Sri Lanka - Tree Crop Diversification (Tea) Project

PILE COPY Document of The World Bank FOR OMICIAL USE ONLY Reort No. P-2330-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 TREE CROP DIVERSIFICATION (TEA) PROJECT May 19, 1978 Thi dosnot h a restricted dItrbuton and my be _d by ecipients dn,y in the erfemn"e Of teir eflal duti. Its eoutents my *d othrwie be disdoed wihot World Bank aoatlon.   0 OMlCAL VSE ONLY SRI LANKA TREE CROP DIVERSIFICATION (TEA) PROJECT Credit and Project Summary Borrower: The Republic of Sri Lanka Amount: US$4.5 million equivalent Terms: Standard Project Description: The project would be the Government's initial effort in a long-term program to rehabilitate, diversify, and settle degraded mid-country lands, mainly nation- alized tea estates. It would provide financing for diversification of about 11,500 ha of marginal tea land, scrub land, or degraded forest, and would in- clude establishment of about 4,500 small farms based on mixed minor tree crops, mainly spices; some 1,300 of these farms would be provided with a dairy cow. The project would provide the 27,000 settlers with both regularly paid work opportunities in land devel- opment and about 5,700 ha of developed homesteads, with garden plots (0.2 ha) and farms (0.8-1.6 ha). The entire settled area would be protected by soil conservation measures. In addition, some 3,700 ha of forest would be developed on a commercial basis with fuelwood and timber, while about 2,200 ha would be kept as conservation forest. Necessary social infra- structure, including housing, water supply, and access roads, would be provided at low cost. Project bene- ficiaries would be displaced estate workers, landless laborers, and unemployed youth with a current average per capita income of less than US$60 equivalent per annum. Realization of expected benefits will depend on development of the management and logistic capabil- ities of the major implementing agency, the newly established National Agricultural Diversification and Settlement Authority (NADSA). Avoidance of possible social friction and hardship will depend on provision of effective relief to those displaced estate workers who are not eligible for settlement under the project. Thbi document ha a rtrfctod distribution and may be used by recipients only in the performance of their o(Acl dutis. Its contents may not otherwise be disckoSd without World Bank authorization.  - ii - Estimated Cost: US$ Million Equivalent Local Foreign Total NADSA - Capital and 0.7 0.7 1.4 Operating Costs Farm Development Soil Conservation/ Conditioning and Surveying 0.5 0.1 0.6 Mixed Tree Crop Farms 0.7 0.1 0.8 Dairy Development 0.2 0.7 0.9 Cardamom Farms 0.2 0.0 0.2 Social Infrastructure 0.7 0.1 0.8 Forestry 0.5 0.1 0.6 Total Base Cost 3.5 1.8 5.3 Physical Contingencies 0.4 0.1 0.5 Price Contingencies 0.6 0.1 0.7 Total Project Cost 4.5 2.0 6.5 Financing Plan: Local Foreign Total IDA 2.5 2.0 4.5 Government of Sri Lanka 2.0 - 2.0 Estimated Disbursements: IDA Fiscal Year 1979 1980 1981 1982 1983 -----------US$ Million--------- Annual 0.3 1.3 1.6 0.9 0.4 Cumulative 0.3 1.6 3.2 4.1 4.5 Rate of Return: 16% Appraisal Report: No. 1936-CE, dated April 3, 1978  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF SRI LANKA FOR A TREE CROP DIVERSIFICATION (TEA) PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Sri Lanka for the equivalent of US$4.5 million on standard IDA terms to help finance a tree crop diversification project. PART I - THE ECONOMY 1/ 2. The latest economic report, "Development in Sri Lanka: Issues and Prospects" (Report No. 1937-CE, March 22, 1978) was distributed to the Executive Directors on March 23, 1978. Country Data are provided in Annex I. 3. Sri Lanka has achieved social progress far beyond that of other countries with comparably low per capita incomes. Literacy, health, and life expectancy are high; nutrition is adequate, and mortality and population growth rates have been declining. These 'impressive gains have been achieved despite generally low output and employment growth. Per capita GDP growth was only 0.9% per annum in the 1948-60 period; it accelerated to 2.1% per annum in the 1960s and then declined to 1.3% per annum in the 1970s. Throughout the 1960s and the 1970s, these modest output gains were eroded by adverse terms of trade trends. This disappointing performance has been accompanied by a disturbing increase in the level of open unemployment. In the 1970s, while the labor force has been growing at about 125,000 per year, employment has been rising by about 85,000, much of it in unproductive jobs. The number of unemployed has, therefore, been rising, and open unemployment is estimated at over one million or 20% of the labor force. 4. The gains in the social field were made possible by favorable initial conditions. Compulsory primary education had been introduced as early as 1901. The food ration was introduced in 1942. Thus, at the time of Independence in 1948, Sri Lanka already enjoyed high levels of adult literacy and life expectancy. These initial gains were consolidated and expanded in the post-Independence period through large expenditures on social services and the food subsidy, which have accounted for two-fifths to one-half of government revenues in the 1960s and 1970s. These expenditures have been financed by harnessing the surpluses of Sri Lanka's three major tree crops, tea, rubber, and coconut, which provided the Government with both an easy revenue source and the foreign exchange earnings needed to pay for food imports required to meet consumption requirements. 1/ This part is the same as the Part I under the Tree Crop Rehabilitation (Tea) Project.  -2- 5. There is no doubt that there are both measurable and non-measurable economic benefits flowing from these improvements in health, nutrition, and education. Of these, the most important ones are the decline in fertility and the relatively low rate of urbanization. At the same time, there have been some significant costs arising from the firm commitment of successive governments to maintaining these social gains. The fiscal burden of these expenditures has imposed a high degree of inflexibility on Sri Lanka's policy- makers in their attempts to accelerate long-term growth. That inflexibility has increased over time as growth slowed down and in particular, the ability of the tree crop sub-sector to provide resources weakened as commodity prices kept falling and productivity suffered due to inadequate incentives. Moreover, the gains in education have had a negative impact in the form of large numbers of educated unemployed who have posed a challenge to the established political order. With political parties competing against each other to offer induce- ments to the electorate, it has proved difficult for governments to focus social expenditure programs more narrowly on specific groups living in poverty. 6. In the 1960-77 period, gross domestic product at constant prices rose by 3.8% per annum, slightly above the 3.5% per annum recorded in the first 12 years after Independence. This impressive performance masks a marked deceleration in the growth of the productive sectors of the economy between the 1960s and the 1970s. GDP growth slowed down from 4.4% per annum in the 1960s to 3.0% in the 1970-77 period. Agricultural growth fell from 3.4% to 1.9% in agriculture; from 6.2% to 2.3% in manufacturing. 7. The key to the slowdown in GDP growth lies largely in the slow growth of agriculture, which accounts for over one-third of GDP and four-fifths of export earnings. Tea and coconut output has been declining steadily from the mid 1960s; rubber, after showing a rapid increase in the 1960s, stagnated in the 1970s. Poor weather, declining commodity prices, a rising effective tax burden, and low producer returns, combined with the uncertainties caused by a long, drawn-out land reform (1972-75), depressed producer incentives and, hence investment and production, to new lows. These problems were aggravated by a dual exchange rate, introduced in 1968, which discriminated against tra- ditional exports and in favor of food imports. 8. Paddy production, which grew at 7.4% per annum in the 1964-70 period, slowed down to 0.7% per annum in the 1970-77 period. This decline in yields and cropping intensities is attributable to a series of droughts and a sharp deterioration in the institutional support for production pro- grams. A bright spot on the agricultural scene was the rapid increase in output of subsidiary food crops in the 1970s. This represents gains in acreage rather than yields, and is in response to the improved incentives arising from a ban on imports introduced in 1970. 9. The slowdown in manufacturing output in the 1970s was due to the cumulative impact of declining investment levels, severe foreign exchange shortages that necessitated import rationing (with serious consequences for a sector in which imported raw materials account for 70% of the value of  3 raw materials used), the exhaustion of import substitution possibilities, and inefficiencies in management of the public sector, which now accounts for 66% of the gross value of production in organized industry. 10. In general, economic growth was constrained by a persistent for- eign exchange shortage throughout the 1960s and 1970s, inadequate levels of saving and investment, and the low efficiency of resource use. Sri Lanka's terms of trade have deteriorated steadily since the early 1960s and worsened sharply in the mid 1970s following increases in the price of imported food, fertilizer, and petroleum. The share of these three items in Sri Lanka's total imports jumped from about 50% in 1972 to 70% in 1975. This sharp in- crease has, to some extent, offset the improvement in export prices (parti- cularly of tea) since 1973. Trade policies that discriminated against exports and encouraged import substitution caused a slow growth in exports of 2.5% per annum between 1960 and 1976, which acted as a significant constraint on growth for an economy in which exports accounted for 30% of GDP in 1960, and, at 22%, are still substantial today. 