Nepal - Second Rural Development (Mahakli Hills) Project

Document of The World Bank Report No. P-2579-NEP REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE KINGDOM OF NEPAL FOR THE SECOND RURAL DEVELOPMENT PROJECT MAHAKALI HILLS June 7, 1979 This r4post may not he published nor may it be quoted as. representing the views of the World Bank. The Wor-ld Bank does not accept respoosibility for the accurapy or complieteness of the repo'rtff  CURRENCY EQUIVALENTS Currency Unit - Nepalese Rupee (NR) Since March 20, 1978 US$1.00 NRs 12.00 NR 1.00 = US$0.08 NRs 100 = US$8.33 WEIGHTS AND MEASURES 1 kilogram (kg) = 2.20 pounds 1 quintal = 100 kg = 220 pounds I metric ton = 1,000 kg = 0.98 long ton 1 millimeter = 0.039 inch 1 meter (m) = 3.29 feet = 1.09 yards 1 kilometer (km) 2 = 0.62 mile 1 hectare (ha) 3 = 10,000 m = 2.47 acres 1 cubic meter (m ) 35.31 cubic feet 1 liter (1) = 0.26 US gallon FINANCIAL YEAR July 16 - July 15 ABBREVIATIONS AND ACRONYMS ADBN - Agricultural Development Bank of Nepal AIC - Agricultural Inputs Corporation BVNCC - Back to the Village National Campaign Committee CCC - Panchayat Development Central Coordination Committee DAP - District Administrative Plan DA - Department of Agriculture DCVI - Department of Cottage and Village Industries ICB - International Competitive Bidding LDD - Local Development Department, Ministry of Home Panchayat MFAI - Ministry of Food, Agriculture and Irrigation MOHP - Ministry of Rome Panchayat PCC - Project Coordinating Committee ZCC - Zonal Coordinating Committee STAFF ABBREVIATIONS CDO - Chief District Officer CPC - Central Project Coordinator PC - Project Coordinator  FOR OFFICIAL USE ONLY NEPAL SECOND RURAL DEVELOPMENT PROJECT MAHAKALI HILLS Credit and Project Summary Borrower: Kingdom of Nepal Amount: US$11.0 million Terms: Standard Relending Terms: Agricultural credit funds of about US$350,000 equiva- lent would be made available to the Agricultural Develop- ment Bank of Nepal (ADBN) at 6% per annum for short-term and 4% per annum for medium-term loans. ADBN would on-lend to cooperatives at 10% and 8% per annum respec- tively, which would in turn lend to farmers at 14% and 11% per annum respectively. Project Description: The proposed project would help develop the three Hill districts of Dandeldhura, Baitadi, and Darchula and aims to raise agricultural production to levels whereby farmers could meet full family subsistence. The proposed project would provide for increased agricultural and live- stock production through minor irrigation development, strengthening of agricultural extension and animal health services, training, and improved availability of farm in- puts. These directly productive investments would be com- plemented by investments in erosion control, health care, village water supplies, lower and upper secondary educa- tion, postal services, panchayat facilities, and trails and foot-bridges. The project also provides for a study of cottage industry potential and prospects, as well as for facilities and staff required for project implementation. At full development, the project would raise food levels to about 330 days at average subsistence levels, compared to present food levels of about 260 days, for the 53,300 families residing in project districts. In view of the remoteness of the project area, the project faces a risk that government staff may not be willing to live and work in project areas. The project, however, is designed to minimize this risk by providing accommodation, project allowances and social amenities. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Estimated Cost US$ Million Equivalent of Project: 1/ Component Local Foreign Total I. Agriculture Agriculture Extension 0.88 0.08 0.96 Credit & Input Supply 0.44 0.42 0.86 Horticulture 0.06 - 0.06 Livestock 0.49 0.12 0.61 Irrigation 1.00 0.11 1.11 Subtotal 2.87 0.73 3.60 II. Social Infrastructure Water Supply 0.09 0.01 0.10 Health Services 1.27 0.18 1.45 Education 0.15 0.03 0.18 Panchayat Development 0.17 0.02 0.19 Postal Service, 0.04 0.01 0.05 Trails and Bridges 0.91 0.25 1.16 Erosion Control 0.36 0.11 0.47 Cottage Industry 0.26 0.06 0.32 Subtotal 3.25 0.67 3.92 III. Project Administration 1.01 1.52 2.53 Total 7.13 2.92 10.05 IV. Contingencies Physical 0.40 0.20 0.60 Price 1.90 0.90 2.80 Subtotal 2.30 1.10 3.40 Total Project Cost 9.43 4.02 13.45 Financing Plan: US$ Million Equivalent Local Foreign Total IDA 8.0 3.0 11.0 Government 1.4 - 1.4 UNDP 0.1 1.0 1.1 Total 9.5 4.0 13.5 1/ Includes a negligible amount of taxes and duties.  - iii - Estimated IDA US$ Million Equivalent Disbursements: IDA FY 1980 1981 1982 1983 1984 1985 1986 Annual 0.02 0.54 1.68 2.30 2.70 2.45 1.31 Cumulative 0.02 0.56 2.24 4.54 7.24 9.69 11.00 Rate of Return: 21% Staff Appraisal Report: No. 2401-]NEP dated May 31, 1979.   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT lO THE KINGDOM OF NEPAL FOR THE SECOND RURAL DEVELOPMENT PROJECT - MAHAKALI HILLS 1. I submit the following report and recommendation on a proposed development credit to the Kingdom of Nepal for the equivalent of US$11.0 million on standard IDA terms to help finance the Second Rural Development Project - Mahakali Hills. The UNDP is expected to provide about US$1.1 million equivalent for the technical assistance requirements of the project. About 3.0% oE the total project cost (US$350,000 equivalent) will be on- lent to the Agricultural DeveLopment Bank of Nepal (see para 50). PART I - THE ECONOMY 1/ 2. The most recent economic report entitled "Nepal-Country Economic Memorandum" (Report No. 1873a--NEP) was distributed to the Executive Directors on March 21, 1978. The principal findings of the Memorandum are described below. Country data are shown in Annex I. An economic mission is visiting Nepal (May/June 1979) and will prepare an economic memorandum for the Aid Group Meeting scheduled for January 1980. 3. Nepal is one of the least developed countries in the world. Per capita incone in 1977 was estimated at $120, and health and education standards are well below the average of South Asia: life expectancy at birth is less than. 44 years, infant mortality exceeds 200 per thousand, and adult literacy is only 19%. Population in mid-1976 was 12.9 million, of which over 90% lived in, rural areas. Both birth and death rates are high, keeping popu- lation growth at 2.1% a year. 4. The economy of Nepal centers around agriculture. It accounts for 65% of GDP and almost 75% of merchandise exports, and provides a livelihood to over 90% of the population. In addition, most of the small industrial sector, which comprises about 4% of GDP, processes agricultural raw materials. However, about 25% of total rural incomes are estimated to arise from non- agricultural activities. Cottage industries are one of the most important of these, estimated to engage over 1 million people and comprise about 7% of GDP. They provide basic consumer goods in the many small, isolated markets where such goods would otherwise not be available. 1/ Part I of this Report is substantially the same as Part I of the Report and Recommendation of the President to the Executive Directors on a proposed credit to the Kingdom of Nepal for the Narayani Zone Irrigation Development Stage II Project (Report No. P-2385-NEP of September 25, 1978).  - 2 - 5. As a small open economy with virtually free trading links with India, Nepal's economy is highly susceptible to developments in India. The Terai, which lies along the Indian border, has close trading links with India, and accounts for about 60 percent of the country's GDP, and about 40 percent of the population. The Kathmandu Valley, the administrative and commercial center, is closely linked with the Terai, but at significant transportation costs. The rest of the country, the hills and mountains, is almost inaccessi- ble economically, and consists of a large number of fragmented markets. 