Upper Volta - Cotton Road and Rural Development Fund Projects

RETURN TO RESTRICTED REPORTS DESK Report No. P-1075 WITHIN ONE WEEK_ FILE COPY This report is for offlcial use only by the Bank Group and specifically authorized organizations or persons. It may not be published, quoted or dted without Bank Group authorization. The Bank Group does not accept respondbility for the accuracy or completenes of the report. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON PROPOSED CREDITS TO THE REPUBLIC OF UPPER VOLTA FOR A RURAL DEVELOPMENT FUND PROJECT AND FOR A ROAD PROJECT May 23, 1972   REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON PROPOSED CREDITS TO THE REPUBLIC OF UPPER VOLTA FOR A RURAL DEVELOPMENT FUND PROJECT AND FOP A ROAD PROJECT 1. I submit the following report and recommendation on two proposed development'credits to the Republic of Upper Volta, one for the equivalent of US$2.2 million for the establishment and operation of a Rural Development Fund, and the other for the equivalent of US$2.8 million for the construction of two secondary roads. PART I - THE ECONOMY 2. The basic problems of economic development in Upper Volta were set out in a report entitled"The Economic Development of Upper Voltall and dated November 27, 1970. An updating memorandum of January 13, 1972 was distributed to the Executive Directors on March 2, 1972. (Annex II contains country data, including some data on foreign aid.) 3. Extreme poverty and the harshness of ecology and climate present special constraintsto economic development in Upper Volta. The mass of the population is eking out a meager subsistence from the soil with ineffi- cient techniques and grappling with conditions which are more difficult than in most other African countries: soils are often poor and shallow; water is scarce; population distribution is unequal and ill-related to physical resources; food may be sufficient, if not adequate, in normal years, but becomes scarce in drought years and is a constant preoccupation of the rural people; numerous endemic diseases seriously impair the effi- ciency of labor; distance from the sea seriously handicaps external trade. 4. Economic opportunities in Upper Volta are so few that many young men (estimated at half a million out of a population of slightly more than five million) work in coastal countries (mainly the Ivory Coast) and save an average of US$30 annually for their relatives in Upper Volta. This emigration is an ancient phenomenon. Today's rising expectations, however, have inflated it to the point where remittances from migrant workers have become the most important source of external receipts (about $15 million a year). On the other hand, this migration aggravates manpower shortages in rural areas during the three-to-five months of the crop season and partly accounts for the apparent decline of productivity in traditional agriculture. 5. The pensions paid by France to war veterans form another source of foreign exchange. Apart from those transfers, Upper Volta can earn foreign exchange only by exporting primary products--which do not yet include  -2- minerals. Livestock used to be Upper Volta's main export. In recent years, however, livestock exports have declined slightly in absolute terms and rapidly as a percentage of Upper Volta's exports from 65 percent in 1964 to 37 percent in 1970. The difference was made up by cotton, which rose from three percent of exports in 1964 to 29 percent in 1970. Cotton exports will undoubtedly continue to grow largely as a result of the West Volta Cotton project for which the Association made a'$6.2 million credit (225-UV) in December, 1970 and of a second, smaller cotton project presently under preparation. -However, the limits to cotton development are already apparent, because cotton can be grown profitably only below-the 800 mm rainfall line. The downward trend of livestock exports can perhaps be arrested and reversed, but to make this possible many problems will have to be-overcome, such as increasingly inadequate i ding, persistent diseases and above all unremuner- ative meat prices maintained by the governments of the coastal countries. 6. Minerals may some day become another source of foreign exchange. There are a number of mineral deposits in the Liptako-Gourma, an area of about half a million square kilometers in Upper -Volta, Niger and Mali named after ancient 'kingdoms astride the central Niger River. Only the manganese deposit at Tambao has.,attracted the attention of 'foreign investors so far. A limestone deposit has been found at Tin .Hrassan and there is also some phosphate, iron ore, copper, vanadium, molybdenum, 'zinc, lead and nickel. However, this area is 1,500 km or more from the.,sea. 7. The domestic market is very narrow.,,and offers little scope for the development of manufacturing activities. ;Ampng the crops now grown in Upper Volta, rice can be developed to meet a growing demand. 8. Mainly because of these constraints, economic development since independence in 1960 has been disappointing. Temporary upswings have been followed by setbacks. Real GDP.per capita'seems to have remained approximate- ly constant. While it declined between 1964 and 1968, it appears to have grown about two percent a year in 1969 and 1970, but bad weather caused a setback again in 1971. Furthermore, income disparities have probably increased. 