Sri Lanka - Smallholder Rubber Rehabilitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 9261 PROJECT COMPLETION REPORT SRI LANKA SMALLHOLDER RUBBER REHABILITATION PROJECT (CREDIT 1017-CE) DECEMBER 28, 1990 Agriculture Operations Division Country Department I Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their ofricial duties. Its contents mav not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENT (Rs per US$) Year Rupees 1980 (Appraisal) 15.5 1981 (Project start) 19.2 I/ 1989 (Completion) 33.1 1/ 1/ Based on average loan disbursement conversion rates. FISCAL YEAR January 1 - December 31 WEIGUTS AND JiEASURES Metric System ABBREVIATIONS AND ACRONYMS ARTI Agrarian Research and Training Institute ASD Advisory Services Department DCA Development Credit Agreement ERR Economic Rate of Return FAO/CP Food and Agriculture Organization Cooperative Programme GOSL Government of Sri Lanka GPC Group Processing Centre IRR Internal Rate of Return JEDB Janatha Estates Development Board MFP Ministry of Finance and Planning MPI Ministry of Plantation Industries PAD Processing Advisory Division PCU Project Coordination Unit PCR Project Completion Report RCD Rubber Control Department REO Rubber Extension Officer RPPU Rubber Policy and Planning Unit RPRC Rubber Policy Review Committee RRI Rubber Research Institute of Sri Lanka RSS Ribbed Smoked Sheet SAR Staff Appraisal Report SPC State Plantation Corporation TCWP Tree Crops Working Group  FOR OMCIL USE ONLY THE WORLD BANK Washington. DC 2043 3 U.S A Office of DirectowCGeneral Operatmm nvakIwton December 28, 1990 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Sri Lanka Smallholder Rubber Rehabilitation Project (Credit 1017-CE) Attached, for information, is a copy of a report entitled "Project Completion Report on Sri Lanka: Smallholder Rubber Rehabilitation Project (Credit 1017-CE)" prepared by the Asia Regional Office with Part II contributed by the Borrcwer. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  PROJECT CONPLETION REPORT FOR OFFICIAL USE ONLY SRI LANMK SMALLHOLDER RUBBER REHABILITATION PROJECT (Cr. 1017-CE) CONTENTS Page PREFACE . . . . . . . . . . . . . . . . . . . . . . . . .i EVALUATION SUMMARY . .. PART I PROJECT REVIEW FROM BANK'S PERSPECTIVE A. Project Identity . . . . . . . . . . . . . . . . . . . .1 B. Background .1 C. Project Objectives and Description . . . . . . . . . . . 2 D. Project Design and Organization . . . . . . . . . . . . 3 E. Project Implementation . . . . . . . . . . . . . . . . . 4 F. Project Resuilts . . . . . . . . . . . . . . . . . . . . 5 G. Project Sustainability .11 H. Bank Performance .11 I. Borrower Performance . . . . . . . . . . . . . . . . . . 12 J. Project Relationship .13 K. Consulting Services .13 L. Project Documentation and Data . . . . . . . . . . . . . 13 PART II PROJECT REVIEW FROM BORROWER'S PERSPECTIVE . . . . . . . . 15 PART III STATISTICAL INFORMATION A. Related Bank Loans and/or Credits . . . . . . . . . . . 17 B. Project Timetable ..17 C. Credit Disbursements .17 D. Project Implementation ..18 E. Project Costs and Financing . . . . . . . . . . . . . . 21 F. Project Results ..22 (1) Direct Benefits .22 (2) Economic Impact .22 (3) Financial Impact .23 (4) Studies .23 G. Status of Covenants . . . . . . . . . . . . . . . . . 23 H. Use of Bank Resources . . . . . . . . . . . . . . . . . 24 TABLES 1. Economic Analysis .... . . . . .... . . . . . . . 25 1.1 Rubber Crop Model (Yields and Ilaputs) . . . . . . . 26 1.2 Rubber Crop Model (Financial Budget) . . . . . . . 29 2. Financial Rate of Return ... . . . ..... . . . . . 32 3. 3.1 Banana Crop Model (Yields and Inputs) . . . . . . . 33 3.2 Banana Crop Model (Financial Budget) . . . . . . . 33 MAP - IBRD 14733R 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.  i PROJECT COMPLETION REPORT SRI LANKA SMALLHOLDER RUBBER REHABILITATION PROJECT (Cr. 1017-CE) PREFACE This is the Project Completion Report (PCR) for the Smallholder Rubber Rehabilitation Project in Sri Lanka for which Cr. 1017-CE in the amount of US$16 million was approved in May 1980. On January 17, 1986, US$4.0 million was cancelled from the Credit account due to a considerably reduced disbursement rate, mainly as a result of the depreciation of the Sri Lankan Rupee against the US Dollar. The Credit closed on December 31, 1988 an undisbursed belance of US$0.86 million was cancelled. This report was prepared by an FAO/World Bank Cooperative Programme mission i/ which visited Sri Lanka in April/May 1990. 2/ It is based, inter alia, on the Staff Appraisal Report, the Development Credit Agreement, supervision reports, correspondence between the Bank and the Borrower, the draft PCR prepared by the Borrower, and discussions with staff of the various implementing agencies, and farmers. 1/ Messrs. H. Trupke (Economist, Mission Leader) and K.K. Aw Yong (Agronomist). 2/ Minor editorial changes were made by IDA staff.  iii PROJECT COMPLETION REPORT SRI LANKA SMALLHOLDER RUBBER RRHABILITATION PROJECT (Cr. 1017-CE) EVALUATION SUMMARY Obiectives 1. The main objective of the project was to increase production and improve quality of Sri Lanka's rubber by providing smallholders with adequate replanting inputs and incentives, and reorganizing and strengthening the agencies concerned. It mainly consisted of replanting 18,800 ha of over-aged smallholder rubber area and providing institutional support to the Rubber Control Department (RCD) and the Advisory Services Department (ASD), including the provision of office and housing facilities, equipment and training and technical assistance. Implementation Experience 2. The project was planned to be implemented over a period of six years, starting in July 1980 (with retroactive financing of expenditures from January 1980) and ending in December 1985. Total costs were estimated at Rs434.0 million CUS$28.0 million equivalent) and an IDA credit of US$16.0 million was made available. Initially, replanting exceeded appraisal targets, however, starting from 1983, programme implementation fell considerably short, due mainly to droughts and floods and partly to land ownership and registration problems. 3. In addition to the above problems, the State Plantation Corporation (SPC) and the Janatha Estates Development Board (JEDB) also failed to supply the necessary amount of planting materials, resulting in further delays in the replanting programme. Subsequently, private commercial nurseries increasingly supplied planting materials to growers. However, the attempt of the two corporations and the private nurseries to substantially increase the output of planting materials within a short period resulted in the production and supply of poor quality budded stumps and mixed clones to project participants. This siLuation was rectified during the latter part of the project. 4. PB 86 was the predominant clone planted in the project area, since the availability of higher yielding and disease-resistant clones was limited. Commencing from 1984, rubber varieties RRIC 100 and RRIC 103 were planted. The latter clone was found to be extremely susceptible to Corynespora leaf spot, a fungal disease requiring the uprooting of at least 4,000 ha countrywide, of which about 1,900 ha was on smallholdings. Inter-cropping, mainly with bananas, was carried out by about 132 of farmers, slightly above the 112 appraisal estimate.  iv 5. In 1986, US$4 million of the Credit was cancelled due to slow progress and low replanting cost in US$ terms per unit of land. To achieve the original replanting target, the Credit had to be extended twice by one year and at the time of credit completion (December 1988), a balance of US$0.86 million remained unspent and was cancelled. 