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MICROFICHE COPY

Report No. 10235-MA Type: (PCR)MCPHAIL / / X31755 / T9059/ OEDD1 Report No. 10235

PROJECT COMPLETION REPORT

MALAYSIA

KELANTAN LAND SCHEMES REHABILITATION PROJECT(LOAN 1899-MA)

DECEMBER 30, 1991

Agriculture Operations DivisionCountry Department IEast Asia & Pacific Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may DOt otherwise be disclosed without World Bank authorization.

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CURRENCY EOUIVALENT

Currency Unit Malaysian Ringgit (M$)

Year Exchange RateUS$1.00 - 1979 (appraisal) 2.15

1980 2.181981 2.301982 2.341983 2.321984 2.341985 2.481986 2.581987 (Completion) 2.52

ABBREVIATIONS

DOA - Department of AgricultureDOF - Department of FisheriesDPW - Department of Public WorksEPU - Economic Planning UnitERR - Economic Rate of ReturnFELCRA - Federal Land Consolidation and Rehabilitation AuthorityKESEDAR - South Kelantan Development AuthorityLKTN - Kelantan State Land Development BoardPCR - Project Completion ReportRISDA - Rubber Industry Smallholders Development AuthoritySAR - Stdff Appraisal ReportTAKDIR - KRlantan Darul Naim Land Development and Rehabilitation

Corporation

WEIGHTS AND MEASURES

(Metric System)

FISCAL YEAR

(January 1 - December 31)

THE WORLD BANK FOR omc USE ONLYWashington. D.C 20433

U.S A

Office of DOtectcowGewalOpefatm Evaluatom

December 30, 1991

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on MALAYSIA - Kelantan LandSchemes Rehabilitation Proiect (Loan 1899-MA)

Attached, for information, is a copy of a report entitled"Project Completion Report on Malaysia: Kelantan Land S-bhemesRehabilitation Project (Loan 1899-MA)" prepared by the former AsiaRegional Office. No audit of this project has been made 'ay theOperations Evaluation Department at this time.

Attachment

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

FOR OFFICIAL USE ONLYPROJECT COIPLETION REPORT

MALAYSIA


Table of Contents

Paxe No.

Preface . . . . . . . . . . . . . . . . . . . . . . . . . .Basic Data Sheet . . . . . . . . . . . . . . . . . . . . . .iiiEvaluation Summary. v

OVERVIEWA. Introduction .... . . . . . . . . . . ... I... . I

Background . . . . . . . . . . . . . . . . . . . . . . 1Project Identification and Preparation . . . . . . . . 2Project Objectives and Description . . . . . . . . . . 2

B. Project Implementation . . . . . . . . . . . . . . . . 3Overview of Progress . . . . . . . . . . . . . . . . . 3Project Costs and Disbursements . . . . . . . . . . . 5Tree Crop Development.. 6Orchard Planting and Rehabilitation . . . . . . . . . 7Fishponds.. 7Hybrid Coconut/Intercrop Trials . . . . . . . . . . . 7Infrastructure.. 7Studies and Consultancies . . . . . . . . . . . . . . 8

C. Project Impact . . . . . . . . . . . . . . . . . . . . 8Overall Impact.. 8Quality of Tree Crop Development . . . . . . . . . . . 9Crop Production . . . . . . . . . . . . . . . . . . . 10Settler Incomes . . . . . . . . . . . . . . . . . . . 11Economic Rate of Return . . . . . . . . . . . . . . . 11Sustainability .. 12

D. Borrower and Bank Performance . . . . . . . . . . . . 12Government and Project Management Performance . . . . 12Bank Performance .. 13

E. Implementation Issues and Lessons Learned . . . . . . 14Implementing Agency Experience and Commitment . . . . 14Tree Crop Development Strategy . . . . . . . . . . . . 14Timing of Budget Releases . . . . . . . . . . . . . . 15Scheme Lay-out Criteria . . . . . . . . . . . . . . . 15Availability of Land .. 15Contracting for Land Development . . . . . . . . . . . 15Summary of Lessons Learned . . . . . . . . . . . . . . 16

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.

ANNEXES

1. Table 1 Targets and Achievements . . . . . . . . . . . . . 17Table 2 Project Costs . . . . . . . . . . . . . . . . . . 18

2. Table 1 Phasing of Tree Crop Development (ha) . . . . . . 19Table 2 Block Planting by KESEDAR . . . . . . . . . . . . 20Table 3 Estimated Yield Profiles:

Rubber and Oil Palm . . . . . . . . . . . . . . 21Table 4 Estimated Costs of Development and

Production (M$/ha) - Rubber and Oil Palm . . . 22

PROJECT COMPLETION REPORT .. . . 23Introduction .... . . . . . . . . . . . . . . . . . 25Project Formulation . . . . . . . . . . . . . . . . . . 28Review and Change in Scope . . . . . . . . . . . . . . 29Physical Implementation ... . . . . . . . . . . . . . 33Agricultural Cost, Production and Settler Income . . . 37Financial Analysis . . . . . . . . . . . . . . . . . . 39Staffing .... . . . . . . . . . . . ....... . 42Issues and Lessons to be Learned . . . . . . . . . . . 43Appendices .... . . . . . . . . . . ....... . 46

HAP IBRD 14768R

i


HALAYSIA

KELANTAN LAND SCHEMES REHABILITATION PROJECT(LOAN 1899-NA)

PREFACE

This Project Completion Report (PCR) reviews implementation of theKelantan Land Schemes Rehabilitation Project in Malaysia, for which Loan 1899-MAin the amount of US$25.0 million was approved on August 26, 1980. The loanagreement was amended twice during implementation. First, on November 24, 1984when the original loan closing date of June 30, 1987 was extended by one year toJune 30, 1988 following project reformulation in early 1984. Second, on July 31,1986 when US$7.0 million was cancelled. An additional US$6.87 million of theloan amount was canceled at the time of the last disbursement on January 4, 1988.

The PCR was prepared by the South Kelantan Development Authority(KESEDAR), the implementing agency for the project since 1983, and the Preface,Basic Data Sheet, Evaluation Summary and Overview were prepared by the formerAgriculture Operations Division, Country Department II, Asia Region. TheOverview is based, inter alia, on the PCR; the Staff Appraisal Report (No. 2845-MA) dated July 25, 1980; the Loan Agreement dated December 1, 1980; the Bank'ssupervision reports and project files; field visits to the project sites;discussions with the Borrower's project staff and Bank staff associated with theproject; and findings of a Bank mission in May 1991 to update information on thestatus of the project and KESEDAR.

The Asia Regional Office wishes to express its appreciation to KESEDARfor having prepared the PCR and for providing information to Bank staff for theOverview.

The Report was sent to the Government for comment on October 7, 1991;no comments were received.

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PROJECT COtPLETION REPORT

HMALYSIA

KELANTAN LAND SCHEMES REEABILITATION PROJECT(LOAN 1899-tlA)

BASIC DATA SHEET

KEY PROJECT DATA

Appraisal Actual or Actual as 2 ofexpectation currint estimate appraisal estimate

Project Cost (US$ million) 70.18 32.82 46.8Loan/amount (USS million) 25.00 11.13 44.5Date Board approval 08/26/80Date effectiveness 03/03/81Date physical components completed 12/31/85 09/30/87Proportion then completed (2) *

Closing date 06/30/87 09/30/87Economic rate of return (2) 17.0 22.0Financial rate of return (2) - -Institutional performance generally unsatisfactoryAgronomic performance mediocreNumber of direct beneficiaries 7.500 7,344

Cumulative Disbursement

FY81 FY82 FY83 FY84 FY85 FY86 FY87 FY88

Appraisal Estimate (US$mil) 0.4 4.8 9.8 15.7 19.8 23.4 25.0 -Actual (US$mil) 1.6 2.9 3.4 3.7 7.2 9.1 11.13Actual as 2 of estimate 0 33 30 22 19 31 36 44.5Date of final disbursement 01/04/88 Cancellations: 07/18/86 US$7.0 mil; 01/04/88US$6.87 milPrincipal repaid to (mo./day/yr.) (US$ million) 4.05 as of May 31, 1991

* See para. 25, Evaluatlon Summary

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Hission Data

Date No. of Man-days Specializations Performance Type ofMission (mo/lr) Persons in field represented /a Rating /b Trend /c problems /dIdentification 1 02/76 2 6 b.aIdentification 2 12/76 2 8 b.aPreparation 1 02/78 2 8 b.aPreparation 2 04/78 2 12 b.aPreparation 3 10/78 4 24 b.a.dPreparation 4 11/78 1 11 aPreparation 5 05/79 4 48 b.a.d.fPre-appraisal 1 05/79 1 4 aPre-appraisal 2 07/79 1 4 bAppraisal 09/79 5 75 a.3b.dPost-Appraisal 01/80 1 5 b

Subtotal 205

Supervision 1 04/81 2 14 a.b 2 2 MPSupervision 2 10/81 2 14 c.d 2 2 MTFPSupervision 3 05/82 2 12 a.d 2 3 PMTFSupervision 4 12/82 2 11 a.b 3 3 PMTFSupervision 5 05/83 1 10 a 3 2 PMTFSupervision 6 11/83 2 10 a.d 3 3 PKTFReformulation 03/84 4 26 2a.b.d. - - -

Supervision 7 09/84 3 12 2a.d 1 1 FSupervision 8 06/85 1 7 a 2 2 FSupervision 9 03/86 2 10 2a 2 2 FMSupervision 10 11/86 2 10 2a 3 3 FMSupervision 11 07/87 1 5 a 3 3 PPM

Subtotal 141

Total 346

Borrower Government of MalaysiaExecuting Agency State Agency TAKDIR initially; from June 30, 1983 Federal Agency KESEDARFiscal year of borrower Calendar

Time Recorded (Staff weeks)

Name of currency (abbreviation): Rinaait (MS) LENP 33.0Appraisal year average 1979 US$1.00 - M$2.15 LENA 93.1Intervening years average US$1.00 - M$2.37 LENN 4.3Completion year average 1987 US$1.00 - M$2.52 SPN 71.7

PCR 10.0 (estimated)Total 212.1

Follow-on project:Name NoneLoan/credit amount (USS million)Date Board approval

/a a - agriculturist; b - agricultural economist; c - financial analyst; d - engineer; e - soilsspecialist; f - nutritionist.

lb 1 - problem-free or minor problems; 2 - moderate problems; and 3 - major probletis.Le 1 - improving; 2 - stationary; 3 - deteriorating.ld F - financial; M - managerial; T - technical; P - political; and 0 - other

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MALAYSIA


EVALUATION SUMMARY

Prolect Obiectives and Description

1. The project was located wit'-.n the State of Kelantan, which in 1978 hadthe lowest per capita income in Malaysia. -- project aimed at increasing theincomes and improving living conditions of 7,500 low-income households byassisting 5,700 existing settlers on schemes managed by the Kelantan Darul NaimLand Development and Rehabilitation Corporation (TAKDIR) to complete thedevelopment of their holdings and by settling and assisting 1,800 new familiesto develop landholdings. To achieve this objective, the project provided for11,575 ha of rubber new planting, 2,915 ha of rubber replanting, andrehabilitation of 5,709 ha of existing rubber; new planting and rehabilitationof 1,620 ha of orchards; construction of 120 ha of fishponds; and demonstrationcoconut intercropping with cocoa and coffee on 100 ha. About 1216 km of accessand farm roads, 3,850 settler houses, and scheme management and socialinfrastructure facilities were also to be constructed. For institutionaldevelopment, the project provided additional staffing, vehicles, equipment,facilities, and technical assistance to TARDIR; and consultant services to theRubber Industry Smallholders Development Authority (RISDA) to strengthen itsextension services for rubber and to other Government agencies for a roadconstruction sector study and assistance in formulation, implementation,monitoring and evaluation of nutrition/health programs. Project implementationwas to be by the State government agency, TAKDIR, while RISDA was to providegrants to settlers for the rubber replanting program. The project comprisedTAKDIR's development activities in 26 schemes over a six-year period (1980-1985).

Implementation Experience

2. TARDIR proved to be a weak implementing agency, confirming the doubtsexpressed by the February 1976 Bank pre-identification mission, which hadproposed that the Federal Land Consolidation and Rehabilitation Authority(FELCRA) be the implementing agency. TARDIR was also handicapped by a poorproject preparation report, which had been prepared by a consortium ofconsultants selected by the Government- but reluctantly agreed to by the Bank,which had ranked the consortium the lowest among interested consultants. A newsurvey in 1982 revealed that 57% of registered settlers did not reside on theschemes and only 20Z of the settlers had land titles. Topographic informationhad been deficient and this had resulted in many plots being located onexcessively steep terrain.

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3. From June 1, 1983, TAKDIR was dissolved and the South KelantanDevelopment Authority (KESEDAR), an existing federal land developmenL agency, wasgiven full responsibility for implementing the project. In 1984, the project wasreformulated and the Loan Agreement amended to provide for a changed approach torubber development from individual plantings to large scale block development bycontract, with settlers becoming responsible for maintenance and production afterloan repayment and sharing in the proceeds based on their allotted area of rubberland in the meantime. Since farmer interest in fruit tree planting/rehabilitation and fishpond construction had ceased after the termination ofGovernment subsidies, these components were dropped. Minor changes were alsomade in the infrastructure component.

4. KESEDAR faced serious problems on most schemes where a large proportionof individual settlers continued to be neither eligible nor willing toparticipate in scheme activities, frequently for political reasons. Blockdevelopments were much slower than anticipated, despite the Bank agreeing in late1985 to planting oil palm when its outlook was more encouraging than that ofrubber. RISDA was also allowed to incorporate rubber growers outside thesettlement schemes, but within the KESEDAR command area, under its mini-estateand individual replanting and rehabilitation programs. Extremely low and latebudget releases in 1984 and 1985 when the economy was facing a downturn led notonly to slow progress, but also to development activities outside the mostfavorable season, which has resulted in some low standard plantings. Moreover,several contractors, who had been awarded contracts simply because of their lowbid prices and without a review of their experience and financial status, provedfinancially and technically incapable of completing works in a timely manner.Other unexpected problems were late releases of logged-over forest areas, thepresence of illegal settlers on proposed scheme areas, and security restrictionsin some areas in Kelantan which prevented access to a few project schemes. Withcontinuing slow project implementation, the Government decided in mid-1987 torequest early project termination, effective September 30, 1987. Final projectcost was less than half that expected at appraisal and reformulation, while thedisbursed Bank loan amount was only US$11.13 million or about 45% of the originalloan amount.

