REPORT AND RECOMMENDATION OF THE ... - The World Bank · 3. World War II and the events leading up to Independence in 1948 devastated the Burmese economy and divided the country politically.

Document of 'FILE C PThe World Bank COPY

FOR OFFICIAL USE ONLY

REPORT AND RECOMMENDATION

OF THE Report No. P-2457-Bk

PRESIDENT

OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

TO THE

SOCIALIST REPUBLIC OF THE

UNION OF BURMA

FOR A

RUBBER REHABILITATION PROJECT

January 25, 1979

This document has a restricted distribution and may be used by recipients only In the performance oftheir oeficgal duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Since May 1977, the Burmese kyat has been officiallyvalued at 8.51 to the IMF Special Drawing Right (SDR) andconsequently its value floats relative to other currencies.The following exchange rate is used throughout this reportexcept where stated otherwise:

US$1.00 - Kyat (K) 7.2K 1.00 - US$0.14

WEIGHTS AND MEASURES

Engiish/US Units Metric Units

1 mile (mi) 1.609 kilometers (km)1 acre (ac) - 0.405 hectare (ha)1 long ton (lg ton) (2240 lb) 3 1016 kilograms (kg)

BURMESE FISCAL YEAR

April 1 - March 31

FOR OFFICIAL USE ONLY

ACRONYMS AND ABBREVIATIONS

AC - Agriculture CorporationAD - Agriculture DepartmentBSPP - Burmese Socialist Program Party

CC - Construction Corporation, Ministry of ConstructionMAF - Ministry of Agriculture and ForestsPAPRD - Project Appraisal and Progress Reporting Department

PCD - Plantation Crop DivisionRRIM - Rubber Research Institute of Malaysia

RS - Rubber Section, Agriculture CorporationSEE - State Economic Enterprise

GLOSSARY

Budding or budgrafting - vegetative multiplication by means of budding orbudgrafting a bud onto a seedling rootstock. The

trees obtained by this process are known as clones.

Clone - a clone refers to all plants derived vegetativelyfrom an individual source plant; as such they have

the same genetic composition as the source plant.

Creping mill - a machine in which coagulated latex and scrap rubber

are macerated and rolled into thin sheets with a

crepe texture. The resulting crepe is air-dried.

Block (Crumb) Rubber - a process by which either latex coagulated in thefactory or scrap rubber is broken down into crumbs

or granules, dried and then compressed into blocks.

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 disclosed without World Bank authorization.

BURMA

RUBBER REHABILITATION PROJECT

Credit and Project Summary

Borrower: The Socialist Republic of the Union of Burma

Amount: US$4.5 million equivalent

Terms: Standard

Cofinancier: UNDP - US$635,000 equivalent, on grant basis, tofinance cost of technical assistance component.

ProjectDescription: The proposed project would rehabilitate 15 Government

rubber estates, expand rubber processing capacity andprovide staff training and technical assistance. Bycreating an effective and well-trained staff competentin all aspects of rubber development and by establishinghigh-yielding plant material suitable for Burmese con-ditions, this project would contribute to the rehabi-litation and expansion of the rubber industry in Burma.The major direct benefits would be the incrementalproduction from Government estates which would totalabout 28,000 long tons over 15 years (valued at US$25million) and the incremental employment totalling about3,200 man-years during the four-year implementationphase. The project is well within the implementationcapacity of the agencies concerned and involves nosubstantial risks beyond those normally associatedwith tree crop projects involving introduction of newtechnologies.

Estimated Cost: US$ Thousands EquivalentLocal Foreign Total

Major Categories

Estate Rehabilitation 2,721 1,807 4,528Rehabilitation of Processing

Facilities 526 719 1,245Staff Development and Research 147 209 356Technical Assistance 54 484 538

Total Base Cost 3,448 3,219 6,667

Contingencies

Physical 354 246 600Price 811 633 1,444

Subtotal 1,165 879 2,044

Total Project Cost 4,613 4,098 8,711

Total Project Cost(net of taxes) (3,813) (4,098) (7,911)

Financing Plan: US$ Million EquivalentLocal Foreign Total

IDA 1.4 3.1 4.5UNDP - 0.6 0.6Government of Burma 3.2 0.4 3.6

Total 4.6 4.1 8.7

Estimated US$ Million EquivalentDisbursements: 1979 1980 1981 1982 1983 1984

IDA FYAnnual - 0.9 1.6 1.1 0.5 0.4Cumulative - 0.9 2.5 3.6 4.1 4.5

Rate of Return: 30%

Staff AppraisalReport: No. 2193a-BA, dated December 20, 1978.

Map: IBRD No. 13711

INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND'RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS

ON A PROPOSED CREDITTO THE SOCIALIST REPUBLICOF THE UNION OF BURMA

FOR ARUBBER REHABILITATION PROJECT

1. I submit the following report and recommendation on a proposed de-velopment credit to the Socialist Republic of the Union of Burma for theequivalent of US$4.5 million on standard IDA terms to help finance a rubberrehabilitation project. UNDP will finance the technical assistance componentof the proposed project, US$635,000 equivalent.

PART I - THE ECONOMY 1/

2. The latest economic report entitled, "Burma - Country EconomicMemorandum" (Report No. 1700-BA, October 19, 1977) was distributed to theExecutive Directors on October 26, 1977. Country data are shown in Annex I.

3. World War II and the events leading up to Independence in 1948devastated the Burmese economy and divided the country politically. Asa result, the 1950s were a period of turbulence. In 1962, parliamentarydemocracy was declared a failure, and the assembly and high court weredismissed. In their place, a Revolutionary Council was formed with GeneralNe Win as its Chairman, and the Burmese Socialist Program Party (BSPP) wasestablished as the only authorized political party. After eleven years ofgovernment by the Revolutionary Council, a Constitution was adopted in anationwide referendum in December 1973 under which the Pyithu Hluttaw(People's Assembly) was created with supreme executive, legislative, andjudicial authority.

4. The guiding philosophy of the present Government, as stated inthe April 1962 document on the Burmese Way to Socialism, is based on a com-bination of traditional Burmese values and socialist doctrine. Nationalisticin character, its economic objectives are set out in the Twenty-Year Plan,which was adopted by the BSPP in 1972 and is being implemented through asuccession of five Four-Year Plans. The intent is to fashion a new orderfor Burma by reorienting the economy to provide adequate food, clothing andshelter for the masses and to improve the quality of social services.

5. By and large, the Government has made notable progress in theattainment of its social and political objectives. Insurgency is still aproblem, particularly in the hills and border areas, but there is probably

1/ Parts I and II of this report are substantially the same as the corres-ponding parts of the President's Report for a Paddyland Development IIProject, dated June 22, 1978 (P-2359-BA). The 1979 Country EconomicMemorandum, currently under preparation, will be issued in March 1979.

greater territorial control by the Government now than at any time sinceIndependence. Greater equality in the distribution of economic opportunityhas resulted from land redistribution, which led to a more equal size ofholdings among farm families, and the nationalization of a number of majoreconomic activities in trade and industry. At the same time, the access ofthe population ro social services has been expanded, particularly in respectto education and health facilities.

6. However, the Government's ability to maintain the social well-beingof the population has been constrained by slow economic growth. Per capitaincome at present is about $140 and permits little above basic needs for thegreater part of the population. Urban unemployment is estimated to be over10% of the labor force, and rural underemployment is substantial.

7. Burma's economic performance over the last decade and a halfreflected to a significant extent the effects of the particular policies itadopted to establish economic independence. Capitalism was considered ex-ploitative and alien. Thus, State control was established over the means ofproduction and distribution in large parts of the economy and sweeping mea-sures were taken to reduce the role of the private sector, which was regardedas being largely synonymous with foreign investments. As public policies andpublic sector performance did not compensate for the drastic declines inprivate investment and production which resulted, economic growth suffered.Throughout the period investment levels were low. Gross capital formationaveraged 10-11% of GNP, and even this limited investment was not directedtowards the sectors having the greatest comparative advantage. With invest-ment in nationalized industry providing the main thrust in the Government's

efforts to reduce the country's reliance on external transactions, key directlyproductive sectors of agriculture, forestry and mining did not receive dueattention. The pricing policies of the Government exacerbated the problem.They were aimed at keeping the cost of living low for the masses, but lowproducer prices discouraged the production of paddy and other crops and led todwindling export earnings. Furthermore, State industrial enterprises were notallowed full recovery of their costs, leading to a decline in their financialsurpluses and ultimately in domestic savings. An increasing share of produc-tion was either traded in the domestic unofficial market or illegally exportedabroad at a multiple of official prices. In both cases, income was siphonedoff by segments of the private sector with little opportunity or inclinationto invest these resources productively. The distortions arising from thissystem were compounded by low official interest rates and an overvaluedexchange rate.

8. As a result, the increase in value added by the directly productivesectors of the economy scarcely matched population growth, while exportvolumes declined for most of the period. Low export earnings, in turn,reduced the capacity of the economy to import essential raw materials, spares,and capital equipment which led to increasing underutilization of capacity inmost sectors of the economy and severely limited its ability to invest.

9. In recognition of the practical problems faced in the implementa-tion of its overall economic policies in the 1960s, the Government began

pragmatically in the early 1970s to evolve a modified approach to the attain-ment of its basic objectives. Pricing policy still reflects the desire toprovide basic consumer goods cheaply and to prevent inflation, but it increas-ingly recognizes the role of prices in creating production incentives andfinancial viability. Procurement prices of a variety of agriculture productshave been raised to improve the economic position of the farmer, while othershave been decontrolled. The procurement price for paddy was raised by 150%between 1972 and 1974. It has, however, remained unchanged since then despiterapid inflation, although the subsidy of domestic rice sales was eliminated in

1976, leading to a 9% increase in the retail price of rice. In industry, the

Government obtained new costing schedules in 1976 and increased the ex-factoryprices of State Economic Enterprises (SEEs) though the adjustments remainincomplete. New costing schedules were established in 1976 which, in prin-ciple, allow for the first time profit margins at the producing level. Theofficial exchange rate of the kyat was reduced by 25% in January 1975 and a

further 9% in 1977 relative to the SDR, thus partially compensating for theovervaluation of the exchange rate.

