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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO MALAYS IA FOR A NATIONAL EXTENSION PROJECT Report No. P-2162-MA November 3, 1977 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.

2 CURRENCY EQUIVALENTS* Currency = Malaysian dollars (M$) US$1 = M$2.50 M$1 = US$0.40 M$1 million = US$400,000 *The exchange rate is floating close to the rate used in this report and is indicated in this table. ABBREVIATIONS DOA - Department of Agriculture FELDA - Federal Land Development Authority GDP - Gross Domestic Product GNP - Gross National Product ICA - Industrial Coordination Act MARDI - Malaysian Agricultural Research and Development Institute RETDC - Regional Extension Training and Development Center SMP - Second Malaysia Plan, TMP - Third Malaysia Plan, GOVERNMENT OF MALAYSIA FISCAL YEAR January 1 - December 31

3 FOR OFFICIAI tise ONLY MALAYSIA NATIONAL EXTENSION PROJECT Loan and Project Summary Borrower: Amount: Terms: Malaysia US$19.0 Million 17 years, including four years of grace, with interest at 7.9% per annum. Project The project would strengthen agricultural extension Description: services by: (i) increasing the number of field level staff and regularizing their in-service training throughout Malaysia; (ii) constructing and strengthening pre-service training facilities in Sabah and Sarawak; (iii) providing 135 man-years of graduate and undergraduate fellowships, (iv) providing vehicles, equipment, housing, offices and storage facilities for extension services; and (v) providing about 78 man-months of consultant services. The project would also provide for the improvement and expansion of seed production, processing and marketing facilities at federal and state crop production centers; it includes 31 man-years of training fellowships and 24 man-months of consultant services for seed development. Estimated Costs: Local Foreign Total (US$ million) Civil works Equipment and vehicles Operating expenditures Technical assistance Fellowships Total base cost Physical contingencies Price contingencies Total project cost Estimated Fiscal years Annual Cumulative Disbursements: (July 1 - June 30) disbursements disbursements (US$ million) 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.

4 Procurement Arrangements: Civil works contracts estimated to amount to US$400,000 or less will be awarded after competitive bidding in accordance with Government procedures satisfactory to the Bank; civil works contracts above US$400,000 will be awarded after international competitive bidding in accordance with Bank guidelines. Bank financed equipment and vehicles will be procured under international competitive bidding in accordance with Bank guidelines. The Bank guidelines would also be used for technical assistance and consulting services. A 15% preference margin, or the prevailing customs duty, whichever is lower, would be extended to local manufacturers in the comparison of bids. Rate of Return: 25% Consultants: For extension planning and the planning and design of seed processing facilities; for developing a pilot soil conservation scheme; for improving agricultural credit facilities for Sabah and Sarawak and for improving the operation and maintenance of farm machinery (Sabah). Estimated consultant services cost per man-month: US$5,750. Appraisal Report: Report No. 1555a-MA, dated October 26, 1977.

5 REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO MALAYSIA FOR A NATIONAL EXTENSION PROJECT 1. I submit the following report and recommendation on a proposed loan to Malaysia for the equivalent of US$19.0 million to help finance the National Extension Project. The loan would have a term of 17 years, including four years of grace, with interest at 7.9% per annum. PART I - THE ECONOMY 2. The latest economic report is "Malaysia: New Perspective and the Third Malaysia Plan" (No MA), dated October 21, Detailed data on Malaysia's economy are shown in Annex I. 3. By most economic indicators, Malaysia has done well in the past and, in particular, during the Second Malaysia Plan (SMP, ). The per capita income of US$860 (in 1976) is among the highest in Southeast Asia. Public and private investment activity was stepped up and, as a result, economic growth, which during the 1960s averaged 6% a year, increased during the SMP to 7%. During the Second Plan the proportion of agricultural households in poverty in Peninsular Malaysia was reduced from 68% to 63%. Progress has been made in reducing the economy's dependence on rubber, and the manufacturing sector has performed well, in terms of output, employment and exports. With a high export component in GNP, the country is very vulnerable to external fluctuations, which were significant during the SMP. In spite of the increased investment activity and resulting current account deficits in the balance of payments, Malaysia managed to maintain a strong external position during the SMP with relatively low debt service payments and growing international reserves. 4. Notwithstanding this good past performance, there are still substantial racial inequalities in income and employment, generally correlated with racial background and considerable poverty remains, especially in the countryside. The inferior income position of the Malays is related to this concentration in traditional smallholder agriculture and the complementary meager ownership of corporate assets; and Malays are poorly represented in the modern industrial sector, especially in managerial, professional, supervisory and clerical occupations. These inequalities have threatened the stability of the country and in 1971 prompted the Government to introduce a New Economic Policy, which is designed to achieve national unity through the two-pronged objective of eradicating poverty and restructuring society to eliminate the identification of race with economic function. 5. The Government recently initiated the Third Malaysia Plan (TMP, ). In addition to reconfirming the goals of the New Economic Policy, the TMP stresses that national unity as well as social and economic progress can only be achieved in an environment of security and order. The major objectives of the TMP are: (a) to reduce the overall incidence of poverty from 44% in 1975 to 34% by 1980 (which would mean reducing poverty among agricultural households from 63% to 49%); (b) to increase Malay employment in the

6 modern sectors of the economy (from the 1975 Malay share of 32% towards the 1980 goal of 50%); and (c) to increase the share of Malays in the equity ownership of the corporate sector (from a share of 8% in 1975 to 16% in 1980). 6. One of the principal means set out in the TMP to reduce poverty is to raise agricultural production. In the Third Plan one quarter (M$4.7 billion) of total public development expenditures is allocated to this sector (compared with 22%, or M$2.1 billion, in the SMP). Of this more than one-third will be spent on increasing productivity in existing agricultural areas. In addition, one million acres of new land are scheduled for development. As a means of reducing poverty, the TMP also provides for improved housing and other essential services for the poor in both rural and urban areas. The TMP also stresses that greater attention will be given to improving the less developed states in Malaysia. 7. The TMP goals are set out in a framework of substantial economic growth. The target growth rate for GDP is set at 8.5% per annum. The investment rate, in real terms, is projected to increase from 18% to 19.5% of GDP, resulting in an investment of M$44 billion, in current prices, over the TMP period. Public development expenditures were set at M$18.6 billion, with a higher level of M$20 billion targeted if resources became available. 8. During 1976, a substantial increase in exports together with low investment activity led to an almost unprecedented balance of payments performance. Significant increases in exports, both in prices and volumes, particularly of oil exports, combined with moderate import increases resulted in a current account surplus equivalent to 6.2% of GDP. Despite a reduction in market borrowing by the Government, as well as a fall in net corporate investment, reserves increased by US$900 million. At the end of 1976, gross official reserves were the equivalent of about seven months of imports. 9. Current projections of oil exports and export prices in general are higher than those used as a basis for the TMP. Therefore, the resource outlook for Malaysia is now much brighter than was forecast in the Third Plan. Overall export earnings during the Plan period should be about US$5 billion more than was forecast in the TMP. Largely as a result of this increase, public sector revenues are also expected to be higher by about US$3 billion. The likelihood of these additional resources has prompted the Government to increase its TMP target for development expenditures to M$20 billion, and if implementation constraints are overcome an even higher target could be set. 10. The outlook for private investment is much less favorable. Recent Government action in this area appears to be having adverse consequences. The Industrial Coordination Act (ICA), passed in 1975, enforces the Government's equity and employment restructuring targets through a system of licensing of existing and new firms above a certain minimum size. The ICA is just now

7 - 3 - beginning to be implemented, so it is too early to make an informed judgment as to how it will be implemented at the enterprise level, including what the timetable of achieving the restructuring conditions will be. Nevertheless, this extension of Government control appears to have had an unsettling effect on the investment climate and, combined with the worldwide slowdown of economic growth, was no doubt a significant cause of the substantial deterioration in the rate of private investment in 1975 and During the next five years Malaysia's balance of payments should be in substantial surplus. The cumulative current account surplus could amount to over 5% of GDP compared to a negligible current surplus in the previous five years. Since such a current account surplus would be sufficient to provide for an adequate level of reserves, capital inflows may moderate in the future. At present about 19% of public debt outstanding and disbursed is from the Bank; this percentage may increase somewhat by the early 1980s. Reserves are also expected to continue to increase slowly, while the debt service on public obligations is likely to remain at its present level of 4-5% of export earnings. In this light, Malaysia appears to be an excellent credit risk. PART II - BANK GROUP OPERATIONS IN MALAYSIA 12. Over a period of 29 years, the Bank has made 37 loans to Malaysia for projects in education, population, agriculture, forestry, industrial finance, power, water supply, sewerage, telecommunications, ports, railways, roads and urban transport. The proposed project follows up on the Agricultural Research and Extension Project, financed under Loan 1115-MA of May 1975, which includes commodity oriented and other research programs related to smallholder farming, and, through the establishment of an Extension Liaison Unit in the Extension Branch of the federal Department of Agriculture (DOA), promotes the efficient transfer of research results to the state Departments of Agriculture. After initial delays, particularly in the international recruitment of research scientists for MARDI (the Malaysian Agricultural Research and Development Institute). implementation of that project is improving. The implementation period will probably extend beyond the six years planned initially; moreover, after realizing that initial targets were overly ambitious, the fellowship program for the research component was reduced slightly from 286 to 275 manyears and that of internationally recruited scientists from 104 to 81 man-years. 13. The execution of Bank projects in Malaysia has generally been satisfactory, although disbursements have been slow in a few cases. As of August 31, 1977, the loans to Malaysia held by the Bank amounted to US$682.5 million. In addition, the Bank made a loan in 1965 to the Public Utilities Board of Singapore (Loan 405-MA), guaranteed by Malaysia, to finance the Johore River Project. The amount held by the Bank under that loan, as of August 31, 1977, was US$3.8 million. Thirteen loans have been fully disbursed. Annex II contains a summary statement of Bank loans as well as notes on the execution of ongoing projects.

