Malawi - Second Highway Project

FILE COPY DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. P-1525 MAI REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO MALAWI FOR A SECOND HIGHWAY PROJECT November 18, 1974 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  Currency Unit MIlawi Kwzacha. (NK) US $ 1 IK o.84 1/ E~( 1 uS $1.19 1/ 1/ The exchange rate of the Ph'lami Kwacha is deterinir,ed daily by the Central Bank to equal a weighted. average of the value of the Pound Sterling and the US dollar. Above rates reflect the situation as of MArch 31, 1974. Fiscal Year : April 1 - Yarch 31  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO MALAWI FOR A SECOND HIGHWAY PROJECT 1. I submit the following report and recommendation on a proposed credit to the Republic of Malawi, for the equivalent of $10 million, on standard IDA terms to help finance a Second Highway Project. PART I - THE ECONOMY 2. A report, "Recent Economic Developments and Prospects of Malawi" (67a-MAI), was distributed to the Executive Directors on April 17, 1973 (R73-77); Country data are provided in Annex 1. An updating economic mission visited Malawi in May 1974. Its report will be discussed with the Govern- ment at the end of November and is expected to be distributed to you by the end of 1974. 3. Since Independence, in 1964, Malawi's gross domestic product has grown by an annual average of 8 percent. However, with a per capita income of only $105, Malawi remains one of the poorest countries in the world and is included in the United Nations list of the 25 least developed countries. Natural resources are limited to moderately fertile soils, substantial water resources and a climate favorable to crop production. Although bauxite and coal deposits have been discovered, their exploitation has not yet been found commercially viable. Forests, which cover about 23 per cent of Malawi, constitute the main essentially unused resource which could be exploited on a significant scale in the near future. 4. The economy is however still heavily dependent on agriculture and is subject to annual fluctuations in output. For example, real GDP dropped by 6 percent in 1968, but rose by 18 percent in 1971. Agriculture has also stimulated much of the high growth in other sectors. The increasing output of export crops has directly caused a comparable increase in processing, distributive and commercial activities, while indirectly higher farm incomes have stimulated the local production of consumer goods. Government policy is oriented towards rapid growth of agricultural production and, indeed, real per capita farm incomes have risen faster during the last two years than incomes in the non-agricultural sectors. 5. A substantial savings and investment effort and generally effi- cient management of the economy have contributed to economic growth. At Independence, domestic savings were negligible and gross domestic invest- ment was only 8.7 percent of GDP. By 1973, domestic savings had increased  to In percent of GDP and gross domestic investment to 20 percent, leaving a resource gap of US$48 million. A significant improvement in the financial position of the Government has contributed to this impressive rise in savings. At Independence, the Government was able to finance only about half of re- current expenditure from local resources, the deficit being met by grants and loans from the U.K. Between 1964 and 1973, however, improvements in tax administration and some changes in the tax system caused domestic reve- nue to rise annually by 15 percent, in comparison with an average increase in recurrent expenditure of only 8 percent. Consequently, the Government Was abAe to balance its recurrent budget in 1972173 for the first time. 6. lThe Government hias increased development expenditures at an aiinual average rate of 20) percent over the last five years. and nas laid -ieavy eimphasis otl infrastructure and agriculture. Infrastructure investments hcive included tLle construction and improvement o- roads, particularly those openirLg up the central and northern region, and the construction of a rail l_n tro Nacala in Mozambique, which hias providedi a secoud rail outlet to the sea. Since 1969, the construction of a new capital at Lilongwe has taken ufp about 10 percent of the Governmuent's annual development budget. Since 1968, several large-scale agricultural scheries, including the provi- sion of credit to small scale farmers and the supply of inputs, marketing facilities and some basic infrastructure, lhave also been started near Salima (wvith IDA credits). Approximately one-fourth of total Government investment has been in agriculture. Greater emplhasis is now being placed on this sec- tor, and one-third of the US$176 million public. investment program over the next three years will be devoted to agricultural development. 7. Total investment was US$100 million in 1973 and it is expected to grow by 8 percent (in real terms) througlhout the 1970's. A substantial role is expected to be played by the private sector in Xalawi's future development, and private investments are expected to equal those of the public sector. Government has liberal policies to encourage both domiestic and foreign private investment. Domestic private capital is concentrated mainly in agriculture and small trading enterprises. Larger scale business is dominated by foreign- owned companies. 