Results

5. Overall, the project had significant achievements despite major problemsfaced during implementation. At project termination in late 1987, about 21,800ha of existing rubber was rehabilitated (382Z of appraisal and 232% ofreformulation target), about 9,000 ha of rubber and some 680 ha of oil palmplanted or replanted (66X of appraisal and 73% of reformulation target), andadditional land cleared and developed, which was planted by KESEDAR after 1987.About 3,275 settler houses were constructed (85% of appraisal and 69% ofreformulation target), about 1,328 km of roads constructed or upgraded (1091 ofappraisal and 111% of reformulation target) and other settlement and agencyinfrastructure provided. Though the project's achievement in the provision ofsettlement and agency infrastructure (accounting for 60Z of final project costs)was significant, its productive impact was less impressive. Planting andreplanting accounted for 81% of agricultural development costs but fell short of

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target and projected yields are not very high, particularly for individualplantings (52% of planted and replanted area). At completion, the economic rateof return (ERR) is estirAated at 22% compared with 17% at appraisal and 122 atreformulation. The ERR at comp)etion is high mainly because of therehabilitation component, which acco"l d for 69% of the area benefitted by theproject and substantially exceeded -tC. Rehabilitetion, which consisted offertilization, weeding and ethrel stimulation of farms already in production, haslow costs and produces an early yield response. Excluding rehabilitation, theproject ERR is much lower but still reasonable at about 9%. The institutionalimpact of the project was negligible. Compared to the appraisal expectation of1,800 new settler families, only 23 new families had been settled on KESEDARschemes as of May 1991, mainly due to slow settler selection by the StateGovernment. However, including existing settlers, the total of 7,344 was closeto the appraisal target of 7,500 beneficiary households.

Sustainabilitv

6. Most of the project components are sustainable. Both KESEDAR and RISDA,which are now under the Ministry of Rural Development, are well establishedagencies with adequate funding and are maintaining block plantings and settlementinfrastructure (KESEDAR) and mini-estates (RISDA). However, individual plantingson most ex-TAKDIR schemes are less viable and the status of farms rehabilitatedby RISDA is unknown, since RISDA does not have a system of monitoring the impactof its programs on smallholders.

Findings and Lessons Learned

7. The main lessons emerging from this project are:(a) The Bank should not have financed consultants for project

preparation it had evaluated as unsuitable, and should haveexercised better judgement in agreeing to the choice of the projectimplementing agency (Overview, para. 34);

(b) Settlement policies relating to settler selection, loan eligibility,land titling and investment levels per family, must be wellunderstood and evaluated at appraisal (Overview, para. 35);

(c) Schemes in which individual settlers are given land to be developedlargely on a self-help basis without a reas-.nable technicalknowledge of improved agricultural production methods and withoutguidance from a good extension services are less likely to besuccessful (Overview, para. 39);

(d) Untimely budget releases can adversely affect tree crop development,which depends critically on optimum timing of operations (Overview,para. 40); and

(e) Contract awards should be made to the lowest evaluated bidders,taking due account of their experience and financial status(Overview, para. 43).


MALAYSIA

KELANTAN XAND SCHEMES REHABILITATION PROJECT(LOAN 1899-MA)

Overview

A. Introduction

1.01 This Overview is based on the PCR for the above project prepared by theSouth Kelantan Development Authority (KESEDAR). The PCR documents achievements,implementation delays and problems in project execution. It, however, does notcalculate the ERR and the cost table is incomplete since it excludes expenditureson a Road Sector Study, which was done under the aegis of the Economic PlanningUnit (EPU) in the Prime Minister's Department. The Overview agrees with themajor observations in the PCR but elaborates on several specific aspects such asproduction and benefits and implementation issues.

1.02 The project was executed during a period of rapid political and socio-economic changes in the State of Kelantan, which had a substantial negativeeffect or project execution and funding. The project had an early terminationin September 1987 at the request of the Government of Malaysia (GOM) due toinsufficient funding and slow progress.

Background

1.03 Some 37Z of Malaysia's population in 1978 had annual per capita incomesof less than US$270, which was considered the income needed to provide acceptableminimum levels of food, shelter, clothing and other basic needs. Furthermore,two-thirds of those in poverty were to be found in the agricultural sector, inparticular, among households engaged in low-income, traditional activities inrice and rubber smallholdings. The main objectives of GOM's agricultural policywere: (i) alleviation of rural poverty and redressal of interregional andintergroup income disparities; (ii) increasing incomes in agriculture as rapidlyas possible; and (iii) generating employment opportunities for new entrants tothe rural labor force.

1.04 The State of Kelantan in 1978 had the lowest per capita income in thecountry (about 38% of the national average). The population was overwhelminglyMalay and rural. Poor road and other infrastructure had hindered bothagricultural and industrial development. In southern Kelantan, the StateGovernment had commenced the development of 26 land settlement schemes, mostlyby self-help, but progress had been slow. The Government, therefore, requestedBank assistance in completing scheme development.

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Proiect Identification and Preparation

1.05 In 1975, the Kelantan State Land Development Board (LKTN) prepared aproposal for the Third Malaysia Plan (1976-80) for rehabilitating and expanding26 existing settlement schemes covering 76,000 acres, of which about half werede-veloped. A February 1976 Bank pre-identification mission considered theproposal and recommended a detailed feasibility study. The mission also proposedthat the Federal Land Consolidation and Rehabilitation Authority (FELCRA), ratherthan LKTN, be the implementing agency since the latter organization's managementand staffing was judged unsatisfactory.

1.06 In July 1976, it was agreed that consultants would conduct afeasibility study for the project with the assistance of the Department ofAgriculture (DOA) Soil Survey Unit. In the meantime, some policy issues, suchas the level of investment per family and cost recovery as well as agencyresponsibility (State or Federal) for project execution, would be addressed bythe EPU. Hiring a consultancy firm proved to be time-consuming and difficult.The Government finally selected a consortium of firms, which was ranked lowestby the Bank staff among contending firms. After lengthy discussions andcorrespondence over an eight and a half month period, the Bank reluctantly agreedto fund the study with amended terms of reference &nd with changes in theconsultant team. The consultancy was to be financed under North Kelantan RuralDevelopment Project (Loan 1294-MA). The consultancy commenced in April 1978.Draft reports were unsatisfactory and required substantial revision based oncomments by EPU and the Bank. A total of seven preparation and preappraisalmissions were required before project appraisal could take place inSeptember/October 1979. Several of the originally planned project components,including most of the access roads to schemes and a substantial health andnutrition component, were by then already included in the ongoing locallyfinanced projects.

Proiect Obiectives and Description

1.07 The principal objective of the project was to increase the incomes andimprove living conditions of 7,500 low-income ho"seholds in Kelantan by assisting5,700 existing settlers on schemes managed by the Kelantan Darul Naim LandDevelopment and Rehabilitation Corporation (TAKDIR) to complete the developmentof their holdings and to replant or rehabilitate their existing perennial crops;and settling and assisting 1,800 low-income rural households to develop landholdings on the schemes. The project was also to strengthen TARDIR, previouslyknown as LKTN, to enable it to provide adequate support directly to settlers andto improve coordination with other state and federal agencies providing servicesto settler households. The project comprised TAKDIR's development activities in26 schemes over a six-year period (1980-85).

1.08 Agricultural development included 11,575 ha of rubber new plantings,2,915 ha of rubber replanting, and rehabilitation of 5,709 ha of mature andimmature existing rubber; new planting of 405 ha and rehabilitation of 1,215 haof mixed fruit crops; pilot-scale planting of 100 ha of MAWA coconutsinterplanted with cocoa and coffee; and the construction of 120 ha of fishponds.

Infrastructure development included construction of about 3,850 settler houses;basic infrastructure for scheme villages including 1 secondary and 8 primaryschools, 11 clinics, 24 community halls, and 8 gravity-fed water supply systems;and about 136 km of village roads and 1,080 km of secondary field access roadsand field tracks. Settlement of 1,800 families was to be completed.Institutional Development included assistance to TARDIR through additionalstaffing, vehicles, equipment, facilities, and technical assistance; andconsultant services to the Rubber Industry Smallholders Development Authority(RISDA) to strengthen its extension services for rubber, to the ImplementationCoordination Unit (ICU) for the formulation, implementation and evaluation of theNational Applied Food and Nutrition Program, and to EPU to undertake a roadconstruction sector study.

1.09 Organizationally, overall responsibility for project implementationrested with the State of Kelantan. tInder the direction of the State, TAKDIR wasto be responsible for overall coordination of project activities; overall schememanagement; construction and maintenance of scheme roads, offices and facilities;provision of settler credit; maintenance of settler accounts; and procurement ofequipment and materials. Settlers replanting rubber were to receive grantassistance from RISDA under the existing system. Settlers not qualifying forRISDA grants were to be provided credit by TAKDIR. The Department of Agriculture(DOA) was to supervise annual crop, fruit tree and MAWA coconut intercroppingpilot scheme activities and provide materials and inputs. The Department ofPublic Works (DPW) was to second engineering staff to TAKDIR and constructschools, clinics and water supplies. The Department of Fisheries (DOF) was tosecond staff and provide facilities and extension services for fishpondactivities by scheme participants.

B. Project Implementation

Overview of Progress

1.10 Although TAKDIR lacked satisfactory managerial, implementation andcoordinating capacity during the early project period, it made reasonably goodprogress with staff recruitment and training. RISDA and DOA appointed most ofthe required staff and initial project progress under these agencies wassatisfactory. Rubber planting progressed slowly, however, since it was foundthat scheme surveys were frequently inaccurate and TARDIR's nurseries were unableto deliver planting materials in a timely manner. Some new plantings were madeon excessively steep terrain which precluded satisfactory terracing and erosionprevention. Most of the first 120 miles of farm roads within schemes were notproperly aligned and many were on steep gradients without adequate drainage.Much of the latter was due to the delayed appointment of the required roadsengineer. RISDA replanting and rehabilitation operations slowed significantlysince many settlers were found to be ineligible for grants as they lacked clearland titles. There was an initial good response to new orchard plantings andfishpond construction, while a limited number of coconut intercropping

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demonstrations were established with cocoa and coffee. Budget releases by bothFederal and State Government were less than half of requirements and TAKDIR wasforced to utilize overdraft facilities.

1.11 Throughout 1981 and 1982 Bank supervision missions urged TAKDIR toresurvey the settlement schemes to establish settler eligibility for grants,their residency within schemes, land availability for new development, andacreage requiring replanting and rehabilitation. Data was finally available inlate 1982 and it showed that 57% of tegistered settlers did not reside within thesettlements; only about 20X of the settlers were officially registered; thetopographical information had been inadequate which resulted in many plots beinglocated on excessively steep terrain; and that about half the houses built beforeproject implementation were located outside the designated settlement areas,mostly within farm and reserve areas. In mid- 1982 it was decided that TAKDIR,the executing agency, was to be abolished since the new State Government wasunable to bear this agency's operating costs. At the end of 1982, seriousimplementation delays were obvious with only about a third of appraisal targetsreached for rubber new planting, rehabilitation and replanting, while RISDA'sbudget for 1983 was adequate for only about 252 of the targeted rehabilitationprogram. Disbursement for housing loans was 41% of the project target and fishpond development had reached 38% of its target. Orchard development andcoconut/cocoa trial establishment had slowed. Actual disbursement of the Bankloan as of December 31, 1982 was US$2.4 million or 34% of the appraisal target.It was then agreed with GOM that, following the announcement of the newimplementing agency, a detailed review and rescheduling of operational planswould be undertaken by July 1983.

1.12 The existing federal land development agency KESEDAR was given fullresponsibility for the project, effective June 1, 1983. Project operations wereto continue through a newly established Rehabilitation Division within KESEDAR,which absorbed more than half of TAKDIR's management and field staff (150 out of255). A revised project implementation schedule, budget proposals and staffingplans were prepared for Government and Bank review. Actual budget allocationsfor 1983 and proposals for 1984 and 1985 under the Fourth Malaysia Plan (1981-85)were far short of requirements established at appraisal. This necessitated areview of priorities and a revision of targets as well as the projectimplementation time frame. A Bank mission assisted the Malaysian Government withproject reformulation in March 1984. Original and revised project components,development targets, and achievements are summarized in Annex 1, Table 1. TheLoan Agreement was amended on November 24, 1984. The Loan closing date wasextended by one year to June 30, 1988. The economic rate of return (ERR) of thereformulated project was estimated at 12% compared with 17% at appraisal. Themajor project changes were: KESEDAR, a federal agency, became the newimplementing body (which made the Project Agreement between the Bank and theState of Kelantan redundant); the area of rubber to be rehabilitated wassubstantially increased, the area of rubber to be replanted was reduced, andKESEDAR was allowed new planting of rubber in settlement blocks rather than onan individual basis (to facilitate improved standards of development, plantingand maintenance); and DOA activities in orchard and fishpond development werediscontinued. Only minor changes were made in the settlement and agency

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infrastructure development component. It was expected that KESEDAR, anexperienced land development agency under a dynamic management, would be able tocomplete the revised project works in a satisfactory manner, particularly sincethe federal Treasury had agreed to provide the required budgetary resources.

1.13 Unfortunately, the high expectations from KESEDAR did not materialize.There were top management changes at KESEDAR and budget allocations under theFifth Malaysia Plan (1986-90) remained far below requirements due to a downturnin the economy and to some extent due to a lack of confidence in KESEDAR'sability to complete project works through its newly established RehabilitationDivision. KESEDAR itself continued to give greater priority in internal budgetallocations to its original Development Division, although the concept of blockdevelopment on remaining ex-TAKDIR schemes was proposed by the agency and fullyaccepted. Dealing with existing smallholders on settlements and their problems,many of them political, proved to be difficult for KESEDAR. In addition,unseasonal rainfall which delayed burning of felled forest lands, poorperformance of some contractors who proved financially and technically incapableof completing works, delayed access to ex-forestry land, and security andwildlife problems, made progress in the years following Teformulation extremelyslow, with only a few schemes progressing well. In late 1985, the Bank agreedto finance oil palm development, since the outlook for palm oil was at that timesignificantly better than that for rubber (Amendment to Loan Agreement datedJanuary 7, 1986). Due to slow progress with land development and roadconstruction, inclusion of farm roads in block development contracts, reducedneed for funds allocated for settler houses and consultancy services, andincreased funding requirements for RISDA's rubber replanting (mini-estates) andrehabilitation, there was a further amendment to the Loan Agreement on July 31,1986, which reduced the Bank loan amount by US$7.0 million to US$18.0 million.

1.14 Continuing inadequate and late budget releases led to late contractawards for land development in blocks. In addition, poor contractor performance,late release of logged-over forest lands, the presence of illegal settlers onproposed scheme areas, and security restrictions in some areas of Kelantan slowedprogress on most block developments and reduced the need for settlers' andvillage infrastructure. Slow project implementation led to poor disbursementsand following a detailed review by a Bank mission in July 1987, it was agreedthat the project should be discontinued. GOM requested by telex of July 20, 1987project termination effective September 30, 1987. The final disbursement wasmade on January 4, 1988 and the undisbursed loan amount of US$6,866,181.76 wasthen canceled.

