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World Bank Document Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. P-4017-BD REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AMOUNT OF SDR 31.3 MILLION TO THE PEOPLE'S REPUBLIC OF BANGLADESH FOR A Public Disclosure Authorized FLOOD REHABILITATION PROJECT April 11, 1985 Public Disclosure Authorized This document has a restricted distributionad maybe usedby recipientsonly in the performanceof ftheir official duties. Its contents may not otherwisebe disclosed without World Bank authorization. CURRENCY EQUIVALENTS The external value of the Bangladesh Taka (Tk) is fixed in relation to a basket of refeience currencies, with the US dollar serving as intervention currency. On February 25, 1985 the official exchange rate was set at Tk 26.47 buying and Tk 26.53 selling per US dollar. Unless noted otherwise, the rates shown below have been used throughout this report: l Taka = US$0.04 26.0 Taka = US$1.00 WEIGliTS AND MEASURES 1 inch (in) 25.4 millimeters (mm) 1 foot (ft) = 30.5 centimeters l mile (mi) 1.509 kilometers (km) I square mile (sq mi) 640 acres (ac) hectares (ha) I acre (ac) = 0.405 hectares (ha) I bigha - 0.333 acres (ac) = 0.135 hectares (ha) I bale (cotton) = 178 kilograms (kg) I bale (jute) = 186 kilograms (kg) 1 cubic foot per second - 0.028 cubic meters per second (cusec) (m3sec) ABBREVIATIONS USED ADP - Annual Development Program BWDB - Bangladesh Water Development Board IWTA - Inland Water Transport Authority LGD - Local Government Division LGEB - Local Government Engineering Bureau MTFPP - Medium Term Foodgrain Production Program PPAR - Project Performance Audit Report RHD - Roads and Highways Department UNDP - United Nations Development Programme GLOSSARY Aman - Rice planted before or during the monsoon season and harvestEl in November-December. Aus - Rice planted during February-March and harvested during June-July. Bcro - Rice transplanted in December-January and lharvested in April-May. District - Administrative unit comprising a number of upazilas. Upazila - Smallest administrative unit as defined by Local Government. FISCAI. YEAR (FY) July 1 - June 30 FOR OFFICIAL USE ONLY BANGLADESH FLOOD REHABILITATION PROJECT Credit and Project Summary Borrower : The Government of the People's Republic of Bangladesh. Amount : SDR 31.3 million (US$30.0million equivalent) Terms Standard Proiect Description The project would comprise priority components of the Government's program to rehabilitate flood damaged facilities and would include: (a) rehabilitation of irrigation, drainage and flood protection works; (b) rehabilitationwork on roads and associated structures; (c) procurement of road construction equipment; (d) replacement of navigational aids and water gauging equipment; (e) repair of river landing jetties; and (f) provision of technical services by local and foreign consultants. Risks Delay in executing the project might result from con- straints a'fecting the four implementingagencies. However, the works to be undertaken are relatively simple and are well within the capacity of the individual agen- cies concerned. Because the project comprises a large number of individual rehabilitation schemes and because of their urgent nature the appraisal of the individual components has not been subject to the usual standard of scrutiny; however, only those schemes which meet criteria agreed with IDA will be accepted for financing. Because rehabilitationworks would be scattered throughout the flood afflfectedarea, it may prove difficult to supervise individual schemes closely. However, consultants would be employed to assist the executing agencies in reviewing the proposed works against the agreed criteria and in supervising and implementing these works. This document has a restricted distribution and may beused by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Estimated Proiect Costs la Local Foreign Cost Exchange Total -US$ Million Equivzlent- Civil Works Irrigation, drainage and flood protection (BWDB) 9.14 3.07 12.21 Roads and associated structures (RHD) 10.67 3.56 14.23 River landing jetties (IWTA) .09 .03 .12 Roads and associated structures (LGD) 4.50 1.50 6.00 Total Civil Works 24.40 8.16 32.56 Equipment Purchase 1.73 2.34 4.07 Consu ltancies .81 .81 1.62 Engineering and Administration 3.27 _ 3.27 Total Base Cost 30.21 11.31 41.52 Physical Contingencies 2.36 .87 3.23 Price Contingencies 2.69 .81 3.50 Total Project Costs 35.26 12.99 48.25 /a Including US$1.8 million equivalent in duties and taxes. Financing Plan Local Foreign Cost Exchanze Total -US$ Million Equival.ent- Proposed Flood Rehabilitation Project 19.60 10.40 30.00 Credit 864-BD Savings 5.10 1.70 6.80 Credit 1184-BD Savings 3.00 1.00 4.00 Government of Bangladesb 7.43 _ 7.43 Total 35.13 13.10 48.23 Estimated Disbursements: IDA Fiscal Year 1985 1986 1987 Annual 5 20 5 Cumulative 5 25 30 -iii- Rate of Return Not Applicable Map: Area flooded in 1984 INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON tAPROPOSED CREDIT TO THE PEOPLE'S REPUBLIC OF BANGLADESHFOR A FLOOD REHABILITATION PROJECT 1. I submit the following report and recoumendation for a proposed credit to the People's Republic of Bangladesh for SDR 31.3 million (the equivalent of US$30 million), on standard IDA terms, to help the Government's program of rehabilitating infrastructure damaged by the floods in 1984. PART I - THE ECONOMY 1/ Introduction 2. An economic report entitled "BangLadesh: Economic and Social Development Prospects" (Report No. 5409-BD, dated April 2, 1985) has been distributed to the Executive Directors. 