11. The share of consumption in GDP has remained relatively stable and high (at 86%) over the last decade and a half. Domestic savings, when adjusted for the dual exchange rate, fell from 11.5% of GDP in 1966-70 to 9% in 1971-76. This deterioration in savings performance is largely explained by a decline in public savings. Public savings averaged a mere 1% of GDP in the 1960s, shrinking rapidly in the 1970s, and eventually becoming negative. This poor performance is attributable to the large and growing burden of subsidies and transfers, which worsened in the 1970s because of the increasing disparity between import and officially-determined prices. Savings levels were also adversely affected by the large hidden subsidy burden implicit in the failure to recover costs from beneficiaries of irrigation and other infrastructure projects. Private savings were adversely affected in the 1970s by political uncertainties, a confiscatory tax burden, and falling real interest rates. 12. Gross investment has averaged 16% of GDP at current market prices in the 1960-1976 period. In real terms, investment has been declining, and there has been a persistent failure throughout this period to raise the level of public investment (around 6-7% of GDP) while private investment in produc- tive activities was, on the whole, not being given much encouragement. The efficiency of investment has also been rather low due to both a misdirection of investment and a failure to exploit the full potential of past investments. Thus, much of the investment in agriculture has been directed to paddy, to the neglect of replanting in the tree crop sub-sector, resulting in an erosion of the latter's production base. Even within paddy, the strategy pursued emphasized costlier, more visible extensive development of the Dry Zone to the neglect of cheaper, but less intensive, development. In the manufactur- ing sector, capital-intensive import substitution was pursued to the neglect of labor-intensive export-oriented production. Utilization of the potential already established is uniformly low. This is reflected in low cropping intensities and yields in the agricultural sector, and low-capacity utili- zation in manufacturing.  -4- 13. In the elections of July 1977, the eighth since Independence, the zi-ited National Party won a large majority. In the relatively short period it has been in office, it has embarked on a number of changes in the struc- ture of Government and economic policies. On February 4, 1978, Sri Lanka shifted from a Westminster style parliamentary system to a Presidential sys- tem of government. In parallel, reorganization of local administration is also under way. On the economic front, the Budget for 1978, introduced on November 15, 1977, contains a number of policy initiatives designed to "pro- vide a basis for strong and sustained growth." The explicit objectives identified by the Government are a revival and resuscitation of the economy, increased capacity utilization in the productive sectors, increased employ- ment opportunities, the stimulation of savings and investment, and an improve- ment in the balance of payments over the medium term. These objectives are to be achieved through a shift in emphasis from direct controls to reliance on the price mechanism, together with a restructuring of relative prices, and an increased role for the private sector. 14. The main thrust of the comprehensive economic reforms, in support of which the IMF granted, in December 1977, a Stand-by Arrangement in the amount of SDR 93 million, is to dismantle administrative controls over the allocation of resources and to set realistic relative prices. On the external front, this involved a major liberalization and restructuring of the external trade and payments system supported by a reform of the exchange rate. Most public sector monopolies in imports (with the exception of food and refined petioleum) have been terminated. Prior licensing of imports has been reduced to a short list of items. Most controls over invisibles transactions have been relaxed. In order to ease the task of managing the external payments position and reduce the bias against tree crop exports in favor of food im- ports, the exchange rate has been unified and allowed to float on the basis of underlying market forces at an initial level of Rs 16 = US$1.00. 15. Import liberalization and the reform of the exchange rate required corresponding adjustments of indirect taxes. A new import tariff structure has been introduced. The Business Turnover Tax rates have been substantially lowered and rationalized to be consistent with the new import tariff and ex- change rate. Export duties on traditional tree crops have been increased to mop up the bulk of the additional receipts flowing to this sector as a result of the unification of the exchange rate. 16. In order to reduce the drain on resources caused by the sharp in- crease in the cost to the budget of the food subsidy following the unification of the exchange rate, the rice subsidy has been confined to households with a monthly income of Rs 300 (US$19) or less. This implies that roughly half the population will no longer be entitled to the ration and will have to rely on the open market. To compensate those adversely affected, wages and salaries have been increased, provision was made for a dole of Rs 50 per month for the unemployed (which has so far not been put into effect), and the procurement price of paddy has been raised by 21%. Further, price adjustments arising from the new exchange rate and wage increases have been deferred in the case of wheat flour, fertilizer, petroleum, public transport, and infants' milk food. However, price controls have ended for most commodities, and public corporations are to be allowed more autonomy in pricing and distribution policies.  - 5 - 17. The reform of the exchange rate, combined with corresponding adjust- ments in import and export tax rates, is expected to result in a substantial increase, by 75%, in Government revenues in 1978 over 1977 levels. Expendi- tures have also risen, partly due to the exchange rate unification and to increased subsidies and transfers designed to cushion consumers from the impact of the increases in prices resulting from the exchange reform, the reduction in scope of the rice subsidies and the removal of price controls over a wide range of goods. The combined impact of the various budgetary measures has resulted in a current account surplus of about Rs 650 million, permitting the Government to increase allocations to the capital budget. 18. An adequate response of investment, production, exports, and employ- ment to the major realignment of relative prices introduced in the Budget of 1978 is contingent on a well-thought-out medium-term development strategy. This is recognized by the Government, which is beginning the process of iden- tifying the steps necessary to tackle the constraints facing agricultural out- put, industrial efficiency, and exports. The capital budget for 1978 repre- sents a determined effort to raise the level of public investment. Although the sectoral allocations in the budget mainly reflect the momentum of contin- uation works, the process of allocating financial and manpower resources to three new key programs has already begun. These are: (i) a significant acceleration in the pace of implementation of the Mahaweli Ganga Development Program; (ii) a new export processing zone north of Colombo; and (iii) devel- opment of the Greater Colombo urban area. 19. The Government has also begun the process of integrating these policies and programs into a medium-term investment program. In order to streamline the machinery for planning, the Ministry of Planning and Economic Affairs has been merged with the Ministry of Finance. The enlarged Ministry has been entrusted with the task of preparing a medium-term investment program by the autumn of 1978. A review of sector programs and policies is also under way. Project preparation capabilities, which have been a major weakness in the past, are to be bolstered by a new UNDP-financed technical assistance Umbrella Project with IDA as Executing Agency. There are a number of parallel bilateral technical assistance programs involved in similar efforts. 20. The ability of the Government to manage this period of transition in economic policies is greatly enhanced by a relatively strong short-term economic situation. GDP in 1977 rose by 4.4%. This was due mainly to a 9% increase in agricultural output and a 4% increase in manufacturing and serv- ices. Paddy production reached a record high of 82 million bushels due to favorable weather conditions. Tea production recovered from a low of 433 million lbs in 1976 to 460 million lbs in 1977. Rubber production also rose to 370 million lbs from 345 million lbs. However, coconut output fell in 1977, reflecting the delayed impact of drought in 1976. With the money supply expanding rapidly (33% annual growth through June 1977), prices have remained under pressure despite the improvement in supplies. However, there has been a substantial improvement in the external accounts. Export earnings in 1977 rose by a record 37%. This was due in the main to a 69% increase in earnings from tea, brought about by record tea prices. Rubber and coconut  -6- exports also benefited from higher unit values and there was a further en- couraging growth in non-traditional exports. Despite various import-inducing policies, such as the March 1977 revaluation and record food imports, imports grew much more slowly. As a result, a current account surplus emerged for the first time since 1965. With a substantial net foreign exchange inflow, gross foreign exchange reserves have risen sizably from US$92 million at the end of 1976 to US$290 million at the end of 1977. Part of this reserve build up represents a US$64 million drawing against the SDR 93 million IMF Stand-by Arrangement. 21. The task of external management will be greatly eased in the short term by the buildup in reserves and the relatively favorable prices for tra- ditional exports. However, Sri Lanka's current account deficit is likely to widen sharply in the coming years for four seasons. First, the new policy of import liberalization will permit industry and trade to replenish depleted stocks and meet some of the large unsatisfied demand for imports of consumer goods intermediates and spare parts. Second, the substantial rehabilitation requirements of the economy will gradually begin to be addressed. Third, as the Government implements its medium-term investment program, major new in- vestment efforts will place an additional burden on the balance of payments. Finally, the increased volume of imports will be set within a background of deteriorating terms of trade in the medium term, as tea prices decline in real terms and foodgrain import costs rise. The success of the program of economic reforms instituted in November 1977, thus depends heavily on an increase in aid flows. Such an increase will help discourage excessive speculative im- ports, by strengthening in the eyes of speculators, the Government's ability to persist with its import liberalization policy. It will also enable the Government to desist from more costly forms of borrowings. Most important, increased concessional aid will be needed to supplement the Government's efforts at domestic and external resource mobilization in support of higher levels of investment spending. In this context, local financing will be needed, particularly in the early years, before domestic resource mobilization efforts begin to gather momentum. 