FINANCIAL PERFORMANCE ANALYSIS OF BESUT INTERGRATED AGRICULTURAL DEVELOPMENT PROJECT, MALAYSIA

Abstract

Introductions In Malaysia massive investments have been made and continue to be made in construction of irrigation projects to meet the increasing requirements of irrigation water for intensive agriculture. Nevertheless the low yield and produce per unit area of irrigated land and improvement in productivity were considerably lower than what was envisaged during their formu-lation. If this trend prolong5the objective of producing more farm harvests to meet the need of ever increasing food grain demand for the expanding population would be lost. Besides, the investment cost on irrigation systems could not be recovered. In this context an attempt has been made to carry-out a post-construction evaluation study of Besut Intergrated Development project so that remedial measures like modernization, efficient operation technique of the system, consolidation of holdings and introduction of suitable cropping pattern could be initiated which would be the guiding factors for consideration of future project implementation. 1.2 Objectives: Performance auditing is gaining its importance (in Malaysia, at least) in comparison to the normal-stereotype auditing which usually looks into procedural irregulatities/ weaknesses in the expenditure and spending of Government funds. Infact, performance auditing takes stock of theic.evements and progress of the project and can be carried out periodically even before the project is completed. In contrast to the normal auditing which only traces the persons responsible for "wasting" the public funds (and acts as a deterant to potential "culprits") performance auditing - financial or physical alike - helps to provide remedies and corrective measures before the seriousness of the problem aggravate. However, this is one such method which helps in Diagnostic Analysis of an existing irrigation system. -2- Thus, the objectives of the study could be simplified as follows:- (a) To study the existing conditions of the system i.e. actual financial performance of the project and to compare with the pro-jected achievement computed at the time of its formulation and thus, work out the divergence. (b) To examine the net contribution of the project to the economy of the farmers in the command of the project. (c) To suggest remedial measures(and short comings)which could be adopted in other on-going projects. (d) To estimate the financial impact of the project on the farmers, in particular and the other community and to evaluate the ader,uacy of incentives created for them and other project participants. 1.3 Methodology : From the feasibility study report of Besut Project, Appraisal Report, Memorandum of Understanding and Commissioning Report c osts and benefits of the project prior to its launchings were recorded. These costs and benefits could be used as the basis of comparison with the existing scenario. The change in agricultural practices, socio-economic factors and marketing facilities are some varied reasons for the farmers' choice of crop presently grown by them. However, it was essential to evaluate all these contributions with respect to the financial or economic gains of the system as a whole. 1.4 Analytical Frame Work: The costs and benefits of the project were ascertained by the tabular analysis and normal mathematical approach. The benefits were in the form of harvest from the farmers' field and the corresponding sale of the produce less farm production costs. The costs constituted the capital cost, operation maintenance and replacement (OMR) costs.