Congressional Record

FOREWORD

(i) This report is based upon information gathered during a twelve-day visit to East Pakistan in early June by a World Bank Mission consisting of the following members (length of stay in brackets) :
I. P. M. Cargill, Director, South Asia Department, IBRD (June 6-10), John W. Gunter, Acting Director, Middle Eastern Department, IMF (June 6-10), Manfred G. Blobel, Chief Economist, South Asia Department, IBRD (June 5-10), William H. Edwards, Agriculture Specialist, Islamabad Office, IBRD (May 30-June 11), Douglas H. Beare, Economist, Dacca Office, IBRD (May 30-June 11) , Shigemitsu Kuriyama, Asst. Resident Representative, Dacca Office, IBRD (May 31-June 10)
J. Hanns Pichler, Economist, Islamabad Office, IBRD (May 30-June 10), John W. Rose, Economist, IMF (May 31-June 10), Hendrik van der Heijden, Economist, Pakistan Division, IBRD (May 31-June 10), Michael H. Wiehen, Chief, Pakistan Division, IBRD (May 31-June 10).
(ii) During our visit we spent some time in Dacca holding discussions with officials, travelled frequently in the immediate vicinity of Dacca and, in parties of one to three, visited twelve of the nineteen administrative districts of East Pakistan - some of them more than once. With one important exception - an intended trip to the cyclone disaster area (Noakhali and Patuakhali) which had to be cancelled due to monsoon weather - the list of places visited was constrained only by the time available. The Government was most cooperative in accommodating our requests for trips within the Province and visits within each district and in arranging transport - including use of the Governor's plane.
(iii) The information for this report was obtained, though not in normal circumstances, in more-or-less the normal way - that is, by travelling, observing, asking questions, filtering answers and figures obtained and evaluating the information obtained for accuracy and consistency. This was, of course a more difficult task than is confronted by most Bank Missions and it should be said that, in the absence of hard facts, we have had to draw frequently upon general impressions of the situation. Some information (for instance, that concerning actions by the Army and the extent of insurgent activity) is technically hearsay in that it was not contained in official statements or reports made available to us; however, some treatment of these matters is necessary in order to round out a description of the situation in East Pakistan, and we have included only information that we have seen (or heard) for ourselves and which appears consistent with the position we have noted and observed ourselves.
(iv) The overall assessment of the situation at which the mission arrived is not encouraging. Above all, the mission found it difficult to discern in the present situation the basis for rapid economic recovery in the Province. As it saw the situation at the time of its visit, the obstacles in the way to normalization appeared overwhelming - essential elements in the Province's infrastructure were severely damaged, including in particular the transport and communications system, and remained vulnerable to further destruction; there was little understanding among the authorities concerned of the complexity of the problem of economic revival and consequently neither a program to aid recovery nor effective management; and there was all-pervasive fear as a major inhibiting factor. Reinforcing each other, these factors together appeared to the mission to amount to a formidable problem that would defy early resolution.
(v) While this is the judgment the mission reached after extensive travel in the Province and after thorough deliberation, it also needs to be said that the factors that entered into its judgment formed a highly unstable combination. Just as at the time of the mission's visit all the major elements in the situation appeared to reinforce each other in making early normalization impossible to envisage, it is conceivable that a major improvement in one of them may have a "snowball" effect. Thus, it is possible that the railway will function better than the mission thought likely and that, if in addition the carrying capacity of the coastal fleet is increased considerably and the country boats reappear, the physical constraints to recovery could be reduced considerably, and thus incentives for renewed economic activity be strengthened to the point where the psychological constraints lose some of their power. Similarly, everybody familiar with war-torn economies is aware that the problems of physical destruction are less of an obstable than they may at first glance appear to be if there is confidence and the determination to make things work among the populace and if there is purposeful direction. Thus, if somehow the element of fear, distrust and uncertainty were removed from the scene and if conditions were created that allowed the administration to function effectively, then it may turn out that the physical constraints are less formidable than they now appear to be. Yet, at the time of the mission's visit, there was no concrete evidence that improvements of the kind mentioned were about to happen; hence the mission found itself unable to come to a more encouraging view of the outlook for rapid economic recovery.

I. THE CURRENT SITUATION

A. Major Economic Impacts of the Conflict

1. The Mission noted four principal impacts of the conflict whose inhibiting effects upon the functioning of the economy are evident at present. The first is the general destruction of property in cities, towns and villages. This was inflicted in small part - and selectively - by the insurgents during the period in which they remained in control of certain areas, but was largely the result of military activity in the major cities and towns and along the major road arteries between them. The second is the major damage to the transport and communications networks, inflicted by the insurgents during the early days of the conflict. The third is the loss of vessels and vehicles to the economy, which occurred in a number of ways. The fourth is the general atmosphere of fear and uncertainty which persists as peace has not yet returned to the Province.
2. Most cities and major towns have sizable pockets of destruction where market places, small shops and workers' housing once stood, and, in some, the damage has been severe; unauthorized homes and shops along roads and railway rights-of-way have been obliterated both within towns and along major arteries between towns; and numerous villages have suffered heavy destruction, particularly to market places and bazaars. The extent of damage and destruction varies greatly both between and within districts; however, few areas have escaped altogether. In all cities visited there are areas that have been razed; and in all districts visited there are villages which have simply ceased to exist.
3. Damage to the transport and communications network was widespread and severe. Ten major road and thirteen major railway bridges were blown up with varying, but generally considerable, degrees of success; scores of smaller bridges and culverts were also destroyed or damaged; and rails, ties and footplates have disappeared all over the province. In addition, during the fighting, some damage occurred to locomotives and railway rolling stock, ferries and vessels; the telecommunications system was severely disrupted and railway telecommunications were put out of commission entirely.
4. The loss to the economy of vessels and vehicles occurred in a number of ways. Substantial numbers were damaged or destroyed. Others were taken across the borders by the insurgents. Some were abandoned by owners who have fled, gone underground, or are simply too frightened to venture out. Probably the largest number, particularly of trucks and land-rovers, was commandeered by the Military. This holds true particularly of the districts North and West of Dacca, where the combination of heavy fighting and disruption of transport preventing the shipment of military vehicles up from Chittagong prompted the Army to seize virtually all vehicles. "Requisitioning" occurred also, however, in areas such as Chittagong. There, contractors' new vehicles were taken from the port and, as elsewhere in the province, jeeps and LCTs intended for relief work in the cyclone-affected areas were also commandeered. At present, in Chittagong, while scores of Army jeeps and trucks wait for the road and railway links to be opened so they can be sent North, requisitioned vehicles have still not been returned to their owners.