8. WThereas Malawi has benefited fror, a very rapid1 expansion of agri- culture, since indepen(ience, the room for future expansion is smaller. A1n annual economic growth rate of over 6 percent seens likely in the 1970s. Much of this will occur in the agricultural sector, as a result of increased production of export crops such as tobacco, tea and _otton. Small but growing surpluses of maize, pulses, groundnuts, cassava and sugar are also expected. Malawi's agricultural exports, which increased, in constant prices, at an average rate of nearly 10 percent thirough 1973, are projected to rise by an average of over 6 percent annually until 1980. lJith the increasing investment program and growing consumer demand that can only be partly met by domestic manufactures, it is likely that the country's import requirements will grow more rapidly than in the past, increasing bv 6 percent annually in volume until 1980. In 1973, the deficit on goods and services was US$52 million.  -3 Capital inflow has generally been adequate to finance deficits and build up moderate reserves. In 1973, net capital inflow was US$70 million. 9. The sustained improvement in the mobilization of domestic resources for economic development is likely to continue during the rest of the decade. Public savings, which have been negative in the past, shiould in the future make a positive contribution to investment. In 1973, Malawi financed 52 percent of its investment from domestic resources; this proportion should grow to about 60 percent by the end of the decade. The external capital re- quirements will, however, continue to be in excess of the foreign exchange component of projects and external aid should, thierefore, also cover some local costs. 10. At the end of 1973, Malawi's external public debt totalled $263 million of which $189 million had been disbursed. Debt service in that year amounted to $11.2 million, or about 10 percent of export earnings. As Malawi's need for external capital is expected to increase in the next few years, the Government may encounter increasing difficulty in borroviing on terms as soft as those it has received in the past. Debt service is likely to increase and the debt service ratio could reach 15 percent by the. end of the decade. In view of its low per capita income and the fluctuations of its export earnings, Malawi should still continue to receive substantial amounts of external assistance on concessionary terms but could also receive a limited amount of assistance on harder terms. PART I1- BANK GROUP OPL%kTIONS 11. To date, eleven 1/ IDA credits amounting to US$66.6 million hiave been made to -alawi. Five of these credits, representing US$34 million (51 percent of the total IDA investment in Malawi) were for projects in the agricultural sector. The others consist of a US$11.5 miillion credit for highways in 1968, a USS6.4 million credit for education in 1967, two credits totalling US$12.75 million for power projects in 1970 and 1973, and a US$2 million credit for the planning and engineering of the infrastructural and technical assistance requirements of a proposed pulp development scheme in Northern Malawi. There have been no Bank loans or IFC investments. Annex Il contains a summary statement of IDA credits as of September 30, 1974 and notes on the execution of on-going projects. Project execution is generally satis- factory. 12. At the end of 1973, IDA's share in Malawi's total external debt was 22.6 percent but servicing of IDA credits accounted for only 2.7 percent of total debt service. 1I/ Excluding Credit No. S-2-MAI of US$0.49 million of 1967 for highway engineering, which was made in 1967, and which has since been refinanced.  13. Bank Group operations in Malawi will continue to emphasize rural development. In accordance with the recommendations of the Agricultural Sector Review Report on Malawi (No. 235a-MAI distributed to you on January 14, 1974), several projects are currently being prepared. Among these, the next stage of the Lilongwe Rural Development program is scheduled to be presented to you this fiscal year. A water supply project for Blantyre recently pre- pared with U.K. assistance may be ready for presentation in fiscal year 1976. Discussions on the development of the education sector are being held with the Government and may well lead to IDA's consideration of a second education project. Finally the Bank Group is assisting (through Credit S-17-MAI) the Governm.ent in the preparation of a major pulp development project whose total cost is currentlv estimated at over $300 million. If it is established that the proiect is economically viable and satisfactorv arrangements can be made for its implementation and for marketing, and if financing can be arranged on an enclave basis so as not to burden Malawi's debt servicing capacity, we expect to recommend that the Bank contribute to its financing. PART III - TIIE TRANSPORT SECTOR General 14. A landlocked country, Malawi depends on several neighboring coun- tries for the transportation requirements of its international trade. Its terrain is varied with mountains in the north rising to 8,000 feet, and the Shire Valley in the extreme south rising approximatelv 300 feet above sea level. The bulk of the population is in the lower half of the country which has the most productive agricultural land. All these factors together make the problems of economic and political integration verv difficult. As part of its effort to overcome these difficulties, the Government has transferred the capital of the country northwardl to Lilongwe in the Central Region and is executing several development projects in the Nortlhern Region. In recog- nition of the important role which an adequate and efficient transport system can play in integrating and developingg the countrv politically and economi- cally, the Government has formulated a transport policv which has three broad aims: (i) to improve the adminiistrative, social andi economic integration of the countrv bv linking all three Regions witlh reliable all-weather con- nections; (ii) to encourage agricultural development by ir;proving access to rural areas; and (iii) to ensure efficient and reliable access to the sea for the transport of exports and ir,iports. Guided by this policy, the Government has invested heavily in the transport sector and between 1964. when the country became independenit, and 1970, 37 percent of pub,lic investrmient went to the transport sector. 