22. Sri Lanka's dependence on foreign aid has risen substantially in recent years. Net aid transfers have gone up from about US$40 million in 1970 to US$139 million in 1977, with gross aid rising from US$63 million to US$199 million. About four-fifths of net aid comes from member countries and institutions of the Sri Lanka Aid Group (at the fourteenth meeting of the Aid Group in May 1978, aid indications amounted to about US$342 million). Despite the improvement in export earnings, the debt service ratio (inclusive of short- term borrowings and IMF repurchases) remains at 21%. However, it is expected to decline sharply in 1979 as amortization and interest payments reflect the fall in the last two years in short- and medium-term borrowings. PART II - BANK GROUP OPERATIONS IN SRI LANKA 23. 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 thirteen credits totalling US$120.3 million (net of cancellations and  - 7 - exchange adjustments) in support of 19 projects. About 30% of Bank Group assistance has been for power, 50% for agriculture (irrigation and agricul- tural and dairy development), and the remainder for development finance company operations, highways, a program credit (mainly involving the import of raw materials for industry), and water supply. Three early power loans, the credit for the Mahaweli Ganga Development Project I, and the program credit together with the recently completed Lift Irrigation and Drainage and Land Reclamation credits have been satisfactorily completed and fully disbursed. Of the two loans made to the Development Finance Corporation of Ceylon (DFCC), US$6.8 million of the US$12.0 million available was cancelled by DFCC due to a sudden deterioration in the private investment climate resulting from a change of governments in 1970. Under an ongoing IDA credit of US$4.5 million made to the DFCC in 1975, sub-projects for the total credit amount have been approved. A second IDA credit of US$8.0 million to DFCC and an equity invest- ment by the IFC of about US$199,000 equivalent in the DFCC were approved by the Board early in FY78. An IFC non-revolving line of credit of US$2.0 million to the government-owned Bank of Ceylon for onlending to private small- and medium- scale industrial enterprises has also been approved in FY78. At the request of the Borrower, a loan/credit for highways was cancelled in 1970, after disburse- ment of US$0.8 million of the credit, following the Government's decision to make major changes in the scope of the project. An IFC investment of US$3.25 million to the Pearl Textile Mills, Ltd. (Ceylon) was approved by IFC's Board of Directors in January, 1970, but cancelled the same year because Government approval for the project was withdrawn. Annex II contains a summary statement of Bank Group operations as of April 30, together with notes on. the execution of ongoing projects. 24. The Bank Group's current strategy is focused on the agricultural sector to support Government efforts to increase food production and reduce its dependence on rice/flour imports, and to improve productivity in the tree crops sub-sector. Projects to support industry and basic infrastructure are also included. The Bank Group has agreed to assist the Government of Sri Lanka to accelerate the development of the Mahaweli Ganga Catchment Area by helping to develop an implementation strategy and to coordinate external assistance for project preparation and implementation. It is expected that significant investment opportunities for IDA and other Aid Group members will result. A proposed project for tea rehabilitation has been appraised and is expected to be presented to the Board shortly. Appraisal has been largely completed for an integrated rural development project for the Kurunegala District, and preparation is under way for a road maintenance project. In addition, projects in other fields, including irrigation and drainage, and rainfed farming, are being prepared for possible IDA financing. 25. The Bank Group presently accounts for nearly 13% (Bank, 3%; IDA, 10%)of Sri Lanka's total external debt outstanding, and about 5% (almost totally Bank) of debt service. It is projected that the Bank Group's share in total external debt will increase to about 17% by 1980 (with the Bank's share declining to about 2%). The Bank and IDA shares in the debt service will show a slight decline.  PART III - AGRICULTURE AND THE TREE CROP SUB-SECTOR The Role of Agriculture in the Economy 26. Agriculture plays a major role in Sri Lanka's economy, accounting for 37% of GDP, over one-half of total employment, over four-fifths of export earnings, and a large share of public revenue. Approximately 80% of the country's total population lives in rural areas. Thus, economic growth in the country depends largely upon performance in the agricultural sector. During the 1960s, considerable progress was made in increasing food produc- tion as Government pursued a policy of reducing dependence on imports. Paddy production expanded from 840,000 tons to 1.6 M tons (6.5% per year) per year during the 1960s, as a result of: area expansion (175,000 ha), increasing yields (from 725 kg/ha to 1,050 kg/ha), and increased cropping intensity. After 1970, area expansion continued at a similar rate, but yields and cropping intensity declined so that production grew at only 0.7% per year. Apart from generally poor weather the major reason for the fall off in productivity was the sharp deterioration in institutional support programs aggravated by farm power and fertilizer shortages arising from foreign exchange constraints. 27. In the early 1960s, the tree crop sub-sector accounted for over 90% of the value of merchandise exports. During the 1960s, production grew at only 1% per annum, and that mainly from rubber which was benefiting from the substantial replanting in the early 1950s. Since 1970, conditions in the tree crop sub-sector have further deteriorated, with output of tea, rubber, and coconut all tending downward although in 1977 there was an increase in tea and rubber production (para 20). Declining quality has also been evident, especially in the tea industry. The disappointing production trends in the tree crop sub-sector, although also influenced by drought, were primarily a reflection of declining profitability associated with lower prices and high taxes, the uncertainties associated with Government's land reforms, and in- adequate foreign exchange allocations for vital inputs such as fertilizer and spares and replacements for machinery and vehicles. 28. The importance of the traditional export crops (tea, rubber, and coconut) lies not only in the fact that they are the source of 70 to 90% of export earnings, but also in their vital role in all aspects of the economy: these three crops account for about 45% of agricultural employment, 40% of the value added in the agricultural sector, and in addition, are expected to contribute about 50% of government revenues according to the 1978 budget. Tea alone accounts for approximately one-half of the value of the country's total merchandise exports. 29. In the tree crop sub-sector, besides tea, rubber and coconuts, the country produces numerous other crops, such as cinnamon, cardamom, citronella, cashews, cocoa, pepper, cloves, nutmeg, and coffee. They are commonly referred to as minor export crops and are all, with the exception of cashews, Wet Zone crops. The value added generated by these crops is about Rs 125 M, and they provide employment for over 10,000 persons. Performance of the minor export crop sector has been encouraging. From 1970 to 1976, the value added of minor  export crops increased by about 150% in constant prices, but their contribu- tion to GNP is still less than 1%. This portion of the sector has substantial potential for future development. Land Reform 30. Sri Lanka has undergone an extensive land reform which has had a great impact on agriculture, particularly the tree crop sub-sector. The first phase of land reform, initiated in 1972, limited private holdings to: (i) 25 acres (10.12 ha) if exclusively paddyland, or (ii) 50 acres (20.24 ha) if not exclusively paddyland, with paddyland not to exceed 25 acres. In the first- phase takeovers, implemented in 1973 through 1975, about 225,000 ha of land were vested in the Land Reform Commission (LRC). Of this, about 60% was under tree crops, which included about 23% of the total tea area, 15% of the rubber area, and about 10% of the coconut area. The State Plantations Corporation (SPC), under the Ministry of Plantation Industries (MPI), was given about 40 of the larger, well-maintained tea and rubber estates, covering about 10% of the tree crop land taken over. The management of most of the remainder was placed in the hands of cooperatives. 31. In the second phase, initiated in October 1975, all land owned by Sri Lankan and foreign companies, which included the country's major tea and rubber estates, was vested in the LRC. About 65,000 ha were assigned to SPC and nearly 95,000 ha to the Janatha Estates Development Board (JEDB) which was established for that purpose under the Ministry of Agriculture and Lands (MAL). The compensation terms of foreign-owned plantations were agreed in 1976, and payments have commenced. Compensation negotiations for rupee com- pany and private estates are still in progress. 