Document of

The World Bank FILE COPYFOR OMCIAL USE ONLY

Report No. P-2732-BD

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

TO THE

PEOPLE'S REPUBLIC OF BANGLADESH

FOR THE

SECOND CHITTAGONG WATER SUPPLY PROJECT

March 6, 1980

Tl docuIent ha a restried disribution and may be use by retpients only in the perforance oftheir ofel dutIes. Its contents may not othewise be disclosed without World Bank a_thoriztion.

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CURRENCY EQUIVALENT

In August 1979, the Bang:Ladesh Taka was officially devalued relativeto the Pound Sterling to a rate of Tk 34.7 to the Pound. The Pound Sterlingnow floats relative to the US Dollar and consequently, the Taka-US Dollar rateis subject to change, although it has been fairly stable for some time ataround Tk 15.5 per Dollar. The rate below has been used throughout thisreport except where otherwise stated.

US$1.00 = Taka 15.5Taka 1 = US$0.0645Taka 1 million US$64,516

NEASURES AND EQUIVALENTS

cum - cubic meter (220 Imperial gallons or 264.2 US gallons)gcd - gallons (Imperial per capita per dayha - hectare (10,000 m or 2.47 acres)km - kilometer (0.62 miles)

1 - liter (0.22 Imperial Gallons or 0.264 US gallons)lcd - liters per capita per daym - meter (39.37 inches)

N - million (Dollars or Taka)mgd - million Imperial gallons per dayml - million liters or ].,000 cubic metersmld - million liters per day (0.220 million Imperial

gallons per day or 0.264 million US gallons per day)mm - millimeter (0.04 inches)Sq. K - square kilometer (0.386 sq. miles)

ABBREVIATIONS AND ACRONYMS

ADB - The Asian Development BankAIC - Average Incremental CostCMC - Chittagong Municipal CorporationDPHE - Department of Public Health EngineeringECNEC - Executive Committee of the National

Economic CouncilERR - Economic Rate of Return

GOB - Government of BangladeshGON - Government of the NetherlandsMLGRD - Ministry of Local Government Rural

Development and CooperativesPEC - Project Evaluation CommitteeWASA - Water Supply and Sewerage Authority

FISCAL YEAR

July 1 - June 30

FOR OFFICIAL USE ONLY

BANGLADESH

SECOND CHITTAGONG WATER SUPPLY PROJECT

Credit and Project Summary

Borrower: People's Republic of Bangladesh

Beneficiary: Chittagong Water and Sewerage Authority (WASA)

Amount: US$20 Million

Terms: Standard

Relending Terms: The proceeds of the IDA Credit will be onlent from GOBat 7 percent per annum over a period of 25 years, in-cluding five years of grace. GOB will bear the foreignexchange risk.

Purpose: The project will provide additional supplies of waterto meet the needs of Chittagong's growing population andindustry up to 1990. Included in the project are: a newwater intake and treatment plant with a capacity of 90 mld(20 mgd), six tubewells, modifications to an existing ironremoval plant and pumping station to expand its treatmentcapacity from 45(10) to 70 mld (15 mgd), and associateddistribution works. The project provides for about 14,000service connections with meters, some 1,500 public stand-pipes and two public water concessions, which are beingintroduced on an experimental basis. There is also a pro-vision for training and engineering services for projectsupervision, and for preparation of an appropriate sewerage/sanitation plan. Direct benefits of regularly availablewholesome water supplies and improved access to publichydrants will be supplemented by improvements in publichealth and environmental conditions.

There are no special physical risks associated with theproject. The institutional risks are somewhat greater,-however, and full support of GOB and continued managerialimprovements will be necessary to achieve the project'sfinancial objectives.

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclsed without World Bank authorization.

Estimated Project Local Foreign TotalCosts: ------US$ Million----

Equipment and Civil Works 9.5 7.9 17.4Engineering Services 1.2 0.7 1.9Training 0.1 0.1 0.2Land Acquisition 0.2 - 0.2

11.0 8.7 19.7Contingencies

(i) Physical 0.9 0.8 1.7(ii) Price 4.1 2.3 6.4

Net Project Cost 16.0 11.8 27.8Duties and taxes 11.9 - 11.9

Total Project Costs 27.9 11.5 39.7

Financin Plan: GOB IDA WASA TotalN'et of taxes and duties) US$ Million---

3.9 20.0 4.0 27.9

Estimated FY80 FY81 FY82 FY83 FY84Disbursements: ---------- US$ Million

Annual 0.2 5.7 6.0 6.0 2.1Cumulative 0.2 5.9 11.9 17.9 20.0

Economic Rateof Return: About 9%

Appraisal Report: Bangladesh - Second Chittagong Water Supply Project,December 19, 1979, Report No. 2701a-BD

INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT

TO THE PEOPLE'S REPUBLIC OF BANGLADESH FOR ASECOND CHITTAGONG WATER SUPPLY PROJECT

1. I subm t the following report and recommendation on a proposedcredit to the People's Republic of Bangladesh for the equivalent of US$20.0million, on standard IDA terms, to help finance the Second Chittagong WaterSupply Project. The proceeds of the Credit would be relent to the ChittagongWater and Sewerage Authority for 25 years, including 5 years of grace, withinterest at 7 percent per annum.

PART I - THE ECONOMY

2. An economic report entitled "Bangladesh: Current Trends and Devel-opment Issues" (Report No. 2245-BD) was distributed to the Executive Directorson December 15, 1978. An updated Country Economic Memorandum is currentlybeing prepared by an economic mission which visited Bangladesh in October 1979;it will be distributed in early 1980.

Background

3. The first years of independence were difficult for Bangladesh.With its economy already disrupted and its physical infrastructure severelydamaged by the struggle for independence, the country was afflicted by poorharvests in 1972/73 and by damaging floods in 1974. Foodgrain output felldrastically during these troubled years and recovered to the pre-independencelevel only in 1975/76; foodgrain imports averaging over 2.1 million tons peryear were required between FY72 and FY75 to maintain food consumption levelsnear minimum standards. The terms of trade worsened considerably and theproduction of jute, the predominant export commodity, declined sharply. Infla-tion, declining real wages, labor unrest and political instability added tothe troubles. Relief, rehabilitation, the building of a national governmentfrom a provincial administation, and the consolidation of Government authoritywere unavoidably the paramount concerns of policy makers in the first half ofthe 1970s.

4. Economic improvements in recent years, together with greater poli-tical stability, have signaled a significant shift in the conditions ofBangladesh and have somewhat brightened its economic prospects. The late1970s may be characterized as a period of consolidation and economic recov-ery--following the shocks of the early 1970s--in which planners and policymakers had an opportunity to focus on the longer-term needs of development.In recognition of its needs for a reorientation of policies, the Governmentwisely chose to delay the preparation and implementation of a new Five-YearPlan by two years. The current Two-Year Plan (FY79-FY80) has given GOBofficials time to consider the development strategy and policies to beincorporated in the next Five-Year Plan to begin in July 1980.

Recent Developments and Near-Term Prospects

5. From 1975 until March 1979, Bangladesh was governed under martiallaw and without a parliament. In elections held in February 1979, 29 politi-cal parties and groups contested 300 seats in the National Assembly. Roughlytwo-thirds of the seats were won by the Bangladesh National Party (BNP) headedby President Ziaur Rahman, who hacd won the presidential election held inJune 1978. Thirty additional seats, reserved for women, were subsequentlyfilled by the BNP. Martial law was lifted following the convening of thenew Parliament in March 1979, and a new cabinet was appointed at that time.

6. The year FY78 (July 1977-June 1978) was a relatively good one forthe Bangladesh economy. Mostly as the result of a record grain crop (13.1million tons) and a 10% increase in industrial output, GD)P grew by nearly 8%in real terms, following a 2% rise in FY77. But the experience of the pastyear has again demonstrated the severe vulnerability of the Bangladesh economy.During this period, economic deve:Lopments were dominated and largely determinedby the consequences of unfavorable weather conditions, including droughts andfloods. These conditions affectedl adversely both the foodgrain crops (whichrepresent roughly one-third of GDP) and the size and quaLity of the jute crop;they also had repercussions throughout the rest of the economy. Inflation,which was aggravated by the shortfall in food production and consequent rapidrises in rice prices, increased to a current rate of about 17%; GDP growthslowed sharply, and with population growing at 2.7% annually real per capitaincomes rose barely, if at all. C)n the positive side, however, FY79 broughta continuing strong performance oi- the construction sector, improved budgetaryperformance, a substantial increase in development expenditures, the emergenceof stronger balance-of-payments and international reserves positions than hadbeen expected, further rapid growth in wheat production, and a number of signi-ficant policy adjustments, most notably in the areas of eaxchange rate manage-ment and public sector pricing. B3ut due to the continuing effect of the1978-79 drought, the current outlook for FY80 is that GD]? growth will be wellbelow the rate of 7.3% projected by GOB in its FY80 budgoet.

7. The succession of three relatively poor crops in a row (1978/79aman, 1979 boro and aus) meant. that foodgrain available from domestic produc-tion during CY1979 was considerab'Ly below the previous yesar's level. Thissituation was compounded by a serious slippage in the scheduled arrival offood aid during the first half' of CY1979 and resulted in a fall in the percapita availability of food and in increased rice prices to levels unrecordedsince the food crisis of 1975. Meanwhile, low domestic foodgrain procurementfrom the small crops, and high offtakes under the ration system, led to arapid depletion of public food stocks. In contrast to the targeted level ofone million tons, stocks fell to only 209,000 tons at the end of June 1979.Below this level, it is generally conceded, the public foodgrain distribu-tion system is liable to break down, with the dire consequences that thiscould entail.

8. To prevent a serious food crisis in the July-October 1979 lean sea-son, Government authorities at: the highest level took charge of the situationand directed an all-out effort: to import and distribute the massive volume of

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foodgrain needed to supplement the reduced domestic crops. This effort wasremarkably successful. Almost 2 million tons of food, both aid-financed andcommercially purchased, were imported between July and December 1979. Thisplaced a heavy burden on the country's port handling capability, its internaltransport facilities, and its public administration and distribution system.Although the disruptive impact of this massive effort on the her sectorsof the economy was held to a minimum, it could not be entirely avoided. Theinternal movement of other important bulk commodities and the shipment ofexports were impeded for some time during the peak months of foodgrainimports. Nevertheless, the authorities were able to unload and distributethis unprecedented volume of foodgrain imports in a minimal amount of time,enabling offtake to be stepped up and stocks to be restored to a more com-fortable level. By the beginning of September 1979, therefore, rice priceshad begun to ease and what might have become a serious food crisis was averted.

9. The slow growth of agricultural production has become the principalfocal point of concern among Bangladesh's top leadership and economic planners.The Second Five-Year Plan is expected to give top priority--together withpopulation control--to agriculture, and especially to food production.Meanwhile, the short-term food supply outlook is still problematic. Thepublic stock position at the end of CY1979 was adequate because of the sub-stantial imports between July 1979 and December 1979. The current aman crop,also affected by the drought, appears to be no better than last year's andprocurement from this crop--in spite of a recent procurement price increase--will be very small. Consequently, in order to avert a repetition of theCY1979 situation, considerable amounts of additional imports will be neededin CY1980. The extent of these requirements will depend on the prospects forthe boro, wheat and aus crops, which cannot yet be ascertained. In any event,efforts to ensure an adequate stock of foodgrain to meet 1980 consumption andstock build-up requirements cannot yet be relaxed. A special meeting of theBangladesh Aid Group was convened in late January 1980 to consider the country'sfood situation, import requirements and policy measures needed to preventfuture repetitions of the recent experience. A Bank report entitled"Bangladesh: Food Policy Issues", prepared for consideration at that meeting,was distributed to the Executive Directors in late December 1979. 1/

The Balance of Payments

10. Repercussions of the 1979 food shortage were reflected also in thebalance of payments. For example, the need to finance commercial purchasesof food imports was evidently a factor underlying GOB's rather cautious imple-mentation of its import program. Other factors included the Government'sdesire to defer the importation of non-essential items during the periodwhen the ports were expected to be congested with the food imports anticipatedto arrive during the last quarter of FY79. Delays in commitments of commodity-aid also resulted in corresponding delays in the issuance of import licenses.As a result, non-foodgrain imports in FY79 remained considerably below target.

1/ Report No. 2761-BD, dated December 19, 1979.

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Because of this and other factors, foreign exchange reserves increased, whichin turn added to the increase in money supply and further aggravated infla-tionary tendencies. The reserve increase, however, was a temporary phenomenon.Even at this higher than expected level, reserves at the end of FY79 werestill not quite sufficient to cover two months of merchandise imports at theprojected levels of FY80. Even with a continuing relatively favorable exportperformance and a restrictive import policy, a substantial current accountdeficit is projected for FY80, primarily due to large increases in the volumeand price of foodgrain imports and to significant price increases for importedcrude oil and petroleum products and other imports.

11. Bangladesh's balance of payments continues to be characterized bya massive structural trade deficit and heavy dependence on foreign aid. Ex-port earnings in FY79 represented less than 7% of GDP and less than 40% ofthe import bill. Moreover, Bangladesh's export structure continues to bedominated by raw jute and jute goods, which together account for approximately70% of total export earnings. Altlhough exports increased by about 20% in FY79,the trade deficit widened to almost $1 billion. The terms of trade appear tohave improved somewhat during the year. The value of raw jute exports totalledUS$143 million in FY79, a 47% increase over the previous year's receipts; thisreflected a 17% increase in vo:Lume and a 27% increase in prices. Jute goodsexports in FY79 were valued at US$276 million, an 11% increase over the pre-vious year's receipts; a decline in export volume was mores than offset by a 27%increase in unit prices. RelativeLy large gains were also recorded in exportsof leather, fish and shrimps and other non-traditional exports. Among thenotable developments on the import side in FY79 was the US$40 million declinein food imports to a level of aboul US$200 million; this was some US$50 millionless than had been projected, owing mainly to the delays in food aid arrivalsnoted above. Capital goods imports rose by 21% to US$384 million. Fertilizerimports nearly doubled in value, and there were significant increases also inimports of petroleum products and cement.

12. The FY79 current account deficit was considerab:Ly smaller than thetrade deficit, owing mainly to the continued rapid growth of worker's remit-tances. These receipts are now the second most important source of foreignexchange earnings, exceeded only by jute goods exports. A notable developmentwas the US$100 million increase in project aid disbursements in FY79, reflect-ing in part the country's growing absorptive capacity. Total aid disburse-ments, which exceeded US$1 billion for the first time, were equivalent to 63%of total merchandise imports. Debt: service payments rose to US$95 million,notwithstanding some debt relief measures undertaken by various donors, andthe debt service ratio deterioratecl from 13.5% in FY78 to 15.8% in FY79. 1/

13. Between August 1978 and ALugust 1979, GOB undertook a series of ex-change rate adjustments whereby the Taka was devalued by about. 24% againstthe Pound Sterling. These adjustments served to strengthen somewhat thebalance of payments and the allocat:ion of resources within the economy. InJuly 1979, the IMF approved a Stand-by Arrangement for a period of one year

1/ Debt service as a percentage of merchandise exports.

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in an amount equivalent to SDR 85 million. Net of repayments, and including

projected disbursements from the IMF Trust Fund and (possible) new SDR alloca-tions, the IMF is expected to cover about US$59 million of Bangladesh's financ-ing requirements in FY80.

Public Finan~.e

14. Public finances improved in FY79 and are expected to improve furtherin FY80. In both years, the contribution of the current budget surplus to the

development budget showed a rising trend, in absolute as well as relative terms.