6. Besides the replanting of over-aged rubber, the project was also to improve the quality of output from both private processors and group processing centres (GPCs) and by strengthening and expanding the GPCs Lo provide alternative processing channels to reduce the proportion of individually-processed rubber. The component accounted for less than 1Z of total project cost. Although GPCs were improved and expanded as planned and some quality improvement took place, the impact on the industry and on farmers' incomes was marginal as the GPCs continued to suffer from low throughput, poor management and financial constraints. 7. The institutional reorganization proposed at appraisal underwent some minor changes during implementation. Institutions dealt with farmers' requirements expediently, laying the foundation for a continuous, well-managed replanting programme. Results 8. It was estimated at appraisal that successful project implementation would lead to incremental annual production of about 25,000 tons of rubber at full development. As the planting material used for replanting was mostly of the lower yielding PB 86 variety, incremantal production has been re-estimated to reach a maximum of 19,500 tons at full development. 9. The economic rate of return (ERR) at appraisal was estimated at 23Z for the project as a whole. The re-estimated ERR of the project is 18Z. Factors contributing to the decrease are the delay in the replanting programme, the lower than anticipated yields and the lack of benefits from the processing component. The recalculated financial IRR on the Government project cash flow is 12Z,below the appraisal estimate of 14Z. Sustainability 10. As a result of an improvement in institutional structuring, the prospects for sustainability of project activities, are promising. Physical facilities provided by the project continue to be properly maintained and staff recruited for project purposes were integrated in the cadres of the respective agencies. Farmers have demonstrated their willingness and ability to adopt improved practices.  v Findings nd Lessons Learned 11. The project was generally well designed and both the Bank and the Borrower performed well throughout the whole project. Implementation suffered some delays due to lack of planting material and adverse weather conditions. The implementation experience suggests a number of specific lessons to be learned (see paras 56 and 59). Generally, more attention should have been paid to the supply and quality control of planting materials, as well as the processing component. Greater care in the design of the institutional framework would have avoided the need for partial restructuring during implementation.  PROJECT COMPLETION REPORT SRI LANKA SMALLHOLDER RUBBER REHABILITATION PROJECT (Cr. 1017-CE) PART I s PROJECT REVIEW FROM BANK'S PERSPECTIVE A. Project Identity Project Name : Smallholder Rubber Rehabilitation Project Credit No. : 1017-CE RVP Unit : Asia Region Country : Sri Lanka Sector : Agriculture Sub-sector : Tree Crops B. Background 14. Recognizing the pivotal role of agriculture in stimulating economic growth and rural development, the Government of Sri Lanka's (GOSL) development plans and programmes have persistently focused on: a) increasing agricultural employment as well as improving income levels; b) increasing self-sufficiency in basic food items; and c) expanding export earnings from both traditional agricultural exports, i.e. mainly tea, rubber and coconut, and "non-traditional" items such as cocoa, coffee and spices. 15. The Government's strategy for achieving these objectives had emphasized better utilization of the existing potential through institutional and policy improvement, as well as rehabilitation of the production base, including a stepped-up programme for rehabilitation of plantation tree crops. The tree crop sector is second only in importance to the food crop sector within Sri Lanka's agricultural economy. Over the last decade, tree crops accounted for over 702 of total export earnings and provided some 452 of all agricultural employment. Rubber is the second most important tree crop after tea. During the seventies, rubber accounted for about 182 of tetal export earnings and provided some 82 of all agricultural employment and contributed about 52 of the value added by the agricultural sector. Duties and cesses levied on rubber exports in 1979 accounted for some 122 of Government tax revenue. 16. The ownership of rubber land was predominantly private (65Z) with 352 owned by the State following the nationalization of private estates between 1972 and 1975. At appraisal, Sri La-'a's rubber production was about 147,000 metric tons per year. However, the medium-term outlook for the rubber sector was considered to be poor, reflecting the e,,sion of the production potential caused  2 by a failure to maintain an adequate replant-..g rate over the past * -ade. In order to address the situation GOSL had requested IDA assistance. C. Project Objectives and Description 17. Obiectives. The main objective of the six-year project was to increase future rubber production through its support of an on-going 30SL scheme to replant the backlog of over-aged and low-yielding smallholder rubber in Kegalla, Kalutara and Ratnapura, the three main rubber growing Districts. This was to be achieved by re-organizing and strengthening the agencies responsible for replanting, by the provision of adequate replanting inputs and incentives and by improving the quality of rubber produced. 18. Comaonents. The major components of the project were: (a) replanting of 18,800 ha with high-yielding rubber on about 27,000 smallholdings (below 20 ha) over five years, to replace about 702 of over-aged privately-owned rubber in the project area, or about 452 of Sri Lanka's total. (b) institutional support for the Rubber Control Department (RCD) and the Advisory Services Department (ASD), comprising re-organization and strengthening through staff recruitment, training, provision of equipment and civil works, and the creation of a Project Coordination Unit (PCU) within the Ministry of Plantation Industries (MPI); (c) improvement of smallholder processing standards through establishment of a Processing Advisory Division (PAD) within ASD which would service private processors and 67 existing Group Processing Centers (GPCs); and, following the attainment of satisfactory operating norms for existing GPCs, establishment of 50 new GPCs; (d) support for research directed towards the smallholder through the provision of vehicles and equipment for the Rubber Research Institute of Sri Lanka (RRI); (e) support to the Agrarian Research and Training Institute (ARTI) to conduct surveys and case studies aimed at evaluating the project's impact on smallholders; and (f) provision of technical assistance for training, project evaluation, development of improved procedures for administration of the replanting scheme, and for the establishment of the Processing Advisory Division. 