Sri Lanka - Second Mahaweli Ganga Development Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No.P-2031-CE REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF SRI LANKA FOR A MAHAWELI GANGA DEVELOPMENT PROJECT II April 7, 1977 This document hs 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 authoriation.  CURRENCY EQUIVALENTS On May 24, 1976, the Sri Lanka Rupee was officially linked to a basket of currencies with the initial parity rate based on the Rupee/Pound rate at that date. Both the composition of the basket and the weights assigned to the currencies in it were revised on March 12, 1977. The current Rupee/US Dollar rate has been used throughout the report, except where stated to the contrary: 1/ US$1 = Rs 7.28 Rs 1 = US$0.137 Rs I M = US$137,363 WEIGHTS AND MEASURES I long ton = 2,240 lb = 1.016 metric tons 1 hundredweight (cwt) = 50.8 kg = 112 lb 1 bushel (bu) of paddy = 45 lb 1 pint = 0.57 liters 1 acre (ac) = 0.405 hectare (ha) 1 mile (mi) = 1.609 kilometers (km) 1 square mile (sq mi) = 640 ac (259 ha) 1 foot (ft) = 30.5 centimeters (cm) Most non-foodgrain imports have to pay a surcharge of 65% through the purchase of Foreign Exchange Entitlement Cer- tificates (FEECs), and most non-traditional exports receive a 65% premium over the official rate through the sale of FEECs. The premium is now fixed at 65% of the Rupee parity rate, resulting in the following current exchange rates including FEECs: US$1.00 = Rs 12.01; Rs 1 = US$0.083.  FOR OFFICIAL USE ONLY PRINCIPAL ABBREVIATIONS AND ACRONYMS USED APC - Agricultural Productivity Committee APL - Agricultural Productivity Law ARTI - Agrarian Research and Training Institute B - Billion CC - Cultivation Committee CP - Cooperative Program DA - Department of Agriculture DME - Department of Machinery and Equipment FAO - Food and Agriculture Organization (U.N.) FEEC - Foreign Exchange Entitlement Certificate GA - Government Agent GDP - Gross Domestic Product GNP - Gross National Product ICB - International Competitive Bidding LCB - Local Competitive Bidding M - Million MAL - Ministry of Agriculture and Lands MCC - Mahaweli Coordinating Committee MDB - Mahaweli Development Board MIPL - Ministry of Irrigation, Power and Highways MW - Megawatt O&M - Operation and Maintenance PAC - Project Advisory Committee PMB - Paddy Marketing Board SLTC - Sri Lanka Trading (Tractor) Corporation TSC - Technical Subcommittees WFP - World Food Program GLOSSARY chena - Slash and burn or "shifting" agriculture district - the principal Government administrative sub- division. There are 22 districts in the country. dry zone - northern and eastern two-thirds of Sri Lanka ganga - major river maha - northeast monsoon season (October to January) paddy - unhusked rice purana - villages inhabited by descendents of original settlers with historical traditions rotational irrigation - intermittent water deliveries to minor canals and field turnouts tank - small reservoirs with earth-filled dams, typically with a storage capacity of a few thousand ac-ft wet zone - southwestern one-third of Sri Lanka, including Colombo, the Capital, and the urban coast yala - southwest monsoon season (March to June) FISCAL YEAR January 1 - December 31 This document has a restricted distribution and may be used by recipients only in the performance of theif ofcial duties. Its contents may not otherwise be disclosed without World Bank authorization.   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF SRI LANKA FOR A MAHAWELI GANGA DEVELOPMENT PROJECT II 1. I submit the following report and recommendation on a proposed development credit to the Republic of Sri Lanka for the equivalent of US$19.0 M on standard IDA terms to help finance a project for the construc- tion of irrigation works and settlement facilities, agricultural production support, and social infrastructure for a contiguous area of about 106,000 ac located in the north-central dry zone of Sri Lanka. Cofinancing arrangements on various terms have been made with Canada, The Netherlands, the United King- dom and the United States for a total of US$23.2 M equivalent (para 55). PART I - THE ECONOMY 2. The latest economic report, "Sri Lanka: Country Economic Memo- randum" (Report No. 1425-CE February 28, 1977) was distributed to the Executive Directors on March 1, 1977. Country data are provided in Annex I. 3. The economic difficulties that presently beset Sri Lanka can be traced principally to two basic characteristics of the country's economic and social system: first, the dependence of the economy on three export crops -- tea, rubber and coconut -- and, second, a political commitment to the welfare state. This commitment found its expression in two policy tenets which, for the past quarter century, successive Governments have followed in varying degrees: the supply of mass consumption goods, principally food and textiles, at low prices, and the provision of public services -- mainly education, healch and transport -- free of charge or substantially below cost. 4. Sri Lanka's progress in social fields has been noteworthy. Public services are widely available at little or no cost and a more equal distri- bution of income has been achieved by maintaining relatively high wages, subsidizing services, and distributing food free or below cost. The welfare state has been based mainly on the earnings of the export sector. A major concern, however, is that Sri Lanka has experienced a pronounced weakening in the market for tea and rubber beginning in the mid-fifties. Its effects on the earnings of the traditional export sector, combined with the failure to establish new sources of growth, seriously affected the ability of the economy to generate a surplus in the form of savings and exports, which in turn was one of the main reasons for little economic growth in the past two decades. Between 1969-70 and 1975-76, the gross national product (GNP) at constant prices increased at an annual rate of about 2.8%. With population growing at a rate of about 1.7% p.a., there was only a slight improvement in per capita gross income.  - 2 - 5. Against this background, Sri Lanka had to face the shocks generated by the oil crisis and worldwide inflation. In response to the changed world economic conditions, the Government took a series of measures during 1974-75 to reduce the burden of subsidies on food and transport, and adjusted prices of key consumer goods such as petroleum products. However, the impact was small, and major economic problems--increasing domestic savings, improving the price structure and reducing unemployment (now estimated at 20% of the labor force) -- remain. These problems have been compounded by severe drought in recent years. 6. As in the previous year, 1976 was also a year of severe drought. Nevertheless, paddy output in 1976 was about 5 M bu above the previous year's level of 55 M, which was the lowest since 1970. This was ascribed to the availability of adequate water from tank irrigation in the eastern rice- growing districts. Over the past several years, the basis has been estab- lished for a substantial rise in paddy production by improvements in irriga- tion works, institutions, pricing, seed varieties, fertilizer availability, and rural roads. With good weather conditions, Sri Lanka now has the pro- ductive potential to meet at least three-quarters of its rice requirements. 7. In the tree crop sector, tea production in 1976 was down 9% and at the lowest level for the 1970's. Severe drought again was the main cause, but the change-over in management after the land reform also played a role. The drop in output was sharpest in the mid-elevation tea areas which were most poorly managed before the land reform. However, the production of rub- ber rose 5% in 1976. Both tea and rubber benefited from substantially higher prices. The coconut sector, on the other hand, continued to suffer from both declining output and low prices. 8. The tree crop sector, after the 1972 and 1975 land reforms, is in a state of transition. As might have been expected, difficulties have emerged, but the take-over has been orderly and, by and large, the productive capacity of the sector seems to have been preserved. Among its major problems are the fragmentation of management arrangements after takeover; political pres- sures to disperse lands to villages and landless farmers; the backlog of maintenance and investment by previous owners anticipating nationalization; and poor management conditions on a substantial number of estates, especially those run by cooperatives. For some of these and other problems no easy solutions are in sight, but there are some positive developments. Two major public sector corporations, the State Plantation Corporation and the Janawasama, (established after the 1975 land reform) are responsible for managing the bulk of the estates taken over. These organizations have in part decentral- ized management to regional offices, and are currently benefiting from high tea and rubber prices. In particular, Janawasama realized substantial profits in 1976. Also, plans are being prepared for the amalgamation of those estates presently managed by electorate-level cooperative societies with these two public sector units and possibly with a third group, the Janawasas (individual cooperative agricultural/settlement schemes, formed after the 1971 land reform, now being grouped together). This would be a healthy step towards restoring an efficient pattern of management.  - 3 - 9. The budgetary position in 1976 deteriorated considerably as com- pared with 1975. Revenue was down and both current and capital expenditures were up from the original budget estimates. Consequently, there was a cur- rent account deficit of Rs 474 M as compared to the previous year's deficit of Rs 305 M, and the total cash deficit rose by Rs 200 M to Rs 2,427 M. The result of this increase in the cash deficit is that expansionary financing was needed in the amount of at least Rs 440 M. The main reasons for this worsening of the 1976 budget situation were: (i) lower than expected imports, resulting in a substantial shortfall in revenue from Foreign Exchange Entitle- ment Certificates (FEECs); (ii) the poor performance of many public sector corporations; (iii) an increase in the net food subsidy resulting from the reduction of bread and flour prices; (iv) expenditures related to the Non- aligned Conference; and (v) drought relief. The 1977 budget shows a current account deficit of Rs 87 M. Capital expenditures are expected to remain virtually unchanged and the cash deficit to decline by about Rs 400 M to slightly over Rs 2 B. The estimated increase in revenue of about 10%, however, will be vulnerable to any shortfall in the import program, as was the case in 1976. No additional revenue measures have been proposed. The recent rEvaluation of the rupee is likely to worsen the budgetary deficit in 1977 (see para. 17). 10. A significant feature of the 1976 budget was the effort to encourage economic activity in the private sector. Together with measures such as the removal of the restrictions on the transport of rice, the budget signalled a change in the Government's attitude towards the private sector. However, announced plans for follow-up measures were held in abeyance. Thus, uncer- tainties remain and the signals are still unclear. 11. An encouraging development in 1976 was the apparent improvement in Sri Lanka's terms of trade, possibly reversing temporarily the steady deter- ioration over the previous decade. Tea and rubber prices rose strongly over the year, while the price of food imports declined sharply. The improvement in tea prices came too late in the year to fully offset the decline in the volume of tea exports which followed a reduction in output. The rise in rubber prices was, however, sharp enough to offset the fall in volume of rubber exports. Coconut exports did not share the improvement in commodity prices, and also declined in volume. The share of tree crop exports in Sri Lanka's export earnings declined in 1976 to 71% from 76% in the previous year. 12. The share of non-traditional exports in total exports has also been rising. In addition to measures taken in 1970 to promote minor export crops, the Government's policies since 1973 have provided fiscal and financial incentives to export-oriented industries. Tourism and gem exports, which have good prospects for further development, have now become important sources of foreign exchange earnings. Manufactured exports, after a temporary pause in 1975, resumed the upsurge that began in 1972-73. This was due primarily to exports of sea foods and ready-made garments. These non-traditional exports will be, however, adversely affected by the recent revaluation (see para. 17). 13. The decline in the cost of imports in 1976, due mainly to lower food prices, made possible a substantial reduction in the current account  - 4 - deficit to an estimated $46 M. The deficit was more than offset by net capital inflows and this caused Sri Lanka's net reserves to rise for the first time since 1973. The import program for 1977 implies a strong deter- ioration in the current account deficit, due to a major increase in imports of items other than fertilizer and petroleum. 14. An Aid Group for Sri Lanka, for which the Bank acts as the Chairman, was formed in 1965 and has held twelve meetings. At the twelfth meeting, held in Paris in April 1976, the members recognized Sri Lanka's need for continued assistance, particularly in agriculture, and indicated their intention to con- tribute aid of about US$180 M. However, aid group members' actual new commit- ments in 1976 totalled $120 M, due, in part, to the decline in the value of food aid caused by lower food prices. Disbursements of aid from all sources in 1976 totalled $161 M, as against $202 M in 1975. 15. Slow progress in the development of new exports and the long-term deterioration in Sri Lanka's terms of trade, compounded by the rise in food and petroleum prices since 1973, have greatly increased the country's require- ments of foreign capital. Although concessional aid flows to Sri Lanka have risen significantly, they have not been sufficient to prevent a sizeable increase in the country's resort to short- and medium-term borrowing in the early 1970s. Outstanding debt with one to five years maturity increased from a negligible amount at the end of 1972 to $96 M (16.5 per cent of total external debt) at the end of 1974, and then declined to $83 M. This has been largely responsible for the marked deterioration in the debt service ratio from 12% in 1974 to 20% in 1975. 16. Concessional aid flows are needed to help finance imports of mainte- nance and capital goods, which remain inadequate in relation to the economy's requirements, without a further deterioration in the debt service ratio. Aid is also needed to supplement the country's meager domestic resources available for investment, and must, therefore, involve some local cost financing. The import program for 1977 provides for a sizeable increase for imports of capital goods under project aid. If this should materialize, it would lead to a con- siderable depletion of the project aid pipeline and fresh commitments would be needed to replenish the pipeline. 17. Following the sharp upsurge in tea and rubber prices in early 1977, the Government revalued the rupee by an average of 20% against major curren- cies on March 12, 1977, in order to translate what it considered to be exces- sive windfall profits to the producers of these commodities into benefits to the consumer in the form of lower prices for imports. This measure has been followed by an increase in the rice ration, the increase being subject to availability of stocks. As the volume of imports remains tightly controlled, the immediate effects of these moves on Sri Lanka's economic and financial position seem manageable, although the budgetary deficit will be larger, and consequently inflationary pressures stronger, than estimated at the time the budget was presented. However, it is difficult to reconcile the revaluation with the developmental needs of an economy that has suffered from inadequate savings to finance investment; that must diversify its exports; and that demands continuing attention to the adequacy of incentives for agricultural production. Resolution of these conflicts between short-term benefits to the  - 5 - consumer and the longer-term developmental needs of the economy will have to be left to the new government that takes office after the national elections due to be held by late September. PART II - BANK GROUP OPERATIONS IN SRI LANKA 18. Since the beginning of its operations in Sri Lanka in 1954, the Bank Group has made eight loans totalling US$73.4 million (net of cancellations) and ten credits totalling US$84.1 million (net of cancellations and exchange adjustments) in support of 16 projects. About 38% of Bank Group assistance has been for power, 45% for agriculture (irrigation and agricultural and dairy development), and the remainder for development finance operations, highways, and a program credit (mainly involving the import of raw materials for in- dustry). Three early power loans, the two loans to the Development Finance Corporation of Ceylon (DFCC), the credit for the Mahaweli Ganga Development Project I, and the program credit were satisfactorily completed and fully disbursed. At the request of the Borrower, a loan/credit for highways was cancelled in 1970, after disbursement of US$0.8 million of the credit, follow- ing the Government's decision to make major changes in the scope of the proj- ect. The IFC's only investment in Sri Lanka, US$3.25 million to the Pearl Textile Mills, Ltd. (Ceylon), was made in January 1970, but cancelled the same year at the request of the Company. Annex II contains a summary statement of Bank Group operations as of February 28, 1977, and notes on the execution of ongoing projects. 19. The Bank Group's current strategy is focused heavily on the agri- cultural sector to support government efforts to increase food production and to improve productivity in the tree crops subsector. However, projects in basic infrastructure are also included. A project for the modernization of five existing tank and drainage schemes, aimed at increasing farm production in the Mahaweli Ganga area in the dry zone, was approved by the Board in November 1976. A Water Supply project, designed to improve water supply in and around Colombo, the capital, as well as the southwestern urban coast, has been negotiated and is being processed for Board presentation shortly. A proposed project for diversification of crops on marginal lands now under tea and rubber is being prepared by the Government together with an FAO/UNDP team with IDA assistance and is expected to be appraised during the fourth quarter of the current fiscal year. Preparation has begun on a tree crop rehabilita- tion project which is aimed at maintaining quantity and quality of Sri Lankan tea output as some tea lands are diverted to other uses. Projects in other fields, including rural development and drainage and land reclamation, are being prepared for possible IDA financing. 