Cameroon - ZAPI (Zones d'Actions Prioritaires Integrees) Integrated Rural Development Project

FLE COPY Document of The World Bank FOR OFFICIAL USE ONLY Report No. 2190-CM REPORT AND RECOMMENDATION OF TIE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE UNITED REPUBLIC OF CAMEROON FOR THE INTEGRATED RURAL DEVELOPMENT PROJECT - ZAPI February 22, 1978 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.  CAMEROON ZAPI PROJECT CURRENCY EQUIVALENTS CURRENCY UNIT CFA Franc (CFAF) US$1 - CFAF 245 1/ CFAF 1,000 - US$4.082 CFAF 1,000,000 5 US$4,082 1/ Floating exchange rate. ABBREVIATIONS FONADER = Fonds National de Developpement Rural FNFP = National Fund for Forestry and Fisheries IITA = International Institute for Tropical Agriculture ONAREST - Office National de la Recherche Scientifique et Technique ZAPI = Zones d'Actions Prioritaires Integrees FISCAL YEAR July 1 to June 30  FOk bFFICIAL USE .NLY CAMEROON Integrated Rural Development Project Zones d'Actions Prioritaires Integrees (ZAPI) Credit and Project Summary Borrower: United Republic of Cameroon Beneficiary: Zones d'Actions Prioritaires Integrees (ZAPI) Amount: US$8.5 million Terms: Standard IDA credit Project Description: The proposed project would support ZAPI's ongoing in- tegrated rural development activities as well as an expansion of ZAPI's activities in Eastern Cameroon. Specifically, the proposed project would support insti- tutional development, agricultural production, marketing and processing and social infrastructure. The main components to be financed by the IDA credit would be: civil works, technical assistance and training, ZAPI's incremental operating costs and vehicles and equipment. Economic benefits would result from increased production of coffee, cocoa, rice, fish and food crops, and from cost savings in marketing and processing. At full development an estimated 13,200 farm families would benefit with net farm incomes increasing from a present average of US$490 to US$720. The project faces two main risks: (i) the possible difficulty in recruiting for key staff position; and (ii) the uncertainty of the farmers' response to the project. Estimated Cost: Project costs, including about US$0.4 million taxes and duties, are estimated at US$12.2 million, of which about US$4.9 million is in foreign exchange. This document bha a retricted distribution and may be usd by recipients only in the perfo0mance of their officl dutie. Its contents may not otherwi be disclod without World Bank authofintton.  -ii - % of Local Foreign Total Base -----US$ thousands------- Costs Organization & Management 1.3 0.7 2.0 20 Extension 0.9 0.2 1.1 11 Training 0.9 0.4 1.3 13 Monitoring & Evaluation 0.3 0.1 0.4 4 Farm & Crop Development 0.5 0.3 0.8 8 Fisheries 0.2 0.1 0.3 3 Research 0.4 0.3 0.7 7 Credit 0.2 - 0.2 2 Processing & Marketing 0.6 1.4 2.0 20 Agric. Inputs/Consumer Supplies 0.4 0.2 0.6 6 Health 0.2 0.2 0.4 4 Water Supply 0.2 0.1 0.3 3 Total Base Costs 5.9 4.2 10.1 100 Physical Contingencies 0.2 0.1 0.3 3 Price Contingencies 1.2 0.6 1.8 18 Total Project Costs 7.3 4.9 12.2 Total Project Costs Net of Taxes 6.9 4.9 11.8 Financing Plan: Local Foreign Total Percent -------US$ millions-------- IDA 3.6 4.9 8.5 72 Government 3.7 - 3.7 28 Total 7.3 4.9 12.2 100  - iii - Estimated Disbursement of IDA Credit Amounts in US$ thousand IDA Fiscal Year 1979 1980 1981 1982 1983 1984 Annual 1,000 3,900 1,200 1,200 1,000 200 Cumulative 1,000 4,900 6,100 7,300 8,300 8,500 Rate of Return: The overall economic rate of return of the project was calculated at 25 percent. Appraisal Report: Report No. 1737a-CM dated February 17, 1978.   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE UNITED REPUBLIC OF CAMEROON FOR AN INTEGRATED RURAL DEVELOPMENT PROJECT - ZAPI 1. I submit the following report and recommendation on a proposed credit for the equivalent of US$8.5 million to the United Republic of Cameroon to help finance an integrated rural development project. The IDA credit would be on standard terms, and would be passed on by the Government to the Zones d'Actions Prioritaires Integrees (ZAPI) as a grant. PART I - THE ECONOMY 2. A report, "Proposals for a Medium-Term Public Development Program, A Special Study, Cameroon" (No. 1097a-CM), was distributed to the Executive Directors on May 11, 1976. The findings of an economic mission which visited Cameroon in October-November 1976 are incorporated below. The mission's report is being reviewed by the Government. Annex I provides basic country data. Economic Potential 3. Cameroon haZ a population of about 7.6 million (1976) and covers an area of 475,000 km . The country's natural resources are considerable and varied, but not always easily accessible. Soils and climatic conditions permit cultivation of a wide range of crops, and the forest areas of the Southeast contain large untapped timber resources. The North holds promis- ing potential for livestock development. The main opportunities for develop- ment in Cameroon lie in the expansion of agricultural production, including forestry, and the processing of agricultural and forestry products for ex- port. Offshore oil and gas exploration has yielded modest results. Trade transportation and transit services are other important economic activities. Cameroon's main economic centers are separated by vast underpopulated areas; furthermore the country's transport facilities also serve landlocked Chad. As a result, a large port and inland transport infrastructure are essential for promoting agriculture, forestry and industry, and strengthening Cameroon's role as a regional trade center. Past Performance 4. During the Second Plan period (1966-1971), GDP increased at a high rate of 7.6 percent per annum. However, during the Third Plan period (1971- 1976), output grew at only 2.5 percent per annum partly because of the drought which affected the North of Cameroon in 1972 and 1973 and the impact of world- wide recession and unfavorable terms of trade, partly because of serious dif- ficulties in maintaining and expanding Cameroon's main tree crops which have been compounded by the failure of producer prices to keep up with those of  - 2 - competing food cash crops and inputs, and partly because of the limited size, early saturation, and slow expansion of the domestic market for import substituting manufactures. Terms of trade improved during 1966-1971 but deteriorated during 1971-1976. As a result, gross domestic income increased faster than GDP at 8.3 percent per annum during 1966-1971, but grew only by 2.4 percent per annum during 1971-1976. Population growth is estimated at about 1.8 percent per annum in the 1960's, about 1.9 percent until the mid-1970's and about 2.3 percent from 1975-1980. Per capita GNP reached about US$300 in 1976. 5. During the 1960's, a confluence of a number of favorable factors led to the high growth of output and income. Agriculture, accounting for about one-third of GDP, increased at a rate of 5.5 percent per annum during 1966-1971. Most agricultural crops (except cotton, rubber, millet/sorghum), livestock, fishing and forestry experienced high growth rates, thanks to favorable supply and demand conditions such as high domestic income growth, favorable producer prices, and rapid economic expansion abroad. For example, during the 1960's although Cameroon already faced the problem of the increas- ing age of its cocoa and coffee! trees, supply was still able to increase reflecting the high amount of new plantings during the 1950's and early 1960's. In addition, the Government was able to maintain adequate cocoa producer prices even when export prices dropped thanks to the reserves built up earlier in the cocoa stabilization fund. Manufacturing and mining, account- ing for 11 percent of GDP, increased at 10 percent per annum during 1966-1971 due mainly to the rapid development of import substitution industries, partic- ularly manufactured consumer goods, facilitated by the high rate of domestic income growth and the availability of foreign exchange for the purchase of inputs and intermediate goods. The high rate of expansion of productive activities was accompanied by the rapid growth of construction activities, public administration and other services. 6. In contrast, during the Third Plan period, a number of external and internal factors led to a much reduced growth in output and income. Agricultural growth declined to only 3.6 percent per annum, influenced par- ticularly by commercial crops (1.3 percent per annum, or less than one-tenth of the preceding rate). On the other hand, production of the main subsis- tence food crops expanded at about 6 percent per annum reflecting increasing demand and high prices for such crops in urban areas. Growth of commercial forestry production declined sharply due to reduced Western European demand, lower domestic construction activities, and some transportation bottlenecks, while the drought cut growth in livestock production (mainly cattle in the north) from 7.2 percent to 3.3 percent per annum. Cocoa and Arabica cof- fee, accounting for about 55 percent of commercial crops, actually decreased, mainly because of the failure of cocoa producer prices to keep up with those of competing food cash crops, the termination of the fertilizer subsidy pro- gram for Arabica coffee with the end of the supporting foreign assistance, the increasing age of cocoa and coffee trees, unfavorable climatic condi- tions in some years, and inadequate Government services to counter the black pod disease of the cocoa trees. For the other main commercial crops, the declining trend in cotton experienc,ed in the earlier Plan period was reversed  in large part through the efforts of SODECOTON, a specialized public enter- prise; reversal from decline to growth in rubber and an acceleration in growth of oil palm were facilitated by two plantation projects assisted by the World Bank Group and other co-donors. Growth in manufacturing slowed, follow- ing the first wave of import