TAR:MAL 26309

ASIAN DEVELOPMENT BANK

TECHNICAL ASSISTANCE

TO

MALAYSIA

FOR THE

DARO- 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, 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

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1. The 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 Subdistrict in the north. It extends inland to the Sibu- Highway (see Map). It is located in the coastal areas of (Sibu, Dalat, Mukah Districts), with a small area () in 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 . 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 /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 (<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 .

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 toward that achieved in , 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 base and generate employment opportunities to maximize income and improve the quality of life of the population; (iii) commercialize the existing traditional agriculture subsector to maximize farm productivity; (iv) lower the incidence of rural poverty; (v) manage local resources on a sustainable basis, especially to reduce shifting cultivation practices; and (vi) ensure greater contribution of the Project area to the state economy.

14. These objectives are consistent with the Bank's crosscutting concerns of reducing poverty, improving the status of women, and protecting the environment, and the Bank's strategic objectives of capacity building and human resource development and creating/strengthening productive capacity, infrastructure, and services. Environmental considerations and integrating women in development will be a key part of the Project design.

III. THE TECHNICAL ASSISTANCE

A. Objectives

15. The overall goal of the Project is to carry out environmentally sound economic development, particularly targeting poverty reduction in the Project area. The objectives of the TA are to: (i) formulate a framework master plan (FMP) for the coastal zone of the Daro-Mukah area, for the period 1996-2010; (ii) consolidate and harmonize the existing plans and programs to make them consistent with FMP; (iii) carry out a feasibility study for selected high-priority agriculture, fisheries, forestry and infrastructure subprojects; and (iv) prepare a cohesive project proposal for the design and implementation of subprojects. Details are given in the Project framework (Appendix 1).

16. The objectives of the ensuing investment Project will be to (i) increase the income and employment opportunities of the target beneficiaries, particularly women; and (ii) reduce poverty among small farmers and fishermen. Its expected outputs are the (i) implementation of high-priority agricultural, fisheries, forestry and infrastructure development projects designed in the feasibility study; (ii) strengthening of district planning and project management capacity; and (iii) facilitation of private sector investment in the Government's infrastructure development area. 4

B. Scope

17. The TA will be conducted in two parts. In Phase 1 (6 months) a master plan for the Project area including refined selection criteria for the subprojects will be prepared.' In Phase II (4 months) a feasibility study will be conducted to formulate a project that is acceptable to the Government and suitable for external financing. Phase I will (i) review previous and ongoing studies in the Project area, including the prefeasibility study for the Lower Rajang- Mukah Integrated Agriculture Development Project (IADP) carried out by the Government in 1992; (ii) conduct a rapid rural appraisal and mobilize local communities to participate in and contribute to the planning process; (iii) collect all relevant information on existing and proposed development plans and programs in the Project area; (iv) identify the key opportunities for and constraints to private sector participation in the Project area; (v) formulate a long list of priority agriculture, fisheries, forestry, and infrastructure subprojects and conduct prefeasibility-level analysis on such subprojects; (vi) prepare a draft master plan for the period 1996-2010; (vii) organize a workshop and finalize the plan after consultation and feedback from stakeholders and interested private sector entrepreneurs; and (viii) prepare an interim report with the results of the Master Plan, and recommendations to proceed with Phase 11, if feasible.

18. Based on the findings in Phase I, Phase II will (i) prepare the feasibility studies on selected high-priority agriculture and infrastructure investment components or subprojects, which could form the basis for a cohesive project package; (ii) conduct social and environmental impact assessments of these components or subprojects; (iii) assess the institutional capability of the proposed implementing agencies, and formulate an institutional strengthening program, if required; (iv) identify Project linkages to all complementary programs particularly in the private sector; and (v) prepare a Project proposal containing sufficient information for consideration by the Government and the Bank.

C. Cost Estimates and Financing Plan

19. The total cost of the TA is estimated at $1,200,000 equivalent, comprising $600,000 in foreign exchange cost and $600,000 in local currency equivalent (Appendix 2). It is proposed that the Bank provide a TA grant to cover the entire foreign exchange cost of $600,000. The local cost component for domestic consultants, counterpart services, office facilities, secretarial support, surveys and studies, amounting to $600,000 equivalent, will be borne by the Government, out of which the equivalent of $165,000 covering the cost of the domestic consultants will be executed under a separate contract between the Government and the domestic consultants.

20. Subject to the results of the TA study and based on available information, the estimated Project cost will be up to $100 million with a maximum of 40 percent of foreign exchange. It is currently envisaged that the Project will include agriculture, fisheries, forestry, infrastructure, and capacity-building components, the details of which will be designed during Phase II of the TA. The Government has been informed that approval of the TA does not commit the Bank to financing any ensuing Project.