5. Perhaps most important of all, people fear to venture forth and, as a result, commerce has virtually ceased and economic activity generally is at a very low ebb. Clearly, despite improvements in some areas and taking the Province as a whole, widespread fear among the population has persisted beyond the initial phase of heavy fighting. It appears that this is not just a concomitant of the Army extending its control into the countryside and the villages off the main highways, although at this stage the mere appearance of military units often suffices to engender fear. However, there is also no question that punitive measures by the Military are continuing; even if directed at particular elements (such as known or suspected Awami Leaguers, students or Hindus), these have the effect of fostering fear among the population at large. At the same time, insurgent activity is continuing. This is not only disruptive in itself, but also often leads to massive Army retaliation. In short, the general atmosphere remains very tense and incompatible with the resumption of normal activities in the Province as a whole.

B. Results

6. The first thing that strikes one - whether in Dacca or travelling in the countryside - is that there seems to be very few people about. The situation varies greatly from Dacca, where our collective impression is that no more than 50 percent of the usual population is in evidence during the day; to Chittagong, where only a third of the population appears, and these feel it necessary to indicate their "loyalty" by displaying Pakistani flags on their vehicles or their persons; to Kushtia, where no more than 10 percent of the normal population remains; to Bhola, where virtually the total population seems to be in place. One ominous development is that the population is reliably reported to have doubled in areas of Patuakhali and other parts of the coastal region where the food situation is already critical and there is serious doubt that even the normal population can be supplied with adequate foodgrains over the coming months.
7. This is the impression one gains by day. After dark the situation is more unusual still. Most areas have curfews. In Sylhet it is 7 :30 PM to 5 :00 AM; in Chittagong 10 :00 PM to 6:00 AM; in Dacca curfew was abolished on the 11th of June. Whatever the curfew hours, the streets begin to clear in mid-afternoon and are completely deserted by dark.
8. What this situation means for East Pakistan's subsistence economy - where normally the scores of thousands of small pockets (extended family, village, union, etc.) of more-or-less self-sufficient mini-economies are loosely linked together over extremely difficult terrain by a costly transport and commercial network - is that the links have been completely broken and the economy not only stopped temporarily but fundamentally dislocated. For almost three months there was virtually no movement of jute, tea or other exports from farm to factory or port, and very little from port abroad; severely limited movement of foodgrains into the country and to the Dacca area, and practically none within the province - either from central storage depots or between surplus and deficit areas. In general, intra-provincial, inter- wing and international trade ceased for a period and have so far barely begun to function again. The mini-economies have in general gone on at a reduced level; however, the setbacks to agriculture - to rice production in particular - as well as the virtual cessation of food movements for three months, mean that additional food import and distribution requirements must be imposed upon a crippled transport, commercial and administrative system that was not all that sturdy in normal times. At the same time, demands may be placed upon the system to try to move larger than normal quantities of jute, tea, etc., in an attempt to make up for the past few months.
9. Though the last large pockets of "organized resistance" were eliminated by early May, and the population centers of the Province have been under firm Martial Law Administration since then, the disruption of communications has persisted. Telecommunications and mail services have been partially restored to most areas, but people aren't travelling - except within urban areas - and goods are not moving even there. Our estimates for Dacca are that perhaps half the rickshaws and one-third of the mini-taxis, cars and buses are back on the roads; while no more than 15 percent of the carts and trucks are back to moving goods. Everywhere else the figures are lower, but the phenomenon is particularly marked between population centers. Nowhere is vehicular traffic along the roads at more than 5 to 10 percent of normal levels. And, except for some fishing activity, the waterways appear deserted. The country boats have disappeared.
10. The disruption of commerce was just as complete and fundamental and there is, as yet, no sign of recovery. During the period of conflict, many village markets were destroyed and economically important groups within the population - such as beparis, or up-country jute traders - have virtually disappeared. During and since the conflict there has been widespread looting, and so far traders have been reluctant to return to work. In this situation, a jute buyer, who was trying hard to get jute moving again, felt compelled to carry Rs. 500,000 (in Rs. 10 and Rs. 50 notes) up-country very recently in his quest for traders with jute to sell.
11. It was difficult to obtain figures about banking; however, it is known that there were substantial withdrawals in March and some looting and loss of staff from late March to late April. Since then, most bank branches in the cities and probably more than half of those in outlying areas have been "opened" but deposits of the system have not been restored to prior levels and activity has remained very low.
12. In all spheres, the severity of the disruption and its persistence are due much more to psychological than to physical factors. This is nowhere more true than in industry. With very few exceptions - a couple of jute warehouses burnt in Chittagong, one tea factory in Sylhet, one tea chest factory in Chittagong, the paper mill at Tongi - the damage to physical plant of large factories has been slight. In fact, most of that which has occurred since 25 March has been inadvertent : many electric motors were burnt out by unusually severe voltage fluctuations during the early weeks, the rayon plant at Karnaphuli Paper Mill was badly damaged by sulphuric acid left in the system for several days and several plants have suffered from reduced or faulty maintenance. Damage and destruction of smaller industrial enterprises such as sawmills, brick kilns and handlooms - particularly around Narsingdi and Northwest Bengal - was probably more significant, but detailed information is not available. In any case, the major factors affecting industry now, and likely to persist for some time to come, are loss of management and labor, financial problems, the inability to obtain supplies, and the inability to sell and transport finished product.
13. Managerial staff and labor who have fled to the villages have been slow to return. They are probably intimidated both by the continuing presence and actions of the Army and by threats from the insurgents that they should not support the latter's cause by returning to work. Those who have returned remain frightened; and the appearance of threatening posters put up by the insurgents has caused serious setbacks to recruiting efforts, e.g., in Ghorasal and Chittagong, and reportedly also elsewhere in the Province. In some instances, management and technical personnel - especially non-Bengalis and Hindus - were killed, with the result that many others have left East Pakistan and, in part at least, are unlikely to return.
14. In these circumstances, the failure of the administration to function properly is understandable. Most Class I and II officers are back on the job : and the continued absence in most areas of perhaps half the Class III and IV officers is unlikely to be a serious impediment to effective administration. However, for a number of reasons, most of the officers who are back are functioning perfunctorily at best. Among the senior officials the mission met, none have travelled extensively in the Province to see for themselves what the situation was in their particular area of responsibility. Communication between offices below the level of the Provincial Government hardly exists. Few officers at the district and thana level are venturesome enough to leave their offices, and people are afraid to come to town. At the same time, the inevitable military intervention in matters normally dealt with by the civil administration and the continued dominant presence of the military are inhibiting factors; in addition, the appointment of several West Pakistanis to important posts in the provincial administration, the drastic curtailment of the development program, and the fact that most important decisions, including in particular those pertaining to the management of the economy, are being taken without their involvement, have tended to reduce interest.