19. The project was to be implemented by three existing agencies: i.e. the ASD, the RCD and the RRI. In addition, a Rubber Policy and Planning Unit (RPPU) was to be established under the project within the MPI to develop appropriate policies for the rubber industry and to plan their implementation. All project activities were to be coordinated by PCU, also to be established under the project. Following past practice, rubber replanting payments to farmers were to be financed by a Replanting Fund administered by RCD and financed by a  3 Replanting Cess levied on rubber exports. At the end of 1979, the fund had accumulated cash reserves of about US$3._ million. It was, however, expected that due to t.e project induced acceleration of replanting, the fund would be exhausted by PY2 and thereafter the fund would accumulate a deficit estimated at US$17.4 million by PY6. IDA's direct contril'ution to the Rubber Replanting Scheme of US$13.3 million was to meet 47Z of t', accumulated fund deficit, the balance to be funded from Government resour.:es. Farmers were to receive replanting payment in eight installments over a seven-year period. D. Prolect Design and Organization 20. Desin. The project's concept was clear and fitted well in Government's development strategy to arrest the decline in export earnings and budget revenue from rubber and to strengthen the agencies responsible to ensure continuing support to the sub-sector. Although it was the first IDA-financed project in support of rubber production, the project concept was not innovative as it generally followed the same well proven approach to replanting taken by GOSL since 1953. It was, however, the first time that an attempt was being made to streamline and improve the services provided to smallholders by the main implementing agencies and to improve smallholders processing standards as well as research. 21. Two consecuti-e FAOICP identification and preparation missions prepared the project on behalf of GOSL followed by Bank pre-appraisal and appraisal missions. In general, the project was well prepared. However, more attention should have been paid to qualitative and quantitative aspects of nursery production, the planting of proven high-yielding clones in the field and the adequacy of subsidy rates. 22. Organization. In order to implement the project, the responsibilities of ASD and RCD were redefined. ASD was given responsibility for distribution of inputs, technical advice, inspection of land for registration and issuing of replanting permits and payments. In addition, it was to conduct publicity campaigns to stimulate replanting efforts of smallholders. The RCD was made responsible mainly for the administration of the replanting programme, but was also continu.ag to collect and maintain industry statistics relating to rubber area, produ Uon, processing and marketing. RCD was also designated to estimate replanting input requirements and procure these inputs and RCD was to retain its inspectors (which were previously responsible for the inspection of holdings, authorization of replantirig permits and distribution of replanting inputs) for verifying a sample of the inspections carried out by ASD officers. RCD was required to relinquish its responsibility for setting replanting payment and cess levels to the Rubber Policy and Planning Unit to be established within the MPI. 23. In retrospect, the simplicity of the project focussing on a single commodity and built on precedent, and designed to meet a real and already established demand for funds, inputs and services, contributed to the success of the project. The use of existing (albeit modified) institutions rather than the creation of new ones for mainstream activities, facilitated project start- up and implementation.  4 24. The project came at a most propitious moment, when the Government, with a newly prepared master plan for the rubber sub-sector, funded by the Overseas Development Ministry (ODM) of the United Kingdom was reviewing the state of the industry and considering proposals for its long term improvement. E. Project Implementation 25. Critical Variances in Project Implementation. The project was planned to be implemented over a period of six years, starting in July 1980 (with retroactive financing of expenditures from January 1980) and ending in December 1985. Total costs were estimateed at Rs434.0 million (US$28.0 million equivalent) and ar IDA credit of US$16.0 million was made available. In January 1986, US$4.0 million of the Credit was cancelled 1/ due to the slow progress in the construction of physical facilities and less than estimated replanting cost in US$ terms per unit of land. Also staff recruitment was slower than anticipated. By 1983, ASD had recruited only 41 Rubber Extension Officers (REO's) and RCD only 39 Rubber Inspectors compared with a target of 60 and 59 ASD and RCD staff respectively. Subsequent droughts further delayed replanting and the credit had to be extended twice by one year. At the time of credit completion (December 31, 1988), a balance of US$0.86 million remained unspent and was cancelled. 26. Slippages occurred in the initial years (1981 to 1983) mainly in the construction of staff qu Pters. For instance, by the end of 1981 only 16 out of a target of 41 ASD staff quarters were completed. The slower than anticipated staff recruitment also resulted in a slow down in the procurement of corresponding vehicles and equipment. 27. Contrary to SAR expectations, the State Plantation Corporation (SPC) and the Janatha Estates Development Board (JEDB) failed to supply the necessary amount of planting materials, because at preparation SPC and JEDB did not make an accurate assessment of the total amount of planting materials required for use in their own estates and .n the project area. The ability of the private sector to supply planti,.g materials was also not explored at preparation/appraisal. The shortage of planting material resulted in delayed implementation of the replanting programme. The bulk of the requirement of planting materials was supplied by private commercial nurseries from PY3 onwards. The attempt of the twe corporations and private nurseries to eubstantially increase the output of planting material within a short period resulted in the supply of poor quality budded stumps and mixed clones to project participants. The RRI, in charge of quality control, was unable to effectively carry out its function, due mainly to a lack of staff and mobility to inspect the widely dispersed private nurseries. 28. Subsequently, with the increase in RRI's inspectors, private nurseries were supplying good quality plants at a better price than the public estates. With the establishment of three additional large nurseries by RCD during 1984/85, more planting materials were produced, thus allowing the completion of the project replanting target by June 1988. 1/ January 17, 1988.  5 29. PB 86 was the predominant clone planted in the project area, owing to tile limited number of higher yielding and disease-resistant clones available. Commencing from 1984, RRIC 100 and RRIC 103 were also planted. The latter was prematurely released and after planting in project holdings was found to be extremely susceptible to Corynespora leaf spot, a fungal disease requiring the uprooting of at least 4,000 ha countrywide, of which about 1,900 ha were on smallholdings (including about 1,500 ha in the project area). 30. Project Risks. The SAR did not anticipate any major project risks, indicating that even if replanting targets were not entirely met, or that no improvement of rubber quality would take place, the project would remain economically viable. This has proven to be a correct assumption (para 49). However, it should have been anticipated that the estates would give higher priority to their own planting ma .rial requirements vis-a-vis the smallholder needs, and more support should have been provided to the strengthening of the private nursery sector. 