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World Bank Document Document of The World Bank FOR OFFICIAL USE ONLY C $?/ / Public Disclosure Authorized Report No. 5461-BA STAFF APPRAISAL REPORT Public Disclosure Authorized BUR4A TIMBER DISTRIBUTION PROJECT May 30, 1985 Public Disclosure Authorized Public Disclosure Authorized Power & TransportationDivision South Asia Projects Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents maY not otherwisebe disclosed without World Bank authorization. CURRENCYEQUIVALENTS Currency Unit = Kyat (K) US$1.00 = K 8.90 K 1.00 = rJS$0.112 Value of Kyat is tied to SDR and floats against US dollar. WEIGHTS AND MEASURES 1 hoppus foot (HF) = 1.273 cubic feet (cu. ft.) true geometric measure for roundwood 1 hoppus ton (Ht) = 50 HF in round logs, equivalent to 50.64 - 63.66 cu. ft. depending on log shape = 1.4-1.8 cubic meter (M) of wood underbark depending on log shape 1 sawn ton (St) = 50 cu. ft. of sawnwood, or 1.416 m 1 metric ton (mt) = 2,205 pounds ABBREVIATIONS AAC - Annual Allowable Cut ADB - Asian Development Bank BFSSC - Burma Five Star Shipping Corporation BPC - Burma Ports Corporation 3RC - Burma Railways Corporation CC - Construction Corporation CAO - Central Accounts Office CMCC - Central Movement Coordination Committee ERR - Economic Rate of Return FAG - Food and Agriculture Organizaticn of the United Nations FD - Forest Department FFS - Forest Feasibility Studies FFYP - Fourth Five Year Plan FOB - Free on Board GDP - Gross Domestic Product GOB - Government of the Socialist Republic of the Union of Burma Ht - Hoppus Ton ICB - International Competitive Bidding IDA - International Development Association IWTC - Inland Water Transport Corporation K - Kyats LTT - Lanaing Tank Type MAF - Ministry of Agriculture and Forests hOC - Ministry of Construction MOPF - Ministry of Planning and Finance MOTC - Ministry of Transport and Communications PCG - Project Coordination Group PU - Project Unit RTC - Road Transport Corporation SEE - State Economic Enterprise St - Sawn Ton TC - Timber Corporation TFYP - Third Five-Year Plan UNDP - United Nations Development Program FISCAL YEAR April 1 - March 31 FOR OFFICIALUSE ONLY BURMA TIMBER DISTRIBUTION PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. ECONOMIC SETTING ...................................... 1 II. FORESTRY AND TRANSPORT SECTORS ........................ 2 The Forestry Sector: A. Introduction ...................................... 2 B. Forestry Sector Objectives ........................ 2 C. Forest R-sources .................................. 3 D. Forest Management ................................. 3 E. The Timber Corporation ............................ 4 F. Timber Management ................................. 5 G. Teak Sales and Export Pricing .................... 6 H. Manufacturing Facilities .......................... 7 The Transport Sector: I. Introduction ...................................... 7 J. Transport Planning and Coordination .... ........... 8 K. Transport Agencies ................................ 8 L. Road Systems and Transport ........................ 9 M. Rail System and Transport ......................... 10 N. River Transport ................... 12 0. Rangoon - Log Depots .............................. 12 P. Ports and Ship Loading ............................ 13 Q. Ocean Shipping ....................... 13 III. THE PROJECT .......................................... 14 A. Project Genesis and Strategy ...................... 14 B. Project Objectives ................................ 14 C. Project Components ................................ 14 D. Cost Estimates ................... 16 E. Financing Plan ................... 17 F. Implementation .................................... 18 G. Operational Conditions ............................ 20 H. Procurement ..........................-...-..... 21 I. Disbursements ..................-............... 23 J. Environmental Impact ..........................-. 23 K. Reporting .............-............... 23 | 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 disdosed without World Dank authorization. -ii- Page No. IV. ECONOMIC EVALUATION ................................... 24 A. Main Benefits and Beneficiaries ................... 24 B. Economic Evaluation of Subcomponents .... .......... 25 C. Overall Evaluation ..........................--. 29 D. Sensitivity Analysis ......................... 29 E. Risks ............................................. 29 V. AGREEMENTS REACHED AND RECOMMENDATIONS .... ............ 30 ANNEXES Annex 1 - Selected Documents Available in the Project File 32 Annex 2 - Central Movement Coordination Committee .... ....... 34 Annex 3 - List of Railway Stations to be Developed as Primary Timber Shipping Points .... .............. 