15. The nature and course of the fighting varied greatly from one part of the province to another, and there have been associated differences in the persistence of insurgency and economic inactivity. The border is more-or-less open along its entire length and adjacent areas are therefore particularly vulnerable. Most of the early damage occurred and much of the continuing insurgency is taking place in the crescent from Ramgarh to Srimangual along the eastern border and in the inaccessible area along both sides of the Mymensingh/Sylhet division. The heaviest fighting and greatest destruction by the Army took place West of the Jamuna/Padma - with the trail of devastation running from Khulna to Jessore to Kushtia to Padna, Begra, Rangpur and Dinajpur. This is the area of greatest population loss at present and where agriculture has been most retarded and activity most disrupted. Least affected apparently were the southern and coastal areas of Noakhali, Bakarganj and Patuakhali. Though the fighting started there, Dacca, as the capital city and administrative center, is probably closest to "normal" at present; however, one similarity for all districts is that all remained very far from normal up to the time of our departure from East Pakistan on June 11.

C. Effects On the Major Economic Sectors

16. (1) Agriculture. - Although the Mission did not observe major physical damage to this sector, it is clear that agriculture has suffered badly as a result of the conflict. Many farmers have fled; others have been killed: all farmers have lost some time in the fields; and in all areas there have been in all farm operations delays, neglect and a lack of inputs.
17. In the case of rice, the boro crop (which last year accounted for about 16% of production) was very good - up about 15%, on average, over last year. There is, however, some late boro still in the ground and, with the early rains and disappearance of many farmers, it is not certain that all of this will be harvested. The aus crop is generally much later planted than in normal years, weeding has been neglected in areas where farmers have been harassed or have fled, and there is much yellowing, probably due to shortage of fertilizer. According to field staff of the ADC and Department of Agriculture and our own observations, the acreage planted is some 15% below normal and the average yield on this reduced acreage is also likely to be down by a minimum of 15%. This works out to a minimum drop in production of 28%.
18. More seriously, present indications are that the important aman crop may also be considerably affected. If this is to be avoided, severe problems of delay, lack of seed and difficulty in providing inputs will have to be overcome. In general, the entire process of aman planting appears to be seriously behind schedule. For highest yields transplanting from mid-July to mid-August - but preferably in mid-July - is recommended. Allowing for one month in the nurseries, this means that seedlings should have gone into the nurseries by mid-June: however, very little preparation of fields or nursery beds was observed during our various tours of the Province. An additional factor is that, owing to heavy early rains, late transplanting has been attempted on much of the aus acreage and this late aus is not likely to be off the fields before late August. This means, as a minimum, that aman planting may be further postponed and yields correspondingly reduced. In some areas, the planting of aman may he precluded altogether.
19. For a variety of reasons - the firing of farmers' houses and market places, Army "requisitioning", the flight of refugees who have taken seed stock with them for food, etc. - much aman seed appears to have been lost throughout the Province. And, given the disruption of administration and the transport and distribution system, it is difficult to see how all the lost seed can be replaced or sufficient seed be supplied to areas, that are normally in deficit, in time for the aman planting. Though fertilizer is available in the Province, point-of-use storage is in most cases adequate for only a few days' requirements during the growing season. As the entire process depends so critically upon the transport and distribution system, it appears most unlikely that fertilizer will be available in all the right places at the right times. Timely pesticide application, which is difficult in normal times, can hardly be expected.
20. Areas where the situation is particularly serious are the cyclone disaster area and the western border areas. In the former area, the supply of draft animals for land preparation remains drastically below requirements, while people are already going hungry and - unless an effective relief operation is mounted immediately - are likely to turn to seed stocks for food. In the latter area, cultivation is being considerably reduced by the absence of many farmers and the continuing harassment by both sides of those remaining. If conditions conducive to normal pursuit of agricultural activities were restored promptly, and all efforts made to supply farmers with the necessary inputs, the adverse effects of the present situation on the aman crop could perhaps be contained. However, on the basis of present conditions, it is the Mission's estimate that total aman acreage may be 20-30% below normal, and that some drop in the yield is also likely. All factors considered, the overall drop in agricultural production may well be of the order of 30%.
21. Obviously, this assessment must be regarded as tentative, particularly as it applies to aman, the largest crop, where it is still too early in the season to make definitive judgments and where prompt remedial action could still be effective in improving crop prospects. However, if this assessment turns out to be correct, then the total net quantity of foodgrains available in the Province will be 2 million tons less than in 1970/71 and 3 million tons less than in 1969/70. Two conclusions follow : First, and of immediate operational significance, 2 million tons of foodgrains will have to be imported in the period July-December 1971, including a carry-over of some 550,000 tons from 1970/71, if a daily supply of 15.4 oz. per person is to be maintained and total stocks kept at a reasonable level. Internal distribution of such a quantity will make extraordinary demands on the transport system and the administrative capacity of the province. Second, given the possibility that imports of another 2 million tons may be required in the second half of 1971/72, a continuous watch will have to be kept over progress of the aman crop.
22. The picture with respect to jute varies considerably from district to district; however, acreage is widely reported to be down substantially. In addition, during the fighting and the ensuing period of fear and uncertainty, weeding and thinning operations in many of the fields have been neglected. Fertilizer application, if it has occurred at all, has been minimal and cultivation has been sparse. In many areas, the heavy early rains and neglect have led to considerable weed growth - and, in some areas (notably Mymensingh District), unusually heavy rains have caused water-logging and further reduction of yields. Our overall judgment is that acreage is down by some 20%, while the yield on that acreage will be down by a minimum of 10%. Applied to the 1970/71 target figure of 6.9 million bales, this composite reduction of 28% gives a crop of 5 million bales. Since there is no guarantee that cultivation will proceed normally from this point or that adequate labor will be available for harvesting and retting, this figure must be regarded as a maximum for raw jute. Even then, it is by no means certain that all of this reduced crop can be moved by the crippled transport system to mills and ports.
23. Until quite recently the situation in the tea gardens appeared to be surprisingly good. There was virtually no plucking during April and May - the first two months in the tea year - and that tea which was plucked was either not processed or badly processed. However, despite the surrounding border, the heavy fighting that has occurred in the area and the very high proportion of Hindus in the labor force, the bulk of the population appeared to be in place at the time of our visit and approximately two-thirds of estate labor was present. Only half of field, factory and office staff were available for work by the first week of June, while management (including assistant managers) was still largely absent but beginning to return in large numbers.
