Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No. 3160-MA

MALAYSIA Public Disclosure Authorized

ROMPIN-ENDAU AREA DEVELOPMENTPROJECT

STAFF APPRAISAL REPORT

Public Disclosure Authorized February 20, 1981 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 their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENT

US$1.00 M$2.15 M$1.00 = US$0.46 M$1 million = US$465,000

WEIGHTS AND MEASURES

1 hectare (ha) 2.47 acres 1 kilometer (km) 0.62 mile 1 meter (m) = 3.28 feet 1 square meter (sq m) 10.76 square feet 1 cubic meter (cu m) 35.31 cubic feet = 1.308 cubic yards 1 kilogram (kg) 2.2 pounds

ABBREVIATIONS

AA - Agricultural Assistant AAO - Assistant Agricultural Officer AO - Agricultural Officer AT - Agricultural Technician BPM - Bank Pertanian Malaysia DARA - Pahang Tenggara Development Authority DID - Drainage and Irrigation Department DOA - Department of Agriculture DOAA - Department of Orang Asli Affairs DOF - Department of. Fisheries DOVS - Department of Veterinary Services FAMA - Federal Agricultural Marketing Authority FDC - Farmers' Development Center FELCRA- Federal Land Consolidation and Rehabilitation Authority FELDA - Federal Land Development Authority FOA - Farmers' Organization Authority LCC - Local Credit Center LPN - Lembaga Padi dan Beras Negara - National Padi and Rice Authority MARDI - Malaysia Agricultural Research and Development Institute MOA - Ministry of Agriculture MOHA - Ministry of Home Affairs NEB - National Electricity Board NPV - Net Present Value O&M - Operation and Maintenance PPAR - Project Performance Audit Report PWD - Public Works Department SEDC - State Economic Development Corporation SMEC - Snowy Mountains Engineering Corporation T&V - Training and Visit Extension System

GOVERNMENTOF MALAYSIA

FISCAL YEAR

January 1 to December 31 FOR OFFICIAL USE ONLY

MALAYSIA: APPRAISAL OF THE ROMPIN-ENDAU AREA DEVELOPMENTPROJECT

Table of Contents

Page No.

1. BACKGROUND ...... 1

Introduction .I...... I The Agricultural Sector 1 Government Strategies for Agricultural Development . . . 2 Irrigation Development ...... 3 Project Formulation ...... 4

2. THE PROJECT AREA ...... 6

The State of Pahang ...... 6 The Rompin-Endau Region...... 6 Climate and Hydrology. 7 Topography and Soils. 9 Population ...... 9 Agriculture ...... 10

3. THE PROJECT .1.0...... l0

Project Description ...... 10 Project Works .11 Water Demand, Supply and Quality ...... 15 Design Standards ...... 16 Status of Engineering .18 Project Implementation...... 19 Cost Estimate .19 Financing ...... 21 Procurement ...... 21 Disbursements ...... 22 Accounts and Audits .22 Environmental Effects ...... 22

4. ORGANIZATION AND MANAGEMENT ...... 23

Project Coordination .23 Settler Selection and Administration ...... 24 Agencies and Agency Responsibilities ...... 25 Consulting Services .31 Land Acquisition .32 Operation and Maintenance ...... 32 Safety of Dams .33

This document has a restricted distribution and may be used by recipients only in the performance of | their official duties. Its contents may not otherwise be disclosed without World Bank authorization. -2- Page No.

5. AGRICULTURAL PRODUCTION ...... 33

Land Use and Production ...... 33 Farm Size ...... 34 Crop Management ...... 34 Drying, Storage and Processing ...... 37

6. MARKETS, PRICES, FARM INCOMES AND COST RECOVERY . . . . . 37

Markets ...... 37 Prices ...... 38 Farm Incomes ...... 40 Cost Recovery ...... 40

7. BENEFITS, JUSTIFICATION AND RISKS ...... 42

8. AGREEMENTSREACHED AND RECOMMENDATION ...... 46

LIST OF TABLES IN THE MAIN TEXT

2.1 Climatic Data 3.1 Net Irrigable Area 3.2 Road Widths 3.3 Cost Summary 3.4 Schedule of Construction Contracts 5.1 Present and Projected Harvested Area, Yields and Production 6.1 Rice Price Structure 6.2 Summary Budgets for 2.4 Ha Padi Farms With Alternative Supplementary Enterprises

ANNEXES

1. Crop Water Requirements 2. Cost Estimates, Expenditures, Disbursements and Allocation of Loan Funds 3. Production Coefficients and Farm Budgets 4. Economic Analysis 5. Schedule of Critical Events 6. Related Documents and Data Available in the Project File

LIST OF FIGURES

3.1 Implementation Schedule 3.2 Implementation Schedule 4.1 Project Organization 5.1 Proposed Padi Cropping Calendar

MAP

IBRD 15104 Rompin-Endau Area Development Project MALAYSIA

APPRAISAL OF THE ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

1. BACKGROUND

Introduction

1.01 The Government of tIalaysia has requested Bank assistance in finan- cing the Rompin-Endau Area Development Project, which would provide for the development of about 11,400 ha of new land for irrigated rice cultivation in Pahang State. The proposed project would provide 4,750 settler families with 2.4 ha each of irrigated rice land. They would also be provided with a 0.17 ha housing lot, housing, community infrastructure, and agricultural support services. The project focuses on one of the major identifiable groups in rural poverty, the rice smallholders, and addresses two of the major constraints to achieving an income above poverty level - the small size of holding and low land productivity. The proposed project would open up one of the few remaining areas in Peninsular Malaysia suitable for large-scale irrigation of rice and would contribute to the country's goal of self-sufficiency in rice production.

1.02 A feasibility study for the project was prepared under the provisions of National Small-Scale Irrigation Project (Loan 1444-MA) by Snowy Mountains Engineering Corporation (SMEC) of Australia in association with International Land Development Consultants (ILACO) of the Netherlands and KPM Khidmat Sdn. Bhd. Malaysia. Planning for the agricultural, fisheries, and livestock support services for the project was done by the Ministry of Agriculture (MOA). This report is based on the findings of an appraisal mission composed of Messrs. R. Qureshi, A. Menkir, T. Daves (Bank) and G. Thorksy (consultant) which visited Malaysia in April 1980. Mr. R. Dy and Ms. K. Hill assisted in the preparation of the report.

The Agricultural Sector

1.03 The agricultural sector plays a dominant role in the economy of Malaysia, though its relative importance is declining as the country proceeds toward industrialization. The sector accounts for about 24% of GDP, 40% of export earnings, and 42% of employment. GDP in agriculture grew at an average rate of about 5% p.a. between 1973 and 1979. Based on past investments in tree crops and new land development, and continuing public sector investments, growth is likely to be sustained at 4-5% for the next decade. Agricultural production has been heavily export-oriented since colonial times; however, the composition of exports has changed significantly in the last decade due to the Government-s policy of diversification in the sector. Rubber continues to be the single largest export earner, but its share has dropped from 40% in 1969 to 21% in 1979 as earnings from palm oil, wood products and cocoa have grown. Malaysia is the world's largest producer and exporter of both rubber and palm oil, supplying 42% of the world's natural rubber output and 49% of palm oil production in 1979. Agriculture's share of total employment has gradually declined from 53% in 1970 to 42% in 1979. The government expects the agricultural labor force to grow about 1% per annum for the next decade with industry and services absorbing increasinglylarger percentages of the total labor force. Continued growth in volume and favorable prices in agriculture, along with the expansion of manufacturing and the recent development of Malaysia's oil and gas reserves have enabled the country to maintain a healthy trade surplus, estimated at about US$2.1 billion in 1979.

1.04 Peninsular Malaysia has about 3.2 million ha, or 25% of its area, under cultivation, of which almost 2.3 million are in rubber and oil palms. Nearly two thirds of the tree crop area is in smallholdings. The other major crops are rice, grown on 478,000 ha, of which about half is double cropped, and coconut, with 337,000 ha. Other crops (each occupying below 40,000 ha) are pineapple, cocoa, cassava, sugarcane, tobacco, coffee, pepper and groundnuts. Output has grown rapidly over the past decade; rubber output increased 100% and oil palm by 300%. Output of rice increased by 90%, primarily due to improved and expanded irrigation facilities. Domestic production of rice supplies 85-90% of consumption requirements. With population growing at 2.7% p.a., an additional 45,000 tons of rice are required each year just to maintain the current per capita consumption level. The Government has formulated three basic objectives with regard to rice: (a) to increase the incomes of padi farmers; (b) to achieve self-sufficiency in rice production; and (c) to provide reasonably priced rice to consumers.

1.05 Notwithstanding the impressive overall performance of the Malaysian economy, some 36% of the population had incomes below the official absolute poverty line in 1978. Two thirds of those were in agricultural households, where the incidence is about 55%. Among rice farmers, about 74% have family incomes below the absolute poverty line. There are two main factors responsible for the high incidence of poverty among rice farmers - small size of holdings and low productivity per unit of land. According to a recent Bank report on rural poverty in Malaysia a farmer with no off-farm income needs 2.4-2.8 ha of single cropped rice to achieve a poverty level income; however, the average size holding is 1.2 ha, with over half the holdings being smaller than this and 90% of all holdings less than 2.6 ha. To reach a poverty level income on an average size holding would require either double cropping or supplemental income equivalent to padi income.

Government Strategies for Agricultural Development

1.06 Having officially adopted in 1970 the objective of poverty eradication, the Government has employed two basic strategies. The first has been land development to allow the absorption of workers from low income rural occupations to higher productivity employment. The second has been the provision of projects and programs aimed directly at increasing small- holder productivity. Aided by strong growth in the secondary and tertiary - 3 -

sectors, implementation of these strategies has contributed to a significant decrease in the incidence of rural poverty: from 67% in 1970 to 55% in 1978. Strong industrial growth during this period provided enough employment opportunities outside agriculture to absorb two-thirds of the increase in the rural labor force. Large scale irrigation projects that came into fruition in the early 1970s provided increases in rice productivity that significantly changed the income position of the project beneficiaries and allowed the country to reduce its imports from 42% of consumption requirements in 1967 to about 10% in 1979. Government agencies, such as FELDA, carried out land development projects opening up over 1.1 million ha of new land, mostly for tree crops and resettled about 250,000 rural families.

1.07 With Malaysia's strong industrial base and its financial resources, it is in a position to continue its efforts to increase the productivity of small farmers as a principal thrust of its poverty strategy. It is also in a position to implement income distribution measures such as increasing the prices received by poverty households for their output, reducing the price of essential consumer goods, or increasing net incomes by direct supplements. That the Government has already begun to move in this direction is indicated by the recent reduction in the rubber export tax and the increases in padi price supports and fertilizer and pesticide subsidies to rice farmers.

Irrigation Development

1.08 Irrigation in Malaysia is confined mainly to the cultivation of rice. The Drainage and Irrigation Department (DID) was established in 1932 after a serious rice shortage in the early 1920s and the realization that overdependence on other countries for basic food supplies was risky. DID-s responsibility was land improvement and water resources development, particularly with regard to rice, which had been cultivated as a wet season crop over some 100,000 ha, and treecrops, which had been established on about 40,000 ha in coastal areas subject to tidal inundation. Until the early 1960s, irrigation schemes were designed to stabilize production of a single crop of rice during the wet season, providing water to supplement rainfall during short periods of drought. In the early 1960s, the expansion of irrigation was accelerated as part of the massive rural development program after independence, and DID began aiming its programs toward double cropped rice by building storage dams and pumping stations, and upgrading distribution systems. DID has now provided irrigation facilities allowing double-cropping over practically all major rice producing areas, with the result that 80% of the country-s 478,000 ha of rice land now has some form of irrigation facilities and over 50% is technically capable of double cropping. In addition, DID has constructed drainage schemes on some 425,000 ha of land devoted to treecrops. Although the major part of DID's program has been to provide irrigation systems in traditional rainfed rice areas, they have also undertaken projects to develop new land for rice production. The largest single system of this type is the Tanjong Karong - 4 -

Irrigation Scheme, under which 20,000 ha of coastal mangrove swamps and shallow peats were developed into productive rice land during the late 1930s and early 1950s.

1.09 The Bank has participated in irrigation development in Malaysia since 1965 when it financed the Muda Irrigation Project (Loan 434-MA), followed in 1967 by the Kemubu Project (Loan 500-MA). Together, the project areas amount to nearly 120,000 ha, or about 25% of the rice land in penin- sular Malaysia, and accommodate some 73,000 farm families. According to the PPAR (Report 1295, September 24, 1976), they were successful projects which helped to reduce rice imports from 42% of national requirements in 1967 to 17% in 1974, and resulted in increases of 75-100% in the incomes of project beneficiaries. The design of field distribution and drainage systems, based on the standards prevailing in East Asia in the 1960s, involved widely spaced secondary canals and field-to-field irrigation and drainage. At that time, there was neither the experience in design and construction of more intensive on-farm developments nor widespread use of the HYVs which depend on precise water control at the field level. Higher standards of on-farm development are now being initiated in the Muda II project (Loan 1717-MA) on an area of 25,000 ha. Five other Bank-financed projects under implemen- tation will improve, expand and intensify irrigation over 116,000 ha of rice land and drainage over 212,000 ha of tree crops. These projects include, in addition to the irrigation and drainge infrastructure, provisions for strengthening agricultural support services such as credit, extension, processing and marketing. Coordination of the various agencies and departments is a major element in the successful implementation of the projects, and the Government has developed an effective organization for this purpose. A Steering Committee of federal and state officials is appointed to guide and support a project manager, who is responsible for the progress of all components of the project.

Project Formulation

1.10 In the Third Malaysia Plan, 1976-80, an extensive jungle region between the Rompin and Endau Rivers in the state of Pahang was identified as one of the few remaining areas in Peninsular Malaysia suitable for large-scale padi development. Subsequent investigations showed that out of some 60,000 ha in the area, about 16,000 ha might be suitable for irrigated rice cultivation. To allow further examination of the area's development potential, the National Small-Scale Irrigation Project (Loan 1444-MA) provided financing for a feasibility study. The Economic Planning Unit (EPU) engaged consultants to identify and examine alternative development strategies, and to prepare preliminary layouts and designs of major structures and irrigation and drainage systems for the proposed project. The study was guided by a Government Steering Committee chaired by EPU and consisting of representatives from relevant agencies. The first stage of the study, carried out in April/May 1978 resulted in an Inception Report that identified about 8,600 ha suitable for rice cultivation. Since this was less area than anticipated, the Government amended the consultant-s contract to include an additional 4,200 ha north of the Rompin River. - 5 -

The final study report, submitted in December 1979, identified a gross area of about 19,200 ha of clay and shallow peat soils suitable for rice. The net irrigable area is about 11,400 ha (12,700 gross) after eliminating areas with unsuitable location or topography and deducting right-of-way for project works. The report was accepted by the Steering Committee and formed the basis for the appraisal of the proposed project.

1.11 A major issue during project formulation was the amount of padi land to be allocated to each settler family. Consideration was given to estate rice culture and to large scale, 4 to 8 ha, fully mechanized family farms. Both of these alternatives were rejected because the quality of management necessary for operation of such farms is not available and because their contribution to the alleviation of rural poverty would be negligible. The alternative of a 1.2 ha size holding (about the national average rice farm size) was also rejected, on the grounds that farmers on such holdings would not be fully employed and would not earn incomes sufficient to raise their families out of poverty. The size chosen, 2.4 ha (6 acres), would fully employ each settler head-of-household and give substantial part-time work to other family members. It would also move the settler families out of absolute poverty (US$320 per capita), providing an income of about US$700 per capita in 1992.

1.12 A second important issue explored by the appraisal mission, was the impact of the project on the aboriginal population (Orang Asli) in the project area. The project would affect the traditional life style of about 200 Orang Asli families. There would be some loss of agricultural land and of some areas which traditionally have been used for gathering of forest products and hunting. However, the project would result in a general improvement in the economic opportunities open to the Orang Asli and would require little physical displacement. The Orang Asli families along with other local residents would be given priority for settler status in the project. They would be allowed to maintain their small units in contiguous housing blocks within the new farm settlements nearest their traditional homes. They would also be given priority rights to participate in the fishery cage culture scheme in the project area. The Orang Asli welcome the project and several of the village leaders have expressed to the Government their group's desire to participate in it. Most of the Orang Asli families have farming experience. Collectively they now cultivate about 630 ha of which almost 60 ha is rainfed rice. The timing of the proposed project is appropriate because the Government, in consultation with the Orang Asli, was already considering a scheme to move them from their dispersed habitat to a planned settlement on the coastal highway. As elsewhere in Malaysia, any families affected who choose not to participate in the proposed project would be compensated under Government procedures for the loss of traditional use areas and resources. The Bank mission fully discussed the matter of the Orang Asli with the Director General of the Government Department of Orang Asli Affairs who agreed with the plans made in the proposed project. -6-

2. THE PROJECT AREA

The State of Pahang

2.01 The State of Pahang is on the east coast of Peninsular Malaysia with the States of Trengganu and Kelantan to the north, Perak and Selangor to the west and Negri Sembilan and Johore to the south. It is the largest state in Peninsular Malaysia, with a coastline of 220 km on the South China Sea and an area of about 36,000 sq km. Much of the state is thickly covered with virgin equatorial forest and is rich in timber. It is also rich in land resources and is consequently the subject of Malaysia's major thrust in land development. In recent years, Pahang has achieved one of the highest economic growth rates in Peninsular Malaysia and now stands among the higher per capita income states. With continued development of its large land and agricultural resources, and rapid expansion in manufacturing industries, Pahang offers relief for people who can be resettled from the land-poor States of Kedah, Kelantan, Melaka and Perlis. Seven industrial tree crop estates have recently been developed in the state and about one hundred factories have come into operation, while over one hundred more have been approved for construction. Industries like motor assembly, cement, woodchip, and timber complexes are also being set up, some on a joint venture basis between the private sector and agencies such as the State Economic Development Corporation (SEDC). Kuantan, the state capital, is being developed into a major growth center to attract urban and industrial development to the east coast of Peninsular Malaysia. Future growth will be stimulated when the M$250 million port at Tanjung Gelang, 30 km from Kuantan, becomes operational. Plans are in hand to establish new industries in the area, which will serve not only the regional market but also the national and export markets.

The Rompin-Endau Region

2.02 The Rompin-Endau region, within which the areas proposed for development are located, is a flat coastal plain in the extreme south of Pahang State. It is bounded by the Rompin River/Bukit Ibam road in the north, the Endau River in the south, the South China Sea to the east, and the foothills of the central escarpment to the west (map 15104). It has an elevation of between 2 m and 10 m above mean sea level, varies from 5 km to 20 km in width and is approximately 40 km from north to south. Large parts are swampy and are regularly inundated by the Rompin, Pontian, Anak Endau and Endau Rivers and numerous creeks draining the foothills. By far the major part of the region is covered with jungle, mainly consisting of primary and secondary forest and scrub. The region is in the administrative district of Rompin and covers parts of the subdistricts (mukims) of Rompin, Pontian and Endau. The main business and administrative center is Kuala Rompin, situated at the mouth of the Rompin River, 134 km by paved road from Kuantan and 195 km from Johore Bharu. Another much smaller center is the fishing village of Kuala Pontian while Padang Endau, located in the State of Johore, acts as a service center for the southern part of the region. Kuala Rompin and Kuala Pontian have independent treated water -7-

supply systems and plans are underway to provide treated water to more villages in the southern part of the project. There is regular bus service along the coastal highway and telephone communications facilities are good to the towns on the highway. Rural electrification has been completed to most population centers and more is planned. Two unpaved roads connect the Pahang Tenggara developments in the hinterland with the coastal road; one of these, the Bukit Ibam road, runs parallel to and north of the Rompin River and the other is on the right bank of the Pontian River. Except for these roads, and some tracks, access is restricted to river transport. The development of the region is the responsibility of the Pahang Tenggara Development Authority (DARA), an autonomous federal authority created in 1972 to plan and implement economic and social development of the southeast part of Pahang State.