32. As a result of the second phase of the land reform, about 60% of the tea estate land, 30% of the rubber estate land, and 10% of the coconut estate land is now vested in the LRC. In late 1977 the management of much of this land was significantly rationalized. JEDB was transferred from MAL to MPI, and several organizations and cooperatives, which had mismanaged the estates they received under the first phase of Land Reform were disbanded and their estates divided between JEDB and SPC. Government Tree Crop Sub-sector Strategy 33. The Government gives high priority to development of the tree crop sub-sector as a part of the national economy. Efforts to streamline the orga- nization and management of the nationalized tea and rubber lands have been made recently or are currently under way. The Government has made efforts to improve policies on recruitment, staffing, and compensation of personnel for SPC and JEDB to promote flexible and commercially-oriented operations. To provide the Government with a policy framework in the tree crop sub-sector on sales and export taxes, and on subsidies for fertilizer and replanting, a "Tree Crop Incentives Study", a component of the Agricultural Development Project (Credit 595-CE), is presently under way. To formulate future policies for the tea industry on such questions as desirable production levels, organi- zation, management, diversification, replanting, marketing strategies, etc.,  - 10 - the Government, with the assistance of the Canadian International Development Agency (CIDA), began work in January 1978 on an overall Tea Master Plan ex- pected to be completed in early 1979. The Master Plan will develop recom- mendations on industry structure, fiscal policy, and investment programs and priorities. To promote production of minor export crops, the Department of Minor Export Crops, responsible mainly for minor crops research and extension, was established in 1973 in the Ministry of Plantation Industries. 34. In addition to rehabilitation policies for the tree crop sub-sector, the Government has declared that it intends to intensify its efforts at agri- cultural diversification for lands which are currently marginal or abandoned. The Ministry of Agriculture and Lands, through its Agricultural Diversification Division (ADD), has been entrusted with the responsibility for implementing this effort. ADD has specifically been assigned the task of: (i) preparing an inventory of lands suitable for diversification; (ii) assigning development priorities to the inventory; and (iii) preparing future diversification pro- jects. The executing agency for these programs of rehabilitation, diversifi- cation, and settlement of degraded lands is the National Agricultural Diver- sification and Settlement Authority (NADSA) which was established in early 1978 under the State Agricultural Corporations Act of 1972. PART IV - THE PROJECT 35. The proposed project would be Government's initial effort in its long-range program to rehabilitate, diversify, and settle degraded mid-country lands, mainly nationalized tea estates. The project was identified and pre- pared by the Agricultural Diversification Division (ADD) of the Ministry of Agriculture and Lands, with the assistance of the UNDP and the FAO/IBRD Co- operative Program (CP). At the request of the Government, the project was appraised by IDA in May 1976, but it was found to be in need of significant modifications before its justification could be assessed. After substantial improvements were made in the project concept, the project was reappraised in October/November 1977. A report entitled "Sri Lanka - Tree Crop Diversifi- cation (Tea) Project (No. 1936a-CE) is being distributed separately to the Executive Directors. The Supplementary Project Data Sheet is attached in Annex III. Negotiations were held in Washington, D.C. from April 17 to April 21, 1978. The Borrower's delegation was led by Mr. A. Mohamed, Additional Director, External Resources Department, Ministry of Finance and Planning. 36. The Government of Sri Lanka issued, in early 1978, a policy state- ment on diversification of marginal tea and rubber lands and is developing a national program to diversify substantial amounts of these lands to other productive uses. The project, which would constitute the Government's first pilot effort under that program, has as its major objectives to: (a) develop an institution, the National Agricultural Diversification and Settlement Authority (NADSA), which can implement a program of rehabilitation, diversification, and settlement, by landless families, of degraded lands, mainly nationalized tea estates;  - 11 - (b) stem the environmental destruction that has occurred from soil erosion under uneconomic tea by introducing suitable farming and land use systems in the project area; and (c) increase national agricultural production and income by rehabilitation and development of degraded and abandoned lands. 37. The project area is situated in three catchments in the densely pop- ulated mid-country in the vicinity of Kandy, some 90 km northeast of Colombo. The cultivatable area of the three catchments amounts to about 42,000 ha, while the project works would be carried out on 61 non-contiguous tea estates total- ling about 11,500 ha. The past neglect of the tea estates and the difficult topography have led to serious soil erosion problems. Unemployment, estimated at 30%, has also been rising due to weakening employment opportunities on the estates. Some 7,000 people, living both on the estates and in surrounding villages, are employed on the 61 project estates as laborers, about half of them women tea pluckers. The average estate family income is estimated at only Rs 3,000 (US$188) per annum. 38. The proposed four-year project would implement the diversification of about 11,500 ha and would settle about 4,500 landless families on newly established small farms based on mixed minor tree crop production. Some 1,300 of these farms would also be provided with a dairy cow. As a result of the project, about 4,900 ha of scrub land, 4,600 ha of marginal or abandoned tea land, and 1,800 ha of degraded forest would be diverted to more productive uses while about 180 ha of existing high yielding clonal tea would remain under small-holdings. The project would provide 27,000 people with both regularly paid work opportunities in land development and settlement on about 5,700 ha of developed homesteads, with garden plots (0.2 ha) and farms (0.8- 1.6 ha). The entire settled area would be protected by soil conservation measures. In addition, some 3,700 ha of forest would be developed on a com- mercial basis with fuelwood and timber, while about 2,200 ha would be kept as conservation forest. Necessary social infrastructure, including housing, water supply, and access roads, would be provided for the settlements at a low cost. It was agreed that the Government would take measures acceptable to IDA to safeguard water supply systems, built under the project, against waterborne diseases (DCA, Section 3.10). 39. The project would establish two types of mixed tree crop farms; about 2,600 Lower Altitude (below 750 m) Mixed Tree Farms of 0.8-1.0 ha each and about 1,300 Higher Altitude (between 750 and 1,000 m) Mixed Tree Farms of 1.3 ha each. Similar types of mixed tree farms are found in the catchment areas in which the project is located. Farms developed under the project would be improved through better planting materials and agricultural practices, a balancing of shade requirements, and by introduction of a greater proportion of high value species. These tree crop farms would include inter alia, banana, papaya, coconuts, avocado, coffee, nutmeg, cloves, pepper, and ginger. The mix of the many different species, including both food crops and cash crops, would spread the income of the settlers evenly over the year and would protect the settlers against the adverse effects of international and domestic price fluctuations. In addition to mixed tree crop farms, the project would  - 12 - establish 390 Cardamom farms on 705 ha of degraded forest lands, and the pieservation of some 180 ha of vegetatively propagated tea in the area as tea smallholdings. Each participating family would be provided with a small homestead plot of 0.2 ha to grow vegetables. While providing the basis for improved livelihood for settlers, the farms would constitute an efficient biological system of soil conservation and regeneration. Experts would be employed by NADSA (PA, Section 2.06) to assist in carrying out the project and especially to advise on variety selection, processing, and marketing of the most important spices (especially ginger, pepper, and cardamom) to be grown under the project. This would be done through short-term visits expected to amount to a total of 12 man-months (US$96,000 including transport charges). Project Organization and Management 40. The National Agricultural Diversification and Settlement Authority (NADSA) operates under the Ministry of Agriculture and Lands and is financed through Government budget appropriations. Overall responsibility for imple- mentation of the project rests with a seven member Board appointed by the Minister of Agriculture and Lands. The chief executive of the NADSA is the General Manager, who is responsible for all operational matters and reports directly to the Board, which is expected to meet at least quarterly to review progress. The Board members and the General Manager of the Authority have been appointed and most of the key officers of the operating staff have been recruited. 41. NADSA would be responsible for all aspects of overall management of the project, including production of planting material, soil conservation measures, establishment of the farms and forests, and social infrastructure construction. It is composed of an Operations Department, a Support Services Department, and a small technical unit to assist the General Manager. The Operations Department has three Area Operations Divisions and a nursery unit. Under the Area Operations Division the key management figures at the field level would be three Area Operations Officers in charge of 25 Field Opera- tions Officers who, in turn, would each be responsible for managing an average of 180 settler families. The three Area Operations Officers and a Nursery Officer would be senior estate superintendents or agricultural university graduates with considerable experience in organizing a large labor force. The Field Operations Officers would be responsible for coordination and management of all project activities, including the ones where technical expertise would be provided by specialized agencies. The NADSA Planning and Program Control Officer and Chief Technical Officer would be the key administrators respon- sible for day-to-day project monitoring and supervision. 