Niger - Pilot Private Irrigation Promotion Project

Document of The World Bank Report No. 13939-NIR STAFF APPRAISAL REPORT REPUBLIC OF NIGER PILOT PRIVATE IRRIGATION PROMOTION PROJECT MARCH 30, 1995 Agriculture and Environment Operations Division West Central Africa Department Africa Region  CURRENCY EOUIVALENTS Currency Unit - CFA Franc (CFAF) US$ I = CFAF 590 (as of November 30, 1994) SYSTEMS OF WEIGHTS AND MEASURES Metric and Anglo-Saxon Systems 1" = 2.54 cm GOVERNMENT FISCAL YEAR January I - December 31  TABLE OF CONTENTS Credit and Project Summary ............ ........................................i Selected Data and Documents Available in the Project File .................................. vi I. INTRODUCTION ................................................... .1 II. THE AGRICU LTURAL SECTOR ...................................................1 A. Background ...................................................I B. The Role of Agriculture in the Economy .............................................1 C. Experience with Past Lending and Lessons Learned ............................2 D. Bank Strategy in the Sector .................................................4 IIL. THE IRRIGATION SUBSECTOR ................................................5 A. Background ...................................................5 B. Subsector Issues Relevant to the Project ............................................ . 7 IV. THE PROJECT AREA .................................................... 13 A. Physical Features .................................................... 13 B. Socioeconomic Features . . ............................ 13 V. THE PROJECT ......... ....................: 14 A. Rationale for IDA Involvement . . ........................ 14 B. Project Objectives and Scope . . ......................... 14 C. Summary Project Description ....... ...................... 14 D. Detailed Project Description .......................... ... 15 Private Irrigation Management Agency Component ........... ......... 15 Small-Scale Mechanized Irrigation Component ............... ............ 16 Improved Manual Irrigation Component ................................ ..... 16 Environmental Protection Component ......................................... 17 The Savings and Credit Schemes Component .............................. 17 Studies and Audit ............................................. 18 E. Status of Project Preparation and Implementation Schedule ............. 18 F. Cost Estimates ............................................. 19 G. Financing Plan ............................................. 20 H. Procurement and Use of Consultants ............................................. 21 I. Disbursements ............................................. 23  VI. PROJECT ORGANIZATION AND MANAGEMENT .............................. 25 A. Organization and Management by the Private Executing Agency ... 25 B. Reporting, Monitoring and Evaluation .............................................. 26 C. Project Accounts, Audit and Reporting ............................................. 29 VII. PROJECT BENEFITS, RISKS, AND ENVIRONMENTAL IMPACT ..... 29 A. Benefits ........................................................ 29 B. Risks ......................................................... 30 C. Environmental Impact ........................................................ 31 VIII. ASSURANCES AND RECOMMENDATION ........................................ 31 ANNEXES Annex 1: Institutional Setup .............................................................. 34 Annex 2: Project Organization and Management .......................................................... 36 Annex 3: Project Cost Summary .............................................................. 48 Annex 4: Schedule of Project Expenditures .............................................................. 51 Annex 5: Estimated Schedule of Disbursements ..................................... 53 Annex 6 Implementation Plan . .............................................................. 54 Annex 7 Supervision Input into Key Activities .............................................................. 55 MAP: IBRD 23395R - Project Areas  - i - REPUBLIC OF NIGER PILOT PRIVATE IRRIGATION PROMOTION PROJECT Credit and Project Summary Borrower: Republic of Niger Beneficiaries: Ministry of Agriculture and Livestock, Ministry of Hydraulics and the Environment Credit Amount: SDR 4.6 million (US$6.8 million) Terms: Standard, with 40 years maturity Project Description: The Project is a pilot operation designed to: test and evaluate local capacity building through private sector development in the irrigation sector; test and disseminate improved low-cost technologies for small-scale private irrigation; and test procedures that will enable the public sector to commission projects through delegated contract management. The Project would finance: (a) the package of services to be provided directly by the private irrigation association (ANPIP), which has already been established, including: (i) carrying out promotional campaigns in support of the Government's private irrigation development strategy; (ii) facilitating small farmers' access to the legal and administrative procedures for obtaining tenurial security; (iii) providing assistance, upon demand, in preparation of bankable irrigation projects and in establishing economic interest groups; and (iv) overall project implementation, including procurement and contract management, coordination of project activities and monitoring and evaluation; and (b) the package of training and technical assistance services which ANPIP will contract out to consulting firms, including: (i) testing and evaluating small-scale mechanized and manual irrigation technologies; (ii) promoting grassroots savings and credit schemes; and (iii) project- related evaluation studies and the periodic audits. In addition, the project would finance the goods and part of the operating costs for the monitoring of the replenishable shallow aquifers and erosion control works, which would be conducted by the Ministry of Hydraulics and the Environment. Project Implementation: The distinguishing features of the project implementing Agency (ANPIP) would be its private sector management style and the legal and administrative flexibility to execute the project. The Agency will have a private legal statute. The Government will entrust the Agency with the full responsibility of executing the project without political or bureaucratic interference. The Agency's administrative, financial and accounting procedures will be guided by a special operations manual (Manuel des Procedures) to be agreed with IDA before negotiations. Although independent from any Government interference, the Agency will  - ii - periodically file activity reports to the Ministry of Agriculture and Livestock and will be audited externally every six months. ANPIP will engage consultants' services to provide a package of technical assistance and training services for the implementation of specific project activities.. The Project would introduce a savings-first approach to rural financial intermediation by promoting savings and loan schemes in the Project zones. In addition, the Project would promote the creation of small voluntary farmer groups (Groupements d'intMr6t economique), which would permit joint voluntary liability for future borrowing. This group will also serve as the front line of contact with extension. Project Benefits: An economic rate of return has not been calculated due to the service and institution-building nature of this operation. The project is an investment in creating capacity for a self-sustaining process of technological development, with a pay-off spreading over many years. However, while it is difficult to be precise, broad-based and substantial increases in family welfare are expected as a result of the proposed project. The technology promotion program would benefit at least 4000 smallholder families through increased productivity and income. This direct benefit would result from their adoption of motorized pumps which have been designed to meet small farmer-requirements and-capabilities, by making tubewells less expensive, more versatile and easier to install. The Project would also have an added benefit of training artisans to manufacture and repair irrigation equipment. Another major direct benefit of the project would be its contributions to the development of rural financial intermediation. Over the four-year implementation period, the project would establish about 60 savings and credit associations at the grassroots level which would provide improved access to financial services to their membership. The indirect benefits from the cultivation of a savings and credit culture, along mutualist lines, would contribute to significantly improved smallholder-access to financial services, as the supported actions would ease the risk and high transaction cost that have, until now, prevented commercial banks from lending to potential rural clients. Other intangible social benefits include the establishment of a service-oriented private sector agency for irrigation development, improvement in the social status of women and development of associations/groups of producer enterprises oriented towards solving common problems faced in their income-generating activities. Overall, the innovations introduced under this project would provide private economic agents in Niger's smallholder sector with the technical and management know-how that is now critically lacking to significantly increase the productivity of their resources and independent capabilities.  - iii - Economic Rate of Return: N/A Risks: A major risk is that, over time, the Government may subject ANPIP, the new association, to bureaucratic controls and pressures of political patronage which could undermine the agency's autonomy and effectiveness. The Government's willingness to use a non-governmental organization to deliver publicly-funded services for promoting its private-led irrigation development strategy can be expected to ensure the independence and professionalism of this organization Regular joint Government-IDA review of the performance of the agency will also serve to minimize the risk of Government interference. The risk of political patronage will be alleviated by other safeguards built into the project, including: (a) clearly spelled out and enforceable performance criteria for ANPIP; and (b) IDA's prior review and approval of ANPIP's annual work program; and beneficiaries will be organized into solidarity groups which can deny entry to those outside the target group who may attempt to improperly access project resources. As is true for most new and inexperienced institutions, a managerial risk may exist with respect to ANPIP, including the potential for misuse of public funds. This risk will be minimized through personnel training, adequate internal regulation and monitoring systems and strict enforcement of the Agency's operational guidelines (ANPIP's Manual of Procedures). Another risk is the Government's inability to provide counterpart contributions for financing of incremental operating expenditures, especially in light of past underfunding of operations and maintenance in the sector. This risk will be minimized by reliance on private sector institutions for project implementation, and by requiring the Government to make up-front and, subsequently, annual deposits into an account for payment of its counterpart contributions. Finally, Government interference through restrictive legislation or unnecessary controls are likely to stifle grassroots initiatives in financial intermediation. Such a risk would be minimized by requiring the Government to provide an appropriate legal framework for grassroots savings and loan associations, as well as a clear regulatory framework for the GIEs, which would ensure accountability and transparency. Poverty Category: The great majority of Niger's poor and, hence potentially food insecure, are concentrated in the rural areas. The actions financed under this project would strengthen the capacity of smallholder farmers to expand irrigated production of food crops. This will enhance the food security of the rural poor through increases in their food supply. The support to small-scale rural microenterprises and the actions designed to facilitate small-farmer access to financial services and to obtain tenurial security would also improve the distribution of income and alleviate rural poverty. The project's strategic focus on smallholder intensification of production, using low-cost, low-risk and simple techniques will permit efficient and  - iv - sustainable use of the scarce water and land resources. This would have a positive impact on the environment. Maps: IBRD 23395R - Project Areas.  - v - ESTIMATED COSTS AND FINANCING PLAN i ------------------------ (US$ million) ------------------------ Estimated Costs TOTAL AS % LOCAL FOREIGN TOTAL OF BASE _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _C O ST S 1. Private Project Mgmt Association 1.08 0.91 1.99 31 (ANPIP) 2. Small-scale Mechanized Irrigation 0.38 1.44 1.82 28 3. Improved Manual Irrigation 0.38 0.39 0.77 12 4. Environmental Protection 0.10 0.22 0.32 5 5. Savings & Credit Schemes 0.47 0.41 0.89 14 6. PPF Refinancing 0.18 0.52 0.70 11 7. Total Base Costs 2.59 3.90 6.49 100 Physical Contingencies 0.15 0.30 0.45 7 Price Contingencies 0.41 0.13 0.54 8 Total Project Costs 3.15 4.33 7.48 115 a/ Total may not add up due to rounding. FINANCING PLAN BY SOURCE ----------(US$ mnillion) --------- Local Foreign Total Government 0.7 0.0 0.7 IDA 2.5 4.3 6.8 TOTAL 3.2 4.3 7.5 ESTIMATED IDA DISBURSEMENTS !y ---------------------------- (US$ million) --------------------------- FY95 FY96 FY97 FY98 FY99 FY2000 Annual 1.5 1.4 1.9 1.1 0.4 0.3 Cumulative 1.5 2.9 4.8 5.9 6.5 6.8 k/ The projections deviate from the standard profile for agricultural projects in Niger (i.e., they are based on the Profile for Sectoral Adjustment Loans) because: (a) as a pilot capacity- building project, a large part of the disbursements, especially for the Goods category, would take place in the early phase of the Project; and (b) because the Agency, due to its private status, is expected to manage disbursement operations expeditiously without being subject to countless bureaucratic procedures.  - vi - REPUBLIC OF NIGER PILOT PRIVATE IRRIGATION PROMOTION PROJECT Selected Data and Documents Available in the Project File 1. Project Implementation Manual (PIM). 2. Detailed cost tables. 3. Termes de reference pour I 'audit des comptes et de gestion du projet. 4. Liste des membresfondateurs de / 'ANPIP (le Conseil d'Administration d'ANPIP). 5. Statuts. 6. Reglement interieur. 7. Projet de contrat de recrutement du directeur d'ANPIP. 8. Projet de contrat de recrutement du personnel d 'ANPIP.  REPUBLIC OF NIGER PILOT PRIVATE IRRIGATION PROMOTION PROJECT I. INTRODUCTION 1.1 The Government of Niger has requested IDA's assistance in financing a project designed to help implement its smallholder-focused private sector irrigation development strategy aimed at achieving sustainable agricultural growth, higher levels of income growth, and poverty alleviation. The Government has already implemented significant reform measures intended to establish a favorable environment for promoting private sector activities in the economy (para. 2.9). The proposed project would assist Niger in promoting the above-mentioned strategy by helping private economic agents in the smallholder irrigation sector overcome the constraints on full exploitation of their potential, notably, inefficient irrigation techniques, limited information on and access to commercial markets for products and factors of production, lack of access to financial services, and lack of access to basic technical and farmn management skills. The project would provide support for specialized assistance and training to help build the technical and institutional capacity necessary to overcome these constraints and would emphasize greater private investments in farmer-owned and operated small-scale irrigation development through support for promotional work, studies, and price and market information systems. 