Cameroon - Second Semry Rice Project

Report No. 1722a-CM FILE COPY Appraisal of A Second Semry Rice Project Cameroon December 27, 1977 Agriculture Projects Department Western Africa Regional Office FOR OFFICIAL USE ONLY M 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 US$1 : CFAF 245 CFAF 1 : US$0.0041 CFAF 1,000,000 US$4081.63 WEIGHTS AND MEASURES (Metric System) 1 hectare : 2.47 acres 1 kilometer 0.62 miles 1 kilogram: 2.205 pounds i metric ton 2,204.6 pounds l liter : 1.057 U.S. quarts ABBREVIATIONS BCD : Banque Camerouna::se de Developpement CCCE : Caisse Centrale de Cooperation Economique FAC : Fonds d'Aide et de Cooperation FONADER : Fonds National de Developpement Rural ICRISAT : International Crops Research Institute for the Semi-Arid Tropizs LITA International Institute of Tropical Agriculture IRAF Institut de Recherches Agricoles et Forestieres IRAT : Institut de Recherches Agronomiques Tropicales ONAREST : Office National de la Recherche Scientifique et Technique SEMRY : Societe d'Expans:.on et de Modernisation de la Riziculture de Yagoua SOGREAH : Societe Grenobloise d'Etudes et d'Applications Hydrauliques WARDA : West Africa Rice Development Association FISCAL YEAR July l to June 30  CAMEROON SECOND SEMRY RICE PROJECT Attachment to Appraisal Report Since this report was completed before the end of the last quarter of 1977, the Bank lending rate used (paras. viii, 5.04, and Annex 18, Table 3) is 7.9% p.a. instead of the rate of 7.45% p.a. applicable during the first quarter of 1978 announced on January 3, 1978. The decrease reduces the Government's debt service obligations on the Bank loan by 2.4%.   FOR OFFICIAL USE ONLY CAMEROON SECOND SEMRY RICE PROJECT Table of Contents Page No. SUMMARY AND CONCLUSIONS .OCO....C.......... O.C........... i-v I. INTRODUCTION .e. .................00000 e e oo oooo.o oo oo ................... e ...... 1 II. BACKGROUND ....e..o.ooee ..ooooooee.ooo...eoooeee...o.o..e.e 1 A. General ooooo........................................... e . 1 B. The Agricultural Sector .o..o.eoeoe.o. eee.. e........ 2 C. Institutions .... ,.ee..e.. o*..**e..... 3 D. Agricultural Development Strategy .. .. 4 III. THE FIRST SEMRY RICE PROJECT ............................ 5 A. The Project Area .....oo...o.. e.e.. ...e..e.......... 5 B. Project Description ..0e o .oe ....oeeo .....e....*.e.** 5 CO Project Performance .o Cee.o..................... 5 D. Conclusions ,.,..o..... o...oooe... eo....o......... 7 IV. THE PROJECT ............ ............ ............ 8 A. Project Description ........................oee.** .* 8 B. Detailed Features of Project Works .9 C. Water Supply, Demand and Quality ................... il D e Water Rights .................... ................... E. Status of Engineering e.. e.o e.Il11 F. Irrigation Works and Construction .................. 12 G. Implementation Schedule o..... ...oe... .. 12 H. Agricultural Development oooo ... oo.o** ... *e 12 I. Resettlement ...................o............... 13 J. Health and Environment ............................. 14 V. COST ESTIMATES AND FINANCIAL ARRANGEMENTS ............... 14 A. Cost Estimates ........o..................... ...... 14 B, Financial Arrangements ............................. 16 C. Procurement ........................................ 18 D. Disbursements ......C ........................... 19 E. Accounts, Audits, Reports ... .... 19 This report is based on the findings of an appraisal mission comprising Messrs. M. Burer, P. Streng, C. des Bouvrie (Bank), R. Noronha and J. ter Vrught (consultants) which visited Cameroon in May/June 1977. Messrs. A. Otten and P. Brimble assisted in preparing the report. 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 Worid Bank authorization.  -2- Page No. VI. ORGANIZATION AND MANAGEMENT .............................9 19 A. SEMRY Organization and Staffing Requirements ....... 19 B. Training ........................ e ....e......... 21 C. Food Crop Research ......................22 D. Agricultural Inputs and Credit ..................... 22 VII. PRODUCTION AND YIELDS; MARKETS AND PRICES; FARM INCOME AND FARMERS' CHARGES; RENT AND COST RECOVERY; SEMRY AND GOVERNMENT CASH FLOWS ............... 23 A. Production and Yields ... . ..... ..... ... 23 B. Market Prospects and Prices ....... ..... 24 C. Farm Income and Farmers' Charges ................. 25 D. Rent and Cost Recovery .. .... .. .......... 26 E. SEMRY and Government Cash Flows. .................... 26 VIII. BENEFITS AND JUSTIFICATION...................es*....... 26 IX. AGREEMENTS REACHED AND RECOMMENDATIONS .................. 27 ANNEX 1 THE PROJECT AREA . ............. 31 Table 1 Climatological Data . ......... 36 ANNEX 2 THE FIRST SEMRY RICE PROJECT (Credit 302-CM) .37 Table 1 SEMRY I Area, Yields and Production 41 Table 2 Value of SEMRY I Output. 42 ANNEX 3 PROJECT WORKS .43 Table 1 Construction Quantities for Civil Works. 46 Table 2 Principal Project Features .47 Table 3 Irrigation Facilities Costs .48 ANNEX 4 Table 1 Heavy Earthmoving Equipment for Force Account Work .49 Table 2 Land Preparation Equipment ............. 50 ANNEX 5 WATER DEMAND, SUPPLY AND QUALITY 51 Table 1 Summary of Irrigation Water Requirements 54 Table 2 Reservoir Inflow and Outflow Balance ... 55 ANNEX 6 ENGINEERING SERVICES .56 Appendix 1 Works Under Consulting Firm's Responsibility .58 Table 1 Staffing Pattern of Consulting Firm 59  -3- Page No. ANNEX 7 Table 1 Implementation Schedule .... ............ 60 Table 2 Schedule of Early Events ............... 61 ANNEX 8 RESETTLEMENT ....... .................... 62 Table 1 Resettlement Schedule ..... ............. 65 ANNEX 9 HEALTH AND ENVIRONMENT .......... ....... 66 ANNEX 10 SCHEDULE OF ESTIMATED EXPENDITURES Table 1 Project Cost Summary ...Project 70 Table 2 Expenditure Estimates: Civil Works 71 Table 3 Expenditure Estimates: Equipment .....t 72 Table 4 Expenditure Estimates: Operation and Maintenance .74 Table 5 Expenditure Estimates: Personnel 75 Table 6 Inflation Indices Used in Calculating Price Increases .77 ANNEX 11 FINANCING PLAN ......................... 78 ANNEX 12 SCHEDULE OF ESTIMATED DISBURSEMENTS .... 79 ANNEX 13 ORGANIZATION AND MANAGEMENT Job Descriptions and Qualifications of Senior Staff .....80 Chart i SEMRY Organizational Structure. ........ 82 Chart 2 SEMRY Directorate General: Organizational Structure and Staff in Charge .83 Chart 3 SEMRY Il: Organizational Structure .... 84 Table 1 Staffing Pattern .85 Table 2 Senior Staff: Cameroonization Targets . 86 ANNEX 14 RESEARCH ... . . ... . . . . . . . . ... .R.......... 87 ANNEX 15 AREA, YIELDS AND PRODUCTION . .90 ANNEX 16 MARKET PROSPECTS AND PRICES Table 1 Rice Market Projections, 1977-1990 91 Table la Domestic Production of Paddy and Rice, 1974-1990 .92 Table 2 Cameroon Rice Market Estimates, 1970-1976 93 Table 3 Economic Ex-Mill Price of Rice .94 Table 3a Rice Price Structure (Current Terms) 95 Table 4 Economic Ex-Mill Prices for Different Marketing Shares .. 96  - 4- Page No. ANNEX 17 LABOR REQUIREMENTS, FARM BUDGETS AND FARMERS' CHARGES Table 1 Farm Labor Requirements - Per Crop ..... 97 Table 2 Farm Labor Requirements - Per Month .... 98 Table 3 Crop Production Costs .... ............... 99 Table 4 Farm Family Budgets .................... 100 Table 5 SEMRY Farmers' Charges ........... ....... 101 ANNEX 18 FINANCIAL DATA Table 1 Rent and Cost Recovery Indices ......... 102 Table 2 SEMRY II Cash Flow ................. 103 Table 2a Value of SEMRY II Output ... 105 Table 2b SEMRY Ex-Mill Prices ..... .............. 106 Table 3 Government Cash Flow ............. 107 ANNEX 19 ECONOMIC ANALYSIS Table 1 Project Benefits ....................... 108 Table 2 Project Costs .......................... 109 Table 3 Summary of Costs and Benefits for Rate of Return Calculations and Sensitivity Tests ................................ 110 Table 4 Rates of Return ........................ 111 MAPS 13021 13022  - j - CAMEROON SECOND SEMRY RICE PROJECT Summary and Conclusions Background i. The Government of Cameroon has requested the Bank Group and two French aid agencies, the Fonds d'Aide et de Cooperation (FAC) and the Caisse Centrale de Cooperation Economique (CCCE) to help finance a second SEMRY I/ rice irrigation project. The project would build on experience with the first SEMRY Rice project (Credit 302-CM) which was completed in 1976. ii. Cameroon has a population of 7.6 million and a per capita income of US$300. It possesses a great variety of soils and climates, from rain forests in the south and east to mountainous highlands in the west and center, and bush savannah in the north, giving agriculture a considerable degree of diversity. The country experienced satisfactory growth in the 1960's with GDP increasing at about 7% per year. Since 1971, the growth rate has dropped to less than 3% per year, caused by deteriorating terms of trade and drought in the north. The First SEMRY Rice Project iii. The objective of the first SEMRY Rice Project, located along the Logone River in Cameroon's northern province, was to increase rice production by constructing an irrigation network on 4,300 ha, a rice mill, and by providing inputs, mechanical services and extension, as well as technical assistance for SEMRY. At appraisal, project cost including taxes was estimated at US$8.0 million; the proposed participation of IDA was US$3.7 million while FAC and CCCE together provided US$2.6 million and approved a supple- mentary credit of US$3.2 million in 1976. iv. Project execution was on schedule with 4,500 ha completed by April 1976 and another 800 ha under the supplementary credit by mid-1977, or 1,000 ha more than originally foreseen. The project has been well man- aged, and production results are considerably better than estimated: paddy production in 1976/77 was 24,500 tons compared with an original estimate of 12,300 tons, as farmers have readily adopted double cropping, and yields in both seasons are about 50% higher than expected at appraisal. Some 3,400 farm families now participate in the project. At full development, their average net income (after payment of all charges) is projected to reach US$890, or almost three times the appraisal estimate. SEMRY's financial position is sound, and the project is generally regarded as successful. 1/ Societe d'Expansion et de Modernisation de la Riziculture de Yagoua.  Project Description v. The proposed project would lead to the production of rice and other crops on 15,000 ha which would be protected from flooding by the Logone River through the construction of two dikes. It would be located some 70 km north of the SEMRY I site. Of the 15,000 ha, 7,000 ha would be irrigated by gravity permitting two rice crops per year, and 8,000 ha would be under traditional rainfed cultivation. Irrigation water would be pro- vided by a reservoir covering a maximum of 38,000 ha. The reservoir would offer potential for fishery development, and its fringes would provide pas- ture land throughout the dry season. The project would be carried out over a six-year period (1977/78-1982/83) and would consist of: (a) constructing two dikes, totalling 48 km, with main intake structure, feeder canal, regulators, and drainage outfall; (b) constructing an irrigation and drainage system, in- cluding on-farm works, and feeder roads serving an area of 7,000 ha; (c) constructing access roads linking, in particular, the main localities in the project area, viz. Tekele, Pouss, Maga and Guirvidig, totalling 50 km; (d) constructing a headquarters and services complex, including staff housing, garages, warehouses, a rice mill, storage facilities and an airstrip; (e) providing heavy earthmoving and agricultural equip- ment, and vehicles; (f) staffing and equipping the project authority, train- ing local staff, and conducting applied research and studies; (g) providing 7,000 participating farm families, half of whom would be resettled, with support services including credit; and (h) providing a health program for the project area. vi. As the Logone forms the border with Chad at the proposed project site, Cameroon informed Chad in 1975 of its intention to carry out the proj- ect, in accordance with the existing Logone Water Agreement between the two countries. In January 1976, the two countries signed a document in which Chad gave its agreement in principle to the execution of the proposed project, and this agreement was confirmed in June 1977.  - iii - Cost Estimates and Financing Arrangements vii. Project costs are estimated at US$55.5 million, including indirect taxes, but excluding direct taxes and duties from which the project would be exempted. The foreign exchange component is US$41.2 million or 74%. Project costs net of taxes are estimated at US$51.0 million. Physical contingencies and expected price increases together would amount to US$13.4 million or 32% of base cost estimates. viii. The Bank loan of US$14.5 million would be made to Government at 7.9% interest p.a. with a term of 20 years, including a five-year grace period. The IDA credit of US$14.5 million would be made on standard terms. The CCCE contribution of US$8.2 million would be a loan at 5.5% interest p.a. with a term of 20 years, including a five-year grace period, while the FAC contribution of US$4.0 million would be a grant. Conditions of effective- ness of the proposed loan/credit would be the execution of the Financing Agreement between SEMRY and Government and the signature of the first-year grant agreement between FAC and Government, and the loan agreement between CCCE and Government. ix. One-third of the Bank Group funds would be passed on to SEMRY as a grant, and two-thirds as a loan at 6.75% interest p.a. with a term of 35 years, including a six-year grace period. Of the CCCE funds half would be a participation in equity, one-third a grant and one-sixth a loan at 5.5% interest p.a. with a term of 35 years, including a six-year grace period. The FAC funds would be passed on to SEMRY as a grant, and Government's contribution partly as a grant (about 25%) and partly as equity. x. In view of the limited period during which the area is accessible for heavy equipment, the main civil works contract and the contract on essential heavy earthmoving equipment had to be signed in late 1977. A mobilization fee, amounting to approximately US$1.1 million, for the civil works contract, a down payment of about US$400,000 for the equipment contract and US$100,000 for engineering consultant services had to be paid at that stage. It is therefore proposed that an amount of up to US$1.6 million be retroactively financed. Procurement and Disbursement xi. Contracts have been awarded for the construction of the main civil works and the supply of heavy earthmoving equipment following inter- national competitive bidding in accordance with Bank guidelines. Contracts for fertilizer; land preparation equipment; rice milling machinery; all transport vehicles; garage and workshop equipment; and electricity, water and telephone networks would be awarded similarly. Miscellaneous items not exceeding US$100,000 would be procured on the basis of local competitive bidding. For contracts of less than US$20,000, direct procurement on the basis of several quotations would be used. The irrigation network, on-farm development works, and all other buildings would be carried out by SEMRY on force account.  - iv - xii. The proposed Bank loan and IDA credit would be disbursed to cover 66% of the cost of civil works, equipment including farm machinery and inputs, and consultants and studies not financed by FAC. Organization and Management xiii. For the purposes of the project, SEMRY would be reorganized. A Directorate General would be created with overall management responsibility. Two departments, SEMRY I and SEMRY II, would be in charge of day-to-day operations in their respective project areas. SEMRY staff would also implement a training program, be responsible for applied research, administer a credit scheme for its farmers on behalf of FONADER, and upgrade existing health services. It is expected that initially most senior staff positions in the Directorate General and SEMRY II would be filled by expatriates. Expatriate staff input would amount to 64 man-years over the project implementation period, reaching its peak in project year 4. The large number of expatriates is necessary because the project demands skilled and experienced personnel not readily available in Cameroon. Moreover, Cameroonization of management is best achieved by gradually increasing responsibilities of qualified nationals in specific positions, a process which takes time. Markets xiv. At full development, the project would produce about 47,000 tons of paddy annually, and some 26,000 tons of rice would be available for sale. If all rice projects presently identified or under preparation proceed as scheduled, domestic rice production would reach 90,000 tons by 1990, of which SEMRY I and SEMRY II would produce 60%. Assuming that the rapid in- crease of domestic rice consumption experienced in the 1970's continues, total domestic consumption in 1990 would about equal the production esti- mate. xv. Only part of SEMRY's production would be absorbed domestically, how- ever. SEMRY is better placed to serve northern Cameroon and neighboring ex- port markets, such as Chad and Nigeria, than Cameroon's southern markets where distance puts it at a disadvantage. Exports of SEMRY rice to north- ern Nigeria have increased recently, reaching close to 9,000 tons or about 60% of SEMRY's sales in 1976. This upswing is expected to continue in the future. Cost Recovery, SEMRY Finances, Government Revenue xvi. The project would create three main sources of revenue: farmers' charges, milling margins, and incremental rice sales taxes. Taking all project costs and discounting cost and revenue streams at 10% over 35 years, the present value of total revenues would cover about 60% of the present value of total cost. xvii. SEMRY's cash flow from the proposed project shows that, after allowing for replacement needs, it could meet its debt service obligations  - v - to Government. Government's net inflow from the project would be nega- tive until year 10, as SEMRY's debt service payments would begin only in year 7 and would not cover the full amount of external borrowing. Benefits and Justification xviii. The project's direct benefits would be increased rice production which would raise net incomes of the 7,000 participating farm families more than threefold to about CFAF 183,000 (US$745) per year. The project would also lead to improvements in livestock, fisheries, health, and dry farming. The economic rate of return is 14%. xix. As the proposed project would follow the successful SEMRY I project and use essentially the same organizational structure and techniques, the normal risks associated with projects of this kind would be minimized. However, three important risks can be identified: a delay in the start of irrigation works, a slower than expected Cameroonization, and a slower development of exports. Sensitivity tests show that in the worst case -- a delay of project start by one year, an expatriate presence for two extra years, a reduction of exports to 30% of production, and a 10% reduction in yields -- the rate of return would still be 8%. On the other hand, if all goes as planned, exports rise to 80% and yields increase by 10%, the rate of return would be 17%. xx. In addition to the direct benefits, the project would entail several non-quantifiable, indirect benefits: (i) creation of good pasture land on the fringes of the reservoir in the dry season; (ii) introduction of fishing pos- sibilities in the reservoir, thus creating a supplementary source of protein; (iii) introduction of a health program; and (iv) initiation of research on dry-land food crops and establishment of an organization to promote research results among the farmers. Recommendations xxi. Based on the assurances obtained concerning the items listed in Chapter IX, the project would be suitable for a Bank loan of US$14.5 million and an IDA credit of US$14.5 million.   I. INTRODUCTION 1.01 This report appraises a second SEMRY rice irrigation project for which the Government of Cameroon has requested Bank Group financing. The first project, which IDA cofinanced with FAC and CCCE, was successfully im- plemented. Its performance is summarized in Chapter III. 1.02 Previous Bank Group assistance for agriculture comprises: (i) the CAMDEV oil palm and rubber project -- Loan 490-CM, US$7.0 million, and Credit 100-CM, US$11.0 million in 1967; (ii) the SOCAPALM oil palm project -- Loans 593-CM, US$7.9 million in 1969, and 886-CM, US$1.7 million in 1973; and (iii) the SEMRY rice project -- Credit 302-CM, US$3.7 million in 1972; all of these have been satisfactorily completed. The Bank Group is also assisting: (i) a livestock project -- Loan 983-CM, US$11.6 million in 1974; (ii) a cocoa project -- Loan 1039-CM, US$6.5 million in 1975; (iii) the Niete rubber project -- Credit 574-CM, US$16.0 million in 1975; and (iv) the Plaine des M'bo Rural Development Project -- Credit 672-CM, US$2.0 million in 1977. Except for occasional delays in implementation, all of these projects are progressing satisfactorily. In addition, three operations were approved recently by the Board: (i) a Technical Assistance project -- Credit 673-CM, US$4.5 million; (ii) the Second SOCAPALM project -- Third Window/Bank Loan 1391/2-CM, US$25 million; and (iii) the Rural Development Fund project - Credit 723-CM, US$7.0 million. 1.03 The feasibility study for the proposed project was prepared by consultants (SOGREAH) in 1974, updated in 1976, and supplemented by a rice market study (1975). This report is based on the findings of an appraisal mission composed of Messrs. M. Burer, P. Streng, C. des Bouvrie (Bank), R. Noronha and J. ter Vrught (consultants) which visited Cameroon in May/ June 1977. Messrs. A. Otten and P. Brimble assisted in preparing the report. II. BACKGROUND A. General 2.01 Cameroon covers an area of some 475,000 km , of which approximately 37% is forest, 30% is grazing land, only 4% is cropped, and the remainder is accounted for by rivers, lakes and unoccupied (including fallow) land. Total population is estimated at 7.6 mil'lion (mid-1976), with an overall growth rate of 2.3% a year. Particular demographic features are: (a) a rapid migration to urban areas (where the growth rate is 7%); and (b) a relatively low ovErall population density of 15.4 persons/km , which masks a range of 225/km to 1/km . The country's ecoclimatic zones range from tropical for- est in the south to Sahelian plains in the north -- giving agriculture a considerable degree of diversity.  - 2 - 2.02 Average per capita income is US$300, with the absolute poverty level estimated at about US$70 per capita. During 1960-70, growth of real GDP was about 7% per annum; but since 1971, it has declined to less than 3% per annum. This was caused by factors largely outside Cameroon's control, such as fall- ing prices for its exports, drought, and rapidly rising import prices. Meanwhile, Government stepped up public investment, which increased by 50% to reach an annual average of about US$190 million in constant 1974 dollars during the Third Development Plan (1972-76). At the same time, greater emphasis has been placed on agricultural output. The Fourth Plan (1977-81) projects a GDP growth of 7% per annum. B. The Agricultural Sector 2.03 Agriculture plays a major role in Cameroon's economy, providing a livelihood for about 75% of the population and accounting for about 35% of GDP and over 70% of the value of exports. Traditional agriculture accounts for over 90% of agricultural output. It comprises some 1 million small- holdings of about 2 ha each, using family labor. Smallholders produce food crops for subsistence and the local market, and cocoa, coffee, cotton and groundnuts for export. Cattle-raising mainly by nomadic and semi-nomadic pastoralists in northern Cameroon and the north-central Adamaoua plateau accounts for about 15% of the production of the traditional subsector. The industrial plantation subsector comprises several large government-owned and a few private industrial estates (foreign-owned), producing palm oil (mainly for domestic consumption) and rubber (for export). 2.04 Production of foodstuffs expanded over the past five years at an annual rate of about 5.0%, which was ahead of population growth. But this was due mainly to rapid growth in the output of vegetables, potatoes and, to some degree, rice in response to growing urban demand, while there was stagna- tion in the output of traditional staples, such as maize (in the west), plantains, yams, cassava and cocoyams (in the center-south) and millet and sorghum in the north (here, production was adversely affected by the Sahelian drought). Although Cameroon is largely self-sufficient in foodstuffs, imports of wheat and rice (again mainly for urban consumption) have risen sharply since 1970. Marketing of food crops is almost exclusively in the hands of private traders, most of whom operate over limited areas and with a small turnover. 2.05 The national livestock herd is estimated at 3 million head of cattle (of which about 40% are in the north), 3 million sheep and goats, 0.5 million pigs and 8 million poultry. Annual meat production is esti- mated at 80,000 tons. In the past, this was supplemented by imports of live animals from Chad, but recently these cattle have been diverted to Nigeria. As a result, without an increase in local production, annual per capita consumption in Cameroon has probably fallen from its previous level of about 11 kg. Market price increases for beef and cattle over the last two years were about 15% per year. Price controls were established by Gov- ernment, but have so far been ineffective.  - 3 - 2.06 Although forests account for 37% of the total area, the forestry sector contributes less than 3% to GDP, 8% to exports and 7% to employment. Better utilization of Cameroon's vast forest resources calls for improved inventory statistics, construction of feeder roads, changes in concession and fiscal policies, and encouragement of local wood processing. Studies financed under the Second Highway Project (Credit 429-CM and Loan 935-CM) are designed to assist Government efforts in these fields. 2.07 There are marked regional disparities in farm incomes, stemming basically from differences in farm size due to population pressure and the type of cash crops grown. Per capita agricultural incomes are highest in the cocoa and coffee producing areas of the south (about US$150), whereas in the northern highlands, they are as low as US$70. C. Institutions 2.08 The National Fund for Rural Development (FONADER) was created in 1973 and given the dual role of: (a) providing credit to farmers, precoop- eratives and cooperatives, and (b) appraising, financing and supervising a wide variety of rural development programs, from pesticide and fertilizer supply to village water supply and irrigation projects. It operates from its Yaounde headquarters, relying on the departmental field services of the ministries concerned for basic evaluations and implementation. 