World Bank Document

CIRCULATINGCOPY ('-1 m BERETURNED TOREPORTS DESK ReportNo. 1137-MA Appraisalof the North Kelantan FILECOPY RuralDevelopment Project Malaysia Public Disclosure Authorized June10, 1976 EastAsia and Pacific ProjectsDepartment RETURN TO Irrigation and Area Development Division REPORTS DiS WITHIN ONE WEI}K FOR OFFICIALUSE ONLY J 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 offi(ial duties. Its contents may not otherwise be disclosed witlhout World Bankauthorization. CURRENCYEQUIVALENTS US$1.00 = M$2.57 M$1.00 = US$0.39 M$1 million = US$389,000 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 (km ) = 0.386 square miles 1 hectare (ha) = 2.47 acres 1 cubic meter (m ) = 35.31 cubic feet 1 liter (1) = 0.264 gallons (USA) 1 liter/second (1/sec) = 0.035 cubic feet per second 1 kilogram (kg) = 2.2 pounds 1 metric ton (ton) = 2,205 pounds ABBREVIATIONS AA = Agricultural Assistant BPM = Bank Pertanian Malaysia CCL = Critical Consumption Level DID = Drainage and Irrigation Department DOA = Department of Agriculture FDC = Farmers Development Center FO = Farmers Organization FOA = Farmers Organization Authority GRP = Glass-Reinforced Polyester JAA = Junior Agricultural Assistant KADA = Kemubu Agricultural Development Authority MOA = Ministry of Agriculture MARDI = Malaysian Agriculture Research and Development Institute PWD = Public Works Department RISDA = Rubber Industry Smallholders' Development Authority SAU = Small Agricultural Units MALAYSIA FISCAL YEAR January 1 to December 31 FOR OFFICIAL USE ONLY MALAYSIA APPRAISAL OF THE NORTHKELANTAN RURAL DEVELOPMENT PROJECT Table of Contents Page No. SUMMARY AND CONCLUSIONS ................... i-iii I. INTRODUCTION ..... 1 II. BACKGROUND 1. General 1.. The Agricultural Sector . 2 The State of Kelantan. .... 2 III. TTHE NORTH KELANTAN REGION. 3 Climate ... 3 Soils ....... 4 Farm Population, Farm Size, and Land Tenure. 4 Agricultural Production. 5 Agricultural Support Services. 6 Irrigation Facilities. 8 Transport Facilities. 9 State Land Development Schemes .10 Project Formulation .10 IV. THE PROJECT . 11 Project Components ........................... 12 Status of Design ............................ 15 Implementation Schedule ... 16 Cost Estimates . ........... 16 Financing ... 17 Procurement ..... 18 Disbursements ............ ................18 Accounts and Audits ... 19 Environmental Effects ... 19 V. ORGANIZATION AND MANAGEMENT . .19 Project Coordination ........... 19 Agency Responsibilities . 21 Agricultural Manpower Availability ... 23 Cost Recovery ... 23 VI. PRODUCTION, MARKETING, PRICES, AND FARM INCOME ... 24 Production ... 25 Marketing and Prices . .. 25 Farm Incomes. 26 This documenthas a restricteddistribution and may be used by focipihntsonly in the performance of theif offcial duties.Its contentbmay rot otherwisebe disclosedwithout World bank authorization.^ -2- Page No. VII. BENEFITS AND JUSTIFICATION ............................27 VIII. RECOMMENDATIONS ....................................... 29 ANNEXES 1. Agricultural Production in Kelantan 2. Lemal Irrigation Component - Water Supply, Demand, and Quality 3. Lemal Irrigation Component - Project Works 4. Small-Scale Irrigation Component 5. Rural Road Component 6. Agricultural Extension Component 7. Farmers Development Center Component 8. Cost Summary 9. Expenditure, Disbursement and Implementation Schedules 10. Allocation of the Proceeds of the Loan 11. Lemal Irrigation Component - Economic Analysis 12. Economic Analysis of Alternative Tertiary Canal Systems 13. Lemal Irrigation Component - Incomes, Taxes, and Cost Recovery 14. Rural Road Component - Economic Analysis 15. Small-Scale Irrigation Component - Economic Analysis 16. Studies MAPS Project Components Map 12003 Lemal Irrigation Area Map 12004 MALAYSIA APPRAISAL OF THE NORTH KELANTANRURAL DEVELOPMENTPROJECT SUMMARYAND CONCLUSIONS i. The Government of Malaysia has requested Bank assistance in financing the North Kelantan Rural Development Project. Several studies have shown that while large investments in basic infrastructure, particularly highways and large-scale land settlement, are necessary to open up and begin development in South Kelantan, the North Kelantan Region would require agricultural intensification aimed at achieving higher yields, to enable incomes to rise while long-run land settlement and industrialization programs could be for- mulated. Major constraints on agricultural productivity in North Kelantan are: inadequate extension services; supply of agriculture inputs and credit; storage facilities; basic road access to agriculture areas; and inadequate irrigation facilities. The proposed project is designed to overcome