8 Bank assistance to Malaysia is consistent with and supports the country's policies to eliminate racial and geographical imbalances in income. The Bank will continue to provide assistance to Malaysia's agricultural programs, including land development, rehabilitation and settlement, and improvement of production in low income farming areas, all of which are effective means of reducing unemployment and income disparities. We also intend to continue to assist in financing infrastructure development, providing increasing support for improvements in low-cost.irban services and housing for the poor, as well as for transport projects that improve links between producers and markets. In the course of its lending operations and its sector work, the Bank has helped the Government to prepare projects, and has also helped to strengthen public agencies responsible for carrying out important parts of Malaysia's development program. Last April, with the assistance of UNDP, we launched a major effort to strengthen the Government's project preparation capacity, providing 19 technical advisors over the next few years to assist key federal and state planning and functional agencies. In the next few years loans are planned for projects involving irrigation, rural development, land settlement, education, and such infrastructure sectors as transport and power. 15. IFC has been active in Malaysia since 1963 and has made six investments totaling US$8.69 million. The total commitments under the investments held by IFC as of August 31, 1977 amounted to US$1.55 million (Annex II). PART III - THE AGRICULTURAL SECTOR General 16. The agricultural sector maintains an important position in the Malaysian economy in spite of the rapid progress which is being made in the development of manufacturing and services. The sector generates 30% of Gross Domestic Product, provides employment for over half of the economically active population and accounts for about 60% of the country's total exports. Agricultural production is thus largely oriented towards world export markets, in which Malaysia occupies a predominant position in natural rubber and palm oil. Expansion of rubber exports in the 1960s in the face of declining prices was achieved by large gains in productivity. At the same time crop diversification, mainly into oil palm, was vigorously encouraged and has resulted in Malaysia becoming the world's largest producer of palm oil. Paddy production has doubled through the provision of irrigation, and Malaysia is now nearing self-sufficiency. Malaysia is also an exporter of pineapple. Other major crops such as coconut, cassava, groundnuts, coffee, cocoa, sugar, fruits and vegetables are grown mainly for domestic consumption. 17. While Malaysia is relatively prosperous, the agricultural sector still includes a large number of smallholders, particularly of rubber, coconut and paddy, among whom the incidence of poverty rises above 75% (Peninsular Malaysia). In the early 1960s the Government began to resettle the landless rural unemployed and marginal smallholders on new land cleared from virgin jungle and planted with oil palm and rubber. Land settlement programs are to a large extent carried out by the Federal Land

9 - 5 - Development Authority (FELDA), and the Bank has assisted in the financing of the Jengka Triangle, Johore Tenggara and Keratong land clearing and settlement schemes. FELDA is currently developing about 100,000 acres and settling about 7,000 families annually. Other land settlement programs for smallholders are being undertaken by the Rubber Industry Smallholders Authority and by state organizations. Also in the 1960s irrigation systems were improved and enlarged to introduce double cropping in smallholder paddy producing areas, two of which (the Muda and the Kemubu irrigation schemes) were financed under Bank loans. However, settlement programs and large-scale irrigation schemes can only deal with a relatively small number of people and cannot by themselves alleviate rural poverty throughout Malaysia. Furthermore, the availability of virgin jungle for large-scale land settlement schemes is limited, at least in Peninsular Malaysia, particularly if the needs for soil and forest conservation are fully taken into account. Areas considered feasible for large-scale new development for irrigation are also limited. 18. Therefore, increasing attention is being given to improve the lot of the majority of smallholder farmers who depend on rain-fed agriculture or who could be served by small-scale irrigation schemes, such as those included in the Bank-financed National Small-Scale Irrigation Project. Smallholder farmers are also being assisted under area development schemes, through the Bank-financed Western Johore and North Kelantan rural development projects. The productivity and incomes of the farmers is further being improved through national programs aimed at development-oriented agricultural research, as under the Bank-financed MARDI project, as well as through improvement in extension, extension training and seed production as proposed under this project. Agricultural Extension 19. Under the Malaysian constitution, agricultural extension is a state responsibility. But as far as Peninsular Malaysia is concerned, the federal Government establishes agricultural policy and provides managerial, technical and financial support to each of the states. Moreover all the state Directors of Agriculture and most of the senior officers are seconded from the federal Government, although they work under the administrative control of the states. Intermediate and operational agricultural staff are state employees. These arrangements provide the federal Government with adequate control and influence over planning and development activities and assure the coordination of the states' function of extension with the federal functions of setting agricultural policy, research, training and education. Authority and responsibility for day-to-day activities remain at the local level with people who are familiar with local problems, customs and procedures. In the Borneo states of Sarawak and Sabah, the state Departments of Agriculture, reporting to the state Ministries of Agriculture and staffed only by state employees, are responsible for setting agricultural policy within the national framework as well as for extension, training and education. 20. Quantity and quality of extension services vary from state to state depending on their resources and the stage of development of their agriculture. Generally, there are too few people engaged in extension at the farm level; at present on the average one extension worker has to cover 1,300 farm

10 - 6 - families. Regular contact can only be maintained with a small portion of the farmers. Other duties, such as administration of the agricultural input subsidies program, often divert the attention of the extension officers. While extension workers have generally received adequate basic agricultural training, they are often not up-to-date on technical information and extension methodology, a situation which can be improved by providing more subject matter specialists to backstop the extension workers and by more intensive in-service training. Planning, coordination and evaluation of extension work is inadequate. Supervisory staff do not receive training in personnel management and project planning; chains of command are often not clear; efficient employment of staff is sometimes constrained by requirements for academic qualifications; and no system exists for the evaluation of the effectiveness of the extension work. Training 21. Professional training for agricultural degrees is offered at the Faculty of Agriculture of the University of Malaysia in Kuala Lumpur and at the University Pertanian Malaysia at Serdang. Agricultural field staff receive operative-level training, which is provided at six vocational Agricultural Training Institutes well distributed throughout Peninsular Malaysia, of which three were financed under the Bank's First Education Project. Capacity of the six institutes is now 1,680 graduates. Intake, however, has been slower than projected for a number of reasons, foremost of which is the lack of scholarship funds. In addition to the training at the institutes, institutionalized in-service training programs are being set up to improve and update the extension technical knowledge of all field staff, including training in extension techniques, communications, operational skills and farm management. The use of television for the support of extension work, both for conveying information to the farmers and for the in-service training of extension workers, is also being explored. Almost all primary and lower secondary schools are now equipped with receivers as part of an educational television program set up under the Bank's Second and Third Education Projects. Seed Production 22. At present, seed production is primarily confined to rice. In Peninsular Malaysia seeds are produced by the Department of Agriculture, in Sarawak by the state Department of Agriculture and in Sabah by the state Department of Agriculture and the Sabah Padi (Paddy) Board. Present controlled rice seed production in all of Malaysia accounts for less than 800 tons of improved seeds annually, which would only plant about 5% of the total annual paddy crop area. There has been no effective seed certification and very limited quality control. Testing facilities at the production centers allow only for simple checks on germination and viability. Inadequate processing and storage facilities as well as a shortage of trained staff are the main constraints on increasing production and improving quality.

11 PART IV - THE PROJECT 23. The proposed project would provide extension and related services to an estimated one million rural families throughout Malaysia. These represent more than 80% of the rural families served by the Department of Agriculture (DOA) extension service and comprise the majority of the poorest group in the agricultural sector. Settlers on land development schemes, as well as farmers in large-scale irrigation areas, are generally provided adequately with extension services by the respective operating agencies. The farmers who would benefit from the proposed project would primarily be paddy and coconut growers, including farmers who intercrop or grow other minor crops in rotation and who by-and-large rely on rainfed agriculture. The project would endeavor to make the benefits of improved technology available to them, thus reducing the gap between known technology and its application on the farm. The project was initially identified under the Bank's Agricultural Research and Extension Project and was prepared by the federal Department of Agriculture, assisted by the FAO Cooperative Program. 24. The project would be implemented by the federal Department of Agriculture in Peninsular Malaysia in close collaboration with the states and by the state Departments of Agriculture in Sabah and Sarawak. The differences in project composition and in subprojects to be described below reflect the differences in agricultural development between the three areas, as well as the varying scope of responsibility of the three departments. In Sabah and Sarawak, the relatively lower level of agricultural development and supporting infrastructure and the more comprehensive responsibility of the Departments of Agriculture require a wider range of components and a different emphasis than in Peninsular Malaysia. 25. Extension is primarily an educational activity and its objective is to give guidance to farmers on the availability of research results, on packages of new and improved technology, on the trends of cultivation in a way that can be incorporated into farming systems, and on ways of communicating successful techniques to each other, thus increasing farm productivity and profitability. This is the main task of extension in Malaysia. The project would emphasize regular in-service training of field level agricultural staff, provision of additional field level extension staff and supporting subject matter specialists, the progressive improvement and regularization of extension methodology, the strengthening of extension educational activities and of extension management. Project Components 26. The project may be divided up in the following components: agricultural extension staff and facilities, extension training, extension methodology, seed production, and technical assistance. The components of the project are summarized below. 27. Extension Staff and Facilities. The proposed project would build each state Department of Agriculture into an effective institution to provide

