World Bank Document

Document of The World Bank FILECOpy

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No. 2344-MA

MALAYSIA

MUDA II IRRIGATION PROJECT Public Disclosure Authorized

STAFF APPRAISAL REPORT Public Disclosure Authorized

May 16, 1979 Public Disclosure Authorized

Projects Department East Asia and Pacific Regional Office

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

US$1.0() = M$ 2.21 M$ 1.00 = US$0.45 M$ 1 million = US$452,000

WEIGHTS AND MEASURES

1 millimeter (mm) 8 0.03937 inches 1 centimeter (cm) = 0.3937 inches 1 meter (m) = 39.37 inches 1 kilometer (km) = 0.62 miles 1 square kilometer (sq km) = 0.386 square miles 1 hectare (ha) = 2.47 acres 1 cubic meter (cu m) = 35.31 cubic feet 1 million cubic meters (MCM) = 811 acre feet 1 liter (1) = 0.264 gallons (USA) 1 liter/second (1/s) = 0.035 cubic feet per second (cusec) 1 kilogram (kg) = 2.2 pounds 1 metric ton (ton) = 2,205 pounds 1 milligram/liter (mg/i) = 1 part/million (ppm)

ABBXE', tA TIONS

AA - AgricultuLaJ A;.sistant AAO - Assistant Agricultural Officer AO - Agricultural Officer AT - Agricultural Technician BPM - Bank Pertanian Malaysia CCL - Critical Consumption Level DID - Drainage and IrrigationlDepartment DOA - Department of Agriculture FA - Farmers' Association FDC - Farmers' Development Center FOA - Farmers' Organization Authority GRP - Glass-Reinforced Polyester HYV - High-Yielding Varieties ISA - Irrigation Service Area ISU - Irrigation Service Unit LPN - Lembaga Padi dan Beras Negara - National Padi and Rice Authority MADA - Muda Agricultural Development Authority MARDI - Malaysia Agricultural Research and Development Institute MOA - Ministry of Agriculture MSL - Mean Sea Level NPV - Net Preseut Vatue O&M - Operation anid Maintenance SARDEC - State Agricultural Research and Development Committee SMS - Subject Matter Specialist VHF - Very High Frequency

GOVERNMENT OF MALAYSIA FISCAL YEAR

January 1 to December 31 FOR OFFICAL USE ONLY

MALAYSIA: APPRAISAL OF THE MUDA II IRRIGATION PROJECT

TABLE OF CONTENTS Page No.

1. BACKGROUND ...... 1

General . .. . .*...... 1 Irrigation Development in Malaysia ...... 1 Project Formulation ...... 3

2. THE PROJECT AREA ...... 4

Location ...... 4 Climate ...... 4 Topography and Soils ...... 6 Farm Size and Land Tenure ...... 6 Existing Infrastructure ...... 7 Agricultural Services ...... 8

3J THE PROJECT ...... 11

Project Description ...... * . . * . 11 Project Works ...... 12 Buildings ...... 14 Equipment and Vehicles ...... 14 Studies ...... 15 Water Supply, Demand and Quality ...... 17 Status of Design and Construction ...... 20 Land Acquisition ...... 20 Implementation Schedule ...... 20 Cost Estimates ...... 20 Financing ...... 21 Procurement ...... 23 Disbursements ...... 24 Accounts and Audits ...... 24 Environmental Effects ...... 24

4. ORGANIZATION AND MANAGEMENT ...... 25

Project Management ...... 25. . . . Engineering and Technical Services ...... 25 Consulting Services ...... 26 Agricultural Services ...... 26 Monitoring and Evaluation ...... 32

This report is based on the findings of a Bank mission which visited Malaysia in October/November 1978 comprising Messrs. R. Harris, S. Hong, (Bank), P. Judd and G. Thorsky (Consultants), while the agricultural aspects were appraised separately by Mr. E. Boerema (Bank) in August 1978.

This document has a restricteddistribution and may be used by recipients only in the performance of-their-officialduties. Its contents may not otherwise be disclosed without World Bank authorization. -2-

Page No.

5. AGRICULTURAL PRODUCTION ...... 32

Cropping Intensity ...... 33 Cropping Patterns ...... 33 Crop Husbandry ...... 33 Yields ...... 35 Production ...... 36 Milling Facilities ...... 37

6. MARKET PROSPECTS, PRICES, INCOMES AND PROJECT CHARGES . . . . 38

Market Prospects ...... 38 Prices ...... 38 Farm Incomes ...... 39 Regional Impact ...... 42 Project Charges ...... 42

7. BENEFITS, JUSTIFICATION AND RISKS ...... 43

Economic Analysis of Tertiary Block Development...... 43 Social Analysis of Tertiary Block Development ...... 46 Investments Outside the Tertiary Development Area . . . . . 47 Risks ...... 48

8. RECOMMENDATIONS ...... 48

LIST OF TABLES IN THE MAIN TEXT

2.1 Climatic Data ...... 5 3.1 Summary Cost Estimate ...... 22 5.1 Present and Projected Padi Yields ...... 36 5.2 Present and Future Cropped Area and Padi Production . . . . 37 6.1 Rice Price Structure ...... 40 6.2 Summary Farm Budgets ...... 41

ANNEXES

1. Water Supply and Demand 2. Cost Estimates, Equipment and Staffing Lists, Implementation, Expenditures,Disbursements and Allocation of Loan Funds 3. Crop and Farm Budgets 4. Economic Analysis 5. Schedule of Critical Events 6. Procedures for Statement of Expenditure 7. Related Documents and Data Available in the Project File

LIST OF FIGURES

Proposed Padi Cropping Calendar (World Bank-18927) ImplementationSchedule (World Bank-20077) MADA OrganizationChart (World Bank-19775) MADA AgriculturalDivision OrganizationChart (World Bank-18920) MAP IBRD 13613R - fludaII Irrigation Project MALAYSIA

APPRAISAL OF THE TUDA II IRRIGATION PROJECT

1. BACKGROUJND

General

1.01 The Government of Malaysia has requested Bank assistance in financing the Muda II Irrigation Project. The project would be the first phase of tertiary irrigation and drainage development in the existing 9R,000 ha Muda irrigation area. The main objective of the Droject is to raise the productivity and incomes of about 16,000 smallholder padi-farming families through improved water management in those parts of the Muda area which are least adequately served by the present irrigation and drainage network. In addition, by strengthening agricultural support services and improving operation and maintenance, equipment fleets, and large drainage and coastal protection works, the project would benefit all of Muda's 60,000 farm families, or 340,000 people.

Irrigation DeveloDment in Malaysia

1.02 With most of Peninsular Malaysia's cultivated land under rubber (58%) and oil palm (18%), rice production (accounting for 14% of cultivated land) is largely confined to irrigated areas situated in the coastal plains. Concern for reducing the country's dependence on rice imports to satisfy its staple food requirements, and for alleviating the poverty of padi-farming communities, has led to a long tradition of Government support for irrigation development. The lank financed the original Muda Irrigation Project (Loan 434- MA) in 1965, thus contributing to the largest single irrigation project, indeed the largest development project of any kind at that time, in Malaysian history. However, Government-financed irrigation development began long before the Muda project. Surveys and design for the first major irrigation scheme, Krian, commenced in 1880, followed bv the construction of major irrigation infrastructure in Sungei 'lanik (1933), Tanjong Karang (1937), Pasir Mas (1958), Sungei Lemal (1962), Kemubu (1968), and Resut (1970). In the Muda region, major drainage works (some still in use today) were constructed during the period of Siamese hlegemonv,which ended in 1904, and in succeeding decades i-henr;t)7a;tgg arid Irrigation Department (DID) constructed several coTItrolled drainage schemes which provided assured wet-season irrigation to the northern half of the Kedah plain. Over the same period DID also constructed numerous small irrigation schemes, with the result that 80% of Peninsular Malaysia's 370,000 ha of padi land is now provided with some form of irrigation facilities and 57% is technically capable of double-cropping. Aside from Muda, the Bank has financed major irrigation works in Vemubu (Loan 500-MA).

1.03 The Muda and Yemubu projects have been successfully completed. According to the Project Performance Audit Report (Reference B 12), these projects have made a major contribution to the Government's two objectives of reducing rice imports and improving rural incomes in three of the poorest states of Malaysia. The main outstanding technical problems of the Muda project were deficiencies at the Muda and Pedu dams and difficulties - 2 -

and delays in water distributionat the field level. Partial repairs of the dams have been made but recent investigationsindicate that additional technical problems exist. The Government has engaged consultantsunder the Krian- Sungei Manik IntegratedAgricultural Development Project (Loan 1632-MA) to prepare a detailed investigationof the safety of the dams, and to identify additional storage sites for the Muda project area. The study began in May 1978 and is scheduled for completion in December 1979. Improved water distribution at field level would be the focus of the proposed project.

1.04 The main policy question in both the Muda and Kemubu projects concerned compliance with loan covenants on cost recovery. However, Bank policy on irrigationwater charges has evolved since the two loan agreements were signed in 1965 and 1967, respectively,and in 1975 the Bank accepted the compulsory religious "zakat" tax on padi production as a substitute for water charges. Since then, considerationof farm income levels and tax payments, together with the Government'sminimum target for rural income, has led the Bank to accept the Government'spolicy for irrigation investment in smallholderpadi areas which requires no special taxation of project beneficiaries to recover project costs (para. 6.09).

1.05 In recent years the major thrust of irrigation development in Malaysia has shifted from the constructionof new schemes, emphasizingpro- vision of headworks and primary and secondary distributionand drainage facilities to permit double-cropping,to the rehabilitationand improvement of established schemes and the constructionof small schemes. Under the North Kelantan Rural Development Project (Loan 1294-MA), the Northwest Selangor IntegratedAgricultural Development Project (Loan 1522-MA), and the Krian-Sungei Manik Project the existing Pasir Mas, Sungei Lemal, Tanjong Karang, Krian and Sungei Manik schemes will be improved through the provision of tertiary canals and drains to provide the higher standard of water control necessary to improve padi yields and increase cropping intensity, along with the upgrading and replacement of major structures. The Bank is also helping finance approximately 200 small irrigation schemes under the National Small-ScaleIrrigation Project (Loan 1444-MA). In keeping with the new emphasis on higher standards of water control, the recent projects have included strong agricultural service components designed to assist the great majority of project area farmers to make full use of infrastructurefacilities to raise their yields, production, and incomes.

1.06 The irrigation projects under implementationhave gotten off to slow starts, due primarily to staff shortagesand delays in land acquisition. The Government is well aware of these two problems and has taken action to create new positions in both the implementingagencies and the district land offices, and to recruit and train new staff. Since the Government is committed to an expanding program of investment in rural areas, however, staff limitationsare likely to persist. The implementationschedule for the proposed project has taken the recent experience with staffing and land acquisitioninto account. -3-

Project Formulation

1.07 The engineering elements of the proposed project are similar in nature to the irrigation components of the North Kelantan, Northwest Selangor, and Krian-Sungei Manik projects, basically consisting of the construction of new systems of tertiary canals, drains, and access roads. A small part of the project works would consist of improvements in larger structures, particularly major drains and coastal embankments, which would serve the larger project area. Project works as a whole represent a natural follow-up to the original project, which provided the storage facilities (the Muda and Pedu Dams and connecting Saiong Tunnel) and main canal system required to transform an impoverished single-cropping padi area into a relatively commercialized region characterized by a high degree of double-cropping. While the original works have justified themselves fully in fostering the agricultural revolution associated with double-cropping, and have in addition permitted minor increases in padi yields, they do not provide the intensity of canals, drains and access roads required to enable the Muda area to achieve its full agricultural potential, particularly in terms of higher yields.

1.08 Since 1970 the management of the engineering, agricultural extension, cooperative, production credit, and monitoring aspects of the Muda irrigation scheme has been vested in the semi-autonomous Muda Agricultural Development Authority (MADA). MADA is under the jurisdiction of the Federal Ministry of Agriculture (MOA), and was originally staffed by officers seconded from other Federal agencies under MOA, in particular, agricultural officers from the Department of Agriculture (DOA) and engineers from the Drainage and Irrigation Department (DID). In addition to taking full responsibility for operating and maintaining the irrigation system and dams, organizing 27 Farmers Associations and numerous business subsidiaries, implementing agricultural credit and extension programs, and promoting agricultural innovations such as mechanization of land preparation and harvesting, MADA has for several years undertaken a series of pilot development projects and studies. These pilot projects have been aimed at developing plans for a system of on-farm development which would be implemented over the entire Muda command area, and have resulted in detailed analysis/l of civil works requirements, cropping schedules, water management guidelines, water demand and availability, and project costs and benefits. The proposals for improvement are based on MADA's accumulated experience with the existing works and agricultural programs, and their first-hand perceptions of the potentials of Muda's farmers and land.

1.09 Several Bank missions, comprising Messrs. J. Goldberg, E. Boerema (Bank), and G. Thorsky (consultant) visited the Muda area in 1976, 1977 and 1978 to assist MADA in refining its overall 15-year program for tertiary development, and to prepare the present project as the first phase in that program. The project was appraised in October/November 1978 by a mission composed of Messrs. R. Harris, S. Hong (Bank), Thorsky and P. Judd (consultants), while the agricultural aspects were appraised separately by Mr. Boerema in August 1978.

/1 See, in particular, References Bl and B2. - 4 -

2. THE PROJECT AREA

Location

2.01 The Muda Irrigation Scheme is located in the States of Kedah and Perlis in northwestern Peninsular Malaysia, about 500 km north of Kuala Lumpur (Map 13613R). The irrigation area occupies the flat alluvial coastal plain about 20 km wide and 65 km long between the foothills of the Central Range and the Straits of Malacca. Alor Setar, the capital of Kedah, lies in the center of the project area, while Kangar, the capital of Perlis, lies at its northern edge.

Climate

2.02 The climate is tropical and is influenced by the southwest monsoon between May and October and by the northeast monsoon between November and March. Three rainfall seasons can be distinguished (Table 2.1): the dry season from early December to the end of March with an average of less than 100 mm precipitation per month; the moderate season from early April to late July with an average of about 200 mm per month; and the wet season from August through November with between 200 and 300 mm per month. The long term average annual rainfall is 2220 mm. With the exception of the wet season, rainfall is erratic, often occurring in high intensity storms of short duration. Dry periods of up to 10 days in the wet season and 30 days in the dry season are not uncommon. The coefficient of variation of rainfall for the drier months (83% for December and 107% for January and February) is much greater than that for the wetter months (31% for October). Rainfall patterns pose some problems in managing the irrigation and drainage system, and grain harvested in August- September must frequently be artificially dried. Temperatures vary little around the mean value of 27o C, relative humidity ranges from 71% to 87% and, situated at about 6o N, the day length variations are also slight. The climate is well suited to rice production throughout the year. Table 2.1: CLIMATIC DATA

Total/ Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. Average

Average rainfall (mm)/a 48 57 121 219 229 179 195 228 286 319 225 106 2222 1930-1975

Average evaporation (mm)/b 6.8 7.6 7.4 6.6 5.6 4.6 5.3 5.6 5.1 4.8 4.3 4.8 68.5 1972-1975

Mean Temperature ( C)Ic 26.4 27.3 27.8 27.9 27.8 27.4 27.1 27.0 26.7 26.3 26.1 26.1 27.0 1959-1972

Mean Relative Humidity (%)/c 74.7 71.1 73.5 79.5 83.5 83.7 83.7 83.8 85.5 86.6 85.7 81.0 81.0 1963-1974

/a Kepala Batas Meteorological Station.

/b MADA Division of Engineering (DID Standard Black Pan).

/c Meteorology Department. Topography and Soils

2.03 The Muda irrigation scheme area slopes gently from about 4 m above MSL near the main canal (some 10 to 16 km inland) to about 1.5 m above MSL near the coast. The terrain is drained by numerous small river channels and creeks, supplementedby excavateddrains. An inadequate tertiary drainage system results in frequent drainage problems during periods of intense rainfall in the wet season. Salt water intrusionis preventedby tidal gates on the drainage outlets and a system of coastalbunds, a portion of which is undergoing wave erosion.

2.04 Although the plain is extremely flat on a macro-level,the micro- topography is quite variable. There is a considerableamount of higher ground surrounded by natural depressions,and complex systems of linked settlements,which partly or entirely hinder the supply of irrigationwater to higher or more distant padi areas under the present system. This leads to either water shortage or ponding in the problem areas, wastage of irrigation water, and reduced yields. The irrigationblocks proposed for inclusion in the present project were selected on the basis of the presence of large sub-areaswith major water control problems. These sub-areas total over 8,000 ha, or one-third of the proposed project area.

2.05 The soils are typical of many flood plains found in SoutheastAsia. Most of the Muda soils are heavy, poorly drained, slightly acidic silty clays, ideal for rice production. There is a small area of coarser textured free draining soils near the foothills on the eastern fringes of the project area, which is suitable for rice but which can also be used for upland crops. Heavy marine soils and soils derived from mangrove swamps are found in a narrow bank along the coast. These are protected from sea water intrusion by coastal bunds and, with drainage and good water management, the better portions of this area have proven suitable for rice production. Organic and acid-sulfatesoils occur in natural depressionswith no free drainage covering about 27% of the Muda area and about 30% of the proposed project area. These are problem soils requiring careful management in terms of water control and nutrient input. Although these areas are used for rice production, yields and production potential are lower than for the rest of the project area.

Farm Size and Land Tenure

2.06 Farm size: The average size of the 60,000 farms in Muda is 1.6 ha and 50% of the farms are smaller than 1.4 ha. The distributionof holdings according to farm size is as follows:

Class <0.5 ha 0.6-1.1 ha 1.2-1.7ha 1.8-3.4ha >3.5 ha Avg size 0.2 ha 0.8 ha 1.4 ha 2.5 ha 4.5 ha % of farms 10 32 25 27 6 No. ha 1,240 15,980 21,830 42,110 16,840 % of area 2 16 22 43 17

Although Muslim inheritancelaws decree subdivisionof the land on death of the owner, farms have mostly remained intact. Out-migrationand renting - 7 -

of family shares by active inheritors are mainly responsiblefor the stable farm size in the project area. Absentee landlordsand landlords with large holdings are insignificantin number.

2.07 Land Tenure: About 37% of farmers are owner-operators,35% are tenants and 28% are owner-tenants. Tenancy is largely between kin with 71% of tenancy agreements between close relatives. About 80% of land rental agreements are still verbal and negotiated downward in bad years. Tenants have a high degree of security of tenure, due to the large incidence of kin- based tenancies.

Existing Infrastructure

2.08 The Muda Irrigation Project was executed during the period 1965- 1970./i The principal project componentswere:

(a) The constructionof the Pedu Dam with a reservoirstorage capacity of 1,070 MCM, the Muda Dam with a reservoir capacity of 160 MCM, and the 7 km long Saiong connectingtunnel with a maximum capacity of 70 cu m/sec;

(b) a conveyancesystem comprisingan existing river channel, a diversion barrage, and 115 km of main canals;

(c) an internal reticulationsystem with some 970 km of secondary canals from 1,200-2,000m apart (canal density 10 m/ha), 870 km of drains (drain density 9 m/ha), some 2,000 structures,24 pumping stations and about 780 km of laterite surfaced farm roads; and

(d) some 100 km of coastal embankmentwith 25 tidal gates.

2.09 The aim of the original Muda Project was to introduce double-cropping over an area of nearly 100,000 ha, previously devoted to a single rice crop. The project was a notable success,/2 since it led to an increase in the cropping intensity from about 95% to about 185% between 1969 and 1974. The design of the field distributionand drainage system, based on the standardsprevailing in Malaysia in the 1960s, involved widely spaced secondary canals and field- to-field irrigationand drainage. At the time there was little experiencein the design and constructionof more intensivesystems of on-farm development, recently introduced in Malaysia and other countriesin the region. Also, the short-staturedhigh-yielding padi varieties which depend on precise water

/1 Some minor constructionwas carried out as late as 1975, but the project was essentiallycompleted in 1970.

/2 The Project CompletionReport (No. 795-MA) of June 15, 1975 estimated the economic rate of return of the project to be 18%. An updated analysis based on experience through 1978, using lower actual cropping intensity (para. 5.03) and yields (para. 5.12) and higher actual and projectedworld market prices for rice (para. 6.03) than in the PCR, also gives an economic rate of return of 18%. 4, control at field level were still in the developmentstage when the Muda system was being designed. Finally, the main concern of the desiRnerswas a series of difficult,large-scale engineering problems, including the impoundmentof Muda river water in mountains 100 km east of the padi area, its transfer to a better storage site in the Pedu river catchment,its conveyanceto the padi area and gross distributionover and drainage from the farmlands;and the protectionof the lower reaches of farmland from salt water intrusion. The system adopted resolved these problems within a relativelyshort time, while allowing for the future developmentof more intensive field distributioni,drainage and road systems as now proposed.

2.10 The present Muda system relies on field-to-fieldflooding over distancesranging from 1,200 to over 2,000 m, averagingabout 1,600 m. Water must be moved across numerous parcels of land, each of which is surroundedby small field bunds required for water level control within the parcel. The drainage system is equally crude, and difficultiesin applying and removing water on a field-to-fieldbasis are compoundedby the variations in micro-topography. Only about 10% of the parcels have direct access to either a canal or a drain, and associatedroads. This situationresults in lags of up to 40 days in cultivationactivities within each block, which causes serious agricultural problems because of varying water requirementsover the stages oF the padi crop. The maximum water demand is in the land preparationand early growth stages,while excessivestanding water during the late heading stage depressesyields, and water in the fields during harvest makes mechanized harvestingdifficult, increasestransportation costs, and results in loss of grain, high moisture content, quicker deteriorationand poor milling quality. Thus early cessation of irrigationsupply and initiationof drainage depresses yields of the late planted crops within the large irrigation blocks, while continuingirrigation and postponementof drainagedamages the crops planted earlier. It is impossiblefor farmers to achieve their potential yields with so little control over water levels in their parcels. Widely staggered plantings in close proximityalso facilitatethe buildup and carry-overof pests and diseases.

2.11 While the main road network in the Muda region is adequate, there are no farm access roads within individualirrigation blocks. This lack of access leads to delays and high costs in the supply of inputs, in the transport of harvested padi, and in the use of tractors and harvesters. A farm road from their homesteads to the paved roads leading to the region's towns, markets, and factoriesis generallymentioned by the farmers and their families as the most desired Government investment.

AgriculturalServices

2.12 All major irrigationand drainage developmentis financed by Federal Governmentwith the Federal Drainage and IrrigationDepartment (DID) exercising technicalcontrol over State DID offices. State offices are responsiblefor the operationand maintenanceof works and smaller developmentprojects. The - 9 -

State Departmentof Agriculture (DOA) is responsiblefor agriculturalextension and State developmentprograms. The Federal DOA provides technical assistance, supplementarystaff and finance, and is responsiblefor formulatingnational policies and rrograms. It is representedin each state by technical units which support the state extension service. The Farmers' OrganizationAuthority (FOA) is responsiblefor amalgamatingrural cooperativesinto viable Farmers' Organizations,based on an appropriatedevelopment area served by a Farmers' DevelopmentCenter (FDC). The long-term objective is for the FDC and Farmers' Organizationto effectivelyorganize input supply, credit, processing, storage and marketing operationsfor the majority of smallholders,and for the system to eventuallybecome self-financing. The Bank Pertanian Malaysia (BPM) is the key governmentsource of agriculturalcredit for productioninputs, equipment and land purchase. The Lembaga Padi dan Beras Negara (LPN), or the National Padi Authority,is responsiblefor controllingthe marketing and processingof rice and maintaining a national stockpile. The Malaysian AgriculturalResearch and DevelopmentInstitute (MARDI) is responsiblefor all agriculturalresearch with the exception of rubber.

2.13 With the exception of LPN, all agencies report to the Ministry of Agriculture and maintain state offices to serve the states of Kedah and Perlis. MADA manages agricultural support services within the Muda project area, with the cooperationof state offices which provide services outside the Muda area. MADA maintains an Agricultural Division to supervise extension, development, farm mechanization, farmer organization, cooperatives, agribusiness and credit activities,and an EngineeringDivision to manage operationand maintenance of irrigation and drainage works and to plan and evaluate future improvements for water control and management within the project area (Chart 19775).

