RESTRICTED

FILE CO Y Report No. P-821 Public Disclosure Authorized This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views.

INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized

REPORT AND RECOMMENDATION

OF T HE

PRESIDENT

TO THE

EXECUTIVE DIRECTORS

Public Disclosure Authorized ON A

PROPOSED CREDIT

TO

THE ISLAMIC REPUBLIC OF PAKISTAN

FOR THE

KARNAFULI AND MUHURI ENGINEERING SERVICES PROJECT Public Disclosure Authorized

May 19, 1970 INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE ISLAMIC REPUBLIC OF PAKISTAN FOR THE KARNAFUILI AND MUHURI ENGINEERING SERVICES PROJECT

1. I submit the follawing report and reccommendation on a pro- posed credit in an amount in various currencies equivalent to US $2.4 million to the Islamic Republic of Pakistan to cover the foreign ex- change costs of engineering and consulting services for the Karnafuli and Muhuri Irrigation projects, situated in East Pakistan.

PART I - HISTORICAL

2. The Association to date has made two credits to help finance consultants in the agricultural sector of East Pakistan: Credit No. 136- PAK (US $2 million equivalent) in January 1969, to provide general con- sultants to the East Pakistan WFater and Power Development Authority (EPiAPDA), and Credit No. S-8-PAK (US $800,000 equivalent) in December 1269 for engineering services for the Dacca Southwest Irrigation Project. The latter was the first in a series of proposed engineering credits for projects in East Pakistan. The Association has also assisted in financ- ing the construction of three water development projects in East Pakistan, with credits totalling US $25 million. The first (Credit No. 11-PAK) in an amount of US $1 million was made in 1961 for the Dacca-Demra project, and construction of the project was completed in 1967. The secoad (Credit No. 39-PAK) for US $5 million was made in 1963 for the Brahmaputra E;m- ban1cment Project, which was substantially completed in 1968. Both pro- jects are now in operation. A third (Credit No. 4o-PAK) of US $9 million (later reduced to US $5.25 million) was made in 1963 for the Chandpur Irrigation and Flood Protection Project. A Credit of US $13 million equivalent to complete the Chandpur Project was approved by the Executive Directors on April 14 and was signed May 14, 1970. 3. The proposed engineering project was appraised in November 1969. Negotiations were held in Washington on March 16, 1970. Messrs. A.R. Bashir, Economic Minister, and Mr. A.M.A. Muhith, Econcnic Counselor at the Embassy of Pakistan in Washington represented the Government of Pakistan and the Province of East Pakistan. PART II - DESCRIPTION OF THE PROPOSED CREDIT

4. Borrower: The Islamic Republic of Pakistan.

Beneficiary: East Pakistan Water and Power Develop- ment Authority (EPWAPDA).

Amount: Various currencies equivalent to US $2.4 million.

Purpose: To finance the foreign exchange costs of consulting engineering services for the Karnafuli and Muhuri Irrigation Projects in East Pakistan.

Amortization: In 10 years, including a 3 year grace period, through 14 equal semi-annual installments, beginning on Nov. 1, 1973 and ending on May 1, 1980.

Service Charge: 3/4hof 1% per annum.

Relending Terms: The Islamic Republic of Pakistan will re- lend the proceeds to the Provincial Govern- ment of East Pakistan on the same financial terms as those of the credit, except that repayment obligations shall be in rupees.

PART III - THE PURPOSE

An Appraisal Report entitled "Engineering Services for the Karnafuli and Muhuri Irrigation Projects, East Pakistan"(No. PS-la dated May 15, 1970) is attached.

6. The control of its water resources is vital to East Pakistan. The Province is an extensive, very flat flood plain stretch- ing from the Himalayas to the Bay of . The bulk of this plain is less than 30 feet above sea level and comprises a vast netwvork of rivers and channels. The , Brahmaputra and Meghna Rivers, with more than 600,000 square miles of drainage area, of which only 55,000 lie in East Pacistan, meet there to form part of the largest delta in the world. Half of the Province is flooded annually and almost two thirds is subject to flooding at one time or other. These floods are caused by spills from the main rivers to the land and from the fact that local runoff from the monsoon is backed up by flood levels in the main rivers. Another but less general type of flooding is from tributary streams draining hilly areas near the Indian border. While the duration of this type of flooding is less, the rise and fall in flood levels is much more rapid. The Karnafuli and Muhuri projects, located in the south- eastern part of the Province, are in areas subject to the latter type of flooding. 7. The proposed credit would provide engineering services for the following:

Karnafuli Irrigation Project $1,100,000 Muhuri Irrigation Project 1,000,000 Dakatia Muhuri Water Transfer Scheme 300,000 ..$2,400,000

8. The Karnafuli Irrigation Project consists of two sub-projects: The Halda sub-project would provide flood protection to an area of 131,500 acres by means of 70 miles of earth embankments of 9-feet average height. Irrigation, with water pumped from the Karnafuli River and utilizing existing natural channels as distributaries, would be provided initially for 55,000 acres. Finally, drainage and navigation (for country boats) would be other features of the sub-project; for these purposes some of the natural channels would be enlarged and deepened and some new chan- nels would be excavated. The Ichamati sub-project with 16,000 acres is much smaller. Its development would be based on concepts similar to those followed for the Halda sub-project.

