Senegal - Feeder Roads Project

Document of rO BE RETURNED TO REPORTS DESK FILE COPY The World Bank FOR OFFICIAL USE ONLY CIRCULATING COPY, TO BE RETURNED TO REPORTS DESK Report No 1732 a-SE REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF SENEGAL FOR A FEEDER ROADS PROJECT March 4, 1976 sdocument a a ed dLibuon and ma bethe mnc thei oficia du ies ts contents 'nay n00 otherwise be dIselosed wilthout Word hae Perfon rxe Of  CWRRENCr EQUIVALENTS Currency Unit - CFA Franc (CFAF) EXCHANGE RATES Currency Unit Official Floating (as of December 31. 1975) US$1 CFAF 230.21 CFAF 225.o0 CFAF 1,000 US$4.2o US$4.44 CFAF 1,000,000 US$4,200 US$4,444 The CFA Franc is officially valued at the equivalent of FF 0.02. As the French franc is now floating relative to the US dollar, the US dollar/ CFAF exchange rate is subject to change. The exchange rate on December 31, 1975 of US$1 - CFAF 225 was retained for conversions made in this report. FISCAL YEAR July 1 - June 30  FOR OFFICIAL USE ONLY INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF SENEGAL FOR A FEEDER ROADS PROJECT 1. I submit the following report and recommendation on a proposed loan to the Republic of Senegal for the equivalent of US$6.6 million to help finance a Feeder Roads Project. The loan would be made on standard Third Window terms of 25 years, including seven years of grace, with interest at 4-1/2 percent per annum. PART I: THE ECONOMY 2. A report entitled "The Economy of Senegal" (212-SE) was distributed to the Executive Directors on September 10, 1973. A special mission on public finance visited Senegal in October 1974; its findings are included in this report. Country data appear in Annex I. Past Development 3. During the 1960's, the Senegalese economy experienced virtual stag- nation, as real output increased less rapidly than population, and per capita GNP declined. Two factors were responsible for this situation. First, with independence, Senegal lost its privileged position as the center of French West Africa and therefore had to adjust to reduced economic, administrative, and political dimensions. Secondly, the difficulties of adaptation to the new situation were compounded in the latter part of the decade when ground- nut production fell by 50 percent due to unfavorable weather and falling export prices. In 1971, weather conditions improved temporarily, but 1972 and 1973 brought the Sahel's most severe drought in this century. Food emergency operations avoided widespread starvation, but both the fiscal and balance of payments situations sharply deteriorated. 4. Public savings net of amortization, which had substantially improved during the preceding years, were all but wiped out in. 1972/73 and 1973/74. Revenues were affected by the decline in economic activity; and recurrent expenditures were further increased by a rise in salaries to compensate for the rapidly increasing cost of living, substantially higher debt service pay- ments, and perhaps most importantly, heavy consumer subsidies which resulted from maintaining low domestic prices in the face of skyrocketing food import prices. Thus, at mid-1974, in spite of a US$46 million higher transfer to the Stabilization Fund from groundnut sales than in the previous year, the public finance situation was more serious than it had been since 1960. 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 - 5. Faced with a difficult situation in public finance, the Government took a number of steps in November 1974 which were expected to put public finances on a sounder footing. Consumer prices for rice, sugar, and ground- nut oil were raised to bring them more closely in line with world market prices. Thus, the consumer price of rice was increased by 70 percent (com- plete elimination of the subsidy), the price of sugar was increased by 90 percent (leaving a subsidy of about 20 percent) and that of groundnut oil was raised by 43 percent (leaving a subsidy of about 20 percent). However, high world market prices for wheat required an increase in domestic flour prices which the Government was reluctant to pass on to the consumer and which led to a subsidy on flour. At the same time, when subsidies were reduced, Government salaries were raised by 16 percent on the average, but with actual increases ranging from 60 percent for the lower salaries to 3 percent for the higher salaries, to compensate for the rapid increase in basic food prices. Farmer prices for groundnuts were brought closer to world prices which were particularly high at that moment. The Government thought it could safely reduce its take from the groundnut crop since world phosphate prices had increased five-fold and compensating revenues from this source were assured through expanded government participation in the phosphate mining company and a 100 percent tax levy on excess profits accruing from the price rise. However, during FY75 a good part of the additional public savings was absorbed by payments for the increased participation in the phosphate mine and the servicing of debt incurred to finance new investments and state acquisi- tions of two foreign-owned public utility companies. 6. Through FY75 the current budget of the central Government showed record surpluses but deficits started to build up again in the Stabilization Fund due to the consumer subsidy on flour and sagging world market prices for groundnuts. The falling trend in wheat prices may enable Government to phase out the flour subsidy in the course of FY76, but the financial situation of the public sector will nevertheless become difficult again; groundnut prices are continuing to fall and the world fertilizer market has been unable to support the earlier five-fold price hike. 7. The balance of payments also came under pressure in 1973 and 1974, in the former year because of a w:idening of the trade gap and in the latter year because capital outflows from the private sector partly offset a sub- stantial improvement in the current account. Net foreign reserves at the end of 1974 stood at minus US$44 million. In January 1975 Senegal drew its full US$19.2 million allocation under the IMF oil facility. 8. Balance of payments problems persisted through 1975 largely because of cyclical factors. The good 1974 crop was harvested at a time when world groundnut prices were still high; this created an atmosphere of optimism both in the private and public sector. At the end of 1974, the state marketing organization purchased the crop from the farmers at generous prices thereby injecting massive purchasing power into the economy. In summer 1975 private and public expenditures were booming, but the bulk of the groundnut crop remained unsold, world market prices were 30 percent lower than a few months  - 3 - earlier, and foreign exchange reserves fell rapidly under the pressure of excess demand. The Government responded by introducing selective credit restrictions which so far have been effective in reducing total credit out- standing and stabilizing domestic inflation. Foreign exchange reserves stood at minus US$66 million by the end of November 1975; this was financed by a drawing in September of US$11.7 million under the second IMF oil facility, by the monetary union to which Senegal belongs, and by the mostly foreign-owned commercial banks. 9. The first half of 1976 will see a continuation of the problems experienced in 1975; the Government's reluctance to cut incomes of groundnut farmers has encouraged it to maintain producer prices in the face of slack- ening world demand for groundnut products. Unfortunately, phosphate rock prices are weakening as well; this will effectively eliminate the cushion which has enabled Senegal to absorb the recent rises in oil and other import costs while implementing a policy of income distribution in favor of the rural areas. Hopefully, this income redistribution policy will not fall victim to the current difficulties Senegal is experiencing. There are strong indications that several OPEC countries are willing to provide increased capital aid; moreover, there remain substantial sources of additional balance of payments assistance the Government can tap such as the IMF, Stabex and the monetary union to which Senegal belongs. Finally, the Government has already demonstrated its willingness to use credit restrictions and to eliminate costly consumer subsidies to maintain control over the short-term situation. Prospects 10. As demonstrated during the last five years, weather conditions and groundnut world market prices remain critical for Senegal's growth prospects. The Government is striving, with our support, to reduce its vulnerability to variances in these factors. Its long range program calls for development of areas less affected by rainfall fluctuations (Casamance and Eastern Senegal) where cash crops other than groundnuts can be grown. Irrigation is being developed in the arid northern part of the country; this will reduce depen- dence on cereal imports. With substantial gains also in industry, tourism and fisheries, weather conditions and groundnuts by 1980 will be far less decisive factors than today. However, groundnut cultivation is the mainstay of the economy and provides the livelihood for the majority of the rural poor. The Government is, therefore, introducing animal traction, fertilizers and crop rotation techniques to raise the productivity of the groundnut farmer. 