2.09 The shortcomings of assuming such widespread responsibilities from a narrow base have now become apparent; a reorganization plan is pres- ently under review by Government. This plan suggests FONADER's concen- trating on activities such as the opening of regional offices, and offer- ing full agricultural banking services. In addition, a detailed organiza- tion study, to be financed by the European Development Fund (FED), is about to get underway. 2.10 Agricultural services are provided by a variety of government and parastatal organizations. At Government level, the Ministries of Agricul- ture and Livestock have primary responsibility for most aspects of agricul- tural and animal production, respectively. Agricultural research is largely undertaken by crop-oriented institutes under the umbrella of the National Organization for Scientific and Technical Research (ONAREST) and coordi- nated by the Ministry of Planning. Food crop research, which until recently was carried out by the French "Institut de Recherches Agronomiques Tropicales (IRAT)", is now the responsibility of the "Institut de Recherches Agricoles et Forestieres (IRAF)". Responsibility for agricultural training is divided between the Ministries of Agriculture and Education. The Ministries of Agriculture and Livestock are represented in each province and department, where a delegate or section head liaises with local administrative authori- ties (Governor and Prefects). Most delegations include representatives of various ministerial directorates (e.g., Rural Engineering, Cooperatives, Vet- erinary Services) who enjoy operational autonomy. However, these national  - 4 - services suffer from a number of shortcomings which constitute constraints on development: (a) management, communication and coordination are lacking; (b) research is not adequately applied to rural needs; (c) extension agents are few in number and often insufficiently equipped and trained; and (d) oper- ational funds are critically short, rendering key services such as mainte- nance largely inoperative. 2.11 The parastatal sector is composed of Development Companies (Societes de Developpement) which are charged with specific agricultural programs or projects usually built around a single product. They include SODEPA for livestock, SOCAPALM for oil palm, and SODECAO for cocoa. Some are responsi- ble for all product activities -- provision of inputs, extension services, processing and marketing -- such as SODECOTON for cotton and SEMRY for rice, both operating in the northern province. D. Agricultural Development Strategy 2.12 To achieve the 1977/81 growth target of 7%, the Fourth Plan pro- poses a high-level of public investment of over US$2.0 billion (in constant 1974/75 terms), and gives increasing emphasis to directly productive sectors. The projected public investment in agricultural development is, in 1974/75 prices, CFAF 85 billion (US$380 million), representing some 17% of the Plan's total public investment expenditure. At the same time, recurrent expenditures for rural development services are projected to grow by 6.7% per annum over the Plan period. 2.13 Implicit in the Fourth Plan is a two-pronged strategy. Due to the need for increased export revenues, and in order to utilize potentially productive natural resources as well as the technical and managerial experi- ence already acquired by existing organizations, about a quarter of total projected investment will be devoted to the further expansion of plantation agriculture, including promotion of smallholder schemes. The rest of the investment program is to promote and improve production in the traditional sector through a variety of means, such as integrated regional development, settlement schemes, and specific crop promotion. In livestock, a similar balance between projected investment in modern ranch programs and in activ- ities to improve traditional livestock production is planned. 2.14 The Bank supports Government's efforts to achieve balanced growth of rural development projects in traditional areas and integrated estate and smallholder plantation projects. This strategy involves developing both in- dustrial companies and smallholder schemes. The Bank's lending in the agri- cultural sector has three main objectives: firstly, increasing technical and managerial capabilities, strengthening institutions, and improving sec- tor policies, mainly through training and technical assistance; secondly, improving the country's foreign exchange position through expanding production and export of agricultural products; and thirdly, increasing the productivity of the overpopulated and poor rural areas. The project which is the subject of this report is designed to meet these objectives-.  - 5 - III. THE FIRST SEMRY RICE PROJECT A. The Project Area 3.01 The project is in the Logone River floodplains of Cameroon's north- ern province, north of the town of Yagoua (Map 13021). Except where protected by river dikes, the underdeveloped plains are flooded for up to five months of the year, and agriculture is limited to the few high grounds and to lands where flood levels allow cultivation of submerged rice. Before the project, some 20,000 ha or less than 2% of the floodplains was cultivated by tradi- tional methods in any one year. Livestock raising, however, is important using the numerous water holes remaining in the dry season, and fishing is also a widespread dry-season activity. A more detailed description of the project area is in Annex 1. B. Project Description 3.02 The first SEMRY Rice project aimed at increasing rice production by the construction of an irrigation network providing a fully controlled water supply, and by the provision to farmers of inputs, mechanical ser- vices and extension. At appraisal, the project was expected to irrigate 4,300 ha and to benefit 2,800 families. A completion report was issued in May 1977. Details on project performance are in Annex 2 and are highlighted in the following section. 3.03 At appraisal, total project cost including taxes was estimated to be US$8.0 million; the IDA contribution was US$3.7 million, while French aid (FAC and CCCE) provided US$2.6 million to finance technical assistance and consultant services, as well as local expenditures for extension and research. In 1976, FAC and CCCE contributed an additional US$3.2 million to extend tech- nical assistance and consultant services for one year, provide additional storage, and complete irrigation works on an additional 800 ha. 3.04 As originally envisaged, the project has been executed by SEMRY (para 3.09), which has its headquarters at Yagoua. Project implementation started in late 1972, and irrigation works on 5,300 ha were completed in mid-1977. C. Project Performance 3.05 The SEMRY Rice project was carried out on schedule and results to date have been markedly better than expected at appraisal.  - 6 - 3.06 Project Works. The original project was completed at a cost about 10% higher than appraisal estimates, including contingencies; the financing gap was covered by Government and FAC contributions. The cost overrun is remarkably small in view of: (a) the rapid annual price increases reaching 10-12% in Cameroon as against price contingencies of only 4-5% budgeted at appraisal; (b) the fact that the entire irrigation system was newly built and not partly rehabilitated (1,300 ha were assumed to be rehabilitated at appraisal), and 200 additional ha were completed; and (c) the construction of primary canals on an additional polder of 800 ha. Main civil works were constructed on contract, and on-farm development works were carried out by SEMRY on force account. The volume of work accomplished each dry season was consistently larger than appraisal estimates. 3.07 Production and Farmers' Benefits. Broadcasting of seed was assumed at appraisal. However, early in the implementation period, farmers adopted the more efficient transplanting method, which constitutes a major innovation in the area. This was the main reason why paddy yields over the past three seasons averaged 4.5 tons/ha, or 50% above appraisal estimates at full devel- opment. In addition, double cropping was more readily accepted by the farmers than foreseen, and dry-season cropping in 1977 reached 1,400 ha and is expected to reach 3,000 ha in 1981 (the maximum obtainable in view of dry-season pump- ing restrictions under the Cameroon-Chad Logone Water Agreement), or double the appraisal estimate. As a result, paddy production in 1976/77 was 24,500 tons compared with an original estimate of 12,300 tons, and full development is expected to be reached in 1980/81 with a production of 34,800 tons, or twice the original estimate. 3.08 With a larger paddy production and higher paddy prices than assumed at appraisal, average farm'family incomes are correspondingly higher. At full development, they are now projected to reach CFAF 218,000 (US$890) annually, almost three times the appraisal estimate and almost six times the amount "without the project". Since the project covers a larger area than estimated at appraisal, it will also benefit a larger number of families: about 3,400 instead of 2,800. The economic rate of return is estimated at 19- 22% compared with an appraisal estimate of 11%. 3.09 Management Performance - SEMRY. Instrumental in achieving the above results has been the effectiveness of project management, aided by strong sup- port from the Cameroonian authorities. The management structure which evolved during the project implementation would not change significantly with the pro- posed second project, and Cameroonization would continue as planned. In early 1977, 14 of the 35 management and middle level staff were still expa- triates. Replacement of expatriates by Cameroonians at the management level lagged behind the schedule agreed upon during negotiations; Government has resisted adherence to the schedule arguing that it would not allow enough time for Cameroonians to receive sufficient training to assume positions of responsibility. But, in 1976, four Cameroonians took up management positions, and their number is expected to double by the end of 1977. The performance of Cameroonians in the project is satisfactory.  3.10 Marketing. Despite the rapid rise in production, SEMRY has not experienced any major difficulties in selling its rice though outlets have been somewhat different of those envisaged. SEMRY is located about 1,500 km from the main domestic markets in the south, resulting in a high transporta- tion cost. For this reason, it was assumed that SEMRY's output would be partly exported to northern Nigeria or Chad. However, until 1976, almost all output of the project was absorbed by the domestic market. This was due to the fact that: (a) internal rice demand grew considerably faster than incomes during the 1970's, and (b) price increases on imported rice put SEMRY in a competitive position in the southern markets up to 1975. With the subsequent decline in international prices, sales of SEMRY rice to the domestic market declined and exports to Nigeria increased, reaching 60% of total sales during 1976/77. 3.11 Cost Recovery and SEMRY's Financial Position. For services ren- dered, farmers are paying back to SEMRY, on average, 44% of their gross in- come from paddy production (with the paddy price set at CFAF 30/kg). These charges fully cover the cost of cash inputs (fertilizer, seedlings) and net- work operation and maintenance, and partly cover the cost of custom plowing, extension services, and amortization of the irrigation network. However, SEMRY has a surplus on its operating account -- the difference between the paddy price and the average ex-mill sales price (currently CFAF 81/kg) more than covers the costs of paddy collection, milling, and all personnel. After deduction of debt service (US$4.1 million of project financing was on-lent by Government to SEMRY) and equipment replacement needs, the net surplus is expected to be about CFAF 160 million (US$0.65 million) annually at full development. This expected surplus offers scope for an increase in the producer price which has lagged behind equivalent prices paid elsewhere in Cameroon. D. Conclusions 3.12 The project's implementation to date has been successful techni- cally, agronomically and financially, and also has had a favorable impact on the local population. Some 1,600 applicants for irrigated holdings could not be satisfied, dispelling the uncertainty at appraisal as to whether suf- ficient farmers would be prepared to take on the heavy workload and accept the discipline of work to which they are traditionally unaccustomed. There is also evidence that the increases in farmers' income are not limited to project participants but are spreading through the extended family system to rural inhabitants outside the project. 