1.2 The proposed project would be a pilot capacity-building operation in the private irrigation sector. It is based on extensive preparation work by a Technical Working Group set up by the Government and an FAO/CP team and developed through dialogue with senior administration officials, private farmers, businessmen and Non-Governmental Organizations (NGOs). H. THE AGRICULTURAL SECTOR A. Background 2.1 Three quarters of Niger's vast territory of 1.3 million km2 is desert. Of the total cultivable area of 15 million ha, only about 3.8 rnillion ha are cropped every year, mostly in the Southern part of the country. Another 9 million ha are maintained in rotational fallows and pastures. Even in the cultivable areas, highly variable and declining rainfall (only 11 percent of the country receives more than 350 mm of rainfall) plus frequent drought cycles make rainfed agriculture an extremely risky enterprise. The irrigation potential (officially estimated at 270,000 ha - see para. 3.1), though limited in comparison with that of other Sahelian countries, offers opportunities for irrigation development to supplement rainfall with water pumped from the Niger River and from the country's substantial shallow groundwater resources (para. 3.1). B. The Role of Agriculture in the Economy 2.2 Agriculture in Niger contributes about 40 percent of GDP, 85 percent of employment, 16 percent of total export earnings and 100 percent of non-uranium export receipts. With the projected continuing decline of the uranium sector, agriculture will become a major source of foreign exchange in the foreseeable future. The internal and external adjustment measures taken since the realignment of its currency early in 1994 will substantially enhance  - 2 - Niger's external competitiveness as well as create the conditions for sustained economic growth and poverty alleviation. The leading activities in the sector are the production of cereals (millet, sorghum, rice and maize) for domestic consumption and the production of cowpeas for export, followed closely by nomadic cattle-raising for both domestic consumption and export. Nigeria is the principal market for both export products. The crop subsector accounts for about 54.4 percent of agricultural GDP, while the livestock subsector accounts for 35 percent. 2.3 Nigerien agriculture is drought-prone and subject to uncertain and irregular rainfall. This makes the use of costly inputs (fertilizer, animal power technology) and increased labor inputs extremely hazardous, and severely limits the scope for increasing productivity in rainfed agriculture. The performance of the agricultural sector during the past two decades has been greatly influenced by rainfall variability as well as the lack of adaptable and profitable technological packages that would permit the farmer to move out of the present rainfed production systems into a more intensive type of agriculture. During much of this period, production of cereals, notably millet and sorghum, which are the main coarse grains and principal source of calories, was highly variable, and cereal yields have tended to decline due to the high correlation between coarse grain production and the rainfall level. Simnilarly, low cowpea yields, averaging about 200 kg per hectare since the early 1980s may be explained largely by the rainfall factor. However, cowpea supplies have been increasing during the last decade, due mainly to expansion of the cultivated area. Estimates of annual cowpea production vary from 250,000 to 400,000 metric tons, about 90 percent of which is exported to Nigeria. The second leading export crop, onions, has been less affected by rainfall, because it is grown as an off-season crop under smallholder irrigation techniques. Onion yields have increased substantially from 20 metric tons per hectare in the mid-1980s to more than 30 metric tons per hectare by the beginning of the 1990s. This increase in productivity came from adoption of simple and low-cost irrigation techniques and increased use of chemical fertilizers. The prospects for increasing exports of Nigerien onions to the West African markets appear to be excellent. Further improvements in storage infrastructure and quality control will enhance the competitiveness of this export crop. 2.4 The droughts have adversely affected the livestock sector as well, especially the cattle population, which dropped from 3.5 million heads in 1983 to 1.4 million heads in 1986. The small ruminants population (mainly sheep, goats, camels, horses and donkeys) was about 10.5 million in 1994. According to official estimates, the numbers of livestock which could be available for export, while maintaining a stable livestock herd, are: 100,000 heads of cattle, 225,000 sheep, 400,000 goats and 15,000 camels per annum. Full exploitation of the growth potential of the livestock subsector would require appropriate measures to: improve the institutional and regulatory environment; pass legislation on the Rural Code on tenurial security; improve sanitary conditions of livestock and encourage the development of a modern private sector in the processing and marketing of animal products. C. Experience with Past Lending and Lessons Learned 2.5 The Bank has so far financed two irrigation projects (Namarigoungou and Irrigation Rehabilitation); two projects in rainfed agriculture (Dosso and Maradi II); two in forestry (Forestry I and II), one in Livestock, the Small Rural Operations Project and the Agricultural Research Project and the Agricultural Services Project. _ ~ ~ ~ ~ ~ ~ ~ ~ - - - - -_-  - 3 - 2.6 In the irrigation subsector, the performance of the completed Namarigoungou Project (Cr. 851 -NIR) was less than satisfactory in terms of economic profitability (ex-post ERR of only 3 percent) but good with respect to institution-building objectives. The Project Performance Audit Report (PPAR), on the one hand, stressed the low economic rate of return inherent in the comparatively large scale high unit area cost approach adopted under the project, thereby leading both the Government and IDA to shift irrigation strategy in favor of smaller, more simply designed schemes in the most favorable areas where unit area development costs are less. On the other hand, the report highlighted the project's success in institution building, including: (a) the creation of ONAHA (para. 3.7) as a public irrigation agency; (b) the introduction of improved agricultural technologies; (c) the establishment of two cooperatives that function satisfactorily; and (d) about 100 percent recovery of O&M costs and agricultural credit through project cooperatives (but not recovery of capital costs on the irrigation system). The experience in implementing the Irrigation Rehabilitation Project (Cr. 1618-NIR), which closed on December 31, 1991, is satisfactory with regard to economic profitability and efficiency of crop production, with 200 percent cropping intensity and high paddy yields (about 5 tons/ha). But the experience has also demonstrated: (a) that state-controlled cooperative organizations are prone to political and bureaucratic meddling, and hence unsustainable; and (b) public irrigation agencies face serious financial viability problems stemming mainly from the inability of the Government to fund the non- commercial services that these agencies perform on its behalf (such as planning, general studies, and extension and applied research exacerbated by inefficient management). Major lessons have been drawn from these two projects for the design of the proposed private irrigation project. 2.7 In rainfed agriculture, both Dosso (Cr. 967-NIR) and Maradi II (Cr. 1026-NIR) Projects experienced implementation problems and failed to increase crop production as expected, mainly because of inadequate technical packages. The Livestock Project (Cr. 885-NIR) was aimed at establishing a participative approach to management of animal, water and pasture resources. The Forestry II Project (Cr. 1226-NIR) was reoriented to concentrate on the maintenance and rehabilitation of the plantation already in place and on pilot rural resource management schemes. The major lessons learned from these four completed projects are that: (a) due to the heterogeneous soils and localized rainfall patterns, a single technical package is not widely applicable; (b) areas with good production potential exist but are quite localized and of limited size; (c) to avoid further deterioration of natural resources, it is necessary to establish more integrated mixed farming systems; (d) participation of the rural population in decision making, execution and maintenance is crucial, and self-help endeavors and decentralization should be encouraged; (e) services and advice provided to farmers by the public administration have to be upgraded; and (f) it is necessary to allow for sufficient time to reach and sustain project performance during implementation. 2.8 The ongoing Small Rural Operations Project (Cr. 1890-NIR) provides support to Government's decentralization policy through reinforcement of capacity of field level technical services in project preparation, execution, and evaluation and by facilitating the active participation of beneficiary groups and non-governmental actors in every aspect of small rural operations, and investments, such as bottom land improvements, small irrigated perimeters, soil conservation and watershed management and social forestry, including village tree nurseries. The lessons learned after three years of implementation experience are that: (a) it is possible to decentralize financial operations to the local level, provided there is an adequate project accounting and monitoring system in place; (b) there is greater accountability of public officials  - 4 - (field-level implementing agents) in projects which require financial participation of beneficiaries than those that do not; and (c) sustainability and security of investments in collective production activities cannot be guaranteed without incontestable tenurial security over cultivated land. 2.9 The actions taken by the Government to liberalize the economic system, with Bank support under the First Structural Adjustment Loan (SAL-I) and the Public Enterprise Sector Adjustment Program (PESAP), helped to encourage the emergence of private sector initiatives in the agricultural sector, including agricultural support industries. The changes introduced under these two operations have resulted in: (a) liberalization of cereal marketing and prices; (b) elimination of set prices for groundnuts and cowpeas; (c) setting of paddy and cotton producer prices according to the opportunity cost criteria (border prices); (d) replacement of compulsory domestic purchases by rice importers by a protective tariff on imported rice; and (e) commitment to promoting grassroots initiatives in rural credit. These policy measures have been substantially reinforced by the Government's recent action to realign the real exchange rate of its currency, which, ceteris paribus, should significantly improve the incentive structure for resource allocation decisions in the trade sector and enhance the external competitiveness of Nigerien agriculture. D. Bank Strategy in the Sector 2.10 Niger's principal objective in its development strategy is to achieve sustainable per capita income growth with equity. IDA's strategy in support of the above objective is based on four major building blocks: (a) building private and public sector institutions to promote private sector-led growth; (b) increasing efficiency of public resource management, (c) addressing long- term human capital and natural resources issues, and (d) supporting actions to stimulate supply response. With the support of IDA, the Nigerien Government launched (a) the Small Rural Operations Project (Cr. 1890-NIR) in 1988 to enhance rural incomes and food security through increased off-season crop production as well as to promote rural beneficiaries' participation in the financing and management of small rural operations; (b) the Agricultural Research Project (Cr. 2122-NIR) in 1991, which aims at strengthening adaptive research capacity and making research more responsive to farmers' needs and constraints; (c) the Agricultural Services Project (Cr. 2355-NIR), whose objectives are to develop an institutional framework at the national level for better defining strategies and programs for extension staff and for channeling a two-way flow of information between farmers and researchers and ensuring that research is geared to farmers' needs; (d) the first phase of a Natural Resources Management program currently under preparation, whose objectives are to halt and reverse the process of natural resource degradation in order to ensure sustainable agricultural growth; and (e) the Food Security Study which will lead to the identification and preparation of a project to improve food and nutrition security in Niger. 2.11 The proposed private irrigation project is complementary with the sectoral strategy in that it will support actions that will facilitate attainment of the objectives of increased agricultural output, growth in incomes and reduction of poverty in a mutually supportive way with the above projects. It will contribute to building private and public sector capacity in promoting private sector-led growth and support actions to stimulate supply response. The project's focus on simple, low-cost and low-risk techniques of intensification of agricultural production on small-scale private irrigation farms will have the complementary advantage of providing feedback to both extension and research on the development of appropriate extension  - 5 - messages for producers of off-season crops. The strategy supported by the project to promote the growth of food crops production is based on increasing productivity, using existing proven low-cost technologies and cultivation practices to ensure sustainable use of the water and land resources. Sustainability has important implications for resource management, in particular, water conservation, the maintenance of soil fertility and soil physical characteristics. The focus of the project's technology promotion activities would be in the most agroecologically suitable areas. These actions would provide useful lessons for the Natural Resources Management Project currently under preparation. Furthermore, the focus of the strategy would be on smallholder production, as this is readily adapted to localized changes in agroecological conditions, reduces land tenure difficulties, is compatible with food crop farming and is suited to the local management capabilities. Also under the project, voluntary groupings (Groupements d'Interet Economique) would be established to serve as the front line of contact with extension, as active members of the grassroots savings and loan associations to be created, and, ultimately, to provide collective guarantees for credit to its members. Successful implementation of the project will depend on parallel actions to improve delivery of research and extension services. It would also depend on mutually reinforcing actions to improve input supplies, credit, marketing arrangements and farmers' and non-governmental organizations - all of which would be supported through the project. m. THE IRRIGATION SUBSECTOR A. Background 3.1 Niger has a gross potential for irrigation of 270,000 ha' of which approximately 140,000 ha lie in the Niger Valley and 60,000 ha in the Maradi and Zinder agricultural zones. The remainder is spread across the valleys of the dallols and along the South-Eastern and South- Western parts of the country (see Map IBRD 23395R). The groundwater resource potential for irrigation is considerable. Surface water resources come mainly from the Niger River and a network of seasonal rivers that change their course frequently and inundate nearby land and numerous permanent and semi-permanent swamps. 