Report No. 2422-CRB i ,w Current Economic Position and Prospects of Dominica April 18, 1979 RETURN TO LA, & C, Latin America and the Caribbean Regional Office FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties, Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit: East Caribbean Dollar Since its creation in 1965, the East Caribbean dollar was tied to sterling at the rate E 1.00 = EC$4.8. In July 1976 the link with sterling was broken and the East Caribbean dollar was aligned with the US dollar at the rate US$1.00 = EC$2.70. Since July 1976: EC$1.00 = US$0.370 or US$1.00 = EC$2.7no FOR OFFICIAL USE ONLY This report is based on the work of an economic mission to Dominica during October 16 - October 27, 1978. The mission was coordinated by Murray Ross (IBRD - Consultant Senior Economist) and consisted of: Peter Davies, Chief of Mission (IBRD); Christine Fallert, Economist (IBRD); Samuel Olayinka, National Accounts Specialist (IBRD); Jenaro Simpson, Economist (IMF); Ralph Melville, Agriculturalist (UNDP); Nathan Koenig, Agricultural Economist (UNDP); Charles Johnson, Agriculturalist (UNDP); Clarence Dunn, Agricultural Economist (UNDP); Anthony Edwards, Industrial Economist (UNDP); Amadeo Francis, Industrial Promotion Specialist (UNDP); Jane Harris Ghramm, Transport Economist (UNDP); Hendrik van Helden, Transport Engineer (UNDP); Peter Kendell, Tourism Specialist (UNDP); and Eduardo Baranano, Architect-Physical Planner (UNDP). I 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. TABLE OF CONTENTS Page No. MAP COUNTRY DATA SUMMARY AND CONCLUSIONS ...... ....................... i-viii I. ECONOMIC BACKGROUND ...... .......................... . 1 A. Resource Endowments .* ............. . ............. . 1 B. Developments Prior to 1972 .................. ...1 C. Economic Developments 1972-1977 .............. .. I D. Events in 1978 . .......... 8 II. DEVELOPMENT ISSUES AND STRATEGY .................. ... 10 A. Introduction ................................... 10 B. Agriculture .................. 10 C. Industry ....................................... 19 D. Tourism ........................................ 24 E. Transportation ................................. 27 F. Economic and Social Infrastructure ............. 32 III. THE PUBLIC SECTOR INVESTMENT PROGRAM 1978/79-1983/84 41 IV. ECONOMIC PROSPECTS 1979-83 . . .45 A. General ....45 B. Output and Expenditure . .45 C. Public Sector Investment and Its Financing 46 D. Balance of Payments ..50 E. Conclusion ..51 GOVERNMENT'S PROJECT LIST STATISTICAL APPENDIX - - ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~ - ! 9 R .' os f t ' a h! % WK 2 'K ,,. XK ,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~!1 '''K0 Page 1 of 2 pages COUNTRY DATA - DOMINICA AREA 2 POPULATION DENSITY 750 km 76,700 (mid-1977) 102 per Ik2 Rate of Growth: 1.2% (from 1970 to 1977) 350 per k2 of arable land POPULATION CHARACTERISTICS (1977) HEALTH (1977) Crude Birth Rate (per 1,000) 22.3 Population per physician 4560 Crude Death Rate (per 1,000) 6.7 Population per hospital bed 230 Infant Mortality (per 1,000 live births) 24.1 INCOME DISTRIBUTION DISTRIBUTION OF LAND OWNERShIP % of national income, highst quintile .. % owned by top 107 of owners lowest quintile .. % owned by smallest 10% of owners ACCESS TO PIPED WATER ACCESS TO ELECTRiCITY % of population - urban 87.0 % of population - urban - rural (grams per day) 56.9 - rural NIUTRITION (1977) EDUCATION Calorie intake as % of requirements Adult literacy rate 7. Per capita protein intake Primary school enrollment % 1/ GNP PER CAPITA in 1977 US $410 GROSS NATIONAL PRODUCT IN 1977 ANNUAL RATE OF GROWTH (7.. coistant prices) US $ Mln. % 1972-76 1977 GNP at Market Pr'ses 33.0 100.0 -4.3 0.4 Gross Domestic investment 7.1 21.5 Gross National Saving 1.9 5.8 Current Account Balance -5.2 15.8 Exports of Goods, NFS 14.9 45.2 0.4 Imports of Goods, NFS 21.9 66.4 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1977 Value Added Labor Force 2/ 1 A. Per Worker US $MIn, % '000 % iS $ % Agriculture 12.3 36.6 8.0 36.3 1532 100.9 Industry 3.5 10.6 2.3 10.5 1530 100.7 Services 17.7 52.8 11.7 53.2 1505 99.1 Unallocated - Total/Average 33.5 100.0 22.0 100.0 1519 100.0 GOVERNMENT FINANCE Consolidated Public Sector Central Government ( EC$ Mln.) 7. of GDP (EC$ Mln.) % of GDP 1977 1977 1977/78 1977/78 Current Receipts 31.9 35.2 Current Expenditure -5.2 38.9 Current Surplus -3.4 3.8 -3.3 3.6 Capital Expenditures 13.7 15.2 8.2 9.1 External Assistance (net) 17.7 19.6 15.3 16.9 1/ The Per Capita GNP estimate is at 1977 market prices, calculated by the same conversion technique as the 1978 World Atlas. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered. 2/ Total labor force; unemployed are allocated to sector of their normal occupation. "Unallocated" consists mainly of unemployed workers seeking their first job. not available not applicable Page 2 of 2 pages COUNTRY DATA - 90MICA MONEY, CREDIT and PRICES 1972 UN_ 1974 1975 jQ76 19'7 (Million EC$ outstandinri end period) Money and Quasi Money 31.4 29.5 32.5 37.1 s-0.5 44. Bank Credit to Public Sector 4.4 4.1 5.7 4. 6.7 6.0 Bank Credit to Private Sector 27.6 32.9 33.3 36.9 36.7 43.8 (Percentages or Index Numbers) Money and Quasi Money as % of GDP 69.3 60.0 57.1 61.2 55.9 48.8 General Price Index (1964 - 100) 145.2 180.0 235.4 269.0 291.0 315.8 Annual percentage changes in: General Priut~ Index 5.8 24.0 30.8 14.3 8.2 8.5 Bank credit to Public Sector - -6.8 39.0 -26.3 49.4 -10.4 Bank credit to Private Sector * 19.2 3.1 10.8 -O.5 19.3 BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1975-7' 1975 1976 197 7 US $ Mln % (Millions US $) Bananas 6.7 58.3 Exports of Goods, NFS 14.1 13.9 14.9 Coconut Products 1.5 13.0 Imports of Goods, NFS ~ 207 19.1 21.9 Citrus Products 1.7 14.8 Resource Gap (deficit = ) -6.6 -5.2 -7.0 All other commodities I 1X,0 Total 11.5 10O0 Factor Payments (net) -0.6 -0.6 -0.6 Net Transfers 1.9 2.1 2.4 EXTERNAL DEBT, DECEMBER 31, 1977 Balance on Current Account -5.3 -3.7 -5.2 US $ Mln Net MLT Borrowing 3.5 2.0 2.7 Public Debt, incl. guaranteed 9.7 Disbursement 3.5 2.8 2.7 Non-Guaranteed Private Debt Amortizationi - 0.8 - Total outstanding & Disbursed Capital Grants 3.2 0.9 2.2 DEBT SERVICE RATIO for 1977 Other Capital (net) -1.3 0.1 0.1 Increase in Reserves (+) 0.1 -0.7 -0.2 Public Debt, incl. guaranteed 4.2 Non-Guaranteed Private Debt Total outstanding & Disbursed RATE OF EXCHANGE IBRD/IDA LENDING, (Million Us5): IBBI) IDA Outstanding & Disbursed Undisbursed Since May 1976 Cutstanding incl. Undisbursed US $ 1.00 = EC$2.70 1.00 = US $0.37 1/ Ratio of Debt Service to Exports of Goods and Non-Factor Services. not available not applicable SUMMARY AND CONCLUSIONS Background i. Dominica is one of the poorest of the Caribbean islands with a GNP per capita in 1977 of US$430 and a population of about 77,000. The country is rugged, mountainous, heavily forested and well watered with spectacular scenery but a lack of both minerals and white sand beaches. ii. The economic performance between 1972 and 1977 was poor, real GDP in 1977 being some 16% less than that in 1972, although positive growth was achieved in 1976 and 1977 after severe contractions in all sectors through 1975. In 1978 the economy progressed strongly with real GDP growing at an estimated 5%, primarily as a result of the best banana crop since 1970. Investment, particularly in the private sector, has remained sluggish. iii. The poor economic performance between 1972 and 1977 resulted in a deterioration in the public finances. Faced with declining economic activity, proportionately higher costs of public administration, and high levels of taxation, combined with a reluctance on the part of the United Kingdom to provide budgetary assistance except in emergency situations, the Government consistently had to struggle to provide even the minimum level of services. The result has been that expenditures upon such items as maintenance (especially of roads) and payments into sinking funds have been neglected. The fiscal position has deteriorated steadily and by the end of 1977, aggravated by a substantial award of back pay, it is estimated that payment arrears on contractual budgetary obligations of EC$3.5 million had accrued (11% of 1977/78 current revenue), and only timely budgetary assist- ance from the UK permitted salaries to be met each month. Central Government current revenues were unable to maintain their share of GDP despite various tax measures, while expenditures kept rising because of increases in wages and salaries. Although the rest of the public sector has managed to produce a growing surplus, positive public sector savings, even after inclusion of budgetary assistance, were only achieved in one year. Development Strategy and Issues iv. The economy is experiencing serious and widespread economic and financial problems. The physical capital is decaying, output and exports of many products are not only below their potential but also below the levels attained a decade ago, the public finances are in severe disequilibrium, unemployment is causing serious economic hardships and the social conditions, particularly housing, water and sewerage, are much worse than those in the rest of the region. All these problems have to be tackled but there is no simple solution. The first priority has to be stopping the decay--in agriculture, infrastructure and the social sectors--and putting the public finances on a viable footing. Only once this has been done can an expanded productive base be created for the economy and only then will the capacity emerge for even the partial solution of the social problems. - ii - v. The major constraint in placing the economy on a viable path will be the lack of technical, managerial and skilled manpower. There is a dearth of suitably trained and experienced people to implement the public investment program, to achieve sound economic and financial management and to restimulate the private sector. The accession to independence will hopefully encourage some Dominicans to return to their country but this is unlikely to solve all the problems since the best trained human resources apparently still tend to emigrate. The country will thus have to rely on the international community for large amounts of technical assistance if it is to make any progress in overcoming its serious economic and financial difficulties. Moreover, a fundamental rationalization of the institutional structure and policies will be essential if the country's development potential is to be realized. Agriculture vi. Agriculture is the hub of Dominica's economy. Arable land is not in short supply, attractive opportunities exist for increasing agricultural output and growth of the sector can take place both extensively and inten- sively. For the potential to be fully realized, additional areas of Crown Lands will need to be opened up and colonized, support services will have to be greatly strengthened and additional investments in feeder roads will be required. The recent outbreak of leaf spot disease poses a serious problem. It is proposed that projects be undertaken to rehabilitate bananas, coconuts, limes and other citrus crops, to expand production of coconuts and to introduce schemes for corn, pineapple, sugarcane, coffee and other tree crops, possibly including tea. There is considerable potential for the development of the forest resources; the livestock industry possesses good prospects for expan- sion and the fishing industry may justify development but a full survey of fishing resources will be required. If the ensuing recommendations are followed and the public sector investment program is implemented, by 1983 a base will have been provided for high output growth in the following years. vii. The successful development of the agricultural sector requires that: i) The Government immediately implement policies concerning land tenure, the breakup of estates and opening up of Crown hands. A number of resettlement projects should be undertaken by Government. However, where concessional external resources are not available for purchase of estate lands, such projects should be concentrated on crown hands so as to avoid financial cost to Government. Such schemes should utilize a "controlled-feed hold" system of tenure. When existing estates are broken up, priority for purchase should be given to existing managers and workers and a caretaker system should be established by the Banana Growers Association in order to try to maintain output; ii) The Agricultural Extension Service be expanded and restructured in order to service effectively the shift from plantation to small farmer agriculture; iii) The Agricultural and Industrial Development Bank be upgraded and a general expansion of agricultural credit be instituted. The Extension Service should also focus the attention of farmers on the availability of credit; - iii - iv) The operations and financial position of the Dominica Marketing Board should be reviewed with the specific intention of making it an effec- tive agency while ensuring that its marketing operations cease to be a burden on the public finances. Industry viii. Industry is still in its infancy and its further development is severely constrained by the very small market size. The range of import- substituting industries which can viably be established is small, and industrialization will have to be based primarily on production for export. Industrial development has been deterred by the Government's inability to translate effectively into action the key role it gives to industry and by the low level of confidence of the private sector. The development of agri- cultural processing industry is constrained by a lack of raw materials as the agricultural sector is poorly geared to supplying large scale industry's needs. The natural resource base is only suitable for a limited number of industrial ventures, such as forestry and coconut products; the potential lies more with the pool of low cost labor. The Government itself lacks the capability to establish industries based upon the pool of low cost labor and will thus have to depend upon private sector initiatives. However, at the present time the environment is unlikely to attract private risk capital. To improve the investment climate it is imperative that the Government gain the confidence of both the local private sector and potential foreign investors, effectively promote Dominica's investment potential and expedite the industrial estate and factory shell construction program. Tourism ix. Tourism to date has been of minor importance to the economy. A potential, however, exists for the development of a relatively small tourist industry based primarily upon the scenic mountainous interior of the island. This requires a government policy emphasizing forests rather than beaches although a limited potential may exist for "split-package" holidays. Large- scale tourism is necessarily precluded by its lack of white sand beaches and the problem of air access. New marketing arrangements will be necessary if the full tourist potential is to be realized. Economic Infrastructure x. Domestic transport communications are unsatisfactory. Road condi- tions have sadly deteriorated over the last decade to the point where certain sections are almost impassable by conventional means of transport. The cause of this has been Government's neglect of even the minimum levels of mainte- nance mainly as a result of the lack of current budgetary funds. An improve- ment of the road system is urgently required; without such, the nation's capital stock will further deteriorate, maintenance costs and requirements will increase and roads may become impassable. As a first step it is recom- mended that a comprehensive road rehabilitation and maintenance program be prepared. External transport communications are generally satisfactory for - iv - present and projected traffic. While expanded port facilities and an enlarged airport could generate some additional traffic, the increase would be insufficient to justify the very large investments reqjuired. Government, however, still considers their provision a priority. No expansion of elec- tricity generating capacity is necessary over the covmi.gD five years but investments are necessary to increase the efficiency ar,nd coverage of the system. However, such investment appear only justified provided the electri- city tariffs are raised and the Dominica Electrical Service is made credit- worthy. Social Infrastructure xi. Despite the very large needs for improvemenlt in th-le social condi- tions, at best only a reasonable start can be made in the next five years. Housing construction has slumped in recent years essential1y because most sections of the community have been unable to afford to service the requisite mortgage payments. In order to make housing affordable to the bulk of the population it will be necessary to make greater use of prefabrication, bulk importation of building materials, reduced size and design scandards and self help schemes. Despite the ample potential supplies of water, the developed sources of potable water are inadequate for present and future requirements. The existing lack of water treatment poses a serious health hazard. While investments in water supply can be justified the Central Water Authority needs to improve its present shaky financial position as a prerequisite to the receipt of further external financial assistance. xii. The education system in Dominica is constrained by the lack of recurrent financing, the shortage of trained teachers and the absence of a practical orientation to the curriculum. A study needs to be made of other countries' experiences with the development of school gardens and other low cost teaching methods which relate academic desciplines to an agricultural economy. Investments in the sector should concentrate on preventing the physical deterioration of existing schools. There is also a need for more part-time courses to upgrade semi-skilled workers who are already employed and to expand the number of fellowships available ior overseas diplomas and degree level training in agriculture. The health sector faces similar constraints. The proposed investment program is unlikely to lead to any real improvement in services but rather maintain the existing level. Public Sector Investment Program xiii. The public sector investment program for 1978/79-1983/84 consists of projects which are ongoing, projects in the pipeline for which external assis- tance has been requested, and projects for which no donor has yet been identi- fied or approached. Taken together, the projects to be implemented during the five-year period aim at promoting the viability of the economy beyond the medium term. The projects in the several sectors are not all supported by complete technical, economic and financial feasibility studies. The estimates of total public sector investment are made, therefore, subject to ttui-2 completion of these studies and on the assumption that they will confirrm: tie feasibility of these projects. A first objective of the program is to .Ialt and reverse the deterioration of the nation's capital stock. A secornd obtective is to v undertake a phased reduction in infrastructural investment and to establish a basis for diversified growth by increasing emphasis on directly productive projects, particularly in agriculture. In the productive sectors, the invest- ment program releases the economy's potential for growth, most of which will materialize after the period, however. In the social sectors, projects are included which will maintain the level of social services and expand vital infrastructure, particularly as related to water supply and housing. The recurrent cost implications of the proposed projects will be relatively minor because they focus on improvements in existing infrastructures and services, and the public enterprises are expected to be self-financing. xiv. The proposed public sector investment program calls for total expenditures averaging 24% of GDP. Over half of the expenditures will be made in the directly productive sectors of agriculture, industry, and tourism and about 20% each in transportation and in social investments. The ability of the public sector to carry out the proposed investment program is a matter of concern, even though implementation of the major ongoing projects has proceeded without serious problems or delays. As only about a third of the proposed public sector investment program comprises ongoing projects additional technical assistance will be imperative if implementation of the overall program is to be carried out efficiently and according to sche- dule. Preparation of the proposed projects is likely to pose the major bottleneck, however, as many of them are still at the concept state. Feasibility and design studies will be required with external financial and technical assistance for most of the projects. Economic Prospects xv. Although the economy has exhibited a fairly strong growth perform- ance during 1976-78, real GDP remains below the level achieved in 1972. The country possesses the physical resource endowment to substantially increase output but its ability to do so over the medium term is strongly limited by the deteriorating state of the economy's capital stock, the long gestation period required by the investments in which it has a comparative advantage, and the general lack of confidence of investors. This situation is further aggravated by the critical position of the public finances which will require austere measures if they are to be placed upon a viable basis. Nevertheless, if the recommended policies are adopted and the public sector investment program is implemented timely real per capita growth of 2-1/2% per annum on average could be attained between 1979 and 1983 and the economy could be in a strong position to attain higher growth rates during the latter half of the 1980s. All this is predicated, however on the establishment of an appro- priate institutional structure and maintenance of sound economic management. xvi. The prospects for medium term growth rely predominately on the performance of the agricultural sector, It is unlikely, however, that the recent growth performance of this sector can be sustained primarily because of the recent outbreak of leaf spot disease. Overall both agricultural pro- duction and GDP are projected to attain an annual average real rate of growth - vi - of 3% through 1983. The prevailing low level of confidence is expected to limit the average annual level of private investment to about 8% of GDP throughout 1979-83 but public sector investment is expected to compensate partially for the limited performance of the private sector, and as a result total investment should average 28% of GDP. This relatively high level of investment however is unlikely to have a direct and immediate impact upon output and incomes but will instead halt the deterioration in the nat on's capital stock and build up the long run productive capacity of the economy. Private consumption is likely to achieve a small real increase on the average over the period. Private savings will be required to remain fairly constant at the historical level of about 10% of GDP while the public sector reverses its position from being a net dissaver to one where, by 1983, public sector savings reach 3% of GDP. xvii. The labor force is projected to grow at 2% per annum through 1983. As a result, 4,000 new entrants will be seeking jobs during the perioc. in addition to the approximately 5,000 already estimated as unemployed. Although the public sector investment program is geared more to attainment of long-term viability of the economy than strictly to employment generation, the Emphasis on productive agriculture in particular should generate a number of lcing-term job opportunities. Private sector investment is expected to remain sL.bdued. Overall, although the unemployment rate is unlikely to decline substartially by 1983, the number of jobs created during the period should absorb the new entrants to the labor force. xviii. The public sector finances have been experiencing serious difficul- ties with continuing current deficits financed by external budgetary assist- ance and borrowing from the domestic banking system. As the UK has indicated that it intends to phase out budgetary assistance and as the domestic finan- cial system has the capacity to provide only very limited increases in credit to the Government, Dominica faces the monumental task of eliminating the cur- rent budgetary deficit and producing public sector savings large enough to service maturing debts and make a meaningful contribution to its investment program. This can only be achieved by adequate policy measures backed up by the establishment of an appropriate institutional structure and the intro- duction and maintenance of sound economic management. xix. In order to finance the public sector investment program public sector savings of EC$19.9 million will be required in total between 1979/80 and 1983/84. If the targeted levels of public sector savings, which increase from 1.3% of GDP in 1979/80 to over 3% in 1983/84, are to materialize the Government will be required to implement a program containing the foll3wing or equivalent measures: (1) Current expenditures need to be kept under exceptionally strict control. The wage bill will have to be almost frozen at the current level with no additional wage settlements and virtually no net additions to the number employed during the period. Expenditures on goods and services need to remain constant in real terms. Such a program will require substan- tially stricter budgetary control and financial management than has been practiced in recent years. - vii - (2) A major package of revenue measures totalling EC$2.4 million (2.4% of GDP) needs to be introduced during 1979/80, rising to EC$3.8 million (3% of GDP) by 1981/82, to compensate for the phasing out of budgetary assistance and the inelasticity of the present tax system. It is recommended that the agricultural income tax be reinstated promptly. Further measures totaling EC$1.8 million rising to EC$3.2 million by 1981/82 are required. It is recommended that as a matter of the highest priority a fiscal expert be provided under technical assistance to examine the existing tax system in detail. The report should indicate the necessary measures paying particular attention to the anomalies, inconsistencies, and inequities of the present tax system and recommend any further assistance that will be necessary to implement the measures. (3) The state enterprises will have to raise tariffs and imple- ment other policies to generate a surplus of ES$1.1 million in 1979/80 rising to EC$1.3 million in 1981/82. xx. The financing projections are based on the assumption that external sources of finance will continue to cover a large, but declining proportion of the investment program falling from 96% of the public investment program in 1979/80 to 76% in 1983/84. This implies gross external disbursements of EC$129.4 milliion (US$48 million) over five years. Of this amount 22% has already been committed to specific projects. Of the remaining EC$100.6 million (US$37 million) the United Kingdom has already pledged E 10 million, EC$54 million, as part of a Special Independence Package. The balance of EC$46.6 million (US$17 million) remains to be