11. The Fourth Development Plan (1973/74 - 1976/77) continues to give highest priority to rural development (36 percent of the total), housing/ public utilities (18 percent) and transport infrastructure (16 percent). Industry and tourism, quite justifiably, see their share increase from 5 to 10 percent of the total. Assuming average rainfall conditions, Senegal's growth in real terms in the remainder of the 1970s will be of the order of 4.5 percent or about 2 percent per capita, which is still a considerable  -4- improvement over the past decade. A new plan is under preparation and will be reviewed in the course of a basic economic mission scheduled for the Fall of 1976. 12. The structure of Senegal's balance of payments will gradually im- prove, but in the next few years the benefits of these favorable trends will be reduced by falling terms of trade. Tourism, some new export industries and an important expansion of phosphate rock mining will provide additional foreign resources, and the implementation of existing irrigation plans will progres- sively diminish the large food imports for urban centers. These prospects combined with a favorable long-term outlook for groundnut production should result in a healthier trade balance in the early eighties. The favorable long-term prospects remain contingent on the execution of the investment program which will have to be largely financed from abroad at a rate of about US$125 million annually on concessionary terms. Traditional sources of aid will probably not suffice, and it will take time before new aid flows from Middle East OPEC countries are developed. Therefore, for the coming two or three years supplemental foreign funds, over and above foreseeable project aid, will be needed. 13. The financial pressures of the past three years have already led the Government to borrow on the Eurodollar market for a total amount of US$85 million, partly to roll over previous debts. Part of the expected balance of payments deficits over the next two or three years could be financed through access to the expanded IMF facilities or the Stabex fund; but additional foreign exchange resources at a rate of about $25 million a year will pro- bably be needed. Assuming additional borrowing to cover the gap is done on Eurodollar terms, debt service would increase from six percent of exports of goods and non-factor services in 1975 to roughly ten percent by the end of the 1970s. 14. In view of Senegal's performance in economic development and the expected shortfall in the amount of concessionary aid needed to implement the Government's development program and to raise the incomes of the rural poor Senegal is considered eligible for Third Window loans from the Bank. The country is creditworthy although foreign reserves are at the moment low and will stay so for the rest of the decade because of the recent reverses in the terms of trade. By extending the grace period on their loans foreign donors can help to alleviate the balance of payments situation during this period of financial stringency. PART II: BANK GROUP OPERATIONS IN SENEGAL 15. The Bank Group has had 23 operations in Senegal to date. Total lending amounts to US$116 million (net of cancellations), including fourteen IDA credits, four Bank loans, two blends of Bank and IDA funds, two IFC opera- tions, and one blend of Bank and IFC funds. Annex II contains a summary  - 5 - statement of Bank loans, IDA credits and IFC investments as of January 31, 1976 and notes on the execution of ongoing projects. 16. Execution of these projects, apart from the Railway Project and the Site and Services Project, is moving forward witlhout exceptional delays. The procurement for the railway has been slow due to time consuming contract approval procedures, but most project components have now been received or ordered. The Site and Services Project is about one year behind schedule, although physical execution is now progressing satisfactorily. The Bank Group and Senegal held discussions recently on delays in reorganizing the executing agency, Office des Habitations a Loyer Mod,re (OHLM), and in implementing Government's commitment to reorient its housing policy in favor of lower income groups. Two agricultural credits (140-SE and 404-SE) pro- vided for technical assistance designed to facilitate the reorganization of the Office National de Cooperation et d'Assistanc2 au Developpement (ONCAD); while this program failed to achieve meaningful results for some time, the Government recently took a number a steps to strengthen ONCAD's management and financial operations. Some improvement, especially in accounting, resulted from these efforts. But ONCAD's overall performance has not improved and the organization remains overstaffed, which is costly in times of high wage inflation (see Annex II). 17. In view of Senegal's need for substantially higher capital inflows, the scale of Bank Group lending is expected to increase significantly in the future. The Bank Group share of foreign aid disbursements (including grants) is expected to increase from about 6 percent in 1970/71 to 24 percent over the 1974-80 period. By then the Bank Group is likely to be the largest aid donor. This will increase the Bank Group's share of the outstanding and disbursed debt from 12 percent at the end of 1973 to about 25 percent by 1980. IBRD/ IDA share in public debt service will probably go up from 2.2 percent in 1973 to about 13 percent by 1980. 18. The objectives of Bank Group project lending in Senegal fall under four main headings. Priority will continue to be rural development, including development of irrigation in the Senegal River Valley Region (e.g., the Debi- Lampsar Engineering Credit), intensification of groundnut production and diversification into new crops and new regions (e.g., the Sine Saloum and Terres Neuves projects and the proposed Eastern Senegal Livestock Project). As in the past, our agricultural lending is expected to exceed one-third of the total. Secondly, we shall assist diversification of the economy by lending for the growing sectors of tourism and industry (e.g., the proposed tourism infra- structure project on the Petite Cote and a proposed second loan to SOFISEDIT, a development finance company established with assistance from the Bank Group in 1974). Thirdly, we shall continue investment for modernizing and expanding the country's infrastructure (e.g., the project described in this report and a Third Highway Project, and a proposed fishing wharf at Dakar Port). Finally we shall continue lending to reorient and expand the country's education system, as in the Second Education Project.  - 6 - PART III: THE RURAL ROAD SECTOR Roads and Agricultural Development 19. Agriculture plays a central role in Senegal's economy, employing over 70 percent of the total labor force. Although it contributed only 38 percent of GDP in 1974, the sector's leverage on the economy is and will remain considerable through its impact on exports (over the past decade, agri- cultural products have accounted for about 60 percent of total exports) and rural demand for locally produced goods and services. Groundnuts and millet are the country's main agricultural products, and groundnuts are the country's principal export. During the last four years, groundnuts have comprised between 35 and 55 percent of total exports and generated about 60 percent of value-added in the agricultural sector. While agricultural development potentials differ between regions, in general Senegal suffers from inade- quate or irregular rainfall and poor soils, particularly in the Groundnut Basin where the majority of the rural population is concentrated. In addi- tion to the constraints imposed by nature, an important factor limiting increases in agricultural production is the poor condition (due primarily to inadequate maintenance) or total absence of rural roads. Government is aware of the critical relationship between feeder roads and agricultural development and has asked the Bank to assist in establishing a systematic means of evaluating and meeting feeder road requirements. The Marketing System 20. Agricultural production falls into two main categories, crops grown for export, mainly groundnuts, and those grown for domestic consump- tion, primarily cereals; the mec.hanism for marketing varies according to these categories. Office National de