2.14 For servicing purposes the project area is divided into four irrigation districts. Each district is further subdivided into six to nine areas served by an FDC which covers 3,000-5,000 ha, or 2,000-3,000 farm families, and acts as the headquarters of the Farmers' Organization, or Farmers' Associa- tion (FA). The FDCs are staffed by a General Manager and five Agricultural Technicians (ATs) who take care of extension, organization and cooperatives, credit, agribusiness and accounting. In each district a small cadre of agricultural personnel supervise development, crop protection, demonstration and extensionactivities. At MADA headquarters,small units have been established to supervise extension, development, farm mechanization, input supplies, agribusiness and cooperative development. The Agricultural Division is supported by the DOA State Crop Protection UJnit (which is primarily concerned with the monitoring of insect populations and pest control), the DOA State Crop Produc- tion Unit (which is mainly concerned with seed production and cooperating with MADA on a seed exchange program for project farmers) and the State Soil Survey and Analytical Unit (which carries out soil surveys and soil checks on problem areas). MARDI operates the Bumbong Lima National Rice Research Center just south of the project area. The center has about 20 research scientists and 70 research assistants and carries out a comprehensive program covering breeding, crop physiology, agronomy and crop protection. It also maintains a unit within the project area for testing and adaptive research. Research facilities are adequate and will be further improved under the Agricultural Research and Extension Project (Loan 1115-MA). - 10 -

2.15 Relative to other parts of Malaysia, Farmers' Organization activities in the Muda area have been successful. There were originally 289 agro-based cooperatives which are gradually being phased out and amalga- mated with the 27 Farmers' Associations. As of September 1978, FA membership was about 22,000, or about 36% of all farm families. The agribusiness unit at MADA headquarters procures fertilizer and chemicals for all FDCs. In 1976, purchases included 8.500 tons of urea, 6,300 tons of mixed fertilizers and 3,200 tons of insecticide, valued at US$28 million. The volume of certified seed distributed has been small, but will be expanded under the National Extension Project (Loan 1493-MA). The FDCs/FAs also act as local credit centers for the BPM. Under this program, credit for fertilizer, insecticides. tractor services and hired labor is extended to eligible applicants at 4.25% interest for six months. In 1976, about 30% of farmers received short-term credit with an average value of US$200 per farmer per season, for a total of about US$2.4 million per season. Recovery rates are 82% after the first season, rising to 98% after three seasons. The main constraint to extending the credit program is that only FA members are eligible, and only one credit officer is available at each FDC to process applications and supervise credit transactions. Commercial banks also supply short-term production loans, while BPM provides medium-term loans for tractors, equipment and other needs through four branch offices in the Muda area.

2.16 In June 1975, MADA formed a joint trading company with the 27 FAs with an approved capital of M$2.0 million. The FAs have a 49% shareholding. The objective was to coordinate all FA business and mobilize farmers' capital into agribusiness ventures. In its first 18 months of operation, the company had a turnover of M$9.4 million and a profit, before tax, of M$160,000. Operations consisted mainly of marketing agricultural inputs and machinery. Through bulk purchases, the FAs can supply at competitive prices. Income is derived from membership shares, 1.25% commission for handling BPM padi production credit and markups on inputs sold to farmers- Relative to other commercial ventures, padi marketing has not gained popularity. In 1976, only 680 tons were purchased from farmers, largely due to inflexible purchase rules and noncompetitive prices.

2.17 The success of the Muda project in promoting substantial change in the agricultural practices and attitudes of the majority of farmers is due to a number of factors - the unification of services under one authority, the allocation to MADA of a strong cadre of competent and committed staff, and a pragmatic approach to achieving goals. However, routine extension at field level is limited to one extension officer per FDC who must serve 2-3,000 farm families, as well as assist his colleagues with credit administration, loan recovery and other commercial activities. With this number of farmers to handle, and the workload, it is not possible for the AT to provide effective - 11 -

extension- Reliance was placed on a number of "saturation coverage" extension campaigns with all MADA staff, local government administrators, politicians and community leaders participating. These were an outstanding success in promoting double-cropping and introducing production credit and inputs. However at present levels of production, the campaign approach alone may not be sufficient to impart the more detailed information required to achieve continuous improvement in cultural technique, input usage, yield and income over a prolonged period. With the planned improvements in infrastructure, which will lay the foundation for the next major breakthrough in terms of production and income. it is necessary to review and intensify field services. Key requirements for success are, a more intensive extension system which effectively reaches the majority of farmers at field level on a regular and continuous basis; an improved credit system which brings institutional credit within the reach of the majority of farmers; an effective input supply system that can cope with expanded demand; and an improved operations and management system which requires field staff of all disciplines to plan, implement and evaluate their work programs as a team and deliver an effective "package" of essential services to the majority of farmers.

3. THE PROJECT

Project Description

3.01 The proposed project would be the first phase of tertiary irrigation and drainage development in the Muda irrigation area. It would provide tertiary canals, drains and access roads to serve nearly 25000 ha of padi land, representing about 25% of the total Muda command area. Tertiary works would be constructed in 37 discrete irrigation blocks, averaging about 700 ha each, selected from among the 110 blocks which comprise the Muda scheme (Map 13613R). The number of blocks to be included was determined on the basis of DID's and MADA's capacity to implement work of this kind over a five-year period. Other works and agricultural programs would benefit the entire 98,000 ha Muda padi area. The project would include:

(a) construction of tertiary irrigation canals and drainage channels, and associated structures;

(b) construction of farm roads along tertiary canals and drainage channels and separate farm roads, bridges, and culverts where required;

(d) construction of miscellaneous structures on primary canals and major drains, including escape structures, water level control structures and tidal control gate structures;

(e) upgrading of the present water control communication system;

(f) construction of a project headquarters office, and expansion of existing IIADA engineering offices;

(g) construction of district agricultural and operation and maintenance offices, and quarters for staff; - 12 -

(h) expansion of existing workshop facilities and procurement of workshop equipment;

(i) construction of a seed store at each of the 27 FDCs in the Muda area;

(j) establishmentof a system of staggered cropping scheduleswithin blocks and sub-blocks for agriculturaland water conservation purposes;

(k) introductionof a sound extensionmethodology, an increase in extension staff, and the use of continuous staff training and regular farm visits;

(1) extension of farm credit and improvementof input supply and marketing facilities;

(m) a training program;

(n) a monitoring and evaluation program;

(o) studies; and

(p) procurementof vehicles and equipment for construction,supervision, operation and maintenance of irrigationworks, agriculturalsupport services, and studies.

Project Works

3.02 Tertiary Canals, Drains and Access Roads. Each of the 37 selected irrigationblocks would be divided into four to six Irrigation Service Areas (ISAs) which would each be served by one tertiary canal. Each ISA would be further divided into Irrigation Service Units (ISUs) of 15 to 25 ha, each of which would be enclosed by a 0.5 m high earth perimeter bund and would follow a uniform cropping schedule. The tertiary system would be designed to meet the maximum ISU demand of 4.6 1/sec/ha.

3.03 Tertiary canal alignmentswould follow lot lines to the extent practicable. Upon completion of construction,80% of farm lots would have direct access to tertiary canals, drains, and access roads, and most of the remainderwould be only one lot removed, a considerableimprovement over the current situation. The irrigation run from a tertiary canal to a drain would be 300-500 m with a canal density of about 20 m/ha. Most of the land would be served by gravity, but areas where ground is too high (totallingabout 1,200 ha) would be served by pumping. Turnouts from the existing secondary canals to the tertiary canals, as well as all offtakes from tertiary canals in excess of 0.85 cu m/sec, would be of the constant head orifice type. Ancillary structuressuch as drops and checks with crossings, end control structures and bridges would be provided. From detailed layouts for approximately 49500 ha, it is estimated that the tertiary system to be constructed would include 390 km of concrete-linedcanals, 23 km of pipelines, 45 km of structural canalets, 45 km of earth canals, 384 constant head orifice turnouts, 530 checks and controls with crossings,4,700 farm turnouts, 420 end controls, - 13 -

54 pump-stations and 36 bridges. All tertiary canal embankments would carry either a minimum 2 m wide laterite path or a 3 m wide farm road.

3.04 The construction of conventional earth tertiary canals presents problems in the Muda area because of the lack of fill material for the embankments. Either the fill has to be hauled in from a considerable distance, or the canals have to be overexcavated to provide the required fill. In most areas concrete-lined canals are the least-cost solution after taking into account lower costs for land acquisition and maintenance. A typical lining would be made of precast panels, 5 cm thick by 50 cm square. Joints would be mortared, except that at 3 m intervals a 1 cm wide transverse joint would be filled with an elastic compound. The inside slope would be 1:1 and the outside slope of the banks would normally be 1-1/2:1. About 9% of the tertiaries would be structural canalets, either the glass-reinforced polyester (GRP) flume currently being installed under the North Kelantan Rural Develop- ment Project,/1 or any other type of flume system which could meet the performance specifications already achieved by the GRP system in terms of speed of installation, lack of disruption of cropping activity, minimization of land acquisition, ease of maintenance, and durability. Structural canalets would be used where necessary to accommodate local topographic conditions, thus avoiding large volumes of earthwork. Reinforced concrete or asbestos cement pipelines with rubber gasketed joints would generally be used in conjunction with pumped systems. The remaining tertiaries would consist of compacted laterite earth canals.

3.05 The tertiary drainage system would be designed on the basis of evacuating 0.35 cu m/sec per sq km. Farm drainage outlet pipes and control structures would be provided to control and restrict flow, as needed, for agricultural purposes and to prevent flooding in the lower reaches of the Muda area. All drains would have a 3 m wide farm road on one bank. It is estimated that there would be 490 km of drains, 234 end control structures, 635 intermediate controls with crossings, and 4,100 farm drainage inlets. Also, an estimated 60 km of separate farm roads would be constructed, in addition to those built along drains or tertiary canals.

3.06 Minor Works. A series of small. scattered tertiary canal and drainage systems and farm road improvements would be provided in high priority locations throughout the Muda area, benefitting a total of about 1,200 ha.

3.07 Major Drainage Improvements. In addition to tertiary drain construction, the major outfall drains and natural channels would be improved where experience has found them to be inadequate. Construction would generally include widening, deepening and occasional straightening of rivers and drains to increase their capacity.

3.08 Miscellaneous Works. This category includes the construction of three new 4 m wide tidal gates and associated outfall structures; two new water control structures, with crossings, on the primary canal system; and one escape structure on the southern main canal.

/1 GRP flumes are described in detail in Report No. 1137-MA, Appraisal of the North Kelantan Rural Development Project - Malaysia, June 10, 1976. - 14 -

3.09 Rehabilitationof Coastal Bunds. The 18 km coastal bund between Kuala Perlis and Kuala Sanglang has been undergoingwave erosion in a number of places, totallingabout 6 km in length. These eroded areas would be rehabilitatedand faced with rock, following a design concept successfully used in the Western Johore AgriculturalDevelopment Project (Loan 973-MA).

3.10 Water Managementand Control CommunicationSystem. The functions of the existing MADA computerizedcontrol system are to assess the irrigation water requirementsand available water storage capacity in the padi fields; to estimate the availableuncontrolled flow in the river above the diversion dam and arrange reservoir releases only when required; to arrange distribution of water to irrigationblocks; and to keep project authoritiesinformed of the water situation throughoutthe area. These functionswould be retained in the new system that would be built to enhance, and replace as necessary,the existing system for the entire Muda command area. The existing land-line system has proven to be unreliable,difficult and expensive to maintain, and subject to frequent breakdowns. The new system would use a simpler, more reliable VHF system as its primary means of communication. The system would include more remotely monitored rainfall and river stage recordingdevices, an enhancementof the existing data processingsystem and modificationsto the existing control building. More data would thus become available to manage efficientlythe limitedwater resources,including data on rainfall, stream stages, flow into tertiaries,and depth of water stored in padi fields. MADA and DID, with the assistanceof the suppliersof the equipment,would provide training and prepare a manual for staff use on how the system would be operated and how the water would be managed. See Annex 2, Table 2 for a list of the proposed equipment and costs.

Buildings

3.11 MADA's administrativestaff are currentlyheadquartered in small temporary office buildings at Telok Chengai,while engineeringstaff are located 12 km away in a separate small block. Under the project new head- quarter buildingswould be constructed,consisting of one four-storeyand two three-storeyblocks with a total of 4,900 sq m which would provide adequate space for all present and incrementalMADA staff. DID engineeringstaff associatedwith project implementationwould be located in present MADA engineeringoffices which would be enlarged under the project. In line with MADA's plan to move both offices and quarters of operation and maintenance staff closer to the field areas for which they are responsible,two District offices of 560 sq m each, and 160 quarters for field staff would be constructed under the project. Small seed stores (140 sq m each) would be constructedat the 27 existing FDCs to facilitateexpanded distributionof certifiedseed. The existingworkshop at Jitra would be enlarged and improved. Buildings to be constructedunder the project would serve the entire Muda irrigationscheme area.

Equipmentand Vehicles

3.12 Vehicles and equipmentwould be purchased under the project to improve the capabilityof DID to superviseconstruction and MADA to operate and maintain project works. The workshop to be enlarged and equipped under - 15 -

the project would perform routine maintenance and minor repairs for this equipment,while major repairs of heavy equipment,and fabricationof parts would be undertakenby the DID Federal Workshop in Ipoh. Agriculturalequip- ment and vehicles would also be purchased to improve the mobility of MADA agriculturalextension staff and to enable the FDCs operated by MADA to provide expanded transport and tractoringservices to farmers on a fee basis. A complete vehicle and equipment list is presented in Annex 2, Table 2.

Studies

3.13 Studies and Pilot Projects n the Muda Area. An important feature of the Muda Project is the program of studies and investigations carried out by project management to improve efficiency and provide a sound basis for future development. To date these studies have been carried out on a part-time basis, which has limited the scope and amount of data collected and the analytical work that could be carried out. Nevertheless, many features of the proposed project are based on experience gained from several pilot studies carried out over the past few years which have been used to determine the engineering, agricultural, economic, sociological and managerial approaches to intensifying the irrigation and drainage network. In addition to providing a sound basis for planning improvements in Muda, these studies may also provide useful guidelines for upgrading other irrigation systems in Malaysia. It is important that they be continued on a regular basis, and that additional staff and operating budgets be made available. Staff requirements are presented in Annex 2, Table 4.

3.14 The required activities may be divided into three broad categories - engineering studies, management studies and pilot tertiary demonstration areas.

(a) Engineering studies would be designed to determine the costs and impact of alternatLve approaches to further intensification to the physical system, such as construction of minor irrigation, drainage, roads, quaternary systems, and land levelling by groups of farmers under different degrees of public assistance. An important objective of these studies would be to make a critical field evaluation of the Muda IT system with a view to developing proposals for subseque',tinvestmeznts both within and outside the Muda irrigation area. The studies would also determine the effects of alternative approaches to tertiary and on-farm irrigation and drainage on the level of water control, water use efficiency, ease of management and operation and maintenance costs.

(b) Management studies would be closely integrated with the engineering studies to determine the agronomic and socioeconomic improvements needed both for farmers to make the best use of the infrastructure provided in the pilot areas, and to develop appropriate strategies for tertiary unit operation and maintenance. Critical analyses would be made of the project's irrigation operation and maintenance, farm management oractices, credit, input supply and marketing systems, to identify problems and devalop improved approaches to ensure that improvements in management and support services keep pace with infrastructure development. An important objective of these management studies would be to determine the effectiveness of and problems - 16

associatedwith the proposed field organizationof farmers, with a view to developingimproved approaches,as well as to explore the extent and feasibilityof farmer involvementin the operationand maintenance of tertiary systems.

(c) Pilot tertiary demonstrationareas would be establishedto show Farmers the potentialbenefits of intensificationand improved field oz:genization.Project management regards the 14 pilot double-cropping demonstrationareas establishedunder Muda I as having been an importantcatalyst in the implementationof the project so far. Under Muda II a similar extension role is envisagedfor the pilot project areas.

An assurancewas obtained that MADA would prepare a detailed program for studies and pilot projects, and submit the proposal to the Bank by December 31, 1979.

3.15 GrcundwaterStudies. Dry spells experiencedin Malaysia during the past two years and the experiencegained in a number of other developing countries in the conjunctiveuse of surfaceand groundwaterhave aroused Government interest in the developmentof groundwaterresources. This interest has been reinforcedby the Kelantan River Basin Study recently undertaken under the auspices of the Colombo Plan to carry out a comprehensive hydrological study of Kelantan which has indicatedthat the region is underlainby a series of aquifers. According to a preliminary estimate these aquifers have an ultimate potential of about 20 cu m/sec for groundwater irrigation. The basin study has recommendedthat a continuingprogram of groundwaterobserva- tion and irr4gation should be conducted. It has also identifiedfive pilot schemes for early implementationcovering areas of up to 60 ha each. The first of these pilot schemes, located in Pasir Mas District in Kelantan, has been implementedand has demonstratedthe viability of groundwaterexploitation in that particular area.

3.16 DID would establish a geohydrologicalunit within its hydrological branch to undertake studies in areas with possible groundwaterpotential. However, since DID's experiencein groundwaterdevelopment is limited, technical assistancewould be required and DID plans to hire a number of experts in this field. The unit would formulatethe objectivesof the groundwaterstudies, detailed work program and terms of referencefor specialists. The studies would include the collection and collation of data from previous studies, if any; a program of daily groundwaterlevel measurements;and an extensive drilling program leading to an estimationof the location,quantity and quality of availablegroundwater and determinationof exploitationtechniques and costs. Proposed extractionsfrom fresh aquifers near the sea would have to be carefullybalanced to avoid salt water intrusion. Two sets of drilling rigs and accessorieswould be required and the studies would take about two years to complete. The total cost of consultants,equipment and materials is estimated to be about US$1.5 million, includinga foreign exchange component of about US$1.2 million.

3.17 Pergau--GalasIntegrated Rural DevelopmentStudy. An important element of the Basin DevelopmentPlan identifiedby the Kelantan River Basin Study is the Dabong Dam. It is proposed to be located on the lower Galas river about - 17 -

5 km downstreamfrom the confluenceof the Pergau and Galas rivers (tributaries of the Kelantan river). The proposed dam would provide flood mitigation,water supplies and electric power for the developmentof the whole of the coastal region of the State of Kelantan. At high water level the proposed dam would flood an area of about 20,000 ha of which about 8,000 ha is currentlybeing cultivated. There are 37 villages that would be affected by the dam and most of the inhabitants,numbering about 10,000 people, would have to be settled elsewhere. Many of these villages are already subjectedto periodic flooding from the main rivers and the state governmenthas been examining ways and means of moving them to safer locations.

3.18 The valleys of the Pergau and Galas rivers, outside the reservoir of the proposed Dabong Dam, have a potential for about 42,000 ha of agricultural land, most of which is suitable for rubber. This land could be developed to support a future populationof about 25,000 (about two and one-half times the existing population),thus creating a potential for absorptionof an additional 15,000 settlers from elsewhere. This developmentcould precede the constructionof the dam, thus providing in advance new communitieswithin the valleys to which the populationexpected to be displaced by the reservoir could be moved with minimal inconvenience.

3.19 The objective of the proposed study would be to prepare a phased integratedrural developmentplan for the Pergau and Galas valleys within the frameworkof Government'spolicy on regional developmentand poverty eradication. The study would take into considerationalternatives both with and without the dam, and before and after dam stages. The Governmenthas already prepared detailed terms of referencefor the consultants. The State Economic Planning Unit of Kelantan, jointly with the Federal Economic Planning Unit would be responsiblefor monitoring the study. A steering committee consistingof the concerned governmentagencies would guide and advise the consultantson the conduct of the study, which is estimated to require about 100 man-months of professionaltime, at a cost of US$0.7 million (US$7,000per man-month).

Water Supply, Demand and Quality

3.20 The question of adequate water availabilitywas the subject of considerablestudy during project preparationand appraisal, due to the relativelyheavy reliance of the Muda irrigationscheme on direct rainfall and uncontrolled streamflow, the wide year-to-year variations in reservoir inflow and the occurrence in 1977/78 of the worst drought in the 48 years of record. The water availabilityanalysis summarizedbelow (para. 3.22-3.26) presents the situationwhich would prevail once the level of tertiary facilities to be implementedunder the present project is extended to the entire Muda padi area. A second analysis was performedfor the "without project" case, to determine the net effect of the proposed tertiary development program on water demands. The conclusion of the analysis is that the tertiary developmentprogram would result in substantialwater savings which would be used to increase the overall long-run cropping intensity. The water saving effects of tertiary developmentare due chiefly to the following factors: (a) The present system of field-to-field flooding over long reaches of up to 2 km entails considerable wastage of water as low-lying land must be flooded to considerable depths, 25 cm or above, in the various blocks in order to move water to more distant higher land. The standing layer of water now provided is deeper than required for agricultural purposes due to wide variations in topography within the large irrigation blocks. By providing separate tertiary supply systems to smaller blocks within which topography varies less, tertiary development would enable the application of water to unit areas to be reduced by an average of 5 cm per annum. This would save about 12.5 million cu m of water per annum compared to the "without project" situation, and ultimately nearly 50 million cu m when tertiary developmentis completed throughout the Muda scheme.

(b) The conveyance efficiency in a system which distributes water through concrete lined and unlined channels, concrete pipes, and fiberglass flumes is higher than one based on field-to-field flooding, where much water eventually reaches natural or constructed drains before reaching the lots intended for irrigation. Overall conveyance efficiency is expected to increase from the current 75% to 80%.

(c) The subdivision of the current large irrigation blocks is expected to facilitate the shift from scattered private nurseries to communal nurseries located near irrigation outlets. This would eliminate the need to irrigate the entire padi area during the nursery period in order to serve each farmer's small nursery.

3.21 The water supply and demand analysis considers the supplies for, and demands on, the entire Muda system at its projected ultimate stage of development. The net irrigated area would be 96,000 ha. This includes 4,000 ha of fringe padi areas (included in the National Small-Scale Irrigation Project) which will derive water from the Muda main canals, and allows for land taken out of production because of right-of-way requirements for tertiary construction. Also, the supply system would be required to supply 14.8 million cu m/ month of water for domestic, industrial and municipal use.

3.22 Water Supply. The water supply would come from the following three sources:

(a) Direct rainfall on the padi fields. This is a most valuable source of water because it supplies the immediate demand, and in addition, water can be stored in the fields and continue to be used for a number of consecutive days. However, during heavy rainfall periods, only a portion of the daily rainfall can be effectively utilized, to a maximum storage depth of 15 cm. During the supplementary irrigation period, vihich starts after presaturation and ends before harvest, rainfall in excess of 5 mm and less than 40 mm per day is assumed as effective. Effective rainfall on the padi fields would supply 43% of total average water demand.

(b) Useful streamflow (uncontrolled flow). The flow from the Padang Terap River is diverted into the existing Muda feeder canal at the Pelubang barrage and then discharged into the Northern and Southern - 19 -

main canals by the bifurcation headworks. Annex 1, Table 1 shows the estimated monthly streamflow of the Padang Terap River at the barrage. Uncontrolled flow would supply 19% of total average water demand.

(c) Reservoir releases (controlled flow). The existing Pedu and Muda dams are connected by the 7 km long Saiong Tunnel. They have a combined catchment of 1,200 sq km and a combined reservoir storage capacity of 1,230 MCM. Irrigation releases are made from the Pedu Dam into the Pedu River, which joins the Padang Terap River above the barrage. Annex 1, Table 2 shows the estimated monthly inflow into the two reservoirs. Reservoir releases would supply 38% of total average water demand.

3.23 The daily rainfall and daily available uncontrolled flow are allowed to meet demand as much as possible. In the event the amount of available water exceeds demand, the excess is stored on the padi field to the extent that the depth in the field does not exceed 15 cm. If the depth exceeds 15 cm, the remaining water is drained off. Conversely, if, as a result of low rainfall and streamflow, the depth in the field falls below 5 cm, then water is released from the reservoirs to provide the daily requirement.

3.24 Water Demand. The present system of continuous flow irrigation would be converted into a system of staggered continuous irrigation with controlled water depth. The padi area would be divided into four irrigation schedules, 15 days apart, resulting in a cropping pattern staggered over a two-month period in each block. This allows for a reduction in peak water requirements and is also desirable in order to obtain a spread in peak labor and machinery requirements. Presaturation would be accomplished in seven to eight days in each ISU, and presaturation for the first dry season cropping schedule would start on February 1, the date selected to take the best advantage of rainfall on the padi fields. The proposed cropping schedules are shown in Chart 18927.

