Document of The World Bank FOR OMFICIAL USE ONLY Report No. 11460 PROJECT COMPLETION REPORT MADAGASCAR COTTON DEVELOPMENT PROJECT (CREDIT 1433-MAG;SF 008-MAG) DECEMBER 22, 1992 Agriculture Operations Division South-Central and Indian Ocean Department Africa Regional Office 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. EXCHANGE RATES Currency Unit: Malagasy Francs (FMG) Year - US$1.00 Equivalent 1983 - 475 1984 - 658 1985 - 636 1986 - 770 1987 - 1,234 1988 - 1,526 1989 - 1,533 1990 - 1,466 1991 - 1,835 WEIGHTS AND MEASURES I are (a) = 0.0247 acres I hectare (ha) = 2.47 acres I kilometer (kim) = 0.62 miles I square kilometer (km2) = 0.39 square mile I kilogram (kg) = 2.20 pounds I liter (1) = 0.26 US gallon 0.22 Imperial gallon I ton (t) = 2,204 pounds ABBREVIATIONS BTM Agricultural Credit Bank CCCE Caisse Centrale de Cooperation Economique (French aid agency) CFDT French Company for the Development of Textile Fibers (Compagnie Francaise pour le Developpement des Fibres Textiles) CSCC Cotton Sector Coordination Committee CSPC Cotton Stabilization Fund (Caisse de Stabilisation du Prix de Coton) FAC Fonds d'Aide et de Cooperation (French aid agency) FMG Malagasy Franc FOFIFA Center for Agricultural and Rural Development Research HASYMA Hasy Malagasy, Cotton Marketing Parastatal IDA International Development Association IRCT French Cotton and Textiles Research Institute (Institut de Recherche du Coton et des Textiles) MIC Ministry of Industry and Commerce (Ministere de l'lndustrie et du Commerce) MPAEF Ministry of Animal Production, Fisheries and Forests (Ministere de la Production Animale et des Eaux et For&s) MPARA Ministry of Agricultural Production and Agrarian Reform (Ministere de la Production Agricole et de la Rdforme Agraire) MTP Ministry of Public Works (Ministere des Travaux Publics) PCR Project Completion Report SAMANGOKY Cotton and rice producing irrigation scheme in the Mangoky area (Societd pour l'Amenagement de la Mangoky) SODEMO Cotton producing irrigation scheme in the Midwest area (Societe pour le Developpement du Moyen-Ouest) SUMATEX Malagasy Textile Company FISCAL YEAR OF BORROWER January Ist - December 31st FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation December 22, 1992 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Madagascar - Cotton Development Project (Credit 1433-MAG: SF 008-MAG) Attached is a copy of the report entitled "Project Completion Report on Madagascar Cotton Development Project (Credit 1433-MAG; SF 008-MAG)" prepared by the Africa Regional Office. The project did not achieve its objectives. Madagascar cotton production in recent years decreased substantially due to a sharp decline in the world market price of cotton and fixed nominal producer prices combined with devaluation of the local currency. The project is rated as unsatisfactory, its sustainability as unlikely and its institutional impact as negligible. The Project Completion Report (PCR) is comprehensive and informative. While no comments on Parts I and Im were received from the Borrower, it prepared its own Project Completion Report which is available in the project files. An audit is planned jointly with two other investment projects in the agricultural sector and an agricultural sector adjustment operation (ASAC). Attachment 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. FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT MADAGASCAR COTTON DEVELOPMENT PROJECT (CREDIT 1433-MAG: SF-008-MAG) Table of Contents PREFACE .................................................... EVALUATION SUMMARY ......................................... iii PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE .............. 1 Project Identity ............................................ 1 Background . .............................................. 1 Project Objectives and Description ................................ 2 Project Design and Organization ................................. 3 Project Implementation ....................................... 3 Project Results and Impact ..................................... 7 Project Sustainability ........................................ 9 IDA Performance .......................................... 9 Borrower's Performance ..................................... 10 PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE . ........ 11 PART III: STATISTICAL INFORMATION ............ .. ................ 12 Table 1: Related Bank Credits ................................. 12 Table 2: Project Timetable ................................... 13 Table 3: Project Costs and Financing ............................. 14 Table 4: Disbursements ..................................... 16 Table 5: Implementation Indicators .............................. 19 Table 6: Project Results ..................................... 21 Table 7: Compliance with Credit Conditions ........................ 27 Table 8: Use of Bank Resources ................................ 29 ANNEX 1: ECONOMIC ANALYSIS .................................. 31 MAP: IBRD 15921R 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. - i - PROJECT COMPLETION REPORT MADAGASCAR COTTON DEVELOPMENT PROJECT (CREDIT 1433-MAG: SF-008 MAG) PREFACE This is the Project Completion Report (PCR) for the Madagascar Cotton Development Project for which Credit 1433-MAG in the amount of SDR 7.5 million (US$7.9 million equivalent) was approved on December 22, 1983, and Special Fund Credit SF 008-MAG in the amount of SDR 9.4 million (US$9.9 million equivalent) was approved on December 22, 1983. Both credits became effective on August 31, 1984, a delay of less than three months. Credit 1433-MAG was closed on June 30, 1990, two years behind schedule; the last disbursement took place on July 3, 1991, at which time an amount of SDR 10,012.87 was canceled (0.1 percent of the credit). Credit SF 008-MAG also closed on June 30, 1990, two years behind schedule; the last disbursement took place on May 24, 1991, at which time the undisbursed balance in the amount of SDR 25,618.55 was canceled (0.3 percent of the credit). 1/ Parallel financing in the amount of FF 86.3 million (US$11.3 million) was obtained from the Caisse Centrale de Cooperation Economique. At the time of closing of the IDA credits, FF 49.6 million (US$6.6 million) had been disbursed from the CCCE loans. The PCR (Preface, Evaluation Summary and Parts I and III) was prepared by staff of the Agricultural Operations Division of the South-Central and Indian Ocean Department, Africa Regional Office and staff of the FAO/World Bank Cooperative Program (FAO/CP), who visited Madagascar in June 1991. The PCR is based on project documentation such as the Appraisal Report, the Credit Agreements, project correspondence, supervision reports, etc. The Borrower was sent a copy of Parts I and III of the PCR on April 3, 1992. However, the Borrower did not provide a Part II. _/ I/ Delays in final disbursements were the result of administrative delays at the level of the Central Bank in Madagascar. 2/ The Borrower sent a project completion report in lieu of Part II. This report is in project files. - iii - PROJECT COMPLETION REPORT MADAGASCAR COTTON DEVELOPMENT PROJECT (CREDIT 1433-MAG: SF-008 MAG) EVALUATION SUMMARY Background 1. At the time of project preparation in 1981-82, agriculture contributed about 40% of GNP and over 80% of export earnings, supporting directly over 80% of a population of about 9 million. Sector performance had been disappointing during the 1970s. There had been sluggish growth in rice and livestock production, and a rapid decline in industrial crops, notably sugar and groundnuts. Production declines were the result of economic policies which increased state intervention and included the nationalization of processing industries, the establishment of public marketing and banking monopolies, and enforcement of controlled prices. 2. Agricultural Development Strategies were reviewed in 1982-83 by the Government following discussions with the Bank and the donor community; it was envisaged that a more favorable economic environment, through divestment from unsuccessful parastatals, more incentive producer prices, improvement of rural infrastructure, and selective support to private enterprises should be promoted. Also, urgent recovery measures for the rice, cotton, coffee and livestock sub-sectors were planned for the 1983-85 period. Government policy regarding the cotton sub-sector was fragmented as two different ministries were responsible for it. The new policy, supported by the Project, aimed at encouraging production to meet the demand of the domestic textile industry through adequate prices and improved access to credit for producers. Project Objectives and Description 3. The main objective of the project was to increase cotton production in Madagascar in order to meet domestic cotton fiber demand. This was to be achieved principally through increasing seed cotton production from 1982 levels of some 26,000 tons to about 45,000 tons, by increasing yields on existing areas and by extending cultivation through the development of a further 8,000 ha. Production was to be undertaken by smallholders and large private farmers. 4. To attain its objectives the project included: (i) provision of equipment and vehicles to replace and expand existing pools and so improve yields and extend areas planted with cotton; (ii) construction of workshops and stores to maintain equipment and vehicles, and ensure input supply; (iii) rehabilitation and maintenance of cotton roads to improve communications for input supply and marketing; (iv) provision of farm inputs to maintain and improve productivity; (v) adaptive cotton research and pre-production trials aimed at boosting yields and improving production techniques; (vi) technical assistance to HASYMA (cotton parastatal) and SAMANGOKY (cotton and rice producing - iv - irrigation parastatal), training of their personnel and strengthening of HASYMA's data processing system; (vii) monitoring and evaluation of project activities; and (viii) studies. Implementation Experience 5. Implementation started in 1983 following the successful arrangements for parallel financing from the Caisse Centrale de Cooperation Economique (CCCE, a French aid agency). Disbursements from the IDA credits proceeded swiftly until mid-1987 when over 90% of the credits had been disbursed. Most of the project activities had progressed rapidly except for the cotton tracks rehabilitation component which suffered numerous and lengthy delays. Services provided under technical assistance were generally considered satisfactory and the training component was fairly comprehensive and particularly useful. A number of studies were financed. As a result of research supported under the project, three improved cotton varieties have been disseminated since 1992 that have higher yields and better fiber quality. 