Cooperation et d'Assistance au Devel- oppement (ONCAD) has the monopoly for the marketing of groundnuts which it buys at a uniform producer price from about 1,700 cooperatives throughout the country. Transport rates are fixed in five categories by ONCAD according to road conditions. Benefits resulting from the project will accrue to ONCAD where road improvements result in a road being shifted from a lower to a higher category or to transporters if they result in improvements of a road through better maintenance within a given category. These transport cost savings should allow ONCAD to improve and extend its services to farmers. Competition among the private groundnut transporters is strong enough to ensure that transport savings would be passed on to the farmers in the form of lower rates on the transport of consumer goods, agricultural inputs and commodities other than groundnuts. Specifically with respect to cereals, marketing is less well organized than with groundnuts and road improvement would have a more direct impact. While Government has decided to expand ONCAD's role in cereal marketing, cereals are presently bought both by ONCAD (20-30,000 tons annually) and by private traders (about 50,000 tons). Pro- ducer prices for cereals are set by Government, but except for ONCAD pur- chases, products are sold freely, often below Government prices. Cereal  -7- marketing suffers particularly from a lack of storage capacity 1/ and trans- port. In regions where poor road conditions allow limited access, the unreliability and high costs of transport and the lack of competition among those traders willing to collect produce result in lower producer prices. Farmers are therefore less inclined to generate marketable surpluses. In these circumstances, access to feeder roads and the resulting reduction of transport costs, and the increased competition this would permit, should help stabilize producer prices at levels attractive to farmers and consequently stimulate production increases. Highway Network and Traffic 21. Senegal's highway network is one of the most extensive in West Africa, comprising about 13,300 km of which 9,100 km are classified, meaning that their maintenance and improvement are in principal financed by the national budget. However, only 5,840 km are presently being maintained and of the remaining 7,460 km of roads, about 4,200 km are not classified as they are under the authority of local officials whose limited financial means do not permit them to do any significant improvement or maintenance work. Less than half of the existing 7,460 km of feeder roads have been partly improved, the remainder being rather ill-defined tracks without adequate foundations. The proposed project addresses itself to the economically most important of these partly improved or unimproved tracks. Traffic on rural roads is highly seasonal and consists mainly of groundnuts and other agricultural products and agricultural inputs. Traffic growth in the rural sector is projected to be 4 percent annually on average, higher in areas in which there are specific agricultural development projects. Road Transport Industry 22. The road transport industry specializing in rural transportation, including agricultural commodities and inputs, is composed of about 250 firms with some 1,500 trucks. There are 19 large firms (of which two are coopera- tives of small owners) owning between 16 and 60 vehicles each while about half of the rest of the industry is composed of smaller firms owning one or two trucks, mostly of lighter build. Some trading companies and government agen- cies have also established their own trucking fleets. Much of the freight generated by commerce and industry is transported by the large modern firms while the small ones rely on the groundnut campaign aad general cargo and suffer from sharp seasonal traffic variations. Among smaller firms, competi- tion is fierce and the rates are often barely sufficient to cover direct operating costs. 1/ A study of cereals production, marketing and storage has recently begun, financed under the Sine Saloum Agricultural DeveLopment Project (Credit 549-SE/Loan 1113-SE).  -8- Highway Administration 23. Highway administration is the responsibility of the Ministry of Public Works, Urban Development ad Transport (MPWUT). Within MPWUT the Directorate of Public Works (DPW) is responsible for construction and mainte- nance of the classified highway system. As a result of a recent reorganiza- tion of MPWUT, DPW has five divisions in Dakar (central, buildings, new works, equipment and road maintenance) and seven regional divisions. Maintenance works are carried out by the regional divisions under the overall direction of the Road Maintenance Division (DER) with equipment managed and repaired by the Central Equipment Division (PCM). A Subdivision for Feeder Roads, Bureau des Pistes de Production (BPP), has been created within DER to coordinate betterment and subsequent maintenance of the feeder road network. BPP will receive assistance from a Directorate of Studies and Programming (DSP) in MPWUT established to coordinate and execute planning for the entire ministry. Staff for DPW come from existing Government personnel, training programs, two technical colleges and several technical universities. These facilities should produce sufficient Senegalese personnel to fill progressively positions in DPW now held by foreign staff. At present, French aid (FAC) provides 14 engineers to MPWUT. Development and Financing of Feeder Roads 24. Development of the feeder roads system has been an important element in many IDA financed transport and agricultural projects. A total of 494 km of feeder roads and secondary roads related to agricultural projects were financed by the First Highway Project (Credit 198-SE in 1970), the Casamance Rice Project (252-SE in 1971) and the First and Second Terres Neuves Settle- ment Projects (Credits 254-SE in 1971 and 578-SE in 1976). The Second High- way Project (Credit 366-SE in 1975) contained the comprehensive survey of feeder road requirements on which the proposed project is based. 25. Until FY74, no funds were allocated for feeder roads, except those included in Bank/IDA financed projects. Since then about US$178,000 have been budgeted annually for these roads. These funds represent only a small portion of Government's total expenditures for roads and its revenues from road-user charges; less than 1 and 0.5 percent respectively. However, with the proposed project alone, additional average annual expenditures of about US$756,000 will be made on feeder roads over the next three years. If Govern- ment continues the program at its present rate and extends it to the next level of agricultural roads - the extensive farm-to-market network - which is highly likely in view of Government's growing emphasis on rural develop- ment, the financial requirements for these roads will grow very rapidly. In fact, present estimates are that US$3 million annually would be required for feeder road construction, improvement and maintenance by 1985. Given Government's other commitments in the highway sector, it is unlikely that sufficient funds would be allocated to the DPW budget for feeder roads. A two-pronged strategy to stem this short:age of funds consists of: (i) re- ducing the costs of feeder road works; and (ii) finding extra-budgetary funds to supplement DPW's resources.  -9- 26. Consultants BCEOM, as part of their feeder road study in Senegal financed under the Second Highway Project examined various ways of reducing feeder road costs and concluded that excavation and truck loading of laterite for regravelling and routine maintenance operations could be performed with considerable cost savings by labor-intensive methods. The proposed project would use these methods. In addition, Government will look into other alter- natives during project execution with the help of the technical assistance experts included under the project. Government has agreed to discuss its findings with the Bank and establish a program for i-ollow-up action at the same time as the program for the second year of the project is submitted to the Bank for approval. (Section 3.05 of the Loan Ag:reement.) 