Tanzania - Tobacco Processing Project

Document of FILE COPY The World Bank FOR OMCIAL USE ONLY Report No. P-1902-TA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE UNITED REPUBLIC OF TANZANIA FOR A TOBACCO PROCESSING PROJECT August 20, 1976 This doeument hs a rtricted distributon and may be used by recipients only In the performance of their official duties Its cootents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (as at August 1, 1976) Tanzania Sh = US$0.12 US$1.00 = T Sh 8.05 (The Tanzania Shilling is officially valued at a fixed rate of 9.66 T Sh to the SDR. The US Dollar/Tanzania Shilling exchange rate is there- fore subject to change. Conversions in this report were made at US$1.00 to T Sh 8.05, which is close to the short-term average exchange rate.) ABBREVIATIONS TANU = Tanganyika African National Union The Authority = Tobacco Authority of Tanzania The Company = Tanzania Tobacco Processing Company, Ltd. TANZANIA FISCAL YEAR July 1st - June 30th  FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE UNITED REPUBLIC OF TANZANIA FOR A TOBACCO PROCESSING PROJECT 1. I submit the following report and recommendation on a proposed credit to the United Republic of Tanzania for the equivalent of US$8.0 mil- lion on standard IDA terms to help finance a tobacco processing project. From the proceeds of the credit, the equivalent of US$2.0 million, would be relent to the Tobacco Authority of Tanzania (the Authority) and, the equiva- lent of US$6.0 million, to the Tanzania Tobacco Processing Company Ltd. (the company) at 10 percent annual interest and would be repaid over seven and eight years, respectively. PART I - THE ECONOMY General 2. Although it has been sometime since the last full economic and updating reports on Tanzania were finalized in May and December 1972, re- spectively, considerable staff economic work has been accomplished on the country since that time. An agricultural sector report was issued in December 1974. The report of an industry and mining mission was distributed in April 1975 and a study of the fiscal aspects of Tanzania's recent decentralization was completed in April 1975. In March 1976, at the request of the Government, the Bank mounted a special mission which analyzed the fiscal implications of the Government's programs for Universal Primary Education and Universal Rural Water Supply. The work of this mission will provide a substantial input to the work of the basic economic mission which visited Tanzania in July/August 1976. Throughout the last two years or so Bank staff have engaged in a continuous economic dialogue with the Government on the serious balance of payments difficulties which have been encountered by the country and the Government's policies and programs designed to close the external gap. These policies and programs were reviewed in the Program Loan President's Report No. P-1517a-TA, dated November 25, 1974 and in a memorandum (M75-687) from the Secretary dated September 25, 1975. The Consultative Group for East Africa met in April 1975 to discuss the progress and prospects of the Tanzania economy and the need for additional resources to support the Government's development program. 3. The TANU Party, under the leadership of President Nyerere, has been the guiding force in Tanzania's political evolution since the 1950's. Over the years following independence the political leadership has developed a philosophy of egalitarian socialism which has been articulated in many documents, most central of which is the Arusha Declaration of 1967. In restructuring the political, economic and social life of the country the leadership has introduced an impressive series of far-reaching institutional This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - 2 - reforms. For the past decade Tanzania's social and economic policy has been guided by three fundamental objectives: (a) the achievement of a participatory, decentralized socialist economic order; (b) the eradi- cation of absolute poverty and progress toward greater income equality; and (c) more rapid long-term economic growth with full participation of all regions and population groups in the development process. Reflecting this philosophy some of the Government's most significant decisions have been in the area of incomes policy. The tax structure is highly progressive and middle and upper incomes have been restrained while lower income wages have been increased. In the provision of social infrastructure services, poorer areas have been favored. As a result of these and related policies, differentials in living standards between upper and lower income urban dwellers have been narrowed and some impact has been made on urban/rural differentials and regional disparities of income. 4. The overriding goal is to develop a socialist economic system and one of the consequences of this has been a series of industry nationali- zation measures and proliferation of government parastatal enterprises. The state has increasingly intervened in the price mechanism; prices of domestic factors and products and imports are controlled directly or by such indirect methods as import licensing. These structural changes have resulted in some implementation problems. In addition, scarce managerial manpower has been spread very thinly, exacerbating already serious shortages of top and middle- level staff. Some of these conflicts should be seen, however, as the inevi- table consequences of a "frontal" attack on poverty and underdevelopment. 5. With a per capita income of only $170, Tanzania is classified as- one of the 25 least developed countries as defined by the United Nations (country data are provided in Annex I). Between 1968 and 1973 Tanzania's GDP grew at 4.6 percent per annum. Domestic savings averaged 17 percent of GDP, while gross investment averaged 21 percent -- extremely high rates for a country at Tanzania's low level of per capita income. The growth rate of GDP was not commensurate with the magnitude of the investment effort, how- ever, in part because of the high proportion of investment which was di- rected into infrastructure and social services projects such as the trans- portation links with Zambia, because of sluggish growth in the agricultural sector and because of stagnant or declining productivity in parastatal en- terprises. During this period the balance of payments position of Tanzania was generally satisfactory, despite the disappointingly slow growth of ex- ports (overall export volume grew at only three percent per year from 1968 to 1972 and in 1973 export volume fell back to the 1968 level). Neverthe- less, because of a sharp increase in capital inflows, the overall balance of payments was in surplus from 1971 to 1973, and there was a modest build-up in foreign exchange reserves. As a result of prudent financial management, net reserves were increased to approximately $145 million by the end of 1973, the equivalent of four months' imports. 6. Events then occurred which resulted in a drastic change in the overall balance of payments of Tanzania. The 1973 and 1974 rains failed in many parts of the country necessitating substantial increases in imports of basic food items beginning in mid-1974. The drought also affected cash crops, leading to a further decline in the export volumes of coffee, cotton  - 3 - and sisal. Although world prices for Tanzania's exports jumped 52 percent in 1974, total export receipts rose only 18 percent due to drought-affected crop yields. At this same time as a result of higher prices for imports the total import bill for 1974 rose by 60 percent over 1973. The outcome of these forces was a rapid depletion of net reserves to only $50 million at the end of 1974, equivalent to only three weeks of imports. Industrial production also stagnated in 1974, due in part to shortages of imported raw materials and spare parts stemming from the growing foreign exchange con- straint. As a result, overall GDP may have actually declined slightly during the year although official statistics indicate an increase of 2 percent. While production declined, domestic demand increased rapidly, due to expansionary fiscal, monetary and wage policies, causing severe pressure on the domestic price level. The retail price index for low in- come workers rose by 57 percent in 1974 while that for middle-grade civil servants jumped 35 percent. 7. During 1975, while the food production shortfall was substantially reversed and inflation was reduced to around 30 percent, grain imports were still required and the balance of payments situation remained critical. In addition, export performance was extremely disappointing with total value of exports declining by over 11 percent. The overall balance of payments gap for 1975 was about $140-145 million, equal to the deficit for 1974. Tanzania was able to cover the 1975 foreign exchange gap by curtailing im- ports to the bare minimum and by securing substantial program type assis- tance, including a $30 million Program Loan (No. 1063-TA) from the Bank and the IMF special oil facility approved in August 1975. 8. Tanzania's present economic crisis cannot be attributed exclusively to drought-related crop failures and import price escalation. The most disturbing aspect of Tanzania's economic situation has been the declining growth rate of output from the agricultural, industrial and mining sectors. The growth rate of agricultural output had been running slightly behind the rate of growth of population for six years prior to the harvest failure of 1974. Inadequate producer price incentives, inefficiencies in the transport and distribution systems for inputs and marketed production, and the effects of inadequately planned villagization contributed to this disappointing performance. In the modern sector many enterprises have experienced declining labor productivity which has been attributed to lack of incentives, poor discipline and ineffective management. Furthermore, while the ratio of domestic savings to GDP rose during the 1960's, it began to decline by 1973 and fell drastically to 7.5 percent in 1974 as a direct outcome of the balance of payments crisis. In addition to the above-mentioned factors, the high level of investment which has gone into slow-gestation social and economic infrastructure rather than into the directly productive sectors has prevented more rapid growth of output. 9. The Tanzanian Government in late 1974 formulated a comprehensive program of policy actions to bring the balance of payments under control in the medium run and to restore the growth rate of output. The principal elements of the program included a reallocation of investment in favor of directly productive sectors, measures to raise agricultural output, steps  - 4- to improve incentives in industry and mining and to increase the export orientation of these sectors, and constraints on public and private con- sumption demand. Imports were cut through direct controls and measures were introduced to slow down the rate of growth of private consumption. Indirect taxes were raised and further increased in the 1975/76 budget. User charges for water and electricity were also raised and an extremely restrictive wage and salary policy has been followed. Further, the Gov- ermient is making a serious effort to bring the rate of growth of public consumption expenditures under control. The 1975/76 budget called for a level of current expenditures below the revised estimate for 1974/75 and while this target may not be realistic the intentions of the Government are nevertheless clear. In addition cuts of about 7 percent in the civil service were made in March 1976. 