3.25 Annex 1, Table 3 shows the daily irrigation requirements for each cropping schedule for each month. To develop this table, the following assumptions were made:

(a) Evapotranspiration equals 0.7 of the pan evaporation during presaturation, nursery preparation and early growth; evapotranspiration equals the pan evaporation during the middle plant growth; and evapotranspiration equals 1.3 times the pan evaporation during late growth. These coefficients were derived on the basis of experimental work done in Muda.

(b) Field losses (percolation) would be 1.27 mm/day, based on percolation measurements made on Muda's tight clay soils.

(c) Water required for saturation during presaturation is 15 cm and water required to establish a standing layer during presaturation is 10 cm, for a total of 25 cm.

(d) There would be a conveyance efficiency of 80%. - 20 -

3.26 Water Demand and AvailabilityAnalysis. A computerizedanalysis of water demand and supply was performedby DID on the basis of 22 years of data. The analysis shows that the availability of water is adequate, but that there would be a shortage of water for the dry season crop in 6 years out of 22. The results are shown in Annex 1, Table 4 and emphasize the need for good water management. On an average annual basis, the direct supply would meet 90% of the dry season demand, and 100% of the main season demand. The water demand and availabilityanalysis does not consider the fact that there would be some recirculationof drainage water in Muda's coastal areas, estimated to cover 800 ha in Muda II blocks, which would increase sustainablecropping intensity to 193%. An overall water use efficiencyof 59% would be achieved.

3.27 Water Quality. From samples of water collected at the diversion barrage from 1972 through 1975, the water has been found to be of excellent quality for agricultural,municipal and industrialuse. The average concentra- tion of chlorideswas less than 4 ppm, the pH values ranged from 6.8 to 7.2 and the solids averaged 97 ppm.

Status of Design and Construction

3.28 As of October 1978, design plans and drawings had been completed for project blocks totalling about 4,000 ha (16% of the project area). This area is consideredadequate as a basis for cost estimates in the light of the regularity of the terrain and the uniformity of the works. Planning and design procedures are well establishedwith no major unresolved engineering problems. The area has had maps prepared to a contour interval of 15 cm based on aerial surveys. In addition, detailed surveys would be made along all tertiary canal and drain alignments. Constructionof the tertiariesand farm roads in the first project block (Tanah Merah) is now about 65% complete. Land Acquisition

3.29 The Kedah and Perlis State Departments of Lands and Mines are responsible for land acquisitionand property compensation. Their staffs have been increased to handle the extra workload imposed by the project. A total of 930 ha would be acquired affecting some 12,000 farm owners. As of October 1978, layouts had been prepared for 14 blocks representingabout 375 ha which had been submitted for acquisition. Right-of-waywould be acquired before constructioncontracts are awarded.

ImplementationSchedule

3.30 Except for some work undertakenin 1978 (para. 3.32), the project would be implementedover a five-year period ending December 31, 1983 (Chart 20077). The agriculturalsupport componentsprovide for a buildup of staff and facilitiesphased over the implementationperiod.

Cost Estimates

3.31 Total project costs are estimatedat US$69 million, of which US$31 million (45%) would be foreign exchange. Cost estimates for irrigation and drainage works, roads, and buildings are based on unit costs in recent - 21 -

contracts for similar work in the Muda area, and on quantitiesderived from detailed layouts and engineeringstudies for six complete blocks totalling about 4,000 ha. The basis for estimated costs of vehicles and equipment are recent quotati:nsfrom suppliers (Annex 2, Table 2). Because of the tax-exempt status of Governmentdepartments, cost estimatesexclude all known taxes and duties. Base costs are expressed in 1979 prices. Physical contingenciesof 10% were applied for all works and equipment. Project works would be relatively simple and repetitivein nature, and experiencewith similar works in Malaysia indicates that this allowancewould be sufficient. Expected price increases over the implementationperiod amount to 21% of base costs plus physical contingenciesand assume annual rates of price inflation for local and foreign costs of 7% for civil works and servicesand 6% for equipmentand vehicles in 1979-83. Detailed project costs are presented in Annex 2, and are summarizedin Table 3.1.

Financing

3.32 The proposed Bank loan of US$31 million would finance the foreign exchange requirementsof the project. Retroactivefinancing has been included for most Bank-assistedprojects in Malaysia to maximize the Bank's participa- tion from the beginning of project implementation,to ensure that satisfactory procurementprocedures are followed from an early stage and to facilitate discussionof staffing requirementsand agency responsibilitiesearly in the project cycle. In this case, basic issues concerningproject scope, procurement procedures,staffing requirementsand interagencycollaboration were resolved in the course of preappraisalin November 1977 and follow-up discus- sions in March 1978. Constructionof sample areas began in early 1978 and all constructionsince April 1978 has been in accordancewith procedures acceptableto the Bank. The loan would thereforefinance retroactively the foreign exchange componentof expendituresincurred after March 31, 1978. The estimated total cost of such works is US$2.8 million, of which US$1.4 million (50%) would be foreign exchange. This is a Federal project and all local costs would be borne by the Governmentthrough annual budget allocations. The Governmentwould provide funds to MADA for carrying out its part of the project as a grant. - 22 -

Table 3.1: SUMMARYCOST ESTIMATE

Foreign Local Foreign Total Local Foreign Total exchange --- (M$ million )------(US$ million) --- (%)

On-Farm IrrigationBlock Development Tertiarycanals and associatedroads 21.9 20.2 42.1 9.9 9.2 19.1 48 Tertiarydrains and associatedroads 7.5 8.2 15.7 3.4 3.7 7.1 52 Other roads and bridges 1.4 1.1 2.5 0.6 0.5 1.1 45 Pumphouses 1.1 1.6 2.7 0.5 0.7 1.2 58 Irrigationservice unit perimeter bunds 1.2 1.4 2.6 0.6 0.6 1.2 50 Minor dispersedworks 1.6 1.6 3.2 0.7 0.8 1.5 53 Land acquisition 6.9 - 6.9 3.1 - 3.1 0 Engineeringand supervision 5.5 0.3 5.8 2.5 0.1 2.6 4

Subtotal 47.1 34.4 81.5 21.3 15.6 36.9 42

General IrrigationSystem Improvement Major drainageimprovements 1.8 2.2 4.0 0.8 1.0 1.8 55 Coastal protection 2.1 1.8 3.9 1.0 0.8 1.8 44 Miscellaneousworks 0.6 0.7 1.3 0.3 0.3 0.6 50

Subtotal 4.5 4.7 9.2 2.1 2.1 4.2 50

Buildings MADA headquarters 1.7 0.8 2.5 0.8 0.3 1.1 27 DistrictO&M offices and quarters 3.1 1.3 4.4 1.4 0.6 2.0 30 Workshop 1.4 0.6 2.0 0.6 0.3 0.9 33 Seed stores 1.0 0.4 1.4 0.4 0.2 0.6 33 DID offices 0.4 0.2 0.6 0.2 0.1 0.3 33

Subtotal 7.6 3.3 10.9 3.4 1.5 4.9 31

Equipment construction& O&M equipment 0.2 1.5 1.7 0.1 0.7 0.8 88 Water control and managementsystem 0.1 1.1 1.2 0.1 0.5 0.6 92 Agriculturalequipment 0.1 0.7 0.8 - 0.3 0.3 88 Extensionand office equipment - 0.7 0.7 - 0.3 0.3 100 Drillingrigs and accessories - 2.2 2.2 - 1.0 1.0 100

Subtotal 0.4 6.2 6.6 0.2 2.8 3.0 93

Studies Studiesand pilot projectsin the Muda area 0.8 0.7 1.5 0.4 0.3 0.7 43 Groundwaterstudies 0.4 0.7 1.1 0.2 0.3 0.5 60 Pergau-Galasstudy 0.3 1.5 1.8 0.1 0.7 0.8 87

Subtotal 1.5 2.9 4.4 0.7 1.3 2.0 65

TechnicalServices Consultingarchitects, surveyors, and engineers 1.2 0.1 1.3 0.5 0.1 0.6 8 Training and study tours - 0.4 0.4 - 0.2 0.2 100 Monitoringand evaluation 0.4 0.1 0.5 0.2 - 0.2 20

Subtotal 1.6 0.6 2.2 0.7 0.3 1.0 30

Base cost estimate 62.7 52.1 114.8 28.4 23.6 52.0 45 Physicalcontingencies 6.6 5.1 11.7 3.0 2.2 5.2 42 Expectedprice increases 14.6 11.3 25.9 6.6 5.2 11.8 44

Total Project Cost 83.9 68.5 152.4 38.0 31.0 69.0 45 - 23 -

Procurement

3.33 All tertiary works (canals, drains, and farm roads) within each irrigation block would be tendered under a single contract, resulting in about 38 tertiary works contracts worth an average of US$1.1 million each./l To the extent that progress on design and land acquistion permits, such works would be grouped in appropriate bid packages and contractors would be allowed to bid on one or more blocks. Major drainage works (US$2.4 million), coastal protection works (US$2.3 million), miscellaneous works (US$0.8 million) and buildings (US$6.5 million) would also be designed and tendered in relatively small packages of about US$2 million each. Because these contracts would be small and scattered, and would require coordination with large numbers of small farmers maintaining continuous cropping schedules, with operation and maintenance and with local Government land acquisition teams, they would not be suitable for international tender. They would thus be awarded after competitive bidding advertised locally in accordance with Government procedures satisfactory to the Bank. The local contracting industry is competitive and strong, and local tendering is well-managed and publicized. Bids would be accepted from foreign contractors who wished to participate. No preference margins, whether domestic or international, would be utilized in the evaluation and award of civil works contracts.

3.34 Force account work would be limited to the fabrication and supply of gates and hoists for water control structures. DID has been fabricating its own gates and hoists at its Federal Workshop in Ipoh for more than 15 years, and has supplied all the gates and hoists for Muda I. Estimated costs are reasonable for the quality of work required. Bank missions have visited the Workshop and have found it to be efficiently operated and well-managed (Annex 6). The total cost of force account work is estimated at US$0.9 million.

3.35 Agricultural, construction and operation and maintenance equipment and vehicles, workshop equipment, water management and control equipment, drilling rigs and accessories for groundwater investigations (totalling US$3.8 million) would be procured under international competitive bidding in accordance with Bank Group Guidelines. A 15% preference margin, or the prevailing customs duty if lower, would be extended to local manufacturers of these items. Off-the-sheif items, costing less than US$35,000 each and limited to a total of US$1.2 million, would be procured through normal Govprr,ment procedures.

-/ All estimates of contract values in this section include base costs, physical and price contingencies. The tertiary works contracts would include one contract for each of the 37 blocks, plus one contract for a series of small, scattered tertiary works (para. 3.06). - 24 -

Disbursements

3.36 MADA, as coordinatingagency, would collate all expendituresand trasmit them to the Federal Treasury for loan reimbursement. Disbursements would be made at the rate of 100% against foreign exchange expenditureson directly imported equipment and vehicles, 100% of the ex-factorycost of such items manufacturedlocally, and 80% of the total cost of locally procured items. Disbursementsfor civil works executed by contract would equal 50% of total costs. Disbursementfor force account work would equal 50% of total costs, and would be made against a certificateof expenditure,the documen- tation for which would be retained by the borrower and be available for inspectionby the Bank during the course of project supervision. Bank missions have reviewed DID's supportingdocumentation for certificatesof expenditure and have found such documentationto be complete and accurate (Annex 6). For consultingservices, disbursementswould equal 100% of total expenditures. For overseas fellowshipsand study tours, disbursementswould equal 100% of foreign expenditures. It is expected that disbursementswould be completedby December 31, 1984. Estimated expenditureand disbursementschedules for the project and a proposed allocation of the proceeds of the loan are presented in Annex 2, Tables 7-9.

Accounts and Audits

3.37 The agencies involved in the project are all subject to normal Government control and audit procedures. Assuranceswere obtained that:

(a) all agencies involved in project implementationwould maintain separate accounts for the project;

(b) all project accounts would be collated by the Project Manager (para. 4.01);

(d) the Project Manager would send the audited project accounts, together with the auditors' comments, to the Bank within nine months of the close of each financialyear.

EnvironmentalEffects

3.38 All project works would be implementedwithin a densely populated area which has been relativelyintensively cultivated, chiefly for padi production, for generations. Chemical fertilizersand pesticides are already widely used in the area and the extensionservice would continue to caution farmers in the use of toxic chemicals. Effects on the existing environment would thus be minimal. - 25 -

4. ORGANIZATION AND MANAGEMENT

Project Management

4.01 MADA is responsible for a wide range of administrative, agricultural extension, engineering operation and maintenance, agribusiness, monitoring, evaluation and planning functions pertaining to the general agricultural development of the Muda command area (Chart 19775). The General Manager of MADA would serve as Project Manager and would be responsible for coordinating the implementation of the proposed project. He would be guided on policy matters by a Steering Committee chaired by the Secretary General of the Ministry of Agriculture and including other officials the chairman may nominate. The General Manager would report semi-annually to the MADA Board of Directors and the Steering Committee on the progress of the Project.

Engineering and Technical Services

4.02 Final design of drainage, irrigation and coastal protective works and supervision of construction would be the responsibility of DID. To accomplish this DID would establish a project office in Alor Setar headed by a Project Director, with branches in the four MADA districts, and assign a team of engineering staff with a peak complement of 26 professional engineers and 109 technical assistants and technicians. The Project Director would report to the Director General of DID and coordinate DID activities in the Muda area with the Project Manager. DID would be responsible for procurement and contract supervision for all works under its charge. Surveying, planning, designing and tendering would normally be done in-house by DID staff. Licensed surveyors and local consultants would be engaged as necessary to assist DID in survey work and in preparing final designs and bid documents.

4.03 MADA would be responsible for the design, tendering and construction of MADA offices, workshops, quarters and pilot projects, and would also be responsible for upgrading the existing water control system. To achieve this MADA would assign a team of seven professional officers and 27 subprofessional and technical officers to implement its part of the project.

4.04 To ensure that design concepts, features, assumptions, and data are transmitted effectively from the design staff to the MADA district-level staff who will operate and maintain the systems, assurances were obtained that upon completion of final design, DID would prepare a designer's operation manual covering major project works. The commissioning of all completed works would be the joint responsibility of DID and MADA. The Engineering Division of MADA would assume responsibility for operation and maintenance upon satisfactory commissioning of the works. Detailed estimates of engineering staff requirements for all phases of project implementation are presented in Annex 2, Table 4. An assurance was obtained that all DID and MADA engineerin, staff required to design, implement, operate and maintain the project would be appointed. - 26 -

Consulting Services

4.05 Services of local consulting engineers, surveyors and architects are expected to total 200 man-months of professional staff, 100 man-months of technical assistants and 150 man-months of technicians and draftsmen. Total costs of this consultant input are expected to average US$1,300/month for professionals, US$950/month for technical assistants and US$430/month for technicians and draftsmen. Approximately 170 man-months of professional consulting services at an estimated cost of US$7,000/month would be employed to assist with the proposed groundwater and Pergau-Galas studies (para. 3.15-3.19). Assurances were obtained that consultants employed for project implementation and studies would be acceptable to the Bank and would be engaged, as required, under terms and conditions satisfactory to the Bank.

Agricultural Services

4.06 The agricultural service component would cover the entire Muda area, or about 60,000 farmers and 100,000 ha of padi land. The proposed arrangements for integrated agricultural services have evolved in the course of carrying out the North Kelantan, Northwest Selangor and Krian-Sungei Manik projects (para. 1.05) and follow the principles of the training and visit system being implemented under the National Extension Project. To date they have been applied on a pilot basis in each project area, starting with extension and following with credit, input supply and irrigation O&M. Results so far are encouraging and the programs are being expanded as staff and other resources permit. For the proposed project the Agricultural Division of MADA would be responsible for implementation, but would work closely with the State Directors of Agriculture and the Federal technical units represented in the area, to ensure efficient use of staff and facilities for the MADA and non-MADA areas in the states of Kedah and Perlis. Programs would be implemented through the four irrigation districts, 27 Farmers' Development Centers (FDCs) and groups of farmers formed on the basis of Irrigation Service Areas (ISAs) and Irrigation Service Units (ISUs) (para. 3.02). The objective is to achieve group action at field level with regard to planting and irrigation schedules, water management, pest control, etc. and to provide each group with an effective integrated service package covering extension, water management, plant protection, credit, input supply and marketing on a regular and continuous basis.

4.07 The proposed organization of agricultural services in the MADA area is presented in Chart 18920. The head of the Agricultural Division would be responsible for implementation and day-to-day management. He would coordinate his programs and maintain close liaison with DOA, MARDI, LPN and FOA through the regular meetings of the State Agricultural Research and Development Committee (SARDEC) and bi-weekly meetings convened by the General Manager. He would be assisted by a Deputy for Extension, Training and Development and a Deputy for Agribusiness and Credit. The Senior Agricultural Officer for Extension and Training would coordinate extension programs and, with the assistance of the Agricultural Officer for Training, organize bi-weekly training sessions for field extension personnel and all other training programs required for field staff and farm group leaders. Subject matter specialists for rice agronomy, crop protection, extension, and farm family development (home economics) would prepare and present training programs for the extension - 27 -

field personnel, provide technical field support, and work with MARDI, technical units of the Federal DOA and other relevant institutions, to introduce new technology and improve and update extension recommendations. The Development and Statistics unit would coordinate seed and input supplies and subsidy programs with extension and agribusiness activity in each FDC area on the basis of seasonal farm management surveys, and assume responsibility for maintaining basic statistical data. The Farm Mechanization Unit would continue its role in assessing and introducing appropriate forms of farm mechanization into the Muda area, running training courses for farmers and supporting the tractor rental programs of the FDCs. The Deputy for Agribusiness and his staff would supervise and monitor all business activities at the 27 FDCs and continue the program to incorporate the remaining agro-based cooperatives into the 27 main Farmer Associations.

4.08 In each district, an Agricultural Officer would coordinate and supervise all extension activities at five to nine FDCs. He would be assisted by an Assistant Agricultural Officer (AAO) and support staff to take care of crop development, crop protection and related programs, and an administrative assistant. He would spend most of his time in the field supervising the FDCs. He would also coordinate the programs of field extension and irrigation U&M personnel with regard to scheduling of water supplies, water management and planting schedules. Each FDC would be managed by an Agricultural Assistant (AA) assisted by an Agricultural Technician (AT) for Agribusiness, one for Accounts and one for Organization and Cooperatives. One Extension AT and one Credit AT would be assigned for every 10 ISAs in an FDC service area. With about 600 ISAs, at least 60 Extension and 60 Credit ATs would be required, giving a ratio of 1 Extension AT to about 1000 farmers.

4.09 Extension. Effective extension would be the core of the improved service system. The 12-18 farmers cultivating land within an ISU of 15-25 ha, having common water supply and drainage facilities and irrigation schedules, would be formed into a field work group, with an elected group leader. The six to eight ISUs within an ISA would form an ISA group of 70-140 farmers on a contiguous block of 100-200 ha of padi land, and would elect one member as ISA Group Leader. The ISA and ISU group leaders would be the main points of contact between extension workers and farmers. They would be responsible for attending regular field meetings with the extension workers; encouraging group members to attend the meetings and follow extension advice; planning and implementing irrigation, planting, and O&M schedules within the ISA; and effective deployment of labor and machines. There would be one progressive farmer for every six to eight ISU group members to help group leaders disse- minate extension information.

4.10 The Extension ATs would visit each ISA group on a set day at a set time at a fixed meeting place in their fields once every two weeks throughout the year. A typical field meeting would consist of a practical training session relevant to the farmers' immediate needs, a farm walk through the ISA to inspect crops and give on-the-spot advice on the current topic of extension, and a general discussion of current field problems. Group leaders, progressive farmers, and as many members as they could encourage to attend, would join the regular field meetings. Group leaders would ensure that all members not attending the meeting were informed of the key points arising a, the meeting. - 28 -

Where possible, the AT would establish a simple trial plot in cooperationwith group members, to compare three or four cultural techniques relevant to the farmers' needs. On a fixed day every two weeks, the District AO would call all field extension personnel and AAs for a program review and training session. A typical session would be conductedby a subject matter specialist (SMS) and consist of a training session covering the theory and practice of key field operationswhich would be encounteredby the extensionAT in his next round of group visits. This would be presented in a form which the AT could use to run his own training session with his farmer groups; each AT would give a brief verbal report on progress and problems for the past two weeks, based on a simple daily diary in which he would record his main activities,problems encounteredand advice given. The District AO, area AAs and SMS, would review the AT's work programs, answer questions raised, and refer questions that they could not answer to project management,with a view to giving a satisfactoryanswer at the next bi-weekly meeting.

4.11 On a fixed day each month, Area AAs and District AOs would meet with senior staff at MADA Headquarters. Progress and problems of the past month's work would be reviewed, and plans formulated to improve performancein the following month. At the end of every cropping season, the Deputy for Extension and Training would call all extensionATs, AAs and AOs together for a program review and planning session. The objectivewould be to reach conclusionsand formulate recommendationsfor improving performance in subse- quent seasons. Special attentionwould be given to selecting "impact points"/1 for the following season's extension program for each District. The most appropriate extension techniques and methods would be determined and bi-weekly AT training topics selected to support the program. Finally, technical problems would be referred to participatingSMS, Federal DOA or MARDI personnel for advice, recommendationswould be reviewed, and research priorities identified to meet the immediate needs of the extension service and farmers. MARDI, SMS and Crop Development Units would follow up on these discussionsby estab- lishing standard replicated field trials at representativelocations. The ExtensionATs, with the guidance of the SMS, would establish small unreplicated plots with the same treatments and managementprocedures, in cooperationwith their ISA group leaders, to test key management variables over a wider range of conditions. Successful plots would be used for demonstrationpurposes. The cooperativeadaptive trial program would be a powerful tool in rapidly refining and improving area-specificextension recommendationsand providing valuable feedback to the research service.

4.12 Agribusinessand Credit. The number of credit officers located at the FDCs would be increased to match the number of Extension ATs. The two ATs would work together to achieve a close link between extension advice and credit. The Credit Officer would join the Extension AT on his regular bi-weekly visits to ISA groups at strategic times of the year, to explain and promote the FA credit program and to register farmers for the program.

/1 A few aspects of crop management,which the majority of farmers could follow, and which have the best chance of increasingyield and profit. - 29 -

4.13 Irrigation O&M. Improved water control and management, and increased water use efficiency,are key objectives of the project. Irrigation O&M field staff would play a vital role in the improved servicing system. Irrigation overseerswould be assigned to work as a team with Extension ATs to form farmer groups at ISU and ISA level. The visiting schedule of the Extension ATs to each ISA group would be assigned to the irrigationoverseers and inspectors. The overseerswould make joint visits with the Extension AT to the ISA groups just prior to the irrigation season, to explain the new irrigation and drainage system, to work out irrigationand planting schedules, advise the farmers on maintenance of bunds and farm ditches, and assist them to plan water distributionand management within the ISA and ISU. They would make other visits with the Extension AT at strategic times during the season, such as when the water supply regime was due to be changed, or when requested by the Extension AT to assist in solving specific water contol and management problems. The overseerswould work on a continuingbasis with ISA and ISU group leaders, to follow the agreed irrigationprogram. They would note any major infringementsof regulationsand report them to the District Office. Irrigationinspectors would maintain a close working relationshipwith the District AO and area AAs. They would attend the bi-weekly and monthly extension program reviews, as required,to deal with water control and management problems. They would be responsible for establishingirrigation committeesat block and district level with members elected from among the ISA group leaders. The committeeswould negotiate with the irrigationservice on irrigationand drainage schedules,and all matters related to the 0&M of the irrigation system. They would also assist the irrigationservice to enforce regulations and encourage farmers in their area to follow the agreed irrigation and planting schedules.

