Burundi - Forestry Project

Document of F1LE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-2542-BI REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON PROPOSED CREDITS TO THE REPUBLIC OF BURUNDI FOR A FORESTRY PROJECT May 9, 1979 This document bas a restricted distrIuon and may be usd by recipients oniy In the perfonrance of taelr oficial duties. Its contents my not otherwise be discloe without World fank authoriztion.  CURRENCY EQUIVALENTS Currency Unit - Burundi Francs (FBu) US$1.00 - FBu 90 FBu 1 - US$0.011 ABBREVIATIONS BNDE - Banque Nationale pour le Developpement Economique (National Bank for Economic Development) EEC - European Economic Community FAC - Fonds d' aide et de cooperation (France) (French Aid and Cooperation) FAO - United Nations Food and Agriculture Organization FED (or EDF) - Fonds Europeen de Developpement (European Development Fund) ISABU - Institut des Sciences Agronomiques du Burundi (Burundi Institute of Agronomy) UNDP - United Nations Development Program FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY BURUNDI FORESTRY PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Burundi. Amount: US$4.3 million (IDA); and US$1.2 million (EEC Special Action Credit). Terms: Standard IDA terms (for both credits). Project Description: (i) Purpose: To assist the Government in initiating the first stage of a long-term program to develop basic forestry services and plantations supplying fuel wood, building poles and timber and to further the Government's objectives of increasing forest production and establishing long-term production and marketing policies. (ii) Components: a) establishment of rural nurseries in 30 communes; b) establishment of a 2,000 ha Eucalyptus plantation and a 5,000 ha Pine plantation; c) technical assistance for project management and training of local staff for forestry services and d) studies on energy needs and applied trials in particular to improve charcoal production. (iii) Benefits: increased supply of fuel wood, building poles and charcoal to the population; an increase in employment opportu- nities through the creation of about 400 permanent jobs and employment of about 3,000 persons to meet unskilled labor requirements for project implementation. (iv) Risks: The project does not face any unusual risks. Manage- ment difficulties, recruitment problems and slow delivery of materials and equipment may delay project implementation. However, these delays would not significantly reduce the economic rate of return of the project. The principal risk relates to the rural nursery component, because of the uncer- tainty about the willingness of farmers to pay for seedlings and to develop woodlots for their own fuel needs. The project provides for regular consultation on this matter between Burundi and the Association to seek solutions when problems occur. This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Estimated Cost: (US$'000) Local Foreign Total Rural Nurseries 293 108 401 Eucalyptus Plantation 535 288 823 Pine Plantation 1,099 673 1,772 Project Management and Administration 222 120 342 Technical Assistance 131 1,179 1,310 Training 55 500 555 Studies and Trials 260 221 481 Total 2,595 3,089 5,684 Contingency Allowances Physical 338 382 720 Price 1,138 1,284 2,422 Total Contingencies 1,476 1,666 3,142 TOTAL PROJECT COSTS (net of taxes) 4,071 42755 8,826 Financing Plan: Local Foreign Total % ----------------US$ million-------------- Government 0.77 - 0.77 9 F.A.C. (France) 0.19 1.67 1.86 21 U.N.D.P. 0.07 0.63 0.70 8 E.E.C. (Special Action Account) 0.78 0.42 1.20 13 IDA 2.26 2.04 4.30 49 Total Project Cost 4.07 4.76 8.83 100 Estimated Disbursement: --------------US$ thousand---------------- IDA Fiscal Year 80 81 82 83 84 85 IDA Annual 60 1,140 1,260 1,000 600 300 Cumulative 60 1,200 2,400 3,400 4,000 4,300 EEC Annual 50 200 550 400 - - Cumulative 50 250 800 1,200 - - Rate of Return: About 20 percent (on about 80% of total project cost). Appraisal Report: Report No. 2376-BU dated May 8, 1979. Map: IBRD 13869  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON PROPOSED CREDITS TO THE REPUBLIC OF BIJRUNDI FOR A FORESTRY PROJECT 1. I submit the following report and recommendation on two proposed Credits to the Republic of Burundi for the equivalent of USS5.5 nillion on standard IDA terms to help finance a forestry project. One Credit of US$4.3 million equivalent would be made from IDA resources; a second Credit of about US$1.2 million equivalent would be made from the EEC Special Action Account administered by the Association in accordance with the terms of the Agreement of May 2, 1978, between the Association and the European Economic Community. The French Republic and the UNDP will provide a grant of about US$1.86 mil- lion and US$0.7 million equivalent, respectively. PART I - THE ECONOMY I/ 2. The last economic memorandum on Burundi (1838-BU) was distributed to the Executive Directors on April 25, 1978. tJpdated country data are pro- vided in Annex I. 3. With an average GNP per capita of about US$130, Burundi is one of the poorest countries in the world and is designated as "least developed" by the United Nations. Of a population of about four million, only 121,000 are wage earners; the remainder depends mainly on subsistence agriculture. The Government is facing several critical problems in its efforts to develop the economy: the capability to prepare and manage programs and projects is weak; the agricultural labor force is largely untrained; and population growth keeps straining Burundi's productive resources, particularly in agriculture. Despite the recent adoption of a policy of "spaced births", the problem of population pressure cannot be solved in the immediate future; therefore, a major effort must be made to increase agricultural productivity. Agri- cultural yields have been declining, because more and more marginal land has been brought under cultivation. The search for more arable land has caused large-scale deforestation, resulting in a severe lack of firewood in the rural areas and forcing the development of alternative energy sources. 