10. In a policy announcement in 1973, the Government reaffirmed its aim"to transform the economy of Burma from an agricultural to an agriculture-based industrial country, and thence gradually to an industrial nation." Inthe same statement, however, the Government accorded priority at the presentstage of the country's development to improvements in agriculture, livestock,fisheries, forestry and mining and the establishment of consumer goods indus-

tries based on the raw material resources of the country. More recently, theneed to increase primary product exports has received increasing attention,and a significant shift in public investment in favor of the primary producingsectors has been effected.

11. Managerial and organizational reforms of the SEEs have also beeninitiated. In 1975, a comprehensive set of guidelines was introduced toenable SEEs to operate on a commercial basis and to improve distribution oftheir production. The guidelines encourage autonomy in the management ofSEEs, set standards by which their operational performance will be measured,introduce financial and costing practices to encourage efficiency, and providefor a bonus scheme under which management and the work force may be rewardedfor successful performance.

12. A major tax reform was enacted in April 1976. It included theintroduction of a Commodities and Services Tax and a Profits Tax. At thesame time, the revisions in the selling prices of SEEs in 1976/77, andimproved financial performance, raised the current revenues of boards andcorporations substantially. The reform thus resulted in increasing UnionGovernment revenue from 9% of GNP in 1975/76 to 13% in 1976/77, reversing thedecline in domestic savings and halting the rapid expansion in money supplythat fueled a high rate of inflation. It represented a major turnaround inpublic finance and was perhaps the most important achievement of the Govern-ment in recent years.

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13. These actions have undoubtedly improved the conditions for acceler-ated economic growth and thereby contributed in a positive manner to economicperformance under the Second Four-Year Plan (1974/75-1977/78). In 1976/77 GDPis estimated to have risen by 6% in real terms compared to 4.8% in 1975/76 and2.6% in 1974/75. After a decline in 1974/75, agricultural output growthrecovered mainly because of the favorable weather conditions. The tradition-ally important forestry and mining sectors showed mixed performance, but awelcomed development was the expansion of onshore crude oil production by 21%in 1976/77. With the increased availability of raw material from the primarysectors and larger imports of intermediate materials and capital equipment,the growth of the processing and manufacturing sector increased from 4.2% in1974/75 to 10.6% in 1976/77.

14. After declining in the early 1970s, gross fixed capital formationis estimated to have increased in real terms by 16.2% in 1975/76 and 12.6% in1976/77, although the severe problems of implementation experienced during theperiod suggest that these estimates may be scaled down. Along with theincrease in investment, domestic savings expanded. The improved budgetaryposition of the Government lessened its dependence on the banking system,which in turn contributed to a reduction in the rate of inflation. During1976 the consumer price index in Rangoon increased by 22% as compared with 32%in 1975. The consumer price index declined slightly during 1977, and contin-ued to decline during the first nine months of 1978.

15. The value of exports (in US dollars) grew by 9.8% per annum during1974/75 and 1976/77 in nominal terms, principally as the result of exportprice increases for most export products and an expanded volume of rice ex-ports. This increase in exchange earnings, plus some use of external financ-ing, enabled imports to rise although Burma's capacity to import continued tobe insufficient in relation to its needs.

16. Despite these favorable developments, much remains to be done toput the economy firmly on the path to sustained, more rapid growth. Fur-ther progress needs to be made in rationalizing the role of agricultural andindustrial prices in the allocation of resources. At present, investment andproduction decisions are still chiefly guided by plan targets rather than inresponse to changes in production and market conditions. In agriculture,the Government has established a Rice Commission to examine the appropriatelevel of agricultural prices, especially paddy, and this inquiry needs to besustained and broadened. In industry, further adjustments of SEE productprices are required to reflect resource scarcities more accurately, to stimu-late productivity growth, and to generate surpluses for reinvestment. Inexternal trade, the impact of the exchange rate needs to be kept undercontinuing review, given the importance of greater export growth for thedevelopment of the domestic economy.

17. Together with the use of prices to allocate resources to the mostproductive activities, a sharpening of sectoral development strategy aimedat rehabilitating productive capacity and ensuring more efficient use of thenational resource endowment is also required.

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18. The Bank economic reports have drawn attention to the wealth ofBurma's agricultural resources, its importance for the country's economicdevelopment, and the difficulties in sustaining more rapid growth. Apartfrom the controlled price system, which militates against fuller realizationof potential and timely adjustments of production to changes in export marketconditions, the problems confronting agriculture include insufficient suppliesof essential farm inputs, inadequate transportation facilities and shortagesof farm power, basic farm services, in particular agricultural credit, andextension services.

19. If Burma's agricultural performance is to be improved, intensiveand coordinated action will be necessary to deal with these difficulties.Along with such action, priority needs to be given to improvements of pro-ductivity in existing cultivated areas, with emphasis on quick-yieldingprojects.

20. In forestry, Burma is estimated to have 75% of the world's remain-ing teak reserves in addition to extensive reserves of marketable hardwood.The rehabilitation of existing and the purchase of new equipment, improvedmaintenance, construction of access and feeder roads to forest areas, andbetter management and coordination between Government agencies are priorityrequirements if the potential of the sector for increased production andexport earnings is to be more fully tapped.

21. Burma's reserves of mineral products are similarly impressive.Although only a few areas of the country have been systematically prospected,it is clear that Burma has a highly varied and favorable endowment of minerals-- tin and tungsten, lead, zinc, silver and copper. Their effective utiliza-tion will, however, require that urgent attention be given to the rehabilita-tion, modernization and maintenance of existing mining operations, institutionbuilding and technical training. The benefits foregone by past neglect andinadequate management in the post-war period are enormous. A new opportunityis the development of petroleum resources where current onshore crude oilproduction already permits self-sufficiency.

22. The primary sectors, in turn, provide Burma with a base for indus-trial development, provided managerial efficiency is improved and research anddevelopment are promoted. In contrast to this potential, investments in therecent past have concentrated on industries which have not always been in linewith the country's comparative advantages. Notable cases in this connectionare a number of heavy industries where capacity has been built up over theyears to levels that do not permit efficient production. A review of indus-trial strategy is needed, given the character of the country's resource endow-ments and the fiscal and balance of payments implications of capital-intensiveindustrial development.

23. Together with the development of the primary and secondary sectors,greater attention is required for the rehabilitation of the country's physicalinfrastructure, in particular transportation. The transport sector is in aserious state of disrepair for lack of spares, new equipment and maintenance.Only some 60% of the stock of diesel locomotives, 50% of the fleet of trucksin the public sector, and 75% of inland watercraft are in running condition.

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24. The transportation and communications sector accounted for about 17%of all development expenditures during 1974/75-1976/77. An expanded share isjustified during the Third Four-Year Plan. Within such an allocation, thehighest priority needs to be given to the rehabilitation and maintenance ofexisting capacity, although some expansion of capacity in the communicationssector is also required. Also, rationalization of transport pricing policy isessential. To have any substantial impact, these measures must, in addition,be accompanied by improvements in operational efficiency and management in thepublic sector.

25. The need for institution building and management development gearedto expanding absorptive capacity by improving the design, administration andimplementation of development programs cannot be overemphasized (para 38).The Burmese planning and administrative system, as it now exists, is complexand rigid in its manner of operation and focuses excessively on the formula-tion rather than the implementation of targets. Streamlining of the entireplanning and administrative apparatus, decentralization of decision makingand strengthening of the capability of Government entities to prepare andimplement projects are urgently needed.

26. The Government concurs broadly with the above diagnosis of the prob-lems it faces and the issues to which attention must urgently be addressed.If pursued vigorously, and duly supplemented with additional measures, theGovernment's new policy orientation should lead to a significant accelerationof economic growth. In this connection, the recently enacted law on the"Rights of the Private Enterprise" is welcomed. By legitimizing privatesector activity and establishing a clearer set of guidelines for the develop-ment of the public, cooperative and private sectors, some re-integration ofthe economy will take place which can be expected to have a beneficial impactupon economic performance.

27. The targets of the authorities entail GDP growth in real terms of6.6% per annum under the Third Four-Year Plan (1978/79-1981/82). Agricultureis targeted to expand by 5.8% per annum and the processing and manufacturingsector by 12.2%.

28. A more modest view of the intermediate-term prospects of the economy,however, is forecast in the 1977 Burma Country Economic Memorandum because,unavoidably, it will take some time before recent reforms and intended newinitiatives are fully implemented and begin to have a significant impact.Annual increases in GDP of 5% in real terms (with agriculture and manufactur-ing industries growing by 3% and 8.5% per annum, respectively) together withannual increases in investment of about 13%, constitute a more reasonable setof expectations. The targets, although modest, are a substantial improvementof performance over the past decade. The financing of such an investmenteffort will require that domestic savings should grow from 8.5% of GNP in1976/77 to 11.1% in 1981/82, and that substantial foreign transfers ofresources into Burma should continue. While the tasks involved will put heavydemands on the fiscal, administrative and management capacities of the Govern-ment, it should be feasible, provided adequate action is taken.

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29. External assistance is needed for projects which contribute towards:

-- intensified and more efficienct use of existing cultivatedareas and the reclamation of abandoned land in agriculture(research and extension services, supply of essentialinputs especially high-yielding varieties of plantingmaterials, fertilizer and light agricultural machinery;improvement of irrigation facilities, in particular,tubewell development; and integrated agriculturaldevelopment);

-- better utilization of forestry resources (through theimprovement of extraction and transport facilities);

-- development of known mineral deposits; and

-- development of agro- and mineral-based industriespossessing clear comparative advantage (including food,fish and wood products, and fertilizer production).