The indicative selection criteria include minimum disturbance of the environment, maximum impact on poverty reduction and the ethnic groups, availability of labor and satisfactory financial and economic returns. 5

D. Implementation Arrangements

21. The TA will be implemented over a period of 10 months. The Executing Agency for the TA will be the Federal Ministry of Agriculture, while the Sarawak State Planning Unit (SPU), whose performance in implementing similar studies has been satisfactory, will be the implementing agency. A Steering Committee responsible for providing guidance on policy and coordination issues will be formed under the chairmanship of the Federal Economic Planning Unit, and a Technical Committee responsible for the technical aspects will be chaired by SPU. SPU will appoint a senior staff member as counterpart Liaison Officer for the TA. The Government will provide local counterpart liaison staff from relevant departments. At the end of Phase I, the implementing agencies for the proposed loan will be identified and will take a more substantive role in guiding and assisting the feasibility study in Phase Il. The TA will operate out of a Project site at Mukah (to be fully refurbished by the Government) and a suboffice at Daro.

22. An international consulting firm will be engaged in accordance with the Bank's Guidelines on the Use of Consultants and other arrangements satisfactory to the Bank. The international consulting firm, in addition to other duties, will be responsible for the overall supervision of eight domestic consultants to be engaged under a separate contract between the Government and such domestic consultants. It is anticipated that a total of 41 person-months - 22 for five international experts and 19 for eight domestic experts - will be necessary to carry out the TA. The five international consultants will have expertise in the following fields; rural development planning, indigenous people/community development, economics/marketing, agriculture, and environment; while eight domestic consultants in the field of civil engineering, forest management, fisheries, rural sociology, tree crop, environment, livestock, and soil. Appendix 3 gives the detailed TOR for the TA. Appendix 4 gives an indicative staffing schedule. The TA is scheduled to be completed in December 1996.

23. The consultants will prepare an inception report within one and a half months after the TA commencement, an interim report at the end of the sixth month of services, and a draft final report at the end of the tenth month. Tripartite meetings among the Government, the Bank, and the consultants will be held to discuss the inception, interim, and draft final reports. The final report will be submitted within one month of the final tripartite meeting.

IV. THE PRESIDENT'S DECISION

24. The President, acting under the authority delegated to him by the Board, has approved the provision of technical assistance, on a grant basis, to the Government of Malaysia in an amount not exceeding the equivalent of $600,000 for the purpose of the Daro-Mukah Coastal Zone Development Project, and hereby reports his action to the Board. Appendix 1

MALAYSIA: TECHNICAL ASSISTANCE DARO-MUKAH COASTAL ZONE DEVELOPMENT PROJECT PROJECT FRAMEWORK

Design Summary Measurable Indicator Means of Important Assumptions Verification

1. Sector/Area Goals (i) Average rural (i) National and (i) Environmentally 1.1 Increase rural incomes. household incomes state statistics sensitive and equal to at least the (ii) Baseline survey, economic 1.2 Reduce remaining pockets national average by benefit development areas of poverty in the Project 2001. monitoring can be physically area. (ii) Incidence of rural evaluation separated. households below database. (ii) Economic 1.3 Optimize use of the Project poverty line reduced (iii) Environmental development will area's natural resources for to the national monitoring plan. benefit the poor. sustainable economic average (currently (iv) Bank Review (iii) Environmental development and 19%) by 2001. Missions. impacts can be environmental conservation. (iii) Environmental measured. condition of Project area remains the same or is enhanced by development activities.

2. Project Purpose (i) Basic rural (i) Project progress (i) Goverment of 2.1 Provide basic infrastructure infrastructure reports, Bank Malaysia improvement and complete by 2001. Review Missions. commitment. development to facilitate (ii) Agroecological environmentally sound rural (ii) Number of profitable (ii) Initial, midterm, conditions conducive development. rural enterprises and end of to new crops. established by project surveys. (iii) Viable rural small-holders and enterprises can be private sector. established. (iv) Private sector will invest in areas with good infrastructure and land consolidation.

(Reference in text: page 3, para 15) 7 Appendix 2

COST ESTIMATES AND FINANCING PLAN ($'000)

Item Foreign Local Total Exchange Currency

A. Bank Financing

1. International Consultants (Remuneration including per diem and Out-of-pocket Expenses) 534,000 — 534,000

2. Reports and Communication 10,000 — 10,000

3. Government Observer for TA Negotiations 2,000 — 2,000

4. Contingencies 54,000 — 54,000

Subtotal (A) 600,000 — 600,000

B. Government Financing

1. Domestic Consultants (Remuneration including per diem and Out-of-pocket Expenses) — 165,000 165,000

2. Counterpart Staff — 125,000 125,000

3. Workshop/Support Services and Others — 270,000 270,000

4. Contingency — 40,000 40,000

Subtotal (B) — 600,000 600,000

Total (A + B) 600,000 600,000 1,200,000

(Reference in text: page 4, para. 19) 8 Appendix 3, page 1

TERMS OF REFERENCE FOR CONSULTANTS

1. A team of international and domestic experts will be responsible for preparing a framework master plan and feasibility study for the proposed Daro-Mukah Coastal Zone Development Project in Sarawak. The team will work in close collaboration with the Malaysian Federal Economic Planning Unit (EPU), the Sarawak State Planning Unit (SPU), and other relevant National and provincial agencies The Government will provide staff, as necessary, for the conduct of socioeconomic, topographic, and geotechnical surveys, and for geographic information system (GIS)-related activities.

