Guinea - National Seeds Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-4626-GUI MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPO3ED CREDIT OF SDR 7.1 MILLION TO THE REPUBLIC OF GUINEA FOR A NATIONAL SEEDS PROJECT Noveimber 16, 1987 This doaument has a restricted distribution and may be used by redpients only In the performance oi their official duties. Its contents may not othenrise be disdosed without Wodd Bank suthorizaion.  CURRENCY AND EQUIVALENT UNITS Currency Unit = Guinean Franc (PS) US$1 = FG 40O a/ SDR 1 - US$1.27964 b/ WEIGHTS AND MEASURES Metric System ABBREVIATIONS NSC - National Seed Committee PPF - Project Preparation Facility SCC - Seed Conditioning Center FISCAL YEAR January 1 - Dacember 31 a/ Represents the exchange rate at appraisal in June 1987. The exchange rate is established through an auction system and at the time of negotiations (October 1987) was FG 440 to the U.S. dollar. b/ As of September 30, 1987.  FOR OFFICIAL USE ONLY REPUBLIC OF GUINEA NATIONAL SEEDS PROJECT CREDIT AND PROJECT SUMMARY Borrower: Government of Guinea Beneficiary: Ministry of Rural Development Amount: SDR 7.1 million (US$9.0 equivalent) Terms: Standard, with 40 years maturity Onlending Terms: Not applicable Financing Plan: Government US$ 1.6 million IDA US$ 9.0 million TOTAL USS 10.6 million Economic Rate of Return: 30Z Staff Appraisal Report: No. 6918-GUI Maps: IBRD 20468 - National Seeds Project IBRD 20469 - Agricultural Production Zones This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTEFWATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF GUINEA FOR A NATIONAL SEEDS PROJECT 1. The following report and recommendation on a proposed development credit to the Republic of Guinea for SDR 7.1 million (US$9.0 million equivalent) is submitted for approval. The proposed credit would be on standard IDA terms with 40 years maturity and would assist in financing a project to establish a national improved seed production system. 2. Background. Agriculture is the most significant sector in Guinea's economy, accounting for about 43% of GDP and employing about 80% of the labor force. Although land and climate are not limiting factors to increased agricultural production, the sector is not realizing its full potential. Agricultural commodities, while accounting for the bulk of Guinea's exports in 1958 (58%), now represent less than 2% of the total value of exports. Rice imports, which were 7,000 tons in 1958, exceeded 100,000 tons in 1986. Failure to develop the sector stemmed from distorted macroeconomic conditions, inadequate sector policies and services, including research and extension, and lack of inputs. This resulted in a low le-el of technology being practiced by farmers. Within this environment, the efforts to select and produce good quality seed did not have any tangible impact in terms of varieties produced and accepted, and the amount of improved seed commercially distributed. 3. In consultation with the Bank and the IMP, the Government of Guinea in 1984 began to redress the basic macroeconomic problems with an IDA-supported structural adjustment program which includes market liberalization and removal of exchange rate and price distortions. It also undertook the restructuring and divestiture of many public sector enterprises, the reform of the public administration, and the establishment of better public investment programs. The revamping of the relative price structure has resulted in production incentives which correspond more closely to Guinea's comparative advantage. In addition, removal of official impediments to the free marketing of agricultural produce has stimulated development of domestic agricultural markets. Expected improvements in the road network will further stimulate agricultural production. The Government now intends to reform basic agricultural institutiors and services through measures which would reinforce research and extension, and other specialized agricultural services which would sustain the supply response stimulated by a more favorable policy environment. 4. Since independence, Guinea has expended considerable effort to seLect and produce improved foodcrop varieties. Numerous varieties have  - 2 - been introduced, tested and disseminated. Although some have deteriorated considerably, many could be recovered, physically improved and re-released. The combined production of improved conditioned seed in Guinea (about 350 tons/year) reaches only a fraction of the farmers. All efforts in seed selection and production have lacked the key elements for success: clear objectives, continuity of effort, concentration of available resources in the most viable seed production areas and, most importantly, an adequate organizational structure. Nevertheless, the potential exists for the rapid provision of good quality, physically improved seed of the best varieties already available, and for the selection and production of addi$onal improved varieties in the near future. To achieve this, a catalytic investment is required to fill certain voids and coordinate existing eff4rts. This need has already been recognized by the Government and would be addressjd under the proposed National Seeds project. 