3. Bangladesh, which became independent in 1972 under very difficult circumstances, is a country with a very high population density and widespread poverty (annual income per capita is about US$130). The economy, dominated by agriculture, remains highly vulnerable to disruption by both natural and external factors. Although considerable progress has been made in terms of increased flood control, and extending the availability of irrigation and other inputs, foodgrain production remains beavily dependent on weather conditions and falls short of domestic requirements. To meet minimum needs, the Government has to import foodgrains financed by aid or from its own resources. The uncertainties of foodgrain availability also make it necessary to maintain public foodgrain stocks, the financing of which adds to the problems of fiscal management. 4. The economy is also characterized by low savings, which reflect the low level of incomes, and by a large structural external payments gap. Domestic savings account for only a negligibLe part of investment (which has averaged about 16% of CDP in recent years). Export earnings cover less than 30Z of the import bill, with raw jute and jute goods accounting for about 60% 1/ Parts I and II of this report are substantially the same as Parts I and II of the President's Report for the Second Primary Education Project (Report No. 3976-BD) dated March 7, 1985. -2- of merchandise exports. The resource gap of about 15% of GDP is financed by workers' remittances, which rose rapidly to more than 5% of GDP in FY83 (beforedeclining somewhat during the past two years) and by foreign assis- tance equi.valentto about 10% of GDP per annum. The capacity to finance imports can be sharply affected by external factors that are beyond the control of the Government; the effect of such adverse factors on the economy is amplified by the heavy dependence of budgetary revenues on import duties and sales taxes, which together account for about 60% of tax revenues. Recent Economic Developments 5. In the late 1970s, Bangladesh enjoyed a period of political stability and economic consolidation and was able to plan for longer-term development. GDP growth of nearly 6Z per annum from FY75 to FY80 was accompanied by rising public investment, financed by a substantial real increase in aid disbursements. A combination of adverse domestic and external events after FY80 disruoted the momentum of development. Between FY80 and FY82, the external terms of trade for Bangladesh fell by 30%, due to declining prices for jute and jute products, as well as to increases in import prices. External aid flows, which had been rising steadily up to FY80, declined in FY81 and in FY82 barely recovered to their FY80 level. Foreign exchange reserves declined to about US$120 million (equivalent to about two weeks' imports) by end-FY82. The deterioration in the terms of trade and stagnation of aid receipts in real terms had an adverse impact on public finances and forced the Government to impose severe cuts in domestic public investment in FY81 and FY82. At the same time, the rate of growth in GDP decreased from about 6% in FY81 to 1.4% in FY82, largely due to a decline in food crop production following a prolonged drought during FY82. 6. In response to these adverse developments, the Government took a series of measures designed to stabilize the economy. In the FY83 Budget, growth of public expenditure was tightly restrained, new tax measures were introduced and a series of pricing adjustments were made to reduce subsidies and improve the financial performance of public sector enterprises and utilities. Taken together, the tax, pricing, and subsidy-reductionmeasures amounted to an impressive 2.3% of GDP. In FY83, the Government also announced its New Industrial Policy designed to improve the efficiency of public sector enterprises and provide an improved policy environment for the private sector. More than 100 public sector enterprises were subsequently denationalized, investment sanctioning procedures were streamlined and many industries freed from requiring investment sanctions. Imports were liberal- ized by increasing access to imports through a secondary exchange market and by eliminating some quanticative restrictions.
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