37 Annex 4 - Details of Project Components ..................... 38 Annex 5 - Implementation Schedule ........................... 45 Annex 6 - Project Coordination Group ........................ 46 Annex 7 - Expected Annual Traffic Volumes to be Transported in the Main Proposed Project Subcomponents ...... 48 Annex 8 - Details of the Economic Analysis of the Myitkyina Region Component ...................... 49 TABLES Table 1 - Logs and Sawn Timber Transported to Rangoon ....... 51 Table 2 - Timber Distribution Performance - Teak and Hardwood ..................-----. 52 Table 3 - Sawmill Capacity .................................. 54 Table 4 - Transportation of Logs by Rail .... ................55 Table 5 - Logs Inventory at Railway Stations .... ............ 56 Table 6 - Inventory of Timber Wagons ........................ 58 Table 7 - Inventory of Logs at Storage Depots, Rangoon ...... 59 Table 8 - Detailed Cost Estimates ........................... 60 Table 9 - Estimated Schedule of Disbursements .... ........... 64 CHART World Bank-25042 - Timber Corporation - Organization Chart MAP Map No. IBRD 18518 - Burma Timber Transport/Distribution Project This report was prepared by Messrs. Alikhan, Auzmendi, Melrose, and Sabeti (ASPPT), and Messrs. Holmsen and Burns (Consultants) BURMA STAFF APPRAISAL REPORT TIMBER DISTRIBUTION PROJECT I. ECONOMIC SETTING 1.01 Burma covers an area of about 262,000 square miles and consists of lowlands in the basins of the rivers Irrawaddy, Chindwin, Sittang, and Salween, surrounded by hills and mountains to the east, north, and west and divided by a hill range running from north to south in central Burma (Map IBRD 18518). The country has a total population of about 35 million, which is growing at a rate of about 2.0% per annum. About one-quarter of the population lives in urban areas and the rest is dispersed in a large number of villages located in the main agricultural areas, i.e., the river basins and the Irrawaddy delta. The main centers of population and economic activity are Rangoon and Mandalay, the former being the capital, the seat of Government, and the country's main internationalport. 1.02 Per capita income (FY82 current value) is reported to be K 1,275 (US$143), up from K 1,145 (US$129) in FY81. The real growth in per capita income during the Third Five-Year Plan (TFYP) period was 4.6% p.a. Because of a sharp reduction in rice exports, export earnings declined significantly in FY83, resulting in a balance of payment deficit of K 915.4 million versus the targetted K 213.7 million. The foreign exchange reserves were consequently reduced from K 1,586.5 million (US$178.3 million) (March 1982) to K 781.8 million (US$87.8 million) at the end of September 1982. 1.03 Because of damage suffered during World War II, internal unrest and a decade of economic stagnation during a period of social restructur- ing (from the mid-60's to the mid-70's), Burma has only recently begun to expand per capita output of major commodities and to augment export earn- ings in real terms. During the mid and late 70's, the Government of Burma (GOB) carried out a series of major reforms aimed at reorienting economic policies in a more open and pragmatic fashion. These reforms included shifts of investment priorities in favor of the primary producing sectors, adjustment of producer and retail prices to enhance incentives and ration- alize the price structure, and increased emphasis on commercial principles in the management of State Economic Enterprises (SEE). Mainly as a result of these reforms, real GDP increased approximately 6.5% p.a. between 1976/77 and 1980/81, against only 2.9% p.a. between 1971/72 and 1976/77; while growth rates in the transport sector were 7.3% p.a. and -0.4% p.a., respectively. -2- 1.04 The GOB's main economic goals under the Fourth Four-Year Plan (FFYP) 1982/83-85/86are to maintain overall economic growth and to realize a surplus on the balance of payments, while avoiding undesirable inflationarypressures. This will require, among other things: (a) recovery and maintenance of forestry and agricultural production; (b) further improvements in capacity utilization and productivity, espe- cially in transport and industry; (c) a more selective approach to public investment projects; and (d) sufficient resources, both foreign and domes- tic to carry out the planned investment program. Continued economic development will be reflected in increased pressures on all transport systems as well as on the forest resources. II. FORESTRY AND TRANSPORT SECTORS THE FORESTRY SECTOR A. Introduction 2.01 Burma is well endowed with natural resources. Forests form a major element
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