Guinea - National Rural Infrastructure Project

Document of The World Bank FOR OmCIAL USE ONLY Report No. P-5125-GUI MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AMOUNT OF SDR 31.3 MILLION TO THE REPUBLIC OF GUINEA FOR A NAr,0ONAL RURAL INFRASTRUCTURE PROJECT NOVEMBER 27, 1989 This document has a restricted dixtdtton and may be used by redp{ents only to the performance of tbelr offcial dudes. Its conteots may not otberwise be disclosed without World Bank aahorlzaton.  CURRENCY EQUTVALENTS Currency Unit - Guinean Franc (GF) US$ 1.00 - GF 590 a/ SDR 1.00 - US$1.28 b/ WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS DNGR - Direction Nationale du G4nie Rural FAC - Fonds d'Aide et de Cooperation (France) ENlW - Kreditanstalt fUr Viederaufbau (Federal Republic of Germany) MARA - Ministare de l'Agriculture et des Ressources Animales USAID - United States Agency for International Development SNAPE - Service National d'Amenagement des Points 'Eau FISCAL YEAR January 1 - December 31 a/ Represents the exchange rate at appraisal in June 1989. The exchange rate is established through an auction system and was GF 615 to the U.S. dollar at the time of negotiations in November 1989. b/ As of November 1989.  FOR OFFICIAL USE ONLY REPUBLIC OF GUINEA NAT;ONAL RURAL INFRASTRUCTURE PROJECT CREDIT AND PROJECT SUMMARY Borrower ' The Government of Guinea Beneficiaries: Ministry of Agriculture and Animal Resources (MARA), Rural Engineering Directorate (DNGR), and Rural Water Supply Agency (SNAPE). Amount: SDR 31.3 million (US$40.0 million equivalent) Terms: Standard, with 40 years maturity Onlendina Terms: Not applicable Tentative Financing Plan: Governnent US$13.5 million IDA US$40.0 million KfW US$ 6.8 million USAID US$27.0 million FAC US$ 0.5 million Beneficiaries USS 1.0 million TOTAL US$88.8 million Economic Rate of Return: 15.7Z feeder roads (Category AIB) 23.22 bottomlands and rural roads (Category C) Staff Appraisal Report: No. 8012-GUI Ma2s: IBRD Nos 21840 and 21841 rThis document ttas a resfticted distribution and may be used by recipients only in tbe performance |of their offcia duties. Its contents may not othlerwiw be dbctosed WittlOUt World Bank authorizatiov.  MEMORANDUM AND RECOMMENDATION OF THE nRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF GUINEA FOR A NATIONAL RURAL INFRASTRUCTURE PROJECT 1. The following memorandum and recommendation on a proposed credit to the Republic of Guinea for SDR 31.3 million (US$40.0 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 strengthen national rural infrastructure. 2. Background. The rural sector is the mainstay of Guinea's economy, providing a livelihood to 752 of the population and generating about 302 of GDP. The favorable climate and ecological diversity of Gu`nea offer a wide range of development possibilities for the rural sector. However, the economy was mismanaged during nearly 30 years, and as a -esult, development did not materialize. 3. Since 1985, under its structural adjustment program, the Government has shifted toward sounder economic development policies whose main elements are: (a) withdrawal of the state from directly productive sectors and restructuring of the public sector through a comprehensive administrative and public enterprise reform; (b) resource allocation policies consistent with the establishment of a flexible, liberal economy through, inter alia, realistic exchange rate, interest rate, price and trade policies; and (c) macroeconomic policies consistent with long-term fiscal and balance of payments equilibria. These policies provide a favorable environment for agricultural development. The dilapidated infrastructure, however, still constrains such development. 4. The Government, the Bank, and the other main donors agree that future programs in the agricultural sector should, in priority: (a) provide agricultural services to the farming community, in particular applied research, credit, extension, and animal health services; (b) improve the efficiency of the entities providing services to the rural sector (Government Departments, and to the extent possible, village level organizations, and private services); and (c) rehabilitate rural infrastructure, particularly feeder roads, bottomlands, and rural water supply. 5. Proiect Objectives and Description. The project would assist the Government in implementing policies in rural infrastructure by reinforcing the capacity of institutions involved in the sub-sector, implementing a specific rural infrastructure investment program, carrying out studies, and implementing pilot actions to test new methods of construction and maintenance of rural infrastructure.  -2- 6. To reach these objectives the project would (a) strengthen the planning and supervision capacity of DNGR (Rural Engineering Directorate) and SNAPE (Rural Water Supply Agency), and provide training; (b) rehabilitate 2.600 km of feeder roads, develop 2,100 ha of small bottomlands, drill 220 boreholes, and establish two small community piped water supply systems with sanitation components; and (c) prepare studies and launch pilot actions, including a Feeder Roads Master Plan, a pilot program to develop labor-based methods for road works and promote the emergence of small and medium scale contractors, a pilot program to develop bottomlands with the assistance of a NGO, and studies and pilot schemes to define a national strategy for the development of Rural Water Supply and Sanitation (RWSS). 7. The project would be implemented by DNGR and SNAPE services, both at the national and regional levels. Project activities would take place in all four natural regions of the country, but would support in priority zones with ongoing agricultural development activities in 16 of the 33 prefectures of the country, including but not limited to, the areas covered by the recently approved IDA-financed National Research and Extension Project. Implementation would follow annual work plans approved by IDA. The detailed work plan for the first year was agreed at negotiations and is available in the Project Implementation File. 8. Rationale for IDA Involvement. Rural infrastructure rehabilitation requires support of a scope and nature that IDA is in a position to provide. The project would complement other IDA-financed projects (National Research and Extension, Transport Sector, and IVth Highway) in stimulating agricultural production and income, and therefore, fits into IDA's overall assistance strategy for Guinea. The RWSS component would benefit from the regional UNDP/World Bank Water and Sanitation program, of which Guinea is envisaged to be part. Through the project, IDA would play a catalytic role in enabling the Government to coordinate the activities of the many donors involved in the rural infrastructure sub-sector. The project would assist the Government in integrating all externally financed projects into a national strategy for rural infrastructure development. IDA has a significant comparative advantage in providing this kind of support. Its leadership role would ensure that adequate attention is paid to policy issues, including institutional strengthening, private sector development, and cost recovery. 9. Agreed Actions. The project design, objectives, and costs were agreed at negotiations. Assurances were obtained on the existence of satisfactory arrangements to ensure the timely availability of funds for road maintenance. In this respect, it was agreed that the implementation arrangements for the recently created Roads Fund would be made effective. Standard legal conditions of credit effectiveness would apply. Credit effectiveness would also be conditional on submission of the official statutes defining the organization and management of thie project implementing agencies and the autonomous entities under their tutelage.  - 3 - 10. Benefits. The following tangible benefits are expected under the project. Institution-Building: Strengthened institutions responsible for rural roads, bottomlands development, and RWSS operations, as well as private enterprises working under contract on rural infrastructure development. Rural Roads: Acceleration of economic growth, reduction of transportation costs, and expansion of commercial services through better communications. Bottomlands: Increased food production, larger farmer incomes, and land conservation. Water Supply: Improvement of sanitary conditions and living standards, benefiting directly the rural population, including women, children and the poor. Benefits with respect to roads and bottomlands were quantified at appraisal, and the cost-benefit analysis resulted in an Economic Rate of Return of 15.72 for the feeder roads, and 23.2Z for bottomlands and rural tracks. 11. Risks. The main risk of the project lies in the fragility of government institutions following the changes in structures carried out recently. The Government reorganization of ministries could result in a lack of commitment of those civil servants in charge of implementing these reforms. These risks are being addressed as part of the establishment, under the Government's overall administrative reform program, of adequate incentives for civil servants. 12. Technical risks due to shortages of trained staff are minimized through training programs, technical assistance, and a minimal use of force account in carrying out the works. The project was designed to explicitly address the issue of maintenance of the rural infrastructure to ensure its sustainability. Concerning the RUSS component, boreholes would be drilled only in villages which would make a substantial financial contributions toward the purchase of handpumps. The risk is that villages may not be willing, or able, to make such substantial contributions, thereby undermining the establishment of a viable maintenance system. This risk is minimized by the sensitization program to be undertaken as part of the project. 