Zambia - Technical Assistance Project

Document of FILE C. OPY The World Bank F FOR OFFICIAL USE ONLY Report No. P-2430-ZA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF ZAMBIA FOR A TECHNICAL ASSISTANCE PROJECT December 6, 1978 Iris document has a restricted dribution and may be used by recipients ony in the perfomance of Ltheir oiial duties. Ils contents may not oterwise be disclosed withot World Bank authorization.  CURRENCY EQUIVALENTS Currency unit Kwacha (K) US$1.00 K 0.83 K 1.00 = US$1.20 WEIGHTS AND MEASURES 1 meter (m) 3.28 feet (ft) 1 kilometer (km) 2 0.62 miles (mi) 1 square kilometer (km ) 2 0.386 square miles (sq mi) 1 metric ton (m ton) = 2,204 pounds (lb) GLOSSARY OF ABBREVIATIONS ,CIDA - Canadian International Development Agency METC - Ministry of Economic and Technical Cooperation MLA - Ministry of Lands and Agriculture ODM - United Kingdom Ministry of Overseas Development PPU - Project Preparation Unit in the National Commission for. Development Planning FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY ZAMBIA TECHNICAL ASSISTANCE PROJECT CREDIT AND PROJECT SUMMARY Borrower : Republic of Zambia Amount : US$5.0 million Terms : Standard Project Description : The proposed project would assist the Government with project planning and preparation by providing (a) about 35 manyears of long-term expert services to the PPU and operational ministries or other government agencies; (b) about 35 manyears of con- sultant services for feasibility studies, design work, implementation and other project-related activities; and (c) training of local staff, ser- vices, equipment, vehicles, supplies and operating costs. The project would help the Government achieve the project targets set out in the Third National Development Plan (1979-83), and would help train a cadre of local staff to plan, prepare and implement projects in future years. The most substantial risk facing the project concerns the possible difficulties in recruiting long-term experts. The unsettled condi- tions in the region may have an impact on the Govern- ment's ability to recruit the highly-qualified experts required for planning/project preparation work. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  US$ Million Estimated Cost: Local Foreign Total 1. Long-term experts 0.5 2.1 2.6 2. Consultant services 0.3 2.3 2.6 3. Vehicles, equipment, training and operating expense 0.1 0.2 0.3 4. Contingencies 0.1 0.4 0.5 Total 1.0 5.0 6.0 (taxes and duties) (0.4) (0.4) Total net of taxes and duties 0.6 5.0 5.6 Financing Plan IDA - 5.0 5.0 Government of Zambia 0.6 - 0.6 Total 0.6 5.0 5.6 Estimated Disbursements: (US$ Million) Bank FY 1980 1981 1982 1983 1984 Annual 0.3 1.3 1.5 1.5 0.4 Cumulative 0.3 1.6 3.1 4.6 5.0  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF ZAMBIA FOR A TECHNICAL ASSISTANCE PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Zambia for the equivalent of US$5.0 million on standard IDA terms to help finance a technical assistance project. PART I - THE ECONOMY 1/ 2. A Basic Economic Report on Zambia (1586b-ZA) was issued in December 1977. Its main conclusions are reflected below. The most recent economic data are summarized in Annex I. 3. With its large mineral reserves and large area of land suitable for crops and livestock, Zambia has the potential for rapid and sustained development. From 1965 through 1977, however, real output grew at a rate of only 2.8 percent per annum owing to stagnation in mining, agriculture, con- struction, and transport and communications; the value added by the other sectors increased at a higher rate - services at 6.7 percent annually and manufacturing at 7.7 percent annually. In recent years, the Zambian economy has been battered by a severe economic crisis caused primarily by depressed world copper prices and exacerbated by external political and transport difficulties. 1977 GNP per capita was US$450 - virtually unchanged from that of the previous year. In urban areas, per capita incomes were over three times those of rural areas, providing a powerful incentive for migration. Today more than one-third of the country's population lives in towns and there is substantial urban unemployment. Goals and Performance 4. The broad economic and social goals of Zambia's last two national development plans (1966-1970 and 1972-76) may be summarized as follows: (i) raising the general level of welfare; (ii) diversifying the economy to make it less dependent on copper; (iii) narrowing the gap between urban and rural incomes; and (iv) raising the level of education and developing a wide range of technical and managerial skills. While progress toward the goals of more rapid growth, diversification and equity has been relatively slow, substantial progress has been made in education and training. 5. Despite stagnation in copper production since independence, Zambia's heavy dependence upon mining continues; in 1977, the mining sector still accounted for more than 90 percent of exports and about 21 percent of GDP. 1/ The section on the economy is the same as in the President's Report for the Coffee Production Project (P-2391a-ZA, November 30, 1978).  Such a heavy reliance has had unfortunate repercussions for the country. Wide fluctuations in world copper prices have caused serious instability in govern- ment revenues and the balance of payments. Periods of high prices resulted in the expansion of expenditure to levels which could not be sustained without serious stress in periods of low prices. As a result of the current slump in world demand for copper, Zambia is passing through its most serious economic crisis since independence (paras. 10-12). Because of the precipitous decline in copper prices since mid-1974, the mining companies' profits have been severely squeezed (at times, turning to losses), their tax contribution to the Government has declined to zero and their growing reliance on borrowing from the central bank and commercial banks has led to more rapid growth of the domestic money supply and hence contributed to inflationary pressure. 6. Although Zambia has plentiful land for the development of crops and livestock, the contribution of the agricultural sector to increasing welfare, diversifying the economy and bridging the rural-urban gap has been below its potential. During the ten years following independence (1964-74), output ex- panded at a rate of only about two percent annually, failing to keep pace with population growth and resulting in a continuing reliance on imports of food and agricultural raw materials, most of which Zambia has the capacity to produce at home (e.g., wheat, rice, vegetable oils). The failure of the sector to perform up to its potential has been due largely to government pricing policies which discouraged production and reduced farm incomes while insufficient government resources were devoted to the planning and imple- mentation of programs and projects. 7. It is against this background that, in the last three years, the Government has begun to devote greater attention to the rural areas, taking steps to increase price incentives and improve project implementation capacity in the rural sector. Agricultural producer prices for a wide range of crops have been substantially increased since 1973/74 which, together with generally favorable weather conditions, contributed to more rapid output growth; agri- cultural value added grew at 4.6 percent per annum during the 1975-77 period. Maize production hit record levels in 1976 and 1977 and large increases were registered in the output of cotton, groundnuts, wheat, rice and sunflower seeds. The Government is committed to maintaining adequate incentives for farmers and, in August 1978, announced further producer price increases for the 1978/79 growing season ranging from 10 to 19 percent for maize, sunflower, groundnuts, wheat and coffee. In addition the Government has taken a number of steps to increase production directly. Efforts to augment its capacity to implement projects have begun in rainfed wheat production and a number of programs have been undertaken to train manpower (particularly youth) for rural employment. The Government has expressed its intention to strengthen the Ministry of Lands and Agriculture (MLA) and provincial administrations and a working group has recently submitted a draft report. President Kaunda has charged the MLA with the responsibility for identifying and preparing projects in eight or nine key areas of high growth potential on which the development effort would be focused; in some cases these projects may involve only small- holders, and, in others, estates with joint government and private ownership,  with smallholders as outgrowers. The Bank is currently providing assistance to a special unit in the MLA for the identification and preparation of projects in these areas. 8. Manufacturing, although expanding more slowly than in the 1960's, has contributed to growth and diversification while providing employment for a growing number of migrants from the rural areas. However, much of the invest- ment in manufacturing has been for final stage assembly or processing indus- tries, necessitating large inputs of imported raw materials and capital goods. Such a structure of development has made the sector more vulnerable to periodic foreign exchange shortages and meant that its contribution to import substitu- tion and employment has been less than would have been the case with an investment policy more oriented towards agro-processing and resource based industries - e.g., fruits and vegetables processing, cooking oil, sugar, copperwire and cable, textiles and clothing, wood products, and furniture. 9. Zambia has made important strides in improving the economic and social infrastructure necessary for future development. Investments in power and transportation have laid the basis for a future expansion in copper pro- duction and the rest of the modern sector. At independence, there was a severe shortage of skilled manpower (e.g., Zambian university graduates numbered less than 100). Since then the expansion of the educational system has been impressive. From 1964 to 1974, primary school enrollments doubled and secondary and technical school enrollments more than quadrupled; since its establishment in 1966, the University of Zambia has produced 860 graduates and enrollment has increased more than sevenfold. Despite these achievements, skilled manpower remains an important constraint on the development effort. The Current Economic Crisis 10. Because of Zambia's dependence upon copper, the fall in copper prices from US$0.93/lb in 1974 to an average of US$0.60/lb during the 1975-77 period has had serious consequences for the balance of payments, government budget and domestic production. The sharp decline in copper prices (combined with stagnating copper sales volumes) has led to large balance of payments deficits beginning in 1975. Despite government controls on imports (which, when combined with an average rate of increase of 20 percent annually in import prices, have sharply reduced import volumes), a 20 percent devaluation of the Kwacha in mid-1976 and stricter controls over service payments (e.g., expatriate remittances, foreign travel), current account deficits of US$611 million, US$58 million and US$228 million were incurred during the years 1975, 1976 and 1977 respectively. Because net capital inflows during the three years were far short of the amounts necessary to finance these deficits, large arrears in payments for imports and for private foreign remittances were accumulated and foreign exchange holdings declined. By the end of 1977, arrears had accumulated to US$470 million. Between the ends of 1974 and 1977, net foreign assets fell from US$119 million to minus US$227 million; gross international reserves at the end of 1977 stood at US$74 million (the equiva- lent of just under one month's worth of imports).  - 4 - 11. Through its import licensing system, the Government has attempted to allocate foreign exchange to those products most essential for the operation of the economy. While the real volume of imported consumption items fell 65 percent between 1975 and 1977, imports of capital goods and of spare parts, raw materials and intermediate goods fell 42 and 32 percent respectively. Shortages of spare parts and essential intermediate goods have created idle capacity and unemployment in many productive sectors and contributed to a decline in real output. While real GDP fell 2 percent between 1975 and 1977, larger declines were suffered in manufacturing (11 percent), construction (13.8 percent), and transport, communications and storage (25.8 percent), sectors particularly affected by shortages of essential imports. 12. To counter the effects of falling mineral tax revenues, the Govern- ment has attempted to curb expenditures while increasing non-mineral tax revenues. Firstly, in contrast to the 1965-75 growth rate of 15 percent per annum, recurrent expenditures expanded by only 4.2 percent annually during the 1975-77 period (far less than the rate of inflation). Government wages have been frozen while subsidies were cut by 20 percent through substantial in- creases in the prices of fertilizers and important basic foods such as maize meal, wheat flour and bread; nonetheless other recurrent expenditures have continued to expand, mainly due to greater servicing charges on foreign and domestic debt and rising prices of goods purchased by Government. Secondly, capital expenditures have been cut by about 30 percent, severely reducing the Government's development effort; in real terms government capital expenditures during 1975 to 1977 were lower than in the late 1960s. Thirdly, non-mineral tax revenues have been expanded greatly through higher personal and company taxes and increases in the rates and coverage of sales, excise and customs taxes; during 1975 to 1977, income tax revenues increased 39 percent while revenues from sales and excise taxes and tariffs grew by 28 percent. Despite these expenditure cuts and tax increases, which partially offset the effects of the precipitous decline in mineral revenues and brought a steady decline in the size of budgetary deficits over the three year period, deficits con- tinued to be large and were financed mainly by borrowing from the central bank and commercial banks; this added to inflationary pressures at a time when domestic production and declining import volumes were reducing the available supply of goods. During the 1975-77 period the rate of inflation averaged 14 percent annually. 13. Adding to Zambia's present difficulties are the major problems it is experiencing with the transportation of its imports and exports. Some 90 percent of its international traffic currently moves along the transport route through the Port of Dar-es-Salaam. Effective capacity on the rail and road corridor to the Port now has fallen to such a low level as to cause major disruptions in the movement of both imports and exports, although the recent reopening of the southern rail route in October 1978, and the planned reopening of the Benguela Railway in the near future should provide some relief. This has resulted from (i) the TAZARA Railway's failure to achieve expected per- formance, due in large measure to new and unseasoned staff, spare part short- ages, inadequate maintenance of locomotives and rolling stock and difficulties in offloading goods; (ii) deterioration of road trucking capacity (lack of  - 5 - spare parts and adequate maintenance); (iii) arrears in payments on freight and port charges, and (iv) resulting congestion in the Port of Dar-es-Salaam. At the Government's request the Bank is currently examining ways to help alleviate these problems. The 1978 Budget and Economic Program 14. The Government planned through a reduction in expenditures and in- creased taxes to bring about a sharp decline in the size of the 1978 budgetary deficit, thus (together with an expansion in disbursements from foreign loans) reducing its reliance on borrowing from the central bank and commercial banks by over 60 percent as compared with the 1977 level; these measures should contribute to reducing inflationary pressures. Among the major bud- getary measures were: a reduction in recurrent expenditures mainly due to a 33 percent cut in subsidies resulting from substantial price increases for maize meal and fertilizers; a freeze on the level of capital investment, which, taking into account inflation, would reduce the Government's investment program to the lowest level since independence, and an eight percent increase in non-mineral revenues mainly through higher duties on imports of capital goods and luxuries, and higher sales and excise taxes on various luxury items. However, preliminary estimates suggest that the budgetary deficit may be somewhat larger than originally planned: while recurrent and capital expendi- tures will be lower than in the 1978 Budget, there will be a substantial shortfall in corporate income tax receipts and customs and excise taxes because of the decline in economic activity and the fall in imports owing to transport difficulties. In addition to the budgetary measures, the Government has taken other steps to increase the diversification of the economy and ensure more appropriate relative factor prices. Among the most important measures are: (i) a 10 percent devaluation of the Kwacha (on March 17, 1978) designed to increase the international competitiveness of Zambian goods and, together with cost cutting measures, to raise mining company profits, thus reducing their reliance on the domestic banking system for borrowed funds; (ii) increased agricultural producer prices (see para.7) and a 30 percent increase in government budgetary investment in agriculture (at a time when the capital budgets of most other ministries are being cut); (iii) an Industrial Development Act designed to attract private domestic and foreign capital through assurances about nationalization and to promote such government goals as exports, use of local raw materials, use of labor-intensive techniques and the development of rural, small-scale enterprises through various types of tax incentives; and (iv) a freeze on wages and an increase in interest rates in order to hold down private consumption and encourage savings, as well as promote more labor-intensive production techniques. External Capital Requirements 15. Zambia has relied on external capital flows to an extent similar to other African nations with comparable per capita income (e.g., Ivory Coast and Congo). The terms of these flows range from the very concessionary terms given by the People's Republic of China to suppliers' credits and Euro-dollar loans. With a 24 percent share in debt outstanding and disbursed at the end of 1977, the Bank is the country's largest creditor, just ahead of the  - 6- People's Republic of China (22 percent) and private banks (23 percent). Zambia's outstanding and disbursed external public debt amounted to US$1.3 billion at the end of 1977. Owing to greater reliance on external capital flows, a growing proportion of which has been from commercial lenders, and to a trend toward harder loan terms from all sources (except bilateral). Zambia's debt service ratio has increased since the late 1960s. These fac- tors, in combination with relatively low copper prices, resulted in a debt service ratio of 19.4 percent in 1977. 16. Given current copper price projections and the need to build-up foreign exchange holdings and pay off arrears, the 1978-80 period will see continued balance of payments stringency (owing to the sluggish recovery of the world economy, current Bank projections show little improvement in real copper prices before 1981). The Government will, therefore, have to maintain tight import controls with consequent continued shortages of spare parts and materials, unutilized productive capacity and unemployment. Even under such restraints, net capital flows required to cover the current account deficits, pay off arrears, and eliminate the negative net foreign assets balance by the end of 1980, would amount to about US$1.4 billion over the three year period. Over US$380 million is being provided by IMF resources, including a standby agreement (approved by the Fund Board on April 26, 1978), the Compensatory Financing Facility and the Trust Fund (to date Zambia has actually drawn about US$180 million from these facilities). Zambia's terms of trade are expected to improve in the early 1980's (current Bank projections show an increase in real copper prices, as compared with 1977, of about 33 percent by 1981 and 67 percent by 1985). Its capital requirements, therefore, should fall, averaging around US$400 million per annum during the 1981-85 period. In obtaining capital over the 1978-85 period, the past trend toward harder loan terms for Zambia's external borrowing are not expected to continue. A recent Consultative Group Meeting for Zambia, organized under the auspices of the Bank, revealed a sizeable increase in bilateral and multilateral aid committed to Zambia under relatively soft terms. The Bank also considers Zambia to be eligible for a small amount of IDA lending in view of the country's large short- and medium-term capital requirements, its recent progress towards economic diversification and improved fiscal management (paras. 13 and 14) and its per capita income level. On these assumptions, Zambia's debt service ratio would average about 23 percent per annum through 1980, slowly declining thereafter as Zambia's terms of trade improve, reaching about 18 percent in 1985. PART II - BANK GROUP OPERATIONS 17. Since 1956, the Bank has made 24 loans and 1 credit to Zambia totalling about US$530 million. A US$6.0 million credit for a coffee produc- tion project is scheduled for consideration by the Executive Directors on December 14. Eleven loans, and the credit approved in FY78 for a third highway project, together totalling US$346 million (65 percent of the total), financed physical infrastructure projects of which power, transportation and communications accounted for three quarters of this amount. Four loans for  - 7 - education helped to expand and develop Zambia's secondary school system, teacher training, higher education and commercial, agricultural and technical education. In 1974, the Bank made a loan for urban development and a US$30 million program loan. The program loan was slow to disburse due to dramati- cally improved copper prices which reduced the Government's need for the funds, and partly because the disbursement mechanism proved more complicated than expected. US$12.5 million of the loan was cancelled in June 1975. A second program loan, extended in late 1976, provided foreign exchange for importing essential capital and intermediate goods, raw materials and spare parts for agriculture, mining and manufacturing. The Bank also made a loan to the Development Bank of Zambia in 1976, to help finance manufacturing and commercial farming. The Bank made five loans during 1968-77, for industrial forest plantations, livestock, commercial crops and integrated family farming. The livestock loan was cancelled in 1973, and the disbursed portion prepaid at the Government's request. The project was having serious problems due mainly to adverse pricing policies and poor management. The Family Farming Project is experiencing managerial difficulties which are being overcome gradually. A second loan for industrial forestry in 1977, is assisting the Government's long-term plantation program, and an expansion of logging and sawmilling capacity. Twelve loans are now fully disbursed. In 1977, the Bank's shares of Zambia's total debt (disbursed and outstanding) and total debt service payments were 24 percent and 13 percent respectively. On the basis of present projections, both of these percentages are expected to be less than 25 percent in the mid-1980's. 18. IFC made its first investment in Zambia in 1972, by providing US$1.1 million (including US$227,500 as equity) for the expansion of the Zambia Bata Shoe Company, Ltd. and, in 1973, invested an additional US$1.2 million in Bata for a tannery. In May 1975, IFC invested about US$1.0 million in Century Packages, Ltd. for a packaging materials factory and a further US$100,000 in January 1978. An IFC investment of US$550,000 equivalent in the share capital of the Development Bank of Zambia was made in February 1976, in conjunction with a US$15.0 million Bank loan to that institution. A summary statement of Bank loans, IDA credits and IFC investments along with notes on the execution of ongoing projects is contained in Annex II. 19. During the past year, the Bank Group has been providing substantial assistance to the Government in the preparation of programs and projects for rural development including a coffee production project (to be considered by the Executive Directors on December 14, 1978) and a cotton project whose preparation is near completion. Bank Group assistance in this sector, however, is not limited to agricultural projects as such. The Fourth Education Project, approved in 1976, includes a major component for training farmers and govern- ment agricultural technicians. A Rural Water Supply Project, now under preparation, will provide assistance to smaller towns in predominantly rural environs. 