RESTRICTEDPCR NEP 13013

ASIAN DEVELOPMENT BANKThis Report has been prepared forthe exclusive use of the Bank

PROJECT COMPLETION REPORT

OF THE

AQUACULTURE DEVELOPMENT PROJECT[LOAN NO. 462-NEP(SF)]

IN

NEPAL

August 1989

CURRENCY EQUIVALENTS

Currency Unit

Appraisal(hay 1980)

Project Completion Report(May/June 1989)

- Nepalese Rupee (Rs)U. S. Dollar ($)

- Rs. 1.00 = $0.083$ 1.00 = Rs12.00

- Rs. 1.00 = $O.O.37$ 1.00 Rs26.90

ABBREVIATIONS

ADBN

Agricultural Development Bank of NepalAFO

Assistant Fisheries OfficerAR

Appraisal Report (of the Project)DOA

Department of AgricultureFA

Fisheries AssistantFAO

Food and Agriculture OrganizationFDC

Fishery Development CenterFDD

Fisheries Development DivisionFT

Fisheries TechnicianPTA

Fisheries Technical AssistantEA

Executing AgencyLCB

Local Competitive BiddingUNDP

United Nations Development Programme

NOTES

(i) The Fiscal Year (FY) of the Government ends on 15 July.(ii) In this Report, "$" refers to U. S. dollars.

PCR: NEP 033

PROJECT COMPLETION REPORT

OF THE

AQUACULTURE DEVELOPMENT PROJECT

[LOAN NO. 462-NEP(SF)]

IN

NEPAL

AUGUST 1989

Note: This report was prepared by a Bank Mission that visited Nepal from24 May to 8 June 1989. Members of the Mission were Dr. Harpal Singh(Project Economist/Mission Leader), Mr. William Bailey (AquacultureDevelopment Specialist/Staff Consultant), Mr. David A. Lucock(Financial Analyst/Staff Consultant) and Mr. Norman C. Pamintuan(Senior Clerk).

TABLE OF CONTENTS

Page

MAP: Project Location

(ii)

BASIC DATA

(iii)

I. PROJECT DESCRIPTION

1

A. Preparation and Appraisal

1B. Objectives, Rationale and Scope

1C. Implementation Arrangements

1

II. EVALUATION OF IMPLEMENTATION

2

A. Project Components

2B. Project Costs

8C. Implementation Schedule

9D. Procurement and Engagement of Consultants

9

E. Project Management

10F. Conditions and Covenants

10C. Performance of Executing Agencies

10H. Performance of the Bank

11I. Project Benefit

11

III. CONCLUSIONS AND RECOMMENDATIONS

12

A. Conclusions

12B. Recommendations

12

.1

16

30°

28°

= a, - --< -o;

:_ f

- 2' eno ,

3.-- -a

30°

28°

82°

840

86°

88

NEPAL

AQUACULTURE DEVELOPMENT PROJECT(Project Location)

/..

FAR WESTERN )REGION 5

ti :. 0 0 100 150 200C-'— \. MID-WESTERN /

REGION ! Scale Kilometers

(WESTERN REGION

Pokhara0 / '"Nepalganj

CENTRAL REGION

(

L E G E N D:

, EASTERN REGION

- ... Development Region Boundary

PROJECT AREA:

[_J inner Teral Districts

Teral Districts

£ Fishery Development Centers0

—. International Boundary(not necessarily authoritative)

26°

82°

84°

86°

88°

Nepal462-NEP(SF)Aquaculture DevelopmentKingdom of Nepal(i) Department of Agriculture

(Fisheries DevelopmentDivision)

(ii) Agricultural DevelopmentBank of Nepal

US$11.8 million

24 July 198028 July 1980

28 August 1980

22 January 1981

22 April 198102 September 1981One (1)

31 December 198615 July 1988Two (2)

1.0 percent per annum40 years10 years

(iii)

BASIC DATA SHEET

I. LOAN IDENTIFICATION

1. Country2. Loan Number3. Project Title4. Borrower5. Executing Agencies

6. Loan Amount

II. LOAN DATA

1. Appraisal

- Date Started- Date Completed

2. Loan Negotiations

- Date Started- Date Completed

3. Date of Board Approval

4. Date of Loan Agreement

5. Date of Loan Effectiveness

- In Loan Agreement- Actual- Number of Extensions

6. Closing Date

- In Loan Agreement- Actual- Number of Extensions

7. Terms of Loan

- Service Charge- Maturity- Grace Period

20 May 198030 May 1980

5.0 percent per annum15 years5 years

6 October 198202 February 1989

$ 9.043 million

$ 2.757 million

$ 5.000 million60 percent31 percent

(iv)

8. Terms of Relending to ADBN

- Interest Rate- Maturity- Grace Period

9

Disbursements

- Date of Initial Disb.- Date of Final Disb.- Amount Disbursed- Amount Cancelled

10. Local Costs (Financed)

- Amount (US Dollar)- Percentage of Total LCs- Percentage of Total Cost:

III. PROJECT DATA

AppraisalEstimate Actual

(in $ million)A. Project Cost

1. Foreign Exchange Cost

7 . 900

5 . 2562. Local Cost

8.400

8 . 307

3. Total Cost

$16 .300

$13 .563

B. Financing Plan

Appraisal Estimate ActualFE LC Total 1/ FE LC Total

1. Borrower Financed - 3.130 3.130 0.504 J 3.086 3.5902. Bank Financed 6.800 5.000 11.800 3.954 5.089 9.0433. Other External

Financing - UNDP 1.100 0.270 1.370 0.798 0.132 0.9304. Total 7.900 8.400 16.300 5.256 8.307 13.563

1/ Inclusive of physical and price contingencies.

./ ADBN claimed to have incurred this expenditure but failed to providedetailed account of the same. Since the loan account has been closed on02 February 1989, the amount in question will have been left to be met outof ADBN's resources.

0.034 0.0340.030 0.0300.063 0.0630.101 0.101

0.020 0.020

0.060 0.0600.053 0.0530.110 0.1100.059 0.059

0.035 0.035

Cv)

C. Cost Breakdown by Project Components

Appraisal Estimate ActualFE J Total j Total

(in $ million)

Department of Agriculture

1. Fisheries Dev. Centers 2.237 1.263 3.500 2.773 2.947 5.7202. Extension & Other

Services

(a) Extension Personnel

(i) AFO's - 16(ii) FTs - 20

(iii) FTA's - 50(iv) FA's -400

(b) Fisheries statistics Unit

ADBN Components

1. Fish Farms

(a) Rehabilitation of2,000 ha ofold Donds 0.631 1.386 2.017 0.439 0.956 1.395

(b) Construction of800 ha ofnew ponds 0.284 1.329 1.613 0.652 2.835 3.487

(c) Construction of25 private hatche-ries/nurseries 0.019 0.054 0.073 0.167 0.475 0.642

(d) Development of 50pilot pig-cum-fishfarms 0.028 0.038 0.066 0 0 0

(e) Development of 30pilot duck-cum-

fish farms 0.013 0.021 0.034 0 0 0

(f) Production credit 0.097 0.269 0.366 0.214 0.588 0.802

(g) Motorcycle for

ADBN staff 0.024 - 0.024 0.025 - 0.025

2. Fish Marketing 0.480 0.053 0.533 0.188 0.057 0.245

(vi)

Fellowship & Consultant Services

Appraisal Estimate ActualFE LC Total LC Total

(in $ million)

1. Fellowship Program

(a) In-service training -(b) Training Fellowship 0.296(c) Study Tours/

Group Training 0.040

2. Consultant Services

0.060 0.060 - 0.022 0.022- 0.296 0.322 - 0.322

- 0.040 0.030 - 0.030

(48 man-months) 0.408 0.072 0.480 0.446 0.110 0.556

Physical Contingencies(15 per cent) 0.684 0.719 1.403 - - -

Price Contingencies 2.659 2.888 5.547 - - -

Total 7.900 8.400 16.300 5.256 8.307 13.563

D. Project Schedule

(a) Date of Contract with Consultants -

(b) Completion of Engineering Designs -

(c) Civil Works Contract

Date of Award -Completion of Works -

(d) Equipment & Supplies

Date of First Procurement -Date of Last Procurement -Completion of equipmentinstallation -

(e) Start of Operations

Completion of tests and commissioning -Beginning of start-up -

9 June 1982

December 1982

19 February 198316 July 1988

22 December 198215 July 1988

October 1987

January 1988February 1988

Inception

SLA

Country Disb.