31. Unforeseen Factors AffectinR Project Implementation. Most of the project area suffered from a severe drought during 1983, affecting both nursery production and replanting. The subsequent 1984 floods also considerably reduced the planting material supply. These factors negatively affected the 1983 to 1985 replanting targets. F. Project Results 32. General. The project as a whole can be considered a success, as it has met its main objective of replanting the backlog of over-aged, low-yielding smallholder rubber As planned, it has also strengthened the implementing agencies' capacity and capability in providing support to the rubber smallholder sub-sector. The project role in increasing the quality of rubber and thus increasing farmers' incomes through the improvement of private and group processing was not entirely satisfactory. In general, the success of this project established the basis for the formulation of the Second Smallholder Rubber Rehabilitation Project (Cr.1909-CE), which was approved by the World Bank group in 1988. 33. Replanting. At appraisal, it was estimated that a total area of 18,800 ha would be replanted on about 27,000 smallholdings over a five-year period. Initially, replanting exceeded SAR targets. However, starting from 1983, programme implementation fell considerably below targets, due mainly to drought and floods but also land ownership and registration problems. By early 1985 it became clear that the original replanting target could not be achieved, and the programme was rephased and extended by one year. However, even those targets could not be reached, requiring a further rephasing and extension by an additional year. By 1988, about 20,500 ha were planted. However, due to the Corynespara leaf spot disease, about 1,500 ha had to be uprooted (para 29) and annual planting figures were adjusted accordingly. A comparison between SAR targets, revised targets (October 1986) and actual achievement is provided below:  6 r..II-. %Inr 1w12 m 1a4 1a 11 1a? 1m Tye,l (a)/jer Appraisul 1,60 2.600 4.000 4,800 6, 600 - - 18.600 Eatiuate (he) Revised 2.418 2,991 2,429 2,900 3,472 2,600 2,000 - lS,810 Target (ha) Actual (ha) 2,418 2,991 2,429 2,900 8,472 2,381 1.617 392 18,800 34. Almost all the project participants have planted PB 86 at a density of 180 plants per acre, since thinning was generally not practiced. Pueraria Phaseloides was the predominant cover crop, owing to the unavailability of seeds of Desmodium species. Generally, it was found that the work preparatory to planting had been well done and that spacing was correct and terraces on sloping lands well prepared. 35. Subsequent maintenance, however, was not always satisfactory. In numerous cases replanting payment installments had to be withheld until the situation was rectified. This was due mainly to the inadequate replanting payment which was estimated to cover only 472 of the full cost, with no complementary line of credit was available. All the payments were actually given in the first five years as opposed to seven years as planned. The majority of holdings were still not tappable for at least two more years. No fertilizers (rock phosphate) were applied in the planting holes and, in subsequent applications, magnesium was lacking in the compound fertilizers supplied. Premature tapping was common and so was daily tapping in holdings using hired tappers. This reflected lack of extension service in providing the necessary advice or assistance particularly in marking the tapping panel, tapping frequencies and tapping of various mixed clones. This deficiency can be partly attributed to the fact that the ASD officers were given additional responsibilities, such as input distribution, and were not allowed full-time dedication to the extension task, but also partly due to the failure to recruit an adequate number of staff (para 41). 36. It is premature to estimate yields since the earliest plantings were only in the third year of tapping during the mission's visit. Yield data were not monitored by ASD. Based on visits to some smallholdings and discussions with farmers, yield assumptions of the mission in comparison with SAR estimates are indicated below:  7 1st Year 2nd Year 3rd Year Average for (kglha) (kglha) (kglha) Tapping Period SAR 300 675 840 1,077 PCR 240 540 670 738 37. The distribution of inputs to farmers was considerably improved. Additional fertilizer stores were provided in the respective regional headquarters. Fertilizers and planting materials were supplied by ASD to farmers at convenient distributing centers or even to their houses if accessible by road. 38. Intercropping. In order to maintain adequate cash incomes, especially for the smaller smallholders during the immature period of the replanted rubber, and to maximize returns per hectare, the project encouraged intercropping of rubber with other crops such as bananas, passion fruit and pineapples. During the project period, a total of 2,485 ha were intercropped, most of it with bananas, either in pure stand (1,655 ha) or mixed with other crops (336 ha). Passion fruit accounted for 477 ha, the balance being planted to coffee and spices. Practically all farmers obtained their planting material from neighboring farmers and not from the Department of Agriculture as had been foreseen in the SAR. The area intercropped amounted to about 13Z of the total replanted rubber area, slightly above the SAR estimate of 11Z. However, as fig"ires below show, intercropping rates declined in the later project years due to numerous factors such as unsuitability of soils, soil erosion problems, difficulties in obtaining quality planting material and unattractive prices, particularly for passion fruit. Int.rcropping 1961 1962 1968 1984 1906 1966 1907 1066 Total (ha)/Yer Bananas 167 232 239 822 285 265 130 86 1,666 Bananas A Pine- 15 88 es 49 64 72 a8 9 888 apple. Passion fruit B8 149 97 8 27 77 84 14 494 ond others TOTAL 260 414 402 879 86e 404 202 s6 2,485 39. Institutions. Under the project a Project Coordinating Unit was to be established and the roles and functions of the main implementing agencies, i.e. (the ASD and the RCD), were redefined (para 22) and both institutions were strengthened in terms of staff, facilities and equipment. The PCU was established as planned and has functioned well throughout implementation despite the high turnover (three changes) in the post of project coordinator.  8 40. The changes in the institutional responsibilities of ASD and RCD, as proposed at appraisal (para 22), were implemented soon after project start-up. During implementation it was found that in some areas clear demarcations could not be achieved resulting in overlapping of activities and duplication of efforts. Procedures had therefore to be revised. Beginning in 1984, the inspection of holdings for replanting permits, the issue of replanting permits and the inspection of replantings for authorization of replanting payments became the entire responsibility of RCD. After the census of Rubber Lands, conducted by the RCD in 1983/84, the systematic quadrennial field checks on rubber holding registration details were also implemented by RCD and became part of the industry statistics already maintained by RCD. 41. The required incremental staff for the PCU and the RCD was recruited, although in some cases with delay, and facilities, vehicles and equipment provided according to SAR or revised targets (see also Part III/4). The main exception was the recruitment of ASD rubber extension officers, which by the end of the project, fell short by 44 out of 121 positions. The training center, established by ASD, had a very positive impact on the level of knowledge of both staff and farmers and a total of 5,350 persons (of which 3,442 farmers) had received training during the project period. 