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Malaysia Appraisal of the Northwest Selangor Integrated Agricultural ReportNo. 1757b-MA Mft 0 t Malaysia Appraisalof the NorthwestSelangor IntegratedAgricultural Development Project Public Disclosure Authorized lanuary30, 1978 ProjectsDepartment EastAsia and Pacific Regional Office FOR OFFICIAL USE ONLY Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank This document hasa restricteddistribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosedwithout World Bankauthorization. CURRENCY EQUIVALENTS US$1.00 = M$2.48 M$1.00 = US$0.40 M$1 million US$403,000 WEIGHTS AND MEASURES - METRIC SYSTEM 1 millimeter (mm) = 0.039 inches 1 meter (m) = 39.37 inches 1 kilometer (km) = 0.62 miles 1 square kilometer (sq km) = 0.386 square miles 1 hectare (ha) = 2.47 acres 1 cubic meter (cu m) = 35.31 cubic feet I liter (1) = 0.264 gallons (USA) 1 liter/second (l/s) = 0.035 cubic feet per second 1 kilogram (kg) = 2.2 pounds 1 metric ton (ton) = 2,205 pounds ABBREVIATIONS AA = Agriculture Assistant AO = Agriculture Officer AT = Agriculture Technician BPM = Bank Pertanian Malaysia DID = Drainage and Irrigation Department DOA = Department of Agriculture FOA = Farmers' Organization Authority GOM = Government of Malaysia GRP = Glass-Reinforced Polyester MOA = Ministry of Agriculture MARDI = Malaysian Agriclture Research and Development Institute LPN = Lembaga Padi dan Beras Negara = National Padi Board SG = Sungei = River MALAYSIAN FISCAL YEAR January 1 to December 31 FOR OFFICIAL USE ONLY MALAYSIA APPRAISAL OF THE NORTHWEST SELANGOR INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS i-ii 1. INTRODUCTION . 2. BACKGROUND . 1 The Agricultural Sector . 2 Irrigation and Drainage Development in Malaysia . .. 2 The State of Selangor. 3 3. THE PROJECT AREA . 4 Climate . .. 4 Soils, Topography, and Drainage . 5 Drainage and Irrigation Infrastructure . 6 Farm Size and Tenure .. .. .... 7 Estate Agriculture . 8 Agricultural Supporting Services . 8 Project Formulation . 11 4. THE PROJECT . 12 Project Components . .. 12 Status of Design . 15 Implementation Schedule . 16 Cost Estimates . .. ... 16 Financing . - . * . 17 Procurement . .. 18 Disbursements . .. 19 Accounts and-Audits . 19 Environmental Effects . ... .. 19 5. ORGANIZATION AND MANAGEMENT ................ 20 Project Coordination . 20 Agency Responsibilities . .. 21 Smallholder Rent and Cost Recovery . 23 Estate Taxation . 24 This report is based on the findings of an appraisal mission composed of Messrs J. Goldberg and G. Temple (Bank), and G. Thorsky, R. Shepherd, and P. Judd (consultants). This docunenthas re tricteddistribution andmay be usd by recipients only in the performance of their omcial duties. Its content mAy not otherwise be diclosed without Worid Bankauthorization. Page No. 6. PRODUCTION, MARKETING, PRICES AND FARM INCOME . 24 Padi Production, Marketing, and Prices . 25 Tree Crop Production, Marketing, and Prices . 25 Farm Incomes .. ....... .. 27 7. BENEFITS, JUSTIFICATION AND RISK . 28 8. RECOMMENDATIONS . 29 ANNEXES 1. Water Demand, Supply, and Quality 2 Present and Projected Developments in Padi Production 3. Present and Projected Developments in Tree Crop Agriculture 4. Drainage and Irrigation Works, Equipment and Staff - Cost Estimates 5. Agricultural Supporting Services 6. Summary Cost Estimates 7. Expenditure and Disbursement Schedules 8. Proposed Allocation of the Proceeds of the Loan 9. Production, Marketing and Prices 10. Farm Budgets and Incomes 11. Economic Analysis CHARTS 17908 - Proposed Timing of Farm Activities in Tanjong Karang Padi Area (attached to Annex 2) 17696 - Schedule of Implementation of Civil Works (attached to Annex 4) 17618 - Tanjong Karang Irrigation Area - Typical Layout (attached to Annex 4) MAPS 13026R - Northwest Selangor Rural Development Project 13027R - Typical Drainage Layout (Sabak Bernam) REFERENCES 1. FAO/IBRD Cooperative Program; "Draft Report of the Northwest Selangor Drainage and Irrigation Improvement Project Preparation Mission;" March 8, 1977 2. S. Selvadurai, "Coconut Smallholdings in Lower Perak, Kuala Selangor, and Sabak Bernam," Ministry of Agriculture, 1974 3. S. Selvadurai, "Padi Survey in Kuala Selangor and Sabak Bernam," Ministry of Agriculture, 1976 MALAYSIA APPRAISAL OF THE NORTHWEST SELANGOR INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT SUMMARY AND CONCLUSIONS 1. The Government of Malaysia has requested Bank assistance in financing the Northwest Selangor Rural Development Project. The major objective of the project is to raise the productivityand incomes of about 32,000 smallholder farm families dependent on the cultivation of padi and a wide variety of tree crops in a region bordering the northwest coast of the State of Selangor. Project formulationoriginated