Document of The World Bank FOR OFFICIAL USE ONLY Report No. 13697 PROJECT COMPLETION REPORT MALAYSIA NATIONAL FORESTRY RESEARCH AND DEVELOPMENT PROJECT (LOAN 2828-MA) NOVEMBER 10, 1994 Agricultural and Natural Resources Operations Division Country Department I East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Currency Equivalents Name of Currency = Ringitt ( M$) Currency Exchange Rate March 1987 June 1992 US$1.00 = M$2.56 M$2.60 M$1.00 = US$0.39 US$0.38 Government of Malaysia Fiscal Year January 1 - December 31 Weights And Measures Metric System Abbreviations & Acronyms ADB - Asian Development Bank CGIAR - Consultative Group for International Agricultural Research CIFOR - Center for International Forestry Research FD - Forest Department FRIM - Forest Research Institute of Malaysia ICRAF - International Center for Research in Agroforestry MFRDB - Malaysian Forestry Research and Development Board PWD - Public Works Department RAC - Research Advisory Committee of the MFRDB FELDA - Federal Land Development Authority SAFODA - Sabah Forestry Development Authority FOR OFFICIAL USE ONLY THE WORLD BANK W"hington, D.C. 20433 U.S.A. Off0oe of Dreatow-etu Opeitkne Evalution November 10, 1994 MEMORANDUM TO THE EXECUITIVE DIRECTORS AND THE PRESIDENT Subject: Project Completion Report on Malaysia National Forestry Research Development Project (Loan 2828-MA) Attached is the Project Completion Report on Malaysia-National Forestry Research and Development Project (Ln. 2828-MA), approved in 1987. Parts I and m were prepared by the East Asia and Pacific Regional Office and Part II by the Borrower. The quality of the PCR is satisfactory. The project supported institutional development of the newly-established Forestry Research Institute of Malaysia (FRIM). Specific objectives were to support research in environmental science and management of moist tropical forests and forest plantations; staff development through training and fellowships in Malaysia and abroad; and construction of administrative and technical facilities. Despite a slow start, the main objectives were met. Limitations on Bank support for recurrent expenditure on forestry research had to be relaxed and delays were incurred due to unfamiliarity with the Bank's procurement procedures. Support for integration of Malaysia's national and state forestry research agendas was less effective than expected. On the other hand, FRIM has emerged as a leading, global tropical forestry research institute with committed support from Government and international donors. Seven covenants aimed at ensuring quality in FRIM's research program, staffing, training, and consultancy were fully complied with. The outcome of the project is rated as satisfactory, institutional development as substantial, and sustainability as likely. No audit is planned. Attachment This document hes a restricted distribution end may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OFFICIAL USE ONLY Proiect Comoletion Report Malaysia National Forestry Research And Development Proiect (Ln 2828-MA) Table Of Contento Paae No. Preface ..i Evaluation Summary ................... . iii PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE 1. Project Identity .1 2. Background .1 3. Project Objectives and Descriptions. 3 4. Project Organization and Management. 4 5. Project Implementation. 4 6. Project Results. 5 7. Project Suotainability. 8 8. IDA Performance. 8 9. Borrower's Performance. 8 10. Project Relationship. 8 11. Consulting Services .9 12. Project Documentation and Data. 9 PART II: BORROWERS'S COMMENTS .10 PART III: STATISTICAL TABLES 1. Table 1. Related Bank Loans Credits .11 2. Table 2. Project Timetable .11 3. Table 3. Loan Disbursements 4. Table 4. Project Costs and Financing: Table 4A.Project Cost ..12 Table 4B.Project Financing ..13 5. Table 5. Status of Legal Covenants .14 6. Table 6. Use of Bank Resources: Staff Inputs . . . 15 7. Table 7. Bank Resources: Missions .16 MAP IBRD 20233 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. PROJECT COMPLETION REPORT MALAYSIA NATIONAL FORESTRY RESEARCH AND DEVELOPMENT PROJECT (Ln. 2828-MA) PREFACE This is the Project Completion Report (PCR) for the National Forestry Research and Development Project in Malaysia, for which Loan 2828-MA in the amount of US$9.0 million was approved on August 14, 1987 and made effective on September 10, 1987. The Loan was closed on 30 June 1992 (as per the original Loan Agreement). Total disbursement amounted to US$7.0 million compared with the original loan amount of US$9.0 million. In response to a request received from GOM in January 1992, US$2.0 million of the loan were cancelled. The rationale for this request was that by 1992, the Forestry Research Institute of Malaysia (FRIM) had become an attractive partner for international grant aid-funded research projects from many different overseas institutions and donors. It no longer needed Bank funding and technical assistance in the amounts determined at appraisal and loan negotiation. This PCR was prepared by EAIAN based on material collected in the course of a final supervision mission and in the project file. The Borrower's comments are included as Appendix 1 to this PCR. - iii - PROJECT COMPLETION REPORT MALAYSIA NATIONAL FORESTRY RESEARCH AND DEVELOPMENT PROJECT (Ln. 2828-MA) Evaluation Summary Introduction 1. The National Forestry Research and Development Project was the first free-standing forestry research project in the Bank. It was conceived as a model to be developed for major tropical forestry countries in general and as a catalyst to integrate Malaysia's somewhat loose network of forestry research organizations. Project identification coincided with a growing awareness of the need for a change in direction in tropical forestry research from production to sustained management for multiple purposes with special emphasis on preservation of biodiversity. The main objectives of the project were to improve and reorient forestry research and development by strengthening FRIM's institutional capacity to carry out an expanded research program in ecology, natural forest management, plantation forestry, timber processing, forest economics and forest policy. 