2. The Project is expected to comprise two phases. Phase I will prepare the framework master plan (FMP), and Phase II will conduct the feasibility study of the Project for possible external financing.

3. The main objective of FMP is to establish a development framework for the Daro- Mukah area for the period 1996-2010 so that a balance between economic development (targeting poverty reduction), environment protection, and natural resources management is achieved. The FMP component also aims to coordinate existing plans and programs so that they are integrated with FMP. The Bank's environmental-cum-economic planning methodology will be used for the study. Phase I is expected to be completed in six months.

4. At the completion of Phase I, a tripartite review meeting will be held in Malaysia to review the findings, put suggested projects into priority order, obtain a consensus on Project components for the feasibility study, and determine how to proceed with Phase II, the feasibility study of the proposed investment Project.

5. In Phase II, the consultants will conduct a feasibility study and prepare a Project proposal suitable for Bank funding. The Project will focus on primary sector development to reduce poverty and on improvement of rural infrastructure along the coastal strip between Daro and Mukah. Phase II is expected to be completed in four months.

A. International Consultants

1. Team Leader/Rural Development Planner (9 person-months)

5. The team leader/rural development planner should have (i) at least 10 years of field experience in the conduct of rural development planning projects and feasibility studies as team leader, preferably in ; and (ii) work experience in participatory planning. He/she should preferably have experience in the application of GIS to rural development planning.

6. The consultant will provide the required leadership and will supervise the work of the other consultants (international and domestic) to ensure that the reports are prepared on time and according to specifications. He/she will liaise with the Government through the SPU liaison officer, the Technical Committee, and Steering Committee as required. He/she will consolidate the findings of the consultants in the Phase I report (incorporating the master plan)

(Reference in text: page 5, para. 22) 9 Appendix 3, page 2 and the Phase II final report (incorporating the feasibility study), and attend the tripartite review meetings to discuss these reports. The consultant will perform these tasks in the given phase:

(i) Adopt a process or participatory approach, broadly based on the Bank's environmental-cum-economic regional planning framework, in the preparation of FMP and the Project design. This approach will ensure the involvement of stakeholders in the public and private sectors and will comprise participatory surveys, workshops and meetings as mentioned below. The FMP must be consistent with the Government's prevailing policy on agriculture and rural development sector, although it should also suggest areas of future policy improvement. (Phase 1)

(ii) Review relevant information in the 7th Malaysia Plan, the Lower Rajang-Mukah Integrated Agriculture Development Project (IADP) Pre-feasibility Study, the Master Plan Studies for Sarawak (Agriculture, Fisheries, Roads), existing development plans, programs and ongoing studies for the Project area, and any other relevant reports and document.' Identify key data gaps and prepare a detailed work plan for collection of additional data needed. The work plan will form a major part of the inception report. (Phase 1)

(iii) Prepare alternative development scenarios to 2010, covering a full range of development possibilities for the Project area. Assess the social, environmental, and economic implications of these alternatives and nominate a preferred development path for Government concurrence. Coordinate the preparation of preferred socioeconomic, infrastructure, agricultural, fisheries, forestry, and environmental plans by team members. (Phase 1)

(iv) Prepare a draft FMP for the Project area in collaboration and consultation with stakeholders, taking into account the various technical, environmental, economic, and social constraints, as well as other current and planned development projects. Develop selection criteria for zoning area development and identify potential growth centers under FMP. (Phase 1)

(v) Prepare a long list of possible agricultural, fisheries, forestry, environmental, and infrastructure subprojects for the area, in consultation with stakeholders and team members; establish selection criteria and rank the subprojects according to priority for Phase II feasibility studies. (Phase 1)

(vi) Conduct workshops for stakeholders in the Project area and ; incorporate comments in the final FMP; finalize the list of priority projects to be taken forward to Phase II feasibility study. (Phase 1)

(vii) Assist the Government in identifying development opportunities for promotion of private sector investment in the coastal zone. Identify existing private sector

Particular reference should be made to the PCR: 572-MAL: Kalaka-Saribas lntegratedAgricultural Development

Project, September 1995. 1 10 Appendix 3, page 3

economic activities in place and assess the need for support from the Project (eg. infrastructure, etc.) and the Government (eg. incentives, credits, etc.). Assist the Government in inviting potential private sector investors to hold discussions on their interest in investment and participation in the area's development. (Phase 1)

(viii) Through close involvement with counterpart staff, enhance district-level development planning capacity by on-the-job training of District Office staff in all aspects of FMP preparation. (Phase 1)

(ix) Assist with upgrading of SPU's GIS and provide on-the-job training of SPU's GIS staff, using the system to prepare FMP. (Phase 1)