20. Agricultural and rural sector development is essential to diversify the economy and improve rural living conditions. Until recently, progress in this sector has been difficult, primarily because of the Government's weak- nesses in making and carrying out suitable policies and in formulating and  - 8 - implementing effective programs. To help identify the sector's problems and possible solutions, the Bank, at the Government's request, undertook a rural sector survey in 1975. The report has stimulated wide discussions about agriculture and rural development at all levels of Government, and is playing a key role in increasing cooperation between Zambia and the Bank Group in the development of this sector. 21. In addition to the agricultural and rural sector, the Bank Group has carried out sector surveys of investment opportunities in agro-based industries, urbanization and water supply and sewerage. A basic economic mission which visited Zambia in June/July 1975, and subsequent follow-up missions, focused largely on the industrial and mining sectors as well as manpower planning in its broadest aspects. The reports of these missions have provided the basis for a more intensive dialogue between the Bank and Zambia. 22. While the Bank Group's program will continue to emphasize agri- cultural and rural development, it will also continue to support the devel- opment of industry, and of physical and social infrastructure. At the Government's request, the Bank Group is reviewing Zambia's transport system to help identify the system's problems and potential solutions, and a pro- posed third railway project is being prepared. Further assistance is being considered for the Development Bank of Zambia to help it continue its efforts in industry and commercial agriculture. In all aspects of the Bank Group's program, institution building will continue to occupy a central position. PART III - THE NEED FOR TECHNICAL ASSISTANCE Background 23. Zambia's present reliance on substantial inflows of technical assistance can be traced to the colonial period when large investments were made in mining and industry without a matching emphasis on the development of the social infrastructure. At independence in 1964, there were only 100 Zambians with a university degree and some 1,200 with secondary school certificates out of a population of 3.5 million. Four Zambians held pro- fessional jobs in the government civil service and fewer than twenty were employed in higher administrative posts. These numbers were totally inade- quate to manage Zambia's sophisticated, expatriate-controlled modern sector and to develop programs to improve productivity and the level of services in the vast rural areas where 70 percent of the population resided. Des- pite massive expenditures on education (in which the Bank has assisted by providing four loans for US$69 million), and the resulting sizeable increases in school enrollments, Zambia has had to continue its dependence on expatri- ate manpower to fill many positions requiring technical and administrative skills. At present, there are an estimated 30,000 to 35,000 expatriates (including dependents) in Zambia, roughly the same as at independence. About 4,500 expatriates work for the two government-controlled copper companies and  - 9 - another 2,500 are employed in the governmental/parastatal sector under exter- nally-financed technical assistance programs; the rest work either in the private sector or for the Government on direct-hire contracts. There are, however, numerous vacancies in government service and parastatals for posi- tions requiring managerial expertise or technical skills. The lack of trained manpower for project preparation and planning has had a particularly serious impact on economic development as it has constrained preparation of urgently needed projects which would have furthered economic growth and diversifica- tion, and it has also delayed the effective coordination and full utiliza- tion of technical and financial assistance offers from bilateral and other sources. 24. Since its independence, Zambia has received substantial inflows of technical assistance. During the 1972-77 period, external sources contri- buted an estimated US$170 million in technical assistance to the public sec- tor. Of this, 79 percent came from bilateral sources, 17 percent from UN organizations and 4 percent from non-governmental groups. The 1977 break- down of technical assistance flows, in terms of sectoral allocations and source, was: Technical Assistance Available to Zambia, 1977 I/ (US$ Million) Bilateral 2/ UNDP Other 3/ Total % Agriculture & Forestry 11.5 0.7 1.0 13.2 33 Education 7.6 - 0.2 7.8 19 Health 2.2 0.1 3.0 5.7 14 Economic Planning 3.6 0.6 0.2 4.4 11 Natural Resources 2.0 - 0.5 2.5 6 Industry 1.7 0.3 0.3 2.3 6 Transport 1.9 0.1 0.1 2.1 5 Other 1.6 0.6 0.3 2.5 6 Total 32.1 2.4 6.0 40.5 100 79 6 15 100 % 1/ UNDP figures; does not include value of technical assistance provided by the Soviet Union and the People's Republic of China. 2/ Includes non-governmental groups. 3/ Comprises other UN and multilateral agencies.  - 10 - 25. The British Government, through the Overseas Development Ministry (ODM), supports the largest technical assistance program in Zambia. In 1977, ODM spent t 7 million (US$12.4 million) to fund or supplement the salaries of 1,057 teachers, experts and advisers, most of whom were employed in the civil service. The number of individuals involved in these programs has declined steadily over the last four years due more to shortfalls in recruitment than reductions in the numbers of authorized posts. The Bank Group has been active in providing substantial amounts of project-related technical assistance to Zambia both for future project preparation activities and for project admin- istration or related institution building purposes. The Third Highway Project, approved in May 1978, provides financing for an estimated 1,200 man-months of consultant services and technical assistance to improve Zambia's road mainte- nance capability. The Coffee Production Project, to be considered by the Executive Directors on December 14, contains a small technical assistance component to assist project implementation and to strengthen coffee research. Future Requirements for Technical Assistance 26. The University of Zambia's Manpower Research Unit has estimated that in 1977 there were 16,000 jobs in the government and parastatal sectors (excluding mining) requiring post-secondary education. Based on recent data for cumulative educational output and assumptions on public and private sec- tor employment, only about 9,000 Zambians with secondary or post-secondary school education were available for public service in 1977, leaving a short- fall of at least 7,000 positions. Since 2,500 positions were filled under official technical assistance programs, about 4,500 posts were subject to direct government recruitment. Ceilings on governmental and parastatal salary levels, restrictions on foreign exchange flows, and deterioration in local living conditions, however, have constrained Zambia's ability to recruit on the international market. Consequently, many vacancies exist in higher level positions requiring experienced management skills and technical expertise. 27. The Zambian Government in its development plans has accepted the need for technical assistance during the long gestation period necessary to educate and train enough local manpower to manage the economy. In the past, the Government has fallen short of its development objectives, in part be- cause its use of technical assistance was poorly focused. Offers from bila- teral sources went unutilized, while ministries crucial to diversification efforts were short of the skilled manpower needed to plan and implement proj- ects. In 1976, the Government established the Ministry of Economic and Tech- nical Cooperation (METC), to improve coordination of technical and economic assistance. The METC tried to match technical assistance requirements with resources available under external assistance programs, but internal problems combined with the lack of proper planning capabilities in the operational ministries hampered its efforts. 28. The operational ministries' general weakness in planning and project preparation has contributed to the failure of the previous two Plans to meet their general targets and to improve economic diversification. In order to  - 11 - reach the investment objectives of the Third Plan, the Government is placing great emphasis on better technical assistance coordination in order to strengthen planning and project preparation. To help with these efforts, the Government has established a Project Preparation Unit (PPU) in the Na- tional Commission for Development Planning to assist ministries in preparing projects. In addition, the Government intends to strengthen planning/project preparation units in key operational ministries. As part of this effort the Canadian Government (CIDA), under a Can $2.5 million technical assistance project, has agreed to provide a team of four advisers in the planning unit of the Ministry of Lands and Agriculture (MLA) and one adviser in the Plann- ing Commission. The CIDA project will strengthen MLA's capability to plan, prepare, implement and evaluate development projects, will improve coordi- nation between the MLA and the Planning Commission and will provide for an intensive program of counterpart training. 