6. While project execution thus proceeded swiftly, with disbursements well ahead of schedule, two issues arose, which in the end, proved detrimental to the project, to the institution in charge and to the cotton sector as a whole. First, while cotton production progressed rapidly in the first three project years from 23,000 tons to over 40,000 tons, it was not immediately realized that this increase resulted almost exclusively from an extension of cotton cultivation in rainfed areas, often on marginal lands, while yields actually declined. 7. Second, the macro-economic environment turned sharply negative for the cotton sub-sector during implementation. At the time of project preparation, in 1982-83, Government had just introduced several economic adjustment measures in order to reduce excess demand and thus inflation, and to liberalize some prices. For the cotton sub-sector, this meant that local textile companies were free to vary both quantities and prices for cotton bought from HASYMA (although a mixed Government/industry committee was supposed to review pricing decisions), whereas HASYMA was obliged to buy all the seed cotton from farmers, and at prices fixed at the beginning of the planting season. These potential commercial and price risks actually came to bear in 1985/86, when world market prices fell drastically (from US$1,656/ton to US$1,091/ton); textile companies supplied themselves largely on the world market, leaving HASYMA with large unsold stocks, which made the latter financially insolvent. The large devaluation of the local currency in 1987 (by 80%) again made domestic cotton competitive but, although local fiber prices were well below export parity prices, the Government obliged HASYMA to supply local mills first (at below world market prices) before they could export cotton. To date, HASYMA has not yet fully recovered from the financial repercussions of these policies. Project Results 8. On the basis of the PCR mission's assessment of costs and benefits an economic analysis was carried out on the production sector component, which resulted in an economic rate of return of 5%, as compared to 30% estimated at the time of appraisal. This discrepancy was caused by the lower than expected yields, resulting from poor varietal performance and poor ginning outturn, lower than expected cotton prices and high investment costs relative to production. The project also failed to set up a viable institution for the cotton sub-sector, as the financial situation of HASYMA has considerably worsened during the project period and this parastatal is still technically insolvent. v - Sustainability 9. Coton Production. The future of cotton production is threatened by technical, economic, and institutional factors. Partly due to insufficient research, pest infestation is on the rise, particularly in the North, which affects both fiber quality and production costs. Thus, the viability of large scale intensive production is jeopardized; a number of large farms are diversifying out of cotton, to tobacco in particular. Soil erosion in the South has resulted in decreasing yields, which inter alia also has affected the viability of rainfed farms; the need to integrate cotton into sustainable cropping systems is not yet understood by farmers and HASYMA's efforts in this direction are still inadequate. 10. Institutions. While it is most likely that, well organized, large farms could do without HASYMA, peasant farms are dependent on its services for credit, input supply, extension and marketing. In spite of HASYMA's recent, and apparently successful efforts to establish farmers' associations at village level to take over their share in such services, they will still need an integrated organization to support them. Indeed, efficient pest control requires that all growers follow recommendations on time, which implies that they can find and afford the required chemicals. Thus, the link between extension, supply and credit appears essential, and for sometime at least, only a marketing body can realistically offer the requisite credit facilities. The latter, however, does not constitute a justification for the continued support to HASYMA, as independent producer associations could take over part or all of its role. HASYMA requires massive capital injections and a major reorganization to be viable. The present wait-and-see policy, delaying a financial solution, is precipitating its collapse, with potential harmful effects on peasant farmers. Lessons Learned 11. The experience from this project shows that: (a) The project was aimed from the beginning at providing more domestically produced cotton fiber to the local textile mills, as such, it fitted with the prevailing self- sufficiency and exchange rate policies. Both Government and HASYMA failed to adjust themselves when these policies changed; (b) Liberalization of a sub-sector cannot be introduced in half measures. A situation where consumer prices are liberalized while producer prices are fixed is a prescription for disaster. This was the case when HASYMA was faced annually with falling prices for its fiber, while being held to predetermined prices for the seed cotton bought from farmers; (c) Supervision was insufficient to detect in time the mediocre performance of HASYMA in the field. The upswing in seed cotton production in the 1983/85 period disguised the declining yields, which in turn were caused by poor variety performance and poor plant protection measures. Furthermore, ginning deficiencies led to poor fiber quality. The continuous presence of a cotton specialist in supervision missions could have detected these deficiencies at an earlier stage; and - vi - (d) In-depth studies were carried out on the restructuring of HASYMA following the 1986-87 events, with few results despite donor pressure for change. It was agreed, however, that HASYMA could take independent marketing decisions for its fiber, and export cotton if it could obtain better prices. Due to the mediocre quality of its production, this has not yet happened. - I - PROJECT COMPLETION REPORT MADAGASCAR COTTON DEVELOPMENT PROJECT (CREDIT 1433-MAG: SF 008-MAG) PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE 1. Project Identity Project Name: Cotton Development Project Credit No.: 1433-MAG; SF 008-MAG RVP Unit: Africa Country: Madagascar Sector: Agriculture Sub-Sector: Industrial Crops 2. Background The Agricultural Sector 2.1 At the time of project preparation in 1981-82, agriculture contributed about 40% of GNP and over 80% of export earnings, supporting directly over 80% of a population of about 9 million. The dominant crop was rice, followed by cassava, with much of the population also dependent on livestock production. The most important cash and export crops were coffee, which represented almost half of total export earnings in 1980, and cloves and vanilla which earned another 20%. Other important cash crops -sugar, cotton and tobacco - were not exported. 2.2 Sector performance had been disappointing during the 1970s. There had been sluggish growth in rice and livestock production, and a rapid decline in industrial crops, notably sugar and groundnuts. Madagascar became a net rice importer and rice imports exceeded 350,000 tons in 1982. Production declines were the result of economic policies which increased state intervention and included the nationalization of processing industries, the establishment of public marketing and banking monopolies, and strict enforcement of controlled prices, which acted as a disincentive. 2.3 The Cotton sub-sector, involving some 20,000 families in farm production and about 10,000 persons in the textile factories and garment manufactures, formed a major economic activity in Madagascar (33% of the value-added in the industrial sector). Production started in 1958 on large plantations in the northwest (Mahajanga), and developed rapidly after 1968 on smallholdings in the southwest (Toliara) i/, reaching a peak of 37,000 tons of seed cotton in 1977. Thereafter, price 3/ These two regions are referred to below as "the North" and "the South". -2 - disincentives and supply difficulties contributed to a sharp decline to 26,000 tons in 1982, which was below the needs of the industry (about 40,000 ton), forcing the latter to import fiber at substantially higher costs. A parastatal, HASYMA (Hasy Malagasy), was created in 1979 and charged with cotton processing and marketing, input supply, extension, and sub-sector coordination and planning. 2.4 Agricultural Development Strategies were reviewed in 1982-83 by the Government following discussions with the Bank and the donor community; it was envisaged that a more favorable economic environment, through divestment of unsuccessful parastatals, more incentive producer prices, improvement of rural infrastructure, and selective support to private enterprises should be promoted. Also, urgent recovery measures for the rice, cotton, coffee and livestock sub-sectors were planned for the 1983-85 period. Government policy regarding cotton, fostered manufacturing, but not farm production, there being two ministries for the cotton sub-sector. The new policy, supported by the project, aimed at encouraging production to meet the demand of the textile industry through adequate prices and improved access to credit for producers. 