substitution, and with rising costs and expanded claims on available public revenues, real growth in public administration was also reduced below the 1966-1971 rate. Construction actually declined during 1971-1976 and with a deceleration in exports, near stagnation in imports and the low growth in real income throughout the economy, other services (mainly trade and transport) increased only at one percent per annum. Investment and Savings 7. During the Second Plan period, the investment rate, including increases in stocks, exceeded 16 percent of GDP, and gross domestic savings and gross national savings were respectively 13.4 and 12.6 percent of GDP. Foreign resources financed about 33 percent of investment during this period. During the Third Plan period, despite slow income growth, the investment rate increased to 18.1 percent of GDP, as the share of public investment increased to almost 70 percent of total fixed investment. Gross domestic savings and gross national savings rose to 16.4 and 13.9 percent of GDP, but debt service increased by 60 percent. External resources therefore continued to finance about one-third of total investment during this period. This substantial improvement in savings during 1971-1976 was due to a drastic reduction in the real growth of consumption, particularly private consumption, to less than 2 percent per annum from 9 percent per annum during 1966-1971. One of the prices paid for the substantial improvement in savings was, however, a limita- tion on farmer's earnings in tree crops, which provided inadequate incentives Lo induce farmers to obtain more output from the existing stock and to do sufficient treatment and new plantings to maintain and expand production capacity. The maintenance of a high investment rate during a period of low output growth resulted in an apparent reduction in efficiency of investment. Some reduction in capital productivity was also attributable to investments, such as oil exploration, which would lead to production only a number of years later, investment in transport infrastructure (about 20 percent of total investment) which would result in increased output through the years, and social infrastructure investments which would likely increase welfare more rapidly than output. During this period there was considerable progress in the development of high level human skills. For example, the number of physicians increased by more than 50 percent (decreasing the population per physician rate to about 20,000), dentists more than doubled and pharmacists increased by more than 5 times. Public Finance and Balance of Payments 8. Budgetary revenue was respectively 16.6 and 17.2 percent of GDP during 1966-1971 and 1971-1976, while gross public savings after debt ser- vice in total public investment declined from about 39 percent in 1966-1971 to about 36 percent in 1971-1976. The balance of payments was not a major constraint until recent years. However, imports increased rapidly in 1975  - 4 - and 1976 as a result of worldwide inflation and heavy public development expenditure, especially in capital goods. At the same time, agricultural exports declined, particularly exports of cocoa and timber, causing sizeable current account deficits. The bulk of the current account deficits was fi- nanced by net capital inflows buat a substantial drawdown of international reserves was also made in 1975. Therefore, net official international re- serves decreased from more than 2 months in 1974 to less than one month of imports in 1975. In 1977, exports recovered substantially (by 35 percent) but imports also increased (by 28.5 percent) because of economic recovery and expanded investment. Gross of f:Lcial international reserves were rebuilt in 1976 and 1977, in part by the use of IMF credit (Oil Facilities and Com- pensatory Financing), but net official international reserves continued to be less than one month of imports in 1977. This was a low level by inter- national standards but still acceptable considering Cameroon's membership in the Central African Monetary Union. Development Issues and Prospects 9. Cameroon's main medium and long term potential lies in the devel- opment through both industrial plantzations and smallholders of a diversified agricultural sector, comprising export crops and domestic food crops to feed the growing urban population and replace imports, particularly of grains. Implementation of such a strategy depends on an appropriate mix of public intervention and support and price and policy measures to stimulate private initiative; net financial returns to the public sector are more difficult to capture than in a less diversified foreign trade-oriented strategy. Factors which complicate the agricu:Ltural development effort further in Cameroon are the extensive dispersion of its main economic and population centers separated by vast underpopulated areas, its regional and institu- tional diversity, the competition between export and cash food crops for the dwindling agricultural labor in some parts of the country, the dependence of a substantial part of public revenue and savings on cocoa and coffee, and the limited availability of skilled agricultural agents and administrators. Through its technical assistance and education projects and through its normal project work, the World Bank Group is supporting Cameroon's effort in manpower training and development in public services in agriculture, as well as other sectors. In industry the Government has moved to channel more financial resources for investment directly through the public sector, in addition to the indirect support provided by tax incentive and other meas- ures, which have been in existence for many years. The Government has actively participated in a World Bank Group study of the manufacturing sector whose results will help to idlentify bottlenecks and opportunities to develop existing as well as new industrial activities. 10. In the medium term, GDP growth will accelerate substantially because of recovery of cocoa, Robusta coffee and logs spurred by high international commodity prices, further expansion in most other commercial and food crops, increase in manufacturing and mining production and rapid growth in construc- tion activities and services resulting from expanded investment activities and rapid income growth. The outlook for considerable agricultural growth  during 1976-1981 is based on the maintenance of cocoa output at near the previous peak level for a number of years, recovery for Robusta coffee, con- tinuing expansion for Arabica coffee, cotton, rubber, oil palm and most other commercial and food crops and livestock production, and continuing recovery then further expansion of commercial forestry production. This projection is also based on the assessment of the medium-term outlook for Cameroon's exports, projects under implementation, and certain policy alternatives. Continuing growth of manufacturing production from existing and expanded facilities, particularly in food, beverages and construction materials, and new mining and manufacturing output of crude oil, sugar, paper pulp and other products, are projected to result in a marked improvement in manufacturing and mining growth during 1976-1981. With high growth in productive and in- vestment activities, construction and services are also expected to increase at a high rate. 11. Long-term growth in the 1980's is projected to be somewhat con- strained because the expected high investment rate during 1976-1981 is not likely to be sustainable due to worsening terms of trade, at least through the 1980's, and the necessity of prudent debt management to maintain the country's long-term capacity to borrow. Growth prospects will be impor- tantly influenced by the extent to which Cameroon succeeds in the diffi- cult task of maintaining and expanding the country's main traditional ex- port crops, cocoa and coffee, and the large-scale development of still unexploited forestry resources. Results of studies on the forestry poten- tial, forestry sector development policy, investment plans and transport requirements, many of which are parts of World Bank Group projects, will support the latter development. In addition, there are still uncertain in- dications for the exploitation of iron ore, but with heavy investment re- quirements, and long lead times to establish commercially viable export operations, production could probably not begin until the end of the 1980's. Fourth Development Plan (1976-1981) 12. Cameroon is implementing its Fourth Economic and Social Develop- ment Plan. Private investment is included in the Plan, and is encouraged, under Government guidelines, to expand production capacity in agriculture, forestry, mining and manufacturing. A part of financing of private invest- ment activities, however, will be publicly guaranteed borrowing. The Plan investment program of some US$3.1 billion (in 1974/75 prices) is about 80 percent higher in real terms than the estimated level achieved during the last Plan period and almost triples previous Plan expenditure in nominal terms. The Plan gives greater emphasis to agricultural development (about 16 percent of total investment), power (11 percent, mainly the Song Loulou hydroelectric scheme), manufacturing and mining (22 percent with a substan- tial part in oil exploitation, refining and storage), transport infrastruc- ture (26 percent), urban development and low-cost housing (7 percent) and social infrastructure (7 percent). Public investment is expected to account for 73 percent of total investment. However, because of the high dependence of public revenues and savings on cocoa and coffee prices, which are projected to decline substantially from their record levels in the last three years  (1979-1981) of the Fourth Plan while import prices are expected to continue their inexorable rise, and of the need for adequate producer prices to pro- vide sufficient incentives for production and new plantings to