Climate and Hydrology

2.03 Climate. The climate is tropical with high temperatures, rainfall and humidity, and only minor variations in temperature and day length (Table 2.1). The mean annual rainfall is about 3,500 mm and is affected by the northeast monsoon and to a lesser extent by the southwest monsoon. About 40% of the annual rainfall comes during the northeast monsoon, between mid-November and mid-January. Average rainfall is quite high in both cropping seasons; it is also highly variable. Although some wet season rice is grown without irrigation, no dry-season rice is curently grown. For double-cropping irrigation water is needed in both seasons; particularly, during the presaturation/land preparation stage for the dry-season crop. Furthermore, to ensure high yields and cropping intensity and proper timing of agricultural operations, supplemental water to bridge temporary droughts of up to 10 days in the wet season and 20 days or more in the dry season must be provided. Conversely, there is often excessive rainfall for optimum rice growth, particularly during the November-January period, which requires a high standard of drainage. The average sunshine varies from 3.9 hrs/day in December to 7.4 hrs/day in April.

2.04 Hydrology. The Rompin River, with a catchment area of 3,950 km 2, covers about 90% of the hydrological area studied and extends up to 70 km inland. The smaller Pontian and Anak Endau Rivers have their source on a range about 25 km from the coast. The highest parts of the catchments reach elevations of 500 m to 800 m above sea level. The lower areas of all rivers are flat and swampy with poorly defined tributary drainage networks and are regularly inundated during the northeast monsoon. Rainfall data have been recorded for about 10-50 years at 20 stations located in and around the project area; evaporation data are available for 7 locations covering a period of 7-15 years. There is a gauging station on each of the rivers, the Rompin, Pontian, Anak Endau, and its tributary, the Kemelai. The available records, however, cover only about half of the recording periods since installation in 1974-76. There are no hydrological data available for the Endau river. During project formulation, additional stream flow measurements were taken by DID for 11 locations on the rivers. Use was also made by the consultant of the results of previous studies, the Pahang Table 2.1: CLIMATIC DATA

Total average Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Rainfall (mm) /a 209 266 443 912 3,546 Average 1964-79 333 210 174 168 199 203 208 220 247 96 164 681 598 3,174 1977 52 626 40 52 108 205 305 157 169 276 214 289 - 1978 n.a. 380 59 50 202 210 131 102 119 171 761 791 3,195 1979 454 121 192 154 53 177 100 102 96 120 198 301 1,233 Minimum 24 13 40 50 53 136 100

Evaporation (mm) /a 151 146 144 124 119 1,710 Average 1962-1979 129 135 156 156 158 143 149

Number of rainy days /b 13 13 14 14 16 17 155 0 Average 1952-79 13 10 10 11 13 11

Temperature (°C) /b 25.6 25.8 25.7 25.5 25.1 25.9 Average 1960-73 25.5 26.1 26.5 26.8 26.7 26.2 25.8

Relative humidity (%) /c 85.8 87.2 88.8 89.7 86.2 Average 1963-73 84.8 84.2 84.2 84.8 86.0 86.2 86.4 86.5

Sunshine (hrs/day) /c 6.3 5.7 5.5 4.1 3.9 6.1 Average 1968-72 5.8 6.7 7.3 7.4 7.1 6.4 6.5

Windspeed (m/s) Ic 2.7 2.8 2.6 2.8 3.3 3.2 Average 1968-72 4.8 4.5 3.8 2.8 2.6 2.1 2.8

/a Paya Sepayang Station.

/b Mersing Station.

/c Average of Mersing and Kuantan Stations. -9-

Tenggara Water Resources Study (1979) and the Pahang River Basin Study (1974), in estimating water availability and design floods. Mathematical models and correlation techniques were also used to determine a rainfall- runoff relationship for extending runoff records.

Topography and Soils

2.05 Topography. The project area is situated on a portion of the east coast alluvial plain that slopes gently from about El. 9 m near the foot- hills to the South China Sea. The land also slopes to the Rompin and Endau Rivers which have bank levels in the project area of about El. 2 m. The smaller rivers (Pontian, Anak Endau and Mentelong) have more deeply incised beds. Although the macro relief is quite flat, detailed topographic surveys have shown that the micro relief is irregular, caused by beach ridges, swales, creeks and old river beds.

2.06 Soils. A succession of parallel sandy beach ridges, alternating with elongated sandy swales, extends from the coast inland to an average distance of 4 km. These soils are unsuitable for growing rice. Large areas of clay soils have been deposited along all rivers and are suitable for rice cultivation, except near the mouths of rivers where they have become saline. Large areas between the beach ridges and clay soils on one side and the sedentary soils of the foothills on the other side are covered with peat, in some places to a depth of 6 m or more. Where the depth of peat does not exceed about 1 m these soils are suitable. The above pattern is general but several different soil series can be found within relatively small areas. The soils most suitable for irrigated rice cultivation are clays, about 15,000 ha; organic clay and muck, 1,700 ha; and shallow peat, 3,200 ha. There is a possibility that acid sulfate soils might develop in some areas, primarily peat areas underlain by clay; however, those judged dangerous were excluded from the planned development. Proper water management and suitable rice varieties would control the problem in other areas. Thus a total of 19,900 ha out of 61,000 ha studied by the consultants would be suitable for rice. Approximately 37% of the area studied is deep peat and 30% is too sandy or has other serious deficiencies. Also, not all of the 19,900 ha can be included in the project. Many areas with suitable soils are too small and scattered or far from a water source or have too high and unfavorable topography to warrant development. The total area available for development is therefore about 12,700 ha.

Population

2.07 The population in the subdistricts of Rompin, Pontian and Endau, estimated to be about 12,000 persons in 1976, has been declining at a rate of 3.8% per annum in recent years. Approximately 90% of the population is Malay. There are about 4,450 Orang Asli (aboriginal people) in the entire district of Rompin; one fourth of them live in the project area. The majority of the population live in Kuala Rompin, Kuala Pontian and villages along the coast road. Settlements are also found on the left bank of the Endau River where wet season rice and tree crops are grown and where - 10 - recently there has been an influx of rice farmers from other states. In the Paya Sepayang area there are small settlements of migrants who came 10 to 15 years ago, mainly from rice growing areas in Kedah, Perlis and Trengganu. There is also some outmigration, mainly by young people, to new land development schemes or to urban areas as far away as Singapore. This accounts for the decline in population in recent years. The average family size is 6 persons. Most households derive their income from subsistence agriculture supplemented by activities such as fishing and services. Two thirds of the households earn about M$150 or less per month from agricultural activities; the average annual total family income from all sources is about M$ 1,500. The majority of the farm families are headed by men 40 years of age or older.

Agriculture

2.08 Cultivation in the project area consists of about 170 ha of wet season rice in the Paya Sepayang irrigation scheme and 50 ha of rainfed rice at Paya Laka, both within the Pontian subproject area, and 150 ha of rainfed rice along the Endau River in the Endau subproject area. Rubber, coconut, and fruit trees occupy 1,920 ha, and cash crops (watermelon, tobacco, upland rice, maize, vegetables) covering 540 ha are found on scattered plots of upland soils interspersed among the various subproject areas. About 1,500 cattle and buffalo and about 1,000 sheep and goats are in the project area. The 370 ha of rice is transplanted in October/November and harvested in March/April of the following year. Yields obtained average about 1.4 ton/ha with total annual production being only about 500 tons of padi, virtually all of which is processed by small private mills for home consumption. Rice land holdings range between 0.4 ha and 5.0 ha and average 1.2 ha.

2.09 The Paya Sepayang Irrigation Scheme was constructed by DID in 1968. It is located between the Pontian River and its tributary, the Sepayang. It was planned to be served by the existing diversion weir on the Sepayang but because of inadequate flow in that river pumps were installed on the Pontian to supplement the water supply. As the Pontian at this point is often saline due to seawater intrusion, supplementary water provided by the pumping plant is also not sufficient to support a dry season crop. Originally the land was developed with an average holding of 1.2 ha (3 acres) per family. Due to lack of local interest, fields have been neglected and have been gradually taken over by migrants from Kedah, Perlis and Kelantan. At present, they form the majority of the farmers cultivating the fields partly on an annual lease basis and partly as owner-operators.

3. THE PROJECT

Project Description

3.01 The proposed project would develop one of the last major undeveloped areas suitable for rice cultivation remaining in Peninsular Malaysia. Irrigation would be developed on a net area of about 11,400 ha - 11 -

presently under cover of tropical forest. Settlement facilities would be provided for 4,750 settler farm families.

3.02 The main features of the project are:

(a) land clearing on about 13,800 ha of swampy tropical forest;

(b) construction of an earthfill dam on the Anak Endau river, a cutoff channel and ancillary works on the Rompin river, and three weirs, one each on the Pontian, the Anak Endau and Kembar rivers;

(c) construction of about 110 km of main and secondary canals, 130 km of drains, 95 km of dikes, and 12 pumping stations;

(d) construction of tertiary and quaternary canals and drains for a net irrigable area of 11,400 ha;

(e) construction of about 45 km of access roads and about 150 km of farm roads;

(f) construction of two subregional centers and six farm settlements with physical and social infrastructure for 4,750 settler farm families;

(g) construction of office buildings, staff quarters, workshops, stores and agricultural service facilities;

(h) procurement of equipment, vehicles and supplies for project opera- tion and maintenance and for agricultural support services; and

(i) consulting services for detailed design and construction supervision of project works.

Project Works

3.03 The area which would benefit from the project is divided into four subprojects corresponding to the four main rivers: the Rompin, the Pontian, the Anak Endau and the Endau. The locations and main features of the subprojects are shown on map IBRD 15104. The net irrigable areas are shown in Table 3.1. - 12 -

Table 3.1: NET IRRIGABLE AREA

Subproject Left bank Right bank Total ------ha ------

Rompin 2,770 1,280 4,050 Pontian 515 1,330/a 1,845 Anak Endau 970 3,225 4,195 Endau 1,310/b - 1,310

Total 11,400

/a The existing Paya Sepayang Irrigation Scheme which covers 275 ha net irrigable area and needs extensive rehabilitation, is included in this subproject.

/b Consists of four discrete areas - Kembar (600 ha), Mentelong (200 ha), Upper Endau I (270 ha) and Upper Endau II (240 ha).

3.04 Rompin Subproject. This subproject involves the construction of a 60 m wide cutoff channel of about 7 km in length, two closures of the existing Rompin river channel, and a 12 km long flood protection dike. The cutoff channel would bypass about 26 km of river meanders, which would be used as a storage basin for irrigation water in the dry season and a flood detention reservoir in the wet season. A concrete weir would be constructed across the cutoff channel near its upstream end to provide additional storage and also prevent salt water intrusion. A gated intake structure would be built near the upstream closure to draw water into the storage basin from the Rompin river whenever possible and necessary. The drains in the irrigated area would discharge into the storage basin; outlet works would be constructed near the downstream end of the basin to release the excess water into the Rompin river.- As the weir cannot be constructed high enough to command the subproject area, two pumping stations, one on each bank, would be installed to lift water to the canals.

3.05 A subregional center covering about 285 ha would be constructed southeast of the right bank irrigated area. It would serve a population of about 7,500 and would have secondary and primary schools, community service facilities, government offices and shops. On the left bank a farm settlement would be constructed on about 128 ha to accommodate 520 additional settler families. It would have a primary school, some service facilities and some shops. The secondary school and the facilities in the - 13 -

subregional center would also serve the farm settlement and the surrounding rural communities. A 14 km main access road would link the subproject to the east coast highway. This road would pass through the subregional center and continue as the main collector road to the farm settlement, crossing the river over the downstream closure.

3.06 Pontian Subproject. A weir comprising an earth and rock fill embankment (maximum height about 14 m), a concrete spillway and a gated sluiceway would be built on the Pontian river. The reservoir behind the weir would have a capacity of about 15 million cu m. A short channel from the reservoir would supply a pumping station which, supplemented by a booster, would irrigate the area on the left bank. The main drains would discharge into the river through outlet sluices supplied with flap gates, with manual controls for use in case of emergency. A 2.5 km concrete lined feeder canal would be constructed from the reservoir on the Pontian to the existing Sepayang weir, which is in good condition. The existing Paya Sepayang area would receive improved supplies from this weir. New dikes would be built around the area, roads would be improved and the canals and drainage facilities would be reconstructed. Small plots in the existing scheme would be consolidated to ensure all participants 2.4 ha plots. The new area on the right bank of the Sepayang river would be supplied through a pumping station which would be constructed about 1 km upstream of the Sepayang weir. Irrigation and drainage works and flood protection dikes would be constructed.

3.07 A farm settlement to be built on the Pontian left bank would have about 270 houses. Another farm settlement on the right bank would accommodate 550 families. The existing earth road would be improved to provide access to the left bank and a new access road would be built from the right bank farm settlement to the coastal highway. Maintenance and inspection roads would be laid out along the canals to the tertiary blocks and the pumping stations.

3.08 Anak Endau Subproject. Normal flow of the Anak Endau river is not adequate to serve all of the area, therefore, an 18 m high zoned earthfill dam with a storage capacity of about 35 million cu m would be built on the upper reaches of the river. A weir would be built about 10 km downstream of the dam to prevent sea water intrusion, provide a forebay pool for the pumping plants, and re-regulate flows from the dam. The peat soils and site topography limit the weir elevation, requiring the use of low lift pumps to raise water to the canals on both banks. For the area on the left bank, a supply channel and a pumping station would be constructed to feed three laterals for serving the tertiary blocks. On the right bank, a pumping station upstream of the weir would supply a main canal and two laterals for serving the tertiary network. A booster pumping station would be required - 14 -

to supply water to about 800 ha in the southern part of the right bank area. A system of dikes would protect the irrigated area and the settlementson both banks of the river against floods. The drains would discharge into the river through gated outlet sluices.

3.09 The Anak Endau subregionalcenter would be located on a ridge along the southern boundary of the right bank area. It would cover about 290 ha and would accommodate1,160 settler families. A farm settlement covering about 90 ha on the eastern end of the right bank would serve 380 settler families. A second farm settlement,occupying about 130 ha on the eastern boundary of the left bank, would serve 500 families. The main access to the Anak Endau right bank area would be over the existing road on the left bank of the Endau river, which continues southwards to the Kembar subproject. The existing ferry crossing over the Anak Endau is in good condition and is adequate for the present. A new main road would be built and the existing road improved to connect the left bank area to the coastal highway. Farm roads and motorcycle tracks would provide access to the irrigated area and the pumping stations.

3.10 Endau Subproject. The Endau Subproject consists of four discrete areas: one each on the Kembar and the Mentelong, both tributariesto the Endau, and two on the Endau (Upper Endau I and II). A small concrete gated weir would be built on the Kembar which would provide sufficient storage for the operation of a pumping station to irrigate the Kembar area. The weir would prevent salt water intrusionand would also provide a crossing for the road to the areas further inland. The Endau River is saline during high tide to well upstream of Upper Endau II, 30 km from the estuary. However, the Endau is a large river and the relatively small water requirementsof the three areas would be adequately supplied by pumping stations operated during low tide when the water in the river is fresh (about one-half of each 24 hours). The pumping station for the Mentelong area would be located on the Mentelong River about 3 km upstream from its confluencewith the Endau. The Upper Endau I pumping plant would be on a creek, about 2 km from the Endau river, and the pumping plant for the Upper Endau II area would be on a small bay about 1/2 km from the Endau. Flood protection dikes would be constructed to protect the padi fields and settlementworks as needed.

3.11 The Mentelong farm settlementwould serve the Mentelong, Upper Endau I and Upper Endau II farmers and also those from the western part of the Kembar area who are too far from the Anak Endau subregionalcenter to reside there. This settlementwould have 370 houses, a primary school, a small mosque and a small health center. An 18 km access road would be built from the Kembar weir to the Mentelong area and a 15 km motorcycle track would continue to Upper Endau I and II. Wet season traffic and heavy goods would be moved by boat over the river. A network of motorcycle tracks would provide access to the tertiary blocks and pumping stations. - 15 -

3.12 Equipment, Vehicles and Buildings. Vehicles, equipment and supplies for project operation and maintenance (O&M) and for the agricultural support services would be purchased under the project. These include equipment and vehicles for O&M of the irrigation works and the roads under DID, agricultural equipment and vehicles for FOA and DOA and livestock, fish, poultry and supplies for DOVS and DOF. The equipment and vehicles would be serviced and maintained in the workshops to be constructed and equipped under the project. The lists of vehicles, equipment, supplies and spare parts for project implementation are shown in Annex 2, Tables 5, 6, and 7. The project also would provide for the construction of offices, stores, staff quarters, seed multiplication and variety research facilities, and farmers development centers (FDC). These are summarized in Annex 2, Table 8. The pumping stations are listed in Annex 2, Table 9.

Water Demand, Supply and Quality

3.13 Wlater Demand. The estimated water demand for irrigation is based on staggered planting in three parts of each tertiary irrigation block and each block growing two crops of padi per year. Identical cropping schedules would be followed in each tertiary block at staggered intervals of 15 days. Sequential irrigation with staggered planting reduces peak demands for water, labor and machinery. Water demand was calculated assuming that field saturation and crop establishment would require 250 mm of water, of which 100 mm would be standing water and 150 mm would be required to saturate the soil. Further, there would be field percolation loss of 2 mm per day. Monthly crop demands and assumptions used in calculating demand are shown in Annex 1. A maximum annual demand of 22,000 cu m/ha was derived assuming that it would be exceeded in only 1 out of 10 years. In a year with average rainfall the estimated demand is about 16,000 cu m/ha. The maximum irrigation diversion demand would be about 2 1/sec/ha.

3.14 Water Supply. The peak demand for the Rompin Subproject is about 8.1 cu m/sec corresponding to a peak 15-day requirement of about 10.5 million cu m. Augmented with storage provided in the bypass basin (4.2 million cu m) and upstream of the weir (5.6 million cu m), the water supply in the Rompin river would be sufficient for a 1-in-25-year drought.

3.15 The maximum demand for the Pontian Subproject is about 3.7 cu m/ sec corresponding to a 15-day requirement of about 4.8 million cu m. Low flow values in the Pontian river which would occur at the time of maximum irrigation demands, were difficult to determine accurately because of sparse data but are estimated to be considerably less than the maximum demand. Simulation studies made by the consultant indicated that a reservoir with 15 million cu m capacity would be needed. The Pontian weir would provide the needed storage and would meet the water demand of the l-in-20-year drought for the left and right bank areas. It would also meet the 1-in 10-year drought for the existing Paya Sepayang area. Changes in runoff characteristics due to oil palm developments in the Pontian watershed would not adversely affect the water supply. - 16 -

3.16 The maximum demand for the Anak Endau Subproject is about 8.4 cu n/sec corresponding to a 15-day requirement of about 10.9 million cu m. Low flow values in the Anak Endau river are considerably below 8.4 cu m/sec at the location of the weir. The needed storage for the dry season crop would be provided by the construction of a dam having a storage capacity of about 35 million cu m. Simulation studies indicate that the reservoir would meet the water demand of a 1-in-15-year drought. The small storage capacity of the weir was not considered in the analysis.

3.17 The relatively small (610 ha) Kembar area has a maximum demand of 1.2 cu m/sec corresponding to a 15-day requirement of about 1.6 million cu m. The catchment above the weir is in excess of 4,000 ha, much of which is deep peat. It is estimated that there would be sufficient water storage in the peat, and run-off from the catchment, to irrigate the area. There are no flow records available for the Endau River. It is estimated, how- ever, that low tide fresh water flows in this large river would be adequate to meet the pumping requirements of the relatively small Mentelong, Upper Endau I and Upper Endau II areas.

