Document of -, U hnn The World Bank FILE COur FOROFFICIAL USE ONLY Report No. P-2810-BA REPORT ANDRECOMMENDATION OF THE PRESIDENTOF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSEDCREDIT TO THE SOCIALIST REPUBLICOF THE UNION OF BURMA FOR A NYAUNGGYAT DAM MULTIPURPOSE PROJECT May 9, 1980 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contentsmay not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document of - , U hnnThe World Bank FILE COur
FOR OFFICIAL USE ONLY
Report No. P-2810-BA
REPORT AND RECOMMENDATION
OF THE
PRESIDENT OF THE
INTERNATIONAL DEVELOPMENT ASSOCIATION
TO THE
EXECUTIVE DIRECTORS
ON A
PROPOSED CREDIT
TO THE
SOCIALIST REPUBLIC OF THE
UNION OF BURMA
FOR A
NYAUNGGYAT DAM MULTIPURPOSE PROJECT
May 9, 1980
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS
Since May 1977, the Burmese kyat has been officiallyvalued at 8.51 to the IMF Special Drawing Right (SDR) andconsequently its value floats relative to other currencies.
The following exchange rate is used throughout this reportexcept where stated otherwise:
AC - Agriculture CorporationAFPTC - Agriculture and Farm Produce Trade CorporationAMD - Agricultural Mechanization DepartmentCD - Cooperative DepartmentDNP - Director of the Nyaunggyat ProjectEPC - Electric Power CorporationERR - Economic Rate of ReturnGOB - Government of BurmaICB - International Competitive Bidding
ID - Irrigation DepartmentKfW - Kreditanstalt fuer WideraufbauMAB - Myanma Agricultural BankMAF - Ministry of Agriculture and ForestsMFTB - Myanma Foreign Trade BankMI-2 - Ministry of Industry No. 2PIC - Project Implementation CommitteePSD - Planning and Statistics Department
PV - Present ValueSD - Survey DepartmentSEE - State Economic EnterpriseSLRD - Settlement and Land Records Department
FOR OFFICIAL USE ONLYBURMA
Nyaunggyat Dam Multipurpose Project
Credit and Project Summarv
Borrower: The Socialist Republic of the Union of Burma
Amount: US$90.0 million
Terms: Standard
Co-financiers: The Governments of Germany, Japan, and Norway.
ProjectDescription: The project would be the first step in a long-term
program of land and water development in the Panlaungand Samon River Valleys in Lhe centra± ary Lone ofBurma. It would provide year-round irrigation forabout 200,000 acres in the Mandalay Division in UpperBurma. About 88,000 acres of this area are under anexisting irrigation system which is only capable ofproviding irrigation for one crop during the monsoonseason. With the construction of the proposed NyaunggyatDam, and the flood control works, ttie project area wouldreceive assured water supplies for irrigation, allowingdouble cropping. To help achieve this, the project pro-vides for the rehabilitation of the existing inefficientand silted-up irrigation system and construction of newirrigation and drainage facilities in the new areas.Complementary measures include on-farm development,improved water management, agriculture extension andresearch, farm mechanization, technical assistance, andtraining. The project would also provide for hydroelectricpower generation with a maximum generating capacity of56 MW and an average annual energy production of 165 GWh.The project would benefit about 33,000 farm families,double the utilization of family labor and increase hiredlabor requirements by about 38%. At full development, netbenefits from inci,mental agricultural production areestimated at US$14 million per annum. The cost of powergeneration represents the least cost alternative. Higherthan usual contingencies are included in the cost esti-mates to allow for the uncertainties of bidders for theICB civil works construction, since this will be thefirst such venture in Burma. The project involves noother special risks beyond those commonly associated withsimilar multipurpose dams.
This document has a restricted distribution and may be used by recipients only in the performance- of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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Estimated Cost: US$ Million EquivalentLocal Foreign Total
Civil Works 31.4 61.2 92.6Equipment 13.6 37.3 50.9O&M Civil Works 0.5 - 0.5Technical Assistance 1.1 9.0 10.1Engineering and Administration 8.8 0.2 9.0
Base Cost 55.4 107.7 163.1
Engineering StudiesDetailed Eng. of PaunglaungProject and Power Plan Review /a 0.8 6.4 7.2
Staff Appraisal Report: No. 2767-BA dated May 1, 1980.
Map: IBRD Nos. 14543, 14544, 14545, and 14546.
/a Including physical and price contingencies./b Including about US$13.0 million for taxes and duties.
INTERNATIONAL DEVELOPMENT ASSOCIATIONREPORT AND RECOMMENDATION OF THE PRESIDENT
TO THE EXECUTIVE DIRECTORSON A PROPOSED CREDIT
TO THE SOCIALIST REPUBLICOF THE UNION OF BURMA
FOR ANYAUNGGYAT DAM MULTIPURPOSE PROJECT
1. I submit the following report and recommendation on a proposeddevelopment credit to the Union of Burma for the equivalent of US$90.0 millionon standard IDA terms to help finance the Nyaunggyat Dam Multipurpose project.
Co-financing arrangements are being made with Germany, Japan, and Norway(paragraph 47).
PART I - THE ECONOMY 1/
2. The latest economic report entitled, "Burma: Development Perform-ance and Policies" (Report No. 2347-BA, March 8, 1979) was distributed to
the Executive Directors on March 16, 1979. Country data are shown in Annex I.
3. The present leadership under President Ne Win has ruled the countrysince 1962, first under the Revolutionary Council and more recently under anew Constitution. The Constitution was adopted in a nationwide referendum inDecember 1973, and under it, the Pyithu Hluttaw (People's Assembly) was
created with supreme executive, legislative, and judicial authority. TheBurma Socialist Program Party (BSPP) was confirmed as the only authorizedpolitical party. The Government's guiding philosophy stated in the 1962document entitled The Burmese Way to Socialism reflects a combination oftraditional Burmese values and socialist doctrine. Its economic objectivesare set out in the Twenty-Year Plan, which was adopted by the BSPP in 1972 andis being implemented through a succession of Four-Year Plans.
4. During the 1960s and early 1970s, the Government made substantialprogress in the attainment of its social and political objectives. Theseincluded increased government ownership of economic assets, greater equalityin the distribution of income, and Burmanization of important professional andmanagerial jobs. A fundamental change in the economic and social structureresulted from land redistribution, which led to a more equal size of holdingsamong farm families, and from the nationalization of a number of major economicactivities in trade and industry. At the same time, access of the populationto social services was expanded, particularly with respect to education andhealth facilities. Insurgency was and is still a problem, however, partic-ularly in the hills and border areas, although there is probably greaterterritorial control by the Government now than at any time since Independencein 1948.
1/ Part I of this report has been revised since the last Board presentation.
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5. Burma's economic performance over this period, however, reflectsthe severe disruption in ownership, management, and distribution systems whichaccompanied the social restructuring. Public policies and public sectorperformance did not compensate for the drastic declines in private investmentand production which resulted; and economic growth suffered, scarcely matchingpopulation growth. Throughout the period, investment levels were low, withgross capital formation averaging only 10-11% of GNP. Furthermore, invest-ment was excessively skewed toward nationalized industry, while such key,directly-productive sectors as agriculture, forestry, and mining did notreceive due attention.
6. The pricing policies of the Government exacerbated the problem.They were aimed at keeping down the cost of living for the masses, and StateEconomic Enterprises were not allowed full recovery of their costs, leading toa decline in their financial surpluses and hence in domestic savings. Further-more, low agricultural producer prices discouraged the production of paddy andother crops and led to dwindling export earnings. Low export earnings, inturn, reduced the capacity of the economy to import essential raw materials,spares, and capital equipment, leading to increasing underutilization ofcapacity in most sectors of the economy and severely limiting expansion.An increasing share of production was either traded in the domestic unofficialmarket or illegally exported abroad at a multiple of official prices. Inboth cases, the tax base was undermined and income was siphoned off by seg-ments of the private sector with little opportunity or inclination to investthese resources productively. The distortions arising from this system werecompounded-by low, official interest rates and an overvalued exchange rate.
7. In recognition of this poor economic performance, the Governmentinitiated a period of reforms with the publication of the Twenty-Year Plan.The main objectives of the Plan are to foster economic growth within thecontext of a socialist system, to enhance economic strength and self-sufficiency by converting from an agricultural to an agriculture-basedindustrial society, to eliminate unemployment and to reduce income disparities.The GOB's strategy for achieving these goals is constantly evolving, withinnovations proposed as new constraints are encountered. The main elementsof this strategy, however, appear to be: (a) to give higher priority initiallyto the directly productive sectors, especially to agriculture, forestry, andmining; (b) to make greater use of aid, trade, and -- to a lesser extent --
technical assistance; (c) to follow a price stabilization program whichemphasizes cost reduction, through increased efficiency in industry andtechnical change in agriculture; and (d) to begin to introduce work incentivesand commercial principles, especially in the State Economic Enterprises(SEEs).
8. Pricing policy still reflects the desire to provide basic consumergoods cheaply and to prevent inflation, but it has begun to recognize the roleof prices in creating production incentives and financial viability. Procure-ment prices of a variety of agricultural products were raised to improve theeconomic position of the farmer, while others were decontrolled. The procure-ment price for paddy was raised by 150% between 1972 and 1974; it has, however,remained largely unchanged since then despite rapid inflation in the mid-1970s.In industry, the Government obtained new costing schedules in 1976 and increasedthe ex-factory prices of SEEs, although the adjustments remain incomplete.
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These new costing schedules, in principle, allow profit margins at the produc-ing level for the first time. The official exchange rate of the kyat wasdevalued by 25% relative to the US dollar in January 1975 and a further 9%relative to the SDR in 1977, thus partially compensating for the overvaluation.The interest rate on savings deposits was raised from 3.5% to 6% in April 1975and raised again to 8% in November 1977. Interest charged to farmers onagricultural loans has been raised to 12%.
9. In addition to these pricing reforms, the Government introducedreforms in investment allocation, management of SEEs, and taxation. Thepercentage of public investment which was allocated to agriculture (includinglivestock, fishing, and forestry) and mining in the Second Four-Year Plan(1974/75 to 1977/78) increased to 33%, compared to 16% during the previousdecade. The share of industrial investment which was allocated to consumergoods and light industries, however, was very small. In 1975, a comprehen-sive set of guidelines was introduced to enable SEEs to operate on a commer-cial basis and to improve distribution of their production. The guidelinesintroduce greater autonomy in the management of SEEs, set standards by whichtheir operational performance will be measured, introduce financial andcosting practices to encourage efficiency, and provide for a bonus schemeunder which management and the work force may be rewarded for successfulperformance. Although problems remain, particularly in regard to incentivesfor operational and investment efficiency, production trends and financialperformance have greatly improved. In April 1976, a major tax reform wasenacted. It included the introduction of a Commodities and Services Tax anda Profits Tax and resulted in increasing Union Governmentt revenue from 9%of GNP in 1975/76 to 13% in 1977/78. This tax reform represented a majorturnaround in public finance and was perhaps the most important achievementof the Government in recent years.