42. The Soil Conservation Division and the Forest Department of MAL would be responsible for planning and supervising all technical aspects of the soil conservation and forest component. At field level, the actual work would be done by the prospective settlers managed by NADSA staff and assisted by staff of the respective agency. Plot demarcation would be undertaken by the Survey Department, and the dairy component of the project would, in turn, be managed by the Project Technical Unit (PTU) of IDA Dairy Development Project (Cr. 504-CE). The PTU would be responsible for the importation and rearing of  - 13 - heifers, processing of loan applications for cows and all follow-up activity on dairying. The dairy sector is currently being reorganized on the basis of farmer owned Dairy Cooperarive Societies and Milk Unions along the lines of the successful AMUL-model (Kaira District) developed in India. Assurances were obtained (DCA, Section 3.04) that, before dairy animals are sold to farmers, but in any event by July 1, 1981, the Government would establish dairy cooperative societies with by-laws acceptable to IDA. In general, the specialized departments and agencies assisting in implementing the various components of the project have already established substantial professional experience in their respective fields, and no specific problems are foreseen in the technical implementation of these components. For the purpose of in- tegrating the plans of the above-mentioned specialized agencies into an over- all plan, the agencies would prepare detailed annual work plans, and submit them to NADSA for approval. Necessary additional staff, who would work full time on the project (DCA, Section 3.09), and vehicles and operating funds would be provided through NADSA to these organizations under the project. 43. The project as designed consists of two phases, a development phase (3 years) and a consolidation phase (3 years). Although all Project lands would come under control of NADSA at the start of the development phase (DCA, Section 5.01(b)), diversification would not begin simultaneously on all of them and NADSA would not be equipped to continue routine estate management. Therefore, the Government organizations currently managing the lands not imme- diately needed for diversification will continue to do so until the lands are needed for project development. The development phase would be characterized by the establishment of homesteads and farms and the implementation of the social infrastructure and forest components; these would be entirely under the responsibility of NADSA. This phase would end with the allocation of farms to settlers, and assurances were obtained that this would be accomplished by July 1, 1981 (DCA, Section 3.08). The consolidation phase would strengthen the accomplishments under the development phase by providing support for the newly established farmers through the sixth year of implementation (PA, Section 3.04). During this phase NADSA would gradually withdraw from the project area and leave it entirely when the tree crops have come into bearing. In the process responsibility for support and services would be turned over to existing agricultural service institutions in the area (e.g. Forest Department, Depart- ment Minor Export Crops, Department of Agriculture). IDA's involvement in the project would extend over the development phase plus the first year of the consolidation phase. 44. Settler selection would also be a two-stage process. First, project settlers would be selected from the following categories listed in the order of priority: (i) citizens who are workers on estates in the project area and who as a result of the project would be unemployed (para 60); (ii) landless families from villages in the catchments; and (iii) unemployed youth from the project catchments. At the end of year one, these eligible settlers will be given, on a temporary lease, a homestead consisting of 0.2 ha of land on which a house would have been constructed. The second stage of selection will occur at the end of the development phase (project year 3) when those initially selected settlers who had accepted and satisfactorily completed at least 80%  - 14 - of the jobs offered to them by NADSA (DCA, Section 3.08 and Schedule 3) would become permanent settlers. Farms developed under the project would then be allocated to the permanent settlers. 45. Settlers' income in the development phase of the project will be mostly from wages paid by NADSA for work on project tasks. In the consoli- dation phase, farm income is expected to come mainly from relatively slow- developing tree crops while at the same time development job opportunities under the project would decrease. Although projections indicate that settlers' incomes would be adequate over the consolidation phase of the project, it is necessary to ensure the availability of additional assistance should it be necessary. Assurances were obtained that NADSA would collect income data at least twice a year (PA, Section 2.07), and if family incomes were found to be below Rs 3,600, in constant 1978 Rupees, (US$225 per annum), the Government would take necessary measures, satisfactory to the Association, to ensure that settlers have the financial ability to continue to develop their farms (DCA, Section 3.05). Project Costs and Financing 46. The total project costs are estimated at US$6.5 M equivalent, in- cluding about US$0.1 M in taxes and duties. The foreign exchange component would be about US$2.0 M or about 31% of incremental total project cost. The major elements included in the cost estimate are the operational costs of NADSA (US$1.4 M) the inclusion of which is justified because NADSA, that is to play a key role in the Government's diversification program, is a new institution which needs to be built up; farm development including soil conservation and establishment of mixed tree crop and dairy farms (US$2.5 M); construction of social infrastructure (US$0.8 M); and forestry works (US$0.6 M). Physical contingencies of 15% have been applied to all labor requirements, and 10% to materials, equipment and operating expenditures, totalling US$0.5 M. The estimated price increases over the implementation period amount to US$0.7 M or 13% of the base costs including the physical contingencies. Works estimates are based on detailed quantity estimates provided by the various specialized agencies, while the unit prices for equipment and materials are quotations of December 1977. 47. The proposed IDA credit of US$4.5 M would finance about 70% of the total project cost, net of taxes and duties. This would cover fully the for- eign exchange costs as well as US$2.5 M of local costs (para 21). The Govern- ment would provide for the remaining local costs of US$2.0 M which, together with the proceeds of the credit, would be allocated as a grant (DCA, Section 3.01(b)), under the regular budget to NADSA. NADSA would reimburse, as neces- sary, the Soil Conservation Division, the Forestry Department and the National Livestock Board to meet project-related expenditures. 48. It was agreed (DCA, Section 3.07) that the Government would, with due regard to the settlers' ability to pay, take all measures necessary to recover a part of project costs through the collection of charges which are satisfactory to the Association. Project costs would be recovered under the Sale of State Land Law of 1973, in equal annual installments over a 20-year  - 15 - period. The amount of annual payment will vary according to type of farm from US$40 for the small tea farms to US$140 for the cardamom farms. This level of charges from settlement farms plus government revenues from forest land would result in recovery of about 80% of the total project costs in nominal terms; if inflation were to be 7% per annum, the cost recovery ratio would be 55%. Although full cost recovery might be possible, the following considerations favor the proposed rate of recovery: (i) the settlers' current absolute level of income is very low; and (ii) even at full development, settlers' incomes are not expected to exceed the national average family income. The operating and maintenance costs for water supply, roads and other related facilities would be small, and are expected to be covered either by the settlers directly or through the Village Councils -- the local bodies responsible for maintenance of social infrastructure facilities. Procurement 49. Procurement under the project would be in accordance with IDA guide- lines. NADSA would be responsible for all procurement activities. Since further proliferation of makes of imported tractors and trailers (US$0.40 M) and vehicles (US$0.23 M) would create additional problems of maintenance and repairs, procurement for these items would be through competitive bidding ad- vertised locally and in accordance with local procedures satisfactory to IDA. There are enough local firms and representatives of foreign firms to ensure a sufficient degree of competition and reasonable prices. Small tools, and sur- vey and office equipment (US$0.18 M) would be procured by prudent shopping following local procedures. These items are expected to be procured in small batches over the life of the project and would not be suitable for ICB. 50. The import of cattle (US$0.9 M) for the dairy component of the proj- ect would be organized by the Project Technical Unit (PTU) of the National Livestock Board, MAL. Because of the wide variation in breeds, types and adaptability of animals available, and the disease situation in supplying countries, proposals would be obtained from at least three countries free from foot and mouth disease that can supply the cattle required, in accordance with procedures acceptable to IDA. Planting materials, under the afforestation component, would be procured directly by the Forest Department of MAL by negotiated purchases after quotations have been solicited from at least two suppliers. 51. All project works, including construction of access roads, housing, water supply, soil conservation, planting of homestead plots, farms and forest would be carried out directly by NADSA, using prospective settlers as labor for the project. Any skilled labor requirements that cannot be met from the pool of settlers would be provided by contracting local craftsmen; such con- tracts would be small and not suitable for ICB. 52. In order to expedite project implementation, NADSA has prepared tender documents for vehicles, tractors, and trailers for which retroactive financing of up to US$0.5 million is recommended (DCA, Schedule 1, para 4).  - 16 - Disbursements 53. Disbursements from the proposed IDA credit would be made for: (i) 100% of the foreign expenditures for directly-imported goods; (ii) 60% of expenditures for goods procured locally; (iii) 100% of the ex-factory price of goods manufactured locally; (iv) 50% of project-related expenditures for salaries of staff and operating costs of NADSA, Soil Conservation Division, Forestry Department, and PTU; (v) 60% of expenditures for civil works and land development; and (vi) 100% of expenditures for consultants. Disbursements for force account work would be made every quarter against a physical works pro- gress report and statement of expenditure provided by the Government. Project Benefits and Risks 54. The proposed project constitutes a first step in the Government's program to diversify marginal or abandoned lands to other agricultural uses. It would help to establish an institutional structure for planning and implementation of further diversification and in the project area would: (i) increase agricultural production; (ii) reduce unemployment and under- employment; (iii) improve real incomes and income distribution; and (iv) improve land utilization and foster rehabilitation of degraded lands. 55. The project would increase the exportable surplus of spices and coffee and reduce the import of milk products and fuel oil. The increase in annual production due to the project at full development of the tree crops in 1990 would include inter alia, 1,300 tons of pepper, 600 tons of ginger, 400 tons of cardamom, 100 tons of cloves, and 300 tons of coffee. This production would constitute 5% of the international pepper trade and less than 6% for any of the other spices, with coffee production less than 1% of the international coffee trade. Projected prices indicate that Sri Lanka will be able to export these quantities profitably without difficulties or adverse effect on world market psices. The amount of forestSy products would increase per year by 35,000 m of eucalyptus and 13,000 m of pine. The annual farmgate value of the minor tree crop production is estimated at full development at about US$2.5 M, while the value of milk and forestry products (excluding pines) would amount to US$0.9 M. The project's net foreign exchange benefit, after deducting the cost of imported fertilizers, would amount to US$2.9 M per annum by 1990. 56. The project's overall weighted economic rate of return (ERR) is estimated at about 16% on the entire project cost. The economic rate of return is estimated to be 16% for the Settlement Component, the cost of which is $5.7 M, and 15% for the Forestry Component, the cost of which is $0.8 M. Sensitivity tests indicate that the project would remain viable even in the event of adverse conditions. If there is a two-year delay in realization of project benefits because soil rehabilitation turns out to take longer than was expected, the ERR would drop to 13%. 57. The project catchment areas are currently characterized by severe unemployment owing to declining employment opportunities on tea estates and increasing population. The project would provide direct employment to about  - 17 - 4,500 households (about 27,000 persons) in the lower 40% income bracket whose average per capita income is less than US$60 per annum. The project would help raise their per capita income to about US$125 per annum by 1990. Without the project, 4,800 ha of tea lands would be abandoned by 1985 creating another 3,300 unemployed households or 8% of the population of the catchment areas. The project would reverse that trend and reduce migration to urban areas. 58. The benefits from the social infrastructure are largely non- quantifiable, but would satisfy the essential needs of the settlement popula- tion, i.e. shelter, safe and adequate water supply, and access to the area's basic road network and services nearby. Upgrading of water supply would have a beneficial impact on the health situation of the people by reducing the incidence of water-borne diseases, still relatively common in the area. The planned community development, by concentrating housing into clusters and im- proving access to services, would also constitute a major step in the Govern- ment's policy to increase the viability and attractiveness of settlement schemes. 59. The project would have a highly beneficial impact on the natural environment of the area through land rehabilitation and soil conservation. Without the project, soil erosion would continue at an accelerating pace, making future efforts at rehabilitation very difficult and costly, and greatly reducing the possibility of continued agricultural use of the project area. 60. Project risks are of thr.ee types: economic, institutional, and social. The economic risks consist primarily to commodity prices being lower than projected and lower yields due to weather, plant diseases, and pest attack. These will be reduced by diversifying production in such a manner that none of the commodities would contribute more than 30% to the project's economic benefits or 35% to any settler's family income. The institutional risk arises from the fact that the project organization, NADSA, is new and there are inevitable uncertainties regarding its operating efficiency. How- ever, the staff is being carefully chosen with a view to ensuring adequate experience in tree crops and handling of a large labor force. A social risk arises from the fact that only two-thirds of the 3,000 displaced estate workers are now Sri Lankan citizens and are eligible for selection as settlers under the project. The remainder are Indian Tamils who have not applied for Sri Lankan citizenship. Since there is a risk of social friction and hardship for these ineligible workers, assurances were obtained that Government would pro- vide relief to those displaced estate workers not eligible for settlement under the project either through relocation to other estates or through accelerated repatriation (DCA, Section 3.02) under the existing agreement between the Indian and Sri Lankan Governments. PART V - LEGAL INSTRUMENTS AND AUTHORITY 61. The draft Development Credit Agreement between the Government of Sri Lanka and the Association, the draft Project Agreement between the Association and the National Agricultural Diversification and Settlement Authority, and the Recommendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement are being distributed to the Executive Directors separately.  - 18 - 62. Special conditions of the project are listed in Section III of Annex III of this report. Additional conditions of effectiveness for the IDA credit include: (i) execution of the Project Agreement on behalf of NADSA; and (ii) the transfer of control over the lands included in the Project to NADSA (para 43). 63. I am satisfied that the proposed development credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 64. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachments Washington, D.C. May 19, 1978  Annex 1 Page T of 4 pages SRI LANKA - SOCIAL INDICATORS DATA SHEET LAND AREA(iTNOUK#4N-- - - -- - - ---) - - SISI LAUA REFERENCE COUNTRIES (1970) TOIAL 05.6 MOST RECENT AG&IC. 24.2 1960 197?t ESTIMATE TANZANIA PHILIPPINES MALAYSIA*r GNP PER CAPITA (USS) 80.0 130.0 200.0). 100.0* 230.07 440.0* ____________________ POPULATION AND VITAL STATISTICS POPULATION (MID-YR. MILLION) 9.9 12.5 13.8). 12.9)a. 36.9 10.8 POPULATION DENSITY. PER SQUARE KM. 151.0 191.0 210.0)a 14.0 .123.0 33.0 PER SQ. KP. AGRICULTURAL LAND 507.0 518.0 570f1])& 25.0 375.0 18S.0 VITAL STATISTICS CRUDE BIRTH RATE C/THOU, AV) 37.6 33.1 28.2 50.5 44.2 42.2 CRUDE DEATH RATE (UTOU,AV) 10.7 e.0 17 23.0 13.2 12.9 INFANT VoRTALITY RATE (/THOU) 52.0 50.0 51 , 165 o s 40:) LIFE EXPECTANCY AT BIRTH (YRS) 60.5 65.8 67.8 41.8 58.6 56.7 GROSS REPROOUCTION RAT6 2.5 2.3 2.2 3.2 3.3 2.6)a POPULATION GROWTH RATE (%) TOTAL 2.6 2.4 1.7 3.0 )a 3.0 - 2.9 URBAN 4.8 4.5 3.7 5.6 4.0 3.0 URBAN POPULATION (% Of TOTAL) 17.9 22.0 24.3 5.5 )b 27.6 26.9 AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 41.5)a 40.0 39.0)a 44.4 )b 45.6 44.a 15 TO 64 YEARS 54.3 )a^ 56.0 56484) 53.0 )D 51.6 52.1 65 YEARS ANO CVER 4.2 )a 4.0 4.2)A 2.6 )b 2.8 3.2 AGE DEPENDENCY RATIO 0.8 )4 0.8 O.f)@ 0.9 0.9) a ECONDAIC DEPENDENCY RATIO 1.S 1.4 1.2 ) 1.2's' 1.5 1.6) FAMILY PLANNING ACCEPTORS (CUTIULATIVE, THON) .. 215.3 431.5 .. 320.0 222.2) USERS (X OF MARRIED WOEN) .. 7.0 9.9 .. 2.0 8.0)a EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 3500.0 4100.0 4600.0 S600 0)a,l2400 0 3600 0 LABCR FORCE IN AGRICULTURE (%) 49.0 52. a 55.0c . 91:o)a b 55:0)a 49,5 UNEMPLOYED (t OF LABOR FORCE) 4.0),,b 9b 11)d *- 7.6 7.0 INCOME DISTRIBUTION S OF PRIVATE INCOME REC D BY- HIGHEST 5% OF HOUSEHOLDS 26.4) 1B.8 18.6 33.5 28.3 HIGHEST 20% OF HOUSEHOLDS 52.1. 45.6 42.8 63.3 54.0. 56.0 LOWEST 20% OF HOUSEHOLDS 4.5Ja 7.4 7.3 2.3 3.6 3.5 LOWEST 40% OF HOUSEHOLDS 13.7) 17:9 19.3 7.8 1137 11.2 DiSTRIEUTION OF LAND OWNERSHIP - % O^'4ED BY TOP 10% OF OWNERS .. .. .. X OwNED BY SMALLEST 10% OWNERS .. .. .. .. HEALTH AND NUTRITION POPULATION PER PHYSICIAN 4600.03C .. 3980.Q )e 21570.0) POPULATION PER NURStNG PERSON 4170.0 2730.0)c 2280. )a 4890.0 a POPULATION PER HOSPITAL BED 290.0) 330.0)c 330.0)a 700.00 850.0 270:0)a PER CAPITA SUPPLY OF - CALORIES (% OF REQUIREMENTS) 92.0 101.0 97.0 73.0 93.0 PROTEIN (GRAMS PER DAY) 45.0 50.0 45.0 43.0 45.0 49 CO -OF WHICH ANIMAL AND PULSE 15.0 16.0 15.0 23.0 22.0 20.0)b DEATH RATE (/THOU) AGES 1-4 .. .. 16.8 .. 6.6 EDUCATION ADJUSTED ENROLLMENT RATIO PRI.aRY SCHOOL 95.0 99.9 96.0 35.0 113.0 89q.Oa SECCNDARY SCHOOL 27.0 51.Q)d 59.0)f 3.0 49.0 .34.0)a YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 12.0 12.0 12.0 13.0 10.0 13.0 )a VOCATIONAL ENROLLMENT (5 OF SECONDARY) ,, i.o)d i.o)f 10.o)c 6 0b 3.0 )a ADULT LITERACY RATE (x) 61.0)a .. 78.1 * * 55.0 )a HOUSING PERSONS PER ROOM (URBAN) 2.1 )a 2.7 )g 2.3)a OCCUPIED DWELLINGS WITHOUT PIPED WATER (.) 80.9,8 .. 77.5)9 3o.o)b,d 76.0 65.0)a,c ACCESS TO ELECTRICITY (% OF ALL DWELLINGS) 7,5 )a ..0 )g ,, 23.0 43.0)a RURAL DOELLINnS CONNECTED TO ELECTRICITY (X) 2.3 )a .. ) .. 7.0 30.0 )a CON SUMTPT ION ___________ 37 . 0 RADIO RECEIVERS (PER THOU POP) 36.0 . 