3.13 It is undoubtedly true that the expatriate presence has been in- strumental in achieving the above results. The project was the first of its kind in Cameroon and local talent capable of implementing it was not sufficient. After 4-1/2 years of project operations, the picture has changed substantially. Firstly, as part of the works has been done on force account, an efficient local team of field technicians has been formed that is capable  - 8 - of operating and maintaining the irrigation network. Secondly, the perfor- mance of Cameroonian staff is such that, by 1979, they are expected to be in charge of all day-to-day operations. 3.14 Due to the single-minded dedication of management to reach its main target of promoting rice production, other aspects received less attention. The envisaged improvement of the accounting system could not be realized until 1975/76 when SEMRY found an expatriate chief accountant who established an analytical accounting system which greatly improves the flow of base cost information to management and promises to ensure tighter cost control. Re- cruitment of Cameroonian staff was still unsatisfactory by the end of 1975, and although a considerable number of Cameroonians was to be appointed within the next six months, and SEMRY's Board of Directors approved a new competitive salary scale, it was clear that expatriate staff would have to be maintained beyond the mid-1976 project completion date to ensure continuity. Applied research had been entrusted to IRAT until early 1975, when its contract expired and a Cameroonian agronomist took over as head of the Vounaloun station. To make the transition easier, the specialist responsible for the national rice program was to provide technical assistance. However, in early 1977 applied research had come to a stand-still. The program has since been restarted with assistance from IRAF, the Cameroonian organization which has taken over the functions of IRAT. Government failed to monitor as agreed the incidence of bilharzia in the project area and to make periodic checks on the snail population. Based on the few observations that could be made in the Yagoua hospital and dispensaries in the area, the project fortunately does not seem to have adversely affected the situation. IV. THE PROJECT A. Project Description 4.01 The proposed project would lead to the production of rice and other crops on 15,000 ha which would be protected from flooding by the construction of two dikes. It would be located some 70 km north of the SEMRY I site. Of the 15,000 ha, 7,000 ha would be irrigated by gravity permitting two rice crops per year, and 8,000 ha would be under traditional rainfed cultivation. Irrigation water would be provided by a reservoir covering a maximum of 38,000 ha. The reservoir would offer potential for fishery development, and its fringes would provide pasture land throughout the dry season. Under SEMRY I, assurances were obtained that SEMRY would not undertake or execute any new major project or development without satisfying the Association that such development would not interfere with its obligations under this project. This assurance has been repeated under the present project but the definition of a major project or development has been revised to mean an investment of more than the equivalent of US$1.0 million rather than of US$200,000. Assurances were also obtained under the first SEMRY project, and have been  - 9 - repeated, that Government would take all necessary steps to ensure that no works would be carried out on the Logone river which could have an adverse effect on agriculture in the project area. 4.02 The project would be carried out over a six-year period (1977/78 to 1982/83). It would consist of: (a) constructing two.dikes, totalling 48 km, with main intake structure, feeder canal, regulators, and drainage outfall; (b) constructing an irrigation and drainage system, in- cluding on-farm works, and feeder roads serving an area of 7,000 ha; (c) constructing access roads linking, in particular, the main localities in the project area, viz. Tekele, Pouss, Maga and Guirvidig, totalling 50 km; (d) constructing a headquarters and services complex including staff housing, garages, warehouses, as well as a rice mill, storage facilities, and an airstrip; (e) providing heavy earthmoving and agricultural equipment, and vehicles; (f) staffing and equipping the project authority, training local staff, and conducting applied research and studies; (g) providing 7,000 participating farm families, half of whom would be resettled, with support services including credit; and (h) providing a health program for the project area. B. Detailed Features of Project Works 4.03 Dikes, Intake and Drainage Control Structures (Map 13022). Project works are described in detail in Annex 3. The main design problem was to meet the provisions of the Logone Water Agreement between Cameroon and Chad: since the maximum water off-take permissible during the dry season would be completely used up by the first SEMRY project, a means had to be found to store wet season water for the dry season crop. A dike would be constructed between Guirvidig and Pouss, perpendicular to the Logone river, over a length of 27 km and with an average height of 4.5 m above ground  - 10 - level; the reservoir thus created would store flood waters from the river. Another dike of 21 km would be built between Pouss and Tekele, parallel to the Logone river, to protect against intrusion by river waters. To ensure adequate filling of the reservoir, an Il km long canal with an intake con- trol structure would be built from Djafga on the Logone River to the Mayo Burad. The reservoir would be drained through an outlet it the head of the Mayo Vrik, with a maximum discharge capacity of 100 m /sec. Upstream from the Mayo Pous5, a broad-crested weir would be built with a maximum discharge of 300 m /sec to return excess flood water to the river in case of a dike rupture. 4.04 Irrigation and Drainage Systems, On-Farm Development. The area to be irrigated would cover 7,000 ha, subdivided into four irrigation blocks. Each block would be provided with a head regulator and primary canal. On- farm development works would be carried out on 7,000 ha, including land clearing and light levelling, and construction of secondary and tertiary canals and drains. An existing natural drain, the Mayo Vrik, would collect the project area's drainage waters. 4.05 Roads. The main access roads within the project area would run parallel to and on the inland side of the dikes, opening up an all-year connection between Pouss, Guirvidig (27 km) and Tekele (23 km). A network of small feeder roads linked with the above would be constructed along the primary and secondary canals for operation and maintenance and farm-to- market transport. The project area would be connected with the provincial north-south trunk road by the road from Guirvidig to Bogo. This road needs to be improved to all weather standards in order to serve the project area and assurances were obtained from Government that this would be done before June 1, 1980. 4.06 'Headguarters and Services Complex. Project headquarters would be constructed at Maga and would include staff lodgings, machinery sheds and repair facilities, and an airstrip. A rice mill would be constructed composed of two milling units, each with a capacity of 5 tons/hour, and rice/paddy storage facilities for 26,000 tons. Milling and storage capacity would be sufficient to handle the project's expected output at full development. 4.07 Equipment and Vehicles. Heavy earthmoving equipment would be pro- vided for building the irrigation canal and drainage system and for on-farm development works. In addition, to carry out custom plowing for farmers, agricultural machinery, including spare parts, would be purchased. A mobile repair unit would be procured, and the central garage would be equipped for routine repair and maintenance of all equipment. Vehicles would be provided to ensure regular supervision and communications with the main supply centers, Maroua and Garoua. A detailed equipment list is presented in Annex 4. Replacement of the light plane presently operating under SEMRY I is envisaged for 1978/79, and financing would be provided under the proposed project. Air transport for emergency supplies and ambulance service has proven to be a necessity, in particular during the rainy season.  - il - C. Water Supply, Demand and Quality 4.08 The reservoir's maximum annual inflow would be 900 Sillion m which, after deducting est mated evaporation losses of 500 million m and dead stor- age of 70 million m , would leave useful storage of 330 million m ; this would be amply sufficient to satisfy irrigation requirements throughout the year. The reservoir would draw its water from three main sources: (1) streams draining the Mandara mountains (33%); (2) rainfall in the reservoir area (32%); and (3) Logone River waters either from the Mayo Guerleo (18%) or from the Djafga intake canal (17%). The reservoir inflow and outflow sched- ule provides for water diversion up to the middle of January. 4.09 Annual water demand is estimated at about 140 million m per year for the entire service area, based on the proposed cropping calendar of two rice crops per year with a 160% cropping intensity, and an overall irrigation efficiency of 46%. Field requirements are calculated at 880 mm and 1,213 mm for wet and dry season paddy respectively, with a peak diversion demand of 11.2 m /sec in March. Sample tests have shown the Logone waters to be of excellent quality for irrigation purposes. Details on water supply, demand and quality are provided in Annex 5. D. Water Rights 4.10 In accordance with the existing Logone Water Agreement between Cameroon and Chad, Cameroon informed Chad in 1975 of its intention to carry out the proposed project. In January 1976, the two countries signed a docu- ment in which Chad gave its agreement in principle to the execution of the ploposed project, and this agreement was confirmed in June 1977. E. Status of Engineering 4.11 Aerial photographs of the project area, taken in 1975 at the scale 1:20,000, were used for the preparation of the 1:10,000 scale topographic maps at 50 cm contour intervals. These maps cover the reservoir area as well as the land to be brought under irrigation and, in view of the generally flat topography, can be used for final design and construction quality esti- mates. The maps would be supplemented by additional topographic mapping at 1:2,000 scale and 20 cm contour intervals for planning the irrigation block layouts and on-farm facilities. Detailed designs have been prepared for the main works at scales 1:10,000 and 1:5,000, and for the main structures at scale 1:100. Construction quantities for tertiary canals and on-farm works were based on unit requirements for the comparable SEMRY I area. Sufficient investigations have been made on site to ensure that suitable materials are available for construction of the dam, dike, canal embankments and roads.  - 12 - F. Irrigation Works and Construction 4.12 Construction in the floodplains is possible only in the dry season when the floodwaters have receded, between November and June. The dike sys- tem, feeder roads, intake canal, regulators and drainage outfall would be built by a contracting firm during two dry seasons, starting in 1977/78. The irrigation and drainage network and on-farm development works would be carried out by SEMRY on force account over six dry seasons, also starting in 1977/78. The total cost of these irrigation facilities has been estimated at around US$3,500 per ha without contingencies and over US$4,000/ha with contingen- cies, 47% of which would be for contract works, 32% for force account works including the purchase of the necessary heavy earthmoving equipment, and 22% for engineering, advisory and supervisory services. The project's buildings consisting of staff lodging, headquarters offices, machine sheds and workshops as well as the rice mill and storage facilities, would also be constructed on force account using small work gangs as has been successfully done under the first SEMRY project. 