15. The surface transport network is now made up of 6,750 m;iles of road, 440 miles of railway and shipping routes on lalae lalawi. Civil avia- tion is relatively smialler, offering services to nine airports and airfields spread around the country. The southern half of the countrv, which is more  - 5 - active economically, is served by fairly well developed transport facilities. The northern half of the country and most of the rural areas have less de- veloped transport facilities. Railways 16. The main railway line in the country is about 276 miles long. A 63-mile branch offering an alternative route to the sea was completed in 1970 and an extension to the main line from Salima to Lilongwe is scheduled to be built within the next five years. The railway carries mostly agri- cultural products for export, and imported manufactured items. In 1972, the railway carried about 1.1 million tons of freight and about 900,000 passengers. Despite the diversion of some traffic to roads, rail traffic in ton-miles has grown at an average rate of over 12 percent annually over the past ten years largely due to increasing import-export traffic. Malawi Railways is wholly owned and controlled by the Government. Its financial and operational management is competent and, in 1972, it had an operating surplus of about US$1.3 million equivalent. Lake Transport 17. Freight and passenger transport on Lake Malawi is provided by Lake Service Limited, a subsidiary of Malawi Railways. In 1972, Lake Ser- vice Limited moved an estimated 28,000 tons of freight and some 105,700 passengers. Though these traffic volumes are relatively small, the Lake provides an important alternative means of transport for the remote northern parts of the country. About three-quarters of the lake traffic is northbound but this will change as the impact of the IDA-assisted Karonga Rural Develop- ment Project is felt. It is estimated that lake freight traffic will rise to about 40,000 tons by 1975. In addition, lake transport will increase sharply if the proposed pulp mill in the Northern Region is developed. Until recently, the Lake Service incurred heavy operational deficits for many years. Under the Karonga Rural Development Project (Credit 282-MAI), a review of the rate structure was undertaken and increased freight rates recommended by the review were implemented in September 1972. As a result of these rate increases, revenue on goods traffic rose and an operating surplus was achieved in 1973. Lake passenger service is expected to continue in deficit because it is operated primarily as a social service to the remote parts of the North and its rates have not been changed for many years. Roads 18. Roads are the most important mode in the transport sector. In 1972, roads accounted for about 440 million ton-kilometers of freight or two-thirds of the total freight moved by all modes of transport. Trunk roads connect Blantvre (the major commercial city) in the Southern Region and Lilongwe (the new capital city) in the Central Region. The strategy which the Government has adopted for road development aims at providing a basic trunk road system serving key points in the three Regions of the country.  - 6 - 19. The Government has evolved a Planning organization which is playing an -increasin.g role in coordinating investments in the transpor. sector. The Ministry of Works and Supplies (MWS) prepares investment proposals for roads while the Mlinistry of Transport and Communications (MrTC) prepares proposals for all other modes. These proposals are submitted to the Economic Planning Division (EPl)) of the Office of the President and the Cabinet. The EPD has the responsibility for ensuring the coordination of proposed investments within the transport sector, and between the transport sector and the rest of the economy. Until recently, coordination was inadequate because of staff limitations. Since the development of particullar modes of transport in the past has tended to he complementary rather than competitive, coordination of investment in transport was not critical. IHowever, since the Government is now embarking on an extensive transport development program encompassing the various modes of transport, coordination has become essential. The Government's 'Statemenit of Development Policies 1971-1980' fixed prospective investment in transport at about 30 percent of total public investment. The analysis re- quired for this level of investment represents an important responsibility for the EPfi. In recognition of this, the LPD has recently employed a transport i-conomist with experience in sector investment analysis; in addition, a United Klingdom-financed consultant is undertaking a transport planning study to determine priorities for the period 1975-1985. 20. The responsibility for planning, constructing and maintaining all classified (except district) roads belongs to the Roads Department of the Ministry of Works and Supplies. District roads are the responsibility of District Councils. The Department has efficientlv met its responsibilities. Most engineers in the Department are expatriate civil servants provided through an aid program of the British Ministrv of Overseas Development under 2 to 2-1/2 year contracts. The Government is implementing a program of educa- tional training of Malawian nationals for senior engineering positions, but because of the long periods involved in the training of engineers, the program is necessarily long-term. Both the United Kingdom Ministrv of Overseas Development and the UNDP are assisting the Government in flnancing lower echelon personnel such as road supervisors, foremen, equipment operators and mechanics. 