Docomes of The WorldBank

FOROFFICIAL USE ONLY Public Disclosure Authorized Report No. P-.-MA.K

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT Public Disclosure Authorized

T THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

IN THE AMOUNTEQUIVALENT TO US$55.0 MILLION

TO MALAYSIA

Public Disclosure Authorized FOR THE

SECOND WESTERNJOHOR AGRICULTURAL DEVELOPMENTPROJECT

June 19, 1986 Public Disclosure Authorized

o Thisdocument has a resticted distributionand may be used by recipientsonly in the performance. |of their officialduties. Its contents may not otherwise be disclosedwithout World Bank authorization.| CURRENCY EQUIVALENTS

Currency Unit = Ringgit M$

Average 1985 December 1985

US$1 = M$2.48 US$1 = M$2.43 M$1 = US$0.40 M$1 = US$0.41

FISCAL YEAR

Governmentof Malaysia: January 1 - December 31

WEIGHTSAND MEASURES

Metric system

GLOSSARYOF ABBREVIATIONS

DID - Department of Irrigation and Drainage DOA - Department of Agriculture ffb - fresh fruit bunch (Oil Palm) JKR - Department of Public Works MOA - Ministry of Agriculture HPIB - Malaysia Pineapple Industry Board RISDA - Rubber Industry Smallholders Development Authority FOR OFFICIAL USE ONLY

MALAYSIA

SECONDWESTERN JOHOR AGRICULTURALDEVELOPMENT PROJECT

Loan and Project Summary

Borrower: Malaysia

Loan Amount: US$55 million equivalent

Terms: Repayable in 15 years including three years of grace, at the standard variable interest rate.

Project Description: The project would support the Government'songoing program of flood control and drainage in the valuable farmlands in the southwest of Johor State. It would complement the first Bank-assistedproject for the same purpose and would extend over a further 210,000 ha worked by 30,000 smallholders. The project would finance (i) constsuctionof a dam with a storage capacity of 92 Mm for flood control and water supply to nearby small towns; (ii) construction of 100 km of embankments and other flood control works along the rivers of the Batu Pahat river basin amounting to 10 M mn of earthworks; (iii) completion and upgrading of ongoing drainage and road works; (iv) replanting of 14,500 ha of senile rubber with oil-palm, high- yielding rubber and diversified crops; and (v) support to project administration. The project would reduce flood damage to farms and towns, increase incomes from higher value crops, provide safe drink- ing water to communities and improve road access for commuters to employment. Without the project, recurrent flooding would continue to cause crop losses and urban damage; and the poor drainage and transport system would continue to restrict replanting of old rubber with oil palm.

Risk: The main project risks would be delays in on-farm development should government budgetary problems re- occur and delays in land acquisition. Government has reaffirmed the priority it gives the project and incremental staff are already in place to expedite land acquisition.

Thbisdocument has a rstricted distribution and may be used by recipients only in the performane of their officiai duties. its contents may not otherwise be disclosed without World Bank authorization. - ii-

Estimated Cost: Local Foreign Total (US$ million) --

Civil works 25.5 32.8 58.3 Equipment and vehicles 0.1 0.2 0.3 Consultants 0.5 1.2 1.7 Project Staffing 5.4 - 5.4 Crop Production 13.5 5.9 19.4 Land acquisition 30.2 - 30.2

Base Cost 75.2 40.1 115.3

Physical contingencies 3.5 4.6 8.1 Price contingencies 14.6 10.3 24.9

Total Project Cost /a 93.3 55.0 148.3

Financing Plan:

IBRD 0.0 55.0 55.0 Government 93.3 0.0 93.3

Total 93.3 55.0 148.3

Estimated Di sursenents:

Bank FY 1987 1988 1989 1990 1991 1992 1993 1994 1995 -- - --(US$million) ----

Annual 1.3 4.7 8.4 10.0 8.7 7.1 6.7 5.7 2.4 Cumulative 1.3 6.0 14.4 24.4 33.1 40.2 46.9 52.6 55.0

Rate of Return: 14Z /b

Staff Appraisal Report: No. 6076-MA, dated June 25, 1986

MAP: IBRD 18871

/a Including taxes and duties amounting to US$8.0 million. 7_ Does not include benefits of access roads and water supply. REPORT AND RECOMMENDATIONOF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENTTO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO MALAYSIA FOR THE SECOND WESTERN JOHOR AGRICULTURAL DEVELOPMENT PROJECT

1. I submit the following report and recommendationon a proposed loan to Malaysia, for the equivalent of US$55.0 million, to help finance the Second Western Johor Ag-icultural Development Project. The loan would have a term of 15 years, including 3 years of grace, at the standard variable interest rate.

PART I - THE ECONOMY

2. The latest economic report, "Malaysia: Development Strategies and their Financing" (No. 5560-MA), is dated September 3, 1985. This section reflects also the findings of a Bank mission which visited Malaysia in July 1985 for a general economic review with particular emphasis on agriculture and industry,and of a follow-up mission in April 1986.

3. By most economic indicators,Malaysia's economic performance was out- standing in the 1970s. The per capita income of US$1,990 in 1984 is among the highest in Southeast Asia. In the last decade, per capita GDP growth has averaged about 5.5% p.a., somewhat higher than the 4% p.a. per capita growth achieved in the 1960s. This sustained good performance was a reflection of several factors, including the country's wealth in natural resources, especially ample reserves of cultivable land and oil and gas; an outward-orientedgrowth strategy; favorable developments in the world economy; good economic and financialmanagement; and, not least, stable social and political institutions. Three specific elements have been important: first, substantial attention and priority has been given to agriculture, resulting in high productivity gains in the sector which have cushioned it against occasional steep price declines; second, manufacturing growth has been rapid, at about 12% per annum, in the last two decades, following first an import substitutingpattern, but later increasinglyoriented towards exports; third, in a very open economy, with exports and imports recently averaging more than 50% of GDP, exports have diversifiedfrom an initial large dependence on rubber and tin to include palm oil, petroleum and manufacturedgoods.

4. Malaysia is a multiracial society with approximately 55% of the popula- tion indigenousMalays, 35% Chinese, and the remainder largely Indian. The country inherited deep divisions in the distribution of income between ethnic communities. The incidence of poverty covered all ethnic groups, but was dispro- portionatelyhigh among Malays; "heir average per capita incomes were only half those of the Chinese community. In 1971, the Government declared a New Economic Policy (NEP), and accorded the highest priority to eradicating poverty and reducing the racial imbalances in income, employment, and ownership of assets. By 1983, some progress had been made in reducing the number of households living below the poverty line, particularly in rural areas. In addition, there has been substantialprogress towards reducing interracial disparities in income and asset ownership. -2-

5. The Malaysian economy has been undergoing some important structural changes. Industry has joined agriculture as the major contributor to GDP and exporting manufactured goods has replaced import substitutionas the cutting edge of industrial growth. In particular, there has been a remarkable and dominating increase in exports of electronic goods over the last 15 years. Export diversification(particularly through palm oil, petroleum, and more recently LNG) has proved important, as some of Malaysia's traditional major foreign exchange earners show signs of flagging vitality. Tin production steadily declined in the face of weak prices, the exhaustion of many mines, and increasing costs of extraction, and was severely disrupted recently by the suspension of international tin trading. Although timber production has recently been buoyant, exploitationof the resource has led to detrimental environmentalconsequences, and the Government has restricted logging in Peninsular Malaysia. Finally, rubber production has been fluctuatingacross a declining trend for several years. While factors specific to the cultivation of rubber have been at work, an important reason has been the migration of the young and educated from the farms to the towns. This has fostered a major structural change in the Malaysian economy, as it appears that the agricultural labor force may now be peaking in absolute numbers. In turn, this suggests rather different strategies to be followed in the agricultural sector in years to come, both to maintain agricultaral production as well as to tackle the large extant problem of rural poverty. In the tree crops sector, for example, production growth is being pursued through productivityand efficiency gains rather than increased acreage. As for food crops, further growth in rice production may well prove to be uneconomic and entail considerablyhigher subsidies than the rice sector already receives. It is therefore appropriate that the Government has moved gradually away from its previously proclaimed goal of rice self-sufficiencyand is emphasizing greater crop diversification.

6. While, in general, the economy has performed well in the last few years, this progress has been punctuated by periods of occasional difficulty. This has been particularly true in the most recent international commodity price cycle. Between 1977 and 1980, prices for palm oil, rubber, timber, and petroleum increased rapidly, and export receipts nearly doubled. The terms of trade improved by about 13% in the game period, and real national income grew by more than 11% p.a. In 1980, however, the prices of virtually all of Malaysia's export commodities began to fall and, over the next two years, the terms of trade declined by more than 8Z, represencing a loss of national income of about 5. Anticipating, in 1980, a short international recession, the Government introduced a countercyclicalfiscal policy, comprising large expenditure increases and tax cuts, in an attempt to maintain domestic income levels. This combination of falling commodity prices and an expansionary fiscal stance led, in 1981 and 1982, to very large fiscal and balance of payments deficits; thus, in 1981-82, the current account deficit on the balance of payments averaged 12% of GNP, while the overall public sector deficit averaged 18% of GNP. Overall, GDP growth averaged 6Z p.a., and inflation initially accelerated before falling to 6% in 1982.

7. To finance these large deficits, the Government had to borrow heavily, both domesticallyand abroad. Domestic borrowings were largely noninflationary, from the Employees Provident Fund, the national oil company and the commercial banks. Even so, the ratio of domestic debt to GNP grew from about 37% to nearly 48% between 1980 and 1982. Increasing proportions of the deficits had to be -3- financed from abroad, and the level of disbursed public external debt almost doubled between 1980 and 1982 (from 16X to 32Z of GNP); there was, in addition, an important shift in the sources of borrowing, away from project financing towards market borrowings. Because of the low levels of external borrowing in the previous decade, this surge in the 1980-82 period did not give rise to a high burden of debt service. As a proportion of exports, debt service on private, public and publicly guaranteed MLT debt was 14.5Z at the end of 1985.