3. Project Objectives and Description 3.1 The project was to support Government's cotton development program, which was aimed at expanding seed cotton production over a four year period from 1982 levels of around 26,000 tons to about 45,000 tons, thereby saving foreign exchange expenditures on cotton fiber imports. Increases in production would be achieved by increasing yields on existing areas and by extending cultivation through the development of a further 8,000 ha. Smallholders and large private farms would contribute to these increases in production in about equal proportions. The project included the following components: (a) provision of equipment and vehicles to replace and expand existing pools and so improve yields and extend areas planted to cotton; (b) construction of workshops and stores to maintain equipment and vehicles and ensure input supply; (c) rehabilitation and maintenance of cotton tracks to improve communications for input supply and marketing; (d) provision of farm inputs to maintain and improve productivity; (e) adaptive cotton research and pre-production trials aimed at boosting yields and improving production techniques; (f) technical assistance to HASYMA (cotton marketing parastatal) and SAMANGOKY (cotton producing irrigation scheme in Mangoky), training of their personnel and strengthening of HASYMA's data processing system; (g) monitoring and evaluation of project activities; and (h) studies. 4. Project Design and Organization 4.1 The project was prepared by the Ministry of Agriculture (MPARA), with assistance from IDA missions in 1981 and 1982, and submitted in June 1982 for consideration by the Bank. It was appraised in November 1982 by the Bank with the participation of a representative from the Caisse Centrale de Cooperation Economique (CCCE). The project was scheduled to extend over four years, and expected to cost US$34.4 million, of which US$7.9 million were to be provided by an IDA credit, US$9.9 million by an IDA special credit from the Special Fund, US$11.3 million by a CCCE loan, and the remaining US$5.3 million by the Government and farmers. Most investments were to be made in the first two years. Monitoring and evaluation activities, and the envisaged studies on HASYMA's role and performance and on cotton development prospects were to provide indications as to what further action should be taken. The need for improved subsector coordination and pricing mechanisms had been observed at appraisal. The establishment of a sector coordination committee was therefore made a condition for effectiveness, and assurances were received at negotiations that pricing proposals would be submitted yearly to IDA, and that prices would be maintained at about 90% of border prices. 4.2 Primary responsibility of the project was given to HASYMA. Created in 1979, HASYMA was seen as fairly professional, albeit managerially weak, and given much autonomy by the Government. It was financially vulnerable, since the controlled prices for seed cotton and fiber left little margin to recover processing and marketing costs. The Government was to give HASYMA a substantial capital injection as condition of credit effectiveness. The Center for Agricultural and Rural Development Research, FOFIFA, was made responsible for applied research. 4.3 In retrospect, project design had not properly addressed some of the major risks identified at appraisal. The need for a healthy economic and institutional environment had been understood, but the measures proposed for price fixing and sector coordination were inadequate and in practice only rarely followed. In addition, the analysis of project risks did not take into account the country's rapidly evolving economic situation and ignored the possible effects of the liberalization measures on the sub-sector and HASYMA. 5. Project Implementation General 5.1 The Credit Agreement was signed on March 5, 1984 and became effective on August 31, 1984, a delay of slightly less than 3 months. This delay in effectiveness was the result of the longer than anticipated time needed to establish the Cotton Sector Coordination Committee (CSCC). Implementation started in 1983 following the speedy arrangements made for CCCE financing. When the IDA and Special Fund credits became effective, most project activities, except for the cotton tracks rehabilitation component, were already operational and progressing rapidly. 5.2 During the project implementationperiod the Malagasy Franc depreciated dramatically against the US$. The exchange rate changed from around FMG 475/US$ at the time of appraisal, in 1983, to around FMG 1,500/US$ in 1990. Also, in 1985-86, during project implementation, the world cotton price fell from US$1,656/ton in 1984 to US$1,091/ton in 1986. This exacerbated the financial difficulties experienced in the cotton sub-sector. - 4 - 5.3 The credit was extended twice beyond the original closing date of June 30, 1988 --the first time to June 30, 1989; the second time to June 30, 1990-- mainly to permit disbursement under the delayed cotton track rehabilitation and maintenance component. Also, studies reviewing HASYMA's role and the restructuring of the sector needed to be finalized. 5.4 The last disbursement of Credit 1433-MAG took place on July 3, 1991, at which time an amount of SDR 10,012.87 was canceled (0.1 percent of the credit). The last disbursement of Special Fund Credit SF 008-MAG took place on May 24, 1991, at which time the undisbursed balance in the amount of SDR 25,618.55 was canceled (0.3 percent of the credit). 4/ 5.5 Based on financing provided by IDA and CCCE, actual project costs were about 80 percent of estimated costs (US$27.5 million actual versus US$34.4 million estimated). The project received, however, an unknown amount of financing from the Fonds d'Aide et de Cooperation (FAC) for training (para 5.7) and from the IDA financed Agricultural Adjustment Credit (Cr. 1691-MAG) for agricultural inputs (para 5.5). Implementation of Individual Components 5.6 Supply of equipment and farm inputs. Prior to IDA credit effectiveness, inputs and equipments were procured using funds available under the CCCE loan, which allowed for a quick start-up of project activities. Tenders for agricultural equipment and trucks for the transport of cotton, financed under the IDA credit, were adjudicated in June 1985 and the bulk was delivered in early 1986. Due to financial difficulties experienced by some farmers at the time, part of the equipment was not taken up. These were sold back, with IDA's approval, to local distributors at cost. Also, as part of a new policy from HASYMA to delegate services to the private sector, the trucks were sold to financially viable private transporters, who progressively took over all cotton transport. Starting in October 1984, farm inputs were procured regularly in early fall for the next campaign, first with IDA credit funds, then with foreign exchange resources made available under the Agricultural Sector Adjustment Credit (Cr. 1691-MAG). A planned revolving fund for inputs was never established. The procurement of the mobile workshops and increased storage capacity for HASYMA were delayed and finally canceled following the financial difficulties of HASYMA and the decline in cotton production after 1986. The acquisition of an aircraft for aerial spraying was maintained, after delays, although there is little evidence that it was ever really needed. 5.7 Rehabilitation/maintenance of cotton tracks. This component suffered numerous and lengthy delays. The feasibility studies, which could not be completed at appraisal, were finalized by mid- 1985, and the works started in 1986 for the South, and in 1987 for the North. Following the decision to extend the credit beyond June 1988, the undisbursed funds for track rehabilitation were reallocated to the maintenance program; two brigades were equipped in 1987/88, but started operating, on a small scale, only during the summer of 1990. Problems in the implementation of this component seem to have arisen from insufficient studies, inadequate monitoring of the works, and HASYMA's lack of experience in road maintenance. 4/ The last disbursements took place more than one year after closing, as a result of administrative delays at the level of the Central Bank in Madagascar. 5.8 Technical assistance and training. The project employed a total of 11 foreign specialists, of whom 4 were funded under the IDA credits (Table 6-D). Their services were generally considered satisfactory, although a number of those experts were seconded to organizations that virtually ceased to grow cotton (SAMANGOKY, SODEMO), which reduced the impact their contribution could have had on project objectives. The provision of financial/management experts to HASYMA did not prevent accounting irregularities and major management problems. Training, mostly funded by the FAC, was fairly comprehensive (Table 6-E). The IDA funded study tour to Zimbabwe, Mali and Burkina Faso was particularly useful to initiate the debate on sector restructuring and the reorganization of extension along a participative approach relying on farmers' associations. 5.9 Research. Although a protocol was signed in September 1985 to define their respective responsibilities, relationships between HASYMA and FOFIFA were never good; the former taking over tasks, mainly because FOFIFA was not in a position to undertake them. FOFIFA's contribution was limited to genetic improvement, a work which was boosted with the secondment of a breeder by the French Cotton and Textiles Research Institute (IRCT), in 1987. Of the numerous strains introduced from West Africa, two or three varieties will be disseminated in 1992. Due to their higher yield, improved ginning output and fiber quality, they could give a boost to cotton growing in Madagascar. For pest control, HASYMA did much to constantly update control packages through systematic screening of new formulas. In addition, technical assistance was obtained from AST consultants (Mauritius) for work on residual effects of pesticides, and on resistance build-up of Spodoptora littoralis. Pest control research lacked continuity and guidance, and, given the seriousness of that issue, it is unfortunate that plans to secure a cotton entomologist, first under IDA, then under FAC funding, never materialized. Also, more research would have been advisable to arrive at more specific recommendations, particularly for fertilizers, as well as to promote diversification from cotton monocropping on peasant farms in the South. 