Togo - Cocoa - Coffee Development Project

FILE COPY DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. P-1481-TO REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO TOGO FOR A COCOA-COFFEE DEVELOPMENT PROJECT July 10, 1974 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group dges not accept responsibility for the accuracy or completeness of the report. Currency Equivalents Currency Unit = CFA franc (CFAF) Present Rate US$1.00 = CFAF 250 CFAF 1 = US$ .004 OFAF 1,000 = US$h.00 CFAF 1,000,000 = US$4,000.00 Fiscal Year = January 1 through December 31 1/ The CFA franc is tied to the French franc in a ratio of 50 CFA francs to 1 French franc. The French franc is currently floating. INTERNATIONAL DEVELOPMNT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF TOGO FOR A COCOA-COFFEE DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed Development Credit to the Republic of Togo for the equivalent of US$6 million on standard IDA terms to help finance the rehabilitation, planting and maintenance of ,00 ha of cocoa and 4,000 ha of coffee in Togo's Plateaux Region. France (FAC) is expected to provide co-financing for the project in the form of a US$1.7 million grant. PART I - THE ECONOMY 2. The most recent economic report on Togo, Report No. 34a-TO entitled "Current Economic Situation and Prospects of Togo" was issued on December 20, 1972. An updating economic mission visited Togo last December. Its findings are incorporated below. 3. During Togo's first decade as an independent state, its economy grew steadily. From 1966 to 1970, for example, GDP growth in real terms averaged 6 percent yearly and by 1971 the country's per capita income had reached US$150, a low figure but one about 50 percent higher than in neighboring Dahomey. The sustained upswing in Togo's economy was due, in great part, to a vigorous expansion in the country's external commerce which, in turn, was spurred on by favorable market conditions for two of Togo's principal exports, cocoa and coffee. With its low tariff structure - a legacy of trusteeship days - the country developed into an important regional commercial entrep8t for both official and unrecorded trade and accumulated, in the process, substantial foreign reserves. Between 1965 and 1970, Togolese exports increased by 22 percent yearly. During this same period, imports - particularly of consumer goods a high percentage of which were subsequently re-exported - also rose sharply. 4. From 1971 through mid-1973, a slump in world cocoa prices resulted in a marked decrease of commercial activity and in an economic slowdown. Foreign reserves decreased to about US$25 million - still enough, however, to cover nearly three months of imports. Fortunately for Togo, by mid-1973 world cocoa prices were well on the way to their presently high level and the nation's economy showed signs of recovery. 5. Through 1968, the Togolese Government followed prudent financial policies which led to substantial budgetary savings. Since then, however, there has been a relaxation of Government austerity and current expenditures, particularly for stepped-up personnel outlays, have been allowed to increase by about 20 percent yearly. In 1973, this rise in current expenditures coincided with a leveling off of revenues due to the economy's downturn. The result has been a tightening financial situation which could hamper Togo's ability to contribute to its future development - 2 - unleis the recent trend is arrested and public savings are raised. The Bank has, therefore, advised the Government to hold down new hirings pointing out that during the next few years it should be possible for the Government to meet most new demands for services by more effectively using existing personnel. 6. A pressing problem facing the '0ogolese economy is the growing gap .etween urban and rural living conditions. The lot of city dwellers engaged in commerce, industry, construction and the civil administration - particularly in LomS - has improved considerably since independence. 'Most of Togols rural population, on the other hand, has remained largely untouched by the modern sector's economic expansion and continues to live in poverty, i.e., per capita incomes in the nation's towns average an estimated US$350 and are growing; meanwhile, farm incomes hover around US$70 and are consider- ably lower in the country's poor northern region. Unless this growing disparity is narrowed, rural poverty and exodus leading to urban over- crowding and unemployment will be accentuated. The Government is aware of this and is taking steps to improve conditions in the country;.ide by promoting the increased production of food crops and of important cash crops like cocoa and coffee. 7. The scarcity of carefully prepared, suitable development projects has also been an important obstacle to economic progress in Togo. Recently, however, Togolese officials have been able to obtain funds for much needed preinvestment studies and technical assistance froi UND?, the Bank Grouo and other aid donors. The fruits of an expansion in this form of aid should be forthcoming during the second half of the seventies as more projects are identified and prepared for eventual external financing. 8. During the next two years, Togo's GDP is likely to grow at a real rate of between 7 and 8 percent yearly. The recent rise in oil prices will increase the country's import bill but this increase will be more than offset by expected record earnings for Togo's major exports; cocoa prices are, for example, at an all time high and the world price for phosphate, Togo's second largest export item, has tripled in recent months. Trade should, therefore, fuel the economy's upswing. The industrial sector should also experience a healthy rate of expansion, particularly if the large CIMO cement clinker plant project discussed in Part II of this report is launched. On the minus side of the ledger, agricultural production will probably continue to lag well into the second half of the seventies since the identification and preparation of development projects in this sector has just begun and it will be some time before these projects and programs become operational. 