Seventh Power Project isproceeding satisfactorily, about 75% complete at the end of September 1979.Unit No. 4 was commissioned in September 1979. Commissioning of Units No. 5and No. 6 is targeted for the end of February and August 1980, respectively,as originally scheduled. Progress on the Pasir Gudang Thermal Power Stationunder the Eighth Power Project was about 30% complete at the last review,about 5 months behind schedule due to delays in the delivery of structuralsteel columns and boiler parts.
Loan No. 1808 Ninth Power Project; US$50.0 Million Loan of May 21, 1980;Effective Date: August 21, 1980; Closing Date: August 31, 1985
The loan has not been made effective yet. The project estimated tocost $232.9 million will be cofinanced by Commonwealth Development Corporation(UK), Canadian International Development Agency, Overseas Economic CooperationFund (Japan) and commercial banks. It includes construction of two dams andhydroelectric power stations (192 MW) and about 174 km of transmission linesand associated substations.
35 ANNEX IIPage 10 of 14 pages
WATER SUPPLY AND SEWERAGE
Loan No. 908 Second Kuala Lumpur Water Supply Project; US$13.5 MillionLoan of June 14, 1973; Effective Date: August 27, 1973;Closing Date: June 30, 1980
The project consists of the expansion of water supply facilities tomeet increasing demand in Kuala Lumpur and the Klang Valley area. The firstpart of the project, comprising ordinary water works, was completed in 1976,practically on schedule and within the cost estimates and is operational.The construction of the Langat Dam, the last and major work of the project,after delays due to land acquisition, is now substantially completed andimpoundment of the reservoir has started. Overall project completion wasabout two years behind the appraisal schedule. Staffing problems persistwithin the Selangor State Water Department, which is responsible for theproject. There are deficiencies in the accounting, billing and collection,and reporting system. Although the project is virtually completed, the Loanis not yet fully drawn down. Requests have been made to WD and the Treasuryto expedite applications for disbursement of the US$86,000 remaining as ofJune 30, 1980. No extension of the Closing Date is envisaged; completion ofthe disbursement is expected soon.
Loan 1213-MA Kuala Lumpur Sewerage Project; US$21.5 Million Loan ofMarch 11, 1976; Effective Date: August 25, 1976;Closing Date: December 31, 1981
The project is the first stage (1976-81) of a 30-year master planfor sewerage development in the Kuala Lumpur metropolitan area. It includesthe extension of sewage collection (about 70 miles of trunk and lateralsewers) and treatment facilities to serve an additional population of 200,000in the Kuala Lumpur Federal Territory; the institution of a separate SewerageDepartment within the Kuala Lumpur City Hall with its own accounting systemand finances; engineering and management consultant services; staff training;and the preparation of sewerage and pollution control system in the KualaLumpur metropolitan area. The engineering of the project has been satisfac-torily completed. Construction of the three major contracts is progressing.Land acquisition and resettlement of present occupants have created seriousproblems but these are now being solved. Sewerage surcharges on water billswere instituted after delays. Compliance with covenants regarding longtermsewerage and urban planning in Selangor State is lagging. The project isexpected to be completed by mid-1982, about two years behind the originalschedule, at about the estimated cost.
TRANSPORTATION
Loan No. 931 Second Highway Project; US$19.5 Million Loan of August 22,1973; Effective Date: October 25, 1973; Closing Date:December 31, 1981
The project includes: (a) construction and improvement of twosections of Federal Route I totalling about 90 miles in length; and (b)consultant services for (i) feasibility studies and detailed engineering of
- 36- ANNEX IIPage 11 of 14 pages
about 22 miles of Route I and connecting roads in the vicinity of KualaLumpur, (ii) detailed engineering of about 200 miles of roads in West and EastMalaysia, (iii) town development studies for Kuantan and for the region ofNorth-East Negri Sembilan and an urban road improvement study for KualaLumpur, and (iv) supervision of (a) above.
