Somalia - Northwest Region Agricultural Development Project

Report No. 912-SO FILE COPY Appraisal of the Northwest Region Agricultural Development Project Somalia May 7, 1976 Eastern Africa Projects Department General Agriculture Projects Division FOR OFFICIAL USE ONLY Document of the World Bank 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.  CURRENCY EQUIVALENTS Currency Unit Somali Shilling (So.Sh.) So.Sh. 1.00 = US$ 0.16 US$ 1.00 = So.Sh. 6.23 So.Sh. 1,000 = US$ 160 WEIGHTS AND MEASURES 1 hectare (ha) = 10,000 m = 2.47 acres (ac) 1 kilogram (kg) - 2.20 pounds (lb) 1 Quintal (ql) = 100 kg = 0.1 ton 1 Ton (metric) = 1,000 kg (2,205 lb) ABBREVIATIONS ADC = Agricultural Development Corporation ONAT = National Tractor Hiring Agency (Organizzazione Nazionale Agricoltura Trattore) PIU = Project Implementation Unit PMC = Project Ministerial Committee SDB = Somali Development Bank WDA = Water Development Authority Government Fiscal Year January 1 - December 31  FOR OFFICIAL USE ONLY SOMALIA NORTH WEST REGION AGRICULTURAL DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ........*................ i-iii I. INTRODUCTION ................................... 1 II. BACKGROUND. 1 A. General. 1 B. The Agricultural Sector. 2 C. Government Services ....................... 3 III. THE PROJECT AREA .................... 4 A. General .......... ......................... 4 B. Agricultural Potential ..... ............... 5 IV. THE PROJECT .... 7 A. General.....% .... 7 .............. 7 B. Detailed Features . . 8 C. Project Costs . .11 D. Financing ............ ................ 13 E. Procurement . .13 F. Disbursements . .14 G. Accounts and Audit . .14 V. ORGANIZATION AND MAiAGEMENT .15 VI. PRODUCTION, PRICES, FARMERS' BEi'EFITS AND RECOVERY OF PROJECT COSTS .18 A. Production and Yields .18 B. Markets and Prices ........................ 19 C. Farmers' Benefits ......................... 20 D. Recovery of Project Costs .21 VII. ECONOMIC BENEFITS AND JUSTIFICATION .22 VIII. AGREEMENTS REACHED AND RECOMMENDATIONS .24 thi ofica du_s _t cotnsmyntohrieb_icoe ihu ol akatoiain 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.  1. Somali Development Bank 2. Agriculture in the North ,'est Region Table 1 - Rainfall Table 2 - Existing Small-scale Irrigated Horticultural Gardens 3. Field Bunding for Soil and Water Conservation in the North Wqest Region 4. Project Consultancy Services 5. Project Costs Table 1 - Summary of Development Costs Table 2 - Construction of Field Bunding and Water Points: Capital Costs Table 3 - Construction of Field Bundilug and Water Points: Operating Costs Table 4 - Small-scale Irrigation Development: Capital Costs Table 5 - Extension and Training: Capital Costs Table 6 - Extension and Training: Operating Costs Table 7 - Dry-land Crop Trials: Capital Costs Table 8 - Dry-land Crop Trials: Operating Costs Table 9 - Geed Deeble 11orticultural Station: Capital Costs Table 10 - Geed Deeble Hlorticultural Station: Operating Costs Table 11 - Feasibility Studies: Capital Costs Table 12 - Feasibility Studies: Operating Costs 6. List of Equipment, Velhicles and Buildings to be Financed 7. Estimated Schedule of Disbursement 8. Draft Terms of Reference, Duties, Responsibilities and Qualifications for the Project Manager 9. Farmers, Bunding and Sorghum Production 10. Mlarkets and Prices Table 1 - Agricultural Developrnent Corporation Organization Chart Table 2 - Sorghuni Import Parity Price Table 3 - Fruit and Vegetable tarketing Costs and Margins 11. Farmn.Budgets Table 1 - MIodel Farm Budget: Dry-land Farms Table 2 - One lIectare Irrigated Farm Production Development Table 3 - One Hectare Irrigated Farm Cash Flow Projections  ANNEXES (Cont'd) 12. Analysis of Recovery of Project Costs 13. Economic Evaluation Table 1 - Costs in the Economic Analysis Table 2 - Benefits in the Economic Analysis Table 3 - Internal Rate of Return 14. Foreign Exchange and Government Budgetary Implications Table 1 - Foreign Exchange Implications Table 2 - Government Cash Flow CHART Chart 1 - Implementation Schedule (World Bank 9467) Chart 2 - Organization of Ministry of Agriculture (World Bank 8931) Chart 3 - Organization of North West Region Agricultural Development Project (World Bank 8971 (3R)) MAPS North West Region Agricultural Development Project (IBRD 11190) Location of Feasibility Studies Areas (IBRD 11307)   SOMALIA NORTH WEST REGION AGRICULTURAL DEVELOPMENT PROJECT SUMMARY AND CONCLUSIONS i. Somalia's agricultural development strategy emphasizes self-suffi- ciency in food grains which has become an increasingly urgent objective since the drought of 1975, and aims at remedying the uneven economic develop- ment between the northern and southern regions of the country. The main elements in the Government's program to achieve these goals are increased sorghum and maize production, control of the country's severe soil erosion (which unless checked could eventually destroy the most productive lands, specially in the North West Region), water conservation, irrigation, and various types of assistance to peasant farmers aimed at encouraging a gradual transition from nomadism to settled farming. As part of this program, the Project would aid the redevelopment of the North West Region through water conservation, erosion control measures and irrigation designed to increase production of the major food crops. The Project would also support the current trend toward settled agriculture and create the technical basis for future agricultural development projects in this area, including the training of Somali personnel to execute future projects. ii. The Project would include provision for the construction of field bunds for soil and water conservation on 25,000 ha, repair of existing bunds on a further 2,000 ha, and a small experimental gulley erosion control program. The bunding component is based on valuable experience acquired over a 30 year period during which time bunds have made a significant con- tribution towards the control of environmental deterioration and raising the productivity of land. Fifty small irrigated farms of about 1 ha each would elsewhere be established which would produce citrus and other fruit trees, and some vegetables. A nucleus agricultural service for the region would be established by rehabilitating and expanding the existing extension service for dry-land farmers and providing additional facilities for the train- ing of extension agents at the Aburin experimental and demonstration farm. A small horticultural extension service would also be created to provide advice to farmers on the production of fruits and vegetables. Under the Project, provision would also be made for the improvement of the dry-land crop trials program at the Aburin farm and for the extension of the Geed Deeble irrigated horticultural station. The latter would carry out fruit crop trials, estab- lish a nursery for production of grafted seedlings, and set up a sorghum seed multiplication program. The Project would in addition provide 100 water points for human consumption and 50 water points for livestock. Finally the Project would provide technical services to assist the implementation of the Project and to undertake the preparation of feasibility studies for two future agricultural projects within Somalia. iii. The Project would be under the overall direction of a Project Ministerial Committee comprising(the Secretaries of State for Finance, Agri- culture and the President of the Somalia