(x) Coordinate and assist in preparing of the Project feasibility study in a form suitable for external funding; assess the nature and extent of additional investigations that may be required during the Phase II feasibility study and arrange for their execution; determine appropriate phasing of the Project, considering the technical, financial, economic and social viability of each phase, private sector investment flows, etc.; take into account other ongoing or planned activities of relevant agencies and the implementation capacity of such agencies; prepare detailed implementation and staffing schedules in close consultation with stakeholders; provide detailed TOR for consultants and budget details; and identify institutional arrangements for Project implementation. (Phase 11)

(xi) Prepare and finalize various reports required including the inception, interim, and final reports by consolidating all consultants individual reports. Prepare a Project framework for the proposed Project according to the Bank's format. (Phases I and II)

2. Indigenous People/Community Development Specialist (3 person-months)

7. The indigenous people/community development specialist should have at least 10 years experience in (i) the identification, design, and implementation of rural community projects; (ii) design, conduct, and analysis of socioeconomic surveys; (iii) working with indigenous peoples; and (iv) preferably the ability to speak Bahasa Malay. The community development specialist will work closely with the local rural sociologist. Specifically, the consultant will perform these tasks:

(i) Review all relevant documents relating to social analysis, poverty reduction, and regional statistics on poverty reduction programs in the area, including the Poverty Study of Selected Areas of Sarawak. (Phase 1)

(ii) Identify any major data gaps and, if necessary, conduct an initial social assessment of the study area, and assist with the preparation of a detailed TOR for additional Government-financed socioeconomic surveys. (Phase 1)

(iii) Consult with community groups (e.g. farming, fishing associations) in the study area, and other relevant rural development Non Governmental Organizations (NGOs) in Sarawak; determine roles and effectiveness of existing community groups in representing Project beneficiaries' interests and their level of Motivation 11 Appendix 3, page 4

for participation in the Project; determine the need and mechanisms for creation of more effective or representative community groups. (Phase 1)

(iv) Considering the socioeconomic survey data and community consultation, specify a time-bound action plan and methods to enhance the effectiveness of community groups in economic activities; verify community development perceptions and aspirations; and identify the community role in Project design, planning, implementation, and management. (Phase II)

(v) If required, identify the additional resources needed to prepare an indigenous people's plan to assess the impact of the Project on the various indigenous groups. (Phase 11)

(vi) Develop TOR for benefit monitoring and evaluation under the Project, using on the computer-based system in the Bank-funded Kalaka-Saribas project. (Phase II)

(vii) Review the development activities proposed for the loan Project to ensure that they focus on the targeted beneficiaries - the poor and women - according to the Bank's Guidelines for the Classification of Loan Projects. (Phase II)

3. Environment Specialist (3 person-months)

8. The environment specialist should have at least 10 years experience in (i) environmental impact assessment (EIA), preparation of environmental monitoring plans in Southeast Asia; and (ii) environmental planning and management of wetland and coastal environments. The environment specialist will work closely with the domestic environmental specialist. Specifically, the consultant will perform the following tasks:

(i) Conduct an initial environmental evaluation (IEE) of possible coastal zone rural development activities, including land clearing for agricultural development, plantation establishment, road construction, drainage and flood control facilities, agricultural/forestry/fishery processing activities, development impacts on water supply areas, effects of forestry-based activities on biodiversity. (Phase 1)

(ii) Identify any proactive environmental projects for consideration under the feasibility study for the loan Project. (Phase 1)

(iii) Develop TOR for an EIA of the proposed development Project to be conducted under the Phase II feasibility study in accordance with Malaysia's environmental legislation and the Bank's Environmental Assessment Requirements and Environmental Review Procedures. The TOR should include provision for suitable measures to mitigate possible adverse environmental impacts, cost estimates, and an environmental management and monitoring plan. (Phase 1)

(iv) Conduct a full EIA and a summary EIA (SEIA) of Project components (including alternatives) in accordance with Malaysia's environmental legislation and the Bank's Environmental Assessment Requirements and Environmental Review Procedures; in 12 Appendix 3, page 5

this context review the nature and characteristics of proposed Project sites and their surroundings, and identify current and potential development conflicts, particularly with respect to environmentally sensitive areas such as water supply areas, downstream fisheries, and swamp forests. (Phase II)

(v) Formulate an environmental control and monitoring plan for the Project area; propose strategies, mitigation measures, and feasibility-level designs to avoid or minimize undesirable environmental impacts; specify methods for evaluating benefits and costs of the environmental measures proposed. (Phase II)

(vi) Assist the local environment specialist in formulating a strategy for public participation in and review of the EIA. (Phase II)

(vii) Identify and delineate any areas warranting environmental protection, and recommend areas for gazetting. (Phase II)

(viii) Assess the feasibility of proactive environmental projects for inclusion under the loan, and assist with design plans for their implementation. (Phase II)

4. Agriculturalist (3 person-months)

9. The agriculturalist should have at least 10 years experience in (i) the management, production, processing of smallholder cash crops, preferably in Southeast Asia; (ii) evaluation, planning, and development of agricultural extension, marketing, and support services; (iii) design of development plans for both smallholder and plantation-scale agriculture; and (iv) preparation of feasibility studies for agricultural development projects. The agriculturalist will work closely with the local rural sociologist, tree crops, livestock and soils specialists; and economist/marketing specialist; and community development specialist. Specifically, the consultant will perform these tasks:

(i) Evaluate all available agronomic data, including soils, climate, current land use, cropping patterns (disaggregated by ethnic group), cultural practices, input levels, yields, and production levels of smallholder crops in the area. (Phase 1)

(ii) Assess traditional smallholder agricultural practices and recommend improved practices where relevant. (Phase 1)

(iii) Evaluate opportunities for land consolidation in association with the rural sociologist, and rehabilitation of abandoned or underutilized drainage schemes in association with the civil engineer. (Phase 1)

(iv) Assess medium- and long-term labor availability in areas of agricultural potential in association with the rural sociologist. (Phase 1)

(v) Delineate areas where shifting cultivation is widely practiced and constitutes an environmental and/or economic problem; recommend measures to replace this practice with permanent cropping systems or alternative farming systems. (Phase 1) 13 Appendix 3, page 6

(vi) Identify and evaluate options for high-value cash crops, horticulture, and smallholder value-added agro-industries, including handicrafts; prepare prefeasibility report on main options. (Phase 1)

(vii) Prepare an agricultural development plan for inclusion in FMP in consultation with other team members, relevant Government agencies, private sector investors, and beneficiaries; identify priority Project components for feasibility study in Phase 11. (Phase 1)

(viii) Assess the role, capabilities, and effectiveness of existing agricultural extension and support services; identify extension requirements for main development options and prepare an extension strengthening plan. (Phase II)

(ix) Assess existing agricultural research activities in the Project area; identify information gaps, technology transfer options, research needs; prepare specific recommendations for adaptive research and demonstration activities to be included in the Project. (Phase 11)

(x) Assess the existing organization, delivery systems, and availability of various agricultural inputs; prepare specific recommendations for improvement in organization, delivery systems, storage, and transport facilities needed to meet Project requirements. (Phase 11)

(xi) Propose appropriate fertilizers, insecticides, pesticides, and herbicides for application in the Project area taking into account environmental impacts. (Phase 11)

(xii) Assist in the preparation of feasibility studies on the most suitable agricultural development options for each part of the study area, taking into account physical, economic, and social factors (including labor supply and marketing); recommend specific options for inclusion in the loan Project. (Phase II)

5. Economist/Marketing Specialist (4 person-months)

10. The economist/marketing specialist should have (i) at least 10 years experience in economics and marketing in the agriculture, fisheries, and forestry sectors, preferably in Southeast Asia and Malaysia; and (ii) 5 years experience in conduct of economic and financial analyses for rural development projects. Specifically, the consultant will perform these tasks:

(i) Conduct a rapid survey of regional markets (e.g. Bintulu, Mid, Sibu, Sarikei) for agro-based products to identify product gaps. (Phase 1)

(ii) Assess existing marketing infrastructure and channels; determine market demand for agricultural, fisheries, forestry, handicraft, and value-added products; assess outlets, pricing structures, transport services, and costs; institutional structures; distribution system facilities; determine their adequacy to meet present and projected production levels of various products; and prepare specific 14 Appendix 3, page 7

recommendations to improve the existing marketing facilities and infrastructure. (Phase 1)

(iii) Identify and evaluate potential domestic and international market opportunities for agricultural, fisheries, forest products, and other income-generating activities, including private sector agro-industries. (Phase 1)

(iv) Assess the availability of credit for smallholder agriculture and fisheries, including presence of lending agencies and moneylenders, terms and conditions of loans, collateral requirements, collection methods for past loans; prepare specific recommendations for improvement in credit systems needed for smallholder activities under the Project. (Phase 1)

(v) Assess the activities and facilities of the existing farmers and fishery organizations; recommend specific measures for their organization into more effective groups for input purchasing, marketing, development of value-added products, credit sourcing, and other services (including land consolidation for farmers). (Phase 1)

(vi) Based on prevailing social, technical, and market conditions, determine the most appropriate farming model or models for the area's rural communities and incorporate these models into the Project feasibility studies. (Phase 1)

(vii) Review these analyses of comparative and competitive advantage for products proposed over the short (1-3 years), medium (5-10 years), and long term (15-20 years), and determine the economic viability of the proposed agricultural, fisheries, and forest-based Project activities. (Phase II)

(viii) Conduct economic and financial analyses of Project benefits and costs according to the Bank's Guidelines for the Economic Analysis of Projects and Economic Analysis of Environmental Impacts of Development Projects. (Phase II)

(ix) Conduct risk analysis under various possible adverse assumptions based on past experience in the rural development sector in Malaysia. (Phase II)

(x) Propose measures for effective cost recovery from Project beneficiaries, taking into account the effects of Government schemes and subsidies on economic viability of proposed Project components with and without subsidies, as well as transparency and justification of subsidies. (Phase II)