4.13 SEMRY will retain the services of SOGREAH consultants for the supervision of civil works as well as force account work. SOGREAH provided these services satisfactorily under the first SEMRY project, and also prepared the feasibility study and tender documents for the proposed project. Its services will be acceptable to the Bank provided that qualified personnel are assigned. Assurances were obtained that their qualifications, experience and terms and conditions of employment would be satisfactory to the Bank. A description of engineering services to be provided is in Annex 6. G. Implementation Schedule 4.14 A contract for the main civil works was signed in December 1977 and work will start in January 1978. Contracts for force account equipment have been awarded and work will start on delivery of the equipment, expected in March 1978. An implementation chart and key dates are given in Annex 7. H. Agricultural Development Irrigated Rice 4.15 Irrigated rice cultivation techniques to be used under the proposed project would be the same as those in use under the first SEMRY project. SEMRY would carry out the seedbed preparation (5% of plant field) in each irrigation unit, and farmers would be notified sufficiently in advance to collect the seedlings for transplanting in the fields allotted to them. Soil preparation (plowing, harrowing, and levelling), allowing for a crop- ping intensity of about 160% at full development, would also be done by  - 13 - SEMRY. Farmers would receive fertilizers (150 kg urea and 100 kg ammonium sulphate per ha) to be applied by them as prescribed by management. Assur- ances were obtained under the first project that SEMRY would provide technical services to project farmers for a period of not less than 10 years after the date of project effectiveness, and the same assurances have been repeated. Farmers would be charged for all these goods and services provided by manage- ment, with repayment at harvest time (para. 7.09). Based on experience gained under the first SEMRY project, cultivation practices would be closely super- vised and lead to the following yield averages in tons per hectare: Wet Season Dry Season First Cropping Year 3.8 4.5 Second and Following Cropping Years 4.0 4.7 4.16 Expected increases in irrigable and cultivated area would be as f ollows (in ha): Calendar Year 1979 1980 1981 1982 1983 1984 1985 Irrigable Area 800 2,300 3,800 5,400 7,000 7,000 7,000 Cultivated Area Dry Season - 720 2,070 3,420 4,860 4,725 4,725 Wet Season 720 2,070 3,420 4,860 6,300 6,300 6,300 Dry Crops 4.17 Under the project, an effort would be made to increase yields of traditional rainfed crops (sorghum/millet, mouskouari). Part of the exten- sion staff (rural development agents), supported by research, would focus on introducing to the farmers the use of better quality seed, more appropriate planting time and techniques, and more efficient use of agricultural equip- ment. The general purpose is to make the cultivation of traditional crops an integrated part of rural development, next to rice growing. I. Resettlement 4.18 Of the 7,000 farm families expected to participate in the project, about half are currently living in the project area. The other half would come from the western uplands or from riverain land north of the project area. Appropriate steps are being taken to inform the local population, through their traditional leaders, of the effect the proposed project would have on their lives; in particular, the transhumant cattle raising families, some of whose herding practices would be affected, would be informed of the safeguards that would be taken to preserve their livelihood. Direct responsibility for implementing the resettlement program would be with the extension coordinator,  - 14 - assisted by the extension, research, and livestock chiefs and their staff in SEMRY II. The outline of the resettlement program is given in Annex 8. 4.19 While private ownership and tribal land rights, are recognized by the State, land can be claimed by the State if this is in the general inter- est. Under the SEMRY I project, title to the land was vested in SEMRY by the Government; this land tenure arrangement was commonly accepted by farm- ers after they were properly informed of the development plans by their traditional chiefs. A similar procedure would be applied under the pro- posed project and assurances were obtained to this effect during nego- tiations. J. Health and Environment 4.20 As hygiene is poor (para 3.14) and existing health services reach only a fraction of the population, and the creation of the reservoir is likely to increase the incidence of disease, particularly malaria and schis- tosomiasis, a health program has been included in the proposed project. The tentative program covers five measures to improve public health: (1) con- structing and equipping a health center in Maga and three propharmacies 1/ in Yagoua, Maga and Guirvidig; (2) upgrading of the departmental center of preventive medicine at Yagoua and the health centers in Pouss and Guirvidig; (3) constructing enclosed potable water vells; (4) training of medical person- nel; and (5) improving mother-and-child care and endemic disease control (Annex 9). The program would be carried out by SEMRY under contract with the Ministry of Health. The project would also finance a health study including a survey of the epidemiological situation, and the available health infra- structure. The study would analyze the regional health sector, collect data to design appropriate health measures in future Bank projects, and assist Government in adjusting its health strategy to local conditions. The study would also address the relationship between health and productivity in the area. Assurances were obtained during negotiations that consultants would be employed under conditions and terms of reference satisfactory to the Bank, to carry out the health study and to formulate a detailed health program and proposals for its implementation. The draft program and proposals would be sent to the Bank for its concurrence not later than June 30, 1978. V. COST ESTIMATES AND FINANCIAL ARRANGEMENTS A. Cost Estimates 5.01 Project costs are estimated at CFAF 13,600 million (US$55.5 million) including indirect taxes (US$4.5 million) but excluding direct taxes and duties 1/ Village pharmacies with limited supplies of prescribed drugs.  PROJECT COST SUMMARY CFAF Million US $ Million Local Cost Foreign Total Local Cost Foreign Total % Foreign Exchange Exchange Exchange CIVIL WORKS 1137 3180 4317 4.64 12.98 17.62 74 A. Irrigation Infrastructure 672 2471 3143 2.74 10.09 12.83 79 1. Main Civil Works 456 1825 2281 1.86 7.45 9.31 80 2. Irrigation and Drainage System 216 646 862 0.88 2.64 3.52 75 B. Buildings and Other Civil Works 465 709 1174 1.90 2.89 4.79 60 1. Project Eeadquarters 228 342 570 0.93 1.40 2.33 60 2. Rice Mill 113 264 377 0.46 1.08 1.54 70 3. Other 124 103 227 0.51 0.41 0.92 45 EQUIPMENT 376 2490 2866 1.54, 10.16 11.70 87 A. SEMRY Equipment 326 2204 2530 1.33 9.00 10.33 87 1. Force Account 105 945 1050 0.43 3.86 4.29 90 2. Rice Mill 117 660 777 0.47 2.70 3.17 85 3. Other 104 599 703 0.43 2.44 2.87 85 B. Farm Machinery and Inputs 50 286 336 0.21 1.16 1.37 85 OPERATION AND MAINTENANCE 158 431 589 0.64 1.76 2.40 73 A. SEMRY 94 239 333 0.38 0.98 1.36 72 B. Support Services for SOGREAH 64 192 256 0.26 0.78 1.04 75 Consultants PERSONNEL 943 1404 2347 3.85 5.73 9.58 60 A. SEMRY 671 528 1199 2.74 2.16 4.90 44 1. Technical Assistance - 528 528 - 2.16 2.16 100 2. Local Personnel 671 - 671 2.74 - 2.74 - B. SOGREAH Consultants 97 876 973 0.40 3.57 3.97 90 C. Health Personnel 119 - 119 0.48 - 0.48 - D. Special Training 56 - 56 0.23 - 0.23 - Short-Term Studies 21 192 213 0.09 0.78 0.87 90 TOTAL BASE COST 2635 7697 10332 10.76 31.41 42.17 74 Physical Contingencies 218 782 1000 0.89 3.19 4.08 Expected Price Increases 667 1605 2272 2,72 6.55 9,27 TOTAL PROJECT COST 3520 10084 13604 14.37 41.15 55.52 74  - 16 - from which the project would be exempted. The foreign exchange component is CFAF 10,080 million (US$41.2 million) or 74% of total costs. Project costs net of taxes are estimated at CFAF 12,500 million (US$51.0 million) or about CFAF 1.8 million (US$7,300) per participating family (and per hectare). Details on project costs are in Annex 10 and summarized in the table above. 5.02 The project costs include all investment costs as well as operation and maintenance cost during the start-up period. Cost estimates for construc- tion were based on quantities of work derived from detailed designs estab- lished by a reliable consulting firm, and on unit prices prevailing in mid-1977. For equipment, materials and supplies, prices are based on recent quotations. Cameroonian staff salaries have been determined following the current official salary scale; expatriate staff costs are estimated, in accordance with prevailing market conditions, at US$90,000 per man-year, and supervisory consultants' costs at US$7,800 per man-month. Physical contin- gencies are 20% for main civil works (Annex 10, Table 2), 15% for the irriga- tion and drainage system, roads and force account equipment; 10% for buildings and 5% for other equipment. Costs (including physical contingencies), expressed in end-1977 prices, were increased by an estimated price escalation of 20% calculated at the following annual compound rates: for civIl works, 9% in 1978 and 1979, and 8% thereafter; for equipment, 7.5% in 1978 and 1979, and 7% thereafter; and for all personnel, including expatriates, 8%. B. Financial Arrangements Financing Plan 5.03 The project would be financed by the proposed Bank loan and IDA ctedit, and by contributions from the French agencies FAC and CCCE and Government. The Bank Group, FAC and CCCE funds would cover the foreign exchange cost of the project. The proposed financing plan is shown in detail in Annex 11 and summarized below:  - 17 - US$ Million Bank/ Govt. % FAC % CCCE % IDA % Total % I. Civil Works 3.61 15 - - 4.50 19 15.98 66 24.09 100 II. Equipment 2.19 15 - - 2.73 19 9.70 66 14.62 100 III. Operation & Maintenance 3.25 100 - - - - - - 3.25 100 IV. Personnel 5.18 41 3.96 32 0.72 6 2.58 21 12.44 100 V. Short-Term Studies 0.17 15 - - 0.21 19 0.74 66 1.12 100 Total Cost 14.40 26 3.96 7 8.16 15 29.00 52 55.52 100 (Net of Taxes) (9.89) (19) (3.96) (8) (8.16) (16) (29.00) (57) (51.01) (100) 5.04 The Bank loan of US$14.5 million would be made to Government at 7.9% interest p.a. with a term of 20 years, including a five-year grace period. The IDA credit of US$14.5 million would be made on standard terms. 5.05 The FAC contribution of FF 19.4 million (US$4.0 million) would be a grant to cover the cost of technical assistance staff and part of SOGREAR consultants' services during the project implementation period. In addition, FAC would provide FF 4.4 million (US$0.9 million) to finance technical assis- tance for SEMRY's Directorate General. The CCCE contribution of FF 40 million (US$8.2 million) would be a loan at 5.5% interest p.a. with a term of 20 years, including a five-year grace period. It would finance pari passu with the Bank Group funds items (i) to (iv) listed in para. 5.11. The execution of the financing agreement between SEMRY and Government and the signing of the first-year FAC agreement and the CCCE loan agreement with Government would be conditions of loan/credit effectiveness. 5.06 Government's contribution of US$14.4 million equivalent would finance all local costs, including taxes of US$4.5 million. On-Lending 5.07 One-third of the Bank Group funds would be passed on to SEMRY as a grant and two-thirds as a loan at 6.75% interest p.a. with a term of 35 years, including a six-year grace period. Of the CCCE funds, half would be a participation in equity, one-third a grant and one-sixth a loan at 5.5% interest p.a. with a term of 35 years, including a six-year  - 18 - grace period. As under the first project, the FAC funds would be passed on to SEMRY as a grant, and Government's contribution partly as a grant (one-fourth) anid partly as equity. Retroactive Financing 5.08 In view of the limited period during which the area is accessible for heavy earthmoving equipment, the main civil works contract had to be signed by end-L977, for field operations to commence in early 1978. A mobi- lization fee amounting to approximately US$1.1 million had to be paid at that stage. For the same reasons, the contract for heavy earthmoving equip- ment for force account work had to be signed in December 1977 and a down payment amount:Lng to approximately US$400,000 had to be made at the same time. In addition, about US$100,000 was needed for engineering consultants' services. Government has tendered under international competitive bidding (ICB) pro- cedures satisfactory to the Bank. It is therefore proposed that retroac- tive financing up to US$1.6 million be provided for expenditures incurred after November 1, 1977. C. Procurement 5.09 Contracts have been awarded following ICB in accordance with Bank/IDA guidelines for the construction of the main civil works (US$12.2 million) and the supply of 1heavy earthmoving equipment for force account work (US$4.9 million). Contracts for fertilizer requirements, the purchase of land preparation equipment (US$1.4 million), rice mill machinery, equipment and trucks (US$4.3 million), as well as all other vehicles, garage and workshop equipment, and electricity, water and telephone networks (US$1.9 million) would also be subject to ICB. Domestically manufactured goods would be allowed a prefierence of 15%, or the level of the applicable import duty, whichever is lower. Miscellaneous items of equipment and furniture not exceeding US$1100,000 would be procured under local competitive bidding satis- factory to the Bank. For contracts of less than US$20,000, for office furni- ture and equipmnent (US$0.1 million), direct procurement on the basis of several quotations would be acceptable. 