Borrowing from the domestic banking system, which re-emerged as a source ofbudget financing in FY78, has since been avoided. Nevertheless, inflation has

again become a serious problem, while the implementation of many projects, both

aid and non-aided, continues to be hampered by insufficient or tardy allocation

of domestic funds. This emphasizes the urgent need for further improvement in

the mobilization of domestic resources if the ratio of public investment to GDP

is to be raised above the 10% level of recent years.

15. This task of raising additional domestic resources is wide-ranging,

involving not only a strengthening of the tax effort, but in addition--and

above all--improved performance of the public sector business enterprises and

utilities and reduction of the three key subsidies (on jute, food and agricul-

tural inputs). The Government has shown growing awareness of the problem. In

October 1976 it established a Taxation Enquiry Commission, and in mid-1978 five

special committees to review various aspects of domestic resource mobilization.

The five committees reviewed, respectively: (i) gradual elimination of thefood subsidy; (ii) rationalization of the rate structure of public transportagencies; (iii) economic pricing by public utilities; (iv) reduction in agri-

cultural input subsidies, including the fertilizer subsidy; and (v) improve-ment in the financial performance of public sector enterprises. The committees

recently concluded their work; the final report of the Taxation Enquiry

Commission was submitted to the Government in April 1979. Furthermore,a detailed survey of the jute industry was recently completed for GOB by

Economic Consultants Ltd. (ECL).

16. A start has been made to implement some of the recommendations ofthese advisory groups. Several of the measures suggested by the TaxationEnquiry Commission, especially those in regard to tax administration, have

been implemented gradually from FY78. In mid-1978 the Government increased

railway fares, and in the course of CY1979 it raised foodgrain ration prices,several utility rates and commodity sales prices of public sector enterprises.

Fertilizer prices, for example, were increased by 28% in September 1979 and

petroleum product prices by up to 45% in November 1979. In some cases these

price adjustments only kept up with inflation, but in others they served to

reduce the subsidy burden in real terms.

17. Development expenditures increased by almost 40% and total revenuesby about 21% in FY79; development-expenditures are projected to increase by

a further 29% and revenues by another 21% in FY80. Increased development

activity has also been reflected in the increased disbursement of project aid,

which rose by an estimated 35% in FY79 and is projected to rise by a further

24% in FY80.

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18. As noted above, the Government abstained from domestic budgetarydeficit financing in FY79, and it plans to avoid doing so in FY80 as well.but inflationary pressures, which re-emerged in FY78 (sparked primarily bytoo rapid a creation of liquidity by the banking system) continued into FY79,especially in the latter part of t:he year when rice prices rose very rapidly.The cost of living index (col) for urban consumers rose by an estimated 19%between June 1978-June 1979 although the average col index for FY79, pushedby a 48% increase in average rice prices was only 9% above that for FY78.This rate should decline somewhat during the current fiscal year as a resultof efforts being made to slow down the rise in liquidity., In addition, acce-lerated foodgrain imports and higher foodgrain production should contributeto an abatement of inflationary pressure on consumer prices; in December 1979,rice prices had in fact already receded by roughly 20% from their peak levelsof July and August.

Development Planning and Policy Issues

19. FY79 and FY80 comprise the period of the Two-Year Plan, which wasmeant to provide an opportunity for policy re-appraisal and for preparationof the Second Five-Year Plan and a Twenty-Year Perspective Plan. In the pro-cess of preparing the plans the planners have addressed themselves to thefactors underlying the slow development of the economy over the past decade:these include poor land use, lack of irrigation, inadequate public adminis-tration, low domestic resource mobilization, and social impediments to change.The planners have also analyzed those problems posed by the basic structuralconditions of the economy: a unique environment prone to natural disasters;a high rate of population growth; mass poverty; a highly-skewed distributionof income and land ownership; a high ratio of population to land; extremefragmentation of landholdings and growing landlessness of the predominantlyrural population; high illiteracy; poor health and short life expectancy;high unemployment and underemployment and scarce employment possibilitiesoutside agriculture; and a heavy dependence on foreign aid, not only forinvestment financing, but also for food and other recurrent inputs.

20. Although the Second Five-Year Plan is still in preparation, it seemsclear that first priority in the next Plan will go to agriculture and, withinagriculture, to the production of food. The potential for increasing agricul-tural output in Bangladesh is considerable, as yields are among the lowest inAsia, cropping intensity is low, and fertilizer use still very modest. Exceptfor last year, when it was adv(ersely affected by the weather, fertilizerdemand has been growing at a rapid rate. Wheat production has expandedquickly since FY75 and is likely to continue to grow significantly, and thereseems to be a large unsatisfied demand for irrigation. Precisely how rapidlyfood production could be boosted remains to be determined. The Plan's targetshave yet to be announced, but are expected to be very ambitious.

21. Recent projections 1,/ indlicate that the population of Bangladesh,estimated at roughly 90 million in January 1980, would total 145 million

I/ World Development Report (World Bank, August 1979), Tablie 17, pg. 158.

by the year 2000 if a net reproduction rate of 1 were not reached until 2035.These projections imply that the population growth rate, currently estimated atabout 2.5% -2.7% per annum, would not decline very dramatically over the next15 to 20 years--a grim but seemingly realistic assumption in view of thepoor implementation and limited success of population control efforts inBangladesh so far. The implications of such a rate of population growthfor the development prospects of Bangladesh are staggering. The density ofpopulation on cultivable land would increase from the present 3.8 persons peracre to over 6.2 persons per acre by the end of the century. In a countrywhere the mainstay of the economy is agriculture and where food shortages arealready serious, the adverse consequences of such overcrowding are obvious.Annual foodgrain requirements--even at the present low per capita consumptionlevel of about 15.5 ounces per day, would increase from about 14 million tonsat present to roughly 23 million tons by the year 2000. For domestic produc-tion to meet this requirement, it would almost have to double from its recordlevel of about 11.9 million tons (net of seed, feed and waste) achieved inFY78. Substantial increases in cropping intensity and in yields will berequired, therefore, even to maintain food consumption at a subsistencelevel.

22. Without a drastic reduction in the rate of population growth a sig-nificant improvement in real incomes, the satisfaction of basic needs and theprovision of public services also would be extremely difficult. By the sametoken, it would become increasingly impossible to educate the rapidly growingnumber of people and to provide gainful and productive employment opportun-ities for them. In recognition of these factors, high priority is being givenby GOB to improving the performance of its population control and familyplanning program. Emphasis in the next five years is also likely to be placedon the satisfaction of a number of basic needs, including the provision ofadequate clothing, universal primary education and rural electrification. Theplanners recognize that it will take more than five years to meet these andother targets, but strides will be made in the next plan period towards theirachievement.

23. A plan aimed at effecting a significant departure from past trendswill place a severe strain on domestic finance and managerial skills. Evenwith the adoption of labor-intensive and low capital-cost techniques, a signi-ficant step-up in development spending will be required. This in turn willrequire sizeable increases in both the mobilization of domestic and the inflowof foreign resources. A critical factor will also be the extent to whichimplementation capabilities are improved. Although immediate improvements canbe made in the ability of the administration to expedite project implementation,it is unlikely that the efforts of public agencies alone would be adequate toachieve the targeted breakthrough. The Government recognizes that in certainkey areas, greater reliance will have to be placed on the private sector. Italso believes that, to a certain extent, activities such as education and ruraldevelopment should be carried out in a decentralized fashion, with greateremphasis on local initiative and grass-roots participation.

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PART II - BANK GROUP OPERATIONS IN BANGLAESH

24. Bangladesh became a member of the Bank and IDA in 1972. Initially,Bank Group operations in Bangladesh concentrated on the reactivation of elevencredits, amountLng to US$148.6 M, made originally to Pakistan before 1971.In addition, 39 ew credits have been approved, totaling US$1,126.7 M; of these,US$575 M have been for program. credits (eight import program credits and onefertilizer imports credit). Annex II contains a summary statement of IDAcredits and disbursements as of January 31, 1979, and notes on the executionof ongoing projects. On June 18, 1976 Bangladesh became a member of the IFC,and one investment for a shipbuilding and engineering company has been approved.

25. Bangladesh's debt service ratio was 15.8% in FY79. 1/ (If workers'remittances amounting to US$140 million are added to total merchandise exportearnings of US$602 million, the debt service ratio would drop to 12.9%.) Whilethe debt service ratio is not expected to exceed 20% before the mid-1980s, itcould do so thereafter, unless careful debt management policies are pursuedand aid is provided on appropriately concessional terms. Bangladesh's totaloutstanding and disbursed external public debt amounted to just over US$3 bil-lion as of June 30, 1979, with IDA credits and the single IBRD loan accountingfor 25% of the total. In FY79, the Bank Group accounted for 9% of Bangladesh'stotal debt service payments; and because assistance is now entirely in theform of IDA credits, debt service to the Bank Group will rise slowly.

26. Of the 30 new project credits totaling US$551.7 M, US$22 M equiv-alent consisted of a Second Dacca lWater Supply and Sewerage project. Asexplained below in the discussion of the water supply and sewerage sector,much remains to be done to improve water supply and sanitation, within theconstraints of reasonable financia:L limits.

27. The main focus of IDA assistance in recent years has been on agricul-ture (14 of the 30 projects, and one fertilizer imports credit). This isconsistent with the country's needs and the Government's priorities. Particularemphasis continues to be placed on projects that provide agricultural inputs,improve water management, develop rural infrastructure, process or provideproducts for rural areas, and reduce the strain on Bangladesh's foreign exchangeresources. The enormity of Bangladesh's population problem makes this anextremely high priority sector also, limited only by its absorptive capacity.The first population project is now making encouraging progress, and a secondpopulation project was approved in FY79. Improved education and availabilityof trained manpower is also crucial., and lending in this f-ield has emphasizedagricultural, technical and vocational training.

28. Industry has been the main beneficiary of the eight imports programcredits approved to date. Given the need for substantial net transfer ofresources and the persistent structural weakness of the economy, program lending

1/ As a percentage of merchandise exports only.

will continue to be a desirable component of IDA operations in Bangladesh.The industrial sector has also benefited from DFC and small scale industryprojects and a fertilizer production project. IFC is currently in the pro-cess of identifying further suitable investment opportunities.

29. IDA should continue to provide assistance to critical infrastruc-tural areas such as transportation, energy and power, and telecommunications.A first power project was approved in late FY79 and a second highway projectwas approved this FY.

30. Disbursement of the program credits has proceeded satisfactorily;however, project disbursements initially lagged behind expectations, owinglargely to delays in the release of local funds, approval of contracts, employ-ment of consultants, and appointment of staff. Underlying these delays wereserious constraints that included a shortage of qualified staff, over-centralized bureaucratic procedures and organizational deficiencies. Someprogress has been made recently on these issues and the disbursement pictureis improving. IDA and GOB have given increased emphasis to regular monitoringand supervision in order to identify and resolve potential problems. IDA isproviding assistance both under specific projects and under three technicalassistance credits (Credit 409-BD, 622-BD and 872-BD) to assist in improvingplanning, project preparation and implementation capabilities.

31. In view of Bangladesh's difficult foreign exchange position, IDAcredits should continue to cover all foreign exchange costs; and in order todirect IDA lending to those sectors - such as agricultural and rural develop-ment - where the percentage of foreign exchange costs is relatively low, thefinancing of local currency expenditures is fully justified.

32. Economic and sector work continues to provide the basis for adialogue between the Bank Group and the Government on development strategy.It is also designed to enhance coordination of external assistance within theframework of the Bangladesh Aid Group. Recent activities in this area haveconcentrated on food policy, industrial investment strategy, and increaseddomestic resource mobilization.

PART III - THE WATER SUPPLY AND SEWERAGE SECTOR

Sector Characteristics

33. About a third of Bangladesh's area lies on the Ganges/BrahmaputraDelta; rainfall, concentrated in the monsoon period, generally exceeds 1,500 mmannually. This combination of abundant rainfall and great rivers enteringthe country, along with a generally porous subsoil, ensures that water isplentiful either from surface or underground sources. About 56% of the 85million people now have reasonably safe supplies of tubewell water but theremainder still depend on easily contaminated surface sources such as streams,tanks and dugwells.

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34. Most public water supplies use groundwater which requires lesstreatment and therefore is generally cheaper than surface water. Groundwatersupplies are generally adequate for present needs. However, interest insurface water sources is growing especially in the cities of Dacca andChittagong because groundwater frequently contains iron and also because ofthe possible long-term limitations of local aquifers in relation to rapidlyincreasing urban requirements. Studies are being undertaken to determinethe maximum to which aquifers can be safely exploited.

35. Sanitation is unsatisfactory and only Dacca has a water bornesewerage system. Elsewhere there is limited use of septic tanks with thebulk of the population dependent on municipal night soil collection systemsor direct disposal to fields. Compared with the 56% of the population havingwholesome water only about 8% benefit from waste disposal services. Thiscompares with an average access level of 38% to water and 33% to waste dis-posal in all developing countries.

36. Sector development has gradually improved over the past five or sixyears; during this period investment in water supply and sewerage has beenabout 7% of GOB development expenditures, a level which is unlikely to increasein the near future given the urgent and competing claims of other sectors ofthe economy.

Institutions

37. GOB exercises control of the sector through the Mi-nistry of LocalGovernment, Rural Development and Cooperatives (MLGRD). The agencies operat-ing under MLGRD are the Department of Public Health Engineering (DPHE), themunicipalities, and the Water and Sewerage Authorities (WASAs) in Dacca andChittagong. Several international organizations are supporting these agencies'activities. WHO and UNICEF have been active in the rural areas where aprogram, extending through 1985, for the provision of hand pump tubewellsis in progress. The total cost for this program through 1978 has been US$47million, including US$14 million for rural sanitation. Water supply projectsin Barisal, Bogra, Comilla, Jesscre and Mymensingh are being prepared forconsideration by the Asian Develcpment Bank. Projects have been completedin Dacca and Chittagong with IDA support and IDA has, under Credit 941-BD,provided support for a second project in Dacca. In addi-tion, GOB has obtainedassistance from the Government of the Netherlands (GON) for a feasibilitystudy for projects in Khulna and Rajshahi. GOB has indicated that they willseek financial support from IDA if projects emerge for R:hulna and Rajshahi.

38. DPHE develops and executes water supply projects countrywide, exceptfor Dacca and Chittagong, and operates and maintains waterworks throughout therural areas. In urban areas, DPHE generally turns over operational and main-tenance responsibilities to the municipalities. In the rural areas no chargeis made for water consumed. In municipalities a charge is made for waterconsumed by house connections; but this charge frequently covers only a smallpercentage of the cost of operation, maintenance and depreciation. The remain-ing costs are covered from the Government budget. Water from standpipes isprovided free of charge to the users. In Dacca and Chittagong where IDAhas been involved over a period of years, regular tariff structures are in

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operation, and autonomous water and sewerage authorities (WASAs) have been setup with responsibility for construction, operation and maintenance of watersupply and sanitation systems.

The Chittagong Water Supply and Sewerage Authority (WASA)

39. WASA functions as a semi-autonomous entity under MLGRD. Its man-agement is headed by a Chairman who is assisted by a secretariat, a commercialdivision and an engineering division. The organization, strengthened onlyrecently, is appropriate for WASA's needs and will facilitate future opera-tional improvement. Prior to any reorganization, WASA will afford IDA areasonable opportunity to exchange views thereon (Section 3.07(b) of theProject Agreement).