20. The Bank Group presently accounts for nearly 13% (and the Bank alone for about 5%) of Sri Lanka's total external debt outstanding, and about 5% (with IDA negligible) of debt service. It is projected that the Bank Group's share in total external debt will decline to about 9% by 1980 (and the Bank's share alone to fall to less than 2%). The Bank and IDA share in the debt service will also show a slight decline.  - 6 - PART III - THE AGRICULTURAL AND IRRIGATION/SETTLEMENT SECTORS 21. Agriculture is dominant in Sri Lanka's economy, accounting for over four-fifths of export earnings, more than half of all employment, about one-third of the GNP, and much of the Government revenues. And yet, despite considerable potential for higher output levels, growth in agricultural pro- duction has been slow in recent years. In the tree crop sector, during the decade ending in 1973, the level of tea production remained stagnant and coconut production declined by about 2% per annum; only rubber production expanded significantly increasing by 3% per annum. Following a poor crop in 1974, tree crop production increased substantially in 1975 owing mainly to favorable weather conditions. In foodgrain sector, production increased at an annual rate of 3.1% during the decade ending in 1973, but it too has stagnated since. Paddy production in 1970, under favorable weather condi- tions, reached a record 77 M bu. However, the 1975 paddy crop totalled only about 55 M bu due to unusually severe drought. 22. The sluggish performance of the tree crop sector is largely a result of inadequate investment due to poor financial returns and uncertainty over future ownership. Production of field crops has suffered from poor water management, lack of adequate farm power for tillage, inadequate atten- tion to extension, marketing and credit facilities, and the system of con- trols and subsidies which work to reduce farmer incentives. In light of its major objective of increased food self-sufficiency, the Government is con- cerned about the stagnation in agricultural production. Historically, the country had depended upon the export earnings from tree crops to provide for the import of foodgrains and other goods. The worsening terms of trade, particularly within the last few years, have prompted a reexamination of the Government's past strategy. In the tree crop sector, nationalization of estates has given the Government extensive control over production and investment. 23. Measures taken during the last few years to increase field crop output have included increases in guaranteed support price levels; lifting of controls on movement of paddy; reduction in free and subsidized rations; banning imports of subsidiary crops such as chillies, onions, potatoes and pulses; establishment of Agricultural Productivity Committees (APCs) as the principal regulatory bodies for all agricultural activities at the field level; and, most importantly, increased emphasis on efficient water utili- zation and management. 24. About half of Sri Lanka's total cultivated area of 5 M ac is under field crops, primarily paddy (1.3 M ac). Where sufficient water is available, it is common practice to produce two or more crops a year. In the dry zone, however, where cultivation in the yala season is entirely dependent upon ir- rigation (and partially dependent even in the maha season), the cropping intensity is only about 110%. A large part of the problem is that farmers in Sri Lanka follow traditional methods of field-to-field irrigation of paddy. This is a highly wasteful use of water, particularly on soils with high per- meability. With the recent improved methods of irrigation and proper opera- tion and management of the irrigation systems, the Government is becoming  - 7 - increasingly aware that it is possible to increase substantially the irri- gated area with existing water supplies. 25. Irrigation in Sri Lanka dates back to about 600 B.C., and at pre- sent, about 900,000 ac (about 35% of the area under field crops) are irrigated. Efforts are continuing to expand the area throughout the island. The Mahaweli Ganga, Sri Lanka's largest river, is the principal source of water for irriga- tion in the dry zone. Draining an area of about 4,000 sq. mi., it flows north- east from the mountainous south-central part of the island into the Bay of Bengal. 26. The Master Plan for Mahaweli Development, formulated by a UNDP/FAO team in 1968, envisages the irrigation development of about 900,000 ac (which would double the country's irrigated area) and 970 MW of hydroelectric power over a 30-year period. Stage I of the Plan, supported by the Bank Group through Loan 653-CE (US$14.5 M) and Credit 174-CE (US$14.5 M), was started in 1972 and is now nearly completed. It includes a trans-basin diversion from the Mahaweli Ganga at Polgolla through the Polgolla and Bowatenna Tunnels to the present p-oject area, provision for an assured water supply to some 130,000 ac of existing irrigated lands, and a 40 MW power station. Delays early in the construction were due mainly to foundation problems at the Polgolla power house, tunnelling problems at Bowatenna, and slowness in awarding contracts for the Bowatenna diversion dam. After overcoming these problems, the construc- tion progressed satisfactorily. Water was diverted at Polgolla in January 1976, and at Bowatenna in March. A concern reconfirmed during the project implementation was that much greater attention needed to be given to agricul- tural extension and research, and that, for future projects, increased emphasis would be required in the areas of land development, settlement and social in- frastructure. Good progress in these areas have been made during the last year. The Stage II works, started by the Government in late 1975 (presently about 20% completed), would utilize part of the diverted water from Stage I to irrigate about 71,000 ac of new land in the proposed project area for the settlement of about 27,000 families. 27. Many settlement schemes have been introduced since the turn of the century to relieve the over-population and unemployment in the more densely populated areas of the wet zone. During the late 1950s and early 1960s, settlers were admitted to the schemes prior to land development and were left to do this work themselves. This resulted, however, in a slow build-up of benefits, wasteful use of water, and high drop-out rates. In addition, these schemes have suffered from inadequate supporting services, inappropriate settler selection, lack of competent management, and insecure tenure. 28. During the early 1970s, a number of laws were enacted in an effort to support settlement, increase agricultural productivity, and achieve a more equitable income distribution. The Agricultural Productivity Law (APL) of 1972 obliges all owners and occupiers of agricultural land to use it to the maximum benefit of the country and provides for dispossession from those who do not properly utilize their land. The Agricultural Lands Law (ALL) of 1973 provides for the regulation of tenants' rights and security of tenure and prescribes rents payable to landlords. The ALL also established the APCs and reorganized the local Cultivation Committees (CCs).  - 8 - 29. The APCs have the responsibility to promote, coordinate and develop agriculture in the areas they cover and to assist the Ministry of Agriculture and Lands (MAL) in formulating and implementing annual programs for cultiva- tion, supply of farm inputs and supporting services, collection/distribution, marketing and storage of farm outputs, and other programs for crop and live- stock production. They are directly responsible, through the CCs, for water distribution below the 50 ac level. Because of their power to regulate cropping patterns, the APCs also have a responsibility for the overall water allocation within their areas. The APCs and CCs, whose members are appointed by the MAL, do not have any professional staff. They work through, in coop- eration with, and, to a large extent, under the supervision of the Government's technical staff. The most important task of the APCs is the preparation of the Annual Production Program, done in consultation with the Government's agricultural officers and subject to approval by the District Government Agent and the MAL. PART IV - THE PROJECT 30. The proposed project was identified and prepared by SOGREAH (French Consultants), with the assistance of the FAO/IBRD Cooperative Program (CP). The project preparation costs were financed by the Bank Group under Loan 653/Credit 174-CE. At the request of the Government, the project was appraised in April/ May 1975 in conjunction with the Tank Irrigation Modernization Project (Cr. 666-CE). The appraisal mission was accompanied by representatives from four prospective cofinancing countries: Canada, The Netherlands, U.K. and U.S. Subsequently, it was learned that the Government had started work in the pro- posed project area and was well along in the land clearing and construction of irrigation works. Thus, at the request of the Government, and with the assist- ance of the prospective cofinancing countries, the project was reformulated to take in additional adjacent areas. The extended period from the appraisal to date is largely due to this reformulation. A report entitled "Sri Lanka - Appraisal of the Mahaweli Ganga Development Project II" (No. 1487-CE) is being distributed separately to the Executive Directors. Negotiations were held in Washington, D.C., during March 7-15, 1977. The Government was represented by Mr. T. Sivagnanam, Secretary, Ministry of Irrigation, Power, and Highways, and Mr. S. Velayutham, Director, External Resources Division, Ministry of Planning and Economic