2. The project's main components included: (i) support for implementation of an agreed research program through strengthening of FRIM's scientific staffing capability, provision of technical assistance, delivery of services, operation and maintenance of equipment and establishment of research plantations; (ii) construction and improvement of civil works at FRIM headquarters and field stations; (iii) provision of vehicles and equipment for FRIM activities; and (iv) training of FRIM staff. 3. Special loan covenants that were expected to promote achievement of project objectives included: (i) referral to the Bank of a long term research plan with staffing and budgetary requirements; (ii) selection of research projects that were satisfactory to the Bank; - iv - (iii) appointment of scientific staff with qualifications and experience satisfactory to the Bank; (iv) appointment of external consultants with qualifications acceptable to the Bank to assist in the implementation of research projects and in training of FRIM staff; (v) implementation of an approved training program; (vi) appointment of an Independent panel to carry out a mid-term review of FRIM's research program; and (vii) appointment of a second panel of experts to carry out a final review of the project. 4. The decision by the Bank to support this FRIM project was timely and appropriate, given the major expansion of both natural forest management and plantation establishment envisaged in Malaysia's Fifth Development Plan (1986-90) and the weakness of the technical basis for such expansion. Project Design and Organization 5. The project design was a time-slice of FRIM's projected expansion program in which Bank financing was to support all activities. A special feature which was later to prove troublesome for implementation was the high percentage of recurrent costs in FRIM's total expenditure. This occurred because FRIM had inherited substantial land, buildings and other facilities from the Forest Department when it was established as a separate entity. Apart from a few items of civil works, most expenditures were for operational activities. No special project management unit was created and project implementation was to be undertaken by the regular management of FRIM which was accountable to the Minister of Primary Industries through the Malaysian Forestry Research and Development Board representing State and Federal Forest Departments, Timber Producer Organizations and Universities. Implementation 6. Total project costs during the five year project period 1987-92 were estimated at appraisal at M$95.5 million (US$37.3 million) . The Bank loan of US$9.0 million was intended to finance the foreign exchange requirements of the project. The borrower was GOM. FRIM was subject to normal GOM financial control and audit procedures that were acceptable to the Bank. 7. Actual project costs were US$7 million with US$2 million being cancelled. An unusual feature of the project was the financing arrangement with the Borrower financing 90% of FRIM's projected research program costs and the Bank only 10%. This was calculated to be the foreign exchange content of the overall program. FRIM needed Bank assistance more early in the project but the restrictive financing arrangements effectively constrained support to a low level. This was compounded by FRIM's unfamiliarity with the Bank's very complex procurement and disbursement procedures. Attempts to amend the financing percentages eventually proved successful, three years after project start-up in - v - 1987, but were difficult to negotiate because of the Malaysian Government restrictions on external borrowing for recurrent cost expenditure. Project Results 8. Despite the slow start, the project was generally successful in achieving its objectives. By the time of project completion, FRIM had emerged as one of the leading tropical forestry research institutions in the world. This status resulted in its being successful in attracting grant funds for collaborative research with established research organizations throughout the world. FRIM became attractive to Malaysian scientific staff with a strong program in training and upgrading capabilities. FRIMb research publications are internationally recognized and the Institute has been a major force in the development of the rubberwood industry. Civil works and buildings were constructed on time and are being maintained satisfactorily and the research facilities are well equipped. The one objective on which results were mixed, was that of integrating Malaysiab somewhat dissipated forestry research efforts among the different State forestry research organizations. It was