6. When Nepal adopted economic and social development as major govern- ment objectives in the early 1950s, there was virtually no economic and administrative infrastructure. Under these circumstances, initial develop- ment efforts necessarily concentrated on establishing a foundation for future development. It was inevitable that, during these early stages, growth would remain slow and that, as a result, there would be little if any increase in per capita income. However, four successive development plans passed with little shift in emphasis or improvement in per capita incomes and living standards. The Fifth Plan (1975/76 - 1979/80) was to become the turning point; emphasis was to shift away from heavy infrastructure towards quicker- yielding investments in directly productive activities, and towards the provision of social services. Investment in primary infrastructure would be highly selective, and kept in line with the country's near-term ability to exploit it. Infrastructure directly supporting other development activities would continue to receive priority. 7. To some extent the objectives of the Fifth Plan are being achieved; and investment has begun to be reoriented. However, GDP growth has been well below the 4-5% annual growth rate envisioned in the Plan, mainly because of poor agricultural performance. Following two years of stagnant performance, Nepal's economy has showed some improvements during the current fiscal year. An improved harvest due to favorable weather conditions is likely to boost agricultural production by 3 to 4 percent compared with the declining output during the two previous years. The growth in agricultural output together with the continued growth in other sectors of the economy, especially tourism, is likely to lead to a growth of 4 to 5 percent in overall real GDP in 1978/79. However, continued shortages of certain essential construction materials such as cement and iron bars, as well as shortages of electricity, have proved to be limiting factors in the growth of much of the nonagricultural sector. 8. So far overall balance of payments developments have not been a policy constraint for the authorities, and foreign exchange reserves in July 1978 were equivalent of about 8 months of imports. There has, however, been a large and increasing trade deficit. Imports have been growing under the impetus of the Government's development programs, while exports, principally rice (almost 50% of total exports) and jute (about 15%), declined. The trade deficits have been largely offset by increased earnings from tourism and remittances from Gurkhas (soldiers from Nepal serving in the British or Indian army). Tourism earnings accounted for 22% of total convertible foreign exchange earnings in 1976/77. However, despite increasing receipts from tourism and remittances from abroad, improvement in the trade balance remains critically important. Imports, particularly development goods and raw materials, are  - 3 - bound to rise steadily; however, medium term prospects for exports are not promising. Prospects for rice, the largest export, are not favorable due to declining surpluses at home and a comfortable supply situation in India. 9. On Marc'h 31, 1978, the authorities implemented a major reform of the ex- change and trade system applying to transactions with third countries. This involved the replacement of a complex system of multiple exchange rates and exchange and trade restrictions by a dual exchange system and liberalization. Transactions with India, whichn are virtually free from restrictions, were unaffected by these changes. New treaties on trade and transit with India were also concluded in March 1978. 10. The poor long-run performance of the economy is chiefly due to the poor growth of agricultural production which is failing to keep pace with population growth. Over the period 1967-77, cereals production grew at an average annual rate of only 1.8% against an annual increase in population of 2.1%. Increases in the area under cultivation account for almost all of this increase; average yields rose by only 0.1% annually. Malnutrition is acute in the Hills, which contain only one-third of the country's agricultural land, yet close to two-thirds of the population. Population density on agricultural land in these areas is higher than in Bangladesh, under even less favorable natural conclitions. Cultivation has been pushed up steep hillsides and onto marginal latnd, and average yields have actually declined. Food availability for the average family has dropped to less than the equivalent of 225 days minimum subsistence needs a year. Because they have little to trade except their labor,, one-third of thet inhabitants of these areas migrate seasonally to the Terai plains and northern India for food and work. Since the mid- sixties, an estimated 400,000 have migrated permanently; there are signs that this exodus is accelerating. Family planning services which could help miti- gate this crisis are weak. Although such services are available in most of the larger towns, they are only just beginning to be extended into outlying rural areas. These efforts are being hampered by the inaccessibility of most of the population; mounting a program on the scale needed will require much more manpower and funds. 11. W'hile the average-sized farm in the Terai is only 1.7 ha, it is still four times as large as that in the Hills. The small surpluses produced by the Terai farmers have been the basis for Nepal's rice exports. However, these exports have been steadily declining, from about half a million tons in the early sixties to only about 100,000 tons in 1977/78. This has been the result of production lagging behind population growth and, more recently, the relative decline in export prices resulting from good crops in India in combination with poor harvests at home. 12. Agriculture thus has the highest development priority in Nepal, not only because of its central economic role, but also because of the pressing need for fcod in the Hills. However, only the Terai presents opportunities for establishing market-oriented farming in the near future; agricultural development in the Hills will have to concentrate on meeting subsistence needs. The focus of agricultural development efforts in the Terai has been on major surface irrigation schemes to increase cropping intensity. However, inadequate attention in the past to bringing development down to the farm  level has resulted in the full benefits not being realized. The inadequate support services--inputs, credit, extension and research, and farm-to-market roads--compounded this problem. However, recent major irrigation projects financed by IDA and the Asian Development Bank are addressing these problems by taking more comprehensive and integrated approaches. 13. Although agriculture must occupy a predominant position in Nepal's development strategy, important opportunities exist in other directly produc- tive sectors, including tourism and industry. Tourism is one of the most rapidly growing sectors of the economy. Tourist arrivals have risen from fewer than 50,000 in 1971 to over 125,000 in 1977. But unless tourist services, particularly air transport, are expanded apace, this growth must necessarily come to a halt. Investment opportunities in large-scale industry are limited by the extremely low purchasing power of the population, the inaccessibility of much of the country, the country's remoteness from sources of supply and markets abroad, and its poor endowment with mineral resources. Under these circumstances, most private capital is invested in small agro-industries, trade, tourism and real estate, where profits are more assured. Effective promotion of agro-industrial investments would help promote crop diversifica- tion by farmers and increase domestic value added. Similarly, improved mar- keting arrangements both within Nepal and abroad, inputs supply and credit availability could help expand production by cottage industries. There is also potential in forest-based industries, based on controlled exploitation of forest resources. At present, however, fuelwood needs are causing the rapid depletion of forest resources in the Hills, contributing to the already massive erosion arising from natural causes and forage depletion. Immediate efforts in this sector must, therefore, concentrate on reforestation and water- shed management. In the longer run, fuller exploitation of Nepal's vast water resources could provide a basis for accelerated economic growth. 