3.18 Water Quality. Monthly water samples taken by DID from the upper reaches of the Rompin, Pontian and Anak Endau rivers indicate that the waters are suitable for irrigation. The mean pH value is about 6.5, mean total solids about 50 ppm, and mean chloride content about 6 ppm. Weirs would be provided on all rivers, except the Endau, for storage as well as for prevention of sea water intrusion. Future land development in the upper catchments of the major rivers may lead to construction of palm oil mills. However, the discharge of effluent from these mills into rivers is controlled by law and pollution would not affect irrigated padi agriculture. DARA is implementing a water quality monitoring program in southeastern Pahang which also includes the project area.

Design Standards

3.19 Irrigation Works. Canals would be designed for a demand of 2.0 l/ sec/ha. Quaternaries would be designed to meet a maximum water requirement of 4.0 1/sec/ha to accommodate the off-season presaturation requirement All tertiaries and quaternaries would be unlined. Main canals would be lined with concrete only where they traverse pervious materials. All turnouts to tertiary canals would include measuring devices. Checks would be provided in main and secondary canals, as needed, to maintain command levels. Each farm lot of 2.4 ha would be enclosed by a small bund and would be served by an earthen quaternary canal and a drain. Secondary and tertiary drains would be designed to dispose of excess water resulting from the 1-in-5-year 3-day rainfall equivalent to a unit discharge of about 8 1/sec/ha. Major drainage outfalls and gated outfall tidal control structures in the dikes along the rivers would be designed for a unit discharge of about 12 1/sec/ha because high tides would reduce their discharge capacity during one third of each 24-hour period. - 17 -

3.20 A tertiary canal would serve an area of about 60 ha and would be about 1.0 to 1.5 km long. It would convey water to the quaternaries which would have an average length of about 500 m (maximum about 800 m) each and would be spaced at about 150 m to 200 m. Each block would be provided at its lower end with a field drain to convey excess runoff to a collector drain and from there to the main drainage system. The proposed water distribution system would allow rotational irrigation at the time of presaturation and land preparation and continuous irrigation after transplanting. A schematic layout of a typical tertiary block is shown in the inset of Map IBRD 15104. Actual layouts would be determined by the topography of each particular area.

3.21 Land Clearing and Flood Protection. Main drains would be excavated first to provide access to the project area. Land clearing operations would follow the completion of logging to salvage residual commercial timber which is proceeding in anticipation of the project. Tree felling would be accomplished by appropriate mechanical means to minimize disturbance of the top-soils. The logs would be chainsawed, raked, piled into windrows and allowed to dry for burning, with the process repeated for reburning as necessary. Care would be taken to maintain soil moisture levels in the peat soils adequate to prevent peat fires. Stump holes and other ground irregularities would be filled and levelled by bulldozing. Materials excavated from drains and canals would be used for formation of flood protection dikes, some of which would carry service and farm access roads and tracks. Dikes would be designed for a 50-year frequency flood with 0.5 m freeboard, would be 1-2.5 m high and have top widths of 2-4 m, and side slopes of 2:1.

3.22 Settlements and Roads. Main roads would provide access from the coastal highway to each of the subprojects. Each tertiary block would be accessible by a farm road to be provided along canals to serve as maintenance roads. Within the settlements, the main roads would extend to the centers of the settlements where the central facilities would be located. Main collector roads would take off from the main roads and run in a loop through the settlement and minor collector roads would serve the remaining areas. Motorcycle tracks would provide access to the outer areas and link the settlements to the farms. The widths of different types of roads and tracks are given in (Table 3.2.) - 18 -

Table 3.2: ROAD WIDTHS

Total road Road type Pavement Shoulders Berms Drains reserve ------m ------

Main access 5.0 2.3 6.7 6.0 20.0 Main collector 3.0 2.5 3.5 3.0 12.0 Minor collector 2.5 2.4 2.4 1.7 9.0 Motorcycle track 1.0 2.3 - - Farm 3.0 2.0

The main access roads would meet PWD standards for Group 01, gravel surfaced roads. Within the settlements, the main roads would have an 18 cm crushed stone base course and a 6.3 cm bituminized macadam surfacing. The base course would extend over the full shoulder to enable future surfacing. The collector roads would have a 10 cm crushed stone base course and surfacing similar to the main access roads, and the motorcycle tracks would have a surface dressing with 5 cm of stone chips. Farm roads along canals would have a pavement of 15 cm crushed stone or laterite on a compacted base.

3.23 The average size of the residential plot would be about 0.17 ha. Settler houses would be built of timber and elevated above the ground for better air circulation in the Malay tradition. The design would permit future expansion by the settler according to his needs and income. The facilities to be provided in the subregional centers and the farm settlements would follow practices established by DARA for similar projects in the area. Turfed open areas would be developed to retain the natural vegetation wherever possible. A water supply system for each settlement would be designed and constructed by consultants under the auspices of DARA. For the present, backhouse type sewerage facilities would be provided. DARA has schemes in the area for the installation of central sewerage collection, treatment and disposal systems. Electricity would be provided from portable diesel generator sets until the NEB grid system reaches the project area. Detailed features of the settlement facilities are shown in Annex 2, Table 4.

Status of Engineering

3.24 Feasibility designs were prepared for all the major works in the project. In addition, detailed layouts of the irrigation system on three representative areas totalling about 2,000 ha were prepared based on detailed topographic surveys, soils investigation and geological data. Feasibility grade subsurface investigations in conjunction with detailed topographic surveys were conducted for the dam and the weirs. Additional subsurface data would be required for final design of some major works including the Rompin cutoff channel. The Government has appointed - 19 -

consultants (para. 4.27) to prepare the final designs, construction plans and tender documents and to supervise construction of the project works. The consultants have already started preparing final designs for some of the major works. Preparation of detailed designs and tender documents is sufficiently advanced for procurement to start shortly after loan approval and for construction to start on schedule. Contracts totalling about US$18 million would be awarded during the first year of the implementation period. This would cover land clearing, river diversion works, main roads, drains, dikes and appurtenant structures in the Pontian, Anak Endau and Rompin subprojects.

Project Implementation

3.25 The project would be implemented over six years, from mid-1981 to mid-1987. The proposed implementation schedule is shown in Figures 3.1 and 3.2. Land clearing would start in 1981 on the Pontian subproject, which is the most accessible; this would be followed by the weir, the irrigation works and the tertiary development. Farm settlements would be completed in coordination with the irrigation infrastructure. The work on other subprojects would be undertaken progressively as the design and tender documents are prepared. The agricultural support staff and facilities would be built up in phase with the completion of the irrigation and settlement infrastructure and the selection and placement of settlers.

Cost Estimate

3.26 The total project cost in mid-1981 prices is estimated at US$141 million with a foreign exchange component of US$59 million or 42% of the total cost. Because of the tax exempt status of the implementing agencies, cost estimates exclude all known taxes and duties. Quantity estimates for all major work items, based on feasibility designs, were prepared for the project works. Unit prices for the work items were based on recent contracts for similar works carried out for DID, PWD and DARA in this region of Malaysia. The costs of land clearing, drainage, flood protection dikes, tertiary irrigation development and settler housing construction were updated to reflect recent increases in these areas of construction. The costs of equipment and vehicles are based on recent bid prices.

3.27 Physical contingencies of 20% were applied for irrigation, drainage and road works, 10% for settlement works and 5% for vehicles and equipment. Expected price increases over the project implementation period of six years amount to about 27% of the base cost plus physical contingen- cies, assuming cost escalation (for both local and foreign elements) of 9.0% in 1981, 8.5% in 1982, 7.5% in 1983-85 and 6.0% in 1986-87. Details of the project costs are given in Annex 2, Tables 1-8 and are summarized in Table 3.3. - 20 -

Table 3.3: COST SUMMARY

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

Civil Works Land clearing, main drains & roads 18 6 17.1 35.7 8.7 7.9 16.6 48 Irrigation works & farm roads 11.0 7.8 18.8 5.1 3.6 8.7 45 Tertiary development 10.5 7.1 17.6 4.9 3.3 8.2 42 Subregional centers & settlements 38.5 10.7 49.2 17.9 5.0 22.9 22 Rompin cutoff channel, weir & dikes 13.5 11.2 24.7 6.3 5.2 11.5 45 Pontian weir & dikes 2.4 1.9 4.3 1.1 0.9 2.0 45 Anak Endau dam, weir 7.7 6.3 14.0 3.6 2.9 6.5 45 & dikes Kembar weir & dikes 1.3 1.1 2.4 0.6 0.5 1.1 45

Subtotal 103.5 63.2 166.7 48.2 29.3 77.5 38

Service buildings & staff quarters 5.8 1.7 7.5 2.7 0.8 3.5 22

Equipment, vehicles & supplies 2.1 12.3 14.4 1.0 5.7 6.7 85

Land acquisition 1.0 - 1.0 0.5 - 0.5 -

Consultant services 3.9 9.0 12.9 1.8 4.2 6.0 70

Administration & engineering 5.9 0.6 6.5 2.7 0.3 3.0 10

Base cost 122.2 86.8 209.0 56.9 40.3 97.2 42

Physical contingencies 16.8 12.7 29.5 7.8 5.9 13.7 42

Price contingencies 37.2 27.5 64.7 17.3 12.8 30.1 42

Total 176.2 127.0 303.2 82.0 59.0 141.0 42 - 21 -

Financing

3.28 The proposed Bank loan of US$40 million would finance 68% of the foreign exchange requirements of the project cost. The Government's contri- bution of US$101 (M$217) million would finance the balance of the costs through annual budgetary allocations. The Government is currently exploring possible cofinancing arrangements to secure the additional US$19 million of foreign exchange required. Operation and maintenance costs of the completed works and the cost of providing agricultural extension services would be borne by the State of Pahang.

Procurement

3.29 Table 3.4 shows the construction contracts scheduled for international competitive bidding (ICB) and local competitive bidding (LCB). Land clearing would be combined with construction of main drains and access roads, to allow early access to the project sites and to minimize contractor interference, forming five contracts to be awarded following ICB procedures in accordance with Bank Group Guidelines for Procurement. ICB would also be used for the Rompin cutoff channel and dikes, the Anak Endau dam and weir, the Pontian weir and the two subregional centers. There would, therefore, be eleven ICB contracts totalling about US$73 million including contingencies ranging in value from about US$2.5 to US$15 million. The remaining works would be spread over the project area and would be phased over six years. These are not large enough for ICB and would therefore be carried out under about 22 contracts to be awarded following local competitive bidding procedures, in which foreign bidders would be eligible to participate. The LCB contracts would range in value from about US$100,000 to US$2.5 million, totalling about US$43 million.

Table 3.4: SCHEDULE OF CONSTRUCTION CONTRACTS

ICB LCB ---- (US$ million)----

Land clearing, main drains & roads (5)/a 21.5 (2)/a 2.5 Diversion works (4) 27.5 (1) 0.5 Irrigation works (-) - (10) 23.0 Settlement works (2) 24.0 (6) 13.0 Project buildings (-) - (3) 4.0

(11) 73.0 (22) 43.0

/a Figures in parentheses are numbers of contracts. - 22 -

3.30 Purchases of agricultural and O&M equipment, service vehicles and supplies totalling US$4.7 million would be scheduled into convenient packages for procurement under ICB procedures 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. Small off-the-shelf items costing less than US$35,000 each and limited to a total of US$2.0 million, would be procured through normal Government procedures. Local competitive procedures are acceptable and foreign firms are allowed to participate. Force account work would be limited to the fabrication and supply of gates and hoists for water control structures. This is estimated to cost about US$0.6 million which is less than 1% of the total project costs. DID has been fabricating its own gates and hoists in its Federal Workshop in Ipoh for more than 15 years.

Disbursements

3.31 Disbursements would be made at the rate of 100% against the foreign exchange expenditure on directly imported equipment and vehicles, 100% of the ex-factory cost of such items manufactured locally, and 80% of the cost of imported items procured locally. Disbursement for civil works executed by contract would be 24% of total costs. For consulting services, disbursements would be 100% of the expenditures incurred. No disbursement would be made for force account expenditures. It is expected that disbursements would be completed by June 30, 1988. Estimated expenditure and disbursement schedules for the nroject and a proposed allocation of the proceeds of the loan are presented in Annex 2, Tables 10-12.

Accounts and Audits

3.32 The agencies involved in the project are all subject to normal Government controls and audit procedures. Assurances were obtained during negotiations that all agencies involved in project implementation would maintain separate accounts which would be collated by the Project Manager. The Government would furnish to the Bank such information concerning such accounts as the Bank shall from time to time reasonably request.

Environmental Effects

3.33 Commercial grade timber has been extracted from the forests in the project area and only residual timber remains to be salvaged prior to land clearing operations. No loss of habitat critical to endangered species is expected. The project area does not overlap the Endau Kluang Wildlife Preserve. The declaration as "Environment Forest" of the peat swamp areas between the Rompin and Endau rivers and extensive areas to the southwest, as recommended in the Pahang Tenggara Master Plan, would provide additional sanctuary to the displaced deer, monkeys, birds and snakes. The Fisheries Department plans to increase significantly the production of fresh water fish in Pahang State by promoting aquaculture in the irrigation canals and reservoirs. The plan includes cage culture in the Anak Endau reservoir and the storage basin of the Rompin and public stocking of irrigation channels. - 23 -

Project development would not interfere with the migration of commercial prawns between the estuarine and riverine sectors for the breeding and maturation phases, however, the extent of the natural breeding habitat may be reduced. The incidence of malaria is low in the project area. There would be a possibility of introduction of malaria through the immigration of settlers. The Malaria Eradication Program and Pahang State Hlealth Depart- ment would institute monitoring procedures and undertake appropriate remedial measures. The Ilalaria control program in the State is making good progress. Preventive and remedial measures for the project area would be integrated into the regional programs. Health centers would be provided in the farm settlements and subregional centers in the project. During negotiations an assurance was obtained that the Government would take all measures necessary to ensure that the design, construction and operation of the works under the Project are carried out in accordance with appropriate ecological and environmental standards.

4. ORGANIZATION AND M1ANAGEMENT

Project Coordination

4.01 Overall project direction would be the responsibility of a Project Manager appointed by the Ministry of Agriculture (MOA). The Project Manager would be guided on policy matters by a Government Steering Committee composed of representatives from all government agencies having project responsibilities, and co-chaired by the Secretary General of MOA and the State Secretary of Pahang. The Project Manager would be the Secretary of the Committee and would thereby have direct access to top officials of the State Government and the Federal MOA. He would also be a member of the Pahang State Agricultural Planning Committee composed of senior state-level officers from all the agriculture-related agencies. Involvement of the State Secretary who has broad administrative and political authority would ensure the participation of both State and district level agencies and officers and should facilitate coordination of project activities at the ground level. This management structure has worked well in the previous Bank-financed integrated agricultural development projects (Loans 973-MA, 1294-SA, 1444-MA, 1522-MA, 1632-MA and 1717-MA) and is in line with the federal and state responsibilities and jurisdictions under the Malaysian constitution. To improve this structure, the Government has recently decided that in the future all funds for implementing integrated agricultural development projects will be allocated to 2IOA who will in turn allocate them to the implementing agencies. The Project Manager would reside in the project area and would have adequate staff to assist him in the discharge of his functions. The appointment of a suitably qualified and experienced Project Manager would be a condition of effectiveness of the proposed loan.

4.02 The Project Manager would have direct responsibility for settler placement and administration and for ensuring rational phasing of implementation of the different project components. His responsibilities as - 24

coordinatorwould include: monitoring constructionand equipment procurement; coordinatingextension programs and preparationof budget requests; representingthe project in official meetings; monitoring and evaluating project effects and benefits; and reporting on progress to the Steering Committee and the Bank. He would also ensure that adequate credit is available through BPM to enable farmers to purchase recommended agricultural inputs.

4.03 The proposed organizationof the office of the Project Manager and the line agencies working under him (described in paras. 4.06-4.25) is presented in Figure 4.1. The Project 'lanager'soffice would have four sections - Community Development,Administration, Finance and Budget, and Monitoring and Evaluation. The CommunityDevelopment Section would provide, as needed, transportation,temporary housing and first-year subsistence loans for immigrant settler families. The section would also oversee health, education, water and electricity services, and maintenance of streets and community buildings during project implementation. It would conduct educational programs on home management, nutrition, health and sanitation practices,child care, home gardens,foodpreservation, and cottage handicrafts. The AdministrationSection would be responsible for managing all staff under the project office and all matters relating to service. The Finance and Budget Section would prepare and schedule loans and subsidies;supervise loan repayments;collate budget requirementsof the implementingagencies; prepare overall budgets for the project; ensure the smooth flow of funds to project entities; and prepare periodic financial statements for the Bank. ''OAand other federal and state agencies. The functions of the Monitoring and Evaluation Section would include timely collection and evaluationof informationon project inputs, outputs and complementaryactivities contributingto attainment of the project objectives. It would assist in the preparationof planting and harvesting schedules and would prepare project progress reports. Altogether, the Project Office staff would total 46 including the Project Manager, the four division heads, and five other senior officers.

Settler Selection and Administration

4.04 The Pahang State Government, in conjunctionwith MOA, would select the settlers. Since there are not enough rice farmers to fulfill project needs either in the Rompin Endau region or in the rest of the Pahang State, it is expected that the State Government would select the bulk of the settlers from among applicants from areas with surplus rice farmers in Kedah, Perlis, Kelantan, or other states. The settlers would mostly be traditionallowland rice farmers, either landless or owning ineconomic holdings. The Orang Asli and other families now living in the project area and cultivatingrice would be given priority for settler status. All settlers would be able-bodied,between 20-50 years of age and prepared to sign an agreement with the Government setting out their obligationsand rights. A sizeable group of families sharing a common origin would be settled on contiguous plots of land and housing units, which would contribute - 25 -

to the long-term viability of the farming and settlement process. This would also materially assist in the formation of farmer's groups to pool labor for labor-intensive crop activities. During negotiations an assurance was obtained that by June 30, 1981, detailed settler selection criteria and the Government-settler agreement would be forwarded to the Bank for review and comment.

4.05 The cost of the house built for the settler and the cost of land clearing for his individual padi plot would be considered a loan advanced to him. The settler would be obliged to repay this debt obligation (para. 6.08). The Project office would keep a loan account for each settler. The loan account would be credited with deductions from the revenue generated by sale of the settler's padi crop (which he would be obliged to market through FOA/LPN) and debited with deductions for land taxes and debt servicing. At the end of the debt repayment period the settler would be given clear title to his house and land and would then have a legal position similar to other owner-operator rice farmers in Malaysia.

Agencies and Agency Responsibilities

4.06 Of the agencies involved in the project, seven are under the jurisdiction of the Ministry of Agriculture (MOA) - the Drainage and Irrigation Department (DID), the Department of Agriculture (DOA), the Farmers' Organization Authority (FOA), the Bank Pertanian Malaysia (BPM), the Department of Fisheries (DOF), the Department of Veterinary Services (DOVS), and the Malaysian Agricultural Research and Development Institute (MARDI). One, the Department of Orang Asli Affairs (DOAA), is in the Ministry of Home Affairs. Other participating agencies include the Pahang Tengarra Development Authority (DARA) and the National Padi and Rice Authority (LPN), both of which are semi-autonomous organizations working under the control of the Federal Government. For agencies under the MOA both federal and state level staff would be involved in project implementation, with the state staff having primary responsibility for operation of the project once it is completed.