10. In part as a result of these measures and in part as a resultof favorable weather and increased capital inflows, GDP during the SecondFour-Year Plan (1974/75 to 1977/78) increased by an annual average of 4.7%,compared to 2.7% in the previous decade. Gross fixed capital formation in-creased by about 8% per annum in real terms, and domestic savings as a percentof GDP also increased. The improved budgetary position of the Governmentlessened its dependence on the banking system, which, in turn, contributedto a reduction in the rate of inflation. The consumer price index declinedslightly during 1977, and continued to decline, by an estimated 6%, during1978. The average annual growth in exports was 3-4% in real terms; andincreased external borrowing permitted an annual average real growth inimports of 16%.
11. More recently, during the first two years of the Third Four-YearPlan (1978/79 to 1981/82), GDP, investment, and export growth continue to befairly high, but the domestic savings effort may have to be intensified asbudgetary surpluses of both SEEs and Central Government are stagnating. Infact, despite the generally favorable developments, much remains to be doneto put the economy firmly on the path to sustained and more rapid growth. Theproblems confronting agriculture include insufficient supplies of essentialfarm inputs, inadequate transportation facilities and shortages of farm powerand basic farm services, in particular agricultural credit and extensionservices. They also include the need for further production incentives
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through increased agricultural producer prices and through a greater flow ofconsumer goods to the rural areas. In industry, further adjustments of SEEproduct prices are required to reflect resource scarcities more accurately, tostimulate productivity growth, and to generate surpluses for reinvestment. Ir.external trade, the role and impact of the exchange rate needs to be keptunder continuing review, given the importance of greater export growth for thedevelopment of the domestic economy. Greater export promotion efforts forminor products must also be made.
12. The need for institution building and management development, whichexpand absorptive capacity by improving the design, administration, and imple-mentation of development programs, cannot be overemphasized. The Burmeseplanning and administrative system, as it now exists, is complex and rigid inits manner of operation and appears to focus excessively on the formulationof targets. Streamlining of the entire planning and administrative apparatus,decentralization of decision-making, and strengthening of the capability ofGovernment entities to prepare and implement projects are urgently needed.
13. The Government recognizes the general nature of the problems andissues to which attention must urgently be addressed. If appropriate actionsare taken, Burma is capable of a significant acceleration in economic growth.In this connection, the 1977 law on the "Rights of the Private Enterprise"is welcomed. The Rules and Regulations of this law have now been issued, andit is hoped that by legitimizing private sector activity and establishing aclearer set of guidelines for the development of the public, cooperative, andprivate sectors, some reintegration of the economy will take place which canbe expected to have a beneficial impact upon economic performance.
14. The Government's planned GDP growth for the Third Four-Year Plan is6.6%, an ambitious target and one which will require external assistance forprojects contributing towards:
- intensified and more efficient use of existing cultivatedareas and reclamation of abandoned land in agriculture(research and extension services, supply of essentialinputs, especially high-yielding varieties of plantingmaterials, fertilizer and light agricultural machinery;improvement of irrigation facilities, in particular,tubewell development; and integrated agricultural devel-opment);
- better utilization of forestry resources (through theimprovement of extraction, processing, and transportfacilities);
development of known mineral deposits; and
- development of agro- and mineral-based industries whichpossess clear comparative advantage (including food,fish, and wood products, and fertilizer production).
In addition to such directly productive projects, external assistance is alsorequired for infrastructure development, particularly to rehabilitate exist-ing capacity in transportation and communications. The transport sector isin a serious state of disrepair for lack of spares, new equipment, and main-tenance. While project loans and technical assistance can be used to addressmost of these projects, commodity financing will also be required from externalsources to meet Burma's needs for fertilizer, materials, spares, and equipmentin support of its rehabilitation efforts.
15. Burma's debt service ratio increased from 10% in the 1960s to about20% in the mid-1970s, due primarily to a relative decline in exports withrespect to GDP rather than a relative increase in debt servicing. By early1980, Burma's external public debt, disbursed and outstanding, was approxi-mately US$1 billion; and the debt service burden had increased further due toservicing of loans to the oil industry on commercial terms. Burma's exportsare increasing after a long period of decline, and the potential for a con-tinued upward trend is good. Nevertheless, because of the rising debt serviceburden and because of Burma's low income level, external assistance should beon concessionary terms and should, in addition, finance part of local costrequirements which cannot, at present, be covered adequately by domesticsavings. Local cost financing is particularly needed for the agriculturalsector where most investments have a low foreign exchange component.
16. Burma is potentially one of the richest countries in South Asia.Apart from an impressive natural resource base, it is endowed with a healthyand literate population. The crucial question is the quality with which theseresources will be managed and developed. The Bank continues to discuss withthe Government further improvements in economic policy which might help Burmarealize its promising potential for economic development as well as externalassistance requirements. Discussions on these topics are carried on jointlywith other donors and the IMF during the Burma Aid Group meetings which theBank has organized at the Government's request. The first meeting of theGroup was held on November 30, 1976, in Tokyo; and there have been two subse-quent meetings, with indications of increasing donor support each year. Thefourth Burma Aid Group Meeting is scheduled for December 1980.
PART II - BANK GROUP OPERATIONS
17. Burma became a member of the Bank in 1952, IFC in 1956, and IDA in1962. Between 1956 and 1961, the Bank made three loans totalling US$33.1million, all for transportation projects. One loan for the Port of Rangoonhelped finance the reconstruction of cargo berths and storage facilities, andthe purchase of cargo handling and port equipment. Two loans helped financethe post-war reconstruction and dieselization of the railways. All threeprojects were satisfactorily completed and the loans fully disbursed by FY68.
18. No lending was requested between 1962 and 1972. At the request ofthe Government, IDA lending was resumed in 1973. Since 1973, IDA has madefourteen credits totaling US$272.3 million equivalent (net of cancellations),three of which have been fully disbursed. About 58% of this assistance was
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channeled to the agricultural sector, consisting of eight projects: irrigation,
rubber, livestock, seed development, two paddyland development projects, and
two forestry projects. About 16% of IDA's assistance supported the rehabili-
tation of the transport sector through three projects, namely inland water
transport, railways, and a second ports project. The remaining L6% of IDA's
assistance has been for two projects in the telecommunications sector (20%)
and one project in the mining sector (6%). The proposed credit would be the
third in FY80, bringing the total of IDA assistance to Burma to US$362.3 mil-
lion equivalent, net of cancellations. Annex II contains a summary statement
of Bank loans and IDA credits as of March 31, 1980, and notes on the execution
of ongoing projects. IFC has made no investments in Burma.
19. In the past, lending was partly constrained by incomplete knowledge
of some sectors and the lack of adequately prepared projects. Through our on-
going projects and sector work, our knowledge of many sectors has improved. A
US$4.1 million UNDP Technical Assistance Project (Burma Umbrella Project), for
which the Bank is the Executing Agency, has developed a project pipeline suit-
able for external financing in priority sectors such as agriculture, transport,power and industry. The Seed Development and Rubber Rehabilitation Projects
(Credit Nos. 745-BA and 879-BA, respectively) were prepared under the Umbrella
Project. A second phase of this Umbrella Project has been agreed with the
Government and UNDP. Furthermore, the Association plans to continue its
technical assistance on a project-by-project basis to help improve Burmese
project preparation capabilities, as well as administrative and managerial
skills through in-service and overseas training.
20. The Bank Group strategy is aimed at easing the most immediate con-
straints to growth and, particularly, at increasing and diversifying production
for export in order to alleviate the shortage of foreign exchange. Within this
overall strategy, primary emphasis is being placed on the development of
agriculture, forestry, and mining. Within this framework and where possible,
priority is being given to quick-yielding projects. At the same time, finan-
cing of infrastructure improvements will continue in such areas as transporta-
tion and telecommunications, mainly to rehabilitate existing facilities. Many
of these are inoperable at present and have increasingly impeded economic
activity in the directly productive sectors of the economy.
21. In line with the need to increase Burma's foreign exchange earnings,
most of the projects under active preparation are designed to have an impact
on increasing agricultural surpluses for export. A paddy storage and handling
project is being appraised. Other projects under preparation include forest
and a tubewells project. In addition, a power project to augment transmission
networks is under consideration.
22. The Bank Group presently accounts for about 15% of Burma's totalexternal debt outstanding and about 1% of its debt service. In five years,
the Bank Group's share in the total external debt is projected to rise to
about 20% and its share in the debt service to about 2-3%.
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PART III - THE AGRICULTURAL AND POWER SECTORS
The Agricultural Sector
23. The importance of the agricultural sector, including livestock,forestry, and fisheries, in Burma's economy is reflected by its accountingfor 36% of GDP (constant 1970 prices), 85% of exports, and 68% of the workforce in 1978. More than 60% of industrial output comes from processing ofagricultural crops such as paddy, cotton, jute, and sugarcane. Paddy is byfar the most important crop, accounting for about 42% of the value added foragricultural crops and more than half of the sown area. Other major crops interms of sown area include oilseeds, pulses, maize, cotton, sugarcane, wheat,chillies, jute, tobacco, onions, coconut, and rubber. Over the decade from1965 to 1975, the agricultural sector performed poorly, with a growth rateestimated at 1.6% p.a. compared to 2.3% growth in GDP and 2.2% in population.Agricultural exports in constant prices decreased by about two-thirds, largelydue to declining rice exports. The performance has been attributed to thelack of production incentives as well as inadequate support services, agricul-tural inputs, and public investments.
24. Since 1975/76, however, considerable improvement has taken placein the sector's performance as a result of Government action to redress pastproblems. Reflecting these improved conditions, combined with favorableweather, the agricultural sector's growth rate from 1975 to 1978 averaged anannual 3.8%. Public expenditure in the agricultural sector including live-stock, fisheries, and forestry is targeted to increase to 27% of total stateexpenditure under the Third Four-Year Plan (1978/79-1981/82) compared to 11%in the First Four-Year Plan and 20% in the Second Four-Year Plan. Over thepast few years, the Government has also raised procurement prices for severalimportant crops, notably jute, cotton, and sugarcane, and has attempted toincrease availability of agricultural inputs and services, particularly ferti-lizers and extension service.
25. At present, most agriculture in Burma is rainfed. In LowerBurma, where the rains are heavy, there is little water control. These con-ditions greatly restrict crop yields. In the dry zone, which covers mostof Upper Burma, water availability is inadequate even during the monsoon.Irrigation systems throughout Burma were severely damaged during World War II,and the irrigated area did not reach prewar levels until the mid-1960s. About2.4 million acres or 12% of the sown area is presently irrigated, although onlyabout 300,000 acres are double-cropped. The Irrawaddy River and its tribut-aries are the main source for irrigation water, which is used primarily tosupplement monsoon rainfall during the wet season for paddy, and to a muchsmaller extent to irrigate other crops in the dry season. The Government,through the Irrigation Department, controls and maintains the major irrigationsystems. Scattered village irrigation works are constructed and maintained bycultivators.
