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World Bank Documents FILECOPY The DocumentWorld ofBank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. P-2203-BD REPORT AND RECOMMENDATION OF THE Public Disclosure Authorized PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE Public Disclosure Authorized PEOPLE'S REPUBLIC OF BANGLADESH FOR A JUTE PROJECT January 17, 1978 Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwisebe disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS The BangladeshTaka is officiallyvalued at 26.70 to the Pound Sterling. The Pound floats relative to the US Dollar and consequently,the Taka US Dollar rate is subject to change. The rate below has been used through- out this report, except where stated to the contrary. US$1 Tk 15.0 Tk 1 US$0.067 Tk 1 million = US$67,000 WEIGHTSAND MEASURES 1 acre (ac) 5 0.405 hectares (ha) 1 mile (mi) 1.609 kilometers (km) 1 square mile 640 ac (259 ha) (sq mi) I maund (md) = 82.27 lb. (37.3 kg) 1 metric ton (MT) - 26.8 md 1 katcha bale jute = 4 md I pucca bale jute = 5 md FOR OFFICIAL USE ONLY PRINCIPAL ABBREVIATIONS AND ACRONYMS USED ADA - Assistant Director of Agriculture ADB - Asian Development Bank BADC - Bangladesh Agricultural Development Corporation BJRI Bangladesh Jute Research Institute BKB - Bangladesh Agriculture Development Bank (Bangladesh Krishi Bank) DAJ - Directorate of Agriculture (Jute) DEM - Directorate of Agriculture (Extension and Management) HYV - High Yielding Varieties IJCS - Intensive Jute Cultivation Scheme IRDP - Integrated Rural Development Program ISO - Input Supply Officer JEA - Jute Extension Assistant JEO - Jute Extension Officer JFA - Jute Farmers' Association KSS - Village Cooperative Society (Krishi Samabaya Samity) SMS - Subject Matter Specialist TCCA - Thana Central Cooperative Association T&V - Training and Visit (extension system) GLOSSARY Block - Smallest unit in the Intensive Jute Cultivation Scheme - 200 or 400 acres jute. District - Administrative unit in Bangladesh. There are 19 Districts in the country. Katcha bale - Jute bale compressed by manually powered press, weighs 4 maunds. Paddy - Unhulled rice. Pucca bale - Jute bale compressed by hydraulic press, weighs 5 maunds. Thana - Administrative unit in Bangladesh. There are 413 thanas in the country. Unit - Intermediate unit in the Intensive Jute Cultivation Scheme - formed by 5 to 10 blocks - about 2,000 acres jute. Zone - Largest unit in the Intensive Jute Cultivation Scheme - formed by 25 units - about 50,000 acres jute. FISCAL YEAR July 1 to June 30 This document hasa restricteddistribution and mnaybe used by recipientsonly in the performance l of their official duties._~__ Its contents may not otherwisebe disclosedwithout World Bank authorization. BANGLADESH JUTE PROJECT Development Credit and Project Summary Borrower: People's Republic of Bangladesh Amount: US$21 million equivalent Terms: Standard Relending Terms : Part of the proceeds of the IDA Credit would be passed on to Sonali Bank at a rate of 3% per annum. Purpose: The proposed project, through the on-going Intensive Jute Cultivation Scheme (IJCS), is intended to bring about: (a) a higher productivity in jute cultivation; and (b) better marketing for raw jute. The project would, over a five year period, aim at: (a) raising yields and reducing cost of production of jute on 1 million acres by improved extension activities (including provision of housing and transportation for jute extension workers) and credit; (b) establishing a pilot jute marketing scheme aimed at increasing farmers' returns; and (c) improving production and marketing equipment (seed drills, hand hoes, storage sheds, baling equipment, etc.). In addition, technical assistance would be provided through consultants; the project would include overseas training of staff, local training of selected farmers and project evaluation services. Improved marketing practices, in particular through the pilot marketing scheme and ultimately through the establishment of intelligence and price management mechanisms would contribute to stabilizing the supply of jute fiber and goods around a level adequate to meet the requirements of local jute mills and for export at compe- titive prices. The increases in jute yields and reduction in production costs achieved through the project would enable Bangladesh to either: (a) maintain jute produc- tion at present levels and release approximately 400,000 acres for paddy growing or alternatively, (b) use its improved competitive position to capture a larger share of the world market for jute and its substitutes. In practice, the actual situation resulting from the project would presumably be a combination of these two alternatives, - ii - with some increase in the total jute production and some decrease in the jute acreage in non-IJCS areas. The eco- nomic rate of return is sensitive to the level of jute prices on the world imarket. There is a risk