Prolect Costs and Disbursements

1.15 Project costs are summarized in Annex 1, Table 2, and include costs forthe Road Sector Study, which are omitted in Appendix 14 of the PCR prepared byKESEDAR. Project accounts unfortunately did not allow a separation of road andvillage/social infrastructure costs. Total costs are M$77.891 (US$32.816)maillion or only 51.6Z and 46.82, respectively, of appraisal cost estimates. Treecrop development costs by KESEDAR and RISDA amounted to M$26.8 million, which is57.6% of appraisal costs. Infrastructure costs (roads, settler housing and

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village/social infrastructure) amounted to 27% of appraisal costs. Although theappraisal targets for access and village roads were exceeded, farm roads (680 km)were mostly included in land development contracts and thus excluded frominfrastructure costs. Fewer settler houses (69% of revised target) wereconstructed due to non-eligibility of settlers (non-signing of Settler Agreement)and delayed scheme development. Most of KESEDAR's agency and social facilitieswere completed with the exception of staff houses (70% of target). Managementcosts, which included procurement of limited numbers of vehicles and equipment,greatly exceeded (by 162%) appraisal estimates.

1.16 Due to slow project execution, low budget allocations, and thus lowlevels of expenditures, disbursements were extremely slow throughout projectimplementation. At project closing, US$11.13 million or only 44.5% of theoriginal loan amount was disbursed.

Tree Crop Development

1.17 The total area achieved for various tree crops by the end of 1987 ascompared to reformulated project targets is summarized in Table 1. The phasingof tree crop development is shown at Annex 2, Table 1.

Table 1: TREE CROP ACHIEVEMENTS (As of End 1987)

ReformulationTarget Achievement Z

Type of scheme (ha) (ha) Achievement

New PlantingIndividual 5,345 4,695 88Block 5,710 2,057 36

Subtotal 11.055 6,752 61

RISDA Replanting 2,201 2,865 130RISDA Rehabilitation 9,396 21,785 232

KESEDAR's reformulated program 7,000 2,697 39

TAKDIR's original new plantingprogram (1980-83) 11,575 4,055 35

1.18 TARDIR's performance was unsatisfactory. Before its dissolution,TAKDIR had only achieved 352 of its new planting (individual) target. KESEDAR

-7-

was also initially slow and planted only 2,057 ha or 36Z of its program for blockplanting agreed at reformulation, although some more land was cleared anddeveloped by the end of 1987. KESEDAR's block planting continued after projecttermination and reached 4,161 ha by the end of 1990. A further 559 ha isexpected to be planted in 1991 (Annex 2, Table 2). The problems faced by TARDIRand KESEDAR in project implementation were detailed in paras. 10-14.

1.19 In contrast, the achievement of the RISDA component for rehabilitationand replanting was substantially above target. The RISDA program, which up toproject reformulation was confined to TAKDIR schemes and had progressed veryslowly, was given a much broadened base at reformulation. RISDA operationswithin the geographical region allocated to KESEDAR were absorbed into theproject and, further, mini-estate development was included. These operationswere part of RISDA's ongoing national program and were largely free of theconstraints on TAKDIR/KESEDAR schemes. The RISDA component greatly helped loandisbursement.

Orchard Planting and Rehabilitation

1.20 Existing settlers were originally eligible for planting andrehabilitation grants (fertilizers, planting material, agro-chemicals and tools)for mixed orchard crops. While these grants were available, about 200 ha peryear were planted and about 50 ha/year rehabilitated. When these grants were nolonger available, settlers had little further interest in the DOA orchardprogram. However, many settlers continued to plant fruit trees using their ownresources with many obtaining planting material from Thailand.

Fishponds

1.21 The establishment of fishponds near streams proved popular on severalschemes during early project years, when some 66 ha were established. Hcwever,when the subsidy scheme was terminated in 1984, interest in the program ceasedand no further development under this component was, therefore, included atreformulation.

Hybrid Coconut/Intercrop Trials

1.22 Some 100 ha were to be planted on five sites to test crop suitabilityand attractiveness to settlers. Only in 1982 some 51 ha were planted, withcoconuts performing reasonably well but cocoa suffering from considerable pestand disease problems. Continuation of this program after project reformulationwas, therefore, not considered.

Infrastructure

1.23 The component aimed at improving access to the existing and newsettlement schemes as well as to provide settlers adequate access to plots withinthe schemes and to provide housing and other facilities for both staff andsettlers. Implementation of the roads component was uneven, but finalachievement was satisfactory. Delayed appointment of a project roads engineer

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and the resulting poor alignment and drainage of many roads was of major concernin early project years, and budget shortfalls prevented achievement of sometargets in later years. After reformulation, farm roads were included in theland development contracts. These crude roads require upgrading after asettling-in period. Housing construction targets could not be achieved sinceseveral schemes either commenced land clearing operations close to projecttermination or were deferred. Achievements are summarized in Annex 1, Table 1and in Appendix 7 of the PCR.

Studies and Consultancies

1.24 The Road Construction Sector Study was expected to take about 9 monthsfor the first phase, commencing in 1980, while a second phase was expected torequire a further 6 months. The first phase study was completed withconsiderable delay and at a cost close to that anticipated for the entire study.Due to deficiencies in the first phase study, the second phase was not undertaken(see further para. 37). Another consultancy, which established an accountingsystem in TAKDIR and trained staff in accountancy procedures, was successfullycompleted. The consultancies for RISDA and ICU (para. 8) were not considerednecessary and were dropped.

C. Prolect Impact

Overall Impact

1.25 Overall, the project had significant achievements despite majorproblems faced during implementation. At project termination in late 1987, about21,800 ha of existing rubber was rehabilitated (382Z of appraisal and 232% ofreformulation target), about 9,000 ha of rubber and some 680 ha of oil palmplanted or replanted (66% of appraisal and 73% of reformulation target), andadditional land cleared and developed, which was planted after 1987 (para. 18).About 3,275 settler houses were constructed (85% of appraisal and 692 ofreformulation target), about 1,328 km of roads constructed or upgraded (109Z ofappraisal and 111% of reformulation target) and other settlement and agencyinfrastructure provided. Though the project's achievement in the provision ofsettlement and agency infrastructure (accounting for 60% of final project costs)was significant, its productive impact was less impressive. Planting andreplanting accounted for 81% of agricultural development costs but fell short oftarget and projected yields are not very high, particularly for individualplantings (52% of planted and replanted area). Though rehabilitation, accountingfor 12% of agricultural development costs, substantially exceeded targets, itconsisted only of fertilization, weeding and ethrel stimulation of areas alreadyin production. The institutional impact of the project was negligible.

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Oualitv of Tree Croy Development

1.26 The overall quality of rubber development is variable. Generally thestandards of ex-TAKDIR schemes are unsatisfactory. Vigor of tree growth is veryvariable; there are many incomplete tree stands due to planting losses; andweeding has not been satisfactory resulting in lalang infestation in many cases.Quality of plantings in the KESEDAR block schemes is higher and field maintenanceafter planting is usually satisfactory. Factors most frequently contributing tounsatisfactory tree crop performance in TAKDIR/KESEDAR schemes were: poorscheduling of land development in relation to optimal seasonal plantingconditions, inadequate nursery operations, poor quality rubber planting material,poor post-planting field maintenance, and poor contractor performance.

(a) Land Development Schedules: Late scheduling of land development,particularly for block planting and nursery sites, was frequentand yet its adverse impact was inadequately recognized.Administrative problems and procedures seemed to rule continuallyagainst a better scheduling performance. Typically, contractswere arranged too late in the season, often to coincide with latebudget releases, and thus land could not be ready for planting atthe optimum time. Planting even proceeded into the non-plantingmonths to satisfy administrative goals without due concern forthe inevitable high planting losses.

(b) Nursery Operations: Technically, these were very weak. PoorTAKDIR planning often left farmers without a supply of plantingmaterials in the planting season. In KESEDAR, poor scheduling ofnursery works often resulted in inadequately grown plantingmaterials. There were also examples of inappropriate sitings ofnurseries (poor soils, lack of water), inadequate monitoring ofsupplies and quality of rubber seeds for stocks resulting in lowgermination levels and large numbers of poor quality plants forbudgrafting, and poor contractor performance in budgrafting,which affected planting material quality and its timelyavailability. Mention should be made, however, of the goodstandard of rubber and oil palm nursery production schieved atKESEDAR's Paloh 4 scheme under capable and experiencedmanagement. Seedling vigor and nursery conditions there were upto the standard of better private estates.

(c) TvRe of Planting Material: The successful use of bare-rootedbudded stumps, the standard rubber material of the project,depends on vigorous materials planted early in the plantingseason so as to benefit from adequate rainfall during earlyestablishment. The project dependence on stumps thus becamerisky where scheme management was weak and uneven plantings arenot uncommon in the project area. One particularly inappropriatecourse of action by TAKDIR in 1982 in the face of plantingmaterial shortages was to allow individuals to plant seed andlater budgraft it: most settlers were not trained budgrafters

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and could not be guided against using poor clones or even growingunbudgrafted seedlings.

(d) Field Maintenance: Whereas standards are generally good in thecentrally managed KESEDAR block schemes, those of ex-TAKDIRschemes are much less satisfactory. High field variability wasinevitable in TAKDIR schemes under their largely self-helparrangements and lack of good extension and management guidance.In contrast, KESEDAR's rehabilitation service has vigorouslytried to increase the interest of settlers in their schemes andoverall field conditions.

(e) Contractor Performance: Inadequate evaluation of financialresources and past field performance of contractors often ledboth TAXDIR and KESEDAR to appoint poorly qualified contractorsfor land and nursery development, thus compounding their problemsand contributing to implementation slippage (see further para.43).

1.27 Oil palm development, included in the project from 1986, is limited tothree of KESEDAR's seven block schemes. Standards of planting achieved to date,both in nursery and field, are satisfactory. The program, however, fell behindschedule when orders for planting materials were not placed in a timely mannerand KESEDAR had to forego purchases on the open market when prices soared. Asin some rubber block schemes, land preparation contracts were not appropriatelyphased to ensure planting at the optimum time.

CroD Production

1.28 The yield profiles used for the project economic analysis are given inAnnex 2, Table 3. They have been constructed from PCR data and otherinformation, and reflect the difficult management conditions in Kelantan. Theprofiles given in KESEDAR's PCR for block plantings of rubber and oil palm aretoo optimistic considering field conditions and management constraints in theschemes. Yield profiles for RISDA's rubber rehabilitation and mini-estates havebeen estimated (individual replanting under RISDA is assumed to have the sameprofile as that of TAKDIR/KESEDAR). The profile for rehabilitation assumes aslightly inferior performance compared to KESEDAR's individual replanting asrehabilitation is already indicative of below average teclmology and managementstandards. The year of first production in the rubber profiles for blockplanting and mini-estate has been assumed to be 6 and that for individualplantings 8 years after planting to reflect the effects of different levels oftechnology and management inputs. While most of the area under individual rubberplanting and replanting is now under production, only oil palm in part ofKESEDAR's block planting at Meranto and Paloh 4 schemes was in production as ofMay 1991. During the peak period in 1993/94, the incremental production ofrubber is expected to reach some 26,000 tons annually from 31,400 ha planted orrehabilitated until the end of 1987. Of this, about 15,000-16,000 tons areexpected from 21,785 ha of rehabilitated farms and the rest from planted andreplanted farms. The incremental oil palm output is anticipated to peak at about

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14,300 tons of fresh fruit bunches (ffb) in 1997 from 680 ha established by theend of 1987.

Settler Incomes

1.29 Settlers on the original TAKDIR schemes were provided with 3.2 ha ofland, of which 2.4 ha was for rubber and 0.8 ha for orchards. Afterreformulation, KESEDAR planted rubber and oil palm on contiguous blocks of virginunalienated land, mostly on the fringes of original settlement schemes and on afew new schemes such as Paloh 4. The settlers on this new land are expected toreceive individual title to the land, once clear policies have been decided byGOM. At appraisal, it was expected that as a result of the project, the projecthouseholds would be taken out of the poverty group since family incomes wereexpected to increase to two to three times their pre-project levels. There wereno systematic survey data during project implementation. However, KESEDARconducted in Tune 1988 a soclo-economic survey which covered 1,135 settlers in24 schemes. Results from this survey relating to production and settler familyincomes should be interpreted with caution since in mid 1.988 latex production wasabove average for the year and farmgate rubber prices were high. Moreover, thesurvey results do not reflect project outcome since it is unlikely that anyproject planted or replanted rubber farms would have been in production in mid-1988. The average rubber yield was 92 kg/ha/month or about 1,100 kg/ha/yearwhich is slightly above the smallholder average of 900-1,000 kg/ha/year butsubstantially below that achieved on estates (about 1,350 kg/ha/year). Settlerincomes averaged M$842/month, of which 57.4% was from rubber and 382 from off-farm sources and the remainder (4.5%) from other farm resources (fruit,vegetables, chickens, fish, etc.). The June 1988 level of family income was morethan double the rural household poverty level income of M$325/month. It alsocompared very favorably with the 1978 family income level on the settlementschemes (average of M$97/month), 65% of which was obtained from farm sources,predominantly rubber. No data is available for the project planted or replantedrubber farms, but it is likely that settlers on producing rubber farms have nowbetter incomes and living conditions (access to Kota Bharu and other towns, watersupplies, schools and other community facilities) than before projectimplementation. It should be mentioned that compared to the appraisalexpectation of 1,800 new settler families, only 23 new families had been settledin KESEDAR block schemes as of May 1991, mainly due to slow settler selection bythe State Government. However, including the existing settlers, the total of7,344 was close to the appraisal target of 7,500.

Economic Rate of Return

1.30 At completion, the project ERR is estimated at 22% compared to 172 atappraisal and 12% at reformulation. The ERR is calculated in 1990 constant termsusing the World Bank price projections of December 1990. Project costs wereconverted to 1990 constant terms using the Malaysian consumer price index. Onlyrubber was included in ERR calculations since oil palm was negligible untilproject termination at the end of 1987. The calculation excludes costs oforchards, fishponds and coconut trials; road construction sector study;village/social infrastructure, as at appraisal; and 50% of the costs of

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management facilities, since they also cover non-project areas. As at appraisal,full costs of settler houses and farm and access roads were included. Cropdevelopment and production costs are based on estimates as shown in Annex 2,Table 4. The ERR at completion is much higher than at appraisal andreformulation mainly because of the rehabilitation component, which accounted for69Z of the area benefitted by the project and exceeded the appraisal target by382Z and reformulation target by 232% (para. 25). Incremental rehabilitationcosts are low since clearing and other establishment costs are avoided and ayield response starto the first year after treatment. Excluding rehabilitation,the project ERR at completion is much lower but still reasonable at about 9Z.