Development Bank. The Project would be implemented by a Project Implementation Unit (PITT) attached to the Ministry  - ii of Agriculture and headed by a Somali Project Manager, who would be assisted by a management team to be provided by a consultant firm. This team, which would be an integral part of PIU, would comprise a management team leader, a soil conservation officer, an extension and training officer, a horticultural officer and a chief mechanic. iv. An IDA credit of US$10 million is proposed which would cover about 72% of total Project costs of So.Sh. 86.78 million (US$13.93 million). The foreign exchange requirements of the Project are estimated at US$10.2 million. Government's contribution would be So.Sh. 24.3 million (ITS$3.91 million); this owould be offset to some degree by taxes (USS0.7 million) derived from import duties on fuel and from income taxes over the six-year development period. Farmers' downpayment contribution would be limited to participants in the irrigated farm component, which at 35% of sub-project cost reflects their relative affluence and ability to contribute. The remaining 65% of the capital costs or about US$41,000 would be channeled by the Government to the Somali Development Bank which would in turn onlend to farmers at 5 1/2% per annum - the prevailing rate for loans of this type in Somalia. Procurement of tractors, equipment and vehicles (US$3 million) in orders exceeding US$50,000 would be by international competitive bidding in accordance with Bank/IDA guidelines. Field bunds and water points would be executed by force account. Contracts for buildings, water tanks, dug wells, and installation of irrigation equipment (US$519,000> would be awarded on the basis of competitive bidding advertised locally. Pumps and other small items (US$99,000) would be procured locally; supplies are adequate and competition among firms is satisfactory. V. From year 8 the total annual incremental production of sorghum in the Project area would be 4,000 tons; this would represent an 80% increase over pre-Project production levels. Incremental annual production of fruits and vegetables would total 400 tons and 100 tons respectively from Year 13. In addition, the Project would make a major contribution in arresting soil erosion which represents a major threat to the economic life of the North West Region. The water retention measures and the overall soil improvement would eventually enable farmers to diversify their cropping patterns and thus raise the levels of production and farm incomes in the Region. vi. The Project would directly benefit about 2,500 farm families. The estimated annual family cash income on a dry-land farm would increase on avetage by about 170% from So.Sh. 640 (US$103) to So.Sh. 1,730 (US$278). The annual net cash income from the sale of fruits and vegetables from the small irrigated farms would average So.Sh 4,900 (US$790) at full development. The construdtion of the field bunding would employ 500 persons over a five year period. vii. The internal economic rate of return of the Project would be 11% over a twenty-five year period. The estimated rate of return does not take into account important non-quantifiable benefits such as the prevention of the continued decrease in cultivable area which would have occurred without  - iii - the Project and the continued erosion of the very basis of livelihood of the population. The major risks facing the Project would be a failure to achieve the projected increase in sorghum yields and a delay in delivery of machinery and equipment for bund construction. The yields used in the economic analysis are relatively conservative; they take into account the possibility of partial crop failures, and have been achieved by farmers now located in the Project area. The estimated delivery period of machinery and bund construction is realistic. Sensitivity tests have shown that the economic rate of return is relatively insensitive to changes in costs and benefits within reasonable ranges. The rate of return resulting from the bunding component alone would be 10%. viii. This would be the Bank Group's second Project for Somalia's agri- cultural sector. Since 1965 IDA has extended eight credits to Somalia totalling US$53 million. Three of these credits were for highways, two for education, two for port development and one for agriculture (the Trans-Juba Livestock Project which became effective in October, 1974). Some of the projects encountered initial delays in implementation, but overall performance has generally been good. ix. Subject to the required assurances and conditions, the Project would be suitable for an IDA credit of US$10 million to the Government of Somalia.   I. INTRODUCTION 1.01 An important element of Somalia's development strategy is the increased emphasis on self-sufficiency in food grains which has become an increasingly urgent objective since the drought of 1975. Although self- sufficiency is considered in the light of the country's requirement as a wbole, there are important reasons why food grain production in northern Somalia should be considered within the context also of regional self- sufficiency. The principal reasons are the geographical isolation of northern Somalia, the considerable distances that separate it from the more productive areas of the country, the weak transport links between the two parts of the country and the consequent high transport costs. The Government attaches much importance to the development of northern Somalia which has hitherto remained largely poor and undeveloped by comparison with the southern part of Somalia which is relatively better off owing to a favourable physical environment, particularly rainfall and perennial rivers. Emphasis is being placed on increased production of sorghum and maize, control of the country's severe soil erosion (which unless checked could eventually destroy the most productive lands especially in the North West Region), the improvement of living standards for the rural population, and the encouragement of a transi- tion from nomadism to settled farming. 1.02 This would be the third Bank Group project for Somalia's agricul- tural sector. The first, the Trans-Juba Livestock Project (for US$10 million), was declared effective in October 1974; after some initial delay, the project is now beginning satisfactorily. The second, the Drought Rehabilitation Project (US$8 million), was approved in April 1976 but has not been declared effective. Since 1965 IDA has extended seven other credits totalling about US$43 million to Somalia. Three of these credits were for highways, two for education and two for port development. Performance under these projects has been generally good, although there have been some initial delays in project start-up. 1.03 This Project was prepared by the FAO/IBRD Cooperative Program with the collaboration of the IBRD Regional Mission in Eastern Africa (RMEA). This report is based on the findings of an IDA appraisal mission in May/June 1974 comprising Messrs. E. M. Sicely, H. R. Malik and W. Stolber (IDA) and Mr. R. Benham (Agricultural Development Service). II. BACKGROUND A. General 2.01 Somalia is located in the eastern corner of Africa and has a total area of about 637,000 km2. Rainfall is low and uncertain, ranging from 200-600 mm, and the country is generally arid to semi-arid. The population is estimated at about three million, and is growing at a rate of 2.5% per annum. About 90% of the total population Is located in rural areas.  - 2 - 2.02 In 1971 GNP was about US$200 million with a per capita income of about US$70. Although there are no national accounts, it is believed that between 1960 and 1970 the per capita income remained static. Total value of imports rose from US$58 million in 1969 to USS115 million in 1973. Im- ports of food ranked second only to those of manufactured goods. Cereals and cereal products accounted for about 8% of the value of total imports (US$9 million) in 1973 and sugar, tobacco, vegetable oils and fats (US$11.5 million) accounted for about another 10%. Total export earnings did not show any significant increase in the sixties, but improved in early seventies, and in 1973 they totalled about US$55 million. Livestock and livestock products including hides and skins contributed about 68% of the total value of exports (US$37 million), and fruits and vegetables accounted for another 20% (US$11 million). The droughts which occurred in late 1974 and 1975 have since seriously disrupted this pattern of 1"puts and outputs. B. The Agricultural Sector 2.03 Somalia is heavily dependent on the agricultural sector for its economic development. However, with the exception of commercially produced bananas and sugarcane, production is mainly for subsistence. About 70% of the population are pastoralists, some of whom engage in subsistence culti- vation; an additional 15% are engaged in settled agriculture, fishing and forestry. Of the total land area, 32% is too arid for any form of agricul- ture, 55% is suitable for grazing and 13% for settled agriculture. There is, however, a significant potential for settled agricultural development, since only about 650,000 ha out of a total of about 8 million ha of potentially arable land are now cropped. All land belongs to the State, and is largely used by nomadic herdsmen. All natural and Government-constructed stock watering facilities are for common usage and are mostly free of charge. 2.04 Sorghum and maize are the main food crops. Estimates of maize area range from 70,000 to 120,000 ha and for sorghum upto 1 million ha in two seasons. Fluctuations in yield and production are extreme due to variability in the weather. Yields in a normal year are estimated to average 7 quintals per ha countrywide for both crops and have not shown any noticeable increase over the past decades; some estimates suggest even a decrease. Bananas, sugarcane, rice, vegetables and frlits (mainly citrus) are grown under irri- gation.. Some groundnuts, sesame, cotton and pulses are also cultivated. Agricultural research facilities in Somalia are generally inadequate although some research on major cash crops has started. There are a number of con- straints which have severely limited the development of rainfed agriculture. These include: poor cultural practices, inadequate extension services, poor seed quality, severe soil erosion, lack of agricultural credit, and inadequate and uneven distribution of water facilities for both human and livestock con- sumption.  -3- National Agricultural Policy 2.05 The Government has placed the highest priority on agricultural development. During the 1971-73 Development Plan period, Government introduced a comprehensive agricultural development program including a guaranteed price scheme for grains and bananas, as well as the development of large-scale irrigation schemes in the south. Helped in part by extremely favorable weather in 1972 the country produced sufficient sorghum and maize to make it self-sufficient in these crops that year. Another good harvest in 1972-73 crop season maintained self-sufficiency in 1973. However drought has since seriously affected crop and livestock production. The Five-Year Plan 1974-78 emphasises: (i) self-sufficiency in basic food and cash crops (oilseeds, cotton, vegetables and fruits); (ii) the production of crops hitherto im- ported (rice, wheat and dates); (iii) development of export crops; (iv) the development of irrigation; (v) soil and water conservation in less developed areas such as the northern regions: and (vi) improvement of livestock. As part of this overall plan, Government has decided to initiate a first phase development project in the North West Region. C. Government Services 2.06 The Government provides a wide range of services to the agricul- tural sector through (among other institutions) the Ministry of Agriculture, the Ministry of Livestock, Forestry and Range, the Agricultural Development Corporation, the Water Development Agency and the Somali Development Bank. The Ministry of Agriculture (Chart 2) suffers generally from a lack of funds, a shortage of trained staff, and insufficient transport facilities. The Mlinistry has a total staff of 670, of whom 160 are extension staff with some training in their field, but the quality of training is variable. In the North West Region in 1974 there were only 4 agricultural staff; these were all at the sub-professional level. The overall situation is expected to improve, however, as agricultural graduates from the University of Somalia and diplomates from the Vocational Agricultural Secondary School become available from 1976/77, and as additional agricultural extension agents are trained under the Project. 2.07 The Agricultural Development Corporation (ADC), an autonomous agency of the Ministry of Agriculture, was set up in 1971 with monopoly powers for the purchase of all marketable surpluses of sorghum, maize, oilseeds and cotton from farmers, procurement of sorghum and maize from abroad (when necessary), and the-'sale of this grain to the regional government authorities and muni- cipalities at prices fixed by Government. The regional government authorities and municipalities in turn sell these grains at a Government-fixed price which covers their costs of handling and operations. The ADC has replaced the National Grain Marketing Agency and numerous private grain traders. The National Tractor Hiring Agency (ONAT) which was operated by ADC until 1972, provides tractor hire services for farm operations, using mainly Russian equip- ment. ONAT's operations are limited by a lack of trained staff, its operations  -4 - are dispersed over a wide area and its management is not experienced in handling large-scale operations. The Water Development Agency (WDA) is an autonomous agency within the Ministry of Mineral and Water Resources which designs and undertakes the siting, drilling and equipping of boreholes for municipal and rural water supply and the excavation and maintenance of artificial reservoirs for livestock. It has some 25 drill rigs and other auxiliary equipment and its staff includes four qualified hydrologists. 