4.14 Seed Production. Project seed requirementsare estimated at 400 tons per season. The DOA Crop ProductionUnit at Telok Chengai would be responsible for supplyinghigh quality rice seeds to the project. A regional seed assess- ment committee,with representativesfrom MARDI, DOA, LPN.,FOA, MADA and millers operating in the region, would determine the varieties that should be recommendedand multiplied. MARDI would supply the required breeder seed to the Telok Chengai Seed Production Center. Under the seed component of the National Extension Project, the capacity of the Telok Chengai unit will be increased to 500 tons per season, which is adequate to meet the needs of the project and the expected demand from padi farmers in the remainder of Kedah and Perlis. Seed will be multiplied on about 40 ha of Government land and about 100 ha of private land operated by selected seed growers supervised by the Seed Production Center. The National Extension Project provides for buildings, processing facilities and additional staff, and should be operational by 1981. The Government will establish and maintain a seed fund for DOA to buy quality seed at a premium above the farmgate price from seed producers for distribution to farmers. To operate the seed program on a self-financing basis, the Government has agreed to review its seed pricing policy and furnish the results to the Bank for comment by January 31, 1980. Seed will be supplied to farmers in the project area through FAs operating at each FDC. The proposed project would include a small seed store at each FDC to support the seed distribution program. 30

4.15 Crop Protection. Wider spread use of high-yielding varieties, and higher rates of fertilizer application invariably lead to a more favorable environment for pest and disease attack. The most serious threat in the Muda area is the brown planthopper (Nilaparvata lugens) which has caused serious losses in neighboring countries practicing intensive rice cultivation. Muda, with a large contiguous area of intensive rice monoculture, is vulnerable to attack. As it is the "rice bowl" of Malaysia, a widespread outbreak would not only reduce project benefits, but would seriously affect the Government's goal of reducing rice imports. Currently, the DOA Crop Protection Unit serving Kedah and Perlis is responsible for monitoring and controlling pest outbreaks in the project area. The staff consists of one AO, one AA, five ATs and support staff. An interdepartmental pest surveillance program was established in late 1977 following an outbreak of brown planthopper. Under this program the Crop Protection Unit is responsible for monitoring pest populations and providing chemicals and equipment for control, while MADA extension personnel are responsible for educating farmers on the identifica- tion of the pests and correct control measures. The concept is excellent, but resources in terms of staff, equipment, and monitoring facilities are not adequate to cover effectively the 128,000 ha of padi land in Kedah and Perlis. No crop protection component was included in the proposed project since a national program to strengthen crop protection services is currently under review. However, an assurance was obtained that the Government would submit to the Bank for review its proposal for strengthening the crop protection program in the Muda irrigation area by December 31, 1979, and would implement an agreed program by June 30, 1980.

4.16 Research. A continuous flow of new technology relevant to farmers' needs and continuous refinement of extension recommendations are basic to maintaining an effective extension system and improving yields and farm incomes. MARDI, through the National Rice Research Center at Bumbong Lima and its substation near Alor Setar, would continue to be responsible for basic research. The DOA technical units and the project extension SMS and field staff would work with MARDI on adaptive and simple field trials, to refine extension recommendations on an area basis. These units already cooperate formally through the SARDEC meetings. In addition, as part of the program to strengthen services, a closer working relationship would be established by forming a technical working group to plan and implement adaptive field research. This group would become the main link between extension and research to bring new technology to the field and ensure quick feedback to the research service.

4.17 The need for the working group and field program is highlighted by the fact that there is currently only one fertilizer recommendation for wet and dry season for the entire Muda area, even though five soil classes and 16 soil series have been identified. A soil fertility evaluation program would be the group's first task. The DOA Soil Survey and Analytical Unit would carry out a detailed soil survey on 5-10 representative irrigation blocks, covering some 3,000-7,000 ha, to check the variability of the soils and to determine to what extent soil series might be grouped in terms of soil fertility for rice production. This work would be completed by June 1979. The technical working group would review the data and select 40-50 representative sites based on soils information and crop performance data. MARDI - 31 -

would design replicated field experimentswith levels of nitrogen as the main variable, and treatments included to check response to basal applicationsof phosphate and potash. The experimentswould be conductedover two seasons. Response to fertilizerwould be correlatedwith appropriatesoil parameters measured in the 0-15 cm horizon at each experimentalsite. The results of the first two seasons' experimentswould be used to determine the type of soil survey that should be extended to the rest of the Muda area, and further trial programs needed to refine fertilizer recommendations.

4.18 Staffing. Estimated incrementalstaff requirementsto implement the improvedAgricultural Service program are presented in Annex 2, Table 4 and summarizedbelow:

Designation Number

Senior AgriculturalOfficer 1 AgriculturalOfficers 8 AgriculturalAssistants 19 AgriculturalTechnicians (specialgrade) 30 AgriculturalTechnicians 84 Support Staff 25

Recruitmentof agriculturalstaff would be from AgriculturalTraining Institutes and Universities. An assurancewas obtained that all staff needed to strengthen the extensionand agriculturalservice program would be appointed in a timely manner. It was further agreed that MADA would prepare an operationsmanual for extensionand other supporting services, clearly setting out job descrip- tions and operationalprocedures at each level of operation, to achieve the objective of a fully integratedfield service for farmers in the project area. A draft manual would be prepared for review by December 1979.

4.19 Training. Training requirementsare set out in Annex 2, Table 3. Local training would include project orientationtraining for all key staff and farm group leaders, to familiarizethem with the new methods of operation and to provide basic training on the improved field service system; short 1-2 day field courses for ISA groups, covering the principles of improved water control and management,and synchronizedplanting and harvesting in the irrigation blocks; and program review/trainingsessions, to be held at the end of every cropping season, for all field staff. Longer term in-servicetraining courses for agriculturalpersonnel would be conducted at the Rural Extension Training Center to be constructedat Telok Chengai under the National ExtensionProject. Longer term water management training for irrigatin O&M field personnelwould be conducted at the Water Management Training Center now being establishedby DID at Kota Bharu in Kelantan.

4.20 Overseas training would be provided for 18 technicalstaff. Two-week overseas training and study tours would be provided for farm group leaders and field workers involved in extension, water management and agribusinessactivi- ties. A committee comprising area, district and headquarterspersonnel would select a few outstandingfarm group leaders and field workers in each district who had achieved success in furthering the objectives of the project. The group, headed by a senior officer, would be sent to a neighboringcountry for - 32 -

a study tour of intensiveirrigation areas, to observe farming practicesand management systems at the field level, with a view to bringing back innovations for their own service area. This program would be implementedin years 3-5 of the project when it would be clear which personnel were performing well and would benefit most from observationoverseas.

Monitoring and Evaluation

4.21 Monitoring and evaluation of the project's cost, impact and economic benefits would be carried out by the Planning and Evaluation Unit, which has for several years undertaken periodic and special surveys and studies of cost of production,yields, farm incomes, milling output, credit flow, mechanizationand other factors related to the agriculturaldevelopment of the Muda region. Monitoring and evaluation to date has provided valuable feedback to project management and has been used extensively in developing more effective delivery systems for agriculturalservices. These efforts would continue under the proposed project. Special attention would be given to a comparison of tertiary with nontertiarydevelopment areas, and to the results of pilot investigations(para. 3.13-3.14).

5. AGRICULTURALPRODUCTION

5.01 Padi productionwould be increased primarily by providing farmers with greatly improved water control on their holdings. Project works would reduce the farmers' dependence on their neighbors for irrigation,drainage and access and would allow the establishmentof clearly defined cropping patterns within ISUs, ISAs and irrigationblocks. Project area farmers have already adopted high-yieldingvarieties (HYVs) with reasonably high rates of inputs to optimize their yield under conditions of limited water control. To encourage an accelerated shift to an even higher level of agricultural technique, a greatly intensifiedextension program, covering the entire Muda padi area would be introduced under the project. It is anticipated that farmers would be able to achieve both a higher cropping intensity and higher padi yields once tertiary canals and drains and access roads have been completed. Because of land acquisition for project works, the total padi area in project blocks would decline by about 1,000 ha from 25,200 ha at present to about 24,200 ha in the future.

5.02 In the absence of the project there would be little change in cropping intensity,cultural practices and yields, as lack of tertiary developmentand access are the most serious constraintsto further increases in production. Most farmers are already growing high yielding varieties and use fairly high levels of nutrients. The standard of crop husbandry, with the exception of plant densities, is already high when compared with other rice growing areas in the tropics. Thus, for purposes of economic analysis the "before project" situation is considered equivalent to the "without project" situation. - 33 -

Cropping Intensity

5.03 Past estimatesof the cropping intensityachieved as a result of the first Muda IrrigationProject have been uniformlyvery high, typically in the range between 193% and 197%./1 These estimates,based largely on interviewsurveys of farmers, overestimatedthe long-run sustainabledegree of double-cropping,due chiefly to the fact that a severe drought did not occur during the design, construction,and early implementationphases of the project, and the possibilitiesof recurrent droughts and operationaldiffi- culties in distributingwater with the present irrigationsystem were not fully apparent. The detailed hydrologicalstudy undertakenduring the preparationof this project indicates that the sustainableaverage cropping intensityof the entire Muda Scheme area served by the present gravity irrigationsystem, is 174%. This estimate takes into account the effect of recurrentdroughts on water supply and demand, land out of command, and farmers' practices. Recirculationof drainagewater through pumping, as currentlypracticed by MADA, is estimated to raise the overall Muda cropping intensityunder present conditionsto 185%. The introductionof tertiary canals and drains, which would save water, increase the area under command by gravity, and reduce areas ponded and flooded, coupledwith an intensification of agriculturalsupport services,would raise the overall long-run cropping intensitybased on gravity irrigationto 190%, while maintenance of the more efficientportions of the recycling programwould further increase cropping intensityto close to the sustainablemaximum, or about 193%. The present project area, consistingof blocks selected on the basis of difficultiesin water distribution,is estimated to improve from a present long-run cropping intensityof 175% to the overall projectedfuture Muda average of 193%.

Cropping Patterns

5.04 Under the project farmers would follow four distinct cropping schedules,staggered at two-week intervals (Chart 18927),based on water requirementsfor presaturation,growth characteristicsof varieties with a maturationperiod of 120-135 days, and the rainfall pattern. Water would only be made availableaccording to a set timetable. Extensionand water management staff would work together to encourage farmers to follow the planting schedule for each ISU. Demonstrationtertiary areas have already been established,and have shown that with communal or commercialnurseries, an ISU can be transplantedwithin a week with the cooperativeeffort of all farmers. Enough tractors are available for land preparation. The limiting factor would be labor for transplanting,but staggeredtransplanting within an irrigationblock would allow labor to follow the irrigationschedule for ISUs so that the labor force could cover the whole area over an 8-9 week period.

Crop Husbandry

5.05 Class I and II soils, covering nearly 70% of the area, are ideally suited for padi, and their high clay and silt content and poor drainage

/1 The Project CompletionReport (No. 795-MA) of June 15, 1975 estimatesa final cropping intensityof 197%. - 34 -

characteristicswould preclude any alternativecrops. The small area of lighter Class III soils on the eastern fringe would be suitable for crops such as soybeans, mung bean, and maize, but have been traditionallyplanted to padi due to the ready market for that crop and the farmers' own consumptionprefer- ences. The nitrogen and phosphate status of the slightly acidic soils is relatively low and crops have shown marked yield response to nitrogen. The response to phosphate is not as well documented,but positive responseshave been reported. Basic potash applicationshave not given economic responses. No satisfactoryrelationship between soil type or soil class and fertilizer response has been established. This subject would be studied under the soil fertilityprogram (para. 4.17).

5.06 Class IV soils are found in low-lyingsections in the extreme northern and southern portions of the Muda area. These soils generally have an acid-sulfatehorizon fairly close to the surface. If this horizon is aVlow'edto dry out, sulfates oxidize through aeration, thus creating extremely acidic conditions,and toxic aluminum and iron compounds are formed which may kill newly transplantedseedlings. Some of the sulfuric acid and toxic compounds can be removed through flushing and flooding, and if reducing conditions are maintained for about two months so that the pH increases to about 4, a crop can be established. Present yields are some 20% lower than those on Class I-III soils. Good yield responses have been reported with lime applicationsof 2.5 ton/ha. A lime subsidy is available to farmers on acid- sulfate soils, and with improved access roads under the project it is expected that more farmers will take advantage of this subsidy.

5.07 Current fertilizer recommendations(kg/ha) for HYVs in the Muda area, irrespectiveof soil type are:

Main season: 50 N:22 P:22 K two weeks after transplanting, and 50 N at panicle initiation.

Off-season: 40 N:22 P:22 K two weeks after transplanting, and 40 N at panicle initiation.

The lower N recommendationin the off-seasonis based on two studies in 1971 and 1976, which indicated that Muda soils have a lower natural supply of nitrogen in the main season. Further detailed studies are required to determine more precisely the effect of climate and soil on the N-release in MAda soils and the optimum time of nitrogen applications. IncorporatingN and P before transplantingcould prove beneficial,particularly with regard to N°efficiency. Fertilizer recommendationswould also be refined with regard to K, in view of the uneconomic response obtained to basic potash applications(paras. 4.17 and 5.05).

5.08 Land preparation is mostly mechanized. In 1977 there were about 6¢000 two-wheelpower tillers and about 1,200 four-wheel tractors operating in the Muda scheme. The power tillers are mostly owned by individual farmers with larger holdings and commercial contractors. The four-wheel tractors are owned by contractors. In a few areas where soils are extremely soft, land preparation is done by hand or by buffalo. Additional raking and smoothing is usually done by hand or by animals following rotavating. The - 35 -

DOA Farm Mechanizationand Training Center in Alor Setar is studying mechanical land preparationproblems. Special attentionwould continue to be given to protecting the hard-pan in the soil where this exists.

5.09 Nursery beds are generally prepared separatelyin a corner of the field where irrigationwater is available. The beds are first kept moist and later shallow-flooded,and most farmers incorporatesome ammonium phosphate before seeding. Seedlingsare transplantedmanually when 4-5 weeks old. Due to labor shortage,plant densities are usually too low, often 30 cm or more apart in a random pattern. The traditionaluse of a forked stick for transplanting frequently results in the placement of seedlings too deep for maximum tillering. Drainage is also inadequateto allow continuous shallow water (7-10 cm) during tillering. With improvedwater management,higher yields are possible when the correct plant density/fertilizercombination is used.

5.10 Almost all Muda farmers grow HYVs. The uncertifiedvariety "Seribu Gantang,"which is susceptibleto false smut (Ustilaginoidaevirens) and bacterial leaf blight (Xanthomonasoryzae) was planted on 72% of the area in the 1977 off-season. In the future, the MARDI breeding and plant introduction programs will give farmers access to HYVs with a growing period of 115-130 days and resistance to the major pests and diseases. A number of local long-grainvarieties occupied 13% of the area in 1977. Although these varieties are generally lower yielding, they are better adapted to the acid-sulfatesoils. Muda farmers have shown remarkable initiative in choosing varieties most beneficial to them, and they can be expected to do so in the future. Integratedpest management, resistantvarieties, timely applicationsof preventive or curative insecticides,distinct cropping scheduleswith a break between crops, and improved field hygiene would all help reduce losses to vermin, insects and diseases.

5.11 Until 1973 virtually all harvesting in the Muda area was done manually, requiringa high labor input for cutting, threshing,winnowing and transport. In 1969, MADA and the DOA Farm MechanizationCenter began a demonstrationprogram of large combine harvesters,followed in 1973 by a separate line of experimentsto develop small harvesters to cope with the soft soils, poor access and small, fragmentedfields of Muda. Commercialharvesting also began in 1973 when agents and contractorsintroduced medium-scale combines. Since then the trend has been towards larger tracked combines specializedfor padi, having good flotation characteristicscoupled with high clearance to cope with field bunds. By 1978 there were 88 large combines operating in Muda and 14 more on order by contractors,plus 30 small combines operated by FAs. About 35% of the 1977-78main-season crop was harvestedmechanically and this proportion is expected to increase with synchronizedripening of crops within ISUs. Ultimately,mechanical harvestingmay cover 60% of the Muda area, but poor access, soft soils and competitionfrom gangs of manual laborers will continue to be limiting factors.

Yields

5.12 Present yields were determined from adjusted crop cutting data for the last three years (six crops). Main-seasonyields on Class I-III soils - 36 -

averaged 3,470 kg/ha, while off-season yields were 3,770 kg/ha. Yields on acid-sulfate(Class IV) soils averaged 2,870 kg/ha in both seasons. There was no trend in yields or evidence that average yields in the 37 project blocks were significantlydifferent from the overall Muda average. With the project, yields are expected to increase as shown in Table 5.1, with increases in each block achieved over three to four years.

Table 5.1: PRESENT AND PROJECTED PADI YIELDS

Present & future Future without project with project ------(ton/ha) ------

Main season Class I-III soils 3.5 4.2 Class IV soils 2.9 3.5

Dry season Class I-III soils 3.8 4.6 Class IV soils 2.9 3.6

5.13 To achieve the estimated yield increases, farmers would have to make full use of all available support services and use the required inputs. Correct timing of operations would be essential and standardsof field preparation,crop husbandry and water management would have to be high. Adequate and timely extension advice would be provided by MADA and inputs and credit would be available when needed in sufficient quantities.To alleviate labor shortagesduring transplanting,experiments with direct seeding would continue. Broadcastingpregerminated seed onto mud or into shallow water (7-10 cm) would contribute to a uniform crop in ISUs, but would place heavy demands on organizationwithin the ISUs and require strict water control and land levelling. Improved drainage would enable timely evacuation or lowering of water levels in the padi fields for land preparation,transplanting, topdressing fertilizersand harvesting. Access roads would also allow farmers to get harvesting machinery in the field when grain moisture is high enough to prevent excessive suncracking. This would lead to better mill returns and improved grain quality which in turn should result in higher farmgate prices for padi.

Production

5.14 As a result of the project, annual padi production in the project irrigationblocks would increase by 29% from 150,300 tons at present to 193,300 tons at full developmentin 1988, five years after project completion (Annex 4, Table 1). Additional benefits would result from providing improved agriculturalsupport services and access to credit and inputs in the remaining 72,000 ha of Muda, since all FDCs would be fully staffed and all farmer groups would be regularly visited by well trained extension personnel. These benefits are assessed in terms of yield increases of 100 kg/ha of padi (about 3% of present production)per season. Present and future cropped areas and padi production are shown in Table 5.2. -*37 -

Table 5.2: PRESENT AND FUTURE CROPPED AREA AND PADI PRODUCTION

Cropped Area Annual Production Present & future Future Present & future Future without project with project without project with project ------(ha) ------(tons) ------

Project Irrigation Blocks: Main season Class I-III soils 17,640 16,940 61,700 71,100 Class IV soils 7,560 7,260 21,900 25,400

Dry season Class I-III soils 13,230 15,750 50,300 72,500 Class IV soils 5,670 6,750 16.400 24.300

Total project irrigation blocks 150,300 193,300

RemainingMuda Area: Main season 72,000 72,000 241,200 248,400 Dry season 63,600 63,600 228,300 234,700

Total 619,800 676,400

Incrementalproduction from tertiary development in project irrigationblocks 43,000 Incrementalproduction from agricultural support services outside project areas 13,600 Total incremental production 56,600

Milling Facilities

5.15 The total throughput capacity of rice mills in the Muda area is 317 tons of padi per hour, consistingof 39 large private rice mills (161 tons/ hour) licensed to engage in the commercialtrade, 232 small private mills (111 tons/hour)permitted to mill rice for farmers' own needs, and 9 large milling complexes (45 tons/hour) operated by LPN. Padi production in Muda is now estimated to average 325,000 tons in the main season, rising to 360,000 tons in good seasons. The proposed project would raise average main season production to 345,000 tons, which would result in peak deliveries to mills of about 3,000 tons/day./l As mills generally operate on extended shifts in peak

/1 In a typical season, 15% of the harvest is deliveredto mills in the first month of harvest, 25% in each of the three succeeding months, and 5% in both the fifth and sixth months. - 38 -

seasons, existing milling capacity is adequate to process the projected increase in production. In fact, the LPN mills have frequentlybeen plagued by excess capacity,as they cannot show the same flexibilityas private mills in raising prices (or in granting credit) in line with market conditions. Total mechanical padi drying capacity in Muda is 1,550 tons of padi per day, concentratedin the LPN mills and in some of the larger private mills. Because of this factor, the LPN mills obtained 22% of the entire 1977 dry season crop, harvested in the early stages of the wet season,while they milled only 7% of that year's wet season crop, harvested in dry conditions. As padi is typically sun-dried on roads, mats in farmers' house compounds, and padi drying floors except in the rainiest periods, and as several feasibility studies of investmentsin additional drying capacity have proved negative, existing drying capacity is considered adequate. Given the large number of milling establishmentsin close proximity, there is active competition in Muda for the farmers' produce, and farmgate padi prices are relatively high, stable, and consistent across the region at any point in time. When required, both private and publicly-ownedcapacity have expanded to cope with increased production.

6. MARKET PROSPECTS, PRICES, INCOMES AND PROJECT CHARGES

Market Prospects

6.01 The Government'slong-term goal is approximate self-sufficiency in rice. Despite its impressive efforts in support of that goal in terms of investmentsin irrigation infrastructureand the upgrading of the entire range of agriculturalsupporting services,Malaysia continues to be dependent on imports to satisfy its rice requirements. Between 1964 and 1974 domestic production increased by over 70% to 1.3 million tons of milled rice, chiefly due to the increases in cropping intensity achieved by the Muda and Kemubu Irrigation Projects. During the same period there was a correspondingdecline in imports of 38%, and an increase in the degree of self-sufficiencyto 83%. Since 1974, production has stagnated, in part due to recurrent droughts in the west coast rice areas, causing imports to rise to 280,000 tons in 1977. Government projectionsof domestic rice production,taking into account the effects of all ongoing and contemplated irrigation projects, imply an increase in production of 3.4% per annum, to 2.1 million tons in 1990. Projections of demand are based purely on population growth forecasts (2.7% per annum), with no increase in per capita consumption (120 kg/annum). These projections imply that Malaysia will continue to import over 90,000 tons of milled rice beyond 1990, and that all incremental domestic rice production will continue to find a ready market in Malaysia. The present project would result in an incrementalproduction of 36,800 tons of milled rice (56,600 tons of padi) by 1988, slightly less than 2% of the total domestic supply.

Prices

6.02 In addition to operating a network of rice mills in the larger padi-producingareas and maintaining the national rice stockpile,LPN is responsible for setting official offer prices for a wide range of grades - 39 -

and varieties of padi in the major producing areas at the beginning of each season, which serve as guaranteed minimum prices for that season's produce. LPN mills generally pay the offer prices, discounted for moisture content in excess of 14% or for dirt, empty grains, straw, or ether foreign matter. Private mills generally offer prices equal to or better than the official prices. Although the official price historically has stood above world market price levels, it has been reduced since 1974. The average padi price received by Muda farmers during the harvest of the 1978 main season crop was M$450/ton. This is roughly in line with the price of US$328/ton for 5% broken Thai rice (f.o.b. Bangkok) as derived in Table 6.1. The financial farmgate padi price is projected to rise along with the projected world market price throughout the period of analysis. Purchased inputs have been valued at actual farmgate prices, which are closely linked to world market prices.

6.03 Although the project output would substitute for the highest grades of Chinese and Thai rice (which are the grades commonly imported), for purposes of economic analysis it is assumed that the mixture of grades to be produced under the project would equal in value the standard 15% broken Thai grade. This grade is typically traded internationally at prices 10% below those of the Thai 5% broken grade for which the Bank's Economic Analysis and Projections Department makes long-term projections. Estimates of milling costs and value of milling by-products are based on a financial analysis of a proposed medium-sized rice mill prepared by MADA in 1977. Using an average mill return of 65%, and assuming that incremental project output would go primarily to satisfy the requirements of the Kuala Lumpur metropolitan area, the equivalent economic farmgate price for padi would rise from M$465/ton in 1979 to M$588/ton (US$267/ton) in 1990 and thereafter, in constant 1979 values.

Farm Incomes

6.04 Farm budgets have been prepared for five representative model farms. The five models are 0.2 ha, the average size of farms smaller than 0.5 ha (10% of farm holdings); 0.8 ha, the average size of farms between 0.5 and 1.1 ha (32% of farm holdings); 1.4 ha, the average size of farms between 1.2 and 1.7 ha (25% of farm holdings); 2.5 ha, the average size of farms between 1.8 and 3.4 ha (27% of farm holdings); and 4.5 ha, the average size of farms larger than 3.5 ha (6% of farm holdings). Estimated economic and financial crop production costs are derived for each of the five farm models in Annex 3, Table 2 and summarized in Annex 3, Table 3. Annex 3, Tables 4-6 present financial farm budgets for each of the farm models for the present, future without project, and future with project cases. - 40 -

Table 6.1: RICE PRICE STRUCTURE Tin constant 1979 values)

1978 1979 1985 1990

Rice

Export price Thai 5% broken, f.o.b. Bangkok (US$/ton) 328 358 437 453 Grade differential (less l0%)(US$/ton) 295 322 393 408 Exchange rate conversion (US$1 = M$2.21)(M$/ton) 649 708 865 898 C.I.F. price of rice, Port Klang /a (M$/ton) 696 755 912 945 Port handling and road transport lb (M$/ton) +23 +23 +23 +23 W'nolesale price of rice, Kuala Lumpur (M$/ton) 719 778 935 968

Transport cost from Muda to Kuala Lumpur /c (M$/ton) -32 -32 -32 -32 Ex-mill rice price, Muda (M$/ton) 687 746 903 936

Padi equivalent price (65% mill return) 447 485 587 608 Milling cost not covered by value of byproducts (M$/ton) -20 -20 -20 -20

Economic farmgate price, Muda (M$/ton) 427 465 567 588 Financial farmgate price, Muda (M$/ton) 422 460 562 583

/a M$47/ton for ocean freight and insurance, Bangkok to Port Klang.