42. In spite of the recruitment of 92 incremental clerical officers, it was found that RCD's performance in the processing of replanting permits and payments was cumbersome in the initial stages. It was therefore decided to computerize data processing. The progt_mme started in 1985 and by 1989 a decentralized computer system was operational in all districts. As a result, processing delays of registrations, replanting permits and subsidy payments were reduced from about 6 months to 3 to 4 weeks. This is considered a major success of the project, as farmers will no longer be discouraged from participating in rubber replanting programmes due to slow processing of applications and delayed payments. 43. The Rubber Policy and Planning Unit (RPPU) within MPI and the Rubber Policy Review Committee (RPRC) were established as outlined in the SAR. Both units, however, became inoperational and were essentially dissolved by end-1982. By early 1984, the RPPU was revived and renamed Smallholder RPPU concerning itself only with the development of appropriate smallholder policies. This avoided any clash of interest with the estate sector which was a main reason for the operational difficulties of the original RPPU. In lieu of the RPRC, the Government had established in 1985 a Tree Crops Working Group (TCWP) within the Ministry of Finance and Planning (MFP). This working group assumed more important functions than those of the RPRC and was considered a viable alternative arrangement. The appointment of an ombudsman in each of the divisions covered by the project did not materialize, apparently without any detrimental effect on project implementation. 44. Processing. A total of 67 Group Processing Centers (GPCs) were to be improved and 50 new ones established, and technical and managerial advice was to be given to the GPCs, as well as individual private processors, to improve quality of Ribbed Smoked Sheet (RSS) thus enhancing farmers' returns. Registration of GPCs with the Cooperative Department, a prerequisite to qualify for financial support under the project, was quite slow and many could not be  9 registered dtring implementation; by mid-1983, only 35 GPCs were rehabilitated and the full target of 67 was reached by 1986. In view of this slow progress, the number of new GPCs to be established was reduced to 15 units during the 1985 review and all of these were set up by 1988. Now, at the time of the PCR preparation, 70 GPCs were still operational. 45. This component, which accounted for less than 12 total project cost was not very successful. Although quality improved, returns to farmers generally did not increase'/ since the performance of many GPCs was unsatisfactory because of incompetent management and inadequate throughput resulting in high unit cost. Furthermore, many farmers preferred to sell RSS to the private trade, which extended informal credit for consumer goods. Under a pilot Savings and Loan Scheme, which was started in 9 GPCs in 1987, members were allowed to draw small consumption credits from the GPC savings account, which was financed from a small levy on the farmers' produce and by optional additional savings. By offering credit facilities, delivery to these selected centers had reportedly increased. Farmers in the vicinity of crepe factories preferred to sell latex, as this has proven to be more profitable, suggesting a need for the establishment of latex collecting centers. Also, due to PAD's concentration on support to selected GPCs, upgrading of private sector processing was neglected. 46. Research. As planned, support to research was provided mainly in the form of vehicles for improved mobility to carry out field trials, laboratory equipment and the provision of five 12-month post-graduate fellowships. All fellowships were utilized and most staff trained under the programme are still in position. The supervision of field trials has improved due to better mobility of the field staff. 47. Project Evaluation. At appraisal, it was planned that the project's achievements would be evaluated throughout the project period by the Agrarian Research and Training Institute (ARTI). This evaluation was to comprise an initial baseline survey of smallholders in the project area to be followed by case studies to identify changes required in the operation of the implementing agencies, as well as in the replanting scheme, to make it more attractive to smallholders. The studies carried out by ARTI were considered useful by the implementing agencies. Their impact on the course of project implementation, however, appears to be small. ARTI was also required to carry out a post evaluation of the project to facilitr ' PCR preparation. A draft report was submitted to MPI by July 1988. The ' ementing agencies disagreed with many of the findings and ARTI was requested to amend the draft which was not done. 48. Technical Assistance. A total of 15 man-months of technical assistance in the form of consultancies was earmarked, consisting of 6 man-months for the administration of the replanting scheme, 3 man-months each for training, processing and project evaluation. Technical assist e on administration, and training in particular, proved most beneficial. 49. Economic Rate of Return. At appraisal, the ERR for the whole project was estimated at 23Z. Using 1989 constant prices, the re-estimated ERR amounts to 1/ ARTI: Post ProJect Evalustion - SFaliholder Rubber Rehabilitation Project, Colombo, 1988.  10 18Z. Factors contributing to the decrease are mainly the delay in the replanting programme and the lower than anticipated yields. In addition, no benefits were attributed to the improvement of processing as the performance of most GPCs was not satisfactory and no reliable data on throughput and operational costs was available (see Table 1). 50. Financial Performance. At appraisal, the analysis of the Government project cash flow, consisting of replanting payments, administrative overheads and fertilizer subsidies as expenditures and income from cess and export duties as revenues, indicated a financial IRR of nearly 14Z. The recalculated IRR amounts to 12Z, a slight decrease mainly due to lower rubber output resulting in reduced revenues from cess and duty (see Table 2). By end-1989, the closing balance of the Rubber Replanting Fund amounted to Rs49.4 million (US$1.5 million), but according to RCD projections, it is expected to go into deficit by Rs34.9 million by 1991 unless the replanting cess is increased and/or Government contribution enhanced. 51. For individual farmers using family labor, the net farm income based on a 1 ha model (as at appraisal) is now expected to reach Rsl8,250 at full development (Years 15 to 17) as compared with the appraisal estimate of Rs8,487 (equivalent to Rsl8,926 in 1989 prices), resulting in a financial rate of return 1/ of about 17Z on farmers' investment. By planting intercrops (mainly bananas) during the first four unproductive years of the rubber plantation, the net farm income on intercrops has been re-estimated at Rsl8,500 compared with an appraisal estimate of Rs4,885 (equivalent to Rsll,040 in 1989 prices) with an IRR in excess of lOOz. 52. Proiect Impact. The replanting of over-aged smallholder rubber had a significant impact on the sub-sector, by not only halting the previously encountered trend of declining production and productivity but actually increasing rubber production by an estimated 19,530 tons at full development. The improvement of the institutional framework, capable of adequately catering for the smallholders' requirements, has laid the foundation for further timely replantings and improvement of the production base. The replanting of over-aged trees, resulting in improved maintenance of blocks and terraces, had a positive influence on the environment. Although the project resulted in a higher use of chemical fertilizers, water pollution is considered minimal due to trench application. 