4.07 Drainage and Irrigation Department. DID would be responsible for all land clearing (including padi land and settlement area), provision of all irrigation and drainage facilities, land levelling in the farm and settlement area and provision of farm roads. Final design and construction supervision would be done by consultants (para. 4.26) under overall supervision and guidance provided by DID through two resident engineers with back-up from DID headquarters staff in Kuala Lumpur. Consultants would also prepare designs and contract documents for the main roads - the design standards for these would be provided by the Public Works Department (PWD) while packaging of contracts and overall supervision would be the responsibility of DID. To ensure that design concepts are effectively transmitted from the design staff to the District-level staff who will operate and maintain the completed systems, upon completion of final design DID would prepare a designer's operational manual covering major project works. Pahang State DID would assume responsibility for operation and - 26 -

maintenance of works upon completion and acceptance by Federal DID. Operation and maintenance staff for State DID at full project development would include 2 irrigation engineers, 4 irrigation inspectors, 20 overseers, 40 gatekeepers, 35 pump operators and about 100 other field workers.

4.08 Pahang Tenggara Development Authority. DARA was established by a 1972 Act of the Federal Government to foster comprehensive economic and social development in southeastern Pahang. DARA has wide powers to implement and monitor development activities in the region and it can impose charges for the provision of public services. DARA has a full complement of skilled professionals seconded from the various government agencies such as PWD, DID, DOA, T&CPD (Town and Country Planning Department) as well as its own professionals to discharge its functions in respect to the various projects which it implements either directly or through contracts to agencies such as FELCRA or FELDA . Under the Project, DARA would assist in the alienation of land for the project and would be responsible for settlement development, including detailed planning and design, tendering and awarding of contracts and construction supervision.

4.09 Department of Agriculture. DOA would have primary responsibility for organization and operation of the agricultural services component of the project. Their task would include agricultural extension, crop production (certified seed production, varietal selection and demonstration), crop protection, soil surveys and monitoring, and mechanization.

4.10 As -gricult.zJ c::cension is a State responsibility, the Pahang State Director of Agriculture would be responsible for assignment of extension staff to the project and for general direction of the extension effort. On-site responsibility would be assigned to a Senior Agricultural Officer who would also administer the other programs of DOA in the project area. Technical extension staff required at full project development would include three Agricultural Assistants (AAs) with subarea supervisory responsibilities and 14 Agricultural Technicians (ATs), 8 of whom would be the field extension agents with responsibility for rice. Responsibilities of the others would include community development, garden crops, nutrition and consumer education. During negotiations an assurance was obtained that DOA, in consultation with DID, FOA, and BPM, would prepare an agricultural services operations manual as a guide for field staff by January 1, 1984.

4.11 The technique for the provision of extension services to padi farmers would be the training and visit (T&V) extension system. Implementa- tion of the system would require the formation of farmer groups of about 70 farmers with each extension agent (AT) serving about 600 farmers. Meetings with the groups would be on a regular basis, once per two week period at a preestablished place and time. Group leaders would be selected with the - 27 -

participation of the farmers, as would subgroup leaders for wat:er management, credit, and input supply. During his visit, the AT would review demonstration plots and fields with the farmers, and would advise them on agricultural operations required by their crops over the next t:woweeks. DID, FOA and BPM staff would accompany the AT as required to emphasize points of immediate importance related to their responsibilities. The Agricultural Assistants stationed at the subregional centers would supervise the ATs assigned within their areas and would conduct regular biweekly training sessions for them supported by subject matter specialists and senior staff of the cooperating agencies. Field staff of FOA, BPM and DID serving the same farmer groups would also attend these training sessions.

4.12 To enable extension operations staff to devote full t:ime to the crucial tasks of extension and training, a separate regulatory unit would be established to perform management and distribution of input subsidies, crop monitoring and measurement, demonstrations, ad hoc pilot projects and other regulatory work. Professional staff of this unit would include one Agricultural Officer (AO), one AA and three ATs.

4.13 The Crop Production Unit under DOA would be responsible for the 60 ha certified seed production center to be established in the Anak Endau subproject area. It is envisaged that for the 11,400 ha of padi in the project area about 450 tons of seed per crop would be required. To maintain seed quality, certified seed would be needed for every third crop. Thus, the center would need to produce about 300 tons of improved high quality padi seed per year, entailing a commitment of about 50 ha to this task. The remainder of the center's land would be devoted to demonstration fields, limited varietal and fertilizer trials and the activities of the DOA Farm Mechanization Unit described in paragraph 4.14 below. Other activities of the Crop Production Unit would include collaboration with MARDI in the performance of varietal trials, demonstrations of drying, processing, and storage methods, demonstration plots on farmers- fields to encourage use of improved varieties and proper management techniques, and provision of technical back-stopping to the Extension Unit. Professional staff for this unit would include two AOs, one AA and six ATs.

4.14 The DOA Farm M4echanization Unit, to share land and facilities with the crop production unit, would have as its main functions the observation, development and demonstration of crop production mechanization. It would also be responsible for maintenance of a machinery status inventory for the project area. The unit would maintain a pool of machinery and vehicles required by the various branches of the DOA. As available and necessary the tractors in the pool might also be used to give services to farmers during critical periods, supplementing the tractor services provided by FOA. An agricultural engineer would be responsible for farm mechanization activities at the center and throughout the project area and would be the mechanization - 28 -

subject matter specialist for in-service training of extension workers. He would receive technical guidance from the senior agricultural engineer of the Farm Mechanization Center at Kuantan. An AA and three ATs would also be assigned to this unit.

4.15 The Crop Protection Unit would be responsible for forecasting and controlling major pest and disease outbreaks, for regulation of pesticide use, and for providing general support to extension through pest and disease identification and prescription of remedial measures. It would initiate effective rat control in the project area. In conjunction with the Crop Production Unit it would conduct observations and demonstration plots on measures to reduce crop losses due to pests and diseases, and would extend such information to the extension personnel. This unit would be headed by an AO stationed at the Regional Extension Center, Kuala Rompin, and responsible to the State Crop Protection Officer. The AO would be the project subject matter specialist for crop protection and would provide in-service training for extension workers. Other technical staff of the unit would include one AA and three ATs.

4.16 The Soils and Analytical Services Unit would serve as a liaison for the federal DOA Soils and Analytical Services Branch which would provide soil surveys and soil analyses for the project area. It would be responsible for the initial design of proper soil and water management systems and, with the extension service, for advising farmers on soil and water management practices, particularly with regard to correct fertilizer uses and water requirements. It would also participate in joint demonstration plots in farmers' fields using appropriate technological packages and assist in simplifying them to a level understandable by the farmers. The unit would include an AO assisted by one AA and three ATs.

4.17 Farmers' Organization Authority. The FOA component in the project area would have as its primary responsibilities: management and staffing of the Farmers' Cooperative, provision of mechanized agricultural services and of fertilizers and chemicals, and training for staff and members of the Farmers Cooperative. The existing Farmers Cooperative at Kuala Rompin would increase staff and facilities. At full project development FOA would have a professional staff of 23 in the project area, 4 assigned general adminis- trative tasks, 7 responsible for mechanized agricultural services, and 12 in the Farmers' Cooperative. FOA operations would be housed in the new Farmers- Development Center (FDC) in Kuala Rompin which is due for completion by mid-1981. TJnder the project the new facility would be expanded to be the main agricultural complex for the area, providing space for offices and storage for all MOA departments/agencies involved in the project. FOA/Cooperative offices would also be located at the FDC facilities to be built at the Rompin and Endau subregional centers. These centers would be staffed and equipped to provide the full range of FOA services within their areas. - 29 -

4.18 Because the project is in a region largely undeveloped and remote from other rice growing areas, private sector plowing and harvesting services are not available now and are unlikely to be attracted in the initial years of the project implementation. Therefore, until the local rice economy matures, the FOA would provide most of the tractor, combine harvester, transport and drying services needed. By the end of construction FOA would have 127 four-wheel tractors, 24 combine harvesters, 13 six-ton trucks and 3 batch dryers for contracting, at cost, to farmers in the project area. Most of this equipment would come on line early in the project period. At full development it would be adequate to cover about 50% of land preparation and of harvesting, and a minor part of transport and drying needs. It is anticipated that the private sector would react quickly to the service opportunities created by the project and would make up the deficit. FOA would also work with BPM to set up a loan scheme to enable interested farmers to own their own power tillers and thus reduce dependence on FOA and private sector tractor services.

4.19 Training activities of FOA would include regular sessions relevant to the immediate work programs for all field staff. This continuous on-the-job training would help to raise the competence and confidence of the project field staff and give them regular back-stopping from senior personnel. For more senior staff, specialized courses on project planning and management would also be held. Farmer training would be at different levels and for different groups, namely small agricultural unit chiefs, cooperative members and directors. Those in leadership positiolns would be given project orientation training - to explain project concepts, the management system, and the responsibilities of the field staff serving them. Special training sessions addressing topics such as cooperative principles and management, supervision, and credit would also be conducted.

4.20 Bank Pertanian IMalaysia. The primary role of BPM in the project area would be to provide seasonal production credit to padi farmers either directly or, in the case of cooperative members, through FOA. ]3PM would also perform other normal rural bank functions such as providing livestock, fishery, forestry, land purchase, and construction loans; savings schemes; and general bank services. The Rompin Branch (rural unit) of B]?M, opened in June 1979 to service the Rompin District, has responsibility for all credit and banking activities within the project area. As the project develops Local Credit Centers (LCCs), contractor agencies for BPM, will be established in the project subregional centers. The LCCs will process applications and repayments of loans. For each loan processed they will receive a 1.5% commission, out of the 4.25% interest chargeable on the loan per season. Most of the loans to farmers would be through a system whereby farmers would be given coupons for presentation to previously appointed input suppliers or machinery contractors. The suppliers and contractors would bill BPM on the total inputs/services disbursed, to be accompanied with the signed coupons. At the season-s end farmers would repay the LCCs concerned, which in turn would channel all collections back to 3PM. - 30 -

4.21 Department of Fisheries. Objectives of the DOF in the project area are to raise project participants incomes through aquaculture and to increase the supply of low cost protein for families in the project area. The Department-s operations to support achievement of these objectives would include extension services, specific training of farmers in the various aspects of fish culture, regular stocking of irrigation canals and financial assistance for fish-cage culture. Under the latter DOF activity - extension of the national fish-cage subsidy program to the project area - 165 project families would be given grants of M$2,500 each for construction and stocking of fish cages, one 4-unit (20- x 20/unit) cage and 800 Chinese Carp fish fry per family. Participants would be selected from among settler families who apply and who are not participating in the livestock or poultry schemes (para. 4.22). Priority would be given to Orang Asli. The cages would be placed in the reservoirs created by the Anak Endau dam (75 cages) and by the Rompin River cut-off (90 cages). Phasing of this project element would follow development of the respective reservoirs and be concurrent with arrival of settlers in the adjacent project areas. Project area staff of DOF would consist of a fisheries sub-officer responsible to the State Fisheries Director. and two fisheries assistants, one responsible for the developmaent of project areas to the South, the other of areas to the north of Kuala Rompin. These officers would all be stationed at Kuala Rompin.

4.22 Department of Veterinary Services. The role of the DOVS in the Rompin Endau Project is to provide technical extension, and livestock development suppcrting services to project participants. DOVS would introduce small sneep or goat and poultry enterprises as supplemental income earning activities for settler families. The sheep/goat scheme proposed would represent extensicn of the national small farm animal assistance program, PAWIAR, to, initially, 1,000 families in the project area. Under this program participants are given six sheep or goats and assistance for pasture development and animal housing. Over the next six years they return six yearlings to -he Government as repayment for the original stock. As this prograrris largely self-sustaining it would be extended as feasible and as demand warrants. Initial participants would be selected from settler family applicants not receiving help under other project-financed supple- mentary income programs. The poultry scheme, also currently nationwide, would entai' prcvidilng initial 50-bird flocks, feed and poultry housing assistance to 750 settler families not in the fish-cage or sheep/goat schemes. Both of th1ese programs would be phased with development of project facilities and arrival of the settlers. DOVS staffing in the project area would include a Ieterinary officer with overall responsibility, a research officer, two assistant veterin2ry officers with responsibility for the sheep/goat and poultry programs, and three veterinary assistants. Veterinary staff would be posted at each of the FDCs. The Pahang State DOVS would be responsible for project livestock services, however they would receive planning and implementation assistance from the Federal DOVS.

4.23 Malaysian Agricultural Research and Development Institute. No direct contributions to MA1RDIfacilities or operations are included in the project. However, under the Fourth Malaysia Plan expansion of MARDI-s staff - 31 -

in the Rompin region from two to seven professionals with mosi: of the expansion focused on rice production is expected. The research services that will be provided by MARDI to this area will come from research conducted by the Annual Crops Production Division at the main rice research stations and location specific research conducted by the Project Development Research Division in the project area. MARDI's central rice research station at Bumbong Lima conducts breeding, agronomy, crop physiology and crop protection research. Technologies developed from these research activities will be evaluated, modified and improved to suit the requirements of the Rompin-Endau project through location specific trials iin the project area. Research would be concentrated on selecting relatively short season varieties (120-140 days) promising good productivity on the various soil types deemed suitable for rice cultivation. Special attention would be given to selection for tolerance to acid sulphate soils, and to developing specific recommendations for fertilizer use and other management practices. Local staff would include a research oficer stationed at Kuala Rompin supported by two assistant research officers and four research assistants to be stationed at the FDCs in the Rompin and Endau subregional centers. Laboratory facilities would be provided by the existing MARDI station at Bukit Ridan.

4.24 National Padi and Rice Authority. LPN was established in 1971 as a Statutory body to ensure a fair and stable price of padi for farmers, a fair and stable price of rice for consumers and sufficient supply of rice to meet emergencies, and to recommend policies to promote development of the padi and rice industry. The government purchase price of pad:i is reviewed annually by the Government with advice from LPN. LPN buys padi in the rice growing areas, provides drying, storage and processing services, and sells rice to wholesalers. LPN compiles rice-related statistics and conducts research on its grade and quality.

4.25 LPN would be responsible for the provision and maintenance of padi drying, storage and rice milling facilities in the project and for the provision of marketing services. All padi produced in the project would be transported by FOA/Cooperative and sold only to LPN who would deduct a determined proportion to be credited to the Project Office as repayment of housing, land clearing and other loans (para. 6.08).

4.26 Department of Orang Asli Affairs. DOAA has responsibility for the administration and socio-economic development of the Orang AsLi throughout the country. Under the project DOAA would assist in resettling and providing extension services to Orang Asli families. It would also participate in other project activities as needed to protect l:heoverall interests of the Orang Asli in the project area and to ensure them full opportunity to obtain settler status or other project benefits.

Consulting Services

4.27 DID has extensive experience in the design, execution, operation and maintenance of irrigation and drainage works, and its staff is competent - 32 -

to design the range of works included in the proposed project. However, as DID is currently designing and supervising construction of six Bank projects in addition to numerous ADB and locally financed projects, the volume of work exceeds the capacity of DID-s personnel. Due to these manpower constraints and the need to design large works, the Government has engaged a consultant, Sepakat Setia Perunding Sdn. Bhd. in association with the Snowy Mountains Engineering Corporation (Australia) to design, prepare tenders and supervise construction of the irrigation, drainage, road, and land clearing components of the project under DID supervision. This arrangement has been accepted by the Bank. During negotiations an assurance was obtained that the consultant would prepare, on completion of the final design of each subproject, a designer-s operations manual and a technical record of design and construction.

4.28 The cost of the consultants would be about US$6 million. This provides for about 850 man-months, over a period of six years, vehicles, engineering survey costs and equipment, local transportation and other minor costs. The average man-month cost (including salary, overhead, profits, international travel and subsistence) is estimated to be about US$3,800; the average local man-month cost is about US$2,000 (550 man-months) and the average expatriate man-month cost is about US$7,000 (300 man-months).

Land Acquisition

4.29 The Pahang State Department of Lands and Mines is responsible for land acquisition and property compensation. An estimated 1,260 ha of the project area (about 9% of the total area), located in the Pontian and Anak Endau subproject areas is presently alienated to private owners. Of this about 125 ha would be required as right-of-way for project construction. Some reallotment would also be required in the Paya Sepayang scheme to consolidate uneconomically small holdings. An estimated M$l million has been allowed in the project cost for land acquisition and property compensation. Land acquisition needs of the project are relatively small as most of the land is state-owned which does not require formal proceedings. Timely steps would be taken to acquire the small privately-owned area needed for the project.

Operation and Maintenance

4.30 The State DID would operate and maintain irrigation and drainage facilities and works to the tertiary level. Quaternary irrigation ditches and drains would be maintained by the farmers. Diversion structures, dikes, farm roads and tracks would also be maintained by the State DID. Main roads, built to PWD standards under contracts administered by DID, would be maintained by the State DID until project completion, when PWD would take over maintenance responsibilities. State DID personnel would work as a team with agricultural extension personnel in dealing with farmers on such matters as irrigation and planting schedules, water control and management, and other matters relating to operation and maintenance of the irrigation system. Vehicles and equipment required for O&M are shown in Annex 2, Tables 5-7. Estimated O&M costs of the project for all agencies are shown in Annex 2, Table 13. - 33 -

Safety of Dams

4.31 The Anak Endau dam would be a zoned earthfill dam with a maximum height of about 18 m and a storage capacity of about 35 million cu m. The weir on the Pontian river would include a closure embankment, consisting of a dumped rockfill shell and a silty or clayey sand core, with a maximum height of about 14 m and a storage capacity of about 15 million cu m. During negotiations, assurances were obtained from the Government that: (a) an independent expert or panel of experts, acceptable to the Bank, would be employed by the Government to review the design of the dams and associated structures before start of construction, and to examine during construction whether any changes in the designs are needed; and (b) following completion of construction of the dams and associated structures, these would be periodically inspected in accordance with sound engineering practice to determine whether there are any deficiencies in the condition of these dams and structures, or in the quality and adequacy of maintenance or methods of operation of the same, which may endanger their safety. To this end the Government shall propose to the Bank appropriate arrangements for the Bank's review not later than one year before the completion of the said dam and weir.

5. AGRICULTURAL PRODUCTION

Land Use and Production

5.01 The project area now comprises 650 ha of poorly developed rice land, 40% of which is cropped annually, and about 12,000 ha cf undeveloped swamp forest. Of the land now developed, 230 ha in the Paya Sepayang irrigation scheme is within the Pontian subproject. However, because of inadequate diversion and water delivery structures, only about 75% of this area is in production and only a wet season rice crop is grown. Yields in the Paya Sepayang scheme average 1.6 ton/ha; in the other, rainfed lowland, areas they average from 1.0 to 1.2 ton/ha. Total production is about 500 tons of padi annually (Table 5.1).

5.02 Without public investment, little change from current levels of agricultural activity or production is likely. Settlers who have recently moved to the Endau River left bank area and established illegal rice farms are believed to have come in anticipation of the project development. In the absence of the project further settlement and land clearing would be quite limited. Therefore, for practical purposes the present situation can be taken to represent the "without project" situation.

5.03 With the project the Paya Sepayang scheme would be rehabilitated and improved and about 11,000 ha of additional land, including the lowland areas currently cropped under rainfed conditions, would be developed for irrigation. All of the land rehabilitated or developed under the project - 34 -

would be used for rice production, with an anticipated cropping intensity of 160% initially building up to 190% within five years after completion of project works. As adequate water is available, an intensity of close to 200% might be achieved in later years as operation of the various subproject schemes and cooperative farming practices are perfected.

5.04 At full development, the net area irrigated in all project schemes would be 11,400 ha, which with 90% double cropping would result in a net area harvested annually of 21,700 ha (Table 5.1). Padi yields are projected to increase from 2.7 tons/ha in the wet season and 3.0 tons/ha in the dry season during the first crop year to 3.8 tons/ha and 4.2 tons/ha, respectively, at full project development. Gross annual production at full development is projected to be about 87,000 tons of padi.

Farm Size

5.05 Each settler family would be allocated 2.4 ha (6 acres) of irri- gated rice land. The Government rejected the alternative of a 1.2 ha size holding on the grounds that farmers on such holdings would not be fully employed and would earn less than the projected rural target income. To maintain adequate farm size for an acceptable level of income for the owner-farmer, an assurance was obtained from the Government that all necessary measures would be taken to ensure that no farm in the project area will be fragmented or fall into the hands of absentee landlords.