/b M$29/ton for port handling; M$3/ton for road transport from Port Klang to Kuala Lumpur (30 km x M$0.10/ton-km; group conversion factor of 0.72 and 0.66 is applied to port handling cost and road transportation cost, respectively).

/c 480 km x M$0.10/ton-km; group conversion factor of 0.66 is applied.

6.05 Estimates of input usage and other parameters (Annex 3, Table 1) were based on farm surveys and interviews with farmers during project preparation and appraisal. Projections of future input levels with the project are based on actual results from the pilot areas developed in the course of project preparation. Financial labor cost (M$7/day) and contract rates are based on surveys in the project area. Estimates of hired labor incomes, non-agricultural incomes and home produce values are also based on survey results and are assumed to remain constant with the project. Household subsistence rice consumption of 895 kg/year/family is also based on survey data. - 41 -

6.06 Muda farmers pay a wide variety of land-based taxes to the Kedah and Perlis State Governments through the respectiveDistrict Land Offices, including irrigation rates, quit rents and education rates, averaging a total of M$59 per annum for a typical 1.4 ha farm. These tax payments are projected to remain constant. The only production-relatedtax paid by padi farmers is zakat, the Islamic padi production tithe, paid to the State Departments of Religious Affairs, which use the receipts to finance the religious school system, teachers' salaries,welfare expenses,and maintenance of mosques. Zakat is paid by all Muslim padi farmers /1 in PeninsularMalaysia on production in excess of "subsistence"requirements as determined by officials of the Department. Payment rates vary from state to state, but in Kedah and Perlis, the rate is 10% of the total padi crop net of 1,224 kg/crop/family. Because of the allowance, zakat payments are progressive. Average annual payments are valued at M$292 for a 1.4 ha farm at present, and are projected to rise to M$438 at full project development.

6.07 At present the total annual family income generated by the typical 1.4 ha farm is M$3,000 (US$1,360) which includes hired labor incomes and non-agriculturalincomes. The family income is approximatelyequal to a per capita income of US$250/annum. The range of per capita incomes derived from the various sizes of farms is relatively narrow, from the equivalent of US$120 for the 0.2 ha farm to US$470 for the 4.5 ha farm (Table 6.2). Estimated national average per capita income is US$1,030. Assuming that farm family size remains constant, at full project developmentin 1988 the projected per capita farm income would range between US$150 to US$970 while the projected national per capita personal income would rise to US$1,530. Thus, unless farmers in the project area can augment the incremental income which the project would provide, their relative income position would deteriorate. However, without the project the situationwould be even worse.

Table 6.2: SUMMARY FARM BUDGETS

Farm Size of Farm income/b Per capita income model family/a Present Future/c Present Future/c Present Future/c

(ha) (no.) ---- (M$f000) ------…__…S$)…------… --- ~

0.2 4.8 1,240 1,580 560 720 120 150 0.8 4.8 2,300 3,560 1,050 1,620 220 340 1.4 5.5 3,100 5,180 1,400 2,350 250 430 2.5 6.0 4,160 7,900 1,890 3,590 320 600 4.5 6.2 6,440 13,240 2,910 6,020 470 970

/a Source: Farm Surveys.

/b From Annex 3, Tables 4 and 6, rounded to nearest M$20 and US$10. Includes hired labor income and nonagriculturalincome.

/c At full project maturity in 1988.

/1 Virtually 100% of the padi farmers in Muda are Malays, and hence legally liable Muslims. - 42 -

Regional Impact

6.08 A separate analysis has been carried out to measure the "downstream" financialeffects of the project./l These indirect effects arise mainly because the higher incomes flowing from the project would induce increased demands for the outputs of other sectors, as well as investmentand intermediate goods. For this analysis, in addition to the farm householdsin the project area, two other groups have been considered. The first group is engaged in farming within the Muda region but outside the project area, mainly the productionof rubber and/or rainfed main season padi. They would receive cash income in return for labor supplied to households in the project area (which would be offset in part by foregone output from their own fields). All farm householdsin the Muda region, whether inside or outside the project area, would enjoy additional incomes from such non-padi activitiesas petty trading, housing improvementand growing vegetables,the demands for which would be increaseddue to the project. The second group is engaged in nonfarm activitiesin the region. Nonfarm householdsaccount for 35% of the region's populationand, in general, enjoy higher per capita incomes than the farming community,although there are wide variations in income and wealth within the group. The incomes of the poor in this group would rise due to additional wage earnings. Income would also flow to such sectorsas milling and agricultural machinery services. It turns out that for every additional dollar of value added in padi production arising from the project at maturity, there would be about 75 cents of value added generated in "downstream"effects, mostly accruing to nonfarm households. Each dollar of "downstream"value added associatedwith the project would require about a dollar of complementary investmentappropriately distributed over all non-padi sectors. For a summary table refer to Annex 4, Table 8.

Project Charges

6.09 Given the low incomes of the padi farmers in the project area, the general Malaysian Government policy would require no special taxation of project beneficiariesto recover project costs. Zakat payments,however, are an integral part of traditionalMalay culture, and they can be expected to continue regardlessof general tax policy. Incrementalzakat payments are derived for each of the five farm models in Annex 4, Table 10, and are related to both the project rent and annualized project cost. The rent recovery indices vary from 0% to 14%, averaging 11% for the entire project. The cost recovery indices vary from 0% to 32%, averaging 26%. Average zakat payments would rise from a present level of about US$100/ha to about US$160/ha, compared with incrementalO&M costs of US$25/ha,and would make a substantial contributionto capital cost recovery. It should be noted, however, that O&M of irrigation facilitiesin Malaysia is totally divorced from collectionsof either irrigationcharges or zakat payments;that irrigationO&M is financed out of general revenues supported by an efficientand generally progressive

/1 The "downstream"effects of Muda II were calculated using the model developed for Muda I. See Reference B5. - 43 - tax system, and that the level of 0&M is not constrainedby a shortage of funds. In view of these factors and the level of farm incomes, the present structure and level of charges are considered acceptable. Assurances were obtained that the Kedah and Perlis State Governmentswould continue to collect irrigationcharges whose level would be determined taking into account O&M and capital costs, incentives to farmers, farmers' capacity to pay, and other taxes and charges imposed upon them, and that the Government would exchange views with the Bank from time to time on the level of those charges.

7. BENEFITS, JUSTIFICATIONAND RISKS

Economic Analysis of Tertiary Block Development

7.01 Irrigationblocks to receive tertiary canals, drains and associated roads representabout 25% of the Muda command area, while investment in tertiary developmentrepresents 78% of project costs. By providing improved water control, reliable irrigationsupplies and intensifiedagricultural support services,the proposed tertiary developmentwould increase cropping intensity,yields and production on 24,200 net ha. Some 16,000 families,or 85,000 people, would benefit. The incrementalannual production of 43,000 tons of padi at full project developmentwould result in net annual foreign exchange savings of about US$11 million in 1979 currency values, and contribute toward meeting the Government'sgoal of reducing dependence on rice imports to satisfy food requirements.

7.02 Costs. To estimate the economic cost of the project, 25% of general project expenditureson buildings, equipment, coastal protectionworks and miscellaneousworks, 63% of expenditureson major drainage improvements,/125% of incrementalannual expenditureson improved agriculturalservices, and incrementalannual operationand maintenance expenditureswere included in addition to the full costs of investmentswithin the tertiaryblocks. All local costs were multiplied by specific conversion factors to express them in terms of border prices./2 Financial land acquisitioncosts were excluded from the calculations,since the net padi area was reduced by the 930 ha required for project works. Costs for studies, monitoring and evaluationwere also excluded. Using these assumptions,total investmentcost (includingphysical contingencies, but excluding price contingencies)expressed in 1979 prices is US$37.9 million. This consists of civil works (US$35.4 million), equipment (US$0.4million), engineering and supervision(US$2.1 million). The estimated annual incremental cost of 0&M and agriculturalservices is US$24/ha and US$5/ha, respectively. A nominal salvage value equal to 25% of the original cost of all civil works was assumed after 30 years.

/1 Major drainage improvementsincluded in the project would serve about 40% of the total Muda area, concentratedon the 37 blocks.

/2 The common unit of account used in the economic analysis is uncommitted public income at border prices, expressed in terms of local currency at the official exchange rate of M$2.21 = US$1. Financialprices were converted to economic prices using specific conversion factors (Annex 4, Table 5). Techniquesare developed in References B7 and B8; while parameter estimates were taken from Reference B6. - 44 -

7.03 Farm Labor. The demand for labor in the region is highly seasonal. During the transplantingand harvesting seasons there is virtually full employ- ment. In peak periods local labor shortagesmay develop, and those are met by migrant workers from Thailand and the state of Kelantan. Since the rural labor force is relativelymobi'le, the labor market works fairly efficiently ana therefore the observed mar:ket wage for hired labor provides a good estimate of the efficiency price of farm labor, particularly during the peak seasons. Thus all farm labor has been valued at the prevailingmarket wage of M$7/man-day. All labor costs were convertedto border prices by applying conversion factors.

7.04 Benefits. All benefits were calculatedin terms of increasedpadi production. Expected future yields and productionwith and without the project are discussedin Chapter 5. Chapter 6 discusses the economic and financial farmgate prices for inputs and outputs, based on actual farmgate prices and the Bank Economic Analysis and ProjectionsDepartment's projections to 1990. Crop production costs are given in Annex 3, Tables 1 and 2. Anneg 4, Table 2 summarizes the foregoinginformation and gives the expected buildup of pro4ectbenefits.

7.05 Development Period. All project works were assumed to be completed by the end of 1983, while the first crop to reach maximum potential cropping intensity would be the 1984 dry season crop, planted in February/March. Expenditures were phased separately for each of the 37 blocks to be developed, as well as for dispersed minor works, and benefit phasing was related to assumptions of physical development on an area basis. Yields and cropping intensity without the project were assumed to remain constant,-asagricultural practices of Viudafarmers are already quite advanced, and there has been no upward trend in yields or cropping intensity over the past few years. With the project, cropping intensity is assumed to reach its maximum potential the first full season after completion of work in each block, as water availability is clearly the constraint on this parameter. Yields are projected to reach their full developmentwith the harvest of the eighth complete crop after work is completedin each block, i.e. over a span of 4-1/2 years. Thus, for the entire project, full production would be reached with the 1988 main season crop.

7.06 Economic Rate of Return. Using the foregoingassumptions and discountingcosts and benefits over a 30-year evaluationperiod, the economic rate of return on the 24,200 ha tertiary developmentarea is 18% (Annex 4, Table 3). The economic net present value (NPV), discounted at the accounting rate of interest of 10%, is M$60.5 million.

7.07 Sensitivityof the Economic Rate of Return. Sensitivityanalysis has been carried out to determinewhich variableswould be most crucial to the success of the project. As a measure, the crossovervalue was used, defined as the value of the variable tested for which NPV discounted at 10% is zero. The crossovervalue may be interpretedas the value of the variable tested, beyond which the economic rate of return would be below 10%. The results are presented in Annex 4, Table 9, and discussed below. - 45 -

(a) Project Yields. The project is not sensitivewith respect to yields. The incrementalpadi yield at full developmentwould have to be about 50% (360 kg/ha) less than the expected value before the proj'ct'seconomic rate of return falls to 10%. Farmers in the project area already use close to the optimal mix of agricultural inputs. With improved water control and extension services,it would be highly unlikely that actual incrementalyields would be as much as 50% below the projection.

(b) Cropping Intensity. Even with no increase in cropping intensity, the economic rate of return would still be 10%. Such an event is consideredunlikely, since one of the main goals of the project is to increase the cropping intensityby providing better water control, and water availabilityhas been confirmed by a detailed hydrologicalanalysis (para. 3.20).

(c) Price of Rice. The crossover value represents a 35% drop from the expected world market price, which seems unlikely. With the export parity price of rice as a basis for the economic farmgate price of padi, instead of the import parity price, the economic rate of return is 16%.

(d) ConstructionCosts. The result is not sensitive to an increase in constructioncosts, which would have to double before the economic rate of return falls below 10%. Experiencewith other projects in Malaysia has shown that cost overruns of this magnitude are highly unlikely to occur.

(e) DevelopmentPeriod. All benefits would have to be delayed more than five years before the rate of return falls below 10%. Although other projects in Malaysia are experiencingdelays of one to three years, it is unlikely that implementationand the realizationof benefits would be delayed by five years in the case of the proposed project. Constructionis already underway and designs are completed about one year in advance of construction. Based on experiencewith Muda I, farmers in the project area respond rapidly once works are completed and support services are activated.

(f) ConversionFactors. The specific conversionfactors used in the economic analysis all cluster around 0.8 (Annex 4, Table 5). Use of a general conversion factor of 0.8 would not affect the economic results. With a general conversion factor of 1.0, the economic rate of return would be 14%, while the crossover value of the conversion factor is 1.5. While a figure of 1.0 is plausible for Malaysia in view of the tariff and export tax structure,a true value as high as 1.5 is highly unlikely. - 46 -

7.08 Sunk Cost Analysis. An analysis of the combined Muda I and Muda II projects was carried out to determine whether the initial decision to undertake major investmentsin irrigationin the Muda region was correct. Construction of Muda I began in 1965 and was completed in 1975 (para. 2.08). Total economic cost in terms of 1979 prices was M$661.9 million (US$301.8million). Production in the 98,000 ha project area was transformed from a single rainfed padi crop yielding 2.3 ton/ha, to intensive (185% sustainablecropping intensity)padi cultivation yielding an average of 3.3 ton/ha in the wet season and 3.5 ton/ha in the dry season. The proposed project would build upon this base of sunk costs and realized benefits.

7.09 To make the cost and benefit streams for the two projects compatible, all prices were expressed in terms of constant 1979 values and the same conversion factors were applied to the local componentsof all costs and benefits as in the foregoing analysis of Muda II. Also, the same actual and projected yields, cropping intensityand labor costs were used. Finally, 25% of the total cost and benefit streams for Muda I were used to estimate the costs and benefits associatedwith the tertiary developmentblocks of Muda II, and added to the costs and benefits of Muda II. Based on the above assumptionsand discounting over a 46-year evaluation period, the economic rate of return of Muda I and Muda II taken together is 18% (Annex 4, Tables 11-13), showing that the initial decision to build Muda I with the prospect of future intensification was economicallyjustified.

Social Analysis of Tertiary Block Development

7.10 The foregoingeconomic analysis is concerned with the size of the net economic benefits of the project, not their distribution. Social cost- benefit analysis, on the other hand, is intended to take explicit account of the impact of the project on the distributionof income both between investment and consumptionand between rich and poor. Computationally,the project's net social benefits equal the net economic benefits plus a term representing the net social value of increased private sector consumptionresulting from the project. This consumptiondistribution adjustment may be positive, when the beneficiariesare predominantlypoor as in the present case, or negative when they are relativelywell off.

7.11 Empirical studies have shown that the average level of consumption in the project area compared to the national average seems more important in determining the social rate of return than the income distributionwithin the project area. /1 This would be particularlytrue in places like Muda where

/1 Reference B9. - 47 -

the farm size and income distribution are relatively even (para. 2.06). Although Muda farmers are relatively well off compared with padi farmers in other parts of Malaysia, their incomes fall far below the national average personal income of US$1,030(in 1979 prices). Approximately 50% of project beneficiary families subsist on incomes below the absolute poverty line of US$270, while 90% earn less than the critical consumption level (CCL) of US$430./1 A median size farm (1.4 ha) makes at present about M$3,000 (US$1,360) annually. By full project development, this typical farm would make about M$5,200 (US$2,350) or a per capita income of US$430. Implementation of the project would lift 80% of all beneficiaries out of absolute poverty, but would still leave about half below the CCL. Furthermore, the gap would widen between the incomes of the project beneficiaries and the national average at project maturity, which is expected to reach US$1,530. Reflecting the circum- stances described above, and the present Government policy of a moderate emphasis on income distribution,/2 the social rate of return is 35%, signifi- cantly higher than the economic rate of return. The social NPV discounted at 10% equals M$233.8 million. Subtracting the economic NPV of M$60.5 million (para. 7.04) gives a positive NPV for the consumption distribution adjustment (para. 7.10) of M$173.3 million. The analysis and assumptions are presented in Annex 4, Tables 5-7.

7.12 Sensitivity of the Social Rate of Return. Sensitivity analysis was carried out with respect to different assumptions about Government policy regarding income distribution and savings versus consumption (Annex 4, Table 14). The assumption that distribution and saving do not matter is reflected in the traditional economic rate of return of 18%. The more egalitarian the Govern- ment's policy, the higher would be the social rate of return. Only in the case of no preference about income distribution and a positive saving premium (which does not reflect actual Government policy) would the social rate of return be less than the economic rate of return. Even in that case, the social rate of return would not fall below 14% within the relevant range of assumptions. Finally, a social analysis was carried out on the assumption that national average private consumption would not grow at all from its present level, so that beneficiary incomes would increase in relative terms. In that case, the social rate of return would still be 27%.

Investments Outside the Tertiary Development Area

7.13 A separate simplified analysis was performed (Annex 4, Table 4) to compare the annualized costs of project works and agricultural programs

/1 The CCL is defined as the level at which the Government gives equal weight to additional private consumption and additional public sector investment. In this case it is estimated as the per capita income level which is exempt from income tax, and is about 40% of average personal income.

/2 Consumption of different income groups has been weighted proportionally. For example, consumption at twice the average level has been given a weight of 1/2, where average consumption has a weight of 1. A neutral assumption has been made about Government preference for saving versus consumption at the average level of consumption. - 48 -

benefitting the remainder of the Muda area with their estimated benefits. Costs of project civil works serving the entire Muda area, as well as agricultural, extension and office equipment, and the water control and management system were annualized by amortizationover their respective economic lives at a 10% discount rate. These costs (totallingM$25/ha), plus the estimated annual cost of additional agriculturalservices (M$11/ha), result in a total estimated annual cost of M$36/ha for project-relatedimprovements outside the irrigation blocks proposed for tertiary development. A total yield improvement of only 40 kg/ha would be required to justify these expenditures. Such an increase is well within the expected production response from the proposed improvementsto general infrastructureand agriculturalservices.

Risks

7.14 Project risks are no greater than can normally be expected with operations of this type. The main problem encounteredin similar projects in Malaysia has been delays in implementation. This experience has been taken into account in sizing and scheduling the project's civil works and in providing for sufficient staff. Furthermore,sensitivity analysis shows that the economic rate of return is not sensitive to delays in benefits.

8. RECOMMENDATIONS

8.01 During negotiationsassurances were obtained from the Government on the followingmajor points:

(a) MADA would submit to the Bank for review a detailed proposal for studies by December 31, 1979 (para. 3.14);

(b) the implementingagencies would maintain separate accounts for the project; these would be collated by the Project Manager, audited by auditors satisfactoryto the Bank, and forwarded to the Bank within nine months of the close of each year (para. 3.37);

(c) all DID and MADA engineeringlandagricultural staff required to support the project would be appointed (para. 4.04 and 4.18);

(d) consultantsacceptable to the Bank would be employed as required for project implementationand studies, under terms and conditions satisfactoryto the Bank (para. 4.05);

(e) DID would prepare on completion of final design a designer's operationmanual covering major project works (para. 4.04) and MADA would prepare a draft agriculturalservices operationmanual as a guide for field extension staff by December 31, 1979 (para. 4.18); - 49 -

(f) the Government would submit to the Bank for review a proposal for strengtheningthe crop protectionprogram in the Muda irrigation area by December 31, 1979 and would implement an agreed program by J-'ne30, 1980 (para. 4.15);

(g) the Kedah and Perlis State Governmentswould continue to collect irrigationcharges whose level would be determined taking into account O&M and capital costs, incentivesto farmers, farmers' capacity to pay, and other taxes and charges imposed upon them, and the Government would exchange views with the Bank on the level of these charges (para. 6.09).

8.02 With the above assurances, the proposed project is suitable for a Bank loan of US$31 million, with a 17-year maturity and a grace period of four years. The Borrower would be Malaysia. -50- ANNEX 1 Table 1

MALAYSIA

MUDA II IRRIGATION PROJECT

Estimated Monthly Uncontrolled Flow /a (In thousand- acre feet)

Year July Aug. Sept. Oct. Nbv. Dec. Jan. Feb. March April May June Annual

1946/47 - - 59.70 172.65 124.44 82.71 30.21 10.06 10.06 25.16 71.94 46.75 633.68 1947/48 52.51 58.98 51.79 137.40 113.64 94.23 24.45 8.63 12.93 40.99 30.92 7.91 634.47 1948/49 28.03 87.76 32.36 105.01 69.76 17.97 4.30 30.92 41.70 24.45 56.12 27.34 460.39 1949/50 64.03 38.12 76.95 153.22 142.44 104.29 25.16 11.49 6.81 18.69 52.51 23.73 717.18 1950/51 17.25 22.30 79.13 89.91 123.72 42.44 17.25 17.25 8.63 13.67 23.58 10.06 463.26 1951/52 33.08 22.30 112.20 80.56 187.75 103.58 12.93 10.78 16.54 29.49 44.60 17.97 671.87 1952/53 17.97 15.104 13.67 48.90 146.02 69.76 18.69 16.54 9.34 53.22 38.12 42.42 489.88 1953/54 38.84 15.82 102.14 157.54 163.99 24.45 24.45 5.73 7.19 10.06 43.88 18.69 612.89 1954/55 11.49 54.66 34.51 153.93 56.81 19.40 7.91 5.09 1.59 20.12 60.42 35.97 461.82 1955/56 12.93 89.19 74.80 128.05 184.14 33.08 14.39 4.02 13.67 28.06 64.74 59.70 707.12 1956/57 53.94 61.85 66.89 126.59 126.59 25.88 10.06 5.02 6.45 10.78 20.86 23.73 536.63 1957/58 58.08 25.16 36.68 67.61 103.58 18.69 6.96 9.93 3.81 1.87 22.30 14.39 362.55 1958/59 4.30 10.06 10.78 100.71 87.76 17.43 3.15 1.20 3.30 1.72 50.36 41.70 330.91 1959/60 9.34 21.58 64.74 44.60 115.10 68.33 10.06 3.15 3.30 7.91 35.97 19.40 403.56 1960/61 47.97 18.20 84.58 32.33 114.76 23.99 8.58 4.28 9.42 15.62 19.05 13.49 392.27 1961/62 4.71 4.51 12.41 56.52 41.11 26.98 19.48 4.28 5.15 6.86 34.05 7.91 223.97 1962/63 26.98 19.69 66.15 131.25 45.18 4.51 3.87 2.36 1.48 1.28 5.79 0.84 309.38 1963/64 3.00 1.48 15.41 73.45 74.93 12.41 0.84 0.44 1.08 1.72 11.34 6.22 201.88 1964/65 8.78 5.56 41.11 39.83 89.29 15.41 1.92 1.28 4.92 8.99 10.93 3.87 231.88 1965/66 6.66 31.26 56.93 106.85 124.19 142.59 21.20 8.99 8.14 7.50 18.00 28.26 560.36 1966/67 7.91 7.27 31.69 110.69 94.00 77.52 68.74 7.50 6.86 10.27 36.20 33.84 492.49 1967/68 35.53 25.47 38.96 145.59 88.42 55.68 17.92 7.68 33.28 7.68 58.88 15.36 530.46 1968/69 29.70 27.14 30.98 61.70 52.48 38.66 55.04 35.53 24.32 28.42 43.01 37.12 462.08 1969/70 0.26 0.26 20.48 71.68 104.96 56.32 33.28 7.68 12.80 2.56 46.00 28.16 384.51 1970/71 17.92 28.16 25.60 53.76 46.08 74.24 15.36 23.04 43.52 33.28 48.64 51.20 460.80 1971/72 74.24 28.16 30.72 51.20 15.36 20.48 7.68 28.16 17.92 48.64 17.92 10.24 350.72 1972/73 10.24 2.56 56.32 71.68 94.72 38.40 238.08 120.32 17.92 58.88 51.20 74.24 834.56 1973/74 48.64 76.80 20.48 58.88 7.68 23.04 0.26 25.60 20.48 20.48 35.84 43.52 407.30 1974/75 28.16 28.16 33.28 64.00 46.08 17.92 35.07 17.23 36.48 30.18 21.66 22.02 380.24 1975/76 51.61 21.45 44.85 64.33 114.66 188.90 33.92 16.59 0.49 20.63 68.02 30.46 655.92

/a Padang Terap River at the Pelubang barrage.