27. Regarding alternative sources of funds, consideration has been given to the possibility of increasing participation from the ultimate beneficiaries of feeder road improvements, the ruraL people they serve. This participation could be in the form of cash contribution, self-help labor, or a mixture of both. As a result of Government's policy of admin- istrative decentralization, Rural Communities, groups of villages with about 10,000 inhabitants and with autonomous budgets, are becoming the basic administrative centers in rural areas. Experience with the more established Rural Communities, particularly in the Thies region, has shown that roads are second only to wells on their list of priority investments. The Rural Communities can therefore be expected to contribute financially and with self-help labor for roads in their areas. particularly in periods of the year when farmers are underemployed. Government will ex-lore the possibilities of obtaining voluntary contributions in cash or labor from Rural Communities for maintenance of feeder roads. As an incentive to these communities, Government will examine with the Bank a formula to give priority to pledges of voluntary contributions from Rural Communities wrnen selecting roads to be included in the second and future year programs for feeder roads. Before the above-mentioned contributions become available, DPW will have to spend about US$556,000 annually for maintenance of the feeder roads to be improved under the project. Government agreed that it will allocate not less than US$556,000 for maintenance of the project roads and that these annual alloca- tions will be increased in line with cost increases and maintenance require- ments of the feeder road network. (Section 4.04 of the Loan Agreement.) PART IV: THE PROJECT 28. The Government of Senegal has requested that the Bank finance a comprehensive program of feeder road rehabilitation and maintenance based on a study of feeder road requirements under the Second Highway Project (Credit 366-SE) carried out by consultants BCEOM. The project was appraised in May 1975 and negotiations were held February 9-11, 1976 in Dakar, Senegal with a Senegalese delegation led by Mr. Tidiane Ndiaye, Director of Finance in the Ministry of Plan and Cooperation. The appraisal report (No. 941a-SE)  - 10 - is being circulated separately to the Executive Directors. Annex III provides a loan and project summary and the attached map (IBRD 11868R) shows the project area. The Project Area 29. The project will cover the Groundnut Basin which comprises the administrative regions of Thies, Diourbel and Sine Saloum, the Casamance region, and the west part of Eastern Senegal. The project will not cover the Cap Vert peninsula and the Senegal River region: the former already has a fairly well developed secondary road network which is mostly paved, while the feeder road requirements of the latter will be determined within the framework of plans to develop the Senegal River Basin through major dam and irrigation works. Project Description 30. The proposed project consists of a three-year program for the improvement and subsequent maintenance of about 1,000 km of feeder roads and maintenance of about 250 km of existing feeder roads, including the following: (a) purchase of highway equipment and spare parts: (b) purchase of materials and supplies for the opera- tions included under the project; (c) technical assistance to (i) the Subdivision for Feeder Roads (BPP) for implementation of the proposed road improvement and maintenance program and (ii) monitoring of the project; and (d) construction of BPP's headquarters. Project Execution 31. Physical execution of the project is scheduled to begin in mid- 1976 and to take three years to complete. UIPWUT will be responsible for execution of the project through BPP. To implement the feeder road program BPP will need two engineers and two administrative assistants at headquarters in Dakar. The latter can be recruited in the country. The two engineers will be recruited from abroad for a period of two years until Senegalese engineers have been trained. Road rehabilitation and maintenance will be carried out by three BPP brigades, with some support provided by contractors and possibly by community self-help programs. BPP's brigades will initially be located in the regions of Thies/Diourbel, Sine Saloum and Casamance with the Thies/Diourbel brigade transferred to Eastern Senegal in the third year of the project. The Government has given assurances that, within the frame- work of the project's objectives, feeder road brigades can be transferred from one region to another according to the changing priorities of agricul- tural development. (Section 4.03 of the Loan Agreement.)  - 11 - 32. The feeder roads to be included in -the first year's rehabilita- tion and maintenance program have been selected by Government with assist- ance of consultants and with the approval of the Bank in areas where ongoing or planned development projects would increase agricultural traffic. In order to maintain a desirable degree of flexibility for iuture years, an Interministerial Consultative Committee (ICC) will be created before June 30, 1976 (Section 3.04a of the Loan Agreement) to review annually and, if necessary, revise the provisional programs prepared for the second and third years. ICC will be chaired by the Minister of Public Works and will consist of representatives of the Ministries of Rural Development, Plan and Cooperation, Finance-and the Interior (representing the Rural Communities) as well as of ONCAD. These agencies will review and submit annually their particular feeder road requirements. The proposal will be coordinated and screened from technical and economic viewpoints by the Directorate of Studies and Programming (DSP) of MPWUT. (DSP has been established by Decree but not yet staffed; the proposed Third Highway Project includes the services of four technical assistance experts for three years to fill key positions and to train local counterpart staff in their duties). The criteria 1/ for analyzing feeder roads have been established with assistance of the Bank and the annual programs for the second and third years of the project will be submitted to the Bank for approval four months before the beginning of each working year. (Section 3.04b of the Loan Agreement.) 33. Some civil works, particularly drainage structures and excava- tion and hauling of laterite and construction of the BPP offices, will be carried out by domestic contractors. Present administrative procedures for contract approval and payment of invoices are slow for contracts of more than minimal size and this tends to discourage small enterprises from bid- ding because delays in payment cause serious liquidity problems for these firms. Government has recently taken a number of actions to accelerate small payments and is presently exploring other possibilities for simplifying and expediting procedures. In addition, the proposed Third Highway Project provides technical assistance to DPW to determine the action required to promote the domestic construction industry. Labor-intensive methods for routine maintenance and excavation and loading of laterite may be carried out by self-help brigades of Rural Communities. 34. Several concepts and assumptions included in the design and justi- fication of the project require careful monitoring and regular evaluation to determine the extent to which they can be replicated or should be modified in subsequent projects. The project provides for monitoring by the technical assistance consultants in BPP and by other experts of such items as the costs, 1/ These criteria include both a first-year benefit and an economic rate of return of at least 10%, that a road section be in an area where there is at present or will be in the future substantial agricultural activity and that a road section fit geographically into the work-program of one of the feeder road brigades.  - 12 - productivity and quality of various methods of work construction and mainte- nance, and the impact of feeder roads on, inter alia, per capita income, traffic growth and transport charges. The project will include US$440,000 for 55 man/months of technical assistance. Project Cost and Financing 35. The total cost of the project net of taxes but including contin- gencies is US$8.5 million. The proposed Third Window Loan of US$6.6 million will finance the estimated foreign exchange component or 77 percent of total project costs net of taxes. The local costs (US$1.9 million equivalent) will be provided by Government. Procurement and Disbursement 36. Equipment, materials and supplies amounting to about US$5.0 million will be procured on the basis of international competitive bidding in accord- ance with Bank Group guidelines. Contracts for equipment, materials and sup- plies costing under US$20,000, and for spare parts, can be awarded on the basis of competitive bidding in accordance with local procedures acceptable to the Bank; the total amount of such purchases would not exceed US$400,000. Civil works may be carried out by contract or by force account. Contracts for the construction of selected civil works (drainage and crossing structures, excavation/haulage of materials for base courses, and BPP office building) amounting to about US$0.5 million, will be awarded on the basis of competitive bidding advertised locally following procedures acceptable to the Bank. Con- struction supervision will be carried out by BPP with the assistance of the Regional District Engineers. 