4. Improvements to the internal transport system will be of limited effect unless reliable external links can be established. Shipments of imports and exports through the principal outlet via Tanzania have tradi- tionally encountered frequent delays and losses because of theft. However, some action is being taken to improve the situation. For example, several donors (Canada, Belgium and the European Development Fund) are considering financing the rehabilitation of railway and port infrastructure in Tanzania. The link via Rwanda and Uganda to the former East African Railways and the port of Mombasa (Kenya) is becoming increasingly attractive with the con- tinuing improvement in national highways between Bujumbura and Mombasa. 1/ This part is identical to that of the President's Report regarding the Second Technical Assistance Project (P-2532-BU).  - 2 - Recent hostilities in Uganda have illustrated the vulnerability of Burundi's external transport lines, as imports of heavy bulk goods (gasoline, construc- tion materials, etc.) and equipment came to a standstill, affecting prices, production, trade and development work. 5. Recent Economic Developments. Over the period 1970-77, Burundi's GDP grew at a rate of only 2.2 percent per annum in real terms (about the same as population) and per capita income stagnated. Growth was concentrated mainly in the capital city, particularly in manufacturing and construction activity. Food crop production grew significantly slower than did population, averaging an increase of 1.3 percent annually, while the production of export crops (including coffee) fluctuated around a declining trend. 6. The overall investment rate of the economy rose considerably in 1977, when it accounted for 11.0 percent of GDP, but it is still below the average for low-income countries. The allocation of investment between production and infrastructure, one-third and two-thirds, respectively, has not changed noticeably in recent years. The bulk of investment in the rural areas has been to a large extent financed by official external aid and has been allocated mostly to export crops. In 1977, the public sector accounted for about 90 percent of gross fixed capital formation. This has been accom- plished largely by government investment in social and transport infrastruc- ture and by the activities of public corporations. Investment by private enterprises has been relatively weak, reflecting in part the excess capacity prevailing in certain industries and the limited financial and managerial capabilities of most private firms. 7. Burundi's coffee production has become increasingly important for its foreign exchange earnings: the share of coffee in total exports rose from 79 percent in 1965 to 88 percent in 1977-78. Owing mainly to the sharp increases in the world coffee price and a large crop in 1976-1977, average prices for Burundi's exports more than doubled in 1976 and again in 1977. For the first time since 1970, the current account balance registered a surplus, amounting to US$16.9 million in 1977. By the end of 1977, Burundi had accumu- lated about US$86 million in net foreign reserves, equivalent to 11 months of imports. The improvement in the terms of trade resulted in income gains equivalent to an increase of about one-fourth of GDP over 1975. Including these gains, gross national savings, which averaged only 5.4 percent of GDP in 1970-75 and were below the level for most developing countries, increased to 11 percent and 16 percent of GDP in 1976 and 1977, respectively. The increases in income have accrued primarily to the Government through higher export taxes; the rest was shared by the small coffee producers. Producer prices were increased two-and-a-half-fold from 1975 to 1977, but the export tax on coffee more than quadrupled in 1976 and was raised by another 300 percent in June 1977. This resulted in an increase in tax revenues from coffee exports from a level of BuF 154 million (4.4 percent of total current revenue in 1975) to an unprecedented BuF 1,250 million in 1976 and BuF 3,500 million (43 percent of current revenue) in 1977. 8. The increase in Government revenues allowed substantial increases in current and investment expenditures. During 1976-77, ordinary budgetary  - 3 - expenditures shot up by about 58 percent to BuF 5.1 billion, owing to signif- icant increases in the basic salary scale, the effects of a 14 percent devalu- ation which took place in May 1976, and the establishment of new ministries. The salary increases were the first since the mid-sixties, although in real terms, the average salary has increased very little, if any, since that period. Revenues allocated to ministries which provide economic and social services, which had declined in real terms up to 1975, were increased by 57 percent in 1976-77. Nevertheless, budgeted amounts for agriculture in 1977 were still low and constituted only 3.8 percent of the ordinary budget. Although in 1976 only half of the investment budget was spent, investment expenditures were three times higher than in 1975. In 1977, Government investment doubled to about BuF 2 billion. In spite of the substantial increases in expenditures, overall budgetary transactions, which showed a small deficit in 1975, registered a surplus of BuF 170 million and BuF 890 million in 1976 and 1977 respectively, due to the higher growth of tax revenues. 9. Although Burundi still holds a comfortable net international reserve position (US$69 million at the end of 1978, equivalent to over eight months of imports), the situation is less favorable than it was 18 months ago. During 1978 Burundi lost US$17 million of its reserves, and this despite a large increase in net disbursements of external loans. According to preliminary information, several factors were responsible for this deterioration. Despite a one-third increase in exports of coffee, total merchandise exports dropped by one fourth to US$67 million, mainly as a result of a 50 percent decline in the average unit price of this commodity. Although part of this decline was attributable to unfavorable sales in the forward market, most of it was due to deteriorating world market conditions. Additionally, in the wake of rapidly increasing public investment, strong consumer demand, a 12 percent increase in import prices and rising insurance and freight costs, Burundi's merchandise imports shot up by one-third to US$98 million. Faced with a significant decline in revenues from coffee exports, as well as rapidly rising expendi- tures, after two years of surpluses, the Government was forced to borrow close to BuF 1,196 million from the banking system (2 percent of GDP) to finance its overall deficit. 