Document of The World Bank

Report No: 27415

IMPLEMENTATION COMPLETION REPORT(TF-29556 IDA-30040)

ON A

CREDIT

IN THE AMOUNT OF SDR 8.3 MILLION(US$11.35 MILLION EQUIVALENT)

TO THE

PEOPLE'S REPUBLIC OF BANGLADESH

FOR A

SILK DEVELOPMENT PILOT PROJECT

December 23, 2003

Rural Development Sector UnitBangladesh Country OfficeSouth Asia Regionals Office

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CURRENCY EQUIVALENTS

(Exchange Rate Effective )

Currency Unit = Bangladesh Taka (Tk.) At Appraisal (October 1997) Tk.1.00 = US$ 0.017

US$ 1.00 = Tk.44.50ICR (October 2003) US$1.00 = Tk.58.4

FISCAL YEARJuly 1 to June 30

ABBREVIATIONS AND ACRONYMS

BIDS Bangladesh Institute of DevelopmentStudies

BSB Bangladesh Sericulture BoardBSRTI Bangladesh Sericulture Research and

Training InstituteCAS Country Assistance StrategyCBA Collective Bargaining AgentsDCR Demonstration Chawki RearingDRC Domestic Resources CostERR Economic Rate of ReturnFRR Financial Rate of Return FTC Field Training CentersFY Financial YearGB Governing BodyGMC Germplasm Maintenance CentersGOB Government of Bangladesh

IDA International Development AssociationMAA Memorandum and Articles of AssociationMD Managing DirectorMOF Ministry of FinanceMOT Ministry of TextilesMTR Mid-Term ReviewNCB National Competitive BiddingNGO Non-Governmental OrganizationNPV Net Present ValueO&M Operation & MaintenancePAD Project Appraisal DocumentPKSF Palli Karma Shahayak FoundationSF Silk FoundationTA Technical AssistanceTSMU Textile Strategic Management UnitVIU Vertically Integrated Unit

Vice President: Praful C. PatelCountry Director Christine I. WallichSector Manager Gajanand Pathmanathan

Task Team Leader/Task Manager: Wahida Huq

BANGLADESHSilk Development Pilot Project

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 75. Major Factors Affecting Implementation and Outcome 116. Sustainability 127. Bank and Borrower Performance 138. Lessons Learned 149. Partner Comments 1510. Additional Information 15Annex 1. Key Performance Indicators/Log Frame Matrix 17Annex 2. Project Costs and Financing 18Annex 3. Economic Costs and Benefits 19Annex 4. Bank Inputs 25Annex 5. Ratings for Achievement of Objectives/Outputs of Components 27Annex 6. Ratings of Bank and Borrower Performance 28Annex 7. List of Supporting Documents 29Annex 8. Borrower's Contribution to the ICR 30

Project ID: P040713 Project Name: Silk Development Pilot ProjectTeam Leader: Wahida Huq TL Unit: SASRDICR Type: Core ICR Report Date: December 24, 2003

1. Project DataName: Silk Development Pilot Project L/C/TF Number: TF-29556; IDA-30040

Country/Department: BANGLADESH Region: South Asia Regional Office

Sector/subsector: Other industry (47%); Agricultural extension and research (22%); Animal production (20%); Central government administration (10%); Other social services (1%)

Theme: Regulation and competition policy (P); Rural policies and institutions (P); Rural non-farm income generation (P); State enterprise/bank restructuring and privatization (P); Administrative and civil service reform (P)

KEY DATES Original Revised/ActualPCD: 05/15/1995 Effective: 12/05/1997 03/19/1998

Appraisal: 04/11/1997 MTR: 11/16/2000Approval: 11/18/1997 Closing: 12/31/2003 06/30/2003

Borrower/Implementing Agency: Government of Bangladesh (GOB)/Ministry of Textiles and Silk Foundation/NEW AUTONOMOUS SILK DEV. FOUNDATION & NGOS

Other Partners: Participating Non-Governmental Organizations

STAFF Current At AppraisalVice President: Praful C. Patel Mieko NishimizuCountry Director: Christine I. Wallich Pierre Landel-MillsSector Manager: Constance A. Bernard Ridwan AliTeam Leader at ICR: Wahida Huq Wahida HuqICR Primary Author: Charles Bevan and Wahida Huq

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: M

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: S S

Project at Risk at Any Time: Yes

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:

This Silk Development Project (SDP) was designed as a pilot to ascertain whether Bangladesh can be competitive in sericulture provided the institutional, economic and technical constraints affecting silk development are addressed. The development objective of the project is to assist in increasing the incomes of small-scale silk producers, who are mostly poor women, through introducing improved technology and creating an enabling institutional and policy environment to encourage sustainable development of the silk sector.

The key indicators identified in the Project Appraisal Document (PAD) were:• Improvement in rearing productivity of 60 %;• Improvement in reeling productivity of 30 %; and • Increase economic efficiency of silk production.

Rural poverty is pervasive in Bangladesh. More than 75 percent of the population live in rural areas. Introduction and adoption of sustainable economic activities in the rural areas would help raise the living standards of the rural poor. Sericulture (raising silkworms) and silk reeling provide attractive income generating activities for the rural poor, provided markets for cocoons and raw silk exist. Bangladesh has a suitable climate for both mulberry cultivation and for raising silkworms. {Mulberry leaves are used to feed silkworms.} In 1978, the Government of Bangladesh (GOB) set up the Bangladesh Sericulture Board (BSB) to promote sericulture and silk production nationwide. The Bangladesh Sericulture Research and Training Institute (BSRTI) was merged with BSB and the new organization was made responsible for research, training, operation of silkmoth egg hatcheries (grainages) to produce eggs to sell to silkworm rearers, the purchase of cocoons from the rearers, operation of reeling units and management of two silk mills. In the 1980s a number of the larger NGOs introduced sericulture as one of the income generating activities for rural poor women. The NGOs faced considerable problems arising from BSB’s monopoly in silkmoth egg supply, resulting in poor quality and uncertainty of eggs supply, and cocoon pricing policies of the BSB. At appraisal, the key issues identified in the silk sector were: (a) a history of protectionist policies that did not provide the proper incentives to the silkworm rearers and reelers to become competitive; (b) a parastatal-led regime (input production and input and output marketing) monopolizing silkmoth egg production and controlling prices of cocoons; (c) under-capitalized producers, operating low return technologies that are unable to generate the means for adopting more productive known technologies; and (d) lack of global market information.

Around the mid 1990s, the Government recognized that interventionist and protectionist policies failed to stimulate growth of the silk sub-sector. Consequently in 1994, import duties on raw silk was reduced to zero from 30 percent. As a result of this policy, the weaving segment of the industry got a boost. With trade liberalization, rearers and reelers were unable to compete with the imported yarn favored by the silk weavers using mechanized looms. The Government, at that time, recognized two things: (a) search for comparative advantage for this agro-industry should proceed upstream (rearing and reeling) and (b) the development of the commercial aspects of silk sub-sector has to take place in the private sector while BSB’s role needed to be modified according to its comparative advantage. Accordingly, the Government sought to restructure BSB/BSRTI into autonomous technical organizations. Consistent with this strategy, GOB also established the Bangladesh Silk Foundation (SF) as a non-profit company to undertake promotional aspects of small scale silk producers and to introduce improved technology. The SF is run by a Managing Director (MD) who reports to a Governing Board (GB) of 12 members, representing all sub-sector stakeholders, such as rearers, reelers, weavers, NGOs, rural financial institutions,

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represented by Palli Karma Shayak Foundation (PKSF), Ministry of Finance (MOF) and Ministry of Textiles (MOT). The Government sought assistance from IDA to address the technical, institutional and policy constraints affecting the sub-sector, and to specifically support the restructuring of BSB/BSRTI, and strengthen SF.

Assessment of Objectives:

The project's development objective addressed the need to identify sustainable employment opportunities for rural poor women through further deregulation, institutional development, productivity enhancement based on client-focused research, extension and training, product development and market information. The objectives conformed with the Bank's Country Assistance Strategy (CAS Report 14998-BD, November 1996) which inter alia, stressed on the need for further improvements in the policy environment to capture the value added in economic activities through increased participation of the private sector and to target programs towards the poor, particularly women and increase the participation of NGOs in social and economic development.