Crop Management

5.06 Under the project farm activities would be done cooperatively by small groups of farmers. These farmers and their families would. do all labor-intensive farm work together, especially transplanting, harvesting, and maintenance of the quaternary irrigation and drainage systems. Land preparation, transplanting, pest control, and harvest would be done considering the quaternary unit as one plot of land. Fertilizer application, weed control and other minor farm activities would be done by the individual farmer on his own plot. All farmers within one tertiary irrigation block would be combined in a Farmers Association and would coordinate activities among themselves. The main objectives of this organization would be to optimize labor and water management within the tertiary block. DOA and other agency personnel would be responsible for guiding the farmers in cultural practices, implementation of cooperative farming activities, input use, water management, and padi marketing. Farmers would be obliged by their settler agreements to follow the production schedules - particularly for transplanting, water applications and harvest - established by the DOA and DID technicians.

5.07 The staggered rice cropping calendar for the project areas is presented in Figure 5.1. The cropping calendar i-sdesigned to facilitate labor sharing and to allow up to 45 days for hand transplanting. With 100% mechanization of land preparation and 75% mechanization of harvesting, no - 35 -

Table 5.1: PRESENT AND PROJECTED HARVESTED AREA, YIELDS AND PRODUCTION

Harvested area Production (ha) Yield (tons/ha) (tons) Future Future Future with with with Present project Present project Present project

Rompin Rainfed 0 0 - - 0 0 Irrigated W 0 4,050 - 3.8 0 15,400 D 0 3,650 - 4.2 0 15,350

Subtotal 0 7,700 - - 0 30,750

Pontian Rainfed 50 0 1.0 - 50 0 Irrigated W 170 1,850 1.6 3.8 250 7,050 D 0 1,650 - 4.2 0 6,950

Subtotal 220 3,500 - - 300 14,000

Anak Endau Rainfed 0 0 - - 0 0 Irrigated W 0 4,200 - 3.8 0 15,950 D 0 3,800 - 4.2 0 15,950

Subtotal 0 8,000 - - 0 31,900

Endau Rainfed 150 0 1.2 - 200 0 Irrigated W 0 1,300 - 3.8 - 4,950 D 0 1,200 - 4.2 - 5,050

Subtotal 150 2,500 - - 200 10,000

Total Project Area Rainfed 200 0 1.2 - 250 0 Irrigated W 170 11,400 1.6 3.8 250 43,350 D 0 10,300 - 4.2 0 43,300

Total 370 21,700 - - 500 86,650 - 36 -

hired labor would be required by most farmers. However, farmers with small families might have to hire some labour, which could be readily supplied by other, large, settler families. As indicated on the cropping calendar, the crop operations would be scheduled so that harvest and land preparation would be completed during the relatively dry months of each season, while transplanting and crop maintenance activities would occur in the higher rainfall months.

5.08 Nurseries would be planted at a rate of 40 kg/ha of transplanted rice and would receive about 160 kg/ha of ammophos 11:48:0 incorporated into the soil. For every third crop, fresh seed would be obtained from the seed multiplication unit managed by DOA in the -rpject area. Varieties used would be high yielding, tolerant to blast and to sheath blight, with a maximum growth duration of 135i days and would withstand flooding to a depth of 50 cm when the plant is fully grown. Suitable varieties appear to be Mahsuri, Mat Candu, Sri Malaysia I, Sri Malaysia II, Padi Jaya and MR7 (not yet officially released). New varieties are regularly produced and the above-named varieties could be outdated at the time of development of the project, however, they are the types of varieties to be considered.

5.09 Field fertilizer requirements would include 65 kg of TSP, 0:46:0, incorporated into the soil at land preparation, and a 200 kg basal dressing of 15:15:7.5 at transplanting, followed by 25 kg of muriate of potash, 0:0:60, two weeks after transplanting, and 150 kg of urea, 46:0:0, in one or two top dressings - hall at 2 to 3 weeks after transplanting and half just before heading. Although the soils are acid, no lime would be needed because the prevailing anaerobic soil conditions under irrigated rice cultivation would result in an increase in the pH.

5.10 Weed control would be realized tnrough application of a herbicide at 1-2 weeks after transplanting and one subsequent manual weeding. Insect pests and rats would be controlled throu6 h application of appropriate insecticides and rodenticides as needed.

5.11 Good water control and drainage would allow complete drainage and two weeks of drying prior to harvest. Abou",75% of the area would be harvested using self-propelled combine harvester-threshers provided by the FOA/Cooperative and by private contractors. Residual crop areas, e.g., late maturing areas or areas where machinery access or bogging down is a problem, would be harvested by hand and threshed in small stationary threshers. The threshed padi would be sacked at the field - to enable identification of each farmer's production - and transported to the nearest drying and storage center/sales point in trucks provided on a fee basis by the cooperative or by private traders.

5.12 With application of the above outlined procedures, and appropriate adjustments as conditions change, the projected yields and production for the project area (para. 5.04) should be readily obtainable. The large extension-supervision-technical assistance component designed into the project should assure the high quality of management required. - 37 -

Drying, Storage and Processing

5.13 Currently, padi produced in the project area is processed for home consumption at small private mills. The Farmers'Cooperative mill at Kuala Rompin, now inoperative, is scheduled for rehabilitation and expansion to 1 ton/hr capacity by 1984. Initially, this mill would handle production from the Paya Sepayang area. It would later serve the Rompin Subprcject. Additional milling capacity would be developed as needed, with the responsibility being shared by LPN and FOA. Under the Fourth M!alaysia Plan (1981-85) LPN is scheduled to construct integrated drying, storage and milling complexes in the Pontian and Anak Endau subproject areas, each with 5 ton/hr of milling and 30 ton/hr of drying capacity. A similar LPN complex to be built at Kuala Rompin would come on line in 1988 and, with the rehabilitated cooperative mill, would serve the Rompin Subproject area. FOA's processing facilities would include two integrated complexes in the Endau Subproject area - each with 2 ton/hr of milling and 20 ton/hr of drying capacity, the cooperative mill at Kuala Rompin, and two reception centers with drying floors at the subregional center FDCs. Each of the LPN and FOA complexes would have drying floors and storage areas adequate to handle expected production levels within their respective service areas. Phasing of construction would be linked with development of the various subproject areas and with padi output increases. At full development, all of the mills would operate double shifts for about 250 days per year. During negotiations assurances were obtained that the Government would allocate adequate funds to LPN and FOA to provide padi drying and storage and rice milling and marketing facilities in the project area as needed.

6. MARKETS, PRICES, FARM INCOMES, AND COST RECOVERY

Markets

6.01 Despite impressive efforts to increase rice producticn through investments in irrigation and improvements in agricultural support services, Malaysia continues to depend on imports to satisfy part of 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 I and Kemubu Irrigation Projects. During the same period, imports declined by 38% and the degree of self-sufficiency increased to 83%. After 1974, production stagnated, in part due to droughts in the northern rice areas in 1977 and 1978, causing rice imports to rise to 409,000 tons in 1978. Production recovered to about 1.5 million tons in 1979 with consumption estimated at 1.7 million tons. Taking into account the effects of all pipeline irrigation projects, the Government expects domestic production to increase by 3.2% p.a., to 2.1 million tons in 1990. Demand projections based on population growth (2.7% p.a.), with no increase in per capita consumption (120 kg p.a.) imply imports of about 100,000 tons of milled rice in 1990, with all incremental - 38 -

rice productioncontinuing to be consumed domestically. The project would generate an incrementalproduction of 56,000 tons of milled rice (87,000 tons of padi) by 1992, about 2.5% of domestic supply.

6.02 Market prospects at the local level are good. Pahang and the adjoining state of Johore are traditionallyrice-deficit areas. In 1975, about 29,000 tons of milled rice were produced in Pahang against about 76,000 tons consumed; similarly, less than 4,000 tons were produced in Johore compared to about 180,000 tons consumed. Thus, project output is expected to be distributedmainly within the two states.

Prices

6.03 Financial farmgate prices are based on the Government purchase price from which deductions are made for moisture content in excess of 14% and for impurities. The purchase price is fixed by the National Padi and Rice Authority (LPN) before the start of every planting season. The mid-1980 LPN offer price is M$528/ton for long grain at millgate, M$495/ton for medium grain, and M$462/ton for short grain. The farmer is responsible for transport from farm to mill. If transport is provided by LPN, the cost incurred will be deducted from the offer price. LPN has also appointed purchasing agents - farmers organizations and cooperative societies; in which case, the agent's commission and transport cost are deducted from the offer price. Also active in the rice trade are private millers whose prices generally fluctuate slightly around the 'CovernmeIntpurchase price.

6.04 According to the Bank's commodity price forecasts, the world market price of Thai 5% broken rice is expected to rise in 1981 prices from US$511/ton f.o.b. Bangkok to US$600/ton in 1990. The quality of rice likely to be produced in Malaysia, 15% broken, historicallytrades at a 10% dis- count from the price of 5% broken rice. Its world market price is expected to rise from US$460/ton in 1981 to US$540/ton in 1990. Using an average mill return of 65% and assuming the primary market for project output would be Kuantan, the equivalent economic farmgate price for padi would rise from M$632/ton in 1981 to M$ 744/ton in 1990, in constant 1981 prices (Table 6.1). Financial padi prices would rise from M$531 in 1981 to M$625 in 1990. - 39 -

Table 6.1: RICE PRICE STRUCTURE (In constant 1981 values)

1981 1985 1990

In US$/ton Export price, 5% broken, f.o.b. Bangkok 511 581 600 Grade differential (less 10%) 460 523 540 Ocean freight and insurance +28 +28 +28 C.i.f. price, Kuantan 488 551 568

In M$/ton C.i.f. price, Kuantan 1,049 1,185 1,221 Port handling and road transport, Kuantan /a +21 +21 +21 Wholesale price, Kuantan 1,070 1,206 1,242 Transport cost from mill to Kuantan /a -18 -18 -18 Ex-mill price 1,052 1,188 1,224 Padi equivalent (65% mill return) 684 772 796 Milling costs not covered by value of byproducts /a -44 -44 -44 Transport, cost, farm to mill /a -8 -8 -8 Farm-gate price: Economic 632 720 744 Financial /b 531 605 625

/a Economic prices were determined by adjusting financial base estimates using standard conversion factors from Annex 4, Table 1: 0.72 for port handling costs; 0.66 for transport costs; and the general conversion factor, 0.89, for milling costs.

/b For estimating financial farm-gate prices it was assumed that the ratio of financial to economic prices established by the Governmeant in 1980 through its retail, wholesale and farm level price control/support activities would be maintained. Thus, the projected financial prices were estimated by multiplying the economic farm-gate price estimates by the ratio of the 1980 Government purchase price for medium grain padi (adjusted by farm to mill transport cost), M$483, to the estimated 1980 economic price, U1$573; i.e., by 0.84.

6.05 Farmgate fertilizer prices based on the Bank's world market price projections for urea, triple super phosphate and muriate of pol:ash are presented in Annex 3, Table 1. Prices of other farm inputs (Annex 3, Table 2) are based on data provided by DOA personnel in the project area. Economic prices were estimated by applying the conversion factor for agri- cultural inputs, 0.86, (Annex 4, Table 1) to the financial price estimates. - 40 -

Farm Incomes

6.06 The project would provide each settler family with 2.4 ha (6 acres) of irrigated riceland served with adequate water for full double cropping. It would also give assistance for establishment of supplemental livestock, poultry, or fishery enterprises to about 2,000 (40%) of the settler families. The supplemental enterprise programs would later be expanded if demand warrants. Separate farm budgets prepared for padi and for each of the supplementary enterprises are summarized in Table 6.2. Each of the budgets is independent as each family would be limited to one supplemental enterprise and no competition for resources between padi and the supplemental enterprises would occur. Labor required for the supplemental enterprises would be provided from leisure time and/or by children not otherwise employed. Present and future without-project cases were not budgeted because in these cases the rice area is negligible, only about 300 ha single cropped, relative to the 11,400 ha of double cropped rice at full project development. Projections of input use with the project are based on practices recommended to achieve the projected output levels under project conditions.

6.07 The prospective settlers are mostly tenant or owner-operator rice farmers with uneconomic sized holdings from Pahang State or from traditional rice growing areas in Kedah, Kelantan and Perlis. Based on a national survey, in 1980 about 75% of all rice farmers had annual incomes below the absolute poverty line of US$300 and substantially below the national per capita income of US$1,150. Virtually all of the families chosen for settlement would be from the poverty group. With the project, net returns would be about US$1,400/ha or about US$3,360 per 2.4 ha farm. This represents about a 250% increase over projected without-project returns for similar sized farms in the project area. For settler families participating in the livestock supplementary income schemes, additional yearly net earnings per farm of between US$165 (poultry) and US$460 (goats or sheep) would be available. Those participating in the fish cage scheme would earn supplementary net income of abbut US$580 per year. Thus all of the settler families (5 persons/family) could expect to earn per capita incomes of US$670 or more, with the average being about US$ 700 per capita before repayment of housing and land development costs (para. 6.08). This would be about 30% of the projected 1992 per capita GNP, or 55% of projected national average per capita consumption.

Cost Recovery

6.08 Water charges would be treated along the lines of the previous four Bank-financed irrigation projects in Malaysia (North Kelantan, Northwest Selangor, Krian-Sungei Manik, and Muda II). In Malaysia operation and maintenance costs are funded from general state and federal revenues. Nominal water and drainage rates are collected by state governments and form part of the general revenue. Since virtually all the - 41 -

Table 6.2: SUMMARY BUDGETS FOR 2.4 HA PADI FARMS, WITH ALTERNATIVE SUPPLEMENTARY ENTERPRISES /a

Farm enterprises Padi Padi Padi Padi goats/sheep poultry fishery ------M$ ------

Cash Inflows Padi sales 11,500 11,500 11,500 11,500 Supplemental enterprise - 1,210 1,965 2,120

Total Cash Inflows 11,500 12,710 13,465 13,620

Cash Outflows

Net Production Cost Padi 3,170 3,170 3,170 3,170 Supplemental enterprise - 220 1,610 870

Subtotal 3,170 3,390 4,780 4,040

Taxes and fees 1,110 1,110 1,110 1,110

Total Cash Outflows 4,280 4,500 5,890 5,150

Net Farm Cash Flow 7,220 8,210 7,575 8,470

Per capita income 1,445 1,640 1,515 1,695 (US$670) (US$760) (US$705) (US$790)

/a At full production, after debt repayments are complete. - 42 -

Rompin-Endau settlers would be Muslims, they would be subject to the compulsory religious tithe, zakat, which in Pahang State is levied at a rate of 10% of gross value of annual padi production less a one-ton subsistence allowance. On project farms, zakat would average about US$500 /1 per farm per annum at full development; about twice the irrigation system operation and maintenance costs per farm. Thus zakat payments would make a substantial contribution to capital cost recovery. Also, because the project entails major social infrastructure and land clearing cost, settlers would be required to repay the capital costs for their housing and for land clearing following the FELDA model. Consistent with current government policy to eliminate all interest charges for projects aimed at alleviating poverty, no interest would be charged to settlers in this project for their housing and land clearing loans. Repayment of housing costs over 15 years with a 2-year grace period would require annual payments of about US$140 per family. Repayment of rice land clearing costs over 20 years with a 10-year grace period would entail annual payments of US$320 during the repayment period. Altogether, settler families would have annual tax and debt retirement obligations of about US$630 (17% of pre-tax net farm income) for the 3rd through 10th years after receiving their land, US$975 (25%) during the 11th through 15th years, and US$835 (22%) during the 16th through 20th years and US$515 (13%) thereafter. Based on present values of project rent, costs, fees and taxes discounted at 10% (excluding settlement costs and housing cost recovery) the total project rent recovery index is 44%. The cost recovery index is 24% (Annex 4, Table 4), which is comparable to those of other Bank-financed irrigation projects in Malaysia. This level of cost recovery seems appropriate because even after full development the US$700 per capita incomes of these settlers would still be below the projected 1992 critical consumption level in Malaysia of US$790 (one-third of average per capita GNP). Due to its sound financial position the Government is well able to absorb the loss of interest revenues in order to achieve its poverty reduction goals.

7. BENEFITS, JUSTIFICATION AND RISKS

7.01 By developing new land, providing flood and salinity control, irrigation and drainage infrastructure and integrated agricultural support services, the project would result in 190% cropping intensity on about 11,400 net ha currently under swamp forest. The project would also provide housing and community services. About 4,700 families, mainly new settlers or about 24,000 people would directly benefit from the project. The project would create an annual demand for farm labor of about two million labor-days, equivalent to some 9,500 full time jobs. The project would contribute to the Government-s goals of self-sufficiency in rice and more balanced regional development at a capital cost of about US$23,000 per farm family or US$9,600 per ha in financial prices. The cost per farm family is

/1 All cost and benefit estimates are valued in 1981 prices unless otherwise indicated. - 43 -

much higher than in other recent Bank-financed irrigation projects in Malaysia, which range between US$2,000 and US$4,400. The reason for this is that previous projects involved only the improvement of existing physical works in contrast to Rompin-Endau where all works are new and the project includes settlements. Incremental annual padi production per hectare at Rompin-Endau will be higher and as a result the capital cost per ton of incremental paid production ($1,250) is close to that of recent projects ($1,590 at Muda and $870 at Krian-Sungei Manik). Compared to previous land settlement projects, the cost per family (in 1981 prices) is lower than Keratong ($48,400) and Johore ($34,600) and higher than Felda VI ($12,500). This project would provide somewhat better income levels for the direct beneficiary families than would the other projects. The settler families would achieve per capita income levels of about US$700 per capita, well out of absolute poverty (US$320 per capita) although still below the projected 1992 critical consumption level of US$790. In contrast the Krian-Sungei Manik and Muda II projects will provide average per capita incomes of only about US$350 and US$400 respectively, with about 15% of the beneficiaries remaining in absolute poverty. The Keratong, Johore and Felda VI projects would allow average incomes of from about US$400 to US$600 per capita. The incremental annual production of 87,000 tons of padi would result in annual foreign exchange savings of about US$32.2 million at the forecast world market price for rice plus cost of insurance and freight. The net foreign exchange savings would be about US$29.7 million after deducting the incremental cost of imported fertilizers and chemicals.

7.02 Foreign Exchange. The unit of account is uncommitted foreign exchange in the hands of the Government, expressed in terms of local currency. All tradeable components are valued directly in foreign exchange converted to local currency at the official exchange rate and adjusted for local transport and handling. Conversion factors for a number of broad categories of goods and services produced or consumed by the project were used to express all nontradeable inputs and outputs in terms of the unit of account (Annex 4, Table 1).

7.03 Benefits. Expected yields, cropping intensities and production are discussed in Chapter 5. Input and output prices, production and labor costs and gross and net returns are shown in Annex 3 and in supplementary enterprise budgets in the project files. Expected annual benefits in the project area at full development are M$40.4 million (Annex 4, Table 6).

7.04 Distribution of Benefits. All of the direct benefits to be derived from the project at full development, padi and suppleamentary enterprise production, would accrue to the settler families, about 24,000 people. The settler families, all in the target group, have an average present income of about US$125 per capita, about 60% below the estimated 1981 absolute poverty level income of US$320. Indirect benefits not included in the economic analysis - e.g., increased employment in the public and private services sectors, increased commercial activity and increased high-quality local food supplies - would accrue in some measure to most of the project area population, projected to be about 50,000 people at full project development. - 44 -

7.05 Employment Impact. The annual demand for labor with the project is estimated at 2 million labor-days. The average settler family has five members, with an equivalent of two persons available to work full time as needed. It was assumed that during peak labor demand months (April and October) 2.5 worker equivalents per family would be available. Thus, the total labor supply at full development in 1992 would amount to about 14,250 workers, one third of whom would be employed full time. Assuming 25 work days per month, the total labor supply would be almost 3 million labor-days in 1992 (Annex 3, Table 6). Most of the settlers will be drawn from areas where the average size of rice holdings are such that some underemployment exists. However, in view of the generally tight agricultural labor market in Malaysia, the opportunity cost wage rate was assumed to be the current average agricultural wage rate of M$7 per day, M$5.53 in border prices. Total labor cost at full development would be M$11.2 million.