Affairs. A. Project Area 31. The proposed project would constitute the first major integrated development of unirrigated land under the Mahaweli Master Plan. Located in Anuradhapura, Kurunegala and Matele Districts in Sri Lanka's north-central dry zone, the project would cover a contiguous area of 106,000 ac included in Stages I and II of the Plan. Included in Stage I are 35,000 ac of old irrigated lands (settled during 1946-1964). Stage II includes 30,700 ac presently under development, and 40,300 ac of undeveloped or new land. The estimated population in the project area is about 140,000. The climate is  - 9 - tropical with unpredictable rainfall which makes irrigation necessary through- out the year. 32. The old irrigated areas and the areas presently under development have a population of over 100,000 comprised of subsistence farmers cultivat- ing farms averaging about 3.0 ac. The undeveloped or new land is sparsely populated with an estimated population of about 37,000. Most of the settle- ments in the undeveloped areas are purana (old) villages with a traditional pattern of clustered homesteads next to a small village tank. Farm incomes are low, with only about one-third of the families deriving all their income from the farm. 33. Land tenure in the purana villages is complicated. Most of the tank irrigated paddylands with traditional ownership rights have been in- herited and subdivided from one generation to another, which has resulted in small and fragmented holdings. About three-quarters of all the land--almost exclusively upland area--is owned by the Government. The peasants can farm this land with annual permits, but, in most cases, cultivation is practiced without permit. A small number of families lease their paddyland from the Government at a nominal rent. This land can be inherited, but not sold, mortgaged or fragmented. About 80% of the paddy land is cultivated by the owner. The remainder is rented under a variety of arrangements such as share-cropping, cash lease or fixed rent paid in kind. B. Project Description 34. The proposed project would build on experience gained in previous settlement schemes in Sri Lanka. Its principal project design criteria are: (i) optimal use of available water resources through irrigation and drainage facilities with adequate control structures, canal lining and proper land preparation; (ii) equitable distribution of project benefits through uniform- sized farms (2.5 ac); (iii) self-reliance among settlers achieved through self- help work and land sales (with secure tenure) to settlers at a price which, in nominal terms, would recover about 60% of the cost of the irrigation and land development works; (iv) provision of well-organized, highly intensive exten- sion services; (v) creation of a settlement pattern which is socially and economically viable; and (vi) strong project management and coordination in its implementation and maintenance. 35. The project would include equipment for completing the irrigation and drainage works, road infrastructure, jungle-clearing, and settling of some 15,300 families initiated by the Government under Stage II, as well as equipment and vehicles for maintaining such works in the entire Stage II area (71,000 ac). To enable farmers to cope with tightened crop calendars and to intensify cropping patterns, the project would provide for a substantial in- crease in farm equipment for land preparation and plant protection in the Stage II area. The agricultural production support services for the area would be strengthened, particularly for the supply of farm inputs, processing, trans- port and marketing, and the extension service would be improved throughout the Stage I and Stage II area (106,000 ac). In addition, social infrastructure  - 10 - (village wells, schools, medical and community development facilities) would be provided for 64,900 ac. And finally, technical assistance will be provided by a project Implementation Adviser, an On-Farm Development Specialist, and a Hydrologist (short-term). C. Detailed Features Project Implementation 36. The Mahaweli Development Board (MDB) was established in 1970 to plan and implement the development of Mahaweli Ganga's water resources. It is an agency under the Ministry of Irrigation, Power and Highways (MIPH), financed by regular Government budget appropriations. The MDB would have the overall responsibility for the project implementation including irriga- tion and land development, settlement, agricultural production, social infra- structure, and the operation and maintenance of the completed irrigation system. While the MDB is well-staffed with technical personnel for engineer- ing design and construction, additional managerial staff will be required to accommodate the greater emphasis to be placed on the settlement and agricul- tural aspects of project planning and implementation. Accordingly, the Govern- ment would assign the present General Manager to be in charge of engineering design and construction, and fill the newly-created position, i.e., Additional General Manager (Operations), who would be assisted by three Deputy General Managers for Agriculture, Settlement and Community Development, and Irrigation Operation and Maintenance (O&M). Both the General Manager and the Additional General Manager (Operations) would report to the Chairman of the Board. The actual appointment of the Additional General Manager (Operations) would be a condition of effectiveness (Section 6.01 (b) of the Development Credit Agreement). 37. Whereas the MDB is responsible for planning all aspects of develop- ment in the project area, including irrigation, agriculture, marketing, stor- age, health and education, the specialized departments in the Government are responsible for the operation and maintenance of the various facilities built under the project. To ensure coordination between the MDB and the specialized departments, the Government established a Mahaweli Coordination Committee (MCC), chaired by the Secretary, MIPH, with Directors of the specialized departments, Chairman of the MDB, and the Implementation Advisor (non-voting consultant, para 52) as members. To ensure such coordination at the working level, the Government established technical subcommittees (TSCs) for sectors other than irrigation. Each TSC is headed by the Director of the specialized department, with concerned MDB and department staff as members. The General Manager (Operations) of the MDB would coordinate the work of the TSCs. 38. The MDB would be responsible for implementing all civil works and the construction of all buildings through its Deputy General Manager (Con- struction). Field construction offices, each headed by a Chief Project Engineer, would be responsible for the design of minor structures, distributary canals, field channels and drains, and construction supervision within their areas of operation (typically about 20,000 ac). After completion of the roads and  - 11 - buildings, the facilities would be handed over to the specialized departments concerned. 39. The M1DB would be assisted by the Department of Mechanical Engineer- ing (DME), MIPH, in preparing procurement documents for all construction and O&M equipment, and the Sri Lanka Trading (Tractor) Corporation (SLTC) would import the equipment including that required by private firms awarded con- tracts. The availability of the required equipment would be specified by the Government in the bid documents and the contractors would receive an advance from MDB to buy the equipment. The DME would provide repair facilities for the equipment, but the contractors would have the option to select other repair facilities. Public sector agencies carrying out works under negotiated contracts would rent the equipment from DME. 40. The Deputy General Manager (Settlement and Community Development) would be responsible for implementing the settlement program, which is based on detailed socio-economic surveys. Privately-owned land would be purchased by the Government under the Land Acquisition Act of 1964 for settlement. The Government would acquire all land and land rights required for the implementa- tion of the project, and would provide IDA with satisfactory evidence to that effect (Section 3.04 of the Development Credit Agreement). Farm families already residing in the project area would be given priority in the selection of settlers, with the exception of a small number of encroachers on State land who moved into the area after 1970. The balance of the families to be settled would be recruited from nearby areas. The selection would be based on a detailed point system, with considerable weight given to agricultural experience. After selection, each settler would purchase and be allotted a 2.5 ac farm and a 0.5 ac homestead under the Sale of State Land (Special Provisions) Law of 1973 (para 61). 41. The SLTC would procure farm tractors and implements and distribute them to dealers for resale within the project area. In line with Government policy, the APCs would buy and operate some farm equipment on a cooperative basis. However, as the APCs are relatively new organizations and inexperi- enced, private custom operators, selected and supervised by the APCs, would play a major role. A condition of sale of tractors to the private operators would be that they agree to do custom work within the project area, as spe- cified by the concerned APCs. Credit facilities for the purchase of farm equipment and implements would be provided by the Bank of Ceylon and the People's Bank at prevailing commercial terms. Refinancing for not less than 75% of the total loans for farm equipment would be made available by the Central Bank of Sri Lanka. 