The Muhuri Irrigation Project would provide flood protection to an area of 101 ,000 acres by means of 92 miles of major embankments of average height 9 feet along the larger streams in the area and 56 miles of smaller embankments along tributary streams. Irrigation, drainage and navigation facilities would be similar to those of the Karnafuli project. Water supply for irrigaticn is insufficient in or near the Muhuri project area; it can however be imported as part of a transfer scheme (Dakatia-Muhuri Water Transfer Scheme) described below.

10. About 15 percent of the proposed credit would be used for revisions of the feasibility studies for both sub-projects of the Karnafuli project and for the Muhuri project. These studies need amplification with respect to (a) drainage facilities, (b) method of irrigation distribution, (c) project organization for provision of agricultural inputs and (d) re- turns to and repayment capacities of participating farmers.

11. About 70 percent of the proposed credit would be required for preparation of tender documents and final designs for an initial portion of the major works of the Halda unit of the Karnafuli project and of the Muhuri project. Tender documents and final designs for the Ichamati Unit would not be covered but their financing could be considered for inclusion in a future credit or loan for the construction of the Halda Unit.

12. The balance of the proposed credit would finance a preliminary study of the Dakatia-Muhuri Water Transfer Scheme. Under this scheme water for irrigation purposes would be transferred over a distance of about 50 miles from the to the Muhuri River via the Dalcatia River, a "link" canal about 12 miles long, the Little and - 4 -

several other segments of minor rivers and channels. While the scheme would increase the limited water now available from the Muhuri River, a far greater longer-range benefit would result ultimately from the irrigation of as much as half a million acres located in the adjoining "Comilla-Noakhali" and "Little Feni" project areas. The study to be financed from the proposed credit would consist of carrying out a recon- naissance, preparing preliminary designs, and planning the staged develop- ment of such a scheme. Detailed feasibility studies for the Comilla-Noakhali and Little Feni projects would be carried out at a later stage.

13. The elimination of flooding and the provision of irrigation and drairnage would make possible the use of fertilizer and improved varieties of rice resulting in tripling the present yields in the areas of the two projects. As the tender documents would be prepared con- currently with the revision of the feasibility studies, it would be possible to start construction one to two years earlier than would be the case if tendering were delayed until after the revised study is completed. With this procedure, construction of the Karnaftali project could start December 1971 and the Muhuri project a year later. 14. The feasibility reports for the Halda and Ichamati units of the Karnafuli project were completed in May 1968 by the consulting engineering firm Justin-Courtney-Hohlweg-Watts (USA). The feasibility report for the Muhuri project was prepared in January 1967 by the con- sulting engineering firm Lechner-Consult of Karachi. These reports are adequate to demonstrate that these projects would enjoy high economic priority.

15. The proposed engineering project would be executed by EPWAPDA, a semi-autonomous body, established under the East Pakistan Water and Power Development Authority Ordinance 1958, and charged with coordinating development and utilization of water and power resources of the Province. Procurement would be on a competitive basis under procedures normally followed by the Province.

16. The proposed credit would be refinanced out of the proceeds of any IDA credit or credits ultimately made for the construction of the projects to be engineered or studied.

PART IV - LEGAL INSTRUMENTS AND AUTHORITY

17. The draft Development Credit Agreement between the Islamic Republic or' Pakistan and the Association, the draft Project Agreement between the Province of East Pakistan and the Association, the Recom- mendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement, and the text of a resolution approving the proposed Development Credit, are being distributed to the Executive Directors separately. The draft Development Credit Agreement and the dra't Project Agreement follow the usual pattern of credit and project agreements for engineering projects of this type. -5-

PART V - COMPLIANCE WITH ARTICLES OF AGREEMENT

18. I am satisfied that the proposed Development Credit would comply with the Articles of Agreement of the Association.

PART VI - RECaOMENDATION

19. I recomend that the Executive Directors approve the proposed Development Credit.

Robert S. McNamara

by

J. Burke Knapp

May 19, 1970