29. Zambia's requirements for technical assistance will in fact in- crease during the Third Plan period. While the Plan has not yet been finalized its estimated expenditure targets in real terms are projected to exceed Second Plan levels. Moreover, the focus of the Third Plan on boost- ing agricultural and industrial productivity would lead to expanded techni- cal assistance requirements to implement sectoral projects. A prerequisite to achieving the sectoral investment programs is the need to strengthen through technical assistance the planning/project preparation capabilities of the Planning Commission and operational ministries. Zambia's traditional sources of technical assistance (UNDP, ODM and CIDA) are fully committed to ongoing programs. While these agencies and other donors indicated their intention at the First Consultative Group Meeting in June 1978 to step up their offers of technical assistance, most of it will likely be related to their ongoing programs. Meanwhile, it is essential that the Government have immediate access to additional discretionary and flexible resources for planning/project preparation expertise. With this type of assistance in place, the Government would be better able to utilize technical and fi- nancial offers from external sources. PART IV - THE PROJECT 30. The project was prepared jointly by the Government and the Associ- ation, following the Government's request in November 1977. Negotiations were held in Zambia from November 9-13, 1978. Mr. Sichilongo, Permanent Secretary, Ministry of Finance, and Mr. Simonda, Permanent Secretary, Na- tional Commission for Development Planning jointly led the Government's delegation. Objectives and Description of the Project 31. The project would help the Government carry out the Third National Development Plan (1979-83) by strengthening planning and project preparation capabilities through the provision of (a) long-term expert services in key  - 12 - ministries and government agencies; (b) short- and medium-term consultant services to assist project preparation and implementation; and (c) training of counterpart staff. Specifically, the project would provide for: (a) about 35 manyears of long-term expert services to the Project Preparation Unit (PPU) in the National Commission for Develop- ment Planning and operational ministries or other agencies of the Borrower to (i) strengthen sectoral planning and re- source allocation, (ii) improve monitoring of project preparation/implementation, and (iii) assist with pre- investment, implementation and supervision of specific de- velopment projects; (b) about 35 manyears of consultant services to be used to under- take feasibility studies, design work, implementation and other project-related activities; and (c) training of local staff, services, equipment, vehicles, supplies and operating costs. 32. Expert Services. The project would provide for experts to strengthen the capability of the PPU and the operational ministries to plan, prepare and implement high priority projects under the Third National De- velopment Plan (1979-83). One of the experts to be recruited in the PPU would be designated the senior expert and would help with the recruitment of the remaining experts financed under the project. Several experts would be attached to the PPU, while others would be assigned to those operational ministries and government agencies that have the highest need for planning/ project preparation assistance. The Government is in the process of review- ing the manpower requirements of those ministries and agencies which will have substantial roles in the Third Plan to determine which ones should be assisted through the proposed project. The ministries currently being con- sidered include Industry; Water and Natural Resources; Lands and Agriculture; Works, Transport and Communication, and Local Government and Housing. Out- line terms of reference for the experts are provided in Annex IV. 33. Consultant Services. The project would also provide funds for medium- and short-term consultant services to be used for identifying, pre- paring and implementing high priority projects. Consultants could be em- ployed to help draw up detailed preparation plans for preparing complex proj- ects, undertaking feasibility studies, monitoring preparation work, assisting project start-up by preparing tenders, and helping with project supervision and implementation. Most of the consultant services would be used to undertake feasibility studies for high priority agricultural and industrial projects. Details of several projects which will require consultant services for addi- tional preparatory work are provided in Annex V. While some of these studies may lead to projects suitable for Bank Group financing, the consultant services could be used for preparing any project of high national priority which the Government intends to implement under the Third Plan.  - 13 - 34. Counterpart Training and Miscellaneous Operating Expenses. The project would provide vehicles and funds for vehicle operating expenses, local travel, small office equipment, and miscellaneous operating expenses. The Government would provide office space, secretarial services and would arrange for housing on a priority basis. The Government has agreed to assign a qualified local counterpart to each expert financed from the proceeds of the credit (Section 4.03, draft Development Credit Agreement). Each expert would be expected to draw up and implement a detailed training program, which would include plans for on-the-job training, short-term courses and possible training abroad. The credit provides a small amount of funding for short-term training courses and other training requirements. Project Costs and Financing 35. The estimated project costs are: US$ Million Foreign Local Foreign Total % 1. Long-term experts (35 manyears) 0.5 2.1 2.6 81 2. Medium- and short-term con- sultants services (35 manyears) 0.3 2.3 2.6 89 3. Vehicles, Equipment, Training, Operating Expenses 0.1 0.2 0.3 67 4. Contingencies 0.1 0.4 0.5 80 Total 1.0 5.0 6.0 83 (taxes and duties) (0.4) (0.4) Total (net of taxes and duties) (0.6) (5.6) 90 An IDA credit of US$5.0 million would finance the project's estimated foreign expenditure costs which amount to 90 percent of total net costs. Expert and consultant services have been costed at US$75,000/manyear. Price contingen- cies, calculated at eight percent per annum, have been allowed for salaries, vehicles, equipment and operating expenses; a physical contingency of ten percent has been allowed for vehicles, equipment and operating expenses. Implementation 36. The National Commission for Development Planning would be the focal point for project implementation. The Planning Commission, headed by a Min- ister, comes under the jurisdiction of the Prime Minister, who serves as its chairman. The Commission is responsible for formulating the Third National Development Plan and monitoring and approving annual capital expenditure  - 14 - proposals. To help with these responsibilities, the Planning Commission es- tablished a Project Preparation Unit (PPU), whose duties include assisting governmental ministries and agencies to prepare high priority investment proj- ects. In addition to direct assistance for project preparation, the PPU helps to coordinate the flow of technical assistance and external financial re- sources to projects which have identified requirements. Under the project, all proposals for utilization of the funds would be submitted to the Associ- ation in the form of sub-projects and would be subject to the Association's agreement (Section 4.02 (a), draft Development Credit Agreement). The initial sub-project, providing assistance to the PPU, has been discussed and agreed with the Government. For those sub-projects involving consultancy services, a working group would be established comprising staff from the PPU and the ministries or agencies concerned (Section 4.02 (b), draft Development Credit Agreement). The working group would prepare the sub-project proposals for approval by the Government and would follow-up with sub-project implementa- tion. The terms of reference for the PPU and the working groups for sub- projects are provided in Annex VI. 37. In submitting sub-projects to the Association, the Government will provide the following supporting documentation (Section 4.04(b), draft Develop- ment Credit Agreement): (i) a detailed description of the studies and work to be carried out in connection with the proposed sub-project, including the purposes and objectives of the proposed sub-project and the benefits expected from each sub-project; (ii) information regarding the qualifications, terms of refer- ence and duration of service for any experts or consultants to be engaged in carrying out the proposed sub-project; (iii) a description of the functions of the agency or agencies or personnel of the Borrower to be responsible for the execution of the proposed sub-project; (iv) estimates of the foreign and local costs of the proposed sub-project broken down by major items and showing amounts to be financed by the Borrower and out of the proceeds of the credit, respectively, and an estimated disbursement schedule; and (v) a description of the measures to be taken regarding arrangements for appointment of qualified counterparts. Procurement and Disbursement 38. The Government would recruit the experts to be funded under the project, with the Association providing assistance as required. The quali- fications, experience and terms and conditions of employment of the experts would be satisfactory to the Association (Section 3.03(a), draft Development  - 15 - Credit Agreement). For contracts exceeding US$100,000 in value, the Govern- ment would furnish the Association a copy of the proposed contract for prior review and concurrence. To minimize recruitment difficulties, the Government expects to follow a two-step approach for recruiting the proposed expert services. The senior expert in the PPU (see para. 32) would be recruited initially and he in turn would actively assist in the recruitment of additional experts for the PPU and experts in the operational ministries. 39. The consultants would have qualifications, experience and terms and conditions of employment satisfactory to the Association (Section 3.03(a), draft Development Credit Agreement). Contracts exceeding US$100,000 in value would be furnished to the Association for prior review and approval. Con- tracts for the purchase of goods to be financed out of the proceeds of the credit shall be let on the basis of competitive bidding advertised locally, in accordance with local procedures acceptable to the Association. 40. The Association would disburse against 100 percent of foreign ex- penditures and 80 percent of local expenditures for experts and consultants services, training, equipment and supplies and operating costs. Project Duration and Reports 41. The project would cover the period of the Third National Development Plan (1979-83). Since most experts financed through the project would be recruited in 1979/80, their contracts would have a three-year duration. The project should be completed by December 31, 1983. The PPU would prepare, not later than September 30 of each year, a detailed annual work program setting forth its proposed project preparation and monitoring activities dur- ing the following fiscal year. The proposed work program would be furnished to the Association for review by October 31 of each year. The Planning Com- mission would be responsible for preparing an annual report by August 31 of each year beginning in 1980, and continuing until project completion, setting out (i) the status of all project preparation activities financed with the proceeds of the credit, and (ii) the status of all projects prepared with the proceeds of this credit and being executed under the Third Plan (Section 5.01, draft Development Credit Agreement). The Government would prepare and furnish to the Association an evaluation report following project completion (Section 4.06(c), draft Development Credit Agreement). Benefits and Risks 42. The project would help the Zambian Government achieve its invest- ment objectives in the Third National Development Plan (1979-83) by provid- ings.assistance to strengthen planning and project preparation. Long-term expert assistance would help the Planning Commission and operational min- istries overcome critical shortages of experienced planners and project analysts which in the past have hindered the formulation and preparation of sectoral plans and projects. The short- and medium-term consultant services financed by the credit would enable the Government to carry out essential pre-investment work on high priority projects. Counterpart training would  - 16 - provide Zambians with valuable experience in economic planning and project preparation work. An important benefit would be the improved availability of high priority projects ready for external financing. The project would also enable the Government to more effectively identify its technical assis- tance requirements and utilize offers of such assistance from bilateral, multilateral and private sources. The project's main risk is in recruiting long-term experts. The Government's internal machinery for recruiting highly qualified experts does not operate quickly or efficiently. Moreover, the unsettled conditions prevailing in southern Africa complicates recruitment of qualified expatriates whose services are in high demand elsewhere in the developing world. To facilitate recruitment, the Association would assist the Government in finding suitable candidates for the position of senior expert in the PPU (para. 38). The senior expert in turn would help the Government recruit other experts financed by the credit. PART V - LEGAL INSTRUMENTS AND AUTHORITY 43. The draft Development Credit Agreement between the Republic of Zambia and the Association, and the Recommendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 44. Special conditions of the project are listed in Section III of Annex III of this report. 45. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 46. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President By Ernest Stern Attachments December 6, 1978  -17 - ANNEX I ZAMBIA - SOCIAL INDICATORS DATA SHEET REFERENCE GROUPS (ADJUSTED AVERAGES ZAMBIA /A LAND AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE) TOTAL 752.6 SAME SAME NEXT RIGHER AGRICULTURAL 350.0 MDST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 lb ESTIMATE Lb REGION /c GROUP /d GROUP Le GNP PER CAPITA (US$) 190.0 310.0 450.0 223.6 432.3 867.2 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) .. 495.0 504.0 86.7 251.7 578.3 POPULATION AND VITAL STATISTICS TOTAL POPULATION, MID-YEAR (MILLIONS) 3.2 4.3 5.2 URBAN POPULATION (PERCENT OF TOTAL) 20.0 30.0 36.3 13.6 24.2 46.2 POPULATION DENS ITY PER SQ. KM. 4.0 6.0 7.0 18.4 42.7 50.8 PER SQ. KM. AGRICULTURAL LAND 9.0 12.0 15.0 53.6 95.0 93.3 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 45.0 .Ls 45.8 46.5 44.4 44.9 42.9 15-64 YRS. 51.0 /f.h.h 51.9 50.9 52.7 52.8 53.5 65 YRS. AND ABOVE 4.0 /f.1.L 2.3 2.6 2.8 3.0 3.5 POPULATION GROWTH RATE (PERCENT) TOTAL 2.8 2.9 2.9 2.6 2.7 2.5 URBAN .. 13.6 Li 6.3 5.8 8.8 4.7 CRUDE BIRTH RATE (PER THOUSAND) 49.5 49.7 51.5 46.9 42.2 37.8 CRUDE DEATH RATE (PER THOUSAND) 23.1 20.9 20.3 20.6 12.4 10.8 GROSS REPRODUCTION RATE .. 3.3 3.4 3.1 3.2 2.5 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. .. .. USERS (PERCENT OF MARRIED WOMEN) .. .. .. 2.5 14.2 20.0 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1970-100) 109.3 100.0 114.3 94.2 104.3 107.3 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 87.0 88.0 89.0 90.1 99.5 105.3 PROTEINS (GRAMS PER DAY) 63.0 64.0 58.8 55.2 56.8 63.0 OF WHICH ANIMAL AND PULSE .. 25.0 |1 16.5 17.1 17.5 21.7 CHILD (AGES 1-4) MORTALITY RATE .. .. .. .. 7.5 8.0 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 38.5 43.5 44.5 43.7 53.3 57.2 INFANT MORTALITY RATE (PER THOUSAND) .. .. .. 138.4 82.5 53.9 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 37.0 42.0 22.4 31.1 56.8 URBAN .. 70.0 86.0 66.3 68.5 79.0 RURAL .. 22.0 16.0 10.4 18.2 31.8 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 16.0 42.0 23.9 37.5 30.9 URBAN .. 12.0 87.0 70.3 69.5 45.4 RURAL .. 18.0 16.0 14.2 25.4 16.1 POPULATION PER PHYSICIAN 12860.0 8110.0 .. 21757.5 9359.2 2706.8 POPULATION PER NURSING PERSON 9950.0 If 2430.0 .. 3473.8 2762.5 1462.0 POPULATION PER HOSPITAL BED TOTAL 350.0 jf 310.0 .. 645.4 786.5 493.9 URBAN .. 340.0 /k .. 172.9 278.4 229.6 RURAL .. 330.0 /k .. 1292.6 1358.4 2947.9 ADMISSIONS PER HOSPITAL BED .. .. .. 19.2 19.2 22.1 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. 4.4 .. 4.9 .. 5.2 URBAN .. .. .. 5.0 .. 5.0 RURAL .. .. .. 4.7 .. 5.4 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. 2.6 .. .. .. 2.0 URBAN .. 2.6 .. .. 2.3 1.5 RURAL .. 2.6 .. .. .. 2.7 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. .. .. 28.3 64.1 URBAN 27.5 .. .. .. .. 67.8 RURAL .. .. .. .. 10.3 34.1  - 18 ANEX I ZAMBIA - SOCIAL INDICATORS DATA SHEET REFERENCE GROUPS (ADJUSTED AVERAGES ZAMBIA /a - MOST RECENT ESTIMATE) SAME SAME NEXT HIGHER MOST RECENT GEOGRAPHIC INCOME INCOME 1960 Ab 1970 A ESTIMATE Ab REGION Le GROUP /d GROUP /e EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 48.0 JA 70.0 88.0 52.1 75.8 99.8 FEMALE 38.0 64.0 86.0 37.6 67.9 93.3 SECONDARY: TOTAL 1.0 13.0 14.0 8.0 17.7 33.8 FEMALE 1.0 8.0 9.0 5.0 12.9 29.8 VOCATIONAL. (PERCENT OF SECONDARY) 28.0 3.0 8.6 7.2 7.4 12.8 PUPIL-TEACHER RATIO PRIMARY 50.0 47.0 48.0 43.2 34.3 34.9 SECONDARY 14.0 21.0 21.0 22.8 23.5 22.2 ADULT LITERACY RATE (PERCENT) 28.5 /f 47.3 .- 20.3 63.7 71.8 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 11.0 14.0 18.0 3.9 7.2 12.4 RADIO RECEIVERS PER THOUSAND POPULATION 9.0 /1 18.0 21.0 40.1 71.1 104.5 TV RECEIVERS PER THOUSAND POPULATION *- 4.0 5.0 2.2 14.1 28.1 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 7.0 13.0 22.0 3.9 16.3 45.2 CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. .. 1.2 1.6 4.6 EHPLOYMENT TOTAL LABOR FORCE (THOUSANDS) .. 1160.0 1310.0 FEMALE (PERCENT) 33.7 33.0 32.5 32.6 28.0 25.7 AGRICULTURE (PERCENT) 78.7 72.8 52.0 73.3 54.1 46.2 INDUSTRY (PERCENT) 7.0 8.8 PARTICIPATION RATE (PERCENT) TOTAL 40.4 38.9 37.6 42.0 37.8 33.8 MALE 54.1 52.7 51.3 54.8 50.3 48.1 FEMALE 26.9 25.3 24.2 27.3 20.9 17.3 ECONOMIC DEPENDENCY RATIO .. .. 1.8 1.2 1.3 1.4 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 33.7 .. 23.0 25.7 19.5 23.6 HIGHEST 20 PERCENT OF HOUSEHOLDS 58.2 .. 63.0 55.1 48.9 52.3 LOWEST 20 PERCENT OF HOUSEHOLDS 5.4 .. 3.8 5.8 5.9 4.3 LOWEST 40 PERCENT OF HOUSEHOLDS 13.0 .. 10.1 14.5 15.7 13.1 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 175.0 108.8 155.9 191.9 RURAL .. .. 125.0 74.1 97.9 193.1 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. 124.4 143.7 319.8 RURAL .. .. 125.0 59.6 87.3 197.7 ESTIMATED POPULATION BELOW POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 25.0 26.8 22.9 19.8 RURAL .. .. 70.0 47.6 36.7 35.1 Not available Not applicable. NOTES /a The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme values of the indicator and the most populated country in each group. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970. between 1969 and 1971; and for Most Recent Estimate, between 1973 and 1977. Ic Africa South of Sahara; /d Lower Middle Income ($281-550 per capita, 1976); /e Intermediate Middle Income ($551-1135 per capita, 1976); /f 1963; /R African population; /h 15-59 years and 60 and over respectively; /i 1965-69; /i 1965; /k 1967; /1 Data for Rhodesia and Malawi included. September, 1978  - 19 - ANNE I DEFINITIONS OF SOCIAL INDICATORS ligI: The adjusted group averages for each indicator ore population-weighted geometric means 1 excluding the extreme values of the indicator and the nest populated country in each group. Coverage of countries among the indicators depends on availability of data and is not unifom. Due to lack of data, group averages for Capital Surplus Oil Exporters and indicators of mocesa to watec and mecrota disposal, housing, income distribution and poverty are simple popuiatioo-wnighted geometric mesas vithout the eoIlusion of estreme values, LAND AREA th.ousand q. ki) Population per hospital bed - total, urban, and rural - Population (total, Total - Total surface -rea nrprising load ar-a and inland water, urban, and rural) divided by their respective number of hospital beds Agricutural - Most rec-- cot 1=ate of ogricaltural area used tenporarily av-ilable in public and private general and pecialieed hopitaL1 and re- or per-anently for crop, pastures, market and kitchen gardens or to habilitation centers. Hospitals are establishments permanently staffed by lie fallow, at least one physician. Establi.hment. providing principally tcstodial cae ureno tincluded. Rural hospitals, however, include health and self- iNIP PER CAPITA_ USi) - CN? per capita estimates at current market prices, cal centers not permanently staffed by a physician (but by a medical as- calculated by same -cnversion method an World Bank Atlas (1975-77 basis); sistant, nurse, midife, etc .) which offer in-patient accom.odatiot and 1960. 1970, and 1977 dato. provide s limited range of medical facilities. Admissions per hospital bed - Total number of admissions to or discharges ENERGY CONSUMPTION PER CAPITA - Annual consumption of commercial energy from haspitals divided by the number of beds. (coal end lignite, petroleum, ---ual gas and hydra-, nuclear and geo- thermal electricity) in kilograst of coal equivalent per capita. HOUSING Average sine of house.hold (persons pen household) - total, urban. and rural- POPUL.ATION AND VITAL ITATIS-ICI A household consists of a group of individuals who share living quarters Total populatior, = oillios) - As of July 1; if not available, and their main meals A boarder or lodge my or may rot hr inoluded io averge of two ecd-year estimates, 1960, 1970, and 1977 data, the household for statistical purposes. Statistica1 definitions of house- Urban population (percent of total) - Ratio of urban to total popola- hold vary. tien; different definitions of urban areas may affect comparability Average number of persons per roon - total, urban, and rural - Average num- of data -mong countries ber of persons per room in a11, urban, and rural occupied conventional Population density dwellings, respectively. Swellings exclude non-permanent structures and Per sq. km. - Mid-year population per square kilometer (100 hectares) unoccupied parts. of total area. Access to electricity (percent of dwellings) - total. urban. and rural - Pear sq._i Ari_ultu-e land - Computed as above for agricultural land Conventional dwellings with electricity in living quarters ox percentage only, of total, urbn., and rural dwellings respectively. Population axe atrorture (percent) - Children (0-14 years), working-age (15-64 years), and retired (65 years and over) as percentages of mid- EDUCATION year popolation. Adjusted enrollment ratios Population growth rate(ernt)L- total. and urbon - Compound annual Primary school - total, and female - Total and female enroll=ent of a11 apes growth rates a I total and urban mid-year populations for 1950-60, at the primary level as percentages of respectively primary sthool-age 1960-70, and 197Q-75 populations; normally includes children aged 6-11 yearn hbu adjusted for Crude birth rote _per-hnou and) - Annual live births per thousand of different lengths of primary education; for countries with universal edu- mid-year population: tee-year arithmetic averages ending in 1960 and cation enrollment may exceed 100 percent since some pupils are below or 1970 and five-year sverage ending in 1975 for most recent estimate, above the official school age. Crude death rate (per thouaand) - Annual deaths per thousand of mid- Secondgry school - total, and female - Computed an above; secondary educa- year population; ten-year arithmetic averages ending in 1960 and 1970 tiom requires at least four yearn of approved primary instruction; pro- and five-year a-r.oge ending in 1975 for most recent estimate. vides general vocational, or teacher training instructiono for pupils Gross ropr-dti rate - A-uveage number of daughters a on will bear usually of 12 to 17 years of age; correspondence courses are generally in her normal reproductive period if she experiences present age- excluded. specific fertility rates; usually five-year averages ending in 1960, Vocational enrollment (Percent of secondary) - Vocational institutions in- 1970, and 1975. clude technical, industrial, or other progrms which operate independently Family planning - acceptors, annual (thousands) - Annual number of or as departments of secondary institutions. acceptors of birth-control devices under auspices of national family Pupil-teacher ratio - primary, and s.c.ndory - Total students enrolled in planning program. priary and secondary levels divided by numbers of teachers in the corre- _aily pl epg-users (esreet of married woean) - Percentage of sponding levels. arried women of child-bearing age (15-44 year.) who use birth-control Adult literacy rate (percent) - Literate adults (able to read and write) as devices to a11 married women in same age group. a percentage of total adult population aged 15 years and over. FOOD AND NUTRITION CONSUMPTION udesx of food produc-tio per capita (1970-100) - Index number of per Pasn e ar. (per thusand population) - Pa.senger cars comprise motar cars capita annual production of all fond coo-dities. seating less than eight persons; excludes ambulances. hearses and military Per capita SuPplv of calories (percent of requirments) - Computed from vehicles. energy equivalent of sat food supplies available in country per capita Radio receivers (per thousand population) - All types of receivers for radio per day. Available supplies comprise domestic production, imports less broadcasts to general public per thousand of population; excludes unlicensed exports, and changes in stock. Net supplies exclude animal food, seeds, receivers in countries and in years when registratien of radio sets was in quantitiss used in food processing, and losse in distribution. Re- effect; data for recent years may not be comparable since most countries quirments were estimated by FAO based on physiological needs for nor- abolished licensing. ma activity snd health considering environmestal tempetature., body TV receivers (per thousand population) - TV receivers for broadrest to general weights, age and sex distributions of population, and allowing 10 per- public per thousand population; excludes unlicensed TV receivers in coun- cent for waste at household level, tries and in years when registration of TV sets was in effect. Per caoita supply of protein (gras per day) - Protein content of per Neespaper circulation (per thousand population) - Shows the average circula- capita net supply of food per day. Net supply of food is defined as tion of "daily general interest newspaper", defined as a periodical publi- above. Requiremento for ]1l countries established by USDA provide for cation devoted primarily to recording general nes. It is considered to a minimum allrwance of 60 gra of total protein per day and 20 gra be "daily" if it appers aet least four ties. a week. of animal and pulse protein, of which 10 grams hould be animal protein. Cinema annual attendance per capita per year - Rnaaed on the number of tickets These standards are lower than those of 75 grin of total protein and sold during the year, including admissions to drive-in cinemas and mobile 23 sgms of animal protein as an average for the vorld, proposed by umit FAC in the Third World Food Survey. Per capita protein supply from animal and pulse - Protein aupply of food EMPLOYMNT derived from animals and pulses in grsi per dy. Total labor force (thousands) - EConomically active persons, including armed Child (.ass 1-4) mortality rcat (per thousand) - Annual daths per thous- forces and unemployed but excluding housewives, students, etc. Defini- and in age group 1-4 years, to children in this age group. tions in various countries are not comparable. Female (percent) - Fema1e labor force as percentage of total labor force. HEALTH Agriculture (percent) - Labor force in farming, forestry, hunting and fishing Life expectancy at birth (ve-xe) - Average musber of yers of life as percentage of total labor force. remaining at birth; usually five-year averages nding is 1960, 1970, Industry (percent) - Labor force in mining, construction, mnufacturing snd and 1975. electricity, water and gas as percentage of total labor force. Infant mortality rate (per thousand) - Annual deaths of infants under Participation rate (percent) - total, male, and female - Total, male, and one year of age per thousand live birhts. lemle labor force as percentages of their respective populations. Access to safe weter (percent of population) - total, urban, and rural - These are rILO's adjusted participation rates reflecting n ge-sec Number of people (total, urban, and rural) with reasonable acces. to struct-re of the population. -nd lng tine trend. safe water supply (includes treated surface waters or untreated but Economic dependency ratio - Ratio of population under 15 and 65 snd over to uncontaminated water *uch am that fron protected boreholes, springs, the labor force in age group of 15-64 yea. snd sanitary wells) as percentages of their respective populations. In an urban area a public fountain or ntandpost located not more INCOME DISTRIBt'TION than 200 meters from a house may be considered as baing within rea- Percentage of private income (both in cash and kind) received by richest 5 sortble access of that house. In rural areas reasonable access would percent, richest 20 percent, poorest 20 percent, and poorest 40 perccnt imply that the housewife or members of the household do not have to of h.usehold.. spend a disproportionate part of the day in fetohing the family's water needs. POVERTY TARGET GROUPS Access to escrete dispnaal (percent of population) - total, urban, and Estimated absolute poverty income level (USl per capita) - urban and rural. rural - Number of peoplc (total, urban, and rural) served by exorrta Absolute poverty income level is that income level below which a niniral disposal as percentages of their reopective populations. Excreta nutritionally adequate diet plus essential non-food requirements is nct disposal nay include the collection and disposal, with or without affordable. treetmen,ce ot hunac excepts and w-'t -ta-er by wter-borne systems Estimated relative poverty income level (US$ ar Ca pita) - urban and rural - or the use of pIt privies and similar installations Relative poverty income level is that income level less than one-third PoPulation Perpysician - Population divided by number of practicing per capita personal income of the country. phynictens qualified from a medical school at university level. Estimated population below poverty incone level (percent) - urbsn and rural - Popularico per nuorsingperson - Population divided by nsober of Percent of population (urban and cural) who are either "abnclote poor" or practicing mole and female graduate nurses, practical nurses, and "relative poor" whichever is greater. 0051cc OOtnurses. Economic and Social Dta tDivision Economic Analysis and Projections Dep-rtment  ANNEX I -20 - ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1977 ANNUAL RATE OF GROWTH (%, constant prices) US$ Mln. _ 1965 -70 1970 -76 GNP at Market Prices 2,335 100.0 2.6 2.9 Gross Domestic Investment 630 27.0 8.4 -5.7- Gross National Saving 402 17.2 9.4 0.3 Current Account Balance -228 9.8 Exports of Goods, NFS 963 41.2 2.3 2.4 Imports of Goods, NFS 1,008 43.2 9.1 -7.1- OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1974 Value Added Labor Forc / V. A. Per Worker US$ Mln. M1n. 7f S Agriculture 297 10.0 0.687 52.0 432 19.3 Industry 1,704 57.6 0.198 15.0 8,606 384.2 Services 958 32.4 0.337 25.5 2,843 126.9 Unallocated . . 0.099 7.5 * _ Total/Average 2,959 100.0 1,321 100.0 2,240 100.0 GOVE14MENT FINANCE 2/ General Government Central Government ( Mln.) % of GDP (Kwacha Mln.) % Of GDP 1977 1977 19F1- 76 Current Receipts 499 26 27 Current Expenditure 5 599 32 27 Current Surplus ) -100 6 0 Capital Expenditures ) 131 7 10 External Assistance (net) ) 30 2 2 MONEY, CREDIT AND PRICES 1965 1970 1972 1974 1975 1976 1977 (Million K outstanding end period) Money and Quasi Money 107.6 355.6 341.0 440.7 492.9 623.5 697.8 Bank credit to Public Sector -88.7 -163.8 147.2 78.1 517.8 571.1 790.4 Bank Credit to Private Sector 3/ 42.3 136.9 165.0 335.8 392.9 394.1 470.4 (Percentages or Index Numbers) Money and Quasi Money as % of GDP 15.1 27.8 25.5 23.1 31.6 34.8 36.8 General Price Index (1970 = 100) 74.2 100.0 111.7 128.8 141.7 168.2 201.8 Annual percentage changes in: General Price Index 8.2 2.6 5.4 8.4 10.0 18.7 20.0 Bank credit to Public Sector . . 691.4 -61.9 306.9 79.7 38.4 Bank credit to Private Sector 3/ . 21.9 -9.7 92.1 17.0 0.3 19.4 NOTE: All conversions to dollars in this table are at the average exchange rate prevailing during the period covered. 1/ Total labor force; unemployed are allocated to sector of their normal occupation. "Unallocate" consists mainly of unemployed workers seeking their first job. 2/ Figures do not differ significantly from "Central Government". 3/ Includes parastatal organizations. not available not applicable November 1, 1978 EACPI  -21- ANNEX I TRADE PAYMENTS AND CAPITAL FLW1S BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1973-76) 1976 1977 US $ Min X (Millions USS) Exports of Goods, NFS 1,141 963 Copper 1,019.6 93.0 Imports of Goods, NFS 980 1,007 Lead, Zinc, Cobalt 55.3 5.0 Resource Gap (deficit = -) 161 -44 All other commcdities 22.1 2.0 D Total 1,097.0 100.0 Factor Payments (net) -111 -100 Net Transfers -108 -84 Balance on Current Account -58 -228 Direct Foreign Investment *- *- EXTERNAL DEBT. DECEMBER 31. 1977 Net MLT Borrowing 'Public) Disbursements 270 244 US $ Mln Amortization 45 120 Subtotal 225 124 public Debt, incl. guaranteed 1,307.8 Capital Grants . . Non-Guaranteed Private Debt .. Other Capital (net) 145 200 Total outstanding & Disbursed 1,307.8 Other items n.e.i -368 -169 Increase in Reserves (+) -56 -74 DEBT SERVICE RATI () 1/ 1977 Gross Reserves (end year) 100 74 Net Reserves (end year) -145 -227 Public Debt, incl. guaranteed 19.4 Non-Guaranteed Private Debt .. RATE OF EXCHANGh Total outstanding & Disbursed 19.4 Before February 1973 March 1978 US$1.00 = Kwacha 0.714 SDR1 = Ki.0243 K1.00 = US$1.40 Kl = SDRO.9763 IBRD/IDA LENDING,-(Oetober-31;197N ) (US$ Million) February 1973 to July 1976 Annual Averages IBRD IDA US$1.00 - Kvacha 0.643 1976 :l K US 1.4019 K1.00 = US$1.554 1977 :K = US$1.2675 Outstanding & Disbursed 310.9 _ Jaly 1976 to March 1978 Untdisbursed 124.1 11.3 SRi = K0.922 lOutstanding incl. Udisbursed 435.0 11.3 Kl - SDR1.085 1/ Ratio of estimated Debt Service to Exports of Goods and Non-Factor Services in 1976. not available not applicable November 1, 1978 EACPI  - 22 - ANNEX II STATUS OF BANK GROUP OPERATIONS IN ZAMBIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (October 31, 1978) Amount (less cancellations) US$ million Loan Credit No. No. Year Borrower Purpose Bank IDA Undisbursed 12 - fully disbursed 185.2 - - 592 - 1969 Zambia Education 17.4 - 1.2 645 - 1969 Zambia Education 5.3 - 0.6 701-2 - 1974 Kariba North Power Station Bank Company 42.1 - 1.4 882 - 1973 Zambia Integrated Fam- ily Farming 11.5 - 7.1 900 - 1973 Zambia Education 33.0 - 14.4 919 - 1973 Zambia Electri- Hydroelectric city Supply Corp. Power 115.0 - 11.7 1057 - 1974 Zambia Urban Develop- ment 20.0 - 7.6 1131 - 1975 Posts & Tele. Telecommuni- Corps. cations 32.0 - 25.5 1210 - 1976 Development Bank Development of Zambia Finance Co. 15.0 - 14.2 1356 - 1977 Zambia Education 13.3 - 13.1 1424 - 1977 Zambia Industrial Forestry 16.8 - 16.0 15661/ 7981/ 1978 Zambia Third Highway 11.3 11.3 22.6 Total 517.9 11.3 135.4 of which has been repaid 75.4 - Total now outstanding 442.5 11.3 Amounts sold 49.6 of which has been repaid 42.1 7.5 - Total now held by Bank/IDA 2/ 435.0 11.3 of which is undisbursed 124.1 11.3 135.4 1/ Not yet effective. 2/ Prior to exchange adjustments.  - 23 - ANNEX II A. STATEMENT OF IFC INVESTMENTS September 30, 1978 Investment US$ million equivalent No. Year Type of Business Loan Equity Total 216 ZA 1972 Zambia Bata Shoe Shoe manufacturing 0.85 0.23 1.08 Co. Ltd. 250 ZA 1973 Zambia Bata Shoe Shoe manufacturing 1.20 - 1.20 Co. Ltd. and tannery 307 ZA 1975 Century Packages Packaging materials 0.78 0.21 0.99 Ltd. 324 ZA 1976 Development Bank Development Finance - 0.54 0.54 of Zambia Co. 394 ZA 1978 Century Packages Packaging materials 0.10 - 0.10 Ltd. Total gross commitments 2.93 0.98 3.91 Less cancellations, terminations, repayment and sales 1.93 - 1.93 Total now held by IFC 1.00 0.98 1.98 Total undisbursed 0.10 - 0.10  - 24 - ANNEX II B. PROJECTS IN EXECUTION 1/ Loan No. 592-ZA First Education Project: US$17.4 million loan of April 11, 1969, Effective Date: July 15, 1969; Closing Date: March 31, 1979 Due to prolonged negotiations with architectural consultants, budgetary constraints in both 1972 and 1977 resulting from low copper prices, poor management in the early stages of project implementation, and more recently shortages of construction materials and financial difficulties of several major contractors, the project is about four and a half years behind schedule. Latest estimates indicate an increase in cost of about 17 percent which is manageable. Educational objectives in quantitative terms are being met, while qualitative changes of content of education have not yet been achieved. Some problems with respect to defects in materials used in con- struction of project secondary schools have recently emerged and are being closely monitored. Loan No. 645-ZA Second Education Project: US$5.3 million loan of November 20, 1969; Effective Date: May 5, 1970; Closing Date: March 31, 1979 The project as originally approved has been completed satisfactorily with the exception of finalization of accounting. Due to contributions of instructional equipment by bilateral donor agencies, savings in the loan proceeds of about US$1.0 million were realized. As a result, the Government requested an amendment, which was approved by the Bank, to the Loan Agreement for additional work at the University to utilize these savings and also enable the postponement of the Closing Date by two years to March 31, 1978. However, delays in the procurement of furniture and equipment for the project items included in the amendment and in the transfer of farm lands to the University necessitated a further extension of the Closing Date to March 31, 1979. Loan No. 701-ZA Kariba North Hydroelectric Project: US$82.1 million loans of July 29, 1970 and August 16, 1974: Effective Date: December 16, 1974; Closing Date: December 31, 1978. The power station has been in full operation since May 1977. Recently the thrust bearings of two of the four 150-MW units failed, and are undergoing repair; one is still under the manufacturer's guarantee, while the 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any prob- lems which are being encountered and the action being taken to remedy them. They should be read in this sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  - 25 - ANNEX II other is covered by insurance. The two units are expected to be in operation again shortly. The Central African Power Corporation (CAPC) is fully respon- sible for operation of the power station. Staffing of the power station was initially problematic but an adequate number of experienced staff were recruited and are now at site. A project completion report is being prepared. Loan No. 882-ZA Integrated Family Farming Project: US$11.5 million loan of February 28, 1973; Effective Date: July 26, 1973; Closing Date: June 30, 1979 The project is experiencing difficulties. Management at head- quarters and scheme level is unsatisfactory. Slower than expected recruitment of project farmers, together with inflation, have precipitated sharp increases in settlement cost per farmer. These developments are threatening the eco- nomic viability of the project. However, because of satisfactory yields (tobacco and maize) and government subsidies, financial returns to farmers are good. In addition to visiting consultants, the Tobacco Management Board of Zambia (TBZ) has recently selected a new Project Manager to replace the one who resigned in November 1976. However, two expatriate staff, the Extension/ Training Officer and the Financial Controller, may soon leave Zambia if TBZ's efforts to gain government approval to increase their remuneration are not successful. It is hoped that ODM would agree to top up their salaries. The Bank is following this matter closely. Loan No. 900-ZA Third Education Project: US$33.0 million loan of June 6, 1973; Effective Date: August 9, 1973; Closing Date: September 30, 1979 Project implementation is generally proceeding satisfactorily. Government's decision to locate the agricultural campus in Solwezi, which in effect deleted the construction and equipping of a Faculty of Agricultural Sciences at the Lusaka campus, as well as the devaluation of the kwacha and savings from the equipment category, have given rise to expected savings of about K 4 million. Requests by the Government of Zambia for the utilization of some of these savings in other areas are under consideration. The project is expected to be completed by March 1979, six months earlier than the closing date. Loan No. 919-ZA Kafue Hydroelectric Project (Stage II): US$115.0 million loan of July 16, 1973; Effective Date: January 15, 1974; Closing Date: December 31, 1979 The two 150-MW units at the Kafue Gorge power station were commis- sioned in mid-1977. Construction of the main dam has been completed and the reservoir filled. The project is expected to be completed within the appraisal cost estimates. Power availability has not been up to expectations because of unexpected breakdowns at the power station, but the problems are now under control. Appropriate maintenance procedures also are being intro- duced. The Zambia Electricity Supply Corporation (ZESCO) financial perfor- mance has not been satisfactory, but an appropriate tariff increase is now  - 26 - ANNEX II under consideration. Largely because of the economic recession affecting Zambia, ZESCO has been experiencing a shortage of spare parts and the depar- ture of some expatriate staff. Loan No. 1057-ZA Lusaka Squatter Upgrading and Site and Services Project: US$20.0 million loan of December 6, 1974; Effective Date: April 1, 1975; Closing Date: December 31, 1979 Implementation of the project is slower than anticipated because of delays in land acquisition and difficulties in providing construction materials and spare parts due to Zambia's foreign exchange shortage. Upgrad- ing of the first major squatter settlement in Chawama has been completed, and construction and improvement of houses is progressing satisfactorily. Provi- sion of services in various new sites is in full swing and construction of houses in these sites should start soon. At present, arrears in building materials loans are very high but Government is taking appropriate measures to reduce these to a realistic level. Loan No. 1131-ZA Telecommunications Project: US$32.0 million loan of June 24, 1975; Effective Date: December 10, 1975 Closing Date: December 31, 1980 Project procurement and execution are approximately one year behind schedule but recently have been proceeding satisfactorily. Contracts for switching equipment and microwave and radio systems have been awarded. Implementation, however, may slowdown considerably as a result of government budgetary constraints. An increase in telecommunications tariffs has been approved by Government, and arrears and delays in billing have been reduced. Implementation of the financial/management consultants report is proceeding satisfactorily. Implementation of the initial capitalization of the recently formed Posts and Telecommunications Corporation, however, still remains to be completed. Loan No. 1210-ZA Development Bank of Zambia: US$15.0 million loan of February 18, 1976; Effective Date: April 23, 1976; Closing Date: March 31, 1980 The loan has been committed to the extent of about US$5.5 million equivalent for a number of projects in various industries such as chemicals, textiles, packaging, agriculture and food processing. The low level of commitments is mainly due to a slower pace of operations than anticipated at appraisal, due to the serious economic recession in the country. Loan No. 1356-ZA Fourth Education Project: US$13.3 million loan of January 17, 1977; Effective Date: March 8, 1977; Closing Date: March 31, 1983 The project has made a very good start with two of its components (the Educational Services Center and the Evelyn Hone College) progressing ahead of schedule. Budgetary constraints in 1977 have affected procurement of equipment as well as the overall progress of the project.  - 27 - ANNEX II Loan No. 1424-ZA Second Industrial Forestry Project: US$16.8 million loan of May 12, 1977; Effective Date: November 15, 1977; Closing Date: December 31, 1983 Project implementation has started well despite some problems with staffing, equipment and spare parts. Planting targets are being met very well and while there are some handicaps caused by a lack of equipment in good running order, no serious difficulties have yet been encountered. Loan No. 1566-ZA and Credit 798-ZA Third Highway Project: US$22.5 million (US$11.25 million loan and US$11.25 million credit) of June 27, 1978; Closing Date: June 30, 1983 The loan and credit are expected to become effective by December 29, 1978.  - 28 - ANNEX III Supplementary Project Data Sheet I. Timetable and Key Events (a) Time taken to prepare Six months (b) Prepared by Government and Association (c) Initial discussion with IDA November 1977 (d) First IDA mission : May 1978 (e) Appraisal mission departure October 1978 (f) Negotiations : November 9-13, 1978 (g) Planned date of effectiveness March 31, 1979 II. Special Bank Implementation Actions None III. Special Conditions of the Project (a) The Borrower would assign a qualified local counterpart to each expert financed from the proceeds of the credit (para. 34). (b) All proposals for utilization of funds under project would be subject to the Association's agreement (para. 36). (c) For sub-projects involving consultancy services, a working group comprising staff from the PPU and the ministries or agencies concerned would be established to prepare sub-project proposals and to follow-up on implementation (para. 36). (d) The Borrower will provide necessary support documentation in requesting the Association's approval for sub-projects (para. 37). (e) The qualifications, experience and terms and conditions of employment of experts and consultants would be subject to the Association's approval (paras. 38 and 39). (f) The PPU would prepare a detailed work program annually (para. 41). (g) The Planning Commission would prepare an annual report on the status of all project preparation activities financed with the proceeds of the credit and all projects prepared with the proceeds of the credit, and all projects prepared with the proceeds of the credit, which are being executed under the Third Plan (para. 41).  - 29 - ANNEX IV Republic of Zambia Technical Assistance Project Terms of Reference for Experts I. Senior Expert/PPU Job Description: A senior professional with a strong background in economic/ development work whose duties would include: - Help draft detailed terms of reference and recruit additional experts as required to staff the PPU and planning/project preparation posts in the operational ministries. - Help coordinate the work of the PPU, with special emphasis on developing monitoring systems to provide in-depth cov- erage on the status of project preparation activity financed with the proceeds of the credit. - Prepare an annual work program setting forth the PPU's proposed project preparation and monitoring activities to be financed out of the proceeds of the credit. - Provide assistance with the preparation of annual reports containing detailed information on the status of project preparation activities financed under the project and the progress on implementing projects prepared with the proceeds of the credit. - Assist with the developing of training programs for counter- part staff. - Assume responsibility for the smooth functioning of the entire project, ensuring that all conditions of the Credit Agreement are met with regard to the use of funds for short- and medium- term consultants. Qualifications: A graduate degree in Economics or Business Administration is re- quired plus experience with planning/project preparation work in a developing country. Candidate must be a senior professional with exten- sive management experience, and be capable of assuming diverse responsi- bilities, including developing monitoring systems, recruiting expert staff and preparing training programs.  - 30 - ANNEX IV II. Experts/PPU Job Description: The experts will be attached to the PPU and will advise and assist the PPU in: - Identification, preparation and appraisal of projects. - Training Zambian counterparts on the job by designing and conducting in-service courses. - Supervision of project preparation with respect to depth and quality of financial, technical and economic analysis and suitable presentation. - Recruiting of consultants envisaged under the project. - Setting up and coordination of working parties envisaged for project preparation. - Other related services as the head of the PPU may require. Qualifications A degree in Economics or Business Administration, with practical experience in project analysis in a developing country with particular emphasis on economic, technical, financial and managerial analysis. At least one ex- pert will have a strong background in financial analysis, another in mechani- cal or industrial engineering.  - 31 - ANNEX IV III. Experts/Ministries and Agencies of the Borrower Job Description: The experts would: - Evaluate and prepare ministerial policies and plans to achieve major sectoral objectives. - Establish priorities for further preparation work for projects that are pending. - Determine the additional analysis and studies required to com- plete project preparation, and preparing a timetable of re- quired actions. - Coordinate and monitor project preparation activity, utilizing as required the services of the PPU and the consultancy funds available under the IDA credit, or resources available from external sources. - Evaluate project preparation, recommending if project should be implemented. - For projects to be implemented, arrange for external financing and use of IDA credit for project start-up activities as necessary. - Monitor project implementation. - Provide on-the-job training for Zambian counterparts. Qualifications: A degree in economics with experience in planning/project prepar- ation work in a developing country (preferably as a resident and in Africa). The individual should have relevant sector experience for the ministry with which he will be associated.  - 32 - ANNEX V CONSULTANT STUDIES The Government has identified the following agro-industrial projects and given them a high priority in the Third Plan. To prepare these projects for financing, consultant services are required for additional feasibility studies. These are only a few of many high priority projects which will re- quire additional studies to prepare them for implementation during the Third Plan (1979-83). (1) Agricultural Development Bank The Ministry of Lands and Agriculture wishes to transfer the Agri- cultural Finance Corporation (AFC), which at present provides loans for agri- cultural projects, into a bank capable of establishing commercial operations in predominantly agricultural areas. By this transformation, the MLA would expect to mobilize additional local resources which could be recycled into a higher volume of agricultural lending, and result in additional agricultural production. Consultant services are needed to advise the Government on the necessary procedures to restructure the AFC into the Agricultural Development Bank, and to recommend on the scope, size, marketing approach and operational procedures which the new bank should adopt to become effective. (2) Vegetable Oil Production from Maize Germ and Soya Beans A project is under consideration to utilize the substantial amount of vegetable oil contained in the germ of the maize produced in Zambia, and not now recovered. The same facilities to be constructed for the extraction of maize oil could, at the same time, be used to extract the oil and meal from soybeans. The project would be structured so that the extracted maize germ would be recycled back into the maize meal in order to maintain the latter's protein content. In order to facilitate this recycling process, the project would consist of two plants, one to the north and one to the south of Lusaka, located near the main maize mills. Consultant services are required to undertake the full feasibility study of this project including a marketing analysis, technical evaluation and economic justification. (3) Fodder Yeast and Alcohol Production from Molasses A project has been prepared to utilize the almost 40,000 metric tons of molasses produced yearly by the Nakambala sugar plant, for the manu- facture of high protein fodder yeast and alcohol. Yearly production would be more than 8,000 metric tons of yeast, which is equivalent to an equal amount of soybean or groundnut meal, currently valued, conservatively, at US$3 million. Furthermore, the plant would supply fully the country's alco- hol demand, both for industrial and personal consumption purposes. Con- sultant services are required to update project preparation and to review project costs.  - 33 - ANNEX V (4) A Fruit and Vegetable Processing Plant Consultant services are required to assist in the preparation of a project to produce fruit and vegetable products. The project would have four separate components: two of these components, a large-scale general canning plant and a citrus operation, have to be started as new ventures; the other two components, strengthening of the pineapple cannery in Mwinilunga and an increase in mango juice processing, are expansions of existing operations. Total investment in the enterprise, including a multi-product canning plant as well as a large farm, is estimated at over US$16 million. The project would produce more than 5,000 metric tons per year of net product once full capacity utilization has been achieved. (5) Fish Processing, Freezing, and Distribution A project for fish processing, freezing and distribution has been identified. The project would include fish processing, freezing and dis- tribution centers at Nsumbu, Kampinda, Kashikishi, and on the Kafue and Upper Zambezi rivers. Ice manufacturing facilities would be located on lakes Mweru-wa-ntipa, Mweru-Luapula, and Bangweulu and in the Kafue, Upper Zambezi and Lukanga fisheries. Fish handling facilities at Kitwe would be renovated. Access roads to northern fisheries areas would be improved. The overall pro- duct should also include enhanced fisheries extension, training and credit programs, service centers to supply the needs of fishermen, and expansion of the capacity of the fishery input supply industry to meet the requirements of fishermen. Investment costs for the processing, freezing, distribution and access roads parts of the project have been estimated roughly at about US$20 million. Studies are required on the project's technical and marketing as- pects, management arrangements and economic justification. (6) Cashew Development The Government is considering a cashew production project in an effort to improve agricultural exports. Cashewnut production has been pro- pagated as a smallholder crop since the early seventies in the Western Pro- vince. In the absence of a remunerative domestic market, cashew kernels will have to be exported, and in the foreign market these Zambian cashew kernels will have to compete with Mozambican or Tanzanian kernels that are processed in large-scale mechanical decortication plants. Manual processing of cashewnuts is prohibitively expensive in Zambia and elsewhere in Africa. Moreover, in order to feed a minimum economic scale cashew processing plant, an amount of at least 5,000 metric tons yearly is required. The current program of cashew propagation in Western Province will not generate such an amount in the foreseeable future. Agricultural experts are required to examine the cultivation potential for cashews in the Western Province to de- termine if production can be increased economically to justify an investment project. The project will also require feasibility studies to determine mar- keting and management arrangements.  - 34 - ANNEX VI Terms of Reference for Project Preparation Unit and Working Groups for Sub-Projects Purpose 1. The Project Preparation Unit (PPU) of the Planning Commission will ascertain the need for preparation of high priority projects and will be con- cerned with the administration of the funds earmarked to finance project preparation work and the provision of technical assistance in the execution of such work. In the cases involving short or medium term consultancy ser- vices to be financed under the project, the PPU and the operational ministry or agency concerned will organize a working group for the formulation and implementation of the particular proposal. The working group would have the following organization and functions: A. Organization and Staffing - Working Groups The Project Preparation Unit will organize informal Working Groups for work on individual projects involving the proposed use of consultancy services funded under the credit. Its staff will include: (a) staff of the PPU; (b) staff of the operational ministry or agency; and (c) secretarial and support staff. B. Procedure for Project Analysis Working Groups will be established for high priority projects which will require consultancy services to assist with pre- paration. The Working Group will determine the nature and scope of the studies required to prepare the project for financing, will help to draw up terms of reference for those studies and a schedule for their execution, will submit the proposal to the Association for agreement, and will help to supervise the execution and evaluation of the studies. Re- quirements for coordination with other ministries and agencies would be identified and agreed with those agencies. If a financing organization or agency has already been tentatively identified, it would be consulted about the preparation require- ments. The Working Group will assist in evaluating proposals made for studies and in negotiating contracts pertaining to the studies.  - 35 - ANNEX VI C. Supervision of Project Preparation Studies The Working Group will assist in the technical supervision of studies being executed, will review progress reports, arrange for prospective financing agencies to be kept in- formed of the progress and assist in evaluating the studies on completion. D. Terms of Reference for Consultants Services In drawing up terms of reference for consultant services, the Working Group will ensure that the project is analyzed in all its facets and made ready for appraisal by a financing agency. The scope of the studies required will vary, depending on the nature of the preparatory work done prior to submission of the project to the Working Group. It will be the Working Group's task to ensure that all the available alternative solutions to an investment need are appropriately analyzed. The studies will, if necessary, extend to market analysis of investment and operating costs, the legal, fiscal and financial conditions, and management, organization and manpower requirements. These studies should also include analysis of the economics of the project, as well as financial viability, and social cost-benefit analysis and environmental consideration as appropriate. The project studies will address the possible problems of implement- ing the project which may emerge and will propose solutions to overcome them.   22 - Zr- Of~~~~~~~~ ~ ~~, ~ 6~~ : ~~~~~~~ 3 t tAb ZI JAUR I 1 g'l ,OOJ$ ol WI mIltIl ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 2Kt ~ ~~ { Kcsa6~~~~~ Bay \~~~~ T A N Z AT NA NIA AI AIw%'r Murn~.~ KPijTA ~M.ou ol - RULH OP LAMrA -- K~~~~~~~~~~~~~~~~~15KMp `~ COMMERCIAt CROPS FARMING MENT PROJECT L Mooroo's&'