14. Nepal has made significant progress in mobilizing domestic resources to undertake its development programs, considering the extreme poverty, low degree of monetization, and fragmented nature of the economy. Revenues have grown at 16% a year since 1969/70, and revenues as a percentage of GDP have increased from 5.0% in 1969/70 to about 7.5% in 1976/77. Over the same period, the Government was able to maintain savings on current account in excess of 2% of GDP, a good achievement for a country in Nepal's economic position. 1/ It will be difficult, however, to maintain the public savings rate because current expenditures will have to start growing more rapidly than in the past to allow for proper maintenance of roads and major irrigation schemes, and the operating expenses of expanding social services. 15. The narrow tax base limits the potential for generating increased revenues through tax rate adjustments, but there is still considerable scope for increasing the contribution of agriculture, and improving tax administra- tion. Effective implementation of the recent agreement with India to improve control of unauthorized trade along the long common border would constitute an important step in this direction. 1/ Average government saving in the least developed countries as a whole is about -0.7%.  - 5 - 16. In view of the limited prospects for additional resource mobiliza- tion, foreign aid remains the decisive factor in Nepal's development. Foreign aid has increased rapidly during the 1970s, but present projections indicate that there will nevertheless be residual financing needs, which will prove difficult to fill through projects assistance. Donors need to consider financ- ing a larger portion of the local costs of projects, increasing commodity assistance, and providing sector aid. 17. As important as the need for additional financial assistance is the need to boost further absorptive capacity. Donors have responded through project-related technical assistance, and more recently, through efforts to strengthEn the development administration capacity in certain key sectors. To assist in the overall coordination of financial and technical assistance efforts, the Nepal Aid Group was formed in 1976; the Group has met twice at plenary meetings to discuss overall external assistance needs as well as at the local. level in Kathmandu to discuss and coordinate strategy. 18. As of December 31, 1977, official foreign debt amounted to $299 M. Although utilization has been slow in the past, disbursements are beginning to accelerate rapidly. Debt service was equivalent to about 2% of exports of goods ancl services. In view of the accelerating pace of development, external public debt is expected to rise and, based on the trend in recent years, may reach about $450 million by 1980, of which approximately 50% could be in IDA credits. Because of the large grant element in much of the foreign aid, the total. debt service ratio is projected to remain below 5% by 1980; debt service t:o the Bank Group alone would be less than 2% of exports of goods and services. PART II - BANK GROUP OPERATIONS IN NEPAL 19. Bank Group operations in Nepal began in FY70 with an IDA credit of US$1.7 million equivalent for a telecommunications project. In the fol- lowing nine years, 17 additional credits were approved, bringing total IDA assistance to Nepal to US$190.4 million equivalent, net of cancellations. In view of Nepal's many development needs, this assistance has been for projects in a wide variety of sectors. Five of these sectors account for 84% of IDA credits by amount: irrigaition (31% for 4 projects); power (22% for 1 project); telecommunications (11% for 3 projects); highways (10% for 2 projects); and water supply and sewerage (10% for 2 projects). The remaining 16% of IDA assistance has been for one project in each of the areas of rural development (4%), settlement (3%), technical education (3%), tourism (2%), technical assistance (2%), and industrial development financing (2%). The proposed credit would be the second in FY79, bringing the total amount of IDA assist- ance to Nepal to US$201.4 million equivalent, net of cancellations. No Bank loans have been made to Ne!pal. IFC made its first investment in Nepal ($3.1 million) in a hotel project in Kathmandu in FY75. Annex II contains a summary statement: of Bank Group operations as of April 30, 1979, and notes on the execution of ongoing IDA projects. It shows certain delays in the implementa- tion of these projects, particularly during the initial periods. These delays  - 6 - have been largely due to Nepal's limited technical and managerial capabilities. In order to assist Nepal in coping with this constraint, considerable tech- nical assistance is being given by Bank Group staff, including our Resident Mission in Kathmandu. As a result, improvement in the rate of disbursements is being realized. During FY78, US$11.4 million equivalent were disbursed compared to US$12.8 million equivalent disbursed during the entire previous seven years; disbursements through April 30, 1979 indicate a further improve- ment, disbursing $14.6 million equivalent so far in FY79. 20. Bank Group lending to Nepal has so far been at a modest level com- pared to the country's need for external assistance. The international community has persistently shown considerable interest in Nepal's economic development and, to date, shortage of funds has not been a bottleneck. The main constraint on the utilization of increased aid has been Nepal's limited absorptive capacity, affecting the pace of project preparation and implement- ation. The Bank is assisting the Government in project preparation through the Technical Assistance Credit and by acting as Executing Agency for a number of technical assistance projects in the current UNDP Five-Year Program. The Bank Group has also addressed the problem of absorptive capacity through its role in organizing the Aid Group for Nepal (para 17). 21. The Bank Group's current strategy places major emphasis upon the directly-productive sectors (particularly agriculture) and the development of complementary infrastructure, including feeder roads (particularly con- necting the Hills to the Terai), communications and hydroelectric power. Preparation of projects in irrigation, forestry, water supply, grain storage, and cottage/small industry is under way. PART III - THE RURAL SECTOR 22. Nearly 96% of Nepal's population lives in rural areas and for 95% of these residents, agriculture is the main source of livelihood as alter- native occupations are extremely limited. In the decade 1961-1971, when the non-agricultural labor force increased by 2.5%, the agricultural labor force increased in that period by 6.3%. This both increased pressure on land and increased rural underemployment. Urban areas are few and most settlements contain populations of less than 3,000. Hamlets are more widely dispersed in the Hills and Mountains than in the Terai (plains), adding yet another dimension to the problems of developing rural Hill and Mountain regions. Thus, the contrasts in Nepal are not so much between urban and rural areas, as between the Terai (with its relatively higher level of overall development) and the Hills and Mountains (except the three districts comprising the Kathmandu Valley). 