3- 9. In the longer run, Togo's GDP growth is likely to be more modest, i.e., in the neighborhood of 4 percent yearly in real terms. The country's natural resources are limited and its smaLl domestic market will tend to restrict as in the past, industrial growth. In order to realize Togo's full potential, the Government will have to foster development of the country's directly productive sectors, particularly agriculture, while increasing efforts aimed at regional economic cooperation and pushing through a program of much needed educational reform. The Government should also be encouraged to pursue a policy of budgetary austerity so as to permit it to continue funding a significant part of the country's overall development effort. Finally, the Government should continue to expand and improve, as necessary, the existing transport infrastructure with particular emphasis on the development of the country's secondary road system which is closely linked to Togo's rural development. 10. At present, 70 percent of Togolese public investment is financed by foreign aid and total disbursements average about US$20 million yearly. France (FAC) is the single largest donor providing roughly a third of this aid with the European Economic Community (FED) and Germany funding another 25 percent each. The Bank Group and other U.N. agencies contribute about 15 percent of the total aid package and the remainder is provided by other sources, e.g., the U.S. and Canada. Most of the foreign aid given Togo through 1973 has been earmarked for infrastructure development. 11. During the next few years, as more projects are identified and prepared for external financing, the level of foreign aid inflows could grow to close to US$40 million per annum. As in the past, foreign funding is expected to account for about 70 percent of Togolese public investment but increasing amounts of aid should be earmarked for projects in the agricultural sector and to finance technical assistance. While traditional aid donors are expected to continue to be active in Togo, the People's Republic of China pledged in 1972 to provide Togo with approximately US$48 million in assistance. It is still unclear when or how this aid will be made available but it appears likely that the Chinese will focus on financing rural development projects and that their aid will take the form of 30-year interest free credits with 15-year grace periods. 12. Aid to Togo has traditionally been furnished on generous terms with grants accounting for about 75 percent of foreign assistance provided to date. As of November 30, 1973, the country's external public debt amounted to only US$68 million and most of this was incurred at modest interest rates and with repayment periods of more than ten years. Service on this debt amounted to approximately 5 percent of exports for the year. Given Togo's relatively good reserve position and the favorable world market outlook for its principal exports, the country should be able to service this debt without problems. In view of Togo's poverty, difficulty in mobilizing public savings and only modest prospects for GDP growth in the longer run, however, foreign lenders should continue to provide financing on concessionary terms except for enclave-type projects such as CIMAO. PART II - BANK GROUP OPERATIONS IN TOGO 13. To date, the Bank Group has extended two Credits totalling US$12e_.'h million to Togo. Both of these were for road projects briefly described below. Annex II contains a summary statement of IDA Credits to Togo as of June 30, 1974 as well as notes on the execution of both projects. 14. A Highway Maintenance Project (Credit 131, October 10, 1968, US$3.7 million) was the Bank Group's first lending operation in Togo. As in many other African countries, road maintenance fell off in the years follcwing independence because of the poor state of the country0s road maintenance fleet and the lack of adequate personnel and funds. .a a result, the national highway network's condition deteriorated and long stretches of road became virtually impassable, particularly during the rainy season. Credit 131 aimed at remedying this situation. Mbre specifical,ly, project funds were earmarked to finance a four-year maintenance program which included the purchase of maintenance and shop equipment, the training of Department of Ptablic Works.staff and necessary technical assistance. Financing was also provided for preinvestment studies aimed at identifying other road projects. The project is nearing completion and its execution has been satisfactory. 15. The Second Highway Project (Credit 450, December 23, 1973, US$8.7 million) evolved from these studies and provides for (i) reconstruction to a paved, two-lane standard of the 81 km Blitta-Sokod6 road on Togols main north-south transport axis; (ii) improvement and construction to gravel standards of the Sokod4-Kambol (75 km) and Agou-Nuatja (51 km) roads, respectively, which serve important agricultural regions; (iii) extension through 1976 of the road maintenance program initiated under Credit 131; and (iv) preinvestment studies. 16. Togos rural development is of the highest priority. Consequently, in addition to the Cocoa-Coffee Project discussed in this report, the Bank Group is also considering an integrated rural development scheme for Togovs densely populated coastal region. This project is likely to be ready for Board action in FY76. Other aid donors such as FAC and FED have also been active in the agriculture sector. The country's economic development also calls for additional investments in transportation, a sector in which FAC, FED, KfW (Germany) and USAID as well as the Association have been active. Our involvement in transportation will continue; we are presently preparing a Third Highway Project which should be ready for the Executive Directors' consideration by FY77. 17. In an effort to diversify the nation's economy and to expand its industrial base, the Togolese Government has requested Bank financing for the US$125 million CIMAO cement clinker plant project. This operation - a regional undertaking which would involve production of clinker for the cement markets of West Africa - is jointly sponsored by the Togolese and Ivorian Gove--nments. The Bank pre-appraised the project in 1971 but had reservations regarding CIMAO's high technical risk and marginal economic return. Since then, a number of positive factors including the discovery of a large, high qualfty limestone deposit at Sika-Kondji, have eliminated most of this undertakingIs risk and have improved CIMAO's economic viability. Consequently, the Bank has agreed to reconsider the project and is sending a mission to Togo this fall to proceed with the final stages of its appraisal. Uther multinational aid agencies, such as the European Investment Bank and African Development Bank, as well as several bilateral donors have indicated their readiness to consider co-financing for the project. PART III - AGRICULTURE IN TOGO 18. General characteristics: Agriculture is the mainstay of the Togolese economy. Although its importance vis a vis other sectors is diminishing, it still accounts for about 40 percent of GDP and is the source of livelihood for over three-quarters of the country's population. Agricultural products are also major export items. All told, they earn over 60 percent of Togo's foreign exchange receipts with two crops - cocoa and coffee - accounting for half of the country's export earnings. 