8. The unsustainabilityof deficits of the magnitude experienced in 1981 and 1982 was recognized by the Government, and a policy of expenditure restraint was implemented through 1983-85 and affirmed in the 1986 budget. The overall public sector deficit halved from almost 23% of GNP in 1982 to 11% in 1984. Both the Government and public enterprises registered equally sharp adjustments. In 1983 and 1984, federal government development expenditures declined by 16% and 11%, respectively,and the federal government budgetary deficit fell from almost 18Z of GNP to 6Z. The reduction in the deficit of public enterprises,on the other hand, came about from substantial increases in internal savings which more than absorbed a continued expansion in development expenditures. To some extent, the impact on the external account of the shrinking public sector deficit was offset by private investment expenditureswhich rose by 17% in real terms during 1983-84.- Nonetheless, the balance of payments current account deficit improved considerablyfrom 14% of GNP in 1982 to 6% in 1984.

9. Malaysia's growth performance in 1985 was its worst in over two decades. Nominal GNP fell by 2.1% under the combined weight of continued adjustments in public sector expenditures,lower international commodity prices, stagnant exports of manufactures and higher interest payments on external debt. On the other hand, the public sector succeeded in cutting its overall deficit further to 6.8Z of GNP, and the external current account deficit followed suit by shrinking to 3.1% of GNP. The slack pace of domestic economic activity and the consequent closures or cutbacks in the manufacturing,mining and construction sectors added substantiallyto the unemployed. In response, the Government introduced modest reflationarymeasures including a major new low-cost housing scheme to be implementedover the next three years.

10. 1986 marked the beginning of Malaysia's fifth five-year plan with its objective of generating a pattern and pace of economic growth that would create sufficient employmentopportunities for its expanding labor force and yet be consistent with a prudent level of external debt. However, the precipitous fall in internationalprices of petroleum and palm oil, and possibilities of only a modest recovery over the medium term, has unequivocally altered Malaysia's resource position and given it considerablyless room in which to maneuver. Though the internal and external balance are likely to deteriorate this year,

1/ This was largely the consequence of higher outlays by quasi-public agencies misclassifiedas part of the private sector in the national accounts. According to the Government's classification,nonfinancial public enterprises like PETRONAS (the petroleum company) and HICOM (the heavy industry corporation)are not included as part of the public sector in the national accounts. -4-

Malaysia could continue to reduce its external and internal imbalance over the medium term, provided the Government exercises restraint in public expenditures and promotes exports, particularlyof manufactures. With relatively heavy external borrowing undertaken in recent years, and with continued external deficits till the turn of the decade, the debt-serviceratio is expected to rise initially and then stabilize at just below 20Z. The possible impact of public investmentcutbacks on growth prospects underscores the critical importance of ensuring greater efficiency in the public investmentprogram. In addition, new growth sources will need to replace those that propelled the economy forward in che 1970s. Internationalprice prospects for rubber, palm oil, petroleum and tin suggest that commodities production will be of less importance to Malaysian economic growth than in the past. Even in the manufacturing sector, Malaysia faces stiff competition from its populous neighbors in internationalmarkets for labor-intensiveproducts such as textiles and electronicsassembly.

11. The Fifth Five Year Plan includes a strong emphasis on resource-based industrialization,the bulk of which would need to be financed by the private sector. In preparing the ground for encouraging greater private sector investment,the Government liberalized partially the investment licensing laws and continued with its policy initiative of privatizing some sectors of the economy. A cogent, comprehensiveand well-coordinatedindustrial and trade strategy will be central to Malaysia's economic future and its ability both to compete internationallyand transcend sudden shocks inflicted by changes in the world economic environment.

PART II - BANK GROUTPOPERATIONS IN MALAYSIA

12. The Bank has, to date, approved 66 loans to Malaysia, totalling US$1,712.21 million for projects in agriculture, education, population, power, water supply, sewerage, telecommunications,ports, railways, roads, and urban transport. As of March 31, 1986, the effective loans to Malaysia held by the Bank amounted to US$1,291.55million; a total of 46 loans to Malaysia had been fully disbursed. Annex II contains a summary of Bank loans and IFC investments.

13. Up to a few years ago, during years of a relatively comfortable foreign exchange and fiscal situation and prospects, the Bank's lending strategy towards Malaysia aimed at assisting the Government to alleviate poverty in the country, and was thus focussed upon rural development and education. The agricultural projects enjoyed major success in raising the incomes of the beneficiaries, substantiallyincreasing the foreign exchange earnings for the country, and contributing to a high economy-widegrowth. Although, as mentioned above, the economic situation and prospects have, since then, changed considerably, Malaysia's commitment to assist its low-income groups has not diminished, and the Bank therefore intends to continue to allocate a substantial share of its assistance to the agriculture and education sectors.

14. However, responding to a government request, the Bank has increased and diversified its program of cooperation to cover both the commodity producing sectors as well as supporting social and physical infrastructure. The assistance is aimed at maintaining a high overall rate of growth for the economy and at raising productivity,efficiency, and cost effectiveness. Consequently, the Bank is now also assisting in sectors where serious structural problems or -5- institutionaldeficiencies exist. The Bank has increased its coverage to lend to such sectors as industry, transport, power and water supply, and is thus also making a more substantial contributionto alleviating Malaysia's balance of payments and fiscal constraints over the medium term.

15. Although overall implementationof Bank-financedprojects in Malaysia has been satisfactory, it has in recent years been seriously affected by the country's budgetary constraints. This has also been reflected in project dis- bursements,which dropped from US$137 million in FY83 to US$87 million in FY84 and to US$100 million in FY85. Disbursementperformance, measured in terms of the rates of actual disbursements to cumulative undisbursed amounts, was 0.22 in FY83, 0.14 in FY84, and 0.17 in FY85 (compared to regional averages of 0.20, 0.21, and 0.22 respectively, in the same years).

16. Apart from lack of counterpart funding, the major problems causing dis- bursement delays in Malaysia have been: delays in project start-up due to manpower shortages and time-consumingland acquisition procedures, and the limited capacity of the Public Works Department and the local contracting industry. To improve the situation, the Bank has held various project imple- mentation reviews with the central and implementingagencies in [uala Lumpur (the last one in November 1985). These reviews and the corrective action taken by the agencies subsequentlyare having a positive impact on project implementation. Further reviews will be undertaken with the Malaysian authorities when necessary. It is also proposed to continue to reinforce the implementation reviews with occasional seminars on disbursementsand procurement (the last disbursementseminar took place in September 1985, and the next procurement seminar is scheduled for mid-1986) for the benefit of the implementingagencies.

17. IFC has made six investments in Malaysia totalling US$21.19 million. The total investments held by IFC, as of March 31, 1986, amounted to US$12.50 million (Annex II).

18. In 1985, Malaysia's debt service ratio on private, public and publicly guaranteed debt was about 14.5%. In the same year, debt service on Bank obliga- tions constitutedabout 8X of total debt service. With the rapid increase in market borrowings in the last three years, the proportion of Bank disbursed debt in total disbursed debt has fallen from about 15Z in 1979-80 to less than 3.5% at end-1985. Various projections, on a variety of assumptions, suggest that the Bank share in debt service and total disbursed debt of Malaysia is likely to remain well below 10% through the rest of the decade.

PART III - TEE AGRICULTURAL SECTOR

19. The agricultural sector continues to play a dominant role in the Malaysian economy though its relative importance is declining as the country proceeds toward industrialization. In 1985, the sector contributed about 23% of GDP, 40% of total merchandise exports and 35% of total employment. In the 1960s and early 1970s, agriculture grew at 7% p.a., but slowed to an average 5.5% p.a. during 1976-80 and to 3.7Z p.a. during 1981-84. Agricultural production has been primarily export-oriented,with Malaysia being the world's largest producer and exporter of rubber and palm oil, producing about 40% of the world's natural rubber and more than half of its palm oil. Malaysia's share of world exports is - 6 - about 45Z for natural rubber and 70% for palm oil. It is also a major exporter of wood and timber.

20. Malaysia's climate and soil conditions provide a strong comparative advantage for tree crop development, particularlyrubber and oil palm. About one third of PeninsularMalaysia and less than 5% of East Malaysia (Sabah and Sarawak) are under cultivation,while most of the remaining area is still tropi- cal forest. The total cultivated area is about 4.5 million ha, of which about 2.0 million ha are under rubber, 1.3 million ha oil palm, 300,000 ha coconut, 200,000 ha cocoa and 500,000 ha rice. About half of the rice area is double cropped. Minor crops include sugarcane,pineapple, tobacco, coffee and pepper. The entire rice area and about two thirds of the tree crop area are in small- holdings averaging 1.2 ha; the remainder is mainly in estates.

21. With the strong performance of the Malaysian economy until recently, poverty incidencehas been reduced from about 49% in 1970 to 18% in 1984. How- ever, it remains higher (25%) in the rural areas which account for about two thirds of the nation's poor. This is particularly the case among paddy, rubber and coconut smallholders,primarily because of small farm sizes. With increasing industrializationand low incomes in the sector, the rural youth are migrating to urban areas, reducing the agricultural labor force and further contributing to the slowdown of farm output.

Government Policies and Strategy

22. Government efforts in agriculture have traditionallybeen oriented to poverty alleviation through programs of land settlement, technology transfer, subsidies and infrastructure. In view of the downturn in agriculturalgrowth and increasing migration to urban areas, the Government reviewed its sectoral objectives and announced its National Agricultural Policy (NAP) in 1984. Maintaining the emphasis on poverty alleviation, the NAP objectives are: (a) maximizationof farm incomes to improve the quality of rural life and facili- tate retention of productive labor in the sector; and (b) expansion of production of traditional and new export and food crops to revitalize the agricultural sector.