5. Rationale for IDA Involvement. The proposed project would draw together the diverse activities in varietal selection and seed production into a focused effort. It forms an integral part of the Government's and IDA's strategies for the sector by addressing the identified need for developing an improved eeed production capacity which, with minimum risk, would improve the income of smallholders in that it would provide seeds adapted to Guinea's varied ecological and economic environments. It would complement and build on ongoing research, extension and seed production activities financed by IDA and other donors, and capitalize on the existing human and institutional infrastructure and on the genetic material available. IDA's participation at this stage would fill a void in existing projects by providing an overall national system which would help to coordinate donors' efforts and ensure the supply of an essential input for extension messages. Furthermore, the project would be in line with the Government's and IDA's development strategy because important parts of the seed production and distribution system would be privatized in the future. 6. Project Objectives. The main project objectives would be to (a) supply the financing, the management assistance, and the organization to establish a reliable national seed production system which would be conducive to privatization; and (b) increase agricultural productivity through the production of improved rice, maize and groundnuts seed. Under the project, an important part of the seed production system (multi- plication) would be contracted to farmers. Production of base seed and quality control would be initially under state control. The operations of Seed Conditioning Centers (SCCs) would be organized to facilitate their privatization by establishing appropriate pricing mechanisms, cost control, and incentives for good management. 7. Project Description. The project would, over a four-year period (1988-91), set up the first national improved seed production system in Guinea. It would build on existing institutions (research stations, agricultural and regional development and extension projects) to identify, produce and distribute improved rice, maize and groundnuts seed. This  - 3 - would be implemented by (a) strengthening research stations to identify, select and produce base seed of adapted varieties of foodcrops; (b) setting up SCCs to supervise base seed production and its multiplication by contract outgrowers, and to condition the improved seed for sale to farmers and commercial suppliers; (c) establishing quality control facilities; (d) training staff to carry out varietal selection and base seed production, and to undertake auality cor.trol activities; and (e) providing the organization which would ensure the control and coordination of countrywide seed production activities. The total cost of the project is estimated at US$10.6 million equivalent, of which US$8.6 million (81Z) in foreign exchange. Project costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and disbursement. as well as the disbursement schedule, are presented in Schedule B. A timetable of key project processing events and the status of Bank Group operations in Guinea are given in Schedules C and D, respectively. Two maps showing project locations are also attached. The Staff Appraisal Report No. 6918-GUI dated 16 November 1987 is being distributed separately. A Project Preparation Facility (PPF) has been awarded to ensure timely start-up of project implementation and early selection of the varieties that would enter the multiplication cycle. 8. Agreed Actions. The Government has agreed on the following actions: (a) Government would do its utmost to sell the SCCs to the private sector beginning upon their establishment (expectations are, however, that the pri-ate sector will not purchase the centers until they are running smoothly and generating profit, which will require several years); (b) formalities to establish the SCCs would be completed by DecemDer 1988; (c) proceeds of seed sale would be retained by the SCCs to ensure their adequate furotioning and to establish conditions for future privatization; (d) the National Seed Committee (NSC) in consultation with IDA and the Regional Seed Committees would establish, at least on an annual basis, the structure of seed prices for publicly owned SCCs and for contract outgrowers to ensure adequate prefitability of both; and (e) Government would ensure that an annual review of seed marketing and pricing is carried out to determine seed price for publicly owned SCCs. Conditions of effectiveness would be that (a) adequate land has been