19. Togo's approximately 300,000 farm families work holdings that average 2 - 5 ha. Cultivation is usually by traditional techniques and yields are low. While cocoa and coffee stand out because of their importance as export crops, staples such as yams, cassava, maize and sorghum account for over 80 percent of agricultural output. The bulk of this foodcrop production is consumed by the farmers themselves. 20. Institutional framework: The Ministry of Rural Economy is broadly responsible for Togogs rural development. To date, however, the inistry has focused on policy formulation and program coordination. It has delegated the task of actually promoting agricultural growth to five Regional Agricultural Development Agencies (SORADs) and to seven commodity oriented public enterprises. 21. The SORADs, which were set up in 1967, are charged with providing extension services and agricultural inputs to farmers in Togo's five adtinistrative regions. They also act as intermediaries between individual farmers and credit institutions. The SORADs have been faced with difficulties. Their effectiveness has been undercut by a shortage of trained manpower, inadequate management and limited financing. 22. As the SORADa have waned in importance, Togo's commodity oriented public enterprises have grown in number and scope of responsibility. The Soci&tS Nationale pour la RAnovation et le D6veloppement do la Cacaoybre et de la CafAi6re Togolaise (SRCC) is the most important of these public enterprises. It was founded in 1971, with FAC assistance, to rehabilitate and extend cocoa and coffee cultivation in the Plateaux Region by providing farmers with needed extension services, agricultural inputs and infrastructure. SRCClae-performance has been good and it will have the primary responsibility for executing the Cocoa-Coffee Project discussed in PartIV of this report. 23. In Togo, agricultural credit is extended by the Caisse Nationale du Cr6dit Agricole (NCA). The Government set it up in 1967. So far, its activities have been limited to making a small number of seasonal and marketing loans to SORADs and cooperatives. CNCA has hadIvirtually no experience in providing credit to individual farmers and its performance has been poor in even the limited credit activities it has undertaken. Nevertheless, it will be primarily responsible for the proposed projectfs credit component after certain institution building measures discussed in Part IV of this report are implemented. -0 24. No discussion of Togolese agricultural institutions would be complete without a reference to -he Office des Produits Agricoles du Togo (OPAT). This agency has broad marketing and price stabilization functions. On its recommendation, the Government sets farmgate prices to be Daid for export crops. Buying agents licensed by OPAT purchase the produce from farmers at the guaranteed price and sell it, in turn, to OPAT. The agency then markets the country's export crops overseas. To date, OPAT has been generally well run and has, over the years, accumulated important rese:ves. 25. Performance and sectorial constraints: Growth in the agricultural sect3r has lagged behind that registered by the rest of the economW. From 1965 to 1970, for example, agricultural production rose by only about 3.5 percent annually, barely enough to keep pace with Togo's population increase. In more recent years, there is evidence to suggest that even this modest growth rate has not been maintained. 26. Difficult agro-climatic conditions in many parts of the country have been partially responsible for the sector's slow development. In the coastal Maritime Region, for example, rainfall is only half what it is in the coastal areas of most other West African states. This climatological quirk has limited the range of crops which can be economically cultivated in the region and has held down yields for those crops wnich are grown. Ln Togo's northern Savanna and Lama Kara Regions, agricultural growth has been restrained by the worsening Sahelien drought, the presence of onchocerciasis in otherwise agriculturally promising river valleys and the exhaustion of soils in the densely settled Lama Kara hill country. 27. Apart from the natural limitations referred to above, a number of other factors have contributed to the rural economr's sluggish performance. The most important of these has been the sector's limited absorptive capacity. The dearth of sound agricultural projects has handicapped the introduction of modern cultivation techniques which would botn stimulate farm productivity and improve rural living conditions. The low level of public investment in agriculture has.also dampened the country's rural development. During the late sixties, for example, Government investment in the sector amounted to only about a fifth of overall public capital outlays and the negative repercussions of this underfinancing were felt throughout the sector. Rural development agencies like the SORADs were especially hard hit and their ability to operate effectively was undercut by the shortage of funds. 28. Prospects and strategy: In recent years, the Government has grown increasingly aware of the agriculture sector's priority and of the need to press for Togogs-rural development. The second Five Year Plan whicn covers tne 1971-1975 period, aims at increasing agricultural output by an annual 6.6 percent,. In light of the sector's performance through 1973, this target seems unattainable. Nevertheless, during the past few years the Government has taken n number of measures to mount an effective agricultural development program which should result in stepped-up agricultural output in the second half of the seventies. These include, for example, the creation of several commodity- oriented, public enterprises whose objective is to stimulate and guide the development of critical cash and food crops. Furthermore, in its project - 7- identLfication and preparation efforts, the Government has paid increased attention to tne agricultural sector. 29. Togo's 1971-1975 Plan stresses cocoa and coffee development in the Plateaux Region, a humid, upland area stradaling the Togo-Ghana border and beginning some T00 km north-west of Lome. This emphasis is sound given (i) the region's generally favorable agro-climatic characteristics; (ii) the importance of both crops as foreign exchunge earners; (iii) the limited piospects for other export crops in Togo, with the exception of cotton; (iv) the propitious world market outlook for cocoa and coffee; and (v) the fact that the implementation of a cocoa-coffee development program will benefit a relatively large number of farmers. 