5.10 The irrigation and on-farm works (US$5.5 million) and the project headquarters, lodgings, offices, machine and repair shops as well as the rice mill buildings and storage facilities (US$6.4 million) would be built by SEMRY on force accourt (para 4.13). The reasons for the choice of force account as the optimal solution are that: (1) SEMRY has carried out similar works success- fully over the past four years and, with the help of SOGREAH consultants, has formed a capable and efficient construction team; (2) the estimated unit price of US$1,600/ha including consultants' supervision, based on SEMRY's recent experience, is about 40% lower than the cost of comparable works carried out in the northern province by civil works contractors; and (3) heavy machinery operators could be locally recruited and trained by consultants which, after  - 19 - project completion, would leave the capability essential for correct main- tenance of the dike and irrigation system. Assurances were obtained at negotiations that for procurement of goods and services to be financed jointly by CCCE and the Bank Group the above procedures would be used. D. Disbursements 5.11 The Bank loan and IDA credit would cover the following expendi- tures: (i) Civil works: 66% of total expenditures -- US$13.62 million; (ii) Equipment (including farm machinery and inputs): 66% of total expenditures -- US$8.43 million; (iii) Consultants (advisory and supervisory services not covered by FAC) 66% of total expenditures -- US$2.02 million; (iv) Short-term studies: 66% of total expenditures -- US$0.58 million; and (v) Unallocated: US$4.35 million. A schedule of estimated disbursements is in Annex 12. Disbursements under (i), (ii), (iii) and (iv) would be fully documented, except in the case of force account works under (i), which would be against certified summary statements of expenditures verified annually by the project auditors. Where disbursements are against certified statements of expenditures, the pertinent documentation would be retained by the Borrower and held avail- able for inspection by project supervision missions. E. Accounts, Audits, Reports 5.12 Government would cause SEMRY to: (i) keep separate records for the Directorate General and the two project units, SEMRY I and SEMRY Il, adequate to reflect their operations and financial position and to identify project cost and disbursements; (ii) have the accounts of the entire organi- zation as well as SEMRY II audited by independent auditors acceptable to the Bank; (iii) send certified copies of the audited accounts and the auditor's report to the Bank within six months after the end of each fiscal year; and (iv) ensure that the auditor's reports are of such scope and detail as the Bank may reasonably request and, in particular, include confirmation that the summary statements of expenditure on force account works, against which disbursements have been made, correctly reflect the detailed records kept by SEMRY. Assurances to this effect were obtained during negotiations.  - 20 - 5.13 Projeci: monitoring and evaluation would be carried out by SEMRY staff, and SEMRY would submit periodic progress reports to Government and financing agencies. Assurances have been obtained during negotiations that SEMRY would submLt a project completion report not later than six months after the closing date for the project. VI. ORGANIZATION AND MANAGEMENT A. SEMRY Organization and Staffing Requirements 6.01 For the purposes of the proposed project, SEMRY would be reor- ganized. A Direztorate General would be created with overall management responsibility. Two departments, SEMRY I and SEMRY II, would be responsi- ble for day-to-day operations in their respective project areas. The Directorate General would be headed by the present SEMRY project manager assisted by five specialists in charge cf: (a) finance and administration; (b) coordination of extension services and training; (c) accounting; (d) the experiment station (para. 6.07); and (e) water management and training. Charts of the SEM!RY organization are attached to Annex 13. 6.02 The SEMRY II organizational structure would be essentially the same as for SEMRY I. The SEMRY II director would be assisted by senior staff in charge of administration and accounting, land preparation, crop production, extension, livestock, rice milling, marketing, workshops, nurseries and irrigation, and an administrative and technical staff of 15 persons. There would be four station chiefs, each in charge of one irri- gation block. Under the station chiefs, the field staff at full develop- ment would comprise 15 zone chiefs and 85 extension agents, of whom 15 would be responsible for rainfed crops and 70 for rice. The latter would be in charge of the dissemination of better rice cultivation techniques, distribution of water and inputs, collection of credit and organization of the harvest. Hiring of staff for the Directorate General and SEMRY II would be in accordance with the project implementation schedule (Annex 13, Table 1). The project would also provide for short-term consultant services and studies to assist management in possible problems related to settlement, training, livestock, public health, food crops research, and other activities including aerial photography to obtain the necessary information. Employment of these consultants would be according to qualifications and terms of refer- ence satisfactory to the Bank. 6.03 It is expected that expatriate staff input would amount to 64 man- years over the project implementation period (Annex 13, Table 2), reaching its peak in PY 4, when 15 of a total of 20 positions would be held by expa- triates, declining to three in PY 6. The large number of expatriates is necessary because: (i) the project involves the development of an irriga- tion scheme at the relatively high rate of 1,200 ha per year and adopts a  - 21 - more integrated approach to rural development than SEMRY I (settlement, health, livestock); (ii) these activities, which are concentrated in the initial years, demand highly skilled and experienced personnel that is not readily available in Cameroon; and (iii) experience under SEMRY I has shown that Cameroonization of management is best achieved by gradually increasing responsibilities of qualified nationals in specifie positions, a process which takes time. Assurances have been obtained during negotiations that: (a) at all times the positions of director general, deputy director general and director of SEMRY Il would be filled by persons with qualifications and experience adequate for the satisfactory performance of these tasks; and (b) for a period of ten years, SEMRY would annually exchange views with Government and the Bank on Cameroonization, for which a target scheme has been prepared by Government (Annex 13, Table 2). B. Training 6.04 Training of promising Cameroonians to replace expatriate staff would include: (a) six scholarships for specialized training abroad; (b) specialized courses for lower and middle level extension agents in the agricultural school in Maroua; (c) on-the-job training by the SOGREAH team of topographic assistants, heavy machinery and tractor operators, mechanics and construction workers, to make SEMRY self-sufficient in the operation and maintenance of heavy earthmoving and agricultural machinery; (d) on-the-job water management training for station chiefs and extension agents; and (e) specialized training at the research station for extension agents. Training Consultant 6.05 Because the SEMRY Il director and his staff, during the intensive period of getting the project going, would have no time to devote to train- ing, the project would provide for a training consultant to identify specific training needs and prepare detailed training programs. The consultant would also make return visits to assess progress and prepare training programs for field level operational staff, and to cater for specific problems encountered. To this end, three man-months of consultancy services in PY 1, three in PY 2, and two in PY 3 would be provided. Assurances have been obtained during negotiations that, not later than September 30, 1978, a well qualified specialist would be employed under terms of reference satisfactory to the Bank. Draft terms of reference are in Annex 13. Training Officer 6.06 A full-time Cameroonian training officer would be given responsi- bility for detailed planning and implementation of the training programs under the overall responsibility of the extension coordinator. One of the development agent posts provided under the project would be allocated for the training officer position. It is unlikely that a suitably trained and experienced officer would be available immediately, and the person appointed  - 22 - would benefit from a brief period of training outside the country covering agricultural teaching methods, curriculum design and techniques for identifi- cation of training needs. In addition, he would take responsibility for the development and use of mass media in support of extension programs. Appoint- ment of the Training Officer would take place early in project implementation, but the need for this position would continue after project completion. C. Food Crop Research 6.07 The proJect provides for the execution of applied research for SEMRY I and SEMRY II. It would be carried out by SEMRY's staff at its own experiment station near Yagoua (Vounaloun). The experimental station's activities would i ocus on rice and would include varietal testing, experi- ments on planting time, fertilizer trials, and studies of soil preparation methods and water regimes. In addition, varietal trials of sorghum would be performed to select appropriate local strains, the cultivation of which would demand less of the farmer's time during the transplanting and weeding of his rice crop. Also, a better quality seed would be produced by the sta- tion. More details on the applied research program are given in Annex 14. 6.08 A technical assistance contract would be concluded between ONAREST and SEMRY to supervise the annual research program to be executed by SEMRY. The draft technical assistance contract has been discussed with the Bank and assurances have been obtained that the annual research programs would be communicated to the Bank for comment. It is expected that regular contacts with research institutes working under comparable climatic conditions (IITA, WARDA, ICRISAT) wrould be established. D. Agricultural Inputs and Credit 6.09 SEMRY would provide custom plowing, seedlings, fertilizer, pesti- cides if necessary, and farm equipment (pedal threshers, carts) to partici- pating farmers on credit and would administer the credit program. The cost of plowing, seedlings and fertilizers would be repaid at harvest time through the consolidated fee (para. 7.09). Equipment would require a 20% down pay- ment and would be paid off in up to three annual installments. The rate of interest would be uniformly 10% per annum, which is consistent with present credit practices. Total credit requirements under the scheme are expected to rise to about CFAF 430 million annually at full development. 6.10 FONADER would procure and directly pay for fertilizers and farm equipment in the! quantities requested by SEMRY. A draft agreement between FONADER and SEMERY has been drawn up indicating, inter alia, the division of interest income from fertilizer and equipment credit: one half would go to FONADER, one sixth to SEMRY as a commission for its services, and the balance into a contingency fund to cover unpaid debts. Losses not covered by the  - 23 - contingency fund would be borne by FONADER. Assurances have been obtained during negotiations that the credit administration agreement between FONADER and SENIRY would be acceptable to the Bank, and that it would be concluded not later than June 30, 1978. VII. PRODUCTION AND YIELDS; MARKETS AND PRICES; FARM INCOME AND FARMERS' CHARGES; RENT AND COST RECOVERY; SEMRY AND GOVERNMENT CASH FLOWS A. Production and Yields 7.01 At full development, from 1984/85 onward, the project would produce about 47,000 tons of paddy annually. In view of the excellent soil and cli- mate conditions for rice growing and in line with actual experience under the first SEMRY project, yields are assumed to reach 4.0 tons/ha in the wet season and 4.7 tons/ha in the dry season, two seasons after the start of produc- tion in each irrigation block. The average cropping intensity would reach 158%. Details on cropped area, yields and production are given in Annex 15 and summarized below: Wet Season Dry Season Total Cropped area (ha) 6,300 /1 4,725 /2 11,025 Yields (t/ha) 4.0 4.7 Paddy production (t) 25,200 22,200 47,400 Home consumption, seed requirements, losses (t) 5,170 4,500 9,670 Paddy to be milled (t) 20,030 17,700 37,730 Milled rice for sale (t) 13,920 12,300 26,220 /1 90% of irrigable area, allowing for nurseries and incomplete transplanting. /2 75% of wet season area due to polder maintenance (resurfacing). SEMRY would collect the paddy harvest, process it, and sell the output ex- mill to private traders, as under the first project. At full development, some 26,000 tons of rice would be available for sale each year.  - 24 - B. Market Prospects and Prices 7.02 If all rice production projects presently identified or under preparation wouldl go ahead as scheduled, total domestic rice production would reach 90,000 tons by 1990, of which the first and the proposed second SEMRY project would produce 60% or about 53,000 tons (Annex 16, Table 1). However, there is a strong possibility that domestic rice production from sources other than SEMRY will grow more slowly than projected due to tech- nical difficulties (drainage, water availability) and to the fact that other crops can also profitably be grown in these areas. A less optimistic fore- cast of domestic output by 1990 would be about 60,000 tons. 7.03 Due to changing consumption habits and rapidly rising prices of competing traditional foodstuffs, rice consumption grew considerably faster than national income during the 1970's (at 3.7% against 2.8% per year) reaching about 29,000 tons in 1976 (Annex 16, Table 2). Assuming that the same relationship between consumption and income growth holds in the future, and that national income rises by 5-6% per year through 1981 and about 7% thereafter as estimated by a recent Bank economic mission, total domestic rice consumption would equal the production estimate of 90,000 tons by 1990 (Annex 16, Table 1). 