expected that FRIM would take a strong role in integrating Malaysiab forest research effort. Because of States rights over land and forest matters, State Forestry Departments continued with separate programs, often duplicating topics and missing others of greater relevance. Project SustainabilitY 9. Now that FRIMb value to industry and sustainable forest management has been successfully established, its ability to attract local and foreign funding appears assured. Donors remain committed to funding joint research programs with FRIM, industry supports the timber utilization programs and Government regards FRIM as the leader in developing the research base for sustainable management of its unique forestry resource. Findings and Lessons Learned 10. The main lessons which emerged from the project and likely to be relevant elsewhere are: (i) Research is intensive in recurrent cost expenditure. Traditional design of project financing and disbursement is likely to be unsuitable. Close collaboration with Bank disbursement staff is needed early in the project design stage to design an administratively simple system related to a financing percentage of the cost of the total program. In retrospect, choosing to finance a percentage equivalent to the foreign exchange component had no meaning. (ii) Amendments to the disbursement schedule of the legal documents proved difficult from the Borrowerh end. For innovative projects, the degree of uncertainty is high and - vi - documents need to provide for a high degree of flexibility to avoid the need for legal amendments to respond to changes not affecting the projecth basic objectives, design and other attributes. (iii) A federalist system with states having constitutional rights over land and forestry matters poses special problems for implementation of national forest policy. The project started the process of integrating Malaysias forestry research effort, to a limited extent. Important timber producing states closely guarded against intervention in the sector. This continues to restrict the success of developing and implementing a national forest policy with due regard to environmental sustainability. PROJECT COMPLETION REPORT MALAYSIA NATIONAL FORESTRY RESEARCH AND DEVELOPMENT PROJECT (Ln 2828-MA) PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE 1. Prolect Identity Project Name National Forestry Research and Development Project Loan Number 2828-MA RVP Unit EAlAN Country Malaysia Sector Agriculture Subsector Forestry 2. Backaround 2.1 Malaysia's Forests contain more tree species than any other ecosystem in the World. Timber production and exports have been major contributors to the economy. However, development policy has given priority to agriculture and mining in the allocation of land and forest resources have declined precipitously. Nevertheless, in terms of exports and contributions to state revenues, forestry remains a major sector. 2.2 Malaysia's topography and well distributed rainfall are eminently suited to forestry. Of the total land area of 33 million ha, about 20 million ha or 62% are covered by natural forest. Although much of the forest is secondary growth, Malaysia retains one of the largest areas of tropical rain forest in the world. These are noted for their rich species diversity and the high value of the timber. However, the "timber boom" of 1974-84 saw large areas cut over by loggers and much forest land planted to tree crops, particularly oil palm. During this decade, the Peninsular States lost almost 1 million ha, and Sabah State almost 2 million ha of forest. Because of steep and swampy terrain, Sarawak State suffered little depletion while lower cost log alternative remained, particularly in Sabah. 2.3 Malaysia is one of the world's largest producers and exporters of tropical timbers. Annual output is about 36 million cubic meters (mm3) of timber products. Of this, some 23 Mm3 are exported annually, mostly as logs. Production has declined due to weak demand, the depletion of easily accessible timber supplies, and conservation measures under the National Forestry Policy. Under the Malaysian Constitution, land is a State matter within the jurisdiction of each of the 13 states and Foderal Territory that constitutes the federation of Malaysia. As such, each state is empowered to enact forestry laws and to formulate foreot policy independently. The executive authority of the Federal Government only extends to research and maintenance of experimental and demonstration stations, training and advice and technical assistance to the states. 2.4 From the 1920a up to 1984 the Forest Research Institute (FRI) operated as a subdivision of the Federal Forest Department. The main achievements were the classification and timber testing of over 200 species of tropical hardwoods and management of lowland dipterocarp forest. Its development of grading rules for tropical hardwood timber was instrumental in *nabling the acceptance of Malaysian processed timber exports on world markets. As timber resources began to decline, the demand for research services expanded and shifted towards conservation and reafforestation with a particular focus for economic and policy analysis. In response, the Government, assisted by the FAO/UNDP, studied the institutional changes required. Subsequently, under the Malaysian Forestry Research and Development Board Act, 1985, a statutory body called the Malaysian Forest Research and Development Board (MFRDB) was formed. This Board reorganized FRI into the Forest Research Institute of Malaysia (FRIM). The Act also made the Institute a statutory body, managed by the MFRDB, responsible to the Minister of Primary Industries. 