21. The Roads Department maintains divisional offices in all three regions of the country. The maintenance operations are largely mechanized though manual labor is used whienever feasible. In order to minimize expen- ditures on the required equipment and also mnaximize the utilization of available equipment, the MWS, in 1971, created a Plant and Vehicle Hire Organization wlhich is responsible for procuring and maintaining all Government- owned equipment and vehicles. The organization rents equipment to the Roads Department at rates based on the cost of purchasing and maintaining the equipment. This centralization has improved the availability of equipment to all regions of the country. Nevertheless, and in spite of the existence of a reasonably well-trained cadre of maintenance personnel in each of the regions, the level of maintenance operations is not adequate largely because the funds allocated for this purpose have been consistently insufficient.  -7- This problem has been discussed with the Government and the Government has agreed that it would ensure that sufficient funds are allocated to the MWS from time to time for proper maintenance of the road network. (See Section 4.04 of the draft Development Credit Agreement.) 22. Road use is regulated by laws which cover such matters as limits on vehicle weights and dimensions, vehicle and driving licenses, vehicle inspec- tion, etc. These regulations are adequate though they have not had to be strictly enforced because the majority of trucks now in use are of small capa- city. There is, however, a trend towards larger vehicles which increases the likelihood of serious damage to the roads. The Government has accordingly agreed that vehicle weight and size regulations consistent with the structural and geometric design of roads will be properly enforced. (See Section 4.02 of the draft Development Credit Agreement.) 23. Road users contribute to Government revenue through taxes and duties on fuel, lubricants, vehicles and spare parts and through licenses and regis- tration fees. No data are available on the total revenues collected from these sources, but the rates charged indicate that road users are already making a substantial contribution to Government revenues. 24. It is essential that improved data on road traffic trends be available to strengthen the basis for road planning, enable the formulation of the appro- priate road use regulatory policies and provide a more reliable basis for anti- cipating the requirements of the road transport industry. The Government has agreed to establish and maintain a suitable traffic data collection svstem (See Section 4.03 of the draft Development Credit Agreement.) PART IV - THE PROJECT 25. The preparation of the project was undertakeni withl the assistance of a consulting engineering firm financed by the LIDP. The project was appraised in Malawi in March 1974. An Appraisal Report entitled "Appraisal of the Second Highway Project, Malawi" is being circulated separately. A credit and project summary is provided as Annex III. The proposed credit was negotiated in Washington, D.C. in October 1974; the Government negotiating team was led bv the Minister of Finance, the llonorable D. T. Matenje. 26. The project consists of the following two parts: (i) improvement and bituminous paving of two lanes of the Lilonge-Kasungu Road (about 73 miles) including a bypass around the Lilongwe industrial area and the recon- struction of the Lingadzi Bridge; and (ii) a pilot program for the improvement of the development and maintenance of district roads. The total cost of the project is estimated at about US$11.8 million equivalent (net of taxes) including about US$4.3 million equivalent (about 36 percent) in local cur- rency. The proposed IDA credit of US$10.0 million would meet about 84 percent  of total project costs net of taxes and will cover the required foreign exchange (US$7.6 million) and make a substantial contribution to the local currency requirements. The Government will provide the balance from i-s own funds. Execution of the project is expected to be completed by June 30, 1977. 27. The Lilongwe-Kasungu road is a 73-mile segment of Mlaliwi's mLin trunk road which runs from the M1ozambique border in the Soutih throug.h Lhe country's main cities to the Zambian border in the North. It is ctrrently unpaved and its width varies between one and three lanes in different segments. A section adjacent to it from Lilongwe to Zomba was recently iruprn;ed under the first highway project finarnced through IDA credit No. 112-MAI of 1968. Though the alignment of the road crosses flat to rolling terrairn and is, for the most part, satisfactory, drainage is poor and the gravel surface is rough wnder present traffic conditions. Under the proposed project, the roaf v.ili bo reconstructed for improved drainage and paved. Construction, of the Road, bypass and the Bridge 28t The Government department which will be in charge of the project will be the Roads Department of the Ministry of Works and Supplies. I;] recent years, the Department has successfully undertaken several road coastrcz.ion projects (about US$2.5 million equivalent annually) using its own equiplu2ent and staff and employing direct labor. Its performance has been satisfactory. For major road projects or whenever its own resources are fully oa,mnitted, the Department employs contractors following suitable prequalific.rIton and tendering procedures and contracts are usually let on a unit-price basis. The capacity of the available Malawian contractors is very limit-< and major road construction works can only be undertaken bv foreign contractc-s, It was therefore agreed that the contract for the construction of the _ilongwe- Kasungu road, including the bypass and the Lingadzi Bridge would be submitted