Sustainability

1.31 Most of the project components are sustainable, including blockplantings by KESEDAR, RISDA mini-estates and settlement infrastructure, sinceboth KESEDAR and RISDA, now under the Ministry of Rural Development, are wellestab.ished agencies with adequate funding. In particular, significant favorableorganizational changes occurred at KESEDAR in 1990 with the abolition of theRehabilitation Division and integration of the project schemes with KESEDAR'sother schemes. Now all KESEDAR schemes are being managed by two zonal officesin the north and south and the two zonal managers report directly to the GeneralManager of KESEDAR. Compared to block and mini-estate plantings under KESEDARand RISDA, respectively, individual plantings on most ex-TARDIR schemes are lessviable. The status of farms rehabilitated by RISDA is also unknown, since RISDAdoes not have a system of monitoring the impact of its programs on smallholders.

D. Borrower and Bank Performance

Government and Prolect Management Performance

1.32 The principal issue during project preparation was the selection by GOMof a consultancy group that was inadequately experienced (the consortium rankedfifth in evaluation by Bank staff). Before appraisal, the consultant's reporthad to undergo many changes in response to the suggestions of EPU and Bank staff.During the first two years of implementation, it was found that the feasibilitystudy was based on inaccurate statistics, particularly regarding settler presenceon the schemes, and many issues had been inadequately highlighted. Following thechange of State government, there was inadequate commitment to revitalize theState implementing agency TAKDIR, which faced a multitude of political,managerial, technical and social problems on the schemes. This in turn affectedprogress with rubber, orchard, coconut/cacao planting, replanting andrehabilitation, and the road construction program (see paras. 10-11 for details).

1.33 After the dissolution of TAKDIR, project implementation responsibilitywas transferred to KESEDAR and a project reformulation took place in May 1984(para. 12). A major beneficial aspect of the reformulation was that RISDA wasassigned greater involvement in replanting on mini-estates and in rehabilitating

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older plantings after the settlers signed a Settlement Agreement (rather thanawait land title). However, project progress continued to be slow, due toinsufficient budget allocations and other problems (paras. 13-14). Overall,Government commitment to the project was variable but generally weak.

Bank Performance

1.34 The 1976 Bank pre-identification mission recommended that FELCRA,rather than the State land development agency, be given the responsibility forscheme completion and rehabilitation due to the latter's inadequate management,staffing, funding and achievements (4,000 families settled on 38,000 acres in 16years). However, this recommendation was not acceptable to the Kelantan StateGovernment. The feasibility study financed by the Bank was to address majorissues such as land settlement strategy (individual self-help type of developmentor managed scheme developed with settler participation as shareholders), thelevel of investment per family, organizational responsibility and cost recovery.Shortlisting and selecting consultants took months and significantly delayedproject preparation (paras. 6 and 32). In retrospect, it was ill-advised toallow Bank financing of a consultancy consortium which was ranked fifth inevaluation by Bank staff. The resulting study did not address the issuesadequately and the scheme statistics proved to be inaccurate or were wronglyinterpreted (para. 6).

1.35 The BtL,k appraisal team did not adequately evaluate the land title andsettler eligibility issue, which in many cases prevented settlers from schemeparticipation. Settlement policies and requirements for scheme participationshould have been clearly outlined to prevent the difficulties experienced in thisproject. In particular, the ineligibility of many settlers for grants and loansdue to lack of land title and their subsequent unwillingness to sign a SettlerAgreement slowed progress of new planting, rehabilitation and replanting, andinfrastructure development.

1.36 Since project progress continued to be slow, the July 1987 supervisionmission recommended early project termination which advice was readily acceptedby the Government. Bank supervisions were adequate and fully reported the manyproblems encountered. Perseverance with the project, despite slow progress anddisbursements, was due to the expected change in Government commitment to thereformulated project with project execution by a federal agency. However,KESEDAR was given inadequate budget and managerial capacity to achieve thedevelopment targets for an underdeveloped and poor part of the State of Kelantan.

1.37 Bank guidance for the first phase of the Road Construction Sector Studywas insufficient. Mainly due to deficiencies in the terms of reference, theconsortium of consultants focusad mostly on organizational aspects. This provedunacceptable to the Government and the follow-up study, which was to be morefocused on the analysis of the contracting industry, was not agreed to by theGovernment and, therefore, not carried out.

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E. Implementation Issues and Lessons Learned

Implementing Asencv Experience and Commitment

1.38 Identification of a capable project implementation agency is ofcritical importance. This was the major lesson learned from the project.Although the Bank initially preferred FELCRA as the lead agency, it acceptedTAKDIR, an inadequately experienced State executing agency, for projectexecution. With a change in State Government, this agency did not receive thepolitical and financial support it needed to u.pgrade its capacity and efficiency.XESEDAR, which later assumed the responsibility for project implementation, haddifficulty coping with the task of scheme rehabilitation, particularly of schemeswith difficult politico-socio-economic conditions. When inadequate federalbudget allocations necessitatod prioritizing tasks, the agency favored itstraditionally assigned tasks of new land development on schemes identified by itsown staff. It was, therefore, appropriate that project reformulation hadfocussed on new block plantings, rather than individual holding development. Inretrospect, all scheme rehabilitation work should have been assigned from thebeginning to specialized and experienced agencies.

Tree Crop Development Strategy

1.39 The input of settlers in individual holdings in TAKDIR-managed schemeswas generally insufficient and this led to the need for rehabilitation orreplanting. Even after the necessary initial improvements were made, themajority of settlers were not able to manage their properties adequately for avariety of reasons such as insufficient technical knowledge, inadequate incomefrom the property necessitating off-farm employment, and non-residence on thescheme. In contrast, large block planting with adequate lay-out, terracing,cover crop development, tree spacing and quality grafted planting material,followed by a satisfactory standard of management (weeding, fertilizing, pruning,etc.) during the long (6-7 years for rubber) non-productive stage and the tappingof the trees using standard technology, has generally ensured reasonably highrubber and oil palm yields. This form of development in Malaysia with settlerssharing in the work and proceeds has proven substantially more successful thanindividual tree crop management, which almost invariably has resulted in unevenstands and poor maintenance, management and production standards. As in theprivate sector, parastatal-sponsored development must have skilled andexperienced agricultural managers, but they were lacking both in TARDIR and inKESEDAR's Rehabilitation Division. Moreover, whereas good quality plantingmaterial is essential to attaining high levels of future production, nurserystandards at TAKDIR and KESEDAR unfortunately were not always satisfactory. Ofthe several land development approaches utilized in the project, the KESEDARblock development with settlers working under central management until cropdevelopment investments have been recovered, has the highest agriculturalpotential. In contrast, the area under ex-TAKDIR schemes is not expected to dobetter than average smallholdings.

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Timinf of Budaet Releases

1.40 41Good tree crop development depends critically on optimum timing ofoperations such as land clearing, land development, covercrop seeding, planting,weeding, etc. and it is, therefore, imperative that budget releases areappropriately matched to these seasons. When clearing and burning extends beyondthe dry season, it is not only much less effective, but more significantly,delays planting beyond the optimum season and into the next dry season withserious consequences. The award of land development contracts was consistentlylate in the years 1985-87 and this delayed all planned development work. Thesedelays were in the first instance due to untimely budget releases. Future treecrop development projects need to take due account of this lesson.

S^heme Lay-out Criteria

1.42 Undulating and hilly terrain with easily erodible soils requiresspecific and careful planning to avoid erosion problems on terraces and alonginternal roads. Existing schemes, which required substantial upgrading of farmroads, had considerable problems of erosion due to inappropriate road alignmentand insufficient road-side drainage. These early problems were mostly avoidedin newly developed schemes when detailed design features for internal roads wereincorporated in development plans. There remain a few small areas in the projectwith excessively steep slopes, but satisfactory stabilization measures have nowbeen taken, mostly through the successful establishment of covercrops betweenrubber and oil palm.

Availability of Land

1.43 There were delays in releasing logged-over land by the ForestryDepartment for new land development, and the non-availability of either landtitle or Settler Agreement prevented KESEDAR and RISDA from expanding the areaof rehabilitated or replanted rubber in a timely manner. Despite an assurancethat the State of Kelantan would make land available for the proposed projectactivities, thie was not always done. There were also problems of access to afew project schemes due to security restrictions, which had been imposed in someareas of Kelantan.

Contracting for Land Development

1.44 Contracts for scheme development (from clearing to planting, lay-outof internal roads and initial crop maintenance) were frequently awarded tobidders whose bid prices were well below agency estimates. Many of thesecontractors were not able to execute the work in a timely and satisfactory mannerdue to undercapitalization and insufficient machinery and manpower. Manycontractors were also awarded contracts during the wrong season (due to latebudget releases) with poor working conditions, whici caused unintentional delays.Contracts should be awarded to the lowest evaluated bidders, taking due accountof their experience and financial status, and should be timed to make use ofoptimal seasonal conditions, when necessary.

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Summary of Lessons Learned

1.45 Lessons learned from this project are:

(a) The Bank should not have financed consultants for projectpreparation it had evaluated as unsuitable, and should haveexercised better judgment in agreeing to the choice of theproject implementing agency;

(b) Settlement policies relating to settler selection, loaneligibility, land titling and investment levels per family, mustbe well understood and evaluated at appraisal;

(c) Schemes in which individual settlers are given land to bedeveloped largely on a self-help basis without a reasonabletechnical knowledge of improved agricultural methods and withoutguidance from a good extension service, are less likely to besuccessful;

(d) Untimely budget releases can adversely affect tree cropdevelopment, which depends critically on optimum timing ofoperations; and

(e) Contract awards should be made to the lowest evaluated bidders,taking due account of their experience and financial status.

Annex I- 17 - Table 1

TarRets and Achievements

Rem SAR Reformulation Actual AchievementTarget Target 1984 Docember Appraisal Reformulation1960 1987 % %

Rubber- rehabilitation ha 5,709 9,396 21,785 382 232- rplanting ha 2,915 2,201 2,665 98 130

(ndividual and mini-estate)- new planting (Individual) ha 11.575 5,345 4,695 } 88- now panting (blocks) ha - 5,710 1,360 } 56 24

il Palm - new planting (blocks) ha - 680 }

rchards - rohabilitaton ha 1,215 207 17- new planting ha 405 - 689 170

Hybrid Coconut/Cocoa Trials ha 100 - 51 51

Flshponds ha 120 - 66 55

Setter Housing no 3,850 4,720 3,275 85 69

:ads- accewnew km 136 50 158 116 316- accesupgrading km - 160.5 44.2 28-farm-new km 1,080 11 455 683 L 63 150- farm-upgrading km - 480 307.4 64- village-new km 50 135.8 - 272

Social InfrastructureSchools no 9 25 15 167 60Post Offices no - 24 2 - 8Village Halls no 24 26 20 83 77Suraus no 26 19 73Heath Post no 11 11 11 100 100Mosques no - 10 12 - 120

Agency FacilitiesOffices no 4 30 30 750 100Staff Quarters no 98 206 137 140 67Tractor Sheds no 28 23 14 54 61

Labeled as principal and minor agricultural roads In SAR.Constructed as part of land development contracts after project reformulation In 1984.

ANNTEX 1Table 2

Prolct Costs

SAR Actual as XEstimate of Appraisal106 16 1982 06 194 1986 1906 19897 Tots I US '000 Estimte-

( ~~~~~~~~~~---------_---- _ _ __ _ _ _

KESEDARa. grTcultural Development 2,054 2,782 2,032 669 892 1,379 6,02S 3,306 13,141 36,302 61.3b. Settler House 5,W03 2,255 372 S08 343 S1S 320 200 9,101 11,650 78.6c. Management 8,847 8,955 4,584 4,294 3,362 2,618 2,170 2,777 27,007 10,693 282.4d. Roods, Village/Social

Infrastructure 291 197 478 623 1,541 2,249 2,244 2,186 9,768 36,165 27.0Sub-total 9,996 9,109 7,466 6,394 6,643 6,961 9,762 8,417 84,007 93,610 69.2

RISOAa7l-bber Replanting 220 1,865 1,069 221 493 71 1,006 328 5,252b. Rubber R babilitation 170 60" - 175 272 179 1,069 879 3,414 1

Sub-total 890 2,636 1,059 306 765 250 2,064 1,207 8,666 11,256 77.0 0DOA/DOF. Or-chard - noe planting 173 267 214 207 - - - - 861 ) }b. Orchard - r.habilitation S1 63 30 94 - - - 238 ) 1,038 ) 104.9e. Coconut Intercropping

Demonstratlon - - 63 - - - - - 63 627 12.0d. Fishponds 262 237 400 - 89 - - - 978 1,360 72.4

Sub-total 476 657 707 301 89 - - - 2,130 2,916 73.3Road Construction Sector Study - - - 2,288 - - - - 2,208 2,150 106.4Contingencies - - - - - - - - - 40,960 -

Project Total (3 '000) 10,861 12,261 9,232 9,879 7,497 7,211 11,326 9,624 77,691 160,39O 61.6Exchange te (MS/Ul) 2.13 2.30 2.84 2.32 2.34 2.46 2.56 2.62 2.37 2.16 110.2Project Total (UN '000) 4,962 5,881 8,946 4,043 5,204 2,908 4,584 3,819 52,616 70,181 46.8

Annex 2Table 1

PhasinR of Tree Crop Development by PlantinR Year (ha)

1980 1981 1982 1983 1984 1985 1986 1987 TotalRubberIndividual NewPlanting(TAKDIR/KESEDAR) 1950 1305 625 175 345 85 30 180 4695

Block New Planting(KESEDAR) - - - - - 70 785 525 1380

Rehabilitation(RISDA) by Yearof Implementation 830 3065 - 1120 1505 950 7300 7015 21785

IndividualReplanting (RISDA) 20 35 - 75 85 45 90 - 350

Nini--Estate (RISDA) 115 1060 670 65 225 - 170 210 2515

Oil PalmBlock New Planting

(KESEDAR) - - - - - - - 680 680

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Annex 2Table 2

Block Planting by Kesedar

Name of Scheme Year of Development Area Developed Area Planted Area to Type of(ha) by December be Planted Crop

31, 1990 (ha) In 1991

Ulu Bertam 1984/85 180 180 - RubberAir Chanal 1984/85 218 218 - RubberSungai Satan (2A) 1984/85 164 164 - RubberSungai Satan (2B) 1984/85 164 164 - RubberSungal Satan (2C) 1986/87 286 286 - Oil PalmChenulang (2A) 1985/86 349 349 - RubberChenulang (2B) 1985/86 435 435 - Rubber1engkebang 1986/87 405 245 _ RubberMeranto 1985/86 455 260 - Oil Palm