2.08 The Somali Development Bank (SDB), a Government banking institution with an authorized share capital of So.Sh. 100 million (US$16 million) provides medium and long-term loans to both industry and agriculture (Annex 1). In 1972 SDB extended loans of So.Sh. 10 million (US$1.6 million) for industrial development and So.Sh. 5 million (US$0.8 million) for agriculture - mainly to large-scale and commercial enterprises. Loans to the northern regions accounted for only a tenth of total agricultural lending and were primarily for purchase of tractors, pumps and irrigation equipment. A branch of the Bank was opened in Hargeisa in January 1976 to facilitate future lending operations in the North. Lack of loan capital and a high proportion of non- recoverable loans hamper the Bank's operations generally. III. THE PROJECT AREA A. General 3.01 The Project area would cover some 200,000 ha in the southwestern part of the North West Region in the Hargeisa, Gebile and Borama districts. The districts are administered by District Commissioners aided by a small number of supplementary staff. The main towns in the area are Hargeisa (regional capital) Gebile, Borama and Tug Wajale, and in addition there are about 113 settlements comprising less than a dozen families. Gravel-earth roads connect the main towns and provide access to the major ports nearby; plans are underway to upgrade some of these roads and to link the regional capital with Mogadishu. There is an airport at Hargeisa and landing strips at Gebile and Borama. The region is relatively well served with health and education facilities, having about 17% of the country's medical and para- medical staff, and about 20% of the total enrolment of school pupils. 3.02 The North West Region has a settled population of 160,000 persons, about 120,000 of whom reside in Hargeisa, Gebile and Borama districts. Although the great majority of the people are nomadic herdsmen, an increasing number are gradually adopting settled agriculture as a means of supplementing their low incomes. Over the last 20 years arable areas have been progressive- ly cleared of bush and brought into cultivation. Of about 160,000 ha of po- tential arable land, it is estimated that at this time about 126,000 ha are under cultivation by about 12,000 farmers.  -5- 3.03 There is now a uniform system of land tenure in Somalia established under Law No. L 73 1975. The Secretary of Agriculture grants concessions on land for agricultural purposes to individual farmers as well as cooperative societies, state farms, autonomous agencies and local governments. For a family only one concession may be issued, valid for 10 years and renewable for the same period. Land holding ceilings have been set for private farmers at 30 hectares of irrigated land and 60 hectares of dry land (excluding land used for plantations). Concessions for plantations have been limited to an area of 100 hectares. Only in the case of physical disability may the owner of a concession sublet it to another, with prior authorization of the Secre- tary. Otherwise transfer, sale, mortgage or lease are not permitted. In the case of death of the land user, the concession is transferable to legal heirs. If however in these circumstances a concession should be revoked and the land pass to a new user, the latter would be required to compensate the heirs for any investments made by the testator. As under this Law all land in the Republic whether occupied or unoccupied belongs to the State it no longer provides commercial security for lending by banks which in future would lend against the value of development improvements and the increased income generated thereby. B. Agricultural Potential (Annex 2) 3.04 The Project area lies at an altitude of about 1,500 meters. Two rainy seasons (April-early June and end June-September) yield an annual rain- fall averaging between 400 and 500 mm (Annex 2, Table 1). There are no per- manent rivers, but normally dry streams (tugs) become torrents for a few hours after rain. Surface water reservoirs (ballehs) are the main water sources for both the nomadic and settled population. Water collects at a shallow depth below the bed of many of the large tugs, and hand-dug wells beside the banks are used to irrigate small horticultural holdings. No comprehensive attempt has as yet been made to assess the total water resource potential. Soils are mainly fine-grained reddish sandy clay of alluvial origin, and seem to be fairly fertile; they appear, however, to have slow infiltration capacity, as during the rains the heavy run-off results in considerable soil erosion. Soil erosion has already denuded a substantial area and, if allowed to conti- nues unchecked, would pose a serious threat both to the cultivated areas and to the overall environment. The effects of this erosion are further ag- gravated by over-grazing and deforestation. Rainfed Farming 3.05 Soil and climatic conditions normally allow seasonal dry-land cultivation of food crops, and this now accounts for about 80% of the cropped area. Sorghum is by far the most important crop, although some maize and pulses are also grown. In years of low or poorly-distributed rainfall, crops often wither before reaching maturity, except in the limited areas where field bunds have been constructed. These bunds utilize rainfall to the maximum extent and control erosion by limiting run-off. They consist of crescent shaped earth banks averaging about 120 m long and 75-85 cm high,  -6- 1 to 2 bunds per ha. About 20,000 ha were bunded between 1954 and 1964, all of which are located in the Project area. About 90% of the bunds have been maintained in excellent condition. It is reported that no instance of complete crop failure has yet occurred on bunded land. At present bund construction is the only method used for controlling soil erosion. It has the added advantage of increasing moisture retention behind the bunds which facilitates crop production in areas which are devoid of water during most of the year. There is a significant difference in yields between bunded and non-bunded land. There is no technically viable alternative to bund construc- tion which could provide a secure basis for crop production with a reasonable yield. 3.06 Annual rainfed farm income is low, averaging about So.Sh. 640 (US$103), not including subsistence consumption valued at about So.Sh. 800 (US$128). lIoldings of arable land -verage about 10 ha, and one-third of this is traditionally fallow. Sorghum yields in the non-bunded area average about 3 quintals of grain per ha, and in the bunded areas about 6 quintals per ha. These low yields are attributable to limited rainfall, inadequate seed-bed preparation and weeding, broadcast sowing and poor seed. 3.07 Available data on individual herd size are not reliable, but indi- cations are that an average settled farming family owns about 10 head of cattle, 2 to 4 camels, and 20 to 40 sheep and goats. Natural rangelands provide the main food supply and the settled farmers supplement this feed with sorghum stover. An alarming rate of degradation is reported in range- lands due to over-grazing, aggravated by the inadequate number of water points. Foot and mouth disease and various tick-borne diseases are present, but the main cause of economic losses are parasites and caprine pleuro- pneumonia. Rinderpest, which was the chief disease affecting cattle, has been controlled by vaccination. Small-Scale Irrigated Horticultural Farming 3.08 Some 600 small horticultural gardens of between 2 to 10 ha, covering a total area of about 2,700 ha (Annex 2, Table 2), are scattered through the region beside tugs or springs. Irrigation is usually carried out by small, diesel-operated, centrifugal pumps. The main crops are citrus (oranges, grape- fruit, lemons), watermelons, guavas, mangoes, coffee and qat 1/; some vege- tables (onions, cabbages, tomatoes) are also grown. Most of these farms are individually owned and operated; a few are grouped into cooperatives. In spite of poor water management and lack of experience with intensive crop produc- tion, the financial returns on these farms appear to be good. There is a strong demand for horticultural produce within the region, and fruit and vegetables are also exported to the expanding markets of Aden and Djibouti. There appear to be possibilities for further development of such farms, but any such development should proceed cautiously until more is known about surface and ground-water resources. 