farmers, and because of the need to keep supplementary borrowing at commercial terms at prudent levels to maintain Cameroon's long-term capacity to borrow, public investment should be reduced by 10--20 percent from the planned level. The investment rate during the Fourth Plan period would then be about 22 percent of GDP, and total investment in current prices would be US$3.4-3.7 billion or about US$690-740 million per yeaLr. Financial Prospects and Creditworthiiness 13. In the first two years of' the Fourth Plan period (July 1976-June 1978), thanks to favorable terms of trade, public savings after debt service would finance about 65 percent of total public investment. However, in the last three years (July 1978-June 1981), public savings after debt service are projected to finance only about 30 percent of total public investment and this share of domestic public Einancing is likely to continue in the longer run. Cameroon will thus have to rely increasingly on external financing for the bulk of its public investment, and foreign official lenders should con- tinue to finance a high proportion of total project costs of externally financed projects, including local costs in appropriate cases. An increasing reliance on foreign borrowing during a period of deteriorating terms of trade will require careful external debt management. Cameroon continues to be creditworthy for World Bank financing on the basis of its ability to maintain and improve productivity in the utilization of the country's resources in the medium-term and its potential in the long-term to further diversify the economy by developing still unexploited resources. On the reasonable as- sumption that at least 50 percent of foreign public capital will be on con- cessionary terms, the foreign debt service ratio, 5.9 percent of export earnings in 1976, could be maintairned below 13 percent by 1983. PART II - BANK GROUP OPERATIONS IN CAMEROON 14. The Bank Group's commitments in Cameroon now amount to US$355.1 million and cover twenty-six projects: eleven in agriculture, nine in transportation, three in educaltion, one in public utilities, one small- and medium-scale enterprise project, and one technical assistance project. Transportation represents the largest share (44 percent) of our past commit- ments followed by agriculture (41 percent). Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of December 31, 1977 and includes notes on ongoing projects. Although delays and setbacks have been occasionally encountered in the execution of projects, the Govern- ment has consistently shown willingness to collaborate with the Bank in finding solutions to such prob.Lems. 15. For the future, the Bank Group's strategy is to support the Gov- ernment in its effort to increase aLgricultural production, including export- oriented crops, and in the process create productive employment in rural  areas; to upgrade and improve the operation and maintenance of the country's infrastructure; to stimulate investment by local entrepreneurs and increase employment in urban areas; and to increase the efficiency of Cameroon's in- stitutions. 16. Bank Group assistance to Cameroon supports the priority the Gov- ernment rightly attaches to the regional distribution of agricultural devel- opment and to a sound balance between improving conditions in the traditional sector and promoting plantation agriculture, including smallholder schemes. Thus we have helped the Government create an effective and well-managed plantation sector by financing oil palm and rubber plantations in the south and west. At the same time, we have helped promote smallholder rice irriga- tion in the north. The ongoing cocoa project is helping to modernize cocoa growing by smallholders and to raise rural productivity in areas south and west of the capital. The rubber project is helping develop the southwest coastal region. Rural development projects in populated but poor regions are being established with the assistance of the Bank. The Plaine des M'Bo Rural Development Project, which was approved by the Board in February 1977, is helping to finance the studies and three-year trial activities required before a full-scale rural development program can be launched. The Rural Development Fund Project is designed to help the Government establish the machinery for processing and implementing small-scale rural development schemes. The Second SOCAPALM Project approved in March 1977 and the Second CAMDEV Project, approved in December 1977, are follow-ups to successful oil palm projects (SOCAPALM I and CAMDEV I) and are a first step in promoting smallholder oil palm plantations in Cameroon. A recently approved rice project in the north, which is a follow-up to the successful SEMRY I project, also contains a small- holder component. Besides the present project, another rural development project is due to be presented to the Board shortly. Increased Bank Group lending for agriculture will support the Government's effort to focus on rural development in order to improve income distribution and to achieve a better balance in regional development, as well as promoting much needed foodstuffs production. 17. Recognizing the crucial importance of transportation to economic growth in Cameroon and in neighboring countries, the Government has devoted the largest portion of public investment to this sector. The Bank Group, together with bilateral institutions, has substantially aided development of adequate transport facilities. The First and Second Highway Projects were designed to help complete the country's basic trunk road system. The latter project encountered severe cost overruns which were partly alleviated by a Supplementary Credit approved in March 1976, as well as by the elimination of the reconstruction of the Garoua-Figuil section from the project. This section is now being financed under the recently approved Third Highway Project. The Second Railway Project of 1974 has focused on track improvement and expansion of the equipment needed to maintain and augment the railway's overall carry- ing capacity. Given projected sharp traffic increases, and the backlog of required investments, substantial capital outlays are still necessary, par- ticularly for the expansion of the port of Douala, which is being assisted by a Bank loan and IDA credit, and for some related facilities such as a  --8- railway station and marshalling yard to be built outside the port area. An engineering loan, approved in May 1976, will help complete the engineering of this station and marshalling yard. A study of the improvements required in the Douala-Yaounde transport corridor which was financed under a Bank project and desigiied to help determine an economically optimal investment strategy for this corridor, has led to a proposed investment package that is being discussed between the Government and a number of aid-giving agencies, in- cluding the Bank. Future road investments should place greater emphasis on road maintenance and on developing the network of feeder and farm access roads. Our future operations in the road sector have been planned accordingly. The Feeder Roads Project approved in November 1977 will establish institutions for feeder roads maintenance, in addiition to providing the necessary resources for a feeder road program to support high priority agricultural/rural develop- ment projects. The proposed Fourth HIighway project which is currently under preparation will concentrate on road maintenance and rehabilitation. In other sectors, the Small- and Medium-Scale Enterprise Project, approved in 1975, focuses mainly on developing local entrepreneurship. A Third Education Project, approved in April 1976, places special emphasis on rural education and training. 18. In all our projects, we include, as needed, training, technical assistance, and other provisions necessary for strengthening institutions and improving sector policies. The Technical Assistance Project approved in June 1977, will help strengthen Glovernment services in several key ministries involved in investment planning, pol:Lcy analysis and project processing. In addition, through our economic work we will continue to advise the authori- ties, at their request, on development questions in general, and on particular matters such as economic management and problems of industrial and manpower development. To help achieve the Government's priorities and to support our future lending strategy will require continuing emphasis on strengthening the institutional framework, particularly concerning sector planning and project preparation and implementation in transportation and rural and urban develop- ment. 19. During the second half of the sixties, overall disbursements to Cameroon amounted to about US$40-45 million a year. While at the beginning of this period 65 percent of aid funds were grants, the proportion of loans slowly increased. A major part of external assistance was provided by France and was concentrated in infrastructure and productive sectors. The European Development Fund and European Investment Bank directed their lending mainly to agriculture, with infrastructure in second place. Bank and IDA disbursements were small during this period. From 1972 to 1976 overall disbursements of foreign aid increased to about US$90 million with one-fifth as grants. The Bank and IDA share of these inflows amounted to about 23 percent. Our lend- ing to Cameroon has been closely coordinated with other donors; in thirteen of our twenty-six projects, joint or parallel co-financing arrangements have been made. 20. Public debt outstanding and disbursed as of December 31, 1976 amounted to US$529.3 million and is projected to reach US$2.1 billion in 1983.  - 9 - Public debt service as a proportion of export earnings amounted to 5.9 per- cent in 1976 and is projected to reach 12.4 percent in 1983. At that time annual foreign aid disbursements may be over US$400 million with only 7 per- cent consisting of grants. At end-1976 IBRD debt accounted for 10.9 percent of Cameroon's public debt outstanding and disbursed, and 11.4 percent of its public debt service. IDA credits accounted for 12.8 percent of public debt outstanding and 1.1 percent of public debt service. The Bank and IDA are expected to account for about 22 percent of total public debt and 13 percent of public debt service in 1983. 21. In October 1974, Cameroon became IFC's 100th member. IFC's first operation in Cameroon, a US$450,000 underwriting to bring domestic share- holders into a previously wholly foreign-owned shoe manufacturing company, was approved in May 1975. In September 1976, the IFC Board approved an equity investment of nearly US$900,000 in a foreign-owned rubber estate (SAFACAM). The investment will assist in the rehabilitation and diversi- fication of an existing estate, producing rubber for export and palm oil for the domestic market. The operation will also facilitate participation by domestic shareholders. On November 29, 1977 the Board approved a third operation consisting of an investment of up to US$125,000 in the share capi- tal of a promotional company for maize development. PART III - THE SECTOR 22. Agriculture including forestry and livestock plays a major role in the Cameroon economy, providing a livelihood for about 75 percent of the population and accounting for about one-third of GDP and over 70 percent of the value of exports. The agricultural sector can be divided in two major subsectors: traditional agriculture and industrial plantations. The tradi- tional subsector accounts for over 90 percent of agricultural output. It comprises some one million smallholders cultivating plots averaging about 1.5 hectares each using family labor. Smallholders produce foodcrops for subsistence and for the local market, and cocoa, coffee, cotton and ground- nuts for export. Cattle-raising mainly by nomadic and semi-nomadic pastoral- ists in northern Cameroon and the north-central Adamaoua plateau accounts for about 15 percent of the production of the traditional subsector. The industrial plantation subsector comprises several large government-owned and a few private industrial estates (foreign-owned) producing palm oil (mainly for domestic consumption) and rubber (for export). Additionally, the country has vast forestry resources which are only partially tapped. 23. Production of foodstuffs expanded over the past five years at an annual rate of about 6.0 percent, which was ahead of population growth. But this was due mainly to rapid growth in the output of vegetables, potatoes and, to some degree, rice in response to growing urban demand. At the same time, there was stagnation in the output of traditional staples, such as maize (in the west), plantains, yams, cassava and cocoyams (in the center- south) and millet and sorghum in the north (here, production was adversely  - 10 - affected by the Sahelian drought). Although Cameroon is largely self-suffi- cient in foodstuffs, imports of wheat and rice (again mainly for urban con- sumption) have risen sharply since 1970. Marketing of food crops is almost eA,usively in the hands of private traders, most of whom operate over lim- ited areas and with a small turnover. 24. Agricultural serviceis are provided by a variety of Government and parastatal organizations. At Government level, the Ministries of Agricul- ture and Livestock have primary responsibility for most aspects of agricul- tural and animal production, respectively. The parastatal sector is composed of Development Companies which are charged with specific agricultural programs or projects usually built around a single product. They include SODEPA for livestock, SOCAPALM for oil pa:Lm, and SODECAO for cocoa. Some are responsible for all product activities -- provision of inputs, extension services, pro- cessing and marketing -- such als SCIDECOTON for cotton and SEMRY for rice, both operating in the north. 25. The Bank supports the Government's efforts to achieve a balance between the growth of overpopulated traditional areas and of less populated but potentially productive areas in the south and southeast. This strategy involves developing both industrial companies and smallholder schemes. To date the Bank has incorporated financing for smallholder schemes within its financing of industrial companies, has provided a line of credit for small- scale rural projects through the Rural Development Fund Project, and is financing three-year trial activities on the Plaine des M'Bo Project in the expectation of being able to launch a full-scale rural development project. However, this proposed ZAPI project would be the first direct financing by the Bank of a development project in Cameroon designed exclusively for a specific target group in the rural sector. The Bank's lending in the agricultural sector has three main objectives: firstly, increasing technical and man- agerial capabilities, strengthening institutions, and improving sector pol- icies, mainly through training and technical assistance; secondly, raising foreign exchange earnings through expanding production and export of agricul- tural products; and thirdly, increasing the productivity of the overpopulated and/or particularly poor rural areas. The project which is the subject of this report is designed to meet these objectives. ZAPI's Programs in Eastern Cameroon 26. ZAPI is a semi-autonomous development authority supervised by the Ministry of Agriculture. It was established in 1966 with French technical assistance to provide an integrated approach to the social and economic de- velopment problems of the Eastern Province. A Presidential Decree gave it legal status in 1972. ZAPI's headquarters are located in Bertoua, the capi- tal of the Eastern Province. ZAPI began operations in 1967 and, up to 1975, operations were confined to three zones (Nguelemendouka, Doume, Angossas). In 1974, staff were posted to Diang-Belabo and Mbang to assess needs, eval- uate the socio-economic conditions and to create an environment conducive to later full operations (the process is part of ZAPI's standard operating  - 11 - procedure). Subsequently, in 1976 expansion into these areas was initiated and a nucleus staff is now in operation. The five zones in which ZAPI is now established cover some 13,200 km in which some 15,000 farm families, or about one quarter of the total for the Eastern Province, live. 27. ZAPI is the executing agency for a small farmer-oriented partici- patory development program. The unique feature of ZAPI's philosophy is to induce and train farmers to participate in, and eventually take charge of, measures to improve their living standard and way of life, thereby creating an environment for sustained social and economic development. The approach has evolved through a number of phases and reflects ZAPI's 10-year experience. Management early acquired a sense of the limitations of applying a "top down" planning approach to a complex long standing socio-economic structure. Similarly, it quickly grasped the multi-sectorial character of rural needs, and has always been sensitive to the client-patron nuances that can occur between development institutions and the populations they are established to serve. A central concern has been to establish a framework within which ZAPI itself can eventually be phased out and such continuing assistance as is necessary will be provided through the usual Government agencies. In brief, the long-term strategy is to transform the main elements of the program into a farmer-controlled and operated cooperative structure. 28. For reasons that are in part a broader reflection of conditions in Cameroon and its current stage of development, the long-term strategy, while consistently followed, is far from close to realization. Underlying many of ZAPI's problems is the shortage of trained and experienced staff, still fairly pervasive in Cameroon, especially for the rural sector, and the weaknesses of supporting programs at the provincial level that are needed to complement ZAPI's own programs. While initially supported with French technical assistance, ZAPI's expatriate advisors decided early on to rely exclusively on Cameroonian staff. Advantages that followed from this significant step are apparent today in the experience and maturity of ZAPI's staff - attributes not least displayed in the readiness to admit past mistakes and willingness to take corrective actions. Nonetheless, mistakes were made and some programs have failed; as a semi-autonomous and partially self- financing agency, such mistakes have direct financial consequences and have imposed added constraints on the scope of subsequent operations. 29. ZAPI's organizational structure consists of (i) a 9-12 member Administrative Council headed by the Provincial Governor, with ultimate re- sponsibility for policies and budgets. A director general is the chief exec- utive of the organization which has its headquarters in Bertoua; (ii) five ZAPI zones which are each responsible for planning and implementing a wide range of commercial and social programs for between 2,500 and 4,000 local farmers in each zone; and (iii) between 3 to 5 branches within each zone, each of which includes eight to twelve villages and each of which has its own manager who is responsible for locally recruited village-level extension workers. At the zone, branch and village levels, ZAPI staff work closely with farmer organizations. ZAPI now has a total staff of about 200, but  - 12 - qualified staff are lacking at virtually all levels. There is a shortage of adequate logistic support and existing buildings are deficient. Financ- ing of its programs is secured primarily through margins (that apply nation- wide) on marketing of cocoa and marketing and processing OL- cofree produced in the ZAPI zones. 