to international competitive bidding in accordance with the Association's procurement guidelines. Since there has not been a -major road work 1hne under contract in Malawi in recent years, it was considered desirable to receive tenders prior to presenting the project to you to ensure that the cost estimates are realistic. The pre-qualification of contractors was conpleted in June 1974. Of the 19 firms fror) X countries which submitted pre-qualification documents, 15 were pre-qualified and 6 of them submitted bids. The bids have been reviewed by thie Government and the lowest bid, which the Government proposes to accept, is within the estirmates calculated during appraisal. Construction work is scheduled to beg;in in Marchi 1975 and be completed by the end of 1976. Thie pavement structure will be composed of natural gravel subbase and cement-stabilized-base course with a double bituminous surface treatment. If the quality of the base gravel when placed on the road proves adequate, cemient stabilization will be omitted. In that event, some savings in the project costs may be realized. The Government will consult with the Association before a decision is made on tlhe type of base course to be used (See Section 3.01(c) of the draft Developrment Credit Agreement.)  - 9 - 29. The supervision of the construction work under the project will be undertaken by the consultants who conducted the feasibility study and prepared the detailed engineering for the project. The consultants will be retained under terms and conditions satisfactory to the Association. (See Section 3.02 of the draft Development Credit Agreement). PilotPrormfrteIrovement MdMaintenan e Dsrc od 30. District Councils have the responsibility for the maintenance of district roads. Performance has, however, been poor. They are inadequately staffed, poorly funded and short of maintenance equipment. District roads are largely in poor condition and consequently impede agricultural develop- ment in several rural areas. The Government is anxious to build an effective maintenance organization. However, before modifying the existing system, it wishes to demonstrate the greater effectiveness of alternative arrangements. It has accordingly decided to undertake a pilot program in Kasungu District (one of the country's twenty-three districts) which has 250 miles of district roads and is an important agricultural area in which development has particu- larly been impeded by the poor condition of its feeder road network. 31. Under the project, Kasungu District's road maintenance capacity will be strengthened by the provision of essential road maintenance equipment and the construction of a small workshop cum office and several road camps for maintenance crews. The necessary personnel will be employed to program and supervise operations. Also, under the program, MWS will carry out a study to determine (i) the most suitable method of road maintenance in terms of combinations of labor and equipment; (ii) the appropriate level of opera- tional and training funding; and (iii) the feasibility of extending the pro- gram to other districts. 32. The pilot program will be controlled by the MWS working in close cooperation with the District Council of Kasungu. The maintenance equipment, estimated to cost about US$36,000 equivalent, will be procured locally and in accordance with usual Government procurement procedures which are satis- factory. The few buildings required under the program will be constructed by local contractors after competitive bidding. The program is expected to start in mid-1975 and yield preliminary results in late 1976. The MWS will review these results and thereafter make recommendations to the Government on the possibility of extending it to other districts. The Government has agreed that prior to implementation, it would discuss with the Association, its proposals for extending the district roads maintenance program to all other parts of the country. (See Section 3.07 of the draft Development Credit Agreement). Disbursement 33. Reimbursements covering 80 percent of the total cost of the civil works under the Lilongwe-Kasungu road will be made to the Government on the basis of work certificates prepared by the Ministry of works and supplies;  - 10 - for consultant services, disbursements covering 100 percent of foreign expen- ditures will be made directly to consultants and, under the pilot program, reimbursements covering 100 percent of the foreign expenditures and 50 per- cent of local expenditures will be made to the Government. Justification 34. As part of the main trunk road system of the country, the Lilongwe- Kasungu rcad is a vital link in the national transport network. Lilongwe, the new capital of the country, is also an important transsihipment point for goods transported to and from the nortlhern half of the countrv. It's present population of 75,000 is expected to reach 175,000 by 1980 when it is also expected to have a direct rail connection to the Indian Ocean. 