Alongside such directly productive projects, external assistance is alsorequired for infrastructure development, particularly to rehabilitate existingcapacity in transportation and communications. While project loans andtechnical assistance will be justified for most projects in the above fields,commodity financing also will be required from external resources to meetBurma's needs for fertilizer, materials, spares, and equipment in support ofits rehabilitation efforts.

30. Given Burma's low income level and the scarcity of foreign ex-change, such external assistance should be on concessionary terms and should,in addition, finance part of local cost requirements which cannot, at present,be covered adequately by domestic savings. Local cost financing is parti-cularly needed for the agricultural sector where most investments have alow foreign exchange component.

31. Burma's debt service ratio has increased from 10% in the sixtiesto about 20% in 1976/77 due primarily to a relative decline in exports withrespect to GDP rather than a relative increase in debt servicing. By theend of March 1977, Burma's external public debt, disbursed and outstanding,amounted to US$321 million. With increased foreign assistance, externalpublic debt will rise further, but Burma should have no major problem inservicing this debt, in view of its moderately favorable export potential.

32. Burma is potentially one of the richest countries in South Asia.Apart from an impressive natural resource base, it is endowed with a healthyand literate population. The crucial question is the quality with which theseresources will be managed and developed. While there are some signs thatBurma's performance in this regard is now being improved, these need to bestrengthened and broadened. Provided Burma sustains its efforts at utilizing

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this endowment efficiently and combines them with a positive attitude towardspopulation planning, it should make the task of economic development moremanageable and provide increasingly productive employment for its people inthe longer run.

33. The Bank Group, in close cooperation with the IMF, will continuediscussions with the Government regarding further improvements in economicpolicy which would help Burma realize its promising potential for economicdevelopment. At the Government's request, the Bank has organized an Aid Groupfor Burma. The first meeting of the Group was held on November 30, 1976, inTokyo. In endorsing the measures being taken by the Government to accelerateeconomic growth and strengthen Burma's planning and management capabilities,the Group, in its second meeting held on February 1, 1978, in Paris, assuredthe Government that in these efforts it will find the Group responsive inmeeting Burma's requirements for external capital and technical assistance.The third meeting of the Group is scheduled for April 27, 1979, in Tokyo.

PART II - BANK GROUP OPERATIONS

34. Burma became a member of the Bank in 1952, IFC in 1956, and IDA in1962. Between 1956 and 1961, the Bank made three loans totalling US$33.1million, all for transportation projects. One loan for the Port of Rangoonhelped finance the reconstruction of cargo berths and storage facilities, andthe purchase of cargo handling and port equipment. Two loans helped financethe post-war reconstruction and dieselization of the railways. All threeprojects were satisfactorily completed and the loans fully disbursed by FY68.

35. No lending was requested between 1962 and 1973. At the request ofthe Government, IDA lending was resumed in 1973. Since 1973 IDA has madeeleven credits totalling US$197.8 million equivalent (net of cancellations),two of which have been satisfactorily completed and the credits fully dis-bursed. About 60% of this assistance was channeled to the agriculturalsector, consisting of six projects: irrigation, forestry, livestock, seeddevelopment, and two paddyland development projects. About 21% of IDA'sassistance supported the rehabilitation of the transport sector through threeprojects, namely inland water transport, railways, and a second ports project.The remaining 19% of IDA's assistance has been for one project each in thetelecommunications sector (11%) and the mining sector (8%). The proposedcredit would be the second in FY79, bringing the total of IDA assistance toBurma to US$202.3 equivalent, net of cancellations. Annex II contains asummary statement of Bank loans and IDA credits as of December 31, 1978, andnotes on the execution of ongoing projects. IFC has made no investments inBurma, nor are any planned.

36. In the past, lending was partly constrained by incomplete knowledgeof some sectors and the lack of adequately prepared projects. Through our on-going projects and sector work, our knowledge of many sectors has improved. AUS$3.0 million UNDP Technical Assistance Project (Burma Umbrella Project), forwhich the Bank is the Executing Agency, has developed a project pipeline suit-able for external financing in priority sectors such as agriculture, transport,

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power and industry. The proposed Rubber Rehabilitation Project, as well asthe Seed Development Project (Credit No. 745-BA), were prepared under theUmbrella Project. A second phase of this Umbrella project is now under dis-cussion with the Government and UNDP. Furthermore, the Association plansto continue its technical assistance on a project-by-project basis to helpimprove Burmese project preparation capabilities, as well as administrativeand managerial skills through in-service and overseas training.

37. The Bank Group strategy is aimed at easing the most immediate con-straints to growth and, particularly, at increasing and diversifying productionfor export in order to alleviate the shortage of foreign exchange. Within thisoverall strategy, primary emphasis is being placed on the development ofagriculture, forestry, and mining. Within this framework and where possible,priority is being given to quick-yielding projects. At the same time, finan-cing of infrastructure improvements will continue in such areas as transporta-tion and telecommunications, mainly to rehabilitate existing facilities. Manyof these are inoperable at present and have increasingly impeded economicactivity in the directly productive sectors of the economy.

38. The Association intends to assist the Government with the implemen-tation of these objectives. However, the extent to which the Associationwould be able to provide assistance will depend largely on the pace by whichthe Government continues to improve overall macroeconomic performance alongthe lines noted in paragraphs 16 to 25. In particular, future lending maybe constrained by the low absorptive capacity of implementing agencies, espe-cially in the agriculture sector. Thus, the Government's action to improveits absorptive capacity, in particular, to make its administrative machinerymore conducive to development, will essentially determine the scope and volumeof external assistance.

39. In line with the need to increase Burma's foreign exchange earnings,most of the projects under active preparation are designed to have an impacton increasing agricultural surpluses for export. A major irrigation project,Nyaunggyat Dam, is being prepared. It is designed to increase food productionin areas of Upper Burma, as well as to meet the raw cotton requirements of thedomestic textile industry. Due to the size of the project, the Association isexploring co-financing with a number of bilateral donors. A proposed paddystorage and handling project, as well as a second forestry project, have beenappraised.

40. Programs to expand production and exports will need to be supportedby complementary improvements in economic infrastructure. In this connection,a second telecommunications project, prepared by the Government, has beenappraised. It will complement the first telecommunications project (Credit551-BA, US$21 million) by further rehabilitating the telecommunicationsnetwork which is presently inadequate and is a major bottleneck to growth ofproductive sectors. The project will help finance the expansion of telex andtelegraph facilities, and extension of existing telecommunication facilitiesto meet demand in Rangoon, Mandalay and other smaller towns and rural areas.It will also help improve international services through a satellite groundstation.

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41. The Bank Group presently accounts for about 15% of Burma's totalexternal debt outstanding and about 1% of its debt service. In five years,the Bank Group's share in the total external debt is projected to rise toabout 20% and its share in the debt service to about 2-3%.

PART III - THE AGRICULTURAL SECTOR

42. The agricultural sector, excluding livestock, forestry, and fishe-ries, accounted for about 40% of GDP in 1976/77 in current prices and employed65% of the labor force. Agricultural products, primarily rice and teak,account for about 85% of all exports. About 60% of Burma's industrial outputstems from the processing of agricultural crops including cotton, jute andsugarcane. Rice is by far the most important crop, accounting for about 50%of the agricultural output and more than half of the sown area. Prior toWorld War II, Burma was one of the world's largest rice exporters and, whilerice production has grown less rapidly than domestic demand, rice and riceproducts are still the major exports. Other major crops in terms of sown areainclude sesamum, pulses and groundnuts; other crops include maize, cotton,sugarcane, wheat, chillies, jute, tobacco, onions, coconut and rubber. Theagricultural sector performed poorly over the decade prior to 1975/76; itsgrowth rate, estimated to be 1.6% per annum, was less than both the 2.3%growth in GDP and the 2.2% population growth. During this decade, exportvolumes decreased by about two-thirds largely due to declining rice exports.The poor performance of the agricultural sector was a major cause of Burma'seconomic deterioration over the past decade. Its origins can be traced toinsufficient public and private investment in agriculture, to inadequateproduction incentives, and to shortages of inputs including agriculturalsupport services. There has been a considerable improvement in the sector'sperformance in 1975/76 and 1976/77 with an annual growth rate averaging about5%, reflecting both more favorable weather conditions and Government actionto redress past problems.

43. The Government has recently re-ordered its development prioritiesto give more emphasis to agriculture and other primary producing sectors.The Third Four-Year Plan (1978/79-1981/82) calls for agricultural output toincrease by 5.8% annually. The Government has increased agriculture's shareof State capital expenditure from about 10% for the period 1968/69 to 1974/75to about 20% for the period 1977/78 to 1981/82. Over the past few years, theGovernment has also increased procurement prices for major crops and attemptedto improve input availability and agricultural support services.

44. At present, the private sector accounts for about 99.7% of agricul-tural output, excluding livestock and fisheries. The Government is consideringsome structural adjustments in the agricultural sector such that by 1994, statefarms are expected to account for 10% of the cultivated area; the cooperativesector, 50%; and the private sector, 40%. However, neither the means nor thepace for achieving these adjustments has been specified.