10. On the production side, several steps have been taken to increase output. The Government has raised agricultural producer prices to levels approaching world parity and certain progressive export taxes have been reduced or eliminated. The overall planning capability of the Ministry of Agriculture is being strengthened and a project coordination unit to improve imnplementation has been established in the Ministry. Furthermore, as a major component of its effort to expand material production the Gov- ernment has made significant progress in reallocating public investment in favor of the directly productive sectors of agriculture, industry and mining. Another problem area in which action has been undertaken is that of export development. In October 1975, Tanzania, in conjunction with Kenya and Uganda, devalued the shilling by approximately 14 percent. Given the heavy reliance of the East African Community for export markets in the U.K. and the substantial recent decline in the value of sterling, this de- valuation can be construed as an attempt at restoration of competitiveness of exports to the U.K. and also an incentive to exporters to non-sterling markets. The Government's progress in implementing policies and programs designed to close the balance of payments gap in accordance with under- standings relating to the program loan was the subject of a memorandum (M75-687) from the Secretary to the Executive Directors dated September 25, 1975 (paragraph 2 above). The most encouraging aspect of the Government's response to the balance of payments crisis was the demonstration that Tanzania retains the ability to push through necessary and unpopular measures over a wide front. It is this characteristic of a "hard state," together with the basically sound program of economic restructuring, which holds the promise for the future. II. Tanzania's prospects for bringing the balance of payments deficit under control in the medium term clearly depend upon the effectiveness of the program of policy actions outlined above. It is not possible to deter- mine the time period over which all the policy measures introduced by the Tanzanian Government will take effect. The austerity measures introduced in 1974 and 1975 have already had an impact on imports and on domestic consumption, and the recovery of food production in 1975 has clearly helped to alleviate the food deficit. However, the basic program of economic re- structuring will require more time before its full effects can be realized.  - 5 - For example, some new investments in agriculture, industry and mining that will directly benefit the balance of payments will take several years to come to fruition. Thus the balance of payments will remain weak in the short run. However, Tanzania should have a stronger economy at the end of the restructuring process. The central focus of the assistance efforts should be, therefore, to ensure that the balance of payments gaps arising over the next few years do not prevent Tanzania from implementing a development program designed to incorporate the required policy changes. In this connec- tion, negotiations for a proposed second program credit were recently held in Dar es Salaam. In addition, and despite Tanzania's impressive domestic savings performance, a continued capital inflow in excess of the foreign exchange component of high priority projects will also be required if Tanzania is to achieve its development targets. Financing of some local expenditures will, therefore, be justified. 12. In terms of debt outstanding and disbursed, the Bank Group is Tanzania's second largest creditor after the People's Republic of China. Other major lenders are Sweden, Canada, Denmark, the Netherlands and the Federal Republic of Germany. The current low overall debt service ratio of about 7 percent is expected to rise to about 11 percent by 1980 and remain at about that level throughout the 1980's. Including a notional one-third share of the debt of the East African Community Corporations, the IBRD is presently holding 13 percent of Tanzania's outstanding external debt and IDA 10 percent; the IBRD share is expected to rise to about 23 percent in the next five years, and the IDA share to rise to about 13 percent. Debt service payments to the Bank are about 13 percent of total debt service payments; the corresponding share for IDA is about 3 percent. These two figures are projected to rise to about 25 percent and 3 percent, respectively, by 1980. The debt service ratio of Bank loans to exports is expected to rise to about 2 percent by 1980. The Bank's exposure is high because several major donors are now making their aid available either on grant basis or very concessional terms and because as a result of prudent debt management suppliers' credits have been kept to a minimum. The average interest rate on loans to Tanzania outstanding at December 31, 1974 amounted to only 2.4 percent and the average term was 22 years. East African Community 13. The East African Community Corporations have experienced diffi- culties in recent years. While the 1967 Treaty for East African Coopera- tion is one of the most far-reaching and comprehensive economic cooperation agreements in existence among sovereign states in the developing world, in practice, the degree of economic integration and cooperation among the Partner States is much less than what was envisaged in the Treaty. Poli- tical developments in the Partner States have created tension within the Community and impaired the growth of interstate trade. These difficulties have been compounded by the balance of payments constraints which all three Partner States experienced.  14. Of the Community Corporations, the East African Railways Corpora- tion (EARC) has been the most severely affected. As a result of long delays by the Partner States in approving increases in tariffs and restrictions on the interstate transfer of corporate funds, EARC was unable to order essen- tial spare parts and supplies with the result that its operational capacity has deteriorated considerably. In July 1974, the Partner States agreed, with Bank assistance, on a package of financial measures to rehabilitate the EARC including interstate transfer of funds and injection of additional capital. However, this agreement was never fully implemented and as a re- sult disbursements under Loan No. 674-EA (East African Railways III) were suspended in February 1975. A further meeting was held in July 1975 at which an agreement was again reached on a formula for sharing of debt ser- vice payment by the Partner States, and suspension of the loan was lifted. 15. The Partner States recognized that because of their fundamental political and economic differences, a review of the 1967 Treaty was called for. For this purpose a Commission has been established consisting of three Cabinet level officials from each country, with Mr. Demas, President of the Caribbean Development Bank, as Chairman. This Commission is expected to submit its report by the end of 1976. While there is hope that the Com- mission may recommend measures to deal with the structural differences in the long run, the Corporations are still facing a difficult period. 16. Since February 1976 the relationship between Partner States further deteriorated. Arrangements for debt service payments were again disrupted resulting in long delay in making debt service payments to the Bank. Disburse- ments to the East African Railways Corporation, the East African Harbours Corporation, the East African Posts and Telecommunications Corporation and the East African Development Bank were suspended by the Bank on April 28, 1976. As the Executive Directors were informed on May 25, 1976 (Sec. M76-383), a mission visited East Africa in May to discuss with the Presidents and Finance Ministers the debt service problems which endangered both the Bank's opera- tions in East Africa and the credit standing of the Community and the Partner States (being jointly and severally responsible). Agreement was reached on May 28, 1976 to ensure remittances from the Regional Offices of the Corpora- tions to complete all over-due payments and as these were made by June 1, 1976, the suspension was lifted. Since then debt service payments are being made on time. Regarding future debt service payments, the agreement (i) specifies fixed contributions by each Partner State to meet external debt obligations, (ii) commits the Government to ensure remittances from the Regional Offices of the Corporations, (iii) establishes a mechanism and procedure for timely payments, and (iv) provides automatic foreign exchange cover to debt service remittances. PART II - BANK GROUP OPERATIONS IN TANZANIA 17. Tanzania joined the Bank, IDA and IFC in 1962. Beginning with an IDA credit for education in 1963, 24 IDA credits and 11 Bank loans  amounting to $395.8 million have so far been approved for Tanzania. In addi- tion, Tanzania has been a beneficiary of 10 loans totalling $244.8 million, which have been extended for the development of the common services and development bank operated regionally by Tanzania, Kenya and Uganda through their association in the East African Community. The only IFC investments in Tanzania to date, totalling $4.7 million, were made in the Kilombero Sugar Company in 1960 and 1964. This Company encountered financial difficulties and in 1969 IFC and other investors sold their interest in the Company to the Government. Annex II contains summary statements of Bank loans and IDA credits to Tanzania and the East African Community organizations as of July 31, 1976 and notes on the execution of ongoing projects. 18. In keeping with Tanzania's overall development strategy our lending operations are increasingly focusing on the rural sector and directly produc- tive projects. Up to the end of FY72 10 out of 15 Loans and credits made directly to Tanzania had been for infrastructure. Of the 20 Tanzania opera- tions approved since then all but five: Urban Sites and Services (Credit No. 495-TA), Highway Maintenance (Credit No. 507-TA) Technical Assistance (Credit No. 601-TA) and Education IV and V (Credits No. 371-TA and 607-TA), were for directly productive projects. These directly productive projects are support- ing both the agricultural and industrial sectors, including the Kigoma Integra- ted Rural Development Project (Credit No. 508-TA), the National Maize Program (Credit No. 606-TA), the recently approved Fisheries Development Project (Credit No. 652-TA) and the first direct Lending for an industrial project, Mwanza Textile Project (Loan No. 1128-TA). The first Bank Group assisted project in the forestry sector, Sao Hill Forestry Project (Loan No. 1307-TA), approved on July 1, 1976 will provide the raw material for Tanzania's first paper and pulp plant, also under preparation for Bank Group financing. -We plan to continue assistance for productive projects in the industrial and agricultural sectors and a project to support selected industries at Morogoro is expected to be ready for consideration by the Executive Directors in the near future and a proposed second rural development project and a water sup- ply project have been appraised in the field. In view of Tanzania's con- tinuing balance of payment difficulties, negotiations for a second program credit were recently held in Dar es Salaam. 19. While it should be borne in mind that over one-half of total Bank Group lending to Tanzania has been approved in the last two fiscal years and that initial start-up difficulties are perhaps inevitable, the project implementation difficulties referred to in Annex II of this report have been greater than anticipated. Some of these problems stem from the scarcity of suitably trained and qualified manpower, some reflect the un- derstandable reluctance and apprehension of an essentially conservative traditional sector to adopt new "technology", and others are undoubtedly a reflection of the strains created in a society which is attempting a unique traverse from one set of economic, institutional and political rules to another. The Government has become extremely conscious of these implementation issues and is taking steps to resolve these problems. An earlier reluctance to recruit technical assistance for planning and im- plementation has been replaced by a willingness to utilize such assis- tance whenever it is demonstrably necessary. A technical assistance project designed to strengthen project preparation and implementation was recently approved by the Executive Directors. At the request of the  - 8 - Government about 10 technical staff have been supplied by the Agriculture Development Service and a Bank staff member has recently been seconded to the Project Implementation Unit in the Ministry of Agriculture. In a longer term attempt to alleviate the human resource constraints our lending is ex- pected to increasingly emphasize formal and non-formal training. Furthermore, a conscious attempt is being made to develop less complex projects. 