3.2 Revised Objective:

The objectives were not revised during the project implementation period, even though the project was substantially scaled back with cancellations totaling to SDR 3.77 million.

3.3 Original Components:

The project had five components: (a) Policy Reform and Institutional Development, (b) Productivity Enhancement and Research, (c) Technology Dissemination, (d) Product Development and Market Promotion, and (e) Monitoring and Evaluation. Some of these components had several sub-components.

(a) Policy Reform and Institutional Development (US$5.06 million base cost). This component had five sub-components of which one was related to policy reforms.

• Further Deregulation: The GOB agreed that, in addition to the removal of the BSB monopoly on silkmoth egg supply, the reduction of the tariff on silk yarn to zero, and the deregulation of cocoon prices, the BSB would (i) lease out up to 5 grainages (silkmoth egg hatcheries); (ii) henceforth charge prices for silk moth eggs that cover the full production costs, and (iii) restructure BSB/BSRTI.

• Restructuring of the BSB (US$1.19 million base cost). It was envisaged that BSB/BSRTI would be restructured to provide quality research, training and extension support services to the sub-sector. The restructuring program included scaling back commercial activities, transferring of two silk mills operated by BSB to another organization pending privatization, and redundacies of some 190 staff. These activities were to be financed by the project together with the Technical Assistance (TA) to carry out an organizational study and prepare a restructuring action plan.

• Establishment of the SF (US$2.72 million base cost) The project financed the operational cost of SF on a declining scale, cost of TA required for business planning, monitoring and evaluation, quality control, product and market development. In the early years of the project the SF’s operating costs were to be met by the project, but it was

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envisaged that after five years of its operations, it’s recurrent expenditures would be financed out of surplus revenues from its grainage operations.

• Development of Rearers’, Reelers’ and Silk Weavers’ Associations (US $0.12 million base cost): The project provided for the necessary TA and training to establish these associations considered necessary to represent the respective stakeholder interests within the SF.

• Textile Strategic Management Unit (US$0.40 million base cost): Established in 1989, the Textile Strategic Management Unit (TSMU) had evolved into an important policy making unit within the MOT. The project provided funds to enable the TSMU to continue its work, mainly in relation to the sericulture sub-sector.

(b) Productivity Enhancement and Research Support (US$. 4.69 million total cost). This component had four sub-components:

• Development of Research Capacity (US$1.65 million base cost). This consisted of two main activities: (i) a contract research program (US $0.38 million) of extensive multi-disciplinary field studies to determine the causes of the gap between laboratory and on-farm silkworm productivity and output; and (ii) renovation of BSRTI’s research facilities (US$0.43 million). Funds were provided to renovate buildings, procure equipment and finance training of scientists to improve BSRTI’s capacity to manage Germplasm Maintenance Centers (GMGs) and undertake collaborative research on improved sericulture practices.

• Germplasm Maintenance Centers (GMC) (US$0.76 million base cost).The project financed the renovation and equipping an existing GMC, construction and equipping of a new GMC to maintain new pure lines of silkworms in isolation from breeding centers, and TA to develop protocols, and initially for incremental staffing.

• Development of Grainages (US$1.80 million base cost). The project provided funds to renovate and re-equip five leased grainages to produce high quality silkworm eggs. The project also provided for a limited amount of TA to advise SF on grainage management, to meet operating costs of the grainages on a declining basis over five years, and purchase hybrid silkmoth eggs from abroad to test market response to high quality eggs.

• Pilot Bivoltine Cocoon Development (US$0.48 million base cost) To determine the feasibility of producing international quality bivoltine silk, as opposed to the poorer quality polyvoltine silk produced in Bangladesh, the project was to finance an integrated input-extension-credit-market package in partnership with a selected NGO or private sector organization with proven sericulture managerial expertise.

(c) Technology Dissemination (US$2.70 million base cost) This component had four sub-components:

• Development of BSRTI’s Training Capacity (US$0.94 million base cost) The project financed the upgrading of the training facilities at BSRTI, development of practical training modules to train trainers, and regional training for BSRTI and NGO staff.

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• Field Training Centers (US$0.85 million base cost) The project financed the costs of establishing and operating field training centers (FTC) for rearers and reelers centered around the grainages leased by the SF, and the associated incremental training costs.

• Extension (US$0.36 million base cost) The project provided limited resources to cover, on a declining basis, the incremental costs to NGOs associated with recruiting additional sericulture extension staff.

• Demonstration of Chawki Rearing Technology (US$0.45 million base cost) The practice of early stage rearing of the silkworms and then selling off the worms to late age rearers is called Chawki rearing. The project supported the establishment of about 100 chawki units to demonstrate the benefits of using specialist rearers for the early stage of silkworm rearing.

(d) Product Development and Market Promotion (US$0.28 million base cost). The project provided funds to the SF to contract professional services for training in the production of creative fashion designs to weavers, and to promote Bangladeshi silk products through fashion shows and publications.

(e) Monitoring and Evaluation (US$0.17 million base cost). The project provided funds to finance the cost of establishing a monitoring and evaluation system in SF to anually monitor production and price parameters, in relation to data recorded by an initial baseline survey. In addition, the project provided funds for undertaking related special studies on market trends, and economic analyses.

3.4 Revised Components:

At the Mid-term Review (MTR) several changes in the project components were made. Since the component on restructuring of the BSB was moving slowly due to the wavering commitment of the MOT and funds provided for redundancy payment was not being utilized, it was agreed with the Government that funds (US$900,000 approximately) allocated for financing the redundancy program would be cancelled. To demonstrate the benefits of improved post harvest handling and cocoon processing, it was agreed at the MTR that the project would finance the establishment by SF of Vertically Integrated Units (VIU) consisting of low cost driers and modern reeling equipment at two suitable locations. It was also agreed that TA and training support to develop associations for rearers and reelers would be discontinued as the NGOs were not cooperating with SF in this activity. The Pilot Bivoltine Cocoon Development sub-component was dropped as suitable organizations could not be identified to test the commercial feasibility of this activity. By MTR, it was evident that sericulture productivity cannot be enhanced if rearers continue to use mulberry leaves from road side trees. Good quality bush plantation if mulberry needed to be undertaken to supply quality leaves for the silkworms. The project, in response to the demand from the NGOs, supported the plantation of bush plantation on a cost-sharing basis.

3.5 Quality at Entry:

This is rated as satisfactory based on the criteria used by the Quality Assurance Group (QAG). The criteria include project concept, objective and approach, technical and economic analysis, social and stakeholder analysis, institutional aspects, readiness for implementation and risks and sustainability.

(a) Concept, Objective and Approach. This was an innovative project which aimed to test a hypothesis that silk production can be commercially viable in Bangladesh. The design included

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strengthening and develop public, private and NGO partnerships to bring about efficiency in the sub-sector. As such, it was correctly designated as a pilot project. The modest size (in terms of cost) of the project was appropriate as the design required experimentation with new approaches before scaling up. The design was predicated on relatively modest reforms that would build on the strengths, and not totally marginalize, existing institutions supporting the sub-sector. Similarly, it aimed to consolidate policy reforms that had already been initiated, and that were not expected to be controversial. However, on hindsight, it appears that some of the assumptions were unrealistic. The project also assumed that, since the NGOs were facilitating the development of women's silk activities, the need for a distinct focus on addressing the issues of long-term sustainability of these enterprises would not be necessary. This assumption was also found to be unrealistic.

(b) Technical, Economic and Financial Analysis. Extensive technical, financial and economic analysis were undertaken during preparation and appraisal. The technical interventions were wide ranging, reflecting the backwater status of sericulture in Bangladesh at the time, and the need for a massive improvement in the technology used at all stages of production if the sector was to become competitive. To assess the competitiveness of the sub-sector, Domestic Resource Cost (DRC) analyses was carried out at appraisal. Financial Rates of Returns (FRR) were also estimated at appraisal for: Grainage operations, Chawki (early stage) silkworm rearing, late age rearing of silkworms and Cottage basin reeling. The appraisal of the project preceded the introduction of the Bank's Loan Accounting and Change Initiative (LACI) guidelines. Therefore there was no formal financial management (FM) assessments of the implementing agency and FM systems and controls at appraisal. stage.