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The Rubber Subsector

45. Rubber was introduced in the far south of Burma about one hundred

years ago. The trees grew successfully in the Tenasserim salient and rubberacreage reached about 30,000 ac by the turn of the century and 120,000 ac by1930. The acreage declined during the economic depression of the thirtiesand the industry was completely disrupted by World War II. Since then, theacreage increased, partly as the result of Government planting, to reach apeak of 214,000 ac in 1973, but declined again in recent years and is now esti-mated at 207,000 ac. The main rubber growing area remains the Tenasserimsalient, comprising Mon State and Tenasserim Division, which accounts for 82%of the planted rubber. The remainder is scattered in the ecologically lesssuitable areas north and northwest of the Tenasserim salient. Only 57% ofthe total planted area is currently being exploited with the balance eitherimmature (about 11%) or abandoned (about 32%). The abandoned rubber isgenerally overaged and unproductive although some potentially productiverubber may have been abandoned due to security problems. The private sector,comprising smallholders 1/ with 54% of the total area, and private estates,with 28% of the total area, together control 169,000 ac with 100,000 accurrently exploited. The remaining 18% or 38,000 ac is controlled by theRubber Section (RS) of the Agriculture Corporation (AC) which owns andoperates 23 government rubber estates. The Government is the sole legalbuyer of rubber in Burma and, through the AC, sets procurement targets forindividual producers. Of the three creping mills for processing rubber, twoare government-owned and the third, privately-owned mill operates solely forthe Government under contract. The Government also controls the marketing ofall rubber for both domestic consumption and export.

46. Burma's total annual rubber production has fluctuated around 14,000tons for the past decade, or about 0.4% of total world production. Officialestimates of rubber exports have averaged about 7,300 tons annually since1965/66, although there has been considerable fluctuation between years.Official exports have contributed an average of US$3.3 million per year since1970, representing approximately 2.4% of total exports. These exports do notinclude a substantial quantity of rubber which is unofficially exported. Suchexports are estimated to vary between 3,000 and 6,000 tons annually or 40% to80% of official exports. Most of the unofficial exports originate fromsmallholdings in the southern half of Tenasserim Division where there isrelatively easy access by sea to Malaysia and overland to Thailand. Withoutrehabilitation of the rubber subsector and with increasing domestic demand,rubber exports would be reduced by about half this level in ten years. Withthe strong prospects in the export market, however, Burma should have littledifficulty finding markets for significantly greater rubber production andexports.

1/ Defined as operating less than 100 ac. The latest data on ownership(1963) indicate that there were 14,250 smallholdings and only 200 planta-tions larger than 100 ac.

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47. Due to inadequate maintenance and reinvestment in recent years,rubber yields in Burma currently average about 275 lb per tapped acre whichis about 25% of average Malaysian yields. The industry faces the prospect ofcontinued decline if productivity is not improved by replanting with modernhigh-yielding cultivars, introducing modern exploitation practices, and reha-bilitating both the production and processing facilities. The cause of theindustry's decline has been the failure to maintain investments, uue mainlyto: (i) the disruptions during World War II and subsequent insurgency in MonState and Tenasserim Division after independence in 1948; (ii) the lack ofconfidence of the private sector, and in particular the private estate sector,following the Land Nationalization Acts of 1948 and 1953; and (iii) the lackof financial incentives for the smallholders to replant. The situation isfurther exacerbated by a shortage of trained manpower. With appropriate invest-ments, yields from existing plantings could be increased 25%-50%, yields fromnew plantings could more than double even the yields from upgraded existingplantings, and processing could be concentrated in the more profitable highergrade ranges.

48. Rehabilitation of the rubber subsector is made difficult by currentGovernment policies. The private estate operators appear to be reluctant torehabilitate their estates partly because the 30-year Government guarantee ofnon-nationalization, which expires in 2003, may provide insufficient securityfor their slow-yielding investment. Both the private estate operators and thesmallholders regard present financial returns from rubber as inadequate, parti-cularly in Tenasserim Division where relatively lucrative but unofficial trad-ing opportunities have driven wages to three times the official Governmentrate. As the Government is reluctant to provide indirect grants for replant-ing and since there is, at present, no agency capable of administering long-term credit to rubber producers, institutional financing for rubber rehabili-tation in the private sector is not available. Finally, in part of the rubberproducing areas, insecurity resulting from insurgent activity has discouragedrehabilitation both through its effect on labor supply and through the invest-ment risk it poses.

49. Given the existing constraints to rehabilitation in the privatesector, the Government sector currently offers a better investment opportunity.While the Government sector accounts for only 14% of total rubber production,rehabilitation of Government estates would increase rubber production for ex-port. Furthermore, it would revitalize supporting services in the sector andcontribute to the rehabilitation of the rubber industry. The Government hasendorses the strengthening of the RS to be staffed with officers competent inmodern rubber husbandry, as well as the production of proven suitable plantingmaterial. The Government has accorded a high priority to rehabilitation ofits estates under the current Four-Year Plan and has already greatly increasedits importation of the improved planting material required to replant over-agedand less productive trees. The Government, however, would require externalassistance to make the necessary supporting investments in estate equipment,civil works, processing facilities, staff training and technical assistance.

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PART IV - THE PROJECT

50. The proposed project was prepared by the Government with assistancefrom consultants financed under the UNDP Technical Assistance Project (UmbrellaProject). The project was appraised in November 1977, with a follow-up missionin March 1978. A report entitled "Burma: Staff Appraisal Report - RubberRehabilitation Project" (No. 2193a-BA) dated December 20, 1978, is being cir-culated separately to the Executive Directors. Negotiations were held inWashington, D.C. during December 4 to 11, 1978. The Borrower's delegation wasled by U Khin Win, Managing Director, Agriculture Corporation, Ministry ofAgriculture and Forests.

Project Objectives

51. The objectives of the proposed project are to increase the quantityand improve the quality of rubber produced by 15 Government estates and toupgrade and expand rubber processing capacity. The project will establisha staff within the Ministry of Agriculture and Forests (MAF), well-trainedin modern techniques of rubber production, and provide improved plantingmaterials, thus contributing to the rehabilitation of the rubber industry inBurma.

Project Description

52. The main components of the proposed project are:

(a) provision of agricultural equipment, vehicles, processingfacilities, and housing, to rehabilitate 15 Governmentrubber estates;

(b) establishment of 4,500 ac of high-yielding rubber on Govern-ment estates in Tenasserim Division to replace over-aged,unproductive rubber (3,375 ac) and to expand the area undernew plantings (1,125 ac);

(c) introduction of modern tree exploitation practices on allGovernment rubber estates in the project area includingimproved husbandry for immature rubber, upward and high-level tapping for older trees, and yield stimulation;

(d) rehabilitation of two Government creping mills by replac-ing worn out equipment and expanding the capacity of Burma'sonly crumb rubber plant;

(e) provision of in-service and overseas training for theRS staff and estate staff;

(f) provision of 76 man-months of technical assistance to theRS to assist with and supplement the staff training activ-ities; and

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(g) introduction of a small-scale adaptive research program totest planting materials, investigate the feasibility ofreplanting in Mon State, and improve rubber productivitygenerally.

Organization and Implementation

53. The Government rubber estates and the service and commercial func-tions for the rubber industry are now managed by the RS which is part of theProcurement, Distribution, Planning and Statistics Division of the AC. Theproposed project would be implemented by the RS. The General Manager ofthe RS would report directly to the Managing Director of the AC. Assuranceshave been obtained that the RS head office would be headed by an officer ofGeneral Manager rank whose experience and qualifications are satisfactory tothe Association [Section 3.06(a) of the draft Development Credit Agreement(DCA)]. The General Manager would have a small head office staff located inRangoon to provide support for the field staff and to monitor project progress.It was further agreed that the RS's head office would be adequately staffedand provided with, inter alia, not less than eleven officers, whose experienceand qualifications are satisfactory to the Association [Section 3.06(b) of thedraft DCA].

54. The Government has proposed a major reorganization within MAF whichwould result, inter alia, in the creation of an Agriculture Department (AD)to replace the existing AC. AD would have responsibility for agriculturalresearch, extension, input supply, land use planning, and plantation crops.A new division, the Plantation Crop Division (PCD), which would be createdwithin AD, would have responsibility for all aspects of plantation crop produc-tion in both the state and private sectors. In the proposed reorganization,PCD would assume, inter alia, the current responsibilities of the RS. The PCDwould, therefore, carry out the service functions of extension and researchand the commercial functions of Government estate management, rubber procure-ment, processing, and marketing. The timing of the reorganization of the AChas not yet been determined.

55. In order to increase the productivity of all estate workers, itwas agreed that the incentive scheme presently in effect for rubber tapperson the Government estates would be extended to the remaining project estateworkers [Section 3.05(a) of the draft DCA]. Agreement has also been reachedthat, in the event the existing incentive scheme is modified or abolished,an alternative incentive scheme acceptable to the Association would be main-tained [Section 3.05(b) of the draft DCA]. The Government has also agreedto take all necessary measures to ensure that the project estates are ope-rated on the basis of sound commercial principles [Section 3.05(c) of thedraft DCA]. Assurances were obtained that the RS and each project estatewould keep separate accounts adequate to reflect the operation and financialcondition of each estate and that the RS would consolidate these records withits own accounts to produce statements of sources and uses of funds, incomeand expenditure, and balance sheet [Sections 4.01(a) and (b) of the draft DCA].

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56. The Government has already completed its survey of Governmentrubber estates in Tenasserim Division and has identified areas suitable forreplanting and new plantings totalling more than 4,500 ac. The proposed imple-

mentation schedule calls for rehabilitation work on the estates in TenasserimDivision selected for replanting or new planting to be completed before com-mencing rehabilitation of the estates in Mon State. With the assistance ofthe RS head office and the consultants (para 58), the project estate managers,who would report directly to the RS head office, would each prepare a five-year development and operation plan to be updated annually [Section 3.09(a) of

the draft DCA]. The RS would amalgamate these plans in an overall five-year

development and operation plan to be submitted to IDA not later than September30, 1979, and annually thereafter by April 1 of each subsequent year [Section3.09(b) of the draft DCA]. The Government estates would also be used to carry

out adaptive research under the direction of RS Deputy General Manager (Estatesand Research). With the assistance of the consultants (para 58), RS wouldprepare and submit annually to the Association (i) by December 31 of eachyear, beginning December 31, 1979, a five-year research program; and (ii) byJune 30 of each year, beginning June 30, 1980, a research report detailing RSresearch activities and findings and indicating its proposed future activities[Section 3.09 (c) of the draft DCA].