Training

40. The steady increase in water supply facilities in the country hasplaced a strain on available manpower. In rural areas, replacement of obso-lete hand pump tubewells amounts to about one-third of the current pump instal-lation program. Ordinary day-to-day maintenance is subject to delays due tothe lack of skilled repairmen and spare parts. Trained operators for tubewells,water treatment plant and pumping stations in the urban areas are scarce, andtraining facilities and instructors are needed for training of additional staff.

41. Training for Chittagong WASA and Dacca WASA, mostly directed at theupper levels of these organizations, was provided under Credits 367-BD and368-BD, and has been supplemented by other multilateral and bilateral donors.A training element in the recently started project for Dacca under Credit941-BD is directed at operational staff, and focuses on the developmentof a suitable in-house training capability. Provision is made for ChittagongWASA to participate in this planned joint training effort. Ultimately, thetraining organization is expected to develop into a nationwide vocationaltraining center for the sector (see paragraphs 63-64 below).

Problem Areas

42. Extensions to Chittagong's water supply system during the period1961-1979 kept abreast of the population increase during the same period(from about 350,000 inhabitants in 1961 to about 600,000 inhabitants in 1979).Per capita water supply in Chittagong, which had reached a level of about 47lcd in 1961, reached a level of about 100 lcd in 1979, although if the 120,000people in the urban fringe just outside WASA's area of supply are included, theresult is about 80 lcd for 1979.

43. Water borne diseases and those arising from unsanitary conditionsrepresent one of the country's major health problems. Health benefits encour-aged by hygiene education are critically dependent on access to safe water andimproved sewerage systems. Chittagong does not have a sewerage system; about athird of the population have the benefit of septic tanks but the remainder makeuse of fields or other open spaces for defecation or are dependent on a night

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soil conservancy scheme operated by Chittagong Municipality. The additionalsupplies of water being made available under the project will be distributedover a much wider area than is presently served; and only a marginal effect onexisting drainage problems is expected.

Experience with Previous Project

44. In the early 1960s GOB, with the assistance of consultants, estab-lished a comprehensive water supply and sewerage development plan forChittagong. In 1963 the plan became the subject of an IDA Credit (42-PAK)to the Government of Pakistan; but the scope of the proposal was beyond thefinancial and institutional means of the newly establishedi Chittagong Waterand Sewerage Authority. In 1969 the credit was reduced from US$24.0 millionto US$7.0 million mainly by deferr:ing the proposed river abstraction schemeand the proposals for a waterborne sewerage system and sewage treatment plant.Political disturbance and war interrupted progress and disbursements weresuspended. The project was reactivated in 1973 under a credil: to GOB (Credit367-BD), and was expanded to inclucte the development of a well-field of 13tubewells at Kalurghat, northeast of the city, and an associated treatmentplant (45 mld) to remove the iron present in solution in t:he water from thetubewells. In addition the project: completed about 33 miles of water mainsbegun under the earlier credit and a 14 ml (3 mg) service reservoir. Theproject also included a training element. The project cost was US$25.0 millionequivalent 1/ and the credit of US$7.0 million has been fully disbursed;contract payments have been completed except for a small amount of retentionmonies.

45. The objectives of the project were to (a) complete the physicalworks and (b) establish WASA as an efficient and viable commercial under-taking. Local contractors were slow but improved as they gained experience;the inexperience of local agents caused procurement delays but WASA nowproposes to pre-qualify these agents. Slow customs clearance was also adelaying factor but newly introduced procedures providing for book transfersof customs and duties payments are expected to bring improvements. The physicalelements of the project were completed in 1978 and, although attended by teethingtroubles (which are being eradicated), and some weakness at operators level,(which is being treated by improved training), the whole apparatus is nowworking reasonably well. Water production is affected by iron depositsin pumps and pipes and by power outages; WASA has now introduced a program forcleaning iron deposits and under the proposed project power outages will becountered, to a reasonable degree, by standby generators. As a result of thefirst project, water supplies increased from about 9 mld in 1963 to about 60mld in 1978 bringing for the first time a 24 hour supply of good quality waterto the city. Institutional objectives have not been fully realized butimprovements have been made in a number of areas despite piersistent problems.Overstaffing has been difficult to dleal with because of lalbor resistance butthis is a general problem in Bangladesh and is not restricted to WASA.Because institutional problems persisted throughout the supervision of the

1/ Based on an exchange rate for l:he Taka averaged over the duration ofthe project.

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first project, particular attention has been given to incorporating appro-priate managerial and financial improvements during the preparation andappraisal of the proposed project. While management quality has variedaccording to the ability of the incumbent chairman, the present incumbenthas shown signs of making definite improvement efforts since pre-appraisal.Financial staffing was very weak in WASA's early days; although there hasbeen gradual improvement, additional progress is necessary and feasible.The proposed project therefore includes a detailed program, formulated inconsultation with IDA, to achieve the financial and managerial improvementsnecessary to place WASA on a sound commercial footing (see paragraphs 52-64below). Particular emphasis will continue to be placed on billings and col-lections, both of which have presented problems over the duration of thefirst project.

PART IV - THE PROJECT

46. The proposed project was prepared by Chittagong WASA with the assist-ance of consultants and Bank Staff and was appraised in June/July 1979. TheStaff Appraisal Report No. 2701a-BD dated February 28, 1980 is being distri-buted separately to the Executive Directors. Negotiations were held inWashington in February 1980. The Government of Bangladesh and WASA wererepresented by a delegation headed by Mr. Anisuzzaman, Secretary, MLGRD. Asupplementary Project Data Sheet is attached as Annex III.

Project Objectives

47. The proposed project will provide a new source of water which willproduce the additional supplies needed by Chittagong's growing population anddeveloping industry. Initial development of the source will meet needs up to1990, but later expansion to meet future needs has been allowed for in design.The existing tubewell facilities will be expanded to meet demand during devel-opment of the new source. Complementary objectives of the proposed projectare:

(a) achieving further managerial and financial improvementsthrough implementation of a detailed improvement program;

(b) extending the distribution system to an additional 120,000people who are now without convenient access to safe water;providing full time service to about 90,000 people onintermittent supplies;

(c) establishing WASA as sole authority for water basin controland water supply within the area; and

(d) preparing a feasible sewerage/sanitation plan.

The preparation of the sewerage/sanitation plan is aimed at developing ascheme to meet the requirements of those areas of the city where a suitablealternative to water borne sewerage is not available, allied with proposalsfor the conversion of bucket latrines to water sealed pit latrines or other

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low-cost sanitary disposal methods for the remainder of the city. WASA willhire consultants for such a study by September 1, 1980 (Section 2.02(b) of theProject Agreement). Finance for this study would be made available under theThird Technical Assistance Credit (872-BD).

Project Description

48. The project will provide a new water intake and treatment plant atMohara near the confluence of the rivers Karnaphuli and Halda with a capacityof 90 mld (20 mgd), six tubewells to provide early supplies while the Moharawork is proceeding, modifications :o the existing Kalurghat iron removal plantand pumping station to increase its capacity from 45 to 70 mld (10-15 mgd)and associated distribution works. The project will also provide for 14,000service connections with meters, some 1,500 public standpipes and two publicwater concessions, which will be installed on an experimental basis. 1/ Therewill also be provision for training and consultancy services.

Project Costs

49. The costs of the project are as follows:

Local Foreign Total(US$ million equivalent)

Equipment and Civil Works 9.5 7.9 17.4Engineering Services 1.2 0.7 1.9Training 0.1 0.1 0.2Land Acquisition 0.2 - 0.2

11.0 8.7 19.7Contingencies

(i) Physical 0.9 0.8 1.7(ii) Price 4.1 2.3 6.4

Net Project Cost 16.0 11.8 27.8Duties and taxes 11.9 - 11.9

Total Project Costs27.9 11.8 39.7

The estimates for equipment and civil works are based on bids for similarequipment recently obtained in connection with the first project (Credit367-BD) and on the cost of comparable work undertaken during 1979. Physicalcontingencies of 10% have been included. Price contingencies have beencalculated using an annual escalation of 10% for local costs and 12% (1979),10-1/2% (1980), 9% (1981), 8% (1982) and 7% thereafter for foreign equipment.Customs duties and taxes have been added in accordance with local regulations.

1/ A public water concession will comprise 6 to 8 standpipes in an enclo-sure where water may be purchased from a concessionaire.

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Detailed engineering, which will be undertaken by a domestic/expatriate jointventure, is estimated to cost US$1.9 million, including about 2,760 man-monthsof consultants' services and local office and transportation costs. The esti-mated average man-month cost is US$510 (including salary, fees, internationaltravel and subsistence); the estimated average local man-month cost is US$220(2,600 man-months) and the average expatriate man-month cost is US$6,560 (160man-months).

Project Implementation

50. WASA is responsible for the implementation of the project but willbe assisted by consultants in design, drafting of bid documents, bid evalua-tion and construction supervision except in respect of tubewells and distri-bution mains where WASA will carry responsibility (Section 2.02(a) of theProject Agreement). Appointment of the consultants is a condition of Crediteffectiveness (Section 5.01(a) of the Development Credit Agreement). Foreignconsultants are expected to associate themselves with a local firm. Majorconstruction is expected to be completed by mid-1984 and project completionin all respects is scheduled for December 1984.

Financial and Institutional Improvements

Finance

51. In each of the six years since Credit 367-BD was approved for thefirst Chittagong water supply project, WASA has been unable to finance thenormal annual system extensions and a reasonable proportion of future majorexpansion as required by a covenant under the project. Despite three tariffincreases between FY74 and FY79, WASA's financial performance remained unsatis-factory for several reasons: water sales amounted to only about 50% of waterproduced; there were no satisfactory arrangements for recovering the cost ofwater supplied through public standpipes; programs for leak detection, wasteprevention or dealing with illegal connections were inadequate; cash collectedgenerally did not exceed 70% of annual billings (although an improvement to 83%was recorded in 1979); and expenses, and staffing costs increased significantly.GOB and WASA recognize that decisive improvement effort is required for WASAto become a financially viable and well managed utility, and will thereforecarry out a major improvement program, as described below (paragraphs 52-64).

Present Financial Position

52. Preliminary unaudited accounts for FY79 show that as of June 30,1979 ratios for current assets/current liabilities and debt/equity were 4:1and 33:67 respectively. Despite this favorable appearance the present finan-cial position requires improvement for the following reasons:

(a) Fixed Asset Valuation

WASA has not maintained proper records of fixed assets,whose values now are based on historic cost at the dateof transfer (1964) or subsequent acquisition. WASA has

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recently completed a physical verification of its fixedassets and has agreed to undertake a valuatiorL based oncurrent replacement costs. Completion of this valuationis a condition of effectiveness for the proposed credit(Section 5.01(f) of the Development Credit Agreement).WASA will be required to revalue its fixed assets there-after 'Section 4.04 of the Project Agreement). For thispurpose, an appropriate index, acceptable to IDA, has beenestablished; and revaluation will be carried out wheneverthe index has increased by more than 10% since the previousrevaluation.

(b) Inventory Levels (Spare Parts)

WASA is carrying out for the first time a physical checkof all inventories. Storekeeping arrangements are unsatis-factory and stores records are not reconciled with the finan-cial records. Therefore, as a condition of credit effective-ness, WASA will valtue its inventories as of June 30, 1980(Section 5.01(g) of the Development Credit Agreement); andthereafter progressively reduce its holdings to no more thanthree months' requirements by June 30, 1982 (Section 4.05of the Project Agreement:). GOB will make avaiLable to WASAaccess to sufficient foreign exchange to maintain this levelof inventories (Section 3.11 of the Development CreditAgreement).

(c) Arrears

At the time of appraisal., arrears owing to WASA from Gov-ernment departments amounted to Taka 8.9 million, of whichTaka 6.2 million has since been paid. GOB has recentlyprovided confirmation that payment of a further Taka 1.0million would be made prior to March 25, 1980. In addition,GOB has undertaken that the entire remainder, includingamounts in dispute and all arrears which have aiccumulatedsince June 30, 1979 will be cleared prior to any disburse-ment out of the Credit, with the exception of disbursementsfor consultants (Section 3.08 and Schedule 1 of the Develop-ment Credit Agreement). Thereafter, GOB departments willpay all charges within 30 days of billing (Section 3.07(b)of the Development Credit Agreement (see also paragraph 56below).

Tariffs

53. Since FY74 domestic charges have increased by 200%, industrial by330% and commercial by 350%. The imost recent increase was in September 1979.While the recent increase, combined with the improvements in operational effi-

ciency and billing and collection described below, is expected to improveWASA's finances significantly, it is estimated that a further increase would

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be necessary to produce a 3% rate of return on historically valued assets inFY80 and FY81. The Government will introduce revised tariffs increasing thedomestic tariff to Taka 7 per 1,000 gallons (currently Taka 6 per 1,000gallons) and introducing a single tariff of Taka 20 per 1,000 gallons forindustrial and commercial customers (presently Taka 9 and 18 per 1,000 gallonsrespectively). Announcement of such tariff increases, to become effective notlater than September 1, 1980, is a condition of credit effectiveness (Section5.01(h) of the Development Credit Agreement, and Section 4.08 of the ProjectAgreement). Thereafter, further tariff increases will be required to providefor WASA's contribution to the project (about 15% of total project costs) and,subsequently for future expansion of the supply system. Therefore, GOB andWASA will review and set tariffs for each fiscal year to ensure that for thethree years from July 1, 1981 (i.e., FY82-84) revenues are sufficient to coveroperating and administrative expenses, depreciation and to provide a rate ofreturn of 2-1/2% on currently valued net fixed assets. From July 1, 1984(i.e., FY85), the rate of return on currently valued net fixed assets willbe increased to 3% in FY85, 4% in FY86, 5% in FY87 and 6% annually thereafter(Section 4.09 of the Project Agreement). During the FY82-84 period, there-fore, tariffs should not have to be raised beyond what would be required tomeet inflation, in view of the extra water that will become available fromnew tubewells after July 1, 1981. On completion of the project in FY85, theaverage tariff, expressed at FY80 prices is projected to be Taka 10 per 1,000gallons against the present Taka 9.2 per 1,000 gallons. These rates areconsidered reasonable in relation to consumer's ability to pay, representingat most about 2-1/2% of monthly incomes.

Water Supplied through Public Standpipes

54. WASA presently receives no payment for the supply of water to publicstandpipes and, in earlier years, the payment made by Chittagong MunicipalCorporation (CMC) was insufficient to cover the cost of supplying water. InFY80, the cost of supplying such water, calculated at the domestic tariff, isabout Taka 3.3 million. GOB will ensure that in future WASA receives promptpayment for water consumed through public standpipes at the prevailing dom-estic tariff (Sections 3.07(a) and (b) of the Development Credit Agreement).To this end, WASA has begun to meter a representative number of standpipes(Section 3.05 of the Project Agreement).

Water Supplied to Housing Colonies

55. WASA presently supplies water at a rate of Taka 1.5 per dwellingunit per quarter to several Government housing colonies in Chittagong ori-ginally established for refugees from India at partition. In future, theGovernment will ensure payment for such water at the prevailing domestictariff (Section 3.09 of the Development Credit Agreement).

