Sri Lanka - Kurunegala Rural Development Project

Document of The World Bank FOR OMCIAL USE OnY MI CjOFIDHE COPY Report No. : 10970 CE Type: (PPAR) ReportNo. 10970 Title KURUNEGALA RUAL DEVELOPMENT PE Author: TAWHID NAWAZ Ext. :31680 Room:T9032 Dept. :OEDDI PERFORMANCE AUDIT REPORT SRI LANKA KURUNEGALA RURAL DEVELOPMENT PROJECT (CREDIT 891-CE) AUGUST 3, 1992 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AEARP Agriculture Extension and Adaptive Research Project AGA Assistant Government Agency ARTI Agrarian Research and Training Institute BOC Bank of Ceylon CCB Coconut Cultivation Board DOI Department of Irrigation DS Divisional Secretary ERR Economic Rate of Return FINNIDA Finland International Development Authority GDP Gross Domestic Product GOSL Government of Sri Lanka GTZ German Technical Aid Agency ICB International Competitive Bidding IDA International Development Agency IFAD International Fund for Agriculture Development IIMI International Irrigation Management Institute IMF International Monetary Fund JICA Japan International Cooperation Agency MPCS Multi Purpose Cooperatives Societies NORAD Norwegian Agency for International Development OED Operations Evaluation Department PB People's Bank PCC Project Coordinating Committee PCR Project Completion Report PAR Performance Audit Report PSC Project Steering Committee RD Rural Development SAR Staff Appraisal Report SIDA Swedish International Development Authority SPN Supervision Report FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-Ceneral Opetatons EvaluAItMn August 3, 1992 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Performance Audit Report on Sri Lanka - Kurunegala Rural Development Proiect (Credit 891-CE) Attached, for information, is a copy of a report entitled "Performance Audit Report on Sri Lanka - Kurunegala Rural Development Project (Credit 891-CE)" prepared by the Operations Evaluation Department. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OFFICIAL USE ONLY PERFORMANCE AUDIT REPORT SRI LANKA KURUNEGALA RURAL DEVELOPMENT PROJECT (Credit 891-CE) TABLE OF CONTENTS Page No. Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. Basic Data Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . .iii Evaluation Summary . . . . . . . . . . . . . . ..... . . . . . . . v I. INTRODUCTION . . . ... . . . . ...... ..... . . . . . . . 1 II. PROJECT EVOLUTION, OBJECTIVES AND DESIGN . . . . . . . . ... . . 2 Project Evolution . . ..... . . . . . . . . . . . . . 2 Objectives . . . . . . . . . . . . . . . . . ... . . . . 3 Design . . . . . . . . . . . . . . . . . . . . . . . 4 III. IMPLEMENTATION . . . ......... . . . . . . . . . .. 5 Implementation Experience....... . . . . . . . . . . . 5 Irrigation and Water Management......... . . . . . . 7 Coconut Development... . ......... . . . . . 9 Agricultural Credit... . . . . . . . . . . . . . . . 10 Other Agricultural Components . . . . . . . . . . . . . . 11 Social Infrastructure Components . . . . . . . . . . 12 Post Implementation Development . . . . . . . . . . 12 IV. PROJECT OUTCOME....... . . . . . . . . . . . . . . . . . . 13 Agricultural Impact.............. . . . . . 13 Institutional Impact . ............ . . . .. 15 Sustainability .......# * . . . . . . . . . . . 16 V. FINDINGS AND LESSONS .. ... 17 ANNEXES Annex 1 Table 1: Project Implementation . . . . . . . . . . . . . . 21 Table 2: Credit Disbursements by Participating Banks . . . 23 Annex 2 Table 1: Economic Rate of Return Analysis . . . . . . . . . 24 ATTACHMENT: Comments from the Borrover... . . . . . . . .... 27 MAP: IBRD 23815 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. PERFORMANCE AUDIT REPORT SRI LANKA KURUNEGALA RURAL DEVELOPMENT PROJECT (CREDIT 891-CE) PREFACE This is a Performance Audit Report (PAR) of the Kurunegala Rural Development Project in Sri Lanka involving IDA credit in the amount of US$20.0 million. The credit was approved on June 12, 1979 and signed on July 24, 1979. US$17.1 million was disbursed and the undisbursed balance of US$2.9 million was cancelled. The credit was closed on June 30, 1986 two years behind schedule. Final disbursement of the credit was on January 21, 1987. The PAR is based on the Project Completion Report (PCR)I, the Staff Appraisal!' and President's Report!', the Credit Agreement-, the transcript of the Executive Directors' meeting at which the project was considered, on a study of project files and discussions with Bank staff who were associated with or knowledgeable about the project. An OED mission visited Sri Lanka in May-June 1991 and discussed the effectiveness of the Bank's assistance with officials in the Ministry of Policy Planning and Implementation and with staff of the Kurunegala Rural Development Project. The mission met with farmers and field staff and visited numerous project sites. The kind cooperation and the valuable assistance of the GOSL in the preperation of this report is gratefully acknowledged. The PCR provides a full account and assessment of the project's implementation experience. The PAR elaborates on specific aspects such as project design, agricultural and institutional aspects, project economics and sustainability, and post-implementation developments. Following standard OED procedures, copies of the draft PAR were sent to the relevant GOSL officials for comments on March 25, 1992. The comments received from the Ministry of Policy, Planning and Implementation are reproduced as Attachment to the PAR. Project Completion Report: Sri Lanka Kurunegala Rural Development Project (Cr. 891-CE), Report No. 8273, December 31, 1989. Staff Appraisal Report: Sri Lanka Kurunegala Rural Development Project, Report No. 2292a-CE, March 8, 1979. President's Report: Sri Lanka Kurunegala Rural Development Project, Report No. P.2492-CE, March 19, 1979. Development Credit Agreement: Sri Lanka Kurunegala Rural Development Project, Credit No. 891- CE, April 26, 1979. -ift - PERFORMANCE AUDIT REPORT SRI LANKA KURUNEGALA RURAL DEVELOPMENT PROJECT (CREDIT 891-CE) BASIC DATA Key Proiect Data Actual I of Appraisal Estimate Actual Appraisal Estimates Total Project Cost (US$ million) 30.00 33.73 112 Total Project Cost (Re million) 465.00 726.98 156 Credit Amount (US$ million) 20.00 ---- Disbursed (US$ million) --- 17.10 Cancelled (US$ million) ... 2.90 Economic Rate of Return 322 23Y 61 Institutional Performance Fair Cumulative Estimated and Actual Disbursement (in US$ million) FY80 FY81 FY82 FY83 FY84 FY85 FY86 Appraisal Estimates (US$ million) 3.00 8.00 12.00 16.00 20.00 ---- ---- Actual (US$ million) 1-57 3.38 5.00 7.60 9.70 11.6 17.10 Actual as 2 of Appraisal 52 42 42 48 49 58 86 Date of Final Disbursement Jauuary 21, 1987 Project Dates Original Actual First Mention in Files ---- Sept. 3, 1976 Negotiations ---- Feb. 21-23, 1979 Board Approval ---- March, 1979 Credit Signing ---- April, 1979 Credit Effectiveness July, 1979 August, 1979 Credit Closing June, 1984 June, 1986 Staff Input (In Staff Weeks) FY77 FY78 FY79 FY80 FY81 FY82 FY83 FY84 FY85 FY86 FY87 FY88 Total Preappraisal 22.8 16.5 .3 -- -- -- -- -- -- -- -- -- 39.5 Appraisal -- 34.2 49.0 -- -- -- -- -- -- -- -- -- 83.2 Negotiation -- -- 8.4 -- -- -- -- -- -* -- -- -- 8.4 Supervision *- -- 2.8 37.2 14.9 6.8 10.9 9.8 8.3 8.8 -- 1.1 100.8 Other .2 .1 .4 1.2 -- -- -- .4 --- 2.3 TOTAL 22.9 50.7 61.0 38.4 14.9 6.8 10.9 10.2 8.3 8.8 .0 1.1 234.2 Audit estimate of ERR is about 232, while PCR estimate was 382. - iv- Mission Data Date No. of Man Days Specializat pns Performa?e Type of Mo/Yr Personall in Field Represented-' Rating - Problemail Through 12/76 6 25 E,M,C,A,I -- -- Appraisal 6/77 3 6 E,A -- -- 3/78 6 27 E,A,C,Cr. -- -- 9/78 2 14 E.C -- -- 1/79 2 * 23 E,A -- -- Supervision I 9/7911 4 30 E,M,C 1 T Supervision II 7/8011 3 * 95 A,E,C 2 F,M,T Supervision III 12/801' 1 10 E 2 F,M,T Supervision IV 6/81 1 * 10 E 2 F,T Supervision V 11/81 1 7 A 2 T Supervision VI 1/82 4 * 7 E,A,C 2 F,T Supervision VII 9/82 3 5 E,A,C 2 T,M Supervision VIII 7/83 3 * 20 E,A,C 2 T,M Supervision IX 3/84 3 * 15 E,A,C 2 T,M Supervision X 12/84 2 * 11 A,C 2 T,H Supervision XI 3/85 1 * 19 E 2 T,M Supervision XII 12/85 2 * 18 E,C 2 -- Supervision XIII 3/86 3 * -- E,A,C, 2 -- Other Prolect Data Borrower : Goverment of the Democratic Republic of Sri Lanka (GOSL) Fiscal Year : January 1 to December 31 Name of Currency : Rupees (Re) Exchange Rate : Appraiiial Year : 1978 US$ 1 w 15.80 Intervening Years/Average : 1979 US$ - 15.57 1980 US$ * 16.58 1981 US$ w 19.25 1982 US$ - 20.80 1983 US$ a 23.53 1984 US$ - 25.44 1985 US$ - 27.16 Completion Year 1986 US$ - 27.95 Post Implementation Years 1987 US$ - 30.76 1988 US$ - 33.03 1989 US$ - 40.00 1990 US$ - 40.24 k' Multiple purpose missions marked (*). l E - Economist. M - Monitoring and Evaluation Specialist. C - Civil Engineer. A - Agronomist. I - Rural Industries Specialist. Cs:.- Credit Specialist. I - Problem free; 2 - Satisfactory; 3 - Deteriorating. 11 F * Financial; M - Managerial; T * Technical; D - Others. Date of return to headquarters. - v - PERFORMANCE AUDIT REPORT SRI LANKA KURUNEGALA RURAL DEVELOPMENT PROJECT (CREDIT 891-CE) EVALUATION SUMMARY Introduction Obiectives 1. The Kurunegala RD project, the 3. The objectives of the project subject of this audit, was the first which was the first attempt to of three RD projects approved by the develop an entire district in an Bank in Sri Lanka. In addition to integrated manner, was to evolve a these three, the Bank to-date has replicable model of regional develop- approved credits for 24 projects ment for raising productivity, em- amounting to US$549 million for the ployment, incomes and living agriculture sector. These include standards through strengthening of Mahaweli Ganga development, irriga- development-oriented institutional tion, treecrop, area development, services, accompanied by critical dairy development, forestry, input complementary investments in physical supply and agricultural research infrastructure. The project speci- projects. Following the Kurunegala fically consisted of: a) rehabili- RD project, 11 other RD projects were tating existing irrigation schemes financed by other donors. These are and improving water management; b) either completed or currently under rehabilitating coconut plantations; implementation. c) strengthening agricultural ex- tension services; d) improving agri- 2. In 1990 agriculture accounted cultural input supply services; e) for 24 percent of GDP, 43 percent of strengthening agri-cultural credit employment and 32 percent of exports. facilities; f) improving utilization In recent years agriculture's im- and effec-tiveness of transportation, portance to the economy has declined health, education, drinking water and due to its relatively poor per- rural electrification facilities. formance, partly caused by the ethnic conflict in the North and East, civil ImRlementation Experience disturbances in the South and unfavorable weather conditions. Tea 4. Overall, the limited capacity is the important export crop followed of the line agencies, the shortage of by rubber and coconut products. staff, and budgetary problems were About 73 percent of agri-cultural the main reasons for the two-year land is under smallholdings; 50 implementation delay. US$17.1 mil- percent of the smallholders operate lion of the original credit amount of 85 percent of the cultivable land, 39 US$20.0 million was eventually dis- percent have home gardens, and about bursed and the balance of US$2.9 11 percent are landless. Treecrops million was canceled. Actual costs (40 percent) and paddy (33 percent) were 12 percent higher than appraisal account for major areas of permanent- estimates in US dollar terms and 56 ly cultivated land. percent higher in local currency - vi - terms