195 - Rubber1988/89 439 69 289 Oil Palm

0 81 RubberPaloh 4 1985/86 712 476 - Oil Palm

236 - Rubber1986/87 737 419 - Oil Palm

318 - Rubber1989190 336 147 141 Oil Palm

0 48 Rubber

Total 4,880 4,161 559

Annex 2Table 3

Estimated Yield Profiles - Rubber and Oil Palm

RUBBER (kg dry rubber/ha) OIL PALW (tons ffb/ha)

Yearsfrom Block New Individuals RISDA Mini- RISDA Reha- Block New Oil Extraction KernelsPlanting Planting (TAKDIR/KESEDAR) estate bilitation Planting Rate (2) (Z)

I - - 4502 - - 650 -3 - - 900 1 13 44 - - 1000 5 15 45 - - 1000 8 17 46 350 - 250 1200 12 18 47 650 - 600 1300 16 19 4.58 900 500 900 1300 18 20 4.59 1100 700 1100 1200 19 20 510 1200 900 1150 1100 20 20 511 1300 1000 1250 1100 21 20 512 1500 1000 1400 1000 21 20 513 1550 1200 1550 900 20 20 514 1600 1300 1600 800 19 20 515 1600 1400 1600 700 19 20 516 1500 1400 1500 900 18 20 517 1600 1300 1600 800 18 20 518 1500 1100 1550 700 17 20 519 1450 1000 1550 600 17 20 520 1350 900 1500 600 16 20 521 1300 800 1400 600 16 20 522 1300 700 1450 500 15 20 523 1250 900 1350 900 15 20 524 1200 800 1250 700 14 20 525 1100 700 1150 500 14 20 526 1000 600 1000 13 20 527 800 600 900 13 20 528 700 600 800 12 20 529 1100 1000 110030 900 800 90031 700 600 700

Total 30500 21800 31100 21400 397No. Prci. Yrs. 26 24 26 25 26Av. Yield/Year 1170 910 i200 860 15.3

Annex 2Table 4

Estimated Costs of Development and Production(M$/ha)

Loam. 1L 2j 3 _ _5 _6 7 _8 9 10 I11 12 13 16 15 16 17 18 19 20 21 22 23 26 25 26 27 26 29 30

SchbmemRe-PlantigCR16DA) at 2400 700 450 450 300 300 300 250 1180 1050 1050 1050 1030 950 950 950 900 900 700 700 700 700 700 600 600 600 600 600 600 600

RuSDA

(Rubber) 3160 840 680 1060 600 3501120 970170 1150 1200 2015 10 1110 1110 III-) 1130 1130 1130 1100 1100 1000 1000 1000 900 900 900 900 900

Oil PalmScheme bI 2220 1000 800 1900 700 600 900 1000 1000 1000 1000 950 950 950 900 900 850 850 650 800 800 800 800 650 650 650 600 600

RubberScheme b 2500 900 650 1550 450 350 300 700 900 1050 1050 1050 1150 1200 1200 1350 1300 1300 1300 1200 1200 1150 1150 1050 900 900 800 800 700 600

LendClClea nd---i-->g and -ybeor podctatur------------before------------od podcttnpeoo ------p---o-----ct----on----period…-------Planting

It Also asaumed for individual nem planting.

ki Used for Block ne, planting by 2ESKDA.R.

- 23 -

DRAFTCONFIDENTIAL


MALAYSIA

KELANTAN LAND SCHEME REHABILTTATION PROJECT

(Loan 1899)

DECEMBER 31, 1987

- 24 -

TABLE OF CONTENTS

'NO.. CONTENTS PAGE NO.

1. INTRODUCTION 1 - 3

2. PROJECT FORMULATION 4 - 5

3. REVIEW AND CHANGE IN SCOPE 5 - 8

4. PHYSICAL IMPLEMENTATION 9 - 12

5. AGRICULTURAL COST, PRODUCTION 13 - 14AND SETTLER INCOME

6. FINANCIAL ANALYSIS 15 - 17

7. STAFFING 18 - 19

8. ISSUES AND LESSONS TO BE LEARNT 12 -V.

9. Appendices

- 25 -

KELANTAN LAND SCHEMES REHABILITATION PROJECT(LOAN 1899 - MA)

1. INTRODUCTION

South Kelantan Development Authority (KESEDAR) was established

on 5th March, 1978 under the South Kelantan Development Act No.

203/1978. KESEDAR is a Federal Agency placed under the Ministry

of Land and Regional Development and it is the fourth Regional

Development Authority formed by the government after DARA (1971),

KEJORA (1972) and KETENGAR (1973).

Southern Kelantan Region is situated in the South of Kelantan

bordering Thailand in the North, Perak State in the West, Pahang

State,in the South and Terengganu State in the East. The total

acreage of Southern Kelantan Region is 1.24 million hectares

which comprises three-quarter (3/4) of the total size of

Kelantan. Southern Kelantan Region includes the whole of Ulu

Kelantan District, Jeli District and part of Tanah Merah District

i.e. Belimbing, Jedok and Ulu Kusial.

The majority of Southern Kelantan Region comprises of hilly and

steepland. Approximately 407. of the area is about 300 metres

above sea-level and only 25% of the area is found to be less

than 76 metres above sea-level. Nearly 50% of the area is found

to have steepness more than 25 degrees while only about 10% of

the area having less than 15 degrees steepness.

KESEDAR is empowered under the South Kelantan Development Act

No. 203/1978 to execute the following functions:-

(i) Develop, initiate, assist and execute the social and

economic development in the Southern Kelantan Region;

(ii) Develop, initiate, assist and execute the agricul-

tural, industrial, commercial and settlement develop-

ment in Southern Kelantan Region;

- 26

(iii) Control and co-ordinate the implementation activities

mentioned above in Southern Kelantan Region.

Though KESEDAR is a Federal Agency, it has to have a close commu-

nication with Kelantan State Government in its effort to develop

Southern Kelantan Region in particular and Kelantan State-in

general. KESEDAR slowly becomes the most significant concributor

to the development of the state of Kelantan. With this status,

KESEDAR was given the trust to take over TAKDIR with effect from

1st June, 1983. With the absorption of TAKDJR, it has become

the responsibility of KESEDAR to undertake all the responsibili-

ties that had been under the jurisdiction of TAKDIR especially

the Rehabilitation Programme which was started since 1980. KESEDAR

has formed a new division in order to be responsible for the

execution of the rehabilitation programmes left by the dissolved

agency (TAKDIR). This new division which was established from

1st June, 1983 is called the Rehabilitation Division of KESEDAR.

TAKDIR formerly known as Kelantan State Land Development Board

was established on 1st January, 1960 through the State Order No.

82/1959 under Section 30, Land Development Ordinance 1956 with

the aim of opening and developing land settlement schemes for

the low-income rural families who were either landless or had

very small holding,from among the citizens of Kelantan. The

concept of development is by self-help i.e. using settler's

labour (without pay) to the maximum and government aid to the

minimum. Every settler is given six acres of rubber lot, two

acre of orchard lot, two acres for padi (if there is suitable

area) and k acre for house lot. All works involved such as land

development, house construction etc., were carried out by the

settlers themselves. Settlers were provided with some planting

materials but no other assistance. The 26 TAKDIR schemes based

on rubber are located in the districts of Kuala Krai (10),

Plachang (1), Tanah Merah (9) and Ulu Kelantan (6). These com-

prise a total gross area of 70.800 acres, (28,650 ha.) initially

planned for allocation among some 7,000 settle.rs. Develcpment of the

schemes.was very slow. Fourteen of the schem6e were initial-ly

opened before 1965 and 9 between 1965 and 1970. Major factors

- 27 -

in this slow rate of development were the inaccessibility of

many of the schemes, particularly those opened after 1965 and

the lack of both assistance provided by TAKDIR to the settlerg

and the social infrastructure on the schemes. Limited assistance

was provided by other agricultural support services, for instance,

in development of small group processing centres (GPCS) for

rubber and other rubber extension services by RISDA, crop and

livestock extension by the Department of Agriculture (DOA) and

the Department of Veterinary Services (DVS) respectively. This

support has, however, been limited by accessibility, and lack of

resident population. The general lack of infrastructure reflects

TAKDIR's past financial constraints and earlier lack of support

from the Federal Government. In mid-1978 only four schemes could

be reached by all-weather roads, three had a piped water supply,

eight had primary schools, only one scheme had a secondary school

and six had clinics. Lack of these facilities and other basic needs

caused them leave the scheme periodically to earn a subsis-

tiance income, resulted in reluctance by settlers to construct

houses on the schemes and move in with families and contributed

significantly to the slow pace of the scheme development. A

survey of settlers resident on schemes carried out in 1978 indi-

cated average household cash incomes of $1,165.00 per year of

which about $755.00 was from farm sources predominantly rubber.

A survey of nutritional and health conditions on the schemes

indicated the presence of anemia and that protein/calorie-

malnutrition is common particularly among children. Malaria is

also endemic in these areas and intestinal parasites are common.

In order to speed up the rate of development of the schemes,

TAKDIR had to improve the accessibility to the schemes, provide

more assistance to the land development and also social infra-

structure on the schemes. However, TAKDIR had to solve its

financial constraints and the lack of support from the Federal

Government, before it could manage to carry this rehabilitation

programme which is known as Kelantan Land Schemes Rehabilitation

Project.

- 28 -

2. PROJECT FORMULATION

The Kelantan Land Schemes Rehabilitation Project is designed to

increase the income and improve the living conditions and well

being of 7,500 households in the State of Kelantan. It comprises

development activities in the Project Area for a period of six

years, 1980-85 and consists of the following:-

(i) Development through new planting, and rehabilitation

of about 37,200 acres of rubber, 4,000 acres of

orchards, 300 acres of fish ponds and 650 acres of

house lots by the State of Kelantan;

(ii) Development through replanting and new planting of

about 12,700 acres of rubber by RISDA;

(iii) Develooment of about 250 acres of hybrid coconuts/

inter-crop trial planting by appropriate agencies

concerned;

(iv) Construction of about 3,850 settler's houses,

eight primary and one secondary schools, 11 rural

clinics, 24 community centres, and eight water supply

Systems.all by the State of Kelantan;

(v) Settlement of about 1,800 families by the State of

Kelantan;

(vi) Assistance to TAKDIR management through additional

staffing, vehicles, equipment, facilities and

technical assistance by the State of Kelantan.

(vii) Technical assistance to RISDA to strengthen its

extension services and to the Borrower's Implementation

and Coordination Unit for development of a monitoring

system for Applied Food And Nutrition Programme (AFNP).

(viii) Technical assistance and consultant services to EPU

to undertake a study of the road construction sector

in Malaysia.

- 29 -

The total project cost was estimated at M$150.89 million

(US$70.2 m) of which M$54.57 million (US$25 m) or 37% of the

total cost would be financed by the World Bank. The summary of

the cost-estimates is shown in Appendix I. The proposed Bank

Loan of US$25.0 m would finance the full foreign exchange cost

of the project exclusive of taxes and duties. Kelantan State

would provide M$7.31 million (US$3.4 m) or 5% of the total

project cost as grants to TAKDIR to cover management cost. The

Federal Government would provide M$39.3 million (US$18.3 m) or

26%of the total projecz cost to the State in the form of loans

for lending to settlers to finance development of rubber and

settler housing and M$38 million (US$17.7 m) or 25% of the

project cost in the form of grants for funding of infrastructure,

development of agricultural enterprises other than rubber, and

lcoal cost for the road construction sector study. RISDA would

provide M$12.3 million (US$5.7 m) or 8% of the project cost from

its own resources for rubber development. In addition project

beneficiaries would contribute non-cash inputs to the value of

M$19.6 million (US$9.1 m). The summary of the financing plan

is presented in Appendix 2.

The project was expected to be completed by December, 1985 and

the Loan Agreement Number 1899 - MA was with lWorld Bank signed

on 1st Decembqr, 1980. The'withdrawal Schedule of the proceed of

the Loan is shawn in Table 1.

3. REVIEW AND CHANGE IN SCOPE

TAKDIR was dissolved and absorbed into Kelantan Selatan Development

Authority with effect from 1st June, 1983. Thus, it has become

the responsibility of KESEDAR to continue with the rehabilitation

programme that had becn undertaken by TAKDIR since 1980.

The event of 1st June, 1983 in which TAKDIR was dissolved and

absorbed into KESEDAR has to a certain extent hindered the

implementation progress of the projects under the programme.

- 30 -

Table 1: Withdrawal Of The Proceeds Of The Loan

Amount of the Loan % of ExpenditureBil. Category Allocated (Expressed to be Financed

in $ Equivalent)

1. Fertilizers, chemicals 8,000,000agricultural supplies,vehicles and equipment.

a) Directly imported 100% of foreignexpenditures.

b) Manufactured 100% of locallocally expenditures (ex-

factory).

c) Procured locally 80%.

2. Roads and tracks in- 6,000,000 40%cluding engineeringservices.

3. Housing Materials 3,300,000 50%and building

4. Consultant's services 400,000 80% of totalto the State of expenditures orKelantan 100% of foreign

expenditures.

5. Consultant's services 1,500,000 80% of totalexpenditures or100% of foreignexpenditures.

6. Treasury payments 1,800,000 100%for RISDA replantingand new plant4 ng

7. Unallocated 4,000,000

TOTAL 25,000,000

- 31 -

In the process of handing over;certain projects had to be slowed

down and payments were stopped. As a result, the progress of

the rehabilitation programmes achieved until then was below

expectation and KESEDAR realised that a review and change in

scope of the projects formulated previously should be carried

out immediately.

After several meetings and discussions between KESEDAR and several

World Bank staffs, a New Amending Loan Agreement was signed on

24th November, 1984 between the Bank and the Government of

Malaysia in which KESEDAR had to undertake the responsibility

to increase the incomes and improve the living conditions and

well-being of 7,500 households in the State of Kelantan. The

project comprises development activities in the project area for

a period of eight years 1980-1987 and consists of the following:-

(i) New planting and rehabilitation of 11,060 hectares

(27,309 acres) of rubber, 895 hectares (2,210 acres)

of orchards, 60 hectares (24.3 acres) of fish ponds

and 500 hectares (1,235 acres) of house lots.

(ii) Construction of 4,720 settlers houses, 24 primary

schools, one secondary school, 11 rural clinics,

26 community centres, 17 water supply systems and

24 post offices.

(iii) Settlement of 4,500 families in the Project Area.

(iv) Assistance to KESEDAR's management through addi-

tional staffs, vehicles, equipment, facilities

and technical assistance including extension

services and implementation capacity.

(v) Construction of about 555 km. of new, access,

farm and village roads and upgrading of about

640 km. of access and farm roads.

- 32 -

(vi) Development of 51 hectares (126 acres) of hybrid

coconuts/intercrop trial planting.

(vii) Development through replanting and rehabilitatdon

of about 11,600 hectares (28,642 acres) of rubber

by RISDA.