23. The Government'smain objectives have been pursued through two basic strategies: (a) land development and settlement schemes providing viable farm sizes and adequate incomes, and expanding tree crop production for export; and (b) in situ developmentprojects designed to consolidate small farms, rehabili- tate idle lands, increase productivityand improve farm management. This has led to development of large land settlement schemes by the Federal Land Development Authority (FELDA) and the State governments;irrigation and drainage projc a by the Ministry of Agriculture; land rehabilitationprograms by the Federal Land Consolidation and RehabilitationAuthority (FELCRA); and rubber replanting and mini-estate development programs by the Rubber Industry SmallholdersDevelopment -7-

Authority (RISDA).21 Under the NAP, these strategieswill continue, but greater attentionwill be given to the problems of uneconomic farm units, unremunerative crops and low productivity in the in situ development projects. This includes promotion of group farming with centralized management, support to farm mechanization,crop diversification,the intensificationof integrated support services and provision of credit for selected crops.

Government Strategy

24. The success of government programs has been limited by the faster rise in real wages for nonfarm work, the reluctance of urban migrants to sell land they no longer cultivate and falling prices for agriculturalcommodities. Most affected has been the rice-growingindustry where production has fallen from a peak of 1.8 million tons of rice in the early 1970s to 1.2 million tons in the mid-1980s, despite an increasinglymore expensive output price support scheme coupled with free fertilizer and other input subsidies. The rubber industry has suffered from declining internationalcompetitiveness. The scarcity of rubber tappers has led to increasing areas of mature untapped rubber, even though wages for Malaysian rubber workers are double those of neighboring producers. Government policy now accepts the desirabilityof structural change within the sector and has abandoned explicit paddy productiongoals, trimmed some subsidy programs and is concentratingon supporting change within high productivity areas. This has led to a decreased emphasis on rice, rubber and coconuts in favor of oil palm, fruit trees, and cocoa, all of which have a lower labor demand and a higher value added.

Bank Sector Strategy

25. The B_rvk has consistently supported the Government's objectives and institutionbuilding efforts in agriculture. Initially, Bank lending in agri- culture concentratedon land development, settlement and irrigation. More recently,emphasis has also been given to programs designed to raise productivity in existing smallholder areas such as irrigation and drainage improvement, rehabilitationof tree crops, land consolidation,agricultural research and extension. To date, the Bank has made 24 agricultural loans amounting to US$781.3 million, nearly 45% of total lending to Malaysia. Of these, the most successfulhave been the six loans to assist implementationof FELDA projects in the states of Pahang, Johor and Negeri Sembilan (Loans 533,672, 885, 967, 1044 and 1590-MA). These projects cover some 66 settlement schemes, comprising developmentof IY,750 ha, construction of basic infrastructureand settlement of 29,450 families.- Favorable circumstances for these projects included fertile soils in unoccupied lands, and readily exported crops (oil palm and rubber).

2/ Production cooperativesor mini-estates are formed from contiguous areas of about 40 ha or more of old smallholder rubber in which the individual owners caveat their land titles from the time of land clearing for about 15 years, until development costs have been reimbursed from production, for the benefits of higher standards of management.

3/ PPAR Nos. 2122, 3024, 3978 and 4221. -8-

Successhas been mixed among the area development schemes for existing small farms producing foodcrops, particularlyrice. Problems have been smallness of farm size, shortage of irrigation water and low returns relative to non-farm employment. However, in ecologically favored areas, there have been notable successes,such as the MUDA Irrigation Projects (Loans 434 and 1717-MA) which have led to a doubling of cropping intensity, increased yields and strong institutionaldevelopment. Now that Peninsular Malaysia is running out of long- run supplies of land available for new settlement schemes, government policy has reemphasizedthe need to concentrateon development of older areas with entrenched rural poverty. ThZ Bank supports this view and is assisting the program of structural change._

26. In view of the sector's contribution to national output and poverty alleviation,an important thrust of future Bank assistance to Malaysia will continue to be for agriculture along the lines proposed in the NAP. Particular attention will be given to the solution of structural problems facing the sector, through land consolidation and improved efficiency and management of smallholder agriculture;and to strengtheningthe land development and settlement programs, as the most effective way of providing viable farm units and improving rural incomes.

PART IV - THE PROJECT

Background

27. Johor has the second largest population of Malaysia's states and one of the highest population growth rates; average per capita incomes are below the national average and rural incomes are about one half urban incomes. Johor is the Federation's largest agricultural producer, responsible for some 15% of sectoral GDP. However, the annual growth rate of farm output at 1.6Z for 1981-84 is only one-half the national average. The slow growth rate reflects the high average age of tree crops and the depressed pineapple industry.

28. The southwestern part of the State, settled with smallholders, is mostly poorly drained and flood prone, and has been minimally involved in the nationwide replanting of rubber with oil palm. Less than 10% of the rubber and pineapple areas have been converLed to oil palm, compared :o 40% statewide. Public land schemes and private estates are mostly located on higher elevations of low flood risk and lower development costs. In the early 1970s, a 300,000 ha block of these lowlands was selected for infrastructure development to assist smallholdersdiversify into oil palm, vegetables, cassava, groundnuts and other crops. Too large to be managed as a unit, it was divided into two blocks for sequential development. The first block was appraised in 1973 as the Western Johor Agricultural Development Project (Loan 973-MA), which became effective in August 1974 and was completed in October 1984. The second block comprises Phase II and is the project p=oposed in :his report.

4/ OED Impact Evaluation Report No. 3587 on the Muda and Kemubu Irrigation Projects. Experience under the First Project (Loan 973-MA)

29. The first project financed construction of two flood control dams, river works, a drainage system, roads, a coastal embankment and agricultural development in an area of some 135,000 ha. The project was completed in 1984, five yea5 later than expected at appraisal, and experienceda 31% cost overrun._r The major causes of delay and cost overruns were inadequate preparation of engineeringworks and budgetary shortfalls,implementation of additional works not included at appraisal, and staffing shortages. Consequent cost overruns and delays reduced the IRR from 15% forecast at appraisal to 1OZ. Expected benefits from vegetables,cassava, groundnuts and agroindustry did not raterializewith farmer interest centered on replanting old rubber with oil palm mnd underplanting coconut with cocoa. Nevertheless, participatingfarmers benefited significantlyand important secondary benefits were generated in terms of road access and improved living conditions.

30. The PPAR's main findings were that: (i) changing economic circumstancesadversely affected the project leading to farm labor shortages; (ii) smallness of farm size often relegated farming to a secondary occupation with reduced interest; (iii) civil works were inadequatelyprepared at time of appraisal and appraisal premature; (iv) initial weakness in project organization delayed implementation;(v) shortage of staff for land acquisition delayed progress of works; and (vi) time could have been saved by switching earlier to LCB procedures on roads and drainage civil works after little interest in bidding was shown by foreign firms.

31. During preparationof the second project these findings have been incorporatedinto project design. The cropping pattern to be supported, predominatelyoil palm, has a lower labor demand per hectare than the mixed cropping pattera proposed for the first project. The proposed project envisages formation of mini-estates,that is, producer cooperativesin support of government strategy to overcome the problem of smallness of farm size. The problem of inadequate preparationhas been avoided by not appraising until after completion of detailed design (now finished) of the Bekok Dam which is the major project civil works component. During the ten-year implementationperiod of the first project a satisfactoryproject organization eventuallyevolved. It is proposed to continue using the same arrangements. The initial la-ndacquisition delays due to staff shortages for title processing were eventually overcome by increasing the staffing for the purpose. These staff positions specifically created and filled for project land acquisition are temporarilystill in place and the starf are already working on land acquisition for the proposed project. During implementationof the completed project, after 13 ICB contracts had been satisfactorilyexecuted by local firms and given the negligible response from foreign contractors,changes were made to allow for LCB on remaining civil works for drains and agriculturalroads. Under the proposed project, the ICB contracts would be large enough to attract foreign bidders and the smaller contracts for works to be carried out under LCB would be open to foreign bidders. The problem of cost overruns has been addressed by adequacy of detailed design before

5/ Draft PPAR, December 2, 1985. - 10 - appraisal. Implementationdelays have been dealt with by readiness of preparation and by allowing a seven year implementationperiod.

The Project

32. In 1981, the Government submitteda feasibility report to the Bank which included a follow-up agriculturaldevelopment plan and engineering proposals including a consultant's detailed design of the BeliokDam. After review by the Bank, it was agreed to engage international consultants to: (a) review the general infrastructureplan with emphasis on the hydraulic works and a study of the flood control options; (b) prepare preliminarydesigns, cost estimates and schedule of implementationfor the selected option; (c) prepare a long-term agriculturaldevelopment plan and a specific program for the project implementationperiod; and (d) review detailed designs for the Bekok Dam. The work was financed under the National Small-Scale Irrigation Project (Loan 1444-MA). The draft proposals for the least-cost solution were reviewed and agreed to by the Bank in 1983, and detailed design was begun. A final report was accepted by the Government in 1985 and proposed to the Bank for appraisal. The project was appraised in April 1985, and postappraisedin November 1985 to adjust final appraisal to the allocation made under the Fifth Plan. Loan negotiations were held at the Bank in March 1986, with the government delegation led by Mr. Nik Najib Husain, Principal Assistant Secretary of the Treasury. A staff appraisal report (No. 606-MA dated June 25,1986) is being distributed separ- ately. Supplementary pro_ect data is given in Annex III of this report.

Rationale and Objectives of Bank Involvement

33. The difficult hydrology of the Batu Pahat river basin required long preparation and complex modelling. Bank assistance led to design changes and a satisfactory resolution of choice among alternative engineering solutions. In addition to continuing assistance to the MOA in project preparation and implementation,the Bank project would strengthen the integration of farmer support services and assist the Government'sattempts at land consolidation through use of the mini-estate concept.

34. In support of the Government's in situ development program, the project would (i) construct flood-control structures in the Batu Pahat river basin to protect towns and farm property, (ii) rehabilitateand complete the existing drainage and access roads network, (iii) support RISDA's replanting activities in the drained areas, and (iv) provide potable water supply to the adjacent towns from water stored in flood-control structures.