26. Burma has considerable potential to increase its agricultural pro-duction for exports. A key factor for agricultural development in LowerBurma would be the protection of paddyland from flooding (Middle Delta) andsalt water intrusion (Lower Delta). The development of groundwater resourcesin Central Burma and the expansion of gravity irrigation systems in Upper
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Burma are essential for increasing and diversifying agricultural output.Other important complementary measures for increased productivity include:(a) adoption and expansion of area planted with high-yielding varieties (HYV),particularly for paddy and cotton; (b) increased supply and distribution effi-ciency of all farm inputs, particularly fertilizer; (c) adequate provision ofsuitable extension services; (d) expansion and upgrading of applied agricul-tural research capabilities; (e) development of an effective agricultural creditsystem; (f) appropriate supply of equipment and equipment maintenance to over-come draft power shortages in peak demand periods; (g) rehabilitation and ex-pansion of post-harvest infrastructure for storage, processing, and marketingof farm produce; and (h) maintenance of adequate incentives for farmers includ-ing the provision of adequate supply of consumer goods for rural areas.
27. Paddy, Burma's main crop, is also its main export commodity. Pro-duction has grown slowly, increasing only slightly during the decade before1975. Over the last 15 years, there has been no significant increase in totalsown area nationwide as increases in acreage in Upper Burma merely compensatedfor losses, due to flooding, in Lower Burma. The rice surplus producing areascomprise about 9 million acres in Lower Burma, mainly in the Irrawaddy Riverdelta, where soils are fertile and the rainfall abundant. Upper Burma andthe Hill regions to the North and West with less than 4 million acres are ricedeficit areas even though over 300,000 acres of new rice land have been dev-eloped there since World War II. Under the Third Four-Year Plan, Burma hopesto boost paddy production to 11.0 million tons by 1982 or by an average 4.2%p.a. principally throuigh greater adoption of HYV packages. In the past twoyears, paddy production exceeded 10 million tons for the first time.
28. While open market paddy prices currently offer growers considerableincentive to increase paddy production, particularly in rice-deficit areas,the GOB-regulated compulsory paddy procurement system and its prices, whichhave been maintained at an unchanged level since 1974, now dampen some of thisincentive. Sensitive to the inflationary, budgetary and social consequencesthat might arise from increasing procurement and consumer prices, the GOB hasattempted to mitigate this constraint to growth by instituting, over the lastseveral years, a series of subsidized input supply programs, complemented byinstitutional and technical support. A Rice Commission. chaired by theMinister of Agriculture and Forests, was established in 1977 to examine allaspects of rice production, marketing, and incentives. It has made severalrecommendations on paddy pricing and procurement. The Government is takinginitial steps to adopt some of these recommendations, including higher procure-ment prices (about 4%) for premium quality paddy.
29. Cotton cultivation was introduced into Burma in the late 1950s tosupply a newly installed cotton manufacturing industry designed to substitutefor imported cotton goods. Cultivated areas were almost entirely confined tothe irrigated dry zone of Upper Burma. Production of cotton has risen inimportance as the country is faced with growing demand for cotton textilesand inadequate supplies of raw materials for its underutilized manufacturingcapacity. Over the 1974-78 period, Burma moved from self-reliance for rawfiber requirements to importing about 8,000 tons or about 37% of her needs.
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Although bolstered by initially favorable compulsory procurement prices, thecotton development program proved unsuccessful because of unadjusted and in-creasingly non-competitive prices from 1961 to 1971, mandatory cropping inunsuitable areas and seasons, high risk, and unsatisfactory varieties. Sownarea declined from 616,000 acres in 1965 to 362,000 acres in 1970 and increasedto 461,000 acres in 1979. Seed cotton production stagnated over most of thelast decade around 40,000 tons annually. Historically, there has been a widedivergence between sown and harvested areas, reflecting the fact that 90% ofthe cotton crop is grown under rainfed conditions. Doubling of cotton pro-curement prices in January 1974 and again in March-December 1976, has raisedthe incentives for farmers to increase cotton production. Yields for 1978 and1979 show an average increase of 30% over 1971-77 yields, and production isestimated to increase to 52,000 tons in 1979.
The Power Sector
30. Available energy resources in Burma include hydro potential, petro-leum, and gas. The most abundant source is hydroelectricity, with a theoreti-cal potential estimated at 100 million kW and 370 billion kWh p.a., enough tomeet Burma's power needs for the foreseeable future. In spite of the vasthydroelectrical potential, only 168.5 MW, generated by the sole hydroelectricpower station at Lawpita, has been exploited. Past planning for the powersector has, to a reasonable extent, reflected strategic and security consider-ations rather than balanced, cost effective solutions. Investment in trans-mission and distribution facilities had been limited. Investments in theshort-term should, therefore, concentrate on transmission and distributionfacilities and the economic use of existing and planned generating capacity,while long-term investment should focus on installation of new hydroelectricfacilities.
31. The Electric Power Corporation (EPC), one of seven statutory corpora-tions under the Ministry of Industries No. 2, is responsible for power genera-tion and distribution. It has autonomy in its daily operations; however,responsibility for decision-making in important matters rests with MI-2. EPChas a total of 390 MW generating capacity, accounting for 86% of the totalcapacity in Burma. Hydroenergy from the Lawpita Hydro Power Station supplied72% of EPC's total generation in 1977/78. The balance was generated by gasturbines, steam plants, and diesels.
32. In 1978, average consumption per capita in Burma was estimated atabout 26 kWh and average generation per capita at about 34 kWh, including thatin captive generating plants owned by GOB departments and industries. Thelatter figure compares with 15 kWh in Nepal, 24 kWh in Bangladesh, and 156kWh in India. At the end of 1978, about 469,000 consumers were connected tothe system, mostly in the major cities. About 7% of the population has accessto electricity and there is a waiting list of over 150,000 potential consumerswho cannot be served, mainly because of inadequate distribution facilities.EPC sales increased at an average rate of 10.3% during the period 1969/70 to1977/78 with annual rates increasing from 9.3% during the first 4 years to11.8% during the last 3 years. Future demand growth is expected to average10.8% from 1977/78 to 1990/91. GOB plans to meet the short-term requirementsfor additional power through gas turbine plants, and medium/long-term needsthrough hydroelectric plants. To provide a sound basis for power system
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development, the Government would prepare and submit to IDA for its review andcomments a Power System Planning and Operations Review by April 30, 1981(Section 4.06 of the draft Development Credit Agreement (DCA)).
33. The existing power tariffs are based on a block system with kWhcharges declining with increasing use and averaging about 23 pyas (USd3.4)per kWh. Whilst general purpose rates are reasonable at 42.5 pyas (USi6.3)per kWh, industrial rates are low at 12.8 pyas (USil.9) per kWh. A modesttariff increase of about 14.5%, accomplished by reducing the number of blocks,was proposed by EPC to the Ministry of Industry No. 2 in February 1979.The Government would implement the electricity tariff increase of about 14.5%during 1980/81 (Section 4.08 of the draft DCA). T-o further improve thefinancial position of EPC and ensure economic use of power, the Governmentwould carry out a comprehensive study of electric tariff structures andlevels. The outcome of this study, along with GOB plans to modify powertariffs, would be submitted to IDA, for its review and comments, by March 31,1981 (Section 4.09 of the draft DCA).
PART IV - THE PROJECT
34. The project was first identified during engineering investigationsof the Nyaunggyat site to develop water storage along the Panlaung River bythe Irrigation Department (ID), with assistance from Soviet Consulting Engi-neers. These investigations led to a request by GOB for IDA assistance infinancing the project in 1973. In 1975, a consulting firm was commissionedto prepare a feasibility report with subsequent appraisal by IDA in May/June1976. The first appraisal, however, questioned the soundness of the dam site,and further engineering studies of the Nyaunggyat Dam were conducted by anotherconsulting firm employed by GOB and financed under IDA Credit No. 483. Thesestudies led to selection of an alternative upstream site for which a feasibil-ity report was prepared, and together with subsequent field investigations byID and FAO/CP, they formed the basis of project appraisal by IDA along withrepresentatives of three potential co-financiers -- KfW, ODA, and Norway --in April/May 1979. A report entitled "Nyaunggyat Dam Multipurpose Project -Staff Appraisal Report" (No. 2767-BA) dated May 1, 1980 is being circulatedseparately to the Executive Directors. Negotiations were held in Washington,D.C. during April 11 to 17, 1980. The Borrower's delegation was led by HisExcellency U Ye Goung, Minister of Agriculture and Forests. A supplementaryProject Data Sheet and Special Conditions of the proposed credit are given inAnnex III.
Project Objectives
35. 'In addition to dam construction the project would entail agricul-tural development of an area covering 200,000 acres in the Mandalay Divisionin Upper Burma through the rehabilitation of an existing inefficient andseverely silted-up irrigation system and new construction of irrigation anddrainage facilities for new areas. Together with complementary provisionsfor agricultural support services, flood control, O&M facilities, and tech-nical assistance, the project aims to increase area production of paddy,cotton, oilseeds, and other cash crops by increasing yields and cropping
- 11 -l
intensities. The project would also provide for hydroelectric power genera-
tion with maximum generating capacity of 56 MW and an average annual energyproduction of 165 GWh.
Project Description
36. The project would be implemented over a six-year period. Itincludes the following components:
Irrigation
(a) construction of a zoned earthfilled/rockfilled dam with animpervious core of about 236 feet in height, and alliedstructures;
(b) rehabilitation of existing irrigation and drainage networkserving an area of about 88,000 acres;
(c) construction of irrigation facilities for the developmentof about 113,500 acres of new land;
(d) construction of 110 miles of canal maintenance roads for usealso as farm roads;
(e) improvement of existing small channel "yoes" and excavationof new drainage channels over a total length of about 100miles;
(f) construction of about 32 miles of earth embankments alongthe Panlaung and Paukchaung Rivers for flood protection;
(g) provision of construction, operation and maintenance andworkshop equipment; vehicles, buildings, and O&M services;
(h) resettlement of persons displaced from the reservoir areas,including compensation for loss of immovable private andcommunal property; and
(i) provision for a pilot groundwater scheme to explore groundwaterpotential in Burma's dry zone.
Power
(a) construction of powerhouse and installation of two generatingunits of 28 MW each and allied works;
(b) construction of about 31 miles of 132 kV transmission line andextension of Thazi substation;
(c) construction of re-regulating dam; and(d) preparation of detailed engineering and designs for the
Paunglaung hydroelectric project, which EPC is planning toimplement to meet power demand.
Agricultural Support and Extension
(a) construction of office buildings, residential quarters,godowns, workshops, and other buildings required for O&M;
(b) strengthening of extension services including provisions for
incremental staff, training centers, equipment and transport;(c) setting up of four demonstration plots to demonstrate irrigated
agriculture to dryland farmers;(d) setting up of a 100-acre irrigated cotton research, demonstra-
tion, and training center in the newly irrigated area; and(e) provision of equipment for Agricultural Mechanization Department
(AMD) tractor workshops and for land clearing and leveling.