30. The proposed Cocoa-Coffee Project fits well into Tog-'s overall agricultural development strategy. It is also the first of several recently prepared agriculture projects having a clear potential for prompt and success- ful i-plementation, to come on stream. 31. The Cocoa-Coffee 6ubsectors: At present, approximately 12,000 Larm families grow cocoa in Togo. The total area under cocoa cultivation is about h0,000 ha and most of this hectarage is located in the Plateaux Region's Litim6 and Klouto plains. In recent years, annual cocoa production has averaged about 10,000 tons. Since the quota allocated to Togo under the new International Cocoa Agreement is 28,500 tons, there is significant scope for increased cocoa production in the country. 32. Cocoa yields in Togo have tended to be low. Most existing plantings are old and an estimated 30 percent date back to the late 1930s. Very little new cocoa has been planted because farmers' confidence in the crop was shaken by the low prices which prevailed during most of the sixties. The absence of a concerted Government cocoa development effort geared to provide growers with technical assistance, credit and improved planting material also held down new plantings. 33. Aware of cocoa's importance to the economy, the Government has taken a number of measures in recent years to encourage increased cocoa production. in 1969, for example, it successfully launched capsid and swollen shoot virus disease (SSVD) control programs. Two years later, the Government set up the SIRCC with FAC financial and technical support and kicked off a major cocoa re- habilitation scheme. Fortunately, this program has coincided with an upturn in the world market outlook for cocoa which, in turn, has permitted the Government to raise cocoa farmgate prices to their presently satisfactory level of CFAF 105/kg. The favorable level of cocoa producer prices should reinforce the other cocoa development measures being taken by the Government which include the proposed project which is a follow-up to the cocoa rehabilitation program referred to above. 3). Coffee is also grown in the 0lateaux Region, principally in the kposso and Dayes districts. Despite favorable growing conditions,coffee yields are lo, and production has stagnated. Thus, while nearly 40,000 ha of coffee are under cultivation,the country's annual production in recent years has averaged less than 10,000 tons and slumped to only 5,000 tons in 1972 and 1973. Under the now inoperative Second International Coffee Agreement, Togo had been allocated an annual quota of 12,000 tons. 3r. A major reason for the subsectorls disappointing showing is that most To-olese coffee plantings are aging and of the Niaouli variety. Maxirum yields 'or 'Niaouli coffee are in the order of 400 kg/ha. Yields for irproved varieti3s of Robusta coffee, on the other hand, run as high as 2,000 kg/ha. Despite this fact, Togolese farmers have been unwilling to switch to the new varieties or even to more efficiently work their existing holdings. Inadequate farmgate prices for coffee - which have persisted for more than a decade - explain their reluctance to do so. The absence, until recently, of a Govern- ment program to provide growers with technical assistance and improved Robusta planting materials also contributed to farmer disinterest in improved coffee plantings. 36. As in the case of cocoa, the Government has begun to push for a more effective exploitation of the Plataaux Region's coffee potential. Since 1971, the SRC3 has been providing coffee growers with a package of services as part of the 3overnment's coffee development program. Furthermore, in early June, the Government raised the farmgate price of coffee from CFAF 80/kg, the previous level, to CFAF 100/kg. The project discussed in the following paragraphs provides for a continuation of this program through 1981/82. PART IV - THE PROJECT 37. The proposed project evolved from studies financed by the Government and prepared in 1972 by the Soci6t6 d'Etudes pour le D6veloppement Economique et Social, a French consulting firm. While it would be the Bank Group's first operation in the agricultural sector, it is the second stage of a program launched by the Government - with FAC financing and technical assistance - in 1971 to promote the development of modern cocoa and coffee production among small farmers in the country's Plateaux Region. The project was appraised by a Bank Group mission in March/April, 1973, and the mission's report (352a-TO, dated June 26, 1974 ) entitled "Appraisal of a Cocoa-Coffee Development Pro- ject" is being distributed separately. Annex III contains a Credit and Project Summary. Negotiation of the Credit took place from June 10 to June 13, 1974, and the Togolese delegation was headed by Mr. Dogo, Minister of Planning,and included Messrs. Fofana (Minister of Rural Economy), Etsi (Secretary General, Finance Ministry), Bannerman (Secretary General, Ministry of Justice),Sema (Rural Economy Ministry), Adigo (Planning Ministry), Deuss (Head of the SRCC), Batchassi (Deputy Director, SRCC) and Sossah (Officer, National Investment Company). 3, Description: The project consists of the following elements: a) planting and maintenance of 4,400 ha of cocoa and 4,000 ha of coffee; b) strengthening of the SRCC and CNCA, the project's executing agencies; c) applied cocoa and coffee research; a) construction and rehabilitation of 50 and 110 km of feeder roads, respectively. Funds would also be provided under the proposed Credit for the maintenance of these and other feeder roads in the project area during the project development period; and e) studies (i) to evaluate the project and prepare, if justified, a follow-up operation and (ii) to develop appropriate administrative and lending procedures for the CNCA. The cocoa and coffee planting programs envisaged under the project have been referred to and been found acceptable by, the International Coffee Organization and thE FAO. 39. Approximately 6,500 farm families would plant and maintain the cocoa and coffee referred to in part (a) above with the help of credit, grants and technical assistance provided under the project. This support would be forthcoming over an eight year period - from 197b/75 through 1981/82 - by which time the plantings would come into production. At maturity, the cocoa and coffee planted under this project is expected to produce about 4,400 tons of cocoa and about 4,800 tons of dry coffee beans per year. This output would equal 30 and 90 percent, respectively, of Togo's 1973 cocoa and coffee production. About a quarter of the hectarage planted under the project would consist of new farms. The remainder would involve rehabilitation of existing but low yielding plantings. Cocoa development activities would be concentrated in the Plateaux Region's Litim6 and Klouto areas while the project2s coffee component would be carried out in the Region's Akposso and Dayes districts. Agro-climatic conditions in these areas favor cultivation of both crops and they are already important cocop-coffee growing zones. 