24. During the first ten days of June, however, two expatriate tea planters disappeared, and the second is reliably reported to have been murdered by the insurgents as part of a beginning campaign to dissuade expatriates - as well as locals - from collaborating with the present Government in its efforts to restore "normalcy". As a result, and on the advice of the UK High Commission, those expatriate planters who were working in the gardens have now left Sylhet.
25. Without qualified management, it is most unlikely that tea production can go on efficiently. Probably it cannot occur at all. At the very least, therefore, production for April through July - or about 40 percent of the normal annual output - will be substantially or completely lost. What happens thereafter will depend, firstly, upon whether security can be restored sufficiently to persuade management to return and labor to remain on the job. Even if this can be accomplished fairly soon, formidable start-up problems will have to be overcome. The labor force will have to be re-organized and the backlog of weeding and pruning - which also have been largely neglected since March 25th - will have to be eliminated before production can start. Perhaps the most optimistic outcome would be that half the normal output for the remainder of the year could be achieved - which would give a total of some 20 million pounds, as opposed to 69 million pounds last year. Less optimistically, it remains possible that substantially the whole year's output will be lost and that, for want of pruning, the productivity of the plants will be reduced for subsequent years as well.
26. (ii) Transport. - This is probably the most affected and therefore the most important, sector. As the major dislocations to the system have been discussed in general terms in the introduction, the analysis here will be by mode.
27. Facilities at the two major ports of Chittagong and Chalna were not damaged in the fighting; however, they operated at only 40 percent normal during March, and virtually not at all during April. During April administration of the ports was taken over by the Military and, in May, operations returned to about 40% normal and a portion of the backlog of work and blockage of godowns and the port areas was cleared up so that ports are now in a position to operate more efficiently. At present the ports are operating with about 45% of normal labor supply. The navy administrators claim that more labor is available, but is not needed - that, with their superior management, they can operate more efficiently and handle normal work loads with the reduced labor force. This is probably true to some extent; however it should be said that these "ports under new management" with their partly new and inexperienced labor forces have not yet been put to the test, as ships are not yet calling at the ports with anything approaching normal frequency.
28. What can be said at this juncture is that the ports are probably capable of operating at up to two-thirds of normal capacity and do not, therefore, constitute a bottleneck in the system - nor will they until such time as the internal transport system is able to accommodate something approaching normal volume. A few qualifications are called for in the case of Chittagong. Firstly, in connection with foodgrain imports, all incoming vessels for both Chalna and Chittagong must be lightered at Chittagong - and, for this, the same "coasters" (or coastal steamers) and "bay-crossing" barges that are used for movement to inland ports are required. Secondly, the efficiency of use of these coasters and barges is limited by the fact that only one of three gantries at the Chittagong silo is operating. Thirdly, at present only 40% of port handling machinery is operating, probably due mainly to the continuing absence of trained operators and mechanics. Fourthly. and most important. imports cannot really be brought into Chittagong port at a faster rate than they can be taken off by the combined modes of internal transport, for additional storage space is not available, and in any event the goods are needed in the interior and not in the port area.
29. So far as internal movement to and from the ports is concerned, both the railway and road transport are in very poor shape - placing, at present. an impossible burden on water transport. Except for limited lightering capacity and the strong possibility that lightered goods may pile up and create an added bottleneck at Chittagong as a result of the inability to move them up-country, the situation at Chalna port is probably manageable - or will be in the fairly near future. Here - as opposed to Chittagong - the imbalance between imports and exports is not extreme, the traditional role of water as the mode of internal transport is relatively more important and the connecting railway and roads suffered less damage and will probably remain less vulnerable to insurgent activity in the future. - At Chittagong, however, the situation is much less promising. This is almost exclusively an "imports" port, relying in normal times upon the vital Chittagong-Dacca road and rail links to move perhaps three-fourths of all cargo up-country to Dacca and other points. Until these two vital links have been restored and something approaching normal traffic is moving over them, the port cannot operate at anything approaching normal capacity, even if the coastal fleet is increased considerably as an emergency measure.
30. In all, 13 major railway bridges were damaged. Most of these have been repaired or are expected to be by the end of June. 'One notable exception is the bridge near Fenchuganj in Sylhet on which work has not yet commenced. Girders must be moved by rail and the railway is still inoperative over the entire Chittagong-Sylhet line. In addition, the vital Feni Rover Bridge remains a substantial question-mark; the truss has been jacked up but not yet repaired, and it remains likely that - once repaired - it will again become a target of the insurgents. Numerous small bridges and culverts have also been knocked out and are being knocked out every week. These are being repaired with bundles of rails in order to conserve girders; however, rails too continue to disappear all over the province.
31. Even on sections where the line is intact, the PER is confronted with formidable obstacles preventing the operation of trains with normal frequencies, at normal speeds and carrying normal loads. In the first place, the repairs which have taken place are temporary measures only, and in most cases trains will be able to operate over these bridges and culverts only at reduced speeds and loads. Secondly, there is the problem of security. It is almost certain that small bridges will continue to be blown up, leading to interruption of service over the section in question for varying periods of time; that rails will continue to disappear throughout the province, forcing operation at reduced speeds; and that operations over sections running close to the border will be difficult if possible. So long as operations are confined to daylight hours, the capacity of the system by this one fact alone is reduced to less than one-half normal. In addition, the destruction of the railway's telecommunication system - now reported to be half repaired - reduces capacity by perhaps as much as half again by restricting the speeds at which trains can operate.
32. On the whole, it is our assessment that there are no operations over about one-third of the PER trackage, while operations over the remainder are at no more than 15 percent of normal. This means that the PER is presently performing at 10 percent of capacity at best, and this capacity is not necessarily in the right places or being used to move goods. Of greatest importance, the railway will not be able to begin to perform its normal function until such time as the vital Chittagong-Dacca link has been physically restored and something approaching normal operations over the line has been achieved; fulfillment of this objective is not presently in sight.
33. In the case of roads, the damage to the system was similar to that to the railways. Ten major bridges and numerous minor bridges and culverts were blown up - and, being mainly of reinforced concrete, these cannot be repaired quickly. Instead, diversions in the form of Bailey Bridges, pontoons or ferries must be installed. These will force some restrictions on speeds and reductions of loads. In addition, at least one ferry was lost and several were damaged. While these a re now partly back in operation, the damage to the engine rooms and steering of some was extensive and will take several months to repair. It is therefore likely that overall ferry capacity will remain at reduced levels at most crossings. However, the major problem with road transport is that most of the trucks in the Province have been withdrawn from commercial use. Disregarding total interruption of operations over certain sectors. it is our observation that trucking operations throughout the Province as a whole are currently at a level no higher than 5 to 10% of normal.