42. The Department of Agriculture (DA), MAL, would be responsible for the reorganization and strengthening of agricultural extension services in the project area. This would include increasing the number of extension workers from one per 500 farm families to one per 250 families, thereby per- mitting weekly visits to small farmer groups. It would also include the pro- vision of equipment, vehicles, supplies and staff quarters for the extension service, as well as equipment, teaching aids, staff quarters and dormitory accommodations for the training of extension staff and farmers. Also, a new Irrigation and Water Management Pilot Project, jointly sponsored by the MDB  - 12 - and the Irrigation and Agriculture Departments, would be set up in the project area to investigate water management and cropping patterns. Motorcycles and bicycles for extension personnel would be procured under the project and sold by the DA to the staff on terms and conditions satisfactory to IDA. 43. Field surveys have been completed and detailed maps for the layout of the irrigation distribution and drainage systems are scheduled for comple- tion during 1977. Surveys for farm layout and design of the irrigation and drainage systems within field turnout areas (about 50 ac) will be made after clearing of forested areas. Detailed design of major irrigation works will be completed by MDB during 1977. All designs are in accordance with sound engineering criteria and standards. 44. Construction work in the project area is ongoing and the new works would be implemented within a relatively short period. Tender documents for construction equipment and vehicles are being prepared, and awards would be made for delivery beginning in early 1978. Under MDB's present rate of imple- mentation, it is estimated that the different project components would be completed as follows: (i) irrigation and land development and settlement, three years; (ii) social infrastructure, four years; and (iii) on-farm works, five years. Thus, the project would be fully implemented by mid-1982. The Government will provide adequate funds to the agencies concerned for project implementation and that it would submit to IDA, not later than November 1 each year, a detailed implementation and financial plan for the following fiscal year (Section 3.01 (b) of the Development Credit Agreement). In order to ensure a well-planned settlement process, no settlers would be brought into any subarea earlier than three months prior to the expected delivery of water (Section 3.08 of the Development Credit Agreement). Field Operation 45. To ensure proper coordination among field-level officers for irrigation, agricultural extension and community development, the Government would establish a project management team consisting of the Resident Project Manager (RPM), reporting directly to MDB's Additional General Manager (Operations), and the three Deputy RPMs for Agriculture, Engineering O&M, and Settlement, Community Development and Cooperatives. 46. At the project level, a Project Advisory Committee (PAC) has been established consisting of the RPM as Chairman, the three Deputy RPMs, senior officers from Anuradhapura District (e.g., District Health Officer), and farmer representatives nominated by the APCs and Multipurpose Cooperatives. 47. In keeping with Government policy, the APCs, assisted by village Cultivation Committees (CCs), would eventually take over most of the respon- sibilities for agricultural planning and operation of the irrigation system. Working with MDB and DA field staff, the APCs and CCs would make recommenda- tions with respect to cropping patterns and calendars and the water-issue periods for the distributaries. The CCs would also recommend minimum flows for domestic purposes and livestock. With this information, the MDB would then establish the operating calendars for the various command and sub-command  - 13 - areas under the project. The success of this program would require complete cooperation of the CCs and the APCs in the adopted water management plans. Because of this water allocation responsibility, the jurisdictional boundaries of the APCs and CCs would conform to the command and sub-command areas of the irrigation system (Section 4.05 of the Development Credit Agreement). 48. The Community Development Officers (CDOs), who would be responsible for all settlement aspects of the project at the field level, have been given many of the powers of the Government Agent, including broad supervisory re- sponsibility over the APCs and CCs. The Agricultural Officers (AOs) would fulfill the important function of providing technical advice to the APCs. The Project Agricultural Extension Officer (PAEO) would be responsible for the extension activities within the area (recently established as a separate extension district), reporting directly to the Deputy Director of Extension, DA. The PAEO, ex officio, also would be the Deputy RPM (Agriculture). These officers would be located adjacent to the APC offices and would work closely together. With the storage facilities, buildings, vehicles, and plant and equipment for a processing complex provided under the project, the Paddy Mar- keting Board (PMB) would be primarily responsible for the storage, processing and marketing of the agricultural output from the project. Within one year after settlement, the Government will ensure that the schools and medical centers are adequately staffed (Section 4.04 of the Development Credit Agreement). Maintenance 49. Responsibility for the maintenance of the construction equipment would be with the DME which operates a regional workshop at Anuradhapura. Until local institutions have developed sufficient competence, the MDB would have the responsibility for the O&M of the irrigation infrastructure down to the field turnout level. The Government would provide sufficient funds and staff for the proper O&M of the irrigation works, roads and buildings in accordance with appropriate engineering practices (Section 4.03 of the De- velopment Credit Agreement). 50. The CCs, acting under the general supervision of the APCs, and advised by field staff of the MDB, would be responsible for the maintenance of the field channels and for the distribution of water among the various users on each distributary. The MDB staff would oversee the maintenance and water distribution operations of the CCs, and would report any deficiencies to the APCs or higher authority. In case remedial action is not taken, authority would be given to the NDB to take over these functions and to assess the costs against the water users with such charges to be collected by the Government Agent (GA). 51. Adequate repair facilities and workshops exist in the private sector to provide maintenance services for the farm equipment to be provided under the project. Motorcycles and bicycles sold to the extension staff would also be maintained by private workshops. The DA would provide a mile- age allowance to the extension staff for the operation and maintenance of these vehicles. The maintenance of the other extension equipment and vehicles  - 14 - would be the responsibility of the DA. Funds for such maintenance, as well as for fuel, personnel and operating supplies, would be provided through the annual budget of the DA. The Government would continue to make avail- able adequate provisions for the agricultural extension services in the project area (Section 4.03 of the Development Credit Agreement). Technical Assistance and Monitoring 52. The MDB would employ an Implementation Advisor for about 3 years to serve as a non-voting member of the MCC and to assist the MDB Chairman in the planning, scheduling and management of all aspects of the project, as well as the feasibility studies for the next stages of the Mahaweli Develop- ment Scheme. The MDB also would employ an On-Farm Development specialist for about 3 years to assist in planning the irrigation of upland crops, developing suitable farm layout models within the field turnout areas, and establishing operational criteria for the irrigation system. These two specialists would be appointed by January 1, 1978 (Section 3.06 of the Development Credit Agreement). 53. The project would include a program for monitoring irrigation efficiencies and the agricultural, economic and social impact. Funds would be provided for installing about 50 flow recording stations, equipment and vehicles, services of a short-term hydrologist (12 man-months), and agro- economic surveys to be carried out by the Agrarian Research and Training Institute (ARTI). The net impact of the project on the environment and pub- lic health is expected to be favorable. The Government would monitor the incidence of malaria in the project area, and take preventive and remedial measures as required (Section 4.02 of the Development Credit Agreement). D. Project Costs and Financing 54. The total project costs are estimated at US$100.5 M equivalent, in- cluding about US$20.5 M in taxes and duties. The foreign exchange component would be about US$32.6 M or 41% of the total, net of taxes and duties. The estimates for civil works are based on actual contract prices recently awarded for similar ongoing works in the project area, updated to January 1977 level. Unit prices for equipment, materials and supplies are based on c.i.f. prices for recently imported items in Sri Lanka and on January 1977 price quotations from equipment suppliers. The major elements included in the cost estimate are irrigation, land development and on-farm works (US$29.1 M); equipment and vehicles for construction and O&M (US$12.6 M); farm equipment and other agri- cultural production support (US$15.5 M); social infrastructure and settlement (US$8.7 M), and technical assistance (at an average rate of US$93,000 per man- year) and monitoring (US$1.1 M). Physical contingencies, based on the level of data preparation and investigations completed, are estimated at US$6.8 M (20% for irrigation works, 15% for market roads, and 10% for social infra- structures, stores and other buildings, and the monitoring program). The Government's costs for administration, design and construction supervision  - 15 - are estimated at US$4.5 M, i.e., 10% of construction costs (including physical contingencies). The provision for expected price increases amounts to US$22.2 M, or about 31% of the base cost estimate including taxes and duties. 