22 to 24 OneApr 81

4to9 TwoOct 82

14 to 20 FourApr 83

Country Disb

24 to 30 ThreeOct 83

Review 21 Mar to Three2 Apr 84

(vii)

IV. DATA ON BANK MISSIONS

No. ofName of Mission Date Persons

Appraisal 20 to 30 SixMay80

Country Disb. 3 to 17 TwoMay 84

Follow-up' 28 Apr to OneMission 1 May 85

Joint Evaluation 29 Sep to One11 Oct 85

SLA 3to8 OneDec 86

SLA 18 to 21 TwoMar 87

No. of SpecializationMandays of Members

66 Economist,Aquacul tureSpecialist,Country Officer,Counsel,Financial Analyst,(Consultant) &Fisheries CreditAnalyst (Consultant)

3 Loan Adin. Officer

12 FisheriesSpecialist & LoanAdm. Officer

4 Misison Chief,Project Engineer,Control Officer &Proj ect Specialist

3 Project Specialist,Control Officer &Technical Asst.

39 AquacultureSpecialist,Financial Analyst &Loan Adm. Asst.

2 Project Specialist &Control Officer

4 Financial Analyst

13 Financial Analyst

6 Financial Analyst

8 Livestock SpecialistLA Clerk

(viii)

No. ofName of Mission Date Persons

Review 18 to 26 ThreeNov 87

SLA 29 Aug to One14 Sep 88

SLA 4to19 TwoOct 88

PCR 22 May to Four21 Jun 89

No. of SpecializationMandays of Members

27 Livestock Specialist,Staff Consultant &Sr. Assistant

2 Livestock Specialist

32 Livestock Specialist &LA Clerk

96 Project Economist,Fisheries Specialist,Financial Analyst, &LA Clerk

I. PROJECT DESCRIPTION

A. Preparation and Appraisal

1. A Bank Project Identification Mission visited Nepal in December 1978and identified an aquacu1ture project for possible Bank assistance. A Fact-Finding Mission which visited Nepal during 6-21 January 1979 finalized the scopeof work and terms of reference for a technical assistance grant for projectpreparation. The technical assistance (No. 290) was approved on 24 April 1979.A team of consultants from Aquatic Farms Ltd. of Hawaii, USA, selected by theBank to prepare the Project feasibility study, began its work in October 1979and submitted its final report to the Bank in May 1980. An Appraisal Missionvisited Nepal from 20 to 30 May 1980 to examine the Project (see Appendix 1 forChronology of Project Processing). Except for some minor deviations, theAppraisal Mission found the Project to be feasible and attractive, besides beingaccorded high priority by the Government.

B. Objectives, Rationale and Scope

2. The objective of the Project was to accelerate the development ofwarmwater aquaculture in 16 Terai districts of the Western, Central and EasternDevelopment Regions of Nepal. By increasing fish production, the Project was tohelp meet the needs for animal protein in the national diet and increaseemployment opportunities and incomes for fish farmers, fish harvesters, and otherindividuals associated with the fisheries subsector.

3. It was realized that Nepal had many of the elements considerednecessary for rapid expansion of fresh water fish production, including extensivewater resources, under utilized fish ponds, large numbers of interested farmers,available technology, and a substantial domestic demand for fish. The Projectwas, therefore, designed to overcome the remaining constraints, i.e., the lackof availability of quality fish fingerlings in sufficient quantities and theabsence of a broad organizational and institutional base to exploit thepotential. The Project, accordingly, included: (i) strengthening of five FishDevelopment Centers (FDCs); (ii) strengthening of extension, training andresearch; (iii) provision of credit for the rehabilitation of old ponds,construction of new ponds, establishment of fish hatcheries/nurseries,introduction of fish-curn-livestock rearing, and initiation of better marketingfacilities; and (iv) provision of consulting services and fellowships.

4. At full development, the Project was expected to produce anadditional 3,930 mt of fish for domestic consumption, and additional income andemployment to improve the economic and social status of over 10,000 participants.

C. Implementation Arrangements

5. The Project included two Executing Agencies (EAs), i.e., theDepartment of Agriculture (DOA) and the Agricultural Development Bank of Nepal(ADBN). DOA was responsible for implementing the components relating to thestrengthening and expansion of FDCs and conducting of training, extension andproduction research. ADBN was responsible for advancing credit forrehabilitation of old ponds, construction ofnew ponds, setting up of hatcheries,and establishment of fish-cum livestock enterprises and fish marketing. Each

2

of the EAs was to establish a Project office headed by a full-time ProjectManager, to implement their respective components and prepare progress reports.A Coordination Committee chaired by the Director General of DOA was to be setup to resolve policy issues and provide guidelines, ensure coordination, andarrange Project monitoring. Under the technical assistance, a Project Advisorand three other experts were appointed by the Bank to assist the EAs in Projectimplementation.

II. EVALUATION OF IMPLEMENTATION

A. Project Components.

1. DOA

(a) Hatchery and Nursery Facilities

(i) Design and construction of new hatcheries andupgrading of existing hatcheries.

6. The Project provided for the construction of four new hatcheries atthe FDCs in Tarahara, Fatehpur, Hetauda, and Bhairawa and upgrading of theexisting hatchery at Janakpur. In fact, new hatcheries were constructed at allthe five sites. Although, the design of breeding, incubation, and holdingfacilities was technically sound, the development of water supplies to make thehatcheries fully functional was yet to be completed at Bhairawa, Janakpur, andTarahara. Old hatcheries were also upgraded and these helped meet the shortfallin hatchling production from the new hatcheries. The failure to complete thenew hatcheries before the end of the project has, however, had only a limitedadverse impact on the achievement of target goals in fry production, since themain constraint to fry production is not so much the lack of hatchlings, butlimitations in nursery pond space and seasonal demand by the farmers.

(ii) Construction of New Ponds

7. New ponds were to be constructed at Fatehpur, Tarahara and JanakpurFDCs. These included additional nursery ponds of an improved design and newbrood stock ponds at all the three FDCs and a number of experimental ponds atJanakpur to support production oriented research. In a deviation from theProject asappraised, new ponds have also been constructed at Hetauda to increasebroodstock and nursery space as well as to support experiments. New ponds havealso been constructed at Lahan Nursing Center, along with fencing and buildings.The Lahan site was developed to support Fatehpur FDC since lands adjacent toFatehpur FDC were too sandy for pond development. The new ponds constructed inthe Project have served the Project as planned. The additional ponds at Hetaudahave been constructed primarily by modifying the problem ponds and have improvedthe potential capability of the center to produce fingerlings.

3

(iii) Construction of Pi and Duck Houses and Pens

8. The Appraisal Report (AR) proposed the construction of duck and pighouses at all the five FDCs to demonstrate the advantages of duck and pigintegration with fish farming and to produce ducklings and piglets fordistribution to the fish farmers. The facilities were constructed as plannedat all centers with only one minor deviation: no pig facilities wereconstructed at Janakpur. The DOA affirmed that due to known religious objectionby the people in the area, they had never planned to construct pig houses there,and inclusion of the pig houses in the Project was a mistake. This deviationhad little effect upon the outcome of the Project since similar facilities werecreated at the four other centers.

(iv) Improvement of Water Suiply

9. The Project provided for the full development of water supply systems forall of the FDCs except at Bhairawa. Though water supply work was undertakenunder the Project, none of the FDCs have been able to solve the problemcompletely. Even the Bhairawa FDC developed a problem with water supply duringProject implementation. The unsatisfactory level of achievement in this respectwas largely due to the deletion at Appraisal of the position of aquacultureengineer consultant, along with inadequate civil engineering and designcapability within DOA. The effects of continuing water problem have been thedelay in the operation of new hatcheries and a reduction in the number ofbroodstock at the Centers. It has also lowered the intensity of fish culturein experimental ponds, limiting the scope of applied research.

(v) Production/Distribution of Fingerlings

10. The envisaged and actual production (distribution) of fingerlingswere as follows:

Table 1: Targeted and Actual Production of Fingerlings at the FDCs

FDCs Appraisal Target Actual Achievement (1986/87)(million nos..) (million nos..)