arranged. The domestic finan- cial system is likely to be in a position to provide only limited domestic financing of the public sector. However if the targetted levels of public sector savings are attained the program can be adequately financed with the local counterpart contribution increasing from 4% of the program in 1979/80 to 10% in 1983/84. xxi. The continuing level of public investment which has a high foreign exchange component together with the elimination of external budgetary assistance is expected to keep the current account of the balance of payments in deficit at levels only slightly lower than has been the case in recent years. However, if the inflow of public capital continues on highly conces- sional terms, it may be expected to cover the current account deficit without creating a debt service problem in the foreseeable future. Debt service is expected to peak in 1982 when it is projected at 8% of foreign exchange earnings, as against 5% in 1978. However, the high degree of concessionality and long term structure of the external debt should render it manageable over the foreseeable future. xxii. If the recommendations proposed above are carried out and the public investment program is implemented efficiently the economy will have made substantial progress over the period 1979-1983. The physical decline of the economy will have been halted, an expanded productive base will have - viii - been created which will be capable of yielding returns in the following five years and the public finances will have been placed on a viable footing. Such an achievement, however, will take a major effort, require appropriate policies, basic institutional changes and sound economic management. Without such efforts the economy may be expected to continue its downhill slide, with per capita GDP further declining below the current relatively low level of US$430. xxiii. The foregoing analysis of Dominica's problems and prospects high- lights the serious difficulties that confront the economy in its development. Although the report indicates how some of the problems may be resolved, it is clear that the road to viability is long and difficult, and its successful navigation is predicated upon Dominica's becoming a part of a larger economic unit. The analysis has pointed out the pressing need for a number of services which Dominica is unable to provide and operate in isolation. These include among others, an efficient agricultural extension service, overseas representa- tion including industrial and tourist promotion and provision of a variety of specialized technical and administration services. It is clear that economies of scale exist in the provision of such services. Dominica, for example, could potentially benefit to the same extent from the establishment of a regional investment promotion office abroad as from a unilateral office. However, the shared costs of such an office would be substantially less. It is also probable that the full costs of such an office would be prohibitive. Similarly, the hiring of a technical expert, such as a specialized ports engineer, a citrus agronomist or bank auditor, may not be justifiable for work in just Dominica but if work were to cover a number of islands, the expert could be fully employed and the cost of his services reduced to each island. Furthemore, the existence of such broader employment opportunities would provide a new incentive and challenge for trained nationals of the region, and is likely to encourage many to either remain in or return to their home countries. If the government does not join in such proposed common services, it will forego the substantial economic benefits that can be achieved and, as a result, the attainment of viability will be postponed. If such services are attempted to be provided on a unilateral basis, the resulting financial burden would be unbearable. I. ECONOMIC BACKGROUND A. Resource Endowments 1. Dominica, the largest island in the Windward Group, is located between the French islands of Guadeloupe to the North, and Martinique to the South. It is 29 miles long, 16 miles wide and has a total land area of 289.5 square miles. The population is estimated at about 77,000. The country is rugged, mountainous, heavily forested and well watered with an average rainfall of 100 inches a year which reaches up to 300 inches in some areas of the interior. The island is crisscrossed by over 300 rivers, most of which are non navigable but which do provide a source of hydro-power. There is a conspicuous absence of metallic minerals although pumice is mined and exported. The island's volcanic origin has lead to a dearth of white sand beaches but provides spectacular scenery together with a number of natural hot springs and geysers. B. Developments Prior to 1972 2. Real average annual GDP growth of 3.5% concurrent with population growth of 1.6% reflected the good economic progress made during the 1960s. Banana exports grew steadily, reaching their highest level in 1969--54,900 tons (nearly twice the 1960 level). The economy was slowly diversifying, a coconut processing factory was established and an embryonic tourist sector was expanding by 20% each year. The brisk economic activity reflected itself in high levels of construction activity and a decline in the rate of unemploy- ment to about 8%. But this performance peaked with the turn of the decade. By 1972 the basic fragility of the economy became visible. Banana output had begun a steady decline and exports were already less than two-thirds of the 1969 volume. As grant-in-aid for the recurrent budget was reduced, the structural weaknesses in the public finances became apparent. Meanwhile, the domestic agricultural sector was unable to satisfy consumption requirements and food imports began to rise rapidly. The country's economy was thus at a low point as the repercursions of the oil crisis began to emerge on the horizon. C. Economic Developments 1972-1977 Output and Expenditure 3. The economy is dominated by agriculture and services which together contributed almost 90% of GDP in 1977; agriculture comprised 37% of GDP and services 53% (of which Government was 26%). Manufacturing and construction both play only minor roles with shares of 4% and 5% respectively. The economy is very open and its susceptibility to external fluctuations is exacerbated by its reliance on one major export crop, bananas. Trade comprised 108% of GDP in 1977 with imports alone totaling 66%. 4. The economy contracted severely between 1972 and 1975 and only partially recovered in 1976 and 1977. Real GDP in 1977 was still 16% less than that of 1972, an average fall of over 3% a year. All sectors of the economy were involved in the contraction, agriculture declined with thle fall in banana production despite some diversification into citrus; several industrial enterprises closed; and the previously expanding tourism sector was partially hit by the world recession and unfavorable publicity. In 1976 the trend was reversed and real GDP grew by over 7%. Agricultural prcduction grew by nearly 11% as banana production recovered and farmers diversified into traditional foodcrops such as tannia and dasheen and industrial cutput increased with an expansion of the production of soap. In 1977 real growth declined to 0.5%. Agricultural growth was held to 3% as further increases in the output of traditional vegetables and fruits were conterbalanced by a decline in banana output caused by poor rainfall. Industrial output expanded only marginally and construction contracted. 5. Estimates of expenditure on GDP indicate that consumption averaged 97.5% of GDP between 1975-77 with gross domestic investment and the resource gap averaging 24% and 21%, respectively. Domestic savings averaged only 2.5% of GDP with investment being predominantly financed externally by official development assistance. Consumption expenditures increased strongly in both 1976 and 1977 in the wake of increasing smallholder agricultural incomes in both years and the payment of back pay by Government in 1977. Private consumption increased from EC$43.3m in 1975 to EC$65.4m in 1977, an average increase of 23%; the consumer price index increased by an average of only 10% over the comparable period implying a substantial increase in real terms. Public consumption meanwhile increased from EC$15.7m to EC$26.7 million, of which EC$5.9 million represented bak pay paid in 1977. Invest- ment, particularly in the private sector, remained sluggish with few rew investments being made; the public sector was the country's major investor undertaking 62% of investment during the 1975-77 period. 1/ Trade and Balance of Payments 6. Dominica's small size and fairly narrow resource base dictate that the external sector must be of great importance to the economy. [n 1977 imports and exports of goods and non-factor services were equivalent to 66% and 42% of GDP respectively; these magnitudes have remained fairly constant since 1972 with export earnings reaching a maximum of 51% and imports -74% in 1975. The heavy dependence on external sources of supply and on one major export crop (bananas were nearly 60% of domestic exports in 1977) makes the economy highly susceptible to external fluctuations and other vagaries such as the weather. Throughout the period 1972-77 the current account of the balance of payments has remained in serious imbalance, the deficit being predominantly financed by public capital inflows, initially mainly in t-he form of grants but with concessional loan finance increasing in importance since 1975. The net inflow of private capital over the period was minimal and changes in international reserves were also minor. 1/ The major schemes being the new deepwater port and upgrading of airport facilities in the public sector and expansion of soap production in the private sector. - 3 - 7. The current account deficit declined from a peak of 25% of GDP in 1972 to 14% in 1973 when export prices increased by an unprecedented 46%, but then the deficit consistently increased through 1975 to US$5.3 million (19% of GDP) as the economy contracted, export volumes declined and import prices increased. In 1976 the economy recovered, import payments declined, export volumes increased and the current account deficit fell to US$3.7 mil- lion (13% of GDP). The less certain economic performance in 1977 increased the deficit once again to US$5.2 million (16% of GDP). 8. The export performance has relied heavily on the performance of bananas, which are shipped to the UK at preferential prices. Output of bananas is liable to strong fluctuations and export prices are ruled by the "green market price" in the UK and the strength of Sterling. Export volumes of bananas showed a trend decline through 1975, recovered somewhat in 1976 but slipped back again in 1977. Total export volumes followed the same trend, being less than 85% of the 1972 level in 1975 despite an increase in citrus exports. However, an increasing diversification into soap and non-traditional fruit and vegetables permitted export volumes to increase in 1976 and in 1977 they are estimated to have reached a level approximately 2% above that of 1972. Through May 1976 the EC Dollar was tied to Sterling and export prices grew strongly, averaging 16% in 1974 and in 1975. In 1976 the link with Sterling was broken. As Dominica was dependent upon the UK market 1/ the further depreciation of Sterling led to a fall in export prices (in US$ terms) of some 18% in 1976 to a level 4% below that of 1974. Banana prices in particular recovered in 1977 as export prices grew by 7.5% but export prices had only grown an average of 4.2% per annum between 1973 and 1977, implying a strong decline in the terms of trade. 9. Real imports followed trends in real GDP between 1972 and 1977 but exhibited a degree of inelasticity. As the economy contracted from 1973 through 1975, imports in nominal terms increased from US$16.5 million to US$20.7 million or by 12% per annum, while GDP in nominal US$ grew by 6% a year. Real imports of machinery and transport equipment and of manufactured goods are estimated to have fallen. In 1976 imports fell by 8% in current US$ terms despite the economic recovery, mainly because of the decline in Sterling but grew by nearly 15% in 1977 despite a 3.5% fall in food imports as a result of increased local production. 10. Debt service poses no serious problem because of the low interest and long maturities of most of the external public debt. The debt service ratio in 1977 was 4%; no amortization payments were required. Outstanding and disbursed public and publicly guaranteed debt was EC$27.4 million (US$10.2 million), 30% of GDP, of which over 80% is due to the Caribbean Development Bank (CDB). Public Finances 11. The poor economic performance between 1972 and 1977 resulted in a deterioration of the public finances. Faced with declining economic activity, proportionately higher costs of public administration, and high levels of 1/ Over 70% of exports went to the UK in 1976. - 4 - taxation combined with a reluctance on the part of the United Kingdom to provide budgetary assistance except in emergency situations, the Government consistently had to struggle to provide even the minimum level of services. The result has been that expenditures upon such items as maintenance (espe- cially of roads) and payments into sinking funds have been neglected. The fiscal position has deteriorated steadily and by the end of 1977 it was estimated that arrears on contractual budgetary obligations of EC$3.5 million had accrued (11% of 1977/78 current revenue), and only timely budgetary assistance from the UK permitted salaries to be met each month. 12. The Central Government has run a current deficit (before bucgetary assistance) every year between 1972-77/78. 1/ The deficit increased from EC$2.5 million in 1972 (5-1/2% of GDP) to a massive EC$11.0 million (12% of GDP) in 1977/78 when current expenditures were inflated by the paymient of EC$8.6 million in back wages and salaries. Budgetary assistance was received from the UK, the CDB and CIDA in each year except 1973 but the assistance was insufficient to create a current surplus any year except 1975/76. Central Government capital expenditures have increased in nc,minal terms from EC$4.7 million in 1972 to EC$8.2 million in 1977/78 but have remained almost constant as a percentage of GDP at 10%. The overwhelming bulk --85%-- of these expenditures were financed by grants from the UK and CIDA. Domestic financing of the deficit has been provided by the Social Security System, the rest of the public sector and the commercial banks. 13. Central Government current revenues (including budgetary assistance) have been unable to maintain their share of GDP, declining from 29% in 1972 to under 27% in 1977/78 despite the raising of indirect tax rates and the introduction of various new taxes such as a foreign exchange levy, bank deposit levy, and electricity sales tax. The introduction of the common ECCM tariff in 1973 reduced the average import duty from 11% in 1972 to under 6% in 1977 but the introduction of the substitute stamp duty on bills of entry in 1975 has since more than compensated for the revenue loss. The tax burden (at 24% of GDP in 1977/78) is high but there still remains room to improve collections of existing taxes and for the introduction of new measures, both of which will be required if fiscal viability is to be attained and essential public services are to be provided. 14. Current expenditures 2/ of the Central Government are dominated by payments for wages and salaries which, excluding back payments, comprised over 50% of total current expenditures in 1977/78, increasing from 45% in 1972. Total current expenditures increased by 11% per annum on average 1/ In 1975 the start of the fiscal year was changed from January 1 to July 1. 2/ All references to current expenditures and wages and salaries in the following paragraphs exclude the back pay of EC$8.6 million made in 1977/78 unless specifically stated otherwise. between 1972 and 1977/78, from EC$15.0 million to EC$26.6 million as wages and salaries increased at almost 14% p.a. Actual payments on wages and salaries increased sporadically. In 1974 the Government granted a cost of living pay increase averaging 40% retroactive to January 1, 1974. As part of the salary settlement, the Government agreed to adjust wages and salaries for cost of living every three years. The agreed wage and salary award was not implemented but in April 1975, still within the same fiscal year, the Government paid an interim 20% average increase, and in June 1976 the balance of the negotiated salary adjustment. The difference due to Government employees (EC$8.6 million) was not paid until a strike was held in September/ October 1977 which paralyzed all public services for six weeks. To end the strike, and as an interim measure until a new cost of living increase takes place, the Government agreed to increase civil service emoluments by EC$10 every time the consumer price index increases 10 points. 1/ As a result, actual expenditure on wages and salaries (including back pay) reached EC$22.3 million in 1977/78, 63% of total current expenditures. 15. The constraint on the availability of funds led to a retrenchment and expenditures on goods and services only increased from EC$6.0 million to EC$6.9 million between 1972 and 1977/78, representing a substantial decline in real expenditures. Increased indebtedness led to a three-fold increase in interest payments during the period but, mainly because of the high proportion of grant and low interest financing, these were still less than 7% of total current expenditures. Despite the cutbacks that have occurred and the recently successful restraint in the hiring of civil servants, there is still room for tighter expenditure controls and continued efforts must be made not to in- crease the public service establishment. 16. The performance of the rest of the public sector 2/ has been domi- nated by the growing surpluses of the Social Security System. Although, as a group, the rest of public sector has produced a continuing surplus, the performance of a number of state enterprises has been cause for concern. The Dominica Banana Growers Association (DBGA) and the Central Water Authority (CWA) have both shown persistent deficits and the Dominica Agricultural Marketing Board has displayed increased deficits in recent years. 17. The surplus of the rest of the public sector has, however, been inadequate to create positive public sector savings; only in 1976 did the public sector as a whole create a surplus of EC$0.1 million which even then only emerged as a result of external budgetary assistance of EC$1.8 million. Excluding this budgetary assistance public sector dissavings were EC$2.9 mil- lion (6% of GDP) in 1972 and despite a slight decline through 1974 increased steadily thereafter reaching EC$7.4 million (8% of GDP) in 1977. Total public sector capital expenditures increased from EC$4.9 million in 1972 (11% of GDP) 1/ This represents a pay increase equivalent, on average, to 65% of the increase in the cost of living. 2/ Comprised of local Governments, the Social Security System and seven State Enterprises. to EC$14.2 million (16% of GDP) in 1977. Despite the continuing prevalence of development grants, external loans have financed an increasing proportion of public sector capital expenditures, 50% in 1977 as against only 4% in 1972. This has been because of the increased lending of the CDB (especially for the new port) and the fact that some of CIDA assistance has been made available as low interest loans rather than as grants. In 1977 external assistance, grants and loans, financed 93% of public sector capital expenditures. The Financial Sector 18. The financial sector consists of the East Caribbean Currency Authority (ECCA), of which Dominica is a member jointly with six other Leeward and Windward Islands; 1/; three commercial banks; the National Commercial and Development Bank; the Government Housing Loans Board; the Government Savings Bank; the Dominica Mortgage Finance Company; the Dominica Cooperative Bank; and a number of credit unions. The commercial banking system includes two branches of foreign banks and the commercial section of the National Commer- cial and Development Bank. 19. ECCA has to date only sparingly used any monetary instruments and has acted primarily as a currency board. However, discussions among the member countries on the transformation of ECCA to a central bank were initiated in 1977, and draft articles have been circulated to member governments. 20. The Central Government has made only very limited use of legislation which could affect the establishment or the operations of the financial insti- tutions. Once a year, banks are required to pay a 1 percent tax on their average fixed or time deposit liabilities. In 1977 the Government impDsed a 7-1/2 percent statutory reserve requirement on all deposits with the two branches of foreign commercial banks, to be discharged in Treasury bills. 21. Dominica's access to the resources of ECCA has been limited by its share in the total "investible funds" of the Authority, which have been set by the Board (not to exceed 40 percent of the demand liabilities of the Authority). As of the end of 1977, Dominica's entitlement based ol its share of total current revenues of the member governments amounted to 11.2% of the total investible funds. As of that date, ECCA held EC$3.3 million in Dominica Treasury bills and debentures, which were EC$0.4 million in excess of its entitlement based on the above formula. ECCA's last purchase of Dominica stock took place in 1975. 22. After weakening considerably in 1974-76, demand for credit recovered again in 1977; the trend representing a one-year lagged function of economic 1972-77 while nominal GDP grew at almost 15% reflecting declining private sector investment and confidence in the economy. Over the same period credit to the Central Government increased from EC$1.8 million to EC$5.6 million but the savings of the Social Security System permitted them to 1/ Antigua, Grenada, Montserrat, St. Kitts-Nevis-Anguilla, St. Lucia and St. Vincent. -7 - reduce credit from EC$2.6 million to EC$0.4 million to the rest of the public sector. The commercial banks reduced their foreign assets and accumulated claims on ECCA increased commensurately. Liabilities to the private sector have increased by 8.3% per annum during 1972-77, with an increase in foreign liabilities, predominantly CDB borrowing by the AIDB subsidiary of the National Commercial Development Bank financing the credit expansion. Wages and Prices 23. Consumer prices in Dominica follow closely trends in import prices. Price increases through May 1976 reflected the depreciation of the EC dollar while tied to Sterling. Consumer prices consequently increased by 30% in 1973 and 1974 and 14% in 1975. The tying of the EC dollar to the US dollar in 1976, together with the slowdown in international inflation reduced consumer price increases to 8.2% and 8.5% in 1976 and 1977 respectively. The largest price increases occurred in clothing and footwear and household goods which increased by an annual average of 21% and 25% between 1973 and 1977. Fuel and light, protected by artificially low electricity tariffs increased by only 10% a year. 24. There is no comprehensive information available on wages and salaries in Dominica. However, from collective bargaining agreements which affect a large number of the wage and salaried employees, it is possible to assess trends in remuneration. Indications are that wages of workers in the unionized industries of the private sector have moved slightly ahead of inflation at least since 1976. The unions negotiated 10-15% increases in 1977 and again for 1978, with raises of 5-10% to be awarded in 1979. By contrast, the wages of government employees have declined in real terms in the 1974-78 period. Civil servants negotiated a 40% cost of living increase in 1974, which was only fully implemented with back pay after a six-week strike in 1977. In October 1978, the government employees negotiated an agreement for a flat increase of EC$10.00 per month for every 10-point rise in the consumer price index. This arrangement amounted to a 2% increase in the average monthly salary of a civil servant, in relation to what was then about a 3% upturn in the inflation index. Another civil service salary review is scheduled to become effective January 1979. The employees' union is expec- ted to receive a 40% non-retroactive adjustment over the 1974 base wage and salary level, net of the EC$10.00 per month increase already awarded in 1977. Population and Employment 25. The population of Dominica is estimated to have grown from 70,760 in 1970 to 76,880 in 1977, or at an average annual rate of 1.2%. Although the rate of natural increase averaged more than 2% per year over the period, consistent net emigration of around 750 persons annually significantly limited the overall population growth. Both birth and death rates have declined sharply. The reduction in births during the present decade and the concurrent cutback in opportunities for emigration to the UK and Canada reduced the pro- portion of the population under 15 years of age from 49%, as registered in the 1970 Census, to an estimated 43% in 1976. - 8 - 26. The 1970 Census counted a labor force of some 21,000 persons, of whom 19,400, or 92%, were employed in the year preceding the Census. As a result of a decline in labor participation for both males and females from 1970 to 1976, the actual labor force increased at a slightly slower pace than the potential work force (persons aged 15-64 not in school) during the period--about 5% per year. At this rate, the labor market was confronted with almost 700 new entrants a year while the number of jobs probably de- clined. Unofficial estimates by the National Planning Organisation place full-time employment between 70% and 80% of the labor force in 1976 and 1977, implying that the number of persons unemployed or underemployed rose from 1,600 in 1970 to 5-7,000 in the latter half of the decade. In both absolute and proportional terms, manufacturing and construction suffered the greatest drop in employment from 1970 to 1976. Transport and communications, trade and hotels, and service sectors picked up shares of total employment, while agriculture fell from 40% to 38%. Female labor was affected most by the decline in agricultural employment, which occurred with the shift from production of citrus and other crops to bananas and from estate to small- holder cultivation, with a consequent reduced demand for women as pickers. However, the greater emphasis on banana and coconut production implies less seasonality of agricultural employment in Dominica than is found on scme of the other Caribbean islands. D. Events in 1978 27. The economy progressed strongly in 1978 with real GDP growing an estimated 5% primarily as a result of the best banana crop since 1970. Banana prices also increased as the EC dollar declined against Sterling in line with the US Dollar. Soap exports continued to expand and citrus par- tially recovered from its 1977 slump. Export values consequently are esti- mated to have grown by 35%, a 24% real increase. The increase in agricul- tural incomes together with the impact of the civil servant back pay award, which was not fully disbursed until well into 1978, resulted in a rapid increase in imports of almost 30%. The current account deficit of the balance of payments remained at an estimated US$5.2 million (15.5% of GDP). Despite the increase in consumption and output, private investment remained sluggish partly because of uncertainties resulting from independence which was achieved on November 3, 1978. 