12 - 8 - adequate extension service to smallholders and to ensure that research results are translated into farm benefits. The project would seek to do this by the following measures: (a) to recruit an additional 560 agriculture technicians (extension workers, to increase the number from 780 to 1,340) and 38 subject matter specialists, and strategically to locate these staff throughout the 13 states of Malaysia (excluding most of Kelantan State which is already provided for under Loan 1294-MA); (b) to provide better in-service training for agricultural staff; (c) to grant local and foreign training fellowships to selected staff members; (d) to provide four man-years of technical assistance in extension and training; (e) to improve the facilities (housing and offices) available to extension staff; and (f) to introduce a more positive and direct style of extension methodology (regular training and farmer visits) and management for executing extension activities. 28. The national average ratio of field level agricultural technicians to farm families would be increased from 1:1,300 to 1:800. Field level extension staff would be increased from 495 to 895 in Peninsular Malaysia, from 113 to 213 in Sabah, and from 171 to 248 in Sarawak. These increases will not only help increase overall productivity, by improving the national ratio of extension staff to farmers, but it will particularly help increase yields by raising substantially the ratio of extension workers to farmers where current ratios are well below the national average. The 38 additional subject matter specialists would provide technical backstopping for the extension workers. Appropriate housing and office facilities would be constructed for field staff. The project would also contribute boats as well as vehicles to make extension workers mobile and increase their coverage, permitting them to reach those areas inaccessible by road. 29. As mentioned above, a shortage of scholarship funds has contributed to the inability to use the full capacity of the six Agriculture Institutes. Funds for scholarships would be provided by the federal Government to ensure that an adequate number of trained workers will be available. The 400 additional extension workers in the project for Peninsular Malaysia represent about 15% of the projected output of the six institutes during the project period. The remainder of the institutes' graduates are employed by the other government and quasi-government organizations and the private sector. 30. The increase in extension workers resulting from the project would be used for giving farmers technical assistance and not to administer subsidy programs nor perform regulatory functions. In the future a much larger proportion of the extension officers, therefore, would be able to concentrate on teaching the farmer. Extension is an activity that depends upon adequate

13 -9 - numbers of trained and informed staff and satisfactory assurances were obtained during negotiations on the creation and financing of new positions and recruitment of staff to fill them. (See Section 3.10 of the draft Loan Agreement.) 31. Extension Training. Training under the proposed project would strengthen the technical and operational capability of the extension services by the means set out below. In addition, the increasirng emphasis to be given to training activities within the DOA will be supported by the training of staff of the Extension Liaison Unit under Loan 1115-MA. (a) A new Agriculture Institute would be established in Sarawak. Facilities at the Agriculture Vocation School in Sabah would be improved and output of existing institutes in Peninsular Malaysia would be increased. The quality of training at the institutes would be improved by the training of teaching staff and by closer integration of the institutes into field extension programs. (b) In-service upgrading and specialized training of field staff would be achieved by the establishment of five new Regional Extension Training and Development Centers (RETDCs) (four in the Peninsula and one in Sarawak) and the establishment of an Agricultural Training Center in Sabah to perform the function of an RETDC. Courses would have a practical orientation; they would last from several days to three weeks and would be aimed at keeping staff informed and up to date. Courses would be offered in extension methodology, extension techniques, and technical subjects. In addition, any remaining capacity at the RETDCs would be filled by training programs for other agricultural agencies. During negotiations assurances were given that the DOA would conduct an analysis of agricultural in-service training requirements. The findings of this analysis are expected to be submitted to the Bank no later than June 30, (See Section 3.11 of the draft Loan Agreement.) (c) Over 400 supervisory staff of the extension services would receive training in management skills and in extension and communications methods. Selected senior staff would also be given an opportunity to visit places outside Malaysia where effective extension systems have been developed. (d) Subject matter specialists would be given major responsibility for in-field, in-service training of extension staff, as well as acting as a constant channel of communication between extension and research workers. Training of these specialists in their fields and in communications skills would be provided for under the project. (e) A farm mechanization training and extension unit would be established in Sabah in conjunction with the state's training center. In Sarawak, to strengthen mass media support for the extension service, a unit for the production of agricultural extension communications materials would be established and staff would be trained.

14 Although in-service training will upgrade the knowledge of the field staff and keep them informed, there is also a need to provide for specialized fellowships to upgrade management and technical ability. About 166 man-years of training will be provided through: (a) undergraduate scholarships, (b) postgraduate studies, and (c) overseas short courses and study tours. Assurances were obtained during negotiations that annual fellowship programs would be prepared well in advance and submitted to the Bank staff for review and comment. (See Section 3.02 (b) of the draft Loan Agreement.) 33. Extension Methodology. The widely varying nature of agriculture throughout the country requires a flexible and practical extension approach, adjusted to the level of development of local agriculture and supporting services (credit, marketing, input supply, etc.). The main emphasis of the proposed project would be on pre-service and in-service training of extension workers so that they will be adequately informed. Armed with information, the extension workers would concentrate on counseling individuals and groups of farmers on appropriate inputs and farming techniques. Extension officers are presently involved in regulatory activities and input supplies as much as in educational activities. One of the major goals of the project would be to systematically separate as rapidly as practicable extension from regulatory and input functions, providing a strong cadre of extension officers who were free to concentrate on providing technical assistance to the farmers. 34. The basis of the proposed project extension methodology would be systematic planning and application of extension activities at the farm level (training, visits and demonstrations), beginning with the day-to-day work of the field level extension worker up through the area, district, region, and state levels of organization. The agricultural technician would plan his program on a two to four week schedule, depending on local requirements, and would plan regular training, demonstration (based on a package input approach) and discussion visits to provide timely agricultural information relevant to the most important crops and activities in his area at specific times of the year. He would conduct regularly scheduled visits, discussions and demonstrations with farm leaders and other farmers and maintain records of visits, information transmitted, acceptance by farmers and their achievements. These reports would form part of a cumulative record of activities and achievements from the area, district, region and finally the state level, which would then form the basis for systematic monitoring, evaluation and long-term planning. The planning and evaluation of extension work will be developed at the state, region, and district levels. 35. The study of the use of television for extension purposes would open up a potentially very valuable communications medium for improving agriculture in Malaysia. Assurances were obtained during negotiations that the DOA, in cooperation with the Ministry of Agriculture and Radio T.V. Malaysia, would complete such a study for Bank review by December 31, (See Section 3.13 of the draft Loan Agreement.) 36. Seed Production. This component of the project would provide for facilities and capability for producing quality seeds of paddy and minor crops.

15 In Peninsular Malaysia five crop production centers (now producing 800 tons of seeds annually) would be expanded and strengthened to produce, process and distribute approximately 2,500 tons of seed annually by full development. Seed quality control would be developed through a central seed testing and quality control laboratory to be established at Serdang for Peninsular Malaysia. In Sabah, two seed production, processing and distribution centers would also be developed, with the capacity to produce annually 200 tons of paddy seed and 150 tons of minor crop seeds (mainly groundnuts, maize, sorghum and soybeans). In Sarawak, one seed production center would be established with the capacity to process annually about 250 tons of paddy seed. Production of up to 50 tons of minor crop seeds would also be developed. The production centers would become the major suppliers of domestic seed requirements. 37. Initially, quality seeds production would be accomplished through improvement of existing government seed farms. Quality seed production would progressively be extended to farmer outgrowers, and 50% or more of the seed is expected to be grown by farmers by full development. A seeds fund would be established and maintained by the DOA to provide adequate operating capital to purchase seed at a premium price from farmer growers and cover operating deficits. Assurances to this effect were obtained during negotiations. (See section 3.06 of the draft Loan Agreement.) 38. The Malaysian Agriculture Research and Development Institute (MARDI) would supply foundation seed to the seed production centers. The respective research institutes of Sabah and Sarawak would also produce some foundation seed for local requirements. Seeds would be multiplied by the crop production center and farmer outgrowers. Seeds would be sold at cost to the more progressive farmers with adequate resources. However, initial emphasis would be on distribution through subsidy programs, administered by the state Departments of Agriculture, to introduce and demonstrate the benefits of improved seeds to small farmers and farmers with inadequate resources or insufficient incentive to purchase seeds at market prices. With a view to establishing seed production on a self-financing basis, assurances were obtained during negotiations that the Government's pricing policy for seeds would be reviewed and that the Bank would be advised of the Government's seed pricing proposals by January 31, (See section 3.07 of the draft Loan Agreement.) Seeds pricing policy is closely linked to the Government's subsidy program and policy to be reviewed under the project (see para 47). Also, assurances were obtained during negotiations that, during the project implementation period, the Bank would be given reasonable prior notice of the Government's intention to enact any federal or state legislation concerning seed production. (See section 3.08 of the draft Loan Agreement.) The Malaysian seeds industry is in the initial stages of development, with the Government as the only producer of improved seeds at present; therefore, legislation at this time would be premature. 39. Technical Assistance. The federal and state Governments have requested a total of eight and one-half man years of technical assistance for the extension, training and seed components of the project to assist with specialized activities in relation to planning, organization, design and implementation as described below. Assurances were obtained during negotiations that this technical assistance would be acquired under terms and conditions satisfactory to the Bank. (See section 3.02 (a) of the draft Loan Agreement.)