35. The project will serve about one-half million small farmers who grow and market maize, grotndnuts and tobacco. Two important schemes de- signed to increase agricultural production are also underway in the project area: the Lilongwe Agricultural Development for which the Association has made two credits (Credit 113-MfAI of 1968 in an amount of US$6.0 million and Credit 244-MAI of 1971 in an amount of US$7.25 million), and a program for flue-curing tobacco which has become an important processing industry near Kasungu. The Kasungu Game Reserve is an important tourist attraction in the project area. 36. Traffic on the project road is projected to grow at about 9 percent annually until 1986, levelling off thereafter to about 8 percent annually. Taking into ac-:ount savi:s iin vehicular operating and road ma.:1tL-na-a:ce uo_sts, the proposed iTnvestLmzents are expected to yield an econaomic return of 14 percent. If it proves unnecessary to cement-stabilize the base of the road, thle economic return will be 16 percent. If traffic is more conservatively estimated to grow at only 7 percent annually throtughout the project life, the economic return on the proposed investment (with a cement-stabilized base) remains satisfactory at 13 percent; a 10 percent decrease in savings in vehicle operating costs would also have the effe:t of reducing the return to about 13 percent. If both the traffic growth rate and vehicle operating cost savings fall to 7 percent and 10 percent respectivelv, the economic return remains satisfactory at 12 percent. PART V - LEGAL INSTRM .NTS A:M1) AUTliORITY 37. The draft Development Credit Agreement between the Republic of Malawi and the Association, the Recomimendation of the Committee provided for the Article V, Section I (d) of the Articles of Agreement and the text of a resolution approving the proposed Credit are heing distribulted to the Execu- tive Directors separately. Features of the draft D)evelopment Credit Agreement of special interest are referred to in parai;raphs 28 and 32.  38. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOM ENDATION 39. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachments November 19, 1974   Page I of 3 PegeS OO DA~TA - MAIAWI nF h6k I 4.nuuw(.id-1972) 10 efr kn2of arabl. lanid SOCIL MdICATORS OwiR CAnITA US38 (AdmA2 U31S) 100 so8 UO12 LO 3,670 Ai EF N rt ats (par thousand) 54~ [47 [.7 / 61 Crude d..th rote (per thousand) 28 22 22 . Iefan. mortality rate (par thousand live birth.) 11.8 /d 1i . 1604165 Zc 14.2 Life xpectancy at birth (years) 36 IV, 4.13 73 Gross reproduction -ats 3.2 3.2 3.0 3.2 1.2 Population pocrth rate ly2.2 2.62:. L/ 0 7~ iP.Pultinn grOWth rate - urban 7__ 75 : AMm tr..ture (percent) 6561 5dv,0 521 5?23 .[ 65 an~~~~ o'er 1.0 l.t ~~~~~~~~~ 2 53 11.94 Denendeny ratio 10. 0.9 0.9 o 0.8 4D tI,ban p*Olm.ltioO asPeront of total ..6 ~.6 /c.o 80L) Paoi12. Plannirg. I o. of o.coptore cumul.tive (thes... .. W o. of usors (% of married ,men)... SW N ,foroe (theusando) . 000 1,000 5,750 14Jj 2,..00 Percentage employe:d.in ogrioulture * 88 480 88 h 11 PerosotAgs uneo.ploy d 204 . 3 IRca6 DiaNIBUTION ftroent of oatie--' Inooco reoi,d by highest 5% ..27 ..4 2 Percnt of notional Ioomwe reesived by highest 20% .. .1 cc 0 48 , Peroent of n Ati l income roivad by lowest 2.0% .21. 5 a .. Perot ifotionaltco reocived by lowest 4QF% . 0 a . 8 oaned by meallast 10% of Owners . . MrIlAtiO pr IPI4N i a.~s 35,000 It 75,250 21,I10 21,570 7, 690 Poisulation per mrooring person . 16,090 -a 3,220 A. 41,890 ~h 210 Population per hoepital bed 91.0 /v 610 570 700h4 100 4w Per capit, calorie supply a- % Of requirments 15 78 Ia 98 72 4 69 119 Per capit, protein mapply, total (gras per dayrT6 [9 63 57 43 89 Of Wh~I.h, anieal and pul- 6 4 9 27 4 23 62 Death rote 1-IY.ryacr /7.... 0.7 4. Lw . pr Ir sho e ll.met retie 39 37 10 37 c, 98 Adjusted scoor= ier sohooel enrollment ratio 1 3 1. 3 4 87 Terao i mhoircg povided, first and second level 11. 11. 12-11 13 13 Tooctiorual enolmet as of ....c. shool enrollment 24. 3 2 a. 3 4 32 Adult literay ra.te % 5.. ~~.c . 99 c M vrage. No. of persons per room (-rban) 1 9 c .. ./0. Percent of occupied units without pipcd vetsr 78 cr .* 3/ad Aooees tn electricity (ae 5 Of total population).16 r ...9 Percet Of t.ra1 pepul.tion .oneted to e1eotrioity .. .0. . J,~~i srs per 1000 population 9/c 20 18 15 144 325 Peseenge, care pcr 100 population 2. 2 2 3 219 4,l Nistric power conouxption (kwh p.c.) a0 /~ 2 7 29 2981 .eupriot consueption p-c kg par year 0.03 01..6L. 0.1 30.3 Notmo, Fliguros refer either to the lateat periode or to conn f eoviroomental temperature, Cody weigh,an the leteet Yearn. Lateet periods refer in principle to distribution by age andi sex of nat-ional populittione. the yec.e 1956-60 or 1966-70; the leteat year. in prin- A Protein standards (requiremnte) for all countries as etatb- .Plo. to 1960 nod 1970. 16.8hd by USDfA Eacnomie Reemarob Service provide for a einimume The Per Copite ObNP setlate i. at carkrt pri... for allowanc of 60 greas Of total protein per day, cand 20 grace of Yrar other thai lI:k`0,.alculI.td by the aae conversIon eatel and pulee protein, of which 10 grams ehudld be animel technique as the 197? World flen Atlos. protein. Thece at.andarod are eomwhat lowr than thoee of 75 A-erage nueber ofdaughters per woes of reproductive grass of total, protein and 23 grme of atnial protein uas n .ge. vavrage for the world, prop"oed by ?LO in the Third World Fued Fj Pp.1Leico groLh raise &de for thc decades ending in Survey. 1960 nod 970. L.7 Some etudiee have suggested that orods death rates of children 41 Oct10 ofr under 15 aid 65 nod o-e oge brackets to ages 1 through 4 say be used as a first approximation idee of CLthoee in labor force b-kcht of agea 15 through 61. malnutrition . ,j?A0 reference etand.rds rep-eent phy'eiological re- LP Peroetae enrolled of oorreopondl.ng population of school age qui-amts for normal -ctini ty and health, taking cc defined for soh osuntry. /a 1,72; 19731 /c 1967; 4d '1531 41 1960-f2; 4 oatiztete & All towmehipo and time plaaning areas anAiall dietriot centere; & Tanganyika; 4L 15 gaeetted townships, 1957-67; IU kggoesrations of 200 or maor inhabitants; & 1962, UN estimate for African poyulation; 4L 1966; & Ratio of population under 15 an 65 end over age bmeeketa in chose in 15-&1 age brackets la Ratio of populetion under 15 end 65 and over to those la labor lfoom Of ages 15-61.; 4 16 gasetted townahipe; 4E iAO estimate; & 1.968; & Urban only; Econoeically active population; a) 1962; & Include. midwives; v 1963; & 1969; & 1961-63; 1961L-66; a tweluding facos Isan&de and Ocesto*lad /at Eholois private votational echoel.; 4j4 15 year and o..r; 44 Detinition uAonn; 4a4 1965; . IL* Includee &o.themo Rhodesia and Zambia; a4 Dwuluding vehiclee operated by police or other goveroaat seauerity orgeoisstions; 4g. 1961; /ah Oovarage of data incompletel &L Houehelds. CDermeok hase bean selected as as objective country, because it is an exople of a amall, deoneely populated, but highly developed country. Nelerd has sought incrsa.ing asmsitance from Dlomark in recat yeare. A.M. R1. Sept-ebar 23, 1971.  