Billing and Collection

56. Although WASA's billing and collection effort showed a slight improve-ment in FY79, the record is generally unsatisfactory. Accounts receivable atthe end of FY79 were estimated at Taka 15.7 million, equivalent to roughly 13

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months' billings; less than half of the Taka 14.6 million billed in FY79were collected during that year. The arrears included Taka 8.9 million owedby Government departments. Significant progress has been made since then withrespect to GOB accounts, and all remaining arrears will be paid prior to dis-bursement (see paragraph 52(c) above). Government will pay or cause to bepaid charges for all water supplied by WASA to the various departments andagencies of the Government and its employees residing in Goverment providedhousing, within 30 days following receipt of the bill (Sections 3.07 (b) and3.09 of the Development Credit Agreement). Management also must give muchgreater emphasis to billing and collection henceforth for non-Governmentaccounts. The current 5% late payment surcharge and Taka 100 reconnection feeprovide little incentive for prompt payment and generally WASA has been slowto resort to disconnection. Several disconnection squads have been formedrecently and a publicity campaign has been mounted. In addition, WASA willinitiate a program of improvements to its billing and collection arrangementssatisfactory to the Association to ensure that the level of accounts receivableis progressively reduced to no more than two months billing by end-FY82(Section 4.06 of Project Agreement). The program will include disconnectionof delinquent consumers within 45 days of the overdue date and more effectivefinancial penalties for late payment and for reconnection of supply.

Metering and Waste Prevention

57. Metering of connections (standpipes excepted) is standard practicein Chittagong but about 30% of meters are in need of repair; metering ofproduction and distribution by district is incomplete. As a condition ofeffectiveness WASA will prepare a program acceptable to IDA for the instal-lation and repair of meters, waste detection and elimination of illegal con-nections (Section 5.01 (d) of the "Development Credit Agreement, and Section3.03 of the Project Agreement). The project makes provision for metering14,000 new domestic connections and about 550 new industrial and commercialconnections and will extend meterinlg to standpipes wherever practicable.

Audit and Insurance

58. WASA's accounts are audited by an independent firm of accountantsappointed in consultation with MLGRD. In the past, delays in making theappointment have combined with delays by WASA in preparing the accounts foraudit to prevent the submission of audited accounts to IDA within the requiredsix months of WASA's financial year-end; however, the audit of FY79 accountswas completed in January 1980, and the appointment of auditors for FY80 hasbeen made. In the future:

(a) Auditors, satisfactory to the Association, will beappointed prior to the start of each financial year(Section 4.02(b) of the P'roject Agreement); and

(b) WASA's audited accounts, together with the auditor'sreport, will be submitted to the Association withinsix months of the end of WASA's financial year(Section 4.02(a) of the Project Agreement).

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59. Until recently, WASA has not made arrangements for insuranceagainst public utility risks; but a satisfactory self-insurance fund for thispurpose has now been established (Section 3.01 of the Project Agreement).

Management and Staffing

60. WASA has suffered from inadequate management but this has improvedrecently. In addition, in an effort to improve WASA's financial management,WASA will appoint a consultant with experience in financial management andinformation systems in the water supply sector for a period of up to two years(Section 3.06 of the Project Agreement), financed under the Third TechnicalAssistance Credit (Credit 872-BD). This person will act as a counterpartto WASA's commercial manager, advise the Chairman on the introduction ofsatisfactory management information systems, and arrange a training program.Appointment of such a consultant is a condition of credit effectiveness(Section 5.01(e) of the Development Credit Agreement). In addition WASAhas recently established a separate management accounting section andstrengthened the control of billing and collection activities. Appointmentsof a second Deputy Chief Accountant, a Budget Officer and a Chief RevenuesOfficer are being made.

61. Although WASA has a number of qualified engineers, nine additionalprofessional engineering staff and some support staff will be appointed toenable WASA to undertake a part of the design and contract supervision forthe project. Appointment of the additional staff is a condition of crediteffectiveness (Section 5.01 (b) of the Development Credit Agreement; andSection 2.02 (b) (ii) of the Project Agreement). On completion of the pro-ject, additional staff will be needed to operate the new facilities.

62. WASA's total manpower was stable between 1970 and 1974 but hasincreased from about 420 in 1974 to about 650 in June 1979. In part, therecent increase is attributable to the commissioning of works under thefirst project but the present level appears excessive. WASA has indicatedits intention to limit increases in its staff numbers prior to completionof project facilities to the three new financial positions, nine engineeringpositions and limited engineering support positions as described above. BySeptember 1, 1980 WASA will prepare a staffing plan acceptable to IDA forthe period of project implementation (Section 2.02(b) (iii) of the ProjectAgreement).

Training

63. Training, both in Bangladesh and abroad, was provided to WASA'sstaff under the first project. Supplementary assistance for training wasreceived during that same period from multilateral and bilateral sources.Although some of this training was received at the operational level, thethrust of the formal programs was directed at the upper levels of theorganization. The nucleus of suitably trained mid-level managerial andtechnical staff now available will provide a foundation for furtherinstitutional development.

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64. The training element in the proposed project is directed principallyat the operational staff with a limited overseas fellowship program. A train-ing program is recommended which involves developing an in-house training capa-bility in Chittagong and establishing a joint program with Dacca WASA. Theprogram will utilize staff expertise gained under the first project. Train-ing in commercial and financiaL management will also be provided. WASA willprepare a training program acceptable to IDA, taking the joint program intoaccount, by September 1, 1980 (Section 3.04 of the Project Agreement).

Public Health and Control of Domesltic Water Supplies

65. About 70,000 people obtain water supplies from their employers.These supplies are not subject to public health control and are in some casesof dubious quality. Provision is being made under the proposed credit toenable WASA to assume responsibilit:y for all domestic supplies by June 30,1984 (Section 3.02 of the Project Agreement); and GOB's Department of HealthEducation will prepare a program ofi public hygiene education satisfactory tothe Association to ensure that the project benefits may be maximized. Theprogram will be initiated not later than September 1, 1980 (Section 3.06 ofthe Development Credit Agreement). This program will consist of a publicinformation campaign, utilizing handbills, mass media, and school programs.

Control of Abstractions

66. WASA aims to meet all industrial and commercial needs within theChittagong area, and increased production under the project will enable itto move towards this goal. Industries having their own wells, but using WASAsupplies as required, now obtain benefits from WASA's investment but avoidmaking their full contribution toward costs. Further, overdrawing of ground-water could result in saline intrusion of the aquifer. In the future it willbe necessary for WASA to control abstractions so that this valuable source ofgood quality water is protected. GOB confirmed during negotiations that WASAhas the authority to compel the licensing of all abstractions. GOB will byDecember 31, 1980 prepare a program satisfactory to the Association for thelicensing of all private abstractions (Section 3.05 of the Development CreditAgreement).

Land Acquisition

67. The site for the surface water treatment plant at Mohara has alreadybeen acquired by WASA. The remaining land requirements are for about six acresin total to provide sites for six tubewells, two booster piumping stations,staff quarters at Mohara and Kalurghat and a service reservoir. In addition,acquisition of land is required for an effluent pipe from the 14ohara plant tothe river and a number of minor rights of way are needed for water mains. GOBand WASA confirmed during negotiations that these sites and rights of way havebeen obtained, or may be obtained without difficulty.

68. The Mohara site is sufficiently large to permit some future exten-sion, but to ensure that later extensions are not obstructed, the land aroundthe site will be preserved for water supply purposes (Section 3.03 of theDevelopment Credit Agreement).

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Pollution Prevention

69. The waters from which Chittagong will take its supplies requireprotection, and GOB will prevent or control all discharges to the riversKarnaphuli and Halda (and tributaries) upstream of Mohara and for 2 milesdownstream (Section 3.04 of the Development Credit Agreement).

Procurement

70. All contracts for equipment, materials and meters will be awardedunder international competitive bidding procedures in accordance with theAssociation's guidelines. Expenditures will be largely for pipes whichmay include steel, ductile iron, asbestos cement and PVC for water mains.Exceptions will be made for items costing less than US$15,000 having anaggregate value not exceeding US$350,00 which can be procured through localshopping on the basis of at least three priced quotations. In evaluatingbids for equipment and materials, domestic manufacturers will be given apreferential margin equal to 15% of the c.i.f. costs of the competing importsor the existing rate of customs duty, whichever is lower. Major items ofproject construction (e.g., the surface water treatment plant and trunk mains)will be subject to international competitive bidding, with a 7-1/2% margin ofpreference given to domestic contractors. The remaining works are small (con-tracts of US$0.5 million or less), scattered, labor intensive, and withinthe scope of local contractors. For these works, international competitivebidding is not practical, and local competitive bidding procedures acceptableto IDA would be applied.

Disbursement

71. Disbursements under the proposed credit would cover:

(a) 57% of total expenditures for civil works contracts procuredunder I.C.B. in connection with the Mohara treatment plantand construction of trunk mains and appertenant works;

(b) 100% of foreign expenditures for equipment and constructionmaterials and vehicles procured overseas, or 100% of localexpenditures for manufactured equipment, construction materialsand vehicles (ex-factory), and 50% of expenditures for otherequipment, construction materials and vehicles procured locally;

(c) 100% of total expenditures for training; and

(d) 100% of total expenditures for consultants services.

The Credit is expected to be fully disbursed by December 31, 1984.

Financing

72. The Credit of US$20 million would finance 72% of the total projectcosts of US$27.8 million (net of duties and taxes). It would cover all for-eign costs (US$11.8 million) and US$8.2 million of expenditures in local

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currency. GOB would finance US$15.7 million (including US$11.9 million induties and taxes), and WASA would finance the remaining US$4 million (seeProject Costs table in paragraph 49). GOB will ensure the availability ofsufficient funds to complete the project. It has been agreed in principlethat funds for the financial manager and for a feasibility stucy of sanitationimprovements can be provided under the IDA Third Technical Assistance credit(Credit 872-BD). Retroactive financing, not exceeding US$250,000 is recom-mended for expenditures incurred after January 1, 1980 to cover advance pay-ments for consultants, equipment and materials needed to be procured early topermit prompt initiation of project works (paragraph 4 of Schedule 1 of theDevelopment Credit Agreement). To protect its future financial stability, WASAwill be required not to incur any long-term debt without IDA's prior agreementunless its maximum future debt service is covered at least 1.25 times by itsmost recent 12 months' operating surplus before depreciation (Section 4.07 ofthe Project Agreement).

Relending Arrangement

73. The Government will relend the proceeds of the credit to WASA at7% per annum interest, for a term of 25 years, including 5 years of grace.GOB will bear the foreign exchange risk. These terms, which are identicalto those for the Second Dacca WASA Project (Credit 941-Bd), are consideredappropriate, given WASA's financial circumstances. The average annual infla-tion rate in Bangladesh from FY76-78 was about 4%, and for the next threeyears is expected to average about 10%. Conclusion of a satisfactory subsidiaryloan agreement between GOB and WASiA is a condition of effectiveness (Sections5.01 (c) and 5.02(b) of the Development Credit Agreement).

Project Approval

74. Government approval of the Project Proforma is a condition of Crediteffectiveness (Section 5.01(i) of the Development Credit Agreement).

Benefits and Risks

75. Without the project, per capita supplies of water would drop toabout 75 lcd from the 1979 level of 100 lcd. Supplies would, perforce, becomeintermittent throughout the area of supply instead of being generally avail-able throughout the 24 hours. Deteriorating standards would be reflectedin an increase in the risk of disease especially in relation to diarrhealdiseases and skin diseases, where reasonable standards of personal hygieneare important.

76. Using incremental revenues as a proxy for projecit benefits theeconomic rate of return is about: 9% which is satisfactory.

77. The physical risks involved in the project are, iLf anything, ratherless than those normally expected with operations of this type, since thework is no more difficult than that carried out under the first project, andis in the same general area with substantially the same soil conditions. Theinstitutional risks are somewhat greater, however, and full Government supportand continued managerial improvements will be required to achieve the project'sfinancial objectives.

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PART V - LEGAL INSTRUMENTS AND AUTHORITY

78. The draft Development Credit Agreement between the People's Republicof Bangladesh and the Association, the draft Project Agreement between theAssociation and the Chittagong Water Supply and Sewerage Authority, and therecommendation of the Committee provided for in Article V, Section l(d) ofthe Articles of Agreement are being distributed separately to the ExecutiveDirectors.

79. Special conditions of the project are listed in Section III of AnnexIII and include as special conditions of effectiveness: (a) appointment ofconsultants for detailed design and supervision of construction, (b) employ-ment of nine additional professional staff, (c) signing of the SubsidiaryLoan Agreement between GOB and Chittagong WASA, (d) preparation of a programfor waste detection and prevention, and meter repair, (e) appointment of acounterpart to WASA's commercial manager for two years, (f) valuation ofWASA's assets, (g) valuation of WASA's inventories, (h) announcement of aninterim tariff increase, and (i) approval of the Project Proforma.

80. I am satisfied that the proposed credit would comply with theArticles of Agreement of the Association.

PART VI - RECOMMENDATION

81. I recommend that the Executive Directors approve the proposedCredit.

Robert S. McNamaraPresident

March 6, 1980

ANNEX I- 24 -

TABLE 3A_ ANISDESH - SOCAL DIcaTORS DATA S

= QWuE GROUPS (ADJUSTD *A)AESLAND ARBE (THOUS SQ. N.) - MDST RECZRT E7STST

TOTAL 14.0 SAME SAMS I IUlllAICULTUL 99.9 HDST RECENT C RAPIC ENCOUE sca

196l /b 1970 lb ZRSTI4T A 3C1010 Li GROUP L GCROfUP L_

ClP PER CAPITA (US$1 40.c 60.0 90.0 191.1 209.6 467.5

ME=G? COUSNPTnO PZR CAPITA(XUCWn- IF COAL EIVALT) .. .. 33.0 69.1 83.9 262.1

POPLATtIO AND VITAL STATISICSPOPULAXIOW. 9tH-YE" (MILLIONS) 51.4 68.3 t1.2UlA POpULATIoN (PECUT or TOwT.) 5.2 7.6 9.3 13.2 16.2 24.6

POPULATIEO POjETONSPOPM.ATIU IN TE 2000 (MILLIONS) 145.0STAOIIUT POPMLATIOI (NILOUS) 334.0TA STATIONARY POPULATION I BXACI 2165.0

POPULLTION DENSITIF SQ. U. 357.0 474.0 564.0 86.6 49.4 45.3PU SQ. DI. AGRICULTRAL LAND 540.0 683.0 813.0 330.2 252.0 U49.0

POPULATION AGE SMUCTUB (PERCENT)0-14 US. 4.3 46.4 46.0 44.3 43.1 45.2

15-64 ns. 52.5 51.0 51.0 52.4 53.2 51.965 YnS. AND ABOVE 3.2 2.6 3.0 3.1 3.0 2.8

POPULALION GROWTH RAT (PUCT)TOTAL 2.4 2.9 2.3 2.4 2.4 2.7.- .. 6.7 6.3 4.1 4.6 4.3

CRDDE BIST ATE (PE THOUSLAD) 49.0 48.0 46.0 44.4 42.4 39.4CIUDE DEATH RATE (PER THOUSAND) 23.0 20.0 18.0 16.4 15.9 11.7GROSS REFODUCIION RE 3.5 3.1 3.2 3.2 2.9 2.7FAMKTL PLANNING

ACCEFRS, AAIUAL (TWOUSANDS) .. 345.6 1103.1USERS (PECENT OF RZIIILD V)) .. .. 8.9 7.9 12.2 13.2

FOOD AND NUMT ONINDEX OF Foo PROUCTION

Pt CAPITA (1969-71-L00) 107.3 101.0 98.0 99.4 9S.2 99.6

PR CAPITA SUPPLY OFCALORiti (PRCENT OF

REQUR.ETS) 89.0 89.0 93.0 93.0 93.3 94.7PRTINS (GRS m DAT) 42.6f .. 58.5 56.1 52.1 54.3

OF WTCH ANIMAL AND PM1S5 9.2 .. 8.0 10.4 13.6 17.4

CElO (AS 1-4) .14OTALXTY URT 29.0 25.0 23.0 19.2 18.5 11.4

LIFE EVOTANCY AT IRH (YEAS) 42.0 *5.0 47.0 49.1 49.3 54.7I9PFANT NOTALITT NATE (PETHDUSAND) .. 153.0 140.0 .. 105.4 68.1

ACCESS To SAE WArE (PERCENT OFPtOPULAXION)

TOTAL .. 45.0 53.0 31.3 26.3 34.4# .. L3.0 15.0 63.9 58.5 57.9

URAL .. 47.0 55.0 20.1 15.8 21.2

ACCESS TO W=RIA DISPOSAL (PERCMNTOF POPULATION)

TOTAL .. 6.0 5.0 15.7 16.0 40.8URAk .. .. 40.0 66.S 65. 1 71.3RURAL .. .. .. 2.5 3.5 27.7

POPULATION PQE PHYSICIAN ,. 7600.0 11350.0 7107.9 11396.4 6799.4POPULATION PEL NURSING PSO .. 72030.0- 53700.0 12064.0 5552.4 L522.1POPULATION PEIL HOSPITL BED

POTAL 1100.0OL/ 8120S.0h 4430.0 2738.4 1417.1 726.3-1 .. .. .. .. 197.3 272.7

LURAL .. .. .. .. 445.9 L404.4

ADMISSIONS PDL HOSPITAL SM .. .. .. .. 24.8 27.5

HLOUSINGAVERAGE SIZE OF HOUSEHOLD

TOIAL .. .. .. . 5.3 5.4URBAN .. .. .. .. .9 5.1ROBAL - .. .. .. .. 5.4 5.5

AVERAGE SUNMER OF PRSONS PDL OOMTOTAL .. .. .. ..84AN.. .. .. ..RURBAL.. . ......