16 Project Implementation 40. The project will be implemented through existing administrative structures at both the federal and state levels. The Director General of the federal Department of Agriculture (DOA) would be responsible for project implementation. The Director of the DOA Extension Branch would become the National Project Director for all states, and each of the state DiFectors of Agriculture in Sabah and Sarawak would be Assistant Project Directors. Each state Director of Agriculture would be responsible for execution of the extension component through the state's Chief Extension Officer. Assurances were obtained during negotiations that all states would designate their chief extension officer by June 30, (See section 3.09 of the draft Loan Agreement.) 41. The Director of the DOA Extension Branch, would, in addition to his overall responsibility for extension activities, be responsible for the training to be carried out under the project and for the administration of the Regional Extension Training and Development Centers. A working level committee of all user agencies would be formed to provide policy guidelines to these centers. 42. The Director of the DOA Crop Production Branch would be responsible for implementation of the seeds component of the project. Separate units would be established within the Crop Production Branch for (a) seed production; (b) seed processing, storage and marketing;, and (c) seed certification and testing. MIARDI would produce, maintain and supply breeder and foundation seeds for released varieties, and the National Seeds Assessment Committee would approve the new varieties for release. 43. The project would be implemented over a period of five years. The capacity to implement the components of the project varies from state to state. The federal DOA and the Bank are confident that the administrative constraints can be overcome through proper coordination and cooperation. The seeds component of the project would be implemented slowly in the first two years to allow the seeds consultant time to prepare design, production and processing requirements, with the objective of reaching full development by 1982 or as soon thereafter as practical. 44. Seed production centers and Farmers' Associations (which will be used for seed distribution in Sabah) would adopt cost accounting procedures which are acceptable to the Bank, and assurances to this effect were obtained during negotiations. (See section 4.04 of the draft Loan Agreement.) Monitoring and Evaluation 45. The success of the DOA's extension activities and those of the project will ultimately be measured by the increased productivity of smallholders in Malaysia. However, there is inadequate information regarding present agricultural practices, farmer attitudes, and the constraints that keep smallholders from increasing their productivity. Therefore, there is a clear need at this time to establish a monitoring and evaluating capability within the DOA.

17 Monitoring the project would require a systematic framework of data collection, analysis, and periodic reporting. Consultants employed under the UNDP/IBRD State and Rural Development Project would assist the federal and state DOA's in the development of an appropriate system. Also, a computer specialist and statistician economist provided under Loan A would be available. The DOA and their consultants would examine (a) present agricultural practices of farmers, including the use of improved seeds, fertilizers and pesticides; (b) credit mechanisms avail'able to the farmers and their use; and (c) marketing channels available to farmers, particularly for the new crops that are encouraged under crop-diversification schemes. 47. Farm subsidy programs have been a principal component of the DOA's extension programs and will remain so under the Third Malaysia Plan. The principal objectives of the subsidy scheme are: (a) to introduce farmers to new crops; (b) to demonstrate to participants (and their neighbors) the benefits of improved agricultural practices; (c) to assume some of the risk of innovation when farmers cannot be expected to do so; and (d) to grant initial working capital to farmers who have no opportunity for savings during the maturation period of investments. Subsidies are primarily provided in the form of inputs consisting mainly of seeds, planting materials, fertilizers, insecticides and pesticides. Federal funds budgeted for these programs in the Third Plan for Peninsular Malaysia (US$23.8 million) are about four times the amount spent under the previous five-year Plan (US$6 million). Increases of similar magnitude are envisaged in Sabah and Sarawak. Although the subsidy schemes are being increased in crop coverage as well as in amounts, there is virtually no information on the past achievements of the schemes. Therefore, there is a need to review the objectives and effectiveness of the subsidy programs. Assurances were obtained during negotiations that an appropriate monitoring and evaluation system of the extension and the subsidy programs will be set up by January 31, (See section 3.05 of the Loan Agreement.) Project Costs and Financing 48. Total project costs are estimated at US$46.5 million, of which US$19.0 million would be foreign exchange. Extension accounts for 49%, training and fellowships for 40%, seed production for 9%, and technical assistance for 2% of the total base costs. All prices and salaries have been adjusted to mid-1977 levels, based on recent Malaysian and international price trends. Physical contingencies of 15% for civil works and 10% for vehicles and equipment are included and account for 5% of total project costs. Costs due to expected price increases amount to 22% of project costs and are based on the following annual inflation rates: for local costs a 7% annual rate; and (b) for foreign exchange costs for 1976 a rate of 8% for civil works and of 10% for vehicles and equipment for , 7.5% and 9%, respectively; and thereafter, 7% and 8%, respectively. Unit costs for civil works in Sabah and Sarawak are estimated at 25% to 30% above those in Peninsular Malaysia, reflecting higher local contractor and transport costs. Project costs for the seeds subproject include an estimate of the working capital (seeds fund) required to purchase seeds from farmer outgrowers and to cover operational deficits during the development phase of the seeds industry. Working capital is calculated on the basis of the above cost less revenues generated from seed sales.

18 The proposed Bank loan of US$19.0 would finance the foreign exchange cost of the project. Foreign exchange expenditures are estimated at US$5.6 million for civil works, US$4.4 million for equipment and vehicles, US$600,000 for technical assistance, US$2.3 million for fellowships and US$6.1 million for contingencies. All operational expenditures, other than those for incremental field staff, would be funded under state budget allocations. All capital costs, as well as expenditures for incremental field staff, would be financed under the federal Government budget. Satisfactory cost sharing and administrative arrangements between the federal and state Governments have been agreed to. Assurances were also obtained during negotiations that the Government will make funds available to hire all incremental field staff required to conduct, support and maintain project activities. (See section 3.01 of the draft Loan Agreement.) Procurement 50. The Project Director would have overall responsibility for the procurement of goods and services under the project. He would use and expand the procurement staff and facilities already established for the extension component financed under Loan 1115-MA. The Project Director would approve all procurement action of the ten states of Peninsular Malaysia (which excludes Kelantan, covered under a separate project) and would rely on the state Directors of Agriculture for Sarawak and Sabah to carry out procurement in their respective states. 51. Construction contracts would generally be small (averaging less than US$100,000), dispersed in time and space and could not be grouped together for simultaneous bidding; therefore, all contracts estimated to cost US$400,000 or less (totalling about US$10.0 million) would be awarded after competitive bidding in accordance with Government procedures, which are satisfactory to the Bank. Contracts above US$400,000 (totalling about US$8.0 million) would be awarded after international competitive bidding in accordance with the Bank guidelines. Vehicles and equipment (totalling about US$7.5 million) would be procured under international competitive bidding procedures in accordance with the Bank Guidelines. A 15% preference margin, or the prevailing customs duty, whichever is lower, would be extended to local manufacturers in the comparison of bids (see Part B 2 of Schedule 4 of the draft Loan Agreement). Consulting services totalling 8.5 man-years would be engaged under terms and conditions satisfactory to the Bank, and 166 man-years of fellowships would be managed under programs acceptable to the Bank (together totalling approximately US$4.0 million). Disbursement 52. Disbursements would be made at the rate of 100% against the foreign exchange expenditures on all directly imported equipment and vehicles, 100% of the ex-factory cost of items manufactured locally, and 85% of the cost of imported but locally procured items. Disbursement for all civil works would equal 40% of total cost including site development. For fellowships and technical assistance, disbursements would equal 100% of foreign exchange expenditures. It is expected that the proposed Bank loan would be disbursed by June 30, 1983.

19 Justification, Benefits and Risks 53. The Project would provide the infrastructure and extension services necessary to increase the yields of paddy, other field crops, and coconuts. An estimated one million rural families will be reached by the increase in the extension and seed production services, with particular emphasis on increasing extension services in rural poverty areas. The cost of the project's extension component would be about US$26 per rural family. The project is supporting the development objectives of Malaysia (a) by improving the productivity and incomes of the poorest segments of Malaysian society; (b) by reducing urban-rural and ethnic income disparities; and (c) by reducing the need to import food grains. 54. Aside from advancing basic national development objectives, the project would yield high economic returns. The expected overall economic rate of return of the project is estimated to be at least 25%. This rate of return represents only a modest increase of 8.4% in production value and assumes an increase of less than 4% in padi production, when the projected rise (to 1988) in the real price of paddy is taken into account. 55. The project would raise net paddy farm incomes of project farmers by US$ per family (US$15-19 per capita) even assuming present farmgate prices, thus raising incomes of the majority of them by 14 to 26% and raising the incomes of some above poverty levels (US$1,150 per family). 56. In calculating the rate of return of the project, the various components were considered as an integrated package. Proper implementation of the project will require a high degree of organizational effectiveness and coordination among the federal Department of Agriculture and the state Departments of Agriculture, as well as with other public institutions in Malaysia. In particular, institutional services such as credit and marketing will have to be progressively strengthened in order to obtain the full benefits of the project. Much of the initial emphasis will be on raising the subsistence level of rural families. The major risks involve untimely availability of staff, funds and equipment, administrative ineffectiveness as well as acceptance by farmers which would slow down the rate of development of extension services and seeds production. The federal and state Departments of Agriculture are well aware of these managerial, organizational, and administrative limitations and are confident that adequate coordination and cooperation in implementing the project can be achieved. These views are shared by the Bank. Environmental Effects 57. It is unlikely that any components of the project would have a significantly adverse effect on the environment of the country. The use of high yield seed varieties will require the application of chemical fertilizers and sprays for pest control, but the level of application in the country will be relatively modest.