2.5 Forestry Research Institute of Malavsia (FRIM) The objectives of FRIM, under the MRFDB Act, include the following: a. to conduct and promote research into forest development including the production, extraction, processing, storage, transportation and utilization of forest produce and rubberwood, and other fields appropriate to the continued development of the forestry sector and the conservation of the resource base; b. to collect, collate and disseminate information relating to forest management and development, forest produce and forest product utilization; and c. to coordinate activities within Malaysia relating to research and development, publicity and other matters relating to forest development and forest industries and to liaise with bodies outside Malaysia concerned with these matters. 2.6 In addition to forestry research, FRIM provides a variety of forestry services. Technical consultancy services are provided on a range of forestry topics and utilization of forest products. As an apex institution, FRIM provides forestry extension services to state forestry departments and the private sector. FRIM conducts training courses, provides genetically superior planting material to state forestry departments and to the public, and maintains a collection of forest species. In addition, FRIM publishes periodicals and bulletins reporting research results on specific topics of relevance to the timber industry. 3. Project Objectives and Descriptions 3.1 The principal recommendations of the FAO/UNDP study of Malaysia's forest research in 1984 was to change the status of the Forest Department's research division, the Forest Research Institute, to a statutory body, in line with the Rubber Research Institute and the Palm Oil Research Institute. Subsequently, the 1985 Forestry Research and Development Board Act reconstituted FRIM as a statutory body to undertake forestry research and development and to coordinate State research activities. Support to FRIM was identified as being suitable for Bank assistance in the Agricultural Assessment Report (No. 6226-MA) of September 1986, when the Government requested Bank funding for the new program. The Bank accepted the FAO/UNDP report as project preparation since it involved detailed analysis of existing and future research priorities and redeployment of staff and the need for increased resources. Preparation was completed by a preappraisal mission in October 1986, with appraisal in February 1987. Negotiations took place in Kuala Lumpur in May 1987. 3.2 The project comprised a five-year (1987-91) time-slice of FRIM's work program. The time-slice was estimated as necessary for FRIM to become proficient in new fields of research. Specifically, the project funded an agreed program of research and development activities through the engagement of scientists and experts, on a consulting basis, to supplement the cadre of 50 professional staff already working in FRIM. The project also funded vehicles, scientific equipment, and infrastructure, including laboratories, office buildings and roads, required to strengthen FRIM's ability to sustain its R&D program, and staff training. The research program was defined in detail and supported the government's shift in forest research priority away from logging for export to one of conservation, reforestation, environmental protection and domestic processing of timber. 3.3 The project was to be implemented over five years. The major components were: (a) support to research in environmental science, natural forest management, forest science, plantation forestry, timber utilization, forest economics and rehabilitation of coastal forests; (b) support to staff development through training and fellowships both in Malaysia and abroad; and (c) construction of offices, an auditorium, a botanical museum, roads, workshops and other facilities as well as experimental tree planting and equipping of laboratories. 3.4 The total project costs were estimated at US$37.3 million based on March 1987 prices. Of this, about US$28.3 million was local cost and US$9.0 million was the estimated foreign exchange cost. The project was to be implemented over the period 1987-1991. 4. Project Organization and Management 4.1 The project was to be implemented by FRIM under the direction of MFRDB. No special arrangements for project implementation were considered necessary as FRIM had adopted a new management structure just prior to project identification. The components were to be administered by the four FRIM Divisions of Forestry, Economic and Advisory Services, Administration and Finance, and Forest products, each with a Director reporting to the Director- General of FRIM. Independent of these divisions was the Research Evaluation Unit responsible for monitoring progress and quality control. 5. Project Implementation 5.1 Implementation got off to a slow start partly because of FRIM's unfamiliarity with the Bank's procurement and disbursement procedures and partly because at the time of Loan approval the percentage of research activities that could be financed by the loan had been set at an unrealistically low figure (10%). An amendment to the Loan Agreement dated April 30, 1990 raised this to 40%. 