Janakpur 3.79 1.843Fatehpur 0.76 0.902Hetauda 1.02 1.414Bhai;awa 2.21 2.293Tarahara 1.74 1.320

Total 9.52 7.772

11. The shortfall in fingerling production/distribution is largely dueto a compressed seasonal demand for fingerlings. Some of the farmers wait forthe rains to fill their ponds, while those with perennial supply of water eitherobtain fry from other sources or are not motivated to take fry early. Whendemand for fingerlings increases with the onset of the monsoon, the turnover offingerlings from the ponds cannot keep pace with the sudden spurt in demand.

4

12. To overcome the seasonal concentration of farmer demand and yet allowits hatcheries to continue operations, the DOA rightly changed its policy ofnursing the hatchlings up to fingerlings before selling to the farmers, andinstead decided to distribute hatchlings to private nurseries, which in turnreared them up to fingerlings and sold them to the farmers. This method ofdecentralizing fingerlings production in nurseries owned by the private sectorhelped produce more fingerlings, provided fish sale points which were moreconvenient to farmers, and enabled the Project to meet a much larger demand forfingerlings than would have been possible if DOA had reared by itself all thehatchings up to fingerlings stage.

(b) Training

13. The Project provided for the training of 20 Assistant FisheriesDevelopment Officers (AFDOs), 25 Fisheries Technicians (JTs), 60 FisheriesTechnical Assistants (JTAs), and 500 Fisheries Assistants (FAs). The Projectalso provided for in-service training of 60 ADBN staff in technical aspects offisheries production. For this purpose, the Project financed the establishmentof a training center at Janakpur. The dormitory facilities at Janakpur were,however, still incomplete and hence were not being used. The target at Appraisaland the achievement are shown below;

Table 2: Targeted and Actual Achievement in Training

Categories of Staff Appraisal Target Achievement(No. of Staff) (No. of Staff)

Asst. Fisheries Development

20Officers (AFDOS)Fisheries Technicians (FTs)

and Junior FisheriesTechnicians (25 + 60)

85

243Fisheries Assistants

500

537Private Breeders

121ADBN Staff

60

48

Total

665

994

14. While overall training targets were exceeded, ADBN preferred totrain their staff at their own training center instead of the DOA center atJanakpur. Under the Project, ADBN gave training to 495 staff at their trainingcenters, where DOA also provided some technical support. The quality andduration of training imparted in the Project needs to be reviewed and thetrainees, after they leave the Center, need to be followed-up for subsequent on-the-job support.

5

(c) Extension

15. The Project envisaged the strengthening of extension by financingone Fisheries Extension Officer (FEO) at each of the five FDCs, one AssistantAFDO in each of the 16 Project districts, 70 JTs/FTs and JTAs/FTAs, and 400 FAs.As against this, the actual appointments comprised five FEOs (100 per cent), 16AFDOs (100 per cent), 70 FTs/FTA5 (100 per cent) and 133 FAs (33 per cent).There was, therefore, a serious shortfall in the lowest - - and an important --tier of extension service, i.e., at the level of FAs in the villages. This wasbecause, although accepted at Appraisal, the Government was not convinced of theutility of appointing activity-specific FAs for each of the agriculturesubsectors in the same village.

16. Under the Project, farm demonstration units have been used verysuccessfully. Selected farmers were given inputs free of cost and were able torealize the benefits and proper management without any accompanying financialrisk. Since the number of hatchery and nursery operators was relatively small,they received considerable individual attention, which largely accounted for therapid extension of fry production in the private hatcheries/nurseries.

17. Extension staff, however, still need further training to observe andrecognize the differences in production characteristics of individual ponds andgain the experience to be able to adjust management recommendations accordingly.To some extent, this is being done already, but more training and experience arerequired. Standard recommendations have not always been appropriate to specificfarm pond situations and have led in some cases to operational losses.

(d) Production Research

18. The Project envisaged the strengthening of research activities atJanakpur FDC by providing staff, experimental ponds, a laboratory, a library,duck and pig houses, staff housing, and related equipment and supplies. Researchon best stocking densities, species combination in polyculture ponds,supplemental feeding, and fish-cum-livestock culture activities had beeninitiated. Some research results have led to the determination of appropriatestocking ratios. This is a good and practical beginning. Work on manytechnologies appropriate to varying resource constraint conditions of fishfarmers, however, remains to be undertaken to test and develop the technologiesfor adoption.

2. ADBN Component

(a) Rehabilitation of Existing Ponds

19. As against the target of advancing loans to 5,700 fish farmers forrehabilitating 2,000 ha of existing ponds, ADBN advanced loans to 2,638 farmersto rehabilitate 1,075 ha of ponds. The achievement, therefore, constituted only54 per cent in terms of area and 46 per cent in terms of number of fish farmers.The main reasons for the shortfall were that many of the existing ponds wereowned by religious bodies who were reluctant to lease out ponds for fishingpurposes on religious grounds. In the majority of the remaining cases, pondsowned by village panchayats and leased to the fishermen were not acceptable to

6

ADBN as a collateral for lending to the lessees. In the initial years of Projectimplementation, the short duration of the leases (often two years) beinginconsistent with the long-term nature of investment and repayment schedules alsoacted as a constraint to ADBN's financing of this sub-component.

(b) Construction of New Ponds

20. The Project envisaged the development of 800 ha of new ponds of anaverage size of 0.35 ha each (a total of 2,300 farmers) by financing pondconstruction, purchase of fingerlings, construction of nursing cages (happas),and purchase of nets. As against these estimates, ADBN advanced loans to 3,980farmers for a total fish pond area of 1,448 ha and thus exceeded the appraisaltargets by 81 per cent in area and 73 per cent in the number of farm familiesassisted. The achievement could have been even higher had labor for excavationworks not been in short supply or had appropriate earth digging and movingequipment been available.

(c) Development of Private Hatcheries/Nurseries

21. The Project provided for the financing of 25 hatcheries/nurseriesin the private sector. The credit was for pond construction, fencing, andpurchase of brood stock, nets and other hatchery/nursery facilities. Comparedwith these estimates, ADBN actually financed 75 private hatcheries/nurseries with420 ponds covering an area of 60 ha. By 1986/87, 40 private hatcheries/nurseriesproduced 5.59 million fry compared with an end-of-Project target of 2.50 million.

(d) Fish Culture-cum-Pi g Rearing (FCP) andFish Culture-cum-Duck (FCD) Raising

22. The Project envisaged the financing by ADBN of 50 FCP and 30 FCD.ADBN has kept no record to confirm or deny the same. Of all the productivecomponents, Project design in respect of these enterprises was rather weak. Thedemand for pig outside the major cities was limited, piglets were costly, andcommercial fattening of piglets on purchased feedstock was not attractivefinancially. Similarly, in the case of duck raising the number of ducklingsavailable from the FDCs was limited, the productivity of available ducks was low(about 100 eggs per year), and the marketing of duck eggs and duck meat waserratic and undependable. Not enough extension work was initiated in the Projectfor these enterprises. A gross-margin budget of fish-cum-duck enterpriseprepared by the PCR Mission casts some doubt about the financial feasibility offish-cuni-duck enterprises unless a low-cost feeding regime becomes practicable(see Appendix 2).

(e) Production Credit

23. Production credits were given as the last tranche of investmentlending. Since 6,618 farmers received investment loans, it is presumed that thesame number received production credits. ADBN maintained no separate recordsto verify this. The AR projected that 6,000 farmers would receive productioncredits; this target was probably exceeded. However, farmers met by the PCRMission stated that the third (final) installment of their loans (mainly workingcapital) was often late in delivery.

7

(f) Fish Marketing

24. The Project provided for the financing of 15 three-wheel deliveryvans to private fish contractors for collection and transportation of fish fromthe producers to the markets. ADBN did not finance this as these vans wereconsidered unsuitable for use on rough rural roads/tracks. Consequently, ADBNreported a lack of demand for credit for such purposes. The Project alsoenvisaged the financing of construction of a fish collection terminal involvingprimarily the construction of an ice plant and chill room for storing ice atJanakpur for receiving, storing and sending fish to markets. ADBN did notfinance the same as ice plants already existed in Janakpur and there was nodemand for constructing a new facility. As envisaged, ADBN did finance an iceplant and a cooling chamber in Kathniandu and another ice producing plant atButwal (near Bhairawa). Only a part of their capacity, however, was beingutilized for fish storage as the plants had few linkages with fish farmers andother transporters and collectors of small fish. Paradoxically, therefore, whileADBN reported absence of demand for lending for fish marketing facilities, therewas a general perception that current marketing and transport facilities for aperishable such as fish were inadequate. Accepting the need for providing bettermarketing facilities for fish farmers, the PCR Mission considers that ADBN, incooperation with DOA, should provide the necessary assistance to the potentialentrepreneurs in the private sector to undertake necessary marketing andtransportation operations in the fishery subsector.