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Technical Assistance
(a) provision of expatriate engineering consultancy services fordesign, specification, supervision of construction and qualitycontrol of Nyaunggyat Dam, power plant, and allied works andpreparation of operational manuals for dam and power plant(480 man-months); planning, design, and supervision of con-struction of hydraulic structures and irrigation works(180 man-months); planning, design, and supervision andquality control of construction of transmission line andsubstation facilities (40 man-months); and consultancyassistance for analysis of the risks and related insurancerequirements for construction of the dam, powerhouse, andallied structures (3 man-months);
(b) provision of specialist services of a cotton agronomist,(48 man-months), plant protection specialist (36 man-months),water management specialist (24 man-months), agricultural extensionspecialist (15 man-months),and a consulting team comprising aneconomist, cotton ginning engineer, and a paddy storage and millingengineer (9 man-months), to assist in their respective areas indownstream agriculture development;
(c) provision of assistance to GOB/EPC in preparation of powersystem planning and operations review (40 man-months),
(d) provision of short-term fellowships and overseas studytours for project engineering staff and extensionpersonnel;
(e) provision o assistance to GOB/ID in development of thepilot groundwater scheme (40 man-months); and
(f) provision of services of an Advisory Panel of Experts to reviewthe plans during various stages of design refinement and damconstruction, perform periodic inspections during construction,and provide technical advice to ensure the safety of the dam andallied structures.
Project Execution
37. The Ministry of Agriculture and Forests (MAF) would be mainlyresponsible for the implementation of the project. The Irrigation Department(ID), Agriculture Corporation (AC), Agricultural Mechanization Department(AMD) under the MAF, and the Electric Power Corporation (EPC) under theMinistry of Industries No. 2 (MI-2) would execute various components of theproject. The Planning and Statistics Department (PSD) and Settlement and LandRecords Department (SLRD) of MAF, and the Ministry of Planning and Finance(MPF) would be directly involved with the implementing agencies in projectcoordination and management while the Survey Department (SD), the CooperativeDepartment (CD), the Agriculture and Farm Produce Trade Corporation (AFPTC),and the Myanma Agricultural Bank (MAB) would be indirectly involved in projectimplementation.
38. The ID would be responsible for (a) supervising construction of thedam and allied structures under ICB contract; (b) rehabilitation of existingirrigation works; (c) construction of new irrigation facilities; (d) con-struction of flood control works, drainage improvements, and canal roads;
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(e) on-farm development and water management; (f) construction of the accessroad, O&M buildings, and camp sites; and (g) procurement of constructionequipment and materials for force account works.
39. The AC would be responsible for (a) strengthening extension services;(b) establishing a cotton research and demonstration farm in the newly irri-gated area; and (c) constructing input godowns, staff quarters, dormitories,and farm buildings. An AC Deputy General Manager would be appointed ProjectExtension Manager to coordinate implementation of the T&V extension program inthe four townships. The other project activities would be performed byexisting operational units in AC. The AMD would be responsible for (a) landclearing and leveling in the new development areas; (b) construction of staffquarters, tractor sheds, and workshops; (c) providing tractor services tofarmers; and (d) maintaining farm machinery.
40. The EPC would be responsible for (a) supervising construction ofthe powerhouse and allied structures and installation of equipment; and(b) erecting, by force account, the 132 kV transmission line to Thazi. Tofully utilize the off-peak energy from the Lawpita station at present andthat of the proposed Nyaunggyat power plant, the Government would take neces-sary actions to fully utilize the power output of the Nyaunggyat plant priorto its commissioning (Section 4.05 of the draft DCA). These actions include(a) integration of the Kyunchaung gas turbine with the hydro-grid system;(b) installation of additional transformers at the Mandalay and Thazi sub-stations; (c) upgrading of the transmission voltage for the Thazi-Toungooline from the currently planned 132 kV to 230 kV; and (d) installation of anadditional transformer at Toungoo substation.
41. The experience and past performance of the main implementing agenciesindicate that they are capable of successfully implementing their functionsunder adequate technical assistance. To assist these agencies in implementingthe project, the Government would establish three additional circles, eachheaded by a superintending engineer and 11 additional units, 8 for ID and 3for EPC. The Government would appoint, in accordance with a schedule satis-factory to IDA, additional staff for ID, AC, and EPC by October 31, 1980(Section 3.05 of the draft DCA).
42. The various implementing agencies would be assisted by consultants.The Government would employ such consultants (paragraph 36) on terms andconditions satisfactory to IDA (Section 3.02(a) of the draft DCA). Theestimated cost for consultancy services is about US$6,000 per man-month(individual specialists) and about US$10,000 per man-month (consultancy firms).This cost includes salary, allowance, travel, settlement, miscellaneousexpenses, arnd overhead charges (for firms).
43. To improve extension services and increase agricultural input sup-plies in the project area, the Government would (a) set up a work program forthe agricultural extension services, (b) supply fertilizers for paddy, cotton,and other crops at rates recommended each year by the extension service, and(c) stock sufficient sprayers and pesticides in each AC Township on the basis
- 14 -
of estimates made annually by the extension service (Section 4.04 of the dr&£fDCA). To achieve agricultural production potential from project investments,the Government would make arrangements for adequate seasonal and investmentcredit to farmers in the project area (Section 4.14 of the draft DCA).
Project Coordination
44. To coordinate the work of the various implementing agencies, aProject Implementation Committee (PIC) has been established in MAF, similarto those PICs functioning successfully in the Paddyland I and II projects(Section 3.06(a) of the draft DCA). The PIC, chaired by the Deputy Ministerof Agriculture and Forests, would comprise representatives of agencies directlyinvolved in project implementation, and would be responsible for inter-ministerial coordination, project-related policy issues, resolution of imple-mentation bottlenecks, and important administrative matters. In addition toproject coordination, the Committee is also responsible for reviewing andapproving annual work programs and budgets, reviewing monthly progress reports,and liaising with IDA and other co-financiers on all project-related policymatters.
45. To coordinate technical planning and field execution of all projectcomponents, the MAF has appointed a Senior ID Officer as a full-time DirectorNyaunggyat Project (DNP). The responsibilities of the DNP would include prep-aration of annual work programs and budgets in collaboration with the variousimplementing agencies; resolution of implementing bottlenecks; and conferringwith PIC (on which he serves as member-secretary) on all project matters. TheDNP would be assisted by three superintending engineers, two from ID, one forthe dam and allied structures construction under ICB contract, and the otherfor irrigation and agricultural development works by force account, and onefrom EPC for the power plant and transmission lines. The Government hasalready appointed the three superintending engineers. In appointing thethree superintending engineers, the Government had also approved threeadditional project circles (two for ID and one for EPC).
Cost and Financing
46. The total project cost is estimated at US$235.0 million (includingtaxes and duties of about US$13.0 million equivalent) with a foreign exchangecost of US$158.0 million. Cost estimates (based on March 1980 price levels)are based on detailed designs and quantities. Physical contingencies are esti-mated at: (i) 15% for the TCB civil works, force account works (except forArea F for which contingencies were estimated at 20%), and the access road;and (ii) 5% for equipment for all project components. Price contingencies arebased on recent Bank projections for inflation: 10.5% for 1980, 9.0% for 1981,8.0% for 1982, 7.0% for 1983-85, and 6.0% for 1986 for foreign costs; and 7.0%for 1980-85 and 6.0% for 1986 for local costs. Nevertheless, the cost esti-mates include a risk allowance of 8% (about US$6.0 million, including about$3.3 million in foreign exchange) of the cost of ICB civil works for the dam,powerhouse and allied structures to allow for possible country risks, sincethis will be the first venture involving international competitive bidding(ICB) for civil works construction in Burma. The Government has taken variousmeasures to minimize the uncertainties on the part of bidders (paragraph 64).
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47. With assistance from IDA, GOB is tentatively making arrangements forfinancing part of the foreign exchange cost (about US$66.4 million equivalent)from bilateral sources:
Source Amount Terms and Purpose(status) (US$ million
equivalent)
Federal Republic 45.0 German funds would finance the entire for-of Germany eign exchange cost of the power component:
(approval by KfWBoard is expected (i) About DM 68.0 million would be Germanby end-June 1980) capital aid (on IDA terms), including
about DM 23.0 million untied aid forjoint financing of the ICB civil worksrelated to the power component, andthe remaining as parallel financingfor tied procurement.
(ii) About DM 13.0 million would be Germanexport credits (terms not vet final-ized). Parallel fi,nancing for tiedprocurement.
Norway 6.4 Grant for detailed engineering studies(grant Agreement for the Paunglaung Power Project and con-will be signed in sultancy services for the Power Plan Review.June 1980) Parallel financing for tied procurement.
Japan 15.0 Loan for equipment for irrigation and drain-(under active age works, and agricultural and farm supportconsideration) (about US$12.3 million), as well as for
civil works of the irrigation component forthe project areas C and E (about US$2.7million).
The above assistance was discussed during a co-financing meeting which was
chaired by IDA in Paris in February 1980. The Myanma Foreign Trade Bank (MFTB)and EPC would,be co-borrowers of the German funds. The Norwegian grant andthe Japanese loan are expected to be made directly to GOB. The proposed IDACredit of US$90.0 million would finance part of the foreign exchange cost of
the project or about 40% of total project costs, net of taxes and dtuties.Total external financing would amount to US$156.4 million equivalent or about70% of total project costs, net of taxes and duties. Satisfactory arrange-ments for commitments for co-financing are a condit ion of effectiveness of theproposed IDA Credit (Section 6.01 of the draft DCA). The Government of Burmawould finance about US$78.6 million equivalent including about US$1.6 millionof the foreign exchange cost (including contingencies) for equipment reservedfor procurement under local procedures (paragraph 48). The proposed financingplan is as follows:
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Financing Plan(US$ million)
IDA Germany Japan Norway GOB Total
Dam & Allied Structures 77.0 24.5 101.5Power 45.0 18.0 63.0Irrigation, Drainage, &Flood Control 9.6 13.5 31.9 55.0
48. Equipment, vehicles, and materials financed by Germany, Japan, andNorway under parallel financing arrangements would be procured in accordancewith their respective procurement guidelines, while those financed by IDAwould be procured by ICB in accordance with IDA guidelines. Equipment, spareparts, and materials and groupings, thereof, estimated to cost the equivalentof less than US$100,000 which are either required urgently or are not suitablefor international tendering, would be procured through prudent shopping bynormal GOB procurement procedures on the basis of compa7-ative prices from notless than three independent suppliers. Such purchases would be limited to amaximum of US$1.0 million. Because access road completion is critical totimely and effective execution of the project, essential equipment for roadconstruction may be procured after comparing prices from not less than threeindependent suppliers in accordance with procurement procedures of the Borroweracceptable to IDA. Such purchases would be limited to a total of US$1.0million. Tractors, power tillers, other equipment, and field vehicles with anestimated foreign exchange cost of about US$1.6 million (including contin-gencies) would be reserved for procurement under local procedures and wouldnot be eligible for reimbursement out of the proceeds of the IDA Credit.