Source: DID. - 51 - ANNEX 1 Table 2

MALAYSIA

MODA II IRRIGATION PROJECT

Monthly Estimated Inflow Into Reservoirs (1947-75) (In thousand acre feet)

Year July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March April May June Annual

1946/47 - - - 117.34 156.89 101.67 56.21 31.37 35.37 60.22 82.99 59.18 - 1947/48 69.41 60.96 68.63 159.96 157.66 148.58 54.96 30.32 29.D0 53.43 49.50 75.54 906.52 1948/49 41.89 77.19 44.58 103.89 83.64 37.96 20.64 29.05 28.27 35.50 75.81 50.10 602.99 1949/50 81.40 53.81 97.42 186.60 146.46 147.52 52.74 34.93 29.61 46.22 80.89 45.20 1,003.70 1950/51 38.18 36.15 81.31 108.97 123.18 61.49 36.18 30.19 22.71 26.30 44.36 33.37 642.04 1951/52 53.84 38.65 103.71 85.86 196.09 168.70 42.47 28.66 38.93 43.46 53.85 37.46 891.19 1952/53 39.95 29.85 32.29 78.90 172.31 85.63 41.23 30.41 27.10 55.72 50.82 52.00 695.35 1953/54 66.07 39.61 122.23 203.75 150.88 51.47 46.48 22.70 22.27 27.88 52.07 40.73 848.19 1954/55 40.42 75.24 42.92 181.89 78.08 45.50 28.54 21.45 12.10 29.82 74.99 46.98 677.90 1955/56 27.01 98.71 79.62 149.82 206.66 62.32 38.05 22.03 30.79 39.90 69.70 64.73 889.99 1956/57 56.00 72.56 89.50 166.71 172.20 61.00 36.36 23.42 22.48 31.65 60.54 49.19 843.35 1957/58 67.45 50.75 53.25 106.75 134.27 49.22 33.16 20.34 16.46 9.71 62.10 38.05 638.62 1958/59 16.65 30.87 29.16 143.13 143.56 52.08 17.69 10.95 11.77 12.65 85.54 65.19 619.26 1959/60 40.58 50.84 63.71 87.78 164.72 94.55 28.80 13.70 16.76 22.55 62.45 44.50 691.57 1960/61 82.50 52.34 131.07 65.83 151.02 65.55 31.64 22.39 21.D1 33.59 46.29 39.75 744.96 1961/62 26.94 22.28 27.96 91.61 87.59 49.19 39.89 15.82 20.94 24.00 88.50 33.97 504.69 1962/63 52.38 50.33 76.84 162.64 69.05 37.41 31.39 15.86 10.14 10.46 51.47 34.80 602.78 1963/64 38.83 41.62 79.94 169.35 174.32 74.98 24.44 12.52 11.18 13.82 48.46 39.49 728.78 1964/65 55.03 32.45 78.62 77.52 157.01 46.86 20.08 12.25 12.48 31.60 55.67 21.64 604.21 1965/66 21.13 55.84 76.43 156.10 171.64 194.57 58.09 38.57 27.B8 30.82 61.42 69.22 961.63 1966/67 36.96 28.94 64.38 163.78 170.80 135.28 168.70 41.58 24.60 24.93 65.74 60.64 986.33 1967/68 59.11 45.61 50.88 145.93 99.49 62.99 74.10 41.60 31.50 38.40 51.10 40.80 741.51 1968/69 50.85 48.85 37.80 89.94 77.48 53.76 63.32 63.32 37.70 34.20 53.96 43.66 654.14 1969/70 27.10 51.10 28.00 133.00 138.00 108.00 48.00 35.00 19.00 16.00 50.00 49.00 692.20 1970/71 45.00 50.00 63.00 108.00 137.00 117.00 87.00 51.00 74.00 39.00 39.00 44.00 854.00 1971/72 57.00 43.00 39.00 82.00 72.00 96.00 91.00 33.00 11.00 56.00 34.00 36.00 610.00 1972/73 28.00 21.00 66.00 112.00 183.00 146.00 143.00 63.00 17.00 56.00 75.00 61.00 971.00 1973/74 53.00 96.00 20.00 103.00 90.00 186.00 63.10 47.00 31.00 38.00 52.00 26.00 815.10 1974/75 46.00 23.00 66.00 64.00 74.00 73.00 61.00 31.00 37.00 26.00 56.00 28.00 592.00

Source: DID. MALAYSIA

MUDA II IRRIGATION PROJECT

Field Water Requirement U, for Padi (Inches per Day) (Based on S.H. Thavaraj and R.L. Stewart, "Evaporation Rates in the Muda Irrigation Project)

Mean Schedule No. 1 I Schedule No. 2 I Schedule No. 3 I Schedule No. 4 daily pan KC= Field I KC= Field I KC= Field I KC= Field Month evaporation Days Et/Ep loss, P U I Days Et/Ep loss, P U I Days Et/Ep loss, P U I Days Et/Ep (In/day) loss, P U (In/day) I (In/day) I (In/day) I (In/day)

Feb. 0.30 15 0.7 0.05 0.87 1 15 0.0 - - I 28 0.0 - - I 20 0.0 - - 13 0.7 0.05 0.26 1 13 0.7 0.05 0.87 1

31 0.7 0.05 0.25 1 2 0.7 0.05 0.87 1 2 0.0 - - I 17 0.0 - - Mar. 0.29 1 29 0.7 0.05 0.25 1 15 0.7 0.05 0.86 1 14 0.7 0.05 0.86 I 1 14 0.7 0.05 0.25 1 Apr. 0.26 12 0.7 0.05 0.23 1 27 0.7 0.05 0.23 1 30 0.7 0.05 0.23 I 1 0.7 0.05 0.86 18 1.0 0.05 0.31 1 3 1.0 0.05 0.31 1 I 29 0.7 0.05 0.23 May 0.22 2 1.0 0.05 0.27 i 17 1.0 0.05 0.27 1 12 0.7 0.05 0.20 1 27 0.7 0.05 0.20 29 1.3 0.05 '* 0.34 1 14 1.3 0.05 0.34 1 19 1.0 0.05 0.27 1 4 1.0 0.05 0.27 Jun. 0.18 23 1.3 0.05 0.28 1 30 1.3 0.05 0.28 1 1 1.0 0.05 0.23 1 16 1.0 0.05 0.23 7 0.0 - - I 1 29 1.3 0.05 0.28 1 14 1.3 0.05 0.28 Jul. 0.21 31 0.0 - - 1 8 1.3 0.05 0.32 1 23 1.3 0.05 0.32 I 31 1.3 0.05 0.32 1 23 0.0 - - I 8 0.0 - - I 2 0.0 - - 1 17 0.0 - - I 31 0.0 - - I 7 1.3 0.05 0.34 Aug. 0.22 7 0.7 0.05 1.04 1 7 0.7 0.05 1.04 1 24 0.0 - - 22 0.7 0.05 0.20 1 7 0.7 0.05 0.20 1

30 0.7 0.05 0.19 30 0.7 1 0.05 0.19 I 1 0.0 - - 1 16 0.0 - - Sept. 0.20 1 1 7 0.7 0.05 1.03 1 7 0.7 0.05 1.03 I 1 22 0.7 0.05 0.19 1 7 0.7 0.05 0.19 4 0.7 0.05 0.18 1 19 0.7 0.05 0.18 1 31 0.7 0.05 0.18 1 31 0.7 0.05 0.18 Oct. 0.19 20 1.0 0.05 0.24 1 12 1.0 0.05 0.24 1 1 7 1.3 0.05 0.30 1 1 1 30 1.3 0.05 0.28 1 8 1.0 0.05 0.22 1 3 0.7 0.05 0.17 1 18 0.7 .0.05 0.17 Nov. 0.17 1 22 1.3 0.05 0.28 1 20 1.0 0.05 0.22 1 12 1.0 0.05 0.22 I 1 7 1.3 0.05 0.27 1 Dec. 0.19 10 1.3 0.05 0.30 25 1 1.3 0.05 0.30 1 31 1.3 0.05 0.30 1 8 1.0 0.05 0.24 w 21 0.0 - - 1 6 0.0 - - I 1 23 1.3 0.05 0.30

Jan. 0.27 31 0.0 - I - 31 0.0 - - I 9 1.3 0.05 0.40 1 24 1.3 0.05 0.40 I 22 0.0 - - I 7 0.0 - -

Source: DID. ANNEX 1 -53- Table 4

MALAYSIA

MUDA II IRRIGATION PROJECT

Simulated Annual Demand and Supply of Water and Acreage Cropped in Muda Padi Area

Operating limit: 600,000 ac ft Rainfall stn: 6204039 (Kepala Batas)

Reservoir Net reservoir releases Total Performance storage at the Total and annual with project beginning of Total area irrigated annual Effective Useful reservoir reservoir (% of dry season Year Ist crop 1st crop 2nd crop demand rainfall streamflow losses inflow demand satisfied) (Ac. ft.) ------(Acres) ------(Ac. ft.) ------

1954 1,000,000 237,000 237,000 1,934,695 815,587 316,499 802,609 658,240 100% 1955 855,631 237,000 237,000 1,992,634 735,943 454,869 801,822 847,530 100% 1956 901,399 237,000 237,000 2,018,108 849,228 494,217 674,663 881,480 100% 1957 1,000,000 237,000 237,000 2,033,304 856,878 342,897 833,529 682,130 100% 1958 848,601 237,000 237,000 1,997,031 744,651 233,876 1,018,504 579,800 100% 1959 409,897 142,200 237,000 1,562,261 670,803 351,913 539,545 717,079 60% for 1st crop 1960 587,431 213,300 237,000 1,878,729 910,651 333,199 634,879 739,909 90% for lst crop 1961 692,461 237,000 237,000 1,964,696 972,976 211,271 780,449 508,470 100% 1962 420,482 165,900 237,000 1,564,695 608,693 274,292 681,710 663,270 70% for 1st crop 1963 402,042 142,200 237,000 1,468,440 558,698 145,616 764,126 726,210 60% for lst crop 1964 364,126 118,500 237,000 1,454,280 585,683 178,558 690,039 593,840 50% for lat crop 1965 267,927 94,800 237,000 1,250,843 470,374 375,326 405,143 867,440 40% for 1st crop 1966 730,224 237,000 237,000 2,008,403 1,057,361 373,684 577,358 996,749 100% 1967 1,000,000 237,000 237,000 2,035,100 797,220 405,334 832,546 755,600 100% 1968 923,054 237,000 237,000 2,037,234 901,601 395,307 740,326 625,100 100% 1969 807,828 237,000 237,000 1,981,486 856,122 377,786 747,578 766,040 100% 1970 826,290 237,000 237,000 1,994,074 974,437 330,485 689,152 766,000 100% 1971 903,138 237,000 237,000 2,009,942 979,422 379,955 650,565 687,000 100% 1972 939,573 237,000 237,000 2,084,456 799,551 460,892 824,013 870,000 100% 1973 985,560 237,000 237,000 2,016,087 894,160 473,751 648,176 883,000 100% 1974 1,000,000 237,000 237,000 1,989,066 919,147 370,333 699,586 602,000 100% 1975 902,414 237,000 237,000 2,009,246 892,859 498,371 618,016 761,700 100% 1976 1,000,000 ------100%

Mean 212,223 237,000 1,876,582 811,457 353,365 711,561 735,354 90%

Source: DID. - 54 - ANNEX2 Table 1

MALAYSIA

MUDAII IRRIGATION PROJECT

Cost Estimates for Irrigation Works /a

Quantity Unit Unit cost Cost (M$) (M$'000)

Tertiary Irrigation (a) Earth (laterite) canals 441,000 cu yd 6 2,646 (b) Concrete-lined canals (i) Imported laterite for embankments, paths, and farmroads 1,812,667 cu yd 6 10,876 (ii) Concrete lining 1,543,250 cu ft 8.5 13,118 (c) Pipeline canals (i) Imported laterite for embankments, paths and farmroads 62,667 cu yd 6 376 (ii) Pipe (supply and installation) 14.32 miles 110,500 1,583 (d) Structural canalets 28.64 miles 48,840 1,399 (e) CHO offtakes for tertiary canals 384 nos. 5,500 2,112 (f) Irrigation check crossings 528 nos. 5,000 2,640 (g) Irrigation farm turnouts 4,704 nos. 700 3,293 (h) Irrigation end-controls 423 nos. 2,000 846 (i) Pumphouses 54 nos. 50,000 2,700 (j) Mediun traffic bridges 36 nos. 40,000 1,440 (k) Intermediate control crossings along secondary canals 144 nos. 15,000 2,160 (l) Improvements to existing primary & secondary canals LS 1,000

Tertiary Drains and Farm Roads (a) Tertiary drains (i) Excavation of drain sections 1,275,000 cu yd 1 1,275 (ii) Imported laterite for farm roads 1,125,167 cu yd 6 6,751 (b) Drainage end controls 234 nos. 6,000 1,404 (c) Drainage intermediate controls/ crossings 635 nos. 5,000 3,175 (d) Farm drainage outlets 4,112 nos. 750 3,084

Separate Farm Roads 177,489 cu yd 6 1,065

Irrigation Service Unit Perimeter Bunds 287,667 cu yd 9 2,589

Minor Dispersed Works LS 3,225

Coastal Protection Works 3.7 miles 1,060,000 3,922

Major Drainage Improvements LS 4,000

Miscellaneous Works (a) Southern canal escape LS 300 (b) Intermediate controls/ crossings along primary canals 2 nos. 250,000 500 (c) Tidal control gates LS 500

Total 77,979

/a Financial land acquisition costs are estimated at M$6,918,000 for 2,306 acres (M$3,000/ac). - 55 - ANNEX2 Table 2 Page 1

MALAYSIA

MUDA II IRRIGATION PROJECT

Equipment List /a

Unit Total No. Item Quantity cost cost (M$) (M$'000)

Operation and Maintenance Equipment:

A. Heavy Maintenance Equipment 1. Hydraulic backhoe (long boom) 1 70,000 70 2. Motor grader with 6 ft blades 1 45,000 45 3. Hydraulic excavator (long boom) 1 100,000 100 4. Forklift (3 tons) 1 35,000 35 5. Submersible pump (electric) c/w switch gears 1 26,000 26 6. Mechanized chemical spray equipment (attached to tractors) 2 15,000 30

Subtotal 306

B. Workshop Equipment 1. Vehicle servicing jacks 1 15,000 15 2. Greasing and lubrication equipment 1 3,000 3 3. Optical alignment equipment 1 3,000 3 4. Mobile vehicle jacks 2 2,000 4 5. Tractor P.T.O. dynamometer 1 25,000 25 6. High pressure cleansing equipment 1 5,000 5 7. Special tools set (hydraulic puller, midget spanner, etc.) 1 set 5,000 5 8. Variable speed electric motor c/w switch gear for pumps test bay 1 set 35,000 35 9. Metal spray coating equipment 1 12,000 12 10. Spray painting equipment 1 2,000 2 11. Electric air compressor for spray painting 1 4,000 4 12. Distilled water production equipment 1 1,000 1 13. Lathe m/c 24" 0 x 6 ft length c/w grinder attachment 1 set 20,000 20 14. Vertical drilling machine 1 18,000 18 15. Slotting and shearing machine 1 25,000 25 16. Electrical testing equipment 1 set 5,000 5

Subtotal 182

/a This list is for estimation purposes only and may be changed during project implementation. ANNEX 2 - 56- Table 2 Page 2

Unit Total No. Item Quantity cost cost (M$) (M$'000)

C. Transport (DID) 1. Lorry (5 tons) 1 40,000 40 2. 4-wheel drive vehicle 17 30,000 510 3. Personal carrier 1 30,000 30 4. Staff car 1 35,000 35 5. Motorcycles 10 2,000 20

Subtotal 635

D. Transport (MADA) 1. Low loader (25 tons) 1 150,000 150 2. Lorry (5 tons) 3 40,000 120 3. 4-wheel drive vehicle 12 30,000 360 4. Mini bus (20 passengers) 1 40,000 40 5. Micro bus (12 passengers) 1 30,000 30 6. Personal carrier 1 30,000 30 7. Staff car 1 35,000 35 8. Motorcycles 5 2,000 10

Subtotal 775

Total, operation and maintenance equipment 1,898

Water Control and Management System: 1. VHF base station c/w aerials, etc. 1 10,000 10 2. VHF mobile/stationery equipment 30 3,000 90 3. Telemetry water level/rainfall stations c/w masts, aerials, etc. 5 50,000 250 4. Telemetry rainfall recorder 20 20,000 400 5. Telemetry base station 1 20,000 20 6. Hydrological equipment (e.g. current meters, rainfall gauges and recorders, anemometer, etc.) LS 50 7. Data processing equipment upgrading LS 310 8. Staging stations, etc. LS 130

Total, water control and mangement system 1,260

Agricultural Equipment: (Farm Machinery and Equipment for Trials and Demonstrations) 1. Tractors 4 25,000 100 2. Harvesters 4 60,000 240 3. Power tillers 4 10,000 40 4. Transplanters 4 50,000 200 5. Rotavators 2 7,000 14 6. Ridgers 2 8,000 16 7. Leveler 1 20,000 20 8. Spare parts LS 170

Total, agricultural equipment 800 ANNEX 2 Table 2 Page 3

Unit Total No. Item Quantity cost cost (M$) (M$'000)

Extensionand Office Equipment:

A. Audiovisualand ExtensionEquipment 1. Mobile units 4 30,000 120 2. Slide projectors 5 2,000 10 3. Overheadprojectors 5 2,000 10 4. Film projectors 2 6,000 12 5. Extensionslides and films LS 150 6. Electronicsingle screen presentation unit & screen 1 10,000 10 7. Video tape + TV (coloured)+ Video camera 1 25,000 25 8 Professionaltape recorder 2 5,000 10 9. Graphic artist equipment LS 2 10. Calculators 20 100 2 11. Cameras 6 500 3 12. Motorizedsprayers 27 750 20 13. Cynogas pumps 27 250 7 14. Extensionmodels LS 10,000 10 15. Extensioncharts and wall sheets LS 1,000 1 16. Referencebooks and relevant literature LS 5,000 5 17. Extensionkits and visual aids 80 500 40 18. Miscellaneousequipment and tools LS 263

Subtotal 700

B. Office, Surveying& DraftingEquipment (DID) 1. Miscellaneousoffice equipment (filingcabinets, calculators,typewriters, furniture, etc.) LS 50 2. Overheadprojector, slide projector,cameras LS 5 3. Survey instruments(levels, staffs, prismatic compass,etc.) LS 50 4. Drawing office equipment LS 30 5. Cube testingmachine 1 30,000 30

Subtotal 165

C. Office, Surveying& DraftingEquipment (MADA) 1. Miscellaneousoffice equipment(filing cabinets, calculators,typewriters, furniture, etc.) LS 20 2. Video tape c/w tape recordermonitor 1 9,000 9 3. Overheadprojector, slide projector,cameras LS 2 4. Cutout sectionalengine models, pump modes, gear boxes 1 set 5,000 5 5. Drawing office equipment LS 15

Subtotal 51

Total, extensionand office equipment 916

Studies Drilling rigs and accessories 2 sets 1,100,000 2,200 ANNEXC2 -58- Table 3

MALAYSIA

MUDA II IRRIGATION PROJECT

Cost Estimates for Training

Man-days Cost (M$)

LOCAL TRAINING

Project Orientation Training Farmer Group Training 200 ISA leaders 400 2,000 1,400 ISU leaders 4,200 21,000 15,000 farmers 30,000 60,000

Subtotal 83,000

Field Staff Training 27 AAs 81 405 81 ATs 1,215 6,075 36 IOs 540 2,700 34 IIs 714 3,570

Subtotal 12,750

Total 95,750

OVERSEAS TRAINING

Category No. Man-months Total M$ Rice agronomy 2 6 Soil science 1 3 Crop protection 1 3 Ag. engineering 1 3 Monitoring/evaluation 2 6 Design techniques 3 9 Erosion protection 1 3 Water management 2 6 Agribusiness 2 6 Extension methods 2 6 Electronic data processing 1 3

Subtotal 18 54 138,000

Short Duration Study Tours No. Man-days Farm group leaders 37 370 Agricultural field staff 20 200 Irrigation field staff 30 300 Monitoring and evaluation staff 2 20 Management 3 30

Subtotal 92 920 230,000

Total 368,000 - 59 - ANNEX 2 Table 4 Page 1

MALAYSIA

MUDA II IRRIGATIONPROJECT

Staff Requirements/a

Total Requirements Current 1979 1980 1981 1982 1983

A. Project Implementation

I. DID Project Director's staff (to plan, design, tender and superviseconstruction)

1. Project director 1 1 1 1 1 1 2. Deputy project director 1 1 1 1 1 1 3. Senior engineer 3 3 3 3 3 3 4. Engineer 20 14 23 23 23 23 5. Qiantity surveyor 0 1 1 1 1 1 6. Senior technical asst. 0 4 6 4 4 4 7. Technicalasst. 0 7 15 18 18 18 8. Senior technician 0 10 21 21 21 21 9. Technician 40 33 63 66 66 66 10. Senior draftsman 0 2 3 2 2 2 11. Dkaftsman/Jr.technician 8 6 9 6 6 6 12. EKecutiveofficer 0 1 1 1 1 1 13. Senior clerk 0 0 3 3 3 3 14. Clerk 4 7 8 10 10 10 15. Stenographer 0 0 1 1 1 1 16. Storekeeper 0 1 3 3 3 3 17. Typist 4 5 9 10 10 10 18. Telephoneoperator 0 1 1 1 1 1 19. Office boy 0 8 9 9 9 9 20. Storeman 0 2 2 2 2 2 21. Driver 6 4 17 17 17 17 22. Watchman 0 6 6 6 6 6 23. Laborer 46 62 108 128 128 128

/a This list is for estimation purposes only and may be changed during project implementation. -60-

ANNEX 2 Table 4 Page 2

Total Current Incremental requirement (1979 onwards)

II. MADA DLvision of Engineering District Office 1. Senior engineer 4 0 4 2. Technician 12 0 12 3. Survey laborer 16 0 16

Planning Section 4. Senior engineer 1 0 1 5. Engineer 2 0 2 6. Technical assistant 1 0 1 7. Senior technician 0 1 1 8. Technician 4 0 4 9. Junior technician 4 0 4

Construction Section 10. Senior engineer 1 0 1 11. Technical assistant 0 2 2 12. Technician 0 4 4 13. Clerk 0 3 3

Workshop Section 14. Mechanical engineer 0 1 1 15. Mechanical technician 0 1 1 16. Leading hand 0 1 1 17. Tradesman 0 1 1

III. MADAAdministration & Finance Section 1. Administrative officer 0 1 1 2. Financial officer 0 1 1 3. Executive officer 0 1 1 4. Assistant librarian 0 1 1 5. Clerk 0 4 4 6. Junior clerk 0 2 2

IV. MADAPlanning & Evaluation Section 1. Agricultural economist 1 1 2 2. Field supervisor 0 1 1 3. Field assistant 0 9 9 4. Clerk 0 2 2 5. Typist 0 1 1 - 61 - ANNEX 2 Table 4 Page 3

Total Current Incremental requirement

V. Kedah State Department of Lands & Mines 1. Acquisition officer 0 2 2 2. Settlenent officer 0 4 4 3. Clerk 0 6 6 4. Typist 0 2 2 5. Notice server 0 4 4 6. Laborer 0 4 4

