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Bank Activity: Sixth Annual Review of Project Performance Audit Results published; $400 million for petroleum production in India; Bank loans and IDA credits

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
March 1981
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“Significant impact” of Bank lending for rural poor

A review of 130 World Bank lending operations has found that 94 per cent of the total investments completed between 1976 and 1979 have appeared to achieve their major objectives or are well on their way to doing so. And the Bank’s first projects for helping large numbers of poor small farmers have significantly improved the farmers’ productivity and incomes. Most of the projects were launched in the 1970s.

The rural development projects under scrutiny showed the same average cost overrun as did conventional agricultural projects, had fewer time delays, and had about the same re-estimated rate of return (17 per cent as against 20 per cent). Of the 13 agricultural projects in this year’s review that achieved or surpassed their production targets, 8 belonged to the small farmer group.

The findings published in November 1980 in the sixth “Annual Review of Project Performance Audit Results” concluded that of the 76 projects for which economic returns were estimated at the time of their approval, 65 offered final returns worth 10 per cent or more of the initial investment. The projects in agriculture, which have now become the largest sector of Bank lending, averaged an economic rate of return at audit of 19.5 per cent.

The 130 operations that were audited—all during calendar year 1979—represented US$2.8 billion in Bank loans and IDA credits for projects whose total investments amounted to approximately $10.2 billion. This latest review forms part of a continuing process by which experience with every completed Bank-assisted project is subjected to independent assessment, first as an individual project and then as part of an annual overview of completed projects.

These latest findings by the Operations Evaluation Department (OED) do not differ greatly from those of past years. But the audited projects themselves do differ from those scrutinized in the past in that the dominant concerns of recent Bank lending—with equity and with improving the productivity and incomes of the poor—are strongly reflected for the first time.

The 1980 review, the fourth consecutive annual review to be made public, reports that 39 agricultural projects assisted with Bank funds were estimated to have benefited more people than had been originally anticipated: 4.5 million as against a projected 3.4 million. In addition, the report concludes that the returns on 14 rural development projects in this group—more than half of whose anticipated benefits will accrue to the rural poor—”compare well” with the agricultural projects whose intended benefits were not so targeted.

In general, small farmer operations, particularly in rural development projects, were also found to be more cost effective than traditional agricultural projects in reaching farmers; for every $1 million loaned by the Bank to support small farmer projects, 660 farmers benefited, while only 47 farmers benefited from the same amount of funds in projects aimed at medium-scale and large-scale farmers. The annual review also found that the projects aimed at small farmers had a “significant impact” on their incomes. Income increases, the review found, were much greater in relative terms for small than for medium and large farmers and were obtained by ten times as many farmers.

IDA credits approved during second quarter of fiscal year 1981(Ended December 31, 1980)
Amount
(In millions
Country1Purposeof U.S. dollars)
Bangladesh (2)Program credit, gas development150.0
BeninFeeder roads7.0
CameroonRural development12.52
Central African RepublicEducation, highways (supplement)5.4
Egypt (2)Rural development, education120.1
EthiopiaAgricultural development40.0
GuineaPower28.5
India (3)Rural roads, irrigation, urban development160.0
LiberiaSmall-scale enterprises4.0
MadagascarFlood control2.3
NicaraguaPreinvestment fund5.0
Papua New GuineaPrimary education12.03
SenegalStructural adjustment30.04
Sri LankaRural development33.5
TanzaniaAgriculture6.8
UgandaTechnical assistance8.0
Western SamoaAgricultural development2.0
ZaireSugar development26.4
Total653.5

Figures in parentheses are the number of credits approved for the respective country.

With a $25 million Bank loan.

With a $6 million Bank loan.

With a $30 million Bank loan.

Figures in parentheses are the number of credits approved for the respective country.

With a $25 million Bank loan.

With a $6 million Bank loan.

With a $30 million Bank loan.

“The experience confirms the cost effectiveness, the economic viability, and the social equity of a strongly preferential focus on small farmer projects in supporting agricultural development,” the report concludes.

Some of the OED’s other findings were that:

  • 65 per cent of all the audited projects were changed in scope during implementation, usually as the result of changed political or economic circumstances;

  • 65 per cent of the 120 projects for which physical completion was measurable required over 25 per cent more time to complete than estimated at the time of their approval; and that

  • about 49 per cent of the projects showed cost overruns, due mainly to high inflation during the implementation period, as well as to initial underestimation of costs and increases in project scope and changes in design.

The Bank’s evaluation team states that it seems “clear that development investments can be fruitful, even in the most challenging of circumstances, if the political will exists, if the investments themselves are well conceived, carefully managed and closely supervised, and their managers are alert and responsive to the lessons of their experience.”

See also “Evaluating the Bank’s development projects” by Mervyn L. Weiner on page 38 of this issue.