20. The difficulties facing the East African Community and the common services corporations (paras 13-16 above) have affected the Bank's lending program to the Community. Yet while the exact form of the reorganized Com- munity services remains to be determined, the development of the transport and communications infrastructure to facilitate national programs of the Partner States will continue to be an important aspect of the development of the three countries. We therefore anticipate a continuing role for the Bank in these sectors. Field appraisal of a fourth Posts and Telecommunications project has been completed and a Railways project and a Harbours project will be ready for appraisal in fiscal year 1977. In each instance all organiza- tional and guarantee questions will be resolved before conclusion of lend- ing arrangements. PART III - THE AGRICULTURAL SECTOR General Background 21. Agriculture and related activities constitute the largest single sector in the Tanzanian economy. Roughly 40 percent of GDP is derived from the sector of which 50 percent constitutes subsistence production. Agri- cultural exports, which account for 80 percent of total exports, include mainly sisal, cotton, cashewnuts and coffee. About 94 percent of the pop- ulation live in rural areas and 90 percent of the economically active peo- ple are engaged in agriculture. 22. Most production is from smallholdings using family labor. Large- scale agriculture is represented by a small number of private estates and some state farms producing sisal, coffee, tea, wheat, rice and livestock. Estate production has diminished in importance and the state farm program remains small. Tanzania's national herd, the second largest in Africa, is grazed extensively over the 40 percent of the country which is free from tsetse fly infestation. It is largely managed along traditional lines. There is limited use of oxen for cultivation, mainly in the western cotton areas. Major food crops in Tanzania are maize, millet, sorghum, paddy, potatoes, cassava, bananas and beans. These are produced predominantly by smallholders who use most of their production for subsistence. Agri- cultural output has stagnated in recent years (paragraph 6 above). Food crop production has failed to keep pace with the expanding population, and Tanzania has become increasingly dependent on imports of maize, rice and wheat. The deteriorating food balance position was seriously aggravated by the poor, drought-affected harvests of 1973, and of 1974 (paragraph 8 above) when some 440,000 tons of grain were imported.  - 9- Agricultural Development Strategy 23. The Government has undertaken a comprehensive program to support the development of productive activities, particularly in the agricultural sector, in conjunction with efforts to achieve balanced regional growth and a more equitable income distribution. With these objectives, and in the light of the country's current balance of payment difficulties, particular attention is being given to support for those crops which represent sources of foreign exchange earnings. The proposed project fits into this strategy, and although tobacco generates only about 4 percent of current foreign exchange earnings, the potential for expansion of total output is significant. In addition to priority to the expansion of selected export crops, the Government, in response to the drought and food crises of 1974 when the output of maize declined by 30 percent, has given greater emphasis to a program of self-sufficiency in food production. This program was assisted by a recent IDA Credit of $18.0 million for a National Maize Project (Credit No. 606-TA). The substantial increases in producer prices of May, November 1974 and September 1975 (paragraph 10 above), the reform of the coffee export tax structure, and the formation of a permanent Agricultural Price Review Commission constitute major rationaliza- tions of production incentives in agriculture and further evidence of the Government's newly found recognition of the importance of agricultural pricing policy. In the light of the critical economic difficulties facing the country and in an attempt to generate a quick production response, the Government is now placing greater emphasis on production rather than social aspects of new rural development projects. Tobacco Production 24. In the last ten years the production of tobacco in Tanzania has in- creased from 5 million kg to over 18 million kg and most of the expansion was achieved in the smallholder sub-sector where 75 percent of Tanzania's tobacco is grown by nearly 40,000 smallholders cultivating an average of 0.5 ha of tobacco each. The main tobacco growing areas are Tabora, Iringa and Mbeya regions with production expanding also in Singida, Shinyanga, Kigoma and Lindi regions. In Iringa region production is dominated by about 60 large-scale farmers who are mainly expatriates. Smallholder production is assisted by the Tobacco Authority of Tanzania (the Authority) which provides extension advice on growing, curing and classifying tobacco, as well as essential inputs. The average smallholder produces a crop with a potential yield equivalent to about 1,000 kg of wet cured leaf per ha. It is however estimated that up to 45 per- cent of this crop is lost due to shortage of barn capacity, poor curing tech- niques, and inefficient bulking and grading operations. Consequently, the average smallholder produces only 550 to 600 kg per ha. of saleable tobacco. There is therefore considerable potential for an increase in tobacco produc- tion if measures are taken to reduce these losses. 25. With the considerable further expansion of tobacco into new areas, and with the yields per family increasing as farmers gain experience of tobacco cultivation, the Authority has forecast a 20 percent production increase from 1973/74 with production reaching nearly 46 million kg by 1979-80. However, these projections are considered over-optimistic and we  - 10 - estimate growth at an average of 7-1/2 percent per annum: on this basis, tobacco production is expected to increase from 20.2 million kg in 1975-76 to about 40 million kg in 1984-85 (the basis for this projection is discussed in detail in Annex III of the appraisal report). Flue-Cured Tobacco Project (Credit 217-TA) 26. An IDA credit for US$9.0 million was extended in October 1970 for a project designed to increase the production of flue-cured tobacco in Tanzania. The project aimed at settling some 15,000 new tobacco growers in villages of 100 families each; it was estimated that these farmers would, on average, cultivate about 0.5 ha of tobacco along with basic food crops. The project also included provision for on-farm credit, extension services, construction of curing barns and grading sheds, access roads, water supplies, a minor expansion of processing facilities and additional storage. Although national tobacco production has been on the increase (paragraph 25) the prog- ress under the IDA financed project in the three districts covered by it (Tabora, Mpanda and Chunya) has been slower than expected and incremental tobacco production is three years behind schedule. The principal reason for this poor performance has been the settlement nature of the project with initial delays occurring in the construction of water supplies for the new tobacco villages, slow recruitment of farmers due mostly to early attempts at communal production, and smaller areas cultivated per family than esti- mated at appraisal. In addition, yields have been low in the past due to shortage of extension staff to advise new farmers on tobacco cultivation. A full review of the project was carried out in 1972 which resulted in the rephasing of both physical development and of project costs, and the estab- lishment of more realistic production targets. Total production of wet leaf from the project is estimated to increase from 675,000 kg in 1974/75 to 1.6 million kg in 1975/76, which would be appreciably below the appraisal esti- mates of 6.3 million kg. Indications are that the project is now beginning to show substantial progress, and it is expected that project production will expand at a greater rate than will overall national tobacco production. Tobacco Processing 27. Tobacco processing is currently carried out in two plants in Tanzania. The one at Songea handles only fire cured tobacco, while the Moro- goro plant, which is to be expanded under the proposed project, handles all types of tobacco. Both these plants are operating close to full capacity. The Morogoro plant has a maximum capacity to handle 18.5 million kg of wet leaf which gives a production of about 15.6 million kg of dry weight tobacco. Some of the equipment in these plants is, however, old and performance has not been up to the standard required by export buyers. Under the project, it is proposed to provide equipment to replace and further expand the processing facilities in the Morogoro plant to meet the increased tobacco production in the country. Alternative locations for the new processing capacity were examined; Morogoro was selected as the best site for the current expansion because of its excellent rail and road communications with both the tobacco growing areas and the port at Dar es Salaam, the availability of physical facilities, and management and technical staff which can, with minor addi- tions, handle the expansion proposed under the project.  - 11 - Tobacco Authority of Tanzania (the Authority) 28. The Tobacco Authority of Tanzania (the Authority) was established as a statutory body under the Tobacco Industry Act of 1972 and is responsible for the development of the tobacco industry. Its functions include supervi- sion of growers; research on cultivation, processing and marketing; control over transport and processing; and the regulation of marketing. The Minister of Agriculture has direct responsibility for overseeing the activities of the Authority. The Authority is headed by a Board of Directors representing grow- ers, the Regional authorities and concerned Ministries and has an Executive Chairman and a General Manager. In March 1976, the Authority was reorganized into 6 functional departments: Administration, Finance, Marketing, Produc- tion, Development and Planning and Research. A Management Committee which meets once a month has been formed to assist the General Manager with the formulation of overall policies for the Authority. Prior to the recent reor- ganization, the Authority had serious organizational and management problems. While the organizational problems are now under control, the management is still hampered by a lack of specialist staff, particularly in the Marketing and Finance Departments. This situation is being remedied and under the pro- posed credit financing for the position of a Financial Controller, originally provided under Credit 217-TA, will be continued (Section 4.03 Project Agree- ment). The Authority purchases the tobacco crop from the growers, who for the most part are organized in local village cooperatives which act as agents for the growers in dealing with it. The leaf is purchased on the basis of grade classifications, with prices for each grade being established in advance by the Authority. The Authority which also arranges transport to Morogoro for processing by the Tanzania Tobacco Processing Co. Ltd. (the company) and from factory to port for exports. 29. In addition to providing extension and marketing services, the Authority is responsible for the supply of inputs, including tobacco seed and fertilizer. Recently fertilizer has been supplied with a 75 percent subsidy. This has been justified in view of the temporarily high cost of fertilizers and has avoided the need for cumbersome credit operations. The cost of this subsidy increased from about $0.7 million in 1974/75 to $4.0 million 1975/76 and continuation at this rate would have caused the Authority's otherwise sound financial position to deteriorate rapidly. The Government has, however, reduced the subsidy level to 50 percent for 1976/77 and is proposing that most of this cost be met from the Government's recurrent revenues. The whole ques- tion of fertilizer subsidies is being kept under scrutiny in connection with the National Maize Project (Credit No. 606 TA) and Government's policy regard- ing the continuation of the subsidy as a charge on the Authority would be reviewed in the same context. Tanzania Tobacco Processing Co. Ltd. (the company) 30. Tanzania Tobacco Processing Co. Ltd. (the company) was incorporated in 1966 and is now a wholly owned subsidiary of the Tobacco Authority of Tanzania. The company is charged with responsibility for the processing and re-drying of leaf purchased by the Authority and preparing it for export.  - 12 - The company's Board of Directors supervises the activities of the General Manager, who is in day-to-day charge of the company's operations. The com- pany's main activity is the operation of the tobacco processing facility at Morogoro. The plant is under the supervision of a Senior Engineer, but although there are adequate number of staff to assist with plant operations, most of these are poorly trained and need close supervision. Provision has been made under the project for overseas and on-the-job training for selected factory staff. The company's accounts indicate that it is in a sound finan- cial position. This is made possible by the relatively high processing fee paid by the Authority, which is negotiated annually. PART IV - THE PROJECT 31. The project would assist in expanding the capacity of the Morogoro factory to accommodate tobacco production increases in Tanzania. The project was appraised in October-November 1975 and negotiations were held in Washington from July 7 to 10, 1976. The Tanzanian delegation to the negotiations was headed Mr. Mushi, Principal Secretary, Ministry of Agriculture. An appraisal report entitled "Tanzania Tobacco Processing Project" (Report No. 1141a-TA) dated August 20, 1976 is being distributed separately to the Executive Direc- tors. A Credit and Project Summary is provided as Annex III to this report. General Description 32. The proposed project would over a five year period (1976-1980) in- crease the operational capacity of the Tanzania Tobacco Processing Company, Ltd. facility at Morogoro from a maximum of 18.5 million kg cured leaf per annum to some 41 million kg. This expansion would be carried out in two stages; initially the existing threshing line would be improved and enlarged, and at a later date a second, somewhat larger, line would be installed. Specifically, the project would include provision for: (a) improvement and enlargement of the existing processing line at Morogoro through the purchase of equipment, machinery and quality control devices; (b) installation of a completely new processing line; (c) construction of two new storage facilities at Morogoro and one new store and office in Dar es Salaam; (d) construction of roads, water supply facilities, offices, railroad sidings and other basic infrastructure at Moro- goro; (e) technical assistance and training; and (f) a study of further tobacco processing investment require- ments.  - 13 - Overall responsibility for the organization and management of the project would be that of the Tobacco Authority of Tanzania. The Tanzania Tobacco Processing Co. Ltd. which currently operates the Morogoro processing factory would have specific responsibility for the expansion of the plant's capacity and for the construction of storage and infrastructure at the plant. The Authority would be responsible for the construction of the storage at Dar es Salaam, for the recruitment of technical assistance staff and for hiring consultants to undertake the tobacco processing study. Machinery and Equipment 33. For the immediate short-term expansion of the Morogoro plant the project provides for the purchase of additional machinery and quality con- trol devices. This new equipment would both improve the quality of the leaf produced and also increase the total plant capacity from 18.5 to 21 million kg per annum. To be ready for the 1977 tobacco season this equip- ment is required to be installed by late 1976. Consequently advance contracting ($375,000) for this equipment was approved. Since by 1979/80 the total crop would again exceed processing capacity within the country the proposed project provides for the installation of a new and larger processsing line at Morogoro to supplement existing production. This new line would increase the plant operating capacity from 21 million kg to about 41 million kg per annum. In addition to expanding overall capacity, the installation of a new line would also introduce a degree of flexibility into the operation of the plant by enabling the simultaneous processing of different types of tobacco destined for separate markets and, by reducing the processing season, would reduce risk of loss of wet leaf. Moreover, the existence of an alterna- tive line would substantially reduce the likelihood of a total plant shut-down due to equipment failure. In order to assure better maintenance of existing equipment, and to provide the tools necessary for the maintenance of the new equipment, the project would also include provision of tools for the factory engineering workshop. Storage Facilities and Infrastructure 34. To facilitate handling of the expanded volume of leaf to be pro- cessed at Morogoro, adequate storage facilities are required at the factory site. The project includes provision for the construction of two new stores with a total floor area of 10,700 m . With the proposed construction, the total fl2or space available at Morogoro woulj be 35,100 m consisting of 2 16,900 m of existing good storage, 10,700 m of new construction and 7,500 m of temporary sheds. This storage capacity would meet the planned capacity of the plant in 1979/80. Additional storage is also required for tobacco stored in Dar es Salaam awaiting export. The present storage facilities at Dar-es-Salaam are scattered and unsuitable for this purpose and new facilities are required to prevent unnecessary losses. The project therefore includes provision for the construction of 6,400 m storage facilities capable of holding about 5 million kg of processed dry tobacco. In order to ensure the construction of new storage in Morogoro and in Dar es Salaam in time to handle the expected increased volume of tobacco, authorization to enter into  - 14 - contracts was communicated to the Governmen5 in January 1976. This authoriza- tion was for advance cpntracting of 2,600 m of storage space at Morogoro ($365,000) and 6,400 m at Dar es Salaam ($1,260,000). Additional infra- structural facilities would also be required at the Morogoro plant site both to allow better handling of the increased volume of leaf processed there and to provide services for the expanded labor force which will be recruited over the project period. The investments required would include the improvement and extension of roads in the factory area, storm drainage, railway sidings, and water storage and distribution facilities. Technical Assistance and Training 35. In order to strengthen the company's management capability and to provide engineering back up for local staff the project would include technical assistance at the Morogoro processing plant. At present an experienced Senior Engineer (expatriate) is managing the plant. It is expected that the incumbent engineer would continue to be employed until the completion of the project and in addition a Tanzanian graduate engineer would be employed to receive training and support from the Senior Engineer. In the event that the incumbent senior engineer does not continue in service, an experienced engineer would be recruited internationally and would also have the respon- sibility for training a Tanzanian counterpart. (Section 2.02 (a) i and ii Project Agreement). The project also provides for the employment of a produc- tivity officer to improve employee selection and training techniques, and three expatriate specialists who would provide on-the-job training to local operators at the plant in the operation of the new equipment and in quality control. Two of the three experts would be required for about six months each year over a two year period and the third expert for only four months in the second year of project implementation (Section 2.02(b) Project Agreement). The project would also provide for overseas training in quality control and local training in plant maintenance for selected staff. Tobacco Processing Study 36. It is expected that the expanded Morogoro processing facility would be operating at full capacity by the mid-1980s. As total production of tobacco is expected to continue to expand in the following decade, some future expansion of Tanzania's processing capability will ultimately be required. The project would therefore include provision for a study to investigate the timing, scale and location of future investments in to- bacco processing facilities; particular attention would be given to the feasibility of establishing future plants at different locations within Tanzania. The study would also evaluate future storage requirements and would investigate the possibility of introducing a greater proportion of labor intensive methods into processing.  - 15 - Project Cost and Financing 37. The total cost of the project, net of taxes, is estimated at US$11.3 million. The foreign exchange component would amount to $8.0 million or 70 percent of total costs. Details of project costs are included in Annex III. The proposed IDA Credit of $8.0 million would finance only the foreign exchange costs of the project. The Authority and the company would together contribute $3.3 million or the remaining 30 percent of total project costs. 38. The Government would onlend from the proceeds of the IDA Credit $2.0 million to the Authority at 10 percent annual interest for 7 years in -cluding 4 years grace and $6.0 million to the company also at 10 percent annual interest for 8 years including 3 years grace. The interest rate is that at which these organizations currently borrow internally. The finaliza- tion of a subsidiary loan agreement between the Government on the one hand and, the Authority and company on the other would be a condition of loan effectiveness (Section 5.01 (b) Development Credit Agreement). Both organiza- tions would have to contribute $3.3 million to meet the local cost require- ments of the project. The cash flows of both these organizations indicate that the Authority would be able to meet this obligation only with some changes in the charges -- fertilizer subsidy -- that it is required to meet or in the prices paid to farmers for tobacco, while the company's contribution assumes continuation of adequate processing fees (paras 29 & 30). The Government has agreed that the Authority would be allowed to retain each year sufficient funds, and that the company's processing fees would be maintained at such levels as to enable both these organizations to cover their project obligations (Section 3.02 of Development Credit Agreement). Procurement and Disbursements 39. Equipment and materials financed out of the proceeds of the IDA Credit will be procured on the basis of international competitive bidding in accordance with Bank Group guidelines except for equipment to improve the existing tobacco processing line at the Morogoro plant (detailed in Annex 5 Table I of appraisal report) which is being purchased through international shopping. This exception has been made as there are only two or three sup- pliers of this type of specialized tobacco equipment and international com- petitive bidding would have unnecessarily delayed procurement without achieving economy in purchase. This equipment is estimated to cost under US$375,000. The civil works contracts which are divided between Dar es Salaam and Morogoro would be too small to attract international firms; these have been advertised locally. To ensure that improvements to the existing threshing line at the Morogoro plant is carried out in time for the next tobacco processing season and to ensure that the construction of new storage in Morogoro and Dar es Salaam is completed in time to handle the expected increase in the volume of tobacco, advance contracting for equipment of the value of $375,000 and civil works of the value of $1,625,000 have been authorized. It is recommended that retroactive financing for these items up to an amount of $0.7 million incurred after February 1, 1976 be approved. A schedule of estimated disbursements is included in Annex III.  - 16 - Markets and Prices 40. Out of the total production of 18 million kg (1972-73) of tobacco in Tanzania the domestic market takes around 4 million kg annually and the remainder is exported mainly to the United Kingdom and the rest of the Euro- pean Economic Community. Tanzania is well established in the U.K. market where it obtains a duty preference. Export potential is also growing in continental EEC countries where imports are expanding and where Tanzania's associated status gives it duty preferences. The outlook for increased flue -cured tobacco exports from Tanzania are therefore considered good. Such exports are unlikely to affect international prices as the incremental pro- cessing under the project would be a little less than 2 percent of world import demand by 1985. Tobacco leaf prices on the world market have shown an upward trend with a sharp increase of 15 - 25 percent in 1974. Export prices (FOB Dar es Salaam) for Tanzania flue-cured tobacco have increased from T Sh. 8.36 per kg in 1967 to T Sh. 16.40 per kg in 1975. It is estimated that world prices will hold firm, in constant terms, with some increases anticipated in the early 1980's. Hence an export price of T Sh. 16.48 (FOB Dar es Salaam) has been used for project evaluation purposes. Benefits and Risks 41. The project would double the total tobacco processing capacity of the company and would provide needed capacity for processing anticipated increases in tobacco production up to the mid 1980's. Most of the incremental tobacco processed would be exported. The gross foreign exchange value of the tobacco crop is expected to be about US$57 million by 1985 as compared with about US$27 million in 1976. 42. The economic rate of return for the project is estimated at 25 percent over twenty-five years. The risks faced are that tobacco production might not increase to the levels estimated, that the world market prices for tobacco might be lower or that the processing costs might increase dispro- portionately. The project is very sensitive to tobacco production and export prices, and a 10 percent reduction in either could reduce the economic rate of return to 19 percent; and if both these events occurred simultaneously the return would be reduced to 11 percent. A combined increase of both tobacco production and export prices could, however, increase the rate to nearly 42 percent. These risks have been taken into account and the processing facilities under the project have been designed to accommodate a range of tobacco production. Although the production growth rates, assumed for plant capacity, at 7-1/2 percent per annum from 1975 to 1985 are conservative in view of the recent trend of a 12 percent per annum growth, the processing facilities would have sufficient flexibility to accommodate a more than 25 percent higher level of production than that projected. The company has in the past had a good record of managing the Morogoro plant and the further technical assistance provided under the project should enable the new equip- ment to be operated at a reasonably efficient level of production.  - 17 - PART V - LEGAL INSTRUMENTS AND AUTHORITY 43. The draft Credit Agreement between the United Republic of Tanzania and the Association, the draft Project Agreement between the Association, the Tobacco Authority of Tanzania and the Tanzania Tobacco Processing Company Ltd., the Report of the Committee provided for in Article V, Section 1(d) of the Articles of Agreement and the text of a resolution approving the proposed credit are being distributed to the Executive Directors separately. The draft Development Credit and Project Agreements follow the form previously used for this type of project. 44. Features of the Development Credit and Project Agreements of special interest are referred to in paragraphs 28, 35 and 38 of this report. The ratification of the Project Agreement and the Subsidiary Loan Agreement, between the Authority and the company referred to in Section 3.01 (a) and (b) of the Development Credit Agreement, are additional conditions of Credit effectiveness. 45. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 46. I recommend that the Executive Directors approve the proposed Credit. Robert S. McNamara President Attachments August 20, 1976   ANNEX 1 Page I of lj pages TABLE SA TANZANIA - SOCtAL tNDRCAT13RS DATA SHVEET LAND AREA (TNOU RNZ) - - ---- -------- ------- - --- ----- --- TANZANIA REFERENCE COUNTRIES (1970) TOTAL 945.1 MOST RECENT AGIRIC. .. 960 1910 ESTIMATE KENYA KOREA, REP. 01' MALAYSIA- .4P PER CAPITA CUSS) 70. 12.0 10.0 ~ . i. 4. POPULATION AND VITAL STATISTICS POPULATIO (MID-YR.MILLION) 9.6 /a 12.9 /a 1a.7 /a 11.2 31.4 10.h4 POPULATION DENSITY PER SQUARE KM. 10.0 14.0 16.0 19.0 119.0 32.0 PER SQUARE KM. AGITIC. LAND 23.0 /a 23.0 1 320.0 291.0 VITAL STATISTICS CRUDE BIRTH BATE PER TMOUSAND 51.5 50.5 50.2 4i9.0 35.0 42.2 CRUDE DEATH RATE PER THOUSAND 27.1 23.0 20.1 17.0 11.L4 1 2.9 INFANT MORTALITY RATE C/THOU) 1 90.0 160.0 L/b . 55.0/a 4l0.8 /a LIFE EXPECTANCY AT BIRTH (YRS) 36.7 41 *8 44.5 4~7.5 57.7 56.7 - GROSS REPRODUCTION RATE S . 2 31.2 3. 4 2. 6 2.6 /a POPULATION GROWTH RATE (Z) TJTAL 2. 1 /a 1. 0/a t/( a 1. 1 2.3 2.6 URBAN 5.0 5.6 5.7 6.5 6.b 3.6 URBAN POPULATION (2 OF TOTAL) 4&.6 6. 0 6.8 9.9 41 .2 27.8 AGE STRUCTURE (PERCENT) 0 TO 14 TEARS 142.5 /a 44. 4/b . 48. 4 42. 1 4.7/ 15 TO 64 YEARS 55.5 Z~, 53.0 .4. 5 4. 6 52.1 7?- 65 YEARS AND OVER 2.0 /a 2 . 6 4 . 36 3. 3 3.2 7- AGE DEPENDENCY RATIO O .8 /a.b 0. 9 /b4 I.. 1.1 0.8 EC04GRIC DEPENDENCY RATIO 1.0 =j 1. 2(.U~ .. 1. I/b 1 .41 a FAMILY PLANNING- ACCEPTORS (CUMULATIVE, THOU) ... .66.1 . 222. 2 USERS (I OF MARRIED WOMEN) ... .. 42.0 80 . EMPLOYMENT TOTL LABOR FORCE (THOUSAND) 4 900.0 /b 5600.0 ~a b60. b50. 00. 900/ LABOR FORCE IN AGRICULTURE (I) 96.0a gj 1. o 7 .. 9~0 i 50. Ia 43.0 UNEMPLOYED (1 OF LABOR FORCE) ... . 5.0 6. 0a INCOME DISTRIBUTION 1 O0PIVTE NCMEREC-D 8Y- HIGHEST 5x OF HOUSEHOLDS .. 1.5 ..20.2/d 17.1 28.03 HIGHEST 200 OF HOUSEH0LIIS 63.3 . 52.6 d 441.5 56.0 LOWEST 200 OF HOUJSEHOL.DS .. .03 3.9 / ~ 7.~ 3.5 LOWEST 401 OF HOUSDEHOLDS .. .A .111 17.7 11.2 OISTRIVUTION OF LAND OWNERSHIP 1 OWNED BY TOP 101 OF DONERS . .. 28.0 % OWNED BY SMALLEST 101 OWNERS ... . 2. 0 HEALTH AND NUTRITION POPULATION PER PHYSICIAN 20000.0/a.dZ1570.0/. 21450.0 ~~ 7830:0/e 2210:0/ POPULATION PRNURSING PERSON 8900. Otdh4i890.0Z8 411 0. 0 1 7 0 7e 1 76 0.0 1080.0 /a.c~ POPULATION PER HOSPITAL BED 5530.:0 a,.d 10 0.0 . 800.0 1 9 2 0.0 2170.0 / PER CAPITA SUPPLY OF - CALORIES (I OF REQO INEMENTS) 69.0 70.:0 98. a 10 1.0 1 03.0 9 4.0 d~~ PROTEIN (GRAM4S PER DAY) 42.0 4 3.0 6 3.0 Ic I 0 65.0 4 9.0 -OF WHICH ANIMAL AND PULSE 22.0/e 23.O 29. 0 19.0 2 0.0 DEATH RATE (/THOU) AGES 1-4 . .. .. 5.5 EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 224.0 AL 36.0 If 143.0 /d 614.o/ 10 4.0 89. 0 /a SCCONOART bCHOOL 2.0 . 3. 0 7? 3.0 7-d 9 .O0LbL 41.0 3 4. o7a, e TEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 1 3.0 0 3.0 0 3.0 1 3.0 12 .0 I s. O/a VOCATIONAL ENRO-LMENT Cl OF SECONDARY) 2 3.0 1O0~ 0d 2 .0~ 1gi6.o 0 s./a ADULT LITERACY RATE (Z) 17.0 . 49.0 lb 50.0 87.0 17.0 If HOUS ING PERSONS PE OM(AVERAGE) .12 23 OCCUPIlED DWELL INGS WI THOUT . .. . . PIOPEO WATER (0) 3. 0-0/b.o.a .. 80.0 /d 65.0 ACCESS TO ELLCTRICITY (I OF ALL DWL' INGS) ... . 50.0 4 3. 0 RURAL DWELLINGS CONNECTED TO ELECTRICITY CI .. .. 0.0 30.0 CONSUMPTION RADIO RECEIVERS (PER THOU POP) 2 .0 1. 0 1 6. 0 4 8. 0 1 26.0 4 1. 0 PASSENGER CARS (PER THOU POP) 3.0/a 3. 0 3 .0 9.0 2.0 23.0 Ia ELECTRICITY (KWH/YR PER CAP) 13.Oa 3. ~3.0 ~ 80 307.0 38. a NEWSPRINT (KG/YR PER CAP) 0 .1 0.1I 0. 1 0. 9 3. 4 4. 0 a SEE NOTES AND DEFINITIONS ON REVERSE  ANNEX T Page 2 of 4 page- NOTES Lhnlen otherwise noted, data for 1960 refer to any year betwee 1959 and 1961, for 1970 bet-ee 1969 and 1970, and for Most Recent Erlnote betwee 19 73 andI1973. - ... hllyl ansee slce asnnbjeLtte countrY beta..oe Ire PoPoistion in trePorablo In lne and it. etonot development In - ne Srlantps ahead TANZANIA 1960 / MalndTa....nis /b 1951, Afetten ppolatine; It ROacio of popolatIon onder 11 and 65 and -ovr -o rOsl. labo _________ ____ - fore /d 1962, ,jj 1961-63, L.f 1959, taneibse; a& E9N3; /b le1rlodiv aldelve-ad arennh nd-tcr qnalifi-taiest; regIstered, n-t all peanntinig In the tnontey, /1 6-12 nod 13-IN ynare nf a ge r 1-eooe 1970 IaMainland Ta....ets; lb 1967; /c H-aeeblds, /d 1965, In Urban only IE 7-13 and 14-19 years of aog ree Pen ties ly. HMOST RECENT I SCAT]M Isa Mainlend Tsn...nin, Lb 1972; Ic 1969-71 averge. Id 7-13 and 14-19 v-a ot age r-perl-ely KENYAo 1970 Ls Rgagtstred only, Lb RetEn of pop.o.latn ander 15 and 61 end -os to labor forvo age 15-59 ynnr, Ic La,bor fCr, sn15-59yer Id UErhan -nhntdn., / Regtecered, tot oil proctiring to the -ontry, If 5-11 yer f ngv Totel setendery inclnJden nearber training at the third leve KOREA, REP. OF 1970 /A.O percentage of neMplny-sst, lb Registered; /t Reginterd, not all proctiting iv the cconoev ILd Piped corer insIde MALAYSIA 1970 Ia gnt Meleysla; Lb Registered applicansn fee nnrk, Ic Gove-rnet only, 'A i9646-h. In 12-10 yent of go,e 7? 1967, /A Pipsd water Inside.._ E9, Aoguot 10. 1976 DEFINITIONS OF SsiL IDIDCCAIORS Lend area (th-o bm2l PoPolon e ooaoEro,-POpyLa_tcon di,idnd by oujccr of1 p-oti- Totni - To.to aofonsescmpiin -ed area end inland waters o maleodfml reo ona "L-oced" 0v "Celttafcod" vor,no, Igrir' - Mono reet nhoc of sget-ltoea1 nrea osed temporarily nr od nooli-vy pernovoel -ot traoinig or -opemenc- pnr,aneiiaforcros, petaen,narrar4 kitcben g-dem or to Ie. fal Io. P0onclotlco net, iceoitol bed - Popolaccoc diecdnd bly voor of hoopntai1 heds craclble cc public a-d povoto g-ra1 and opeomico-d honpitolA Glipon cpta Y(iS$ - GNP Pen naptte estiamtee an norrect Maraket prines,, and reoiioi o vetern; encouder vovocg h.On and ootaibliclnncntn naolid ysn n"er"rdon methad .e Worlid BReAttida" (2973-75 hoja for vontodit Ro,d preve-ntive -rn. 1960, t970 and 1775 data- Percai, enorcr ofcasurpoly of ecormeoc - omnmotd fro co-ry eqoirolent of net. fodnpln tole cv vovoc'iryet opoco P.r Pnliinn' end vital c-etnion day; ovolloble nuppliensopre domantcv r.-dotio-, opo-te Inn Ponolotio bid-yr. ilnn -Aso of July first i ot"aAibI,nPorte.tohd nhooge cc Stockc; OMi voppline "oood aoc-w foci, cevdn, aonrgn Of o - ed-year ontlsaet-, 1960, 1970 ned 1975 darn. qoseti nn ,,ned iv food P- Onno ovA lnevcditbtn;to qoc-emoin" were eS timated by PRO cooed on phyniOiogcvir neel for Ponclaion dnottv -net ncare In - Hi-yearpnpaI.loti Per Sq- kilo- vo-1a coiiycd hnlth...vneder-g anvircooental terpnnotwn, netor (100 bectarca I ef total area. vit'~bod weightn, age and sr dtnorbctoens of population, cod alloccog rovulotln deeniveOt 50am inn f agrin land -COMpared as n ov for 17% for wate at hoonebo.ld lne-l. a Orion licral land onlp. ~~~~~~~~~~~~~~~~~Per capita muroly of ptrlem (gpacra Po, day) - PrOt-in mactent of P.r capita net noyply of fon per day; coo cmpply of fond is d.fnceo o vital n-ainoirn b-nce reqolreemot fnt oil COc-irtses otablished by illin Euncov- Crude h1irh rate per rhosad - denal ILin births per thb....nd Of ed- lins ... letrrn procede fey a eci_nnon o1lowocre of 61) grot Of .totl yorpopolatlo_ t-yea arthetc eeaga ne In 1960 and 1970, p,ctno" per day, aci /0 gram Of atolci ad pours .. pronic -00, aed fv-ea -craoe endc In975 for ...t recent earimate. grants nh-ld inn anraci p.totn Lhno. cLandordz -0 13-cr ti, tloo fi-ds death rate nor rhoosand - ninoal desoba" pe r rhesand.ni nid-ysar of 75 gaMan of totol pOtotco Rod 23 graMo of ani-n1 protein an anovr popalarln, ten-yar aritbeetin avrages enieg in 16f1 and 970, andage for the ,rld prOpOnd by FA0 iv the Third World Fond Sorvey. flo-yea acerge ending in 1975 fnr Mnet recente ..imot.. rcpt rti nonoly frm. animat and oulne - Protein oupplys Of food nfanr nortalry raeC Ibo - Annual dearhs nf inf-tra order one year of derived frm. onolol and pulses tin grott pint day aePer Lboc-ndlIve bOrrhe fate thi 1- - Ainocl deothn per thooanod in age grocp tife -ooociancv at birrh fYre - Average camber of yeare of life reInaing 1-ly Lrn, hild.. cc tims ago groovi cggvItnd on -v ind-ctor atbirIh. unly fine-year -rsrgan endieg In 1960, 1970 and 19/5 for of Malnotr_tioc irsrG r odocrom rate-A-erage nonber of lIve daughtser a oa ill Education bea ba hr noma- rpodI e period if oh. s.oprla...e. prseer age- Adloestedaernilmeo racL rmaEeho - Grilc o i agoo0 opcfifetlity rate; .... hr, fireyer-aerges ending In 1960, pertyetarsbe of privacy , dnbfn-agr ppltico i" ia hlrnAe 1070 and 1975 for deenlpfng roontLries 6-f yer o dotafrdfeeti tho of Primry edonotion; Pneoiatlon growt rats M - total - Conpoted .enoaI growth rates Of mid- for co,nstrien with onciveroa odocatitn, eorolln..ot may emced til/% fear pepolatlon for1950-if, 