11.0 72.0 41.0 PASSENGER CARS (PER THOU POP) 8.0 7.0 J0 3.0 8.0 27.0 ELECTRICITY (KWH/YR PER CAP) 31.0 65.0 '2.u 31.0 235.0 382.0 NEWSPRINT (KG/YR PER CAP) 1.2 1.5 0.5 0.1 2.0 4.0 SEE NOTES AND DEFINITIONS ON REVERSE  ANNEX 1 Page 2 of 4 pages NOTES Unless otherwise noted, data for 1960 refer to any year between 1.959 and 1961, for 1970 between 1968 and 1970, and for Most Recent Estimate between 1973 and 1975. * GNP per capita data are based on the World Bank Atlas methodology (1974-76 basis). ** The selection of Malaysia as an objective country is based on its ability to combine a high rate of economic growth with an adequate level of wel- fare making it a suitable objective for policymakers in Sri Lanka. SRI LANKA 1960 a/ 1963 b/ Registered applicants for work. c/ 1962 1970 a/ As a percentage of employment b/ Registered unemployed c/ Government only d/ Between 1965 and 1970 the duration of general secondary education wa*s increased from 4 to 7 years. Data on vo- cational education refer to technical institutes attached to the Ministry of Education only. X Technical institutes attached to the Ministry of Education only. &/ 1971 Most Recent Estimate: a/ 1976 b/ Ratio of population under 15 and 65 and over to total labor force. c/ As percentage of employment d/ Registered unemployed e/ 1972 f/ Between 1965 and 1970 the duration of general secondary education was increased from 4 to 7 years. Data on vocational education refers to X. Tanzania 1970 a/ Mainland Tanzania b/ 1967 c/ 1965 d/ As percentage of urban households Philippines 1970 a! As percentago of employment b/ Not including prtvate vocational schools or vocational slhort-terni school. Mala].ysica 1970 a/ Peninsular Malaysia h/ 19()4-66 c/ Pi.ped water inside  Annex 1 Page 3 of 4 pages COUNTRY DATA - SRI LANKA AREA POPULATION 1 DENSITY 65,607 sq km 13.8 million (mid 1976)-' 210 per sq km (1976) Rate of Growth: 1.7% (from 1971 to 1976) 554 per sq km of agricultural land (1974) POPUlATION CHARACTERISTICS (1976) HALTH (-1976) Crude Birth Rate (per '000): 27.4 Population per physician: 6,107 Crude Death Rate (per '000): 7.9 Population per hospital bed: 330 Infant Mortality (per '000 live births): 51 (1974) INCOM DISTRIBUTION (1973? DISTRIBUTION OF LAND OWNERSHIP % of national income, highest quintile: 45 % owned by top 10% of owners ** lowest quintile: 13 % owned by smallest 10% of owners ** ACCESS TO PIPED WATER (1971) ACCESS TO ELECTRICITY (1971) % of population - urbant 77 % of dwellings - urban, 9 - rural: 5 - rural: 3 NUTRITION (1973) EDUCATION (1973) Calorie intake as % of requirements: close to 100 Adult literacy rate: 78% Per capita protein intake (grams per day): 45 Primary school enrollment: 86% 2/ GNP PER CAPITA in 1976: US$200 GROSS DOMESTIC PRODUCT IN 1976 ANNUAL RATE OF GROWTH (I. constant prices) __s$ Mn % 1960-65 1965-70 19'0-76 GDP at Market Prices 3,114 100,0 3.6 5.3 2.7 Investment, 495 15.9 ** ** ** Domestic Saving 430 13.8 ** ** Current Account Balance -65 -2.1 * * * Exports of Goods, NFS 628 20.4 3.8 -0.6 -0.8 Imports of Goods, NMIS 679 22.0 -8.4 3.5 -5.0 OUTPUT, EMPLOYMENT, AND PRODUCTIVITY IN 1976 Value Added Empleymeat-V V. A, Per Worker Jiss M-n %Mn 7 1IJS$ --___ Agriculture 1,053 36.1 2.029 50.1 519 73 Industry 4/ 468 16.3 0.389 9.6 1,203 171 Services 1,343 46.9 1.632 40.3 823 110 Unallocated * * * * Total/Average 2,864 Th5-0 4.050 10021f 707 100.0 GOVERNMENT FINANCE Central Govermnent (Rs m) % of GDP 1976 1970-72 1976 4 Current Receipts 5,837 21.0 18.8 Current Expenditure 5 925 23.1 19.1 Current Surplus -88 2.1 -0.3 Capital Expenditures 2,030 6.4 6.5 External Assistance (net) 1,050 2.7 3.4 1/ Provisional estimates. 2/ The per capita GNP estimate for 1976 is taken from the World Bank Atlas. Per capita adjusted GNP in 1977 (see Annex C) at the new exchange rate is $160. All other conversions in this table are at the average official exchange rate prevailing during the period. 3/ The sectoral distribution was assumed to be the same as for 1971. 4/ Includes mining. Note: As described in "The Economy" section of this report, Sri Lanka has introduced a number of major chan,ges in domestic and external policies. The implications of these policies for the future have been reviewed in the Country Economic Report entitled "Development in Sri Lanka: Issues and Prospects," dated March 22, 1978 (Report No. 1937-CE). In consultation with the Government, work on detailed projections of the maJor macro-economic parameters, and the balance of payments is currently under way. ** not available * not applicable  Annex 1 Page 4 of 4 pages COUNTRY DATA - SRI LANKA September MONEY, CREDIT, AND PRICES 1971 1972 1973 1974 1975 1976 1977 (end of period) Money and Quasi Morey 3,379 3,916 4,093 4,504 4,712 6,521 7,795 Bank Credit to Public Sector 2,738 2,709 2,600 2,468 2,497 3,580 3,016 Bank Credit to Private Sector 1,736 2,117 2,133 3,188 3,363 3,919 5,222 (Percentages or Index Numbers) Money and Quasi Money as % of GDP 26.6 28.7 24.8 20.9 19.6 23.7 - General Price Index (1970 - 100) 102.7 109.2 119.7 134.4 143.3 145.2 146.2-' Annual percentage changes in: 1/ General Price Index +2.7 +6.3 +9.6 +12.3 +6.6 +1.3 +1.3- Bank credit to Public Sector +8.3 -1.1 -4.0 -5.1 +1.2 +43.4 -13.0 Bank credit to Private Sector +8.6 +21.9 40.8 +49.5 +5.5 +16.5 +34.8 BALANCE OF PAYMENTS MERCHANDISE EXPORTS (1977) 2/ 1976 1977- US$ Mn % (US$ Million) Tea 419 53.6 Exports of Goods, NFS 627 864 Rubber 109 14.0 Imports of Goods, NFS 679 809 Coconut Products 38 4.9 Resource Gap (deficit = -) -52 +55 Interest Payments (net) -20 -17 All other commodities 215 27.5 Workers' Remittances - - Total 781 100.0O Other Factor Payments (net) - - Net Transfers +7 +7 EXTERNAL DEBT, (US$ Million)3/ Balance on Current Account -65 +45 December 1976 December 1977 Direct Foreign Investment 1 -1 Total outstanding 1,102.6 1,124.0 Net MLT Borrowing 83 74 Disbursements (111) (122) Total Outstanding Amortization (28) (48) and Disbursed 702.3 784. Subtotal 83 Capital Grants 58 62 DEBT SERVICE PATIO for 1977A-/ 22.8% Other Capital (net) 244 1 Other items n.e.i. +4 2 Increase in Reserves (+) 5/ +67 +183 Gross Reserves (end year) 92 292 Net Reserves (end year) -67 +116 RATE OF EXCHANGE IBRD/IDA LENDING, December 31. I977 (USS Million) 1967 - 1971 IBRD IDA US$3.z) - R. 5.93 Rs 1.0 = US$0.17 Outstanding & Disbursed 34.3 57.5 Undisbursed 5.8 64.2 End 1972 Outstanding incl. Undisbursed ff0-1 121.7 US$1.00 = Rs 6.70 Rs 1.00 = US$0.15 End 1973 US$1.00 - Rs 6.75 Rs 1.00 - US$0.15 End 1974 Foreign Exchange Entitlement US$1.00 = Rs 6.69 Certificate (FEEC) Rates 6/ Rs 1.00 = US$0.15 1968 US$1.00 - Rs 8.54 (44% FEEC) 1969 to End 1975 1971 US$1.00 - Rs 9.19 (55% FEEC) US$1.00 = Rs 7.71 1972 (end) US$1.00 - Rs 10.38 (55% FEEC) Rs 1.00 = US$0.13 1973 (end) US$1.00 - Rs 11.13 (65% FEEC) 1974 (end) US$1.00 B Rs 11.04 (651 FEEC) End 1976 1975 (end) US$1.00 - Rs 12.72 (65% FEEC) US$1.00 = Rs 8.83 1976 (end) US$1.OU - RS 14.57 (65% FEEC) Rs 1.00 = US$0.11 1977 (end October) US$1.00 - Rs 14.07 (65% FEEC) End 1977 US$1.00 = Rs15.56 Rs 1.00 = US$0.06 V/ Average of first three quarters of 1977. 2/ Preliminary estimate as of March 1978. 3/ Repayable in foreign currencies and with a maturity over one year. 4/ Ratio of debt service including short-term and IMF credits to exports of goods and non-factor services. 5/ Includes errors and omissions. 6/ The certificates were abolished on November 15, 1977. South Asia Programs Department May 12, 1978  ANNEX II Page 1 of 5 pages THE STATUS OF BANK GROUP OPERATIONS IN SRI LANKA A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of April 30, 1978) US$ Million Amount (net of can- Loan or cellations and ex- Credit change adjustments No. Year Borrower Purpose Bank IDA Undisbursed Six loans and three credits fully disbursed 42.4 34.6 636 1969 Ceylon Electricity Board Power 16.5 0.7 653 1970 Sri Lanka Mahaweli Ganga Development 14.5 4.1 372 1973 Sri Lanka Power Transm. 6.0 0.4 504 1974 Sri Lanka Dairy Development 9.0 7.8 566 1975 Sri Lanka DFC - Industrial Finance 4.5 1.1 595 1975 Sri Lanka Agricultural Devel- opment 25.0 13.0 666 1976 Sri Lanka Tank Irrigation 5.0 4.9 701 1977 Sri Lanka Mahaweli Ganga Devel- opment II 19.0 19.0 709 1977 Sri Lanka Water Supply 9.2 9.2 742 1977 Sri Lanka DFC - Industrial Finance 8.0 8.0 Total, 73.4 120.3 68.2 of which has been repaid 34.1 _T2_ Total now outstanding 34.5 120.3 Amount sold, 3.6 - of which has been repaid 3.6 Total now held by Bank and IDA 34.5 120.3 Total undisbursed 4.8 63.4 68.2 B. STATEMENT OF IFC INVESTMENT (as of April 30, 1978) Amount of US$ Million Year Obligor Type of Business Loan Equity Total 1977 The Development Finance Development Banking Corporation of Ceylon - 0.1 0.1 1977 Bank of Ceylon Development Banking 2.0 - 2.0 Total Commitment now held by IFC 2.0 0.1 2.1  ANNEX II Page 2 of 5 pages C. PROJECTS IN EXECUTION I/ Ln. No. 636 - Maskeliya Oya Power Project; US$16.5 million of July 28, 1969; Effective Date: January 19, 1970; Original Closing Date: September 30, 1973, Revised Closing Date: December 31, 1978 The project is virtually completed. The first unit of 50 MW was commissioned in February 1974, about 1-1/2 years later than originally esti- mated. The second unit was commissioned in July 1974. The gas turbine unit was cancelled upon the request of the Ceylon Electricity Board (CEB). Delays were caused mainly by problems associated with the appointment of acceptable consultants, landslides in the penstock area, and various strikes in manufac- turers' factories. Site work has in general been carried out satisfactorily. The only remaining work, the extension of the Polpitiya switching station, will be completed during 1979. The closing date of the loan has been extended to December 31, 1978, to allow for completion of the Polpitiya switching station, and the use of foreign exchange savings of about US$1.7 million to cover the cost overrun on the Power Transmission and Distribution Project (Credit 372-CE), discussed below. Ln. No. 653 - Mahaweli Ganga Development (Irrigation/Power) Project; US$14.5 million of January 30, 1970; Effective Date: April 30, 1971; Original Closing Date: June 30, 1976; Revised Closing Date: July 31, 1978 An assurance has been received from the Government that the invert lining of the Bowatenna Tunnel was completed during closure of the Tunnel in February/March 1978. This work completes implementation of the project, some two years later than originally scheduled. An undisbursed amount of $4.1 mil- lion remains in the loan, which the Government is attempting to utilize for equipment procurement before the loan terminates on July 31, 1978. The credit associated with the loan has been fully disbursed. Cr. No. 372-CE - Power Transmission and Distribution Project; US$6.0 million of April 18, 1973; Effective Date: July 5, 1973; Original Closing Date: December 31, 1976; Revised Closing Date: December 31, 1978 The project is proceeding without major problems. Procurement of equipment and materials is practically completed. Route survey and right-of-way acquisition are progressing satisfactorily. Inflation since signing has increased foreign exchange costs by some 30%, and we have agreed to cover the cost overruns from savings under Loan 636-CE above. Although 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution and, in particular, to report any problems which are being encountered and the action being taken to remedy them. They should be read in this sense and with the understanding that they do not purport to present a balanced evaluation of strengths and weakness in project execution.  