4o. The SRCC would be responsible for executing the project's technical and infrastructure aspects. More specifically, the SRCC would (i) promote the project among farmers and select participants; (ii) assist farmers in preparing farm plans and loan applications; (iii) recommend farmers to the CNCA for loans and supervise the use of such loans; (iv) produce planting material and distribute it and other inputs to farmers; (v) provide anti- capsid treatment to cocoa farmers in the Plateaux Region; and (vi) execute the project's feeder roads program and other infrastructure components. 41. Under the project, agricultural credit would fall under the CNCAIs general auspices. However, because CNCA has had no ecperience in extending credit to individual farmers and has had difficulty in managing its limited lending portfolio in the past, it was agreed during negotiations that a Project Credit Unit (PCU) would be established within the CNCA to handle the projectfs credit component (see Sec. 3.07 [a) of the Credit Agreement). An experienced agricultural credit specialist acceptable to the Association would head the Unit (see Sec. 3.07 (b] of the Credit Agreement) and its lending procedures would be drawn up after a review of the findings and recommendations of a study of CNCA's present operations and structure. Funds for this stucy would be provided under the proposed Credit. The PCU would work closely with the SRCC and would (i) consider and process loans to farmers recommended by the SRCC; (ii) manage credit accounts; and (iii) establish and monitor credit repayment procedures. Farm credit to be extended by the PCU would be principally for land preparation, planting material, fertilizer and small tools. 42. While the SROC is a sound institution with capable, proven man- agement and the CNCA is expected to develop into one, the proposed project would impose a substantial, additional workload on both agencies which requires their strengthening. Project funds would, therefore, be earmarked for (i) both agencies project related operating expenditures; (ii) an expansion of their office, housing and storage facilities; (iii) the hiring and training of about 110 additional staff; and (iv) the procurement of vehicles and road construction equipment. - 10 - 41. In addition to the institution building aspects referred to above, the prcJect calls for applied cocoa and coffee research. SRCC would be respon-ible for conducting the research with support from the French Insti- tute for Coffee, Cocoa and Other Stimulant Plants. While the research program envisaged is a varied one, emphasis would be given to the selection of high yield cocoa hybrids as well as robusta and arabica coffee varieties suited to the Plateaux Region's ecological conditions. The improvement of planting material multiplication and cocoa/coffee planting techniques would also be stressed. h. A road construction, rehabilitation and maintenance orograam would also be financed under the project. Altogether, about 50 km of new roads and a dozen small bridges would be built and another 110 km of existing but badly deteriorated roads would be rehabilitated. The maintenance of project area feedec roads would also be provided for under the Credit. The roads in question - built to cne- lane, gravel standards - are important to the project's effective execution since they would furnish the project areas with much--needed,all weather transport links. 45. This operation's final component is a study evaluating the project's performance and preparing, if justified, a follow-up project. The study would be carried out for the SRCC by consultants as soon as 1,000 ha each of cocoa and coffee have been planted and would focus on the effectiveness of project institutions, farmer response to the program and on the world market outlook for cocoa and coffee. 46. Costs and financing: The project's total costs - including US$500,000 in taxes and duties - is estimated at US$10.5 million. Its foreign exchange component is US$3.76 million or 37 percent of the project's cost, net of taxes and duties. The proposed IDA Credit would be for US$6 million and would ac- count for 60 percent of the project's net cost; it would cover US$2.7 million in foreign expenditures and US$3.3 million in local costs. FAC has also indicated its willingness to co-finance the project with the Association and is expected to contribute a US$1.7 million grant. The conclusion of a financing agreement between FAC and the Government as uell as the fulfillment of all conditions precedent to disbursement under the FAC agreement are a condition of effectiveness of the proposed Credit (see Section 6.01 [b] of the Credit Agreement). The pro- ject's remaining costs - US$2.8 million including US$500,000 in taxes and duties - would be borne by the Government. A breakdown of the project's cost and financing is contained in Annex III. 4Y. Relending terms: To permit the SRCC to carry out the promotion activ- ities, extension services and infrastructure aspects called for under the project, US$7.5 million would be passed on to it by the Government in the form of a grant. The Association and FAC would provide approximately US$3.6 million and US$1.7 million of this amount, respectively. The CNCA would also receive a grant - for US$ 62 ,000 - to cover the costs of the CNCA/PCU organization study. One hundred percent of the costs of this study would be funded under the proposed Credit. Approximately US$2.9 million would be on-lent by the Government to the CNCA for agricultural credit to farmers, equipment and administrative expenses. The Association would provide about US$2.3 million of this amount. The subsidiary loan to the CNCA would bear a one percent interest rate and would be repayable over 13 years including a six-year grace period. Subloans to farmers would be for nin, years, including five and four year grace periods for cocoa and coffee, respectively. All subloans would bear an interest of 8 percent which is con- sistent with rates presently charged for agricultural loans in Togo. The - 11 - favorable terms under which the Government would on-lend.to CNCA are needed to help the PCU meets its operating expenditures which are expected to be relatively high since the Unit is starting from scratch and will be handling initially, at least, a comparatively small program of supervised credit. 