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Technical Assistance to Malaysia for the Daro-Mukah Coastal Zone

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TAR:MAL 26309 ASIAN DEVELOPMENT BANK TECHNICAL ASSISTANCE TO MALAYSIA FOR THE DARO-MUKAH COASTAL ZONE DEVELOPMENT PROJECT December 1995 CURRENCY EQUIVALENTS (as of 30 November 1995) Currency Unit - Ringgit (RM) RM1.00 = $0.40 $1.00 = RM2.50 (i) The ringgit is linked to a weighted basket of currencies of the country's major trading partners. (ii) An exchange rate of RM2.50 to $1.00 has been used in this Report. ABBREVIATIONS DID - Department of Irrigation and Drainage EIA - Environmental Impact Assessment FELCRA - Federal Land Consolidation and Rehabilitation Authority FMP - Framework Master Plan GIS - Geographic Information System GTZ - German Technical Cooperation Agency IADP - Integrated Agricultural Development Project IEE - Initial Environmental Examination NGO - Non Governmental Organization SEIA - Summary Environmental Impact Assessment SPU - State Planning Unit, Sarawak TA - Technical Assistance TOR - Terms of Reference NOTES (i) The fiscal year (FY) of the Government ends on 31 December. (ii) In this Report, °$' refers to US dollars. 116'E 118"E 11 '30'E 6'N - MALAYSIA S01138h MALAYSIA Pro1W Area DARO-MUKAH COASTAL ZONE DEVELOPMENT PROJECT Project Area E::4* •0! 011 110°E 11 8'E SOUTH C H SF,-1. 3000'N 3*.O(rN— BBali Iigin ian Mukah fl Sg. TqWs Selangau .................. A OWN— !'30'N . %8lapang le31YE x^ .................. Provincial Capital SIBU U Town Proposed New Road Existing Road q Framework Master Plan Area lava J, River Kuala Belawai Divisional Boundary ......................... .......... District Boundary Bintangor Sub-district Boundary International Boundary Kuala IKEV (Boundaries not necessarily authoritative) Rajang 11'3(YE 1. INTRODUCTION 1. The Government of Malaysia requested Bank technical assistance (TA) to prepare the Daro-Mukah Coastal Zone Development Project in the State of Sarawak. A Bank TA Fact- finding Mission visited Malaysia in September 1995 and reached an understanding with the Government on the objectives, scope, terms of reference (TOR) and implementation arrangements of the proposed TA. The Mission confirmed that the proposed TA is accorded high priority by the Government and is consistent with the Bank's operational strategy for Malaysia. The TA is included in the 1995 Country Program for Malaysia'. II. BACKGROUND AND RATIONALE 2. The Daro-Mukah area, located along the west coast of Sarawak, is one of the least developed regions of Malaysia. The Project area comprises approximately 625,000 hectares (ha) extending from Daro and the Batang Lebaan in the south to Mukah and Balingian Subdistrict in the north. It extends inland to the Sibu-Bintulu Highway (see Map). It is located in the coastal areas of Sibu Division (Sibu, Dalat, Mukah Districts), with a small area (Daro District) in Sarikei Division. It comprises a narrow (< 1 kilometer (km) wide) sandy coastal strip, extensive peat swamps (70 percent of the area) extending up to 30 km inland, narrow raised levees along both sides of the large rivers that dissect the area, and small areas of rolling land with strongly leached mineral soils adjacent to the Sibu-Bintulu highway. 3. The major economic activities in the area are agriculture (sago, oil palm, pepper, paddy, coconut, and rubber) [60 percent], coastal fishing (25 percent), logging (10 percent), and mills (5 percent) processing sago, palm oil, and timber. Many of the agricultural and fishing activities are for subsistence purposes or sale to small local markets. Indigenous forests comprise about 50 percent of the area. 2 Peat swamp forest is the dominant forest type with small areas of mangrove forests and mixed dipterocarp hill forests on the rolling land. Areas designated as Permanent Forest Estate comprise 332,000 ha, of which 226,000 ha is designated as Protection Forest, 83,000 ha as Forest Reserves, and two areas (TG Bud and Lassa-Matalau) comprising 13,000 ha as Nature Reserves. 4. Current fisheries activities are mainly small-scale prawn, terubok, 3 jellyfish, and crab fishing. Important prawn fisheries lie off the mouth of the Rajang River. Sibu and Mukah are the major fishing centers and contain the main fisheries infrastructure including cold stores, fish/prawn processing and boat-building facilities. The Bank-funded Sabah/Sarawak Fisheries Infrastructure Development Project4 is located at Mukah. 5. The Project area is one of high environmental sensitivity because of the large areas of wetland, swamp forest, shallow coastal water supply areas, fragile peat and sandy coastal soils; risk of salt water incursion; and breeding areas for prawn and terubok fisheries. The TA first appeared in ADB Business Opportunities in May 1995. 1 Sarawak SPLl, Interagency Study Team Lower Rajang-Mukah Integrated Agricultural Development Project Study, 1994. 