3.2 Niger's large irrigation potential is far from being fully utilized. Despite the remarkable expansion of non-governmental irrigation schemes for dry-season cropping during the 1980s, easily exploitable water resources still abound along the Niger river and in the Dosso-Gaya Dallols, the Maradi Goulbis or the Zinder Koramas (see Map IBRD 23395R) where ample renewable shallow aquifers remain largely untapped. Of the total irrigable area, only about 70,000 ha or 22 percent are presently fully or partially irrigated. These are of three kinds: (a) publicly-funded medium- to large-scale (100 to 1,500 ha each), full-water control schemes totaling 12,000 ha, distributed among smallholders organized into government-established cooperatives responsible for operation and maintenance and input supply services; these schemes have good prospects for reasonable financial returns because of the systematic practice of double cropping and high 1/ Estimated potential takes into account areas irrigated by water regulated by the Kandaji dam for which a feasibility study is underway.  - 6 - crop yields but still have low economic returns because of the very high investment costs; (b) small-scale full- to partial-water control schemes totaling 46,000 ha initiated either collectively by the village farmers with assistance from NGOs or the local authorities through various small rural operations projects or by the private sector (individuals or small voluntary groups) with no external financial or technical help; the village perimeters are 20 to 30 ha subdivided among smallholders; they have good prospects for financial and economic profitability but suffer from inadequate functioning of the village farmer cooperatives that are established in each perimeter; the private schemes are usually at a scale of a few ares, with manual or "shaduf' lifting (para. 4.10) of water from rivers, depressions or shallow aquifers; but there are instances of schemes of a few hectares located around the major cities, irrigated with mechanical pumping from various surface or groundwater sources; these have good financial and economic returns and are increasing; and (c) traditional schemes totaling 12,000 ha and located in areas benefiting from non regulated river floods of wide range of volume and duration; these are more important for fodder and forestry regeneration and fishing activities than for farming. 3.3 The main crops produced on the large scale public schemes are rice and cotton while the privately-owned and managed schemes produce a high diversity of crops, including rice, wheat, cowpeas, fruits, onions, off-season garden vegetables and tubers (root crops). 3.4 In the public schemes, technical performance has been impressive since the beginning of the eighties. Rice production output increased significantly, averaging about 70 percent of the national total from 1981-1988, and accounting for an average of 80 percent thereafter. This phenomenal increase in rice output was due primarily to increases in productivity. Rice cropping intensity reaches 200 percent, and yields increased considerably, now averaging about 5 tons/ha per season in all the perimeters along the Niger Valley. The capital investment costs estimated at between US$13,000-20,000/ha make them, however, extremely costly and economically non-viable. They continue to be plagued by weak institutional support, poor marketing arrangements, and the lack of cost recovery measures to finance operations and maintenance. 3.5 In the private micro-irrigation schemes, area expands when there is ample water (normal rainy season). In years of low water flow, however, the area under cultivation tends to contract, yields decline and the opportunity for using modern techniques is limited. Thus, production mostly of off-season products, had been unstable, varying from a high of 138,000 tons in 1984 to a low of 84,000 tons in 1987 with much of the increase accounted for by the micro- irrigation schemes. With the recent devaluation of the domestic currency and the expected resulting improved competitiveness of the trade sector, there is great potential to increase their contributions to food security and to income growth, especially in light of the considerable export market opportunities in the rapidly expanding markets in neighboring Nigeria. However, it is critical that these traditional irrigation systems be improved and modernized (using low-cost and technically simple irrigation motorized and manual technology), in order to achieve greater  - 7 - economy and water-use efficiency, and hence higher levels of sustainable production. The proposed project aims at introducing such technologies and create both institutional and financial capacity for their adoption in future on-farm investments by small private irrigation farmers, contributing to achieving this objective. B. Subsector Issues Relevant to the Project Government Institutions and Farmer Organizations 3.6 Agricultural sector activities fall under the responsibility of two governmental ministries, namely the Ministry of Agriculture and Livestock and the Ministry of Hydraulics and the Environment. The boundaries of intervention between these institutions are often unclear and inter-agency coordination at the central level is unsystematic. Each ministry has decentralized its services to both the regional and district levels with greater focus on the latter. The district technical services, which generally tend to work within a multidisciplinary team, provide support in four functional areas, viz, agriculture, livestock, environment and rural engineering. Agriculture and rural engineering are the most active services in the subsector. The former provides extension support based on the T&V method and advises farmers on fertilizers, improved seeds and other agricultural inputs. The latter undertakes hydraulics studies and inventories of water resources and supervises well construction works that are usually contracted out to NGOs and other private operators. The most immediate constraints that hinder the operational effectiveness of technical services are: (a) lack of transport, especially for field agents; (b) inadequate and generally unskilled technical staff, (c) excessive mobility of staff, (d) low motivation of personnel; and (e) insufficient funding for operating expenses. 3.7 The public irrigation agency, the Office National des Amenagements Hvdroagricoles (ONAHA) provides technical support to the service cooperatives in the public irrigation perimeters. ONAHA has benefited from substantial technical assistance support from various sources and financial support from the Irrigation Rehabilitation Project. However, its principal mission is to provide services of a public good nature, without adequate funding from the state. As a public agency, ONAHA has no say on matters related to the quantity and quality of its staff nor is it subject to strict accountability. More importantly, it has no incentives to improve efficiency in comparison with a private agency. Similarly, the state-controlled cooperatives are unable to gain full control over their collective resources or manage and profit from their enterprises in a sustainable manner due to state intervention and political interference in cooperative affairs. The success of a private sector-led irrigation development strategy hinges on maintaining a supportive policy environment for autonomous private management structures and voluntary farmer groups to replace the existing parastatal entities and state-controlled cooperatives. These issues have been addressed in the design of the proposed project (paras. 5.1 and 5.2). 3.8 There have been virtually no autonomous local organizations in the rural sector. The irrigation cooperatives in the ONAHA schemes, or the indigenous grassroots associations, such as the Samaria and village cooperatives, are at best, quasi-governmental creations incorporated into a centralized hierarchical organization. The Government is, however, committed to decentralizing decision-making authority and to opening up community  -8- development to private sector intervention and to transfer administrative and financial autonomy to rural organizations. Non-Governmental Organizations (NGOs) 3.9 Historically, NGOs have played a lesser role in Niger's rural sector than most neighboring countries due primarily to the Government's centrist and highly interventionist orientation. The Government recognizes 86 NGOs, of which some 50 percent are non-resident. Only 6 of this total are national NGOs. In contrast, there are 184 NGOs in Mali of which 122 are local; 142 officially recognized NGOs in Burkina Faso and about 120 NGOs in Senegal. Since 1988, policy changes in Niger have opened the way for greater NGO autonomy. These changes include: (a) permission for national NGOs to operate legally, with effect from 1988; (b) approval of NGO-supported micro-irrigation projects and other small rural operations at the regional or district level without prior approval from the center (with effect from 1989); and (c) permission for regional and district authorities (prefets and sous-prefets) to approve all micro-projects which do not require contribution from the Government or donors (effective since 1990). 3.10 Current NGO-involvement in the subsector is primarily on rural works (well- digging), with much of the contracts going to a handful of resident NGOs, including OFEDES, the Lutheran World Relief (LWR), Africare and the Brigade Hvdraulique de Mavahi (water engineering brigade). Special effort is needed to expand NGO and other private sector involvement, such as in private equipment services and environmental protection in order to ensure higher efficiency and profitability of investing in private irrigation development. The proposed project would, as much as possible, use qualified NGOs in execution of certain project activities. Private Holders 3.11 Small Private Holders2. The experience in Niger demonstrates the responsiveness of small private farmers to market incentives and production parameters for farming in general. For instance, the growth of cowpeas production as a replacement cash crop to groundnuts since the end of the seventies was exclusively a private sector initiative. As groundnuts faded, owing to the combination of poor incentives and rainfall, farmers and traders saw a profitable opportunity in cowpeas and took advantage of it. In 1982, for instance, cowpeas production was estimated at about 282,000 tons whereas that of groundnuts was only 87,000 tons. This massive shift into cowpeas production appears to be permanent as groundnut output remains constant at below 100,000 tons (at times at less than 50,000 tons) while cowpeas production oscillates between 300,000 - 400,000 tons since the late eighties. The second experience is with the widespread practice of off-season irrigation farrning. Following the devastating droughts of 1984, the Government encouraged farmers to exploit bottomlands by irrigation from groundwater to grow food for domestic consumption. They responded with a record harvest of 138,000 tons (cereals equivalent) of dry-season irrigated crops the following year (1984-85). 3.12 The small private farmer does not belong to any formal farmer organization except the village cooperative. Irrigation is generally practiced on micro-plots of a few ares per farm unit 2/ This term refers to smallholder farmers who finance, construct and manage their own irrigation schemes.  - 9 - (4-6 members is typical) in collectively irrigated perimeters or on an individually irrigated plot. Relying on inefficient and outmoded irrigation techniques, the farmer cultivates mainly off-season vegetables as major source of revenues, and on a limited scale, tobacco and sugar cane. Technical support to this group is both irregular and inadequate, and training in functional literacy and management is virtually non-existent. Lack of access to a reliable source of credit is also an important limitation on the ability of the traditional private small farmer to adopt improved techniques. Their productive potential can be put into even more efficient use by providing support in: (a) training; (b) systematic extension support to adopt modem inputs and to maintain a viable mix of high-value crops; (c) access to unsubsidized credit and services for mobilization of savings; and (d) market and price information dissemination systems. The proposed project would, on a pilot basis, help provide these services. 3.13 Private Commercial Farmers. This group consists mostly of traders, civil servants and village notables. The average size of their irrigated plots varies from 3 ha to 20 ha or more. They invest in mechanical equipment to irrigate from surface water along the Niger River or groundwater, and recruit wage-labor on their perimeters. Crop production is diverse, including vegetables, fruits, fodder, groundnuts, cowpeas, sugar cane and cereals. This group cannot be quantified with any precision, but their farms are concentrated near big cities, the Niger Valley (Niamey), and in the regions of Maradi and Zinder. 3.14 Rural Women. The role of women in the smallholder sector and their socioeconomic impact in Niger have traditionally been under-reported or under-valued and, hence, are not well-understood, although there is a strong association between rural poverty and women's role in agricultural production, post-harvest and other income-generating activities. It is also recognized that they carry out these activities in addition to their traditional family welfare role. In agriculture, women actively participate in virtually every activity of the family farms, including land preparation, sowing or planting, weeding and harvesting. Their post-harvest activities include the shelling of grains, storage, processing and marketing. Evidence from the Maradi region, for instance, suggests that women are now earning an increasing proportion of the family income and, in many cases, are the principal breadwinners. Women also play a dominant role in rainfed food crop production. In terms of access to credit, women clients have built a reputation of being creditworthy and prompt in repayment of loans. They represent more than 60 percent of the clients currently served by CARE's ongoing credit operations in the Maradi region and are the principal focus of this NGO's recent initiatives in grassroots savings mobilization in Tahoua and Maradi regions. 3.15 Tradition-bound cultural biases, however, continue to prevent women from fully exploiting prevailing income-generating opportunities in the smallholder sector. To begin with, women have been excluded from permanent access to land, primarily because customary land tenure practices deny women legal rights on land. Consequently, women are often unable to offer any security or collateral to obtain a loan to finance investment activities. Second, technical training and extension support tend to be directed almost exclusively to men. Third, seclusion, whereby a woman's activity is limited to the confines of the house- commonly practiced in Hausa society-- inhibits meaningful development of women's potential, and in certain cases, tend to undermine efforts to promote group formation and to deliver extension messages due to resistance from male spouses.  - 10 - 3.16 Unless these constraints are removed, the effectiveness of development actions is likely to be limited, as a large segment of potential beneficiaries would find it difficult to exploit the opportunities offered by the development process. The Government is taking action to remove all forms of discrimination based on gender, particularly with respect to land resource rights and tenurial security, in order to enhance women's contributions to the objectives of sustained growth in smallholder production, increased incomes of rural families and poverty reduction. In addition to an improved legal framework, special effort needs to be directed to identifying actions designed to accommodate rural women's needs and develop their economic potential. Special effort will be made to include women beneficiaries in this project. 3.17 Rural Microenterprises. In Niger, microenterprises are defined as small-scale income generating units employing between four and six people, usually on part-time basis. They include most household businesses and agroprocessing industries. Such enterprises represent an important alternative to wage employment in the rural sector. While it is difficult to be precise about the scope and volume of microenterprise operations, the available information suggests that a large number of the rural population earn income working in self-employment or small business activities often as a supplement to agricultural wage labor. Most of the microenterprises are largely non-farm enterprises, operating mainly in the informal sector. They provide agriculture- related commercial services, including inputs and equipment supplies, land preparation, agroprocessing, equipment repair and maintenance, primary marketing, including storage, and marketing of transformed products. While some of the employment created by these enterprises is often low-paying, part-time and provides only supplemental household income, they have considerable yet-to-be tapped potential to contribute significantly to family income on a sustainable basis. To realize this potential, however, it is important to overcome the constraints on entrepreneurship development and prepare the entrepreneur to better respond to new opportunities. Access to markets and credit rank high in the obstacles that need to be overcome. Aspiring entrepreneurs with neither a track record nor assets to pledge find it difficult to come up with guarantors or collateral required by commercial banks. They lack knowledge or expertise to penetrate outside markets and lack an organizational base from which to demand services and engage in bulk purchasing or selling. 3.18 Consistent with its private sector-led development strategy, the Government is committed to assisting small rural private entrepreneurs with the objective of enhancing their contributions to greater efficiency in agricultural production, processing and marketing. In support of this strategy, the proposed project will finance workshops on how to overcome the obstacles in the management capabilities of the small entrepreneur in the irrigation subsector as background material for the preparation of the second phase of this project. Land Issues 3.19 The process of clarification of land resource rights, involves judgments regarding not only who has what rights, but also which authority shall prevail and what rules shall govern new and unanticipated issues which might arise. The Government's ongoing work on a Rural Code development will clarify the authority framework in which land resource conflicts are resolved, which will in turn have a major influence on the system of incentives within which long- term investments in irrigation and rural economic activity takes place. One element of the Cod Rural that is of immediate interest to smallholder production is the task of formalizing customary  - 11 - rights in the modem legal system such that traditional rights which were decided by local authority under customary law will be converted into secure, legal title. This involves land registration based on declaration of property rights substantiated by local authority, and local consensus on the size and location of the property. The Code Rural is in the process of being translated into appropriate enabling legislation. Assistance on land titling, including review of documentation and processing services would be provided to the beneficiaries of this project. The Project will finance the services of a legal consultant to review the existing legal and regulatory framework of land tenure, and subsequently to design a User's Guide on how to obtain tenurial security and/or usufruct rights (para. 5.10). The overall framework for addressing land issues is being developed under the Natural Resources Management Project presently under preparation. Rural Financial Intermediation 3.20 Prior to the banking sector reforms of the late 1980s, state-owned banks had dominated banking, viz, the Nigerien Development Bank (BDRN) and the Agricultural Credit Bank (CNCA). These institutions collapsed due largely to accumulation of significant amounts of non-performing loans. The formal financial sector comprises also three main private commercial banks namely, the Societe Nigerienne de Banque (SONIBANK), the Banque Internationale de l'Afrique Occidentale (BIAO) and the Nigeria International Bank (NIB) which is an affiliate of CITICORP. Two other banks, namely, the Islamic Bank and the Lebanese-Nigerien Export Bank (BALINEX) operate as specialized banks. The non-bank system consists of a state-owned social insurance institution (the Caisse Nationale de S&urite Sociale), the bankrupt housing finance institution (the Credit du Niger), a national post office savings scheme, a few private insurance companies, mutual funds and pension funds. 3.21 The importance of informal finance is widely recognized in Niger and the Government realizes that lack of savings and credit schemes at the grassroots level hampers the creation of a potential for intensification and diversification of production in high-potential areas. Current Government strategy aims at improving the efficiency of informal intermediation in rural areas by encouraging better use of private sector initiatives in rural financial services. The focus of this new policy will be on the development of grassroots savings and credit groups along mutualist lines. 3.22 Private commercial banking practices appear inappropriate to the rural clients, since most smallholder farmers are without the required collateral, may not have credit records or history and financial information in the form expected by traditional banks. Commercial banks perceive lending to the smallholder sector to be inherently risky and costly. 3.23 Following a Bank review on rural finance in Niger in June 1992, it was concluded that: (a) Niger enjoys a robust tradition of mutual help, which still exists in the form of traditional rotating savings and credit associations; (b) these associations, if properly organized and managed, have a potential for reducing the risks and costs of smallholder-lending, as well as the potential for mobilizing savings, particularly in high potential areas, where investment activity readily generates excess liquidity, and (c) future strategy in rural finance should focus on creating farner-owned, savings-based institutions, along mutualist lines and where credit is provided strictly in accordance with the collective guarantee principle. Several NGOs have worked in rural finance, testing new approaches. Two of these agencies, namely, CARE-International (Care-  - 12 - Niger) and the World Council of Credit Unions (WOCCU), have been working in Niger for about five years. The former's experience has been based on a credit-only approach, with credit resources coming from external sources, notably, USAID, and sustainability ensured by expanding clientele, diversifying loans and charging sufficient interest rates to cover the costs of providing the credit. The WOCCU emphasizes promoting savings mobilization as a prerequisite to credit. Member savings in the WOCCU system are deposited in a private commercial bank and withdrawals are made for on-lending, whenever there is need to do so. Such direct links between the formal and informal financial sector need to be reinforced to enhance rural financial intermediation. 3.24 WOCCU Credit Development Project. The objective of the USAID-financed Credit Union Development Project is to increase access to credit by the rural and urban population through the creation of a network of savings-based sustainable financial services institutions (credit unions). The project executing agency is WOCCU, whose activities, in addition to coordinating the project operations, include the following: (a) creation of additional sound credit unions and expansion of existing ones; and (b) education and training of credit union members, managers and elected members in skills related to credit union operations and operating principles, functional literacy, basic bookkeeping, accounting and auditing and other relevant skills. Launched in September 1989 in the Zinder region, it was subsequently expanded to the Maradi and Niamey regions. By September 1993, sixteen credit unions had been created, of which three are exclusively for women. The total membership amounts to about 1,500, of which about 260 are women. Member deposits were increasing regularly and more than doubled from about CFAF 5.5 million in 1992 to CFAF 12.3 million in 1993. Lending is generally for small investments at an average interest rate of 24 percent. 3.25 Care-Maradi Microenterprise Development Proiect. In contrast to the savings-first approach in the WOCCU project described above, CARE International's activities in rural finance are based on a credit-only approach. Nevertheless, the credit system that it has established under the microenterprise project in the Maradi region is perhaps the most successful private sector initiative in the non-bank system, with an average credit recovery rate of 98 percent since it began this operation in 1988. This impressive collection performance may be attributed to safeguards which improve the overall culture concerning cost recovery and credit discipline, such as rigorous credit screening and increasing use of group-based lending and the associated peer-support systems to encourage timely repayments and to recover arrears. Overall, the program has disbursed a total of US$1.25 million equivalent to about 4,400 clients (in 365 groups) from July 1988 to December 1991. Women represent about 53 percent of the sub-borrowers (4-year average) and 65 percent of clients who were granted loans during the past seven months. 3.26 Although there is no formal law pertaining to rural savings and credit institutions, the Government of Niger has adopted a transitional legislative law in the form of an Administrative Decree, which provides for the legal recognition of savings and credit cooperatives. In addition, the Government has established a registrar within the Ministry of Finance and Planning, whose principal mission is to charter savings and credit cooperatives. In order to provide adequate protection for such grassroots-level initiatives in rural finance, the Government should enact a definitive credit union law which would correspond to the international norms and standards of credit union law.  - 13 - IV. THE PROJECT AREA A. Physical Features Location and Climate 4.1 The geographic coverage of the project would be limited to the Departments of Tillaberi, Dosso, Maradi and Zinder (see Map IBRD 23395R). Project activities will be concentrated in four zones carefully selected during project preparation, viz, the Niger River (Niamey), the Dallols Bosso and Maouri (Dosso), the Goulbi of Maradi and the Koramas of Zinder. (Details are in the Project Implementation Manual - PIM.) The selected zones correspond to what the Government has designated as "the strategic agricultural zones" in light of the development potential and prospects which they represent. These zones are referred to in this report as the high potential areas. They have been selected based on their relatively favorable conditions for private irrigation development, i.e. availability of replenishable water resources, access to land, good soil quality, market outlet, and access to technical services (details are in the PIM). Other important factors taken into account for the selection of the project zones were the economic potential in terms of liquidity and profitability of investments in small-scale productive activities and access to markets, as well as social potential in terms of cooperative tradition and active NGO-involvement. 4.2 The project zones are located in the better-watered area of Southern Niger between Niamey and Maradi, covering a stretch of about 600 km along the Nigerian border. They are located in the Sahelian-Sudanian ecological zone with mainly dry savannah vegetation and precipitation averaging between 400 mm in the Northern parts and 800 mm in the extreme South, concentrated in four months (June to September) and are prone to strong drought risks. Rainfall infiltration is high due to the predominantly sandy soil encountered and rainfall intensity. Vagaries of weather, particularly the time of rainfall, limit the capacity of rainfed crops to profitably utilize the yield increasing inputs. Consequently, irrigation is, in these zones, not only essential for production in the dry season, but also can have an important role in the wet season. Estimates of replenishable groundwater in this area exceed 500 million m3/year (see details in PMI). B. Socioeconomic Features 4.3 The project area lies in the Districts of Niger with the highest population density. The average density of 30 persons/km2 is about five times larger than the national average of 6.2 persons/km2. Seasonal migration towards these zones during both the wet and dry seasons increases the pressure on the available land. With the improvement and expansion of irrigation under the proposed project, the cropping intensity will increase substantially as a result of the general increase that is expected to occur as increasing population and land pressures stimulate a more intensive land use, especially on smaller farms. In addition to being within close proximity to the Northern Nigeria market towns, the project area has a rapidly expanding urban population (rate of urbanization of 20 percent), and as such should have readily available market outlets for the incremental production supported in the subsector.  - 14 - V. THE PROJECT A. Rationale for IDA Involvement 5.1 IDA's strategy in the irrigation subsector is to support private sector initiatives and reducing the role of the State in managing irrigation schemes. It emphasizes better dissemination of market and price information and encourages the development of autonomous rural associations, capable of mobilizing savings and providing credit for viable operations. Small farmers, who are the dominant economic agents in the irrigation subsector are now severely constrained by inefficient techniques for irrigation, limited information on, and access to commercial markets to their products and factors of production, lack of access to financial services, and lack of basic technical and farm management skills. The proposed project is designed to help overcome these constraints and, thus, create the necessary institutional and technical capacity for small farmers to fully exploit their potential. The Government is fully committed to this private sector-led irrigation development strategy and has been fully involved in the preparation and design of this operation. In addition, project preparation has been conducted in close association with representatives of existing and potential private irrigators. B. Project Objectives and Scope 5.2 The proposed project is designed to test and evaluate: (a) local capacity building through private sector development in the irrigation sector; (b) improved low-cost technologies for small-scale private irrigation; and (c) procedures that will enable the public sector to commission projects to the private sector through delegated contract management. By promoting technologies which meet small-farmer requirements and capabilities, the Project will contribute to increased small-farmer productivity and incomes, and improved rural well-being. The project would focus primarily on the poorest small irrigation farmers, and selected private commercial irmgators. C. Summary Project Description 5.3 The proposed project would be a four-year pilot for capacity building in small- scale private irrigation. The Project will have five main components: (a) a Private Irri2ation Management Agencv Component aimed at building institutional and technical capacity for promoting the Government's private sector- led strategy for the development of small-scale irrigation, in delivery of services through contract management and for providing demand-driven assistance to small farmers under procedures which ensure transparency and cost-effectiveness; (b) a Small-scale Mechanized Irrigation Component aimed at testing and disseminating simple, low-cost mechanized technologies for small irrigation farmers (para. 5.6); (c) an ImDroved Manual Irrigation Technolozr Component aimed at testing and disseminating improved manual small-scale irrigation technologies as well as  - 15 - providing training and technical assistance to the local artisans in the manufacturing of these technologies; this component also aims at building local capacity, through technical support and training, in developing entrepreneurial skills in complimentary non-farm activities, including maintenance and repairs on simple irrigation equipment (para. 5.7); (d) an Environmental Protection Component aimed at developing capacity for monitoring the potential environmental impact of future investments in irrigation production and for proper husbandry of the soil and water resources (para. 5.8); anci (e) a Savings and Credit Schemes Component aimed at testing and promoting viable instruments for providing financial services to rural clients and educating the beneficiaries on the principles and practices of mutualist savings and credit schemes, through training and technical assistance (para. 5.9). D. Detailed Project Description Private Irrigation Management Agency Component (US$1.3 million) 5.4 Based on the disappointing experience with public irrigation agencies, it was deemed necessary to establish an association of private irrigators, hereinafter referred to as the Agency. The Agency has already been established with private legal status in order to insulate it from the ex ante control and political interference that prevented public agencies from effectively performing their responsibilities as executing agency of past irrigation programs. The proposed project will be implemented by the l'Association Nigerienne de Promotion de l'Irrigation Priv6e (ANPIP), which was created on July 1, 1992, endowed with significant independence and autonomy. ANPIP will carry out this function under delegated contract management to deliver programs of assistance and services to private irrigators. The Association will recruit a small technical team of national staff by open competition to be responsible for day-to-day project execution. The package of services fall under two broad categories: those which ANPIP provides directly and those which it contracts out to others. The services which would be provided directly by ANPIP, include: (a) carrying out promotional campaigns in support of the Government's irrigation development strategy; (b) facilitating small farmers' access to the legal and administrative procedures for obtaining tenurial security; (c) providing assistance, upon demand, in preparation of bankable irrigation projects and in establishing economic interest groups (GIEs); and (d) overall project implementation, including procurement and contract management, coordination of project activities and monitoring and evaluation. The package of technical assistance and training services which ANPIP will contract out to consulting firms include: (a) testing and disseminating improved small-scale mechanized and manual irrigation technologies (paras. 5.6 and 5.7); (b) promoting grassroots savings and credit schemes (para. 5.9),; and (c) project-related evaluation studies and the periodic audits (para. 5.10). ANPIP will work closely with the national research and extension services to evaluate the performance of the contracted services on technology promotion. The Government has submitted to IDA, prior to negotiations, a draft Statute establishing the above-mentioned economic interest groups and would enact a law establishing the GIEs as private economic interest groups as a condition of effectiveness (para. 8.3(a)).  - 16 - 5.5 Detailed description of ANPIP, its Board as well as its role and functions are presented in Annex 1 of this report; further details are included in the PIM which is available in project files. The Agency's management team consist of a Director, and four senior technical staff, including, a communication specialist, an irrigation engineer, a hydrogeologist, and an agronomist. There will also be an administration team, consisting of a an accounting and financial officer, an operational assistant, and relevant support staff. The organizational structure, staffing and associated responsibilities of ANPIP are further defined in the Institutional Setup in Annex 1. In addition, ANPIP will need a short-term expatriate marketing specialist to establish and monitor a price and market information system for the project area. The proposed project would finance the organizational development and operational support which ANPIP would require to implement the project with due diligence and efficiency. The costs that would be covered include personnel, short-term technical assistance, consultants' salaries, office equipment, vehicles and operating costs, as well as annual external audits. Small-scale Mechanized Irrigation Component (US$1.8 million) 5.6 This component would comprise testing and evaluating simple, low-cost mechanized technologies to improve the productivity of smallholder irrigation farmers with plot sizes larger than 0.5 ha. In addition to promoting the adoption of technologies which already exist on the shelves or could be easily imported from Nigeria. The project would finance research in less familiar techniques for tubewell and washbore drilling, water distribution technologies; and testing of adapted and cost-efficient water distribution systems, including motorized auguring and rotary drilling systems, motorized bailers, small petrol powered suction pumps, small submersible pumps for deeper water table applications and distribution systems such as drip or sprinkler irrigation. Motorized auguring will target zones with soil that is unsuitable for hand auguring techniques. The component also builds local capacity through study visits of the Fadama Development Programs (FDP) in Northern Nigeria for selected demonstration groups, technical workshops for the staff of ANPIP and Government staff in the Department of Genie Rural of the Ministry of Agriculture and Livestock, and extension support for adoption of the technological innovations promoted under this project. Implementation of this component will be contracted out by ANPIP. (See Annex 1) Dissemination of the tested technologies will be done through the existing agricultural extension services supported by the IDA-financed Agricultural Services Project (Cr.2355-NIR). Improved Manual Irrigation Component (US$0.8 million) 5.7 This component would focus on testing and evaluating manual technology packages to improve the productivity of smallholder irrigation farmers with plot sizes of up to 0.5 ha. The manual technologies would include: (a) improvements to hand dug wells to increase recharge rate and reduce construction costs, manual methods for inserting tubewells, such as, hand augers, manual bailers and sludger; (b) manual water lifting technologies, such as, those discussed in paragraph 4.10 above; (c) simple water distribution technologies discussed in paragraph 4.11 above; and (d) training of local artisans to produce manual irrigation equipment. The package of services under this component also includes technical and training support to beneficiaries on complimentary activities, including development of cost-efficient techniques for crop conservation and storage, agroprocessing, building marketing expertise and linkages; and  - 17 - creating capacity for maintenance and repairs services in the irrigation subsector. Since the majority of women involved in market gardening have smaller plots, special emphasis would be given to identifying manual technologies acceptable to women. Implementation of this component will be contracted out by ANPIP. (See Annex 1) Dissemination of the tested technologies will be done through the existing agricultural extension services supported by the IDA-financed Agricultural Services Project (Cr.2355-NIR). Environmental Protection Component (US$0.3 million) 5.8 The project includes a rigorous program of physical monitoring of shallow aquifer levels and soil and water quality in the project zones to determine ways of safeguarding against overexploitation of these aquifers in future investments in irrigation production and to ensure sustainability of the irrigated farming systems by developing techniques for proper husbandry of the soil and water resources on which such systems are based. The monitoring system would focus on monitoring the performance and recharge characteristics of the shallow aquifers and the possible potential for causing excessive draw-down, the possibility of salinization of the soils as a result of future irrigation under conditions of high evapotranspiration and possible contamination of groundwater by agrochemicals. This component also includes soil and water erosion control works in the river valley zone. This component will be implemented by governmental agencies, namely, the Nigerien Institute for Agricultural Research (INRAN) of the Ministry of Agriculture and Livestock and the Department of Water Resources of the Ministry of Hydraulics and the Environment. The costs associated with this component will include motorcycles, equipment and materials; and incremental operating costs. The Savings and Credit Schemes Component (US$0.9 million) 5.9 This component would consist of a package of technical assistance and training services for promotion of savings and credit schemes in the project area. ANPIP will contract the implementation of this component to consulting firms. (See Annex 1) The contracted firm would be required to train Nigerien personnel to prepare them to take over the implementation of the savings and credit schemes after a maximum of three years. The pilot areas will be selected on the basis of the following criteria: (a) economic potential, notably, liquidity and investment profitability and access to markets; (b) social potential, in terms of cooperative tradition; and (c) institutional base, particularly the existence of farmer associations and support organizations. Agreement was reached at negotiations that a time-bound action program for the implementation of the Savings and Credit component acceptable to IDA would be submitted by the Government to IDA by January 31, 1995, and subsequently implemented (para. 8.1(b)). The services to be provided by the contracting firm would include feasibility work to identify specific locations within the project area; identification of target populations to include individual women or women groups; education and training; support for the creation of SCAs, including provision of management and accounting tools and safes; development of savings and credit programs; evaluating each year's activities and undertaking evaluation of groups already established and in operation. It was agreed during negotiations that the Government would respect the autonomy and private status of savings and credit cooperatives and would refrain from interference in the internal management and in the democratic functioning of savings and credit cooperatives and their institutions (para. 8. Ic)). Assurances have been obtained at negotiations that the  - 18 - Government would adopt an action program acceptable to IDA, for the implementation of this component not later than September 30, 1995 (para. 8. Ib). Studies and Audit (US$0.7million) 5.10 As part of the activities under the Private Association component, ANPIP will commission independent studies on: (a) review of the existing legal and regulatory framework of land tenure and the subsequent design of a User's Guide on how to obtain tenurial security and/or usufruct rights (para. 3.19); (b) improved price and market information systems, including follow- up actions to establish such a system within ANPIP; (c) a comprehensive review of overall project performance, which will be used as a background document for the project mid-term review and final evaluation (para. 6. 11); and (d) the feasibility study on future investment opportunities in the irrigation subsector, that would include on-farm investments and complimentary commercial activities. The terms of reference of the above feasibility study would include an assessment of the potential impacts of irrigation production on the biological features of the fauna and flora and an examination of other potential riparian issues. ANPIP will provide the necessary administrative support for these contracted services. E. Status of Project Preparation and Implementation Schedule 5.11 Status of Proiect Preparation. Project preparation was undertaken by a local multidisciplinary working group established by the Government in 1990. This group participated actively in the design and preparation of this project and was assisted by an FAO/CP team in writing the project final preparation report.3 This report is based on various surveys and project preparation working papers prepared by the local group. The Government and the Bank jointly prepared a project in April 1992, which would have included a line of credit, estimated at 75 percent of the IDA credit, to finance on-farm investments. Following the elimination of the IDA line of credit, in August 1993, due to the prevailing unfavorable macroeconomic and financial sector environment, the Government and the Bank redesigned the project in November 1993 to focus on building the technical and institutional capacity that would permit sustainable private sector investments in the irrigation subsector. Selection of the project zones where substantial replenishable surface and groundwater resources are available and selection of the mechanized tubewell drilling, water pumping and irrigation techniques to be adopted under the Project have been made following extensive study work and field visits made by two expatriate hydrologists and two irrigation engineers with vast experience in groundwater and surface irrigation development in Africa and Asia. 5.12 International Water Rights. The riparian states of the Niger River have signed the 1980 Faranah Convention creating the Niger Basin Authority (ABN). Under this Convention, the member states are obliged to inform the Executive Secretariat of ABN of all projects and works they might intend to carry out in the Basin. Assurances were obtained at negotiations that the Government has complied with this requirement (para. 8. 1(m)). Since the activities to be financed under this Project would be limited to training, technical assistance and on-station demonstration of tested improved technologies, the project would not have any adverse effect on water quality and consumption capacity or the biological characteristics of the fauna and flora. However, this 3/ Report No. 42/91 CP-NER 23 dated April 29, 1991.  - 19 - Project is financing, in accordance with the recommendations of the studies undertaken on riparian issues, physical monitoring of the acquifers and the potential for causing excessive draw- down, salinization and contamination by agrochemicals from future irrigation production activities. In addition, the Project would finance an assessment of the potential impacts on the biological features of the fauna and flora and an examination of other potential riparian issues of future investments in irrigation production (para. 5.8). The Government has provided evidence of formal notification of the Niger Basin Authority as a condition of Board Presentation (para. 8.2(b)). 5.13 Implementation Schedule. The Project would be implemented over a four-year period in accordance with the schedule of expenditure, shown in Annex 4. The first year of the Project would be primarily devoted to completing the development of ANPIP, identification of target populations for all the components of the project, with special effort to include individual women or women groups, publicity campaigns promoting the new private irrigation development strategy, awarding the contract for acquisition of technologies to be tested and introduced, education and training in the savings and credit approach, and setting up the monitoring system for physical monitoring of the shallow aquifer levels and soil and water quality. Gradually, other actions will be launched, including training and technical support programs for small irrigators, setting-up a price and market information system as well as studies. All project works are expected to be completed by December 31, 1998. F. Cost Estimates 5.14 Total project costs, net of taxes and import duties, which would be waived, but including price and physical contingencies and the refinancing of advances from the IDA PPF are estimated at about CFAF 4.4 billion, equivalent to US$7.5 million, with an estimated foreign cost of US$4.3 million or about 58 percent of total costs. Cost estimates are computed on 1993 base prices and adjusted subsequently to reflect the full impact of the devaluation of the CFA Franc. The total allowance for physical contingencies averages 15 percent of base costs for civil works and 8 percent for other project components. Price contingencies, which amount to 8 percent of the total cost or 7.7 percent of baseline costs including physical contingencies, assume an annual domestic inflation rate of 36.7 percent for 1994, 7.3 percent for 1995, 2.9 percent for 1996 and 2 percent for 1997 through 1999, and foreign inflation rates of an average of 2.5 percent over the same period. A summary of the project costs is shown in Table 1 below. Detailed project costs are presented in Annex 2.  - 20 - Table 1: PROJECT COST SUMMARY CFAF million US$ million % Foreign % Total Category Local Foreign Total Local Foreign Total Exchange Base Costs Private Project Mgmt 640.0 535.5 1175.5 1.08 0.91 1.99 46 31 Association (ANPIP) Small-scale Mechanized 223.4 850.7 1074.1 0.38 1.44 1.82 79 28 Irrigation Improved Manual 221.3 233.1 454.4 0.38 0.39 0.77 51 12 Irrigation Enviromnental 58.7 129.7 188.4 0.10 0.22 0.32 69 5 Protection Savings and Credit 279.9 243.3 523.2 0.47 0.41 0.89 47 14 Schemes PPF Refinancing 104.8 309.2 414.0 0.18 0.52 0.70 75 11 Total Baseline Costs 1528.1 2301.5 3829.6 2.59 3.90 6.49 60 100 Physical Contingencies 88.1 177.7 265.8 0.15 0.30 0.45 67 7 Price Contingencies 240.9 77.8 318.8 0.41 0.13 0.54 24 8 Total Project Costs 1857.1 2557.1 4414.2 3.15 4.33 7.48 58 115 Note: Totals may not add due to rounding. G. Financing Plan 5.15 The IDA Credit of US$6.8 million equivalent will finance about 90 percent of total project costs, net of taxes and duties. Financing would cover vehicles, equipment, tools and materials, consultant services, and incremental personnel and operating costs. The Nigerien Government would contribute about 10 percent of total project costs (US$0.7 million). This amount would finance 40 percent of the incremental personnel costs of the participating governmental agencies as well as the auxiliary personnel and operation and maintenance costs of the project management agency, ANPIP. The financing plan for the project is shown in the table below. 5.16 Government Counterpart Contributions. The Governrment would provide in its budget amounts sufficient to cover its counterpart contributions to the costs of the project (para. 5.15). In this regard, the Government will open and maintain an account in a commercial bank acceptable to the Association and on terms and conditions acceptable to the Association, and deposit into this account, an initial deposit in CFA Franc equivalent to US$175,000, representing the amount of its annual counterpart contributions. Following the initial deposit, the Government shall deposit in the above project account, by January 1 of each year, an amount equivalent to the initial deposit for further implementation of the Project. The opening of this account and the making of the initial deposit would be a condition of effectiveness (para. 8.3(f)).  - 21 - Table 2: FINANCING PLAN BY SOURCE _____ _ -----(US$ million) - Local Foreign Total Governient 0.7 0.0 0.7 IDA 2.5 4.3 6.8 TOTAL 3.2 4.3 7.5 H. Procurement and Use of Consultants 5.17 Procurement would be managed by the privately-managed association, ANPIP. Assurances have been obtained during negotiations that all procurement under IDA Credit would be in accordance with procedures consistent with Bank Guidelines for Procurement and Consulting Services and carried out by ANPIP (para. 8. 1(a)). Submission of a Procurement Plan, satisfactory to the Association, for procurement of goods would be a condition of effectiveness (para. 8.3(g)). Because ANPIP is new and would lack experience on procurement issues, the management team (the Director, the accounting and financial officer, and the two technical staff) financed under the project (see para. 5.5) would be trained in IDA procurement procedures, to be able to manage all procurement matters. To this end, a project launch workshop will be organized. The project elements, their estimated costs and the proposed methods of procurement are summarized in Table 3 below. 5.18 Goods (US$0.4 million). The goods to be procured, under this project, include vehicles and spare parts. Since the purchases are for small packages and miscellaneous equipment mostly needed at an early stage of the project, competitive bidding would not be the most efficient and economic method of procurement. Vehicles (2 light vehicles and 2 four wheel drive) and spare parts will be purchased through the use of International Shopping and/or IAPSO for an aggregate value of US$400,000. Office equipment and furniture in packages below US$50,000 for an aggregate value of US$400,000 may be purchased through local shopping method of procurement based on comparing price quotations from at least three local suppliers. Miscellaneous goods and office equipment for values below US$20,000 may be purchased through direct contracting following procedures acceptable to the Association.  - 22 - Table 3: SUMMARY OF PROPOSED PROCUREMENT ARRANGEMENTS (US$ Million) PROJECT ELEMENT Int. Sh. Local OTHER NIF TOTAL 1. GOODS 1.1 ANPIP 0.4 0.4 (0.4) (0.4) 2. CONSULTANTS' SERVICES, TRAINING, STUDIES & AUDITS 2.1 ANPIP /a 0.9 0.9 (0.9) (0.9) 2.2 Mechanized Irrigation Component 2.2 2.2 (2.2) (2.2) 2.3 Manual Irrigation Component 0.9 0.9 (0.9) (0.9) 2.4 Savings & Credit Component 1.1 1.1 (1.1) (1.1) 3. OPERATING COSTS 3.1 ANPIP 0.4 0.2 0.4 1.0 (0.4) (0.2) (0.6) 3.2 Government Agencies It 0.3 0.3 4. PPF REFINANCING 0.7 0.7 (0.7) (0.7) TOTAL 0.4 0.4 6.4 0.7 7.5 (of which is IDA) (0.4) (0.4) (6.4) (6.8) Note: Figures in parenthesis ( are the respective amounts financed by the IDA Credit. NF = Not IDA Financed. /_ Including support to ANPIP for overall project implementation and associated technical support to beneficiaries, studies and audits. /b For the envirorment protection component. 5.19 Consulting Services, Studies and Training (US$5.1 million). The services to be provided under the proposed project include direct support to ANPIP for overall project implementation and associated technical support to beneficiaries, implementation support contracted out to individual consultants or consulting firms, including NGOs, studies, and training. All consultant services would be procured in accordance with "The Bank's Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" as indicated in the Agency's Procedures Manual (Chapter I, Section IV(E) of the Procedures Manual). These services will include the contracts for the implementation of the following components: (a) small-scale mechanized irrigation promotion; (b) improved manual irrigation; (c) savings and loans associations promotion; and (d) studies, which will include engineering, training, setting up a price and market information system, audits and a feasibility  - 23 - study on investment opportunities in the irrigation subsector. Contracts under (b), (c), and (d) will include a limited provision for irrigation equipment, computers, tools and materials, and supplies essential for the consultants' assignment. 5.20 Operating costs will include O&M, and off-the-shelf procurement of materials and supplies. 5.21 Bank prior review procedures will be followed with respect to: (a) all contracts for Goods estimated at US$100,000 or more; (b) all consultant services' terms of reference; and (c) all consultant contract documents for single source selection of firms, or estimated to cost US$100,000 equivalent or more for firms selected from a short list and US$50,000 for individuals. Other contracts would be reviewed by the Bank ex Dost on a sample basis during project supervision (1 in 4). 5.22 Procurement information will be collected and recorded as follows: (a) prompt reporting of contract award by Borrower; (b) comprehensive 6-monthly reports by ANPIP to IDA indicating: (i) revised timing of procurement actions, including advertising, bidding, contract award and completion time for individual contracts; and (ii) compliance with aggregate limits on specified methods of procurement; and (c) a completion report by the Borrower within six months of the Credit's Closing date. I Disbursements 5.23 The IDA credit would be disbursed over a five-year period. This deviates from the standard disbursement profile for agricultural projects in Niger on the grounds that the private status of the Agency will allow its Director and key technical personnel to prepare disbursement requests expeditiously without being encumbered by countless and inefficient bureaucratic procedures of the central administration. All disbursement activities under this Project will be managed by the Government. The Closing Date of the credit would be June 30, 2000, or one year after project completion. This time is required for the completion of studies, the payment of goods, and services procured during the last year of the project and the processing of the corresponding disbursement applications. The expected schedule of disbursements is given in Annex 4, and summarized in Table 4.  - 24 - Table 4: ESTIMATED II)A DISBURSEMENTS/a IDA Fiscal Year 1995 1996 1997 1998 1999 2000 Annual 1.5 1.4 1.9 1.1 0.6 0.3 Cumulative 1.5 2.9 4.8 5.9 6.5 6.8 /a The projections deviate from the standard profile for agricultural projects in Niger (i.e., they are based on the Profile for Sectoral Adjustment Loans) because: (i) as a pilot capacity-building project, a large part of the disbursements, especially for the Goods category, would take place in the early phase of the Project; and (ii) because the Agency, due to its private status, is expected to prepare and process disbursement requests expeditiously without being subject to countless bureaucratic procedures. 5.24 Disbursement categories, credit amount and the share of expenditures to be financed by IDA would be as follows: Table 5: DISBURSEMENT CATEGORIES Amount of the % of Expenditures Categories Credit Allocated (US$ m) Financed by IDA 1. VEHICLES, EQUIPMENT AND MATERIALS 0.4 100% 2. CONSULTANT SERVICES, TRAINING, STUDIES 4.5 100% AND AUDITS 3. INCREM. OPERAT. COSTS'a 0.5 60% 4. PPF REFINANCING 0.7 5. Unallocated 0.7 Total 6.8 /a Incremental operating costs are defined as travel allowances, materials, supplies as well as the operations and maintenance of vehicles, equipment and offices. 5.25 Withdrawal applications would be fully documented, except for expenditures relating to incremental operating costs, training, and all contracts costing less than US$100,000 which would be disbursed on the basis of statements of expenditure (SOEs). In the case of SOE procedure, supporting documentation would be kept by ANPIP for verification by the auditors and for review by IDA supervision missions. 5.26 Special Account. In order to facilitate project execution, the Government would establish, maintain and operate, in a commercial bank, acceptable to IDA, a Special Account into  - 25 - which IDA will deposit an initial amount in Franc CFA equivalent to US$0.5 million, representing estimated credit disbursements over four months for eligible expenditures under the Project. IDA would replenish these accounts monthly, upon receipt of satisfactory evidence that all expenditures were eligible for financing, together with a Bank statement reconciled with invoices and/or statements of expenditures submitted. All payments of less than US$100,000 equivalent will be made through the Special Account. Full documentation would be retained for inspection in the course of normal project supervision and by independent auditors. Agreement was reached during negotiations that the Borrower would operate the special account according to procedures, acceptable to the Association (para. 8. 1 (d)). VI. PROJECT ORGANIZATION AND MANAGEMENT A. Project Implementation 6.1 The Project will be implemented under the overall responsibility of the Ministry of Agriculture and Livestock whose primary function will be to ensure the enforcement of the Framework Agreement (Convention) (para 6.3). .Under this agreement, the Government selected the l'Association Nigerienne de Promotion de l'Irrigation Privee (ANPIP) (the Association), to execute this project with the notable exception of the environmental protection component. The Association will entrust responsibilities for day-to-day project implementation to a team of competent local staff. ANPIP will have primary responsibility for the package of services which it provides directly to beneficiaries (para. 5.4) and for delivering the package of training and technical assistance services which it contracts out to consulting firms, for the implementation of the following components: (a) improved mechanized irrigation; (b) improved manual irrigation; (c) savings and credit promotion; and (d) studies and audits. The environmental protection component would be implemented by the Department of Water Resources of the Ministry of Hydraulics and the Environment (MOH). The infrastructure and competencies required for effective implementation of this component presently exists only in the public sector. This government department has accumulated valuable experience in project implementation under the previous IDA-financed Namaringoungou and Irrigation Rehabilitation Projects and the ongoing Agricultural Research Project. These agencies will be subject to the strict supervision and monitoring requirements outlined in paragraphs 6.6 to 6.9. 