9. Difficulties were compounded and economic development hampered .during the first years of independence (1960-66) by irresponsible financial management and, since then, by financial sri4ngency. At the end of 1965, there was an acute financial crisis. The Government had accumulated about $20 million in short-term debts and could no longer pay the salaries of its employees. The military government.which inherited power in January 1956 gave first priority to financial recovery, which it considered the only sound basis for healthy growth. The austerity policy which has been consistently applied since then has enabled the Government to repay the short-term debts in full, to accumulate relatively large liquid reserves, and to' build up substantial foreign assets. 1(. 'As a result of its austerity policy., the Government is now in a position to face the adverse consequences of drought years such as 1970 and 1971 and is gradually turning to a-more development-oriented policy. Develop- ment investments are expected to accelerate in coming years. Foreign aid agencies .are expected to contribute not only most of the required funds, but also assistance for the necessary strengthening of public services. The  -3- Government realizes that these investments will increase recurrent demands on the government budget. As a result of its austerity policy, it will have sufficient resources to meet these demands. The Government also recently hired, upon Bank advice, two advisers financed by UNDP (one in the Ministry of Finance, and one in the Ministry of Planning) to review the level of current resources required by development investments and their budgeting. 11. The principal sources of aid until now have been the "Fonds d'Aide et de Coop6ration" (FAC) of France and the "Fonds Europeen de Deve- loppement't (FED) of the European Economic Community. As Annex II shows, these two agencies together provided about 79 percent of foreign aid. Most of their aid was in grants. About halL' of it was capital aid and one fourth was technical assistance. An important part of French grants (in 1972, a third) has been for assistance to public administration; the rest has been distributed (in 1972, almost equally) between agriculture, road maintenance, education and telecommunications. FED contributions have been primarily for water control (urban water supply and villageKwells) and roads. FED, USADm, CIDA, the World Food Program and other organizations have been providing emergency food aid to relieve the effects of droughts. 12. The second five-year Development Plan (1972-76) is about to be approved by Parliament. Like the previous plan, it is essentially a list of projects to be presented to foreign aid agencies for financing, but it is unlikely to be fully carried out. The Government hopes that it will be possible to develop resources such as the Tambao manganese deposit and the valleys heretofore made uninhabitable by onchocerciasis and thus to achieve a higher rate of growth than in the past decade. The Minister of Planning has proposed annual investments averaging about CFAF 12 billion, or US$47 million, not including some 'optional investments" such as the ex- ploitation of the manganese deposit at Tambeo. 13. The development strategy is designed to make the best of limited assets. While continuing to try and strengthen its capacity to earn foreign exchange, Upper Volta must develop the rural sector, which employs 89 percent of the population. Obviously, the primary goal of rural development is the improvement of productivity in agriculture and livestock. However, this goal itself poses problems of balance between agriculture and livestock, between food crops and cash crops, and will also require investments in improving the transportation network, in developing an appropriate system for the dif- fusion of specific and general knowledge, in combatting endemic diseases and in trying to achieve a better distribution of the population over the country. 14. The precarious situation which continues to prevail with respect to food must be reversed. Rice offers immediate possibilities. At the same time, increasing attention needs to be given to the proper balance between cash crops and food crops. The development of one sometimes contributes to to the other, particularly when cash crops are rotated with food crops: fertilizer benefits both. However, other effects may be less favorable. Studies made in other similar countries seem to indicate that cash incomes generated by export crops are sometimes more apparent than real. Labor is drawn away from food production, which in some areas becomes insufficient. Farmers who used to feed their families become unable to do so, when they grow cash crops. They ought to buy food to cover their annual requirements right after the harvest, when food is abundant and cheap. Frequently they  do not do so and spend too much of their money in other ways. One reason is that many lack means of storing food. But when the end of the dry season comes, speculators sell grains at four or five times-the lowest price. USAID, CIDA and FAC are presently financing the construction of grain stores and Bank Group involvement does not seem to be needed at this point. Another burden on rural development is the lack of storage-for farm inputs. The proposed Rural Development Fund project would finance such facilities. 