(c) Social and Stakeholder Analysis. The design of all components of the project involved extensive discussions with key stakeholders, such as the NGOs and private sector, engaged in sericulture and silk weaving and marketing, micro-finance institutions, universities engaged in silk worm research and development partners. Extensive field surveys and data was analyzed to confirm that sericulture was a socially acceptable and financially viable activity for rural women.

(d) Institutional Aspects. The institutional mechanisms developed for providing improved support to the sub-sector were generally satisfactory in the context of the difficulties associated with institutional reform in Bangladesh. It was particularly important that the BSB was not to be abolished but restructured under the project. Furthermore, it is noteworthy that privatization of the two silk mills operated by the BSB was not made a condition of the project, as this was perceived to be politically very sensitive, and that, it would be better addressed by the on-going policy dialogue of state-owned enterprise reform. The project design team could have paid greater attention to the institutional assessment of NGOs supporting this sub-sector, particularly the relationship between the smaller and the larger NGOs operating in this area.

The concept of the SF was based on comparable institutional initiatives in other sectors ( e.g. the HORTEX Foundation established to promote horticultural exports) and the PKSF (established to provide micro-credit), that appeared to be able to represent all stakeholder interests, and at the same time move responsibility for sectoral development towards the private sector. The not-for-profit status of the SF was judged appropriate, however weaknesses in the SF's Memorandum and Articles of Association (MAA), specially the lack of provision for a General Body, from which the Governing Body (GB) would be selected, led to a failure of all stakeholder interests to be adequately represented. This should have been addressed at appraisal.

(e) Readiness for Implementation. As mentioned earlier, from the earliest days the project was subject to extensive discussions with representatives of the MOT, BSB, BSRTI, and NGOs. Several

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preparation mission were undertaken and these included stakeholder workshops. There was a reform minded Minister and a Secretary in MOT who led the discussion on the project design and the reform agenda. By appraisal, the GOB had already abolished the BSB monopolies on egg supply and no longer fixed the price of cocoons, and by negotiations of the Credit for this project, the SF was legally established. Based on these up-front actions, it is considered that the project was ready for implementation. Subsequent changes in key management positions in MOT (particularly the Minister and the Secretary) which occurred soon after negotiations could not have been anticipated at entry.

(f) Risks and Sustainability. While a wide range of risks were correctly assessed at appraisal, some important ones were missed. Almost all risks bare linked to GOB’s commitment to maintain and continue with reforms, and/or commitment by major stakeholders i.e. NGOs to continue their support for the project. At the time these commitments by GOB were judged to be firm as the Cabinet of Ministers had endorsed the key reforms. Project sustainability was inextricably linked to many of these commitments, notably to lease operational grainages to SF and the restructuring of BSB/BSRTI. The risks associated with these politically sensitive actions were not clearly specified and adequate mitigation measures were not identified. The likelihood of larger NGOs not supporting the development of producers organizations was not highlighted as a risk. The fall in price of raw silk in the international market could have also been identified as a risk.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:

Overall, the project has substantially achieved its stated development objectives. Keeping in mind that it was a pilot operation and the scope of the project was scaled back considerably, this assessment has been based not so much on the overall quantitative achievements but more on the lessons which were learned from this operation. On a pilot basis, the project has clearly demonstrated that Bangladesh has the potential to produce quality silk, and that sericulture can be an attractive income earning activity for rural women. Prior to this project the silk sub-sector has been operating very inefficiently, despite efforts by the government from 1960s and NGOs from the 1980s. The project has been successful in establishing some parameters for a silk enterprise to become viable. It has provided knowledge on improved technology and modern practices in research, extension, silkmoth egg production, rearing and reeling. The project has also helped to address to a large extent, the distortions in the policy environment.

Average cocoon yields from quality eggs exceeded expectations and income increase were on target. Average cocoon yields increased, on average, by nearly 100 percent. Reeling productivity (measured by renditta which is estimated by the amount of cocoon required to produce one kg of raw silk) indicated by lower renditta has also improved from baseline figure of 18 to 13. Based on the independent evaluation carried out by Bangladesh Institute of Development Studies (BIDS), the project has succeeded in raising the incomes of the silkworm rearers from Tk18-20 to Tk. 58-60 per day among the beneficiaries in the sample survey, suggesting that productivity gains could be significant even in a situation of low domestic prices. The survey found that producers who were able to use the new technology continued to adapt and remain in production, while others who would not exited the industry. However, not surprisingly the survey also found that despite the growth in income, sericulture continues to be only a secondary source of income for the majority of the rearers. On the broader policy reforms anticipated under the project, there has been considerable progress but only after closure of the project. This is detailed below.

4.2 Outputs by components:

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(a) Policy Reform and Institutional Development.

The overall assessment of the achievements of this component is satisfactory albeit with some delays. The project has had a positive impact in initiating measures for improving the policy and institutional framework for a modern silkworm industry in Bangladesh. Four BSB grainages were leased to the SF. Two grainages were used for commercial production of good quality silkmoth eggs, one for mulberry plantation nursery for the developing good quality mulberry saplings for sale to NGOs and the remaining one for the field training center. BSB raised the selling price of silkmoth eggs.

On the institutional front the project was able to achieve significant results within the Bangladesh country context. Despite the opposition from the Collective Bargain Agent (CBA) of the BSB, the Government succeeded in carrying out three major reform actions. Effective December 2001, the two silk mills operated by BSB were closed and staff retrenched. BSRTI was separated from BSB and the legal framework of BSRTI was amended to provide full autonomy from BSB. A major implication of this separation is that BSRTI would now have complete access to the funds provided by the Government for research and training instead of these being diverted to other areas as was the practice in the past. BSB has also retrenched the services of about 80 staff financed from the development budget and 8 staff from the revenue budget. In addition, BSB scaled down some of its commercial operations.

The SF was established as planned, and continued to function satisfactorily throughout most of the project. SF provided a forum for the NGOs, private sector and the MOT to exchange ideas, forge partnerships and discuss issues related to the development of the sub-sector. SF made available international standard technical advice in the areas grainage management, rearing and reeling technology, silkworm disease, germplans maintenance, dyeing and weaving technology which benefitted the rearers and the weavers. SF responded fairly quickly to the NGOs request for assistance with the supply of mulberry saplings and the development of bush type of mulberry tress on a cost-sharing basis. The lack of clarity about the Chair of SF in the MAA affected the leadership of SF as there were frequent changes. There some problems with the structure and composition of the GB, notably its failure to rotate members at the Annual General Meetings (AGM). Prompt management actions regarding staff performance could have contributed to better performance by SF.

It was not possible to establish any of the envisaged producer associations, largely because of resistance from the participating NGOs who viewed such organizations as trade unions which could be politicized and not serve the interests of the poor women.

The TSMU functioned throughout the project, but problems were experienced with the recruitment of some of its consultants, The TSMU consultants, when recruited, provided objective advise to the MOT and made useful contributions to the development of the Government’s silk policy. The draft policy document is under review by an inter-ministerial committee.

(b) Productivity Enhancement and Research Support.

The overall performance of this component is satisfactory. The Action Research Program (ARP), though started later than planned, was able to determine quite convincingly the main constraints limiting the productivity of Bangladeshi rearers, and the possibilities of improving the quality of raw silk through the use of modern drying and reeling facilities. It is expected that the NGOs will implement the recommendations as their beneficiary groups participated in the ARP. The renovation of BSRTI’s facilities and procurement of most of the major equipment has been completed albeit after some delays.

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The GMC at Rajahahi was renovated as planned, and a new facility was constructed and equipped at Sakoa. As there was some delay in completing the civil works and procuring the equipment, the facility become operational just after project closure. Silkworm eggs of superior races were purchased from major silk producing countries

Two grainages leased from BSB were renovated and their associated mulberry gardens rehabilitated. The quality of silkmoth eggs produced at these facilities has been good, production targets exceeded, and production costs were within expectation.

The project was unable to carry out the Pilot Bivoltine Cocoon Development feasibility study for reasons mentioned earlier. On hindsight, the inclusion of this technical sub-component was possibly premature since inter-disciplinary research capacity was still at a premature stage.