53. It is too early to adequately assess the project's impact on the social environment, as only about 25Z of the hectarage replanted has become productive. At appraisal (1980), it was estimated that the income of the small smallholders (up to 0.4 ha) was almost 60Z below poverty income and that of medium smallholders (0.4 - 0.8 ha) 34Z below poverty income of about Rs6270 per household. Based on the prevailing poverty threshold of Rs9,000, small smallholders are now only 20Z below that threshold, whilst medium smallholders / Appraisal timat4s did not provido IRR figures.  11 are already 202 above, l/ improving SAR estimates of 37Z and 12Z below the poverty threshold for the two respective groups. Medium and large smallholders were even in the "without" project situation enjoying incomes considerably above the poverty threshold. 54. The institutions involved in project implementation benefitted considerably from the project as their managerial, financial and operational capacities and/or capabilities were improved. G. Proiect Sustainability 55. Most of the backlog of replanting requirements has been cleared by the project and further replanting as well as new planting is supported by the IDA- financed Second Smallholder Rubber Rehabilitation Project (Cr.1909-CE). All incremental staff recruited under the project was included in the regular payroll of the respective agencies, and the facilities established and equipment and vehicles procured under the project continue to be well maintained. Generally. the farmers have acquired the necessary skills to maintain replanted blocks at reasonable standards. Increasing labor cost and the lack of skilled tappers may affect rubber production in the long-term but it can be assumed that the project will maintain an acceptable level of net benefits throughout its economic life. H. Bank Performance 56. The Bank's performance during the project cycle was very satisfactory. A total of 13 supervision missions were fielded during implementation, with a considerable degree of staff continuity. The intervals between missions fluctuated from 6 to 9 months (see Part III/8). The main lessons learned from project implementation, that could be relevant to other Bank financed projects are: (a) In view of the importance of the rubber sector for the economy, it would have been appropriate to set up a single organization to be responsible for all project components. If separate agencies are involved in implementation, care must be taken to avoid conflicts of interest and duplication of efforts (paras 22 and 40). (b) The dependence on monopolistic supply of planting material from the estate sector should have been avoided and alternative (private) sources supported from the beginning to ensure timely and adequate supply of planting material (para 27). (c) An effective quality control mechanism should have been established at an early stage to ensure that only high quality planting material of the appropriate clone was supplied to farmers (para 27). 1/ Bas d on tho income at full development from re-calculated one-hectare model, without intercropping.  12 (d) Group Processing Centers have proven to be necessary, particularly in remote areas. However, in design, a greater degree of flexibility is required to also provide for latex collection in the vicinity of crepe factories (para 45). (e) Adequate finance (capital and operating expenses) for establishment, sufficient throughput and good management, are essential for Group Processing Centers to be successful (para 45). (f) In projects involving large numbers of participants requiring a multitude of different operations, computerization of data processing should be included as a project component (para 42). 57. In addition to the above lessons learned, implementation experience indicates that the success of the project can partly be attributed to the simplicity of design and the use of already existing institutions for project implementation, rather than the creation of new ones. Also, the use of cess- funded grants, rather than farm credit, for replanting has helped to overcome the farmers' traditional resistance to replanting. I. Borrower Performance 58. The borrower performed very well throughout the whole project. Although there were three staff changes in the post of the Project Coordinator, project implementation was not disrupted due to staff continuity at the top levels of the implementing agencies. Only the RPPU and the RPRC did not function well, as there was a lack of cooperation from the agencies involved and decisions made by these bodies were cutting across ministry's lines of responsibilities. These problems were resolved by 1984 (para 43). 59. The borrower adopted all the agreed covenants (see Part III/7). Initially there were considerable delays in the submission of audit accounts/reports which was partly attributable to a union dispute over the recruitment of accountants. The situation improved considerably from the beginning of 1985. However, the borrower did not submit a PCR within six months after credit closing, as stipulated, as the findings of the Post Project Evaluation Report prepared by ARTI were not fully accepted by the implementing agencies and lacked the required financial evaluation and cost data. A revised and improved draft was not submitted. The main experiences gained by the borrower were: (a) replanting payment installments should be increased in the first two years when capital investments are highest and an additional installment provided at the end of the immature period to avoid premature tapping. In addition, a special credit line should be provided to bridge farmers' financial shortfalls during the establishment phase (para 35); (b) extension staff should not be burdened with additional responsibilities such as land inspection and input distribution, as all these activities  13 reduce time available for providing techniral advice to farmers (para 35); (c) new clones should not be released for planting unless their yield performance and particularly their resistance to important diseases is known (para 29); and (d) adequate staff allocation should be made to ensure timely auditing in compliance with the respective covenant (para 60); J. Project Relationship 60. The Bank/Borrower relationship was satisfactory throughout the project period. A fruitful dialogue was maintained between GOSL, as principal borrower, and the implementing agencies on one side and the Bank on the other. All ministries and agencies collaborated fully with the preparation and appraisal missions and were very supportive to the supervision missions. Only the initially delayed submission of audited accounts/reports required the Bank to indicate the risk of disbursement suspension to the borrower. However, in subsequent years audited accounts were received on time. K. Consulting Services 61. The functions and performance of consultants have already been described in para 48. Contractors and suppliers generally also performed satisfactorily. A problem arose over the quality of construction of the two regional offices in Ratnapura and Kalutara, where the original contractor had to be dismissed half- way through the contract and the work had to be completed by a new contractor. This caused a delay in project implementation. L. Project Documentation and Data 62. The main documents governing project implementation were the Staff Appraisal Report (SAR) and the Development Credit Agreement (DCA). Both documents were well prepared and generally adhered to. The SAR provided a useful framework for the Bank and the Borrower to monitor the achievement of physical targets throughout the project period. Due mainly to the rapid depreciation of the Sri Lankan Rupee against the US Dollar, the financial data provided in the SAR were no longer applicable. 