Project Description

35. The proposed project would control floods and improve drainage over 98,000 ha in Western Johor (IBRD Map No. 18871) and would replant 14,500 ha of senile rubber on smallholdingsduring the construction period. The works would increase yields of younger existing plant stands, and would enable the develop- ment of a further 70,000 ha after completion of the works as part of the ongoing programs under several agencies. The civil works would consist of: - 11 -

(a) constructionof a dam on the Kembong River and a 6.5 km long channel to direct river flows into this reservoir;

(b) constructionof extensive river improvement works on the Simpang Kiri, Simpang Kanan, Bcrnk a"d Sembrong Rivers, including river enlargement (79 km), river realignment (14 km), and new levees along tidal reaches (55 km);

(c) constructionof a catchment separator bund (12 km) between the Simpang Kiri and Bekok Rivers and a small flood-retardingembankment on the Simpang Kiri River beside a future expressway;

(d) constructionof a main drainage system consisting of high level drains (146 km in nonflooded areas and 69 km in flooded areas) and associated structures, and lower level drainage outlet works on the lower rivers, and replacement or construction of bridges;

(e) replacement of eight existing bridges on the main rivers;

(f) flood protection for the town of Parit Sulong; and

(g) development of three coastal blocks through constructionof secondary drains (85 km), new agricultural roads (112 km), resurfacing of existing roads (920 km) and maintenance tracks along existing secondary drains (350 km).

36. Agricultural development would involve about 14,500 ha of smallholdings during the project construction period through:

(a) conversion of about 10,000ha of old low yielding rubber to oil palm of which about 3,000 ha would be developed as mini-estates;

(b) replanting of 3,000 ha of old rubber with high yielding rubber; and

(c) conversion of 1,500 ha of old rubber to diversified crops.

This developmentwould form part of the 85,000 ha expected to be developed in the project area over 20 years as a result of the drainage and flood control works. It would be the first time-slice in the replanting of some 50,000 ha of old rubber, the bringing of about 20,000 ha of swamp and scrub lands into production with oil palm and diversified crops, and the intercroppingof another 15,000 ha of coconut with cocoa, coffee and fruits.

37. In addition, support would be given to project management in the form of engineering consulting services, equipment and vehicles, administration buildings, equipping of a soils laboratory, and incremental project staff.

Project Implementation

38. The project would be implemented by the Department of Irrigation and Drainage (DID) for civil works and by RISDA for the agricultural program. Both agencies are involved in implementationof ongoing Bank projects and are familiar - 12 - with Bank standards and procedures.61 The MOA, through its project office, would be responsible for planning, coordination, monitoring and coordinationof project activities. Its Department of Agriculture would be responsible for agriculture support services, primarily for farmers with crops other than industrial rubber and oil palm which are covered by RISDA. Extension services for mature oil palm would be provided in association with the Palm Oil Research Institute of Malaysia for technical advice and new crop production technologies. Other services include farmer training, supply of planting materials and monitoring of soils. DID has already engaged consultants for design of remaining works and for constructionsupervision.

39. The project would be implemented over a seven-year period beginning 1987. Bidding documents for construction of the Bekok Dam were available to pre- qualified contractors in May 1986 and constructionwould start in early-1987 at the end of the flood season and is expected to be completed by end-1989. Stored water would be available in 1990 for distributionthrough the new Batu Pahat system which is expected to be completed in the same year. Following pre- qualificationof contractors, bids for river improvement works would be called in November 1986 and constructionwould start in mid-1987. Other works would be undertaken progressively between 1988 and 1990 as land acquisition progresses. Agriculturaldevelopment would be an expansion and intensificationof ongoing operations.

40. Land Acquisition. The proposed infrastructureworks require acquisi- tion of about 3,100 ha of land. Crop compensationwould also be made to a small number of families now living on about 950 ha of government lands legally developed within river reserves; they would be relocated. There are no households presently in the Bekok reservoir area. Under the previous project, land acquisition problems were a major source of delay until the project financed the appointment of 48 staff positions in the State Lands Office. This ensured timely processing and would continue to do so, although land owners have recourse to time-consuminglegal appeal. Work has already begun on land acquisition for the Bekok Dam site giving a lead time of more than one year before start of construction. Assurances were obtained during negotiations that Government would make appropriate arrangements for timely land acquisition and for resettlementor compensationof the families to be displaced, in accordance with a plan of action satisfactoryto the Bank.

41. Dam Safety. To assist DID in ensuring the safety of the Bekok Dam, assurances were obtained that, by December 31, 1986, the Government would appoint a panel of experts, whose qualificationsand terms of emp'loymentwould be acceptable to the Bank, and whose responsibilitywould be to review: (a) con- struction quality and progress; (b) revisions in design and construction practice; and (c) the adequacy of the maintenance and safety program. Assurances

6/ RISDA's extension and farmer training services are among its most important and beneficial roles for rubber smallholders. A network of district and subdistrict offices are maintained with close farmer contacts at the village level. RISDA also assists farmers in rubber marketing. - 13 - were obtained that DID would carry out a maintenance and inspection program for the Sembrong Dam, and the Bekok Dam after its campletion, to determine any actual or potential deficienciesin the conditions of the structures or in the quality of maintenance or methods of operations which might render the dams unsafe, and initiate a1-7necessary remedial action. Copies of each inspectionreport would be furnished promptly to the Bank.

42. Operation and Maintenance. DID would be responsible for operation and maintenance (O&M) of the Bekok and Sembrong Dams, and all river and drainage works down to secondary drains and roads. The operating rules of the flood mitigation system were defined during the feasibility studies and would be included in the operating manual. During construction, DID would continue to operate and maintain existing schemes in the area and would take over the new works as completed. DID is responsible for operation and maintenance of both drainage works and roads in the Johor Phase I area, which is satisfactory. Staff and equipment for the Phase I project would be redeployed over both project areas, supplementedby contract works in line with government policy. Assurances were obtained that the Government would ensure that, promptly after construction, drainage works would be transferred to Johor State for operation and maintenance.

43. Monitoring and Evaluation. The Project Office would continue its project monitoring role, under the Phase I project economist. The surveys of social and agricultural conditions during project preparation are adequate for baseline analysis. Lessons learned from the previous project indicate the need for closer coordinationbetween the monitoring and planning functions and for better balance between data collection and processing into a usable form (draft PPAR, December 2, 1985). Evaluationwould be made by a body external to the Project Office.

44. Agricultural Credit. Agricultural credit needs are supplied by the Agricultural Bank. Credit demand is generally low for treecrops because of the funding supplied by RISDA to farmers contributing to the cess fund. Direct provision of inputs by the DOA under diversificationprograms also reduces credit lemand,and the Agricultural Bank's main work in Western Johor is in supplying credit to farmers not qualifying for other funds. In the area of the first project, the Agricultural Bank lends about M$3 million annually for cocoa, coffee, coconut and pineapples. Interest rates for agricultural deve7opment by smallholdersare generally 0% or 2%, while estates pay market rates.-

45. Cost Recovery. The direct beneficiaries of the project works would be users of the town water supply, urban property owners and farmers. Costs of the

7/ The Government introduced subsidized interest rates through the Agricul- tural Bank in 1981 as a way to assist the poorest farmers. This conces- sional lending is financed by substantially interest-free loans and grants from the Government. The Agricultural Bank now seems to have problems with the quality of its portfolio, but we have little informa- tion on its operations and financial condition. This is expected to be corrected following a study of Development Finance Institutions,which is currently being carried out. - 14 - town water supply would be recovered through the revenue measures agreed for the Johor Water Supply Project (Loan 2654-MA of US$62 million), for which the loan was signed on March 26, 1986. Recovery of costs for protection of urban land from floods would be made through reassessmentof the taxable value of the property for annual land tax payment. Recovery of costs for agricultural land improvementwould be made through the established practice of adding a betterment levy to the land tax upon completion of project works. Recovery of planting costs would be made through cess funds and export taxes on rubber and palm oil. Assurances were obtained that the Federal Government would ensure that Johor State would gazette areas benefiting from project drainage, and would collect and periodicallyreview these charges.

46. EnvironmentalEffects. The environmental impact statement concluded that the project would have a beneficial effect on the environment by providing drainage facilities in an area presently suffering from flooding and poor drainage. Improved water supply and drainage wouLd help to control water-borne diseases and malaria. Although the project would bring about a temporary increase in the turbidity of rivers during construction,this short-term negative effect is considered minor and is outweighed by the social and economic benefits of the project. The project does not entail any forest clearance.

Project Cost and Financing

47. The total project costs in 1986 prices are estimated at US$148.3 mil- lion, inclusive of US$8.0 million of taxes and duties, with a foreign exchange component of US$55.0 million or 37%. Quantity estimates were prepared for the project works based on feasibility designs for the Bekok Dam, feasibility designs for river improvement and drainage works and on prefeasibilitydesigns for road works. Unit prices were based on recent contracts for similar works carried out for DID in Johor. The costs of equipment and vehicles are based on recent bid prices. Project base costs are calculated from January 1986. Physical contin- gencies of 10% were applied to works where detailed designs were available, and 15% for other civil works and 10% for other components. Physical contingencies amount to 7% of base costs. Price contingencieshave been calculated at the following rates of projected increases, using censtant purchasing parity exchange rates. Price contingenciesamount to 22% of total base costs.