55. Cofinancing arrangements totalling US$23.2 M equivalent have been made as follows: Canada, US$6.0 M; The Netherlands, US$5.0 M; U.K., US$7.2 M; and U.S., US$5.0 M; all to be provided in the cofinanciers' respective cur- rencies and at various terms (Annex III, page 1). Together with these co- financing arrangements, the proposed IDA contribution of US$19.0 M would finance the full foreign exchange costs and about US$9.6 M of local costs, or about 53% of the total project cost net of taxes and duties. In light of the limited domestic resources available for investment (para 16), such local cost financing is justified. Commercial banks and the buyers of farm equipment would provide about US$9.7 M for financing the farm equipment. Net of receipts from taxes and duties on imported project items, the Government's contribution would be about US$28.1 M, or about 35% of the project cost net of taxes and duties. A condition of effectiveness would be the effectiveness of agreements between the Government and the respective cofinancing countries (Section 6.01 (a) of the Development Credit Agreement). E. Procurement and Disbursement 56. Equipment and vehicles supplied by Canada, U.K. and U.S. under parallel cofinancing arrangements would be procured in accordance with their respective procurement guidelines, while equipment and vehicles supplied by The Netherlands and IDA under joint cofinancing arrangements would be pro- cured through international competitive bidding (ICB) in accordance with Bank Group guidelines. A 15% preference margin, or prevailing customs duties if lower, would be extended to local manufacturers in evaluation of bids. Small off-the-shelf items costing less than US$10,000 each, which are not practical for international tendering, would be purchased through normal Government procurement procedures which are satisfactory to IDA. Such pur- chases, however, would be limited to an aggregate total of US$250,000. 57. Because most of the civil works would be labor-intensive, relatively small, restricted to seasonal construction, scattered over a wide area, and not practical for grouping into large contracts, they would be unsuitable for ICB. Since the private sector does not have sufficient capacity to carry out all the civil works under the project, a number of public agencies with substantial experience in this type of work would also be used. Thus, part of the works would be awarded to private contractors (US$28.7 M equivalent) after local competitive bidding (LCB), part to public agencies under negotiated contracts (US$8.5 M equivalent), and a small amount would be carried out under force account (US$0.6 M equivalent). Award of contracts to public agencies would be governed by the following conditions: (i) unit prices offered would not exceed the unit prices in the lowest evaluated LCB bid for similar work; (ii) all participants, whether under LCB or negotiated contracts, would meet prequalification standards acceptable to IDA; (iii) all public agency con- tracts would be approved by IDA before they are awarded with the exception of contracts below US$50,000, up to an aggregate of US$500,000; and (iv) DME,  - 16 - the central pool in Sri Lanka for machinery and equipment for public works, would be restricted to procuring, renting, repairing and maintaining equipment and vehicles, and would not participate directly in any construction work. Small works, such as brush clearing and minor land preparation, distributary canals, drainage channels, and on-farm development would either be carried out following LCB or let on a unit price basis to small village contractors. This work designation formula is designed to utilize, as far as possible, the locally available construction capacity, while controlling the cost of negotiated contracts. 58. Disbursements from the proposed IDA credit would be made for: (i) 100% of the foreign expenditures for directly-imported equipment, vehicles and spares; (ii) 50% of local expenditures for imported equipment, vehicles and spares procured locally; (iii) 100% of ex-factory price for locally-produced goods; (iv) 100% of foreign expenditures for technical assistance and the monitoring program; (v) 25% of expenditures for irrigation infrastructure and roads; and (vi) 47% of expenditures for social infrastructure and buildings. Disbursements for force account work under item (v) above would be made against statements of expenditure provided by the Government. The documenta- tion in support of these statements of expenditure would be retained by the Government and made available for inspection during project supervision. All other disbursement would be made against full documentation. It is expected that disbursements would be completed by end-1982, about six months after completion of the project. F. Cost Recovery 59. The present value of the project investments in irrigation infra- structure and land development is estimated at Rs 180 M or about Rs 4,700 per ac (at a discount rate of 10% per annum). In addition, the O&M of the irrigation system would require an annual expenditure of about Rs 80 per ac. Assuming that water charges are introduced in phase with the construc- tion schedule, but with a one-year grace period, full cost recovery would require an annual charge of about Rs 1,850 per farm or Rs 740 per ac -- Rs 660 for recovery of capital costs (over 30 years) and Rs 80 for O&M costs. These charges would represent about 50% of the net incremental farm income. 60. Whereas it might be possible to recover full project costs, the following considerations argue for significantly lower recovery rates: (i) the farms are small and even after full development the incomes of the set- tlers would not exceed the average per capita income in Sri Lanka; (ii) the settlers should be given proper incentives to purchase and fully develop their new farm and maximize their contribution to an important national objective, i.e., self-sufficiency in foodgrain production; and (iii) Sri Lanka has not charged for irrigation water in the past, and thus there would be considerable opposition from farmers if the charges are perceived as "too high". Thus, it has been agreed that project charges would be set at a level equivalent to about 22% of net incremental farm income.  - 17 - 61. The prime institutional mechanism for recovery of capital costs for the project is the Sale of State Land (Special Provisions) Law of 1973 under which the developed land, all publicly-owned (para 40), would be sold to the settlers. The sales prices would cover the cost of development below the intake structure at the field turnout level and the amount of special assistance to the settlers. The Government has agreed that the land sales price would average Rs 8,880 per family (Rs 3,550 per ac of farm land), which would be paid over 20 years at 4% interest. This amounts to an annual charge of Rs 650 per farm .(Rs 260 per ac) in current terms. 62. The O&M costs for the irrigation works included in the project would be covered by charges levied in accordance with the Land Betterment Charges Law of 1976, under which the Government is able inter alia to impose annual charges in irrigation and drainage schemes taking into account factors such as amount and dependability of irrigated water, increased agricultural production, cropping intensity, and capital and O&M costs. The detailed regulations required for the implementation of land betterment charges are under preparation and expected to be enacted by end-1977. Work is also underway to revise, update and prepare the land registers necessary for the administration of land betterment charges. By January 1, 1978, the Govern- ment would complete all measures necessary to enable it to impose and collect appropriate charges from within the project area and other major irrigation and drainage schemes throughout the country (Section 3.09(a) of the Develop- ment Credit Agreement). Actual collection of the charges would begin after the yala harvest (September 1978). 63. The Government would collect from the project beneficiaries charges adequate to recover full O&M costs and as much as possible of the construction costs, after taking into account the ability of the beneficiaries to pay, in accordance with a cost recovery plan acceptable to IDA (Section 3.09(b) of the Development Credit Agreement). The initial charge for O&M costs would be Rs 30 per ac, to be gradually increased to cover full O&M costs in the fifth year. 64. The agreed level of charges (land sales price and land better- ment charge) would lead to about 33% of cost, in real terms, being recovered. The Government, in agreement with the Association and beginning in 1986, would review and revise, if necessary, on a regular basis every three years, the level of charges collected under the project. G. Project Benefits and Risks 65. The land and water resources in the sparsely populated dry zone of Sri Lanka are highly underutilized. Due to low rainfall, irrigation is essential for intensified cultivation. The proposed project would help re- lieve this major resource constraint and assist the Government in achieving  - 18 - three basic development objectives: (i) increased food production; (ii) reduced unemployment and underemployment; and (iii) improved income distribution. 