3. Consultant Services and Fellowships

(a) Consultant Services

25. The Project envisaged consultant services of 48 man-months; 52 man-months were actually utilized. The services of the Fisheries Statistics Advisorwere increased by four man-months to complete an impact assessment of theProject. While the consultants were useful, the PCR Mission considers that theyshould have taken more initiative to correct water supply deficiencies at theFDCs and could have been more helpful in the development of economic fish culturealternatives as well as in designing, planning and investigating fish-cum-livestock culture techniques. The Project Advisor recruited under the Bank'sTechnical Assistance did not prove very useful. According to DOA, this Advisordid not have adequate qualifications and experience in fisheries development.

(b) Training Fellowships

26. Of the 229 man-months of overseas training fellowships for DOA andADBN staff financed by a UNDP grant, 183 man-months have been utilized. Twofellows already in Thailand will use up the balance of 46 man-months offellowships. Many of these fellows were under only temporary employment and therisk of them leaving the Project was not guarded against by a bonded period ofemployment on their return. The Government is cautious in offering permanentemployment to its project-tied employees. In view, however, of the SecondAquaculture Project (No. 792-NEP(SF)) inoperationwith the implementation periodextending upto December 1992, the employees trained overseas under the captionedProject could be offered at least longer term employment and be bondedaccordingly.

8

B. Project Costs

1. Overall Assessment

27. As against the total Project cost of $l6.300 million estimated atAppraisal, the actual expenditures amounted to $13.563 million. There was areduction of 17 per cent in total Project cost, 1 per cent in local cost, and33 per cent in foreign exchange cost (see Appendix 3 for details). Major costoverruns of 23 per cent for new ponds (increased areas) and 400 per cent forhatcheries and nurseries (increased numbers) were more than offset by underrunsof 61 per cent for the rehabilitation of old ponds (reduced area), 74 per centfor fish marketing (not implemented), and 32 per cent in the fellowships andconsultant services components. The actual Project costs by sources of financingand by component are shown in Appendix 3, Table 2, and a summary of projectedand actual financing by source is shown in Table 3 below.

Table 3: Prolect Financing : At Appraisal and Actual

($ '000)

At Appraisal Actual Deviation of ActualSource Over Appraisal

(^ overrun; - underrun)

Local Foreign Total Local Foreign Total Local Foreign Total

1. Bank 5,064 6,736 11,800 5,089 3,954 9,043 + 25 -2,782 -2,757 -23.42. UNDP 206 1,164 1,370 132 798 930 - 74 - 366 -440 -32.13. ADBN 1,210 0 1,210 506 504 1,010 -704 + 504 -200 -16.54. Govt. 1,920 0 1,920 2,580 0 2,580 +660 0 +660 +34.4

Total 8,400 7,900 16,300 8,307 5,256 13,563 - 93 -2,644 -2,737 -16.8

2. Utilization of Bank's Loan

28. The Bank approved a loan of $11.8 million, of which the utilizationamounted to$9.043 million. The main reasons for the savings of $2.757 millionwere that out of an amount of $1.57 million provided for working capital, only$1.13 million was actually disbursed due to over-estimation of cost ofreimbursable working capital. Second, ADBN expenditures and claims were lowerfor fish farms and fish marketing (see Appendix 4).

3. Utilization of UNDP Grant

29. As envisaged at Appraisal, UNDP was to provide a technical assistancegrant of $1.37 million, but three successive annual revisions reduced this amountto $1.058 million. As of 31 December 1988, $0.93 million had been spent and$O.128 million was being held to cover the costs of ongoing fellowships whichwill be well within the balance available. The fellowships, and consultantservices, which UNDP believes the Bank frequently over-budgets, reported savings.The cost details are provided in Table 2 of Appendix 3.

9

4. The Government's Contribution

30. The Government provided $2.58 million to the Project compared withthe Appraisal estimate of $1.92 million. This increase was due to over-runs incivil works costs and the exclusion of claims from the Bank working capitalreimbursement of items of expenditure such as salaries. It was not clear toDOA from the Project Agreement whether such operating expenses, which clearlyhad no foreign exchange component, were eligible for reimbursement.

5. ADBN's Contribution

31. ADBN contributed $1.01 million of its own funds to the Projectagainst the Appraisal estimate of $1.21 million. The reduction was mainly dueto lesser amounts and numbers of loans given for working capital for fish farmsand fish marketing enterprises.

C. Implementation Schedule

32. The Project implementation period was to be five years from the dateof loan effectivity. The loan became effective in early September 1981 andimplementation continued till July 1988, almost seven years. Implementation ofmost of the project components such as upgrading of FDCs, procurement,recruitment of consultants, and rehabilitation of old ponds and construction ofnew ones was behind schedule as compared with what was envisaged at Appraisal.Almost all the major Project components have, however, now been completed. Onlyminor activities such as civil works in buildings and fellowship training werenot fully completed by the loan closing date in February 1989. Appendix 5 showsthe envisaged and actual Implementation Schedules.

D. Procurement and Engagement of Consultants

1. Purchase of Equipment

33. All materials and equipment financed under the Bank's loan wereprocured in accordance with the Bank's Guidelines for Procurement. A list ofgoods procured under different modes of procurement and by country of origin isgiven in Appendix 6. The Suppliers' performance was generally acceptable thoughsome difficulty was encountered with misinterpretation of specifications in afew cases. By the time the failure to meet specifications was discovered in thelatter (after shipment, transport and clearance by Customs) the 90 per centadvance payment had been made months before, making it difficult to convincesuppliers to rectify deficiencies. Generally, however, most of the itemsprocured were received in good condition and as per specifications.

2. Civil Works Contracts

34. Civil works, being small and scattered, were executed by localcontractors selected through LCB. The contractors in their anxiety to win thebids quoted low prices and hence in all FDCs either did not complete the workand abandoned the same, or did work which was of poor quality. Labor shortages

10

also affected the pace of civil works. Lengthy procedures of approval andshortages of technical and engineering staff also hampered the progress of civilworks as designed at Appraisal.

3. Engagement of Consultants

35. The Consultants were engaged in accordance with the Bank Guidelineson the Use of Consultants. No problem was encountered in their recruitment.The DOA, however, suggested that it would be better if the recipient agency (theExecuting Agency) be consulted at the appropriate stage in the shortlisting ofthe Consultants. The existing Guidelines of the Bank, however, do not requiresuch consultations.

E. Project Management

36. The Project included two Executing Agencies (EAs) - - the DOA and theADBN. As envisaged, a Project Coordinating Committee was set up and functionedreasonably well. The Project office, originally located at Janakpur, wastransferred to Kathmandu in 1987. While at Janakpur, the Project Manager oftenneeded to travel to Kathmandu to follow up on Project-related matters. Further,with most of the Project staff being temporary, there had been a high turnoverand the staff which still remains suffers from low morale. Coordination betweenthe field staff of DOA and ADBN, though satisfactory, could be further improved.No separate Project Management Office (PMO) for the Project was established inthe ADBN.

F. Conditions and Covenants

37. The loan became effective seven months after signing the LoanAgreement, instead of the expected 90 days. This was due to delays in theexecution of the subsidiary loan agreement between the Government and ADBN andthe time taken by the Government in the appointment of the Project manager.

38. The status of compliance with major loan covenants is given inAppendix 7. The loan covenant stipulating that the Borrower shall cause the DOAwithin three.years of loan effectivity to study the organization and structureof the Fisheries Development Division (FDD) and propose measures to strengthenthe sameis still to be fully complied with. The requirement for the EAs tosubmit quarterly progress reports to the Bank has not always been fulfilled ontime. The covenants relating to the submission of certified audit reports withina specified time after the end of each financial year were also not fulfilledby either EA. Most of the other Project-related operational covenants have beencomplied with.