ANNEX II Page 3 of 5 pages actual physical completion of the project will not be until late 1979, dis- bursements from this credit and the US$1.7 million from Loan 636--CE, are expected to be largely completed by the revised closing date. Cr. No. 504 - Dairy Development Project; US$9.0 million of August 9, 1974; Effective Date: February 10, 1975; Closing Date: December 31, 1980 Farmers' response to the project has been most encouraging, with a high rate of applications for loans to purchase cattle. However, progress of the project has been seriously impeded by a shortage of such cattle due to problems with imports and an overestimation of the national herd at appraisal stemming from unreliable Government statistics. In order to improve project coordination, which has not been effective, the Project Technical Unit was transferred from the Department of Agriculture to the National Livestock Devel- opment Board in November 1977. Milk Collection by the National Milk Board (NMB) has already exceeded full development targets as a result of an increase in milk prices, approved by IDA, which were designed to ensure that milk pro- duction incentives for farmers were maintained. Consequently, NMB has had neither the time nor the incentive to establish project milk collection centers and delivery systems. The Government has proposed a reformulation of the project along the lines of the AMUL-model (Kaira District, India) of farmer- owned and operated dairy cooperative societies. A supervision mission is currently in the field to review and evaluate the reformulation proposal and, dependent upon their findings, a determination will be made whether IDA should continue with the project in its present form. Cr. No. 566 - Third Development Finance Corporation of Ceylon Project; US$4.5 million of June 27, 1975; Effective Date: August 22, 1975; Closing Date: September 30, 1979 The credit was designed to help meet the estimated foreign exchange requirements of the Development Finance Corporation of Ceylon (DFCC) for lend- ing mainly to export industries and tourism. Sub-projects for the total credit amount of $4.5 million have been approved, and the credit is likely to be fully disbursed by the closing date. Cr. No. 595 - Agricultural Development Project; US$25.0 million of December 24, 1975; Effective Date: March 1, 1976; Original Closing Date June 30, 1978; Revised Closing Date: June 30, 1979 Project implementation and disbursements fell behind schedule be- cause of initial delays in finalizing complementary UNDP Projects, appointment by Government of key consultants and inadequacies in local overall project coordination. The most severe of these deficiencies have now been removed and project progress is satisfactory. However, disbursements are expected to be only $16.9 M on June 30, 1978, the initial closing date. In order to complete the vehicle repair program and procurement of spare parts for the Department of Agriculture, procurement of equipment for the Sugar Corporation, and the procurement of additional trucks for the plantation sector and tractors for Dry Zone farm power, the closing date has been extended to June 30, 1978, when the credit is expected to be fully disbursed.  ANNEX II Page 4 of 5 pages Cr. No. 666 - Tank Irrigation Modernization Project; US$5.0 million of January 12, 1977; Effective Date: April 12, 1977; Closing Date: June 30, 1981 The construction program is behind schedule by about one year due to delays in procurement of construction equipment, civil disturbances in 1977, and shortages of experienced staff for surveys, designs, and supervision. Practically all construction equipment has now been procured and should be available at work sites by mid 1978. The Government has also introduced special incentives to stem the exodus of experienced technical staff for better paid jobs abroad. Implementation is expected to pick up significantly from this year. However, project completion is likely to be delayed by about one year. Procurement and distribution of farm equipment is proceeding on schedule. Introduction of the Training and Visits system of agricultural extension is also proceeding satisfactorily. Due to changes in the exchange rate, as well as refinement of quantities for various civil works, revised project costs (net of taxes and duties) are expected to be about 30% lower than those estimated at appraisal. A supervision mission returned in late April 1978. Cr. No. 701 - Mahaweli Ganga Development II Project; US$19.0 million of April 21, 1977; Effective Date: December 29, 1977 Closing Date: June 30, 1983 The new Government, which came into office as a result of the Gene- ral Election in July 1977, has chosen to make the Mahaweli Ganga the focus of its development effort and is making a serious attempt to complete the project in less than the four years planned during project appraisal. The Mahaweli Development Board has negotiated several contracts with the Army Engineers and other Government agencies for clearing forested areas and undertaking other construction work; some work was initiated in October, some two months before credit effectiveness. It appears that IDA's goal of strengthening the private construction sector by splitting the larger public works between private and public agency contracts will not be realized in the Government's haste to complete the project. Procurement actions for vehicles and equipment are moving rapidly and some equipment arrivals are anticipated by mid 1978. Construction work is presently going ahead with equipment available in the Government Sector. Cr. No. 709 - Water Supply Project; US$9.2 million of May 10; Effective Date: February 9, 1978; Closing Date: March 31, 1982 Due to the change of Government in July which resulted in a change in Secretary of Local Government and chairman of the Water Supply and Drainage Board, and the post-election disturbances, the new Government's consideration and review of its obligations under the credit agreement was delayed. As a consequence, at the time of the scheduled effectiveness date, the Government and WDB had not complied with agreed upon rate increases for bulk water. The Government indicated its intention to comply with this covenant by January 31,  ANNEX II Page 5 of 5 pages 1978, and the effectiveness date was changed to February 15, 1978. The Government subsequently fulfilled all necessary covenants including the rate increase for bulk water, and the credit was declared effective on February 9, 1978. Cr. No. 742 - Fourth Development Finance Corporation of Ceylon Project; US$8.0 million of September 30, 1977; Effective Date: December 16, 1977; Closing Date: December 31, 1981 This credit was designed to meet a substantial portion of DFCC's estimated foreign exchange requirements over a two-year period for lending to private sector industrial projects and tourism. Implementation is progressing satisfactorily, and, to date, sub-projects for US$1.5 million have been approved by IDA.  ANNEX III Page 1 of 2 pages SRI LANKA TREE CROP DIVERSIFICATION (TEA) PROJECT Supplementary Project Data Sheet Section I: Timetable of Key Events (a) Time taken by the country to prepare the project The project was identified and prepared on the basis of the FAO/UNDP technical assistance in agricultural diversification beginning in 1970. The FAO/IBRD Cooperative Program assistance was provided in project preparation in 1975/76. The project proposal was finalized in September 1977. (b) The agency preparing the project The project was prepared by the Agricultural Diversification Division (ADD) of the Ministry of Agriculture and Lands with FAO/UNDP assistance. (c) Date of first presentation to the Bank, and the date of the first Bank mission to consider the project April 1976, first presentation to the Bank; May 1976; first (identification) mission (d) Date of departure of Appraisal Mission October 1977 (e) Date of completion of negotiations April 1978 ) (f) Planned date of effectiveness September 1978 Section II: Special Bank Implementation Actions In order to expedite project implementation and procurement of key equipment needed in the project, retroactive financing of up to US$0.5 million is recommended for tractors, trailers, and vehicles under the credit (para 52).  ANNEX III Page 2 of 2 pages Section III: Special Conditions Conditions of Effectiveness (a) Execution of the Project Agreement on behalf of NADSA; (b) Transfer of control over the lands included in the project to NADSA (para 62). Other Special Conditions (c) Government would take measures to protect water supply systems against waterborne diseases (para 38); (d) NADSA would employ experts to assist in carrying out the Project (para 39); (e) All staff provided under the project to SCD, FD, and PTU would work full time on the Project (para 42); (f) Government would establish necessary Dairy Cooperatives by July 31, 1981 (para 42); (g) NADSA would continue to support and organize settlers work efforts through project year 6 (para 43); (h) NADSA would monitor the settlers economic status and Government would ensure that settlers have the financial ability to continue to develop their farms (para 45); (i) Government would make available on a grant basis the proceeds of the credit to NADSA (para 47); (j) Government would adopt cost recovery proposals acceptable to IDA (para 48); and (k) Government would take all measures to provide relief to displaced estate workers (para 60).   IBRD 13383 Koraesatttuie, 25' 800 80\4c FEBRUARY 1938 SRI LANKA TREE CROP DIVERSIFICATION PROJECT (TEA) I KANDY 1 Ri Project Boundaries a 0] ~~~~~~~~~~~~~~~~~~~~~~~~Setfler,en,t Areos L ANKA N Forest Areos ____ Roads .,' N -r--- Perodenrtya j olo8o\' / 7.15' P_ oinc7lBould.rv 7 15' /naf;an Ocean O______2__3__4__s___________________________ _= 80' 20j 7)~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Y I 7702- enne Undo GURUGODA H'NrnIoKd 7 aan I~~~GH CAI'CHMENT nAlnn -d ...et 7~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 05 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~'0' 80- 20' 80' 25' -- s'ocpO,o B0,hoa O, n 80' 30' 35'~~~~~~~~~~~~~~~~~~~~~~04