28. Preliminary data for the first few months of fiscal 1978/79 in- dicate a continued strong current revenue performance and current expendi- tures, free from the burden of back pay, are expected to be lower than in the previous year. The improvement, however, has not removed the very significant constraints on the public finances and through independence the Government still needed to rely on approximately EC$1.2 million of budgetary assistance per month from the UK. As part of an independence settlement, the UK indicated that it would phase out budgetary assistance rapidly over three years but would provide an additional 110 million (EC$54 million) in highly concessional capital assistance. - 9 - 29. The increase in export earnings, the back pay award and an uncertain investment climate created liquidity in the financial system. During the twelve months through June 1978 liabilities to the private sector increased by 14.6% while domestic credit expansion was only 9.2%. As a result, net foreign assets of the financial system increased by EC$2.1 million. Consumer prices increased by 10% through September 1978, in part spurred by a 25% in- crease in fuel and light costs following a long overdue tariff increase by the Dominica Electricity Service. - 10 - 11. DEVELOPMENT ISSUES AND STRATEGY A. Introduction 30. The economy is experiencing serious and widespread economic and financial problems. The physical capital is decaying, output and exports of many products are not only below their potential but also below the levels attained a decade ago, unemployment is causing serious economic hardships and the social conditions, particularly housing, water and sewerage, are much worse than those in the rest of the region. Meanwhile, the public finances are also in severe disequilibrium. All these problems have to be handled but there is no simplistic solution. The first priority has to be stopping the decay--in agriculture, infrastructure and the social sectors--and putting the public finances on a viable footing. Only once this has been done can an expanded productive base be created for the economy and only then will the capacity emerge for even the partial solution of the social problems. 31. The major constraint in placing the economy on a viable path will be the lack of technical, managerial and skilled manpower. There is a dearth of suitably trained and experienced people to implement the public investment program, to achieve sound economic and financial management and to restimulate the private sector. The accession to independence will hopefully encourage some Dominicans to return to their country but this is unlikely to solve all the problems, since the best trained human resources apparently still tend to emigrate. The country will thus have to rely on the international community for large amounts of technical assistance if it is to make any progress in overcoming its serious economic and financial difficulties. Moreover, a fundamental rationalization of the institutional structure and policies will be essential if the country's development potential is to be realized. B. Agriculture Structure and Role in the Economy 32. Agriculture is the hub of the economy. It accounted for approxi- mately 37% of GDP in 1977 and provided employment for 40% of the labor force. Agricultural exports contributed over 80% of export earnings with bananas being the dominant crop. Land distribution is skewed in favor of large land holdings with 1.4% of the total number of holdings occupying about 56% of the land. Approximately 53% of the holdings range up to 5 acres in size. Land tenure is predominantly freehold - 76% of the total number of holdings are owned. The Government holds title to 60% of the land, extensive areas of which are in virgin forests and small amounts are available for settlement. 33. The extremely mountainous terrain renders only about 40% of the land suitable for agriculture. However, the high rainfall and humidity permits the growing of a wide range of crops, among which bananas, coconuts, grape- fruits and limes, are the most important. - 11 - Potential for Agricultural Development 34. Attractive opportunities exist for increasing agricultural output both by raising yields of existing crops and by diversifying into less traditional areas. Arable land is not in short supply and expansion can take place both extensively and intensively. In spite of a pronounced wet and dry season, the island enjoys a rainfall pattern that is favorable to the production of a wide range of crops. For this potential to be fully exploited, additional areas of Crown Lands will need to be opened up and colonized, sup- port services will have to be greatly strengthened and additional investments in feeder roads will be required. It is estimated that, if the ensuing recom- mendations are followed and the proposed public sector investment program is implemented, agricultural production could grow at an annual average rate of 3% during 1979-83 and by 1983 large numbers of new schemes will be under implementation to provide the base for higher output growth over the following five years. 35. Improvement and extension of feeder roads is a precondition to agricultural development. Existing roads have reached an advanced stage of deterioration and, if improvement is not urgently initiated, many will soon be impassable (see para 96). At the same time, with the opening up of virgin lands, a larger proportion of agriculture will be located in areas inaccessible to vehicular traffic. It is recommended that the Feeder Road Program should be implemented in accordance with the proposed overall roads program and, where possible, concurrently with the Banana Development Program. 36. Bananas are the most important crop, acting as the backbone of the agricultural sector and the economy as a whole. Value added in banana production made up 8.9% of GDP in 1977 and exports reached EC$18.6 million, 57.7% of export receipts. Husbandry is generally poor with pest and disease control a particular problem. This has led to a recent serious outbreak of leaf spot disease. Banana yields are low, estimated at approximately 3.5 tons an acre, compared with about 10 on some neighboring islands. 37. A UK-financed Banana Development Program is presently being imple- mented by WINBAN through the Dominica Banana Growers Association (DBGA). On the basis of a cess of 2.44c per lb. plus a UK subsidy of 0.94c per lb., the program provides a revolving fund from which growers can draw to provide inputs. But in view of escalation in prices of inputs, this fund is inadequate to provide the necessary fertilizer and pesticide inputs. An estimated additional EC$l million will be required in 1979/80 in the form of fertilizer and pesticide commodity assistance to DBGA and approximately EC$100,000 a year in the future. WINBAN already supplies freely available literature of excellent quality to farmers which serves to transfer the latest technology, but its effectiveness is reduced by the inadequacies of the local extension service. Therefore, an all-embracing program, designed to ensure satisfactory levels of inputs and supported by a strengthened extension service, is a basic requirement of the industry. 38. The problem of increasing banana output could be complicated by the breaking up of large estates, some of which are banana plantations with high levels of productivity. In the absence of proper safeguards, this could - 12 - result in dislocation of production practices and a possible reduction in output. Yet, if ensuing policy recommendations are adopted and production problems facing farmers are addressed, average yields could be raised and pre-export rejection rates reduced. Export volumes could reach at least 42,000 tons by 1983, 40% higher than achieved in 1977. 39. The next most valuable crop is citrus which accounted for 8.3% of total exports in 1977. Citrus occupies about 4,900 acres of land of which grapefruits, limes and oranges account for 2,500 acres, 1,500 acres and 900 acres, respectively. The early maturity of the Dominica grapefruit gives it a favored fresh fruit market in the UK during September and October each year, when the Israeli and South African fruits are out of season. How- ever, because of inadequate packing and storage facilities and poor husbandry practices, this market is not being fully exploited. Fruits unsuitable for export are usually diverted to processing for juice, but frequently the sugar/ acid ratio makes juicing uneconomic and so wastage is high, averaging 10-20%. 40. The prospects for lime, which was once a major export crop, are limited by the incidence of red-root disease and wither tip, which have considerably reduced the average life span of trees, making it unprofitable to invest in further plantings. However, existing fields would be very responsive to the proposed rehabilitation program. Orange production, which was estimated at 48,000 boxes in 1977, could also be significantly increased. Fields are poorly maintained and are in a state of decline. However, citrus in general responds rapidly to productive inputs such as fertilizers, pruning and pest and disease control; and, if the proposed lime rehabilitatior. program were expanded to include grapefruits and oranges, exports of grapefruits (assuming improvement of packing facilities) and production of oranges and limes could be increased substantially. Essential oils are also produced, the output of which is now increasing after having declined in recent years. 41. There are strong incentives for increasing coconut production as a result of the processing factory, high prices for fresh nuts and the exist- ence of the CARICOM Oils and Fats Agreement, which provides incentive prices for coconut oil. The present coconut acreage is estimated at 7,700 acres and production in 1977 was of the order of 26 million nuts, of which approximately 50% was processed into copra. Although sale of fresh nuts to the export market is much more profitable for the farmer, under the "Oils and Fats Agree- ment" only 10% of the island's seed nut production can be exported. Each huckster is, therefore, theoretically limited to 100 nuts per three months. High fresh nut prices have led to a prevalence of smuggling. 42. Yields appear to be fairly good, averaging an estimated 2,500 nuts per acre or the equivalent of 1,200 lbs. of copra per acre. Net return from coconut is about $400 per acre as against $340 per acre for bananas; it is a relatively easy crop to manage and, like bananas, it provides a regular income. Therefore, farmers should be highly motivated to expand output despite the relatively long time it takes to produce the first crop. A CIDA-funded program of fertilizer application has already started and indi- cations are that this could generate a 25% increase in yields within five years. There is also a proposal to expand coconut acreage by 2,500 acres. It is recommended that this project also include replacement of those trees that are going out of production. - 13 - 43. Apart from the foregoing traditional crops, there have been success- ful attempts to diversify agricultural production in recent years. The transition from plantation agriculture to small-scale farming and increasing food prices have led to significant increases in production of foodcrops and vegetables for domestic consumption. Output of small-farmer interplanted crops such as dasheen, tannia and plantains which form an important part of the local diet have been increasing. For example, dasheen production in 1977 has been estimated at 12,900 tons as against 7,200 tons in 1975. Imports of food 1/ have declined from 32.2% of total imports in 1974 to 28.1% in 1977; in 1977 food imports in value terms actually declined. With expanding trade flows in a variety of fruits and vegetables to the UK and neighboring islands, the prospects for increasing exports, in particular, are good. 44. Trials are now being carried out with corn (maize) and the public sector investment program includes a proposal to establish 1,000 acres annually for five years commencing 1979. A pineapple multiplication plot has also been laid down and the results have been quite good. A sugarcane industry is proposed to substitute imported sugar and to create employment opportunities. This will be based on 2,000 acres of land producing a projected 4,000 tons of sugar annually. 45. Dominica has the best natural environment within the Eastern Caribbean for the growing of coffee, but this crop continues to be of minor importance in the economy. A Coffee Development Program is now proposed, under which 1,000 acres will be planted and existing processing facilities will be expanded to produce instant coffee. This crop comes into commercial bearing within three years, yields a high return and is labor intensive. Therefore, if the program is properly managed and receives sufficient support, it could become a major crop within the next decade. There is currently a Tree Crop Diversification Program which is to be expanded to establish 1,250 acres of indiginous fruits such as mangoes, sapodillas and avocados over a period of five years. Conditions are also suitable for the growing of tea but local opinion is that there would be an aversion to harvesting tea leaves in the traditional manner. In view of the high labor content and attractive market prospects further consideration should be given to its possibilities. 46. With improvement in air transportation, Dominica would be well poised for the development of a cut flowers industry--particularly anthuriums-- for export. The indigenous anthurium (Caribbean Pinks) flourishes in the higher elevations, where together with other cultivated flowers, they provide an important source of small farmer income. These are marketed locally and also to the French islands. The export market potential for improved varieties is very attractive and already two commercial producers have started exporting by air to the Virgin Islands. Relatively large amounts of working capital are required for establishment, but in terms of develop- ment, it could contribute significantly to employment, incomes and foreign exchange earnings. 1/ SITCO. - 14 - 47. The livestock industry is small, comprising an estimated 4,000 head of cattle, 3,500 head of sheep, 6,000 head of goats and 7,500 pigs. Slaughter of cattle, sheep, goats and pigs in 1977 amounted to 1,775, 2,675 and 6,750 head, respectively. In spite of the limitation imposed by the mountainous terrain and the dominance of permanent and semi-permanent crops, there is the potential of transforming what is essentially a "backyard industry" ir.to one with the capacity of, at least, substituting a significant proportion of imported animal protein. Therefore, over the next five years the following programs are proposed: (a) Cattle Development Program--establishment of artificial insemination service; (b) Cattle Improvement Program--to increase milk and beef production; (c) Sheep Improvement Program--to upgrade and increase sheep population by importing pedigreed stock; (d) Meat Industry Project--to produce pork and pork products from an annual pig output of 6,000 within five years. 48. These initiatives are considered realistic and the possibilities of the meat industry project are particularly promising because Dominica has competitive advantage for pig production, as a result of the low cost of locally derived feed 1/ and also because of the activities of the Dominica Meat Producers Association. This organization, which began in 1975 now has a membership of 200 farmers and a heard of 700 pigs. It handles tie slaughtering and distribution of animals. Recently, the Government in an effort to provide an incentive, decontrolled the price of choice cuts of pork. Within five years, it is proposed to produce 6,000 pigs annially to satisfy local fresh pork, sausage and bacon demand. The outbreak of swine fever in the north of the island has caused problems and concern, but the quarantine measures appear to be effective so far. 49. The fishing industry in Dominica is at a low level of develo=ment and is operated by approximately 1,500 small, mostly part-time, fishermen who usually use canoes and thus only venture comparatively short distances off shore. Estimates of the annual catch are in the order of 1.5-2.0 million lbs. which is all consumed locally. Little fish reaches the urban market and, as a result, about 1.2 million lbs. of fish is imported annually. The expansion of fishing could be another means of ensuring the supplies of animal protein to the population and could effectively import substitute. CIDA has expressed a willingness to undertake a regional fishing program with a subproject in Dominica. 1/ Animal feed is comprised of rejected bananas, coconut meal and fishmeal. Only the fishmeal is imported. - 15 - 50. Dominica possesses considerable potential for the development of forest industries. The island contains a total forest area of 77,000 acres, 40% of the total land area; of this, about 95% is productive forest. The total volume of marketable timber has been estimated at 250 million cubic feet. There are 64 merchantable identified species of trees in Dominican forests, the most important being Gommier and Carapite, which together account for 40% of the volume. At present, very little commercial exploitation of the forest resources is taking place despite the great physical potential. However, the state-run Forest Industries Development Corporation has been established and the implementation of a UK-assisted pilot project is under way. (For further details, see para. 79.) Issues and Constraints in Agriculture (a) Land Ownership 51. The people of Dominica are no longer content to work as hired laborers on plantations or to be tenants on land. They want to own land and to have a measure of security. Fortunately, land is not scarce, some acreages of unoccupied cultivable Crown Lands still exist and increasing numbers of large estates are coming on the market for sale. Uncertainty, however, pre- vails as the Government has not yet implemented definitive policies as to the breakup of estates, sale of Crown Lands or land tenure. 52. As a result of the Government's serious financial situation it is not recommended that Government buy any of the estates which are or will be available for purchase in the near future unless external resources can be raised on concessional terms. It is, nevertheless, recommended that land settlement projects should still be undertaken by Government. Where conces- sional external resources are not available for purchase of estate lands, however, land settlement schemes should be concentrated on Crown Lands so as to minimize the financial cost to the Government and to bring about an opening up of virgin lands. 53. It is further recommended that settlement schemes be implemented generally in line with the proposals of a BDD Land Tenure Specialist, which have been accepted by Government. These call for the creation of economic- sized family farm to be leased to operators for an initial three-year period. Those who prove to be good farmers would then be transferred automatically to what is termed controlled freehold status, with price lease payments being considered part of the total payment. The "controlled-freehold" arrangement refers to the period after initial three year and prior to the final payment. During this period, transfer of land by the family through sale of equity or inheritance would be transacted through the Land Management Authority (LMA), which would have the first option to buy. Subdivision of land could be made only with LMA approval. Inheritance would be respected as a first resale option to one heir only. Land could be transferred to cooperatives on lease- hold basis for up to 25 years. 54. The breakup of estates such as the Watford Hill, one of the most highly productive banana plantations, has serious implications for the agricultural sector as a whole and the banana industry in particular. There - 16 - is a danger that transfer of ownership of such land to persons either with no interest in farming or to others who lack the expertise or financial resources will lead to a reduction in agricultural output. 55. In the future, this risk could be reduced if (a) managers and workers of such estates be given first option to purhcase of land, and (b) if a caretaker service is established on each settlement. This service could be promoted by the Land Management Authority and comprised of key personnel drawn from the existing management of the estate. It would provide guidance to farmers in the various field operations and would be responsible for the purchasing and timing of inputs and the marketing of fruits. Essentially, it would be contracting its services to farmers, the cost of which could be prorated on a per acre basis and deducted from sales. 56. Government must implement the relevant policy decisions on these land issues promptly. Further postponement is likely to lead to a decline in output on the existing estate lands, delays in the benefits to be obtained from settlement schemes and a continuation of the uncertainty that exists, which is a contributory factor to the poor investment climate in Dominica. (b) Agricultural Extension 57. The Ministry of Agriculture has paved the way for developing an effective extension service. It has divided the island into five regions and each region into subregions. Subregions are further broken down into districts. However, it is understaffed; and furthermore, its complement of trained staff numbers only ten. The officers who are in direct contact with farmers are untrained. 58. With the shift from plantation agriculture that is taking place and the heavy investment in agriculture that is proposed in ensuing years, the need for an effective Agricultural Extension Service becomes a matter of great urgency. The difficulty of movement and inaccessibility of farmers will perhaps require twice the number of district officers currently provided for in the organizational structure to adequately service the farmers. Tech- nical assistance will be required to assess the manpower needs, restructure the service and plan and initiate a training program. The proposed Regional Pool of Experts when established, could be drawn on for technical support as required. (c) Agricultural Credit 59. From the standpoint of agricultural credit, the banana growers are in the best position as a result of the credit supplied for inputs by the DBGA. If the additional resources recommended are provided to the DBGA, banana production is unlikely to be constrained by lack of credit. Cozonut production is similarly well serviced by the CIDA coconut fertilizer scheme. - 17 - 60. The availability of credit for most other agricultural enterprises is rather limited, and there is potential for significant improvement. The Dominica Agricultural and Industrial Bank (DAIDB) was established in 1971. In 1972 its CDB-financed "Farm Improvement Credit" scheme became operative. At the end of June 1978 a total of only 219 loans amounting to EC$1,962,000 had been approved, of which 78% was disbursed. This level of operation is too small to maintain the Bank's financial viability. 61. There are hopeful signs of improvement in the field of creidt as competition is now being offered by Barclays Bank International through its new credit project known as the "Farm Plan," which covers farmers with 5-50 acres. Its interest rate is 9-9 1/2% as against 6% at the AIDB but less emphasis is placed on security, which should bring credit into the reach of more farmers. At the end of September 1978, a total of 42 loans amounting to EC$213,360 had been made by Barclay's. This competition has made AIDB step up its promotional activities by distributing brochures on its operations. 62. But in the light of projected agricultural activities in the ensuring years, much more will have to be done to promote expansion of lending operations. The AIDB willhave to be upgraded to perform a more efficient service. There is also an urgent need to get the Extension Service involved in focusing the attention of farmers, particularly small farmers, on the availability of loan funds from governmental and private banking sources. In this respect, the Extension service can advise and guide individual farmers on the effective use of credit in improving and expanding production so as to increase producer incomes. Through timely action and appropriate contacts, Extension Service workers can help farmers anticipate production problems, monitor the progress of their crops, and in turn prevent losses that otherwise might occur. Such involvement or cooperation on the part of the Extension service becomes even more cruicial as the agricultural lending portfolio of financing institutions increases and the number of farmers receiving loans expands. Through such performance on the part of the Exten- sion Service, both the farmer borrower and his source of credit stand to gain as a matter of mutually beneficial good business. (d) Marketing 63. The problems of marketing in Dominica are primarily related to foodcrops and vegetables. Specialized commodity organizations like the Dominica Banana Growers Association and the cooperative Citrus Growers Association handle their respective crops relatively efficiently although the marketing of grapefruit is facing problems. These can be corrected by expan- sion of the degreening and storage capacity of the existing packing plant. 64. The marketing of other commodities is handled by the huckster trade and the Dominica Marketing Board (DMB). The hucksters include small traders and some private companies who are primarily engaged in export to neighboring islands. In 1965, the DMB was established to provide a secure outlet for produce as a means of stimulating agricultural development. It has, however, failed to compete with hucksters who are engaged in interisland trade with similar crops. - 18 - 65. A recent study conducted on behalf of CIDA concluded that the DMB was "falling short of the expectations placed on it by Government and the produce growers of Dominica." It found among other things that this organization: (i) has not made effective use of its power to regulate and stabilize agricultural production and export. Its share of the market (other than bananas) is less than 3%; (ii) has never performed an effective marketing extension functicn; and (iii) has played an ineffective role as a development agency. At the end of 1977, it had accumulated deficits of some EC$436,000 as compared with some EC$295,000 at the end of the previous year. Over the years, this agency has been plagued by continuing debts and losses. 