30. ZAPI's production-oriented programs include (i) extension services aimed both at increasing coffee and cocoa production and diversifying farm incomes; (ii) marketing of cash crops purchased from farmers' groups; and (iii) provision of seasonal and term credit, as the intermediary of FONADER in the project area, for acquisition by farmers of directly productive assets. ZAPI has also stimulated a number of activities designed to improve the quality of life of its target population. These activities include: de- velopment of village credit and savings associations; creation of retail stores; health programs; improvement of drinking water sources; and im- provement of village housing. The scope of the socially-oriented programs has thus far been quite limited, due primarily to lack of funds and tech- nical skills; furthermore, programs of other agencies (e.g., for health care delivery) with which ZAPI's activities are coordinated are generally weak, which also limits the effectiveness of ZAPI's own actions. Commer- cial activities, particularly the marketing of coffee and cocoa, have thus far been the most important, with coffee and cocoa purchases reaching US$2.5 million in the 1975/76 crop y,ear, the latest for which full data are available. ZAPI has successfully organized the farmers to operate their own village-level markets and now deals directly with village development committee rather than with individual farmers. The same system applies to credit arrangements, where again village committees take collective respon- sibility for disbursements and collection. Repayment rates have been high, an average of 96 percent over the past several years; total credit disbursed during 1976/1977 amounted to some US$400,000, a considerable part of which has been for housing improvements. Marketing and credit activities are linked to extension programs, the primary thrust of which has been to in- crease coffee and cocoa production. Extension work, while claiming some success, is weakened by poor technical supervision which is particularly crucial since village level agents are virtually untrained. At present, ZAPI has only two agricultural technicians and one graduate agriculturalist; the remaining staff has been trained on the job. A further problem of major significance for cocoa is the weakness of the provincially-managed crop protection program (for capsid and b:Lack pod control). 31. These constraints on the ZAPI programs have been exacerbated by a failure to establish appropriate funding arrangements, affecting the amount and timing of direct Government support for ZAPI's non-commercial activities as well as the increases needed for ZAPI's capitalization for investment pur- poses. Initial capitalization of CFAF 130.6 million (US$0.5 million) was provided by the Government in 1972 and has not subsequently been increased, despite the considerable expansion in ZAPI's programs and investments since then. Increased capitalization would greatly strengthen ZAPI's financial position. Government's contribution to ZAPI's non-commercial activities,  - 13 - financed through annual budgetary appropriations, has similarly caused prob- lems, occasioned mainly by delays which result in substantial interest costs to ZAPI under bridging arrangements with commercial banks. These problems would be addressed through a variety of actions included in the project and described in the next chapter. PART IV - THE PROJECT 32. A report entitled "Appraisal of an Integrated Rural Development Project - ZAPI" (No. 1737a-CM of February 17, 1978) is being circulated sepa- rately. The Government of Cameroon has requested IDA assistance to strengthen and further develop a series of ongoing rural development programs in the Eastern Province of Cameroon. These programs were prepared and will be administered by ZAPI, a Cameroon development institution established in 1967, under the overall supervision of the Ministry of Agriculture. An IDA mission appraised the project in March 1977, and a follow-up mission discussed a draft report in November 1977. Negotiations were held in Washington, D.C. from January 23 to January 27, 1978 with a Cameroonian Delegation which was led by Mr. Benoit Bindzi, Ambassador of the United Republic of Cameroon in Washington. Background 33. Support for an integrated rural development project for Eastern Cameroon was first recommended in the Bank's 1973 Agricultural Sector Survey of Cameroon. ZAPI, the only rural development agency in Eastern Cameroon, was cited by the authors of the Bank's study of rural development in Africa as one of the most innovative programs in participatory smallholder develop- ment in West Africa. After further study of ZAPI's activities in relation to development needs in Eastern Cameroon, where a large proportion of the popu- lation live in relative or absolute poverty, IDA agreed with the Government in early 1976 to strengthen and expand ZAPI's activities. Terms of reference were drawn up jointly by the Government and IDA for the preparation of an integrated rural development project, designed to provide a package of infra- structure and services necessary to raise the incomes and living standards of the poorer sections of the rural population. Purpose 34. The project would support an expansion of ZAPI's activities in recently designated new zones and strengthen ongoing programs in these and in the older ZAPI zones. The major objective is to increase productivity and incomes among the resident farming population involving greater em- phasis on food crop development as well as improvement in cash crop earn- ings (coffee and cocoa), together with improvement of the rural environment through provision of health care services, water supplies and improved re- tail market outlets. These activities would also complement and be rein- forced by the program of road development for these areas being supported under the Feeder Roads Project (Loan No. 1494-CM). A subsidiary objective  - 14 - would be to strengthen ZAPI's financial position by improving its management capabilities and increasing the eff'iciency of its coffee and cocoa market- ing and processing activities (through which other activities are in part i4_aanced). To this end, the project would support expanded staff training facilities and technical assistance, as well as renovation and expansion of equipment, buildings and transport facilities. Women have sole responsibility for food crop production, but are precluded by social custom from working with male extension agents. Therefore the special needs and problems of women farmers would be addressed through provision of a cadre of female village extension workers and by a food crops research program, to be conducted with assistance from the International Institute for Tropical Agriculture (IITA). Furthermore, the health and water c:omponents are directed at improving the quality of life in the villages ancl, in particular, in the home. Project Description 35. The proposed project would support ZAPI's institutional develop- ment, increase and diversify agricultural production, improve marketing and processing and provide social infrastructure in the project area. I. Institutional Development. The project will improve management and or- ganization; strengthen extension services; provide staff and farmer training; and establish a monitoring and evaluation unit; through provision of: (a) 84 man-months of technical assistance: (i) to assist in improving the effiectiveness of ZAPI's present organi- zational structure and to develop management's planning capability and (ii) to design appropriate systems of accounting and cost control and streamline financial procedures; (b) training facilities: construction of and equipment for a rural development training center to provide courses for ZAPI staff and farmers, and financial resources to staff and operate the center during the disbursement period would be prov-ided to give technical support to three target groups i.e. extension services, village programs and small local enterprises. Thirty man-months of technical assistance will be provided to assist ZAPI with the planning, clevelopment and establishment of an effective training system. In addition, the project would provide: (i) one year rural development management training scholarships for members of ZAPI's senior management staff i n existing institutions in Africa or overseas; and (ii) 24 scholarships for agri- cultural and 5 for home economics higher education courses of three years' dLuration each; (c) additional operating capital amounting to US$1.1 million, so that at the end of the five-year investment program, ZAPI would have adequate financial and material resources to serve the zones identi-fied for accelerated development under the project; and  - 15 - (d) monitoring and evaluation services comprising 28 man- months of local and expatriate assistance; (i) to help establish a monitoring unit, which as a management tool, would function at the project level under ZAPI's management, and an evaluation unit for over- all evaluation of the project, which would be in the Ministry of Agriculture's Directorate of Studies and Projects; (ii) to train staff for these units, and (iii) to assist in the preparation and analysis of surveys for the unit's use. In addition, eleven man-months of technical assistance for overall design and early supervision of the monitoring system will also be financed. II. Agricultural Production. The project would encourage smallholders to increase production, productivity and farm incomes, through: (a) diversification of production by assisting farmers to expand production of their cash crops and to improve and diversify agricultural production in the project area; as follows: (i) coffee: establishment of seedling nurseries, including minor construction for storage of equipment and provision of staff and laborers; these nurseries, centrally located in each ZAPI zone would provide high yielding varieties to replace older and non-productive coffee plantings over time; (ii) cocoa: provision of equipment and staff for a capsid control program to be carried out