49. The major civil works contract (about US$70.0 million) would includethe construction of the dam, powerhouse, and allied structures, includingfurnishing and installation of spillway gates and irrigation outlets. Tender-ing for this contract would be done under ICB in accordance with IDA guide-lines. Under a joint financing arrangement, Germany would finance the portionof these civil works related to the power component (paragraph 47). GOB hastaken niecessary steps for prequalifying bidders for ICB works. The biddingdocuments for the ICB civil works contract have been prepared by consultants,and reviewed by Bank staff and ID and EPC engineers. The Government is in theprocess of approving these documents, and bids are expected to be invited byJune 1980.
50. Civil works for irrigation facilities, flood control and drainage,land clearing, workshops, agricultural godowns, and training dormitories
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would be carried out by force account by ID, AC, and AMD. These widely scat-tered works, which would be subject to seasonal weather interruption, arephased over six years and would not be suitable or attractive to internationalcontractors (there is no private construction industry in Burma). Owing tothe urgent neecd for an access road, the ID had already started constructianof this road by force account.
5X. Disbursements from the proposed IDA Credit would cover: (a) 100%of foreign expenditures for construction of the dam and allied structures underthe ICB contract, including furnishing and installation of spillway gates andirrigation outlets (other than those financed by German assistance); (b) 100%of toreign expenditures (cif) and 100% of local expenditures (ex-factory costs)for equipment, spare parts, and construction materials (other than thosefinanced by Germany, Japan, and Norway); (c) 80% of local expenditures forother equipment and spare parts procured locally through prudent shopping;and (K 100% of foreign expenditures for consulting services and training(other than those financed by German assistance and the Norwegian grant).
52. Disbursements against all items would be fully documented. To ensuretiDlely completion of the access road, being carried out by force account by ID,it is recommended to retroactively finance about US$1.5 million for eligibleexpenditures (foreign exchange cost for equipment and materials) incurred afterJanliary 1, 1980.
Operation and Maintenance
53. ID would be responsible for reservoir operation in collaborationwith: -,PC based on irrigation and power generation. The Government would sub-mit to IDA, for its review and comment, detailed regulations for reservoiroperations by September 30, 1983 (Section 4.03(b) of the draft DCA). ID wouldalso be responsible for the maintenance of irrigation facilities, campsites,construction and maintenance quarters, and workshop buildings. Fertilizergodowns, residential quarters for extension staff, and training school build-ings would be maintained by AC; farm equipment workshops by AMD; and power-house and transmission lines by EPC. Incremental O&M costs during the six-yearimplementation period have been included as a GOB contribution to the projectcost. The Government would provide these agencies with adequate staff andfunds for the operation and maintenance of the project (Section 4.17 of thedraft DCA).
Dam Safety
54. Consistent with the growing concern over dam safety by the Interna-tional Commission on Large Dams and various dam project agencies throughoutthe world, the Government would appoint, prior to the award of the ICB civilworks contract, an Advisory Panel of Experts, on terms and conditions satis-factory to IDA, to review the dam and related structure designs and completedworks (Section 3.02(b) of the draft DCA). The panel would conduct comprehen-sive reviews and meet as required to ensure general safety of the dam andal'ied structures and suggest safeguarding measures and/or treatments as andwhen necessary during various stages of dam construction. The project also
- 18 -
includes provision of instrumentation on the main dam, saddle dikes and alliedstructures to help forecast serious damage or failure on the basis of measure-ment of movements, strains, settlements, internal seepage, pressures, seepagegradient, and uplift forces.
Resettlement
55. The construction of the Nyaunggyat Dam would entail the floodingof four villages in the reservoir area with a total population of about 400people and about 650 acres of rainfed cultivable land. The project providesfor the resettlement of this small number of dislocated persons on areasof unutilized land which will be developed under the project, and for suit-able compensation for loss of property. The Government would carry out aresettlement program, including adequate compensation, in accordance with aresettlement plan acceptable to IDA (Section 4.16 of the draft DCA).
Cost Recovery
56. The capital costs of the agricultural components -- dam, irrigation,drainage, flood control, agricultural support, land clearance, and O&M duringimplementation -- would amount to about K 663 million in present value (PV)terms. 1/ Assuming that GOB would adjust its controlled input and output pricesover time to maintain relative prices within the economy (i.e., to increasenominal prices by the domestic rate of inflation), the PV of total capital andrecurrent project costs, including O&M and subsidies on farm inputs such asfertilizers and pesticides, over the 50-year project life would amount toabout K 927 million.
57. Under the existing compulsory paddy procurement and cotton purchasesystems, total GOB net procurement earnings from incremental paddy and cottonpurchases would amount to about K 936 million. This amount exceeds totalcapital and recurrent including O&M project costs and subsidies (paragraph 56).Therefore, full incremental costs would be more than recovered principallythrough implicit commodity taxation. In addition, recoveries through landtaxation would amount to about K 1.7 million. This concept of cost recoveryis similar to that approved for the Paddyland I and II projects (Credit Nos.642-BA and 835-BA).
58. Similar to arrangements reached with the Government for the Paddy-land I and II projects, the Government would periodically review and, ifnecessary, revise its paddy and seed cotton pricing systems to ensure thatfarmers in the project area have adequate financial incentives to make theinvestments necessary to increase production (Section 4.12 of the draft DCA).In the event that the existing compulsory paddy procurement system and/orcompulsory cotton sales program are modified or abolished, the Governmentwould establish and maintain arrangements in consultation with IDA for therecovery of the agricultural capital and O&M costs of the project (Section4.13 of the draft DCA).
1/ Analysis was done in constant 1980 currency units.
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59. To achieve a reasonable cost recovery through EPC's tariff forcapital investment in the power component, this investment should be made partof EPC's own assets. The Government, therefore, would give ownership of theinvestment in the power component of the project to EPC (Section 4.11 of thedraft DCA). This assumes that EPC should be allowed to set tariffs so as tocover all operating expenses and to ensure a reasonable rate of return.Based on the new tariff rates (paragraph 33), GOB/EPC would realize a fiscalrate of return (excluding taxes and duties) of 6.9% for the power component ofthe project.
Project Benefits and Justifications
60. The project would principally intensify and upgrade agriculturalproduction in the project area. Annual incremental paddy production, at fulldevelopment, is estimated at 121,000 tons. Annual incremental production ofseed cotton, at full development, is estimated at 42,000 tons, yielding about12,100 tons of lint, and about 10,200 tons of oilseed cake and 4,000 tons ofindustrial oil. Incremental cash crop production is estimated at 52,600 tonsof onions, sesame, groundnuts, chillies, and pulses. Considering all capitaland recurrent costs and benefits valued in border kyats, the Burmese economyis expected to realize net benefits of about US$115.6 million in PV terms orabout US$14.0 million p.a. over the 50-year project life.
61. Directly benefitting from the project would be about 33,000 farmfamilies. Farm labor requirements in the project area would increase fromabout 8.3 million man-days at present to an estimated 22.3 million man-daysp.a. at full development. Presently, 38% of farms in the project area fallbe:Low the IBRD-estimated relative poverty line of US$65 disposable income percapita p.a., 27% lie between this line and the average of US$120 disposableincome per capita p.a. and about 35% lie above the national average. Withproject implementation, all beneficiary farm families are likely to realizeper capita income levels above the national average.
62. At a modest incremental cost, the project would also provide elec-trical power of 28 MW firm capacity (maximum 56 MW) and average annual energyproduction of 165 GWh when completed in 1985. The project's energy productionwould be gradually absorbed from 128 GWh in 1986 to full absorption in 1989 bythe existing transmission system, and serve the requirements of the northernregion. During the first three years, energy production would meet incrementaldemand and substitute for the generation of the Kyanchaung gas turbine plant.Thereafter, it would be allocated solely to meet incremental demand. Sincethere exists no hydroelectric project which is ready for implementation, theonly realistic alternative to compare the Nyaunggyat power plant would be athermal alternative using petroleum fuel. The analyses of four such alterna-tives showed that a combination of medium-speed diesel engines (70%) and gasturbines (30%) would be the least cost thermal alternative at discount ratesabove 12%. The economic cost stream of the power component, consisting ofincremental capital, replacement, and O&M costs, was compared with the leastcost thermal alternative. The discount rate which equates the PVs of the twocost streams is 15.9%. This implies that the power component of the projectis the least cost solution at discount rates below 15.9%.
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63. The economic rate of return (ERR) from the total project investmentis estimated at 21.3%. Were the power component excluded, the PV of net bene-fits from remaining project components would decline from K 829.8 million toK 774.4 million. Since the power component enhances the economic viabilityof the project, the multipurpose nature of the project is sound.
Project Risks
64. The project would have no adverse environmental effects on publichealth and water quality but instead, reduced flooding and improved drainageprovided by the project would improve conditions in the project area. Inrecent years, the incidence of malaria has been increasing due to a varietyof factors including the evolution of mosquitoes resistant to DDT and a gene-ral slackening of control measures because of inadequate staffing and budget-ing. The project works are not expected to aggravate the existing conditionsof this malady. The Nyaunggyat project would be Burma's first venture involv-ing ICB civil works construction. Potential project risks are that: foreigncontractors would find working conditions in Burma difficult and that thesewould affect adversely the pace of implementation; problems would arise inproject coordination; and GOB would face difficulties in providing in a timelymanner needed professional and technical staff. To minimize this risk, GOBhas agreed to remove various constraints and provide normal operations forforeign contractors for ICB works. Because of the complexity of this multi-purpose project and potential problems concerning coordination in implement-ing its various components, the Government has already appointed a full-timeProject Director and -hree superintending engineers (paragraph 45), andhas also established a PIC (paragraph 44).
65. Sensitivity analysis indicates that if project completion weredelayed two years as a result of the potential problems discussed above, thenet PV for the total project would decline from K 829.8 million to K 607.7million, and the ERR would decline from 21% to about 19%. If cotton yieldsamount to only 1,000 pounds per acre (instead of the projected 1,500 poundsper acre), the net PV for the total project would decrease to K 473.2 million,and the ERR would drop to about 18%.
PART V - LEGAL INSTRUMENTS AND AUTHORITY
66. The draft Development Credit Agreement between the Socialist Republicof the Union of Burma and the Association, and the recommendation of the Com-mittee provided for in Article V, Section l(d) of the Articles of Agreement,are being distributed to the Executive Directors separately.
67. Special conditions of the project are listed in Section III ofAnnex III. The following events of suspension have been added namely: thedissolution or the disestablishment of the EPC and the AC or the suspension ofthe operation of the EPC or the AC (Section 5.01(a) of the draft DCA); and thesuspension, cancellation, termination or prematuring of the German assistance,Japanese assistance, and Norwegian grant (Section 5.01(b) of the draft DCA).