15. In many areas of Upper Volta, land is becoming scarce for- traditional extensive techniques and the soils are deteriorating under a shortened fallow period. However, the introduction: of more intensive tech- niques is resisted by traditional leaders as risky. Younger people, who would be more innovative, are prevented-from -acquiring land of their own by traditional laws and customs. Their migrati.on-;to towns or neighboring countries might be slowed down if they could settle on presently unused land and enjoy the fruits ofJtheir labor. 16. Most-of-the population lives in areasc.which are unsuitable-for cotton-and other cash crops. In these areas water is very scarce and, when stored, it evaporates rapidly. It often-has to be carried considerable distances by hand. However, there are underground-water tables which can be tapped and the Rural Development Fund project provides for the sinking of wells. 17. -Disease and malnutrition seriously affect human beings. In addition to onchocerciasis, kwashiorkor -(a. children's -disease caused by malnutrition) and bilharzia are viidespread.. It has been estimated -that close to half the population of Upper Volta is infected-at-some time during their lives with Schistosoma Haematobium, the- worm parasiltes-causing bilharzia. Moreover, the disease could easily spread as a -result-of migration, concen- tration around water holes, or the construction. of dams and the introduction of new ways of farming -which use surface-water. Measures to guard against such consequences are necessary in every project involving water control. 18. Rural development is -further hampered in Upper-Volta by a very primitive transportation network. Densely populated areas cannot be adequate- ly supplied with food, drugs and public services. Local communities are expected to maintain the secondary -roads, which are little more than earth tracks, but they lack the resources- to do itl, and the-tracks are usable only during the -dry season; The improvement of'transport.links between the villages and the main towns is therefore an important, part of rural development. The improvement of feeder roads is included-in the-proposed-Rural Development Fund project. 19. The rural population needs- advice, training and education. Much effort has been made for agricultural extension, but the conventional education system is both very costly and alien to-rural life. The Government has long recognized that rural areas need a more relevant and less costly type of education. Soon after independence, it established a rural-education system. However, this system has -been allocated only about eight percent of the education budget, and owing. to lack of resources 'and prestige it has gradually become a-second class conventional- education-. 20. To take- into account the. diversity of!'problems in various parts of the country, the Government has created regional, development bodies (Organismes R6gionaux de'D4veloppement - ORD). An'ORD is a- decentralized agency administered by a Board of Directors., that is responsible for formu-  lating and implementing development projects within its region. The eleven OPD devote most of their efforts to extension work. Most of them have hir-ed foreign development agencies to carry out operations and train Voltaic nationals at all levels. PART II - BANK GROUP OPERATIONS 21. The Bank Group's contribution to Upper Volta's development is recent. As Annex I shows, two credits only have been made and disburse- ments today amount to little more than $0.3 million. The telecommunications project for which a $0.8 million credit was made in 1969 (144-uv) has been delayed by difficulties in recruiting expatriate experts, but is now proceeding satisfactorily. The West Volta Cotton project for which a $6.2 million cre- dit was made in 1970 (225-uv) is also proceeding satisfactorily, although bad weather has kept production below expectations. 22. The Bank Groupts strategy is in accord with the goals defined in paragraph 13. While financing projects which will increase Upper Volta's earnings of foreign exchange and assisting with the necessary infrastructure, it is also directed to developing production for the domestic market mainly through rural development. Of the two proposed projects, the Road project serves mainly the first goal, and the Rural Development Fund project serves mainly the second. 23. Further projects presently under consideration to increase Upper Volta's foreign exchange earnings are: - A second cotton project. Financing for the preparation of this project was provided under the first cotton project. The study will begin at the end of 1972. - A livestock project. Livestock exports would be expected to benefit from improvements in transportation and marketing in the southwestern part of the country. A preinvestment study is expected to begin later this year. 24. There is some possibility of: - A mining project. UNDP-financed technical studies of the manganese deposit at Tambao have been completed and show the deposit to be of unusually high quality (N'Sutite ore). The deposit, however, is 1,500 km from the sea, and a railway would have to be constructed from Ouagadougou to Tambao to remove the ore. An economic feasibility study is now under- way, and the Bank Group is being informed of its progress. The Government is maintaining contacts with mining companies. 