23. Nepal is divided physically into three broad ecological zones: the Terai, Hills and Mountains. These th ee zones cover respectively 17%, 68% and 15% of the total area (140,800 km ). Rivers and streams cut through the country from north to south and with the hills create numerous microclimatic zones in valley bottoms and on surrounding hill peaks. Geography, a limiting  factor in the development of the Hill and Mountain areas, adds to isolation and perpetuates ethnic, linguistic and cultural differences. This isolation is further accentuated by lack of communications; in 1974, 42 out of 55 hill districts were without major road access, and 10 of these districts did not have even feeder roads. 24. The population of Nepal is now estimated at about 13 million and is distributed as follows: 58% Hills, 34% Terai and 8% Mountains. The annual national growth rate of 2.1% has shown no perceptible signs of decrease over recent years. Most of the population is young: the median age is about 22 years, and 66% of the population is below 30 years. In the decade 1961-1971, the popu'Lation grew at a faster annual rate in the Terai than in the Hills and Mounitains: 2.6% and 1.4% respectively. This difference in growth rates is large'Ly explained by migration from the Hills and Mountains. 25. In 1971, the average holding size in Nepal was 0.94 ha per family but this average masks considerable variations as 81% of families in the Hills own less than 1 ha, compared with 53% in the Terai. In 1962, the average farm holding of a household in the Hills was 0.56 ha; in 1976, this was estimated at less than 0.4 ha, while in the Far West Region, the estimate was less than 0.3 ha. Each holding, particularly in the Hills, is sub-divided into plots of smaller size covering several microclimatic zones, thus reducing risks conse- quent on vagaries of weather, changes in the courses of rivers and streams, and landslides. In addition, inheritance continues to decrease land holding size at each succeeding generation. 26. Nutrition. Zonal differences in production of major food crops are considerable, and when translated into terms of caloric requirements for mini- mum subsistence 1/, the average family in the Mountains now has enough food for aboul: 190 days; in the Hills, for 225 days; and in the Terai, for 540 days. The declining potential of the Hill and Mountain areas to provide subsistence for its residents is reflected in high infant mortality rates (estimated at over 200,/1,000 live births), a high child mortality rate between the ages 1-4 (estimated at 39/1,000) and a general lowered resistance to disease. Objectives and Strategy for the Future 27. The Fifth Plan (1975-1980) attempts to shift investment in favor of quick--yielding growth promoting programs in agriculture, industry, water resources and tourism. In the Hill areas, it is the Government's goal to eliminate the deficit in foodgrains production. For cottage industries, the Government has proposed a two-pronged approach: (i) developing cottage industries in the most promising growth areas in the Hills for sale in the rest of the country or for export, and (ii) developing self-reliance in inaccessible areas, by catering to the needs of the local people in the area. For rura'L development, the Government envisages an area-based integrated development strategy. Earlier, the general approach had not been integrated, 1/ About 2,000 calories per day for an adult.  - 8 - and efforts were concentrated on one or, at best, a few facets of district development. Most agencies had established autonomous project authorities which had generally operated through different ministries of the Government. In early 1977, the Government decided to formulate guidelines for implementa- tion of future rural development projects and which would be adoDted by all international agencies agreeing to assist in the financing of such projects. In light of experience gained during execution of the IDA financed First Rural Development Project (Credit 617-NEP) (see para 34 below), the Government requested IDA assistance in formulating appropriate guidelines; these were discussed with representatives of aid donors at a meeting held in Kathmandu in mid-1977. The proposals emphasize participation of the people in drawing up development plans and establish that implementation should be carried out under the aegis of the District Administrative Plan (DAP). Furthermore, they identify priority areas for development, training and technical assistance and indicate those components which should normally be included in rural development projects. These proposals have since formed the basis for project formulation and implementation. Organization and Implementation 28. Overall responsibility for coordination and implementation of rural development projects is vested in the Ministry of Home Panchayat (MOHP) and exercised by an already established Panchayat Development Central Coordination Committee (CCC), which is chaired by the Minister of Home Panchayat and in- cludes representatives of the National Panchayat, Back-to-the-Village National Campaign Committee (BVNCC), and Secretaries of the line ministries (designated as project officers). A Central Project Coordinator (CPC), holding the rank of Additional Secretary, serves as member/secretary. To assist the CPC in carrying out his duties, five new administrative divisions, each headed by a Joint Secretary, have been established within the MOHP, responsible for resource mobilization, training, research, coordination and panchayat devel- opment. The CPC, operating through the five administrative divisions, ensures inter-project coordination and funding, provides general administrative sup- port in project implementation and monitors and evaluates progress. Respon- sibility for implementation of individual project components rests with the designated project officers of the respective ministries and agencies. 29. Administratively, Nepal is divided into four Development Regions, running from north to south and each comprising Mountain, Hill and Terai areas. Each Development Region is sub-divided into Development Zones, vary- ing from 3 to 5 in number, which are further divided into Districts. Zonal Coordinating Committees (ZCC) would be established and chaired by the Zonal Commissioner and comprise Chief District Officers (CDOs), regional directors of line departments, BVNCC District Chairman, and District Panchayat Chairmen. The responsibilities of the ZCC would be: (i) to coordinate project activi- ties of participating ministries and agencies; (ii) to keep under regular review the progress of development projects; (iii) to review and to evolve, as necessary, procedures for smooth project implementation and monitoring; and (iv) to identify bottlenecks hindering project progress and to prescribe, as necessary, remedial measures to overcome them. In addition, ZCC would provide guidelines on the directions and nature of support which should be  - 9 - given by central line agenciess to the districts and the time schedules for planning, preparation, approval and implementation of subprojects. The ZCC would also endorse district plans. 