5.10 Studies. Between 1987 and 1991, a number of important studies were carried out on HASYMA's financial situation, on the broader sub-sector situation, and on possible restructuring. These studies were financed by CCCE, FAC, and IDA. They led to a major restructuring of HASYMA whereby, a) cotton producers in the north were given the freedom to set up their own ginning and marketing channels; and b) HASYMA became a mixed company and got the freedom to market its cotton internationally. However, no financial restructuring was approved which has serious consequences for the restructuring process, as HASYMA is technically bankrupt. 5.11 Monitoring and Evaluation. Monitoring and evaluation plans were only finalized during supervision missions (July 1985), and the intended baseline survey was never carried out because of the reorganization of HASYMA in 1985. Instead, starting in 1991, a series of information notes were prepared for annual reports. These included comprehensive data on production, credit, output and cultural practices by area. Such data was computerized and statistically analyzed for possible correlations between practices and yields, demonstrating in particular the importance of early planting. Little is known, however, of the farming systems in which cotton farmers operate and of their evolution with the expansion of cotton in the mid-eighties. Thus, an evaluation of direct project impact is not possible. 5.12 The information collected was not always the most relevant, or was not sufficiently analyzed for the purpose of drawing strategic indications. For example, it was often mentioned that prices had been increased for the following season, but with no reference to local inflation and FMG depreciations. A quick investigative analysis would have sufficed to evaluate the real bearing of the - 6 - price change, and make relevant recommendations. More generally, better monitoring would have highlighted earlier the need for changes in the pricing system, possibly minimizing HASYMA's losses. Similarly, the declining trend in yields during project implementation should have been seen much earlier. Actual yields were always much below SAR projections, and this should have triggered their careful monitoring. It is likely that an analysis of available yield data, including comparisons between new and old farms, late/early planted fields, etc. would have given the necessary insights in order to take timely remedial action. Financial Situation of HASYMA 5.13 As a condition for credit effectiveness, the Government strengthened HASYMA's financial position with a cash injection and an increase in equity. Initial supervision missions ensured that prices were fixed at levels which guaranteed positive returns to the company. In 1985, as a result of a bumper crop, high fixed producer prices, a domestic market in recession, and falling world market prices, HASYMA was forced to export with high losses, which were aggravated by delays in obtaining export permits. Production has declined significantly since, but the cost of services and processing, can no longer be covered by the price differential between fiber and seed coton. Having also lost heavily on the CCCE loan as a result of foreign exchange risks, HASYMA is now technically bankrupt. Measures proposed by IDA and CCCE to improve HASYMA's financial situation, including the formal attribution by Government of counterpart funds to increase its capital, have never been implemented. Sub-sector Oreanization and Management 5.14 The Cotton Sector Coordination Committee (CSCC) was created in August 1984, as a condition for credit effectiveness. It was expected to convene frequently during the first year to review project goals and operations. After a first meeting in January 1985, the Committee was not convened again until April 1987, after which it met on average once a year until April 1990. Discussions were always limited to price fixing, and the Committee never took on the coordinating role between consumers and producers of cotton, for which it was originally created. 5.15 Pricing system. It was envisaged at appraisal that producer prices would be based on border prices (about 90% of import parity), and annual price proposals would be presented to IDA for discussion. When it was realized that the country would soon become a net exporter, IDA missions in 1984-85 suggested that the reference be changed to export prices. In practice, however, prices were decided by the CSCC, following recommendations made by HASYMA and discussions with the textile manufacturers. 5.16 When world prices plummeted in 1985 and 1986 (from US$1,656/ton in 1984, to US$1,409/ton in 1985 and US$1,091/ton in 1986), producer prices were kept constant while prices to the industry dropped, with HASYMA taking the heavy losses. After 1986, when world prices recovered and the Malagasy Franc underwent a series of devaluations, producer prices were not sufficiently increased. These artificially low prices were benefitting the local textile industry at the expense of farmers and HASYMA. However, HASYMA had little bargaining power as the Governmnent policy was to protect the local industry and to allow exports only when all its needs were satisfied. In short, HASYMA became the victim of a pricing system, that was fundamentally non- viable, with fixed producer prices, and varying selling prices. - 7 - 5.17 Sub-sector restructuring. It was clear, in 1987, that HASYMA's financial problems could not be settled without major reforms. Both CCCE and IDA pressed HASYMA and the Government to propose a subsector reorganization and supported or undertook the requisite studies. Discussions revolved around the need for a central organization, the price fixing mechanism, and cotton marketing strategies. Until now, Government proposals have been in favor of a status quo, with allowances for HASYMA to decide freely on cotton sales and pricing policies, and for private producers to participate in HASYMA's capital and have a say in its industrial and commercial management. Pending its financial restructuring, HASYMA is merely surviving and staff is demoralized. Many operators in the sub-sector are determined to reduce their dependency on HASYMA. 6. Project Results and Impact 6.1 Cotton production. As a result of project activities, which quickly eased farm mechanization, input supply and transport constraints, and because of initially favorable producer prices, cotton production increased from 26,000 tons in 1983 to almost 43,000 tons in 1985, close to the final appraisal target of 45,000 tons. The production increase was entirely due to area increases, mainly in rainfed areas, and was accompanied by a sharp decline in yields. After HASYMA decided to retain only the better farmers and limit their area to what they could properly cultivate, production fell to 27,000 tons in 1987. Thereafter, in spite of an exceptionally good year in 1989, production has been stagnating at around 31,000 tons. There is no decisive evidence yet that the control on area expansion has translated into improved yields. 6.2 Farmers' situation. In the North, large cotton farms in the flood recession system represented over 60% of national production before the project. With mostly stagnating yields and areas, their present share has slightly declined to about 55%. Without the project, their production would have certainly regressed further; however, with increasing production costs, particularly for pest control, their viability remains doubtful, particularly for those still indebted for the equipment bought under the project. Besides those farms, a new class of peasant farmers (about 2,000) has emerged, which, under a less intensive flood recession system, produce at much lower cost. These peasant farmers have directly benefitted from the project. 6.3 In the South, irrigated cotton cultivation, formerly at par with rainfed cotton cropping, has almost disappeared, mostly to the benefit of rice, where irrigation was adequate. This was the case on the SAMANGOKY scheme where cotton yields had dropped, due to poor water and pest control, especially on the large state farms, to below 1 t/ha in 1985. By contrast, rainfed cotton production increased from 5,600 ha in 1983 to almost 24,000 ha in 1986, with yields dropping from 0.9 t/ha to 0.57 t/ha respectively, during the same period. This uncontrolled development resulted from attractive prices, pressure from local politicians on HASYMA and credit institutions enrolling candidate growers with no experience in farming. Since then, areas and yields have fluctuated around 12,000-15,000 ha and 0.7 to 0.9 tlha respectively. A strict selection process was then exercised, which eliminated most of the smaller farms, and concentrated production on some 4,000 farmers, raising the average cotton area per farm from less than I ha in 1984 to about 3 ha at present. Little -8 - is known of the situation of the 9,000 or so cotton growers who dropped out after a year or two. I/ The remaining growers, although their yields remain generally poor, seem to have less difficulty in reimbursing their seasonal loans: repayment has increased from 67% in 1987/88 to 87 % in 1989/90. 6.4 Financially, gross margins of cotton produced on large farms in the North have been eroded from US$416/ha in 1983 to about US$186/ha in 1990 (see Table 4 in Annex). On the basis of the farm model gross margins to small farms in the South were approximately US$93/ha in 1990 (down from US$265/ha in 1983). 6.5 HASYMA's financial situation has considerably worsened after a short-lived improvement in 1983/84. In summary, HASYMA is burdened by excessive debt in relation to assets and consequently there has been a constant depletion of equity (see Table 2 in the Annex). There are a number of reasons which appear to have led to this excessive debt burden: inappropriate price structure, excessive borrowing, inadequate protection against foreign exchange risks on the CCCE loans, weak management and overcapacity in ginning (65,000 tons). However, as a result of project activities in training, technical assistance and the availability of some counter part funds, HASYMA's capacity to service cotton growers, particularly small farmers, has improved. 