1/ Catha edulis, a mild stimulant commonly used in Ethiopia and Somalia.  -7- Extension and Research 3.09 Agricultural extension services are rudimentary: there are only 4 extension workers in the Region, all of whom are at sub-professional level. There are also 2 plant-protection workers and a few veterinary staff. There are, however, no separate extension workers for the horticultural farms. Some crop trials are being conducted at Aburin Demonstration and Experimental farm on sorghum, pulses and fodder crops. At Geed Deeble a 10 ha horticultural trials and multiplication farm is carrying out limited work on citrus. The farms, supervised by non-resident agricultural officers at the sub-professional level, suffer from inadequate facilities, funds, equipment, housing, transport and management. IV. nTE PROJECT A. General 4.01 The Project would over a six-year period aid in the redevelopment of the North West Region through water conservation, control of soil erosion and other measures (Chart 1) designed substantially to increase agricultural production. The Project would establish some basic agricultural services for the first time and strengthen others which have been allowed to rundown during the past years. It would, however, take advantage of some valuable experience built up over the years, particularly in the construction and maintenance of bunds. It would assist the current trend toward settled agriculture, and xwould pioneer the technical basis for future production increases in both the North West and the Bay Regions including training of Somali personnel aimed to create the capacity to execute future projects of this type exclusively with Somali manpower. The Project would include: (a) construction of field bunds on 25,000 ha, repair of existing bunds on about 2,000 ha and experimental gully erosion control works; (b) development of 50 small irrigated farms; (c) improvement of crop trials and training facilities at tile Aburin dry-land demonstration and experimental farm; (d) extension of the Geed Deeble irrigated horticultural station for fruit crop trials, nursery production and sorghum seed multiplication; (e) rehabilitation of the extension service to dry-land farmers and establishment of a new extension section serving irrigated farms;  - 8 - (f) construction of 100 water points for human consumption and 50 water points for livestock; and (g) technical services, training and feasibility studies. The Project would be implemented by a Project Implementation Unit (PIU) attached to the Ministry of Agriculture. Overall responsibility would be vested, however, in a Project Ministerial Committee (PMC) comprising the Secretaries of State for Finance, Agriculture, and the President of Somali Development Bank. B. Detailed Features Field Bunding, Gully Erosion Conlrol and Water Points (Annex 3) 4.02 Earth bunds would be constructed on about 25,000 ha in priority areas to be selected by the PIU in Hargeisa, Gebile and Borama districts (Map IBRD 11190). Old bunds would be repaired on a further 2,000 ha, i.e. about 10% of the area bunded between 1950 and 1964. The bunds would be triangular in section, 1 m high and 2 m wide at their base; lengths of indi- vidual bunds and spacings between bunds would vary according to topography. The slope of the land to be bunded ranges from 1% on the watershed boundaries to 5% and 6% along the main water courses; the average slope is about 2%. Bunds would be built by bulldozers. This continues the practice adopted in the 1950s after difficulties had been experienced in using animals in bund construction (Annex 3). Soil would be obtained from the downhill side only in order to preserve as great a depth of undisturbed topsoil as possible immediately above the bund where most water would be impounded. In general, the layout of the bunds would follow the pattern proved by previous experi- ence, but greater attention would be paid to siting and spacing than in the past in order to improve longevity, minimize maintenance and control erosion more effectively. In the light of experience already available in the area, about 300 m of bunds per ha will be needed. Some costs of bund construction would be recovered from project farmers (para 6.08), who would also be responsible for bund maintenance. Bund construction has been interrupted during the past decade owing to a lack of expertise and finance. Failure to resume bund construction at thls time would exacerbate soil erosion which would be far more difficult and expensive to resolve in the longer run. 4.03 FJperimental gully erosion control measures would be implemented on 200 ha in an area to be selected where gully formation is already in an advanced stage. This experiment would help to establish the technical feasi- bility and cost of controlling gully formation in arable areas, and its results would be taken into account in the design of future projects in this area. The work would be done in the course of construction of the field bunds using the field bunding equipment.  -9- 4.04 Water Points. One hundred underground concrete water tanks of about 120 m each with handpumps, silt settling tanks and catchment ditches would be constructed for the human population in the existing and newly bunded areas. These would supplement the present inadequate water supply by providing about 1i litres of water per person to about 50% of the farming families during the driest period of the year (about 120 days). Also, 50 earth water reservoirs of 6,000 m3 each with catchment ditches would be constructed by mechanical excavation for the livestock owned by the farmers in the bunded areas. These would supply about 30 litres of water per day to each animal unit during the driest period. Small-Scale Irrigation Development 4.05 Fifty new small irrigated farms averaging 1 ha would be established (in addition to the existing 600 farms) alongside tugs or springs in scattered places throughout the Project area where underground water resources exist. These resources are known to be limited in many areas and the number of farms to be developed has been restricted in the Project to avoid over exploitation. It is expected that the feasibility studies under the Project would identify possibilities for further expansion, which could be undertaken under a future Project. It is estimated that each irrigation unit would consist of a hand- dug shallow well (about 7 m deep) equipped with a 2.5 hp pump, pipes and a watertank. Land clearing and levelling would be undertaken. The main crops to be grown on the farms would be citrus and other fruit trees and some vege- tables. Dry-land Crop Trials 4.06 The crop trial program being carried out at Aburin experimental and demonstration farm would be improved through the introduction of. improved varieties, crop husbandry techniques, pest control, rotations and alternative crops including fodder crops. Investigations would also be carried out to select improved ox-drawn implements suitable for the small local oxen, par- ticularly for sowing sorghum in rows and for inter-row weeding. Extension of Gedeblede Horticultural Station 4.07 The existing 10 ha citrus farm and nursery at Geed Deeble would be expanded to a total area of 30 ha under irrigation. About one-third of this area would be utilized for variety trials of citrus, peaches, plums and other fruits (10 ha); a nursery for production of grafted seedlings of citrus and other fruits for sale to farmers (5 ha); and for a date nursery (5 ha). The remaining 10 ha would be used for multiplication of selected sorghum seed. This improved seed would be used by the extension service in demonstrations carried out on farmers' fields and would also be available for sale to farmers. At present the quality of farmers' seed is poor; farmers are not aware of the value of improved seeds and there is no seed industry. The production, demon- stration and distribution of better quality seed grown under irrigation under the Project would be a first step in the introduction of a seed multiplication  - 10 - program for the northern regions. Under the Project provision would be made for staff salaries, equipment for cultivation and pest control, transport, housing and storage. 