World Bank loans approved during second quarter of fiscal year 1981(Ended December 31, 1980)
Amount
(In millions
Country1Purposeof U.S. dollars)
Argentina (2)Vocational education, coal development68.0
Brazil (2)Rural development, power110.0
Cameroon (2)Rural development, small-scale enterprises40.02
ChileRoad rehabilitation42.0
Costa RicaWater supply26.0
EgyptGas exploration25.0
FijiPost-cyclone reconstruction18.0
GuyanaTechnical assistance8.0
IndiaOil production400.0
Ivory CoastHighways100.0
Korea (2)Development banking190.0
LiberiaPetroleum exploration5.0
MauritiusUrban development15.0
Mexico (3)Irrigation, water supply, railways298.0
Papua New GuineaPrimary education6.03
Romania (3)Irrigation, livestock, power280.0
SenegalStructural adjustment30.0”
Thailand (2)Agricultural research, transportation77.0
Turkey (3)Oil exploration, structural adjustment162.0
UruguayDevelopment banking30.0
YugoslaviaDevelopment banking110.0
ZambiaDevelopment banking15.0
Total2,055.0

Figures in parentheses are the number of loans approved for the respective country.

With a $12.5 million IDA credit.

With a $12 million IDA credit.

With a $30 million IDA credit.

Figures in parentheses are the number of loans approved for the respective country.

With a $12.5 million IDA credit.

With a $12 million IDA credit.

With a $30 million IDA credit.

$400 million for petroleum production in India; largest single loan by Bank

India’s efforts to increase petroleum production will be assisted by a loan of $400 million from the World Bank. The loan, the largest single operation for the Bank, will help finance the foreign exchange cost of the development of the Bombay High oil and gas field, located about 160 kilometers from Bombay.

The $823.2 million project will help complete the development of the southern and central areas of the Bombay High field and thus help achieve a production potential of 240,000 barrels a day by mid-1982. The principal components of the project are drilling of 64 development wells, construction and installation of 15 production platforms, and construction and installation of a three-deck processing platform—Bombay High South—and a separate living quarters platform. The project also includes about 133 kilometers of subsea flow lines, expansion of shore facilities, extension of telemetry and telecontrol installations, and engineering, technical services, and reservoir consultancies.

India’s petroleum deposits occur in sedimentary basins that cover a total area of about 1.4 million square kilometers onshore and about 250,000 square kilometers offshore (to a water depth of 100 meters). So far, commercial production has been established in only two basins: the Assam-Arakan basin in Assam, Manipur, Meghalaya, Mi-soram, Nagaland, and Tripura in the eastern part of the country and the Cambay basin in Gujarat with its offshore extension, the Bombay High. India’s total recoverable hydrocarbon reserves were recently estimated at 6.5 billion tons, of which 5 billion tons were offshore.

Crude oil production from domestic reserves has increased steadily over the last 20 years, from as little as 0.45 million tons in fiscal year 1960/61 to almost 7 million tons in 1970/71 and 11.8 million tons in 1979/80. It is projected to almost double, to more than 22 million tons, by 1984/85.

The bulk of the increased production in the 1970s is attributable to Bombay High: from nil in 1970/71 to 36 per cent of domestic production in 1979/80. The potential oil-bearing structures offshore of Bombay were first identified by a seismic survey in 1966, but no exploration took place for almost eight years, since offshore oil was not thought to be competitive with imported supplies at pre-1973 prices.

As a result of the slow growth of the economy and Government measures to limit consumption of refined products, which was growing at a trend rate of 8-9 per cent in the period before the oil crisis, consumption of petroleum products declined from 22.5 million tons in 1973 to 21.8 million tons in 1974; since then it has increased at an average annual rate approaching 7 per cent to 29.6 million tons in 1979/80. Even with a low rate of overall economic growth in India, consumption of petroleum products will exceed domestic production. In the period 1984-85, consumption of petroleum products is expected to reach 44.9 million tons. This would exceed expected domestic crude oil production by some 22 million tons, well over twice the gap that existed in 1979/80.

India is making a concerted effort to attract foreign oil companies to help explore for oil both onshore and offshore. This is a recent initiative that has generated considerable interest within the international petroleum industry. The success of these efforts over the next three to four years will be a key factor in determining whether indigenous crude oil supplies can be increased sufficiently to meet the anticipated growth in demand during the present decade.

The World Bank has been involved in the Indian energy sector since 1950. It has made 20 loans and credits totaling $1,504.5 million for power generation and transmission and 2 loans totaling $47.4 million for coal production. The $400 million project would be the Bank’s second lending operation in the Indian petroleum sector. In 1977, it made a loan of $150 million toward Phase III of the Bombay High Development, which included production wells, production and production/processing platforms with a combined capacity of 180,000 barrels per day, and ancillary facilities, such as a 26-inch gas and a 30-inch oil pipeline, an oil and gas processing terminal, a supply base, supply lines, and telecontrol facilities.

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