63. During the short stay of the PCR preparation mission in the country, it was not possible to collect and generate all data required for a thorough financial and economic analysis and the results presented are based on mission estimates where data were not available.  15 PART II 1/ 64. The draft PCR was reviewed by a group of senior Government officials from MPI and agencies which were involved in project implementation. The analysis contained in Part I was found to correctly reflect project progress and the factual information provided in Part III to be adequate and accurate. 65. The assessment of the Bank's and Borrower's performance during the evolution and implementation of the project, as indicated in Sections 8 and 9 of Part I, was also considered appropriate. In addition to the lessons learned indicated therein, the following recommendations were derived from implementation experience: - effective extension service must be provided, particularly during the immature period and early tapping years; - timely adjustment of subsidy rates to replanting cost is necessary to maintain an adequate level of incentives for project participants to carry out the essential operations; - in addition to the provision of adequate inputs and technical advice, market price of rubber must be renumerative in order to encourage farmers to replant and maintain their holdings satisfactorily; - technical competence of staff needs to be periodically upgraded through training and study tours; - visits of mobile units to project area should be adopted in order to deal with land registration and farmers' problems more expeditiously. 66. The relationship between the Bank and the Borrower during the project period was satisfactory es indicated in Section 10 of Part I. 1/ Proparod by Ministry of Plantation Industries - GOSL.  17 PART III A. Related Bank Loans and/or Credits Credit/TIttl PMr Approval Sta tus Tree Crop Rehab. (Te) To eprove econosic efficiency of too 1978 Completed Estate improvesnt has Project (Cr.818-CE) ;ndustry and to ieprove tee quality. been a succoe whil*t private teo fnctory and sma Iholder componente wore a failure. Fourth Treo Crop Project To increass production of too, rubber 1985 On-going The physical progrese of (Cr 1562-CE) and coconuts by rehabilitating the project is production aci lities and improving the sati factory. perforew'ce of JED8 end SPC. Second Smellholder Rubber To increase production and improve 1988 On-going The project io a follow-up Dev. Project (Cr.1909-CE) quality of coaliholder rubber through to Cr.1017-CE and in provision of replanting inputs and pro9rae ins incentives and strengthening of etafactorily. agencies concerned. B. Project Timetable I te Dats Planed Dae Rwevied Actual Date Identification Auguat 1978 September 1978 Preparation February 1979 Appraisal *i--ion September 1979 October 1979 Credit negotiation March 1980 April 1980 April 1980 Board approval November 1979 Nay 1980 May 1980 Credit signature - Jun 1980 Credit effectiveness Septe.bor 1980 Credit closing June 1986 June 1987 June 1988 Credit cosplotion - March 1989 jJ / Extnded by three months beyond the customary 6-month grace period, due to disruption in disbursoeant proiessing as a rosult of civil disturbsnces. C. Credit Disbursements Cumiative Estiut and Actual Disbursement (USS million) Project Yer 198 198 1982 1968 19" 196 116 1967 16 196o *Caled ear) Appraisal 0.2 1.3 8.0 5.2 8.8 18.0 16.0 - - - estimate Actual j/ - 0.3 0.8 1.8 3.4 6.5 7.5 9.4 11.0 11.1 Actual as I - 23.1 26.7 34.6 41.0 42.3 46.9 68.7 68.8 69.4 of estimate Date of final March 1, disburse- 1989 aent; / Source. World Bank Loan Departeent; Report ID:LOA 1069 of 6/28/89. Comments 67. Based on a project revision during 1985, US$4.0 million was cancelled from the credit account by reducing the unallocated account by US$2.0 million and the allocation to Category I (replanting payments to smallholders) by US$2.0 million. The cancellation was made effective by January 17, 1986. The disbursement schedule, however, was not changed. Against this revised disbursement figure of US$12.0 million, the actual disbursement amounted to 92.5Z.  18 D. Project Implementation Key Indicators Unit SAR Revised Actual Target Target 1/ Planting ha 18,800 18,810 18,800 Civil Works: ASD Staff quarters no. 78 69 69 Divisional offices no. - 6 6 Fertilizer stores no. 3 3 3 Training Institute no. 1 1 1 RCD Regional offices no. 3 3 3 Staff quarters no. - 2 2 Nurseries no. - 3 3 Nursery/house-cum-office no. - 3 3 Vehicles: ASD Trucks no. 10 10 10 Mobile publicity units no. 3 3 3 4-wheel drive vehicles no. 19 18 18 Passenger cars no. 3 3 3 Motorcycles no. 92 43 43 Bicycles no. 108 27 27 RCD 4-wheel drive vehicles no. 3 6 6 Pick-up no. - 1 1 Passenger cars no. - 2 2 Motorcycles no. - 1 1 PCU 4-wheel drive vehicles no. 1 2 2 Passenger cars no. 1 1 1 1/ Revision of 1986. ..  19 lay Indicators Unit SAR Revised Actual Target Target RRI Cross-country vehicles no. 16 4 4 4-wheel drive vehicles no. 2 2 2 Equipments ASD Tree pullers no. 63 63 90 Film production no. 3 3 3 RCD Computers no. - 5 5 RRI Laboratory air conditioners no. 15 15 15 Humidifiers no. 6 6 6 Photographic equipment lot lot lot lot Film production no. 3 3 3 Group Processing Centress Existing no. 67 67 67 New no. 50 15 15 Study Tourst ASD no. 20 25 24 RCD no. 5 13 13 PCU no. 1 5 3 Post Graduate Courses and Fellowships: RRI no. 5 5 5 ASD no. 2 2 2 RCD no. - 9 9 PCU no. 2 3 3 Staffing: PCU Project Coordinator no. 1 1 1 Project Accountant no. 1 1 1 Project Officer no. 1 1 1 Senior Clerk no. 1 1 1 ClerklTypist no. 3 1 1 Drivers no. 2 2 2 Peon no. 1 - -  20 Key Indicators Unit eKR Revised Actual Target Target RCD Deputy Controller no. 3 3 Sr. Assistant Controller no. 3 3 Assistant Controller no. 8 8 8 Accountant no. 3 3 3 Office Assistant no. 3 4 4 Clerical Officer no. 139 92 92 Stenographer no. 3 3 3 Typists no. 6 6 6 Minor employees no. - 13 13 Drivers no. - 4 4 ASD (Head Office) Director no. 1 1 1 PA to Director no. 1 1 - Deputy Director (field) no. 1 _ _ Publicity Officer no. 1 1 1 Film Operator no. 3 5 5 Head, Supplies Division no. - 1 1 Head, Processing Advisory no. 1 1 1 Deputy Director no. 1 - - (Training/Admin.) Chief Admin. Officer no. 1 1 1 Assistant Accountant no. 1 1 1 Clerk/Typist no. 3 9 9 Head - Training Division no. 1 1 1 Assist. Training Officer no. 1 1 1 Watcher/Cook no. 2 2 2 Drivers no. 9 11 11 Peons/Labourers no. 2 2 2 Cleaners no. - 2 2 ASD (Regional Offices) Sr. Processing Advisors no. 3 3 3 Clerk/Typist no. 6 6 6 Labourers no. 3 3 3 ASD (Divisional Offices) Div. Extension Officers no. 3 9 9+2 1/ Processing Advisors no. 9 9 9+2 1/ Clerk/Typists no. 9 9 9 ASD (Range Office) Rubber Extension Officers no. 121 121 77 1/ Paid by ASD grant.  (1) Project Cost Apraieal Etimt Revised tuimat./ ctal .... ... ( elIIio) . . . . . .....( . (OM SIIoa) ..... . . . . . (USI Sillion) . Local Foreign Total Lcal Foweign Total LOCal Foreign Total Raplanting Coat: Budded stumpa 1.43 0.07 1.50 1.31 0.07 1.38 1.03 0.05 1.08 Fertilizers 0.82 3.30 4.12 0.4S 1.93 2.41 0.32 1.27 1.59 Labour and other input. 6.77 0.14 6.91 9.42 0.19 9.61 9.01 0.18 9.19 Total NPlwating CA*t 9.C2 3.51 12.53 11.21 2.19 13.40 10.86 1.30 11.86 InstitUtioel SkpgOrt: AM,iar Services Dept. (A8D) CiIl wo k. 0.67 0.19 0.76 0.70 0.24 0.94 0.63 0.21 0.84m Equipment *nd vehicles 0.04 0.50 0 54 0.22 0.29 0.51 0.23 0.30 0.53 Staffing 1.02 - 1.02 0.91 - 0.91 0.88 - 0.b8 Operating coat 0.18 0.32 0. SO 0.31 0.46 0.77 0.33 0.49 0.82 Total - ASD 1.41 1.01 2.tl2 2.14 0.99 3.13 2.07 1.00 3.07 Dept. of IbAba - Control (O) Civil aortaD 0.04 0.01 0.05 0.20 0.07 0.27 0.53 0.18 0.71 0 Equip_nt A vehicles 0.03 0.04 0.07 0.08 0.21 0.29 0.16 0.40 0.56 0 N Staffing 0.34 - 0.34 1.35 - 1.36 1.26 - 1.26 Operating coat 0.05 0.04 0.09 0.31 0.19 0.50 0.76 0.47 1.23 m Tftal - ROD 0.48 0.09 0.5i 1.94 0.47 2.41 2.71 1.06 8.76 Trainin: 9' Civi aor- 0.06 0.03 0.09 0.04 0.08 0.12 0.08 0.04 0.12 Equipment 0.01 0.07 0.08 0.01 0.04 0.05 0.01 0.06 0.07 Training coure, 0.11 0.15 0.26 - - - - - C Totl - Trainleg 0.18 0.Zi 0.4 O-.QC i ' a9.17 0.09 0.10 0.19 5 Technical Aneiateac: 0.01 v 08 :,0 - 0.4 0.24 - 0.02 0.02 Proceaing Comonent: 0.11 0.08 0.19 0.13 0.29 0.42 0.04 0.08 0.12 _A eAr Coonpnt: 0.06 0.14 0.22 0.24 0.31 0.55 0.12 0.16 0.26 Project Coordination: 0.06 0.04 0.12 0.13 0.04 0.17 0.19 0.07 0.26 Prject Evtaat^o: 0.02 - 0.07 0.02 - 0.02 0.02 - 0.02 TOI8L E t 11.77 S .20 16.97 15.86 4.66 20.U1 - -- Phlysical Contingencies 0.40 0.13 0.53 0.32 0.10 0.42 Price Contingencies 8.46 2.04 10.50 1.75 1.22 2.97 - - TOTAL PR0.T COST 20.63 7.37 28.00 17.93 S.97 23.90 15.60 3.90 19.58 1/ Figures in US1 wvar derived from actual rupee figure. as provided by MPI. Smal l diacrepancies aer due to conversion and rounding.  22 (2) Project Financing Sourcc Plannd Rcvised FILal USS M (%) USS M () USS M (%) IDA (Total) 16.0 57.1 12.0 50.0 11.1 56.6 1. Replanting payments to 11.2 9.2 8.S smallholders 2 avil work 1.1 1.1 1.0 3. Vehicles, equipment and 1.1 1.1 1.2 materials 4. Consultants' services and 0.3 0.3 0.4 overseas training S. Unallocated 23 03 GOSL (rotal) 12.0 42.9 1U0 50.0 8.5 43.4 TOTAL 28.0 100.0 24.0 100.0 19A 1o0. F. ProJect Results (1) Direct Benefits Indicatos Unit Apprisal stimte EFtimate at Closing Date Estimate at Fuil Dcvebpmeot Replanting 1/ no. 27,000 35,046 35,046 Processing 2/ no. 6,000 3,500 4,900 E'mployment jobs 9,500 4,500 11,000 1/ Number of smaliholders beneritting from replanting component. 2/ Number of smallholders benefitting from processing componenL (2) Economic Impact Appraisal Estimate PCR Economic Rate of Return: 23% 18% 1/ Underlying Assumptions: 1. Incremental annual rubber production 25,000 tons 19,500 2. Intercropping (mainly with bananas) 11% of rubber area 13% of rubber area 3. Expected benefits from up-grading of Included Excluded rubber through better processing 4. Production foregone as a result of Yes Yes uprooting and replanting of rubber is fully costed for the estimated remaining productive life of the plantation (five years). 5. Period of analysis 30 years 30 years 1/ See Table 1.  23 Comments: The re-evaluation was carried out using constant 1990 prices using World Bank Commodity Price Forecasts for 1995. On this basis, tne economic price for rubber was estimated at Rs39.7/kg and the economic price for compound fertilizer at Rs8.4/kg. All local costs, excluding labour, were converted into border prices using the standard conversion factor of 0.91 and labour at a specific CF of 0.75. (3) Financial Impact SAR Estimate Actual Financial rate of return to Government, including overhead costs. 13.7% 12% 1/ 1/ See Table 2. (4) Studies Studies Purpose as Defined Status at Appraisal 1. Socio-economic Conditions of Rubber Baseline Study Completed May Smallholders in Sri Lanka 1984 2. Innovation, Receptivity and Adoption Case Study Completed May in Rubber Smallholders of Sri Lanka 1986 3. Smallholder Rubber Replanting in Sri Case Study Completed June Lanka: Trends, Problems and Factors 1986 Influencing Their Decision Comments: See para 6.16 for more details. G. Status of Covenants Ctedit Subjeet Deadlime ror Cinpliaac Status eat 3.02 Borrower to employ consultants - Complied with 3.06A Borrower to cause all group processing cent.ms (Part C) to be 03/31/81 Complied with established and organized. 3.06B No new GPC to be established in the project area until members Complied with have pledged to collectively supply not less than 100 kg per day of operation. 3.07A Borrower to establish Advisory Services Department wtthin 01/0181 Complied with Ministry of Plantation Industries. 3.07B Borrower to establish Rubber Policy and Planning Unit. 01/01/81 Complied with 3.07C Borrower to establish Rubber Policy Review Committee. 01/01/81 Deleted 4.02 Audit accounts/repotts due to IDA not later than 12 months after - Complied with end of fiscal year. 4.03 Borrower to appoint accounting staff required to implement the 01/01/81 Complied with project. 4.04A Borrower to review annually financial resources of replanting - Complied with scheme, results to IDA. 4.04B Borrower to provide replanting fund with resourmes to finance - Complied with project implementation.  H. Use of Bank Resources k 9Wkp* 1J Task Pre-fY78 FY78 FY79 FYM FY81 FY2 FYM3 FYN4 FY65 FY8s FY87 FY88 FY8W FY90 Totat LENP 0.2 0.7 62.4 9.5 - - - - 72.8 LENA - - - 69.5 . - - - - 69.5 LENN 4.4 4N4 LOP 0.3 8.1 - - - - - 8.5 SPN - 0.3 11.4 7.0 10.2 5.5 7.5 4.8 9.3 11.7 * 0.1 67.7 PCR - - - - - 9- - O PAD - 0.1 0.4 - 0.1 - 0.6 Total 0.2 0.7 6z7 92.0 11a8 7.0 10O.2 7.6 4.8 9.3 11.7 Os9 0.1 224.3 1/ Staft weeks, recorded by tiscal year/activity, excluding Trust Fund consultants (net of overtime). LENP Actihties prior to Appraisal. LENA * Activities related to Appraisal LENN - Negotiation activities. LOP Pre-appraisal and Appraisal work by Country Department. SPN Supervision time. PCR * PCR preparation time. PAD Project administration work during Supervision stage. EL Misalane MoefVaf 1/ No.d Persons 2/ I"s Iield SpedD tlu Represented 31 Pwutrmmice tfV 4/ Ths of Ptoblebm Pre-ideniticatlon 4118 3 18 E.E,A Ident,ticatbornPreparatlon 9/78 4 20 A,A.E.P Pre-appraisaJ mission 8/79 3 10 A.E.E Appraisal mission 10/79 4 23 E.R,T.AC Supervision t 7/80 1 6 E 1 Supervision 2 3/81 1 7 E 1 Supervision 3 2/82 1 6 E 1 Supervision 4 10/82 1 9 E 2 Supevision 5 5/83 6 E 2 Supervision 6 12/83 1 6 E 2 Supervrsion 7 8/84 1 8 E 2 Supervision 8 5/85 1 10 E 2 Supervision 9 11/85 1 12 E 2 Supervision 10 4/86 1 7 E 2 Supervsion 11 11/86 2 9 E.T 2 Supervision 12 10/87 4 23 E.T,AC.E 2 Supersi5ion 13 5/88 1 6 T 2 1/ Date of ret,eun to headquarters 2i Multiple pturpose missions marked (-) 3/ A - Agriculturist. AC . Accounting Specialist E * Economist. P . Processing Specialist. T . Tree Crop Specialist. 4/ 1 . Problem-tree or minor problems. 2 - Moderate problems. 3 - Major problems  Sri tanka Smaltholder Rubber Rehabilitation Project Economic Analysis Mitlion Rs. ..................................... ........................................... ..................................................................... ............................................................................................ .. . ...... ... ............ 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990