6.2 The Agency. The implementing arrangements for the Agency, especially with respect to the procurement of the different package of services which it cannot provide directly, are similar to those of NIGETIP in Niger, AGETIP in Senegal and GAMWORKS in The Gambia. These arrangements are described in detail in the Procedural Manual (para. 6.3). ANPIP is an independent institution, with the legal status of a non-governmental, non-profit organization. Its Board is drawn from the private irrigation sector, consisting of individual farmers and representatives of farmers' cooperatives in both the rural and urban areas. ANPIP has the legal status of a private agency and will enter into an agreement (Convention) with the Government of Niger to execute the Project (See Implementation Manual). It will follow its own procedures and will not be encumbered by cumbersome bureaucratic procedures and will strive to ensure efficiency and transparency in the execution of its mission without any political interference.  - 26 - 6.3 Creation of the Agency. As a condition of negotiations, the Agency has been created by a general meeting of its Board of Directors (the Board), held on July 1, 1992, and, as a condition of Board presentation, its director and team of four technical staff. with qualifications and terms of reference acceptable to IDA have been recruited (para. 8.2(a)). A draft framework agreement (Convention), to which a Procedures Manual is attached, acceptable to IDA, whereby the Government designates ANPIP as the executing agency of this project, has been submitted prior to negotiations, and the signing of a Convention, acceptable to IDA in form and substance would be a condition of effectiveness (para. 8.3(b)). The Procedures Manual will include: (a) eligibility criteria for selecting subprojects submitted by potential beneficiaries for implementation under the proposed project; (b) procurement and disbursement procedures; (c) internal organization and administrative, financial and accounting management; and (d) extemal control and audits. 6.4 The professional staff of the Agency would be recruited mainly from the private sector through recruitment procedures satisfactory to IDA. Any staff member from the public sector would have to resign before accepting a position in the Agency. The compensation offered to the staff will be high enough to make it attractive to top-level professionals. It was agrred during negotiations that any change in the Director of ANPIP will be acceptable to the Association (para. 8.1(f)). The Agency will be based in Niamey, and will have a regional center in Maradi region. It will be headed by a Director, who will be a competent Nigerien with strong background in irrigated agriculture. ANPIP's Director would be responsible for: (a) overall project implementation performance; (b) providing external auditors with the necessary information for audit of project accounts; and (c) relations with government ministries and technical services, the Chamber of Commerce and Agriculture, non-governmental organizations and projects and all other parties involved in project activities. Staffing of the Association is described in detail in Annex 2. 6.5 In order to ensure expeditious implementation of the Project, the Agency would have full authority, without being submitted to any ex ante clearance, for carrying out the whole process of project execution. The Agency would, however, be submitted to close ex post supervision by the Government and will be required to furnish detailed activity reports as outlined (see Section B below). B. Reporting, Monitoring and Evaluation 6.6 Annual Work Programs. ANPIP and MOH would establish an annual work program and budget for each project year for Government's and IDA's review and approval. Contracting participant governmental agencies and consulting firms will provide operational data and other information as may be reasonably requested by ANPIP for the preparation of these programs. The program for the first year of the project will be submitted prior to effectiveness (para. 8.3(d)), and the programs for the remaining three years will be submitted to IDA no later than June 30, every year for implementation starting the following year. The work programs would each contain a detailed review of implementation performance during the preceding year. The objective of these programs would be: (a) to facilitate review of overall program direction, performance of individual components and periodic assessment of the ability of the programs to reach the intended beneficiaries or achieve the assigned objectives; (b) to serve as a planning and monitoring tool; and (c) to alert managers of the problems in program implementation and of the  - 27 - need for investigation of causes of performance deviation and recourse to necessary corrective action by appropriate adjustments/modifications in the program. Each program would include: (a) a budget for project activities with the details for each component; (b) monitorable targets for project activities; (c) commitments and expected disbursements under the IDA credit; and (d) a discussion of any major issues and problems affecting project implementation and proposed follow-up actions. 6.7 Ouarterly and Annual Progress Reports. ANPIP's and MOH's technical team would regularly collect and analyze data on key performance indicators (para. 6.8) to assess implementation progress, including assessment of the performance of participating consultant services and governmental agencies, identify difficulties encountered, summarize the corrective actions which need to be taken and prepare a quarterly report. Based on the above reports, ANPIP would prepare and submit to IDA and the Government quarterly and annual progress reports not later than two months after the end of each reporting period. Assurances were obtained at negotiations that the Goverrunent and IDA would meet at least twice a year to discuss these reports and to exchange views with regard to the performance of ANPIP, and to propose and implement any measure that will be deemed useful to ensure actual fulfillment of the project's objectives, including hiring and dismissal of the ANPIP's staff (para. 8.1e)). In addition, agreement was reached during negotiations that ANPIP and MOH would prepare quarterly and annual progress reports, which would be submitted to the Government and the Association, including up-to-date physical and expenditure data for each project component as well as a report on the performance of consultant services (para. 8. lg)). 6.8 Supervision. Given the pilot nature of the project and the innovativeness of the activities being promoted, particular attention need to be paid to quality control of implementation. Therefore, project supervision is expected to be staff-intensive, requiring approximately 12sw, the expected project start-up being in January 1995, and 20sw from FY96 to FY2000. The Government will organize, with support from ANPIP, an annual donor's meeting to ensure greater harmonization of principles and procedures adopted for promoting private sector initiatives in the irrigation smallholder sector. 6.9 The first year of implementation will be devoted to activities aimed at creating the conditions for success of this operation. These would include training of ANPIP staff on Bank procurement procedures, familiarization of staff and beneficiaries with ANPIP's principal mission and with the package of services it provides, internalization of the ANPIP's Manual of Procedures, promotional campaigns by ANPIP and the testing/development of the different technical packages that will be disseminated subsequently. IDA will work closely with the Government's technical group on private irrigation and the various implementing agencies in launching the project. As indicated in the Supervision Plan in Annex 7, IDA would mount a joint supervision mission with the Government in order to officially launch the project's implementation shortly after the effectiveness date. 6.10 Donor Coordination. One of the principal missions of the Association of Private Irrigators (ANPIP), which will be responsible for executing this project, is to promote the governments strategy for the development of private irrigation, with special reference to the task of ensuring that all externally-funded investment activities in the irrigation subsector are consistent with the above strategy. The project will finance technical assistance support to ANPIP in order  - 28 - to, among other things, build capacity for donor coordination and for serving as intermediary between donors and private irrigators. In addition, the Bank will encourage donor participation in the mid-term evaluation of this pilot project and in future discussions of a possible follow-up operation. 6.11 Performance Monitoring. The monitoring indicators to measure project performance and implementation efficiency of ANPIP, the consulting firms and NGOs and the participating government agencies (GAs) will be the following: (a) number of GIEs formed per year; (b) number of mechanized water lifting and water distribution technologies tested per year; (c) number of on-farm/on-station dissemination/evaluation activities held annually to promote improved mechanized technologies; (d) number of manual water lifting and water distribution technologies tested and/or developed; (e) number of dissemination/evaluation sessions held annually to promote manual irrigation technologies; (f) number of savings and credit associations created per year; (g) number of membership in savings and credit associations per year; and (h) number of beneficiaries trained in manufacturing manual irrigation technologies and in savings and credit principles and practices. Below is a table indicating the desired numbers to be achieved for each project year. 6.12 Mid-Term Review. By the end of the second year following credit effectiveness, the Government and IDA would undertake a joint mid-term review, consisting of a comprehensive evaluation of implementation performance, with particular focus on the extent to which the project is realizing its expected developmental objectives. The objective of this review is to evaluate overall implementation performance and to make recommendations, if needed, to modify some of the design features of the Project. The review would include: (a) critical assessment of the implementation of the adapted technology program, including the rate of diffusion of the tested technologies, adoption of new technologies, number of women beneficiaries, number of artisans trained in manufacture and repairs of manual irrigation technologies; (b) evaluation of the savings and credit program, including assessment of the validity of the approach, the effectiveness of the tools used for promotional activities and for operating the schemes, quantitative performance in terms of meeting numerical targets (see PIM), especially with respect to number of beneficiaries trained in savings and credit education and associated farm management skills, and the enabling environment; (c) evaluation of performance of ANPIP, with special reference to efficiency in delivering services to beneficiaries, number of producer groups created and their performance; (d) evaluation of the performance of consultants and participating government agencies; and (f) assessment of project sustainability. It was agreed during negotiations that the Government would carry out a mid-term assessment of the project at least eight weeks before the beginning of the mid-term review mission, and that its report will be submitted to IDA two weeks before the mid-term review (para. 8.1(k)). The mid-term review would make recommendations on possible changes in design and time-bound monitorable actions to enhance implementation performance during the remainder of project life. Assurances were obtained at negotiations that a mid-term review of the Project would be carried out in the second year following credit effectiveness, and that the operational conclusions accepted by the Government and IDA would be promptly implemented (paras. 8. 1(j) and (k)).  - 29 - C. Project Accounts, Audit and Reporting 6.13 ANPIP would establish and maintain its accounts in accordance with International Accounting Standards (IAS). ANPIP and MOH would conserve all the documentation related to project expenditures. A detailed proposal on the accounting system and procedures to be followed, profile of personnel needed and equipment required would be prepared by consultants under PPF financing. The terms of reference for the consultants to be recruited to establish the accounting and financial management system of ANPIP was reviewed and agreed upon at negotiations (para. 8.1(1)), and the establishment of a financial management and accounting system for ANPIP and MOH, acceptable to IDA, would be a condition of effectiveness (para. 8.3 (c)). ANPIP and MOH would at all times keep financial records in accordance with sound accounting practices to reflect its operations and financial position. These records would be made available to visiting Bank missions and independent auditors. It was agreed during negotiations that ANPIP's accounts would be audited quarterly and MOH accounts would be audited annually, in accordance with Intemational Standards on Auditing (ISA), by independent external auditors acceptable to IDA. In addition to financial audits, ANPIP would be subject to quarterly management and technical audits; the audited accounts and the auditor's report, including the Management Letter (Long Form), and a statement as to whether or not IDA funds had been used for their intended purpose and a separate opinion with respect to statements of expenditures and the Special Account, would be submitted to IDA within three months of the end of the close of each quarter, with respct to ANPIP and within six months of the end of the fiscal year for MOH (para 8.1(h)). It was also agreed during negotiations that an interim audit of ANPIP's accounting system and internal controls would be carried out during the first three years following the effectiveness date, and the auditors' report submitted to IDA not later than September 30th in each fiscal year (para. 8.1(h)). The Terms of Reference for audit contracts are provided in the PIV. Agreement was reached at negotiations on the terms of reference, the shortlist of firms and the selection procedures for audit contracts (para. 8. 1(i)), and a multi-year contract award for auditing the project and ANPIP's accounts, acceptable to the Assocition, would be a condition of credit effectiveness (para. 8.3(e)). VI. PROJECT BENEFITS, RISKS, AND ENVIRONMENTAL IMPACT A. Benefits 7.1 An economic rate of return has not been calculated due to the service and institution-building nature of this operation. The project is an investment in creating capacity for a self-sustaining process of technological development, including its financing, with a pay-off spreading over many years. However, while it is difficult to be precise, broad-based and substantial increases in family welfare are expected as a result of the proposed project. It is estimated that the technology promotion program would benefit at least 4,000 smallholder families through increased productivity and income. This direct benefit would result from their adoption of motorized pumps which have been designed to meet small farmer-requirements and- capabilities, by making tubewells less expensive, more versatile and easier to install. The project would also have an added benefit of training artisans to manufacture and repair adapted small- scale irrigation technologies.  - 30 - 7.2 Another major direct benefit of the project would be its contributions to the development of rural financial intermediation. Over the four-year implementation period, the project would establish about 60 savings and credit associations at the grassroots level which would provide improved access to financial services to their membership of some 2,500 family units, or 15,000 persons. The indirect benefits from the cultivation of a savings culture along mutualist lines, would contribute to significantly improved smallholder-access to financial services, as the supported actions would ease the risk and high transaction cost that have, until now, prevented commercial banks from lending to potential rural clients. Other intangible social benefits include the establishment of a service-oriented private sector agency for irrigation development, improvement in the social status of women and development of associations/groups of producer enterprises oriented towards solving common problems faced in their income- generating activities. 