made available to the SCCs; (b) a local currency Project Account has been Gpened with an initial deposit by the Government of FG 80 million; (c) technical specialists have been recruited; and td) the NSC has been established with membership satisfactory to IDA. 9. Benefits. The project would provide the assistance and the organization necessary for reliable production and distribution of improved seed. Because improved seed at full development would cover about 20Z of the area planted in Guinea with rice, maize and groundauts, crop productivity would increase by 20-30Z. Additionally, the SCCs would generate revenues from PY3 onwards, and the system has been set up in such a way that it can be privatized a few years after start-up. Finally, the project would train local staff to take over responsibility for base and improved seed production and quality control. The Economic Rate of Return  -4- is 3O2 and is relatively insensitive to likely variation in cests or benefits from that predicted. 10. Risks. Two possible risks are (a) delays or complications in project implementation due particularly to the need to coordinate several institutions involved in the project; and (b) inadequate Government counterpart funding. Delays will be minimized because the project has already started up under PPF financing. Coordination among the various institutions will be facilitated by the eagerness wvit which the entire agricultural community is awaiting improved seeds, and by specific coordination measures included in the project. The research centers are looking forward to collaborating with the ptoject, which will assist them technically and financially in exploiting available research results and producing the base seed. In addition, the ongoing rural development projects need improved seed to sz:pply their farmers. Furthermore, a management unit and a consultative process (NSC) are provided to direct project activities. Regarding timely Government counterpart funding, risks have been lowered by reducing Government's finanurial contribution to a minimum, by creating a revolving fund in which Government's contribution would be provided in advance, and by ensuring that revenues from seed sales would be kept in a bank account for the project's use. 11. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Barber B. Conable President Attachments Washington, D.C. December , 1987  w q 5 Schedule A REPUBLIC OF GUINEA NATIONAL SEEDS PROJECT ESTINATED COSTS AND FINANCING PLAN Estimated Project Costs a/ Local Foreian Total ---(US$ million)-------- Base Seed Production 0.2 '.0 1.2 Improved Seed Production 0.8 3.7 4.5 Quality Control ... 0.1 0.1 Training 0.1 ... 0.1 Project Administration 0.3 3.1 3.4 Base Costs b 1.4 7.9 9.3 Physical Contingencies 0.1 0.5 0.6 Price Contingencies 0.5 0.2 0.7 Total Project Costs 2.0 8.6 10.6 1I Inclusive of taxes and duties which are negligible. b/ Including PPF for US$0.58 million. Financina Plan Local Foreign Total ---((US$ million)--------- Government 1.6 . 1.6 IDA 0.4 8.6 9.0 Total 2.0 8.6 10.6  t-"I,~~~~~~~~~~~~~~~~~~~~~~~~  -7- Schedule B REPUBLIC OF GUINEA NATIONAL SEEDS PROJECT PROCUREMENT METHOD AND DISBURSEMENTS Project, element Procurement Method Total ICB LCB Other N.A. Cost --------------------(US million)------------------ Buildings 2.00 2.00 (2.00) (2.00) Vehicles 0.79 0.79 (0.79) (0.79) Equipment 1.35 0.30 0.10 1.75 (1.35) (0.30) (0.10) (1.75) Technical Assistance 2.68 2.68 (2.68) (2.68) Training 0.14 0.14 (0.14) (0.14) Inputs 0.64 0.64 (0.64) (0.64) Operating Costs 1.82 1.82 (0.52) (0.52) Local Salaries 0.30 0.30 Project Preparation 0.38 a: 0.10 0.48 (0.38) (0.10) (0.48) TOTAL 2.14 2.30 3.16 3.00 10.60 (2.14) (2.30) (3.16) (1.40) (9.00) a/ Employment of technical assistance and consultants would be in accordance with IDA guidelines. Notes Figures in parentheses show the respective amounts financed by IDA.  Schedule B Disbursements Category Amount X (US$ '000) Buildings 1,800 100l of total cost Vehicles and Equipment 2,400 100? of total cost Tecbnical Assistance 2,400 1002 of total cost Training 100 100? of total cost OperaZing Costs 420 100? of foreign costs and 70? of local costs in PYI 502 of local costs in PY2 3O0 of local costs in PY3 15? of local costs in PY4 Agricultural Inputs 600 1002 of total cost Refinancing PPF 480 Unallocated 800 TOTAL 9,000 Estimated IDA Disbursements IDA Fiscal Year a8 89 90 91 92 93 94 Annatl 0.6 1.3 2.1 2.0 1.6 1.0 0.4 Cumulative 0.6 1.9 4.0 6.0 7.6 8.6 9.0  Schedlle C REPUBLIC OF GUINEA NATIONAL SEEDS PROJECT Timetable of Key Proiect Processing Events (a) Time taken to prepare: 11 months (b) Prepared by: PAO/CP (c) First IDA mission: June 1986 (d) Appraisal mission departure: May 18, 1987 (e) Negotiations: October 26-28, 1987 (f) Planned Date of Effectiveness: July 1988 (g) List of Relevant PCRss None  ow 10 - -A) fAel  - 1I - Schedule D STATUS OF WORLD BANK OPERATIONS IN OUINEA SUMMARY STATEMENT OF LOANS/CREDITS