G. Performance of Executing Agencies

1. Department of Agriculture

39. FDD of DOA has endeavored to carry out its job in an efficient andtechnically appropriate manner. FDD has proven capable in the technical areaof hatchery and nursery operation and has successfully transferred thistechnology to the private sector. FDD has also met goals in conducting training

11

courses and carrying out some appropriate research. FDD has, however, not alwaysbeen able to meet the deadlines for construction of FDCs within the Projectperiod and has proven inexperienced in ensuring adequate water supplies, whichare an essential input in fish production at the FDCs. Overall, the performanceof FDD is considered good and FDD has acquired the experience and capabilityuseful for future development of the sub-sector. The Appraisal assessment ofthe capabilities of the DOA was, therefore, reasonably accurate, although theservices of an aquaculture engineer (consultant) would have helped much to remedythe water deficiency problems.

2. Agricultural Develoiment Bank of Nepal

40. ADBN adequately met its commitments under the Project. It appointedthe necessary staff to undertake fisheries lending under the Project, althoughit did not appoint a Division Chief as a full-time Project Manager as recommendedin the AR. In view of the large number of projects in which ADBN is a co-executing agency, this was not a realistic expectation.

41. The loan recovery rate has remained at about 61 per cent for the pastfour years (see Appendix 8). The introduction of interest rate subsidies of 5per cent since July 1986 does not seem to have improved loan recovery performancealthough it guarantees a portion of interest income to ADBN (see para 1, Appendix8).

42. All of ADBN's fisheries lending has been through the Project. Thismeant, in effect, that separate accounts were kept, as required by the Project.The approval of the Second Aquaculture Development Project (Loan No. 792-NEP(SF))in 1987 and its over-lapping with the first has lead to some problems indifferentiating lending/expenditures between the two Projects. Informationrequirements and procedures at ADBN's head office need review, as not all datawere readily available to the PCR Mission. These observations hold good for ADBNin general, as noted in a recent report on an In-Depth Review of the AgriculturalDevelopment Bank of Nepal, commissioned under the Fifth Agricultural CreditProject (Loan No. 831-NEP(SF)).

H. Performance of the Bank

43. To assist in the implementation of the Project, the Bank fieldedmissions as described in the Basic Data Sheet. The PCR Mission considers Banksupervision as satisfactory although UNDP and the EAs stated that the Bank didnot provide timely progress reports on the use of fellowship funds and theactivities of the consultants.

I. Prolect Benefit

44. Some of the deviations and difficulties in implementationnotwithstanding, the Project is widely perceived to be a success. Against anincremental target of rehabilitating old ponds and constructing new pondscovering a total area of 2,800 ha, the actual achievement had been slightlylower, at 2,583 ha, although new pond area was about twice the expectations atAppraisal. Further, while the Project envisaged influencing an additional area

12

of 400 ha with extension benefits, an area of 1,170 ha was actually benefitedby fingerlings distribution produced under the Project. Furthermore, as againstthe Appraisal expectation of an average yield of 1.3 mt of fish per hectare, theactual achievement is estimated at 1.57 mt. As a more direct measure of success,the Project resulted in an annual incremental fish production of 4,052 mt in1987/88 as against the Appraisal expectation of 3,930 at at full development.As a result, and also due to some increase in fish production in the country innon-Project area, the per capita consumption of fish in Nepal is estimated tohave increased to 630 gas per annum in 1986/87 as compared with the target of430 gms given in the AR.

45. The Project has also helped, as expected at Appraisal, in removingconsiderably the major constraints of lack of high-quality fingerlings insufficient quantities by producing and distributing, both in the private and thepublic sector, 13.36 million fingerlings as against the Project target of 12million. As explained earlier, the shortfall in fingerling production by DOAwas more than made up by the greater than expected achievement in the privatehatcheries/nurseries financed under the Project.

46. Of no less importance, the Project has created the infrastructureas well as generated the staff capability and farmers' enthusiasm to build andimprove the quality and quantity of fish production in future.

III. CONCLUSIONS AND RECOMMENDATIONS

A. Conclusion

47. The Mission considers the Project a success. The Project hasincreased fingerling production, encouraged the setting-up of hatcheries/nurseries in the private sector, and successfully transferred the fish rearingtechnology to the farmers. The Project has strengthened and createdinfrastructure at the FDCs to produce and distribute fingerlings, continueresearch, and provide training to staff and fish farmers. It has also helpedin strengthening staff confidence and capability. However, some aspects needsfurther attention to better develop the subsector. These include the temporarynature of most of the staff appointed and trained in the project, lack ofengineering expertise, inadequate decentralization of decision making, deficientcoordination between DOA and ADBN at the field level, and lack of marketingsupport commensurate with production increases.

B. Recommendations

1. Project Related

a) Fish-cum-Pig and Fish-cum-Duck Enterprises

The technical as well as financial feasibility of fish-cum-pig and fish-cuni-duck rearing should be further investigatedbefore farmers are encouraged to invest in these enterprises.The promotion of this component should wait until the

13

enterprise combinations have been adequately field-tested.The involvement of the Department of Livestock Services shouldbe sought in investigating the technical and economicfeasibility of these enterprises.

b) Shift of Emphasis to Low-Cost Fish Production

So far, the emphasis in the generation of fish rearingtechnology and its subsequent dissemination to fish farmershas been on a few chosen technologies which are largely basedon purchased inputs produced off the farm. Fish farming inNepal is undertaken by poor people under a wide spectrum ofresource constraint. Often a farm family tries to minimizethe use of purchased inputs and maximize the use of farm-produced inputs. It is therefore recommended that futureresearch on fish culture should emphasize the use of low-costfarm produced/supplied feed inputs such as manure and farmwastes. It should also focus on best stocking ratios toincrease the farm family's income and welfare under thisregime.

c) Water Supply at the FDCs

The resolution of water supply problems at the FDCs should begiven a high priority. Specifically, there should be aninvestigation of ground-water resources at the FDCs at Hetaudaand Bhairawa. Alternative sources should also be explored andthe most appropriate source should be developed. In choosingthe sources of water, attention should be given to quality ofwater as well as quantity and economy.

d) Fish Narketin

Having developed a base of fish farming technology and havingachieved substantial increases in aquaculture production, astage has now come when the constraints of marketing, i.e.,fish collection, transportation, storage and retailing, canno longer be overlooked. It is recommended that aninvestigation should be made into appropriate methods ofimproving fish storage, transportation and marketing. Methodsshould be developed to support fish farmers in remote areasas well as near the marketing centers. This is not to suggestthat Government should take over these tasks, but rather thatthe Government should support the private sector in theseendeavours. A possible mechanism might be to establish, onthe pattern of fresh milk, fish pick-up routes for fishproducers and consumers.

14

e) Short-Term Lending by ADBN

In order to decentralize private enterprises in fish marketing,ADBN should be encouraged to provide more short-term andsmaller sized loans for collection and transport of fish tothe markets in areas where there is a demand for such servicesand where such enterprises are indeed profitable.

f) Re-Designing of Reporting Systems at ADBN

A review and improvement of the data reporting requirementsin the Head Office as well as the branches is needed so as toprovide better, detailed and relevant data that is morecomprehensive and useful for Project monitoring and financialand management purposes. This is expected to be accomplishedthrough the improved management information system which isbeing supported under the on-going technical assistance onInstitutional Strengthening of ADBN (TA No. 870-NEP), piggy-backed to the Fifth Agricultural Credit Project (Loan No. 831-NEP(SF)).

g) Overseas Training Fellowships

It is recommended that necessary funds needed for financingthe remaining on-going fellowships be transferred as soon aspossible to technical assistance grant available under theSecond Aquaculture Project (Loan no. 792-NEP(SF)), subject toan evaluation of the needs and the balance of grant funds stillremaining unutilized under the captioned Project (Loan No. 462-NEP(SF)) be cancelled and the UNDP account closed.

2. General

(a) Review of Reporting and Auditing Requirements by the Bank

The covenants relating to the periodical submission of progressreports and audit reports are seldom complied with in a timelymanner. There are difficulties in sending certified copiesin English of audit conducted by the Auditor General of Nepal.It is recommended that the need, frequency and form in whichsuch reports are required by the Bank is critically reviewedtaking into consideration, inter alia, their actual use in theBank and the capability of the Executing Agencies to complywith the same.

15

(b) Provision of Engineering Ex pertise in AgriculturePro ects

It is recommended that the design of subsector developmentprojects such as those in aquaculture, livestock, horticulture,crops, etc., should provide for necessary engineering and civilworks expertise, in addition to the usual technical andadministrative staff inputs provided in the projects. Oftenthis is overlooked, resulting in loss of time andunsatisfactory construction and installation.