20 PART V - LEGAL INSTRUMENT AND AUTHORITY 58. The draft Loan Agreement between Malaysia and the Bank, the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement and the text of a resolution approving the proposed loan are being distributed to the Executive Directors separately. 59. Special conditions of the project are listed in Section III of Annex III. 60. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 61. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Washington, D.C. November 3, 1977

21 ANNEX I Page 1 of 4 pages TABLE 3A MALAYSIA - SOCIAL INDICATORS DATA SHEET LAND AREA (THOU KM2) ~---~~~~~~~~~~ LAND-_--- AREA(THOUKM MALAYSIA REFERENCE COUNTRIES (1970) TOTAL MOST RECENT AGRIC ESTIMATE PERU PORTUGAL MEXICO ** GNP PER CAPITA (US$) 230.0* * 860.0*/a 470.0* 950.0* 690.0* POPULATION AND VITAL STATISTICS POPULATION (MID-YR. MILLION) /a POPULATION DENSITY PER SQUARE KM /a io.d PER SQ. KM. AGRICULTURAL LAND ia VITAL STATISTICS CRUDE BIRTH RATE (/THOU, AV) CRUDE DEATH RATE (/THOU,AV) INFANT MORTALITY RATE (/THOU) a/a 35.4/b 65.1/a LIFE EXPECTANCY AT BIRTH (YRS) GROSS REPRO#CTION RATE /a 2.4/b POPULATION GROWTH RATE (X) TOTAL /a 3.4 URBAN URBAN POPULATION (X OF TOTAL) AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 43.8/a b 44.7/a 42.7/b 45.0/a 28.S TO 64 YEARS 53 4/a b 52.17a W si. 'ia YEARS AND OVER 2:.8B~ 3.2Ta 3.47W 3. 17a AGE DEPENDENCY RATIO 0.9/a,b 0.9/a 0.9/b 0.9/a ECONOMIC DEPENDENCY RATIO 1.4/a,b 1.67a 1-,7b. /b 2.0 FAMILY PLANNING ACCEPTORS (CUMULATIVE, THOU) /a 371.8/b *- * USERS (% OF MARRIED WOMEN).. 8.0/a.... EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) /a LABOR'FORCE IN AGRICULTURE (%) 56.0 o /a 29.2 /c 45.0 UNEMPLOYED (% OF LABOR FORCE) 2.P0-K.c W7c 2.6 INCOME DISTRIBUTION % OF PRIVATE INCOME RECD BY- HIGHEST 5% OF HOUSEHOLDS HIGHEST 20% OF HOUSEHOLDS * LOWEST 20% OF HOUSEH4LDS LOwEST 40% OF NODUSESLDS DISTRIBUTION OF LAND OWiERSHIP % OWNED BY TOP 10% OF OWNERS % OWNED BY SMALLEST 10% OWNERS HEALTH AND NUTRITION POPULATION PER PHYSICIAN /d /b c /d POPULATION PER HNUSING SPTA PEPSO E70.0 N e /a 2 POPULAION PE HOSPIAL BED 2900O7-d 270.0/ Cj B80.0- PER CAPITA SUPPLY OF - CALORIES (% OF REQUIREMENTS) /b PROTEIN (GRAMS PER DAY) 49.0 /b / -OF WHICH ANIMAL AND PULSE W /c DEATH RATE (/THOU) AGES /b EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 9i.0 /a 89 0 /a 92 0 b SECONDARY SCHOOL 91.07Ia 69. 0/a 92.0/bC YEARS OF SCHOOLING PROVIDED 190j 34D- 2E.7~ (FIRST AND SECOND LEVEL) 13.0 /a /a 13.0 /b VOCATIONAL ENROLLME.'( (% OF SECONDARY) 5.0 /a 3.0 Ia 3.0 /b c 19.0/d ADULT LITERACY RATE (%) 5 a0, b o e 360o.o HOUSING PERSONS PER ROOM (URBAN) /a,,, 0.8/f 2.2 OCCUPIED DWELLINGS WITHOUT PIPED WATER (%) 50/, d SCCESS TO ELECTRICITY 6. /, * /d (% OF ALL DWELLINGS) / URAL DWELLINGS CONNECTED TO ELECTRICITY (%) /a CONSUMPT ION RADIO RECEIVERS (PER THOU POP) PASSENGER CARS (PER THOU POP) ELECTRICITY (KWH/YR PER CAP) /d /b NEWSPRINT (KG/YR PER CAP) F _- - SEE NOTES AND DEFINITIUNS ON REVERSE