6.6 The situation of the textile industry worsened sharply during the first years of the project, as a result of a drop in demand on the local market: annual consumption of fiber per capita declined from 1.5 kg in 1979 to 1.05 kg in 1985. One of the three major Malagasy textile companies, Sumatex, had to close down in 1986 _/ and, in spite of significant protection, the situation of the other two has remained precarious until now. 6.7 Environment. The project had no direct effect on the environment in the North, where the substantial area expansions envisaged in the Staff Appraisal Report for the large plantations were (and still are) effectively opposed by villagers and local politicians. The expansion of rainfed cotton in the South, however, with no crop rotation, no organic restitution and no particular care in tractor ploughing, has resulted in decreased soil fertility and, locally, in serious soil erosion. 6.8 Institutions. The project clearly failed in setting up viable institutions for the sub-sector. HASYMA's future is uncertain, and there is no general agreement regarding its possible restructuring. The Committee created by the project never fulfilled its role, and has virtually ceased to exist. 6.9 Economic returns. On the basis of the PCR mission's assumptions of costs and benefits, an economic analysis was carried out on the production sector component. 7/ The analysis resulted 5/ At least officially; in fact, a number of them continue to grow cotton using seeds and other inputs from registered growers which accounts for, inter alia, lower planting density than required for both types of planters, and for wild plots where pest infestation is not monitored. 6/ Leaving a debt of FMG 1.6 billion with HASYMA. 7/ Basic assumptions, methodology and results are discussed in the Annex. The results are summarized in Tables 6A and 6B. in an economic rate of return of 5%, as compared to 30% estimated at the time of appraisal. This discrepancy was caused by lower than expected yields, resulting from poor varietal performance and poor ginning outturn, declining international cotton prices and high investment costs relative to production. 7. Project Sustainability 7.1 Cotton Production. The future of coton production is threatened by technical, economic, and institutional factors. Partly due to insufficient research, pest infestation is on the rise, particularly in the North, which affects both fiber quality and production costs. Thus, the viability of large scale intensive production is jeopardized; a number of large farms are diversifying out of cotton to tobacco in particular. Soil erosion in the South has resulted in decreasing yields, which inter alia also has affected the viability of rainfed farms; the need to integrate cotton into sustainable cropping systems is not yet understood by farmers and HASYMA's efforts in this direction are still inadequate. 7.2 Institutions. While it is most likely that, well organized, large farms could do without HASYMA, peasant farms are dependent on its services for credit, input supply, extension and marketing. In spite of HASYMA's recent, and apparently successful efforts to establish farmers' associations at village level to take over their share in such services, they will still need an integrated organization to support them. Indeed, efficient pest control requires that all growers follow recommendations on time, which implies that they can find and afford the required chemicals. With the need to often change technical recommendations, the link between extension, supply and credit appears essential, and for sometime at least, only a marketing body can realistically offer the requisite credit facilities. The latter, however, does not constitute a justification for the continued support to HASYMA, as an independent producer association or a strengthened agricultural extension service could take over part or all of its role. HASYMA requires massive capital injections and a major reorganization to be viable. The present wait-and-see policy, delaying a financial solution, is precipitating its collapse, with potential harmful effects on peasant farmers. 8. IDA Performance 8.1 Details of staff inputs by the Bank during appraisal, negotiation, and supervision, and data on supervision missions are provided in Part III Table 8. 8.2 The project was regularly monitored in 1984 and 1985, and the supervision missions during this period were clearly helpful in speeding up procurement procedures, and in getting the difficult cotton tracks component on the move. However, they failed to see that the increase in production through area expansion had excessively stretched HASYMA's supervision capacities, which affected yields and farmers' repayments. The first agriculturalist to participate in a supervision mission came only in September 1986, two years after credit effectiveness, and too late to sound a warning. 8.3 It was realized early on that local sales were shrinking but this was not seen as a threat, since exports were thought to be viable. The 1986 world market glut could hardly be foreseen. The real bottleneck was the price mechanism, which had been designed at a time when the economy was - 10- artificially insulated from outside influences. This issue was never seriously reconsidered after appraisal. It is fair to say that, although this had been seen as crucial at appraisal, it was thereafter given inadequate attention. Renewed interest on this issue should have been triggered when the need to export fiber became a reality in 1985. 8.4 Cooperation between the two co-financiers has been most successful in allowing an early start to the project, which was essential to its objectives. In 1987, both agreed on the need for radical institutional changes, and financed complementary studies, but delays in the implementation and sometimes conflicting conclusions or perceptions of such studies did not always permit the co- financiers to present a firmly united front in their recommendations. IDA, which focused on production and primary marketing, lacked a global view of the sub-sector and could not effectively monitor prices and recommend relevant changes. 9. Borrower's Performance 9.1 The main project implementing agency --HASYMA-- has, given the social, economic and political context in Madagascar in the mid-eighties, performed its technical responsibilities fairly well, although not cost-effectively. Supplies were adequate and timely. Difficulties in marketing and custom tractor services were resolved by gradually delegating such services to the private sector and successfully promoting draught cultivation. Much was done to take over research responsibilities from the deficient FOFIFA. The present drive to set-up strong farmer organizations, although late, is also impressive. The lack of rigor in farmer selection and supervision during the expansion phase, as well as the still pervasive lenience in quality classification, may be largely imputed to pressure from local politicians. 9.2 The Borrower has been fairly supportive of the project, particularly during the expansion phase. However, insufficient attention was paid to the long term effects of the pricing policy. There is no doubt that the financial difficulties of HASYMA are largely due to the Borrower's reluctance to reconsider the pricing system, as well as to its inability to take financial remedial action, as suggested by IDA/CCCE, following the steep drop in the price of cotton in 1985 and 1986. Lengthy delays in delivering export permits for excess cotton production aggravated the situation. - 11 - PROJECT COMPLETION REPORT MADAGASCAR COTTON DEVELOPMENT PROJECT (CREDIT 1433 MAG: SF 008-MAG) PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE No comments were received. The Borrower did, however, send a project completion report which is available in project files. - 12 - PROJECT COMPLETION REPORT MADAGASCAR COTTON DEVELOPMENT PROJECT (CREDIT 1433 MAG; SF 008-MAG) PART III: STATISTICAL INFORMATION Table 1: Related Bank Credits Loan/Credit Title Year of Purpose Amount of Status Approval Loan/Credit (Millions of SDR) Cr. 1211-MAG 1982 Second Village Livestock and 15.0 Closed on December 31, Rural Development Project 1988 Cr. 1337-MAG 1983 Second Lac Alaotra Irrigation 16.7 Closed on September Project 30, 1991 Cr. 1589-MAG 1985 Irrigation rehabilitation Project 42.6 On-going Cr. 1709-MAG 1986 Technical Assistance to 8.7 On-going Agricultural Institutions Project Cr. 1691-MAG 1986 Agricultural Sector Adjustment 50.0 Closed on June 30, 1990 Credit Cr. 1804-MAG 1987 Second Agricultural credit 8.0 On-going Project Cr. 1878-MAG 1988 Forestry Management and 5.1 On-going Protection Project Cr. 2041-MAG 1989 National Agricultural Research 18.6 On-going project Cr. 2125-MAG 1990 Environment Project 19.8 On-going Cr. 2150-MAG 1990 Agricultural Extension Pilot 2.8 On-going Project - 13 - Table 2: Project Timetable Mission Date Planned Revised Date Date Actual Identification Preparation Pre-appraisa - - November 1982 Negotiations - - July 1983 Appraisal - - November 1983 Board approval - - December 1983 Credit signature (Cr. 1433- - - March 1984 MAG and Cr. SF 008-MAG) Credit effectiveness (Cr. 1433- - - August 1984 MAG and Cr. SF 008-MAG) Project completion - Cr. 1433-MAG December 1987 December 1988 December 1989 - Cr. SF 008-MAG December 1987 December 1989 December 1989 Credit closing - Cr. 1433-MAG June 30, 1988 June 30, 1989 June 30, 1990 - Cr. SF 008-MAG June 30, 1988 June 30, 1989 June 30, 1990 Last disbursement - Cr. 1433-MAG December 31, 1988 December 31, 1989 July 3, 1991 - Cr. SF 008-MAG December 31, 1988 December 31, 1989 May 24, 1991 _/ Delays in final disbursements were the result of administrative delays at the level of the Central Bank in Madagascar. - 14 - Table 3: Proiect Costs and Financing A. Project Costs 2/ (US$ '000) Category Estimated Actual Actual as % of Estimate Vehicles and Equipment 12,900 10,074 78.1 Agricultural Inputs 13,500 7,629 56.5 Civil Works 5,000 7,441 148.8 Technical Assistance and 2,200 2,324 105.6 Consultants' Services Studies 360 - 0.0 10/ Monitoring and Evaluation 220 0.0 Training 220 9 4.1 11/ Total 34,400 27,477 79.9 9/ All numbers are mission estimates. A presentation of costs by project component was not possible given the lack of information. The project kept its financial information on the basis of the categories in the credit agreement. IO/ Financing for studies is included under the heading Technical Assistance and Consultants' Services. 