10. Government Development Strategy. Since 1977 the Government has designed a new strategy to achieve social justice, ethnic reconciliation and improved living conditions in the rural areas. The poll tax, which was levied on all males, was replaced by compulsory deposits which can be withdrawn after three years. In addition, small farmers no longer have to provide services to landowners in exchange for land, as they have acquired exclusive rights to the land they cultivate. Likewise, land which was obtained in an irregular manner for speculative purposes has been returned to the state or to the farmers who cultivated it. Other aspects of the new policies, which are embodied in the Third Five-Year Plan (1978-82), are: (a) to emphasize agricultural production to face the increasing needs in food supplies of the fast-growing population; (b) to increase the rate of economic growth substantially in order to provide greater employment opportunities and more income to the poorest segments of the population;  4- (c) to raise the investment rate significantly; (d) to give the Government a more active role in mobilizing financial and manpower resources an in parti- cipating in mixed enterprises in the commercial and productive sectors; and (e) to foster decentralization of economic and social activity away from the capital city and achieve a more balanced geographic distribution through the creation of development poles, voluntary settlement of the peasant population in villages, and migration from densely populated areas. To facilitate the implementation of its strategy, the Government has strengthened the role of planning by elevating the planning organization to the rank of ministry and by giving it a key role in the allocation and monitoring of public investment. 11. External Assistance and Prospects. Economic prospects are less favorable than during 1976-77 as a result of rapid declines in coffee prices. The major issues which the Government currently faces are how to limit the loss in reserves, preserve its revenue base, and contain inflationary pres- sures. This will require cautious budgetary income policies and a significant reduction of the Government's investment targets for the remainder of the Third Five-Year Plan. In addition, the producer price for coffee will have to be reduced in real terms, as the world market price for this commodity is expected to average in real terms, during 1979-82, only 38 percent of the 1977 level. The Government is currently revising its policies in all these areas as well as considering the use of IMF facilities. 12. If the Government continues to focus on development and strengthens its administration, it may achieve a steady, albeit slow, improvement in per capita income. If mining of Burundi's nickel deposits proves feasible, the prospects over the next ten years would be much better. However, the commer- cial viability of exploiting these deposits has yet to be established. Regional development in Central Africa will also be important to Burundi's economy. On September 20, 1976, Burundi, Rwanda and Zaire signed a conven- tion establishing the "Economic Community of the Countries of Great Lakes". The Community, which has its seat in Gisenyi, Rwanda, aims inter alia at stimulating and intensifying intra-regional trade and cooperation in a wide range of activities. A major objective of the Community is the electrifica- tion of the Great Lakes region. The three countries have also agreed to set up a joint development bank, exploit methane deposits around Lake Kivu, and develop a fishing industry around Lake Tanganyika. They also instructed the Secretariat to investigate ways of improving the transport system around the lakes in order to ease the enclavement of Burundi and Rwanda. 13. Disbursements of official loans and capital grants averaged US$21 million per annum during 1976-77, most of it coming from Belgium, IDA, the UN agencies, and the European Development Fund. In the 1973-77 period, total net foreign capital inflows amounted to about US$95 million, of which US$66 million was in the form of grants. On December 31, 1978, Burundi's external medium and long-term debt amounted to about US$55.6 million (excluding undisbursed amounts), of which IDA held 26 percent. Debt service averaged 3.7 percent of export earnings during 1976-77, with IDA receiving 18 percent of all debt service payments. Due to the large grant element in external  assistance, IDA will probably continue to hold an important proportion of Burundi's debt. Notwithstanding the low debt service ratio, Burundi is unable to absorb any borrowing on commercial terms, because of its poverty and the instability of its export earnings. External aid should therefore be on grant or very concessional terms and continue to include a substantial share of local cost financing. PART II - BANK GROUP OPERATIONS 14. Since IDA lending started in Burundi in 1966, ten Credits have been made totalling US$48.4 million. One Credit (US$1.1 million) helped improve water supply to Bujumbura; three Credits (US$13.0 million) were for agriculture (coffee production and fishing); three Credits (US$19.4 million, including an engineering credit of about US$400,000) helped start a highway maintenance and improvement program; a US$10.0 million Credit is supporting the improvement of primary education; a US$1.5 million Credit was made for a technical assistance project and the National Economic Development Bank received a Credit of US$3.4 million. Seven of these Credits (US$44.1 million) were made after 1973 since civil strife in the years before made lending difficult. The Second Coffee Project and the Fisheries project are being cofinanced by the Kuwait Fund (US$1.0 million) and the Abu Dhabi Fund (US$1.2 million). The Second Highway Project is cofinanced by the Arab Bank for Economic Development in Africa (BADEA) in an amount of US$6.0 million. Annex II contains a summary statement of IDA Credits and notes on the execution of projects and the status of disbursements as of March 31, 1979. 