34. Water transport is the surface mode least affected by the conflict. Of the 24 coastal vessels which provide year-round connections between Chittagong and the river ports, one was apparently sunk. Minor damage was suffered by a few other vessels, which may account for the fact that only 16 are presently in operating condition, though officials insisted repeatedly that it is normal for approximately one-quarter of the fleet to be out of operation at any time. Initially the entire motor-powered inland fleet was commandeered by the Military; however, about half the operating vessels are now available for commercial use. During the conflict, country boats virtually disappeared from East Pakistan's waterways, and very few of these have returned. All told, the inland fleet may be operating currently at about 50 percent normal for cargo carrying.
35. PIA has escaped destruction and damage entirely; however, its operations are limited to a handful of major towns. Domestic service is being operated with high load factors on a considerably reduced schedule (about 30 percent normal) from Dacca to Chittagong, Jessore, Sylhet, Ishurdi and Comilla. This low service level is not explained by any loss of aircraft, nor is it commensurate with the 65-70 percent of employees reportedly back to work. Probably it is explained by the reduction of hours to avoid any operations after dark, the limited supply of mechanics and a military requirement to maintain some "slack" in the event of urgent need. Even this reduced schedule is occasionally interrupted in order to use the Fokkers and STOL planes in support of military operations - as occurred once during our stay. And, as a security precaution, the commercial flights are not permitted to carry cargo.
36. In sum, as of June 10, our assessment is that provincial cargo-carrying capacity is at present no more than one-fourth normal. And, because this capacity is badly placed in relation to demand and not properly integrated, it is not all being used. Furthermore, even if the program of bridge repairs is completed more-or-less on schedule, cargo capacity might be raised to one-third by July and - even with substantial foreign assistance - to no more than two-thirds by the end of the year. The reason for this pessimistic judgment is that, although restoration of the physical road and rail networks is a relatively simple technical matter - and is, in fact, well underway - it will continue to be extremely difficult to operate available capacity efficiently, except within the framework of an integrated operational program for this system as a whole, and such a program does not yet exist. Most repairs and diversions which have been carried out thus far are temporary in nature and cannot be completed until after the monsoon at the earliest or, in some areas, until security situation has improved; and insurgent activity is continuing with at least minor disruptions to the physical network in several areas. More important, operations over the physical network will continue to be constrained by the security situation and the absence of vehicles and vessels. Even if the Military should decide to return all vehicles and vessels to full-time commercial use - which it has not yet done - it will be unable to restore those that have been destroyed or seriously damaged, taken over the border or rendered unserviceable by intensive use without maintenance by the Military; nor is it likely to experience success in finding all the owners who are capable of maintaining those still available in operating condition. Finally, expansion of the water transport system, which will be needed to compensate for the reduction in land transport capacity, will require comprehensive planning and - for at least some vital components - time-consuming procurement procedures.
37. (iii) Commerce. - Very little hard evidence about the commercial sector was obtainable during our visit; however, along with the sectors concerned with commodities and their transportation, the financial and trading sectors have also suffered severe physical and, particularly, psychological dislocation, with serious implications for the pace of economic recovery. This dislocation is observable at the level of the local retail and wholesale establishment; in the rupture of normal relationships in internal, inter-wing and external trade and in the banking system and the realm of financial transactions generally.
38. The destruction of bazaars, shops and village markets - with their stocks - has been recorded; as a result of this and for other reasons, many small traders have fled. This disruption of the internal disruptive trade has persisted. as is evidenced in the towns by the large proportion of retail stores and business premises which still remain shuttered. In most places visited it appeared to the Mission members that less than half those establishments left standing were open for business, and those that were open seemed to be conducting very little business.
39. One result of the severe psychological impact of the conflict is a general loss of confidence which affects both trading and financial relationships. Numerous traders have disappeared, at least temporarily; but, even for those who have remained, trading links and concomitant extension of credit facilities between importers, manufacturers, distributors and retailers have been disrupted; in circumstances where the settling of outstanding commitments has been prejudiced, creditors are unable or reluctant to extend new facilities. This has repercussions also on inter-wing and external trade relations. Apart from transport problems, trade with the West wing has been affected by the uncertainties (especially of West Pakistan exporters) over credit risks; similarly, some foreign exporters are presently requiring special payment guarantees for shipments to East Pakistan.
40. The extent of damage to trading links has not yet been tested because so far the disruption of transport has been the principal factor inhibiting the movement of goods, and demand has been very low. But trading links between jute farmers, the intermediate markets, domestic jute manufacturers and jute shippers will be put to a test in the near future, with serious implications if they should prove to be inadequate.
41. At the center of the credit system, the posture of the banks is vital. The banking system was seriously disrupted during the first week of March and again in the period after March 25; though it is now functioning in the main urban areas, the country branch network is still far from restored as a result of absence of staff, damage to property and records and lack of communication; and - depending upon the bank-20 to more than 50% of branches are still not functioning. While the banks may be expected to restore their services and facilities within a reasonable period, the full restoration of the trading structure, probably involving the mobilization of new traders with financial resources, will no doubt be a longer process.
42. Any tendency for the economy of East Pakistan to recover is likely to be constrained, possibly seriously, by a lack of liquidity. Banking statistics for East Pakistan separately are not available; however, deposits declined substantially during the first quarter and have not been fully restored. The position of Pakistani banks remains depressed; and Karachi-based banks indicated that, for the time being, their operations in the East would have to rely entirely upon the local deposit base, which has been always insufficient. Furthermore, it is not clear that in present circumstances the banks are willing to provide much credit. The recent 'demonetization" must have aggravated these problems substantially, introducing an added element of uncertainty and drastically reducing currency in circulation. All notes of Rs. 100 and 500 ceased to be legal tender and had to be deposited within three days. There is no basis for estimating how the impact was divided between East and West Pakistan and illegal holdings abroad. According to the State Bank, demonetization affected more than half of the total currency issue, or Rs. 4,300 million out of Rs. 8,200 million. Roughly a quarter, or about Rs. 1,000 million, was not turned in; even allowing for large holdings abroad, this is a large share which probably reflects not only a substantial amount of hot money in the system but also the unsettled conditions in East Pakistan, including the flight of large numbers to India. The Government has now raised the ceiling on deposits redeemable in full from Rs. 1,000 to Rs. 10,000; holders of larger deposits have the option of paying a graduated levy, which on average comes to about 40 percent, or of having their deposits examined for possible tax evasion.