due to an 80 percent devalu- Finally, with regard to increasing ation of the Rupee relative to the US te production of existing plants, dollar during the period of project which comprised 70 percent of all implementation. In local currency plantations, nothing was done and no terms the agricultural components subsidy was provided. cost 58 percent more than planned, especially irrigation and credit, the 7. The People's Bank (PB) and Bank two largest components; cost overrun of Ceylon (BOC) were the two main for the social infrastructure compo- lending institutions providing agri- nent was 27 percent. cultural credit. Disbursements for paddy cultivation and for coconut 5. Irrieation and water manage- fertilizer were slow. However, the ment, the largest component, achieved main variation with what was planned much of its physical targets after a in the SAR was with regard to equip- two year project extenston. All 9 ment and vehicle loans for land major schemes and 453 minor schemes preparation. Only 100 four-wheel were rehabilitated. However, despite tractors (200 targeted in the SAR) these physical achievements, improved were financed, in part because they water management has been largely were much too expensive for most ineffective due to lack of accounting farmers. The large residual funds for the risk of crop failure, short- were used for the purchase of 2,383 age of water in the Yala (southwest two-wheel tractors compared to 500 monsoon) season, nonexistence of targeted in the SAR. Recovery rates operational plans to guide and in- for paddy loans were about 80 per- volve farmer groups and lack of con- cent, for farm machinery loans 60 sideration of the different agroeco- percent and for high value crop loans logical zones in the district. As a over 90 percent. result, cropping intensity has been lower than expected. Minor irriga- 8. With regard to iLiut suPEly, tion schemes have only been able to despite construction of 57 stores stabilize the Maha (northeast (SAR target of 80) farmers continued monsoon) season crop, but have not to purchase a large quantity of produced the expected Yala season fertilizer from private traders due increases. to more convenient credit arrange- ments. A seed processing center was 6. For the coconut development built (2 tons/hour capacity). How- component, physical rehabilitation ever, farmers continued to obtain targets were achieved; so were large quantities of seed from outside replanting/underplanting targets, sources. despite delays caused by insufficient supply of seedlings, difficulty in 9. The reorganization and identifying smallholdings, land strengthening of agricultural exten- disputes, and reduction in the real sion in the district subse-quently subsidy rate due to inflation. came under the responsibility of the However, the intercropping sub- Agricultural Extension and Adaptive component achieved less than 50 Research project .(AEARP), which was percent of its SAR target due to concurrently implemented. farmers' lack of familiarity with the production technology, unsuitability 10. The iroundwater comi3onent, cost of some of the soils, inadequate more than planned but deserved rainfall, lower subsidy for fertil- greater emphasis. The audit is very izer and declining coconut prices. impressed with the real opportunities - vii - to farmers where groundwater is productivity should be accepted as available in the district. Other valid? To evaluate this question, a Government programs and donor as- number of secular changes in Sri sistance are currently trying to Lanka between 1979-85 have to be exploit this resource. considered. These changes make the case that all of the increase in 11. The social infrastructure sup- production and yields are not at- ported by the project, such as rural tributable to the project alone. roads, improvements to health care Paddy yields nationally increased delivery systems, provision of educa- significantly after 1975, particu- tional facilities and equipment, larly after 1979, and continued up electrification of rural areas and until 1985 when yields began to construction of dug wells for drink- stagnate. There are clear idi- ing water (mostly in line with SAR cations that the nationwide increase targets) were beneficial for the in yields at the time was attribut- receiving communities, although small able to the availability of high by way of needs. A large number of yielding varieties, provision of the dug wells were, however, contami- subsidized fertilizer, improved nated with iron and became non-opera- quality seeds and supportive tional within a short period of time. Government policies such as guaran- The audit was rather impressed by the teed price and market. Thus the recent efforts of a donor (GTZ) which yield increases reported in the PCR has operationalized all of these iron are not all due to the project inter- contaminated wells by not only find- ventions. ing a technical solution but also by developing a system of social respon- 14. Coconut: The PCR analysis is sibility among the villagers in re- based on the assumption that the solving this problem. project resulted in an incremental yield of 880 nuts/acre annually Results compared with the SAR estimate of 400 nuts/acre. The PCR assumes that 12. Aericultural Impact: Quanti- without the project interventions fiable project benefits in the SAR conditions on the field would have and PCR are attributable to increased deteriorated much faster and yields paddy and coconut productioL. Incre- would have declined from a base of mental paddy production, which would 1,700 nuts/acre to 1,420 nuts/acre reach full development in 1986, was rather than increase to 2,000 to be about 49,000 tons (SAR) but auts/acre without the project as reached 56,000 tons (PCR); and incre- stated in the SAX! This change in mental coconut production at full the without project situation is what development in 1991 was to amount to has increased the PCR's incremental 144 million nuts (SAX) but was re- yields and production gains. vised to reach only 107.1 million nuts in the year 2003. 15. Economic Analysis: With the 13. Paddy: The incremental average above two caveats on paddy and paddy yield in the SAR is 0.12 coconut yields and production, the ton/acre and in the PCR is 0.08 audit reestimated the ERR of the tons/acre. The main issue concerning project on the basis of the latest the agricultural impact is whether price forecasts. The SAX's ERR for incremental yields cited in the PCR the project was 32 percent while the are realistic i.e., what increased PCR reestimated the ERR at completion - viii - to be 38 percent. On the basis of 18. However, despite these positive arguments presented above incremental contributions, the next level of paddy and coconut benefits are much institutional transformation was lower than those reported in the PCR. neither aimed at nor achieved. The Thus, the audit reestimated the ERR project did not involve participation of the project on the basis of 75 of beneficiaries in identification, percent and 60 percent incremental planning or implementation. A good benefits, the latter perhaps being example of the neglect of beneficiary the best guess estimate at best. At involvement is illustrated by the 75 percent of projected benefits for sub-par performance of the minor paddy and coconut, the ERR is about irrigation schemes. 28 percent and at 60 percent of projected benefits, the ERR is about Sustainability 23 percent (Annex 2, Table 1). The audit believes the ERR real4stically 19. Sustainability of assets would be 23 percent or less. created under the project poses a real problem. Assets created under 16. Institutional Impact: On the the project were expected to be whole, the project had a positive maintained by the respective line impact on the evolving institutional agencies. However, decreased reve- framework for RD. The project util- nues and the government's budgetary ized and strengthened the existing problems in recent years have meant line agencies to implement the lower level of funds for line agen- various activities. It did not cies. Adequate and timely funds to create a new institution that might undertake maintenance and upkeep are have undermined the traditional not available. Staffing levels de- government departments. A signifi- creased after project completion and cant institutional achievement has a number of staff who gained valuable been considerable administrative, experience left the country with the technical and financial decentral- deterioration in the securitv situ- ization as well as the valuable ation. On the agri-culturai side, experience gained by staff at the the poor quality of work on the down- Project Office in trying to coordi- stream component of the minor irriga- nate different project activities and tion schemes meant that higher levels agencies. of maintenance expenditure are re- quired sooner than expected. Also, 17. The project set up a Project the ramoval of the fertilizer subsidy Coordinating Committee (PCC) at the has resulted in a sharp decline in district level and a'Project Steering fertilizer use on coconut within the Committee (PSC) at the national past year and a half. Unless there level. The main achievement of the is some way to 'ncrease the financial PCC has been in resolving outstanding profitability oi coconut for small- inter-departmental coordinating holders, yields will continue to de- problems; and of the PSC has been cine even further. that of playing the role of final arbitrator in solving policy issues and coordinating unresolved problems Findings and Lessons at the district level. Both com- mittees have facilitated harmonious 20. Overall, the project is con- coordination of government line sidered satisfactory despite a two- departments with the Project Office, year delay in implementation and a comendable achievement. subpar performance of some of the - ix - components. The strong commitment of use of rainfall, switching to higher the Government to RD and its active value crops in some cases and en- role in conceptualization, identi- couraging greater community partici- fication and preparation of the pation for water users. project has been an essential in- gredient of the project's success. 