(viii) Technical assistance to strengthen the borrower's

implementation and co-ordination unit for development

of a monitoring system for AFNP.

(ix) Technical assistance and consultants services to

EPU to undertake a study on the road construction

sector in Malaysia.

The summary of the project components of the above reformulated

project in comparison to the original project can be seen in

Appendix 3.

The revised estimated total project costs are M $169.8 million

(US $73.8 m) in which M $57.5 million (US $25 m) is the allocation

from the World Bank Loan. The detail of the Revised Project Costs

can be seen in Appendix 4.

The break up of loan allocation and percentage of expenditures

to be financed are as in Appendix 5.

The total World Bank allocation was reduced to M $41.4 million

(US $18 m) in early 1986 after KESEDAR's request for cancellation

of M $16 million (US $7 m) was agreed by the World Bank.

At Government request the loan account was closed on January

4, 1988 after disbursement of US $ 11.134 million and the

remaining loan Amount was cancelled (See para 6.2.)

- 33 -

4. PHYSICAL IMPLEMENTATION

4.1. Agriculture Development

The achievement of the agriculture development programme

implemented by the agencies involved are as follows

4.1.1. New Planting By KESEDAR

The achievement of new planting programme falls very

much short of the target and its detailed progrees >

can be seen in Appendix 6. The new planting program is

carried but by 2 concept of development as below

a. Individual New Planting

During the first four years (1980-1983), a total

area of 4055 hectares of rubber was planted on

individual basis. In 1984 some policy changes were

made to accelerate the development progranune. Under

the new project scope a total of 5,345 hectares was

to be developed on individual basis. Total achievement

at the end of the project was 4,695 hectares of

rubber or 88% of target.

b. Block New Planting

An area of 5,710 hectares of new and additional

areas were to be developed on contract basis. The

areas developed on contract basis include development

of two new hemes (i.e. Meranto and Paloh 4) and

additional areas adjacent to RPT Mengkebang, Chenulang,

Sungai Satan, Air Chanal and Ulu Bertam.

In 1985, an approval was obtained from the World

Bank to develop the new and additional areas with

oil palm wherever suitable. Due to the difficulty

in getting oil palm seeds inn 1986 the proposal to

plant oil palm for the suitable areas was postponed

to a later year. By December, 1987 a total of 2,057

- 34 -

hectares (36% of target) were planted under block

system of which 1,378 hectares and 679 hectares

were planted with rubber and oil palm respectively.

The achievement of New planting programme especially

the block falls very much short of target.

The delay in obtaining forest clearance, incapable

contractor, illegal settlers and security restrictions

form the bottle neck in developing the new and

additional areas. The resistance of some 'recognised

settlers to sign the settler agreement pose a

serious threat to the success of the individual rubber

new planting programme.

4.1.2. Rubber Rehabititation And Replanting BY RISDA

Under the new project scope it has been identified that a

total of 9,396 hectares of rubber deserved rehabilitation

and 2,201 hectares need replanting in KESEDAR Rehabilitation

schemes. From the planned target, a total of 21,784 hectares

(232% of target) and 3,238.4 hectares (147% of target) have

been rehabilitated and replanted respectively. Most of the

replanted area is mini estate.

It is worth mentioning that this programme does not only

involve KESEDAR schemes but it also, include areas/villages

in the Kelantan Selatan region and ex-TAKDIR schemes Air

Belanga and Air Lanas which are rubber mini estate financed

under the loan.

4.1.3. Orchard New Planting And RehabilitationBy Department Of Agriculture

During the first four years (1980-1983) a total of 689

hectares of fruit trees were planted at an average cost

of M $1235.00/ha. and 207 hectares were rehabilitated, at

an average cost of M 't151/00/ha. through gevernment

subsidies (see Appendix 8).

- 35 -

Under the new revised project scope with affect from

1984, the Department of Agriculture no longer participate

directly in the programme. However the extension services was

still continued. This is due to the financial-constraint

confronted by the Department as the result of the economic

recession faced by the nation.

4.1.4. Fish Pond Development By TheDepartment Of Fisheries

Under the revised schedule, the development of fish ponds

were reduced from 110 hectares to 60 hectares. Dy December,

1987, total of 66 hectares of fish ponds (110% of target)

were completely developed at an average cost of M$14,826.00/ha.

4.2. Infrastructure And Social Services

The summary of the project components and their achievements are

as shown is Appendix 7.

The preparation of infrastructure and social services programmes

were based on the priority needs. Due to that, several projects

were implemented not according to the planning set up by the

World Bank. On top of that KESEDAR had to face budgetary problem

due to the economic recession faced by the country. The budget

request for the programme was cut and KESEDAR were given just a

minimum allocation to continue with the project. The progress

achieved in the preparation of infrastructure and social

services are as follows

i. Settlers Housing

The target for the programme was to built4720 settler's

houses but to date only 3275 houses had been built or 69%

of target.

The construction of settlers houses under the settlers housing

programmes was slow due to the refusal of some settlers to sign

the 'Settlers Agreement From' with KESEDAR and the delay in

- 36 -

the preparation of housir.g site at Ulu Bertam, Air

Chanal and Sungai Satan Schemes.

ii. Roads

Achievement for roads were gbod. A total of 158 km. of

access road to the scheme (316% of target) was built.

A total of 683.5 km. (150% of target) of farm road was

constructed. A tctal of 135.8 km. of village roads (272%

of target) had also been contructed. A total of 307.4 km

of form road and 44.2 km access roads had been upgraded.

iii. Social Inrfastructure

A total of 15 primary schools and 11 clinics ere cons-

tructed under the programme. The number was below the

target of the World Bank because the programme was based

on the needs of the settlers and the policy of the Ministry

concerned. Not even a secondary schools is built until today.

A total of 17 schemes are now with water supply system. The

schemes are also equipped with prayer houses (mosque and surau)

and now total of 12 mosque and 19 surau are constructed all

over the schemes. Village hall 'Balairayal is another basic

need for the rural community and to date a total of 20

village halls have already been constructed.

Postal agencies and police posts are still very few. So far

only two postal agencies and one police post have been

constructed and this is found to be far below the actual

requirement. The electricity supplies so far are found

in eighteen schemes.

iv. KESEDAR's Facilities

The construction of offices and staff houses had been

progressing well. To date a total of 30 units of offices

(100% of target) and 137 staff houses in the schemes (70%

of target) had been completed. The number of tractor

shelters is 14 units to date or 100% of target.

- 37 -

5. AGRICULTURE COST, PRODUCTIONAND SETTLER INCOME

5.1. Cost

The total agriculture project from 1980 to the end of

1987 is M $ 28.9 million. The detailed break down of

the cests can be seen in Appendix 8.

5.2. Production

5.2.1. Rubber

The Rubber yield estimates for the individual rubber

planting is as shown in appendix 9. Estimate are based

on an average yield of 1100 kg/ha. from 1988 sociO-

economic survery. This is much improve over the 1978

survey which show on average yield in unimproved areas

of only 599 kg/ha. In general rubber production in the

twent-four schemes have shown substantial increasing

trend.

For the rubber Block Planting Project, the rubber is

expected to come into tapping in 1992. In calculating

rubber production and estimated yield per hectates are as

illustrated in appendiot 11. It is expected that with the

proper control of field establishement and management the

higher rubber production will be obtained.

5.2.2. Oil Palm

A total of 1974 hectares of oil palm is expected to

be planted by end 1989 to finish the project area.

The oil palms will start to come under production in

1989. The estimates of yield and FFB proe-tion for

the project area are as illustrated in appendix 12 and

13. The FFB will be sold and processed at KESEDAR's

joint venture palm oil mill in Paloh 2.

- 38 -

5.3. Settler Income

A socio-economic survey of farmers in 24 schemes was

carried out by KESEDAR in Jun 1988, a period of high

farm-qate price for rubber. The number of farmers

responding to the questionnaire was 1136 in 20 schemes.

Information was collected on their rubber production

and income from rubber, orchard and other off-farm

resources. Results are summerised in Table 2.

Table 2 : Results of Socio-Economic Survey

Acreage Yield Monthly Income (M$)

Kg/ha/month Rubber Orchard Other TotalSources

92 483 47 321 842

The figure show that about 57% of total income come from

rubber, 6% orchard and 37% from other sources. Although

every farmer did not enjoy all three sources of income,

it is clear that income is much higher in 1988 compared

to the 1978 survey. At that time average amount household

income was M$ 1165 (M$ 97/month) which M$ 755.00 (M$ 63.00/

month) was from sources predominantly rubber.

- 39 -

6. FINANCIAL ANALYSIS

6.1. Project Cost

The actual cost incurred by the project until the end

of physical year 1987 is indicated in Appendix 14.

Actual cost incurred up to 1987 ammounted to M$75.57

million a decrease of 53% below the appraisal astimate.

However physical implementation of the project is still

being carried at all schemes especially for the new block

system project such as Paloh 4, Meranto, Mengkebang,

Sungai. Satan, Ulu Bertam, Air Chanal and Chenulang.

Project and actual cost for the major components are

summarised in Table 3.

Table 3 : Total Project Cost (M$ Million)

Appraisal DecreaseActivity Estimate Actual (%)

Agricultuce 60.43 28.9 52Development

Settler House and 21.24 9.10 57Lot

Management 34.08 27.81 18

Roads, Village 45.44 9.76 79Sites and SocialInfrastructure

TOTAL 161.19 75.57 53

- 40 -

6.1.1. Agriculture Development

Actual cost incurred under this category indicate

a decrease of 52% below the appraisal estimate.

This is due to the fact that several on-going

agriculture development programmes were facing

acute problem due to the presence of illegal

settlers, security restriction, economic recession

and delayed forest clearance by Forestry Department.

These factors contribute to the delay in the im-

plementation of the agriculture development and

thus made their achievement fall short of the

programme target.

6.1.2. Housing And House Lot Develooment

Actual cost incurred under this category indicate

a decrease of 57% below the appraisal estimate.

This is due to the refusal of some settlers to

sign the "Settlers Agreement Form" with KESEDAR

and the delay in house construction due to delay

in the preparation of lay-out plans.

6.1.3. M4anagement

Management cost also decrease 18% below appraisal

estimate due to the frozen of new staff intake and

delayed in promotion exercise.

6.1.4. Roads, Villages Sites And Social Infrastructure

A cost decrease of 79% is indicated under this

programmes of expenditure below appraisal estimate.

This was due to the delay in the construction of

road, water supply and social infrastructure. The

delay in the above works with special reference

to the construction of road, water supply, clinics

and schools has resulted to inflation.

- 41

6.2. Disbursement

A sum of US$ 25 million was provided by the World Bank to

finance the project (loan no. 1899 5MA). The loan took

effect after December 1, 1980 and closing date was June 30,

1988, or such later date as the bank shall establish.

The total World Bank allocation was reduced to US$ 18

million in early 1986 after KESEDAR's request for cancella-

tion of US$ 7 million was agreed by the World Bank.

Allocation and utilization of loan proceeds by category of

works is shown in Table 3. From the total amount of loan

provided only US$ 11,133,818.24 or 61.85% had been utilized

leaving a balance of US$ 6,866,181.76. The un utilized

balance was cancelled effective January 4, 1988.

Table 4: Disbursement By Category

Category Description ActualDisbursement

1 Fertilizer, chemical, agricul- US$ture supplier, vehicles andequipment 1,557,935.33

2 Road and village preparation 110,141.60

3(a) Cash sub-loan material andconstruction cost for settlerhouses 1,540,307.88

3(b) KESEDAR's Building 309,127.304(a) Consultant's services 162,127.30

5 Development and plantingcost of rubber new planting 1,424,646.28

6 Replanting and rehabilitation 5,414,498.17

7 Studies 614,fo1.10

Total Disbursement: 11,133,818.24

Undisbursed loan c4ncalled 6,866,181.76

AmeV]ed Loan 18,000,000.00

Reduction in Original Loan 7,000,000.fno

Original Loan 25,000,000.00

- 42 -

7. STAFFING

7.1. Prior to the absorption into KESEDAR in 1983, TAKDIR was

a State statutory body run by the staff which were not pro-

fessionally qualified and che agency had operated under in-

adequate technical, managerial and financial facilities. At the

end of 1979, TAKDIR had a total staff of 157 which comprises of

the Director and Assistant Director, head office staff including

a Project Manager who is an agriculture diploma holder, an

Assistant Project Manager, an Agricultural Advisor (made avai-

lable under the Colombo Plan), an Account Officer (a diploma

holder), a Chief Clerk, a Settlement Officer (surveyor), and

two Religious Supervisors as well as a number of Clerks, Typists

and Drivers. There were 37 Supervisors and Assistant Supervisors,

25 Surveyors and various suppor.ing staffs including 58 labourers

were attached at the three regional office and the settlement

schemes.

7.2. With the involvement of the World Bank Loan to TAKDIR in

1980, the volume of work in rehabilitation programmes were

increased and so the number of staffs had to be increased. by

1983, TAKDIR was approved with 303 posts consisting of category

A, B, C and D. Out of this total, only 270 posts or 89% had

been filled up.

7.3. When TAKDIR was dissolved some of the former staffs opted

for pension, a few left for other agency and the others opted

to stay with KESEDAR. Due to this, KESEDAR had to reorganise

the new division by injecting former KESEDAR's staff which were

more professionally qualified and experienced. At the end of

September, 1987 the division was approved with 333 posts which

is made up of category A, B, C and D. Out of this total, only

259 posts or 78% were filled up. This is as shown in Table 5

below:-

- 43 -

Table5.: Rehabilitation Division - Staffing

Category Approved Filled Vacant

A 4 3 1

B 30 15 15

C 169 129 40

D 130 112 18

Total 333 259 74

8. ISSUES AND LESSONS TO BE LEARNT

8.1. Project Implementation

8.1.1. Implementation Strategy

8.1.1.1. When KESEDAR took over TAKDIR on

the 1st of June 1983, the Agency had no choice

but to continue implementing the projects that

was agreed upon by the World Bank. The overall

performance of the project was not satisfactory

especially on agricultural development and roads

and tracks services. All the projects were

expected to be completed by December, 1985 but

after revision the period was extended to

December 1987. The total project cost was

reduced from US$ 25 million to US$ 18 million

and later in early 1986 KESEDAB requested for

another cancelfation of $7 million to the World

Bank. To date, the actual loan withd,rawal was

,US$ 11,133,818.24 (as on 29.2.1988).

- 44 -

8.1.1.2. The overall performance of the project

to a certain extent was satisfactory. There was

no detaii soil feasibility study undertalcen by

any consultant and because of that soil errosion

took place in Chenulang Schcme which effect the

agriculture roads and terraces.