1986 1987 1988 1989 1990 1991-93

Local inflation rates (X) 5.0 5.0 5.0 5.0 5.0 5.0

Foreign inflation rates (Z) 7.0 7.0 7.5 7.7 7.6 4.5

48. The proposed Bank loan of US$55.0 million would finance the foreign exchange requirementsof the project. The Government's contributionof US$93.3 million would be provided through annual budgetary allocations to the agencies involved in project implementation. - 15 -

Procurement

49. Procurement arrangementsare summarized in the table below.

PROCUREMENTARRANGEMENTS /a (US$ million)

Item ICB LCB Other NA Total cost/b ------(Includingcontingencies) ------

Civil works 44.7 34.8 - - 79.5 (25.6) (19.4) - - (45.0)

Land acquisition - - - 34.1 34.1 (0) (0)

Agriculturaldevelopment - 10.0 14.8 - 24.8 (3.4) (4.0) - (7.4)

Equipment and vehicles - 0.5 - - 0.5 (0.4) (0.4)

Consultancies - - 2.2 - 2.2 (2.2) (2.2) Administration - - - 7.2 7.2 (0) (0)

Total 44.7 45.3 17.0 41.3 148.3 (25.6) (23.2) (6.2) (0) (55.0)

Number of contracts 3 50

/a Figures in parenthesis include amount of Bank financing.

50. Civil Works. Three contracts for constructionof the Bekok Dam (US$20.9 million) and for river dredging works (US$23.8 million) would be awarded following internationalcompetitive bidding (ICB) according to Bank Group guide- lines. The remaining river improvement and drainage works would not be large enough for ICB and would therefore be carried out under contracts to be awarded following local competitive bidding procedures (LCB) which are satisfactoryto the Bank and in which foreign bidders would be eligible to participate. The con- tracts for secondary drains and agriculturalroads, which would be small and scattered in space and time, would not be of interest to foreign contractors and would be awarded after locally advertised competitive bidding. The total cost of LCB works would be US$34.8 million. All ICB and LCB bidders would be prequa- lified by DID to standards acceptable to the Bank.

51. Goods and Services. Purchases of O&M equipment, service vehicles and supplies totaling US$0.5 million would be grouped into packages for procurement - 16 - under LCB procedures in accordance with Bank Group Guidelines. Small off-the- shelf items, costing less than US$35,000 each and totaling not more than US$0.2 million, would be procured through normal government procedures satisfactoryto the Bank. Local competitive procedures are acceptable and foreign firms are allowed to participate. The fabricationand supply of gates and hoists for water control structures would be carried out through force account at an estimated cost of less than 1% of the total project cost. DID has been fabricating its own gates and hoists for more than 30 years. Consultants would be selected in accordance with Bank guidelines.

52. Contract Review. Civil works contracts over US$2.0 million and supply contracts over US$0.2 would be subject to prior review. This would cover about 80% of the total value of all contracts. Other contracts would be subject to selective post-award review.

Disbursements

53. Disbursement of the proposed loan over 8 years would be as follows: (a) 65% of the cost of civil works; (b) 55% of the replanting and conversion g-ants; (c) for equipment and vehicles, 100% of the foreign exchange cost of directly imported items, 100% of the ex-factory cost of locally manufactured items, net of taxes, and 75% of the cost of imported items procured locally; and (d) 100% of expenditures for consulting services. For disbursementsmade against statements of expenditure,documentation would be retained by the implementing agencies for Bank review and scrutiny by auditors. The loan is expected to be disbursed over eight years. A one-year lag between project expenditure and disbursementshas been allowed to account for disbursementapplication delays. Project completion is expected by December 31, 1993. The disbursement schedule is six months faster than that for the standard profile for Bank loans to Malaysia for area development on the basis of the readiness of engineering, progress ir. land acquisition,and the experience in implementingthe previous project. A special account with an authorized allocation of US$2.7 million, correspondingto four months' expenditure,would be established to facilitate disbursements.

Accounts and Audits

54. The agencies involved in the project are all subject to normal govern- ment control and audit procedures. Assurances were obtained during negotiations that all agencies involved in project implementationwould maintain separate project accounts; that the special account and the accounts of implementing agencies and the Project Office would be audited annually by independent auditors acceptable to the Bank; and that the auditors' reports would be furnished to the Bank within nine months of the end of the Government'sfiscal year.

Benefits and Risks

55. Benefits. The project benefits would be (i) reduction of flood damage of farms and villages resulting from Bekok dam constructionand river training, (ii) increased value-added from replanting old rubber trees with new clones and oil palm, bringing swampland into production, and from diversificationof coconut and (iii) increased provision of drinking water to Keluang and associated small - 17 - towns. Other nonquantifiable benefits would accrue, such as improved road access for comuuters to urban employment and institutional strengthening. The project would directly benefit some 30,000 smallholder families. At full production, it would result in an incremental annual output of 4,100 tons of rubber, 40,000 tons of palm oil and 900 tons of diversified crops. After the project works are completed, another 72,500 ha would remain to be planted which should produce another 20,000 tons of rubber, 200,000 tons of palm oil and 4,500 tons of diversified crops annually. Flood control benefits to agriculture are captured in the estimation of incremental production with and without the project. Flood control benefits to urban areas are assessed on the basis of the annual value of recorded damage during recent years, varying between M$1 million and M$4 million. Most of the direct project benefits would accrue to about 30,000 smallholder families. The smallholders, over 95% in the poverty target group, have average annual incomes of US$350 per capita. With the project, average incomes are expected to rise to about US$580 per capita per year. While this would be above the absolute poverty level of US$360 per capita per year it remains below the average per capita income of about US$2,000 per year.

56. Economic Return. The economic rate of return for the project is estimated at 14% and is relatively insensitive to variations in basic assump- tions. For example, commodity prices would have to fall another 25% from their present depressed levels before the internal rate of return switches below 10%. Costs would need to rise 40% to produce the same effect. Exclusion of urban infrastructurebenefits entirely reduces the IRR by only less than 1Z. Labor is costed at the full wage rate assuming the marginal opportunity cost of labor is equal to the market wage.

57. Risks. The major risk is from land acquisition delays and reoccurrence of government budgetary problems. In the previous project, land acquisition, which became a serious impediment to project implementation,was eventually overcome by the recruitment of an extra 48 professional staff in the Lands Office. Nevertheless, landowners are entitled to time-consuminglegal appeals. Budgetary restrictionshave been maintained for the Fifth Malaysia Plan, although adequate provision for the project has been made. Unplanned further spending cuts could influence the rate of implementation. These two risks have been incorporated into the project design by having a conservative pace of implementa- tion over seven years, including a lead time of one year (1986) prior to commencementof works during which land acquisition and further detailed design would proceed. PART V - RECOMMENDATION

58. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank, and recommend that the Executive Directors approve the proposed loan.

A. W. Clausen President

Attachments June 19, 1986 Washington, D. C. - 18 - Annx I

TA *L: It Page 1 of 6 AOCUL D tICADST UTS MALAYSIA RSP~~lerENSMrIs (HEIGMTSDAVUSESI la. win'16 (onS ISCEUT MIMTAT)/b a 97k.IDKS INURE " mI rT a ImaLlb *StASIAsuTb & PACFric LAT. ASMICA & CA a Ciiuum. mu) TOAL 329.6 329.6 329.6 AGRICULTURAL - 34.5 39.6 43.6

- PEE CUIA A ) .. .. 100.0 / 1011.1 h1u7.9 aNtV anin.uur FM cz.:a (EILOCRANSOF OIL WUIVALENT) 610.0 455.0 669.0 Sfl.a "3.6

L . AM ViTAL TEU POULATIUN.NID-YAR(CUUSams) 6205.0 10663.0 14863.0 URA POPULATIONCl OF TOTAL) 25.2 27.0 30.7 35.9 07.7

POWULAnDONOJEcYItOI POPULATiOYIN MEP 200 (DLL) 20.5 STATI0ZI POPULATION(MILL) 33.0 PaPULAYEOnMOMNETUM 1.5

PoPUmAIN DOSrr Fi so. at. 24.9 32.9 45.1 36b.9 48.0 PU SQ. 1C AGRI. LAND 235.3 273.2 333.2 1591.2 91.1

POPULATIONSEg STUCTURE(2) 0-14 YRS 45.1 45.4 37.7 30.2 36.5 15- TMs 51.2 31.4 55.4 57.7 57.1 65 ANDABOVE 3.6 3.0 3.7 3.5 4.2 POPULATIOCIIOU RATE t2) TOTAL 2.7 2.6 2.3 2.3 2.4 URBAN 4.9 3.5 3.4 4.1 3.6

CRUDE3IXTR1 KATY (P8 13W0) U.3 35.7 29.1 30.1 3U.9 CR3DC hSI RATE(PE TllW) 14.9 9.2 6.4 9.4 0.0 CROSSRPUDOUCN hIaT 3.4 2.6 1.8 3.9 2.0

rAMILYPLASUIC ACCEPTRS. AU (n s) .. 54.0 61.1 Ic US* a orOF lRsWOMN) .. 33.0 /d 42.0 56.5 45.3 FM m nwlrn MU110OF No 1o. PER CAPITA C1969-71-100) 65.0 99.0 133.0 124.4 109.6

PR CAPrTAsumP or CALORIES(C or BQUIUSUNT) 302.0 109.0 122.0 115.7 113.2 PROrES (CRAMS t DAX) 46.0 so.0 66.0 60.3 69.4 Of MUCR ANIMALAS PULSE 17.0 16.0 23.0 1. 14.1 34.2

CHILD (ACES 1-4) DEAH RATE 7.5 3.4 1.0 7.2 4.3 SWAM Lift ElPECY. a EXWE (1ARS) 53.9 61.2 66.9 60.6 MA WAlEArMOT. RATECPU THOUS) 72.0 45.5 29.0 64.9 59.7 ACCESSTO 5AFZ WATK CTWIN) TOTAL * 29.0 66.0j/ 46.0 65.3 1 .. 75.0 90.0 77 57.6 76.5 RURAL .. 1.0 49.0 T 37.1 44.2 ACCZSSTO EKCRETADISPOSAL ( Or POPULATION) TOTAL *- 59.0 70.0 /c 50.1 50.3 URBAN . 100.0 100.0 7c 52.9 73.4 RURAL *- 43.0 55.0 /C 44.7 1.5