5.2 Following introduction of this loan amendment disbursements picked up quite sharply. SUMMARY OF PROJECT DISBURSEMENTS Cumulative Disbursements (USS 000) 1987 1988 1989 1990 1991 1992 Expected Disbursements 1,000 3,500 5,000 7,000 8,500 9,000 Actual Disbursements 0 240 1,130 2,680 4,820 7,000 a/ In January 1992 the loan amount was reduced to US$7.0 million, with agreement of the Bank (see Preface above). 5.3 The project closed in June 1992 after a one year's extension with US$2 million being cancelled. Although disbursements had increased with the amendment of the disbursement schedule in the Loan Agreement, the Malaysian Government did not want to continue paying commitment fees when FRIM had developed to the point where cheaper funding was available. with the growth of interest in tropical rain forest ecology, FRIM had become an important partner in internationally collaborative research into this field. 5.4 No substantial implementation problems were encountered, other than with disbursements. Civil works were constructed on time to acceptable standards and are well maintained. The training and staff upgrading programs - 5 - were successful in attracting suitable research personnel and retaining them. The appraisal had specified an independent review of FRM's performance at mid- term and at closing. However, FRIM's performance was evaluated annually by an independent research panel consisting generally of international experts and found to be of high standard. 5.5 Project costs were US$33.9 million compared with the estimate at appraisal of US$37.3 million mainly because of the amount cancelled. With this type of project consisting mostly of recurrent costs, cost overruns resulting from price increases in lumpy investments are not incurred. 6. Project Results 6.1 Staff Development. In 1986 FRIM's research staff numbered 50. The project staff development programs aimed to upgrade some existing staff and to double the total professional staff. This target was achieved (over 100 professional scientific staff were in post by project completion in June 1992). 6.2 The staff development program included training arrangements with local and overseas universities and forestry institutions, support for research fellowships and courses at FRIM, backed up by technical assistance from high calibre overseas consultants. The training and fellowship program supported 100 staff. Professional staff with higher degrees rose from 34% of staff at project inception to 62% by project completion. 6.3 Research. FRIM's performance was reviewed by the Research Advisory Committee (RAC),of the Malaysian Forestry Research and Development Board (an independent statutory body), that met annually and made detailed recommendations on research standards, research content and priorities. After reviewing this research monitoring process and recommendations of the RAC and finding them to be of high standard, these periodic reviews were accepted by the Bank in lieu of a covenant that required an independent mid-term review of project progress and performance. 6.4 The Bank's contribution to FRIM's development helped the institution to consolidate and maintain its strong focus on utilization related research, whilst at the same time broadening the scope of its research programs to reflect emerging environmental and forest conservation and management issues. Over the years FRIM had become a leader in the tropical forest products research field. One of its major achievements had been the documentation of the taxonomic and utilization properties of a wide range of indigenous tree species, many of which are now in commercial use. 6.5 A manual on rattan documented the growth, yield and utilization properties of the rattans of Peninsular Malaysia. These are now a major resource for the development of rural industries. 6.6 FRIM pioneered rubberwood utilization research that made a major contribution to expansion of trade in that timber from virtually zero in the mid 1970s to over M$100 million per year by the mid 1980s. - 6 - 6.7 During the project period, additional staff availability enabled FRIM to undertake a more broadly based research program covering the areas of hill dipterocarp and mangrove forest silviculture and management; plantation silviculture and management, forest environment and resource management; timber utilization; rubberwood utilization; non-wood forest products; chemical utilization; wood chemistry; and techno-economic evaluation and information technology. 6.8 FRIM's senior management remained highly committed to achievement of project objectives throughout, and their enthusiasm and leadership played a key role in contributing to the project's satisfactory performance. Project Shortcomings 6.9 The main shortcoming of the project was its failure to develop strong research networking arrangements on some high priority forest establishment and management problem areas that urgently needed to be addressed, both within Malaysia itself as well as in the region as a whole. 