7.04 However, only part of SEMRY's production will be absorbed domestically. SEMRY is better placed to serve Cameroon's northern region as well as neighboring countries, such as Chad and Nigeria, than Cameroon's southern markets where its rice has to absorb high transportation costs. Exports of SEMRY rice to northern Nigeriai have increased strongly, reaching close to 9,000 tons or 60% of total SEMRY sales in 1976. Therefore, Government's strategy is that production in northern Cameroon would largely serve that area and neighboring export markets, while southern Cameroon would continue to be served by imports and by domestic producers in the east, center-south and west. 7.05 The SEMRY paddy producer price was increased to CFAF 30 per kilo- gram in early 1977, while the private market price in Cameroon presently ranges from CFAF 38 to CFAF 42 per kilogram. Although there is no evidence so far that the lower SEMRY price has been a disincentive to farmers, Govern- ment intends to raise it to CFAF 37.5 per kilogram starting with the 1977 wet season harvest, to bring it more in line with the market. 7.06 Based on present IBRD forecasts of world market prices of rice, SEMRY's economic ex-mill price for 1980 and later years would be about CFAF 112,000 per ton for sales in northern Cameroon, CFAF 110,000 per ton for exports to northern Nigeria, and CFAF 78,000 per ton for sales to south- ern Cameroon, in constant 1977 terms (Annex 16, Table 3). The average eco- nomic price would thus depend on the share of each of these markets, as shown in Annex 16, Table 4.  - 25 - C. Farm Income and Farmers' Charges 7.07 Under the project, each participating family is assumed to farm 1 ha of irrigated rice fields, which would be allotted to them, and slightly over 1 ha of rainfed land on which they would continue to cultivate sorghum, vegetables and tobacco without, at this stage, any appreciable increase over traditional yields. The average extended family comprising three workers would be able to cope with all labor requirements for irrigated and dry land crops (Annex 17, Tables 1, 2). 7.08 At full development, from 1984/85 onward, the farm family's' net income under the project (including home consumption) after deduction of all production costs and SEMRY charges would be about CFAF 183,000 (US$745) annually, compared to CFAF 53,900 (US$220) without the project. This would be equivalent to a per capita income of CFAF 33,250 (US$135) and a return per man-day of CFAF 560 (US$2.30). Although per capita income of partici- pants would thus be nearly double the regional average now (US$70), it would still fall short of present income in the cocoa and coffee producing areas (US$150). Details on cropping costs and farm budgets are given in Annex 17, Tables 3 and 4, and summarized below: Without the Project With the Project Paddy (ha) 0.65 1.575 Other crops (ha) 0.90 1.075 Total cropped area (ha) 1.55 2.65 Gross value of production (CFAF) 62,235 293,425 Cropping costs, charges (CFAF) 8,350 110,540 Net family income (CFAF) 53,885 182,885 Net income per capita (CFAF) 9,800 33,250, Man-days worked 168 326 Net return per man-day (CFAF) 320 560, 7.09 Farmers would pay a consolidated annual fee of CFAF 70,800 per ha of paddy land, equivalent to about 44% of gross income from paddy production. This fee would fully cover direct production costs (custom plowing, fertil- izer, seedlings, carts and pedal threshers) as well as the cost of other ser- vices such as extension, irrigation water, network maintenance and amortiza- tion (Annex 17, Table 5). It would be deducted at harvest time from the purchase price of paddy, an arrangement that has worked well under the first  - 26 - SEMRY project -- the recovery rate was 96% in 1975/76. Experience with the first project has also shown that the level of charges is consistent with maintaining sufficient incentives for participating farmers. D. Rent and Cost Recovery 7.10 Annual SEMRY charges -- for extension, irrigation water, network maintenance and amortization -- would total CFAF 29,540 per ha of paddy land. Discounted at 10%' over the project's life, they would cover 53% of the rent attributable to the project (Annex 18, Table 1). The corresponding cost recovery index -- including all investment cost plus operating costs and replacement needs -- would be 15%. However, besides farmers' payments the project would create two additional sources of revenue: (i) the difference between SEMRY paddy purchases and rice sales (CFAF 840 million per year at full development in constant 1977 prices), and (ii) additional Government revenue from the rice sales tax (CFAF 220 million per year). Taking these items into accouwt, the cost recovery index increases to 59%. In order to maintain adequate cost recovery compatible with farmer's incentive and ability to pay, assurance has been obtained during negotiations that the level of charges and paddy/rice prices would be reviewed annually by Government/SEMRY and the Bank. E. SEMRY and Government Cash Flows 7.11 SEMRY's cash f1o1w from the proposed project (Annex 18, Table 2) shows that SEMRY should be able to meet its debt service obligations to iovernment and finance all replacements, assuming that paddy/rice prices and farmers' charges are revised in line with expected inflation through PY 6 by when there would be a cumulative net surplus. 7.12 Government revenue from the project would consist of taxes on rice sales and SEMRY debt service payments. Expenditures would be the initial investment, an annual grant for the maintenance of the dikes and access road (public domain), some health personnel expenditures, and debt service payments to the Bank Group and CCCE. As SEMRY debt service payments would start only in PY 7 and would not cover the full amount of external borrowing, the Govern- ment net inflow from the project would be negative until PY 10 and positive thereafter (see Annex 18, Table 3). VIII. BENEFITS AND JUSTIFICATION 8.01 The project would make a substantial contribution to the develop- ment of Cameroon's northern province, one of the poorest areas in the coun- try. 7,000 participating families would experience a more than threefold  - 27 - increase in their net farm income, and the economic value of incremental paddy production at full development (43,000 tons) would be CFAF 2.9 bil- lion. 8.02 The economic rate of return is estimated to be 14% (Annex 19). Important assumptions made in that estimation are: (1) Benefits: the inclusion of direct benefits only, with incremental paddy production calculated by subtracting the estimated production of the 7,000 families without the project from the estimated production with the project. Yields, production and milling ratio are as given in Chapter VII, and the average economic ex-mill price is derived from the prices for sales to the various markets given in para. 7.06 with the assumption that 15% of SEMRY pro- duction would be sold in southern Cameroon. (2) Costs: the inclusion of all investment costs, all expenditures on operation and maintenance, paddy collection, milling, SEMRY personnel and consul- tants. In view of the very limited employment opportunities in the area, incremental family labor has been valued at CFAF 60 per man-day, equivalent to roughly two hours per day of salaried employment at the minimum wage, or a daily catch of 600 g of fish at the current market price. (3) Exchange rate: the exchange rate used in the rate of return calculations is the same as the financial rate of exchange i.e., CFAF 245. (4) Project life: the economic life of the project is assumed to be 35 years, including the six-year implementation period. 8.03 As the proposed project would follow the successful SEMRY I project and use essentially the same organizational structure and techniques, the normal risks associated with projects of this kind would be minimized. However, three important risks can be identified: (i) a delay in project commencement resulting in higher cost of the main civil works and an implemen- tation period extended by two years; (ii) a slower Cameroonization than envisaged resulting in a longer presence of the expatriate staff in senior posts at SEMRY and higher costs; and (iii) an inability to export to Nigeria as much as expected resulting in a larger portion of SEMRY production being sold in the south at a lower economic ex-mill price, thus reducing benefits.  - 28 - 8.04 The resulting changes in the project's parameters have been in- corporated in sensitivity tests of the economic rate of return (Annex 19, Tables 3 and 4). In the worst case -- a delay of project start by one year, an expatriate presence for two extra years, a reduction of exports to 30% and a 10% reduction in yields -- the economic rate of return would be 8%. On the other hand, with implementation on schedule, Cameroonization as planned, exports of 80% and a 10% increase in yields, the rate of return would be 17%. 8.05 In addition to the direct benefits, the project would entail several non-quantifiable, indirect benefits: (i) creation of good pasture land on the fringes of the reservoir in the dry season; (ii) introduction of fishing possibilities in the reservoir, thus creating a supplementary source of protein; (iii) introduction of a health program; and (iv) ini- tiation of research on dry-land food crops and establishment of an organi- zation to promote research results among the farmers. IX. AGREEMENTS REACHED AND RECOMMENDATIONS 9.01 The following agreements were reached during negotiations: (a) SEMRY would not undertake or execute any major project or development -- an investment of more than the equivalent of US$1.0 million -- without satisEying the Association that such development would not interfere with its obligations under the proposed project (para. 4.01 and P.A. 3.07); (b) Government would take all necessary steps to ensure that no works which could have an adverse effect on agricultural development in the project area would be carried out on the Logone river (para. 4.01 and C.A. 4.02); (c) Government would improve the road between Guirvidig and Bogo before June 1, 1980 (para. 4.05 and C.A. 4.01); (d) SEMRY would employ well-qualified consultants for the supervision of civil works construction under contract and on force account under terms and conditions satis- factory to the Bank (para. 4.13 and P.A. 2.02a); (e) SEMRY would provide technical and extension services to project farmers for a period of not less than ten years from the date of project effectiveness (para. 4.15 and P.A. 3.01b);  - 29 - (f) Governnent would apply a similar procedure as was used under the SEMRY I project with regard to land tenure arrangements for project farmers (para. 4.19 and P.A. 2.05a); (g) SEMRY would employ qualified consultants under conditions and terns satisfactory to the Bank to formulate a detailed health program for the project area and proposals for its implementation. The draft program and proposals would be sent to the Bank for its concurrence not later than June 30, 1978 (para. 4.20 and P.A. 2.02b and 2.06); (h) retroactive financing up to US$1,600,000 would be provided for expenditures on civil works (US$1,100,000), force account equipment (US$400,000) and engineering consultants' services (US$100,000), incurred after November 1, 1977 (para. 5.08 and C.A. Schedule 1, para. 3); (i) SEMRY would procure goods and services financed jointly by CCCE and the Bank Group according to procedures acceptable to the Bank (para. 5.10 and P.A. 2.03); (j) SEMRY would follow accounting and auditing procedures satisfactory to the Bank (para. 5.12 and P.A. 4.02); (k) SEMRY would submit a project completion report not later than six months after the closing date of the project (para. 5.13 and P.A. 2.08c); (1) SEMRY would employ short-term consultants whose qualifica- tions and terms of reference will be satisfactory to the Bank to carry out the necessary studies on settlement, training, livestock, public health, food crop research and other activities (para. 6.02 and P.A. 2.02b); (m) SEMRY would at all times fill the positions of director general, deputy director general and director of SEMRY II by persons with qualifica- tions and experience adequate for the satisfactory performance of these functions; and, for a period of ten years, SEMRY would annually exchange views with Government and the Bank on Cameroonization (para. 6.03 and P.A. 3.01b and 3.02);  - 30 - (n) SEMRY would appoint a training consultant with qualifications, experience and terms of reference satisfactory to the Bank, not later than September 30, 1978 (para.6.05 and P.A. 2.02b); (o) SEMRY wdould communicate the annual research programs to the Bank for comments (para. 6.08 and P.A. 2.04); (p) SEMRY would conclude a credit administration agreement with FONADER, acceptable to the Bank, not later than June 30, 1978 (para. 6.10 and P.A. 2.05b and C.A. 3.02a); and (q) Government and the Bank would review annually the level of farmers' charges and paddy/rice prices (para. 7.10 and P.A. 3.08b). 9.02 A condition of effectiveness of the loan/credit would be that the SEMRY Financing Agreement has been executed and the first FAC agreement and the CCCE loan agreement with Government have been signed (para. 5.05 and C.A. 6.01). 