25. Linked with the development of the modern sector would be the following infrastructure projects: - A second telecommnications project. Its object would be to improve local telephone lines and switching facilities, and micro-wave links for national and international communications.  -6- - A trunk road project. Available data would Seem to justify the paving of important sections of trunk roads. 26. Fbod production is the most important of all activities oriented toward the domestic market, and the first operation of the Bank Group in this field'will probably be: - A rice project. With technical assistance from Taiwan, some 300 families are being settled in the Kou valley to cultivate rice. A similar project seems possible in the Banfora area and the Association is considering its feasibility. 27. Animals, which Wre plentiful in Upper Volta, are general-ly regarded as a source of prestige and not used in agriculture for traction power and manure, nor slaughtered for food. Although a change in attitudes will take time, it would make possible productivity improvements in traditional crops (millet, sorghum, sesame, etc.). This will be.a long-term objective of livestock development. 28. While the reclamation of unused land is-a secondary feature of the rice project, it is the main feature of: - Integrated rural development projects to- follow the control of onchocerciasis. This disease, transmitted by a fly (Simulium davmiosum) which breeds in turbulent waters, causes severe itching in its mildest form and may.ultimately cause blindness by attacking the optical nerve'.. It makes certain valleys in Western Africa uninhabitable and seriously reduces the productive potential of countries such as Upper Volta.. A project for the control of onbhocerciasis: in an area of about 20C0,00 km2 in and around Upper Volta' is being prepared by WlDH with UNDP financing and a work plan for the campaign is expected to be ready for consideration by potential donors next fall. When onchocerciasis is effectively controlled in Upper Volta, certain relatively fertile valleys are likely to be resettled promptly because land is becoming scarce for traditional agriculture in adjacent areas. Projects for the development of these areas are being prepared by FAC experts for eventual Bank Group financing.. 29. The Bank Group is also concerned about the lack of employment possibilities in rural Upper Volta during the seven-to-nine months of the dry season. The feasibility of more labor-intensive methods in road work was recently discussed with the Government (see paragraph 53). The possibilities of using rural labor for the maintenance of properly bulilt rural schools, of developing handicrafts as well as artisan and repair trades, and some day of introducing small manufacturing activities, are being kept under review in cooperation with other agencies such as' IL and UNIDO. 30. In education., rural areas deserve a higher priority, and the Bank Group is presently appraising: - An education -project, the main objective of which will be to bring rural education back to its original purpose: training rural  - 7 - people for rural life. The Rural Education Centers would be integrated into village life, and teaching would be made more relevant and practical with the assistance of the ORD. Qua- lity improvements in conventional education would be a secondary objective of this project. 31. The Bank Group intends to study further nutrition deficiencies with a view to devising a course of action to alleviate them. As a first step, the desirability and feasibility of including nutrition among the subjects to be taught in the Rural Education Centers will be explored. 32. The Bank Group, with the help of consultants, is also endeavoring to define a realistic program to improve the management capabilities of Voltaic people working in the ORD and in the Ministry of Public Works. 33. In conclusion, Upper Volta is an extremely poor country faced with severe constraints, which-has made an exceptional effort to make use of its resources. It is one of the six countries for which the UNDP will rnake a special effort. It is eminently eligible for aid on concessionary terms. It deserves special consideration also with respect to the finan- cing of local costs. PART III - THE RUPAL DEVELOPMENT FUND 34. The proposed Rural Development Fund (RDF) project was identified by an economic mission in November 1969. It was prepared by the National Development Bank (BED) with the assistance of the Bank's Permanent Mission in Western Africa (PMWA), appraised in August 1971 and negotiated in April 1972 with a delegation headed by H.E. Antoine' Dakoure, Minister of Agri- culture, Livestock, Land and Water Resources, and Tourism. FPAO and "Caisse Centrale de Cooperation Economique"l (CCCE) of France assisted in its pre- paration and will contribute to its financing (paragraph 39). 35. The most critical constraints on rural development in Upper Volta, as analyzed above, can only be dealt with through a multiplicity of small projects which do not lend themselves to direct Bank Group finan- cing. Hence the proposal to create a Rural Development Fund (paragraph 40 below) to channel external funds to local communities. 