8.1.2. Project imolementation Delay

8.1.2.1. The completion of most contract works

were delaved. Among the major problem encountered

were slow release of forest lands, adverse weather

and soil condition, the illegal settlers, security

restriction, the failure of getting the settlers

to sign the "Settler Agreement Form" and the

economic recession. v

8.1.2.2. The contract works were mostly given to

Bumiputera contractors. They in turn gave sub-

constract to s.nall local contractors which have

not much experience in agricultural works. In

most cases they did not have enough capital to

rent machineries and hence, their inability to

complete the work on schedule. About half of

the contractors involved in the project were not

financially equipped and having little technical

capability and experience.

8.1.2.3. Most of the agriculture contracts were

given to the cheapest bidder although they were

below our estimate. Failure to select a good

contractor would affect the project implementation.

For example, the agriculture contracts given to

Maya Construction in Meranto, Huzaima and Everjoy

in the Sungai Satan Scheme and Seri Kerjaya iu Air

Chanal had to be terminated.

- 45 -

8.1.3. Lesson Learned

8.1.3.1. Technical, social and economic sustain-

ability should be looked into very serious'ly in

project planning and design, and this should be

constantly revised during implementation.

8.1.3.2. Forest clearance, soil feasibility study,

the illegal settlers problem and the security

restriction should be cleared first before any

agriculture programme is implemented. These fac-

tors would delay the projects if they are ncL

taken care of very seriously in the early planning

stage.

- 46 -

Appendix 1: Estimated Project Cost At Appraisal

CaTponent Local Foreign Total Local Foreign Total oase ForeigaCarponent ~~~- (M$m) - - (P~S $ m) - case Exhag

A. Aericultural Development

Rubber: TAKDIR-new planting 23.17 7.32 30.49 10.78 3.40 14.18 28 24

-rehabilitation 0.97 3.84 4.81 0.45 1.79 2.24 4 80

RISDA -new planting 4.03 1.42 5.45 1.87 0.66 2.53 5 26

-replanting 4.30 1.51 5.81 2.00 0.70 2.70 5 26

Other agriculture /a 1.53 1.38 2.91 0.72 0.64 1.36 3 47

Sub-total 34.00 15.47 49.47 15.82 7.19 23.01 45 31

B. Housing 8.08 3.47 11.55 3.76 1.61 5.37 10 30

C. Roads and Tracks 17.17 13.38 30.55 7.99 6.22 14.21 ' 28 43

D. Social Infrastructure 3.66 1.96 5.62 1.70 0.91 2.61 5 35

E. Managerrent

Facilities 0.57 0.31 0.87 0.27 0.14 0.41 1 35

Vehicles & Equipment 0.45 1.08 1.53 0.21 0.50 0.71 1 70

Salaries & Overhead 5.58 0.46 6.04 2.59 0.22 2.81 6 8

Technical Assistance 0.65 1.52 2.15 0.30 0.70 1.00 2 70

Sub-total 6.25 3.37 10.59 3.37 1.56 4.93 10 31

F. Road ConstructionSector Study 0.43 1.72 2.15 0.20 0.80 1.00 2 80

Total Base Cost 70.61 39.32 109.93 32.84 18.29 51.13 100 36

Physical Contingencies 8.60 4.73 13.33 4.00 2.20 6.20 12 V 36

Price Contingencies 17.93 9.70 27.63 8.34 4.51 12.85 35

Total Project Cost 97.14 53.75 150.89 45.18 25.00 70.18 36

/a Includes orchards, hybrid coconuts/inter-cropping trial and fish ponds.

Appendix 2: Financing Plan

Federal Government State__ _ _ _ _ _

Total___ __St tComponent RISDA Grants Loans Government Bank Total

Amount % Amount % Amount 7/ Amount % Amount % Amount %($ m) ($ m) ($ m) ($ m) ($ m) ($ m)

Agricultural Development

Rubber - TAKDIR - - - 10.88 66 _ _ 5.54/a 34 16.42 100- RISDA 3.55 66 _ - - -_ _ 1.68/b 34 5.23 100

Other Agriculture - - 1.36 100 _- - - 1.36 100Housing - - - - 2.69 50 _ _ 2.69/a 50 5.38 100

Roads and Tracks

Works - - 7.87 60 - - _ _ 5.24/b 40 13.11 100Vehicles & equipment - - - - - - 0.22 20 0.89/a 80 1.11 100Social Infrastructure - - 2.61 100 - - - - _ _ 2.61 100

Management

Facilities - - - - - - 0.20 50 0.20/a 50 0.40 100Vehicles & equipment - - - - - - 0.14 20 0.57/a 80 0.71 100Incremental salaries & 0.71 26 - - - - 2.10 74 _ _ 2.81 100overheadTechnical assistance 0.04 4 0.07 7 - - 0.09 9 0.80/a 80 1.00 100Road Construction Sector Study - - 0.20 20 - - - - 0.80 80 1.00 100Contingencies 1.36 7 5.58 29 4.76 25 0.76 4 6.59 35 19.05 100Total Financing 5.66 8 17.68 25 18.33 26 3.51 5 25.00 36 70.18 100

/a On-lent from Government to Kelantan./b Made available as grants.

- 48 -

Appendix 3: Summary of Project Components

Comp tUnit Original Revised ChangeComponent Unit Project Project (%)

Agricultural Develoment

Rubber - Rehabilitation ha. 5,709 9,396 + 65

- replanting ha. 2,915 2,201 - 24

- new planting ha. 11,579 11,055 - 5

Orchards - rehabilitation ha. 1,215 205 - 83

- new planting ha. 405 690 + 70

Hybrid coconuts/cocoa trials ha. 100 51 - 49

Fish Ponds ha. 120 60 - 50

Housing no. 3,850 4,720 + 23

Roads, access: new upgrading km. 136 50 ) + 22

upgrading km. - 160.5)

Roads, farm : new km. 1,080/a 455 ) - 13

upgrading km. _ 480 )

Roads, village: new km. - 50

Social Infrastructure

Schools no. 9 25 +178

Post Office no. - 24

Village Hall no. 24 26 + 8

Surau no. 8 26 +225

Health Posts no. 11 _

KESEDAR Facilities

Offices no. 4 30 +650

Staff Quarters no. 98 206 +110

Tractor Sheds no. 26 23 - 12

/a Labelled as principal and minor agricultural roads in SAR.

Appendix 4: Revised M-stimated Prpject Costs

Appraisal Revised Cost (M$ '000) Revised Cost (US$'000) 7. of ForeignTotal Cost Base ExchangeComponent (M$ '000) Local Foreign Total Local Foreign Total Cost (M)

Agricultural Development

Rubber - new planting 35,940 27,746 22,701 50,447 12,063 9,870 21,933 45Rubber - replant & rehabilitation 10,620 5,110 4,180 9,290 2,222 1,817 4,039 45Other Agriculture 2,910 379 310 689 165 135 300 45

Subtotal 49,470 33,235 27,191 60,426 14,450 11,822 26,272 38 45

Housing (Settlers) 11,550 11,682 9,558 21,240 5,079 4,156 9,235 13 45Roads & Village Sites 30,550 15,686 12,834 28,520 6,820 5,580 12,400 18 45Social Infrastructure 5,620 10,998 5,922 16,920 4,782 2,575 7,357 10 35KESEDAR Facilities 870 2,668 1,437 4,105 1,160 625 1,785 3 35Management 7,570 24,174 2,686 26,860 10,510 1,168 11,678 16 10

Consulting Services, Studies,& Staff Training 4,300 624 2,497 3,118 270 1,085 1,355 2 80

Total Base Cost 109,930 99,067 62,125 161,189 43,071 27,011 70,082 100 39

Physical Contingencies 13,330 2,154 1,763 3,917 936 767 1,703 45Price Contingencies 27,630 2,866 1,832 4,698 1,246 797 2,043 39

Total Project Cost 150,890 104,087 65,720 169,804 45,253 28,575 73,828 39

/a US$1 = M$2.3

- 50 -

Appendix 5: Withdrawal Schedule Of TheProceeds Of The Amended Loan.

Amou.r.. ± theLoan &2Jc a-e % of Expenditures

Bil. Category (Expi''-l ,' -1 to be Financed

Equivales'<-

1. Fertilizer, chemicals, l,30J COO 100% of foreignagricultural supplies, expenditures, 100%vehicles and equipment of local expenditure

(ex-factory); and80% of local cost.

2. Roads and village sites 2,100,000 40%preparation

3. (a) Construction of settler 2,200,000 50%houses, including watersupply and electricity

(b) KESEDAR's Buildings 750,000 50%

4. (a) Consultants Services 190,000 100% foreign50% local

(b) Staff Training 60,000 100% foreign50% local

5. Development, planting and 5,000,000 90% blockmaintenance costs of oil 50% individualpalm and rubber new planting

6. Replanting and Rehabilitation 4,600,000 80%

7. Studies 800,000 90%

8. Unallocated 1,000,000

Total 18,000,000

Appendix 6

''MALAYSIA- ' KELANTAN LAND SCHEMES REHABILITATION PROJECT

Progress On KESEDAR New Planting

1980-1983 1984 1985 1986 1987

Scheme Pl(ha) Contract Contract Contract Contract TotalDevelop- Planted Develop- Planted Develop- Planted Develop- Planted Plantedment. ment ment ment

Individual Planting

All Schemes 4055 1 347 - 86 - 32 ,- 175 4695

Block Planting

Meranto - - - 485 - 468 129 _ 129

Ulu Bertam - 182 - - 71 ill - - 182

Chenulang - - 924 - - - - 525 525

Air Chanal - 182 - - 8 - 128 - - 136

Sungai Satan - - - - 1 247 306 - 21 328

Mengkebang - - - - - 526 - - v- -

Paloh 4 - 714 - 709 126 - 631 757

Subtotal - - - - 80 - 800 - 1177 2057

Total 4055 692 347 2123 166 1950 832 _ 1352 6752

…======================================…==============

Appendi>: 6 (con.)

- 52 -

Inclividual Planting 1980-1.923Consist Of :-

Year Area

1980 1951 ha.

398). 1303 ha.

1982 626 ha.

1983 175 ha.

Total 4055 h1a.

f

Appendix 7

MALAYSIAKELANTAN LAND SCHEMES REHABILITATION PROJECT

INFRASTRUCTURE AND PUBLIC AMENITES RATE OFDEVELOPMENT OF CONSTRUCTION UNDER PROJECT

PROGRESSBil. Items Unit Appraise __ _ __.__ TOTAL Percentage

'1980 1981 1982 1983 1984 3985 1986 1987

1. Settlers Housing no. 4720 1941 188 344 246 250 210 60 36 3275 692. Roads:

a. Access: New km. 50 - - 158 - - - - - 158 316b. Upgradi.. Upgrading km. 160.5 - - - - - - 44.2 - 44.2 27b. Farm : New km. 445 168 61 212 - 125 21 36 64 683 150

Upgrading km 480 - - - - 16. 65.2 76.2 150 307.4 64c. Village: New km. 50 20 18 18 14 17.1 22.7 18 8 135.8 272

3. Spcial Infrastructure

a. School no. 25 - 13 - 1 1 a _ 15 6nb. Post Office no. 24 - 2 _- - - 2 8c. Village Hall no. 26 - 14 - - _ 12 2 2 20 77d. Surau no. 21 - 17 - - 1 - 1 - 19 90e. Health Post no. 11 - 11 - - - - 11 100f. Mosque no. 10 - 7 - - 2 - 3 - 12 120

4. KESEDAR's Facilities

a. Offices no. 30 13 7 5 - - 2 3 - 30 100b. Staff Quarters no. 206 28 36 15 - 36 6 8 28 137 67c. Tractor's Sheds no. 14 - 10 4 _ - - - - 14 100

Appendix a

MALAYSIAKELANTAN LAND SCHEMES REHABILITATION PROJFCT

COST OF AGRICULTURE DEVELOPMENT (M$'000)

1980 1981 1982 1983 1984 19B5 1986 1987 TOTALAKTIVITY -_ _ _ _ _Area Cost Area Cost Area Cost Area Cost Area Cost Area Cost Area Cost Area Cost Area Cost

1. KESEDAR New n

Planting 3ha).

a. Individual 2542 2054 1047 2782 566 2032 281 '669 1902 686 302 460 279 193 267 206 7166 9082b. Block _ _ _ _ _ _ _ _ 728 206 2169 919 1721 4835 _ 3099 4618 9059

2. PISDAR RubberRehabilitaion 831 170 3065 680 _ _ 1119 175 1503 272 952 179 7302 1059 7G12 879 21784 3434(ha)

3. RISDA Rubber

Replanting (ha) 134 200 1094 1855 670 1059 140 221 312 493 4' 71 636 1005 20B 328 3258 52 52

4. DOA Orchard NewPlanting (ha) 140 173 208 257 173 214 168 207 - - _ _ _ _ _ _ 689 851

5. DOA OrnhardRehabilitaion (ha) 44 51 55 63 26 30 82 94 - - _ _ _ _ _ _ 207 238

6. DOA Hybrid CocoalCoconut Trial (ha) _ _ _ _ 51 63 - _ _ 6 3

7. DOF Fish Ponds(ha) 17 252 16 237 27 '400 - _ 6 89 - _ _ _ _ _ 66 978

TOTAL - 2920 - 5874 - 3798 1366 - 1746 _ 1629 _ 7092 _ 4512 _ 28,937================= === === ========_=== === ==: ==== ==== === ===:========= ==========: ===_

- 55 -

Appendix 9

MALAYSIAKELANTAN LAND SCHEME REHABILITATION PROJECT

ESTIMATED RUBBER PRODUCTION

A: Individual Rubber Planting

Year Acreage of Acreage of Rubber ProductionImmature Rubber Mature Rubber (in tons)

1980 1,951 7,740 8,8821981 3,362 8,849 9,6161982 4,336 9,902 9,9981983 4,739 10,841 10,7871984 5,218 11,785 11,9271985 5,439 12,696 12,9181986 5,706 13,386 13,7941987 6,023 13,386 14,2121988 - 15,337 15,6221989 - 16,748 17,0121990 - 17,722 18,1991991 - 18,125 19,0441992 - 18,604 19,7891993 - 18,825 20,3291994 - 19,092 20,7151995 - 19,409 20,5071996 - 19,409 18,9641997 - 19,409 18,3741998 - 19,409 18,3891999 - 19,409 17,4682000 - 19,409 16,6252001 - 19,409 15,6372002 - 19,409 14,9052003 - 19,409 14,5442004 - 19,409 14,1322005 - 19,409 12,9842006 - 19,409 11,8172007 - 19,409 10,6512008 - 19,409 9,5452009 - 19,409 8,5482010 - 19,409 7,3652011 - 19,409 6,3992012 - 19,409 6,0952013 - 19,409 4,1262014 - 19,409 2,6882015 - 19,409 1,7152016 - 19,409 1,2882017 - 19,409 7842018 - 19,409 5532019 - 19,409 292

- 56 -

APPENDIX 9 (cont.)