(c) Coordination Between ADBN and other Executing Agencies

As ADBN is a co-executing agency in most of the projects inthe agriculture sector, serious thought should be given todevising, establishing and strengthening means of coordination,consultation and reporting between the ADBN and the otherexecuting agencies such as DOA. One possible method could beto designate a senior officer from each of the two EAs to actby rotation as Project Director while the other acts asAssociate Project Director with jurisdiction over the Projectoffices in the two EAs.

(d) Monitoring and Review of the Need for Subsidies

Interest subsidy on loans advanced by ADBN to fisheriesenterprises were introduced during the Project period. Aproposal has also been submitted to the Government to extendsubsidies on capital investment as well. Such subsidies arein-vogue in other areas of rural lending. Considering theBank's known opposition to subsidies, it is recommended thatthe Bank reviews in a comprehensive, rather than in a projectand/or commodity-specific project framework, the justificationfor and the effect of such subsidies, if necessary throughtechnical assistance.

16

APPENDIXES

Appendix

Pane

1 Chronology of Project Processing

17

2 Budget for a Typical Fish-cum-DuckEnterprise

18

3 Detailed Project Costs - Appraisal and Actual

19

4 Allocation and Utilization of Loan Proceeds

22

5 Implementation Schedule

23

6 List of Items Procured Under DifferentModes of Procurement

25

7 Status of Compliance with Major Loan Covenants

27

8 ADBN's Lending Operations Under the Project

31

17

Appendix 1 I

CHRONOLOGY OF PROJECT PROCESSING

- December 1978

6- 21 January 1979

January 1979

24 April 1979

6 October 1979

May 1980

20 - 30 May 1980

28 August 1980

22 January 1981

2 September 1981

- Bank's Project Identification Mission

- Bank's Fact-Finding Mission

- Government's Request to the Bank forTechnical Assistance

- Bank's Approval of Technical Assistance

- Commencement of Project Feasibility Study byAquatic Farms, Ltd., Hawaii, USA

- Submission of Consultant's Report on the Projectto the Government and the Bank

- Fielding of Project Appraisal Mission

- Approval of Loan by the Board

- Signing of Loan Agreement

- Date of Loan Effectivity

(Reference in text: page 1, para 1)

18

Appendix 2

BUDGET FOR A TYPICAL FISH-CUM-DIJCK ENTERPRISE

1. Production and Inputs: 1/

Duck stocking rate per ha.Fish production kgDuck production kg/duck 2.3Duck survival rate 95%Duckfeed concentrates total kg

(@ 7kg of feed per kg df duckmeat)

2. Revenues and Direct Expenses: 2/

Sales of:Fish Rs/kg 27.0Duckmeat Rs/kg 25.5

Total Sales:

Expenses:Fingerlings Each 0.02Ducklings Each 10.00Feed Rs/kg 7.00

Total Expenses:

Net Profit/Loss:

Without

Ducks With Ducks

0 500 1,000720 1,560 1,700

0 1,092 2,185

O 7,647 15,295

19,440 42,120 45,900

0 27,859 55,717

19,440 69,979 101,617

-100 -100 -100

0 -5000 -10000

0 -53532 -107065

-100 -58632 -117165

19,340 11,346 (15,547)

1/ From Janakpur FDC research trial.2/ Excluding other costs such as shed maintenance, labor

and -fencing.

(Reference in text: page 6 , para22 )

19 Appendix 3

Page 1

Table 1: Detailed Project Costs

(in $'OOO}

Appraisal Actual

Foreign Foreign

Local Exchange Total Local Exchange Total

Cost Cost Cost Cost Cost Cost

A. DOA Co.ponents

1. Fisheries Developient Centers

(a) Janakpur FDC

(b) Bhairawa FDC

j o) Taralara FDC

(d) Hetuda FOC

(e) htehpurFDC

(t) Working Capital

(i) Janakpur FDC

(ii) Ebairava FDC

(iii) Tarakari FDC

(iv) fietanda FDC

(v) htebpur FDC

2. Extension and Other Services

(a) Extension Personnel

(i) AFOs

(ii) PTa

(iii) FTLs

(iv) Fin

{b} Fisheries Statistics Unit

2,655 3,965 6,620 3,263 - 2774 6,037

2,221 3,965 6,186 3,228 2,174 6,002

1,072 1,096 2,167 2,154 2,334 4,488

203 337 540

199 418 617

118 202 320

114 342 458

152 473 625 783 440 1,233

81 186 2S7 281 282

93 388 481

60 138 198

128 315

434 0 434 35 0 35

60 60 60 60

53 53 53 53

110 110 110 110

177 177 59 59

35 35 35 35

(Reference in text: page 8 , para 27

and page 8, para 29)

20 Appendix 3Page 2

8. ADBN Components

1. Fish Farms

(a) Rehabilitation of old ponds(b) Construction of new ponds(c) New private hatcheries/nurseries(d) Pilot pig/fish farms(e) Pilot duck/fish ponds(f) Production credit

(i) Old pond operators(ii) New pond operators

(iii) Private hatchery(iv) Seine nets for harvesters

( g ) Isotorcycles for ADB( staff

2. Fish Marketing

(a) Fish collection vehicles with10 fish boxes each

(b) Bh.airawa ice plant improvements(c) Janakpur ice plant and fish

receiving station(d) Kathiandu fish receiving station(e) Other fish boxes for private

traders(f) Working capital for earketing

businesses

C. Fellowshi ps and Consultant Services

1. Fellowshi p Progra.

(a) Training and fellowships(b) Study tours/group training

2. Consultant Services

Table 1: Detailed Project Costs (Continued)

(in $'OOO)

Appraisal Actual

Foreign Foreign

Local Exchange Total Local Exchange Total

Cost Cost Cost Cost Cost Cost

5,539 2,771 8,310 4,911. 1,685 6,597

5,452 1,927 7,379 4,854 1,497 6,351

2,439 1,110 3,549 956 439 1,395

2,340 500 2,840 2,835 652 3,48795. 33 128 475 167 642

67 49 116

37 23 60

384 83 467 352 77 429

83 33 116 172 70 242

7 4 U 64 32 96

51 51 35 35

42 42 25 25

87 844 931 57 188 245

373 373 31 31

8 74 82 9 60 69

7 283 290

7 25 32 17 59 76

4 4

86 151 31 38 69

206 1,164 1,370 132 798 030

91 509 600 22 352 374

91 448 539 22 322 344

61 61 30 30

115 655 770 110 446 556

Project Cost Including Contingencies

8,400 7,900 16,300 8,307 5,256 13,563

Per cent of total expenditures:

52 48 100 61 39 100

21Table -2: Total Project Cost: Appraisal and Actual by Source _ - jeu1 3

----Appraisal Esti.ates--------- ---------Actual Expenditures-------------

Percentage Percentage

of of

Local Foreign Total Total Local Foreign Total Total

94 525 619

113 638 751

206 1,164 1,310 6

TOTAL PROJECT COST 8,400 7,900 16,300 100

PERCENTAGES OF LOCAL AND FOREIGN COSTS 52 48 100

1/ Apparent errors are due to rounding.

2/ Claised but not disbursed as insufficient detail provided by ADBN to the Bank.