57. The two Government creping mills are currently operated by twoseparate Government corporations under contract to the RS, and would remainunder their control. Assurances have been obtained that the mills would beadequately rehabilitated and efficiently operated (Section 3.08 of the draftDCA). The crumb rubber processing plant at Thanbyuzayat and all sheet pro-cessing factories on the Government estates would be under the direct controlof RS. The Rubber Processing Officer in the RS head office would be respon-sible for ensuring efficient operation of the facilities and would advise themanagement of the two Government creping mills on the operation of those mills.

58. About 268 man-months of in-service training would be provided forGovernment estate staff by senior RS staff and project consultants; the courseswould include commercial estate operation, annual refresher courses with em-phasis on modern rubber husbandry, and training in budding techniques. SeniorRS staff would participate in study tours to visit commercial and governmentestates and research facilities in other countries and undertake specificcourse work at overseas universities and at the Rubber Research Institute ofMalaysia (RRIM). The RS would prepare and submit to the Association an annualplan for overseas training of its staff indicating selected candidates andtraining institutions, the first such plan to be presented to the Associationby July 1, 1979 (Section 4.02 of the draft DCA). In addition, the Governmentwould retain about 76 man-months of consultant services to assist RS staff toimplement the proposed project and prepare a subsequent project (Section 3.02of the draft DCA). Consultants would be employed by the Food and AgricultureOrganization (FAO), the Executing Agency on behalf of the UNDP. The con-sultants would provide in-service training and advice on modern commercialestate operations and development planning, adaptive research, monitoringand evaluation, soil survey and land use, pathology, processing and training.The technical assistance program has been designed to establish work programs

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which would be implemented by the RS staff, with periodic visits by theconsultants. The Government has agreed on a draft terms of reference forthese consultants.

59. Project performance would be continually monitored by an internalmonitoring unit set up in the RS head office and reporting directly to theGeneral Manager. This unit would consist of a full-time Monitoriiig Officerand a full-time Field Monitor. These officers would be assisted by stafffrom the Accounts and Administration Section of the RS as required. Project

operations would be restricted primarily to the fifteen Government rubberestates in the project area and monitored using the existing estate recordingsystems supplemented by specific field observations as necessary. The con-sultants would assist RS staff in the development of a satisfactory projectmonitoring system. The Government's Project Appraisal and Progress ReportingDepartment (PAPRD) would assist the RS in preparing a draft project completionreport [Section 3.04(c) of the draft DCA].

Cost and Financing

60. The total project cost is estimated at US$8.7 million, includingcontingencies and about US$0.8 million in taxes. The foreign exchange compo-nent is estimated at US$4.1 million, about 47% of the total project cost, ofwhich the United Nations Development Program (UNDP) would finance aboutUS$635,000 equivalent for the technical assistance component. The proposedIDA Credit of US$4.5 million would finance US$3.1 million equivalent of theforeign exchange cost of the project and US$1.4 million equivalent of localcost. External sources would contribute about 65% of total project cost netof taxes. The Government would finance the balance of US$3.6 million equiv-alent, including US$0.4 million equivalent of foreign exchange costs for theequipment reserved for procurement under local procedures (para 61). TheGovernment funds would be made available in the form of annual budgetaryallocations to the RS. The cost of technical assistance, including overheads,travel and per diem, is estimated at US$8,400 per man-month.

Procurement

61. The RS would be responsible for all procurement under the project.Equipment for estate rehabilitation and processing facilities, (US$0.77 mil-lion equivalent 1/) would be procured through international competitive bid-ding in accordance with Bank Group Procurement Guidelines. A preference of15% of the cif price or the prevailing duty, whichever is lower, would beextended to local manufacturers in the evaluation of bids. Small off-the-shelf items costing less than US$50,000 for each contract, which are eitherrequired urgently or are not suitable for international tendering, would bepurchased through normal Government procurement procedures, which are satis-factory to the IDA. Purchases of such equipment would be limited to a totalof US$200,000 excluding duties and taxes. Small tractors, trailers, waterpumps, other small equipment, and vehicles (about US$0.4 million equivalent)

1/ Excluding duties, taxes and contingencies.

- 17 -

would be reserved for procurement under local procedures and would not beeligible for reimbursement out of the proceeds of the IDA Credit. The RSwould procure estate supplies comprising yield stimulants, fencing materials,fungicides, other agricultural chemicals, cover crop seeds and sheet process-ing chemicals (US$0.77 million equivalent 1/) following normal Governmentprocedures, which are satisfactory to the Association.

62. Civil works (US$1.28 million equivalent 1/) would comprise a largenumber of small, relatively simple works, widely scattered through the projectarea, which would not be suitable for international competitive bidding. TheRS would be responsible for the construction of almost all such works (US$1.20million equivalent 1/) using force account. Assurances were obtained that theGovernment would (i) empower the RS to construct buildings which have a unitcost per building of not more than K 100,000 (US$13,900 equivalent) and (ii)ensure that the necessary building materials are available to the RS in atimely manner [Section 3.07(a) of the draft DCA]. Construction of buildingscosting more than K 100,000 each would be carried out by the ConstructionCorporation (CC) under contract to the RS (US$0.08 million equivalent 1/).The RS would submit to the Association not later than July 1 of each year,beginning July 1, 1979, an annual work plan for all civil works to be carriedout under the proposed project [Section 3.07(b) of the draft DCA] togetherwith a draft contract, satisfactory to the Association, for the execution ofconstruction work by CC on behalf of the RS [Section 3.07(c) of the draftDCAI.

Disbursements

63. Disbursements from the proposed IDA Credit would be made against:(a) 100% of foreign expenditures for directly imported equipment, estatesupplies and processing chemicals; (b) 100% of local expenditures (ex-factory)for equipment, estate supplies and processing chemicals manufactured locally;(c) 70% of local expenditures for other equipment, estate supplies and pro-cessing chemicals procured locally (off-the-shelf); (d) 100% of foreign ex-penditures for training; (e) 70% of local expenditures for civil works; and(f) new plantings of rubber at the rate of US$240 equivalent per acre.

64. Disbursements for project plantings (US$1.0 million equivalent)would be made against statements of expenditures indicating those projectplantings which had been satisfactorily established, up to a maximum of 4,500ac. Project plantings would be inspected by the consultants twelve monthsafter planting. Disbursements for estate supplies would be limited to theincremental requirements during the first two years of the project, estimatedto amount to roughly US$0.7 million equivalent excluding duties and taxes.

Marketing

65. During the next fifteen years, the demand for rubber will continueto be determined largely by the growth of the automotive industry. Even under

1/ Excluding duties, taxes and contingencies.

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conservative economic growth assumptions, world consumption of elastomersshould continue to expand at a healthy rate, allowing both natural and syn-thetic rubber producers ample scope for expansion. Natural rubber accountsfor about 30% of the world's elastomer market and has a substantial costadvantage over polyisoprene, the synthetic elastomer which competes mostdirectly with natural rubber. Unless the major producing countries take stepsto expand the natural rubber supply, it will grow at below market potentialand the continued demand growth expected in the 1980s will have to be met byfaster expansion of synthetic rubber capacity. Assuming constant crude oilprices and no excessive expansion of basic petrochemical production capacityduring the 1980s, the world price of natural rubber (RSS1, which is thestandard grade) is expected to be about USJ45-51 per pound cif New York inconstant terms by 1990, compared to USg42 per pound in 1977. The currentprice of standard grade rubber is USJ46 per pound cif New York. Domesticsales prices have historically been about 90% of fob export prices and 35%above domestic procurement prices. Burma currently exports about 87% of itstotal rubber output; although domestic demand is expected to grow rapidly,especially if the Government establishes the proposed domestic tire plant,most of the rubber produced by Burma will continue to be exported.

Project Benefits and Risks

66. The proposed project would rehabilitate 15 Government rubber estates,expand rubber processing capacity and provide staff training and technicalassistance. The major direct benefit would be the incremental production onthe Government estates resulting from the replanting of over-aged and low-yielding rubber, from new plantings, and from improved husbandry and exploita-tion techniques for replanted, new, and existing plantings. Annual incrementalproduction is estimated to reach 3,600 long tons by 1993/94 valued at US$3.3million and total incremental production would reach 28,000 long tons over 15years valued at US$25.0 million. The project would provide incremental employ-ment totalling about 3,200 man-years during the four-year implementation.Civil works would provide about 1,200 incremental man-years and replanting andmaintenance activities would provide about 3,200 incremental man-years; thesewould be partially offset by a reduction of about 1,200 man-years for produc-tion activities due to more efficient production and processing techniques.Most of the employment opportunities would go to landless families or wouldsupplement the incomes of families with insufficient land to employ fullyfamily labor resources. Improvement and expansion of Burma's sole crumb rubberprocessing facility would provide Burma with valuable experience in the pro-duction of technically specified rubber while offering the opportunity forBurma to establish its credentials as a producer of specified rubbers whichare increasingly in demand. By creating an effective and well-trained staffcompetent in all aspects of rubber development and by establishing high-yielding plant material suitable for Burmese conditions, the proposed projectcould pave the way for rehabilitation and expansion of the entire rubberindustry.

67. The financial rate of return to the project investment is about 17%.This rate of return represents a conservative estimate, since the analysis

- 19 -

assumes that most of the incremental output from Government estates would besold on the domestic market, rather than exported and therefore reflects thelower revenues obtained when all output is valued at domestic rather thanworld prices. The economic rate of return of the project is estimated to be

30%. Sensitivity analysis shows that, even with project costs increased by10% or the valv1e of the proposed project's incremental production decreasedby 10%, the economic rate of return would still remain above 25%.