37. loan funds will be disbursed as follows: (a) 100 percent of c.i.f. costs of equipment, spare parts, and other imported supplies and materials, and 91 percent of the cost of these items if purchased locally; (b) 100 percent of foreign expenditures for technical assistance services; and (c) 64 percent of total costs (with taxes) of works by contractors. Benefits and Justification 38. The economic justification of the project rests on two types of benefits from road improvement and subsequent maintenance: (i) savings in total transport costs; and (ii) increased transport reliability and, in some cases, provision of access to possible markets. Because of the prevailing marketing system (para. 20), transport savings would have only a limited direct impact for the farmer on the main agricultural product, groundnuts. The per kilo savings in transportation costs due to the project (about 0.30 CFAF) would be insufficient: to warrant an increase in the national price  - 13 - ONCAD pays farmers for groundnuts (41.5 CFAF). However, the total savings for ONCAD in transportation costs as a result of the project would be sub- stantial - about US$900,000 annually by year four, representing about 17 percent of ONCAD's present transportation costs. These savings will either be used by ONCAD to expand and improve its services to farmers, or will be passed on to Government's Price Stabilization Fund. In addition, road improvement will increase ONCAD's ability to provide essential agricultural inputs, particularly improved seed varieties, fertilizer, pesticide and equipment, in sufficient quantity and on a timely basLs to assist farmers in increasing their output. Transport savings will have a more direct im- pact on cereal production. With easier and more regular access of trucks to farming areas reducing the risk that surpluses wilL not find a buyer, farmers can take advantage of modern agricultural methods to increase their cereal production. 39. Institution-building is of primary importanze, and the project provides major benefits in this area which cannot be quantified. These consist of: (i) establishing within DPW a Subdivision for Feeder Roads with separate budgetary appropriations and its own equipment financed under the project; (ii) setting up an Interministerial Consultative Committee with MPWUT's new Directorate of Studies and Programming acting as its secretariat; and (iii) trying to develop a system of partly financing feeder road maintenance on a self-supporting basis through the involvement of Rural Communities. These institutions will ensure that development of agriculture and of feeder roads is effectively coordinated so that requests for feeder road improvement from different regions of the country will be assessed according to uniform and objective criteria. In addition, the possible participation of Rural Commu- nities in maintaining feeder roads may help reduce the burden of these recur- rent costs on the national budget. 40. Economic justification for the road improvement component of the project has been based on vehicle operating cost savings in areas where agricultural activity is already substantial and on incremental value-added on roads with little or no existing traffic which form part of an agricul- tural development project. For the estimates of benefits from the mainte- nance of previously improved feeder roads, only savings in vehicle operating costs have been taken into account. The economic rate of return of the whole project would be about 14 percent. The rate of return is considered conser- vative as benefits from other than the main agricultural crops are not taken into consideration, and the assumption of 4 percent traffic growth may be low since most feeder roads to be improved are located in areas with ongoing or future agricultural development programs aiming at a much higher rate of production increases. PART V: LEGAL INSTRUMENTS AND AUTHORITY 41. The draft Loan Agreement between the Republic of Senegal and the Bank, the Report of the Committee provided for in Article III, Section 4 (iii)  - 14 - of the Articles of Agreement of the Bank and the text of a draft resolution approving the proposed loan are being distributed to the Executive Directors separately. 42. Features of the Loan Agreement of special interest are referred to in paragraphs 26, 27, 31 and 32 of this report. 43. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and with the established criteria for Third Window loans. PART VI: RECOMMENDATION 44. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President by J. Burke Knapp Attachments Washington, D.C. March 4, 1976  Page 1 of 3 pages ODUNTRY DATA- SENEGAL AREA POPULATION DENSITY 196,192 km 2 5.0-*miflion (mid-1974) Per kosof arable land SOCIAL INDICATCRS Reference Countries Senegal (Ghans Ivory Coast Tunisia** 1960 1970 I970 1970 1970 ONP PER CAPITA US$ (ATLAS BASIS) .. 280 /a b 300 / 380 ~a 146fo / DEMOGRAPHIC Crude birth rate (per thousand) h3.2 32.3 17 146 37 Crude death rate (per thousand) 25.6 1!.3 18 /c 23 16 Infant mortality rate (per thousand live births) .. 156 /d 106 Life expectancy at birth (years) 37 11- h7 41 56 Gross reproduction rate .. 3.0 3.2 3.1 3.4 Population growth rate 2.2 /e 2.7 If 2.6 /f 3.8 /f 2.1 /f Population growth rate - urban 3.5 4 5 9 3 7 Age structure (percent) 0-11 42 42 47 42 46 15-64 54 54 h9 55 50 65 and over 4 4 14 3 1 Age dependency ratio 0.9 0.9 1.0 0.8 1.0 Economic dependency ratio 1.1 1.2 1.4 1.0 /h 1.i /h Urban population as percent of total 23 29 32 28 14 /i Family planning: No of acceptors cumulative (thoua.) .. .. 11 .. 108 No. of users (% of married women) .. .. 2 .. 12 EWLOYMENT Total labor force (thousands) 1,300 1,700 / 3,500 2,600 1,500 /k Percentage employed in agriculture 73 55 78 53 7jk Percentage unemployed 7 9 9 T INCOME DISTRIBUTION Percent of national income received by highest 5% 36.8 * *- 28.h /1 Percent of national income received by highest 20% 62.5 .. . 58.5 7T Percent of national income received by lowest 20% 3.2 .. .. 3.9 7 . Percent of national income received by lowest 140 9 *o. 10.6 DISTRIBUTION OF LAND O,NERSHIP % owned by top 10% of owners . . 53 /m % owned by smallest 10% of owners .. .. .. .. 0.5 7m HEALTH AND NUTRITION Population per physician 20,000 /n 114,940 12,950 Z 12,1hO 5,950 Population per nursing person . 2,1410 1,070 /0 2,L80 730I Population per hospital bed 760 /a r 730 /r 760 680 r r10 2 Per capita calorie supply as % of requirements 97 97 96 108 86 Per capita protein supply, total (grams per day) 61 614 6 60 5h Of which, animal and pulse .. 28 Li 10 /s 18 /s 14 Is Death rate 1-1 years .. .. .. .. 1.5 7 E:DUCATION Adjusted primary school enrollment ratio .. 38 It 89 77 107 Adjusted secondary school enrollment ratio s15 7iu 5 11 20 Years of schooling provided, first and second level 13 13 15 13 13 Vocational enrollment as % of sec. school enrollment .. 7 23 7 34 Adult literacy rate % .. 10 .. 20 55 L HOUSING Average No. of persons per room (urban) 1.5 2.7 Percent of occupied units without piped water 12 60 Access to electricity (as % of total population) 96 .. 17 2 i Percent of tural population connected to electricity .. .. CONSUMPTION Radio receivers per 1000 population 47 68 k 78 17 77 Passenger cars per 1000 population 8 11 4 11 13 Electric power consumption (kwh p.c.) 47 77/k 338 120 155 Newsprint consumption p.c. kg per year 0.06 0.1 0.14 0.2 0.1 /a 1973; a In mid-1975 on the basis of new population figure, the per capita ONP would be $320; Li Registered onlyl 7d 1968; a 1956-60; If 1960-73; & 1956-66; h Ratio of population under 15 and 65 and over to total labor force; ai 1966; a 1972-73; k 1972; Li Incame recipient; m Covering 1.5 million hectares of private land, excluding 0.8 million hectares in public ownership, and 2.1 million hectares of collective land; La 1963; / Registered, not all practicing in the country; & Personnel in goverrment services; g 1962; a Government hospital establishments; Is 1964-66; Lt Utadjusted; /u Lower secondary level. * In a recent demographic study on Senegal, Bank experts found under-enumeration of children in the last population aurvey and increased the 1975 existant population from 4.3 million to 5.0 million. Per capita GNP for 1975 on the old basis would have been $358. ** Tunisia has been selected because of some similarity of its economy with the Seneg:alese economy, including favorable prospects for the development of fisheries and tourism. R5, February 27, 1976  Page 2 ECONOMIC DEVELOPM4ENT DATA (Axo. nt, in oilli.ns of US dollars) Act.al ESti.ated Proiected 1971 - 1974- 1972 1973 1974 1975 1976 1960 1974 1980 1971 1974 1980 NATIONAL ACCOUNTS Thre-year Average. et1971 Priese and Exchange Rates Av. Annual Grouth Rates As Perrent of GDY-- Gros Doneoric Prodoct 914.8 929.4 918.6 1,039.8 1,089.6 1,281.4 3.2 4.8 98.9 97.6 102.0 Casin, fron Terns of Trade(-) 15.8 27.9 24.2 24 -15.8 -25.4.. 