1960-70, and 1970-73. nion .noo popiln are below -r bo-v ,I,, Official nohoot age. Populmation cro.00 rate (%) - wham, - Conepted lIke groeth rat of total lmtderlaotaio-nrdrynbt-Cmptdnahn;c- oopciiotioo,; different defliitl.nm of oba,,ao rease may affect Lompara- ondans- aduaction requireo at leant foor ye..roof approed pri-ioy bilit vfdt mn countries inotroitionn provides geonral, oco nior teo-her troiinnog tnr lirionpopoloioc (0of cata1) - Ratio of urban to total population; dif- tac o obeof1 n1 rr o g;tr"podonohr r felnt dnfcntL.oon of orhov orae na. y affet noeparabolitty of data eealonldd leave Of echnoltg provde,d (firet.and enoonrd laevei) - Total yearn Of - . - , v- fo~Children (l-il, yearn). oa-k-g-ngs (15-61. yearn), srbooling; at oecodn- leel voaiclntouotrm ion coy be partially -.,-and yOst) an roercntcgnn Of mid-yea ponulatint Vor -onwletelsr emctudnd. Ag -~ , VocS,,In Rto fpplto d 5 n 5adO-t ational enrollment j% of Secondary.) - Sn-atoonal -otbtotionn Lonldod Aredeeidi_ rato Ratioh ofp6 ltn adr5 n 6 n tt tevhmhnal, indostrial or othnr prgro.n hbcc. opera.te ldepncdaatly Evoroon de,nmdeny ratio - Ratio Of ponolnioma under 15 and 65 co,d vner r A. antoa- dee tmetso eotndaty adnults atiln.t.raan t) -otelbor forc in age grow of 15-64. yerarn oe -Ltrt dlo(al ora rt)a Faomil; plsait-ig - acceptern (noalett~ee 09) - Coo_cttee nmoaber of pecnaeof total adult populatio aged 15 yaaro and over. accptors Of birth-oootral devOcee anidsr auspices of mational family placciog program eiocn inception. ho3n faMily Planning - users (0 ftoridam - P-r tgnofmridPer,nOo tIe room )orvrag) - Adrarge comber of pe...ooo per roam ho or- womn of obild-bear-nig age (15-1. yearn) tbo uace birth-cotrol din- copiedtoStrecturesan denfcipge dI ra arnl-t ilEo nld cn allotoot married iMoe in namea age group.peentnrntae aduocpidpto 09eipied dlljingo wthou le ae ()-Ocped ocooremtlonol Obmtooe,sct frye doefliogo iv oman and rora) arean witboat ~~ivoide or outoid. pipnd ~zr.. furl(thousand) - F&ooniotally ectime persons, inolodicg water facilities an preretaefalorpid seIig. arced forcce ond ooemployed hou, exocluding hno sne todente, Set.; Aceet lnrot ( faldeln Conventional dwollcogn deitnticne in variono -ootriec ore cot o.Mpara ble. with eLentirlaty in lrloing quartero an pertent of total dwelliago fint. force in aerin,alt-u M - hginltna.e lebnr torne (In Conig,in arb.an cd rura areas. as Ps mtsRO Of total laRbrl dwellirs".nmceT ed to electricity (0) - Computed an above for forestr, bootng ondfiohin) enpretg fttllbo oc.raa wfog noSy who fm~~~ce) - Unemployed are asually defined as personsn hor.e able ao oilltog to tkhe a Job, Oat of a Job on e gOrse day, cnom,a pemaloed o.t Of a job, and oeeklcg aorh fcr a pe.alfied lnicnSim kMdi re are pa tbo p) - All types of e-eirer for rcdio broad- perodno nteding cnn. Weekl may cot he comparable between ocac- cne gnrlpbi e btedo oaaic nldooi tre InI different definitionn of unemployed and e.care of data, tensed receIers bo ontrl "'anrd inyorn populareintr ot,iond rradio e.g., employment office etotietices esaeple sornya, compnlsonry ome- e.d-e,rin ut.0adnyashnrgsrtonfrdo ployment Insorance. onto wee io affect; data for recent peeve5 may not be oneparab2e oSime most vooutrien abolisbed licensing. boyce dtntrtbot Pon -Pertnrgs mi peinsos Ia- both L. cashb and bled) Paseeeer cars (ner tbhou no - P..sanger care oonprin ector oars neat- renaied by richest 5%, elbeat 201, poorest 201, and penmen hat 4 a f Mg lean than eight P5r..5 sacldee ambolanee, hearoen cod mili- boasebolds. tary rehinls.. El Ctrlicity4skelVyrpgR gp -r ocAnul cocsaptlcv of industrial, con- 1ltetribuotton oflan,1,d naorehn Perten.tgee of land n,amed by ,seesth- aoo 'Iulcmd pritate electricity' in kilowtt boats per ospita; test IfSnod cornt of and na,ner.. geoerasl baoed on pmnduntion data, withoot alnaoefor losnsn iv grida hot alloving for imports and amprte of' s1-trloity. Henalti Lid Rutrititn Newprint (kg/yr pere is) - Per napita annuial conaumption in ktilogramw Popooti perolnyIania - Popolation diided by cwaber of prac ticing estimated fran domestic produetloi pita cet impon-tn of onweprint. phyolcioce qoalfied fron a Medical shobon at unlnershoy iseel.  Aglual t~~~~~~~~~~~9d7- 19 73- 19 7A- 19 75 - NIATIONAL ACCOUNTS ____Fd17 17 2_5 la 1973 AP275 19 80 i. 400.0 10 2 4~~~~192 97 175 190 _ Gross DomTesti f rc:&D ag ae vrg AnnualGrowh Ra~te . As Percet of CDI GalasfecaleresoTraec)- -14 2 - 45 6 -03 - -7 98 _ 2 4 -33 Gr-o D-wstlc Incm.11. flORa fT. 6l9.o 77rS6 DINY 4.5 1 9 2.2 4.7 7M TO0 Sor 1Or IFOort (tact. 870) ~~~~~~~519.8 530. 6 469.3 483 3 584 8 6.8 2 I -11 6 4. 5 78.6 I- 24.8 8.5 moons " (isniort capacity) Al~~tO, 698n.8 257 R8 28 3.4 382.8 2.6 -25 9 -16 5 8 2 22.9 13.6 16.0 Resu.c lap 102.8 l7'TTX9 rr 5TTT.s 9e,r 077t _.-3- 7 r -rsY Consutiptlo Eopeditures 1538.6 1668.4 1688.4 1772.2 2052.5 4.8 8.4 1.2 4.6 84. 6 89.1 86.6 Invetment (iloot stocks) 406.6 407.0 410.1 455.5 3 533. 6 8.4 0.2 2. 7 5.0 22.4 22.1 22.4 Domestic Saulogs 280.6 189.2 206.6 255.4 331.6 2.7 -34.0 11.6 9.9 15.4 10.9 13.9 Nat..Ioa Sa-Ings 286.8 187.2 212.9 256.8 291.7 3.4 -34.7 14.3 6.4 15.R 11.3 12.2 MM HIAnSI8S TRAIlS Annual Data at Currnt PrIces Au Percet of Tct1 1.~~~P-t. ~~1972 1973 1974 1980 - 973 19_71 1980 Capito1 goode 125.2 125.1 185.7 329.6 29.4 25 7 29.3 Ihtersditat gooda Wc.fnato 15a.4 169.4 189.2 3;8.2 36.8 31.9 33 .7 Fools and related reterioa. 41.3 55.1 148.5 3111.1 11.6 26.0 26 o f wich, Petroleu (41.3) (53:1) 6148.5) (302.1) (11.6) (26.0) (26 R) _n0 tloc gods ILL Jg 2 ALjl fjju8 22.2 16.5 10.2 Tcta1 Morel. I.ports (cof) 403.8 459.8 738.5 1123.7 106.0 100.0 160.0 Primar rOducta ~i=. fuals) 208.6 263.6 309.8 471.0 79.R 75.0 69.8 RueS, and related aterials 30.7 12.5 18.5 52.5 3.8 5.0 7.8 o.f ahlch; Petroleu (30.71 12.5) 618.5) (52.5) (3.8) (5.0) (7.8) Macfoturod nn.ds 491 54.4 55.4 151.0 16.5 19.2 22.4 Total M-eh. Noporte (fob) 288.4 330.5 383.7 674.7 r99Th tM9Th romb Tounin and B.rder Trat NerhledsoT'rade Indice Aerg 1973. - tO typort PIce Ind-o 89.6 108.0 152.0 142.2 151.9' 201.6 Import Price. Index 86.7 108.0 159.0 177.1 185.9 243 6 Ter- of Trade Indco 100.2 Loo.0 95.6 003 04.9 02.8 Zoporta Volum Iedvo 109.7 100.0 81.2 71 79 11L VALUS AD15E81 BY lCTIOR A-oa Data at 1973- Price and E1olage Rate, AvergeAnnalGrowh Rateo As Percent of Tctal 16-2 172-34 1970-80 19(3 1975 1980 AUri-utore 648.6 647.7 634.1 665.8 685.0 784.7 2.6 -:0.5 -3.3 30.73 37.9 35.6 Idadctrp and Mlinig 206.6 208.7 210.8 217.1 278.0 201.1 5.0 G.6 5.3 12.7 12.3 22.7 Se-i-e 737.0 790.0 B34..3.~. 876..0A. 919.8 1141.6 6.1 8.4 1.4 48.0 49.8 51.7 Total 1594.2 1666.4 1679.2 1758.9 1833.5 2207.3 4.5 3.1 4._6 oo 100.0 100.010. A.tol fat. Bdgot 2 PUBIC FI86A8E Ff72 FY73 fY74 FY75 Ff76 hA. Percet of GOP- TCen-trallGe-ncet) _(In illioes of curen T Shilliags) FY72 Ff73 FY74 C-ret Recopta 1859 2357 3082 3884 4007 17.7 09.7 23.2 C_ty4p F49Cr 1717 2134 2685 3696 3530 16.4 17.8 26.8 cdgettry! rd-Iaga. 142 223 317 190 477 1.3 1.9 7.5 OterIlbl Sector- 241 264 . . . 2.3 2.2 . 010Setor Inestarat 1694 1836 1996 2301 . 16.2 15.3 15.4 CIOORIIT ElPflIIOJRE DET0II Actul P-eli.. Es.t As % Total Curet fapr0d.) FYt972 FYt973 Ff19_74 Ff1975 Ed.eation 17.5 16.7 14.8l 16.1 Giber SocIa IcrAces 12.5 11 .0 11. i4.6 Giber fronozaic servIces ( ~~~~~ ~~~~28.3 25.4 31.4 23.2 Admdiatratlon sad Defense. 41.8 46.1 42.2 46.1 Total Curret Epeaditores 100.0 100.0 100.0 108.0 SEIZCTflD INDICAITORS 1965 1973 1976 1981 (Calculated r-e 3-year averged data) 1970 1975 1980 1983 Aeerge ICORt -rg -a7 _rr -rs I80ot lfltloity 1.6 -0.0 1.0 1.1 Pftrgtal l~etic Soelag Rate 0.1 -8.6 0.3 0.2 Pigi-agta NAtional so-igs Rate 0.2 0.6t 0.2 0.1 IA.8)R FOFES AND Tot.l labor Force Value Added Perlrn(i onsn rcs OUTPUT7 PER WORKE in gIL...n % nof Total InU.D.lbsl.l.as eetoAere ~~~~~ ~~~ 1971 1971 1971 AgrliclIt-r 3.3 91 98 43 Indostry 0.1 2 1590 696 Service 8~~ ~ ~~~~~.4 7 2170 948 not applloable nit Or aegluglOl aasnncnrbct ontoretln ant avilable I..tee than half the zi A-ecaRd f0 rc 1amlad year smalest -nit sheenC47  Page 4 of 4 Pages BALANCE OP PAmDi78. EXTBNAAL. ABSSISTANICE AND DEBT (aounts in millions of D.8. dollars at current prices) AvS . Aonual Actual Projected Growth Eate 1972 1973 1974 1976 1977 1979 1979 1980 1972 -198 SBOhMARY BALANCE OF PAYBDUTS Ecports ( .incI NFS) 397.5 417.0 491.0 574.4 643.0 718.7 816.2 922.1 11.1 7.=oprt (tool. NPS) 476.1 519.8 843.6 775.8 883.5 989.4 1113.1 1265.4 13.0 Resource Bala.o. (X-M) -78.6 -102.8 -352.6 -201.3 -240.5 -270.6 -297.0 -343.3 28.8 Istereat (set5 )34 10.4 -6.8 -24.8 -30.1 -32.7 -35.6 -39.8 34.2 Direct Iveatmast Iscomo ) -5.5 0.5 -2.0 -2.0 -2.0 -2.0 -2.0 Workers' Remittasce 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Creast Transf rs (oat) -1.7 0.7 15.7 22.4 15.0 13.0 13.0 15.0 Balance 00 Ourreot Accuots 83.7 97.2 -343.2 -205.7 -257.6 290.4 -319.6 -320.1 Private Direct 1-veatscet - 1.5 2.7 2.8 2.8 2.8 2.8 2 8 12.5 Official Capital Grants 16.0 16.0 20.0 27.5 30.3 33.3 36.6 40.3 Public M&LT Lo..omsI. Disb.rsnm-.ta 110.6 88.4 107.6 3! 112.9 4/ 111.3 5/ 133.5 5/ 160.8 5/ 191.4 5/ 11.2 -renayuemts -15 .4 -18 .3 -12. 7 -[8 .4 -21.1 -22.4 -30.3 -39.6 12.5 Net Dioburs.nrota 95.2 70.1 94.9 94.5 90.2 106.1 130.5 151.8 6.0 Other MALT Looas ... ... Dibur-eoeots -Repav-ent_ Net Disbursements 4.5 9.9 24.3 .. .. One cf lMFP Resources - - 46.3 Actual Capital Transactions n.e.i. 28.2 -29.3 63.8 7/ 97 1973 1974 1923 Chango is Net Reserves -60.2 -20.5 91.0 DEBT AND DEBT SERVICE 2 Public Debt Out. & Disbor-ed 332.5 428.9 578.1 762.1 GRANT AND LOAN COMMITMENTS official Greets 6 Grant-lIko Iteroot on Public Debt 6.9 8.2 8.9 11.9 Repaymonts on Public Debt 29.0 11.4 12.7 23.1 Public MALT Loans Total Public Debt S-ite 35.8 19.6 21.6 IBRD - - 65.0 Other Debt Service (net) IDA 6/ 10.8 28.8 61.2 Total Debt Servier (net) Other -- -- 016cr "ultilateral 3.3 1.8 7.1 Burden oc Expert Earn-ns (T.) Governaents 49.3 94.9 112.5 Suppliers - - - Public Debt SDrvice 9.0 4.7 4.5 4.6 Finencial lntiltati..s - - - Total Debt Serv-cc Bonds TDS+Dorect Invest. Inc. 10.2 6.0 4.4 5.2 Public Loand n.e 1. --- Total Publc M61T Loans 63.4 123.5 245.8 A--rgef Terms of Public Debt Actual Debt Outstanding on Dec. 31. 1975 nt. a . % Pricr Year D004 2.6 2,5 2.0 1.9 EXTERNAL DEiT Diabursed b L0 z Percent Accc. as % Prier Year DO6 10.9 4.2 2.7 2 1 World BDnk bO.4 IDA 83 1 I0.9 I0R8 Debt Out. & Disbursed other multila-erel 19.o 2.5 n % Public Debt 06D0 7.2 7.7 7.1 10.6 Gen__sents 554.5 72.8 an 7. Public Debt Serv _/ 3.6 11.2 13.0 16.9 Suppliorr 0.1 F-nenclal Inseiten.ns 11.3 [.5 IDA Debt Ouc. & Diobersed Bonds 4.2 0.6 as 7 Public Debt O&D 14.8 13.4 11.0 10.9 Public Debts n.e.c. 9.4 1.2 as % Public Debt Serv. -/ 1.1 2.0 2.8 1.9 Total Public M&LT Debt 762, I Netlonal n--tLhird share of EAC debt 93.3 of which: Wor1d Bank (50.7) Other (42 .6) TOTAL 835.4 not epplicable e atoff esticate 1/ Parostotal sod Private MALT loans. ..nt -vilable - nil cr oOEligible 2 / I n cludos drawing on Arab Fund for A-fr-c ($7.1 i.) not available separately -- less than balf t.. 3/ hI-leden bilateral and =ultilatecal proBra assistanco of $91.0 =. bet included it total nemcllest unit hobwn 4/ Includes proposed IBRD progrea credit of $30 0 t. 5/ Ne progrem assistance as.a.. ed. 6/ SDtF Oil Facility and Credit Tranche. 