36. The proposed project would be the first phase of what is intended to be an expanding program designed to alleviate various constraints and increase agricultural production and other rural economic activities. It would extend to most parts of the country where the Government can provide supporting services when they are needed. It is expected that between 300,000 and )450,000 people would benefit from it. 37. Under the proposed project, the Rural Development Fund would finance: (a) About 500 village wells to be constructed by unskilled voluntary labor assisted by three well-digging teams.  -8- The main benefits would be better protection from waterborne diseases, savings of time and energy previously spent on water collection, and the possibility of increas- ing small livestock holdings. (b) About 700 village warehouses for agricultural inputs, to be built in the cotton belt by voluntary labor assisted by paid masons and carpenters. They would benefit farmers by retarding wastage of fertilizers and insecticides, thus increas-ing cotton crops. The ready availability of inputs -should also induce more farmers to use them. (c) About 190 small land and water develoPment schemes, to be carried out by unskilled voluntary lab.or-assisted by skilled paid labor. These schemes will include drainage and.water control of swampy depressions (bas fonds) for rice pr9duction; soil erosion control works on upland farmi,nig,areas surrounding these depressions and producing cotton, groundnuts, cowpeas, sorghum. and millet; small gravity irrig,a,tion schemes on land lyingt-below existing small dams. They are expected to increasqe crop yields. (d) Improvement of feeder roads which can,be -shown to have a minimum economic rate of return of ten percent from road user savings or from -increased agricultural production resulting from better communications wi-th extension servi- ces or markets. (e) Unidentified projects,and studies, which,may include the following :subjects already proposed by the ORD: training of blacksmiths and other rural artisans.; direct agri- cultural production schemes; provision of veterinary equipment. Should the study mentioned -in paragraph 38 indicate that projects might have or have had a detri- mental effect on the health of the peop-le, the amount available under this heading could also be used to finance preventive or remedial measures -such as the purchase of knapsack sprayers to control the bilharzia snails. Well contamination can generally be avoided through proper location, but could be combatted through periodic applications of perchloron or liming of the wells. Another,possible use-of this amount would be to finance the nutrition study mentioned in paragraph 31, should no grant be available from other sources for this purpose. 38. In connection with the Project, the Government has agreed to cooperate with the Association in carrying out,a study, to be financed by the Association on its own budget,, about the sanitary impact and the health effects of the projects. The cost of this study is estimated at US$15,000.  - 9 - 39. The cost of the project is estimated at $3,043,000 including some $445,000 in taxes. The breakdown of costs is in Annex III. FAC and CCCE would contribute about $380,000 to pay the salaries of the project manager and of four other specialists. The Association would provide $2.2 million, and the Government would provide the balance. The project cost estimates do not include the monetary value of voluntary farm labor (about 370,(000) and of resources devoted to the project by government services (about $86,000). 40. The PDF wo ld be a new division of BND. Its senior staff would be a project manager initially, a well-qualified expatriate adviser to the MND), a deputy project manager, who would be a specialist in small rural development projects, and an evaluation officer (also initially an expatri- ate) with qualifications and experience satisfactory to the Association. The deputy manager is expected to take over as manager about two years after the beginning of the project, and additional personnel would be trained for the PDF division. Projects would be prepared by the ORD usually with assistance from the Ministry of Agriculture, except for road improvements, which would be designed by the Directorate of Public Works (DN4). All projects would be appraised by the RDF before being incorporated in an annual program. This program would be reviewed and approved, firstly by an Interdepartmental Technical Committee to be headed by a Cabinet Officer and cons.isting of high-level representatives of all Ministries involved, and secondly by the Association. Establishment of this Committee would be a condition of effectiveness of the credit. ORD would carry out the projects described in subparagraphs (a), (b) and (c) of paragraph 37. They would be assisted for the construction of wells by the Division of Water Development and Rural Engineering (HER) of the Ministry of Agriculture. Farmers' groups would be organized to carry out land and water development projects. The road projects /subparagraph (d)] would be carried out by the DPW on force account, or let to contractors. After construction is completed, ORD0, HEIR and DPW would take over responsibility for subsequent management and main- tenance of the projects. HER and DPW would, under the project, receive the necessary technical assistance (paragraph 39). 