7.06 Investment Costs. The project economic capital cost, excluding settlement costs, is US$75.5 million. This capital cost estimate includes allowances for physical contingencies but excludes price contingencies. The foreign exchange components are valued at border prices while a construction conversion factor of 0.77 was applied to local costs net of taxes and duties. The annual economic costs of irrigation system operation and maintenance average about US$100/ha for the project areas. Capital costs of settler housing and other settlement facilities and services, US$25.2 million, were not included in the economic analysis because it was assumed that benefits to this project element, though unquantifiable, would be at least equal to its cost. With the Malaysian population growing annually by about 360,000 persons, 60,000-70,000 households, new housing and associated services equivalent to about 14 times the total provided by this project would be required each year merely to accommodate the expanding population.

7.07 Development Period. According to the project implementation schedule, all works would be completed by 1987 (Figure 3.1). Full agricultural development would be reached in the project areas by 1992. On some of the subprojects, benefits would be realized earlier, and for purposes of the economic analysis, it is assumed that benefits from the irrigation systems would begin in 1984 and continue increasing until the projected maximum is achieved-in 1992. Supplemental livestock, poultry and fishery enterprises supported by the project would be developed concurrently with the padi-land development.

7.08 Economic Rate of Return. On the basis of the foregoing assump- tions and discounting the costs and benefits over a 30-year evaluation period, the economic rate of return is 17% (Annex 4, Table 5). The criteria for settler selection will ensure that all of the beneficiaries would be from landless or small farm families with incomes below the critical consumption level; therefore, the social rate of return would be above 17%. Rates of return for the subprojects are 15% for Rompin, 17% for Pontian, 17% for Anak Endau, and 19% for Endau. Respectively, these subprojects account for 39%, 14%, 37% and 10% of total project cost. At a discount rate of 10%, the estimated opportunity cost of capital in Malaysia, the economic net present value of the project in 1981 is M$77.4 million. - 45 -

7.09 Sensitivity Analysis. Sensitivity of the estimated rate of return and net present value for the entire project was tested to cost overruns, reduction of benefits and implementation delays. The effecl's of these changes were as follows:

Economic rate Net present of return value @ 10% Case t%) (M$, millions)

1. Base case 17.0 76.9 2. Capital costs up 20% 15.0 52.2 3. Capital costs up 50% 11.6 15.1 4. Farm value of padi down 20% 11.0 6.4 5. Net agricultural benefits down 20% 14.0 33.0 6. Net agricultural benefits down 20% and capital costs up 20% 11.1 8.2 7. Agricultural benefits and costs delayed 2 years 14.1 38.8 8. Agricultural benefits and costs delayed 4 years 10.9 8.3

7.10 Sensitivity analysis was also used to determine which variables would be most crucial to the project. In carrying out the sensitivity analysis, two measures were developed for each variable tested - the crossover value and the elasticity. The crossover value is the value of the variable tested for which NPV discounted at 10% is zero, and is a measure of how the variable can differ frum its most likely value before the project becomes economically unacceptable. The crossover value may also be interpreted as the value of the variable tested, beyond which the economic rate of return would be below 10%. The elasticity is defined as the percentage change in NPV discounted at 10% with respect to a 1% change in the variable tested. It is a measure of the rate of change of NPV relative to the specified variable, at the most likely value of that variable. The elasticity generally changes for movements along the NPV-variable curve.

7.11 The results, presented in Annex 4, Table 7, show that at the most likely values for these variables the economic rate of return is most sensitive to cropping intensity. The likelihood of some critical variations is discussed below.

(a) Yields. The project is not sensitive with respect to yields. The incremental padi yield at full development would have to be about 26% less than the expected value before the project's economic rate of return falls to 10%. Moreover, although the projected - 46 -

yield levels would require very good management by the farmers, they are well below physical potentials of existing rice varieties on the project area soil types and are less than the levels obtained at present on well managed farms elsewhere in Ma3aysia.

(b) Cropping Intensity. The crossover value represents a cropping intensity of l517 which is substantially helow the proiected cropping intensity of 190%. It is also below the intensities routinely achieved in the better drained and irrigated areas of other irrigation schemes in Peninsular Malaysia, e.g., the average cropping intensity in the Muda project area was 175% even before rehabilitation under the Muda II project began. As water supply would be adequate in the project, failure to achieve the projected cropping intensity is unlikely.

(c) Prices. A long-term world rice price 22% below the Bank's 1990 projection would have to occur before the project NPV would fall to zero at 10%. It is unlikely that this will happen given the tight world production/consumption balance for food grains. Short-term fluctuations as have occurred in recent years would not materially reduce the proiect's net benefits or ERR.

(d) Construction Costs. The results are not sensitive to increases in real costs, which would have to rise by 63% before the NPV at 10% falls to zero. Experience with other projects in Malaysia has shown that cost overruns of this magnitude seldom occur.

(e) Economic Wage Rate. The economic rate of return is not sensitive to this variable as the economic wage would have to increase by 123% for the NPV to be zero.

(f) Development Period. Benefits would have to be delayed more than 4 years before the rate of return falls below 10%. Although other projects in Malaysia are facing delays of up to two years, it is unlikely that project execution and realization of henefits would be delayed by 4 years under the proposed project.

7.12 Risks. There are no unusual risks associated with the project. The risks normally associated with area development projects based on irri- gated agriculture have been accounted for in estimating yields, cropping intensities, rates of development, and investment costs.

8. AGREEMENTS RFACHED ANT) RECOMMENDATION

8.01 During negotiations assurances were obtained on the following major points: - 47 -

(a) the implementing agencies would maintain separate accounts for the project; these would be collated by the Project Manager. The Government would furnish to the Bank such information concerning such accounts as the Bank shall from time to time reasonably request (para. 3.32);

(b) the Government would take all measures necessary to ensure that the design, construction and operation of the works under the Project are carried out in accordance with appropriate ecological and environmental standards (para. 3.33);

(c) the Government would forward to the Bank, for its review and com- ment by June 30, 1981, settler selection criteria and. the Government-settler agreement (para. 4.04);

(d) DOA would prepare an agricultural services operations manual as a guide for field staff by January 1, 1984 (para. 4.10), and the consultant would prepare, on the completion of the final design of each subproject, a designer's operations manual (para. 4.27);

(e) an independent expert or panel of experts, acceptable to the Bank, would be employed by the Government to review the design of the Anak Endau dam and the Pontian weir and associated structures before start of construction, and to examine during construction whether any changes in the designs are needed (para. 4.31);

(f) the Government would establish a suitable maintenance and inspec- tion program for the Anak Endau dam and the Pontian weir and would propose to the Bank appropriate implementation arrangements for the Bank's review no later than one year before the expeced com- pletion of the dam and the weir (para. 4.31);

(g) the Government would take all necessary measures to ensure that no farms in the Project area will be fragmented or fall into the hands of absentee landlords (para. 5.05); and

(h) the Government would ensure that adequate funds are a:Llocated to LPN and FOA to provide padi drying and storage and rice milling and marketing facilities in the project area as needed (para. 5.13).

8.02 The appointment of a suitably qualified and experienced Project Manager would be a condition of effectiveness of the proposed loan (para. 4.01).

8.03 With the above assurances, the proposed project would be suitable for a Bank loan of US$40.0 million, with a 17-year maturity and a grace period of 4 years. The borrower would be Malaysia. MA.LAYIA

ROMPlN-eM"AU AREA DEVELOPMENT P10JFCT

Crop Water R! quir-eent.

January February March April May J.ne July August Septenber October Navember December

Average evapaoutlon 55.5 55.5 56.5 56.5 65.0 65.0 63.5 63.5 59.5 59.5 56.0 56.0 56.0 56.0 57.0 57.0 58.5 58.5 55.5 55.5 48.5 48.5 45.5 45.5 Availahle rainfall /b 26.4 26.4 10.2 10.2 29.0 28.0 25.4 25.4 40.2 40.2 67.7 67.7 55.9 55.9 53.3 53.3 52.6 52.6 71.6 71.6 84.2 84.2 152.4 152.4

Cropping Schedule Nn. I Crap enefficient 1.25 - - - - 1.2 1.2 1.2 1.25 1.25 1.3 1.3 1.25 - - - - 1.2 1.2 1.2 1.25 1.25 1.3 1.3 I.and preparation requirementtc - - - - 382.7 ------382.7 ------Canuemptice use 69.4 - _ - - 79.0 76.2 76.2 74.4 74.4 72.8 72.9 7n.0 - - - - 70.2 66.6 66.6 60.6 60.6 59.1 59.1 Perc-latinn 31.0 - - - - 31.0 30.0 30.n 31.0 31.0 30.0 30.0 31.0 - - - - 30.0 31.0 31.0 30.0 30.0 31.0 31.0 Ner cuter require=ent 74.0 - - - 354.7 01.n 80.8 80.9 65.2 6S.2 35.1 35.1 45.1 - - - 330.1 47.6 26.0 26.0 6.4 6.4 0 0 Diversion requirement /d 123.1 - _ - 591.2 135.0 134.7 134.7 108.6 108.5 58.5 SR,S 75.2 - - - 550.2 79.3 43.3 43.3 60.7 10.7 0 0

Cropping ScheduIle Nn. 2 Crap c-efficient 1.3 1.25 - - - - 1.2 1.7 1.2 1.25 1.25 1.3 1.3 1.25 - - - - 1.2 1.2 1.2 1.25 1.25 1.3 t Land preparati.n require=ent - - - - - 3R2.7 - -. ------382.7 - - - - - Canaaaptive cue 77.2 69.4 - - - - 76.2 76.2 71.4 74.4 70.n 72.8 72.9 70.0 - - - - 66.6 66.6 58.2 60.6 56.9 59.1 Percoiatine 31.0 31.0 - - - - 30.0 30.0 31.0 31.0 30.0 30.0 31.0 31.n - - - - 31.0 31.0 30.0 30.0 31.0 31.0 Met eater req.ire.ent 76.R 74.0 - - - 354.7 S0.0 80.8 62.2 65.2 32.3 35.1 47.9 45.1 - - - 330.1 26.0 26.0 4.0 6.4 0 0 Dlverni-n requirement 120.0 123.3 - - - 591.2 114.7 134.7 103.7 108.6 53.8 58.5 79.0 75.2 - - - 550.2 43.3 43.3 6.7 10.7 0 0

Crappi.g Schedule No. 3 Crap -aefflicint 1.3 1.3 1.2S - - 1.2 1.2 1.2 1.25 1.25 1.3 1.3 1.25 - - - - 1.2 1.2 1.2 1.25 1.25 Land preparutiam requirement ------382.7 ------_ _ _ 382.7 - - - - - Cenca-ptie aee 72.7 72.2 70.6 - - - - 76.2 71.4 71.4 70.0 70.0 72.R 72.8 71.2 - - - - 66.6 58.2 58.2 56.9 56.9 Pereclation 31.0 31.0 28.n - - - - 30.0 31.0 31.0 30.0 30.0 31.0 31.0 31.0 - _ _ - 31.0 30.0 30.0 31.0 31.0 Net vater requirement 76.8 76.0 98.6 - - - 357.3 80.8 62.2 62.2 32.3 32.3 47.9 47.9 48.9 - - - 311.1 26.0 4.0 4.0 0 0 Diversion require=ent 128.0 128.n 147.6 - - - 595.5 134.7 103.7 103.7 53.9 53.8 79.8 79.8 81.6 - - - 518.5 43.3 6.7 6.7 0 0

/a Competed .uing Hargr-uoea method (1974), Dln Water Renuarces Publica-tin No. 5 /b Valuec will be noce-ded in 9 act at 10 years. 77 DID Infor=atlon Paper N.. 2. 77 Ascu=e cnaveyance lo.e.s af 40%.

Note: Peak aatnr requirement could nccur in the 15-day period fron Apr1l 1, tu April 15. Tor.1 di-ersion dea.nd daring thin perlud is one-third of the ace of 134.7 + 134.7 + 595.5; equal to 280 me. Thiu is equivalent to s flne af about 7.2 1/n/bc. This in rounded aff to 2.0 1/c/ha for the design af the canal syste=. - 49 -

ANNEX 2 Table 1

MALAYSIA

ROMPIN-ENDAUAREA DEVELOPMENTPROJECT

Project Cost Summary

Local Foreign Total Local Foreign Total Foreign --- M dollar millions --- - US dollar mil:Lions--- exchange (%)

Civil Works Rompin Subproject Land clearing, main drains & roads 6.3 6.0 12.3 2.9 2.8 5.7 48 Cut-off channel and dikes 13.5 11.2 24.7 6.3 5.2 11.5 45 Irrigation works and farm roads 2.6 1.7 4.3 1.2 0.8 2.0 42 Tertiary development 3.7 2.3 6.0 1.7 1.1 2.8 40 Farm settlement and subregional center 13.3 3.7 17.0 6.2 1.7 7.9 22 Subtotal 39.4 24.9 64.3 18.3 11.6 29.9 39 Pontian Subproject Land clearing, main drains & roads 2.9 2.6 5.5 1.4 1.2 2.6 48 Pontian weir and dikes 2.4 1.9, 4.3 1.1 0.9 2.0 45 Irrigation works and farm roads 2.2 1.7 3.9 1.0 0.8 1.8 42 Tertiary development 1.4 1.0 2.4 0.7 0.4 1.1 40 Farm settlements 6.6 1.6 8.2 3.0 0.8 3.8 20 Subtotal 15.5 8.8 24.3 7.2 4.1 11.3 36 Anak Endau Subproject Land clearing, main drains & roads 7.3 6.7 14.0 3.4 3.1 6.5 48 Anak Endau dam, weir & dikes 7.7 6.3 14.0 3.6 2.9 6.5 45 Irrigation works and farm roads 4.6 3.3 7.9 2.2 1.5 3.7 42 Tertiary development 4.3 3.0 7.3 2.0 1.4 3.4 40 Farm settlements and subregional center 16.4 4.7 21.1 7.6 2.2 9.8 22 Subtotal 40.3 24.0 64.3 18.8 11.1 29.9 37 Endau Subproject /a Land clearing, main drains & roads 2.0 1.9 3.9 1.0 0.8 1.8 48 Kembar weir and dikes 1.3 1.1 2.4 0.6 0.5 1.1 45 Irrigation works and farm roads 1.5 1.1 2.6 0.7 0.5 1.2 42 Tertiary development 1.1 0.8 1.9 0.5 0.4 0.9 40 Farm settlement (Mentelong) 2.4 0.6 3.0 1.1 0.3 1.4 20 Subtotal 8.3 5.5 13.8 3.9 2.5 6.4 39 Service buildings & staff quarters 5.8 1.7 7.5 2.7 0.8 3.5 22 Equipment, vehicles & supplies 2.1 12.3 14.4 1.0 5.7 6.7 85 Land acquisition 1.0 - 1.0 0.5 - 0.5 - Consultant services 3.9 9.0 12.9 1.8 4.2 6.0 70 Administration and engineering 5.9 0.6 6.5 2.7 0.3 3.0 10

Base Cost 122.2 86.8 209.0 56.9 40.3 97.2 42 Physical contingencies /b 16.8 12.7 29.5 7.8 5.9 13.7 42 Expected price increases 37.2 27.5 64.7 17.3 12.8 30.1 42

Total Project Cost 176.2 127.0 303.2 82.0 59.0 141.0 42

/a Includes Kembar, Mentelong, Upper Endau I & II.

/b 20% on irrigation, drainage and road works, 10% on settlement works and 5% on project buildings, equipment & vehicle costs. -50 - ANNEX 2 Table 2

MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENTPROJECT

Cost Estimate

Subprojects Anak Rompin Pontian Endau Endau ------(M$'000) …------

Irrigation Works Land clearing 11,163 4,588 11,850 3,675 Main drains 564 312 497 296 Main roads 602 615 1,600 - Flood protection dikes 599 429 1,521 1,545 Diversion works 24,114/a 3,863/b 13,551/c 774/d Main canals 280 1,178 2,030 98 Laterals 1,037 111 1,629 266 Canal structures 650 270 799 179 Drainage structures 364 506 888 608 Pump stations 1,167 460 965 442 Farm roads 687 1,262 1,689 759 Motorcycle tracks 137 33 80 236 Tertiary development 5,924 2,427 7,236 1,899

Subtotal 47,288 16.054 43,335 10,777

Settlement Wlorks Settler houses 6,685 2,807 7,805 1,295 Community facilities 2,553 312 2,672 133 Educational and health institutions 3,384 1,305 4,275 614 Roads and paths 2,363 2,464 3,707 507 Electricity and water supply 945 449 1,103 183 Landelearing & preparation 1,121 868 1,426 237

Subtotal 17,051 8.205 20.988 2,969

Total Subproject Base Cost 64,339 24,259 64,323 13,746

/a Rompin cut-off channel. /b Pontian weir. /c Anak Endau dam (M$8,147) and weir (M$4,404) /d Kembar weir. MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Summary Cost Estimate - Diversion Works

Rompin cut-off Anak Anak thannel. Endau Endau Pontian Kembar w/concrete weir dam weir weir weir Total ------(M$ '000)…------

1. Excavation and stripping 16,336 926 1,166 500 40 18,968

2. Earth embankment 360 3,230 138 164 2 3,894

3. Rock embankment 825 130 559 387 - 1,901

4. Filter material - 675 - - - 675 >

5. Flood protection dikes 1,260 - - - - 1,260

6. Riprap 408 600 - 360 163 1,531

7. Terin cloth - 135 108 67 24 334

8. Concrete construction 2,085 870 1,323 1,323 312 5,913

9. Steel reinforcement 420 300 375 375 75 1,545

10. Gates, fixtures & piling 31 175 335 335 .37 913

11. Pipes and conduits 97 266 - - - 363

12. Minor items 2,292 840 400 351 122 4,005 | |

Total Base Cost 24,114 8,147 4,404 3,862 775 41,302 1 1 ?fALAYSIA

ROMPIN-ENDAU AREA DFVELO0lE?T PROJECT

Subregional Centers and Farm Settlements Cost Estimate

Subregional centers Farm settlements Anak Anak Endau Rompin Endau Subtotal Rompin Endau Pontian (lfentelong) Subtotal Total …______(11$ 000)…------…--

1. Land clearing 470 478 948 215 363 421 149 1,148 2,096 2. Roads & paths 1,506 2,194 3,702 855 1,513 2,464 507 5,339 9,041 3. Houses 4,725 4,725 9,450 1,960 3,080 2,807 1,295 9,142 18,592 4. Primary schools 1,044 1,080 2,124 - - - - - 2,124 5. Secondary schools 642 642 1,284 - - - - - 1,284 6. Kindergarten 82 82 164 326 581 585 254 1,746 1,91g 7. Government centers 1,200 1,200 2,400 - - - - - 2,4no 8. flosques/Suraus 224 224 448 92 146 132 61 431 874 9. Health centers/clinics 930 930 1,860 360 960 720 360 2,400 4,260 10. Shops 929 929 1,858 108 173 180 72 533 2,391 11. Electricity & water supply 668 668 1,336 277 435 449 183 1,344 2,680 12. Earthworks & landscaping 305 296 601 131 289 447 88 955 1,556

Total Base Cost 12,727 13,448 26175 4,324 7,540 8,205 2,969 23,038 49,213

(DX - 53 - ANNEX 2 Table 5

MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Operation and Maintenance Equipment

Drainage and Irrigation Department /a

No. of Unit Total units cost cost Item DID PWD /a Total M$'000 M$'000

Hydraulic excavator, 5/8 cu yd, 50 ft boom 3 - 3 150.0 450.0 Tractor, 60 HP, with front-end loader 1 1 2 50.0 100.0 Tractor, 60 HP, wheel type, with blade 3 - 3 45.0 135.0 Trailer for wheeled tractor 3 - 3 5.0 15.0 Front-end wheel loader 2 - 2 80.0 160.0 Tipper truck 6t 3 2 5 45.0 225.0 Vibrating roller 5t 1 1 2 30.0 60.0 Motor grader, 125 HP 2 2 4 125.0 500.0 Lorry, 6t, with 1.5t crane 1 - 1 60.0 60.0 Rotary grass cutter 4 2 6 4.0 24.0 Backhoe, 3/8 cu yd. 2 1 3 40.0 120.0 Station wagon, 4-wheel drive, LWB, Diesel 4 2 6 30.0 180.0 Motorcycle, 100 cc 10 - 10 2.5 25.0 Speedboat with 40 HP outboard motor 1 1 2 10.0 20.0 Concrete mixer 1 1 2 8.0 16.0 Mobile pump - 3" 2 - 2 10.0 20.0 Mobile pump - 4" 2 - 2 15.0 30.0 Mobile pump - 6" 2 - 2 20.0 40.0 Fuel tanker 1 - 1 60.0 60.0 Mobile service unit 1 - 1 60.0 60.0 Workshop equipment and tools 1 - 1 LS 200.0 Office and survey equipment 1 - 1 LS 100.0 Spare parts (about 10%) 1 - 1 LS 240.0

Total 2,850.0

/a Including equipment for maintenance of PWD main roads. - 54 - ANNEX 2 Table 6

MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Operation and Maintenance Equipment

Department of Agriculture

No. of Unit cost Total cost Items units --- M$ 000------

Combine harvester, 30-35 HP 3 65.0 195.0 Back Hoe 3/8 cu yd 1 40.0 40.0 Tractor, 4-wheeler, 45 HP 10 23.0 230.0 Station wagon, 2-wheel drive 2 15.0 30.0 Pick-up truck, 4-wheel drive 18/a 20.0 360.0 Lorry, 6 ton 6/b 40.0 240.0 Mobile service unit 1 60.0 60.0 Trailer, for tractor 3 5.0 15.0 Three-disc plough 4 3.0 12.0 Rotavator 10 6.0 60.0 Grass cutter, (150 mm) 2 4.0 8.0 Power sprayer (medium) 12 3.0 36.0 Seed drill 10 3.0 30.0 Padi transplanter 2 15.0 30.0 Water pump 4 4.0 16.0 Cages for fish culture (DOF) - LS 330.0 Livestock (DOVS) - LS 2,100.0 Spare parts (about 10%) - LS 128.0

Total 3,920.0

/a Includes 3 units for DOVS, one unit for DOF, and 3 units for DARA.