11/ Financing was provided by the FAC, outside of the project (see Table 6E). - 15 - B. Project Financing (US$ '000) Estimate Actual Actual as % of Estimate Government of Madagascar, 5,300 1,590 30 12/ Hasyma and farmers CCCE 11,300 6,566 58 13/ IDA (Cr. 1433-MAG) 7,900 8,581 109 14/ IDA (SF 008-MAG) 9,900 10,740 108 15/ Total 34,400 27,477 80 12/ Mission estimate based on incomplete information. 13/ Less than estimated spending was, in part, the result of FF/US$ exchange rate fluctuations. 14/ The increase in spending is entirely the result of the depreciation of the US$ versus the SDR. - 16- Table 4: Disbursements A. Cumulative Estimated and Actual Disbursements IDA Credits (Cr. 1433-MAG: SF 008-MAG) IDA Fiscal Year and Appraisal Estimate Actual Actual Quarter (US$'000) (SDR'000) (USS'000) (SDRW00) Disbursement as I ' SS'000) (SDR'000) ~~~~~~~% of Estimate 1985 September30, 1984 S00 S00 1,055 1,065 213 December 31, 1984 3,800 3,600 3,398 3,408 94 March 31, 1985 4,200 4,000 3,557 3,572 89 June30, 1985 4,600 4,400 4,806 3,572 81 19.86 September 30, 1985 5,300 5,000 6,704 4,847 97 December 31, 1985 7,700 7,300 7,468 6,594 90 March 31, 1986 8,300 7,900 9,051 7,598 96 June 30, 1986 9,100 8,600 10,198 9,682 112 1987 September30, 1986 10,100 9,600 11,702 10,983 114 December 31, 1986 11,900 11,300 13,186 12,194 108 March 31, 1987 12,400 11,800 14,104 14,443 122 June 30, 1987 13,300 12,600 16,267 14,574 115 1988 September30, 1987 14,000 13,200 16,334 15,390 116 December 31, 1987 14,900 14,000 17,389 15,390 109 March 31, 1988 15,700 14,900 17,543 15,502 104 June30, 1988 16,400 15,500 17,638 15,571 100 1989 September 30, 1988 17,000 16,100 17,720 15,634 97 December 31, 1988 17,800 16,900 17,806 15,721 93 March 31, 1989 - - 17,850 17,748 93 June 30, 1989 - - 17,916 15,748 93 1990 September30, 1989 - - 17,957 15,811 93 December 31, 1989 - - 18,029 15,856 94 March 31, 1990 - - 18,354 15,886 94 June 30, 1990 - - 18,797 16,120 95 1991 September30, 1990 - - 19,137 16,463 97 December 31, 1990 - - 19,233 16,761 99 March 30, 1991 - - 19,277 16,793 99 June 30, 1991 - - 19,358 16,864 99 Date of last disbursement: Cr. 1433-MAG - July 3, 1991 SF 008-MAG - July 24, 1991 Amount cancelled: Cr. 1433-MAG - SDR 10,012.87 SF 008-MAG - SDR 25,618.55 - 17 - B. 1. Disbursements by Category. Cr. 1433-MAG Category Appraisal Estimate Actual Actual as a % of SDR thousand SDR thousand Estimate Vehicles and Equipment 3,120 2,375 76.1 Agricultural Inputs 3,870 4,630 119.6 Technical Assistance 90 485 538.9 Unallocated 420 Total 7,500 7,490 99.9 Cancellation 10 B.2. Disbursements by Category. SF 008-MAG Category Appraisal Estimate Actual Actual as a X I SDR thousand SDR thousand of Estimate Vehicles and Equipment 940 1,072 114.0 Agricultural Inputs 2,360 5,997 254.1 Road Rehabilitation 3,430 1,540 44.9 Technical Assistance - Hasyma 1,230 560 45.5 - Samangoky 280 197 70.4 Monitoring and Evaluation 190 - - Training 190 8 4.2 Studies 190 - Unallocated 590 - - Total 9,400 9,374 99.7 Cancellation 26 - 18 - C. Actual Annual and Cumulative Disbursements - CCCE Loans Disbursements Year Annual Cumulative (FF million) (US$'000) (FF million) (USS'000) 1983 22,536 2,957 22,536 2,957 1984 14,926 1,707 37,462 4,664 1985 1,926 218 39,424 4,882 1986 2,008 290 41,432 5,172 1987 2,857 476 44,289 5,648 1988 1,529 257 45,818 5,905 1989 1,102 173 46,920 6,078 1990 2,661 488 49,581 6,566 Note: Estimated disbursements were not available. Table 5: Output Indicators A. Production Indicators. Area and Yields Production Indicators, ............................................................. YEA ......................................Y.E. Area and Yields 1983 1984 1985 1986 1987 1988 1989 1990 SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual Total Cotton Area (ha) 17,560 19,849 20,500 23,695 24,500 32,954 25,580 42,850 25,500 22,179 25,500 26,048 25,500 28,813 25,500 27,015 Total Production (t) 26,202 26,381 33,450 33,813 40,650 42,871 43,989 41,010 45,220 27,221 45,220 31,863 45,220 41,538 45,220 32,071 Total Yield/ha 1.49 1.33 1.63 1.43 1.69 1.30 1.73 0.96 1.77 1.23 1.77 1.22 1.77 1.44 1.77 1.19 of which: Flood recession - re (ha) 8,875 9.366 10,000 10,360 11,500 11,946 11,800 10,639 11,800 9,176 11,800 9,331 11,800 11,558 11,800 11,868 -production (t) 19,254 17,222 23,500 20,135 27,600 22,718 28,675 22,370 28,910 18,058 28,910 20,132 28,910 26,021 28,910 21,006 - yield (t/ha) 2.19 1.84 2.35 1.94 2.40 1.90 2.43 2.10 2.45 1.97 2.45 2.16 2.45 2.25 2.45 1.77 Irrigated - area (ha) 4,185 4,905 5,000 5,964 5,500 7,231 6,200 4,480 6,200 1,625 6,200 1,469 6,200 1,921 6.200 1,443 - production (t) 3,348 4,359 5,000 6,446 6,050 7,715 7,440 2,899 8,060 1,225 8,060 1,411 8,060 1,891 8,060 1,472 - yield (t/ha) 0.80 0.89 1.0 1.08 1.1 1.07 1.2 0.65 1.3 0.75 1.3 0.96 1.3 0.98 1.3 1.02 Rainfed -area (ha) 4,500 5,578 5,500 7,371 7,000 13,777 7,500 23.731 7,500 11,378 7,500 15,248 7,500 15,334 7,500 13,704 - production (t) 3,600 4,800 4,950 7,232 7,000 12,438 7,875 15,741 8,250 7,938 8,250 10,320 8,250 13,626 8,250 2,593 - yield (t/ha) 0.85 0.86 0.90 0.98 1.0 0.9 1.05 0.57 1.1 0.70 1.1 0.68 1.1 0.89 1.1 0.70 - 20 - B. Rehabilitation of Cotton Tracks Estimated 15/ Actual North Crossings N.A. 2 (1987/88) Tracks N.A. 150.7 km. (1987/88) Crossings N.A. 7 (1986) Tracks N.A. 114.8 km (1990) 15/ This component was not analyzed in detail until after project appraisal. - 21 - Table 6: Project Results A. Area. Production and Estimated Production Increase .YEAR.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~EAR............. .............................................. Y E R ............................................ ...............l 1983 1984 1985 1986 1987 1988 1989 1990 1991 (1) Actual area (ha) 19,849 23,695 32,954 42,850 22,179 26,048 28,813 27,015 - (2) SAR estimated area 17,560 20,500 24,500 25,500 25,500 25,500 25,500 25,500 - (ha) (3) Increased area over 0 6,135 15,394 25,290 4,619 8,488 11,253 9,455 - 1983 (ha) (4) Actual yield (t/ha) 1.33 1.43 1.3 0.96 1.23 1.22 1.44 1.19 - (5) SAR estimated yield 1.49 1.63 1.69 1.73 1.77 1.77 1.77 1.77 - (t/ha) (6) Rainfed cotton 0.86 0.98 0.9 0.57 0.7 0.68 0.88 0.7 - yields (7) Estimated yield in 0.86 0.86 0.86 0.4 0.6 0.5 0.7 0.6 - new areas (PCR estimate) (8) Actual production 26,381 33,813 42,871 41,010 27,221 31,863 41,538 32,071 - (t) (9) Production increase 0 7,432 16,490 14,629 840 5,482 15,157 5,690 - over 1983 (10) Estimated 0 5,276 13,239 10,116 2,771 4,244 7,877 5,673 5,000 production increase due to project (PCR estimate) 1/ 1/ (10) = (3) * (7) See Annex, para 7. - 22 - Table 6 (cont'd): Proiect Results B. Economic Impact Estimate Economic rate of return (production sector component) Appraisal PCR 30% 5% Note: see Annex for Economic Analysis. C. Studies Financing | Title/Scope Consultant Comments Source Cost IDA US$187,287 Pest control: screening of pesticides; Africa Sugar Consultants Included the setting-up of a monitoring of resistance to pesticides (Mauritius) monitoring lab, and training of operating staff. IDA USS 99,465 Assistance to Hasyma for the Bureau Consultant The consultant also helped in preparation of the debate in July 1990 Resources Industry organizing the study tour on restructuring (Madagascar) CCCE FF 585.014 Studies of the cotton sector Institut Textile de France Nord CCCE FF 658.906 Study of the Textile Sector B.B. Consult CCCE FF 122.620 Analysis of impact of policy changes IRCT on the cotton sector CCCE FF 65,763 Technical audit of production facilities FRANSORIENT - 23 - Table 6 (cont'd): Project Results D. Technical Assistance The following technical assistance positions were financed or co-financed under the project: Organization Technical Assistance Duration Financing Source SAMANGOKY Agronomist - Cotton Specialist October 1983 - June 1988 IDA - " - Mechanical Engineer September 1983 - August 1988 IDA - " - Civil Engineer November 1985 - October 1989 IDA HASYMA Financial Analyst October 1984 to July 1990 FAC - " - Management Specialist January 1985 to July 1986 IDA - " - Research Agronomist June 1984 to July 1988 FAC - - (South West) Extension Agronomist September 1984 to date FAC - - (North West) Extension Agronomist September 1984 to September 1986 FAC - " - Ginning Expert October 1984 to September 1988 FAC - " - Management Specialist January 1985 to September 1989 FAC FOFIFA Geneticist 1987 to date FAC - 24 - Table 6 (cont'd): Project Results E. Training International Training Year Number of | Training objective Institution | Sponsor candidates l 1984 2 Management information CEGOS Paris FAC 2 Functioning of village associations SODECOTON FAC I Export and import financing CEGOS Paris FAC 1 Organization and management of CEGOS - CEPIA/Paris FAC information systems I Personnel administration and CEGOS Paris FAC informatization 1985 2 Monitoring and evaluation BDPA Paris FAC 2 Maintenance of soil fertility CNEARC Montpellier FAC 1 Intensive English for the Director General Institution PITMAN Ltd London IDA I ICAC seminar in Australia ICAC IDA I Introduction to financial management LEFEBVRE Paris FAC 1986 1 Agricultural mechanization Massey Ferguson France M. Ferguson I Cotton ginning techniques CMDT Mali FAC 3 Fiber classification SOSEA le Havre FAC I Entomology IRCT Montpellier& Cameroon FAC 1987 2 Training for subject matter specialists in BDPA Paris FAC the extension service - 25 - Table 6 (cont'd): Project Results I Development projects analysis BDPA Paris FAC I Micro computer systems in a rural BDPA Paris FAC environment 1988 2 Study trip to Egypt Egyptian Government I Training of extension subject matter BDPA/ FAC specialists FORHOM I Agricultural realities and North-South BDPA FAC relations I Cotton production technologies EICA-Egypt I Seminar on management CAMPC-C6te d'lvoire FAC I Seminar on personnel management CAMPC - C6te d'Ivoirc FAC 1989 1 Internal auditing CAPMC - COte d'lvoire FAC I Marketing CAMPC Abidjan FAC I Insecticide application CIBA GEIGY Suisse CIBA I Plant protection - biostatistics - agronomy IRCT Montpellier FAC 2 Provision of goods and services CAMPC Abidjan FAC 3 Study trip Zimbabwe, Burkina, Mali IDA 1990 1 Agricultural mechanization GORKI URSS URSS 1991 2 Village associations Mali/Burkina