B. Operation and Maintenance (MADA Division of Engineering) 1. Head, Ehgineering Division 1 0 1 2. Deputy Head, Ehgineering Division 1 0 1 3. Senior engineer 2 0 2 4. Engineer 8 0 8 5. Senior mechanical engineer 1 0 1 6. Mechanical engineer 1 0 1 7. Senior mechanical technical assistant 1 0 1 8. Mechanical technical assistant 1 0 1 9. Technical assistant 4 0 4 10. Executive officer 1 0 1 11. Programmer 2 0 2 12. Chief irrigation inspector 2 0 2 13. Senior irrigation inspector 5 0 5 14. Senior technician 6 0 6 15. Senior clerk 3 0 3 16. Senior storekeeper 1 0 1 17. Irrigation inspector 27 0 27 18. Technician 41 0 41 19. Clerk 18 0 18 20. Storekeeper 6 0 6 21. Stenographer 1 0 1 22. Computer console operator 1 0 1 23. Senior irrigation overseer 15 0 15 24. Irrigation overseer 89 0 89 25. Junior technician 15 0 15 26. Junior clerk 2 0 2 27. Punch card operator 4 0 4 28. Teleprinter typist 5 0 5 29. Typist 8 0 8 30. Telephone operator 1 0 1 31. Radio telephone operator 1 0 1 32. Office boy 8 0 8 33. IMG group (including punp operators, line operators, etc.) 840 /a /a

/a Incremental requirements will depend on project implementation progress, operational requirements and PSD approval. ANNEX 2 Table 4 Page 4

Total Current Incremental requirement

C. Training 1. Senior agricultureofficer 0 1 1 2. Agriculture officer 1 0 1 3. Assistant agriculturalofficer 0 1 1 4. Agriculturalassistant 3 0 3 5. Senior irrigation inspector 0 1 1 6. Senior agriculturaltechnician 1 0 1 7. Agriculturaltechnician 6 0 6

D. AgriculturalServices (MADA Division of Agriculture) 1. Head, AgricultureDivision 1 0 1 2. Deputy head, AgricultureDivision 1 0 1 3. Senior agriculturalofficer 0 1 1 4. Agriculturalofficer 5 8 13 5. Agriculturalengineer 1 0 1 6. Assistant agriculturalofficer 6 0 6 7. Agriculturalassistant 35 19 54 8. Examiner of accounts 4 2 6 9. Senior agriculturaltechnician 7 30 37 10. Agriculture technician 160 84 244 11. Executive officer 0 1 1 12. Senior clerk 1 0 1 13. Stenographer 1 0 1 14. Clerk 10 4 14 15. Storekeeper 2 1 3 16. Typist 2 4 6 17. Junior clerk 0 1 1 18. Chargeman 1 0 1 19. Mechanic 5 2 7 20. Apprentice 1 2 3 21. Plant operator 1 1 2 22. Office boy 6 0 6 23. Lorry driver 4 1 5 24. Land rover driver 3 1 4 25. Laborer 17 3 20

E. Pilot Projects and Development Studies 1. Engineer 0 1 1 2. Irrigation agronomist 0 1 1 3. Agriculturalofficer 0 1 1 4. Agriculturalassistant 0 1 1 5. Technicians 0 2 2 6. Senior agriculturaltechnician 0 1 1 7. Agriculturaltechnician 0 1 1 8. Senior irrigation inspector 0 1 1 9. Senior irrigation overseer 0 2 2 ANNEX 2 - 63- Table 5

MALAYSIA

MUDA II IRRIGATION PROJECT

Incremental Agricultural and Administrative Staff Operating Costs

No. 1979 1980 1981 1982 1983 Total -- ~~~~~~~~~~~~------(M$'000) ------

A. Agricultural Staff SAO 1 1 28 29 29 29 29 144 SAO 2 1 0 22 23 24 25 94 AO 8 27 42 78 86 107 340 AAO 1 17 18 18 19 19 91 AA 19 41 85 130 154 174 584 Examiner of accounts 2 15 16 17 18 19 85 EO 1 0 6 6 7 7 26 Senior AT 30 46 164 287 298 310 1,105 AT 84 50 117 188 262 324 941 Clerk 4 7 15 23 32 38 115 Storekeeper 1 4 4 4 4 5 21 Typist 4 0 11 12 13 13 49 Junior clerk 1 3 3 3 3 4 16 Mechanic 2 4 8 8 8 9 37 Apprentice 2 3 5 5 6 6 25 Plant operator 1 0 3 3 3 3 12 Lorry driver 1 0 3 3 3 3 12 Land rover driver 1 3 2 3 3 3 14 Laborer 8 5 9 15 20 20 69

Subtotal 172 253 562 855 992 1,118 3,780

B. Administrative and Finance Section Administrative officer 1 9 10 10 12 13 54 Financial officer 1 9 10 10 12 13 54 Executive officer 1 8 8 9 9 10 44 Assistant librarian 1 4 4 4 4 5 21 Clerk 4 14 15 17 18 19 83 Junior clerk 2 6 6 6 7 7 32

Subtotal 10 50 53 56 62 67 288

C. Information Services Section Agricultural technician 2 7 8 8 9 10 42 Draftsman 1 4 4 4 4 5 21 Driver/mobile unit operator 1 5 5 5 5 5 25 Laborer 1 2 2 3 3 3 13

Subtotal 5 18 19 20 21 23 101

D. Kedah State Department of Lands and Mines Acquisition officer 2 18 19 21 24 25 107 Settlement officer 4 14 15 17 18 19 83 Clerk 6 21 23 24 27 28 123 Typist 2 6 6 6 7 7 32 Notice server 4 11 11 12 13 13 60 Laborer 4 9 10 10 10 11 50

Subtotal 22 79 84 90 99 103 455

Total 209 400 718 1,021 1,174 1,311 4,624 - 64 -

ANNEX 2 Table 6

MALAYSIA

MUDA II IRRIGATION PROJECT

Expected Price Increase (US$ million)

Total 1979 1980 1981 1982 1983

Civil works and services 53.7 4.6 9.4 16.9 14.7 8.1 Equipment and vehicles 3.5 - 1.1 1.2 0.6 0.6

Total (incl. physical contingencies) 57.2 4.6 10.5 18.1 15.3 8.7

Expected price increases Civil works and services 11.2 0.2 1.0 3.1 4.0 2.9 Equipment and vehicles 0.6 - 0.1 0.2 0.1 0.2

Total 11.8 0.2 1.1 3.3 4.1 3.1

Total project cost 69.0 4.8 11.6 21.4 19.4 11.8

Annual inflation rates (%)

Civil works and services 7.0 7.0 7.0 7.0 7.0 Equipment and vehicles 6.0 6.0 6.0 6.0 6.0 - 65 - ANNEX 2 Table 7

MALAYSIA

MUDA II IRRIGATIONPROJECT

Estimated Schedule of Expenditures (US$ million)

Total 1979/a 1980 1981 1982 1983

Civil Works On-farm irrigationblock development 31.2 2.6 4.7 10.4 9.1 4.4 General irrigationsystem improvement 4.2 0.4 0.6 1.2 1.2 0.8

Subtotal 35.4 3.0 5.3 11.6 10.3 5.2

Buildings 4.9 0.1 1.0 1.2 1.4 1.2 Equipment 3.0 0.2 0.9 0.9 0.5 0.5 Land acquisition 3.1 0.7 1.0 0.9 0.5 - Engineeringand supervision 2.6 0.2 0.4 0.8 0.7 0.5 Pilot projects and studies 2.0 - 0.7 0.9 0.2 0.2 Technical services,training, 1.0 - 0.2 0.2 0.3 0.3 monitoringand evaluation

Base cost estimate 52.0 4.2 9.5 16.5 13.9 7.9

Physical contingencies 5.2 0.4 1.0 1.6 1.4 0.8 Expected price increases 11.8 0.2 1.1 3.3 4.1 3.1

Total project costs 69.0 4.8 11.6 21.4 19.4 11.8

/a Includes expendituressince April 1, 1978. - 66 -

ANNEX2 Table 8

MALAYSIA

MUDAII IRRIGATION PROJECT

Estimated Schedule of Disbursements

IBRD fiscal year Accumulated disbursement and semester US$ million equivalent

FY80 2nd 1.5

FY81 1st 3.5 2nd 6.0

FY82 1st 9.2 2nd 13.2

FY83 1st 17.4 2nd 21.8

FY84 1st 26.4 2nd 29.8

FY85 Is t 31.0 - 67- ANNEX 2 Table 9

MALAYSIA

MUDA II IRRIGATION PROJECT

Proposed Allocation of the Proceeds of the Loan

Estimated Estimated F.E. Proposed Category total cost component allocation Disbursement ------(US$ million) ------()

1. Civil Works Irrigation, drainage, and roads 35.4 17.6 Buildings and facilities 4.9 1.5 Pilot projects and studies 0.7 0.3

Subtotal 41.0 19.4

Price contingencies (part) 8.0 3.7

Subtotal 49.0 23.1 24.5 50%

2. Equipment and Vehicles 3.0 2.8 100% of foreign Price contingencies (part) 0.2 0.2 expenditures, 100% of local expenditures Subtotal 3.2 3.0 3.0 ex-factory, or 80% of locally procured items

3. Consultants 100% Engineers, surveyors and architects 0.6 0.1 Studies 1.3 1.0

Subtotal 1.9 1.1 1.3

4. Overseas Fellowships & 100% of foreign Training 0.2 0.2 0.2 expenditures

5. Unallocated Engineering & 2.6 0.1 supervision /a Land acquisition /a 3.1 0.0 Monitoring & evaluation /a 0.2 0.0 Physical contingencies 5.2 2.2 Remaining price contingencies 3.6 1.3

Subtotal 14.7 3.6 2.0

Total 69.0 31.0 31.0 (45%)

/a No disbursement would be made against these items. -68- ANNEX 3 Table 1

MALAYSIA

MUDA II IRRIGATION PROJECT

Crop Production Costs: Physical Inputs and Financial Prices

Future Future Present without with project project

Labor Inputs (man-days/ha) Land preparation 13.3 13.3 14.6 Transplanting 17.3 17.3 17.9 Crop maintenance 9.5 9.5 10.7 Transport 8.6 8.6 6.8 Harvest 19.9 15.3 12.2

Total labor inputs 68.6 64.0 62.2

Agricultural Inputs (Kg/ha) Ammonium phosphate 12 12 15 Compound (NPK) 110 110 120 Urea 125 125 200 Insecticide I /a 6 5 5 Insecticide II /b 2 5 15 Seed 35 35 35

Contract Inputs (M$/ha) /d Plowing 121 121 121 Harvest /c 63 90 108

Prices (M$/kg) Ammonium phosphate 0.88 Compound (NPK) 0.38 Urea 0.43 Insecticide I 1.20 Insecticide II 1.40 Seed 0.50

Contract Rates (M$/ha) /d Plowing (twice) 121 Harvest (combine) 180

Wages /d M$ 7/day

/a Granular non-systemic. /b Granular systemic. /c Combine harvest assumed as 35% at present, 50% in the future without project and 60% in the future with project. /d Present and future prices assumed to be equal. MALAYSIA

MUDA II IRRIGATION PROJECT

Crop Production Costs Per Hectare (M$/ha)

0.2 ha Farm 0.8 ha Farm 1.4 ha Farm 2.5 ha Farm 4.5 ha Farm Financial/a Economic/b Financial Economic Financial Economic Financial Economic Financial Economic

P /c 192 389 192 389 269 389 288 385 336 382 Labor inputs/d FW 160 363 160 363 237 363 256 359 305 357 FW 147 352 147 352 224 352 244 350 293 347

p 135 119 135 119 135 119 135 119 135 119 Agricultural FW 139 120 139 120 139 120 139 120 .139 120 inputs FW 189 163 189 163 189 163 189 163 189 163

P 184 132 184 132 184 132 184 132 184 132 Contract FW 211 152 211 152 211 152 211 152 211 152 inputs FW 229 165 229 165 229 165 229 165 229 165

P 511 640 511 640 588 640 607 636 655 633 Total FW 510 635 510 635 587 635 606 631 655 629 FW 565 680 565 680 642 680 662 678 711 675

/a Financial prices are based on Annex 3, Table 1, and include hired labor only.

/b Economic prices.were derived by applying specific conversion factors from Annex 4, Table 5.

/c P = Present; FW = Future without project; FW = Future with project

/d Hired labor in each farm size group as a propo+tion of total labor required is assumed as .4, .4, .56, .60, and .70, respectively at present, based on References B3 and B4. It is further assumed that any reduction in the labor requirement in the future with and without the project would be accompanied by equal reduction in hired labor.

-31(DZ z - 70 -

ANNEX 3 Table 3

MALAYSIA

MUDA II IRRIGATION PROJECT

Crop Production Cost Per Farm /a

Future Future Present Without Project With Project Farm size Financial Economic Financial Economic Financial Economic ------(M$) ------

0.2 ha 179 224 179 222 218 262

0.8 ha 715 896 714 889 872 1,050

1.4 ha 1,441 1,568 1,438 1,553 1,735 1,837

2.5 ha 2,656 2,783 2,651 2,761 3,194 3,271

4.5 ha 5,158 4,985 5,158 4,953 6,175 5,862

/a Based on Annex 3, Table 2. Cropping intensity assumed as 175% at present and in the future without project and 193% in the future with project for all farm sizes. - 71 - ANNEX 3 Table 4

MALAYSIA

MUDA II IRRIGATION PROJECT

Annual Farm Budgets - Present

Farm size 0.2 ha 0.8 ha 1.4 ha 2.5 ha 4.5 ha Season /a MS DS MS DS MS DS MS DS MS DS

Cropping intensity (Z) 100 75 100 75 100 75 100 75 100 75

Yield (ton/ha) 3.3 3.5 3.3 3.5 3.3 3.5 3.3 3.5 3.3 3.5

Production (kg/year) 1,185 4,740 8,295 14,813 26,663

Domestic consumption (kg/year)/b 895 895 895 895 895

Annual Farm Sales (kg) 290 3,845 7,400 13,918 25,768

------(M$) ------Cash Inflows Padi sales /c 133 1,769 3,404 6,402 11,853 Hired labor income 269 323 231 - - Nonagriculturalincome 526 560 593 632 548

Total cash inflow 928 2,652 4,228 7,034 12,401

Cash Outflows Annual crop production costs (Annex 3, Table 3) 179 715 1,441 2,656 5,158

Annual Taxes and Water Charges /d Irrigation rate 7 30 52 93 167 Quit rent 1 4 7 12 22 Zakat - 115 292 618 1,210 Education rate - - - 9 17

Subtotal 8 149 351 732 1,416

Total cash outflow 187 864 1,792 3,388 6,574

Net Farm Cash Flow 741 1,788 2,436 3,646 5,827

Total home produce 85 100 156 94 200

Value of domestic padi 412 412 514 412 412

Net family income 1,238 2,300 3,106 4,152 6,439

/a MS = main season; DS = dry season.

/b From farm surveys.

/c Farmgate price of M$460/ton (1979).

/d Irrigation rate, M$15/acre; quit rent, M$2/acre; Zakat, 10% of gross production of padi net of 1,224 kg/family/crop; education rate, M$1.50/acre for those who hold 5 acres or more. - 72 ANNEX 3 Table 5

MALAYSIA

MUDA II IRRIGATION PROJECT

Annual Farm Budgets - Future without Project

Farm size 0.2 ha 0.8 ha 1.4 ha 2.5 ha 4.5 ha season /a MS DS MS DS MS DS MS DS MS DS

Cropping intensity (%) 100 75 100 75 100 75 100 75 100 75

Yield (ton/ha) 3.3 3.5 3.3 3.5 3.3 3.5 3.3 3.5 3.3 3.5

Production (kg/year) 1,185 4,740 8,295 14,813 26,663

Domestic consumption (kg/year)/b 895 895 895 895 895

Annual farm sales (kg) 290 3,845 7,400 13,918 25,768

------(Ms) ------Cash inflows Padi sales /c 166 2,207 4,248 7,989 14,791 Hired labor income 269 323 231 - - Nonagriculturalincome 526 560 593 632 548

Total cash inflow 961 3,090 5,072 8,621 15,339

Cash outflows Annual crop production costs (Annex 3, Table 3) 179 714 1,438 2,651 5,158

Annual taxes and water charges /d Irrigation rate 7 30 52 93 167 Quit rent 1 4 7 12 22 Zakat - 125 318 674 1,319 Educationrate - - - 9 17

Subtotal 8 159 377 788 1,525

Total cash outflow 187 873 1,815 3 439- 6,683

Net farm cash flow 774 2,217 3,257 5,182 8,656

Total home produce 85 100 156 94 200

Value of domestic padi 514 514 514 514 514

Net family income 1,373 2,831 3,927 5,790 9,370

/a MS = main season; DS = dry season.

/b From Farm Surveys.

/c Farm-gate price of M$574/ton (1988).

/d Irrigation rate, M$15/acre; quit rent, M$2/acre; Zakat, 10Z of gross production of padi net of 1,224 kg/family/crop; education rate, M$1.50/acre for 4:hosewho hold 5 acres or more. - 73 - ANNEX3 Table 6

MALAYSIA

MUDA II IRRIGATION PROJECT

Annual Farm Budgets - Future with Project

Farm size 0.2 ha 0.8 ha 1.4 ha 2.5 ha 4.5 ha Season /a MS DS MS DS MS DS MS DS MS DS

Cropping intensity (x) 100 93 100 93 100 93 100 93 100 93

Yield (ton/ha) 4.0 4.3 4.0 4.3 4.0 4.3 4.0 4.3 4.0 4.3

Production (kg/year) 1,600 6,400 11,200 20,000 36,000

Domestic consumption (kg/year)/b 895 895 895 895 895

Annual farm sales (kg) 705 5,505 10,305 19,105 35,105

---- __------(M$) ------Cash inflows Padi sales /c 405 3,160 5,915 10,966 20,150 Hired labor income 269 323 231 - - Nonagriculturalincome 526 560 593 632 548

Total cash inflow 1,200 4,0436,739 11,598 20,698

Cash outflows Annual crop production costs /d (Annex 3, Table 3) 218 872 1,735 3,194 6,175

Annual taxes and water charges Irrigation rate 7 30 52 93 167 Quit rent 1 4 9 12 22 Zakat - 198 438 1,000 1,800 Education rate - - - 9 17

Subtotal 8 232 499 1,114 2,006

Total cash outflow 226 1,104 2,234 4,308 8,181

Net farm cash flow 974 2,939 4,505 7,290 12,517

Total home produce 85 100 156 94 200

Value of domestic padi 514 514 514 514 514

Net family income 1,573 3,553 5,175 7,898 13,231

/a MS = main season; DS = dry season.

/b From Farm Surveys.

/c Farm-gate price of M$574/ton (1988).

/d Irrigation rate, M$15/acre; quit rent, M$2/acre; Zakat, 10% of gross production of padi net of 1,224 kg/family/crop;education rate, M$1.50/acre for those who hold 5 acres or more. MALAYSIA

MIDA II IRRIGATION PROJECT

Padi Production Buildup

Main Season Dry Season Benefited Benefited Annual area Average Unbenefited Average Seasonal area Average Unbenefited Average Seasonal pro- Year cropped yield area cropped yield production cropped yield area cropped yield production duction (ha) (tons/ha) (ha) (tons/ha) (tons) (ha) (tons/ha) (ha) (tons/ha) (tons) (tons)

1979 - - 25,230 3.3 83,259 - - 18,900 3.5 66,150 149,409 1980 - - 25,230 3.3 83,259 - - 18,900 3.5 66,150 149,409 1981 - - 25,230 3.3 83,259 570 3.8 18,570 3.5 67,161 150,420 1982 4,050 3.5 21,100 3.3 83,805 8,940 3.8 11,250 3.5 73,347 157,152 1983 15,100 3.5 9,700 3.3 84,860 18,250 3.8 3,450 3.5 81,425 166,285 1984 23,640 3.6 760 3.3 87,612 22,500 3.9 - - 87,750 175,362 1985 24,200 3.7 - - 89,540 22,500 4.0 - - 90,000 179,540 1986 24,200 3.8 - - 91,960 22,500 4.1 - - 92,250 184,210 1987 24,200 3.9 - - 94,380 22,500 4.2 - - 94,500 188,880 1988-2011 24,200 4.0 - - 96,800 22,500 4.3 - - 96,750 193,550

Note: Minor discrepancies with Table 5.2 are due to rounding of average yields.

-1 . ANNEX 4 - 75 Table 2

MALAYSIA

MUDA II IRRIGATION PROJECT

Incremental Padi Production, Values and Costs /a

(1) (2) (3) (4) (5) Incremental Incremental Incremental Incremental Padi gross value production project Year production price of production /c cost /d benefits /e (tons)/b (M$/ton) (M$ million) (M$ million) (M$ million)

1979 - 465 - 1980 - 495 - - 1981 1,011 508 0.51 0.16 0.35 1982 7,843 530 4.15 0.93 3.22 1983 16,987 542 9.15 2.13 7.02 1984 25,953 554 14.37 2.86 11.51 1985 30,131 567 17.08 2.98 14.10 1986 34,801 571 19.87 3.21 16.66 1987 39,471 575 22.70 3.49 19.21 1988 44,141 579 25.56 3.77 21.79 1989 44,141 584 25.78 3.77 22.01 1990-2011 44,141 588 25.95 3.77 22.18

/a In terms of economic prices. /b Derived from Annex 4, Table 1. /c Equals column (1) times column (2). /d Derived from Annex 3, Table 2. /e Equals column (3) minus column (4). - 76 - ANNEX 4 Table 3

MALAYSIA

MUDA II IRRIGATIONPROJECT

Economic Costs and Benefits (M$ million)

Project Costs Incremental Year IncrementalO&M Project Benefits/c & agricultural Capital/a services /b Total

1 (1979) 3.33 .09 3.42 _ 2 (1980) 12.12 .18 12.30 - 3 (1981) 27.17 .26 27.43 .35 4 (1982) 24.88 .34 25.22 3.22 5 (1983) 10.42 .77 11.19 7.02 6 (1984) 0 1.23 1.23 11.51 7 (1985) 0 1.52 1.52 14.10 8 (1986) 0 1.52 1.52 16.66 9 (1987) 0 1.52 1.52 19.21 10 (1988) 0 1.52 1.52 21.79 11 (1989) 0 1.52 1.52 22.01 12-32 (1990-2010) 0 1.52 1.52 22.18 33 (2011) -19.44/d 1.52 -17.92 22.18

Economic Rate of Return = 18%

/a Equals 100% of all cost items listed under "On-Farm Irrigation Block Development"in text Table 3.1, minus financialland acquisitioncosts plus 25% of costs of coastal protectionworks, miscellaneousworks, buildings, and equipment, and 63% of costs of major drainage improvements, includingphysical contingencieson these items. Conversion factor for construction(0.77) has been applied to the domestic componentsof the cost.

/b Equals M$ 54 per completed ha for incrementalO&M plus 25% of incremental staff costs listed in Annex 2, Table 5, plus 20% for operating expenses. Conversion factor for Government and other social services (0.8) has been applied to the domestic components of the cost.

/c The last column of Annex 4, Table 2.

/d Salvage value equals 25% of original cost of all civil works. -77- ANNEX 4 Table 4

MALAYSIA

MUDA 11 IRRIGATION PROJECT

Costs and Benefits of Improvements in Agricultural Services and General Infrastructure /a

Total Economic Amortization per cost/b life ha per year /c (M$ million) (years) (M$)

Annualized Costs Major drainage improvement works 9.8/d 30 10.10 Coastal protection works 3.8 30 3.92 Miscellaneous works 1.3 30 1.34 MADA headquarters building 1.5 30 2.58 Seed stores 1.4 30 1.44 Water control and management system 1.2 10 1.85 Agricultural equipment 0.8 5 1.98 Extension and office equipment 0.7 5 1.73

Subtotal 24.94

Incremental agriculture services 11.38

Total Annualized Costs 36.32

Annualized Benefits Main season: 40 kg/ha x 100% cropping intensity x M$0.494/kg /e 19.76 Dry season: 40 kg/ha x 85% cropping intensity x M$0.494/kg 16.80

Total Annualized Benefits 36.56

/a In terms of economic prices.

/b Includes physical contingencies.

/c All capital costs amortized at 10% discount rate over economic life, divided by 98,000 ha of padi.

/d Major drainage improvement works for the entire Muda area are estimated by MADA to cost M$9.8 million. Only M$3.9 million of these works would be implemented under the present project.