POPULATIONPD. PHYSICIAN 7060.0 4310.0 7910.0 1 7751.7 1909.7 POP. PEE IIR1151CtESOI 1600.0 1120.0 940.0 7T 244.8 ao6.2 POP. PER OSPITALDC TCTAL 270.0 e90.0 .. 1112.1 362.C URBN 110.0 140.0 .. 51.4 422.0 RULAL 5710.0 1760.0 .. 2596.9 2716.7

ADSISSIONSPER HOSPITALlED .. 18.4 .. 41.1 27.5

AVERE SIm 0o USEHOLD TO.AL 5.6 /f cEAN .. 5.9 7 . RURAL .. 5.5 F AVERAGENO. OF PERSONS/ROOIu Tt7tlL .I 2.6 If gURa . 2.3 7r RURAL .. 2. 7 F PERCENTAGEOF DULLIHCSM1ii ELECT. TOTL .. 43.4 If URBAN -_ 6.7 7! .. .. L .. 30.1 Tf . 1/ US$1,990 in 1984. -19 - ANNEXI Page 2-of 6

NM CNN! UiW IITIM4T) I'eal 19oLk,umAu ASIA& PuaPCm LAT.ANmuc A CA2 ADJUBM~~ ~ ~ UMCLLS OW LUD a:u.u innjiw EATE PUM To=9-0 * 7-0 97-0 1O0.7 I O U .t IUB - 10.0 O1.0 97.0 104.4 103.5 motw 83.0 U 4.0 97.0 97.2 104.6 U1COUDANITOeAL 19.0 34.0 72.0 47.6 44.2 an 23.0 40.0 72.0 50.6 43.7 IW.3 13.0 33.0 72.0 44.6 44.9 VOCATIOUA(5 W BIU00DhM) 4.6 2.9 1.6 13.4 13.3 11PIL-!UAC RATIO DAIXNM 26.0 31.0 25.0 30.4 29.9 SEDART 33.25.0 26.0 22.0 22.2 16.7

PASSIIUaMCA IPI1 PO 11.6 21.9 423.6J 10.1 6.0 RDIO UCRI9 2I005I PM01J.9 39.6 415A 172.3 326.3 TV mUzYR/EOIE POP 3.32 12.0 *-9 56.5 112.4 WiElDrs C"DAZLYGUER* InNEI) CZIA!IW U UOI I010=T9 60.0 '2.1 163.3 65.3 61.1 A3UNMAL.AETMA/CPIC A 16.0 9.4 2.6 g 3.4 2.4 X- TOTA LAM.UYO (20S) 2300.0 3644.0 5431.0 1323.3 ZmCRCV2 31.4 31.6 33.6 23.6 AI NJRU I(UIE) 63.0 56.0 50.0 Li 53.2 31.4 IUUITITC1REU1) 13.0 14.0 16.0 L 17.9 24.3 PARTZCI1ATZNRAZI (lMCPET) TOTAL 34.1 33.6 36.5 36.9 33.5 INS 48. 45.7 69.3 50." 51.3 IAUE 16i 21.5 23.2 26.8 15.9 I iONic DvCm RfRMO 1.4 1.4 1.3 1.1 1.3

R Ultl305 X or OUIU-O6 34.0 .0 .. .. LINEIT 2S35or 3091 61.2 6.6 .. 44.0 WIll 2001Of OUSZIUM 3.2 3.3 .. 6.4 LOtIIWUI140Z0 UofoL 9.6 10.6 .. 15.5

m naim Deosm LUL CM PU CAW) RAN.. 123.6 314.4 e .. 288.3 RURAL .. 111.6 2B9.2 e 151.9 185.3

LUnL (CM 111 CAPITA) ...... 177.9 519.8 RURAL ...... 164.7 359.7 ISTIAZID POP. LusoM PvsRLCzucm LEVI?CZ) claw .21.3 12.6 23.5 58.7 37.7 - 37..

NrU AVLICLA3Z *INOT *I1 AIT MOTh

/ Th group mraga for oac Indicator arm po_o1atIow.1htad aritl_tSc _man.. Coura of countrim am_ thu Indicators dopondaon aval2mbUty of data ad Is not uiform. /b blama ocbatda noted. "Data for 1960" roter to an yar between 1959 ,d 1961; 'Data for 1970" betwem 1969 ad 1971; and dat for "Sht Vacant SetI I tu as 191 and 1963. /e 1980; Id 1974; /j 1977; /f Peninsular Malaysia; 11978; /b 1 .

JUNE. £965 A!NRi I -20- Page 3 cf 6

DD1FNiONSOF SOCL INDWA1U Nosw:_Mo ihedotman dre. feah moome am llyjudpd bmmo auhhadmve adM, it aboi am bmmatedi shethe amyao beiemmatiWs coMParabec_e1of th lak of mdrdirnd deaitiam ad mept mmdby dlerm cmn In caetlegoilM daIs Th da am. anewtbemetal to dbcib e nee of oepitdella _dkmtrade, ma charseeft anim m_jordMiamian betwm ountrie. The .Ihrse proe en (1) Wse ioanry pqup or bimecouItry a_ (2) a *ouity poop wih _ eehat hiher aw*a u thd imacountry prop of sbjeot can" (_sup for "High IncomeOlEapore" pop wper"Middle lowm Norh Afrda md Midle Emit" clamenbweAn of tronr auocaukurl bamitiIn lh nb paup datetavuat - p*_uam wih aithemetimrm fw inc indicor ai dI oily whm majoyri orthecoumlrie Ina puul hu das forthat ddimla. Slm tdo acvemoeoauoti amongthe ldice depend.on the avauIty ofbdatai is nol ifom cauno muo b reid ab n avim.e of ow rladatto maodeeTie awvenwam oniyumefis ammenng h valueof oenindit at a tme among th counuyad mI PuaP