66. The DMB is now operating at a very low level of efficiency because of lack of operating capital and poor management. It is recommended that the operations and financial position of the DMB be reviewed with the spe- cific intention of making it an effective agency while ensuring that its marketing operations cease to be a burden on the public finances within a specified time frame. Emphasis should meanwhile be placed on improving the huckster trade which is rooted in tradition. Opportunities in the form of training and credit should be made available to facilitate expansion of their operations and increased efficiency. Summary of Main Recommendations (i) The Government must immediately implement policies concerning land tenure, the breakup of estates and opening up of Crown Lands. A number of resettlement projects should be undertaken by Government. However, where concessional external resources are not available for the purchase of estate lands, such proj- ects should be concentrated on Crown Lands so as to avoid financial cost to Government. Such schemes should utilize a "controlled-freehold" system of tenure. When existing estates are broken up, priority for purchase should be given to exis:- ing managers and workers and a caretaker system should be estab- lished by the LMA in order to try to maintain output; (ii) The Agricultural Extension Service should be expanded and restructured in order to effectively service the shift from plantation to small farmer agriculture; (iii) The AIDB will have to be upgraded and a general expansion of agricultural credit be instituted. The Extension Service should also focus the attention of farmers on the availablility of credit; - 19 - (iv) The operations and financial position of the DMB shall be reviewed with the specific intention of making it an effec- tive agency while ensuring that its marketing operations cease to be a burden on the public finances beyond the near term. C. Industry Character of Industry in Dominica 67. Manufacturing industry is still in its infancy, contributing only 4% to GDP in 1977. A 1977 survey 1/ identified 50 manufacturing units employing 850 persons (including parttime workers), or 3.5% of the labor force. During the 1970s the sector has been characterized by the closure of a number of significant operations, notably Dom Can Timbers and its prefa- bricated wooden house building subsidiary together employing 188 people, and Moreau's Garment Factory. Since 1976 industrial production has risen with an increase in soap output, mainly for export, and expansions by some garment firms although this impact has been moderated by declining production of lime and grapefruit juice and bay oil. 68. The two most important manufacturing operations are both in the field of agricultural processing. Dominica Coconut Products produces coconut oil, copra and soap, and L. Rose and Company produces lime juice and grape- fruit juice. Both operations are severely constrained by inadequate raw material supplies, though Dominica Coconut Products' diversification into toilet soap (based to a major extent on imported raw materials) has been very successful. There are several other agricultural processing operations (bread, fruit preserves, and rum), but the once substantial bay oil industry is now of minor importance, mainly because of organizational and marketing problems. 69. Garment manufacture for both the home market and other CARICOM markets, which is based on low labor costs, is the other relatively important type of industry, with three medium-sized operations. Additionally, there are a number of the small import substitution industries of the type found in most countries in the first state of industrialization, even with a market as small as Dominica's (e.g., soft drinks, concrete building blocks, tire retreading), and a number of export-oriented handicraft operations. Apart from L. Rose and Company's long established plant, there is very little foreign investment in industry. The recent establishment of a German-owned rugmaking operation (essentially based on handicraft methods) and a planned paint-mixing operation are, however, more hopeful signs. I! This survey's coverage of very small and handicraft operations was incomplete. The 1970 Census estimate of employment was 1,550 although this figure is not comparable because of definitional differences. - 20 - 70. Though pumice mining has been reestablished on a limited scale, and there is some quarrying for aggregate, mining and quarrying is at present of very minor importance. Recent trends indicate that usable deposits of limestone are too small to be worth exploiting, though clay deposits offer possibilities for very small-scale manufacture. The construction industry's output has been more or less stable at a very depressed level since 1976, after falling sharply in 1974 and 1975. The main reason appears to be the escalating cost of building materials, most of which are imported, which in particular severely constrained private house building. Construction by the local private sector for government has also been at a low level. Problems, Constraints, and the Role of Government 71. Industrial development in Dominica, as in other Caribbean LDS's, is severely constrained by the very small market size. The range of import sub- stituting industries which can viably be established is small, and industrial- ization will have to be based primarily on production for export. Wage rates in Dominica are even lower than in most other LDC's but productivity is often poor, mainly because of bad working conditions and management failures. The new deep water harbor in Roseau provides satisfactory sea access, alth3ugh the inadequacy of air transport links, which the new short airstrip near Roseau may partly solve, is a problem. 72. The development of agricultural processing industry is at present constrained by a lack of raw materials. Both present major producers h1ave the physical capacity to roughly double their output. Copra supplies to Dominica Coconut Products have been insufficient partly because of inadequate domestic coconut production but also because of exports of nuts in excess of the Government's 10% limit. There should, however, be increased supplies over the next few years due to increased fertilizer use, resulting from the ongoing CIDA project, and in the longer term the proposed coconut expansion scheme is likely to have a marked effect. Supplies of lime juice have been affected by disease reducing tree life; many trees are now old and there is little replant- ing. International competition has made it difficult for Rose's to increase prices to the farmer either for limes or grapefruit, and consequently there has been little incentive to increase production. The proposed lime rehabili- tation program, however, is designed to reverse the declining trend. 73. In general, the agricultural sector is at present poorly geared to supplying the needs of large scale industry. Copra apart, there is prob- ably not much potential for improving this situation in the near future. If a modern cannery were to be established capable of competing internationally, it would require a sustained volume of output over a long season which Dominica lacks the physical capacity to supply. 74. A more serious problem still is that the key role in development which the Government gives to industry (as in the Industry Sector Plan' is not being effectively translated into action. The Ministry of Trade, Industrial Development, Tourism and Sports is wholly lacking in the manpower which is needed to implement Government industrial projects, to monitor the sector's development and to effectively respond to private sector initiatives. - 21 - 75. The Government's processing of applications for incentives is slow and, rightly or wrongly, is perceived by the local private sector as deterring industrialization. A continuing dialogue needs to be established between Government and the private sector on how to develop industry and how to build business confidence. Communications between Government and the local private sector leave much room for improvement at present and private sector fears, however unjustified, are bound to be communicated to potential foreign investors. Industrial promotion efforts, meanwhile, have been minimal, often no more than a fringe activity on overseas trips by Ministers; no promotional material is produced. Such a situation is unlikely to attract and encourage the industrial investment Dominica requires. 76. The Agricultural and Industrial Development Bank (AIDB), a sub- sidiary of the Government-owned National Commercial Development Bank (NCDB), expects to approve a record EC$350,000 in industrial lending in 1978; as much as in the previous five years combined. Good progress has also been made in ensuring that interest and principal are paid when due. The AIDB hopes to increase substantially its levels of industry-related lending in the years ahead. In the past its slow approval procedures have led many industrialists to borrow from commercial banks in spite of the higher interest rates charged. It is unlikely, therefore, that demand for industrial loans will rise as rapidly as AIDB hopes especially in light of the present industrial environ- ment and lack of confidence. 77. The AIDB is responsible for the implementation of the Government's factory shell program. Although plans to build three factory shells (two of them of 20,000 sq. ft. each) are fairly advanced, the AIDB has hitherto built only one shell under the long-established CDB loan program, and this is currently occupied by a government operation. A number of firms claim that they have been seeking factory space through AIDB for some years, but because of bureaucratic procedures and other reasons, it has been difficult to get action. It is claimed that quite substantial increases in output and employ- ment have been prevented by lack of factory space. A factory shell program could viably have been established more rapidly than has been the case. Also, neither Government nor the AIDB have possessed the organizational ability to establish an effective industrial area; indeed, the space, originally allocated for this appears to have been largely absorbed for other purposes. Potential for Industrial Development 78. Dominica's industrial potential in terms of both output and employ- ment generation is limited. While the country's forest resources have the potential for development and while the expected increase in coconut output will permit an expansion of the operations of Dominica Coconut Products Ltd, there are few large scale local resource based industries that are likely to be capable of being developed in the near future. As a result Dominica will need to rely predominantly on enclave type assembly industries if she is to rapidly increase her industrial capacity. - 22 - (a) Natural Resource.Based Industries 79. The Government's Industrial Sector Plan envisages the creation of around 800 jobs over the period 1978/79 to 1982/83 in newly established industries based on local natural resources. The major individual industries conceived and their projected employment are: a cannery (130), cement (100), logging and sawmilling (60), particle board (180), veneer and plywood (150), coconut coir processing (36), and brick manufacture (20). This highly ambi- tious program is unlikely to be implemented during the plan period. Neverthe- less, there still exists a limited potential for the establishment of small scale operations which should be encouraged. 80. Only a few of the more important projects have been studied in any detail, and questions must be raised concerning the viability of most schemes. A study was made of the brick manufacturing project and a pilot scheme is to be implemented although no form of long term project organization has been determined. Doubts can be raised about the projects which have not been studied in depth. Raw material supplies for the cement plant have not been identified, and local demand is likely to be inadequate to support a facility of the scale implied. At this stage in forestry development, it is premature to plan for particle board or veneer and plywood manufacture, and a caanery of the size suggested would probably utilize the island's potential fruit supplies several times over. A study, however, is underway to examine the coconut coir processing scheme which may have a greater potential than the other projects. 81, The prospects, however, do seem favorable for the establishment of a viable hardwood logging and sawmilling operation. A four-year pilot project utilizing UK technical assistance is already underway financed by a UK grant. The project which is being implemented by the 100% government-owned Fo-est Industries Development Corporation (FIDC), will, when fully operational, produce one million board feet a year and employ some 70 persons. If it can be demonstrated that the technical problems in timber extraction and sawing can be overcome, then a larger, although presently undefined, project is envisaged probably initially producing about three million board feet a year. Such a scheme could have a major impact upon the economy, further expansion might be possible and secondary industries (such as veneer, particle board and plywood) could eventually be established. 82. In general, it is unclear how it is envisaged that many of these proposed projects could be established as private sector interest appears minimal. Most are unsuitable for direct implementation by Government itself, and indeed Government lacks the technical and management skills to do so. The timber project has been based on a large input of such skills being provided through UK aid, but it is unlikely that a similar approach could be successful for more marketing-oriented operations. (b) Labor-intensive Enclave/Assembly Industries 83. In principle, low labor costs in Dominica should make it posEible to establish "enclave" industries, such as a garment industry (very poEsibly - 23 - employing 200 people as envisaged in the Industrial Sector Plan), 1/ and electrical and electronic assembly. Individual operations might typically only employ between 50 and 200 people, but in combination the employment and export effects could be large. 84. Such operations will be required to be established by the private sector but at present the investment climate in Dominica is unlikely to be able to attract private investors. If this potential is to be realized, the Government must: (a) Gain the confidence of the local private sector and of potential foreign investors by making it clear that the Government rejects expropriation, intends that the private sector alone should develop such industries, and will do everything in its power to facilitate this. In addition to taking every opportunity' to restate this policy, the government should establish a dialogue with the private sector. (b) Strengthen the industrial section of the Ministry of Trade, Industrial Development, Tourism and Sports. This could best be achieved by the provision, under technical assistance, of one industrial officer and one industrial economist. The industrial officer should: (i) advise the Government on industrial policy, (ii) coordinate Government relations with the private sector, (iii) initially streamline and then implement the necessary approval procedure for the new investors. The industrial economist should develop and appraise potential projects in the industrial sector and coordinate with the National Planning Organization. (c) Effectively promote the investment potential of Dominica to potential investors. It is recommended that an industrial promotion officer be appointed in the AIDB for this function, who, before taking post, should participate in the four-week orientation program of the Investment Promotion Service run by UNIDO in New York. It is not recommended that Dominica establish any promotion offices of its own outside Dominica but rather join the proposed regional promotion service. 1/ A knitwear industry is also included in the Industrial Sector Plan and a study has been undertaken. To be viable, it will require a foreign clothing firm to establish it, a high quality output realizing premium prices on the world market and three shift operations. - 24 - (d) Expedite the industrial estate and factory shell construction program. It is recommended that a fully serviced industrial estate be created on which factory shells are constructed not only rapidly on demand, but also one unit (5,000-6,000 sq. ft.) ahead of demand. Conclusion 85. Dominica's natural resource base is only suitable for a limited number of industrial ventures (such as forestry and copra); her potential lies more with the pool of low-cost labor. The Government itself lacks the capability to establish industries based upon the pool of labor and will thus have to depend upon private sector initiatives. However, at the present time the environment in Dominica is unlikely to attract private-risk capital. To do so, it is imperative that the Government gain the confidence of both the local private sector and potential foreign investors, effectively promote Dominica's investment potential and expedite the industrial estate and factory shell construction program. D. Tourism Introduction 86. Dominica is the most mountainous and rugged of the Caribbean islands and possesses few white sand beaches. While it does not possess the potential for the conventional type of Caribbean tourism, it provides spectacular scenery which, along with the relatively undeveloped character of the island, presents a setting that is potentially attractive to tourists. Throughout the mountain- ous center of the island, there is ample evidence of recent volcanic activity, with numerous examples of fumaroles, small geysers and hot springs. In addi- tion, the high tropical rainfall that characterizes the island has covered much of it with a luxurious forest cover and, at the same time, has given rise to an estimated 365 rivers and many attractive waterfalls. 87. The tourist sector in Dominica is still small; there are only 16 units of accommodation providing 348 beds. In 1977 visitor arrivals had increased to nearly 31,000 from less than 14,000 in 1970, having been only partially affected by the general decline in Caribbean tourism and some unfor- tunate incidents in 1975. An important role is played by day-trippers, mainly French and French West Indians, who visit Dominica from Martinique and Guadeloupe for "safari" style tours of the interior. These visitors have more than doubled since 1974. 1977 saw a large rise in the number of cruise ship visitors who are also principally attracted by the unspoiled interior of the island. In 1977 visitors on one-day tours comprised 42% of the total. Occupany rates are low, 25% in hotels and 12% in guesthouses in 1977, with only a small amount of seasonality. The economic impact of the sector remains small with direct employment of 250 persons (1% of the labor force) and a share of less than 1% in CDP in 1977. - 25 - Tourism Strategy 88. The Government's policy towards tourism in the 1970s has called for the implementation of a plan to provide 5,500 tourist beds along with shopping areas, golf courses, marinas and other supporting tourist facilities predominantly based in the north of the island but with some developments planned for the interior. To date, no development has taken place at Ports- mouth or on the North Coast, and the few hotels that have opened in the Layou Valley or the Roseau Valley are either experiencing low occupancies or, as in the case of the Layou Valley Hotel, subsequently closed. 89. Tourism to the Caribbean on a large scale is inevitably dependent on two principal criteria--white sand beaches and accessibility. Dominica is in the unfortunate position of possessing few of the former and, at the same time, has limited accessibility. The specific proposals, therefore, in the development study, which still forms the basis of government policy towards tourism development, cannot be justified on market conditions alone, let alone accessibility. Specifically, the proposals for the Portsmouth area, which in 1975 were estimated to cost EC$5 million for essential infra- structure and a further EC$36 million for a 200-room hotel and support facil- ities, is not a practical proposition. Although the Cabrits is an attractive area, it has little tourist appeal from the point of view of a hotel develop- ment. Similarly, the other proposed developments are on a scale that is too large to be practical for the market. It is therefore recommended that the Government establish a plan based on the development of its mountainous hinterland for tourists and concentrate its marketing campaign on this parti- cular aspect rather than attempting to compete with those islands better placed to provide traditional holidays. 90. It is recommended that a detailed physical planning exercise be undertaken to draw up a practical development plan for the forests that could be implemented. Such a plan should be based on cabin or lodge-style facilities in the mountains, with the provision of adequate recreational activities inc- luding fishing, pony-trekking, sign-posted walks and canoeing. The success of the National Parks in North America, the Forestry Commission in Great Britain and similar developments in France, Germany and Scandinavia indicates that demand exists for holidays in a tranquil forest setting which permits relaxation from the everyday pressures of an industrialized society. Such developments in a Caribbean environment possess an added marketing advantage. It is recommended that technical assistance be provided for both studies. 91. The proposal that policies should emphasize forests rather than beaches does not wholly preclude the latter. Indeed, a market may well exist for "split-package" holidays with part of the time spent in the forest and part at the beach. Beach holidays inevitably are linked to white sand and few suitable beaches for this form of development exist in Dominica. Resand- ing black beaches by pumping offshore sand is an operation which is prohibi- tively expensive, often necessitating the construction of groynes to inhibit erosion and requiring a high throughput of tourists to make it a viable pro- position. - 26 - 92. White beach areas with development potential do exist, however, on the northern part of the island, particularly in the area of La Taille Bay and Woodford Hill Bay. These sites have the added advantage in that they are relatively close to the Melville Hall Airport, although currently served by a poorly surfaced road. These sites were identified by the development study as possessing potential for tourism investment and a possibility of some 890 beds was indicated. Here again, in view of the accessibility constraint to the island, the proposed scale is far too large. It is recommended that a feasibility study is undertaken to determine the viability of developing the two sites into smaller hotel developments of the folm currently being developed in Barbados. This study of development consists of a small complex of two or three 50-bedroom hotels each sharing commion facilities including some operational aspects as well as recreational activities. Such a development has the advantage of being relatively low cost per room. Again it is recommended that technical assistance be provided to undertake this study. 93. It is also recommended that priority should be given to the restora- tion of Fort Shirley, a rehabilitation of the once popular Botanical Gardens and to consideration of the possibility of developing a small-scale health spa based on the existing hot springs, mud pools and sulfurous waters. Technical assistance will be required for these tasks. Constraints to Tourist Development 94. Limited air access to Dominica is a ccnstraint to tourism. The existing Melville Hall Airport has a runway of 4,800 ft. which limits its use to small 50-seat aircraft. The proposed new Canefield airstrip may facilitate small aircraft access from the neighboring islands but will not be able to handle even the LIAT service. Such restrictions necessarily constrain tourism growth, since a priori, tourists to Dominica must arrive via a feeder service from one of the international airports on nearby islands. It is unlikely that a full-scale international airport will be constructed in Dominica in the foreseeable future, or indeed, if one could be justified on economic grounds. At the same time, the feeder services currently flying into Dominica--LIAT, Air Guadeloupe and Air Martinique--are inadequate for large-scale tourism and inevitably entail a stopover either in one or both directions during the journey. Since the large majority of tourists prefer the one-stop destination country, tourism to Dominica is inevitably going to be on a relatively small scale. This again, directs the development of tourism to the islands into an area which has significant appeal and which is exclusive to Dominica. 95. Tourism is further inhibited by the deteriorating state of the road system in terms of access to both hotels and tourist attractions, particularly those in the interior. While it is unlikely that tourist considerations alone would justify new road construction or even rehabilitation, it is recommended that due cognizance be taken of the impact of tourism in the proposed new overall roads program (see para 101). Access to the Boiling Lake, Freshwater Lake and Fort Shirely deserve consideration. - 27 - 96. Marketing of tourism in Dominica is presently ineffective. Dominica is no longer a member of ECTA, and marketing is undertaken by the individual hoteliers, by entertaining visiting tour operators and by issuing publicity brochures to visitors and tour operators alike. Having identified the form of tourist development that will take place and the market segment aimed at, Dominica should consider the possibility of rejoining ECTA or possibly having representation in North America and more especially in Europe, the latter being not only an expanding and increasingly prosperous market but also Europeans tend to be more adventurous in the type of holidays they take. With careful pricing it should be possible to develop an all-year round market from Europe, partic- cularly in view of the direct link from France to the French islands. It is recommended that technical assistance be provided to assist in this matter. Conclusions 97. Tourism to date has only been of minor importance to the Dominican economy. A potential, however, exists for the development of a relatively small tourist industry based primarily upon the scenic mountainous interior of the island. This requires a government policy emphasizing forests rather than beaches although a limited potential may exist for "split-package" holidays. Large-scale tourism is necessarily precluded by its lack of white sand beaches and the problem of air access. New marketing arrangements will be necessary if the full tourist potential is to be realized. E. Transportation 98. Domestic transport communications are unsatisfactory. Road condi- tions have sadly deteriorated over the last decade to the point where certain sections are almost impassable by conventional means of transport. The cause of this has been Government's inability to provide even the minimum levels of maintenance mainly as a result of the lack of current budgetary funds. How- ever, most productive enterprises (agricultural and industrial) are not physic- ally prevented from marketing their products although the domestic economic costs of transportation must be higher than would normally be expected in a country where distances between production and consumption/export centers are very short. An improvement of the road system is urgently required; without such, the nation's capital stock will further deteriorate, maintenance costs and requirements will increase and roads may become impassable. 