ACCESS TO ELECTRIC'TY (PEECENTOP DWEL.LIGS I

TOTAL 35 0/ .3 41

RURAL .. .. .. .. .. 9.9

- 25 - ANNEX I

sAWNWIA SOCUL DSCATSO CATA SR=

BA&acrAzs linuM IC S ( UZSSDA

MRB ucZUt OBOaAMXC INCOME INCOME

10 L 1970 L I8TZMAT L S IOIF /n %am /4 mO La

z U80Lm0 UTEOSPIDIW3 TOAL 47.0 61.0 83.0 59.5 63.3 82.7

muZI 48.0 80.0 106.0 74.9 79.1 87.328.0 42.0 60.0 43.7 48.4 73.8

*00U0? Sau 8.0 19.0 23.0 19.5 16.7 21.4HALE 14.0 30.0 34.0 27.8 22.1 33.0

YOCATEOAL OUL. (2 01 3200mM) 1.0 1.0 1.0 1.3 5.2 9.1

PMMA .. 49.0 55.0 42.2 41.0 34.126.0 24.0 .. 21.7 23.4

AEULT LZ 1= (A ) 21. *- 22.0 25.5 31.2 54.0

CONSMEONRASSMMf CM1 M3 TIOSAND

POW .. 0.4 0.4A 2.3 2.8 9.3laic ucgtm ? m sm

PMMATIO .. .0 .. 15.5 27.2 76.917m SWIm P T0UflD

POULATX .. .. .. .. 2. 13.5IPAMI (0SYA tL Gi

DIT2l82r ) CZIcMAUsOU PUTHOUSAD rATIO .. .. 5.0 .2 5.3 18.3C?344 AAIIL A IM PU CUA .. .. .. .. 1.1 2.5

LADK FOCITOTAL La-OW POICZ (UumSn) 18516.0 23402.0 29900.0

MDALE (PERCENT) 15.2 16.5 17.0 U21. 24.8 29.2AGCULTOU (Fl3RIT) 86.J 85.9 78.0 66.3 69.4 62.7IMSZ (PUZRCET) 3.3 3.5 7.0 9.6 10.0 11.9

PATITCIPATION RATE (PEUP)TOTAL 36.0 34.6 34.4 35.S 36.9 37.1.ALZ 5387 55.8 55.3 52.3 52.4 48.J.tA812 11.4 11.8 12.1 15.7 18.0 20.4

E0131C DmSCY PATIO 1.3 1.4 1.3 1.3 1.2 1.4

LNC0t OtSAISCONPICENT OF PIVATLE INCOME

c:zro ByEHGST 5 3 0l MS LS La.3/ 16.7k .. .. .. 15.2RIXS5 20 PErST or DUOUMLDS 4.5 42.3 .. .. .. 48.2tL1ST 20 UIS OQ SUI2LDS 6.97j 7.971 .. .. .. 6.3iO58T 40 PES 1T Or 80uwLDS 17.9 19.67_ .. .. .. 16.3

POW121, TAlC! muls1T5ZUE AISOLOE PV? INCOMELZVEL (US$ MI CAPITA)

U . . 110.0 86.5 99.2 241.3lAAL . .. 91.0 74.2 78.9 136.6

ESO YIATE SLTMPV=z INCOLIM31 (058 M3 CAPIIA)

U .. .. .. .. 91.9 179.7MDIL .. .. .. 50.4 54.8 103.7

ESTIATED POPULATION BELOU AISOLPOVEnr Dfl1CO VL (vy CEN)

UR3BA . . 55.0 4.3 &4.1 24.8EUAL . 74.0 S2./ 53.9 37.5

. ot availableNot applicable.

OTS

/a Ph. adjusted grop averoga for each indicator are populatin-umighted geometric means, excluding the extr_mvilues of the indicator and the most populated country in each group. Coverage of countries ong theindicators depends on availability of data and Is not uniform.

lb Unless ocherwis noted, data for 1960 refor to any year botween 1959 and 1961; for 1970, between 1969and 1971; and for Most Recent Estimae betwen 1974 and 1977.

Ic South Asia; /d Low Income (S2S0 or lose per capita 1976); le Lower Middle Incme (5281-550 per capita,1976); if W. 1961-65; LI Regoitered, not all practicing in the countr;, /h Govt. astablishmntceonly; 1± 1972; LI 1963-64; 1k 1966-67; /L 1962: /I 1973.

osst lacent Estimats of GSP per capita is for 1978.

August. 1979

-26 - ANNEX I07Tr Or SIAL MNDIATSO

lots.: Athoug the dat.air drawn from souce generlly Judged the wet authoritative and reliable, *it should sian be outed that they y not he Interns-tio..ally comparable because of the lack of standardi-ed definitlon Cad concapti used hy diffesent coutries to collecting the data. The data are, esoetbel.as,uceful to describe orers of magnitude, Indicate trend., and ch2arso4terice certain Major diffePROCss between countries.

The adluotcd cr000 arergo for s-ot Ldluat.r ace ppyuLation-weightsd geometric seems, exicluiding the extra -les of the inidioacr and the mast populatedcountry in each group. , to lack of data, group average of all indicators for Capital Surplus Oil Rxporters sod of indicators of Access no Water and Ecca-t.liepool .. ouslHog,9 Incom 16%stribtion sod Poverty for other country groups are pomslatis-ceu.ghted genearic means without sxciusius of tie extreec, t-ines ec0h. Cost ppueslted coutry. Sinc tecvrgofootcs gteidaosdees00amaiitof data sod is not unifom csto uth xrised

io vlatug aerseo ofoneindicao tsohe.These sysrage r tyosfs saercmtso 'eceted' vaJues when cla io h aie f ooelindcatoir at atome smong the country enid reference group'.

lAnD ARth (thousand sq.ia.) Acces to bkcrsta oesl P (ter,ten.1,t of; poplaton total orhac sod rurline otlsufer eo opiigln ra ln er.luoer of psopic(oa, ross, end coral servd by nret ipsla

Agrso,utural - Post recet estimate of agricultural. area used t eaorsril' pecentages of their respective populations. increta disposal as Inclodeor Permanently for crops, pasturea, market sod klitcen gardens or to the toi1eetice, sad disposal, with cr cltbot r.t-a-t, of knows esrs-t

- -- ~~~~~~lie, fallow. And waste-eater by water-horn systems, or the W.s St privies snd sieinstallations.

GYP Pi CAPITA (us$) - GNP Per capita estimaaes at current market PriesMltlont aePyician -PllaIoc cu-cded by cuabe of Practicing phyisicos,,.EI-Litiiibyiami ooneeri- method -sorled bsan Atlas (1976-72j hasi.); a medicalr school atuneriylv.1960, iSO, sod 1978 data. Psoultios per Nursing Person - Poultin ,Iided by smteir of Praeticing salo

iENERGY CO0c0rnP07Oe PM9 CAPI7A - dnA].- cocoumtion of commercial en,ergy so feeal. graduate cre,practical -use, and axsiocontmocrse..I os. o lossite. potroleum, natural g-asnsd bydro-, ncslear an, ge- Potlto sfhsia e -ttl ra. sod rureal. Ouain(oa,i-s.

thremal eco-tricity) in uilgromu of cocal eqsi-lett Per capita; 1960, sdrridIddhyterepctvoueffhsialbedesoiae it197, ano 1976 data, public sod prooate general sod apeosice.d botpitl and rehatiltatic- ceter.5

Hospitalu are estatishmento Permanently staffed by at leat oepscitPOPIjIATION ANt VITAL STATISTICS Establishments providing Principally custodial cueare oc t iccluced. buarl]

'Total fP,i.tio.. 1i-7heii7iilli-s) - As of July 1; 1960, 1970, sod hostpitalsn howeve, include health sod medical cect-r not preswuae,tiz' etsfito

1977 cats by a pbVisyscia (but by a mediCal assistant, turse, midsife, etc. ) chich offerOrhbn Populatboc (cerment of' total) - Ratio of urban, to total population; in-patient accommdation and proide n limited range of medicalfai:is

liffor-co ooficiticn of urban oea my effect coparability of da." Adaissoons - H-sPital bed - total -occr of sumissioss ha or dischage. foosagcotre;.c, 90 n 17 aa hicaputel divided bp the cougher of isi.-

opolai.oi year 2000 - Curren population projlections are ba.ed on 015)5071I975tEboir96pulati,,i by age sod .eo and toeir inrtality sod fetility Avr-age 'diesfr 1fcecd

toeron c houshol) tot ~al.obah sd coal-

rates. Projection parameter fcc mortJalty atas comrise of .bres A ueodcniton ofa rop finvdul wh hr iving quarters an.leveit aso-Ini life expectancy at birth increasong with cscn'iry,a tbeir main main. A boarder cr lodger may or map cot Ic socluoci ic thePer caioicoclvl and fe..sle life copetsasy stabiliciug at houseold fo cotatintical purposes.77.5 pe-r. TIe parsomtero for fsrtility rate also have tire,, leeds Average number of pesn e oo oa.orba and rura - Average um0c-anssuming oeclios ic~ fertility ecc-eding to inciss level -d psost of perso"n per -mo inanorn no rrl occupied convetuor`Ll oeoofamily olsoing performane. Esob costry in then sosiged so,' of these repectively. Dwsellings eccude hnc-permaneet structures and unorcu-i-ts:nine octinati-n of mernality and fertility trends for prcjecticn Access hr Electricity %.cnIo.oflno -ttl umn, end rural- oop-roce.-ccioa dwellings th electrAicity 10livong queters so p.ernazge

Statiosay occoiatiot -In astationary populatioc there is no gycut total, orba, sod rural dweelliegs -spsctively.N:c oe. birth rate-in equal toothe death rate, and also the agecorocture ree -otcnetu. Thin is achievd only after fertility rates SD5XATIONdecline to the replacement -Lei of unit net reproduction rate, chee Audoitd Pasrolmesst Ratiossoul gosratiosi of eue re1soc$ itself soantly. The stationary pop- Piayohw -ttlwl n feal-ross toa,maeis eae eoiatloc oi:s uao tse,atsd on the basis of the projected chsareteriatios sent of l agsa-tepiar ee anpercentages of reopectio- Primuryof th ouainin the fees 2000, sod the rate of decline of fertility echs-lage pupsslatioe.s; normaly includes childrso aged 6-il yours notrat orpaeet level, adjusted for hiferet lsogth of primary education; for coootsies citl

Pose ssthocsv onpuatiosis reached - ea hc ttoer oulto uiesl education esrollnent mam exceed 150 perceco icce -on pupoicoi.c bas iee reahed. ar blw rshr the official school age..

Proatios DenitinScnaysbc t-total, alesd female - C osted -o L-o- -cooPer o. ft. - Md,-ya poultion per square bunmeter (100 tenures) of education require atleast four yearo of appcr-ed pri-ny oorco

toot]. urea ~~~~~~~~~~~~~~prorides general occtinam]., or osachr trminiing instruction: 1cr p,pilsPer so. ow.agicultural land - Cusputed as show fee agricutusrel lead usually of 12 to 17 years of age; correspondence courseo srn get.srally'

only. ecluded.Population ARe Structure (cerc-et - Children (0-li years), working:-age Pucatio.aIenrollment (ceroent of .econdurv) V- P taonoa inotitotloon icIobon~15-_iyears), med retired (5 years, sod ovr) as per-etage of mid-pear techical,indaustrial, or other Progrems which operate ldpnscl rac

poultico; 1I0,1970. sod 1977 data. depcrtmnta of secondary instit'utions.Ponulation trwt Ras pr tc) - total - Annual growth ratses of total, mid- Popil-ebr rai rir.sd -ecodiry - Total tuidecta cnro11od ic

* pear popula'iinsc f or 1950-n~_o, 19W.-70, sod i9'N-7f. prmr n eodrylvl iie y nushers of teachers In tie con--.Popclatien Growth Rate ) pereet) - urban - Annsual groeth rates of urhun sponding lerelo.

oopLatoo- P r - 0- 190-70, and 1970-7-. Adult literay ratr ceroent) L- ltert ndots (sole t c-ra n write) Crude BirthRte (rtousmod) -nual live births per thousand of mod- aperetgeo otlautpeltonaged iS years sod over.

yea puploio;1900, 1970, end 1977 data.C hd eat Wat th-ussod) - bAsnal denths pe thosuod ci mii-peer cartiNPjaib~iP'nlti6iY I000I197057iiiW1977 data. Pseg r fr (ts, th-sso npL..io) - Passenger oars coprise sotr. srrosReproduction Oats-ovrage smber of daughter a omn Il 05c seaing less tieight persons sclu.des smoulsoces, hearses sod e;lltsry

is her ocreaI Preprodctive p-roed if she cxperieccee present ige-veilsopecific fertility rates; uscalp fieyerevrgec ceding is 19.0, Radio Receiver (per tosand~ pulto)- All types of receoves for e-diL1971, sod 1975. broadcasts to eea pulc e housand of pepulotice; ..ocludes unli-e....

famIy Ploonic -_Acceptoro. Annual (thoussooc3) - Annual number of ree-r in countries and in peer. chec regitrsticn of raio sets n- inerceptr of birth-control de-iues under suspicee of national fsmi.ly effect; data for recent years asp tot te rcparshe nince n-ct oc-corheplcIcs.g progrun. ibolisbed iiconsing.

ail Panning - Uer)iperceu ofcrried come - Percentage of sarried T'o neeier 10r.thosn toocio)- / reeies o broados.t to cecers-

oceenof ohld-herong ge 1-i yesra) eb ice birth-control des-ce pulcprtcosdpplton cidc licensed STVrcieoi ccrrtoeI mrred coe,in sae g group. and in yearo when regoutratico of TV oetn enso effect.