41. Adequate extension and credit services are essential, especially for land and water development projects. The Government has given assuran- ces that it would provide these services. 42. An economic analysis has been made by type of project, because variations between projects will be very small, particularly as regards wells and warehouses. The justification of each type of project is reflected in paragraph 37 above. However, a concise feasibility study would be re- quired for each project estimated to cost more than CFAF 5 million ($20,000). The number of such projects under the proposed project is estimated at about 25. 13. Beneficiaries of the projects are extremely poor and unlikely to work voluntarily on projects which would increase their debts, taxes or input prices. They would not be expected to contribute to project costs. The only exception is that farmers would be expected to finance land and water project maintenance through annual levies. A model tripartite contract between farmers, their association and ORD, incorporating this obligation, would be agreed with the Association before such projects are  - 10 _ approved and carried out. However, if the project succeeds and its scope expands, it may put an increasing strain on the government budget whereas beneficiaries may become better able to contribute to investment costs. It has been agreed, therefore, that studies would be conducted to determine to what extent, as a result of the project, its beneficiaries may in due course become-able to meet all or part of project costs. 44. Goods to be procured for the project (vehicles, drills, compressors, pumps, concrete mixers, brick presses, cement, reinforcing steel, lumber and sheet metal roofing) would cost about $1.0 million,-but-most of the contracts would be smalll. Fbr all purchases or contracts likely to be below $4,000 there would be, no competitive bidding. Contracts between $4.,000 and $5D,000 would be advertised only in'Upper Volta. For all contracts above $50,000, the Government would be obligated to consult.-with the Associa- tion before calling for bids and awarding contracts'.. 45. The RDF would receive quarterly advances from the Government to meet the financial--requirements of the project and.would'subsequently furnish the Government with appropriate documentation to be--presented to the Association for reimbursement. The Association would reimburse-the c.i.f. cost of imported goods and 83 percent of the cost of all other items not financed by French agencies.. 46. It is not possible to quantify. all the-b-enefits of the proljectj particularly the improved well-being'and health of thebpeople. On the basis of quantifiable benefits only, the weighted'overa.l-'economic- rate of return of the project is estimated at 15.6 percent. The rates-of return would still exceed ten percent if costs were ten percent higher and benefits ten percent lower than estimated. PART IV - THE ROAD PROJECT' 47. The proposed Road project was-identified&by the mission which appraised the West Volta Cotton project in February, 1970. It was prepared by the French consulting firm "Bureau Central pour les Equipements- d'Outre- Mer" (BCE1OM), appraised in December 1971 and-negotiated in April 1972 with a delegation headed by H.E. Antoine Dakoure, Minister of Agriculture, Livestock, Land and Water Pesources-, and Tourism. 48. The- proposed project (see AnnexIII) would complement the West Volta Cotton project by upgrading to gravelled surface- two roads in the- project area: (a) the'Sodlenzo-Koundougou road (70 km)-which is-used to transport 20 percent of the total cotton production of the lWest Volta- area; (b) the Hounde-Bgreba road (27 km) which connects the site of the ginnery to be built under the Westi Volta Cotton project to the Ouagadougou-Abidjan railroad.  - 11 - 49. Total cost of the project, including taxes estimated at $0.'? million (20 percent of total cost) would be about $3.5 million, of which about $2.3 million would be for construction contracts and about $0.1 million for supervision. Feasibility and engineering studies would cost about $0.5 million and contingencies about $0.6 million. 50. The proposed project would be the second stage of road improvements linked with the cotton project. The first stage, largely financed by credit 225-UV, is a five-year program of road maintenance and improvement on about 820 km of earth tracks serving the area. This program is now underway. The detailed engineering for the second stage was also financed by credit 225-UV. 51. The proposed $2.8 million credit would cover the total cost of the project net of taxes. The Government has undertaken to provide the additional funds that will be required for maintenance. 