22. A design problem of the project The experience gained in implementing was that it did not address the needs this first multisectoral RD project of the upland farmers in the dry zone has been a valuable learning process, areas in the north of the district. especially in view of the large num- Thus the project missed out on an ber of RD projects that followed. At important segment of the district's worst, the Kurunegala RD project poor farmers who grow upland crops provided little or no integration; at such as maize, finger millet, pulses, best, it provided funds to the line etc. agencies to undertake a whole range of activities at a much faster rate. 23. Another design problem relates It is no surprise that during imple- to the inadequate treatment of organ- mentation the project provided 50 ization and management aspects in the percent of the District's annual SAR, particularly problematic given c-pital budget. In that sense, the the complex, multisectoral nature of focus of the District Administra- the project. Project design ought to tion's task, from largely administra- have addressed more clearly the spe- tive to greater emphasis on cific functions of individual agen- development-oriented activities, has cies and the inter-relationships been a positive development. between them. Also, the experience with this project, in which the SAR 21. The concentration of the is used exclusively as a reference agricultural components on paddy and point for supervision and monitoring to a lesser extent on coconut makes processes, has raised the issue that the project economically viable since a greater level of management flexi- Sri Lanka has been traditionally bility is desirable in the design of competitive in both crops. However, RD projects in Sri Lanka. the means of achieving the benefits, in particular the rehabilitation of 24. Other external donors have the minor irrigation schemes, are in been involved in the design and many cases questionable, in large implementation of RD projects in the part because of the lack of bene- country. Although these donor- ficiary involvement in identifi- assisted projects had the common cation, planning and implementation. purpose of increasing incomes and The essential achievement of the improving quality of rural life minor irrigation schemes has been to through investments in core activi- stabilize the Maha season paddy crop; ties, a number of differences in but the expected Yala season pro- style and substance emerged during duction has not been achieved due to implementation between those sup- unavailability of water for irriga- ported by the Bank and those sup- tion. However, the situation can be ported by the bilateral donors. The improved if greater efficiency of Kurunegala RD project thus brought to water use can be achieved, perhaps by the Lore and sharpened the debate using field pumps where possible within Sri Lanka about the size, rather than relying totally on scope, composition and complexity of gravity-based systems, making maximum RD projects. PERFORMANCE AUDIT REPORT SRI LANKA RURUNEGALA RURAL DEVELOPMENT PROJECT (CREDIT 891-CE) I. INTRODUCTION 1.1 This is the audit of the Kurunegala Rural Development (RD) Project in Sri L4nka, the first RD project in the country. Since the Kurunegala RD project was the first attempt to develop an entire district in an integrated manner, it is viewed as an evolving replicable model of regional development.!, The audit evaluates the Kurunegala RD project in terms of its stated objectives of raising productivity, employment, incomes and living standards of the rural population through strengthening of development-oriented institutional services and complementary physical infrastructure investments. 1.2 The Bank to date has approved credits for projects amounting to US$549 million for the agriculture sector. These include five Mahaweli Ganga Development projects (including a Technical Assistant project), five irrigation projects, five treecrop projects (tea and rubber), three rural development projects (including this Kurunegala RD project), two dairy development projects and one project each in the forestry, agricultural development (providing foreign exchange for purchase of imports) and agricultural research subsectors. 1.3 Sri Lanka is an island country east of the southern tip of India. Its land area is *6.5 million ha and its population was 17 million in 1991. Cultivated land per rural family is quite small in some parts of the country since only a third of the land area is under cultivation. Agriculture plays an important role in the country's economy -- in 1990 it accounted for 24 percent of GDP, 43 percent of employment and 32 percent of exports. Tea is the important export crop, followed by rubber and coconut products. In recent years, agriculture's importance to the economy has declined due to its relative poor performance. At the same time the urban-based sectors of the economy have registered higher growth rates. 1.4 The country is divided into three agro-ecological zones -- the dry zone, where annual rainfall averages between 600-900 mm; the intermediate zone, where annual rainfall averages between 1,200-1,500 mm; and the wet zone, where annual rainfall averages over 2,000 mm. The wet zone covers about 30 percent of the cultivated area and 70 percent of the rural population live there. Rainfall over the island follows a bimodal pattern, the north-east monsoon prevails from November through February (the main season, called the "Maha" season) and the .11 Following Kurunegala RD, the Bank approved two other RD projects in the country. The Second RD project in Matale and Puttalam districts, approved in December 1980, was almost fully implemented. The Third RD project in Mannar and Vavuniya districts, approved in May 1983, was suspended (with only 111 of the credit disbursed) in March 1986 due to ethnic conflict in the north and east. Apart from the three RD projects financed by the Bank, 11 other RD projects are either completed or under implementation in the country. IFAD has financed two and nine have been financed by bilateral donors including SIDA, NORAD, FINNIDA, Dutch Aid, JICA and GTZ. - 2 - south-west monsoon prevails from May through September (the off-season, called the "Yala" season). Variety of soils and vegetation, and temperature changes with elevation and topography add to the varied ecological conditions. 1.5 About 73 percent of agricultural land is under smallholdings, but there are also a large number of plantations of tea, rubber and coconut. The average size of smallholdings is about 0.8 ha; 50 percent of the smallholders operate 85 percent of the cultivable land; 39 percent have home gardens; and about 11 percent are landless. Many of the smallholders have lowland plots where rice is usually grown and upland plots where subsidiary food crops and treecrops are grown. Treecrops (40 percent) and paddy (33 percent) account for major areas of permanently cultivated land. Other crops include minor export crops such as cinnamon, cocoa, coffee, cardamon, cloves, ginger, pepper etc. and also subsidiary food crops such as maize, groundnuts, pulses, chillies, onions etc. 1.6 Before 1977, Government intervention in the economy was extensive and Sri Lanka pursued inward looking economic policies. Despite considerable achievements in the social sectors in the 1960s and 70s, overall economic growth was slow. This led the elected Government in 1978 to liberalize the economy and undertake major new investment programs. In particular, the agricultural strategy after 1978 favored greater liberalization and strengthening of essential services. Agricultural growth rate picked up between 1978 and 1986. However, between 1987 and 1991, agriculture performed poorly. The negative growth rate of agricultural GDP in the past four years is explained by the disruptions caused by ethnic conflict in the North and East, civil disturbances in the South and unfavorable weather conditions. 1.7 The new Government which came to office in early 1989 was faced with a serious financial crisis. The Government, with assistance from IDA and the IMF, initiated an adjustment program in September 1989. The aim was to stabilize the economy and address key constraints to growth by reducing the fiscal deficit and by strengthening the balance of payments. In the agricultural sector, this meant eliminating major subsidies on wheat, flour, rice and fertilizer, rationalizing welfare programs, freezing public sector hiring and reducing recurrent budgetary expenditures. The Government also sought to emphasize a diversification away from only rice to increasing production of higher-value export crops. II. PROJECT EVOLUTION, OBJECTIVES AND DESIGN Proiect Evolution 2.1 From the very beginning, when discussions on a RD project were initiated in Sri Lanka, the Government expressed the view that the project to be identified/prepared ought to be based on an "integrated" concept of rural development that would include agriculture, industry and social and economic infrastructure. Senior officials in the Ministry of Planning and Economic Affairs at the time were very impressed with the "Comilla model" in Bangladesh and GOSL had earlier adopted the Integrated Rural Development concept as a strategy for improving the quality of life in the rural areas of Sri Lanka. Thus - 3 - when Bank staff identified a project in which the components were physical infrastructure (irrigation improvement, water management improvement in the tank command areas, feeder roads), improvement oE coconut production and intercropping under coconut, strengthening extension services for paddy and other crops, credit for the beneficiary farmers, the Government expressed dismay "that the project components do not include any economic and social overheads". It was the Government's view that "for an overall development of a rural area, economic and social infrastructure is as important as agricultural development". The Government wanted other components such as education, health services, water supply, electricity, social services and even small scale rural industries to be included. 2.2 Bank staff expressed some reluctance in including such a wide array of project components, particularly those activities that did not affect agricultural production directly. The initial deadlock was resolved by the Bank proposing to prepare the main components listed above, but continuing to explore the possibility of whether a small scale rural industrial component was suitable for financing and suggesting that GOSL continue preparation of the remaining components such as education, health, water supply, electricity etc. Once preparation oecame fairly advanced and as an approach to possible financing and implementation began to be formulated, the Bank sent additional experts to consider which components would be included in the project. In the end, the Bank agreed to include most of the components proposed and prepared by the Government. Although investments for such individual components were relatively small they added up to about 22 percent of project costs. The only important component proposed by GOSL that was eventually left out was the small scale rural industries component. 2.3 The reason for selecting the Kurunegala district as the site of the first RD project was that its fairly large area and population made it a suitable administrative enclave to test out whether an integrated approach would work successfully and be replicated in other parts of the country. Also, the district's overwhelming rural character, a diversity of agroecological zones, and cropping patterns and large paddy and coconut areas gave it a large potential for integrating high priority economic activities. The fact that Kurunegala district did not benefit from the expensive Mahaweli schemes made the siting of a RD project in the district partially address intra-regional disparity issues. Objectives 2.4 The objective of the project was to evolve a replicable model of regional development for raising productivity, employment, incomes and living standards through strengthening of development-oriented institutional services, accompanied by critical complementary investments in physical infrastructure. 