66. The production increase due to the project is estimated at 42,300 tons of foodgrains, 1,100 tons of chillies, and 3,300 tons of oil crops. The increased foodgrain production would give net foreign exchange savings of US$8.0 M (in 1977 dollars) per year. 67. The increased labor requirements would be primarily due to the expansion of cultivated area and to a more intensive land use. Taking into account the likely growth in farm employment that would occur without the project, about 12,000 full time jobs would be created in agriculture. The provision of farm power would reduce both labor and irrigation require- ments during the land preparation period. The water savings would be used to expand cultivated areas, leading to an increase in labor requirements. It is estimated that these two effects on labor demand would roughly balance. Thus, the overall direct employment effects of the project would largely stem from the undeveloped or new land area (40,300 ac). With an increase in the gross value of agricultural production of some Rs 150 M at full development, the project would generate additional income and employment in the local non- farm sectors such as marketing, transport and processing. Based on experience elsewhere in Asia, this would be an increase on the order of 9,000 man-years. 68. Most of the future settlers -- whether already living in the project area or coming from nearby areas -- are poor subsistence farmers or landless agricultural laborers. Their present incomes, which are fairly uniform, are about half the national average. Under the project, they would be settled with secure tenure on 2.5 ac farms, and their incomes at full development would reach the national average. 69. The benefits from social infrastructure are basically non-quanti- fiable. Likewise, it is not possible to quantify the benefits accruing to other areas where population pressure on scarce land resources would be alleviated. However, as the failure of many settlement schemes in Sri Lanka shows, these components of the project would be important for the success of the settlement program and help to achieve the projected production increases. 70. The project's economic rate of return is estimated at about 21%. If the relevant sunk costs for Stage I are included, the economic rate of return is estimated at 14%. Sensitivity tests indicate that the project is relatively sensitive to construction delays and to changes in future prices and yields, but not very sensitive to a slower build-up of project benefits. Although the project would remain viable under the worst combination of assumptions associated with these risks, there is a need to carefully monitor and control project costs and to ensure realization of full project benefits.  - 19 - PART V - LEGAL INSTRUMENTS AND AUTHORITY 71. The Development Credit Agreement between the Republic of Sri Lanka and the Association, the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement, and the text of a draft resolution approving the proposed Credit are being distributed to the Executive Directors separately. 72. Special conditions of the project are listed in Section III of Annex IV. 73. Conditions of Credit effectiveness would be: (i) Appointment of the Additional General Manager (Operations) in the MDB (para 36); and (ii) effectiveness of agreements between the Government and the respective co- financing countries (para 55). 74. I am satisfied that the proposed Development Credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 75. I recommend that the Executive Directors approve the proposed Credit. Robert S. McNamara President Attachments April 7, 1977   XF-rof 4 paces SRI LANKA- SOCIAL INDICATORS DATA SHE~ET LAND AREA (TMOU RN2)---------------- --------- ............... ~~~~~SRI LANKA REFERENCE COUNTRIES (1910) TOTAL 6 5. 6 MOST RECENT AGOIC. 2&.2 1960 1970 ESTIMATE TANZANIA MDJIPPThES NALATSIA** GNP PER CAPITA (US8) 60.0 100.0 1 50.0 123.0 2350.0 hhs.o POPULATIaN AND VITAL STATISTICS POPULATION (AID-YR. MILLION) 9 .9 12.5 13.6* 12.9 / 36.9 10.4 POPULATION DENSITY PER SgURRE KM. 151.0 - 191.0 201.0 14.0 123.0 32.0o PER S0. KM. AGRICULTURAL. LAND .. 5 06. 0 5 45. 0 23.0 279.0 291.0 VITAL STATISTICS CRUDE BRIfl RATE V/1H10, AV.) 31.6 33.1 28.6 50.-5 44.2 42.2 CRUDE LEATH IRAT (/THOU0, AV.) 10.1 8.0 6. 3 2 3. 0 1 3.2 12 .9 INFANT MORTALITY RATE K/THOU) 5 2 .0 5 0.0 49. 0 160.04/ 8 0 .0 40.8 /a LIFE EXPECTANCT MT BIRTH IYRSjh 6 0.5 6 5. 8 617.0 41.8 5 5 .6 56.1T GROSS REPRODUCTION RATE 2.5 Z. 3 2. 2 3. 2 3. 3 2. 6/a POPULATION GROWTH RATE (Z) TOTAL 2.6 2. 4 1.7 3.0/ 3 .0 2.6b URBAN 5.0/a 4.5 3.71 5.6 4 .0 3. 0 U RBAN P OPULA T ION (1 I F TOT AL) 19.1/A 22.0o 22. 4/a 6. 0 217. 6 26.8 AGE STRUCTURE (PERCENT) 0 TO 14 TEARS 41.54 4 0.0 39. 3 /a 44. 44b 45 .6 4 4.7 /a 15 TO 64 YEARS 5 4.34 56 .0 5 6. 4 7-, 53 . 0 7 5 1.6 52.17T. 65 YEARS ANO OVER 4.2ZE 4.0 4.37-a 2 .A67 2.8a 3.27;. AGE DEPENDENCT RATIO 0.84b 0. 8 0.8/a 0.-94 0 .9 0.9/a ECONOMIC DEPENDENCY RATIOD 1.57U 1 .4 I.27;5 1.2 7-.,b 1 .5 1. 67- FAMILT PLANNING ACCEPTORS CUOMOLAT IVE, THOU) .. 21 5. 3 4 31. 5 . 35 4.0 222. 2/a USERS (X OF MARRIED WOMEN) . . 10 99 .. 2 .0 8.-0 7- EMPLOY MENT TOaTA4L LABOR FORCE ITHDUSAkD) 3 500. 0 /b 4100.0 48 00. 0 5600 0/ab12 300.0 2900.0/a LABOR FORCE IN AGRICULTURE (Z) 49.07 5 2.0 /a 5 5. 0/c 1:,f 5 5 .3/a 4 3.0o7- UNEMPLOYED (Z OF LABOR FORCE) 4.0 7c 9 .o 7; 11.0o; . 1.0 6. o7;7 b I N COME D I STRIAU3LiIOIA % OF PRIVATE INCOME REC'D BY- HIGHEST SCZ OF HOUSEHOLDS 2 6. 4 18. 18.6 3 3.5 Z. 8.3 HIGHEST 202 IF HOUSEHOLDS 52.17 456 42. 8 6 3.3 . 56. 0 LOWEST 202Z Of HUUSEHOLDS 4.5 7; 14 7.3 2.3 ..3.5 LOWEST 0 Z OF HUIJSEHOLDS 13.17 12.9 19. 3 7. it:112 Z OWNED BY TOP lOG OF OWNERS.. .. ..... ZUWNED BY SMALLEST IAO OWNERS.. .. ... HEALTR AND NUTRITION POPULATION PER PHYSICIAN k1620.O /d . 3980.0 /a 21510 0 /a c POPULATION PER NURSING PERSON 4170. 07a 274~0.0 /o 2010.0o7;e 486900 .. 1080%/a Ic PUPOULATION PER HSIA ( 2 90. 07a 3 3 0.07; 3 30. 0 7. 7 00: 0 a 850.0 210:0 __ PER CAPITA SUPPLY OF CALORIES (2% OF R EQU IVAE ME N TS 9 2.0 107.0 1 01. 0 7 3. 0 10 0.0 g 3.0/a d PROTEIR (GRAMS PER DAY) 4 5.0 5. 4.030 450 49.0 -0F RAIC N ANIMAL AND PULSE 1 5. 0 16 .0 15. 0 2 3 .0 2 2. 0 2 0. 0 f DEATH RATE (/THOU) AGES, 1-4 ... 16.8 . 9 .0 5. 5 EDUCATI106 ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 95.-0 /e 101I.0 /d 1 02.0A4, 36. & 108. A 89. a SECONDARY SCHOOL 210; 5. 52. O0 3.0 K!. 48. 7; 0 YEARS OF GCNOULING PROVIDED A (FIRST AN0 SECOND LEVEL) 12. 0 12.0 12. 0 13. 0 1 0. 0 1 3 . 0/a VOCATIONAL ENROLLMENT EX OF SECONDARY).. 1.0 /a ..., 6 .0 /c 3 . 0/a ADULT LITERACY RATE IX) 61.0 . . 1 8. 1 ... 55.o HOUS ING PERSONS PER ROOM (URBAN) 2 .1 A2./a. 2 .1 2. 3/ OCCUPIED DWELLINGS WITHOU'T PTPEO WATER (Z) 80. 9 4b 68.86 /a 30.04bf 1 6 .0 65.0/a fn ACLESS TO ELECTRICITY (2 OF ALL DWELLINGS) b 0/a23. 430a RURAL DWELLINGS CONNECTED * 90/ 304.1 To ELECTRICITY (I) 2. 34 b 2. 8 /a .. . 0 30.0/A CONSUMPTI ON RADIO RECEIVERS (PER THOU POP) 3 6. 0 4 1.0 I. 11.0 4 5. 0 41. 0 PASSENGER CARS (PER THOU POP) 8.0 1.0 10, -3.0 8.0 21.0 ELECTRICITY (KWH/TM PER CAP) 3 1. 0 65.~ 1 77. 0 01.0 Ia 23 5.0 3 82.0 NEWSPRINT (KG/YR PER CAP) 1.2 1.5 0.1 0.1 2.0 40 SEE NOTES AND DEFINITIONS ON REVERSE  Page 2 of 4. pages Unl-s otherwise noted, data for 1960 refer to any year between 1959 and 1961, for 1970 between 1968 end 1970, and for Most Recent Lstimate between lQ73 and 1to75, Population for 1976 provisionally estimated .5 13.8 million. on Te selection of Malaysia as an objective country ie based on ito ability to combine a higb rats of economic growth wiub an adequate leve of celfare making it a suitable objective for policynakers In Sri Lanka.. SRI LAUKA 1960 /a 1953463; /b 1963; Ic Registered applicants for work; /d 1962; /-- 5-12 and 13-16 years of age respectively. 197 / As percentage of employssent; A Regiotered unemployed; /, Gover~nment only; Id 6-10 end 11-17 years of age respectively; /e Betsee 1965 and 1970 the duration of general ..scondary education was increas.ed feco I to 7 yearn. Date non vocational education refer to technical Institutes ettanbed to tie Ministry of Education only. MOST RICIOINT ESTIMATE: IA 1971; A R atio of population under 15 and 65 and over to total, labor force; /c As pernen.tagc of sopioyoent; /d Registered unemployed; /e 1972; If Goveroent only; /a 6-li and 11-17 years of age respectively. tAiIZANIA 1970 IA Mainland Tancania; lb 1967; _/c Including assistant medical officers; Id Including oiduiv- and assistant ourses; /s 7-13 and 11-19 years of age respectively. PHILIPPINES 1970 A/ A.i percntage of emlyen; A 7-12 and 13-16 years of age respectively; Ic Not including private cocational scbools or vocational short-tern courses. PMALAYSIA 1970 /A h)et Malavnla; /b Registered applicants for work; IA Goyernoent only; Id 196h-66; Ic 12-18 years of age; 7T1967; Ig Pipsd-Vatcr inoide. R12, anry5, 1977 DEFINITIONS Op SOCIALI.NDQICATORS Lan.d Aces (tbo. knn P.poplation, per oursina Perso - Popslatico divided by orsber of practinieg Total -Total surface are cprining land ar-eansd inland wa ters. -le ssd femle graduate ourses, "trained" or "certified" nures, and Aunft. M- Ms r--M e naeOf agr-col-nrl stes aed temporarily or susslilary personnel with traisiog oreoetse p-o-oooti for craps. pastures, earken & bitohes gardens or to Iiie Popuistion per hoapita1 bed - Popoistioe divided by orober of baspita1 beds is; Ian. availahle is public sod p,,ieste genersi and spe-aIfted haspfts1 sod rehabilitstion centers; enclades narsing bones scd -tisllssocnts for GNipecr c.Pit. (USl) - GiP per -spita estimates at ostrent market Prices, custodial sod preventive cae. caiccisted by saecovrso method as World pooh Atisa (i973-75 basis): Per capita supply of calories (Z of remuiramestul - Conputed iron esergy 1960. 