'C0D ANDt55 N fl-On Mff 'dail genra interes.t icee1=. .d as 5per,indion1 PublicatiociTo,ex vf Pood _roooeio perfnite )1969.71ai00) - Indeo of per canitosoone primriyornodigeoa.nun itocnseedtItii

nnotal productio f l food candities. Production ecoldes sead sod if it appears t leant Icor times a ace.Dedad In os calendar yea basis. toedltie cover primary sooni Cinema, Annual Attendsoco orCptcr sr-Beased on the number of sl--os

-.. ugr_n :cstesd of sugar) which sre ediblo and -ctai.t ctrients cold during the year, boIcudin in isooc to sLve-in cicemax and coo, Ic-c.cffee and tea or .ccuded). Aggregate prcdothcc of each c-mtup unoin.

in laced onntinl vrage producer price weights. RFOCPer 1-10tpi' folre pret of reuleenn)-comnd fro- oPcPO'

-orgy c.iIiuaeoo tot -bce oupie vla in osot'ry per -spta Toa aorFreth.ousnds) - Economically uctioc por,onc. inolding icper dy~. Aclabesppli.. comprise donewtic production, impor-s less foco n yoepcy lot ecculdig -aseevve, otucto, etc. Dlfioit--.i

coot.sd obmogee in etok Nctoouppiieoe-ciude anisal feed, s..,.nvaiu .nsonries ar oct -oos.rbc..quantitie used in food Proensin edoseicdsrbtc.eqr- l ejren)-P le Inoor force as percentage of total lahoir force

sesto oemestimate by tRiObased is pohyniologicel _ech for cones..] roostv c I -Labor foron it, fasing forestry, bunting sodctl,ity and health considering enir-oetal temprst-r, body -eughtn, 1Ifishin as percetage of tota labor force

:ge _a ceo dictribotion of populatio, sod slic-ig 10 perteot for induistry (percent) - Labor force in sinbng, comotrucoico, sanu.factur:nig edo-st st h-oehoid level. electricity, oster sod gao Sc Percentage of total laboroce

Per -spios ooply of Protein (crms- ts dsp) - Proteis. c.s.es. .1 pe r Pas-tcins tion Oste (peroent) - ctl moe?n.cnc-Prtiripatino o:ptsoties.ply of food per day. Oct copply of food is dcri-od asoatitreun aopo sie total7.ac,Fan fomLLe moo.r Cocos as Per-

shore. qoiremento for anl conre stablished by '15th proide for etages cf total, male sod foamls populsoics of ol ages respectively;sinissunsioac of nograms of total protein per say sod 20 gr.am of 1960 1970, sod 1975 data. These are luau pari.opotion rates reflectingsoseal and pulse protein, of which 10 gram should be metmal protein. age-sen structure of the population, sod 1nng time trend. A fec entiaeteLThese otmodirds ar lowr than, those of 75 graxon of total protein and are finn nattonal. sources.25 grams of -nlso proteic a an meavrage for the esrld, proposed by TAO donac evodrnyRatio - Ratio of population under i and 65 sod over toin th hr ol oo uvy h abrfrsi g group of 15-ho Years.

Per cpsit. proon suppy Ifer e aI and Pulse - Protein supply of food nCM IM3TOderve fro enlomltand tpulses in grsmos Per day. OE ThRlYll

Child agen l. braty Rte(orr tousand) - Ansnual deaths Per etbcssod Percetag`o Privat incme to in cash sod kiind) - Received by richestoo gegrup1- yar, n eilrc i tiaag onu; rr as dntel 5pecet, rcet 20pret turs 20 percest, sod poorest u0 percent

opoog tootries data derived fron life tabl-c of housabsida..

,,.fetpectenoy nobIi (tree) -Average number of years of life istiated Asolut Poery soelot-el (te$ per sia ra n uaremining niyt 90 95 n 97 aa Absoluite poverty Incom level io teat Jc-m lveIio cican.sma

Isfuos htortelotY Rote (per th,uad Ancess] deaths of Infants under one nutritiosaily adequate diet Pins .. s..stial non-food requiro-et. 0000yea of uge e ousolr births. affordshle

A-ccps to 1sf o Cater rocc fcc:ocl-to] ra,ad rual - stimated Ralatie Poverty Income ievei (US$ per rati,) -ranad rurLI-Nocber.t of irpr(otl;ten,nfurl lt rassbl cecRtural relative .povrt Otoas lwo ison-hr ofsaeper vapitsoaf e onr supply (includes treated surfac caner. or untreated but Personal inosoc of -.h. coutry. Urban level is derived run t. ic rura le-unoitminate motor as.h as that from pro.tectd borehole,, springs, with adjostaen for sigher cost of living in urba areas -and saniary -eU.) as Percentagen of their respective populations~ - t Estimated Po.1itioc Reins Absolute oet Itoeleel (rcnt) - urba andan umanvureat n Public fountain or ot&adposc located not moetaburl-Pren fpplain:rassdyrurl a are:anuolte PooR -200 meters from s dous may toconsidered as being within reasonabieacceso of that hoaso. tn rura areas mea.c.able access aculd implythat the housewife or -nbera of the household do wt have to spend t.Dcsnlic and Sicois ista ioidisproportionate part of the dsp to fetching the a. p aster heads M oon-nic, Analysis sd Projections Dspa,,iment

August 1979

-27 -

ANNEX I

Atual Ee1td 1960- 1965- 1973. AV.2.947-69 1974175 a07/78

AV. 1967-69 a972/73 1974/75 1976/77 97/8 16 170 1978fITIISAL A~CCGWTS M 17

1ro~~~~ stic ~~~~In Constant 1972-1973 Prices & z=chage ae Avers.t Annual Gravtk, Rates As Percent of G20YGro.3- Dmestic rodact '" ,8u3 5.314 7.z55 J.3 .3 6.1 98,5 101.8 101.1

-Gaijus frnn Terms of Trade () 89 4117 -. 148 -as 1.5 -1.8 -1.1C;ro~.s Domestci Income 5 3~ S~ 6=9 7 7,107 i774 5.6 2.5 5.8 100.0 1O00.0 10o0.0

import (mzci. xP) 879 747 703 506 791 720.6 6.8 0.7 14.4 11.0 10.2(aot import eatn⁢Y)- 598 369 197 243 31-5 12.3 -14.6 -3.2 9.8 3.1 4.1

ReoreGap 281 378 506i 2-63 7 4.6 7,9 7ConSuMPtion Plcpenditures 5,668 5.817 6,404 6,764 7.531 5.7 3.6 5.2 92.9 100.1 97.1Izvestment "(ci.e. stocks) 714 394 499 660 700 13.3 6.8 12.2 12.9 7.8 9.0

*Domestic Savings 433 16 -6 343 2*4 4.3 10.0 72.0 6.8 .0.1 2.9National Savings 416 32 10 378 279 8.7 20.5 56.3 7.1 0.2 3.6

)HMAIDISE TRADE Annual Data, at Current Prices As Percent of Total

DiportsCapital goodsa 100 135 227 318 29158 2.Intermediate gaood ficfua2.s) 176 386 270 459 2. 1.9 . 30.4 34. 1rueals and related materials

of vhinh: Petrolso . 23 155 141 166 . . 48.5 * 1.Q "MoVen.coods -424 -126 ~~~227406 .. -..

ExportsPrisacy ProdmCts 6.l. fools) . 145 119 220 2D3 . . 7.0 . 40.9 40.8Fuels and related materi.als

of which: PetrolsmManufactued toodb195 239 240 294 . . 85. l

"Ja Wh.Eot (fob) W 7. 100. 100.0Tourism and Border. Trace 779 0. 0,

Merchandise Trade Indices Aege19M72-73 10Export Price index J1tO 3 11 137 . .. 6.5Import Price Index 52 100 215 189 I8SO . 12.5Terms of Trade TdAx 118 100 62 62 76 .. .. 5.6Exports Vo0lm Index 1I1 100 so 13.5 107 . . 1.5

"AWE A002D BY SRCTOR Annual Data at 1972-73 Prices and Exchange DzAtes Av*rage Annual Irowtb Rates AL Percent of Total

Agriculturr 3,542 3,403 3,71.2 4.020 4,318 . .. 4.8 59 59 57Indurtrya&noldMinng 420 412 466 582 642 . . 9.2 7 7 aSer-rqce 2.050 1.848 2.146 ..& .la 7.4 _4 34 35

totti ~~~~6,01.2 5,663 6.324 71044 7.605 6.1 100 100 O

HJMr C FnEARCE As Perc on,(Ce.ntral`Govw=ent)

C~rr-'t Pmceipts 317 280 469 563 665 . . 34.2 5.3 7.2 e.5C S:~- xpenctitures 364 419 464 ..53 16.8 6.1 6.4 7.1

a-u.ry .. vnc.1 .84 50 99TT2 -0.8 0.8 1.4Ci.nur ;bflic Sector . . . .. . .

Pu ac~ ctor Invesoasnt 421 239 246 516 IO:; . 1. 7.0 3.8 6.6

us $ million LI1CUP.PYW E2MITUI¶tE DETAILS ACua Ztlmtd DET-IL 011 At AIV. 1977/76 p nd Et

As 5 Tal uretEoen~p d. 1%/7 jfl9L 197/7 19(7 977/78 FJELIC SIL-T0R-ea ?Id ;of TotalEEZ -atian 15.3~~~ 14.5 12.4 13.0 Th ESST PFO1R4M (1976/7-9- 1979/80

Other .iocisl Servic-- . 4.5 3.6 4.2 4.9 Social Sect-ors 287 13.2Agriculture and Agriculture 600 17.6

Other Exoosmic Services .. 5.0 12.5 6.6 7.0 Industry and Mining 380 17.5Administration and Defense .. 70.4 57.1 61.5 61.2 Power 314 14.4other 4. 6 _U J5- 13.9 Transport and coinznications 387 17.8Tota Current Pxpenditures 100.0 100.0 100.0 100.0 Other 206 9.5

________ ________ _______ ________ ________ _______ ________ ________ _______ Total Expenditures 2.17-4 100.0

SELECTED ..5 IATORS .1960- i965 - 1973- PIRAICIDI(calculated from 3-year averaged data) 1965 1970 1976

Average 1003 . I77 M. 71i Public Sector Savings 557 25.6Wmort Niasticity .. 1.29 1.11 Program Lid counterpart 838 38.6

*Wgina1 onstic savings Rate .. 0.22 0.03 Foreign Project Aid 605 27.8Marginal National Saving s Rte 0.35 0.03 O_bp (16ul. dow. bor?o5t2g) 174 8.0

Total Finacing 2.174 100.0

LAION PORCE AND Total Labor Force Vs2i Aded Per Worker (97 3pie a.RtsOUrzPM PER WORKE in YAllions i ? oal 161 -- 73 InUSDiea rerctnr ctAverg Pr 9es0-7 aes

j2q6I 906 1927 GroWth Rate 19 69/0 19 72173 1969/70 1972/73 Growth Rate

Agriculture 16.1 20.5 85 78 2.0 .. 166 .. 76Industry 1.0 1.8 5 7 3.0 .. 229 .. 105Service 1.8 3.9 I10 13 6.7 .. 484 L.222Total 18 .9 r6.-2 1005 To00 2.8 248 217 100 10-4.

not appl.icabl.e ncl or negligblnot available -- less thin halr the smallest unit shown

Note: Figores are on fiscal year basis (july 1-~a &O).Dars prior to 1972/73 pertain to erstwhile "ast pakistan.=W Plani tuargts.

ANNEX I-28 -

BL8JtR OF P12S, XU8t8L ASS AENCE AND 3DrT

(UlWnte in .iJile of U.S. do7 at ceurrnt prlcie)

Actual 914 tirmtdi peoiet Ae-a. A6t1 Gr,h a.ne19S9170 7S72J73 12L7417. 19S0/ W177/7i 1978/79 1974-1978

S31KARY BALANCE OF FltTS

Bports (incl. NF,) 51 369 338 529 5e8 645 13.7-639 -147 -1,42 _957 _1,427 -1,779 9.8

R9.-8 1enee l--H) - -378 -1,044 -428 - - -1,1 7*4

Interest Cost) IDire-t ,n99.nt ln Im. 1

Wonkor-' R-ittm01. , 45 7 66 83 93

3.urteeonC.nt Tr I kot. i -I07 _- 7 1 0330

?lil-at, Dimec Thaatoeftofficail rcpita ol rt rt 482 397 229 346 400 13.6

Publicie &apTl &rstf

ubmnsW-T.l .. 76 527 273 411 695 5.2-Rae.yrant. ~~~~- -25 -16 -51 -54 -

!Zat Di b-.aaert. -- e -25 7 54 4.89

Other WaL L.0n- *

Di,bu t0,,-R.ea tS .~ -,

Net Di-tur tS . .. ..

Capital Trasasati-e n.s.. . -205 334 -44 16 -33

Cheu9I 1. Neta .- -20 196 -80 24 25 AYtul 1Ad5 (-I odri-01Irons Onsenne. (-nd p*riod) ,, 107 263 293 269 7E8 i17Z773 1974/75 1975/76 1976/77 1977/78

Public Dsbt Out. & DIobursed 228 1,366 1,812 2,065 2,556

OEINTAND klOl lN DIOllfl STIWfAI.ia Grants 1 Orsnt-like 514 368 338 452 1ntnret on Public Debt - 10 21 25 27

Repaye'ntn o pPublic Debt - 25 78 17 51

Public 42T l-oans T0tal Public Debt Service - 35 99 42 78

ED911 - - - Ote2l Debt Service (net) .

DA 6S 150 50 211 Total D3bt Servie (net)Other iItilstrSl 11 87 84 74ConertSt. 2D4 678 200 376 8urdno on p.,ort E-ndinas (0)

SepplierS t t 55 17 2 11pi- ncial In.titutten. - - 5 13 Pablic Debt S-erice 9.8 22.4 7.9 13.7B>zd, , _ _ _ _ T.t-l Debt 5 3 S ic.P_blic LO- ..e.. i - _ _ TDScDirect anest. n..

To.a1 Public MW7 Loan. . 336 932 31T -Average Ter of Public4 Debt

kttl Debt pWtstn-ding J-Io 30, 1978 Int a- % Prior- 7er Do& 2.0 1.5 1.4 1.3

SnAL D89T e Only pecrcnt kort. n 0 Prior le r D .D 5.0 5.7 0.9 0.5

libr2d Bank TDA 554 21.7 D3RD Debt Out. h DsbursedOther ltilt-lotnral 64 2.5 o % SPublic Debt O6D 4.0 3.0 2,7 2.2Oocerccects 1,746 68 4 an 741b-lic Dabt Seerine - 1.6 7.5 4.4q-n w - 111 4.3Ficanolal ltitutilon 26 1.0 mi D4bt Out. & Dinb-reedBonds - 0 P 0 S blic D3bt 061 1.1 18.7 21.0 22.7 21.7

publis 1 bt. n c.. -a % P4bli. Deb4 Servoie - 2.3 2.0 7.5 4.9

T.otl Psblic ?%LT Debt 4OO1.