(c) Technology Dissemination

The overall performance of this component is considered to be mixed.

The Extension Support Program (ESP) was considerably more successful than the training support. Most of the NGOs engaged in sericulture participated in the ESP Some 3,200 new rearers were trained in all aspects of rearing from mulberry cultivation to cocoon marketing. The implementation of the Demonstration of Chawki Rearing (DCR) was somewhat delayed, but the outcome was successful. The target number of 100 Chawki rearers was reached, and the results show convincingly that Chawki rearing can raise cocoon production substantially.

The development of the BSRTI training capacity was disappointing. The TA retained to develop the improved training program was ineffective. As a result, the institute was not been able to improve its Training of Trainers (TOT) courses. The achievements of the Field Training Canters (FTC) were limited. SF was able to establish an FTCs in only ONE location. As a result, SF was not able to organize training for all the targeted number of rearers. (d) Product Development and Market Promotion

The outcome of this activity was disappointing. The component was heavily dependent on a phased series of TA inputs, namely market intelligence, product development and then promotion. Problems with recruiting sufficiently qualified consultants and phasing of the inputs effectively nullified any achievements.

(e) Monitoring and Evaluation.

The outcome of this component was marginally satisfactory. It was not until the third year of the project that the benchmark survey could be commissioned. The methodology of the survey was complex, covering too many non-silk indicators. Instead the SF instituted its own monitoring system or performance tracking system based on a regular protocol of collecting field results either directly from rearers who had purchased eggs, or from sponsoring NGOs. In late 2002, SF launched an independent evaluation study which was based on a small, but in-depth field survey. This study confirmed substantial improvements in cocoon production and income from rearing.

4.3 Net Present Value/Economic rate of return:At appraisal using the base costs of the project components, excluding the costs of the BSB staff redundancy payments, the project was estimated to have an ERR of 20%. Switching values of critical

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items (decreasing benefits by 16 percent and increasing investment costs by 28 percent) would have reduced the ERR to 12 percent. These estimates were based on the assumption that there would be a substantial increase in demand for locally produced raw silk from 44 to 181 tons by the fifth year of the project. The delays in the release of facilities by the BSB prevented the SF from producing enough quality silkworm eggs until Year 3 of the project, and the collapse of the world market price for raw silk led to its massive imports by local weavers. These factors resulted in a virtual stagnation of domestic output in overall terms during the project lifetime. Under the circumstance, there did not appear to be any rationale for recalculating the ERR.

The DRC analysis indicated that the gains in productivity should lead to falls in DRCs sufficient to justify the project. At closure, the DRC for rearing using improved technology is calculated to be 0.35 relative to India (with comparable silk quality) indicating that it is socially profitable to produce cocoons in Bangladesh. When compared to China the DRC remains above unity. However, Chinese silk and Bangladeshi silk are different products and the comparison is of limited value. DRC calculations for reeling have not been undertaken due to lack of reliable data. The details of the analysis are presented in Annex 3.

4.4 Financial rate of return:

The FRR was re-estimated for grainage operations and silkworm rearing. The FRR for grainage operations, using costs and returns data supplied by the SF projected forward for 10 years indicate an FRR of 12 percent. This is substantially lower than 20 percent estimated at appraisal. It is, however, important to note that the SF had to scale down operations considerably (for reasons mentioned earlier) and was therefore was not able to achieve anticipated economies of scale. The FRR for silkworm rearing (all ages) by project farmers using quality eggs supplied by the SF and improved technologies is estimated to be 14%, which is encouraging.

4.5 Institutional development impact:

BSB/BSRTI. The delay in implementation of the reforms of BSB/ BSRTI affected the development of BSRTI’s research and training capacity under the project. It appears that the project team underestimated the political difficulties associated with these reforms and depended too much on the commitment of the Minister and Secretary of MOT. With hindsight, perhaps the project team could have built in contingencies, such as allowing SF to lease an NGO grainage rather than only BSB grainages. Perhaps more time should have been allowed for the reform program to be implemented. However, despite the wavering commitment, the MOT eventually became convinced of the need for the reforms and succeeded in granting operational autonomy to BSRTI from BSB and shutting down the two silk mills. Furthermore, MOT has just begun to seriously analyze the role that BSB can effectively play and determine a reasonable budget to carry out the revised functions. This should have significant long term benefits to the sub-sector as it will even up the playing field at all stages from rearing through to weaving. The opportunity provided by the project for regional training for the BSRTI staff has helped to improve their technical capacity. In addition, opportunity to work with international experts has also helped to enhance their knowledge and procedures.

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Silk Foundation. The project has clearly demonstrated that an autonomous and flexible organization, like SF, operating on commercial principles, rather than a parastatal agency, is a model for better providing of the kind of service support needed by the sub-sector. Although the SF could not become financially independent during the project period, the reasons for this were beyond its control. By the end of the project, the team in SF was better able to respond to needs of the stakeholders, improve the technical and financial management of the grainages, and provide a forum for the organizations involved in silk production to discuss the opportunities and challenges of the sub-sector. SF made a good start but more time and support is required for SF to deliver its mandate.

NGOs and Private sector. The impact of the project on the sericulture development program of the NGOs has been positive. As a result of project intervention, overall the NGOs have been able to increase the size of their sericulture program in terms of coverage, budget and technical staff. The smaller NGOs have developed their technical and management capacity to deliver better services. The larger NGOs benefitted from the extension management support provided by SF. Compared to NGOs, the impact on the private sector has been less significant. A major reason is that the weaving segment of the industry is done mostly by the private sector but the project interventions focused mainly on the upstream activities. Nonetheless, partnership with SF helped the private sector to understand the complexities of the export market, environmental issues and investment in improved design. The project did not finance any activities likely to generate adverse environmental impacts. Training by NGOs helped with the appropriate handling of formaldehyde. Monitoring of the environmental aspects were left with the NGOs and there were no adverse impacts reported by the NGOs.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:

There were two factors which affected implementation. One was the collapse of the world price for silk yarn. China dominates the silk yarn market internationally. Soon after the project started, the silk yarn price fell very low as China reduced its price. This affected the rearing activities as the weavers had access to cheaper silk yarn, thus reducing its demand for domestic yarn. The second was the nature of NGO operations, the buying price of cocoons, selling price for silkworm eggs, resistance to producers organization affected implementation.

5.2 Factors generally subject to government control:

MOT could have avoided the delay with the release of BSB facilities to the SF. The lconsequence of the delay was that the grainages could not be operational from the first year of the project and SF could not capture the market. The delay also led to investments by a large NGO to increase its egg production capacity. Thus SF lost a major share of the market for silkworm eggs before it even started operations. Subsequently this meant the SF was unable to become financially self-supporting from the sale of silkworm eggs. Some problems were experienced early in the project with delays in the release of GOB lcounterpart funds for SF and BSRTI.

5.3 Factors generally subject to implementing agency control:

The SF experienced difficulties in the timely recruitment of competent consultants. This was the cause of some weaknesses in training and M&E. The guidance from the GB was not strong. The SF needed to be more business oriented and proactive. This could have been achieved by having representation of the GB members with good knowledge of the sector combined with business and technical

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acumen.

5.4 Costs and financing:

At appraisal the total project cost was estimated at US$12.99 million of which IDA provided a credit of US$11.35 million (SDR equivalent 8.30 million), GOB US$1.21 million equivalent , and NGOs US$0.09 million equivalent. The SF and beneficiaries were to provide US$0.34 million equivalent. The actual project costs at closure on June 30, 2003 were US$6.48 million equivalent. Withdrawals of the IDA credit amounted to US$5.88 million equivalent (SDR equivalent 4.52 million) or about 83 percent of the revised credit amount. Due to slow implementation progress, dropping/scaling down of some components, on two occasions there were cancellations from the Credit. The first cancellation from the Credit amounted to SDR 1.2 million equivalent on July 2001 and the second one was for SDR 1.635 million equivalent on June 2002. On October 31, 2003 after the final accounting of the Credit was completed, the outstanding balance of SDR 0.935 million equivalent was cancelled.