22 ANNEX I Page 2 of 4 pages NOTES Inu rhersji 1973 end oaed dots for l9os refer to any yearhosee 1959 aod 1961, for, 1970 between 1968 and 1970, and for Moat Recent Estimate between TNP per cspiuc detc ore hosed so the World Book Ailos methodology ( busts). 00Mojic. has sot a rapid path of indootolal ooaso..ad since Malaysia's industrial base is relatively small and the o..untry has the capacity and place to eopand its industrtal siroicition rapidly in the future, Mecico has been selected as the e-jective coun.try. MALAYSILA 1960 Ia peninsular Mouoi 1, Ic 1962, registered applican.ts for woeb; /d Federation of Malaya /a eninsolor Malaysia, /b , /c Piped water inside. MtOST RECfIll? ESTPiATE I a 1976, Lus Peninsular Malavsia; /c fir;)t 1970 /o icoldimg Lodian jungle poo otin, /b Ratio of po,pulation under 15 and 65 and over to total labor forts Ic Urban only, ~ I- Icodinf -veniog ucbools. PORTfOGAL 1970 /e Po to enigratlon poyolo,ti- growth rote is lowr than rat of natural increase; /b ngratio of puptiotton under 15 and 65 and over to total labor force. Ic Eunluding unemployed, Id Registered, intcludin phyaiciaca practicing dentiatsy; le 1Inlodlesg assistant -ooe, If Total, urban aod.rurl. MREI C 1970 /s Including ausistoot cors-, Lb 1969-flavrae /c , /d Inside only. Rit, Noveber 1, 1977 Land urea lihs he2i Poelation per cursin perso - Population dioided by niober of practcicig ftol - Tossl sof-o arcs -p,riisia land urea sod Island waters. nab and femal grad uss nurse. trai-od or cerrifted" nurses, and AAric. -Moot tetet etaeof ogr,.irtrsi oreo,eod temporarily or pain- asailisry persaaa wish training or esperiance sestly (or crps, postres, jiuret & kitchen ga-deos or to lie follow Population Par hospital bed - Population dicided by masher of hospica1 beds avaiable in public and prie-te genera an sd spctialiod hospital and GNP Per coolis. (L1S$) - lhp per capita esci.ates t --- orrs nchrk prices, rehabilitation centers, -ssldes nursing hone and eetablish-neta for calclatd by cam conoer1i -rthud us World Bank At100 ( hotl utodial sod pr-vetlos cars and 1975 dots. Per capita supply of"clories ft of re..uirensts( - Conputed fr energy equivalent of net food sopplies available in co...try per capita per day, Population ond oltal ocaciutrc -oulable sopplies renprise donestic production, imparts lane esports, and Population adsr Iille) As of (dy first- ir cot -viluble. asrage changes is otoob, cot supplies osolude animal feed, seeds, quantities used of two eod-yvar es-ilaeo. '~to, 1970 cod 1975 data, to food process.ing ond loasses in diatributian; req.iremets worr estimated by FAO basedza phya ill"cgioa seeds frnorma - activity sand health -aidfopularioo est c osuare km - Mitd-sea puoulactoon nr square kilstor ering ensit.eoemr t-pratre, body weights, age sod ass distributions of (BOB hecrrr f 'tota are Pouaindens to-po_t u_susre i, of asric. land - ConPutoi -s shoe fur populattos, and ail1aing 10 for -ants an household level. Per capita supply of protein fgram per day)-prticoesofprcit agiutr lad osls Met supply of food per day; Met supply of toed is defined as above; requinnests for all cotrios ennahifahhd6by SDBA -ononaic Reese.rch Sccuices Vital saitc pcuoide foramisina llesao of0h gi of total protein par day, and Crudo birth rare Per thousod, ovrage - Aos.ou Ioe birtt. per rhousuod of 20 gras of an=ima and pulne protein, of which 10 grs should he asimal old-peer populstic,te-year -rirhaotic o--rage ending to i960 and 1970, protein, theae standards ore lowr than those of 75 gros af total protein ard fiso-year overae ocie. in 19'5 for -sot recnt estjoate. and 23 gras of animal proneis as an average for the world, proposed by FAO Crude doath rate per rhauo-d, -oe-ge - AnnuoI dauths, per thoosad of mid-ysec to rh. Third World Feud Sarvy. population; 1cc-year arichmeti.o.eru 0dn Io 1960 and 197 Lo ive- Per cap;itafproto~in opnol fro, soimian sd pulse - Protein supply of food sear _-gerg rditf to 1975 for cosit almr. isc de_odio cnla rd pussla rm per day. lofcionraity rate ( Atou) - Iau deaths af nfaro under ace year of age Death rare f/thou) ages 1_4 -A..ous deaths per thousand in age group 1-4 pe h,-.uod Ire hlrtho- years, to children in tbie age group, coggested aa an todiarotr uf ife cpecuoasat brth l -As) eraf camber of peers of life remining atmaution bitrh, usualy fls-y-or aeoragnsemding in 1960, 1970 sod 1975 for d-olopmg ceworics idc-tion lr-osrorod-ctioorate-;oe-oge niabec of lito daugthirs.. w.n.a.sill hear 04-looed ecllerartio - perimr sc.hool - Esroi1mnt of all ages es perin her co-1 -rpr-d-tl- p-clod if rho osperiecces pro.set age-specific -ontags of prioury school-age population; includes children aged 6-11 pears fertility rero, ucualyo fio-y-ea. raecges ocding in 'f an 19')5 hut adjoated for different leogtha of primary educa.tion, for couctries with for developig conris..toraeooion, enrolmnt nay sense..d osoncens Poeclaton ucoth rot ( iop,o rs1got crso i-year oshnteofficial school age. pupils are belo population, far , aod id!luoted..e.lliset ratic-secosdafy school - C-puted aabove, secondary poult _ngwh rot (7,)-cebon - tonputed like grawih rate uf total ods...sio requires at least four Yeats of approved primary iateuction, popolutter; d ifferer definitions of urbc area nay affect _oporbility of pro-ides geners1, occaional or resehe training inatrrutioes for popils data aooog citooriec febao cucai f _C tura1) - Ratio of o,rin cc total populslo, different of 12 to 17 years of age: --repandeaceaese ar geosrally eocluded. YPear of schoolinx,provided frie and second levels) - Total yeses of deiiin.f urhan siu r.. na a tro cspsbit of dotsamog c-nerin- shooing; at ancondary Isosl, emeti_nl imatr_tion nay bn partially or Omapletely -aclded. ar srutre nprcs) - Childre- (0-14, ycors). workinig-age (15-64 years), Vocationalerlmn.1 fscnay - Vonation1 institutions inclde sod rtired 1615 era n oe) as p-rcerges of oid-y-s pepslatioe. technical, Industrial or ether Program ehich operatle indopandesilo or as Age depend-no -a 1i - Rat,io. of Popultion usder 15 and 65 and ovr to those departmenrts of srondery in-titurioras uf ages 15 thre..gh km ic-oic. depc-dcoty Ruso- a-s of ypulstuo u-nder (5 sod 65 sod ever to Adult lterco rae(.). Literate adults (able to read aed write) au per- cetgoftoa adir tpopulati on aged 15 ye-ursad a th. labor for'ce in agegroup of i5 -h4 yeses. Family pl...ois - Ccept-r (tsussi.,ts I, tho) - fuolts. o -uhn of scsptrurs.. Inulg of srhctrldo--e coder c-psoe- of matina.l family placc-o progrms Person per coos furbn) - Average nsb-e uf prcoos per coos is occpied sicce in-pt- c_c_ecional dwellings in orb on areas,. dwellings -nc1ade sun-p.-smaent foorl el-oolc - usrs (. of nsrrind w--) - Pe-etotgcs of --ud c-on of ut-uccueu and unecopiod pare.. rhsld-bcar Ing ag ( your) oh. use birfhs-rt-1 d-icos to all mactied Occuprod Owllca ibatpie wter (7.)- olucupied tou-stl..noi dwellings so_en issae age group. in ousd -rura areas without inuide or -ta-de piped outer facilities sprotge of,al occupied dwellings. ImoloymerI itoce to olnot1icsts (7. of all dwelitci) - Con-en--r1 duelligs with Total Labor furon (thou..ond)- Eco-oi-Ily -trioe peroons, icoluding ared eleorr-it'y in floingqoresa peruest of rtatl dwellgs is -rhe end foresand ucemplysod hut e-ulod-g h-usewirn. studenco,errc., def-iriroos rru1 ares. Illvnou oust lea aroue rotnipocble loca dw1lllogs consocrd to elorcr 7) -topured as obve for ruroi Labor farce ic ar,icultur f7)-giutr labot force (fin f airmio. foresty. dwel1tng alyt huto odfutg)i as pertenrofe of total labor force Sonspload (7. ofl- oce cnise r saly dofined so per.soo cho Imismption ore able acd will ing to take a job, out of a jb os, agfren day, cem-ied ou Radio rteeiver (Par than Pop) -All types of r-oeosc- for rode. heod-ar of a joh, ond soking worh fur a specsled LoLwn peiod eot onodsirg ncc to geneco1 public pcr tho...and of population, excludes -cliceosd -eesers wah aycih opcble between -c`uurci dse to different dolt-tion in consecins and icyears. wheecogiotration of adu- test -s Lo effect; ofoepleyodd suc fdta,eg. -ipcpiedata elyetofc ltto, for recont yours osy sor be -mpscshle dorut oot r.hlished toocs oopclsory umemplaysmo insur..oce. liosmn log. Inras distributionc- Pocceotae of pri-ato inroam (hush o cah sod kias') Posssso cus" (Per thespeon -.Pu..s.oge.r.ce cosupris uncu cas taiog losthan eighht persona;... eiudesa ors hesra millitr. rec-toed by richest 57., rirhe-t 207., poorest 20%., aod poorest 417. of houue- vehicles. colds Electricity (Ikoh/yr per 05p) - Asmoa.l -onsaptiem f ledustrlal. co--tecial, Distribution of udoweshp Pretogeu - of land -1s b, wral,th-o Illr publicasod ptiiate e1-cteit in hilemart bars per us.pita, geurarlly hased on productls data, wiitthout al11wasne for lo.sse to grids Lr allowand pourest 107. of laod ownrs. ing for imprcts and seperts ofelectricitry gesith and Nutrition Neenpetot (ho/yr soc cap) - Pr,cpita aonnua kosnrinl ilogeos esiaenrs:1eri cdcinp5 etiprso eeto P.elation per phtysician - Popilatlo ducided ho nsooher of pra.itfitg physicla... qualified Ico a nedica1l schoc a taciterst level1

23 ANNEX 1 Page 3 of 4 COUNTRY DATA - MALAYSIA AREA POPULATION (1976) DENSITY 330 thousand sq km 12.7 million 37 per sq km POPULATION CHARACTERISTICS ( average) HEALTH Birth rate Population per physician (1973) - 4,400 /a Death rate Population per hospital bed (1973) /a Population growth rate EDUCATION (1972) ACCESS TO ELECTRICITY (1970) Adult literacy rate - 60% All dwellings - 43% la Primary school enrollment - 92% La Rural dwellings - 30% /s GNP PER CAPITA IN 1976: US$860 Lb GROSS NATIONAL PRODUCT IN 1976: ANNUAL RATE OF GRKDTH (% in constant prices and M$) USS Mln X GNP at Market Prices 10, Gross Domestic Investment 2, Gross National Saving 2, Current Account Balance Exports of Goods, NFS 5, Imports of Goods, NFS 4, OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1975 Value Added Labor Force V.A. Per Worker US$ Hln X Kin. % US$ X Agriculture 2, , Industry 2, , Services 3, , Unemployed Total/Average , GOVERNMENT FINANCE General Govorma-mt MS Kln S of GDP Current Receipts 7, Current Expenditures 6, Public Authorities Surplus Current Surplus Development Expenditures 2, Foreign Borrowing (net) MONEY. CREDIT AND PRICES Oillioa MS outstandiag end period) Money and Quasi-Money 3,724 4,131 4,666 5,770 7,574 8,729 10,001 12,769 lank Credit to Public Sector ,045 1,186 1,375 1,746 2,148 3,036 Bank Credit to Private Sector 1,841 2,246 2,572 3,014 4,586 5,278 6,084 7,471 (Percentages or Index Numbers) Yoney and Quasi-Money as S of GDP Consumer Price Index ( ) Annual Percentage Changes in: Consumer Price Index Bank Credit to Public Sector Bank Credit to Private Sector /a Peninsular Malaysia. lb World Bank Atlas.. not applicable NOTE: All conversions to dollars in this table are at the average exchange rate prevailing during the period covered. September 1977

24 ANNEX 1 Page 4 of 4 TRADE PAYMENTS AND CAPITAL FLOWS BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE ) US$ Mln % (US$ million) Exports of Goods, NFS 4,420 4,076 5,555 Imports of Goods, NFS 4,424 3,965 4,409 Rubber 1, Resource Gap (deficit = -) ,146 Tin Interest Payments (net) Timber Other Factor Payments (net) Palm Oil Net Transfers Petroleum Balance on Current Account All Other Commodities Total 4, Direct Foreign Investment Net MLT Borrowing /a EXTERNAL DEBT, DECEMBER 31, 1976 Disbursements Amortization US$ Mln Subtotal Public Debt, incl. Guaranteed 1,619 Other Capital (net) -5 (-502 (-185 Non-Guaranteed Private Debt Other items n.e.i. ( ( Total Outstanding & Disbursed 1,619 Increase in Reserves (-) Net Official Reserves DEBT-SERVICE RATIO FOR 1976 /b (end year) 1,615 1,695 2,504 % Fuel and Related Materials Public Debt, incl. Guaranteed 4.3 Imports Non-Guaranteed Private Debt of which: Petroleum Total Outstanding & Disbursed 4.3 Exports of which: Petroleum IBRD/IDA LENDING (AUGUST ) (US$ million) RATE OF EXCHANGE IBRD Average rate during period: Outstanding & Disbursed M$ per US$ US$ per M$ Undisbursed Outstanding incl. Undisbursed /a Medium and long-term capital flows are obtained from World Bank debt data and are not comparable with balance of payments estimates. /b Ratio of debt service to exports of goods and nonfactor services... not available