/b Includes 2 units for DARA. ANNEX 2 Table 7

MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Operation and Maintenance Equipment

Farmers' Organization Authority

No. of Unit cost Total cost Items units -M$-000------

Combine harvester, 30-35 HP 24 65.0 1,560.0 Station wagon, 4-wheel drive LWB, Diesel 7 30.0 210.0 Lorry, 6 ton 13 40.0 520.0 Tractors, 4-wheeler, 45 HP 127 23.0 2,921.0 Rotavator 127 6.0 762.0 Three disc plough 127 3.0 381.0 Tipping trailer 127 5.0 635.0 Ancillary equipment - LS 125.0 Fuel truck 1 60.0 60.0 Mobile service unit 2 40.0 80.0 Workshop equipment - LS 75.0 Office furniture & equipment 3 L^ 15.0 Spare parts (about 5%) 306.0

Total 7,650.0 -56 - ANNEX 2 Table 8

MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Project Buildings

Cost Estimate

(M$000)

Regional extension centers and subcenters: DOA, DOVS, DOF, and farmer development centers: FOA 2,100

Agricultural station: DOA 1,000

Workshops: DID and FOA 400

Staff Quarters: DOA, DID, DOVS, FOA & DOF 4,000

Total 7,500 - 57 - ANNEX 2 Table 9

MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

PUMPING STATIONS

Area served and location Q (1/sec) Lift (m)

Rompin right bank 2,685 7.5

Rompin left bank 5,820 7.0

Pontian left bank 1,077 3.5

Pontian left bank /a 560 1.2

Pontian right bank 2,220 4.5

Anak EDdau right bank 6,770 3.0

Anak Endau right bank /a 1,690 1.2

Anak Endau left baDk 2,040 3.5

Kembar 1,280 3.7

MenteloDg 415 6.0

Upper Endau I 560 6.0

Upper Endau II 500 7.0

/a Booster pumping stations.

Note: Number of units in each plant is variable, depeDdent on final desigD considerations. ANNEX 2 - 58 - Table 10

MALAYSIA

ROMPIN ENDAUAREA DEVELOPMENTPROJECT

Estimated Schedule of Expenditures (US$ million)

/a /a Total 1981 1982 1983 1984 1985 1986 1987

Rompin Subproject Land clearing, drains, roads 5.7 0.4 3.0 2.3 - - - - Cut-off channel, weir & dikes 11.5 - 2.2 2.3 3.0 2.5 1.5 - Irrigation works 4.8 - - - 0.5 2.0 1.5 0.8 Settlement facilities 7.9 - - - 1.5 2.8 2.8 0.8

Subtotal 29.9 0.4 5.2 4.6 5.0 7.3 5.8 1.6

Pontian Subproject Land clearing, drains, roads 2.6 0.8 1.8 - - - - - Weir & dikes 2.0 0.5 0.8 0.7 - - - - Irrigation works 2.9 - - 0.8 1.2 0.9 - - Settlement facilities 3.8 - - 0.6 1.8 1.4 - -

Subtotal 11.3 1.3 2.6 2.1 3.0 2.3 - -

Anak Endau Subproject Land clearing, drains, roads 6.5 1.6 3.5 1.4 - - - - Dam, weir & dikes 6.5 - - 2.0 2.4 2.1 - - Irrigation works 7.1 - - 0.5 2.0 2.5 1.7 0.4 Settlement facilities 9.8 - - - 2.5 3.5 2.5 1.3

Subtotal 29.9 1.6 3.5 3.9 6.9 8.1 4.2 1.7

Endau Subproject Land clearing, drains, roads 1.8 - 0.5 1.0 0.3 - - - Kembar weir & dikes 1.1 - - 0.8 0.3 - - Irrigation works 2.1 - - - 0.6 0.8 0.7 - Settlement facilities 1.4 - - - 0.6 0.8 - -

Subtotal 6.4 - 0.5 1.8 1.8 1.6 0.7 -

Service buildings & quarters 3.5 - 0.2 0.7 1.0 1.0 0.6 - Equipment, vehicles & supplies 6.7 - 0.5 1.0 1.5 1.5 1.5 0.7 Consultant services 6.0 0.8 1.3 1.3 1.2 0.6 0.4 0.4 Administration & engineering 3.0 0.1 0.3 0.7 0.7 0.5 0.4 0.3 Land acquisition 0.5 0.2 0.3 - - - - -

Base Cost 97.2 4.4 14.4 16.1 21.1 22.9 13.6 4.7

Physical contingencies 13.7 0.7 2.4 2.5 2.8 3.1 1.7 0.5 Expected price increases 30.1 0.2 1.5 3.2 6.3 9.2 6.9 2.8

Total Project Cost 141.0 5.3 18.3 21.8 30.2 35.2 22.2 8.0

/a Project implementation is over six years, from mid-1981 to mid-1987. - 59 - ANNEX 2 Table 11

MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Estimated Schedule of Disbursements

Accumulated IBRD fiscal disbursement year and US$ million semester equivalent

FY82 lst 1.0 2nd 3.0

FY83 1st 6.0 2nd 10.0

FY84 1st 14.5 2nd 18.0

FY85 lst 22.5 2nd 26.0

FY86 1st 30.0 2nd 33.5

FY87 1st 35.0 2nd 37.0

FY 88 1st 38.5 2nd 40.0 ANNEX 2 - 60 - Table 12

MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Proposed Allocation of Loan Proceeds

Cost Proposed Category Total Foreign allocation Disbursement ------US$ million ------%

Civil Works Land clearing, main drains & roads 16.6 7.9 Diversion works and dikes 21.1 9.5 Irrigation development 16.9 6.9 Settlement works 22.9 5.0 Buildings and facilities 3.5 0.8

81.0 30.1

Price Contingencies 23.5 9.6

Subtotal 104.5 39.7 25.0 24

Equipment and Vehicles DID 1.3 1.2 {100% of foreign expendi- } DOA 1.8 1.5 {tures, 100% of local } FOA 3.6 3.0 {expenditures (ex-factory)} {or 80% of imported items } 6.7 5.7 {procured locally. }

Price Contingencies 2.0 1.7 { } { } Subtotal 8.7 7.4 8.0

Consultants Services 6.0 4.2 6.0 100

Unallocated Administration & engineering 3.0 0.3 Land acquisition 0.5 0.0 Physical contingencies 13.7 5.9 Remaining price contingencies 4.6 1.5

Subtotal 21.8 7.7 1.0

TOTAL 141.0 59.0 40.0 (28) - 61 - ANWFX 2 Table 13

MALAYSIA

PROMPIN-ENDAUAREA 'EVLOPRhENT PROJECT

Phasing of Incremental Operating & tMaintenance Costs

1981 1982 1983 1984 1985 1986 1987 1 98 8/a ------(M$0) ------

Project Office 56 56 84 112 168 168 168 112 FOA /b 0 0 6 20 74 145 187 208 DID 0 0 42 118 376 1,171 1,900 2,440 DOA 0 0 11 34 154 482 791 1,006 DOF 0 0 9 17 41 41 41 41 DOVS 0 0 16 19 19 185 185 185

Totals 56 56 168 320 832 2,192 3,292 3,(92

/a Full development assurmed in 1988.

/b FOA's costs associated with revenue earning are excluded since they are self-liquidating. A?1EX 3 -62- Table 1

MALAYSIA

ROMPIN-E2NDAUAREA DEVELOPMEMTPROJECT

Fertilizer Price Structure (In constant 1981 values)

1981 1985 1990 Finan- Econ- Finan- Econ- Finan- Econ- cial omic cial omic cial omic

Urea

In US$/ton Export price, f.o.b. Europe 218 279 294 Ocean freight and insurance 42 42 42 C.i.f. price, Ruantan 260 321 336

In M$/ton C.i.f. price, Kuantan 559 559 690 690 722 722 Port handling and transport to wholesaler /a 30 22 30 22 30 22 Dealer's margin /b 29 19 36 24 38 25 Transport to farm from whole- saler /c 27 18 27 18 27 18 Farm-gate price 645 618 783 754 817 787

Triple Super Phosphate

In US$/ton Export price, f.o.b. TTSGulf ports 205 237 241 Ocean freight and insurance 42 42 42 C.i.f. price, Kuantan 247 279 283

In M$/ton C.i.f. price, Kuantan 531 531 599 599 608 599 Port handling and transport to wholesaler /a 30 22 30 22 30 22 Dealer's margin /b 28 19 31 21 32 21 Transport to farm from whole- saler /c 27 18 27 18 27 18 Farm-gate price 616 590 687 660 697 660

Mfuriate of Potash

In US$/ton Export price, f.o.b. Vancouver 104 105 119 Ocean freight and insurance 42 42 42 C.i.f. price, Kuantan 146 147 161

In 2f$/ton C.i.f. price, Tuantan 314 314 316 316 346 346 Port handling and transport to wholesaler /a 30 22 30 22 30 22 Dealer's margin /b 17 11 17 11 19 13 Transport to farm from whole- saler /c 27 18 27 18 27 18 Farm-gate price 388 365 390 367 422 399

/a Wlholesaler- Kuantan; conversion factor of 0.72 has been applied.

/b Assumed 10% of c.i.f. price plus port handling and transport; a conversion factor of 0.67 is applied.

/c Kuantan to project area: 134 km at M$0.20/ton-km; conversion factor of 0.66 has been applied. - 63 - AN"IFY 3 Table 2

MAIAYS IA

ROMPIN-E YDAUAREA T)EVELOPMEU PROJECT

Padi Production - Physical Inputs and Financial Prices

Future IJnit prices with project (W$/unit) /a

Land Preparation 2-wheel rotovator (%) 25 Tractor cultivation (v) 75

Harvesting Hand harvesting (%) 25 Machine harvesting (%) 75

Agricultural Inputs (per ha) Seed (kg) 40 0.80 Basal fertilizer mix, 15:15:7.5 (kg) 200 0.70 /b Urea, 46:0:0 (kg) 150 0.80 lb TSP, 0:46:0 (kg) 65 0.70 lb MP, 0:0:60 (kg) 25 0.40 lb Herbicide (1) 2 8.45 Insecticide (kg) 25 3.80 Rodenticide (kg) 1 8.50 Bait (kg) 30 0.25 Sacks (#) 55 1.10

Labor Inputs (labor-days/ha) 7.00 Nursery 3.5 Land preparation 8.5 Transplanting 20.0 Weed ing 15.0 Application of fertilizers 4.0 Application of chenicals 5.0 Irrigation & field system maintenance 25.0 Harvest, threshing & transport 12.0

Total Labor Inputs 93.0

Contract Operations (ha) Land preparation 165 Transplanting 232 Harvest - machine 198 - hand 20% of crop Threshing (cost/ton) 23

/a 1990 projected prices in 1981 constant dollars.

/b Farm level fertilizer prices without subtracting subsidies. ANNEX 3 -64 - Table 3

MALAYSIA

ROMPIN-EWDAU AREA DEVELOPMENT PROJECT

Padi Production Costs - Future With Project (M$)

2.4 ha farm - Costs per hectare 190% cropping intensity Financial Economic Financial Economic

Agricultural Inputs Seed 30 30 135 135 Compound fertilizer 140 135 640 615 Urea 120 120 545 545 Triple Super Phosphate 45 45 205 205 Muriate of Potash 10 10 45 45 Herbicide 15 15 70 70 Insecticide 95 80 435 365 Rodenticide and bait 15 15 70 70 Sacks 60 50 275 230

Subtotal 530 500 2,420 2,280

Contract Inputs Land preparation 165 120 750 545 Machine harvesting 150 105 685 480

Subtotal 315 225 1,435 1,025

Labor Inputs Family labor 0 515 0 2,350

Total Costs of Production 845 1,240 3,855 5,655 ANNEX 3 - 65 - Table 4

MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Annual Farm Budget - Future With Project (2.4 ha padi)

Wet season Dry season

Cropping intensity (0) 100 90

Yield (tons/ha) 3.8 4.2

Farm production (tons) 18.4

M$ Cash Inflows Padi sales (@ M$625/ton) 11,500

Cash Outflows Crop production costs (Annex 3, Table 2) 3,855 Less fertilizer subsidy (M$60/acre/crop) 685

Net Crop Production Costs 3,170

Taxes and Water Charges Irrigation rate & quitrent 25 Zakat (10% of gross sales minus 1 ton consumption allowance) 1,085

Subtotal 1,110

Total Cash Outflow 4,280

Net Farm Cash Flow 7,220 MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Cash Flow of 2.4 Ha Rice Farm

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7-10 Year 11-15 Year 16-20 Year 21

Cropping intensity (%) 160 170 180 185 190 190 190 190 190 190

Yield (tons/ha) Wet 2.7 3.0 3.3 3.5 3.8 3.8 3.8 3.8 3.8 3.8 Dry 3.0 3.3 3.6 3.9 4.2 4.2 4.2 4.2 4.2 4.2

Production (tons/2.4 ha) 10.8 12.7 14.8 16.6 18.4 18.4 18.4 18.4 18.4 18.4

Padi price (M$/ton) 601 605 609 613 617 621 625 625 625 625

…------…------Cash Flow (M$) ------

Receipts ' padi sales 6,490 7,685 9,015 10,175 11,350 11,425 11,500 11,500 11,500 11,500

Costs Net production costs 1,710 2,075 2,465 2,810 3,170 3,170 3,170 3,170 3,170 3,170 Taxes & fees 615 735 865 980 1,095 1,100 1,110 1,110 1,110 1,110

Total Costs 2,325 2,810 3,330 3,790 4,265 4,270 4,280 4,280 4,280 4,280

Net Farm Income (Before debt servicing) 4,165 4,875 5,685 6,385 7,085 7,155 7,220 7,220 7,220 7,220

Debt Repayment Housing cost /a 0 0 296 296 296 296 296 296 0 0 Land clearing/7b 0 0 0 0 0 0 0 690 690 0

Total Debt Service 0 0 296 296 296 296 296 986 690 0

Net Farm Income 4,165 4,875 5,389 6,089 6,709 6,859 6,924 6,234 6,530 7,220

_,tnw /a Repayment over 15 years, with no interest, 2 years grace. /b Repayment over 20 years, with no interest, 10 years grace. MALAYS IA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Monthly Labor Requirements and Supply

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

Unit Labor Requirement Labor-days/ha Wet season 10 13 2 0 0 0 0 2 17 23 15 10 93 Dry season 0 1 15 22 14 9 9 12 2 0 0 0 84

Total 10 14 17 22 14 9 9 14 19 23 15 10 177

Labor-days/farm Wet season (2.4 ha) 25 31 5 0 0 0 0 5 42 56 37 23 224 Dry season (2.16 ha) 0 3 36 52 35 21 22 28 5 0 0 0 202

Total (4.56 ha) 25 34 41 52 35 21 22 33 47 56 37 23 426

Labor Supply/Farm /a 50 50 50 62 50 50 50 50 50 62 50 50 650

Surplus (Deficit) 25 16 9 10 15 29 28 17 3 6 13 27 224

------('000 labor-days) ------Subproject Labor Requirements Pontian (1,845 ha) 19 27 31 40 26 16 17 25 36 43 28 18 326 Anak Endau (4,195 ha) 44 61 71 91 60 36 39 58 81 98 65 40 744 Kembar (610 ha) 6 9 10 13 9 5 6 8 12 14 9 6 107 Endau (700 ha) 7 10 12 15 10 6 6 10 14 16 11 7 124 Rompin (4,050 ha) 42 59 69 88 58 35 38 56 78 95 62 38 718

Total (11,400 ha) 118 166 193 247 163 98 106 157 221 266 175 109 2,019

Total Labor Supply 238 238 238 297 238 238 238 238 238 297 238 238 2,974 (4,750 farm units)

Surplus 120 72 45 50 75 140 132 81 17 31 63 129 955

a Z /a Labor supply is assumed to be 2 persons per family available to work 25 days per month, except for peak labor demand months (April and October) when 2.5 workers per family is assumed. a W -68 - ANEX 4 Table 1

MALAYSIA

ROMPIN-E NDAUAREA DEVELORfENT PROJECT

Conversion Factors and National Parameters

General conversion factor 0.89

Conversion factor for - consumption 0.79 - agricultural inputs 0.86 - contract inputs 0.72 - port handling 0.72 - transport 0.66 - trade 0.67 - Government and other social services 0.80 - construction 0.77 - other industrial inputs 0.90

Opportunity cost of capital 0.10

Absolute poverty income (1981) /a US$320

Critical consumption level (estimated 1992) /b US$790

Average private per capita consumption (estimated 1992) US$1,260

GNP per capita (estimated 1992) US$2,370

/a US$300 in 1980.