that the project might encourage production of raw jute beyond the level of which it can be sold at economic prices. Parallel efforts, designed to establish effective systems for price management and marketing, are intended to minimize this risk. Project Costs: Local Foreign Total ---- (US$ million) ---- I. Short-Term Credit 7.03 3.35 10.38 II. Implements 1.23 - 1.23 III. Extension Services 9.43 2.41 11.84 IV. Marketing Infrastructure 0.53 0.20 0.73 V. Technical Assistance 0.18 0.35 0.53 Base Cost Estimate 18.40 6.31 24.71 Physical Contingencies 0.56 0.24 0.80 Price Contingencies 5.69 2.08 7.77 Total Cost (with contingencies) 24.65 8.63 33.28 Financing Plan: Bangladesh Government Sonali Bank IDA Total ------------------(US$ millions)--------------- 5.82 6.46 21.00 33.28 Disbursements: -------------------- (US$ million)------------------- Bank FY 1978 1979 1980 1981 1982 Annual 0.1 3.4 4.0 6.5 7.0 Cumulative 0.1 3.5 7.5 14.0 21.0 Rate of Return: Above 50% Appraisal Report: No. 1587-BD, dated D)ecember 29, 1977 INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE PEOPLE'S REPUBLIC OF BANGLADESH FOR A JUTE PROJECT 1. I submit the following report and recommendation on a proposed credit to the People's Republic of Bangladesh for the equivalent of US$21 million, on standard IDA terms, to help finance a jute project. PART I - THE ECONOMY I/ 2. A Basic Economic Report on Bangladesh, entitled "Bangladesh: Development in a Rural Economy" (Report No. 455-BD dated September 15, 1974) was distributed to the Executive Directors on October 1, 1974. An economic mission was in the field in November 1976 and its report entitled "Bangladesh: Current Economic Performance and Development Policy Issues" (Report No. 1469-BD, dated May 19, 1977) was distributed on May 23, 1977. Introduction 3. The Basic Economic Report described the obstacles to development in Bangladesh and outlined a course of action to maximize the development of the country's resources. The high ratio of population to natural re- sources, the slow development of the productive and infrastructural base and the weaknesses of the administrative and institutional framework led the Report to project a growth rate of GDP of between 2% and 3.5% per year in real terms over the five years 1973-78, the variations within that range depending on the appropriateness of the policy framework and on levels of aid. 4. Overall economic progress since independence, however, has been in- adequate. Agriculture output remains insufficient for a population growing at close to 3% a year. Industrial output, heavily dependent on imports, has been affected badly by scarcity of foreign exchange. State enterprises have been hampered by management deficiencies, excessive government controls, shortages and price regulation. Exports have been stagnant and finance less than half of import needs. Bangladesh also has been severely affected by an adverse shift in its terms of trade since 1973. Trade problems are compounded by dependence on annual food imports of 1-2 million tons, even in years of favor- able weather, and by heavy reliance on imported industrial raw materials. Gov- ernment revenue has been insufficient to meet current and development expend- iture needs. Bangladesh has had to depend on large flows of external assist- ance to support its development effort. 1/ Parts I and II of this report are substantially the same as Parts I and II of the President's Report for the Sixth Imports Program Credit (Report No. P-2155-BD), dated November 2, 1977. - 2 - 5. The present Government, in power since November, 1975, rules by martial law. General Zia Rahman, the Army Chief of Staff, serves both as President and Chief Martial Law Adiministrator. The two chiefs of the other defense services serve as Deputy Chief Martial Law Administrators. The three service heads and fifteen civilians form a President's Advisory Council. Each of the members has responsibility for one or more ministries. General Zia Rahman's political program was endorsed by an overwhelming majority in a referendum held in May 1977. This program includes national elections in December 1978 and local elections, at the municipal and district levels, this year: municipal elections have already taken place, while district elections are scheduled for December 1977 (UrnionCouncils were elected in January 1977). 6. The current Government has introduced some economic reforms, such as a reduction of producer and consumer subsidies, a tax on agricultural income, liberalized imports and an improved climate for private investment and private sector participation in domestic and foreign trade. Steps have also been taken to disinvest about 300 industrial enterprises and to grant greater functional autonomy to public corporations. In the financial field, the Bangladesh Gov- ernment (GOB) has continued to pursue prudent monetary and fiscal policies.
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