2.5 The project specifically included: a) rehabilitation of existing irrigation schemes accompanied by improved water management practices to fully exploit the irrigation potential; -4- b) stepped-up program of replanting/underplanting, interoropping and fertilizing of smallholder coconut plantation to overcome past neglect; c) reorganization and strengthening of agricultural extension services to improve their effectiveness; d) improvements in input supply services such as fertilizer distribution, seed supplies, planting materials and farm equipment; e) strengthening of agricultural credit facilities for crop production loans as well as for investment in farm equipment and machinery; and f) limited investments in transportation, health, education, drinking water and rural electrification to improve utilization and effectiveness of the existing facilities. Desian 2.6 The project was meant to emphasize: i) directly productive investments; ii) local level political participation in identification of project investments; iii) reduction of intra-regional disparities; and iv) financial, technical and institutional replicability and v) labor-intensive quick-yielding rehabilitation works rather than new construction. GOSL, thus saw this first RD project as a complementary, and in a sense, alternative approach to the more expensive Mahaveli Ganga irrigation and power schemes for improving the quality of rural life. In contrast to the Mahaweli schemes, the Kurunegala RD project was a quick-yielding, smaller scale, relatively low-cost per beneficiary investment. From GOSL's viewpoint, it was an attempt to decentralize the development process and benefit the low and middle-income rural farmers. The project complemented the on-going administrative measures taken at the time to empower district administration, decentralize the capital budget and promote village-level development initiatives. 2.7 Specifically, project design emphasized rehabilitating the production base for paddy and coconut and improving the supporting services essential for this increased production. Thus a large part of project investments (39 percent of base costs) was directed at the irrigation and water management component for paddy and coconut. If, in addition, credit, extension and input supply program components were added to this, 78 percent of the project's base costs is accounted for by paddy and coconut improvement investments. 2.8 Organizationally, the project was complex, comprising 13 different components and involving 12 different ministries and 20 agencies. As such, it was totally unrealistic to expect that the project would be implemented in 5 years. The roles of the various agencies were not clearly defined and coordination threatened to be a problem from the start. However, unlike other RD projects the Bank has supported in many countries, the essential institutional components existed prior to the project. Kurunegala RD project was expected to -5- work through existing line agencies rather than through the creation of a separate implementing agency that often undermine the government's line agencies. The project was expected to be coordinated by a Project Steering Committee at the national level and a Project Coordinating Committee at the district level. The Project Director was the head of the latter committee and was entrusted with the responsibility of monitoring, supervising and coordinating the project works of the various agencies involved in the project. Also, as a result of the organizational structure, administrative decision making and financial matters were left with the institutions and persons at the district level rather than with a central agency. III. IMPLEMENTATION Implementation Experience 3.1 The project's physical implementation is adequately described in the PCR.' The achievements and shortfalls of the physical implementation targets are shown in Annex 1, Table 1. This implementation section summarizes the project's physical implementation, discusses selective issues and updates some recent developments that have affected the project investments. 3.2 The Credit Agreement was signed in April 1979 and it became effective in August 1979. The credit was closed in December 1985, two years after the original closing date because implementation did not progress as planned during the initial phase. The main reason for the initial delay was slow procurement of equipment and vehicles due to the implementing agencies' lack of familiarity with International Competitive Bidding (ICB) procedures. Also, shortage of staff, especially in the Department of Irrigation (DOI), slowed down the tank identification and rehabilitation works. The social infrastructure components were completed more or less according to schedule. Overall, however, the limited capacity of the line agencies and budgetary problems were the main reason for implementation delays. US$17.1 million of the original credit amount of US$20.0 million was eventually disbursed and the balance of US$2.9 million was cancelled. 11 Report No. 8273, December 31, 1989 (parse. 5.10-5.36). -6- TABLE 1: Comparison of Appraisal and Actual Proiect Cost and Financing A. PROJECT COSTS ACTUAL AS 2 ACTUAL AS 2 APPRAISAL ACTUAL OF APPRAISAL APPRAISAL ACTUAL OF APPRAISAL -----------(US$ million)-------- -----------(Re million)--------- I. Agricultural Components Irrig. & water management 8.03 8.70 108 124.50 194.79 156 Coconut development 5.27 4.82 91 81.75 105.75 129 Agricultural extension 1.29 1.00 59 20.00 20.04 100 Agricultural inputs 1.35 1.07 79 20.90 21.38 102 Agricultural credit 7.62 9.93 130 118.05 220.25 187 Livestock 0.20 0.20 100 3.10 3.70 119 Groundwater exploration 0.62 1.44 232 9.65 31.00 321 Sub-total 24.38 27.16 111 377.97 596.91 158 II. Social Infrastructure Rural Roads 1.10 1.39 126 17.00 26.91 158 Rural water supply 0.86 0.41 48 13.35 8.45 63 Rural electrification 1.01 1.06 105 15.60 17.36 111 Health 0.41 0.71 173 6.40 14.81 231 Education 0.94 0.91 97 14.50 17.13 118 Sub-total 4.31 4.48 104 66.85 84.66 127 III. Project Coordination 1.30 2.09 161 20.20 45.41 225 and Investigation Total 30.00 33.73 112 465.00 726.98 156 B. FINANCING APPRAISAL ACTUAL (US$ million) (M) (US$ million) (2) IDA 20.0 66.7 17.1 51 GOSL 5.2 17.3 11.2 33 People's Bank/Bank of Ceylon 0.8 2.7 1.7 5 Beneficiaries 4.0 13.3 3.7 11 TOTAL 30.0 100 33.7 100 -7- 3.3 Project cost comparisons at appraisal and completion are shown in Table 1. Actual costs were 12 percent higher than appraisal estimates in US dollar terms and 56 percent higher in local currency terms due to an 80 percent devaluation of the Rupee relative to the US dollar between the time of project approval and completion. For the agricultural components (81 percent of actual cost), overall cost overrun was about 11 percent higher in US dollar terms and 58 percent higher in local currency terms. In local currency terms all the agricultural components cost more than planned. Expenditures for irrigation and water management and credit, the two largest project components, were significantly more than planned. Groundwater component, which comprised a relatively small investment (4 percent of actual cost) had the highest cost overrun. Cost overrun for the social infrastructure component (13 percent of actual cost) was 4 percent higher in US dollar terms and 27 percent higher in local currency. Expenditure on the rural roads component was significantly higher than planned. Also, expenditures on project coordination activities (6 percent of actual cost) were also higher than expected. 3.4 The SAR stipulated that IDA would finance two-thirds of the project expenditures, while GOSL would finance about 17 percent, People's Bank (PB) and Bank of Ceylon (BOC) about 3 percent and beneficiaries about 13 percent. At completion, GOSL contribution increased to 33 percent and the Bank contribution dropped to 51 percent of total expenditures; PB/BOC financed 5 percent and beneficiaries financed the remaining 11 percent of project expenditures. Irrigation and Water Management 3.5 Irrigation and water management, the largest component in terms of cost, targeted to rehabilitate 9 major and 500 minor irrigation schemes at appraisal. The rehabilitation work on the minor irrigation schemes included repairs to bunds, installation of lockable sluices, repairs to the spillways and construction of field channels. The rehabilitation work on the 9 major irrigation schemes were more extensive and included desilting and enlarging the main channels, repairing, enlarging and graveling embankments such as farm roads, selected lining of conveyance system to reduce water seepage, construction of drainage outlets and regulators, and installation of distributor gates. Although the rehabilitation works got off to a slow start, the two year extension of the project made it possible to complete all 9 major schemes and 453 minor schemes were also rehabilitated (Annex 1, Table 1). However, despite these physical achievements, the improved water management of irrigation schemes proposed in the project has been largely ineffective or has not worked.21 3.6 Once the physical rehabilitation work was completed, the SAR emphasized adopting a system of controlled use of water. The SAR favored the adoption of the "Walagambahuwa" model developed over a few years prior to the project at the Maha Illupalama Research Station to increase efficiency of rain Also, a number of supervision reports raised the issue that the quality of work downbtream on the minor irrigation schemes were unacceptable in many cases (e.g. SPN Report, April 24, 1985). -8- water use, decrease wastage of stored water and improve equitable water distribution within the irrigation schemes. This approacb is based on advancing the paddy planting date to mid-October with the onset of the Maha season rains and by using a rapidly maturing paddy variety (90-105 day variety) in order to mature the Maha season paddy with minimum water from the tank as supplementary irrigation. One of the important premise of "Walagambahuwa" approach is that by adopting this system water would be saved during the Maha season when there was plentiful rainfall and would be used to grow a second crop of paddy or short term food crop in the Yala season when the need for water was greater. The main implication is that the Maha rice would be dry seeded, water would be supplied on a rotational basis to the farmers and crop diversification would be promoted in the Yala season. 3.7 An evaluation of the irrigation and water management component of the project was undertaken by the Agrarian Research and Training Institute (ARTI) based on the rehabilitation work of the minor and major irrigation schemes at the first stage of the project.- The study found that water availability was the major factor affecting farmers' decision regarding date of planting, input use and whether to cultivate paddy or chena.1i Chena cultivation is very important in the dry zone areas of the district and estimates by ARTI shows that as much as 50 percent of the net income of farmers in the dry zone areas come from chena cultivation. In the dry zone areas most farmers cultivate chena as a hedge against partial or total failure of the paddy crop. The SAR noted for this reason that only when the chena crops are secured do the farmers transfer attention to paddy land, resulting in delayed Maha planting and consequent waste of rainfall. The ARTI evaluation takes exception to this point of view and suggests that farmers do not delay paddy cultivation because of preoccupation (in terms of labor allocation) with the chena crop and that chena crop does not impede paddy cultivation. The reason they cite is thit in tank-based paddy cultivation, farmers delay paddy sawing until tanks receive sufficient water for farmers to feel secure that there will be enough water to see them through the end of cultivation. Tanks in the dry zone usually take between October to mid- December to fill up, meanwhile farmers plant chena on the basis of rain water, which is enough for chena crop germination. By the time farmers decide whether to undertake paddy operations (i.e., there is enough water in the tanks), the heavy work in chena is already over. 3.8 The ARTI study also found that the cropping calendar was neither advanced in the district no- did dry seeding, where practiced, show any significant impact on water savings for the Yals season. Survey undertaken by the evaluation study revealed that most farmers were unaware of how the "Walagambahuwa" model operated and how it saved water for the Yala season. An International Irrigation Management Institute (IIMI) study notes that improving irrigation management in Sri Lanka requires not only an organizational structure but also an operational plan which gives a clear role to farmer groups and which Kurunegala Integrated Rural Development Project: Ex-poet Evaluation; Research Study No. 84, January 1988; and Evaluation of the Irrigation and Water Management Component (Phase II), Research Study No. 74, September 1986, ARTI. The main chena crops are manioc and tubers, kurakkan and other coarse grains, and vegetables and pulses. -9- makes clear sense to the farmers.Yi Thus, it is the farmers' perception of the effectiveness of any irrigation system and their comprehension of the plan that bear importantly on their willingness to comply. Information feedback from the irrigation system to farmers and officials and information exchange between farmers and officials are critical to making the system work. 3.9 Farmers' main concern is coping with the risk of crop failure. For instance, where rainfall is erratic farmers tended to minimize the risk of crop failure by delaying sawing until tanks have sufficient storage. In the dry zone areas, total rejection of dry seeding was reported. Thus the "Walagambahuwa" approach was inappropriate for the dry zone areas of the district because of water scarcity and risks associated with crop failure.zl The improved water management system proposed by the project failed to consider the different agroecological conditions existing in the district. Coconut Development 3.10 The coconut development component included rehabilitation, replanting/underplanting, intercropping and increasing the productivity of matured plantation. The physical implementation achievements are shown in Annex 1, Table 1. 