1.1 2.4 -2.0 Gro- Donstic Incone 930.6 957.3 1,005.8 1,042.2 1,073.8 1,256.0 3.7 4.4 100.0 Ioo.o 100.0 Import (-nol. NFS) 264.5 277.8 298.5 320.3 331.2 390.1 4.6 5.7 28.9 29.7 31.0 Eoports (lecI.NFS - IaPort rxpacity) 256.0 281.5 273.0 286.3 286.3 365.8 2.3 6.5 28.2 27.2 29.1 R-sorce lap -85 3. 7 -2 5 .5 -34.0 -44.9 -24.3 . . -0T.7 -2.5 1.9 C-on-pri-n Enpenditute- 758.3 781.4 826.3 880.1 923.4 1,054.4 2.9 4.2 84.1 82.1 83.9 Inve-rexo Expeodituren (led,. stocks) 180.8 172.2 205.0 196.1 195.3 225.9 11.2 4.2 16.6 20.4 18.0 o-esic Savings 1 72 .3 175.9 179.6 161.3 150.4 201.6 7.8 5.5 15.9 17.9 16.1 NaLional S-oinge 157.7 158.9 158.9 137.1 125.0 175.6 7.0 3.1 14.4 15.8 14.0 MERCHANDISE TRADE Anul-t-tfors rcsAs ~Percent _ofTotl Capital goodS 67 77 91 127 116 190 24.3 13.1 21.4 18.0 18.3 tmeterediato goods (en. f.els) 54 67 105 135 132 231 36.8 14.1 18.7 70.8 2 2 .2 F-niu -d related naterials 17 24 63 79 94 286 65.0 28.7 6.4 12.5 27.6 CovoaoptiOO goods ~~~~ ~~~~ ~~142 191 246 241 262 331 20.8 5.1 53.5 48.7 31.9 Total Metch. Inpocts (oif) 280 359 505 582 604 1,038 31;8 12.8 100.0 100.0 100.0 Eoportt 0ro-dnu- 114 69 133 150 164 174 43.5 515 41.6 36.9 22.4 Phosphate- 19 25 los 023 87 1 77 95.3 9.1 13.0 29.2 22.8 Pocroleun products 9 11 22 23 30 201 46.6 44.9 6.5 6.1 25.8 Other no-facturd goods 48 72 102 101 122 226 32.8 14.6 38.9 27.8 29.0 Total Meroh. Exports (fob) 190 1 77 36_0 40-3 4903 77-8 4-9.0 13.7 100o .0 1500.0- 16070. Morchaodi-e Trade Indices A-erage 1971 - 100 Eoport Price loden 100 120 480 162 151 225 Ixport Price- Iodeo 109 130 165 153 172 242 T.ros of Trade loden 92 92 109 105 88 93 Foporto VIone loden 169 117 139 168 197 243 VALOE ADDED BY SECT)2R Annual Data at 1974 Prie.s and E.change Rates Agrlcl tore 225 259 300 296 326 376 0.7 3.8 3 5.2 34.2 3 3. 2 lnd-try and Mining 171 1 75 188 201 218 278 6.6 6.7 18.6 21.4 24.5 Scroi- 395 326 390 4-03 4 18 4t81 0.5 3.5 46.2 44.4 42.3 Totl1 791 810 878 900 962 1,135 1.8 4.4. 100.0 100.0 105.0 PUBLIC FINANCE Fiuce,l yeSrs (Jly I/J... 30) in cur rent pri... An Pe-ceo of T11JP C.rroct R-ooiptu (Central Coot 169.1 190.0 221.3 302.8 1.8 481 16.8 15.9 16.2 Current Ecqendit.re- (Central Coot) 150.7 184.8 209.0 269.5 385 526 15.7 15.0 14.8 Bloder-ry S-diogu 18.4 5.4 12.3 33.3 23 45 1.1 0.9 1.1. Otlier Pchblie Sector a-ingn 7 .5 0.4 17.6 - 6 .2 -1i4 6 ), 9 1.2 0.2 PoblIc DoCtor In-et-Ln 62.6 68.9 98.3 85.2 108 190 5.7 7.1 5.5 CUJRRENT EXPEND ITORE DE TA ILS Actual PrelIx. Bodget (As 7. Total Corrnt pe.diture) EL.72 FY73 FY74 FY75 17 milli."0, DETAIL 0ON PUBLIC SECTO3R Third Plan Educotion 21.9 22.2 21.9 21.7 INVESTMENT PROGRFAM1 (1969/70 - 1912/231 Oth-r Social Services 8.4 8.1 7.6 7.2 Agrica1t.re 5.7 5.6 4.9 4.7 Social Doctors 24.3 (l.3 Other E-onoic Seroioen 7.9 7.4 8.0 7 .7 Agriculture 62.4 2914.1 Ad.ioistratioo and Defteoe 54.5 54.9 55.6 56.7 Industry 41H1ring (i... Poaer) 15.3 7.1 Other 1.6 1.8 2.0 2.0 Water Supply 24.8 11.5 Tota1 Curret Enpenditure, 100.0 100.0 100.0 100.0 Transport and co-ninolotioss 45.4 21.1 ______________________________________________________________________________ Othor (Inel. Tther oorllsoT... is. s -ing) 43.1120.0 Total Expenditureu 2-15.3 100.0 SELECTED INDICATnOR 1971- 1974- 1971- (Calcu,Ilatd fron 3-year averaged dnts) 1974 1980 1980 FINANCINC P.blt. S..tor Sa~ings51.9 24.1 Average ICOR 5.6 4.0 4.4 Publi Secto SaviiL ngs 25 75 laport Elouticity 1.4 1.0 1.1 Lra.t. fnd Official Soans. 125.7 58.3 Marginal Doxestic Savings Rate 35.0- 8.8 16.5Lon froPIvtSnce3777. M.rgin.1 N.tio.l S-i.g. R.t.27.9 0.6 12.9 Total Finan..Ing 215.3 100.0 LABOR FORCE ANDO Total Labor Porte Vao de e okr(91PIe xhseBts OUTPUT PER 410811R In Millions 7. nf Total Sn U.S. Dollars Percent ef Average 1971 1975 1971 1971 Agricu1tare 0.8 70 356 5t iod-utry 0.1 a 1.667 237 Service 0~~ ~ ~~~~~~.3 22 1,429 203 Total 1.2 100% 703 100% not applicable - il or negligible not available- less than half the snalleot unit sho-n e/ estimated T/ base.d on loca1 currency data T/ High sanings rate doe to good crop and favorable tenon of trade in 1974.  Pag. 3 QAL,%NCE OF PAYMEN0TS. EXTERNAL ASSISTANCE AND DEBT (aons i illion of US dol1ar at c-ret prices) Actosi ~~~~~~~~~~~EoEi-utd Projectod Avegag Annual G-oth Ratc 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1974 - 1980 SIMBARY BALANCE OP PAYMENtS tEpocts (l.cE. NPS) 217 216 312 322 523 563 609 679 760 910 1,098 13.2 Im.rts fi-1. NFS) 235 259 328 414 563 663 693 758 836 980 1.179 13.1 Resouree Bal1nce (X-8i) -18 -43 -16 -92 -40 -100 -84 -79 -78 -70 -81 Inter-t (poblim debt) -1 -4 -5 -7 -14 -16 -19 -32 -24 -27 -30 13.5 Dirett Inveotnnt I ene-16 -15 -19 -27 -21 -20 -27 -31 -34 -37 .41 11.8 Other f-tmoincone 7 9 11 12 4 1 -2 -2 -4 -5 -3 Corrent Transfers (met) -4 -3 -1 -2 -2 -1 -2 -2 -2 -2 -2 Balance mm Curremt AccoUnt. -32 -56 -0 -.11 -73-1613-3614-41-7 Private Di7.ct SovesOmeet a 13 17 -2 2/ -2 23/ -Si/ 12Y' i8 36 41 45 Official Capital Grente 16 30 15 3 8"' 22 36 36 36 39 41 43 Public N & LT Loans fflsb.rse.ent. 19 23 18 97 45 103 106 120 134 148 148 22.0 - Repay.setv -4 -B -B -22 -19 -20 -34 -6-59 -64 -65 22.9 Net Disbursents 15 15 10 75 26 83 72 74 75 85 83 21.3 Short-term Capital (net) 11 -10 -14 -6 21 -1 -4 9 3 -4 6 capital ..e.i. 11/ 61' 41/ -9 19 -7 - - - - - Ionrea..e Em total reserves ()21 -2 2 -40 -7 -30 -18 +5 +11 +23 +20 L-1e of rese-ve (end year) 7 6 7 -30 -4-70 -88 -87 -76 -54 -34 GRANT 65111 LOA511 CGMINrfENID Ofifcial Grants & Grant-like 16 30 ES 38 22 1970 1971 1972 1973 1974 DEBT AND DEBT SERVICE P.bti. M & LT W-a P.bli. Debt Ot. & Di.braed ~~~~~ ~ ~~~~~~~~~~~~101.9 127.5 138.5 201.3 239.3 IBRD1 - - 16 1 3 IDA 2 7 11 23 - Interest ono Psblic Debt 1.4 4.4 4.6 7.0 13.6 0other - - - - - Bapaysento en Public Debt 4.1 7.9 8.2 21.6 1. Other Ma1tiLateral - I I 2 10 Tetal Public Debt Dervice 5.5 12.3 12.8 28.6 33.0 G-vernsets 4 10 14 59 - 34 Other Debt Service (net) .. Suppliers 1 4 1 1 - Total Debt Service (net)*.... Fin.nCi.1 Isotitotimo - 10 6 83 6 Bonds - - - - Public Loans n.e.i -- Total Fublic M & LT wa.osn36 49 169 53- Publi. Debt Service 2.2 5.1 3.7 8.3 6.3 Total Debt Service.. .. Actual Debt Outstanding on eceeber 31. 1973 TIDS + Direct Inv-t. Inc... EXTERNAL DEBT Dib-dol e tAverage Ter. of Public Debt W.moId Bnok 3.2 1.6 IDA 20.8 10.3 Int. as 7 Prior Yea DO 4 D 1.6 4.3 3.6 5.1 6.7 Other Multilateral 4.1 2.0 Aesot. as 7. Prior Y.ar 0O 64 D 4.7 7.7 6.5 15.6 9.5 Conerms-ents 72.3 35.9 luPppliers 8.4 4.2 1IB0D Debt Out. 4 Disbur-d 2.2 2.2 2.3 3.2 3.3 Pinn..cia1lInstitutions 87.1 43.2 11111Ra 7. Public Debt 0 4 D 2.2 1.7 1.7 1.6 1.4 Bonds 5.6 2.8 IBRD. as P.Pblic Scbt Service 5.5 3.3 3.1 1.9 1.9 Public Debts .eE Total PublicM&LIT Debt. 201.5 110.0 IDA Dcbt Oct. & Dinb-red B.7 10.6 15.0 20.8 31.5 IDA on I P.blie Dnbt 0 & I 8.5 8.3 11.4 10.3 13.2 Other M & IT Debts . IDA -s 7 P.blic Debt S-rvlc - 0.5 3.8 0.3 0.7 Short-tern, Debt (dish, only) .- N.t.ri Import projections assume agroun.dnut volm of 650-700 th .u..ot MT -nheled) whir, rtbes acut of crop fatiLes onc in tho fou ye-r- not oppli-able no -vilable ci taff -i-tmae 1,0t avil.ble neparoreiy - il or -oligible I_ Incding SDR, o11c..ti-n -- e- th-u holl Ite~ -1-let unit sho- 2/ -1.ldi.,E 133.4 illi-n paid hy the lnc---nen fur rho utlnru uf tl-ce -oe1 std nultis5 of which: l'Vtnntm 10ib. shurholders XIS.5 nil li- / uf which, Tuihu phosphate vit- - (24.9 snilliom 4/ lt pci-Vte aitl i-clodiog $3.4 iltli-u payments tm ui1ha shur-I-odors 4/ In-lode about SB million food old 7/ ml whic Chinu $44.4 illi.n  ANNEX II Page 1 THE STATUS OF BANK GROUP OPERATIONS IN SENEGAL A. Statement of Bank Loans and IDA Credits (as of January 31, 1976) Amount, less cancellation Loan or (US$ million) Credit No. Year Borrower Purpose Bank IDA Undisbursed Three loans and three credits *fully disbursed 13.6 14.3 140-SE** 1969 Senegal Agricultural Credit 6.0 0.1 252-SE 1971 Senegal Rice Development 3.7 0.9 253-SE 1971 Senegal Technical and Agricul- tural Education 2.0 0.4 254-SE 1971 Senegal Settlement Scheme 1.3 0.3 835-SE 1972 Senegal Railway 6.4 3.6 336-SE 1972 Senegal Housing Site & Service 8.0 6.6 866-SE 1973 OPTS Telecommunications 6.25 4.8 350-SE 1973 Senegal River Polders 4.5 0.2 366-SE 1973 Senegal Highway Maintenance 8.0 4.3 404-SE 1973 Senegal Agriculture Credit 8.2 4.2 S-3-SE 1974 Dakar- Ship Repair marine Engineering 0.6 0.2 446-SE 1974 Senegal Drought Relief 3.0 0.8 987-SE 1974 SOFISEDIT Development Finance 3.0 2.2 530-SE 1975 Senegal Education 15.0 14.9 S-18-SE 1975 Senegal Irrigation Eng. 1.0 1.0 549-SE) 1975 Senegal Agric. Diversifi- 1113-SE) cation 7.0 7.0 14.0 578-SE 1976 Senegal Terres Neuves II _ 2.0 2.0 Total, 36.85 84.0 60.5 of which has been repaid 8.49 - Total now outstanding 28.36 84.0 Amount sold 3.0 of which has been repaid 3.0 Total now held by Bank and IDA* 28.36 84.0 Total Undisbursed 17.8 42.7 60.5 * Prior to exchange adjustments. ** A loan of US$3.5 million for agricultural credit (584-SE) made in 1969 was cancelled on March 25, 1971.  