52. The most likely economic return on the roads has been estimated at 17 percent for the Koundougou-Solenzo road and 13 percent for the Hound6-BMrdba road. The rates of return on both roads are sensitive to the long-term trend of cotton production, which is difficult to estimate because varying rainfall causes sharp fluctuations in output from year to year. A sensitivity analysis, however, shows that the return on the Koundougou- Solenzo road would remain satisfactory with conservative assumptions about the future growth of cotton production. The justification of the Hounde- Bereba road is based essentially on the traffic that will be generated by the construction of a cotton ginnery at Hounde under the TWiest Volta cotton project being financed in part by credit 225-uv. Droughts in 1970 and 1971 reduced cotton production to a level which did not justify immediate con- struction of the ginnery, but with the revised production forecasts for the project area and to the southeast, operation of the ginnery is now planned by 1975. At the very worst, in the Association's judgment, future cotton production will require operation of the ginnery by 1977 and full use of its capacity in 1978, which still would imply a satisfactory return on the road investment. 53. The Association has explored with the Government the possibility of amending the specifications of one or both of the proposed roads, to encourage the use of more labor-intensive construction methods. The govern- ment delegation welcomed IDA's interest in providing employment opportuni- ties to the rural population. It pointed out, however, that road construc- tion would provide on]y temporary employment; that it might be difficult to mobilize unskilled labor for unfamiliar work; and that the longer construction period required would increase administrative and supervision costs. It was agreed therefore that no attempt would be made to amend the specifications of the two project roads although it was agreed that further consideration would be given to labor-intensive methods in the future. The same problems, however, would not affect road maintenance, and FAC, which is presently studying how Upper Volta could meet the requirements of secondary road maintenance, has agreed to extend the study to the feasibility of labor- intensive maintenance methods.  - 12 - The proposed project would include $500,000 for feasibility studies of about 400 km of trunk roads and engineering studies of sections agreed to be of highest priority. 55. Ecxecution of the project would be the responsibility of the DP''. Contractors would be prequalified. Construction would be supervised by DPTrW personnel with qualifications and experience satisfactory to the Association on the basis.of a program to be mutually agreed. The Government has agreed, however, to employ consultants, if necessary, to strengthen the DPW staff, and funds have been provided under the,proposed credit to cover this possibility. 56. Construction work would.be awarded,in a single contract under international competiti-vte bidding procedures... The Assoc,iation.would reim-. burse .75 percent of the-cost of construction contracts.and 100 percent of the. cost of supervision and pre-investment studies.,. PART V - LEGAL INSTRUMENTS,AND.AUTHORITY 57. The draft Development Credit Agreements between the Republic of Upper Volta and the Association for the Rural Develppment,Fund Project and, for the Road Project respectively,,the Recommendations of the Committees provided for in Article V, Section:.l(d) of the Articles.of Agreement of the Association and.the text of Resolutions.approving.-each of the proposed Devel- opment Credits'are being distributed to the Executive.Directors separately. 58. The draft Development Credit.Agreement for the Rural Development Fund project contains covenants.usually foundAin the Association!s agree- ments for agricultural projects. The.effectiveness of the proposed credit. would be conditional upon the establishment:of,,an.,Interdepartmental Tech- nical Committee and-the appointment of its memb,ers,. in accordance with the provisions set forth,in the Development Credit Agreement (Section 8.01). 59. The-draft Development Credit Agreement for the Road Project is, in the usual form for such projects. 60.. I am satisfied that the proposed Development Credits would comply with the-Articles of Agreement.of'the. Association. PART VI - REECOMMENDATION 61. I'recommend that the Executive'Directors approve the proposed Development Credits. Robert S. McNamara Annexes President Washington,.D.C. May 23, 1972  ANNEX I STATEMENT OF IDA CREDITS TO UPPER VOLTA AS OF APRIL 3O0 1972 Credit Amount (US$ millions) Number Year Borrower Purpose ~IDA Undisbursed 141-UV 1969 Republic of Upper Volta Telecommunications 0.8 0.8 225-Uv 1971 Republic of Upper Volta West Volta Cotton 6.2 5.9 Total 7.0 6.7   ANNEX II Page=1 COUNTRY DATA - UPPER VOLTA AREA: 27h4200 on2 POPULATION: 5.2 million (1970) DNSITY: 19 per Rate of growth 2% per annum POPULATION CHARACTERISTICS: HEALTH Crude Birth Rate (pe=r 1000) 149 P7opulation per physician 86,000 (1970) Crude Death Rate (per 1,000) 29 Population per hospital bed 1,68o (1966) Inrfant mortality (per 1000 live births) 120 NUTRITION: EDUCATION Calorie intake as % of requirements 94 (1963/64) EdulTiteracy rate 5-10% Per capita protein intake (grammes) 20,800 (year)(1963/64) Primary school enrollme:d. 10% Per capita meat consumption (grammes)ll,OOO (1970) DROSS D0MESTIC PRODUCT 1970: GDPper capita Annual AveraBe Growth Rates.L%) (value in uS$ min) 2 (US$) 196-70 99-7O CDP at market prices 30U 100 59 (1970) 3 Gross Investment 25 8 Dross Domestic Savings - - Resource Gap 25 8 OUTPUT, LABOR FORCE ANDt Value added Labor Force (Value adds Worker FRODUCTIVITY IN 196X/1970) T(US3 Miion) f (000) % n a aera national average Agriculture 135 44 1,952 96 69 45 Secondary sector 65 21 0,022 1 2,954 1,94o Services 1i8J5 35 o,