2/ Net including Tancania' share is EAC debt. 8/ 8RD0 acd IDA Debt Service as % of Public Debt Service EgACPIA Auguat, 1976  STATUS_QLEBANK_GROUPQOPERATIQNS ANNEX II IN TANZANIA Page 1 of 11 A. STATEMENT OF BANK LOANS AND IDA CREDITS AS OF JULY 31, 1976 (US$ million) Amount less cancellations No. Year Borrower Purpose Bank IDAV7 Undi sbursed Three loans and six credits fully disbursed 65.2 43.0 586-TA 1969 Tanzania Roads 7.0 1.9 149-TA 1969 " Education 5.0 0.4 217-TA 1970 " Tobacco 9.0 0.8 232-TA 1971 Education 3.3 1.2 265-TA 1972 Roads 6.5 2.6 287-TA 1972 SmalLholder Tea 10.8 3.6 371-TA 1973 Education 10.3 9.5 382-TA 1973 " Livestock1/ 18.5 12.6 454-TA 1974 Cotton 17.5 15.6 460-TA 1974 Tanzania Investment Bank 6.0 2.9 715-TA 1974 TANESCO Power 5.0 0.3 1014-TA 1974 Tanzania Cashewnut 21.0 12.5 495-TA 1975 it Sites and Services 8.5 6.2 507-TA 1975 it Highway Maintenance 10.2 10.2 508-TA 1975 to Rural DeveLopment 10.0 9.3 513-TA 1975 " Sugar 9.0 1.7 1041-TA 1975 of Sugar 9.0 9.0 580-TA 1975 It Dairy 10.0 9.8 1128-TA 1975 " Textile 15.0 14.6 1172-TA 1975 Tanzania Investment Bank 15.0 13.1 601-TA 1976 TechnicaL Assistancea/ 6.0 6.0 606-TA 1976 National Maize Program 18.0 17.9 607-TA 1976 Education 11.0 10.9 1306-TA 1977 TANESCO Power 30.0 30.0 1307-TA 1977 Tanzania ForestryZ/ 7.0 7.0 652-TA 1977 Tanzania Fisheries2/ 9.0 9.0 TotaL 174.2 221.6 218.6 of which has been repaid 1.2 3.4 Amount soLd 0.1 of which has been repaid 0.1 Total now outstanding 3 173.0 218.2 Total undisbursed 88.4 130.2 1/ Includes grant participation of $6.2 million of which $3.4 is undisbursed 2/ Not yet effective 3/ Net of exchange adjustments  ANNEX II Page 2 of 11 B. SUMMARY STATEMENT OF BANK LOANS FOR COMMON SERVICES GUARANTEED BY KENYA, TANZANIA AND UGANDA AS OF JULY 31, 1976 -------------------------------------------------------------- (S$_MJ Lion) Amount Less canceLLations No. Year Borrower Purpose Bank Undisbursed Three loans fulLy disbursed 75.0 638 EA 1969 EAHC Harbours 35.0 2.1 674 EA 1970 EARC RaiLways 42.4 11.3 675 EA 1970 EAPTC Telecommunications 10.4 .01 843 EA 1972 EADB Development Finance 8.0 .3 865 EA 1972 EAHC Harbours 26.5 11.3 914 EA 1973 EAPTC Telecommunications 32.5 10.2 1204 EA 1976 EADB Development Finance 15.0 15.0 Total 244.8 50.2 of which has been repaid 34.3 Total now outstanding 210.5 Amount sold 24.4 of which has been repaid 24.4 0 Total now held by Bank 21 210.5 Total undisbursed 50.2 1/ $21,251.53 remains undisbursed 2/ Net of exchange adjustments  ANNEX II Page 3 of 11 C. PROJECTS IN EXECUTION 1/ (As of July 31, 1976) There are currently 21 projects under execution in Tanzania. AGRICULTURAL SECTOR Credit No. 217 TA-Tobacco Project: $9.0 million Credit of October 9, 1970; Date of Effectiveness - February 1, 1971; Closing Date - September 30, 1976 Project infrastructure Investments are 95% complete; all 15 complexes and 114 villages are established and water development has improved with 54 villages having permanent water supplies, 50 temporary water and the remaining 10 are being surveyed for water. Only 314 km of roads have been established compared with appraisal estimates of 1,104 km the reduced road construction program is however considered sufficient for present production. A total of 10,700 farmers, about 70% of appraisal target have been recruited and total production of wet leaf from the project is estimated to Increase from 675,000 kg in 1974-75 to about 1.2 million kg in 1975-76. Measures to enforce minimum tobacco acreages per family are expected to contribute to increased tobacco production. However, yields per hectare and quality of leaf have been below anticipated levels. Improvements are required to strengthen the extension and cooperative services. Credit No. 287 TA-Smallholder Tea Project: $10.8 million Credit of March 3, 1972; Date of Effectiveness - July 26, 1972; Closing Date - December 31, 1976 After initial serious management problems the Tanzania Tea Authority (TTA) has now finally reached a satisfactory level of senior staffing and this has had a clear impact on the working of TTA and a definite control over the field activities. The April supervision mission estimated that 5,734 hectares would be planted by the end of 1975/76 seasons, i.e. 69% of the target of 8,300 ha which should have been achieved by June 1974. Yields are lower than expected due to competition from coffee and/or 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report and problems which are being encountered, and the actions 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 weaknesses in project execution.  ANNEX II Page 4 of 11 maize in some areas and lack of labor and poor soil conditions elsewhere. This may adversely affect the viability of TTA which is already seriously overstaffed and depends on factory profits for its revenue. TTA are reviewing their operational plans which will include construction of another tea factory in the Rungwe area. Credit No. 382-TA - Second Livestock Development Project: $18.5 million Credit of May 23, 1973; Date of Effectiveness - September 28, 1973; Closing Date - December 31, 1977 Project implementation has been extremely slow and disbursements thus far have been a fraction of the appraisal forecast mainly as a result of the size and complexity of the Project and due to delays encountered in recruiting staff and in concluding contracts for the construction of abattoirs and the supply of heavy earth moving machinery. Project imple- mentation is expected to pick up momentum now that these problems have been resolved. However, a number of post appraisal developments such as marked reduction in the world market price of bully beef and meat products, escalation in project costs, delays in project implementation and critical financial position of the implementing organization have adversely affected viability of the project and because of this an indepth review was under- taken by the Bank staff and consultants. The consultants' report is now awaited. Credit No. 454-TA - Geita Cotton Project: $17.5 million Credit of January 17, 1974; Date of Effectiveness - April 5, 1974; Closing Date - December 31, 1982 Progress has been made during the year in the consolidation of scattered holdings into village block farm areas for cotton and maize. Altogether about 60% of the cleared arable land has been consolidated with 8,000 families having cotton and maize plots of 1.25 ha each. This is an essential first step in the villagization process without which the extension service and the inputs to be supplied by the project cannot be efficiently utilized. Some increases in farm input use and small improvements in husbandry are apparent. A number of infrastructural components will be reduced in size to maintain productive investments in the face of rising costs. Loan No. 1014-TA - Cashewnut Development Project: $21.0 million Loan of June 24, 1974; Date of Effectiveness - September 2, 1974; Closing Date - December 31, 1981 The project has been progressing satisfactorily with materials for civil works either on site or in transit. Original completion target dates are likely to be achieved in spite of an initial delay of about two  ANNEX II Page 5 of 11 months. The Cashewnut Authority's take-over of the industry and consoli- dation of its activities are proceeding slowly. The Finance and Accounting Department needs strengthening to speed up the establishment of meaningful financial and physical control over the Authority's activities. Recruit- ment of senior staff at departmental head level needs to be intensified in order to develop capacity for growth resulting from the project's con- struction of five additional cashewnut processing factories. Credit No. 508-TA - Kigoma Rural Development Project: $10.0 million Credit of August 21, 1974; Date of Effective ness - November 20, 1974; Closing Date - December 31, 1980 Project implementation during the present fiscal year has been mixed. Villagers' response under various self-help schemes has been extremely positive. Progress in agricultural production appears encourag- ing, with improved husbandry practices and widespread and timely use of fertilizers where available. Fertilizers were delivered as scheduled while insecticides were distributed late to eligible farmers. Performance of the marketing parastatal organizations (TCA and NMC) has been satis- factory while that of the credit institution (TRDB) requires improvement. Implementation of the program of village infrastructure, including water supply, health and educational facilities and godowns, has been slow, but measures are planned following the recent supervision mission to improve implementation capacity. A total of 45 villages are to be included for project financing during fiscal year 1976/77. Preparation of Mwanza and Shinyanga integrated rural development project, supported under this project, is it an advanced stage and the preparation team's report will be discussed within the Bank shortly. Credit No. 513-TA and Loan No. 1041-TA - Kilombero Sugar Development Project: $9.0 million Credit and $9.0 million Loan of September 27, 1974; Date of Effectiveness - February 24, 1975; Closing Date - December 31, 1979 Estate field development and outgrower planting program is ahead of schedule with 2,740 acres of sugar cane planted during 1974/75 (about 500 acres over the target), but Kiliosa District Development Corporation is lagging. Construction of the new sugar mill, financed by Dutch and Danish loans, is on schedule and should be completed by July 1976. Procurement of field machinery and equipment and supporting project activities are progressing reasonably well. Due to cost escalation of the housing and community development component some problems have been encountered in initiating construction of staff housing but this should not hold up the actual production.  ANNEX II Page 6 of 11 Credit No. 580-TA - Dairy Development Project: $10.0 million Credit of August 15, 1975; Date of Effectiveness - November 28, 1975; Closing Date - April 30, 1981 The Government is proceeding with the recruitment of key personnel and the first phase of procurement. Credit No. 606-TA - National Maize Project: $18.0 million Credit of January 29, 1976; Date of Effectiveness - May 28, 1976; Closing Date - June 30, 1980 The initial stages of project implementation are proceeding well. Key personnel for the project have been recruited. Credit No. 652-TA - Fisheries Development Project: $9.0 million Credit of July 12, 1976; Closing Date: December 31, 1981 This Credit is not yet effective. Loan No. 1307-TA - Sao Hill Forestry Project: $8.0 million Loan of July 12, 1976; Closing Date - June 30, 1982 This Loan is not yet effective. EDUCATION SECTOR Credit No. 149-TA - Second Education Project: $5.0 million Credit of May 29, 1969; Date of Effectiveness - June 19, 1969; Closing Date - December 31, 1976 Following successive extension of the Closing Date by three years to December 31, 1976, the project is now nearing completion. Clean-up of minor civil works was expected to be finished by April 30, 1976. A bal- ance of about US$60,000 equivalent for equipment remains to be committed, and direct purchase has been agreed in order to facilitate completion. The processing of applications for disbusement on account of expenditures for equipment by Crown Agents of approximately $150,000 is a continuing problem, but timely resolution appears feasible. The Government has tentatively agreed to a Completion Mission in December 1976.  ANNEX II Page 7 of 11 Credit No. 232-TA - Third Education Project: $3.3 million Credit of February 5, 1971; Date of Effectiveness - May 10, 1971; Closing Date - December 31, 1976 The Closing Date for this project has been extended 18 months to December 31, 1976, to provide ample time for its completion. All civil works furniture and equipment contracts have been awarded. Civil works are about 80% completed and the entire works is expected to be completed before the current closing date. Ineffective project unit management, currently under-staffed because of budgetary problems and shortage of qualified personnel have limited follow-up activities and correction of deficiencies and may result in further delays. A number of changes in the programs and management of the institutions involved in this project are being discussed with the Government. Credit No. 371-TA - Fourth Education Project: $10.3 million Credit of April 13, 1973; Date of Effectiveness - July 2, 1973; Closing Date - June 30, 1978 Statements of project cost overruns are now reduced to about 25% over appraisal estimates as a result of curtailments of the project (deletion of three secondary schools) and more favorable than anticipated bids on civil works. Out of 18 project institutions, construction works have started on 10 sites. Disbursements are less than 10% of appraisal estimates. Time lost in design and tendering is being made up, but project completion is likely to be about 12 months behind schedule. A medical health consultant has given impetus to the lagging medical health components of the project. The experimental self-help construction project item (eight Community Education Centers) requires special attention in future to help overcome problems of supply, distribution and control of building materials and supervision of construction standards. Disbursements are not a good criterion of the progress of implementation, which is now satisfactory. Credit No. 607-TA - Fifth Education Project: $11.0 million Credit of January 29, 1976; Closing Date - December 31, 1981 A good start has been made with respect to the Village Management Technicians (VMT) Training Program. All five Rural Training Centers have been rehabilitated and instructional staff trained. VMT courses commenced at three of the five Centers. Budgetary constraints are likely to impose a reduction in the level of training activity in the coming year. The Project Executive is adequately staffed. Also, the program has been handicapped by slow procurement of vehicles and equipment and delays in the selection of housing sites. Planning and tendering for schools is progressing well.  