these constraints in an integrated manner. ii. The largest project component involves the construction of flood control dikes, major drainage works, and access roads to serve 30,000 gross ha in and around the existing Lemal irrigation area, and tertiary and quaternary distribution and drainage systems to serve 12,000 net' ha of padi within the Lemal area. Other infrastructure components involve the construction of a number of small irrigation systems to serve about 1,300 ha of padi outside the large irrigation areas, and construction of about 190 km of rural roads of various standards throughout the North Kelantan region. In addition to infrastructure, the project has two agricultural components: provision of facilities, equipment, agricultural credit and staff for a network of 13 existing Farmers Development Centers, and construction of 12 new Centers, to serve the farm input, crop marketing, and credit needs of the region's farmers; and an agricultural extension component, which would include the staff and equipment necessary to provide frequent, regular, and effective extension service to the majority of the region's farmers. Two studies are included in the project, one of the feasibility of rehabilitating a number of State land development schemes, and a second study to confirm the long-term properties of glassreinforced polyester (GRP) flumes, which would involve an accelerated testing program. Subject to review by the Bank of the results of the testing program, GRP flumes would be installed in Lemal as the tertiary distribution system. iii. The project is in line with several basic Government objectives, including improving the productivity and incomes of small farmers; reducing urban-rural, racial (Malay-non-Malay), and regional (East Coast - West Coast) income disparities; and reducing the national dependence on imported food grains. The East Coast State of Kelantan is the poorest in Malaysia, with a - ii - per capita income 46% of the national average. The Malay padi farmers of the heavily populated flood plain in the North Kelantan region are the most impoverished group in the State, despite the benefits of several major irrigation systems, including the Bank-financed Kemubu Project (Loan 500-MA). The Lemal irrigation component of the proposed project would provide 16,000 farm families with the degree of water control necessary to expand cropped areas, particularly in the dry season, and to raise padi yields in both seasons. The small-scale irrigation systems would ensure good wet season crops to small padi areas now dependent on rainfall, and provide for some double-cropping in addition. Several types of rural roads would be constructed under the project, including an asphalt paved link serving a high volume of existing international and domestic through-traffic, high-standard laterite roads providing improved access to established intensively-cropped agricultural areas, and lower standard roads which would open up sparsely settled areas. The agricultural extension and Farmers Development Center components would complement each other in an integrated effort to teach simple but effective cultural practices necessary to increase yields of padi, groundnuts, and other crops to 100,000 farm families; to supply the inputs, services, and credit required to improve yields; and to collect, store, and market the produce efficiently. iv. Total project cost is estimated at US$48 million (M$123 million), of which the foreign exchange component would be US$21 million, or 44% of the total cost. The proposed Bank loan of US$21 million would finance the foreign exchange component. The Lemal irrigation component would be divided into three packages, one each for flood protection dikes (US$1.6 million), major drainage works (US$0.8 million), and access roads (US$1.6 million), which would be carried out under contracts awarded after competitive bidding advertised locally in accordance with government procedures satisfactory to the Bank. Subject to review of the results of the accelerated testing program, the GRP flume tertiary system (US$4.0 million) would be installed under a central national contract awarded in August 1975 after the same locally advertised competitive bidding procedures. The Farmers Development Centers and facilities, as well as the offices, facilities, and quarters included in the agricultural extension component (US$3.0 million) would also be subject to local competitive bidding. Local tender is justified in all these cases, as the works are dispersed and labor-intensive, and the contracts relatively small. The rural road component would be divided into

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