25 ANNEX II Page 1 THE STATUS OF BANK GROUP OPERATIONS IN MALAYSIA A. STATEMENT OF BANK LOANS (AS OF AUGUST 31, 1977) Amount in US$ million Loan (Less Cancellations) Number Year Borrower Purpose Bank Undisbursed Thirteen Loans fully disbursed / Malaysia Education (I) Malaysia Land Settlement Sabah Ports Authority Ports Malayan Railway Administration Railroad Malaysia Education (II) Malaysia Urban Transport (I) (Highway I) Malaysia Population Malaysia Land Settlement Malaysia Water Supply (II) Malaysia Highway (II) Malaysia Land Settlement Malaysia Agricultural Development Malaysia Education (III) National Electricity Board Power (VI) Malaysia Land Settlement Malaysia Agricultural Research and Extension National Electricity Board Power (VII) Malaysia Sewerage Malaysia Urban Transport (II) Malaysia Rural Development Malaysia Education (IV) Malaysia Highway (III) Total effective commitment /2 of which has been repaid 74.3 Total now outstanding Amount sold 37.4 of which has been repaid Total effective loan now held by Bank Total undisbursed /1 In addition, Malaysia is Guarantor for Loan 405-MA of February 26, 1965, to the Public Utilities Board in Singapore (amount being held by the Bank as of August 31, US$3.8 million). /2 Additional loans of US$22.0 million for an eighth power project and US$39.0 million for a national small-scale irrigation project were signed on Ausust 3, 1977, but were not effective as of August 31, 1977.

26 ANNEX II Page 2 B. STATEMENT OF IFC INVESTMENTS (AS OF AUGUST 31,1977) Type of Amount in US$ Million Year Business Loan Equity Total 1964 Malaysian Industrial Development Finance Development Ltd. (MIDF) Financing Tasek Cement Ltd. Cement Malayawata Steel Ltd. Steel Malayawata Steel Ltd. Steel India-Malaysia Textiles Ltd. Textiles Malaysian Industrial Development Finance Development Ltd. (MIDF) Financing Total gross commitments Less: repayments, sales, cancellations, terminations and write-offs Total investments now held by IFC Total undisbursed

27 ANNEX II Page 3 C. PROJECTS IN EXECUTION Loan No. 599 Education Project; US$8.8 Million Loan of May 23, 1969; Effective Date: September ; Closing Date: September 30, 1977 The Project provides US$8.8 million for the construction of technical, vocational, agricultural and general secondary schools and one teacher training college. All project institutions have been completed and are in satisfactory operation. US$2.0 million of project funds still remain undisbursed because of lower than expected project costs and the shift in the exchange rate. A proposal from the Borrower to utilize this balance to finance an additional project item to be transferred from the Second Education Project (Loan 810-MA) is being considered by the Bank. The disbursement of the balance is expected to be completed very shortly. Loan No. 672 Loan No. 885 Second Jengka Triangle Land Settlement Project; US$13.0 Million Loan of May 20, 1970; Effective Date: August 20, 1970; Closing Date: May 31, 1977 Third Jengka Triangle Land Settlement Project; US$25.0 Million Loan of March 30, 1973; Effective Date: June 22, 1973; Closing Date: December 31, 1981 The projects (including the First Jengka Triangle Land Settlement Project which has been completed) consist of clearing the forest, planting 62,000 acres of oil palm and 35,000 acres of rubber, and settling 10,000 families in the Jengka Triangle (State of Pahang). The Federal Land Development Authority (FELDA), responsible for the execution of the projects, operates efficiently, keeping high standards of planting and maintenance. Physical works under the Second Project (Loan 672-MA) have been satisfactorily completed. Under the Third Project (Loan 885-MA) clearing and planting have been completed. Delays of about six months in the planting program and in infrastructure development will result in similar delays in housing and settler intake. Standards of agricultural development under both projects are generally satisfactory. Loan No. 700 Fifth Power Project; US$20.0 Million Loan of July 16, 1970; Effective Date: September 29, 1970; Closing Date: April 30, 1977 The Fifth Power Project (the third stage extension of the Port Dickson Thermal Power Station, 3 x 120 MW) is complete with all three units in satisfactory operation. The loan was fully disbursed by the closing date.

28 ANNEX II Page 4 Loan No. 753 Second Telecommunications Project; US$18.7 Million Loan of June 21, 1971; Effective Date: August 18, 1971; Closing Date: February 28, 1977 Project execution is substantially complete. The two pending work items are likely to be completed by the end of Disb,ursements have been completed and the loan account has been closed. Loan No. 774 Sabah Ports Project; US$16.1 Million Loan of June 30, 1971; Effective Date: August 24, 1971; Closing Date: December 31, 1977 Work has been satisfactorily completed on the new berths at Kota Kinabalu and Sandakan. Slow progress in completing the access road to Sandakan delayed full use of the latter facilities until mid The new headquarters building has been occupied. The total and foreign exchange costs of the works are now estimated to be US$47.1 million and US$24.4 million respectively, about 1.5 times the appraisal estimate. Settlement of a large outstanding claim will delay the final account and the closing date of the loan has been extended by one year to December 31, Loan 799 Railway Project; US$16.0 Million Loan of February 11, 1972; Effective Date: April 17, 1972; Closing Date: March 31, 1978 All equipment and materials have been received. However, project completion has been further delayed due to the damage caused by heavy rains to the earth works on the Port Dickson line. Malayan Railway (MR) operations showed an all-round improvement during 1976 although the key efficiency indicators were well below acceptable standards, especially those pertaining to locomotive and rolling stock maintenance. As a result of the successful marketing drive, freight traffic during 1976 registered a recovery for the first time in five years and increased by 24% over 1975 levels. Passenger traffic continues to grow modestly. These results are expected to produce MR's first annual profit since Audit reports are two years in arrears due to the delay in submission of accounts to the Auditor General by MR. Efforts are being made to clear the backlog. Loan No. 810 Second Education Project; US$15.5 Million Loan of April 5 L 1972; Effective Date: July 7, 1972; Closing Date: December 31, 1977 The project is financing the establishment of a curriculum development center, science schools for the University of Penang, vocational schools, and an educational television system. Implementation has improved but is still about two years behind schedule mainly due to delays in the appointment of consultant architects in the approval of the designs and the campus plan and in the preparation of documents by the Public Works Department. Staff shortages in the project unit have also contributed to the delays. The delays are reflected in slow disbursements, but the problem is currently being addressed by the Bank and the Government. Project cost overruns are expected to be financed by the Government.

29 ANNEX II Page 5 Loan No. 851 Kuala Lumpur Urban Transport Project (Highway I); US$16.0 Million Loan of July 20, 1972; Effective Date: September 20, 1972; Closing Date: April 30, 1978 The project is designed to improve the transport facilities between Kuala Lumpur and the adjacent town of Petaling Jaya. It consists of improvement of about six miles of Federal Route 2, including detailed engineering, widening of the road, construction of interchanges and cycle tracks, and relocation of services. Civil works are about 11 months behind schedule, due to initial shortcomings in the contractor's project management. These problems have since been overcome and implementation is being accelerated. The project also includes a transport study for metropolitan Kuala Lumpur (completed), a national road maintenance study (draft final report completed), and detailed engineering of about 137 miles of Federal Route 1 (completed). Loan No. 880 Population Project; US$5.0 Million Loan of February 9, 1973; Effective Date: June 21, 1973; Closing Date: September 30, 1978 The civil works component continues to make progress. Out of,571 buildings, 127 have now been completed and another 101 are under construction. Tenders have been awarded for an additional 17 buildings. Until recently, the most delayed construction component has been the provision of 31 Family Planning Clinics. This has now been corrected and of the 31 clinics two are now in the stage of preparation of tender documents. Preparation of layout site plans has been started for another 12 clinics. The National Family Planning Board (NFPB) has selected a supplier for the computer to handle the management information system; a draft contract is being prepared. A review of the project was carried out by an external team of experts in April. Program performance in 1976 was even better than in 1975 when the number of new acceptors was the highest since Loan No. 908 Second Kuala Lumpur Water Supply Project; US$13.5 Million Loan of June ; Effective Date: August ; Closing Date: June 30, 1978 The project consists of the expansion of water supply facilities to meet increasing demand in Kuala Lumpur and the Klang Valley area. The first part of the project, comprising ordinary water works, was virtually completed in 1976, practically on schedule and within the cost estimate and most of the works are in operation. The contract for the construction of the Langat Dam was awarded late, in mid-1976, but construction is now progressing satisfactorily. The dam is expected to be completed by the end of 1979, more than two years behind schedule, and will cost about 25% more than originally estimated. However, no difficulties are foreseen in raising the additional funds required. The Selangor State Water Department, which is responsible for the Project, performs well in spite of staffing problems. Its financial management still needs some strengthening.