B. Domestic Consultants

1. Civil Engineer (5 person-months)

11. The civil engineer should have (i) at least 10 years field experience in the design and construction of civil works, particularly rural roads, flood mitigation, irrigation and drainage facilities, preferably in peat materials and in Malaysia; and (ii) work experience in the design and cost estimation of structures such as small bridges, wharves, jetties, and breakwaters. The civil 15 Appendix 3, page 8 engineer will act as deputy team leader assisting the team leader with project management, Government liaison, and report preparation. Specifically, the civil engineer will perform these tasks:

(i) In association with the team leader and the Government, identify potential infrastructure investment components (such as roads, bridges, irrigation and drainage scheme rehabilitation, jetties, etc), and select priority projects for inclusion in the Phase II feasibility study. (Phase 1)

(ii) Prepare detailed TOR for engineering studies for the infrastructure components identified in (i) and for Government-financed topographical and geotechnical surveys. Assist Government counterparts in initiating the surveys. (Phase 1)

(iii) Prepare preliminary engineering designs of major infrastructure items (e.g. roads, drainage scheme rehabilitation, jetties) including quantity and cost estimates for works. Drainage scheme design items should include relevant hydrological and hydraulic analyses. (Phase 1)

(iv) Assess the condition of the upper watersheds of the rivers and streams affecting the coastal zone; determine any adverse impacts of land use in the catchments on water supply and quality (e.g., soil erosion); estimate the sediment contribution to lower reaches of the rivers; and propose land use controls, soil conservation measures, as required. (Phase 1)

(v) Review the results of the topographic and geotechnical surveys, laboratory tests, and prepare materials parameters for use in the design of roads, drains, embankments, and culverts for Project infrastructure activities. (Phase 11)

(v) Where required, prepare flood mitigation, irrigation, and drainage plans for agricultural development areas, including drainage rehabilitation plans for existing underutilized schemes. These should consider environmental, engineering and agronomic constraints imposed by peat soils, the need to maintain minimum water table levels in protected areas (water supply areas, forest reserves), the influence of tide levels and saltwater intrusion, and the removal of rainfall and floodwaters. (Phase II)

(vi) Determine optimum construction methods, structures, and foundations for major civil structures according to subsoil conditions at the proposed sites. (Phase II)

(vii) Prepare designs and operational requirements for all major civil works under the Project, including drawings, reinforcement schedules, quantities, and cost estimates. (Phase II)

(viii) Estimate the allocation of Project construction costs in accordance with the implementation schedule. Estimate the recurring costs of Project operation and maintenance (O&M), and replacements. (Phase II) 16 Appendix 3, page 9

(ix) In consultation with relevant agencies, propose the most suitable construction and procurement arrangements, considering the capacity and experience of local contractors, the Government's capacity to supervise the work, procurement of any special equipment required, and the most suitable construction techniques (i.e. equipment or labor-intensive methods). (Phase II)

2. Forest Management Specialist (3 person-months)

12. The forest management specialist should have at least 10 years (i) field experience in Malaysia in the planning and implementation of sustainable peat swamp forest management, including balancing production, conservation, and biodiversity needs; and (ii) work experience in Government processes for gazetting protection forest areas. Specifically, the forest management specialist will perform these tasks:

(i) Review recent forest management plans for the study area prepared by private sector companies, the Department of Forestry, and the GTZ Forest Management Project. (Phase 1)

(ii) Delineate areas of differentforest types, timbervolumes, conservation value, current condition. (Phase 1)

(iii) Assess forest resource, current plans, and EIA reports for logging and conversion of specific areas to agriculture in relation to conservation and biodiversity needs, wildlife habitat, water supply protection; assess the remaining timber production potential and long-term viability of conversion to agriculture. (Phase 1)

(iv) Make specific recommendations on the management and use of the remaining forest areas, including establishment of buffer zones between agricultural land and protection forest areas. (Phase 1)

(v) Identify and evaluate any viable opportunities for small-scale, forest-based commercial activities, excluding logging. (Phase 1)

(vi) Identify, assess, and delineate any forest areas worthy of protection forest status, including existing forest reserves; assist the Government to define and recommend specific areas for gazetting as protected forest, and recommend specific protected forest enforcement procedures. (Phase 1)

(vii) Prepare recommendations for the use and management of the forest resource over the next 15 years for inclusion in FMP. This should include a summary of the area- wide plan adopted as relevant from the recent management plans reviewed in (i) and priority projects for inclusion in the proposed Project. (Phase 1)

(viii) Conduct feasibility studies on viable options for small-scale forest-based income- generation activities (excluding logging), and make specific recommendations on how to develop such activities in an environmentally sound manner. (Phase II) 17 Appendix 3, page 10

3. Fisheries Specialist (2 person-months)

13. The fisheries specialist should have at least 10 years experience in the planning and implementation of coastal and riverine fisheries development, preferably in Sarawak. The consultant will work closely with Fisheries Development Authority of Malaysia in carrying out his/her tasks. Specifically, the fisheries specialist will perform these tasks:

(i) Review the Sarawak Fisheries Development Study as it relates to the Project area; evaluate the current role of fishing as an economic activity in the Project area, identifying opportunities for increased economic return, including value-added activities and aquaculture. (Phase 1)