ANNEX II Page 8 of 11 INDUSTRIAL SECTOR Credit No. 460-TA - Tanzania Investment Bank Project: $6.0 million Credit of February 13, 1974; Date of Effectiveness - April 18, 1974; Closing Date - June 30, 1978 This Credit has been fully committed. Loan No. 1172-TA - Tanzania Investment Bank: $15.0 million Loan of November 12, 1975; Date of Effectiveness - February 20, 1976; Closing Date - December 31, 1980 Commitments under this loan are proceeding quickly. Nine sub- projects totalling $7.8 million have been approved for disbursements. Loan No. 1128-TA - Mwanza Textile Project: $15.0 million Loan of June 19, 1975; Date of Effectiveness - October 6, 1975; Closing Date - July 1, 1979 The project is progressing extremely well and project execution is on schedule. Tenders for the bulk of the plant and machinery have been evaluated and contracts placed with suppliers. Contracts for civil works have been concluded. Cost of project is currently well within appraisal estimates. A study by consultants to examine the feasibility of establishing a textile plant to produce cotton-polyester blend material is underway. Credit No. 601-TA - Technical Assistance Project: $6.0 million Credit of January 9, 1976; Closing Date - June 30, 1980 Tanzania Investment Bank (TIB) has selected Tata Consulting Engineers to man the key feasibility unit staff to supervise the execution of this credit and a contract is in preparation. In order to allow sufficient time to prepare the contract and complete other formalities the terminal date of effectiveness has been postponed a second time to September 14, 1976.  ANNEX II Page 9 of 11 POWER SECTOR Loan No. 715-TA - Kidatu Hydroelectric Project Phase I: $30.0 million Loan of December 14, 1970 and $5.0 million Supplementary Loan No. 712-2-TA of June 24, 1971; Date of Effectiveness - March 31, 1971 and September 26, 1974; Closing Date - December 31, 1976 Construction work for this project has been completed. The project is on schedule and the first and second unit came on stream in March 1975 and July 1975, respectively. In order to allow sufficient time to process any residual withdrawal applications, the Closing Date was postponed to December 31, 1976. Loan No. 1306-TA - Kidatu Hydroelectric Project Phase II: $30.0 million Loan of August 12, 1976; Closing Date - December 31, 1981 This loan is not yet effective. TRANSPORTATION SECTOR Credit No. 265-TA - Third Highway Project: $6.5 million Credit of August 6, 1971; Date of Effectiveness - October 12, 1971; Closing Date - December 31, 1976 After long delays in completing tender arrangements, the contract for the Mtwara-Masasi road was signed at nearly three times the appraised cost. Most of the overrun is covered by a $4.4 million loan from ADB and use of the $1.8 million balance from the Bank's Second Highway Project (Loan No. 586-TA). The portion of the road now financed by the Bank is nearing completion. Execution of road betterment works in two agricultural areas commenced about a year ago and is progressing satisfactorily in one but is behind schedule in the other. Preinvestment studies for Kilombero and Kilimanjaro areas have been completed and final reports are being prepared. Credit No. 507-TA - Highway Maintenance Project: $10.2 million Credit of August 21, 1974; Date of Effectiveness - November 20, 1974; Closing Date - June 30, 1979 The project is more than one year behind schedule. Tenders for equipment, vehicles and spares procurement were opened in October 1975 and notifications of bid acceptance have been issued with the exception of some equipment. After a considerable delay, some progress has been made in obtaining technical assistance. Following the initiative taken by the Bank staff, ORT, Geneva expressed interest in providing the  ANNEX II Page 10 of 11 technical assistance and subsequently visited Tanzania. We are awaiting the outcome of the discussions. The final report of the Trucking Industry Study, approved under this credit, is being prepared by the Consultants (TRIMAC) following comments on the draft report from, the Government and Bank's staff. URBAN SECTOR Credit No. 495-TA - Sites and Services Project: $10.0 million Credit of July 12, 1974; Date of Effectiveness - October 3, 1974; Closing Date - December 31, 1978 The project is proceeding very well. Contracts for infrastruc- ture construction at all seven sites have been awarded and are expected to be completed on schedule. Other components of the project, i.e. training, monitoring/evaluation and nutrition studies are progressing satisfactorily. EAST AFRICAN COMMUNITY There are six projects under execution. Loan 674 EA - Third Railways Project: $42.4 million Loan of May 25, 1970; Date of Effectiveness - October 30, 1970; Closing Date - June 30, 1977 The physical execution of the original project has been seriously delayed due to administrative and political problems within the Community and the East African Railways Corporation's unsatisfactory procedures for procurement, investment planning and coordination. In November 1974, the Executive directors approved a reallocation of the uncommitted balance of the Loan to be used for consultant services and emergency investments. Agreement was reached in July 1975 for the hiring of consultants to assist EARC with outstanding organizational and financial issues. Coopers and Lybrand (financial consultants hired by ODM) completed their asset studies in early 1976 and CANAC (technical consultants) have submitted a report on decentralization of the railways. Loan No. 638 EA - Second Harbours Project: $35.0 million Loan of August 25, 1969; Date of Effectiveness - December 16, 1969; Closing Date - December 31, 1976 Loan No. 865 EA - Third Harbours Project: $26.5 million Loan of December 18, 1972; Date of Effectiveness - April 16, 1973; Closing Date - June 30, 1977 Considerable delays have occurred in implementing the project financed partly by Loan 638-EA. However, construction is now more than 95% complete. The Closing Date has been postponed from December 31, 1975  ANNEX II Page 11 of 11 to December 31, 1976. The major civil works financed partly by Loan 865 EA were completed in September 1975, six months behind schedule. Some smaller project elements intended to be financed under Loan 865 EA, will have to be deleted. Serious cost overruns for cargo handling equipment, tugs and lighters financed by CIDA have occurred, and its credit has been increased accordingly from Can.$26.0 million to Can.$33.5 million. Cargo handling productivity has stagnated in Mombasa, but improved in Dar es Salaam. At the same time cargo throughput has declined considerably for Mombasa and increased above forecasts for Dar es Salaam, where the three berths financed under Loan 865-EA are now being used. Loan No. 843 EA - East African Development Bank Project: $8.0 million Loan of June 28, 1972; Date of Effectiveness - September 28, 1972; Closing Date - June 30, 1977 The entire loan has been fully committed by EADB. Loan No. 1204 EA - East African Development Bank Project: $15.0 million Loan of March 1, 1976; Date of Effectiveness - June 2, 1976; Closing Date - March 31, 1980 The loan was declared effective on June 7, 1976. No funds have so far been committed under this Loan. Loan No. 914 EA - Third Telecommunications Project: $32.5 million Loan of June 22, 1973; Date of Effectiveness - September 19, 1973; Closing Date - December 31, 1976 All major works other than microwave and UHF/VHF system construc- tion have now been completed despite initial delays caused by staffing and other problems associated with the relocation of the headquarters. Because of the long lead time required for the delivery of the microwave equipment the project is expected to be fully completed by late 1978.  ANNEX III Page 1 of 3 TANZANIA - TOBACCO PROCESSING PROJECT CREDIT AND PROJECT SUMMARY BORROWER: United Republic of Tanzania BENEFICIARIES The equivalent of US$2.0 million to Tobacco Authority of Tanzania and $6.0 million to Tanzania Tobacco Processing Company Ltd. AMOUNT: US$8 million equivalent TERMS: Standard RE-LENDING At 10 percent per annum to be repaid by the Authority over seven years and the company eight years. PROJECT DESCRIPTION The project would, over five years (1976-1980), increase the operational capacity of the Tanzania Tobacco Processing Company facility at Morogoro from a maximum of 18.5 million kg cured leaf per annum to some 41 million kg, of which 36 million kg would be mechanically processed. This expansion would be carried out in two stages, the first comprising additions and improvements to the existing process- ing line through purchase of equipment, machinery and quality control devices and secondly, installation of a completely new processing line. This would accommodate incremental leaf production over the next five years. A survey to deter- mine timing, scale and location of any further investment in processing plant would be provided for in the project. The project would also include technical assistance and training and would provide for improved storage facilities at Morogoro and a new office and export storage in Dar es Salaam. Con- struction of roads, water supply facilities, offices, railroad sidings and other basic infrastructure at Morogoro would also be provided for in the project.  ANNEX III Page 2 of 3 ESTIMATED PROJECT COSTS: Foreign Local Foreign Total Exchange -------US$'ooo------- % Machinery and Equipment 1/ Improvement to Existing Line 39 353 392 90 New Line 410 3,689 4,099 90 Sub-total 449 4,042 4,491 Storage Morogoro Storage 552 552 1,104 50 Storage at Dar es Salaam 764 764 1,528 50 Sub-total 1,316 1,316 2,632 1/ Includes installation and related charges. Foreign Local Foreign Total Exchange _---- US$oo 00 Infrastucture Roads and Drains 165 41 206 20 Water Supply Facilities 17 7 24 30 Other Facilities at plant 288 288 576 50 Security, Equipment & Other Costs 84 9 93 10 Sub-total 554 345 899 Training 51 11 62 17 Technical Assistance 58 327 385 90 Tobacco Processing Study 62 62 124 50 Base Cost Estimate 2,490 6,103 8,593 Contingency Allowance Physical 226 537 763 70 Price 648 1,348 1,996 67 Total Project Cost 3,365 7,987 11,352 70  ANNEX III Page 3 of 3 FINANCING PLAN: US$ Million % IDA 8.0 70 TAT 0.8 7 TTPC 2.5 23 ESTIMATED DISBURSEMENTS: FY77 FY78 FY79 FY80 FY81 Annual 1.3 5.5 1.0 0.1 0.1 Cumulative 1.3 6.8 7.8 7.9 8.0 PROCUREMENT: The new processing line and ancillary equipment (US$4.5 mil- lion) would be let as a turnkey contract selected by inter- national competitive bidding in accordance with Bank guide- lines. Due to the small number of specialized tobacco processing machinery suppliers and the small order size (under $375,000) equipment for improving the existing line has been procured by international shopping in accordance with guidelines. Since civil works construction is scat- tered and too small to attract international bids, part has been and remainder will be,procured by contracts subject to competitive bidding advertised locally. Retroactive financing in the amount of about US$0.7 million on civil works and equipment procured after February 1, 1976 is recommeded. CONSULTANT SERVICES: The project includes funds for technical assistance and consultants for the post project investment study (4 man months) and would be in accordance with IDA guidelines for selection and use of consultants. RATE OF RETURN: 25% over 25 years. APPRAISAL REPORT: Report No. 1141a TA dated August 20, 1976 General Agriculture Division, Eastern Africa Region MAP: A map of Tanzania which identifies tobacco growing areas, flue cured tobacco project areas and the factory site, is attached.  IBRD 12126 U G A N D 1Ar It t t32- / / C K E---; g at TAN ZAN I A MARCH 1976 */~~~S T .. L~-- KE" ----i. 6-TNAI _43kobo TOBACCO PROCESSING PROJECT RWANDA AeOO k~ia M A R A R-, rbacco Growing Areas Morn roods F,,,. ~ure Tobcco --+**Rolwoys rAE