15. Project performance has been uneven, reflecting the lack of local management capacity and technical skills which is likely to remain a stumbling block for some time to come. This situation has particularly delayed the execution of the Fisheries and the Second Coffee projects although recently the implementation of both projects has improved. Disbursement of the Credit to the National Economic Development Bank has been lagging because of the general sluggishness of the industrial sector. Conversely, implementation of the Education project and the Second Highway project has been very satisfac- tory. Following a slow start - mainly because of recruitment difficulties - the first Technical Assistance Credit is now entirely committed. Nearly all key staff envisaged to be hired under the project are in post and several studies have been completed. 16. Future IDA operations in Burundi will continue to focus on improving agricultural productivity, transportation and education. In addition, lending will continue to include assistance in the field of project management and technical expertise. Documents concerning a proposed Second Technical Assis- tance project are being circulated to the Executive Directors. Preparation of an agricultural development project which would aim at improving the living standards of the rural population in one of the poorest areas of the country, is being completed and the project is expected to be appraised early next fiscal year. Further improvement of the road sector will be envisaged under a third highway project to facilitate the distribution of foodstuffs between  - 6 - surplus and deficit areas and reduce regional price differences. A second education project is being appraised to improve and expand technical education. An urban project is being prepared to help improve the living conditions of the urban poor in Bujumbura. We also intend to provide further assistance to the industrial sector by supporting the activities of the National Economic Development Bank. PART III - THE AGRICULTURAL SECTOR 17. General features and Constraints: Agriculture dominates Burundi's economy and employs about 90 percent of the total population (about 750,000 farm families). Burundi's agricultural economy is almost exclusively composed of smallholdings. Average farm size is about one hectare. Farming techniques are traditional and based on hand labor, using rudimentary equipment (hoes and machetes). Modern techniques are used only for the cultivation of cash crops. Extension services or provision of inputs for food crops are limited. Non- agricultural services in rural areas are poor; although progress is being made in extending the primary school system, education facilities are still inade- quate; health centers are limited in number and lack staff and equipment. The road network is relatively dense, but feeder roads are often impassable during the wet seasons. The rural population is scattered and there is virtually no public transport system. 18. Because of its varied topography and generally favorable climate, Burundi produces a wide range of crops. The distribution of rainfall between two wet seasons allows two harvests a year in most places. About 90 percent of cultivated land is under food crops, mostly beans and manioc. Maize and sweet potatoes are the other principal crops. The principal cash crop is coffee followed by tea and cotton though in much smaller quantities. Live- stock is also being kept, although overgrazing (there are about 760,000 cattle in Burundi) has led to serious soil and pasture deterioration. The traditional farming techniques, and inadequate extension services cause crop yields to be generally low. On most farms, no chemical fertilizers are used. Crop yields depend on leaving the fields fallow and on returning crop residues to the soil as manure. However, because of extensive deforestation in the search for more arable land, crop residues are increasingly used for cooking and heating purposes causing a loss of material for compost which in turn reduces crop yields even further. 19. Land Tenure. All land in Burundi belongs to the Government, and any unoccupied and unutilized land can be used by the Government for any purpose. In practice virtually all land (about 98%) is governed by a combination of traditional land law and modern regulations; about 1 to 2 percent of all land is formally registered, with modern title deeds. Tradi- tional land rights grant individual usufruct rights to continously cultivated land, while all pasture land is communally held. Cultivated land can be passed on to heirs and is occassionally sold within the rural community for cash. When the Government expropriates cultivated land, compensation must be paid; the Government can, however, take over other land, including pasture, without compensation to the local community.  20. Government Services. The Ministry of Agriculture Livestock and Rural Development is responsible for the direction and coordination of all activities in the agricultural sector. The Ministry also oversees all agri- cultural research and training activities and employs about 800 extension staff. The Institut des Sciences Agronomiques du Burundi (ISABU), a semi- autonomous agency under the Ministry of Agriculture, is responsible for agricultural research. Almost all of its professional staff are foreigners. ISABU's activities have focussed on the key cash crops and research on fores- try has been relatively limited. There is pressing need for research on food crop production and on Burundi's energy use and needs. Lack of manpower and equipment has been a severe constraint on research activities. 