9.03 On the basis of the above assurances and conditions the project would be suitable for a Bank loan of US$14.5 million and an IDA credit of US$14.5 million.  - 31 - ANNEX 1 Page 1 CAMEROON SECOND SEMRY RICE PROJECT The Project Area General 1. The proposed project would be located some 70 km north of the first SEMRY project, in the flood plains on the west Bank of the Logone river. The Logone here forms the border with Chad until it joins the Chari river, of which it is a major tributary (MAP 13021). The plains upstream of the confluence are flooded for up to five months each year and, as a result, carry little permanent habitation. They are mainly used as grazing land by transhumant cattlemen, following the floods, and are sparsely cultivated on the high grounds. On the other hand, the adjacent flood-exempted areas to the west of the project have a relatively dense population which depends for its living on precarious rainfed cropping. Climate 2. The climate is Sudano-Sahelian, with a single rainy season from May to October. About 85% of the average annual rainfall of 750 mm falls from June through September, with the heaviest rains occurring in August. Potential evaporation exceeds 2,000 mm/yr. Rainfall, together with flood waters inundating the plain during the wet season, is generally adequate for a single rice crop. The onset of the rains and floods as well as their distribution in space and time are irregular, however. This has adverse effects on crop yields. 3. Average annual temperature is 27 0C, varying between 25 0C in the wet season and almost 33 C in the dry season. Temperatures may go as low as 10 0C in December and early January, which prolongs the growing period of dry season crops. Solar radiation levels during the same months are reduced by the prevailing duststorms locally known as the Harmattan. Further details are given in Table 1. Topography. Drainage and Soils 4. Longitudinal slopes run from south to north at less than 0.02% with cross slopes away from the river towards the natural bypass channels, the Mayo Guerleo, and the Mayo Vrik. These channels, which by and large run parallel to the river, serve as natural drains and divert flood waters towards depressions in the plain. Return flow of floodwaters to the river, as a result of the flat topography, is slow. 5. Soils in the project area are predominantly heavy clays (clay content varying from 50 to 80%) and have vertic and hydromorphic properties; internal drainage is slow. More recent alluvial deposits of clayey loam  - 32 - ANNEX 1 Page 2 are found on the river levees and along the Mayos. The cation exchange capacity is fair at 35-60 meq/1O0g, and organic matter content in the upper 100 cm ranges from 3.5 to 6% whereas acidity decreases from a PH of 5 in the top layers to 7 and 7.5 at greater depth. Currently soil fertility is good, requiring relatively low fertilizer applications. In the long run, however, higher gifts of nitrogen and also phosphate would be needed, particularly if rice is to be continuously double-cropped. No salinity hazards are expected from irrigation, since analyses of water from the Logone River and wells in the area indicate low soluble salt content and low sodium absorption ratios (SAR values of 0.6 to 1.5). The lands which have been selected for irrigation development rank among those best suited for rice production in the region. Hydrology 6. The flooding of the project area is the combined result of rainfall, (from June to September), run-off from the Mandara mountains (August and September) and overflow of the Logone (Seetember/October). The river rises in June, reaches its peak flow oS 1,200 m /sec in September/October and recedes3to a low flow of 50-60 m /sec by January and its lowest point of 45 m /sec in March/April. The onset, extent and duration of the floods may vary from year to year. Population 7. The basic social and economic unit in the project area is the sare, an extended family residing together under the authority of the eldest male. Sare are traditionally linked together by lineage and are under the authority of a chief. Traditional chiefs are not part of the legal-administrative system of Cameroon but, nevertheless, have persuasive influence over their followers sanctioned by custom. Important ethnic groups in the project area are the Mousgoum, Massa, Toupouri and Fulani. Mousgoum account for approximately 95% of the population in the project area. 8. Population statistics are not entirely reliable, but it is esti- mated that the population in the project area numbers around 19,500 in- habitants divided into 3,450 sare with an average size of 5.5 persons of whom 3.1 are economically active. Of these, about 7,300 (or 1,350 sare) live in the area of the proposed reservoir. 9. Except for Maga, Pouss and Guirvidig, where settlement patterns are nucleated, the main type of settlement is dispersed. Clusters of sare, each at some distance from the other, are loosely described as "villages" for administrative purposes. Administratively, the project area is divided between the "cantons" of Pou,as and Guirvidig with a total of 28 villages, half of which are located in the reservoir area.  - 33 - ANNEX 1 Page 3 Land Tenure 10. Traditional land use patterns in the project area involve the demarcation of customary boundaries among the ethnic groups. Within each group, paramount title belongs to the chief who has the power to allocate and redistribute land for use and residence among the members based, generally, on an assessment of needs. Although land is allocated for use and occupation and would apparently result in a right only to the fruits of land (usufruct), an allocation once made is disturbed only for exceptional reasons (as, for instance, abandonment, or floods necessitating re-allocation). In effect, therefore, the occupant has title to the land once allocated, which can be transferred and inherited by custom. In addition to these allocated lands, some lands are used in common, e.g., for grazing purposes. In the project area there are also migratory routes and cattle trails demarcated customarily, which are used seasonally in common with other transhumant groups. 11. There is no land pressure in the project area. The major problem is the limitation to make full use of the land. This is the result of several factors: traditional agriculture, irregularity of the rains, and, most importantly, inundation of major portions of the project area. Thus, there are areas which are unoccupied and unexploited. 12. Traditional land use and ownership patterns have been modified by statute. The ultimate title to land vests in the state. The most recent statute relating to ownership is Ordinance 74/1 of July 6, 1974, which reaffirms the state has the ultimate right to regulate the use of land while affirming private ownership and occupancy rights. This ordinance applies to the project area. Agricultural Practices 13. The average farm size per sare is 1.55 ha of which 0.65 is rice; 0.5 ha sorghum/millet; 0.3 ha mouskouari and 0.1 ha other crops, such as vegetables and tobacco. Small farm sizes, traditional practices, and adverse ecological conditions result in low productivity. Sorghum and, on a much smaller scale, millet are the main subsistence crops grown on land where surface drainage is good and a high water table is not a problem. Rice has been grown under traditional conditions with artisanal water control since the early 1950's. The area under rice was modest, but has increased rapidly to over 1,000 ha, or 37% of all land under traditional crops, since SEMRY introduced custom plowing for individual farmers. Yields of traditionally grown rice average 1 t/ha. 14. Wet and dry season sorghum still represents the most important subsistence crop in the project area. Sorghum and millet are planted with the arrival of the rains in June and harvested in October. Sorghum is also grown as a dry-season crop, locally known as mouskouari, mainly  - 34 - ANNEX 1 Page 4 on the levees along the Logone river and the mayos. Nurseries are prepared in September and the seedlings are transplanted to superficially prepared lands in October when the floods recede. Harvest takes place in January/ February. An average yield of 700 kg/ha is thus assured, whereas wet season sorghum yields vary from 600-1,000 kg/ha; millet yields are somewhat lower. Livestock 15. Livestock, particularly cattle, plays an important role in the life of the population of the project area. The possession of cattle is an index of prestige, and cattle is used as a bride price. There are an estimated 12,000 head of cattle. In addition, sheep, goats, poultry and, in some instances, pigs are raised. In contrast to most cattle, they are kept for consumption. On average, a sare keeps 3.6 head of cattle, 6.6 sheep, 9.7 goats, and 14.8 head of poultry. The number of cattle and sheep is estimated to have increased considerably, while that of goats and poultry has stagnated in recent years. 16. Most herds remain in the project area throughout the year feeding on grass and straw. Some cattle herds are transhumant and are accompanied by hired herdsmen, generally residents of the same villages as the cattle owners. There is growing recognition of the commercial value of cattle, and increasing numbers are sold. There are two major markets in the north, Bogo and Waza, where cattle are bought by middlemen (usually Hausa traders) and sent by train to Yaounde and other growing markets in the south, or on the hoof west to Nigeria. There is little reliable information on weight, weight loss and mortality during these journeys, but the price paid in Nigeria is said to be 200-250% higher than the average price in Cameroon of CFAF 50,000 per head. 17. Herds from the districts to the south and west, mainly owned by Fulani, also move through the project area on their yearly trek to the grazing lands (yaere) in the north. They pass through the Manga forest in November/December, the Anderni-Guirvidig-Maga corridor in December/ January and reach the yaere east of the Waza National Park in February. Their number is estimated at 150-200,000. 18. The project would affect cattle and cattle movements in several ways. The construction of the dikes and the creation of the reservoir would change the cattle routes going north and would require the relocation of local herds. After project completion, transhumant cattle are likely to follow the route along the Mayo Vrik, which would become a permanent watercourse, thus opening up rangeland north of the project area for dry season grazing. Transhumance of the local herd is likely to be reduced for the following reasons: (i) the new watering facilities offered by the reservoir would allow cattle to graze the pastures of the Manga forest longer into the dry season than at present; and (ii) grazing land in the reservoir area, would be reduced by 12,000 ha, leaving a fringe area of around 26,000 ha, from which waters would recede gradually. Of this area, about 12,000 ha  - 35 - ANNEX 1 Page 5 would never be under more than 90 cm of water, providing growing conditions for palatable grass species and natural pasture which would remain lush and nutritious well into the dry season. The increased number of cattle remaining in the project area could give rise to problems regarding grazing rights and practices, which would require close attention at an early stage by project management and traditional leaders. 19. In view of the lack of detailed information on livestock, provi- sion has been made under the project for a study which would result in a program for livestock improvement and pasture development, including improved fodder and veterinary services. Fifteen man-months of consultants for technical assistance would be provided to assist in program design and implementation. Fisheries 20. The fish resources of the Logone river during years of normal run-off are reputed to be of significance. Also the riverain lands (the yaeres) offer excellent spawning grounds during the flood season. The fish, mainly carp and lungfish species, are highly appreciated and much fished by the local farmers during the dry season. Overexploitation, in fact, took place during the drought of 1973-74 and the catch has since then sharply declined. The reservoir area and in particular its permanently inundated 12,000 ha would offer potential for fishculture. Total annual production under natural conditions could, according to preliminary estimates, in fact reach 2,000 tons. The project, therefore, has made provision through consultant services to focus greater attention on the development of this resource. Roads 21. The roads in the project area are on average adequate. The main north-south trunk road traversing northern Cameroon, parts of which are being improved under a Bank project (Loan 663/Credit 180-CM), passes 60 km to the southwest of the project area. The existing provincial road connecting the project area with this trunk road is in good condition between Maroua and Bogo, but needs to be improved between Bogo and Guirvidig to accommodate all weather traffic. This is foreseen under Government's plan for the imme- diate future. Another all-weather provincial road connects Guirvidig with Yagoua, where the SEMRY headquarters is located; it is adequate for the expected traffic.  CAMEROON SECOND SEMRY RICE PROJECT 1/ Climatological Data Annual Item Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total A. MEASURED VALUES 1. Temperature (