6. Sustainability

6.1 Rationale for sustainability rating:

The sustainability of the project activities has been assessed based on the improvements in the policy environment, diffusion of knowledge about improved technology and practices and not so much on the sustainability of SF. As a result of the project, there is a greater understanding among the policy makers and the private entrepreneurs on what are the factors for becoming competitive in this activity.

The institutional and policy reforms (mentioned earlier) carried out by the government can be a good indicator for sustainability. The productivity enhancement of the silkmoth eggs, improved grainage management, training of rearers on improved rearing practices and technical and managerial support to the smaller NGOs are likely to be sustained. It is also expected that the key reforms will also be sustained. The increase in rearers’ income would possibly be sustained as long as NGOs continue to support them with quality silkmoth eggs and markets for good quality cocoons exist. This will only happen when the demand for domestically produced raw silk increases, which in turn, is a function of the returns to reeling quality yarn. There are concerns over factors that continue to discourage the use of domestically produced raw silk. Although the project has demonstrated that improved yarn can be produced domestically at prices below those of imported yarn, the volume of production and the reliability of supply remains uncertain and weavers still prefer to use imported silk yarn. The next stage in the development of the sub-sector has to be to expand the capacity of high quality domestic rearing.

The future of the SF is yet to be determined. Without SF, one or two of the larger NGOs will possibly be able to continue sericulture activities in a modest scale because these have grainage facilities, but the smaller NGOs would have to terminate this activity.

Based on the above, the project sustainability has been rated as Likely.

6.2 Transition arrangement to regular operations:

The MOT has made budgetary provision in the amount of US$0.6 million for the first year of operations after the project closure, and has prepared a five year plan for a total of US$3.0. It is reported that the MOT is also investigating the possibility of securing additional donors funds to support the sub-sector, in the areas of extension and post-harvest operations. Steps have also been taken to secure a credit window for sericulture. These developments, together with the institutional reforms recently would

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seem to confirm some level of GOB commitment to sericulture but this is not enough to conclude that SF will continue with its operations.

7. Bank and Borrower Performance

Bank7.1 Lending:

The World Bank’s performance at this stage is considered satisfactory. The Bank put a considerable amount of thought, time and resources into the preparation of this project. Together with FAO/World Bank Cooperative Program (CP), several missions were fielded during project preparation. These missions participated in several stakeholder workshops to discuss proposed project components and institutional reforms.

7.2 Supervision:

The World Bank’s performance during supervision is considered to be Satisfactory. Considerable effort was exerted by the task team to advance project implementation in the face of sometimes unfavorable environment with frequent changes in Secretaries of MOT having responsibility for implementation, necessitating restarts of discussions on institutional issues. However, the task team persistently maintained discussions with the borrowers on solutions for achieving development objectives of the project. Supervision missions were regular and comprehensive up until the mid term review. In total, including the MTR, there were nine supervision mission, at approximately six monthly intervals. The supervision mission included a staff member from the New Delhi field office with extensive experience in sericulture. The supervision mission composition (Annex 4a) for most of the project was the same resulting in a remarkably consistent evaluation of the project. The supervision missions were proactive in making suggestions for modest modifications of the project during implementation and in continuing to press for institutional reform, but in a way that did not jeopardize the other components of the project. Regular follow-up of audits by FM significantly improved the timely delivery of audit reports.

7.3 Overall Bank performance:

Overall the performance of the Bank is considered to be Satisfactory.

Borrower7.4 Preparation:

The Borrower’s role during preparation was highly satisfactory. It played an active and supportive role during preparation. It formed a consultative group with major stakeholders, such as the NGOs and the private sector to advise the Government with the project design. It used the Poverty and Human Resource Development (PHRD) grant to commission useful studies. Up-front actions on some policy reforms, mentioned earlier were taken by the Government.

7.5 Government implementation performance:

In contrast, the performance of the Government during implementation varied. Immediately after the Credit for the project was negotiated in late 1997, there were changes in the leadership of MOT and the new leaders did not demonstrate strong commitment to the project. They took little interest to introduce reforms of support the SF. Only in the last eighteen months of the project, with yet another change of management, support for the project and its aims increased noticeably again. The one-time

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release of counterpart funds by the Government for SF activities helped to avoid any fund constraint.

7.6 Implementing Agency:

The performance of the SF has been satisfactory. It carried out procurement relatively with less delays, except for the civil works part. Introduction of a procurement core team had contributed considerably in managing their procurement. SF could have been more proactive and perhaps have done more on the business development aspects. The financial management system of SF was satisfactory with a computerized accounting system, well defined policies and procedures and adequate internal control arrangements in place. SF adhered to Bank procedures e.g. funds flow (including counterpart funds). There was adherence to good accounting practice e.g. budgeting and general financial management, including accounts preparation, reporting, compliance with standards, FM staffing and capacity. There were some delays in submission of audited financial statements. Independent private auditor's reports on SF were mostly received later than due dates. SF promptly responded to the audit observations and succeeded in getting most of the observations settled.

Initially BSRTI's performance was not satisfactory but it gradually improved. There were delays in procuring goods/ equipment but most of the civil works and procurement of essential items were procured by the Credit closing date. However, under the project this institute developed some procurement capacity, which is likely to contribute positively in future. The BSRTI could have been more proactive in developing a multi-disciplinary team for research and training. The Government auditor's reports on BSRTI and TSMU components were received mostly on time with one time expectation. BSRTI also responded promptly to audit observations and got those settled. The audit reports did not depict any major accountable issue.

7.7 Overall Borrower performance:

Overall the borrower performance is considered to be satisfactory.

8. Lessons Learned

Several key lessons were learnt from the implementation of this pilot project in terms of impact of the global market on the competitiveness of silk sub-sector, institutional reforms, women's entrepreneurship development, merits of pilot project and institutional framework for innovative projects.

Competitiveness of the Silk Sub-sectorBangladesh has good potential for sericulture and cocoon processing and can compete in a lworld market where the playing field is level and not dominated by China, as it is now. If and when China moves to the high end of the silk market as Japan has done. Bangladesh is well positioned to benefit. Sericulture can provide an attractive income for the rural poor, but not necessarily for those lwho have no access to some land, or modest amount of finance (own equity or credit) needed to start the operations.Sericulture as an activity depends on efficient downstream processing of cocoons and weaving, land will only be successful if there is vertical integration of all stages of the production chain.

Institutional ReformsInitiating fundamental institutional reforms in a deeply entrenched bureaucratic structure is l

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difficult and time consuming and should not be under-estimated at project design stage.

Pilot ProjectPilot projects, if well designed and supervised project, can be very successful in demonstrating lnew technologies and in supporting politically sensitive institutional reforms. Their particular strength being an ability to focus on important key details rather than concerns about rates of progress or disbursement.

Institutional FrameworkNot-for-profit Foundations can provide the essential support services representing the interests lof a range of stakeholders from small scale producers through to manufactures. However, there are problems in securing adequate autonomy for Foundations initially supported with government funds, and in attracting capable managers from the private sector.

9. Partner Comments

(a) Borrower/implementing agency:

(b) Cofinanciers:

(c) Other partners (NGOs/private sector):Although the ICR was a core ICR and not an Intensive Learning ICR a group of partner NGOs were invited to submit comments on the project. Key comments are listed below:

1. The project has made a huge contribution to the sub-sector through the timely supply of quality silkworm eggs (disease free laying/dfl), leading to substantial increases in Cocoon output.

2. Secondly the project has convincingly demonstrated the benefits of Chawki, and late age rearing.

3. The project has also assisted in demonstrating the benefits from establishing mulberry gardens.4. Major problems remain with cocoon and raw silk marketing and post-harvest operations that

the project did not have time to fully address.

10. Additional Information

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

Improvement in reeling productivity from 16 to 28 kg cocoons (per 100 dfl) ± 34 kgImprovement in rearing productivity from 18 to 12 kg cocoons per 1 kg of raw silk 11.5Increase in average daily income of rearers Tk 70 from Tk 40-Tk 70 per day Tk 64/dayCreate additional person days of employment 1.23 million days 150,000 (lower than anticipated due to

reduced demand for domestic silkIncrease economic efficiency of silk production as DRC :-rearing -reeling

from 2.18 --> 0.77from 3.72 --> 0.59

Output Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

Governance of SF is democratic and transparent according to the Memorandum and Articles of Association of SF; SF’s financial operation breaks-even by Year 5 of the project

Governance of SF partially democratic and transparent. Financial operations failed to breakeven by closure.