in the efforts of the Selangor Drainage and IrrigationDepartment (DID) to upgrade existing drainage and irrigation infra- structure and to promote agriculturaldevelopment (increasedcropping intensity in padi areas, intensified intercroppingin tree crop areas) in the major agriculturalsubregion of the state. Over time it became apparent that only piecemeal engineeringsolutions to the region's drainage and irrigation problems were possible as long as developmentwas dependent on routine annual budget allocations. It was also necessary to involve the agencies providing agricul- tural supporting services together with DID in an integrated extension effort to upgrade smallholder farm practices in conjunctionwith full-scale improvement in agriculturalinfrastructure. The formulationof this project thus involved the long-term planning of irrigationworks and regional drainage systems on the engineeringside, and the working out of a complete operationalmethodology of field extension activitieswith the Department of Agriculture, the Bank Pertanian Malaysia, the Farmers' OrganizationAuthority, and DID at both the State and Federal levels. 2. The proposed project is composed of three major infrastructure elements, including the upgrading and intensificationof the existing Tanjong Karang irrigation system serving 12,000 families cultivating 20,000 ha of padi; provision of an integrated and improved drainage and flood protection system for about 10,000 families cultivating28,000 ha of coconuts and intercrops in the Sabak Bernam area; and provision of major drainage works in the Kuala Selangor area, to serve 10,000 smallholder families cultivating25,000 ha of tree crops and to link the private drainage systems of 35 estates with over 26,000 planted ha. In addition to the irrigationand drainage infrastructureelements, the project would provide required access roads throughout the region and agricul- tural installations,quarters, and equipment to support an expanded program of agriculturaland irrigation extension, production credit, crop marketing, input supply, and operation and maintenance services for the region's smallholders. 3. The project would advance the Government'stwo major goals for the rural sector - increasing incomes of smallholderfarmers and increasingproduc- tion of imported staples and diversifiedexport crops. About 65% of the North- west Selangor region's padi and tree crop smallholderscurrently earn incomes below the absolute poverty line, and the incomes of the majority of these families would be raised above the absolute poverty line by full project develop- ment. A combinationof factors, includingthe rapid spread of intercropping of cocoa and coffee by coconut farmers, the recent developmentof very high yielding hybrid dwarf coconuts, and relativelyhigh prices for a range of coconut products, provides the first opportunityin recent years for large numbers of coconut farmers to escape poverty, given adequate drainage of the coconut areas. - ii - Similarly, padi farmers in the region are progressive enough and possess large enough farms (1.7 ha on average) to rise out of the poverty group, given an adequate irrigation and drainage system. The project would produce an incre- mental 30,000 tons of milled rice at full development, reducing imports by about US$10 million per annum at present prices. Total incremental production of coconut products, cocoa, coffee, rubber and oil palm products would amount to approximately US$9.3 million per annum by the year 2000. The overall eco- nomic rate of return is estimated at 21%, comprising a 19% rate of return for the irrigation component and a 22% rate of return for the drainage component. 4. Total project cost is estimated at US$60 million (M$148.7 million), of which the foreign exchange component would be US$26 million, or 43% of the total cost. The proposed Bank loan of US$26 million would finance the foreign exchange component. The average capital costs of the irrigation works proposed are US$1,390/ha (US$2,100/family), while costs of the tree crop drainage works in smallholder areas are US$225/ha (US$540/family). Average capital costs of drainage directly allocable to estate areas are US$33/ha, or US$52/ha if costs of regional drainage works are allocated pro rata. Incremental annual costs of agricultural services at project completion (1983) would amount to about US$12 per smallholder family. 5. The drainage and irrigation works and access roads would be constructed through a total of 12 contracts, of which five pertaining to the Tanjong Karang irrigation component (US$28.3 million) would be subject to international competitive bidding in accordance with Bank Group guidelines. The three largest ICB contracts; (totalling
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