The project, several months after its original completion date, isabout 92% complete. The new Kuala Lumpur-Seremban Expressway was open totraffic for about 80% of its length by the end of 1977, and except for aone-mile section at the northern end, the balance of the Expressway and itsaccess ramps were opened to traffic by the beginning of June 1979. Thenorthern extremity, while completed, will be open to traffic only after thecompletion of the interchange and access ramps which form part of the KualaLumpur Traffic Dispersal Scheme (Loan No. 1214). The Expressway is operatingfairly well under traffic. However, traffic hazards are being created byunauthorized use of road and shoulders for roadside stands, cattle driving andgeneral lack of driver discipline by road users. Government is slowly takingaction. The improvement work for the previously existing Kuala Lumpur-Seremban Road has been completed and the entire length of the road is open totraffic. There have been, however, long delays in the completion of thewidening and improvement works for the Kuala Lumpur-Batang Kali Road,construction of which began in November 1976; it is now 64% completed.Construction costs have escalated sharply due to the delays in projectexecution combined with rapid inflation and the total project cost is nowestimated to be approximately US$53 million compared to an appraisal estimateof US$37 million, an increase of 43%.
Loan No. 1376 Third Highway Project; US$35.0 Million Loan of April 4, 1977;Effective Date: May 4, 1977; Closing Date: June 30, 1982
The project consists of: (a) reconstruction and improvement of trunkroads in Sabah; (b) four-year maintenance program for Sabah, including procu-rement of equipment, upgrading 290 miles of 13 road sections and consultantsservices for supervision of construction and technical assistance to Sabah'sPWD; (c) development of pilot road maintenance and pavement strengtheningprograms for the states of Johore, Perak and Kelantan in Peninsular Malaysia,including pavement strengthening of about 120 mi in Johore; and (d) atransport/railway study for Peninsular Malaysia and an urban study of KotaKinabalu.
The project overall is about 60% completed. Construction work onthe east and west coast roads in Sabah started in September 1977, about fivemonths behind schedule. Progress is slow at present on all three contracts,but the situation on one of them is particularly serious. The Government isnow considering terminating his contract and appointing other contractor(s) orrebidding the contract to complete the work. The Highway Maintenance and RoadUpgrading Program in Sabah is now proceeding satisfactorily with the help ofconsultants but the program is more than a year behind schedule. Whilesatisfactory progress is now being made on the Pavement Strengthening Program
ANNEX IIPage 12 of 14 pages
in the three pilot states in Peninsular Malaysia, the reorganization andupgrading of the State Maintenance Sections and of the Maintenance Unit withinthe Federal Public Works Department is far behind schedule, primarily due tostaff shortages. The Project also included an urban study of Kota Kinabalu inSabah and a transport/railway study in Peninsular Malaysia. Both of thesestudies have been completed. Procurement of the first tranche of maintenanceequipment for the Sabah Highway Maintenance Program has been completed.Procurement of the second tranche, which represents the balance of theequipment to be acquired under the project, is underway.
Loan No. 1580 Second Sabah Ports Project; US$13.0 Million Loan ofSeptember 20, 1978; Effective Date: November 10, 1978;Closing Date: September 30, 1982
The project aims at: (a) providing Tawau Port with the capacity tomeet forecasted traffic; (b) providing the ports of Kota Kinabalu, Sandakanand Tawau with cargo handling equipment to meet future traffic growth and toreplace worn-out items; and (c) improving the performance of the Sabah PortsAuthority by providing technical assistance and staff training. The contractfor civil works has been awarded and work commenced in December 1979. Trafficand financial results for 1978 were generally better than forecasted.Management consultants commenced work in August 1979.
POPULATION
Loan No. 880 First Population Project; US$5.0 Million Loan of February 9,1973; Effective Date: June 21, 1973; Closing Date:December 31, 1981
The objective of the project is to: (a) strengthen administrationof the family planning program; (b) extend family planning services to ruralareas; (c) expedite in-service training of medical and paramedical personnelin family planning; (d) introduce population education in schools; (e)improve family planning, nutrition and health education programs for the ruralpopulation; (f) broaden research and evaluation through establishment ofpopulation research centers.
The National Family Planning Board (NFPB), by activating thenational and state level committees and subcommittees, has recently gainedgreater managerial control over the project implementation. With the creationof the Project Construction Coordination Unit (PCCU), the Government hassucceeded in halting the slow progress in the civil works. To date, 453buildings out of a total of 571 have been completed and a further 95 areunder construction. According to the revised schedule, construction of somefacilities will be completed only by mid-1981. Due to this delay, the closingdate has been extended to December 31, 1981. Annual contraceptive acceptorsrose from about 75,000 in 1976 to over 87,000 in 1979; nearly 40% ofthese acceptors were reported to have been recruited through the integrated
- 38 - ANNEX II
Page 13 of 14 pages
rural health facilities supported through the project. The percentage ofwomen in childbearing age using contraception increased from 16% in 1970 toover 39% in 1978. The estimated rate of current users of contraceptives isabout 45% of the women in reproductive age.