ANNEX II Page 2 B. Statement of IFC Investments (as of January 31, 1976) Amount (US$ million) Type of Equity Year Obligor Business Loan Investment Total 1967 Societe Industri- Fertilizer 2.45 1.01 3.46 ell d'Engrais Plant au Senegal 1972) Bud Senegal, Vegetable 1973) S.A. Export - 0.18 0.18 1974 SOFISEDIT Development Finance Company - 0.23 0.23 Total Gross Commitments 2.45 1.42 3.87 Less Cancellations, Terminations, 1.68 .20 1.88 Total Commitments now held by IFC .77 1.22 1.99 Undisbursed balance C. Bank and IDA Projects in Execution 1/ Cr. No. 140 First Agricultural Credit Project: US$6.0 Million Credit and Ln. No. 584 US$3.5 Million Loan; Credit of February 10, 1969 and Loan of same date (cancelled); Effective June 25, 1969; Closing Date: December 31, 1975 The credit is almost fully disbursed and a completion report is being prepared. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  ANNEX II Page 3 Cr. 252 Casamance Rice Project; US$3.7 million Credit of June 18, 1971; Effective January 6, 1972; Closing Date: June 30, 1977 Project progress is satisfactory although the number of farms super- vised has not increased as much as anticipated. On the other hand, production targets established at appraisal will be reached. Adequate rainfall will ensure a satisfactory 1975/76 campaign, although maize production suffered from heavy rains in August. Because of cost overruns, mainly due to the increased number of extension staff, salary increases and changes in the US dollar exchange rate, the project was running out of funds. However, Govern- ment has made available US$960,000 to finance project implementation between July 1975 and June 1976. Together with undisbursed IDA funds (US$900,000) this would ensure enough money to maintain project activities until a second project is submitted to the Board for consideration. Cr. 253 Technical and Agricultural Education Project; US$2.0 million Credit of June 18, 1971; Effective November 30, 1971; Closing Date: October 1, 1976 All components except the Universit:y Institute of Technology (IUT) have been implemented. This item is 2.5 months overdue and is now expected to be completed in March 1976. Delay has been due largely to technical problems. A cost overrun of about US$500,000 on the project as a whole is anticipated; the Government will finance it. Cr. 254 Terres Neuves Settlement Project; US$1.35 Million Credit of June 18, 1971; Effective January 31, 1972; Closing Date: December 31, 1977 The project's settlement program was completed in 1974 as antici- pated at appraisal. Adequate and evenly distributed rainfall ensured good crops during the last two seasons. The project has been successful in pro- viding higher incomes than expected for settlers and has attracted families with more adult workers than anticipated. STN (the state corporation in charge of the project) has taken over project management from the management agency agreed upon at appraisal. During negotiations of the second project, satisfactory arrangements were worked out to ensure adequate project manage- ment and coordination with other regional agencies involved in the area. The credit will be fully disbursed in the near future.  ANNEX II Page 4 Cr. 314/Ln. 835 Second Railway Project: US$3.2 Million and US$6.4 Million Credit and Loan of June 23, 1972; Effective December 29, 1972; Closing Date: June 30, 1976 The original project was substantially modified to reduce track renewal works in favor of funds for spare parts for track laying and maintenance equipment and for locomotives. By the end of 1975, US$6.0 million had been disbursed out of the total Loan/Credit of US'j9.6 million; track re- newal had been completed, as well as procurement for workshop rehabilitation and orders had been placed for all track equipment and spare parts for loco- motives under the project; bids for the civil works to rehabilitate the work- shops had been submitted and were being analyzed. In recent months, as a result of sustained efforts by supervision missions, :he railway has been granted financial autonomy, locomotive availability has been increased result- ing in a higher carrying capacity, and steps have been taken to strengthen technical assistance. Much improvement is still needed, however, in manage- ment efficiency, and a proposed Third Railway Project, scheduled for FY 1977, will focus on this. A drop in international traffic (end of the Mali drought relief program) and in phosphate traffic (slump in world phosphate market) has weakened railway finances. Cr. 336 Site and Services Project; US$8.0 Million Credit of September 29, 1972; Effective August 31, 1973; Closing Date: June 30, 1979 Progress has been made in removing the major bottlenecks to project execution. To accelerate physical execution the Government has: (a) created a separate Site and Services Project Capital Account authorizing OHLM's Director General to make direct withdrawals under a post hoc audit control and permitting accelerated payments to contractors; and (b) permitted the continued use of a "procedure d'urgence" to accelerate tender award proce- dures. As these measures have only recently been implemented, physical pro- gress remains slow, although construction activity has visibly quickened. These and other agreed upon measures should contribute to recouping some of the delays now amounting to about one year. Some 1,100 plots have now been allocated by public lottery. Plot occupation is expected to begin in early 1976. Rather than reduce the size of the project, the Government and IDA have agreed to reduce the disbursement percentage on civil works from 67% to 45% to ensure the availability of IDA funds for all project components. Although improved working performance has been achieved at the executing agency level and some counterpart personnel have been elevated to project responsibility, adequate counterpart staffing continues to pose difficulties and will warrant close attention.  ANNEX II Page 5 Ln. 866 Telecommunications Project; US$6.25 Million Loan of December 19, 1972; Effective June 5, 1973; Closing Date: December 31, 1976 Large cost overruns have raised the cost of this project from US$8.9 million at appraisal to US$19.9 million according to recent esti- mates. A co-financing formula was successfully worked out which included a loan from the French Caisse Centrale de Cooperation Economique (CCCE) of US$4 million, new French suppliers' credits of US$4 million, and an increased contribution from our borrower, Office des Postes et Telecommunications du Senegal (OPTS). The new financial package and conditions of the CCCE loan were accepted by the Senegalese Government and the agreement would enable the project to be completed as originally appraised. However, recently OPTS has been informed that the Government intends to levy an income tax on OPTS's profits from operations in FY 1975 and also for previous years. OPTS has never before been subject to tax. This change of policy towards the OPTS is causing doubts about the financing plan drawn up at the time the CCCE loan was negotiated. These matters are being discussed with the CCCE and the Government. Ln. 867 Airport: Project; US$3.0 Million Loan of December 9, 1972; Effective May 22, 1973; Closing Date: June 30, 1976 All project work was completed, the runway in full opera- tional service and the loan fully disbursed by the end of January 1976. The total cost of the project did not exceed the CFA franc costs made at appraisal although the devaluation of the US dollar resulted in the proceeds of the Bank loan financing a smaller percentage of the works than originally contemplated. Cr. 350 River Polders Project; US$4.5 Million Credit of January 9, 1973; Effective June 8, 1973; Closing Date: December 31, 1977 Procurement has been completed for the main components of the project and contracts have been awarded. Construction of works is progres- sing satisfactorily. The Senegalese authorities requested that the Debi/ Lampsar components of the project be deleted from Credit 350-SE and be reform- ulated within the broader framework of integrated development of the Senegal River Basin. The proposed reformulation was agreed upon by IDA and an en- gineering project for Debi/Lampsar was appraised in December 1974 and approved by the Board in April 1975. Because of price increases, US dollar devaluation and additional works, the proceeds of Credit 350-SE will not be sufficient to complete the project, despite the deletion of the Debi/Lampsar component. The project authority SAED (Societe d'Amenagement et d'Exploitation des Terres du Delta), is presently seeking supplementary financing from Government of about US$3.6 million to complete the project.  