68. The proposed project is exposed to the risk of introduction of a

rubber technology as yet unproven in Burma. The accumulated experience withhigh-yielding clones and modern exploitation techniques in nearby Malaysia,Thailand and Indonesia permit a high degree of confidence that suitableimproved technologies exist and can be successfully introduced to Burma.Provision of extensive staff training and technical assistance will alsominimize any risk that the modern technology is incorrectly applied. The

risks attached to project execution appear to be minimal, given the assurancesobtained on the incentive scheme and the operation of Government estates on a

commercial basis (para 55). Finally, the possible security risks are reducedby concentrating the proposed project area on Government estates, where laboravailability and cost, as well as security of investment, are more assured.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

69. The draft Development Credit Agreement between the Socialist Repub-

lic of the Union of Burma and the Association, and the Recommendation of theCommittee provided for in Article V, Section l(d) of the Articles of Agreementare being distributed to the Executive Directors separately.

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

PART VI - RECOMMENDATIONS

71. I recommend that the Executive Directors approve the proposed credit.

Robert S. McNamaraPresident

Attachments

January 25, 1979

-20 - ANNEX I

TABLE 3 Page 1 of 5 pagesBURMA - SOCIAL INDICATORS DATA SHEET

REFERENCE GROUPS (ADJUSTED AVERAGES

LAND ARtA (THOUSAND SQ.DIN.) BUMA - MOST RECENT ESTIMATE)TOTAL 676.6 SAHZ SAME NEXT HIGHER

AGRICULTURAL 107.5 DMST RECENT GEOGRAPHIC INCOME INCOME1960 /1 1970 lb ESTIATE ^ REGION L GROUP Ld GROUP La

GNP PER CAPITA (USS) 50.0 80.0 140.0 167.4 182.9 432.3

ENERGY CONSUMPTION PER CAPITA(KILOGRAHS OP COAL EQUIVALENT) 55.0 58.0 51.0 65.7 88.9 251.7

POPULATION AND VITAL STATISTICSTOTAL POPULATION, MID-YEAR

(HILLIONS) 21.8 27.0 31.5URBAN POPULATION (PERCENT OF TOTAL) 17.1 19.9 23.2 12.8 15.0 24.2

POPULATION DENSITYPER SQ. KM. 32.0 40.0 47.0 85.2 46.8 42.7

PER SQ. KM. AGRICULTURAL LAND 204.0 253.0 293.0 322.6 254.1 95.0

POPULATION AGE STRUCTURE (PERCENT)0-14 YRS. 41.0 40.0 40.5 44.0 43.6 44.9

15-64 YRS. 56.0 57.0 55.9 52.9 53.3 52.8

65 YRS. AND ABOVE 3.0 3.0 3.6 2.9 2.9 3.0

POPULATION GROVTH RATE (PERCENT)TOTAL 1.8 2.2 2.2 2.2 2.4 2.7

URBAN 5.7 3.7 4.6 4.2 4.0 8.8

CRUDE BIRTH RATE (PER THOUSAND) 43.6 41.3 39.5 45.1 44.3 42.2

CRUDE DEATH RATE (PER THOUSAND) 24.4 19.3 15.8 17.3 19.7 12.4GROSS REPRODUCTION RATE .. 2.7 2.7 3.2 2.9 3.2

FAMILY PLANNINGACCEPTORS, ANNUAL (T80USANDS) .. .. ..

USERS (PERCENT OF MARRIED WOMEN) .. .. .. 13.7 14.6 14.2

FOOD AND NUTRITIONINDEX OF FOOD PRODUCTION

PER CAPITA (1970-100) 104.9 100.0 97.8 95.6 96.4 104.3

PER CAPITA SUPPLY OFCALORIES (PERCENT OF

REQUIREMENTS) 90.4 101.0 103.0 91.1 92.3 99.5

PROTEINS (GRAMS PER DAY) 50.0 49.0 58.0 49.6 50.0 56.8OF WHICH ANIMAL AND PULSE 12.1 13.0 f 12.9 12.6 13.9 17.5

CHILD (AGES 1-4) MORTALITY RATE 30.9 a .. .. .. .. 7.5

HEALTHLIFE EXPECTANCY AT BIRTH (YEARS) 45.0 47.5 50.1 43.1 45.8 53.3INFANT MORTALITY RATE (PERTHOUSAND) 129.9 .. 48.3 99.5 102.7 82.5

ACCESS TO SAFE WATER (PERCENT OFPOPULATION)

TOTAL .. 18.0 17.0 30.0 26.4 31.1URBAN ,, 35.0 31.0 66.3 63.5 68.5

RURAL .. 13.0 14.0 17.2 14.1 18.2

ACCESS TO EXCRETA DISPOSAL (PERCENTOF POPULATION)

TOTAL .. 35.0 33.0 15.7 16.1 37.5URBAN .. 45.0 38.0 66.9 65.9 69.5

RURAL *- 32.0 32.0 2.5 3.4 25.4

POPULATION PER PHYSICIAN 12270.0 8970.0 5440.0 8830.8 13432.7 9359.2

POPULATION PER NURSING PERSON 11310.0 7540.0 6260.0 8479.3 6983.3 2762.5POPULATION PER HOSPITAL BEDTOTAL 1980.0 1200.0 1200.0 /f,h 1624.5 1157.6 786.5URBAN *- 250.0 250.0 /f.h .. 183.3 278.4

RURAL *- 15820.0 6070.0 /f.h .. 1348.8 1358.4

ADMISSIONS PER HOSPITAL BED .. 34.0 39.0 /f .. 19.5 19.2

HOUSINGAVERAGE SIZE OF HOUSEHOLD

TOTAL 4.6 .. .. .. 5.2URBAN .. .. .. .. 4.8RURAL .. .. .. .. 5.3

AVERAGE NUMBER OF PERSONS PER ROOMTOTAL .. .. ..

URBAN .. .. .. .. 1.8 2.3RURAL .. .. ..

ACCESS TO ELECTRICITY (PERCENTOF DWELLINGS)

TTAL .. .. .. .. 25.9 28.3URBAN .. .. ..

RURAL .. .. .. .. 8.7 10.3

- 21 - ANNEX I

TABLE 3A Page 2 of 5 pagesBURMA - SOCIAL INDICATORS DATA SHEET

REFERENCE GROUPS (ADJUSTED AVERAGESBURMA /a

- MOST RECENT ESTIMATE)SAME SAME NEXT HIGHER

MOST RECENT GEOGRAPHIC INCOME INCOME

1960 /b 1970 /b ESTIMATE Lb REGION Le GROUP td GROUP teEDUCATION

ADJUSTED ENROLLMENT RATIOSPRIMARY: TOTAL 56.0 87.0 85.0 59.1 62.9 75.8

FEKALE 52.0 83.0 81.0 38.4 45.9 67.9

SECONDARY: TOTAL 10.0 25.0 26.0 19.9 14.4 17.7FEMALE 7.0 20.0 21.0 9.9 8.8 12.9

VOCATIONAL (PERCENT OF SECONDARY) 0.5 1.4 1.4 1.5 6.6 7.4

PUPIL-TEACHER RATIOPRIMARY 42.0 47.0 44.0 If 38.2 38.5 34.3SECONDARY . 32.0 33.0 tf 23.5 19.8 23.5

ADULT LITERACY RATE (PERCENT) 59.7 tR 67.0 35.6 36.7 63.7

CONSUHPTIONPASSENGER CARS PER THOUSAND

POPULATION 0.8 1.0 1.2 2.2 3.1 7.2RADIO RECEIVERS PER TWUSAND

POPULATION 6.0 15.0 22.0 14.9 31.1 71.1TV RECEIVERS PER THOUSAND

POPULATION . . 2.8 14.1NEWSPAPER ("DAILY GENERALINTEREST") CIRCULATION PERTHOUSAND POPULATION 15.0 11.0 6.4 6.0 16.3CINEMA ANNUAL ATTENDANCE PER CAPITA 6.0 8.1 tf 1.4 1.6

EMPLOYMENTMTAL LABOR FORCE (THOUSANDS) 10600.0 10920.0 12300.0

FEMALE (PERCENT) 40.1 36.9 36.4 21.3 24.2 28.0AGRICULTURE (PERCENT) 68.0 70.0 67.0 62.8 60.7 54.1INDUSTRY (PERCENT) 11.3 15.4

PARTICIPATION RATE (PERCENT)TOTAL 47.8 42.9 41.2 35.8 39.8 37.8MALE 58.0 54.1 52.9 52.4 53.3 50.3FEMALE 37.8 31.1 29.8 15.6 19.6 20.9

ECONOMIC DEPENDENCY RATIO 0.9 1.1 1.1 1.3 1.3 1.3

INCOME DISTRIBUTIONPERCENT OF PRIVATE INCOMERECEIVED BY

HIGHEST 5 PERCENT OF HOUSEHOLDS 14.6 ti 18 6 20 3 19.5HIGHEST 20 PERCENT OF HOUSEHOLDS 44.7 /i 40.01t 42.8 45.1 48.9LOWEST 20 PERCENT OP HOUSEHOLDS 6.5 a 8.0 /f 7 3 5 7 5.9LOWEST 40 PERCENT OF HOUSEHOLDS 16.5 I 21.0 If 19.3 16.8 15.7

POVERTY TARGET GROUPSESTIMATED ABSOLUTE POVERTY INCOMELEVEL (USs PER CAPITA)

URBAN 60.0 80.2 88.5 155.9RURAL . 40.0 67.2 71.9 97.9

ESTIMATED RELATIVE POVERTY INCOMELEVEL (US$ PER CAPITA)

URBAN . 100 8 143 7RURAL 29.0 39.8 42.0 87.3

ESTIMATED POPULATION BELOW POVERTYINCOME LEVEL (PERCENT)

URBAN . 25.0 50.3 46.0 22.9RURAL . 24.0 44.6 48.0 36.7

Not availableNot applicable.