3.11 The project achieved rehabilitation of 79,800 acres of coconut rehabilitation compared to appraisal target of 60,000 acres. This included construction of contour drains and removal of excess palms. 3.12 The replanting/underplanting subcomponent got off to a slow start, due to insufficient supply of seedlings, difficulty of identifying smallholdings and land disputes. Also, the reduction in the real subsidy rate due to inflation, despite nominal subsidy increases slowed down replanting activities. However, at the end of the two year project extension period, 24,000 acres were replanted/underplanted compared to SAR target of 25,000 acres. 3.13 The intercropping subcomponent achieved less than 50 percent of its SAR target of 10,000 acres and its overall performance is considered unsatisfactory. Intercropping of coffee, cocoa, and pineapple were not successful, but black pepper was successful. The reason for unsatisfactory performance was the farmers lack of familiarity with production technology and their reluctance to accept the recommendations. Also, unsuitability of some of the soils and inadequate rainfall adversely affected some inter-crops. Finally, as output prices declined and the real subsidy rate decreased, farmers did not find intercropping profitable. In other words, what project wanted farmers to do made no financial or technical sense. As a result, the project introduced Ekanayoke and Groenfeldtt Organizational Aspects of Improved Irrigation Management: An experiment in Devahuva Tank, Sri Lanka: IIMI, Working paper no. 17, May 1990. 11 The PCR also notes "that the model is best suited for adoption in the intermediate zone as rainfall is more plentiful, whilst for the dry areas of the district the model is less suitable*. - 10 - home gardens (1,422 set up by project ccmpletion) and horticulture program in 1983. 3.14 Lastly, the project did not make adequate provision for increasing the productivity of existing crops which comprised 70 percent of all plantations. There was no manuring or fertilizer use for existing crops since no subsidy was provided for existing crops unlike the replanting/underplanting component. 3.15 Extension for this component was provided by the Coconut Cultivation Board (CCB). Under the project, staff increased by 100 percent and 25 percent additional office space was created. However, sustainability of this component now appears to be a serious problem due to a number of reasons. First, the operating budget of CCB which was Re 500,000 during the period of project implementation, has been reduced to only Rs 200,000 while maintaining the same number of staff. Second, the subsidy on fertilizer has been removed with the result that it now costs Re 8,800 per ton of fertilizer -p from Rs 3,500 per ton. The result has been a sharp decline in fertilizer use on coconut within the past year and a half. Calculation by CCB shows that in 1991 operational cost per nut production went up to about Rs 1.5 from Rs 0.85. And the price per nut sold to estates is between Re 1.25-1.40. Farmer profitability for coconut production has gone down, and with the decrease in fertilizer use, future yields can be expected to fall. Agricultural Credit 3.16 At appraisal it was expected that 25 percent of project expenditures (US$7.62 million) would be directed towards agricultural credit for the purpose of enhancing farmers' ability to purchase necessary inputs. However, at project completion, 29 percent of actual project expenditures (US$9.93 million) was spent on this component. (Annex 1, Table 2) 3.17 Credit facilities were expected to finance: a) short-term production loans for paddy and other field crops; b) medium-term production loans for coconut fertilizer; c) medium-term loans for purchase of about 200 four-wheel tractors, 500 two-wheel tractors and 1,000 hand sprayers; and d) medium-term loans for purchase of 20 five-ton trucks by Multi-Purpose Cooperative Societies (MPCS). To foster credit discipline and to impress upon the farmers a break from past default habits, the credit component also aimed at recovering Re 16 million in overdue debt prior to initiating lending operations. BOC was able to obtained over 90 percent of its overdue debt, while ?B recovered less than 40 percent. 3.18 The People's Bank (PB) and Bank of Ceylon (BOC) were the two main lending institutions through which most of the credit was channelled. Disbursements for paddy cultivation and coconut fertilizer were slow. The main variation from what was planned in the SAR was with regard to equipment and vehicle loans for land preparation. Only about 100 of the 200 four wheel- tractors planned for financing were purchased through the PB and BOC in the first year (1980). Subsequently, four-wheel tractors were no longer financed, in part because they were much too expensive (Rs 200,000 for each in 1991) for most farmers and were not the most appropriate machinery for land preparation. - 11 - Therefore, the remaining funds were used for the purchase of additional two-wheel tractors (Re. 60,000 for each in 1991). In the end, 2,383 two-wheel tractors were financed compared to 500 estimated in the SAR. 3.19 The two-wheel tractors are currently very popular. The audit is unable to comment on how extensively they are used for land preparation which was the original purpose of providing the funds, but observed that two-wheel tractors were extensively used for transporting people and farm goods from village to market as well as for other purposes. Question arises as to whether such a large number (4 times the appraisal estimate) of two-wheel tractors ought to have been provided in an RD project which was designed to benefit poor farmers. The audit is not surprised that the two-wheel tractors are used for purposes other than land preparation since those uses are more lucrative for the entrepreneurial farmer. But because interest rate subsidies were provided, some questions arise as to whether the project should have been providing credit to the better-off farmers. 3.20 BOC officials interviewed suggested that recovery rate for paddy loans were about 80 percent, of which 50 percent paid were in time and the remaining 30 percent were eventually paid up. Recovery rates were only about 60 percent for farm machinery loans, Credit for high value crops such as chillies, onions and vegetables had the highest recovery rates (only 10 percent default rates). Other Azricultural Components 3.21 Input Suplv for paddy production was facilitated under the project. 57 stores were constructed by project completion compared to an tppraisal target of 80. In spite of this farmers continued to purchase a large volume of fertilizer from private traders due to more convenient credit arrangements. A seed processing center was built (2 tons/hour capacity) in 1983. The PCR and a survey by ARTI in 1985/86 reported that farmers obtained two-thirds of their certified seed requirements outside of Government cbAnnels. At the time of mission visit the plant appeared to be functioning well and storing good quality seed. It appeared to be suitably located and easily accessible for large number of farmers. The seed processing center now appears to be supplying a wider variety of seeds to a larger number of tarmers than a few years ago. 3.22 The reorganization and strengthening of Agricultural extension in the district under the project was to complement the extension effort that was being concurrently undertaken on a national scale under the Agricultural Extension and Adaptive Research project (AEARP), which was approved by the Bank three month after approval of this project. The achievements and shortcomings of the extension program under this project was at par with the efforts at the National level and have been discussed in detail in OED's recent audit of AEARP. Overall, the performance of the extension system under AEARP was considered only marginally satisfactory and provided a valuable experience for redesigning a new system currently being contemplated via an Agricultural Support Services project which was approved in July 1991. The extension system set-up earlier played an important role between 1979-84 in exploiting the gains of improved technology and - 12 - is likely to have speeded up the rate of adoption of improved rice technology. However, the extension system did not adapt to new challenges after 1984 -- in particular its high fixed personnel costs led it to be perceived as cost- ineffective in its existing form. 3.23 The other agricultural components livestock development and groundwater exploration provided a very useful experience. In particular, the groundwater component, although costing more than planned in developing 88 test wells and 200 tube wells, deserved greater emphasis in the project. The audit is very impressed with the real opportunities to farmers where groundwater is available in the district. The audit mission saw extensive groundwater utilization in some dry zones areas of the district and the production of high value crops and vegetables. The incomes generated by these high value crops have considerably changed the lives of those benefitting from groundwater. Other Government programs and donor assistance are currently trying to exploit the available groundwater through agro-well programs. The audit notes this development with satisfaction. Social Infrastructure Components 3.24 Although small by way of project cost (13 percent of actual costs), the social infrastructure supported by the project, such as 130 miles of rural roads, improvements of 15 health care delivery centers, provision of educational facilities and equipment, electrification of 17 rural areas and construction of 400 dug wells for drinking water (in line with SAR targets) were beneficial for the receiving communities. However, these were rather small compared to the total social infrastructural need in the district. In retrospect, the project provided some additional funds to the existing line departments in intensifying some of their routine activities. A large number of the dug wells were contaminated with iron and became non-operational within a short period of time. The audit was impressed by the recent efforts of a donor (GTZ) which has operationalized all of these iron contaminated well3 by not only finding a technical solution but also by developing a system of social responsibility among the villagers in solving this problem. Post Implementation Development 3.25 Since the PCR was written in early 1989, some changes have taken place at the macroeconomic and national administrative levels that have affected the project. 