Othnr 0LT Debt3Sh.rt-tw'a Debt (dib. nony)

rot pli2.cable e ntaff nati-otenot aoailable - nil or negl 4iblnot available epgitey --- loon than hAl tO.

but icclded ic total .a.lleat -ait 6h0N 19

H.-b-a 1978

- 29 - ANNEX II

THE STATUS OF BANK GROUP OPERATIONS - BANGLADESH

A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of January 31, 1980)

US$ Million /aAmount

Loan or (less cancellations)Credit Un-Number Year Borrower Purpose Bank IDA disbursed

One loan and 12 credits fully disbursed 54.9 428.28 -

339 1972 Bangladesh Cyclone Area Reconstruc-tion (replaces CreditNo. 228-PAK of 1971) 25.00 1.39

340 1972 Bangladesh Chandpur Irrigation II(replaces Credit No.184-PAK of 1970) 13.00 0.36

341 1972 Bangladesh Tubewells (replacesCredit No. 208-PAKof 1970) 14.00 1.72

343 1972 Bangladesh Telecommunications (re-places part of CreditNo. 145-PAK of 1969) 7.30 0.16

407 1973 Bangladesh Education (replacesCredit Nos. 49-PAKand 87-PAK of 1964 and1966) 21.00 3.57

408 1973 Bangladesh Highways (replaces CreditNo. 53-PAK of 1964) 25.00 5.05

410 1973 Bangladesh Cereal Seeds 7.50 4.17424 1973 Bangladesh Inland Water Transport

Rehabilitation 8.70 0.34487 1974 Bangladesh Second Telecommunications 20.00 9.75527 1975 Bangladesh Ashuganj Fertilizer 62.00 24.23533 1975 Bangladesh Population 15.00 9.67542 1975 Bangladesh Barisal Irrigation 27.00 19.13605 1976 Bangladesh Karnafuli Irrigation 22.00 13.22621 1976 Bangladesh Agricultural and Rural Training 12.00 7.61622 1976 Bangladesh Technical Assistance II 7.50 3.69631 1976 Bangladesh Rural Development 16.00 13.83632 1976 Bangladesh Bangladesh Shilpa Bank 25.00 9.45

- 30 - ANNEX II

A. Bank Loans and IDA Credits to Bangladesh (Cont'd)

JS$ Million /aAmount

Loan or (leass cancellations)Credit Un-Number Year Borrower Purpose Bank IDA disbursed

724 1977 Bangladesh Shallow Tubewells 16.00 14.61725 1977 Bangladesh Muhuri Irrigation 21.00 18.96729 1977 Bangladesh Extension and Research 10.00 8.96735 1977 Bangladesh Inland Water Transport II 5.00 3.95752 1977 Bangladesh Imports Program VI 75.00 4.61765 1978 Bangladesh Jute 21.00 18.50787 1978 Bangladesh Foodgrain Storage II 25.00 24.97825 1978 Bangladesh Small S,cale Industry II 7.00 6.99828 1978 Bangladesh Agricultural Research 6.00 5.74864 1978 Bangladesh Drainage and Flood Control 19.00 18.05866 1978 Bangladesh Imports Program VII 75.00 17.05872 1978 Bangladesh Technical Assistance III 10.00 9.94890 1979 Bangladesh Oxbow Lakes Fisheries 6.00 6.00 /c912 1979 Bangladesh Vocational Training 25.00 25.00921 1979 Bangladesh Second Population &

Family Health 32.00 32.00 /b934 1979 Bangladesh Bangladesh Greater Khulna

District 28.00 28.00941 1979 Bangladesh Bangladesh 2nd Dacca Water

Supply & Sewerage 22.00 22.00944 1979 Bangladesh Bangladesh Fertilizer Imports 25.00 21.19955 1979 Bangladesh Small Scale Drainage and

Flood Control 25.00 25.00 /b964 1979 Bangladesh Second Hiighway Project 10.00 10.00 lbTotal, 54.9 1,219.28 448.88of which has been repaid 0 0.40 -

Total now held by Bank and IDA 54.9 1,218.88

Total undisbursed 0 448.88 448.88

/a Prior to exchange adjustments../b Not effective./c Became effective in February.

-31 -ANNEX II

B. PROJECTS IN EXECUTION 1/

Multi-Sector ProjectCr. No. 339 Cyclone Area Reconstruction Project: US$25.0 Million Credit

of October 18, 1972; Effective Date: January 17, 1973;Closing Date: June 30, 1980

After a very difficult start, the project is expected to be com-pleted by early 1980, about four years behind schedule. Parts A, F, and G(Inland Water Transport, Coastal Fisheries, and Cyclone Warning System) havebeen completed for some time. IDA financed portions of Parts D and E (Primaryand Feeder Roads) have been substantially completed. Some feeder roadsoriginally scheduled to be financed under the Credit have been financed byWorld Food Program as part of an agreed program to meet cost escalation. TheGovernment has requested WFP finance for additional feeder roads. This requestis currently under consideration. Work on the completion of Part B and C(Telecommunications and Cyclone Shelters) appears to be proceeding generallysatisfactorily. Most equipment under the sub-project is now installed. Com-missioning and takeover of all VHF base stations and PCO sets at 68 locationshas taken place. Delivery for operation of microwave and UHF systems is sub-ject to corrective measures, and was due to be completed by end December 79.Government and TTB have stated that physical transfer of the assets under thesub-project from Cyclone Reconstruction Board (CRB) to TTB was made as fromJuly 1, 1979, when action to dissolve CRB was undertaken. Formal transferof these assets will take place through the issuance of an Executive Order,which has been furnished to IDA for review. TTB indicated that measures arebeing taken to complete all works and arrangements for full operation by theend of December 1979. A detailed report on the actual operational status ofthe assets transferred, together with details of TTB/GOB action required toensure their full operational use was due to be submitted by December 15, 1979.

Agricultural Projects

Cr. No. 340 Chandpur Irrigation II Project: US$13.0 Million Credit ofOctober 18, 1972; Effective Date: January 17, 1973;Closing Date: December 31, 1979

The project has now been completed three years behind schedule.Delays have been due to major flooding, labor problems, shortages of materials,equipment breakdowns and rebuilding the embankment as a result of rapid rivererosion during the construction phase. Major agricultural development startedin 1978 will continue for four years. A seven month extension of the ClosingDate is under consideration to allow time for the arrival of some remainingorders of maintenance equipment.

1/ These notes are designed to inform the Executive Directors regardingthe progress of projects in execution, and in particular to report anyproblems which are being encountered, and the action being taken toremedy 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.

- 32 - ANNEX II

Cr. No. 341 Tubewells Project: US$14.0 Million Credit ofNovember 6, 1972; Effective Date: January 17, 1973;Closing Date: December 31, 1982

All 3,000 deep tubewells have now been drilled and will be commis-sioned by early 1980. Approximately $1.2 million from the project and $0.7million from the Extension and Research Project (Credit 729-BD) will be con-solidated to fund the Command Area Development (CAD) of the deep tubewells inthe Northwest of Bangladesh.

Cr. No. 410 Cereal Seeds Project: US$7.5 Million Credit of June 29, 1973;Effective Date: January 30, 1974; Closing Date: December 31,1979

There has been little improvement in project implementation in thepast six months. Key constraints continue to be: Taka shortage, and civilwork construction difficulties. Ak revised work programme has been finalizedand an extension of the closing date to June 30, 1981 would be considered oncondition that adequate ADP Taka provision is made available by GOB. The mainpositive aspect of the project continues to be the success of the contractgrower scheme. Wheat seed sales remain good, but paddy seed sales are wellbelow appraisal targets. The main problem preventing increased paddy salesare poor marketing arrangements and lack of suitable improved seeds for multi-plication. Improvements in seed distribution and marketing are in hand andmarketing consultants have been engaged for this purpose. The Seed Certifica-tion Agency continues to be weak, however, and an intensive training programmeis currently under preparation. Future prospects have improved as a resultof GOB's recent strong committments to stimulate foodgrain production and sup-port intensive seed production efforts.

Cr. No. 542 Barisal Irrigation Project: US$27 Million Credit of April 29,1975; Effective Date: September 30, 1975; Closing Date:December 31, 1980

Project civil works continue to make good progress and are expectedto be completed within six months of schedule. Poor quality work is beingremedied by contractors at no cost to the project. The 60 primary pump unitsare in various stages of arrival and about 30 are expected to be operationalby the year-end. 2,500 secondary pumps are in store and ready for issue, thetarget for the 79/80 boro season is 1,100 pumps in the field or 44,000 acresplanted.

Cr. No. 605 Karnafuli Irrigation Project: US$22 Million Credit ofJanuary 28, 1976;_ Effective Date: February 24, 1976;Closing Date: December 31, 1980

The project had been behind schedule due to initial delays inhiring project consultants. The consultants for the irrigation portion of theproject began work in September 1976, but their effectiveness was limited by

33 ANNEX II

delays in procurement of vehicles and equipment and in the assignment of localconsultants to assist in the design work. This has been resolved. After aperiod of good progress, project civil works have again slowed down due to

shortages of local Taka and a payment dispute with the contractors.

Cr. No. 631 Rural Development Project: US$16.0 million Credit ofJune 3 1976; Effective Date: August 3, 1976; Closing Date:December 31, 1981.

The project was designed as a pilot application of the rural devel-

opment approach pioneered at the Comilla Academy in the mid-sixties. It

aims at introducing accelerated agriculture and rural development in seven

thanas in Bogra and Mymensingh Districts. It provides financing inter aliafor rural roads, minor irrigation, buildings, storage, rural credit andstrengthening of rural cooperatives. The project became effective onAugust 3, 1976. Initially, despite some teething problems, the project was

progressing satisfactorily. But by June 1977, the following weaknessesbecame apparent: (i) lack of cooperation between the various ministries andagencies involved; (ii) lack of effective organization and ineffective super-

vision of the project by the implementing agency, the Integrated Rural Devel-opment Program (IRDP); (iii) basic deficiencies in the cooperative system(complex regulations and procedures); (iv) inadequate training of projectpersonnel; and (v) conflicting government policies in the field of ruralcredit. In November/December 1977, IDA, in association with IRDP, undertooka comprehensive review of the project, and an Aide Memoire, setting out anaction program to overcome these problems, was presented to the Governmentin December 1977.

The Government has made a concerted effort to implement the recom-mendations of the Aide Memoire prepared in December 1977. A full-time ProjectManager has been appointed who is assisted by three assistants responsible forcredit, cooperatives and training, respectively. International recruitmentis being used to obtain for IRDP technical assistance in project management,

supervision, and monitoring. At the field, two district managers, for Bogra

and Mymensingh, have been appointed to work full time on project activities.Budgetary and procedural changes have been introduced to enable participatinggovernment agencies to be fully responsible for the implementation of theproject's subcomponents. This, together with a revitalized coordinating

committee of Secretaries of the Ministries concerned has greatly improved

cooperation. Implementation of the physical aspects of the project such as

rural works is proceeding satisfactorily but project beneficiaries are, sofar, yet to receive tangible benefits in the form of increased farm inputs orfarm equipment. A proposal has recently been approved to amend the Credit

Agreement to finance incremental fertilizer needs for the project instead ofincremental credit for fertilizer.

1 4 -ANNEX II

Cr. No. 724 Shallow Tubewells Project: US$16 Million Credit of July 1,1977; Effective Date: December 9, 1977; Closing Date:December 31, 1981.

There has been satisfactory progress in procurement of engines andpumps, tools and equipment, office equipment and part of the transports.Sales of shallow tubewells will be to both individuals and groups. Theproject will procure in its first phase 2,050 pumpsets -which will be distri-buted by January 1980. Procurement for the second order of about 5,000shallow tubewells will be based on farmers' preference system. The construc-tion of workshops is proceeding with only minor delays.

Cr. No. 725 Muhuri Irrigation Project: US$21.0 Million Credit of July 1,1977; Effective Date: January 6, 1978; Closing Date: June 30,1983

Overall progress, judged by the progress of construction of the FeniRegulator which is the single most important component of the project, is about18 months behind schedule due to delays in recruiting the Implementation Assis-tance Team (for the contractor) and weak project management (Water DevelopmentBoard and its Consultants). After many attempts to remove bottlenecks andimprove the management, the performance is beginning to improve. The contrac-tor has resumed the construction and expects to place a substantial quantityof concrete for the regulator this season. The revised cost estimate indicatespossibility of higher project cost than given in the Appraisal Reports duemainly to necessary design changes and additional access roads as well asprice escalation.

Cr. No. 729 Extension and Research Project: US$10 Million Credit ofJuly 1, 1977; Effesctive Date: January 6, 1978; Closing Date:April 30, 1981.

Project implementation has improved. Most of the vehicles have beenprocured and Phase I civil works const:uction is nearing completion. Contactfarmer attendance has increased by 600 to 100% in most areas. Main achieve-ment of the extension service has been in expanding wheat cultivation through-out Northwest. Key problem rema:ining is the revision ofE Project Proforma (PP)to provide adequate funds for completing remaining civi:L works. The Ministryof Agriculture has prepared a draft Project Proforma (PP) for Ministry ofPlanning approval.

Cr. No. 765 Jute Project: US$21 Million Credit of February 8, 1978;Effective Date: ALpril 14, 1978; Closing Date: June 30, 1983

The Jute Project has been very successful in getting the projectfarmers to use higher quantities of fertilizer, resulting in higher yields.Partly as a result of this, raw jute stocks are high, but the price of deshi(white) jute variety (70% of area) is low. Even then, the average projectfarmer would make a profit, but non project jute farmers would not, and someof latter are expected to switch to paddy production as was envisaged in theproject. To maintain jute production levels, further intensification of the

- 35 -ANNEX II

production in the project area will be necessary. Steps for ensuring such4Sntensification was discussed and agreed with GOB.

Cr. No. 787 Foodgrain Storage II Project: US$25 Million Credit of April 12,T978; Effective Date: September 29, 1978; Closing Date:December 31, 1982

Project actions are proceeding steadily: the first batch of con-struction contracts, out of a total of possibly 10 batches, have been awarded;equipment procurement is well underway and the project construction, implemen-tation and monitoring units have been established. Improvements in the systemfor domestic food procurement were identified for implementation in 1979 amanseason. A pilot project for paddy marketing by farmer cooperatives is doingwell in its early stages. However, delays in full staffing and in landacquisition, and inadequate financial allocations for the project in GOBAnnual Development Plans could slow down progress in the future.

Cr. No. 828 Agricultural Research Project: US$6 million Credit ofJune 16, 1978; Effective Date: November 15, 1978;Closing Date: December 31, 1984

The overall progress of the project is satisfactory and all par-ticipating institutions are cooperating fully. The revised plans forBangladesh Agricultural Research Council (BARC) headquarters building andthe Bangladesh Agricultural Research Institute (BARI) research stationshave been approved by IDA and prequalification of contractors has been com-pleted. The BARC Technical Working Groups are progressing satisfactorily.Progress has been made in selecting the candidates for the PhD trainingscheme. Action is needed to (i) fill positions of BARDC Executive ViceChairman and two other Board members; (ii) complete PhD overseas trainingarrangements and initiate M.Sc. training arrangements in Bangladesh;(iii) recruit consultants; and (iv) prepare National Research Plan.

Cr. No. 864 Drainage and Flood Control Project: US$19.0 million Creditof December 22, 1978; Effective Date: October 19, 1979;Closing Date: June 30, 1984

Effectiveness had been delayed primarily due to delays by theGovernment in approval of the project budget and staffing plan. In ChenchuriBeel (CCB) and Kolabashakhali (KBK) two regulators have been completed andin Brahmaputra Right Bank (BRE) a large program of contracts has been prepared,which are scheduled to start by end 1979.