FAC I Laboratory testing of DL 50 IRCT Montpellier FAC I Fiber technology IRCT Montpellier FAC - 26 - Table 6 (cont'd): Project Results E. Training National Training Year Number of Training objective Institution Sponsor candidates I l 1987 2 Action marketing CFC Antsirabe HASYMA 3 The firm and its relationships with CFC HASYMA Banks 3 Financing and credit CFC HASYMA 1988 3 Accounting CFC HASYMA 2 Training of the instructors CFC France HASYMA 2 Use of audio-visual materials CFC HASYMA 2 Marketing CFC HASYMA 4 Accounting for 1987 CFC Montpcllier & HASYMA Cameroon 1989 1 Time planning CFC HASYMA 1990 3 Planning and organizing farmers' CFC FAC associations 3 Monitoring and evaluation of extension CFC FAC 3 Planning and organizing extension CFC FAC campaigns - 27 - Table 7: Compliance with Credit Conditions Articles Status DCA Section 3.01 (a) Borrower shall cause HASYMA to perform in accordance with the Complied with provisions of the Project Agreement l (b) Borrower shall make available to HASYMA the proceeds of the Credit and Complied with Special Fund under.., the Subsidiary Loan Agreement ... including provisions that: (A) ... proceeds of the Credit ... for ... Parts A2 and C ... shall be repaid over In default. HASYMA has not ma nine years any repayment (B) all funds received by HASYMA for (i) the sale of agricultural inputs shall In default. HASYMA has retaine all be used in accordance with Section 2.11 of the Project Agreement, and (ii) the counterpart funds sale of equipment and vehicles under Part Al shall be used (in accordance with provisions referred to in Section 5.01 (a) of the Project Agreement). (c) Borrower shall (i) cause SAMANGOKY to carry out Part J ...; and (ii) made In compliance available to SAMANGOKY as a grant the proceeds of the Credit allocated for I Part 1. (e) Borrower shall ... make available to HASYMA ... sufficient foreign In compliance exchange l DCA Section 3.02 Borrower shall, through its Ministry of Public Works (MTP): Generally in compliance. Howev maintenance of public roads is st (a) assist HASYMA in the preparation of bidding documents, evaluation of bids, poor and a constraint to cotton and supervision of civil works; production (b) carry out such works as shall be beyond the capacity of HASYMA work brigades. DCA Section 3.03 ... Borrower shall cause SAMANGOKY to employ technical assistance, to Complied with provide reports and maintain records; DCA Section 3.05 (a) Borrower shall cause SAMANGOKY .... to exchange views with IDA with In compliance regard to the progress of part J... and (b) ... to inform IDA promptly of any condition which interferes .... with the progress of Part J. DCA Section 3.07 Borrower shall establish and maintain a committee responsible for development Committee established by Govt. policy and overall coordination of the cotton sector, including the distribution of Decree of 8.3.84. Has met yearly to fibers to the textile industry ... such committee to be adequately staffed.., discuss seed cotton and fiber pric DCA Section 3.08 Borrower shall furnish to IDA annually ... a report on the utilization of the Fund was created, but proceeds o proceeds of the special reserved fund.., input sales were never transferred - 28 - 2. Special Fund Credit Agreement (SFCA) See Terms and Conditions, and status report, for DCA Section 3.01-3.08 above. Note: SFCA Section 2.03 (b) amended by standard ltcer issued September 1984 with reference to all SF agreements. 3. Project Agreement (PA) Article Status PA Section 2.01 (b) By June 30, 1984, HASYMA shall, for ... Part E... submit to IDA for HASYMA/FOFIFA agreement h comment a proposal for the program to be executed by FOFIFA, and (c) By been ratified September 30, 1984.... finalize (this) program to reflect IDA's comment. (d) By June 30, 1984, HASYMA shall for ... Part H ... submit to IDA for In compliance. Reporting is comment a proposal for the monitoring and evaluation program, and (e) By satisfactory September 30, 1984 .... finalize (this) program to reflect IDA's comment PA Section 2.02 HASYMA shall employ two agricultural managers, a ginnery specialist, a In conformity financial management specialist, and an agriculturalist whose qualifications (etc.) shall be satisfactory to IDA. PA Scction 2.05 (a) HASYMA shall furnish to IDA ... promptly ... the plans, specifications, In conformity reports, contract documents and procurement schedules for parts A through I... (b) HASYMA shall: (i) maintain records and procedures adequate to monitor In conformity. Reporting timetab progress identify goods and services financed ... and report progress to IDA at has been rcaligned to fit changes in six months intervals HASYNIA's fiscal year to 1/1.31 with effect from 1984. PA Section 2.07 By June 30, 1984, HASYMA shall appoint a training coordinator Coordination of training is assure by HASYMA's Chief of Personn PA Section 2.08 (a) By April 30 in each year ... HASYMA shall prepare and furnish to IDA In compliance proposed annual work program (b) By December 15 in each year ... HASYMA shall furnish to IDA an annual work program ... for the next following year PA Section 2. 10 HASYMA shall sell farm inputs to cotton farmers at full cost In compliance PA Section 2.11 HASYMA shall deposit all funds reccived from (the above sales of inputs) into a HASYMA has opened account at separate account in a commercial bank acceptable to IDA, the proceeds ... shall BTM, but has never transferred be used by HASYMA for financing of rehabilitation and maintenance of cotton proceeds of inputs sales tracks. PA Section 2.12 HASYMA shall deposit all funds received from the sale of equipment and HASYMA has opened account at vehiclcs financed (under Cr. 1433 and SF-8 MAG) ... into a special reserved BTM, but has not yet transferred fund in BTM. proceeds of inputs sales. PA Section 4.01 HASYMA shall maintain adequate operational and financial records..., in Complied with accordance with .... appropriatc accounting practices .... including ... separate accounts reflecting all expenditures (against which IDA disbursement is requested) on the basis of statements of expenditure. PA Section 4.02 HASYMA shall: Gcnerally complied with, but aud reports were sometimes late and of (a) have its accounts and financial statements ... for each fiscal year audited; dubious quality. (b) furnish to IDA .... not later than six months after the end of each year financial statements and audit report PA Section 4.03 HASYMA shall not declare or pay any dividend In compliance - 29 - Table 8: Use of Bank Resources A. Staff Inputs per Supervision (staff weeks per FY) Fiscal Year 81 82 83 84 85 86 87 88 89 90 91 92 Total Preparation 2.3 2.1 8.6 13.0 Appraisal 42.1 12.8 54.9 Negotiations 11.5 11.5 Supervision 1.6 18.3 15.9 9.6 1.3 5.3 4.0 56.0 PCR 8.6 8.8 19.4 Total 2.3 2.1 50.7 25.9 18.3 15.9 9.6 1.3 5.3 4.0 8.6 8.8 152.9 B. SuDervision Missions Supervision Organization Month/Year No. of Persons Days in Country Performance Rating Type of (Specialization) of Project Problems Status Trend Appraisal IDA Dec. 1983 5 Nov 1983 Post appraisal IDA March 1983 1 (Ag) N.A. 1 2 I IDA September 1984 1 (NW) 2 1 2 P 2 IDA December 1984 3 (Ec.Mk.Eg) 18 1 2 M 3 IDA July 1985 1(Ec) it 1 2 M 4 IDA April 1986 1 (Ec) 2 2 - F 5 IDA Scpt.Oct 1986 3 (Ec, FA, Ag) 21 2 F 6 IDA Oct/Nov. 1988 1 (FA) 10 3 - F,M 7 IDA Aug. 1989 1 (Ec) N.A. 2 - F,M 8 IDA/FAO April/May 90 2 (FA, Ag) 14 2 F,M (CP) Key: Specialization: Ag=Agricultural; Eg=Engineer; Ec=Economist; Mk=Marketing; FA = Financial Analyst. Status: 1 =Problem-free or minor problems; 2=Moderate problems; 3=Major problems. Trend: 1=Improving; 2=Stationary; 3=Deteriorating. Type of Problems: F=Financial; M=Management; P=Procurement. - 31 - ANNEX 1 (Page 1 of 8) ECONOMIC ANALYSIS Assumptions and Methodology 1. The main quantifiable economic benefits resulting from the project investments have consisted of increased production of seed cotton. Cotton production is sold, after ginning, to the domestic textile industry. The PCR mission has assumed that the project has reached full development. The appraisal estimated annual incremental production of 19,800 tons of seed cotton attributable to project implementation has not been achieved. The PCR estimate of incremental annual seed cotton production (Table 6a, Main Text), is based on the fact that most of the area expansion occurred in rainfed areas and encompassed areas which were not suitable for cotton farming. Farmers in these new lands were mostly unfamiliar with cotton and thus obtained lower than average yields. The PCR mission estimates that the incremental annual production peaked to over 10,000 tons during the years 1985 and 1986, thereafter stabilizing at 5,000 tons per annum. This is worth about US$3.05 million at the farmgate equivalent import parity price. 2. There are other benefits which cannot be fully captured within this economic analysis, for example the forward and backward linkages of regional development in cotton production and manufacturing areas. Also, other benefits can be derived from research and development expenditures. Investments in studies in the cotton subsector has resulted in human resource development which eventually will result in higher productivity and new productive potential (which could also be transferable to the non-cotton sub-sector). 3. For the purpose of the economic analysis (see Table 3a, b and c) the foreign exchange was shadow priced to the US$ at FMG 600 for 1983 and 1984, and FMG 700 and 750 for 1985 and 1986 respectively (the prevailing rates were FMG 430 for 1983; FMG 576 for 1984; FMG 662 for 1985; and FMG 676 for 1986). For the other years (1987-1990) the FMG rates to the US$ were annual averages and these corresponded to the free and real exchange rates. For the calculation of economic benefits, the project benefits were valued at the Import-Substitution Economic Farmer Reference Price. The CIF prices (North Europe annual average price of cotton of equivalent quality) were obtained from the World Statistics of cotton published in the Bulletin of the International Cotton Advisory Committee (see Table 3a). Transportation costs were obtained from various supervision reports and/or other sub-sector studies. Ginning costs were obtained from HASYMA. Non-economic costs, such as taxes and other transfers, were excluded. 