Page 2 of 3 pages ECONOMIC INDICATORS GROSS NATIONAL PRDUTDI IN 1973 ANNUAL RATE OF GROITH (7.. constant prices) US $ Mln. . 1960-65 196572 19_2 GNP at Market Prices 499.5 100.0 7.0 7.8 Gross Domestic Investment 100.3 20.1 7.9 11..L Gross National Saving 51.2 10.3 . 62.5 Current Account Balance -149.1 9.8 a-7.8 Exports of Goods, NFS 111.9 22.4 * * 8.1 Imports of Goode, NFS 1i60.1 32.1 , 3.2 14.( OUT1L-1, LABOR FORCE AND P1D0WCTIVI1Y IN 1973 Value Added Labor Force1/ V. A. Per Worker 2014.8 143.2 99 87.2 11434.8- 5 Agricultury 66.0 1.0 46 24.3 14340.8 L9; 5 gIcdulture 91 8.5 23- 1( Services 203.0 42.8 9 TJralaocated Total/Average 473.8 100.0 1,076 440.3 100.0 OOVERNMENT FINANCE General Ooverrment Central Oovernment MK M1n. of -( H X Mln.) of GDP 1972 1972- 196X-7?21979 1- Current Rsceipts 50.2 13.4 12.8 148.5 13.0 12.2 Current Expenditure ' 14.7 16.9 W0 10.9 Current Surplus - 41-- - Capital Expenditures 20.7 ).7 6.1 1 .7 Zxternal Assistance (net) 29.2 7.8 11.6 29.2 7.8 MONEY.CREDIT and PRICES 1965 1970 1971 1972 1973 (Milli.n Kwacha outstanding end period) Money and Quasi Money 25.3 48.1 57.7 63.5 85.6 Bank Credit to Public Sector -2.2 2.1 3.2 9.6 10.7 Bank Credit to Private Sector 10.2 26.9 34.9 37.1 33.7 (Percentages or Index Numbers) Money and Quasi Money as % of GDP 14.1 16.8 16.7 17.1 20.0 General Price Index (1963 = 100) 102.9 130.4 138.9 1L3.6 152.7 Annual percentage changes in: General Price Index 2.9 +8.3 + 6.5 + 3.4 6.3 Bank credit to Public Sector * * -63.4 +147.2 +200.0 11.5 Bank credit to Private Sector * . +20.0 +36.3 3.8 -9.2 NOTE : All conversions to dollars in this table are at the average exchange rate prevailing during the period covered. 1/ Total labor force defined as male population between 15 and 60 years of age plus women actually employed. not available not appl~icable  Page 3 of 3 pages TRADE PAYMENTS AND CAPITAL FWWb BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1971-73) 1971 1972 1973 US Mln / (Millions US $) Tobacco 31.2 11h.8 Tea 15.3 22.0 Exports of Goods, NFS 86.7 96.8 111.9 Oramcdnuts 8.0 11.5 Imports of Goods, NFS 128.7 154.9 160.1 Cotton 2.7 3.9 Resource Gap (deficit - -) -4.o -5TB.1 l 2 Others 12.14 17.tP Total 69.6 100.0 Interest Payments (net) -2.0 -2.3 -2.6 Workers' Remittances 7.8 10.9 13.1 Other Factor Payments (net) -9.0 -11.0 -14.2 Net Transfers 2.0 2.8 2.8 EXTERNAL DEBT. DECEMBER 31. 1913 Balance on Current Account -74-.2 51.7 -tPI91 US $ Mln: Direct Foreign Investment 13.3 8.4 19.7 Net HLT Borrowing Public Debt, incl. guaranteed 1b9.1 Disbursements 24.5 32.7 31.7 Non-Guaranteed Private Debt Amortization 4.3 7.0 3.3 Total outstanding & Disbursed Subtotal 2U2 ; .7 -Mi4 I/ Capital Grants 10.7 10.9 10.6 DEBT SERVICE RATIO for 1973- Other Capital (net) 1.2 12.3 22.4 Other items n.e.i -1.3 5.6 Increase in Reserves (+) T.0 .2 32.0 Public Debt, incl. guaranteed 7.7 Non-Guaranteed Private Debt Gross Reserves (end year) 31.9 36.2 66.9 Total outstanding & Disbursed Net Reserves (end year) 26.8 32-0 64.0 FUESL AND R1SLAT8D MATISIAIS 1971 1972 1973 IBRD/IDA L!iDING, July 31, 157% (Mi, ]ion U2 tp (million US $) Inorts 9.3 10.6 11.6 Oatstanding & Disbursed - of which: Petroleum 2.8 3.3 3.4 Undisbursed - 1 Exports - - - ex (dCustmet)7 of iwhich: Petroleum - - - RATS OF EXCHANGFr Prior to November 1973, the Milalawi Kwacha was pegged to the pound sterling at the rate L. 1 .0 K Since November 1973, the Milawi Kwacha has been determined as a weighted average or the i and US $. Rxchange rates in the last five years have averaged 1970 1971 1972 1973 197M (seven months' US 4i1.00 = K 1.20 1.22 1.26 1.2I 1.15 h 1 .00 = US $ 0.83 0.82 0.79 0.1E 0.8L 1J Ra'io of Debt Service to Exports or Goods and Non-Factor Services Oct. 15, 1974   Annex II Page 1 THE STATUS OF BANK GROUP OPERATIONS IN MALAWI (Sept.30, 1974) Statements of IDA Credits to Malawi US$ nillion Loan or Account Credit (less cancellations) Number Year Borrower Purpose Bank IDA Undisbursed Rep.of Malawi 5 credits fully 26.94 disbursed 102-MI 1967 " Fiducation 6.30 0.47 244-MAI 1971 " Agriculture-Lilongwe II 7.25 2.89 282-14I 1972 " Agriculture-Karonga 6.60 4.71 363-MAI 1973 " Agriculture-Shire Valley II 10.50 8.70 420-_AI 1973 " Second Power Project 7.50 7.50 S-1 7-MAI 1974 Transport Rigineering & Services 2.00 2.00 TOTAL : *. ..................... 67.09 of which has been refinanced 0.49 (Credit S-2-MAI) TOTAL aiunt held by the Association (before exchange adjustments) .... 66.60 TOTAL undisbursed ...... ........................ . 26.27  ANNEX II Page 2 PROJECTS INi EXECUTIOT- Credit No. 102-MAI - Education: $6.3 million credit of May 4, 1967; closing date June 30, 1977 The project consists of the construction and equipping of one national primarv teacher training college and the provisioll of technical instruction facilities irn 12 secondarv schools. The project has been implemented satisfactorily and school premises have been in use for about two years. At the request of the Government, the Closing Date was first extended from the original date of December 31, 1972 to June 30, 1973 to allow di3bursement for the completion of construction of the college, which was delayed by a chiange in site. A second extension, to March 29, 1974, was agreed to allow disbursement for installation of electricity in the secondary schooL at Dedza. A request fronm the Government to use savings under the credit, amounting