30. Under the DAP, the Chief District Officer (CDO) is the administra- tive head of all government functionaries of line ministries operating at the district level. District officers of these line ministries are merged into a District Secretariat, which also functions as the Secretariat to the district panchayat. DAP defines the two areas of responsibility of the CDO as mainte- nance of law and order and district development. Execution of the latter function is entrusted to a Panchayat Development Officer under the CDO's supervision. Line ministries retain technical supervision of staff at dis- trict level while delegating administrative and financial responsibility to the CDO for the preparation and implementation of district development plans. Popular participation in development is established through coordination com- mittees, chaired by the district panchayat Chairman and comprising the CDO, representatives of line ministries and district panchayat. The District Secretariat is responsible for implementation of approved projects. 31. The panchayat system, which encompasses the political and develop- mental organizations, has three tiers. At the lowest level is the village panchayat or, for areas with a population of 10,000 and more, a town panchayat. The next level is the district panchayat. At the highest level is the National Panchayat whose 125 members are elected by members of district panchayats. The Panchayat system and assistance in local development are the responsi- bilities of the MOHP, headed by a minister who is responsible to the National Panchayat. The Local Development Department (LDD) of the Ministry is its executive arm, through which technical assistance and funds are channelled to panchayats. 32. The major responsilbility for local development lies with village and district panchayats. Village panchayat programs are initiated at village meetings and submitted to the district panchayat for technical clearance and financial assistance from grants which the LDD places at the disposal of district panchayats for this purpose. Village panchayat projects are imple- mented through local implementation committees composed of village panchayat chairmen, district assembly members and voluntary workers. Technical super- vision is provided by district panchayat staff. The MOHP undertakes training of officials and elected memlbers and provides staff and development funds. 33. The responsibility for planning and implementation of district panchayat development programs lies with the Secretariat of district pan- chayats. After approval by the district assembly, development programs are submitted to the concerned departments for technical approval and provision of funds. During implementation, projects are supervised by technical staff of the appropriate departments. The MOHP provides a multipurpose development worker to each village panchayat, who also acts as secretary of the panchayat. Such workers not only serve as a liaison between the district administration and village panchayats, but also provide administrative support, especially in respect of record keeping and accounting.  - 10 - Bank Group Support to Rural Development 34. The Bank Group is at present involved in an on-going rural develop- ment project and a settlement project. The first Rural Development Project (Credit No. 617-NEP, US$8.0 million equivalent) became effective in July 1976 and is assisting in the development of the two Hill districts of Nuwakot and Rasuwa, located in the Central Region. The project is comprised of eight components: (a) Development of more intensive agricultural extension accom- panied by wider use of improved crop varieties, establishment of farmer and staff training, improvements in marketing of horticultural produce and upgrading of research stations; (b) Livestock development through improved animal health services, small cheese/butter plants, a livestock market, an exchange program for improved sires, and improved fodder resources; (c) Establishment of a district organization for and undertaking investments to improve and extend hill and river terrace, and river valley irrigation systems; (d) Improvements in availability of inputs through provision of small warehouses and credit; (e) Soil erosion control; (f) Health centers and development of village water supplies; (g) Tracks and footbridges and upgrading of existing trails; and (h) Improvement of cottage industries. 35. General progress has been satisfactory. With some exceptions, implementation is either ahead of schedule or as forecast at appraisal. Track and trail improvement has lagged owing to shortages of labor during the con- struction season. Furthermore, shortages of well-trained staff and lack of seed of improved varieties have contributed to a slow rate of improvement in agricultural production. However, with the recruitment of village agricul- tural assistants from the area farmers and with the Agricultural Inputs Corporation (AIC) providing improved seed and fertilizer through their sales depots, agricultural production is on the increase and considerable increases in potato production have occurred at higher elevations. The establishment of four small cheese/butter plants have also increased cash returns to livestock keeping. District staff are now acquainted with the project and display considerable keenness and initiative. Preparation of the annual district development plan has insured local participation and there is a marked increase in the confidence of local people toward the ability of Government to implement these programs. Interministerial coordination has been good and the Project Coordinator has been effective in ensuring funding  - 11 - and providing support for district staff. Reporting of progress has been satisfactory. Disbursement is 85% of estimates (the discrepancy being due to savings in building costs and failure to meet expected development of tracks and trails), even though procurement procedures have been cumbersome due to unfamiliarity with procedures. 36. The Settlement Project (Credit No. 505-NEP, US$6.0 million equiva- lent) became effective in 1975 and is assisting in the clearing of land and settlement of three areas, two in the western Terai at Kanchanpur and Bardia, and one in the eastern Terai at Jhapa. The settlement schemes are designed to relocate rural families mainly from the Hills, and include food assistance during the first 270 days of settling in, extension services for agriculture and provision of credit. The project concept is designed to utilize the earn- ings from the sale of logs and lumber to finance investments in the settlement schemes, resulting in a very low-cost rural development scheme, in addition to a viable investment in the logging industry. Project progress in the forestry clearing component has been slow, due to both technical and managerial con- straints, while the implementation of the commensurately smaller settlement schemes has been satisfactory. PART IV - THE PROJECT 37. The proposed project was prepared by the Agricultural Projects Service Center of Nepal, withi assistance from the FAO/IBRD Cooperative Program; preparatory work was financed under the first IDA-assisted rural development project. The project was appraised in November/December 1978. Negotiations were held in Kathmandu, Nepal, in May 1979. The Nepalese delegation was led by H.S. Shrestha, Joint Secre!tary, Ministry of Finance. A report entitled "Nepal - Staff Appraisal Report - Second Rural Development Project" (Report No. 2401-NE]?, dated May 31, 1979) is being circulated to the Executive Directors. A timetable of key events relating to the project, special imple- mentation actions to be taken by the Association and special conditions of the proposed credit are given in Annex III. Project Objectives 38. The project would help develop the three far western Hill districts of Dandeldhura, Baitadi, and Darchula (Maps IBRD 14189 and 14190) and aims to raise agricultural product:ion to levels whereby farmers could meet full family subsistence. Given the remote project area, poor communications, and low income levels, the project: (i) emphasizes the adoption of low-cost mea- sures for raising productivity; (ii) utilizes simple design schemes for con- struction of irrigation