1970 aod 1975 dat, equivalsst of net food sopplies avilable in country porn .pits Per day, svaiiabls supplies comp rise domestic prodaction. imports Iess eop-r, Pupnl.tin sod vice taitcssd1hae is kIch net supplies eon lde sciusi teed. needo, quantiss- Popolation ind-v cillia. - As of July first if nor avilable, ased is food prscans ing and losses in dictribotio, requir-mets unto average of t,'c end-yea -stimatan, 1960. 1970 and 1975 data, estimated by FAQ based on physiological - fee o i nroal activity sod hea lth considering envirosesta1 temnpertstcr, body asights. age sod se. Papalata- densit - per 55am Ian - Mid-year papolation per square kila- distributions f papulation , sod allowing 107% for wast.eat boo...bold level, metr 'll" bectar..s)of total ares. p caiodeco icy - Per sc_rn Am of sgric, isod - Conputed as above far Per ..pit. eapplv of rortni. (arson nor day) - Prcteiona---n Of per agi-icct-Ia isod osly. capita set sapply Of fecd per day. nor -pplv of fond is defined a absee,. requirsocafral onre established by US00A Econonmi Vital statintico Researhleets provide fcr a oioimm alwac of 60 grams Of irude birth rate oer thousad. -g seta- Anoa.. live births per thousand tota1 protein per day, and 20 fran of animl sod psise protein of ooid-year pop~latlo-, 1cnn - ye r aitbetin averge. esding in 19h0 sod which 10 grams should be animi protein, thes standards are lower 1970. sd five-year averge ceding In 1975 for soot reent estimate, than those of 75 grams f icta1 pr-reto and 23 gSna of soLmel protein trude death rtst per Lhb....nd, averag - Annual deaths per thc-soad of mid- as ae average for the world, propose.d by FAQ in the Third Weld Fond '-er populatico, ten-year arithmetic averges ending in 1960 and 1970 sod S.r-e.Y flo-pyea avera.ge ending iv 1970 for vat receot entitste. Per capita protein supply from sotsi and poise - Prcteln supply of fond Iofant -otli rtc f/thou) - Annual deaths Of infants under one year derived Iron ailsoad poises in grams Per da., of aePot thousa.nd live births, leash rate f/thee) ages 1-4 -Aessa.l deaths per ch-nndni.t age grop Lctn cprLanrv of hitchfru - Averae number nf years of life remain- 1-4 pears, to children in this age group, -uggencd acanId--o cf ind at birch, usal y./e-yeor avo-ge- -dini in 1960. 1970 cod sal1-tritio-. 1975 fcr developing cutries. G--s rer-ducti-on , atAvr-go number of lin- daughter a wosn wili Edu...sien beat in hot norma -cpr-d-c- pcnied if she euperiennes present age- Aidnoted srIlelnocto rtio - prinaty school - inro1lsent of all gesc sp-ecift fe-ititi -t-u, usually fiv-yea averages ending in 1960, percestage of prfmary school-age populurs-n iocludes children aged I190 and 1975 for developing uutis 6-il yesr- but adjusted for different lengths of primary cducatien, tnltogrowth rote ill-ttal - ipound ...mual growh rates af old- for ceuntries with universa ed-ntico, entailment may encred 1007, yearpeplacnn ar 95060.190-70'ad 190-15. since sme pupils ar.e hlo rabev- the official school age Population crowl rae (7,) - urban - ipute luegowhrt o oa Adjusted enrollment rotia -secodary school - Computed as bv.- Ppoplation,different dcfi-nt-es of uno area say affect compare- secndary duatian require on leat feur year of approve.d pri-rt hIh oyf dat o-ne countries, instru.ttle, provides gene.ral. -ootiona1 or teac.her tra1inin ic.oc popula-tim (1 of total) - coia Of orion to icta pepolotion, instruction for pupils of 12 to I7 veer of agn,O cupropnd-c- differect definpitions cf urbanareas may affec copr.biIiryof data coursesareSgmrlly -ncldad. among teen. tries Years of schooling provided (first and -ecnd Il...ls) - Toral Your of Agc -trucre cren) Child-c (0-lA, yst). -urbiog-oge (15-h4 yearn). scheoliog, at secondary 1-levl oatoa e t-r-ntics soy he Pa-- and retired (60 years -d ever) A_pece_ rtoe of mid-year population. c!isly or completelIy(eacnded. Ac dependency ractio - tacIc f pplto 5 ad 60 and cver Ic Pacation eI tolloent IT of secondary) - cec-mioa1 institution chos- fages 10 through hi. include technical, isduasris1 or other p-cgrsu which operate E-onvl dependenc rocic -Rtud of populati-onuder 15 and 65 and avr Indespendently or as departpe,nto of uec.odary i-atiturtion cthe lbor forty in aggroup of 15-hi years Adult lit--ay rtst ()-Literate adu1to (able tc red and units)a famil olaeica accptor (cnaeiaee. hou ) _-Cuultive comer ef percentage ef total ados pepalation aged 10 years and ever. o-epter of birthb-cnc-1 d--ce t,nderu -p-re of matiena1 foeily plOOuciOtufom tor icpt11"ion d gassinP-g-g - - e fail p ..no -. usru (. of yandae)-Pecnae fmareesn Per room (urbam) - Average o-ber of pers-- Per teem in wovec .I chsld-b-oing age (15-44 year) wig u- birth--ot-Il device .....sPied conventional dw-lliags in urbacaras duellings -1clde cc al mrrie somon v 000 ge gr_op....sps-pemset sttru turc and unoccupied ports. ccpie dooilng without 'Pipd aster (1) - Oc-pied cnefca E.ployn-L dwellidngs isubn - a..n' rural1area wIthout inside or outside piped Teto1 labor fete tthousand) - E-osoica11y active peroons. including aster faugilitie as per..stage of all occupied dwellings. armed fgrcrs and,seyoe bu mrcig,housawive, students. etc., Access en e1strigity (7. of oil dtellinos) - Conventional dwellings doiotest aie onrie r o - oprable with electricity in living quater as p-erne of coral dwellings in isab- f-einc oarclus( - Agriculturl labor force (in onming, urban and rua- aes f.... cry, buntIng and ftebieg) as percentge of total labor forc aRalI daeIiiaa cossected cc e1-uricirn ( C)-Cpcted as above for ium.pl.eyd (. of Iohar fgrue) - Unnplycyd are ann ally defined asrural d-Illingo only. person who are able sod swilliisg to tabs a Jab, out of a Job a gSie dsp _emined out of a jb, and neeking worh for a spegifled Cens Ptapien climom- period no reeneding one we oh, my met be coparable betesaem Radlori is feet thea 22p) - All ryp-c of rcivers for radio broed- countries due no different d.fisitigno of uneoplcyod and esurc of castsese genersi public per thousa.nd Of pepsiatia.. esnludes data.e.g. ,oplcy-set eff-e catistics, .-nPIc s-.vY., cmpsisry _Iiimensd rece.ivers In nooncries and in years when registeasie of ceopovetose . radio set ass in effece; data for reget years may eat he comparble since mot conotrie abolished lcnig Iscone distribution - Percentage of private incom (beth Is cash sad Pa:ss1engercars iee thos Pop) - Pssegerca comprise otcar car bind) received by richest 5%, richest 207., poor-- 207%, and pooret s..ating less thas .eight peron, eoclods- omb41--e, hearses and 4I/ fhousholds. nilitary -hics.1 Electricisy (kwh/yr Per cap) - Annual consuption ai isdsstriol, . D-trributiam of land osonerobip - Percn.eao cf Iuod ownd by ucaitbiast meri_l public sod private electricity in hilowart hosts Per capita, 10, and poores 107. Of land most.generally based on prodution data, without alwnefor Ionsca in grids her owing for imports and enperto af elenctricity Osit.1h and Nutitioan New-prin (ba/ylr per cap) - Ports pita annual -onmption in kilograms Popula,tion Per physfigis - Pcpclstie- divided by somber ef practicing estimoted from domestic productieo plus set imparts of -raprint. physi.an qualified from a medical -cb-I an university level.  ANNEX I Page 3 of 4 pages COUNTRY DATA - SRI LANKA AREA POPULATION 1/ DENSITY 65,607 sq km 1r.8 million (mid-1976) 210 per sq km (1976) Rate of growth: 1.7 70 (from 1971 to 1976) 554 per sq km of agricultural land (1974) POPULATION CHARACTERISTICS (1974) HEALTH (1970) Crude birth rate (per 1,000): 27.3 Population per physician, 3,690 Crude death rate (per 1,000): 8.9 Population per hospital bed, 330 Infant mortality (per 1,000 live births): 45 INCOME DISTRIBUTION (1973) DISTRIBUTION OF LAND OWNERSHIP % of national income, highest quintile, 45 % owned by top 107. of owners lowest quintile, 13 % owned by smallest 10%/. of owners ACCESS TO PIPED WATER (1971) ACCESS TO ELECTRICITY (1971) % of population - urban 77 7. of dwellings - total .. 9 - rural 5 - rural .. 3 NUTRITION (1973) EDUCATION (1970) Calorie intake as % of requirements: close to 100 Adult literacy rate, 78% Per capita protein intake (grams per day): 45 Primary school enrollment, 89% 2' GNP PER CAPITA in 1975: US $150 GROSS NATIONAL PRODUCT IN 1975 ANNUAL RATE OF GROWTH (%,constant prices) US$ Mn. % 1960 -65 1965 -70 1970-75 GNP at Market Prices 3,367 100.0 3.9 5.0 2.8 Gross Domestic Investment 525 15.6 - 2.0 14.1 - 1.0 Gross National Saving 354 10.5 - 1.2 13.2 - 8.5 Current Account Balance - 186 - 5.5 Exports of Goods, NFS 628 18.7 2.3 0.8 0.0 Imports of Goods, NFS 799 23.7 - 4.3 - 2.0 - 7.5 OUTPUT, EMPLOYMENT, AND PRODUCTIVITY IN 1975 Value Added Emplovment V. A. Per Worker us5$ Mn. %_ M __ US $ % Agriculture 1,226 39.2 1.829 54.9 670 71 Industry 3/ 507 16.2 0.367 11.0 1,381 147 Services 1,398 44.6 1.136 34.1 1,231 131 Unallocated Total/Average 3,131 100.0 3.332 100.0 940 100.0 GOVERNMENT FINANCE Central Government (RL. Mn.) % of GDP 1976 1970-72 1976 Current Receipts 4,859 21.0 17.8 Current Expenditure 5,333 23.1 19.6 Current Surplus - 4/4 - 2.1 -'1-