AREA (thousandsq.kmL) Caudehh hti (perthamd)-Number of live birthsin theyear ri-Total surface ar ompnung lan areaand inland waters; perthouand of mid-yearpopulation; 1960.1970. and 1933data. 1960,1970 and 1983data. Cmr Dewh Rot (pwr 1md)-Number or deathsin the year Agsteubrui-Estiinoteoraltul m u.d t or perthousand of mid-ycarpopulation; 1960. 1970 oan 1983data. pemanendyfor cropatur. markt andkitchen gardens or to CGretRepsehele Raw-Averg numberof daughtesa woman Hefalow, 1960,1970 and 1982data. wiF bear in her normal reproductiveperiod if she ex pr t a-speiic fetiity rates;usually five-year avge endig GNP PER CAPITA(USS)-GNP per capitaestimatc- at curret in 1960,1970. and 1983. mrwketprices. calculated by sme convrsion mediod a Worldit n Am (damnd)-Annual num- Bo*A das (198143baim); 1983 data. berof aeptors of birtb-ctroldeice underauspce of ti.nal ENERGY CONSUMPTION PElt CAPM-Annual apparent family panning program. consumptionof commeial primay energy (coal and lignite, &ud(*f lm* -Va-fp (pmit efma- ini w m)--Tbe paen- petroleuo, naturalgs and hydro-. nuckr and geothemalclar tageof manied wouenof cbild-bearingage who arepracticing or ticity) in kilogramsof oii equivalentper capita; 1960,1970, and whoe husbandsre prcticing any form of contraception.Womeo 1982data. of child-bearingae aregenerasy wme aged15-49. although for somecounties contraceptive-ag is meured ror other age POPULATION AND VITAL STATIStlCS groups TeedPhpEIat Mi,MMYe(thosmds)-As of July 1; 1960.1970, FOOD AND NUTriMON and 1983data. E46mpffca opsiltion of wd)-Rdo ofurbm o to A&*1 ef FoodAoecde se PerCipilts (1965-71- 160)--lndexof per Urban ?.pdatim (per ofJ tpf of urban to toa anuRtioproducti of all food commodi odu popution; differentdefinit of urbanareas m- affet comnpar- excudes anma fad an sed for agrictur Foodcommodites ability of data anongcountris; 1960. 1970.and 1983data. pe commodities (eg. sugareaneinstead of suar) Rg.ktim Pf*ceiow which are edible and contain nutrients (cg. coffee and tea am Populaon in yaw 200-The projection of population for 2000, excuded) they comps cral root crops. pules, oil seds. madefor each economy separately. Starting with information on vegeabes fruit nuts, su_ ae and augr beets livesock,and total population by age and sxx,freflity rates.morality rates, a- livestockproducts Aggregt production of each country is based intrationa migration in the baseyear 1980. these parumeters on national avea producer price weights; 1961-65. 1970.and wvre projected at five-yearintervals on the basis of generalied 1982 data assumptons until the population became stationary. rr CG_aSNPlb qCofm.dez(percet ofrqmf mmmu)-Comput- Stadoeaypopubalnm-ls one in which ag and scx-specificmor- ed from caloricequivaient of net food suppliesavailable in country taihtyrates havenot changed over a long peiod, while age4pecific per capita per day. Avaiable supplies comprise dometic produc- frtility rateshave simultuneouly remaied at eplacementlevel tion. import less exports. and changes in stock. Net supplies (net reproductionrate-1). In such a population, the birth rate is exdude animal feed,seeds for use in agricultum.quantitics usd in omstantand equal to the death rate. the age structureis also food processig and lossesin distribution. Requiremcntswe constant. and the growth latc is zero. The staionary population estmuatedby FAO basedon physiologial needsfor normal activity sizewas estumaedon the basis of the pojected characteristicof and bealth considering envonmental tenperature, body weights, thepopulation in the year 2000. and the rate of decie of fc7tility age andsex distribution of populion, nd alowing 10 percent for rate to replament lvd. wasteat household level;1961, 1970 and 1982 data PopudatwioMomenawa-Is the tendency for popultion growth to PewCa SW& qf rwa_ (grumtrper aly-fProtein content of continue beyond the time that eplment-level fertility has been per capita net supply of food per day. Net supplyof food is defined acbeved; thats.even after the net reprodution te hasre ace as above. Requirements for all countries estabed by USDA unity. The momentumof a population in the year t is meauredas provide for minimum allowances of 60 gams of totd protein per a ratio of the utimate stationarypopulation to the population in day and 20 gams of animaland pule protein. of which 10 grms the year t. given the assumption that fertity remains at replace- should be animal protein. Thescstandardsare lower than those of meat lvd from year r onward. 1985 data. 75 gramsof total protein and 23 gamns of animal protein as an _Al-doaD siy average for the world. proposed by FAO in the Third World Food PersqJkr.-Mid-'ear population per square kLometer (100hec- Supply; 1961, 1970and 1982 data. tares) of total area; 1960. 1970.and 1983 data. PerCGita PWti Spp &m Admd andPlabr-Protein supply Persq bn. qrfcdaal lnd-Computed as above for agnciadtiar of food dered from animals and pulss in gammsper day; 196165. land only. 1960.1970, and 1982 data. 1970 and 1977data. Pepubt. AgeSbctwre (jw tChildren (0-14 years). work- ChI (ags 1-4) Deat i R ( hossmnd)-Number ordeaths of ing age (15-64years) and rerd (65 years and over) as prcentage children aged 1-4years per thousand children in the same age of mid-year popuation 1960.1970. and 1983data. group in a given year. For most developing counties data derived Arpuluie Grot Rot (prcessr)-te.d-Annual growth ratesof from life tabks; 1960. 1970and 1983data. total mid-year population for 1950-60.1960-70, and 1970-83. HEALTH Pw Grwthh (e ) Annual growth rates Le Expeetmcy at ith (ymsD-Number of years a newbom of urban popultion for 1950-60,1960-70. and 1970-83data infant would live if prevailig patterns of mortality for all people - 21- ANNE I Page 4 of 6 at the timeof of its birth wereto sty thesame throughout its life. Pspi-teacher Ratio- primary.and serodary-Total studentsen- 1960.1970 and 1983data. rolled in primary and scondary levelsdivided by numbersor InfawMaidty Rat (perthuusendI-Number of infantswho die teachersin thecorresponding levels. beforereaching one year of ageper thousand live birthsin a given year 1960.1970 and 1983data, CONSUMPTION Awessn Stp Watr (ptU0 o,f p_Ihtln)-tatm4 mb., and PasengerCur (per thousandpapulaien)--Passenger cars com- rural-Number of people(total, urban,and rwral with reasonable prisemotor carsseating less than eight persons;excludes cmbul- acess to sarewater supply (includestrated surfacewater or ances.hearss and military vehicks. untreatedbut uncontaminatedwater such as that from protected R ,esW., (perthamdpuadoiu-All typesof rceivers borehoks,sprin andsanitary wils) a peentogesof theirrspec- for rdiobroadcasts to genea publicper thousandor population: tive populations.In an urban - a publicfountain or standpost excudesun-licensed rceiver in countries and in yearswhen lcted not morethan 200meter from a houe maybe considered egistrtion of rdio setswas in effect;data for recentyears may reasonabe access woud imply tht the houewif or memberof the not becomparable since most countries abolished licensing. housedholddo not haveto spenda disproportionatepart or the day TVewdvrs (perrheusandpep.laedaJ-TV receivers for broadcst in fetchingthe family'swaler needs. to gneral publicper thousand population; excludes unlicensed TV receiverin countriesand in yearswhen registration Of TV setswas Accessto Excrct Dsp6t (pftm of popolseim)-eteralet-. in elec. andrura-Number of people(total, urban,and rural) servedby excretadisposal as percentagesof their rspective populations. I Psp CprCdha (perthae _hpepalatle. -Shows theaver- Excretedisposal may includethe collectionand disposaL with or agedrculation of "daily genealinterest newspaper." defined as a without treatment,of humanexcreta and waste-waterby water- periodicalpublication devoted primarily to recordinggeneral news. bornesystems or the useof pit priviesand similar instalations. It isconsidered to be daily- if it appearsat leastfour timesa week. Populationper Physidn-fPopulation divided by numberof prac Cuane Am_mlAreeAnt per Cata per Year-Basedon the tisingphysicians qualified Froma medicalschool at university kevel number of tickets sold during the year. including admissionsto Pbpulationper Nrsing Person--Ppulationdivided by number or drive-incinemas and mobile units. practicing male ard femalegraduate nurses assistant nurses. practical nurses and nuning auxiliaries. LABORFORCE Pop.Ad. per Hospital hi-tal, wam, endra.ral-bpulation TegalLahFir ner(thowmsim-Economically active persons. in- (totaL urban and riral) divided by their respectivenumber of cluding anned forces and unemployed but excludinghousewives. hospitalbeds availabl in publicankd private, general and spzeia students.aiu ontisaent tc. covering populationoprbe16.17 of all ages. nd18Definitions aa in hospitals and rehabilitation centers. Hospitalsare establishmnents vanous countries are not compambk: 1960. 1970and 1983dau. permanentlystaffed by at least one physician.Establishments provw Femal (percenri-Fenalelabor forte as pemrtage of total labor iding principaflycustodial care are not included. Rural hospital force. however.include health and medicalcenters not permanentlystaffed Agrikhure (perceni--Labor forcein farminiLforestry. hunting by a physician (but by a medicalassistant. nurse. midwife.etc.l and fishingas percentageof total labor forme 1960.1970 and 1910 which offer in-patientaccommodation and providea linited range data. of medicalfacilities. Inxdury(percemi-Labor forcein mining. construction. manu- Admissioner Hospital Bed-Total number of admissions to or facturingand electricity.water and gas as percentageof total labor dischargesfrom hospials dividedby the number of beds. forcf. 1960. 1970and 1980 data. Pi*ticpatimure (percsfl _-tol. makemndfieL-Participation HOUSING or activityrates are computedas totaL male. and femalelabor force Aver Se of Hawehad (person per hruseflfdj--torda wham, as percentagesof totaL male and femal population of all ages as d -A householdconsists ofa group of individualswbo share respectively.1960. 1970. and 1983data. These are based on [Las livingquarters and their main meals.A boarder or lodger may or participationrates reflectingage-sex structure tf the population.and may not be induded in the household (or statisticalpuaposes. longtime trend. A fewestimates are from national sources. AverageNumber of Pars= perRoom-retoaL uran and rura- Eomic DepemdencyRati-Ratio of population under 15. and Average number of persons per room in all urban. and rural 65 and over. to the working age population (those aged 15-641. occupied conventional dwellings,respectively. Dwellings exclude non-permanentstructures and unoccupiedparts. INCOME DISTRIBUTION -Percentage 'DueRigs with Electricirp-eoual,wam, andruatl- Percentae of Total Dispombeincome (both i cashmd kid)- Conventionaldwellings with electricityin livingquarters as percen- Accruingto permentilegroups or householdsranked by total house- tage of totaL urban. and rural dwellingsrespectively. bold income. EDUCATION POVERTY TARGETGROUPS Ad4jned Enrollmet Ratos The followingestimates are veryapproximate measuresof poverty Primary school - total. male and femolce-ross total. male and levels.and should be interpreted with considerablecaution. femaleenrollment of aH ages at the primarylevd as percentagesof Es£timaedAbsolnte Poverty Incme LewdfUSS per ptWa)_-arba respectiveprimary school-age populations.While many countries andrural-Absolute poverty income level is that income level consider primary school age to be 6-11 years others do not. The below which a minimal nutritionally adequate diet pius essential diffences in country practices in the ages and durationof school non-food requirementsis not affordable. are reflectedin the ratiosgiven. For some countrieswith universal EstimatedRelaivre Poverty Income Levd (fUSS per caphai-arban education.gross enrollment may exceed 100 percent since some andrural-Rural relative poverty income level is one-third of pupils are below or above the country's standard primary-school average per capitapersonal income of the countrv. Urban level is age. derived from the rural level with adjustment for higher cost of Secondar school- total. maleand female-Computed as above. livingin urban areas. secondary education requires at leastfour vears of approved pri- Etimaed Popution Belw Ahsolte PoeeryIncome Levd (per- marv instruction:provides general.vocational. or teacher training ceuri--wrbanand rural- PLtrent of population I urban and rural instructionsfor pupils usuallyof 12 to 17 years of age. correspond- who are -absolute poor.- ence courses are generallyexcluded. VucarsumaEnronllmei £percent ofsecondary)-Vocational institu- ComparativeAnalysis and Data Ditision tions includetechnicaL industriaL or other programswhich operate EconomicAnalvsis and ProjectionsDepanrtment independentlyor as departments of secondaryinstitutions. June 1985 - 22 - ANNEX I Page 5 of 6

COUNTRY DATA - MALAYSIA

CROSS NATIONAL PRODUCT IN 1905: US$ mln 29,346 ANNUAL RATE OF GROWTH:

2 in constant prices and MS USS mln 2 1961-70 1971-77 1978 1979 1980 iq8i 1982 1983 1984 19Vf

CNP at Market Prices 29,346 100.0 6.4 7.8 5.9 9.1 9.3 7.5 4.2 3.9 6.h 2.- Croms Domestic Investment 9,394 32.n 6.7 11.4 R.1 11.3 20.6 1fi.9 13.2 7.R 4.4 -9.1 GroassNational Saving 8,494 28.9 * * * * * * * * * * Exports of Goods 6 NFS 17,20n 58.9 6.0 7.5 7.6 IR.n 3.2 -0.8 in.7 12.4 14.1 4.f Imports of Goods £ NFS 15,842 54.0 2.9 8.5 12.9 20.4 20.5 5.6 13.8 9.0 6.4 -6.1

OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 19R4 /a Value Added Employment Valued added per worker USS n1n 2 mln 2 USS 2

Agricultutre 4,967 20.1 1.9 35.2 2,614 54.2 Industry 9,242 37.5 1.3 24.1 7,109 147.3 Services 10,451 42.4 2.2 40.7 4,751 9h.5