by ZAPI; (iii) swamp rice pilot development: to stimulate and test local interest in rice cultivation, provision of equipment for land development involving clearing of selected swamps and valley bottoms, and provision for the recruitment of three rice specialists to demonstrate improved methods of rice cultivation to farmers; (iv) family fish ponds: establishment of a five-year pilot project to train extension staff and rent hand tools to farmers, for pond construction; funds would also be provided for rehabilitation and expansion of two existing fingerling production stations and construction of one new stock pond; (b) food crop research by establishing facilities and provid- ing equipment and transport to conduct effective research. The project would provide three man-years of technical assistance of one resident expert from the International Institute for Tropical Agriculture (IITA); two man-months per year of senior IITA scientific staff for five years to assist in all phases of a food crops research program; and training for Cameroonese scientific staff at IITA; (c) improvement of extension services by constructing a small agricultural service center in each ZAPI branch which would be the headquarters for all direct field extension  - 16 - activities and serve as the base for all training and demonstration sessions and community meetings. In order to strengthen extension services in the project areas, an additional 84 extension personnel and all necessary equipment and facilities for them would be provided; and (d) farmers' credit by provision of funds by FONADER to ZAPI for increased seasornal credit to farmers and for term credit, mainly to finance land development for modern swamp rice production. III. Marketing Farm Inputs and Processing. The project would improve and expand coffee processing; improve cocoa and coffee marketing; and provide retail marketing facilities; as follows: (a) coffee processing: purchase and installation of a new cof- fee processing plant at Belabo, improvement and renovation of plants at N'ka, Douma and Angossas, and installation of small hulling plants in Ngato and Diang; plus training of personnel and technical assistance during the first three years of the project; (b) coffee and cocoa cash crop marketing: purchase of trucks; construction of and equipment for expanded workshop facil- ities; construction of additional storage capacity and introduction of bulk handlling techniques; installation of radio communication between ZAPI offices and commercial outlets; and technical assistance for eight man-months to improve the efficiency and cost effectiveness of all phases of the marketing operation; and (c) retail outlets: to faciLitate distribution of essential goods, retail storage capacity and counter space in local stores will be expanded; provision of vehicles for goods transport would be provided; a pilot program to create vil- lage outlets for produce and inexpensive medicines would be established; and working capital would be provided. IV. Social Infrastructure. The project would improve health and domestic water supplies as follows: (a) health: provision of six man-months of technical assistance and four man-years of supervisory staff to improve existing health services; equipment of health centers; provision of vehicles and laboratory equipment to four departmental health centers; (b) water supply: provision of materials and technical assistance for constructing or improving about 80 water points and 6 wells and preparing plans for 13 village water supply systems to supply villagers with potable water.  - 17 - Project Costs and Financing 36. Project costs, including some US$0.4 million equivalent in taxes, are estimated at US$12.2 million, with a foreign exchange cost of US$4.9 million or 40 percent of total costs. An allowance for physical contingen- cies of 15 percent has been added to the costs of construction and equip- ment. Provision for future price increases has been calculated separately for the various items and amounts to about 15 percent of total project costs. The proposed IDA credit of US$8.5 million would finance 70 percent of project costs, including taxes, i.e. 100 percent of foreign exchange costs and some 49 percent of local costs. The IDA credit would finance 72 percent of project costs, net of taxes. The Government would pass on the proceeds of the credit to ZAPI as a grant; its own contribution would consist of US$3.7 million or 30 percent of the project costs including taxes. Financing would be chan- nelled through a special project account. The Government has agreed to estab- lish such an account and to deposit therein an initial amount of CFAF 150 mil- lion (US$612,200 equivalent) as part of its contribution to the cost of the project in order to ensure the financing of initial project expenditures. In order to maintain a timely flow of funds the Government will replenish the account each month to a level at least equivalent to the estimated amount of expenditures for the next two months (Section 3.01 b(ii) A, B and C of the draft Development Credit Agreement). The establishment of this account is a condition of effectiveness (Section 6.01 (b) of the draft Development Credit Agreement). As part of its contribution to project costs, the Government has agreed to subscribe additional share capital to ZAPI in the amount of CFAF 268 million (US$1.1 million equivalent) by October 1, 1978 i.e before the beginning of the 1978 coffee season (Section 3.01 (b) (i) of the draft Development Credit Agreement). 37. The project has been essentially prepared with Cameroonian manpower and financing, which entails significant savings. However, certain discrete tasks needed to be carried out by three expatriate consultants (a coffee pro- cessing specialist, an agricultural economist and a planning economist) and the Project Preparation Facility was used in the amount of US$30,000 to cover the foreign exchange costs of these experts. Local Cost Financing 38. The IDA credit would finance US$3.6 million of local costs since the foreign exchange component, at 40 percent of project costs, would re- quire an excessively high contribution by the Government. As stated in para. 13, local resources are only expected to cover 30 percent of invest- ment outlays in the period 1978-1981, so that foreign lenders will have to finance a high proportion of total project costs, including local costs. This high priority rural development project, with its multiple components, is a suitable candidate for local cost financing by IDA. Project Implementation and Monitoring 39. ZAPI would have prime responsibility for implementing the proposed project. ZAPI's central organization is headed by a director general who coordinates and supervises day-to-day operations. He is assisted by a director for programs and studies and a director for administration, finance, and marketing. The Government has agreed that individuals appointed to these  - 18 - three key positions would have qualifications and experience satisfactory to the Association (Section 4.01 (d) of the draft Development Credit Agreement). The employment on a full-time basis of eight individuals i.e. director general, d .._^-orfor programs and studies, director of administration, finance and marketing, chief financial officer, chief accountant, chief of production services, chief training officer and extension officer, would be a condition of effectiveness (Section 6.01 (a) of the draft Development Credit Agreement). At the sub-regional level, the project would be carried out by the directors of the local ZAPI entities and their staff. The project includes measures to strengthen ZAPI's management because of its expanding role in new areas and the intensification in many of its existing activities. Therefore, the Asso- ciation has obtained assurances from the Government that there would be an exchange of views if any major change in the scope of ZAPI's responsibilities were envisaged, so as to ensure that such measures would not materially and adversely affect the carrying out of the project (Section 4.03 of the draft Development Credit Agreement). The Government has agreed that the monitoring unit (see para. 35 I (d)) should be established within ZAPI by December 31, 1978 and that the evaluation unit (see para. 35 (d)) should be established within the Ministry of Agriculture according to arrangements satisfactory to the Association (Section 4, of Schedule 2 of the draft Development Credit Agreement). 40. Management of the health services component would be provided by the Ministry of Health, the inland fisheries activities would be executed by the National Fund for Forestry and Fisheries, and agricultural research would be conducted by the National Research Organization, ONAREST in collaboration with IITA. The key project staff for the inland fisheries and food crops research components of the project would be the provincial chief of fisheries and the chief research officer of ONAREST. The appointment of qualified inviduals to these new positions would be conditions of disbursement for these two compo- nents (Section 4(b) and (c) of Scheduled 1 of the draft Development Credit Agreement). ZAPI would pass to the Ministries of Agriculture and Health, to ONAREST and the National Fund for Forestry and Fisheries in the form of grants the portion of the credil proceeds which these agencies will require to discharge their responsibilities under the project (Section 3.01 (d) of the draft Development Credit Agreement). Furthermore, ZAPI would provide the institutional linkages between these agencies and project beneficiaries and monitor their activities. Each cooperating agency would designate a senior official responsible for liaison with ZAPI. To ensure effective co- ordination at the regional level, a meeting of these representatives, chaired by the Provincial Governor or his representative, would be convened every three months until completion of the project. A condition of effectiveness is that measures to ensure the convening of these meetings have been taken by the Government (Section 6.02 (c), of the draft Development Credit Agree- ment). ZAPI and the other agencies would submit to the Association for its approval, no later than June 1 of each year until completion of the project the proposed work program and budget for the project for the fiscal year beginning July 1 of that year (Section 3.07 of the draft Development Credit Agreement).  - 19 - Technical Assistance and Training 41. Technical assistance in the amount of US$2.2 million would be provided under the project. As described in para. 35, the experts will be provided for different purposes, from a number of widely different sources, and for both long- and short-term assignments, therefore the average cost per man-month ranges from US$3,000 to US$8,800. The technical experts would be recruited, under procedures acceptable to the Association, by the Director General of ZAPI. All contracts for these experts whose aggregate cost exceeds US$25,000 would be subject to prior review and approval by the Association (Section 3.02 of the draft Development Credit Agreement). Emphasis has been placed on staff training partly to compensate for its absence in the past and partly to assist existing and new management staff to assume the respon- sibilities that result from an expansion in ZAPI's activities under the project. Procurement 42. International competitive bidding would apply for the bulk of vehicles, processing equipment, communication equipment, and agricultural equipment and tools, which are estimated to involve outlays of some US$2.9 million. To facilitate international competitive bidding, bulking in suit- able packages (US$100,000) would be followed wherever possible. Goods manu- factured in Cameroon would be allowed a preference of 15 percent of the c.i.f. price on imported goods, or the level of applicable imports duties, whichever is lower. Construction contracts totalling US$1.8 million would be too small and too dispersed to attract international contractors and would therefore be awarded on the basis of local competitive bidding procedures acceptable to the Association, as would be goods contracts under US$100,000. Where contractor's interest is not sufficient to secure competitive bids, construction would be undertaken through force account. For equipment contracts under US$20,000 direct procurement on the basis of several quotations would be acceptable; in total such contracts would not exceed US$300,000 equivalent. Consultant contracts with foreign firms or individuals would be awarded in accordance with Bank Guidelines. Contracts for local consultants and technical services would be awarded in accordance with standard Government procedures which are satisfactory to IDA. Disbursements 43. The proceeds of the IDA credit would be disbursed to cover: (a) 73 percent of the cost of civil works; (b) 73 percent of the cost of technical assistance and training; (c) 73 percent of the cost of incremental operating costs;  - 20 - (d) 100 percent of the foreign cost or 73 percent of total expenditures for directly imported vehicles and equipment, or 73 percent of cost if items are procured locally; and (e) 100 percent of the refunding of the project prepara- tion advance (see para. 37). No disbursements would be made against incremental operating capital and farmer credit (US$1.3 million) which are included in project costs. US$0.8 million of the IDA credit would be unallocated. Disbursements against (a), (b) and (d) would be fully documented. Disbursements for item (c) and for work done through force account under item (a) would be against certified statements of expenditures with the supporting documentation retained by the borrower and held available for inspection by project supervision mission. Benefits and Justification 44. Economic benefits would result from increased production of coffee, cocoa, rice, fish and food crops, and from cost savings in marketing and processing. The overall economic rate of return of the project was calcu- lated at 25 percent. Calculated separately, the marketing and processing components, which account for 16 percent of total project costs, showed a rate of return of 19 percent. The sensitivity of these rates of return, has been tested against changes in costs and benefits as well as delays in imple- mentation and even under a very pessimistic hypothesis - a delay in benefits of three years with costs incurred aLs scheduled - the rate of return would still be an acceptable 14 percent. 45. At full development, an esstimated 13,200 farm families would ben- efit directly from the project, with net farm incomes increasing from US$490 up to a maximum of about US$950 and on average to about US$720. An estimated 20 percent of farmers would continue with traditional methods with no sig- nificant increase in income. The non-directly productive components, water supply, health services and farm and consumer supply services, were excluded from the rate of return calculations as benefits are difficult to quantify. These services are now almost totally absent in the project area, and are expected to benefit about 85,000 people. The project is expected to generate other non-quantifiable benefits.. The substantial investment in training of management and technical staff would contribute significantly toward overcom- ing the present shortage of ski!Lled manpower for rural development in Cameroon, particularly in the eastern region. The project would also strengthen in- ter-agency coordination and help farmer organizations play a much more active part in the development process.. The inclusion of a research component, which has been designed to address and help solve the problems of food crop produc- tion systems in a humid forest ecology, is expected eventually to bring about major improvement in food production, with important benefits to women farmers. Furthermore, Cameroon's research capability would be strengthened through collaborative programs with the International Institute for Agricultural Research.  - 21 - Risks 46. The principal risk of the project would be the possible diffi- culty in recruiting and retaining high-caliber Cameroonians for key staff positions. Intensive efforts are therefore already underway to recruit senior staff. Moreover, the project would provide short-term, interna- tionally-recruited consultants to assist with implementation of critical components. The uncertainty of response on the part of low income farmers to the improved environment for development, a response conditioned by domes- tic and international market factors and influenced by social and cultural traditions of Eastern Cameroon, would also constitute a risk. These factors have, however, been given careful consideration in the projections of produc- tion benefits and in the design of organizational arrangements through which services are to be channeled to participating farmers. PART V - LEGAL INSTRUMENTS AND AUTHORITY 47. The draft Development Credit Agreement between the United Republic of Cameroon and the Association, and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 48. Special conditions of the project are listed in Section III of Annex III. 49. Additional conditions of credit effectiveness would be: (i) the establishment by Government of a special project fund (Section 6.01 (b) of the draft Development Credit Agreement); (ii) the appointment of qualified individuals acceptable to IDA for eight key positions (Section 6.01 (a) of the draft Development Credit Agreement); and (iii) that measures have been taken by the Government to convene the meeting of the coordinating committee by the Governor of the Eastern Province (Section 6.02 of the draft Develop- ment Credit Agreement). 50. Conditions of disbursement for the respective project components would be that: (i) the National Fund for Forestry and Fisheries has appointed on a full-time basis, a qualified and experienced regional fisheries officer (Section 4 (b) of Schedule I of the draft Development Credit Agreement); (ii) ONAREST has appointed, on a full-time basis, a qual- ified and experienced research officer (Section 4 (c) of Schedule I of the draft Development Credit Agree- ment).  - 22 - 51. I am satisfied that the proposed development credit would comply with the Articles of Agreement of the Bank and the Association. PART VI -- RECOMMENDATION 52. I recommend that the Executive Directors approve the proposed devel- opment credit. Robert S. McNamara President by J. Burke Knapp Attachments February 22, 1978  - 23 - ANEX I TABLE 3A Page 1 of 4 pages CAMEROON - SOCIAL INDICATORS DATA SHEET LAND AREA (THOU KM2) ------------------------ --------- CAMEROON** REFERENCE COUNTRIES (1970) TOTAL 475.4 MOST RECENT AGRIC. 150 .4 1960 1970 ESTIMATE GHANA IVORY COAST MALAYSIA GNP PER CAPITA (USS) 100.0* 210.0* 300.0* 430.0* 350.0* 440.0* POPULATION AND VITAL STATISTICS POPULATION (MID-YR, MILLION) 5.7 6.8 7.6 8.6 5.4 10.8 POPULATION DENSITY PER SQUARE KM. 12.0 14.0 16.0 36.0 16.0 33.0 PER SQ. KM. AGRICULTURAL LAND 56.0 44.o 49.0 64.0 32.0 185.0 VITAL STATISTICS CRUDE BIRTH RATE (/THOU, AV) 43.5 42.1 40.4 49.8 46.1 42.2 CRUDE DEATH RATE (/THOU,AV) 28.0 23.9 22.0 24.4 23.3 12.9 INFANT MORTALITY RATE (/THOU) .. .. 142.0/L 156.0 *- 40.B Ia LIFE EXPECTANCY AT BIRTH (YRS) 35.9 41.0 41.0 41.5 41.0 58.7 GROSS REPRODUCTION RATE 2.3 A 2.7 2.7 3.2 3.1 2.6 /a POPULATION GROWTH RATE (8) TOTAL 1.8 1.8 l.9/b 2.6 3 4/& 2 6 URBAN *- 6.1 7.6 4.5 8.7 E 2689 URBAN POPULATION (% OF TOTAL) 14.9 A 20-5 28.5 28.4 28.0 26.9 AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 40.0 43.0 42.7 46.9 42.5 44.7 /a 15 TO 64 YEARS 56.0 54.0 53-8 49.5 54.8 52:1 7a 65 YEARS AND OVER 4.0 3.0 3.5 3.6 2.7 3.2 7 AGE DEPENDENCY RATIO 0.8 0.9 0.9 1.0 0.8 0.9/8 ECONOMIC DEPENDENCY RATIO 1.0 1.2 .. 1.4 0.9/c i 76 FAMILY PLANNING ACCEPTORS (CUMULATIVE, THOU) .. .. .. 10.9 *- 222.2 /a USERS (% OF MARRIED WOMEN) .. .. .. 