4. The economic cost of farm production of seed cotton has been estimated by calculating the total cost of input use per ton of seed cotton. To this cost was added the weighted average cost of land preparation; labor; on farm transportation; input application; cultural practices; and harvesting on a per kilo of seed cotton basis. 5. All the project capital costs, as financed by IDA and CCCE, have been included into the analysis. The HASYMA contribution to the road rehabilitation component (so-called cotton tracks) was excluded as benefits to other sub-sectors can also be derived from this investment. - 32 - ANNEX 1 (Page 2 of 8) Other Indicators 6. The project sought to improve the financial situation of HASYMA, the nationalized parastatal which is the executive arm of the Government, responsible for the cotton sub-sector. The SAR described the poor performance of HASYMA as being due to both input and output prices having been low in relation to import parity price levels and the margin between them had been insufficient to cover costs. It therefore recommended that price fixing should be tied to border prices in order to reflect external prices and to provide both appropriate rewards and stimuli for efficiency. This recommendation has not been realized during the last four years (1987-1990). In Table 1 the nominal protection coefficient (NPC) for cotton lint during project implementation has been estimated. It appears from the analysis that the Government has been protecting, during the years 1987 to 1990, the domestic textile industry which is the main user of domestic cotton. The analysis suggests that the main production objectives may not have been sustained, due to low producer and fiber prices. The pricing policy adopted has served to reinforce the position of textile manufacturers whilst undermining the position of producers and HASYMA. The analysis of Table 3a shows that prices for seed cotton set over the years had remained at low levels (except for 1985 and 1986) in relation to the border prices. 7. The financial situation of HASYMA remains precarious (see Table 2). In summary, the serious problem is associated with an excessive debt burden in relation to assets, and consequently, the depletion of equity. However, it can be noted that there has been a slight improvement in total debt to total assets in 1989. This has been mainly due to the revaluation of the main assets, which increased the total capital worth of the company. Nevertheless, the debt burden remains at a high level, the normally accepted level being about 50%. It now threatens the survival of the company. Major problems have arisen from the size of investments (ginning and transportation equipment) during the early 1980s and a combination of price policy and low capacity utilization (the highest was in 1986 at 63% capacity utilization) have not permitted the company to generate sufficient funds to cover operating costs and to service debt. The increase in FMG value of the CCCE loan as a result of the devaluation of the domestic currency has also contributed to the poor financial situation. 8. HASYMA has also been burdened by other losses. Clients who have purchased fiber and cotton seed and cotton producers who had obtained credits from HASYMA have not paid up. In the case of fiber, the large majority of losses are attributable to one state-owned enterprise, SUMATEX. With regards to producers, some of the credit failure is attributable to the drought of 1986, or to having planted on lands unsuited to cotton production. Other losses amongst cotton producers result largely from the provision of aerial spraying services on credit that are subsequently not honored by the beneficiary. 9. It is doubtful if HASYMA, even with the most optimistic of assumptions concerning the future, could resolve the financial problems that have developed. The management of the company has attempted to control costs, improve its delivery etc. However, the issue of high debt servicing will continue to present difficulties for a long-term solution. In addition, it remains very doubtful whether HASYMA as a monopoly parastatal company could ever be made to be cost efficient. - 33 - ANNEX 1 (Page 3 of 8) Results 10. On the basis of the above assumptions the cost and benefit flows of the cotton development project up to year 2009 result in an ERR of 5% (see Table 3). This is lower than the appraisal estimate of 30%. The main factor contributing to a lower ERR has been the lower than expected yields in the extra area under cotton. 11. The most likely risks associated with the project were, amongst other factors, insect-pests risks, and the risks associated with the failure of Government to maintain incentive levels of producer prices. The analysis of Table 3a demonstrates that, over the years, prices set had not remained at levels approximating the import parity price. The PCR mission identified that production risks associated with climatic and high pest incidence together with the failure to maintain adequate producer price incentive levels and the inherent financial difficulties of HASYMA have minimized the overall impact of the project. - 34 - ANNEX 1 (Page 4 of 8) Table 1 - Nominal Protection Coefficient for Cotton Fiber Year 1983 j 1984 1 1985 1 1986 1 1987 1988 1989 T 1990 Financial price of cotton fiber 1,050.00 1,350.00 1,100.00 1,100.00 1,700.00 1,660.00 1,800.00 2,000.00 (FMG/kg) (A) Cif. Mahajanga FMG/kg fiber 1,028.81 1,149.59 1,134.83 961.62 1,462.11 2,361.48 2,431.24 2,766.72 ADD Transport from port to 13.00 30.00 35.00 40.00 50.00 75.00 80.00 80.00 manufacturers (FMG/kg) Economic importparity price 1,041.81 1,179.59 1,169.83 1,001.62 1,512.11 2,436.48 2,511.24 2,846.72 (FMG/kg) (B) Nominal Coefficient 1.00 1.14 0.94 1.09 0.79 0.68 0.71 0.70 of protection A/B Table 2 - Summary of HASYMA's Debt Situation 1986 1987 1988 1989 Total debt to total assets % 114.4 103.2 94.3 74.9 Table 3a - Economic Price of Seed Cotton YEAR 1983 1984 j 1985 1986 1987 1988 j 1989 1990 Import Substitution cts/lb CIF. North Europe 77.94 87.09 73.69 58.28 62.17 76.29 68.94 83.84 USSAkg 1.77 1.92 1.62 1.28 1.37 1.68 1.52 1.84 FMG/USS 600.00 600.00 700.00 750.00 1,069.00 1,407.00 1,603.00 1,500.00 CIF. Malajanga/kg of fiber 1,028.81 1,149.59 1,134.83 961.62 1,462.11 2,361.48 2,431.24 2,766.72 ADD Transport to manufacturer 13.00 30.00 35.00 40.00 50.00 75.00 80.00 80.00 FMG/kg of fiber LESS Transport to ginnery FMG/kg 13.00 30.00 35.00 40.00 50.00 75.00 80.00 80.00 of fiber LESS Cost of ginning 110.00 115.00 120.00 123.00 194.00 227.00 250.00 353.00 FMG/kg of fiber Valucoffibernetofginning 918.81 1,034.59 1,014.83 838.62 1,268.11 2,134.48 2,181.24 2,413.72 costs FMG/kg ADD Value of cotton seed/kg of 45.00 60.00 60.00 77.00 158.00 145.00 210.00 213.00 fiber SEED Cotton Equivalenta 366.25 415.94 408.43 347.94 541.92 866.20 908.67 998.15 38% Ginning Outturn o0m x0 Table 3a (cont'd) YEAR 1983 1984 1985 1986 1987 1988 1989 1990 LESS Cost of transport and purchasc 20.00 37.00 45.00 50.00 62.00 83.00 90.00 92.00 FMG/kg seed cotton Farmer ReferencePrice at 346.25 378.94 363.43 297.94 479.92 783.20 818.67 906.15 Farm Gate FMGlkg seed cotton 1/ Financial Price Paid to 156.00 240.00 287.00 287.00 320.00 508.00 546.00 631.00 Farmer FMG/kg seed cotton 2/ Nominal Coefficient of 0.45 0.63 0.79 0.96 0.67 0.65 0.67 0.70 Protection 2/1 cm 00 Table 3b - Cost-Benefit Analysis 1983 1984 1985 1986 Y 1987 1988 1989 1990 Extra Cotton Production with Project (tons) A 0 5,276.1 13,238.84 10,116 2,771.4 4,244 7,877.1 5,673 Total Benefits B Ax I (table 6a) 0 1,999.33 4,811.39 3,013.96 1,330.05 3,323.90 6,448.75 5,140.5 FMG millions 4 Cost of Production/ kg of seed cotton 143 145 203 223 303 387 435 630 C Recurrent Costs 0 765.03 2,687.48 2,255.87 839.73 1,642.43 3,426.54 3,573.9 A x C FMG millions 9 Table 3c - Economic Analysis (Million FMG) 1983 1984 J 1985 j 1986 j 1987 Y 1988 T 1989 1990 11991 1992-2009 Benefits Total Benefits 0 1,999.33 4,811.39 3,013.96 1,330.05 3,323.90 6,448.75 5,140.59 4,530.75 4,530.75 Costs IDA - 1,958.0 2,188.0 4,466.0 4,359.0 586.0 320.0 1,864.0 76.0 158.17 CCCE 1,703.0 983.0 144.0 195.0 668.0 360.0 275.0 732.0 - Recurrent Costs 0 765.03 2,687.48 2,255.87 839.73 1,642.43 3,426.54 3,513.99 3,150.0 3,150 Total Costs 1,703 3,706.03 5,019.48 6,916.87 5,866.73 2,588.43 4,021.54 6,169.99 3,226 3,158.00 Net Benefits -1,703 -1,706.70 -208.1 -3,902.90 -4,536.68 735.47 2,427.2 -1,029.4 1,304.75 1,380.75 ERR 5% , b Z o0m - 38 - ANNEX 1 (Page 8 of 8) Table 4 - Gross Margin/ha of Cotton (1990) Large Cotton Farm in the North Gross Output: 2.2 tons/ha @ FMG 705/kg: 1,551,000 Variable Costs Fertilizers 232,750 Pesticides 262,470 Seeds 12,500 Farm machinery 150,000 Labor 400,000 Transport 120,000 Other charges 100,000 Total 1,277,720 Gross Margin/ha 1,551,000 - 1,277,720: 273,280 Table 5 - Gross Margin/ha of Cotton Small-Holder Draught Cultivation in the South Gross Output: 0.8 tons/ha @ FMG 615/kg: 492,000 Variable Costs Seeds 3,000 Fertilizers 103,500 Insecticides 138,625 Rental of Equipment 9,900 Other miscellaneous charges 100,000 Total 355,025 Gross Margin/ha 492,000 - 355,025: 136,975 -12' MADAGASCAR AREAS OF COTTON PRODUCTION tnsironvnd LOCATION OF GINNERIES, TEXTILE INDUSTRIES AND OIL MILLS ZONES Df PRODUCT/ON COTONNI-RE EMPLACEMENT DES US/NES DEGRENA GE, DES INDUSrRIES rEXrILES, Er DES HUlLER/ES NOSY.Ilk zone ln,.its Paned roods. 4 AItti d tAttS t.lwe/ boletSrOn;.S Hh I-dJ @ ) + , t no R.oi.fd ceh16-6on __ AllI.o,eoI roods CttflttY p/or,/,, Ro.d. .,w,otXih/.,g, dphtsooso,| ,; tov >. eyioted cdo;ltinohn Ro;l os T It rAN i A Ch.en~, Gaflvrw ite I'., T ANAAN hsn d otroo. ofte roo>Cd w. thdroal r,, ror t x1 do.' dkre.. ~gd m TenSiindsr,es t-iotms l/odo,h'ie,tens /eas fR,r,tuJ 4 Snolenon -_ _ HASYMA S.nnenes Forr U,es teig,...g. l8XMSM4 Povsit s p\tndp Oil mills processing cotton groins Foir onr , bodrie. 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World Bank Group · Project Completion Report
Madagascar - Cotton Development Project
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World Bank Group
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Project Completion Report
Country
Madagascar
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World Bank