works, wells, trails etc., which can subsequently be maintained by the beneficiaries; (iii) upgrades infrastructure; and (iv) pro- vides complementary investments in social services. Project Description 39. The main components of the project are:  - 12 - (a) upgrading of agricultural and livestock extension services; (b) expansion of agriculture and cottage industry credit programs and strengthening of Sajha cooperatives; (c) expansion of horticulture through provision of fruit trees and vegetable seed; (d) establishment of animal health and buffalo breeding programs; (e) development and improvement of about 700 ha of hill and terrace irrigation schemes using water from perennial and seasonal sources and of about 700 ha of gravity-fed irrigation schemes in river valleys and lower terraces; (f) upgrading of 225 shallow drinking water wells; (g) construction and improvement of 3 small (15 bed) hospitals and about 25 health posts and provision for increased staff and supplies of drugs and medical equipment; (h) upgrading about 110 lower secondary and 15 secondary schools through improvement to buildings and libraries, construc- tion of 5 student hostels, provision of teaching aids, and increasing the number of mathematics and science teachers; (i) provision of panchayat facilities by construction of about 22 multipurpose panchayat community centers, strengthening of district accounting staff, and training of panchayat officials and staff; (j) provision of furniture and fittings for existing post offices and construction of about 19 additional sub-post offices and about 50 relay stations; (k) upgrading of about 250 km of main trails and about 340 km of secondary trails, and construction of about 128 timber and 19 suspension bridges; (1) establishment of a divisional erosion control office and undertaking of protection measures for roads and trails and on other infrastructure; (m) improvement of cottage industry through a study to determine the potential and prospects in the project area and through training of staff and of those engaged in wool weaving; and (n) establishment of project headquarters and provision of staff, equipment and technical assistance. 40. In line with the administrative procedures established for all rural development projects in Nepal (para 28), overall responsibility would be  - 13 - vested in the Panchayat Development Central Coordination Committee (Section 3.03(a) of the Development Credit Agreement (DCA)). It would be a condition of effectiveness that the ZCC had been established for the Mahakali Zone and a full-time Project Coordinat:or (PC) had been appointed (Sections 3.03(b) and (c) and 5.01(c) of the DCA). The PC would be appointed from the MOHP of at least Joint Secretary rank and would serve under the general direction and supervision of the CPC. The PC would serve as member/secretary of the ZCC and would be assisted by an adviser appointed under the technical assistance program (para 47) and would establish a project headquarters expected to be located in Patan. 41. Each District Secretariat (para 30) would prepare annually a District Development Plan for each district in the project area in consulta- tion with the district panchayat, with assistance from the PC. Participating ministries/agencies would thean provide technical clearance of their components through their designated project officers. Individual components of the plan would then be implemented under the direct supervision of the technical func- tionaries of the concerned ministries, but under the overall guidance of CDO and with the support and cooperation of the district panchayat. District Development Plans would be submitted annually to IDA by September 15 for com- ment, and budgetary allocations to districts would be made in amounts suffi- cient for the proposed projeczt (Section 3.07 of the DCA). 42. The project would be implemented according to standard procedures of Government as they apply to planning, approval, budgeting procedures, and responsibilities of the Ministry of Finance. The PC would play an important role in preparation of financial estimates and district development plans and would assist CDOs and District Secretariats in the preparation of these development plans and detailed implementation schedules within the broad framework of: (i) project proposals; (ii) requirements of the DAP; and (iii) technical guidelines from central line agencies. Although the PC's role would be advisory, he would have the responsibility of bringing disputes and conflicting priorities, which cannot be resolved at the district level, to the attention of the relevant ministries and central agencies and, if necessary, to the ZCC for resolution. The PC would also provide assistance and advice to central line departments of Government in the timing, phasing and contents of their inputs to district plans. The PC would then present the completed district plan to the ZCC for endorsement and thereafter ensure timely sub- mission of the district plan to the CCC for approval. Finally, the PC would monitor the process whereby each concerned ministry and agency makes budgetary requests for financial provision to implement the planned project components and would collate such requests for the ZCC and the Finance Ministry. 43. Ait the three district headquarters, facilities, including the con- struction of offices and staiff housing and provision of equipment, materials, and incremental staffing, would be developed for expanded and improved pro- grams of agricultural and livestock extension work, irrigation development, health services, cottage indlustries, and technical offices of the Ministry of Works and Transport (MOWT). Similar headquarters facilities to serve all three districts would be established in Patan for the PC, and for a Panchayat training program, erosion control, and technical support unit of the MOWT, and at Dandeldhura for the L.DD water supply project.  - 14 - 44. The focus of most project activities would be the administrative service centers. About 22 such centers would be established under the proj- ect, each covering about 4-5 panchayats. Each center would be constructed from locally-available materials and would comprise a small office building for use by extension staff and other visiting government staff, as well as facilities for a small livestock dispensary and standing buffalo bull, a sajha cooperative office and store, post office and community hall; office and training equipment and staff quarters would also be provided. Each service center would also make available to local farmers the use of a small hand winnower to clean and grade seed. 45. Overall project implementation would take five years. A seed exchange program as well as extension services would be initiated from the beginning of the project. Given the focus of the extension programs on adoption of low-cost measures for raising agricultural production, increased agricultural credit is not expected to be required until the fourth and fifth years of the project. The upgrading and construction of the irrigation works, trails and bridges, health posts and schools are planned to commence at the end of the first or at the beginning of the second year of the project. As some of the project components were developed and would be implemented by separate corporations, as opposed to Government line agencies, it would be a condition of credit effectiveness that the Government had entered into formal arrangements, satisfactory to the Association, with the Agricultural Input Corporation (AIC), the Agricultural Development Bank of Nepal (ADBN), and the Dairy Development Corporation (DDC) (Sections 3.01(b)(i) and 5.01(a) of the DCA). 