4.08 Irrigation water would be supplied by a deep tubewell, fed by the underground flow of a tug which iS also drawn upon for hargeisa's water supply. It is expected that electric power for the new installation would be available from the nearby thermal generating station supplying the city water supply installation. The consultants carrying out the feasibility studies (para 4.11) would at the same time provide assistance to the PIU with the design and super- vision of construction of the irrigation system, with particular attention being given to the availability of sufficient water supplies for the horticul- tural station from the existing city water supply installation. In the event that sufficient water were not available for the proposed development, the horticultural station would be relocated to a new site on Tug Arapsio or else- where where water supplies are adequate. In this case the costs would be similar to those at Geed Deeble. Extension Services and Training Facilities 4.09 A nucleus agricultural service for the North West Region would be established by rehabilitating, strengthening, and expanding the existing extension service for dryland farming to a total of 23 extension agents. Initially, there would be one extension agent per 200 farms; at full develop- ment this would be reduced to 1:600. The potential for improvement in farming methods and techniques is limited under the low rainfall environment, except in those areas where bunding is carried out; extension would therefore be directed mainly towards (but not restricted to) farmers on bunded lands. It would concentrate on simple concepts - including timeliness of cultivation and planting, improved seed, row-sowing, weeding, the use of improved implements and plant protection - and would utilize demonstration plots on farmers' land (para 6.06). Farmers would also be advised on the maintenance of bunds and the control of gully erosion. A small horticultural extension service (3 professionals) would also be created to provide advice to farmers on the production of fruit and vegetables under irrigation. The service would cover advice on irrigation equipment, irrigation layouts, varieties, irrigation, fertilizers, cultural and plant protection practices, marketing, etc. Most of these activities would be concentrated in the latter part of the Project implementation period on the fifty small irrigated farms to be developed under the Project. Costs of the extension service would include provision for staff salaries, vehicles, equipment, and housing. 4.10 .. Additional facilities for the training of extension agents would also be provided at Aburin. Housing, a dormitory and a lecture hall would be constructed and water supply would be installed. About 28 middle-school graduates would be trained in an eigiht-months' course as extension agents; it is assumed that about 80% of the trainees would complete the course success- fully. The facilities would also be used for farmer training in short courses.  Consultancy Services and Feasibility Studies (Annex 4) 4.11 A range of technical and other services would be provided by consultants employed under the Project (para 5.05). These services would include: (a) Project Management Team. The consultants would provide a project management team (para 5.03) to assist the Project Manager with the execution, coordination and supervision of the Project; in addition they would devise a training program for all Somali staff (para 5.11). (b) Feasibility Studies. Provision would be made for the con- sultants to undertake two feasibility studies for the eval- uation of a prospective second phase project in the North West Region and an integrated rural development project in the Bay Region. (c' Technical Assistance. The consultants who would undertake feasibility studies would also provide technical assistance to the PIU both during the course of the feasibility studies and on their completion. The former would include assistance with the design and construction of an irrigation system at the Geed Deeble Horticultural Station and water resources studies in both the liorth West and Bay Regions. The Water Development Agency (WDA) would assist in carrying out the test drilling and pumping for the water resource studies. In view of the importance to the Project of the input from the Water Development Agency the Government, pursuant to informal assurances, has undertaken to ensure that it will be both adequate and timely. Upon completion of the feasibility studies, the consultants would provide technical advice to the PIU with regard to the development of the 50 small irrigated farms to be established under the Project (para 4.05). C. Project Costs (Annex 5) 4.12 Total Project costs are estimated at So.Sh. 86.78 million (US$13.93 million) of which US$10.2 million or about 73% represents foreign exchange requirements. The estimated costs are summarized below:  - 12Z - --So.Sh. '000------ -----US$ '000----- Foreign Local Foreign Total Local Foreign Total Exchange Construction of Field Bunds and Water Points 9,142 24,093 33,235 1,468 3,867 5,335 72 Small-scale Irrigation Development 165 230 395 26 37 63 59 Dry-land Crop Trials 430 271 701 69 43 112 38 Geed Deeble Horticultural Station 839 1,278 2,117 135 205 340 1 60 Extension and Training 2,069 6,954 9,023 332 1,117 1,449 ! 76 Feasibility Studies and Technical Assist- ance 2,064 7,904 9,968 331 1,269 1,600 '4 79 Base Cost 14,709 40,730 55,439 2,361 6,538 8,899 73 Contingencies Physical 1,014 2,869 3,883 163 460 623 74 Price 7,715 19,748 27,463 1,238 3,169 4,408 72 Total Project Cost 23,438 63,347 86,785 3,762 10,168 13,930 73 Project costs are based on prices actual or estimated to be prevailing as of June 1975. Physical contingencies of 5% on bunds and 10% on all other costs have been included. Price contingencies for equipment, civil works and other items reflect the latest estimates of possible cost increases to cover the period from June 1975 to the expected start of implementation in mid 1976 and thereafter during the Project period. Over the Project period price contingencies amount to about 50% of the base costs. Cost estimates include taxes totalling about US$0.7 million derived from import duties on fuel and from income taxes over the! six-year development period.  - 13 - D. Financing 4.13 The financing of Project Costs would be shared in the following amounts and proportions: US$ '000 X IDA 10,000 72 Government 3,908) ) 28 Farmers 22) 13,930 100 The proposed IDA Credit of US$10 million would be on standard terms to Govern- ment. The Government's contribution would be US$3.91 million equivalent to about 28% of the total cost. This would be offset, however, to the extent of US$0.7 million which is attributable to taxes included in Project costs. In order to ensure the smooth implementation of the Project, it is important that the PIU should have prompt access to the requisite funds, particularly since the Project activities are all located at a considerable distance away from Mogadishu, the country's capital. It was agreed that the Government would, from time to time, provide the PIIJ with adequate funds and in a manner acceptable to the Association to enable the PIU to function efficiently. The contribution of farmers would be significant, although small, for the 50 one ha. irrigated farm component. Farmers downpayment contributions would be limited to participants in the irrigated farm component and which at 35% of sub-project cost reflect their relative affluence and ability to contribute. IDA would finance the rest of the canital costs which would be channelled bv the Government to the farmers through the Somalia Development Bank at 5-1/2% interest a year, the prevailing rate for loans of this type in Somalia. E. Procurement 4.14 Procurement of tractors, equipment for the field bunding works and the Geed Deeble farm, and vehicles (USS3 million) in orders exceeding US$50,000 would be by international competitive bidding in accordance with Bank/IDA guidelines; orders would be bulked whenever possible. The consultants would be appointed in accordance with Bank/IDA policies and procedures. Field bunds and water points would be unsuitable for construction by contractors either because the design cannot be standardized or due to the widely dispersed location of small works. They would be constructed by force account (mainly by the PIU) using equipment procured under the Project. Contracts for the  - 14 - construction of buildings, concrete water reservoirs and fencing (US$469,000) which by reason of their dispersed location and small size would not attract international bidding would be alwarded on the basis of competitive bidding advertised locally and in accordance with local procedures, which are satis- factory to IDA. Draft tender documents for all items exceeding US$50,000 would be submitted to IDA for approval before issue of invitations. Construc- tion of dug wells, supply of pipes and installation of irrigation equipment (US$50,000) for small scale irrigation development would be by local contrac- tors. Pumps for these farms (US$13,000) would be procured locally, and farmers would be free to purchase from existing commercial channels. Single units of tractors and cultivation equipment, furniture, office equipment and other small items (US$86,000) would be procured locally; supplies of the items for local procurement are adequate and competition between firms is satisfactory. A list of Project equipment, vehicles and buildings is at Annex 6. PIU would be responsible for the preparation of all contract documents, evaluation of tenders and award of contracts. 4.15 The IDA credit would finance (a) 100% of the C.I.F. cost of imported equipment, Somali port of entry, and 70% of imported equipment procured locally; (b) 100% of the fees and expenses for management team, (c) 100% of the foreign exchange cost for feasibility studies and technical assistance, and (d) about 45% of operating cost for bunding, water points, extension and training. Dis- bursement for expenditures in respect of items procured through international or locally advertised competitive bidding and feasibility studies would be subject to IDA standard disbursement procedures requiring full documentation. In the case of PIU's operating costs, expenditures would be approved by the Project Manager, and disbursed against a certified statement, the documenta- tion for which would not be submitted for review but would be retained by the Borrower and available for inspection by IDA during the course of a Project supervision mission. Any funds remaining in the Credit account upon comple- tion of the Project would be available for reallocation for financing of supplementary expenditures at the discretion of IDA. The estimated quarterly schedule of disbursements is shownL in Annex 7. G. Accounts and Audit 4.16 The Project Manager would be responsible for the design and imple- mentation of an accounting system and financial controls for all Project - related activities. The accounts of all Government agencies in Somalia are audited by the Magistrate of Accounts, and it is expected that they would also be responsible for the auditing of Project accounts. The Government agreed that the Project would be constituted as a separate accounting unit and accounts adequate to reflect all Project expenditures and cost recovery  - 15 - would be maintained, that Project accounts would be audited by independent auditors acceptable to IDA, and that these audited accounts, together with the auditor's report, would be forwarded to IDA within six months of the end of each fiscal year. V. ORGANIZATION AND MANAGEMENT 5.01 A Project Ministerial Committee (PMC) comprising the Secretaries of State for Finance, Agriculture and the President of the Somali Development Bank would have the overall responsibility for the Project. The Committee would delegate responsibility for Project implementation to a Project Imple- mentation Unit, attached to the Ministry of Agriculture (Chart 2) for admini- strative purposes. Project Implementation Unit 5.02 The Project Implementation Unit (PIU) would be responsible to the PMC and would directly oversee the implementation of all parts of the Project. Its proposed organization is shown in Chart 3. Upon the completion of the Project the purposes for which the PIU was set up would have been accomplished and its continuing responsibilities would be taken over by the Ministry of Agriculture. 5.03 The PIU would be located in Hargeisa and would be responsible for Project execution, coordination and supervision. It would be headed by a Somali Project Manager who would be assisted by an expatriate project manage- ment team of four senior officers and a senior technician. The team would comprise its leader, a soil conservation officer, an extension and training officer, a horticultural officer and a chief mechanic (who would be under the direct supervision of the soil conservation officer). Draft terms of reference outlining the responsibilities and qualifications of the Project Manager are given in Annex 8; a similar outline for each member of the management team is given in Annex 4. It would be a condition of credit effectiveness that the Government had appointed a Project Manager in consultation with the Association. In view of the lack of suitably trained and experienced local staff, the Project management team would be provided by a firm of consultants (para 5.05). However, all expatriate staff would have local deputies, who would receive training both in-service and outside Somalia. By the end of the Project, they would be fully qualified to assume responsibility for future development work in these fields. It was agreed that the Government would appoint suitably qualified candidates to the positions-of horticulturalist (Geed Deeble) and farm manager (Aburin). Pursuant to informal assurances, the Government would not transfer Project local staff trained under the Project from the PIU to other Government employment during the implementation period without prior consultation with the Association.  - 16 - 5.04 During the Project implementation period, PIV would be responsible for the extension and training services, the operation and maintenance of the water points, the gully erosion pilot area, Aburin Farm and the Geed Deeble Horticultural Station, together vlth the seed multiplication activities. As so recorded that on completion of the Project these responsibilities would be assumed and adequately continued by the Government. Maintenance of the field bunds would be the responsibility of the farmers on whose lands they were constructed. Consultancy Services 5.05 Consultants acceptable to the Association would be employed to provide the Project management team, to undertake the two feasibility studies (para 4.11), and to nrovide technical assistance for the construction of the irrigation systems for the small--scale farms and the Geed Deeble Horticultural Station (para 4.11). These services would best be provided by an agricultural consultant firm acting in association with a firm of irrigation engineering consultants, the one supplying the agricultural management team and the other carrying out the feasibility studies and nroviding the technical assistance for the irrigation development. It would be a condition of credit effective- ness that the Government had appciinted these consultants under terms and conditions satisfactory to IDA. Aerial Photographs and Maps 5.06 Aerial photographs and up-to-date maps would be essential for the implementation of the Project. An aerial survey of the North West Region was carried out'in 1958 and in 1973 the whole country was covered by new aerial photography done under bilateral assistance. Using these t*o photo- graphic coverages the PIU could make an accurate comparative determination of the location and rate of soil erosion and derive other essential informa- tion. However, all aerial photographs and maps are now in military custody in Somalia, and unless special arrangements are made PIU's access to them may be limited. Furthermore, the new aerial photographs had not arrived in Somalia at the time of Project appraisal. In order to ensure that all nec- essary photographs would be availLable in a timely manner for the Project, it has been a condition of Board presentation that both the 1958 and the 1973 air photographs of the Project area should have been made available to the Project Ministerial Committee for the use of the PTIU. It was agreed that the Government would expedite the completion and handing over to the PMC of the topographical maps being made from the 1973 photographs. Construction by Force Account 5.07 The construction of field bunds and water points and the extension of the Geed Deeble Horticultural Station would be executed by the PIU's own forces employing about 140 staff, including surveying staff, bulldozer opera- tors, tractor and vehicle drivers, mechanics and laborers. As so recorded, the PIU would operate entirely independently of the National Tractor Organization (ONAT para 2.07).  - 17 - Water Law 5.08 It is important for the orderly development of water resources tqat a satisfactory water law had been enacted. Government consideration of a draft law is at an advanced stage. It was agreed that the Government would take all necessary action to safeguard existing users of surface and underground waters against possible loss of water supply through unregulated over-development. Allocation of Irrigated Farms 5.09 The District Commissioner concerned would invite applications from candidates for the 50 new irrigated farms. A committee consisting of the concerned District Commissioner, the Project Manager and the Horticultural Extension Officer would allocate the farms on criteria and procedures for settlement to be agreed between the government and the Association during negotiations. Project Allowance 5.10 In the past, development projects in Somalia have generally been implemented by autonomous government agencies. These agencies have been able to attract staff because they have offered higher remuneration than Government departments. In some respects the PIU would be autonomous, but unless special arrangements are made the Government's pay and allowances scales would apply to it. The Ministry's staff position in the North West Region has deterio- rated seriously in recent years to the extent that only a few junior staff now remain. The original staff, having retired from Government service, or having been transferred to other posts within the Government or found other employment, are no longer available and there is no suitable manpower to draw on except by competing in the marketplace. The Project works would be in remote locations with harsh physical conditions. In order to obtain the necessary staff the PIU would have to offer an inducement allowance to supple- ment the Government pay scale. The cost estimates therefore include provision for this allowance for all local PIU staff at the rate of 30% of basic pay, roughly equivalent to the remuneration differential between autonomous agencies and Government departments. Training 5.11 Local staff would be trained under the Project. The Project would be of a pioneering nature because it would create the capacity to execute future projects of this type exclusively with Somali manpower. Senior staff would be trained in landuse planning, arid zone agriculture, soil and water conservation, and management. For the junior staff the training would con- centrate on vocational and job-related skills. Provision would be made for formal courses within and outside Somalia and on-the-job training. Government would submit to the Association a training program to be prepared by consult- ants for the Association's comments within six months of the appointment.  - 18 - Project Evaluation 5.12 The. Project Manager would be responsible for Project evaluation, both during and at the end of the Project period. The progress of the Project would be monitored to evaluate the rate of completion of Project works as well as the achievement of yield increases, benefits due to extension services, crop production targets and farm income. VI. PRODUCTION, PRICES, FARMER'S BENEFITS AND RECOVERY OF PROJECT COSTS A. Production and Yields Dry-land Farms 6.01 Under the standard cropping pattern on an average 10 ha holding in the North West Region, sorghum is grown on two-thirds of the area and the remainder is left fallow. The fallow is used as grazing for oxen and other farm animals. Sorghum is a dual purpose crop, supplying grain for human consumption and stover as fodder for the livestock. Under the Project 10% of the farm area would be occupied by bunds, but the decrease in arable area would be more than offset by increased production due to impounded rain water. The cropping pattern would not change with the Project. Estimated sorghum yields and sales surplus to subsistence requirement are given below for improved farm areas both with and without the Project (Annex 11, Table 1). The estimate of improved yields due to water conservation by bund construction takes into account the possibility of partial crop failures caused by erratic and poorly distributed rainfall, and assumes a three-year transition to full development after bunding to take account of the time needed to restore soil fertility.