NOTES

/a The adjusted group averages for each Indicator are population-weighted geometric means, excluding the extremevalues of the indicator and the most populated country in each group. Coverage of countries among theindicators depends on availability of data and is not uniform.

/b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969and 1971; and for Most Recent Estimate, between 1973 and 1977.

/c South Asia; /d Low Income ($280 or less per capita 1976); /e Lower Middle Income ($281-550 per capita,1976); /f 1972; /i 1962; /h General hospitals only; /i 1958, Rangoon.

September, 1978

- 22 - ANNEX IPage 3 of 5 pages

DEFINITIONS OF SOCIAL INDICATORS

Note: The adjusted group averages for each indicator are population-weighted geometric mveans, excluding the extreme values of the indicator and the mostpopulated country in each group. Coverage of countries among the indicators depends on availability of data asd is not uniform. Doe to lack of data,group averages for Capital Surplus Oil Exporters and indicators of access to water and escreta disposal, housing, income distributisn and poverty aresimple population-weighted geometric means without the exclusion of extreme values.

LAND AREA (thousand sq. km) Population pee I.osital bed - total, urban, and rural - Population (total,Total - Total surface area comprising land area and inland waters. urban, anvd rural) divided by their respective number of hospital bedsAgricultural - Most recent estimate of agricultural area used temporarily available in public and private geseral and specialized hospital and re-or permanently for crops, pastures, market and kitchen gardens or to hahilitati-n centers. Hospitals are establishments permanently staffed bylie fallow, a- least one physician. Establishments providing principally custodialcare are not included. Rural hospitals, however, include health and medi-GNP PER CAPITA (US$) - lNP per capita estimates at current market prices, cal centers not permanently staffed by a physician (but by a medical as-calculated by same conversion ahod as World Bank Atlas (1975-77 basis); sirtast, nurse, midwife, etc.) which offer in-patient accommodation and1960, 1970, and 1977 data. provide a lii.ited range of medical facilities.

Admissions per hospital bed - Total number of admissions to or dischargesENERGY CONISUMPTION PER CAPITA - Annual consumption of commercial energy from bispitals divided by the number of beds.(coal and lignite, petroleum, natural gas and hydro-, nuclear and geo-thermal electricity) in kilograms of coal equivalent per capita. HOUSING

Average size of household (persons per household) - total, urban, and rural-POPULATION AND VITAL STATTSTICS A hounohold consists of a group of individuals who share living quartersTotal population, mid-year (milions) - As of July 1; if not available, and their main meals. A boarder or lodger may or may not be included inaverage of two end-year estimates; 1960, 1970, and 1977 data. the household for statistical purposes. Statistical definitions of house-Urban population (percent of total) - Ratio of urban to total popula- hold vary.tion; different definitions of urban areas may affect comparability Average numr f persons per coon - total, urban, and total - Average num-of data among countries. ber of prsor-s per room in all, urban, and rural occupied conventionalPopulation density dwellings, respectively. Dwellings exclude non-permanent structures andPer so. km. - Mid-year population per square kilometer (100 hectares) unoccapied parts.of total area. Access to electricity (percent of dwellings) - total, urban, and rural -Per sq. km. agriculture land - Computed as above for agricultural land Conventional dwellings with electricity in living quarters as percentages,,iy. of total, urban, and coral dwe11iogs respectively.

Population age structure (percent) - Children (0-14 years), working-age(15-64 years), and retired (65 years and over) as percentages of mid- EDUCATIONyear population. Adjusted enrollment ratios

Population growth ratet (r total , and urban - Compound annual Primary shool- total, and female - Total and female enrollment of all agesgrowth rates of total sod urban mid-year populations for 1950-60, or the primary level an percetages of r-spectvely primary school-age1960-70, and 1970-75. populations; normally includes children aged 6-11 years but adjusted forCrude birth rate (per thousand) - Annual live births per thousand of different lengths of primary education; for countries with universal edu-mid-year population; ten-year arithmetic averages ending in 1960 and catios enrollment may exceed 100 percent since some pupils are below or1970 and five-year average .oding in 1975 for most recent estimate. above the official school age.Crude death rote (per thousand) - Annual deaths per thousand of mid- Secandarv schoul - total, and female - Computed as above; secondary eduea-year population; ten-year arithmetic averages ending in 1950 and 1970 ticn requires at least four years of approved primary instruction; pro-and five-year average ending in 1975 for most recent estimate. vides general vccational, or teacher training instructions for pupilsGroes ce-rcdaccio cat -Average number of daughters a woman will bear usually of 12 to 17 years of age; correspondence courses are generallyin her normal reproductive period if she experiences present age- excluded.

specific fertility rates; usually five-year averages er.ding in 1960, Vocational e,rr1i1eot (percent of secondary) - Vocational institutions in-1970, and 1975. clude ne ia,industrial, or other program which opera.te independentlyFamily planniog - acceorr, annual (thousands) - Annual number of or as departments of secondary institutions.acceptors of birth-control devices under auspices of national family Pupil-teacher ratio - primary, aod secondary - Total students enrolled inplanning program. primary aod secondary levels divided by numbers of teachers in the corre-Pamily planning - users (percent of married women) - Percentage ef sponding levels.married women of child-bearing age (15-44 years) who use birth-control Adult literacy rate (percent) - Literate adults (able to read and write) asdevices to all married women in same age group. a percentage of total adult population aged 15 years and over.

FOOD AND NUTRITION _OSCS_PTI()Nlinden of food production per capita (1970-1O) - Index number of per Pasenger cars (per thousand population) - Passenger cars comprise motor carscapita annual production of all food commodities. seating lens than eight persons; excludes ambulances, hearses and militaryPer capita supply of calories (percent of requirements) - Computed from vehicles.

energy equivalent of net food supplies available in c austry per capira Radio receiv-es (per thousand population) - All types of receivers for radioper day. Available supplies comprise domestic production, imports less broadcasts to general public per thoosand of population; excludes uslicensedexports, and changes in stock. Net supplies exclude animal feed, seeds, receive-s in rountries and in years when registration of radio sets was inquantities used in food processing, and losses in distribution. Re- effect; data for recent years nay not be comparable since m.ost countriesquirements were estimated by FAO based on physiological needs for nor- abolished licensing..al activity and health considering environmental temperature, body TLI receivers (per thousand nopulation - TV receivers for broadcast to generalweights, age and sex distributions of population, and allowing 10 per- public per thousand population; excludes unlicensed TV receivers in coun-cent for waste at household level. tries and in years when registration of TV sets was in effect.Per capita supply of orcein (grams per day) - Protein content of per Neunnaper circulation fpe thousand popolation) - Shows the average circula-capita net supply of food per day. Net supply of food is defined as tion of "daily general interest newspaper", defined as a periodical publi-above. Reqoirenents for all countries established by USDA provide for cation devoted prinarily to recording general mews. It is considered toa mini.mu allowance of 60 grams of total protein per day aod 20 grams be "daily" if it appears at least four tiros a week.of aninal asd pulse protein, of which 10 grams should be animal protein. Cioe'a annual a e ca per vear - BPsed an the number of ticketsThese standards are lower than those of 75 grams of total protein and .. ld during the year, including admissions to drive-in cinenas and mobile23 grams of animal protein as an average for the world, proposed by units.

FAD in the Third World Food Survey.Per capita protein supply from animal and Pulse - Protein supply of food EMPLOYYENT

derived from animals and pulses in grass per day. Total labor force (tl ousaods) - Efonoomially active persons, including armedChild (ages 1-4) mortality rate (per thousand) - Annual deaths per thous- forces aud anemployed tut eocluding housevives, students, etc. Defini-and in age group 1-4 years, tn children in this age group. tions in various countries are not comparable.yemale (percert) - Female labor force as percentage of total labor force.HEALTH Agriculture (yercent) - Labor force in farmirg, forestry, hunting and fishingLife expectancy at birth (years) - Average number of years of life as percentage of total labor force.romaining at birth; usually five-year -verages onding in 1960, 197f, Iriuscry (percent) - Labor force in mining, construction, masufacturing andand 1975. electricity, water and gas as percentage of total labor force.Irfant mortality rate (per thousand) - Annual deaths of infaots under Participatior rare (percent) - total, male, and female - Total, male, andone year of age per thousand live birhts. e.sale labor fo-ce an percentages of their respective popslations.Access to safe water (percent of population) - total, urban, and rural - These are TLO's adjsstrd participation rates reflectirg age-senlasber of people (total, urban, and rural) with reasonable access to structre of the pepl3tion. and Surg time trend.safe water supply (includes treated surface waters or untreated bht Ecoromic de, endency ratio - Ratio of population under 15 and h5 and over touncontaminated water such as that from protected boreholes, springs, the labor force in age group of 15-64 years.and sanitary wells) as percentages of their respective populations.

an urban area a public fountain or standpost located not more INrOME DISTRIBUTIONthan 200 meters from a house may be considered as being within rea- Percenraoe of private income (both in cash and kind) received by richest 5sonable access of that house. tn rural areas reasonable access would percent, richest 20 percent, poorest 20 percent, and poorest 40 percentimply that the housewife or members of the household do not have to o1 households.spend a disproportionate pert of the day in fetching the fa-ily'scater needs. POVERIY TARGET GROlPi

Acc tsa o excreta dispoa __(percent of populaton) - total, urban, and t r, i nco m o ieol 115$ par rapina) - urban and rural -rural - Number of people (total, urban, and rcral) served by excreta Absolute p-eerty ieco-e level is that incone level below chich a minimaldisposal as percentages of their respective populations. Eicreta nutritionaily adequate diet plus essential non-food requi-ements is notdisposal nay include tho c1laection and dioposal, with or without affordable.treatment, of humao e-creta and waste-water by water-borne systems Estimated relatioe poverty income lapel (iSS per capita) - urban and rorel -or the -sa of pit privies and similar installations. Relative peverty incom.e leoel i that incomo level less than one-thirdyPsiatiop ohvsioian - Population divided by number of practicing per capcra personal income of tie country.phynicians qualified from a medical school at university lonel. Estimad population below pavertr income level (percent) - urban and rural -Popolanion peor ouruing parson - PoPpuation diridad by numbor of Porcent ar populaton (urban and rural) who are elther "absolute poor" orpracticing male and female graduate nurses, practical nurses, and '-elati-e foor" whichever is greater.ussistant nurses.