46. With the assistance of a training and communication officer (Section 3.02(d) of the DCA), detailed proposals for agricultural training programs for extension staff would be prepared and submitted by December 31, 1980 to the Association for comment (Section 3.10(a)(i) of the DCA). Funds would be provided under the project for the Dairy Development Corporation (DDC) to carry out studies by December 31, 1980 and to initiate pilot programs for the improvement of marketing and prodution of ghee (Section 3.10(a)(iii) of the DCA). The study on the prospects and potential of cottage industries in the project area would be initiated by December 31, 1980 (Section 3.10(a)(ii) of the DCA). Technical Assistance 47. Through a UNDP technical assistance agreement, three internationally recruited staff are expected to be employed for three years to assist in project implementation (Sections 3.02(a), (b) and (c) of the DCA). A rural development administrator would serve as assistant to the PC to help develop procedures and expertise at district level in planning, budgeting and project implementation and to assist in setting up a system for project monitoring, disbursement and accounting. A civil engineer would work with staff of a district technical support unit and a district technical office of the MOWT in planning, design and implementation of work programs for project buildings, bridges, trail improvement, and construction of hill terrace irrigation. A socio-economist would formulate and develop procedures for monitoring the socio-economic impact of the project on participants and assist in the  - 15 - analysis of data collected. The socio-economist would also design and carry out such ad hoc studies as are necessary to monitor progress and provide guidance to project management in project implementation. It would be a condition of credit effectivieness that the Government had made arrangements, satisfactory to IDA, for the retention of these technical experts, as well as the training and communication officer (para 46) (Section 5.01(b) of DCA). Monitoring and Evaluation 48. The socio-economic unit set up in the Office of the CPC in the MOHP under the first rural development project (para 34) has proven to be a very useful tool in providing data on project progress and pointing out areas of concern and ways of resolution. The proposed project would strengthen this socio-economic program through the appointment of additional staff, training of local ccunterparts, and with the assistance of the socio-economist to be provided under the technical assistance program. The project would also provide funds for project evaluation; under the program a baseline socio- economic survey of the three project districts would be designed and conducted. The unit would also prepare, under the supervision of the PC, semi-annual project reports. Funds would also be provided under the project for employ- ment of shcrt-term consultants to assist in preparation of the project com- pletion report, as well as for feasibility studies and preparation of a further rural development project. Cost and Financing 49. The total project cost is estimated at US$13.5 M equivalent, in- cluding contingencies and a negligible amount of taxes and duties. The cost estimates are updated to March 1979 prices and include physical contingencies of 10% for construction of buildings and 15% of costs of trails, irrigation and erosion control works. Price contingencies have been calculated using 6% per annum price increases for equipment and vehicles and 8% per annum for civil works and other project costs. The foreign exchange cost is estimated at US$4.0 million or about 30% of total project cost. The proposed IDA credit would cover all the foreign exchange cost (excluding the financing for tech- nical assistance expected to be provided by UNDP) and about US$8.0 million equivalent of local costs, amounting to 81% of total project cost. UNDP would provide about US$1.1 M and the Government would contribute US$1.4 M equivalent in local cost or about 11% of total project cost. The cost of individual consultantst services is based on the UNDP scales of about US$65,000 per man-year, including benefits, overheads, etc. 50. Agricultural credit funds (US$350,000) 1/ would be made available to ADBN under arrangements and upon terms and conditions satisfactory to the Association (Section 3.01(b)(i) of the DCA). It is expected that funds would be on-lent to ADBN at 6% and 4% per annum for short- and medium-term loans, respectively, equivalent to present rediscount facilities of the Central Bank. In line with present policy, ADBN would lend to cooperatives at 10% and 8% 1/ Net of price contingencies.  - 16 - per annum respectively; they, in turn, would on-lend to farmers at 14% and 11% per annum respectively. Interest margins would be adequate to cover all operating expenditures and charges, including taxes and borrowing from all sources and are sufficient to maintain adequate reserves to meet reasonable bad debt risks. Inflation in Nepal over the past three years has averaged 6.7% per annum and is not expected to exceed 7% annually over the next three years. Therefore, the proposed rates to the ultimate borrowers would be positive in real terms. 51. Capital costs, including construction and civil works, provision of equipment and supplies, and studies, represent over 55% of total project cost. 1/ Operating costs 1/ for incremental staff and other incremental recurrent expenditures amount to about 30% of total project cost. The re- mainder 1/ is made up of technical assistance (11%) and credit (4%). The incremental operating costs are relatively small and well within the capacity of the Government to sustain after the five year project implementation period. In light of the investment to be undertaken to upgrade gravity-fed irrigation schemes in river valleys and lower terraces, the Government would submit proposals to the Association by June 30, 1984, regarding the amount and method of collection for the levy of appropriate water charges (Section 3.09 of the DCA). 52. Procurement. Procurement of equipment, furniture and vehicles (US$908,000) 1/, involving contracts above US$100,000 would be on the basis of international competitive bidding (ICB) in accordance with IDA guidelines. Orders of less than US$100,000 would be purchased under Government local tender procedures which are satisfactory. Because of the remoteness of the project area and small size of individual schemes, it would not be practical to group civil works contracts (US$5.8 M 1/) for ICB or local competitive bidding. Consequently, civil works would be undertaken by the Ministry con- cerned, using local labor, with the exception of works on "major" irrigation schemes (US$659,000) 1/ which would be subject to local competitive bidding. 53. Disbursement. Disbursement of funds would be on the following basis: (i) 90% of local expenditures for civil works carried out either by contract or by force account; (ii) 100% of foreign expenditures for directly imported equipment, furniture and vehicles and 100% of local expenditures (ex-factory cost) for locally manufactured goods and 90% of local expenditure for other goods procured locally; (iii) 90% of agricultural and cottage in- dustry subloans disbursed by ADBN; (iv) 100% of total expenditures for consul- tant services and training; and (v) 90% of local expenditures for salaries and allowances of staff engaged in the project in agricultural and livestock development, cooperatives, AIC, health, cottage industry, civil engineering, training and in project management, monitoring and evaluation. Disbursement against civil works carried out by force account and by contracts costing US$5,000 equivalent or less and against categories (iii) and (v) above would be made against statements of expenditures. The documentation for such expenditures would be retained by the Government and made available for 1/ Net of price contingencies.  - 17 - inspection by IDA representatives during the course of project supervision. Requests for disbursement against other items would be fully documented. 54. The Government would cause participating Government ministries, ADBN, AIC, and DDC to establish and maintain separate accounts for the project in accordaince with sound accounting practices and would insure that these accounts wrould be audited annually by an independent auditor acceptable to IDA and furnished to the Association not later than twelve months after the end of each fiscal year (Sections 4.01(a) and (c) of the DCA). The audit report would be required to include a statement that funds disbursed against statements of expenditure had been used for the purpose for which they were provided. The documents evidencing the expenditures on account of which withdrawa:Ls are requested on the basis of statements of expenditure would be retained until one year after the closing date (Section 4.01(b) of the DCA. Productionl and Farm Incomes 55. At full development in 1990, production is expected to increase by between 25-50% for the various crops (valued at about US$2.35 M annually) and net farm incomes would improve by 50-130%. Benefits are expected through yield improvements rather t:han increased cropping intensity or area expansion. Production increases from Livestock would result in increased production of milk, meat, wool, hair, and dung valued at about US$475,000 annually (gross value of production in financial prices). Almost all increased production would be consumed on farm to help meet subsistence needs. Ghee would be marketed across the border in India where there is a high demand for the product. Incremental wool producticn would be readily absorbed in the project area since wool based cottage industries presently have to import wool from Tibet and India. Consequently, no marketing constraints are foreseen for any incremental production resulting from the project. Benefits and Risks 56. At full development, increased production would raise family food levels tc about 410 days at minimum subsistence levels 1/ or 330 days at average subsistence levels 2/, compared to 295 days and 250 days respectively without the project. Current consumption levels are estimated at about 300 days at minimum subsistence and 260 days at average subsistence levels. In- creased production would help reduce underemployment on farms and over the project period, development of infrastructure would provide about 4 million mandays of employment, mainly in construction. It is expected that the project would also help slow down permanent migration from the area, which in turn wou:Ld reduce population pressures on scarce land resources elsewhere in Nepal. Benefits from the social and other infrastructure programs would also contribute indirectly to increased production. At full development, the average income of the poorest group would increase from about 17% of the 1/ 2,000 calories per day for an adult. 2/ 2,500 calories per day for an adult.  - 18 - national average to about 25%. Per capita incomes of larger farmers in the project areas (the average farm holding in the far West Region is only 0.3 ha) are expected to increase from 20% of national average to about 40%. 57. Discounting the economic costs and the quantifiable benefits over a 20 year period, the economic rate of return for the project as a whole is estimated at about 21%. The economic rate of return for the agricultural development component, which represents about 18% of total project cost, is estimated at about 50%; the economic rates of return for the irrigation component, which represents about 11% of total project cost, and for the livestock component, which represents about 6% of total project cost, are estimated to be about 12% and 15% respectively. Costs and benefits of the social programs have not been included as the benefits are non-quantifiable. Sensitivity tests indicate that, under a series of adverse assumptions, the project would remain viable. If projected crop yields decreased by 20%, and construction costs increased by 50%, the economic rate of return would be 14%. If achievement of full benefits of the project were delayed by 5 years, the economic rate of return would be 17%. 58. In view of the remoteness of the project area, the greatest risk lies in the availability and willingness of government staff to live and work in project areas. The project is designed to minimize this risk by providing accommodation, project allowances and social amenities to create sufficient incentives for staff participation. In addition, the training of staff for the Department of Village and Cottage Industries would be allocated on a priority basis to locally resident staff, and those selected for training would undertake to serve in the project area for at least two years from the date of return (Section 3.08 of the DCA). Lack of communications and means of transportation may also affect farmers' participation in the project. To minimize this risk, activities would be decentralized to administrative service centers located throughout the project area. In addition, tracks and trails would be improved to facilitate delivery of inputs. PART V - LEGAL INSTRUMENTS AND AUTHORITY 59. The draft Development Credit Agreement between the Kingdom of Nepal and the Association, 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. 60. Special conditions of the project are listed in Section III of Annex III. Special conditions of effectiveness would be that the the Govern- ment had: (i) established the Zonal Coordinating Committee and appointed the Project Coordinator (para 40); (ii) completed arrangements, satisfactory to the Association, for the carrying out of the project components to be imple- mented by AIC, ADBN, and DDC (para 45); and (iii) completed arrangements, satisfactory to the Association, for the retention of the required technical experts (para 47).  - 19 - 61. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 62. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachment:s June 7, 1979  - 20- ANNEX I TABLE 3A NEPAL - SOCIAL INDICATORS DATA SHEET AND a>'_ THGU KM2) ------------------------------- --------------- NEPAL REFERENCE COUNTRIES (19701 TOTAL 140.8 MOST RECENT AGRIC. 40.0 1960 1970 ESTIMATE AFGHANISTAN BOLIVIA TURKEY** GNP PER CAPITA (US$) 50.0 70.0 110.0 110.0 29C.0 510.0 POPULATION AND VITAL STATISTICS _______________________________ POPULATION (MID-YR, MILLION) 9.3 11.3 13.1 12.3/a 4.9 35.B POPULATION DENSITY PER SQUARE KM. 66.0 80.0 93.0 19.0 4.0 46.0 PER SQ. KM. AGRICULTURAL LANO 243.0 284.0 328.0 87.0 16.0 65.0 VITAL STATISTICS CRUDE BIRTH RATE (/THOU, AV) 46.3 44.7 42.9 48.7 44.4 40.6 CRUDE DEATH RATE (/THOU,AV) 27.8 24.6 20.3 27.6 19.7 14.4 INFANT MORTALITY RATE (/THOU) .. 200,0 -300 1 154.0 153:0 /a LIFE EXPECTANCY AT BIRTH (YRS) 35.6 40.6 43.6 37.8 45.3 54.4 GROSS REPRODUCTION RATE 3.0 3.0 2.9 3.4 2.8 2. /b,c POPULATION GROWTH RATE (X) TOTAL 1.5 2.1 2.1 2.21b 2.6 2 5 URBAN 6.5 3.9 5.4 5.2 4.2 4.9 Id URBAN POPULATION (X OF TOTAL) 3.4 4.1 4.8 10.7 32.3 38.7 AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 39.9 .. 40.5 43.2 41.9 41.7 15 To 64 YEARS 57.0 56 .4 54.2 54.6 54.0 65 YEARS AND OVER 3.1 . 3.1 2.6 3.5 4.3 AGE DEPENDENCY RATIO 0.6 .. 0.8 0.6 0.8 0.9 ECONOMIC DEPENDENCY RATIO 1.0 1.0 - 1.0 /a 1.1 Ia FAMILY PLANNING ACCEPTORS (CUMULATIVE, THOU) ,. 86.5 378.6 '' USERS (X OF MARRIED WOMEN) .. .. 17.0 .. .8. .2 EMPLOYMENT TOTAL LABOR FORCE (THOUSANO) 4300.0 4900.0 . .. 2300.0 14000 If LABOR FORCE IN AGRICULTURE (X) 94.6 94.4 , .. 6s.0/b 63 - UNEMPLOYED (5 OF LABOR FORCE) .. .. .. .. 16.0 11.9 a INCOME DISTRIBUTION S OF PRIVATE INCOME REC'D BY- HIGHEST 5% OF HOUSEHOLDS .. .. .. .. C 32.8 a HIGHEST 20% OF HOUSEHOLDS .. .. .. .. 59.0j 60.6 LOWEST 201 OF HOUSEHOLDS .. .. .. .. 4.0 2.9 1