21. Government Strategy. The Government's agricultural development strategy to address the problems described in paragraphs 17-19 is presented in the Third Five Year Development Plan (1978-1982). Special attention is given to rural development projects and reforestation. About 22 percent of total investment is to be allocated directly to the agricultural sector and an additional 35 percent to related infrastructure such as rural housing, water supply, electricity and roads; the rural areas are thus expected to benefit from about 57 percent of total investment. The Government also intends to convene a Round Table Conference on Agriculture with foreign aid agencies to discuss the constraints Burundi is facing in agricultural development and to consider specific project proposals. IDA is assisting the Government in preparing the documentation for this Conference, which is expected to be held later in 1979. The Forestry Sub-Sector 22. General. Burundi's forest resources, including woodland savanna and tree plantations, amount to about 90,000 ha (about 3 percent of the country's total area). Areas of natural forest include the remnants of dense mountain tropical forest along the Zaire/Nile crestline (about 40,000 ha), small areas of savannah woodland (15-20,000 ha), and forest galleries along water courses and in steep gorges, making a total area of approximately 60,000 ha. It is estimated that there are also some 25,000 ha of forest plantations, mainly Eucalyptus, as well as roadside trees and small woodlots. 23. Wood Consumption and Future Needs. A high proportion of wood con- sumption is for fuel, especially in the rural areas. Poles are used exten- sively outside the towns for construction and repair of dwellings. Sawn timber, when available, is used for construction, furniture manufacture and boat-building. At present Burundi imports only very small quantities of wood and wood products. This is largely because costs of imported wood are very high and supply is not well-organized. Official statistics for the period 1976-1977 indicate that the total for all imports of wood and wood-derived products represented only about 0.3 percent of the value of all imports, while metal imports, which substitute for wood at a high cost in the modern construction sector, represented about 6 percent of the value of imports, paper and paper products about 2 percent, and petroleum products about 8 percent. Although future wood needs are difficult to estimate, it is  -8- expected that by the year 2000 the production of at least 50,000 ha of plant- ation would be required to satisfy3a demand for about 1.3 million tons of wood (equivalent to about 0.5 million m a year). It is certain that there will be a demand for wood far in excess of current supplies since demand is steadily increasing with the growth of population. 24. Prices and Marketing. Prices of wood and wood products vary widely. The most important wood commodity in terms of value is charcoal, which is the preferred source of fuel for most of Bujumbura's population. Charcoal prices, which a few years ago were US$2.78 equivalent for a 40 kg bag, had increased to US$5.56 equivalent by July 1978. Most of the limited trade in wood and wood derived products centers on the Bujumbura market. 25. Because forests and plantations are scattered and personnel is scarce, control of wood cutting and fee collection is almost impossible. Thus, firewood and poles for construction are usually cut directly by con- sumers in the rural areas without payment or permits. Because of the dif- ficulties of exercising effective controls and for fear of increasing illegal speculation, the Government hesitates to increase license fees. As a con- sequence, prices of wood and wood products do not reflect the economic value of wood. To attain a balanced use of Burundi's forestry resources, it is, therefore, essential that the Government define a comprehensive policy for the forestry sector (see para. 30). 26. Forestry Services. The Forestry Department is part of the Ministry of Agriculture, Livestock and Rural Development. Forestry services are organized at provincial and district level, with one "agronome forestier" per province and "assistants forestiers" in the districts, assisted by a varying number of lower level staff. The Forestry Department's recurrent budget used to be less than FBu 10 million (US$110,000) p.a., supplemented by a small development budget; the latter has recently been increased from FBu 10 million to 35 million. 27. Training. Effectiveness of forestry staff is seriously hampered by a lack of adequate training and supervision. Even today, Burundi does not have a single national trained forester. Existing forest department staff have only general training in agriculture, with no specialization in forestry, and their numbers are far from adequate. Training in existing agricultural institutions in Burundi devotes only a few hours to forestry. Thus the need for trained manpower, particular at higher and middle levels, is crucial and is to be met through training staff overseas and on-the-job training in Burundi (para. 39). 28. Energy Needs. Burundi's forest resources are dwindling rapidly. Both natural and man-made forests are being cut down faster than they are being replaced and production is far below the population's minimal require- ments for fuel wood and building timber. The urban population is directly affected by the wood shortage, as prices of charcoal increase rapidly and periodic shortages occur. The prognosis for the near future is a speedy aggravation of these problems compounded by increases in population and  -9- reductions in total forested areas. This is likely to lead to a severe energy crisis and, unless remedial action is taken rapidly, charcoal and wood would simply no longer be available. Some specialists have predicted the total disappearance of Burundi's forests in less than a decade. The poorest segments of the population would suffer most from the increasing prices and ultimate scarcity. The Government is aware of the gravity of the situation and has initiated a broad reforestation program. 