7.3 Overall, the innovations introduced under this project would provide private economic agents in Niger's smallholder sector with the technical and management know-how that is now critically lacking to significantly increase the productivity of their resources and independent capabilities as well as to enhance prevailing opportunities offered by formal markets for products and technology. B. Risks 7.4 A major risk is that, over time, the Government may subject the new agency (ANPIP) to bureaucratic controls and pressures of political patronage which could undermine the agency's autonomy and effectiveness. The Government's willingness to use a non-governmental association to deliver publicly-funded services for promoting its private-led irrigation development strategy can be expected to ensure the independence and professionalism of this association. Regular joint Government-IDA review of the performance of the agency will also serve to minimize the risk of Government interference. The risk of political patronage will be alleviated by other safeguards built into the project, including: (a) clearly spelled out and enforceable performance criteria for ANPIP; and (b) IDA's prior review and approval of ANPIP's annual work program; and beneficiaries will be organized into solidarity groups which can deny entry to those outside the target group who may attempt to improperly access project resources. As is true for most new and inexperienced institutions, a managerial risk may exist with respect to ANPIP, including the potential for misuse of public funds. This risk will be minimized through personnel training, adequate internal regulation and monitoring systems and strict enforcement of the Agency's operational guidelines (ANPIP's Manual of Procedures). Another risk is the Government's inability to provide counterpart contributions for financing of incremental operating expenditures, especially in light of past underfunding of operations and maintenance in the sector. This risk will be minimized by reliance on private sector institutions for project implementation, and by requiring the Government to make up-front and, subsequently, annual deposits into an account for payment of its counterpart contributions. Finally, Government interference through restrictive legislation or unnecessary controls are likely to stifle grassroots initiatives in financial intermnediation. Such a risk would be minimized by requiring the Governrment to provide an appropriate legal framework for grassroots savings and loan associations, as well as a clear regulatory framework for the GIEs, which would ensure accountability and transparency.  - 31 - C. Environmental Impact 7.5 The environmental category "B" has been assigned to the Project. The environmental assessment has been undertaken by FAO/CP as part of the normal work of project preparation. Its major finding is that the project will not have any profound negative effect on the environment. As an institution-building operation, the project does not include a crop production component. Rather, it is designed to create the necessary capacity that will make future on-farm investments in the irrigation subsector profitable, sustainable and environmental sound. The project will finance activities which will, in fact contribute to greater enhancement of the environment, including: (a) monitoring shallow aquifer levels and soil and water quality in the project area to determine ways of safeguarding against overexploitation of these aquifers in future investment operations, and (b) soil and water erosion control works in the river valley zone of the project area. By introducing modem techniques for proper husbandry of the soil and water resources, the project would ensure sustainability of the irrigated farming systems in the smallholder sector. VIII. ASSURANCES AND RECOMMENDATION 8.1 During negotiations agreements were reached on the following: (a) all procurement under IDA credit would be in accordance with procedures consistent with the Bank Guidelines for Procurement and Consulting Services, and carried out by ANPIP (para. 5.17); (b) the Government would adopt a time-bound action program for the implementation of the Savings and Credit component acceptable to IDA by September 30, 1995 (para. 5.9); (c) the Government would respect the autonomy and private status of savings and credit cooperatives and would refrain from interference in the internal management and in the democratic functioning of savings and credit cooperatives and their institutions (para. 5.9); (d) the Special Account would be operated according to procedures acceptable to the Association (para. 5.26); (e) at least twice a year, a meeting between Government and IDA would be organized to exchange views on the performance of the Agency, and to propose and implement any measure that will be deemed necessary to ensure realization of the project's objectives, including hiring and dismissal of the Agency's staff (para. 6.7); (f) any change in the Director of ANPIP will be discussed with and acceptable to the Association (para. 6.4); (g) ANPIP and MOH would prepare quarterly and annual progress reports, which would be submitted to Government and IDA, including up-to-date physical and  - 32 - expenditure data for each project component as well as a report on the performance of contracting consultant services (para. 6.7); (h) ANPIP's accounts would be audited quarterly and MOH accounts would be audited annually, in accordance with International Standards on Auditing (ISA), by a firm of external auditors acceptable to IDA. The auditor's report, including the Management Letter (Long Form), and a statement as to whether or not IDA funds had been used for their intended purpose and a separate opinion with respect to statements of expenditures and the Special Account would be submitted to IDA within three months of the end of each quarter. In addition, an interim audit of ANPIP's accounting system and internal controls would be carried out during the first three years following the effectiveness date, and the auditors' report submitted to IDA by September 30th of each fiscal year (para. 6.13); (i) draft terms of reference for audit contracts, a shortlist of firms as well as an outline of the selection procedures for awarding audit contracts would be agreed upon with IDA (para. 6.13); (j) in the second year following the credit effectiveness date, the Government would carry out jointly with IDA and any other donor and private organizations, such as NGOs interested in participating, a detailed mid-term review of project implementation performance, covering inter alia the issues mentioned in paragraph 6.12; (k) not later than two weeks prior to the mid-term review, the Government would submit to IDA a report by independent consultants assessing the progress of project execution and covering the same issues mentioned in paragraphs 6.10 and 6.11; and soon after the mid-term review, implement its recommendations in accordance with an agreed time-bound action plan (para. 6.12); (I) the terms of reference for the consultant to be recruited to establish the accounting and financial management system of ANPIP would be jointly reviewed and agreed upon by the Government and IDA (para. 6.13); and (m) the Government has informed the Executive Secretariat of the Niger Basin Authority (ABN) about undertaking this Project in the Basin as required under the 1980 Faranah Convention (para. 5.12). 8.2 As condition of Board Presentation, the Government has: (a) recruited the Director of ANPIP and four technical staff, with qualifications and terms of reference acceptable to the Association (para. 6.3).  - 33 - (b) notified the Niger River Basin Authority in conformity with its obligations under the 1980 Faranah Convention (para. 5.12). 8.3 Conditions of Credit Effectiveness would be that the Government would: (a) enact and promulgate legislation establishing a legal regime for Groupements d'Interet Economique enabling the organization of farmers into economic interest groups (para. 5.4); (b) sign with ANPIP a Convention in form and substance acceptable to the Association (para. 6.3); (c) cause ANPIP and MOH to establish a financial management and accounting system for the project, acceptable to the Association (para. 6.13); (d) cause ANPIP and MOH to submit to the Association their annual work program and budget for the first 12 months after the effective date of project implementation, and acceptable to the Association (para. 6.6); (e) cause ANPIP and MOH to sign a multi-year contract with an auditor for the auditing of the project and ANPIP's accounts, acceptable to the Association (para. 6.13); (f) open the Project Account and deposit the initial deposit therein (para. 5.16); (g) submit a Procurement Plan, satisfactory to the Association, for the procurement of all goods during the execution of the Project (para. 5.17). 8.4 Recommendations. With the above conditions and agreement, the proposed project would be suitable for an IDA credit of US$6.8 million equivalent to the Republic of Niger on standard IDA terms with 40 years of maturity.   - 34 - ANNEX 1 Page 1 of 2 REPUBLIC OF NIGER PILOT PRIVATE IRRIGATION PROMOTION PROJECT INSTITUTIONAL SETUP The institutional setup of this project is reflected in legal and contractual relationships among the various actors concerned: the central government, local governments and other beneficiaries, the Executing Agency, contractors, and consulting firms/individual consultants. The term "contractors" is used here to include building and construction companies, cooperatives, Groupements d'lnteret Economique (GIE) and other legally constituted entities able to enter into a contract for subproject execution. The term "consulting firm/individual consultants" refers to local or foreign consulting firms or private individual consultants, as well as other legally constituted entities (e.g., non-governmental organizations (NGOs)) able to provide the services required. The legal texts setting forth the above-mentioned contractual relationships are described below: (a) The implementation of the project is entrusted to an executing agency named l'Association Nig#rienne pour la Promotion de l'Irrigation Privee (ANPIP), hereafter referred to as "the Agency". The Statutes (Articles of Agreement) of the Agencv (Statuts, PIV) which must at all times be acceptable to the Bank, provide that the Agency is a non-profit association whose Assemblee Generale includes representatives of irrigation cooperatives and individual private irrigators. The role of the President of the Assemblee Generale is limited to convening and presiding over the meetings thereof. The Assemblee Generale also includes one person elected Director of the Agency, to whom is fully entrusted the day-to-day management of the Agency. As provided by the Statutes of the Agency, the Director may be replaced only by extraordinary decision of the Assemblee Generale. The Director, however, must be at all times acceptable to the Bank. The Agency was effectively created after the founding members of the Assemblee Generale hold their first meeting (Assemble Generale Constitutive) to approve the Statutes, and the Ministere de 1'InzWrieur issued its agrement. The creation of the Agency was a condition of negotiations. (b) The Framework Agareement (Convention, See Implementation Manual) between the Government and the Agency describes the latter's modus operandi in the context of the present project. Among other things, the Agreement establishes that: the Agency will deliver a package of services consistent with those defined in the project; these services will be exclusively located in the Project area (Maradi, Dosso, Tillabery/Niamey, Zinder); the central government will place non-reimbursable financial resources at the disposal of the Agency, including the proceeds of the credit (in a Special Account); the Agency can also receive resources from other sources; the Procedures Manual is an  - 35 - ANNEX I Page 2 of 2 integral part of the Framework Agreement; the Director of the Agency has full powers in connection with the management of the Agency; the Director can be replaced only in accordance with the Articles of Agreement of the Agency; the Government confers to the Agency all powers required for the implementation of the project; the Agency will execute this project in strict compliance with the Procedures Manual (which is anl integral part of the Framework Agreement); and the Bylaws of the Agency cannot he modified without Government's agreement. (c) The Bylaws of the Agency (Reglement Interieur, see PIM) establish: the internal organization; hiring, firing and other personnel management procedures; and administrative rules and regulations. They ensure, among other things, that the Agency will have a small staff, including a Director assisted by one Financial Director and a technical team consisting of a communications specialist and two technlical specialists. (d) The Procedures Manual (Manuel de Procedures, see PIM), which must at all times be acceptable to the Bank, recalls the fundamental objectives of the Agency and establishes: the procedures whereby the Agency receives and processes subproject execution requests from beneficiaries, the procedures used by the Agency to establish and continuously update a roster of contractors for different types of subprojects; the various procurement procedures to be used by the Agency for subproject execution (depending on the estimated value of the contract), including Sample Bidding Documents with model contract to be signed with contractor (Modele de Lettre de Soumission, Modele-Type de Caution dAvance, and Contrat-Type de Travailc); the procurement procedures to be used by the Agency for subproject engineering and supervision, including model contracts to be signed with consulting firms (Contrat-Type d'Etudes and Contrat-Type de Supervision des Travaux); the accounting and disbursement procedures to be used by the Agency in connection with each subproject; the nature and periodicity of reporting by the Agency; the procedures to be followed to secure independent external auditing of the Agency; and personnel management procedures.  - 36 - ANNEX 2 Page 1 of 12 STAFF APPRAISAL REPORT REPUBLIC OF NIGER PILOT PRIVATE IRRIGATION PROMOTION PROJECT Organisation et gestion du projet Obiectifs et strategies du projet I . Le contexte institutionnel du developpement agricole (dont le sous-secteur de l'irrigation) au Niger est caracterise par des insuffisances profondes au niveau des capacites de gestion. Ce constat est justifi6 par la mauvaise utilisation des rares competences qui existent, mais aussi par la lourdeur des procedures administratives qui regissent le fonctionnement des structures d'intervention. C'est la raison pour laquelle, sur la base d'une etude juridique et institutionnelle, il a ete propose d'opter pour une agence d'execution de droit prive, independante de l'Etat dans son fonctionnement quotidien, et donc capable d'echapper aux lourdeurs de la machine administrative. Cette agence se classe juridiquement dans la categorie des associations dont les traits essentiels sont l'absence de but lucratif, la non obligation de constitution de capital social, et la grande souplesse statutaire et reglementaire dans son fonctionnement. Cette association, denomme l'Association Nigerienne de Promotion de l'Irrigation Priv6e (ANPIP), a dejA et creee (Arrete N