99. External transport communications are generally satisfactory for present and projected traffic. The new Government-owned deep water port in Roseau, together with the new pier which will shortly be built in Portsmouth, should be adequate to handle the country's trade relatively efficiently. The existing Melville Hall airport, although located at a significant distance from Roseau, the main population and economic center, is essentially adequate to accommodate the amount of traffic and type of aircraft presently serving Dominica. While expanded port facilities and an enlarged airport could generate some additional traffic, the increase would be insufficient to - 28 - justify the very large investments required. The Government however still considers their provision to be a priority. Roads 100. The country's road system consists of 470 miles of "motorable" roads, of which 230 miles are asphalted, 168 miles are gravel or "tarish" (a kind of laterite) roads, and 72 miles are unsurfaced. In addition, there is an unknown mileage of tracks in the forests. The main asphalted roads, with the excep- tion of the transinsular airport-Roseau road, tend to hug the coastline and thus primarily serve to link population rather than production centers. Road access to the interior, where it exists, is essentially by the gravel, tarish and unsurfaced roads and some of the most badly broken up asphalted roads, which feed into the main asphalted roads for eventual access to markets. 101. Because of extreme weather conditions, poor drainage and insiffi- cient maintenance, the roads have physically greatly deteriorated over the years, and only few isolated sections, recently improved because their con- dition became intolerable, are in reasonable condition. Surface conditions vary greatly, even over relatively short distances, reflecting continuous emergency repairs rather than planned reconstructions and improvements of clearly defined sections between towns and/or important crossings. 102. There is under construction an EDF-financed road project for the improvement of two separate sections of about 8 miles each between Salisbury and Portsmouth on the West Coast Road, and of a 12-mile section between Hatton Garden and Castle Bruce on the East Coast Road. Responsibility for execution rests with the Crown Agents. However, even this important EDF project, cost- ing EC$6.1 million or about US$80,000 equivalent per mile, 1/ will only put a small dent in the total needs of road reconstruction and improvements. CIDA has indicated her willingness to make available C$8 million (EC$19 milLion) for further road rehabilitation, France has shown interest in financing recon- struction of part of the transinsular road, and the UK is to be approached for an allocation from the "Special Independence Package" to be made available for roads. 103. At present, however, there is no comprehensive road rehabilitation and maintenance program. The existing road network, as a result of the practice of only maintaining, repairing and improving those sections where such work was most urgently needed, consists of a large number of short sections of greatly varying conditions, a few reasonably good but mostly poor. It is recommended, as an immediate priority, that: 1/ Actual cost of roadworks in Dominica, as in most LDCs, are imposs.lble to compute accurately since on some projects existing PWD equipment is used but accounted for at subsidized rates, whereas on other projects, new equipment is purchased which may have considerable residual value. At times, there is a combination of both procedures. - 29 - (i) a complete inventory of the present road system be prepared with a detailed description of the existing deficiencies on each section; (ii) traffic counts be undertaken in order to indicate the present vehicle loads; (iii) on the basis of (i) and (ii) above that a full road rehabilita- tion and maintenance program be prepared, determining engineering and geometrical standards, priorities for and realistic phasing of reconstruction and a detailed program for maintenance for both existing roads and those to be rehabilitated. 104. It is further recommended that donors coordinate their assistance in line with the proposed overall roads program. Suitable phasing of assis- tance to avoid bunching of construction projects is of critical importance. This would reduce mobilization costs, permit more efficient use of equipment and provide a more stable source of employment. Such a program may also attract larger contractors and is likely to reduce overall construction costs. 105. It is imperative, however, that this program include maintenance as well as rehabilitation. The major cause of the deteriorating state of the road system has been the lack of systematic maintenance. If the rehabilitated roads themselves are not continuously maintained, the adverse weather condi- tions would rapidly create the need for a further rehabilitation program. 106. The assessment of the agricultural sector has indicated that the construction of additional feeder roads are required in order to expand agri- cultural production. Such feeder roads should also be included in the overall road program taking into account the timing of the agricultural developments to be serviced. Ports 107. The deepwater port at Woodbridge Bay, near Roseau, was completed in 1978 with CDB and CIDA finance. It consists of a 500 ft. berth with 36 ft. depth alongside, and a 180 ft. inter-island vessel berth adjacent to it. An access bridge connects the wharf structure to the nine-acre reclaimed land area and transit sheds. Ro-Ro facilities have been supplied by a modifica- tion of the southern end of the main wharf. These facilities are only suit- able for the type of barge presently being used by CTMT. The facilities could not be used by conventional Ro-Ro ships. Also, although the port authority owns some smaller pieces of equipment, the port is not yet fully operational for imports due to a lack of some larger pieces for handling containers. Approximately 50,000 tons of cargo per year are imported and 50,000 tons exported. Currently only 15% of cargo is containerized (approximately 20 containers per month) but it is projected that this will increase to 30-50%. 108. Dominica has two other jetties. The larger is at Portsmouth, close to the major banana producing areas. Here a new 220 ft. finger pier is to be constructed with CIDA assistance to handle the exports of bananas and other produce, and imports of agricultural inputs--approximately 30,000 tons per - 30 - year in all. The smaller is the old 93 ft. jetty in downtown Roseau for inter- island vessels. The two cranes working the wharf are in need of eventual replacement. 109. Given annual cargo volumes over the past few years and projections, port facilities in Dominica should be generally adequate for at least the next five years although a small amount of additional investment is required at Woodbridge Bay. The planned upgrading of the facilities at Portsmouth, through which two-thirds of the major export crops are moved, should improve the efficiency of operations to satisfactory levels. At Woodbridge Bay, there are two investment priorities: acquisition of container handling equipment for lo-lo vessels and ro-ro vessels amounting to an investment of say US$250-500,000; and improvement to the ro-ro berthing capability of the port. CIDA has expressed an interest in supplying the equipment. 110. Particular attention should be given to the issue of ro-ro handling capability since an increasing number of the very expensive large European and North American-bound container vessels transship containerized cargo to the smaller Caribbean ports by a ro-ro tug and barge service out of Puerto Rico. The change to transshipment by barge is being made because the Dperating cost of the large container vessels, carrying some 1,200 containers, amnount to some US$20,000 to $30,000 per day, and thus the shipping lines can no longer afford to call at ports where they would discharge only a few hundred :ons, some 10 to 20 containers, at a time. Ill. The Government is proposing an extension of the berth at Woodbridge Bay by 700 ft, to a total of 1,200 ft. The extension would permit the port to handle two ships at a time rather than the present one. Preliminary cost estimates for this extension are in the region of EC$25 million (US$9 million). However, congestion delays with the existing facilities are small and projected traffic increases are insufficient to be able to justify such an invest:ment. Airports 112. Dominica's only airstrip is Melville Hall Airport situated on the northeast coast of the island. It has a 4,800 ft unlighted runway, and a new passenger terminal which has recently been completed with CIDA assistance. The location of the airport is not suitable for instrument landings since at the landside the terrain does not provide adequate approach tunnels. Extending the runway into the sea has been considered, but costs are not commensurate with projected increased volumes of traffic. The annual number of passengers and aircraft movements has been increasing but freight decreased over the past few years. In the whole of 1977, there were only about 8,000 aircraft movements; congestion is thus not yet a problem. 113. The airport location, however, is far from ideal since it takes an hour and a half drive over a tortuous road to and from the capital and main population and economic center, Roseau. The Government with BDD assistance has begun work on a 2,000 ft. unpaved "test" airstrip located two miles north of Roseau at Canefield. It would be able to accommodate direct flights of STOL aircraft from other islands, and possibly of feeder traffic to and from - 31 - Melville Hall. It is anticipated that scheduled day excursion tourist flights from the French islands and private pleasure and cargo aircraft would use this airstrip, while larger LIAT aircraft will continue to use Melville Hall. It is anticipated that this project would increase the tourist traffic to the island and may possibly provide better facilities for the presently miminal agricultural exports by air. The Government's basic strategy is to develop Canefield for small aircraft operations as a first step. Depending on whether the operations prove feasible, consideration may be given to expanding oper- ations at Canefield and winding down operations at Melville Hall. However, until such time as a decision is taken, significant expense will be incurred in the aviation sector due to duplication of services, such as customs and immigration, whereas traffic volumes are low. According to the 1978/79 budget estimates, Melville Hall now requires EC$154,000 for operation and maintenance. This allocation to airfields may have to be about doubled, when Canefield becomes operational, and even more significant expenses would be incurred if duplication of airport equipment are considered. Once the initial tests at Canefield have been completed, it is imperative that a thorough reassessment of the airport sector be made. Preliminary indications are that projected air traffic cannot justify two airports although Government believes to the contrary. 114. Despite the substantial investments in Melville Hall in recent years (CIDA financed a new terminal and runway refurbishing) a number of additional small investments are required to ensure the operational safety of the airport. For the last few years, Melville Hall has been in a critical position concern- ing telecommunications equipment and fire and rescue equipment, both land-based and offshore. Each year requests for this and other basic maintenance equip- ment needed to preserve capital investments, have been deleted from the budget because of lack of funds. It is recommended that donors, as a matter of urgency, consider financing the equipment which has been estimated to cost EC$1 million. Summary of Needs for Immediate Action 115. The following are recommended as the most urgent requirements for action within the transportation sector: (i) The preparation of a comprehensive road rehabilitation and maintenance program including a road inventory, traffic counts, and recommendation of road design standards, priorities and phasing. All donors should coordinate their assistance in line with this program. (ii) In the port sector, the acquisition of container handling equipment for lo-lo and ro-ro vessels and an improvement to ro-ro berthing capability at Woodbridge Bay. (iii) The provision of telecommunications, fire and rescue equipment, and basic maintenance equipment for Melville Hall airport. - 32 - F. Economic and Social Infrastructure Electricity 116. Electricity sales in Dominica increased from 10.0 million units to 13.14 million units between 1972-77, an annual average rate of increase of 5.6%. The peak load increased from 2,510 Kws to 3,200 Kws, 5% per annum. The existing installed capacity of the Dominica Electricity Service (DES) is 6,621 Kws, of which 2,840 Kws (43%) is hydro; the hydro capacity is estimated to have supplied 88% of power generated in 1978 with an overall load factor of 48.3%. The installed diesel capacity is used primarily for peak lDad generation. DES projects that by 1982 units sold will increase to 16.36 million and the peak load to 4,082 Kws, average annual increases of 4.5% and 5.0%, since 1977, respectively. The load factor in 1982 is expected to increase to 61.7% without any increase in generating capacity. 117. DES is a joint venture company with the Commonwealth Development Corporation (CDC) owning 51% of the share capital and the Government z9%. Prior to March 1976 the company was 100% owned by CDC. The Ministry of Communications and Works has responsibility for the electrical energy sub- sector as well as all energy exploration and development activities (includ- ing geothermal energy). The Public Utilities Board which falls under the portfolio of the Ministry of Communications and Works has responsibility for setting electricity prices. 118. The DES is presently in a critical financial condition. In 1977 it sustained a loss of EC$135,000 on revenues of EC$1,563,000 before an esti- mated allowance for depreciation of EC$311,000. Electricity tariffs remained fixed between 1973 and March 1978 which led to the deterioration in the company's financial situation. In March 1978 tariffs were raised by about 25% on average and a fuel surcharge was introduced. This will improve the financial condition of the DES but not sufficiently to lead to a surplus high enough to cover depreciation. The estimated surplus in 1978 is EC$181,000, but depreciation requirements are estimated at EC$318,000, implying a net loss of EC$187,000. No dividends will be paid. Tariffs are still below those in other ECCM countries 1/ and a further increase will be necessary if DES is to be able to create a surplus sufficient to become creditworthy for future lend- ing for expansion and development programs. 119. While no expansion of generating capacity is envisaged to be neces- sary over the coming five years, the public investment program calls for investments of approximately EC$5 million by the DES. These expenditures are required to increase the efficiency of the Trafalgar hydro station to cover the dry weather spells and to expand the electrification of rural areas. How- ever, such investments appear only justified provided electricity tariffs are further raised and the DES is made creditworthy. 1/ Most other ECCM countries rely solely on diesel generation which has a higher unit generating cost. DES, however, does not create an adequate surplus to cover replacement of capital. - 33 - Housing 120. The housing sector in Dominica is characterized by a slow rate of construction of new or renovated units, and a low level of effective demand as a result of mounting costs and the lack of housing assistance on terms which low and lower-middle income households can afford. The need for an active program of public and private investment in housing is overwhelming. The existing housing stock is antiquated and deteriorating rapidly. The absence of infrastructure, particularly water supply and latrines, violates acceptable standards of health and safety. Yet the response of the public sector to housing needs has been meager. Only two projects involving con- struction, a UK-aided self-help scheme and CDB Working Class Housing, are ongoing, and the CDB scheme provides fewer than 200 houses over two years. At an average monthly rental of EC$69 (US$26) and even with government subsidy to cover the costs of land, these homes are beyond the reach of households with annual disposable incomes at the national average of EC$3,300 (US$1,222) in 1977. 1/ The supply of mortgage finance for private housing construction has also been insufficient to address effective demand. The only non- commercial source, the CDB-financed secondary mortgage scheme administered by the Roseau Cooperative Credit Union, is presently depleted and needs replenishing, but with interest rates of 9% and at the prevailing costs of private construction, demand for the mortgage loans has been low relative to the funds available. 121. To reduce housing costs and address effective demand more adequately, a sector strategy must be aimed at developing a package of projects which meet the minimum needs through lower standards of provision and appropriate construc- tion techniques. Use of prefabricated materials, provision of infrastructure and core housing utilizing owner self-help, and upgrading of deteriorated housing rather than direct reconstruction are approaches which must be employed if any assistance at all is to be given to the low income group (households with incomes of EC$1,200 or less), and to provide more than token assistance to families in the lower-middle income range (EC$1,200-5,000 per annum). Although there appears to be some potential for use of indigenous building niaterials such as timber and clay, in the near term, bulk importation of inputs may be a more effective means of lowering building costs through economies of scale. 122. The Housing Development Corporation (HDC), a statutory body estab- lished in 1976, bears the major responsibility for analysis of policy and implementation of programs in the housing sector. The housing projects included in the 1978/79-1983/84 investment program are largely those proposed in the Housing Sector Plan prepared by HDC and the Government and which still require external financing to be identified. For the low income target group, the program includes a sites and services project and a home renovation scheme, both employing aided self-help. The direct cost to the owner in both projects, excluding own labor, is estimated as EC$5,500-6,500 in 1978 prices. Even with interest of only 5% repayable over 30 years, families would require an annual 1/ It is assumed that households spend up to 20% of monthly income on housing. - 34 - income of EC$2,000 to participate in either program. A pilot demonstration scheme to introduce indigenous building materials into housing construction is expected to lower housing costs up to 50%. If the costs of inputs are substantially reduced through bulk procurement and use of some local materials, and if the standards of sites and services are kept to a minimum, the unit costs of renovation and core housing might be lowered to around EC$2,000. Even households with incomes of EC$1,200 could afford such assistance at near commercial terms (say, at 10% interest repayable over 25 years), thus making it possible for funds to be attracted to the housing sector so that the projects can be replicated on a wide scale. However, some subsidy may still be required for the poorest families, particularly where considerable develop- ment of land or infrastructure is involved. In such cases, it is recommended that subsidies be provided by means of highly concessional donor assistance. 123. For middle income households, the investment program provides for an extension of the CDB-financed secondary mortgage scheme and urban working class housing, introduction of multiple-story condominiums in Roseau, and home renovation. At an average expenditure per unit of EC$11-13,000 (1978 prices) and assuming interest rates of 10%, the construction projects will bypass the lower middle income group entirely. For some families in this group to acquire assistance without "raiding" the low income housing described above and without requiring subsidization by Government, the middle class housing schemes will also have to incorporate lower standards and use prefabricated materials and self-help so that expenditures for most units may be kept to a range of EC$3-9,000. Since, for a country at Dominica's level of development, public investment funds should be devoted more to large-scale assistance for low and lower middle income families than to the provision of very few units for households above the EC$5,000 annual income mark, it is recommended that the project designs for the middle income housing projects be reevaluated in this light. Households in the middle income bracket could finance loans of EC$11-13,000 through the banking system, but this level of credit is grossly inadequate given the prevailing costs of private construction. Thus, even for this income group, some government intervention in the housing sector, at least through provision of lower cost materials, is necessary to enable effec- tive demand to be served. 124. While the HDC has the capacity for project preparation and implemen- tation, technical assistance has been proposed to review the housing models under consideration and develop a set of priorities to ensure that the housing program provides the greatest possible coverage of needs at the lowest: cost. It is also recommended that study be made of bulk importation of construction materials at the national or regional level as a means of reducing the cost of housing construction. Water Supply and Waste Disposal 125. With an average annual rainfall of 100" and an abundance of rushing rivers, Dominica enjoys an ample supply of water, but the developed sources of potable water are inadequate for the present population and for future expan- sion. The distribution system in most areas is weak, leakage is high, and the reservoir capacity at some sites does not permit adequate service during - 35 - periods of peak demand. The lack of treatment poses a potential health hazard, since raw water is pumped to the consumer in most of the supply schemes except those serving Goodwill (Roseau), Grandbay, Vieille Case and Penville. 126. Responsibility for the provision of water services is vested in the Central Water Authority, which the Government established to implement the Development Plan for Water Supply and Distribution prepared by WHO/PAHO in 1963. The Central Water Authority installed new water sources in the south west, including Roseau with CIDA assistance, and in the Wesley/Woodford Hill area, with UNICEF assistance, as the first phase of the water supply scheme. The CDB-financed essential parts of the second stage of the develop- ment program, but as a result of cost overruns owing to delays in construction, ony half of Phase Two has been completed. The Government is urgently request- ing financing from CDB to finish the second stage, which includes the follow- ing minor works: (1) improvement of water supply to Soufriere and Scottshead, (2) establishing new water supplies for Bellevue, Chopin, Eggleston, and Giraudel, and (3) other minor water works schemes. Given the long delay since the original conception of Phase Three, the Government has proposed a renewal of technical assistance from CIDA to review the scheme and recommend those aspects which warranted immediate financing, as distinct from elements which can be postponed until further demand arises. 127. The Government is seeking assistance concurrently from CIDA and CDB to undertake the construction of the third phase of the water development program. As originally outlined, Phase Three provides for an improvement and extension of both urban and rural water supply systems in the north, east and southwest. 128. Although investment in the infrastructure of the water supply sector is greatly needed, the shaky financial structure of the Water Authority raises doubts as to its capacity to maintain an extended system. The existing tariffs have been inadequate to meet the operating costs to date, requiring Government subsidies of EC$200,000, on the average, per year. As a pre- requisite to the granting of further capital assistance to the CWA, steps should be taken to strengthen its internal finances. 129. The present practices for disposal of liquid and solid wastes in Dominica are primitive and fragmented. Only one residential section of Roseau has a sewerage system, operated by the Housing Development Corporation. On most of the island, raw sewage, including hospital wastes, is discharged directly into the sea. Collection and disposal of refuse is carried out more or less regularly only in Roseau, by the Town Council, and in Goodwill by the Housing Corporation. Existing dumps near the towns are almost filled to capacity and the spillover of solid wastes on the ocean front and roads, particularly at the entrance to the capital, pose a serious threat to health and the environment. 130. A major issue which must be addressed during the planning period is the need for a national agency with the capability to manage a program of waste collection and disposal and to provide the necessary surveillance of this activity. - 36 - 131. Responsibility for supervision of home sewage disposal rests at pre- sent with the Ministry of Home Affairs, Health and Welfare, which has neither the expertise nor the equipment to oversee a national system of waste disposal. The Government has approved in principle the creation of a central Liquid and Solid Waste Management Authority as a statutory body to design and implement a country wide scheme. While the establishment of this body, with an adequately trained staff, is essential, a legal framework must also be devised which will set standards for the acceptable levels of pollution and give the agency a basis for enforcement. Clarification of responsibilities between the agency and local governments will also be required. 132. As an immediate measure, Government is requesting external aid to the Ministry of Home Affairs to acquire capital equipment and short-term technical assistance in the development of sanitary landfill disposal of solid wastes in Roseau and Portsmouth. Provision has been made in the public sector investment program for rodent control and extermination which is vitally needed, particularly in Roseau. A high priority should also be given in present investment program to the Government's requests for capital aid to resume the private latrine program and to provide public latrines. In the former project, Government will sell precast latrine units to all house- holders in areas where it is appropriate to construct private pit latrines. In those villages where home facilities are unsuitable for a given hoising density or soil structure, public toilets and showers will be provided. 