At least 50% of the women producers whose primary occupations either rearing or reeling are organized in the associations and are empowered through access to training and extension services. Representatives of these associations are represented in SF.

Not fully achieved. Formation of associations discouraged by participating NGOs.

Restructuring of BSB is completed with stakeholder participation in its Governing Body by Year 1 of the project.

Restructuring completed, but not until project closure.

Total annual domestic output of raw silk to increase from 29 tons in 1994-95 to 36 tons by Year 5.

Decrease in domestic output over much of project period due to cheap imports of raw silk yarn from China.

1 End of project

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Annex 2. Project Costs and Financing

Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 0.00 0.89 0.10 0.00 0.99(0.00) (0.79) (0.08) (0.00) (0.87)

2. Goods 0.05 0.65 0.42 0.00 1.12(0.05) (0.44) (0.28) (0.00) (0.77)

3. Services 1.02 0.89 1.00 0.00 2.91(1.02) (0.89) (1.00) (0.00) (2.91)

4. Miscellaneous 0.00 0.00 0.54 0.00 0.54(0.00) (0.00) (0.54) (0.00) (0.54)

5. Miscellaneous 0.00(0.00)

0.00(0.00)

2.15(0.96)

0.00(0.00)

2.15(0.96)

6. Miscellaneous 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

Total 1.07 2.43 4.21 0.00 7.71(1.07) (2.12) (2.86) (0.00) (6.05)

1/ Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies.2/ Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff

of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

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Annex 3. Economic Costs and Benefits

Financial Analysis

Table 1 presents budgets for control farmers (without project) and project farmers (with project). The budgets are based on a 2002 Bangladesh Silk Foundation survey. Table 1 indicates that project farmers have higher cocoon production, lower silkworm egg, mulberry leaf and labor costs but, as expected, higher chemical and materials costs.

Incremental returns (after labor costs) for project farmers are Tk 1,510 and the incremental returns per person-day (before labor costs) is Tk 25.4. Total average returns per-person-day (before labor costs) for project farmers is Tk 63.7 and compares with the unskilled person-day wages of Tk 44, Tk 30 and Tk 15 for male, female and child person-day wages respectively.

Table 2 presents a financial analysis of silk rearing by project farmers over the period 1998 to 2007. This scenario depicts the financial analysis of project farmers who started with the project in 1998. The FRR (before labor costs) is 56% with a NPV of Tk 14,424 and a person-day labor return of Tk 64 in 2002 increasing to Tk 81 in 2007. The FRR (after labor costs) is 13% with a NPV of Tk 427.

Table 1. Bangladesh Silk Rearing Enterprise Budgets: Control and Project Farmers, 2002Control Farmers(Without Project)

Project Farmers(With Project)

Investment Costs (Tk) Rearing Room 3,000 7,000 Equipment 1,500 3,000Total Investment Costs 4,500 10,000Revenue Cocoon Production (kg) 92 112 Cocoon Price (Tk/kg) 76 76 Cocoon Sales Revenue (Tk) 6,992 8,512 Fuelwood Sales (Tk) 300 402Total Revenue 7,292 8,914Operating Costs (Tk) Silkworm Egg Cost 664 359 Chemicals, Materials 514 1,814 Mulberry Leaves 1,940 1,432 Depreciation (Rearing House @ 10%/yr.) 300 700 Depreciation (Equipment @ 10%/yr.) 150 300Total Operating Costs 3,568 4,605Labor Costs (Tk)a 3,073 2,148Total Operating & Labor Costs 6,641 6,753Returns (Tk) Returns (Before Labor) 3,727 4,309 Returns to Labor (Tk/person-day)b 38.3 63.7 Returns (After Labor) 651 2,161 Incremental Returns (After Labor) - 1,510 Incremental Returns/Person-Day 25.4Source: Bangladesh Silk Foundation 2002 survey of Control Farmers (Without Project) and Project Farmers (With Project).

a Control Farmer labor person-days of 17 male, 74.6 female and 5.8 child and Project Farmer labor

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person- days of 15.2 male, 46.2 female and 6.2 child valued at Tk 44, Tk 30 and Tk 15 per person-day respectively.b Total Control Farmer person-days of 97.4 and Project Farmers person-days of 67.6.

Table 2. Bangladesh Silk Rearing Model: Scenario I Financial Analysis (in 2002 Taka)

Actual Planned1998 199920002001200220032004200520062007

Investment Costs (Tk) Rearing Room 7,000 000000000 Equipment 3,000 000000000Total Investment Costs 10,000 000000000Revenue Cocoon Production (kg) 92 97102107112115118121124127 Cocoon Price (Tk/kg) 76 767676767676767676 Cocoon Sales Revenue (Tk) 6,992 7,3727,7528,1328,5128,7408,9689,1969,4249,652 Fuelwood Sales (Tk) 300 325350375402402402402402402Total Revenue 7,292 7,6978,1028,5078,9149,1429,3709,5989,82610,054Operating Costs (Tk) Silkworm Egg Cost 664 590515440359359359359359359 Chemicals, Materials 514 8401,1651,4901,8141,8141,8141,8141,8141,814 Mulberry Leaves 1,940 1,8131,6861,5591,4321,4321,4321,4321,4321,432 Depreciation-Rearing House 700 700700700700700700700700700 Depreciation -Equipment 300 300300300300300300300300300Total Operating Costs 4,118 4,2434,3664,4894,6054,6054,6054,6054,6054,605Labor Costs (Tk) 3,073 2,8432,6132,3832,1482,1482,1482,1482,1482,148Total CostsOperating & Labor 7,191 7,0866,9796,8726,7536,7536,7536,7536,7536,753Invest., Operating & Labor 17,191 7,0866,9796,8726,7536,7536,7536,7536,7536,753ReturnsBefore Labor Costs -6,826 3,4543,7364,0184,3094,5374,7564,9935,2215,449Tk/Person-day Return - ---646770747781After Labor Costs -9,899 6111,1231,6352,1612,3892,6172,8453,0733,301 Financial AnalysisBefore Labor Costs FRR% 56% NPV @ 12% (Tk) 14,424After Labor Costs FRR% 13% NPV @ 12% (Tk) 427Source: Control farmer coefficients (from Table 1) are used for 1998 (since there was little project activity in the first project year). Actual coefficients for 2002 (from Table 1) have been used. Coefficients for 1999 to 2001 are assumed to increase or decrease linearly between 1998 and 2002. The coefficients for 2003 to 2007 are set equal to 2002 coefficients with the exception that cocoon production continues to marginally increase.

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Domestic Resource Cost

The concept of domestic resource cost (DRC) provides a measure of the opportunity cost (in terms of domestic resources) of providing a net marginal unit of foreign exchange. DRC analysis involves calculating a DRC ratio A/(B-C), where A is the social value of non-traded inputs used to produce one unit (i.e., kg) of the commodity (fixed land and capital costs expressed as the return to capital and land and, labor costs using a shadow wage rate), B is the social value of gross output (value of output at border price x shadow exchange rate) and C is the social value of traded inputs used to produce a unit of the commodity (value of inputs at border price x shadow exchange rates).

The DRC ratio is used as a cost-benefit ratio; if the DRC ratio is less than 1, then it is socially profitable to produce the commodity, if the DRC is greater than one, it is not socially profitable. The DRC ratio only provides information in terms of efficiency and does not include other considerations such as welfare, risk and security.

The analysis calculates two DRCs for cocoon rearing: (i) Bangladesh relative India (Table 3) and (ii) Bangladesh relative China (Table 4), as opposed to a traditional analysis of Bangladesh relative to the World. The reason is to demonstrate the difference between the two types of cocoons from Bangladesh and India that are of similar type and produce similar quality silk and the cocoons from China which are of a different type (bivoltine) that produce a higher quality silk.