3 A local species of herring. 4 Loan No. 563-MAL: Sabah/Sarawak Fisheries Infrastructure Project in the amount of $20.6 million, approved in December 1981 and closed in March 1991. 2 Shifting cultivation occurs in about 14 percent of the area, mainly on rolling land near the Sibu- Bintulu Highway. 6. Approximately 60,000 people live in the project area. They are concentrated along the coastal strip and the rivers. Mukah is the largest town with 12,000 people. Ethnic groups comprise the Melanaus (65 percent), Iban (30 percent), and Chinese and Malays (<5 percent). The Melanaus are mainly coastal fishermen and part-time farmers settled in villages along the coast and rivers. The Iban live along the inland parts of the rivers and are mainly subsistence farmers, practicing shifting cultivation. 7. Household income is below the poverty level' in 30-50 percent of the population throughout the area, with hard-core poverty levels of 3-9 percent2. Poverty is highest among the [ban. Out-migration (3.7 percent per year) of young people, particularly males, in search of employment has resulted in a higher female/male ratio, creating a need for development activities to focus on women's employment opportunities. Out-migration also limits the labor supply for plantation or other agro-industry development in the area. 8. High priority has been given to the development of the Daro-Mukah area in the Government's 6th and 7th Malaysia Plans. The state Government's strategy is to develop infrastructure (roads, electrification, water supply, marketing, agricultural and fisheries infrastructure, small-scale port development, drainage, and flood mitigation) to stimulate both public and private sector investment in agricultural, fisheries, and forestry activities. Infrastructure investment scheduled for the 7th Malaysia Plan includes the construction of the remaining sections of the Bintulu-Daro coastal road, bridges, rural electrification, rural water supply, and provision of other public services. 9. A number of agricultural development schemes are ongoing or planned. These include 7,000 ha of drainage schemes under the Department of Irrigation and Drainage (DID) for paddy and cash and tree crop (coconut, cocoa, rubber) production; and 27,000 ha of sago palm plantations on deep peat soils under the Land Custody and Development Authority of Malaysia and oil palm plantations under the Federal Land Consolidation and Rehabilitation Authority and Muka Plantation Industries. A new industrial zone is also being developed at Mukah. The Sarawak Fisheries Development Study3 has identified the continental shelf and river estuarine systems of the Project area as having the potential for further development of prawn, terubok, jellyfish, crab fisheries, and fish processing activities. 10. A private sector firm is currently undertaking a forest development plan that includes the Project area. The German Technical Cooperation Agency (GTZ) is also preparing a Forest Management Plan for Sarawak, including the Project area. The Danish Cooperation on Environment and Development has proposed a major coastal management project that includes Sarawak, but final Federal Government approval is still pending. The official poverty line for Sarawak (1993) is RM495 ($198) per month per household of 5 persons. The hard-core poverty line is RM248 ($99) per month. Universiti Kebangsaan Malaysia "Poverty Study of Selected Areas of Sarawak' December 1994. Ministry of Agriculture, 1994. "Sarawak Fisheries Development Study". 3 11. A number of diverse development projects, both from the public and the private sector, are in various stages of planning and implementation, and they need to be integrated into a cohesive master plan with short-and long-term action programs. The proposed TA is envisaged to undertake such integration and, further, to identify the priority areas for immediate development. 12. The rationale for an investment Project is to raise the level of economic development of East Malaysia toward that achieved in Peninsular Malaysia, and to reduce the pockets of poverty that still remain in East Malaysia. Given the low population density, limited labor supply, environmental sensitivity, and range of ethnic groups, the Project will emphasize rural development planning and the protection of environmentally sensitive areas, followed by provision of infrastructure as leverage to initiate economic development. In line with Government strategies, commercial agricultural development will be left largely to private sector initiatives. 13. The Government's objectives in developing the Project area are to (i) provide basic infrastructure (road and water management structures) to facilitate development of the agricultural sector within the Project area; (ii) diversify the economic
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