6.10 One good example of a research topic that called for high priority treatment was the urgent need to focus on provenance selection, tree breeding and improvement of a few fast growing plantation species such as Acacia mangium that had been planted on a very large scale throughout the region. Because of inadequate research, these plantation programs are in general using inferior provenances and planting stock, and uncertain establishment and silvicultural management practices. Prospects for producing timber or other products of acceptable quality (apart from pulpwood) are currently poor. 6.11 Interventions by FRIM were successful in persuading GOM to introduce a moratorium on further large scale planting of this species in Peninsular Malaysia until such time as further research has been able to clarify uncertainties about the technical growth, utilization properties, marketing prospects and economic viability of Acacia mangium plantations. 6.12 Fast growing industrial plantation species will assume increasing strategic importance in the region in the coming decades. Domestic demands for utility grade timbers are escalating at faster rate than can be met by the sustainable yield from natural forests. Countries such as Thailand, that were formerly large scale exporters of high value timbers, are now importing utility grade forest products on a massive scale. Compensatory plantation programs that are now being undertaken in Peninsular Malaysia, Sabah, Philippines, Thailand, Indonesia and elsewhere in the region based on similar species are in urgent need of underpinning with a well defined and focussed regional research effort. FRIM can play a lead role in this area. 6.13 Part of the reason for FRIM's slowness in responding to the need to develop strong collaborative research networking arrangements within Malaysia itself is attributable to difficult political relationships that existed between Peninsular Malaysia, Sabah and Sarawak. These inhibited FRIM from pressing too strongly to take a leadership role. The Bank could probably have - 7 - helped to overcome this constraint by more active involvement in regional workshops on high priority themes. 6.14 Secondly there is no doubt that the extremely rapid staff expansion that took place during the project period and the time needed for new and quite young scientific staff to gain experience, made it difficult to for FRIM staff to play a lead role in developing overseas networks. More recently FRIM has become quite active in supporting the FORSPA research network for the region. Summary of Findings and Key Lessons Learned 6.15 The most important finding of the project implementation experience is that the Bank can play a positive role in strengthening of national forestry research capability by supporting capacity building. The weakness of many national forestry research institutions is a major constraint to more effective conservation and management of forest resources. This was the first attempt by the Bank to support a major forestry research institution and some positive lessons of experience have emerged that will be of relevance to future Bank work in this area. 6.16 Firstly the Bank can be influential in steering research priorities to address obvious gaps in national research programs. In the case of FRIM for example, the Bank pressed strongly in support of an RAC recommendation for strengthening of the socio-economic policy analysis dimensions of FRIM's various programs and this did have a positive impact. 6.17 Notwithstanding that observation, an issue for Bank consideration is whether or not the Bank should have taken a stronger position at the time of appraisal in developing a more broadly based dialogue on research priorities and then using the project as a vehicle for encouraging a more sharply focussed research program of relevance not only to Malaysia but also to the region as a whole. By hindsight it may have made sense to have organized a regional workshop during preparation and appraisal to discuss common problems and research needs. From the outset the Bank could have used its influence to encourage the creation of collaborative research networks on these priority topics. It could have assisted FRIM in the development of a strategic research agenda that would have concentrated resources on high priority problem areas. Such regional research networking arrangements have since emerged in the form of a regional, "Forestry Research Support Program for Asia and the Pacific" and FRIM is heavily involved in that program. 6.18 A second issue with wider implications for future Bank work is the question of technology transfer, which was singled out by the RAC as one of the weak areas of FRIM performance that urgently needed to be addressed. The RAC had recommended that FRIM take vigorous steps to strengthen linkages with end users of its research results, particularly through collaborative extension programs. Recently, in new projects such as the China National Afforestation Project, (Credit 2145-CH of 1990) and India Maharashtra Forestry (Credit 2328-IN of 1992), the Bank has introduced project components and - 8 - covenants that specifically tackle the issue of building more effective bridges between research and field operations. 6.19 In the context of future operations the Bank could play a pro- active role in fostering collaborative linkages between national research agencies and international research centers such as those of the Consultative Group for International Agricultural Research (CGIAR), e.g. the Center for International Forestry Research (CIFOR), and International Center for Research in Agroforestry (ICRAF) both of which it supports as part of its financial contribution to the CGIAR system. 