43. (iv) Industry. - Manufacturing in general is in a very bad state. In early March. many plants shut down and others operated at low levels. During April and early May, there was practically no production. Since then, a number of factories have resumed operations; however. the regional variation in performance is considerable. In Chittagong and the Tongi industrial area outside Dacca industrial activity is starting up only slowly. In Chittagong less than 25% of factories are open but far less than that are really operating: at Tongi it is reported that only about 2.000 out of 12,000 workers are back on the job. In the Dacca-Narayanganj area and in Khulna most factories are open. In Jessore, Bogra and Comilla half may be open. It is evident that, of those factories which have resumed production, most are operating at very reduced levels of efficiency and output, many at only 10-20% of their former levels. Only a handful of industries are working at more than 50% of their previous levels; and these firms, many of which are expatriate-owned and most of which are relatively capital-intensive, are not now selling all of their output, and may be forced to shut down due to insufficient demand and storage space if the dislocation of the economy continues much longer.
44. As stated previously, physical damage was relatively slight and the major problems confronting the industrial sector are those of labor, management, finance, transport and demand. In most factories visited, less than half the labor force had returned to work. In many cases, the figure was as low as 10 to 15 percent. Low attendance is further aggravated by the small proportion of trained workers among the returnees. There has been some movement back to the factories during the past few weeks; however the movement has been gradual and sporadic. Hindu workers ( often constituting a large proportion of the skilled labor force) are unlikely to return, and others will be slow to return because of such factors as the destruction of laborers' colonies, the continuing search of workers' buses by the Army and the massive presence of the Army near many industrial centers. At the same time, the appearance around factories in recent weeks of posters threatening workers with retaliation by the insurgents if they work too hard and the receipt by employees of letters containing a similar message, have in some areas (e.g., Ghorasal and Chittagong) reversed the flow of workers and reduced still further the productivity of those remaining.
45. In many factories, non-Bengalis have constituted a high proportion of management and supervisory staff. Some of these were killed and many more fled during the disturbances, and are returning only at a slow rate. To find satisfactory replacements for those who have been killed or have chosen not to return will be a very difficult task.
46. Disruption of transport and commerce is affecting most industries and factories by restricting movement of raw materials and supplies as well as finished products.
47. For the jute industry in particular, obstacles to the normal supply of raw jute to the mills do not as yet pose a serious constraint, as the months of April through June normally coincide with the phasing out of the crop year and a seasonal slackening of raw jute movements; furthermore, most mills - except for a few special cases - appear to have sufficient stocks for three to four months' normal operation. Also, with some effort and support by the authorities (which in the case of jute is particularly emphasized), adequate transport facilities can probably be arranged for the small quantities currently being produced. Thus, transport at present does not appear to be a crucial constraint to jute production; it is, however, already a problem for the movement of the remainder of the last jute crop from secondary markets to terminals as well as for exports of raw jute and jute goods. The outlook for the coming season (to start in July/August) is not encouraging and the lack of transport may well pose a serious problem for the jute industry as a whole in the period ahead.
48. For the tea industry, transport is already a serious problem. In the event that plucking is resumed on any scale, POL will be needed for internal movement on the estates and to operate the factories. This is now in short supply, and resupply is a serious problem. Sylhet is virtually isolated so far as land transport is concerned. Both the railway and the only road connection pass close to the border at many points, have suffered heavy damage and are likely to remain subject to frequent harassment. As a result, both POL supply and the shipment of processed tea are in doubt : one further factor is that capacity for making tea chests is currently down to one-half normal with the destruction of one factory of four and the flight of management from one other.
49. Several large factories. though producing only at reduced rates. haye very large stocks of finished goods on hand with no possibility of lifting them soon : Chattack Cement and Fenchuganj Fertilizer have nearly exhausted their storage facilities, and soon may have to reduce production further. Eight EPIDC sugar mills have very large stocks which they can't move despite shortages and demand all over the Province. Without sales. EPIDC cannot pay farmers in full for their cane and will soon be unable to meet payrolls. Until its labor scare during the week of 7th June, the steel mill in Chittagong was operating at about 20 percent of capacity, producing forever increasing stocks of raw steel, while re-rolling mills in Khulna remain closed due to non-receipt of billets from Chittagong. Pakistan Tobacco is one of the few factories operating at a respectable level in Chittagong, while the cigarette factory in Jessore reports a severe shortage of paper. And there are countless other examples of problems caused for industry by the disruption of the transport network.
50. Considering that many factories apparently have been "encouraged" to reopen irrespective of economic and financial considerations, there are two additional effects of the disturbances which have not had a great impact as yet, but are likely to assume major proportions in the near future. These are the disruption of short-term credit facilities and the certainty that - at presently reduced levels of production, reduced productivity and restricted sales - many companies which are attempting to operate will do so only with heavy losses and even greater negative cash flows. As a result, they will be unable to meet payrolls, taxes and debt service payments.
51. (v) Other Sectors. - The major utilities appear to be functioning satisfactorily; however, they are not yet under any pressure to produce in large quantities due to reduced demand and have not yet been operating long enough to run into the maintenance problems which will eventually arise due to absence of key staff and inability to obtain necessary materials and spares due to the disruption of transport. The supply of power and gas was interrupted in many cases, but supply of gas now seems to have been restored fully; and, with some exceptions, present demands for power (totalling only 40 percent of demand six months ago) are being met. Water supplies, at least in Dacca and Chittagong, are functioning adequately.
52. Communications other than transport were also severely disrupted, and have not yet been fully restored. Telecommunications are reported to have been restored to all but one district and to all but 6 of 60 subdivisions; however, service levels over these main lines - never high in the best of circumstances - are now very low, and service within districts and subdivisions remains largely disrupted. Mail service was completely disrupted and is being restored only gradually. Communication with most villages, especially in the cyclone disaster area, remains difficult.
53. The contracting industry lost the major portion of the construction season, many trucks and some other equipment. Its financial position, always precarious, is now critical and most firms are unable to establish contact even with their normal work force. Thoroughly demoralized and afraid, the firms appear unable to return to work and, with a few exceptions, they are unwilling to even think in these terms as yet.
54. Primary and secondary schools are now open in most areas, but attendance is very low. Most college and university teachers had returned, as requested, by early June, but they are demoralized and afraid and no one is predicting that the students will return in large numbers for the scheduled reopening on 2nd August.
D. Public Revenue and Investment
55. Current Situation. - Natural calamities coupled with political uncertainties which ultimately climaxed in the recent conflict have severely affected the provincial resource position and the pace of public investments throughout this fiscal year.
56. Provincial tax revenues are likely to amount to only about 50% of budget estimates (down from Rs. 380 million to some 190 million), and may still fall below that. Receipts other than taxes are also reduced considerably. The most drastic setback has been registered in land revenue, the most Important single tax : collections by mid-May amounted to no more than Rs. 23 million and for the fiscal year as a whole may, at best, yield some Rs. 40 to 50 million, compared to Rs. 150 million budgeted. This particularly poor record reflects the fact that there was considerable agitation against the present land revenue system during the election campaign so that the difficulties of collection began long before March 25.