Loan No. 1608 Second Population and Family Health Project; US$17.0 MillionLoan of July 17, 1978; Effective Date: December 15, 1978;Closing Date; December 31, 1983
The project is designed to strengthen further the national familyplanning program in order to achieve the demographic goal of reducing thebirth rate from 30.3 per 1,000 in 1975 to 26 in 1985, with a correspondingreduction in the population growth rate from 2.4% to 2% in PeninsularMalaysia, and to extend family planning services to Sabah and Sarawak for theimprovement of maternal and child health.
Due to recent changes in several key management positions in theMinistry of Health and National Family Planning Board and those agencies'preoccupation with the preparation of the Fourth Malaysia Plan, progress ofproject implementation has slowed down. Procurement of equipment and vehiclesis proceeding on schedule. National program performance, in terms of thenumber of new acceptors, reached an all time high of over 87,000 during 1979compared to about 85,000 in 1978. Project components related to health inSarawak and those under the Ministry of Agriculture in the whole of Malaysiaare progressing well. Of the 200 buildings under the project, sites for 150have been acquired, of which 22 are either under construction or have beentendered. The Government has taken action to locate and acquire sites for theremaining 50 buildings. NFPB will review NFSC building plans in terms of itsspecial functional requirements and seek Bank's comments prior to its final-ization. Considerable progress has been made in establishing specializedservices, training, and research under the National Family Planning Center.
URBAN
Loan No. 1214 Second Kuala Lumpur Urban Transport Project; US$26.0 MillionLoan of March 11, 1976; Effective Date: November 11, 1976;Closing Date: June 30, 1981
The main objective of the project is to increase the efficiency ofthe transport system in Kuala Lumpur. Public transport services will beimproved while the use of private cars will be restrained. Although primarilyconcerned with urban transport, the project also introduces new approaches toresidential development for low-income families. The main components are:(a) road and intersection improvements, traffic engineering and controlschemes and construction of new radial roads; (b) transport policy measuresincluding introduction of minibus services, traffic priorities for high-occupancy vehicles and area road pricing; (c) provision of new serviced plotsfor households and businesses, and improvement of infrastructure services for
- 39- ANNEX IIPage 14 of 14 pages
existing households; and (d) technical assistance to support traffic manage-ment and transport planning, to prepare an urban development project forKuantan, and to review national housing policies and programs. Overallprogress of the physical components on the transport side has been quitesatisfactory. Initial delays, however, will not be overcome and the estimatedproject completion date has been moved back 30 months. Execution of theresidential components has been less satisfactory due to administrative andpolicy problems which are in the process of being resolved. There is alsoconcern about delays in implementing the various policy measures included inthe project. Discussions with the Government are currently in progress toensure their implementation.
- 40 - ANNEX IIIPage 1
MALAYSIA
KELANTAN LAND SCHEPES REHABILITATION PROJECT
Supplementary Project Data Sheet
Section I: Timetable of Key Events
(a) Time taken to prepare the project: 2 years
(b) The agencies which have preparedthe project: Kelantan State Economic
Planning Unit; KelantanDarul Haim Land Developmentand Rehabilitation Corpo-ration
(c) Date of first presentation to Bank: January 1976
Date of first Bank mission toconsider the project: June 19, 1976
(d) Date of departure of appraisalmission: September 19, 1979
(e) Date of completion of negotiations: June 11, 1980
(f) Planned date of effectiveness: December 31, 1980
Section II: Special Bank Implementation Actions
The Bank plans to send a supervision mission shortly afterBoard approval.
Section III: Special Conditions
(a) about 5,000 acres of State land adjacent to the schemes will bealienated to settlers by the State of Kelantan (para. 31);
(b) a Deputy Director (Operations) acceptable to the Bank will beappointed as a condition of effectiveness (para. 41);
- 41 - ANNEX III
Page 2
(c) RISDA will establish a Project Extension Unit (para. 42);
(d) no material changes in the relending terms to beneficiary andultimate borrowers are to be made without prior consultation withthe Bank (para. 50);
(e) a Subsidiary Loan Agreement will be executed between the Governmentand the State of Kelantan as a condition of effectiveness (para.50); and
(f) acceptable financial consultants will be appointed as a condition ofeffectiveness (para. 53).
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