133. These four projects, although relatively small and of an emergency nature, should form part of an ongoing waste disposal system for the entire island. A national plan for liquid and solid waste management should be prepared at an early date, if necessary even before a statutory body for this sector is created. Provision for technical assistance for such a study has been included in the investment program. A major consideration of the plan should be to provide an integrated sewerage system in each of the urban areas which will be consistent with the water supply program already proposed. Education 134. Formal education is compulsory for children aged 5 to 14 in a 2-5-3 year sequence of which the last stage is termed junior secondary level. In 1976/77, about 21,300 students were enrolled in the "tall-age" primary schools offering all 10 grades, and another 1,500 were enrolled in Forms 1-3 in the secondary schools. The total number of places in the first ten gradeE appears sufficient to enroll the population aged 5-14. However,wastage throuFh the system is high and the distribution of schools is poor, which has led to some overcrowding. Although accurate historical data on enrollments are lacking, the available figures imply that about one fifth of the students enrolled in standard 1 drop out before they reach standard 5, and 30% of the standard 5 students leave school before completing form 3. 135. Because the existing secondary schools (Form 1-5) cannot accommo- date all the students leaving standard 5, a common entrance examination at that point is used to determine which students will continue in the all-age primary schools. Since most students terminate their education at form 3, the Government has made some efforts to adopt a practical studies-oriented - 37 - curriculum for the junior secondary level. Although several of the all-age primary schools have been designated to provide woodworking, home economics, crafts, and agricultural training for their own and for area students, almost no instruction of this sort is actually being carried on at this level. 136. Post Form 3 schooling is provided first at the secondary schools, which enrolled abut 1,000 students at the upper level in 1976/77, 150 of whom were in Form 6. Church groups are heavily involved in the administration of secondary education in Dominica, and Government provides financial assistance to meet teachers' salaries in the denominational schools. 137. Further post-secondary education is provided at the Teachers College, and the Technical College and Nursing School (see below). Annual output of the two-year teacher training course amounts to 20 given present capacity, and short in-service workshops are conducted for about 140 untrained teachers each year. 138. Major issues on the development of education in Dominica are the lack of recurrent financing capability, the shortage of trained teachers, and the absence of a practical orientation to the curriculum. On the first point, the shortage of funds for recurrent expenditures has caused most primary schools to become severely dilapidated and deprived students of adequate books and writing materials. Since 1973, the Ministry has spent, on average, only 2% of the total expenditure on primary education on teaching supplies and maintenance, or EC$0.90 per student per year. Given the cost constraints, the shortage of trained teachers is not surprising. About 400 untrained teachers are presently in service in the primary schools and 50 in secondary education. At the existing rate of output of the Teacher Training College, the need for trained teachers would not be met until well into the 1990's, without allowing for attrition. Both the lack of suitably trained teachers and of funds for equipment and supplies have impeded implementation of a practical studies course at the Junior secondary level, where most students are given no introduction to agricultural or vocational concepts, or to devel- opment of manual skills. 139. Ongoing projects in the education sector consist mainly of primary school construction by CIDA (nearly complete) and by the UK. Once the few schools in the project pipeline are completed, construction of additional primary schools should not be required, since the population aged 6-14 is tentatively projected to decline. Except for replacement of selected schools which are beyond repair, the development of primary education should focus on improvement of quality. The project for rehabilitation of primary schools should receive a first priority, as it aims to make the most urgent physical repairs, enlarge the capacity of the teacher training college, and expand the supply of affordable textbooks, all with minimal increases in recurrent costs. At the post-primary level, the strategy should be geared to building up the junior secondary program in selected primary schools in such a way that students in even fairly isolated settlements can continue their schooling to this level. Given the difficulties of transport and the likelihood of recurrent financial constraints for some time, Dominica should not aim to provide more five-form secondary school places, other than those existing - 38 - or planned in the major regional centers. By the latter half of the 1979-83 period, some investment should be made in junior secondary classrooms and workshops. In the interim, study should be made of experiences in other countries with the development of school gardens and other low-cost teaching methods for both primary and secondary levels which relate academic dis- ciplines to an agricultural economy. Manpower Training 140. The largest manpower training institution within Dominica Ls the Technical College, which enrolls about 90 full-time students in two-year craft-level courses in mechanical and electrical engineering, agricul:ture, auto mechanics, building trades, and secretarial studies. A technician course in mechanical engineering is also offered for about a dozen entrants holding 0-level certification. Given the small size of the industrial sector in Dominica, unemployment of graduates has been high; a recent tracer study showed that only about 40% of the college output from 1974-76 gained relevant employment on the island. The job prospects are most favorable for motor mechanics at present. There appears to be a growing need for more part-time courses to upgrade engineering craftsmen and secretaries already employed, and demand for carpentry graduates may increase as the forest industries projects get underway. Given these requirements and the high cost of full- time study at the college, the proposed project to provide evening classes in selected trades appears justifiable, although care must be taken to restrict the courses as much as possible to upgrading workers, rather than increasing the numbers of craftsmen at the basic level. 141. Agricultural education has been relatively neglected within Dominica. The staff for the agriculture course at the technical college are underutil- ized, apparently a reflection of weak coordination between the Ministries of Education and Agriculture on this point. The proposed project to convert the Londonderry youth camp to train farmers and field technicians for the settle- ment schemes requires further preparation, but could contribute measurably to the success of the settlement program. A significant expansion in the number of fellowships available for overseas diploma and degree-level training in agriculture is also required to develop the extension staff, the Land Manage- ment Authority, and ministry staff in all departments if the proposed agri- cultural projects are to be carried out. 142. In general, training the required number of Dominicans to the degree level is constrained most of all by the Government's inability to meet the full economic cost of education at the regional university, since most of the donors require fellowship or loan recipients to train within the region and do not pay economic costs. As a result of Dominica's large arrears with UWI, the institu- tion has refused to admit Dominican students unless they or a sponsor other than their Government promises to finance the economic costs. Priority areas in which degree and diploma-level fellowships are required during the 1979-83 period are administration, agriculture, secondary education and health. In an effort to conserve costs of post secondary training and to increase ouitput, the Government has proposed to consolidate the facilities of the TechnicaL College, Sixth Form College, and nursing program in one College of Further Education. - 39 - Health 143. The Government's objective in the health sector is to provide an integrated program of preventive health services, comprising community centers for primary care, health education, and environmental inspection, supported by a system of secondary, or curative health facilities. The health infra- structure consists of 44 health centers each staffed by a District Nurse/ Midwife whose duties include operating material and child health clinics, community health instruction and providing basic health care. Twelve health inspectors are posted to the rural areas to inspect water supplies and com- municable diseases and enforce public health regulations. Three hospitals, of which the largest is Princess Margaret Hospital in Roseau, provide curative care for patients referred by the rural health centers. Fourteen district medical officers (of which two are temporary and six expatriate) service the hospitals and visit the clinics and health centers. 144. Although the Government's strategy for health service is admirable, in reality it is seriously undermined by the lack of recurrent finance for maintenance, salaries, and drugs, by shortage of trained staff and equipment, and by difficulty of transportation. Most of the health centers are actually rented houses which lack facilities for the multiple functions they are intended to provide. As a result of poor roads and inadequate upkeep of vehicles, district medical officers and inspectors have great difficulty visiting all the centers regularly, and cannot efficiently refer patients to the hospitals when special treatment is required. Although the present health establishment represents the minimum staff needed to carry out the sectoral program, funds are lacking to fill certain critical vacancies. Moreover, given the increases in costs of drugs and salaries, any real improvement in services is unlikely in the foreseeable future. 145. Ongoing projects which have received external funds consist of renovation of the Portsmouth Hospital and physical improvement of Princess Margaret Hospital. Government has undertaken to replace two health centers at LaPlaine and Delices, and local self-help funds as well as foreign volun- tary organizations are financing the rebuilding of Marigot Hospital. As the existing hospital facilities are in dire condition, the requests for addi- tional external funding to complete the Marigot and Portsmouth Hospitals are justified to maintain the present level of care. A preliminary plan which has been drawn up for the rehabilitation of Princess Margaret Hospital where further renovations and additions are urgently needed. 146. The largest single investment proposed in the health sector capital program in the 1979-83 period is EC$1.3 million for replacement of six health centers, together with equipment (including refrigerators for storing vaccines) and expansion of the dental clinic. This project must receive a high priority if primary health care is to be provided to all Dominicans. Provision of a health education unit and of vehicles for the malaria eradica- tion program are also essential to make the strategy of community health a reality. - 40 - 147. To meet the manpower needs of the health sector, a first require- ment is greater financial support for the nursing school so that the intake of about 20 nurses can be maintained each year. Government is requesting fellowships to train about 50 of the existing health staff at diploma level or below, mostly in public health areas over the next three years. PAHO is expected to provide these fellowships. The major manpower problems in the sector, however, will continue to be paying the salaries of the required health staff, and attracting personnel once trained to return to Dominica, partially to the rural clinics. - 41 - III. THE PUBLIC SECTOR INVESTMENT PROGRAM 1978/79-1983/84 148. The public sector investment program for 1978/79-1983/84 consists of projects which are ongoing, projects in the pipeline for which external assistance has been requested, and projects for which no donor has yet been identified or approached. Although Dominica has still to complete the pre- paration of a national development plan for the period, the list of proposed projects reflects the concerns and priorities of Government. The projects identified in the several sectors are not all supported by complete technical, economic, and financial feasibility studies, however. The estimates of total public sector investment are made, therefore, subject to the completion of these studies and the assumption that they will confirm the feasibility of these projects. 149. Taken together, the projects to be implemented during the five-year period aim at promoting the viability of the economy beyond the medium term. A first objective of the program is to halt and reverse the deterioration of the nation's capital stock, on the one hand by rehabilitating important tree crops whose yield has been declining and, on the other hand, by carrying out a program of reconstruction and long-delayed maintenance of the road network. A second objective is to undertake a phased reduction in infrastructural investment and establish a basis for diversified growth by increasing emphasis on directly productive projects--by settling small farmers on Crown Lands, expanding or introducing the production of various crops and livestock, set- ting up new industries, and developing a new focus for tourism. Thus in the productive sectors, the investment program releases the economy's potential for growth, most of which will materialize after the period, however. In the social sectors, expenditure to eliminate the backlog of maintenance in the health and education sectors are high priorities of the program, as a pre- requisite to any major expansion of services. Projects, however, are in- cluded which will expand vital infrastructure, particularly as related to water supply and housing. Public investment is expected to have only a minor impact on the rate of unemployment, and of output, up to 1983/84, since most of the projects to expand productive capacity come on stream late in the period while the labor force will continue to grow at a rapid rate. The recurrent cost implications of the proposed projects will also be relatively minor because they focus on improvements in existing infrastructure and services, and the productive enterprises are expected to be self-financing. In sum, the public sector investment program addresses the sectoral issues and strategies outlined in the preceding chapters. 150. The proposed public sector investment program calls for a total expenditure of EC$173.5 million over the period 1978/79-1983/84. This sum represents a real level of expenditure of EC$22 million in 1978 prices at the beginning and end of the period, and about EC$24 million during each of the middle years. In current prices, the level of capital expenditures in 1978/79 will be double that achieved in calendar year 1975; nominal capital expenditure is projected to rise sharply in 1979/80, to EC$26.6 million, and again in 1982/83, to EC$34.5, before dropping slightly to EC$32.9 million in the final year. As a proportion of GDP, the public sector investment program - 42 - will hold steady at around 24% during the period, with slightly higher shares in the second and third year. This compares to an average of 16% of GDP devoted to capital expenditures from 1975-77. Fixed capital formation accounts for about 85% of the total public sector investment program in the first two years, reflecting the heavy expenditure on ongoing infrastructure projects, but declines to about 75% by the end of the period as transfers to the private sector in the form of credit schemes for purchase of lancL and housing come on stream. As a result of these schemes, the relative importance of capital transfers in the public sector investment program is much greater during the period projected than in the previous three years. Whereas the proportion of the public sector investment program to be undertaken by Central Government reaches a high of almost 70% in 1978/79-1979/80, the development banks and state enterprises are expected to resume their his- torical share of slightly more than 50% of total capital expenditure by the end of the period. Ongoing projects comprise 90% of the public sectcr investment program in 1978/79, and average 30% of the total over the entire period. 151. Over half of the projected public capital expenditures will be made in the productive enterprises of agriculture, industry and tourism. The rela- tive importance of agriculture in investment will increase throughout the period after a previous downward trend, rising from EC$8.1 million (37% of the total) in 1978/79 to EC$15.4 million (a 47% share) in the final year. Major ongoing projects in this sector are the UK-financed Banana Development scheme administered by Winban, and Tree Crop Diversification; the Coconut Fertilizer Fund assisted by CIDA as part of a long-term effort to expand coconut production; and feeder roads, the current phase of which is nearing completion wth CDB assistance. Land resettlement, to be undertaken in two phases, is the largest of the new projects, involving the sale of Crown Lands to farmers and the provision of some infrastructure. A major replenishment of funds for feeder roads to assist in the bringing of new lands into cultiv- ation is being sought. Separate projects have been included in the program to rehabilitate limes and grapefruit; expand acreage for coconuts, coffee, and other tree crops; and develop cattle, sheep, sugarcane and corn production. Modest increases in output of coconuts, bananas, and citrus are projected within the next five years as a direct result of project investment. On the whole, however, the effect of public sector investment on agriculturaIL output will only occur after 1983/84 because the projects materialize late in the period, and most concern tree crops and breeding stock which take several years to become productive. Projects to build up human capital in agriculture through the training of farmers and extension workers have been included to complement the directly productive investment in the sector. 152. Industry and tourism together will receive about 10% of capital expenditure. Development of forestry and sawmilling forms the core of: the industrial sector program. A pilot logging and sawmilling scheme is presently underway with UK assistance, and a major expansion of the operation is proposed for external financing. This phase could yield a significant output c,f cut board within the planning period. Additional new projects for the production of knitwear and processing of coir and clay for building materials have been included, although they are unlikely to become operational before 1983/84. - 43 - Several of the Government's proposals for industrial projects which seem premature or unfeasible in their present design have been omitted. A request has been added for an expansion of factory shell construction, which should provide an impetus to the development of private industry. In the tourism sector, the Cabrits Development Scheme has not been included in the public sector investment program, as it is not considered to be economically or financially viable. Rather, small expenditures are proposed to undertake a tourism marketing survey and possibly to develop tourism activity based on the national parks. Overall, the investment program is not expected to have a significant impact on output in either sector or on the reduction of un- employment by the end of the period. 153. The transportation sector will receive the largest share of capital expenditures after agriculture (averaging 20%), as a result of heavy ongoing investment by EDF in the east and west coastal roads, construction of the Canefield airstrip by the UK, and CIDA assistance with the Portsmouth pier and road rehabilitation. The large expenditure on roads, which will occur mainly in projects already approved, is necessary to prevent further deter- ioration of the capital stock in this sector and to improve services for agricultural producers. Relatively small investments to enhance the utility of the airport and port are proposed for the middle years of the planning period. 154. The remaining project of productive infrastructure included in the program is a rural electrification/hydro scheme. This could commence by 1980/81 pending the outcome of feasibility studies which have yet to be undertaken. 155. Social investments comprise about 22% of total capital expenditures. The largest projects include a two-phased expansion of the water supply system which has already received some funding from CIDA and CDB, and provision of equipment and technical assistance for the introduction of a solid and liquid waste disposal system. A major effort of capital formation in housing is an urgent necessity during the period, both by provision of mortgage finance and direct construction to replace and rehabilitate the antiquated housing stock. Projects which are proposed for a renewal of financing include aided self-help housing, for which UK funds are nearly depleted, and the secondary mortgage fund and urban working class housing scheme previously supported by CDB. 156. Investment in education consists mainly of ongoing primary school construction and expansion of training places which, although a high priority, will not imply large capital expenditures. In the health sector, external financing is being requested to complete construction and equipment purchases for the Princess Margaret, Portsmouth, and Marigot Hospitals, which are under- going renovation with assistance from the UK and private donor agencies. Rehabilitation of health centers rounds out the development of social infra- structure during the planning period. 157. The ability of the public sector to carry out the proposed invest- ment program is a matter of concern. Implementation of the major ongoing projects has proceeded without serious problems or delays mainly because - 44 - donors have provided technical assistance to manage the projects, such as by contract with Crown Agents in the case of the EDF roads. In instances where implementation has been attempted by local subcontracting, progress has been much less smooth. As only about a third of the public sector investment program comprises ongoing projects, additional technical assist- ance will be imperative if implementation of the overall program is to be carried out efficiently and according to schedule. Technical assistance will be required in particular to implement the infrastructure projects il the pipeline and the projects for which a pilot or model scheme has not already been carried out in the country. Preparation of the proposed projects is likely to pose the major bottleneck, however, as many of them are still at the concept stage. Feasibility and design studies will be required with external financial and technical assistance for most of the projects. Provision has been made in the investment program for technical assistance to carry out studies relating to project preparation and also including some sectoral planning for roads, tourism, housing, water supply and sewerage. - 45 - IV. ECONOMIC PROSPECTS 1979-1983 A. General 158. Although the economy has exhibited a fairly strong growth performance during 1976-78, real GDP remains below the level achieved in 1972. The island possesses the physical resource endowment to substantially increase output but its ability to do so over the medium term is strongly limited by the deterior- ating state of the economy's capital stock, the long gestation period required by the investments in which it has a comparative advantage, and the general lack of confidence of investors. This situation is further aggravated by, the critical position of the public finances which will require austere measures if they are to be placed upon a viable basis. Nevertheless, if the recommended policies are adopted and the public sector investment program is implemented on a timely basis, real per capita growth of 2-1/2 percent per annum on average could be attained between 1979 and 1983 and the economy could be in a strong position to attain higher growth rates during the latter half of the 1980's. All this is predicated, however, on the establishment of an appropriate institutional structure and introduction and maintenance of sound economic management. B. Output and Expenditure 159. The prospects of medium-term growth rely predominately on the performance of the agricultural sector. It is unlikely, however, that the recent growth performance of this sector can be sustained primarily because of the outbreak of leaf spot disease. Minimal growth is expected in 1979 but, on the assumption that leaf spot disease can be controlled and that the impact of the breakup of estates is only temporary, and agricultural output, spurred by the Government's fertilizer schemes for bananas, coconuts, and later citrus, should be able to attain a growth rate averaging 3% per annum. Manufacturing is expected to be limited by the continuing low level of confidence in the economy but the increase in coconut production and the expansion into shampoos should also permit real output to grow by at least 3-4 percent per annum. Overall, with services following the performance of agriculture and industry, real GDP should also be able to attain a growth rate of about 3% per annum, 2-1/2% per capita. 