2.0 .. .O7-i EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 2800.0 3500.0 .. 3300.0 2600.0 2900.0 /8 LABOR FORCE IN AGRICULTURE (%) 88.0 82.0 .. 54.0/a 82.0 43.0o7 UNEMPLOYED (% OF LABOR FORCE) .. .. .. 6.2 .. 6.o7i.b INCOME DISTRIBUTION % OF PRIVATE INCOME REC'D BY- HIGHEST 5% OF HOUSEHOLDS .. .. .. .. .. 28.3 HIGHEST 20% OF HOUSEHOLDS .. .. .. .. .. 56.0 LOWEST 2V% OF HOUSEHOLDS .. .. .. .. .. 3.5 LOWEST 40% OF HOUSEHOLDS .. .. .. .. .. 11.2 DISTRIBUTION OF LAND OWNERSHIP ____________________ -_______- % OWNED BY TOP 10% OF OWNERS .. .. .. % OWNED BY SMALLEST 10X OWNERS .. .. .. HEALTH AND NUTRITION POPULATION PER ;'HYSICIAN 40160.0 60.0 26220.0 / 12950.0/A 15320.0 POPULATION PER NURSING PERSON 10898*0 2470.0 2270.0 1070.O/ 2830.0/. POPULAIION PER HOSPITAL BED 530.0B 48O.Q .. 760.0 1150.0 270:0/a PER CAPITA SUPPLY OF - CALORIES (% OF REQUIREMENTS) 96.0 96.0 104.04 96.0 108.0 110.0 -OF WHIC ANIMAL ND PULS .. 23.0~ 64: _ 46 0 60 0 49.0I PROTEIN (GRAMS PER DAY) 59.0 59.0 64.0 a 46.0 , 60.0 , 4.0/C -OF WHICH ANlMAL AND PULSE .. 23. 0 /A .. 10.0/ 18.0/e 20.o0 z DEATH RATE (/THOU) AGES 1-4 .. .. .. .. .. 5.5 EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 74.0 100.0 108.0 61.0 76.0 89.0/a SECONDARY SCHOOL 3.0 9.0 11.0 11.0 11.0 34.07a YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 14.0o/aA 14.0jAL 14.0,AL 15.0 13.0 13.0/a VOCATIONAL ENROLLMENT (% OF SECONDARY) 23.0 23.0 23.0 23.0 7.0 3.0/a ADULT LITERACY RATE (%) .. 12.0 .. 25.0 20.0 55.0 HOUSING PERSONS PER ROOM (URBAN) .. .. .. .. .. 2.3/a OCCUPIED DWELLINGS WITHOUT PIPED WATER ( .. .. .. .. .. 65.0/ad ACCESS TO ELECTRICITY (% OF ALL DWELLINGS) .. .. .. .. .. 43.0/a RURAL DWELLINGS CONNECTED TO ELECTRICITY (X) .. .. .. .. .. 30.0ja CONSUMPTION RADIO RECEIVERS (PER THOU POP) 3.0 36.0 36.0 78.0 .. 41.0 PASSENGER CARS (PER THOU POP) 3.0 6.0 6.0/a 5.0 10.0 27.0 ELECTRICITY (KWH/YR PER CAP) 190.0 201.0 . 338.0 95.0 382.0 NEWSPRINT (KG/YR PER CAP) .. .. . 0.4 0.2 4.0 SEE NOTES AND DEFINITIONS ON REVERSE  24 _ ANNEX I Page 2 of 4 pages NOTES Unless otherwise noted data for 1960 refer to any year between 1959 and 1961, for 1970-between 1968 and 1970, and for Most Recent Estimiate between 1973 and 1975. SGNP per capita data are based on World Bank Atlas mthodology (1974-76 basis). sCaeroon GN' data are for July/June fiscal years imad population data are those at corresponding fiscal mid-years. Malayci - k- scloted as the only non-OPEO of a iaoe similar to CO ..roon, which endowed with a diversified tropical production, reaches the GDP per capl;a target (US$ 400-60C). SIAMEROON 1960 /L West Coeroon only; tb 1962; inmluding ex-South Cammeroons under British ad&inistration; /c Caversanent hospitals, including rurI hospitaT and medical center s; /d 13 years fur East Camaroon. 1970 /a 1964-66; /b 13 years for East Ceeron. MOST PECE21T ESTIMATE: / 1972; /b 1970-7i; /c 1971; /d 1969-71 average; /e 13 years for East Ca-recss SHAXA E970 /a Excluding unemployed; A Registered, rot all practictng in the country; /c 1966-68. VCRY COAST 1 /970 L Due to imeigration population gnwtot rate is higher than the rate of natural increase; /A 1965-70; Pc Ratio of population under 15 and 65 and over to total labor force; /d Gonrernment only, including midwives; / 1964-66. iAlAYS2A I9?0 /8 West Malaysia; /t Registered applicanto for work; /c 1964-66; /d Piped water inside only. R4, August 29, 1977 KIEFINITIOSiS OF SOCIAL INDiCATORS Land Area (thou k,2) punulotion per -ursicg Person - Popolation divided by nsmber of practicing 7ocal - Total sorface ores cosprising land area and inland waters. -ai and feamalo graduate nrse, "trined" or "ertifled' norar and ric. - Moat recest astioate if agri-ulturoiarea weod temporarily or pema- avuillary personnel with training or-eaprienoe nently for crops, postures, market & kitchen gardens or to lie folios Posulation set hospital bed - Population divided by sasber of hospital beds vailable in public and private general and specialieed hbspital and GNP per 00pitu (US$) - GNP per opita cati.atra at currant market Friosa, rehabilitation -naners; eaclades nur-ing hboes and estsblislheets for calculated by sa-e conver-ion metbod as World Bank Atlas (1973-75 basis); catodial and preventive care. 1960; 1970 and 1975 data. Per ospita supply of calories (% of reguircen-ta) - Ciputed fro- energy squivalent of net foud suppliea available in country par capita par day; Population and eital statistic availble cuppliec comprise doseftio production imports less esports, and Ppo.lation (=id-yvar million) As of JloY first: if not available., setag! changes in atcok; net supplies ex-lode animal feed, seeds, quastitie cseed of Mwo end-year nstisatec; 1)60, 1970 and 1975 date. in fond processing and losses in diutnibutios; esquirn ts wer estiated by FAO base~d on phyailosgical needs for norma activity and health -onid- Pocolation demaity - per anuse lks - Mid-yea population per square kilomter acing euir_se tme1 temperature, bsdy weights, age and sea distrihatissa of (100 hectaren) of total area, Population, and allowing 10- for wast at hoebghald ;awelo Pspslation density - per asmare kc of agric. and - Conputed as above for Per spita supply of protein (scans per day) - Potsein emteent af par capita agricultural land only. nt supply of faod per day; mnt supply of food is defined as abse; require- "nets for a11 countries eshtblished by USDA Ecoemic Research S.rvicee Iit.l statisti-s provide for a cioimum allowance of 60 gras of total protein pee day, and Crode birth tat por thousand average - A_uA-l lice births per thousa.nd of 20 gras of aminol and pulse protein, of which 10 grS should be seimal nid-year populstion; ten-yeer arithsetic averages ending in 1960 and 1970, protein; these standards or levr than those of 75 grst of total protein sod five-vyar overage ending in 1975 for moat recent estimate, and 23 grams of animal protein as an verage for the wrld, proposed by FAO Crude death rate Per thsasend, averae - Annual desahr per thousand of mid-pear in the Third World Food Survey population; ten-year atit._2sic averages ending in 1960 and 1970 and five- Per capita protein sUPslv fron anima1 sad pulse - Protein supply of fsod yeor average ending is 1975 for moet rceent estiate. derived from animals and pulses in graS per day. Infant mortalitv rate (/thou) - Annual deaths of infanta -nder one year of alge Dseth rats (/thou) ages 1-4 - Annual deeths per thoans.d in age group 1-4 per thousand lice births. years, to children in this age group; suggested as an indicator of life exaectancys t birth (yru) - Average n.mher of years of life retaining ot maloserition. birth; t suaily five-year averages ending in 1960, 1970 and 1975 for develop- ing counris.Educa.tion Gross re =eoductic= rateo -verge smnber of liie daughters a woman will besa Adiusted enrollment ratio - primary school - Enrollment of a11 ages as per- to hen -oseal reproductive period if she eperiences present age-specific ce-tage of primary school-age popalatise; includes children aged 6-11 years fertility rates; ussaily fivs-ypas averages ending in 1960, 1970 and 1975 but adjioted for different lengthe of primary education; for cou-trise with for developing countries, universal ed-cation, enrollment may sensed 1007, sines r es pupils are below Population growth rate (7.) - total - Cospsand ...ulI growth rates of mid-yecr or aboue the official schol age. population for 1950-60, 1960-70 and 1970-75. Adiusted esrell3ent ratio - secondary schocl - Co-pseed as sboos; secondary population growth rats (%) - urban - Compoted like growth rate of total education requires at leant four years of approved ptrlary inatruction; po;.ulatio; different definitions of urban orean may affect cnpar-bility of prerides general. -cctional cr teacher training ipstroctiona fsr pupils data enoong ro,nrriea. of 12 to 17 yer f age; c-rreapondance co. rss re generally ecIuded. :rhan copulation (, of total) - Ratio of orban C. tutal population; differeat Yeats of *chooling provided (first and second levels) - Tats) years of defiritiona of urban aress may affect comparability of data ameng c-ustriie. scheling; at secondary level, vocstion,l isnt-ction my be partiaIly r completely ecluded. Agt structure (percent) - Children (i-14 years ,vorking-age (15-64 y-era), Vocational enrollme1nt (% of secondary) - Vocational institutions is-lude and retired (65 "corn and 00cr; 00 percootafro of =id-year population. techbical, indstrtal or other progras which operate iadependently or en :t depesdecy rat-os- Ratio of popolatiso uedecs 15 sd 65 and ov-r to thoar depamtuenta of secondary i-stitotiona. of agn 15 through h4i odIt literacy rate (7) - Literate adus(sle to rd nd write) as Per- onocdeocdo to o-isi o popol -ic- ondor 15 and 63 and aver to eotagci local adult popoation aged I)yearn and user. the labor force in age groop of 19-_4 years. joily classici-sacceptor- )coolaiiyt. thos) - Cumulatio- -nber of acceptors Huosing of birth-control devices -nder auspices of nati1nal fonilv planning progr-m Persno per room (urbas) - Average oobhec of pets am per ro-m in nonptied since inception conventional dwellings in urban areas; dwellings e-cIude no--pereanent ramlvo planniog - users ft/ of msa reind 0 c) - Pe rcentages of married women of ecrottures and snoccspied parts -nild-hearing age (15-44 yearnl) o oe birth-control devices to all osrleed Occpied -ellinga without piped aster (%) - Occupied conventional dwellings -en one age gro p. in urban and roral areas withoor inside or outside piped water facilities as percentage rf all occupied duelliags. FEpLcyuent access to electricity (b7.of all dwellings) - C-eventional dwellings with Total labor force rth-sand) - Fconomi-Illy action persona, isclading armed electricity in living quarters as percent of torsi dwellings in urban and sooces and unemployed but e-oloding hounewivet, students, etc; definiti-ot -eI areass. in carious countries are not comparable focal dw-l1ingu ounnected to electricity (1