NOTE: (i) Based upon socio-economic results in 1988 the present averageyields at the level of 1100 hg/hectare/yr.

(ii) The yield of rubber trees is highly correlated to the age of thetrees. The correlation is assumed to be:

Year of TaRiing Index1 452 603 754 90

5-16 12017-29 90

average 100

(iii) The estimate yield of rubber trees for new planting started in1980 is based on 70Z of the yield profile in Appendix 10.

- 57 -

Appendix 10MALAYSIA

KELANTAN LAND SCHEME REHABILITATION PROJECTESTIMATED RUBBER YIELD PER HECTARE - BLOCK PLANTING

Tapping Year Yield per Hectare_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _(k g )

1 7252 1,0543 1,3184 1,5825 1,7156 1,7807 1,8368 1,8369 1,83610 1,83611 1,83612 1,83613 1,83614 1,83615 1,81216 1,78217 1,74718 1,71519 1,68120 1,64821 1,58222 1,62723 1,45024 1,38425 1,318

A. 8LOCK YsSTEM :ELA14TAN LAND SCHEMES REHABILITATION PROJECT Appendix 11 A------------ FRODUCTIONI - RUBBER (WG)

SCHEME PHASE PLANTABLE YEAR OF DATE OFHECTARASE DEVELOPMENT TAPPING 1992 1993 1994 199' 1996 1977 199B 1999 2000 2001 2002 2003 2004 2005 2006

1. Ulu Bertas 2 182 1984165 Jun 1992 131950 191828 23?97b 287-24 317130 323960 3341512 334152 3'9.152 334152 334152 334152 134152 334152 ;297B4

2. Air Chanal 2 162 1984;65 Jan 1?93 --- 131950 191828 23'876 287924 ;12130 323960 334152 334152 334152 '34152 334152 334!52 334152 334152

i. Sungai Satan 2A & 3& 22 1984/85 Jun 1792 237800 345712 43237Q4 518.96 .62520 583B40 602208 602208 602208 602208 602208 602208 602208 602208 594336

i. Chai,0n3 2A X a 972; 1985/86 Jan 1994 --- 66--- 73S?7 12;7362 1461768 1584660 1644720 1b96464 169464 1696464 16~6464 1696464 6764;64 169646&

5. FalolI 4 0) iA, & E 2297 158586 Ogos 19;2 i66025 241366 301822 362278 9273, 40,7620, 4 .4444 420444 4204;4 420444 420!444 420444 42()444 420444 ^149;420) * 6 t b 284- 1986187 Ogos 1993 -- - !205900 297 b36 37431 4;288 437060 50i5520 521424 521424 521424 521424 521424 521424 52142. ¶2142

A. &2rarto i0 1 173 lq86I97 Jan 1994 125425 1823;2 228014 273686 276695 307940 317628 317622 3.17628 317626 7627b82 31762A -17K6

ii) 2 117 988i8B9 Dec 1996 --- --- --- --- 84625 121316 1542t06 185094 2;0655- 208260 214812 214812 214A12 214212 214612

7. hsnqBebanq 2 526 1938889 Dec 1996 --- --- 381350 5P 54404 693268 832132 902090 936280 965736 765736 96577'6 9657736 q6573V6

Appendix 11 e

SClHEIo PHASE PLANTABLE YEAR OF DATE OF

HECTARA6E DEVELOPMENT TAPPIN6 2n.17 2008 2009 21)0I 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

1. Ulu BertaD 2 IB2 1984/85 Jun 1992 324324 317954 312130 305942 299936 287921 296114 263900 251868 239876 ---

2. Air Chanal 2 182 1984/85 Jan 1993 329784 324324 317954 312130 305942 299936 287924 296114 263900 251688 239876 --- -

3. Sungai Satan 2A & 8 328 1984/85 Jun 1992 584496 573016 562520 551368 540544 518896 533656 475600 453952 432304 --- -- --- -

4. Chenulanq 2A & 8 924 1985/B6 Jan 1994 1696464 1674288 1646J68 1614228 1584660 1553244 1522752 1461768 1503348 1339800 1278816 1217832 --- -

5. Paloh 4 i0 IA & 8 229 1985/86 OOs 1992 408078 400063 392735 3B4949 377392 362278 372583 332050 316936 301822 --- --- --- -

ii) 2A & B 284 1986/87 Ogos 1993 514608 506088 496148 487060 477404 468032 44928B 462068 411800 393056 374312 --- --- -

6. Heranto 0l 1 173 1986/87 Jan 1994 317628 3i3476 308286 302231 296695 290813 285104 273686 261474 250850 239432 228014 --- ---

l) 2 117 1988189 Dec 1996 214812 214812 214812 212004 208494 204399 200655 196677 192816 185094 190359 169650 161928 15420

7. lengkebang 2 526 1988189 Dec 1996 965736 965736 965736 953112 937332 918922 902090 884206 866848 832132 855602 762700 727984 693268-- - - -- - - - - - - - - - - -- - - - - - -- - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - -

- 59 -

Appendix 12MALAYSIA

KELANTAN LAND SCHEME REHABlLITATION PROJECTESTII*'ATED OIL PiiLlvl YIELD PER HJ-CTARE

Years FFB Oil KernelFrom Plantin_ Tonnes/Ha % %

3 1.255 16 4.0

4 9.037 18 4.4

5 15.815 19 4.5

6 21.338 21 4.8

7 22.593 22 5.0

8 23.484 22 5.0

9 24.601 22 5.0

10 e5.103 22 5.0

11 24.350 22 5.0

12 23.848 22 5.0

13 23.340 22 5.0

14 22.592 22 5.0

15 22.091 22 5.0

16 21.589 22 5.0

17 21.087 22 5.0

18 20.585 22 5.0

19 20.083 22 5.0

20 19.58; 22 5.0

21 19.079 22 5.0

22 18.576 22 5.0

23 18.074 22 5.0

24 17.572 22 5.0

25 17.572 22 5.0

MALAYSIAKELANTAN LAND SCHEMES REHAI1LITATION PROJECT

PRODUCTION - OIL PALtS (FFD TNMS)

SCIIElIES PHASE PLANTABLE YEAR OF DATE OFHECTERACE DEVELOPHEIT HARVEST 2002 2003 2004 2005 2006 2v07 2008 2009 2010 2011 2012 2013 2014

Iteranto 1 269 1985186 Oct.89 290.25 283.52 276.80 270.07 260.93 256.63 247.48 243.18 249.90 236.45 ---- ---- ----

it 421 1988189 Oct.92 486.25 475.73 468.99 454.26 443.73 433.21 422.68 408.37 401.63 247.70 254.55 240.85 ----

Sungal 111 274 1987188 Jun 91 309.62 305.24 295.65 286.80 281.95 275.09 265.78 261.40 252.08 387.32 380.58 391.11 370.06Satan

Palob 4 1 485 1985186 Oct. 89 523.80 509.25 499.55 485.00 475.30 460.75 451.05 436.50 245.80 425.80 ---- ---- ----

II 425 1986187 Jun. 89 459.00 446.25 437.75 425.00 416.50 403.75 395.25 382.50 374.00 374.00 ---- --

MALAYSIAKELANTAN LAND SCHEMES REHA8ILITATIOII PROJECT

PRODUCTIONI P rALH OIL (lOlNES)

SCHEME PHASE PLANTA8LE YEAR OF DATE OFHECTARACE DEVELOPHEIIT HARVEST 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Meranto 1 269 1985186 Oct. 89 1276.14 1242.51 1215.61 1188.44 1161.54 1134.37 1039.95 1039.70 1039.95 1039.95 ---- ---- ....

11 421 1988189 Oct. 92 2155.94 2092.37 2058.69 1997.22 1944.60 1902.50 1859.98 1817.88 1775.36 1627.59 1627.59 1627.59 1627.59

Sunsae III 214 1987/88 Jun. 91 1361.78 1339.86 1299.86 1265.61 1238.21 1210.53 1183.13 1155.46 1059.20 lo59.20 1059.20 1059.20 ---- aSatan

Prlob 4 1 485 1985186 Oct. 89 2303.75 2250.40 2197.05 2143.70 2090.35 2037.00 1983.65 1930.30 1876.95 1876.95 .... ---- ----w

11 425 1986187 Juln. 89 2018.75 1972.00 1925.25 1878.50 1831.75 1785.00 3717.80 1691.50 1644.75 1644.75 ---- ---- ----

MAIATSIAKELANTAN LAD SCIEMES REIBAIILITATIOU PROJECT

PRUCTION - PAIM OIL (ITIUES)

sln=s PHASE PLARTA8LE YEAR OF DATE OFHECTARAGE DEVELOPMENT HARVEST 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Meranto 1 269 1985/86 Oct.89 53.80 444.39 010.23 1208.89 1336.93 1411.44 1451.79 1485.69 1438.34 1411.44 1377.55 1336.93 1315.4111 421 1988189 Oct. 92 ---- ---- ---- 84.20 695.49 1268.05 1891.97 2092.37 2208.99 2272.14 2325.18 2251.08 2208.99

Sungat III 274 1987/88 Jun. 91 ---- ---- 54.80 452.65 825.29 1231.36 1361.78 1437.66 1478.78 1513.30 1465.08 1437.68 1403.15Satan

Paloh 4 1 485 1985/86 Oct. 89 97.00 800.25 1459.60 2172.80 2405.60 2546.25 2623.85 2677.20 2599.80 2546.25 2492.90 2410.45 2357.10it 425 1986/87 Jun.89 85.00 701.25 1279.25 1094.00 2108.00 2231.25 2299.25 2346.00 2276.00 2231.25 2184.50 2112.25 2065.50

MALAYSIAKELANTAN LARtD SCHEMES REHABILITATION PROJECT

PRODUCTION - OIL PALMS (FFB TONS)

SCHEME PHASE PLANTABLE YEAR OF DATE OFHECTARAGE DEVELOPMENT HARVEST 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Meranto 1 269 1985/86 Oct. 89 5807.44 5672.40 5537.37 2402.32 5267.29 5132.25 4996.96 4861.90 4726.87 4726.87 ---- ---- ----1; 421 1988/89 Oct. 92 9846.14 9511.65 9600.31 9088.97 8877.63 8666.29 8454.94 8243.60 8028.47 7820.50 7609.15 7397.81 7397.81

Sungal III 274 1987/88 Jun. 91 6190.48 6052.93 5915.39 5777.84 5640.29 5502.74 5365.19 5229.65 5089.82 4952.28 4814.73 4814.73 ----Satan

Paloh 4 1 485 1985/86 Oct. 89 10471.15 10228.85 9986.15 9738.80 9501.15 9253.80 9011.30 8768.80 8521.45 8521.45 ---- ---- ----11 425 1986/87 Jun. 89 9175.75 8963.25 8750.75 8534.00 8325.75 8109.00 7896.50 7684.00 7467.25 7467.25 ---- ---- ----

MAJAYSIAKEIANTAN LAND SCHEMES REHABILITATION PROJECT

PRODUCTION - OIL PALMS (FF TONS)

SHEMES PHASE PLANTABLE YEAR OF DATE OFHECTARAGE DEVELOPMENT HAR'JEST 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Meranto 1 269 1985t86 Oct.89 337.59 2430.95 4254.24 5739.92 6077.51 6317.20 6617.67 6152.71 6550.15 6415.11 6280.07 6053.30 5942.4811 421 1988/89 Oct.92 ---- ---- ---- 1528.36 3804.58 6658.11 8983.30 9511.65 9886.76 10357.02 10563.36 10251.35 10040.00

Sungat III 274 1987/88 Jun. 91 ---- ---- 343.87 2476.14 4333.31 5846.61 6190.58 6434.62 6740.67 6878.22 6671.90 6534.35 6396.80Satan

Paloh 4 1 485 1985186 Oct. 89 511.00 4384.00 7673.00 10350.00 10941.61 11567.25 11931.00 12178.35 11809.75 11567.25 11324.75 10956.15 10713.65 C,11 425 1986187 Jun. 89 536.00 3842.00 6723.00 9069.00 9588.00 10136.25 10455.00 10671.75 10348.75 10136.25 9923.75 9600.75 9388.25 1

MALAYSIAKELANTAN LAND SCHEMES REHABILITATION PROJECT

PRODUCTION - PALM KERNEL (TONNES)

SCHEME PHASE PLANTABLE YEAR OF DATE OFHECTARAGE DEVELOPMENT HARVEST 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Keranto 1 269 1985/86 Oct. 89 13.45 107.87 189.11 276.80 303.97 317.42 330.87 337.60 324.15 317.42 310.70 303.97 299.6711 421 1988/89 Oct. 92 ---- ---- ---- 21.05 168.32 295.96 429.42 475.73 496.78 517.83 528.36 507.73 496.78 rJ

Sungat III 274 1987/88 Jun. 91 ---- ---- 13.70 109.87 192.62 279.48 309.62 323.32 337.02 343.87 330.44 323.32 316.47 :Satan X

Paloh 4 I 485 1985/86 Oct. 89 24.25 194.00 344.35 494.70 548.05 577.15 596.55 611.10 591.70 577.15 567.45 548.05 533.5011 425 1986/87 Jun. 89 21.25 170.00 301.75 433.50 480.25 505.75 522.75 535.50 518.50 505.75 497.25 480.25 467.50

- 63 -

Appendix 14MALAYSIA -----------KELAINTAN LAND SCHEMES REHABILITAIlON PROJECT (LOAN 1989 - MA)ANNUAL PROJECT COST.

ITEMS 1980 1981 1982 1983 1984 1985 1986 1987 TOTAL

COSTS

1, KESE,4R

a. Agriculture 2,054 2,782 2,032 669 892 1,379 5,028 3,305 18,141Devel opevent

b. Settler Houses 3,803 2,235 372 Soo 848 515 320 200 9,101

c. Management 3,847 3,955 4,584 4,294 3,362 2,818 2,170 2,777 27,807

d. Road, villaged 291 197 478 623 1,541 2,249 2,244 2,135 9,758and socialinfrastructure

Sub Total : 9,995 9,169 7,466 6,394 6,643 6,961 9,762 8,417 64,807

2. RISDA

a. Rubber Replanting 220 1,855 1,059 221 493 71 1,005 328 5,252

b. Rubber 170 680 - 175 272 179 1,059 879 3,414Rehabilitation

Sub Total : 390 2,535 1,059 396 765 250 2,064 1,207 8,666

3. DODADOF

a. Orchad New Planting 173 257 214 207 - - - - 851

b. Orchad Rehabitation 51 63 30 94 - - - - 238

c. Coconut/Cocoa Trial - - 63 - - - - - 63

d. Fish Ponds 252 237 400 - 89 ^ - - 978

Sub TDtal : 476 557 707 301 89 21130

TOTAL PROJECT : 10,861 12,261 9,232 7,091 7,497 7,211 11,826 '9,624 75,603

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