/b One third of GNP per capita. MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Padi Production Area Buildup by Subproject and by Season

Rompin Pontian Anak Endau Endau Total Wet Dry Wet Dry Wet Dry Wet Dry Wet Dry Total

1981-83 0 0 0 0 0 0 0 0 0 0 0 1984 0 0 535 320 0 0 0 0 535 320 855 1985 0 0 1,320 845 0 0 0 0 1,320 845 2,160 1986 1,335 200 1,845 1,295 2,585 1,550 500 300 6,265 3,945 10,210 1987 3,125 2,010 1,845 1,450 3,390 2,295 1,310 835 9,670 6,590 16,260 1988 4,050 2,880 1,845 1,570 4,195 3,115 1,310 965 11,400 8,565 19,970 1989 4,050 3,215 1,845 1,635 4,195 3,405 1,310 1,075 11,400 9,330 20,730 1990 4,050 3,465 1,845 1,660 4,195 3,755 1,310 1,140 11,400 9,920 21,320 1991 4,050 3,600 1,845 1,660 4,195 3,735 1,310 1,180 11,400 10,175 21,575 1992-2010 4,050 3,645 1,845 1,660 4,195 3,775 1,310 1,180 11,400 10,260 21,665

X P ANNEX4 Table 3

MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Derivation of Incremental Project Benefits from Padi /a

/b Gross value Production Net value Imputed /d Project Production of production/c costs /d of production Labor costs benefits (tons) ------MS million ------

Rompin Subproject

1981-1985 0 0 0 0 0 0 1986 6,000 4.4 1.1 3.3 0.8 2.5 1987 15,140 11.0 2.7 8.3 2.0 6.3 1988 21,890 16.1 3.9 12.2 2.8 9.4 1989 25,160 18.6 4.5 14.1 3.2 10.9 1990 28,280 21.0 5.0 16.0 3.6 12.4 1991 30,300 22.5 5.4 17.1 3.9 13.2 1991-2010 30,990 23.1 5.5 17.6 4.0 13.6

Pontian Project

1981-1983 0 0 0 0 0 1984 2,530 1.8 0.4 1.4 0.3 1.1 1985 6,490 4.7 1.1 3.6 0.8 2.8 1986 9,820 7.1 1.8 5.3 1.3 4.0 1987 11,320 8.3 2.0 6.3 1.4 4.9 1988 12,750 9.4 2.3 7.1 1.6 5.5 1989 13,720 10.2 2.4 7.8 1.8 6.0 1990-2010 14,120 10.5 2.5 8.0 1.8 6.2

Anak Endau Subproject

1981-1985 0 0 0 0 0 1986 11,630 8.4 2.1 6.3 1.5 4.8 1987 17,320 12.6 3.1 9.5 2.2 7.3 1988 23,840 17.5 4.4 13.1 3.1 10.0 1989 27,080 20.0 4.8 15.2 3.5 11.7 1990 30,300 22.5 5.4 17.1 3.9 13.2 1991 31,500 23.5 5.6 17.9 4.0 13.9 1992-2010 32,100 23.9 5.7 18.2 4.1 14.1

Endau Subproject

1981-1985 0 0 0 0 1986 2,260 1.6 0.4 1.2 0.3 0.9 1987 6,290 4.6 1.1 3.5 0.8 2.7 1988 7,370 5.4 1.3 4.1 1.0 3.1 1989 8,440 6.2 1.5 4.7 1.1 3.6 1990 9,410 7.0 1.7 5.3 1.2 4.1 1991-2010 10,010 7.4 1.8 5.6 1.3 4.4

Total Project

1981-1983 0 0 0 0 1984 2,530. 1.8 0.4 1.4 0.3 1.1 1985 6,490 4.7 1.1 3.6 0.8 2.8 1986 29,710 21.5 5.3 16.2 3.8 12.4 1987 50,070 36.6 8.9 27.7 6.4 21.3 1988 65,860 48.4 11.7 36.7 8.4 28.3 1989 74,410 55.1 13.2 41.9 9.5 32.4 1990 82,110 61.1 14.6 46.5 10.5 36.0 1991 85,930 63.9 15.3 48.6 1 .0 37.6 1992-2010 87,220 64.9 15.5 49.4 1'.2 38.2

/a Production without the project would be less than 1% of production with the project; therefore, it was not included in these estimates. All MS values are in terms of economic prices. /b Derived from Table 5.1 and Annex 4, Table 2. 7T Padi prices used in estimating gross value of production were derived from the 1985 and 1990 economic price estimates of Table 6.1 /d Derived from Annex 3, Table 3 and Annex 4, Table 1. - 71 - ANNEX 4 Ta,ble 4

MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Rent and Cost Recovery Analysis /a

Farm model Total 2.4 ha project (M$) (M$ mln)

At Full Project Development Incremental gross value of productio. /b 11,500 Less: Incremental cash production costs /b 3,170

Equals: Incremental cash income 8,330

Less: Incremental imputed return on own capital /c 65 imputed value of family labor Id 2,970 imputed value of farm management /e 1,150 Allowance for risk and uncertainty /f 1,150

Subtotal 5,335

Equals: Project rent 2,995

Incremental water, quitrent and zakat taxes 1,110 Loan repayment: Land clearing 690 : House construction 296

Subtotal 2,096

Incremental taxes plus loan repayment as a % of incremental cash income 25

During Project-s Life /g Project rent 16,030 76.1 Incremental taxes plus loan repayment /h 7,074 33.6 Rent recovery index (%) 44.0 Project costs - 142.3 Cost recovery index (%) - 24.0

/a All calculations are in mid-1981 financial prices and represent incremental conditions. Supplementary enterprises are not included. /b From Annex 3, Table 4. /c Assumes 20% of production costs are met from farmer s own resources, an allowance of 10% return on capital is made. /d Family labor valued at M$7/man-day. 7e Ten percent of incremental gross value of production. /f Ten percent of incremental gross value of production. /g Present values in 1981 discounted at 10% p.a. over project life; project costs net of housing and other settlement costs. /h Excludes repayment of housing loans to be consistent with exclusion of housing and other settlement costs from the project cost estimates. ANNEX 4 Table 5 - 72- Page 1

MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENTPROJECT

Economic Costs and Benefits: Overall Project (M$ million)

Project costs Incremental Incremen- project Year Capital tal O&M Total benefits

1981 9.7 /a 9.7 0

1982 31.8 /a 31.8 0

1983 34.1 0.1 34.2 /a

1984 32.3 0.2 32.5 1.2

1985 32.0 0.6 32.6 3.2

1986 15.7 1.7 17.4 13.3

1987 5.0 2.6 7.6 22.4

1988 0 3.1 3.1 30.0

1989 0 3.1 3.1 34.4

1990 0 3.1 3.1 38.2

1991 0 3.1 3.1 39.8

1992-2009 0 3.1 3.1 40.4

2010 /b (-)40.2 3.1 (-)37.1 40.4

Economic Rate of Return = 17% NPV (1981) discounted at 10% = M$77.4 million

/a Less than M$55,000.

/b A salvage value in year 30 equal to 25% of original capital costs is assumed. MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Subproject Economic Costs and Benefits (M$ million)

Rompin Pontian Anak Endau Endau Capi- Oper.& Net Capi- Oper.& Net Capi- Oper.& Net Capi- Oper.& Net tal maint. Total bene- tal maint. Total bene- tal maint. Total bene- tal maint. Total bene- Year rost cost cost fits cost cost cost fits cost cost cost fits cost cost cost fits

1981 1.7 /a 1.7 0 3.3 /a 3.3 0 4.5 /a 4.5 0 0.2 0 0.2 0 1 1982 13.8 7a 13.8 0 6.6 Ta 6.6 0 9.6 7a 9.6 0 1.8 0 1.8 0 1983 13.8 /a 13.8 0 4.5 Ia 4.5 0.0 11.1 /a 11.1 0 4.7 /a 4.7 /s 1984 11.3 r 1 11.4 0 4.2 7a 4.2 1.1 13.2 rTF1 13.3 /a 3.6 7a 3.6 TF1 1985 12.8 0.2 13.0 /a 3.3 0.1 3.4 2.9 13.1 0.2 13.3 Ia 2.7 0.1 2.8 0.2 1986 6.7 0.6 7.3 2.8 0.6 0.3 0.9 4.3 6.0 0.6 6.6 5.2 2.3 0.2 2.5 1.0 1987 2.5 0.9 3.4 6.8 0.2 0.4 0.6 5.0 2.1 1.0 3.1 7.8 0.2 0.3 0.5 2.8 1988 0 1.1 1.1 10.0 0 0.5 0.5 5.7 0 1.2 1.2 10.9 0 0.3 0.3 3.3 1989 0 1.1 1.1 11.7 0 0.5 0.5 6.3 0 1.2 1.2 12.6 0 0.3 0.3 3.9 1990 0 1.1 1.1 13.2 0 0.5 0.5 6.4 0 1.2 1.2 14.1 0 0.3 0.3 4.4 1991 0 1.1 1.1 14.1 0 0.5 0.5 6.5 0 1.2 1.2 14.7 0 0.3 0.3 4.6 1992-2009 0 1.1 1.1 14.4 0 0.5 0.5 6.5 0 1.2 1.2 14.9 0 0.3 0.3 4.6 2010/b(-)15.6 1.1 1.1 14.4 (-) 5.7 0.5 (-) 5.2 6.5 (-)14.8 1.2 (-)13.6 14.9 (-) 3.9 0.3 (-)13.5 4.6

ERR = 15% ERR = 17% ERR = 17% ERR = 19% NPV /c = M$ 18.6 million NPV /c = M$ 19.4 million NPV /c = M$ 28.0 million NPV /c = M$ 11.3 million

/a Less than M$55,000. /b A salvage value in year 30 equal to 25% of original capital costs is assumed. X 7c Net present values in 1981 discounted at 10% over project life.

LJ1 MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Project Benefits at Full Development (In economic prices)

Farm-gate Gross value Production Net value of Imputed Project Area Yield Production price of production costs production labor cost benefits (ha) (tons/ha) (tons) (M$/ton) -- …------(M$ million) ------

Padi

Wet season 11,400 3.8 43,610 744 32.4 8.2 24.2 5.9 18.3

Dry season 10,260 4.2 43,610 744 32.4 7.4 25.0 5.3 19.7

Subtotal 21,660 8.0 87,220 744 64.8 15.6 49.2 11.2 38.0

Supplementary Enterprises

Goats/sheep - - - - 2.1 0.2 1.9 0.2 1.7 Poultry - - - - 1.5 1.1 0.4 /a 0.4 Fish cage - - - - 0.4 0.2 0.2 ja 0.2

Subtotal - - - - 4.0 1.4 2.6 0.2 2.4

Total - - - - 68.8 17.0 51.8 11.4 40.4

/a Less than M$55,000.

Sources: Tables 5.1 and 6.1; Annex 4, Tables 3 and 5; supplementary enterprise tables in the Project File.

>4 ANNEX 4 Table 7 - 75 -

MALAYSIA

ROMPIN-ENDAU AREA DEVELOPMENT PROJECT

Sensitivity Analysis

Appraisal Crossover Change Elasticity value value /a (%) /b

Yields at full development (tons/ha) Main season 3.8 2.8 -26 +4.7 Off season 4.2 3.1 -26

Dry season cropping at full 10,260 5,790 -44 +5.0 development (ha) (90%) (51%)

World market price (5% broken, 600 467 -22 +4.4 f.o.b. Bangkok, US$/ton, 1990)

Construction costs (M$ million, 160.6 261.6 +63 -1.6 economic)

Development period (years) 11.0 15.3 +39 -2.5

Economic wage rate (M$/day) 5.53 12.32 +123 -0.7

/a Value of variable for which NPV is zero at a discount rate of 10%.

/b Percent change in NPV (discounted at 10%) due to a 1% change in a variable. - 76 - ANNEX 5

MALAYSIA

ROtMPIN-ENDAU AREA DEVELOPMENT PROJECT

Schedule of Critical Events

Target Activity Responsibility date

1. General a. Appoint Project Manager GOM 03/81 b. Determine settler selection criteria Pahang State 06/81 c. Prepare draft agricultural services operations manual DOA 01/84 d. First settlers moved into project Project Manager 02/84

2. Civil works a. Engage consultant to design tender and supervise construction of land clearing, irrigation and drainage systems, roads, including flood protection and drainage of farm settlements and subregional centers DID 10/80 b. Complete clearing of land, construction of main roads and drainage for: - Pontian subproject DID 12/82 - Anak Endau subproject DID 10/83 - Rompin subproject DID 12/83 - Endau subproject DID 09/84 c. Begin detailed geologic investiga'ion and earth materials study for tle Rompin cut-off channel; Pontian, Anak Endau and Kembar weirs; and Anak Endau dam DID 02/81 d. Begin construction of Pontian weir and rehabilitation of Paya Sepayang area DID 06/81 e. Begin construction of: - Rompin cut-off, weir, closures & structures DID 04/82 - Anak Endau dam DID 01/83 - Anak Endau weir DID 04/83 f. Begin construction of irrigation, drainage and farm road systems on cleared areas DID 06/82 g. Begin construction of settlement facilities DARA 06/82 h. Complete preparation of draft designers' operating criteria for irrigation works DID 12/84 j. Complete preparation of technical record of design and construction DID 12/87

Note: Activity 2 (a) and 2 (b) could be handled by the same consultant. - 77 -

ANNEX 6

MALAYSIA

ROMPIN-ENDAUAREA DEVELOPMENTPROJECT

Related Documents and Data Available in the Project File

A. General Reports and Studies on the Agricultural Sector

A.1 S. Selvadurai, "Agriculture and Peninsular Malaysia", Ministry of Agriculture, April 1977.

A.2 IBRD, "Malaysia - Agriculture and Rural Development", Draft Country Sector Memorandum, June 1980.

A.3 IBRD, "Malaysia - Selected Issues in Rural Poverty", Report No. 2685-MA, January 1980.

B. General Reports and Studies Related to the Project

B.1 Snowy Mountains Engineering Corporation, "Rompin-Endau Irrigation Development Study - Final Report", November 1979, 3 vols.

B.2 Ministry of Agriculture, "Rompin-Endau Integrated Agricultural Development Project", May 1980.

B.3 Farmers Organization Authority, "Rompin-Endau IrrigationiProject - Farmers Organization Authority Project Component", ApriL 1980.

B.4 Department of Agriculture, "Endau/Rompin Integrated Agricultural Development Project - Proposal for the Department of Agriculture Component", April 1980.

B.5 Department of Veterinary Services, "Proposal for Livestcck Program for the Endau/Rompin Irrigation Projects", April 1980.

B.6 Department of Fisheries, "Fisheries Programme for Endau/Rompin Irri- gation Development Project", April 1980.

B.7 Bank Pertanian Malaysia, "The Role of the Bank Pertanian Malaysia in the Endau/Rompin Irrigation Development Scheme", April 1980.

C. Material Related to the Project

C.1 Project Notes by G. Thorsky (Consultant).

C.2 Infrastructure cost working tables.

C.3 Supplementary enterprise budgets and cost/benefit estimates.

C.4 Details of project cost and benefit estimates. - 78 -

Figure 3.1

MALAYSIA ROMPIN-ENDAUAREA DEVELOPMENTPROJECT IMPLEMENTATION SCHEDULE

ITEM 1980 1981 1982 1983 1984 1985 1986 9

A) PONTIAN IRRIGATION AREAS: 1. Land Clearing, Roads,Main Drains: Left Bank _ ,

Right Bank m m 11_

2. Pontian Diversion Weir, Feeder aa Canaland Rehabilitation of Paya Sepayang _ _ _ _ _- _ m -

3. Pontian Left Bank System: D & I Works, Farm Roads _ m -

4. Pontian Right Bank System: 1 9 t D & I Works, Farm Roads L m m*

5. Farm Settlement on Pontian t Left Bank

6. Farm Settlement on Pontian Right Bank _ _ _

B) ROMPIN IRRIGATION AREAS: 1. Main Roads,Collector Drain *n , m and Rompin Sluice Gate ' _ _ _ i 2. Rompin Cut-off Channel,Weir, Closures,and Inlet Structure

3. Land Clearning, Main Drains, Roads: Right Bank P M_

Left Bank _ - _ -

4. Rompin Right Bank System: D & I Works, Farm Roads _ _ _ _ _ m

5. Rompin Left Bank System: _ uui D & I Works, Farm Roads _ * _ _ 9 _

6. Subregional Center on Rompin _l Right Bank _ L _. m

7. Farm Settlement on Rompin Left Bank I

Legend: _ ~ Survey and Investigation *m.mgmu.gn.u Planning& Design Land Acquisition Tender->_as World Bank -21700 m _ _ m * Construction - 79 - Figure 3.2

MALAYSIA ROMPIN-ENDAUAREA DEVELOPMENTPROJECT IMPLEMENTATION SCHEDULE

ITEM 1980 1981 1982 1983 1984 1985 1986 1987

C) ANAK ENDAU IRRIGATION AREAS: 1 Main Road on Right Bank up Il to Sg. Kembar __ __

2. Anak Endau Dam liii tt s- I-

3. Land Clearing, Main Drain, Roads: Left Bank

Right Bank _~ ~~______- ____

4. Anak Endau Diversion Weir, Left Bank System D & I Works, Farm Roads _ _ - m

5. Anak Endau Right Bank System D & I Works, Farm Roads _ _ _

6. Farm Settlement on Anak Endau Left Bank

7. Subregional Center and Farm Settlements on Anak Endau Right Bank m D) UPPER ENDAU RIVER, MENTELONG & KEMBAR IRRIGATION AREAS 1. AccessRoad from Sg. Kembar to Upper Endau II and Kembar Weir __ _ _ 2. Land Clearing and Drains: Mentelong & Kembar

Land Clearing and Drains: Upper Endau I & II _ _ 6 i m_

3. Kembar System: D & I Works, Farm Roads _"_ l i-- ~~~~.______.._ _-- __..__.

4. Mentelong System: D & I Works Farm Roads, and Farm Settlement

5. Upper Endau I System: D & I Works, Farm Roads * - -

6. Upper Endau II System: D & I .15, Works, Farm Roads _ _ -

E} SERVICE BUILDINGS AND STAFF QUARTERS F) PROCUREMENT OF O & M EQUIPMENT, _ _, _i - VEHICLES, AND SUPPLIES ______

Legend: r Survey and Investigation World Bank-21701 lIsllfliEIllImPlanning & Design X I Land Acquisition _T dTender _ _1 a Construction '____ Procurement - 80 - FLgure 4. 1

MALAYSIA ROMPIN-ENDAU AREA DEVELOPMENT PROJECT Project Organization

|STEERING COMMITTEE l

F PROJECT MANAGER PROJECT OFFICE

- Community Development/ Administration - Monitoring and Evaluation - Administration - Budget/Finance

|DOF l l DOVS

- Fishery Programs Livestock Program - Irrigation Management - Credit - Poultry Program and Operation

FOA DOA mARDI

- Mechanization Services - Extension - Crops Research - Cooperative Management - Regulation - Marketing/Transport - Seed Production - Crop Protection - Soils Management - Mechanization Trials/Training

VVorldBank - 22010 - 81 -

MALAYSIA Figure 5.1 ROMPIN-ENDAU AREA DEVELOPMENT PROJECT PROPOSEDPADI CROPPINGCALENDER

JAN FEB MARCH APRIL MAY JUN JULY AUG SEF'T OCT NOV DEC

P P

N N SCHEDULE 1 ROMPIN-ENDAU D T D

H H mm~ ~ ~ ~ ~ ~ m

N N SCHEDULE 2 ROMPIN-ENDAU D T D T

H H

P P

N N

SCHEDULE 3 ROMPIN ENDAU 0T D T

H ~~~~~~~~~~~~~H

NOTATION: 850 P = PRESATURATION 800 N = NURSERY (21 DAYS) T = TRANSPLANTING 600 O = DRAINAGE H = HARVESTING Note: P, T, D and H 400 are assumed to take 5 days each. 200 AVERAGE RAINFALL (MM)

JAN FEB MARCH APRIL MAY JUN JIJLY AUG SEPT OCT NOV DEC

World Bank - 22009

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