7. Project Sustainabilitv 7.1 No issues of sustainability are anticipated. Government, industry, the universities and the international forestry agencies are actively involved in supporting FRIM. In fact, the increased attention to issues in tropical rainforest management and preservation has increased the relevance and importance of FRIMs work. A follow-up project had been considered but availability of local and foreign concessional funding for FRIM made this unnecessary. 8. IDA Performance 8.1 IDAs performance was generally thought to be satisfactory except in the matter of disbursements which related to a design flaw compounded by unnecessarily complex procedures required to make needed changes. There was no reason to tie the project financing percentage (24%) to the foreign exchange equivalent. This led to an unusually low level of only 10t financing for the research program after high disbursement percentages for equipment, civil works, consultants and other items. Given that the prime objective of the project was to support the research program directly, a higher share of the total cost should have been considered. In the first year of project implementation, no disbursements were made at a time when Bank assistance was most needed, because of its small share in a program just beginning to build up. A more careful analysis of expected expenditure patterns at appraisal would have given rise to a more realistic disbursement projection and a probable adjustment in financing arrangements. 9. Borrowers Performance 9.1 The performance of the Borrower was highly satisfactory. Full support was given to the project at all times and FRIM senior staff carried out their project management functions with dedication. The Action Plan of measures on policy and institutional development was diligently carried out. A new Forest Policy Statement was issued and enabling legislation was passed, FRIM was reconstituted as a statutory body, external reviews were carried out and a staff development plan was implemented. 10. Project Relationship 10.1 There were no issues of concern. -9- 11. Consulting Services 11.1 The performance of consultants, mainly in research and training, was considered satisfactory. 12. Project Documentation and Data 12.1 The Loan Agreement and supporting documentation were adequate for the project needs. Because of the nature of this project in supporting a program of multiple research activities, individual expenditures were mostly small and did not require detailed preparation and analysis with large documentation. - 10 - Project Completion Report Malaysia National Forestry Research And Development Project (Ln. 2828-MA) PART II: Borrower's Comments 1. From our knowledge the Bank rarely funds forestry research per so, so it was very encouraging to discover that the Bank responded positively to the GOM's request to fund FRIM's development by way of this project. The project officially started in August 1987. While we in FRIM recognize that by early 1992, the Bank had acceded to a GOM request that US$2.0 million be cancelled from the total loan amount of US$9.0 million because this money was no longer needed, as the financial circumstances of FRIM had greatly improved, it must be stressed that the situation prior to, and during the loan negotiation period in 1986-87 was somewhat different. At that time, FRIM was merely one year in existence and funding mechanisms and funding opportunities were still unsettled; there was genuine concern that the development plans for FRIM may be stymied by insufficient funds. 2. Concerning the progress of the project, after a rather hesitant start, due mainly to unfamiliarity with Bank reimbursement procedures, things went smoothly until loan closure in June 1992. For this we need to thank EAlAN who, on discovering that there were problems associated with Bank reimbursements, very quickly helped to resolve them. 3. One main element of the project activities was training of newly recruited FRIM scientists. For this, FROM adopted the model of scientists working on local research problems for a "split" PhD degree, a departure from the past approach of the FRIM scientists absent overseas from FRIM for the entire duration of the training. 4. EAlAN understood the training objectives of FRIM and this is reflected in the funding of the research and development project at the Sabah Forest Industries (SFI), a state-owned integrated pulp and paper company, using Bank-administered Japanese Trust Fund, in which various FRIM scientists were appointed resource persons. This SFI project provided much needed opportunities for FRIM scientists to be involved in problem-solving research on the ground. The project began in September 1990 and at that time of preparation of this report, the project activities were still on-going, albeit on a much reduced scale because a private company had taken over the running of SFI since late 1993. 