57. Tax collections generally came to a halt in early March. They have only gradually been resumed at a much reduced scale in parts of the Province since the second half of May. Apart from provincial taxes, this disruption of tax collections - closely linked with the general disruption of the overall administrative system - has further affected the generation of centrally-collected taxes with direct repercussions on public resources at the national level. Preliminary estimates indicate that provincial generation of central taxes this year is less by at least some 40 percent than in 1969170; this is reflected in turn in a reduction in the share of central taxes for the Province.
58. As a consequence of these developments, the current surplus originally budgeted for the Province has turned into a sizable deficit on the order of Rs. 200 million. In addition, the financial position of the railways and other public entities (such as EPWAPDA, EPIDC, EPADC, IWTA, EPSIC, EPRTC, etc.) - notoriously precarious in any case - has been severely affected. Their combined current deficits are now expected to be well above Rs. 300 million, this adding further to the stringent resource position of the Province.
59. In these circumstances, the public investment program could not remain unaffected - quite apart from other factors which have hampered, physically or otherwise, the execution of projects. As a result, this year's development program (including flood control) now stands reduced by about one-fourth - down from around Rs. 3400 (after allowing for budgeted shortfalls) to Rs. 2600 million. After deducting another Rs. 580 million for liabilities of autonomous bodies visa vis the Government (largely for debt service but also for other claims) which due to lack of own resources tend to be financed, through the budget mechanism, out of investment allocations, actual net investments come down to a level not higher than Rs. 2000 million; and this may yet turn out to be an optimistic estimate for this fiscal year.
60. The Outlook. - Prospects for the coming fiscal year are shrouded with many uncertainties. There can be little doubt, however, that present conditions do not augur well for a rapid recovery in fiscal performance, unsatisfactory as it was even under normal circumstances.
61. Preliminary budget estimates of the Government for 1971/72 suggest a recovery in provincial revenues (taxes and other) to somewhat above this year's original budget estimates. While taxes proper are projected slightly lower, other revenue receipts are expected to exceed the 1970/71 budget leyel. By all indications, such estimates appear to be highly unrealistic. They imply that total revenues in 1971/72 will be nearly 50% higher than the amount actually collected in 1970/71. Clearly they suggest an almost miraculous pace of economic revival throughout the Province, assume that the basis of taxation as well as capacity to pay revenues has been left more or less unimpaired, and furthermore, presuppose normal functioning of the entire tax administration and collection system.
62. The Mission found no evidence to support the assumption that such conditions are likely to prevail in the near future. It is thus difficult to accept the above estimates. Merely as a rough guess, even a recovery in provincial revenue performance to about two-thirds of the 1970/71 budget estimates would in our present judgment still imply a commendable effort based on fairly rapid economic recovery and by no means pessimistic assumptions. It may indeed be too optimistic and makes no allowance for tax relief measures which in the circumstances may well be required to aid economic recovery.
63. According to estimates of the Central Government, adjusted for the built-in liabilities of autonomous bodies, revenues collected in the Province, allocation of certain centrally collected taxes and central loans and grants will provide East Pakistan in 1971/72 with rupee resources amounting to Rs. 2,160 million to finance public programs. This compares with estimated actual resources of Rs. 2.260 million in 1970/71. The Government expects that of this amount. Rs. 1.220 million will be required for non-development expenditures (Rs. 920 million in 1970/71) leaving Rs. 1,040 million for development, rehabilitation of physical assets destroyed in the recent events, and cyclone reconstruction, as compared to Rs. 1.340 million in 1970/71. On the assumption that the Province will be able to absorb Rs. 570 million of project aid, as against Rs. 250 million in 1970/71, the Central Government puts the 1971/72 development program (including rehabilitation and reconstruction as mentioned above) for East Pakistan at Rs. 1.010 million, or roughly the same amount as is now estimated for 1970/71. These estimates call for comment In respect of the resource projection and the use of resources.
64. As regards the resource projection, the Mission arrived at a very much lower estimate of the rupee resources likely to be available. It thought that
the amount available to East Pakistan might be as low as Rs. 1,550 million, in contrast to the Government's estimate of Rs. 2,160 million and an actual availability of about Rs. 2,260 million in 1970/71. About half the difference between the Mission's and the Government's estimates is in respect of provincial revenues and stems from the reasons given in paragraphs 61 and 62 above. The other half is in respect of transfers, in various forms, from the Center: The Mission has difficulty seeing the Center collect about 10 percent more in taxes on the basis of existing rates than in 1970/71, as the official estimates assume. This is because the Mission cannot see how the assumptions underlying the Government's projections regarding expansion in taxable economic activity in West Pakistan and the associated level of imports can be realized unless it proves possible for Pakistan to obtain considerably more commodity-type assistance from abroad than it actually received in recent years.
65. It is difficult to see how East Pakistan's public administration in its present state as described above could be able in 1971/72 to handle effectively any sizeable expansion in activity. There is also the question how meaningful it is in the circumstances likely to prevail in 1971/72 to think of Government activity, beyond routine administration, as being directed towards development in the normal sense and in the framework of the usual development program and thus concerned primarily with the continuation of projects already underway, as the fiscal program available at the time of the Mission's visit seemed to suggest. Yet, this having been said, there is no question that the task of resuscitating the economy of East Pakistan will make very substantial demands on public resources. Some of these will not require large administrative inputs, an example being free distribution rather than sale of food grains which may well be necessary on a large scale because purchasing power is likely to be very low in the Province. Others, such as a comprehensive program of rehabilitation and reconstruction in the public sector and of providing financial and other assistance to the private sector for the same purposes, will pose major problems of planning, organization and execution. Unfortunately, except for some Rs. 300 million included in the estimates for rehabilitation in the public sector, a program designed to provide maximum Government support for the vital task of economic recovery does not yet exist, even in rudimentary form. Preparation of such a program obviously should command first priority. However, it is also clear that the rupee resources which the Mission sees in prospect for East Pakistan would be totally inadequate to meet the needs for the situation and that the Central Government must give urgent consideration to ways and means of ensuring that economic recovery in East Pakistan is not held back by insufficient public resources.

II.

A. The Near Term Outlook

66. All this amounts to a situation that is far from normal and that is notable for the absence of any forces that might he relied upon by themselves to generate a strong momentum towards normalization. Such forces, however, might become operative if it were possible to remove two formidable constraints and if the Government launched a comprehensive economic program designed actively to aid the recovery of the economy.