(ii) Identify breeding areas, nurseries, and fisheries of high environmental sensitivity; identify and assess upstream activities with potential to impact on the quality of the fishery areas; and recommend measures for environmental protection of the fisheries. (Phase 1)

(iii) Evaluate existing fisheries extension services, and make recommendations for capacity building and improved extension methods. (Phase 1)

(iv) Assess existing fisheries research activities in the Project area; identify information gaps, research needs, and prepare specific recommendations for required research activities. (Phase 1)

(v) Recommend fisheries development options for inclusion in the feasibility study, excluding those that are not feasible from economic, environmental, or technical perspectives. (Phase 1)

(vi) In consultation with the Government, fishermen's associations, beneficiaries, and the private sector, conduct feasibility studies and prepare small-scale fisheries development plans (including marketing plans, value-added activities, infrastructure) for potential projects. (Phase II)

(vii) Prepare designs and costs for basic infrastructure requirements to support enhanced fisheries options. (Phase II)

4. Rural Sociologist/Women-in-Development Specialist (3 person-months)

14. The rural sociologist/women-in-development specialist should have (i) at least 10 years experience in the design, conduct, and analysis of socioeconomic surveys including gender-disaggregated data in Malaysia, particularly for indigenous peoples in rural areas, preferably Sarawak; and (ii) ability to speak Bahasa Malay, Melanau, and Iban dialects. A female consultant will be preferred to facilitate dialogue with women's groups. The rural sociologist/ women-in-development specialist will work closely with the community development specialist. Specifically, the consultant will perform these tasks:

(i) Review documents, especially those in Bahasa Malay, relating to social analysis, poverty reduction, women in development, and regional statistics on poverty 18 Appendix 3, page 11

reduction programs in the area, and make relevant information available to the consultant team. (Phase 1)

(ii) Where data gaps exist, assist with an initial social assessment and contribute to the design of additional Government-financed socio-economic surveys, if needed. (Phase 1)

(iii) Assist the Government in supervising any additional socioeconomic surveys, according to the Bank's Guidelines for Incorporation of Social Dimensions in Bank Operations, to ensure that adequate information on beneficiary profiles, income levels and sources, incidence of poverty, status of current labor use, beneficiary aspirations and economic opportunities, particularly focusing on women-in- development issues such as gender division of labor by time, task, and frequency, access to credit, legal, cultural, or religious constraints on women's participation in project activities, are available to the consultant team. (Phase 1)

(iv) Describe the socioeconomic environment, including presence of vulnerable groups (e.g., indigenous peoples, the poor, women, the elderly, children) and disaggregated demographic data by gender; systems of land tenure and land use rights; levels of education; availability of labor for agricultural, fishing, and forestry- based development activities; cultural characteristics and customs affecting agricultural, fishing and forestry land uses. (Phase 1)

(v) Conduct social and gender analyses on existing plus any additional survey data; identify the benchmark conditions for effective beneficiary participation, and benefit monitoring and evaluation; assess the likely Project impact on the beneficiaries; undertake separate consultations with women beneficiaries and assess their willingness to participate in the Project and their absorptive capacity to take on additional work loads. (Phase 1)

(vi) Assist the community development specialist to consult with community groups including women as required; identify Government and NGO institutions and mechanisms to promote the involvement of women in the development process, and to effectively integrate women's needs and aspirations into Project activities; recommend specific interventions to effectively and equitably benefit women. (Phase 1)

(vii) Based on the analysis of the socioeconomic survey data and community consultation, assist the community development specialist to prepare a program of action and specify methods to enhance the effectiveness of community groups and NGOs; identify their respective roles and that of the private sector in the proposed loan Project; and identify women's organizations or NGOs that should be involved in Project planning, design, and implementation. (Phase II)

(viii) Identify any resettlement and land tenure issues that may arise from any proposed Project activities and propose additional activities to deal with these issues. (Phase II) 19 Appendix 3, page 12

(ix) Assist in the preparation of an indigenous people's plan for the area, if one is required. (Phase II)

5. Tree Crop Specialist (2 person-months)

15. The tree crop specialist should have at least 7 years experience in (i) the management, production, and processing of tree crops in lowland Malaysia, including oil palm, sago, fruit trees, rubber, cocoa, and coconut; and (ii) the preparation of feasibility studies for tree crop development projects. The tree crop specialist will work closely with the international agriculturalist, economist/marketing specialist, and community development specialist, as well as with the local rural sociologist, and soils specialist. Specifically, the consultant will perform these tasks:

(i) Evaluate all available tree crop agronomic data, including soil management, production methods, input levels, yields, and production levels of both plantation (e.g., sago, oil palm, rubber) and smallholder tree crops (e.g. mango, coconut, bananas) in the area. (Phase 1)

(ii) Identify potential high value tree crops for both smallholder and estate development in the area, including areas for suitable tree crop areas to be delineated in FMP; processing, infrastructure, and marketing requirements. (Phase 1)

(iii) In collaboration with the agriculturalist and economist/marketing specialist, prepare a tree crop development model most appropriate to the existing situation, which can be used in the Phase II feasibility study. (Phase 1)

(iv) Assist in the conduct of feasibility studies of possible tree crop development and investment opportunities in the study area (Phase 11).