29. In the meantime, however, wood supplies will remain inadequate requiring studies of the possible use of alternative energy sources. Peat was identified in large quantities in Burundi in 1959. Potentially, these peat deposits could provide an alternative source for private as well as industrial consumption. To promote the use of peat for household as well as industrial purposes (inter alia for the processing of nickel ore), the Government estab- lished in 1977 a national peat development agency (ONATOUR, Office National de la Tourbe) which is mining peat at several small valley bottom sites using manual labor. Current production is about 800 tons a year, although ONATOUR hopes to increase this rapidly to 5,000 tons a year. Peat is currently used by some bakeries, tea factories and schools, but has not yet been sold to the population on a large scale. With financial assistance from USAID and the Catholic Relief Services, the Government is initiating a pilot project to test and promote the acceptance of peat by the rural population. The use of peat for household purposes is meeting with some resistance because it implies basic changes in cooking habits. Farmers have been reluctant so far to use peat even when offered free of charge because of high smoke production. The Government is considering requesting Irish aid and expertise to study further development of the peat resources and to improve exploitation techniques. 30. Forestry Development. Forestry development in Burundi faces three major problems: (a) a scarcity of land; (b) a critical shortage of local forestry staff and (c) the lack of a coherent policy for forestry development and wood prices. A coherent forestry policy for Burundi should include, inter alia, appropriate measures to protect the natural forests for environmental purposes, more effective protection and control of plantations, a concerted effort to develop plantations to meet the needs of the urban and rural popu- lation for fuel wood and saw timber, a comprehensive pricing policy and an intensive staff training program. The Government has taken steps to address these demands. To create a greater awareness among the population of the impending fuel wood crisis and of the long-term damage to the ecology that may result from forestry destruction, the Government has proclaimed the year 1979 as "the Year of the Trees". The budget of the Department of Water and Forests has been increased over the last two years, although it is still too modest to meet the needs. Until 1976 new plantations rarely exceeded 250 ha p.a., but in 1977 they increased to 750 ha. In 1978 the target was 1,500 ha, of which 1,000 ha would be Government and 500 ha communal plantations. The proposed project is designed to assist in the development of a coherent forestry policy including pricing and marketing (paras. 45-47). 31. Among the foreign aid givers that are assisting the Government in its reforestation efforts, France has provided support for forestry trials, research and expertise and is financing a 500 ha project to protect the  - 10 - natural forest around the Zaire/Nile crest line. The European Development Fund (EDF) is financing a 3,200 ha forestry project in the Rusizi valley. A 2,000 ha pilot project is being studied by the national agricultural research institute (ISABU) to be followed by a 12,000 ha project expected to be co- financed by Belgium and the Saudi Fund for Development. Both projects would mainly aim at preventing soil erosion on hill tops. Small forestry components will be included in agricultural projects, which are currently being prepared in the Rumonge and the Kirimiro regions. USAID is also examining ways to assist in the forestry sector. Effective coordination among these various projects is important and will be ensured by the Government institutions concerned (para. 44). The Government has requested the Association to parti- cipate in this concerted effort to restore Burundi's forest resources. PART IV - THE PROJECT Background 32. The proposed project was identified in 1977 and was prepared by Burundi, with IDA assistance, during 1978. A staff appraisal report entitled "Burundi Forestry Project" dated May 8, 1979 is being circulated separately to the Executive directors. A map (IBRD 13869) showing the project areas is attached. Negotiations were held in Washington from April 16 to 20. The government delegation was headed by H.E. Donatien Bihute, Minister of Planning. Objectives and Description of the Project 33. The project, to be carried out over a period of five years, will be the first stage of a long-term program to develop basic forestry services and plantations supplying fuelwood, building poles and timber. its purpose is to redress the current and worsening shortage of wood resources in the country, to lessen reliance on wood imports, to increase forest acreage and to restore the ecological balance. It will assist the Government in devising comprehen- sive production and marketing policies for the subsector. If successful, the project could be replicated in other areas of the country. Specifically, the project will comprise: (a) Establishment of rural nurseries in 30 of Burundi's 79 com- munes to produce high quality Eucalyptus seedlings for commune plantations and for sale to individual farmers; (b) Development of 2,000 ha of Eucalyptus in the Mageyo area as a short rotation plantation to supply fuel wood and charcoal to Bujumbura; (c) Development of a pine plantation of about 5,000 ha in Vyanda, near Bururi, to produce saw timber; (d) Training of Barundi staff for forestry services, princi- pally through overseas courses at higher and intermediate levels;  - 11 - (e) Technical assistance for project management and on-the-job training for Barundi forestry staff; and (f) Studies and applied trials, notably a study of Burundi's energy use and needs, trials of more efficient charcoal production techniques, development of new designs for cooking stoves for the rural population and preparation of future forestry projects. Detailed Features 34. Project Area. Rural nurseries will be established in 30 communes, several of which have already been selected by the Government. By Ministerial decree of July 1978, the Government has designated land for the proposed Eucalyptus and Pine plantations. An area of 6,000 ha has been reserved out of which 2,000 ha will be utilized for the Eucalyptus plantation and an additional 29,000 ha has been reserved from which 5,000 ha will be selected for the Pine plantation. 35. Rural Nurseries. 