ANNEX II Page 6 Cr. 366 Second Highway Project; US$8.0 M.illion Credit of April 9, 1973; Effective November 28, 1973; Closing Date: December 31, 1978 Implementation of the maintenance program and engineering studies started about six months behind schedule and execution at the begin- ning was slow but has improved since 1975. Engineering studies for the next phase of pavement strengthening were completed during the first half of 1975. Work on pavement strengthening began in February 1975, about 18 months later than appraisal estimates. The pavement strengthenirg component originally comprising 109 km of road rehabilitation had to be reduced to 35 km due to higher construction costs than expected at appraisal., changes in the exchange rate of the US dollar and the shifting of funds from pavement strengthening to higher priority road maintenance. Cr. 404 Second Agriculture Credit Project; US$8.2 Million Credit of June 25, 1973; Effective November 28, 1973; Closing Date: June 30, 1977 The 1974/75 campaign was good: groundnut and cereal production (1.0 million and 0.7 million tons, respectively) reached their highest levels since 1969. Demand for short and meclium-term credit under the 1975/76 campaign remained stronger than anticipated, but available credit funds were sufficient to cover requirements for this campaign, the output of which is expected to be even higher than that of 1974/75. Government intends to cancel the subsidy on equipment but the subsidy on fertilizers will not be reduced significantly, as required. However, the on-going study on fer- tilizer applications financed under the Credit should provide a basis for policy review. Major organizational and financial problems still exist at ONCAD despite technical assistance provided since 1969. Steps taken by Government in early 1975 to remedy this serious situation--maintaining staff level, giving ONCAD management more financial autonomy and strengthening it with qualified accountants--resulted in some improvement, especially in accounting. However, ONCAD's overall performance has not improved and the organization remains overstaffed. High wage inflation increased operating costs without compensation through higher tariffs for its interventions. ONCAD credit requirements attained record levels, partly because of accumu- lating operating losses but mainly because of the large groundnut and millet stocks and prolonged prefinancing for Government's account. Ln. S-3 Ship Repair Engineering Loan: IJS$0.6 Million Loan of September 20, 1973; Effective February 5, 1974; Closing Date: March 6, 1976 The project consists of carrying out the following studies to determine the feasibility of a dry dock project:  ANNEX II Page 7 (a) Technical studies including those of physical and geophysical factors affecting site selection. (b) Economic studies including a market survey, a revision of the dry dock project feasibility study and a survey formulating a training program. The studies have now been completed; they indicate low economic and financial returns, and a relatively high market risk. The Government is exploring possible financing and ways of reducing the market risk. Cr. 446 Drought Relief Project; US$3.0 Million Credit of December 7, 1973; Effective February 5, 1974; Closing Date: June 30, 1976 The project is part of the Senegalese plan to rehabilitate people in drought affected areas by assisting them to redevelop and improve their farms and lands. Operations, including strengthening of health and water supply services, have been proceeding satisfactorily and the project is expected to be completed on schedule. Ln. 987 SOFISEI)IT Project; US$3.0 Million Loan of May 24, 1974; Effective November 22, 1974; Closing Date: December 31, 1978 SOFISEDIT was created by the Government in March 1974 for the purpose of providing long-term financing for industry and tourism develop- ment. To recruit the initial staff and to find office space took several months and the company did not start operations until November 1974. During its first fiscal year of operations which ended September 30, 1975, SOFISEDIT approved nine loans totaling US$2.4 million and three equity investments for a total of US$320,000. The loan to SOFISEDIT is expected to be fully committed by the end of 1976 and a second project was appraised in December 1975. Cr. 530 Second Education Project: US$15.0 Million Credit of February 19, 1975; Effective April 22, 1975; Closing Date: June 30, 1980 The project management unit has been strengthened and is functioning well. Design work on the four lower secondary schools is well advanced and is proceeding satisfactorily in the case of the lower secondary science/technology centers. Construction at the Dakar Industrial Worker Upgrading Center has begun and a tender has been issued for the National Marine Training School. Equipment lists and bills of quantities of construc- tion materials for the nonformal rural youth training program have been approved by IDA. The Hotel/Tourism Training Center is delayed due to pro- longed contract negotiations between the Government and the selected archi- tectural consulting firm. Also the Government has yet to complete the terms of reference for a preinvestment study of primary education.  ANNEX II Page 8 Cr. 549/Ln. 1113 Sine Saloum Agricultural Development: US$7.0 million Credit and Loan of May 22, 1975; Effective October 31, 1975; Closing Date: June 10, 1981 This project, which started in late 1975, aims at increas- ing and diversifying agricultural production in the Sine Saloum region through the reinforcement of SODEVA'S activities. Activities under the project, includ- ing the setting up of extension services, are underway as planned. Cr. S-18 Debi-Lampsar Irrigation Engineering Credit, US$1.0 million Credit of May 22, 1975; Effective February 13, 1976; Closing Date: December 31, 1977 The credit finances the execution of the engineering studies needed for the implementation of the Debi-Lampsar irrigation scheme. Despite delays in effectiveness, the studies are well advanced and the original schedule for project implementation will not be substantially delayed. Cr. 578 Terres Neuves II Resettlement and Eastern Senegal Technical Assistance Project, US$2.0 million Credit of August 6, 1975; Effective November 14, 1975; Closing Date: December 31, 1979 The project, due to start in 1975, consists of the resettle- ment of 600 families, and studies and surveys for a master plan for the Eastern Senegal region.  ANNEX III Page 1 SENEGAL - FEEDER ROADS PROJECT Loan and Project Summary Borrower: Republic of Senegal Amount: US$6.6 million equivalent Terms: Standard Third Window terms Project Description: Improvement and subsequent maintenance of about 1,000 km of feeder roads and maintenance of about 250 km of existing feeder roads; purchase of highway equipment and spare parts and of materials and supplies for project operations; technical assistance for project implementation and monitoring; construc- tion of a headquarters building for BPP.  ANNEX III Page 2 Estimated Cost: (net of taxes) US$'o0o equivalent Local Foreign Total A. Equipment and Materials - Equipment 242 2,274 2,516 - Materials 88 44 132 330 2,318 2,648 B. Spare Parts and Supplies 275 2,590 2,865 C. Staff - Technical Assistance 50 390 440 - Head Office 124 - 124 - Field Staff 608 - 608 782 390 1,172 D. Works Contracted - Head Office 151 111 262 - Other Works Contracted 76 304 380 227 415 642 Totals A-D 1,614 5,713 7,327 E. Contingencies 280 888 1,168 GRAND TOTAL 1,894 6,601 8,495 (rounded) (1,900) (6,600) (8,500) Percent 23% 77% 100% Financing Plan: The proposed loan of US$6.6 million will finance all the foreign costs of the project, or 77% of total costs net of taxes. The Government will finance the local costs amounting to US',1.9 million equivalent.  ANNEX III Page 3 Estimated Disbursements: In US$ millions FY77 FY78 FY79 FY80 Yearly 3.5 1.4 1.4 0.3 Cumulative 3.5 4.9 6.3 6.6 Procurement Arrangements: Equipment, materials and supplies amounting to about US$5.0 million will be procured on the basis of inter- national competitive bidding in accordance with Bank Group guidelines. Contracts for equipment, materials and supplies costing under US$20,000, and for spare parts, can be awarded on the basis of competitive bidding in accordance with local procedures acceptable to the Bank; the total amount of such purchases would not exceed US$400,000. Contracts for the construction of selected civil works (drainage and crossing struc- tures, excavation/haulage of materials for base courses, and BPP office building) amounting to about US$0.5 million, will be awarded on the basis of competitive bidding advertised locally following procedures acceptable to the Bank. Construction supervision will be carried out by BPP with the assistance of the Regional District Engineers. Consultants: Total consultants' services would amount to about 55 man/months. Economic Rate of Return: About 14%. Appraisal Report: No. 941a-SE of March 4, 1976.  SENEGAL M,