6. Environment Specialist (2 person-months)

16. The environment specialist should have at least 7 years experience in (i) EIA in Malaysia; (ii) experience in facilitating public participation in environmental planning; (iii) familiarity with Malaysia's environmental legislation; and (iv) and experience in conservation management of wetland and coastal environments. The ability to speak local Sarawak dialects will be an advantage. The environmental specialist will work closely with the international environment consultant. Specifically, the specialist will perform these tasks:

(i) Compile all available baseline data concerning the Project area, including the report on the Prefeasibility Study of the Lower Rajang-Mukah IADP; other studies; aerial photographs; satellite images; soil maps; land use and land capability data; hydrological and climatological data; socio-economic statistics; and agricultural, forestry, and fisheries data. (Phase 1)

(ii) Describe the current physical environment including land use, land capability, vegetation, wildlife, topography, climate, and hydrology; existing and planned infrastructure; population distribution. (Phase 1) 20 Appendix 3, page 13

(iii) Compare the environmental characteristics of the proposed Project area with those of other parts of Sarawak to determine if some features of the Project area are unique and warrant special environmental or conservation protection. (Phase 1)

(iv) Assist the international environment specialist in conducting an initial environmental evaluation (IEE) of possible coastal zone development activities. (Phase 1)

(v) Assist the international environment specialist conduct a full EIA and SETA of Project components (Phase II).

(vi) Design a strategy for public participation in and review of the EIA (Phase II).

7. Livestock Specialist (1 month)

17. The livestock specialist should have at least 7 years experience in smallholder livestock management, production, and processing in Malaysia, including poultry and small ruminants. The livestock specialist will work closely with the agriculturalist, economist/marketing specialist, community development specialists, and the rural sociologist. Specifically, the consultant will perform these tasks:

(i) Evaluate existing smallholder livestock production in the Project area, including any livestock research being undertaken. (Phase 1)

(ii) Identify any possible small-scale livestock agro-industries for the area, including areas suitable for livestock production to be delineated in FMP; processing, marketing, and infrastructure requirements. (Phase 1)

(iii) Collect relevant data for feasibility studies of any potential livestock-based agro- industries for the area, which may be included in the Project. (Phase 1)

8. Soils Specialist (1 month)

18. The soils specialist should have at least 7 years experience in (i) land use suitability assessment for tree, horticultural crops, and livestock; management of peat soils, preferably in Sarawak; and (ii) the application of GIS for land suitability assessment. Specifically, the consultant will perform these tasks:

(i) Collate existing soils, land use, land capability data for the study area and verify data in selected areas by field inspection. (Phase 1)

(ii) Determine land suitability classes for major tree, ground cash crops, and livestock production; identify and delineate with the use of GIS areas with physical potential for these uses, including land management requirements (e.g. drainage, irrigation). (Phase 1)

(iii) Based on the analyses in (ii) prioritize areas of potential agricultural land for development over the next 15 years, identifying any soil-based development constraints. (Phase 1) 21 Appendix 3, page 14

(iv) Prepare recommendations on management requirements for agricultural development of peat soils in the area, including agronomic, environmental, and technical issues. (Phase 1)

(v) Identify soils with specific engineering constraints or design requirements. (Phase 1)

C. Reporting Requirements

1. Inception Report

19. At the end of the first one and a half months after commencing the study, the consultants will prepare and submit an inception report in a format acceptable to the Bank, compiling the general approach, staffing plan, and services schedule for carrying out the assignment; detailing major findings and conclusions made as a result of the review of the collected reports and data; validating basic assumptions and planning parameters provided in the TOR; and stating revisions to be made to the original proposal. Any revisions proposed will be subject to the concurrence of the Bank. A first tripartite meeting will be held for discussing the inception report two weeks after its submission.

2. Interim Report

20. The consultants shall submit an interim report by the beginning of the fifth month after commencing the studies. The report will include, but will not be limited to, the framework master plan, social surrey results, list of priority projects, prefeasibility studies, initial environmental assessments, interim conclusions, and a detailed work program for the feasibility study. The interim report will be discussed at a tripartite meeting.

3. Final Report

21. The draft final report will be prepared and submitted within nine months of commencing the studies. It will cover the studies stipulated in these TOR, in sufficient detail for review by the Government and the Bank and discussion at a tripartite meeting. The final report will be submitted within one month of receiving comments made by the Government and the Bank. The report will also include all design drawings, specifications, social surveys, and environmental assessments prepared as well as comments and recommendations made during the study.

22. Each individual consultant will prepare technical reports for inclusion in the interim and final reports. 22 Appendix 4

INDICATIVE STAFFING SCHEDULE FOR CONSULTING SERVICES

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(Reference in text: page 5, para 22)