3.26 First, was the Government's worsening fiscal crunch already felt at the time of writing the PCR. A financial crisis confronted the new Government soon after it was formed in early 1989. Among other problems, the fiscal deficit became so large that the Government was prompted to embark on a major economic restructuring in mid-1989. One of the important goals of the stabilization program that followed was to cut the fiscal deficit. This translated for agriculture into eliminating some important subsidies including those on wheat, - 13 - rice and fertilizer; also undertaken was structural reform with emphasis on public enterprise and public expenditure reform which translated into plans for cutting the civil service by 20 percent during the next 4-5 years with proportional effects on agriculture expenditures, especially current expenditures. Implication for Kurunegala RD has been fewer funds for operations and maintenance activities. 3.27 Second, as a result of the 13th Amendment of the Constitution in late 1988 which involved devolution of administrative authority to the Provinces, the structure of administrative responsibility has shifted from the district to the Provinces for agriculture and agrarian services as well as most other components of the Kurunegala RD. The devolution involved a move away from the old concept of the district as the administrative focal point. In addition to the responsibilities of the Center, two levels were created at the Provincial and Divisional levels. At the Provincial level, the essential responsibilities are formulating policies, strategies, coordination and monitoring for the Province. At the Divisional level, the emphasis is on implementing developmental activities. The Divisional Secretary (DS) is also the Assistant Government Agent (AGA) and performs two functions. When dealing with devolved functions he acts as the DS, under the Chief Secretary of the Province; and when dealing with non- devolved activities he acts as the AGA. Agricultural is a devolved function under the office of the Provincial Director of Agriculture in most of the Provinces. However, given that maintenance works were already being undertaken by the respective line agencies, disruptions have been minimal except for agriculture extension where the extension workers were transferred to the Government's Poverty Alleviation program. IV. PROJECT OUTCOME Aaricultural Impact 4.1 The main source of project benefits in the SAR was paddy and coconut production. Irrigated paddy land was expected to increase by 10,000 acres; and 60,000 acres of coconut land would be rehabilitated, 15,000 acres replanted and 10,000 acres intercropped. Incremental paddy production which would reach full development in 1986 would be about 49,000 tons; and incremental coconut production at full development in 1991 would amount to 144 million nuts. 4.2 Paddy The PCR analysis assumed that paddy yields were very much underestimated in the SAR for both the with and without project situations. Average paddy yields in the SAR for without and with project situations were 1.0 ton/acre and 1.12 ton/acre respectively; in the PCR these average yields are reported as 1.36 tons/acre and 1.44 tons/acre!i respectively. The incremental average paddy yield in the SAR is 0.12 ton/acre and in the PCR is 0.08 tonsiacre. However, despite this smaller incremental average paddy yield in the PCR the Average paddy yield is based on average of paddy yields from major irrigation schemes, minor irrigation schemes and rainfed conditions. - 14 - incremental production at full development in the PCR (56,000 tons) is greater than in the SAR (49,000 tons). The question is how is this possible when no increase in area cultivated is reported. 4.3 Consider instead not the average paddy yields, but yields from the two types of irrigation schemes and rainfed conditions. Incremental Yields (tons/acre) PCR SAR - Major Irrigation Schemes 0.20 0.17 - Minor Irrigation Schemes 0.09 0.12 - Rainfed 0.00 0.12 4.4 The greater incremental production in the PCR is due to a large proportion of production resulting from the irrigation schemes, especially the major irrigation schemes. 4.5 The main issue concerning the agricultural impact of the project is whether incremental yields (difference between with and without situations) from the irrigation schemes based on water availability and fertilizer application are realistic i.e., what increased productivity should be accepted as valid? To evaluate this question it should be pointed out that a number of secular changes were taking place in Sri Lanka between 1979 and 1985. These changes make the case that all of the increase in production and yields are not attributable to the project alone. As pointed out in a number of reports (including the Audit of AEARP) paddy yields nationally increased significantly after 1975, particularly aftqr 1979 and continued up until 1985 when yields began to stagnate. There are clear indications that the reasons for the increase in yields at the time in Sri Lanka are attributable to the availability of high yielding varieties of paddy, provision of subsidized fertilizer, improved quality seeds and supportive Government policies such as guaranteed price and market. Thus the yield increases reported in the PCR are not all due to the project interventions. The other factor that lends support to the argument that incremental production at full development is below the 56,000 tons of paddy reported in the PCR is the low cropping intensity, particularly of the minor irrigation schemes. As discussed in paragraphs 3.5-3.9 improved water management was largely ineffective with the result that Yala season cultivated area was much below expectations. 4.6 Coconut: The PCR analysis is based on the assumption that the project resulted in an incremental yield of 880 nuts/acre annually compared with the SAR estimate of 400 ruts/acre. This is so because the PCR assumes that, without the project interventions, conditions on the field would have deteriorated much faster and yields would have declined from a base of 1,700 nuts/acre to 1,420 nuts/acre rather than increase to 2,000 nuts/acre without the project as stated in the SARI This change in the without project situation is what has increased the PCR's incremental yields and production gains. - 15 - 4.7 However, expected incremental production of 144 million nuts at full development in 1991 was far from attained. Full production would only be reached in the year 2003 and at only 74 percent (107.1 million nuts) of the SAR target with a 10-year delay. Also, it was planned that 200,000 acres of coconut land would be suitable for intercropping, but not even 5 percent of the land was intercropped. 4.8 Thus, with these two caveats on paddy and coconut yields and production, the audit reestimated the ERR of the project. (Annex 2, Table 1). The SAR's ERR for the project was 32 percent while the PCR reestimated the ERR at completion to be 38 percent. First of all, using the same assumptions as in the PCR reestimation, but updating the price forecasts to November 1991 (PCR used October 1988 prices) alone lowers the ERR to 33 percent. On the basis of arguments presented in paragraphs 4.1-4.7 that incremental paddy and coconut benefits are much lower than those reported in the PCR, the audit reestimated the ERR of the project on the basis of 75 percent and 60 percent incremental benefits, the latter perhaps being the best guess estimate at best. At 75 percent of projected benefits for paddy and coconut the ERR is about 28 percent and at 60 percent of projected benefits the ERR is about 23 percent (Annex 2, Table 1). The audit believes the ERR for the project realistically would be 23 percent or less. Institutional Impact 4.9 On the whole, the project had a positive impact on the evolving institutional framework for rural development in the cotntry. The project utilized and strengthened the existing line agencies to implement the different activities supported by the project. It did not create a new institution that might have undermined the traditional government departmenats, as has been the case in many RD projects supported by the Bank in a number of countries especially in Africa.Y 4.10 The Project Office was the focal point of the '-.anization and was headed by the Project Director, who was the Deputy Director in the District Planning Unit. During implementation the Project Office remained strictly a planning, coordination and monitoring body without specific r sponsibility for implementing project components. At the time of project clrsig, the Project Office and the District Planning Unit wore merged to provid. a broader based planning and monitoring function for the district under a District Planning Office. With the recent devolution of authority to the Provinces, the District Planning Office at Kurunegala has come under the Northwestern Provincial Authority and is still in a position to carry out its development functions. 4.11 A positive aspect of this multi-sector project has been a strong government commitment to RD at various levels. The project set up a Project Coordinating Committee (PCC) at the district level and a Project Steering Committee (PSC) at the national level. The above committees were first set up 1l World Bank Experience with Rural Development, 1965-86, OED Evaluation Study, 1988. - 16 - under the project and their experience have been duplicated on a nationwide scale in implementing other RD projects as well as other district specific development projects. The main achievement of the PCC has been in resolving outstanding inter-departmental coordinating problems; and of the PSC has been that of playing the role of final arbitrator in solving policy issues and coordinating unresolved problems at the district level. Both committees have facilitated harmonious coordination of government line departments with the Project Office, a commendable achievement. 4.12 Another significant institutional achievement has been the performance of decentralized functions and the important role played by the district level institutions in this regard. Decision making - administrative, technical and financial aspects - were delegated to district level agencies and responsible government personnel with the Ministry of Policy Planning and Implementation in Colombo playing a promoting and coordinating role. 4.13 One of the more important institutional achievements of the project, being the first of its kind in the country, has been the valuable experience gained by staff at the Project Office in trying to coordinate the 13 different project activities under 20 different agencies within the context of a multi- sectoral RD project. Although ineffectual supervision and lack of maintenance of the facilities are partly attributable to the inexperience of staff, the project nevertheless exposed staff to a new approach. The coordination role was complex and it exposed the responsible institutions to see, first hand, what can go wrong and how to go about resolving difficult budgetary and administrative issues. In the end, lessons gained from this project have provided a valuable example in dealing with similar problems in other RD and other agricultural projects and also how to avoid such problems altogether during implementation. 