48. Procurement and disbursements: Contracts in excess of US$25,000 for t-he procurement of motor vehicles, road construction equipment and buildings would be awarded on the basis of international competitive bid- ding in accordance with Bank Group guidelines. The aggregate value of these contracts is expected to be about US$900,000. With regard to the construction of the buildings referred to above, the Government may grant a preference of 7.5 percent to domestic contractors. The services of consultants and expatriate personnel to be financed under the Credit would be secured according to procedures acceptable to the Association. The remaining items and local services to be procured under this Credit - which consist of a large number of low cost items and of salaries for local staff - would be obtained in accordance with the borrower's normal procedures. 49. Disbursements under the proposed Credit would cover: (i) 70 percent of the cost of SRCC buildings; (ii) 100 percent of the foreign expenditures or 70 percent of local expenditures incurred in acquiring the equipment and vehicles to be furnished the SRCC and CNCA under the project; (iii) 85 percent of the SRCC's operating expenses excluding the cost of expatriates; (iv) 80 percent of the cost of training new SRCC and 'CU personnel; (v) 80 percent of the PCU's operating expenses; (vi) 80 percent of the amount disbursed as credit to farmers by the CNCA (vii) 100 percent of the costs of the credit organization study; (viii$ 60 percent of the cost of the project evaluation study; and (ix) 40 percent of the cost of applied research. 50. Economic return: The project's primary benefit is expected to be an increase in cocoa and coffee production which should, in turn, result in improved living conditions for the 6,500 farm families expected to participate in the project and in larger foreign exchange earnings for Togo. These incre- mental earnings are expected to rise to about US$10 million annually by 1986 and thereafter to level off. 51. The project's economic rate of return is estimated to be 33 percent. The individual returns for the project's cocoa and coffee components have been calculated at 27 and 40 percent, respectively. If - for the purpose of a sensitivity analysis - prices or, alternatively, yields were assumed to fall 40 percent below appraisal estimates and costs to rise 10 percent above basic assumptions, the project's economic return would still be 19 percent. 52. Over and above the project's direct benefits, there would be important secondary benefits which cannot be quantified. Togolese technicians, for example, would be trained in advanced agronomy and extension methods and two important agricultural development agencies would be strengthened; in one of these, the CNCA, the nucleus of an effective agricultural credit medium would be established. -12 - PART V - LEGAL INSTRUM-ENTS AND AUTHORITY The draft Development Credit Agreement between the Republic of Togo and the Association, the Recommendation of the Committee provided for in Irticle V, Section 1 (d) of the Articles of Agreement of the Association and the draft resolution approving the proposed Development Credit, are being distributed separately to the Rnecutive Directors. 54. The draft Development Credit Agreement conforms substac tialIy to the pattern of recent agreements used for agricultural developrent projects. Over and above those convenants cited in Part IV of this report, the draft Agreement contains a number of noteworthy features including: (i) provisions requiring that the proceeds of the proposed Credit be channeled to the SRCC and CNCA, respectively, by means of Subsidiary Grant and Loan Agreements which would be concluded as conditions of effectiveness to this Credit (see Sec. 3.01 (b) and 6.01 [c) and (d) of the Credit Agreement); (ii) a covenant requiring the Government to review, on at least an annual basis, cocoa and coffee farmgate prices and to afford the Association a reasonable opportunity to comment on the level of these prices during the course of such reviews (see Sec. 4.05 of the Credit Agreement); (iii) a covenant whereby the Govern- ment would consult with the Association prior to appointing a new Director General of the SRCC or new chiefs of the SRCC's extension unit and road department (see Sec. 4.04 of the Credit Agreement); and (iv) covenants whereby, as a condition of effectiveness and to insure the effective and timely execution of the project, the Government would cause the SRCC and CNCA/PCU to establish two special project accounts in a banking institution acceptable to the Association and then deposit in each account CFAF 50 million and CFAF 25 million, respectively. The Government would replenish the project accounts on a quarterly basis to maintain a balance adequate to meet project expenditures (see Sec. 3.02 and 6.01 [e] of the Credit Agreement). 55. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association. PART VT - RECOMMENDATION 56. I recommend that the Executive Directors approve the proposed Credit. Robert S. McNamara President Attachments Washington, D.C. July 10, 1974 ANNEX I OUMTRY DATA - TOGO MT of 3 POPDUTION DUSITT ,000 las t ~2.0- lio1 md-91 .0 5Uiton (eld1971) 35 Per lo erabl land SOCIAL INDICAIMS Reference Countrice Magaey Sierra tvory a TOiRD blic Lkone Goast m Pg M4API (ATISBASIS) .. 150 / 140 /a 200/. 330/. DEOGRAP C Craft bart reta (per thousand) 55/b e 51 /b d 46 /5 /b d 46 /b d Cruda death rata (per thousand) 29 /bec 26 _d 25 71 23 fd 23 Infant mortality rate (per thougand ii-e birtha) 127 .. 102 7e .. 140 LIfe expecancy at birth (yar) 3m 71 0 42 - 42 42 Oroa reproduction rate2 .. 3.3 3.2 2.9 3 Polation groth rea 2.8 3.0 /If 2.5 /f 2.2 /f 3.1 /f POPulation groth rat* - urban 7 /1 6 7R 6 7 , .9~7~97 Ag* *tructure (peroent) 0-4 47 45 / 45 /k 42 /k 42 /k 15-61 49 52 7 52 77 5571' 557n 65 n c 1o ~ 37R 3 7 3 3 7 D-nan,y ratio /4 1.2 d 1.3 7r 1.) 7 1.1 71 1.0 71 Urban popltion a peroent of total 11 1 /h 1u /_ .. 28 Q Family planni.n, N of acoeptors cumulative (thou.) No. of users (% or married ua@ven) ~Tfot bor force (thounande) 630 /m 720 3,200 /n 1,050 /o 2,300 Peroentage exployed in agriculture ., - 78 81 - 73 7- 78 Peroentage uneployed .. .. ,, . - 9 INOM DISTRIBUTOI PNroent ofnaial incom reocied by highest 5% .. .. .. 