30 rural nurseries will be established (i) to produce Eucalyptus seedlings to plant more than 5,000 ha and (ii) to strengthen forestry services through training by expatriate advisers and (iii) to provide advice to farmers on the planting and care of young trees. In view of the limited capacity of the forestry services, the establishment of the nurseries will be spread over three years at the rate of 10 communes each year. One of the objectives of the nurseries is to encourage the rural population to cultivate wood lots to supply their own domestic fuel needs and to support communal planting programs. At full production (about five years after project inception) each rural nursery is expected to produce about 100,000 seedlings (mostly Eucalyptus) per year of which about 40 percent will be planted by the communal administration and 60 percent will be sold to the public. Seed will be imported from neighboring countries to introduce new and better stock. Forest services at the provincial and communal level will be closely associated with the supervision of nursery operations and extension activities of nursery staff. Planting will be undertaken on communal land - at communal expense and for communal use - by the commune administration and by schools and missions. 36. Eucalyptus Plantation. A short-rotation Eucalyptus plantation of about 2000 ha will be established at Mageyo (east of Bujumbura) to supply pine wood, charcoal and building poles, principally for the population of Bujumbura. Plantation would be gradual, reaching 2000 ha during the project period. Infrastructure required includes upgrading of existing rural roads and establishment of forestry tracks, fire protection and buildings for plantation staff housing, offices, stores and workshops. The plantation would be exploited either by a parastatal company established for this purpose or by licensed private entrepreneurs. A decision on this matter will be taken by the end of the project period.  - 12 - 37. Pine Timber Plantation: A Pine plantation of about 5,000 ha would be established at Vyanda in the Bururi province to produce saw timber for use throughout Burundi. Ultimately, about 25,000 ha of pine are expected to be planted in the Bururi province to supply a future sawmill. To support the planting program, nurseries will be established producing over 2 million seedlings per year by the end of the project period. In addition, construc- tion of staff housing and offices, some road improvement and the establishment of forest tracts are included. The exploitation of the Vyanda Pine planta- tion would be undertaken by a parastatal company or by licensed private entre- preneurs; arrangements for these matters will be made when the capacity of the future saw mill is determined (in about 10 years from project inception). 38. Land Use and Tenure. Because of the scarcity of land and the necessity for Burundi to increase food crop production to meet the nutri- tional needs of the population, land which is suitable for cultivation will not be used for the project. Most land in the areas designated for planta- tion development is currently unutilized or used by the local population for extensive grazing of livestock. In designating land for plantation development the principal criterion was the selection of sites which were sparsely populated largely to avoid the need to expropriate farms and to avert possible friction with the local population. Expropriation might be required but only in exceptional circumstances and would be subject to the payment of an appropriate compensation (para. 19). The situation of land tenure and the impact of plantation developments on the local population will be carefully monitored during project supervision. The detailed plant- ing programs for the Eucalyptus and Pine plantations will be submitted to the Association for approval prior to initiating these programs (Section 3.06 of the draft Development Credit Agreement). 39. Technical Assistance and Training. Because of the lack of suitably qualified Barundi staff, a team of specialists will be hired to help implement the project. To strengthen the national forestry services at higher and middle levels, the Government has prepared a detailed training program with the assistance of UNDP and FAO based on the overall manpower requirements projected for the forestry sub-sector. Most training would be at specialized institutions in Africa and Europe. In addition, provision has been made for training visits to forestry projects in neighboring African countries. Exten- sion staff will be trained by the project management team during execution of the project. The Director-General of Agriculture will have the general responsibility for the execution of the training program, which will be discussed periodically with the Association, and will submit annual progress reports to the Association, (Section 3.04(b)(iii) of the draft Development Credit Agreement). 40. Studies and Trials. Several studies and trials will be carried out under the project, some of which will be more specifically defined during proj- ect execution. The Ministry of Planning is considering a study of Burundi's projected energy needs until the year 2000, which will be prepared and moni- tored with the assistance of IDA. A study would be carried out to develop new designs for cooking stoves for use by the rural population. The project also includes studies for the preparation of future forestry projects. The  - 13 - terms of reference will be subject to IDA approval before the start of each study (Section 3.02 of the draft Development Credit Agreement). Trials will be undertaken to improve charcoal production methods for which a few kilns (a heated enclosure made of steel cylinders) of advanced design will be imported. With this design charcoal can be produced five times faster with half as much wood as with the method currently used in Burundi. It is already widely used in Uganda and Kenya and other African countries. A consultant will be hired to train local operators and supervisors in the use of the kilns with the expectation that by the end of the project period, a private enterprise will be interested in taking over the operation on a wider scale. Project