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An additional condition of effectiveness of the proposed Credit is that theGovernment would make arrangements satisfactory to the Association for commit-ments of the German assistance, Japanese assistance, and Norwegian grant(Section 6.01 of the draft DCA).
68. I am satisfied that the proposed development Credit would complywith the Articles of Agreement of the Association.
PART VI - RECOMMENDATION
69. I recommend that the Executive Directors approve the proposedCredit.
Robert S. McNamaraPresident
by Ernest Stern
AttachmentsMay 9, 1980
- 22 - Annex I
TALL 34 Page IDUOMA - SOCIAL IDICATORS DATA S
WhU~ CWS (ADUSYD *SAU
LID AR (IOUSAD SQ. 1. -RDX. 112UT uTmAT '
TOTAL 676.6 sox SW mE IlCUAGRICULTURAL 103.6 MIT XClOU GUGRAREC DCt INCOI
1960 Lb 1970 lb ESTImTEF A1 REGOO j L GIDO Li GOUP J
OR PE CAPIT (USS) 60.0 80.0 150.0 191.1 209.6 467.5
MUG? CONSMTnTM PE CAPIT(i 5Rams or COaL squITYALZAT) 55.0 58.0 49.0 69.1 S3.9 262.1
POPUATION AND VITAL STATISTICSPOPLATIOU. NI-YEA (MILLIONS) 21.8 27.0 31.5011S POPULATION (PUCUT Of TOTAL) 19.0 23.0 25.0 13.2 16.2 24.6
POPULATIC PROJIDONSPOPULAT0IO IN YAR 2000 MILLIONS) 51.0STATIONRUT POPULATION (ULIOUS) 92.0TM STATIO0UY POPULAON TS 2145
POPULATION DESITYPE SQ. 1D. 32.0 40.0 47.0 86.6 49.4 45.3P SQ. 11. AGR.CETU¶AL LAID 204.0 253.0 304.0 330.2 252.0 149.0
POPULATION PER PHYSICIAN 9900.0/h 8970.0 5410.0 7107.9 11396.4 6799.4POPULATION PER NURSING PERSON .. 7540.0 6120.0 12064.0 5552.4 1522.1POPULATION PER HOSPITAL BED
POVERTY TARGET GROUPSESTIMATED ABSOLUTE POVERTY INCOMELEVEL (US$ PER CAPITA)
UR8AN .. .. 94.0 66.5 99.2 241.3
RURAL .. .. 68.0 74.2 78.9 136.6
ESTIMATED RELATIVE POVERTY INCOMELEVEL (USs PER CAPITA)
URBAN .. .. 50.0 .. 91.9 179.7
RURAL .. .. 36.0 50.4 54.8 103.7
ESTI11ATED POPULATION BELOW ABSOLUTEPOVERTY INCOME LEVEL (PERCENT)
URBAN .. .. 35.0 44.3 44.1 24.8
RURAL .. .. 35.0 52.4 53.9 37.5
Not availableNot applicable.
NOTES
/a The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme
values of the indicator and the most populated country in each group. Coverage of countries asong the
indicators depends on availability of data and is nLot uniform.
/b Unless otherwise noted. data for 1960 refer to any year between 1959 and 1961; for 1970 between 1969and 1971; and for Most Recent Estimate, betwen 1974 and 1977.
!c South Asia; /d Low Income ($280 or less per capita 1976); /a Loewr Middle Income (5281-550 per capita,1976); /f 1972; /L General hospitals only; /h 1962; /i 1958, Rangoon.
.lost Recent Estimate of GNP per capita is for 1978.
August, 1979
-24 - Annex IPage 3
ThlflS OF SOCIAL nWICA2VP
Notes: Although the data r draw fro source ge-rally judged the met mstbsritstive ed reliable, it should aaso be sated that they ma sot be inter.-.tionslip compable becaus of the lack of stadardised Wdefntion sad .o-cpt. sed by dirfferet estries in colleting the data. The data are, nontheless,
Iuseu to desc.ribe orders of magntude, indicate trend., and shartein certain major difference betse cousis...
The adusted roup aeragesfor each indicator ar populAtium-weigbted g-smtris meas .sc,disg the soire -lues of th* indicator and the meet populatedcounry n eah goup.baato lack of data, group avrags of all indicators for Capital Surplus Oil kspcrters sad of indicator, of Access to Water an Rooreta
Disposal1, Houing, Inom Distrihuth sad Peverty for other coutry groups are popultio-weightsd getrio men without esissof th eestrem vausadthe most popuated coutry. Sinc th-oeseo onre ateidctr e~ viaiii fdt n snt .nifoem catico mt he eusrised
inreatn aergs f n idiaortoaoter hee veaesar eelyuefl sh..oiaton fce,ece" ale wencsain hevt ua f nidicator at a ien t theountr and reeeeegop,.
lAID ARHA (thoundsqb. Acc.sa to ftcreta Disposal(prornt f poultis) - Itotal urhc and rura -
otl-otal surface ares 1opiin ad are sad inlsad waters. omber of ppc(talurn,ndua)sevdb orta disposa-aAgricultura1 - itet recent estimate of agricultural are used temporarily per-etages of their respective populations. Eicrta dispoa may I Yinclde
or permanetly for orops, pastures, ameht and kitchen gardens or to the collec tion and disposal1, with or sithout treatmct, of hmm c-crtelie fallo. and nate-water by enter-borne yrste or the use of pit privies sod s.ilor
SN tPPCAI (S$ IPprcaiaetmtsatcretmre prices, Pplation per Pl'isn - Po;solatico divided by ousber of practicing piysici-ncalculaed by nme cosrraic mthod asWorld bank Atlas (1976-78 ai) quaified frm md calsho at univerity level.
ip6o, 197o, so 19175aa Pop.Ultion per Ihrarsins Prsos - Population divided by oute.r of practicing malejffl.MVCGISUKPTION P00 CAPPIT - Aduo consue - ption of co-ri1 coergy sId female gradu_te s paticlnre, a sliatuns
(col nd igsic, etrleu, ntural gas and hydro-, ouca and gS- Pp lanprdHospitalPe _-total urban, nod -or1 - Pp.1at I.. (totnl, uric,thee-a electricityp) in kilcgrn of coa quiesacot por capita; 1960 oridvie ythi enetc outerofbositt rebed niaicii970, sod 1976 data, public nod private genra and speialiced hcotpita.l so cniitnticoci-tn-.
Hcapitals are establishments permanently staffed by nIt ie.t -c physicia-POPoTIATION ADii VITAL STATISTICS atabli.hmests proiding principally custodial cave nr st included. Rura
TOtNI Ppulatic., nod-Year Taiilic) .. ho of July 1; i960, i970, and hospitals, hoevr, include hrnlth sad medical ceoters cot peresnetly otafiedi97daa by a physician (hut by a medical assistant, nure, eidsife etc.) hbict offer
Urban Puaico (percent of total) R Otic of urban to total population; In-_patient aconansd procide In limited rsoge of medical facilitio..dfeotdeflintions of urhan re may affect comparbility cf data Adission. per Hospta Red - Total nuber cf adieicts.. to or di-chargen fro
noug coutries; 1960, 1970, and 1975 dntn. hoepitala divided by the outer of beds.Proulti io P-oj-tioos
Fopulation in yearPO - forrest popolatio proJections are based HOUSPIN1971 tcta.1 poP.intion by ug sod sc and their mortality and fertiiity Average Sic- of Hiousebld (persons per h-hoeld) - tctal, uin. and rurl1votes Projeccioc parsaters for morta ity rates comrise of three A hcusehold c...sisto of a group of individuals eho stor liicig quarter sodl-eoi nosunig life eopeotacy It hinth inceaing ctb coutry,s thiei main -. a.o. A bo-d- or lodger map or ay out be i-cludcd ic ticper capita incoe ire1, sod fesale life eupctancy utbiliiag at loonchod for statistical PorP.....75 y-n,. Tho parnt-r for fertility eats also have tbre level A-orag nuber cf persons per roo - total, uba, and rura - Ace-ue cob-cnouion d-vli-e I fertility nocording to ise- levl ndpat of pernonPs per c ic all urba, and rura occpied co-eti-Io duellioct,
family clacigc p-rfr-unE. Sno coutry is then assigoe:d oef these repentively. iOeLlings eclude non-peenoct ot-uturn sod un-cpicicatscine ooehinatins of -otality sod fertility trends for projection A,oesa to Sleotrioity (percet of d-eIlingo) - totnl. rbso, nod v-rn - tpurposco. -etional dwellings itb electricity to licing qoarte- on p-rcntog of
Ittic rcplainI stationay popultion there is so groe,th total, urban, and -ura d-.liigo repectively.since the hirth rate is equal to the death rate, and aLso the ageet-ucur eeins contant. This Is achieved only aftsr fertiiity rates SiOATIONdeciinn to the eplacmet lse-i of unit set reprodution rate, he Adjuted rclment Patioseach geertion of woe repiacs itself eoatly. The sttionas puPo- Primacry school - total, male nod foae-I. ro.s total, sale sd femle -arol-intio a~ ic wa .etimatd os the basis of the peojsted shrceit et *of ali ages at the primar levl a perctages of repective pessyof th population in tbe y.e 20t00, sd the rate of decline of fertility school-age populations; normally includes chiLdren aged 6-il fenro butrate to replacmen lv,adjusted for diffe-et lengths of pri-ny eduotios ; for coutrico cith
Ye.e stainrcotion ion israhed - The year then *ttionar Popsiatin universal edcaio 1nrl-et ma enced 100 percent i-r som pupilssice ba ee beahd. arIelw or hv the official schoolage
Population bennite ~~~~Seconday school totl, male and femal - Cmpted n Ie eouPer so. km. - nod-pear population per squar kilomter (1OO bectares) of education esquiresa latfuy sof appr-cd pimr Iutction;
total re proides genralv. tinl or teacher training instruction for pupilsPee es b. sgiuiualio- Compted an nboe for agricultural iod usually of 1.2 to 17 years of age; -- rep-ndence cor ,oae g-nernly
only .. uluded.Po9-aticsAg Struture (prcent) - ChiLdr. , (0-1u ynars), woking-age Vocatiosal soro1im t (percenthof secodary) V-Vctional i-titutioouio1,idr
i5- yeRs), and retie (b5 Yeuad e)asp-roetsge of mid-year technical, idastria,o ohrrurm sitoperate independently ornpopulation; 1965, i970i e 19177datad, .departmentsiof secodary institutions.