Cocoon Rearing DRC Ratios

Bangladesh relative India: The results (DRC = 0.35) indicate that, if the current technology used by the project farmers were used by all silk cocoon rearing farmers in Bangladesh, it is socially as profitable to produce Bangladesh cocoons as India cocoons. Bangladesh cocoons are produced efficiently (less than one taka of real resources are used to produce one Taka of value added measured in terms of opportunity cost). There is a comparative advantage for cocoon production in Bangladesh of the type and quality produced. Thus Bangladesh should produce cocoons and should expand cocoon production (provided foreseeable prices, costs, level of demand and exchanges rates do not radically change).

Bangladesh relative China: The results (DRC = 1.65) indicate that, if the current technology used by the project farmers were used by all silk cocoon rearing farmers in Bangladesh, it is not socially profitable to produce Bangladesh cocoons of the quality and type produced to compete with the quality and type produced by china. To compete with china, it is likely that the type of production (type of silkworm and quality), production techniques and the scale of production would have to radically change. It is basically a different market.

Raw Silk Production DRC Ratios

A DRC ratio was not calculated for Bangladesh raw silk because of lack of quality data. Furthermore, the technology transfer to make the industry more efficient is in its beginning stages. The DIDS (2002) study reported a DRC ratio of 1.44 for production of raw silk. However, it may be too early to come to conclusions about new technology and its effect on the comparative advantage of Bangladesh raw silk production.

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Table 3. Domestic Resource Costs for Cocoon Production: Bangladesh Relative India

BangladeshDomestic

Production (Tk)

ConversionFactor

India Social Value of Gross Output and Opportunity Cost of Domestic Resources (Tk)

1. Green Cocoon Price/kga 76.0 147 = (B)2. Non-Labor Input Costs/kg Cocoon Productionb a) dfl eggs 3.2 2.00 6.4 b) Mulberry Leaves 16.2 1.00 16.2 c) Disinfectants/Kerosene 12.8 0.90 11.5 d) Depreciation Costs 7.4 1.28 9.5 Total 39.6 43.6 = (C)3. Net Value Added (1-2) 36.4 103.4 (B-C)4. Labor Costs/kg Cocoon Productionc

19.2 0.85 16.3

5. Capital Cost/kg Cocoon Productiond

20.1 0.98 19.7

6. Total Labor + Capital Cost 39.3 36.0 = (A)7. DRC = A/(B-C) 0.35

a Bangladesh average green cocoon price. The social value of gross output calculated as the border price of Indian green cocoon of Rs. 155 adjusted for difference in renditta by factor of 0.69 (imported cocoon of 8 renditta relative to domestic renditta of 11.6) adjusted for shadow exchange rate of 1.37.b Bangladesh dfl eggs, mulberry leaves and disinfectant/kerosene costs from BSF silk project farmer survey in 2002. Dfl egg conversion factor of 2 based on domestic eggs sold at 50% of actual production cost. Other conversion factors from BIDS May, 2003 Final Report (page 31).c Person-days labor/kg of cocoon production estimated at 0.136 male, 0.41 female and 0.055 child person-days (from BSF silk project farmer survey) at wage rates of Tk 44, Tk 30 and Tk 15 for male, female, and child person-day wage rates (wage rates from BIDS May, 2003 Final Report). A conversion factor of 0.85 (from Shahabuddin, 2000) is used to obtain the wage bill in terms of a shadow labor price.

d Return on capital = (Net Value Added – Labor Costs) x a conversion factor for capital of 0.98 (following the procedure in the BIDS May, 2003 Final Report).

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Table 4. Domestic Resource Costs for Cocoon Production: Bangladesh Relative China

BangladeshDomestic

Production (Tk)

ConversionFactor

China Social Value of Gross Output and

Opportunity Cost of Domestic Resources (Tk)

1. Green Cocoon Price/kg 76.0 66 = (B)2. Non-Labor Input Costs/kg Cocoon Productiona a) dfl eggs 3.2 2.00 6.4 b) Mulberry Leaves 16.2 1.00 16.2 c) Disinfectants/Kerosene 12.8 0.90 11.5 d) Depreciation Costs 7.4 1.28 9.5 Total 39.6 34.1 = (C)3. Net Value Added (1-2) 36.4 22.2 = (B-C)4. Labor Costs/kg Cocoon Production 19.2 0.85 16.35. Capital Cost/kg Cocoon Production 20.1 0.98 19.76. Total Labour + Capital Cost 39.3 36.0 = (A)7. DRC = A/(B-C) - 1.62

a Bangladesh average green cocoon price. The social value of gross output calculated as the border price of China dried cocoon of US$ 5.30 adjusted for difference in renditta by factor of 0.207 (2.4 green cocoon/ renditta relative to domestic renditta of 11.6) adjusted for shadow exchange rate of Tk 60/US$.

b Bangladesh dfl eggs, mulberry leaves and disinfectant/kerosene costs from BSF silk project farmer survey in 2002. Dfl egg conversion factor of 2 based on domestic eggs sold at 50% of actual production cost. Other conversion factors from BIDS May, 2003 Final Report (page 31).

c Person-days labor/kg of cocoon production estimated at 0.136 male, 0.41 female and 0.055 child person-days (from BSF silk project farmer survey) at wage rates of T 44, Tk 30 and Tk 15 for male, female, and child person-day wage rates (wage rates from BIDS May, 2003 Final Report). A conversion factor of 0.85 (from Shahabuddin, 2000) is used to obtain the wage bill in terms of a shadow labor price.

d Return on capital = (Net Value Added – Labour Costs) x a conversion factor for capital of 0.98 (following the procedure in the BIDS May, 2003 Final Report).

References:

Bangladesh Institute of Development Studies. 2003. Evaluation of the Silk Development Project: Final Report. Dhaka.Shahabuddin, Quazi. 2000. Assessment of Comparative advantage in Bangladesh Agriculture. Bangladesh Development Studies, Vol XXVI, No. 1, March, pp. 37-76.

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Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle Performance Rating No. of Persons and Specialty

(e.g. 2 Economists, 1 FMS, etc.)Month/Year Count Specialty

ImplementationProgress

DevelopmentObjective

Identification/Preparation07/26/1996

Appraisal/Negotiation10/08/1998

Supervision09/03/1998 7 TASK MANAGER (1);

SR. AGRICULTURIST (1);ECONOMIST (1);PROCUREMENT OFFICER (1); SERICULTURIST (1); DISBURSEMENT OFFICER (1); FINANCIAL OFFICER (1)

U S

03/10/1999 7 TASK LEADER (1); SR. AGRICULTURIST (1); ECONOMIST (1); PROCUREMENT SPECIALIST (1); DISBURSEMENT OFFICER (1); FIN. MGMT. SPECIALIST (1); TEAM ASSISTANT (1)

U S

08/19/1999 8 MISSION LEADER (1); AGRICULTURIST (1); PROCUREMENT SPECIALIST (1); DISBURSEMENT SPECIALIST (1); FINANCIAL MANAGEMENT (1); ECONOMIST (1); TEAM ASSISTANT (1); SERICULTURIST (1)

S S

03/06/2000 9 TASK LEADER (1); CO-TASK LEADER (1); ECONOMIST (1); PROCUREMENT SPECIALIST (1); DISBURSEMENT OFFICER (1); FIN. MGMT SPECIALIST (1); TEAM ASSISTANT (1); PORTFOLIO MANAGER (1); SERICULTURE EXPERT (1)

S S

04/12/2001 4 TASK LEADER (1); SR.AGRICULTURIST (TTL) (1); PROCUREMENT SPECIALIST (1); DISBURSEMENT OFFICER (1)

U S

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12/01/2001 5 TL (SR OP OFFICER) (1); SR OPERATIONS OFFICER (1); DISBURSEMENT OFFICER (1); PROCUREMENT ANALYST (1); INS DEV SPECIALIST (1)

U S

08/25/2002 5 TASK TEAM LEADER (1); PROCUREMENT SPECIALIST (1); DISBURSEMENT OFFICER (1); INST. DEV. SPECIALIST (1); SERICULTURIST (1)

S S

03/05/2003 6 TASK MANAGER (1); SR. FM SPECIALIST (1); DISBURSEMENT OFFICER (1); SR. PROC. SPECIALIST (1); INST. DEV. SPECIALIST (1); SERICULTURE SPECIALIST (1)

S S

ICR10/30/2003 4 TASK MANAGER (1);