1. Bank Financing

A. DOA Co.ponents

FDCs

Working Capital

Total Cost

8. ADBN Co.ponents

Fish Far. investunts

Production Credit

seine Nets

Fish Marketing

Marketing Working Capital

Motorcycles

Total Cost

C. Total Bank Financing

2. ADBN Financing

A. Fish Fare Investients

B. Production Credit

C. Fish Narketinq

0. Narteting Working Capital

Total Cost

3. Governeent Financing

A. FDCs

8. Working Capital

C. Extension Personnel

0. Fish Statistics Unit

Total Cost

4. UNDP Financing

A. Fellowship Progra.

B. Consultant Services

135 2,394 3,129

1,570 1,570

735 3,965 4,700

4,304 1,114 6,019

120 120

51 51

758 158

25 86 111

42 42

4,329 2,711 7,100

5,064 6,136 11,800

668 668

473 473

4 4

65 65

1,210 0 1,210

972 972

513 513

399 399

35 35

1,920 1,920

685 2,333 3,018

0 440 440

29 685 2,113 3,458

3,831 817 4,648

529 116 645- - 35 35

21 150 171

25 38 63

25 25

44

4,405 1,181 5,586

72

5,089 3,954 9,043

435 442 877

59 62 121

5 - S

6 6

1

506 504 1,G1O

1,470 1,470

- 193 793

281 281

35 35

12

2,580 0 2,580

22 352 314

110 446 556

132 798 930

8,301 5,256 13,563

61 39 100

25

41

61

7

19

100

22

Appendix 4

ALLOCATION AND UTILIZATION OF LOAN PROCEEDS

(As of 2 February 1989)

Amount In US$

Contracts Uncontracted Undisbursed Undisbursed

Category Allocation Awarded Loan Balance Disbursements Loan Balance Contract Balance

(1) (2) (3:1-2) (4) (5:1-4) (6:2-4)

I. CIVIL WORKS

(a) DOA Components 740,000 1,222,486 (482,486) 1,220,291 (482,486) 0

(b( ADBN Components 486,000 998,109 (512,109) 998,109 (512,109) 0

II RQUIPENT, VEHICLES &

MATERIALS

(a) 00k Coaponents 1,497,000 1,551,984 (54,984) 1,552,693 (54,984) 0

(b) ADBN Conponents 1,090,000 259,147 830,853 182,379 830,853 0

III. LOCAL EXPENOtTURES for

CIVIL WORKS

(a) OQA Components 735,000 682,329 52,611 684,524 52,671 0

(b) ADBN Components 4,329,000 4,329,000 0 4,405,068 (8) (8)

IV. UNALLOCATED 2,923,000 0 2,923,000 0 2,923,000 0

T o t a 1 11,800,000 9,043,055 2,756,945 9,043,063 af 2,156,937 (8)

a/ Due to rounding off, sum of expenditures for all categories exceeds total by US$1,

(Reference in text: page 8, para 28)

MPONNTCONSU LTANTSScicctFonContract NgotFationWam,woter AquaculturietAquaculture Ext. AdvisorFihrie tietice Atjy.Project Mvisor

• FILLOWSI-UPS• LOCAL TRAINING

Fieh Farmers

Fm 1 FTE I FM

ADSN Staff

PROCUREMENTPreparation of Tender

Doce SpecificotloneSubnlFBsion of TendBr DccBank ApprovalAdvertieement of Bide &

TendersEvaluation of BidsContract Negotiation

Award of Contract.shipment & Delivery

(DI-h(DII

(tI

r1

0)II0)

NJ

01:1

(0

NJ(-h)

01(00)

Li

Aquaculfure Developmeril ProlecfImplementation Schedule

19B1 19B2 19a3 1fl4 15 197 198

I I II I I II I II I I II I I I___ I II II I II I I• I I• r--, I

• I II II I II —,I I i I

__ I

_L- ___I I I I• II I II I I

ET

rITITI] ACTUAL

_________________ ___________ - - -

__a.a___a__-a__._.-_-a.a.._-_-a-_-__a_a_a•_ a-a-a-a-a

.-:_ eee. se e_:e-.-.-a:e:e

Aquaculture Development ProlectImplementation Schedule

i9Bi 1962 19B3 1964 195 198 19B7 196

COMFONENT

E. UPGRADING OF FDC

Janakpur FDC

BhDir-wo POC

Tarihcira FOC

HtDudD FDC

Fatehpur FDC

F. PROCESSING OF SUB—LOANS

G. PRIVATE SECTOR DEY.

Old Pond RchabilitaUon

New Pond Conetrucilon

Morkctir FciIitic

Con trutfon

F-I. STOCKINc

II. HARVESTING

(0

H'xU)

...s.+.. . LU ACTUALa..

25

Appendix 6

Page 1

LIST OF ITEMS PROCURED UNDER DIFFERENT MODES

OF PROCUREMENT

Actual No, Cost Country Mode of

PlC Site DescriptiOn Procured (115$) of Origin Procureient

Tarahara Motorcycle 3 3,041 Japan/India IS

Generator 1 2,523 Japan IS

Pick-up 1 8,333 Japan [CE

Power Tiller with Trailer 1 10,226 Japan IS

& Rotary Mower

Pellet Mill Plant 1 27,128 Singapore 18

Engineering Equipment 1 2,354 Japan [S

Hatchery Equipment 1 37,216 Japan IS

Centrifugal Pump 2 8,846 India IS

Electric Motor Starter 3 5,558 India IS

Chemicals 11,564 W. Germany! IS

India

Fishing Nets 5,241 Japan IS

Fatehpur Motorcycle

Generator

Camera

Pick-up

Loader

Turbine Pump

Power Tiller with Trailer

& Rotary Mower

Pellet Mill Plant

Engineering Equipment

Hatchery Equipment

Chemicals

Fishing Nets

Janakpur Motorcycles

Generator

Camera

Pick-up

Loader

Turbine Pump/Motor

Power Tiller with Trailer

& Rotary Mower

3 3,041

2,523

1,019

8,333

1 24,872

4,423

10,226

1 27,128

1 2,354

37,276

11,564

5,241

3 3,041

1 2,523

1,019

8,333

24,872

3 4,423

I 10,226

Japan! India

Japan

Japan

Japan

Japan

India

Japan

Singapore

Japan

Japan

W, Germany!

India

Japan

Japan/India

Japan

Japan

Japan

Japan

India

Japan

18

IS

IS

ICR

[CE

IS

IS

IS

[S

IS

IS

IS

IS

IS

IS

I CR

ICE

IS

rs

(Reference in text: page 9 , para 33 )

3,873

13,564

8,333

10,226

2,523

15,516

27,128

1,019

8,686

2,354

37,216

4,423

5,241

11,564

3

3,041

8,333

10,226

24,872

2,523

1,019

27, 128

4,423

37,216

2,354

5,241

IS

ICR

ICR

IS

IS

ICE

IS

IS

IS

IS

IS

IS

IS

IS

IS

ICE

IS

ICR

IS

IS

IS

IS

IS

IS

IS

26

Appendix 6

Page 2

LIST OF ITEMS PROCURED UNDER DIFFERENT MODES

OF PROCUREMENT

Actual No. Cost Country Mode of

FDC Site Description Procured (US$) of Origin Procurement

Janakpur Pellet Hill Plant 1 27,128 Singapore IS

Engineering Equipment 1 2,354 Japan IS

Hatchery Equipment 1 37,276 Japan IS

Chemicals 11,564 N. Germany! IS

India

Fishin g Nets 5,241 Japan IS

MovielSlide Projector 5 10,150 Japan IS

Hetauda Motorcycles

Jeep

Pick-up

Power Tiller with Trailer

& Rotary Mower

Generator

Truck (3mt)

Pellet Mill Plant

Came r a

Incubator/Hatcher (duck)

Engineering Equipment

Hatchery Equipment

Turbine Pump/Motor

Fishing Nets

Chemicals

Rhairahawa Motorcycle

Pick-up

Power Tiller with Trailer

& Rotary Mower

Loader

Generator

Camera

Pellet Mill Plant

Turbine Pump and Motor

Hatchery Equipment

Engineering Equipment

Fishing Nets

Japan/India

Japan

Japan

Japan

Japan

Japan

Singapore

Japan

Japan

Japan

Japan

India

Japan

N, Germany!

India

Japan/India

Japan

Japan

Japan

Japan

Japan

Singapore

India

Japan

Japan

Japan

27

Appendix 7Page 1

STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS

Reference Covenant

Status of Compliance

Loan Agreement The Borrower undertakes toSection Section insure or cause to be insured4.05 (b) the goods to be imported for the

Project and to be financed out ofproceeds of the Loan againsthazards incident to the acqui-sition, transportation anddelivery thereof to the place ofuse or installation, and for suchinsurance any indemnity shall bepayable in a currency freelyusable to replace or repairsuch goods.

Loan Agreement DOA and ADBN shall prepare andSection 4.06(b) furnish to the Bank not later

than 6 months after the end ofrelated fiscal year, certi-fied copies of audited financialstatements and report of theauditors in English.

Loan Agreement Two PMOs shall be established;Schedule 6, one within DOA and the otherpara 2 within ADBN. Each PMO shall

be headed by a Project Manager.

Complied with. Governmenthas "self-insured" thefacilities and has repairedor replaced any damaged orlost Project property.