4.14 However, despite these positive contributions, including decentralization of administrative and financial decision making and the evolution of development-oriented institutions at the district level, the next level of institutional transformation was neither aimed at or achieved. The project did not involve participation of beneficiaries in planning or implementation. A good example of the neglect of beneficiary involvement is illustrated by the sub-par performance of the minor irrigation schemes. Beneficiaries from such schemes were selected on the basis of certain physical and technical criteria laid down by the government. However, critical questions with regard to planning and implementation were never asked of the beneficiaries, nor were they encouraged to participate more fully in matters that were critically important to their livelihood. The GTZ village drinking water program in the district, which was taken over from the village water supply component of the Kurunevala RD project, is in sharp contrast to the minor irrigation schemes and illustrates what can really be achieved by beneficiary involvement and participation. Sustainability 4.15 Sustainability of assets created under the project poses a real problem. Assets created under the project were expected to be maintained by the - 17 - respective line agencies. However, decreased revenues and the government's budgetary problems in recent years have also meant a lower level of funds for line agencies to undertake maintenance related activities. 4.16 During the project period, funds for the project accounted for up to 50 percent of the Annual District Capital Budget, so that the project helped the District Administration to undertake its annual developmert program at a much faster rate. It did not really change the structure of expenditures towards any particular sector or subsector. For instance, more funds for the Department of Irrigation meant that the normal activities that were to be undertaken over a longer period of time could now be undertaken within 3-4 years. Therefore, after project completion, the sheer quantity of maintenance work increased without a proportional increase in staffing or operational budget. Adequate and timely funds to undertake maintenance and upkeep were not available. Staffing levels decreased after project completion and a number of staff who gained valuable experience left the country with the deterioration in the security situation. 4.17 On the agricultural side, the poor quality of work on the downstream component of the minor irrigation schemes has caused higher maintenance expenditures sooner than expected. Also, the removal of the fertilizer subsidy has resulted in a sharp decline in fertilizer use on coconut within the past year and a half. Unless there is some way to increase the financial profitability of coconut to smallholders, yieldswill continue to decline even further due to lack of fertilizer applications. V. FINDINGS AND LESSONS 5.1 Overall, the project is considered satisfactory despite a two year delay in implementation and sub-par performance of some of the components. The strong comitment of various levels of Government to RD and the active role of the central Government in the conceptualization, identification and preparation phases of the project has been an essential ingredient of the project's success. The experience gained in implementing this first multisectoral RD project in the country has been a valuable learning process, especially in view of the large number of RD projects (financed by the Bank and other donors) that followed. 5.2 The concentration of the agricultural components of the project on paddy and to a lesser extent on coconut makes it economically viable since Sri Lanka has been competitive in both crops. However, the means of achieving the benefits, in particular the rehabilitation works on the minor irrigation schemes for paddy are, in many cases, questionable due to unavailability of water for irrigation in the Yala season. The essential achievement of the minor irrigation schemes has been to stabilize the Maha season crop; but the expected Yala season production has not been achieved, i.e., the cropping intensity has been much lower than expected, and with the difficulty of attributing yield increases to project activities potential benefits have been tempered. However, this situation can be improved if greater efficiency of water use can be achieved perhaps by using field pumps where possible rather than relying totally on gravity-based systems, making maximum use of rainfall, switching to higher value - 18 - crops in some cases and involving greater community participation for allocating water to farmers. 5.3 A design problem of the project was that it did not address the needs of the poorer upland farmers of the district. In the dry zone areas in the north of the district, the project did not address the needs of the farmers who are growing maize, finger millet, pulses, green gram, cowpeas etc. Thus the project missed out on an important segment of the district's poor farmers who are generally on the lower end of the income distribution curve. 5.4 Another design problem relates to the inadequate treatment of organization and management aspects in the SAR, particularly problematic given the complex, multisectoral nature of the project. Project design ought to have addressed more clearly the specific functions of individual agencies and the interrelationships between them. Also neglected was the participation of beneficiaries in planning and implementation of the project. The latter adversely affected the minor irrigation schemes and water management practices. 5.5 The Government was obviously thinking in terms of an integrated RD project, not as it turned out to be -- disparate project components with little integration where most activities were carried out in independent fashion. It was the Government's view at the time of preparing this project in the late 1970's that "for an overall development of a rural area, economic and social infrastructure is as important as agricultural development"; while it was the Bank staff's view that such a wide array of project components, particularly those activities that did not affect agriculture production directly ought to be left out. In retrospect, Bank staff's fears at the time were well-founded as experience of integrated RD projects worldwide has shown the difficulty of implementing such projects (OED's Rural Development Study of 1987). At worst, the Kurunegala RD project provided little or no integration; at best, it prcvided funds to the line agencies via the District Administration to undertake a whole range of activities at a much faster rate. It is no surprise that during the period of implementation the project provided 50 percent of the District's annual capital budget. In that sense, the focus of the District Administration's task, from largely administrative to greater emphasis on development-oriented activities, has been a positive development. 5.6 The project also brought to the fore and sharpened the debate within Sri Lanka about the size, scope, composition and complexity of RD projects. Apart from the Bank and IFAD, whose project the Bank supervised, other external donors -- Netherlands, Norway, Sweden, Finland, Germany, Japan -- have all been involved in the design and implementation of RD projects in the country. Although all these donor-assisted projects had the common purpose of increasing incomes and improving quality of rural life through investments in such core activities as minor irrigation, rural roads, field and tree crops development, village water supply, primary health care and education, and all projects aimed at transforming the district offices from administrative to development-oriented institutions, a number of differences existed between those projects supported - 19 - by the Bank and those supported by the bilateral donors.!i Also, the experience with this project in which the SAR is used exclusively as a reference point for supervision and monitoring processes, has raised the issue that a greater level of management flexibility is desirable in the design of RD projects. .L These differences are: i) the greater emphasis given by Bank-assisted projects on agricultural productive activities and economic infrastructure while bilateral donor-assisted are more oriented towards social infrastructure; ii) Bank-assisted projects relied on technically proven Improvements while bilateral donor-assisted projects tended to be more innovative and experimental since implementation and planning in their projects allows greater flexibility; iii) direct beneficiaries in Bank-assisted projects are mostly farmers with smallholdings while bilateral donor-assisted projects attempted to assist the more disadvantaged groups such as landless households; and iv) Bank-assisted projects relied on local staff and institutions while bilateral donor-assisted projects employed several expatriates to manage the programs at least in the early stages. Differences between Bank-assisted and bilateral donor-assisted projects in RD projects in Sri Lanka have been reported in two documents: The World Bank and Sri Lanka: A Review of a Relationship. OED Report no 6074, February 24, 1986; and Sri Lanka Review of Rural Development Program, South Asia Projects Department, January 1986. - 21 - Annex 1. Table 1 (Page 1 of 2) PERFORMANCE AUDIT REPORT SRI LANKA KURUNEGALA RURAL DEVELOPMENT PROJECT (CREDIT 891-CE) PROJECT IMPLEMENTATION Project Comonent Unit SAR TarAet Achievement Remarks 1. Irrigation and water management: - Major echemes no. 9 9 ---- - Minor schemes no. 500 453 ---- - Pumps no. 22 2 Discontinued due to lack of demand 2. Coconut development: - Rehabilitation acres 60,000 79,800 Digging of contour drains and removal of excess palms - Replanting/underplanting acres 25,000 24COO ---- - Inter-cropping acres 10,000 4,415 Mostly cocoa - Intercrop. demonstration plots no. 50 30 Discontinued due to failure, partly due to varietal selection problems. - Home garden program no. -- 1,422 Started in 1983 to compensate for low success of inter- cropping programme. - Coconut nurseries no. 10 10 ---- - Office building for CCB no. 1 1 ---- - Staff CCB no. 98 98 Consisting of 20 officers and 78 support staff and laborers. - Staff NEC no. 149 67 Consisting of 33 officers and 116 support staff and laborers at appraisal & 6 officers and 67 support staff and laborers at completion. 3. Agricultural Extensiont - ACe no. 3 2 ---- - SMSO no. 9 4 ---- - Als no. 4 6 ---- - KYSs no. 140 147 ---- - Staff quarters no. 53 48 ---- - Office extension no. 2 2 ---- - Horticultural program acres -- 1,433 In support of dry zone activities. - Horticultural nurseries no. -- 2 ---- 4. Agriculture Input Supply: - Seed processing centre no. 1 1 Tvo tons capacity. - Fertilizer stores no. 80 57 ---- - Mammoties (imported) no. 50,000 --- No imports due to local availability. 5. Agricultural credit: - Short-term : Paddy production acres 20,000 13,000 ---- - Medium-term t Coconut fertilizer acres 50,000 30,000 ---- a 4-wheel tractors no. 200 103 Discontinued due to overlapping with other agency progranme. - 22 - Annex 1. Table 1 (Page 2 of 2) Project Component Unit SAR Target Achievement Remarks 2-wheel tractors no. 500 2,383 Upward revisions including reallocation of 4-wheel funds. : Sprayers no. 1,000 198 Targets not achieved due to low demand. Lorries no. 20 2 Discontinued in 1981 due to lack of demand by MPCS. i Water pumps no. --- 140 ---- : Open dug wells no. --- 24 ---- 6. Livestock Development: - Veterinary ranges no. 5 5 ---- - Clinics no. 3 3 ---- 7. Groundwater exploration: - Test wells no. 180 88 Downward revision due to suf- ficient data and 54 converted in production wells. - Tube wells no. -- 200 Ten percent defunct. 