Economic and Social Data DivisionEcmonoic Analysis and Projections Department

- 23- ANNEX IPage 4 of 5 pages

COUNTRY DATA - BURIA

GROSS NATIONAL PRODUCT IN FY 1977 ANNUAL RATE OF GROWTH (G.. constant prices)

US $ Mln. % FY1965-70 FY1970-77 FY1965-77

GNP at Market Prices 3,968 100.0 2.0 3.5 2.6Gross Capital Formation 406 10.2 - 3.7 - 0.8 - 1.9Gross Domestic Saving 339 8.5 - - _Foreign Capitak Inflow 67 1.7 - - _Exports of Goods, NFS 212 5.3 - 13.6 4.3 - 3.8Imports of Goods, NFS 270 6.8 - 10.5 - 7.8 - 8.2

OUTPUT, LABOR FORCE ANDPRODUCTIVITY IN FY 1977

a!Value Added Labor Forcer' V. A. Per Worker

AS$Mln. 7 Mln. 7% US $ X

Agriculture b/ 1868 46.7 8.4 67.8 222 68Industry 355 8.9 0.9 7.1 394 121Services/Trade 1706 42.7 2.3 18.3 742 228Unallocated c/ 68 1.707 6.8 97 30

Total 3997 100.0 12.3 100.0 325 100

GOVERNMENT FINANCEGeneral Government Union Government

(KyaFs Mm.) % of _GP (Kyats Mln.) %_ of GDPFY77 FY77 FY77 ____=

Current Receipts 4803 V/ 17.9 a/ 3376 12.6ECurrent Expenditure 3854 14.4 3762 14.1Current Surplus 949 3.5 - 386 -Capital Expenditures 1704 6.4 400External Assistance (grosi) 799 3.0

* All data for FY 1977 are revised estimates of the Government of Burma.

a/ TIta-l labor force: unemployed are allocated to seccor of their normal occupation.b/ Includes livestock, fishery and forestry.c/ Mining, power, and construction.d/ Includes current surpluis/deficit of Boards and Corporations.

not availablenot applicabls

- 2 4 - ANNEX IPage 5 of 5 pages

COUNTRY DATA - BUaM

1970 1971 1972 1973 1974 1975 1976 1977

MONEY, CREDIT and PRICES Sep. Sep. Sep. Sep. Mar. Mar. Mar. Mar.

(mln Kyats outctanding at end of period)

Money and Quasi Money 2422 2399 2793 3581 4065 5342 6052 6335

Bank Credit to Public Sector 2616 3043 3676 4342 5040 6447 6663 6429

Bank Credit to Private Sector 537 557 668 1000 685 639 956 1457

(Percentages or Index Nutbers)

Money and Quasi Money as h of GDP 23.6 23.0 25.9 30.5 27.7 27.6 25.7 23.7

General Price Index (1972 - 100) 91.0 92.9 100.0 123.5 156.6 206.4 252.6

Annual percentage changes in:General Price Index -4.0 2.1 7.6 23.5 26.8 31.8 22.4

Bank credit to Public Sector 9.1 16.3 20.8 18.1 16.1 27.9 3.4 3.5

Bank credit to Private Sector 3.9 3.7 19.9 49.7 - 31.5 - 6.7 49.6 52.4

BALANCE OF PAYMfNTS MERCHANDISE EXPORTS (FY 1977)(USS mln)

FY75 FY76 FY77 US $ Mln %

(Millions US $) Rice and rice produces 109 51Teak 57 27

Merchandise Trade -99.9 .30.9 -58.8 Pulses and beans 9 4

Exports, mainly f.o.b. f7E6 U-9- 192.8 Animal feedatuff 7 3Imports, mainly f.o.b. -276.5 -210.8 -251.6 Base metals and ores 8 4

Services and private transfers 11.4 - 18.7 - 8.3Official grants (net) 21 . ~ 02 All other commodities 23 11

Total 213 100

Current account -67.3 -26.3 36.8EXTERNAL DEBT. March 31, 1977

Long-term capital 117.2 25.0 41.6Foreign loans 85-.7 39.8 86.7 US $ Mln

Debt repayment - 23.5 -23.1 -39.2Other capital (net) 55.0 8.3 - 5.9 Public Debt, incl. guaranteed

Short-term bank credit 32.8 -18.3 -18.8 Non-Guaranteed Private Debt 320.9Total outstanding & Disbursed

Capital account 150.0 6.7 22.8 Tt outstaTin f D bursedDEBT SER1r5CE RATIO for FY77=

Errors and omissions 9.5 - 9.2 -6,0 7

overall balance 92.2 -28.8 -20.0 Public Debt. incl. guaranteedNon-Guaranteed Private Debt 19.6

Total outstanding & Disbursed

Gross Reserves (end year) 172.5 134.9 109.3Net Reserves (end year) 38.9 39.7 40.8

RATE OF EXCHANGE IBRD/IDA LENDING.November 30, 1978(M.11ion US$):

Through Dec. 27, 1971 From Feb.19,1973 to Jan.25,1975 IBRD IDA

US $ 1.00 - K. 4.76 US$1.00 - K. 4.81From Jan.25,1975 to May 1, 1977 Outstanding & Disbursed 77.4

From Dec.27,1971 to SDR 1.00 - K. 7.74 Undisbursed 120.4

Feb.19,1973 US$1.00 - K.6.67 Outstanding incl. Undisbursed 197.8

US $ 1.00 - K. 5.35As of May 2, 1977SDR 1.00 - K. 8.51US$J1.00 - K. 7. 2 0(approx±mate)

a/ To be revised pending completion of next economic reportreport in March 1979.

b/ Ratio of Debt Service to Merchandise Exports.

not available South Asia Programs Department,not applicable Division C

December,19 7 8 .

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ANNEX II

Page 1 of 5 pages

STATUS OF BANK/IDA OPERATIONS IN BURMA

A. Statement of Bank Loans and IDA Credits as of December 31, 1978

US$ MillionLoan or Amount (less cancellations)

Credit No. Year Borrower Purpose Bank IDA Undisbursed

Three loans and two credits fully disbursed 33.1 32.3

483 1974 Burma Lift Irrigation - 17.0 4.3493 1974 Burma Forestry - 24.0 13.2551 1975 Burma Telecommunications - 21.0 6.6597 1975 Burma Livestock - 7.5 6.2642 1976 Burma Paddyland Development - 30.0 23.6671 1977 Burma Second Ports - 10.0 8.1686 1977 Burma Tin and Tungsten - 16.0 15.4745 1977 Burma Seed Development - 5.5 5.5835 1978 Burma Paddyland Development II - 34.5 34.5

Total 33.1 197.8

of which has been repaid 33.1 -

Total now outstanding - 197.8

Amount sold 2.7of which has been repaid 2.7

Total now held by Bank & IDA /a - 197.8

Total Undisbursed 117.4 117.4

Total Disbursed 80.4

B. Statement of IFC Investments

None

/a Prior to exchange adjustments.

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ANNEX IIPage 2 of 5 pages

C. Projects in Execution I/

Cr. No. 483 Trrigation I Project; US$17.0 Million Credit of June 21,1974; Effective Date: August 6, 1974; Closing Date:March 31, 1980

The Project Implementation Committee was established on time andis functioning effectively. In January 1975, the contract for procurementof 10,000 pumps and accessories was awarded to a local supplier, HeavyIndustries Corporation. All units have been delivered. Favorable costs onvarious components of the project have been sufficient to permit the purchaseof 3,000 additional low lift pumps. The jute baling machines have been in-stalled and are operating. Some 545 units of construction equipment wererehabilitated under the equipment repair program. Nearly all spare partshave been delivered and a reasonable inventory remains for future maintenance.The program to rehabilitate and extend flood embankments and drainage channelsis now completed. The closing date of the credit has been extended fromDecember 31, 1978 to March 31, 1980, in order to allow for disbursementscovering consulting services for the preparation of final design and speci-fications for the proposed Nyaunggyat Dam Project.

Cr. No. 493 Forestry Project; US$24.0 Million Credit of July 10, 1974;Effective Date: February 27, 1975; Closing Date: March 31,1981

Project implementation continues to improve. Spares availabilityhas increased and urgently needed parts are now received via air freight. Thegovernment has taken effective action to improve mechanical maintenance andis in the final stage of negotiating joint-venture consultant services toimprove management accounting. Progress in sawmill rehabilitation and con-struction is excellent. Hardwood extraction is presently limited to about50% of target due to a shortage of logging trucks, which remains the outstand-ing problem of the project. The Government is expected to take action shortlyto remedy this problem. Fuel shortages have recurred, hindering projectoperations. A second forestry project is currently being appraised. It islikely to include road-building, teak and hardwood extraction, sawmillingand plantation establishment.

1/ These notes are designed to inform the Executive Directors regardingthe progress of projects in execution and, in particular, to reportany problems which are being encountered and the action being takento remedy them. They should be read in this sense and with the under-standing that they do not purport to present a balanced evaluation ofstrengths and weaknesses in project execution.

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