Complied with albeit withsignificant delays.

Complied with by DOA.ADBN did not appoint anyseparate Project Managerexclusively for theProject.

Loan Agreement A Project Coordinating Committee Complied with.Schedule 6, will be established for effectivepara 3 implementation of the Project.

Loan Agreement Not later than two months afterSchedule 6, the effective date of the Loan, apara 4 Fisheries Statistics Unit (FSU)

shall be established within theAgricultural Statistics Divisionof DFAMS which shall be suitablystaffed and equipped.

Complied with.

(Reference in text: page 10, para38 )

28

Appendix 7Page 2

Reference

Covenant

Status of Compliance

Partially complied with.Loan Agreement The Borrower shall cause DOASchedule 6, within three years of thepara 5 effective date of the Loan,

to study the structure andorganization of DOA's FisheriesDevelopment Section and proposemeasures to strengthen theSection.

Loan Agreement Selected personnel of DOA andSchedule 6, ADBN shall be provided fellowshipspara 6 for training abroad, as necessary,

under the Project and evolve asystem of bonding to ensure thatrecipients of such fellowshipsreturn to render services for whatthey were trained.

Fellowships provided.Bonding not complied with.

Loan Agreement All additional staff as Complied with except forSchedule 6, 'may be required for Project FAs which was below target.

para 7 purposes shall be appointed in atimely manner.

Loan Agreement All land or rights over land Complied with.Schedule 6, and rights over water requiredpara 8 for the purposes of the Project

shall be made available so asto ensure timely implementationof the Project.

Loan Agreement Panchayat ponds leased to a sub- Initially not complied as

Schedule 6, borrower under Part B of the leases were for only 2

para 9 Project shall be leased for a years or less. Subsequently,minimum period of five (5) years complied with.at a time.

Being complied with.Loan Agreement The Government will ensure thatSchedule 6, the Project facilities andpara 10 equipment are properly operated

and adequately maintained. Tothis end, the Government willprovide, in a timely mannereach year, sufficient allocationof funds and staff.

29

Appendix 7.Page 3

Reference

Covenant

Status of Compliance

Loan Agreement DOA and ADBN shall submit to the Complied with albeit withSchedule 6, Bank quarterly progress reports, significant delays.para 11 (a) and such other reports as the

Bank may from time to timerequire on the Projectimplementation.

Loan Agreement Within six (6) months of theSchedule 6, completion of the Project, DOApara 11(b) and ADBN will, each with respect

to the Project components forwhich it is responsible, submitto the Bank a report measuringthe impact made by the variousProject components in the Projectareas.

Loan Agreement The Fisheries Statistics UnitSchedule 6, (FSU) established under thepara 12 (a) Project shall carry out socio-

economic surveys of the Projectareas as follows:

Complied with.

(i)an initial benchmark survey, Complied with.within six months of theeffective date of the loan;and

Loan AgreementSchedule 6,para 13

(ii)a post evaluation survey,within six (6) months aftercompletion of the Project.

The foreign exchange risk on theloan shall not be borne by ADBN.

Substantially complied with.

Complied with.

Loan Agreement The Borrower shall review, orSchedule 6, cause to be reviewed, withinpara 14 six months of the effective

date of the Loan, (a) ADBN'spractices relating to borrowingand lending rates and the spreadaccruing to ADBN, and (b) ADBN'soverall interest rate structure.

Complied with substantialdelay.

30

Appendix 7Page 4

Reference Covenant

Project Terms and conditions for subloansAgreement shall include an interest rate ofSection 2.01(b) 11% and a repayment period not

exceeding 10 years, including agrace period of up to 3 years.

Project ADBN shall, within six months ofAgreement the effective date of the Loan,Section 2.03 furnish to the Bank for concur-

rence a plan setting out thespecific guidelines and proce-dures which ADBN will use forthe processing and approval ofsubloan applications.

Status of Compliance

Complied with.Interest rate adjusted to18% in May 1986.

Complied with

31

Appendix 8Page 1

ADBN'S LENDING OPERATIONS UNDER THE PROJECT

1. During the Project, ADBN lent $6.571 million to fisheries enterprisesincluding fish farmers. The bulk of the lending, i.e., 85 per cent was for tablefish production, 11 per cent for hatcheries/nurseries and 4 per cent formarketing enterprises. The loan terms included amortization periods ranging fromseven to nine years including grace periods of one to two years. Interest ratescharged to sub-borrowers were 11 per cent at the start of the Project but in May1986 were increased to 18 per cent but with a 5 per cent discount subsidy toreduce the net cost to 13 per cent. Sub-borrowers who are in arrears do notreceive the interest subsidy. In July 1988, the subsidy benefit was limited toa maximum amortization period of five years. The cost of funds to ADBN underthe subsidiary loan agreement under the Project has not changed from the 5 percent set at the start of the Project. This has meant that the spread to ADBNhad increased to about 8 per cent compared to a minimum of 6 per cent specifiedin the Loan Agreement.

2. Table 2 shows that annual loan disbursements for fisheries were 5.6per cent of total ADBN lending during 1987/88 compared with 1.7 per cent in1981/82 and this is indicative of the increase in importance of the fisheriessector. Loan recovery performance was described by ADBN as being good. However,the loan recovery rate at an average of 61 per cent for the last five years, cannot be described as being very satisfactory although it is substantially higherthan ADBN's average loan recovery rate of about 48 per cent on its overallportfolio.

3. Currently, there is a proposal to the Government to provide capitalinvestment subsidies (rebates) of 25 per cent of investment costs for fisherieswith a rebate limit of NRs25,000 per sub-borrower. This is similar to theschemes already in place for irrigation, tree crops and some rural services.

4. ADBN has prepared fish pond cash flow budgets to help its staffassess the ability of fish farmers to repay loans. Some of the modificationsneeded to these budgets are:

(i) The timing of cash flows needs to be shown more clearly: thefirst year shows investment costs, sales and operating expensesall occurring simultaneously. In turn, this shows a cashsurplus that is not realized in reality.

(ii) The production figures are too optimistic: ADBN assumes thatponds produce 2,280 kg per ha compared to the DOA forecast of1,500 kg per ha.

(Reference in text: page 11 , para 41)

32

Aipendix 8Page 2

5. The PCR Mission was not able to obtain details on interest incomerecovery under Project lending. Details concerning a claim for reimbursementof US$ 1.125 million could not be verified by the PCR mission nor by a previousBank mission. Details on Project cost shows US$ 504,000 in foreign exchangecosts was not reimbursed to ADBN because of the inability of ADBN to providedetails of accounts to support the expenditure in question. It is hoped thatproposals made under the Fifth Agricultural Credit Project [Loan 831-NEP(SF) andT.A. 870-NEP], concerning management and financial information systems, will helpADBN resolve reporting deficiencies.

33

Appendix 8Page 3

Table 1.: ADBN's LENDING FOR FISHERIES(Rs '000)

sear: luii82 1982153 l93i84 1954/85 1985/85 1985/8! 198/188 totals

fish Ponds Hnancea:

Old Donds na. 1i/.0 2O.9 5b. 129.8 155.5 82.8 2/2.4 1,014

New ponds ha. 21. 148.5 1u4.0 12u.1 215.1 340.9 iOO.b u0.b 1,508

lotal Area ha. 255,4 443.8 183.3 346.4 49/,3 383.4 4/3.2 2.582

Lend

lotal Disbursements -

all AU8N Lending: 255.418 345.815 416.241 583.811 663,191 610,861 853,914 3,190,923

Fisheries Disburse-

ments: 4.444 8.523 ,b91 31,/21 21,019 24.290 41,193 131,541

Loans Outstanding: 4,444 12.431 11,904 30,128 45,853 63.3/3 98,123

Rena y ments: 53u 2.224 4.903 5,954 6./10 13,043 33,424

Cumulative:

Renavments 530 2./b4 7.651 13,511 20.381 33.424

Overdues 622 2.202 4.510 8,483 12.6/5 22,454

Averaqe

1,152 4,956 12,32! 22,094 33.055 55,5,5

Loan Hecovery Hate 4b.u% bb.b% 62.1% 81.5% 51.1% 59.8% 60.5%

Fisher y Loans as %

ot total l.1 2.5% 1.0% 3.0% 3.2% 4.0% 5.0% 3.5%

- 1/. Includes /5 new hatcheries and nurseries totallin q so ha.