6 .. Peroent of national incom received by highest 20% .. .. .. 67 .. Peroent of national Income raceived by lowest 20% 4 Peroent of national Income received by lowest 410% 1 MESTII~TO OF LAND O0~gSHP x own~ by lop 10% of omnar. % ewned by mallest 10% of onere Ai MAD NUTITION Population per Phyician 31,000 / 28,140 10,120 17,110 12,110 Population per nuruing person .. 4,200 3,340 3,600 2,L80 /r Population per hoapital bed 580 q 820 /8.t 350 1,040 680 73 Per oapita calorie eupply a~ % of requiresent/ .. 92 /u 91 90 /u 101 /u Per capita protein supply, total (grava per dayTL .. 51Z 51 49 7 59 71 Of which, anial and pulsa . 19 /u 17 16 7u 18 7 Death reta 1-4 yaar /7 .. .. 33 / . d primary school enrollment ratio 44 56 6 32 /t 77 Adjuet*d tiecorary echool enroll.nt ratio 2 7 13 6- v 11 Years of 9 ooling provided, firat and second level 13 13 13 14 13 ocational enrouent ae % of see. school enrollment 10 /w 10 9 3 /t v 7 Adult Utaracy rate % . - . 39 /n 7 7a 20 /t, ~vrage No. of persons per room (urban) Peroent of occupied unite without piped water Acces ta electricity (an % of total population) 5 Percent of xural populatin connected to electricity ~ o.eivers per 1000 population 4 22 /k. 80 /k 56 /k.t 17 /k Pasmenger cara per 1000 population 2 Q 4 6 7 9 11 77 Electric power conmption (ki p.c.) 3 33 36 78 120 Newprint consumption p.c. kg per year .. 0.1 la. 0.04 0.08 0.2 Notes Figures rafer oither to the latest periode or to ancount of «nviromental t .eperature, body weighte, and the latest yeare. Latent periode refer In principle to distribution by age and se of national populatione. the years 1956-60 or 1966-70; the latent yeara in prin- L6 Protein standard (requiremente) for all countrice as entab- ciple to 1960 and 1970. lighed by MBDA Economic Reaearch Servio* provide for a miniu Q The Per Capita oMP etivatc i. at market prices for allowance of 60 graa of total protein per day, and 20 graen of years other than 1960,calculatod by the have converolön animal and pulee protein, of which 10 grae öhould be anmal techniqUe a the 1972 World Bank Atlas. protein. Thece standard are omeihat lower than tho.. of 75 ~ Arerage number of daughters per ~onan of reproductive gra~e of total protein and 23 gram~ of animal protein as an ap. average for the world, proposed by FAO In the Third World Food P Population growth rates re for the decades ending in Surrey. 1960 and 1970. L Some etudie have euggeeted that rude death rates of children Q Ratio of under 15 and 65 and over age brackets to agen 1 through 4 may be used as a firat approximation index of those In labor force bracket of agen 15 through 6. ~alnutrition. Q FAO reference standard represent physiological re- Q Percentage enrolled of corresponding population of ~chool age quirement. for norsal activity and health, taking an defined for each oountry. /a 1971; /b UN estimate; /c 196; /d 1965-70; /_ 1966; /f 1960-71; ý/ Seven urban co~ne; /S inoalities having been given t78 8tatus of communes; /1 3entern having nore thaT-5,000 inhabitante; 1 Over 4,000 popUTation; /k Estimate; ratio of population under 15 ««T65 and over to total labor force; /m Excluding apprentices and uneployed; /n 15 years and over; /a FAO estimate; 1966; householda, Western Province; 7 1962; /r Pernonel in govervnent servlces only; L Gonermeent hopitaln only; S 1969; /u 1964-66; /v Including teacher traininat third level; /w Teacher training at / econd level in Included with general åucation; /Dfianition unknown; ./ 196; / Including governent vehicles; 1965. * Ivory Coast in selectad as the objective country becauee of it. geographic proximity and its vore advanced etage of economic development. R2 July 9, 1974 W.T. ANNEX I Page 2 of 3 pages ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1972 ANNUAL RATE OF GROWTH (7., constant prices) US $ M1n. % 1966-70 1971 12 CNP at Market Prices 319.5 100.0 6.7 .0. -0.7 Gross Domestic Investment 57.0 17.8 Gross National Saving 39.8 12.5 Current Account Balance -17.2 5.* Exports of Goods, NFS 73.4 23.0 Imports of Goods, NFS 98.0 30.7 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1972 Value Added Labor Force V. A. Per Worker US$ M1n. % Thds. % US $ % Agriculture 130.0 38.7 550 77.5 236 50.0 Inuty67.6 20.1 Industry 138.3 1D.2 1i60 22.5 1,28727. Services 13. l2 -o 2.5,,8 272 -.0 Unallocated *_*_*_* Total/Average 335.9 100.0 710 100.0 473 100.0 GOVERNMENT FINANCE General Government Central Government (_FAF B 1.) %/ of GDP ( CA Bin. ) %_ of GP 1972 1972 1966-72 1972 1972 1966-7> Current Receipts 13.5 15.7 12.6 13.1 15.2 12.2 Current Expenditure .11.1 12.9 lo.[4 10.7 12.L 10.0 Current Surplus 2.42. 2.2 2.11 2.8 2.2 Capital Expenditures 2.9 3.L 2.3 2,9 3.h 2. 1967 1968 1969 1970 1971 1972 1973 MNEY, CREDIT and PRICHS (ll1ions of CFA francs outstanding end period) Money and Quasi Money 6,977 8,563 11,491 12,680 14,112 13,899 15,9L1 Bank Credit to Public Sector 1/ -2,527 -2,643 -2,692 -4,742 -3,6h9 -2,269 -1,77, Bank Credit to Private Sector 4,317 5,967 6,369 8,375 9,35 10,190 13,33t (Percentages or Index Numbers) Money and Quasi Money as % of GDP 12.3 14.4 16.5 17.3 17.8 16.2 17.3 General Price Index (1963 = 100) 2/ 101.1 101.4 107.5 112.5 119.6 129.2 Annual percentage changes in: General Price Index 2 -2.3 0.3 6.0 .6 6.3 8.0 Bank credit to Public Sector 26.5 4.6 1.9 76.1 -23.0 -37.8 -21.7 Bank credit to Private Sector 17.2 38.2 6.7 31.5 12.7 8.0 13.1 1 Credit to Government not available 2 African Consumer Price Index not avaiable .not applicable ANNEX I Page 3 of 3 pages TRADE PAYMENTS AND CAPITAL FLOWS BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1970 - 72) IJ 1970 1971 1972 !2/ US M1n % (Millions US $) Cocoa beans 17.6 3h.5 Exports of Goods, NFS 78.1 83.9 80.5 Phosphate 16.3 32.0 Imports of Goods, NFS 85.6 99.7 115.2 Coffee. 9.5 18.6 Resource Gal) (deficit - -) - -. -37 R7ucei75 1i58 - 7 All other commodities 7.6 14.9 Interest Payments (net) 1.0 2.7 Total 51.0 100.0 Workers' Remittances -1.3 -1.8 < -9.1 Other Factor Payments (net) -5.8 -7.0 Net Transfers 16.8 20.8 26.6 EXTERNAL DEBT, DECEMBER 31. 1973 Balance on Current Account 3.2 -1.1 -17.2 US $ iM Direct Foreign Investment 1.0 3.9 Net MLT Borrowing 1.8 2.1 .59 Public Debt, incl. guaranteed 93 Disbursements (4.7) (6.1) (13.7) Non-Guaranteed Private Debt Amortization (-2.9) (-4.0) (-7.8) Total outstanding & Disbursed Subtotal (1.8) (2.1) (5.9) Capital Grants (8.4) (10.1) (13.3) DEBT SERVICE RATIO for 1972 Other Capital (net) -5.4 -0.7 2.3 Other items n.e.i 0. 