Cr. No. 890 Oxbow Lakes Fishery Project: US$6 million Credit of April 3,1979; Closing Date: June 30, 1984

This credit is not yet effective due to delays in appointment ofconsultants. Negotiations with one consulting firm broke down. Negotiationswith a second consultant firm are in progress.

_36-

ANNEX II

Cr. No. 955 Small Scale Drainage & Flood Control Project; US$25.0Million Credit of October 30, 1979; Closing Date:necember 31, 1984

This eLedit is not yet effective.

Industry and Imports Program Credits

Cr. No. 527 Ashuganj Fertilizer Project: US$62.0 Million Credit ofFebruary 11, 1975, as amended by Amending Agreement of June 18,1979; Original Credit Effective Date: December 19, 1975;Supplementary Credit Effective Date: August 1, 1979;Closing Date: June 30, 1985

The project is being colinanced by the Asian Development Bank, KfW,EEC, IFAD, the OPEC Special Fund, and the Governments of Iran, Switzerland, UKand US, providing a total of about: US$190 million equivalent in addition tothe IDA credit. Site preparation work including the necessary dredging andfilling was completed on schedule. However, based on the soil analyses under-taken by two specialist consulting: firms, further preparation of the sitewas undertaken to protect the plant against earthquake risks. Currently theproject is about 32 months behind schedule due primarily to the additionalsite preparation and initial slow progress in (a) placing; orders for time-critical items and (b) planning for construction. Due to the need foradditional site work, the delays and currency fluctuations, supplementalfinancing was required. The required financing has now been obtained. Thesoil compaction and foundation work has been completed and plant construc-tion is now progressing satisfactory. Some additional delays are beingencountered due to delays in the manufacture and delivery of some materials,but these delays are still within the margin for contingencies providedin the schedule shown at the time of IDA supplementary financing.

Cr. No. 632 Bangladesh Shilpa Bank Project: US$25.0 Million Credit ofMay 20, 1976; Effective Date: November 8, 1976; Closing Date:June 30, 1981

As of December 31, 1979, Bangladesh Shilpa Bank (BSB) has committedabout US$24.4 million from the credit, for 122 subprojects. Disbursementswere about US$15.0 million and QuaLified Agreements to Reimburse lettersof credit (QAR) had been approved Eor US$3.6 million.

Cr. No. 752 Sixth Imports Program: US$75 Million Credit of November 30,1977; Effective Date: December 13, 1977; Closing Date:March 31, 1980

As of December 31, 1979 (lisbursements were US$66.8 million and.QARhad been approved for US$5.6 million.

- 37 -

ANNEX II

Cr. No. 825 Small Scale Industry II Project: US$7 million of June 16,1978; Effective Date: September 15, 1978; Closing Date:March 31, 1983

There has been good progress in training commercial bank staff, dis-tributing circulars to commercial bank branches describing project procedures,and advertising the availability of funds for small industry loans. TheProject appraisal and processing capabilities of the implementing Banks havedeveloped rapidly, and the Project is expected to be completed ahead ofschedule. Staff of the Small and Cottage Industries Corporation have begunpreparation of subsector and area studies for small industry promotion.

Cr. No. 866 Seventh Imports Program: US$75.0 million Credit ofDecember 22, 1978; Effective Date: January 8, 1979;Closing Date: December 31, 1980

As of December 31, 1979 disbursements were about $55.9 million andQAR had been approved for $16.6 million.

Cr. No. 944 Fertilizer Imports Project: US$25 million Credit of June 29,1979; Effective Date: August 29, 1979; Closing Date: June 30,1980

As agreed, fertilizer prices have been increased by an averageof about 28%. A staffing plan and administrative authorizations have beencompleted for the provision of staff for the secretariate of the fertilizercoordinating committee.

Education Projects

Cr. No. 407 Education Project: US$21.0 Million Credit of June 29, 1973;Effective Date: September 27, 1973; Closing Date:December 31, 1980

The project finances completion of the construction of the Bangla-desh Agricultural University (BAU), building of five new and equipping ofeight existing technical institutes (polytechnics). The BAU component isnow 80% complete and is expected to be completed by December 1980. However,construction has stopped since March 1979 due to lack of funds. The ExternalAffairs Division of the Ministry of Planning informed the mission that adecision on the allocation of the required funds is expected soon. If fundsare made available by mid-December 1979, the project could be completed by thecurrent closing date, December 31, 1980. The fellowship program is nearlycomplete. Civil works associated with the technical education component,although 30 months behind schedule are virtually complete and the polytechnicsare now operating. About 75% of all equipment (in dollar terms) are close toappraisal estimates due to currency devaluation. Most local cost overruns arecaused by taxes imposed on imported goods. Disbursement as of December 31,1979 is $18.9 million (90% of the Credit).

- 38 -ANNEX II

Cr. No. 621 Agricultural and Rural Training Project: US$12.0 MillionCredit of March 25, 1976; Effective Date: June 30, 1976;Closing Date: June 30, 1981

Implementation of civil works is about three months ahead of sched-ule but has slowed recently due to shortage of local funds. Completion isprogressing satisfactorily. Training of teachers for the AgriculturalTraining Institutes (ATI's) has been set back by a recent transfer ofinstructors to the extension staff to benefit from a recent upgrading ofpositions, which was not extended to the ATI staff. Little progress hasbeen made on the recruitment of technical assistance experts, the developmentof revised curriculum, or the in-service training of extension staff.

Cr. No. 912 Vocational Training Project: US$25.0 million Credit ofMay 31, 1979; Eff,ective Date: November 2, 1979;Closing Date: June 30, 1985

This project has only recently been declared effective. The ProjectImplementation Unit (PIU) is presently understaffed and have only the projectarchitect and an acting project coordinator. The Project Manager (consultant)has already been selected. The furniture and equipment for the PIU officewould be purchased in the near future. The PIU was scheduled to be fullystaffed by December 1979.

Population Project

Cr. No. 533 Population Project: US$15 Million Credit of March 10,1975; Effective Date: September 25, 1975; Closing Date:December 31, 1980

The project is being cofinanced by six co-lenders providing a totalof US$25 million equivalent in acldition to IDA credit. Program performance,which declined during the three months preceding the parliamentary electionsin February 1979, has improved again. The internal reorganization of thePopulation Control and Family Planning Division (PCFPD), as recommended bythe management study, is underway. This reorganization will not be effectivein improving program implementation unless the PCFPD is able to: (a) fillits large number of vacant technical, managerial and supervisory positions;and (b) simplify the administrative, financial and recruitment procedures.Actions have been assured by the Government on both counts. A program hasbeen started for the retraining of field workers which should improve theirperformance. While the pace and quality of construction of 80 Family WelfareCenters, built through community participation, has been encouraging, theprogress on other buildings in the project has been slower than expected by

the last mission. Due to the slow pace of construction, disbursement of thecredit has also shown less than expected improvements.

- 39- ANNEX II

Cr. No. 921 Second Population and Family health Project: US$32.0million; Credit of May 31, 1979; Closing Date:December 31, 1983

This Credit is not yet effective.

Transport Projects

Cr. No. 408 Highways Project: US$25.0 Million Credit of June 29, 1973;Effective Date: August 7, 1973; Closing Date: June 30, 1980

Feni bypass was opened to public traffic on July 1, 1979. Someshoulder damage occurred during the 1979 monsoon, particularly in areaswhere shoulder compaction was incomplete. Work has commenced on shoulderreinstatement and and was due to be completed by end-December 1979. Iso-lated pavement failures have occurred, and the reasons for these failuresare currently being investigated. Progress on the RHD headquarters buildingis satisfactory and now consists primarily of finishing works. The draftfinal report on the Surma River Crossing Study has been reviewed by RHD andIDA, and the consultant is at present making the required amendments to theReport. Arbitration is proceeding on the contractor's claims on the Sitalakhyabridge contract. Due to delays in completion of this arbitration, IDA recentlyagreed to extend the closing date from December 31, 1979 to June 30, 1980.Aside from minor finishing works on the RHD buiulding, all project work isreported to be completed.

Cr. No. 424 Inland Water Transport Rehabilitation Project: US$8.7 MillionCredit of August 10, 1973, as amended by Amending Agreementof October 17, 1975; Original Credit Effective Date:September 27, 1973; Supplementary Credit Effective Date:March 19, 1976; Closing Date: December 31, 1979

Procurement of spare parts and equipment under the original credithas been completed. Under the Supplementary Credit, two used lighteragetankers and the new pontoon berth are being utilized for unloading of crudeoil at Chittagong for the Eastern Refinery.

The oil transfer operations have continued to show a marked improve-ment over previous operations, due to the sustained drive and initiative ofthe new BSC Technical Director, the tankers' crews efforts, the improved co-operation between the respective agencies and the effective utilization ofthe two mechanical engineers provided under technical assistance.

The total amount disbursed to date is US$7.7 million (88% of theCredit). Processing of bills and submission of withdrawal applications forthe remaining balance of the credit are currently underway.

- 40 -ANNEX II

Cr. No 735 Inland Water Transport II Project: US$5.0 Million Credit ofSeptember 30, 1977; Effective Date: March 13, 1978;Closing Date June 30, 1980

The Credit became effective on March 13, 1978 three and a halfmonths behine the original schedule. Lists of spare parts for BIWTA vessels,navigation ai('- and for hydrographic equipment, and for BIWTC cargo vesselshave already been prepared and most items agreed. The selection of con-sultants required for the execution of the project has proceeded very slowly.However, all consultants contracts have now been signed and work is underway.

Cr. No 964 Second Highway Project: US$10.0 Million Credit of December 21,1979; Closing Dat:e June 30, 1984.

This Credit is not yet effective.

Telecommunications Projects

Cr. No. 343 First Telecommunications Project: US$7.3 Million Credit ofNovember 15, 1972; Effective Date: January 17, 1973; ClosingDate: June 30, 1980

Of the four microwave systems provided for under the project threeare completed and in operation. The fourth system required rebidding due toprice changes during the period when the project was interrupted by Bangladesh'sindependence war. Thereafter there were delays due to building constructionand tower erection difficult:ies; it was due to be commissioned by December1979, completing the project abouat four and a half years behind schedule. Theclosing date was extended until June 30, 1980 to allow for retention payments.

Cr. No. 487 Second Telecommun:ications Project: US$20.0 Million Credit ofJune 26, 1974; Effective Date: July 23, 1974; Closing Date:June 30, 1980

The project is behind schedule largely due to delays in procurement,civil works, and reduced output of the domestic switching equipment factory,combined with difficulties in ordlering such equipment and in completing localconstruction/installation works due to budgetary difficulties. About two-thirds of the Credit was committed up to October 1979. The remaining corres-ponds to national trunk and international automatic switching equipment stillto be procured. TTB and Government have now decided on the technique to beadopted for such equipment (not manufactured locally) and corresponding commit-ment could be taken in 1980 for delivery only by mid-1982. The rate of physicalinstallations during FY1979 was about 13,000 lines, showing no improvement fromthe previous year. A new ordinance for the Telegraph and Telephone Board (TTB)was issued in February 1979 and the board was re-instated to function as a"Government Board" effective from April 1979. The regulations governing thefunctioning of the Board, its powers and responsibilities and relations withthe Government, have recently been drafted, and are being reviewed. Government

- 41 -ANNEX II

has stated that the decisions in this matter are being worked out actively andshould be taken and made effective in early 1980. In the absence of satis-factory accounts, it is difficult to assess the financial positions of thebeneficiary, but estimates indicate it may have to be improved, in particularin consideration of TTB's present and future development requirements.

Technical Assistance Credit

Cr. No. 622 Second Technical Assistance Project: US$7.5 Million Creditof April 8, 1976; Effective Date April 14, 1976; ClosingDate: June 30, 1980

Twenty subprojects have been approved for financing under thiscredit thus committing the total amount of the credit. However, due to theextremely slow rate of commitments during the early years of the credit, anextension of the Closing Date will have to be considered to complete theagreed subprojects. The subprojects financed are expected to have a signi-ficant beneficial impact on strengthening IDA's lending program to Bangladesh.

Cr. No. 872 Third Technical Assistance Project: US$10.0 million Creditof December 22, 1978; Effective Date: January 19, 1979;Closing Date: June 30, 1982

Implementation of this project has just begun, with 12 subprojectstotaling about $5.7 million having been approved. Seven further subprojectstotaling about $3 million have been approved in principle, and would beexpected to be committed before the end of this fiscal year. The project isprogressing well with no major problems.

Power Projects

Cr. No. 934 Greater Khulna Power Distribution Project: US$28.0 MillionCredit of June 18, 1979; Effective Date: November 20, 1979;Closing Date: June 30, 1984

This Credit has only recently been declared effective. Consultantshave been appointed as scheduled to begin design work.

Water Supply and Sewerage Projects

Cr. No. 941 Second Dacca Water Supply and Sewerage Project: US$22.0 MillionCredit of June 29, 1979; Effective Date: November 30, 1979;Closing Date: June 30, 1983

This Credit has only recently been declared effective,, Consultantshave been engaged to begin design work as scheduled.

ANNEX III- 42 -

BANGLADESH

SECOND CHITTAGONG WATER SUPPLY PROJECT

Supplementary Project Data Sheet

Section I: Timetable of Key Events

(a) Time taken t:o prepare project:

6 months

(b) Agency which prepared project:

Chittagong WASA

(c) Project first presented to IDA:

September 1978

(d) First IDA mission to review project:

September 1978

(e) Departure of appraisal mission:

June 1979

(f) Completion of negotiations:

February 1980

(g) Planned date of effectiveness:

July 1980

Section II: Special IDA Impletientation Actions

None

ANNEX III- 43 -

Section III: Special Conditions

(a) WASA would take over responsibility for alldomestic supplies within its service area(para 65);

(b) WASA to provide staffing and training programs(paras 61, 62 and 64);

(c) Consultants to be engaged to conduct a feasibilitystudy in connection with sewerage and other meansof excreta disposal in Chittagong (para 47);

(d) GOB will take all measures to prevent or controlall discharges to the rivers Karnaphuli and Haldaand their tributaries upstream of Mohara and for2 miles downstream (para 69);

(e) CMC to pay for standpipe water at domestic tariff,and GOB housing colonies to pay for water at domestictariff (paras 54 and 55);

(f) Tariff increases to produce rate of return oncurrently valued net fixed assets - FY82 through84, 2-1/2%; FY85, 3%; FY86, 4%; FY87, 5%; fromFY88, 6% (para 53);

(g) GOB to pay its water bills within 30 days and WASAto initiate a program to reduce current receivablesto 16% of annual billings by end-FY82 (para 56);

(h) GOB to introduce a program of public health educa-tion (para 65);

(i) WASA to introduce a program for licensing all privatewater abstractions (para 66);

(j) Special conditions of effectiveness would include:

(i) Appointment of consultants for detailed designand supervision of construction (para 50);

(ii) Employment of nine additional professional staff(paras 61, 62 and 64);

(iii) Conclusion of a satisfactory Subsidiary LoanAgreement between GOB and Chittagong WASA(para 73);

(iv) Preparation by WASA of a program for waste detectionand prevention, and meter repairs (para 57);

ANNEX III- 44 -

(v) Appointment of a counterpart to WASA's com-mercial manager (para 60);

(vi) Valuation of fixed assets and inventories (para 52);

(vii) GOB and WASA announcement of a tariff increaseto Taka 7 (domestic) and Taka 20 (non-domestic)per 1,000 gallons to become effective not laterthan Sept:ember 1, 1980 (para 53); and

(viii) GOB approval of the Project Proforma (para 74).

[BRD 14585

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