SERICULTURIST (1); AGRICULTURIST (1); ECONOMIST (1)

S

(b) Staff:

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)

Identification/PreparationAppraisal/NegotiationSupervisionICRTotal

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingMacro policies H SU M N NASector Policies H SU M N NAPhysical H SU M N NAFinancial H SU M N NAInstitutional Development H SU M N NAEnvironmental H SU M N NA

SocialPoverty Reduction H SU M N NAGender H SU M N NAOther (Please specify) H SU M N NA

Private sector development H SU M N NAPublic sector management H SU M N NAOther (Please specify) H SU M N NA

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Lending HS S U HUSupervision HS S U HUOverall HS S U HU

6.2 Borrower performance Rating

Preparation HS S U HUGovernment implementation performance HS S U HUImplementation agency performance HS S U HUOverall HS S U HU

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Annex 7. List of Supporting Documents

1. Evaluation of Silk Development Project, Bangladesh Institute of Development Studies, May 2003.2. Implementation Completion Report of Bangladesh Silk Foundation – September 2003.3. Implementation CompletionReports of TSMU and BSRTI, August- September 2003

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Additional Annex 8. Borrower's Comments to the ICR

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Comments of the Ministry of Textiles on theDraft Implementation Completion Report (ICR) on Silk Development Project (Credit 3004-BD).

Consolidated comments of the Ministry of Textiles on the draft ICR on Silk Development Project are as follows:

1.0 Sub-title 3.3 (a), bullet Nor. 5 : Textile Strategic Management Unit

The second sentence under above sub-title stated, "the project provided funds to enable TSMU to continue its work mainly in relation to the sericulture sub-sector".

It may be mentioned that the objectives of TSMU were to provide Technical Assistance to the Ministry of Textiles (MOT) in relation to:

a) Formulation of textile sector policies, which would promote export diversification and enhanced value addition in the modern textile, handloom and sericulture sub-sectors;

b) Develop effective linkages among the various conflicting sub-sectors of textile industry;

c) Continuous operation of MIS and restructuring of BSB/BSRTI etc.

It appears from the above objectives that continuation of TSMU was not only to work mainly in relation to sericulture sector, but also for integrated development of modern textile sector of Bangladesh. So, the second sentence of Sub-title 3.3 (a), bullet Nor. 5 should be re-phrased in the light of the objectives of TSMU to read as follows :

"The project provided funds to enable TSMU to continue its work in relation to modern textiles sector as well as the sericulture sub-sector".

2.0 Sub-title 3.4 : Revised Components

At the MTR, other than establishment of Vertically Integrated Unit by BSF and discontinuation of Producers' Associations and Pilot Bivoltine Cocoon development Components, another new component namely "Mulberry Development" was also agreed upon that should have been mentioned in this para.

3.0 Sub - title 3.5 (a) : Concept, Objective and Approach

From the very beginning the idea was to set up a limited company, which would subsequently become viable/profitable at the end of the project period. As to how a research project involved mainly with the development and research on silk could become viable and profitable as a private company was never questioned at any stage by the World Bank. The basic philosophy of developing a limited company to provide extension services and conduct research profitably was probably putting the entire basis of the project on a wrong footing right at the very start. Unless, of course, the World Bank had similar experiences elsewhere in the World. The Bangladesh Government in the Ministry of Textiles only went along with the World Bank's train of thought as laid down in the Project Appraisal Document prepared by the World Bank Team. This aspect of the project has not been mentioned in the draft ICR.

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The way the draft has been proposed, it would appear that the GOB, the MOT, the BSF, the BSRTI and everyone else involved on the Bangladeshi side are all to blame for whatever failures the project has had, while at para 7 clause 7.1 it has been stated, "The World Bank's performance at this stage is considered satisfactory. The Bank put a considerable amount of thought, time and resources into the preparation of this project project". Again at para 7.2 it has been started the "The World Bank's performance during supervision is considered to be Satisfactory" (capital "S" has been used). It would appear that while most aspects relating to project implementation have not achieved their envisaged targets, the only item of expenditure that would appear to have achieved 100% utilization is the Overseas Consultancy Components. Nine Supervising Missions came and went at regular intervals. One fails to see the logic behind putting all the reasons for failure on the Bangladeshi components. The consultants should have pointed out the inherent shortcomings in the philosophy of the project also.

However, the statement at page 10 para 4.5 Silk Foundation States "The project has clearly demonstrated that a non-profit organization operating on commercial principles, rather than a parastatal agency, is a much better way of providing the kind of service support needed by the sub sector".

This statement would appear to be sweeping generalization. The activities and outcomes of this project, do not go to support the above statement. In hindsight, it is quite obvious that a project for providing extension services and under taking research set up as a company, which then will also be "a non-profit company" is a contradiction in terms, to put it mildly. We therefore, agree with all the comments at para 3.5 (a) at page 5/6.

4.0 Sub-title 4.2 (a) : Policy Reform and Institutional Development

In para 3 of Sub-title, it has been stated that "The first Chair was the Secretary of MOT who was fully committed to the project design and the policy reforms indicated in the project. However, when the Secretary MOT was transferred to another Ministry, he was not allowed o continue as the Chair and MOT compelled the GB of SF to select the new Secretary as the next Chair. This action compromised the autonomy of the SF, and inhibited the full participation of other stakeholders".

It may be recalled that the Government of Bangladesh (GOB) in consultation with the World Bank sponsored the Silk Development Project. The first Chair was the Secretary of MOT who acted on behalf of the GOB and the Secretaries who subsequently hold the Chair of the GB of Silk Foundation also acted as the representative of the GOB. The ICR should not specifically mention that the Secretary who held the first Chair was fully committed to the project and it is implied by this statement that other Secretaries were non-committal to the project. So, this issue should not be mentioned in the ICR.

Secretaries are always subject to transfer in accordance with their line of duty. Casting aspersions about one particular Secretary as component to other need not be made. It is debatable whether some other Chairman would have made the performance more successful

5.0 Sub-title 5.2: Factors Generally Subject to Government Control Bullet Nor. 1 : "The failure of the MOT to effect the separation of the BSB and BSRTI during the project had a major inhibiting influence on the project throughout its implementation. This is

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because it gave rise to considerable uncertainty over the MOT policies for the sub-sector and in particular the future of the BSB. This in turn, led to doubts about whether the SF would be able to fully undertake its mandate".

It may be pointed out that the World Bank imposed a precondition for de-linking BSRTI from BSB at the last leg of implementation of SDP, as GOB failed to implement the restructuring program of BSB. GOB was committed for de-linking BSRTI from BSB, but it took a considerable time in completing the legal formalities involved in implementation of the de-linking tasks. However, the Government has succeeded in de-linking BSRTI from BSB in July 2003 i.e. immediately after completion of the project. So, this statement should be re-written accordingly or fully omitted.

Bullet Nor. 3: "The failure of the MOT to prevent the BSB selling silkworm eggs at below production cost throughout the project has also had a detrimental effect on the operation of the SF"

This statement is not true and may be omitted.

Bullet Nor. 4: "The occupation of the position of Chair of the GB of SF by the Secretary of the MOT for the period 1998 to 2000 inhibited the autonomy of the SF to appoint its own leader".

In view of the comments given in Sl. Nor. 3.0 this statement should be dropped from the ICR.

6.0 Sub-title 7.6 : Implementing Agency Para-2 : In para-2 it has been stated that "BSRTI's performance was not satisfactory. BSRTI made substantial delays in procuring goods/equipment. However, under the project this institute developed some procurement capacity, which is likely to contribute positively in future".

At the point of time when BSRTI has completed partial procurement of some equipment including two vehicles and when all the formalities for procurement formalities of the remaining goods and equipment were completed, IDA imposed a precondition in February 2001 to the effect that implementation works of BSRTI (civil construction, equipment/goods etc.) will remain held up until restructuring program of BSB/BSRTI is implemented. Due to imposition of this condition by IDA, implementation works of BSRTI (civil construction, equipment/goods etc.) remained held up until February 2002 resulting in overall delay in achieving the objectives of BSRTI components of the project.

So, if para - 2 is kept in the ICR, the reasons for delay in procuring goods and equipment should be mentioned.

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