8. Rural roads: - Village access roads miles 120 120 ---- - School access roads miles 8 8 ---- - Tank access roads miles -- 46 Revision approved in 1983 to provide access to major irrigation schemes. 9. Rural water supply: - Dug wells no. 400 400 About 25% non-operational. 10. Rural electrification: - Areas no. 16 17 Additional scheme at wilgodal Buela approved end 1983. 11. Health: - Staff quarters no. 6 6 ---- - Offices no. 5 5 - Electrification no. 4 4 Including standby generator for Kurunegala Hospital. - Hospital expansion no. -- 10 Utilization of savings due to currency devaluation against dollar. 12. Educational Component: - Science equipment for secondary schools no. 203 203 ---- - Crafts training equipment for school leaver program no. 45 61 ---- - Technical education equipment for institutes no. 2 2 ---- - Teachers quarters no. 40 41 ---- - Construction of science rooms no. 140 137 ---- - Upgrading of secondary schools no. 7 20 Upward revision agreed in 1982. - School roofing no. -- 26 The provision of permanent roofing was included in 1982. 13. Prolect Coordination: - Project office no. 1 1 Not funded under project. - Senior staff quarters no. 2 2 ---- Source: PCR, Part IlI. - Table 4. PERFORMANCE AUDIT REPORT SRI LANKA KURUNEGALA RURAL DEVELOPMENT PROJECT fCREDIT 891-CE) Credit Disbursement by Participating Banks (Re *000) Category of Loan iko 1980 1981 1982 1983 1984 1983 1986 Total No. Asount No. Amount Lo. Amount No. Amount Do. Amount Do. Amount So. Amount o. Amount Cultivation People's Sank 1,074 2,322 1,773 4,317 1,079 3.166 1.201 3.794 1,275 4.764 1,104 3,899 418 1,828 7,924 24.110 Losny Bank of Ceylon 2,309 3,169 2,031 4,132 2,355 4,734 2,861 6,157 4.194 9,533 2,807 9,532 474 2,175 17,031 59,432 Cocomt. People's Bank 601 1,874 251 1,239 134 1,107 83 825 408 3,374 178 1,308 41 249 1,696 9,976 Pertiltser Bank of Ceylon 65 1,779 733 1.737 176 1,111 105 1,016 329 2,546 418 2,315 32 314 2,478 10,818 4-.obool2 People's Bank 59 7,049 2 263 *** .. -.* --- --- --- --- --- --- --- 61 7,312 tractore Bank of Ceylon 42 2,361 -- -- *. .* - -- *. -- --- - --- -- 42 2,361 2.wbe*l People's Bank 194 4.389 23 570 31 860 123 3.318 268 9,113 281 9,962 101 3,994 1,021 32,214 tractor* Bank of Ceylon 131 4,333 94 2,447 93 2.190 232 6.183 422 14.206 241 8,309 149 5,986 1,362 43,636 Sprayer@ People'* Bak 6 6 5 4 1 0 32 101 38 38 42 69 1 0 145 230 Bank of Ceylon 42 57 7 4 16 19 29 53 22 35 is 24 17 29 148 221 Lorrie for People's Bank 2 443 .-- --- ... ... . .. --- ... ... --- --- -- -- ICS. Bank of Ceylon --- -. ... --- --- . ... - ... --- ... - -. - Wat*' People' Dank ... ... ... ... ... 12 61 9 54 6 36 27 131 Pmp Bank of Ceylon .. --- --- --- ... ... 26 137 29 193 s8 383 113 713 opendus People' Bank --- ... --- --- ... 9 130 3 28 2 33 14 191 walls. Bank of Ceylon .. -- --- 5 90 3 75 2 25 10 190 Source: PCR, Table 2 (3 Can include repeater loans by sam farmers. Discontimed due to duplication with other prograe and inappropriate use of tractor@. Balance allocated to 2-wheel tractors. Y Initially not Included in project. World Bank approval in early 1980. Y Discontinued due to inappropriate use of lorries. Y1 Approved In late 1983. Pumps mainly used for vegetable irrigation. Y Approved In late 1983. Wells mostly for vegetable Irrigation In dry sowe. - 24 - Sri Lanka Rurunagals Rural Developsent Project Sconomic Rate of Return Analyste ......... (Page I of 2) ammesaweasemasse.sememememammem..ms.mem..ss.e..a..emeame.essne.s.meaemmes.eaweasseem.cemem..wee.assessmewm....s.emaemmememem.sseemasse 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 Coconut Prices IBRD projections 1 10188 (1985US) 646 543 449 725 1167 590 251 340 412 400 414 ISRD MUV Ratio 1989/1965 6 9188 1.809 1.809 1.809 1.809 1.809 1.609 1.809 1.609 1.809 1.809 1.809 tBRD projections (1989$US) 0 10188 454.1 615.1 745.4 723.7 749.0 749.0 Original World 1989$USlat 454.1 615.1 745.4 723.7 749.0 749.0 Original on farm 1989$Relat 1.610 2.174 2.631 2.555 2.643 2.643 Projected World 1989$US/at 346 469 562 517 319 375 Projected on farm 1989$Rs/at 1.230 1.662 1.988 1.830 1.136 1.332 Paddy Prices Original World 19898st 293 293 293 293 293 293 Original on farm 1989$Relat 6139.4 6139.4 6139.4 6139.4 6139.4 6139.4 Projected World 1989$US/at 245.6 244.2 299 320 271.8 295.3 Projected on farm 1989$Relat 5300.1 5275.3 6245.6 6617.5 5764.0 6180.1 Production 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 Coconut Production (mill anuts) Imputed from Original 89.28 79.90 75.76 84.86 86.17 88.78 Paddy Production ('000at) Imputed from Original 56.00 56.00 56.00 56.00 56.00 56.00 Value of production 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 Coconut value of production (mill Re) Original 5.0 23.6 51.6 82.8 112.4 143.7 173.7 199.3 216.8 227.8 234.7 Projected 5.0 23.6 51.6 82.8 112.4 68.9 93.1 111.3 102.5 63.6 74.6 Paddy value of production (mill Re) Original 55.1 102.4 38.9 189.8 286.5 339.1 343.8 343.8 343.8 343.8 343.8 343.8 Projected 55.1 102.4 38.9 189.8 286.5 339.1 296.8 295.4 349.7 370.6 322.8 346.1 Incremental Costs (mil Re) Original 67.9 184.8 197.3 162.4 132.6 176.1 192.9 202.4 146 146.3 147.8 152.4 153.3 Total value of production (sill Rs) Original Coconut 6 Paddy 0.0 55.1 107.4 62.5 241.4 369.3 451.5 467.5 517.5 543.1 560.6 371.6 578.5 Projected Coconut & Paddy 0.0 55.1 107.4 62.5 241.4 369.3 451.5 365.7 338.5 461.1 473.1 386.4 420.7 (Projected Coconut 6 Paddy) * 752 0.0 55.1 107.4 62.5 241.4 369.3 451.5 274.3 291.4 345.8 354.8 289.8 315.5 tProjected Coconut & Paddy) * 602 0.0 55.1 107.4 62.5 241.4 369.3 451.5 219.4 233.1 276.6 283.8 231.8 252.4 Net Inc. Bene & EBR (1) 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 ER Not Incremental Benefits (aill Re) A. 38.042 Original (Coconut & Paddy) -67.9 -129.7 *89.9 *99.9 108.8 193.2 258.6 285.1 371.5 396.8 412.8 419.2 423.2 B. 33.082 Projected (Coconut 6 Paddy) -67.9 -129.7 -89.9 .99.9 108.8 193.2 258.6 163.3 242.5 314.8 325.3 234.0 267.4 C. 27.83 (Projected Coconut & Paddy) * 752 -67.9 .129.7 -89.9 .99.9 108.8 193.2 258.6 71.9 145.4 199.5 207.0 137.4 162.2 D. 23.422 (Projected Coconut & Paddy) * 602 -67.9 -129.7 -69.9 *99.9 108.8 193.2 258.6 17.0 87.1 130.3 136.0 79.4 99.1 - 25 - am.. Tabau 1 - (Pag. 2.et2) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Comout Prie. 3RD projection e 10/88 (198508) 42 374 3RD ffU gatto 1989/1985 I 9/88 1.809 1.809 U33D projectionu (1989$99> I 10/88 749.0 749.0 749.0 768.9 768.9 768.9 768.9 768.9 676.6 676.6 676.6 676.6 Original World 1989$Ua/t 749.0 749.0 749.0 791.0 791.0 791.0 791.0 791.0 791.0 791.0 791.0 791.0 Original on farL 19891iat 2.643 3.643 2.643 2.791 2.791 2.791 2.791 2.791 2.791 2.791 2.791 2.791 Proj*ote4 World 19890/ut 4$1 454 482 504 506 506 504 506 534 534 534 534 Project* on am 1989$1819t 1.599 1.609 1.707 1.791 1.791 1.791 1.791 1.791 1.890 1.890 1.490 1.890 Paddy frie* original world 1989*08/st 293 293 293 293 293 293 293 293 293 293 293 293 Original On Gagu 1989f1armt 6139.4 6139.4 6139.4 6139.4 6139.4 6139.4 6139.4 4139.4 6139.4 6139.4 6139.4 6139.4 Projecte World 1989$0sat 270.4 242.8 241.5 245.6 245.6 245.6 245.6 245.6 271.8 271.8 271.8 271.8 Projected on Lar 1989$Ralut 5739.2 5230.5 5227.5 5300.1 5300.1 5300.1 5300.1 5300.1 5764.0 5764.0 5764.0 5744.0 Production 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Cocomt Production (ai.( mit*) Zaputed frm Oritginal 91.81 94.99 97.22 94.52 97.00 99.58 101.38 103.34 104.39 105.74 106.71 107.10 Paddy Production (000t) £aputed fra original 56.00 56.00 56.00 56.00 56.00 56.00 56.00 56.00 56.00 56.00 56.00 56.00 valu* of production 1993 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Cooomt value of production (Cill Ua> Original 242.7 251.1 257.0 263.8 270.7 277.9 283.5 288.4 291.9 295.1 297.8 298.9 Projected 89.5 90.1 95.6 100.3 100.3 100.3 100.3 100.3 105.8 105.8 105.8 105.8 Paddy valu. of prodution (mi &e) Original 343.8 343.8 34.8 343.8 343.8 343.8 343.8 343.8 343.8 343.8 343.8 343.8 Projected 321.4 294.0 292.7 296.8 296.8 296.8 296.8 296.8 322.8 322.8 322.8 322.8 Incremental Co*ta (mill Sa) øriginal 156.5 357.8 159.1 159.7 160 159.4 160.6 160.8 161 161.2 161.3 161.4 Total value of production (Sti1 Wa> Original Cocomt 6 Paddy 586.5 594.9 600.8 607.6 614.5 621.7 627.3 632.2 635.7 638.9 641.6 642.7 Projeted Coconut 6 Paddy 410.9 384.1 388.3 397.1 397.1 397.1 397.1 397.1 428.6 428.6 428.6 428.6 (Projacted Coconut 6 Paddy> * 751 308.2 288.1 291.3 297.8 297.8 297.8 297.8 297.8 321.4 321.4 321.4 321.4 (Projeeted Cocout & Paddy) * 60Z 246.5 230.5 233.0 238.3 238.3 238.3 238.3 238.3 237.2 257.2 257.2 257.2 sec In*. Bens & EIL (1) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 EI uet Inerem~ntal Benefit* (mill Ra) A. 38.04% Original (Coc~nt & Paddy) 430.0 437.1 441.7 447.9 454.5 462.3 466.7 471.4 474.7 477.7 480.3 481.3 8. 33.08U Projected (Coeomt 6 Paddy) 254.4 226.3 229.2 237.4 237.1 237.7 236.5 236.3 267.6 267.4 267.3 267.2 C. 27.85 (Projected Coccmt Paddy> * 75Z 151.7 130.3 132.2 138.1 137.8 138.4 137.2 137.0 160.4 160.2 140.1 160.0 0. 23.48% (Projetad C~ant 6 Paddy) * 60& 90.0 72.7 73.9, 78.6 78.3 78.9. 77.7 77.5 96.2 94.0 95.9 95.8 (1) A. EM 38.04. Cr restito based *a Sank* Codity rice Forea.s Octobr 1988 (sa ~CR Table 12.14) 8. CM 33.082. Audit reemtimat., ba*d on Sanke C~Ly Pric Foreaata. November 1991. but all othr aMption h e~ as in A. C. EIL 27.853%. Audit reestiste a* oc 5. but foly 751 af benefite attributable to project interVntiom. D. EM 23.42Z. Audit reestimto as in B. but only 60 of benafits ttributable to projeet intaervntions. - 27 - Attachment gde'IGadG./A-06TeleptIones - @ad gno ogoesgoe =ner 2530 My No. Director S 4.MC3 564770 mtiss0 565290 4"Ls S63101 g cotsa esewle a e 563192 w Q. 1532 t ow~~gadso GSg oD53me a.0.BAn 'J%f.w Q(GJaTA, j..I-S4), 4J&(V&&iA6t 4agU&Onqftoke relegroms PopISec MINISTRY OF POLICY PLANNING& "Sethiripayd' IMPLEMENTATION wrtrAJ4d4av dMa Regional Development Division May 20, 1992. A.. Grahan Donaldson, iiuef, Agriculture & HumRan Develonaent Division, Operations Evaluation Department, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. Dear Mr.Donaldson, Kurunegala Rural Development Project (Cr. 891-CE) Draft Project Performance Audit Report I wish to thank you for furnishing a copy of the draft project performance and audit report with your letter dated March 25, 1992, and regret the delay in replying. I wish to inform you that this Division agrees with the find- ings in the report and an pleased that most of the short- comings identified in the first ever rural develonant project inplenented in Sri Lanka were later rectified in other projects. We have made continuous efforts to incorporate beneficiary participation in the rural development programne. Please be good enough to send a copy of the report once it is finalized. With kind regards, Yours sincerely, C. Mallyadde, Director, Regional Developnent. 1ØRD 23815 SRI LANKA JAFFNA KURUNEGALA RURAL DEVELOPMENT * PROJECT LOAN (Cr. 891 -CE) KUUNtrA RuRA OfVfLOPMFNT 0 osRImcAPws POVANCE CAPIfAIS NORTHERN - oNasous MiLES Voýven 0 110 20 3',0 00 0 10 Ki0 M 0 40 50 CKILOMETE0 Sov 010 Trincmole NNORTH WESTERN •ufic°o EASTERN Arabian KURUPNEGALA Sea KANDY p,a 0 CENTRAL Kogallo 7-N-wro UVA r RATNAPURA WESTERN SABARAGAMULWA INDIA owy SOUTHERNHmbno B. WIld B-k The .d ndt. SRI LE 0 ondon sh~ ,o on ~..nn do i.n* -n th. pcrt i The. hWI' 1992