to about US$420,000 for the construction of a post and telecommunications school was agreed to by the Executive Directors on December 4, 1973. The closing date has consequently been furtlher postpc.ed to June 30, 1977. Implementation of the telecommunications school is pro- gressing satisfactorily. Credit No. 244-MAI - Agriculture - Liwe Development Project Phase II: $7.3 million credit of Mav 13, 1971; Closing date Mlarclh 31, 1976: The project is designed to add approximately 375,000 acres of smallholder crops and a 160,000 acres of cattle ranch to the 500,000 acres developed under the Phase I Project. Physical execution of the project is progressing most satisfactorily. Both the staffing of senior posts and stocking of the cattle ranch which had previouslv fallen behind schedule have now improved. Credit No. 282-M4AI - Agriculture - Karonga Development Project: $6.6 million credit of January 26, 1971; Closingdate December 31, 1977: The project is the first phase of an agricultural development pro- gram for the Karonga area. It includes development of irrigated rice culti- vation, dry-land crop production, livestock development, extension services, credit, health services and the rehabilitation of freight service on Lake Malawi. Cost overruns are expected on the improvement of the lake ports 1/ These notes are designed to inform the Executive Directors regarding the progress of proJects in execution, and in particuilar to report any problems which are being encountered and the action taken to remedy them. They should be read in this sense, and with the understandirg that they do not purport to present a balaniced evaluation ot strengths and weaknesses in project execution.  ANNEX II Page 3 involved, due to lack of experience with marine works in Malawi, remoteness of the northern terminal and basic material price increases. The latter also affects the cost of civil works under the agricultural component. Discussions are underway with the Government on how best to meet the expected cost over- runs. Credit No. 363-MAI - Agriculture - Shire Valley Development ProLect Phase II: $10.5 million credit of March 28, 1973; Closing date December 31 1978: The project is a continuation and expansion of the program completed under Phase I and includes, in addlition to extension services, credit and marketing facilities, a livestock component, health facilities, fisheries developnment, feeder road construction, research on irrigated and rainfed crops, land registration and wildlife protection. Project execution is satisfactory. Credit No. 426-MAI - Second Power Project: $7.5 million credit of September 7, 1973; Closingdate December 31, 1978: The project provides part of Malawi's power generation development program for the period 1973-1977 and consists of: (a) the construction of a barrage and 20 MW hydroelectric power station at Tedzani, as an extension to the station financed under Credit 178-MAI; (b) the installation of a 12 MW gas turbine, to be constructed at Blantyre; and (c) a tariff study. The pro- ject is being financed jointly with CDC which will lend up to US$6.1 million equivalent. As a result of recent world-wide increases in prices, cost over- runs of about $6.0 million over the appraisal estimate of $14.3 million are anticipated and the Government is considering measures to meet additional financing requirements. In spite of the cost overruns the project remains the best choice among the various alternatives to meet projected power demand. Credit No. S-17--MAI - Transport Engineering and Services Project: US$2.0 million credit of June 137 1974; Closing date June 30, 1978: The project consists of the determination of the infrastructural requirements and the provision of technical assistance for the exploitation of the Viphya forest resources. A contract for the study of the project roads has been awarded and another contract for the study of the ports is being negotiated. Execution of the project is proceeding according to schedule.  ANNEX III Page 1 CREDIT AND PROJECT SUMMARY BORROWER: Republic of Malawi AMOUNT: US$10.0 million equivalent TERMS: Standard IDA terms PROJECT DESCRIPTION: The project consists of (a) improvement to two paved lanes, of the Lilongwe-Kasungu road including a bypass around the Lilongwe industrial area and the reconstruction of the Lingadzi bridge; (b) a pilot program to improve the development and maintenance of district roads. CAPITAL COST OF THE PROJECT: US$ Million Local Foreign Total 1. Construction 3.77 5.42 9.19 2. Supervision of construction 0.05 0.28 0.33 3. District Roads Pilot Program 0.08 0.16 0.24 4. Contingencies 1.10 1.64 2.74 Total Project Costs 5.00 7.50 12.50 Total Project Costs (net of duties and taxes) - - 11.8 FINANCING PLAN: US$ MIllion Local Foreign Total IDA 2.50 7.50 10.00 Government 2.50 - 2.50 Total 5.00 7.50 12.50  ANNEX III Page 2 ESTIMATED DISBURSEIENTS: Fiscal Year (US$ Million) 1975 1976 1977 1978 Total 1.50 3.60 4.50 0.40 10.00 PROCUREMENT ARRANGEMENTS: The construction contract for the road, the bypass and the bridge will be on the basis of one unit-price contract awarded after international competitive bidding in accordance with Banlc Group guidelines. For the district roads pilot program, the required equipment estimated to cost US$36,000 will be procured locally in accordance with normal Government procedures which are satisfactory; and the few required buildings will be constructed by local contractors after competitive bidding. CONSULTANTS: Consultants will be retained to supervise the construction of the road. RATE OF RETURIM: 14 percent APPRAISAL REPORT: Report No. 575-MAI dated November 15, 1974 MAP: A map of the proposed project area is attached.   IBRD 11135 \I~JLILY 17 -~ - ' ARE .' ..jTANZAZP ANGOLA r ALA I 0 A'W8#481 a t \ qONIkahole oi gLUMB l -: c | our 1SO~IA N. -o "AF ' \ ;