160. The prevailing low level of confidence, however, is expected to limit the average annual level of private investment to about 8% of GDP throughout 1979-83 but public sector investment is expected to compensate partially for the limited performance of the private sector. In 1979 public sector investment is projected to reach nearly EC$21 million, and comprise over 70% of total investment. Gross domestic investment is expected to peak at about 30% of GDP in 1979 and 1980. It declines to 26% of GDP in 1983 because of the growing share of land transfers in public sector capital expenditures with the introduction of land settlement projects. This rela- tively high level of investment, however, is unlikely to have a direct and - 46 - immediate impact upon output and incomes but will instead halt the deter- ioration in the nation's capital stock and build up the long run proluctive capacity of the economy with investments involving the eventual expa-ided production of coconuts, sugar, corn, citrus, livestock, forest products, etc. 161. The high level of investment, modest growth rate and the essential measures in the public finances will of necessity limit growth in consumption. Public consumption is expected to fall from 31 percent of GDP in 1979 to about 23 percent of GDP in 1983 due to required restricted growth in public expendi- tures. Private consumption, no longer buoyed by back pay from Government, is likely to fall in 1979 but thereafter recover and achieve a small real increase on the average over the period. Private savings will be required to remain fairly constant at the historical level of about 10 percent of GDP while the public sector reverses its position from being a net dissaver to one where, by 1983, public sector savings reach 3 percent of GDP. 162. Available indicators imply that, with allowance for increased emig- ration, 1/ population will grow on average by 0.3% per annum 1977-83. However, the rate of growth of the labor force is expected to be about 2% per annum, representing a fall from the 3% during the early 1970s. As a result, 4,000 new entrants will be seeking jobs during the period in addition to the approx- imately 5,000 already estimated as unemployed. The public sector investment program is geared more to attainment of long-run viability of the eccnomy than to employment generation. Nevertheless, the emphasis on investment in produc- tive agriculture in particular should generate a number of long-run job oppor- tunities. Crop development, rehabilitation and settlement projects should all provide significant employment. 163. The increasing emphasis on housing and the road rehabilitation pro- gram should provide an increase in employment in construction, especially for the semi-skilled and unskilled workers. Private sector investment is expected to remain subdued but public sector investment in industry, primarily forestry, could restore employment in the sector back to the levels prevailing in the 1960s. Overall, although the rate of unemployment may not decline substan- tially by 1983, the number of jobs created during the period should at least absorb the new entrants to the labor force. C. Public Sector Investment and Its Financing 164. The public sector finances have been experiencing serious difficul- ties with continuing current deficits financed by external budgetary assist- ance and borrowing from the domestic banking system. As the United Kingdom has indicated that it intends to phase out budgetary assistance by 1930/81 and as the domestic financial system has the capacity to provide very limited increases in credit to the Government, Dominica faces the monumental :ask of eliminating the current deficit and producing public sector savings large enough to service maturing debts and make a meaningful contribution to its investment program. This can only be achieved by adequate policy measures backed up by the establishment of an appropriate institutional structure and the introduction and maintenance of sound economic management. - 47 - 165. It is anticipated that the 1978/79 public finances will be manage- able in spite of the 40% public sector wage increase, effective January 1979. This is largely because of the receipt of an estimated EC$7.1 million in budgetary assistance from the UK Central Government. Current revenues, inclusive of budgetary assistance, are estimated at EC$35.9 million. Current expenditures are estimated at EC$37.0 million including repayment of arrears of EC$3.5 million. The state enterprises, in aggregate, should break even and the rest of general government, predominately the Social Security System, is projected to produce a surplus of EC$2.0 million. The public sector investment program is expected to be fully financed. Disbursements of external loans and grants are expected to cover 96 percent of capital ex- penditures. After allowance for capital revenue and amortization of EC$0.6 million, the public sector will be required to borrow only EC$0.1 million from the domestic financial system. 166. The task of financing the public investment program for the period 1979/80 to 1983/84 is, however, much more difficult. In order to finance public sector capital expenditures totaling EC$151.3 during the period 1979/80 to 1983/84 public sector savings of EC$19.9 million will be required. The United Kingdom has indicated that it will only be willing to provide EC$3.0 million in budgetary assistance to help attain this target for public sector savings. Consequently, if the targetted levels of public sector savings, which increase from 1.3 percent of GDP in 1979/80 to over 3 percent in 1983/4, are to materialize, the Government will be required to implement a program containing the following or equivalent measures: (a) Current expenditures need to be kept under exceptionally strict control increasing by only 3.4 percent per annum on average through 1983/4. To achieve this, the wage bill should be almost frozen at the current level with no additional wage settlements and virtually no net additions to the number employed during the period. Expenditures on goods and services need to remain constant in real terms. If the recommended program of road main- tennce and essential increases in other such expenditures are to be made, this will imply corresponding cuts in existing expenditures. Transfers similarly need to be held at present real levels. Such a program will require substantially stricter budgetary control and financial management than has been practiced in recent years. (b) A major package of revenue measures totalling EC$2.4 million (2.4 percent of GDP) needs to be introduced during 1979/80 rising to EC$3.8 million (3% of GDP) in 1981/82. On the basis of projected economic prospects, current revenues, excluding budgetary assistance, would decline from 31% of GDP in 1978/79 to 28% of GDP in 1983/84 even with the introduction of the proposed new property tax. Additional revenue measures are thus necessary to compensate for the loss in budgetary assistance and to counteract this inelasticity of the present tax system with respect to GDP. It is recommended Table 1: FINANCING OF PUBLIC SECTOR INVESTMENT, 1977/78-1983/84 (as percentage of GDP) Actual Projected 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 Public Sector Capital Expenditures 19.0 23.7 26.2 25.0 23.0 24.6 21.0 Central Government 9.1 16.1 17.2 14.0 14.0 13.1 10.1 Rest of Public Sector 9.9 7.6 9.0 11.0 9.0 11.s 10.9 Financing 19.0 23.7 26.2 25.0 23.0 24.6 21.0 Domestic Sources 1.4 1.6 2.6 5.0 5.6 6.3 6.5 Public Sector Savings -1.4 1.0 2.0 3.0 3.7 3.6 3.0 (Central Government) (-3.6) (-1.1) (-1.4) (-0.2) (0.8) (1.0) (0.6) (Rest of Public Sector) (2.2) (2.1) (3.4) (3.2) (2.9) (2.6) (2.4) X Capital Revenue - 0.5 0.3 1.6 1.5 2.2 3.1 Net Domestic Borrowing 2.8 0.1 0.3 0.4 0.4 0.4 0.4 External Sources 17.6 22.1 23.6 20.0 17.4 18.3 14.5 Project Specific External Financing 17.6 22.8 25.1 22.3 19.8 20.5 16.0 (Ongoing Projects) (17.6) (21.4) (9.1) (5.1) (3.7) (3.3) (3.0) (New Projects) (-) (1.4) (16.0) (17.2) (16.1) (17.2) (13.0) Amiortization -0.6 -1.5 -2.3 -2.4 -2.1 -1.5 - 49 - that the agricultural income tax be reinstated immediately. Further measures, totalling EC$2.5 million, are required to be introduced. It is recommended that as a matter of the highest priority a fiscal expert be provided under technical assistance to examine the existing tax system in detail. The report should indicate the necessary measures paying particular attention to the anomalies, inconsistencies, and inequities of the present tax system and recommend any further assistance that will be necessary to implement the measures. (c) The state enterprises will have to raise tariffs and implement other policies so that they are able to generate a surplus rising from EC$1.1 million in 1979/80 to EC$1.5 million in 1981/82. The recurring deficit of the Central Water Authority needs to be eliminated, new tariffs introduced and revenue collections enforced. Port tariffs, as proposed, will have to be raised to a level high enough to create a surplus even after debt servicing. Improved performances are also necessary on the parts of the External Trade Bureau and Dominica Banana Growers Association. An additional EC$2.4 million is likely to be raised annually from the Social Security System with no increase in contributions. 167. The public investment program could be carried out if the flows of external finance continues. The financing projections are based upon the assumption that external sources will continue to cover a large, but declin- ing proportion of the investment program. 1/ In 1979/80 external loans and grants are projected to total EC$25.5 million, covering 96% of the public investment program, declining to EC$21.1 million, 76% of the program by 1983/84. This implies gross external disbursements of EC$129.4 million (US$48 million) over five years. Of the 22% has already been committed to 1/ The following assumptions were made concerning the availability of external financing: (1) For ongoing projects or projects where donors have indicated a probable willingness to provide finance, estimates of avail- able external finance are based upon date supplied by donor. (2) Non-projectized capital expenditures are assumed to be locally financed. (3) Projects for which financing is being sought are assumed to require a local contribution of 5 percent, increasing to 10 percent by the end of the program. An exception to this rule is that credit schemes are assumed to be 100 percent financed externally. Where government provides Crown Lands, the cost of such lands is included in the project cost with a contra entry being made in capital revenue. - 50 - specific projects. Of the remaining EC$100.6 million (US$37 million) the United Kingdom has already pledged E 10 million, EC$54 million, in addition capital assistance as part of a special independence financing package. The balance of EC$46.6 million, (US$17 million) is expected to be requested from external sources . 168. The domestic financial system is likely to be able to provide only limited domestic financing--approximately EC$0.5 million a year or EC$2.5 million over the five year period. However, this, together with the targetted level of public sector savings and capital revenues is expected to be adequate to finance the required local counterpart contribution and amortization pay- ments. The local counterpart contribution to the public investment program is estimated to increase from 4% of the public investment program to -L0% in 1983/84 and amortizations payments are expected to be an increasing burden as EC$4.6 million in debentures nature between 1980/84. D. Balance of Payments 169. The continuing level of public investment, which has a high foreign exchange component, together with the elimination of external budgetary assist- ance is expected to keep the current account of the balance of payments in deficit at levels only slightly lower than have been the case in recent years. However, if inflow of public capital continues on highly concessional terms, it is expected to adequately finance the deficit without creating a debt service problem in the foreseeable future. 170. Export receipts, like GDP, depend heavily upon the agricultural sector and, in particular, bananas. As noted above, banana production and, consequently, exports are likely to decline in 1979 with the advent of leaf spot disease. However, by 1983, if the fertilizer and pesticide schemes are successful and if the Government implements the estate caretaker service, banana exports should reach at least 42,000 tons, representing an almost 6% annual growth rate over the 1977 level. Grapefruit exports should continue to recover from their recent poor performance and, aided by the proposed citrus rehabilitation project, reach 7.75 million pounds by 1983. Coconut oil exports spurred by increased production and firm price prospects, should more than double in value terms by 1983 when receipts are projected to reach EC$4.2 mil- lion. Soap exports are also projected to expand rapidly growing at an average of 8% a year in real terms. In total, exports are projected to grow at just over 2% a year on average in real terms between 1978 and 1983 with prices growing on average by 7.3% a year. 171. Imports are projected to drop slightly in 1979 after the unprece- dented high level of 1978 because of the fall in banana output and the fact that no further back pay awards are anticipated. Thereafter through 1983 imports are projected to increase by about 2% a year in real terms. Public - 51 - transfers will decline as budgetary assistance is phased out through 1981 and, as a result, the current account deficit will increase in 1979 to US$5.8 million or 16% of GDP. The deficit is projected to increase very slightly in nominal terms each year thereafter but declining as a share of GDP. In 1983 the current account deficit is projected to amount to US$7.7 million or 14% of GDP. This deficit on current account will have to be financed by public capital inflow. 172. As for the capital account, the net public capital inflow is pro- jected increase from US$6.1 million in 1978 to US$9 million in 1983 because of increasing disbursements on project-related loans and grants. A private capital outflow is projected to continue, although declining somewhat, mainly as a result of the sale of the foreign owned estates and the present general lack of confidence. As a result of increasing amortization payments, external public debt service is expected to peak in 1982 when the debt service ratio is projected at 8% as against 5% in 1978. However, the high degree of conces- sionality and long-term structure of the external public debt creates no cause for concern for the foreseeable future. E. Conclusion 173. If the recommendations proposed above are carried out and the public investment program is implemented efficiently, the economy will have made substantial progress over the period 1979-83. The physical decline of the economy will have been halted, an expanded productive base will have been created which will be capable of yielding returns in the following years period and the public finances will have been placed on a viable footing. Such an achivement, however, will take a major effort, requiring appropriate policies and sound economic management. Without such effort the economy may be expected to continue its downhill slide with GDP per capita further declining below its current relatively low level of US$430. 174. The foregoing analysis of Dominica's problems and prospects high- lights the serious difficulties that confront the economy in its development. Although the report indicates how some of the problems may be resolved, it is clear that the road to viability is long and difficult, and its successful navigation is predicated upon Dominica's becoming a part of a larger economic unit. The analysis has pointed out the pressing need for a number of services which Dominica is unable to provide and operate in isolation. These include among others, an efficient agricultural extension service, overseas representa- tion -- including industrial and tourist promotion and provision of a variety of technical and administration services. It is clear that economies of scale exist in the provision of such services. Dominica, for example, could potentially benefit to the same extent from the establishment of a regional investment promotion office abroad as from a unilateral office. However, the shared costs of such an office would be substantially less. It is also probable that the full cost of such an office would be prohibitive. Similarly, the hiring of a technical expert, such as a specialized ports engineer, a citrus agronomist or bank auditor, may not be justifiable for - 52 - work in just Dominica but if work were to cover a number of islands, the expert could be fully employed and the cost of his services reduced to each island. Furthermore, the existence of such broader employment opportunities would provide a new incentive and challenge for trained nationals of the region, and is likely to encourage many to either remain in or return to their home countries. If the government does not join in such proposed common services, it will forego the substantial economic benefits that can be achieved and, as a result, the attainment of viability will be postponed. If such services are attempted to be provided on a unilateral basis, the result- ing financial burden would be unbearable. - 53 - GOVERNMENT'S PROJECT LISTS 1. This report contains a list of major ongoing projects, a list of projects for which external finance will be sought during the period 1978/83 individual project descriptions and individual technical assistance profiles. Each list contains the name of the project, the executing agency, the expected lender(s), if any, the total cost, the external financing obtained or required, the counterpart contribution required, and the estimated recurrent costs during the 1978/83 period. The individual descrip- tions contain additional information which would be of interest to potential donors or lenders, including technical assistance requirements and the present status of the project. 2. Data for these project lists, which will be presented at the meeting of the Caribbean Group for Cooperation in Economic Development scheduled for June 4-9, 1979, were provided by the Government of Dominica or estimated by IBRD sector specialists. The project lists for 1979/83 reflect the developmental strategy of the Government of Dominica as outlined in the Economic Memorandum dated April 18, 1979. - 54 - DOMINICA: MAJOR ONGOING PROJECTS (US$ '000) External Amortization Grace Counterpart Total Financing Period Period Financing Recurrent Cests Coot Secured Source Interest (years) (years) Amount 1 1979 1980 1981 1982 1983 Agriculture Iree Crap Diversifi-ation I 132 132 UK Glant - - - - - - - - - Marigot Fishing haven 67 57 UK Grant - - 0 5 - - - - - Input Storage Warehouse 43 43 UK Grant - - - - Input Storage Equipment 113 113 UK Grant - - - - Packing and Crating Shed 37 37 LIK Grant - - Bar.ana Developent I 1,852 1,852 UK Grant - - - - - - - - - Cecenut Fertili-er Fond 435 435 CIDA G 50 la - - Farm Impr-es.ent Credits #2,1'3 779 779 CDB 4 15 5 - - Marketing Beard Equipment 312 312 UK Grant - - - - Iadunstr SmaGl Industry Credits ':2,43 304 304 CD8 4 15 5 - - Factery Buildings Credits ii2, s3 622 545 CDB 4 15 5 77 13 - - - - - Pilat Ferertry and Sawmill 821 821 UK Grant - - - - Transportat ion Canefield Airstrip 556 556 UK Grant - - - - - - 50 54 56 PWU Plart and Equipment 533 533 UK Grant - - - - - 15 16 17 Last adn West Ceastal Roads 2,733 2,733 EDF Grant - - - - - - 25 27 30 Road Rehablitirnii 9,574 6,963 CIDA Grant - - 2,611 27 - - - - - Portrmoeth Pier 479 457 CIDA Grant - - 22 5 - - - - - Pert Facilities and Equipment 696 696 CIDA 2 40 10 - - - - - - - Fewe r Geathermal Energy Study 174 174 CIDA Grant - - - - - - - - - liealth Mariget Hospital 102 152 Private Grant - - - - - - 5 6 6 external Education Third Country Training 490 490 CIDA Grant - - - - - - - - School Coentructice 1,848 1,756 CIDA Grant - - 92 5 - 200 215 230 240 Water and Sewerage Water Phase II 2,028 766 CDB 4 20 5 101 5 - - - - - Ho.sing Urban Working Claus Housing 707 636 CDB 4 15 5 71 10 - - - - - Miscellaneous Sports Stadiium 319 319 France Grant--- - - - - - - - 55 - DOMINICA: MAJOR NEW PROJECTS AND SOURCES OF FINAh'CING (US$ 000) External Counterpart Total Financing Financing Recurrent Costs Cost Required Soorce Amount 2 FY79 FY80 FY81 FY 52 FY83 Agr,calture Sheep Improve.ent 93 83 Unknown 10 10 Abattair 79 79 CIDA - - - - - Cattle Dovlopoent 439 402 CDE 37 8 Cattle Tnpravenent 116 106 CDd 10 9 Coffee Development 1,409 1,268 Un0nown 141 10 Sugarca.e Development 1,941 1,840 Unlnown 101 5 - - - - Corn D-evlopment 257 232 CIDA 25 10 Forest Reserves Denar-ation 130 121 Uncoown 9 7 - - - - - Line Rehabilitation 978 911 Unonown 67 7 Citrus Rehabilitation 200 188 Unonown 12 6 - - - - Raral Developenot Youth Corps 1,249 1,139 Unkaown 110 9 Agric-ltural Feeder Roads Phase IlE 2,963 2,704 Usknown 259 9 Coconat Expansion 2,933 2,646 CIDA 287 10 Agricultural Prodaction Credit 200 200 CDB - - Danana Develop-est II 1,036 1,036 Unknown - - Tree Crop Diversification Phase RE 296 272 UK 24 8 Land Settlement I 5,919 2,808 CDR 3,111 53 - - - - - Forcer Services Center 93 89 UK 4 4 - - - 13 35 Farther AgriraRtoral Credit 666 666 CDR - - - Land Settlement II 3,703 1,556 Unknown 2,147 58 Indst ry Filot Woodworking 41 41 Unknown - - Icrme-odiate Technology Building Materials 94 83 UK, CDB 11 12 Knitwear 578 535 Unknown 43 7 Factory Shells 440 395 CDB, UK 45 10 Furthec Industrial Credits 445 445 CDB - - Coir Extracting and Processing 4Y9 463 Unknown 36 7 Forestry and Sawmill Phase IR 1,666 1,589 UK 5 95 - lourism D-velopmeet af National Parks 204 183 Canadian 21 10 - _ _ 2) 20 Nature Fond Transportation and Infrastructure Airport Equipment 370 370 Unknown - - - - Port Equipment 253 253 Unknown - - Bridges Reconstrrction 811 750 CLB 61 8 Roll On - Roll Off Facility 130 117 Unknown 13 10 Sea and River Defenses 168 153 Unknown 15 9 - - - 1, 16 Power Rural Electrification/Hydro Package 1,852 1,666 CUB 186 10 - - - - - HSeath VFctor Control 133 126 PAHO/WL10 7 5 - 50 55 6L 67 Mariget Hospital Completion 56 56 UK - - - 5 6 7 8 St. LCkes Mental Sealth Center 81 77 Unknown 4 5 - 10 11 1! 13 Improvemert to Health Centers 463 427 UNICEF 36 8 - - - - 10 Princess Margaret Hospital lmprovem.nts 366 366 UK - - - - - Port-onth Hospital Completion 17 17 UK - - - - - Health Edacatioo Unit 180 164 Unknown 16 9 - - - Water and Sewerage Solid and Liquid Waste Disposal 419 391 UK, CDB 93 7 - - - Public Latrine Program 281 253 Unlnown 10 90 4 7 11 1U 18 Private Latrine Program 164 147 Usknown 17 10 - - - - - Water Project Phase II 740 704 CDd 36 5 - - Water Project Phase III 3,519 3,167 CI)A, CDB 352 10 - - - - - Water Authority Office Boilding 269 243 Unknown 26 10 - - Education Atkinon, Woodford Hill, Pen-ille Primary Schools 163 163 UK - - - - 5 6 7 Primary School Rehabilitation 198 179 Unknown 19 10 - - - - - Clifton Dupigny Night School 58 52 Unknown 6 10 - - - - - St. Joseph's School Water Supply 185 185 Unknown - - - - Stodent Loans 132 132 CDB - - - - Junior Secondary Program 666 607 Unknown 59 9 - - - - - Portsmouth Secondary 75 67 Unknown 4 5 - - - 7 7 Coliege af Forther Education 104 94 Unknown 10 10 - - Housing Aided Self Help 741 741 UK - - - - Low Cast Housing Pilot 174 174 UK - - - - Mousing Equipment 40 40 Unknown - - - - Secondary Mortgage FPnd 431 430 CDB - - - - Roseau Condominium 494 463 CDB 31 6 - - Renovation - Self Help 303 265 Unknown 38 13 - - Middle lncome Housing 1,481 1,185 CDB 129 9 - - Urban Working Class Housing (II) 1,852 1,672 CDB 180 10 - - Other Garbage Disposal Vehicles 95 95 UK - - - - 5 6 6 Industrial School for Delinquents 391 358 Unknown 33 8 - - Home for Aged 359 323 Unknown 36 10 - - Home for Retarded Children 46 42 Unknown 4 10 - - Pilot Halfway House for Delinquents 41 37 Unknown 4 10 - - - 56 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) I. NAME OF PROJECT: Abattoir II. EXECUTING GOVERNMENT AGENCY: Ministry of Agriculture, Lands and Fisheries III. TOTAL ESTIMATED COST: US$79 IV. EXTERNAL FINANCING REQUIRED: US$79 V. LENDING AGENCY: CIDA VI. DESCRIPTION AND JUSTIFICATION: A. Description: Construction of one small Abattoir for local needs. B. Justification: There is good potential for development of local meat industry geared to local market. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs - 20 20 35 Foreign Costs - 59 59 75 Total Costs - Amount - 79 79 - -% - 100 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources - - - - - - External Sources 79 Total 79 - 57 - IX. STATUS OF PREPARATION: CIDA is preparing a regional project under which one abattoir is expected to be constructed in Dominica. X. TERMS OF FINANCING: Grant XI. PROJECT IMPLICATIONS: Operating and Maintenance Costs: Self liquidating Debt Obligations: None XII. TECHNICAL ASSISTANCE REQUIRED: To be ascertained by CIDA and probably provided on a regional basis, if necessary. - 58 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) I. NAME OF PROJECT: Cattle Development II. EXECUTING GOVERNMENT AGENCY: Ministry of Agriculture, Lands and Fisheries III. TOTAL ESTIMATED COST: US$439 IV. EXTERNAL FINANCING REQUIRED: US$402 V. LENDING AGENCY: CDB VI. DESCRIPTION AND JUSTIFICATION: A. Description: The project aims at increasing milk and beef production. The project includes training and livestock management. B. Justification: There is strong potential for substitution of a significant proportion of imported animal protein with local production. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs 37 51 88 20 Foreign Costs - 351 351 80 Total Costs - Amount 37 402 439 - -% 8 92 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources 6 6 7 10 8 37 - External Sources 98 81 86 91 46 402 Total 104 87 93 101 54 439 - 59 - IX. STATUS OF PREPARATION: Prefeasibility study undertaken in 1975. CDB has expressed interest in project. X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: None Debt Obligations: None during 1979-83 XI. TECHNICAL ASSISTANCE REQUIRED: Project Preparation: T.A. will be required for further preparation and appraisal. Project Implementation: T.A. required for training in livestock management. - 60 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'O00) I. NAME OF PROJECT: Cattle Improvement II. EXECUTING GOVERNMENT AGENCY: Ministry of Agriculture, Lands and Fisheries Ill. TOTAL ESTIMATED COST: US$116 IV. EXTERNAL FINANCING REQUIRED: US$106 V. LENDING AGENCY: CDB VI. DESCRIPTION AND JUSTIFICATION: A. Description: To initiate and develop an artificial insemination service. In the first year of operation it is proposed to utilize artificial insemination on 30% of the breeding population, increasing to 60% by the fourth year. B. Justification: To improve the quality of the national cattle herd, increase meat production and import substitute. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs 10 13 23 20 Foreign Costs - 93 93 80 Total Costs - Amount 10 106 116 - -% 9 91 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources - 3 3 4 - 10 - External Sources 24 27 29 26 - 106 - Total 24 30 32 30 - 116 - - 61 - IX. STATUS OF PREPARATION: Feasibility study completed 1975 CDB has expressed an interest in the project. X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: None Debt Obligations: None during 1979-83 period XI. TECHNICAL ASSISTANCE REQUIRED: T.A. will be required to assist implementation of the project. - 62 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$ 000) I. NAME OF PROJECT: Coffee Development II. EXECUTING GOVERNMIENT AGENCY: Ministry of Agriculture, Lands and Fisheries III. TOTAL ESTIMATED COST: US$1,409 IV. EXTERNAL FINANCING REQUIRED: US$1,268 V. LENDING AGENCY: Unknown VI. DESCRIPTION AND JUSTIFICATION: A. Description: To establish 1000 acres of arobica coffee and set of three pulperies, one control dryer and storeroom; expand existing factory to include the production of instant coffee. B. Justification: The island is ideally suited for the grcwing of coffee and the world market prospects for quality coffee are good. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs 141 141 282 20 Foreign Costs - 1,127 1,127 80 Total Costs - Amount 141 1,268 1,409 - -% 10 90 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources 11 13 15 25 37 141 - External Sources 229 247 265 277 290 1,268 Total 240 260 280 302 327 1,409 - 63 - IX. STATUS OF PREPARATION: Prefeasibility study completed and feasibility study now underway. X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: Self liquidating Debt Obligations: Not determined XI. TECHNICAL ASSISTANCE REQUIRED: Feasibility Studies: Currently underway with CIDA technical assistance. Project Implementation: Experienced practical specialist in processing needed in third year. - 64 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) I. NAME OF PROJECT: Sugarcane Development II. EXECUTING GOVERNMENT AGENCY: Ministry of Agriculture, Lands and Fisheries III. TOTAL ESTIMATED COST: US$1,941 IV. EXTERNAL FINANCING REQUIRED: US$1,840 V. LENDING AGENCY: Unknown VI. DESCRIPTION AND JUSTIFICATION: A. Description: To reintroduce sugarcane into Dominca for sugar production as well as feed or livestock. It is proposed to produce 4,000 tons sugar annually from 2,000 acres. B. Justification: To substitute for imported sugar and contri- bute to the development of the local livestock industry. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs 101 287 388 20 Foreign Costs - 1,553 1,553 80 Total Costs - Amount 101 1,840 1,941 - -% 5 95 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources 16 22 18 22 22 101 - External Sources 304 387 355 381 413 1,841 Total 320 409 373 403 436 1,941 - 65 - IX. STATUS OF PREPARATION: Prefeasibility study completed, feasibility study now underway. X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: None Debt Obligations: Not determined XI. TECHNICAL ASSISTANCE REQUIRED: Feasibility Studies: CIDA providing assistance for feasibility study. Project Implementation: Further T.A. will be required to assist implementation. - 66 - DOMINICA 1979/83 Proiect List - Individual Project Description Agriculture (US$'000) I. NAME OF PROJECT: Corn Development II. EXECUTING GOVERNMENT AGENCY: Ministry of Agriculture, Lands and Fisheries III. TOTAL ESTIMATED COST: US$257 IV. EXTERNAL FINANCING REQUIRED: US$232 V. LENDING AGENCY: CIDA VI. DESCRIPTION AND JUSTIFICATION: A. Description: Aimed at increasing production of corn. It is proposed to establish a maximum of 1,500 acres of corn yielding 30 bushels per acre by the fifth year of implementation. B. Justification: To increase output of locally produced food and animal feed with the possibility of regional export. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs 25 26 51 20 Foreign Costs - 206 206 80 Total Costs - Amount 25 232 257 - - % 10 90 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1978 1979 1980 1981 1982 1983 Total 1983 Local Sources - - - 12 13 - 25 - External Sources 31 50 54 47 50 - 232 Total 31 50 54 59 63 - 257 - 67 - IX. STATUS OF PREPARATION: Feasibility study underway. CIDA may be approached for financing. X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: None Debt Obligations: Not determined XI. TECHNICAL ASSISTANCE REQUIRED: T.A. provided by CIDA - 68 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) I. NAME OF PROJECT: Forest Reserves Demarcation II. EXECUTING GOVERNMENT AGENCY: Ministry of Agriculture, Lands and Fisheries III. TOTAL ESTIMATED COST: US$130 IV. EXTERNAL FINANCING REQUIRED: US$121 V. LENDING AGENCY: Unknown VI. DESCRIPTION AND JUSTIFICATION: A. Description: Project represents third phase of National Park and Food Reserve Demarcation Program which began in 1952. It seeks to identify, demarcate, survey and legalize forest reserves and national parks. B. Justification: To provide a forest estate for the production of lumber, shingles, and forest products; to protect water sources and soils; also to pro- vide recreation and contribute to tourism. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs 9 69 78 60 Foreign Costs - 52 52 40 Total Costs - Amount 9 121 130 - -% 7 193 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1978 1979 1980 1981 1982 1983 Total 1983 Local Sources - - 2 2 5 - 9 - External Sources 22 24 24 26 25 - 121 Total 22 24 26 28 30 - 130 - 69 - IX. STATUS OF PREPARATION: Project profile prepared X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: None during 1979-83 Debt Obligations: Not determined XI. TECHNICAL ASSISTANCE REQUIRED: None - 70 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) 1I NAME OF PROJECT: Lime Rehabilitation II. EXECUTING GOVERNMENT AGENCY: Ministry of Agriculture, Lands and Fisheries III. TOTAL ESTIMATED COST: US$978 IV. EXTERNAL FINANCING REQUIRED: US$911 V. LENDING AGENCY: UK VI. DESCRIPTION AND JUSTIFICATION: A. Description: Project assists 350 lime farmers to increase quality and quantity of lime production. Major component is fertilizer; also provides assistance in replanting, terracing, weeding, pest/disease control; training, demonstration also included. B. Justification: Projects for lime production are good in Dominica, but output has been on the decline for some years due to deteriorating state of trees. VI'T. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs 59 - 59 6 Foreign Gosts 8 911 919 94 Total Costs - Amount 67 911 978 - -% 7 93 - 100 VILL. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources - - 23 25 19 67 - External Sources 160 173 187 252 139 911 - Total 160 173 210 277 158 978 - - 71 - Ix. STATUS OF PREPARATION: Request submitted to UK for b 20,000 for project study, to commence by FY78/79. UK to be approached for financing of full project. X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: none Debt Obligations: none XI. TECHNICAL ASSISTANCE REQUIRED: Feasibility Studies: To be provided by UK. Project Implementation: none - 72 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) I. NAME OF PROJECT: Citrus Rehabilitation II. EXECUTING GOVERNMENT AGENCY: Ministry of Agriculture, Lands and Fisheries III. TOTAL ESTIMATED COST: US$200 IV. EXTERNAL FINANCING REQUIRED: US$188 V. LENDING AGENCY: unknown VI. DESCRIPTION AND JUSTIFICATION: A. Description: Project aims to reverse deterioration of grapefruit and orange trees, through use of fertilizers, pruning, and pest and disease control. Modeled after proposed lime rehab- ilitation project. B. Justification: Project could permit substantial increase in export of grapefruits and of oranges. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs 10 - 10 5 Foreign Costs 2 188 190 95 Total Costs - Amount 12 188 200 - -% 6 94 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Tota 1983 Local Sources - 4 4 - - 12 - External Sources 74 33 81 - - 188 - Total 74 37 89 - - 200 - - 73 - IX. STATUS OF PREPARATION: Concept identified X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: none Debt Obligations: not determined XI. TECHNICAL ASSISTANCE REQUIRED: T.A. will be required for preparation and appraisal. - 74 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture/Community Development (US$'000) I. NAME OF PROJECT: Londonerry Youth Camp-Rural Development Youth Corps II. EXECUTING GOVERNMENT AGENCY: Ministry of Agriculture, Lands and Fisheries/Ministry of Local Government and Community Development III. TOTAL ESTIMATED COST: US$1,249 IV. EXTERNAL FINANCING REQUIRED: US$1,139 V. LENDING AGENCY: Unknown VI. DESCRIPTION AND JUSTIFICATION: A. Description: Existing youth camp to be renovated to house and train 200 of the less educated and un- employed youth, for periods of 6 months - 2 years, in skills of agriculture, forestry, community development, cooperatives, crafts, agro-business, self help low cost construction, nutrition, and health. Objective is to help youth become more organized for productive and self-employment purposes. Capital funds needed for purchase of machinery, vehicles, equipment. B. Justification: Project expected to prepare rural youth for productive employment in agriculture and other rural enterprises. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs 110 390 500 40 Foreign Costs - 749 749 60 Total Costs - Amount 110 1,139 1,249 - -l 9 191 - 100 - 75 - VIII. DISBURSEMENT PERIOD: Post FY 1979/80 1980 1981 1982 1983 Total 1983 Local Sources 7 11 18 30 44 110 - External Sources 153 162 215 272 337 1,139 - Total 160 173 233 302 381 1,249 - IX. STATUS OF PREPARATION: Project brief (prefeasibility study) prepared 1978, site available but no source of financing identified. X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: To be partially met through sale of produce grown on site. Debt Obligations: not determined xI. TECHNICAL ASSISTANCE REQUIRED: Project Implementation: Instructors needed to start up programs. - 76 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) I. NAME OF PROJECT: Agricultural Feeder Roads Phase III II. EXECUTING GOVERNMENT AGENCY: Public Works Department III. TOTAL ESTIMATED COST: US$2,963 IV. EXTERNAL FINANCING REQUIRED: US$2,704 V. LENDING AGENCY: unknown VI. DESCRIPTION AND JUSTIFICATION: A. Description: Construction of twenty miles of feeder roads in rural agricultural areas yet to be identified. B. Justification: (i) open up new agricultural areas. (ii) increase yields, especially of coconuts, where significant number of nuts cannot be harvested due to inaccessibility. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs 259 926 1,185 40 Foreign Costs - 1,778 1,778 60 Total Costs - Amount 259 2,704 2,963 - -% 9 91 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources 18 37 74 93 37 25) - External Sources 352 519 667 833 333 2,704 - Total 370 556 741 926 370 2,963 - - 77 - IX. STATUS OF PREPARATION: Concept identified X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: none during 1979-83 Debt Obligations: not determined XI. TECHNICAL ASSISTANCE REQUIRED: Project Preparation: T.A. will be required for preparation and appraisal. - 78 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) I. NAME OF PROJECT: Coconut Expansion II. EXECUTING GOVERNMENT AGENCY: Agricultural and Industrial Development Bank III. TOTAL ESTIMATED COST: US$2,933 IV. EXTERNAL FINANCING REQUIRED: US$2,646 V. LENDING AGENCY: CIDA VI, DESCRIPTION AND JUSTIFICATION: A. Description: Expansion of coconut average by 50%, with output to be used primarily as raw material for soap factory. Project includes roads fertilizers, equipment, sheds, herbicides, and trucks. B. Justification: Strong incentives exist for increasing coconut production as result of demand from processing factory, high prices for fresh nuts, and exist- ence of CARICOM Oils and Fats Agreement, which provides incentive prices for coconut oil. V'-TI. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs 287 300 587 20 Foreign Costs - 2,346 2,346 80 Total Costs - Amount 287 2,646 2,933 - -% 10 90 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1978 1979 1980 1981 1982 1983 Total 1983 Local Sources 126 50 50 61 - - 287 - External Sources 109 544 827 522 644 - 2,646 - Total 235 594 877 583 644 - 2,933 - - 79 - IX. STATUS OF PREPARATION: Consultants soon to draw up final details and designs. X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: none Debt Obligations: none XI. TECHNICAL ASSISTANCE REQUIRED: CIDA is expected to provide necessary T.A. - 80 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) I. NAME OF PROJECT: Agricultural Production Credit II. EXECUTING GOVERNMENT AGENCY: Agricultural - Industrial Development Bank III. TOTAL ESTIMATED COST: US$200 IV. EXTERNAL FINANCING REQUIRED: US$200 V. LENDING AGENCY: CDB VI. DESCRIPTION AND JUSTIFICATION: A. Description: A continuation of the ongoing CDB program which provides funds to AIDB for onlending for crop loans. B. Justification: To permit further development of Dominica's agricultural potential. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount Local Costs - 200 200 100 Foreign Costs Total Costs - Amount - 200 200 - - % - 100 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1979/80 1980 1981 1982 1983 Total 1983 Local Sources - - - - - - - External Sources 55 76 72 - - 203 - Total 55 76 72 - - 203 - 81 - IX. STATUS OF PREPARATION: Project proposal submitted to CDB X. TERMS OF FINANCING: Interest Rate : usual CDB terms Amortization Period: usual CDB terms XI. PROJECT IMPLICATIONS: Operating and Maintenance Costs: none Debt Obligations: none XII. TECHNICAL ASSISTANCE REQUIRED: none - 82 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) I. NAME OF PROJECT: Sheep Improvement II. EXECUTING GOVERNMENT AGENCY: Ministry of Agriculture, Lands and Fisheries III. TOTAL ESTIMATED COST: $93 IV. EXTERNAL FINANCING REQUIRED: $83 V. LENDING AGENCY: Unknown VI. DESCRIPTION AND JUSTIFICATION: A. Description: To increase the number and improve the quality of sheep by importing pedigree stock, providing stock services, and axcillary services. B. Justification: To permit the substitution of a significant proprotion of imported animal protein with local production. VII. COST COMPONENTS AND FINANCING: Financed by Total_ Local External Sources Sources Amount % Local Costs 10 9 19 20 Foreign Costs 74 74 80 Total Costs - Amount 10 83 93 - -% 10 90 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources 4 6 - - - 10 - External Sources 70 13 - - - 83 Total 74 19 - 93 - 83 - IX. STATUS OF PREPARATION: Project Prepared. X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: None Debt Obligations: None XI. TECHNICAL ASSISTANCE REQUIRED: Project Implementation: 1 sheep specialist - 84 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) I. NAME OF PROJECT: Banana Development II II. EXECUTING GOVERNMENT AGENCY: Dominica Banana Growers Association III. TOTAL ESTIMATED COST: US$1,036 IV. EXTERNAL FINANCING REQUIRED: US$1,036 V. LENDING AGENCY: unknown VI. DESCRIPTION AND JUSTIFICATION: A. Description: Additional funds needed to carry out ongoing UK/Winban Banana Development project; mainly to meet increased costs of fertilizer and pesticides. B. Justification: Considerable increase in output and quality of bananas can be expected from application of fertilizer and pesticides. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs - - - - Foreign Costs - 1,036 1,036 100 Total Costs - Amount - 1,036 1,036 - - % - 100 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources - - - - - - - External Sources 370 37 37 333 259 1,036 - Total 370 37 37 333 259 1,036 - - 85 - IX. STATUS OF PREPARATION: Extension of ongoing project X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: none Debt Obligations: not determined XI. TECHNICAL ASSISTANCE REQUIRED: none - 86 - DOMINICA 1979/83 Project List - Individual Proiect Description Agriculture (US$'000) 1. NAME O3 PRO_ECT: Tree Crop Diversification Phase II I[. EXECUTING GOVERNMENT AGENCY: Ministry of Agriculture, Fisheries and Lands..... ITi. TOTAL ESTIM,TED COST: US$296 IV.lw EXTERNAL FINANCING REQUIRED: US$272 V. LENDING AGENCY: UK VT. DESCRIPTION AND JUSTIFICATION: ia escription: To develop on a commercial basis tree crops such as mangoes, sapodillas, etc. It is proposed to plant 1,250 acres of tree crops over a period of 5 years. L* Justification: i) Stabilization and improvement of farm income. ii) Strong export possibilities for fruits. ViL. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount x Local Costs 24 35 59 20 Foreign Costs - 237 237 80 Total Costs - Amount 24 272 296 - -~ ,08 92 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1979/80 1980/81 1981 1982 1983 Total 1983 Local Sources - 4 4 8 8 24 - External Sources - 70 70 66 66 272 - Total - 74 74 74 74 296 - - 87 - IX. STATUS OF PREPARATION: Continuation of ongoing project, the first phase of which was financed by the UK. X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: none Debt Obligations: none XI. TECHNICAL ASSISTANCE REQUIRED: none - 88 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) I. NAME OF PROJECT: Land Settlement I II. EXECUTING GOVERNMENT AGENCY: Land Management Authority III. TOTAL ESTIMATED COST: US$5,919 IV. EXTERNAL FINANCING REQUIRED: US$2,808* V. LENDING AGENCY: CDB VI. DESCRIPTION AND JUSTIFICATION: A. Description: The development and settlement of estate or presently undeveloped Crown lands by small farmers: Total average to be settled during five year program equals 10,000 acres, to be divided among 1,500 farmers, averaging 7 acres/farmer. Besides survey, purchase, and distribution of land, project provides for necessary infrastructure--roads and water supply--in areas in question. B. Justification: i) To ensure that full potential of estate lands is developed and to bring currently idle Government-owned lands under cultiva- tion; ii) To provide economic parcels of land to some of the 8,000 farmers in Domiriica of whom 37% are presently tenants and 19% own less than one acre. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs 3,111 1,032 4,143 70 Foreign Costs - 1,776 1,776 30 Total Costs - Amount 3,111** 2,808* 5,919 - - % 53 47 - 100 * US$5770 if external donor willing to finance purchase of estate land. ** Includes value of land. - 89 - VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources - 574 611 926 1,000 3,111 - External Sources - 509 556 837 906 2,808 - Total - 1,083 1,167 1,763 1,906 5,919 - IX. STATUS OF PREPARATION: Project study completed 1977 X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: none Debt Obligations: none during 1979-83 XI. TECHNICAL ASSISTANCE REQUIRED: T.A. will be required to assist implementation. - 90 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) NAMN O ROJECT: Farmer Services Center (Pilot) IT. EXEC`TtNC ICG'ERNMENT AGENCY: Ministry of Agriculture 1i. TOTAL ESJYIATED COST: US$93 iV, EXTERNAL FINANCING REQUIRED: US$89 V. . LENDING AGENCY: UK VI. DESCRIPTION AND JUSTIFICATION: A. Description: Center to be erected providing office facili- ties for extension staff and other services, e.g. agricultural inputs supply shops (seeds, chemicals, etc.), agricultural credit. Center will operate as a base for small farmer equipment loan program. It is proposed ultimately to construct 6 such centers in 6 major producing areas. '. iusXiftlation: To promote integrated agricultural services of Agriculture Division in major areas of cultivation. VII. COST CuMSPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Cos.s 4 33 37 40 Foreign Costs - 56 56 60 To,al Costs - Amount 4 89 93 - -% 4 96 - 100 - 91 - VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources - - 4 - - 4 External Sources - - 89 - - 89 Total - - 93 - - 93 IX. STATUS OF PREPARATION: Site acquired X. PROJECT IMPLICATIONS: 1982 1983 (US$000) Operating and Maintenance Costs: 33 35 Debt Obligations: none X1, TECHNICAL ASSISTANCE REQUIRED: None - 92 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) I. NAME OF PROJECT: Further Agricultural Credits II. EXECUTING GOVERNMENT AGENCY: Agricultural & Industrial Development Bank III. TOTAL ESTIMATED COST: US$666 IV. EXTERNAL FINANCING REQUIRED: US$666. V. LENDING AGENCY: CDB VI. DESCRIPTION AND JUSTIFICATION: A. Description: Replenishment of ongoing credit schemes from CDB, including Farm Improvements Crecit, Agricultural Production Credit, etc., for onlending to farmers. B. Justification: Continuing high levels of Agricultural Credit necessary to permit investment and provide working capital for increased production. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount Local Costs - 666 666 100 Foreign Costs - - - - Total Costs - Amount - 666 666 - - % - - - 100 VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981/82 1982 1983 Total 1983 Local Sources - - External Sources - - 222 222 222 666 Total - 222 222 222 666 - 93 - IX. STATUS OF PREPARATION: Continuation of ongoing project. X. TERMS OF FINANCING: Loan Interest Rate 4 Amortization Period: 15 XI. PROJECT IMPLICATIONS: Operating and Maintenance Costs: None Debt Obligations: None during 1979-83 XII. TECHNICAL ASSISTANCE REQUIRED: None - 94 - DOMINICA 1979/83 Project List - Individual Project Description Agriculture (US$'000) I. NAME OF PROJECT: Land Settlement II II. EXECUTING GOVERNMENT AGENCY: Land Management Authority III. TOTAL ESTIMATED COST: US$3,703 IV. EXTERNAL FINANCING REQUIRED: US$1,556* V. LENDING AGENCY: Unknown VI. DESCRIPTION AND JUSTIFICATION: A. Description: Second phase of the land settlement program. Project provides for the replenishment of funds for survey, clearance, and development of estate and Crown lands for sale to farmers. B. Justification: As for land Settlement I. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs 2,147 445 2,592 70 Foreign Costs - 1,111 1,111 30 Total Costs - Amount 2,147** 1,556* 3,703 - -% 58 42 - - VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources - - - 222 814 2,147 1,111 External Sources - - - 148 667 1,556 741 Total - - - 370 1,481 3,703 1,852 * US$3410 if external donor willing to finance purchase of estate land. ** Includes value of land. X.X STATUS OF PREPARATION: Concept stage. X. PROJECT IMPLICATIONS: Operating and Maintenarnce Costs: none Debt Obligations: not determined XI. TECHNICAL ASSISTANCE REQUIRED: T.A. will be required for identification, preparation and appraisal and probably to assist implementation. - 96 - DOMINICA 1979/83 Project List - Individual Project Description Industry (US $'000) I. NAME OF PROJECT: Pilot Woodworking II. EXECUTING GOVERNMENT AGENCY: Ministry of Trade, Industry, Tou:-ism Sports and Housing III. TOTAL ESTIMATED COST: US$41 IV. EXTERNAL FINANCING REQUIRED: US$41 V. LENDING AGENCY: Unknown VI. DESCRIPTION AND JUSTIFICATION: A. Description: Pilot project to manufacture furniture (e.g. desks and benches for schools) using out:p:t of ongoing pilot forestry and sawmill por-ect. Includes equipment and training. B. Justification: With increased output of timber from ongoing forestry and sawmill project, potential exists for import substitution in simple finished wood products; also, project if successful would increase local value added in forestry sector, and create additioncal employment opportunities. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amounr _, Local Costs - Foreign Costs - 41 ,1 lOi Total Costs - Amount - 41 41 - _% - - - 100 - 97 - VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources - - - - - - External Sources 41 - - - - 41 Total 41 - - - - 41 IX. STATUS OF PREPARATION: Project outline prepared X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: none Debt Obligations: not determined XI. TECHNICAL ASSISTANCE REQUIRED: T.A. will be required for training. - 98 DOMINICA 1979/83 Pruiect List - Individual Project Description Industry (USS'0OO) I. 0AME OP PROJECT: Intermediate Technology Building Materials II. EXECT'TING GOVERNMENT AGENCY: Undetermnined III. TOTAL EST!l!"ATED COST: US$94 IV. EXTERNAL. FINANCING REQUIRED: US$83 V. LENDING AGENCY-.: Ul', CDB VI. DESCRIPTION AND JUSTIFICATION: A. Description: Project involves use of locally available materials in simple labor intensive manufactur- ing enterprises; to be set up on a pilot basis producing: (i) burnt clay bricks, (ii) quarry clay tiles and (iii) coir-reinforced concrete roofing. Output is ititended for use by local construction industry. Project is most suit- able as joint venture. B. Justification; If proven viable, schemes would substitute for imported construction materials and generate employment. V'Ll. COST COMPONENTS AND FINANCING- Financed by Total _ Local External Sources Sources Amount % Lczal Costs 11 41 52 55 Foreign Costs - 42 42 45 Total Costs - Amount 11 83 94 - -1 Z12 88 - 100 - 99 - VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources 11 - - - - 11 - External Sources 83 - - - - 83 - Total 94 - - - - 94 - IX. STATUS OF PREPARATION: Feasibility study carried out in June 1978 by Intermediate Technology Consultants Ltd., financed by UK grant. Sites under discus- sion. Reassessment must be made by proposed scale of brickmaking operation, which as designed is excessive for local market. Implementing organization is yet to be identified. Both UK and CDB have express interest. X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: none Debt Obligations: none Xi. TECHNICAL ASSISTANCE REQUIRED: T.A. will be required during first year of implementation. - 100 - DOMINICA 1979/83 Project List - Individual Project Description. Industry (US$'000) I. NAME OF PROJECT: Knitwear Industry II. EXECUTING GOVERNMENT AGENCY: Undetermined III. TOTAL ESTIMATED COST: US$578 IV. EXTERNAL FINANCING REQUIRED: US$535 V. LENDING AGENCY: Unknown VI. DESCRIPTION AND JUSTIFICATION: A. Description: Provides for establishment of four knitw:ar operations, each preceded by a training Feriod. Each unit would produce some 22,000 knit garments/year for export. B. Justification: Large potential export earnings and emplcvyment generation if scheme found to be viable. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount Local Costs 43 101 li4 25 Foreign Costs - 434 434 75 Total Costs - Amount 43 535 578 - - % 7 93 - 100 VIII. DISBURSEMENT PERIOD: .st FY 1979 1980 1981 1982 '1983 Tote, ' )83 Local Sources 7 6 7 15 8 - External Sources 143 70 133 136 53 53- Total 150 76 140 151 61 578 - 101 - IX. STATUS OF PREPARATION: Feasibility study made in June 1978 financed by CFTC. Location is said to be under study. Implementing organization is yet to be identified. X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: None Debt Obligations: not determined. XI. TECHNICAL ASSISTANCE REQUIRED: External expertise required in marketing, design and management. Project is most suitable as a joint venture. - 102 - DOMINICA 1979/83 Project List - Individual Project Description Industry (US$'000) I. NAME OF PROJECT: Factory Shells II. EXECUTING GOVERNMENT AGENCY: AIDB III. TOTAL ESTIMATED COST: US$440 IV. EXTERNAL FINANCING REQUIRED: US$395 V. LENDING AGENCY: CDB or UK VI. DESCRIPTION AND JUSTIFICATION: A. Description: Provides for construction of five factory shells of 6,000 sq. ft. each. B. Justification: Lack of factory space has impeded expansion of output and employment by existing firms. Increase in factory space will also eliminate one constraint on new industrial investment. VII. COST COMPONENTS AND FINANCING: Financed by Total Local External Sources Sources Amount % Local Costs 45 65 110 25 Foreign Costs - 330 330 75 Total Costs - Amount 45 395 440 - - % 10 90 - 100 VIII. DISBURSEMENT PERIOD: Post FY 1979 1980 1981 1982 1983 Total 1983 Local Sources - 7 12 12 14 45 - External Sources 70 75 77 84 89 395 - Total 70 82 89 96 103 440 - - 11-03 - IX. STATUS OF PREPARATION: Concept identified. CDB and UK have expressed interest. X. PROJECT IMPLICATIONS: Operating and Maintenance Costs: none Debt Obligations: none XI. TECHNICAL ASSISTANCE REQUIRED: T.A. is required for design study. - 104 -- DOMINICA 1979/83 Project List - Individual Project Descriptii-n Industry (US$'000) I. NAME OF PROJECT: Further Industrial Credits II. EXECUTING GOVERNMENT AGENCY: AIDB III. TOTAL ESTIMATED COST; US$445 IV. EXTERNAL FINANCING REQUIRED: US$445 V. LENDING AGENCY: CDB. VI. DESCRIPTION AND JUSTIFICATION: A. Description: Replenishment of loans from CDB for ongoilig industry credit schemes. B. Justification: Will permit continued investment in indcus ry by local enterrevenues, providing additioBiai jobs and output. VI!. COST COMPONENTS AND FINANCING: Financed by o oa). Local External Sources Sources Amrunt r Local Costs - 445 445 1(0 Foreign Costs - - Total Costs - Amount - 445 445 - -% - 100 -10) VIII. DISBURSEMENT PERIOD: FY 1979 1980 1981 1982 1983 ot-i I Y3 LJocaL Sour es - -r - External Sources 74 74 93 93 111 Total 74 74 93 93 'iL IX. STATUS OF PREPARATION: Continuation of Pn%y
World Bank Group · Pre-2003 Economic or Sector Report
Dominica - Current economic position and prospects
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