5. In conclusion, FRIM and the Malaysian forestry Research and Development Board are extremely grateful to the Bank and the GOM for agreeing to this loan project which provided critical support during the early stages of FRIM's development. Proiect Completion Report Malaysia National Forestry Research And Development Project (Ln. 2828-MA) Part III: Statistical Information 1. Related Bank Loans Year of Loan No. Title/purpose Approval Status Loan 637-MA Jengka Forestry Project 1970 Completed Construction and Operation of a sawmill/plywood plant. Loan 2550-MA Sabah Technical 1986 Completed Assistance Project Establishment of a pot scale research planation, pilot scale tree farming credit scheme, marketing and other studies 2. Project Timetable Date Actual/ Steps in Project Cycle Date Planned Latest Estimates Identification Sept. 1986 Sept. 86 Preparation Oct. 1986 Oct. 86 Appraisal Feb. 1987 Feb. 87 Negotiations May 1987 May 87 Board Presentation June 1987 June 87 Signing August 1987 Aug. 87 Effectiveness Sept. 1987 Sept. 87 Project completion Dec. 1991 June 92 Loan closing Dec. 1991 June 92 - 12 - 3. Loan Disbursements Cumulative Estimated and Actual Disbursement (USS thousands) FY 87 FY 88 FY 89 FY 90 FY 91 FY 92 Appraisal estimate 1,000 3,500 5,000 7,000 7,000 7,000 1/ Actual 0 240 1,130 2,680 4,820 7,000 Actual as % of estimate 0 15 23 38 69 100 Date of final June disbursement 1/ Loan amount reduced from $9.0 million to US$ 7.0 million with cancellation of US$2 million. 4. Project Costs and Financing A: Project Cost Appraisal Estimate Actual Estimate Local Foreign (US$M) Local Foreign (US$M) cost costs Total costs costs Total Item Research Program 24,164 3,166 27,330 22,958 1,166 24,124 Civil Work 1,916 1,142 3,058 1,886 1,142 3,028 Vehicles Equipt. - 3,497 3,497 - 3,497 3,497 Training 727 727 1,454 727 727 1,454 Total Base cost 26,807 8,532 35,339 25,571 6,532 32,103 Phys. cont. 192 114 306 174 108 282 Price cont. 1,303 381 1,684 1,250 360 1,610 TOTALS 28,302 9,027 37,329 26,995 7 ,000 33,995 - 13 - B. Project Financing Appraisal estimate Actual/latest estimate (US$M) (US$M) Local Foreign Local Foreign Total Source costs costs Total costs costs IBRD/IDA 9,000 9,000 7,000 7,600 Cofinancing institutions Other external sources Domestic contribution 28,302 28,302 26,995 26,995 TOTAL 28,302 9,000 37,329 26,995 7,000 33,995 - 14 - 5. Status of Legal Covenants Agreement Section Covenant Status2/ Original Date Revised Date Description Type 1/ Sched. 5 1(a) GC C 09/30/87 09/30/87 Select research projects under Part A in accordance with objectives acceptable to the Bank 1(b) GC C 09/30/87 09/30/87 ImpLement research projects in accordance with an action plan and the schedule acceptable to the Bank 1(c) GC C 09/30/87 12/31/88 Furnish to the Bank a long-term research plan 2(a) GC C 12/31/87 12/31/87 Appoint as FRIM Dept. Directors persons with qualifications acceptable to the Bank 2(b) PIA C 06/30/88 06/30/88 EmpLoy consultants to asst in implementation of staff training 3(a) PIA C 07/31/89 07/31/89 Appoint a panel of experts acceptabLe to the Bank to carry out an independent review of the research prograrimme3/ 3(b) PIA C 06/30/89 06/30/89 Appoint a panel of experts to carry out a Mid-Term Review4/ 4.01(b) F C Nine months Audited accounts to after end of be sent to the Bank each financial year 1/ Covenant Types: GC = General Conditions, PIA = Project Implementation Arrangements, F = Financial Requirements 2/ Status: C = Covenants complied with, CD = Covenants complied with after delay, CP = Complied with partially, NC = Not complied with 3/ & 4/Bank accepted a prearranged independent panel appointed by FRIM plus periodic reviews by the Research Advisory Committee of the Malaysian Forestry Research and Development Board in lieu of the requirements of these covenants. - 15 - 6. Use of Bank Resources: Staff Inputs Planned Revised Actual Stage of project cycle Weeks US$ Weeks US$ Weeks US$ Through 20 60,000 8(1) 24,000 8 24,000 appraisal Appraisal- 4 12,000 4 12,000 4 12,000 Board Board- 2 6,000 2 6,000 2 6,000 effectiveness Supervision 30 90,000 24 72,000 24 72,000 Completion 2 6,000 2 6,000 2 6,000 TOTAL 58 174,000 40 120,000 40 120,000 1/ Bank found an already completed FAO/UNDP survey of FIRM, a satisfactory basis for project preparation and appraisal. 2/ Above estimated staff week costs, are approximations. (Dollar budgeting had not ben introduced during the period under review) 7. Bank Resources: Missions Performance Rating Specialized Implemen- Stage of Month/ Number of Days in staff skilLs tation Devel. Types of project cycle year persons field represented objectives obiective problems Through appraisal 03/86 2 10 E, F.1/ Appraisal through 08/87 2 E, F Board approval Board approval 09/87 1 E through effectiveness Supervision 87-92 2 2/ 70 E, F, C 14/ 1 Completion 06/94 1 F A 1/ E = Economist, F = Forestry Specialist and C = Consultant Forestry Research. 2/ A total of six supervision missions were carried out. The average mission comprised two staff and or 1 Bank staff plus consultant. _/ Consultant forestry research specialist who subsequently became a Bank Staff member. 4/ Form 590 Ratings as at Project Completion were: Overall Status 1 Procurement progress 1 Project Development 1 Training progress 1 Objectives Technical Assistance 1 Compliance with covenants 1 Studies 1 Project Management Performance 1 Environmental aspects 1 Availability of Funds 1 Financial performance 1 IOC- 104 - * }2t- - 10A- iolr- -; i2202 MALAYSIA NATIONAL FORESTRY RESEARCH AND DEVELOPMENT PROJECT PHILIPPINES THAILAND Roads / __-RolIods 4- Ports - ^ -' 4 ~~~~~~~~~~~~~~~~~~~~~~Airports BENGKOKA PENINSULAR ..- R I vers SARAH FORES TA Y TECHNICAL , Forested Arms ~~~~~~~~~~ASSISTANCE PROJECT * 0-2'°° -State or Div,sion Boundaries PANTAI ?IFORESTRY ~~~~~3/ ~~~~~~~~~~~~~v e0r~~~~~~~~~~~~~~~~~~~~, L~~~BRA ,r REEAC lInte-not,onal Bgoundories ES E' PLANTATION 9 N 0 00 200 300 A~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~SIPITANG .40METIERS PULP AND PAPEAK AK BX X