Total/Average 24,660 100.0 5.4 10i0. 4,825 100.0

GOVERNMENT FINANCE General Government Central Government MS mln Z of GNP MS mln Z of GDP 198A5 19R5 1982-94 19R5 IQRS 19-.2-R4

Current Receipts 24,853 31.7 21.6 21,861 27.9 26.4 Current Expenditures 20,635 26.3 25.R 18,353 23.4 23.3 Current Surplus 4,218 5.4 5.0 3,508 4.5 3.1 Development Expenditures lb 15,103 1n.1 15.1 6,505 8.3 13.5 Foreign Borrowing (net) 781 1.0 5.9 781 1.0 5.9

MONEY. CREDIT AND PRICES 1975 1976 197; 1978 1979 19l0 1981 19R2 19R3 1984 19R5

(Million MS outstanding end period)

Money and Ouasi-Money 10,001 12,771 14,061 17,521 21,739 27,.437 32,340 37,61R 41,154 45,859 48.920 Bank Credit to Public Sector (net) 1,113 1.136 1,214 1,017 -7n2 549 2,786 4,617 4,204 4,771 !,594 Bark Credit to Private Sector 6,077 7,471 8,971 11,626 14,641 20,346 24,97h 29,197 35,403 41,97fi 47,849

(Percentages or Index Numbers)

Money and Ouasi-Money as 2 of GI? 44.R 45.5 46..n 46.2 46.R 51.2 55.9 6n.n 58.9 57.6 62.3 Consumer Price Index (1980 - 100) 80.2 R2.3 86.2 90.5 93.7 In0.0 Inq.7 116.1 120.4 125.1 125.5 Annual Percentage Changes in Consumer Price Index 4.4 2.6 4.7 5.n 3.5 8.7 q.7 5.8 3.7 3.9 0.3 Bank Credit to Public Sector (net) 36.9 -13.5 6.q -16.2 * * 407.5 65.7 -R.9 13.5 -66.S Bank Credit to Private Sector 15.2 20.1 20.1 29.6 25.9 39.0 22.8 16.9 21.3 1R.6 16.0

* Not applicable.

/a In 1978 prices. 7b- Includes net lending.

Note: All conversions to dollars in this table are at the average exchanRe rate prevailing during the period covered.

May 1986 ANNEX I

- 23 - Page 6 of 6

TRADE PAYMEhTS AND CAPITAL FLOWS

BALANCE OF PAYMENTS 1983 1984 1985 MERCHANDISE EXPORTS (AVERAGE 1983-Ri) - (US$ million)--- USS million Z

Exports of goods, NFS 15,703 18,529 17,291 Petroleum 3,568 23.3 Imports of goods, NFS 17,334 17,866 15,842 Palm oil 1,603 10.5 Resource Gap (deficit - -) -1,631 663 1,449 Timber 1,611 10.5 Factor Services (net) -1,814 -2,224 -2,295 Rubber 1,434 9.4 Net Transfers -9 -39 -52 Tin 627 4.1 Balance on Current Account All other commodities 6,491 42.2 (deficit - -) -3,454 -1,600 -R98 Total 15,334 100.C Direct Foreign Investment 1,261 914 754 Net MLT Borrowing /a 2,878 1,435 3,128 Disbursements 3,164 1,949 3,652 EXTERNAL DEBT, DECEMBER 31, 1985 USS mln Amortization 286 514 524/b Public Debt, incl. Guaranteed 12,445 Subtotal 4,139 2,349 3,882 Nonguaranteed Private Debt 4,138 Total Outstanding 6 Disbursed 16,583 Other Items n.e.i. 2,175 819 1,439 Increase in Reserves (+) 48 80 n.a. International Reserves DEBT SERVICE RATIO FOR 1985 /c I (end year) 4,070 4,115 n.a. Public Debt, incl. guaranteed 9.3 Fuel and Related Materials Nonguaranteed Private Debt 5.2 Imports 1,R28 1,424 n.a. Total Outstanding & Disbursed 14.5 Exports 4,009 4,887 n.a. Of which: Crude Petroleum 3,354 3,734 3,617 IBRD/IDA LENDING (MARCH 31, 1986) IBRD (US$ million) RATE OF EXCHANGE MS per USS USS per MS Outstanding & Disbursed 736.R2 1980 2.18 0.46 Undisbursed 554.73 1981 2.30 0.43 Outstanding incl. Undisbursed 1,291.55 1982 2.34 0.43 1983 2.32 0.43 1984 2.34 0.43 1985 2.48 n.40 March 1986 2.53 0.40

* not applicable.

/a Public/publicly guaranteed debt only.

/b Excludes refinancing of HS5,478 million in 1985.

/c Interest and amortization payments as a proportion of total earnings from exports of goods and non-factor services.

May 1986 - 24- ANNEX II Page 1 of 2

THE STATUS OF BANK CROUP OPERATIONS IN MALAYSIA A. STATEMENT OF BANK LOANS /a As of March 31, 198k

Amount in US$ million Loan (less cancellations) no. Year Borrower Purpose Bank Undisbursed

Forty-six loans fully disbursed 935.19 1493 1978 Malaysia National Extension 19.00 0.21 1590 1978 Malaysia FELDA VI Land Settlement 28.00 0.32 1717 1979 Malaysia Huda II Irrigation 31.00 9.04 1808 1980 Nat'l Elec. Board Power (IX) 45.00 4.04 1899 1980 Malaysia Kelantan Land Scheme Rehab. 25.00 20.80 1957 1981 Malaysia Rompin-EndauArea Dev. 40.00 21.83 1960 1981 Malaysia Trans-Perak Area Dev. 50.00 36.21 2013 1981 Malaysia FELCRA I 37.00 23.61 2145 1982 Malaysia Industrial Training (Educ VI) 40.60 31.28 2146 1982 Nat'l Elec. Board Rural Electrification(Pover X) 66.30 37.60 2147 1982 Malaysia Malacca Agri. Development 25.40 17.36 2220 1983 Malaysia Kedah Valleys Agri. Development 56.90 45.29 2291 1983 Malaysia Sabah-Sarawak Road 86.22 86.00 2438 1984 Nat'l Elec. Board Power (XI) 70.00 69.75 2471 1985 Malaysia Small-Scale Enterprises 52.10 48.11 2530 1985 FELDA Felda Palm Oil Mills 31.20 29.90 2550 1985 Malaysia Sabah Forestry Technical Assis. 6.50/b /b 2601 1986 Malaysia Second Industrial Training 73.30 73.3U 2642 1986 Malaysia Land Settlement Infrastructure 50.00/b /b 2654 1986 Malaysia Johor Water Supply 62.007b 75 Total Loans (less cancellation)/c 1,712.21 ot which has been repaid 376.77 Total now outstanding 1,335.44 Amount sold 70.99 of which has been repaid 43.89 Total loans now held by Bank /b ],2Si.55 Total undisbursed _t 554.73

/a The status of the projects listed in Part A is described in a separate report on all Bank/IDA financial projects in execution, which is updated twice yearly and circulated to the Executive Directors on April 30 and October 31.

/b These loans were not effective as of March 31, 1986, and have thus not been counted. Subsequently,Loan 2642-MA became effective on April 10, 1986. /c Subsequently,loans for a Primary and Secondary Education Sector Project (US$127.0million) and a Port Kelang Project (US$18.8 million) were approved on April 29, 1986. - 25 - ANNEX II Page 2 of 2

B. STATEMENT OF IFC INVESTMENT As of March 31, 1986

Amount in Type of US$ million Year Obligor business Loan Equity Total

1964-74 Malysian Industrial Devel- Financing - 1.94 1.94 opment Finance Ltd. (MIDF)

1985 SEAVI-MA Money and - 1.00 1.00 Capital Mkt.

1966 Tasek Cement Ltd. Cement 1.28 0.28 1.56

1968-69 Malayawata Steel Ltd. Steel 2.45 1.24 3.69

1970 India-MalaysiaTextiles, Ltd. Textiles 1.25 0.25 1.50

1985 Pacific Hardwoods Pulp and 9.97 1.53 11.50 Paper Prod.

Total Gross Commitment 14.95 6.24 21.19

Less: repayments, sals, cancellations, terminations and write-off 4.98 3.71 8.69

Total Commitments Now Held by IFC 9.97 2.53 12.50

Total Undisbursed - 0.41 0.41 - 26 - ANNEXIII

MALAYSIA

SECONDWESTERN JOHOR AGRICULTURALDEVELOPMENT PROJECT

SupplementaryProject Data Sheet

Section 1: Timetable of Key Events

(a) Time taken to prepare project: 5 years

(b) Agency preparing project: DID with Consultant Assistance

(c) First presentationto the Bank: October, 1981

(d) First Bank identificationmission: February, 1982.

(e) Date of departure of appraisal mission: March 26, 1985.

(f) Date of completion of negotiations: March 24, 1986.

(g) Planned date of effectiveness: October 31, 1986

Section II: Special Bank ImplementationAction

None

Section III: Special Conditions

(a) The Government would appoint consultants for construction supervision of the dam and river works (already completed) (para. 38);

(b) The Government would (i) acquire land for the Bekok Dam site and land and land rights for the other works in accordance with an action plan satisfactoryto the Bank and (ii) make appropriate arrangements for resettlementor compensation of the families to be displaced (para. 40);

(c) DID would by December 31, 1986 (A) appoint a panel of experts accept- able to the Bank who would review: (i) constructionquality and progress; (ii) revisions in design and constructionpractice; and (iii) the adequacy of the maintenance and safety program; and (B) carry out a maintenance and inspection program for the Sembrong and Bekok Dam and would initiate any remedial action considered necessary (para. 41);

(d) The Government would ensure that, promptly after construction, drainage works would be transferred to Johor State for operation and maintenance (para. 42); and

(e) The Federal Government would ensure that Johor State would gazette areas benefiting from the project drainage, and would collect and periodicallyreview drainage charges (para. 45). 01t TAILANDM MALAYSIA __-- _ SECOND WEST JOHOR AGRICULTURALDEVELOPMENT PROJECT

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