13. A final risk concerns the timely availability of counterpart funding. This risk is minimized, however, through the drastic steps taken by the Government to improve public finance management under the Structural Adjustment Program and through the participation of beneficiaries, thereby decreasing the Government's share of local funding. 14. 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. November 27, 1989  -4- Schedule A REPUSLIC OF GUINEA NATIONAL RURAL INFRASTRUCTURE PROJECT Estimated Costs and Financing Plan 2 of Estimated Project Costs a/ Local Foreign Total Base Cost ---- (US$ million) ---- Institutional Development DNGR Support 2.3 7.5 9.8 14.4 SNAPE Support 0.4 1.2 1.6 2.2 T-aining 1.8 7.3 9.1 13.5 Investment and Maintenance Feeder Roads 10.2 25.0 35.2 51.8 Bottomlands 0.7 1.5 2.2 3.3 Vater Supply 0.9 2.9 3.8 5.5 Studies and Pilot Programs Studies 0.2 2.0 2.2 3.3 Pilot Programs 0.8 3.3 4.1 6.0 Total Base Costs 17.3 50.7 68.0 100.0 Physical Contingencies 1.4 3.8 5.2 7.6 Price Contingencies 7.0 8.6 15.6 23.0 Total Project Costs 25.6 63.2 88.8 130.6 (Including Taxes) Taxes 6.3 - 6.3 Total Project Costs 19.3 63.2 82.5 (Net of Taxes) a/ Including three PPF advances totalling US$1.45 million. Financing Plan Local Foreign Total ---------(USS million)------- Government 7.9 5.6 13.5 IDA 7.3 32.7 40.0 KfW 1.8 5.0 6.8 USAID 7.5 19.5 27.0 FAC 0.1 0.4 0.5 Beneficiaries 1.0 - 1.0 Total 25.6 63.2 88.8  Schedule B Page 1 of 2 REPUBLIC OF GUINEA NATIONAL RURAL INFRASTRUCTURE PROJET PROCUREMENT MMETODS AND DISBURSEMENTS a/ Procurement Methods Total Items ICB LCB Other Cof bl Costs -__-------- USS million ------------- 1. Civil Works a) Roads 6.1c/ - 1.5 38.5 46.1 (5.7) - (1.4) - (7.1) b) Bottomlands - 0.5 1.0 0.3 1.9 _ (0.4) (0.9) - (1.3) c) Water Supply 4.3cl - 0.4 0.1 4.8 (4.0) - (0.3) - (4.3) d) Buildings 0.6c/ 0.9 0.4 1.9 (0.5) (0.8) 0.3 - (1.6) Subtotal 11.0 1.4 3.4 38.9 54.7 (10.2) (1.2) (2.9) - (14.3) 2. Vehicles 1.6 0.3 0.3 - 2.2 (1-6) (0.3) (0.3) - (2.2) 3. Goods & Equipment 2.4 0.8 0.7 1.2 5.1 (2.4) 0.8 (0.7) - (3.9) 4. Consultants a) Resident - 5.6 - 5.6 _ _ t(5.6) - (5.6) b) Short-term - - 3.6 1.4 5.0 -_ - (3.6) - (3-6) Subtotal - (9.2) 1.4 10.6 - - (9.2) - (9.2) 5. Training Courses - - 2.5 0.5 3.0 - - (2.2) - (2.2) 6. Operating and Road - - 7.6d/ - 7.6 Maintenance Costs - - (4.1) - (4.1) 7. Road Maintenance - - 4.2 - 4.2 _ (2.7) - (2.7) 8. PPP 0.6 - 0.8 - 1.4 (0.6) - (0.8) - (1.4) Total 15.6 2.5 28.7 42.0 88.8 (14.8) (2.3) (22.9) - (40.0) a/ Amounts in parentheses indicate IDA financing. b/ Parallel financing by other donors would be under their own procedures. c/ Including work supervision. d/ Including staff allowances for US$200,000 financed by Government.  - 6 - Schedule B Page 2 of 2 Disbursement of IDA Credit US$ Million 2 of Expenditures Cateaory Eauivalent To be Financed a/ 1. Civil Works b/ 12.8 100 cl 2. Vehicles, Goods and Equipment 5.5 100 3. Technical Assistance d/ 10.2 100 4. Operating Costs 3.7 Declining basis 5. Roads Maintenance Costs 2.4 Declining basis 6. PPF Refinancing 1.4 7. Unallocated 4.0 Total 40.0 a/ Of amounts net of taxes. b! Including training courses. c/ Excent boreholes drilling (972) which includes procurement of hand pumps financed at 652 only given 352 financial participation by beneficiaries. d/ Including training courses. Estimated Disbursements from IDA Credit IDA Fiscal Year 1990 1991 1992 1993 1994 1995 1996 -----------------------(US$ Million)---------------------- Annual 3.2 8.8 10.4 8.4 5.2 3.6 0.4 Cumulative 3.2 12.0 22.4 30.8 36.0 39.6 40.0  -7- Schedule C REPUBLIC OF GUi!EA NATIONAL RURAL INFRASTRUCTURE PROJECT Timetable of Key Proiet Processing Events (a) Time taken to prepares 18 months (b) Prepared bys SCET-AGU (c) First IDA mission: March 1988 (d) Appraisal mission departure: May 29, 1989 (e) Negotiations: November 6-10, 1989 (f) Planned date of Effectiveness: April 1990 (g) List of relevant PCRs and PPARu: None  _thedv-ie D Page I of 2 STATUS OF WORLD BAK GROUP OPERATIONS 111 GUN A. Statement of lank Loans and IDA Credits (A of November 25, 1989) kAmt in USLS illion (InS tancslationsl Loan or Fiscal Undis- Credit No. Yar Borrwr Purpo Bank IDA bursed Credits 12 Creditiss) closed 150.23 C12340-GUI 1992 GUIEA INDUSTRY IENAB (DFC) 19.00 4.61 Ci3410-6UI 1993 WUINEA EUCATION11 11.00 5.00 C14300-GUI 1994 6UINEA PROLEUN EIPL. 8.00 .51 C14570-GUI 1994 0UINEA HIISUIAYS III 28.00 14.69 C14660-GUI 1994 GUINEA UR I S SUPPLEWEJIT 1l.70 .72 C15590-6U1 1995 6UINEA TECHNICAL ASSISTANCE 9.50 .32 C15950-6U 195 I GUINEA POR EN1INEERINI 11 9.00 3.32 C16350-6U1 1996 GUIA AUECIKEOU A6RIC.O