Population ?iroeth.Pate (pecet) - total A,au-l grosth rates of total mid- 2ui-ece ai - -oins,nd sncnday- T taletdne,toeaoldiper opla0oo o 1950-ho 70nSU, an 1970-TT. pinymdscooylvl divided by nuber f -tah esicti crr-
Population ir-th hate (Pernt uban - A-mua g-thi rato of urbacsedn levelspopolattuas for 195 -h0, 0ph-70,-sd 17-75. Adult literay rt (rsa)-Literate du1tu (nbis to read sod oritr a
Crude B;ith Pate r- thousad) - Annual lIce births Per thoussd of Idd- ap-retago of total adult population aged 15 Year sodovryear popution 1 0, 1910, and 1977 data.
Crude Death hat.pe r thoasad) - Anm-a deaths Per thousad of mid-yea CINsumpTICSno7' d 197dt.Panseng Cor h(pr tbounnd popujl.nioo) - Paoergcr cor -oprins oot-v o
Ur7ss eroduc.t9ibon0'Rate -OAerag9 ot.der of dsoght-rsooan 1i1 bear setiges than eight persons ; rocldea anbuisoe, heor. sod silitovyin hsr -orsj esp-doeive period if hbe eperiences presen.t age- ehcticler.specific fert iiity rats; .ully fic-y-o -vergen ending in 196o, hadic heceier (per thounand poplition) - Ail typen of rc nfor radio1970, and1975. broad-ats to general pbtlic per thousad of popoltion; eoc loden ocliotoed
FmIdly Planing - Acceptors. Annua (thousands) - Anua -utn of receivers in coutrien and in years he. regiutrti-o of rdind ionst -aon-eptors of birth-ootroi ir-ices noder ..upicen of nstiooal faily effect; datn for recent years es not be c-p-rbie sio- 0.~ -tcouirispianning prog,-Ue.(ee f id e. er.ntabolished iies dng
PumIly Plannig -Ues(ecn fmrre )- Pr entg of maried TV Receive (pert th -nn cpuLation) - TI r-ci-er for broadont to generItome o1 , .f child-hearing age (15-44b year) bcue brhcnrld-evie public per thousand popslaltion;soecudnaunlicensed TI rceicer- ir. ti
tonlmrid -oe i san age group, sod In yea o b rgistratico TV vt n in effect.Seoppr Circoltion(e tosn co]a ho) -Iho the average ciroulti-c
______AND ____TION of 'daily general intret nnpp ,dfnd saperiodical publi-ctionindo of Food Production per Capita (1969-71-100) - Sodco of per .apitn devoted primaily to recoding g-enerlne. It IsIonsIdered to bv "doily"
anno.I production of all food -oiditiss. Production e-iudes seed and if it appear t loant fou timen cor-.fce ad iu on caledar year bais. Caditien cover primary goods Cinema A.o Atedn e'pe CapitoZ1 IeIOar- bnosd on then-1,ror1tickrto
(..ugrcaeni intend of-snga( hkiob ar edible and oo.tniooutricotn sold durin tbe ya, i-cuIogaeoio to drice-1c ci-en acd objire-(eg.cofe so tca are soided). Aggvegat production of each -oonry -nto..
is based co antionni1 average producerpice ights.Percait socl o caora(p-etet of reuui-itts) - Computed from LABOR FOnCE
soergy equivaoot of ort f-sd spplies -viLebLo in country per capita Ttal Labor PFrc (thoussodn) - con-icaLy active pe-non, including aveedper day. Ac-ilable supplies compise dometic pr-d-otic, iports les force and unemloyed but occluding hus-ic-, students, t. Dfiitio-coports, and obangenin stock..Net oupplioenclo.de aninl feed, sssds, io vaious coutries -r not c-p-bti..quantities used in food p,esonsig, andloeni diutributino. Rcquir- Pgomalercent-) - resl labor fore no percentage of total labor force.metnnercestinted by PAO base.d oo pb.oIonis oreda for no-IArmal t_e Pr5 re o.t( - labor force in fnming, forestry, bunting sodIoc"tivt _d heal1th -onidc-lg cvreetltemperature, bodyweights, finhig as percetage of total labor force.
age sd ee, dh,istrbotioe of popuatios, and a11uing iS p.eret for industry (p,eret) - Lbr frc nmiig ont-utioc, -cfacturing sodnatahueod l-el. elcrct,etr n .a.opretaeo on ao fore.
Poroapita supply of p-oteic (gra per day) - Pro tein contest opePatiainOte(rct)- total, mal, and female -Pricipationocait MetaPpl ffn per day. Net supply offo is defined as ctcy. e are copeted so tota,l, mae,ad fs1o1e ibr fore as per-above. Resqirveeto for all coutries established by UShA provide for a cetaI of total, sol and female population of all genrcspeoticei;minima _dionne of 60 gRame fttl rti e day and SO grm_ of 1960, i, an-d 1975 data. Thes ar SIIC. participti ra-tes reflecting
animaland puse prici, ofwiob 15 gram hol be animal proteis. acso.tr of tb.e popeltion, and long tim trend. A fc -atisatenThs tndroae losr than thos.o 75 gram oft toa protein and are fro naina ouoe
23 gram of uia p-tei as no averge fur thwrld, propose d by CAt k..omlo DeednyRPtio - Otic of poplation noise 15 sod 65 and over toin the Thir,dtWorld rood Survey th labor foc in age group of 15-64 year..
Per cacit poein supply fromaimal and puioe - Protein supply of foodderived from aiein and pelnen ingaspe a.1DIYIII
Child (ages 1-4) Aotlt as(crtosn) - Ihca deaths pr thoussad Percentage ofPrivatencm (bt hin o,,h and hlind) - R-cived by richestin ag grop i~i p5m, to ohiidr isl this ng group; for most dec- 5 pereent, richest S eret, porsOpercent, an poorent IS eroet
oping c-utri-n data d-eried from life table,, of household..
HEALTH POVETYf T ARGitr 00012life Eopeotany at hiri(eas -Aerg comQber of years of life E. timated Absolute PoErt Iccom a- r (US per cacpits - urban and rurl-I
remanon atitrb; '90 19,adg 97.dat. Absolute poverty io Is lvlistainoe levelisnabo oliserofat iotlt hae(e.hunn)-doa deaths of infats u-der one nutritionlly adequate diet plus eneti.1 non-food requir-emet is cotyerof age per thous.m.d live births. ffordable.
Access to Safe Water (pecet of Popultin - totl es n ua Ostimated oslotive Por-ty 1oo Leve "pi ecntn -uban ad rurl1
safe .ater nupply (includes treated surface atecs or ontreted hut persenai isom of the coutry. Urba I-ceI ie dericed frmthe rural leov1ucoo-tmi-ated eater ouch an that from protected hrshole, springs, cith adjusten for higher cot of 1on iginurban arenaand saciter )a percentages of their respectice population. En stiated PopultionP1 bouePcryIcm leel(
1rosc) - urban and
an urban are apublic foutain or standyot 1eated not acre thisrrl-Preto ouain(ra o ua)ncoe'bouspc"200- mters from a house say he conidered as being within reasonale-oces of that lous e. In rura area reasonble acne -Iud implytitthc h-...cif. or -abe- of the houshold do not have to spen ooncad Social Dats Diiciuondieproportion..ts port of tie day in fetchin,g the fnlyp'. seter ...edo Pcoic An.alysisad Pr-jectic Deportmet
Augut 1979
- 25 -
ANNEX IPage 4 of 5 pages
COUNTRY DATA - BURMA*
GROSS NATIONAL PRODUCT IN FY 1978 ANNUAL RATE OF GROWTH M. constant prices)
US $ Mln. 7 FY1965-70 FY1970-78 FY1965-78
GNP at Market Prices 4,216 100.0 2.0 3.3 2.8Gross Capital Formation 595 14.1 -3.6 2.7 -0.2Gross Domestic Saving 421 10.0 0.5 14.8 9.1Foreign Capital Inflow 175 4.1 0.2 13.7 8.3Exports of Goods, NFS 252 6.0 -13.5 1.6 -4.5Imports of Goods, NFS 425 10.1 -10.4 -0.4 -4.4
OUTPUT, LABOR FORCE ANDPRODUCTIVITY IN 1978
Value Added Labor Force V. A. Per Workerb- Min. 7Mn. % ' %
* All data for FY1978 are revised estimates of the Government of Burma.
a/ Total labor force: unemployed are allocated to sector of their normal ocCupation.b/ Includes livestock, fishery and forestry.c/ Includes mining, power, and construction.d/ Includes current surplus/deficit of public corporations.e/ Includes capital expenditures of public corporations.
not availablenot applicable
- 26 -ANNEX IPage 5 of 5 Pages
COUNTRY DATA - BURMA
MONEY. CREDIT aa< ^ 1970 1973 1974 1975 1976 1977 1978(Kyats ml outstanding at end of period) Sep. Sep. Mar. Mar. Mar. Mar. Mar.
Money and Quasi Money 2422 3581 4065 5342 6052 6377 6631
Bank Credit to Public Sector 2616 4342 5040 6447 6663 6468 6869
Errors and omissions -9.2 8.9 2.9 DEBT SERVICE RATIO FOR CY77
Overall balance -28.8 -19.9 15.4Ratio of debt service to
Gross Reserves tenG year) 134.9 109.3 124.1 merchandise exports 19.8
Net Rese-ves (end year) 39.7 40.8 28.4
RATE OF EXCHANGE IBRD/IDA LENDING, March 31, 1980 (Million US$):
Through Dec. 27, 1971 From Feb. 13,,;73 tc Jan. 25, 1975 IBRD IDAUS $ 1.00 = K 4.76 US S 1-00 = R 4.81
Outstanding & Disbursed 123.5From Dec. 27, 19'i to From Jan. 25, 1975 to May 1, 1977 Undisbursed 148.8
Feb. l9, 1973 SDR 1.00 = K 7.74 Outstanding incl. Undisbursed 272.3US $ 1.00 = K 5.35
From May 2, 1977SDR 1.00 = K 8.51
As of December, 1979SOR 1.00 = K 8.51US $ 1.00= K 6.70 (approx.)
Annual average at Rangoon.
not available
not applicable
South Asia Programs DepartmentDivision C
April 1980
w 27
ANNEX IIPage 1 of 5 pages
STATUS OF BANK/IDA OPERATIONS IN BURMA
A. Statement of Bank Loans and IDA Credits as of March 31, 1980
US$ Million
Loan or Amount (less cancellations)
Credit No. Year Borrower Purpose Bank IDA Undisbursed
Three loans and three credits fully disbursed 33.1 53.3
483 1974 Burma Lift Irrigation - 17.0 1.4
493 1974 Burma Forestry - 24.0 6.3
597 1975 Burma Livestock - 7.5 4.7
642 1976 Burma Paddyland Development - 30.0 16.0
671 1977 Burma Second Ports - 10.0 2.8
686 1977 Burma Tin and Tungsten - 16.0 5.9
745 1977 Burma Seed Development - 5.5 5.1
835 1978 Burma Paddyland Development II - 34.5 32.1
879 1979 Burma Rubber Rehabilitation - 4.5 4.5
949 1979 Burma Forestry II - 35.0 35.0
958 1979 Burma Telecommunications II - 35.0 35.0
Total 33.1 272.3
of which has been repaid 33.1 -
Total now outstanding - 272.3
Amount sold 2.7of which has been repaid 2.7
Total now held by Bank & IDA /a - 272.3
Total Undisbursed 148.8 148.8
Total Disbursed 123.5
B. Statement of IFC Investments
None
/a Prior to exchange adjustments.