/e From Annex 4, Table 2, an incremental net value of padi production in 1988 of M$494/ton is derived by dividing column 5 by column 1. ANNEX 4 Table 5

MALAYSIA

MUDA II IRRIGATION PROJECT

Values of National Parameters /a

Conversion factor for consumption (0c) 0.2, 0.8, 1.4 ha farm 0.81 2.5 ha farm 0.79 4.5 ha farm 0.76

Conversion factor for Government & other social services 0.80 Conversion factor for construction 0.77 Conversion factor for agricultural inputs 0.86 Conversion factor for contract inputs 0.72 Conversion factor for port handling 0.72 Conversion factor for transportation 0.66

General conversion factor 0.80

Accounting rate of interest (ARI) 0.10 Critical consumption level,/b estimated 1988 M$ 946 Average private per capita consumption, estimated 1988 M$2,380

/a See Reference B6.

/b The maximum income level for a family of five which is exempt from income taxation, converted to a per capita figure. - 79 - ANNEX 4 Table 6

MALAYSIA

MUDA II IRRIGATION PROJECT

Derivation of Distribution Weights (n - 1) /a

Farm size 0.2 ha Farm 0.8 ha farm 1.4 ha farm 2.5 ha farm 4.5 ha farm

C (M$) 2380 2380 2380 2380 2380 C1 (M$) 230 472 571 772 1,209 C2 (M$) 262 592 753 1,053 1,707

AC - C2 - C1 (M$) 32 120 182 281 498 C2 /C 1 1.139 1.254 1.319 1.364 1.412 d - C loge C2 /C1 9.68 4.48 3.62 2.63 1.65 AC

Weight lb 0.01 0.18 0.23 0.40 0.18 Weighted average d <------3.09 -…------_____>

/a For proportional weighting, i.e., an income twice as high receives half the weight.

/b Share of project benefits accruing to each farm size group.

Note: C - Projected national average private consumption per capita in 1988.

C1 - Projected average private consumption per capita for various income groups in 1988 without project.

C2 - Projected average private consumption per capita for various income groups in 1988 with project. MALAYSIA

MUDA II IRRIGATIONPROJECT

Project Benefits at Social Prices (M$ million)

(1) (2) (3) (4) (5) (6) Project Incremental Incremental Distribution Net social cost Incremental year project benefits consumption/a adjustment /b from incremental project benefits Economic Financial AC Oc-d/v consumption/c at social prices /d

(1) 1979 - - - 1.68 (2) 1980 - - - - 1.68 - - (3) 1981 0.35 0.37 0.30 - 1.68 - 0.50 0.85 (4) 1982 3.22 3.20 2.56 - 1.68 - 4.31 7.53 X (5) 1983 7.02 6.86 5.49 - 1.68 - 9.23 16.25 0 (6) 1984 11.51 11.19 8.94 - 1.68 -15.04 26.55 (7) 1985 14.10 13.74 10.99 - 1.68 -18.49 32.59 (8) 1986 16.66 16.01 12.81 - 1.68 -21.55 38.21 (9) 1987 19.21 18.58 14.86 - 1.68 -24.99 44.20 (10) 1988 21.79 21.18 16.94 - 1.68 -28.49 50.28 (11) 1989 22.01 21.40 17.12 - 1.68 -28.80 50.91 (12- 1990- 22.18 21.57 17.26 - 1.68 -29.00 51.18 33) 2011

/a Equals column (2) times the marginal propensity to consume (0.8). /b e = conversionfactor for consumption,weighted average for five income groups: 0.79 d = weighted average distributionweight: 3.09, derived in Annex 4, Table 6. v = investmentpremium at the average level of consumption: 1.25. /c Equals column (3) times column (4). /d Equals column (1) minus column (5).

o z - 81 -

ANNEX 4 Table 8

MALAYSIA

MUDA II IRRIGATION PROJECT

Direct and Indirect Income Change by Group /a (M$'000) /b

H1 H2 H3 H4 H5 Total

Direct income gains 390 2,817 9,131 170 1,109 13,617

Indirect income gains 54 382 956 702 7,721 9,815

Total 444 3,199 10,087 872 8.830 23,432

/a H1 = Landless paddy w,rkers, 1,300 households with less than 0.3 ha/farm. H2 = Labor abundant paddy farms, 5,100 households with less than 1.0 ha/farm. H3 = Land abundant paddy farms, 9,600 households. H4 = Other agricultural households, 25,300 households. H5 = Nonfarm households, 44,000 households. The groups Hi, H2, and H3 correspond to the five farm households in the farm budget analysis.

/b In terms of 1979 constant prices at the 1972 terms of trade. - 82 -

ANNEX 4 Table 9

MALAYSIA

MUDA II IRRIGATION PROJECT

Economic Sensitivity Analysis

Appraisal Crossover % Variable value value /a change

Incremental yields at full development Main season 700 kg/ha 350 kg/ha -50 Dry season 800 kg/ha 400 kg/ha -50

Incremental cropping intensity (dry season) 18% 0% -100

World market price of rice (5% brokens, f.o.b. Bangkok, 1990) US$453/ton US$294/ton -35

Construction costs US$35.4 m. US$71.0 m. 100

Development period: 9 years 14 years 55

General conversion factor 0.8 1.5 88

/a Value of variable tested for which the net present value (discounted at 10%) is zero. MALAYSIA

MUDA II IRRIGATION PROJECT

Rent and Cost Recovery Analysis /a (M $)

Gross value Value of Farm cash Family Management Project Zakat Rent Annualized Gost Farm model of production - purchased = income - labor - & risk/b = rent payments recovery/c project cost/d recovery/e inputs (%) (Z) (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

0.2 ha 242 11 231 0 46 185 0 0 84 0 0.8 ha 956 44 912 0 182 730 74 10 335 22 1.4 ha 2,277 76 2,201 0 440 1,761 122 7 587 20 2.5 ha 3,024 138 2,886 0 577 2,309 333 14 1,048 32 a 4.5 ha 5,443 252 5,191 0 1,038 4,153 481 12 1,886 26

/a All figures are incremental at full development in 1988.

/b Calculated at 20% of incremental farm cash income.

/c Equals column 7 divided by column 6. It is assumed that farm incomes, project rent, and Zakat payments build up to full development levels with proportional time streams. Consequently, discounting the flows will not affect the rent recovery ratios.

/d The average total investment cost (in constant 1979 values) is M$ 3,784/ha or M$ 365/ha p.a. amortized over 30 years at a discount rate of 10%.

/e Equals column 7 divided by column 9.

I_J: ANNEX 4 Table 11

MALAYSIA

MUDA II IRRIGATION PROJECT

Padi Production Buildup for Muda I /a

Planted Average Paddy Year area yield production (ha) (ton/ha) (tons)

1966 89,280 3.18 283,520 1967 91,240 3.23 295,120 1968 91,630 3.33 305,410 1969 91,630 3.26 299,020 1970 127,890 3.06 391,800 1971 143,000 3.26 465,530 1972 165,200 3.27 540,060 1973 184,200 3.33 613,050 1974-2000 181,300/b 3.39/c 614,607

/a Based on the Muda I completion report (Reference B10), the actual figures are reported up to 1973.

/b 98,000 ha x 185%.

/c 3.3 ton/ha for the main season; 3.5 ton/ha for the dry season. - 85 - ANNEX 4 Table 12

MALAYSIA

MUDA II IRRIGATION PROJECT

Incremental Padi Production, Values and Costs for Muda I /a

(1) (2) (3) (4) (5) Incremental Incremental Incremental Year Incremental Padi gross value production project production price/b of production cost benefits (tons) (M$/ton) ------(M$ million) ------

1966 1967 - - - - - 1968 8,860 791 7.01 1.68 5.33 1969 2,320 726 1.68 4.04 -2.36 1970 90,810 503 45.68 33.57 12.11 1971 163,890 416 68.18 43.25 24.93 1972 234,940 429 100.79 60.63 40.16 1973 305,840 848 259.31 70.32 188.99 1974 308,155 1,049 323.21 74.17 249.04 1975 311,644 609 189.73 74.74 114.99 1976 313,018 428 133.95 74.95 59.00 1977 316,179 406 128.35 75.15 53.20 1978 319,625 436 139.33 75.28 64.05 1979 322,680 465 150.03 75.73 74.30 1980 331,220 495 163.93 78.67 85.26 1981 331,220 508 168.24 78.67 89.59 1982 331,220 530 175.53 78.67 96.86 1983 331,220 542 179.50 78.67 100.83 1984 331,220 554 183.47 78.67 104.80 1985 331,220 567 187.78 78.68 109.10 1986 331,220 571 189.11 78.57 110.54 1987 331,220 575 190.43 78.57 111.86 1988 331,220 579 191.75 78.57 113.18 1989 331,220 584 193.41 78.57 114.84 1990-2000 331,220 588 194.73 78.57 116.16

/a The same set of conversion factors as for MUDA II (Annex 4, Table 5) have been applied.

/b Actual and projected economic price of padi. 00 ANNEX 4 Table 13

MALAYSIA

MUDA II IRRIGATIONPROJECT

Economic Costs and Benefits of Muda I and II Combined /a (M$ million)

P r o j e c t C o s t s Incremental IncrementalO&M & project benefits Year Capital agriculturalservices Total

1 (1966) 10.13 1.51 11.64 2 (1967) 17.52 0.77 18.29 - 3 (1968) 22.39 0.89 23.28 1.33 4 (1969) 17.95 0.93 18.88 -0.59 5 (1970) 8.41 1.00 9.41 3.03 6 (1971) 5.65 1.16 6.81 6.23 7 (1972) 3.97 2.24 6.21 10.04 8 (1973) 1.53 1.99 3.52 47.25 9 (1974) 0.42 2.27 2.69 62.26 10 (1975) 0.14 2.53 2.67 28.75 11 (1976) 0 2.53 2.53 14.75 12 (1977) 0 2.53 2.53 13.30 13 (1978) 0 2.53 2.53 16.01 14 (1979) 3.33 2.62 5.95 18.57 15 (1980) 12.12 2.71 14.83 21.31 16 (1981) 27.17 2.79 29.96 22.74 17 (1982) 24.88 2.87 27.75 27.43 18 (1983) 10.42 3.30 13.72 32.23 19 (1984) 0 3.76 3.76 37.71 20 (1985) 0 4.05 4.05 41.38 21 (1986) 0 4.05 4.05 44-30 22 (1987) 0 4.05 4.05 47.18 23 (1988) 0 4.05 4.05 50.09 24 (1989) 0 4.05 4.05 50.72 25 (1990) 0 4.05 4.05 51.22 26- (1991- 0 4.05 4.05 51.19 34 1999) 35 (2000) -28.15 4.05 -24.10 51.19 36- (2001- 0 1.52 1.52 22.18 45 2010) 46 (2011) -19.44 1.52 -17.92 22.18

Economic Rate of Return = 18%

/a All project costs and benefits include 25% of Muda I and the Muda II tertiary development components. - 87 -

ANNEX4 Table 14

MALAYSIA

MUDA II IRRIGATIONPROJECT

SensitivityAnalysis of Social Parameters

Social Rate of Return (%)

v/n 0 0.5 1.0 1.5 2.0

1.25 18/a 24 35/b 51 96

1.50 16 22 31 45 68

2.50 14 19 26 38 56 where n is the elasticity of the marginal utility of consumption. v is the investmentpremium at the average level of consumption.

/a Traditional economic analysis giving equal weight to all benefits, with n = 0 and v = 1/ 8

Ab Moderate emphasis on income distribution(proportional weighting of consumption)and neutral policy on investmentversus consumptionat the average level of consumption. - 88 -

ANNEX 5

MALAYSIA

MUDA II IRRIGATION PROJECT

Schedule of Critical Events

Activity Responsibility Target date

1. General

(a) Submit proposal for pilot projects & development studies MADA 12/79 (b) Prepare draft agricultural services operation manual MADA 12/79 (c) Submit proposal for the crop protection program DOA 12/79 (d) Implement agreed crop protection program DOA 6/80

2. Civil Works

(a) Call tenders for irrigation blocks /a (i) Block 3 (ALBD.7) DID 6/79 (ii) Block 7 (ALBD.8) DID 1/80 (iii) Blocks 8, 9, 11 (CCRBD.1, ALBD.9, ARBD.1) DID 3/80 (iv) Block 10 (LBLBD.7) DID 4/80 (v) Blocks 6, 12, 13, 14 (ALBD.6, LBRBD.3, ACLBD.8b, CCRBD.3e1) DID 6/80

(b) Begin construction of MADA headquarters MADA 9/79

(d) Call tenders for water management control system MADA 6/79

/a Construction to begin three months later. ANNEX6 - 89 - Page 1

MALAYSIA

MUDA II IRRIGATION PROJECT

Procedures for Statement of Expenditure

1. The only component of the Project that would be undertaken through force account is the fabrication and supply of gates and hoists for water control structures. This is estimated to cost about US$0.9 million which is about 1.3% of the total Project cost.

2. The decision to carry out this work through force account is based on the following considerations:

(a) Over the last two decades the Drainage and Irrigation Department (DID) has developed in-house capability to carry out this type of work efficiently and at reasonable cost in its Federal Workshop in Ipoh, which started functioning about 25 years ago.

(b) Gates and hoists would need occasional repairs during operation of the project. These repairs are usually minor and can be carried out more expeditiously and economically through force account as these are not likely to generate enough interest from contractors to have meaningful competitive bidding. Since such in-house capability is in any case required for repairs, it is appropriate to develop the capability for fabrication as well. This practice is followed in many developing countries to great advantage.

3. Bank missions have visited the Workshop and examined the relevant engineering and accounting procedures. The Workshop is appropriately equipped with machinery and facilities to fabricate and supply gates and hoists. It is headed by a Chief Mechanical Engineer with considerable professional experience. He has under him four sections to carry out the functions of the Workshop - an Engineering Section, a Stores Section, a General Administration Section and a Finance Section. The Engineering Section has a staff of 9 engineers, 10 technicians and, on the average, about 160 skilled laborers, 30 semi-skilled laborers and 60 unskilled laborers. The stores section is headed by a Senior Superintendent of Stores who is assisted by 21 storekeepers of different ranks and 4 store laborers. The General Administration Section is headed by an executive officer and has a support staff of five. The Finance Section consists of an executive officer (finance) with a support staff of five. Uq A.j,A.6 -90 - Page 2

4. The Workshop has a Revolving Trust Fund of M$1 million allocated by the Federal Government. In addition, it has an Imprest Account of M$25,000 for day-to-dayrunning expenses. The total value of job orders carried out by the Workshop averages about M$3 million per year.

5. The Workshop prepares an annual program for the fabricationof gates and hoists well in advance after ascertainingthe planned requirements from all the State Directors of DID for different types of gates (aluminum, mild steel or hardwood), their designs and the target dates by which they are required to be delivered. After the annual requirementsof different materials are estimated, these are procured in bulk through open competitive bidding advertisedlocally. Thereafter,the indenting agencies have to place firm orders on the Workshop for specific requirementsthrough Departmental AllocationWarrants confirming inter alia the availabilityof the required funds based on the prices quoted by the Workshop. The fabricationwork is taken up only after the receipt of such orders. A debit is raised by the Workshop against the indentor on the basis of actual cost after completing the job. The indentor verifies the debit in token of acknowledgementand submits it for audit and, after check, forwards copies to the Ministry of Agriculture (MOA) and the Treasury Accountant for adjustment through the Inter-Administration(Federal-State) Accounts.

6. The operations of the Workshop are carried out and regulated on the lines of comparable commercialenterprises. The requisition,issue and pricing of materials and stores are properly organized. Accounts are maintained and audited in accordancewith appropriateprocedures laid down by Government. Accounts Statementsare prepared by the Workshop every quarter and final account is prepared at the end of every year. These Statementsare submitted to the Auditor appointed by the Federal Government in the Treasury of the State of Perak as well as to the Federal MOA. The former carries out a complete audit as the representativeof the Auditor General. This is supplementedby spot audit/verificationby auditors of the MOA who visit the Workshop about three times a year. Surprise checks are also carried out by the auditors of the MOA and the State Treasury.

7. The fabricationof gates and hoists through force account and the withdrawals therefor from the Loan Account on the basis of certificates of expenditurewould be in order. DID would maintain separate accounts for such expenditurewhich would be available for inspectionby supervision missions. Further, DID would retain, until one year after the Closing Date of the Loan, all records (orders, invoices, bills, receipts and other documents) evidencingthis expenditureand would enable the Bank's accredited representativesto examine such records. - 91 -

ANNEX 7 Page 1

MALAYSIA

MUDA II IRRIGATIONPROJECT

Related Documents and Data Available in the Project File

A - General Reports and Studies on the AgricultureSector A 1 - S. Selvadurai,"Agriculture in PeninsularMalaysia," Ministry of Agriculture,April 1977.

B - General Reports and Studies Relating to the Project

B 1 - Muda AgriculturalDevelopment Authority (MADA) "Proposalsfor On-Farm Improvementin the Muda Scheme - The Tanah- Merah Project," Alor Setar, Kedah, December 1975.

B 2 - MADA, "FeasibilityReport on Tertiary IrrigationFacilities for Intensive AgriculturalDevelopment in the Muda Irrigation Scheme,Malaysia," (Two Parts, Three Volumes), Alor Setar, Kedah, January 1977.

B 3 - Goldman, R.H. and L. Squire, "TechnicalChange, Labor Use, and Income Distributionin the Muda IrrigationProject," Harvard Institute for InternationalDevelopment (HIID), January 1978.

B 4 - MADA, "Agro-EconomicStudies in the Muda Region," Alor Setar, Kedah, August 1976.

B 5 - Bell, C. and P. Hazell, "Measuringthe Indirect Effects of an AgriculturalInvestment Project on its SurroundingRegion," World Bank, mimeo, 1978.

B 6 - Veitch, M.D. "National Parameters for Project Appraisal in Malaysia,"Vol. 1. Economic Planning Unit (EPU), Kuala Lumpur, 1976.

B 7 - Squire, L. and H.G. van der Tak, Economic Analysis of Projects, Baltimore:The Johns Hopkins UniversityPress, 1975.

B 8 - Bruce, C. "Social Cost-BenefitAnalysis: A Guide for Country and Project Economists to the Derivationand Applicationof Economic and Social AccountingPrices." World Bank Staff Working Paper No. 239, August 1976.

B 9 - Golan, A., R. Harris and P. Whitford, "The Use of Social Cost-BenefitAnalysis for IrrigationProjects," Tenth Congress on Irrigationand Drainage, Athens, 1978, Question 33, R.30. Inter- national Commissionon Irrigationand Drainage, New Delhi (1978). - 92 -

ANNEX 7 Page 2

B 10 - IBRD. MALAYSIA, Loan 434-MA: Muda Irrigation Project Completion Report, June 15, 1975.

B 11 - IBRD. Appraisal of the Muda River IrrigationProject, Malaysia, October 14, 1965.

B 12 - IBRD. Project PerformanceAudit Report, Malaysia - Muda and Kemubu IrrigationProjects (Loans 434-MA and 800-MA), September 24, 1976. -93- MALAYSIA MUDA 11IRRIGATION PROJECT PROPOSEDPADI CROPPINGCALENDAR

Feb. March April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. I I I I I I I I I I . I m~~~c

N N

CROPPING SCHEDULE I

M M

H ~~~~~~~~H

_C~ ~~~_C

N N

CROPPING SCHEDULE II T T

M M

-H H

_N N

CROPPING SCHEDULE IlIl TT

M M

H H

m~~~~c C

N N

CROPPING SCHEDULE IV T

M M

' H H

Notation 400 C = Cultivation N = Nursery T = Transplanting M =Management 300 H = Harvest

200

Average Rainfall (MM) -Muda

Feb. March April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb.

World Bank - 18927 MALAYSIA MUDA 11IRRIGATION PROJECT Implementation Schedule

1978 980 1979 1981 1982 1983 1978 1979 1980 1981 1982 (983 1978 1979 1990 98 1982 1.983

BLOCK 10 BLOCK 30 BLOCK,080 ha _ =540 h.) (2780h ) r = (580 ha_ BLOCK 16 BLOCK 31 BLOCK 2 (530 h.) W(600 h.)

BLOCKh.)FLOCK 1725332D BLOCK MADA HEADQUARTI3 .RS mlir _ = =B BLOCK 3 3 0_510hT h.) 1930 h.) 8 LOCK 18 BLOCK 33 BLOCK 4 2m(1,380 h.) c___ -(680 h.)

(680 h.) _ C 1111? _ D _ BLOCK 19 BLOCK 8 BLOCK 34 (1,210h-) (550h.h)AO DANG BLOCK(830h.) 1.777 BLOCK20 BLOCK 35 BLOCK 6 (2 . I6 . (820h.) BLOCK 31 BLOCK38 BLOCK7 2 J~~~~~~~h.)1 ~~~~~~~~~~~410 (480 h.) (248h.) -IBLOCK232 B(800ChK)12CJB(LB070CKha26_>EQUIPMEN310=i ha(I(5L0 BLOCKha) 37 BLOCK8 P7n= M ~~~~~~~~~~~~~~~(288h.) (888h.) (1,020h.)o(-1 1 BLOCK 23 MINOR ___ - BLOCK9 r,-,=, ~~~~~~~~~~~~~~~(838h.) WORKS BLOCKh. MAJORDRAINAGE ___ (810GhND BLOCK24 IMPROVEMENT BLOCK10) SLOCKI0 ~ ~~~~~~~~ COASTALPROTECTION____ WORKS~~~~~~~(288)(5.98n,( BLOCK25 DISTRICTOFFICES ______(810) AND BLOCK 11 C=MA0A QUARTERS I HEADQUARTERS (80ho) C-r - 3BLOCK 28 EQUIPMENT BLOCK12 h.) BLOCK12) ~~~~~~~~~~~~~~~~~~~~~~~~~~(970 WORKSHOP& (810IhT) BLOCK 27 EQUIPMENTn (810 h.) WATER MANAGEMENT BLOCK 13 CONTRO_L SYSTEM (1,220h.) BLOCK28 STUDIES BLOCK14 40h)L (798h.) BLOCK 29 (798 h.)

LEOGEND0 C= LandAnqujoljO

Planing andD.,iBn

n S.Pply ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~WoddBank - 28077 MUDA 11IRRIGATION PROJECT MUDA AGRICULTURAL DEVELOPMENT AUTHORITY (MADA) ORGANIZATION CHART

MADA |BOARD

DID OFFICE OF DIRECTOR GENERAL MANAGER GENERAL

Dieeetae Planning ~~Adllinit-ra P blic A, 0 Genenal Ejon Relations lntiornauion

0%......

Division-ofl Division of Prjleet Diwecter Engin wring | Industry Mu.a 11

Water | Planning

System Pilot Projects

Director 9M

Workshopl ~~~~~~~~~~~~~~~Divisiorof Agriculture

JDStaHyOperation 2 | (SeeChart World Bank - 1 920)

SenioEnginenr Resident S-n,oEg Ra.en PI.e

Nort Sousth

Stor-| Dev/elopment I1

~~~~~~~~~I I .11|,|, ,f MADA I MADA MADA MADA RI District I I ititIlDsrc VEnginerEgn-rEgne D t V I Distrit 11 Distict IDititIDsrctI -i W-__ -_-_-_ - - _-n

Control _ Cvordirutiov

Wtrd Bk - 19775 MUDA II IRRIGATION PROJECT MADA -DIVISION OF AGRICULTURE

DOA - Cmp Production ORGANIZATION CHART - Crop Protection -Soils and An.lytiVil MARDI r- - 1 LPN I I e FOA _ ------I SARDEC I- -ioi-ioD A-nic-rC FAMA L

Fidran;Y

Depoectyon Dot tr

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Admin&Sam, Danalopntena Eotrneion Faont Fannilo Cnoo niro~~~ AD ~ AAl FinanceMeohnloation andSaetietioa ad Triig eeomet Posoin Arooy DBnc Doiti ico II 0S B "Ad C_a~

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2AT tAT 1AA Farm Fnmtily - 2 AT Develnastent ' _Daoelopment 1AT IAA 2AT

SAO Senior AgBiOolt,ralOfficer ' AT Sotensio-and 1 AT Credit AG e Ai9lultunDlOttint Will be in htargeof 10 ISA. There- AE A',iroltoal Engin.er will be b60 ISA and thentora AADOAssi-n AgrhultoI Officer BOAT Eension and BOAT C-di. FC FDC FDC FDC FDC FDC AA = ApnioAtor.AlPia-aat2 AT =Agriculturl Tt -niOia3 FDC = Farmer Development Canter 2 A SMS = Sobjact MAttr Speci.liet n Control _2AT E...ttnion Li-e C-drp 2 AT Cradit- ---- Stal Coodi-ito

I AT An-oons_ I AT Org. & Coops. _ AT Atriboainaaa WorldBank - 18920 I BRD13613,R

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