5. . Increase in Reserves (+) 0.8 -0.8 -8.2 Public Debt, incl. guaranteed 5.0 Non-Guaranteed Private Debt Gross Reserves (end year) h6.3 47.2 44.5 Total outstanding & Disbursed Net Reserves (end year) 37.1 36.3 31.1 Fuels and related materials Imports 2.9 4.0 -4.3 IBRD/IDA LENDING, June 30, 1974 (Million US$): of which petroleum 0.5 0.5 0.5 Exports - - - IBRD IDA Outstanding & Disbursed - 3.4 Undisbursed - 9.0 RATE OF EXCHANGE Outstanding incl. Undisbursed - 12. The CFAF floats against all other currencies. Between February 12, 1973 and January 1974, the US$ exchange rate has fluctuated between CFAF 205 - 255 to 1 US$. The following rates have been used (1 US$ equals CFAF): 1973 - 230 1972 - 256 1971 - 278 1970 - 278 1969 - 258 1 Recorded Exports Only 2 Preliminary 3 Ratio of Debt Service to Exports of Goods and Non-Factor Services not available not applicable  ANNEX II Page 1 of 1 page THE STATUS OF BANK GROUP OPERATIONS IN TOGO 1. Statement of IDA Credits (as at June 30, 1974) Amount Credit (in UST million) Number Year Borrower Credit Undisbursed 131 1968 Togo Road Maintenance 3.7 .3 450 1973 Togo Road Reconstruction 8.7 8.7 Total 12.4 of which has been repaid - Total now outstanding 12.4 Total now held by IDA 12.4 Total undisbursed 9.0 B. Projects in Execution Credit No. 131 Highway Maintenance Project; US$3.7 million Credit of October 10, 1968; Closing Date: December 31, 1974. Execution of this project is nearly completed and has been generally satisfactory. Planning and control of the DPW's highway maintenance operations - initiated under Credit 131 - could be improved still further, however, and the Second Highway Project's maintenance component will focus on strengthening this aspect of the DPW's activities. Credit No. 450 Second Highway Project; US$8.7 million Credit of December 2d, 1973; Closing Date: June 30, 1977 This Credit was declared effective on April 19, 1974. The DPW will call for bids during the summer for the project's civil works components and actual construction is expected to get underway in early 1975. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense and with the understanding that they do not purport to present a balanced evaluation of strengths and weak- nesses in project execution.  ANNEX III Page 1 of 2 pages TOGO - COCOA-COFFEE DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Togo Beneficiaries: The Socifte' Nationale pour la R novation et le D,veloppeinent de la Cacaoyere et de la CafAiere Togolaises (SRCC) and the Caisse Nationale de Cr(dit Agricole (CNCA) Amount: US$6.0 million Terms: Standard IDA Terms Relending US$2.3 million would be on-lent to CNCA at an interest rate Terms: of one percent for a term of 13 years including a six-year grace period. CNCA would, in turn, relend US$1.9 million of this amount to cocoa and coffee farmers, at an interest rate of eight percent for a term of nine years including five and four year grace periods for cocoa and coffee farmers, respectively. Project This project consists of: Description: a) planting and maintenance of 4,400 ha of cocoa and 4,000 of coffee; b) strengthening of the SRCC and CNCA, the project's executinis agencies; c) applied cocoa and coffee research; d) construction and rehabilitation of 50 and 110 km of feeder roads, respectively,in the project area. These roads would also be maintained during the project's development period; and e) studies (i) to evaluate the project and prepare, if justified, a follow-up operation and (ii) to develop appropriate admin- istrative and lending procedures for the CNCA. Co-lender: The Fonds d'Aide et de Coop6ration (France) will provide a grant for the equivalent of US$1.7 million. Costs and Financing (in US$ thousands) F INANC ING Total Foreign IDA Government FAC Cost Exchange A Administration and 2,358 468 720 3,546 33 Operating Expenditures Agricultural Credit 1,880 470 - 2,350 5 Road Construction and - 1,140 380 1,520 50 Maintenance Applied Research 515 260 515 1,290 50 Equipment and Vehicles 385 162 - 547 6 Buildings 190 80 - 270 50 Project Evaluation Study 135 - 85 220 100 Capsid Control Program - 200 - 200 60 Training 75 20 _ 95 20 Credit Organization Study 62 - - 62 100 Unallocated 400 - - 00 50 Total 6,000 2,800 1,700 10,500 36% INNEX III Page 2 of 2 pages Estimated Disbursements: While the projeuu will be executed over an eight-year period, the proposed Credit would be fully uisbursed in six and one half years by w'ich time the older plantings financed under the project would begin to come into production. Du=ing PY7 an,d PY8, the Government would provide US$400,000 n financing - essentially for maintenance - to complete the project. The following is the Credit's estimated disbursement schedule in US$ thousanas: Cumulative Yearly Year Disbursements Disbursements June 30, 1975 400 hOU June 30, 1976 1,200 800 June 30, ly77 2,200 1,000 June 3, 1978 3,300 1,100 June 30, 1979 4,400 1,100 June 30, l80 5,600 1,200 December 31, 1980 6,000 400 Procurement Arrangements: Contracts in excess of US$25,000 for the procurement of motor vehicles, road construction equipment and buildings would be awarded on the basis of international competitive bidding in accordance with Bank Group guidelires. The aggregate value of these contracts is expected to be about US$9C0,000. With regard to the construction of the above-mentioned buildings, the Government may grant a preference of 7.5 percent to domestic contractors. The services of consultants and expatriate personnel to be financed under the Credit wouit be secured according to procedures acceptable to the Association. The remaining items and local services to be procured under this Credit - which consist of a large number of low cost items and of salaries for local staff - would be obtained in accordance with the borrower's normal procedures. Consultants: Consultants are to carry out (i) a 10 man-month study of CNCA's oresent ooerations and structure aimed at developing appropriate lending procedures for the PCU; and (ii) a 30 man-month study evaluating the project and prepar-Ing, if justified, a follow-up operation. The consultants selected for both studies must be acceptable to the Association. Rate of Return: The project's economic rate of return is estimated to be 33 percent. Appraisal Report: (352-) IBRD 10536R u MARCH 1974 E g V0 L T A D DAPANGO TOGO COCOA-COFFEE DEVELOPMENT PROJECT 0 MANGO -ANDE " > K . ACCUGOUDA KETAO Z AÅAAo K zø ABOU ASPHALT RCADSBA LATEHTE ROADS RAILWAYS YEGUE lP 20 40 ,. 0Dgla lnoo KILOMETERS KOUN10MOU Dou LITIM AKPO55 ATAKPAME -,DAYE Ela- 'n-w 1Te boundis shou <,n thi, map do nt - b,ply endorement r a~ rptance by the Worl &,nk ndt aff~,te. ? ADETA TOHOUN r.t KP NUATJA A llME GOU GARE TABL1GBO SEEe(MAURITANIA i SENEG MA I I/ N I G ER A5AHOUN GAMBI ISEVIE) PoRT -r e UPPER VO A G NRVOGA AN 51E A OANECHO LoLOME F ArtNrc CEN QGNE - Z Aeo~