67. (i) The General Sense of Fear and Lack of Confidence on the Part of Most of the Population. - The immediate manifestations of this fear and absence of confidence are the persistent failure or refusal to report for duty, which is particularly prevalent among the lower grades of civil servants and workers hut is far from absent at the higher levels, and the general hesitation of those who have returned to expose themselves either physically or in the realm of policies and ideas. Few are functioning properly. Officers are not in proper contact with those at the next higher or lower level of the administration and are not thinking imaginatively about, or working effectively to solve, the numerous serious problems confronting the economy. The effects are evident throughout the administration and the private sector, as well as in the (lack of) interaction between the two: and the result is recorded in the non-resumption of normal activity throughout the economy.
68. Furthermore. there are no signs that the situation will improve significantly or rapidly. Two dates - April 21 and June 15 - were set by the Government for all workers to return to their jobs without prejudice. The second date has now passed, but people remain afraid and untrusting and it is most unlikely that economic pressures can or will be generated which are sufficiently strong to overcome this reserve. The normal urban/rural ratio in East Pakistan is such that those who have left the cities and towns and so far stayed away can be rather easily absorbed in the countryside, and there is no strong "pull" to entice low-wage and low salary workers back to the cities and towns - particularly to areas where large concentrations of the military exist. In addition, for many workers (e.g. household servants and those engaged in the service trades) the demand has largely evaporated for the time being.
69. The only incentives which might come to bear with sufficient force are negative ones which may operate to reduce greatly the relative attractions of the rural areas. If the condition of fear in the countryside should come to exceed that in the cities or if there should be a general failure to solve the food problem, resulting in widespread starvation, workers and people generally might be forced back into the cities and towns in large numbers. But neither of these solutions is in any way desirable.
70. (ii) The Complete Dislocation of the Communications System. - This has been discussed at some length above. Its major manifestation is the almost complete absence of movement of people (except within towns) and of the exchange of goods between regions and sectors anywhere within the province. So long as it continues, this situation will exert a strong negative effect upon all efforts to revive the economy and to meet the basic needs of the population - including, in particular, their food requirements.

B. Minimum Remedial Measures

71. In setting the goals for normalization, the first objective must obviously be to avoid a catastrophe - large-scale hunger and starvation within East Pakistan and further massive movement of people out of the Province into India. The second objective must be to reactivate the economy on a comprehensive and sustainable basis. The question is how this process of normalization might be set in motion. As President Yahya Khan said in his speech on June 28, ". . . normalcy in its accepted meaning can never return to a country without full participation of the people in its administration. The very process of bringing back normalcy requires the active interest of people in the process and this can happen only when the representatives of the people assume responsibility for administration of the country." However, in the same speech the President also explained that it would be "a matter of four months or so" before he would be able to put his "plan of transfer of power into operation." The question then is by what action the Government of Pakistan might in the meantime initiate the process of normalization.
72. The most difficult aspect of this question obviously relates to steps and measures affecting the general atmosphere in the Province. Specific suggestions in this area are outside the Mission's competence. However, it would appear that any interim program would have to include, as essential elements, arrangements that would reduce the visibility of the Army so as to reduce the major source of fear among the people and that would create conditions under which East Pakistan's civil administration can function normally. Progress in the latter direction might be facilitated by the Central Government posting a high-level administrator in East Pakistan to serve, during the interim period, as the head of the civil administration.
73. The food problem has both short-run and long-term aspects. On both fronts, resolute action is urgently required; still, even if appropriate measures are introducted immediately, it may already be too late to prevent starvation in all areas of the Province. The short-run problem is essentially a distribution problem; and the minimum elements of a solution will include programming the large imports which will be required over the next six to twelve months and, by some combination of permanent and temporary measures, managing the crippled and constrained transport system with utmost efficiency. The longer run problem is one of reviving agriculture and rebuilding and strengthening the transport system on a more permanent basis.
74. Detailed and comprehensive analysis and planning are absolutely essential if the Government is to be able to deal effectively with both the short- and the long-run problems, particularly and to begin with those of transport and distribution. However, they will not by themselves produce solutions to all problems, because the physical and managerial capacity now available is insufficient to meet all demands at the same time. Therefore, the Government must also establish a clear order of economic priorities - beginning with food - and prepare an integrated program for transport (by modes) and distribution. Attention should be given as well to the modalities of distribution, including the almost certain need to provide food free in large areas for a substantial period.
75. The integrated transport program (for the formulation and operation of which it may prove necessary to employ the services of expatriate experts in systems and transport) must determine all transport requirements and arrange for the optimal use - defined as first making a maximum contribution to the requirements for foodgrain distribution - of all existing facilities. In addressing itself to the longer-run problems, it should also prepare for the repair of all damaged facilities, determine the remaining transport "gaps" and specify the requirements for additional facilities - both temporary and permanent.
76. Finally, any remaining financial and administrative resources must be directed first to rehabilitation and reconstruction, and to breaking the most important and persistent physical and organizational bottlenecks impeding efforts to revive economic activity. It is clear from the earlier analysis that important problems must be overcome in all major sectors. In agriculture, once security is restored in the countryside, the vital factors are likely to be seed production and distribution; the distribution of other inputs, particularly fertilizer; and the ample provision of credit for the purchase of draught animals and equipment. Once the security situation has improved to the point that most workers have returned to their jobs, re-activation of industry and trade will probably require special supporting measures directly in the form. of special credit facilities, deferral of debt service payments, and tax relief; indirectly through the restoration of purchasing power and reconstruction of workers' housing.
77. Because the Mission was pre-occupied during its short stay in East Pakistan with gathering facts about the existing situation and with problems of immediate urgency, it is unable to suggest concretely by what programs and measures the Government could be most helpful in stimulating and aiding: economic recovery in the Province, beyond ensuring that adequate food. supplies are available at prices people can afford, that available transport capacity is used efficiently, and that the Province's infrastructure is restore& to working order. To identify such programs and measures and to translate - them into workable schemes is obviously an urgent next step for the Government to take. Similarly, while the Mission regards it as impractical, at least for 1971/72, to think in terms of the usual development program and resumption of developmental activity over the full range, there are obviously areas of very high priority where everything possible should be done to carry on. A list of such areas would almost certainly include: rice research, jute-(market) research and promotion, seed production and improvement (rice and jute), food storage and distribution, and rural infrastructure - including the rural works, than a irrigation and integrated rural development programs. However, here too, an operational program needs to be prepared and, to the extent that there are conflicts, priorities established between the development and economic recovery programs. Secondly, a realistic fiscal program needs: to be prepared, comprising both the generation of public resources and their-regional allocation, to ensure that the pace of economic recovery in East: Pakistan is not held back by lack of adequate rupee resources.