30 ANNEX II Page 6 Loan No. 931 Second Highway Project; US$19.5 Million Loan of August 22, 1973; Effective Date: October 25, 1973; Closing Date: March 31, 1980 Overall, the project is about 70% complete. Many of the earlier problems (land acquisition, eviction of squatters from right-of-way, poor contract management) which have delayed progress significantly have been largely overcome. The Kuala Lumpur-Seremban Expressway was opened in October Consulting services for various studies and detailed engineering have been completed. Construction costs have escalated sharply because of rapid inflation, and the total project cost is now estimated to be US$46 million, compared to an appraisal estimate of US$37 million. Loan No. 967 Johore Land Settlement Project; US$40.0 Million Loan of February 27, 1974; Effective Date: May 16, 1974; Closing Date: June 30, 1982 The project, implemented by FELDA, consists of planting 65,000 acres of oil palm and settling 4,400 families in the state of Johore. The agricultural development is progressing satisfactorily in line with the appraisal estimates. Delays in road development, due in part to coordination problems between FELDA and Kejora (a regional development authority) have delayed settler intake by up to two years. However, improvements are noticeable since construction of roads is now being contracted to private contractors, and since responsibility for coordination has been unified under the Ministry of Lands and Regional Development. Loan No. 973 Western Johore Agricultural Development Project; US$45.0 Million Loan of April 5, 1974; Effective Date: August 14, 1974; Closing Date: June 30, 1980 The project includes the construction of integrated drainage systems, roads, and agricultural installations required to accelerate agricultural development in the smallholder tree crop region along the west coast of the state of Johore. The project is still nearly two years behind the original schedule due to substantial redesign of project works in 1974 and an acrossthe-board Government hiring freeze in However, all major drainage basin systems have been designed and 10 of 11 basin contracts have been tendered. Work is essentially completed for force account works. Agricultural Development Centers, and one basin contract, and a second basin contract is considerably advanced. Agricultural developments in the project area have begun to demonstrate the beneficial effects of improved major drainage, in terms of tree crop replanting and accelerated intercropping.

31 ANNEX II Page 7 Loan No. 974 Third Education Project; US$19.0 Million Loan of April 5, 1974; Effective Date: June 26, 1974; Closing Date: December 31, 1980 The project assists the Government to develop technical training, preservice teacher training, and an East Malaysia educational television system. Implementation is about 12 months behind schedule due to earlier delays in the selection of sites for the Teacher Training Colleges (TTCs). Contracts have been awarded for 8 out of 13 project institutions. Construction began in early 1976 and most of the project institutes are scheduled for completion in late The estimated total project cost is about 25% over the appraisal estimate. The Project Unit is functioning satisfactorily. Loan No Sixth Power Project; US$45.0 Million Loan of July 25, 1974; Effective Date: October 22, 1974; Closing Date: June Loan No Seventh Power Project; US$35.0 Million Loan of December 17, 1975; Effective Date: March 10, 1976; Closing Date: June 30, 1981 Progress of the Sixth Power Project (275 kv transmission lines from Temengor to Papan and from Port Dickson to Malacca and extension of transmission and distribution system) and, the Seventh Power Project (the Prai Power Station extension, 3 x 120 MW) is generally satisfactory. Based on the Bank's recommendation, the Government has agreed to apply fuel surcharges to commercial and industrial consumers since mid-1975 and to provide NEB with equity of about US$200 million on a year by year basis to bridge NEB's financial gap. Maximum demand and energy sales for FY77 were 975-MW and 5,253 GWH respectively (15% above FY76 levels). Loan No. 1044, Keratong Land Settlement Project; US$36.0 Million Loan of October 3, 1974; Effective Date: January 9, 1975; Closing Date: June 30, 1983 The project, implemented by FELDA, consists of planting 55,000 acres of oil palm, settling 3,400 families, constructing two palm oil mills and establishing two urban settlements. The agricultural development is progressing satisfactorily. However, progress of urban development and of phasing in nonagricultural activities is still unsatisfactory. Lack of progress in the construction of village infrastructure and housing has caused delays in settler intake. The supervision mission's findings and recommendations for corrective measures were transmitted to the implementing agency, the Pahang Tenggara Development Authority and the Ministry of Land and Regional Development under which control of regional authorities and land development agencies has recently been unified. The development of the urban infrastructure is being reviewed by the Bank's Urban Projects Department.

32 ANNEX II Page 8 Loan No Agricultural Research and Extension Project; US$28.5 Million Loan of May 30, 1975; Effective Date: October 21, 1975; Closing Date: June 30, 1982 Project implementation continues to fall further behind schedule. However, the major bottleneck (terms and conditions of employment of internationally recruited scientists) was overcome with the Government's approval of "Terms and Conditions of Employment" on August 19, 1976 and acceptance by the Bank on September 22,1976. Project implementation has also been constrained by three changes in Directors since appraisal. However, the recent appointment of the former General Manager of MADA as Director General (June 1977) gives promise for the dynamic leadership required to strengthen and expand research activities under the project. This is the first indication that the project could show some progess. Action is also being taken to expedite procurement under local procedures and disbursements have started. Little physical progress can be expected by early Loan No Kuala Lumpur Sewerage Project; US$21.5 Million Loan of March 11, 1976; Effective Date: August 25, 1976; Closing Date: December 31, 1981 The project is the first stage ( ) of a 30-year master plan for the sewerage development in the Kuala Lumpur metropolitan area. It includes extension of sewers (about 70 miles of trunk and lateral sewers) to serve an additional population of 200,000 in Kuala Lumpur Federal Territory; establishment of a separate Sewerage Department within Kuala Lumpur City Hall with its own finance and accounting system; engineering and management consultants services; staff training; and preparation of pollution control measures for the Kuala Lumpur metropolitan area. The project is in its initial stage. It has started about six months behind schedule because of delays in engaging consultants but can be completed on time. Work is proceeding satisfactorily. Loan 1214 Second Kuala Lumpur Urban Transport Project; US$26.0 Million Loan of March 11, 1976; Effective Date: November 11, 1976; Closing Date: June 30, 1981 The main objective of the project is to increase the efficiency of the transport system in Kuala Lumpur. Public transport services will be improved while the use of private cars will be restrained. Although the project is essentially an urban transport project, it also contains important components and initiatives in other urban sectors such as squatter upgrading and development of new low-cost settlements. The main components are: (a) about 7 miles of new roads and 10 miles of road improvements; (b) traffic engineering and control schemes; (c) sites and services for about 1,400 households and 150 businesses; (d) upgrading of infrastructure services for about 2,100 households, and (e) feasibility and engineering studies for a Kuantan Urban Development Project and for a national sites and services program. Related policy measures include the introduction of minibus services, traffic priorities for high-occupancy vehicles and area road pricing. Progress is generally satisfactory.

33 ANNEX II Page 9 Loan No North Kelantan Rural Development Project; US$21.0 Million Loan of July 21, 1976; Effective Date: October 28, 1976; Closing Date: December 31, 1981 The project includes the Lemal Irrigation component which will provide drainage and flood protection to 30,000 gross ha of farmland and intensive irrigation to 12,000 net ha of paddy; construdtion of 190 km of rural roads throughout North Kelantan; 15 small irrigation schemes serving 1,300 ha of paddy; construction, rehabilitation and equipping of 25 Farmers Development Centers (FDC); and establishment of an effective agricultural extension service for Kelantan. The project start-up period has seen rapid implementation of the FDC component, good progress on the agricultural extension component with planning, staffing and preparation of equipment specifications proceeding on schedule and a welcome degree of cooperation between the Farmers Organization Authority and the Kelantan Department of Agriculture in joint planning of agricultural service buildings and field operations. Some delay in engineering of roads and irrigation works has occurred due to delays in approval of staff, but this problem appears to have been largely resolved. Loan No Fourth Education Project; US$35.0 Million Loan of November 18, 1976; Effective Date: January 14, 1977; Closing Date: June 30, 1982 The project is designed to improve the quality of primary schooling and to redress exisiting imbalances in the provision of primary education by providing additional classrooms in poverty areas, facilities for teacher training and one teacher training college in Sarawak. The project includes three new Industrial Training Centers and expansion of two existing ones. It includes also a study on community education in preparation of government investment in nonformal education. Project implementation began in January 1977 and appears satisfactory. Problems in the processing of disbursements have been resolved. Shortage of staff in the Project Unit is being remedied by the Government. Disbursements are expected to start on schedule in the first half of FY78. Loan No Third Highway Prolect; US$35.0 Million Loan of April 4, 1977; Effective Date: May 4, 1977; Closing Date: June 30, 1982 The main objective of the project is to improve the highway network in the East Malaysian State of Sabah through the reconstruction and upgrading of priority links and the development of the Public Works Department's maintenance capacity. A further objective is to protect road investments in Peninsular Malaysia through a pilot road maintenance and pavement strengthening program in three states. The project also includes an urban study of Kota Kinabalu in Sabah and a transport/railway study in Peninsular Malaysia. The project is still in the early stages of implementation. While good progress has been made in implementing the road program in Peninsular Malaysia, some delays have occurred in getting the Sabah road components of the project underway. Construction works on the East and West Coast Roads in Sabah started in July The consulting services for the studies are generally on schedule.