- 28 -
ANNEX IIPage 2 of 5 pages
C. Projects in Execution 1/
Cr. No. 483 irrigation I Project; US$17.0 Million Credit of June 21,1974; Effective Date: August 6, 1974; Closing Date:April 30, 1981
The Project Implementation Committee was established on time andhas functioned effectively. An initial procurement of 10,000 pumpsets(300 g.p.m.) and accessories was awarded to a local supplier, Heavy Indus-tries Corporation. All of these units have been sold to farmers in theproject area. Favorable costs on various components of the project have beensufficient to permit the purchase of 3,000 additional low lift pumps. All ofthese units have already been sold to farmers. The construction of four jutebaling plants is nearly completed. Some 550 units of construction equipmentwere rehabilitated under the equipment repair program. A reasonable inventoryof spare parts remains for future maintenance. The program to rehabilitateand extend flood embankments and drainage channels has been completed. TheClosing Date of the Credit has been extended from March 31, 1980, to April 30,1981, in order to allow for completion of disbursements covering consultingservices for the preparation of final design and specifications for theproposed Nyaunggyat Dam project.
Cr. No. 493 Forestry Project; US$24.0 Million Credit of July 12, 1974;Effective Date: February 27, 1975; Closing Date: March 31,1981
Project implementation is essentially complete. All major sawmillrehabilitation and construction has been completed. Log production, fromprojected area in FY79/80, is well over target for teak and on target forhardwood. Project productivity and profitability are most satisfactory.Remaining procurement will be mainly for spare parts.
Cr. No. 551 Telecommunications Project; US$21.0 Million Credit of May 30,1975; Effective Date: July 23, 1975; Closing Date: June 30,1980
The Credit amount has been fully disbursed. Due to initial delaysin preparation of specification, procurement and contracting, and delays incivil works, execution of the project is about a year behind schedule. TheOPEC Fund is providing a loan to finance a cost overrun of about $3.1 million.
1/ These notes are designed to inform the Executive Directors regardingthe progress of projects in execution and, in particular, to reportany problems which are being encountered and the action being takento remedy them. They should be read in this sense and with the under-standing that they do not purport to present a balanced evaluation ofstrengths and weaknesses in project execution.
- 29 -
ANNEX IIPage 3 of 5 pages
Cost increases due to the recent exchange variation of the US dollar withrespect to the Japanese yen on committed contracts to the extent of US$3.5million is being financed under the second project. The Posts and Tele-communications Corporation, the executing agency, is operating satisfac-torily and is meeting the prescribed rate of return.
Cr. No. 597 Livestock Project; US$7.5 Million Credit of December 30,1975; Effective Date: March 26, 1976; Closing Date:December 31, 1981
The project continues to improve in all aspects of implementation.Field services are being provided by the Veterinary and Animal HusbandryDepartment (VAHD) to all 2,665 villages in the project area. The ArtificialInsemination Program continues to expand with over 80,000 cows now insemi-nated. Communal pastures and village water points are being developed. Vac-cine production is almost on target. The Livestock Development and MarketingCorporation (LDMC) continues to collect milk from its own farms and from theprivate sector. LDMC has agreed to construct a new dairy plant for the Rangoonarea. The site for this plant has been selected. IDA clearance of equipmentbid documents awaits evidence that adequate water of acceptable quality isavailable. The Institute of Animal Husbandry and Veterinary Science (IAHVS)continues with the overseas training component, hiring of consultant lecturersand completion of the building program at Yezin.
Cr. No. 642 Paddyland Development Project; US$30.0 Million Credit ofJune 21, 1976; Effective Date: August 20, 1976; ClosingDate: June 30, 1983
The Credit was declared effective following the establishment ofthe Project Implementation Committee and the Project Unit. Delivery hasbeen made on most of the construction equipment and it is being used effec-tively. Progress on construction has been very good during the 1978/79 and1979/80 seasons. The Irrigation Department believes the construction programwill be completed on schedule. Early in 1977, the Agriculture Corporationinitiated an intensive agricultural extension program for five project town-ships. Village and township level officers have been assigned full time toextension activities. These officers are carrying out a program of periodicand regularly scheduled visits to the farm areas (Training and Visits Program)which has been well received by farmers. Consultants' studies on paddystorage and handling have been completed. Consultants began work on thehydrologic investigations in September 1977. These investigations are pro-gressing satisfactorily.
Cr. No. 671 Second Ports Project; US$10.0 Million Credit of January 13,1977; Effective Date: March 18, 1977; Closing Date:December 31, 1981
Spare parts for existing equipment, new cargo handling equipment,and repair materials have been delivered to Burma Ports Corporation (BPC).
- 30 -ANNEX IIPage 4 of 5 pages
The rehabilitation of the suction dredger has been completed. The repairof the bucket dredger was completed and the dredger returned to Rangoon inDecember 1979. A dredging expert has trained dredger crews in Rangoon, andtwo dredger masters have been in Holland for training. Training specialistsare due to commence courses for technicians in May 1980.
Cr. No. 686 Tin and Tungsten Expansion Project; US$16.0 Million Creditof March 25, 1977; Effective Date: June 13, 1977; ClosingDate: March 31, 1983
Project implementation is well advanced. Procurement is nearlycomplete with orders placed for about US$17.0 million in goods and services.Capital costs are expected to exceed the appraisal by about 14.8% in foreignexchange costs and 32% in local costs, primarily because of the higher:(i) cost of the dredge resulting in change from originally selected procure-ment approach; (ii) taxes and duties on imported equipment; and (iii) costsof construction and civil works. An EEC Special Action Credit (declaredeffective on March 5, 1980) was extended to help finance part of the localcosts of the project. Shortly before delivery of the dredge, the dredge wasdamaged by fire in the shipyard. Damage to the dredge is tentatively esti-mated at about 20% of its cost. The insurance company has already authorizedexecution of repair works. It is expected that repairs would be completedby July 1980. Consideration is being given to deliver the dredge during themonsoon season (May to October). The dredge may be delivered around mid-August 1980. A meeting between the No. 2 Mining Corporation (the implement-ing agency), consultants, the contractor, and possibly the insurance companyis being planned.
Cr. No. 745 Seed Development Project; US$5.5 Million Credit of November 14,1977; Effective Date: February 14, 1978; Closing Date:December 31, 1982
Project civil works are progressing well. About 90% of landdevelopment is expected to be completed at Magwe and 100% is expected to becompleted at Letpedan before the monsoon season. Over 1,000 ac have beencleared at Lungyaw. Building construction is well underway with most farmstructures underway or completed. Most senior staff posts have been filled,however, there is still a critical shortage of support staff. Overseastraining is behind schedule. About 20 staff members have been selected forshort-course training (3-12 months) during 1980/81. Procurement continues tobe slower than appraisal estimates but is following normal GOB guidelines.While very positive progress has been achieved, a number of areas need furtherimprovements.
Cr. No. 835 Paddyland Development II Project; US$34.5 Million Credit ofJuly 28, 1978; Effective Date: October 13, 1978; ClosingDate: April 30, 1986
The Project Implementation Committee and the Project Unit havebeen established as required and a project director and a project exten-sion manager have been appointed. Procurement of equipment has been
- 31 -ANNEX IIPage 5 of 5 pages
initiated. Construction work has commenced with available equipment (fromIrrigation I Project, Credit 483-BA) and the activities would greatly in-crease after the new equipment arrives in May 1980.
Cr. No. 879 Rubber Rehabilitation Project; US$4.5 Million Credit ofMarch 13, 1979; Effective Date: May 25, 1979;Closing Date: December 31, 1983
The rehabilitation of the GOB rubber estates is proceeding verywell. In 1979, the targetted 1,250 acres of old rubber was cleared andreplanted. This represents a major achievement for the project. The 1980program will total 880 acres and land clearing is now underway. Nurserydevelopment is well advanced, supplying the imported clonal seedlings forthe planting program. Estate building program is on schedule. The projectwill proceed with the development of a 10 ton per day crumb rubber plantfor processing scrap. Equipment procurement is behind appraisal estimatesdue to the lengthy government procedures. Rubber section management willconcentrate on the appointment of needed staff and laborers to maintainprogress.
Cr. No. 949 Forestry II - East Pegu Yoma Project; US$35.0 Million Creditof September 21, 1979; Effective Date: December 20, 1979;Closing Date: September 30, 1985
Equipment procurement underway. Bid specifications for majorextraction equipment is complete. Consultant for the rehabilitation of theOkkyin sawmill is on site. Remaining consultants for technical assistancecomponent expected by May 1980. Overseas training program for Burmesenationals has been established.
Cr. No. 958 Second Telecommunications Project; US$35.0 Million Credit ofDecember 18, 1979; Effective Date: March 3, 1980;Closing Date: December 31, 1984
The Credit was declared effective on March 3, 1980.
- 32 -
ANNEX IIIPage 1
BURMA
NYAUNGGYAT DAM MULTIPURPOSE PROJECT
Supplementary Project Data Sheet
Section I: Timetable of Key Events
(a) Time taken by country to prepare the project
May 1975 - April 1976
Follow-up preparation: November 1977 - March 1979
(b) Agency which has prepared the project
Government's Irrigation Department, Electric PowerCorporation, consultants, and FAO/IBRD/CP
(c) Date of departure of appraisal mission
April 16, 1979
(d) Date of completion of negotiations
April 17, 1980
(e) Planned date of effectiveness
October 1980
Section II: Special Bank Implementation Actions
None
Section III: Special Conditions
Conditions of Effectiveness
-- Satisfactory arrangements for commitments for co-financing (paragraph 47).
Other Special Conditions
(a) GOB to implement electricity tariff increase andto submit its proposals to modify power tariffsby March 31, 1981 (paragraph 33).
- 33 -
ANNEX IIIPage 2
(b) GOB to submit detailed regulations for reservoiroperations by September 30, 1983 (paragraph 53).
(c) GOB to appoint an Advisory Panel of Experts toreview dam safety and designs (paragraph 54).
(d) GOB to carry out a resettlement program (paragrapb.55).
(e) GOB would periodically review and, if necessary, reviseits paddy and seed cotton pricing systems and wouldestablish and maintain arrangements for cost recovery,in the event the existing compulsory paddy procurementsystem and/or compulsory cotton sales program aremodified or abolished (paragraph 58).
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ttiJOtA ~~~CHINA fi ~A~BURMAS-i
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fAN%)~ -ow : . A / ) / 4 \ \GENERAL LAYOUT
BURMA ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Dam, Powerhouse, and Al lied Structures
HAM B JrmX / I>/' - - J ....... / 4 t X . e Proposed Access Rood