Implementation 41. The Department of Waters and Forests of the Ministry of Agriculture will have the principal responsibility for the implementation of the project's forestry development components including the rural nurseries. A project management unit will be established including a Project Manager and two silvi- culturists who will be expatriates, and a Deputy Project Manager, three deputy silviculturists and an accountant who will be nationals. The expatriate silvilculturists will be responsible for the rural nurseries and the planta- tions. The employment of the expatriates will be under terms of reference and in accordance with qualifications which will be approved by the Association. The Government will ensure that competent support staff in sufficient numbers will be assigned to the project unit (Section 3.01 c) of the draft Development Credit Agreement). The appointment of the Project Manager, the Deputy Project Manager, the two expatriate silviculturists and the accountant is a condition of credit effectiveness (Section 6.01 d) of the draft Development Credit Agreement). 42. The Government will establish a revolving fund with an initial deposit of US$200,000 equivalent to be managed by the Project Manager under the direct control of the Director of Water and Forests and to be replenished quarterly by the Government, so that sufficient funds will be at hand throughout the implementation of the project. The establishment of this revolving fund is a condition of credit effectiveness (Sections 3.01(b) and 6.01(c) of the draft Development Credit Agreement). 43. The Department of Water and Forests will prepare semi-annual and annual reports during project implementation which would include a review of the rural nurseries in operation and their annual production and sales; progress with the Eucalyptus and Pine plantations, the construction of feeder roads and tracks and other infrastructure, and the impact of the planting program on the local population, specifically the impact on livestock keeping in project areas. Not later than six months after the closing date of the Credit, the Government will prepare a completion report evaluating the proj- ect's operations and benefits (Section 3.04 of the draft Development Credit Agreement). 44. Since the proposed project will be part of an overall reforestation program, the Government recognizes the importance of close coordination of the various forestry projects which will be undertaken with foreign aid. The  - 14 - Director of Water and Forests has been made responsible for project coordi- nation in cooperation with the Ministries of Planning and Finance and will ensure that overall project implementation will proceed smoothly and that difficulties of technical nature, staffing and extension requirements will be resolved satisfactorily. Prices and Marketing 45. As stated above (para. 30) the Government has not yet established a policy for pricing and marketing of forestry products. However, the Govern- ment recognizes the need for a comprehensive pricing and marketing policy and has agreed that fees for forest exploitation should gradually be increased to a level reflecting the economic value of wood. The Government has also accepted the principle that charges for all forest products regulated by the Government should reflect the costs of production and will introduce by December 31, 1980 a system of charges adequate to cover gradually the full production costs (Section 4.03(ii) of the draft Development Credit Agreement). To assist the Government in developing a realistic price system, the project provides that the Government will regularly consult with the Association on general pricing and marketing policies affecting the forestry subsector (Section 4.04(a) of the draft Development Credit Agreement). 46. It is intended to recover the production costs of the nurseries through the sale of seedlings to farmers. Although introduction of charges to farmers should be cautious as farmers are not accustomed to pay for many inputs and services and might resist payments for seedlings in cash, the Government will use its best efforts to sell seedlings produced by the nurseries at prices adequate to recover their full production costs (excluding only expatriate management costs). The annual production costs of the 30 nurseries at full development (about four years after project inception) is estimated at about US$110,000 equivalent. It is expected that at full develop- ment charges for seedlings would yield about US$80,000 per year. The Govern- ment will consult periodically with the Association on prices charged for seedlings and the adequacy of incentives to farmers to plant trees (Section 4.03(i) of the draft Development Credit Agreement). Forest department nurseries have operated for several years in many parts of the country, and have never encountered any difficulty in distributing all available seedlings. However, there has been to date no significant experience with the sale of seedlings, although farmers are gradually getting more willing to pay for some services provided by the Government, for instance with respect to veterinary and medical services. If farmers prove unwilling to pay cash for seedlings, and if no coherent cost recovery policy were introduced for other inputs, the level of payment required for seedlings would be reviewed. Alternative solutions might involve a reduced charge for seedlings, or distribution of seedlings in conjunction with communal labor schemes. 47. The Government will also ensure that the stumpage rates (the value of standing timber) charged for wood produced by the plantations will be sufficient to recover the full investment, operation and maintenance cost of the plantations (Section 4.04 (b) of the draft Development Credit Agreement). The market for Eucalyptus plantation production is virtually guaranteed since  - 15 - it will be producing fuel wood for Bujumbura in quantities which are relatively small in comparison to demand. The theoretical stumpage rate which would 3 cover the production costs (based on mid 1979 prices) is istimated at FB 800/m (about US$9) and would translate into a price of FB 550/m (US$6) for a 40 k